September 10, 1998   

This Date's Issues: 2360• 2361 •2362•2363

Johnson's Russia List
#2361
10 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Moscow Times: Michael McFaul, Is This Last Red Duma? 
2. AP: Aid Depends on New Russia Policies.
3. Steven Solnick: Federation Council.
4. Chris Scribner: Itera and Gazprom.
5. Yuri Luryi: Re Yale Richmond and anti-semitism in Russia.
6. Renfrey Clarke in Moscow: RUSSIA'S CRISIS AND THE BIRTH OF A NEW LEFT.
7. Chubays interview excerpt.
8. Vijai Maheshwari: Moscow's Alice-in-Wonderland Shopping Spree.
9. Reuters: Russia not seen adopting Communist plan.
10. Financial Times (UK): Chrystia Freeland, ANTI-CRISIS PACKAGE: 
Fragile government outlines tax changes.'
11. Moscow Times: Valeria Korchagina, NEWS ANALYSIS: Battle for Survival 
Splits Oligarchs.
12. Bloomberg: Flawed Capitalism Requires Regulation, State Role, Jospin 
Says.]

*******

#1
For more articles from The Moscow Times, check out their website at
www.moscowtimes.ru

Moscow Times
September 10, 1998 
Is This Last Red Duma? 
By Michael McFaul
Michael McFaul is an assistant professor of political science at Stanford
University and a senior associate at the Carnegie Endowment for International
Peace. He contributed this comment to The Moscow Times. 

If the State Duma, the lower house of parliament, votes to reject President
Boris Yeltsin's nominee for prime minister, be it Viktor Chernomyrdin or
someone new, for a third time next week and Yeltsin subsequently dissolves the
parliament and calls for new elections, most people believe that the Communist
Party of the Russian Federation, or KPRF, would win a landslide victory. 

As Russia's economy continues to collapse and the president continues to
demonstrate little leadership in handling the crisis, the time looks ripe for
the Communists to seize power again, but this time through the ballot box. 

This is an oversimplified assumption. Before voting, KPRF leaders may want to
consider several factors that could undermine their ability to secure a
majority in parliament after fresh elections, let alone "seize power." 

Ironically, the KPRF may actually win a higher percentage of the popular vote
in new elections but have fewer seats under their control in a new parliament.
A comparison of the factors that shaped the 1995 parliamentary vote with
thefactors that will influence a 1998 parliamentary vote reveals several
important differences. 

First, the KPRF might not enjoy the multiplier effect it benefitted from in
1995 regarding proportional representation, or party list, seats. In 1995, the
KPRF won 22 percent of the popular vote, but won 44 percent of the seats
allocated according to the party list system because half of the votes cast on
the party list ballot went to parties that did not cross the 5 percent
threshold. The same will not automatically be true in the next parliamentary
election. A new draft electoral law the Kremlin has proposed includes several
new restrictions to prevent a proliferation of parties. 

Most importantly, the law would prohibit the top three names on the party list
from competing in single-mandate districts. In 1995, famous politicians had a
real incentive to create their own party, as they received free television
time and increased notoriety as the leader of a "party" that in turn helped
them win their single-mandate seat, even if they stood no chance of garnering
5 percent of the popular vote on the party ballot. Several prominent deputies
including Nikolai Ryzhkov, Sergei Baburin, Irina Khakamada and Boris Fyodorov
won their races in this way. Under the new election law, they would have to
choose, and most would opt to run in the single-mandate districts and not
compete in the party list election. 

A second factor that will hurt the KPRF is the formation of electoral blocs
associated with Moscow Mayor Yury Luzhkov and the governor of the Krasnoyarsk
region, Alexander Lebed. Both plan to run party lists in new parliamentary
elections and opinion polls suggest that both can steal votes away from the
KPRF. Both Lebed and Luzhkov represent much more serious challengers to the
KPRF than did those opposition parties competing with the Communists in 1995.
It is also very likely that the KPRF may split before the next vote because
militants within the party have grown tired of Gennady Zyuganov's constant
compromising. 

Third, KPRF deputies and their allies will face much stiffer competition in
the single-mandates races in 1998 than they did in 1995. The greatest surprise
of the 1995 election was the collapse of centrist candidates in single-mandate
races. The Communist and Communist-affiliated "opposition" captured in 1995
about 100 additional seats previously held by centrist deputies. This dramatic
swing occurred because the party of power at the time, Our Home Is Russia, was
poorly organized and governors, who at the time were still appointed by the
president, did not play an active role in these elections. This time around,
however, the governors will play an active role in these single-mandate races
to try to send to Moscow representatives who will be loyal to them rather than
the KPRF (or to a new party of power). 

Fourth, several KPRF deputies will run as independents in the next election.
These deputies have had disagreements with Zyuganov over the past two years
and will turn to governors or Gazprom, not the KPRF, for support to win re-
election. 

Fifth, no matter who is in charge of the government during the campaign
period, the acting prime minister and financial actors who support him will
blame the KPRF for this latest political crisis. Negative campaigning against
the KPRF will chase votes to parties such as Yabloko. 

