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Johnson's Russia List


October 14, 1998   
This Date's Issues: 2429  2430  

Johnson's Russia List
14 October 1998

[Note from David Johnson:
1. Ray Smith: Anne Williamson on Russian Fundamentals.
2. AP: Russia Woes Take Toll on Children.
3. Reuters: Foreign firms stay in Russia despite crisis.
4. AP: Yeltsin's Health Makes Rumors Fly.
5. Victor Chudowsky: McFaul/Goldgeier, Rendell. (Yugoslavia).
6. John Varoli: NATO in Russia.
7. Moscow Times: Julia Solovyova, Prosecutor: Crisis May Spur Arrests 
Of Bankers.

8. Financial Times (UK): Arkady Ostrovsky, Media query Yeltsin's fitness 
to rule.

9. Moscow Times EDITORIAL: Truthfulness Needed On Yeltsin's Ills.
10. Argumenty i Fakty: New Left-Center Party, Luzhkov-Primakov Alliance.
11. Jerry Hough: question on Russian finances.
12. Obshchaya Gazeta: Yelena Dikun, "Kiriyenko in the Kremlin Once Again:
The Dismissed Premier Is Reviewing the Program Documents of His Successor."

13. Reuters: Corruption costs Russia $15 bn a year -consultant.
14. Reuters: Russia considers aid to avert food shortages.]


Date: Tue, 13 Oct 1998
From: (Ray Smith) 
Subject: Anne Williamson on Russian Fundamentals 

Anne Williamson's essay on "Russian Fundamentals" (JRL - 2426) should be
required reading for anyone presuming to comment on what went wrong with
reform in Russia and what should be done about it. She moves superbly
between the relevant in Russian culture and the problematic (perhaps
disastrous would be more apt) in reform policies. Print it out, tape it to
your monitor, engage brain and read it again before allowing fingers to
contact keyboard. 


Russia Woes Take Toll on Children
October 13, 1998

MOSCOW (AP) -- More of Russia's children are living on the streets or in
orphanages because of the country's financial troubles, and they are
committing suicide in greater numbers, the head of the U.N. Children's Fund
said Tuesday.
Children's welfare was already on the decline as a result of Russia's
transition to a market economy, when ``the focus was largely on economic and
political reform, with a significant deterioration in education and health,''
UNICEF executive director Carol Bellamy told a news conference.
The 1991 collapse of the Soviet Union brought a rise in the number of Russian
children living in the streets, killing themselves, abusing drugs and
contracting AIDS. Funding for education was cut and children were dropping out
of school in greater numbers.
The situation has only worsened amid Russia's latest financial crisis, as
families slip further into poverty and the government has even less money to
pay teachers and doctors.
Although children in Russia are still better off than in many countries, a
drop in state support for them is ``a very fast-growing problem,'' Bellamy
Russia's ``indicators are not nearly as bad as many of the countries in which
we are working. It's the trend of the indicators that are the most
troubling,'' she said.
The number of children in homes for abandoned babies in Russia, for example,
has increased by one-third from 1989 through 1996, UNICEF figures show. Over
the same period, prosecution of minors has almost doubled, as has the suicide
rate for boys up to 19 years old. The number of children enrolling in
kindergartens is down by 10 percent.
Although official figures are not available for the last year and a half,
Bellamy said these trends are continuing.
To combat the slide, Bellamy said UNICEF is developing programs that target
youth most at risk, and is trying to raise more money. UNICEF's programs in
Russia started two years ago, and only about $1 million is allocated to Russia
Despite the worsening conditions for children, Bellamy praised the Russian
government for early ratification of the U.N. Convention on the Rights of the
Child, which commits it to ensuring that all children under 18 get health
care, education and psychological and social support.
But with the government considering drastic cost-cutting measures, UNICEF is
pushing Russia not to forget education and health as it drafts its economic
``Even in the most difficult of economic times the (cost-cutting) burden can't
just fall on the social development and social protection side of the
budget,'' Bellamy said. ``This is an issue that has to be raised over and over
and over again.''


FEATURE - Foreign firms stay in Russia despite crisis
By Elisaveta Konstantinova

MOSCOW, Oct 14 (Reuters) - Russia's financial crisis has taken its toll on
foreign companies but few are abandoning the world's biggest country -- still
a potentially lucrative market for consumer goods. 
The crisis, which led to the virtual collapse of the banking system in August,
has forced many firms to scale down operations built up during the explosive
consumer boom of recent years, cut staff and generally tighten belts. 
The rouble has lost some 60 percent of its value since an effective
devaluation on August 17, pushing up prices of imported goods. The banking
system's payments problems have also disrupted trade. 
The volume of goods imported into Russia in September fell 45.4 percent from
August's level as the crisis bit deeply, according to the state customs
But foreign companies appear ready to ride out the storm. 
``We are re-organising now to adapt to the new situation, but will maintain
our operation here. In the long-term we expect the situation to improve,''
Alber Richard, Gillette's General Manager for Russia, told Reuters. 
``Russia is one of the priority markets. We will continue to watch and manage
the situation because we intend to be in business in Russia for the long
term,'' said Andrei Bader, Procter & Gamble spokesman for Russia. 
``We plan to overcome these complications, not doubting for a second our long-
term prospects in this country,'' said Iwan Williams, Coca-Cola Co president
for Russia . 


