Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


October 21, 1998   
This Date's Issues: 2441 2442 

Johnson's Russia List
21 October 1998

[Note from David Johnson:
1. Komsomolskaya Pravda: Vladimir Konstantinov, "Yeltsin May Be Offered
Chance To Become Queen of England. But Our President Is Unlikely To Want 
To Leave English-Style..." (Options for 'Sick, Tired' Yeltsin Eyed).

2. Los Angeles Times: John-Thor Dahlburg, Hunger in Russia's Heartland.
3. Toronto Sun: Matthew Fisher, RUSSIAN HOCKEY'S DEATH SPIRAL.
4. Vlad Ivanenko: Menshikov's comment on RAS letter.
5. Anne Williamson: Re Ludmilia Foster/JRL #2427 concerning “Russian 

6. Moscow Times: Sujata Rao, Russia Names Top 100 Local Producers.
7. Reuters: Russia outlines budget plans as IMF arrives.]


Options for 'Sick, Tired' Yeltsin Eyed 

Komsomolskaya Pravda
16-23 October 1998
[translation for personal use only]
Article by Vladimir Konstantinov: "Yeltsin May Be Offered
Chance To Become Queen of England. But Our President Is Unlikely
To Want To Leave English-Style..."

Politics is the art of the possible. Until recently Yeltsin's
entourage had been claiming that he was healthy. He was not young, he had
had a heart bypass, he had been seen conducting orchestras, and he had
listed Japan as a nuclear power. But the worst diagnosis that the
entourage decided to plump for was tracheobronchitis.
The opposition, of course, has been hysterical: "The president has
given the whole country tracheobronchitis!" Loyal politicians -- and also,
incidentally, many citizens who did not support the 7 October processions
-- were asking themselves and each other the question "well, suppose
Yeltsin were forced to resign and all our problems were pinned on him." 
What then? Most probably Russia could expect a political row or,
worst-case, a dictatorship.
There is something of Vysotskiy in all this -- listen, Zina, don't
touch your brother-in-law; whatever he may be, he's still a guarantee.
Then Yeltsin went to Central Asia. He went as a sick and tired man,
running a temperature, with all his bypasses, and with the wholly
understandable irreversible changes that sooner or later emerge in every
Russian man who leads a normal Russian way of life. Everyone was hanging
onto his coattails -- from his doctors to his relatives -- and he went with
the nerve and the desire to show them a thing or two. He didn't, he
stumbled, he almost fell, he did badly; the next morning he read in the
newspapers a cocktail of emphatically impassive derision and sympathy
(doubly hurtful when you are president); he came back to the Kremlin again,
he would show them again, he failed again....
There is something of Shukshin [tragic writer/actor] in all this....
That's it. Following this unsuccessful trip even those who are
closest and most devoted to duty will no longer be able to keep up the
image of a strong, albeit impulsive, but nonetheless subtly understanding
president, the wisdom of whose personnel decisions simply cannot be
assessed by everyone -- politics is the art of the possible. Yeltsin can
undoubtedly expect a proposal to change his image -- why don't you carry
on, Boris Nikolayevich, as the Queen of England [i.e. a figureheadmonarch]?
The regime to be proposed will probably be truly royal -- the
cancellation of all foreign travel until the year 2000, rest, water, tea on
the verandah, dogs barking in the woods, the distant sound of a string
snapping (maybe an excavator breaking at a mine somewhere in the Kuzbass).
There is something of Chekhov in all this.
The power ministries [siloviki] will also be collected and presented
to the wise and faithful Primakov. And he w*try through to the elections
without spilling a drop.
But let's just wait a min**enplay is not clear. Either we will shortly
hear about the dismissal of whd enough to go and tell Yeltsin the bitter
truth -- that would mean that the president hato type and that those who
dared try to bell the cat would be gobbled up. Or Yeltsin understands it
all and accep**ween you and me, would be very sensible and could possibly
even salvage the situation. But would Boris Nikolayevich want to leave
English-style [slip quietly awaas royalty?
There is something of Agatha Christie in all this.
The presence of the president as such will not allow the candidates to
quarrel among themselves ahead of time -- they will be building up their
strength during this period, they too will not be damaged by this hiatus. 
Admittedly, during this period it could transpire that the usual suspects
-- Luzhkov, Lebed, Chernomyrdin, Yavlinskiy, and so forth -- will now have
an at first sight unexpected rival in the shape of Primakov. (The country
has made a full assessment of his calm way of behaving, he simply reeks of
solidity, and the former intelligence chief has plenty of powers, contacts,
and knowledge of what is really going on). There is a ready-made premier
at hand -- Yavlinskiy, for instance. But these are details, as we used to
say, compared to the world revolution.
And the gray-haired president himself, who has replaced dozens of
loyal servants and is surrounded only by those who really love him, is
finally distancing himself from the hustle and bustle in which he finds it
harder and harder to get his bearings, and he will drain this cup to the
dregs. Summoning up all his willpower and strength, he will focus on
carrying out what is indeed a major and large-scale task -- living.
There is something of Shakespeare in all this.


