September 15, 1998   

This Date's Issues: 2373• 2374 •2375•

Johnson's Russia List
#2375
15 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Michael McFaul: New government.
2. AFP: Russian think-tank draws up blueprint for Communist economy chief.
3. Reuters: Key points of Russian academics' crisis programme.
4. Harley Balzer: Industrial policy.
5. Timothy Thompson: The Old Order.
6. Moscow Times: Jean MacKenzie, CONFESSIONS OF A RUSSOPHILE:
Hoarding Supercedes Anger.
7. Moskovskiy Komsomolets: Sergey Larionov: "Order: Don't Open Fire: The
General Staff Is Involved in Map Exercises, the Dzerzhinskiy Division Is
Fixing
the Sewers." (Armed Forces' Loyalty to Yeltsin Eyed).
8. PBS NewHour with Jim Lehrer: A RUSSIAN PREMIER. (With Stephen Cohen 
and Robert Legvold)
9. AP: Russia May Print More Rubles.
10. AP: Moscow Stands Tall Despite Crisis.] 

**********

#1
Date: Tue, 15 Sep 1998
From: Michael McFaul <mcfaul@leland.Stanford.EDU>
Subject: new government

Dear David:

A brief comment on your comment. I do not understand why everyone casts
the latest government as a "return to the communists." Every major figure
named so far has served previously in a Yeltsin government ! There is a
very different way of understanding the present government, i.e. that it
represents continuity with the same old strategy of muddling through
without pursuing any policy reform. This reminds me very much of the
stagnant years of the Chernomyrdin years, not the stagnant years of the
Brezhnev years. Why those who have been so critical of the last several
years should now be upbeat at this "change in course" is a bit baffling to
me. To me, it looks like the same old crowd that began asserting their
influence over economic policy in Russia circa Apri1 1992 and have been in
the driver's seat ever since. The short-lived Gaidar months in power
(January 1992-April 1992) and the short-lived Kiryenko government (April
1998-August 1998) represent the aberrations -- the attempts at changing
course. This new government represents continuity, dating really as far
back as 1989-90 through to the present. After all, didnt Chernomyrdin come
to power in December 1992 under very similar political circumstances? The
same people in Russia and the West who hoped for a a centrist alternative
in December 1992 celebrated Chernomyrdin's initial rise to power when he
was backed by Civic Union and other "centrists" of the day. What's the
big difference politically this time around? (The differences in economic
terms are much more stark in that Primakov inherits a situation much worse
than Chernomyrdin did in 1992).

Do not misunderstand me. I see no alternative to this kind of government
under the current conditions and I wish them well. But I personally do not
see this new government as a break with "Yeltsinism." Its the same, a fact
that will disappoint both critics of Yeltsin on both the left and the
right. 

********

#2
Russian think-tank draws up blueprint for Communist economy chief

MOSCOW, Sept 15 (AFP) - A leftist think-tank said Tuesday it would within
two weeks present Russia's new Communist economy chief Yury Maslyukov with
a detailed plan on how to haul the country out of its crisis.
The economics department of Russia's Academy of Sciences, a bastion of
Soviet-era academics, met Maslyukov on Monday to discuss an alternative to
the monetarist policies of the reformist government sacked last month.

Oleg Bogomolov, the department's deputy head, told the Interfax news
agency that the academy's economic blueprint would focus on boosting
domestic industry, stabilising the ruble and compensating for price rises.
The plan "is expected to give an impetus to the revival of competitive
industries and to stimulate the population's demand in their products,"
Bogomolov said.
It would include a range of "first priority measures to stabilise the
ruble and compensate for losses suffered by the population as a result of
the price rises" triggered by the collapse of the ruble against the dollar.
The plan's authors were seeking a "correct and more pragmatic ways out
of the crisis."
Although precise details of the academy's strategy to haul Russia out of
its worst economic and financial crisis since the early 1990s remain
scarce, analysts were distinctly unimpressed by early reports of its contents.
"The academy of science plan looks very unrealistic and contains a lot
of spending proposals and very few revenue-generating proposals," said Tom
Adshead, co-head of research at the United Financial Group here.
"And it is over-optimistic about the ability of the Russian consumer
goods industry to increase production in a highly protected environment,"
he added.

*********

#3
Key points of Russian academics' crisis programme

MOSCOW, Sept 15 (Reuters) - A group of Russian academics with close ties to
the new prime minister, Yevgeny Primakov, have drafted a plan for tackling the
country's economic crisis. 

Following are key points of the plan as published on Tuesday by Kommersant
Daily newspaper: 

PROTECTING PEOPLE FROM INFLATION 

*Indexation of wages and other social payments, completely compensating for
the impact of inflation on the poor and partially compensating others. 

*Guarantee savings by indexing or increasing bank deposits. 

*Stock foodstuffs in regions to prevent shortages. 

*Ban public and official events for the rest of the year to save funds. 

*Restore trade in imported items by "suitcase traders." 

STABILISATION OF FOREIGN EXCHANGE MARKET 

*Introduce compulsory sales of 100 percent of hard currency revenues by firms
for the period of market stabilisation. 

*Sell hard currency to companies only under import contracts or for repayment
of foreign debt. 

