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September 6, 1998   

This Date's Issues: 23502351• 2352  •

Johnson's Russia List
#2352
6 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: First measures taken to control Russian prices amid panic
buying.

2. Reuters: Adam Tanner, Talks press on before Russia PM vote.
3. Bruce Bean: Lt General Odom's Russian Illusions.
4. Val Samonis: Odom/Crushed Illusions.
5. Ray Finch: New Military Threat.
6. Gregory Tseytin: Re adopt a family, JRL #2340.
7. Mark Temperley: the situation in a small town.
8. Los Angeles Times: Alex Alexiev, A March Toward the Abyss.
9. Boston Globe: David Filipov, Mushroom season has Russians in fungi 
frenzy.

10. AP: Leslie Shepherd, Bartering Is Big Business in Russia.
11. Reuters: Chernomyrdin sees progress with world help.]

*******

#1
First measures taken to control Russian prices amid panic buying

MOSCOW, Sept 6 (AFP) - Several regions in Russian have taken the first steps
in recent days to control rising prices and check the hardship that threatens
citizens as the country is shaken by a financial crisis.
Governors in the regions of Perm in the Ural mountains, Smolensk in the west
and Novgorod in the north have decided to set up price control commissions for
basic goods, the agency ITAR-TASS reported.
Gennady Igumov, governor of Perm, signed a resolution banning companies
controlled by local authorities from carrying out price hikes after prices on
imported goods shot up by between 1.5 and five times.
Russians have been watching helplessly as their currency loses value on an
hourly basis against the dollar, while their own salaries and pensions are
paid in rubles. Since its effective devaluation August 17, the ruble has
dropped from six to almost 17 to the dollar.
In the Urals town of Chelyabinsk, the cost of a bottle of mineral water has
gone from three to 14 rubles, while in Khabarovsk in the far east, meat has
jumped by up to 70 percent in price.
In Moscow, the price of a packet of Marlboro cigarettes has tripled.
Only a few basic products, like bread, have not become more expensive.
In the region of Saratov, on the Volga river, a system of fairs has been set
up where growers can sell their products without paying trading dues.
Authorities hope the measure will make sellers keep their prices down and
allow citizens to stock up on provisions as shelves across the country are
emptied.
Russians, having learned from previous experience of economic crises, are
filling their homes with stocks of basic goods. In the capital, shops are
almost bare of flour, oil, cereal products and washing powder.
Wherever there are stocks left, long queues wait to snap them up.
"People are furiously emptying the shelves," said the daily Sevodnya, while
the magazine Kommersant estimated that that shops' supplies had been depleted
by 50 percent in a week.
The manageress of a grocery shop said she could not get over the panic buying.
"In one day I have sold two tonnes of flour, compared to the normal 100
kilogrammes (220 pounds)," she told Russian television.
Imported goods, which make up between 60 and 65 percent of food products sold
across Russia, and up to 85 percent in Moscow, have been the first to vanish
from the shelves.
Many foreign companies have already cancelled deliveries to Russia as they
have no faith in the country's banks, outgoing foreign trade minister Andrei
Kushneryenko said Friday.
For their part, Russian import companies have stopped buying abroad as they
can no longer afford customs duties, or prefer not to sell their reserves for
fear of being unable to exchange their rubles for dollars.
The secretary of Russia's Security Council, Alexander Kokoshin, attempted to
reassure the population that there was "no danger of a famine in Russia" as
there were still 18 million tonnes of grain from last year's harvest in stock.
But he warned the situation is "dangerous" in several regions such as Primorsk
in the far east.
Russia's harvest this year was also said to be down 48.2 percent on last
year's at the end of August at 28.6 million tonnes.

