September
6, 1998
This Date's Issues: 2350•2351• 2352
•
Johnson's Russia List
#2351
6 September 1998
davidjohnson@erols.com
[Note from David Johnson:
1. The Sunday Times (UK): Orlando Figes, A Red October? Russia's not
at the barricades yet.
2. Washington Post: William Odom, Our Russian Illusions, Crushed by
Reality.
3. New York Times: Aileen Kelly, When Russians Look Inward.
4. The Sunday Times (UK): Mark Franchetti, Kingmaker Zyuganov tastes
power.
5. AFP: Luzhkov attack on Chernomyrdin signals bid for premiership.
6. Sovetskaya Rossiya: Left Party Leaders Justify Rejection of
Chernomyrdin.
7. Moscow Times: Natalya Shulyakovskaya, Grain Harvest Threatens To
Compound Suffering.
8. Interfax: Security Council Secretary Seeks Continued Russian
Reforms. (Kokoshin)]
******
#1
The Sunday Times (UK)
6 September 1998
[for personal use only]
OPINION
A Red October? Russia's not at the barricades yet
By Orlando Figes
Orlando Figes is professor-elect of history at Birkbeck College, London,
and the author of A People's Tragedy: The Russian Revolution 1891-1924
'Worse than 1917." That is how Alexander Lebed described the Russian
crisis to President Clinton in Moscow. The former general is notorious
for talking Armageddon and as a strong figure of authority, whom many
Russians see as a national saviour, he has much to gain.
Gennady Zyuganov, the Communist leader, has just as much to win from the
threat of violence (political concessions from the Russian president)
and he duly echoed Lebed by proclaiming that his party was "ready for
war".
It is a Russian Punch-and-Judy show that has so far succeeded in
frightening the West. The media were full of nightmare scenarios last
week. Russia was compared to Weimar Germany on the eve of Hitler's
sudden rise to power. Pundits prophesied a popular revolt, a communist
or nationalist dictatorship, or the collapse of the country into feuding
regional military regimes with nobody in control of Russia's nuclear
arsenal.
Nobody can say that the outlook isn't grim. Without western aid, the
coming winter will be extremely hard, with people going hungry and many
of the old and sick dying, because more than half of Russia's food and
medicines are imported from the West. Strikes and protests are being
planned by workers who have not been paid for months.
In such a situation anything could happen. Lenin, after all, was an
unknown figure on his return to Russia in 1917. The only predictable
thing about Russia is that it is unpredictable.
There are parallels with 1917. Then, as now, real incomes were
devastated by inflation. There was a crisis of authority as Kerensky's
government and its ideals of democracy became discredited as a servant
of capitalist barons and western interests. Just as the Kremlin is
opposed today by the Communist-dominated duma, so Kerensky's government
was locked in constant battle with the left wing of the soviet.
Kerensky, like Yeltsin, was the butt of endless jokes about his heavy
drinking and tomfoolery. And like the president, he could not rely on
the troops around the capital.
But all this is still short of causing justifiable concern about the
prospects of another Russian revolution. Indeed, what is striking about
the current crisis is how calm the population has remained. The Russians
have been here before. They have their own mechanisms of survival to
cope with the effects of hyperinflation (essentially a return to the
peasant barter economy of their ancestors) and so far have shown no sign
of unrest.
Worse than 1917? Lebed is a good soldier but no historian. The situation
might be bad today but, compared with 1917, it is a picnic.
Russia was exhausted after three long years of war when Lenin came to
power. Two million soldiers had been killed and most people thought that
the only way to end the slaughter was to get rid of the system root and
branch.
That sort of anger does not exist today. There is general contempt for
the Kremlin and much disenchantment with the "alien" institutions of
capitalism and democracy. Many feel nostalgia for the old Brezhnev days.
But most of the people still want Russia to go forward - and they feel
frustrated that it is so difficult. Indeed, the people to suffer most so
far from the current crisis are the new middle classes with savings in
the bank, and they believe most firmly in the free market.
The disenchanted of 1917 had a choice of several revolutionary parties.
Today there is just one - the Communists - and it is a shadow of its
former self. It still has half a million members but most are old-age
pensioners. One can hardly see them taking to the streets in battles
with police. The Communists, moreover, are a fragile coalition of social
democrats and Stalinists, agrarians and youth groups, which could easily
break up if Zyuganov carried out his threat of violent action.
Perhaps Zyuganov's biggest obstacle is his lack of mass support in the
capital. Petrograd and Moscow were the bastions of the Bolsheviks in
1917. But today the Communists are strongest in the provinces,
especially the Volga region and Siberia. Hardly springboards to launch a
bid for power.
Zyuganov must know that - and his talk of civil war is surely rhetoric.
