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Johnson's Russia List


October 1, 1998    
This Date's Issues: 24042405

Johnson's Russia List
1 October 1998

[Note from David Johnson:
1. Baltimore Sun: Will Englund, Russians turn to way of FDR.
2. NTV: "Big Money" Program Discusses Regional Role in Government.
3. Jerry Hough: Re 2401-Gusev/Hough, Balzer/Middle Class.
4. Peter Ekman: Where we were wrong.
5. Anthony D'Agostino: Response to Gorbachev in The Nation.
6. Moscow Times: David McHugh, Luzhkov Says He May Run In 2000.
7. Kimberly Zisk: Why Military Dissatisfaction Is Not a Threat to 
the Russian State.

8. Interfax: Ivanov Comments on Foreign Issues, START II in Izvestiya.
9. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Bandits 
Bloom Under Cover Of Ownership.

10. Interfax: Lebed: Russian Foreign Debt Close To $210 Billion.
11. Reuters: Russian Red Cross appeals for aid.
12. Kerry Franchuk: Western attitudes to aid to the FSU.]


Baltimore Sun
September 30, 1998
[for personal use only]
Russians turn to way of FDR
Roosevelt: Russia, in the throes of economic despair, has turned to President
Franklin D. Roosevelt and how he attacked the Great Depression.
By Will Englund 
Sun Foreign Staff 
MOSCOW -- There was a time when Russians pitied Americans.
Bystanders during the Great Depression of the 1930s, they felt vindicated in
their belief in Soviet progress. But who wouldn't extend some sympathy toward
the victims of the breakdown of capitalism?
"Oh, my God, such a rich country, such a big country," says historian Edward
Ivanian, recounting the way people thought back then and smiling ruefully at
how history has turned. "And those poor people done in by the bankers, their
wealth just poured down the drain."
Russians look around today and they can't help but see the parallels. Banks
closing. Thousands, perhaps millions, thrown out of work. Poverty and
discouragement settling down upon the nation. There's just one thing missing:
a genial aristocrat with an enormous smile and a personality to match, a
charmer, a master politician. A man such as Franklin D. Roosevelt.
FDR has somehow transcended time and place and culture and become a hero in
the Moscow of the late 20th century. Communists in the parliament told the new
prime minister, Yevgeny Primakov, to be a "Russian Roosevelt" and lead the
country out of the depths. The newspaper Vremya bannered a headline that read,
"New Deal or New Order," over photos of Roosevelt in his car on one side, and
Adolf Hitler giving a Nazi salute on the other. Nobody had to guess which
course Vremya prefers.
Roosevelt's message to Americans, says Viktor B. Kuvaldin, a historian with
the Gorbachev Foundation, was this: " `A man can do anything. A country can do
anything.' And he showed it. He did it."
At a time when Europe was falling under the sway of men such as Hitler,
Mussolini -- and Stalin -- the United States turned to an engaging optimist
who wouldn't let himself be beaten down by anything as trifling as polio or
worldwide economic depression.
And of all those men, it's Roosevelt whose legacy endures to this day.
Roosevelt tackled the depression with a seat-of-the-pants approach not overly
burdened by ideology. That sits well here. Russia, says Kuvaldin, has an
unfortunate history when it comes to reverence for a particular ideology, and
the idea that Roosevelt just tried whatever worked now seems enormously

