September 2, 1998   

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

Johnson's Russia List
#2342
2 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Clinton, Yeltsin Conclude Summit.
2. Reuters: Russian Business Daily Warns of "Civil War."
3. Jerry Hough: Boris Fedorov.
4. Ross Wilcock: Helping Russians.
5. Robert McIntyre: Unstoppable Waves of Nonesense, not" Hyper" critical.
6. Victor Kalashnikov: 'The Invisible hand' gets shorter. (Arrest of 
deputy finance minister Vladimir Petrov).
7. Newsday: Cynthia Roberts and Thomas Sherlock, U.S.-Russia Summit: 
Massive Mismatch.
8. New York Times letters: Carol Saivetz, West Isn't to Blame for 
Russia's Mess etc.
9. The Independent (UK): Helen Womack, Street life - How Ivan the 
Typical survives.
10. PRNewswire: Russia in Crisis: A Special Report by Russia Portfolio.
11. Moscow Times: Valeria Korchagina,Tax Man Pits Children Against 
Parents.
12. USIA: REMARKS BY RESIDENT CLINTON AT FIRST DAY OF SCHOOL FESTIVITIES,
Elementary School #19, Moscow, Russia.]

******

#1
Clinton, Yeltsin Conclude Summit 
By Barry Schweid
AP Diplomatic Writer
September 2, 1998

MOSCOW (AP) -- Concluding his two-day summit with President Clinton,
Russia's Boris Yeltsin said his politically paralyzed nation is determined
to stay the course to democracy and a free economy. Clinton held out hope
for expanded western investments but emphasized ``there is no short cut''
for Russian reform. 
The world stands ready to provide financial help so long as Russia
remains on a democratic track, he said. 
Yeltsin, in the throes of a full-throttled political crisis, was asked
in a wrap-up news conference what he would do if the Russian parliament
refused to confirm his choice of Viktor Chernomyrdin to return as prime
minister. Would he dissolve parliament in that event? Yeltsin took several
seconds and then said, speaking in Russian, ``We will witness quite a few
events for us to be able to achieve all those results.'' 
As Clinton and others waited for more, he added, ``That's all.'' 
Clinton was asked whether he had struck the right tone in his TV
appearance regarding Monica Lewinsky. After Yeltsin's reply he grinned and
quipped, ``That's my answer, too.'' 
Regarding the brief TV remarks, criticized by many as too grudging and
not apologetic enough, he said, ``I read it the other day again and I
thought it was clear that I was expressing my profound regret to all who
were hurt.'' 
A reporteer also asked Clinton whether he thought the reaction to his
admission of an affair had hurt his ability to lead the country. 
``I have acknowledged that I made a mistake, said that I regretted it,
asked to be forgiven, spent a lot of very valuable time with my family in
the last couple of weeks, and said I was going to back to work,'' he said.
``I believe that is what the American people want me to do and, based on my
conversations with leaders around the world I think that's what they want
me to do, and that is what I intend to do.'' 
Both presidents described their meetings as successful, and Yeltsin told
reporters he and Clinton discussed ways to intensify U.S.-Russian economic
relations to pull Russia out of its economic tailspin. 
``We shall have to suffer through much blood, sweat and tears before new
forms of business cooperation worthy of our two great powers are found,''
Yeltsin said without mentioning the political paralysis he faces with the
State Duma over forming a new government. 
Said Clinton: ``I know this is a difficult time, but there is no short
cut.'' 
Yeltsin said the key to Russia's economic recovery was not further U.S.
assistance but more foreign investment. ``This is what we really need now.'' 
The Russian leader said several times he wanted the world to know that
Russia does not view U.S. support as a crutch. He said Russia had no choice
but to stick to its plan -- now in danger of failing -- to build a free
market economy. 
``Still we need to conclude our reforms, to bring them to completion
and, consequently, to get results,'' he said. 

Later Clinton addressed some two dozen members of the Duma and regional
leaders, including Alexander Lebed, a regional governor and former
hard-line commander with a record of challenging Yeltsin's policies, and
Gennady Zyuganov, the Communist Party leader who also is a chief Yeltsin
nemesis. 
``Russia must have its own approaches that keep the nation strong, that
care for the people who are in need, that prepare for the future of your
children,'' Clinton said, emphasizing the benefit of a national debate.
``No other country's approach would be exactly right for Russia.'' 
Referring to Russia's failure so far to build an effective tax
collection system, defeat corruption and pass laws to protect and regulate
banking and other commercial enterprises, Clinton said ``I do not believe
you can find one country in the world that is economically successful that
has completely ignored the ground rules of the global economy. 
``If the basic framework is not in place, as a friend I say I do not
believe that you can defy the rules of the road in today's global economy
any more than I could defy the laws of gravity by stepping off the top
floor of Spaso House,'' he said, referring to the U.S. ambassador's
residence in which he was speaking. 
At the Kremlin news conference, Clinton said he told Yeltsin: ``If the
reform process can be completed, I for one would be for greater assistance
to Russia.'' He said the United States has a ``very strong vested
interest'' in seeing Russia succeed. 
Clinton, in his remarks to reporters, referred obliquely to Yeltsin's
standoff with communist and nationalist lawmakers. 
``I think if other political forces try to force the president to
abandon reform in midstream or even reverse it, what I think will happen is
even less money will come into Russia and even more economic hardship will
result,'' Clinton said. 
Before taking questions, Yeltsin and Clinton signed two security
agreements. One commits each country to ridding itself of 50 tons of
weapons-grade plutonium from old nuclear warheads; the other calls for
sharing information on missile launch warnings. 
They also signed joint statements on biological weapons control and on
the situation in the Kosovo, the Balkan region torn with civil strife. 
Yeltsin said the atmosphere in his summit talks was friendly,
notwithstanding disagreements on some security issues that he and Clinton
discussed at length. 
``Russia rejects the use of power methods as a matter of principle,'' he
said. ``Conflicts of today have no military solutions, be it in Kosovo or
around Iraq or Afghanistan or others.'' 
He also reiterated his opposition to what he called ``NATO centrism,''
or the central military role the U.S.-led NATO alliance plays in Europe and
beyond. He added, however, that the two days of discussion had produced a
``greater mutual understanding on these issues.'' 

