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2 October 1998
[Note from David Johnson:
1. Bloomberg: Most in U.S. Aware of Russian Crisis; Solutions Vary,
2. Reuters: Russia lacks market mindset -- Cleveland Fed chief.
3. AP: Greg Myre, Russians Forced To Buy Local.
4. Journal of Commerce: Irina Smetannikov, A wiser West in Russia.
5. Dale Herspring: The Russian Military.
6. Helen Womack: "Undercover Lives: Soviet Spies in the Cities of the
7. Dimitri Simes and Paul Saunders: article on U.S. policy toward
8. The Moscow Tribune: John Helmer, LET THE MAFIA DO ITS JOB.
9. The Economist: How do they survive?
10. AP: IMF Gives Advice to Russia.
11. Komsomolskaya Pravda: Zhirinovskiy on Events Thru Year 2000.]
Most in U.S. Aware of Russian Crisis; Solutions Vary, Poll Says
Washington, Oct. 1 (Bloomberg) -- A majority of U.S. adults are aware of the
Russian financial crisis, though perception of its effect on the U.S. and what
should be done varies among education and income levels, according to a new
Eighty-seven percent of the 1,009 adults surveyed said they have ``seen,
heard, or at least read'' about Russia's economic and political troubles, the
Fifty-seven percent of those with a college education said Russia's situation
``matters a lot'' to the U.S., the poll said. The same percentage of
respondents with incomes of more than $50,000 a year agreed, while 40 percent
of those with a high school education said Russia's problems held the same
level of urgency for the United States.
Sixty percent of college-educated respondents and 43 percent of high school-
educated respondents said the U.S. should provide financial support to Russia,
the poll said.
A majority of the U.S. public, ranging from 71 percent to 84 percent on each
issue, said the U.S. would be damaged if Russia experiences a civil war,
returns to communist control, or has its economy or democracy collapse, the
The poll was conducted by telephone Sept. 9-13 and has a margin of error of
plus or minus 3 percentage points.
Russia lacks market mindset -- Cleveland Fed chief
NEW YORK, Oct 1 (Reuters) - Russia still has a collectivist psychology, far
from the mindset needed to create the wealth generated by free market
economies, the president of the Federal Reserve Bank of Cleveland said
Jerry Jordan, the bank's head, also said Russia needed to create an efficient
legal system with enforceable contracts to speed its transition to a market
Answering questions at a conference on Latin America sponsored by The Wall
Street Journal, he said: "I don't know how long it is going to take to go from
a collectivist psychology, where the sharing of wealth is the dominant trait
rather than the creation of wealth, and to get to the notion where satisfying
customers, finding out what consumers want and providing it, become a part of
He added, "They are a very long way away from that."
Russian Prime Minister Yevgeny Primakov's government is currently mulling
plans to end Russia's economic crisis that have been described by some
commentators as a return to Soviet-style economics.
Russia's effective default on its rouble-denominated debt as well as its
currency devaluation in August darkened the outlook for emerging markets
worldwide and for Latin America in particular.
Evaluating Russia's legal system, Jordan said: "Until you have impartial,
honest, reasonably efficient courts and a legal system that people have faith
in to enforce contracts, and especially lending collateralized by real
property, I don't see how you can get to a wealth-creating society."
Russians Forced To Buy Local
October 1, 1998
By GREG MYRE
MOSCOW (AP) -- Just a few years ago, imports were so scarce that an American
visitor with an extra pair of Levi's blue jeans could ignite a bidding war on
the streets of Moscow.
Today, Russia is one of the most import-addicted nations in the world -- a
remarkable 48 percent of all consumer goods here are foreign made, according
to the State Statistics Committee.
The businessman hasn't made it until he's chauffeured to work in the quiet
comfort of a Mercedes sedan. A middle-class family eats American chicken on
Chinese plates while watching a Mexican soap opera on their Japanese
television. Even a poor Russian stopping at the corner kiosk for sausages and
cigarettes is likely to be buying imports.
This dramatic transformation has created a huge problem: in the current
crisis, most Russians can't afford imports, and the country's feeble economy
can't produce many of the most basic things people want to buy.
And it's not just the wealthy ``new Russians'' who've had their lifestyles
pared back. Imports have infiltrated almost every sector of the economy, but
now they're at least twice as expensive because the ruble has fallen from 6 to
15 against the U.S. dollar.
Russia's economy has been shrinking for a decade, and the latest crisis has
once again driven it into full-fledged depression, with this year's
contraction expected to be around 5 percent. Prices have soared 67 percent
since August and could climb 300 to 500 percent by the end of the year,
according to Central Bank forecasts.
Consider chicken, a major Russian import. American drumsticks began appearing
in Russian stores during George Bush's presidency, and to this day they are
fondly known as ``Bush legs.''
Tyson Foods, a leading American exporter to Russia, slaughters its birds in
Arkansas, sends them to New Orleans, ships them across the Atlantic Ocean and
trucks them into the Russian heartland.
