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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

October 11, 1998    
This Date's Issues: 24232424


Johnson's Russia List
#2424
11 October 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Los Angeles Times: Sarah Carey and Charles William Maynes, Who Lost 
Russia? Why Not Try Saving It?

2. Frederick Kaegi: Why Ickes & Gaddy should not cite the steel industry 
to support the Virtual Economy story.

3. Gregory Tseytin: Russian science.
4. Reuters: Adam Tanner, Yeltsin unsteady abroad, no econ plan at home.
5. Reuters: Timothy Heritage, ANALYSIS-Russian rivals set sights on 
presidency.

6. Sunday Times (UK): Mark Franchetti, Bullies' secret video reveals 
brutality in Russian army.

7. Washington Post: Anne Applebaum, Russians Need Help, Not A Billion-Dollar
Handout.

8. Reuters: Russia fired 20 nuke soldiers on mental concerns.]

******

#1
Los Angeles Times
October 11, 1998 
[for personal use only]
THE WORLD / DIPLOMACY 
Who Lost Russia? Why Not Try Saving It? 
By SARAH CAREY, CHARLES WILLIAM MAYNES
Sarah Carey, a Lawyer, Is Chair of the Eurasia Foundation. Charles William
Maynes Is Its President

WASHINGTON--A consensus seems to be developing that the West's response to the
crisis in Russia should be to do nothing and instead focus on "who lost
Russia." The list of candidates for the latter honor seems to be growing:
ailing President Boris N. Yeltsin, corrupt bankers, the obstructionist Duma,
naive reformers and a misguided cabal of Harvard economists. 
Yet, we should prepare for the possibility that we will have to do
something. The partial collapse of the Russian economy has caused profound
perturbations in the world economy. Its complete collapse would pose a severe
threat to Western security, both economic and military. 
Continued crisis in Russia could produce several unexpected nuclear
powers. It could flood the world with hungry nuclear technicians ready to work
for the highest bidder. It could convulse the economies of neighboring
countries and erode confidence throughout Europe. 
Perhaps that is why a number of people--a few brave senators from both
parties, Bob Dole's former campaign speech writer, the foreign ministers of
the European Union, the secretary general of the North Atlantic Treaty
Organization--are saying we cannot let this happen. They suggest we must
rethink our approach and be prepared, if Russia responds, to do far more than
we have. 
Indeed, there are measures we could take if we had the courage to face up
to past mistakes. The first truth we must acknowledge is that we have
attempted to reform Russia and Ukraine on the cheap. Believing the free market
alone could accomplish the historic task of integrating these two giant
countries into the world economy, the West's approach to the transformation of
the former Soviet Union has been precisely the opposite of the one the United
States adopted after World War II, when it helped Western Europe get back on
its feet. 
Then, the United States recognized that Western Europe would not be able
to pay back its loans. That was a mistake we made after World War I. So, the
United States offered generous grants, which were spent importing U.S. goods,
provided Europe first came up with an effective plan. 
By contrast, the Russians received primarily commercial loans, which now
they cannot pay back. Despite the talk of hundreds of billions in lost "aid"
between 1992 and 1996, as Sen. Daniel Patrick Moynihan (D-N.Y.) has pointed
out, the United States gave Russia $3.1 billion in bilateral assistance. This
compares with $500 billion in grants to Western Europe, in today's prices,
under the Marshall Plan. 
Then, the United States allowed the Western Europeans to protect their
domestic industries and capital markets until they could stand on their own
and compete in world markets. The Russians immediately were forced to open up
completely. Almost no domestic industry, not even the vodka industry, could
withstand the overpowering Western competition. Whereas Western Europe was
allowed to control capital markets, we forced the Russians to open the doors
to large-scale capital flight. 
Then, the United States opened its own markets to Western Europe,
notwithstanding the protectionist measures Western European governments were
taking against U.S. goods. The Russians have discovered that whenever they do
find a market niche, the West Europeans or the Americans immediately launch
antidumping suits. One was recently lodged against the Russian steel industry.
Then, the United States empowered West Europeans to come up with their
