September 3, 1998   

This Date's Issues: 2343• 2344•  2345 •

Johnson's Russia List
#2344
3 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Chernomyrdin Pledges To Remain PM.
2. Reuters: Most Russians want Yeltsin to go, survey suggests.
3. SB Stafford: To Jerry Hough Regarding Boris Fedorov.
4. Electronic Telegraph (UK): Alan Philps, Plot thickens in the 
struggle for power.
5. Interfax: Chernomyrdin Sets Out Russian Government's Priorities.
6. International Herald Tribune: Jim Hoagland, Russia Has to Stop 
Rejecting Open and Fair Competition.
7. Moscow Times: Natalya Shulyakovskaya, ,Now, a Real Crisis: 
No Potato Crop. 
8. RFE/RL: Paul Goble, Russia: Analysis From Washington -- 
Economics-Politics-Economics.
9. Rossiyskaya Gazeta: Vladimir Kucherenko, "Like a Scuffle in a 
Nose-Diving Aircraft..." (Opposition Must Give Chernomyrdin Time).
10. Milan's Corriere della Sera: Interview withZhirinovskiy.
11. Interfax: Zyuganov: Chernomyrdin To Be Used to Establish 
Dictatorship.
12. Journal of Commerce: James Dorn and Ian Vasquez, Ending Russia's 
chaos.]

*******

#1
Chernomyrdin Pledges To Remain PM
September 3, 1998
By GREG MYRE

MOSCOW (AP) -- The Russian ruble fell hard and fast today, but Viktor
Chernomyrdin insisted he would remain a candidate for prime minister despite
opposition demands that he withdraw in favor of a compromise figure.
Russia's financial crisis went from bad to worse this morning, a day
after the government acknowledged it was powerless to stop the fall of the
Russian ruble.
The official ruble rate fell to 13.5 rubles to the dollar, but traders
said it was as low as 17.4 to the dollar. The ruble had been trading at 6.2
to the dollar last month before it began its slide.
Chernomyrdin appealed to Russians not to panic and to leave their money
in banks, where he assured them it would be safe. But the plummeting ruble
was certain to make depositors nervous and increase demand for dollars and
other foreign currencies.
``You have about three weeks to assess the situation and take a correct
decision,'' he said at the start of a Cabinet meeting.
There have been lines at some banks and currency exchange booths in
recent days, but there has not been any panic or unrest in the streets.
Meanwhile, Communist leader Gennady Zyuganov reiterated that his party
will vote against Chernomyrdin when parliament holds a second round of
voting on Friday. Communists and their allies blame President Boris
Yeltsin's government for landing Russia in the current economic mess.
Chernomyrdin was overwhelmingly rejected Monday in a first round of voting.
Russia has been operating with an interim government since Yeltsin fired
Sergei Kiriyenko on Aug. 23 and named Chernomyrdin acting prime minister.
The political turmoil has left the interim government unable to devote
its attention to the mounting economic crisis. Most of the debate has been
focused on forming the new government instead of solving the economic problems.
The State Duma plans a second vote on Chernomyrdin on Friday, although
some lawmakers have called for Chernomyrdin to withdraw and others are
seeking another candidate.
``Neither my conscience nor my sense of duty allows me to take such an
irresponsible step,'' Chernomyrdin told the Interfax news agency.
Chernomyrdin also rejected lawmakers' suggestions that he was using the
prime minister's job as a springboard to a presidential bid in 2000 -- even
though he is widely considered to be a leading contender.
``I would like to see the nut who would call this a good starting point
for presidential elections,'' he told Interfax.
If Chernomyrdin fails to win confirmation a second and third time,
Yeltsin is constitutionally empowered to dissolve the parliament.
However, as Russia's ruble slipped again and the International Monetary
Fund signaled it might delay a loan payment to Russia this month, the ranks
of those opposing Chernomyrdin began to thin a bit.
Ultranationalist leader Vladimir Zhirinovsky indicated Wednesday that his
50-member faction, third-largest in the Duma, would support Chernomyrdin
after having abstained from the first vote.
Influential regional leaders in the Federation Council, parliament's
upper house, also endorsed Chernomyrdin. The chamber will likely pass a
resolution Friday backing Chernomyrdin's candidacy, council member Murtaza
Rakhimov said -- putting more pressure on the Duma, the lower house, to
confirm him.

