September 1, 1998   

This Date's Issues: 2338• 2339••

Johnson's Russia List
#2339
1 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Russians unimpressed, but Clinton OK just the same.
2. Ray Finch: Investment Opportunities.
3. Milan's Corriere della Sera: Interview with Russian Yabloko 
leader Grigoriy Yavlinskiy, "Yavlinskiy: 'West To Blame: It Backed 
a Corrupt Regime'"
4. Bruce Bean: Financial Crisis.
5.Komsomolskaya Pravda: Viktor Baranets, "Today the Kremlin Is 
Gathering Spetsnaz Veterans."
6. The Guardian (UK): Deaf ears await lesson from Uncle Sam. 
Tom Whitehouse reports from a Moscow school where pupils are 
prepared to learn the hard way.
7. The Independent (UK): Anne McElvoy, Russia's old hand at the
helm. (Chernomyrdin).
8. Mayak Radio Network: Aleksei Arbatov on Russian-US Summit.
9. Reuters: Security chief rules out force in Russia crisis.]

*******

#1
Russians unimpressed, but Clinton OK just the same
By Peter Graff

MOSCOW, Sept 1 (Reuters) - Two weeks ago it was Mick Jagger. Last week, Ringo
Starr. And this week, Bill Clinton. 

In the middle of a spiralling economic crisis that has sent the rouble into
freefall and paralysed the entire political system, Russians can probably be
forgiven if they have grown a bit indifferent to the parade of famous
foreigners in Moscow. 

Russia's press, consumed by President Boris Yeltsin's desperate attempts to
obtain parliamentary approval for Acting Prime Minister Viktor Chernomyrdin,
relegated the first summit in nearly 18 months between the two leaders mainly
to the inside pages on Tuesday. 

The popular daily Moskovsky Komsomolets put its Tuesday morning story on page
four, calling the summit a meeting of ``unfortunates'' because of both
presidents' political weakness. 

Even the English-language Moscow Times ran only a small story, also on page
four, giving the U.S. president considerably less space than a lounge singer
who performed for striking coal miners, and about the same amount as a man who
was rescued by police after falling down a garbage chute. 

Nevertheless, when asked, most Russians had only nice words for Clinton, which
is more than could be said for Yeltsin. 

``Clinton is a good president. I think he's a lot better than ours,'' said
Oleg, 14, a pupil at Moscow's School Number 19, where Clinton was to speak
later in the day. 

Another pupil, Sergei, 16, said it was going to be exciting to meet ``the
president of one of -- acutally the -- most famous country in the world.'' 

Many Russians believed -- probably incorrectly -- that Clinton is planning to
announce a major new financial aid package during the summit. 

``He came. He brought money. He'll rescue Russia. Otherwise there will be a
world crisis. The Russian economy is linked to the world economy. That means
everything will blow apart if they don't give us some cash,'' said Vasily
Ivanovich, a heavily bearded man in his thirties on Moscow's New Arbat street.

``Our president is morally dead. Politically and economically. Sure, he walks
and talks. But up here, he's already lost it,'' he said, pointing to his head.

``Clinton is a good guy. He does well with the girls. That means he's capable
all around.'' 

Indeed, Russians have reacted generally with mild bemusement to what Clinton
has called his ``inappropriate'' relationship with 21-year-old White House
intern Monica Lewinsky -- known here as ``Monika Levinsky.'' 

Ultra-nationalist Vladimir Zhirinovsky, who has beat a female deputy on the
floor of parliament, used his face to sell ``Zhirinovskaya Vodka'' and made a
film in which he cavorts with naked women, criticised Clinton in parliament on
Monday. 

``We, as individuals with high moral character, would prefer not to meet a
person who still can't sort out his relationship with his secretary,''
Zhirinovsky said. ``In the traditions of Russian society, in such situations
one divorces the old wife and marries the secretary.'' 

Yulia Yasinskaya, a teacher at School Number 19, said she was not worried that
Clinton's reputation as a womaniser would make him a bad role model for the
school's children. 

``They know about Clinton's affair with Monica,'' she said in English. ``But
in Russia it is so far away, so we judge Clinton on everything he does for the
country. I believe there is something good he did.'' 

Yelena Alexeyeva, a mother of two pupils at the school, agreed. 

``If he wants to live that way, let him live however he likes,'' she said. 

*******

#2
Date: Mon, 31 Aug 1998
From: "Ray Finch-Kroll Associates, Moscow" <krollrf@aha.ru> 
Subject: Investment Opportunities

This is a true story. Sunday morning (30 August), was mild and clear, and
thought I'd get a little air before heading for work. (It's not so much that
I'm that busy, it's just that my family is back in the States and my
apartment is rather grim.) There was a new placard on the Leningradsky
Prospect where two attractive women announced "Vogue-Nakonetz" [at last].
Just what the doctor ordered. 