One final new factor, however, that will play in favor of the KPRF will be low
voter turnout. In the context of a collapsing economy, communist loyalists
will go to the polls in high numbers while former supporters of reformist
parties will stay home. 

Yet even if the KPRF does succeed in winning an outright majority in the next
parliament, so what? Will a slightly more red parliament really alter whatever
leverage they now have vis-a-vis the president and the government? 

If parliamentary elections occur in 1998, the KPRF actually may weaken its
chances to win or influence the presidential election. If it agrees after a
parliamentary election to join a coalition government, then the KPRF will be
held accountable for the deepening economic crisis that only the most
optimistic predict will end before the next presidential election. On the
other hand, if it keeps opposing the government but does not change policy,
then voters will ask why it was necessary to have early parliamentary
elections? Both scenarios weaken the long-term prospects for a Communist or
Communist ally to hold power in the Kremlin anytime soon. By voting against
the nominee next week, the Communists may yet again prove to be their own
worst enemies -- and Yeltsin's best enemy. 

******

#2
Aid Depends on New Russia Policies
September 9, 1998
By MARTIN CRUTSINGER

WASHINGTON (AP) -- The West will not give Russia additional financial
assistance until the United States and other countries can judge the policy
choices the Russian government makes to deal with its economic crisis, a top
U.S. official said Wednesday.

Deputy Treasury Secretary Lawrence Summers sought to lower expectations that
immediate assistance for Russia will come from an emergency meeting of finance
and foreign ministry officials of the world's seven richest countries
scheduled for next Monday in London.

``I certainly do not expect out of any discussions that take place next week
concrete plans,'' Summers told reporters. ``I expect the discussions to be of
a much more analytical and tentative nature.''

Summers said it was ``very much premature to discuss (Western assistance)
pending Russia's making judgments about its choices.''

President Clinton in Moscow last week urged Russian President Boris Yeltsin to
stick to the path of free-market reforms despite the economic woes brought on
by a botched devaluation of the ruble and the suspension of payments on
billions of dollars of foreign debts.

Russia's latest economic crisis came despite efforts by the International
Monetary Fund to assemble a new $22.3 billion rescue package in July.

The $4.3 billion second installment of that support is in doubt because of the
turmoil in the Russian economy. The money had been scheduled to be disbursed
on Sept. 15 but IMF officials have expressed unhappiness with an economic
reform program put forward with Acting Russian Prime Minister Viktor
Chernomyrdin.

Under the plan, the country would print billions of rubles now to cover
Russia's obligations and then clamp down on the money supply later.

U.S. and IMF officials are concerned that if the country's money supply is
debased by rampant printing of rubles, it will be that much harder to attract
necessary foreign investment down the road.

In remarks to an international banking conference, Summers said the United
States and other Western countries were willing to provide additional
financial support for Russia but it would be contingent on the Russian
government adopting a ``framework of constructive policies.''

Yeltsin's government remained paralyzed Wednesday in a standoff with the Duma,
the lower house of parliament, which has twice rejected the president's
nomination of Chernomyrdin as prime minister.

Summers stressed that the response of the United States and other countries
will depend on Russia sticking to the path of reform.

``Until political authorities decide the direction they want to go, it is
difficult to calibrate an appropriate international response,'' he said.

He said Russia's response must be based on ``sound money, the rule of law and
enforcement of property rights.''

The economic turmoil in Russia triggered a huge plunge in the U.S. stock
market last week and rattled markets in several Latin American countries,
where investors fear the economic troubles that first surfaced in Asia a year
ago will hit next.

The turmoil has left the Clinton administration scrambling to come up with
appropriate policy responses. Last Friday, Federal Reserve Chairman Alan
Greenspan held out the prospect that the Fed would consider cutting interest
rates if the global turmoil began to seriously damage the U.S. economy,
remarks that triggered rebounds in U.S. and other markets early this week.

While Japanese officials had raised the prospect of a coordinated reduction in
interest rates to spur global growth, U.S. officials said that did not come up
during discussions Greenspan, Summers and Treasury Secretary Robert Rubin held
with Japanese officials on Friday in San Francisco. U.S. officials said the
talks focused instead on what Japan needs to do to spur its own economy and
deal with insolvent banks.

On Wednesday, the Bank of Japan lowered the target for a key interest rate to
0.25 percent. That was down from an already low 0.5 percent and represented
the first rate cut by the Japanese since 1995.

********

#3
From: "Steven Solnick" <sls27@columbia.edu>
Subject: Federation Council
Date: Wed, 9 Sep 1998 

The following letter appeared in the NY Times on Saturday Sept. 5. With the
Federation Council's overwhelming endorsement of Chernomyrdin last Friday
and new reports that Yeltsin may yet renominate him a third time to the
Duma, the point of the letter may still be relevant. It draws on Article 102
of the Russian Constitution, which governs the exclusive powers of the
Federation Council.
Thank you.