Invoking Roosevelt

Ivanian says that, on economic matters, Primakov, the former foreign minister,
is as much of an unknown quantity as Roosevelt was in 1933. "This man is an
enigma, and perhaps as an enigma he raises some hopes.
"But of course Russia in the '90s is not America in the '30s," Kuvaldin says.
"And Primakov is not Roosevelt."
Primakov himself invoked Roosevelt's name in a speech in London last June,
talking about a more active role for the state in the economy. Dennis Dunn, a
historian at Southwest Texas State University, says he believes that in doing
so, "Primakov was looking for legitimacy with Western audiences," and at the
same time doing what he can "to rouse the people and give them hope." Prima-
kov, he says, may be using Roosevelt to prepare both domestic and
international audiences for dramatic change.
"The approach is shrewd, and tactful," he says.
But no one would accuse Primakov, who speaks in a slow grumble that could most
charitably be described as grandfatherly, of being the sort of inspiring
figure Roosevelt was. For one thing, he's 68. Roosevelt was 51 when he entered
the White House.
"FDR restored the faith of the American people," Dunn says. "He was a master
leader. I don't know if Primakov has that charisma, which is the essential
characteristic -- personality, charm, a wonderful speaker."
Roosevelt, despite his wealthy background, could connect with ordinary people
in a way that Russian politicians simply cannot. No one here in Russia, says
Ivanian, could get away with saying something like "all we have to fear is
fear itself." People are just too cynical. Russians are not the sort to go
around humming "Happy Days are Here Again."
The affection for Roosevelt in Russia is not new. Shortly after he took office
in 1933 the United States established diplomatic relations with the Soviet
Union, a step that Moscow had long been seeking, and that had become more
urgent with the Japanese invasion of Manchuria in 1931.
Although Roosevelt was also interested in learning what the Soviet system
could offer the working man, Dunn says, the recognition was supported by big
business and opposed by organized labor and the Roman Catholic Church, at the
time two strongly Democratic constituencies.
More important, FDR led the United States into the wartime alliance with the
Soviet Union, and the victory over Germany is still looked upon as that
nation's great triumph.
It's hard to overemphasize the power that the war still exerts on Russians'
image of themselves. Roosevelt's name summons up memories of that alliance and
that victory. It was no coincidence that the last time Boris N. Yeltsin came
to the United States, in 1995, he met with President Clinton at the Roosevelt
home in Hyde Park, N.Y.
There's something else going for FDR: He died before the Cold War got under
That perhaps explains why, in Yalta today, where Roosevelt, Stalin and Winston
Churchill met in 1945, one of the main thoroughfares is called Roosevelt
Street. There is no Churchill Street, and there's certainly no Stalin Street;
the idea of either would be nearly inconceivable.
At Yalta, Roosevelt's American critics accused him of giving away Eastern
Europe to the Soviets, though Russians tend to think he was merely recognizing
the reality of Soviet army occupation.
"FDR, being in essence a decent person, believed in Stalin," Ivanian says.
"Stalin certainly did not live up to his promises. If Roosevelt had lived, a
certain type of Cold War would have come anyway, but not as severe, not as
hostile, not as driven by the desire to destroy each other."

Too much faith

Dunn, the author of a new book called "Caught Between Roosevelt and Stalin,"
about U.S. ambassadors here in the 1930s and 1940s, agrees that Roosevelt may
have had a little too much faith in Stalin, and perhaps in himself.
He had such a winning way about him, Dunn says, "that most people turned to
putty after visiting Roosevelt -- with the exception of Stalin, of course."
Some people became enchanted without ever getting close to the president.
Ivanian remembers his wartime boyhood in Tbilisi, and how his family once
received an aid parcel of American curiosities. There was a stick of chewing
gum, "which lasted in my case about six months." Every day he would chew it
for a few minutes, then carefully put it aside until the next.
And there was a magazine, with two black-and-white portraits on facing pages.
One showed a bulldog of a man, with a pudgy face and a cigar clamped
ferociously in his teeth. The other showed a man with a smile that seemed to
rise up off the page, a long cigarette holder at a jaunty angle that ruled out
any possibility of defeat.
Churchill stayed in the magazine. Roosevelt was cut out, and the young Ivanian
hung the portrait over his bed.
"His face was the last one I saw before going to bed, and the first I saw when
I woke up," the historian says. FDR has remained his favorite U.S. president
to this day.


"Big Money" Program Discusses Regional Role in Government

September 29, 1998
In the 8-minute "Big Money" program broadcast by Moscow NTV in Russian
at 0435 GMT on 29 September 98, Presenter Igor Pototskiy discusses the
decision to give regional governors a say in running the country. In the
program, First Deputy Prime Minister Vadim Gustov is shown confirming that
Prime Minister Yevgeniy Primakov will meet with regional governors on 29
September, apparently to deal with the question of pension payments.
Pototskiy said that eight heads of regional associations are to form
part of the government presidium, and he added that this is a crucial
decision: governors have never been allowed so close to the White House
before. Gustov then defined the presidium as "a kind of think tank that
will determine both current policy and long-term policy."
Pototskiy said political analysts are skeptical about what the
governors will be able to do. A video insert shows Sergey Markov of the
Institute of Political Research said the governors will be unable to exert
much influence on government policy because they have no instruments for
doing that, nor do they have the time. Thus, there is no danger of regional
lobbyists being able to secure large transfers of money to the regions
through that channel.
Pototskiy, however, said that the governors are more optimistic about
this. A video insert shows Yaroslavl Governor Anatoliy Lisitsin saying
that the new arrangement will free the Finance Ministry from the need to
deal with the minutiae of monetary transfers to the regions, because it is
the governors who will decide who should get how much and submit a proposal
to the ministry accordingly. This system, Lisitsin said, will be more
efficient and would generate fewer disagreements.
When Pototskiy asked what will remain of federal power and what the
federation will become, Lisitsin replied that the present 89 regions form
an unwieldy mass that does not allow the state to be "consolidated in a
coordinated manner." He proposed the structure created by the government
in 1991 -- eight economic cooperation associations, closely linked with the
government. That is the idea that Lisitsin said the governors want to put
to the government. There is no intention to restructure Russia -- just to
pool efforts within the Russian regions.
Pototskiy said the first stage will clearly be the experiment of
linking St. Petersburg and Leningrad Region, which Gustov said he is to
oversee. Pototskiy said former St. Petersburg Mayor Anatoliy Sobchak is
preparing to stand as head of the new entity, which he thinks should be
called the Neva Territory (Nevskiy Kray). According to Pototskiy, Sobchak
thinks the new formation should be a republic, so it is not just an
economic entity.
In another video insert, Duma deputy Aleksey Mitrofanov (LDPR) traced
a likely future scenario in which the eight regions on the Volga gradually
get together and, in the interests of efficiency, form a joint
administration and then plan a joint budget. This would be much simpler
than having each area make its own separate agreement in the Finance
Ministry in Moscow.
Pototskiy commented that this could bring into being, de facto, a new
Soviet Union. In another video clip, Sergey Markov said there is no longer
any real economic scope for separatism. The regions, he said, have learned
the lessons of the USSR's collapse and now realize that "the unity of the
Russian Federation is good for all of them."
Pototskiy concluded: "In the current situation, that is true of most
of the regions. There are 89 of them, and the overwhelming majority of
them have nowhere to run to: they have to unite first of all."


