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September 21, 1998   

This Date's Issues: 23882389••


Johnson's Russia List
#2389
21 September 1998
davidjohnson@erols.com

[Note from David Johnson: 
1. Reuters: Center-Left Leader Yavlinsky in Hospital.
2. AP: Russia Will Have to Import Grain.
3. Joseph McCormick: The Chocolate Standard.
4. Albert Weeks: Missing element: Politburo/TseKah.
5. Jason Bitter: McFaul on PBS.
6. RMRC Public Opinion Polls (Moscow): WHO DO MUSCOVITES WANT TO BE 
RUSSIAN PM? and CRISIS IMPACTS MUSCOVITES.

7. Jerry Hough: the debate.
8. Dale Herspring: Who Lost Russia?
9. Stephen Shenfield: Who Lost Russia?
10. David Speedie: Re Leonid Bershidsky.
11. Washington Post: Michael McFaul, A Russia Still Redeemable.
12. Financial Times (UK): Anthony Robinson, INDUSTRY: Stricken factories
show flicker of life.

13. New York Times letters: As Russia Teeters, the Rest of Us Should Worry.
14. Boston Globe student letter: Yeltsin picks Primakov.
15. Reuters: Despite Promises, Russia Remains without Gov't.]

********

#1
Center-Left Leader Yavlinsky in Hospital 
September 21, 1998

MOSCOW -- (Reuters) Grigory Yavlinsky, founder and leader of Russia's
center-left opposition Yabloko party, was in hospital on Monday, three days
after suffering heart failure, a party official said. 
The official was unable to give more details of the 46-year-old
economist's condition. 
Party spokeswoman Yevgenya Dillendorf told Itar-Tass news agency the
former amateur boxer was gradually improving and that doctors expected to
release him in three days' time. 
Yavlinsky, whose party has 44 seats in the 450-seat Duma, last week
turned down an offer to enter government under Prime Minister Yevgeny
Primakov, even though he was among the first to suggest the former foreign
minister as a compromise choice between President Boris Yeltsin and the Duma. 
Yavlinsky is an uncompromising critic of both Yeltsin, whom he accuses
of presiding over anarchy and corruption, and of the big opposition
Communist party.

********

#2
Russia Will Have to Import Grain 
September 21, 1998

MOSCOW (AP) -- Russia will be forced to import grain from abroad this year
because of what's expected to be its worst harvest in 41 years, an
agricultural official said Monday. 
Oleg Temashov, a spokesman for the Agriculture Ministry, told the
ITAR-Tass news agency that Russia will harvest only 56 million metric tons
of grain, the lowest since the 54.9 million-ton harvest of 1957. 

He said because of a severe drought that hit 40 grain-growing regions,
Russia will have to make ``small purchases'' of grain from abroad this
year, about 2 million metric tons. 
That, combined with a 20 million-ton surplus from last year's bumper
crop of 88.5 million tons, will be enough to meet the country's food and
fodder production needs, ITAR-Tass said. 
Agriculture officials had been predicting a poor harvest this year, but
just last month said they had hoped to bring in at least 62 to 67 million
tons. 
A drought during the summer growing season, followed by a cold, wet
harvest season have been the main culprits, according to ministry
officials. In addition, they said Russia's economic crisis aggravated the
shortage of harvesting machines, fuel and lubricants. 

*******

#3
From: "Joseph McCormick" <jmccor@osi.ru>
Date: Mon, 21 Sep 1998
Subject: The Chocolate Standard

Every week or so for the past year I've been buying groceries at Sedmoi
Kontinent, a chain of "gastronomy" that have reworked themselves into
something resembling bona fide supermarkets. The prices have been pretty
good for Moscow (i.e., only moderately outrageous by American standards),
and until the crisis, the majority of customers seemed to be "normal,
middle-class" Muscovites. The greatest convenience for me was that they
take plastic (and still do, if you have a foreign credit card). The last
time I was in their Smolenskaya branch, on September 6, the place was
mobbed with the tail end of panic buying, as shoppers emptied the shelves
of everything priced in pre-crisis rubles. Yesterday (September 20) the
place was eerily quiet -- for the first time in memory, staff outnumbered
customers. Except for a window shopping babushka and a family of New
Georgians (although Dad was shouting into his mobile phone in Russian, Mom
and the kids were speaking Georgian) with a suprisingly empty cart, I had
the place virtually to myself. One glance at the prices explained why:
like many other stores selling mainly imports, Sedmoi Kontinent has
switched over to labelling prices in "uslovnye edinitsy", i.e., U.S.
dollars, with payment in rubles at an (inflated) rate of exchange.
Instead of relief at the prospect of price stabilization -- after all,
dollar prices should remain more or less constant -- I experienced an acute
bout of sticker shock: the _dollar_ prices of my favorite foods had doubled
or tripled. Let me cite just one glaring example. In early August, a 170
g Fazer chocolate bar cost 11 rubles, or about $1.75. Yesterday the new
price was $5.10, which would seem to imply a sudden 291% price hike on the
part of its Finnish manufacturers, a clear absurdity. At the store's rate
of exchange of 16.5 rubles to the dollar, the same candy bar costs 84.15
rubles, a 763% increase in local currency. I'll admit the ruble has been
behaving erratically, but this is well beyond the wildest market
oscillations and even exceeds Stockmann's mark-up in the bad old days. (I
will leave out the $3 bottles of beer, the $7 mustard, and -- my personal
favorite -- the $17 jar of German pickles). Needless to say, I left with
only a handful of items, all of them locally produced.
I can't imagine that there are enough cash-rich expats and New Russians
left to support such wildly inflated prices. But who would have thought
that back in early August, the smart money would have dumped GKO's,
mortgaged the farm, and converted everything into chocolate?

