September 20, 1998   

This Date's Issues: 2385• 2386•2387•

Johnson's Russia List
#2385
20 September 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Ray Thomas: Re 2382-Weiler/Inflation.
2. AFP: Can Russian production seize its chance? 
3. Anthony D'Agostino: Yeltsin's Turn. 
4. AP: Money Woes Keep Russians at Home.
5. Reuters: IMF cash for Russia misused or stolen, auditor says.
6. Washington DC and New York events: "Russia's Gray Panthers? 
Deteriorating Conditions for Russian Pensioners and their Rising Political 
Role -- A Look at The Next Elections and Beyond."
7. Reuters: Russia's ex-central bank chief defends actions. (Dubinin).
8. RFE/RL: Paul Goble, Apocalypse Not Quite Yet.
9. Business Week: Robert Barro, WHAT MIGHT SAVE RUSSIA: TYING THE RUBLE
TO THE DOLLAR.
10. Argumenty i Fakty: Kremlin Intrigues After Kiriyenko Sacking.
11. Interfax: Seleznev: Russia Not Heading for Dictatorship.
12. Interfax: Primakov Had Highest Popular Support For Premiership.
13. Moscow Times letter: Sunil Lalvani, Russia Must Disregard West in 
Fight for Survival.
14. Wallace Kaufman: On Len Cormier's 9 Points.
15. Interfax: Berezovskiy: CIS Should Not Limit Itself to Ex-USSR Borders.]

******

#1
From: Ray Thomas <r.thomas@open.ac.uk>
Subject: Re: 2382-Weiler/Inflation 
Date: Sat, 19 Sep 1998

Good questions from Jonathan Weiler about inflation.
Inflation is classically defined as "a state of disequilibrium in which an
expansion of purchasing power tends to cause, or is the effect of, an
increase in price level" (Einzig, 1952).
The point is that inflation needs both printing of more money and the
expectation that prices will increase. There is a great shortage of money
in the Russian economy. The banking system does not even support
inter-firm transactions - a form of credit which is taken for granted in
most capitalist countries. The Russia economy is demonetised and every
increase in money supply is interpreted as a signal for future inflation.
But there is nothing inevitable about inflation. Inflation does not belong
to the world of physics. It is a social phenomenon - the product of beliefs
about the future.
The hope is that an increase in money supply will be accompanied by rigorous
and effective price controls. Those who argue against such controls are
letting their ideologies take over their brains.
The IMF and others seem to have already caused havoc in Russia by advising
on moves to a free market economy without noticing that Russia did not have
the banking system to support a market economy. It is good to see some
hesitancy and variety in the advice now being offered. Even a variety of
nonsense advice is better than near-unanimous advice that is bad.

Ray Thomas, Social Sciences, Open University
Tel (44)1908-679081. Fax (44)1908-880292
Email: r.thomas@open.ac.uk
Post: 35 Passmore, Milton Keynes MK6 3DY

********

#2
Can Russian production seize its chance?

MOSCOW, Sept 20 (AFP) - The crash of the ruble has made the price of imported
goods soar in recent weeks, creating a golden opportunity for national
products to take their place on Russian shelves.
But the question is: is there actually a Russian product?
Soviet products had lost their competitiveness by the fall of communism in
1991. When the doors to Russian markets were opened to foreign goods, these
items were instantly washed away.
Since then, however, the industrial infrastructure has not been remodelled and
is in a bad way today.
"Investment has been falling for seven years. Production machinery is very run
down and and there is now less money than ever to relaunch it," an economist
said.
Only car-manufacturing appears to be in a strong position, having profited
from major foreign investment since a February decree granting privileges to
large investors.
Joint projects between Renault and Moskvich, Fiat with GAZ and Ford in the
Saint Petersburg area remain high points in Russian manufacturing.
Certain mini-sectors could also take advantage of foreign investors pulling
out of the country.
Chocolate, biscuit and confectionery-making have been gnawing away at foreign
competition since the beginning of the year, while fruit juices and milk --
but not dairy products -- are also successful.
Alcohol and tobacco products will also profit from a state monopoly announced
by Prime Minister Yevgeny Primakov.
These sectors, which have managed to attract foreign investors such as Mars,
Danone, Parmalat and RJ Reynolds, remain very limited however.
The situation is less optimistic in other entire sectors of the economy.
The building industry, including cement production and piping, is incapable of
bouncing back. It functions at a loss and ageing conglomerates survive only by
barter.
In the agricultural and food-production sector the situation borders on the
absurd.
Russia imports 50 percent of its foodstuffs. Even Russian sausages, which
flourished in the Soviet era, will have trouble regaining their former
predominance, with livestock depleted and most meat imported.
Russia would need to double the number of its current 50 million cows and pigs
for meat production to get back on its feet, which the weekly paper Dyengi
said would take a dozen years.
Even if, by magic, such results could be achieved, there would be no way to
feed the livestock: while the nation was eating the animals to survive the
last decade, grain harvests have crashed along with the Soviet Union.
The grain harvest this year was 55 million tonnes, just enough to feed the
Russian people, said Leonid Chechinski, president of the Roshkleprodukt baking
ingredients company.
To reach the production levels of the heyday of the Soviet Union would mean
buying thousands of combine harvesters, fertilising vast tracts of land and
building new grain silos. 
But where would the money come from?
Russia's national electrical goods production is almost virtually non-
existant. With the exception of television sets and refrigerators, the market
is contracting under pressure from Korean imports, while neighbouring Ukraine
and Belarus are also making inroads on the market.
As for washing machines, Dyengi reported that "the only quality national
factory, Vesta, went bankrupt a year and a half ago."
Most textile factories from the Soviet era have also shut down. Those that
remain use imported materials but turn out inferior quality goods in the face
of tough competition from factories in Asia, an economist said.
Russian production, now only 40 percent of its Soviet-era capacity, and 30
percent in the light industry sector, will be hit hard by the current economic
crisis.
"The relaunch of Russian production cannot take place without foreign
investment," an analyst stressed.
"In place of high-quality, expensive western goods, the market will be invaded
by Asian products. And then our producers will be shut down," predicted
Dyengi.
Instead of Italian pasta, tomorrow's Russians will be eating Chinese noodles.