own ideas for reform. We were in the position of friendly critic and tough
auditor. The Russians were flooded with Western advisors who told them what to
do. Small wonder they have no sense of ownership in the reforms. 
It is time to turn the page. If we began to listen to those calling for a
change in approach, we could learn from the past and adapt to the present. 
The West must develop a serious grant program for Russia and the other
former Soviet states. At the grass roots, the United States should intensify
its efforts to assist Russia to build a civil society and strengthen
institutions that stand between the state and its citizens. In this regard,
assistance should be given to launch a Small Business Administration-like
loan-guarantee program for small and medium-size businesses and to support the
creation of private-pension systems, a key element of a social safety net. 
At the macrolevel, the West, particularly Western Europe, with its high
unemployment, must focus on job-creating infrastructure projects that will
yield economic benefits for years to come. Russian workers whose factories
will be downsized or closed can work in these projects. As in the rebuilding
of Europe, the payoff for the United States will be orders for capital goods
that will be shipped to the aid recipient. World Bank officials in Moscow, for
example, point out that the Russian water system is outdated. Cities are
losing as much as half their water through leaking pipes. One project could
involve laying new water pipes throughout all major Russian cities, creating
jobs and future benefits. 
Roads in Russia are terrible. So are airports and rail stations. All
these are employment generators. The United States has experience of its own
to offer. Officials in Washington should get out the list of projects launched
under the New Deal to see which were most successful in yielding long-term
gains while creating employment during the Great Depression. 
As was the case with the Marshall Plan, no money should flow to Russia
until it responds, as Western Europe did, to the challenge of coming up with
its own plans for recovery. As before, the donor role should not be that of
policy master but of hard-headed, experienced partner. 
There are other measures, some symbolic, some practical, the West can
take: 
* Russia accepted the burden of the Soviet debt, now more than half its
total. This statesmanlike act should be recognized and the debt should be
renegotiated, delayed or canceled. 
* Russia has long permitted free emigration. The Jackson-Vanik Amendment,
which annually threatens Russia's equal trading status with the United States,
should be repealed. 
* Under great duress, Russia accepted a bilateral agreement with the
United States regarding space launches. The price for Russian admission into
the launch club was restrictions on launches (and their prices) from the
country with the greatest success rate to date in the launch of commercial and
other satellites. Numerical restrictions on launches should be eliminated. 
* Russia faces trade discrimination because of an enriched-uranium
agreement with the United States. The "privatization" of U.S. Enrichment Corp.
has seriously undermined revenues that Russia rightly anticipated from this
agreement. 
* Russia suffers from unfair use of the antidumping laws. Not only do
these laws restrict its uranium and magnesium exports, but, as a result of an
action just filed, they will soon restrict steel, Russia's second-largest
export to the United States. It is imperative that the administration inject
foreign-policy concerns, such as the need to keep the Russian economy viable,
into the application of antidumping laws. 
* Russia faces unfair regulatory harassment. U.S. procedures for
certifying certain Russian imports--for example, helicopters--are time-
consuming and expensive. The United States should simplify them. 
Skeptics will argue that the political climate will not support such a
program, that the mood toward aid is far different from what it was in the
postwar period. But as James Chace's new biography of former Secretary of
State Dean Acheson makes clear, the mood then was no better. Bold plans for
Europe's recovery got little support in the Congress or the country. What
changed the equation was the realization among top officials that they simply
had to persuade Congress and the country. They believed they were racing
against the clock and were determined to succeed. 
Can there be such leadership today, on either side of the Atlantic? Much
depends on leaders' assessment of the stakes involved. We believe they are
great. With time, our leaders will see this, too. 