When they finally hit the freezer section at Russian supermarkets, they are
competitively priced -- at least until the ruble crashed -- and are far
superior to Russian chicken that comes from just down the road.
Russian agriculture has so withered that the country imported 73 percent of
its sugar, 37 percent of its fish and 35 percent of its meat last year, said
Nikolai Kharitonov, leader of the Agrarian Party. This year's drought-stricken
grain harvest is expected to be the smallest since 1957.
``During the seven years of pseudo-reforms, the country has been plundered,
industry has stopped functioning, and Russian agriculture has the rights of a
step-daughter,'' Kharitonov said.
Hundreds of foreign companies took part in the recent World Food Moscow trade
exhibition, all vying for a slice of what had been a rapidly expanding import
market. Instead, many of them may soon be leaving Russia.
``Last chance to look at imported food,'' Kommersant newspaper joked in an
article on the trade fair.
Russians who quickly grew accustomed to filling their shopping carts with
Kellogg's Corn Flakes, Skippy peanut butter and Baskin Robbins ice cream are
now facing sticker shock.
``Before the crisis, I didn't even check the prices,'' said Dmitri Teterin, a
concert pianist lugging groceries out of Seven Continents, an upscale
supermarket stocked almost entirely with imports. ``Now I'll have to start
looking in the Russian shops.''
Some sample prices: Nescafe Gold coffee, $15 for a half-pound. Blue cheese
from France, $25 a pound. Heineken beer, nearly $3 a bottle.
President Boris Yeltsin tried to launch a ``buy Russian'' campaign last year,
but even he wasn't too persuasive.
``Yes,'' Yeltsin conceded, ``our cars are not as good as foreign-made ones and
break down more often.''
The economic emergency has achieved what Yeltsin's exhortations could not.
Imports to Russia fell 19 percent in August compared to a year earlier, and
the trend seems certain to continue, the government said.
Customers have already moved to stores selling cheaper Russian goods, and the
crisis could stimulate some Russian industries to produce more. But many
businesses and shops that depend on imports could be ruined.
As Russian capitalism has evolved, the initial wave of kiosks that sold
imported candy bars, cigarettes and booze in the early 1990s has been followed
by trendy boutiques and American-style shopping malls in Moscow.
Even the remote corners of Russia are now served by an army of ``shuttle
traders'' who fly to Europe, the Middle East and Asia, stuffing their
suitcases with inexpensive clothes and shoes that they sell back home.
Russia had been exporting enough oil, gas and other natural resources to pay
for the imports. But energy prices are sagging, imports are costlier and
something has to give.
St. Petersburg, the country's busiest port, has seen a roughly 50 percent drop
in imports since August, customs officials said.
``The ships have virtually disappeared,'' said Viktor Yatsuk, director of
Barbaletta, a major freight-handling company.
His firm processed 51,000 tons of food in July, but only 17,000 tons in
August. In the first half of September, it handled one ship with 1,300 tons of
``This is terrible,'' said Yatsuk, who has placed all but 20 of his 300-member
staff on unpaid leave. ``There are no imports at all.''
Journal of Commerce
2 October 1998
[for personal use only]
A wiser West in Russia
BY IRINA SMETANNIKOV
Irina Smetannikov is director of international communications for
International Business Creative Inc., a consulting firm in Washington. She
grew up in Moscow.
The Russian crisis may actually turn out to have its benefits -- if it makes
both Russians and Americans review their business approaches in Russia.
To understand the opportunities presented by the crisis, you have to
understand where Russia is now.
Western culture spread throughout the nation too fast and superficially, yet
both sides were pleased with it.
Westerners brought their understanding of how Russia should develop and
promised money to help. And Russians felt as Russians always feel: "Hey, let's
just see what happens."
Westerners were excited, especially about things they could understand, the
Western things. The government looked more democratic, Russians drank Coca-
Cola, kept their money in banks and had credit cards.
"Russia is becoming more capitalistic in its life-style," Westerners thought.
"We just wish they were more like that in their mentality."
And that's the key -- the mentality didn't change.
Russian people weren't ready for all the capitalistic changes, privatization
included. They took hold of enterprises, but ran them the same way an old
Soviet director would: "I am the only one in charge, and everything has to go
But now people personally, not the state, were responsible for the
enterprises. That meant they had to rely heavily on others to help them, which
in turn meant they had to give up power -- a very scary thought. Many Russians
didn't want to do that.
The Western invasion brought the style but no education on how to maintain it
correctly. To tell others how to do it is not enough in Russia; you have to
make sure they really understand. Westerners didn't do that. They didn't
consider the Russian approach to change. And both Russians and Westerners now
have to pay for the oversight.
Media in the United States and Russia blame each other's nations for this
default. Blaming others comes somewhat naturally to Russians; Americans do it
because they don't know what will happen next, and they don't want to be
blamed for "losing Russia." The truth is that both are at fault.