As I was mounting the stairs to the market area, I saw a Russian police
patrol, headed by some overweight detective in a dark suit and the mandatory
cell phone, confiscate the seeds which an old woman was selling and then
order her into the back seat of their car. I'm not sure what crime she had
committed, but I would bet that she dared to sell her bucket of seeds
without first paying off the proper authorities. The fat police detective
was very proud of his bounty, and reminded me of one of the pigs from Animal
Farm, after they learned to walk on two legs. He was even spitting seeds.
I can't describe the look of distress on this old babushka's face as the
police car pulled away. But a word came to mind: proiz-fucking-vol. 

After buying a loaf of dark bread and a newspaper, I returned to the other
side of the street and spent about 45 minutes watching the following
theater. 

There was a group of about 20, nattily dressed young men and women, who were
trying to convince passers-by into playing some sort of lottery game. (They
did not approach me, and regardless of my Russian coat, recognised me as a
foreigner.) I never did figure out the actual mechanics of the game, but it
dealt with rubbing numbers off the lottery card and then betting against
your fellow competitor. As the game progressed the betting became
increasingly higher, and there was a time limit, under which the players had
to determine whether they were in the game or not.

Now in the past month, there have been a host of stories, both in the
newspapers and on TV, warning Russians to avoid these scams. Earlier this
month, the issue received international attention (derison) when Russia's
former Human Rights Representative got suckered into losing $3000 playing
such a game. But I guess there's one born every minute, even here in
Moscow. 

Now this was not your average 42d Street scam, but a well oiled and
practiced operation. The bait was played by attractive, earnest young
women, someone you might think to trust your child with. After catching
their trusting fish, they would quickly be joined by a couple of other
stooges, who were also in on the scam. Circling each trap, were a couple of
lookouts, who served to transfer money to their charges and watch out for
the authorities. The big shark, a dark skinned, sunglass and leather purse
type, hovered in the rear. 

Now in the past month, I can never remember a time when I did not see a
couple of cops or MVD troops patrolling this area. This morning, however,
they were conspicuously absent. Perhaps they were attending worship
services. Everything was going along quite well for these new-old Russians
and a lot of money was changing hands-most of it in one direction. They

would even allow someone to actually win a small amount to keep the bait
fresh. Unfortunately, one large Russian woman, after losing a number of
$100 bills was convinced that she was ripped off and started to raise a
fuss. She actually grabbed the young woman who had enticed her into playing
and demanded her money back. She merely shrugged her off, telling her that
she didn't have her money (which was true; she had already handed off the
cash to one of the roaming assistants). 

In desperation, this newly impoverished sucker, went out onto Leningradsky
Prospect (not a wise manuever) and flagged down an MVD patrol. There was a
flurry of hidden activity in the next 45 seconds and by the time the MVD
patrol arrived all of the incriminating evidence had been safely stuffed
under coats or into bags. The two young MVD troops, dressed in their dark
fatigues and body armor and equipped with Kalashnikov submachine guns looked
better prepared to fight some conventional enemy than dealing with this
sophisticated street enterprise. The large Russian woman pointed out the
young woman who had first talked her into playing, and after checking her
passport and a couple of the other little fish, stuffed five of the minor
culprits in the back of their car. 

Whether or not justice had been served is hard to tell, but the game
recommenced less than five minutes after the MVD pulled out. 

As I walked back to my apartment, it dawned on me that this street corner
game is not confined to petty thieves. Various front men from the Russian
government had masterfully conned western banks and financial institutions
(who really should have known better) into a giant scam. And like that
large Russian woman, there are now a number of western bankers running out
into the street and waving down the police. But was there a crime? The
game, however, goes on, and I'd be willing to bet even money that the IMF is
in for another 4.3 big ones later this month. There's one born every minute. 

******

#3
Yavlinskiy: West Shares Blame for Russian Crisis 

Milan's Corriere della Sera in Italian
August 28, 1998
[translation for personal use only]
Interview with Russian Yabloko leader Grigoriy Yavlinskiy by
Andrea Nicastro in Moscow; date not given: "Yavlinskiy: 'West To
Blame: It Backed a Corrupt Regime'" -- first three paragraphs are
Corriere della Sera introduction

