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Johnson's Russia List


September 4, 1998   

This Date's Issues: 2346 2347•  2348

Johnson's Russia List
4 September 1998

[Note from David Johnson:
1. Reuters: Russian military seen unlikely to act in crisis.
2. AFP: Russia's future "very gloomy", George Soros believes.
3. Tate Ulsaker: Act One, Take One: "The Catastrophie Yet To Come."
4. Sandy Bostian: succession question.
5. Symposium at Georgetown University: RUSSIA IN THE 1990s AND 
BEYOND September 11, 1998.

6. Mark Tauger: Re Richard Pipes' op-ed piece in the New York Times.
7. The Nation: James Henry and Marshall Pomer, Can Russia Save 

8. Boston Globe: David Filipov and Brian Mcgrory, US wary over fate 
of Russian nuclear arms.

9. Journal of Commerce: John Helmer, Russia's coming chaos.
10. Itar-Tass: Zyuganov: US Leadership 'Not Afraid of Communists.'
11. Financial Times (UK): Chrystia Freeland, RUSSIA: Swift stabilisation
programme urged. (Domingo Cavallo).

12. AFP: Last Soviet leader calls for early elections. (Gorbachev)]


Russian military seen unlikely to act in crisis
By Martin Nesirky

MOSCOW, Sept 3 (Reuters) - Russia's disparate, demoralised
military forces are unlikely to step into the country's
political and economic quagmire even if President Boris Yeltsin
orders them to do so, defence experts said on Thursday.
Few who watch Russia would want to rule anything out these
days, but the consensus seems to be that troops will stay in
their barracks, despite doomsday warnings from opposition
leaders of civil war and periodic market rumours of military
``Watching Yeltsin in this crisis and in general is a very
painful experience,'' said Andrei Piontkovsky, head of the
Moscow Centre for Strategic Studies. ``But it does not mean the
army will undertake any rebellion or unconstitutional
Even before the latest tensions, Russia's armed forces faced
enormous problems in a post-Cold War era that demands fewer
troops and can offer less funding to a military machine that
still controls the world's second largest nuclear arsenal.
Wage arrears have started to mount again and morale has sunk
further. Paradoxically, the experts point to precisely these
concerns when explaining why they believe the military will not
stage a coup or support any state of emergency.
``They are very divided,'' said Charles Dick, who heads the
British-based Conflict Studies Centre. ``You have the division
between those that want to reform and those large numbers of
corrupt people who are happy with the way things are. You've got
the hopelessly demoralised other ranks.
``I find it hard to believe they could be rallied to a
cause,'' he said by telephone, noting major regional variations
in loyalties across the vast Russian Federation. ``The army is
so fragile that any attempt to wield it would shatter it
Mindful of Yeltsin's differences with the State Duma lower
house of parliament over his choice of prime minister, Russian
media have invoked the crisis of October 1993 when the Kremlin
chief used tanks to quell a parliamentary rebellion.
Communist opposition leader Gennady Zyuganov repeatedly
raises the spectre of civil war if Yeltsin persists, and
one-time paratroop commander Alexander Lebed, now a regional
governor, says the army is ripe for a fight.
Western and Russian experts do not share these assessments
and regard them as self-serving hyperbole. The head of the
Federal Security Service, Vladimir Putin, has denied the
authorities will use force to solve the crisis.
``In 1993 after an all-night session with (then Defence
Minister Pavel) Grachev, finally he produced four tanks,''
Piontkovsky told Reuters. ``This time he would not get any.''
He said this applied to Defence Ministry forces, Interior
Ministry troops and the presidential guard. Dick said he was
less inclined to speculate on the interior and presidential
forces but said that few commanders would want to bet on
Western defence analysts in Moscow and abroad have been
collating information on what the armed forces are up to and
have held brainstorming sessions to discuss possible scenarios.
One diplomat who monitors defence said there was no evidence
for now to suggest troops were being readied for action.
``It seems clear senior officers and those lower down have
no stomach to leave barracks in support of the existing
authorities or any opposition,'' he said.
Even if they did, their operational capability would be
sorely tested, he said.
Yet he and other defence experts cautioned that it would be
foolhardy to rule out some kind of military response altogether.
For now at least, the Russian Defence Ministry felt
comfortable dismissing market rumours of troop movements around
Moscow as ``nonsense.''
``The harvest is being collected,'' a spokesman said,
referring to the annual tradition of soldiers helping to gather
crops for the winter. ``Maybe trucks are on the move.''