Joseph McCormick
OSI - Moscow

********

#4
Date: Sun, 20 Sep 1998 
From: Albert Weeks <AWeeks1@compuserve.com> 
Subject: Missing element: Politburo/TseKah

No one despised Communism and Communist rule more than 
myself. (I will skip the autobiography here and leave that to the glasnost
of Who's Who.) But I wonder what JRLers think of the ABSENCE 
in contemporary Russia of two potent institutions of the old Soviet period:
a ruling Politburo and a ruling Central Committee (TseKah). Are

they missed in any way today? "Surely not," someone says.
"Could anything positive possibly be said about 
these now missing institutions of Nomenklaturist rulership?"
Well, first, they provided--esp. after Brezhnev and definitely late
in the Gorbachev period--some modicum of control over the
leader, some airing of issues, some critique of decisions
made at the top or to be made at the top.. 
Where, pray tell, is any such institution today acting that way 
vis-a-vis Yeltsin? The Security Council (SB)? Hardly. Yeltsin moves
or "sacrifices" its members like so many pawns. True, GenSeks
for most of the Soviet period did the same. But not GenSek
Gorbachev was by no means toally free to manipulate others 
late in his tenure. (E.g, the coup attempt of August '91.)
But before that, there was the beginning of free discussion and influence
over the leader within that plenary body, be it the Politburo or TseKah. 
Where is such a body today?
The Central Committee, too, in the last years of Soviet power
became in its way a forum of discussion and influence. True,
it also had its negative side. But tell me, what organ functions
today in that capacity as a viable intra-party check on Yeltsin?
Or on the person who succeeds him?
So far as I can see, there are no such institutions within the executive or
within the party of the chief executive in Russia. (Indeed, there is no
such "Yeltsin" party!)
Casting one eyes way back in the prerevolutionary tsarist
period, one locates (pace Klyuchevsky, Kovalevsky, et al.) such 
institutions as the Senate, the tsar's Council of State, Zemsky 
Sobor, Council of the Boyars, etc., and reform plans for
developing other institutions allowing some flow of influence 
from bottom to top. True, all these tsarist-period institutions 
functioned in different ways with different agendas, and with 
varying degrees of influence (often little) on the top authority.
But not unlike the Federal Council today (upper house of the Russian
legislature), in some cases they did provide implicit checks on the leader
stemming either from the locales or within St. Petersburg's upper echelons.
What I am suggesting is that the "Yeltsin constitution" is sorely
in need of an overhaul just as the weakly-functioning political
parties of today's Russia need organization and integrity.
In that way, "central committees," "executive councils," call
them what you will, would begin to operate at the summit
of each party. And when the party and its leader achieved 
power through election, the party plenum could still exercise 
some control over The Boss. But don;t expect a Yeltsin 
"Last Testament," a la Lenin, to suggest changes.
It's rather fascinating, incidentally, to place this same problem 
into today's American context, asking: Why doesn't the 
Democratic Party have the power or influence to say to Clinton, 
as the current issue of the London Economist neatly put it: 
"Just Go"? 
I n the land of the Economist, indeed, party discipline still 
reigns. This perhaps is a plus for their system, as Woodrow 
Wilson pointed out long ago.
The above is not offered as something "profound." Only as

speculative "vydumki" for others chew on--or chew up.

********

#5
Date: Mon, 21 Sep 1998 03:13:15 -0400 (EDT)
From: Jason Bitter <jasonb@yorku.ca>
Subject: McFaul on PBS

The purpose of this message is to get some feedback on Michael McFaul's
comments which were on "the list". I must begin by saying that I agree
with most of McFaul's analysis. I was particularly supportive of his
proposal that micro, rather than macro-economic projects be done in Russia
in the future. However, there is one comment that I wonder about; this is
the one:
"At the highest levels, U.S. officials must send clear signals to Russian
elites about the negative consequences of circumventing the democratic
process."
What are the negative consequences of circimventing democratic processes?
Was this not done in 1996 in the election, 1993, and with the Chechnya
invasion? Is the democratic process simply an election? Perhaps more
importantly, there are some Russians who believe that democracy itself
brings "negative consequences." Certainly the experience has been that
the so-called democratic experiment in Russia has been anything but
democratic. It is also important to note that this has occurred with the
support of the United States in its support of Boris Yeltsin. Quite
frankly I find it rather insulting for the US to say anything about itself
supporting Russian democracy; It has supported Yeltsin, not democracy. 
I am particularly interested in McFaul's "negative consequences". I
am also interested in why the US would choose to push democracy in Russia
(which has yet to be seen), while it maintains support for governments
that are not democratic in other parts of the world. They have no moral
foot to stand on. Actually this debate takes me back to questions of a
dual transition and its feasibility. Does Russia have to have a strong,
authoritarian government in power in order to implement economic reform
that actually produces growth, as South Korea, Chile or others have?
Certainly the Russian experience has given reason to re-examine this
approach. 
I am not advocating a coup, however I think that economic growth
will not come to Russia until there is a leader that can enforce the rules
of the state. In order to do this much has to change. If a leader does
manage to come to power in Russia that is able to make the Russian state
strong, it is my belief that the US would probably support him, regardless
of his democratic or undemocratic tendencies. After all they supported
Yeltsin. As a matter of fact, some foreign investors tell me they would
welcome the day when they could deal with a predictable Russia that has
order, regardless of democracy.