******

#2
Talks press on before Russia PM vote
By Adam Tanner

MOSCOW, Sept 6 (Reuters) - Russian legislators pressed on with talks on Sunday
ahead of a fresh confirmation vote on the prime minister's appointment while
the head of the Orthodox Church urged political leaders to stop their
bickering. 
``We hope the rulers of the Russian state will cease their bickering and
confrontation and consider the abyss which they are approaching along with the
entire country,'' Patriarch Alexiy II, who rarely speaks on political issues,
told a service in Moscow. 
Russian President Boris Yeltsin plunged Russia into political uncertainty two
weeks ago by sacking the government of Prime Minister Sergei Kiriyenko after
the devaluation of the rouble and default on some debt. 
His new choice of Viktor Chernomyrdin, who was prime minister from 1992 to
March this year, lost by a wide margin on his first confirmation vote last
week. Many legislators blame him for the poor state of the Russian economy. 
Ultra-nationalist Vladimir Zhirinovsky on Sunday predicted that the State Duma
lower house of parliament would end its current opposition and approve
Chernomyrdin. 
``I am sure he will be the prime minister, either on the 7th or on the 14th,''
Zhirinovsky told Reuters, referring to Monday's second vote or a possible
final ballot a week later in the Duma. ``Chernomyrdin will be prime minister,
which will lead to better things.'' 
The Kremlin said Yeltsin spent the day at his Gorky-9 country home outside
Moscow and planned no meetings ahead of last-minute consultations on Monday
with parliamentary leaders. 
Zhirinovsky said Chernomyrdin's chance of winning approval on Monday afternoon
would improve if deputies were allowed to vote as they pleased in a secret
ballot rather than following the party line in an open vote. 
The Communists, the largest party in the Duma, have vowed to reject
Chernomyrdin. 
``If there is a secret vote, he'll already go through tomorrow. If it's an
open vote, it's possible that Chernomyrdin will get up to 200 votes and on the
third time he'll get the necessary 300,'' Zhirinovsky said. 
Chernomyrdin needs a simple majority of 226 votes in the 450-seat Duma to be
reinstated as premier in a debate which gets under way at 5 p.m. (1300 GMT). 
If he is rejected again on Monday, the Duma will have another week to consider
his candidacy if renamed by Yeltsin. After three votes, the constitution calls
for the president to disband parliament. 
On Monday, Yeltsin will make a final effort to win over reluctant deputies in
round-table discussions set to begin at 10 a.m. (0600 GMT). The Communists
want Yeltsin to name an alternative to Chernomyrdin, who spent part of Sunday
consulting economists to plot out his reform programme. 
``Of course he'll listen to them,'' Kremlin duty press officer Sergei
Telepnyov said of opposition proposals. 
Asked if Yeltsin would consider alternative candidates to Chernomyrdin, the
spokesman said: ``Only the president knows.'' 
Grigory Yavlinsky, head of the pro-reform anti-government Yabloko party, said
such unpredictability was one of Russia's major problems. 
'`Things will be better only when there will be a new president,'' Yavlinsky,
a candidate for president in the 2000 elections, told Reuters. ``As a rule,
it's quite rare that he says something sensible.'' 
At a meeting of foreign ministers in the Austrian city of Salzburg, the
European Union on Sunday offered Russia no extra cash or debt relief and said
the country bore responsibility for resolving its own political and economic
crisis. 
``We trust that Russia will not revert to a command economy but proceed along
the path of structural reforms in order to establish a social market
economy,'' it said. ``We stand ready to cooperate further with the Russian
authorities in support of sustained efforts towards stabilisation and
reform.'' 
Chernomyrdin on Sunday wrote to the finance ministers of Britain, Germany,
Italy and France saying that Russia ``with international assistance will
succeed in stabilising the situation and will follow the path of sustainable
economic development.'' 

*******

#3
From: BeanMoscow@aol.com (Bruce Bean)
Date: Sun, 6 Sep 1998 
Subject: Lt General Odom's Russian Illusions

A few clarifications regarding General Odom's "Russian Illusions" in JRL 2351.

Ownership of Private Property

Whatever the basis for the current banking and currency crisis in Russia at
the moment, it is not related to legal imperfections relating to private
property. There is no fundamental problem with ownership of private property,
per se. in Russia. The Constitution and the Civil Code have proved an
entirely adequate basis for ownership. 

Ownership of Land

As to land, it is accurate to report that that there is almost no private
ownership of the ground upon which buildings are situated, but in my three
and one-half years here this has yet to prove to be a problem. Forty-nine
year leases are the norm and a typical business plan here (at least prior to
August 17) called for return of all capital invested in less than 49 months.
In addition, ownership of a building gives one a right to continued use of the
land thereunder. We simply have not had problems in this area. If ownership
of dirt were essential to the effective functioning of a market economy, the
millions of American cooperative and condominium owners would presumably be at
risk in our own economy. What problems may arise in three or four decades, as
lease terms near completion is of no concern at the moment. It is widely
assumed that within a few years, once all other state assets have been
auctioned off, the land will in fact be sold.

There is a very real problem with securing a loan with real estate. This
problem exists for pledges of most other forms of property as well. That part
of the private property legal system is still on the drawing board, being held
up in large part by Zyuganov's communists, who claim to object to private
ownership of agricultural land. 

Ownership of Shares of Stock

There is simply not a problem with ownership of stock. Share ownership is
registered with the issuer, but this is just different. It is not a failure of
the system or the cause of any part of today's problem. There are problems
with abuse of shareholders, not through losing ownership, but because the
provisions of the Joint Stock Company Law are sometimes ignored. But this is
not an ownership problem. It is the same greedy, "maybe I won't get caught"
philosophy that guides some U.S. wheeler dealers. 

The Court System

The courts are new at handling commercial disputes, but there is an enormous
amount of successful litigation carried on by Western investors. Without
question the court system is much more efficient than those in most busy
American jurisdictions. In addition, the Federal Commission on the Securities
Markets has successfully stopped a number of alleged shareholder abuse cases
without requiring the parties to go to court. The real problem with the court
system is that, having secured a judgment in your favor, it is still
relatively difficult to satisfy a money judgment. It is even easier to move
assets around in Russia than it is in the U.S.

