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Johnson's Russia List


September 2, 1998   

This Date's Issues: 2340ē 2341ē  2342 ē

Johnson's Russia List
2 September 1998

[Note from David Johnson:
1. Reuters: Clinton bluntly tells Russia to keep reforms.
2. Washington Post: Susan Eisenhower, A Summit for Listening.
(DJ: Wonderful!)

3. Jacob Anschel-Kaltenbach: re dangerous talk.
4. Keith Hudson: Adopt a family.
5. David Woodruff: Banks.
6. Laura Belin: reply to Jerry Hough.
8. Matt Taibbi (the eXile): Bruce Bean.
9. Moscow Times EDITORIAL: Corruption Flourishes as U.S. Fiddles.
10. The Guardian (UK) editiorial: Don't knock the Duma. 
It's democracy in action.
11. NTV: Chubays Criticizes Zyuganov, Yavlinskiy.]


Clinton bluntly tells Russia to keep reforms
By Steve Holland

MOSCOW, Sept 1 (Reuters) - U.S. President Bill Clinton challenged Russia on
Tuesday to adopt tough measures to stop its chaotic economic slide and urged
Moscow against turning back the clock to the "failed policies of the past." 
"Today's financial crisis does not require you to abandon your march toward
freedom and free markets," Clinton said in a speech. 
In Moscow at a time when Russia's economy is collapsing and its government is
in disarray, Clinton hugged 67-year-old Russian President Boris Yeltsin and
then heard Yeltsin and Acting Prime Minister Viktor Chernomyrdin pledge they
were committed to the path of reform. 
But Deputy Secretary of State Strobe Talbott told reporters Yeltsin and
Chernomyrdin described to Clinton "a very complicated and quite contentious
political struggle that's going on" over the future of Russia's economic
"It is not over, to put it mildly," Talbott said. 
In his speech, Clinton called on Russians to adopt tough fiscal disciplines
that would transform their economy into a true market-driven one. 
"Given the facts I do not believe there are any painless solutions and indeed,
an attempt to avoid difficult solutions may only prolong and worsen the
present challenges," Clinton told an audience at the Institute for
International Relations. 
Clinton, himself badly wounded at home over his admission of an
"inappropriate" relationship with former White House intern Monica Lewinsky,
cautioned Russia against returning to Communist-era practices at a time when
some Russian leaders are suggesting the economy needs more state controls. 
"The challenge is to create a new Russia that benefits all the responsible
citizens of this country. How do you get there? I do not believe it is by
returning to the failed policies of the past," he said. 
Clinton brought no new pledges of U.S. assistance for Russia, which won a
$22.6 billion international rescue package in July. Russia received $4.8
billion immediately but soon spent it in a futile attempt to defend the
rouble. The rest of the package awaits a renewed Russian commitment to
economic reform. 
Despite the political chaos, the two sides were able to reach agreements on
two items to give a sense of accomplishment for the long-delayed summit
between Clinton and Russian President Boris Yeltsin. 
The deals, to be signed on Wednesday, included a U.S.- Russian deal to share
early warning information on missile launches, and a pledge to reduce their
plutonium stockpiles. 
They also discussed world troublespots including Iran, Iraq and the Serbian
province of Kosovo. 
But Clinton's objective in coming for a visit he debated calling off was to
preach a tough-love message about the need for Russia to take the steps needed
to create a stable economy. 
Saying he came as a friend and not trying to foist a U.S. agenda on Russia,
Clinton outlined a detailed list of measures he said would restore investor
confidence in Russia, whose problems have caused stock markets to drop around
the world. 
Clinton recommended the Russian government take steps to ensure all people pay
their fair share of taxes, provide fair treatment for creditors and move
against corruption. 
Suggestions by some Russian political leaders that Russia print money to bail
out banks and companies was rejected. 
"Printing money to pay the bills and bail out the banks does not help. It
causes inflation and ultimately will make the pain worse," Clinton said. 
He said he did not want to be preaching to Russia to adopt American ideals,
saying, "This is not an American agenda...These are the imperatives of the
global marketplace...and you can see the costs of ignoring them." 
Recalling Russia's resilient past, Clinton said Russians had proved repeatedly
they have "a sense of courage and spirit and an unwillingness to be beaten
down or to give up." 
The future can be bright, he said. 
"But you can't ignore the rules of the game," he said. "There is no way out of
playing by the rules of the international economy without abandoning them." 


Washington Post
September 1, 1998
[for personal use only]
A Summit for Listening
By Susan Eisenhower
The writer is the chairman of the Center for Political and Strategic
Studies in Washington. 