Jason Bitter
University of Toronto
Department of Political Science

*******

#6
Date: Mon, 21 Sep 1998
From: Slava <slava@rmrc.ru>
Organization: RMRC
Subject: Two reports on opinion poll in Moscow

Please find attached two short reports on the recent express opinion poll
conducted
by our company in Moscow. Those on Primakov is a bit outdated already ­ so
its’s up
to you to decide whether you will send to the list.
Anyway, I hope in the future I will be sending you this information in a
more timely

manner.

#7
WHO DO MUSCOVITES WANT TO BE RUSSIAN PM?
Results of RMRC Public Opinion Poll, Moscow, September 12-13, 1998

What kind of person would Muscovites like to see as a Prime Minister?
The poll
conducted in Moscow has revealed that an ideal candidate for this position
is seen
as a man of 40-50 years old, with education in Economics, work experience in
Business or Finance, and having no affiliation with any political party or
religious
preference.

General Profile

* Almost half (44%) of those surveyed believed that the ideal age for PM is
40-50
years. A quarter (25%) would prefer to have PM older than 50.
* Seven out of ten (67%) declared that PM should have an education
background in
economics, with the next highest group claiming not to have a preference
(18%).
* Four out of ten Muscovites (39%) would prefer that PM has experience in
business
or financial industries; 36% would prefer him to have worked in government.
* Almost half (44% ) explicitly declared that any PM should not have
affiliation
with any political party, although for almost a third of respondents (30%)
this
issue has no importance.
* The majority of respondents (66%) believe that PM should be a Russian
national,
though a significant minority (27%) said that ethnicity did not matter.
* Half of respondents (50%) professed to having no preference with regard
to PM’s
religious beliefs, while 44% would prefer to see an Orthodox Russian as
Prime-Minister.
* Despite almost half (49%) of the respondents stating their preference to
see a
man in the chair of PM, almost 35% would have nothing against seeing women as
prime-minister (the share is slightly less among men ­ 30%)
Primakov as PM
* The majority of respondents (57%) deemed Mr. Evgeniy Primakov to be an
appropriate
candidate for Prime-Minister of Russia; by the time of the survey about 30%
were not
certain about the candidacy.
* The more educated the respondents, the more inclined they were to support
Primakov’s candidacy ­ 84% of post-graduates interviewed agreed with his
appointment, compared to 48% with secondary education.
* Mr. Primakov is more popular among men (65%) than among women (52%), and
among
older people (over 70% of supporters among people older than 50) compared
to 45% for
the respondents younger than 30 years.
The RMRC interviewed 534 respondents by phone in Moscow, September 12 & 13.
The sample represents the population of Moscow in terms of age and gender.
¿ The Russian Market Research Company, 1998

# 2
CRISIS IMPACTS MUSCOVITES
Results of RMRC Public Opinion Poll, Moscow, September 12-13, 1998

Two out of three Muscovites (61%) have experienced either strong or very
strong
negative effects from the financial crisis; one in three (32%) have been
influenced
to some extent. Only 7% claimed to have, so far, avoided its impact.

Problems People Face

* Two out of three families (61%) were unable to buy certain essential food
products
because of the rise in prices and one in three (30%) suffered from product
shortage
at stores.
* Every third family faced a reduction in their savings (36%) and every
fifth (23%)
­ partial or total loss of money saved in banks.

* Every fourth family (27%) had to cope with salary reduction and one in
four (23%)
­ job loss or unpaid holiday leave.

Actions People Make

* A relatively small number of people confirmed they were engaging in currency
transactions: 10% had sold and 7% had bought currency during the recent weeks.
* One in ten (10%) tried to avoid savings decrease by “investing” into
purchasing of
different goods. The share was higher (18%) among 20-35 year olds.
* Every third family (34%) tried to stock food products. The majority of these
families (78%) had stockpiled supplies to tide them over for up to one month.
* When hoarding food people were mostly driven by expected prices upsurge
(59%) and
by fear of food shortages (39%). 22% of respondents were influenced by a
general
sense of agitation or even panic.
* 4% of Muscovites have started looking for opportunities to leave the
country for
some time and 2% - forever.
Expectations People Have
* One out of five Muscovites (21%) expects breaks in electric, heat or
water supply
within the next two or three months.
* Even more people (37%) anticipate public disorder or military involvement
during
the crisis development. Younger people (18-29 year old) are more likely to
expect
these developments - 45%, compared to 30% among 50-64 year-old age group.
* Two out of five respondents (41%) expect stabilisation within a coming
year. One
out of five (22%) believes that crisis will last at least for two years. 8% of
Muscovites are wholly pessimistic about the future and think that the
country will
never cope with the crisis.
The RMRC interviewed 534 respondents by phone in Moscow, September 12 & 13.
The sample represents the population of Moscow in terms of age and gender.
¿ The Russian Market Research Company, 1998