To the Editor:
In your Sept. 3 news article on Viktor S. Chernomyrdin's meetings with
governors from Russia's regions, you note that the upper house of the
Russian Parliament ``has influence but no power over the formation of
governments.'' This is normally true, but these are not normal times in
Russia.
If the Duma rejects Mr. Chernomyrdin three times, it must face new
elections and President Boris N. Yeltsin appoints the prime minister
without its approval. If Mr. Yeltsin named Mr. Chernomyrdin after
dissolving the Duma, the President might then try to postpone
parliamentary elections by declaring a state of emergency. Under the
Russian Constitution, the upper house has responsibility for approving a
state of emergency.
Mr. Chernomyrdin's intense lobbying of regional leaders could suggest
that he has already abandoned hope of confirmation by the lower house and
is seeking support in the upper house for a suspension of the democratic
processes. There are more benign interpretations, of course, but we
cannot lose sight of the fragility of Russia's democratic
institutions.

STEVEN SOLNICK
New York, Sept. 3, 1998
The writer is an assistant professor of political science at Columbia
University.

******

#4
Date: Wed, 09 Sep 1998
From: Chris Scribner <scribner@mindspring.com>
Subject: Itera and Gazprom

I would like to join recipients list and send a message too. Message would
be if anyone knows of the origins of the relationship between Itera (run by
Igor Makarov) and Gazprom. Also why does Gazprom make Itera (which has
legal headquarters in Jacksonville FL) a favored partner. I know Makarov
knows Farid Gazizullin from earlier business dealings in Tartastan but
otherwise the purpose of relationship is unclear to me. Thanks.

*******

#5
Date: Wed, 9 Sep 1998 
From: Yuri Luryi <yluryi@julian.uwo.ca>
Subject: Re Yale Richmond and anti-semitism in Russia

Just a few additions, rather than corrections, if I may (see in caps).
1. >>Jews were, in fact, "allowed" to serve in the Russian Army. An edit of
Tsar
>>Nicholas I in 1827 established a conscription quota for Jewish men, age 18
>>to 25. (The "tour" of duty was 25 years, so it is not surprising that many
>>Jews were draft dodgers.) AFTER SEVING THOSE 25 YEARS, JEWS WERE GRANTED
>>THE RIGHT TO RESIDE OUTSIDE THE PALE, WHEREVER THEY WANTED. BESIDES,
>>DISCRIMINATION AGAINST THE JEWS WAS OF RELIGIOUS RATHER THAN OF RACIAL
>>NATURE. BAPTIZED JEW
DID NOT EXPERIENCE ANY DISCRIINATION. INTERESTING ENOUGH, WHEN TZARINA EXPECTED
HER SON, DOCTOR BOTKIN ASKED THE OBSTETRICIAN IOSIF YAKUB TO ASSIST
DELIVERIES, IF THE LATTER AGREES TO BE BAPTIZED. YAKUB REFUSED. BTW, HE
OWNED A BIG HOSPITAL
IN THE CENTR OF MOSCOW. BECAUSE, THE JEWS WITH UNIVERSITY EDUCATION HAVE
BEEN ALLOWED TO RESIDE IN ALL RUSSIAN CITIES (CRAFTSMEN WERE PERMITTED,
TOO).
>>
2. >>It is also questionable, as Womack states, that in the Soviet era, "Jews
>>were passed over for the best educational opportunities and jobs." If that
>>were true, how to explain the high percentage of Jews with higher education
>>in Soviet society, much higher than for non-Jews? And while Jews were
>>seldom found in the top positions in Soviet institutes and enterprises,
>>they were often in the number two position where they, in effect, ran day
>>to day operations. IT IS WELL KNOWN THAT JEWS WERE EITHER NOT ALLOWED TO
ENTER SOME PRESTIGIOUS UNIVERSITIES, OR WERE INTENTIONALLY FAILED BY EXAMINA-
TORS (TAKE A LOOK AT THE "CHRONICLE OF CURRENT EVENTS", A RELIABLE SOURCE
OF INFORMATION. I REMEMBER, THE LATE A.D. SAKHAROV SAID THAT THE COMPLEXITY
OF PROBLEMS GIVEN TO THE UNWANTED CANDIDATES WAS ON THE POSTGRADUATE
LEVEL). YES,
THE JEWS RAN DAY TO DAY OPERATIONS, AS THE DEPUTIES-BOSSES OR ASSISTANTS TO THE
BOSSES. BECAUSE THEY MUST HAVE BEEN AND WERE REAL SPECIALISTS IN THEIR FIELD.
WITH A FEW EXCEPTIONS THE JEWS DID NOT BELONG TO THE TOP LEVEL OF THE PARTY
NOMENCLATURA. SO, THE HIGHER EDUCATION WAS A KIND OF THE TICKET TO ANY POSI-
TION WHICH REQUIRED BRAINS AND SKILLS AND, THUS, ENTAILED RESPECT AND
RELATIVELY GOOD SALARIES.