Los Angeles Times
October 20, 1998 
[for personal use only]
Hunger in Russia's Heartland 
Devastating summer drought caused worst grain harvest since 1953. Despite
official reassurances, many in impoverished regions fear winter will bring
By JOHN-THOR DAHLBURG, Times Staff Writer

PALLASOVKA, Russia--In July the wheat crop failed, roasted alive in the dust
as the sun baked the hard earth of Russia's southern steppe to 160 degrees. 
Soviet-era collective farms around here lie in ruins, the livestock
killed and butchered, barns and dwellings pillaged by scavengers. The local
administration of this isolated, semidesert area has run out of cash, and in
the largest town, half of the adult population is jobless. 
On the threshold of winter, when temperatures on the wind-scoured plains
near the Kazakhstan frontier can drop to nearly 40 below, many families have
no money and virtually nothing to eat. 
Some have resorted to making gruel from cattle fodder, or expect to
perish from hunger or lack of fuel. In a macabre coincidence, the movie
theater in Pallasovka is featuring a Stephen King horror film, "Thinner." 
"Maybe we'll all die in the winter," said Svetlana Karakusheva, a
44-year-old mother raising five children in a rural settlement. Her kitchen
garden has become an infertile dust bowl. 
Hunger and cold, ancient Russian fears that were supposed to be banished
by capitalist abundance, are back to haunt many. 
This year's harvest of wheat, rye, barley and other grains, withered by
prolonged and fierce drought, was 49.7 million tons, the State Statistics
Committee reported Monday. That was the smallest harvest nationwide since
1953, the last year of dictator Josef Stalin's reign. The committee also
reported that more than 44 million Russians--30% of the population--last month
were living below the poverty line of a meager $37 a month in income. 
Government officials have been reassuring a population already jittery because
of economic turmoil that the situation is under control and that there is
plenty of wheat and other food in storage to feed the nation. 
That may well be the macro picture. But the harsh facts of life in the
Pallasovka region, 600 miles southeast of Moscow, show that the stomachs of
some Russians are far from full and that many fear they will have little or
nothing with which to nourish themselves and their families in the months to
"If you have money, you won't starve; if you don't, you will have
problems, even in Moscow," predicted Andrei Y. Sizov, who runs a think tank in
the capital that tracks the country's agricultural output. "To escape social
shocks--hunger marches, hunger riots--we've got to take care of matters now." 
Late last month, the Russian Red Cross and its international affiliate
launched an appeal for $15 million in emergency aid. Millions across
Russia--especially the elderly, the disabled, single-parent families, families
with many children and rural dwellers--face the most trying winter in a
generation, the Red Cross said. 
To avert "human catastrophe," the Red Cross targeted 1.4 million people
in a dozen regions, from the republic of Buryatia in central Siberia to
Kaliningrad on the Baltic coast, as urgent recipients of food parcels, soup
kitchen meals, warm clothes and shoes. 
'You Can't Exclude Mass Starvation' 
"With the indicators we have seen now, the crop failure and the financial
crisis, you can't exclude mass starvation," said Borje Sjokvist, head of the
Moscow delegation of the International Federation of Red Cross and Red
Crescent Societies. 
Those predictions are much more dire than most, and forecasts of
cataclysm in Russia have been made before without coming true. But few doubt
that nearly seven years after the world's largest country abandoned communism
for what was supposed to be the general prosperity of the free market, many
people will have to suffer grimly through winter--an ordeal that may well
further sap support for post-Soviet changes. 
Prime Minister Yevgeny M. Primakov said Wednesday that the government had
allocated the sum of $600 million for the purchase of emergency food
supplies--enough to feed a third of the population. Earlier this month, he had
said he was counting on the private vegetable plots doled out to workers in
Soviet times to help feed the populace through the long winter. The Defense
Ministry has suggested that military units forage for berries and mushrooms,
so soldiers who have not been paid for months don't go hungry. 
How miserable life is for some is instantly visible here on the now-
defunct Khutor Yesino farm, where 10,000 sheep once grazed. 
"There is no coal, no firewood, no work, no money," said Aiman Zukieva, a
41-year-old shepherd's widow frantically trying to raise her two children and