********

#7
Date: Sun, 20 Sep 1998 
From: "Jerry F. Hough" <jhough@acpub.duke.edu> 
Subject: the debate

I find the debate in your pages discouraging in the way that 
people find it difficult to break out of the monetarist straight 
jackets. The Russians debate seems to center on money emission, Hiatt 
can't think of any alternatives in 1992, McFaul sees no difference 
between the mixture of state and market the last few years and that which 
Primakov in his best moments articulatesd, the inflation debate focuses 
exclusively on the demand side.
The word that needs to come into our lexicon is "investment." 
Money is not inflationary if it goes into savings, at least in the short 
run. In Russia with its shortage of money, it is crucial to create 
incentives for savings and investment. McFaul has been the most active 
of the young scholars--and given the number who have remained silent for 
years, that is something to be admired. But he owes it to us and 
himself--as an alleged man of the left--really to study the different roles
the 
state can have. The disaster of Yeltsin was that he subsidized consumption
and totally neglected investment. That was not and is not inevitable. The 
resource-export industries can be officially renationalized (they already 
are really state enterprises without financial controls to stop 

embezzlement), and agricultural reform can be introduced. Those were 
real alternatives in 1992.
The tragedy of the US domestic scene is shown in the New York 
Post article. A Democratic Administration has promoted a policy in 
Russia to the right of Dick Armey. Men of the left like McFaul still 
see no alternative to that economic policy--unless it is to pour in 
democratization money to create sectarian right-wing parties that Armey 
would reject. Then having adopted an extreme right-wing policy in Russia 
that naturally failed, the Democratic leaders are open to be savaged 
for it by the right in the New York Post for its naivete. It would be 
delicious if it were not so serious. Socialism failed, but the alternative
is not the unregulated market either in the US (as we all know), even less in
Russia, and certainly not in the free flow of capital around the world. 
Those who smiled at how American hedge funds operators insured their 
stock purchases in Russia with derivatives bought from Russian banks and then
were shocked that the insuring banks failed when the market collapsed should 
read Abelson's column in this week's Barrons if they would like their 
Halloween chills early. This country is on the eve of a great debate 
about the role of the state and the global economy, perhaps as dramatic 
as that in the 1930s on the role of the state and the domestic economy. 
Students of Russia have much to contribute to this debate, but it will 
require real thought and research, not just mouthing of cliches from the 
spin of the last ten years. 

********

#8
Date: Mon, 21 Sep 1998 
From: Dale R Herspring <falka@ksu.edu>
Subject: Who Lost Russia?

I suspect that David's printing of the Washington and New York Post
articles will draw a lot of pro and con. As we go into this debate,
however, one of the things that I would plead for is that we try to be
intro-spective rather than accusatory or overly defensive.
Like it or not, the fact is that little attention was given to the
interaction between economic and cultural factors. In fact, the idea that
what works in Latin America or East Europe was the ultimate of cultural
snobery. In fact, this debate we will have goes to the heart of what we
as policy-makers, scholars and members of the media do for a living. How
are we able to understand the impact of one thing on another? This is
what one is asked to do within the USG, and it is what both academics and
journalists try to do. The problem we had with Russia was not only
unfulfilled promises -- something this administration is particularly good
at. 
The problem went much deeper. It was an assumption on the part of our
economists -- and some on the Russian side -- that the laws of economics
preceede those of political culture. What was needed several years ago
was not a model that fit every culture, but one that fit Russian political
culture and one that took into account the emense size of the Russian
problem (when compared with Bolivia or Poland). Unfortunately, we have
far too many devotees from the rational actor model who seem to believe
that if enough money is involved, Russians will act just like Americans or

Mexicans, etc. I am not competent to devise the kind of model that would
have made sense in Russia -- I am not an economist. Having said that, it
did not take a rocket scientist to know that the introduction of radical
economic reforms in the face of an instable political system and a hostile
political culture was going to produce very serious problems. Yet, that
is exactly what happened.
If responsiblity is to be assigned, then there is no doubt that it
primarily rests with the Russians, although at times I think that is
similar to the American government blaming American Indians for becoming
alcholics after setting up a situation where booze was the only thing
availale and cheap. The Russians must accept their responsibility, but a
lot of humility on the side of our economic advisors would have helpeded
as well. It would not have netted them as much money as traveling to
Moscow with instant solutions did, but it would have done the Russians a
lot more good, and it might even have saved them from a lot of suffering.

*******

#9
Date: Mon, 21 Sep 1998 
From: Stephen Shenfield <Stephen_Shenfield@Brown.edu>
Subject: Who Lost Russia?

Comments on "Who Lost Russia?"