The sensible money has been all along on his caving in to Yeltsin at the
final moment in exchange for concessions over the control of economic
policy. This indeed is the likely outcome tomorrow when the duma votes
for a second time on Chernomyrdin as prime minister. The Communists will
probably settle for a ministry or two, knowing how much more that's
worth than millions of votes in the provinces. Zyuganov may not equal
Lebed as a soldier but at least he knows his Russian history.
Yet even if there's no repeat of 1917, there are lessons which the West
should learn from Russian history. Any government that is formed in
Russia now is bound to be unstable. It will have to resort to painful
remedies and serious civil unrest cannot be ruled out. The Communists
and Lebed, if they do not join the government, will be waiting in the
wings.
The West must now do more than watch events. This is what it did in 1917
when the allies gave much praise, but very little money, to Kerensky's
government - and then abandoned it to the Bolsheviks.
One thing it can do is to help the country through the coming winter by
releasing credits to the government - even if if does include the
Communists. The alternative is to run the risk of strikes and
demonstrations that can only help the enemies of democracy.
This does not mean giving up commitments to "reform". But it does mean
recognising that the reform project of the Yeltsin years has become
discredited - that the Russians see its liberties as lawlessness and its
capitalism as simply so much crime - and that some consensus with its
critics must be part of any recovery programme.
In other words, it makes more sense - politically and economically - to
accommodate the Communists within the system rather than have them as an
angry mob outside it and threatening to bring the whole thing down. In
Poland, after all, there are Communists in power, yet this has not
prevented the Polish economy from booming or western investment in it.
This entails a complete rethinking of western strategy towards Russia.
Westerners (in Russia and the West) have tended to regard the question
of reform in Russia as a task of making Russia more like the West. This
is a mistake. The fundamental reason for the failure of democracy in
1917 was the absence within Russia of any preparation for the western
institutions and concepts it entailed.
Equally, in the Yeltsin years capitalism and democracy have been grafted
onto Russia without much regard for that country's own traditions and
social attitudes or indeed for the institutions needed to sustain it
through reform. If there is a lesson to be learnt from history, it is
that Russia must be better understood.
******
#2
Washington Post
6 September 1998
[for personal use only]
Our Russian Illusions, Crushed by Reality
By William E. Odom (eva@hidc.hudson.org)
William Odom, director of the National Security Agency from 1985 to
1988, is a senior fellow at the Hudson Institute and a retired Army
lieutenant general.
Russia's economic crisis seems to have taken the West by surprise. How
did so many observers overlook the warning signs? They saw promise
instead of problems. Sure, they said, Russia's reform process was moving
slowly, but it was on the right path. And yes, foreign investors seemed
leery, but that was to be expected in a country making the transition
from a controlled economy to a free market one. So when the Russian
economy began its dramatic slide, it seemed only sensible in this
atmosphere of optimism for the International Monetary Fund (IMF) to put
together a $22 billion rescue package.
Unfortunately, this rosy assessment is fundamentally wrong. Russia's
economic difficulties cannot be overcome by confidence building measures
or IMF loans. They cannot be solved merely by ending the rampant
political corruption, fixing the failing banking system or putting teeth
into the woefully weak tax collection system. The problems go much
deeper: They require the building of fundamentally new economic, legal
and governmental institutions as well as the demolition of lingering
Soviet institutions.
A metaphor is perhaps the best way to describe the chaos that exists in
Russia today. Think of the Russian economy as a professional football
league. On game day, the teams arrive at their fields to play before
sell-out crowds. The players look around to discover there are no
referees. Nor is the field lined off to mark the boundaries, yard lines
and goal lines. To get the games under way, each team's owner sends one
of its own to officiate. Predictably, the referees only make calls
favorable to their team. At half-time, gamblers send their agents to
bribe the referees. The fans, knowing that skill doesn't determine the
outcome, become unruly. Needless to say, the game turns into a melee.
Meanwhile, most of the gate receipts disappear mysteriously and the
players end up receiving no salaries.
This is a crude approximation of the way the Russian economy operates.
The state authorities are not strong enough to impose order on the game.
They cannot supply honest referees or dictate rules. They may write a
regulatory system for the teams and the owners, but they cannot enforce
it. Nor can they prevent thefts at the box office. And they cannot
extract adequate fees from the owners to pay for all the necessary
regulatory functions to manage the league through a season of play.
Nonetheless, Western governments continue to act as if controlling legal
institutions exist and that the rules are fair.
Much of the West's confusion arises from excessively optimistic
reporting on the Yeltsin government's economic reforms. News accounts of
the new Russian stock market, of the radical privatization program of
1993-94 and of the Russian efforts to bring inflation under control gave
the impression that Russia is not much different from Indonesia or
Mexico. Books and articles with titles such as "How Russia Became a
Market Economy" only reinforced this misperception. The result has been
a widespread conviction, particularly strong in both the State
Department and the Congress, that Russia is headed in the right
direction.