Capital Flows In and Out

I have seen no study or report showing the correlation between capital flows
in and out of Russia. The press has reported that a great deal of capital
seems to have fled for Switzerland, particularly in the past few months. It
may well be that much of the recent IMF support for the Central Bank was
immediately round-tripped out of Russia by bankers or others. If so, it is
surely incumbent upon us to act and not to say "Hands off." Here is a good
instance of where we may well be able to help. [Do you doubt NSA knows where
the money went and who sent it ? Leaning on the Swiss may also be worth
considering if the stories are true.] There may be many areas left to the
Russians, but this should be one where we have something to suggest.

Direct Investment

The real answer to getting Russia's economy moving again, once there is a
banking system and a usable currency, is to foster direct investment. I have
never heard that direct investment, as distinguished from short term financial
investments in the capital markets, escapes to Switzerland or wherever. 

We usually speak of foreign direct investment, but neither new foreign money
nor the $100 to $200 billion in hard currency that is in Russian hands outside
the Russian banking system (much of it mattress money in Russia and much in
foreign banks) is about to be invested here until there are reliable
guarantees of tax stability and freedom from arbitrary governmental
interference in business operations.

If we are to see such direct investment in Russia in the future, it will be
either after many years of a gradual return of investor confidence or under a
contractual arrangement such as the nearly complete Production Sharing Regime.
For Russia's sake as well as our own, we should all continue to work to see
that Production Sharing and similar investment regimes are implemented
promptly.

Bruce W. Bean
Partner, Clifford Chance
Chairman, The American Chamber of Commerce in Russia

*******

#4
Date: Sun, 6 Sep 1998 
From: Val Samonis <vsamonis@chass.utoronto.ca>
Subject: Samonis/Odom/Crushed Illusions

Gen. Odom has made several good points. Please see my (VS) comments below. 
Val Samonis. 

> Washington Post
> Our Russian Illusions, Crushed by Reality
> By William E. Odom (eva@hidc.hudson.org)
> Russia's economic crisis seems to have taken the West by surprise. How 
> did so many observers overlook the warning signs?

VS: Well, this failure is a function of earlier and much more spectacular
Western failures to understand the Soviet communist system and its
legacies. For example, as late as mid-1980s respectable North American
universities published books by respectable scholars who "predicted" that
the Soviet economy would grow by some 4% in real terms in the year 2000
(no joke!). Where is the Soviet Union now, even before that year?
Unfortunately, that sort of thinking about the Soviet legacies did not
share the same fate. It found its manifestations in widespread discussions
about the "morality of secession" from the Soviet Union and the "wisdom of
staying in the ruble zone", the optimal currency area. Sounds like a bad
joke these days but it used to be "wisdom" to many just a few years ago!

*******

#5
Date: Sun, 06 Sep 1998
From: "Ray Finch-Kroll Associates, Moscow" <krollrf@aha.ru>
Subject: New Military Threat

As Russia continues in its slow but steady slide toward chaos, many assert
that given its current ragged condition, the military will remain on the
sidelines (i.e. "Russian military seen unlikely to act in crisis," DJL
#2346, 4 Sep). The chief arguments are that the military lacks the
tradition of becoming involved in politics, they are divided and demoralised
and void of revolutionary leadership. While these are all partially true,
we might be looking at the Russian military through the wrong prism. 

Just what exactly do we mean by the term "military"? As one who just
recently came out of uniform, I'm often amazed at the belief that there
exists a nice neat compartment for those in the military. They're the guys
who live in barracks and protect the state against foreign threats. They
follow orders, conduct maneuvers and are somehow free of pecuniary concerns.
They drive tanks and shoot rockets, hold big parades in Red Square and wear
ill-fitting uniforms. Unfortunately, there are a growing number of folks
today in Russia wearing uniforms and carrying weapons who don't belong to
this classic concept of the military. Nor am I sure that this artificial
divide ever existed.

Just who was it in February 1917 that failed to open fire upon the
demonstrators in Zamenenskaia Square? Those analysts who claim that the
Russian military likes to stay out of politics, ought to re-examine the role
which the Petrograd garrison played in seizing the capital. Today's soldier
is tomorrow's bandit, freedom fighter or terrorist. 

I don't think that we are going to see some sorry repeat of the 1991 or 1993
tanks-in-the-street type of protest. (Mayor Luzhkov would be very upset to
see his fresh asphalt all torn up.) Moreover, there is likely not one
combat-ready brigade in the entire Moscow military district. As the Russian
weapon manufacturers like to boast about their products, there is no analogy
to what is going on today within their military. We have to examine the
situation through a different prism, use an updated method of determining
the correlation of forces. Consider just one frightening refraction from
this new prism.

Just after the war ended in Chechnya, a western reporter asked Shamil
Basayev (a Chechen fighter who gained notoriety for holding a hospital
hostage in Budennovosk in exchange for Russian concessions) how the tiny
Chechen nation was able to defeat the Russian military. He gave a lot of
reasons, but one point in particular is pertinent to understanding the
current threat stemming from the broken Russian military. Basayev explained
that with the advent of weapons of mass destruction, the traditional methods
of determining the strength of a given opponent (numbers of tanks, ships,
soldiers etc...) were no longer valid. As opposed to a century ago, when it
took an army to conquer another country, today, one individual, in theory at
least, provided he had the right tools, could bring a nation to its knees. 