It was not without irony that America's embattled president -- beaten and
bruised by those who fault him in recent weeks for failing to show courage
by owning up to the truth in the Lewinsky matter -- called on the Russians
to demonstrate more self-sacrifice. "We should tell [the Russians] that if
they'll be strong and do the disciplined, hard things they have to do to
reform their country, their economy, and get through this dark night, that
we'll stick with them."
If President Clinton plans to lecture the Russians about discipline and
difficult choices on his visit, you can be sure that he will lose them at
hello. The situation in Russia is far more complex than a simple financial
collapse. The heart of the political fight in Russia is not only about what
measures should be undertaken to stabilize the economic situation but what
effect they will have on keeping the disparate constituencies of the
Russian Federation squarely behind Moscow's new policies. Without such
considerations, ethnic and regional-based splintering could threaten the
viability of the Russian Federation itself. 
The International Monetary Fund's tight monetary policy adopted by the
Russian government worked near miracles in bringing down inflation, from
2,500 percent in 1992 to 11 percent this year. Nevertheless, without
capital for industrial retooling, factories fell idle. And the government,
anxious to meet their IMF budget-balancing targets, defaulted on salary
payments to workers all across Russia, creating a massive internal debt.
People were forced to barter goods, a survival mechanism useless for
producing taxable revenues that could help alleviate the government's cash
crisis. The vicious circle that ensued drove millions of people into abject
poverty and helped bring about the current crisis.
While Western advice and aid curbed inflation -- something of critical
interest to the foreign investors who, unfortunately, rarely financed
projects beyond Moscow or St. Petersburg -- many Russians now understand
that these loans and credits tied Moscow's hands in dealing with the
country's own unique problems. Simply put: The IMF multiyear "bailouts"
were enough to obligate Russia to implement Western-designed programs, but
not enough to do the job. Total Western assistance to Russia has been a
fraction of what West Germany has spent in East Germany since unification.
If the IMF money seemed like an indispensable lifeline for some, the steep
price of it is now becoming apparent. The failure to reach a balanced
policy between inflation fighting, social protection and industrial
retooling brought about a constitutional crisis in 1993, followed in the
next few years by a Communist revival in the Duma and a growing alienation
between Moscow and the country's regions.
Tight monetary policy and the ensuing debt crisis broke Moscow's control of
many outlying regions, as factories and defense enterprises in single-plant
towns closed and the Russian military and other workers went unpaid.
Regional leaders were left holding the bag. The result has been to empower
the local leaders who have picked up the slack, emboldening some to devise
policies quite different from those being formulated in Moscow. Today, many
of the military garrisons outside Moscow have more loyalty to the regional
bosses who feed them than they do to the federal government that is
supposed to issue their orders. There was a rumor -- from reliable sources,
for instance -- that during the miners' strike earlier this year, Boris
Yeltsin called out the troops to break up the civil unrest, but they
refused to follow orders. 
Gen. Alexander Lebed, presidential hopeful and governor of the Krasnoyarsk
region in Siberia, warned that this rupture of federal relations with
Russia's regions and republics could prompt the army to mutiny and inspire
the regions to break way from Moscow because the central government has
failed to meet its financial obligations to them. "In many regions, the
security forces, the executive powers and the people are all in the same
foxhole," he said last week.
Centrifugal forces have also been exacerbated by ethnic strife within the
Russian Federation. The government's rising debt to its impoverished
regions has made some of them vulnerable to competing outside influences.
Since the disastrous war with Chechnya, which ended in 1996, the mainly
Muslim regions of Russian's North Caucasus have become increasingly violent
and unstable, as Wahabis, followers of a conservative sect of Islam
practiced in Saudi Arabia, have challenged the status quo. In Chechnya this
June, fighters supporting Chechen leader Aslan Maskhadov battled these
Islamic paramilitaries. And later President Maskhadov himself narrowly
avoided death when a car bomb exploded, calling into question the role of
radical conservative Islamic forces in the incident.
In the past two weeks, while Yeltsin and his ever-changing team were
dealing with the financial crisis, three villages in Russia's Dagestan
declared their intention to secede from Russia to form a "separate Islamic
territory," using strict Islamic sharia. This move by "extremist forces,"
the government of Dagestan said, poses "a threat to the security of
Dagestan, to its unity and integrity, which could have tragic
consequences." The radical secession is said to come from intense pressure
exerted from forces within neighboring Chechnya.
Only days later, on Aug. 24, Yeltsin appealed for calm in Dagestan after
its spiritual leader was assassinated, along with his brother and his
driver. "The murder of Dagestan's mufti is not only a monstrous crime for
which there is no justification," Yeltsin's telegram said. "It is the
latest attempt to destabilize the social and political situation in the
republic and in the entire North Caucasus [in Russia]." 
Complex and interlocking events are taking place in Russia, which could
only get worse if the Duma and the presidential apparatus do not find an
immediate solution to the political deadlock in Moscow. It is vital that
Bill Clinton use his time in Moscow not for issuing lectures, but for
active listening. Our ability to help shape solutions in the future may
depend on it.


