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Johnson's Russia List


September 1, 1998   

This Date's Issues: 2338 2339

Johnson's Russia List
1 September 1998

[Note from David Johnson:
1. Komsomolskaya Pravda: Interior Ministry and the Army Are Prepared to 
Cut Short Massive Civil Unrest.

2. Reuters: Russian crisis deepens further after Duma vote.
3. Reuters: How Duma voted on Chernomyrdin.
4. Fred Weir on Russians' reactions to latest developments.
5. Garfield Reynold: Re No Panic in St. Petersburg.
6. Jeffrey Busscher: a (useful?) analogy.
7. Jacob Kipp: The rocky history of capitalism in Russia.
8. Dale Herspring: Varoli and Hough. (Military).
9. Los Angeles Times: Juliet Johnson, Let Banks Just Twist in the Wind.
10. John Varoli: Re Hough and Industrial Policy.
11. Reuters: McDonald's says Russian stores busy despite economy.
12. Reuters: Shokhin Seeks Soviet and Reform Mix.
13. Journal of Commerce: Michael Lelyveld, Economists prescribe a 'bitter 

14. International Herald Tribune: Lebed Warns Military Is in 'Revolutionary 

15. RFE/RL: Paul Goble, A State Nation Among Nation States.
16. Frank Durgin: Book on Russian Agriculture.
17. Update - briefing at Georgetown University September 1.
18. MOCT "The Bridge" charity in Rostov-on-Don.]


>From Russia Today press summaries

Komsomolskaya Pravda
31 August 1998
Lead story
Interior Ministry and the Army Are Prepared to Cut Short Massive Civil Unrest 
A highly positioned source at the Defense Ministry told the daily that
the situation there now is similar to what it was in 1993 (when President
Boris Yeltsin ordered troops to fire on parliament). 
Commanders of nearby units -- the Tamanskaya and Kantemirovskaya
divisions and the Tyoplyi Stan brigade -- have been ordered to prepare
themselves for extraordinary situations. The Tula, Ryazan and Tver divisions
have received similar orders. Troops were told increase the guard on stores
of ammunition, fuel and food supplies. 
According to some sources, officers were told to return early from
vacation, and army circles are discussing the last meeting between Defense
Minister Igor Sergeyev and President Boris Yeltsin, in which Sergeyev
reportedly assured the president of the troops' loyalty and support. 
The daily wrote that the situation in the Interior Ministry is also very
tense. According to Komsomolka, the president has ordered Interior Minister
Sergei Stepashin to make sure his ministry is ready to act under
extraordinary circumstances. Interior Ministry forces are ready to mobilize
to Moscow in the event of civil unrest in the capital. 
The daily added that the Federal Security Service (FSB) is gathering
information about the possible destabilization of the situation in Moscow,
as well as keeping a watch on the explosive regions of the Far East. 


Russian crisis deepens further after Duma vote
By Anatoly Verbin

MOSCOW, Sept 1 (Reuters) - Russia's parliamentary leaders are locked into a
new showdown with President Boris Yeltsin, who has been severely weakened by
financial crisis but rose promptly to their challenge over his choice of a new
prime minister. 
The State Duma or lower chamber voted a resounding 253 to 94 thumbs down on
Monday to Viktor Chernomyrdin, the prime minister Yeltsin had discarded five
months ago and recalled last week after being forced to devalue the rouble. 
Yelsin, whose powers to dictate terms to parliament would have been slashed by
a deal Chernomyrdin tried to negotiate over the weekend, did not flinch. 
Barely two hours after the Duma vote, he nominated Chernomyrdin again. 
The last time Russian politics went round this route it took Yeltsin three
tries and the threat of a general election to get approval from parliament for
Chernomyrdin's short-lived replacement, Sergei Kiriyenko. 
This time, there is less time to spare, and election threats may not frighten
the deputies so much. 
U.S. President Bill Clinton, due in Moscow on Tuesday for a pre-planned summit
with Yeltsin, has pledged Western support, but only if Russia sticks with
market reform, something that is in doubt as Chernomyrdin tries to woo the
Communist-dominated parliament. 
Ordinary Russians meanwhile feel the crisis in their pockets. The central bank
set a rate of 9.3301 roubles per dollar on Monday, the first official quote
since 7.905 last week. 
The rouble has lost some 30 percent in two weeks and some prices have already
risen even more. 
Chernomyrdin said on Monday that, despite his defeat, he would go ahead and
propose an acting cabinet team to Yeltsin. 
``Russia today is, in essence, on the verge of economic and political
breakdown,'' said Chernomyrdin. ``Russia cannot do without a government.'' 
A Kremlin source said on Monday it was not yet clear whether Yeltsin would try
to push Chernomyrdin through in a third vote if the second attempt failed. 
A third rejection of Yeltsin's nominee would lead to the Duma's dissolution.
An ahead-of-schedule parliamentary election would be expensive and likely to
return a parliament even more hostile to the Kremlin. 
British Prime Minister Tony Blair told Yeltsin on Monday any new help for
Russia from the Group of Seven leading industrial nations would be tied to the
continuation of economic reforms. 
In Germany, Russia's biggest creditor, Chancellor Helmut Kohl said
developments could turn dangerous. He said it was in the West's interests to
reinforce Russia's stability but ruled out new credits if Moscow abandoned
market reforms. 
Clinton is expected to drum that message home. 