Moscow -- "Yeltsin's time is up: He is irresponsible and incompetent."
"When Russia's crisis hit, you Westerners remembered the Russian nuclear
arsenal. Who is in charge of the nuclear button? This question terrifies
you, but you are partly to blame for the chaos. You carried on praising
Yeltsin, supporting his robber economy, refusing to see how corrupt his
power was. Now you are paying for your mistakes with this nuclear
nightmare." Grigoriy Yavlinskiy is an unusual politician in Russia. He is
the only one to have ruled out any support for the new prime minister,
Viktor Chernomyrdin, on "questions of principle": "There is no point in
haggling over official posts. Six years of Chernomyrdin government have
already amply shown what he is capable of." Yavlinskiy swam against the
tide even during the Gorbachev era, when he proposed to Soviet governments
a 500-day plan for moving "from centralized planning to a free market
economy." The plan was never approved but, following the collapse of the
Soviet Union, Yavlinskiy was left with a reputation as a consistent and
responsible reformist. Thus, as only communists, farmers, nationalists, and
various kinds of populists thrived on the political scene, his party,
Yabloko (literally "Apple,") managed to survive -- the only democratic
party to do so.
"The choice of Chernomyrdin is the latest in a series of gross
mistakes on President Yeltsin's part," Yavlinskiy told Corriere dell Sera. 
"It was he who created the financial pyramids that are now collapsing,
burying the country beneath them. This is now the fourth day since his
appointment, and he has not yet explained to people what he intends to do. 
This is merely allowing the panic to increase."
[Nicastro] Can the West still help Russia?
[Yavlinskiy] Europe and the United States are not charitable
institutions. They have to think about their own citizens' interests. Nor
can we expect private investments, because the rescheduling of the public
debt announced Tuesday [25 August] is tantamount to bankruptcy. Bill
Clinton could still do something, when he comes here next week.
[Nicastro] You are not thinking about funding, are you?
[Yavlinskiy] Definitely not. The US President should merely talk to
the Russians. Explain that this crisis is a growth sickness, that the
United States went through it in 1929, with the Great Depression, and was
able to overcome it. At that time Roosevelt spoke to the nation and
launched the "New Deal."
[Nicastro] Are you proposing a "New Deal," a boost to public
investments, for Russia, too?
[Yavlinskiy] In time. First, the citizens must be enabled to survive;
they must not be reduced to starvation. The shock therapy must be drastic
-- to reduce taxes on essential words, to facilitate national production,
to suspend the activities of private credit institutions, and consequently
to increase the powers of the central bank. Then, once the fall of the
ruble stops, in two or three months' time, of course it could be possible
to rebuild on solid bases.
[Nicastro] Why do you accuse the West of being partly to blame for the
crisis?
[Yavlinskiy] Because this is a political decline, even more than an
economic one. G-7 -- the club comprising the seven most highly
industrialized countries -- came to Moscow in April, and all its members,
without exception, praised the president. Yeltsin, Yeltsin, Yeltsin: It
sounded like a crowd cheering at the stadium. Very well: Are they
complaining now that the same man is at the Kremlin?
[Nicastro] Perhaps at the time there seemed to be no alternative to
Yeltsin's leadership.
[Yavlinskiy] Who ever has a political alternative in advance? Does
anybody know the name of the next US president? The Western countries gave
us advice that they themselves would not have accepted. They could have
remained silent, and been mere spectators. Instead they wanted to take a
leading role, and by supporting Yeltsin and his constitution they help us
to go astray.
[Nicastro] Why do you criticize the Constitution? It was only
approved in 1993. Does it already need to be changed?
[Yavlinskiy] The constitution desired by Yeltsin organizes Russia like
an aircraft, for the sake of example: There is first class, business class,
and economy class. The Russian parties are focused on choosing who should
sit in front, who behind, and who in the middle, but the real decisions
take place in the cockpit. Russia's problem is precisely the pilot, the
president, who is not looking where he is going. When the passengers
behind make too much noise, the pilot, at most, asks the hostess to serve
orange juice. Obviously, with such a constitution, the West must be very
worried to see that there is no longer anyone in the cockpit.
[Nicastro] Who governs in Russia today?
[Yavlinskiy] We have people who govern it in order to rob it. They
have been dubbed "oligarchs." Others govern it in order to suppress
freedoms. Parliament is full of such people. We lack merely members of
government who concentrate on building the country for the sake of its
people.

*******

#4
Date: Mon, 31 Aug 1998 
From: Bruce.Bean@cliffordchance.com
Subject: Financial Crisis

Attached is my "Chairman's Letter" which will appear in the September issue
of the AmCham News, the publication of The American Chamber of Commerce in
Russia.