*******

#3
Date: Sat, 19 Sep 1998 
From: "Anthony D'Agostino" <dagostin@sfsu.edu>
Subject: Yeltsin's Turn

I finished some reflections on Primakov and the Russian foreign policy
tradition (JRL 2317, 20 August 1998) with a question: "Could Yeltsin make a
turn now, defy the west, consolidate power in a regime of 'national
salvation,' and banish the legacy of Mister Yes (Kozyrev)? I am sure he has
thought of it more than once."
Yeltsin has now made this turn under the pressure of the Russian payments
default and the world crash of 27 September 1998. The post-Soviet
alternance is now more visible: Atlanticism, 1992-8 and now Recueillement. 
The turn has for its motif a change in economic policy and the promise of
a Russian New Deal, but it is more than that. Russian national
consolidation and assertion are now on the order of the day and will drive
all economic policies; it is a case of Der Primat der Aussenpolitik. The
irresistible urge will be in the direction of the line of Kurginyan and
Ovchinnikov in 1990, which they called "post-perestroika," a Russian
corporatism based on practice in Japan, China, Cuba, but not on the
discipline of the world economy. Russia is likely to be the second chapter
of the breakout from world economic verities signaled by Malaysia and Hong
Kong. Despite what Primakov may choose or desire, Russia will now be a
standing encouragement for every disruptive influence in world politics.
Yeltsin's turn was taken at least partially to head off the confrontation
with society that is looming on 7 October. He put Primakov and the
opposition into the position of having themselves to face the wrath of the
crowds. Primakov will have to pay the troops first and ensure the
reliability of the security services. But a national rail strike could
arise out of rail traffic stoppages and a Moscow soviet could blossom out of
its strike committee, as in 1905. Some Communist commentators say openly
that this kind of development can serve as a basis for a government of
National Trust. Actually it will introduce Dual Power and serve as a force
to vie with the government itself for the loyalty of the troops. 
Some say that this is all hyperbole, that the danger is overblown, that
the Army is in no mood to meddle in politics. To be sure, Soviet Russia
really had no tradition of military coups, but those days are over. There
was a coup against Gorbachev in September 1990 and of course the attempt of
August 1991.
If there were full-scale civil war as in Spain in 1936, most of the
troops would flee the fighting rather than join it. But it does not take
much to destroy a government. Yeltsin's attack on the White House in 1993
was done with just a few companies of infantry and virtually no tanks.
And it is easy to forget that Yeltsin is still there, like Hindenburg,
and perfectly capable of removing Primakov and installing Lebed. Also, as
with Hindenburg, his death would elevate the PM to a semi-dictatorial
position. That is a good reason for the west to cheer any opposition moves
to revise the articles on Presidential powers in the Yeltsin constitution.
The west should not mope about the failure of its economic model in
Russia. Capitalism is like water flowing downhill, circumventing all
obstacles. It will survive in Russia. We should be more concerned with the
preservation of Russian democracy, the strengthening of parliament, and the
prevention of another coup like that of 1993. 