*******

#2
From: "Frederick Kaegi" <FKaegi@bw.ru>
Subject: Why Ickes & Gaddy should not cite the steel industry to support 
the Virtual Economy story
Date: Sun, 11 Oct 1998 

I know the Virtual Economy debate is getting old, but, as an analyst
covering the steel industry, I find it surprising that people use Russian
steel producers as examples of value destroyers. Ickes & Gaddy always cite
the Accounting Chamber document, quoting passages that are colored with
political rhetoric. They still need to show concrete examples of specific
industries illustrating their story. They instead revert to the fallback
argument that all company financials in Russia are useless because barter
accounting is arbitrary. They do not look at the financials of Russian steel
companies. 

The table below immediately allows us to dispense with the contention that
(1) each company's financials are drawn up in an arbitrary way and (2) that
Russian steel companies use barter to hide the fact that they are value
destroyers. The table shows 1997 sales, net profit, and production numbers
for Russia's top steel producers, which account for about 90% of the sector.
The first three columns are in millions of tons or dollars, the last in
plain dollars, based on the average exchange rate for 1997. Numbers in
parentheses are negative.

Company Prod. Sales Net profit Avg prc/ton
----------------------------------------------------------------------------
------------
Severstal 7,561 2,439 156 323 
Novolipetsk 6,850 1,877 85 274
Magnitogorsk 6,648 1,847 139 281
Nizhny Tagil 3,224 1,043 (144) 324 
Mechel 2,526 828 (153) 328
ZapSib 2,655 767 (73) 289
Nosta 2,073 598 (18) 288
Kuznetsk 2,437 867 (110) 356
Oskol 1,507 585 8 388

Wow. What does this tell us? *Official* financials show that some are making
money, some are losing money. So much for the argument about "hiding" value
destruction! Five producers admit it. The loss-makers here have paid a price
for these losses, because each has been forced over the last 18 months to go
through some form of bankruptcy procedures (usually by surrendering shares
and/or administrative control to outsiders, specifically traders, regional
administrations, Gazprom, and other creditors). This is a major loss for
management. Meanwhile, those making money have produced at more or less
stable levels for the past three years, mostly pay their workers on time (I
know because I've visited these companies, talked to independent labor
unions, and attended the shareholders' meetings), and have been able to
reinvest profits into modernization. Counterparts continue to trade with
them. 

Are Russian financials really that arbitrary? No. The avg sale price per ton
for all the companies ranges between $270 and $360 (Oskol's average prices
are higher because it makes more expensive alloy steels). Average 1997 cash
export prices from CIS countries for various steel products (as quoted in
the authoritative Metal Bulletin) ranged between $210 and $340. Thus, sales
numbers across companies are far from arbitrary; these numbers are also in
line with what the world market would pay for the steel. 

Granted, domestic sales are booked at higher prices because they are in
barter, but any financial analyst following the sector could tell you that
the effect is quite predictable, with markups always around 10-15% over the
export price (call any steel company, and they can quote you the barter
price; then you compare it with published export prices). 

My point: far from being useless, financials (at least for the steel
industry) are a key tool for telling you about the health of a company. For
steel, they match what we know about the reality of operations: loss-makers
are shutting down production and not paying their workers, profitmaking
companies have stable production and pay wages on time. Companies making
profits are the ones with desirable products on world and domestic markets.
Those losing money are marooned in Siberia, are oriented to dying
industries, or have obsolete facilities. Because of barter inflation,
companies do have some wiggle room to cook up the numbers, but not enough to
hide serious problems. More importantly, bartering does not allow you to
suspend reality and continue walking on water, as it were; real problems
like no demand for your your products, high costs, and inefficiency will
still kill your business.

Severstal, Russia's top steel producer and the company that Gaddy, Ickes,
Helmer, and Menshikov have been debating about over the past week, is the
last company that should be mentioned in the value destruction debate. It is
one of Russia's top industrial success stories. This is a company that 

(1) gets over 30% of *domestic* sales paid for in cash (check various
newspapers from late April 1998, which reported on the shareholders'
meeting);
(2) has chosen to pay UES in cash (in one of the first contracts of its
kind) for its power supplies;
(3) was able to import coal (paid for in cash) from Poland and Finland when
the miners' strike broke out in May (Matt Taibbi's eXile miner story also
showed that Vorkuta workers found out Severstal was making partial cash
payments to domestic coal producers as well);
(4) has financed investment in western equipment from internally generated
profits;
(5) owns its iron suppliers.
Furthermore, several steel consultants have found that Severstal in
1997--before devaluation--had among the world's lowest production costs for
hot-rolled coil, the item being targeted by the Commerce Department. One
study found the cost per ton to be $243, second only to Korea's Posco. The
average 1997 US price price was $311. Even though Russian steel is
discounted in the US, this is no case of value destruction. 

Severstal engages in barter, like other profitable steelmakers, because it
is a second-best alternative that still provides some financial benefits.
Example: it sends steel to automakers GAZ and AvtoVAZ in return for cars,
because the automakers are in such poor financial condition; it still
extracts value from the deal because it can then sell the cars for cash.
This is why Severstal is now Russia's second-largest car dealer after
Berezovsky's Logovaz. Novolipetsk might do a three-way deal, asking the auto
company to send the cars to Novolipetsk's power supplier. Sure, US steel
companies would not do these kinds of deals, but then again they don't have
to survive in Russia. That doesn't mean that barter is non-market behavior.

And, finally, although I wouldn't agree with all of what Menshikov is
saying, I would be skeptical about Yulia Latynina's comments on Severstal,
since Latynina works for an Uneximbank-controlled publication; Uneximbank
has been trying to get its paws on Severstal for years, and the relationship
it has with Severstal for all appearances is rather hostile. 

So while the virtual economy story may have interesting things to say about
parts of the economy, I would not cite the steel sector support it.
Published financials provide a resonably accurate picture of what's going on
in the industry, especially when you compare them with wage arrears and
production volumes. It would be nice to see further research on other
industries. Meanwhile, we await the outscome of the dubious proceedings at
the Commerce Department, as perhaps the only creatures lower on the
evilutionary scale than Russia's oligarchs--Beltway trade lawyers--will
decide the fate of Russia's profit-making steelmakers. 

