September 17, 1998   

This Date's Issues: 2378• 2379 •2380•

Johnson's Russia List
#2380
17 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Russians' crisis cure -- stamp collecting and love.
2. AFP: Experts blast think-tank's plans to tackle Russian financial crisis.
3. Jerry Hough: Re 2378-Smith/Hough.
4. Albert Weeks: Baker vs. Safire on Primakov.
5. Transitions: Correction re publication of Weeks' article.
6. Igor Oleynik (Russian Information & Business Center): Dealing with
Russia: A Winning Strategy for the Future.
7. Len Cormier: A Nine-Point Program to Aid Russia.
8. Reuters: Adam Tanner, Russian unemployment grows as crisis worsens.
9. Washington Times: Andrea Billups, Russian students not concerned by
ruble's plunge. (Washington DC area students)]

********

#1
Russians' crisis cure -- stamp collecting and love

MOSCOW, Sept 17 (Reuters) - As Prime Minister Yevgeny Primakov wracks his
brains for solutions to Russia's worst economic crisis since communism, a top
Moscow nerve specialist gave his prescription on Thursday for how to conquer
the stress. 
Love and hobbies, it seems, are the best remedies for depression. 
``We have no power over the macroeconomic situation. But our spiritual
comfort
depends mainly on ourselves. We have to stop putting our hopes in the state,''
Professor Alexander Wein told Noviye Izvestia newspaper. 
``If you're in love or have lots of friends you're protected against stress.
The best cure for any crisis is your hobby. Your organism's defences are
stamp
collecting, exercise or a cat.'' 
For some, of course, the crisis goes deeper than that. 
Just underneath the interview, the newspaper, aimed mainly at Moscow's more
prosperous classes, ran an item reporting how a 13-year-old boy had starved to
death in the Siberian city of Omsk after his father lost his job. 
The hard-left Communist newspaper Sovietskaya Rossiya clearly regards
bourgeois leisure actities as inadequate responses to such troubles. 
Its front-page editorial on Thursday urged readers to fight depression by
going back to work, whatever the financial conditions of Russia's devastated
industrial wasteland. 
``To get us out of ourselves we now have to remember that when we made
planes
and tractors, children's toys, computers and fabrics we were also forming
ourselves,'' the paper said. 
``To keep ourselves together, to survive, we have first and foremost to
stand
up for our right to work.'' 

*******

#2
Experts blast think-tank's plans to tackle Russian financial crisis

MOSCOW, Sept 16 (AFP) - Measures to tackle Russia's economic crisis put
forward by advisors to new premier Yevgeny Primakov will lead the country into
financial ruin, experts warned Wednesday.
In an open letter published in the press, members of the economics
department
of Russia's Academy of Sciences, a bastion of Soviet-era academics, proposed a
nine-point plan of action, on which they say the government can draw.
Four of the authors of the letter -- aged from 61 to 71 and former
Soviet-era
colleagues of Primakov -- have been appointed by the new prime minister to
draw up plans to haul Russia out of its worst economic and financial crisis

since the early 1990s.
In the letter, they propose measures such as indexing salaries and
retirement
benefits to inflation, foreign currency controls and banning ruble issues to
pay for wage arrears.
They also propose central bank credits to cover budget deficits, the
development of trade with the former Soviet states of the Commonwealth of
Independent States and to boost growth and domestic consumption by supporting
production.
"This programme contains only plans for expenditure and I don't believe
in the
proposals to increase revenue it contains," said Yelena Sadovnikova, of the
Russian-European politics and economics centre here.
"If you want hyperinflation, that is exactly what this will do," added Tom
Adshead, an economist with Russia's United Financial Group.
Prices have already risen by 43.3 percent during the first two weeks of
September, following a de facto devaluation of the ruble in August.
"History shows that hyperinflation always ends badly, by a dislocation of
the
economy, the political system and social structure," said Thierry Malleret of
the investment bank Alfa Capital.
Adshead said the programme would favour the black market. "That would
lead to
a flight of capital," he said.
Adshead said plans to favour Russian over imported products were also
flawed.
"The reason people don't buy Russian goods is because the quality is poor," he
said, adding a fundamental restructuring of Russian manufacturing was needed.
"These people have for a long time thought they could bring about reform by
Soviet-style planning," Malleret said.

