Center for Defense Information
Research Topics
Television
CDI Library
Press
What's New
Search
CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

September 25, 1998    
This Date's Issues: 23962397


Johnson's Russia List
#2396
25 September 1998
davidjohnson@erols.com

[Note from David Johnson:
JRL will be absent September 26-28. Going to Massachusetts,
not Florida. A couple more before I depart.
1. Reuters: New jokes from Russia's crisis.
2. Boston Globe: David Filipov, Moscow chills. For US expatriates, 
the music stops.
3. George Marquart: What's coming?
4. AFP: Russian Press Slams Primakov's Economic Measure.
5. Reuters: Yeltsin risks Communist ire on finance chief.
6. Reuters: Russia says planning no nuclear blasts.
7. Moscow Tribune: Richard Evans, Informed Optimist from the BBC.
(John Simpson, the BBC's World Affairs editor).
8. Moscow Times: Konstantin Preobrazhensky, Banking on a Spymaster.
9. IntellectualCapital.com: Richard Pipes, Russia Enters a New Historic 
Phase.
10. Garrett Pettingell: #2393/Vanora Bennett on have-nots.
11. Reuters: Talk of Russia food aid plan 'rumor'-USDA official.
12. Reuters: Russia PM vows crackdown on regional separatism.]

*******

#1
New jokes from Russia's crisis

MOSCOW, Sept 25 (Reuters) - Russia's deep economic gloom has not spoiled the
sense of humour of its leaders. Following are a few jokes that Reuters
correspondents have overheard, as told by leading parliamentary deputies and
officials: 
The Russian State Duma receives a draft of a new constitution consisting of
two items: Thou shalt not kill and Thou shalt not steal. 
Parliamentary speaker Gennady Seleznyov calls an urgent press briefing. 
``We have now begun work drafting amendments,'' he says. 
Russia's finance minister rings the economics minister: 
``Good morning, comrade. Do you happen to know what is going on in the Russian
economy?'' 
``Hold on, I'll quickly explain it to you.'' 
``Explain? I can explain it to myself already. I was just curious about what's
really going on?'' 
An elephant has escaped from its cage at the Moscow zoo. 
It slipped between the bars. 
Officials from the International Monetary Fund must choose between countries
seeking IMF help. They give the officials of each country three huge, heavy
steel balls and says whoever can perform the cleverest trick with them will
get a loan. 
The next day the Indonesian finance minister arrives, juggling two of the
balls while balancing on the other as it rolls around the conference room. The
IMF representative to Indonesia is very impressed. 
Brazil's central bank chief plays soccer with one ball, basketball with
another and volleyball with the third. The IMF representative to Brazil
applauds loudly. 
But suddenly an IMF official leaps out of the conference room with the Russian
delegation, grinning merrily and announces that the loan will go to Russia.
Asked what impressed him so much, he says: ``This guy accidentally broke one
of the steel balls in half, lost the second one under the table and traded the
third one for a bottle of vodka.'' 
President Yeltsin asks how work is proceeding on Russia's programme of social
guarantees. 
``Incredibly, unbelievably bad, Boris Nikolayevich,'' his aide replies. 
'`Don't spare my feelings. Please, tell me the truth,'' says the president. 
President Yeltsin's address to the nation: 
``For years we have stood on the threshold of the abyss. Now, fellow
countrymen, we have taken a great step forward.'' 

*******

#2
Boston Globe
September 25, 1998
[for personal use only]
Moscow chills 
For US expatriates, the music stops
By David Filipov