Some bright minds in Russia knew that the best-looking cooked duck stuffed
with straw is still just a straw-stuffed duck that can't be eaten. But the
majority thought, for example, "If Westerners are willing to invest in banks,
let's give them banks."
Yet how many bankers actually knew what kinds of responsibilities go along
with a bank? Not many. And they could have known had Westerners taken the time
to understand how to educate them.
The Western business model was seen as an example of success all over the
world, so to make Russia attractive to Westerners, Russians knew they had to
make themselves look attractive to capitalistic investments. The surface
changes were made. But behind them not much was different. It was a
capitalistic Potemkin village.
Now something very interesting has happened. Russians see that they have to
know the rules to be able to play. In fact, Russians have done something they
don't do too often -- they have admitted that they lost.
And today's Russians also have become used to many positive Western things
that no smart government will want to make people give up.
Now it's up to Russia to put a foundation under the changes. The Russian
government will need support to make things work -- and this is the reason
Westerners should not give up.
Since the changes were suggested and brought in by Westerners, it would be
logical that Westerners try to find some new ways of helping.
For companies, this is the perfect time to re-evaluate the approaches they use
doing business in Russia. Imposing Western business culture and demanding
immediate changes clearly won't work. Russia is built on relationships, and
relationships take time.
Without good relationships, Russians are resistant to learning new, sounder
approaches. They don't want to look foolish asking questions -- or weak
agreeing to a compromise -- unless they trust you.
The Russian mentality will still be there for a while. Western businessmen
would be well-advised to think through how they can work with Russians for the
benefit of both sides.
Date: Thu, 01 Oct 1998
From: Dale R Herspring <firstname.lastname@example.org>
Subject: The Russian Military
I welcome Kimerly Zisk's well reasoned and well argued piece on the
Russian military and I found myself in agreement with everything she said
until we got to the addendum. In the first part of her erssay she
suggests that the military is too fractionalized to get involved in
political at the national level, I agree. However, she then suggests
that this is not likely to happen either at ther local level. I hope
she is right, but I fear she may be wrong. What evidence is there to
suggest that will be the case? While the evidence is admitedly anecdotal,
there are suggestions that some units may go local. It is one thing to
suggest that the military is not unified at the national level, and that
competition between branches and services over resources (something that
goes on in the Pentagon all the time) is at an all time high. Having
said that, I find the assertion that the military will sit on the
sidelines regardless of what happens unconvincing. As Napoleon said, an
army can do anything with its bayonets except sit on them.
From: "moscow bureau-Helen Womack" <email@example.com>
Subject: notice about helen womack's spy book
Date: Thu, 1 Oct 1998
Announcement from Helen Womack of The Independent
List subscribers may be interested to know that a book I ghostwrote for 12
retired KGB agents is coming out in London on 12 October and in German
translation early next year. "Undercover Lives: Soviet Spies in the
Cities of the World -- Edited by Helen Womack" is published by
Weidenfeld and Nicolson and costs 20 pounds sterling.
Two years ago, the Russian publishing house, Sovershenno Sekretno (Top
Secret), brought out "The KGB's Travel Guide to the Cities of the
World", a light-hearted book of tips for ordinary Russians who were
traveling for the first time to places that the spies knew well.
"Undercover Lives", based only very loosely on that book and far
more the product of my own interviews with the agents, describes their
lives and activities in 16 cities including New York, Washington, London,
Paris, Rome, Rio, Cairo and Tokyo.
The Berlin chapter contains what will almost certainly be news to people
outside Germany, namely that during the Cold War Moscow and Bonn solved
many problems of mutual interest in a secret channel that went behind the
backs both of the Warsaw Pact and the US, Britain and France. The Madrid
chapter describes how the KGB considered murdering General Franco but
thought better of it and worked instead towards restoring diplomatic
relations with Spain.
When the Russians first began working on the original travel guide, they
hoped CIA agents would also take part to produce a &ldquoSpies Guide to the
Cities of the World&rdquo. But CIA agents needed permission to write their
memoirs while, in the chaos following the collapse of the Soviet Union,
former KGB agents were freer to express themselves.
When I started writing &ldquoUndercover Lives&rdquo, it was offered to
American publishers but the reaction was lukewarm. One said I was taking
"too light-hearted an approach to an evil organization". Since
the Soviet secret police tried to prevent my marriage to a Russian, I have
always been an outspoken critic of the KGB and have most certainly not
turned into an apologist for them now. Rather, in my book, I took an
anthropological approach to the subject. I hope that US publishers, seeing
the British book, will be encouraged to buy it.
From: "Paul Saunders" <firstname.lastname@example.org>
Subject: Article by Dimitri Simes and Paul Saunders
Date: Thu, 1 Oct 1998
Following please find an article by Dimitri and me on U.S. policy toward
Russia. I hope it is of interest.