*******

#3
Date: Thu, 17 Sep 1998 
From: "Jerry F. Hough" <jhough@acpub.duke.edu>
Subject: Re: 2378-Smith/Hough

I agree with Ray Smith that the West is not the cause of the 
disaster. The cause is an ideology as wrong as that which led to 
collectivization. It was the ideology of what Joseph Stiglitz calls the 
Washington consensus, but it was also attractive to TsEMI economists. 
The neo-classical economists come out of Ricardo and TsEMI out of 
Marx--both students of early 19th century capitalists, and neither had 
any idea about the modern economy. Knowing nothing else, the economists 
claimed their abstract model would apply anywhere, and leaders bought 
it. But we cannot forget that the IMF created enormous incentives for the
Russian leaders to choose economists who could get Western money on the
condition they took the Washington consensus. However, if the Russian
leaders had been like the Chinese and showed independence and had their 10
percent growth, they would have received investment. They are, therefore,
the ones really at fault.
But if one wants to read about the unseemly role of the Clinton 
Administration in 1993 in approving Yeltsin's consolidation of 
authoritarian rule in exchange for his accepting the IMF program, it is 
in my concluding chapter in the book Colton and I edited and that 
Brookings just published (The two of us have a total of six chapters, 
together with 13 chapters by younger scholars) and that Brookings just
published. (Growing Pains, from Brookings).


*********

#4
Date: Thu, 17 Sep 1998
From: Albert Weeks <AWeeks1@compuserve.com>
Subject: Baker vs. Safire on Primakov

Baker is right, Safire wrong--about Primakov (viz., Safire's column, 
"Beware Primakov," today's [Sept. 17] NYTimes). As author of three 
in-print published editions of Soviet biographies (under the title "Soviet 
Nomenklatura"--see Amazon Books on line) and who has been tracking 
for RFE/RL and the press Soviet and Russian VIPs at least a long as 
Jerry Hough [if that is possible! :-)], I regard the hullabaloo over the 
"spymaster" Primakov as what Russians call a "burya v stakane 
chaya," storm in a teacup.
First of all, Primakov has no power base--a necessity for asserting power
in Soviet or post-Communist Russia. Nor does he have an electoral
base--which
is becoming a necessity in today's Russia. His sojourn in "KGB" ranks, as
head of foreiogn intelligence (SVR), was too short to build a base there.
Second, sad but true, Jews do not wield power at the top in Moscow. If they
do reach near the pinnacle, as Primakov, who is Jewish, has done, they do
so only as appendages of others.
Third, despite Primakov's notorious mission to Baghdad in autumn 1990,
he was sent, after all, as an envoy by the Gorbachev circle. Baker--and 
as I understand her, Madeleine Albright--are right that Primakov is a complex 
figure who by no means can be described as a "hardliner" or "anti-Westerner."
On the contrary. His record shows support of reform away from Soviet
institutions, defense of the Yeltsin regime during the bloody events of
October 1993 
as well as opposing the coup attempt of August 1991. 
On the foreign front, he was helpful in working out a reasonable East-West
compromise on the eastward extension of NATO.
As I see it, there is a lot of glitzy "pokazukha" (for-show) in Primakov's
appointment.
I n typical Russian fashion, he is being held up as a symbol (obraz) of
compromise as well as of mildly-Andropovite discipline. Just how
calico-thin this "performance" by a strictly interim figure and likely
eventual
scapegoat will be remains to be seen. 

*******

#5
From: "Sarah Smith" <sarah@ijt.org>
Date: Thu, 17 Sep 1998 
Subject: correction
I would be grateful if you could run a correction to Albert Weeks's note
(number 10, 2379, 17 September). His book review of Drugaya Voina by Yurii
N. Afanasiev and Stumbling Colossus by David M. Glantz will appear in the
October issue of Transitions, not the November issue.
Many thanks,
Sarah A. Smith
Associate Editor
Transitions

*********

#6
Date: Thu, 17 Sep 1998 
From: "Russian-American Chamber of Comm.(Washington, DC)" <rusric@erols.com>
Subject: Dealing with Russia: A Winning Strategy for the Future

Dealing with Russia: A Winning Strategy for the Future
Dr. Igor S. Oleynik
President, 
Russian Information & Business Center, Inc.
705 8th Street SE Suite 400
Washington, DC 20003
(202) 546-2103. Fax: (202) 546-3275

The latest nearly disastrous economic and erratic political developments
happening in Russia have highlighted serious strategic miscalculations in
the current U.S. policy toward that country. Today it is crystal clear
that these mistakes, accumulating since 1991, are rapidly approaching a
critical mass. Unless serious changes in the Russia-related policy take
place in the nearest future, short- and long-term consequences of these
miscalculations can be very dangerous and even destructive. 