MOSCOW - What do you do when your city is too blue to listen to the blues? 
Lately, Jane has had plenty of time to think that one over. 
Not long ago, she had a life that epitomized Russia's allure for adventurous
Americans - an exciting job at an international financial firm and a regular
gig on Moscow's club circuit as the lead singer of a blues band. 
But that was before Aug. 17, when Russia's government defaulted on its debts,
its banking system froze, and the ruble plummeted. Moscow's burgeoning
financial industry went bust overnight and businesses across the country came
to a virtual halt. The crisis has swept away Russian and Western companies
alike, and survivors have faced losses and layoffs. 
Now Jane, a Pennsylvania native who asked that her real name not be used, has
joined the swelling ranks of Moscow's unemployed. Worse, her band's show at
the Starlite Diner, a favorite expatriate hangout, has been canceled. You can
almost hear them play: 
I was s'posed to play the StarliteBut they turned out the stars there tonight.
Ain't nobody gonna pay to hear me sing my blues. 
It sounds like the right time to mosey on out of Moscow and join the thousands
of Westerners who are leaving or have already left town. But Jane's Russian
fiance, who plays guitar in her band, is not going anywhere. 
Like a number of Americans and other Westerners interviewed for this report,
Jane arrived in Russia hoping to find her fortune amid the feverish capitalist
gold rush here. In the process, these expatriates fell in love with the place
- or at least the opportunities available to enterprising Westerners in a land
whose people had long idealized the West. Many of these foreigners have made
more money or done more interesting things than they would have done at home
by exploiting a society that wrote the rules as it went along. 
At the height of Russia's boom last year, firms invested heavily in short-term
treasury bills that yielded fantastic returns. But when the government
defaulted on the bills, investment companies and banks were left holding
millions of dollars of worthless paper. 
''We were sort of like Daffy Duck stretched out between two boats with the
sharks under his crotch,'' said David Jordan, 27, until recently securities
analyst at RussInvest, a $30 million fund that went under after Aug. 17. 
Jordan came to Russia last year on a tourist visa and landed a job because the
fund wanted an American who knew how to pick stocks. That turned into a
$62,000 annual salary. Now his nationality is his biggest liability. 
''You've got Russians with Harvard MBAs,'' said Jordan, who has an MBA from
Vanderbilt. ''If a company's looking to hire, they are going local. They don't
need expat managers.''
Jordan's Russian wife had a baby three weeks ago. He had no plans to leave,
but his job prospects look slim and he is unsure what he will do. ''I was
definitely caught off guard,'' he said. 
Lots of people expected some kind of crisis to occur in Russia. Its stock
market began its downward plunge months ago, propelled by falling oil prices
and the financial crisis in Asia. By May, Russian equities had gone from the
world's best performers in 1997 to the world's worst in 1998. The Russian
government, which only in August defaulted on its debts to lenders, broke its
contract years ago with millions of workers and pensioners by not paying them
for months at a time. Still, few businessmen expected Moscow's consumer
economy to collapse so thoroughly. 
''I don't think anybody thought it would get so bad so fast,'' said Paul
O'Brien, a native of Waltham and co-owner of the two Starlite Diners in
Moscow. 
Like most businessmen here, O'Brien cannot gain access to his business's
Moscow bank account - where $160,000 is frozen. The collapse of the ruble and
the ensuing problems exchanging it for dollars have wiped out profits and made
it harder to import food. The sudden mass unemployment of Moscow's middle
class has sapped his customer base. 
O'Brien has been forced to cancel $100,000 in food shipments from the United
States. Plans to open a third restaurant in Moscow have been shelved, and jobs
and salaries have been slashed. Still, he considers himself fortunate. The
Starlite made payroll just before the Aug. 17 collapse. For now, the business
will survive. 
Others have not been so lucky. Scott Blacklin, president of the American
Chamber of Commerce in Moscow, said that major consumer goods companies were
tearing down the Russian distribution networks they had built over the past
six years because consumer buying power has plummeted with the ruble's fall
and exchange problems were making it difficult to import. A survey produced by
the chamber found that 50 US companies had lost over $460 million during the
crisis. The overall losses of the international finance community are
estimated by some to be in the billions. 
''It's like we've been hit by a neutron bomb and we've all been irradiated,
which means we're all alive today. But in 30, 60, 90 days, some of us are
going to die,'' Blacklin said. ''The rest of us are going to survive, but
we'll all have to lie around and throw up for a while.''
One man who should be happy right now is Matt Taibbi, 28, co-founder and co-
editor of the eXile, an English-language bi-weekly that predicted the current
crisis months ago in a typically raw and irreverent editorial titled ''Russia
Should Default.''
As a journalist, Taibbi, a native of Boston, is proud that his paper broke the
story. But as a businessman, he knows that eXile, which survives on
advertising that is disappearing, could fold. The paper has already cut
salaries in half. After five years in Moscow, Taibbi is ready to go home. 
But how does one end up here for five years? ''If you're an eccentric person
in the US and you come here you probably feel at home,'' Taibbi said. 
People who have been in Russia for a long time have grown used to crises. The
Russian ''boom,'' for example, began when President Boris N. Yeltsin used
tanks to blow away Parliament and hit its stride while Russia fought a
disastrous war with the breakway republic of Chechnya. 
''But then, you knew the sun was going to come up,'' said Michael Fodor of
Burlington, Vt., a co-founder of F-Squared, a Moscow-based market research
company. ''Now, companies' management is saying `I'm not sure the sun is going
to come up.'''
Not everyone is glum. Some predict that the crisis will prove to be good
because it will correct expectations about Russia, which were inflated despite
the country's myriad political problems, rampant corruption and poor
leadership. Russians have always been patient with the pain their leaders
inflict on them, and some American businessmen have evidently acquired the
same patience. 
''There is a certain romanticism with being in the place in the middle of
history being made,'' said Bruce Macdonald, 64, of Windsor, Vt., a marketing
specialist who has worked in Moscow since 1989. ''You can have more impact on
this society than anywhere else.'' 
That impact has not always been appreciated. In 1992, Macdonald's advertising
company helped design the vouchers that Russia used to sell off shares in
thousands of state-owned factories. Russia's voucher privatization program has
since been widely discredited as a massive scam that allowed a few well-placed
insiders to gobble up the country's best assets for almost nothing. 
Macdonald acknowledged all of that with a nod, but he is still proud of the
role he played in what was considered at the time to be one of the momentous
events of the 20th century. It is that sense that Russia is still on the brink
of something extraordinary that keeps him here. 
''I have the feeling I'd be bored to tears in the states,'' he said. ''It's
too stable, it's too peaceful, it's too regular. The most exciting thing that
happens is that Clinton has an affair.''

