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Johnson's Russia List


September 16, 1998   

This Date's Issues: 2376 2377 

Johnson's Russia List
16 September 1998

[Note from David Johnson:
1. AP: US Criticizes Russia's Old Policies.
2. Reuters: Adam Tanner, FEATURE - Russia's crisis stuns expectant

3. Moscow Times: Chubais: I Didn't Lie. (Letter)
4. The Times (UK): Anna Blundy, Westerners flee as Russians rediscover
black sense of humour.

5. Jerry Hough: Primakov cabinet. 
6. Masha Gessen: inadvertent publication.
7. the eXile: Mark Ames, Escape From Moscow. (And comment on apology)
8. Financial Times (UK): Letter by Robert McIntyre on privatization

9. Mike McKeever: Hasty economics.
10. Reuters: Russian communists say offered no govt posts.
11. RFE/RL: Matt Frost, Zbigniew Brzezinski Skeptical On Primakov 

12. AFP: Moscow restricts price rise for essential items.]


US Criticizes Russia's Old Policies
September 15. 1998s

WASHINGTON (AP) -- The ``do-it-Russia's-way'' approach of newly appointed
Prime Minister Yevgeny Primakov could prove disastrous if key figures in the
new government are allowed to pursue policies of the past, a State Department
official said Tuesday.
Stephen Sestanovich, special adviser to Secretary of State Madeleine Albright,
also said Russia could be headed for a punishing round of inflation unless it
gets its financial problems under control.
``The economic crisis knows no pause,'' Sestanovich told a hearing of the
Senate Foreign Relations Committee. ``The new Primakov government will soon be
forced to make fateful decisions that will determine Russia's future and the
kind of relationship we have with it.''
Sestanovich spoke just hours after Russia's new government proposed printing
money to pay back wages and imposing some Soviet-style controls over the
Primakov, a former foreign minister and spy chief, was approved Friday by a
parliament that had rejected President Boris Yeltsin's first choice for prime
minister, Viktor Chernomyrdin. He has appointed Communists to key economic
posts, but said the government will stay the course with reforms and will not
return to a Soviet-style command economy.
Sestanovich said, however, that the policies some in the new government are
proposing -- such as printing money, wage, price and capital controls and
restoring state management of the economy -- ``are likely to have disastrous
results, above all for the Russian people.''
To create a stable and prosperous economy, Russia needs to improve tax
collection, bring its budget under control, deal with the deepening banking
crisis, improve the climate for foreign investment and control corruption,
Sestanovich said.
``There may be more than one path toward stability and growth, but without
these elements Russian economic policy simply cannot succeed,'' he said.
Sestanovich said there are those in Russia who have no more than a tactical
commitment to democratic process and will be prepared to exploit economic and
political turmoil to gain power.
``Neither we nor Russia's elected leaders can ignore this fact,'' said


FEATURE - Russia's crisis stuns expectant mother
By Adam Tanner

MOSCOW, Sept 15 (Reuters) - Life seemed pretty stable in Russia eight months
ago when Lena Golubeva decided to have a baby as a single mother. 
She had a good job with a firm importing foreign goods, inflation was low and
the situation in the Russian capital appeared to be getting better as economic
reform seemed to be bearing some fruit at last. 
Then four weeks ago the government devalued the rouble, shrinking the value of
her 5,000 roubles savings threefold to about $300. Her company took a major
hit, and she says it is unlikely she still has any future there after
maternity leave. 
``If I had to think today whether I would have a child or not, I'd probably
decide against it,'' she said in her Moscow apartment where she has abandoned
a planned sprucing up midway though the job. ``Everything seems so terrible
``I think that those in the first three months who are not well off will do
something about it,'' she added, referring to abortion which is common in
Golubeva, 36, who is due in early October, is only one of millions facing
hardship after severe economic changes in recent weeks have led to empty store
shelves and have made some medicines hard to find. 
But as Lev Tolstoy wrote in Anna Karenina, every unhappy family suffers
unhappiness in its own way. For Russia's expectant parents the twist of fate
that left the economy reeling is particularly bitter. 
``Stability then played a role in my decision. It was all thought out,'' she
said of her decision to have a baby outside of marriage. ``But I'm afraid that
I cannot survive in this Russian economy, or won't be able to find a job, or
won't find a social safety net in case of need.'' 