Russia's future "very gloomy", George Soros believes

MOSCOW, Sept 4 (AFP) - Russians have before them a "very gloomy future", 
U.S. finacial wizard George Soros predicted Friday in a live interview 
on Russia's private NTV television channel.
The channel presented Soros as the man of foresight who on August 13, 
four days before the ruble was devalued, called in a letter published in 
the London Financial Times, for a "monetary council" to be set up Russia 
to verify that every ruble emission was backed by a corresponding amount 
in hard currency.
The same proposal was made on Thursday by deputy prime minister, Boris 
Fyodorov to save the ruble which has all but collapsed in Russia's worst 
financial crisis since the fall of communism.
Fyodorov did so at the instigation of Domingo Cavallo, the "father of 
the Argentine (economic) miracle" who arrived in Moscow on Tuesday at 
the invitation of the Russian government to offer his advice.
Soros said that establishing such a council "implies for the G7 (Group 
of Seven industrialised nations) disbursing another 15 billion dollars, 
perhaps more" to aid the Russian economy.
He said Russia alone was not in a position to set up such a system 
because its hard currency reserves were insufficient. The Russian 
central bank said its reserves had fallen to 12.7 billion dollars on 
August 28.
But Soros said Russia could not expect international aid on this scale 
unless it was governed by a team "committed to reforms".
"Russia needs a Duma (parliament) which will agree to adopt the laws 
necessary for reforms, a government which will take unavoidable 
decisions and international aid so a 'monetary council' will be able to 
function," Soros told NTV.
He said he had "not lost faith in Russia" but he said "The feeling I 
have is that the government's policy is going to take the wrong 
direction.... it is going to print more money, the currency will lose 
its value and in order to halt the process, hard currency transactions 
could be subjected to restrictions."
"What makes me even sadder" is that "until recently, Russia had a good 
government which was ready to take the necessary measures. With a little 
more support from the West and the possibility to get laws adopted by 
the Duma, it could really have changed the way things turned out," he 
Soros said the Duma bore a large share of responsibility for what had 
happened in Russi because it had refused to adopt the laws which were 
indispensable for the economy to function correctly.


Date: Thu, 03 Sep 1998 
From: Tate Ulsaker <> 
Subject: Act One, Take One: "The Catastrophie Yet To Come"

Act One, Take One: "The Catastrophe Yet To Come"

Man, this place is taking a big dive! Like a 200 meter descent into a
bathtub, people are losing their money to recent devaluations. Imagine two
weeks ago you have $1,000 and today you have 500 officially but only 300 in
reality when you make the USD purchase on the street. Then you wait for
your next paycheck without knowing if you will have 200 or if you will be
paid at all. People crying, people laughing on the street. Now, imagine
that you are already living in the capital city of Moscow where 85% of all
money in Russia is already sucked in. A city already maximized in the
theft potential from the regions, from the International Monetary Fund, and
from it's local citizens. Now, where do you go from here? What do you do?

Two weeks ago there was a slight sign of instability, but now it is assured
that this problem is not a simple fluctuation... it is a lasting trend...
going down fast.

It all happened just as the first tranche of IMF funding came through.
Just when the vacation season was ending (Important here because people are
less able to maneuver due to other businesses that are also on vacation).
The government is failing. Winter is coming. Crop production is down. No
production. Fully dependent upon imports to survive, which are becoming
more and more expensive. If you are a mafia guy, you buy out the store on
the inflated dollar value before the pension checks hit the population. I
saw a Mercedes 600 doing just that at a local market yesterday. If you are
a foreigner, you can go home. Many foreigners have no choice as their
employers have already pulled out. If you are a cop, you can squeeze your
countrymen for their last kopek. But if you are one of the 70 - 80% of the
population Russia-wide who is already hanging by a thread at survival-line
(two times below the average Mexican standard of living and sliding fast)
what do you do?

Local laws have already forced people to operate in crime just to make a
profit, so the option of being a criminal is a choice of economics, not
morals (which has to be evaluated as an absolutely separate topic from what
is 'legal'). But still the population is peaceful. Why? Good question.
I don't know why. I only have 2 observations that are only lightly tied to
the above situation here.

Humorous one
1. The beautiful women are out and about in droves now.
Explanation: Russia has a culture of 'sponsorship', which means that
beautiful girls usually have either a husband, or a couple of sponsors.
The women who have a husband, stay home. The husbands who have money,
typically sponsor a few girlfriends. The deal is this: The girl gets a
place to stay, food, spending money... but has to perform certain
extramarital fantasies upon request. To many, this is the best of both
worlds, but now this option is no longer available. Muscovites should be
aware of the increase in beautiful girls taking the metro these days. All
I have to say about this is that the Chinese word for 'crisis' and
'opportunity' is the same symbol.

Dark Humorous one
2. People are taking this catastrophe in stride... for now.
Illustration: At the bank today there were long lines and little action,
but whenever one person would become noisy with complaints, others would
laugh with an easiness that struck me. This is not an isolated experience
in recent days. Moscow, the 'city of no tears', is taking all of this
trouble with sarcasm and with bravery. Life experiences are accelerating
again. We are all living our lives in dog years again, 7 at a time. We
have all seen this before in the early 90's, but the results of this dive
are collectively taken into account already.