Was the Yeltsin-Gaidar government wrong-headed when it launched reforms
in early 1992? Not really. Former prime minister Yegor Gaidar and his
group were fairly realistic about the political resistance they faced,
yet still brave enough to try. They probably believed that making it
impossible to resurrect the old Soviet system was, in itself, an
important success. To understand why, consider the obstacles they were
up against:
* First, for nearly 70 years, the Soviet economic system had allocated
capital investment by criteria that had nothing to do with the market.
For decades, a huge portion of the industrial investment was spent on
the military (more than 25 percent of the annual national income). There
was no real system of prices to guide producers in making efficient
investments. When the Yeltsin regime decided to introduce a market
system and make the ruble a convertible currency, it didn't have a
prayer that its industrial base could compete internationally or meet
Russian consumer demands for goods and services.
It was easy to see that almost none of the newly privatized industrial
firms could turn a profit, even in the hands of practiced and competent
managers. To avoid the massive bankruptcy that would undoubtedly have
occurred if true competition had existed in the industrial sector, the
Yeltsin government used a mix of expanding the money supply and refusing
to pay state workers' wages--first in one sector, then in another,
continually shifting to stay ahead of the political pressures.
In the case of much of the military sector and some of the large
civilian industrial firms, the government periodically grants credits to
prevent bankruptcy. The firms themselves stave off the inevitable by
refusing to pay their debts. When state wage payments, credits or
foreign investments become available, managers often steal much of the
money designated for salaries. This massive game of musical chairs has
been going on since 1992. But each time the music stops, and one of the
chairs is taken away, the IMF and Western bankers have come in to pay
the band so the music can start once more.
* Second, the controlling legal institutions mentioned earlier have not
been created. For all the talk about privatization of industry--more
than 77 percent of mid-size and large firms, and 82 percent of smaller
ones--private property laws are non-existent or inadequate. Although the
Russian constitution states that private property is a right, in
practice no one is allowed to own land. Citizens may own apartments and
country dachas, but they do not have a clear, registered title to the
land on which the buildings stand.
Ownership of stock is similarly shaky. Shares are registered only within
the firm. While many regulations of the U.S. Securities and Exchange
Commission have been adopted to impress Western investors, they are not
followed. Civil and commercial courts are concepts still in their
infancy. To fill the gap, private security firms have sprung up,
providing services to businesses who want to settle contract disputes.
The banks, of course, are not really "banks" in the Western sense. The
Russian Central Bank does not provide a regulatory service like the U.S.
Federal Reserve system, the Treasury and other agencies. We know that
the sophisticated U.S. banking regulations were not created overnight,
and that some bankers still exploit the system at taxpayers' expense
when loopholes permit, as we saw in the savings and loan debacle of the
1980s.
* Third, consider how daunting the Russian government's fiscal policy
challenge is. The tax system is arbitrary, primitive and corrupt. A
state's capacity to tax--especially to collect income taxes--is perhaps
the best single indicator of strength and legitimacy. By this measure,
Russia is an extremely weak state, something that is likely to continue
for the next 10 or 20 years.
The weak-state syndrome is a trap. Once in it, states seldom extract
themselves. They simply move from one fiscal crisis to another. A sense
of Russia's fiscal problems comes from employment data. Despite the
privatization of industry, only 27 million of Russia's 67 million
workers are in the private sector. The state is still responsible for
the paychecks of 40 million people. How can the government afford to pay
so many salaries? The enterprises under state control--including much of
the military-industrial sector and all the collective farms--are
notoriously unprofitable. And Russian tax receipts certainly won't cover
the government's costs.
* Fourth, no matter how much foreign capital flows into Russia, the
record to date shows that about the same amount takes flight abroad.
This, of course, is primarily a symptom of the other problems afflicting
the Russian economy. But it does show why providing more foreign aid to
Russia doesn't make much sense.
What are the policy implications of these realities? The United States
and Europe can do very little to help Russia, and most of what they have
been doing has exacerbated the problems. By recognizing the limits of
what they can do, Washington and the European capitals will leave the
true culprits to take the blame: Russian leaders at all levels.
We must shift away from our obsession with creating a democracy in
Russia and put our emphasis on creating a liberal political system--that
is, a system that limits the state's power and that guarantees citizens'
private property and civil rights. Their rights are tenuous today, the
result of a feckless police force and weak courts. These things are as
important to Russians' freedom and economic prosperity as periodic
elections. Only when such rights exist will it be possible to talk about
effective monetary and fiscal policies in Russia.
******
#3
New York Times
September 6, 1998
[for personal use only]
When Russians Look Inward
By AILEEN KELLY
Aileen Kelly, a professor of Russian history at Cambridge, is the author
of ``Toward Another Shore: Russian Thinkers Between Necessity and
Chance.''
