September 4, 1998   

This Date's Issues: 2346• 2347•  2348 •

Johnson's Russia List
#2348
4 September 1998
davidjohnson@erols.com

[Note from David Johnson:
Does anyone receiving JRL work with the people at 
RIA Novosti?
1. AP: Duma Cancels Vote on Chernomyrdin.
2. Izvestiya: Will Boris Fyodorov's Plan Save Russia? 
3. Fred Weir on Duma and Chernomyrdin.
4. Dale Herspring: The Military.
5. Victor Kalashnikov: Let's tango. (Argentinean model)
6. Jerry Hough: Re 2345-Stowell/Hough&Squire.
7. Albert Weeks: Responding to Sandy Bostian
8. Laura Belin: succession procedure.
9. Jo-Ellen Pozner: Currency Board.
10. San Francisco Chronicle: Brian Humphreys, Russian conspiracy theories.
11. Alexander Samoiloff: From Khabarovsk.
12. Vlad Signorelli: A prediction.
13. Moscow News: Leonid Bershidsky, MEDIA WATCH: In Russia -- Just in Time! 
14. Christian Science Monitor: Judith Matloff, Russians Ask: What Reform?]

********

#1
Duma Cancels Vote on Chernomyrdin 
By Barry Renfrew
September 4, 1998

MOSCOW (AP) -- Russian lawmakers today postponed a vote on approving the
acting prime minister, avoiding a confrontation with President Boris
Yeltsin as pressure mounted on the opposition parliament to compromise. 
Lawmakers voted 294-54 to hold the vote Monday after parliament leaders
said Yeltsin had called for more talks. The Duma, parliament's lower house,
had been expected to reject acting Prime Minister Viktor Chernomyrdin for a
second time. 
The decision indicated the Communists and their hard-line allies were no
longer confident of winning their confrontation with Yeltsin and were
looking for a way out. 
Communist leader Gennady Zyuganov insisted his faction would never
approve Chernomyrdin and would not agree to a compromise with Yeltsin. But
the Communists abstained from the vote, indicating their position might be
crumbling. 
``We are not going to vote for Viktor Stepanovich (Chernmyrdin). We
believe he won't be able to handle this job,'' Zyuganov said. 
The dramatic turnabout came after Chernomyrdin's hopes of being approved
received a boost today when the Federation Council, the upper chamber of
Parliament, passed a non-binding motion 91-17 expressing confidence in the
acting premier. 
Yeltsin received news of the postponement calmly, ``understanding that a
longer pause for contemplation is better than haste,'' presidential
spokesman Sergei Yastrzhembsky said. 
The Duma's agreement to more talks with Yeltsin boosted Chernomyrdin's
hopes of approval. Yeltsin still retains enormous power and had appeared to
regain the political initiative in the past few days. 
Russia has been plunged into an economic and political crisis by the
collapse of the currency, the ruble, and a power struggle between the Duma
and Yeltsin. Russians have been deeply worried, but there has been no sign
of panic or unrest. 
After today's postponement, a weekend of hectic closed-door talks was
likely as the two sides looked for a compromise. 
The Duma rejected Chernomyrdin last Monday in a first vote. His approval
could ease the political instability in Russia, though it would not end the
nation's economic distress. 
The opposition says it will never approve Chernomyrdin, accusing him of
creating many of the current problems during his previous five years in the
job. Yeltsin has said he will accept no one else. 

Earlier, Chernomyrdin outlined measures to stem the economic crisis. He
said the government would allow the ruble to float freely, letting market
forces determine its value, and would press ahead with market reforms as
soon as the situation was stabilized. 
The Federation Council vote to back Chernomyrdin was only symbolic, but
it may have increased pressure on the Duma to find a compromise. The
governors who make up the Council have huge power in their regions and the
vote signaled they would back Yeltsin in a showdown. 
Just last month, the ruble was trading at 6.2 to the dollar, or about 16
cents. Today, two days after the government said it was powerless to
control the crashing currency, the U.S. dollar was close to 18 rubles in
street trading. 
Chernomyrdin warned a quick solution to the political crisis must be
found. 
``It may be our last chance to build a normal economy in Russia. Yes,
our actions will be unpopular. Everyone will assail us. But don't tie the
government's hands, give us time to step back from the precipice,'' he said. 
Chernomyrdin said his economic rescue package would concentrate on
meeting unpaid wages and pensions, closing down bankrupt and inefficient
businesses, getting rid of dishonest managers and officials, and lowering
taxes. 
If the Duma again rejects Chernomyrdin, Yeltsin has the option of
proposing him a third time, or choosing a new candidate. If the Duma votes
no for a third time, Yeltsin can call new Duma elections. 
Russia has been operating with an interim government since Yeltsin fired
the previous prime minister Aug. 23. 