*Shorten term for export revenue repatriation. 
*Limit rouble fluctuations on the main currency exchange to a short-term
corridor in order to cut inflationary expectations, accept bids only under
import contracts and for banks' cash exchange operations. 

*Borrow hard currency domestically by issuing bonds. 

PUTTING FINANCES IN ORDER 

*Exclude non-payment and money surrogate payments by the government. In case
of inability to meet obligations money will automatically be printed. This
will not fuel inflation but will boost government's sense of responsibility,
academics say. 

*Eliminate payment of arrears in the economy by mutual debt netting and
repayment, liquidate wage arrears at the same time. 

MOBILISING BANKING SYSTEM FOR STABILISATION MEASURES 


*Improve control of commercial banks by government and central bank taking
stakes in major banks. 

*Grant central bank credits to commercial banks if necessary to raise their
capital. 

*Set up an interbank pool, similar to U.S. Federal Reserve system to guarantee
deposits, support pool's liquidity and bolster national currency. 

MOBILISING ADDITIONAL FUNDS FOR STATE EXPENDITURE 

*Draw up and approve emergency budget for fourth quarter. 

* Allow to print money to finance budget deficit, setting limits (quarterly,
monthly and weekly) for central bank credits to the government and assuring
central bank take government and other bonds for the funds. 

*Consolidate accounts of state organisations and enterprises in the Treasury,
using free resources to finance state needs. 
RESTRUCTURING OF DOMESTIC DEBT 

*Significantly amend government and central bank resolution on t-bill
restructuring from August 17. 

*Reschedule central bank and Sberbank T-bill debts for a period of five to 10
years. Repay bills held by banks, insurance companies, pension funds and
individuals, at August 1 market value or acquisition price, using devalued
funds. 

*Launch new government securities, with required currency hedges on
foreigners' holdings limiting yields to 15 percent annually in hard currency. 

NORMALISING RELATIONS WITH WORLD CREDITORS 

*Reiterate clearly that Russia will be servicing its state debt and Eurobonds,
oblige commercial borrowers during the three-month moratorium (announced on
August 17) to negotiate terms of their next payments. 
*Amend priorities for borrowing abroad, focusing on direct investment as
opposed to portfolio investment. 

*Guarantee foreign investment by law, especially through production-sharing
legislation. 

*Draw up a long-term programme for state debt servicing providing for debt
rescheduling. 

*Take new foreign loans only for concrete investment projects. 

*Work closely with former Soviet countries in trade and industry spheres. 

ACHIEVING ECONOMIC GROWTH 

*Stop banking on foreign investment for economic growth. 

*Stimulate consumer spending, targeted at domestic products. 

*Normalise prices of natural monopolies, help industry by improving payments
system governing foreign trade to favour domestic producers. 

*Use lower imports to help the light and food industries, as well as small
businesses. 

*Lower tax burden, including value-added tax to help industrial production,
with losses compensated by improved production and higher tax on land rent,
property, alcohol, tobacco and luxury items. 

**********

#4
[DJ: Excerpt. For complete text contact Dr. Balzer]
Date: Mon, 14 Sep 1998
From: Harley Balzer <Balzerh@gunet.georgetown.edu>
Subject: Industrial policy

Hi David:

The auguries from Moscow suggest that Primakov's government is
seriously entertaining the prospect of adopting something that they will
label an "industrial policy." At minimum, this should make Jerry Hough
happy. 

What should we expect it will look like? I am assuming that, as in any
government, when policy-makers have to produce an important program
on short notice they do not sit at their computers all night writing. Rather,

they look in the files for something they can plagiarize or adapt.
The one serious discussion of industrial policy of which I am aware took
place in 1993-94, when there was a State Committee for Industrial Policy
attempting to set the agenda. I wrote a chapter on its work for a book
edited by Judith Sedaitis: "Commercializing High Technology: East And
West" initially published by the Center for International Security and Arms
Control at Stanford U. and subsequently issued by Rowman and Littlefield
(1997). 

Given the discussions in Moscow this week, it may have more than
historical interest.

Harley

[Excerpt]
DISMANTLING RUSSIA'S TECHNOTOPIA
SIX MINISTRIES IN SEARCH OF AN INDUSTRIAL POLICY
Harley Balzer, Georgetown University1
It would be surprising if a nation as addicted to technological mythology
as Russia did not seek to
alleviate its economic crisis by turning to some form of industrial policy.2
The USSR was not only highly, albeit
unevenly, industrialized, but it was ruled by a leadership committed to a
"scientific" ideology that elevated
technology to the status of a cult.3 Stalin suggested that "technology
decides everything." In the Brezhnev era,
entire research institutes discussed the "scientific-technical revolution"
and its meaning for Soviet development.
Political rectitude could be calculated by the number of times the mantra
"science-intensive industry" appeared
in an economist's writings. This heritage of what I have called a
"technotopian" orientation has a strong and for
the most part pernicious influence. Even many of the leaders in Russia's
younger generation who know
something about real (as opposed to command) economics are captivated by the
myth of high-tech capabilities.4
The myth of Russian high technology prowess has had a detrimental effect on
discussions of science,
technology and industrial policy. It has proven extremely difficult for
Russian policy makers to formulate an
approach based on rational assessments of the nation's industrial and
technical capabilities. In a context of
organizational chaos and institutional rivalries, the high technology myth
inhibits elaboration of a coherent and
effective policy. It has also left Russian policy-makers susceptible to
well-meaning but seriously misguided
attempts to impose developmental models based on the experience of nations
with vastly different cultural and institutional conditions.
This essay will sketch the context for Russia's industrial policy debate
with a brief review of the
situation in applied R&D and conversion--the two realms that are the key to
any successful Russian industrial
policy. We will then turn to an analysis of the debate over industrial
policy within the Russian government. To
help clarify the issues of the Russian debate, we will also examine a
parallel discussion taking place among
Western specialists. Examining these competing proposals against the
background of Russia's technotopian
orientation should help to clarify the prospects for different lines of
development.....