For years instability in Russia after the 1991 collapse of the Soviet Union
deterred would-be parents from having children. The birth rate plummeted from
about 17 births per 1,000 people in 1985 to nine per 1,000 last year. 
But as some families began to see light at the end of the transition period
from communism, the trend began to show a reversal. 
Russian women gave birth to 645,000 children in the first six months of 1998,
up from 639,000 during the same period a year before, during a time that the
overall population fell slightly. 
``From about 1996 or 1997, people began to feel that they could raise children
again,'' said Zinaida Kanasyova, head of the newborn section of the Birth
House 32 maternity hospital where she has worked since 1952. ``We have seen
more births in 1997 and 1998.'' 
Kanasyova said a better economy played a role in the rise, and some experts
say the latest wave of economic setbacks are likely to send the numbers
shrinking again. 
The chaos in Moscow markets outside seems far away for the new mothers in
Birth House 32 overwhelmed by the joy of their new babies. 
``We have forgotten about everything that's happening out there,'' said Layla
Mukhameta, 25, a beauty salon administrator who had just given birth to a
daughter. ``We don't care at all about the course of the dollar, that one
prime minister was rejected and another chosen.'' 
``We are just waiting for the moment when they bring us our babies and it's
then that we are happiest.'' 
As in Soviet times, mothers usually spend about a week in maternity hospitals,
and the infants are kept away except at regular feeding intervals. The
husbands are also barred. 
Mukhameta's husband is a hockey player who earns a salary designated in
dollars so she is not worried about finances. 
``Of course everything that's happening (in the economy) is terrible but we
wanted children anyway,'' she said. 
Another new mother in the ward, Maryam Mogamedova, 26, does not have a
husband, but maintains a cheery, upbeat outlook. 
``My mother had six children and she, an uneducated woman, raised us
practically by herself,'' she said, wearing the hospital's standard-issue
loose robe. ``So why shouldn't I be able to raise one?'' 
Mogamedova said she does not plan to use imported disposable nappies which
have become scarce in Moscow in recent days, and she will supplement her food
through her mother's garden plot outside the city. 
``Of course it will be hard,'' she said with a smile. ``We are already used to
the fact that things will always be unstable.'' 


On the streets of Moscow where panic buying over the past weeks has sucked
goods off stores shelves, Golubeva feels a more glum apprehension only
amplified by a visit to one of the city's baby supply stores. 
Disposable nappies -- called pampersy in Russian after the Pampers brand that
became widespread after the fall of the Soviet Union -- have again become rare
as during Soviet times, and even new cribs have sold out in some stores. 
``It's not that I'm afraid that I won't find imported nappies or food,'' she
said before spotting nappies for more than $30 a pack of about 40. ``The
problem is what happens if he falls ill or I fall ill? The other day I had to
wait 40 minutes in line at a pharmacy.'' 
Golubeva's only significant asset is her apartment which she could either rent
-- she said a neighbour rents a similar apartment for $1,000 a month -- or
sell and move to the periphery of the city. She wants to stay put of course. 
But Golubeva and millions of other Russians now have to cope with the reality
of less in life after years of rising expectations. 
``Of course ultimately I'm not sorry to be pregnant, I want the baby,'' she
said. ``But things are so grim now. I've never been in such a situation


Moscow Times
September 16, 1998 
Chubais: I Didn't Lie 
Special to The Moscow Times

Last week the Los Angeles Times reported that Anatoly Chubais, who led
Russia's negotiations this summer with the International Monetary Fund for a
$22.6 billion bailout in July, had frankly admitted to lying to the IMF about
the state of the nation's economy during those negotiations. The Los Angeles
Times article, which The Moscow Times reprinted Sept. 10 and editorialized
about on Sept. 12, cited an interview with Chubais published in Kommersant
Daily on Sept. 8. Below is an open letter written to the editor of the Los
Angeles Times by Chubais in response to the article. 