*******

#3
From: "George A. Marquart" <marquag@email.msn.com>
Subject: What's coming?
Date: Fri, 25 Sep 1998

To have some credibility, I have to say a little about myself. I first
visited the Soviet Union in 1976 as a businessman. Because of a complex
family history, although I do not have a drop of Russian blood in me, I was
already fluent in the language at that time. Since then, I lived in the
Soviet Union and Russia for over ten years as the General Manager of two
large American companies. My interest in Russia predates my first visit.
There was about a five year period in my life when I read every Russian book
I could lay my hands on.

I believe it was in 1993 when then Undersecretary of State, Lawrence
Eagleberger, visited Russia, and I was one of a dozen or so businesspeople
invited to a lunch at Spaso House, during which we had an opportunity to
express our views about the Russian economy and its future. When my turn
came, I expressed the opinion that even then, Russia was a totally bankrupt
country, not only financially, but also politically, technologically, and
morally. My point was that, unless the West found a way to deal with all of
these aspects, Russia would face "a catastrophe of apocalyptic proportions."
Because this contradicted the earlier, much more optimistic expressions, the
Secretary asked, "Do you all feel this way?" There was silence, but
everybody's head was nodding up and down in affirmation.

For reasons that I see debated by many of the highly qualified, intelligent
contributors to the Johnson List, it appears we have now arrived at the
threshold of that catastrophe, and the point of my message: "famine and
plague" on an unprecedented scale (hard to believe, after what we know about
the time of collectivization) are parts of the armory of the apocalyptic
Rider (so is "the sword," but that is another matter). Whatever we believe
about the causes of Russia's misfortune, or how to fix it, I think one thing
is clear: We in the West must gear up to alleviate the "famine and plague"
that are about to descend on Russia. We have to find a way to do it
differently from the financial aid we provided, which was essentially either
stolen, or wasted in a futile effort to support an unsupportable system.
Could I ask the bright, interested, intelligent, conscientious readers and
participants in the Johnson List to devote a portion of their time and
talents to this question?

*******

#4
Russian Press Slams Primakov's Economic Measures 
September 25, 1998

MOSCOW -- (Agence France Presse) Russia's boisterous press, rarely agreeing on
anything but always boasting strong views, showed remarkable solidarity Friday
as it bashed Prime Minister Yevgeny Primakov and gloomily pondered inflation. 
"Everything Is Still Ahead of Us," noted a sarcastic front-page banner
headline in the liberal daily Vremya as it outlined a government forecast of
possible 400 percent annual inflation by year-end. 
"We Had No Anti-Crisis Program, and We Still Do Not Have One," announced a
front-page headline in the business-oriented Kommersant Daily. 
And Kommersant's historic rival, Nezavisimaya Gazeta, the mouthpiece of
powerful oil and media tycoon Boris Berezovsky, could not agree more. 
"The Government Still Has No Program," Nezavisimaya's headline said. 
"Yesterday's session of the government, like most of its other actions in the
past few days, was remarkably empty," the paper explained. 
Primakov on Thursday chaired his first full session of government since
winning overwhelming confirmation by parliament Sept. 11. 
He cruised into his post as the nation desperately sought a compromise figure
who could lead Russia out of economic crisis without upsetting the delicate
balance of political forces in parliament demanding a change in economic
direction to confront Russia's burgeoning financial crisis. 
But judging by media headlines Friday the former foreign minister's honeymoon
appeared to be over. 
Primakov has made an effort to keep his promise and draft a coalition
government that for the first time in post-Soviet Russia includes leftist
lawmakers in senior economic post. 
Friday's papers, however, ridiculed both Primakov and his economic advisers
for voicing split strategies that contradict each other. 
"We still do not have an economic program, but are being torn apart by the
numerous choices," said the Segodnya daily, which emphatically buried its
government report on the bottom of page four. 
The daily Kommersant, which for effect fully published three government plans
that it said contradicted each other at almost every point, also lashed out
against the only open liberal in the government -- acting Finance Minister
Mikhail Zadornov. 
"Zadornov was full of surprises. He is offering a program that does not seem
to be in the jurisdiction of either the finance ministry or the government,"
Kommersant said. "The central bank is the only one to have an anti-crisis
plan. The government is busy shuffling chairs." 
But the paper was not happy about the bank's plan either. Kommersant reported
that the country's top banker, Victor Gerashchenko, was hesitantly resisting
pressure to print 120 billion rubles this fall. 
The measure, by the Bank's own prognosis, could lead to 300-400 percent annual
rate inflation by year-end, Kommersant observed. 
And the papers also ridiculed Primakov's efforts to distance himself from his
predecessors mistakes; the prime minister on Thursday announced that deposed
Premier Sergei Kiriyenko and retired central bank chief Sergei Dubinin did not
inform the president of their decision to effectively devalue the ruble and
default on short-term debt. 
"Yesterday's only achievement was the prime minister's discovery of a
generally well-known fact -- what Kiriyenko and Dubinin did on Aug. 17 did not
help the economy," Nezavisimaya said.