CAMBRIDGE , England -- After visiting Russia in the 1920's, the
philosopher Bertrand Russell confided to a friend that, horrible though
the Bolshevik dictatorship was, it seemed the best sort of system for
that country. "If you ask yourself how Dostoyevsky's characters should
be governed, you will understand," Russell wrote.
I suspect that as Russia spins out of control many Western leaders echo
Russell's view and yearn for a strong hand to arrest the chaos. But if
any new dictatorship arrives, it could be even more implacably opposed
to the West than Soviet Communism was.
In fact, the present crisis increases the possibility that a charismatic
leader could appear on the scene and promise to mold the half-baked
ideas of various groups into a doctrine of national salvation with mass
appeal.
Whether this will happen depends to a large extent on a national debate
occurring within Russia, where intellectuals are continuing to redefine
their culture and national identity, examining its strengths and
weaknesses in light of the Communist catastrophe.
In conferences, round tables and discussions in the press, social and
political scientists, philosophers, anthropologists and literary critics
have vigorously debated the relationship between Russian and Western
culture, the nature of Russian tyranny and of the Russian "mentality" --
a buzzword in post-Soviet times.
The debate is centered on the "Russian Idea." This is the belief, first
promoted by the czarist state in collaboration with Orthodox
theologians, that Russia's distinctive religion and culture leave it
destined to follow a path separate from the materialistic West and
spiritually superior to it.
This faith in Russian superiority survived into the Soviet period, along
with its encouragement of xenophobia, anti-Semitism and messianic hopes.
And with the fall of Communism, the "Russian Idea" has become even more
popular.
As preached by various neo-Communist and nationalist groups, it purports
to offer a sense of self-respect and purpose to a nation cruelly
humiliated by the West.
Most Russian thinkers historically have claimed that the liberal ideal
of individual freedom is selfish and divisive and that the road to
self-fulfillment lies in the collective pursuit of social or spiritual
ideals.
And this claim continues to find new adherents. The most popular of
previously banned works reissued after the fall of Communism were those
of religious philosophers like Vladimir Solovyov who forecast Russia's
progress through united endeavor toward God's kingdom on earth.
Some Russians argue that today's moral confusion and criminality can be
overcome only by a new messianic creed that unites the nation. According
to A. A. Yermilov, a new right critic, Western "liberal inventions" --
like legal guarantees of rights -- would be superfluous in a society
grounded in religious solidarity.
These discussions may seem trivial compared with the political events
that are daily threatening international markets and stability.
But in Russia ideas have often had direct and terrible political
consequences.
One example to remember is the role of Russian messianic nationalism at
the beginning of this century in inspiring the first pogroms in modern
Europe.
Members of the nationalist and religious right are continually defining
the Russian mentality in ways that mesh with their anti-Western
political programs. They marginalize all thinkers who do not conform to
the messianic model. At a recent major conference on Russian philosophy,
all the papers were on religious philosophers.
Many Russian intellectuals have become alarmed by this imbalance. The
monthly magazine Questions of Philosophy -- at one time an ideological
mouthpiece of the Communist Party but now a voice of reason -- has
spelled out the dangers of a new orthodoxy. One contributor, V. F.
Ovchinnikov, has identified a tendency in universities to treat the
history of philosophy not through movements or periods but through
national types, with special emphasis on Russian spirituality. G. L.
Tulchinsky, a philosophy professor at St. Petersburg University, has
observed that doctoral candidates in philosophy and the human sciences
often cite Russian religious philosophers as routinely as they once
cited Marx and Lenin.
It is no surprise that many Russian intellectuals believe that society
needs not more but less unity and must learn the importance of
pluralism. It is not clear, however, that grafting Western values and
institutions onto Russia is the answer. Mr. Tulchinsky has remarked that
Alexander Solzhenitsyn's Harvard address of 1978, in which he called
liberal freedoms "an absurdity," gave fair warning that Soviet
dissidents, much as they opposed Communism, would not necessarily
embrace Western democracy.
Russia, Mr. Tulchinsky maintains, will develop a stable democracy only
by harmonizing a respect for individual freedom with its own
communitarian ideals and customs.
There are some signs that such a new democratic tradition is developing.
For the first time in centuries the Russian people have been left to
their own devices. Freed from the tyranny of state, church or party,
stripped of all security, Russians have reacted to the crises of the
1990's not with anarchic violence, as was feared, but with astonishing
resourcefulness, exhibiting in their daily behavior the combination of
individual initiative and social solidarity that may portend a new-style
"Russian Idea."
Thanks to their spectacularly incompetent Government, Russians have been
undergoing a harsh training course in the self-reliance that is the
basis of political maturity.
Dostoyevsky's characters are growing up.
A political meltdown may yet bring the Russian right to power, but it
will then have to contend with a population that is beginning to
understand its past well enough to have a fair chance of not repeating
it.