Dear Editor, 

I cannot help but express my categorical disagreement with the Los Angeles
Times' treatment of my Sept. 8 interview with the Russian newspaper Kommersant
I consider the interpretation of my position on relations between Sergei
Kiriyenko's government and international financial organizations as having
been absolutely distorted. 
The article attributes to me a statement in the Kommersant Daily interview
that the Russian government misled the IMF and the World Bank by concealing
the severity of the country's budgetary problems in order to receive credits
from them. In point of fact, I was speaking of something quite different. 
Currently, there is discussion about whether Kiriyenko's government was
justified in using all its resources to support the ruble and to meet its
external and internal obligations. Despite these efforts, the government was
nevertheless compelled on Aug. 17 to announce the now well-known measures of
the government and the Central Bank, which were so painful, primarily, for
foreign investors. Would it have been better, as a large number of analysts
assert, to have implemented these measures back in the spring? Authors writing
about Russia should be very familiar with the content and urgency of this
In the interview I addressed this matter as follows, and my position remains
"A devaluation or default on our obligations with respect to GKOs [treasury
bills] in May would have prompted an extremely negative reaction in the world.
By not doing do so at that time, we showed that the government was fighting to
the end, that it was making every conceivable and even inconceivable effort to
meet the expectations of our partners both at home and abroad." And further,
"Had we done what [economist Andrei] Illarionov proposed [and devalued the
ruble in the spring], they would have ended their dealings with us for good.
In other words, the disaster would have been the same as it is now, but in
addition we would have lost all hope that investors would return." 
It was precisely in this connection that I expressed the view that even
despite the enormous damage suffered by investors, "and we cheated them out of
$20 billion, (a reference to the moratorium on repayment of $16 billion in
loans by Russian banks and $4 billion by other commercial structures -- note
by A. Chubais), there is an understanding that we had no alternative." 
As you can see, this passage has nothing to do with the commitments of Russia
to the IMF in conjunction with the first tranche of $4.8 billion, which the
article said have not been met. As far as the commitments themselves are
concerned, your newspaper must be aware of a statement made by IMF Managing
Director Michel Camdessus on Aug. 17, 1998. It was noted in his statement that
Russia's commitments under the IMF's program were being met "satisfactorily".
His statement also includes an appeal to the international community to show
solidarity with Russia and an understanding of its problems during this
difficult period for the country. 
It was precisely this position of the IMF that I emphasized in my interview,
noting: "That's exactly why the IMF supported us, because we did everything
possible to save face for the country". 
I would like to comment specifically on the assertion ascribed to me to the
effect that the Russian leadership lied about the instability of the fiscal
system, and that I saw this as a defensible position. 
Without starting a debate, I would again like to quote myself: 
"You can criticize the [Russian] president as much as you want for saying [the
evening before the devaluation] that there would be no devaluation, but that's
precisely what had to be said. Any sober-minded politician will tell you that
this is the only way the authorities can behave in such extreme situations.
Authorities who whine and vacillate and say one thing and then another only
hasten collapse. I repeat: Perception is reality. Perceptions, expectations,
fears and hopes -- these are the realities that drive markets. In an extremely
grave financial situation, the authorities have no right to say, 'We don't
know whether we can cope or not.' Everyone would flee at once..." (foreign
investors are meant here -- note by A. Chubais). 
In the Los Angeles Times article, this quote is given in the form of an
assertion ascribed to me to the effect that "had the government spoken the
truth the Russian economy would have collapsed last spring." 
I cannot attribute this and other occurrences solely to the authors' or
translators' poor knowledge of the Russian language and its idiomatic
Given the extensive repercussions which the article in the Los Angeles Times
has caused in the world press, I am forwarding this letter to the foreign mass
media. I trust that you will publish it. 

Anatoly Chubais 
Chairman of the Board 
Unified Energy Systems 


The Times (UK)
September 16 1998
[for personal use only]
Westerners flee as Russians rediscover black sense of humour
Removal firms are the only ones making money as the bankers abandon Moscow to
its crisis, writes Anna Blundy in Moscow 

AS RUSSIA'S new Government awaits the International Monetary Fund delegation
that is likely to decide its economic fate by the end of the week, thousands
of Russians have been laid off or given obligatory unpaid leave and Western
bankers are fleeing the country in their droves. 
Foreign exchange booths were revising their exchange rate notices by the hour
yesterday as the rouble veered between 7.5 and 12.2 to the dollar and, to
depress Russians even further, the Agriculture Ministry has announced that the
grain crop this year will be the smallest since 1957. 
Yevgeni Primakov, the new Prime Minister, told the press after a meeting with
President Yeltsin that a new governmental structure would be announced by the
end of this week, and Viktor Geraschenko, the Central Bank chairman, has still
not ruled out printing money as a way out of the economic crisis. 
Russians have no choice but to grin and bear it, but many foreigners are
busily itemising their belongings for customs clearance on the way out of the
country. The only people prospering here are the shipping and removals
companies, who have been doing a roaring trade as sacked bankers leave the
country with their tails between their legs. 
"I don't want to cause panic," said Robert Mills, of Allied Pickfords. "But
before this crisis we were just tootling along. Now we've come into our own.
People really need us." 
Bookings at Allied Pickfords, which has been moving people around the world
since 1666 and which brought two Rolls-Royces to Russia for the Queen when she
came to Moscow in 1994, have more than doubled in the past few weeks and Mr
Mills must be the only man in town who has been recruiting. 
"Other companies in this business are doing well too, which is great because
we couldn't handle it all on our own," he said. "If you're in charge of either
personnel or accounting here your days are pretty much numbered. There are no
personnel to take charge of and no money to count. 
"A lot of people are leaving. I shouldn't say it, but I hope the crisis lasts
until Christmas." 
One English banker, who has a seat booked on a flight out of Moscow next
Monday, said the transactions he was working on simply ceased to exist and
most of his colleagues were just twiddling their thumbs or chasing up bad
debts. "Anyone connected with equity or securities must be pretty idle at the
moment," he said. 
"All credit lines to Russia have been cut and, although there is still an
equity market, it's bumping along the bottom. There are a large number of
highly paid expats going home." 
MFK Renaissance has laid off half of its staff, many of whom have already left
Russia, and other financiers have removal firms and flights booked so they can
leave at a moment's notice. 
"Of course, we are the lucky ones," said a sacked English banker. "We stand a
chance of getting other jobs back in London, but don't forget that a lot of
Russians are attached to these firms." 
For the thousands of newly unemployed Russians facing a bleak winter, the only
salvation is their sense of humour, dormant during the past few years of boom,
but now resurfacing in newspapers and magazines as the country prepares for
the worst. Old Soviet jokes are being retold with a wry smile. The pessimist
says: "Things won't get any worse now." The optimist says: "They will! They
will! They will!" 
Renowned for their inscrutable black humour, Russians always fall back on it
in times of crisis and some newspapers have now set up hotlines for readers to
ring with their favourite anecdotes. The popular daily, Argumenty i Fakty,
received this from a depressed reader: A banker rings up his friend, another
banker, and says: "Hello, how are you?" "Fine," answers the person who picks
up the telephone. "Sorry, wrong number," the banker replies. 
Russians are so used to misfortune that as this new crisis wipes out their
livelihoods and the Westerners who had symbolised their new prosperity flee
they can only stand by and laugh. 