A 'normal' country has room to confront a crisis with the 'SWOT'
(Strengths-Weaknesses; Opportunities-Threats) analysis, but Russia has
already used up all options. 'No government, no money, no production, no
system.' Although no other people in the world are better equipped
culturally to handle pressure, this may prove a test too much for 


Date: Thu, 03 Sep 1998 
From: Sandy Bostian <> 
Subject: succession question

This question came up earlier today and I was wondering if anyone on the
list knows the technical details: 

If you have the present scenario where Kiriyenko has resigned and
Chernomyrdin is not yet confirmed, what happens if Yeltsin resigns? Can
an acting prime minister become an acting president if Yeltsin resigns?
If not, who (if anyone) is next in line?

Pardon me if this has been asked and answered, I was on vacation the
last couple of weeks.

Also, in case you don't know, this year's national high school debate
topic is "Should the US foreign policy toward Russia be changed?"

-Sandy Bostian
American Foreign Policy Council


Date: Thu, 03 Sep 1998
From: "Cheryl C. Sawyer" <> 
Subject: Symposium at Georgetown University

Center for Eurasian, Russian and East European Studies
Georgetown University
presents the first symposium in our 40th Anniversary Symposium Series:

September 11, 1998
Intercultural Center Auditorium
Georgetown University

Dr. Vadim Radaev, Russian Academy of Sciences and Executive Director,
Dr. Jonathan Sanders, Ferris Professor of Journalism, Princeton
University, and veteran CBS News Moscow correspondent

Dr. Murray Feshbach, Research Professor, CERES, Georgetown University
Dr. Sherman Garnett, Senior Associate, Carnegie Endowment for
International Peace, and Adjunct Professor, CERES, Georgetown University
Ambassador Robert Gallucci, Dean, School of Foreign Service,
Georgetown University

The symposium will be followed by a reception.

RSVP by September 8 to Cheryl Sawyer, CERES Administrative Officer, phone
202/687-2300, fax 202/687-5829, e-mail 

The second symposium in our anniversary series, devoted to Central Asia,
will be held on November 30, 1998 in conjunction with the Center's annual
Nava'i Lecture. Additional symposia during the spring semester will focus
on Central Europe and other regional topics.


Date: Thu, 03 Sep 1998
From: "Mark B. Tauger" <> 
Subject: Re: Richard Pipes' op-ed piece in the New York Times 

In the following I discuss some of the points that Richard Pipes presented
in his NYT op-ed piece that you ran [2333]. While some of my points repeat
some made in the NYT replies, I believe I put them in a different context,
and other points here are not discussed in those letters.

First, despite Prof. Pipes' accomplishments as a historian, his piece
presents an inaccurate historical analysis of the Russian crisis.

He wrote, for example, that the developments in 1991 promised the chance for
Russia to move to a market economy. But the Soviet Union always was a
market economy at least for many of the most important products. We all
know about the private plot economy, which lasted and grew through the whole
Soviet period. Markets [sometimes black] existed for manufactured goods as
well; the archives document this. The shift to the market was less
important than the overly rapid formation of a private sector and the
possibilities for corruption that it gave.

Pipes then attributed the crisis to Russians' inability to create a viable
administrative system in place of the one-party state, and asserted that one
reason for this was that the Russians had no collective memory of
pre-totalitarian political parties. Yet neformal'nye formed as soon as
Gorbachev gave the word in the mid 1980s, and political parties emerged even
before they were pemitted in the Congress of People's Deputies.
Furthermore, I do not see what precise social memory is needed here:
certainly people who lived under the Soviet system learned an important
technique of a democratic system: to compromise their views and convictions
with hard reality.

Perhaps Pipes' most remarkable statement concerned his interpretation of the
economic crisis. He asserted this crisis resulted from inept handling of
the budget, but also to Russians not being accustomed to paying income
taxes, which he said never existed in Russia or the Soviet Union. According
to Franklyn D. Holzman, Soviet Taxation (Harvard UP 1962, pp. 181 ff) the
Soviet Union introduced income taxes in 1922, not long after the US did, and
that system survived with a number of class-based rate changes and
administrative reforms until the end of the Soviet Union.

Furthermore, the tax system that existed before that, i.e. the notorious
razverstka of war communism, also functioned as an income tax, because the
NKProd agents determined the amount requisitioned from peasants based upon
local, regional, and national harvest estimates [which are amply represented
in the archives]. Since a peasant's harvest represented his income, the
razverstka was in effect an income tax.

So the Russians have a long history of income taxes. They also have a long
history of attempting to evade those taxes [a pattern not unique to Russia],
but I do not believe that, as Pipes put it, more "political will" would
alleviate the tax collection problem. More pseudo-tough armed agents
brutally collecting taxes from small businesses run by women [as discussed
in JRL 2323] will not help the budget.