*******

#6
Date: Wed, 9 Sep 1998 
From: austgreen@glas.apc.org (Renfrey Clarke)
Subject: Russia's crisis and the birth of a new left

#RUSSIA'S CRISIS AND THE BIRTH OF A NEW LEFT
#By Renfrey Clarke
#MOSCOW - A few days back, my friend Rod came round unexpectedly
to visit. He brought a bottle of vodka with him, but he wasn't
feeling festive. Quite the reverse.
#An Englishman who has spent much of the 1990s in Moscow, Rod had
just lost his job teaching English to adults in a private
language school. ``Back in the middle of August,'' he related,
``I had five or six students in one class, seven in the other.
Then there were about three in each, and for the class I was
supposed to teach yesterday, no-one came.''
#And that, Rod lamented, was in the first week after the summer
holiday season, when his classes would normally have been full of
freshly-tanned young office workers getting down to acquiring the
language skills they needed to advance their careers.
#But since August 17, when the government stopped trying to avoid
a devaluation of the ruble, the good times have ended for
Russia's small middle class, including Rod's pupils.
#``The students were earning rubles, and the foreign teachers
were getting dollars,'' he explained. ``So when the price of the
dollar tripled in less than three weeks, the students just
couldn't afford it any more.''
#None of Rod's students were really well-off. If they had been,
they would have paid for individual tuition, or studied abroad.
But they were prosperous by Russian standards. Most of them, Rod
guessed, had been taking home the equivalent of around US$500 a
month earlier in the summer, when the average wage was worth
about US$180.
#The students had described their lives in writing exercises.
Most of them worked for commercial organisations, often banks.
Their housing was still in cramped flats built in Soviet times,
but many had been able to buy cars. Most had travelled abroad,
usually on holiday package trips to Turkey or Cyprus.
#Above all, they had been optimistic about their prospects. Other
Russians might face poverty and hardship, but Rod's students
would get ahead; their energy and professional skills guaranteed
it.
#That, however, was weeks ago. Today, Russia's ``middle layers''
are learning that when capitalism goes into crisis, junior
professionals and mid-level office staff are not exempt.
#The odds are high that among the people who were in Rod's
classes, quite a few are no longer working for anyone. A Moscow-
based foreign economic consultant told me soon after the crisis
hit that he expected the crash of the banking industry to wipe
out half the jobs in the sector. Early in September it was
reported that Alfa-Bank, one of Russia's largest, had laid off 40
per cent of its employees.
#Even those members of the new middle class who keep their jobs
will find that the gloss has gone from their lives. Of the marks
of prosperity that define the middle class, few originate in
Russia. From Western-style apartment renovations to foreign
airline tickets, almost all require that someone, at some point,
buy and hand over foreign currency.
#Sales of cheap Mediterranean holidays are reportedly down by as
much as half. With the ``September ruble'' edging down to 4 US
cents, compared to the mid-August ruble of 15 cents, the money
which Rod's ex-students command is now hopelessly inadequate to
finance the modest luxuries they once enjoyed.
#For that matter, it is not only the prices of luxuries that have
exploded. The cost of many staples has doubled. In part, this
stems from merchants taking advantage of panic buying and raising
their prices. But most of the consumer goods sold in Russia are
now either imported entirely, or depend on a hefty shot of
suddenly-expensive foreign inputs. As a result, devaluation has
flowed on directly into hyperinflation and drastic cuts to living
standards.
#The paradox is that millions of people have not taken to the
streets in protest. It is a grim testament to the effectiveness
of Soviet-era repression that most Russian workers, however
bitter at recent developments, remain depoliticised, without
experience of self-organisation, and deeply skeptical that any
initiative they might make would achieve anything except to get
them into trouble.
#By contrast, Rod's ex-students are undoubtedly self-starters.
But before they rise in revolt against capitalism, I suspect,
there is a good deal of ideological debris they will need to
jettison.
#Mercifully, the collapse of Russia's currency will not kill off
the economy entirely. The reasons, ironically, derive from the
government's failures rather than its successes. For years,
Russian finance ministers kept rubles in short supply as a way of
limiting inflation; as a result, people found ways of doing
without them. These mechanisms remain in place, and are allowing
many commercial operations to continue even though the ruble is
scarcely worth picking up off the pavement.
#Justifiably, most Russians have always considered the post-
Soviet ruble suspect as a store of value. As a result, savings
are usually kept in the form of dollar notes stuffed in hard-to-
guess corners of people's homes. Estimated at US$20 billion -
roughly twice the state's official foreign currency reserves -
these hoards will survive the crash both of the ruble and of the
banks, and are likely to provide a buffer against complete
economic paralysis. In coming weeks, more and more dollars can be
expected to emerge from beneath the mattresses. Increasingly, the
dollar will become the mechanism not just of saving, but also
(and although this is illegal) of everyday exchange.
#Another godsend for Russia's rulers is barter. Said to account
for as much as 70 per cent of the value of transactions between
enterprises, this is the main reason why production in wide areas
of the economy did not come to a total halt long ago. Barter
deals have not needed rubles in the past, and do not need them
now.
#A dollarised, barterised Russian economy might keep ticking over
for years, at abysmal levels of efficiency. But there are
countless functions required by modern industrial society -
starting with the regular payment of wages and pensions - that
such an economy cannot perform.
#Even if barter could be phased out, a dollarised Russian
economy, in which the government had few meaningful levers of
financial regulation, would still be incompatible with the task
of rebuilding the country's social infrastructure and productive
plant.
#Nevertheless, this is the choice which Russia's elites now seem
determined to adopt - in the form of a ``currency board''. Under
this system, the government would be legally bound to keep the
number of rubles in circulation in a fixed proportion to the
country's reserves of US dollars.
#A simpler variant of this system would be the one used for many
years in Panama - not to bother printing the national currency,
but to use dollar bills instead. At least the Panamanians are
frank about their semi-colonial status.
#The relations that Russia has with international economic forces
are a matter for very careful, discriminating choice. Wholesale
surrender will only worsen the country's dilemma. But at the same
time, Russia cannot develop in isolation from the world economy.
#This implies that neither market-worshipping neo-liberals, nor
economic xenophobes from Russia's Stalinist-chauvinist ``left''
can contribute to saving Russia from economic decay and political
dismemberment. The need is for radical new ideas and activism
from social layers that have not so far made much of an impact on
the country's politics. And this is where Rod's ex-students, or
people like them, may have a role to play.
#In capitalist society, middle classes ruined by economic
depression are a notorious breeding-ground for fascism. But where
the people involved are educated and well-travelled, their
disillusionment with the system is more likely to thrust them
toward the left than the right.
#The educated young Russians who are now to find their career
hopes blasted will not finish up more disgusted with capitalism
than millions of the country's wage workers are already. But they
will differ from the mass of the workforce in a key respect. They
will not have had beaten into them, year upon year, the
conviction of their powerlessness and unfitness to influence the
circumstances under which they live.
#The coming radicalisation of Russia's ``middle layers'', it
follows, has real potential to create forces with the program,
energy and organisation to achieve what today's opposition has
never looked like doing - to crack the ice of popular passivity
and lead much broader social layers in the active defence of mass
interests.