The trouble with the dominant, ideologically driven discourse on "reform"
has always been that it is built upon an absurdly simple conceptual model
of "transition" from Soviet "socialism" to free-market capitalism,
understood as a linear process for which there is only one possible route
and two possible destinations: free-market capitalism or "back to the
past". So in this model, the process of "reform" or "transition" can go
forwards or backwards, fast or slow -- but there is only one road, with
fixed end-points. The model is reminiscent of the unilinear model of
social progress in Marxist dogma.
Let us get a little closer to reality by thinking instead of movement
within a triangle. One apex is the old Soviet system, the second apex --
the criminal-parasitical type of pseudo-capitalism that "reform" has
created in Russia, the third apex -- a viable capitalism based on small and
medium-size native productive enterprise. Then we can see things that are
hidden from view by the unilinear model, for example:
1. The Gaidar-Yeltsin-IMF "reforms" SIMULTANEOUSLY pushed Russia away from
the Soviet system, by dismantling the institutions of centralized planning
and management, and away from productive capitalism, by stimulating the
criminalization of the economy and by creating conditions (hyperinflation,
collapse of consumer demand etc.) in which most of the new productive
enterprises that had emerged in the late 1980s went bankrupt. Both the
communists (in the sense of supporters of the Soviet system) and the
genuine capitalists lost; those who won were the new oligarchs who made
their fortunes and consolidated their power by means of theft, fraud, and
murder.
2. Opposition to the "reforms" has come from two different directions that
are quite distinct in principle (though political alliances may confuse the
picture). It is essential to distinguish between those who aim to preserve
what remains of the old Soviet industrial structure by means of

indiscriminate subsidies and those who try to create conditions in which
productive enterprise can flourish -- even if this requires measures, such
as currency controls and protection against cheap foreign imports, that are
against perceived short-term Western interests.
Of course, even this triangular model is much too simple, but at least it
helps to weaken the domination of the unilinear model that has obfuscated
reality for much too long.

******

#10
Date: Mon, 21 Sep 1998 10:35 -0500
From: "David Speedie" <DCS@carnegie.org>
Subject: Leonid Bershidsky

David
Leonid's comment on your comment (9/15/98) reminds me 
of an anecdote in Saul Bellow's wonderful short story 
"Him With His Foot In His Mouth." A man comes upon a 
farmer trying to urge his aging, laden horse up a steep 
hill. The animal is visibly trying his hardest, and 
equally visibly failing. The farmer keeps whipping the 
poor beast, until the observer says: "Sir, it is 
perfectly obvious that your horse cannot climb this 
hill with so heavy a load. Why do you keep whipping 
him so?"

The farmer's response: "To be a horse was his idea."

Moral of Leonid's comment: "To be Russian...."

********

#11
Washington Post
21 September 1998
[for personal use only]
A Russia Still Redeemable
By Michael McFaul
The writer is a professor of political science at Stanford University and a
senior associate at the Carnegie Endowment for International Peace. 
From both the right and the left, critics of U.S. policy toward Russia
have had a heyday in recent weeks asserting that the Clinton administration
got Russia wrong. The refrains are by now familiar: "Clinton became too
close to Yeltsin." "The IMF was naive." "The West funded crony capitalism."
"Russians are not culturally predisposed to markets," etc. The policy
conclusion from these observations is that the United States neither can
nor should do anything more to aid Russia but instead should reconstruct a
firewall around this basket case of a country and try once again to contain
the Russian threat to markets and democracy around the world.
This is a premature conclusion for several reasons. First, the argument
assumes that we can ignore Russia. We cannot. As Russia's economic crisis
continues to worsen, the prospect of real tyrants coming to power in Moscow
increases. If Russia's fascists or hard-line communists eventually emerge
on top, Iraq, Iran and Libya will become nuclear powers, Russian volunteer
soldiers will be flooding into Kosovo, and military conflict will ignite
throughout the former Soviet Union.
Second, the call to abandon and contain Russia assumes that "reform" in
Russia is dead forever. In fact, even in the middle of this latest economic
crisis, Russian leaders and the Russian people have not yet rejected
markets and democracy full stop.
Support for markets has reached its nadir. Prime Minister Primakov and
his new team of Gorbachev-era ministers plan to assign a greater role to
the state in managing the economy. Strapped for cash after defaulting on
its debt, the government will print money and thereby fuel inflation. To
control inflation, the new Russian government will introduce wage and price
controls; some governors already have done so. Eventually, this set of
policies will produce shortages, rationing coupons and a black market.
Yet, even in Russia's worst economic crisis of the decade, no serious
political group has advocated a return to the command economy. Even the
Communist Party of the Russian Federation recognizes the right to private
property, the function of markets and the inevitability of international
economic integration. Russia may have to endure another round of
ill-devised state policies for managing the economy, but even under the
extreme conditions of economic disaster, no credible political force has
articulated an alternative non-market future for Russia.