Bruce W. Bean, Partner
Clifford Chance Moscow 

Financial Crisis

As this is being written Russia is reeling from the Government’s 17
August decree radically affecting both the stability of the ruble and
repayment of certain foreign loan obligations. Functioning automated
teller machines and other sources of cash have become rare, and uncertainty
or worse exists throughout the Moscow business community.
The current Russian financial crisis will not be fully understood
for years. Key events leading up to the Government’s mid-August decree
include the March dismissal of Prime Minister Viktor Chrernomyrdin, the May
coal miners’ strike, the late May tripling of short term interest rates by
the Central bank, the mid-June IMF deferral of disbursement of a $670
million installment of its $9 billion loan, President Yeltsin’s late June
anti-crisis proposals to the Duma, the mid-July pledge of $22.6 billion in
additional loan support for Russia from international lenders followed two
days later by the Duma’s rejection of Yeltsin’s anti-crisis legislative
proposals. During August the interbank market became paralyzed by lack of
liquidity and George Soros, the world’s most successful currency
speculator, called for devaluation of the ruble. 
Immediately after the 17 August announcement Mr. Zyugannov accused
President Yeltsin of ruining Russia and called upon foreign investors to
stop “investing in Yeltsin.”
There are many underlying aspects to Russia’s current crisis. The “Asian
crisis,” which began more than 14 months ago, continues to unfold, spooking
fund managers into withdrawing from most “emerging markets.” World oil
prices have fallen dramatically, seriously impacting Russia’s exports and
balance of trade, Russian tax collections continue to disappoint and, in
the very few years since economic reform commenced, no significant, viable
world class industries have yet emerged in Russia. The Russian Government
cannot ease the Asian economic crisis or raise international oil prices,
and development of competitive world class businesses within Russia, if it
is to happen, will take time.
So what is it that Russia can do now to assure that it continues to
progress towards its rightful place as a world economic power?
At the very least Russia’s political leaders must:
Understand that the policy of seeking ever more cash from the West is not a
policy that will develop Russia politically or economically.
Accept the reality that it is Russia, not Yeltsin, that foreign investors
want to invest in and that the Duma is as responsible for economic and
political success or failure in Russia as the President and his Government.
Realize that political compromise is the essence of democracy and that for
progress to be made no one political leader or party will have its way
exclusively. The Duma must stop believing it will somehow “win” if it
succeeds in blocking Mr. Yeltsin’s reform program.
In short the Duma must accept responsibility for its crucial role in
Russia’s future. Short term political ambitions and partisan hopes that
the failure of “Yeltsin’s reforms” will lead to greater political advantage
for the opposition in the Duma must yield to the reality that international
lenders will not keep lending to Russia forever. Indeed, with each passing
week more and more doubts are expressed about the validity of the approach
the IMF has taken to aiding Russia and other “transition” economies.

What should the Duma do now?

Act on the IMF inspired legislative program prepared in June to enhance tax
collections. Outside multinational agency funding can do much to bridge
Russia’s transition to a sustainable market economy.
Take steps through deposit insurance programs and vigorous enforcement of
sound banking practices to create a banking system that Russians will
trust. Once established, such a system will easily find funding in the
capital markets outside Russia.
And most importantly, take immediate, positive steps to encourage long term
foreign direct investment (“FDI”) in Russia. 

Why the focus on FDI?

Unlike portfolio investment in equities and debt, FDI directly creates jobs
and cannot be withdrawn by a computer keystroke. The comparatively
miniscule amount of FDI in Russia should be a source of acute embarrassment
to the Duma and a stimulus to prompt, decisive action. Foreign investors do
not expect guarantees of profit or protection from market forces. They do
require some hope of tax stability and reasonable support, rather than
interference, from the Government. To date Russia has attracted a meager
amount of FDI despite not offering such conditions. If the Duma attempts
to exploit this financial crisis to political advantage, even existing FDI
will likely be cut back. 

How can the Duma encourage FDI?

Refrain from taking further affirmative measures designed to drive away
FDI, such as the recently enacted (i) Law on Foreign Investment, which was
subsequently vetoed by President Yeltsin and (ii) amendments to the Law on
Production Sharing.
Enact the Omnibus Enabling Law that has been needed for more than 30 months
to finally implement the Production Sharing Law, the greatest single source
of FDI for Russia for the foreseeable future.

A few words on Production Sharing Agreements (“PSA’s”):

Russia’s PSA Law was passed at the very end of 1995. As enacted, the PSA
Law triggered the need for further action by the Duma in two areas ­
enactment of “list laws” specifically authorizing PSA treatment for
particular fields or deposits, and passage of an Omnibus Enabling Law which
would conform 12 other federal laws to the PSA Law. 
As we know, a PSA is a direct commercial arrangement between the Government
and those investors (foreign or Russian or both) who wish to develop an oil
or mineral deposit under the PSA regime. The PSA binds the Government,
most importantly with respect to applicable taxes, for the term set forth
in the Agreement. The Agreement will also set forth how the oil or mineral
produced under the PSA will be shared by the Government and the investors
and how the investors will recover the costs they incurred in developing
the deposit. Although the PSA Law was adopted by the Duma in December
1995, there is still not one PSA that is going forward under the Law. The
PSA’s for Sakhalin 1 and Sakhalin 2 are “grandfathered” Agreements that
were signed prior to enactment of the Law and which are proceeding without
awaiting enactment of a “list” or of the Omnibus Enabling Law.
The Duma has many times been informed of the $60 to $100 billion of foreign
investment which awaits investment in various oil projects in Russia under
the tax and legal stability which the PSA Law is intended to supply. The
Duma has been told of the thousands of real jobs for tax paying Russians
that these projects would create if only they could be permitted to
proceed. And the Duma has seen how the grandfathered Sakhalin projects are
already bringing substantial investment to a remote, depressed part of Russia.
The current financial crisis will certainly trigger a decline or an
outright withdrawal of FDI unless the Duma takes positive action. This
crisis must rather be the trigger for the Duma to reach an accommodation
with the Government for the benefit of all Russia and enact both the
Omnibus Enabling Law and a List law, which includes the major proposed
PSA’s, which promise prompt, substantial investment in Russia. 