*******

#7
Date: Wed, 09 Sep 1998 18:15:07 -0400
From: X
Subject: Chubays Interview

Chubays provides a rather lengthy interview in yesterday's Kommersant.
Below is a rough translation of an important excerpt in which Chubays
admits that he "conned (kinuli) the West out of $20 billion." I am
certain that your readers will find it of interest. Unfortunately I do
not have the time to translate it all.

-------
Albats: What abyss could be worse than the one we find ourselves today?

Chubays: What do I mean by stating that we fought until the end? I mean
that we made financial and economic decisions, it means that we declared
that there would be no extreme measures, thus calming the markets. You
can throw abuse at the president for saying that the ruble would not be
devalued, but this is what should have precisely been said. Any
sober-minded politician will tell you that in extreme situations this is
the only way authorities can behave. Any authority that moans and
vacillates and keeps changing its mind only brings collapse nearer.
Because, let me repeat, perception is reality, perception, fears,
expectations, and hope -- this is the reality by which markets live. In
a difficult situation, the authorities have no right to declare: We do
not know whether we can cope or not because investors will flee.

Albats: But do the authorities have the right to lie?

Chubays: In these situations they must. The ABSOLUTELY must. So now in
the international financial institutions, despite everything we have
done with them -- we conned (kinuli) them out of $20 billion --there is
an understanding that we had no other way out.

*******

#8
Date: Thu, 10 Sep 1998
From: arvoman@glasnet.ru (Vijai Maheshwari)
Subject: Moscow's Alice-in-Wonderland Shopping Spree

Hi David: This is the second part of a literary journal Letter From that
I'm writing from Moscow. Looking for a publisher. A web zine like Slate,
Word, etc. that might be interested in weekly installments. Thought you
could put it on the list. It's not journalism, it's kind of New Yorker
style literary narrative. Up to you. Would appreciate it.