*******

#4
Money Woes Keep Russians at Home
September 19, 1998
By NICK WADHAMS

MOSCOW (AP) -- They escaped Russia's freezing winters and mild summers in
droves, heading for the blazing heat of Egypt and the beaches of the French
Riviera. They toured the sights of Europe and explored exotic islands in the
Indian Ocean. 
But these days, Russians are staying put. 
The travel fever that gripped the country after the fall of the Soviet Union
is on the wane, as the ruble plummets and the economy continues to slide. 
``People are more worried about saving their money now,'' said Sergei
Kuznetsov, advertising manager at the Irene tour agency in Moscow. ``They've
got other things to worry about.'' 
When the Soviet Union fell, Russians could travel freely to many spots around
the world for the first time in 80 years after the government eased
regulations on leaving the country. 
Previously, it was almost impossible for Soviet citizens to travel abroad
because of authoritarian controls. Only a favored few were allowed to travel,
usually just in supervised groups on strictly monitored itineraries. 
Last year alone an estimated 5 million Russians traveled abroad to places like
Cyprus, Spain, and France. The more adventurous -- and wealthy -- went to
islands like the Maldives. 
``Before, we didn't even dream about it,'' said Eleonora Albrecht, a speech
pathologist who has traveled extensively throughout Europe in the last five
years with friends. The trips have become ``something to live for,'' she said.
Others started going places tourists rarely go, vacationing ``everywhere they
could,'' said Alla Dobrovolskaya, a columnist with the Segodnya newspaper.
``Travel became a symbol of freedom. After so many years, they could finally
do it.'' 
But now, as many in Russia's emerging middle class lose their jobs with the
collapse of financial companies, ad agencies, and banks, the travel agencies
that sprouted up in Moscow during the boom are as deserted as a beach resort
in the dead of winter. 
``Most of our inexpensive tours have been stopped or are just dead, dead,
dead,'' said Jan Passoff, president of IRO Travel. Though wealthy Russians
continue to buy some tours, the rest have just fled the market, he said. 
For Albrecht, who saved up for her trips each year, ruble inflation has left
journeys to Europe ``out of the question,'' she said. 
``Now, with the crisis, we will have to go to St. Petersburg, or study Moscow
in greater detail. We'll read literature about other countries and watch the
videos we filmed when we were there.'' 
The financial crisis also means a large drop in the once booming ``shuttle
trade'' of foreign goods, which saw Russian traders flood Turkey and China,
seeking consumer goods for re-sale back home. 
Before the crisis, more than 3,000 shuttle traders each week were going to
Turkey and the United Arab Emirates, said Nikolai Kakora, director of the
Midwest tour company. ``Now there are a maximum of two flights a week.'' 
Still, travel agents were confident that the vacation bug would return to
Russia, particularly now that going abroad is becoming the norm, not just a
symbol of freedom. 
``People have learned to spend money on themselves, to relax,'' said Maya
Donitze, editor of the TourInfo magazine. ``They've seen the difference
between Russian and European service, and they won't give it up.'' 

********

#5
IMF cash for Russia misused or stolen,auditor says

LONDON, Sept 20 (Reuters) - A Russian financial official said in a British
television interview on Sunday that billions of dollars of International
Monetary Fund (IMF) loans to Russia were either misused or stolen. 
``We have checked a fair proportion of the loans and I'm ashamed to say that
several billion dollars has not been used for its intended purpose and some of
it was simply stolen,'' Venyamin Sokolov told the BBC's Money Programme. 
Sokolov, Russia's chief state auditor, was indirectly quoted as urging the
West not to give more money unless better supervisory measures were in place.
The BBC released a statement carrying the remarks. 
His comments come as the IMF is considering whether to disburse fresh funds to
cash-strapped Russia, which is grappling with political upheaval. 
``First and foremost we have to establish strict financial controls, the kind
that exist in any country in Western Europe,'' he said. 
``It's a basic prerequisite for the development of market economics in order
to create a highly effective economy and to overcome corruption.'' 

*******

#6
Date: Sat, 19 Sep 1998
From: Gordon Feller <gordonf@pacbell.net>
Subject:INVITATION TO AN EVENT EXPLORING RUSSIA'S ECONOMIC FUTURE

INVITATION TO AN EVENT EXPLORING RUSSIA'S ECONOMIC FUTURE
at Georgetown University's Center for Eurasian, Russian and East European
Studies

Tuesday, September 29
3:30 - 5:00 pm
Copley Hall Formal Lounge
Georgetown University

"Russia's Gray Panthers? Deteriorating Conditions for Russian Pensioners
and their Rising Political Role -- A Look at The Next Elections and Beyond"

A panel discussion with leaders of the Russian Party of Pensioners who are
now forming the Russian National Committee for the United Nations
International Year of the Older Person

+Sergei P. Atroshenko
1995: President of Tyumen-2000 Regional Social and Political Movement
1996: Candidate for Governor of Tyumen Region, receiving 35% of vote
on the second round.
Present: President, Russian Party of Pensioners <http://www.pensioner.org>
+Vladimir N. Chernavin
1979: Chief of Staff, Northern Navy Command; Commander Northern Navy Command
1981: Chief of Staff, USSR Navy
1985: Commander-in-Chief USSR Navy
1992: President, Union of Submarine Sailors
+Yakov P. Ryabov
1979-1983: USSR Minister of Planning
1983-1984: USSR Minister of Foreign Trade
1984-1986: USSR Council of Ministers, Vice President
1986-1990: USSR Ambassador to France
Present: President of the Association for Development of the Urals Region
Interpretation: Lt. Col. Jeffrey Barrie (US Army, retired)
Additional Russian delegation members will be in attendance.
For more information call (202) 687-6080.
Co-sponsored by the Institute of World Affairs and Integrated Strategies.