******
#4
The Sunday Times (UK)
6 September 1998
[for personal use only]
Kingmaker Zyuganov tastes power
by Mark Franchetti
Smoking gun: Zyuganov threatens a
constitutional crisis that could
scuttle economic reforms since 1992
Moscow
SEATED between a bust of Lenin and a red Soviet flag, Gennady Zyuganov,
the Russian communist leader, must have relished the moment. Fidgeting
uneasily in the chair opposite was Vladimir Gusinsky, the country's most
powerful media tycoon and anti-communist, whom he had unceremoniously
summoned to his office overlooking the Lubyanka, the former KGB
headquarters.
Zyuganov had a complaint: he did not like the coverage he was receiving
at the hands of his guest's newspapers and television station. He
expected better, he said. He demanded it. Gusinsky listened patiently.
Two days later, Zyuganov reinforced his message with a stern telephone
call. He knew that even Gusinsky could ill afford to ignore him now.
As the state duma, the lower house of parliament, prepares to vote
tomorrow for a second time on whether to accept President Boris
Yeltsin's choice of Viktor Chernomyrdin as prime minister, Zyuganov -
once an obscure provincial mathematics teacher - is savouring the
unfamiliar taste of power in his role as Russia's kingmaker.
Only with the support of Zyuganov's communists, who dominate the duma,
could Chernomyrdin fulfil his dream of returning to the post he held for
five years until he was sacked by Yeltsin last March. Up to now,
Zyuganov has been adamant: he will block Chernomyrdin's nomination, even
if it means the dissolution of parliament by a president determined to
get his way.
The usually dreary 16-storey duma building was a hub of frenzied
activity yesterday. Lights burnt until the early hours as the various
factions haggled over last-minute deals offered by Kremlin's envoys.
Limousines with flashing blue lights whisked tycoons and bankers to and
fro as they sought to influence events.
The focus was the office of Zyuganov himself, where a crowd, including
Valentin Yumashev, Yeltsin's aide, assembled outside in the hope of
being granted an audience.
The communists - conscious that they are closer than ever to grabbing
back some of the power they lost with the collapse of the Soviet Union
in 1991 - are flexing their muscles. "Yeltsin should just resign of his
own will," said Gennady Seleyznov, the duma's communist speaker. "Yes,
it's true that he has character, but he is able to demonstrate it only
two or three times a day and then only for two or three minutes at a
time.
"As for Chernomyrdin, we can all feel the fruits of his previous five
years as prime minister. We can all feel it through our pockets and our
stomachs."
Zyuganov and his allies held the future of more than merely the
government in their hands this weekend: as Russia edged dangerously
close to a momentous constitutional crisis, fears were mounting that the
economic reforms pushed through at enormous cost by Yeltsin since 1992
could be undone for good and that the country could enter a giddy spiral
of hyper-inflation, mass unemployment and full-scale economic collapse.
Zyuganov, however, has repeatedly blamed Chernomyrdin's time in power
for Russia's economic hardship. Last week he also intensified his
personal attacks on Yeltsin (who defeated him in the 1996 presidential
election), calling him a drunk and demanding his resignation.
If the duma rejects Chernomyrdin three times, Yeltsin will be forced to
dissolve the chamber, evoking memories of 1993, when a similar
confrontation ended with the shelling of parliament and the deaths of
140 people.
Fearing the worst, several deputies have already started to clear their
offices, removing fax machines, television sets and cardboard boxes
bulging with documents.
Zyuganov has made uncompromising statements in the past, only to back
down at the last minute. Many of his deputies are reluctant to risk
losing their seats in new elections and to sacrifice their generous
perks and privileges, including immunity from prosecution, a flat and a
chauffeur-driven car.
Vladimir Zhirinovsky, the colourful leader of the ultra-nationalist
Liberal Democratic party, has swung behind Chernomyrdin, only days after
voting against him, though how his support was secured in the horse
trading that is traditional on such occasions will probably never be
known.
"No matter how bad Chernomyrdin was, he is the most experienced, and
even bad experience is still experience," Zhirinovsky said in an attempt
to explain his change of heart. "The surgeon who has dispatched 200
patients to the morgue may cure the 201st. He has learnt - he knows."
On Friday the duma postponed its vote on Chernomyrdin's nomination to
give Yeltsin more time to negotiate an agreement. A deal would mean a
significant shift of power from president to parliament. In what would
amount to almost a constitutional coup, Yeltsin would give up, for
example, his power to dismiss the government and to hire and fire
ministers.
Yeltsin refused to sign such a deal a week ago. However, it has returned
to the table since the communists rejected Chernomyrdin the first time
around.
Hopes that Chernomyrdin may be voted in after all were raised by the
Federation Council, the upper house of parliament, which decided to
support him. If the lower house rejects him tomorrow, the duma may agree
to a compromise candidate. Yuri Luzhkov, the mayor of Moscow, Yegor
Stroyev, the upper house Speaker, and Alexander Lebed, the governor of
the Siberian region of Krasnoyarsk, are possible candidates. Yeltsin,
however, is still clinging to Chernomyrdin.
