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Johnson's Russia List


September 30, 1998    
This Date's Issues: 240124022403

Johnson's Russia List
30 September 1998

[Note from David Johnson:
1. Harley Balzer: Middle Class.
2. Interfax: Top Media Official Views Current Situation
(Igor Malashenko).

3. The Independent (UK): Phil Reeves, Russia angered by Nato chief's 

4. Reuters: ANALYSIS-New Russian tax chief faces daunting task.
5. John Danzer: Anti-Western Feelings.
6. Dmitri Gusev: Re Hough/who is losing Russia.
7. The Globe and Mail (Canada): Geoffrey York, Emigration from Russia.
8. Obshchaya Gazeta: Yegor Yakovlev, "The Doctor Will Try, But He Is 
Not a Magician: Yevgeniy Primakov Is Assembling a Team To Treat a Gravely 
Ill Country."

9. Journal of Commerce: John Helmer, Russian bank regulator urges US role 
in crisis. Foreign investigators must be sought, he says.

10. Interfax: Poll Says Government Should Concentrate on Wages, Pensions.
11. Jamestown Foundation Monitor: WEAKNESS OF RUSSIAN STATE BLAMED FOR RISE 


Date: Tue, 29 Sep 1998 1
From: Harley Balzer <>
Subject: Middle Class

I have been restraining myself, I thought quite admirably, as all the
Western journalists and Russian colleagues who for the past two years have
explained to me me that I am crazy to be writing a book about the Russian
middle class (because it does not exist) have suddenly begun to chronicle
its demise. This is, of course, in part a function of the congenital
pessimism that infects anyone involved with Russia: a middle class would
have been evidence the reforms were not totally bad, so it did not exist.
Now that Russia has a neo-Soviet government, destruction of the
(non-existent) middle class is evidence of more problems, so it DOES
exist, but only in the guise of more fodder for fascism.
The problem is (at least) two-fold. One is that most Muscovite
intellectuals have visisted America, and they believe that if Russia
within a period of seven years generated a middle class that still had to
drive used cars and could not get cheap home mortgages, then there was no
"real" middle class. And, much more seriously, the middle class refused to
recognize itself as a social entity, and rejected political activity. Now
they are paying the price. Is a "Bulgarian variant" possible in Russia? It
is an attractive idea, but not the most likely outcome. 
In 1939, 88% of Americans told Gallup pollsters that they were middle
class, even though 31% simultaneously stated that their incomes were lower
class--they had a "middle class consciousness" and believed the economic
difficulties were only temporary. One gets the sense that for the Russian
middle class, the situation was reversed. Except, of course, for the
intelligentisa, who consider themselves (Soviet) middle class regardless
of other criteria, even extending to leadership of the Communist Party.
I'm about to go off for two weeks in Central Asia and Russia. I'd love to
return and find some substantive discussion of the middle class issue.

Harley Balzer
Georgetown University


Top Media Official Views Current Situation

Moscow, Sep 28 (Interfax) -- A top Russian media figure has said that
in the present situation it would be best for the country's media if the
pro-reform Yabloko party came to power.
"In the last few years, especially during the Chechen war, those in
authority have recognized the media's right to a degree of autonomy which
they have never recognized before" in Russia, Igor Malashenko, first deputy
chairman of Russian conglomerate Media- MOST's board of directors, said. 
However, "now we have to start everything all over agian" because "people
have come who have preserved the habits of the old system," he said in an
interview published in Monday's issue [28 September] of the newspaper
Novaya Gazeta."Today I know only one person with a team on whom I would stake
this situation [Yabloko leader Grigory] Yavlinsky. I don't know any other
team," Malashenko said.
"If I was sitting in the Kremlin today, my sense of self- preservation
of power would have made me find a way to support the press and
television," said Malashenko, who after President Boris Yeltsin's electoral
victory in 1996 turned down an offer to head the presidential
administration. "But it seems those in authority have lost their sense of
"The mass media are Yeltsin's strategic ally [because] they know that
under this regime they have received an opportunity to develop," Malashenko
continued. "It is not impossible that Yeltsin will be replaced by a person
who will want to turn back the clock, only there will be economic methods
instead of the Glavlit [Soviet- era censorship agency].
"It will be worse for the country if Yeltsin is dismissed before his
term runs out. In 1996 I said a sick Yeltsin was better for me than a
healthy [Communist leader Gennady] Zyuganov. Let me repeat this in 1998. 
Another person will come into the Kremlin in 2000 at the latest.
"There are some we don't understand, such as [Krasnoyarsk Governor
Aleksandr] Lebed. Others, such as [Moscow Mayor Yuriy] Luzhkov, would
predictably start taking control of the mass media. I would prefer not to
fight against any of them but to make them respect the rights of the mass
media," he said.Talking about his own work, Malashenko said he was "solving
problems of survival" of Media-MOST in an "environment which is as
aggressive as possible."
"Before the wonderful actions of [Prime Minister Sergei] Kiriyenko's
government, [television channel] NTV was making a profit," he said. "It
would be good if we ended this year with a zero balance and what will
happen next year we don't know. The advertising market is ruined," he
said. "Any piece of iron can be bought but a team is irreplaceable. NTV
is part of modern Russian history and it would be a crime to lose it. We
are able to survive under the most difficult conditions. It is only those
in authority that can put us out of existence," he said.
"The events of the last few days have shown that it is possible to
live without a government. But it is impossible to live without normal
television," Malashenko said.