********

#2
Russian Business Daily Warns of "Civil War"

MOSCOW, Sept 2 (Reuters)- Russia's main business newspaper,
Kommersant-Daily, said on Wednesday that conflict between President Boris
Yeltsin and the Communist-led parliament could lead to a constitutional
crisis and possible "civil war". 
"Zyuganov Ready for War," the paper ran across its front page above a
half-page portrait of Communist leader Gennady Zyuganov, who accused
Yeltsin on Tuesday of being a "crazy drunk" who was pushing Russia "towards
civil war". 
The normally sober Kommersant said in its front-page editorial that the
Communists, who dominate the State Duma lower house with their allies, were
ready to reject Yeltsin's candidate for prime minister three times-- a move
that would trigger the chamber's dissolution under the constitution. 
It said the Kremlin staff could avoid a showdown by urging Yeltsin to
drop Viktor Chernomyrdin and nominate a more acceptable candidate for
premier-- either upper house speaker Yegor Stroyev or Moscow mayor Yuri
Luzhkov. 
"After yesterday's Duma council meeting it has become clear -- the
country has reached the stage where there is a threat of civil war. The
Duma headed by Gennady Zyuganov is ready to start it," Kommersant said. 
The Duma overwhelmingly rejected Viktor Chernomyrdin on Monday and
Zyuganov said it would do so a second time in a vote due next Monday and
would do so a third time, too, if Yeltsin renominated the man who was
previously premier for five years. 
Yeltsin has already noted that that would leave him no choice but to
dissolve the Duma. 
If that happened, Kommersant said, the Communists had broad support to
go ahead with impeachment proceedings against the 67-year-old president,
creating a constitutional crisis, since the constitution also forbids the
dissolution of the Duma by a president who is under investigation for
possible impeachment. 
"This clinch could lead to consequences we know from autumn 1993,"
Kommersant said, recalling Yeltsin's bloody October 1993 battle with
supporters of the Soviet-era parliament. 
"Today the Left is capable of bringing out many more people on to the
streets...and among them will be many more ringleaders ready to set up a
fiercer stir than in October." 
The Kremlin had made a mistake in its negotiations with the Communists
by admitting Yeltsin's weakness in recent days, the paper said. The
president had proved that he reacts defiantly to any threats from
parliament. But his aides might yet persuade Yeltsin to back down and name
a different prime minister. 

********

#3
Date: Wed, 2 Sep 1998 
From: "Jerry F. Hough"
Subject: Boris Fedorov

I am surprised there has been no discussion of the return of Boris
Fedorov as deputy premier. In 1992, Chernomyrdin promised an industrial
policy to the Congress, but Yeltsin appointed Fedorov who supported and
introduced a radical monetarist party. The result was the dissolution of
the Congress. In the interim, Fedorov has been nastily nationalistic,
been implicated in the diamond trade fraud of 1993 by US News and World
Report, and unfairly offensive to the oil and gas industry in his recent
tax collection policy. Chernomyrdin is asking for the support of the Duma
with an industrial policy and Fedorov is appointed to run economic policy. 
It is hard to imagine any move that would cause such suspicion in the
Duma. Can someone explain what is going on? 

*******

#4
From: "Ross Wilcock" <rwilcock@execulink.com>
Subject: Helping Russians
Date: Wed, 2 Sep 1998 

Thank you for your humanitarian interest. The situation is complicated.
Russia seems to have an infinite capacity like a titanic leaky ship.