Moscow's Alice-in-Wonderland Shopping Spree
By Vijai Maheshwari

In Lewis Carrol's surrealistic tale "Alice in Wonderland," the Mad Hatter
reprimands Alice for having dissed the Queen of Hearts. "But I meant what I
said," protests the now-bloated young girl. "Aha," answers the Mad Hatter,
"but did you say what you meant." He then asks whether to breath when you
sleep is the same as to sleep when you breath; to sit when you're tired the
same as to be tired when you sit.
It follows logically that to know what you want is not the same as to want
what you know. Such is the inverted nature of post-crisis, pre-Indonesia
Russia, however, that the statement above is not true; instead its inverse
is almost a tautology. With supermarket stocks shrinking by the minute-like
Alice-Muscovites have become "consumers" in the purest, most primeaval
definition of the term: People are buying anything they can flash their
diminishing rubles at. I walked out the other day hoping to buy some
aspirin and yogurt, but ended up with fifteen cans of Nalley's Chilli Con
Carne instead; since they were one of the few things left on the
almost-bare shelves of the corner grocery-brothy, bean-filled,
Wisconsin-packaged remnants of the global consumerism that had briefly
transformed Russia's capital into a glittering ziggurat of capitalism. A
fellow shopper whose curiosity was piqued by my inordinate interest in
Chilli, picked up a can and studied the plastered-on Russian language label
with great interest; then shrugging his shoulders he picked out five for
himself. At 50 cents a can-almost four times cheaper than their pre-crisis
price-they were quite a bargain. As we racked up our purchases on the
counter, one of the salesgirls asked: "Celebrating a Holiday?"
"No, just stocking up for the winter," I answered.
She laughed. "A lot of the old babushkas think this is going to be like the
seige of Leningrad."
I used to hate shopping, let alone talking about shopping, which is even
worse than talking about fucking, while shopping. Yet the ruble's collapse
into rubble has turned us all into bored housewives, passing along tips as
we gossip about the latest twists and turns of the Duma. The plummet of the
currency has sent us scurrying back into the Brezhnev era, when life was a
long, vodka-infused struggle against shopping. A friend calls me up at
midnight to announce that his local store is now selling two types of
Coca-Cola. One was priced at three rubles (around 25c) since it came from
the old, pre-crisis stock, while the other was marked up to twelve rubles.
"This is our last old Coke," the salesman had said, "but the Diet Cokes are
still from the previous stock." So he snapped up 20 diet cokes, even though
he's not a calorie watcher. "Tomorrow," said my Iranian-English friend, who
now plans to exploit the crisis by exporting Russian whores to work the
klondike Caspian Oil boom town of Baku in Azerbaijan, "I'm going to spend
$400-500 on shopping, before the old stock runs out." We're living, it
seems, within a Mobius Strip: On one side is the old/new post-Soviet,
pre-devaluation Moscow, with its soothing melange of capitalist goodies;
the other is the new, post-devaluation Capital, with its oscillating
prices, and the almost-empty shells of the shiny, bright citadels of the
New Russia. Where the twain meet is anybody's guess; probably in the two
coke cans that nudge each other in a kiosk on Frunzenskaya Naberezhnaya,
where my friend lives.
At the Doctors Without Borders main office in Moscow, all the young punks
in purple hair and day-glo jackets who once might have discussed Carlos
Castenada while handing out pro-safe-sex fliers, have now reverted
subconsciously back to the chit-chat of their parents' generation. "Spray
paint only costs two dollars at that store near Manezh," says one. "That's
amazing, it was $10 at the other store," says another. They exchange
glances. "I guess they haven't marked up their prices yet. We should head
there during lunch," he suggests. And so it goes all around Moscow.
Housewives in America might laboriously clip out coupons for a discount at
the local store; we're the true bargain hunters of the Information Era.
Information is King they say, especially in Moscow where prices vary wildly
from one store to the next. It's almost like each shop-and different
products within each store-have their own currency clocks ticking within
them. Some stopped on Aug 17 (the day the ruble collapsed); some have kept
pace with the dollar; while the others reflect the huge peaks and valleys
of the ruble as it slowly spun out of control. We're living in a vast
consumerist time capsule, that's in danger of imploding from within.
Even the well-fed, well-stocked foreign correspondents haven't been immune
to the panic buying of the past weeks. The Christian Science Monitor Bureau
Chief proudly displays her larder, stocked wall to wall with toilet paper.
"We've got enough for three months at least," she says. "Then we might have
to start using Pravda like in the old days." The Newsweek stringer has been
spending his last rubles on French wine (at $5 to the bottle, it's quite a
steal); while another is buying up bags and bags of pasta. "It's going to
be the first to go," he warns. "Stock up now."
While we whoop and fret about our pathetic attempts to stay ahead of the
Big "Bother," that might await us when shops are finally turned inside out,
someone is moving the chess pieces from above. It is said that there are
only twelve people that know what is happening in Russia. Why twelve? It
might have something to do with the Apostles. It might be because there
were twelve members of the Soviet Politburo. Whatever the reason, that
Dirty Dozen of financiers and Kremlin insiders decided Sept 9 that the
ruble had plunged far enough, and began selling their dollars-those same
$3.8 billion IMF dollars that the Central Bank had once used to prop up the
ruble. Within an hour of trading, the ruble had rised to eleven against the
dollar-from twenty five just before noon-and Moscow had been sucked clean
of rubles. Blissfully unaware of the vast sell-off, I paid 800 rubles for
lunch. When I emerged from the seclusion of Angelico's restaurant, I
realized that I had spent almost $80 on the meal, twice more than I had
thought.
The cynics claim that the banks sold their dollars to raise the ruble
price, so that they could use those same rubles to buy back more
greenbacks; and thus effectively double their capital. Virtual money. The
optimists believe that those rubles will be used to pay the back wages of
all the starving miners and teachers that threaten to bring down the
Yeltsin regime. The opportunists have begun changing their rubles into
dollars, hoping to exchange them back at a better rate soon. During the
Soviet times, it was said that there was only one true Communist, but since
no one knew who that Communist was, everyone behaved like one. Now it seems
like there's only twelve wise men, but we all pretend to be one among them.
While the ruble shrinks and swells like Alice, depending on the whims of a
few men that hold Russia hostage, the Mad Hatter might have remarked: "Aha,
to change rubles for dollars is not the same as to change dollars into
rubles." The West spent a $100 billion hoping to bring about a Russia where
the Mad Hatter would have been wrong. It failed. "Who stole the cakes?"
asks the Queen of Hearts. "Who stole Russia?" ask the Russians now, before
their whole nation comes tumbling down like a pack of cards.