Date: Wed, 30 Sep 1998 
From: "Jerry F. Hough" <>
To: David Johnson <>
Subject: Re: 2401-Gusev/Hough, Balzer/Middle Class

I often agree with Dmitri Gusev, but he is too quick to reject 
the Chinese model. Its essence was to begin with agriculture and 
services, maintain protectionism and invite foreign investment, 
especially for outsourcing. Russia's industrial character did not 
preclude any of that. It surely had to move more quickly toward 
industrial privatization than China, but did not have to in the 
resource-exporting realm. But the point that Gusev and others do not 
comprehend is that Yeltsin DID NOT privatize big enterprises and banks, 
and they are not now. They are as private as the soviets under 
Communism were democratic. As in the thirties, Westerners were taken in 
by language that was being used in non-Western ways in order to 
manipulate Westerners. The question was the extent to which the banks 
should have remained formally nationalized. The advantage is that the 
big 7 would not have been able to make the big "dividends" to stockholders out
of export earnings and that money could have gone into the budget. We need 
to move beyond the talk of a "virtual economy" to one of a "virtual 
economic structure" and "virtual privatization." Bernstam and 
Rakushka's discussion of the "banks" is a good place to start, for they 
are on the money.
So far as Harley Balzer is concerned, the question is what 
"middle class" is. The Russians used it as the intelligentsia and the 
new Russians. That is a political disaster. Only when the 
intelligentsia begin understanding that "bureaucrats" (civil service), 
"nomenklatura" (big business), the army, the industrial workers, etc., 
are middle class in America and when they begin building 
American-like political parties that bring Gaidar and Volsky together as 
middle-class is there any hope for Russian democracy. 


From: "Peter D. Ekman" <>
Subject: Where we were wrong
Date: Wed, 30 Sep 1998

Where We Were Wrong
Peter D. Ekman (
American Institute of Business and Economics