*******

#5
Mood in 'Power' Structures Like Oct 93; Kulikov in Moscow 
Komsomolskaya Pravda
August 29, 1998
[translation for personal use only]
Article by military observer Viktor Baranets: "Today the
Kremlin Is Gathering Spetsnaz Veterans"

One high-ranking Arbat [Defense Ministry] officer has described the
situation at the Defense Ministry and the General Staff as "very similar to
the situation on the eve of October 1993." The Defense Ministry leadership
has given the commanding officers of the "palace" combined units (brigades
in Teplyy Stan and the Taman and Kantemir Divisions) secret instructions to
be in readiness for action in an emergency situation. The commanding
officers of the Tula, Ryazan, and Tver airborne troops have received
similar instructions. The troops have received a directive on stepping up
protection of weapon, ammunition, fuel, and food depots. Generals and
officers of the Defense Ministry, the General Staff, the Airborne Troops
Main Staff, and Moscow Military District have gone out to the units to
monitor the fulfillment of these instructions.
According to some reports, officers from company commander up have had
their leave canceled or postponed. Work is in progress on operational
documents for coordinating the actions of army units and MVD [Ministry of
Internal Affairs] troops in the event of mass disturbances. The military
special services have been instructed to step up monitoring of the morale
of personnel, and in particular of "unreliable" officers who are capable of
showing disobedience and spreading discord in the ranks of their
subordinates.
Details of Boris Yeltsin's meeting with the defense minister that have
filtered through from the Kremlin are being vigorously spread in offices on
Arbat Square. Marshal Sergeyev supposedly assured the Supreme Commander of
his complete loyalty and promised firmly that in this difficult period for
Russia the president can be absolutely sure of the army's support.
The tensest situation today prevails in the MVD. According to
Komsomolskaya Pravda's information, during a recent meeting between Boris
Yeltsin and Sergey Stepashin the president set the minister the task of
ensuring his department's full readiness for action in the most unforeseen
situations. As a result in recent days MVD units and subunits have been
holding "alarm" exercises more often than usual (the Dzerzhinskiy Division)
and finalizing plans for shipping additional MVD subunits to the capital in
the event of mass disturbances. In parallel, questions of stepping up the
protection of strategic facilities in Moscow and the oblast are being
studied. Officers of MVD units point out that in the five years that have
passed since October 1993 "the units and subunits have been dramatically
strengthened in terms of combat equipment, including heavy equipment." The
number of MVD subunits in the capital has also increased considerably, and
their funding has been much better than for the other power structures. 
People in the MVD staffs drew particular attention to the fact that former
MVD chief Anatoliy Kulikov has broken off his vacation and arrived in
Moscow...
The FSB [Federal Security Service] is also working at a level of
"doubled and redoubled activeness" today. One officer from this
department, in conversation with me, observed meaningfully that "when
Yeltsin replaced Kovalev with Putin, he knew even then which way the
situation would develop." Now the number one task for the Lubyanka [FSB]
is to identify in good time and contain any preconditions that could lead
to destabilization of the situation in Moscow and in Russia. To that end
FSB agents are gathering and analyzing information relating to this sphere
day and night -- particularly in explosive regions like Maritime Kray and
the Far East.
The situation is calmest today in the SVR [Foreign Intelligence
Service]. Here they are occupied intensively with analyzing information on
foreign reactions to the crisis in Russia.
It has become known from confidential sources in the power structures
that a meeting of the country's leadership with veterans of special-purpose
[spetsnaz] units is scheduled for Saturday afternoon in the Kremlin... 
[Baranets ends]
Meanwhile [subhead; unattributed postscript]
Komsomolskaya Pravda was told by a source at the Defense Ministry Main
Directorate of Military Budget and Finance that the other day Viktor
Chernomyrdin demanded that all measures be adopted to ensure the speedy
payment of state arrears to the military. As a result yesterday the first
money -- enough to cover a large part of the arrears to three military
districts -- set off on its way to the troops. Furthermore, the military
are promised a pay increase from 1 January.

*******

#6
The Guardian (UK)
1 September 1998
[for personal use only]
Deaf ears await lesson from Uncle Sam 
Tom Whitehouse reports from a Moscow school where pupils are prepared to 
learn the hard way 

Alexei tried hard but his creative juices just would not flow. 