TABLE-How Duma voted on Chernomyrdin

MOSCOW, Aug 31 (Reuters) - The State Duma, Russia's lower
house of parliament, rejected President Boris Yeltsin's nominee
for prime minister, Viktor Chernomyrdin, in the first of up to
three votes.

The following are the results of the open ballot voting.
Most deputies followed their party lines.

The overall vote was 94 for and 253 against.

Communist 0 124 0 9
Our Home 63 1 0 2
LDPR 0 1 0 49
Yabloko 0 41 0 2
Regions 24 11 0 9
People's Power 2 29 0 13
Agrarians 1 34 0 1
Independents 4 12 0 14


Date: Mon, 31 Aug 1998 
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT Sept 1) -- Russia's warring politicians are
accusing each other of inciting chaos and popular revolt
following parliament's rejection of Viktor Chernomyrdin as prime
But a street survey of average Russians in downtown
Moscow Monday found them furious with their leaders but
disinclined to take to the streets.
``It's sickening to watch this happening. Schoolchildren
are generally smarter and better behaved than these
politicians,'' said Galina Polischuk, a 50-year old primary
school principal.
``The country is in a terrible state. Children are going
hungry and teachers aren't being paid, and all they have for us
is conflict and bombast. I wish they would all go to hell.''
Russia's fragile economy has been unravelling for weeks,
and ordinary Russians have begun to feel the pain. After the
rouble was devalued, peoples' savings evaporated and prices
jumped. A wave of bank failures has added to the general sense of
But the crisis became a full-blown political one Monday
when the Communist-led State Duma rejected President Boris
Yeltsin's appointment of Mr. Chernomyrdin as prime minister. That
is not the last word -- the Duma must vote three times on the
issue -- but it means the country is left without a legitimate
government while politicians battle and the economy nosedives.
``If this chaos lasts for several more weeks, it may
happen that there will be neither Communists nor us,'' Mr.
Yeltsin's parliamentary representative Alexander Kotenkov said
Monday, urging the Duma to vote for Mr. Chernomyrdin. ``I mean
popular uprising, merciless and senseless.''
Communist leader Gennady Zyuganov also invoked the
spectre of mass revolt if Yeltsin refuses to give parliament the
additional constitutional powers it wants to deal with the
``If we fail to reach an agreement here, everything will
spill out onto the streets,'' Mr. Zyuganov said.
But Ms. Polischuk says that's nonesense.
``I don't know what it's like in other parts of Russia,
but no one here wants to turn a terrible situation into
catastrophe,'' she said. ``Revolution won't solve anything. A
little bit of sensible cooperation and hard work by politicians
just might.''
Moscow has fared better in post-Soviet years than much of
the country, because it is the seat of power and has received the
lion's share of foreign investment.
But the new middle class, which has suffered
disproportionately in the financial meltdown, is heavily
concentrated in Moscow. If their mood were to turn ugly the
consequences could be far worse than any isolated revolt in
Russia's far-flung provinces.
``Stability in a few big cities, like Moscow, is crucial
to the survival of the Yeltsin government,'' says Alexander
Konovalov, an expert at the independent Institute of Strategic
``If this crisis brings financial ruin to the majority in
those cities, it could bring people into the streets. It would be
very close to a revolutionary situation.''
But only one of ten Muscovites questioned Monday said the
hour to rise up has already struck.
``We have been humiliated for years by this gang of
thieves,'' said Serafima Nikolayeva, a 70-year old pensioner who
said she's been a Communist all her life. ``Let Zyuganov give the
call, and I'm ready to fight at any time.''
Nikolai Bordovoi, a 34-year old bank worker, agreed that
something radical should be done to end the country's tailspin,
but said that mass action is not the way.
``I believe a strong man is needed to straighten things
out,'' he said. ``That's the Russian way. And if a strong man
seizes power and starts to do what's needed here, I will support
Most others said they were too disgusted with politics in
general, too exhausted by years of turmoil or too absorbed in the
daily struggle for survival to think about taking to the streets.
Analysts say the absence of any opposition force with
mass support, and a perceived lack of credible alternatives to 
integrating Russia with the capitalist world market, are major 
reasons today's situation -- though it is dire -- is not yet 
verging on social explosion.
``I hate Yeltsin and I hate Chernomyrdin, but I hate the
Communists more,'' said Yevgeny Kramer, a 26-year old music
student. ``They are all stupid, but revolution is more stupid.
``I feel sorry for Russia, that it has no leaders who can
rise to meet this crisis. I really fear a disaster is coming. But
when it does I'll be home with my family, not in the streets


Date: Mon, 31 Aug 1998 
From: Garfield Reynolds <> 
Subject: Re: No Panic in St. Petersburg

Well, yes, no panic, but plenty of concern.