a nephew. 
The petite Chechen-born woman heats her small brick house by burning
sheep dung, and a sympathetic neighbor regularly donates a pail of watery
whey--sour milk strained through a sieve--to nourish the youngsters. But it is
not enough. 
Zukieva keeps 15 chickens and trades eggs for other food. However, she
has no feed to tide her fowl through the winter. Her children receive a single
slice of bread each for breakfast, and one other scant meal a day. They suffer
spells of dizziness. 
"I don't like this life," said spindly Rakhmat, Zukieva's 10-year-old
daughter, who nonetheless can manage a dazzling smile. "Mother says all the
time we'll die in the winter. I don't want to die." 
Anatoly I. Galichkin, head of government administration in Pallasovka, a
rude border town whose 20,000 inhabitants have to fetch drinking water in
buckets from tanker trucks, said he would not be surprised if mobs from the
countryside arrive to loot shops and drag him from his office. 
"Crowds of 200, 250 people come to me, and I try to feed all of them with
a single loaf of bread, like Jesus Christ," he said gloomily. 
More than a month ago, Galichkin and his counterparts in five other
regions east of the Volga River, where drought singed an area the size of
Belgium, sent an open appeal to President Boris N. Yeltsin, warning that the
situation was now "a state of emergency." 
To date, officials here say, they have received no reply from Moscow. 
Authorities in Volgograd, about 120 miles to the southwest, have sent 200
tons of flour--a sixth of what Galichkin said he needs for the winter. 
Meanwhile, the government official said, people are dying because they
are not eating enough and cannot buy medicines. 
"If there is absolutely no help from the government, then there is really
just one option left for us--most people will simply starve," Galichkin said. 
The food situation in Russia is a complicated good-news, bad-news story.
According to Sizov and his SovEkon think tank, crop losses reached 68% in the
important wheat-growing Orenburg region south of the Urals in what has been
described as the worst drought in half a century. Outside Pallasovka, one
kolkhoz, or collective farm, sowed 1,400 tons of seed and reaped a wheat crop
of only 400 tons. 
But this tableau is not as bleak as it appears, because roughly half of
Russia's cattle, sheep, goats and chickens have been killed over the last five
years. They were butchered for meat because increases in the prices of fuel
and fodder, and the end of government subsidies for animal husbandry, have
significantly raised the cost of meat and dairy farming. 
So with fewer livestock, Russia now needs less grain. The country, which
enjoyed an 88.5-million-ton harvest in 1997, also claims reserves of 20
million tons. The official in charge of coping with disasters, natural and
human-made, has given his assurance that Russians will have plenty to eat for
the winter. 
"I am totally sure that there will be no sort of famine at all, since
there are sufficient reserves in the country," Maj. Gen. Sergei K. Shoigu,
minister of emergency situations, said this month. 
That may be true, one Western agriculture attache in Moscow said. On the
other hand, "no one has seen these grain stocks they talk about," said the
attache, who estimated that the reserves total no more than 10 million tons. 
Already strapped for hard cash, Russia will be forced to buy millions of
tons of wheat abroad, the Western diplomat said. 
Unpaid Salaries Worsen the Suffering 
Whatever the reserves, Tamara Redin, 38, knows her five children are hungry
and too thin. Her 36-year-old husband, a diesel locomotive engineer's
assistant in Pallasovka, has not been paid for four months. 
For want of anything else, Redin has had to give her children, ages 7 to
16, a porridge made from low-quality grain intended for use as animal fodder.
They each get half an egg a day, along with a glass of milk mixed with water. 
Day after day, the family, which lives along a dirt road near the town's
grain elevator, has eaten an unsavory soup made from unripe tomatoes and
boiled potatoes. It's been a month and a half since they've had meat. Redin
digs her hand into a half-empty sack to show what's left in her
larder--potatoes the size of big marbles. 
The Redins are hardly an exception. Galina M. Milyokhina, head of family
services for Pallasovka district, estimates that 70% of families in town are
in similar straits. 
Local officials say a good share of the suffering could be alleviated if
payment resumes of salaries, retirement pensions and child support, frozen for
months because the Russian government has been unable to collect taxes.