"I was asked to write a poem about President Clinton, but he doesn't 
inspire me. I didn't feel the muse," said the 16-year-old, an aspiring 
poet and songwriter at school 1,240 in Moscow, where Mr Clinton is 
scheduled to meet young Russia today before his summit with old Russia 
in the shape of Mr Yeltsin. "Clinton is too arrogant and should listen 
more to other leaders."

As workers hastily resurfaced the school playground and picked up empty 
Coke cans and Snickers wrappers - the ubiquitous testament to Russian 
youth's love affair with America - Alexei and his friends were pensive.

They are divided by the extent of US responsibility for Russia's 
devastated economy. "All this century, Western experiments have been 
conducted on Russia from above. First communism and now democracy. But 
Russia has to find its own way. We mustn't copy America," Alexei said, 
his shoulders hunched in a camouflage jacket handed down from his 
father, who works at the interior ministry.

"But I like the US for its freedom," said Vassili, posing confidently in 
biker's leathers.

"Take Monica Lewinsky for example. In Russia, you couldn't do what she 
did - to publicly provoke the president like that. You can do many 
things in America that you can't do in other countries."

Mr Clinton will need no interpreter to understand Vassili.

1,240 is a state school that specialises in English language teaching 
and admits only exceptionally intelligent pupils. Most of the children 
come from well-to-do families.

Their argument about President Clinton echoes a wider debate among 
Moscow's elite about how Russia should overcome the failure of its 
American-inspired "reform" programme.

Steel is sold profitably abroad, but the industries that used it at home 
have collapsed. The reintroduction of protectionism and state support 
for manufacturing now top parliament's demands.

Mr Clinton is expected to urge Mr Yeltsin and the acting prime minister, 
Viktor Chernomyrdin, to reject such calls.

Alexei and Vassili's maths teacher, Irina Vlasova, suspects his motives. 
"America does not want a strong Russia because if we were strong - with 
a strong parliament, a strong economy and strong leaders - we would be 
powerful again," Ms Vlasova said.

Fee-paying schools for Russia's new rich have thrived in the past five 
years. But most of Moscow's intelligentsia have stuck with the state 
sector, where the rigorous schooling standards of the Soviet era are 
still observed.

To maintain these standards without government funding, parents do a lot 
more than sell raffle tickets and organise coffee mornings. Schools are 
undergoing a kind of involuntary privatisation as mums come in to clean 
and dads do what they can to repair or replace faulty equipment. Unless 
a school is very lucky and is supported by rich parents, new books - let 
alone videos and computers - are an unaffordable luxury.

"The only teaching aid I have is this piece of chalk," Ms Vlasova said.

*******

#7
The Independent (UK)
1 September 1998
[for personal use only]
Russia's old hand at the helm
By Anne McElvoy -

I STILL REMEMBER OUR DISMAY AT THE FIRST PUBLIC GLIMPSE OF THE NEW 
PREMIER - A SOMBRE FIGURE IN A NAVY-BLUE RAINCOAT 

RUSSIA'S LAZARUS Prime Minister, Viktor Chernomyrdin, started out as the 
man Boris Yeltsin did not want as head of government, and has ended up 
in control of the destiny of the President - or put more cruelly, of the 
pace and manner of his political demise. 

President Clinton, who spent much of last week being told by his 
advisers that Mr Yeltsin was likely to be out of office by the time he 
arrived in Moscow for today's summit, now finds that his opposite number 
in Moscow has pulled off the most extraordinary of his many survival 
acts to date. A deal between the Communist-dominated parliament and 
Chernomyrdin is intended to shore up the President until the Kremlin 
elections planned for the year 2000. 

But it is Chernomyrdin who is pulling the President's strings, and to 
him that the US will appeal to save Russia's battered reforms, just five 
months after a panicked Yeltsin sacked him, only to re-appoint him last 
week after the sudden rouble devaluation brought on an even greater 
panic. Chernomyrdin's eclipse of Yeltsin is the latest step in a 
tortuous and ambiguous relationship between the two men which began in 
1992, when the former head of Gazprom, the natural gas industry, was 
imposed on Yeltsin in his first defeat by the Congress of People's 
Deputies, the legislative hangover from the Communist era, and an early 
power base for the enemies of reform. 

He replaced Yegor Gaidar, the young monetarist beloved of the West, as 
Prime Minister. Yeltsin was unable to hide the pain of the moment, 
standing with bowed head at the podium after he had given in, and 
announcing through his spokesman that he and Gaidar had been "one heart 
and one soul". If the lurid account of the President's ousted bodyguard, 
Alexander Korzakov, is to be believed, Yeltsin's drink problem began - 
or rather resurfaced - at this time. 

Chernomyrdin arrived in office as the incarnation of all that the 
Yeltsin team stood against. He wanted to go slow where the reformers 
sought to move fast, favoured the role of the state where they elevated 
the market, and called for the loosening of monetary policy while they 
saw resulting inflation as the greatest threat to prosperity. 