Date: Tue, 15 Sep 1998
From: "Jerry F. Hough" <>
Subject: Primakov cabinet

I hope that the Primakov cabinet will give us a chance to really 
rethink the history of the last dozen years. Some are saying that the 
Gorbachev economists are back. This is quite wrong. Gorbachev's 
economists were Shatalin (the leader of the 500-day plan), Petrakov (also 
from TsEMI and a man who became what Ed Hewett called the Milton Friedman 
of the Soviet Union), Shatalin's protege Gaidar (who was economic editor 
of Pravda), Shatalin's protege Shokhin (who was Shevardnadze's economic 
adviser), and Yavlinsky (the man he chose for economic reform in August 
1991). The people who are coming back thus far are, apparently, 
Bogomolov, who Gorbachev totally scorned (the biggest mistake in the 
history of Russian economic reform), and three men associated with 
Ryzhkov--Masliukov, Abalkin, and Gerashchenko. Since I think Ryzhkov was 
a serious economic reformer, unlike Gorbachev and Yeltsin, I personally 
am quite happy with this. But it certainly reenforces McFaul's point 
that all this talk about return of Communists and return of Soviet-era 
people does nothing to advance understanding. The place to begin is in 
the Gorbachev era when the conflict was between Communists who understood 
the importance of institutions and investment and those who did not. 
But it also reminds us that Ryzhkov and his faction may be a lot more 
important than we think with all the emphasis on Zyuganov. My feeling is 
that Yeltsin in his instincts has long been closer to men from Sverdlovsk 
like Ryzhkov, Oleg Lobov, and Yury Petrov than to the young economists he 
chose to get money from the West. It never made sense that a 
construction engineer and construction administration was so 
anti-investment. Now that he has chosen to cohabit like Mitterrand (and 
that is how we should see him), he may find himself very supportive of a 
pro-investment, pro-construction policy.


Date: Tue, 15 Sep 1998 
From: "Masha Gessen" <> 
Subject: inadvertent publication

Inadvertently using the "reply all" button resulted in the inadvertent
publication on Johnson's List of a piece of more-or-less private
correspondence in which I inadvertently disclosed some of my views, in
addition to my age. I'm sure all concerned are sorry. It's not much of an
excuse, but trust me: the rest of the exchange was even less palatable.

Masha Gessen


Date: Tue, 15 Sep 1998 
From: "Editor" <>
Subject: eXile

A quick reply to Leonid Bershidsky re: the apology issue. While it must be
annoying for a Russian to hear Westerners, particularly Americans, bleat
apologies to Russia for contributing to the shit they've found themselves
in, it helps to understand that even if an apology from one of the zillions
of Yeltsin-Chubais apologists [McFaul, Pipes, Specter, "Ironhead" Williams,
etc.] doesn't put a loaf of bread on any about-to-be-starving Russian's
table, a public, official apology from those people for screwing things up
badly and dismissing all dissent (or in our case, trying to crush it here
on Johnson's List) would bring an unbelievable amount of emotional
satisfaction. This is an American thing, and it has to be settled in the
American way: with public confessions. So as far as I'm concerned, public
apologies would be HUGELY in order. 
Mark Ames
the eXile