*******

#5
Date: Tue, 15 Sep 1998
From: Timothy Thompson <timothy@halcyon.com>

Subject: The Old Order

This past Sunday I had the opportunity to listen to some table talk
about the Primakov regime not from pontificating Americans but from
Russian émigrés. Several of the Russians, including my wife, were
former members of the Democratic Union movement in St. Petersburg.
The talk was not about Communist economics.
One woman, about 42 years old now, told about her many hours of
interrogation by the KGB, the withdrawal of her foreign travel
"privileges", her confinement to house arrest. She also remembered her
companion, a famous dissident, the impresario for many artists in
exile. First, the three weeks of "questioning" in the Bolshoi Dom. 
Then, the loss of his position. Then, the harassment of his godfather,
a prestigious university professor. Then his godfather's forced
retirement and confiscation of foreign-travel passport. Then, finally,
his death in a car accident: he was a pedestrian, the car was driven by
a KGB officer. 
This happened during another period of Communist retrenchment under
Mikhail Gorbachev's "liberal" regime, the one which practiced socialism
with a human face. 
For these Russians, the sharp turn to the left had little to do with
foreign investments, or bank accounts or defaults. The cost they
estimated wasn't in rubles or dollars. The cost was in lives. The
questions they were asking weren't about repatriation of investments,
they were about closed borders, confiscated passports, internal exile,
ruined careers and state-sponsored assassination. 
It wasn't lost on the Russians that the hard-liners tried to remove
Gorbachev. They wonder about Yeltsin's future. I called it the Quiet
Coup. Chernomyrdin called it the Creeping Coup. Whatever the term,
they sense that there is a real danger that while the West focuses on
the Russian economy the neo-Communists may start to whittle away at the
new personal freedoms in Russia. 
While I understand and respect your position about lecturing to
Russians about Russia, I must disagree about one point. It's always
fair game to snipe away at the Communists. They're bad news for Russia,
they're bad news for the world. Their 70-odd years of power in the
Soviet Union were a blight on the history of mankind and no one in the
West should forget it.

**********

#6
Moscow Times
September 15, 1998 
CONFESSIONS OF A RUSSOPHILE: Hoarding Supercedes Anger 
By Jean MacKenzie

The sun is shining, the temperature is soaring, the ruble is stabilizing,
and
at least for a few days we can all breathe a bit easier. There is no longer
much talk of tanks in the streets, and, although the pudgy, rumpled Yevgeny
Primakov would hardly be my top candidate for Sir Galahad, he has officially
been designated as The Man Who Will Save Russia, which takes the pressure off
the rest of us for a bit. 
All we have to do is try to make some sense of it -- a nearly hopeless
task in
Russia, I have found. It's pretty easy to sell the West on doomsday scenarios,
and I've done my share of "The Bolsheviks Are Coming" pieces over the past few
weeks. 

A population whose savings have been all but confiscated and whose pay,
when
it comes at all, is almost worthless due to rising prices and a ricocheting
ruble, empty store shelves, rising unemployment, a weak and ailing president
and extremists waiting in the wings -- it's almost a textbook recipe for
revolution. 
But even this explosive brew goes stubbornly inert in the face of Russian
psychology. "I should have known better than to put my money in a bank," said
Anatoly, an out-of-work builder who two months ago had finally decided to put
his life's savings -- $5,000 -- in SBS-Agro bank. "I got what I deserved."
Wait a second. If SBS-Agro head Alexander Smolensky ended up in a soup
kitchen, now that would be just deserts. 
With fabled Russian carpe diem aplomb the government has cut itself off
from a
main source of internal financing for the next generation. The IMF and the
World Bank will shrug off their losses and put aside their frustration with
Russia long before Anatoly and his ilk will drag their crumbled dollars out of
their socks again. That $20 billion to $40 billion that Russians have salted
away will stay under mattresses, untaxed and unavailable to the economy. 
I went to a party Saturday night, where we dined on what the host called
"pre-
crisis chicken," drank wine, and weighed up our chances of starving to death
over the coming winter. Surprisingly, it was an uncommonly pleasant evening. 
Not one Russian I talked to was angry. The Americans (myself included) were
spitting nails at the news that Stockmann would no longer take our credit
cards, but our friends were much calmer. "I know it will be hard for us, for
our generation," sighed Sveta, a young doctor who could not be more than 25.
"But at least our children will live in a better world." 
"But that's what your mothers' generation said," I fumed. "And her
mother, and
her mother before her. Where are all these happy children? Where on earth is
this 'better world?'" She just shook her head at my Western impatience. 
Others are positively gleeful that the comforting misery of the old days has
returned. Better the devil you know than the angel you don't, as they say. 
"My mother is so happy," laughed Olya. "She says it's as if we've been
abroad
for five years, and now we've all come home." I guess hoarding matches,
cooking oil and flour reminds people of the bright days of their youth. 
As for me, I'd just as soon not go back to spending my days searching for
bread and toilet paper. Even I had to smile at a news clip that showed a bunch
of bankers -- whose popularity in Russia is probably on a par with that of
lawyers in America -- demonstrating for social benefits. This, presumably, was
a group that had fallen off the gravy train during the mass crisis layoffs. 
"Bankers are people too," read their banners, no doubt scrawled on $500
sheets. Instead of miners' helmets, they were banging their mobile phones
against the pavement, which shows a sense of humor, if nothing else. 
So what happens now? 
If I believe one set of friends, the ruble will seesaw in line with some
nefarious plot to increase hard currency reserves and pay off debts at