The West has become far more jaundiced about the chances of reforms 
making rapid headway in Russia than it was then. As a Moscow 
correspondent when Chernomyrdin arrived in office, I still remember our 
dismay at the first public glimpse of the new premier, still dazed after 
his leap from deciding the fate of oil subsidies one minute to heading 
the government the next. Chancellor Kohl, arriving that day to deliver 
one of his periodic pep-talks and encourage German investment, was only 
told as he was flying over the Baltic States that he was to be met by 
Chernomyrdin, not Gaidar. 

Instead of the podgy young reformer with eager, eccentric English, and a 
fascination for the free market, there stood on the tarmac a sombre 
figure in a navy-blue raincoat - the traditional outdoors uniform of the 
nomenklatura. The new PM looked like a cross between Mikhail Gorbachev 
and Helmut Kohl. But his style was pure Homo sovieticus, and there was 
something strangely familiar about his habit of delivering promising 
starts to sentences, only for their reformism to evaporate in the 
second. "I am for the market, but not for the bazaar" was his first 
soundbite. His first act was to try and re-impose price controls, a move 
defeated by Yeltsin's reformist economic adviser Boris Fyodorov. 

Chernomyrdin was - and still is - a representative of the pragmatic if 
limited mentality of the "red managers" who really kept the Soviet Union 
running in its terminal phase. A recent interview with the Financial 
Times exhibits his continuing pride in this era: "I transformed the 
government industry into a company and I myself. was the first to do 
this in the [Soviet] Union. I understood even then that we had reached a 
dead end." Hauling Gazprom out of the claws of the dying Soviet state 
created one of the world's largest companies. Chernomyrdin clearly 
believes that he is skilled at market economics. But running a monopoly 
in an essential commodity, whose gargantuan size guarantees it a major 
international standing, hardly counts as experience of the cut and 
thrust of capitalism. 

Indeed, his attachment to his former contacts (radical reformers 
nickname him the minister for Gazprom) linked him to several of the 
business and banking oligarchs who are a more powerful force in Russia 
than the politicians. Their empires flourished under his premiership. 
For a man who believed in the market, not the bazaar, he presided over 
the greatest national cut-price asset sale of the century - with profits 
flooding into western bank accounts, not back into the impoverished 
Russian tax system. 

It is hardly surprising then, that many pro-free market Western analysts 
are concluding that the revival of Chernomyrdin is a disaster, since he 
was responsible for many of the problems to start with. But they are 
unable to suggest a politically valid alternative. Chernomyrdin is no 
fool. He is keenly aware that he can only prevent a worse decline in 
Russia - and bolster his own chance of replacing Yeltsin in the Kremlin 
in two years' time - if he manages to collect some tax revenue from the 
country's powerful companies, and clamp down on their habit of salting 
away profits in banks outside the country. In other words, he needs to 
pick a fight with the very people who are supporting him now. 

Watching Boris Berzovsky, the most prominent of the business tsars, 
telling Newsnight that Chernomyrdin would be good for the country - and 
proceeding to mix up the words "country" and "company" several times - 
did not inspire confidence. 

But my hunch is that Chernomyrdin has learned more in the last six years 
than his detractors give him credit for. He has appointed as deputy 
prime minister Boris Fyodorov, the same man who defeated him over price 
controls in 1993. He also knows that Russian business has little 
interest in a fully-fledged Communist revival, let alone a Communist in 
the Kremlin. The red managers who rose to political, as well as 
economic, prominence under Mikhail Gorbachev's perestroika are scathing 
about ideological diehards, like the present Communist leader, Gennady 
Zyuganov, who have substituted nationalist chauvinism for 
Marxist-Leninism. Zyuganov tried to scupper the peace deal that brought 
an end to the pointless, degrading and expensive war in Chechnya, after 
Chernomyrdin had helped broker an armistice. 

"They destroyed everything; they destroyed the best people; they 
destroyed the peasants," Chernomyrdin has said of the Communists, a 
rather cynical outcry for someone whose entire career before 1991 was 
bound up with the Communist Party of the Soviet Union. But it does mean 
that, like Boris Yeltsin, his priority is to keep Zyuganov and his ally, 
the unhinged Vladimir Zhirinovsky, out of power by outwitting them in 
his de facto running of the country. If he is not the best thing that 
could happen to Russia, he is far from the worst. 

Neither, unlike his extremist challengers, is he economically 
illiterate. He knows that he must find some way to pay back-wages owed 
to workers (and a cause taken up by the Communists), while avoiding a 
slide into hyper-inflation and a slump in growth. It is the most 
difficult quandary any politician in Russia can have, however game his 
insistence that this mess is, as he insists "absolutely manageable". 