Date: Tue, 01 Sep 1998 1
From: Jacob Anschel-Kaltenbach <>
Subject: re: dangerous talk

In response to two recent contributions:

While I agree in part with Jerry Hough's analysis (JRL 2336) that Russia
needs a strong regime at the moment, such a new leadership needs to use
its extraordinary powers to bankrupt the oligarch fiefdoms, temporarily
renationalize large portions of the economy including the natural
monopolies and prepare for the true redistribution of wealth the 1990s
should have seen. There should be no crackdown on social freedoms and
certainly none against "intellectuals". Where does Professor Hough get
this hostility? His intellectual-baiting is about as useful in
assessing contemporary Russia as hysterical anti-semitism. Anyone who
looks objectively at the role of the intelligentsia in post-societ
Russia realizes they have had no influence whatsoever and are one of the
most impoverished, disenfranchised groups in the country (except those
who have given up their intellectual work for speculation). Does
Professor Hough mean Chubais, Gaidar et al.? This is not the Russian
intelligentsia but a branch of American neo-liberalism, and if Hough
wants to send J. Sachs to the figurative provinces, more power to him. 
We know that the group responsible for the current mess is a coalition
of bankers, FIG monopolists, those communists who helped support
Chernomyrdin in his last government, and regional leaders. Yes,
REGIONAL leaders (admittedly, Moscow's Luzhkov foremost among them)
. . . in the search for culprits, not all roads lead to Moscow and none
to the feet of the intelligentsia. Flippant talk of cultural
revolutions is dangerous and irresponsible, even in this forum, and even
if (as I suspect) Professor Hough is baiting us.

Just as dangerous is Paul Goble's suggestion (JRL 2338) that the lack of
a stronger ethnic Russian nationalism is in part responsible for the
federation's predicament. There's little point comparing the Russian
experience over the last decade with that of any other in the fSU or
eastern Europe. Yes, it's true that a vast, heterogeneous federation
could never demand the same response from its citizenry as a small, more
homogeneous "nation state" - - but neither would the policies enacted in
Estonia, Poland, etc. have worked in Russia. These countries have been
more successful because of the relatively limited project involved in
renovating their economies, not because of the remarkable bonds of
loyalty created by the identification of the state with an ethnic
nation. We should all be thankful that Russian (rossiiskii) citizens do
not identify so strongly with the state, and that the Russian Federation
is not YET a wholly ethnic Russian (russkii) project.


Date: Tue, 01 Sep 1998
From: Keith Hudson <>
Subject: Adopt a family

Might I use your excellent list to ventilate an idea?
In the summer of this year, my wife and I hosted a visiting Russian choir
member for one night and I learned a little about conditions in Moscow and
Russia generally. (It was, indeed, because of this that I joined your list
in order to find out more.) This particular lady has two young children and
her husband is a hospital doctor (who had not been paid for three months at
that time). As a grandfather with six wonderful grand-daughters who will
probably have as good a future as can be imagined, I am deeply worried for
the future of this particular Russian family whom I fleetingly got to know.
I would like to send a little hard currency to her every month to help
ameleriote the privations that this family is almost certain to endure in
the coming months and years. However, I'm told that sending currency
through the post is risky. some sort of courier service needs to be arranged.
I am wondering, therefore, if some sort of "twinning" organisation could be
set up by which people and families in Western countries can safely send
money to families in Russia. I think, via the Internet, this could be
organised quite quickly if I made contact other like-minded individuals
with the right skills and contacts to offer.
The first priority, it seems to me, would be to set up a Web site so that
plans can be discussed. Is this idea a runner? Can anybody help? Is anybody

Keith Hudson 
6 Upper Camden Place, Bath BA1 5HX, England
Tel:01225 312622/444881; Fax:01225 447727;


Date: Tue, 1 Sep 98 
From: David Woodruff <woodruff@MIT.EDU>
Subject: Banks

I was hoping you'd consider printing the following. I wrote it a couple of
days ago so it's slightly out of date. Since I wrote it, it's been
reported that August's tax collection is down 70%.