THE "ROMANTIC" PERIOD IS OVER

The unpleasant reality is that despite persistent efforts made and money
quite generously spent by U.S. government officials since 1991 to assure
the success of Russian economic and political reforms, the U.S. has not
reached a single initial strategic goal in this distant corner of the
world. The START II treaty was not ratified, the rusty but still mighty
(and unpredictable) Russian military machine has not been dismantled;
stockpiles of nuclear and chemical weapons have not disappeared; Communists
and nationalists are enjoying increasing popularity among many Russians and
getting ready to take advantage of the coming year 2000 presidential
elections; the market economy and democracy are still in the same embryonic
stage as they were several years ago; sales of nuclear and military
equipment to U.S. enemies continue; many American companies are pulling out
of the potentially lucrative Russian market because of a hostile
environment created by the government, etc., etc. 
Because of many tactical mistakes that resulted from Americans'
misunderstanding of the paradoxical Russian political and economic
realities, nationalists there have received many facts that enable them to
paint the U.S. as the main enemy of the Russian people and label it as a
scapegoat for all of Russia's misfortunes. That is why the latest economic
and political crises going on in Russia can be considered as the last
warning before the hurricane. 
The nearly disturbing trend in current U.S.-Russian relations shows that
many recent economic and political actions (especially cash injections
into the Kremlin endorsed by the U.S. government made in hope to support
Russian reforms) brought just the opposite of the initially planned or
expected results. The latest shocking experience in the long line of
strategic miscalculations was complete failure to assist in resolving the
Russian financial troubles. An additional 22.6 billion dollars in new
loans arranged by the IMF and the World Bank was committed for injection
through Moscow into the Russian economy, hindering rather than helping at
the onset of the crisis.
In less than two weeks after the announcement of the loan, the Russian
currency was devalued and the economy went into a deep downward spiral with
unpredictable political and international consequences. 
This warning signal shows quite clearly that the "romantic period" of
the Russian policy conducted by the executive branch of the U.S.
government since 1991 is over. This policy, in spite its good intentions,
became a chain of costly mistakes based mostly on wishful thinking rather
than a clear understanding of the hyper-dynamic and contradictory Russian
realities. 
The fact of the matter is that many U.S. decision makers in charge of
Russian policy are still failing to grasp the paradoxical, multi-faceted
and multi-dimensional economic and political realities of modern Russia.
The main problem is that the direction of current U.S. policy toward Russia
was defined in the very beginning of the 1990s and was initially based on
practically unconditional support of President Yeltsin and his government.
Starting in 1991, U.S. policy toward Russia has been based primarily on the
so-called "black and white", simplified, even primitive, approach and hope,
that Russia will be easily self-transforming from the "Evil Empire into a
"Capitalist Wonderland". Since that time, the political and economic
situation in Russia has changed dramatically, but the approach, based on
unconditional support of the of the Moscow elite -- by now completely
out-dated -- has remained the same. Recent developments show that it is
time to go beyond the Kremlin walls and change the course from the
"romantic" to a more pragmatic one. 
In order to achieve its strategic political and economic goals in the
coming century, the U.S. has to start implementing a variety of new, more
effective strategic approaches and techniques in dealing with Russia. To
be successful, such a strategy should not only reflect U.S. priorities, but
also should correspond with the prevailing political and economic realities
that have formed in Russia over the course of the past 7 years. 

ABANDONING ILLUSIONS

In order to understand what to do next and to determine the key elements
of a successful strategy for the future, it is necessary to highlight
several outdated assumptions and strategic illusions that still determine
the political thinking of many decision-makers in the US.
1. Boris Yeltsin personally and his Moscow-based federal executive
government is the only real driving force of reform worthy of support in
the new Russia.
2. Capitalism in Russia can be successfully built through bureaucratic
means by the strong and powerful Russian executive government in Moscow
staffed with "reformers." This government is the most efficient if not the
only force that can help the U.S. to achieve its strategic political and
economic interests in this region. It is in America's best strategic
interest to support this government as actively as possible. Russian
leadership can be easily taught how to reform the country into a democratic
society, and is willing and able to move the reforms forward with moral
support and a constant supply of cash. The U.S. and G-7 governments
(jointly with the IMF and the World Bank) has enough financial resources
and goodwill to achieve its strategic goals by supporting Boris Yeltsin
personally, and his successor and government in general. 
3. The Russian Parliament is a negatively charged force preventing market
and democratic reforms in Russia, but it can be ignored because all issues
can be resolved by working at the level of the executive branch. It is
useless and unproductive to work with the Russian Parliament and its
members on a long-term basis. 
4. In order to achieve its strategic goals, the U.S. needs a strong
centralized government in the Kremlin. All strategic goals can be achieved
and disputes resolved in the easiest way possible through massive financial
support of the executive branch of the Russian government. Such support
implemented through providing direct loans and numerous "economic
assistance" projects and supervised by the Washington and Moscow
bureaucracies is the shortest way to reaching the US's political and
economic goals and are a must for success of free market and democratic
reforms in Russia as a whole.
5. National Security and disarmament issues can be resolved without a
long term program and hard work, but simply in exchange for economic and
political support of Mr. Yeltsin himself and his perpetually changing
cohort. Disarmament and national security issues such as nuclear weapon
reduction, ratification of the START II treaty, non-proliferation of
nuclear materials and technology can be secured at the level of personal
contacts between "Bill" and "Boris" and/or through the quasi-bureaucratic
institutions like the "Gore-Chernomyrdin Commission". Moscow bureaucrats
are still maintaining nearly absolute power in the country. Dismantling of
the Russian military machine and the elimination of the Russia's military
threat can be secured through secret negotiation with these officials (who
are eventually ready to make deals in exchange for some favors). 