The problem, it seems to me, is much more fundamental than mismanagement.
Pipes referred to the Russians' attempts to cover their deficits by
borrowing abroad, but denied that the West was at fault: the West in his
view has been generous. On the other hand, however, Pipes argues that
Russians have been relying on external aid to delay "putting their house in
order" and should not be allowed resort to this excuse any more. Now Pipes
recommends a "hands-off" approach, which apparently means a cut off of this

I believe this viewpoint reflects inattention to the history of this type of
large-scale IMF - World Bank - USAID development assistance. A significant
literature exists, well-substantiated with internal [often secret] reports
prepared by these agencies themselves, that large-scale aid of this sort
frequently if not inevitably leads to the kind of disruption of economies
and ordinary peoples' lives, and to corruption on a vast scale. The
Russians borrowed because they could; the cycle of large scale debt
requiring ever larger bail-outs began under Gorbachev, if not earlier. The
fall of communism in Russia created a situation similar to decolonization in
the 1950s and 1960s, and as in that earlier period "aid" agencies rushed
forward with offers, and recipient governments saw these offers as
opportunities in more ways than one. Since the World Bank and IMF are
profit-making enterprises, both sides went into the deal for their own
interests, in Russia as elsewhere in the Third World, and despite their
pious words alleging concern for ordinary people. Hence the debt of Zaire
approximated Mobutu's Swiss bank accounts, ditto for the Phillipines and
Marcos. Does anyone on the list have data on the bank accounts of
Chernomyrdin, Berezovskii, etc.?

And the point is that the precedents [Zaire, the Phillipines, etc.] were all
there, the agencies knew about them, the investors knew about them, the
Western governments knew about them, and they all knew about growing
corruption and crime in Russia. Maybe these officials and investors were
too busy to read Susan George and Graham Hancock and the other scholars and
journalists who documented the disasters brought by the World Bank and the
effects of IMF structural adjustment loans on already poor developing
countries. Maybe the officials and investors would have dismissed such
evidence as left-wing propaganda, etc. But it happened, in country after
country, and all the finger pointing will not negate the point that the
West, the IMF, the investors all share part of the blame, and therefore
certainly by "Western" moral standards have part of the responsibility to
help reverse the situation.

When Pipes discussed his views of the possibilities for Russia, he
expressed concern that the crises and shenanigans there would discredit
democracy and capitalism, and argued that in the modern world there is no
other road to stability and prosperity than that charted by the West. Aside
from the fact that this statement ignores the criticisms of the West
precisely on those counts by Asian leaders of stable, prosperous states such
as Singapore and Malaysia, I think that many Russians [including many I

know] do not see the present crisis as discrediting democracy and capitalism
because they do not consider such systems to exist yet in Russia. Where
Pipes warns about a return to communism and expropriations, many people
consider what happened in the early 1990s as a type of expropriation as
well, that deprived them of their jobs, their security, and their basic
entitlement to subsistence that the previous regime provided.

I would like to suggest two precedents to consider in dealing with the
Russian crisis.

First, the doctrine of odious debt. When the US conquered Cuba in the
Spanish American war, Cuba had outstanding debts to Spain. The US
unilaterally cancelled those debts because they were taken on by a country
that was not a democracy, in other words by an elite that did not represent
the people and did not act on the wishes of the people. With this as a
precedent, I think at the very least the West should be more specific about
who in Russia contracted these loans, with whose assent, and for whose
benefit. The loans may have been made to "Russia," but they were received
by a very much smaller group, and do not seem to have alleviated any of the
problems they were intended to solve.

Second, the Swiss banks' concealment of the accounts of Holocaust victims.
Perhaps a similar legal process of exposure could be employed to demonstrate
the misallocation of what was essentialy "our money," and then legal means
could be employed to reallocate these funds to more humane and beneficial


The Nation
September 21, 1998
Signed editorial 
Can Russia Save Russia?
By James S. Henry and Marshall Pomer
James S. Henry is a senior consultant with Monitor Company. His most recent
book is Banqueros y Lavadolores (Tercer Mundo). Marshall Pomer is director of
the Macroeconomic Policy Institute. He is co-editor, with Lawrence Klein, of
Rebuilding Russia: A Pragmatic Approach to Economic Transition (forthcoming
from World Scientifi