******

#5
Yeltsin risks Communist ire on finance chief
By Martin Nesirky

MOSCOW, Sept 25 (Reuters) - President Boris Yeltsin and his prime minister
risked wrecking their undeclared truce with the Communist opposition on Friday
by controversially reappointing a liberal monetarist as Russia's finance
minister. 
Plugging a gap in the cabinet two weeks after Yevgeny Primakov was confirmed
as premier by the opposition-led parliament, Yeltsin signed a decree naming
Mikhail Zadornov to the finance ministry -- a key job in Russia's economic
crisis. 
``At least he is a known quantity,'' said Stephen O'Sullivan of finance house
United Financial Group after the Kremlin ended days of speculation over who
would get the post. 
``He is also familiar with all the circumstances that led us to where we are
today, and that in itself means there is no learning curve for him to go
through, which is good.'' 
But the move was unlikely to please the Communists, who view the 35-year-old
market reformer as embodying much of what they despise in post-Soviet Russia,
and will upset the Russian military, who regard Zadornov as the man who has
held up wages. 
``We declared that we will carry out a policy of electoral support for the
government if it is capable of carrying out a qualitatively different
course,'' party chief Gennady Zyuganov told reporters before Zadornov's
reappointment was announced. 
He said otherwise the party would back a countrywide labour protest on October
7, a date assuming growing significance in the Russian political calendar.
Interior Minister Sergei Stepashin met union leaders on Friday to discuss
their plans. 
The Communists have already hinted they might withdraw backing for the
government completely. 
The State Duma lower house of parliament confirmed Primakov on September 11
after a standoff between Yeltsin and the Communist-dominated chamber over who
should be prime minister to replace the Kremlin's preferred candidate, Viktor
Chernomyrdin. 
Primakov vowed to put together a consensus cabinet to reflect the disparate
strands of opinion on how to tackle Russia's economic crisis. He promised not
to ditch reforms but to ease the burden on Russia's long-suffering people. 
Two weeks on, he has yet to complete his team and policy programme. Many have
sought to avoid the seemingly thankless task of governing Russia. Those who
have grasped the nettle seem certain to disagree about what to do with it. 
Deputy Prime Minister Alexander Shokhin, a centrist, has not been afraid to
speak up. He put pressure on the International Monetary Fund to provide help
for Russia. 
``It would be shameful to leave Moscow without cheering up the world by
announcing results,'' Russian news agencies quoted him as saying at the start
of a meeting with an IMF delegation. 
Shokhin said on Thursday the IMF would drive Russia into a corner if it did
not dish out the next slice of a Fund loan to help Moscow service foreign
debt. The IMF wants to see what the new government's policies are before
handing over money. 
The team will return to Moscow on October 12, another Russian official said
after the talks. 
Primakov was more concerned on Friday with domestic sources of revenue, saying
raising budget revenues was a priority and the rouble could only be
strengthened if capital flight stopped. 
The central bank set the rouble rate for the weekend at 15.8827 to the dollar,
down from Friday's 15.6099. 
The bank was busy on other fronts, launching the second round of an operation
to restart the banking system's stalled interbank payments system. 
That system has been virtually paralysed since mid-August when the previous
government froze the domestic debt market and allowed the rouble to plummet,
shattering confidence among domestic and foreign investors and sparking fears
of social tensions across the vast Russian Federation. 
Earlier, Primakov told Interior Ministry officials to ``be on the cutting
edge'' in the struggle to quell separatist tendencies in some of Russia's 89
regions. 
Moscow has been alarmed by threats from some regional leaders they might
withhold taxes from the centre because of delays or shortfalls in federal
funding. 
Yeltsin, who was out at his Gorky-9 country residence on Friday, reappointed
several key ministers and named some new ones on Friday, including Andrei
Shapovalyants as economy minister. But several posts still remain to be
filled. 
The Kremlin said Yeltsin, who cuts an increasingly marginalised figure, would
visit Uzbekistan, Kazakhstan and Austria next month and was fully briefed on
events in Russia. 
A principal architect of Russia's seven-year market reforms, Anatoly Chubais,
told the weekly Vek his biggest mistake was assuming Russia could make the
transition in a matter of years. 
``Now it is clear,'' he said. ``The transition will take decades, with
retreats, defeats and crises.'' 