advantageous rates. 
With my razor-thin knowledge of economics, I am unable to assess the
technical
likelihood of such a move. Emotionally, it feels right. If you need money, get
it by victimizing the population. It's enough to send people out into the
streets. Scratch that. It's enough to send me out into the streets. 
As for my Russian friends, who are paying the price, they are too busy
hoarding oats, blaming themselves and trying to survive. 

*********

#7
Armed Forces' Loyalty to Yeltsin Eyed 

Moskovskiy Komsomolets
5 September 1998
[translation for personal use only]
Article by Sergey Larionov: "Order: Don't Open Fire: The
General Staff Is Involved in Map Exercises, the Dzerzhinskiy
Division Is Fixing the Sewers"

The exciting thriller, in which we are all participants, is,
alas, approaching the denouement. And the closer the finale, the
more often a frightening dream--tracer rounds, the stench of
burning, the smell of blood--appears to all of us.
The men in uniform have always been keenly aware of when
people want once again to shove dirty work off onto them. This
intuition is based on several indications. The first is the
Kremlin's unconcealed subornation of the generals from Arbat Square,
Lubyanka, and Krasnokazarmennaya Street (this is where the MVD
Interior Troops Main Command is located). Distribution of ranks,
promise of a dizzying career, compromising material--all this comes
into play. The second indication is the juicy bone thrown to the
"ranks" of the power agencies. Banknotes smelling of printer's ink,
six months' pay, and some things on top of that.
The present situation in the Russian Army may boldly be called
catastrophic. Acting Defense Minister Sergeyev is in a state of
weird prostration. Reform of the army is impetuously turning into
the breakdown of the latter. The last time the vast majority of
officers were paid was in May. The marshal cannot break loose from
this hell: There is something by which the Kremlin is holding him
fast, rejecting all the defense minister's requests to leave. At the
same time, on the other hand, many people in Arbat Square are
confident that Sergeyev is not Grachev and that he would not go
along with a disgraceful adventure involving the commitment oftroops to
Moscow.
But another person--Anatoliy Kvashnin, chief of the General
Staff--is capable of this. No one in the military department makes
any secret of the fact that Kvashnin is playing his game with the
presidential structures. The plans for the command-staff exercises,
which will be held from 7 through 11 September in Moscow and which
will be devoted to the army's operations in crisis situations, were
drawn up in the General Staff, incidentally. According to Moskovskiy
Komsomolets' information, all the officers taking part in the "map
exercises" received instructions ahead of time to put in order their
"alarm boxes," papers and documents, and weapons....
Georgiy Shpak, commander of airborne forces, is considered
"loyal" to the President's team. Georgiy Ivanovich himself,
incidentally, in an interview with Moskovskiy Komsomolets made no
secret of the fact that he is "in contact" with Yumashev and