*******

#2
Most Russians want Yeltsin to go, survey suggests

MOSCOW, Sept 3 (Reuters) - The majority of Russians hold President Boris
Yeltsin responsible for Russia's economic crisis and feel he should step
down, a survey published by Interfax news agency on Thursday showed. 
Only 26 percent want Yeltsin to remain at his post, but almost a half of
respondents feel Yeltsin's vast powers written down in the Constitution had
to be curbed. 
The survey, by Russia's Public Opinion Foundation, which questioned 1,500
people across Russia on August 29, showed 67 percent blaming Russia's woes
on Yeltsin. Sixty-six percent felt he should quit before the end of his term
in 2000. 
Yeltsin said earlier this week he would not step down and an agreement
with parliament which could limit his powers failed. 
A total of 34 percent thought the old government of Viktor Chernomyrdin,
premier between December 1992 and March 1998, was to blame for Russia's
economic woes. 
Yeltsin sacked Chernomyrdin's cabinet in March and appointed young and
little-known former energy minister Sergei Kiriyenko to head the government.
Late last month he fired Kiriyenko and his cabinet, recalling Chernomyrdin
as acting premier. 
The communist party and its allies, who dominate the parliament, have
made it clear they will not endorse him 
Only 10 percent of people questioned thought that Kiriyenko and his team
were responsible for the crisis. 

*******

#3
From: SDJStaff@aol.com (SB Stafford)
Date: Wed, 2 Sep 1998
Subject: To Jerry Hough Regarding Boris Fedorov

Boris Fedorov is biding his time awaiting some semblance of calm in the Duma
and Administration. Fedorov has the respect and admiration of many, (I would
argue most in Moscow) but few love him. He is too much the political and
economic realist, trained to call scores at arm's length. His audacious,
open approach to the current realities of the Russian Government freighten
many around him. It is Boris' inclination to care little what is whispered
and bantered about, but rather to get the job done with focus on the goal.
Federov could (and several argue should) be handed the reigns in Russia. He
has the long time respect and experience with western economic, financial and
political decision makers combined with an affinity and understanding of his
homeland. His style is both his genius and worst enemy at the moment with
his fellow citizens.
Would that his former western friends could influence fate a bit more. But
not unlike Soros' and Clinton's recent experience with the Duma, who among us
dare try?

*******

#4
Electronic Telegraph (UK)
3 September 1998
[for personal use only[
Plot thickens in the struggle for power
By Alan Philps in Moscow 

THE crisis in Russia has all the elements of a Hollywood scare movie: an 
ageing and obstinate president, a ruined economy, a disaffected army 
controlling a vast nuclear arsenal, and a parliament dominated by 
Communists eager to seize what may be their last chance at power.
Presidents Clinton and Yeltsin face reporters' questions
The battle is currently being fought according to the Russian 
constitution, but there are many predictions that the confrontation 
between President Boris Yeltsin and his parliament could spill on to the 
streets. The normally sober business paper Kommersant was refusing to 
rule out civil war yesterday.
The crisis stems from Mr Yeltsin's attempt to make the lower house of 
parliament, the State Duma, accept his candidate for premier, Viktor 
Chernomyrdin. Under the 1993 constitution, the President has the right 
to nominate his candidate three times. If the Duma continues to vote 
"No", he must dissolve the assembly and call elections. In past crises, 
the Communists - who control almost half the Duma votes - have always 
shied away from the ultimate challenge to the Kremlin. But this time, 
they sense Mr Yeltsin's weakness following the collapse of his economic 
reforms.
The Duma rejected Mr Chernomyrdin on Monday, and is set to do the same 
tomorrow. If Mr Yeltsin insists on nominating him for a third time, the 
stage is set for confrontation. Gennady Zyuganov, the Communist leader, 
said: "The nomination of Chernomyrdin is a recipe for dictatorship." 
Party officials do not believe that Mr Yeltsin would call new polls. 
They predict that he would rule by decree, using some pretext, such as 
the economic crisis. This would mark the end of Russia's experiment in 
parliamentary democracy.
The big question is whether Mr Yeltsin will push for a third vote. He 
could propose a compromise candidate, but this would be to admit that he 
had finally lost the initiative.
The Communists are preparing a defence tactic in case Mr Yeltsin does 
push Mr Chernomyrdin all the way. The constitution says the Duma cannot 
be dissolved once it has initiated impeachment proceedings against the 
president for "treason or other grave crimes". The Communists are now 
seeking the necessary two-thirds parliamentary majority to begin 
impeachment of Mr Yeltsin. If they can obtain 300 out of 450 votes, the 
stage would be set for a stalemate - the Duma would refuse to approve a 
prime minister, yet could not be dissolved.
Mr Yeltsin might consider sending troops into parliament, as he did in 
1993. But here, he would encounter a big problem: there are practically 
no army units which would go into battle for him. The retired paratroop 
general, Alexander Lebed, says that the army is in a revolutionary mood. 
Officers have not been paid for months, and their career prospects are 
shattered by drastic cutbacks. The army, however, has never shown much 
taste for entering politics, and the last attempted military coup in 
Russia, in 1991, ended in farce.
There was speculation last week that the President was on the point of 
quitting and going to the German Alps where his daughter Tatyana is 
reported to have bought property. If he did resign, the Prime Minister 
would take over for three months while presidential polls were held. But 
nothing in Mr Yeltsin's conduct this week suggests he is ready to give 
in. He has always relished a fight with the Communists. To judge by his 
comments at yesterday's press conference with President Clinton, he 
still hopes to turn the economy around within two years, and be in a 
position to "bequeath" a successor to the nation.
Many observers believe that the President is too weakened politically to 
carry on for more than a few months. But past experience suggests that 
he may use all means - constitutional or otherwise - to hang on to his 
power.