A couple years ago, a Russian General Staff officer gained quick fame (but
lost his job) when he wrote about his daydreams in blowing up President
Yeltsin's limo. This colonel hadn't been paid in months, and for whatever
reason, figured that taking out the president would improve matters. (This
ex-military author, V. Baranetz, has gone on to write three books detailing
the rot within the Russian military.) This officer's sentiments are likely
shared by many today in the Russian military. Their fingers must start
itching when watching the banal and mean grubbing of the current cast of
Russian politicians, while the country burns in corruption, devaluation and
desperation. Unemployment, hunger and vodka might prompt one of these
Russian patriots to more than just cursing and daydreaming. There wouldn't
be any need in seizing the key points in the city. One well-placed
demolition charge would do the trick. 

Those who maintain that Russia is too civilized for such measures ought to
consider what's going on in Dagestan (which still remains a part of Russia).
Friday evening (4 Sep) a bomb devastated one square block in the capital of
Makhachkala, killing 17 and wounding more than 50. The former security
chief of Dagestan (who apparently believes that Dagestan is already split
from Russia) remarked that "what is going on in Dagestan today-will occur in
Russia tomorrow." For those military analysts still out there, don't waste
your time studying orders of battle and movement plans. Watch instead for
the guy with the suitcase.

*******

#6
From: "Gregory S. Tseytin" <tseytin@tseytin.spb.ru>
Date: Sun, 6 Sep 1998 
Subject: Re adopt a family, JRL #2340

Re: Adopt a family, JRL #2340, from Keith Hudson <ac972@dial.pipex.com>

It doesn't seem to be the proper time to discuss such things
now, especially referring to a one-week-old posting. But I
believe this might reveal something about Russia which many
readers don't know.
I appreciate the extraordinary kindness of the Hudson family;
and probably the Russian family whom they met are also very nice
people. But please, don't send them any cash; better have them
in your family for the next holiday. And forget about a charity
society. If you wish to know where the aid ends up, I will tell
you an absolutely real story; only I have to think up other
names for the protagonists.
My American pen-friend, let us call her Jane, was involved in a
humanitarian aid programme for Russian hospitals, and once or
twice visited St.Petersburg on this mission. She made many
friends here, especially among the interpreters (because she
didn't speak Russian). One of the interpreters was a woman
whose teenager son had been injured in an accident, and
therefore needed some treatment (I believe, some plastic
surgery). Let us call the woman Lyuda (Ludmilla); please don't
think that every Russian woman is Natasha (Natalia), or, at the
very least, Masha (Maria).
Jane is not a wealthy person. Since her young age she was eager
to help the needy, and spent many years overseas on some
humanitarian programmes (probably, of the Peace Corps). The time
to build her American career was lost, and she had to end up as
a small administrator, unmarried and with a little son to
support.
She invited some of her new friends to her home, paying all
costs. She also invited Lyuda with her son. Both of them looked
so miserable, and Jane did all she could to make them happier
(Lyuda didn't have a work permit but still was getting a very
small pay for interpreter services). Jane arranged for the boy
to be admitted to a hospital, and also for some treatment (or
dental care) for Lyuda (only much later I realized it was not a
humanitarian help, it was Jane's own money).
The next chapter of this story is about the training programme
for Russian personnel; some people had to go to the U.S. for a
month or two on this programme. You can imagine what did such a
trip mean for ordinary Russians who couldn't expect ever to earn
money just for an air ticket. The great thing was to be
selected for American training. There were rumors that the
Russian boss (a man) used his right to choose to pay for sexual
services of his feminine staff. Now Lyuda was going to influence
this process in favor of a certain person who was
originally scheduled for a later visit. She convinced Jane to do
something to delay the other person's visit, and Jane did it by
mixing up some paperwork. Jane's boss felt that something was
going wrong (though he didn't know what exactly) and became
angry with Jane. And once again, Jane's only comfort was her
wonderful Russian friend.
I had an opportunity to meet Lyuda when she and her son returned
after almost half a year in America. It didn't take me long to
recognize a type which is rather common in Russia, where for
decades honest work was never a way to success. Parasitizing,
using connections and intrigues were a real way to success for
those who knew how to do it. I shared my observations with Jane,
and she, now free of Lyuda's spell, enthusiastically agreed.
Moreover, she told how Lyuda's son harassed her own son, and
also about an affair Lyuda had with an American doctor married
to Jane's friend (Jane had to babysit Lyuda's son during their
dates). I have to give the doctor a name, let it be Juan (for
political correctness).
And now Lyuda was sending letters to Jane, full of complaints
about her Russian life, telling that even ketchup in Russia
didn't taste as it should. (I had to relay their messages before
Lyuda set up her own email, with the computer she got from
Jane.) And when Juan came to Russia for the same humanitarian
mission, you can imagine that he was also a target for such
complaints. He definitely had to take the poor woman and the boy
back to America.
He did it in the end, but there was one big story in between:
Luyda set up an American charity society. She was relying on a
hobby of another rather wealthy doctor who was interested in
traditional Russian crafts and agreed to sponsor the enterprise.
Of course, the society was American, with Jane as the president,
and a Russian advisory board made up of Lyuda's friends and
relatives. This brought Lyuda a well-paid job of an interpreter
(she was complaining bitterly about losing her former Russian
job) and also a three-year entrance visa for USA. No need to
tell how the society crashed later.
At the time Lyuda was about to return to USA in order to marry
Juan (with her business visa and probably without legally
divorcing from her Russian husband!) Jane and her son were
living in the basement of Juan's house (probably for free). But
Lyuda and her son needed more space, and Jane was ordered to
vacate the place immediately (she had trouble finding a new
place and had to stay for some time with a friend).
Last year I had a three-month assignment in the U.S., not very
far from the place where Jane lived. But I was unable to meet
her: she was mysteriously absent. Only later I learned that she
had filed for bankruptcy (because unable to pay off the debts
she had run up helping Luyda), and moreover developed an alcohol
dependency. She was returned to normal life by Alcoholics
Anonymous, and we still correspond sometimes.
---
Any conclusions are left to readers, though I am willing to
comment.
Gregory Tseytin,
St.Petersburg, Russia