*********

#2
>From Russia Today press summaries


http://www.russiatoday.com
Izvestiya
September 4, 1998
Lead story
Will Boris Fyodorov's Plan Save Russia? 
Summary

New economic policies of Russia will be associated with the name of
Boris Fyodorov, the daily wrote. 
A working group under the leadership of Fyodorov, acting deputy prime
minister and tax chief, has been preparing a plan to save the country's
economy. Three foreign consultants are helping to draw up the document,
including the author of the Argentinean "economic miracle" Domingo Cavallo,
a Bundesbank former president and a Harvard professor. 
Acting Prime Minister Victor Chernomyrdin speech containing the plan for
financial miracle is due to be delivered by at the Federation Council. 
The situation is very similar to that of 1991, when Yegor Gaidar's team
proposed radical economic reforms and invited foreign consultants. Then,
Russia was prescribed "Polish-style shock therapy." Now, a more radical
Argentinean option has been chosen as the model for Russia. 
The daily said the main innovation of the program is the system of
currency management. Its essence can be boiled down to the statement that a
country's economy should not have more money in circulation than it has
reserves in gold or hard currency. Every ruble should be guaranteed by gold
and currency. In this case, even with a negative balance, the country
would be secured against a sharp decline in the national currency. 
This system has already been adopted in Argentina, Hong Kong, Lithuania
and Estonia.

On Thursday, Malaysia announced the introduction of a fixed exchange
rate pegged on the dollar, which means that the country will follow the
same economic course. 
The daily said the problem is that this system should have been
introduced in 1997, when Russia had considerable currency reserves.
According to specialists, in order to impose the "currency board" system
now, Russia needs 2.5 times its present reserves of about $10 billion. 
According to Interpol, Russian citizens have a total of $100 billion to
$200 billion hidden in their homes and other places. However, economists
have not yet found a way to bring this money out. 
RUSSIA TODAY Notes:
During his address to the Federation Council on Friday, Chernomyrdin
pledged that the government would introduce harsh, and likely unpopular,
measures to restore stability to the country's financial markets and stop
the ruble's downward spiral. The plan includes backing the ruble with gold
and foreign reserves, introducing a floating ruble and controlled monetary
emission. 

********

#3
From: fweir@rex.iasnet.ru
Date: Fri, 04 Sep 1998 12:53:04 (MSK)
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT Sept 4) -- Acting Prime Minister Viktor
Chernomrydin pledged Friday to install an "economic dictatorship"
to rescue Russia from financial chaos and keep it on the path of
market reform.
"Starting in January the government will introduce an
economic dictatorship -- enterprises will be put in the
conditions under which they will not be able to fail under their
obligations," Mr. Chernomyrdin said in a tough policy speech to
the Federation Council, the upper house of parliament.
Russia's financial system has collapsed in barely a month,
plunging millions of people into sudden poverty, driving banks to
the brink of insolvency and leaving the state unable to cover
basic expenditures.
The beleaguered rouble has lost almost two-thirds of its
value since the Central Bank stopped defending it 3 weeks ago,
slipping from 6.2 to the U.S. dollar to an official rate of
almost 17 per dollar on Friday.
That has sent prices on basic foodstuffs and consumer goods
soaring. Moscow shops were filled Friday with shoppers scrambling
to stock up on staples before their roubles become worthless or
supplies run out.
"This is just unbelievable," said Galina Borisova, a 42-year
old maid. "Every day my money is worth 20 per cent less. I don't
know how I'm going to feed my family."
Mr. Chernomyrdin said the country's condition is so dire
that stern and radical policy departures will be needed to
resolve the crisis.
"If we do not stop panic, there will be a disaster similar
to the one Russia faced at the end of the 1980's," he said. "The
choice is: either the abyss of hyperinflation or the mobilization
of control over the economy."
Mr. Chernomyrdin offered few concrete details of his plan,
but experts believe the Russian government is considering
adopting a currency board to regulate the money supply. Under
that plan the Central Bank would not be permitted to issue any
new money unless it was backed by foreign currency reserves.

Analysts say a currency board is a draconian solution that
will stamp out inflation but drive thousands of Russian
enterprises into bankruptcy and worsen living standards for the
population.
"This may be our last chance to build a normal economy in
Russia," Mr. Chernomyrdin said. "Yes, our actions will be
unpopular. Everyone will assail us. But don't tie the
government's hands, give us time to step back from the precipice.
That refers to everyone from the president on down." 

*********

#4
Date: Fri, 4 Sep 1998 
From: Dale R Herspring <falka@ksu.edu>
Subject: The Military

I would only second Steve Blank's comment "nobody knows how the multiple
militaries might resond . . ." This is the real danger. The military has
lost one of its primary characteristics (cohesion). It began in 1987 and
has been getting worse on a daily basis. Steve is right -- the danger of
a "military" action is low -- unless of course Yeltsin or whomever brings
a division into Moscow and no one resists. That is easy. But what if
there is blood in the streets? I can think of ten or twenty scenarios in
which the military would be deeply involved. Napoleon once said that an
army will do anything, execept sit on its bayonets. I would warn those
who think that we are dealing with the Czech military a la 1968 that this
is a different world. What if soldiers are ordered to restore order and
they do not comply. Read Lebed's biography about his experiences in the
Transcaucasus. Everything worked, but he was a charismatic leader working
with a still cohesive military. The real danger is not only that the
military may get involved, but that it may be on different sides. Even if
it doesn't take up arms, what if if opens its armories and passes out
weapons to whomever wants them? 