******

#5
Chernomyrdin Sets Out Russian Government's Priorities 

Moscow, Sept 1 (Interfax)--Protecting savings, restoring the currency
market and a balanced exchange policy, preservation of the banking system
and improvement of banks' liquidity, and tighter control over currency
transactions are the government's priorities, Russian acting Prime Minister
Viktor Chernomyrdin told a conference of acting government ministers
Tuesday.
The government should coordinate all its activities in these areas
with the Central Bank, he said. "We cannot do anything if we act alone,"
Chernomyrdin said.
He asked acting Deputy Prime Minister and State Tax Service head Boris
Fedorov, Central Bank Chairman Sergey Dubinin and acting Finance Minister
Mikhail Zadornov to work out a set of immediate joint steps by Thursday.
Overcoming the crisis now essentially depends on whether trust in the
authorities can be restored, Chernomyrdin said. This can only be done by
tough and credible actions, he said. "Now every day must bring a tangible
result," Chernomyrdin said.
The country cannot stay without a government in this dire situation,
he said.
"Delays and inaction may push us several years back. This is not to
be. This cannot be allowed under any circumstances. For this reason as
acting prime minster I must suggest candidacies of acting ministers to the
president and I am already doing this," Chernomyrdin said.
He said he wanted the Finance Ministry to report Tuesday on the
tentative August results of budgetary policy and reported data on debts,
above all arrears in wages and pensions.
Chernomyrdin also ordered that proposals be drafted within one day on
the payment of debts owed by the government for September. The government
has a chance to reduce arrears by one month, he said.
He also demanded that suggestions for tax reform be made immediately. 
"We've had enough talk," he said.
The profit tax must be reduced to about 20%, no taxes should be levied
on new production lines, social taxes on enterprises should be cut and
things should be sorted out with the collection of income tax, Chernomyrdin
said.
The country cannot survive without a taxation reform that will
encourage production, he said. "We cannot do without radical measures,"
Chernomyrdin said.
He gave the Fuel and Energy Ministry and the Finance Ministry until
Thursday "to sort things out" regarding excises. "There must be no delays,
especially in the oil industry," he said.
The Finance Ministry was told to draft shortly the special part of the
Tax Code and arrive at a consensus on this with State Duma and Federation
Council members.
The last week was "an attempt to arrive at an accord which would not
be rhetorical or virtual but realistic" between the two houses of
parliament, the Cabinet and the presidential administration, Chernomyrdin
said.
The constitutional reform the country needs, the redistribution of
powers between the branches of authority that society demands and a 
coordinated parliament-supported socioeconomic policy could be started
shortly, he said.
"A new quality of Russian policy" has a chance to be developed,
Chernomyrdin said.
"What (the Duma) did was not just reject a nominee for prime minister.
They dashed the work on the concept of economic development and a
political accord," he said.
The tremendous amount of effort invested in working out an accord was
probably not entirely in vain, Chernomyrdin said.
"The Duma should give it some thought. I hope that the leaders of
political parties and movements, the chairmen of the houses of the Federal
Assembly and heads of parliamentary party groups will think again about
what they should do. I am prepared to engage in any talks. The results
are what count," he said.
"Nobody should get carried away so air-headedly by this game. What are
we doing to the country, to its people? Don't they feel pain, are they not
concerned or offended over what is going on with Russia?" Chernomyrdin
said.
"We have no more margin for mistakes. In this situation the
government does not have a right not to work. And it will work and fulfil
its duties," he said.

******

#6
International Herald Tribune
September 3, 1998
[for personal use only]
Russia Has to Stop Rejecting Open and Fair Competition
By Jim Hoagland The Washington Post