Prime Minister Yevgeny Primakov met foreign investors earlier this month to
assure them that Russia's economy would remain open to them, but it is not
clear what steps the government will take to improve the investment climate. 
At a later meeting with U.S. business representatives, the prime minister
appeared comforted by their willingness to continue operations in Russia. 
``Primakov welcomed the determination of the American businessmen to continue
mutually advantageous trade and economic links with Russia,'' the government
press service said. 
The American Chamber of Commerce in Moscow said last month that about 50 major
U.S. companies had lost $500 million since the latest crisis started. 
Scott Blacklin, head of the chamber, said the foreign business community was
ready to work with Primakov's government but it needed signs that systemic
problems were understood and being tackled. 
Foreign companies have long complained about Russia's complex tax system,
widespread corruption and the lack of key legislation to guarantee
Blacklin said foreign businesses in the process of allocating resources for
next year would probably scale back operations and cut new investment plans,
though most were not yet ready to pull out. 


Despite the latest lurch on the road to economic reform, some foreign
companies remain decidedly bullish about a market of 150 million people
needing quality goods and services. Some projects have been put on hold, but
others are continuing. 
Gillette's Richard said the company was about to finish building a new plant
expected to cost $40 million, although sales suffered a 75 percent drop in
Richard saw consumption shrinking by 50 percent next year. 
Coca Cola was continuing regular supplies and marketing, Williams said. The
company has invested $750 million in seven years of operating in Russia,
building 12 bottling plants. 
``Coca Cola will invest in Russia for the next 100 years,'' Williams added. 
The Anglo-U.S. drugs group SmithKline Beecham Plc also said it would maintain
its billion-dollar operations despite losses suffered from Russia's recent
``Despite changes in the economic and financial situation, SmithKline Beecham
will continue to work in the Russian market,'' Paul Carter, the company's
general manager for the Commonwealth of Independent States, told Reuters. 
The assortment of medicines, cosmetics and hygiene products in pharmacies has
declined gradually because crisis-ridden banks are unable to provide
guarantees to distributors supplying shops. 
Gillette's Richard lamented the government's lack of a plan to tackle the
financial crisis. ``When the government does not have a plan, how can a
businessman like me have one.'' 


Yeltsin's Health Makes Rumors Fly
October 13, 1998

MOSCOW (AP) -- One Russian newspaper claims Boris Yeltsin has had five heart
attacks. Another says the Russian leader is sometimes unsure whether he's in
the Kremlin. A third speculates he's in the early stages of Alzheimer's
Yeltsin's shaky health and the sketchy information doled out by his advisers
have created another cloud of uncertainty over a nation struggling to cope
with economic crisis. But they've been a boon to Russia's press, which freely
traffics in gossip, rumors and conspiracies surrounding the president's
While the 67-year-old Yeltsin recuperated Tuesday from what aides described as
bronchitis and a mild fever, the media was probing the possibility of a
presidential resignation.
``It's not being discussed,'' Yeltsin's spokesman, Dmitry Yakushkin, said of
any talk of resignation.
Yeltsin has consistently provided fodder to critics who say he is unfit to
lead Russia out of its worst economic tailspin since the Soviet Union
collapsed seven years ago.
With the media scrutinizing his first foreign trip in six months, Yeltsin
stumbled and nearly fell shortly after arriving in Uzbekistan on Sunday. He
canceled meetings. He cut short a press conference.
He returned home a day early on Monday due to illness, retreating to Gorky-9,
his country residence outside Moscow, where he now spends most of his time.
The deputy head of the presidential administration, Sergei Prikhodko, told the
Interfax news agency that he and Foreign Minister Igor Ivanov were briefing
Yeltsin regularly -- up to 10 p.m. Tuesday, at Yeltsin's request -- about the
Kosovo crisis.
Yeltsin's extended absences from the Kremlin during the current turmoil
``amount to a state catastrophe,'' the Nezavisimaya Gazeta newspaper said
Tuesday in a front-page editorial. It called on Yeltsin to surrender most of
his powers to Prime Minister Yevgeny Primakov.
Kommersant, the country's leading business daily, said Yeltsin appeared
disoriented at times during his visit to Central Asia.
``The president didn't seem to understand that he wasn't in Moscow,''
Kommersant wrote. The president reprimanded aides as though they were late for
work at the Kremlin, it said.
The robust Yeltsin of the early 1990s has become a man who walks stiffly,
speaks slowly and disappears from public view for days at a time.
Yeltsin's doctors say the president has no major health problems and Yeltsin
has vowed to serve out his term, which runs two more years. The media,
meanwhile, have their own theories.
``The health of the president constitutes one of the most dreadful secrets of
Russian authority,'' the popular daily Moskovsky Komsomolets wrote last month.
``It is a sacredly held secret, more closely held than all classified military
information lumped together.''
The Kremlin has lost credibility by offering only limited, and sometimes
blatantly inaccurate, information on the president's health.
The most serious offense occurred shortly before Yeltsin's 1996 reelection,
when the president vanished and the official line was that he had a sore
throat. It was a heart attack, his doctors later conceded.
Against this backdrop, Kremlin reports on Yeltsin's health are treated with
deep skepticism.
In recent television footage, two small bandages were visible on the back of
Yeltsin's right hand. That immediately sparked rumors he had been receiving
intravenous drug treatments. When asked, the Kremlin said the president had
suffered small burns.
``Suffice it to say that President Yeltsin has suffered ... five heart attacks
... and more than 10 incidents of cardiac seizure,'' Moskovsky Komsomolets
said, without naming a single source.
Yeltsin now faces unflattering comparisons to the late Soviet leader Leonid
Brezhnev, whose doddering manner made his name synonymous with stagnation.
Yeltsin ``often gives incoherent answers to simple questions,'' psychiatrist
Mikhail Vinogradov wrote last week in Nezavisimaya Gazeta. ``In the past, he
would usually realize that he said something stupid. Recently, he hasn't even
been noticing that.''
Vinogradov, who has never examined Yeltsin, still offered a medical diagnosis.
``What I see gives grounds to believe there is an intellectual disorder,'' he
wrote. ``It's also possible that there is an early stage of Alzheimer's
Yeltsin's spokesman just shrugged.
``Generally speaking, it's unethical for a doctor to comment on someone's
health without seeing the patient,'' Yakushkin said Tuesday. ``It also remains
unclear what kind of doctors they are.''