*******

#7
Date: Sun, 6 Sep 1998 11:33:18 +0200
From: Mark Temperley </G=MARK/S=TEMPERLEY/OU=VAX/@tetrapak.400NET.tip.net>
(Tel +7 095 960 2658)
Subject: the situation in a small town

This is the current situation in a small town in southern Russia.

In the market this weekend you could find plenty of vegetables and fruits,
which price increases in roubles of approximately double what it was before. 
The things that are missing are: washing powder, toothpaste, soap, sanitary
towels, nappies, baby products, sugar, oil, caviar and cigarettes. In
Krasnodar, 1 hour's drive away, the prices are much higher, about 2 1/2 times
what it was before. But in the electric and furniture shops the shelves are
empty. I saw just 1 stereo left in a huge store and this was where the prices
had increased by more than 3 times the old ones. In our local camera shop they
no longer sell film, even though it is there on the shelf, because they don't
know what price to charge for it. (it seems that capitalism has not sunk in
too far). Yet, in the state shops in our small town, the prices have hardly
increased at all. And it is still possible to find things at the old price -
not for much longer I guess. There are noticeably less cars on the roads and
police have set up more radar traps. 

*******

#8
Los Angeles Times
6 September 1998
[for personal use only]
RUSSIA 
A March Toward the Abyss 
By ALEX ALEXIEV
Alex Alexiev, an International Business Consultant, Is a Former Rand Scholar
in Russian Studies