Perhaps for lack of space or because they had not hit our web site in
time, David has not included much of The St. Petersburg Times' coverage
in recent JRLs. However, to summarise: there are no large queues at St.
Petersburg banks, but people have had problems getting their money out.
I also know of one Sberbank branch where the only windows woprking were
the ones for closing accounts, because that was what so many people
there were doing. 

Meanwhile many shops have closed down for a day or so to change prices,
others have been hit by an increased amount of buying as wily St.
Petersburgers, well aware that dollars just cannot be found at exchange
points, swap their rubles for goods that have the capacity to retain

Many businesses are also facing hard times because their suppliers are
demanding cash up front. Anyone out there interested in catching the St.
Petersburg angle can do so at our web site:

Yours sincerely,

Garfield Reynolds,
Business Editor
The St. Petersburg Times.


Date: Mon, 31 Aug 1998
From: "Jeffrey S. Busscher" <>
Subject: a (useful?) analogy

When it's time to do some soulsearching on the implosion of the free-market
and constitutional democratic process in Russia--to assign responsibility
for opportunities squandered and time lost--I wonder if the following
analogy would be of use: It's like the scenario when the big brother coaxes
his very much younger brother to the high dive platform...not paying
attention to the fact that he is (in fact) very much too young to be up
there and secondly, conveniently forgetting the fact that he himself was
very much older when he took his first dive. The younger gets to the
platform...gets dizzy, more flops than dives and seriously injures himself
by entering the water like a pancake instead of the seamless entry of his
dolphin like brother. Who was really (at least partially and perhaps
mainly) at fault? I have no doubt that the brother's mother would be quick
to assign responsibility accurately! The eagerness of the younger does not
excuse the need for a more circumspect judgement of the elder...and for
that the responsibility is at best--shared equally--though the consequences
are quite decidedly one-sided. 


Date: Mon, 31 Aug 1998
From: "Jacob Kipp" <KIPPJ@LEAV-EMH1.ARMY.MIL> 
Subject: The rocky history of capitalism in Russia

Russia's earlier attempt to build a market economy in the second half of the
nineteenth century has much to say about the evolution of capitalism in
national economies. Russia had a period of open markets, commercial bank
development, and enticement of foreign investment that lasted into the 1870s
and was associated with the development of private railroads. Its collapse
began with the Grunder in Germany and its extension into Russian capital
markets in the late 1870s in association with the Russo-Turkish War. The
second great spurt of capitlaist development came in the 1890's with Witte's
adaptation of List's National System of Political Economy to Russia. It
collapsed as a consequence of war and revolution in 1904, although there
were already signs of rural dissatisfaction with Witte's protectionism and
tight credit policies. The third spurt of capitalist development proved
even shorter in duration -- there was a serious economic down turn in 1912
-- and its collapse came with modern war and revolution. Bottom line:
capitalism, like Clausewitz' war, is a chameleon. It adapts to national
settings and to dynamics of complex systems. 


Date: Mon, 31 Aug 1998
From: Dale R Herspring <> 
Subject: Varoli and Hough

While I make no pretensions about being an economist, I do know
something about the military. As a result, I was somewhat
takenback by John Varoli's bringing up the militarization of Russian
society as the probable outcome of a Chernomyrdin Prime Ministership.
There are a number of problems with this suggestion.
1. It was not the military in the 20s and 30s which pushed militarization
but the country's political leadership in the form of Stalin and his
2. No one knows better than Russian military leaders that a good military
is dependent on a viable economy. As isolated as they have been over the
years, they know that a strong economy is critical is Russia hopes to play
in the new high tech game that is facing them. They know better than
anyone that they are falling further and further behind in this regard.
One cannot hope to build up only the military sphere.
3. The centralized attack strategy of the 30s makes little sense in this
current situation.
4. Political stablity is critical for the Russian military. They are not
about to support anything if it does not lead to greater political
stability, and given what has happened in the past ten years, I find
myself hard pressed to believe that the populace is going to sit on its
hands and permit the country to go back to the 30s.
5. Even if we were faced with a President Lebed, it does not follow that
he would militarize the country's economy. Lebed knows only too well that
the country cannot survive with so much emphasis in that direction.
6. The military leadership is split. Indeed, I would argue that the
military itself is so split that it would be hard to talk of a "military
role." It depends on which generals one is talking about.
Would the generals be happy if more money was allocated to the armed
forces? Absolutly. On the other hand, they are so far behind the West
now, that I think even the worst trogladite knows that the country needs a
major overhaul. 


