August 29, 1998   

This Date's Issues: 2332• 2333••

Johnson's Russia List
#2333
29 August 1998
davidjohnson@erols.com

[Note from David Johnson:
So much news, so little time.
1. Jana Howlett: No Panic in Petersburg.
2. AP: Russian Opposition Softens Stance.
3. Ray Finch reports from Moscow streets.
4. AFP: START II may offer silver lining in tough summit.
5. Business Week: Patricia Kranz, RUSSIA: IS THERE A SOLUTION?
6. New York Times: Richard Pipes, Let Russia Fend for Itself.
7. AFP: Russian billionaire says Chernomyrdin best choice for 
president. (Berezovsky).
8. Argumenty i Fakty: Vitaliy Tseplyayev, "Will Chernomyrdin Be 
Any Better?"
9. AP: Young Russians Learn From Crisis.
10. Interfax: No 'Sensational Results' Expected From US-Russia 
Summit. (Rogov).
11. Interfax: Berezovskiy Comments on Risk of 'Social
Disturbances.']

*******

#1
From: jrh11@cus.cam.ac.uk (Jana Howlett)
Subject: Re: 2331-Ulfelder/Oligarchs et al.
Date: Sat, 29 Aug 1998 09:53:58 +0100

Just a brief addendum. All the media in the UK and, judging fron JRL, are
talking about the new 'Moscow panic'. Yet in Petersburg yesterday there were
no hysterical queues at banks (which have ATM's functioning normally for the
present) or hysterical politicians. But that is not news.
Dr. Jana Howlett, Jesus College, Cambridge University

******

#2
Russian Opposition Softens Stance
Auguste 29, 1998
By VLADIMIR ISACHENKOV

MOSCOW (AP) -- Boris Yeltsin's opponents appeared today to be backing off on
their demands for an immediate power-sharing agreement, and the interim
government said there would be no return to the Soviet past.

Yeltsin vowed unequivocally Friday that he would not resign, and the
government tried to reassure both Russians and international investors that
efforts to build a market economy would not be abandoned.

``We have already joined the world economy, and there will be no return to the
past,'' acting Prime Minister Viktor Chernomyrdin said on national television.

He reiterated that he would keep the ruble convertible and guarantee savings
held in bank accounts, and that he would not stop the sale of dollars and
other foreign currencies.

Yeltsin went on television Friday night to insist he would not resign and
would serve out the rest of his term.

``I'm not going to resign. I will work as I'm supposed to for my
constitutional term,'' Yeltsin said. ``In 2000, there will be an election for
a new president and I will not run.''

Yeltsin's emphatic denial came after days of feverish speculation that he was
about to resign or be ousted as his country plunged into a seemingly
bottomless economic decline. He had not been seen in public since Tuesday,
prompting reports that he had already stepped down.

The government had earlier indicated it would impose Soviet-style measures to
cope with the mounting economic crisis, despite warnings from the
International Monetary Fund that this would put all loans on hold.

Yeltsin's envoy to parliament negotiated with the opposition today about its
demand for a power-sharing agreement that would sharply limit the president's
powers.

The opposition continued to insist on constitutional amendments to give
parliament more say over key Cabinet appointments and government policies.

But they appeared to cave in on their main demand that these changes be
implemented immediately as a condition for confirming Chernomyrdin, said
Alexander Kotenkov, Yeltsin's envoy to the State Duma.

``In order not to fuel tension, we would not immediately consider specific
amendments,'' Kotenkov said at a news conference today. ``We need a government
now, and then we shall see.''

The Duma, the lower house of parliament, is scheduled to meet Monday to
consider Chernomyrdin's appointment.

As part of the compromise being worked out, the Duma would promise not to hold
a no-confidence motion in the government for one year and Yeltsin would
refrain from shuffling the Cabinet for the same period.

For its part, the Kremlin would agree to consider legal changes that would
increase parliamentary control over the Cabinet.

Yeltsin also promised to accept lawmakers' proposals on Cabinet appointments
-- but only after Chernomyrdin is confirmed, Kotenkov said. That could mean
the appointment of more communists to the Cabinet.

So far the agreement has been accepted by all factions in parliament, he said.

Communist leaders refused to comment, but predicted Yeltsin would still be
forced out.

``The political and economic situation in the country will force Yeltsin to
resign,'' the Communist Party's No. 2 man, Valentin Kuptsov, said, according
to the Interfax news agency.

Earlier in the week, while rumors were swirling of Yeltsin's imminent
departure, his senior aides discussed possible scenarios with the communists,
including such things as immunity from prosecution. Their conversations helped
fuel the speculation Yeltsin would resign.

But Kotenkov said today that Yeltsin specifically asked him to tell lawmakers
on Friday he did not want any such guarantees and was not seeking withdrawal
of an impeachment motion that stands little chance of passing anyway.

``The president said he doesn't need any handouts from the Duma,'' Kotenkov
said. ``The president believes he hasn't done anything illegal, and is ready
to face the people to prove it.''