WASHINGTON - Asked what he thought of Western civilization, Mahatma 
Gandhi said it sounded like a good idea and should be tried sometime. So 
it is with Russian capitalism.
The political and financial upheaval that greeted Bill Clinton in Moscow 
this week represents the death throes of a hybrid national economic 
system that has prevailed, and failed, in Russia since 1991. That system 
is undergoing piecemeal destruction as painful as it is necessary.
Following in the footsteps of Asian nations hit by a similar calamity a 
year ago, Russia demonstrates the perils of trying to skim off the cream 
of the globalized economy without adopting checks and controls to 
restrain human appetites and ambitions. Lacking in Russia and Asia was 
an appreciation of the open and fair competition needed to police 
capitalism and to make it work.
The fundamental problem in Russia, Indonesia, Malaysia and elsewhere was 
not that they went too far in adopting American-style capitalism, as 
ideologues have begun to claim. These nations did not go far enough. 
They sought comfortable halfway approaches that quickly proved 
unsustainable.
These societies must now choose from three courses of action: go 
backward by sealing themselves off from international capital markets 
and free trade; balance where they are and muddle through; or accept the 
responsibilities and limitations that advanced capitalism brings, as 
well as its gratifications, by immersing them-selves more fully in 
global markets. The sealing and muddling options are dead ends.
Russia's immediate turmoil is the product of the unforgiving forces of 
globalization and the country's divided and inept political leadership. 
The crisis cannot be blamed on inherent flaws in capitalism, or on a 
Western failure to provide sufficient help and advice to Russia's 
government.
Since its 1991 revolution, Russia has not developed a risk-based, 
entrepreneurial market economy, and its institutions, so as to allocate 
rewards and pain through the efficiency of the marketplace.
Boris Yeltsin, Viktor Chernomyrdin, the Communists led by Gennadi 
Zyuganov and even the youthful reformers, who brought in the financial 
aid from abroad that kept the world's first nuclear-armed cash flow 
problem afloat until now, never fully committed themselves to that model 
of modern capitalism.
At crunch time, the Yeltsinites always stopped short, intent on 
protecting the robber barons at the top of the heap from the scrutiny 
and regulation that a well-run market economy requires, or fearful of 
the severe dislocation for the public that a full privatization of 
services and goods would bring.
What may have been Mr. Yeltsin's last flinch came this summer, as 
plunging oil prices, the lack of a functioning tax collection system and 
investor flight emptied the national treasury and forced a humiliating 
devaluation of the ruble.
Pressed as well to overhaul the tottering banking system and bankrupt 
the leading oligarchs who backed his re-election in 1996, the Russian 
president fired the reformers and brought back Mr. Chernomyrdin as prime 
minister.
The ineptness Mr. Yeltsin has shown in inflicting pain on the public 
while protecting tycoons has undermined his chances of staying in office 
until the end of his term in 2000.
Mr. Chernomyrdin must now negotiate a transitional political arrangement 
with the Duma that will include Mr. Yeltsin's orderly departure, a 
yielding of significant presidential powers to the Duma, and 
simultaneous presidential and parliamentary elections in the near 
future. Those are all necessary steps before Western financial aid can 
resume and a new generation of politicians, economists and entrepreneurs 
can emerge to tackle Russia's enormous problems.
But this time outside help must be more focused on entrenching the rule 
of law and an authentic free market system in Russia. The country's only 
chance to generate sufficient revenues to ease the painful economic 
transition ahead lies in its oil and natural gas industries, which need 
significant foreign investment to become a global force.
Mr. Yeltsin's government has always refused to open the oil and gas 
sector on commercially viable terms to foreign firms. That was the 
telling, and vital, flinch in Moscow's refusal to come to terms with 
global markets. Balancing on the brink of disaster, Moscow must now 
accept substantial foreign ownership in this sensitive area and show the 
world that it finally gets capitalism.

*******

#7
Moscow Times
September 3, 1998 
Now, a Real Crisis: No Potato Crop 
By Natalya Shulyakovskaya
Staff Writer