By Mark Ames
the eXile
Sept. 10, 1998

Only the paranoid survive.
-Andy Grove

Imagine this. You're in a country where the shock of sudden impoverishment
and famine ignite a nationwide revolt. Riots, which had for weeks been
erupting up in the provinces, break out in the capital. Most police look on
silently, afraid of getting stuck on the wrong side politically. Rioters
smash windows, looting overpriced stores of their remaining goods, and burn
down the banks that had burned them. Black smoke fills the sky, while
roadblocks made from burning tires and overturned trolley buses litter the
streets. Small arms fire can be heard in all districts. Speeding Mercedes
Benzes with blue sirens on their hoods fire at the crowds to keep them
away. Private arsenals are brought out in the open as lawlessness spreads.
Foreigner-owned vehicles, easily recognizable by their yellow or red
license plates and round-headed passengers (i.e., unarmed and respectful of
human life), are stopped by mobs and stripped of all valuables; those who
resist are savagely beaten. All authority has broken down.
The embassies desperately try to evacuate their citizens. The American
embassy, having contacted many of its citizens via fax, email and the
"warden system," arranges for buses to meet citizens at an appointed time
and appointed place. Nationals meet and gather--probably at an American
hotel or else the embassy or the ambassador's residence--from where they
are bused in a police-escorted convoy to the airport. 
The scene at the airport is complete pandemonium. Everyone--locals and
foreigners alike--is desperately trying to get out, and there are too few
flights available. Many expats don't even have enough cash on them to buy a
The U.S. Embassy has chartered two Delta 757s and two Finnair 757s to
evacuate its citizens. But there's a hitch: twice as many Americans have
arrived than were planned for. Half will be forced to stay behind. Women
and children first. Only those with American passports are allowed
on-board; husbands and wives from international marriages are separated
because one only has a green card. Girlfriends or boyfriends are left
behind. And so are the majority of foreigners and natives hoping to flee.
As the jets take off, those stranded sit like naked prey in the cold
airport lobby, waiting through the day and into the night. And still no
U.S. chartered jets. In fact, no jets at all. The airport has been closed
as the uncertainty grows and the armed forces become paranoid. All flights
in the region are prohibited, with orders to shoot down anything that
violates the ban.
It may sound like the plot of a 70s disaster flick featuring Charlton
Heston, George Kennedy, and Jim Brown as the black cop who dies in the
first 40 minutes. But the events above actually follow the way Jakarta went
during riots there in May of this year. The chaos, the looting, the mob
roadblocks, the stranded, terrified expats in the airport-all of that
actually happened. Only the ending about the shutting down of airspace was
invented, because it seems so plausible here in an ex-Superpower caught up
in anarchy.
On Wednesday evening, ORT reported that Russian interior ministry forces
have been put on alert nationwide to prepare for unrest. 
In light of this, the big question on people's minds in Russia is: can
this happen here? 
Paul Simington, the chairman of the security committee at the American
Chamber of Commerce in Moscow, admitted that evacuation in the event of
social upheaval has become the biggest concern in the organization. "Among
Chamber membership, the issue of evacuation seems to be the number one
topic," he said. "A significant number of members are asking around about
contingency plans by the U.S. Embassy to evacuate citizens."
For the moment, none of the embassies contacted by the eXile, including
the U.S. Embassy, have made any specific plans to evacuate citizens,
although all do, as a routine matter, have contingency plans. The specifics
of these plans--that is, how to get out of Moscow--remain secret until the
notice to evacuate is issued to the community.
[Late note: in the days following this article, some embassies, including
the Dutch and Canadian ones, have put ads in the Moscow Times asking its
nationals to register or re-register with the embassy, a move cited by
off-the-record sources as a first step in preparing for emergency
evacuation measures by its citizens.]
"There's no talk now of [evacuating our citizens]," said Patricia
O'Donnell, Deputy Press Secretary for the British Embassy in Moscow. "There
have been calls to the consular section seeking advice on this issue, but
we've told them there's no reason to change plans now."
One major reason why embassies aren't openly preparing their citizens for
evacuation from Russia is that such a move could have serious diplomatic
implications: it could both destabilize the already shaky regime, and
permanently damage relations. 
Nevertheless, foreigners and foreign companies are much quicker to react
to such emergencies, if only because of their insurance and liabilities.
Many are reported to be already working on their own evacuation plans,
although none would admit on the record.
One American businessman who would go on the record, W. E. Butler, a
partner in the CIS Price Waterhouse Law Firm in Moscow, completely
discounted the very notion of evacuation. "I don't think there's any
prospect of [a Jakarta scenario] happening," he said. "I've been here
through the tanks in '93, through it all. I don't believe it."
While the AmCham's Simington agrees that he doesn't believe an evacuation
will be necessary, he said that he is already noticing both expat flight
from Moscow. "A lot of people are leaving," he said. "I do notice that a
lot of wives and families of local executives are 'extending their summer
vacations.' And Russians who have the means are leaving."