The Russian banking infrastructure is on the verge of destruction.
Americans, who know bank runs only from "It's a Wonderful Life," associate
them with crowds of ordinary depositors banging on withdrawal windows. But
the problem goes deeper. Firms transfer their tax payments from their bank
accounts. Without banks to facilitate tax collection, the Russian
government will have no way of financing itself save by printing money.
Rubles will lose their value. To prevent a wholesale flight from the
national currency, the government will have no choice but to make the
shutdown of its currency exchanges permanent. The ruble will return to
inconvertibility, and Russia will drop out of the world financial system.
Within Russia, the economic consequences will also be dire, from the
massive expropriation of ordinary citizens' savings and to the breakdown of
established channels for supplying food and other necessities, many of
which are imported.
It may not be too late to save the situation. In order to do so, the West
has to face up to its responsibility for the current financial devastation
in Russia. The purpose of the massive loan package extended in July was to
allow Russia to defend the ruble by selling dollars, which Russia's Central
Bank did, in enormous quantities. In selling dollars, it bought rubles,
which were thereby sucked out of the banking system. The result was an
enormous reduction in the reserves banks use to make payments to one
another and to pay out withdrawals. As condition of its aid package, the
IMF had enjoined Russia not to compensate for this effect by pumping rubles
back into the economy. By the time the Russian government finally conceded
that the ruble's exchange rate could not be saved, bank reserves were down
to an absolute minimum, and Russian firms' transfers to one another and to
the government were stalling in the clogged payments system. Another side
effect of the reduction of reserves was that almost no rubles were
available to buy Russian government bonds, so that the government could
only borrow rubles in small volumes at astronomical interest rates. There
was no way to roll over its huge short-term debt. In pushing Russian
authorities to fight a hopeless battle to maintain the ruble's exchange
rate, the IMF transformed what could have been a relatively painless
devaluation into a banking crisis and a collapse of government borrowing.
Finally, the inevitable happened. Last week, Russia devalued the ruble and
announced that it would force its creditors to accept new terms for the
repayment of its ruble debts. At this point, the top priority should have
been to save the banking system. Instead, all eyes were focused on whether
foreign investors who had bought Russian government bonds would be given
equal treatment under the restructuring plan. Of course, equal treatment
was only fair. But sometimes whether a policy is fair is less important
than its consequences. Russian banks had enormous holdings of government
bonds. Without a relatively liquid market for these bonds, they had almost
no interest-earning assets that they could sell at short notice to make
payments. Given the banks' already minimal reserves, a crisis was
inevitable. Russian government bonds had a structural meaning for the
Russian banking system that they did not for foreign investors. A
differential approach to foreign and domestic holders of these bonds would
not have been fair, but it was demanded by the circumstances.
It is not too late to reverse this decision. With assurances from a
hopefully chastened IMF that money supply growth and harsher terms for
foreign than domestic bond-holders would not be a reason to deny already
agreed-upon loans, Russia could restart its bond market for domestic banks
only, offering them much more generous restructuring terms that it could
fund at first by spending some of the rubles the Central Bank bought up
this summer. With a high-paying and liquid ruble asset available, banks
would stop hoarding dollars, and the currency market could regain its vital
function of setting an exchange rate for the ruble. These measures would
certainly lead to some inflation, and they would not solve Russia's broader
economic problems, but they could halt the destruction of the banking
infrastructure that seems to be imminent.
It is hard to muster much sympathy for the people who run Russia's largest
banks. Russian bankers earned huge profits by borrowing money cheaply in
the West and loaning it at extortionate rates to their own government,
accomplishing little by way of broader economic change. They behaved
foolishly in the run-up to last week's catastrophe, betting all the money
they had on hand or could borrow on the continued stability of the ruble.
(Of course, in this they were no more foolish than the IMF, which also bet
billions on the same mistaken notion.) Any policy that has the effect of
sparing the banks the consequences of their mistakes is distasteful to our
notions of justice. It is likewise distasteful to encourage Russia to
treat foreign investors in its bonds less generously than domestic ones.
This is not a moment for justice, however, but for responsibility. The
annihilation of Russia's internal payments and tax collection
infrastructure would not just be distasteful. It would be catastrophic.

David Woodruff
Assistant Professor, Department of Political Science
Massachusetts Institute of Technology
1998-1999 Visiting Professor at European University in St. Petersburg
Department of Sociology and Political Science
St. Petersburg, Russia
Phone: 011-7-812-275-8931


Date: Tue, 01 Sep 1998 
From: "Laura Belin" <> 
Subject: reply to Jerry Hough

Jerry Hough writes (JRL #2332) that "The danger of demonstrations and a
coup is enormous. Yet a Laura Belin can think of no explanation for a New
Deal policy other than that the oligarchs want it."

This misrepresents my views in a few respects.

1. I was not attempting to explain Yeltsin's endorsement of a "New Deal" or
"Asian" economic policy. I was attempting to explain why he appointed
Chernomyrdin as acting prime minister. Reasonable minds can differ, but I
do not believe that Yeltsin picked Chernomyrdin because he knew what
policies Chernomyrdin would pursue and supported those policies. I think
that even now no one has a clear idea of exactly what policies Chernomyrdin
will implement if the Duma confirms him as prime minister. 

2. I did not suggest that the only reason I could think of to explain why
Yeltsin appointed Chernomyrdin was that the oligarchs wanted him to do so.
In both my original analysis from RFE/RL Newsline on 24 August and in the
message I sent to JRL a few days later, I said several factors may have
influenced Yeltsin's decision. 

3. Contrary to what Professor Hough implies, I have not endorsed Russia's
past economic policies or said there is no reason to change them. Nor have
I formed my opinions solely based on what we are told by Chubais, Nemtsov,
and their supporters. I do believe that political considerations lie behind
Yeltsin's decision to reappoint Chernomyrdin. I drew this conclusion--which
is of course only speculation, since we cannot read Yeltsin's mind--partly
because of the language Yeltsin used when explaining the appointment on
television (Russia needs political "heavyweights" and "continuity of power"). 