A WINNING APPROACH FOR THE FUTURE
Highlighting the above mentioned illusions gives an opportunity to draft
basic elements of the new strategy for dealing with Russia in the most
efficient and cost-effective way.
1. SHIFTING PRIORITIES. Common wisdom suggests not to place all the
eggs in one basket. That is precisely the case with Russia. Mr. Boris
Yeltsin -- as the elected president of Russia and head of the federal
executive branch of the Russian government -- is still a very powerful man
in this country. At the same time, his personal political power as well as
the economic and political power of his inner circle is vanishing. The new
and permanent trend is that the power of the Russian executive government
-- being nearly absolute even several years ago -- is deteriorating and is
discrediting itself very fast. 
The reason for this is quite simple and somewhat healthy. In the
process of democratization, the Russian political system is undergoing a
rapid and, it is to be hoped, irreversible transformation. The role of the
executive branch and appointed government officials at all levels is
decreasing as the importance of elected officials and the legislative
branch increases. This trend means that the role of the Russian Parliament,
as well as that of the elected officials in Russian regions, will
inevitably increase in strategic decision making at the federal level. In
practical terms it means that relying on the executive branch in
conducting Russian-American relations is a dead end. Today, there are at
least three branches (executive, legislative and local) in Russia that are
struggling with each other, sometimes in a cruel and barbaric way, and the
executive branch is not the winning one. 
I t is quite obvious that the power of the executive branch of the
Russian federal government is deteriorating very fast, and the role of the
legislative branch and the local government (or elected officials at all
levels) is increasing. To put it simply: the power is slipping out of the
hands of appointed bureaucrats at all levels of the Russian government
machine and flowing to the elected officials, including the Parliament.
Such a transformation, theoretically, creates important leverage for
influencing the process of political and strategic decision making in
Russia in a new way. Such influence can be gradually instituted through
using a familiar system of "pressure politics". This system has
effectively worked in the U.S. for decades. There is no reason not to
encourage using it in Russia.
Strategically, the shortest way for achieving economic and political
goals in the future is to stop putting all the resources into supporting
the executive branch and start establishing long-term contacts with Russian
regional leaders and with those who influence their election. It is quite
obvious that elected regional leaders and members of the Parliament, and
not Moscow bureaucrats, will be the next generation of Russian political
elite. In the most foreseeable future, these people will be the ones
holding the key to all strategic decisions made in the country. It would
be a big and very costly mistake to ignore them today. It would be also a
mistake to put all stakes in the coming round of the game on few current
favorites of the race.
2. AWAY FROM PLANNED CAPITALISM. The frightening number of the latest
political and economic crises happening in Russia non-stop since 1992, and
especially the current one, create a feeling of deep dissatisfaction and
frustration. The general impression is that all the money, provided to
"Boris" and his government starting from 1991 for running the Russian

economic roulette has bee spent with little in return or at least has not
brought any visible or rewarding results to the main gamblers.
There are at least three important lessons that can be learned from the
current Russian misfortunes.
a) Nobody in the world has enough money to pay for the mistakes and
miscalculations of the Russian government. 
b) Capitalism in Russia cannot be built by the Moscow reformers or by the
US bureaucrats. 
c) There is no "God, Tsar or Hero" who will be able to fix the economy in
the country, unless the government releases its deadly grip of the economy
and millions of small capitalists and business owners will be breaded in
the shortest period of time possible.
Learning from these lessons shows that the only reasonable way to assist
the Russians in building capitalism is to privatize all forms of economic
assistance to that country. A good start could be to provide more
financial and political support to the small and medium-sized US companies
willing to take risks and exploit the distant frontier. The immediate
useful move could be privatization of all foreign aid and making all the
money appropriated for Russia under the "Freedom Support Act" available
directly to the local governments and businesses in the US and through them
to Russians.
There is little doubt that local US companies from different states and
congressional districts -- if they will be sharing business risk -- would
do a better job in reproducing capitalists In Russia than the federal
government programs, provided they have an opportunity to reduce their
risk. For instance, during past 5 years, the United States has provided
over $9 billion in grant assistance for Russia and NIS programs. All this
money was spent on "democratization, the rule of law, privatization,
favorable investment climate", etc. without any visible results. This
situation needs to be changed.
4. PRIVATISING ECONOMIC ASSISTANCE. During the past seven years, the US
government has spent taxpayers money to help the Russians build their own
model of capitalism. The main assumption was that the Russians and few of
their western consultants know what to do and how to do it. Unfortunately,
only few Americans and Russian have benefited from these efforts. One of
the groups that benefited most is a variety of private investment funds and
some international speculators. These funds, mushrooming in the middle of
the 90's, were created specifically to take advantage of investing into the
Russian economy. These funds, misrepresenting quite often their own vision
of the reality, contributed a lot to launching a pseudo-investment boom
around Russian stocks and government bonds among investors worldwide. 
For example, only in 1996, as a result of such self-promotion,
"Templeton Russia Fund" increased its profits by 66%; "Barring Emerging
Europe Warrant Fund" rewarded its investors with 193% profits; profits of
"Regent Russia Debt Fund" jumped during one-year period to 149%. Riding
on the artificially created waves of a bull market in Russia, only in the
beginning of 1997, stocks of many private funds specializing in Russia
jumped skyward. For instance, in 1996-97 "Vontobel Eastern European Fund"
increased its capital from $3.5 million dollars to $115 millions. Shares
of "Templeton Russia Fund" jumped in value from $14 to $54 dollars per
share. In the beginning of 1997, hypnotized by the enormous profits and
rosy predictions of the financial speculators, Russia was named in a rush
"the single best country for investors." Investors lined up to buy nearly
anything with a Russian flavor. The dream was over in 1998 resulting
substantial losses for all speculators involved. 
The Russian currency and market went down the drain, despite constant
financial support from the IMF and other financial institutions. Current
event show that such large scale support was a mistake. The best strategy
for the US today is not to encourage speculations to pump up stocks in
Russia, but to help thousands of US companies penetrate regional Russian
markets.