Regards,
Fritz Kaegi
Brunswick Warburg

*******

#3
From: tseytin@tseytin.spb.ru (Gregory Tseytin)
Date: Sun, 11 Oct 1998 
Subject: Re: Russian science

The following notes have been inspired by Robert M. Brown's
posting about Russian science in JRL2416#4. I support his
conclusion that "A few research institutions are competitive,
but on the whole, this is not the case. In the long run,
operating these research institutions is a dead end." (I have
made the substitution he suggested.) I would also add that the
number of competitive institutions is smaller than it is usually
presented.

But I diverge from him in his assessment of the belief
that "there is very much world class science happening in
Russia". I believe there is more than he thinks. He argues that
"pertinent scientific research in Russia has been sought by
many Western commercial companies (Boeing, AT&T/Bell Labs,ICM,
Johnson & Johnson, and others) with some successes, but far
fewer than one would expect from a country with such
intellectual potential". I have been observing this process from
the other end.

Let me digress a little and refer to another posting in the same
JRL issue, that of Elena Sokova (#11). The "professors and
teachers at the best Moscow colleges and universities" whom she
meets at her daughter's school miss the good old days of
Brezhnev rule, when they knew the rules and could solve their
personal problems. One instance was a WWII veteran letter to
Brezhnev resulting in a better housing. What about other
veterans throughout the USSR, living in much poorer conditions?
Didn't they know the trick? Can you imagine what would happen if
an ordinary veteran without special connections did the same? I
can tell you: the letter would return to the local party
committee which would harass the veteran for putting them in
trouble. It were the connections (which they avoided mentioning)
rather than knowledge of "the rules" that did the trick. If Ms.
Sokova, a Russian, mistook the parasitic "well-connected"
Brezhnev-era elite for representatives of science what should
one expect of all those Western companies looking for Russian
intellectual potential?

My field of study, computer science and information
technologies, is in a rather unlucky position. Its origins in
Russia were covered by deep secrecy; it never had any traditions
of scientific freedom and integrity and there was no one to
could resist the pressure of quasi-scientific bureaucracy. When
the secrecy was partially relaxed new people from mathematics,
physics and other fields were able to join in, creating the
actual research potential in Russia, but they always were kept
at the back seat. The destructive processes of monopolization of
R&D, its submission to selfish interests of the "bosses", lack
of any objective assessment of the achievements, suppression of
independent ideas by organized copying of foreign products
(passed off as their own work), ubiquitous in Russian technology
of the blessed Brezhnev era, hit computing the hardest. And the
results are well-known. According to a popular joke, a Japanese
who was shown our developments and asked how many years we were
behind replied: forever.

A confirmation of Dr. Brown's point? But compare this to the
fact that tens of thousands of Russian professionals in
computing immigrated in USA, and are employed by American
companies for American, not Russian salaries. Indeed, the US
Congress had to allocate an additional quota of working visas
for the last fiscal year. (Those people usually start with an H1
visa and end up with a green card.) Does it testify to the high
quality of Russian education in the field? Only partially.

In education computer science was for years denied its identity,
and any funds or other resources intended for development of
computing were misappropriated by influential representatives of
other departments: e.g., a "computing-oriented" curriculum could
be opened at physical or chemical department, or at department
of differential equations, creating jobs for representatives of
less needed fields of study. A colleague from an industrial
research institute who needed university graduates majoring in
programming languages was at a loss about where to find them:
could it be at a linguistic department, he asked me.

Another source of corruption was dependence of university
departments from the corrupt and monopolized defence-oriented
R&D; those institutions were actually the only source of
funds and equipment for universities (except possibly a few
privileged universities also connected with military R&D). By
using these levers the military R&D could install their own
people at the head of university departments; deals like "you
give me an expensive research contract and equipment, and I
arrange for a Doctor-of-Sciences degree for you" were not
uncommon, and "red directors" with academic degrees awarded for
theses they never wrote proliferated.

So where the obviously existing Russian intellectual potential
in information technologies came from? Partly from education
system, right. But it was greatly complemented by the
independently developing underground culture.

Of course, Western companies coming for Russian intellectual
potential cannot see the underground. They start from finding
an institutionalized partners and end up cooperating with the
same "red directors". In software industry, additional problems
are created by the fact that companies prefer to see all work
done in a small number of centers in USA, probably for fear of
their code leaking to someone who can later sue them for
copyright violation. To this one should add special
organizational requirements and procedures each company has for
their software development process, which are completely new for
Russian developers. Add to this the general instability, and
vulnerability of independent companies to arbitrary actions of
government bodies, and you will understand why most attempts of
harnessing Russian intellectual potential fail.