My opinion was informed in large part by several months of closely reading
and watching reports by media that are financed by Berezovskii or other
financial and industrial groups. Since before the Duma confirmed Kirienko,
those media have been depicting Kirienko and Nemtsov as incompetent
lightweights who couldn't measure up to Chernomyrdin. I'm not speaking only
of Nezavisimaya gazeta (financed by Berezovskii) here, but of many Russian
media outlets. The tone and frequency of such reports persuaded me that
some very influential business interests believed appointing Kirienko was a
disaster. The way Yeltsin explained his appointment of Chernomyrdin, among
other things, suggested to me that he was throwing a bone to those business


Date: Tue, 01 Sep 1998 
From: brian whitmore <>

By Brian Whitmore
As Russia moves toward what many have already started to call the
post-Yeltsin era, the nation's financial and political imbroglio is
quickly degenerating into a constitutional crisis that could destroy the
country's rickety legal foundations.
"We are in a total political crisis — a crisis of principles. Predicting
where it will lead is very difficult," said ex-Legislative Assembly
speaker Yury Kravtsov, who represents St. Petersburg in the Federation
Council, the upper house of the Russian parliament.
"In today's political climate, any prediction, ranging from the revival
of a Soviet-style administrative system to the breakup of the country is
potentially, and disturbingly, possible," he said.
The nation’s woes are complicated by the fact that the immediate
problems of stabilizing the country's finances and getting a government
confirmed by the State Duma are only one side of the political battle
now raging in Moscow. Behind the scenes, a back-room struggle is being
waged to control who becomes successor to President Boris Yeltsin — a
process that is rocking the country's political system to its very core,
politicians and analysts said Monday.
"It is hard to tell where this is heading. We could return to 1991 or
end up in 1917," State Duma Deputy Yuly Rybakov, who represents downtown
St. Petersburg's Admiralteisky district in the federal parliament, said
in a telephone interview Monday.
Kravtsov said that the current political crisis is the result of a state
system that "was built around one person and one branch of power."
Kravtsov said the country was in a paradoxical situation. On one hand,
concentrating so much power in the president's hands is potentially
dangerous while on the other, giving more authority to the communist-
and nationalist-dominated State Duma could be catastrophic. Kravtsov
added that the Communists’ proposals to pass a law changing the balance
of power between the president and the Duma are unconstitutional.
Amending the Constitution requires a two-thirds vote in both houses of
parliament and the approval of two-thirds of regional legislatures.
"It is possible to legitimately amend our Constitution, including adding
the position of vice president and increasing parliament's authority.
But we can only do this when we have a normal civilized parliament — not
with the nationalist-communist majority we have now in the State Duma,"
said federal lawmaker Galina Starovoitova, who represents St.
Petersburg's northern district in the Duma.
The political crisis broke out in Moscow last week when President Boris
Yeltsin — following the government's decision to devalue the ruble —
sacked his reformist prime minister Sergey Kiriyenko, replacing him with
veteran apparatchik Viktor Chernomyrdin, whom he fired last March.
Yeltsin then named Chernomyrdin his likely heir to the presidency. 
The ruble, which had dropped from 6.2 to the dollar to about 7, went
into free fall after Chernomyrdin's appointment, as people flooded banks
to buy dollars.
"The markets don't trust Chernomyrdin. With Kiriyenko in power, the
financial situation would have stabilized. With Chernomyrdin, the
financial crisis spun out of control and became a political crisis,"
said Mikhail Brodsky, an economics professor at the St. Petersburg
University of Economics and Finance.
Compounding this, reports of Yeltsin's failing health and imminent
resignation fueled speculation that a back-room deal had been cut to
allow the president to gracefully and safely exit the political scene —
a deal allegedly brokered by media and financial tycoon Boris
Berezovsky, Chernomyrdin's chief sponsor among the country's financial
elite, popularly known as the oligarchy.
Attempting to reimpose his tattered authority on the political scene,
Yeltsin gave a nationally televised interview Friday in which he said it
would be “impossible” for him to quit his post (see story, page 3). 
However, Yeltsin’s attempts to hold back the tide had little effect.
During both the weekend’s frantic negotiations between the acting prime
minister and the Duma and Monday’s dramatic if predictable rejection of
Chernomyrdin by the parliament, Yeltsin was on the sidelines.
Gennady Zyuganov's Communists, who dominate the Duma, can smell blood.
In exchange for Chernomyrdin's confirmation, they have been demanding
more power, including control over 10 ministerial portfolios, and
measures such as nationalizing enterprises and ending the ruble's
internal convertibility.
"The measures being proposed by the Communists can't be implemented
without a strong police state. This would mean a sharp turn to the left,
bringing the country back to the politics of the mid-1980s," said
Nikolai Petrov, a political analyst at the Carnegie Center for
International Peace in Moscow.
In a statement released to the media Saturday, Starovoitova called
proposals pushed by the Communists to curtail Yeltsin's authority and
change the Constitution "a hidden form of a state coup."
Likewise, Duma Deputy Sergey Belyayev said that current talk of forming
a coalition government could be "a means to turn over power to the
Alternatively, some observers said that the political crisis in Moscow
and the resulting power vacuum could force the country's 89 regions and
republics to take matters into their own hands, potentially
precipitating a henceforth absurd notion — the breakup of the Russian
"There is a center-regions dimension to this crisis which hasn't yet
been taken seriously but nevertheless exists," said the Moscow Carnegie
Center's Petrov, who specializes in regional politics. "The longer the
power vacuum remains in the federal center, the more the regions will
try to solve the crisis alone. Regional leaders will begin trying to
save themselves."
Such a specter was raised Sunday by Yabloko leader Grigory Yavlinsky on
NTV's Itogi news program Sunday night.
"There is already talk of a confederation, of the breakup of Russia.
Regions are threatening to hold back taxes and gold. Yeltsin runs the
risk of going down in history as the president who oversaw the
dissolution of Russia," said Yavlinsky.
Several developments over the past week lend credence to this
• Alexei Lebed, governor of the Siberian republic of Khakassia last week
asked his regional parliament to stop paying taxes to the federal
• Mikhail Nikolayev, president of the Sakha Republic has threatened not
to send gold to the federal center.
• Several regions, including Samara, Sverdlovsk and Moscow, are
discussing the creation of semi-closed banking systems that are
autonomous from the federal center.
"In the absence of an agreement among the major political players in
Moscow, the country could dissolve. The breakup of Russia is a very real
possibility," said Petrov.