To save it, it is necessary first to stop the leaks.
Russia is a rich country, but suffers serious mismanagement.
Money donated easily gets into wrong hands.
Public assets were stolen by greedy self interested people following the
ideology of "The Iron Lady." It was called revolution from the top.
The difficulties of ordinary people will continue - many have died sometimes
by suicide or despair + vodka. The situation is unlikely to change until
wrongs are put right.
The Salvation Army is now active in Russia. In 1992 before the official
Moscow opening, it was already feeding 10,000 people a day in Moscow. It is
now functioning in more than 25 cities of the FSU from St. Petersburg to
Vladivostock. You can contact The Salvation Army for information on how best
to help through International Headquarters, 101 Queen Victoria Street,
London EC4P 4EP T: +44-171-236-5222

Ross Wilcock
rwilcock@execulink.com
http://www.pgs.ca/

********

#5
From: "Robert McIntyre" <mcintyre@wider.unu.edu>
Date: Wed, 2 Sep 1998 
Subject: Unstoppable Waves of Nonesense, not" Hyper" critical

Two different types of issues to raise: (1) a request that 
someone (Dolan, Turgeon, a World Bank staff reader?) write a note to 
help readers clarify the economic vocabulary they are using; and (2) 
brief attempt to introduce several points about current Russian 
economic policy options.
(1) The vocabulary point is triggered by my small objection 
to a historical point made in the excellent article by Susan 
Eisenhower ("A Summit for Listening", JRL #2340, 2.09.98). It 
relates to the word "hyperinflation". Even articles which do not use 
the word hyperinflation (e.g., Chrystia Freeland, "'Unstoppable 
wave of inflation' on the way", Financial Times, 1 September 1998, p. 
1) contribute to this confusion. I propose that someone (not 
me, although against my better judgement I make a short effort 
below) write a note that deals clearly with three distinctions.
1. "price increase" and "inflation"
2. "inflation" and "hyperinflation"
3. "money" and "income"

REGARDING 1. AND 2. ABOVE:

Prices constantly rise and fall in a market economy, even when the 
reality of the economy in question is far from the textbook image 
of "perfect competition" that so damages the brains of many 
economists. A price rise is not inflation unless it is part of a 
SUSTAINED society-wide process in which MOST PRICES are rising at the 
same time. Hyperinflation is then a sustained and rapid inflation 
process, with some disagreement as to how fast is fast enough to 
qualify (200% or more per year, in terms of your own currency, would 
commonly be cited as the threshold). 
When the 1992-93 period is referred to as a hyperinflation by 
Eisenhower and most other writers, they are partly right (the rate 
of price increase was high enough and general enough to qualify) but 
partly wrong in that it was not a process driven by rapidly expanding 
expenditures outpacing the ability of suppliers to increase 
production in a competitive market. 
The 1992-1993 inflation was the direct effect of 
the sovereign stupidity of Gaidar and colleagues in the way 
that they abruptly destroyed a system of administrative price 
controls (which had parallel "free markets"), while simultaneously 
pursing policies which both disorganized local producers and allowed 
the domestic market to be flooded with much higher priced imported 
food products. Imported products (and what local production still 
came to market) were then distributed through monopoly wholesale 
channels, leading to monopoly-type retail price setting despite 
thousands of outlets. This is a classic "one-time effect" . 
The point is that this was not a conventional inflationary 
situation. It was a "regime-change" situation with a strong 
one-time ("one-off) character that would have greatly slowed down 
without IMF inspired or mandated monetary restriction policies. The 
"young reformers" ignored the need to make sure that markets 
functioned competitively before setting prices "free". 
Part of the 1992-1993 price increase reflected quality improvement 
(and so was not "inflation" at all). Part of the price increase was 
the type of expectations-driven process that builds great inertia 
into the inflation once it gets going at any speed. 
But is any inflation at all desirable?, and how important are 
efforts to suppress it? I believe that "most economists": (a) think 
that some inflation is a natural, healthy thing in a capitalist 
market economy (readers who reflexively disagree with that 
are probably either making a simple logical error, or confusing 
"money" with "income"); (b) do not believe that hyperinflation comes 
out of such normal processes of a healthy peace time economy. Most 
cases of actual hyperinflation are the aftermath of war and reflect 
civil or social disorganization; (c) think that deflation is a 
dangerous and destructive process (many serious economists, even 
monetary policy experts such as Allan Meltzer in the FT 17.07.98, 
"Time to Print Money", advocate an expansionary approach to deal with 
the Japanese stagnation/deflation situation). For Russia the 
arguement is even stronger.
A quote from a very good "conservative" economics textbook: 
"Is hyperinflation likely in the absence of civil war, revolution, 
or collapse of the government? Most economists think not. Further, 
it is clear that high inflation rates over a period of time do not 
mean the inevitable or even likely onset of hyperinflation, however 
serious the distributive and social effects of such rates may be." 
Lipsey & Courant, Economics, 11th Edition, 1996, p. 549.

REGARDING POINT 3. ABOVE: 