The Independent (UK)
30 September 1998
[for personal use only]
Russia angered by Nato chief's tour
By Phil Reeves in Moscow 

Javier Solana, Secretary-General of Nato and a critic of the West's handling
of Russia, was yesterday on a mission that risked deepening anti-Western
sentiment within the unstable and bankrupt former super-power. 
Mr Solana arrived in Tbilisi, the capital of Georgia, for a three-nation tour
of ex-Soviet republics in the Caucasus, a strategically vital region over
which Moscow has long been striving to maintain its geopolitical influence. 
None of his critics - beyond the more extreme elements in Moscow - disputes
the alliance's right to visit independent nations, but questions have been
raised about the timing, which comes amid deep uncertainty over the future
course of Russia. "It is very unfortunate," one Western diplomat said. 
Billed by Nato as an effort to build further co-operation with the Caucasus
republics, the Solana trip coincides with a debate in the West over who is
responsible for what some analysts characterise as the "loss" of Russia. 
Mr Solana has chipped in, lambasting Western powers for lacking leadership or
strategy. Yet Nato, whose expansion into Eastern Europe has long been a bone
of contention with Russia, has further ensured that it gets a share of the
blame by parading its colours on Russia's southern flank in a particularly
fraught and uncertain period. 
More than two weeks after his appointment, Boris Yeltsin's premier Yevgeny
Primakov has yet to complete his government. Doubts abound over how long this
government - an awkward hotch-potch combining weathered apparatchiks with a
scattering of more progressive figures - will last. And no one can be certain
whether Moscow will espouse the mantra of market capitalism, or whether anti-
Western forces will prevail. 
Mr Solana, who will also visit Armenia and Azerbaijan, is not the only example
of questionable efforts by the West to assert superiority at a time of Russian
weakness: in the past month, the flagship of the US Sixth Fleet, the LaSalle,
has been steaming around the Black Sea. 
Publicly, Moscow has said little about Mr Solana's long-planned visit, though
the Ministry of Foreign Affairs yesterday repeated its general hostility to
Nato expansion. But government opinion is not the only issue. Russia is due to
hold parliamentary and presidential elections within the next 22 months.
Actions which strengthen anti-Western sentiment inevitably breath wind into
the sails of resurgent, and potentially extreme, forces on the left and right.
Yesterday, those elements were not shy in airing their views. Alexander
Podberyozhkin, a policymaker for the Communists, announced that he had
complained about the Nato visit to the Georgian government and to the United
States. Much of the State Duma, or lower house of parliament, will share his
views: it has a 300-member anti-Nato group. 
Beneath the issue lies a larger sense of insecurity that has taken hold in
Moscow as Russia watches the withering of its geopolitical sinews both in its
so-called "near abroad" - former Soviet territory - and within its borders,
where regions are straining at the federal leash. 


ANALYSIS-New Russian tax chief faces daunting task
By Karl Emerick Hanuska

MOSCOW, Sept 29 (Reuters) - The newly appointed head of the Russian state tax
service assumed office on Tuesday, facing the huge task of sorting out the
problem of falling tax revenues, a problem at the heart of the country's
economic crisis. 
Georgy Boos, a parliamentary deputy from the centrist party of former prime
minister Viktor Chernomyrdin and a virtual unknown in terms of state office,
was appointed as head of the State Tax Service. 
He replaced controversial and tough-talking reformer Boris Fyodorov, sacked on
Monday as the new government of Prime Minister Yevgeny Primakov reached its
final shape. 
Boos has the mammoth job of turning around Russia's chronically poor tax
record as the cash-strapped country tries to find a way out of severe economic
``Judging by past performance I would say that it is very hard to be
optimistic about his prospects for turning the tax system around. It had been
characterised as inequitable, punative and randomly enforced,'' said Charles
Blitzer, chief economist, emerging markets at Donaldson, Lufkin and Jenrette. 
``Revenue is one of the key issues facing Russia in this crisis. The
government has huge spending obligations and has to come up with a way to meet
those obligations,'' he said. 
Tax receipts have consistently fallen short, prompting concern from creditors
such as the International Monetary Fund, now considering the payment of a next
tranche of a multi-billion aid package. One of the conditions for the package
was improving tax collection, something Russia has so far failed to do. 
Primakov on Tuesday said that again in September the government had missed its
tax revenue goal, this time by a full 50 percent. 
August tax receipts were also less than planned with the government collecting
just 11.2 billion roubles ($700 million) of about 13 billion roubles forecast.
Poor tax collection amid uncontrolled spending are seen as the key factors
that laid the groundwork for Russia's current difficulties and further
international aid will dependly largely on correcting those problems. 
Poor tax revenue forced the country to borrow heavily, eventually causing it
to freeze the domestic debt market and restructure it when it realised it
could not meet repayments. 
The tax service blamed the September shortfall largely on oil and gas
companies, Russia's biggest tax payers, saying they had paid only a fraction
of their overall tax bill. 
Tax officials said oil firms paid just 132 million roubles out of 1.6 billion
owed to state coffers while natural gas giant Gazprom cleared only part of a
two billion rouble tax bill. 
Gazprom officials denied they were behind in tax payments and said the company
had in fact already paid more taxes than were currently due. 
Last week, Gazprom deputy head Pyotor Rodionov threatened that the company
would dramatically slash output unless its tax debt was reassessed. 
Russia's tax woes have been further aggravated by increasing reluctance from
some resource-rich regions to remit tax receipts to the federal government as
wage debts to workers grow. 
Primakov on Tuesday said there might be an argument for building up a local
tax base. 
A partial overhaul of at least part of Russia's outdated and punitive tax
system is expected to be a part of the government's anti-crisis programme when
it is finally released. 
Some steps had already been passed under a previous crisis plan of former
prime minister Sergei Kiriyenko. 
The government has announced that from next month it will introduce a monopoly
on the highly lucrative sale and production of strong liquor. 
There has been talk in the government of encouraging the payment of personal
income tax by slashing the tax rate to 20 percent from 35 percent. 