Date: Tue, 01 Sep 1998 
From: "matt taibbi" <> 
Subject: bruce bean

I wanted to reply to Bruce Bean's letter in your last list. Here goes:

"At McDonald's, 14,000 Russians have been taught to smile. These are the
kinds of lasting changes that matter [to Russia]."
-- American Chamber of Commerce head Bruce Bean, as quoted by the Baltimore
Sun, regarding Russia's financial crisis earlier this year.

Boris Yeltsin should probably reconsider whatever concessions he is
planning to make to the Communists in order to get Viktor Chernomyrdin
approved as Prime Minister. He would probably do better offering them Bruce
Bean's head on a platter.

Bean, who as a public personality is remarkable for being practically
incapable of making any public statement except in the form of letters and
articles warning of dire consequences if the world does drop everything and
immediately follow his advice, has done it again in his latest offering to
the Johnson's List. This time, he castigates the communists for failing to
remain at the beck and call of one of history's most misguided and
ineffective leaders, and urges them-- for their own good, apparently-- to
roll over one more time.

Bean blames a lot of things for the current financial crisis, including the
usual laundry list of Yeltsin-apologist excuses: Asian contagion, a drop in
world oil prices, and poor tax collection. He goes on to ascribe blame to
the Duma for future disasters if it does not approve Yeltsin's ridiculous
candidate for Prime Minister, the mumbling ineffectual bagman Viktor

But nowhere-- and this is the part of his letter that shocked me-- does
Bean assign any blame whatsoever to the Yeltsin government for any of the
country's problems. He mentions the railway strikes as if they were an
unfortunate and coincidental variable to this whole mess, apparently
unwilling to admit even the obvious fact that the miners-- like the vast
majority of the Russian population-- are disgusted by their President's
incredibly callous indifference to their lives. A job at McDonald's is not
going to make these people smile. The sight of Yeltsin swinging from a
telephone pole might, though.

I'm not going to fall into the same trap that Bean does, and offer any
Russians any advice on how to run their lives or their government. I will,
however, offer Bean some advice on what he, personally, can do during this
crisis to help out. To use his phrase, he must, "at the very least":

-- Stop pretending that a government which Control Risk International rated
the most corrupt in the world is the accidental victim of falling
international petroleum prices when it is struck by a financial crisis.
Bean is surely aware that the real reason markets are "spooked" is the fact
that Russian stocks, in the current environment, simply aren't valuable.
Who would invest in any business in a country where the government is
incapable of providing any legal protection for honest businessmen?