Despite the misgivings of some of his deputies, Zyuganov may yet feel
confident enough to push for dissolution. Yeltsin's popularity is at an
all-time low and mass discontent would almost certainly play into the
hands of the communists.
A question mark also hangs over the loyalty of the army, which in 1993
rallied behind Yeltsin. Lebed warned last week that the mood in the
ranks was explosive. Vladimir Efimovich, deputy chairman of the
opposition Movement in Support of the Army and the Defence Industry,
said the army was driven by despair. "Our officers have no time to think
about serving," he said. "They have to survive and care for their
families who live in appalling conditions. There are about 50 suicides a
month."
Dissolution could have a disastrous impact on Russia's battered economy.
After three weeks without a government, the rouble is in free fall: it
has lost more than 60% of its value. Valutchiki, the notorious black
market moneychangers of Soviet times, have made a comeback.
With food prices soaring and many products in short supply, the crisis
is hitting ordinary Russians. One newspaper published a letter from a
pensioner who wrote that he had run out of money to feed himself and had
been forced to eat his cat.
Things may not get much better, however, even if Chernomyrdin is
appointed. Western economists are sceptical about his promise last week
to set up an "economic dictatorship" - under which companies would be
forced to pay their debts, especially taxes, or face bankruptcy. A new
wave of hyperinflation appears almost inevitable if he prints more money
to appease the communists, who are pressing for $10 billion (£6 billion)
in back wages to be paid.
Desperate to find ways out of the crisis, Russia's leading market
reformers have turned to Domingo Cavallo, a former Argentine finance
minister who is widely credited with creating an economic miracle in his
own country.
Cavallo, who held talks last week with Chernomyrdin and Boris Fyodorov,
Russia's acting deputy prime minister in charge of the economy, was
invited later by Boris Berezovsky, one of the country's most influential
power brokers, for a lavish private dinner at Berezovsky's 19th-century
mansion. The Harvard-educated Cavallo explained how Argentina brought
down inflation from more than 200% in the late 1980s to less than 10%
with a so-called currency board arrangement, under which the peso was
pegged to the dollar and central bank reserves held abroad. Chernomyrdin
is contemplating a modified version to pull Russia out of its economic
crisis.
"The economic situation is similar to Argentina's then, but the
political one is very different," said Cavallo. "Political power is
essential to deal with the crisis, but Russia does not have a government
yet. Once it has one, the key to any success to stabilise the rouble
will depend on its ability to collect taxes."
******
#5
Luzhkov attack on Chernomyrdin signals bid for premiership
MOSCOW, Sept 5 (AFP) - Moscow's powerful mayor Yury Luzhkov signalled a
bid for the premiership Saturday attacking acting premier Viktor
Chernomyrdin as a resurgent Left intensified its tussle with the Kremlin
over the post.
In an outspoken attack on President Boris Yeltsin's choice as cabinet
chief, Luzhkov denounced the IMF-backed policies Chernomyrdin had pushed
while in office and called for economic protectionism favoured by the
Communists.
Hirtherto a Yeltsin loyalist in his public comments, Luzhkov's outburst
fuelled speculation he was ready to accept the poisoned chalice of the
premiership, despite harbouring ambitions for the 2000 presidential
elections.
His comments came the day after Yeltsin saved Chernomyrdin from near
certain defeat in a vote on his candidacy in the State Duma lower house
of parliament Friday with an 11th-hour offer of talks with the
opposition.
The dramatic intervention bought the Kremlin two days in which to rally
support for its struggling candidate, but as Chernomyrdin huddled with
senior financial officials Saturday to seek a way out of Russia's
unprecedented financial and economic morass, his prospects looked bleak.
The opposition-dominated Duma blames Russia's economic meltdown on the
policies pursued by Chernomyrdin during his five-year stint as premier
which ended in March, with only his Our Home Is Russia backing his
return.
Chernomyrdin's chances of securing the necessary 226 Duma votes to
secure the premiership took a fresh hit Saturday, as leftists put
forward a list of five rival candidates.
Drawn up by the Agrarian Party and its Communist and People's Power
allies, the list included ex-central bank chief Vladimir Gerashenko, and
Agrarian deputy Gennady Kulik, deputy chairman of the budget committee
in the State Duma.
Outgoing communist industry minister Yury Maslyukov and Yegor Stroyev,
speaker of the Federation Council upper house of parliament, also
featured in the list, which was completed by Luzhkov.
The Moscow mayor used a road opening ceremony to accuse Chernomyrdin of
setting off the current financial crisis by "monetarist policies and
playing games with money."
The mayor said he had "not heard any economic programme" which could
haul Russia out of its crisis in Chernomyrdin's speech Friday to
senators.