The departure of the radical reformers from the Russian government may not
be the end of an era, but it is certainly a significant adjustment of
Russia's course. It is also a major defeat for the Clinton Administration,
which bet heavily on the radical reformers and their erratic patron,
President Boris Yeltsin.
If there is one person in the United States government who may be
considered an architect of the administration's nation-building effort in
Russia, that person is Deputy Secretary of State Strobe Talbott. A
longtime Friend of Bill, Mr. Talbott entered the administration with
impressive credentials as a Russian specialist and was very familiar with
Russia's history, culture, and political personalities. Typical of the
liberal establishment, he also took up his new responsibilities with a
combination of moral certainty about what exactly America should do in the
world and a flawed moral compass (he once seriously argued that Brezhnev
advisor and propagandist Georgy Arbatov had moral standing comparable to
Andrei Sakharov, since each was trying to change the system in his own way).
Another element of this liberal philosophy was a great desire to do good
around the world without particular regard for the sovereignty of other
nations. As a result, the administration acted as if it had all the
answers for Russia -- both politically and economically -- and played
favorites in its government and political system. Ironically, while many
in the U.S. saw the administration as very pro-Russian, it had very few
friends in Russia outside of the radical reformers in the Yeltsin regime.
It was the precisely the personality-oriented, black-and-white approach to
Russia -- manifest by Mr. Talbott but shared widely within the Clinton
Administration -- that led the United States to become the Yeltsin regime's
principal foreign patron. Although direct American assistance has been
relatively modest, senior officials clearly used the International Monetary
Fund and, to a lesser extent, the World Bank, as proxies for U.S. foreign
policy. At the same time, the administration's moral certainty about what
was right for Russia led to an effort to use the leverage provided by this
very important assistance to micromanage the Russian economy and even
top-level appointments in the Russian government.
The administration justified this policy by arguing that despite its
shortcomings, the Yeltsin government was on the right side of history and
that the only alternative to Yeltsin and radical reformers like former
Acting Prime Minister Yegor Gaidar and former First Deputy Prime Minister
Anatoly Chubais was a communist/nationalist comeback with very negative
implications for U.S. interests. But this dichotomy was false from the start.
First, Yeltsin's constant conflict with the Congress of People's Deputies
and then the Duma was at least as much a struggle for power as a battle of
competing political and economic strategies. Yeltsin scored a decisive
victory in the struggle for power in 1993, when he illegally disbanded the
Congress with an armored assault and created a super-presidency in the
country's new constitution -- approved in a referendum many observers
believe to have been fraudulent. Nevertheless -- and this proved to be
decisive for the further course of reform -- only the Duma could pass
legislation. This encouraged further authoritarianism by Yeltsin, who,
after spoiling his relationship for the parliament in the continuous fight
for power, could implement reform only through legally questionable
Equally important, the Communist Party and its allies control less than 40%
of the seats in the current Duma. The most consistent opposition to
Yeltsin is not from the Communists or the clownish Vladimir Zhirinovsky
(who sides with Yeltsin more often than not when the chips are down), but
from the pro-democracy pro-reform Yabloko party.
Thus, the alternative to Yeltsin's authoritarianism was not a Communist
comeback but dialogue with the parliament which could have led to important
legislation protecting property rights and reforming Russia's tax system.
The laws may not have been perfect, and may have taken some time to pass,
but something would have been better than nothing. Without those laws, a
genuine -- and more democratically legitimate -- transition to a market
economy was impossible; foreign and even domestic Russian investors have
simply not been satisfied with the reliability of Yeltsin's decrees.
Similarly, looking at Yeltsin's rivals, while Communist leader Gennady
Zyuganov has always led in the polls, his support has never exceeded 35%.
For a number of years, the credible candidates to replace Yeltsin have not
been Zyuganov or the discredited Zhirinovsky but more moderate politicians
such as Moscow Mayor Yuri Luzhkov, Krasnoyarsk Governor Aleksandr Lebed, or
Yabloko leader Grigory Yavlinsky.
Thus, in supporting Yeltsin and particularly his proteges among Russia's
radical reformers, the Clinton Administration was not putting democracy
over authoritarianism or the market over socialisim, but rather its own
understanding of economic efficiency above Russia's democratically
In this sense, the new government of Prime Minister Yevgeny Primakov does
represent the end of an era. The liberal establishment's approach to
Russia symbolized by Strobe Talbott could be effective in an environment in
which Russia's political pendulum was swinging sharply away from the past,
when the Russian people, and even Russian leaders, were delighted to have
every possible kind of American advice on how to run their own country.
Later, in a changed political climate, the propensity for offering
unsolicited advice earned Mr. Talbott the nickname "Pro-Consul Strobe"
among his counterparts in Moscow.