The picture is not so gloomy yet regarding political reform. To the
surprise of many, Yeltsin and the parliament practiced compromise and
followed the constitution in forming a new government. Likewise, Russia's
patient citizens have not rebelled in response to the economic meltdown.
This adherence to the democratic rules of the game and this social calm
could change quickly as Russia's economy worsens. If one trigger-happy
soldier fires into a peaceful demonstration, calls for violent overthrow of
the regime will escalate. To date, however, those advocating authoritarian
solutions to Russia's latest crisis remain in the wings.
A third and final assumption of the containment school is that the West
can do nothing to change the course of reform/collapse within Russia.
Instead, the United States must sit on the sidelines and hope for the best.
This assumption also is flawed. While weakened and marginalized as a
consequence of both events in Moscow and Washington, the United States --
and especially nongovernmental American organizations and actors -- still
can play a role in helping Russia remain committed to markets and democracy.
Until the new Russian government has a credible anti-crisis program,
Western assistance programs for macroeconomic stabilization such as IMF
loans must be suspended. At the same time, other kinds of assistance aimed
at fostering microeconomic reforms should be expanded. For instance,
programs that provide small business loans, projects that furnish
information about Western markets, business training and exchange
initiatives all should be expanded. Similarly, technical assistance
projects that facilitate the development of important market institutions
such as laws governing property rights, disclosure, bankruptcy, pension
funds, taxes and the securities markets also need to increase.
Since independence in 1991, Russia has yet to attempt genuine market
reforms. If the opportunity arises for a renewed attempt, the people and
knowledge must be in place to make reform work.
On the democratic front, the United States must send clear signals to
Russian elites about the negative consequences of circumventing the
democratic process, in particular, the rules for the next presidential
election.
At the nongovernmental, grass-roots level, programs that promote
democracy and democrats in Russia also must be enlarged -- projects that
provide expertise regarding the development of parties, trade unions,
federalism, the rule of law, independent media and civil society. These
should be expanded, not curtailed, as is presently planned. Russian
democrats who are battling for the heart and souls of these organizations
must be supported, not abandoned.
Obviously, the kinds of assistance programs outlined here will not
"solve" Russia's economic crisis. But they may be the long-term investments
that will save Russia from future crises. More immediately, these kinds of
programs also offer Americans a way to remain involved with Russia during
this difficult period. These programs can be administered without
transferring a dime to the Russian state. They also can be pursued without
presidential leadership in either the United States or Russia.
It is only seven years since the Soviet collapse, and Russia's
revolution has by no means ended. The days of presidential summits may be
over, but the work in the trenches has just begun.


*******

#12
Financial Times (UK)
21 September 1998
[for personal use only]
INDUSTRY: Stricken factories show flicker of life
Anthony Robinson steps through the looking glass into the Alice in
Wonderland domain of moribund factories that have survived on barter and
are now hoping for fresh money

The 1,000km flight east from Moscow to the industrial cities of the
Volga region takes visitors through Alice's looking glass into the
topsy-turvy wonderland of the post-Soviet "real economy" - a surreal place
that has survived the last decade by barter and non-payment of taxes,
suppliers and workers.
This is the economy whose re-invigoration is a declared priority of the
new Soviet government.
Here in the industrial heartland of Russia - in the string of towns and
cities from Nizhny-Novgorod in the north through Saratov and Volgograd to
Astrakhan, where the Volga river flows into the Caspian Sea - the prospect
of looser monetary policies and a government more sympathetic to industry
inspires hope rather than fear that Russia is about to take a step
backwards to central control and economic planning.
In Saratov, a lively regional capital, no one from the populist and
reformist governor, Dimitri Ayatskov, to the general director of the
virtually bankrupt trolley bus plant expects or believes that Russia can or
will return to the Soviet past. But Lenin's words about the occasional need
"to take one step backwards in order to move two steps forward" are on many
lips.
The directors of the moribund industrial giants of the Soviet era are
busy phoning old contacts to make sure that if fresh money is made
available, some at least will come their way.
"The question now is how much new money will be made available and who
will decide how much goes to whom," says the director of a foreign-owned
plant who, like many in the private sector, fears that the new and as yet
unformulated policy will simply result in higher inflation and pay-offs
among old cronies.
Among those looking forward to the changes are the managers of former
military plants humiliated by what they see as the "primitivisation" of
high-tech sectors of the economy.
The loss-making Saratov aircraft factory, which used to produce jump-jet
fighters for aircraft carriers as well as the triple-engined Yak-42
passenger aircraft, is a typical example.
Since 1992 when "market reformers" led by Yegor Gaidar and Anatoly
Chubais cut the military budget by 80 per cent overnight, military plants
either have closed or have been stripped down.
Condemned to struggle to survive like the rest of the orphaned Soviet
economy, former military plant directors have also reverted to the barter
economy which has proved practically impervious to the collapse of the
Moscow-based banking system.
This is an economic system which makes perfect sense to those brought up
within the closed logic of the Soviet command economy but has little in
common with a market economy as understood in the rest of the world.
Alexander Yermishin, the gravel-voiced director of the Saratov aircraft
plant, would develop a civilian vertical take-off aircraft if only he had
the roubles.
A scale model, looking like a flying saucer, gathers dust in one of the
factories. It sits alongside a motley collection of work in progress -
including three half-finished training aircraft of a new design and big red
combine harvesters being assembled for the US agriculture equipment
company, Case.