The Indonesia Scenario

How did Jakarta's large expatriate business community deal with the riots
last May?
For years, expat businessmen in Indonesia enjoyed nothing but growth and
positive news. When the crisis hit last summer, it took a few months for
people to really absorb the severity of it. After six months, when it was
clear that the crisis was only deepening with no end in sight, many started
to pack and leave, as talk of riots grew.
In the week leading up to the riots, the city was swarming with rumors.
The day before the riots began, the streets were supposedly eerily empty,
even though Jakarta is a city of 20 million.
When the riots first broke, panic swept the expat community. Western oil
companies, stung by the memory of Iran, were among the first to evacuate
foreign citizens on private chartered jets. 
The Jakarta riots started on Tuesday, May 12th, but really picked up steam
on Thursday, May 14th. Many wealthier Americans abandoned their posh
Jakarta homes for the safety of barricaded 5-star hotels, from where they
could see plumes of smoke filling the city and fires all around. 
Individual foreigners were already attempting to flee en masse, but that
only made things worse. Traffic jams meant that looters attacked cars and
passengers as they sat helplessly. 
"If you were a foreigner, they'd stop you and steal everything. If you
resisted, the rioters beat you. If you were Chinese, you were beaten pretty
badly no matter what. If you were a Chinese girl..."
At the Jakarta airport, the scene was so desperate that some foreigners
were reportedly selling their cars for the price of an airline ticket out. 
On Friday, May 15th, the American Embassy prepared to evacuate the
estimated 3,000 U.S. citizens in Jakarta, and the 15,000 in Indonesia.
However, the actual plan wasn't implemented until Saturday the 16th--4 days
after riots began, and a time when the worst, according to some, was
already over. American nationals were gathered at three meeting points--the
Hilton Hotel, the U.S. Ambassador's residence, and an international school.
There, convoys of embassy busses and private cars, with an armed escort,
led the Americans to the airport, successfully avoiding looters.
But the embassy underestimated how many Americans would join up to
evacuate--in part because so few had registered. 
In spite of the chaos, one Westerner from Jakarta suggested that it was
far easier to organize expat evacuations there than it would be in Moscow.
"The Westerners in Jakarta really lived apart. They never mixed much. I
mean they even look differently. In Moscow, I would think people are more
spread out and the logistics of disseminating information would be much
more difficult."
Only half the Americans who showed at the airport were allowed to fly out
that Saturday. The rest had to sleep overnight at the airport, and left the
next day. American officials were so concerned about the safety of their
nationals left behind that they sent three U.S. Navy vessels with 2,000
Marines to help evacuate, a move that was only called off at the last
Other Western embassies didn't report the same problems evacuating their
nationals as the Americans had, even though they acted only after the US
evacuation call.
Although many foreigners returned to Jakarta within the next month, few
brought their families back with them. Many who returned only did so to
collect their belongings and leave.
"I would say that 90% of the Jakarta expats who were working there in July
1997 are gone today," said a Western lawyer who asked not to be named. He
left Jakarta this summer, although he gave notice several months earlier.
"I realized by January that it was over, nothing was going to happen. All
the service companies--finance, law, accounting firms--as well as corporate
representative offices--are gone."
Even though rents in Jakarta fell dramatically, the salaries needed to
keep expat workers could no longer be justified in an economy that had
"I've heard stories of apartments that were $2,000 now renting for $600
and houses that were $3,700 now going for $400. Mind you, these residences
are still not filled," said Danielle Surkatty, a member of the Organizing
Committee for Living in Indonesia.
Gary Andrews, Business Manager for the Indonesian-British Business
Association in Jakarta, sent his son home in May and doesn't plan to bring
him back anytime soon. He too confirms the collapse of the real estate
market, a sign of the near-complete exile of foreigners as well as the
overnight disappearance of the middle class. "Broadly speaking, the bottom
dropped out of the real estate market," said Andrews. "Before, you had to
pay two to five thousand a month, two years up front. Now, as an example, I
rent a three-bedroom condo that was $2,500 a month last year for $400."
"The only foreigners left behind really are journalists," said the Western
lawyer. "They love this shit."
For bargain-worshipping journalists the coming Russian upheaval should be
a boon. But for the rest of us, the eXile included since our revenues
depend on the local bar and restaurant business, it's pizdets.

What To Do?