Chernomyrdin had called for a controlled reflation of the economy to pay
off a wages and pensions backlog, followed by a Draconian monetary
policy to shore up the collapsing ruble, which has lost more than 60
percent of its value in three weeks.
In contrast Luzhkov, 61, who also harbours ambitions to run for
president in 2000, demanded a protectionist, pro-industry economic
policy even at the cost of alienating the International Monetary Fund,
which brokered a 22.6 billion dollar two-year bailout for Russia in July
that failed to avert the current crisis.
"Why are we weighed down by the decrees of western states and
economists, who want Russia to be an uncompetitive market, where
national production is destroyed, and the country is merely a vast
reservoir of raw materials?" fumed the mayor.
Luzhkov's mauling of Chernomyrdin was the first time he had openly
criticised the Kremlin's candidate, and marked a break with a pledge
given to Yeltsin last month by Luzhkov and Stroyev to support
Chernomyrdin's return.
Yeltsin has vowed to stand by Chernomyrdin, whom he has designated as
his successor, should a decisive third vote on his candidacy be
necessary, even at the risk of forcing early elections.
But although the Kremlin chief normally relishes a fight with lawmakers,
his authority is at a low-point following the disastrous collapse of the
ruble, the paralysis of the country's banking sector, a default on
domestic debt and a stock market collapse.
Although he has rejected opposition calls to stand down, Yeltsin has
agreed to relinquish some of his vast powers on naming the cabinet to
the incoming prime minister in a bid to mollify his critics.
However, the concessions have not been enough to placate a Duma, often
likened to a glorified debating club, keen to seize a rare opportunity
to grab powers from the Kremlin.
*******
#6
Left Party Leaders Justify Rejection of Chernomyrdin
Sovetskaya Rossiya
3 September 1998
[translation for personal use only]
Undated "Appeal to the Citizens of Russia by the CPRF Faction,
the Agrarian Deputies' Group, and the People's Power Group,"
signed by G.A. Zyuganov, N.I. Ryzhkov, and I.M. Kharitonov: "Why
We Are Refusing To Place Our Trust in Chernomyrdin"
We, as deputies of the State Duma and people of differing views,
ideologies, and predilections, who were elected by the people of Russia,
appeal to you, the citizens of the Russian state, in the hour of utmost
tension that the Motherhood is experiencing. Having rejected by an
overwhelming majority of votes the candidacy of Chernomyrdin as proposed by
the president for the post of head of government, we wish to explain the
factors that prompted us to do so. It is essential to destroy the lie of
the unscrupulous press and television which are defending the selfish
interests of a handful of billionaires whose wealth was created on the
tears and the bones of the people.
We refused to place our trust in Chernomyrdin because we believe that
these terrible past five years -- in which a Russia only recently filled
with hope for the creation of a dignified life was deceived and plunged
into misfortunes that today have taken up residence in the home of almost
every family -- that these terrible five years can be called the
"Chernomyrdin half-decade."
It was in these years that a powerful industry and science, an
invincible army, and a unique culture of world significance were
deliberately taken from Russia.
It was in these years that the country was brought to catastrophe.
Production, finances, and monetary circulation have been entirely
paralyzed. The oil and gas sector created in the past through the labor
and exploits of Soviet people, and which supplied a huge country with
energy, has today become a source of superprofits for Russian and Western
oligarchs, making the country the laughingstock of the world, a pitiful
beggar at the church portico. Inflation and the prices of food and other
consumer goods are growing rapidly. The working people have been left
without the means to exist.
It was under Chernomyrdin that wages and pensions ceased to be paid in
the country, that the payment of child benefit was suspended, and that huge
unemployment appeared. It was under him that hundreds of billions of
dollars were taken out of the country, that crime flourished, that the
shadow economy came to account for 40 percent of economic activity, and
that government was stricken with corruption. It was in these years that
the population -- the most important asset of any state -- declined by 1
million people a year. Nor is it possible to forgive Chernomyrdin for the
senseless unleashing of the Chechen slaughter.
And this is the "administrator" the president is foisting on the
country. This is the premier he offers to a people worn out by
deprivations. The only thing that can explain this immoral intention is
the president's desire to evade responsibility, to hide behind
Chernomyrdin's shadow, to make him his successor -- as though Russia today
is a feudal holding in which power is to be passed to the favorite on the
whim of the lord.
Hence, by rejecting Chernomyrdin we are refusing to place our trust in
the president and calling on him, in the name of our broken, insulted, and
humiliated people, to resign. We wish to tell the people the bitter truth
so that they should not repeat the fateful mistake of the summer of 1996,
when they elected as president a seriously ill man who is effectively
incapable of work and who has become a puppet of cunning courtiers. Today
it is obvious that, owing to his chronic incapacity for reasons of health,
this "chosen one" cannot govern Russia.