******* 

#9
ANALYSIS-Russia not seen adopting Communist plan

MOSCOW, Sept 9 (Reuters) - Russia's Communists are unlikely to be able to
implement many of the ideas in an ambitious programme unveiled on Wednesday
which analysts said was aimed more at winning concessions from an indecisive
president. 

``The Communists want to present themselves as the party that can stabilise
the situation,'' said Alexei Kara-Murza, a political researcher at Russia's
Academy of Sciences who studies the communists. 

``However the market economy is too rooted in Russia now for them to do what
they did early this century.'' 

In a statement to the Russian people, the opposition Communists on Wednesday
said they were ready to form a government that would reimpose state control
over much of the economy by returning ``vital strategic sectors'' to state
ownership. 

Nugzar Betaneli, director of the Sociology of Parliamentarism Institute which
conducts polling, said the Communists did not have the social support to usher
in sweeping changes. 

``The situation in the society is fairly balanced today. Even though the
government is very weak, no other force can announce its pre-eminence, which
is good,'' he said. 

He cited his most recent poll of 6,000 Russians nationwide in which only 21
percent said they felt a Communist return to power would benefit them, which
is near the level it has been throughout the year. 

``The danger of a social explosion which everyone is talking about will be
smoothed out because there is no monolithic ideology of the population,''
Betaneli said. 

Sergei Markov of the Institute for Political Studies said the Communist
programme marked the latest assault to influence the formation of a new
government after a confirmation vote of a new prime minister expected within a
few days. 

``It's another move in the general Communist political assault. The Communists
are determined not to lose the political initiative,'' he said. 

Kara-Murza, who said he had discussed the Communist statement with its authors
before it was made public, said the Communists were most likely to be able to
influence agriculture policy and regional governments, where many left-wing
governors are in power. 

Their greatest support comes from the countryside, where former state farms
are in disarray and poor production has left the world's biggest territory
importing most of its food. 

The Communists, the dominant party in parliament, are seeking a broader say in
the formation of a new government. 

Nina Andreyevna, general secretary of small hardline All-Union Communist Party
of Bolsheviks, said Zyuganov was only mouthing Communist ideas to win popular
support. 

``The programme that Zyuganov has announced is, of course, a liberal bourgeois
one that has nothing to doing with a socialist let alone communist future,''
she said. 

``Still we support his efforts to stabilise the government because what
Chernomyrdin is doing is a dead end that will lead to a collapse.'' 

*******

#10
Financial Times (UK)
10 September 1998
[for personal use only]
ANTI-CRISIS PACKAGE: Fragile government outlines tax changes
By Chrystia Freeland in Moscow

Russia's fragile government has announced tax changes and outlined an anti-
crisis package, as ministers struggled to conduct business as usual in the
face of growing political uncertainty.

The flurry of economic measures coincided with a significant, if probably
shortlived, appreciation of the rouble.

The official rate jumped to 15.9 against the US dollar, from the central
bank's official rate of 20.8. Analysts said the rouble's recovery was unlikely
to last, but it was a welcome sign for the cabinet, whose authority has been
eroded by a battle between parliament and the Kremlin over who will be
Russia's next prime minister.

In the government's first concrete attempts to respond to the economic crisis,
Victor Chernomyrdin, the acting prime minister, focused on the tax system, a
longstanding weakness made more severe by the paralysis of the banking system.

Yesterday, the acting prime minister scrapped a 3 per cent increase in import
duties on medicines and some medical equipment. The duty had been imposed by
the previous government, under pressure from the International Monetary Fund,
to increase tax collection. But the financial crisis, which has sparked fears
of a shortage in imported medicines and food, has forced a change in focus.

The Kremlin also announced its own economic plan, Russian news agencies
reported yesterday. The plan included guaranteeing food supplies to the armed
force and indexing wages and pensions.

Mr Chernomyrdin said the government was considering cutting the oil excise
tax. Oil companies have been calling for a reduction for months, but the
government had been reluctant to give way because the oil excise tax is one of
the treasury's chief sources of revenue.

The cabinet has also introduced a number of changes in the tax collection
system, in an effort to prevent the collapse of the financial system and
rising inflation.

Russia's 14 oil companies and Gazprom, the natural gas giant, will be allowed
to pay their taxes in hard currency, a step economists said was a standard
response to the very high levels of inflation the country is expected to
endure over the next few months.

The government also ordered the transfer of the tax accounts of Russia's 50
largest companies from private banks to the central bank or to state-owned
banks.

Over the past few days, Boris Fyodorov, the first deputy prime minister, has
also released further details of the broader anti-crisis package the
government would like to implement, if it is confirmed by parliament.