From: (John Danzer)
Date: Tue, 29 Sep 1998
Subject: Anti-Western Feelings

Anti-western sentiments in Russia.

Your probably won't find a lot of anti-western feelings on the surface right
now. But
hatred for the west is always present. Such sentiments are implicit
in nature's affection for polarity. There is never a unipolar
world. The existence of what "appears" as unipolarity simply means
that the other pole is submerged. Those least likely to detect
anti-western feelings are those extraverted thrill-seeking
Americans who have given up familiar comforts to live in what they
perceive to be an "exciting" Russia.
Think about it. Are there anti-Russian feelings in the west? 
Absolutely! That's what Nato and its expansion is all about. But
these sentiments probably wouldn't show up in an opinion poll.
Shouldn't you expect the same feelings to be percolating beneath
the surface in Russia.
Jew-hatred follows a similar pattern. It's always there ready to
be exploited when a scape-goat is needed. In the 1930's most
Germans would probably claim some of their best friends were Jews.
However, there is that hard-core of chronic anti-semites encased
within a layer of those who are sympathetic toward this brand of
prejudice. In turn, these sympathizers are surrounded by a layer of
those who are tolerant of extremist attitudes and finally the
surface layer made up of those who are afraid of going against the
About a year ago there was a lot of talk about a "Russian Idea" as
some sort of great uniting principle. Again we must learn from
nature's preference. Identity is established by boundaries. Inside
the boundary is love. Love is content-ment. We love ourselves,
our family, our tribe. Outside the boundary is what is hated. 
Love is diffuse and amorphous whereas beady-eyed hatred is focused
and structured. Love isn't good at creating boundaries. Boundaries
arise from hate, danger, and fear. History has shown that nations
put aside their internal differences when they have a common enemy.
You can be certain that the re-emergence of Russia is going to be
accompanied by hatred of the West and Jews. In fact hatred of the
west may turn out to be the propellent that will help them escape
the gravitational pull of their miserable situation. Hopefully,
hostility will give way to healthy competition in the future.


Date: Tue, 29 Sep 1998 
From: Dmitri Gusev <>
Subject: Re: Hough / who is losing Russia

I would like to comment on Jerry Hough's remarkable
"Who is losing Russia" piece (JRL #2399).

Hough writes:
>Once again the IMF goes to Moscow in a political
>crisis and has an absolutely disastrous impact. 
>Clearly what is going on is that someone (probably 
>Yeltsin playing his old games or maybe Primakov) 
>is wasting time trying to get money out of the IMF 
>and is playing games with policy appointments and 
>promises. In the past, it just conned the IMF, 
>and the IMF then conned Western investors and 
>nothing bad happened in the short term. But 
>now the Russians don't have time to lose playing 
>these stupid games and they are losing--or have 
>lost--the time they could have tried to gain control 
>of the domestic situation.

This is a very good point, and if Hough means that
the IMF should have refused to give any more money
to Yeltsin's bankrupt regime altogether, then he is 
right on target. But if he meant to say that the IMF 
should have quickly disbursed more money without trying to
set up any kind of conditions (I don't think it's
likely that he really meant that, but I am not
ready to rule out this possibility based upon what
Hough wrote), then he is mistaken. Feeding Yeltsin and
his gang just doesn't make any sense. I knew it ever
since it became obvious that civilian targets were
being bombarded by the Russian army in Chechnya
in 1994. And I argued against supporting Yeltsin
and Co. on the JRL on a number of occasions since 1996. 
And a few other people had known the same thing ever since 
October 1993, when Yeltsin's tanks bombarded the White House 
of Russia. (I admit, I approved of Yeltsin's decidedly 
unconstitutional actions then.) 