Direct employment of Russian professionals by Russia-based
divisions of Western companies (without participation by "red
directors") is a better solution but not always possible. And
Russian government bodies pose further obstacles. E.g., an
agreement was signed in 1996 between the Ministry of Science and
Samsung Electronics, according to which Samsung pledged not to
employ Russian professionals concurrently working in government
research institutions without the consent of their primary
employer (no such restrictions existed, at least after the
collapse of the USSR). It was motivated by the alleged stealing
of intellectual property belonging to the "research team"; in
fact any essential property created in a university should be
published, and it were personal skills rather than someone
else's property that were used by researchers independently
employed by Samsung or other companies. But the official bosses
were worried by the fact that they were losing their grip on
researchers, and a press campaign was launched accusing Samsung
of unfair practices.

While in industries of banking former Soviet elite often poses
as private company shareholders or managers, in science the old
Communist-appointed bosses mostly retain their positions, and
this is the principal reason why Russia is losing its
intellectual potential.

Gregory Tseytin,
Dr.Sc., SPASS Learned Secretary,
St.Petersburg, Russia

******

#4
Yeltsin unsteady abroad, no econ plan at home
By Adam Tanner

MOSCOW, Oct 11 (Reuters) - A senior minister said on Sunday that Russia was
finding it hard to come up with a broad economic recovery plan, as President
Boris Yeltsin raised concerns with an unsteady appearance on his first foreign
trip in six months. 

Russia's Finance Minister Mikhail Zadornov, perhaps the most liberal member of
the new coalition cabinet entrusted with restoring growth after a decade-long
depression, said an economic plan would take time to put together. 

``I think it would be rather difficult today to put together a comprehensive,
integral, all-inclusive programme in that the situation is changing very
rapidly and then it is too complex to try and put it into one document,'' he
told Russian Television. 

Asked about a long-term programme to deal with Russia's acute financial
problems, the minister said such a plan could not be expected in the next
three months, at least. 

``But I think that it's exactly these measures that will lay the basis on
which a medium-term programme could be worked out in 1999,'' he said. 

Russia devalued the rouble in August and defaulted on some debt, unleashing a
wave of inflation and a near meltdown of the banking system. There are growing
concerns Russia, especially in the isolated north, may not have enough food
for the winter. 

Yevgeny Primakov, the former foreign minister, who became prime minister a
month ago and has yet to unveil a detailed plan to revive the resource rich
but corrupt and inefficient economy. 

Meanwhile, Yeltsin, 67, who holds the overwhelming balance of power, looked
pale and unstable during a welcoming ceremony at the presidental mansion in
Uzbekistan during his first foreign trip since March. 

At one point he made a difficult step forward towards the guard of honour,
prompting Uzbek President Islam Karimov to take his elbow to help him return
inside. 

Yeltsin, who has a history of medical problems including heart bypass surgery
in 1996, is closely watched on foreign trips. 

Because he rarely appears in public and has even cancelled his weekly radio
address in recent months, Yeltsin's foreign trips can give clues about his
physical and mental state. 

Russia did receive some good news on Sunday when the breakaway region of
Chechnya released nine Russian military servicemen kidnapped in Russian
territory neighbouring Chechnya over the past year. 

A defence ministry representative to Chechnya told reporters there are about
400 Russian soldiers still held hostage in Chechnya, which won de facto
independence from Russia during a brutal two-year war ending in 1996. 

The number of kidnappings has risen in Chechnya since fighting against Russian
rule ended, although the seizure of foreigners there has overshadowed cases
involving Russian soliders. 

Gunmen seized three Britons and a New Zealander working for a British
telecommunications company in Chechnya last week. 

******

#5
ANALYSIS-Russian rivals set sights on presidency
By Timothy Heritage

MOSCOW, Oct 11 (Reuters) - Russia's presidential election is not due until
mid-2000 but don't try telling that to the likely challengers. 

Doubts over President Boris Yeltsin's health and his perceived political
weakness have prompted presidential hopefuls to start announcing their
ambitions and trying to forge campaign alliances and coalitions. 

The jostling for position has been mainly triggered by the decline in
Yeltsin's fortunes during Russia's deep economic crisis and growing calls for
his resignation, underlined by nationwide protests last Wednesday. 

It can also be put down to Moscow Mayor Yuri Luzhkov's announcement nearly two
weeks ago that he might be a candidate, increasing pressure on other
presidential hopefuls to make a move to avoid being left in the starting
blocks. 

``He (Yeltsin) is old and ill. Things are hard for him. He is suffering
because after briefly being the father of the nation, he has now become its
enemy,'' the liberal Sevodnya newspaper said after the protests. 

But it noted that if Yeltsin quit, the constitution stipulates that an
election would have to be held three months after he stepped down. ``And none
of the people who have today declared their intentions is really ready,''
Sevodnya said. 