Under the Russian constitution, the Duma must approve the prime minister. If
it rejects a candidate three times, Yeltsin can dissolve the Duma and call
parliamentary elections -- an option Yeltsin said Friday he had no plans to
take.

Russians, who have weathered one crisis after another in recent years, were
taking the latest one in stride, too. Short lines formed outside some banks as
people tried to change rubles for dollars, but there was little sign of panic.

The financial crisis began in early summer as tremors from Asia's economic
turmoil reached Moscow and a decline in oil prices -- Russia's top export --
derailed vital reforms and sent the economy crashing.

Chernomyrdin, who was fired in March, was brought back in a surprise move last
Sunday as Yeltsin sought a more experienced leader to replace the youthful
Sergei Kiriyenko and contain the crisis.

*******

#3
Date: Sat, 29 Aug 1998
From: "Ray Finch-Kroll Associates, Moscow" <krollrf@aha.ru>
Subject: Friday Evening, 28 Aug

Upon leaving work Friday evening (28 Aug), I thought I'd check to
see if there were new signs of economic/political collapse along my way
home. I was not disappointed. While standing in line to buy some rubles at
one of the exchange points (the rate was 10 rubles to the dollar), a couple
of Russia's finest dragged a young girl out of line who was some 3 or 4
customers ahead of me. She was hurried off to their nearby police car, and
they took off down Prospect Mir. No one was sure what crime she had
committed, but the conjecture was that she had tried to pass some
counterfeit money. 
After the crowded metro ride, I visited the market area near my apartment
to pick up something for dinner. As I mentioned in a previous epistle,
sometimes, there is a representative of the RNE (Russian National Unity)
party handing out their semi-fascist literature near this metro stop. Well
it must have been some sort of occasion (did they smell blood?), but last
night there was an entire squad of these black and leather guardians of
Russian purity handing out their free newspaper. 
I figured that it might be instructive to watch their promotional efforts,
so arming myself with a Baltika No.#3 from a nearby kiosk, I began my
surveillance. There were some eight of these blackshirts, and they
positioned themselves at key locations (within eyesight of each other) all
around the metro-market area. What was truly amazing is that there were an
equal number of Russian police/MVD types tacitly watching the RNE marketing
efforts. For me (and probably for a certain percentage of Russians), it was
difficult to tell which group enjoyed more authority. 
After some 20 minutes (and fortified with my Baltika-3; which is actually a
very good beer. Not to diverge from the subject, but the empty bottle was
quickly recovered by one of the stooped Russian pensioners who supplement
their meagre incomes with the deposit from these empties), I approached one
of the RNE reps, feigning ignorance about the nature of their organization.
This True Russian Soldier, who looked maybe 40 (but might have been only
30), politely explained to me the party's platform, which, by the way,
sounded like a rather reasonable recipe for fixing some of Russia's ills
(i.e. "upwards of 90% of the Russian population is struggling just to get
by, and some have not been paid their wages for 6-9 months, while the
remaining 10% is living like the nobility of old." He then offered me some
free literature and invited me to one of their introductory meetings, where
the basic outlines of the RNE's platform could be explained in depth. 
I thanked him for the brochures, and told him I'd think about it after
reading some of the material he gave me. I was not alone in my curiosity,
as most of the other RNE reps were engaged in conversations with the locals.
The market place was very busy, and as I began to shop for dinner, it soon
dawned on me the reason for such activity. Imagine that at noon tomorrow,
or maybe the next day, all of your dollars were going to be transformed into
monopoly money, and you could nothing to limit your financial losses (like
exchanging your money for German Deutschmarks or British Pounds). And since
all of Moscow's high-dollar consumer goods stores were closed "for technical
reasons," those who had large amounts of rubles were frantically trying to
spend them on cheap consumer goods before they were changed into worthless
bits of colored paper. 
There was a look of distress on the faces of most of the kiosk/shopkeepers.
Like the consumer, they also had lost faith in the government's ability to
prop up this empty ruble, yet were prohibited from trading in dollars. Soon
they would be faced with depleted inventories and stacks of these worthless
rubles. 
Now, put yourself for a moment in the place of one of these little
entrepreneurs. You get up at dawn to set up this shitty little stand,
hauling your goods from some garage, and then for the next 12-16 hours you
stand out in all kinds of weather selling soap, toothpaste and detergent,
maybe making 5-10 bucks on a good day. In the evening, you get to tear down
your stand, and haul it away to prepare for another day of "business." Or
how about one of those lucky kiosk-dwellers positioned underground, in a dim
tunnel underneath one of Moscow's streets, where all day long (and some even
spend the night!) you are trapped in a closet-size cubicle, breathing the
fumes of cars and subways, selling imported underwear or beer. These
god-awful conditions are not helped by the criminal protection money you
have to pay to stay in business. Now just imagine the hatred and disgust
you might feel when you discover that all of your grim labor for the past
couple years was in vain, and that you are poorer today than when you began
this commercial-prison enterprise. 
When you put yourself in these shoes, you begin to see the wisdom and
propriety in belonging to a group like the RNE. 