Steve's warning is very upsetting, but alas, I fear that few are paying
attention to them. Indeed, reading some of the commentary, I am remineded
of a book written by a British professor in the 1930s. The book dealt
with Professions and Politics, but in the introduction, the author made a
statement along the following lines, "We will not consider the military in
this book since we hope it will never be used." As we now know, this
approach was not only wrong, it was stupid. I hope we are not presented
with a similar situation in coming months. 

********

#5
Date: Fri, 4 Sep 1998 
From: machinegun@glas.apc.org ( Victor Kalashnikov )
Subject: Let's tango

Everyone seems to grasp here now that Argentinean model 
is what we need. An important sen'or has just arrived in 
Moscow from another - exactly opposite to ours - part of 
the globe to finalise preparations. They say, it has worked 
in Estonia very well. Local TV gives enthusiastic comments. 
And we have more tango at Moscow radio now than 
country-style.
Boris Fedorov most probably has his hand in that. It will be 
much nicer to collect quasi-dollars under currency board 
than doubtful - for self-printed - Rbls. But Argies reportedly 
have put their eye on a general. They may've forgotten, 
that generals often tend to come over to conquering small 

rocks off shore, rather than risking their bearing at any 
kinds of boards. That one in question already is - 
apparently, for a take-off - annoying Moscow bureaucracies 
with a global air-traffic project, with all lines crossing in 
Krasnoyarsk.
Meanwhile, Russia, as it's known, consists of Gasprom and 
Luzhkov-Moscow. Installing a board-general would destroy 
both of them. Since a strong, governable and transparent 
Rbl-system suggests a soon end to both Gasprom's and 
Luzhkov's money manipulation. So they would resist. Or, 
they will rechannel the general's efforts versus surrounding 
rocks - or mountains, or plains. A possible compromise 
among all them calls rather for getting rid of all those parts 
of Russia which are not worth of hard Rbls Gasprom will be 
forced to provide under currency-board. 
What will come up at minimum? A clue may be hiring of the 
best Moscow's PR-man - Rinat Dosmuchammedov - to the 
Federal tax-ministry under Fedorov. Mr. 
Dosmuchammedov's PR-agency has organised Fedorov's 
widely-covered raids through Moscow's flea-markets to see 
whether proper cheques are given to customers. He also, 
surrounded by masked gunmen, seized a vodka factory 
near capital. The entire world witnessed how a suitcase full 
of vodka-related documents was captured (the factory 
management claimed later that several cartons with vodka 
bottles were also missing after Fedorov's taxmen 
departed). Yet, Fedorov himself made then a jump into a 
vice-premier office. His chances in the new government 
have been also rated high so far. They say that his PR-
agency has arranged top-grade tango classes for him...

********

#6
Date: Fri, 4 Sep 1998
From: "Jerry F. Hough" <jhough@acpub.duke.edu>
Subject: Re: 2345-Stowell/Hough&Squire

As I said in my book, I accept the extremely positive view of 
Financial Times of Viktor Gerashchenko as a banker in 1989-1990. He was a 
part of the intelligent group who understood the problem was not excess 
money supply, but creating more money and directing it into investment
instead 
of consumption. He was one of those scapegoated for the inflation 
caused by the monetarists who never understood the problem was 
investment. I would love to see him back as chairman of Gosbank. 
I hope my position is understood. I am appalled at how 
non-constructive American commentary has been. It is just scapegoating, 
bemoaning, trying to avoid blame. No one has been exploring what is the 
best option out of a series of bad options so far as American and world 
security interests are concerned. I have thought that Yeltsin as head 
of state with little real power, Chernomyrdin as prime minister with an 
industrial policy, Stroev as first deputy minister for agricultural 
reform, Masliukov as minister of industry, Glazev as minister of 
finance, and Gerashchenko as chairman of Gosbank would be as good as 
can be expected in a very, very bad situation.
I think an election at this time is a terrible idea, and constitutionally
that is what the removal of Yeltsin means. I have not thought another
nominee as premier was realistic, but Stroev strikes me as a better premier

than Chernomyrdin. The combination of Chernomyrdin and Fedorov strikes me 
as utter madness for all sorts of reasons. I hope that Fedorov is 
just a bargaining chip to give the Duma, but the team brings up so many 
memories of 1993 and seems so inconsistent that it is hard to imagine 
why it was tried. 

********

#7
Date: Fri, 4 Sep 1998
From: Albert Weeks <AWeeks1@compuserve.com>
Subject: Responding to Sandy Bostian

Sandy Bostian of AFPC raises an interesting problem: What happens
if Yeltsin resigned (or died) before Chernomyrdin or some other
Yeltsin-appointed PM were confirmed by the Duma? 
This situation is not presented anywhere in the 1993 "Yeltsin"
constitution, 
whether in Chapt. 6 (dealing with the PM or Acting PM) or Chapt. 4
(presidential powers). However, reading between the lines of the Russian
constitution, it might be assumed that the powers of the government
(pravitel'stvo), assuming the existence only of an as-yet unconfirmed
Acting PM, would accrue to the former Deputy Prime Minister(s), assuming
they themselves had not been dismissed or did not resign (!). Chapt. 4,
Art. 92, dealing with the president's terminal disability, death, etc., 
stipulates that an election of a new president must be held within three
months. Presumably, either the Acting PM or the former Deputy PMs would
meanwhile represent the government in the interim. Yet given the notorious
Russian tradition in matters of uncharted succession, the situation would
probably become very fluid and unpredictable in Moscow.
The point is, I think, that the Russian constitution is unclear 
precisely as to details concerning a complicated succession, unlike, say,
the details provided in the 25th Amendment of the U.S. Constitution.