Savostyanov. Despite all this, though, the airborne forces are
living in poverty also. Even in the "first echelon"--the airborne
reconnaissance battalion in Sokolniki and the paratroop regiment in
Naro-Fominsk--the officers have not seen any cash for a very longtime.
There is another army figure--Leontiy Kuznetsov, commander of
the Moscow Military District--who cannot be ignored either. After
all, all the "body language" of the Kantemir and Taman divisions,
with which we like to intimidate the irreconcilables and
intractables, now depends on him. Kuznetsov is a commander with good
connections and strong nerves. He was not pensioned off when he hit
60--this favor had hitherto been bestowed only on Marshal Sergeyev. 
But even people who know him well would not venture to predict how
Kuznetsov would behave under emergency conditions. Even if there
comes to be pressure on him, one loophole, as a matter of fact,
would remain, all the same. Which? Everything could be heaped on the
internal troops, in which Moscow itself and its outskirts are
rolling. They are alleged to have everything: infantry fighting
vehicles, armored personnel carriers, mortars, air defense guns, andso forth.
And what about the Taman and Kantemir divisions? It is not
1993 now. The divisions are not at full strength. The officers have
not been paid any money since the start of summer. Everyone is in a
rotten mood. The commander of the Taman Division is on leave, in
fact. Generally speaking, only at a great stretch could our
divisions be called performance-capable. The same is being said also
about the Separate 27th Motorized Brigade, which "props up" Moscow
from the southwest (the Mosrentgen township). There has been all too
frequent a change of the local command in the past several years.
The brigade was even once an airborne brigade. The change of
signboard has not yielded anything good: the 27th is now called
behind its back "spineless".
The internal troops, which, someone having started it, have
been christened the "second army" (for reference, incidentally: a
minimum of 30 percent of internal troops are army officers
disenchanted with their contract with the Ministry of Defense), have
other problems. Following the departure from the MVD of Anatoliy
Kulikov, the internal troops began to experience for themselves what
reduction means. Stepashin's approval rating in the ranks has begun
to fall rapidly. And there was quite recently an event that was seen
on Krasnokazarmennaya Street as an unprecedented piece of folly: The
troops received no money for August. In addition, all social
payments (rations and so forth), which the internal troops, as
distinct from the army, have endeavored not to hold back, weresuspended.
There has come to be talk in the MVD to the effect that the
Kremlin is playing with fire. We have to agree: The 250,000-strong
internal troops and the 36,000-strong airborne forces are, perhaps,
the sole force on which the authorities can still count. Only there
do some traditions and fighting morale persist.
This week the atmosphere among the internal troops was quite
calm, and half the command was on leave. The Sofrinskaya Operational

Brigade, which, incidentally, on the eve of the October holidays
(Brezhnev Constitution Day, anniversary of the revolution) annually
moves to the capital, has not gone anywhere. Just to be on the safe
side. The specialized motorized military unit (headquartered at the
Savelovskiy Station), units of which are distributed among all
Moscow's administrative districts, has also gone about its service
in customary mode.A special mention of the Separate Operational Division
(formerly the Dzerzhinskiy Division). It is no secret that this
"operational vanguard of the interior troops" is required in the
event of the imposition of a state of emergency to immediately take
control of important facilities and lines of supply and
communication of the capital. The division maintains two special
500-man detachments--the Vityaz and Rus (according to Moskovskiy
Komsomolets' information, the Rus is currently out of town--
somewhere in warm climes)--for the performance of specialassignments.
Yeltsin was to have visited the Dzerzhinskiy Division
recently--such things happen only in emergencies, incidentally. It
did not happen. The MVD concluded that the President's team is,
consequently, still hoping for something or other, is not,
consequently, under that much pressure as yet. The division,
meanwhile, has been peacefully renovating sewers, which had been put
out of operation owing to their state of dilapidation.
Nor has any special activity been observed in the 10 regiments
of internal troops that were formed in Moscow and Moscow Oblast back
in 1996--for "reinforcing the rule of law and the fight against
organized crime in the Moscow region." The Internal Troops Main
Staff makes no secret of the fact that, however, everything could
change within 24 hours. And getting the people assembled would not
be difficult: The majority of officers live in base compounds
directly on the grounds of the units. Bringing back those on leave
would not be a problem either.
The problem lies elsewhere: The internal troops are
vacillating. Not like the army, but vacillating, all the same. The
logic is the same: This is not 1993.
Our sources in the Ministry of Defense and the MVD maintain
that no direct instructions for taking off the gun-covers in the
forces have been received. Nonetheless, people in "civilian clothes"
are conducting explanatory work with Russia's generals. The striped
fraternity has already been divided into "whites" and "reds." It is
question of money. The power agencies have no intention of covering
the well-fed backsides of the authorities for nothing. Whence the
conclusion: Whoever takes the army to dinner gets to dance with italso....
P.S. Just before the issue was signed to press, we learned
that the chief of the General Staff had gone to the building of the
former Ground Forces Main Staff (Frunzenskaya Embankment) at about
1500 hours. Anatoliy Kvashnin called to a meeting the generals who
are in charge of the ground and armored troops, artillery, army
aviation, and signals.

*********

#8


www.prs.org
Public Television
The NewHour with Jim Lehrer
A RUSSIAN PREMIER

September 14, 1998 
(With Stephen Cohen and Robert Legvold)

After weeks of political infighting, President Boris Yeltsin and members
of the Duma, Russia's lower house of parliament, have finally agreed on a
new prime minister. Yevgeny Primakov, the former KGB spymaster and more
recently Russia's foreign minister, has been elected to the position. But
can he lead Russia out of its current crisis? Elizabeth Farnsworth and
guests discuss. 
ELIZABETH FARNSWORTH: After weeks of financial crisis and political chaos,
the Russian Duma or<Picture: Primakov> lower house of parliament on Friday
voted to confirm Yevgeny Primakov as prime minister of the Russian
Federation. He had been nominated by President Boris Yeltsin only after his
first choice -- Victor Chernomyrdin -- was rejected twice by the
Communist-led Duma. The new prime minister must now deal with a collapsing
currency, a failing banking system, and an industrial slump. Primakov says
he stands for national unity. 

YEVGENY PRIMAKOV: (speaking through interpreter) I stand for accord across
the political spectrum, the mobilization of all our potential to break out
of the political crisis and to preserve Russia as a united and strong state. 