The Western lawyer who worked in Jakarta would probably disagree with
Price's W.E. Butler's (and indeed many other Russia veterans') assessment
that things can't get any worse than in '91 or '93. 
"What's going on in these parts of the world is the failure of
expectations," he said. "In Indonesia, I don't think anyone would have
rioted if they didn't have expectations. But what happened was you had a
growing middle class in Jakarta, and you had villages that for once had
electricity, and all those years no one cared about the corruption at the
top so long as things kept getting better.
"Then all of a sudden, they lost everything, just like that. After a
while, they couldn't take it anymore, they reached their snapping point."
In '91 and '93, Russian people, and particularly those from the big
cities, hadn't yet seen any tangible benefits from the market reforms. By
1998, they were used to the new luxuries: a huge array of imported goods,
easy money (at least in Moscow), automated bank tellers that gave cash at
2am... simple, even vulgar things that were already taken for granted. Now
people in the provinces are threatened with starvation, and Muscovites have
just lost literally every single gain earned over the past seven years that
they won in spite of Yeltsin's oligarchy.
"I'd be a lot more scared in Russia than Indonesia," the former
Jakarta-based lawyer said. "The population didn't have guns there. Russia
is full of armed mafiosi. Who knows how they'd react in a riot."
Right now, most people in embassies and security firms advise foreign
nationals to register with their embassies so that in case of an emergency,
they can be contacted. Several foreign firms are reportedly already drawing
up their own private evacuation plans, while individuals will be left to
the mercy of their embassies.
"I'm aware of certain companies that are chartering airplanes," said
Simington. "I know of at least one security firm chartering an aircraft and
trying to sell seats at a premium. Frankly, I think it's foolish now."
He said that from his meetings with AmCham members, many are nervous and
anxious but not over-reacting. "They have two concerns. One is accurate
information, which they aren't getting from the embassy or anyone; and
secondly, if there is a need to evacuate, what resources are available."
Simington cautions that things are likely to get worse before they get
better, and that the criminal structures are gaining an alarming grip on
what's left of Russia's economy. He also is concerned that if there is
social unrest, Americans in particular could become targets. "To be honest,
I'm a little afraid of the anti-American backlash. Others I've talked to
agree. The average Russian thinks that it was American reforms that didn't
work here."
His advice to expat businessmen is to make contingency plans, educate
themselves, and take particular concern for their families' safety.
"I don't preach paranoia, but be prepared."


Financial Times
15 September 1998
Letter from Robert McIntyre
To the Editor, Financial Times

Vladimir Potanin's offer ("Plea over Russian bank debt", 11
September 1998, p. 13) to make good on foreign loans by
transferring ownership of Russian companies "owned" by his
bank is funny but not amusing. Since many if not most of
the large-scale privatization steps of the Chubais era are
formally illegal, it has long been obvious that any
post-Yeltsin government that responded to either popular
opinion or the dictates of a rational economic policy would
re-nationalize many of these entities. The abrupt
reorientation of economic policy under Primakov probably
brings these actions forward in time.
These privatized companies continued to this day to export
large physical volumes of valuable goods while declaring
themselves unable to pay wages, taxes or input bills at
home. Norilsk Nickel, controlled by Potanin's Oneximbank
is the largest and most conspicuous example of this general
pattern. The new owners of many such industrial and
resource production enterprises secreted the proceeds of
successful foreign sales abroad, deposited in personal, not
corporate accounts. This is simply stolen money, amounting
to tens of billions of dollars over a 7-year period. Many
of these transactions have been documented in detail by the
"Accounting Chamber" of the Russian government.
Potanin helpfully offers to turn over physical assets in
Russia that he is likely to lose. The value of his claims
to these physical assets will not increase if they are
passed to foreign banks. The question of the sales
proceeds of Norilsk and sister corporations is an entirely
different matter. Since the Russian government now owes
tens of billions to foreign government, banks and
corporations, it may wish to issue what are in effect
licenses to seize the personal assets of the perpetrators
of this unprecedented wave of misappropriation and asset
The West could redeem itself in the eyes of the
once-trusting Russian population by enthusiastically
playing the collection agency role in this process. This
appears to violate western norms of separating personal and
company business, but in this case would only rectify a
sustained criminal process in which the West has been
complicit. Ways have been found to deal with the
international movement of the proceeds of other forms of
criminal activity. Let the Accounting Chamber present its
evidence and then see how much of the loot can be found.

Dr. Robert J. McIntyre
Project Director, Transition from Below
UNU/WIDER (World Institute for Development Economics
Research) Katajanokanlaituri 6B 00160 Helsinki FINLAND


Date: Tue, 15 Sep 1998 
From: Mike McKeever <>
Subject: Hasty economics


You are right that we should admire Russia for re-creating a society and
economy that have been wrecked by following Western advice. In that spirit,
I offer some thoughts on restructuring Russia's economy. These ideas are not
advice, just another way of looking at things that may be useful. They are
from an outsider's perespective and certainly lack the detailed knowledge of
an insider, so I hope you will excuse the generality and perhaps find them
First, I think that the ownership structure of an enterprise is less
important than whether it makes a profit or requires a subsidy; that is to
say, private ownership is less important to the overall economy than is
making a profit. After all, one of the major positives about private
ownership is that the owners take a risk with their capital; but, if the
owners took no risk to obtain their position and take little risk if the
enterprise shows a loss, then the benefits of private ownership to the
overall economy are lost.
So, if that is true, then major enterprises can be government owned and
contribute to society as long as they show a profit. For those enterprises
which do not show a profit, but employ large numbers of people in backward
technologies, there should be a stated limit to subsidies so that employees
and owners/managers can plan for change in an orderly fashion. Additionally,
their markets should be protected by tariffs and quotas for enough time to
allow for an orderly transition. 
Critical services can be managed with a Public Utility Commission procedure:
that is, regulate return on investment and require socially positive actions
in return for a monopoly. Of course, this pre-supposes a sophisticated
accounting and auditing system which is needed anyway.
The country must have good border control so that neither goods or money can
be smuggled into or out of the country. Then, capital flight must be
controlled so that there is only a 5% or 10% excess of money going out
compared to money coming in. This will require international aid to obtain
sufficient food and fuel for winter, but it will be a bargain compared to
the future cost of civil disturbance in Russia. This means that the present
rich and influential people must cooperate with the regime, whether they are
forced or not. This is not an easy task. 
Well, I hope these ideas stimulate some useful thought. For additional
thoughts please review my list of 33 economic policies at: {Note: there is no 'c' in mkeever] for a list of
other policies. 