********

#8
Date: Fri, 04 Sep 1998 
From: "Laura Belin" <laurabelin@mailexcite.com>
Subject: succession procedure

In case no one else has already replied to the question about the
succession procedure, the answer is that the Russian constitution makes no
provision for the possibility that the president dies or resigns when no
prime minister is in place. Article 92 says that if the president's term
ends early, the prime minister becomes acting president and new
presidential elections must be held within three months. An acting
president has a little less power than the president (for instance, he
cannot declare a state of emergency).
Most people agree that if Yeltsin died or resigned before the Duma had
approved a prime minister, it would provoke a constitutional crisis.
Occasionally Russian politicians say that the Federation Council speaker
could become acting president in the absence of a prime minister, but I
don't know how they came up with that scenario, because I don't see that
anywhere in the constitution.

********

#9
Date: Fri, 4 Sep 1998 
From: Jo-Ellen Pozner <jpozner@glasnet.ru>
Subject: Currency Board

I would like to respond to Judy Shelton's September 3 contribution,
entitled
"Russia's Monetary Saviors?" Ms. Shelton has provided an interesting
analysis of the benefits of a currency board, drawing logical conclusions
from the successful use of that institution in Argentina. Her economic

analysis seems to proceed only so far as to find a simple, "happy" solution
to Russia's economic woes. Her failure to extend the analysis to the
political, however, provides the argument's critical flaw. 
Many in recent weeks have suggested the implementation of a currency board
in Russia, including Deputy Prime Minister Boris Fyodorov. With the
exception of Argentina, currency boards have been used with great success in
very small countries such as Estonia, Bulgaria and Hong Kong, among others.
The key to that success, however, lies not in the currency board itself, but
in certain characteristics shared by those countries in which it has been
used. They are small, both physically and economically. They are very open
to and active in international trade, which is critical; in order to keep
the currency peg legitimate, the home country must be exposed to the same
economic trends as the reserve currency's country. Russia shares none of
these traits. Most importantly, however, the government and the population
must be credibly dedicated to economic reform. Reaching such political
consensus was easy in tiny Estonia, in Bulgaria it was only possible after
the people took to the streets in late 1996 and early 1997 and overthrew the
Communist throw-back government.
Ms. Shelton suggests that a currency board would offer Russian economic
reform immediate credibility. This could only be true if the currency board
itself were credible, which in Russia it cannot be. No rational person
could believe that the Russian government is committed to serious reform of
the banking and industrial sectors, or that the Russian people are prepared
to hold reformers to their word and demand that tough choices be made.
There simply is no political will in the country to support the policies
needed to make a currency board effective. Without that will, it would be a
matter of months if not weeks before the hardships brought about by the
introduction of a currency board would cause the government to eliminate it.
There are other problems to consider, as well. A currency board would not
as simple to set up in Russia as Ms. Shelton suggests. A parity rate
between the ruble and the dollar, or whatever reserve currency was chosen,
is impossible to calculate at present. The calculation must not only take
into consideration current market rates but also the effect that reforms
would potentially have on the currency -- once the parity rate is set, it
should only be changed in extreme circumstances and through the passage of a
law, otherwise the currency board loses all credibility. The Central Bank
of Russia would also need to collect enough reserves to back the currency,
which it is not prepared to do now, even given Russia's currently limited
money supply. What's more, that money supply will have to be increased to
solve the non-payment crisis that has been plaguing Russia for the past
several years. 
One must also keep in mind that monetary stabilization is not sufficient to
cure Russia's economic woes. That will require massive industrial
restructuring, making Russia work and produce, and that will take longer

than the few weeks Ms. Shelton sees necessary to set up a currency board.
It will also require severe banking reform, as seen in both Bulgaria and
Estonia in recent years. Once industry is working, once cash is circulating,
once taxes are being collected and once banks operate legitimately and
safely, only then will investors return to Russia. Too many have been
burned here for not doing their fundamental analysis, and deeper analysis
will show that it will take more than a currency peg to solve Russia's
problems.
A currency board definitely presents an attractive, relatively simple
answer. Would that it were enough to help Russia today.

Jo-Ellen Pozner
Financial Services Volunteer Corps
Moscow

*******

#10
From: "Brian Humphreys" <brian72@online.ru>
Subject: SF Chronicle, Russian conspiracy theories.
Date: Fri, 4 Sep 1998 
Dear David:
Following is a story being published in today's issue of the San Francisco
Chronicle. Feel free to use it if you think JRL readers will be interested.
Cheers, Brian.