There is no need to reinvent a bicycle to build up a new system of
mutually beneficial relations. Strategically, it will be wise to
encourage Russians to establish in Russia the same political and economic
model That exists in the US. Small federal government with limited
functions and budget, a powerful legislative branch supported by the local
business constituency, a politically and financially independent local
government elite, and an independent judicial branch - is the best
political model to create. The modern history of the United States clearly
shows that such a model, despite its shortcomings, is still the best one in
existence. Any efforts in this directions would be much more appealing to
the Russian voters than costly over-bureaucratized assistance projects and
payoffs to Moscow bureaucrats. It is also very important to understand
that such model can be built from the bottom but not from the top. 
5. SHIFTING ATTENTION FROM MOSCOW TO REGIONS. Russian and Soviet history
shows quite clearly the danger of a huge, authoritarian and self-sufficient
central government working beyond democratic control. In 1991, when the
current Russian constitution was designed, Mr. Yeltsin and his reformers
obviously were the most progressive and market-oriented force around. At
that time the support of Mr. Yeltsin was justified. Today, the situation
has changed completely. In most cases and for different reasons, Mr.
Yeltsin, his entourage, and over 100,000 Russian bureaucrats have become an
obvious brake to the Russian locomotive of reforms. The center of
reform-generating activity has already shifted from Moscow to the regional
level and it would be a costly mistake not to take advantage of this trend. 
It is time to accept the fact that the Russian Parliament has become an
important element of Russian political life. It would be a big mistake to
continue ignoring this fact and to be afraid and/or late in starting a
productive cooperation with at least 225 members of the lower house (Duma)
elected by direct vote in Russian regions. The upper house of the Russian
Parliament -- Federation Council -- consists of 178 elected government
officials (governors and chairs of the local parliaments) from all 89
regions. These 225 members of the Duma and 189 members of the Federation
Council can become quite reasonable if "pressure politics" methods are
applied to them through their local electorate. It is possible to imagine
that if 89 local legislative assemblies in the Regions adopted one or
another reform-oriented legislation, the federal Parliament would have just
one option - to follow the majority. First steps in this promising
direction have already been made. Exhausted by the endless political
debates in Moscow, some regions have started to adopt their own
reform-oriented laws regarding land ownership, foreign investment, etc.
Support of such initiatives could be the most productive investments made
in Russia so far.
It is guaranteed that the costs of developing such a system would be
much less and the results much more obvious then multi-billion investments
in Mr. Yeltsin and his musical-chair Moscow bureaucrats. It is also time
for US Congress and the governors to give a hand to the executive branch of
the US government in dealing with Russia and even to take a lead and become
more engaged in establishing direct contacts with their Russian
counterparts. The US and Russian voters would find such an approach to
deal with Russia much more understandable and justified. 
Bearing in mind the fact that the upper house of the Russian Parliament
consists of 178 regional leaders, it could be quite beneficial to shift at
least economic attention from Moscow to the regions. Concentrating
assistance efforts on the most important regions, can help achieve all the
planned economic (and gradually even political) targets in the most
effective way possible. Today the Russian parliament, as well as regional
leaders, have a very superficial influence on the Russian foreign policy.
Pushed aside by the strong elbows of Moscow bureaucrats and forgotten by
the US politicians, these people are often acting in a vendetta mood and
blocking many important legislation. This situation needs to be changed.
Economically stable, prosperous and politically active Russian regions can
be a much stronger long-term supporters of US political and business
initiatives, as well as of US legislators and businessmen interested in
mutually beneficial cooperation between the two countries. With some
imagination, a winning strategy for dealing with Russia in the future can
be easily designed.