Most commentators agree that the Russian economy is currently 
demonetized in the sense of barter having replaced money exchange on 
a very large scale, except for Moscow and a few other areas. 
IF this is true (I believe it is) and IF one of things needed to 
allow the economy to begin to revive is restoration of normal market 
payments mechanisms, THEN will not "running the printing presses" be 
necessary to any effort to convert the system back to normal 
exchange. This is especially true if there is to be hope for emerge 
of new small and medium size enterprises that have hard time living 
in the arrears culture.
The macroeconomic policies of the Yeltsin government have 
been based on constant fraud (one of which has been claiming to "cut 
expenditures", but simply not paying legitimate bills for goods and 
services actually procured). Calming the social-political situation 
down will require paying these debts for goods, services and pure 
social transfers. Under these conditions it is impossible to know 
what part of this physcial output is "virtual" in the sense that term 
has recently been used. That is what I meant in JRL2295, item #1 
by the need for a period of "normal respiration" before it is 
possible to have any realistic idea of which production capacities 
are in fact viable.
So, if Russia is forced, both in promise and in fact, "to not run 
the printing presses, it will continue on a completely hopeless and 
suicidal path. 
What can it realistically do: work out a "clearing" of arrears on a 
regional basis (most arrears except for energy are within oblasts, I 
have been told by Academy of Sciences researchers); eliminate 
ruble convertibility; establish exchange controls (on the French or 
British post-war model); let the speculative private banks (see 
Juliet Johnson JRL2338, item #9) collapse but guarantee the deposit 
accounts of individuals; use Sberbank as the long-awaited "treasury 
payments" system: use a partial price control approach (price 
controls, rationing and dedicated luxury taxes to fund the adequacy 
of supply of subsistence goods, as a short term way to deal with the 
coming winter, but with parallel free markets for the same goods); 
raise tariffs on everything except core subsistence food products and 
physical capital equipment; and finance all of this by reasserting 
direct state control and/or ownership of selected energy and raw 
material exporters.
Two last connected points: Is direct foreign investment (outside 
resource extraction cases) capable of playing a big positive role in 
Russia now (I think it is not necessary and will not come in any 
event): and is a serious approach to use of industrial policy 
consistent with success in attracting DFI (I think the two are 
actually inconsistent). I think I do understand the implications 
of the above proposal, but I am not responsable for the readers 
imagination.
Dr. Robert J. McIntyre
Project Director, Transition from Below
UNU/WIDER (World Institute for Development Economics Research) 
Katajanokanlaituri 6B
00160 Helsinki
FINLAND

*********

#6
Date: Wed, 2 Sep 1998
From: machinegun@glas.apc.org (Victor Kalashnikov) 
Subject: 'The Invisible hand' gets shorter

The yesterday's arrest by FSB of deputy finance minister 
Vladimir Petrov may give yet another signal of changes 
underway within both economic and political fibre of Russia.
'Deputy ministers' have constituted a special and very 
influential class of bureaucrats in this country. Since Soviet 
times 'zamy' usually had more weight in managing 
particular issues and stayed longer in their positions than 
their politics-exposed bosses. After 1991 deputy ministers 
were - while predominately public-life shy - key figures in 
what was called 'crony capitalism'. They decided in practice 
on issues like giving/taking loans, issuing state guarantees, 
getting access to federal budget or financing programs. No 
wonder that many of them have entertained closer-than-
allowed links to both local and foreign companies, to 
regional bodies, etc. Hardly any of bigger Western 
companies or banks have started their activities in Russia 
without having had arranged friendships with a selection of 
deputy ministers beforehand. The way to open a branch in 
Moscow or elsewhere usually went through a deputy 
minister's office. This procedure made, in fact, most things 
in Russian economy moving, in defiance of 'invisible hand 
of the market' theories.
Petrov himself is accused, at first, of acting in favour of an 
unspecified bank here. During five years he outlived a 
number of federal finance ministers.
While 'market reforms' have been on rise in Russia, and 
'reformers' enjoyed all support and freedom of action, 
these key corruption mechanisms have been more or less 
immune against law, but most of all - against security odies 
pressure. This, apparently, is starting to change now. 
It came clear, that Petrov has been under observation for a 
longer time (like the entire top-management of the Federal 
Statistics committee - arrested earlier this year). It's 
indicative since practically all major institutions in Russia 
have been keen to equip themselves with security-services 
of their own which have been entertaining, with a great deal 
of professional skills, something like 
intelligence/counterintelligence for their particular masters. 
What happened now, may imply that those 'shadow' 
services are in process of giving up their competition and 
independence and will soon be incorporated/eliminated by 
the good old KGB. Which, in turn, could mean a lot of 
things, indeed.

*******

#7
Date: Wed, 2 Sep 1998 1
From: C. Roberts, croberts@hunter.cuny.edu
and T. Sherlock, jt4491@exmail.usma.edu

note: the following op ed draws in part on our article," Bringing the
Russian State Back In: Explanations for the Derailed Transition to Market
Democracy," forthcoming in "Comparative Politics"

"U.S.-Russia Summit: Massive Mismatch"
New York Newsday, September 2, 1998 p A44.
By Cynthia Roberts and Thomas Sherlock. Cynthia Roberts is an
associate professor of political science at Hunter College. Thomas
Sherlock is an assistant professor of political science at West Point.