The delegation will also be the focus of an event in Manhattan on
October 2 at 4PM at The Nation magazine hosted by editor in chief Katrina
vanden Heuvel <kat@thenation.com>. Join us at 33 Irving Place, 8th floor.

*******

#7
Russia's ex-central bank chief defends actions

MOSCOW, Sept 19 (Reuters) - Russia's former central bank chairman on Saturday
denied any wrongdoing at the bank over the use of loans provided by the
International Monetary Fund (IMF) or in any of its other operations. 
Sergei Dubinin, whose resignation was accepted last week, said he was
surprised Prosecutor General Yuri Skuratov had launched an investigation into
the central bank and other banks' operations amid Russia's deep economic
crisis. 
Skuratov said the investigation was looking at government bonds, hard currency
transfers and use of the first, $4.8 billion tranche of a big loan
orchestrated by the IMF last July. The money was quickly spent in efforts to
defend the rouble. 
Skuratov was quoted by Interfax news agency as saying the indications were
that ``not everything was clean.'' 
``To be honest I never expected that such a high-ranking official would allow
himself to make such assessments before real checks are completed,'' Dubinin
said in an interview with Ekho Moskvy radio station. 
``I cannot accept them. I think such statements are groundless and simply
irresponsible.'' 
Russian leaders are looking for culprits in a crisis in which the rouble has
plunged against the U.S. dollar and prices have soared. 
The previous government, sacked on August 23, announced a de facto debt
default and devaluation of the rouble on August 17 which the new prime
minister, Yevgeny Primakov, said on Friday had failed to remedy the situation
and had grave consequences. 
``The market for government securities has practically collapsed. Banks have
lost the lion's share of their assets and people's savings have become largely
devalued,'' Primakov said. 
``Payments have virtually halted, shares of Russian companies have sunk
catastrophically and the rouble has fallen dramatically against the dollar.
Prices are going up. A crushing blow has been dealt to this country's
international prestige.'' 
Alexander Voznesensky, a central bank spokesman, said on Friday the bank
should not be blamed. 
``Someone must always be guilty in our country but one organisation cannot be
responsible for everything that happens,'' he said. 

*******

#8
Russia: Analysis From Washington -- Apocalypse Not Quite Yet
By Paul Goble

Washington, 18 September 1998 (RFE/RL) -- An ever-increasing stream of bad
news from Russia has convinced many in both that country and the West that
Moscow is on the verge of apocalyptic developments, with some predicting a
return to Soviet times and others the collapse of the Russian Federation 
But such judgments reflect both a Russian penchant for discussing the future
of that country in either-or terms and Western expectations that the
transition from communism would be easy and quick. And as such, most if not
all of them are almost certainly too extreme. 
Not only are the most dramatic of these statements without any real content --
Moscow cannot simply return to the past, and Russia in some form or other will
continue to exist -- but they detract attention from the ways the Russian
government and the Russian people have coped with crises in the past and are
likely to be able to do so once again. 
Consequently, while Russia does indeed face some truly difficult times in the
coming months, predictions about its future that are cast in such stark terms
tend to get in the way of analysis of developments there rather than
illuminate what is actually likely to happen. 
During the past few days, the news from Moscow has been truly disturbing. On
Wednesday, the Russian authorities announced that prices had gone up 43
percent in the first half of September, a rate that already can be described
as hyperinflation. And on that news, the ruble fell back against the dollar to
a rate of 15 to 1. 
Still worse, several of Russian Prime Minister Yevgeny Primakov's appointees
indicated that they favored printing yet more money, a strategy that might
assuage the anger of many Russians who have not been paid in months but one
that will likely harm the Russian economy and certainly cost it any chance for
outside assistance. 
Also on Wednesday, Primakov announced plans to limit the ability of the
Russian media to cover the activities of the government. 
Under new rules, government officials will not be able to talk to the press
until the new government is formed unless they have specific permission from
the prime minister's chief of staff, Admiral Yuri Zubakov, a longtime veteran
of Soviet foreign intelligence. 
Claiming to be a supporter of freedom of speech, Primakov nonetheless asserted
that "openness doesn't have anything in common with attempts at biased
coverage," language that at best recalls the statements of the last years of
the Gorbachev era. 
And on Thursday, two additional developments only added to the concerns of
Russians and non-Russians alike. President Boris Yeltsin ordered increased
security in advance of what many expect will be country-wide mass protests on
October 7. 
Meanwhile, the independent Public Opinion poll group reported that 92 percent
of all Russians report that the crisis in Russia since the effective
devaluation of the ruble in August had affected their lives, with half saying
the impact had been drastic. 
This list can be easily expanded, and indeed virtually every day there are
fresh reports about the collapse of the Russian banking system, the
difficulties Primakov is facing in putting together a new government, and the
suffering of the Russian people. 
And as a result, and again virtually every day, the press in Moscow and the
West is faced with the direst of warnings about what will happen next. 
Some of these warnings may ultimately prove true. But the ways in which they
are usually delivered have the effect of obscuring three important facts. 
First, despite everything that has happened to them, most Russians continue to
cope, eking out an existence in ways that would challenge many other peoples. 
Second, precisely as the official and public structures in the country
continue to fail, many Russians are working out arrangements such as barter
agreements that make it possible for them to survive and in some cases even
prosper in the midst of extraordinary difficulties. 
And third, Primakov's abilities to work with the majority of the Duma,
something that will give him more authority even at the cost of offending
reformers and the West, should not be discounted. 
On the one hand, such arrangements will make it easier for Russians to accept
some of the difficulties they now face. And on the other, they will likely
allow Primakov to act in ways that may purchase some temporary stability. 
That by itself will not solve the problems Russia faces, but it may mean that
the apocalypse will be put off for a little while, an achievement that
sometimes may be the best any leader can hope for. 
Indeed, that appears to be the conclusion of one of the wisest observers of
the situation. In Washington this week, Czech President Vaclav Havel suggested
that developments in Russia were not so serious or dangerous as many thought. 
Russia, Havel continued, is "in a very complicated situation" and is likely to
remain there for "50 to 100 years." But Havel asked his listeners to remember
that "it is much better to have an ill Russia rather than a healthy Soviet
Union" because the former is much less of a threat to itself or to others than
the latter invariably was. 