******

#6
Russia says planning no nuclear blasts

MOSCOW, Sept 25 (Reuters) - Russia, responding to a U.S. press report, said on
Friday it did not plan a nuclear test blast but would continue ``sub-
critical'' tests, which do not cause nuclear explosions and are legal under a
test ban treaty. 
The Washington Times on Thursday cited U.S. intelligence sources as saying
satellite photographs showed Russian trucks unloading material near deep
shafts at the Arctic nuclear test site of Novaya Zemlya. 
The materials could be used to plug up the shafts for an underground nuclear
test, the paper said. 
But a top Russian nuclear official said any planned tests would not involve a
nuclear explosion. 
Russia said in July it would carry out a sub-critical test before this winter
but would not conduct full-scale tests requiring nuclear explosions, forbidden
under the treaty. The United States also regularly performs sub-critical
tests, seen as necessary to maintain its existing nuclear stockpile. 
Viktor Mikhailov, first deputy Russian atomic energy minister, told Reuters on
Friday Russia was continuing its ongoing programme of nuclear experiments, but
planned no explosions. 
He would not comment on whether any specific sub-critical test was planned for
the immediate future, but said the reports of the U.S. satellite photos, if
true, would not constitute evidence that Russia was doing anything illegal. 
``Trucks are used all the time,'' he said. 
``The (legal, sub-critical) experiments that we are carrying out also require
(shafts to be plugged) so that dangerous materials do not escape,'' he said.
``Russia has not planned, is not planning and will not carry out a nuclear
explosion,'' Mikhailov added. 
Russia is a signatory to the international test ban treaty and has pledged to
abide by its terms even though the treaty has not yet officially come into
effect. 

*******

#7
>From Russia Today
http://www.russiatoday.com
Moscow Tribune
September 25, 1998
Informed Optimist from the BBC
By Richard Evans 

"I wouldn't want to be away from this country [Russia] at such an important
time and if I were I would certainly come rushing back." 
Not a surprising statement from an adrenaline-fueled actionman who thrives on
traveling the world and putting his life in danger. What is surprising,
however, is that this daredevil is also the dignified and respected voice of
one of the biggest news corporations in the world. 
Meet John Simpson, the BBC's World Affairs editor, a man who has covered "28
or 29 wars" and whose travel log resembles a tour of the "no-go" areas of the
modern world. 
From Somalia's feuding warlords to the ethnic atrocities of former Yugoslavia,
Simpson has regularly been willing to sacrifice himself for his pursuit of the
truth. 
While admitting that his occupation can have its unsettling moments, like the
time a cruise missile flew past his hotel window during the Gulf war, he
nevertheless approaches his work with a dedicated professionalism: 
"There have been a lot of times when I have been frightened but nobody forces
me to do what I do. I could just sit around and cover big diplomatic events
and never get anywhere near the sound of live ammunition. I just think it's
part of my job." 
While his war zone reporting has taken him to many far-flung corners of the
world, it is with Russia that Simpson has developed a special affinity. "I
feel this is the place I've been most happiest in and most involved ...
intellectually as well as emotionally." 
Simpson first came to Russia in 1978 -- "April 28th, 1978," to be exact. He
has good reason to remember the date. During this visit he conducted the first
ever television interview with the dissident scientist Andrei Sakharov. 
In the unnerving episode that followed, Simpson was apprehended by the
security services as he left the country. His possessions were confiscated and
he was told that his interview would be wiped from the tape. 
However, "thanks to the inefficient Soviet technology" the interview survived
and was broadcast soon after. 
Simpson recalled that he was subsequently informed "in no uncertain manner"
that he would not be allowed back into the Soviet Union. He thus began the
first of three enforced absences. 
Despite his altercations with the Soviet authorities and the obvious
difficulties journalists faced in a Communist state, Simpson recants his
experiences with something bordering on nostalgia: "Of course at the time one
thought that these people were brutal, cruel and ignorant but looking back it
seems to me they showed great sophistication and dignity. Far more than other
closed societies, such as China for example." 
Simpson's three absences all lasted about 18 months and this he felt was
typical of the Soviet regime's attitude. "They expected you to say unpleasant
things about them and it was just a matter of time when they chose to allow
you in to say these things." 
But it is not only in the Soviet Union that Simpson's views have caused a
stir. In an article in the BBC's biggest publication, the TV Times, Simpson
jokingly stated that apart from Col. Gaddafi, it was getting difficult to find
a good dictator these days. When questioned about this statement, Simpson let
out a hearty laugh followed by, "Oh God, what a terribly effected thing to
say!" 
Having had the chance to reflect, Simpson said that despite the light-hearted
nature of the statement, it did carry serious implications for foreign
correspondents of his particular ilk. "Colorful dictatorships are really quite
rare nowadays. I suppose one should be glad about it but I do think that my
job in the future will be a little less exciting." 
For the last two weeks, however, Simpson's job has been anything but boring as
he has witnessed Russia spiraling into a perilous crisis. But, flying in the
face of the prevailing attitude toward Russia, he has a refreshingly upbeat
view of the current situation. "Unlike quite a lot of foreign journalists here
I am really quite optimistic about the whole way Russia is tending." 
Simpson believes that the present situation is a phase in Russia's ongoing
development as a democratic state and that the difficulties it is experiencing
have been, and will continue to be, the catalyst for positive developments. 
"If you leave aside the possibility of chaos and disaster, I think we will
look back on this period as one when the presidency, which was too strong by
any standards, was brought back to a realistic level," he said. "I believe
what we are seeing now is a stabilization of the Russian Constitution." 
Simpson acknowledges that his essentially optimistic view of Russia's plight
comes from his firsthand experience of Russia's development over the last 20
years. But it also seems to stem from a deep-rooted affection for the country
and it is this feeling that forms the bedrock of the BBC World Editor's
philosophy on the qualities required by foreign correspondents in general. 
"I've always taken the line when appointing people that a good foreign
correspondent, in fact the only good foreign correspondent, is one who loves
the country he or she is in." And after talking to Simpson one is left in no
doubt that he is a man who practices what he preaches. 