Who is Yevgeny Primakov?

ELIZABETH FARNSWORTH: Primakov was one of Mikhail Gorbachev's closest aides
during the reform period of the 1980's and, before that, a foreign policy
advisor to President Leonid Brezhnev. The new prime minister is also a
former deputy director of the KGB, the Soviet spy agency, and was a
director of its successor, the foreign intelligence service. In 1991,
Primakov gained world attention in the run-up to the Gulf War by making a
last-ditch attempt to persuade Saddam Hussein to withdraw from Kuwait. Five
years later, he again played go-between in a dispute with the Iraqis over
access for UN weapons inspectors. So far, Primakov has named two
Communist-backed figures to key positions in his new government. But he has
also promised not to return to Soviet-style economics. 

EVGENY PRIMAKOV: (speaking through interpreter) The state could and should
regulate the economic process but this isn't a return to the
state-administered system as in Soviet times. Every state has a right to do
it. Remember that Roosevelt introduced regulatory measures in the America
economy during the Great Depression. 

ELIZABETH FARNSWORTH: Primakov held his first cabinet meeting this morning. 

ELIZABETH FARNSWORTH: And for more now we're joined by Stephen Cohen,
professor of Russian Studies at New York University, and author of
Rethinking the Soviet Experience, and Robert Legvold, professor of
political science at Columbia University and co-author of After the Soviet
Union, From Empire to Nations. Professor Legvold, you know the new prime
minister. What should Americans know about him beyond the details we just
heard? 

Prof. Legvold: "This is a very able, a very shrewd and intelligent man."

ROBERT LEGVOLD: Well, many of us in the Russian-Soviet field know him from
those days when he headed senior key academic institutes in Moscow. I
continued to see him when he was in Gorbachev's entourage and then when he
headed their equivalent of the CIA. In all of these incarnations this is a
very able, a very shrewd and intelligent man. He was committed to the
Soviet system but not unthinkingly. He was a critic of the Soviet - of the
Soviet Union - desired reform and supported what I think at the time would
have been regarded as an enlightened foreign policy. He's a very pragmatic
individual. 


ELIZABETH FARNSWORTH: Stephen Cohen, how did you manage? Is it the
pragmatism that allowed him to be supported by both ends of the political
spectrum in this time of crisis in Russia? 

STEPHEN COHEN: It's very remarkable in Russia. It happened last Friday. How
long it's going to last I'm not sure. But what happened is that there came
a moment when Primakov threatened no one - at 68 and not in great health.
He's not going to trample the presidential ambitions of other people. And
at the same time he gave very important assurances to other people. The
Communists think he will implement some program akin to theirs. The people
in the parliament who want to be sure that there will be further elections,
believe that Primakov will allow them to happen or enable them to happen,
and equally important I think Yeltsin trusts Primakov to prevent any
prosecution on criminal charges of Mr. Yeltsin and his family if and when
Mr. Yeltsin leaves power. So he was all things to all people for a brief
moment. It won't last long. 

ELIZABETH FARNSWORTH: Professor Legvold, do you think that the Communists
are right that Primakov will implement an economic policy something like
their own? 

ROBERT LEGVOLD: I think it'll come much closer than they would have gotten
from Chernomyrdin. But I believe no one in that position is able to do
everything, or even, in large part, what the Communist Party would want
these days, that is, very heavy state intervention in order essentially to
bail out an industrial establishment that cannot be salvaged in order to
save all of those who were suffering in the current environment by using
the state and its resources, it simply can't be done. So the Communists are
going to be disappointed. 
ELIZABETH FARNSWORTH: And do you think that the people, for example, one of
the leading reformers - Boris Nemtsov recently said that this confirmation
that Primakov has brought the Communists back to power - you think that's
wrong? 

ROBERT LEGVOLD: No. I think what Nemtsov was saying is that by appointing
people like Maslyukov, and Gerashchenko - the new head of the central bank
- that a lot of what had been done - in reform before is going to be
undone, that is, it's going to be tampered with. And I think one of the
dangers now is as Primakov attempts to be - in Steve's phrase - all things
to all people - not so much a retreat to Communism as much as splitting the
difference among policies that will lead to a kind of incoherence of policy
at a time of deep crisis, economic crisis, that requires clearly
articulated and coherent policy. 

ELIZABETH FARNSWORTH: Steve Cohen, what do you think about that splitting
of policy, is that the danger? 

A profound crisis.

STEPHEN COHEN: I think we might miss something here. Bob pointed to it, but
let me underline it. I don't want to misrepresent what I think Bob
believes. The country is in profound crisis. It's coming apart at the seams
politically, economically, socially, psychologically. The economy has
collapsed. Winter is coming. People have no money. They have no food.
There's no medicine. I speak now with the provinces, but that enormous
deficit is descending on Moscow. The country is in radical circumstances,
traumatic circumstances. I believe that's what's happening in Moscow is we
watch the struggle of Mr. Primakov to form a government, coalition
government, therefore a compromise government. Maybe the last stand of
centrist or moderate political figures in Moscow - by that I mean moderates
from the different political parties. If you were to say to me are the
Communists coming back into influence, I would say to you which Communists
- this party is a mess. There are people in this party who are essentially
social democrats; there are people in this Communist Party who aren't far
from being fascist. So the question in my mind is: Can Primakov put
together a centrist, moderate government and use the state, because they
are abandoning the former so-called free market - the state doesn't play a
role policies - can he do it; can he stabilize the situation, or will the
moderates collapse and open the door to ferocious forces? That's the issue
in my mind. 