WHAT IS most notable about the fin de siecle Moscow summit is not two
hobbled presidents but the immense disparity in power created by
Russia's profound weakness.
Seven years of political and economic change following 74 years of
failed communism have resulted in an enfeebled state that has little
international influence and is hard-pressed to govern itself or provide
a minimum of economic security for its citizens. With its economy
shrinking, a gross domestic product per capita already lower than
Poland's and only one quarter the size of Spain's, a credit rating
downgraded to Pakistan's level and an underpaid, crumbling army, Russia
today is a shadow of the Soviet imperial leviathan that challenged
American hegemony in the past half century.
While America's strength provides huge buffers against
international pressures, Russia is a decaying raw materials El Dorado
whose assets have been misappropriated, stolen and now devalued by the
sharp drop in the price of oil, a prime source of foreign exchange. The
state's dwindling international reserves - less than one-tenth of
China's - are too paltry to cover growing demands on the state budget,
including servicing past Soviet debt whose principal comes due in 2003.
Even before the recent ruble devaluation and default, it was
improbable that Russia would grow its way out of its problems; a country
that allows investment to dry up and as much as $200 billion of capital
to flee can have no hope of economic expansion. Now Russia risks
repeating another cycle of backwardness and stagnation, not as the great
power it claims to be.
Some crucial policy blunders have been caused by poor leadership,
incompetence and inexperience, but the sources of Russia's failure to
enact sound reforms that would have helped reverse the country's decline
are more fundamental. Many critics here and abroad have charged that
Russia's recent failures are the result of Chicago-school liberalism -
too zealous an embrace of laissez faire capitalism instead of a
much-needed industrial policy to promote growth.
In fact, Russia's problem is not too much market capitalism but
rather not enough of it. Nearly three quarters of transactions by large
firms, including tax remissions, are conducted by barter, wages go
unpaid for long periods and establishing the value of much economic
activity is a guessing game. No industrial policy would work in such
conditions.
Of course, a functioning market economy, like a viable democracy,
requires effective state institutions capable of good governance.
Russia's weak institutions and gaping holes in market infrastructure
from clear property rights to efficient taxation promote arbitrary
actions and corruption. The crony capitalism that contributed to the
crises in Russia and other emerging markets is the direct result of this
weak state syndrome.
How did President Boris Yeltsin's various reform governments
manage to squander Russia's last chance this century to reverse course?
Confronting economic collapse and strong opposition from Communists and
nationalists after the fall of the Soviet Union in 1991, Yeltsin enjoyed
little stable organized political support. Polarized elite conflict and
thin ties to society - both legacies of the Soviet period - led to
pacts with the devil. Yeltsin and his subordinates used the resources of
the state to attract allies and create a political base, allowing
patronage and rent-seeking to corrupt privatization and undermine the
development of the infrastructure of a market democracy. In short,
politics trumped economics.
Yelstin's victory in the 1996 presidential election created an
opening for more authentic reform, but many sound measures were blocked
by the new economic elites his administration had helped to create. In
particular, a small group of avaricious oligarchs who create little of
value had grown too powerful to supplant easily.
Given the failure of Russian market reform, the most important
legacy of the Yeltsin era has been the widespread discrediting of
capitalism and democracy. Russia now faces a time of troubles in which
all politics and economics will be challenged, especially by Communists
and nationalists who were marginalized until recently.
Many Russians now see their country's salvation in the soft
authoritarianism of leaders such as Alexander Lebed. Others hope that
Russia's regions will generate real reform empowering the federal model.
Whatever the outcome of this confrontation over who governs and by which
principles, the central question is whether any political force can
govern effectively. Corrupted by special interests, the Russian state is
too feeble to mobilize sufficient administrative muscle or popular
support to enact fundamental economic and political change.
At last, western politicians recognize that financing the charade
of Russian reform promotes neither genuine markets nor democracy.
Likewise, it makes little sense to lend prestige to Russia by including
it in organizations such as the Group of Seven economic powers, unless
its government undertakes true reform.
Still, the United States should stay engaged, especially on nuclear
issues. A weak Russia is potentially dangerous to others, not only
itself, especially if nationalist leaders promote foreign diversions.
But Washington should avoid overreacting to Russian bluster driven by
envy and resentment over America's global power and leadership.

********

#8
New York Times
September 2, 1998
Letters

West Isn't to Blame for Russia's Mess
To the Editor: 
It is counterproductive to look for someone in the West to blame for
Russia's political and economic collapse (Week in Review, Aug. 30). Yes,
there were mistakes and problems, but the blame lies with the Russians
themselves. 
President Boris N. Yeltsin has repeatedly wavered between supporting
market reforms and supporting the status quo. As recently as January,
Yeltsin diminished the roles of reformers and left his Prime Minister at
the time, Viktor S. Chernomyrdin, who is not an ardent reformer, in control
of economic policy. 
Some of the blame also lies with the so-called reformers. In the
parliamentary elections of 1993 and 1995 they were unable to leave egos
aside and backed several pro-reform candidates, thus diluting their
strength. As a result, the Communists gained control of Parliament.
Reformers also allowed the controversial loans-for-shares program to go
forward, which only enriched the oligarchs, and ultimately emboldened them
to demand Prime Minister Sergei V. Kiriyenko's dismissal. 
President Clinton is right to go to Moscow, but the message he delivers
there must be unequivocal: Yeltsin must push reform forward or there will
be no more aid from the West. 
Moreover, all factions must cooperate or Russia may well collapse.
CAROL R. SAIVETZ
Cambridge, Mass., Aug. 31, 1998
The writer is a research associate at the Davis Center for Russian Studies,
Harvard University. 