First there was the financial crisis. Then the financial crisis and the 
political crisis. Now, Russia faces the financial crisis, the political 
crisis ... and the potato crisis. 
A summer drought, followed by the pouring rains of August, have put 
potato crops across European Russia at risk. September is the potato 
harvest season, but potatoes that have spent too much time in wet, cold 
soil are susceptible to phytophthora, a fungus that rots the tuber. 
"This year, I will be lucky if I dig up as many potatoes as I put into 
the ground in the spring [as seed potatoes]," said Yury Monakhov, a 
Muscovite who five years ago started tending a private potato field in 
the village of Terekhovo, about 200 kilometers southwest of the capital. 
Monakhov's potato field supplements the diets of six people in two 
families the year round. 
"This year is going to be bad, very tight," agreed Sergei Solenkov, the 
head of the crop department at the Agriculture Ministry. "And the people 
survive on potatoes." 
A failed potato crop is of no minor significance. Russians eat six times 
as many potatoes each year as do Americans, and the potato accounts for 
10 percent of the nation's calorie intake. 
In the Soviet era, about 60 percent of the nation's potatoes were grown 
on small private plots -- a statistic often cited by critics of the 
command economy system as proof that its collective farms were failing 
the people. Today, according to the Agriculture Ministry, 90 percent of 
the nation's potatoes are grown at the dacha. 
Potato and bread consumption both rose dramatically in the early 1990s 
as meat, milk and fish consumption dropped, and annual potato 
consumption leveled off in 1993. Today, it is 127 kilograms per capita, 
20 percent above the pre-perestroika intake, according to figures from 
the State Statistics Committee and from the Academy of Sciences' Food 
Consumption Institute. 
Growing their own vegetables, particularly potatoes -- along with 
moonlighting as gypsy cab drivers, gathering mushrooms in the woods or 
offering up the family apartment for lofty rents -- are a key way urban 
Russians have cushioned themselves from the collapse of the economy. 
This is so widely recognized that last month the Defense Ministry 
suggested that military bases organize mushroom- and berry-hunting trips 
for soldiers who haven't been paid in months, so as to keep them from 
going hungry."In [most] regions people somehow manage to get by without 
dollars, T-bills and other securities -- but to live without potatoes is 
simply not possible," warned Novaya Gazeta newspaper last week in a 
full-page spread about the threat of a potato rot. 
"The rains have rotted or ruined the potatoes so badly that to store 
them for more than two months is impossible," wrote correspondent Valery 
Pisigin, after taking an automobile tour of rural regions stretching 
from St. Petersburg to Moscow. "And now there they are standing 
alongside the roads -- not in the tens or the hundreds, but the 
thousands, all from surrounding towns or villages, trying to sell 
potatoes they probably would not be able to give away." 
The Agriculture Ministry will only have an authoritative estimate on how 
bad the potato harvesting is going in a matter of days, and for now, 
they are putting on a brave face. 
"We are not losing optimism," said the ministry's crops expert Solenkov, 
in a phrase reminiscent of the Soviet news reports from the 
"battlefields of the harvest." 
But all of European Russia -- from the Volga River valley to the Moscow 
region to the so-called Red Belt of Bryansk -- has been drenched under 
rain for a month. Fungus may attack the potatoes, and grain harvests may 
also be hampered. 
"It's impossible to enter a field with a combine; everything is soaked," 
Solenkov said. 
Despite the importance of the matter, his ministry's appeal for more 
extensive weather forecasts from the Meterological Service were stymied: 
The service wanted to be paid an amount the ministry found exorbitant, 
and so no forecasts are available. 
In the meantime, as some contemplate hoarding imported foodstuffs -- 
which are bought abroad with foreign currencies and so are rising in 
price as the ruble falls in value -- others are buying up the humble 
homegrown potato. 
At Butyrsky market on a recent afternoon, Oksana Bosonogova, 25, was 
standing by three potato sacks of more than 50 kilograms each that she 
had just bought. 
"I am stocking up," she said. "I was helping my parents in the Smolensk 
region to dig up their potatoes, and all of them turned out to be 
spoiled." 
Around the corner, wrapped in a blue plastic hood to keep them from 
getting soaked in the rain, stood Yury Pelevin, 58, an unemployed 
assembly worker from the village of Savelovo, about 140 kilometers from 
Moscow, and his wife Vera, 58."Here is my social security," Pelevin 
said, stretching his hands over tidy piles of red-headed mushrooms he 
was selling for 4 rubles a bunch. The Pelevins usually collect about 500 
kilograms of potatoes from their small patch of land -- enough to feed 
nearly four people year round -- but this year they said they feared 
their crop might be spoiled. 
"I bring home my pension, 378 rubles [about $29.50 at Wednesday's 
Central Bank exchange rate of 12.82 rubles to the dollar], and it's 
barely enough for bread. Everything else comes from the vegetable garden 
or the forest," Vera said. 

*******

#8
Russia: Analysis From Washington -- Economics-Politics-Economics
By Paul Goble

Washington, 2 September 1998 (RFE/RL) --Russia's economic difficulties 
are affecting Western markets because they are affecting the Russian 
political system, a logic that is sometimes ignored but helps to explain 
what may happen next. 
As numerous observers have pointed out, Russia's economy is simply too 
small and its integration with the international economy too limited to 
have the kind of direct impact on most Western economies that problems 
on the Pacific rim already have. 
But despite that, the Russian economic crisis may end by having an even 
larger if indirect impact on the stock markets of the world through its 
impact on the Russian government. 
That is because the Russian state looms very large on the world stage 
even if its economy is relatively small. And this indirect impact of the 
Russian economic crisis will thus have a profound impact on what Western 
investors are likely to do and on how Western governments are likely to 
respond. 
Buffeted by the Asian economic downturn, difficulties in Latin America 
and in the so-called emerging markets, and political uncertainties in 
the West itself, many investors are adopting an ever more cautious 
approach.
And the very public political crisis in Russia, a crisis triggered by 
the effective devaluation of the ruble, the rescheduling of Russian 
debt, and the collapse of the Moscow stock markets has led investors to 
conclude that Russia is now one of the riskiest places to have their 
money.
But even if they sold off all their Russian equities, that alone would 
not be sufficient to explain the declines in Western markets that many 
analysts have linked to Russian developments.
Instead, these Western investors now appear to view the political 
problems in Russia as casting a shadow on their own earlier optimistic 
expectations that the post-Cold War world would be one in which 
economics rather than politics defines their actions.
Calculations of this kind have the effect of dramatically multiplying 
the impact of the Russian economic crisis on the world's financial 
markets.
But such an analysis not only helps to explain why many Western stock 
markets have declined on the basis of news from Russia. It also helps to 
predict how Western governments are likely to respond.
For them as for the investors, the Russian problem has never been a 
purely economic one. And consequently, the responses of Western 
governments to Russian economic difficulties are likely to be driven 
less by economic calculations than political considerations.
If Western governments conclude that a change in direction in Moscow 
would have the most negative of consequences for themselves, they may be 
willing to provide some additional support for the Russian economy, even 
if the economic conditions and related political institutions in Russia 
do not appear to justify such steps. 
And even those Western investors who are now reacting to the Russian 
crisis and seeking to pull their money out of investments there are 
likely to support such moves less out of a conviction that they will 
solve the Russian economic problem than out of a fear that failure to do 
something may exacerbate the Russian political problem. 