And the question is, what was the real goal of the 
policy pursued by the West? If it was to help Russia 
recover, so that it would become a strong and 
responsible trade and business partner, and a lucrative
civilized market, then the policy has failed miserably.
If the actual (secret?) goal was to weaken Russia to the 
point where it could no longer support the nuclear arsenal, 
thus ridding the world of Russia's nukes, then the policy
may be not that much of a failure, even if not a complete
success yet. I still think that the risk of potential 
instability caused by the latter policy outweighs its
questionable benefits, so I still think that the
support for Yeltsin must stop. The only difference
is, it seems, more people share this view nowadays.
Either way, Russia must keep and maintain its
nuclear arsenal, or the civilized world would simply
disregard her, just like it pretty much disregards some 
Somalia, or even Nigeria. 

Hough writes:
>The tragedy of 1917 was that Kornilov attacked Kerensky 
>instead of allying with him against Lenin.

No, the tragedy was that neither Kornilov, nor Kerensky
could stop the war and conduct a comprehensive
agrarian reform. Let me quote Churchill on Lenin here.
"His objective is, save the world. His method is, blow
it up." The thing is, it worked then. Generally, the historic
analogies made by Hough seem so imperfect, I personally
would disregard them altogether. I'm afraid, there is
no good analogy left in the annals to what we're observing.

Hough then favors
>Lebed allying with the Communists

which makes no sense to me whatsoever. Unlike Lebed, the 
Communists do not seem to have a clue. They have been a 
very lousy opposition, and that helped Yeltsin stay in 
power for so long. The Communists lack anything looking
like a viable program. 

>They both have used Glazev as a chief economist

I thought Lebed was no longer cooperating with
Glaziev. Was I mistaken on that? As far as the
economists go, I recommend Illarionov and Yavlinsky.
By the way, I wonder if someone could dig up Illarionov's 
1993 Izvestia article on Gerashchenko's pro-inflation
policy. That piece had a neat detailed account of
what it was Gerashchenko did. 

Hough claims that
>Both [Lebed and the Communists] have a combination of 
>nationalism and the Asian model that is very close in 

Regardless of whether this statement is correct (I seriously
doubt its correctness), the Asian (read: Chinese) model
will never work in Russia because of the profound difference
between the situations in the agriculture in Russia and
China, respectively. Russia simply does not have enough 
rural population capable to work hard on the land in order 
to successfully feed her without employing much of the modern
technology. Producing a lot of cheap merchandise through
use of abundant near-slave labor does not seem to be
a viable option, either. 

A few other points Hough made regarding Lebed I consider
very good, though.

>The West needs to get the world's economies growing, and 
>that includes the Russian. 

On the other hand, there are natural limits to the growth 
imposed by the finite resources of the planet and its 
limited ability to sustain our ecological pressure.
Those might, however, be expanded by conquering 
thermonuclear energy and eventually trasforming the
neighboring planets. Other technological advances
may prove helpful, too. (Basically, the technology
should improve so that the environment is not damaged
so much in the future.)

>We allied with Stalin when we faced a greater danger 
>in 1941.

I'm afraid that Yeltsin is just way too hopeless.
He should have been given up on back in 1994,
once the Chechen conflict escalated into a
terrible war. The last thing Yeltsin did that made 
much sense was fire Gerashchenko after the Black 
Tuesday, October 11, 1994. Then again, it didn't
take a rocket scientist to figure that Gerashchenko
had to be fired then.

Hough writes:
>The place to start is on the agricultural front.

While I agree with this general statement, the
subsequent detailed proposal makes little sense to me.

>Today the American farmers are in a terrible situation.

The real problem is, the Russian agriculture is
in a terrible situation. 

>But the sooner we get it going, the easier it is to 
>convince Russians that Havel did not speak for
>the Secretary of State when he talked about the 
>desirability of keeping Russia weak

Russia will remain weak until she learns how to
feed herself and not depend so badly on imported
food, period.

P.S. In his postscriptum, Hough writes,
>Incidentally, I would like to congratulate Richard 
>Pipes on his cogent analysis of the cultural reasons 
>Russia should have adopted a Nicholas II economic 
>reform model in 1990-1992 instead of the IMF

Given how Nicholas II ended up, I would not be
in a hurry to congratulate Pipes, especially
since his Capital.Com pieces tend to be godawful, IMO.
(The worst of all that nonsense of analysis was, of 
course, his ugly attempt at a history rewrite unjustly
blaming the Russians of having supported the 
Abkhazian separatists against the Georgians. Some 
of you may recall that the former mayor of Grozny, 
Beslan Gantemirov, later gave a large interview,
in which, among other things, he provided a lot
of details on how Dudayev's Chechens had supported
Ardzinba's Abkhazs. It was Dudayev, Ardzinba,
and Gamsakhurdia against Yeltsin and Shevardnadze.
O well, perhaps Pipes just cannot tell the Russians 
from the Chechens.)