On July 20 Russia received the first $4.8 billion installment of a new $22.6
billion IMF bailout. This was supposed to defend the ruble and the anti-
inflation program that has been the centerpiece of “reforming” the economy.
Six weeks later, having spent the entire $4.8 billion on this quixotic policy,
Russia has done what few other developing countries ever dared to
contemplate—it has unilaterally suspended payments on about $200 billion of
government and private debt. As President Clinton visited Moscow, the ruble
traded at half its pre-bailout value, Russia’s creditors were writing off most
of these loans and financial markets around the world were in turmoil.
Western policy-makers, deeply involved in Russia’s neoliberal program for
almost seven years, reacted to these developments with a mixture of
admonitions and catatonia. Clinton’s National Security Adviser, Samuel Berger,
declared that a change in course “would be of serious concern,” and other
senior US officials also warned against “backsliding.” In his speech in
Moscow, Clinton urged Russia to reject “failed policies of the past.” At the
same time, these officials have been extraordinarily vague about precisely
what Russia should do. Recently, a White House gathering of Russia experts
failed to generate any new ideas for dealing with the crisis. It appears the
neoliberal paradigm for Russia is exhausted, and its supporters are working
overtime to shift the blame.
Dire warnings notwithstanding, a fundamental change in Russia’s strategy is
unavoidable. The simple-minded “reform” program imported from the West after
1991 tried to minimize the role of government. It contained inflation through
a mixture of tight money, budget cuts, wage arrears and, especially, hasty
privatization. Along the way, the program threw Russia wide open to
destabilizing capital and trade flows that it was simply unequipped to handle,
while transferring enormous wealth to a tiny new elite. It also undermined
domestic industry, tax collection and law enforcement. The result is a system
with the superficial trappings of a market economy but without effective legal
institutions or competitive markets.
The alternative is not a retreat to a Soviet-style command economy. That is a
bogyman with little political support in Russia, except among a handful of
aging Stalin idolizers. The right course—supported by such leading economists
as Alexander Nekipelov and Sergei Glaziev—is a progressive market economy,
where government plays a pro-active role in developing the foundations
required by the private sector, as in every other successful Western
democracy. From this angle the crisis has a silver lining.
§ First, by freeing Russia from IMF policies, the state can now implement a
broad range of helpful policy measures.
§ Industry will no longer be stifled by an overvalued ruble, which
artificially raised living standards (especially for the elite) but increased
import competition and encouraged $200 billion of capital flight.
§ Allowing the ruble to decline puts an end to the need for absurdly high
interest rates, which have increased the budget deficit and reduced
§ Now that Russia has defaulted, it will of course find it more difficult to
borrow. But the country has enormous natural resources, which should be able
to generate major foreign investments and foreign exchange surpluses.
§ Relative to the size of its economy, Russia’s debt levels are well below
those in other countries. The crisis was caused by the debt’s term structure
and a perception of drift, not by an inability to repay. Russia is a nuclear
power, whose stability is vital. So it should be easier for it to deal with
Western creditors on favorable terms—assuming its leaders continue, for a
change, to stand up to the West.
Russia has to move decisively, using the breathing room provided by temporary
defaults to gain control over foreign exchange, price hikes and taxes. It also
has to avoid bank bailouts not essential to the national interest. It should
make selective use of policy instruments like import duties, taxes on capital
flows, price controls, exchange controls and even re-nationalization. A
government of national unity is needed to enact tougher bank regulations,
capital market laws and tax enforcement, and to control corruption. This will
give it a freer hand to re-monetize Russia’s heavily barterized economy—though
this has to be managed carefully to prevent hyperinflation.
Russia’s acute crisis is not the unmitigated disaster that many have
portrayed. It is not yet clear whether those who will emerge on top will be
interested primarily in national recovery or in bailing out their tax-evading
cronies. But the crisis provides an opportunity to move beyond the most recent
failed policies. Rather than insist on mindless continuity, President Clinton
should encourage Russia’s centrists—from Viktor Chernomyrdin to Aleksandr
Lebed to reform-minded Communists—to unite around a new, more practical
national strategy. 
James S. Henry and Marshall Pomer


Boston Globe
September 3, 1998
[for personal use only]
US wary over fate of Russian nuclear arms 
By David Filipov and Brian Mcgrory