*******

#9
Opposition Must Give Chernomyrdin Time 

Rossiyskaya Gazeta
1 September 1998
[translation for personal use only]
Viewpoint" article by Vladimir Kucherenko: "Like a Scuffle
in a Nose-Diving Aircraft..."

This [reference to headline] is precisely how the present situation in
the top echelons of power can be described. Primarily in parliament. Do
our politicians realize that that their infighting could end in the
collapse of the entire country?
The situation is terrifyingly reminiscent of 1991, when the fall of
the USSR was followed by the triggering of the disintegration of the
Russian Federation against a background of rapid depreciation of the ruble,
a payments crisis, and dollarization of the economy. There were even
reports in the papers at that time that polls in Magadan showed that the
inhabitants of the region regarded themselves as a special community of
people, virtually a new nation. The present situation is more acute --
society's patience is exhausted.
There are indeed things that are indisputable. It is already clear to
everyone that what is happening is the result of the flawed nature of the
economic course of the "Gaydar kids," who from 1992 got carried away with
building a speculative rather than a real economy. And that sober
opponents accused them perfectly justifiably. And that the government of
"young technocrats" finally plunged the economy into decline.
But now is no longer the time for incantations about "who is to
blame." It is stupid to demand changes to the Constitution and the
resignation of the president and to fight for "your own" premier at a time
when the country could end up losing everything. It is stupid to fight at
the controls of a nose-diving aircraft. Because the winner in such a
scuffle risks dying along with everyone else, albeit shouting: "I told you
so!" This applies to Zyuganov and Yavlinskiy alike: In the ruins of the
Russian Federation any economic programs and all changes to the
Constitution are useless.
But let us concede that there is a way of pulling out of the nose-dive
by deferring the dividing up of power. There is a new program for getting
out of the crisis, which was formulated in complete accord on 25-27 August
by the Trilateral Commission of representatives of both chambers of
parliament and the government -- a program that Viktor Chernomyrdin has
already declared to be his action program.
For the first time it mentions "taboo" topics: the nationalization of
banks and enterprises that are crucial to the country's security, the
rehabilitation of printing money as a means to combat the economic
collapse, and the anathematization of total monetarism.
Admittedly this program is still long on rhetoric and short on
specific mechanisms. Admittedly printing money, if done incorrectly, could
finally drive us into the grave. But what is needed now is not politicking
but an intelligible exposition of the elements of the new course. The
program's second paragraph of urgent measures says that, when giving
financial assistance to the banks, the Central Bank must consider as surety
for their asserts not only state securities but also debt instruments
issued by the regions. Thought must be given to specifically implementing
this paragraph.
There is a sensible proposal for the introduction of bank holidays: 
A balance of debts and settlements needs to be drawn up urgently to prevent
the collapse of the Russian Federation payments system. Finally, thought
must be given to encouraging our exporters to sell half the $40 billion
proceeds from the Moscow Interbank Currency Exchange in the first half of
1998. Because this could save the ruble from collapsing and the Central
Bank's gold and foreign currency reserves from running out. The Russian
Federation's main exporter is Gazprom, and only one man can ensure this
today -- V. Chernomyrdin.
But parliament is engaged in something completely different. It is
blackmailing B. Yeltsin with impeachment and prepared to accept its own
dissolution. The opposition in the Duma is very well aware that its
dissolution and new elections would mean only one thing -- chaos in the
country. Are they going into battle with the authorities on a principle? 
We had to show loyalty to our ideals, comrades! Is this the same CPRF
[Communist Party of the Russian Federation] that confirmed all previous
budgets and candidates for premier while shouting about "anti-people
policies"?
The times require a different approach. The threat of a food and
commodity famine is already visible: Importers are cutting back, and the
country's economy can no longer meet the country's needs. And if famine
comes, the regions will refuse en masse to make payments to the center,
each trying to save itself. And the political skirmishes will yield no
winners.
Whatever happens, the essential thing today is to maintain unity of
power, the country, and the economic area. Viktor Chernomyrdin is at the
controls of the nose-diving aircraft, and he must be given at least several
months to pull out of the dive.
[Description of Source: Rossiyskaya Gazeta -- Government daily
newspaper.]