*******

#4
START II may offer silver lining in tough summit

MOSCOW, Aug 29 (AFP) - With impeachment and an economic meltdown in 
Moscow on their minds, Boris Yeltsin and Bill Clinton could be forgiven 
for putting disarmament on the back-burner at their Kremlin summit next 
week.
But if they do, Russian analysts say, they would be making a huge 
mistake, because the START II disarmament treaty has a greater chance of 
passing through Russia's opposition-led parliament now than ever.

Even if with a slightly hopeful air, military observers here say that 
the same State Duma lower house of parliament that nearly scuttled US 
President Bill Clinton's visit to Moscow may in the end prove to be the 
silver lining in the summit, due to start Tuesday.

"The Duma, with this new government, is closer to ratification of START 
II than ever," said Alexander Pikayev of the Carnegie Moscow Center. "If 
the new government includes the opposition in its ranks, I would not be 
surprised if this agreement was approved by this autumn or next spring."

All it needs is a show of good-will from Clinton, either in a proposal 
of more funds for Russia's swords-into-plowshares program or a promise 
to wipe out a few more thousand American nuclear weapons, the analysts 
say.

"The bankrupt Russian government cannot finance its defense ministry," 
observed Sergei Rogov, director of the USA/Canada Institute. 

"Meanwhile, the nuclear superiority of Russia in tactical nuclear 
weapons makes the United States quite uncomfortable. Russia, despite its 
financial collapse, remains the only country that can physically destroy 
the United States," Rogov said.

START II has proven to be a major headache for the Pentagon ever since 
Russian President Boris Yeltsin and then-US president George Bush in 
January 1993 put their names on a treaty drafted to rid the world of its 
most deadly weapons.

The agreement was ratified in 1996 by the US Senate, which decided it 
was a good idea to cut the number of American warheads to 3,500 and 
Russia's stock to 3,000 while also forcing the Kremlin to melt its 
biggest gun -- the heavy multiple-warhead intercontinental missile.

The Duma was close to taking up the debate in August 1995. But NATO 
strikes against Bosnian Serbs, that came against strong opposition from 
nationalists in parliament who see the Serbs as their close friends, 
made deputies shelve the treaty for another day.

That day has never come, although lawmakers are tentatively scheduled to 
give the treaty its first ever full session hearing in September.

Analysts give several explanations as to why START II has fared so 
poorly in Russia, and why it might be ratified now.

Firstly, financial: The treaty is expensive for Russia to implement if 
it wants to keep on an equal nuclear par with the United States. By 
scrapping its multiple warhead rockets, Russia would have to churn out 
some 1,500 new single-warhead missiles to stay even.

The other is political: Only last spring the Clinton administration 
hinted there would be no Moscow summit unless the Duma approved START II 
before his visit.

"That strategy was a failure from the start because it put a lot of 
pressure on the Kremlin, which wants this summit badly. But Communists 
in the Duma could not care less if Clinton comes to Moscow," said 
Pikayev.

More important than Clinton's visit, analysts say, is the recent 
political shake-up in Moscow.

Acting premier Viktor Chernomyrdin is sending broad hints that for the 
first time since the collapse of communism, the Kremlin is willing to 
assign leftist lawmakers to senior government posts, and this may give 
deputies a new incentive to cooperate.

"The chances of Duma ratification have now improved," said analysts 
Andrei Zobov. "However, as the opposition grows stronger, it may want 
even more concessions from America."

*******

#5
Business Week
September 7, 1998
[for personal use only]
RUSSIA: IS THERE A SOLUTION?
By abandoning reform, Chernomyrdin is inviting hyperinflation, capital flight,
and food shortages
By Patricia Kranz in Moscow, with bureau reports 