Russia's new government is a coalition of diverse and sometimes conflicting
voices. It must face an economy near collapse and a society whose patience
is almost expended. Yet, more than previous governments under Yeltsin, it
can hope to enjoy the support of the parliament both in economic matters
and with respect to important foreign policy actions, such as ratification
of the START II treaty. What Mr. Primakov and his colleagues will actually
do remains unknown. Primakov's record shows him to be a pragmatist and a
survivor rather than a heroic reformer. One thing is certain, however: the
Clinton Administration's guidance on how to run the country will not be in
great demand in tomorrow's Russia.
Dimitri K. Simes is president of The Nixon Center; Paul J. Saunders is its
director. The views expressed in this article are solely those of the
authors. The Nixon Center does not take institutional positions on
Date: Thu, 01 Oct 1998
From: email@example.com (John Helmer)
>From The Moscow Tribune, October 2, 1998: page 2
LET THE MAFIA DO ITS JOB
It's admirable that the new Prime Minister Yevgeny Primakov has
made a priority of cleaning up the country's crooked commercial banking
system. But when he announced this to a meeting of high-level policemen
at the Ministry of Interior a few days ago, he was telling the wrong people.
As the Japanese have begun to demonstrate, the best way to deal with
thieving bankers is to get the local mafia to do its job. In Russia,
the only way to oblige SBS-Agro, Inkombank, and
others to disgorge the wealth they have hidden offshore, repaying the
honest companies and individuals whose assets have been stolen,
is, very simply, at the point of a gun.
In Asia at the moment, it is well-known that Japan's banks are holding bad
loans worth at least $500 billion. That number should be comforting
to Russians and their creditors, because the indebtedness of the
Russian banks before they hit the wall in August was about one-hundredth
of that amount. Even after rouble devaluation, this is unlikely to be more
than $25 billion. Collecting from Russia's banks should therefore be
much less difficult, less costly, and much quicker to pull off.
Now the Japanese government is just as fractious and vacillating as the
Russian one -- too weak to inflict real pain on powerful constituents like
commercial bankers. Japan's bankers are sensitive to pain, too. They are
afraid to press loan collection, because much of the money was borrowed by
Japan's criminal gangs, known as the yakuza.
Rather than risk a backlash -- from which there aren't enough police
to catch the gangsters and safeguard the bankers -- the Japanese
banks have come up with a commercial alternative. This is to sell
their debts to syndicates in China. These are composed of fellows with
financial acumen, as well as motivational similarities to the gangsters across
the water in Tokyo.
The deal between them boils down to this. The syndicate buys the bank debt
for, say, 10 cents on the dollar. It then goes to the yakuza, and proposes
a payback of 25 cents on the dollar. If the two gangs agree, the
Chinese kick 5 cents back, and pocket a handsome 100% profit. If some of the
yakuza won't agree, the Chinese cooperate with the Japanese authorities, who
can pick off the stubborn ones, and liquidate their banks. Chinese methods
may also be applied to the really stubborn cases (amputation of limbs, etc.).
In Russia, bank presidents like Alexander Smolensky, head of SBS-Agro,
and Vladimir Vinogradov, head of Inkombank, the two largest defaulters,
have their escape already planned. Smolensky reportedly holds an Austrian
passport, and keeps his family outside Russia. They claim they have no
criminal responsibility for the defaults of their banks on more than
$1 billion each in foreign loans, and about $3 billion in aggregate domestic
deposits. They have issued press releases claiming they have the means to
pay all their liabilities in full.
While that's to be doubted -- especially while the Central Bank is obliging
them by taking over their debts to depositors -- the way to test
their offer is simple.
The Central Bank has already arranged to swap bank debts with
each other, and bank debts with the government. For the next step, the
Russian government should set a four-week deadline in which the banks
must pay every deposit holder that demands repayment. If they fail, the
government should announce an international tender for syndicates
willing to bid for the right to collect from Smolensky and Vinogradov.
The bankers would be able, of course, in the customary
Russian fashion, to put up fronts, and bid to collect from themselves.
That may be the least worrisome solution for the bankers, from the
personal security viewpoint. All they would have to do would be to
assemble as much money as the winning bid required from the offshore
havens in which it has been hidden.
But the bid would have to be high to win the tender, and the spread between
bid and debt would not be as profitable as some of Russia's mafiosi may
like. Beating the mafia to collecting bank debt would oblige
Smolensky and Vinogradov to be, well, honest.
But for the mafia, here is a golden opportunity to earn the goodwill of the
new government, and gather a Chinese-sized profit. All that's required is
that the mafiosi have a good idea of how much money SBS-Agro and Inkombank
have hidden; where this is located; and an even better idea of how to
terrify the banks' executives into giving up this information and
returning the money.
By ordering Russia's crime-fighters to do this job, Prime Minister
Primakov isn't able to pay enough of a premium to get the job done. In
Russia, bankers have paid policemen to look the other way for years.
The force of the state threatens only the poor in Russia.