--- Stop telling Russians that it would irresponsible for them to act upon
their political convictions. Bean says that "compromise is the essence of
democracy", but courageously representing one's constituents is no less
essential for a democratically-elected official. The "communist-dominated
opposition" Duma has consistently failed to do that since 1993, rolling
over time and again to support the President on virtually every key vote.
In fact, the current parliament has already "compromised" so often that
most political commentators would now hesitate to call Russia a functioning
democracy; it is now really an autocracy with a rubber-stamp legislature. 
Furthermore, the very notion that this Duma can "compromise" at all given
the country's current constitutional structure is simply disingenuous. The
powers Yeltsin has accrued since 1993 have left the legislative branch so
totally declawed that it cannot legally oppose the President without
risking its own dissolution. As an American, what Bean should really be
calling for is an amendment to the Russian Constitution that would allow
for a more rational method of choosing a Prime Minister. The current
structure is not conducive to the "compromise" he wants; it really only
allows for meek submission or outright confrontation. That's not the
American way, as far as I can tell.
That said, the Duma in this instance, if it is at all interested in
maintaining its integrity before its constituents, really has no choice but
to reject Chernomyrdin. Some 90% of the country disapproves of
Chernomyrdin, and not without reason; it was his five-year stewardship of
government that resulted in the current disaster. What's more, Chernomyrdin
was almost certainly forced on Yeltsin by oligarchical powers who hope to
use him to salvage as many of their assets as possible. Cernomyrdin's
policies, if approved, will almost certainly result in the rescue of a
whole range of insolvent banks. It that happens, it will mean that the
Russian people will be made to pick up the bill for a very small group of
venal, greedy criminals who left honest Russians holding bank "savings"
they can't withdraw, because these nouveau riche "bankers" relocated all
the cash to Switzerland and the Isle of Mann. The rejection of such a
person, and such a policy, could only be considered a "short-term political
ambition" by someone who is only IN RUSSIA for the short-term-- like Bean.
The opposition does not need to "hope" Yeltsin's reforms will fail. They
HAVE failed. And the Duma leaders would not be wrong to reap the political
benefits of that failure. They would be exercising their Democratic right
to power and influence, which fell to them by default when the President
failed his country.

3. Stop whining about tax collection.
No less an authority than London School of Economics economist Rory
McFarquhar released a report earlier this year demonstrating that the
Russian government, even with its notoriously inefficient tax collection
methods, collects over 33% of GDP in revenue every year-- a higher
percentage than the United States or Japan. The Russian government does not
need to collect more taxes. What it does need to do is stop allowing the
budget to be plundered by Yeltsin's pals. When Yeltsin stops allowing Boris
Berezovsky to funnel all over Aeroflot's revenues to Switzerland while
using state funds to cover the airline's costs-- and all because Berezovsky
put Yeltsin's son-in-law at the head of the airline-- then I think it would
be a good time to discuss how best to increase tax revenue. 
I also didn't notice Bean complaining about a recent $300 million deal in
which Aeroflot leased Boeing jet liners, a deal which was concluded only
after the Russian government agreed to waive the usual import tariffs. That
deal was backed by the U.S. Import-Export bank-- an American
state-sponsored bank-- meaning that United States taxpayers were asked to
put up money to help Boeing push through a deal to deprive Russians of tax
revenue (and business for their own domestic airplane makers). People like
Bean complain often that the Russian government unnecessarily depletes the
budget when it supports its own inefficient industries, but they never seem
to mind when Western governments take care of their own. These people may
think that Russians don't notice that they're being sent down a one-way
street when Westerners give them advice, but they're wrong-- and that's why
Bean's beloved Yeltsin is doomed now to be swept away by a wave of
anti-Western sentiment. Maybe in a year or two, when he finds that the only
speaking engagements he can wrangle out of Russians are located in Canary
Islands auditoriums, Bean will realize that Russians want a little more for
themselves than an apron and instructions on how to smile.
Anyway, Bruce, there's my advice. Let me know if you want fries with it.


Moscow Times
September 2, 1998 
EDITORIAL: Corruption Flourishes as U.S. Fiddles 

"What I want to do is to go there and tell them that the easy thing to do 
is not the right thing to do. The easy thing to do would be to try to go 
back the way they did it before and it's not possible. -- U.S. President 
Bill Clinton on Monday immediately before leaving for his summit meeting 
in Moscow. 

Ah yes, it's so clear now! The easy thing to do is not the right thing 
to do; the right thing to do would be not to go back and do it the way 
they did it before; no, that would be the wrong thing to do. And of 
course, Russia must stay the course. It must continue to reform. It 
must, uh, stay the course, on the reforms. 

>From the very start of his rule, President Boris Yeltsin has turned to 
the West for advice. Washington was quick to help sketch out the 
contours of the new Russian economy. Prices would be freed; state-owned 
commercial structures would be rushed into private hands; a stock market 
would be conjured into existence; and the national legislature would be 
disdained as a collection of uneducated populists. 

The ensuing years saw massive state corruption suck billions of dollars 
out of Russia. Indeed, on the eve of the bailout by the International 
Monetary Fund in July, as the government was asking for up to $15 
billion in short-term help, a Kremlin study cited by RIA Novosti 
estimated that corruption was costing Russia from $15 billion to $20 
billion each year. 

Yet never have the Western governments or international lending 
institutions really publicly criticized the national government's 
corruption. Hardly a peep was heard from the White House or the World 
Bank about, for example, the flagrantly rigged privatizations of the 
oil, metals and gas companies, or about the shadowy funding behind 
Yeltsin's profligate 1996 re-election campaign. 

In practicing this strange tolerance, Western governments have ignored 
their own expatriate business communities here, which have long 
complained about their battles with out-of-control corruption. 