Russian communists say offered no govt posts

MOSCOW, Sept 15 (Reuters) - Russian Prime Minister Yevgeny Primakov did not
offer any ministerial posts to the Communist party during talks on Tuesday
with left-wing leaders, Communist party chief Gennady Zyuganov said. 
``No proposals were made. They were not considered,'' he said in televised
Zyuganov was quoted by Interfax news agency as saying they discussed for some
two and a half hours the structure of the new cabinet and the state of the
country, including the payment of pensions and wages. 
The Communist leader said they also discussed preparations for winter, when
six or seven months of sub-zero temperatures makes the provision of public
services like gas supplies and heating particularly vital for Russian leaders.
Primakov, confirmed in office by parliament on Friday as a compromise
candidate between President Boris Yeltsin and the Communist-led lower house,
has named moderate Communist Yuri Maslyukov as his first deputy premier. 
But striving for a broad cabinet of ``professionals,'' Primakov has said he
does not want to allocate jobs on a party basis or appoint ministers who owe
their first loyalty to particular political movements. 
The Communists and their two parliamentary allies, the Agrarians and People's
Power, have said they would not join the government but would support it if it
pursued policies aimed at protecting social welfare and reviving domestic


Russia: Zbigniew Brzezinski Skeptical On Primakov Appointment
By Matt Frost

Prague, 15 September 1998 (RFE/RL) -- Former United States National Security
Advisor Zbigniew Brzezinski said today in an interview with RFE/RL that the
appointment of Yevgeny Primakov as Russian Prime Minister is unlikely to
resolve Russia's internal problems. 
"The Russian Smuta," Brzezinski said "will continue for a long time to come."
He said the economic and political situation in Russia remains critical and
Brzezinski cited Primakov's abilities as a successful foreign minister and his
knowledge of the West. But Brzezinski also described Primakov as a product of
the old Soviet "apparat," who "harbors residual imperialistic ambitions," and
who will be beholden to the nationalist factions in the Duma.
In response to a question on Western support for Russian reforms, Brzezinski
points to what he called a flaw in Western thinking on the reform process in
Russia. He said that Western advocacy of the simultaneous introduction of
liberal capitalist economic changes and democratic practices fails to take
into account "the cumulative consequences of seventy years of communism, two
world wars, and the destruction of the Russian intelligentsia by the
communists." All of these factors, said Brzezinski, make it much more
difficult for Russia to reform itself in the same way as Poland, Estonia, or
other countries in Central Europe have done. 
The scope extent of Western economic aid to Russia, Brzezinski said, is
marginal in comparison with the scale of Russia's internal problems. Much more
important, he insisted, is the nature of the Russian reform program.
Brzezinski said that he firmly believes that a high proportion of the
assistance allocated to Russia either never leaves Moscow or is "stolen by the
'oligarchs' who are only interested in enriching themselves and depositing
much of the stolen money back in the West."
Brzezinski said that the aid would be more effective if the West made direct
investments in the Russian regions. Furthermore, he said, Russia's chances of
development would be greater if Russia were organized as a confederation of
three main units: European Russia; Central Russia and Siberia; and Far-Eastern
Russia. Under this confederate arrangement, Brzezinski said, each region would
be far better placed to develop regional trade alliances with neighboring
economic trading zones than under the present system. 
Brzezinski said that his view was certain to meet a hostile reaction from
Russia's nationalist politicians. 
(Interview conducted by Evgeny Novikov, Russian Service) / 


Moscow restricts price rise for essential items

MOSCOW, Sept 15 (AFP) - City authorities in Moscow have issued orders limiting
price rises for essential goods to 20 percent, ITAR-TASS reported Tuesday
citing the town hall.
The ceiling will apply in the capital for two weeks from Tuesday until
November 1, the report said.
The decision came amid the first signs of a return to normal on Monday in
shops and markets in Moscow. Shelves were being restocked and prices were
However the town hall said the fluctuating rate of the ruble and the drastic
reduction in the public's purchasing power, had made the restriction
Products covered by the price curbs included such basics as sausages, poultry,
bread, grain and tea. Butter, Russian-made cheese, sugar, dairy products and
infant foods were also affected, along with washing powder, soap, toothpaste
and matches.


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