If the police fail the latest task, the government budget will still have
to carry the impossible burden of compensating for the losses, and the process
will drag on for months, driving public distrust to private anger, and
possibly public violence.
By allowing Russia's criminals to collect with the threat of private
violence, Primakov can produce money up front to pay
depositors, and the costs to the budget will be much less. Swiftness will
pay a big political dividend.
And if the bankers are smart, they can stay alive. Foreign passports and
hideaways may be comforting if the bankers believe the Russian police are on
their trail. But if the mafia are holding collection contracts, the bankers
know that nowhere is safe.
October 3, 1998
[for personal use only]
How do they survive?
Despite Russia’s economic collapse, most ordinary Russians are managing to
survive, but not thanks to any help from their government
“CRISIS, what crisis?” says Boris scornfully, scratching the back of a
gigantic pig. Nearby, two teenage daughters are energetically digging manure
into the potato patch. Boris’s wife, Masha, is at the roadside, selling milk,
fresh from their two cows, to passing drivers. Beside her is Piotr, who sells
goat’s milk and fresh eggs from his two dozen chickens, and a taciturn man
offering ragged joints of freshly slaughtered lamb from his flock of 200
Viewed from the village of Barki, in the countryside not far from Moscow, the
chaos in the Kremlin, not to mention the economy, seems irrelevant. There is
plenty to eat, and a fair amount of money too: Russia’s richest people have
their country houses nearby, and pay well for fresh food.
The villagers of Barki will survive the winter without difficulty. Even
elsewhere, grim though this winter will be, most Russians expect to get
through it just as they survived previous ones—on their own initiative, with
their own food (see table). Few are paid much money; but few seem to starve
either. They get by, just, on home-grown potatoes or hand-picked wild
mushrooms, kasha (crushed grain) still cheaply available in shops, plus bits
and pieces from their employer if they are lucky.
Not many expect the state to help. The government does have 20m tonnes of
grain stockpiled. Even with this year’s bad harvest, this ought to be enough
to keep the country in bread and porridge—if, that is, the distribution system
All the same, after Russia’s economic collapse, this winter could be
particularly bad. Murray Feshbach, a demographer at Georgetown University in
Washington who monitors Russia’s appalling health, says malnutrition is
spreading. On September 30th the International Committee of the Red Cross
launched a $15m appeal for the 1.4m neediest Russians, such as big families
and pensioners, in the 12 regions worst battered by the economic troubles. Its
Moscow office now talks of the menace of “mass starvation” if things get
In Noginsk, for example, a depressed and depressing textile town an hour’s
drive east of Moscow, pensioners tend not to have their own garden plots, and
therefore no independent source of food. “I’m a city person,” explains one.
Her pension, of 400 roubles a month, used to be worth about $60; after the
devaluation in August it is worth half that. In any event, it has not been
paid for two months. Her son, the only person who might help her, lives in
Kamchatka, in Russia’s remotest far east. He has not been paid for five
The town’s economy is rotting. As the local textile factory went on shedding
jobs in recent years, many workers became traders, shuttling cheap toys, shoes
or make-up from Turkey or Poland, and selling them in Russia’s big outdoor
markets. It was arduous, chancy work, but it fed the family. Now that has
stopped. The implosion of the banking system has wiped out their money.
Trouble has spread even to places considered a model of how to adapt to new
ways. Not far from Noginsk, Chernogolovka is one of Russia’s brainiest towns.
Once a pampered research centre, the town has done all the right things. Its
laboratories, some of them world-class, have contracts with companies such as
Siemens of Germany and NEC of Japan. Nearly one in five of its 22,500
residents has an e-mail address. It has a new vodka factory, run by retired
army officers. The town was thriving until the economic collapse, which has
thrown budgets into chaos, and made it impossible for scientists, or
distillers, to set prices for future contracts. “The government has changed
the rules, without telling us the new ones,” says one scientist. “If this
carries on, hundreds of our best people will simply emigrate.”
Russians may be fed up, but will they revolt? Opinion polls suggest that about
a quarter of the population would take part in mass protests; about a half
think such events are likely this winter. The first test will come on October
7th, when unions and the Communist Party have called a national strike,
designed to oust President Boris Yeltsin, rather than the government of
Yevgeny Primakov, the prime minister.
A strike, a demonstration—or even, when tempers fray, a riot—in Noginsk, and
towns like it, might prod the government into doing something. It has begun to
pay wage arrears, albeit in ever feebler roubles. But what ordinary Russians
need as much as anything is a secure and stable place to live and work. The
diligent smallholders of Barki, for example, who trade by the road, dare not
sell their produce at markets for fear of the mafia. And getting rid of the
mafia, these days, is still a pipe-dream.
IMF Gives Advice to Russia
October 1, 1998
By HARRY DUNPHY
WASHINGTON (AP) -- The International Monetary Fund warned Russia Thursday that
any effort to borrow money to avoid painful economic reforms would be a recipe
IMF Managing Director Michel Camdessus also urged Prime Minister Yevgeny
Primakov's government to avoid any moves that would spark inflation, redouble
efforts to collect taxes and exercise better control over the country's banks.