Loans Aren't a Gift 
To the Editor: 
Re "Let Russia Fend for Itself" (Op-Ed, Aug. 29): Richard Pipes confuses
foreign aid with foreign loans. Loans are not handouts. 
Moreover, Russia, with a population of 150 million, is budgeted to
receive about $225 million in aid from the United States Agency for
International Development; Israel, with a population of 5.5 million, is
budgeted to receive $1.5 billion in aid. 
After World War II our policy makers understood that in order to secure
a lasting peace, the industrial bases of Germany and Japan needed to be
strengthened. Why is it not clear to Pipes that the same holds true for
Russia today? 
PETER J. FOLEY
Washington, Aug. 31, 1998

Fight Corruption First
To the Editor: 
I disagree with Richard Pipes's argument that the "best policy toward
Russia is one of hands off" (Op-Ed, Aug. 29). Rather, what Russia needs is
a new kind of international partnership that effectively addresses
corruption and criminality. 
One cause of the current crisis is a long-term lack of trust in the
Yeltsin administration on the part of the Russian people and foreign
investors. The Russian leadership and its international partners have taken
no effective action to limit the firestorm of criminality and cronyism that
has destroyed assets and lives. 
Five hundred cases for prosecution of corruption have been given to the
prosecutor in the Yeltsin administration over the past year, but only 50
are being acted on. 
Any financial aid to Russia should include a comprehensive
anti-corruption program that demands quick action on these 500 cases and
tough consequences for those who are convicted. 
JOHN SIMMONS
Chicago, Aug. 30, 1998
The writer is president of a consulting company that works on Russian
privatization. 

Breakaway States 
To the Editor: 
Richard Pipes argues that Russia's dissolution into several sovereign
nations is possible but unlikely (Op-Ed, Aug. 29). 
Russia's economic and political dissolution is already underway. Many
regions within Russia act as semi-independent states and openly defy the
Kremlin's authority. It is unlikely that regions like Tatarstan,
Bashkortostan, Sakha, Krasnoyarsk Krai and the maritime region will
formally declare their independence any time soon, but they will continue
to take power away quietly from Moscow and move in the direction of de
facto independence. 
The United States should establish direct ties with some of these
regions, giving clear preference to those that have declared themselves
nuclear-free zones. 
GABDULLAH TUKAI
New York, Aug. 29, 1998

What Anti-Semitism?
To the Editor: 
Susan Gold's suggestion that anti-Semitism played a key role in the
latest Russian Government shuffle (letter, Aug. 29) makes no sense. Ms.
Gold points out the ties between Viktor Chernomyrdin and the Russian
oligarchy. Boris A. Berezovsky, one of the country's leading tycoons and a
driving force behind the dismissal of Sergei V. Kiriyenko, is Jewish. So is
Vladimir A. Gusinsky, another prominent member of the oligarchy. 
While anti-Semitism has always been a problem in Russia, there are
plenty of political and economic reasons for what is happening in Moscow
these days without the injection of baseless speculation about bigotry. 
STEVEN SHABAD 
Ossining, N.Y., Aug. 29, 1998 

*******

#9
The Independent (UK)
1 September 1998
Street life - How Ivan the Typical survives
By Helen Womack
SAMOTECHNY LANE

Russians who have been elbowing each other in queues to buy dollars or 
consumer durables are the second-class passengers on the ship that has 
hit the economic iceberg. (First-class ticket holders long ago 
monopolised the lifeboats and sailed away.) 
But down in the hold are millions more, so lowly paid they have never 
saved a kopeck or worse, survived for months without wages at all. Only 
the Siberian miners have mutinied. The rest have shown a calm that is 
really the resignation of the doomed. It is a miracle they are still 
alive. How have they kept their heads above water? 
In the week that the Kremlin welcomed back Viktor Chernomyrdin, a fat 
cat thanks to his links with the gas monopoly Gazprom, I visited another 
man who has also made his career in the gas industry. But Ivan Andreyev 
is a very thin cat indeed. 
Mr Andreyev works at a gas station in Voskresensk, in Moscow region. The 
station, controlled by the Ministry of Fuel and Energy rather than 
Gazprom, sells propane to drivers who economise by running their cars on 
gas, as well as canisters to householders who cannot get mains gas. 
The stream of customers at the station testifies to the demand for this 
service. Nevertheless, Mr Andreyev last received a wage packet in 
October 1996. If he is ever paid, his money will have lost nearly half 
its value because of the rouble slide. How does he get by? "There are 
many inexplicable things that are only possible in Russia because this 
is the 'strana chudes' (Wonderland)," he said. 
Mr Andreyev, who has just turned 60, should be retired but goes on 
working because he and his wife, Valentina, cannot make ends meet on 
their joint state pension of 600 roubles (now worth about $50). In any 
case, they receive their pensions irregularly and have been kept waiting 
for the money again this summer. 
Some old people in their position might be able to rely on their 
children. But the Andreyevs' son, Andrei, is disabled. "His disability 
allowance of 200 roubles comes from the same state pension fund and his 
payments have been sporadic too," said Mr Andreyev. 
And so the old man continues to work at the gas station in the hope that 
his wages will be paid. "When they first stopped paying us, I thought it 
was a temporary problem and accepted it. But things just got worse." 
Luckily he and his wife do have a roof of their own over their heads. 
Russians in the greatest difficulty these days are those on low incomes 
who are also obliged to rent their accommodation. But Mr Andreyev was 
able to buy a small house when he moved south from Norilsk in the 
Arctic, where he spent most of his working life in a nickel plant. "I 
don't have to pay rent, just the utility bills. I'm up to date with my 
gas bills," he said proudly. 
The house has a garden in which he and his family grow fruit and 
vegetables. Like survivors of a nuclear war, they go into the forests to 
pick berries and mushrooms. The only food items they have to buy are 
bread, milk, tea and salt. "That's our salvation. If we had to shop for 
food, I do not know what we would do." 
The same techniques that helped Russians survive in Soviet times, when 
the shops had nothing to sell, still apply now when it is pockets that 
are empty. As well as gardening, which is a rural option, or collecting 
empty bottles and claiming the money back, a method of the urban poor, 
work "nalevo" (on the side) is crucial. 
"See that tanker over there?" said Mr Andreyev. "We sell gas from that 
directly to the customer and make a few roubles for ourselves. Some of 
the younger lads also fix cars here in working hours. You can't blame 
them. They've got to live." 
Mr Andreyev, who was never a Communist, believed briefly in the 
possibility of democracy in Russia but has now lost hope. He sees no 
difference in the corrupt politicians who come and go and, although he 
respects the miners, sees no point in protesting as they have done, 
because nobody in power listens. He takes joy in things that are beyond 
politics. "I've got my family, two fine grandsons, thank God. They are 
my reason for living." 