The "Who Lost Russia?" debate can be helpful or harmful. It's harmful
when it is vindictive and used for purely political purposes. It's helpful
when we recognize our past mistakes, so that we won't repeat them. Russian
capitalism and democracy are in crisis. It's time to ask ourselves where we
were wrong. This question should not obscure two more important questions:
"What should Russia do now?" and "What should America's policy toward Russia
be in the future?" nor should it minimize Russia's responsibility for its
own crisis.
What should Russia do? This is a question for Russians to decide, if
only because America has shown that it can't effectively dictate the answers
or implement the needed programs. America can continue to cooperate with
Russia and do business in Russia - but only if Russia wants to cooperate and
do business with us. 
Our first mistake was thinking that we had won the Cold War. The Soviet
Union collapsed of its own weight - from its economic inefficiency, from its
transparently false ideology, and, paradoxically, from its lack of central
control. A centrally planned economy needs a viciously strong central
decision maker - a Stalin - to run efficiently. With nobody willing to take
up the horrible personal risk and responsibility of becoming another Stalin,
the Soviet Union was, sooner or later, bound to collapse.
Coming into this collapse as a conqueror, America presumed to dictate
policy. As early as 1993, we should have known that Russians wouldn't
follow American dictates. Rather, America should have helped organize
legitimate power - the power of the Russian people - so that we could work
with a government with popular support.
Our second mistake was forgetting that fairness matters. American
politicians would never impose a domestic policy without first justifying it
as "fair." Debates about fairness seem to last forever, but our
recommendations completely ignored the needed debate on fairness in favor of
Economists are particularly responsible for willfully ignoring the issue
of fairness in the privatization of property. The controversial Coase
Theorem was taken at face value in making real world policy. The theorem,
in essence, states that economic or "Pareto" efficiency is maximized if the
government assigns individuals property rights to all economic goods, but
that it makes no difference who gets the property rights. In other words,
economists simply didn't care about a fair division of privatized property.
The policy was supposed to work as follows: A quick division of state
property would necessarily be unfair, but the new owners would increase
production and the entire population would eventually benefit. The new
owners, however, must have realized that most people thought that they stole
the property, so the owners took as much wealth as possible out of the
country to avoid an almost inevitable re-nationalization. Fairness
obviously matters!
A third mistake was a lack of planning, known as "shock therapy." In
medicine the term refers to a barbaric procedure whereby a psychiatric
patient - when doctors can't figure out what is wrong with him - has
electrical wires attached to his head and has his brain fried until he
starts to behave properly. In economics the procedure is even less well
thought out.
Economists reasoned that a policy of freeing prices wouldn't work unless
policies to control inflation were in place, but these wouldn't work without
free international trade, which wouldn't work without privatized businesses,
which wouldn't work without free prices. The economist's solution to this
circularity was to try to do everything all at once, without priorities. A
program based on the fantasy that everything could be changed overnight was
bound to fail.
A fourth mistake was to ignore economic freedom. To most Americans,
capitalism means keeping the government out of people's private business.
Following the freeing of prices, there were few proposals for freeing up
other aspects of the economy. Russians can't buy or rent land, start a
business, publish a newspaper, import, export, or take a business trip
without serious government interference. Since 1991 Russian bureaucracy has
continually grown, financed to a large extent by the American taxpayer.
A fifth mistake was being overly ambitious. American politicians like to
throw dollars at problems in the same way that Russian generals liked to
throw artillery shells at Chechnya: the bigger the bang the better. But
money, like artillery, is a limited instrument. You need to aim it
carefully to reach your goals, and to check whether you've hit the target.
Indiscriminant use causes more problems than it solves.
American taxpayer money in Russia has been aimed at large fuzzy targets -
macroeconomic stabilization, capital markets development, and industrial
restructuring. Before taking on the big objectives, smaller targets should
have been selected, such as education, environmental programs, setting up a
government treasury system, or limited health care programs. The average
Russian would have had more appreciation for small programs than for all the
billions of dollars sent down the rat-hole of macroeconomic stabilization.
Small programs with concrete goals would have had the benefit that they
could monitored closely. Russian officials are among the most corrupt in
the world. We should have made sure that they understood that they would be
held to account for the money and that concrete results were expected. If
they didn't want to play by our rules, they should have been told that they
could play without our money. In general the federal government should not
have been given any money until it cleaned its house of corruption. Money
could have been sent directly to individuals, such as students, doctors, and
scientists, and to non-profit organizations and local governments.
One theme runs through all of our mistakes in Russia: a lack of respect
for individual Russians and an over-reliance on the federal government. We
can still correct our mistakes. There is no reason to think that Russia is
unable to handle capitalism and democracy. By treating Russians with
respect, using careful planning, starting small, and demanding an
accounting, we can still help Russians help themselves.


Date: Wed, 30 Sep 1998
From: "Anthony D'Agostino" <>
Subject: Response to Gorbachev in The Nation

In his recent Nation piece, Gorbachev has pinpointed the source of the
current economic crisis. It is “the policy course chosen by Boris Yeltsin
seven years ago.” Gorbachev grants, to be sure, that he made some mistakes
in the perestroika years, but he says that it was not until after the
attempted putsch in August 1991 that Yeltsin plunged the country into the
“reckless political and economic adventure” that has arrived at the present
This meshes nicely with a good deal of the western commentary of the last
two weeks. But I wonder if the Primakov government and its Duma supporters
proceed from the same analysis. Anyone who looks at the Gorbachev years
without blinkers will note the apparent success of the uskorenie
(acceleration) period, 1985-7 and the contrast with the nosedive after that.
There was an initial spurt in the growth of national income to 4% in
Gorbachev’s first year in office, then a small dip, followed by a renewed
surge to 8% by 1988. This according to official figures. The consensus in
the varying Goskomstat, CIA, and PlanEcon figures tells the same tale. Best
results were in the European republics, Lithuania, “Belorussia,” and
“Moldavia.” Under uskorenie, things were looking up. 
The decline set in with the Nineteenth Party conference in 1988, which
dismantled the “command-administrative system” by promoting local “soviet
power.” The economists of the day, led by Abel Aganbegyan, argued that the
central task was “to inculcate in the worker the feeling of being a
co-owner,” and that removal of party controls would free his spontaneity,
thus increasing productivity. It was another go at the idea of “Soviet
Man.” What they got was something different. The line on the graph bent
downward and then plunged sharply in the winter of 1990-1. “Soviet power”
caused a breakdown in the national division of labor and a regime of local
embargoes. That was before “shock therapy.”
Considering Gorbachev’s plaint, Communists and their fellow-travelers
will be inclined to conclude that things started to go wrong before the turn
to market economy and privatization. Under the circumstances of Gorbachev’s
horrible nationalities policy and the debacle in the Bloc, the market
reforms were asked to do something that they had never done and probably
could never do. 
Who is right? Gorbachev or the Andropovists who tried to slow him down
during the years of perestroika?