Russian conspiracy theories.
By Brian Humphreys
Chronicle Foreign Service
Moscow
September 4, 1998

As their country does a slow-motion tumble off a precipice, ordinary
Russians are favoring conspiracy theories and divine retribution to explain
events they have trouble understanding.
Two weeks after the collapse of the ruble, Russia is facing economic
problems so intractable that they have confounded the armies of
once-confident economists, bankers and international lenders that sprouted
up after the Soviet Union's 1991 collapse.
But for Igor, a Moscow grocery shop manager trying to keep his business
afloat, the cause of the disaster is obvious.
""It has all been created artificially,'' he said. ""The people in power
have figured everything out already. I don't think the people at the
Central Bank are fools.''
He is not alone in believing that it is a vast unseen conspiracy, rather
than failed reforms or the ""Asian flu'', that has brought the country to
its knees.
Svetlana Pestrikova, a middle-aged St. Petersburg divorcee and a devout
Orthodox believer, agrees that the crisis has little to do with objective
economic realities.
""We are simply getting our just reward for the sins of our fathers,'' she
said, explaining her belief that the Soviet Union's state-enforced atheism
earned God's wrath.
She says that many of her fellow Orthodox Christians have decided that the
crisis that blindsided Russia in mid-August is God's punishment for the
government's 
decision to bury the remains of Czar Nicholas II in July, despite the
church patriarch's refusal to admit their authenticity.
Outsiders generally view the meltdown as one that has explainable causes.
But many average Russians, regardless of age or educational level, see only
a game with a predetermined outcome in which they are helpless pawns.
""People don't understand what is going on. They only know that prices have
suddenly gone up,'' said Yuri Levada of Moscow's respected VTSIOM social
research 
center. ""Nobody ever explained to them why the now-famous August 17
decision (to devalue the ruble and default on state debts) was either good

or bad. For the average person, it's a mystery.''
Indeed, when recently sacked Prime Minister Sergei Kiriyenko announced the
devaluation and default, he attempted to limit the political fallout by
explaining the 
decisions in opaque bureaucratic terms. Devaluation was called a ""widening
of the currency corridor'' and the de facto default was billed as a
temporary moratorium on repayment of several categories of foreign debt.
In a land whose history is filled with intrigues and unexplained disasters,
such explanations are bound to be unconvincing.
""(The conspiracy theories) have their roots in the psychology of the
Russian people,'' said Nikolai Petrov, an analyst at Moscow's Carnegie
Center. ""There is a tradition of believing in the good czar who is
surrounded by evil nobles who convince him to do their bidding.''
This tendency is echoed in the mass media and by political figures, he
added, reinforcing a culture in which complex and crucial issues are cast
in simplistic and 
alarming terms. This is turn frustrates attempts to move Russia toward a
higher level of understanding of both market forces and the workings of
democracy, which the country desperately needs.
Against a tableaux of often-vicious political hyperbole emanating from the
State Duma (the lower house of Parliament) and the Kremlin, the citizenry
remains distant, alienated and cynical, ensuring that few pay attention to
what their leaders say and do.
""People here don't really believe what the government says or what they
show on TV,'' said Lena Rodionova, a college-educated woman in her early
30s who has a 
good job with a Finnish construction firm in St. Petersburg. ""I think even
an idiot can figure out that this is somebody's game, somebody who wants to
get all the money and power.''
She believes that Viktor Chernomyrdin, the prime minister for five years
before being abruptly fired last March by Boris Yeltsin, engineered his own
exit so that somebody else would be blamed for a crash he knew was coming.
Most analysts, on the other hand, agree that Yeltsin fired Chernomyrdin on
a whim, fearing his growing political influence. His motives for rehiring
Chernomyrdin five months later are more obscure, leaving plenty of room for
speculation.
Echoing sentiments held by many, Ludmila Khorobrykh, 28, a recent graduate
of an economic institute in the Far Eastern city of Khabarovsk, said, ""I
hoped that Kiriyenko was somebody new who would be able to change things,
but it turned out that he was just somebody's pawn.''
(Levada's polling indicates that Chernomyrdin and Yeltsin are most often
blamed for the current crisis, with the youthful Kiriyenko coming in a
distant third.)
Yakov Ryzhak, 25, manager of an American newspaper bureau in Moscow,
follows politics closely and is aware of the basic economic issues behind
the crisis. Though he might be expected to be able to identify a figure
capable of dealing with the country's problems, he is hard pressed to name
one.
""Right now it's hard to say who could do anything,'' he said, reluctantly
naming Moscow Mayor Yuri Luzhkov as a possible future leader.

""A lot will depend on how the mess in the Duma is sorted out,'' he said,
referring to the posturing and horse-trading that has dominated the
parliament's reaction to 
the crisis. ""In a couple of years, we might be in such a mess that nobody
will be able to do anything.''
Worries are growing that a search for scapegoats will soon replace today's
abstract fatalism.
Levada thinks this is some way off. ""The calls for radical protests have
always come from the political elite who have their own concerns,'' he
said. ""Average people have never been eager to start a conflagration."
""For the time being they are just trying to figure out what is going on,
but they are not showing any signs of radicalism.''
But Petrov is pessimistic: ""On the eve before a social explosion, people
begin actively looking for somebody to blame. They need somewhere to
channel their pent-up frustrations.''
The search for villains is already under way.
Sergei, the accountant at Igor's grocery store, is certain that the United
States is somehow behind the recent events.
For him, the timing of the emergency IMF loan designed to save Russia's
financial markets, announced a month before the crash and subsequently
suspended, and President Clinton's visit two weeks after disaster struck
are proof positive. Igor nods in agreement.
Sergei, a thoughtful man approaching middle age, echoes Petrov's analysis.
""Right now there is a massive movement in society to figure out what is
going on and who is causing it. If somebody tells Russians they know who
the real enemy is, and they decide to believe him, there will be trouble.''