*******

#7
Date: Tue, 15 Sep 1998 
From: Len Cormier <thirdmillennium@tour2space.com>
Subject: A Nine-Point Program to Aid Russia 

Sustaining the Revolution
by Len Cormier (Panaero)

Enlightened self interest compels us to recognize that Russia 
is in a class apart from other countries. On the positive side 
there is the economic opportunity represented by: 1) the 
enormous land area of the country; 2) the large amount of 
untapped natural resources; 3) the reservoir of a highly 
educated labor force; and 4) the vacuum left by 70 years of 
communism with respect to consumer products and job opportunities. 
This last point might be turned to mutual advantage with the 
development of joint Russian/American products based in part upon 
a vastly underemployed, underpaid, skilled labor force. On the 
negative side, there are the tens of thousands of nuclear weapons 
that could become poorly controlled under unstable conditions. 
What can and should the United States do to help Russia stay on 
the path toward economic reform and democracy? The time has come 
to go far beyond good wishes. The time has come for meaningful 
action with far less sermonizing talk.
Interestingly enough, Russian rapprochement with the United States 
goes back to late 1700s, when Russia wished to secure allies against 
European powers. And again in the middle of the last century, Russia 
returned moral support by the United States in the Crimean War with 
a visit of the Russian Fleet in sympathetic support of Union Forces 
during the U.S. Civil War. Alexander II emancipated the serfs in 
Russia at about the same time that Abraham Lincoln emancipated the 
slaves in the United States. Partly as a good will gesture, 
Alexander II sold Alaska to the United States for the nominal sum 
of $7,200,000. Fort Ross, the Russian colony in California, had 
already been sold in 1844 to J. A Sutter. Russia was also grateful 
for Theodore Roosevelt's arbitration role after the 1904-1905 war 
with Japan, when Russia was soundly defeated. Russia was an ally 
during World War I.
With the loss of the 1917 Revolution to the Bolsheviks, communism 
took complete control of Russia and, eventually, the other 14 
republics of the former Soviet Union. Russia, of course, was the 
core of the USSR that confronted the United States and other 
western countries with seventy years of proselytizing communism. 
However, largely because of the even greater evil represented by 
Hitler and the Third Reich, Russia was an ally during World War II 
— or the Great Patriotic War, as it is called in Russia. As in 
World War I, Russian troops were sometimes sacrificed for the good 
of the other front.
World War II was followed by forty years of cold-war and nuclear 
threat. During this period, the USSR caused much damage to the 
world and its peoples. But perhaps the worst damage of all during 
the 70 years of communism was to Russia and Russians.
With the end of the Cold War, some Americans are confused as to 
where Russia lies in the "friend or potential foe" spectrum. No 
one knows for sure where Russia is heading. Some forms of aid 

could be risky. But too much caution could become a self-
fulfilling prophecy with respect to our worst fears.
Perhaps Russia's greatest disadvantage is not losing a hot war 
to the United States. Russia is not the USSR. Russia has cast 
out its own devil — admittedly in part as a result of a firm 
stand by the United States and NATO. Today, we do not have a 
George C. Marshall, who so well understood the lessons of 
World War I with respect to how to treat former enemies. We 
have rightfully supported the entry of Poland, Hungary and the 
Czech Republic into NATO for their understandable fears of 
further oppression from the East. However, we have not done 
well in understanding the feelings of isolation and 
defensiveness of a country that lost 26,000,000 people during 
World War II — far more than all other countries combined. 
And again, Russia may feel inclined to look toward a special 
relationship with the United States as a counter to feelings 
of isolation from the rest of Europe. Indeed, the key to both 
continued support of NATO and its proposed new members — as 
well as Russia — may be to look to our third nearest neighbor 
as a key member of a Pacific Rim Organization of Democracies. 
Although PRO-Dem, as it might be called, would be unlike NATO 
with respect to treating an attack on one member as an attack 
on all members, an unwarranted attack on any member might well 
be met with guaranteed supplies of military equipment and/or 
funds. Other goals of PRO-Dem would be to promote democracy 
and to support the economic well-being of all members through 
special cooperation.
With respect to the threat of potentially poorly controlled 
nuclear weapons in an unstable Russia, it would seem that the 
United States could solve two problems at once by purchasing 
all of Russia's nuclear warheads for perhaps $100 billion — a 
sum suggested some years ago by William Buckley for the whole 
USSR military machine. Today, Russia needs modernized 
conventional weapons and a revitalized military to defend 
itself without nuclear weapons. Russia desperately needs 
substantial funds for this and other vital purposes.
The proposed purchase would be a package deal involving: 
1) the purchase of nuclear weapons from the Russian Federation 
in exchange for much-needed funds (not loans); 2) proportionate 
reductions in the United States (and other countries) of stocks 
of nuclear weapons; 3) provisions for cooperative defense 
against ballistic missiles; 4) immediate payment of back wages 
owed to Russian workers and military personnel — and other back 
payments to pensioners and others; 5) a safety net comprising 
food stamps and other provisions for the truly needy hurt by 
free-market policies; 6) adjustments in the income from Russian 
national assets given away without sufficient thought to Russia's 
tycoons for insufficient consideration (partially by appealing 
to the rational self-interest of these tycoons); 7) formation of 
the Pacific Rim Organization of Democracies (PRO-Dem); 8) novel 
approaches to providing Russia with a stable currency; and 9) a 
cooperative Russian/American program designed to encourage joint 