It is a bitter August for
Boris N. Yeltsin. Nearly seven years to the day after he defeated a coup
plotted by hard-liners and helped bring down the Soviet empire, the Russian
President experienced his own embarrassing defeat. The triumph of his
presidency--a stable ruble--collapsed on Aug. 17 as his government defaulted
on $40 billion in short-term debts and devalued the currency. Six days later,
Yeltsin humbled himself by reappointing Viktor S. Chernomyrdin, the stodgy
bureaucrat he had fired only five months earlier, as his Prime Minister. It
was, opined Izvestia, ``like swapping parachutes in free fall.''
It's far more than that. Russia's economy is melting down amid signs that
Chernomyrdin's return to power is the end of the era of reform. The ruble is
collapsing. The financial markets have stopped functioning. Banks are short of
cash, stirring panic among ordinary citizens. Within months, Russians could
once again be coping with hyperinflation and food shortages. And Yeltsin,
already a lame duck, could be forced to resign, prompting elections. Now, in
what some are describing as ``a quiet coup,'' Chernomyrdin is preparing to
team up with Communist and nationalist factions in the Russian parliament and
with powerful business tycoons to return Russia to a far more statist style of
economic management.
TIMELY MORATORIUM. Behind the scenes, Chernomyrdin is believed to be pushing
Yeltsin to give him powers to rule Russia's battered economy by decree. Among
other things, insiders say, Chernomyrdin may introduce limits on outflows of
capital as well as price controls. The bailouts of some banks may amount to
their nationalization. The government's default and its debt moratorium are an
open acknowledgment that Russia's top priority is its own internal stability
rather than in meeting its financial commitments to the outside world.
After years of stagnation, Chernomyrdin wants to reflate the Russian
economy, revive industry, and spur economic growth. ``Our first priority will
be defending the social welfare of the population, paying salaries and
pensions,'' he declared after his appointment. ``By purely monetarist
measures, we will not pull Russia out of the crisis.''
Although the details are sketchy, the power shift in Russia was sparked by
banks worried about meeting payments due on syndicated loans from Western
financial institutions. Among others, Chernomyrdin ally Mikhail Khodorkovsky's
Menatep Bank was under pressure. Indeed, the government caved in and announced
its moratorium on the day that he was due to make a payment on an $80 million
loan. But the moratorium and devaluation touched off a wave of panic among
ordinary Russians and foreign investors. To preserve stability and their own
empires, influential tycoons such as oil and media baron Boris Berezovsky
began urging Yeltsin to bring back Chernomyrdin as Prime Minister. Yeltsin
also anointed him as his preferred successor.
Chernomyrdin's return is a watershed event. Russia may become the first
major emerging-market economy in the post-cold-war era to insulate itself from
the forces of globalization. By vowing to pour money into Rus-sian industry,
Chernomyrdin seems ready to reject the International Monetary Fund's canon of
tight money and belt-tightening. Russia's new stance may tempt countries from
Indonesia to South Korea to fend off the market forces that have similarly
disrupted their own hard-hit economies.
CLINTON'S CHALLENGE. Russia's free-market failure is a big blow to the West.
Led by the U.S., Western industrial nations have gone to great lengths to
hasten Russia's transition to capitalism--from sending economic advisers to
lending tens of billions of dollars. With 11,000 nuclear weapons, Russia would
become a major threat to global security if it plunged into chaos. President
Clinton is now faced with a devilishly complicated task as he heads to Russia
for a summit with Yeltsin scheduled for Sept. 1. With the IMF strapped for
cash, he can't offer any financial help. As Russia closes ranks against
Western market solutions, 
Clinton will find it much less willing to bow to U.S. interests.
Meanwhile, global
financial markets are also jittery. Investors around the globe had assumed
that Russia was too big and politically important to fail. But Russia's debt
moratorium and the $32 billion debt restructuring program it announced on Aug.
25 changed that psychology overnight. Investors reacted angrily to the plan,
which forces them to swap high-interest, short-term Treasury bills for longer-
term ruble bonds paying 25% to 30%. Analysts estimate that investors will
receive just 15 cents to 30 cents for every dollar invested. Says E. Gerald
Corrigan, managing director of Goldman, Sachs & Co. and a former president of
the Federal Reserve Bank of New York: ``There was no alternative. But it is a
very bad precedent that runs into a head-on collision with the whole global
credit system.'' Adds Robert Devane, a Moscow-based investment adviser: ``The
restructuring deal will hurt Russia's ability to finance itself in global
markets in the West for some years to come.''
Chernomyrdin's strategy is straight out of the old Soviet book. The former
chairman of gas monopoly Gazprom believes that the backbone of the Russian