******

#8
Moscow Times
September 25, 1998 
Banking on a Spymaster 
By Konstantin Preobrazhensky
Konstantin Preobrazhensky, a former lieutenant-colonel in the KGB, writes on
intelligence affairs for Moskovskiye Novosti. He contributed this comment to
The Moscow Times. 

Old-timers at Moscow's Institute of Oriental Studies do not recall their
former director and Russia's new prime minister, Yevgeny Primakov, with
particular fondness. By contrast, Russia's Foreign Intelligence Service agents
sing his praises to this day, and live in the hope that their organization
will receive a new lease on life from their old boss following his recent
promotion. 
But is it realistic for them to expect a helping hand, and why this disparity
of feeling with others who have lived under Primakov's directorship? 
I remember well the skepticism of the Orientalists when they received news of
Primakov's appointment as their director in 1977. Although the institute's
directors were always appointed by the Communist Party Central Committee, a
candidate had to be a genuine Orientalist and author of numerous academic
works. This was not the case with Primakov, who was "appointed" an academician
by the Central Committee's scientific department. Respected academics
underpinned this decision with their signatures for fear of losing the few
perks they enjoyed: foreign travel privileges and the Kremlin ration of
generally unavailable caviar, fresh meat and sturgeon. 
After taking up his duties in the institute, Primakov exacted a subtle
oriental-style revenge upon those who were ill-disposed toward him: He forced
them to go to work every day. 
At the time, workers of all but military scientific research institutes were
paid very little f 120 rubles, when an overcoat cost 200, boots 150 and a
bottle of vodka five rubles. But as a sign of their proximity to the
government, Orientalists were granted the exclusive privilege of having to go
to work just twice a week, leaving them time for their own, unofficial work on
the side. 
Primakov took this privilege away from them. They had nothing to do at work,
and there was not even enough space for them, leaving many to wander around
the corridors. But that wasn't all. Primakov forced them to produce regular
"situational analysis" reports, a tall order indeed for a specialist in
Egyptian pyramids. This show of initiative went down well with the Central
Committee, and Primakov's career moved forward rapidly. 
When he was appointed director of the Foreign Intelligence Service in 1991, as
an outsider he was also initially met with fixed bayonets. Nevertheless, he
immediately got to work on the main task of improving the material situation
of the service, where state allocations of resources had already been cut back
to the limit. It was under Primakov's direction that the Foreign Intelligence
Service successfully began to infiltrate banks, not for purposes of espionage
but in order to survive. Today, the ranks of Russia's bankers include many KGB
agents recruited back in the 1970s. A few banks are even thought to have been
set up entirely by officers of the KGB's financial service, whose job in
Soviet times was to do the accounting for the KGB's missions abroad. Since the
KGB never had its own financial academy, it used to recruit staff from the
Defense Ministry's academy. Although their education was weak and the banks
set up by its graduates are now barely alive, they continue to bring in a
minimum of income. 
Over the last seven years the Foreign Intelligence Service managed to
establish a strong foothold on the Moscow Interbank Currency Exchange and many
commercial banks. Its operatives are not so much in charge of finances, as
engaged in the altogether more important task of gathering compromising
material on the bank's owners. 
Yet while there are grounds for great affection and respect for Primakov
within the service, it is by no means certain that he will remember them now,
such is the traditional psychology of top dogs in Russia. As they ascend the
career ladder they tend to jettison the departments they used to run behind
them like a rocket dumps its stages. 
Back when Primakov became director of the Institute of Oriental Studies, the
chairman of the Soviet KGB, Yury Andropov, was hatching plans to become head
of state. At that time my father was deputy head of the KGB border guards and
reported almost every day to the all-powerful chairman. Andropov appeared to
take a liking to him and ordered that I be allowed to join the service,
despite my prohibitively poor eyesight. "Congratulations," I said to my
father. "Soon Andropov will take you into the Central Committee and we will
travel around in a government limousine. And in 35 years I'll reach the rank
of KGB general." 
"Alas," replied my father sadly. "Bosses have a short memory." 
Sure enough, as soon as Andropov became general secretary, he turned his back
on the KGB, refusing even to raise their wages on the grounds that the
organization had "still not earned the Party's trust." 
The only structure in Russia where things are different in this respect is the
Defense Ministry, where ministers never forget the forces where they once
served, and grant them privileges that cause resentment in other areas. But
soldiers have their own psychology, KGB generals quite another. 
All this aside, however, the Foreign Intelligence Service looks likely to
benefit under Primakov's government, with or without the prime minister's
direct favor. At the psychological level, other departments will start to show
greater respect toward the intelligence services simply on the grounds of
Primakov's professional background, as will the population at large. In
concrete terms, the main payoff comes by way of First Deputy Prime Minister
Yury Maslyukov's announcement that he intends to actively revitalize the
military-industrial complex by allocating it greater budget funding. 
Consequently, and just as in the Soviet years, the Foreign Intelligence
Service's "T" division, the scientific and technical intelligence wing that
gathers technical military secrets from around the world, will enjoy a stable
demand for its information, generating money to expand the service's foreign
missions. 