Moscow Times
October 1, 1998 
Luzhkov Says He May Run In 2000 
By David McHugh
Staff Writer

The worst-kept secret in Russian politics is officially out. Moscow's populist
Mayor Yury Luzkhov finally admitted Wednesday that he's thinking about running
for president. 
It was the first such public statement from Luzhkov, who had previously denied
presidential ambitions f despite energetically putting together the resources
he would need for a successful campaign, including his own television station,
printing press and political party. 
Presidential elections are due in 2000 unless President Boris Yeltsin resigns
or dies before then. 
During a trip to England to attend the British Labour Party's annual
conference, Luzhkov repeated the stock phrase that, with variations, he has
used for several years: "I do not want to leave Moscow," meaning City Hall. 
Speaking at a news conference at the Russian Embassy in London, he then added:
"But if I see that the candidates who want the post of president do not have
the necessary statesmanlike positions that can guarantee the stability and
flourishing of Russia, then I will enter the fight." 
Luzhkov, 62, was careful to say he was not announcing his candidacy officially
just yet. "If I see that the field is quiet, I will choose one of the
candidates and actively and aggressively support" that candidate, he said. 
He met briefly with British Prime Minister Tony Blair and declared his
affinity for the new-look Labour Party, Reuters said. Luzhkov said he favored
a "center-left" political system that combined capitalism with social welfare
for the less fortunate, Interfax reported. 
Luzkhov's likely competitors for president include Krasnoyarsk region Governor
Alexander Lebed, Communist leader Gennady Zyuganov, liberal Yabloko party head
Grigory Yavlinsky and former Prime Minister Viktor Chernomyrdin. 
Yeltsin, whose political standing has been seriously damaged by the economic
crisis, said last month he would not be a candidate. Yeltsin's aides have said
the 1993 Constitution might permit Yeltsin a third term, and the
Constitutional Court is weighing the issue. But that may be irrelevant given
Yeltsin's doubtful health and fallen fortunes. 
On Wednesday, the State Duma passed a law reinforcing the two-term limit, but
Yeltsin's parliamentary representative, Alexander Kotenkov, said it was not
relevant for the president because he wasn't running. 
Luzhkov favors capitalism with heavy government involvement and protection for
domestic businesses from foreign competitors. He has carved out his political
niche between left and right by criticizing budget-cutting free-market
reformers like former Deputy Prime Minister Anatoly Chubais for supposedly
neglecting ordinary people. 
That could pay dividends among voters turned off by the government's failure
to ward off the August financial collapse, said political analyst Yevgeny
Volk, head of the Moscow office of the Heritage Foundation. 
"He never was associated with the present government, and he always played an
independent role criticizing Chubais and the federal government," said Volk.
"He is clean in this respect f no one can say it was Luzhkov who is to blame
for it." 
Volk said Luzhkov was not a social democrat in the Western sense, but a
populist with authoritarian leanings. "I don't think he has really any
profound political view," said Volk. "He is a pragmatic person who wants power
above all." 
Sometimes described as a ***khozyaistvennik,*** or nonideological manager,
Luzhkov has energetically exploited the wealth flowing through Moscow f the
World Bank estimated last year it got 80 percent of Russia's foreign
investment f to build roads, bridges and the giant Christ the Savior Cathedral
near the Kremlin. 
He is enormously popular among Muscovites, who elected him to a second term in
1996 with 90 percent of the vote. He affects a common touch with his trademark
leather cap and he likes to stage bread-and-circuses festivals, such as the
city's 850th anniversary celebration last year f during which he led the
parade down Tverskaya street perched in a motorized wine bowl. 
He likes to play the nationalist card, trumpeting the injuries of ethnic
Russians in the Baltic states and Ukraine, and advancing Russian claims on the
Ukrainian port of Sevastopol. He is also a conspicuous patron of the Russian
Orthodox Church. 
While Muscovites tend to think he has made their lives better, he must
overcome the suspicion and resentment that less well-off provincials nurse
toward the capital. He has also drawn criticism from human rights groups for
police abuse of refugees and ethnic minorities, and for maintaining the old
Soviet-style system of restricting permission to live in the capital despite
laws supposedly ending the practice. 
His preparations for the race have included setting up Center TV, his own
television station that can be seen across much of the country, and by taking
control of the Moskovskaya Pravada printing center, which prints a number of
newspapers. Political analyst say that the Union for Popular Rule and Labor,
headed by Duma Deputy Andrei Nikolayev, is a stalking horse for the Luzhkov
He also appears to be forging an alliance of convenience with the Communists,
with Communist Party leader Gennady Zyuganov saying Wednesday that such a link
"would benefit all." 
"The more sensible, professional and smart people unite their efforts, the
sooner we can cut off radicals from all flanks," Zyuganov was quoted as saying
by Interfax in response to Luzhkov's announcement. "We will not allow soldiers
who picture themselves as commanders to get through and seize power." His
remarks appeared to be aimed at Lebed, a retired paratroop general who has
drained away some of the Communist's protest vote. 
Given Zyuganov's presidential ambitions, however, any alliance with Luzkhov
may not last longer than the 1999 parliamentary elections, political analysts