ELIZABETH FARNSWORTH: Robert Legvold, how would you answer that question? 

ROBERT LEGVOLD: Well, I think Steve is right. I mean, the country is in a
profound economic crisis and has accelerated enormously since last May.
What we've avoided is a political donnybrook that would have made things a
lot worse had it gone to a disillusion of parliament and then elections at
the same time that the Duma was trying to block them with impeachment. But
the underlying problem remains. There has - up to this point - been no
effective problem for addressing the economic emergency - and until we see
what Primakov is going to do - what kind of a team he's going to put
together - we have no idea whether they're going to get any kind of a
handle on this. If they don't, then what has been a financial crisis
affecting the markets, affecting the value of the ruble and now beginning
to generate inflation within the economy, is going to spread until it
becomes a broad socioeconomic crisis, and that does open the way for
radical, militant leadership that would promise solutions with a heavy and
iron hand, that is, autocracy again. 

ELIZABETH FARNSWORTH: Stephen Cohen, do you want to comment on that, and
then I also want to hear from you what the U.S. should be doing. 

Prof. Cohen: "The so-called free market reforms in Russia have collapsed;
they're over."

STEPHEN COHEN: Well, I think - I'm not sure whether there's a difference
between me and Bob here or not, but I don't see that the government has
much choice. It must pay wages. Do Americans understand that millions and
millions of Russians have not been paid their wages in months and months
and months, or their pensions? They can't get to their bank account, their
savings. First of all, the accounts have been frozen, and secondly, they've
basically evaporated. So what are these people going to do? The government
is going to print money. There's no question about that. That's the
significance of the appointments that Primakov has been. They are going to
print money on the assumption that better say as a friend of mine said 30
percent inflation than 30 percent excess deaths or a complete crumbling of
the situation. These things are going to happen. They're going to go in for
protectionism. The state's going to try to regulate the ranks through price
control and wage control. As we talk, in many of the 89 territorial
administrative districts of Russia local bosses, governors and mayors, are
already imposing price and age controls. They're forbidding products
produced in their province from going to another province. The so-called
free market reforms in Russia have collapsed; they're over; Russia is
changing course; and now, so to speak, the ball is in our corner. 
ELIZABETH FARNSWORTH: And very quickly, Stephen Cohen, what should the U.S.
do, very quickly? 

STEPHEN COHEN: I think we should abandon our dogmas, be humane, and help
Russia save itself by whatever means we can. 

ELIZABETH FARNSWORTH: And Prof. Legvold, what should the U.S. do? 

ROBERT LEGVOLD: Well, I think the message that Clinton delivered in Moscow
was right. The Russians are part of an international environment now and
they're not able to do all - to go in a radical direction, as Steve
suggests, to the degree in which I think they're inclined to. They're going
to have to exercise restraint. 


ELIZABETH FARNSWORTH: Okay. Thank you both very much. 

********

#9
Russia May Print More Rubles 
By Vladimir Isachenkov
September 15, 1998

MOSCOW (AP) -- Russia's new Central Bank chief called today for printing
more rubles to pay off back wages, a risky move that economists fear could
unleash hyperinflation. 
Viktor Gerashchenko, who was broadly criticized at home and in the West
for inflationary policies during his 1989-1994 stint as the Soviet and then
Russian top banker, said the Central Bank would not start adding to the
money supply until its new board of directors is in place and can consider
such a move. 
Parliament plans a confirmation vote on the board members Wednesday. 
Gerashchenko's comments came while President Boris Yeltsin conferred
with his new prime minister, Yevgeny Primakov, in the Kremlin today and
began making appointments to a Cabinet that must deal with Russia's
economic woes. 
When asked about boosting the money supply, Gerashchenko said, ``We
can't do without that,'' Interfax reported. He gave few details. 
Gerashchenko did not say if the increase in the money supply would be
underpinned by the Central Bank's hard currency reserves. If the bank
simply prints money that is not backed by assets, as it did in the early
1990s, this would erode the value of the ruble and lead to hyperinflation. 
Primakov has said the new government's top priority will be paying the
millions of workers and pensioners who are owed back wages. 
But Primakov has yet to say how the government will raise money to meet
its obligations. 
``We will find the necessary solutions to avoid hyperinflation,''
Primakov told reporters today, without elaboration. 
After years of ruinous inflation this decade, Russia had been bringing
prices under control. Inflation was down to 11 percent last year and was
expected to be in single digits this year, until the economic crisis hit
with full force last month. 
Inflation leapt to 15 percent in August, and was 36 percent for the
first week of September. 
Russia's market reformers have expressed concern that the new Cabinet
will rely on outdated methods such as printing money and tightening
administrative controls to undo free-market reforms. 
The reformers also fear that the appointment of Soviet-era bureaucrats
to top economic posts will bring back Communist influences in government
policies. 
Primakov has been consulting with economic planners who worked with the
last Soviet president, Mikhail Gorbachev, and have since been on the
sidelines. They have not been offered jobs in the new government, but their
advisory role shows that Primakov feels comfortable consulting old
colleagues and may have some misgivings about the younger generation of
reformers who were so prominent in the previous government. 
Primakov and other government officials, however, pledged to continue
reforms and promised to walk a tightrope between paying wages and
maintaining control over the money supply. 
Officials on Monday denied reports that the government had already
cranked up the money-printing presses to pay wages. 
The Communist Party has distanced itself from the new administration.
Communist leader Gennady Zyuganov said today that the appointment of
Communists was a Kremlin initiative, not the party's proposal. 