Date: Tue, 13 Oct 1998 
From: Victor Chudowsky <> 
Subject: McFaul/Goldgeier, Rendell

Thank you for running the Goldgeier/McFaul piece. I generally
support the point that Russia's foreign policy in Yugoslavia is
based on reflexive anti-Westernism, augmented by helplessness and
humilitation due to collapse of superpower status, in an area
where the Russians have a soft spot for their Slav brethren. From a 
realist perspective, there seems to be little to gain in such a policy. 
In addition, I might add the Russians can afford to take a "hard
line" on the Balkans because the costs for doing so, for them,
are low. Russia, other than sending token peacekeepers to the
area, has not suffered the consequences of violence in the
Balkans. I doubt that sanctions against Serbia have made a dent
in Russian exports. The 500,000 or so refugees recent crises
have produced have either been taken care of by the West, or have
actually moved there - settling in Italy, Germany, etc. as
refugees. Moscow, on the other hand, is not a big destination
for Muslim or Albanian refugees, and not because it is impossible
to secure a "propiska." I don't know of Russian humanitarian
aid, even to their Serb brothers. 
The West has a legitimate interest in preventing competitive
diplomacy in the Balkans, whereby various ouside states - Russia,
Germany, Arab states - identify clients in the Balkans and
support them with arms, advice, etc. as they slaughter one
another. This was the point of the arms embargo and previous
military actions, and it is also why Ms. Albright was correct to
say that it does not matter what the Russians think. The area of
conflict is right in Europe - much closer to Budapest or Vienna
than to Moscow. Wounded pride does not give Moscow carte blanche
to be a "player" in the region.
This brings me to several comments made by Mr. Matthew
Rendell in JRL 2425. First of all, with the independence of
former republics and the collapse of the Warsaw Pact, the area is
no longer that "close to its (Russia's) borders." Looking at a
map, I find the distance from Belgrade to Russia's border or
Moscow about equivalent to the distance between Belgrade and
Jerusalem. Istanbul is closer. Soon, NATO membership will be
extended to Hungary, a half day's drive. Similarly, I have yet
to hear that the Moldovans, Romanians or Ukrainians - all non-
NATO members geographically much closer to the conflict - are
threatened by air strikes, or feel that "they could be next." 
As far as this action giving the Russians "the right" to do
things like bomb Turkey for oppression of the Kurds, this is an
irrelevant point because it is neither in Russia's geopolitical
interest or within its capability to do so. It has, on the other
hand, freely acted in a numerous CIS conflicts without much
outcry or objection from the West.
In reality, NATO bombing of the Serbs has no negative effect
on Russian security. Psyche, yes; security, no. Western policy
has been to keep other players out as well, so therefore the
competitive diplomacy that existed in 1914 does not exist now. 
Therefore, for the West to sit by idly (as Mr. Rendell suggests
we must) while genocidal policies are taking place, refugees
produced, and border tensions are increased does not make sense
from a geopolitical or a moral point of view. 
On the other hand, where Russia does have actual
geopolitical interests - the near abroad, it has fumbled badly,
again due to the conduct of foreign policy on emotional rather
than rational grounds. Nikiforenko's piece, also in JRL 2425,
drives home the point, blaming poor relations with Kiev on
"nationalists" who actually have virtually no role in the
government. Since 1994, Ukraine's government under Kuchma has
been ready for "stategic partnership" with Russia, and maximum
military, political and economic cooperation with it, in exchange
for an unambiguous recognition of Ukrainian sovereignty. But
again, the post-imperial emotional baggage of the Russian elite
was, and still is, incapable of doing so, the result being to
drive Kuchma to the open embrace of the West. The result is also
a dysfunctional CIS, which only nominally viable entities such as
Kazakhstan or Belarus take seriously. 
If the conduct of Russian foreign policy was indeed
rational, then we would see some sort of top-down and bottom-up
review of the country's options in light of its diminished
circumstances. Instead, we have odd combinations of continuity
as well as change, with little regard for new realities. Russia,
like a mendicant, can plead for free food and money from the
West on one hand, and threaten the West like a bully by
modernizing its nuclear weapons or defaulting on its debts on the
other. Witness Maslyukov's demands for more money. Why doesn't
he just bang his shoe on the table already? Meanwhile, his
bossed practically has to be pumped up in the morning to stand
vertically. Hmmm - the more things change....