In the next hall of the vast complex, which used to employ 8,500
skilled workers, five triple-engined Yak-42D are being slowly put together
for cash-strapped Russian airlines that pay when they can.
But with Asian and Latin American economies now in crisis and the rouble
devalued, Mr Yermishin is optimistic that the plant will now be able to win
new export orders for an aircraft that first flew in 1974.
It has been re-engined and modernised and is on offer at $25m compared
with the $38m which the director believes is the price of an equivalent
Boeing 737 or Airbus 319.
The problem is that at this price range the Yak faces tough competition
from rival Russian manufacturers, especially Tupolev, which is building a
new model of comparable size.
Restructuring has hardly started in the Russian aerospace sector.
As European and US competitors merge, the Russian aircraft industry
struggles to maintain five rival design and construction companies -
Ilyushin, Tupolev, Mig, Sukhoi and Yak.
But it is at the Trolza trolley bus factory, across the two-mile-wide
Volga river in Saratov's sister-town of Engels, that the problems and
survival strategies of the post-Soviet "real economy" can be seen at their
clearest.
In Soviet days the sprawling plant was a near-monopoly supplier of
trolley buses across the entire Soviet Union. It produced more than 2,500
rugged vehicles a year with barely a modification.
Over 30 years the state foreign trade company sold more than 3,000
vehicles abroad in markets as diverse as Vietnam and Chile.
Athens now needs to replace the 350 models it bought over a decade ago.
Cash-strapped Belgrade is also hoping to "buy" 40 vehicles.
In practice payment will come in the form of red peppers and whatever
else the struggling Serbian economy can come up with in barter over the
next 10 years.
But the plant's main hope for salvation lies in its ability to raise the
$6m it needs as working capital to start work on a $25m contract to supply
230 trolley buses to several Russian cities financed by the World Bank.
For the last decade Trolza, a virtual industrial museum of lovingly
cared-for East German presses and solid Soviet lathes a kilometre long, has
just ticked over, producing around 120 vehicles a year in return for
potatoes, cables and whatever could in turn be bartered for goods needed to
"pay" workers, who are mainly at home. It is harvest time now and workers
are being paid with potatoes.
"In the old days the ministry for public transport in Moscow ordered
trolleys from us and sent them to cities across the Union," said Nikola
Polyulak, the plant's director and also the biggest shareholder.

"But when Gosplan and the whole planning system disappeared, local
governments were made responsible and none of them has any money. How could
they, when 80 per cent of passengers have permits to travel free and the
factories that needed public transport to get workers to work are closed?"

********

#13
September 21, 1998
New York Times 
Letters
As Russia Teeters, the Rest of Us Should Worry

To the Editor: 
President Boris N. Yeltsin of Russia should disavow the new Prime
Minister, Yevgeny M. Primakov, and the new cabinet being imposed on him by
the Communist-dominated opposition (news article, Sept. 18). The plan to
print rubles to pay for accrued wages and pensions can only result in
hyperinflation, which will lead to greater social distress and protests.
The election of a new Parliament is scheduled for December 1999. By that
time, the devastating effects of skyrocketing prices and unpredictable
shortages will be evident. 
If President Yeltsin publicly opposes deficit financing, the lines may
be drawn clearly enough in December 1999 for voters to support a Parliament
composed of deputies who will support the agrarian reforms, tax
restructuring and parliamentary approval of long-term mineral production
agreements (production-sharing) that the Communist opposition has blocked
for the last five years. 
JONATHAN RUSSIN
Washington, Sept. 18, 1998
The writer is an international lawyer based in Moscow. 

To the Editor: 
Joseph Stiglitz (Op-Ed, Sept. 16) would have us believe that Brazil and
other South American countries have been tainted undeservedly by economic
turmoil in Russia -- victims of an "irrational panic." This is not
completely true. 
While the region's afflictions are indeed different from those on the
other side of the world, they are ills nonetheless: a current account
deficit of 5 percent of gross domestic product, overvalued exchange rates,
excessive interest rates, profligate fiscal spending, low tax collection
and weak banking institutions. 
Latin America has made great progress, as Stiglitz notes, in undertaking
neoliberal economic reform. However, the job is half-done; the region must
complete the task to speed recovery and insure sustainable growth. 
JERRY HAAR
Miami, Sept. 17, 1998
The writer is senior research associate, North-South Center, University of
Miami. 

To the Editor: 
President Clinton's strategy for dealing with the world's economic
problems is aimed mainly at stimulating growth in Asia and Latin America,
with little attention to Russia (front page, Sept. 15). But Russia's
imminent collapse poses more than a mere economic problem: it is possibly
the most serious threat to security the world has ever faced. 
What would happen to the world's markets if a smidgen of Russia's huge
stockpile of enriched uranium fell into the wrong hands? If Russia
collapses, this frightening possibility will become more tangible. 
We should offer to pay Russia twice the amount of its Government debt --
a sum of $266 billion -- in return for its entire nuclear inventory, with
the understanding that it will be dismantled and disposed of under the
joint supervision of both countries. 
TAD BLAIR
New Haven, Sept. 17, 1998 

To the Editor: 
Re "Key Economic Reformer Said to Quit Primakov Government" (news
article, Sept. 16): While it is true that Boris G. Fyodorov has been an
advocate of radical economic reform in Russia, he is currently under
investigation for his role in a corruption case involving the theft of half
a billion dollars in diamonds and precious metals from the Russian Treasury. 
Fyodorov, Russia's Finance Minister at the time, authorized the transfer
of the diamonds and other commodities to a California-based Russian front
company that spent tens of millions of dollars on a corporate jet, yachts,
a Rolls-Royce and 18 properties. We cannot continue to pretend that
Fyodorov and Russia's other "reformers" are somehow isolated from Russia's
corruption problem or, worse, that they are fighting it. 