economy is its industrial enterprises. Since Yeltsin launched his economic
reforms in 1992, industrial enterprises have been starved for investment as
governments slashed subsidies. At the same time, though, the government kept
enterprises afloat by allowing them to pay for electricity, fuel, and other
necessities through long chains of wasteful barter deals. This system has
become known as Russia's ``virtual economy'' because it managed to keep
millions of workers employed in unproductive factories.
PRESIDENTIAL AMBITIONS. Now, to please his nationalist and Communist
supporters in the Duma, Chernomyrdin wants to turn these companies around by
flooding them with cash. With no money coming in from foreign investors or
international institutions, the only way the Prime Minister can do that is by
printing rubles. Chernomyrdin is expected to allow favored private banks run
by his powerful business supporters to channel credits to industry. That could
further strengthen the grip of powerful financial industrial groups on the
economy.
Above all, Chernomyrdin's goal is to become Russia's President. Elections
are scheduled for 2000 but could be held much sooner if Yeltsin resigns. Until
recently, Chernomyrdin was in the political wilderness. But if he can somehow
pull off his rescue plan for Russia, he will stand a chance to upstage more
charismatic politicians who have already signaled their intention to run for
President: former General Alexander Lebed and the popular Moscow Mayor Yuri
Luzhkov.
But Chernomyrdin's hopes could soon fade. The risk is that cranking up the
printing presses will lead to hyperinflation and a totally worthless ruble.
Increasingly desperate Russians could begin to hoard goods rather than hold on
to money. At the same time, the country's financial squeeze and shortage of
hard currency may make it difficult to keep up the imports of food and other
goods that have flooded shelves over the last seven years. That could pose
political and social problems, especially in cities such as Moscow, which
imports close to 80% of its food.
If inflation takes off, one safety valve for the economy may be the
American dollar. Already, millions of Russians hold their savings in dollars
stashed under their mattresses, while many companies have bank accounts in the
West. As Russia's ruble crashes, more and more business will likely be done in
dollars, either openly or on the black market. That was true in the early
1990s when the dollar circulated parallel to the ruble and kept part of the
economy ticking along. In recent weeks, business in dollars has already been
picking up as the inevitability of devaluation became clear.
Now, the Russian economy is reeling from an overall collapse in confidence.
>From St. Petersburg to Vladivostok, the outlook for many Russian
businesses--as well as ordinary people--is growing bleaker by the day.
Virtually all of the country's 1,600 banks are in trouble. Hundreds of smaller
banks are likely to fail over the next few weeks. Even the country's leading
banks are feeling the pinch. In the week following the ruble devaluation,
seven of Russia's top banks were involved in mergers. The spate of deals was
sparked by an offer by the Central Bank chairman of a ``velvet
nationalization''--bailout loans in exchange for equity stakes in the various
banks. Default would convert ownership to the government.
NIPPED IN THE BUD? In Russia's return to statist capitalism, the vibrant part
of its economy could be damaged. Alongside cash-strapped industry has grown a
dynamic private sector encompassing everything from retail stores to computer
software companies to small consumer-goods manufacturers. Now, they are caught
in the financial squeeze, unable to withdraw their funds from banks or to pay
for imported goods. In Moscow and other big cities, middle-class workers in
new private companies are facing a tough autumn. Already, some brokerages and
banks are cutting their staffs sharply. If layoffs soar, some observers think
the young new middle class could take to the streets to protest Chernomyrdin's
regime.
Will Chernomyrdin's counterrevolution succeed? By restructuring Russia's
debt, the Russian government has bought some time. Even if Chernomyrdin can
delay payments coming due in the future, he will still have to cope with the
staggering flaws in Russia's economic system. He needs to attempt to make
Russia's enterprises more productive, a task that will undoubtedly involve
political pain. And the
oligarchic rule of Russia's economy, while providing short-term stability,
will continue the corruption and misuse of assets that has plagued the
transition so far</A>. Until the oligarchy is broken, Russia's economy won't
be able to grow.
Perhaps it was wishful thinking to believe that a country so badly damaged
by communism for 70 years could make the transition to capitalism in just a
decade. Despite the fervent hopes of Westerners and Russian reformers, Russia
moved only partly down the path to a democratic market economy. In the name of
guaranteeing prosperity and well-being for ordinary people, Chernomyrdin has
returned to power with the strong backing of a small political and economic
elite. Now it's up to the Russian people to react--either through the ballot
box or in the streets.