Date: Tue, 13 Oct 1998
From: "Scheuer, Mark" <> 
Subject: Book search

I was wondering if you wouldn't mind posting this request for help finding a
book entitled, "To Russia with Fire" by George Cohon. I've searched library
databases,, and called bookstores. No one has a record of it. If
any readers have suggestions, I'd greatly appreciate it.


Date: Tue, 13 Oct 1998 
From: "John Varoli" <>
Subject: NATO in Russia

This weekend I had the pleasure to take my son to see seven NATO warships
on a visit to St. Petersburg--- the first ever official visit by NATO ships
to Russia.
While Russian government officials step up their anti-NATO rhetoric and
continue to proclaim their support for "Brother Serbs" in the conflict
over the Kosovo region, it seems that few Russian citizens share the
sentiments of their leaders.
The NATO ships, part of the Standing Naval Force Atlantic based in
Norfolk, Virginia, made a four-day visit to St. Petersburg which ended
Monday morning.
The visit took place within the framework of Partnership for Peace, and the
timing of the visit has nothing to do with events in the Balkans, and in
fact it was agreed upon in December 1997.
Over the course of the four-day visit, thousands of Russians crowded the
embankment of St. Petersburg's Neva river to get a look at the NATO ships,
and to board and tour some of them. 
The vast majority of Russians I spoke with expressed good-will and
friendship toward the NATO ships and their crews.
In fact, over the course of the four days, it seems that far more people
came out to see the NATO ships than participated in the October 7 protests.
When I asked Russians, "But what about your Brother Serbs?" most were
baffled, saying that they had no opinion on the subject since the issue of
the Serbs has never crossed their minds.
Nevertheless, the Russian media--- even the liberal NTV--- continues to
bombard its listeners/readers
with words of solidarity between the two nations.
As far as I know, major international media did not pick up on the
warm welcome given NATO. In fact, quite the opposite. My colleague from
one leading news agencies was told by his editor to only cover the 20 or so
anti-NATO demonstrators that came out. 
The fact that thousands of Russians expressed good will toward NATO was not
considered newsworthy. 


Moscow Times
October 14, 1998 
Prosecutor: Crisis May Spur Arrests Of Bankers 
By Julia Solovyova
Staff Writer