Date: Tue, 29 Sep 1998 
From: Geoffrey York <>
Organization: The Globe and Mail
Subject: emigration from Russia

by Geoffrey York
The Globe and Mail (Canada)
Sept. 29, 1998

MOSCOW -- Some time in the next few weeks, Kirill Fastovsky will be
forced to give up his cellular telephone and his pager.
He has already switched to cheaper cigarettes and stopped buying
bottled beer. He cannot afford to take his 8-year-old son to McDonald's
or Pizza Hut for his favourite food. And no matter how much he scours
Moscow's half-empty shop shelves, he cannot find any of the imported
French yogurt that his family prefers.
The Russian economic crisis has put a severe dent in the comfortable
lifestyle of Mr. Fastovsky and millions of others in Russia's emerging
middle classes. Now he is ready for drastic action: he is joining the
growing crowds of Russians applying to emigrate to Canada.
~We were hoping that life would become decent and normal here," said
the 32-year-old marketing director for a Moscow computer company, who
lost $15,000 when a Russian bank collapsed last month.
~But there is no stability here. I don't know what will happen
tomorrow. I don't know whether I'll have a job. And when the economy
goes down, crime goes up. I'm worried for my children's future."
Dozens of Moscow consulting firms specialize in helping Russians
emigrate to Canada, and more are opening their doors every week. Since
the crisis began, their business has boomed. In Moscow's depressed
economy, immigration is one of the few thriving sectors.
Canada has become a favourite destination for the disillusioned middle
classes who saw their dreams shattered when the ruble crashed and the
banking system collapsed last month. Many agencies say their business
has doubled or tripled in the past few weeks.
~The worse things are for Russia, the better our business is," said
Mark Shamis, a legal advisor at the Moscow office of Gary L. Segal, a
Toronto immigration lawyer.
~It makes me feel uneasy. I'm contributing to the brain drain from
Russia. But I know that life will be better for my clients in Canada, so
that comforts me."
Before the crisis began, Mr. Shamis saw two or three clients a day. Now
he is seeing eight a day, and his prospective clients must wait a week
for an appointment.
~People are very scared of the political and economic situation in
Russia," he said in an interview at his Moscow office, where a miniature
Canadian flag is displayed on the plaque outside his door.
~They're afraid for their future. They think that socialism might
return. They're used to having plenty of choices in the stores."
Several embassies in Moscow, including the Israeli embassy, are
reporting a surge in immigration applications since mid-August, when the
crisis began. Canada is one of the most popular destinations. Earlier
this month, a Russian television report offered advice to its viewers on
which countries were best for immigrants to enter. It concluded that
Canada was the best.
~We're getting three or four times more clients than we got before the
crisis," said an employee at another Moscow agency specializing in
immigration to Canada. ~Before, we only had Muscovites. Now many people
are calling and visiting from other towns, complaining of the hardships
of life there."
The Canadian embassy in Moscow confirmed that it has received a growing
number of inquiries from prospective immigrants since the crisis began.
~There are more people sending faxes and making phone calls to us," said
Hector Cowan, head of the embassy's immigration program.
Russian students, too, are clamouring for information about Canadian
universities. Often they ask whether they can stay in Canada after they
finish their studies.
Even before the crisis, the number of immigrants from Russia was
increasing. The Canadian embassy in Moscow processed about 5,000
immigrants last year, mostly from Russia.
Many of the new applicants are businessmen who lost all of their money
in the collapse of the Russian stock and bond markets and the crash of
the commercial banks. Others have lost their jobs or were placed on
unpaid leave and can see unemployment looming. As many as 100,000
Russians, especially those in middle-class positions, are believed to
have lost their jobs since the crisis began.
Canada is attractive to Russian emigrants because of its high standard
of living, low crime rate, good social programs, clean environment, and
a climate similar to Russia. When the United Nations ranked Canada as
the top country in its index of human development, the report was widely
publicized in the Russian media.
Equally important, the Moscow consultants advise their clients that
Canada's immigration rules are less restrictive than most other Western
~Interest in Canada has skyrocketed," said Nuri Katz, a Canadian
immigration consultant who has worked in Moscow since 1992. ~A lot of
these people are desperate. People have been wiped out. Everyone is
expecting a catastrophe here."
A flock of new immigration consulting firms have opened their doors in
Moscow to exploit the fears of the middle class, Mr. Katz said. ~There's
been an incredible increase in fly-by-night operations. This is a very
dirty business."
With the Kremlin's increasingly nationalist tone, there could soon be a
government backlash against emigration to the West, he predicted. ~I'll
probably make a lot of money in this period, but I'm afraid I'll be shut
down by the government because of the brain drain. Potentially we could
all be shut down."
Mr. Fastovsky, trained as a steel engineer, is typical of the talented
young educated Russians who are emigrating because of the crisis. He
entered Moscow's fast-growing middle class in 1996 when he joined a
company that assembles computers. His salary was more than $1,500 a
month, about six times the national average income.
After the shortages of the Soviet years, when he had to stand in a
lineup for four hours to get sausage, Mr. Fastovsky loved the abundance
of imported goods in Moscow's new boutiques and supermarkets. He hired
an English tutor for his son. He sent his family to a rented villa in
Cyprus for a month's vacation. He bought the best food in the best
Then the crisis struck. His savings were frozen in an insolvent bank.
The computer company sent him on a two-week unpaid vacation. When he
returned, the company was uncertain whether it would have enough revenue
to pay his salary.
The loss of imported goods is perhaps his biggest source of anxiety. ~I
want to be free in my choices. Russian products can't satisfy our needs.
We can't do anything without imports. I can't explain to my son why I
can't buy the brand of yogurt that he likes. Every day the shelves are
more empty. It's difficult for a child to understand. He asks, `Why?'"
On a deeper psychological level, the crisis has destroyed his optimism.
He worries that a civil war could erupt in Russia. And he worries that
his two children could be tempted into a life of crime. ~They see that
criminals live better than other people. I'm not sure that I'll be able
to earn enough so that I can show them that crime is wrong."