Boris Nemtsov, the young reformer who left the Kremlin in despair last 
week, summarises the gamble thus: "Chernomyrdin has some chance of 
winning presidential elections, if the economic and social situations 
improves drastically. But then, who believes that? Only Chernomyrdin." 

*******

#8
Russian State Duma Official on Russian-US Summit 

Mayak Radio Network
August 27, 1998
[translation for personal use only]

How fruitful will be the forthcoming Russian-US summit? Aleksey
Arbatov, deputy chairman of the State Duma Defense Committee, talks to
correspondent Lidiya Podolnaya.
[Begin recording] [Arbatov] It seems to me that both President
Yeltsin's and President Clinton's positions in their respective countries
are so weak, for different reasons, that the summit will be of a strictly
protocol nature. I am not expecting any major decisions. None of them has
sufficient domestic political capital to bring about a breakout from the
impasse in which Russian-US relations have fallen of late.
[Podolnaya] We like talking about breakthroughs and global solutions. 
But maybe such regular exchanges are useful too in order to keep the pace
of the dialogue? Maybe they have their own value?
[Arbatov] I think that these routine events should be handled by
lower-rank officials. Heads of state are people whose time is strictly
limited, and I think that in a normal calm situation, when everything is
fine, they can meet on a regular basis just to keep the pace. But in a
situation when everything is bad, it is a wild luxury to meet for purely
protocol reasons.
[Podolnaya] The START II is still a problem. It is clear that the
current parliament will not ratify it.
[Arbatov] I would not give up START II for lost. Of course, the
situation is quite difficult. If the parliament approves Viktor
Chernomyrdin as Prime Minister and if the United States makes it clear to
the new old Prime Minister that it views this issue as a priority, yet
another possibility, perhaps the last one, for this treaty to be ratified
may appear in the autumn. If Viktor Chernomyrdin finds agreement with the
State Duma's main factions, I think the State Duma will not have the cheek
to refuse him if he asks the State Duma in a serious manner to ratify this
treaty.
[Podolnaya] Many new problems have accumulated in Russian-US relations
in addition to the old ones. The Americans have bombed terrorist training
camps in Sudan and Afghanistan. On the issue of international terrorism
they seem to have similar views in words, but in this specific case Russia
and the United States have strongly diverging positions. What is your
view?
[Arbatov] International terrorism has become one of the major problems
of international security. In this sphere, more than anywhere else,
Russia, the United States, and other permanent members of the Security
Council could have productive cooperation. However, Russia is too
preoccupied with its domestic problems, has neither resources nor
initiative to make real proposals on this account, while the United States
relies too much on unilateral actions. And this hampers us in implementing
joint policy. I have no sympathy for terrorists and would destroy them
wherever they are, but this should not be done on a whim of a single power
however big and strong because this smacks of arbitrariness. The United
States has huge influence in the world, and it could use it to propose an
international antiterrorist body made up of major countries where decisions
would be made by consensus and policy would be defined by joint efforts. I
would rather our President have no personal friendly relations than that,
deluded by these friendly relations, he let all the serious difficulties in
Russian-US relations fall by the wayside, as has happened now. We would
rather work together in earnest on the problems that are creating a barrier
between us. [end recording]

*******

#9
Security chief rules out force in Russia crisis

MOSCOW, Sept 1 (Reuters) - The head of Russia's Federal Security Service
(FSB), one of the successor bodies to the Soviet-era KGB, on Tuesday ruled out
the use of force to resolve Russia's deepening economic and political crisis. 

Asked about deploying force, Vladimir Putin said in televised comments:
``Neither the president, nor the acting prime minister, nor the Duma (lower
house of parliament)...nobody is expecting or preparing such methods to
resolve the country's problems, nobody.'' 

been floating in the Duma that Yeltsin might resort to the army or the
security organs in his battle with parliament over the choice of prime
minister and the country's economic course. 

``I must tell you that Boris Yeltsin in his meetings with us, both formal and
informal, has always had only one aim -- that our work remain strictly within
the constitution,'' Putin said. 

``We have the strength but have no desire to break the law, go beyond the
constitutional limits and work against the interests of our people,'' he
added. 

But Putin, a close Yeltsin ally recently promoted to head the FSB which
oversees domestic intelligence, said anybody trying for political reasons to
fan tensions would ``meet with resistance.'' 

06:37 09-01-98 

been floating in the Duma that Yeltsin might resort to the army or the
security organs in his battle with parliament over the choice of prime
minister and the country's economic course. 

``I must tell you that Boris Yeltsin in his meetings with us, both formal and
informal, has always had only one aim -- that our work remain strictly within
the constitution,'' Putin said. 

``We have the strength but have no desire to break the law, go beyond the
constitutional limits and work against the interests of our people,'' he
added. 

But Putin, a close Yeltsin ally recently promoted to head the FSB which
oversees domestic intelligence, said anybody trying for political reasons to
fan tensions would ``meet with resistance.'' 

******