Prosecutor General Yury Skuratov hinted Tuesday that one of Russia's most
powerful banking tycoons may soon be arrested in connection with the financial
"In a country where not everything is well with its finances and there are
thousands of victims of the banking system [collapse] it shouldn't be
surprising if one of the bankers gets arrested," he said in response to
reporters' questions. 
Skuratov gave no details. 
The country's chief prosecutor warned that the Central Bank also was in for a
hard time. Skuratov said an investigation being conducted by the Federal Audit
Chamber had uncovered violations "reaching a threatening scale." 
The numerous violations concerned the Central Bank's handling of frozen
treasury bills, interbank loans, ruble emission and the bank's internal
expenses, he said. 
Specific charges would be filed next month when the budgetary watchdog's audit
was completed, Skuratov said, adding that the most difficult task would be
determining when mistakes had been made unintentionally because of an
employee's lack of professionalism. 
"If [unprofessionalism] is a crime, we risk putting in jail half of the
country," he said at the news conference. "This is not our goal." 
In updating reporters on other high profile cases, Skuratov said criminal
charges should be brought against Communist State Duma Deputy Albert Makashov,
who made anti-Semitic comments and called for President Boris Yeltsin to be
executed during a rally Oct. 4 to commemorate the 1993 uprising. 
"We are talking about calls for the use of force to change the constitutional
regime and the incitement of racial hatred," Skuratov said. 
The prosecutor general said he wants the Duma, parliament's lower house, to
lift Makashov's immunity from prosecution. Such a move, though, requires a
two-thirds majority and is extremely unlikely. 
"We'll take all the steps that depend on us," Skuratov said. 
He also said the investigation of Andrei Kozlenok, charged with embezzling
$180 million in gold and gems, "is making fast progress." 
"Kozlenok is far from the largest figure in this machination of the 20th
century," Skuratov said. 
Kozlenok was charged with embezzling the gold and gems from state reserves
while working on behalf of California-based Golden ADA Inc. during the chaotic
first years after the Soviet collapse. 
Kozlenok, who was extradited to Russia from Greece in May, has said that some
top government officials were behind him and had threatened to kill him.
Federal prosecutors have questioned Boris Fyodorov, the former State Tax
Service chief who was deputy prime minister at the time the deal was made, and
Yevgeny Bychkov, former head of the now-defunct State Committee on Metals and
Skuratov also said that an investigation into financial impropriety in the
troubled coal industry had led to about 20 cases of embezzlement involving
mine directors and local administration officials in Vorkuta, Rostov and
Kemerovo. The investigation was continuing. 


Financial Times (UK)
14 October 1998
[for personal use only]
RUSSIA: Media query Yeltsin's fitness to rule
By Arkady Ostrovsky in Moscow

President Boris Yeltsin's stumble and early return from a visit to Central
Asia prompted a feeding frenzy in the Russian media, as the country's press
and television questioned his ability to rule.
A Kremlin spokesman said the president was in "stable condition" but would
take the rest of the week off to recover from tracheo-bronchitis. The
infectious disease, which causes coughing and chest pains, forced him to
return early to Moscow on Monday.
Those comments, however, failed to reassure the media, which saw the ailing
president almost fall on his feet during the visit to the former Soviet
republics of Kazakhstan and Uzbekistan. Nor was the Kremlin able to prevent
public exposure of the worst of Mr Yeltsin's gaffes as it has done in the
"Whatever Yeltsin's medical condition is, he has certainly changed
psychologically. He is no longer the strong-willed and daring fighter we used
to see in the past. It is as if air has been let out of a balloon," wrote Otto
Latsis, an influential liberal columnist.
Mr Latsis said the centre of power had shifted towards Yevgeny Primakov, the
prime minister, who would temporarily take over the presidency in the event of
Mr Yeltsin's death. The latest health scare also intensified speculations that
Mr Yeltsin might be forced out of office before his term expires in June 2000.
Andrei Piontkovsky, director of the Strategic Studies Centre, said the only
person visibly in charge of the economy at present was Victor Gerashchenko,
head of the central bank. "At least Gerashchenko is printing money; he is
doing something. Primakov, on the other hand, has reached the level of
economic incompetence. After two months in power he has no coherent economic
Describing Mr Yeltsin's trip to central Asia, Kommersant Daily, a respectable
broadsheet, said the president was unable to walk from his aircraft to the
airport without being propped up and made an incoherent speech at the dinner
in his honour, saying he was "satisfied with visiting objects and shops". The
newspaper quoted a Kremlin source as saying that at one point Mr Yeltsin
thought he was still in Moscow.
Kommersant said Mr Yeltsin's trip was more embarrassing than his infamous
visit to Sweden last December, during which he startled his host country by
calling it Finland, and added Japan and Germany to the list of nuclear powers.
Several Russian newspapers compared Mr Yeltsin with Ronald Reagan, the former
US president, who is suffering from Alzheimer's disease.


Moscow Times
October 14, 1998 
EDITORIAL: Truthfulness Needed On Yeltsin's Ills 

The fears for President Boris Yeltsin's health are not new, nor is the old
Kremlin practice of aggravating them by its secrecy on the issue. 
This is hardly surprising given past performance. The Kremlin for years lied
about the seriousness of Yeltsin's heart problems, concealing the truth from
Russian voters during the 1996 election campaign. The veil of secrecy was
pulled back an inch when Yeltsin had his quintuple heart bypass operation. 
But the doubts have remained. Yeltsin has been in and out of the hospital,
diagnosed with everything from pneumonia to fatigue to drunkenness. At home in
Russia, this can be concealed by artful editing of television footage and
careful stage-managing of public appearances. 
On foreign trips, however, when Yeltsin has been exposed to the full scrutiny
of independent observers, his frailty, both mental and physical, has been all
too apparent. His press secretaries have tried to minimize the embarrassment
of his often incoherent policy announcements and compensate for his unscripted
Yeltsin's trip to Kazakhstan and Uzbekistan this week, however, marked a new
low in the tale of deception. The president almost collapsed on several
occasions and was only saved thanks to a helping hand from Uzbekistan
President Islam Karimov. His answers to questions at a news conference were
nonsensical. He could barely even sign his own name. 
Yet even after Yeltsin's staff was forced to accept reality and cut short the
trip, the Kremlin press service has tried to claim everything is normal.
Yeltsin has bronchitis and will get well soon. Given the record of lies on the
health issue, these reassurances are worthless. 
This is not to endorse calls for Yeltsin's resignation. Sick presidents all
over the world have carried out their duties adequately. The calls for
Yeltsin's impeachment now coming from the State Duma are politically
motivated. If at all possible, Yeltsin should stay in office until 2000,
serving out the term to which the Russian people elected him. 
But the latest debacle underlines the need for some independent information on
Yeltsin's health. The president may have adopted an increasingly hands-off
approach to his job, but he still plays a crucial role in running the country.
The possibility that he may suddenly leave the scene destabilizes Russian
politics. Potential presidential candidates, hoping for Yeltsin's early
demise, are lining up in battalions. 
The only way to stop this nonsense is to make public Yeltsin's medical
records. Yeltsin may argue these are a matter of privacy but the president's
health is a matter of vital national importance. 