Yeltsin's reaction to the manoeuvring has been silence, broken only to say he
has no plans to step down early. His wife Naina says his health is fine and he
will not retire before the end of his term. 

Prime Minister Yevgeny Primakov says an early poll would be a recipe for
instability. ``It would lead to divisions and whip up political passions,'' he
said on Saturday. 

But Yeltsin's rivals say he is the main cause of instability and his
resignation could help Russia out of crisis. 

The list of likely candidates is headed by Luzhkov, Krasnoyarsk region
Governor Alexander Lebed and centrist former Prime Minister Viktor
Chenromyrdin, a long-time Yeltsin ally who has already announced his
candidacy. 

Communist leader Gennady Zyuganov, liberal economist Grigory Yavlinsky and
nationalist Vladimir Zhirinovsky could also run. Communist parliamentary
speaker Gennady Seleznyov said last Thursday he might throw his hat into the
ring. 

All need financial, political and media support and no one is far enough ahead
of the field to be sure of victory. That means all are hoping to forge
alliances and want to do so before their rivals. 

Luzhkov's declaration that he would run under certain circumstances prompted
an immediate response from the opposition Communists who, fearing they cannot
win an election on their own, floated the idea of an alliance with him. 

But Luzhkov distanced himself from that idea on Saturday. 

``I am not their ally, adviser or contender. Let them sort it out for
themselves,'' Luzhkov told a news conference. ``I am not claiming the
leadership of a left-of-centre bloc because I am attracted by a centrist
philosophy.'' 

Luzhkov has been working hard behind the scenes to forge links with various
political groups, including some of the Communists' likely coalition partners.
He has done so by proxy through former border guards chief Andrei Nikolayev. 

Nikolayev, now a member of parliament, has made loose cooperation agreements
with several groups with a view to creating a centrist force for the
parliamentary election due in late 1999 and for the presidential poll in
mid-2000. 

``Nikolayev has been very busy and there is little chance that he can have
acted without Luzhkov's approval,'' political analyst Andrei Piontkovsky said.

Nikolayev could one day hope to become prime minister or president himself.
But Luzhkov has started luring Yavlinsky, an experienced economist and
politician who could immediately be prime minister for a centrist or left-of-
centre bloc. 

Parties to the right of centre such as Chernomyrdin's Our Home is Russia bloc,
have acknowledged the need to consolidate their position by uniting. 

``Plainly speaking, a political coalition is needed now like never before,''
Chernomyrdin said in a recent interview with the Nezavisimaya Gazeta
newspaper. 

Yavlinsky is also mentioned by some Our Home members as a possible partner,
but he was a fierce critic of Chernomyrdin when he was prime minister. 

The fact that other potential partners also opposed Chernomyrdin when he was
prime minister, and last month blocked his attempt to be reinstalled as
premier, has prompted some Our Home members to suggest he should make way for
someone else. 

The coalition talk has also pointed to differences in the Communist camp,
where Seleznyov and Zyuganov appear to be at odds over who might be their
presidential candidate. 

One man who has stood aloft is Lebed, who is likely to run on a law-and-order
ticket. 

But Lebed has not stayed out of the fray. He has been on the offensive against
Yeltsin, led a protest march in Krasnoyark last Wednesday and warned the
president on Saturday he could face a revolt if he ignores the demands of the
people. 

******

#6
Sunday Times (UK) 
October 11 1998
[for personal use only]
Bullies' secret video reveals brutality in Russian army 
by Mark Franchetti 
Moscow 

GRAPHIC evidence emerged yesterday of the horrifying extent of beating and
systematic maltreatment of conscripts within the Russian army. 
An amateur video, secretly copied and broadcast on television, showed two
sergeants from the military police striding along a line of 30 new recruits,
punching and drop-kicking them in the chest and abdomen. The victims reeled
with pain as their assailants, named as Sergeant Igor Semyonov and Second
Sergeant Ivan Napreyev, struck them one by one. 

Another sequence in the film, apparently shot by the perpetrators as a "home
video" to impress their friends, showed the recruits lying in a row on the
floor while the sergeants, both apparently drunk, walked heavily across their
stomachs. 

In a third scene, the recruits - members of an elite unit set up to fight
terrorism and to free hostages - were shown being forced to hold chairs at
chest height with bottles of water on them for a prolonged period. They were
struck when they allowed the bottles to slip. 

Semyonov and Napreyev claimed the abuse was "physical and psychological
training". But a Russian military court described it as assault and battery
and sentenced them to three years in jail for abuse of power. A third man was
given a two-year suspended sentence. 

The Russian army has long been plagued with violence in its ranks. Recruits
have traditionally been subjected to dedovshchina (the rule of old men) a
practice under which they are beaten and humiliated while officers turn a
blind eye. Some victims are driven to suicide. Despite widespread protests
against the practice - especially by groups representing the recruits' mothers
- little attempt appears to have been made by Russia's military authorities to
stop it. 