Date: Wed, 30 Sep 1998 10:36:19 -0400
From: Kimberly Zisk <>
Subject: Why Military Dissatisfaction Is Not a Threat to the Russian State

Why Military Dissatisfaction Is Not a Threat to the Russian State
Policy Memo no. 34, 
Program on New Approaches to Russian Security (PONARS),
Davis Center for Russian Studies, Harvard University
by Kimberly Marten Zisk
Barnard College, Columbia University
September 1998

It is a well known fact that the Russian military today is in terrible
shape. Funding shortfalls are so severe that basic needs go unmet.
Neither officers nor troops get paid on time, many officers’ families are
living in abysmal conditions because adequate housing is not available,
food supplies for the troops have frequently been found to be contaminated
or unfit for human consumption, and the amount of time given to combat
training is very low because adequate fuel is not available to fly planes
or send tanks or ships on exercises. Societal respect for the officer
corps has plummeted as its dirty laundry has been hung out for public
inspection. Corruption in the officer corps is prevalent, ranging from
illegal sales of weapons and supplies to the habit of commandeering troops
for private slave labor on dachas or in officer-owned businesses.
Dedovshchina, the brutal hazing of new recruits by more senior troops, is
rampant, and often leads to murder or suicide; combined with a sharp
increase in the number of serious accidents happening on base, peacetime
death rates within the Russian military have soared in recent years. Not
surprisingly, draft-dodging is at epidemic levels and the officer corps is
hemorrhaging as the youngest and most talented officers leave as soon as
they can.
These problems are exacerbated by the way in which current military reforms
are being carried out. It is clear that the military needs to be downsized
in light of Russia’s shrinking defense budget. It is not clear, however,
that the Defense Ministry has made wise choices in carrying out this
mandate. Several long-standing separate force structures are being
eliminated or merged together, and huge numbers of officers (at the level
of 40 to 45% in many service units) are being discharged into early
retirement. Because entire regiments and brigades are being eliminated,
hundreds and even thousands of officers in particular localities are being
suddenly laid off without being given any housing, significant severance
pay, or useful job retraining or other relocation assistance. Given that a
huge number of officers have left the service voluntarily to take
civilian-sector jobs, it is a good bet that a large percentage of those who
are being involuntarily laid off as a result of restructuring are those who
lack the resources and skills to easily find employment elsewhere. This
means that the burden of social welfare for those with no alternatives is
falling on the shoulders of particular cities and provinces where military
bases are concentrated.
Political activism among the officer corps is correspondingly on the
increase. This is reflected at the most basic level by the staggering
number of articles appearing in the official military press which complain
about resource shortfalls and corruption in the officer corps, and which
blame the Russian state and society for these circumstances. Many military
writers argue that officers have no choice but to steal from the state when
the alternative is hunger and deprivation. Increased political activism is
also reflected by the apparent growing popularity of the Movement to
Support the Army (staffed largely by retired officers) within the active
officer corps. Although membership in any political organization is
legally off-limits to serving officers, it appears that there is a lot of
sympathy towards this movement on military bases, which is especially
disturbing given movement leaders’ recent calls for officers "not to
fulfill orders, not to disarm, and not to leave military settlements if
those demobilized are not provided with housing and compensation."
Most disturbing are the accelerating number of political protests and
demonstrations about funding shortfalls that have been reported at local
military bases over the past year and a half. These protests are often
supported by local government authorities. Some of these protests have
actually resulted in what is technically a mutiny, where officers refuse to
fulfill direct orders. For example, a group of navy officers in St.
Petersburg who were ordered to move their families off of decommissioned
ships where they had been living (in the absence of sufficient military
housing) went on a hunger strike and refused to leave the ship. Officers’
wives at the Uzhur Strategic Missile Forces base in Krasnoiarsk blocked a
road to prevent their husbands from going on duty, and rallied for two
hours demanding their husbands’ back pay. An army major in Nizhnii
Novgorod commandeered a tank from his garrison and ended up leading a large
rally, also demanding payment of back military wages. 
Given the structural financial hardship of the Russian state, particularly
its inability to collect taxes and stop capital flight, it is unlikely that
even the new government’s plans to pay back wages will succeed in
containing these protests in the long run. The funds to keep the military
functioning at its current size do not exist, nor do the funds exist to
provide an adequate social safety net for those demobilized by the reform
process. If money is printed to pay back wages, the result will be
hyperinflation that lowers the value of those wages and other elements of
the military budget, leaving the officer corps as dissatisfied as before.
Yet it is very unlikely that this situation will destabilize the Russian
state or society. While many officers may indeed become more and more
directly involved in politics, they are unlikely to do so in any kind of
cohesive, nationwide fashion, and they are unlikely to take out their
frustrations on democratically elected officials. Instead, the economic
interests of Russian military officers are in competition with each other,
and protests are aimed at the Defense Ministry officials who formulated
reform plans—all of whom are themselves senior military officers. Strong
interservice rivalry is emerging as the commanders of particular services
and units compete against each other for survival in a time of dwindling
resources. The rivalry is also geographical, as governors of at least ten
provinces in Russia have lobbied the Defense Ministry to keep military
bases that were scheduled for closing open, to prevent a massive increase
in local unemployment. And sentiment within the officer corps seems to be
directed against Defense Minister Marshal Igor Sergeev, a career general,
much more than it is directed against civilian politicians.
It is likely that if this situation continues, individual garrisons may
become uncontrollable from time to time, as they are first demobilized by
the reform process, and then politicized by those with revolutionary
agendas. Yet it is unlikely that the immense fissures within the officer
corps will be overcome, and there is unlikely to be unified support for
political action on behalf of any particular platform or individual. What
makes unified action even more unlikely is the fact that dissatisfied
officers have alternatives today. They can either leave the service to
find better work in the civilian sector, or line their pockets by stealing
from a state that cannot protect its resources from predation. In the end,
local protest activity is likely to remain just that. The military will
continue to be an institution that society keeps at arm’s length, one that
is ruled by individual expediency at the local level rather than a common
corporate vision. 