New Left-Center Party, Luzhkov-Primakov Alliance

Argumenty i Fakty, No. 938
6 October 1998
[translation for personal use only]
Konstantin Sergeyev article in the "Political Alliance?" column:
"Luzhkov's New Construction Project;" passages within slantlines
published in boldface; subheadings as published

In line with established tradition, it is from abroad that we learn
the latest news about our politicians' plans. As soon as Moscow Mayor
Yuriy Luzhkov left last week for Britain to study the work of the British
Social Democrats, a cheerful piece of news came from Britain's shores: the
Russians may sleep peacefully--our society's political stability is in
reliable hands. It has turned out that Yuriy Mikhaylovich Luzhkov not only
builds churches and circular motorways but also closely follows the
situation in "the presidential sphere." He described his mission modestly
and with restraint: If worthy candidates for the presidency come forward,
he "will choose someone and give him vigorous and aggressive support," but
if "those few who could be elected are unable to run the country sensibly
and correctly," Luzhkov //will personally join the election campaign.//
The Moscow mayor will not enter big-time politics empty-handed. While
in London, he unveiled his new "political construction project" - //a
social democratic "left-of-centre party" //.A compromise figure [subhead]
According to Luzhkov, the Moscow Government has for a long time been
relying on social democratic ideas in its work: a market economy, a
democratic system of power, full freedom of speech, independent media, the
efficient management of property "regardless of who is the owner," and
support for the weak and socially disadvantaged. Now the time has come to
build //a broad political coalition// based on these principles.
General Andrey Nikolayev, leader of the Union of People's Power and
Labour; Communist leader Gennadiy Zyuganov and Liberal Democratic Party
leader Vladimir Zhirinovskiy have been quick to voice their support for
Luzhkov's ideas. Despite their cautious statements, it is obvious that the
majority of the left-wing opposition has sighed with relief. The period of
uncertainty and vacillation is over. A long-awaited figure, who can serve
as a rallying point, has emerged from the London fog.
Perhaps, having raised the banner of "left-of-center," Yuriy
Mikhaylovich does not realize himself what he has done. If the Moscow
Mayor proves short of sensitivity or experience in coping with the thrust
of the opposition's political ambitions, the left- wing torrent will
overpower and carry away the helmsman.An alliance with Primakov [subhead]
For Luzhkov, an alliance with Prime Minister Yevgeniy Primakov is the
only possibility of preserving a clear mind and full independence in his
protracted game with the Communist Party and the left-wing opposition.
Being a diplomat, Primakov has never mentioned his own political
ambitions and will hardly identify them in the foreseeable future, but he
has every chance of winning the presidential elections. An alliance with
Luzhkov will make it possible to solve the problem of a single candidate
from the party of power. It is not important in this situation which of
the two will lead. If Primakov decides that he would like to perform
presidential duties on a permanent basis, Luzhkov will have to rein in his
own ambitions and agree to the post of prime minister. By the way, if need
be Yevgeniy Maksimovich [Primakov] will help Yuriy Mikhaylovich to make the
right decision: over the years spent in the special services, the incumbent
Prime Minister has gathered a curious file on the Moscow Mayor's entourage.
However, this will hardly be necessary. Luzhkov and Primakov //are
absolutely compatible:// both have common sense, pragmatism, the skills of
parrying blows, and finding original solutions. Today, like 20 years ago,
both have been successfully incorporated into the system of power and can
be tough in rearranging their teams. When making decisions, they do not
waste time agonizing over the right choice. In addition, unlike the
politicians brought in on the democratic wave, Luzhkov and Primakov have
resolved their own problems long ago and can "first think about the
homeland and only later about themselves" .
For the time being, Primakov and Luzhkov are looking in opposite
directions, but the political reality will necessarily push them towards
each other. Perhaps this will be a loveless alliance, but it is a truism
that the most stable marriages are those of convenience.