Date: Mon, 31 Aug 1998
From: Juliet Johnson <juliet.johnson@Dartmouth.EDU> 
Subject: FYI LA Times Op-Ed

Los Angeles Times
August 31, 1998 
[for personal use only]
Perspectives on Russia: 
Let Banks Just Twist in the Wind 
Juliet Johnson Is a Visiting Assistant Professor at Dartmouth College
and Is Author of a Forthcoming Book on Russian Banks

The emerging conventional wisdom that the West must bail out Russia's
collapsing financial system to stave off fascism has it exactly
backward. The current banking crisis presents Russia with its best--and
perhaps last--opportunity to check the power of the parasitic
financial-industrial oligarchy that has persistently retarded Russia's
political and economic development. 
During the 1996 presidential race, Western pundits dubbed the
influential financiers who bankrolled Boris Yeltsin's election campaign
Russia's "robber barons." This attribution is catastrophically
misleading. The largest Russian banks have not made their money by
investing in rebuilding Russian industry. Despite the then-stable ruble,
in 1997 fewer than 10% of all bank loans to enterprises in Russia were
Rather, the bankers became wealthy by engaging in speculative financial
machinations and exploiting their close ties to the government. The
collapse of the Russian treasury bill and stock markets, precipitated by
the Asian financial crisis and the drop in oil world prices, laid bare
this glaring structural weakness. Russia's banks do not act like banks. 
Why should we now let the banks suffer the consequences of their
Icarus-like search for financial glory? Because it will not hurt
Russia's sinking economy and may save Russia's fragile democracy. 
Russian citizens would be little affected by the collapse of Russia's
top commercial banks. Fully 77% of Russians have no bank savings at all,
and of those who do, about three-quarters keep their money in the
state-owned savings bank Sberbank. Unlike Western investors, average
Russians long ago voted no confidence in their country's commercial
banking system. 
Russian industry, too, would remain almost unscathed. Most transactions
among enterprises already take place outside of the banking system. In
fact, according to economist Grigory Yavlinksky, 75% of the economy
operates on a barter basis. A banking crisis would not cut growth by
restricting the availability of credit to enterprises, because the banks
never granted significant loans to enterprises in the first place. 
Neither would future foreign investment in Russia be significantly
affected by a banking collapse. While this was previously a compelling
argument for supporting the banking sector, Russia's devaluation and
subsequent 90-day moratorium on foreign debt servicing for favored banks
will quash any remaining foreign investor interest in Russia for many
Finally, the fall of the biggest Russian banks would have few long-term
repercussions on international financial markets. Although the bankers
are economic powerhouses in Russia, they are relatively tiny on the
world scale. The assets of the entire Russian banking system (excluding
Sberbank) are about 80 times smaller than that of the United States.
Some current foreign investors will inevitably take a hit--Russia's
banks hold about $19.2 billion in foreign debt--but that is hardly
reason to throw good money after bad by continuing to support a fatally
flawed banking system in Russia. 
How would it benefit Russia's future as a democracy? The bankers have,
astutely, used their connections and relative wealth to amass
ever-greater political power in Russia. They now control many of the
largest media outlets, regularly serve in high government positions,
provide much of the financing for Russia's political campaigns and
periodically threaten its elected leaders by publicly predicting dire
authoritarian consequences if the state does not look after the bankers'
interests. Russia's banks have used the political system to ensure a
continued flow of state resources into their coffers, while the
government has amassed a massive debt burden with no economic progress
to show for it, and ordinary Russians suffer perpetual wage arrears.
Russia's democracy, in short, is hollow. Although letting the banks fail
would have uncertain political consequences, supporting them would
undoubtedly perpetuate this gradual evisceration of democratic practice
in Russia. 
Unfortunately, Yeltsin and his government are unlikely to abandon the
bankers. Yeltsin's reappointment of old standby Viktor S. Chernomyrdin
as acting prime minister indicates that the state and the leading
financial-industrial groups are already too politically and economically
intertwined for the state to break free. Yet the West should not make
matters worse by financially supporting this twisted relationship. The
IMF's recent ill-considered loan has already been wasted. When Clinton
goes to Moscow this week, he should refuse further aid to help Russia
"weather" the financial crisis. Russia's banks aren't worth bailing out. 