HUNTSVILLE, UTAH--Seven years after the dramatic events of August 1991, which
led to the demise of Soviet communism and the birth of democratic Russia, the
country is plunging headlong into an economic and political chaos that
threatens to make the nuclear superpower ungovernable. This is no
exaggeration. With its currency stripped of value, inflation running at 50% or
more a month, a banking system near collapse and authorities unable to pay
salaries and pensions to tens of millions, a social explosion seems only a
matter of time. Yet, the political establishment is so paralyzed and polarized
that a part of it hopes to profit from the coming troubles. 
How did seven years of seemingly successful reforms and a functioning, if
imperfect, democracy produce such a monstrosity? Truth is, trouble has been
brewing for some time. Its root cause has been the incomplete, often
contradictory nature of the transition from the ancien regime. A market system
of sorts was established, but not the underpinning legal system that alone can
guarantee its smooth operation. Coincidentally, a democracy was superimposed
on a country that essentially lacked a civil society. Sectors of the economy
were reformed, but much of its obsolete industrial and agricultural
structures, including powerful monopolies, remained untouched. 
Perhaps worst of all, President Boris N. Yeltsin's reformers, in their
zeal to break the socialist economic mold through privatization, created a
semicriminal economic elite that became super-rich through government
giveaways, graft and corruption. These "oligarchs" grew progressively richer
and more powerful as they cornered the country's banking system, commodity
exports and increasingly its media. Their political clout increased
correspondingly. After helping elect Yeltsin in 1996, they saw themselves, and
were perceived by others, as the true masters of the country. 
Cracks in this smoothly running scheme appeared in late 1997, when the
Asian economic crisis began to affect Russia's fragile economy and its banking
system. Plummeting world commodity prices, especially oil and metals,
seriously damaged the oligarchs' interests. 
Then in March, Yeltsin unexpectedly fired Prime Minister Viktor S.
Chernomyrdin and appointed a government of determined reformers under Sergei
V. Kiriyenko to deal with the gathering crisis. For the first time since
Yeltsin's coming to power, long-overdue radical reforms were under
consideration that, if successful, would have forced the oligarchs to pay
taxes and loosen their stranglehold on the economy. They would have none of
it. 
The crisis reached its boiling point early last month. The reformers were
able to secure a new loan pledge from the International Monetary Fund to stave
off immediate financial threats and pay for the reform program. At the same
time, the oligarch-controlled banks, highly indebted to foreign creditors and
sitting on a mountain of devalued government securities, teetered on the brink
of insolvency. As always, the tycoons looked to the government to bail them
out of their self-created mess. Kiriyenko's government responded by devaluing
the ruble, in effect, and declaring a moratorium on paying ruble-denominated
debt. Why an otherwise sensible government made such disastrous and ill-timed
decisions remains unclear. 
In any case, the oligarchs used the shock created by the devaluation and
default to get rid of the reformist government altogether and install leaders
more to their liking. The most powerful and odious of the oligarchs, Boris A.
Berezovsky, said to be close to Yeltsin's daughter, Tatiana, and his head of
administration, Valentin Yumashev, evidently prevailed on a physically and
mentally deteriorating president to fire Kiriyenko and appoint Chernomyrdin as
acting prime minister. The foundation of this astounding political coup
included major concessions to the Communist majority in the Duma, a scaling
down of economic reform, curtailment of the president's constitutional powers
and a power-sharing arrangement, all in return for a quick approval of
Chernomyrdin's candidacy. 
The Communists eagerly embraced the scheme but had no intention of dancing to
Berezovsky's tune. Instead, they regarded the crisis as a once-in-a-lifetime
opportunity to do away with Yeltsin and his reformers and take power through
the back door. Contrary to the oligarchs' belief, the Communists had not
become politically domesticated. Indeed, the party has grown progressively
radicalized. The catalyst was the recent election of Alexander I. Lebed in
Krasnoyarsk, along with the realization that the party could lose its core
support if its opposition to Yeltsin was perceived as less than staunch. In
Krasnoyarsk, the Communist-sympathetic electorate and the local party
leadership, openly defying explicit instructions from Moscow, voted for Lebed
en masse, securing his victory. 
The Communists' price for cooperating with Yeltsin was near-extortion. It
included a return to a quasi-socialist economic model and the effective
political emasculation of the president, de facto control of the Communist-
dominated Duma over ministerial appointments and dismissals, and increased
"public control" of the media. It was astounding that Chernomyrdin and
Yeltsin's representatives signed this "political agreement" and even more
astounding that Gennady A. Zyuganov, the Communist leader, could not get his
party to honor its own proposals, simply because Yeltsin had refused to step
down immediately. Chernomyrdin's rejection by the Duma clearly shows that,
failing to get one of their handpicked candidates nominated, the Communists
are behaving in accordance with the Leninist dictum "the worse, the better."
Apparently, they believe a new proletarian revolution will soon sweep them to
power. 
It is a huge miscalculation, as is the oligarchs' belief that they can
control and steer Russia's turbulent political undercurrents at will. The
logic of the gathering storm is such that, unless stopped soon, it will
inevitably lead to violence, anarchy, separatism and the likely emergence of a
rabidly nationalistic, neofascist dictatorship that will sweep from the scene
oligarchs, Communists and democrats alike. 
Is there an alternative to this nightmare? Ironically, as Russia is
unraveling, a glimmer of hope has appeared. Much like a patient who is
unwilling to consider radical surgery until there is no other hope, Russia is
in such desperate straits that it may be willing to try a truly radical cure
for its economic and political ills: the creation of a currency board and the
wholesale transformation of monetary and economic policies that it requires. 
A currency board is simply a mechanism that pegs a country's money to a
reserve currency and secures its complete convertibility by maintaining
sufficient amounts of the latter to cover all money in circulation. It has a
dramatic effect on policy in that it ties the hands of both the central bank
and the politicians and makes it impossible for them to use monetary policy to
play politics. It leads inevitably to budgetary and monetary policies based on
market considerations, rather than politics, and results in a stable currency
and low inflation in a remarkably short period. 
In Russia, the currency board would have the additional effects of ending
the oligarchs' free ride at public expense and putting the strained relations
between the center and the regions on a sound monetary basis. If the board is
instituted simultaneously with a firm government promise to meet all its
outstanding debt obligations and negotiate a new debt restructuring to that
end, foreign investors may again return to Russia. 
How likely is this radical therapy? It's a long shot, to be sure, but at
least in the past few days it has been talked about at high levels of
government. Chernomyrdin seems to have blessed the idea of a currency board
last Friday. Still, the proposal will be resisted stridently by the opposition
and the oligarchs; accordingly, its implementation will probably require that
Yeltsin dismiss the Duma or declare emergency rule. It will also require
strong support from the West and likely new resources to guarantee sufficient
funds at the outset. 
It behooves the West and the IMF, whose policies toward Russia have been
an abject failure, to respond promptly and positively. The choice is between a
Russia that gets a realistic chance to stave off economic ruination and remain
democratic and anarchy in a country with 20,000 nuclear weapons. 