Date: Tue, 13 Oct 1998 
From: "Jerry F. Hough" <>
Subject: question on Russian finances

I wonder if some readers can help me (and your other readers) with a 
question on Russian finances? At least temporarily, the US dollar has 
been devalued 20 percent against the yen and a lesser amount against many 
other currencies. Given the huge American trade deficit and the help this 
devaluation gives countries like Hong Kong and Brazil tied to the 
dollar by devaluing their currency as well, I tend to assume the devaluation 
will be long term and may deepen, especially if foreigners start drawing 
their money out of the American markets as seems likely. But in any case, 
as I understand it, Russian oil and gas is denominated in dollars. 
Thus, if Russia received $1000 in oil when the yen was 145, it had 145,000 yen
to buy Japanese goods. Last Friday when the yen was 116, its $1000 got
Russia 116,000 yen. The American devaluation doesn't affect Russian
purchases from America, but the selective nature of the devaluation means it 
affects the Russians in a differentiated way. Has anyone taken the geographic 
distribution of Russian purchases, applied the different currency 
devaluations, and seen what the impact of the American devaluation is at 
this point in time, quite independent of the Russian devaluation against the 


New Role for Kiriyenko Envisioned 

Obshchaya Gazeta, No. 40
October 8-14, 1998
[translation for personal use only]
Article by Yelena Dikun: "Kiriyenko in the Kremlin Once
Again: The Dismissed Premier Is Reviewing the Program Documents of
His Successor"

It is the second month now that Sergey Kiriyenko, former prime
minister of the Russian Federation, has been among the unemployed.
There are various rumors about his possible employment: He has been
offered, seemingly, the directorship of the Sberbank and then
Transneft. Since his return from Australia the retiree himself has
maintained a stoic silence. He has refrained from comment, even when
Yevgeniy Primakov said that Kiriyenko had made the sensational
decision of 17 August without having notified the President. Sergey
Vladilenovich appears rarely in public and responded to an Obshchaya
Gazeta request for an interview with a friendly refusal: "Speaking
about the past is pointless, as about melted snow, and there is no
new snow as yet."
But the ex-premier does have things to do. He has in recent
weeks been spotted in the corridors of the Kremlin and Staraya
Ploshchad, where he goes punctually, as if to work. His route
usually runs from the office of Valentin Yumashev, presidential
chief of staff, to the office of Oleg Sysuyev, his first deputy. In
addition, Kiriyenko has met with Central Bank Chairman Viktor
Gerashchenko. It would be natural to assume that the retiree is
"after" a new position, but, according to our information, this is
not entirely the case. Sergey Vladilenovich is apparently on quite a
delicate mission: The new government team has needed him as a
consultant on the surmounting of the consequences of the August
default, and he is being used in the administration as an expert on
the anticrisis documents being drafted by the government.
In former times the administration exercised quite tight
tutelage of the cabinet. Vice premiers and ministers would crowd
into Valentin Yumashev's reception area from morning to night.
Following the embarrassment over the failed return of Chernomyrdin,
the Kremlin has begun to confess the principle of noninterference in
the affairs of the White House, allowing the new government an
opportunity to act as it sees fit--just as long as it does not
encroach on Article 8 of the Constitution of the Russian Federation
guaranteeing the diversity and equality of forms of ownership,
freedom of economic activity, and unity of the economic space since
this is considered the sacred prerogative of the President.
But presidential officials need to occupy their work time
somehow, and the boss could at any moment inquire: "What's happening
in the government?" They are forced, therefore, to take an
importunate interest in the activity of the cabinet.
It was last week that Boris Nikolayevich suddenly, influenced
by the news media, evidently, thought to himself: Why does the
government still have no program? Valentin Yumashev and Oleg Sysuyev
immediately reported to the President that the government does have
programs for leading the country out of the crisis--a whole three.
The President lost his temper: "Why three! There should be one,
clear and precise! Let Primakov himself choose which he likes most,
and then we will consider it."
The President's order was immediately conveyed to the prime
minister. "The White House currently fears the word 'program' like
the plague. Each paragraph will be weighed on apothecary's scales.
Otherwise they could simply catch it from the President," an
official from the Kremlin administration unburdened himself to
Obshchaya Gazeta.
After the anticrisis program signed by Primakov reaches the
Kremlin, it will, by all accounts, be sent for review to his
predecessor Kiriyenko. That the expelled prime minister, who was
blamed for all the adversities that have befallen Russia, is being
invited to perform the role of expert is quite interesting. It is
evidently not only a question of there being no one in the
administration to read economic texts following the dismissal of
Aleksandr Livshits. What is most likely is that both the Kremlin and
the government understand full well that the financial crisis was
not brought about by Kiriyenko and that it would be a sin to
dispense with his professional services, therefore.