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#10
Zhirinovskiy: US Backs New Russian Dictatorship 

Milan's Corriere della Sera in Italian
September 1, 1998
[translation for presonal use only]
Interview with Russian nationalist leader Zhirinovskiy by
Andrea Nicastro in Moscow; date not given: "Zhirinovskiy on the
Attack: 'Bill, Stay Home and Marry Monica'" -- first two
paragraphs are Corriere della Sera introduction

Moscow -- "Clinton thinks he is coming to Russia like some sovereign
visiting his colonies. But he is making a big mistake; we will not drape
garlands of flowers around his neck. The international so-called loans and
investments have done Russia nothing but harm."
Zhirinovskiy was furious. The nationalist leader had just harangued
the Duma on the subject of the evils of Chernomyrdin's candidacy for the
prime ministership. He then indulged in a lengthy aside on the subject of
Bill Clinton and sexgate. "As people of lofty moral standards," he told
the Duma, "we prefer not to meet with a man who does not even know how to
handle his relationship with his secretary. According to the traditions of
Russian society, in such situations you are supposed to divorce your old
wife and marry the young woman: Only thus is it possible to terminate a
particularly shameful episode."
[Nicastro] Mr. Zhirinovskiy, in his closing appeal to the Duma,
Chernomyrdin urged you to convey your suggestions to Clinton personally,
without involving the government. Will you do so?
[Zhirinovskiy] We have more important things to deal with. Clinton's
visit comes at the wrong time. For him, who is too busy organizing his
private life. And for us, who have to prevent the advent of a
dictatorship.
[Nicastro] Is this a real danger?
[Zhirinovskiy] The United States has decided on it. Clinton is coming
here precisely to meet with the possible dictators. His meetings have
already been scheduled. The future czar is one of the four with whom he
will meet -- Moscow Mayor Luzhkov, Liberal leader Yavlinskiy, Governor
Lebed, and Communist Secretary Zyuganov. Which one? Do not ask me.
[Nicastro] What role will be performed by the financial barons, the
oligarchs?
[Zhirinovskiy] They were crucial in Russia's destruction, in helping
the West to plunder its wealth. They supported this criminal regime with
all their strength, and now Boris Berezovskiy, the Kremlin's eminence
grise, has succeeded in removing the rival clan led by Chubays. However,
the West has realized that this "democracy" is no longer governable, and in
order to be able to continue pumping resources out of Russia it needs a
dictatorship. The oligarchs are ready to finance it. [Zhirinovskiy ends]
Zhirinovskiy is accustomed to causing surprises. Back in 1991 he
presented the first alternative party to the CPSU and came third in the
presidential elections. His tie is permanently loosened and his language
is permanently excessive. He cultivates the image of an unconventional
politician, one that does not conform to any pattern, one that the Russian
people like. His LPDR [Liberal Democratic Party of Russia] has 50 seats in
the Duma, not many fewer than Chernomyrdin's 67, and he could realistically
become the crucial element in the formation of the new government.
[Nicastro] Why did you withdraw the support that you made available to
the prime minister-designate?
[Zhirinovskiy] We could perform a major task within the government. 
In the only region where we govern we have already shown that we are able
to resolve Russia's problems: Bread costs less and the mines, instead of
closing, are reopening. We need a drastically different foreign policy. 
We must turn toward the countries that resist US imperialism -- Iran, Iraq,
Libya, Greece, Cyprus, North Korea, Taiwan. The fact is that
Chernomyrdin's team is physically incapable of sharing power with anyone. 
We requested six ministries, not even particularly important ones. But
those people are drugged with power. And, as I have already said,
Chernomyrdin is planning to hand the country over to tyranny. Give him two
months, and in November he will open the doors to the despot.
[Nicastro] Do you not trust Yeltsin? The president has announced that
he will stay on until the year 2000.
[Zhirinovskiy] That old man should have retired some time ago. He is
moribund, more dead than alive. He has two medical teams taking care of
him, but he does not remember the example of Stalin and Andropov. It was
the doctors that killed them. Why should they not do the same to Yeltsin,
once he is no longer needed?
[Nicastro] Is there a threat of civil war?
[Zhirinovskiy] Unfortunately, yes. The Army's combat capability is
close to zero. There really is nobody that can oppose a rising, and it
would be a bloodbath, a massacre. The Russian people must save themselves.
[Description of source: Milan Corriere della Sera (Internet version)
in Italian -- leading centrist daily newspaper; has largest circulation of
all Italian dailies; root URL as of filing date:
http://www.rcs.it/corriere]

******

#11
Zyuganov: Chernomyrdin To Be Used to Establish Dictatorship 

Moscow, 1 Sep (Interfax) -- Russian Communist Party leader Gennadiy
Zyuganov on Tuesday [1 September] unveiled to journalists a scenario, taken
from what he called American special literature, in which acting Prime
Minister Viktor Chernomyrdin, nominated for prime minister by President
Yeltsin, will be used "to eliminate the Russian legislature and to remove
Yeltsin from the Kremlin. A governor-general will be brought in against
the background of the helpless Chernomyrdin," Zyuganov said.
"If this scenario is implemented, there will be no talk about
democracy or freedom of speech," he said. He said this would be "the worst
variant of the Latin American scenario."