MOSCOW - With Russia in financial meltdown and its political leaders 
paralyzed, US and Russian specialists are increasingly concerned about 
the threat posed by the country's vast nuclear arsenal. 
Russia has about 7,000 nuclear warheads and several thousand more 
nuclear bombs and other devices, though no one seems to agree on an 
exact count. The important questions are how many of them are 
well-guarded and how many are simply decaying, half-forgotten, in 
fenced-in cities. 
In a rapidly deteriorating economy where little funding is available for 
maintaining secure facilities and the people who work in them, US 
officials worry that nuclear weapons and materials could end up in the 
hands of terrorists or pariah states. 
``The main concern remains (that) with the economy in trouble, it is a 
constant challenge to make sure no one with access to these materials 
crosses the line and tries to smuggle or sell it,'' one senior US 
official said yesterday, when Presidents Clinton and Yeltsin signed two 
minor nuclear-control agreements. 
One of the deals, on converting 50 tons of Russian weapons-grade 
plutonium into material unusable for weapons, addresses concerns raised 
by US officials and Russian and American analysts about the safety of 
weapons that have been dismantled under arms reduction agreements. 
Another measure signed yesterday would set up a system for the United 
States and Russia to share information on launches of ballistic missiles 
and space rockets. 
Senior US officials say they have significant confidence that Russia's 
active nuclear missiles are properly safeguarded. It is the dozens of 
nuclear facilities spread throughout the former Soviet republics that 
have given the US military its greatest anxiety. 
The combination of the disparate facilities, many of them storehouses 
for plutonium and uranium left over from the Cold War, and the failing 
Russian economy provide a potentially terrifying mix. Officials fear 
that military personnel, many of whom are low paid or unpaid these days, 
will smuggle or sell plutonium and uranium to terrorists, rogue states, 
or US enemies such as Iraq. 
Twice in recent years, the United States has mounted operations to 
remove significant amounts of weapons grade plutonium from former Soviet 
republics where they were at risk of being smuggled, last year in 
Kazakhstan and this year in Georgia. 
Likewise, US officials and other analysts remain fearful that former 
Soviet nuclear scientists, left unemployed and destitute by the end of 
the Cold War, may begin selling their knowledge to developing nuclear 
states such as North Korea. 
``Those would be the first people I would pay,'' said Stan Norris, an 
analyst on nuclear weapons for the Natural Resources Defense Council in 
Washington. ``If you don't pay your nuclear weapon designers and they 
can't feed their families, then they might be tempted.''
In July, nuclear physicists in Sarov, the closed research city that 
designed much of Russia's atomic arsenal, went on a brief strike to 
protest late paychecks. Ivan Gradobitov, head of the nuclear industry 
workers union, said even top specialists faced pay delays of up to five 
months. Nuclear industry workers plan to hold another protest next week. 
To try to stem the risk, the US Department of Energy has created at 
least two programs, though they conceded that the risk still exists. 
Energy officials have set up contracts with some 45 nuclear sites in the 
former Soviet Union to help upgrade the facilities, officials here said. 
Those officials said the pact signed yesterday that calls for each 
country to dissassemble 50 metric tons of weapons grade plutonium will 
also ease the anxieties of the US military. 
At the same time, officials have established a program that allows the 
US government to, in essence, hire former Soviet nuclear scientists to 
assure that they remain gainfully employed and not susceptible to the 
overtures of a terrorist state. 
In July, the United States slapped sanctions on seven Russian defense 
industry companies it suspects of aiding Iran in that country's quest to 
build nuclear missiles. The Russian government says it is investigating 
the cases. 
Most analysts say Russia has done much to consolidate the vast nuclear 
arsenal of the Soviet Union, which comprised over 50,000 nuclear 
devices, and was as late as 1991 spread throughout over 500 sites in the 
former Soviet republics and Eastern Europe. Russia reportedly has made 
efforts to remove weapons from unstable parts of the country, such as 
the north Caucasus regions near the separatist republic of Chechnya. 
``The Russian nuclear arsenal is greatly reduced and over time it is 
atrophying,'' said Robert L. Pfaltzgraff, professor of international 
security studies at Tufts' Fletcher School of Law and Diplomacy. 
Some analysts say Russia's arsenal could before long be reduced by decay 
to fewer than the 3,000 warheads mandated by the 1993 Start-II 
agreement, which the Russian parliament has yet to ratify. 
But Russia remains a country committed to a strong nuclear deterrent as 
part of its defense doctrine, especially in the wake of its conventional 
military's disastrous failure to defeat poorly armed militants in 
As a result, Russia continues to develop new weapons, even as it 
dismantles old weapons. 
Pavel Felgenhauer, defense analyst for the Russian daily Segodnya, said 
Russia has already produced 40 new SS-27 missiles, which have a 
capability to avoid detection by anti-ballistic missiles systems. 
And as Russia's weapons grow older, many are being decommissioned, often 
in ways that pose a threat, if not of falling into the hands of nuclear 
terrorists or pariah states, then to the environment. 
Felgenhauer said that thousands of tactical nuclear weapons have been 
``taken apart and thrown in plutonium pits and factories, where it's 
dismantled and lying around.''
Tamara Robinson, a senior research associate at the Monterey Institute 
of International Studies in California, said Russia's 73 nuclear-powered 
submarines, including some 26 that carry ballistic missiles and 12 with 
nuclear-tipped cruise missiles, also pose a security risk. 
Yesterday, after meeting Clinton at a discussion with other governors 
and opposition leaders, Alexander Lebed, the tough-talking possible 
presidential candidate, said he had told the US president to beware a 
repeat of the Bolshevik revolution in Russia. 
``I told him today the situation in Russia is catastrophic. The 
situation is worse than in 1917,'' Lebed said. ``Now we have huge 
stockpiles of poorly guarded nuclear weapons.'' 
David L. Marcus contributed to this report from Washington 


Journal of Commerce
4 September 1998
[for personal use only]
Guest Opinion
Russia's coming chaos