Corruption costs Russia $15 bn a year -consultant

LONDON, Oct 13 (Reuters) - Corruption is costing Russia's ailing economy about
$15 billion a year and was at least partly responsible for its financial
crisis this year, a British-based business consultancy said on Tuesday. 
At the launch of a study on how busineses should deal with corruption
worldwide, Control Risks Group said the prospects were poor for a clean-up of
corrupt practices in Russia over the next four to five years. 
``Corruption is amorphous and intangible at the best of times, but it's
estimated to be costing Russia about $15 billion a year,'' said Toby Latta, a
specialist in the former Soviet Union at Control Risks. ``When you compare
this with its (Russia's) call for international bailout funds of similar
magnitude, you get a picture of the problem.'' 
The report gave no specifics about how the $15 billion figure was reached but
Latta said tax avoidance, domestic capital flight and the deterrent to inward
investment from corrupt practices cost the economy dear. 
The report gave a number of case studies -- including China, Indonesia, Japan,
Pakistan and Ukraine. 
Its section on Russia said the lack of laws on corruption would hamper any
meaningful change in business dealings there in the near future. 
``The prospects for change are poor over the next four to five years,'' it
said. ``The existing law focuses on cases of straightforward cash bribery,
tending to permit more complex cases of high-level corruption to go
Control Risks, which offers advice to companies dealing with political and
security risks when investing abroad, said problems with dealing with
corruption were of growing concern to clients and a more high profile problem
in recent years. 
John Bray, the group's principal research consultant, said corruption concerns
had recently become a development issue in a way not seen 10 to 15 years ago
and they were now a major issue for institutions like the International
Monetary Fund. 


Russia considers aid to avert food shortages
By Aleksandras Budrys

MOSCOW, Oct 13 (Reuters) - Russia is considering measures to avoid potentially
catastrophic food shortages as economic chaos puts imports at risk ahead of
the bitter winter, the government's top agricultural official said on Tuesday.
Food aid has been offered and may be considered, although it has not been
officially requested, Deputy Prime Minister Gennady Kulik told journalists at
a major Russian food trade fair. 
``Russia has not asked for such aid. Such aid was proposed to Russia,'' he
Last Friday, the press spokeswoman to European Commission President Jacques
Santer said a request for humanitarian aid was made at a meeting between
Santer and Prime Minister Yevgeny Primakov and it was being considered. 
Kulik suggested food aid would help the donors, saddled with surplus supplies
that are depressing prices, as much as Russia. 
`We understand that the West has problems with selling its production. When
we receive proposals on how they are going to build their relations with us,
we will give them a timely, objective and honest reply,'' he said. 
In Washington, the Clinton administration said on Tuesday that talks on
possible food aid had already begun with a team of Russia technical experts.
``We can sell them or transfer to them almost anything they want,'' U.S.
Agriculture Secretary Dan Glickman told reporters. 
The U.S. Congress is also mulling a plan that would allow a U.S. offer of $435
million in direct loans to Russia for commodity purchases. 
As much as 100,000 tons of U.S. poultry may be stuck in Russian ports because
of payment problems, according to U.S. 
industry estimates. 
The threat to Russia's food supplies follows the effective devaluation of the
rouble on August 17. The currency is worth only 40 percent of its pre-
devaluation level, making most imports prohibitive. 
In a country that imports one third of all its food, the consequences could be
disastrous as the long winter looms. 
But Kulik made clear the government was looking at a wide range of measures to
help itself by making imports easier, and was not expecting to rely on Western
Chief among these was the planned abolition of an additional three percent
import duty imposed by former Prime Minister Sergei Kiriyenko in August. 
He also said Russia would abolish an additional 10 percent value-added tax
that the Kiriyenko administration added to some goods previously taxed at a
preferential rate of 10 percent, so bringing the total to 20 percent, the
standard rate. 
Kulik said this mainly applied to basic foods and medicine. 
Other plans included stimulating imports of raw materials that Russia could
not do without. He cited as an example vegetable oil which could be imported
raw and processed in Russian plants. 
He also raised the possibility Russia would scrap hefty import duties on
sugar, imposed to protect the domestic sugar industry. 
The duty has been set at 75 percent on raw sugar and 45 percent on whites, and
was due to have remained in place to the end of the year from its start-up
date of August 1. 
Kulik also suggested Russia may import grain. This contradicted his own deputy
agriculture minister, Vyacheslav Chernoivanov, who said on Friday Russia had
ample stocks. 
Many independent observers agree with Chernoivanov that although the grain
harvest was expected to be a disastrously low 50 million tonnes or less,
compared with 88.5 million last year, there was enough grain in store to get
by without imports. 
But Kulik said there was no point in being dogmatic about refusing imports. 
``We should use every option to fill our market with food, for instance by
using debts of our neighbours Ukraine and Belarus for oil and gas,'' he said.
These two countries had already proposed offering Russia grain to pay off
their debts. 
He agreed that the grain harvest had been poor, and added that grain itself
was not the only thing to suffer. 



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