******

#12
Journal of Commerce
3 September 1998
[for personal use only]
Guest Opinion
Ending Russia's chaos
BY JAMES A. DORN & IAN VASQUEZ
James A. Dorn is academic vice president of the Cato Institute, and Ian 
Vasquez is director of its Project on Global Economic Liberty. 

The failure of the International Monetary Fund's latest bailout of 
Russia should finally put to rest the notion that foreign aid can buy 
free-market reforms. The Russian crisis may also be severe enough to 
force Moscow to introduce reforms it was unwilling to implement under 
IMF programs.
The recent devaluation of the ruble reflects the loss of confidence in 
Russia's reform efforts. It also reflects well-founded expectations of 
future inflation -- the one area of reform in which Moscow could claim 
some success. Those sentiments are reinforced by the grim assessment of 
Boris Nemtsov, a leading reformer who resigned last week from Boris 
Yeltsin's Cabinet: "If Chernomyrdin says now that he can save the 
country, it is just a joke." That is because he did little in the 
previous five years as prime minister to address Russia's economic 
problems.
Nationalizing major industries, controlling prices and suspending the 
ruble's convertibility, as is now being proposed by Duma members close 
to Mr. Chernomyrdin, will only prolong the country's financial storm. 
Leaders of the Western industrialized countries concede that providing 
aid under such conditions is undesirable. But the pattern of IMF lending 
to Russia -- which has helped to bring the country to crisis -- shows 
that the aid-for-reform approach is also flawed.
The fund provided credit amounting to more than $20 billion in 1992, 
1993, 1994, 1995 and 1996 -- each time in exchange for Russian promises 
of reform. It is telling that the conditions of the IMF's $11.2 billion 
loan, approved in July, were virtually identical to the fund's 
conditionality since 1992. According to the IMF, the July loan called 
for reducing the fiscal deficit, addressing banking sector problems, 
dealing with government debt and "expanding and strengthening existing 
policies." We've heard all of that before, so why was Stanley Fischer, 
the second highest ranking official at the IMF, asserting in early 
August that "there is certainty that the IMF measures will be 
implemented in full?"
The answer appears to lie in the agency's often-overlooked institutional 
incentives to lend. In practice, the fund's money has helped to delay, 
rather than accelerate, reforms because it has eased Moscow's economic 
problems and allowed it to forgo policy change. Liberal reformer Grigory 
Yavlinsky noticed as much back in 1993 when he explained, "It has become 
clear that new Western credits are no longer a remedy for Russia, but a 
drug helping to maintain an unfit system."
Faced with a government unwilling or politically unable to stick to IMF 
conditionality, the fund has repeatedly suspended its loans to Moscow. 
On each occasion, the elimination of aid has forced Russian policymakers 
to become more serious about liberalization. Indeed, the IMF has time 
and again encouraged policy change in Russia by cutting off its credit. 
Unfortunately, whenever policy changes do occur, the IMF resumes its 
lending. The fund has simply not risked letting the world watch Russia
reform without IMF intervention.
The fund's institutional incentive to lend explains why the agency was 
negotiating its latest Russian bailout in July even though Russia failed 
to meet the fund's conditionality requirements on its current loan, 
which the fund had suspended. It helps explain, too, why Moscow, despite 
the best intentions of the minority of reformers in government, has 
never placed much credibility in the IMF's conditionality. Mr. Fischer's 
exaggerated expressions of confidence are not surprising, given his 
institution's massive monetary commitment to Russia and its reflexive 
bias toward intervention.
Russia cannot now avoid the pain of past policy mistakes and may make 
things worse by turning back the clock on economic policy. But it is 
possible that financial turmoil will concentrate the minds of Moscow's 
policymakers on introducing real reform.
Even in the aftermath of devaluation, Russia can use the market to save 
the ruble. For example, to meet its short-term foreign debt obligations, 
Moscow can still privatize its vast state-owned enterprises and assets. 
Because such privatization takes more time than Russia has to bolster 
confidence, Martin Feldstein of Harvard University proposes that the 
country issue privatization bonds that can be redeemed in the future as 
state-owned assets are sold.
In addition, or as an alternative, Russia could allow the dollar to 
circulate legally with the ruble. Such currency competition would now 
surely lead Russians to choose the dollar, as many already have, and 
might discipline the Russian central bank to eventually produce a stable 
ruble.
For the transition to the market to succeed, the government must 
ultimately constrain its power and establish the rule of law. That 
process, however, requires full liberalization. In contrast to the 
current practice of saving bankrupt firms, Moscow must finally allow 
insolvent banks and other private enterprises to fail or flourish in a 
competitive market.
In 1994 IMF chief Michel Camdessus expressed concern about the relevance 
of his agency in Russia when he admitted that "there are risks in the 
arrangements we have made. Important risks. But we were running the risk 
of irrelevancy if we had waited for the moment when the situation in 
Russia became risk free."
Now crisis, rather than liberalization, has made the fund's irrelevance 
totally clear. It will also become clear to Russian policymakers of all 
stripes that the end of chaos will come only if a true market economy is 
allowed to emerge spontaneously without external aid. 

******