Alexander Shokhin, the head of the pro-government, centrist Our Home
Is Russia parliament faction, said today he had accepted the post of deputy
prime minister in charge of financial issues. Shokhin previously served in
the Cabinet as economics minister at the start of Russia's post-Soviet
market reforms. 
Shokhin said the government might print some new rubles, but pledged to
keep it under strict checks to prevent fueling inflation. 
Plans to print new rubles are certain to complicate Russia's talks with
the International Monetary Fund. The IMF wants to first make sure that
Russia has sound economic policies in place before releasing the next
installment of a $22.6 billion rescue package put together in July. 
The IMF director in charge of Russia, John Odling Smee, was due in Moscow
today for talks with Russian officials. 
Meanwhile, Russia's currency, which has been gaining strength in recent
days, was trading between 7.5 and 10 to the dollar on today. 

*********

#10
Moscow Stands Tall Despite Crisis 
By Deborah Seward
September 15, 1998

MOSCOW (AP) -- Throughout Russia's economic decline, Moscow has stood out
as a beacon of abundance, the very symbol of reform with its gleaming new
buildings, fancy restaurants and casinos. 
The financial hurricane that has swept away savings and whipped up
prices leaves Muscovites wondering whether the bubble of plenty that has
grown since economic reforms began in 1992 has burst. 
``Things have gotten much better compared to the stagnation under
(Soviet leader Leonid) Brezhnev,'' said engineer Vsevelod Vorobyev. ``We
only hope we'll get through the crisis, and things will improve even more.'' 
Advocates of economic reform reject the complaints of many Russians that
reform has not worked. The problem, they counter, is that most of Russia
has not seen any real reform because of hard-line officials, incompetence
and corruption. 
Moscow is the one place where the benefits of economic reform have been
widely apparent. 
Moscow salaries are 65 percent higher than the national average and
three times as high as in cities in the poverty stricken agricultural ``Red
Belt'' in central Russia or aging industrial cities in the north. 
Even though prices, too, are higher, everything is available -- even
jobs, while in most parts of the country unemployment is growing. And most
Muscovites get their salaries on time in a country where salaries and
pensions often are months behind. 
Russia's banking and financial resources are concentrated in Moscow.
Most foreign investment flows through the capital, and many Russian
companies have their headquarters here, bringing in valuable tax revenue. 
As the crisis deepens, however, there are signs of cracks in Moscow's
economic boom and fears that things could get very bad. 
``The ones who will be losing now are the ones who gained,'' said former
Prime Minister Yegor Gaidar, who ushered Russia's economic reforms by
lifting price controls in January 1992. 
For Russians, Moscow always has been another world, a place of power and
possibility that represented the great escape from the isolation of the
provinces and the promise of a more prosperous life. 
In Soviet times, people used to say obtaining a coveted Moscow
residency permit, or ``propiska,'' was like being made a member of the
nobility. People concluded fake marriages with Muscovites or endured years
in shabby workers' dormitories outside the city, hoping for a ``propiska.'' 

So many people want to live in Moscow that even today in a free Russia,
the city government has a registration system designed to keep down the
number of people legally allowed to live here. Police can ask to see
anyone's documents at any time -- and often do. 
At a branch of the troubled Most Bank on stylish Tverskaya street,
people wait to fill out forms transferring their savings to the state
savings bank. 
The foreign furniture stores that sprouted all over the city to decorate
the apartments of the newly wealthy largely are empty. So are auto
dealerships, and travel agencies have reported business is down. 
``There is a danger Moscow could end up looking like the rest of the
country,'' said Tigran Sarkasyan, an Armenian businessmen who has lived in
Moscow for five years. ``But I hope not.'' 
In some neighborhoods, Moscow is more rundown than when the Soviet Union
collapsed in 1991, and deep pockets of poverty remain. 
Tens of thousands of refugees have flocked to the city, fleeing unrest
in parts of Russia and other former Soviet republics. Growing disparities
in wealth are shocking to many Russians -- even supporters of a free market. 
Elderly ladies battling to survive sell toilet paper on the street next
to stores where a pair of men's shoes costs five times more than the
average monthly pension. 
``Many buildings have been restored, but frankly some of it is over the
top,'' said Vorobyev, the metro engineer. ``Look at this,'' he said
pointing to a new underground mall next to the Kremlin, ``It's a bit
artificial.'' 

*******