``Borrowing to fund government reform is a recipe for disaster,'' Camdessus
said. ``What is needed is a government with a clear strategy for going ahead
and we don't see it yet.''
He also said that the economic plan that Russia and the IMF agreed on in July
in return for a $22.6 billion rescue package was a good one but implementation
The IMF made a first installment payment of $4.8 billion as part of this
bailout but has indefinitely postponed disbursing the second $4.3 billion
after political turmoil forced a change in government.
Camdessus said the government's economic reform efforts needed the support of
the Duma, the lower house of the Russian parliament and Russia's many regional
He also warned the Russian government against printing more rubles to restart
its economy and reverting to Soviet style controls on the country's financial
Camdessus also said Russia needed to take ``every possible step to establish a
good climate of confidence with its creditors.'' Russia suspended payments to
creditors Aug. 17 when it devalued the ruble.
In a related development, Camdessus's deputy defended the IMF's Russian
bailout package, saying the decision to go ahead was difficult but right.
``I think it would have been inexcusable for the international community - the
U.S. and the other members of the IMF - to step back and say, `Sort it out;
we'll show up when you know what to do,''' said Stanley Fischer, first deputy
managing director of the IMF, in a keynote speech at the World Economic
``That's not what we did. I think there are no apologies owed for what was
attempted in Russia,'' Fischer said.
Critics of the IMF said the money it provided Russia went to speculators who
used rubles to buy dollars and then took them out of the country.
Russia's former chief negotiator with the IMF, Anatoly Chubais, was quoted in
a Russian business newspaper as saying he intentionally misled the IMF in
order to obtain the rescue package.
But Fischer said the IMF had difficult decisions to make.
`What do you do when you don't have that ideal? Do you step back and say `Let
us know when you have a government that's ready to do what needs doing,' or do
you try to help with a government that says, `Yes, we will do this,' but you
have the suspicion that maybe it won't?'' he said.
The judgment on Russia was ``very, very difficult,'' Fischer said. But he
noted that Russia had been making progress on reform for seven years,
stabilizing inflation and recording economic growth from 1997.
With that in mind, ``the outside world - through the IMF - decided to weigh in
on one side of that debate, recognizing that it was not clear what the outcome
would be,'' Fisher said.
Zhirinovskiy on Events Thru Year 2000
29 September 1998
[translation for personal use only]
Interview with Vladimir Zhirinovskiy by Vasiliy Ustyuzhanin
conducted at Komsomolskaya Pravda Editorial Office; date not
given: "Vladimir Zhirinovskiy: They Will Wear Lebed Out, a Road
Accident Will Be Arranged for Zyuganov, and Chernomyrdin Will
Become Secret President"
This sensational prediction [reference to headline] was made in the
Komsomolskaya Pravda Editorial Office by the leader of the Liberal
Democratic Party of Russia.
Having driven up to the Komsomolskaya Pravda building, Vladimir
Volfovich [Zhirinovskiy] remained inside his Mercedes for exactly one
minute. Until the security group had "occupied" one of the Editorial
Office's two elevators. But at this point something strange happened. As
soon as Vladimir Volfovich approached the elevator, a mysterious
magnet-like force drew him into the neighboring one, which was wide open.
The door slammed shut. For almost 30 seconds Vladimir Volfovich was alone
with a Komsomolskaya Pravda journalist, whose physical attributes bore no
resemblance to those of a fearless and unflappable bodyguard. When he came
out of the elevator Vladimir Volfovich pounced on the guys who had
blundered: "I'll fire you! Don't you know that you have to cover me from
ahead?" However, the guest cooled down on the way to the chief editor's
office, where he was thoroughly inclined to converse.
[Ustyuzhanin] Your party is called liberal democratic. What sort of
liberal democrat are you, Vladimir Volfovich...?
[Zhirinovskiy] There is Belgian or Swiss liberalism, and there is
Russian liberalism, which is something different. Does the Japanese
Liberal Democratic Party belong to the Liberal International? You should
not judge by names alone. Are Zyuganov's Communists real Communists?
[Ustyuzhanin] What are they then?
[Zhirinovskiy] Pure social democrats. Why do they deceive us?
[Ustyuzhanin] But they are also not admitted to the SocialistInternational.
[Zhirinovskiy] Quite rightly. Socialism is developing according to
Engels and Marx in West Europe now.
[Ustyuzhanin] And in Russia -- according to Lenin?
[Zhirinovskiy] Lenin was a pure extremist, an educated Anpilov.
Anpilov lacks education. He just shouts: "Hurrah for the working class!"
If Anpilov were sent to Zurich for 15 years, perhaps he would return as
another Lenin. It is neither socialism nor capitalism that is developing
in our country, but something that the world has not seen before.