Last month it emerged that a military commander in the Volga region ordered
three recruits to be buried alive overnight in a pit to punish a minor
misdemeanour. Two died and the third was dug out barely alive after the ground
collapsed on them. 

Recently the recruits' misery has been compounded by Russia's growing economic
crisis. The former Red Army - the pride of the Soviet Union during the cold
war years - is now hardly able to feed, clothe and house its own men. Military
prosecutors who raided depots near Moscow this summer found 1,000 tons of dog
food which the army had apparently been planning to feed recruits. 

******

#7
Washington Post
Ocdtober 11, 1998
[for personal use only]
Russians Need Help, Not A Billion-Dollar Handout
By Anne Applebaum
Anne Applebaum, an occasional columnist for the Sunday Telegraph in London, is
writing a history of Soviet concentration camps. 

ARKHANGELSK, Russia—The Germans called it humanitarian aid. The International
Monetary Fund spoke of structural development, the World Bank of business
development. Whatever it was called, it didn't work. Ten years into political
and economic reform in Russia, most of the Western strategies to "save"
Russian democracy or to "stabilize" Russian capitalism--strategies invariably
requiring billions of dollars in loans to the central government in
Moscow--have gone wrong. And no wonder: If the West had really wanted to help
the Russian people along the road to liberalism and free markets, there were
better ways to do it.

We could have started, for example, by buying Galina Dundina a telephone.

Dundina, a diminutive, white-haired lady in a crocheted sweater, is the
president, leading activist and driving spirit behind the Legal Defense Center
of the Arkhangelsk International Human Rights Association, an organization
that consists mostly of Dundina and a few volunteers. With no money other than
her pension (and that hasn't been paid in several months) and no office other
than her tiny apartment (and that doesn't have a telephone), she has
nevertheless spent several years campaigning on behalf of the unjustly
accused, the unfairly imprisoned, and even downright criminals whose rights
have been violated.

She does not always succeed. But then, the importance of her activity does not
lie solely in its results. The larger point about Galina Dundina is that her
organization is self-motivated, self-organized and self-financed--to the
extent that it is financed at all. No state official told her to work on
behalf of prisoners, no communist party apparatchik has sanctioned her
activity. However tiny, efforts such as the Legal Defense Center are therefore
bona fide evidence of the growth of civil society in Russia, and particularly
the growth of civil society in the Russian provinces. This is a revolutionary
change, one almost wholly ignored by the politicians and the bankers who make
Western policy toward Russia--and it should cause a revolution in the way they
think about promoting reforms in the former Soviet Union.

Not that Dundina looks terribly revolutionary. On the contrary, she looks like
the school teacher she used to be, and her classroom skills still show as she
comforts a weeping 15-year-old girl incarcerated in Arkhangelsk's prison on
suspicion that she stole the ruble equivalent of $10. "There now," Dundina
says as she hands the girl a handkerchief. "You keep working on your algebra,
and you'll be out of here soon."

Or so one hopes: Eight years after the collapse of the Soviet Union, it is
still possible to meet people who have been imprisoned for months without a
trial, and the girl has already been in jail for a week.

For the past 70 years, former school teachers didn't visit prisons or engage
in any volunteer work at all, save that organized by the local party cell.
Until recently, the Soviet state controlled all social organizations, from the
Soviet version of the Boy Scouts to scholarly societies. That was the essence
of totalitarianism.

But these days, even in Arkhangelsk--a northern port with a distinct deficit
of anything resembling private enterprise--it is possible to find not only the
Legal Defense Center but other tiny and under-funded organizations defending
children's rights and soldiers' rights, as well as an increasing number of
people abandoning the trade unions set up by the communist government in favor
of their own. The local independent seamens' union already boasts 6,000
members. There are smaller dockers' and teachers' unions, too.

Recently, the human rights activists and the trade unionists in Arkhangelsk
have begun to act in tandem. It gives them more influence, says Alexander
Ufrakov, co-president of the university teachers' union, and it also makes
intellectual sense. "We see human rights as including the right to be treated
equally before the law, the right to receive the salary you are supposed to
receive, the right to live in your apartment without being expelled because
some local boss wants it," says Ufrakov.

Although still relatively small, the groups now lobby together in favor of
reforms and publish the bulletin Anti-Corruptsia, which looks suspiciously
like an old samizdat manifesto and contains appalling stories about the
corrupt local elite.