********

#9
Business Week
September 28, 1998
[for personal use only]
Economic Viewpoint
WHAT MIGHT SAVE RUSSIA: TYING THE RUBLE TO THE DOLLAR
BY ROBERT J. BARRO 

On a recent trip to Russia, I got an up-close look at some of its economic and
political problems. The risks in the situation were evident, but it also
seemed that the political turmoil might create opportunities for basic
institutional changes. At times like these, drastic new policies sometimes
become politically feasible, and it is therefore worth considering reforms
that might otherwise be unthinkable.
One attractive proposal is a currency board, whereby the central bank would
limit its activity to exchanging the ruble for foreign currency at a fixed
rate. Since large quantities of U.S. $100 bills are already circulating and
since many domestic transactions are viewed effectively in dollar terms, the
natural unit would be a new ruble that equaled one U.S. dollar. But the system
could also work in terms of the German mark, euro, or another currency.
The central idea of a currency board is to eliminate exchange-rate
volatility and hyperinflation as threats to the economy. The experiences in
Argentina and elsewhere have shown that this system can work effectively.
However, it is crucial to recognize that a currency board is not a cure-all.
It must be combined with an effective economic team and with a broader program
that includes fiscal discipline, legal reforms, and improvements in the
banking system.
MIXED BLESSING. A currency board is guaranteed to succeed at fixing the
exchange rate if the central bank begins with international reserves at least
equal to its liabilities--mainly currency and bank deposits--and if these
reserves are dedicated to conversions between the domestic and foreign
currency at a specified rate. The setup does rule out an independent monetary
policy. Some economists view this as a shortcoming, although an independent
monetary policy is, at best, a mixed blessing. In fact, a strong point of a
currency board is that it prevents the central bank from financing the
government (directly or by purchasing public debt), bailing out banks,
providing credit to favored industries, propping up stocks, and so on.
The Russian government would foster the idea that the ruble was as good as
the dollar by not restricting the uses of foreign currency as media of
exchange or stores of value. Since tax collections and other items would
remain ruble-denominated, the domestic currency could eventually emerge as the
preferred means of payment for most transactions. In this happy state, people
would choose to exchange their U.S. currency for ruble-denominated assets.
The currency-board period has to be preceded by a period of floating rates
in which the value of the ruble is determined by the market. This market value
would depend on expectations about future policies, notably on whether Russia
was thought to be moving toward a period of uncontrolled money creation and
hyperinflation. The unfortunate fact is that some interval of money
creation--to clear the decks by paying wage and pension arrears and to cover
some bank deposits--is inevitable. Roughly speaking, the monetary base has to
rise by 50% to finance these items. This amount looks large but is actually
small in relation to the rises in the ruble-dollar exchange rate and the price
level that have already happened.
USEFUL OPTION. The key matter is whether the impending money creation is
temporary--a drunkard's last drink that precedes the implementation of lasting
reform--or a permanent policy that goes along with hyperinflation and the
return to a statist economic regime. The reform choice is by no means assured,
but its probability would be raised by the presentation of a coherent economic
plan, which includes a currency board. Also central is a budget program that
involves improved tax collections, reductions in tax rates in areas where
collections are minimal, and cuts in public outlays at the federal and
regional levels. Another good idea would be the conversion of the domestic and
foreign public debts--practically in default now--into long-term, dollar-
denominated bonds.
The implementation of a currency board also provides the International
Monetary Fund with a useful lending option. Instead of providing funds to
Russia that basically disappear and are used as excuses not to carry out
budget reforms, the IMF could lend only for the purpose of strengthening the
currency board's reserves. To begin, something like $5 billion to $10 billion
would be needed to raise international reserves from $12 billion to $13
billion to the required level, which I estimate at around $20 billion. With
this policy, the IMF would not only be doing something economically useful but
also be raising the probability that its old loans would be repaid.