Western leaders said nothing as Russia's news media were consolidated 
into the hands of an oligarchy drawn mostly from the ranks of the former 
Soviet Communist Youth League and made rich at the state's expense. The 
same Western governments so actively concerned over the fate of 
financial institutions stuck with devalued Russian treasury bills have 
never criticized the Kremlin as it has allowed millions to go without 

Instead, the West has heralded vague "reforms," and has encouraged 
Yeltsin to ... stay the course. If Clinton is now uncomfortable visiting 
such an obvious U.S. foreign policy failure as Russia, he is welcome to 
shoulder some of the blame. 


The Guardian (UK)
2 September 1998
Leader (editiorial)
Don't knock the Duma 
It's democracy in action 

The State Duma is Russia's main democratically elected assembly. Its 
members have interests and principles - and constituents, to whom they 
must look for re-election. When the Duma rejects the nomination of a 
prime minister, as it has done in the case of Victor Chernomyrdin, that 
should not be instantly characterised as a dangerous obstruction to the 
efforts to find a solution to the country's economic crisis. This is 
democratic politics, with political groupings and individuals 
manoeuvring for position while appealing to their supporters and to the 
public at large as they do so. Risky stuff, admittedly, when the 
economic and political prospects are so dire. Yet it is precisely 
because they are so dire that the Duma should not be condemned for 
making the most of a transition which offers it what it does not 
normally enjoy under Russia's excessively presidential constitution, a 
substantial influence over events. 

As President Clinton and President Yeltsin, both diminished men, play 
out empty roles in their Moscow meetings, the mistakes of the past are 
clearly to be seen. The West put its bets on Yeltsin as a strong man, 
and now that he is weak, it hardly knows what to do, except to cast 
around for a new strong man and hope that maybe Chernomyrdin will do. We 
see the Russian crisis through spectacles in which one lens is focused 
on our own economic difficulties and another on the need to ensure that 
Russia's nuclear weapons array is secure. Western governments thus have 
a tendency to welcome the autocratic and authoritarian solutions which, 
out of the other corner of their mouths, they say they deplore. But the 
main purpose of the parties and political groupings in the Duma is not 
to bring swift reassurance to worried Westerners or to halt the slide on 
other peoples' stock exchanges. It is to do what is right for Russia, 
while still competing with one another for political advantage. After 
all, if Chernomyrdin is eventually successful in winning enough Duma 
support, the chances are that Russia will have picked not only its next 
prime minister but its next president, a man who might head the country 
for a decade. Surely it is not surprising when Duma members question 
whether this mediocre and limited figure, so involved in past failures, 
and so beholden to Russia's irresponsible new business class, is the man 
to lead Russia into the next century? And where did this Chernomyrdin 
candidacy come from? Out of that same business class, or elements of it, 
dismayed at Yeltsin's illness and at the policies of the young reformers 
to whom he had given a brief opportunity in power.

These are the reasons why Chernomyrdin had such a rough ride. It is not 
just the communists and the nationalists who are opposing Chernomyrdin, 
but the Yabloko bloc, which is the nearest Russia has to a social 
democratic party. That grouping, led by Grigori Yavlinsky, opposes him 
because they see him as the wrong man with the wrong policies. The 
communists, who were in any case about to launch a campaign of 
demonstrations against the government, do not want to moderate their 
opposition to Yeltsin except on terms humiliating to the president. 
Chernomyrdin could nevertheless eventually make it: the communists have 
changed their minds before. In any drawn out process, new candidates 
will emerge. Such candidates may or may not be better than Chernomyrdin 
and may or may not have a serious chance of achieving power. And the 
West may grit its teeth at the market uncertainties to which a longer 
transition in Russia will contribute. Yet who can deny that Russia's 
elected representatives have a right to take their time over a decision 
of such critical importance for their country?


Chubays Criticizes Zyuganov, Yavlinskiy 

August 31, 1998
>From the "Segodnya" newscast

Anatoliy Chubays, one of Russia's biggest managers as head of Russian
Joint-Stock Company Unified Energy System, who people in the Duma do not
shrink from loudly calling a national irritant and who has done a lot to
annoy Gennadiy Zyuganov, has criticized the opposition's point of view.
[Begin Chubays recording] To be honest, I have not for a long time
experienced such heavy emotions as I did after what I saw on television
All faction leaders displayed complete helplessness combined with
complete irresponsibility, such a demonstrative striving, and a complete
inability to take, or at least utter, a responsible decision.
In this sense, Yavlinskiy and Zyuganov looked like twin brothers to me
yesterday. It gave me a very bad impression, the stupendous degree of
irresponsibility of our Duma deputies, even in comparison with -- I don't
know -- with Yuriy Mikhaylovich Luzhkov or Yegor Semenovich Stroyev, who
can also really get into political posturing of a very clear nature. But
at least they nevertheless found the courage to take up positions that they
do not like personally but that the country and the state needs. [end


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