We affirm that we will not vote for Chernomyrdin either on the second
or the third occasion. We are prepared for the fact that they will start
to blackmail us, to fling mud at us, and to frighten us with tanks. We
will share with the long-suffering people all the hardships that have
descended on the heads of the workers, everything that Yeltsin and
Chernomyrdin have planned for the country this winter.
In appealing to you, esteemed fellow citizens, we wish to warn that
the possible dissolution of the Duma and the subsequent proposed banning of
elections will lead to the collapse of Russia's state system. An illegal
government headed by Chernomyrdin, appointed against the wishes of the
people, will lead to chaos and will blow Russia apart. At the same time,
the president still has an opportunity to resolve the crisis of power and
to emerge from the existing situation with credit. For this he must
immediately withdraw his submission of Chernomyrdin, discuss possible
candidates with the Federation Council, and submit an agreed proposal to
the State Duma in line with the constitutionally established procedure.
*******
#7
Moscow Times
September 5, 1998
Grain Harvest Threatens To Compound Suffering
By Natalya Shulyakovskaya
Staff Writer
Russia's grain harvests will be far worse then expected this year,
compounding the nation's economic crisis, officials and analysts said
Friday.
So far, only half of the 1997 amount of wheat, buckwheat, rye and rice
has been harvested. The good news is that 1997 was such a plentiful year
that 20 million tons of grains remain in storage.
But though that will soften the blow, this year's harvest looks likely
to bring in only two-thirds of a typical Russian harvest. Officials at
the Agriculture Ministry said it had been undercut by a drought in June
and July followed by destructive rains across all of the grain-producing
regions -- from the Ural Mountains to the South Caucasus to the Volga
River valley and beyond.
A poor harvest could mean Russia will have to buy grain abroad with a
fast-devaluing ruble. But the Agriculture Ministry says it is too early
for such talk.
"Until every singe ear is harvested, no one will have the guts to say
that we have to buy abroad. Especially now, we don't want to cause any
stir," said Oleg Temeshev, a spokesman for the ministry.
The devaluation of the ruble means that imported foods will be far more
expensive, and August inflation has already hit 15 percent, the highest
in years.
This has already hit the Far East in particular -- a region that relies
on imported grains and flour because the cost of transporting domestic
wheat across Russia by rail is higher than shipping in foreign wheat via
the Pacific Ocean.
Moscow and St. Petersburg are also heavily dependent on food imports. In
Moscow, residents on Thursday were still busily wiping food store
shelves clean, buying six times more buckwheat and five times more flour
than they usually do, said Vitaly Morozov, Moscow's minister of food
resources.
Hardest hit by a poor grain harvest would be the nation's livestock,
which has already shrank by half since 1991. Experts predicted that a
tough winter could see even more cows and pigs sent to the slaughter
house.
Bread production, by contrast, will not suffer that much, said Nikolai
Chubenko, vice president of the Bakers' Union.
He said the nation only needs about 10 million tons of grain for bread,
and added that bakers could simply water down the recipes a bit to
control prices. "Anyway, if we make a 500-gram loaf with a weight of 450
grams and leave the price the same, it would have calming effect," he
said.
Chubenko said his union is appealing to regional administrations across
Russia to exempt bakers from electricity and water price hikes in return
for guaranteed low bread prices.
Bread makes up a whopping 40 percent of the calories in the Russian
national diet, while potatoes, another crop in danger this fall, makes
up a further 10 percent.
Amid expectations that falling exports will push up prices on locally
produced foods, Sergei Rubakhin, deputy chairman of the Agrarian Party,
said reassuringly that agricultural prices have tended to lag behind the
national inflation rate. He said grain prices have not changed in Russia
since 1995.
"The village will survive. After all, people have their vegetable
gardens," Rubakhin said. "But the big question is about the city."
*******
#8
Security Council Secretary Seeks Continued Russian Reforms
MOSCOW, Sept 2 (Interfax) -- Russian Security Council Secretary
Andrey Kokoshin has said the country should continue economic and political
preforms."The country's strategic course of market reforms and developing a
democratic political system must continue, (for it) completely meets the
interests of Russia, the interests of our people," Kokoshin told Interfax,
commenting on Western fears that Moscow will scrap its reform policy.
"However, it should be admitted that quite a few mistakes have been
made lately in implementing this course, mistakes which were not corrected
properly or in time. As a result the country has found itself in a very
serious situation," he said.
The Russian government "is full of determination to do everything
possible for overcoming the acute financial and economic crisis, and under
these circumstances it relies not only on its own experience and knowledge
but also on international practice.
"Russian society is increasingly aware that without a unification of
all of the country's principal political and public forces, especially in
view of today's difficult financial and economic situation, it is
impossible to carry through any serious reforms or solve the problem of
overcoming the crisis," Kokoshin said.
********
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