*******

#6
New York Times
29 August 1998
[for personal use only]
Opinion: Let Russia Fend for Itself
By RICHARD PIPES
Richard Pipes is professor emeritus of history at Harvard and the author of
"The Unknown Lenin." He served as director of East European and Soviet affairs
inthe National Security Council in 1981 and 1982. 

Exactly seven years after the abortive military putsch in Moscow that
precipitated the collapse of Soviet communism, Russia confronts yet another
crisis. Then, in August 1991, the consequences of the crisis appeared wholly
benign, as it seemed to herald Russia's chance to move toward democracy and a
market economy. Today, Russia's prospects are less clear and far more ominous.
The current crisis has both political and economic causes. 
The political crisis derives from the inability of Russians to create a
viable administrative system in place of the one-party regime that had ruled
them for seven decades. In contrast to the Poles or Czechs, who had
traditional political parties up until the time that Soviet rule was imposed
on them in the 1940's, the Russians have no collective memory of pre-
totalitarian parties. 
There is no consensus whatsoever on any political issue: the so-called Red-
Brown (Communist-Fascist) coalition that dominates Parliament shares no common
values with the reform-minded members of President Boris Yeltsin's cabinet. 
Hence, Russia is without effective government. To the extent that anyone
rules, it is the 89 governors who run the provinces largely independently of
the center and each other. 
Under these conditions, it is hardly surprising that Mr. Yeltsin impulsively
hires and fires prime ministers. It is one of the very few powers at his
disposal. The unceremonial dismissal of Viktor Chernomyrdin five months ago in
favor of Sergei Kiriyenko, and the recent removal of Mr. Kiriyenko in favor of
the same Mr. Chernomyrdin, recall the political practices of czarism on the
eve of the Russia Revolution, known at the time as "ministerial leapfrogs." 
Although Mr. Chernomyrdin has better relations with the Duma than Mr.
Kiriyenko does and even contemplates bringing communists into government, the
shuffling seem to have less to do with politics or programs than with a
desperate search for someone, anyone, seemingly capable, by some slight-of-
hand, of fixing things. 
Rumors abound that Mr. Yeltsin is about to be forced out of office in favor
of Mr. Chernomyrdin. Mr. Yeltsin yesterday emphatically denied these rumors,
insisting that he intends to serve out his full term. However, it appears that
he will have to acquiesce to the inclusion of Communists in the cabinet. A
coalition government, with Communist ministers in minor posts, may not be a
bad thing.It will make the main opposition party, until now engaged
exclusively in obstruction, a part of the system and hence responsible, to
some degree, for its success or failure. 
The economy's failure, which triggered the present crisis, is due, above
all, to the inept handling of the budget. Russians are not accustomed to
paying income taxes, which were unknown under czarism and communism. The
Yeltsin Government has been unable to collect them from either enterprises or
individuals because it lacks the political will and the bureaucratic
personnel. The drop in the price of petroleum, Russia's main source of hard
currency, has contributed to the deficits. 
To cover them -- as it had to do to maintain the value of the ruble -- the
Government has been borrowing heavily abroad mostly in the form of short-term
loans. Unable to service the debt even with the help of the multibillion
credit from the International Monetary Fund, the World Bank and Japan, Russia
has effectively defaulted and withdrawn support of the ruble. 
The results of these mistakes have been catastrophic. The seven years during
which Russia could have laid the foundations of a viable democratic and
capitalist order have been irretrievably squandered. Even if Russia succeeds
in coming to terms with its foreign creditors, it is unlikely that foreigners
will be willing to invest new money in it for years to come. And yet without
massive injections of foreign capital, Russia cannot solve its economic
problems, let alone provide its people with an acceptable standard of living. 
The worst aspect of the current crisis is that it will discredit in the eyes
of most Russians both democracy and capitalism. The two institutions -- the
indispensable foundations of stability and prosperity -- appear to them today
as nothing but a swindle. They were willing to put up with reduced consumption
and the disappearance of social services because they saw them as temporary
hardships. 
But who will now be able to persuade them that the faith they placed in
their country's currency was justified? Or that a President popularly elected
is more responsive to their needs than one appointed by an all-knowing, all-
powerful party? Anti-western feeling, which has been gaining ground lately,
will certainly intensify, along with the sense that Russia must follow its own
separate path. 
The problem, however, is that in the modern world there is no other road to
stability and prosperity than that charted by the western democracies. A
return to communism is impossible not only because the majority of Russians
oppose it, but also because it would require forcible expropriations of the
assets acquired by private citizens since 1991. In other words, it would be
yet another revolution for which the government has no strength and the
citizenry no stomach. 
A possible though unlikely alternative would be for Russia to dissolve into
several sovereign nations. Under this scenario, authority would pass to
governments closer to the people and more accountable to them. However,
Russia, which since the l6th century has been a unified and centralized state,
is most likely in no mood to be carved up and lose its national identity. 
There remains the option of Russia turning into a Latin-American, quasi-
democratic, quasi-capitalist state, with an economy that relies heavily on the
export of natural resources and cheap labor. This seems to me a likely
scenario because it can be achieved gradually, without violence, and still
foster the illusion that Russia is following its own path. 
The fact that Russia will be a third world country rather than a superpower
would be masked by its arsenal of nuclear weapons, its immense size, its
ability to intervene along its vast frontier, the longest of any country in
the world, touching on three continents. 
Although Russians fault the West for not having done all it could to help
them make the transition from communism, the reality is that Moscow has
received generous diplomatic and financial support: its foreign indebtedness
tens of billions of dollars. 
The question now arises whether this support should continue. The
International Monetary Fund may take as long as a month before deciding
whether to lend more money to Russia, though a $4.3 billion payout is
scheduled for Sept. 15. Western leaders seem to have concluded that they will
assist Russia further only if it enacts effective economic reforms. But the
problem runs deeper: Russians have been relying on external aid to delay
putting their house in order. 
Top officials in Moscow have been heard to boast that the West cannot afford
to let Russian democracy fail because they fear the alternative, and this
claim has served as a subtle form of blackmail that has proved surprisingly
effective. Foreign help should not give Russia an excuse for postponing
political, economic and legal reforms. 
It seems to me therefore, that under existing conditions the best policy
toward Russia is one of hands off. This will force the Russians to acknowledge
that the crisis they face is of their own making. They must solve their
problems, both political and economic, and only after they have done so will
they merit further assistance. Experience has shown that foreign aid extended
in a more liberal manner is counterproductive.

*******

#7
Russian billionaire says Chernomyrdin best choice for president

LONDON, Aug 28 (AFP) - Russian billionaire Boris Berezovsky said in an 
interview Friday that if presidential elections were to be held in 
Russia immediately, Viktor Chernomyrdin would be the best choice for the 
country.
"What would be better for Russia, if elections were held today, I think 
Chernomyrdin," Berezovsky told BBC television.