*******

#11
Excerpt
From: "Alexander Samoiloff" <tolmach@usa.net>
Subject: From Khabarovsk
Date: Fri, 4 Sep 1998 

Dear Mr. Johnson
I enjoy reading you newsletter and send you the first issue of my E-Zine as
some materials may help you. I mean, you can use materials for your
publication.
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Business Consulting & Attorney Services
Translators & Interpreters
Khabarovsk, Russia
URL: http://www.angelfire.com/biz/Tolmach.index
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"Not only in the West, but also many people here in Russia underestimate


Russian specifics and the Russian mentality. We are proposed standardized
economic schemes. But what, for example, is not bad for little Latvia does
not work in Russia and sometimes produces the opposite result.''
- Acting Russian Prime Minister Viktor Chernomyrdin.
============================================================================
Today's Subject:
- HOT REPORTS FROM LOCAL PRESS
- LET'S PLAY THE "GOVERNOR" GAME
============================================================================
=
HOT REPORTS FROM LOCAL PRESS:
1. STATURE OF LENIN INSTALLED NEAR RESIDENTIAL HOUSE
(Birobijan - 60 thousand population, Jewish Autonomous Region)
A stature of Vladimir Lenin was installed by local jobless workers near a
3-storey living house in Birobijan.
Majority of the house residents are fired workers of Butchery, which went
bankrupt. During re-organization of the Butchery this stature was removed
from its site near a central office building as a trash.
So, the team of jobless ex-workers installed and repainted 100 kg. Lenin.
Leader of the workers explained: "We are much dissatisfied with policies of
the present government, and would not care to see the statures of Eltsin and
Gaidar in a trash".
To the arguments about communist regime crimes against its own people,
workers
said they never evidenced any crimes. But during Soviets they never suffered
hunger and poverty.
The stature area is now a major place for propaganda activities of
nationalist and communist groups.
(Pryamursky Vedomosty Sept. 3 1998)
....

********

#12
From: "Vlad Signorelli" <vlad@garden.net>
Subject: Re: A prediction
Date: Fri, 4 Sep 1998 

Since Kiriyenko’s disposal, I’ve been looking for confirmation that Kremlin
collaboration with the IMF was about to end. Of course, as long as Yeltsin
is in office this avenue will never be blocked off. Yet, after looking at
Chernomyrdin’s comments and what the Communists are likely to do, I think
the moment has nearly arrived. 
I don’t believe the Communists, despite all their protests and threats over
the recent devaluation, are going to kill Chernomyrdin’s appointment. Their
most powerful enemies -- the IMF adjuncts in Yeltsin’s cabinet -- have been
routed. Gaidar is long gone, Chubais severely diminished, Kiriyenko yanked
and Nemtsov finished. And while these “reformers” were content to by-pass
the communist-dominated Duma to implement IMF austerity and shock therapy,
Chernomyrdin a consummate consensus-builder, appears to ready to experiment
with economic growth, which the Communists were never really against to
begin with.
Chernomyrdin's idea to get the Russian economy growing by radically
reducing taxes has significant cabinet support. In fact, Boris Fyodorov --
an early shock therapist who appears to have since converted to sanity --
introduced the idea when he became tax czar in June. Of course, the idea
went nowhere under Kiriyenko -- who had been handpicked by Chubais because
of his affinity for austerity economics and IMF death marches. (Perhaps
this answers Jerry Hough’s question in JRL 2342 #3). But now with the
recent devaluation -- the Russian ruble now trading around 17.5 to the

dollar -- Yeltsin's regime faces outright revolt if it continues on the
path of IMF-imposed austerity. Thus, whether one likes Chernomyrdin or
not, he has seized upon the one policy option anathema to IMF orthodoxy,
growing the real economy.
Should the Communists cross the Rubicon by rejecting Chernomyrdin’s
appointment a third time, the financial crisis would probably deepen and
civil unrest could explode into violence. Yeltsin might dissolve the Duma
and/or just begin ruling by emergency decree. But Zyuganov, no doubt,
understands how such brinkmanship could quickly escalate into an extremely
fluid situation with an unpredictable, nay, disastrous outcome for his
party and political ambitions. After all, the scenario outcome he discusses
in JRL 2344 #11 (which I assume is from Vladimir Kvint’s 9-9-98 piece in
Forbes) becomes more likely if Chernomyrdin remains unable to get Duma
support. I bet Zyuganov will blink once again.
Vlad Signorelli (vlad@garden.net)
Associate Editor - Polyconomics, Inc. (http://www.polyconomics.com)
973-267-4641

*******

#13
Moscow News
September 4, 1998 
MEDIA WATCH: In Russia -- Just in Time! 
By Leonid Bershidsky 