economic ventures between private Russian and American companies.
Many years ago, a work entitled "Shto Dyelat" — literally 
"What To Do" had a profound effect on the future political 
direction of Russia. We now need to ask this same question in a 
global context. As a starting point for further discussion and 
quick action, the author proposes the 9-point program outlined 
in the accompanying box.

----------------------------------------------------------------------------
----
* *
* A Nine-Point Program to Aid Russia *
* *
* Draft Proposal *
* *
* 1. Purchase all Russian strategic nuclear warheads for a *
* price of $10,000,000 per warhead; purchase all tactical *
* nuclear warheads for a price of $4,000,000 each -- providing *
* that no warheads shall be sold by Russia to any other *
* country and subject to mutual agreement with respect to *
* other points in the overall aid program. Total revenue to *
* Russia from the sale of all nuclear warheads should be on *
* the order of $100 billion. *
* *
* 2. Make corresponding reductions in the nuclear inventories *
* of the United States and other countries. *
* *
* 3. Replace the ABM treaty with a cooperative Russian- *
* American program for global ballistic missile defense. *
* *
* 4. Put top priority for use of funds received from the sale *
* of nuclear warheads on back payments to Russian workers, *
* military personnel, pensioners, and others who should have *
* received wages from the Russian government. *
* *
* 5. Establish an appropriate safety net comprising food *
* stamps, etc. -- in lieu of any plan to establish price *
* controls -- for truly needy Russians who have been hurt by *
* free-market policies. *
* *
* 6. Adjust the ownership of certain Russian national assets *
* particularly oil and other extraction assets so that *
* 50 percent of the profits from these privately run assets *
* would flow into the national treasury. The Russian *
* government would not have an active role in the operation of *
* these assets, but would have full access to all financial *
* transactions to guard against improper expenditures and *
* distributions. *
* *
* 7. Form a new treaty organization to be called Pacific Rim *
* Organization of Democracies (PRO-Dem) with a proposed *

* membership comprising the United States, Canada, Russia, *
* South Korea, Japan, the Philippines, Australia, New Zealand. *
* Other candidate countries might include Taiwan, Singapore, *
* Malaysia, Thailand, appropriate South American and Central *
* American countries, and Mexico. PRO-Dem's goals would be to *
* provide for: a) mutual economic improvement; b) mutual *
* promotion of democratic principles; and c) support in the *
* form of military equipment and/or funds in the event of an *
* unwarranted attack on one of the members. *
* *
* 8. Purchase U.S. Treasury bonds with some or all of the *
* funds received from the sale of nuclear warheads. These *
* bonds would guarantee the value of a new Russian currency. *
* Interest on the bonds would go to the Russian Federation, *
* and the new currency, e.g. "Troikas," would be convertible *
* at any time to U.S. dollars on a one-to-one basis. Troikas *
* could be used to pay back wages and other obligations, as *
* well as being used for such purposes as the Russian *
* president and Duma shall determine to be appropriate. The *
* principal amount guaranteeing the value of Troikas would be *
* untouched. However, Troikas themselves and interest from the *
* bonds would be available for appropriate uses. *
* *
* 9. Inauguration of a cooperative Russian/American program *
* designed to encourage joint economic ventures between *
* private Russian and American companies. *
* *

*********

#8
Russian unemployment grows as crisis worsens
By Adam Tanner

MOSCOW, Sept 17 (Reuters) - Tatyana thought she would escape the wave of
firings in recent weeks at her Moscow bank, but it first cut the central
office staff of 700 by 10 percent, then by a third, then by half, and finally
by 90 percent. 
She lost her job. 
``The bank was pretty stable and reliable, and I was confident I would work
there for a long time,'' said the banker, who asked that her last name not be
published. ``But over the past three weeks we perished... I'm now sending out
my resume to other agencies.'' 
Tatyana is not alone. Every day over the past few weeks, Russian firms have
fired workers by the thousands. Some are closing their doors for good, the
latest victims of the rouble's devaluation and collapse of the banking system.
On Wednesday, Moscow travel agency Iro Travel dismissed nearly half of its
staff of 36 after a 50 percent drop in business in recent weeks, owner Jan
Passoff said. 
``I went into giving people indefinite unpaid leave, which is, you know,
basically saying you better go look for something else because I can't promise
you anything here in the near future,'' he said. 
Those who stayed got a 25 to 50 percent pay cut. ``Their basic response is
they worry about how they'll make it but they're happy to have a job still
because they see their colleagues with nothing,'' he said. 