Date: Mon, 31 Aug 1998
From: John Varoli <> 
Subject: Re: Hough and Industrial Policy

Professor Hough's most recent comments on industrial policy are
indicative of a disturbing trend in Russian studies--- the inability or
unwillingness to accept dissonant information, even that which has been
gathered through extensive field research.
I do not claim to be totally correct, and I hope I am wrong. But my
opinion on a possible Chernomyrdin industrial policy, which I expressed
in JRL 2334, has been formed by meeting and talking with dozens of
Russian factory directors, as well as visiting their factories, over the
course of the past two years working as a business correspondent.
Also, I have studied Russian history, something which, I have noticed,
most people pay little attention to.
The course of a country's history/ development, like human behavior,
usually changes gradually. Radical breaks with the past are rare, and
such attempts often see their vigor whither under the weight of a
country's established ways, traditions, and policies.
And in Russia, conservative tendencies are even more pronounced because
of the nature of the culture.
No wishful thinking can change the fact that most existing Russian
factories were created to supply the military. 
Not to mention that the Russian state has for centuries conducted an
aggressive expansionist foreign policy, using most of its industrial
might toward this goal.
If the Russian government indeed wishes to break with its past and
launch a healthy industrial policy--- one based on production for the
civilian sector--- then the first step it will take is to begin
bankrupting many former defense factories. A peaceful Russia simply does
not need so many.
If the government does not take this step, but wishes to save these
factories, then it will have to help them produce that for which they
were created--- weapons and other military equipment.
While we all hope that Hough is correct, objective reality does not
favor his position.
Finally, about Hough's lamentable comment..."Clearly Russia needs a
Chinese cultural revolution that sends the Moscow and St. Petersburg
intellectuals to the countryside for five years."
Do I need to mention how many millions of Chinese died during the
Cultural Revolution? 
Why is Hough filled with such hate and anger, that he wishes suffering
and death on Moscow and St. Petersburg intellectuals?


McDonald's says Russian stores busy despite economy

CHICAGO, Aug 31 (Reuters) - Fast food giant McDonald's Corp. 
said Monday that its 39 Russian
restaurants are busy and have seen no change in demand despite devaluation of
the Russian currency and economic woes in the country. 
"The stores are busy, we haven't really seen a change," said spokesman Mike
Gordon. "The restaurants are open, serving customers." 
McDonald's restaurants had maintained a rate of 13 roubles for its trademark
Big Mac sandwich even as the Russian government devalued the currency last
week. But it has since hiked the cost to 15.50 roubles. 
Two weeks ago, a Big Mac cost about $2 but now goes for only about $1.55,
based on an unofficial street rate of about ten roubles to the dollar. 
Gordon said management of Oak Brook, Ill.-based McDonald's is closely
monitoring what is going on in Russia, but so far plans to open the 40th
Russian McDonald's are still on track for September, he said. 
"We're there for the long term," Gordon said. 
Of the McDonald's 39 restaurants in Russia, about half are in Moscow. The 39th
was opened just 10 days ago. 


Shokhin Seeks Soviet and Reform Mix 
August 31, 1998

MOSCOW -- (Reuters) Aleksander Shokhin, acting Prime Minister Victor 
Chernomyrdin's closest ally in parliament, said on Monday Russia needed 
a mix of Soviet-style and market reforms to emerge from crisis. 
Shokhin, who leads Chernomyrdin's Our Home Is Russia group in the lower 
house of parliament, called for a balance between printing new money, 
administrative control and reform in taxation and other areas. 
"Some measures which are needed now may appear to be a retreat from 
market reforms," Shokhin, a prominent economist tipped to take a senior 
government post if Chernomyrdin is eventually approved, told the Duma 
before a confirmation vote on Chernomyrdin as prime minister. 
"These measures should be mixed with reform, structural reform above 
all, and second, these measures should be strictly limited in time until 
we emerge from the pit of crisis," he said. 
Shokhin's remarks are significant because Chernomyrdin, who was prime 
minister from 1992 to March 1998, has given few specifics of how he will 
seek to remedy the country's prolonged economic ills that resulted in a 
devaluation of the ruble and default on some foreign debt two weeks ago. 
During a speech before Shokhin spoke, Chernomyrdin said he would not 
allow the Russian banking system to collapse and he pledged to defend 
Russians' savings, the value of the ruble, and said the government would 
pay pensions and wages. 
He also said he would defend farms and industry, but gave no details how 
he would implement the measures. 
The Communist-dominated Duma, which has two more chances to approve 
Chernomyrdin after rejecting him on Monday or face dissolution, favors 
printing more money to pay state expenses along with a return to more 
state control over the economy. 
The international community, which in July agreed to lend Russia $22.6 
billion, is insisting on continued progress down the path of free-market 
economics before they send over the next payments on the loan. 
Shokhin -- who pundits say may become the central banker or finance 
minister under Chernomyrdin -- on Monday attempted to reconcile these 
two contrasting approaches. 
He said that using purely administrative methods could lead to a 
shortage of goods as in Soviet times, and simply printing money would 
lead to the wild inflation of 1992 and 1993. But a mix of these policies 
and some reform would work, he said. 
"The dangers of which I spoke could be the same if a balance between all 
the unavoidable methods needed to get out of the crisis are not 
successfully achieved," said Shokhin, known for his thick glasses and 
owlish demeanor. 
He did not give details of how exactly his fusion of new and old would 
revive the economy, which has seen a sharp hike in prices and a public 
run on banks over the past two weeks. 
Shokhin, 47, has served in the past as a deputy prime minister, chief 
foreign debt negotiator, first deputy parliament speaker and most 
recently as head of the pro-government bloc in parliament. 
Shokhin said lower taxes with more efficient collection -- also a goal 
of the previous government of Sergei Kiriyenko -- would be a priority. 
He said he favored a lower personal income tax rate of 20 percent, down 
from 35 percent, and lower value-added taxes of 17-18 percent, down from 
20 percent.