Black humor is as vital an element of the current Russian crisis as the 
collapsing ruble. When your savings are gone, your friends are being 
laid off and your local store charges prices you don't want to pay, what 
do you do? Laugh, of course. It would be ridiculous to weep. 
So I laughed my head off when I saw the TV commercial for the Russian 
edition of Vogue magazine. "In Russia, Finally!" the slogan went. 
Finally, I knew what the missing element was in our hilarious version of 
reality: Vogue. 
I was not the only one giggling at that slogan. "Some situations do look 
like the frolics of some second-rate archangel who is in charge of 
coincidences up there in the heavenly bureaucracy," wrote Kommersant 
Daily. "The Russian edition of Vogue hit the newsstands the day the 
Kiriyenko government was fired, Zyuganov reveled in his triumph, and the 
entire middle class went to the dogs. ... The life serviced by glossy 
lifestyle-building magazines has deflated and is dissolving right before 
our eyes." 
But black humor is like those Russian dolls that Western newspapers can 
never spell right, and so are just called "Russian dolls." As a business 
newspaper, Kommersant is itself in grave danger of going under, partly 
because of its inefficiency and partly because the life it "serviced" 
has all but ceased. 
Just a couple of months ago, the Kommersant publishing house announced 
that it was for sale. Several minority investors were sought and a 
number of big foreign publishing houses were approached. The asking 
price was way too high, though, and the company was not transparent or 
profitable enough. The only Kommersant publication that did make a 
serious profit was Dengi, or Money, a personal investment magazine. At a 
time when a jar stuffed with dollars buried in an orchard is the best 
personal investment option, I'll wager that Dengi, too, will not be 
feeling very good financially. 

So there were no takers. There are certainly none now, unless some 
global publishing giant takes the chance to beat down the price. 
Other Russian publishing empires are in a similar fix. The dailies 
Komsomolskaya Pravda and Izvestia are forced to print on credit and cut 
the number of pages. Advertising revenues are drying up, and 
publications that depend on large newsstand sales cannot make any money 
because they have large printing expenses -- which have increased like 
most other prices -- and by the time distributors pay up, the money is 
worthless. Besides, the new banking group that includes Uneximbank, MOST 
and Menatep (Uneximbank controls Izvestia and Komsomolskaya Pravda, and 
MOST controls the daily Segodnya) has more important problems now than 
tending to the publishers' wounds. 
Foreign publishing companies are also getting hit by the crisis. Paris 
Match, the French weekly magazine that has planned to start publishing 
in Russia next Tuesday, has now given up on the weekly format and plans 
to come out monthly. And then there is the Dutch-owned Independent Media 
holding, publishers of The Moscow Times and a glossy magazines like 
Cosmopolitan and Playboy -- and now Yes, a glossy magazine aimed at 
teenaged girls that hit the streets two days after the ruble 
devaluation. Independent Media management says Yes is doing quite well 
even so, but also admits the crisis is biting company-wide as 
advertising slumps and the cost of printing magazines abroad climbs. 
Amazingly, though, some advertisers with luxury items to sell are 
sticking to their guns. The assumption is that though Russia's 
super-rich have lost some of their wealth -- and some are moving their 
money and their families abroad -- they have plenty of money left for 
Hermes ties and Brioni suits. 
And, even more strangely, some publishing companies that should 
logically be folding, are plodding on cheerfully. Though Uneximbank 
planned to stop financing the daily Russky Telegraf this month, the 
unprofitable paper's lease on life has been extended until December. 
Kompaniya magazine, owned by the National Reserve Bank, is not only not 
closing but planning some expansion with new supplements. Kompaniya 
looks as though the main reason it is still around is black humor -- its 
latest issue had a black cover that said, "The Russian economy. 
1991-1998." In other words, the economy is dead, but the magazine that's 
all about it goes on. 
The long-expected shakeout in the Russian publishing industry is finally 
at hand, and it will be more severe than most people expected. Those who 
survive are likely to be more cynical and inclined toward morbid humor 
than the idealistic publishers who came a few years ago to conquer the 
market. 

********

#14
Christian Science Monitor
SEPTEMBER 4, 1998 
[for personal use only]
Russians Ask: What Reform?
•Runs on banks, food lines bring memories of communist era. Will recent 
progress stick?
By Judith Matloff 
Staff writer of The Christian Science Monitor

MOSCOW 

In recent days, Muscovites have noticed the comeback of a certain 
feminine accessory - the avoska. Loosely translated as "maybe" or "just 