Primakov's Personality, Background Viewed 

Obshchaya Gazeta, No. 37
September 17-23, 1998
[translation for personal use only]
Article by Yegor Yakovlev, Obshchaya Gazeta correspondent:
"The Doctor Will Try, But He Is Not a Magician: Yevgeniy Primakov
Is Assembling a Team To Treat a Gravely Ill Country"

On Thursday of last week a long-awaited letter for grandpa was
delivered to the village. The President had submitted the candidacy
of Academician Primakov to the Duma. There was general exultation.
No one will be fired! The crisis has been overcome! A compromise
has been reached! (Although it is also not clear why the
President's loss to the left-wingers who blocked ChVS [Viktor
Stepanovich Chernomyrdin] is called a compromise.) It is perhaps
apropos here to mention a joke as old as the world about a rabbi who
advised a Jew suffering from crowded conditions to take a goat home.
When he got rid of it after a month, his dwelling would seem to be
uncommonly spacious... However, the analogy here is not without
shortcomings. The President did not simply arrange a reshuffling of
premiers; what is more important is that instead of the goat
Chernomyrdin, there appeared a leader of the government who differed
extremely and significantly from the leaders familiar to us to the
point of tears in recent decades.
All of them, in contrast to Primakov, acquired their
positions, and afterwards their reputations. Absolutely all of
them--from Gaydar through Chernomyrdin, not to mention Kiriyenko.
But there is no need to discuss Primakov's world reputation.
I have known Primakov for a very long time, and so I can be so
bold as to assert: He has not lost the ability to take offense. In
other words, the feeling of his own dignity has not been transformed
into a vestige. I cannot imagine that Primakov, even at an
anniversary celebration, would kiss those who the day before were
kicking him in the rear end. At one time, 30 years ago, Yevgeniy
Maksimovich and his wife and two children were crowded in a tiny
apartment on the edge of Moscow. He was promised that his housing
would be improved--no, not a rabbi this time--Pravda Editor in Chief
Zimyanin. Then Zimyanin thought it over and changed his mind.
Primakov, making a U-turn on the spot, left for the Institute of the
World Economy and International Affairs. (I do not know whether he
speaks well of Mikhail Vasilyevich when he is by himself. If he had
kept his promise and given him the apartment, where would Primakov
be serving now?)
It has become boring to talk about Chernomyrdin's wealth:
Anyway, no one has a right to count it. In one of his first
interviews Kiriyenko reported that he was a well-to-do person.
Primakov cannot say the same about himself. Entrepreneurship and
business are foreign to him. And this, I must admit, suits me fine,
since we are talking about the person who heads the government. He
is by nature not avaricious. Recently journalists asked him whether
he had a hard currency account. Primakov answered that he kept an
honorarium in it which he had received for the publication of his
book in many countries. Now this deposit is frozen. "Although it
is not large, all the same it is a pity..." He had already become
an academician and director of the institute when he went to
Czechoslovakia--I was also serving there at that time. He asked me
to help him buy a new wardrobe--his clothes were completely worn
out. We went to Vaclav Square and bought three suits. At dinner
Primakov said over and over: I have never had so many new
Finally, one more trait that distinguishes the present premier
from many others. He is a diplomat. There have been plenty of
cunning fellows, liars, and windbags among our authorities. But no
diplomats. For the most part we consider diplomacy in the sphere of
contacts with foreigners: How to bluff more cleverly and win
credit, of course, irretrievable. We manage without investigations
into domestic life--and if something is not quite right, yelling out
loud at the top of one's voice will help. Primakov is a diplomat
not by accident, but by nature. Weighty assessments, composure in
relations, and amiability with everyone open many doors to him
without breaking them down.
He lived next to Gorbachev for his entire epoch, and now he
feels comfortable enough in his dealings with Yeltsin. This kind of
thing does not happen accidentally--it is almost a phenomenon that
deserves a place in the history of diplomacy. Incidentally, at the
height of the present crisis the premier was backed by someone from
Yeltsin's very close entourage who is quickly leaving the waning
Boris Nikolayevich and will speed up the presidential elections
without waiting for the year 2000. Primakov is not a helper here.
He has enough composure and prudence not to urge this risky
situation and not to try to initiate it.
A person is judged by what he has gone through--and this is
fair. But we have persons who are willing to put the mark of Cain
on anyone who in party-soviet times was not a janitor, but, let us
say, an academician. Such as Primakov. For the fans of such
occupations perhaps I can cite a forgotten detail. At the Congress
of People's Deputies of the USSR, Primakov voted against the
elimination of Article 6 from the Constitution--on the leading role
of the CPSU. He was a member of the Central Committee of this party
and executed its decree. You will agree, however, if one is to
reason without bias, that it is more reliable to do business with
someone who was honorable in his party, who was a member, and who
later, after giving it a lot of thought, left it, resolving not to
have anything more to do with any other parties. For every party
member these days, there are three "young reformers."
Numerous other traits can be enumerated that are
characteristic of Yevgeniy Maksimovich. But it is not necessary to
overdo it. He is not a god, not a tsar, and not a hero. And he
will not be able to behave only as he himself thinks necessary,
based on his own convictions. This is not possible anywhere.
Especially in Russia. While reporters were waiting for Monday--the
beginning of work for the new premier--"the party of the family"
dismissed those who in the days of the political crisis were
insufficiently loyal to it. And no matter what the premier thought
in this regard--there is no work other than to sit in his patrimony.
The "party of the family" will show itself more than once. But
Yevgeniy Maksimovich, as has already been said, does not intend to
join any parties.
...Exactly two years ago Primakov attended our traditional
meeting--"Thursday in the Morning." By the way, the page of
Obshchaya Gazeta that recounted this was called: "The Minister Whom
the Opposition Does Not Berate." Yevgeniy Maksimovich talked about
a lot at that time:
"I grew up in Tbilisi, and I like this city and this country
very much. It is very distressing for me that I cannot permit
myself to sit in an airplane and fly there for a day and return.
And, alas, I will not be able to as long as I am minister. When I
leave this work, I will without fail make such excursions." I have
changed jobs, and as before, the excursions are being
And several more of his words: "I think that a person has not
really formed himself if he does not have three fundamentals:
friends, work, and family. This can be in a different order--but
these three components are mandatory." Maksim has formed himself.
But he was stricken with an awful grief. The death of a son. And
later, of his wife. A grief that was so boundless that to this day
I cannot understand just how he was able to endure it. A person who
has gone through something like this will always hold out his hand--
if you are in trouble.