[Ustyuzhanin] It was rumored that your support for Chernomyrdin in
the parliament was attributable to the fact that your faction had received
decent payment for it...
[Zhirinovskiy] We neither received anything nor could have done so.
First, Chernomyrdin did not get through, and this rules everything out
already. Second, it was a question of admitting our deputies to the
government. He agreed to take three. Kalashnikov as labor minister,
Ishchenko as deputy at the State Property Committee, and someone else to
[Ustyuzhanin] Why do you think Yeltsin balked at submitting
Chernomyrdin's name to the Duma a third time? Who dissuaded him?
[Zhirinovskiy] I believe it was his daughter and his closest
entourage. But he realized the implications of remaining without a
parliament for any longer in these conditions. The parliament at least
provides a sort of outlet; everything can be blamed on the deputies. But
if there aren't any deputies? Then everyone will club together to join the
Russia-wide strike. Under the banner of "Down With Yeltsin!"
[Ustyuzhanin] Will you be leading your people onto the streets 7October?
[Zhirinovskiy] Not now. It's not our action.
[Ustyuzhanin] What can we expect of it in general?
[Zhirinovskiy] Nothing. People will stand around for a bit and make
a bit of noise, that's all.
[Ustyuzhanin] Is the current regime not threatened by a militarycoup?
[Zhirinovskiy] That is the point, everyone has lost their strength:
the Kremlin, the government, those political structures that would like to
achieve something by street actions, and the military. All the power
departments are so weakened that they cannot carry out a coup. They do not
have a single reliable company of soldiers. Not even the Kremlin brigade
in Teplyy Stan [headquarters of 16th Spetsnaz Brigade, in southwest Moscow]
is being paid its wages. It's a disgrace.
[Ustyuzhanin] And where will this regime take us?
[Zhirinovskiy] We shall continue smoldering like this until the 2000
presidential election. If Yeltsin's health does not improve, he will not
run for a third term.[Ustyuzhanin] And if it does improve?
[Zhirinovskiy] He will run. The world's best medicines can be
acquired for $1 billion, and they will be pumped into him for another four
years, enabling him to represent something, albeit as a mummy.
[Ustyuzhanin] But who will vote for a mummy?
[Zhirinovskiy] He will wipe out all the other candidates. He will
wear Lebed out in Krasnoyarsk Kray, where several processes will be
conducted: There will be corruption, nothing will get done, everything
will be bad, and Lebed will be written off. Moscow will start being
portrayed as a city of crime. People will be shown that Luzhkov is running
a city of bandits, swindlers, and prostitutes. Luzhkov will be wiped out.
[Ustyuzhanin] And Zhirinovskiy?
[Zhirinovskiy] No. I am in the most advantageous situation. I am not
a threat to anyone. Why should I be wiped out? Zyuganov's the problem.
Beggars vote for Communists, you see.
[Ustyuzhanin] And what can be done about him?
[Zhirinovskiy] Some way of dealing with Zyuganov will have to be
devised before the year 2000. Something along the lines of what happened
to Masherov [former first secretary of Communist Party of Belorussia
Central Committee]. Do you remember him? He was going somewhere by car
but never got there, because he was rammed by a truck carrying potatoes.
[Ustyuzhanin] And if Yeltsin's health prevents him from running forelection?
[Zhirinovskiy] He will definitely nominate whoever is closest to him.
Probably Chernomyrdin. Chernomyrdin will now be made chief of the
Presidential Staff. Yumashev will resign.
[Ustyuzhanin] But that is the worst launch pad for Chernomyrdin, who
wants to run for the presidency.
[Zhirinovskiy] On the contrary. Pompidou was head of De Gaulle's
Staff. It is a wonderful entree to the presidency. As head of the
Presidential Staff, he does everything. Especially when Yeltsin is ailing.
Chernomyrdin will be the real president. It is he who will prepare all the
papers and edicts. For two years he will influence the country, everyone
will know him and hear him, and he will be the president's mouthpiece.
Everyone will get used to the idea that Chernomyrdin is effectively
president. It is a good arrangement for both of them.
[Ustyuzhanin] What about Lebed? Does he have no hope?
[Zhirinovskiy] Nothing will come of him, forget him. It is all
scaremongering. Lebed in Moscow? Who needs him? Lebed would be fine if
he were commander of the 14th Army. Then all the Cossacks, patriots, and
paratroopers would flock to him. And they would set off for the Don. Like
Denikin [anti-Bolshevik commander in Russian Civil War], from the south he
would head for Moscow. He would free Odessa and Sevastopol, and the seamen
would join him. Then the campaign toward Moscow would begin. And he would
reach the Kremlin in three months.
[Ustyuzhanin] And why will Zhirinovskiy not become president?
[Zhirinovskiy] In a free election he would become president, but if
Yeltsin is around he will appoint his own man. He doesn't want to be
kicked around in his retirement.