The plan calls for a balanced budget, perhaps using international credits;
pegging the rouble to hard currencies, possibly via a currency board, for five
years starting December 1; eliminating all bank reserve requirements on
October 1; and a radical cut in taxes and an amnesty for old tax arrears.

*******

#11
Moscow Times
September 10, 1998 
NEWS ANALYSIS: Battle for Survival Splits Oligarchs 
By Valeria Korchagina
Staff Writer

The financial-industrial magnates known to Western and Russian media as the
oligarchs are once again not a united force, and for the weeks of this
economic crisis each has been fighting on his own for the life of his empire. 

In previous years, the oligarchs competed in times of plenty -- for them,
anyway -- but in times of crisis came together like a fist to smash mutual
threats. 

Although other names and institutions can easily be added to the list, those
generally considered the core group of oligarchs include seven names
ostentatiously dropped by financier Boris Berezovsky in 1996. 

In a famous interview with the Financial Times, Berezovsky said he and six
other men -- Vladimir Potanin of Uneximbank, Vladimir Gusinsky of MOST-Bank,
Pyotr Aven and Mikhail Fridman of Alfa Bank, Mikhail Khodorkovsky of Menatep
and Alexander Smolensky of SBS-Agro Bank -- had bankrolled President Boris
Yeltsin's re-election, controlled half of the Russian economy and could
dictate government policy. 

In Berezovsky's telling, the oligarchs shared a grand vision for Russia's
future. A year after that interview, the danger of a red revenge gone, the
oligarchs were snarling at each other over the state's largest privatization
of Svyazinvest, the telecommunications holding. 

This year, when the ruble was devalued and the Russian treasury-bill market
frozen, the banks associated with the oligarchs were struck crippling blows.
SBS-Agro has been taken over by the Central Bank; others have laid off
thousands in hopes of staying afloat. 

The oligarchs are now fighting for survival, and though all are still in
Russia, most are laying low. Only Berezovsky, as usual, has made public
appearances in the media -- first advocating Chernomyrdin as prime minister,
then switching to back Krasnoyarsk Governor Alexander Lebed, who now says he
sees Berezovsky as a "partner." 

"There no longer is any consolidated model for which [the oligarchs] are
fighting. They are trying to survive separately from each other," said Sergei
Markov, the director of the Moscow-based Institute for Political Studies. 

However, surviving may involve sharing a few common goals. Former Prime
Minister Sergei Kiriyenko and his deputy, Boris Nemtsov, have both said they
were fired because they advocated bankrupting the failed banks of the
oligarchs. They said Berezovsky, who is close to Yeltsin, prevailed upon the
president to bring back Chernomyrdin. 

Chernomyrdin would be good for Berezovsky and others, like Menatep's
Khodorokovsky or Uneximbank's Potanin, with large oil or gas concerns. A
Communist prime minister, however, could bring tougher times -- or even,
judging by the latest statements of the Communist Party, renationalization. 

And in these days of crisis, what is good for one oligarch may kill another. 

"[Oligarchs] are like tropical plants. They can't live in the mountains or in
the desert. And they are unlikely to change. So once the situation becomes a
bit clearer, all of them will try to affect it so the conditions are suitable
for them," said Yury Korgunyuk, an analyst for the INDEM research center. 

"The SBS-Agro Group could be in favor of somebody like [Communist Party member
and ex-chief of Gosplan] Yury Maslyukov, who might to turn his attention to
agriculture and the regions. SBS-Agro has very close ties with both, and for
that group Maslyukov will mean a flow of state money," he said. 

But despite all that is at stake, with Chernomyrdin now looking unlikely to
pass the State Duma, or parliament's lower house, Markov said Russia seems to
be entering a unique new situation -- when the oligarchs have lost control of
the process. 

******

#12
Excerpt
Flawed Capitalism Requires Regulation, State Role, Jospin Says

Paris, Sept. 9 (Bloomberg) -- Responsible government and effective regulation
must play a role in the world economy next century to counterbalance the
effects of unbridled capitalism, French Prime Minister Lionel Jospin said. 

``Capitalism is its own worst enemy,'' Jospin said in an editorial appearing
in French magazine Le Nouvel Observateur tomorrow. ``The crises we have
witnessed teach us three things: capitalism remains unstable, the economy is
political and the global economy calls for regulation.''.... 

Citing the economic and political problems that have struck Russia, Jospin
said modern market-driven economies need ``rules, solid institutions,
stability and organization'' from the state. He criticized the way in which
emerging economies such as Russia's have been made to undergo a ``forced
march'' towards liberalization from centrally-planned systems without a
sufficient transition period. 

Jospin said the Western world must share part of the blame in ``imposing on
some countries a model which is quite alien to it.'' 

The prime minister also urged better cooperation between governments to
develop common policies and to find solutions to shared problems. Jospin
called on fellow members of the International Monetary Fund to give the body
and its 24-member Interim Committee the means to act as a sort of ``political
government'' to oversee regulation in world markets. 

``The current crisis shows us quite clearly and brutally that the market must
have rules, which run big risks if under- estimated,'' he wrote. 

******