Much of the unemployment resulting from the financial crisis is hidden from
official statistics. Many of the hardest hit firms were semi-official trading
enterprises unable to do business with a rouble fluctuating 10 to 30 percent a
day. 
``According to some estimates unemployment has reached as high as 25 percent
in connection with lay-offs, the closing of banks, bankrupt firms and so on,''
said Fridrikh Borodkin, an economist at the Institute of Economics and
Industrial Engineering in Novosibirsk in central Siberia. 
``I think that of those Russians who want to work already 15 to 20
percent are
jobless.'' 
``Very many small firms of different kinds have collapsed, closed down. Most
of these were different trading firms, middlemen,'' Borodkin said. ``There is
also a lot of hidden unemployment through forced unpaid holidays.'' 
Uralmash, one of Russia's biggest heavy machine plants in Yekaterinburg in the
Urals, sent two-thirds of its 15,000 workers on a two-week forced leave with
partial pay from Monday because of the financial crisis. 
``There's uncertainty. It's not clear what price to make new contracts at.
It's not clear how our customers are going to pay because their money is stuck
in the bank,'' said Kakha Bendukidze, chairman of the board of Uralmash
Zavody. 
``So until the situation becomes clear we will continue loading output
that's
already paid for, but we decided temporarily to stop production.'' 
Moscow, the country's main economic engine with the largest growth of white-
collar, well-paying jobs in recent years, has been particularly hard hit.
Communist leader Gennady Zyuganov earlier this week said 300,000 Muscovites
had lost jobs over the past month. 
``The number of people applying for jobs has increased two or three-fold in
connection with job cuts at other companies,'' said Yelena Kisel, head of the
applications department at Ankor, one of the city's largest employment
agencies. 
``There are very many engineers and electronics specialists, many bank
workers,'' she said. ``Some have already lost their jobs, some have received
notice, some see that their company is in a bad position and can predict they
will lose their job.'' 
Economists say the fate of the growing unemployed is worse in remote regions
of the country because of harsher climatic conditions and fewer alternatives. 
``Of course it's much worse for Siberia. The more sparse the population, the
worse it is, because their opportunities and choices are more limited,'' said
economist Borodkin. 

*******

#9
Washington Times
16 September 1998
[for personal use only]
Russian students not concerned by ruble's plunge
By Andrea Billups

Russian students attending area universities appear to be little
affected so far by the rapid devaluation of the ruble.
"They are not pouring into the office" expressing concern, said Valerie
Woolston, director of International Education Services at the University of
Maryland. "The Asian students were. I'm not really sure what it means, but
it may be too early to tell."
Earlier this year, thousands of South Korean students studying in the
United States were forced to borrow money or quit school after currency

devaluations at home cut the value of the won by about half. Campus
officials scrambled to offer deferred tuition payments or loans to help
keep them afloat financially until the currency collapse in Asia was resolved.
Nearly 6,200 Russian students studied at colleges and universities in
the United States last year, according to figures from the Institute of
International Education. Of those, 92 were enrolled in the District, 147 in
Virginia and 148 in Maryland.
As many as half of the students are probably paying for their own
educations, said Carl Herrin, government relations liaison for the American
Council for Teachers of Russian, a placement organization for students and
teachers.
A significant number of those students, however, are funded by U.S.
dollars through scholarships or corporate support, so "the impact [of the
crisis] is probably negligible," he said. "We've not had any students
canceled by this ... at least not yet."
The ruble has fallen dramatically with Russia's economic crisis.
Yesterday, it was trading between 7.5 to the dollar and 10 to the dollar,
up slightly from 12 on Friday. The ruble's fall has been accompanied by
inflation that soared to 15 percent in August.
At Virginia Commonwealth University in Norfolk, Russian students have
yet to express concern about their ability to stay in school, said Scott E.
King, director of international and scholar services.
"It's probably not going to be the end of their education if the
economy drops," Mr. King said. "Most of our students from that part of the
world are usually here on some kind of aid outside of Russia and very few
of our them get directly their funds from home."
Moscow native Daniil Rozental, a graduate student in the Russian
studies program at Georgetown University, said he's concerned about the
crisis at home, but doubts it will affect his ability to finish school. He
receives financial aid as does his wife, a doctoral student, and also
supplements his education by working part time.
"I think that most Russian students that stay in the United States are
either so wealthy that the crisis won't effect them or they are here on
scholarship," said Mr. Rozental, 24.
Sergei Pirogov, 27, comes from a middle-class family from Moscow, but
is paying for his own education at the University of Virginia. He worked
for five years as an investment consultant for a Russian company in
Arlington before returning to school this month to finish his master's
degree in business administration.
Mr. Pirogov is using his savings to pay for his tuition, but says that
is not the norm for most Russian students he knows, most of whom are funded
by Western sources.
"Some of those students may have problems," he said "if some Western
companies pull out of Russia," because of the deteriorating economic
situation.

*******