Journal of Commerce
September 1, 1998
[for personal use only]
Economists prescribe a 'bitter pill' 
During his visit, President Clinton will urge drastic steps to save 
Russia's economy but isn't likely to offer more than moral support. 

Western economists are urging drastic steps, including currency 
restrictions, to save Russia's sinking economy as President Clinton 
begins a mission to Moscow that may offer little more than moral 
As the two-day summit with President Boris Yeltsin opens, experts are 
sharply divided on whether Moscow can be rescued again, or whether it 
should be forced to go it alone after ambushing the financial world with 
an effective 33% devaluation on Aug. 17.
But both sides agree that this crisis is different from previous Russian 
debacles because Western nations have grown unwilling to help.
Padma Desai, a Columbia University economist, said that the 
International Monetary Fund approached the Group of 7 industrialized 
nations last week about raising more cash for Russia.
"It didn't fly," said Ms. Desai. "That's a big change."
Part of the reason is diminished capacity. The IMF has been strapped by 
bailouts stretching from Indonesia to South Korea, while its latest 
$11.2 billion loan plan for Russia is barely six weeks old. Worse yet, 
the West's pockets are also closed in anger. Perhaps one-fourth of the 
$38 billion in short-term debt that Russia rescheduled last month was in 
foreign hands.
Acting Prime Minister Viktor Chernomyrdin promised Monday in a speech to 
the parliamentary State Duma that he would scrap the debt plan and other 
measures announced by his dismissed predecessor, Sergei Kiriyenko.
But it is still unclear whether Mr. Chernomyrdin will get a chance to 
implement any plan. On Monday, the Duma rejected his nomination by a 
251-94 margin in the first of three votes after the Communist Party 
spurned a power-sharing deal. Anticipating disaster, Russia's Central 
Bank announced early in the day it would not trade rubles for hard 

Unmasked as a fraud

However the Kremlin escapades come out, some experts feel that Mr. 
Yeltsin's seven years of reform pledges have been unmasked as a fraud.
"The emperor has been exposed as having no clothes," said Marshall 
Goldman, associate director of Harvard University's Davis Center for 
Russian Studies. "The whole thing underneath was rotten."
Mr. Goldman and Ms. Desai have very different prescriptions about what 
to do next, but both are bitter pills.
Mr. Goldman would bar any additional aid until Russia launches a 
thorough cleanup of its banks, including re-nationalization and 
In Eastern Europe, a similar process of consolidating bad loans into 
separate institutions took several years to sort out.
But Ms. Desai believes there is no practical alternative to increasing 
Western aid immediately and easing rather than tightening IMF loan 
conditions for Russia, although political resistance is enormous. The 
IMF will have to back away from inflation targets of as little as 5% 
next year and deficit spending goals of 2.8% of gross domestic product, 
compared with 7% of GDP last year, she said.
Ms. Desai says Russia and the IMF should also agree to abolish current 
account convertibility of the ruble, which has allowed foreign investors 
to buy into the high-yielding Russian treasury bills, known as GKOs, and 
convert their profit back into hard currency.
Although convertibility has been seen as a primary post-Soviet 
achievement, it has also given Russian banks a means to spirit profit 
out of the country.
Last week, the ruble's plunge was accelerated when the Central Bank 
lowered reserve requirements for banks, hoping to save them from going 
Instead of meeting depositor's demands or covering short positions, many 
reportedly bought dollars instead.
On Sunday, the head of the Federation of German Banks (BDB), Martin 
Kohlhaussen, also backed the idea of "unconventional" measures for 
Russia such as capital and currency controls, Bridge News reported. 

Will the dollar be broken?

But it is unclear whether the tie to the dollar for major currency flows 
can be easily broken or whether it would succeed in circling the wagons 
around the ruble until it becomes credible again.
Implications for trade and repatriation of profit are also uncertain. On 
the other hand, there is scant hope for profit if chaos persists.
Keith Bush, director of the Russian and Eurasian program at the Center 
for Strategic and International Studies in Washington, said that 
declaring a halt to convertibility may accomplish little after most 
currency trading has already stopped.
"It's locking the door after the horse is bolted," said Mr. Bush, adding 
that currency flows into Russia are effectively dead. "No bankers are 
going to justify touching that market for several years."
That reality leaves the IMF as Russia's sole foreign resource. Mr. Bush 
sees the immediate problem as political. The IMF will be unable to 
approve its next $4.3 billion loan tranche on Sept. 15 unless a Russian 
prime minister and negotiating team are in place and in power.
The IMF's first loan installment of $4.8 billion in July has already 
vanished in a puff of smoke during the Central Bank's unsuccessful 
defense of the ruble. Mr. Goldman believes it has found its way into 
Swiss bank accounts. 