*******

#9
Boston Globe
6 September 1998
[for personal use only]
Mushroom season has Russians in fungi frenzy 
Success measured by basketful in good-natured rivalry
By David Filipov

ODRINOVO, Russia - With the practiced eye of a hunter stalking his 
quarry, Mikhail Volkov spied the two men hurrying across the boggy field 
toward a damp thicket, their knives bared, their eyes scanning from side 
to side. 
``Locals. They're hunting,'' Volkov whispered. ``Let's follow.''
Moving stealthily, Volkov slipped behind the pair and tailed them at a 
safe distance until they unwittingly led him to the place he was looking 
for. The spot was covered with low spruce trees and mossy ground, prime 
territory for Russia's favorite summer pastime - mushroom picking. 
Then came the tricky part. Anyone at home in the woods can find 
mushrooms, especially when someone else leads you to them. But knowing 
which mushrooms to pick can be a matter of life and death. 
Russians, who flock to the countryside on weekends as summer wanes, are 
supremely confident of their ability to distinguish between tasty 
delicacies and lethal toadstools. 
But this confidence is often tragically misplaced. Russia's weekend 
fungus warriors suffer an alarmingly high number of casualties. Since 
mid-July, nine people have died and 180 have been poisoned from bad 
mushrooms, according to Lydia Terezhkova of Russia's Federal Health 
Inspection Service. And this is a good year. Last year, 34 died of 
mushroom poisoning across Russia in July and August. 
The culprit, Terezhkova said, is usually the ``death cap,'' amanita 
phalloides, known to Russians as the ``belaya poganka,'' or pale 
toadstool. Inexperienced mushroom pickers often mistake the death cap 
for one of its edible cousins. 
To the neophyte, the mushroom hunt means a nice stroll through the 
woods, basket in hand, to collect spongy, tasty fungi. But to 
high-intensity Russian mushroom hunters like Volkov, this activity is 
far more than a pleasant hobby or a cheap way to put something tasty on 
the table. Mushroom hunting is silent war - a quiet, good-natured, yet 
fierce competition to see who can collect more mushrooms and best hide 
what he or she finds. 
When the ruble spun out of control in Moscow and other Russian cities 
last month, Russians such as Anna Rasputina, a telemarketer whose 
company is nearing bankruptcy because of the economic crisis, continued 
to head for the woods. 
``There's always an abundance of mushrooms,'' she said. ``And they 
always cost the same: free.''
Like their reckless winter brethren, the legions of ice fishermen who 
sit on lakes and rivers long after the ice has become undependable, 
Russian mushroom hunters seem impervious to the deadly perils of their 
hobby. 
``I don't believe you can be poisoned by a mushroom,'' Volkov maintained 
as he thrashed through a thicket of stinging nettles on a steamy 
summer's day in the woods near Odrinovo, a farming hamlet 30 miles north 
of Moscow. Vicious mosquitoes, apparently immune to American-made 
repellent, attacked in waves. 
``People who suffer poisoning usually do something wrong, like picking 
mushrooms at the side of the road, where they are contaminated, or 
preparing them incorrectly,'' Volkov said just before he broke off his 
speech with a warrior-like cry. 
Bending over, he proudly displayed his find: A pair of large ``beliye 
griby,'' or white mushrooms - boletus edulis in the encyclopedia, the 
``Czar of the Forest'' in Russia's rich fungal folklore. Russians 
consider this the tastiest cooking mushroom and also best for freezing, 
drying, pickling, or marinating for the long winter months. 
``To find whites so quickly - this is mushroom bliss,'' Volkov said with 
a sigh. ``A mushroom miracle!''
Volkov assiduously avoids the white mushroom's evil twin, known as the 
``satanic mushroom,'' which is not deadly but causes a nasty 
stomachache. 
Why are mushrooms so popular in Russia? One reason is their 
availability. Mushrooms will grow wherever it's cool and damp - the 
typical summer weather forecast for Russia. Even in such forbidding 
places as the arctic mining city of Vorkuta, where nothing much grows 
except lichen, people gather mushrooms in the tundra in July. 
When times are hard, mushrooms brighten up an otherwise drab diet. 
Volkov and his wife serve up mushroom-filled pastries, fried mushrooms 
with potatoes, mushroom julienne, mushrooms pickled in brine, and dried 
mushrooms. 
President Boris N. Yeltsin even bagged a few white mushrooms during his 
July vacation in Karelia in northern Russia. In Moscow, anyone with a 
car can easily drive to choice mushroom hunting grounds in the dense 
forests that surround the city. 
Over the years, Volkov has picked up some tips from the dean of Russian 
mushroom hunters, writer Vladimir Soloukhin, whose 1967 work ``Third 
Hunt'' includes a series of lectures on the subject. It is not 
altogether surprising that another Soloukhin work deals extensively with 
ice fishing. 
Whenever a so-called mushroom rain - a light summer sun-shower - falls, 
Volkov heads for the forest to search for whites, ``little foxes,'' and 
``milk caps.'' The same goes for the mushroom moon - the first full moon 
in August. To be certain of the best times, Volkov consults an 
astrological calendar. 
This summer, the mushroom rains have been frequent, and mushroom bliss 
abounds in the forest. 
Mushroom good will is another matter. Russian mushroom hunters take note 
of their fellow foragers, but only to find the best spots. When two 
mushroom hunters meet in the woods, they quickly cover their baskets so 
that a competitor cannot glean success and retrace the other's steps to 
bountiful areas. Volkov calls this intelligence gathering. 
``Find anything?'' Volkov inquired of an elderly man who happened by as 
Volkov was leaving his newly discovered white mushroom site. The 
stranger discreetly zipped his brown leather bag and smiled politely. 
``Nope,'' he said, eyeing the wicker basket covered by Volkov's hand. 
``There were some little foxes back aways, but they're all wormy. You?''
``Naw,'' Volkov said with a slight grin. ``We didn't find a thing.'' 