*********

#10
Russia in Crisis: A Special Report by Russia Portfolio

BOSTON, Sept. 1 /PRNewswire/ -- Global Investor Publishing, Inc., is pleased
to offer qualified market participants and journalists a special August 31
issue of Russia Portfolio devoted to covering the crisis in the Russian
financial markets. The issue is available upon request at no cost. 
The August 31 issue of Russia Portfolio provides an in-depth, balanced and
objective analysis of the August turmoil in the Russian capital markets,
including extensive coverage of the ruble devaluation, the debt restructuring
controversy, and the banking crisis. In addition, Russia Portfolio provides a
full page devoted to the reactions of Western fund managers actively investing
in Russia. 
"The special report is intended to help market participants better
understand
the critical issues surrounding the Russian financial crisis and to provide
insights into the reactions of those investors who are most immediately
affected by the crisis," said Dwight Ingalsbe, Publisher of Russia Portfolio. 
"The Russian capital markets now are extremely complex and volatile, and are
an integral part of the global financial downturn. Investors and market
specialists more than ever have to have access to objective information on
what is happening in the debt and equity markets of Russia," said Brad Durham,
Editor of Russia Portfolio. 
The special report provides investors and market specialists with a detailed
background on the events leading up to the recent debt and equity crises, as
well as extensive comments from fund managers involved with the Russian
financial markets on their perspectives and outlooks on the future viability
of Moscow's capital markets. 
Russia Portfolio is the leading source of information on the Russian capital
markets. Published every two weeks since 1995, Russia Portfolio is devoted to
the debt and equity markets of Russia and brings readers up-to-date objective
analysis of events affecting foreign portfolio investors, brokerage firms,
investment banks, and other market participants. 
The August 31 Russia Portfolio issue is available at no cost by email. For a
copy of the issue, please contact GIP Inc. at 617-864-4999 by phone,
617-864-4942 by fax, or specialissue@gipinc.com by email. Interested parties
also can download a copy of the issue from the GIP web site at
http://www.gipinc.com. Click "Special Issue" on the homepage. 
For additional commentary or analysis on the Russian crisis, please contact
Brad Durham, Editor of Russia Portfolio, at 617-864-4999 or durham@gipinc.com,
or Dwight Ingalsbe, Publisher of Russia Portfolio, at 617-864-4999 or
ingalsbe@gipinc.com. 
SOURCE Global Investor Publishing, Inc. 

*******

#11
Moscow Times
September 2, 1998 
Tax Man Pits Children Against Parents 
By Valeria Korchagina
Staff Writer