MOSCOW -- When President Clinton spoke in Moscow of not going back to 
the past, he forgot to say what past he was thinking of.
From the point of view of virtually every American investor, trader, 
banker and lawyer in Russia, the past they would not like the new 
Russian government to return to is just one month ago. That was when 
Russia's reformers violated the Russian Constitution, the Russian law on 
foreign investment, and a variety of other laws, to expropriate billions 
of dollars of value and property.
Had this expropriation been carried out by a Russian government or by a 
Russian Parliament with Communist representation, President Clinton 
would have been the first among a chorus of international voices to 
condemn the illegal acts, and call for a return to the rule of law.
By contrast, there has been an astonishing lack of attention in the 
Western media about the legality of last month's debt moratorium, 
imposed by Prime Minister Sergei Kiriyenko and the Russian Central Bank, 
and of the subsequent restructuring and write-off of Russia's domestic 
bond debts. The latter was decided by the Kiriyenko government, but 
ordered by acting Prime Minister Victor Chernomyrdin.
None of the reformers, to whom President Clinton said he is looking to 
pull Russia from its current slide, said a word in opposition.
Rather, it is the Russian Parliament, and the independent state auditor 
known as the Accounting Chamber -- both described as "Communist 
dominated" in many Western newspapers -- that have criticized the 
fundamental violations that have occurred.
Of course, the American government, investors and banks have a practical 
problem. Even if they acknowledge the Russian actions to be illegal, 
there's now no working government to restore the rule of law. As for 
President Yeltsin, no one believes he can any longer recognize the 
problem, let alone do anything about it.
The silver lining in this black cloud is that the August illegalities 
can be corrected, once a new government is in place. That's the goal Mr. 
Clinton, other Western leaders, and their banking and investment 
institutions now have in their sights. Why then have they been so 
reticent in securing a public commitment from the proposed prime 
minister, Viktor Chernomyrdin, and possibly Mr. Yeltsin's successor, to 
right the wrongs he and the reformers committed in August?
This is where the silver lining disappears. Every day it looks less 
likely the Kremlin can draw enough votes from the parliamentary 
opposition to put Mr. Chernomyrdin in power. So far, he's been reluctant 
to exchange anything specific for their votes. Western lenders are not 
alone in wondering what the proposed prime minister would do if he takes 
In the absence of a functioning banking system, and with shrunken 
revenues, the government has little cash to wage a campaign. The only 
money the government's bankers have is offshore in personal bank 
accounts. But even if Mr. Clinton and the German and French governments 
kick in a billion dollars, as they did during the 1996 presidential 
race, this won't change the national perception that the men in the 
Kremlin are thieves who have robbed everybody of their money. The 
severity of the crisis is now so obvious that even in Moscow the 
government-controlled media cannot influence votes. Thus, it's a fair 
bet that an election in the next three months would sweep away anyone 
supporting the government. The tactical problem for the Kremlin is 
whether Mr. Yeltsin can be eased out of office, or out of power, to a 
degree the Communists would accept as part of a deal to approve Mr. 
If Mr. Chernomyrdin is rejected on the second ballot, which could come 
as early as today -- and since it seems likely he cannot win a third -- 
the Kremlin will have to consider an alternative candidate. The mayor of 
Moscow, Yuri Luzhkov, and the speaker of Parliament's upper house, Yegor 
Stroyev, would be the obvious choices, and both would be acceptable to 
the parliamentary opposition. But their political and business 
constituencies, and hence their policies, are different from Mr. 
Chernomyrdin's. If the Kremlin sticks with Mr. Chernomyrdin because its 
financiers aren't comfortable with the alternatives, then Russia enters 
the political danger zone where the risk of a coup d'etat is high.
If the financial disarray and economic turmoil continues, there is 
likely to be an attempt to generate support for a "strongman" takeover. 
Alexander Lebed, the former Army general and now Krasnoyarsk governor, 
is priming himself for this outcome. The oligarchs who helped finance 
his regional election may support him if a Communist sweep in the 
parliamentary elections looks likely. An unconstitutional seizure of 
power is another of the pasts Russia could be headed for. If that is 
justified as a way of preventing a return to communism at the polls, 
where does President Clinton stand on that? He didn't say in Moscow. But 
if Mr. Lebed keeps all of the promises he's made, then it's likely the 
United States and the western banks will be persuaded to accept his 
takeover -- with a pledge to correct the August debt illegalities -- as 
the lesser of Russia's political evils. He would then be installed by 
the same forces that brought Mr. Yeltsin, Mr. Kiriyenko and Mr. 
Chernomyrdin to power. The rule of law in Russia would be gone, with no 
prospect of recovery in the foreseeable future. 
John Helmer writes for The Journal of Commerce from Moscow.


Zyuganov: US Leadership 'Not Afraid of Communists' 

Moscow, 2 Sep (ITAR-TASS) -- "I think they are all keen for
legislative institutions to continue to operate in Russia, while reforms
are being carried out at the same time, instead of the aid granted even now
being embezzled," Communist Party [CPFF] leader Gennadiy Zyuganov told
journalists after a meeting between a group of Russian politicians and US
President Bill Clinton, held earlier today at the US ambassador's residence
in Moscow.
According to Zyuganov, the US President listened attentively to what
the Russian participants in the meeting told him about the current
situation in Russia, which the CPRF leader himself described as "critically
dangerous." "They (the Americans) are very worried and concerned with what
is now happening in this country," he said. Zyuganov stressed in particular
that the US leadership was "not afraid of Communists."