Indeed, it is impossible not to have a sense of deja vu in Arkhangelsk, which
is no accident: The politics of the city do sound suspiciously like the
politics of some parts of Central Europe 'round about 1979. Rauf Gabidulin,
the teachers' union's other co-president, jokes that his city bears a distinct
resemblance to the Polish city of Gdansk: the same windswept waterfront, the
same ship builders' cranes--and the same combination of intellectuals and free
trade unionists that led to the birth of the Solidarity movement there in
1980, as well as the same harassment of the latter. When Gabidulin began his
union work, he lost his position as head of his university's philosophy
department.

There is a difference, though. In Poland, Solidarity came before democracy.
Not only did the founders of Poland's first free trade union help push the
communists from power, those who created Solidarity were in the position to
form an alternate political class once the communists were gone.

In Russia, there was no such pressure and there is no such alternate political
class. Russia's politicians are still mostly former leading communists-turned-
elected politicians, acting in concert with other former leading communists-
turned-businessmen. Particularly in the provinces, the combination can be
suffocating: the same corrupt elite still ruling the same region, still owning
the local media, still controlling the local police and still running the
local industry, except that now the profits go straight into their pockets.

This is where we in the West--and in the United States in particular--might
have a role to play. If we are serious about helping to change the political
culture of Russia over the long-term, and if we are willing to abandon the
idea that "saving" Russia means making Russia safe for global hedge funds as
quickly as possible, then these regional power structures--and the people who
want to undermine them--ought to be the target of our efforts. If Arkhangelsk
and Samara and Novosibirsk and other provincial Russian cities bear a striking
resemblance to Gdansk in 1979, we should treat them the way we treated Gdansk
in 1979.

We should give small amounts of financial support to their human rights
activists, send the odd AFL-CIO delegation (or the odd Polish Solidarity
organization) to advise their free trade unionists, offer suggestions about
judicial reform and small business law and beam massive quantities of Russian-
language Western radio across the border, to counteract the effects of their
half-free press.

The U.S. government, the Soros Foundation and others do some work like this
now, but not enough, and not nearly enough outside of Moscow. Yet tiny amounts
of aid--the mobile phone, the spot of funding for a seminar--are much easier
to target than the IMF's billions. Mistakes--money meant for office rental
that disappears into someone's private bank account--are bound to happen but
matter much less. The people who would genuinely benefit from help are not
difficult to identify, as most provincial cities have a handful of known
activists. There are also Russian organizations that have worked very hard to
find and advise potential provincial reformers, most notably the Moscow School
of Political Studies, an independently funded institution that holds seminars
in economics and political philosophy for regional politicians. We should
support them, too.

Of course, this is not a recipe for fast change. A new political class will
take a generation or more to develop. Nor does the quiet distribution of a
hundred dollars here or there have the same glamour as a superpower summit
followed by a multibillion-dollar loan.

But it is a way to make our presence felt in Russia. The powerful oligarchs
and nomenklatura bosses who run Moscow aren't, for the most part, very
interested in our advice or susceptible to our influence. However, among
provincial reformers, who admire Western political ideas and would like to put
them into practice, we have a great deal of influence indeed.

And not only among the reformers. Having traveled around Russia quite
extensively over the past year, I have become convinced that, contrary to most
reports, most Russians are not anti-reform and most Russians do not want life
to return to the way it was before.

Most Russians are, however, opposed to "reforms" as they have so far been
practiced by the kleptocracy that rules Russia. They know perfectly well that
the economic system that has evolved in their country since 1991 is not
capitalism as practiced in the United States, that presidential elections do
not make for democracy as practiced in Western Europe (Boris Yeltsin,
Gabidulin says, is just an "elected autocrat"). They even know that a wrangle
with local prosecutors over the treatment of a 15-year-old prisoner has more
to do with genuine "democracy" than elections which simply bring to power
representatives whose parliamentary votes can then be bought and sold by
Moscow billionaires.

Our task now is to help train the people who might organize these ordinary
Russians, so that they are not always ruled by that kleptocracy. If Russian
society doesn't change, the Russian political system won't change, either.

******

#8
Russia fired 20 nuke soldiers on mental concerns

MOSCOW, Oct 11 (Reuters) - Russia has over the past two years dismissed 20
soldiers with access to nuclear weapons because of psychological problems,
Interfax news agency reported on Sunday. 

It quoted military prosecutors as saying the 20 servicemen where dismissed
from just one unit of the strategic missile forces in 1997-98 for problems
such as psychopathy, schizophrenia and psychological instability as well as
epilepsy. 

The information was revealed at a conference of military prosecutors, who said
servicemen in need of psychological attention often do not get the help they
need. 

As Russia's economic situation continues to weaken, some foreign observers
have expressed concern about the safety of the country's nuclear facilities.
But the military says its vast arsenal remains safe despite the country's
problems. 

******



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