Russia's increasingly desperate tax service has proved that even 
elementary school is no refuge from the weighty cares of adulthood. 
Schoolchildren returning to classes Tuesday after their summer vacation 
were greeted with a stern message that they could be deprived a free 
education if their parents fail to pay taxes. 
The message, which carried heavy overtones of Soviet campaigns 
encouraging children to blow the whistle on dissident parents, is part 
of a series of unorthodox measures by the tax service to tackle Russia's 
chronic tax evasion. 
In 1997, tax authorities collected only 50 percent of the targeted 
amount, and economists say that disastrously low tax revenues played a 
major part in tipping Russia into economic crisis this fall. 
But the heavy-handed tone of the tax service's missive to schoolchildren 
will make many wonder if the service is going too far. 
The message starts amicably enough, congratulating pupils on the start 
of the new school year. "We are delighted that in spite of the difficult 
financial and economic situation in the country, schools and institutes 
of higher education have once again opened their doors," the message 
reads. 
But then it goes for the jugular. "Every student and schoolchild must 
understand that if their parents do not pay taxes, they thus deprive 
their child of the opportunity of receiving free education, i.e. take 
his future away," it said. 
To make the threat more understandable for children, the message even 
offered a brief explanation on how Russia's free education is financed 
from the federal budget. 
It ends: "The Russian State Tax Service wishes success in the new 
academic year and financial prosperity to your parents. We are sure that 
in the future you will become highly qualified professionals and 
conscientious taxpayers." 
The message failed to specify how Russian kids could influence their 
greedy parents to pay taxes, so children would have cheap breakfasts and 
new schools built for them. 
But the message will have brought back memories of Pavlik Morozov, the 
14-year-old pioneer who, in 1932, informed on his wealthy father, 
Trofim, to the Bolsheviks because his parents resisted the 
collectivization of farms. Morozov was held up by Soviet propagandists 
as an example to the nation's youth. 
As state coffers have emptied during the last few months, the tax 
service's propaganda methods have become more innovative. 
In May, Russia's acting tax chief Boris Fyodorov announced plans to 
create dossiers on 1,000 of Russia's richest citizens. Before his 
appointment, Fyodorov said the government should jail pop diva Alla 
Pugachyova for tax evasion. 
Fyodorov's predecessor, Alexander Pochinok, planned to take aerial 
photographs of the area along Moscow's prestigious Rublyovskoye Shosse 
and use them to estimate residents' incomes. 
The tax service has launched a series of 30-second ads warning citizens 
that tax evasion could lead to ailments ranging from impotence to 
insomnia. 
Children have also been targeted before. The tax service has 
commissioned a series of cartoons in which mythical characters who dodge 
their civic duty come undone. 

********

#12
United States Information Agency
01 September 1998 
TEXT: CLINTON IN MOSCOW AT FIRST DAY OF SCHOOL FESTIVITIES 
(With Mrs. Clinton, U.S. ambassador to Russia, others) (800)

Moscow -- President Clinton visited Elementary School No. 19 in Moscow
on September 1, the first day of classes for the students.

After expressing his appreciation for their welcome, he told the
students to "learn as much as you can about as many subjects as you
can and about other people. And imagine what you would like to see
happen in the future, for yourselves, your nation and the world. And
always keep those dreams with you, for in the new century you will be
able to live those dreams."

Following is a text of his remarks provided by the traveling Office of
the Press Secretary:

(Begin text)

THE WHITE HOUSE
Office of the Press Secretary
(Moscow, Russia)
September 1, 1998

REMARKS BY THE PRESIDENT AT FIRST DAY OF SCHOOL FESTIVITIES

Elementary School #19
Moscow, Russia

THE PRESIDENT: Thank you all very much. I am delighted to be here not
only with my wife, who has worked for better education in our country
for many years, but with the Secretary of State, the Secretary of
Commerce, our American Ambassador here, and five members of our
Congress. I thank all of them for being here. We are delighted to join
you on this day.

I would also like to thank Vice Mayor Shanstev and Mr. Muzykantskiy
from the Moscow City School Board for joining us. I would like to
thank your principal, Ms. Gorachkova. And most of all, I want to thank
these fine students, Constantine Sokolov and Valentina Smirnova. I
think they did a fine job and you should give them applause. You
should be very proud of them. Now, in the spirit of the day, even
though Constantine's English is very good, I thought I should try to
say something in Russian, like privet. How's that, is that good. Or s
novym uchebnym godom. [He congratulates the students on the first day
of school.] Is that good?

In America this is also the first day of school for many students. I
understand that some of you have studied in America. I hope more of
you will do so in the future, and I hope more Americans will come here
to study. And in the meantime, perhaps more and more of you can meet
on the Internet.

I know that Russian students love to read and are proud of your
country's great writers. A teacher here in Moscow asked her first
grade class why they thought reading was important. One girl stood up
and answered, "You can read any book. You can read Pushkin." No one in
the first grade in my country is reading Pushkin.

Now, another student answered the same question in a different way. He
said, "If you can read, you can read a fax." Whether you want to be a
business person reading a fax, a writer, or a teacher, or pursue any
other career in the modern world, a good school will help you get
there. In a world where people are working closer and closer together,
a good school, with its languages and its learning about other
countries is very important.

Because more and more of our jobs and lives depend on computers and
technology, more and more of us have to read well, do mathematics, and
know other subjects good schools teach.

In the past, America and Russia too often used our knowledge in
opposition to each other. But things are very different now. Today we
use what we know to work together -- for new jobs, better health care,
a cleaner environment, the exploration of space, the exchange of
ideas, art, music, videos. Our countries are becoming partners, and
more and more of our people are becoming friends.

Your country is going through some difficult changes right now, and I
know things aren't always easy for a lot of people. But I also know
that in times of crisis the Russian people have always risen to the
occasion with courage and determination.

The challenges of this new global economy and society are great. But
so are the rewards. For those who have good schools, like this one,
with teachers and parents who work hard to help children learn, and
with that learning and the new freedom you have in Russia all of you
will be ready for that future and you will do very well.

So I say to all the students here, learn as much as you can about as
many subjects as you can and about other people. And imagine what you
would like to see happen in the future, for yourselves, your nation
and the world. And always keep those dreams with you, for in the new
century you will be able to live those dreams.

Thank you. Spacibo.

********