But is it enough?

The second installment, if it comes, could be enough to pay back wages 
for soldiers, teachers and the miners who have been demonstrating in 
front of the Russian White House. But would it be enough to support the 
"God knows," Mr. Bush said.
Ms. Desai also argues that politics is the key to controlling the 
crisis. She has been urging Mr. Clinton to address the Duma directly 
during the summit with pledges of support. By according it respect as an 
elective body, an American president could get it to act, she said. 


International Herald Tribune
September 1, 1998
[for personal use only]
Lebed Warns Military Is in 'Revolutionary Mood' 
The Associated Press

PARIS - Alexander Lebed, the hard-line retired Russian general who is a 
sharp critic of President Boris Yeltsin, said in an interview published 
here Monday that Russian soldiers, officers and their families were ''in 
a revolutionary mood.'' 
''What mood do you think the army is in when officers haven't been paid 
for five months?'' he said in the interview with the French daily Le 
''Wives are storming the division headquarters,'' he said, ''and the 
commander says: 'As long as you've got earrings you've got nothing to 
complain about.' The army is in a revolutionary mood.'' 
Mr. Lebed, elected this summer as governor of Krasnoyarsk Province in 
Siberia, said Russia was ''on the verge of a social explosion'' in the 
wake of the recent ruble devaluation and devastating economic downturn. 
''Power could collapse within 24 hours,'' he said. 
But he endorsed Acting Prime Minister Viktor Chernomyrdin. 
''The country is falling, and only a heavyweight can slow its fall,'' 
said the veteran of the war in Afghanistan. ''For various reasons, all 
the heavyweights are out of the game. Only Chernomyrdin remains. He has 
a small chance to slow the collapse.''
''It's in everybody's interest to support him,'' Mr. Lebed added. ''If 
not, we're going to drown.''
Mr. Lebed, a presumed presidential candidate in the next election, in 
2000, has often made dire warnings that Russia was on the verge of 
While the current crisis is inflicting severe economic pain on Russia's 
hard-pressed citizens, there have been no reports yet of social 
Mr. Lebed compared the current situation to the hard-line August 1991 
conspiracy against Mikhail Gorbachev.
''After the 1991 putsch, power collapsed in a matter of hours,'' he 
stressed, saying it could happen again.
Mr. Lebed said Mr. Yeltsin's future ''depends on his ability to avoid 
abrupt gestures, like dissolution of the Duma.'' 
Mr. Yeltsin, he predicted, will come under intense pressure to resign.


Russia: Analysis From Washington -- A State Nation Among Nation States
By Paul Goble

Washington, 31 August 1998 (RFE/RL) --Underlying all of Russia's current 
problems -- the collapse of its currency, stock markets and public 
confidence in its government -- is the fact that the Russian Federation 
is a country different from most others around the world. 
Russia is a state nation rather than a nation state. That is, the 
Russian people define themselves in terms of the state rather than the 
state being defined by the people, a pattern that undermines the state's 
ability to maintain authority when its power is weak. 
In contrast to most of its neighbors, the Russian state thus lacks the 
authenticity that states rooted in a nation generally have. 
Consequently, it cannot count on either the authority that such rooting 
often gives or on popular willingness to go along with the state when it 
is unable to deliver but has to make tough choices. 
And that in turn predisposes the Russian state whenever it finds itself 
weakened to try to demonstrate its effectiveness either by relying as 
now on outside support or by using coercive measures to compel its 
population to go along. 
Neither of these means represents a full solution to its political 
dilemmas, but the absence of the kind of natural deference to the 
political authorities that a nation state provides gives the Russian 
state few alternatives and helps to explain why historically it has been 
so difficult for Russia to escape from one of its periodic times of 
This very contemporary Russian problem has its origin in a special 
feature of Russian history. Namely, the Russian state became an empire 
long before the Russian people became a nation. 
Beginning half a millennium ago, the Russian state began a rapid 
expansion across an enormous territory coming to embrace dozens of 
different peoples and cultures. But because the central authorities, 
first Tsarist and then Soviet, defined the population as Russia's, the 
ethnographic group known as the Russians was left in an extremely 
difficult position. 
On the one hand, their identities were defined by the state, leaving 
them at the mercy of its strength and also with no clear definition of 
who they were and equally important who they were not. And that in turn 
meant that they seldom were clear about the borders around themselves 
and their people. 
On the other hand, the state could claim the allegiance of these people 
not as its representative because of who they were but only in terms of 
its ability to demonstrate power and deliver the goods. 
Whenever the Russian state has been strong, the loyalty of the Russian 
people to it has been impressive, even remarkable. But whenever the 
Russian state has been weak, that loyalty has tended to snap, further 
reducing the ability of the state to gain the kind of support it needs 
to regain its strength without taking measures that will repel others. 
Just how serious this problem is for Russia becomes clear in any 
comparison with the nation states that surround it. Sometimes the 
relative success of the non-Russian countries which gained or regained 
their independence in 1991 is explained by their small size. 
Sometimes it is explained by the fact that these countries generally 
view the collapse of the Soviet empire as a gain rather than like most 
Russians as a loss. 
But underlying both of these is the presence in many of these countries 
of a bond of loyalty between the state and the nation, a bond that is 
inevitably complicated and imperfect but one that allows the state to 
count on at least some support even when it is relatively weak and when 
it cannot deliver everything it promises. 
To take the most dramatic example, the Estonian state immediately after 
the recovery of independence was able to ask its nation to make some 
extraordinary sacrifices in order to allow the country to escape the 
consequences of Soviet domination. 
Despite economic measures that hurt many people in that country, 
Estonians generally supported the state precisely because they saw an 
identity between its interests and their own. 
Since 1991, the Russian state has not been able to draw on such a 
reserve of support. And while that does not explain all of Russia's 
current difficulties, it does help to explain why they are as large as 
they are and why both the Russian state and the Russian people are 
having a far more difficult time than other states and nations in the 