But he added he was "sure" that Russian President Boris Yeltsin would 
not resign. 

Berezovsky was speaking amid furious and continuing speculation that 
Yeltsin may shortly resign, despite his protestation on Friday that he 
intended to stay to the end of his term in 2000.

The billionaire is said to be an influential background figure in the 
Russian government and touted for possible ministerial office in prime 
minister Chernomyrdin's administration.

But he denied rumours that he had told Yeltsin that Chernomyrdin's 
predecessor Sergei Kiriyenko had to go. Yeltsin sacked Kiriyenko and 
reappointed Chernomyrdin as interim prime minister on Sunday.

"I didn't tell anything to the president, but I wrote a lot about that. 
I told all people many times that Kiriyenko is weak, the government is 
weak," he said.

"But I never told Yeltsin anything about Chernomyrdin."

Berezovsky's prescription for rescuing the Russian economy was to 
support the 20 largest Russian companies, which he said covered more 
than half the entire country's gross domestic product.

"(The) state has to pay special attention to these companies," he said.

"These companies are able to create a minimum level for Russian society. 
It's absolutely important. We have to create a special rule for these 
companies for some period of time."

He continued: "He (Chernomyrdin) understands well the needs. He does not 
understand well the market mechanisms. But I think at this stage (it is) 
most important to understand the needs of society."

He added the government's failure to push forward further economic 
reforms after 1996 had "destroyed" the Russian economy.

******

#8
Paper on Chernomyrdin's Chances on Russian Economy 

Argumenty i Fakty 
Auguste 25, 1998
[translation for personal use only]
Article by Vitaliy Tseplyayev: "Will Chernomyrdin Be Any
Better;" from the "Commentary" column; passages within slantlines
published in boldface; subheads as published

The president wants it the best possible way 

Essentially, there are two motives which prompted Boris Yeltsin to
appoint none other but Viktor Chernomyrdin. He is trying to prevent //"a
hot autumn"// at all costs and to safeguard himself and his family in case
he resigns. The coalition government ploy, the handing out of portfolios
and budgetary funds will cool down the opposition's revolutionary zeal. 
But even if some skirmishes erupt in Moscow, the president hopes, as in
October 1993, to lean again on the faithful prime minister's shoulder.
It also is very clear why Viktor Chernomyrdin agreed to return. He
seems to understand that the path to the Kremlin throne passes through the
premiership. This can happen in 2000 or earlier. After all, analysts have
been mentioning the head of state's failing health and the possibility of
his voluntary resignation. In this case the prime minister becomes the
master of the country for three months before new elections are held. It
is a question of technology, that is, the latest election technologies, to
ensure that he remains the master for the following four years.
Not only a craving for power, however, might have made Viktor
Chernomyrdin return to the helm. Perhaps he has a sincere desire to
rehabilitate himself because Russia's current crisis has all too often been
linked to his, Chernomyrdin's, five years as prime minister.
Will it turn out as usual? To all appearances, he has a chance to put
things right. In a situation when nothing can be resolved without the
elites' consent, //he is the only one who can reach agreement with
everybody//. He is more or less acceptable to the opposition, the
oligarchs and the West. Viktor Chernomyrdin is an embodiment of stability
and predictability, a political heavyweight who can afford to dispatch his
opponents in an offhand manner. He is a solid manager with a market-geared
mentality and a guarantor of the inviolability of //the natural
monopolies//, the backbone of the economy.
What can we expect from this appointment? It is obvious that economic
policy will take a turn to the left. There will probably be attempts to
continue with reforms //the way China did it//, to build a market "with a
human face," slowly, meticulously, without abrupt changes and social
upheavals. It was Sergey Kiriyenko's team that did the necessary and
thankless work of destroying the T-bill pyramid and devaluing the rouble.
The means saved by the freezing of T-bills are likely to be used for
paying pensions and wages to the budget-funded sector. In essence, it is
yet another //redistribution of the national wealth// but not from the rich
to the poor - "the masters of life" have long since kept their money in
western banks. It is the middle class, the most active and hard-working
section of the population which has entrusted banks with their modest
savings that is going to suffer.
To calm down the people, the new government will set //the presses//
in motion. But Viktor Chernomyrdin is hardly likely to allow creeping
inflation to turn into galloping inflation. He will push through the Duma
new anticrisis laws and a realistic budget. He has already promised to cut
production tax and improve tax collection.
A coalition or a chattering government? Many things depend on who
Viktor Chernomyrdin selects for his team. Will it be demagogues and
loudmouths who have never been managers but are very vociferous speakers
from the Duma podium, or professionals, even if they have "party colouring"
? If it is the former, the cabinet will turn into a branch of parliament
or a debating club, and every attempt to overcome the crisis will end in
empty discussion and moans about the sufferings of the people.
A coalition government is no solution if ministers are selected on
instructions rather than for their intelligence and talents. //The weeping
Bolsheviks// from Okhotnyy Ryad or //Vladimir Zhirinovskiy's "falcons"//
can, of course, bring the appearance of "people's trust" to the cabinet but
only up to a point. If the government starts pulling in different
directions, chasing privilege and power, the people will quickly realize
what is going on. The new old prime minister will not get a third try.