PAUL J. SAUNDERS
Director, Nixon Center
Washington, Sept. 17, 1998 

*******

#14
Boston Globe
21 September 1998
STUDENT NEWSLINE
Your Letters 
Yeltsin picks Primakov
It is 1998 and Russia is faced with the largest economic crisis in seven
years. However, thanks to President Boris Yeltsin's decision to nominate
former minister and spy, Yevgeny Primakov as prime minister, there could
possibly be a flickering light visible at the end of Russia's long and
treacherous tunnel of disaster. All I can say is, ''It's about time!'' For
the past month, lawmakers have strongly encouraged Yeltsin to make a move.
Up until this point they were just wasting their breath. It appeared
obvious that while the people of his country suffered through their long
and tortuous demise, he sat back, engulfed in his adamant behavior. It was
only after a long and fervent dispute with Yeltsin's opposition (the
lawmakers) that he finally agreed upon the nomination. As a result, Russia
and most Americans along with them can stop holding their breath and let
out a sigh of relief. 
RACHAEL WORKMAN
Grade 7
John F. Kennedy Middle School
Northampton, Massachusetts

*******

#15
Despite Promises, Russia Remains without Gov't 
September 21, 1998

MOSCOW -- (Reuters) Russian President Boris Yeltsin handed a senior
government post to an opposition figure on Monday but his new Cabinet
remained incomplete 10 days after Prime Minister Yevgeny Primakov took
office. 
Yeltsin held talks in the Kremlin with Gennady Kulik, a 63-year-old
member of the Agrarian Party which is allied to the Communists, and
immediately announced his appointment as deputy prime minister in charge of
agriculture. 
Kulik, who was a minister when Russia was still part of the Soviet
Union, joins an embryonic team which includes several centrists but also
has a Communist in charge of the economy and a central bank chief who was a
prominent figure in Soviet times. 
Yeltsin said he and Primakov would complete their line-up on Monday but
would not announce it until all candidates had accepted -- acknowledging
the problem of luring people into a government facing Russia's worst
economic crisis in years. 
"Today Yevgeny Maksimovich and I are wrapping up the staffing question,"
Yeltsin said in televised remarks. 
But he added: "It is unethical to name names beforehand -- we will talk
to everyone first." 
Primakov still has many posts to fill, including the key position of
finance minister, following his confirmation by the State Duma, the lower
house of parliament. 
The Communists and several other parties refuse to join the cabinet en
masse and one candidate, centrist Vladimir Ryzhkov, refused to join the
government after he was appointed by decree. 
Russian media have criticized Yeltsin and Primakov for the delay, saying
many politicians regard it as political suicide to join the government at
such a difficult time. Yeltsin responded to the criticism by wooing the
media. 
"(I would like) the mass media here to support the government, support
the president," he said as Primakov and Kulik sat beside him in the Kremlin. 
Primakov, 68, has sent conflicting signals on his still incomplete
economic program, pledging to persevere with market reforms but indicating
that the central bank is ready to print money to help Russian banks out of
trouble. 

The central bank said on Monday that an operation to unclog the banking
system had helped some banks to make payments without fueling inflation or
impinging on the rights of foreign investors. But it said not all banks had
taken up the offer. 
In another major move, Acting Finance Minister Mikhail Zadornov outlined
proposals on Monday to amend a plan for restructuring treasury bills and
bonds in an effort to make it more acceptable to foreign investors. 
Zadornov said he would discuss the plan this week with foreign
investors, who said they felt cheated by the original version, and added
that the government was considering resuming trade in short-term treasury
bills, a form of government debt. 
Despite the moves, the ruble remained in trouble. Electronic trading was
suspended for the day and the central bank said its official rate would
remain at 16.38 to the U.S. dollar, almost twice its rate a week ago of 8.67. 
Western governments have expressed concern at Russia's crisis, but
German Chancellor Helmut Kohl and British Prime Minister Tony Blair
reiterated their view that Russia must be given another chance if it did
not abandon market reforms. 
"So it is a two-way deal...support but only in exchange for reform,"
Blair, the current chairman of the Group of Seven leading industrialized
countries, said in a speech prepared for an audience at the New York Stock
Exchange. 
Alexander Lebed, governor of Russia's Krasnoyarsk region and a leading
critic of Yeltsin, also had some reassuring words. 
He said the immediate threat of violence in the world's second nuclear
power had been removed by Yeltsin agreeing to abandon efforts to reinstall
his old ally, Victor Chernomyrdin, as prime minister, and nominating
Primakov instead. 
"Long live Primakov," Lebed told reporters in Paris. 

*******

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