*******

#10
Russian Paper on Kremlin Intrigues After Kiriyenko Sacking 

Argumenty i Fakty, No 38
(signed to press 15 Sep 98)
[translation for personal use only]
Unattributed commentary from the "Under the Carpet" column: "The
Intrigues of the Authorities"; subheads published in boldface

The political crisis seems to have ended, but its internal motifs are
of interest even now. Former Prime Minister Sergey Kiriyenko's statement
to the president that the management of the Russian economy was out of
control and that he resigned sparked the crisis. That happened in the
middle of August.Since then scheming on a Shakespearean scale began among "the
courtiers." These would have made plots for dramas and tragedies. The
courtiers and the president himself were sure that Viktor Chernomyrdin
would be passed by the Duma without any obstacles. Yet, they miscalculated.
After the Duma's second rejection, the Kremlin was in the grip of panic. 
Yegor Stroyev was believed "to be poor at holding out under attack and too
soft." Viktor Chernomyrdin refused point-blank to work with communist
Yuriy Maslyukov while a consensus candidate, Yevgeniy Primakov, rejected
the offer five times.As for Luzhkov, in all probability he arouses feelings of
incompatibility in the president's administration. One explanation as to
why Luzhkov was not invited to the White House was because they wanted to
preserve him as an acceptable presidential candidate. On the other hand,
there was fear that if Luzhkov becomes Prime Minister, the focus of the
population's discontent will shift from government to president and that
Luzhkov will have no objection to such a development. After all, those in
the Kremlin want to stay there until the year 2000 as prescribed.
Then on that crucial day, three of them got together in Yeltsin's
waiting room: Viktor Chernomyrdin, Yevgeniy Primakov, and Yuriy Maslyukov. 
They agreed that Chernomyrdin would be prime minister, and the other two
his first deputies.
However, Yeltsin had been visited by [Valentin] Yumashev before the
other three went. By all accounts that was the time when he enacted his
final scheme by talking Yeltsin into picking Primakov. The president signed
the letter to the Duma, containing Primakov's name and later received the
unsuspicious threesome. Yeltsin began to read the text of the letter
slowly as those present were looking at the floor. Then Primakov exclaimed
in a fit of emotion "All right then!" almost like Gagarin's "Let us go!."
Subsequent dismissals were a by-product of this scheming. A. Kokoshin
was dismissed for showing too much initiative by trying to push Luzhkov
over the head of his superiors. Press secretary Sergey Yastrzhembskiy was
dismissed for building a second centre in Yeltsin's administration. He
even had meetings with Gennadiy Zyuganov. He did not play by the rules. 
Dmitriy Yakushkin replaced Yastrzhembskiy. Meanwhile a vacuum has formed
around Yeltsin, some have been or are being dismissed. Others are waiting
for something bad. A black joke is going around: In Yekaterinburg
[Yeltsin's home town], the Ipatyev building is being restored for the
arrival of the Yeltsin family.Viktor Chernomyrdin Sent Away [subhead]
In the meantime, the fate of Viktor Chernomyrdin is still unclear. 
They say that last Friday he met Yeltsin. The former Prime Minister is
said to have expressed a wish to be secretary of the Security Council to
replace [Andrey] Kokoshin. He explained his request by the fact that he
would like to set up a strong structure able to "counteract thegovernment."
But despite Yeltsin's predilection for counterbalances, he said he
would think about it and then appointed [Nikolay] Bordyuzha to the post. 
The path to big politics is thus closed for Viktor Chernomyrdin. The other
participants of the September scheming, Boris Berezovskiy and Aleksandr
Lebed, are also in a sad position. They say that the two attempts to
reinstate Viktor Chernomyrdin cost Berezovskiy as much as $15. Lebed has
found himself in a silly position. His canvassing for Viktor Chernomyrdin
has not passed unnoticed. The position of the new director of the Federal
Security Service is also untenable. Up to now he has been seen as a man of
Anatoliy Chubays's and as such he cannot be to Primakov's taste. Primakov
would need his own man in this post, a man he could trust, a man whose
analyses and recommendations he can follow. The director of the Foreign
Intelligence Service, [Vyacheslav] Trubnikov is such a man. But it is not
clear whether Yeltsin who wants to see in the Federal Security Service
someone who is loyal to him personally would agree to Trubnikov.
Zyuganov Is To Shift Focus [subhead]
And finally, on the general strike scheduled for 7 October. Despite
the formation of an essentially coalition government, it will take place. 
Though one of Primakov's conditions to the Communists when he took on
premiership was their promise not to make his life difficult. The
Zyuganovites agreed and promised to shift the focus "of the people's ire"
to Yeltsin. The main slogan calls for Yeltsin's resignation. The
Communist Party has decided to name the 7 October events as "the people's
mandate for the president's impeachment."