*******

#9
Young Russians Learn From Crisis
By NICK WADHAMS
August 29, 1998

MOSCOW (AP) -- Five years ago, college students like Vladimir Sinitsa and
Maxim Tarasenko had little interest in Russia's economic problems. Now they're
all ears. 

``I'm an optimist,'' Tarasenko, a 23-year-old political economy major at
Moscow State University, says over coffee and cigarettes. ``But we never
thought we'd find ourselves in economic crisis.'' 

The last time Russia's economy collapsed, Tarasenko was only 11 years old and
he doesn't remember much. So now, accustomed to the feverish optimism of the
early years of Russian capitalism, he and many other young Russians are
getting a wakeup call as the downside of reform hits them for the first time. 

And ironically, the financial collapse has caught some repeating the mistakes
of their elders, like putting faith in Russia's shaky banking system. 

``I had a bit of money, and I put half of it in one bank, and half in
another,'' said Sinitsa, a 20-year-old who just got a degree in finance at the
country's premier business school, the Plekhanov Economic Academy. 

``Now I go every day and wait in the lines so I can change my rubles for
dollars,'' he said, echoing a lament commonly heard from his elders. 

Perhaps because of the instability, commonly voiced goals haven't changed:
find a secure, well-paying job, hopefully with a Western company that pays in
dollars. 

For Sinitsa, though, it may take time. Companies are firing workers and jobs
are scarce. 

``I've still got hope, but not for the next six months,'' he said. 

One thing they've all grown up with -- and that the collapse confirms -- is
deep mistrust of the government. They say they won't trust their future to
Boris Yeltsin or anyone else in the government. 

``Our government is a boat that's covered with rust,'' Tarasenko said. ``We
have to take a knife and scrape it off.'' 

In fact, they express a view at odds with what many consider youth's natural
affinity for freedom: The government should move away from Russia's
freewheeling democracy toward stricter rule. 

Tarasenko supports Alexander Lebed -- a potential presidential candidate in
2000 elections who appeals to many older Russians sick of the country's roller
coaster economy and drawn by his promises to impose law and order. 

``Our democracy is a joke anyway,'' Tarasenko said. ``I think it's important
to have someone in power like Lebed, who will do what he wants with
criminals.'' 

Still, growing up in times that saw an influx of foreign goods and a rise in
expectations for the future leaves many students unwilling to change their
visions of the future, which often include founding a business or working in
finance. 

``The people's mentality has already changed,'' said Alexander Ratushin, a
19-year-old international economics major. ``They've felt the taste of freedom
and they won't give it up.'' 

``The most important thing for me right now is to get a strong education,''
Ratushin said. ``After all, we're the ones who are going to have to resurrect
Russia.'' 

*******

#10
No 'Sensational Results' Expected From US-Russia Summit 

Moscow, Aug 26 (Interfax) -- The forthcoming Russian-US summit is not
very likely to produce sensational results, Sergey Rogov, director of the
United States and Canada Institute, told a news conference in Moscow
Wednesday.
"The financial collapse of Russia has radically changed the entire
agenda of the US president's visit," he said. "Now Russian- American
relations are dominated by the economic situation in Russia and Russia's
stronger dependence on foreign economic aid, rather than by political and
military issues as before," Rogov said.
Before devaluation, Russia's GDP was estimated at $460 billion, he
said. "In 1998 it is expected to fall by 2 percent to 3 percent;
furthermore, devaluation will erode about 50 percent of the Russian GDP's
value, while the US GDP is evaluated at $8 trillion. This 20 to one ratio
makes it impossible to speak of equal partnership in the system of
international relations," he said.
"The financial crisis in Russia may be viewed as a failure of the US
policy towards Russia since 1991," Rogov said.
"I doubt that Clinton will bring a bagful of money and announce a new
Marshall plan for Russia. He is most likely to offer

******

#11
Berezovskiy Comments on Risk of 'Social Disturbances' 

MOSCOW, Aug 27 (Interfax) -- Only the Russian leadership's appropriate
response to the present situation in the country may preclude social
disturbances, CIS Executive Secretary Boris Berezovskiy told Interfax
Thursday [27 August].
"If the authorities do not act accordingly in the face of the
extremely difficult situation, disturbances will not be avoided," he said.
However, "all talk about some uprising in Russia is far- fetched," 
Berezovsky said. A Russian uprising is a myth beneficial for those who
want to aggravate the already difficult situation in Russia," he said.
Commenting on criticism of his actions voiced by former Deputy Prime
Minister Boris Nemtsov, Berezovskiy asked: "What can I reply to a man going
through a delayed stage of maturity, a man who has not yet found a clear
social orientation for himself?"

******