Journal of Commerce
30 September 1998
[for personal use only]
Russian bank regulator urges US role in crisis
Foreign investigators must be sought, he says 

MOSCOW -- The leading bank legislator in Russia's Parliament has called for
American assistance to mount criminal investigations of what Russian banks and
bankers did with depositors' cash and other assets -- before and during last
month's Russian commercial bank default. Georgy Luntovsky, chairman of the
Duma Subcommittee on Banking, said he believes Prime Minister Yevgeny Primakov
has already asked for assistance from outside criminal investigators to find
evidence of embezzlement, fraud, money laundering and racketeering.
"So far as I know, the problem has been discussed," Mr. Luntovsky said. "For
sure, as a former head of foreign intelligence, Mr. Primakov knows how it was
done. So far as we know, nothing was done to stop it."
Mr. Luntovsky heads the parliamentary body that is preparing a raft of
legislative proposals to deal with the emergency in Russia that has halted
most bank transactions and frozen, if not lost, deposits of millions of
individuals and companies. 

'A prominent issue'

"I am sure that criminal investigation will be a prominent issue on the
agenda," Mr. Luntovsky said, "once Prime Minister Primakov assembles a full
roster of ministers."
There has been criticism of the reappointment last Friday of Mikhail Zadornov
as finance minister. Mr. Zadornov, who formerly chaired the Duma committee to
which Mr. Luntovsky belongs, took over the Finance Ministry portfolio last
He was in charge when Russia's commercial banks got the government to impose a
90-day moratorium on repayment of their debts to foreign lenders. That was
followed by the default of the banks, and the government's default on its
Responding to widespread reporting in the Russian press of looting of bank
assets by senior executives, Mr. Luntovsky -- a former banker himself -- said:
"My point of departure is that the banking system is in systemic crisis now.
There should not only be judgments of the system, but also investigations of
each individual at each bank." 