Date: Mon, 31 Aug 1998 
From: "Frank Durgin" <>
Subject: Book on Russian Agriculture

There have been some requests on the list for information 
about Russian Agriculture.
Professor Steve Wegren of Southern Methodist University most 
recent book on the subject has just published by 
Pitttsburgh University Press.
" Agriculture and the State in Soviet and Post-Soviet Russia" 
University of Pittsburg Press 1998 " 238. PP


Date: Mon, 31 Aug 1998 
From: "Cheryl C. Sawyer" <> 
Subject: update - briefing at Georgetown University

Dear Mr. Johnson,
Would you mind running an updated announcement for our briefing tommorrow?
Thane Gustafson will also be participating.

Cheryl Sawyer
Georgetown U. CERES 

On Tuesday, September 1, the Georgetown University Center for Eurasian,
Russian and East European Studies will host "The Summit and the New/Old
Russian Government," a briefing and discussion on the current political and
economic situation in Russia and the upcoming presidential summit. Panel
members will include Harley Balzer, CERES Director; Angela Stent, Professor
of Government; Thane Gustafson, Professor of Government, Georgetown
University; Clifford Gaddy, Fellow, The Brookings Institution and Adjunct
Professor, Georgetown University; and Leon Aron, Resident Scholar, American
Enterprise Institute. The session will be held from 3:30 - 5:30 p.m. in
McNeir Auditorium (New North). For more information contact CERES at 687-6080.


Date: Mon, 31 Aug 1998
From: "moct" <> 
Subject: Re: Charities

In response to the request for information about charities in Russia, I
would like to suggest the charitable foundation for which I work, MOCT
"The Bridge" in Rostov-on-Don. MOCT is an HIV/AIDS, alcohol and narcotics
initiative that includes education, youth and counseling departments. 

The Education team has developed a "healthy decisions" curriculum,
including posters, video, workbook, that we are training
psychologists/teachers in Azov and Kuleshovka to use. Further, we have
developed brochures regarding HIV/AIDS, STDs, and narcotic use, including
alcohol drinking and smoking. Within Rostov, we conduct visiting lessons
on these themes at local schools. Training sessions with local teachers are
planned for this autumn. We have conducted seminars for various churches
and social organizations as well. The Education Department continues to
produce new literature - translations of methodologies, scholarly articles
and so on, which we distribute to professionals and interested parties in
Voronezh, Volgograd, Krasnodar, Azov, Taganrog and Rostov-on-Don.

The Youth Department operates a drop-in center at the Donskoi Government
Technical University 2 nights a week, with plans for expansion this
academic year. It organizes monthly "molodeshkas" and is planning
sport-related programming for the fall. The Youth Department and the
Education Department have a joint initiative with local radio station
EchoRostov - a weekly one-hour radio program that discusses the topics
which we deal and takes telephone phone calls. We also have done extended
specials, two-hour programs on Sunday afternoons. Furthermore, the youth
program maintains direct contact with users with regular visits and
discussions with youth in old kindergartens and cellars where drug users

The Counseling Department provides free individual and group counseling to
those attempting to break free of chemical dependency and their close
Psychological support and connections to local resources are also provided
to HIV-infected and -affected parties.
Our foundation was created with grants from the Rufford and Laing
Foundation that were secured by the Salvation Army. MOCT was registered as
a social organization Aug.5, 1997.
If you would like to learn more about our program, please contact us at or tel/fax 8632-51-62-34.
Thank you very much.
Maureen Diffley
Education Coordinator
Russia 344030
Ulitsa Buinakskaya 30, k.2
(tel/fax) 7-8632-51-62-34


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