*******

#11
Seleznev: Russia Not Heading for Dictatorship 

MOSCOW, Sept 17 (Interfax) -- Media reports, particularly in the
United States, about an imminent Red and Brown comeback and a dictatorship
in Russia are untrue, Duma Chairman Gennadiy Seleznev on Thursday told
European Union representatives
"Russia does not want or await a dictator because we have opted for
democratic development," but Russians "can no longer tolerate not being
paid their wages for months," the Duma press service quoted him as saying
to Foreign Ministers Wolfgang Schuessel of Austria and Klaus Kinkel of
Germany, British Minister for Europe Joyce Quin and European Commissioner
Hans van den Broek.
Responding to Kinkel's remark that loans might be made available to
Russia, Seleznev said that their use must be supervised, in particular by
the creditors. Because the Duma does not have the right to supervise the
activities of the government, the coal tranche was misused, which resulted
in the opening of 20 criminal cases, and $4.5 billion of the World Bank's
money has disappeared, he said.
The EU officials expressed the hope that Russia would continue with
reforms and that this would help their countries to continue trustingRussia.

********

#12
Primakov Had Highest Popular Support For Premiership 

MOSCOW, Sept 17 (Interfax) -- If a "soft rating vote" had been held on
candidacies for prime minister, Yevgeny Primakov, the current prime
minister, would have won a convincing victory, the Public Opinion
sociological forum told Interfax.
The forum made this announcement with reference to an all- Russia
opinion poll conducted among 1,500 urban and rural residents on September12.
The respondents were asked to chose the best candidate from a list ofnames.
Primakov mustered 32% of the votes, Moscow Mayor Yuriy Luzhkov
received 15%, Governor of Krasnoyarsk region Aleksandr Lebed had 13%,
ex-prime minister Viktor Chernomyrdin received 7%, current first deputy
prime minister Yuriy Maslyukov had 3% and chairman of the Federation
Council Yegor Stroyev came in at 2%.
The respondents approved of the Russian President Boris Yeltsin's
decision not to renominate Victor Chernomyrdin for a third time. Sixty
seven percent of those polled supported Yeltsin's nomination of Yevgeniy
Primakov to the post. Thirteen percent opposed it.
Judging from the poll, signs of a return to political stability have
minimized the potential for protest in Russia. On September 12, 48% of
those polled said that massive disturbances and other actions of protest
will increase in the next few months. On September 5, 76% of the
respondents predicted such developments. The number of Russian citizens who
said that actions of protest would remain at the same level increased from
11% to 17% over the week. The percentage of citizens who thought that
massive actions of protest were less likely to occur also increased from 2%
to 11%.However, the settlement of the recent political crisis has not
affected the citizens' readiness to join protest actions personally. 
Whereas on September 5, such readiness was expressed by 27% of those
polled, on September 12 only 26% said they were ready express protest. 
Respectively 59% and 62% of the respondents had no plans to protest.
Russian citizens between the ages of 35 and 50 expressed the greatest
readiness to protest.

******

#13
Moscow Times
September 19, 1998 
MAILBOX: Russia Must Disregard West in Fight for Survival 

Editor, 
As Western politicians, economists and commentators continue to speculate on
the "right" answer to the current economic crisis in Russia, they all appear
to be ignorant to the real plight that Russia finds itself in, with the masses
suffering and on the verge of starvation. 
After 1991, Russia became one of the biggest consumer markets in Europe, if
not the world. Now when it has suddenly all come crashing down, and no one has
escaped unharmed, the Western world is telling Russia to continue with reforms
and lecturing it on not taking the "easy" way out by printing money. 
The simple truth today is that there is no easy way out. Russia now has to
forget about wooing the West for loans and concentrate on survival. Put itself
and its people first and survive, or please the international community and
face total collapse. 
The steps that must be taken are straightforward. First, print money and pay
off long outstanding back wages. This will boost the economy (and inflation),
but at least there will be liquidity in the country where today there is none.
Second, temporarily allow cash transactions for businesses in rubles and in
hard currency. This should allow commerce to restart in the absence of a
viable banking system. This will certainly lead to gross levels of tax
evasion, but at least with companies trading again, money will start
circulating again. 
Third, nationalize or close all nonviable banks and allow only a select few to
operate under the strict supervision of the Central Bank. It has been weak
controls on the banking system that have allowed businesses to circumvent
customs and tax authorities with transactions and has resulted in enormous
capital flight. 
Finally, once the banking system has been made solvent, fix the ruble exchange
rate to a level that coincides with international purchasing power parity and
force all currency transactions (imports and exports) to be routed through the
Central Bank. This will ensure correct procedures and customs duty collections
from all businesses and would leave no obvious vehicle for currency
speculators to put pressure on the ruble. In conjunction with this, duty rates
may need to be increased, import quotas imposed, and strong incentives given
to investors willing to set up local production. 
These may not prove to be popular steps in the West and they do notpromise to
bring long-term prosperity and an open market economy to Russia. However, in
today's situation, this strategy will not only prove to literally save lives
in the fast approaching winter, but will also halt the current fall of the
economy into oblivion and bring it to a level where, in maybe one year,
serious discussions can begin again on returning to the path of economic
reform and developing a market economy in Russia. 