******

#9
IntellectualCapital.com
http://www.intellectualcapital.com
Russia Enters a New Historic Phase
by Richard Pipes
September 24, 1998 
Richard Pipes is a professor of history and has previously served as
director of Russian studies at Harvard University. He is a contributing
editor of IntellectualCapital.com. 

When, two months ago, I described how the International Monetary Fund and
other international organizations pulled Russia from the brink of economic
collapse, I believed that the injection of some $20 billion would keep that
country solvent for a year or so. It did not turn out that way: Russia's
finances broke down in less than a month as the government defaulted on its
loans and shut down banking operations. The default on the state
obligations sent shock waves through the global economy, unsettling stock
markets and accelerating the flight from securities to bonds backed by the
governments of the leading industrial democracies. 
It is safe to say that in August of this year a chapter in Russia's history
has drawn to a close: a seven-year attempt to introduce democracy and
capitalism into a country ravaged by 70 years of communism and kept down by
tsarist patrimonial rule for nearly 700 years before that. 
It was a nave attempt. Many Russians thought that they merely had to adopt
democratic institutions and privatize the economy to leap into the kingdom
of freedom and prosperity. Westerners who advised them, accustomed as they
were to operating in societies in which private property, law and popular
sovereignty were solidly established, ignored the absence of such
traditions in Russia. The result was a crash that will force Russia to
follow a somewhat different path. 
A return to communism is not in the cards. The communists themselves reject
such a prospect, which is desired by only a small part of the electorate,
mostly the elderly and poorly educated. It is impractical in any event
because it would require the expropriation of millions from new owners of
small enterprises and dwellings, an action for which the government has no
strength and the population no stomach. 
The communist program of today echoes Social-Democratic slogans, calling
for greater government intervention in the country's economy. On more than
one occasion the Communists, ignoring Lenin and Stalin, have invoked
Franklin Delano Roosevelt's policies during the U.S. depression. As for
democratic procedures and civil liberties, they implicitly accept them. One
may, of course, question their sincerity, but polls indicate that the vast
majority of Russians do not want a return to the past, and hence that it
would likely require a bloody revolution to turn the clock back. 

The wrong solutions 
Can Primakov do it?

The present government appears to be a transitional administration charged
with keeping the country together until the next presidential and
parliamentary elections scheduled for 2000. Its head, Yevgeny Primakov, is
not a fanatic or even ideologue but a practical politician with little
knowledge of domestic politics. The team he is assembling to revamp the
economy consists largely of economists who served under Gorbachev and thus
contributed to the collapse of the Soviet Union. It has no clear program,
save to print bank notes to pay wage arrears and save bankrupt banks and
industrial enterprises. It appears to be thrashing about, hoping that a
workable policy will somehow turn up. 
The current government certainly cannot meet its obligations to foreign
holders of Russian bonds without foreign assistance, and it is doubtful
that it can jumpstart Russia's economy without such assistance. The
question on the table is, therefore, whether the West should once again
come to Russia's help with injections of tens of billions of dollars. 
Some in the West favor continuing political and economic aid even to a
wobbly regime as long as it professes loyalty to popular government and the
forces of the market. Some urge a Russian Marshall Plan. 
Such recommendations must be treated with great reserve. When the Marshall
Plan came into being, western Europe was physically devastated, but its
human element was intact: The knowledge of democratic government and
capitalist entrepreneurship survived the war; hence, the infusion of U.S.
capital produced remarkably rapid improvement. 
In Russia, the situation is reversed: The physical plant, such as it is,
remains in place but the talent capable of using Western help is lacking.
The loans extended by the IMF and other Western institutions, when they
were not stolen, have gone largely to pay current bills. The loans have
also served as an excuse for delaying fundamental reforms, especially in
the field of tax collecting. 