*******

#10
Bartering Is Big Business in Russia
September 6, 1998
By LESLIE SHEPHERD

MOSCOW (AP) -- Some big construction companies in Chelyabinsk didn't have the
cash to pay their taxes this spring, so they offered instead to build a subway
system in the Ural Mountains city. 
Instead of wages, seamstresses at a clothing factory in Siberia accepted
grocery carts to transport vegetables from their garden plots. Their clothing
factory initially offered them coffins. 
The governments of Ukraine and Moldova proposed settling their debts to the
Russian gas monopoly in sugar and wine, knowing that Gazprom has accepted
payments from others in the form of steel, turbines, gas pipes and shares in
truck and tractor companies. 
In Russia's underdeveloped financial system, where bank loans, personal
checks, credit cards and other forms of credit are still in their infancy,
barter deals are again on the rise. 
Many workers, factories and even government departments just don't have the
money to pay their bills. The situation is likely to get worse during the
current economic crisis when the ruble is losing value daily, people are
having trouble getting money from banks and it's not clear who is running the
country's finances. 
Economists and government officials say that the pervasive use of the
centuries-old practice of barter is skewing the economy and preventing the
development of a modern, free-market system. Barter now accounts for about
half the transactions in Russian industries and 40 percent of national tax
payments. 
``Barter is undoubtedly a key problem for our country,'' said Boris Fyodorov,
Russia's chief tax collector, in announcing plans to crack down on the
practice. 
Bartering isn't new to Russia; it was common during the Soviet era when Moscow
bartered weapons to its allies and promised to build oil tankers if Pepsico
Inc. would increase soft drink production. But that was under communism, not
the market economy Russia is trying to build now. 
Companies that don't have cash can't buy new equipment or pay their own bills.
Workers aren't paid and taxes aren't collected -- two of the biggest problems
in the Russian economy. 
While some companies turn to barter because they genuinely cannot pay their
bills, others use it to hide revenue and avoid paying taxes and shareholders,
said Barry Ickes, an associate economics professor at Pennsylvania State
University who studies the Russian economy. 
Companies that owe overdue taxes especially like barter, Ickes said. By law,
any money they receive and put in their bank account is immediately seized by
tax authorities. 
Companies that admit they barter say it's the only way they can collect any
payment for their goods and services. 
``Either we refuse to take any payment at all (from cash-strapped companies)
or we receive some payments in goods,'' said Gennady Yezhov, a spokesman for
Gazprom, Russia's largest company and its largest tax delinquent. 
Gazprom collects on average less than 10 percent of its payments in cash,
Yezhov said. In a really good month, the figure rises to 17 percent. Last
month it was only 7 percent. 
``Of course we would like to get cash,'' said Yezhov, press secretary to the
chairman of Gazprom's board. ``We dream about it. ... Unfortunately, it is not
possible right away.'' 
Yezhov said bartering means extra work for Gazprom and other companies because
they often don't want the goods they receive, and have to sell or trade them
to someone else. 
Bartering allows inefficient companies to continue producing these unwanted
goods, Ickes said. If they couldn't pay their bills in goods, they'd have to
close or start producing something for which there is a demand. 
Bartering can also disguise the true value of companies -- and ultimately the
Russian economy -- and allow companies to hide the details of some
transactions. Bribes and other forms of corruption can continue to flourish. 
``When you don't have a straightforward cash system, you can keep lots of
things off the balance sheets,'' said Julia Shvets, an economist with the
European Center for Economic Policy, a Moscow think tank on the Russian
economy. 
``It's not always clear who is dealing with whom and what is the exact
arrangement between the supplier and the customer,'' she said. 

********

#11
Chernomyrdin sees progress with world help

MOSCOW, Sept 6 (Reuters) - Acting Prime Minister Viktor Chernomyrdin said on
Sunday that Russia would succeed in healing its battered economy with the help
of the international community, a government spokesman reported. 
Russia ``with international assistance will succeed in stabilising the
situation and will follow the path of sustainable economic development,''
Chernomyrdin wrote to the finance ministers of Britain, Germany, Italy and
France. 
At a meeting of foreign ministers in Salzburg, Austria, the European Union on
Sunday declined to offer Russia extra cash or debt relief and said the country
bore responsibility for resolving its own political and economic crisis. 
``We trust that Russia will not revert to a command economy but proceed along
the path of structural reforms in order to establish a social market
economy,'' the EU said. 
``We stand ready to cooperate further with the Russian authorities in support
of sustained efforts towards stabilisation and reform,'' the EU statement
added. 
The spokesman said that in his letter, Chernomyrdin pledged cooperation with
international organisations and with the EU. 
``I would like to emphasise that in the process of deep economic reform we are
seeking active interaction with partners in the Group of Eight and
international financial organisations, and we value their attention and
help,'' Chernomyrdin wrote. 

******


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