in case," it is a plastic or net bag easily crumpled into a coat pocket.
The avoska was an indispensable item for women waiting in food lines in 
Soviet times. Shoppers carried a bag wherever they went in case they 
stumbled upon an egg or an odd bag of potatoes. Now, seven years after 
free-market reforms were introduced, Russia is on the verge of 
bankruptcy - and the avoska is back.
Seeing runs on banks and stockpiling of food, ordinary people and 
economists are wondering how far Russia has come since the collapse of 
communism.
The verdict, by most accounts, is not positive.
"Russia failed to create a market economy. What we have now could hardly 
be called a civilized market," says Vyacheslav Nikonov, director of the 
Politika Foundation in Moscow.
"There has been no real reform for years. The situation today is worse 
than in 1991."
Russia has declined into an ailing Third World economy, not the thriving 
free market that President Boris Yeltsin tried to promote under the 
West's tutelage.
More than half of the economy is based on barter, making it hard to 
collect taxes. Agricultural and industrial production have shrunk. 
Millions of workers have been unpaid for months. Hundreds of billions of 
dollars have evaporated in capital flight or corruption. The country is 
suffocating under a heap of debt.
Russia's formal gross domestic product (GDP) has shrunk nearly 40 
percent since 1991 to an estimated $480 billion. The fall is the biggest 
any industrialized country has seen in peacetime.
The most visible reforms were the creation of a capitalist-minded middle 
class, a stock exchange, and a commercial banking system. Inflation was 
brought down from 2,500 percent in 1992 to 11 percent a few months ago. 
Price and currency restrictions were lifted.
All of these changes are endangered today.
The government can no longer protect the ruble, which has halved in 
value over the past two weeks. It has defaulted on debts. Foreign 
investors have fled the stock market.

Who to blame

Analysts place much of the blame on a shortsighted government that 
enforced changes only halfheartedly. Since the end of the Soviet Union 
in 1991, when Yeltsin announced radical liberal reforms, he has been 
vulnerable to grass-roots opposition.
His chief reformers have been sacrificial lambs at crucial ventures. 
Notable victims were Yegor Gaidar, Yeltsin's first prime minister, Boris 
Nemtsov, Mr. Chubais, and Sergei Kiriyenko, who lasted as prime minister 
for only five months until Aug. 23.
The only stability came from Yeltsin's prime minister of five years - 
Viktor Chernomyrdin - whom Yeltsin is now trying to reinstate as 
premier. But instead of generating more productivity, Mr. Chernomyrdin 
built up a pyramid of loans and encouraged a fraternity of tycoons who 
snatched up state resources.
"The new economy did not manage to foster influential persons who could 
protect reforms," says Nikolai Petrov of the Carnegie Moscow Center.
Some of the blame, analysts believe, must be shared by foreign creditors 
who were blind to lurking dangers. Wanting to believe statements that 

Russian authorities were committed to reform, they continued to give out 
loans even without seeing results.
Analysts say the current crisis exposed Russia's dependence on investor 
confidence and on the world prices of its vital export, oil, which had 
declined. It also showed how vulnerable most sectors of the economy are.
"I think we'll see a reverse process toward more state control," says 
Elena Vigdorchik, of the Expert Institute, a think tank in Moscow.

Immediate reforms

Urgent action is needed in nearly every area of the economy.
The prospects for industry are particularly bleak. Production has halved 
since 1991, partly because direct state subsidies to factories dried up 
- as did indirect ones for products. Defense, which once accounted for 
as much as 80 percent of industrial output, was a major victim of the 
cold war's end. And the opening up of borders meant that local producers 
often could not compete against cheap imports flooding in.
Agriculture hasn't fared much better. Privatization reforms, which 
affected banks and businesses, didn't reach farmers. Those agrarians 
with entrepreneurial ambitions find credits hard to come by. Compounding 
the problem are obstacles posed by the Communist opposition for buying 
and selling agricultural land.
Many of Russia's 26,000 farms are collectives, as they have been for six 
decades. Subsidies have dried up and equipment is grossly outdated. The 
agrarian sector is several billion dollars in debt to the state. An 
estimated 80 percent of farms are in the red, and Russia imports half 
its food.
The picture isn't much rosier for the financial sector, where there is a 
serious lack of liquidity. With the current crisis, up to half of the 
country's 1,500 banks may fail. The bigger ones are being propelled 
toward nationalization or mergers to survive.
The government has guaranteed the savings of small depositors, ordering 
ailing banks to transfer the accounts to a solvent one.
But it still has to address wages arrears owed to millions of workers. 
To keep spending down to comply with International Monetary Fund (IMF) 
demands, the state stopped paying salaries. Economists estimate the debt 
in unpaid wages amounts to a staggering 25 percent of GDP.
Equally burned were foreign investors who bought up GKOs, or short-term 
state bonds, which were first issued in the spring of 1993. When the 
government effectively defaulted on this debt instrument by rescheduling 
it earlier this month, investors found they had lost $30 billion.

Future prospects

Some analysts believe it will harder now to remain on the reform path.
Foreign investors are loath to come back. Further support is unlikely 
from a West that is wary of doling out money without signs of promised 
reforms. The IMF assembled a $22.6 billion rescue package in July. But 
the first installment of $4.8 billion vanished in support of the ruble.
The financial chaos has given ammunition to the Communist opposition, 
which is taking advantage of the political vacuum to push for more state 
control. Whether this will be implemented depends on how much longer 

Yeltsin remains in power or if the Communists win their bid for a 
power-sharing agreement giving parliament more say.
Some analysts see a new economic isolationism developing.
"There is a growing feeling that all our hopes of financial aid are in 
the past and that we must do things ourselves," says Mr. Petrov. "It is 
a feeling that we will not play games with the IMF and should instead 
close our borders."

*********