A crisis of culture 

The point is that Russia's current crisis, unlike Japan's, is not the
result only of weak leadership and misguided policies. It is much more
fundamental in nature: It is really a crisis of culture that prevents
Russia from making a rapid transition to modernity. Conditioned by their
past, Russians trust no one, neither their fellow citizens nor their
government. Experience has taught them to look out for themselves. They are
deeply suspicious of foreigners whose aid they interpret as a cynical
device to gain control of Russia's resources. These are not attitudes
conducive either to democracy or the operations of the free market. 
The Russian mindset is not immutable, but culture changes slowly and
through personal experience rather than instruction. People have to unlearn
the lesson of communism and acquire the habits of a civil society. Such
political and economic transformation has to begin below, at the
grass-roots level. The 89 provinces of Russia, now fairly independent of
each other and the central government, are a good vehicle for such an
evolution: Business ties can be forged and political platforms articulated
more readily on a local rather than a national level. 
Russia faces a long and arduous path to modernity. We cannot expect a quick
recovery but should be prepared for a prolonged period of political and
economic vacillation until the younger generation, which is maturing under
conditions of freedom, takes over the reins of power. This means that we
must trust in the Russians to solve their own problems and not try to do it
for them with infusions of money they have not earned and are unlikely to
repay. 
We should give advice -- when asked -- and offer moral support to
democratic forces, but we should not assume responsibility for Russia's
future as happens when we tell them what to do. Let them tell us how we can
help them, as George Marshall requested the Europeans to draw-up their
plans for reconstruction, and, short of lavishing billions on them, see how
we can meet their needs. Once the Russian have put their house in order and
repatriated the tens of billions they presently hold in foreign banks, then
and only then will the time be ripe for the international community to
resume investing in Russia. 

*****

#10
Date: Thu, 24 Sep 1998 10:20:27 -0400
From: Garrett PETTINGELL <garrett.pettingell@mos.bankaustria.com> 
Subject: #2393/Vanora Bennett on have-nots

I feel compelled to reply to Vanora Bennett's piece concerning
Russia's class of have-nots (DJL #2393; LA Times). I do not dispute
the statistics regarding number of crimes committed, nor can I speak
to her anecdotes describing criminal activities and the orphanage
system. Anyone who has lived in Russia in the 1990s, reads the local
newspapers and has at least casual relationships with Russians in the
workplace has heard similar stories about how horrifying life can be
for the disadvantaged classes. 

In reading these accounts, I always wonder what the "folks back home"
think life is like here for the vast majority. I know my mother used
to fear for my life until she visited. Having traveled all over Russia
on business I can say that I have never felt safer. Random violence,
even in Moscow, is much less common than in any US city. Most violent
crime is alcohol-related and is more often than not directed at people
who were previously known by the perpetrator. I, and my wife, feel
quite safe walking the streets, even at night. The biggest fear that I
have as a resident of Moscow is that someone might break into my house
and steal something.

As far as orphanages go, there are many institutions throughout Russia
where children live in clean environments, are fed three meals a day,
and are taken care of by kind and loving women. I have adopted two
children here and have found the "system" to be far more accommodating
than the US bureaucracy. 

The point is that there are many tragic stories in the press about
Russia today. But the sum total of life here is more balanced than
many accounts would have the reader believe. 

******

#11
Talk of Russia food aid plan 'rumor'-USDA official

WASHINGTON, Sept 24 (Reuters) - A top U.S. Agriculture Department official on
Thursday denied the agency has decided about Russia food aid, characterizing
the trading floor talk that a donation plan is set as "rumors." 
"We have made no decisions," General Sales Manager Chris Goldthwait told
Reuters. "We're now in the process of information gathering. "We'll be
watching the situation carefully." 
Speculation has swirled around trading floors in the past several weeks that
the USDA has decided to purchase U.S. commodities for donation to Russia. Some
had suggested Thursday that the USDA planned to buy $80 million of pork for
donation to the struggling country. 
"Those are rumors," Goldthwait said. 
He said the department does not have a timetable for making its decision about
commodity donations to Russia and noted that Moscow has not made any formal
requests for food aid. 

*******

#12
Russia PM vows crackdown on regional separatism

MOSCOW, Sept 25 (Reuters) - Prime Minister Yevgeny Primakov, who has said his
main priority is preserving Russian unity, said on Friday the security forces
must deal firmly with ``separatist tendencies'' in the country's regions, RIA
news agency reported. 
``(The Interior Ministry) must be on the cutting edge of a tough campaign
against separatist tendencies in the Russian regions,'' RIA quoted Primakov as
saying. 
Interfax news agency quoted the former spymaster as saying organised crime was
driving a wedge between Moscow and the regions. 
``Some representatives of local authorities are linked with criminal
structures. Such a connection feeds separatism, strengthens centrifugal
tendencies,'' it quoted him saying. 
Primakov has given regional leaders more say in his government to try to
cement support for efforts to tackle Russia's economic crisis. He has said the
crisis risks tearing the vast, nuclear-armed country apart. Moscow has been
alarmed by threats from some regional leaders they might withhold taxes from
the centre because of delays or shortfalls in federal funding. 

******



Return to CDI's Home Page  I  Return to CDI's Library