Addendum, Sept. 30, 1998: The fact that local garrisons may become
politicized and unruly furthermore does not mean that military officers as
a group will actively support any hypothetical future attempts by
provincial governors to seek regional independence from the Russian state.
The political actions officers take will likely be limited to a passive
refusal to obey orders, rather than a violent attempt to dismember Russia
or overthrow the authority of the center. Loyalty to a particular military
base and anger about the center’s military reform policies does not
translate into undying fealty to treasonous local politicians, especially
given the cross-cutting individual interests in economic survival outlined
above. The combination of passivity and politicization does mean, however,
that military officers are unlikely to support the Russian state if it
attempts an armed crackdown against regional autonomy. Military orders to
carry out a domestic policing action on behalf of the Russian state are
likely to be ignored.


Ivanov Comments on Foreign Issues, START II in Izvestiya 

Moscow, Sept 29 (Interfax)--Russian Foreign Minister Igor Ivanov has
spoken in a newspaper interview about Russia's relations with Japan and
Latvia, the Kosovo crisis, NATO's planned enlargement and Russian plans to
ratify the START II treaty.
Russia and Japan will continue drawing up a mutual peace treaty,
Ivanov told the Moscow daily Izvestiya in an interview to appear in
Wednesday's issue of the paper.
"It must just be clear that what matters is the essence and well-
considered movement ahead and not any unilateral efforts to make these
extremely complicated and delicate issues fit into any kind of calendar.
"All factors, the historic and present-day interests of both parties
must be taken into account here. What is needed is painstaking and calm
work, there must be no jumps or surprises."
It is essential that "our Japanese partners should accept such a form
of interaction," the minister said.
"Yes, we will be working, naturally on the basis of the idea of
territorial integrity of Russia."
A draft for a treaty to definitively mark the border between Russia
and Latvia is "practically ready," Ivanov said. But "much here depends on
how our relations will develop in general and on how the Russian-speaking
population issue will be dealt with."
Talking about Kosovo, the minister said NATO might use force against
the Yugoslav Army and possibly without sanction from the U.N. Security
Council either.NATO's planned eastward expansion is "the wrong step," he said.
He also said he had reached agreement with leaders of various
political groups in parliament to resume a ratification procedure for the
START II treaty.


Moscow Times
October 1, 1998 
SEASON OF DISCONTENT: Bandits Bloom Under Cover Of Ownership 
By Andrei Piontkovsky
Special to The Moscow Times