Financial Times (UK)
4 September 1998
[for personal use only]
RUSSIA: Swift stabilisation programme urged
By Chrystia Freeland in Moscow

Russia must swiftly introduce a radical financial stabilisation 
programme if it is to prevent the economy from plunging into 
hyperinflation, Domingo Cavallo, Argentina's former economy minister, 
said yesterday after two days of consultations with the Russian 
"The currency has already devalued a lot," Mr Cavallo said in an 
interview with the FT. "This process will continue unless there is 
appropriate action taken soon by the government... I hope they will do 
something within the next few weeks."
Mr Cavallo, architect of Argentina's successful currency board system, 
was summoned to Moscow this week to offer the government urgent advice 
on how to cope with its mounting financial crisis.
A currency board takes control of monetary policy out of the hands of 
government and automatically sets interest rates according to the level 
of foreign currency reserves it holds, at a fixed exchange rate.
On arrival, Mr Cavallo immediately found himself at the centre of a 
crucial debate over the nation's future. On one side are advocates of 
radical stabilisation measures, led by Boris Fyodorov, deputy prime 
minister, and advised by Mr Cavallo. They are opposed by amore 
conservative lobby, which is pushing for a return to command-economy 
measures such as currency controls and soft credits.
Mr Fyodorov and his team are currently at work on a reformist emergency 
stabilisation programme, drawing heavily on Mr Cavallo's experience in 
Argentina. The question now is whether that programme will win the wider 
backing of the politically shaky Russian government.
If Mr Fyodorov's approach is triumphant, Russian newspapers speculated 
it could be unveiled by Victor Chernomyrdin, the acting prime minister, 
in parliament today.
Mr Cavallo, who may be on his way to guru status in the former Soviet 
bloc - he is advising Ukrainian officials in Kiev today - became an 
instant celebrity in Moscow, with radio stations playing Argentinian 
tangos to welcome him to the Russian capital and newspapers featuring 
extensive accounts of Argentina's victory over hyperinflation.
Although some western economists have been sceptical about the 
applicability of a currency board system to Russia, Mr Cavallo said Mr 
Fyodorov's team had the technical ability to implement a radical 
stabilisation plan.
"If they decide to implement a monetary reform like the one we 
implemented in Argentina, they have the technical capacity to do it," he 
The big question, Mr Cavallo said, was whether Russia's leaders, who 
have been weakened by a political crisis, would summon the political 
will to pursue difficult reforms.
Perhaps surprisingly, some of the influential Russian financiers who 
have often been viewed as enemies of reform appear to be actively 
lobbying for Mr Cavallo's advice to prevail. Mr Cavallo said that in 
Moscow he met leading businessmen, including Boris Berezovsky.
This week Mr Berezovsky publicly championed Mr Cavallo and called on the 
government to unite behind a stabilisation plan.
If Russia does take a currency board style approach, Mr Cavallo said 
that it would be crucial to reform the tax system simultaneously.
A virtue of the currency board approach, he said, was that it drew a 
line between old and new tax obligations, by, in effect, separating old 
and new money.
The government should use this transition as a starting point for a new 
tax regime.
If Russia opts for a tough stabilisation plan, Mr Cavallo said that 
assistance from the west would be particularly important.
"The only way to produce stabilisation is with some support from the 
International Monetary Fund and the G-7," he said.


Last Soviet leader calls for early elections

PARIS, Sept 4 (AFP) - Mikhail Gorbachev, the last Soviet leader, said in 
an interview published here Friday that President Boris Yeltsin should 
call early general elections in Russia and resign, so as avert a popular 
"The only positive thing that Yeltsin can still do is to propose early 
elections," Gorbachev said in the French daily Le Figaro. 
"If he does that, we can forgive him many things," he added.
If Yeltsin refused to call elections, "people will be out on the 
streets. In the best case scenario, we will need Lebed. In the worst, 
others will come forward whom we don't even know," said Gorbachev, 
alluding to General Alexander Lebed, the former national security chief.
Lebed, who is seen as a potential successor to Yeltsin, said Thursday 
that he might accept to be the "crisis prime minister" if he were called 
to that task by the people and not by Yeltsin.
He said the Russian people were "in a half-crazy state after everything 
that has befallen them in seven years of reform".
Gorbachev said that while Lebed "is not the worst solution" it was the 
mayor of Moscow, Yuri Luzhkov who had the best chance of succeeding 
Yeltsin as president.
Referring to the Duma vote on Friday in which the communist-dominated 
assembly is expected to reject for the second time Yeltsin's choice of 
Viktor Chernomyrdin for prime minister, Gorchachev said "the temptation 
to fall back on Chernomyrdin, to serve up the old recipes, will not 
work" because "neither the president, nor Chernomyrdin, nor parliament 
have the trust of the people," he said.
"All the rest, the financial crisis, the collapse of the ruble, is the 
result of the methods employed up to now," Gorbachev said.
"There is only one thing left for Yeltsin to do, and that is to stand 
down," he said, adding that to dissolve parliament without calling 
elections would be the "worst scenario because a weakened president, 
powerless and manipulated by other people is an extremely dangerous 
Gorbachev criticised the West which he said had made a "hero" of Yeltsin 
because he "overthrew communism". "Thus, they supported Yeltsin and 
closed their eyes on the way he was conducting the reforms," the former 
Soviet leader said.


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