Audit ordered

According to Mr. Luntovsky, the Duma has ordered an audit by the independent
Accounting Chamber of how $4.8 billion in International Monetary Fund money,
provided to the Central Bank in July, was subsequently spent. A parallel
investigation by Russia's state prosecutor is under way.
Officials, including Finance Minister Zadornov, claim $1 billion was spent by
the Finance Ministry on redeeming state bonds, before the default. The rest
was spent by the Central Bank to buy rubles from Russia's commercial banks,
before devaluation was officially ordered on Aug. 17.
Investigators are looking into allegations that Central Bank and Finance
Ministry officials provided commercial bankers with inside information and
preferential credits that channeled the IMF money into commercial banks, and
from there to offshore havens controlled by bank executives.
The suspicions have been fueled by the arrest early this month of Vladimir
Petrov, the deputy minister of finance in charge of budget policy. He is
accused of corrupt dealings with a commercial bank. 

Use of RICO suggested

A prominent U.S. attorney in Moscow said he advises Americans who have been
refused payment by their Russian banks to file complaints with U.S. criminal
"If there is a sufficient connection with the U.S., and there is jurisdiction,
the RICO statutes are designed to cover this activity," he said, speaking of
the Racketeer-Influenced and Corrupt Organizations Act. "If the U.S. mails or
U.S. electronic bank transfers were used, or if the Russian bankers have
assets in the U.S., there is jurisdiction." Scott Blacklin, president of the
American Chamber of Commerce in Russia, doesn't want to signal his intentions
ahead of time. "We are compiling a list of what has gone on, and what may
still be going on," he said, "so that we can bring this to government
attention, when the time is right." 


Poll Says Government Should Concentrate on Wages, Pensions 

Moscow, Sep 28 (Interfax) -- The government must concentrate on the
payment of back wages, pensions, and student stipends, said 55% of Russians
polled by the All-Russia Public Opinion Center September 19-22.
The 2,400 people polled were asked to name the top three priorities
for the government, which is why the total is over 100%. The statistical
margin of error is 3%.
Reducing prices was named by 46%, improving the ruble's exchange rate
by 40% and imposing price controls by 37%.
One-quarter of the respondents believed that the government must
increase wages, pensions, and bank deposits in proportion to price rises,
and 22% said that it had to concentrate on fighting corruption and theft of
state assets.
Financial support of state-run enterprises and improving the rule of
law and crime fighting are the most important tasks of the government,
Seventeen percent named financial support for agriculture among the
top priorities, 14% wanted key sectors of the economy renationalized and
12% believed that availability of goods in stores should be the
government's chief task.
Tax collection and maintenance of civil peace were both named by 9% 
of respondents, and 7% said the government should concentrate on support of
the banking system and guaranteeing bank deposits. Guarantees for private
business was last on the list of 15 government priorities with 6%.


Jamestown Foundation Monitor
September 29, 1998

speakers at a September 19 conference on economic crime in Cambridge,
England, argued that, while economic crime is a major problem for Russia's
fledgling market economy. the extent of the phenomenon has been inflated by
the mass media. The conference was attended by a Monitor correspondent (for
an earlier report, see the Monitor, September 21).

Vadim Radaev of the Institute of Economics in Moscow reported that, whereas
87 percent of the businessmen he had interviewed identified economic crime
as a serious problem, only 65 percent said they had had personal experience
of it. Similarly, 80 percent of interviewees said the use or threat of
violence was common, but less than 50 percent had themselves been
threatened. Radaev said protection rackets flourish where the state is too
weak to protect the citizens and racketeers step in to fill the vacuum. In
Russia, this protection is often provided by moonlighting members of the
state security services, who hire themselves out in a "private" capacity to
paying customers. He said the state agencies tend to be cheaper and more
effective than professional racketeers, and the "krysha" ("roof"--meaning
protection) they provide is regarded as more prestigious. State agencies are
therefore being commercialized, and acquiring a form of "customary rights"
to exercise violence in the marketplace.

Radaev foresees no reduction in economic violence in Russia in the near
term. He did, though, identify what he called the "routinization" of
violence. By this, he meant not that the role of violence has become less,
but that its physical use is gradually declining, while more emphasis is
being placed on the threat of violence. Protection rackets no longer need to
prove how tough they are: Their reputations are now enough. This means,
Radaev said, that the situation is becoming more predictable. Violence is no
longer being used arbitrarily, but is increasingly conforming to an evolving
set of rules.

Moreover, Radaev said, Russia's gangs are looking for areas of the economy
in which to invest their newly won capital. In the long term, he predicted,
this will mean that the gangs will have to adjust their mode of operation to
fit the rules of the marketplace, however distorted.

Addressing the same conference, Vadim Volkov of the European University at
St. Petersburg agreed that the state security agencies are better at the
protection business than the racketeers. Looking to the future, Volkov
suggested that one possible outcome would be the gradual reassertion of
state control over "privatized" sections of the security agencies that
originally broke away from the state. Volkov stressed that economic crime
is flourishing in today's Russia because the state is weak. The struggle
against organized crime stands no chance of success until it tackles this
fundamental problem.


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