Last week, former First Deputy Prime Minister Anatoly Chubais shared with
journalists some of his thoughts about the new government's prospects and
Russia's near political and economic future. His prognosis was sufficiently
grim: an anti-reformist backlash; a communist government coming to power; and,
on the immediate horizon, inescapable hyperinflation and empty shop shelves. 
He ended optimistically, however, saying "some things are irreversible, and no
Maslyukov can destroy the institution of private ownership in Russia." 
Formally, Chubais is right. Yury Maslyukov can not destroy this "institution
of private ownership." Nor is he in the least bit likely to try for the good
reason that he co-owns five companies and because politically he represents
the interests of the "red" directors, who privatized their enterprises long
The problem lies elsewhere. What exactly is the nature of the private
ownership that came about in Russia through the efforts of various forces,
including the active participation of Chubais? 
In my view the reforms gave us not owners of private property, but private
users of state property and private managers of budget funds, and empowered
these people to channel cash flows for their personal benefit without bearing
any responsibility for the future of their companies. Fearful of disclosing
any information to shareholders or potential creditors, they prefer to make
their profit on barter operations and by using budget funds. The wealthiest of
them, the so-called oligarchs, were personally appointed by Chubais through
the "loans-for-shares" auctions in 1995 and 1996. 
Last year, it seems, after becoming first deputy prime minister responsible
for the budget, Chubais finally realized what a monstrous system of incestuous
collusion of power and money he had created. But when he dared to make some
timid attempts to curb the appetites of his own appointees, they unleashed a
fierce campaign against him and ultimately destroyed him morally and
In another recent interview, Chubais conceded that the loans-for-shares
auctions spurred on the creation of "bandit capitalism" in Russia. "But in
1996," he continued with the cynical frankness he has lately begun to display,
"we had to choose between bandit capitalism and a communist victory in the
presidential elections. I preferred the former." 
We can argue indefinitely whether Chubais was right or not in 1996, but in
1998 this is a purely academic question. The real problem now is how to
address this entrenched bandit capitalism. 
The authors of the anti-crisis programs put forward by Prime Minister Yevgeny
Primakov's government are now busy discussing everything imaginable, from
various models for restructuring Russia's debt, to the scale of ruble
emissions, to mechanisms for the sale of currency, tobacco and vodka. But for
all this, they still avoid the cardinal issue f the nature of ownership and
power in Russia. 
Without analyzing the fundamentals of the Russian crisis, we will understand
nothing about its nature, and regardless of whatever cunning restructuring
schemes and "controlled emissions" they come up with, this crisis will recur
again and again. 
Perhaps now, though, with Communist leader Gennady Zyuganov, liberal Yabloko
leader Grigory Yavlinsky and Chubais all finally beginning to use the same
terms to define the current economic reality, the country can eagerly look
forward to its own Adam Smith's "The Stolen Wealth of Nations." 


Lebed: Russian Foreign Debt Close To $210 Billion 

MOSCOW, Sept 29 (Interfax)--Russia's overall foreign debt currently
runs at about $210 billion, Krasnoyarsk territory Governor Aleksandr Lebed
told a news conference at Interfax Tuesday.
The sum includes state foreign debt of $155 billion, commercial banks'
debts of $30 billion and commercial debts of other Russian companies of
about $25 billion, he said.
"One should admire the courage of the prime minister (Yevgeniy
Primakov), who, knowing all this, has taken over running the country. I
think nobody would blame him for rejecting the job at 68, resigning and
fishing in a quiet place," Lebed said.
Like a "courageous man," Primakov took the job "and is forming a
government against the pressures of time," he said. The formation of a
government proved to be a difficult task, but the way he is doing it gives
hope, Lebed said.
"Primakov's success will be Russia's success. We have nowhere to
retreat," he said.


Russian Red Cross appeals for aid

MOSCOW, Sept 30 (Reuters) - The Russian Red Cross appealed on Wednesday for
urgent international aid for Russia and the former Soviet republics of
Belarus, Ukraine and Moldova ahead of what is expected to be a harsh winter. 
Interfax news agency quoted Russian Red Cross Society chairwoman Lyudmila
Potravnova as saying more than 1.4 million people in 12 Russian regions,
mostly in the north, needed help. 
She said the organisation needed to collect some $18 million for the four
countries, $15 million of it for Russia. The aid would be distributed among
families with many children, orphans, the jobless, homeless and disabled. 
The Red Cross aid would be delivered over six months starting in October,
Potravnova said. 
Hundreds of people die of cold in the streets of Moscow alone each winter,
while tyemperatures are much lower in Siberia and Arctic regions, where life
has become harder with the decline of big Soviet-era subsidies to such


Date: Wed, 30 Sep 1998
From: "Kerry Franchuk" <>
Subject: western attitudes to aid to the FSU

I find the following to be simple, yet telling, vis a vis western
attitudes to aid to the FSU. While S&P reports on Ukrainian default, the
EBRD continues its pledging based, among other things, on the fact that
Ukraine has NOT defaulted. Has Ukraine defaulted or hasn't it? Or are aid
organisations quick to overlook the economic reality?
RFE/RL NEWSLINE Vol 2, No. 187, Part II, 28 September 1998
"The U.S.Standard & Poor's rating agency said on 24 September that Ukraine
defaulted on its debt to both domestic and foreign investors. 'The recovery
value of treasury bills held by foreign investors is estimated at around
40-50 percent [of their original value],' the 25 September issue of the
"Financial Times" quoted the agency as saying."
RFE/RL NEWSLINE Vol 2, No. 188, Part II, 29 September 1998
"[EBRD First Deputy Chairman Charles] Frank noted that Ukraine, unlike
Russia, has not defaulted on its debt payments and has not permitted an
insolvency crisis in the banking sector. He said Ukraine can count on $1
billion from the EBRD for various projects currently under consideration."


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