Sunil Lalvani 

******

#14
Date: Fri, 18 Sep 1998 
From: "Wallace Kaufman" <wkaufman@sprintmail.com> 
Subject: On Len Cormier's 9 Points

Perhaps financing Russian recovery by sale of nuclear weapons to a
country that is in the eyes of some Russians still its enemy is akin to
Ronald Reagan's proposal that the US give the Soviet Union all new Star
Wars defense technology. Whether this foundation proposal might come to
pass or not, some of the nine points indicate real remedies. I would like
to suggest a few amendments.

Point 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.

This is a modified re-nationalization. It is better accomplished by a
special independent judicial review board that could bring back to the
national treasury stock in natural resource companies (and other
industrials) that were illegally or improperly &quot;privatized.&quot;
There were rules and guidelines, and there were violations. Stock could
also be accepted in lieu of unpaid taxes. Finally, the government should
consider backing Russian debt instruments with natural resource futures,
promises to pay in a particular resource if it cannot pay in cash. (This
still requires a measure of trust that investors might not give, but I
suggest setting up an international escrow account in which Russia might
place something of significant value, such as art, diamonds, jewels,
titles to property in Western nations, etc. I suppose this is akin to the
medieval hostage system.)

Point 9. Inauguration of a cooperative Russian/American program *
* designed to encourage joint economic ventures between *
* private Russian and American companies. *

To encourage the sound investment of funds supplied unwittingly by
taxpayers in developed countries, no IMF, EBRD or World Bank funds should
be allotted to Russia except on as matching funds when Russia has
established risk levels that will bring in a specified level of private
lending and/or investment. This would at least assure US members of
Congress and taxpayers that dollars were not being given to Russia under
terms riskier than those acceptable to generally prudent risk takers. It
would also guarantee better underwriting in the IMF and World Bank.

With the exception of humanitarian aid, US and other aid programs should
be provided for payment. Payment could be on favorable terms or even
&quot;in kind,&quot; but at least agreement to a nominal payment would
guarantee that Russia had a stake in their success. American taxpayers
might at least feel they were not being taken for chumps. The contractors
delivering the aid might feel more welcomed by their clients.

*******

#15
Berezovskiy: CIS Should Not Limit Itself to Ex-USSR Borders 

Interfax
September 16, 1998
>From the "Presidential Bulletin" feature

CIS Executive Secretary Boris Berezovskiy has said the Commonwealth of
Independent States should not limit itself to the borders of the former
USSR. The Commonwealth cannot be reformed by swift decisions, Berezovskiy
said Tuesday [15 September], summing up the results of a meeting of a
special forum for reform of the CIS. The CIS member states "have not yet
determined their final goal which would be clear and the same for
everyone," he said. Finding a uniform final goal may prove to be a
problem, because "there are groups of (CIS) countries with similar
interests, but their positions often contradict each other," he said. The
Commonwealth is becoming "a mechanism for bringing interests closer,"
Berezovskiy said. It will change "as converging points increase or
differences grow," he said, adding "Many erroneous decisions may be made." 
The CIS should give up the principle that all decisions may only be made by
consensus, Berezovsky said. "Rules of the game inside a group of interested
countries should be set, certainly provided that other CIS countries do not
object," he said. "There is a huge reserve in relations with Iran," he
said. "Our unclear position towards Iran is a great loss for Russia and
all other CIS countries." Asked to comment on the situation in Russia, he
said: "Any hasty comments on whether the latest political events in Russia
signify a 'red revanche' would be dangerous for Russia itself. I would not
assume the responsibility of assessing today's events," he said. There are
two stages characteristic of reforms: a revolutionary one and an
evolutionary one, Berezovskiy said. Former First Deputy Prime Minister
Anatoliy Chubays and leader of the Russia's Democratic Choice party Yegor
Gaydar, "with their Bolshevik-style thinking, were useful," he said. "The
evolutionary stage has now begun, when the foundation of a new political
and a new economic system are already in place." At the present stage,
politicians similar to Chubays and Gaydar "are totally useless," he said.
"It is now totally obvious that those who called themselves reformers, and
moreover Bolshevik-style reformers, are no good for the new stage that
requires smooth realistic decisions," Berezovskiy said. He said he is
certain that Russia will carry on with reforms because "the mentality of
the society has changed."

*******