Although this is one of Prime Minister Primakov's avowed priorities, people in
Pallasovka have seen few results. The top local government official has not
been paid since April. 
Some specialists contend that the new Russian government also has been
recklessly slow to purchase the grain needed to feed armed forces members,
Interior Ministry troops, prison inmates and patients in state hospitals. 
"The state needs to buy 4 million tons. It's only bought 1.3 million so
far," Sizov of the think tank said. "Patients in hospitals can't feed
When the Russian market was opened to consumer goods from outside, imported
food products--from French yogurt to Danish salami--flooded in. Annual sales
reached an estimated $11 billion. For most Russians, frozen U.S.-produced
chicken legs became the cheapest meat. Foreign suppliers were meeting 70% of
the meat and dairy needs of the 10 million inhabitants of the Moscow region. 
Now, deliveries of U.S. chicken, which had been running at a yearly clip
of $800 million, have ground to a virtual halt. Along with other imports, they
stopped in mid-August after Russia effectively defaulted on treasury bills,
and the banks used for most commercial transactions shut their doors. 
A simultaneous tumble in the value of the ruble means that, even if
imports resume, U.S. chicken legs will be twice as expensive for anyone paying
in Russian currency. 
"We can do without animal products, but we can't do without bread,"
Dmitri F. Vermel, a senior member of the All-Russian Research Institute of
Rural Economy in Moscow, said bravely. "We are not Americans, who cannot
survive if they don't get their 300 grams [about 10 1/2 ounces] of meat a
To ensure basic sustenance for their people, at least 28 of Russia's 89
regions and republics have slapped embargoes on the shipment of grain and
other foodstuffs. 
In the Volgograd region, which encompasses Pallasovka, officials have
effectively banned outside sales of sunflower oil, wheat and 12 other
commodities grown by their farmers. 
In other parts of Russia, that could make it even harder this winter for
people shopping for food. And, with the drop in availability of other
foodstuffs, bread should be in even greater demand. 
"The grain harvest should be enough to meet food demands," Sizov summed
up. "It's another matter how we distribute it. Winter will be difficult for
Russia--very difficult." 
Meanwhile, people already suffering from privations are struggling to get
by, sometimes in circumstances that have more in common with Third World
countries than the superpower that Russia once was. 
Once-Thriving Farm Now a Shambles 
Twenty miles outside Pallasovka, 38 extended families, totaling 200
people, are hunkering down amid the shambles of what was once a farm that had
500 cows. 
When state financial support for raising livestock stopped, the animals
of Khutor Novy were slaughtered or stolen. Farm managers, residents and
vandals ransacked the place for anything they could use or resell. 
As a cold wind blew from the east, Safkulu Guseinov, 61, wheeled a
rickety wheelbarrow containing pumpkins, red beets and carrots down a road to
his house. The small load, the grizzled man said, was all he was able to
harvest from his drought-stricken garden. 
Winter is shaping up as a time of hunger for the Khutor Novy man and the
10 members of his household. 
"They all come to me and say, 'Give me bread,' or 'Give me milk,' but how
can I?" Guseinov asked. "I have no money." 
During the drought, a woman from a nearby village hanged herself and her
3-year-old daughter with clothesline after being jilted by her husband and
then by a live-in lover. 
"I can't live like this anymore," Olga Korobova, 22, said in a suicide
note written with a mascara pencil. "I've got no way out." 
State prosecutor Yuri A. Vlasov said that the single mother's troubles
were personal but that the backdrop to her act of despair was depressingly
common: no food, no income, no job, suspension of benefits for her daughter,
Nina, because no government funds were arriving from Moscow. 
"I'm frankly amazed that people are putting up with all of this," the
prosecutor said. "We should have had an uprising a long time ago." 

Emergency Appeal 
These are the regions and republics in Russia for which the Russian Red
Cross and its international affiliate have requested $15 million in emergency
aid to help them get through winter. 
1. Kaliningrad 
2. Murmansk 
3. Ivanovo 
4. Kostroma 
5. Perm 
6. Bashkir Republic 
7. Orenburg 
8. Chelyabinsk 
9. Kemerovo 
10. Khakassia Republic 
11. Irkutsk 
12. Buryatia Republic 


Date: Tue, 20 Oct 1998 
From: Matthew Fisher <> 

Toronto Sun
October 18, 1998
By Matthew Fisher

Tyumen, Russia - Imagine the consternation if the Toronto Maple Leafs
didn't know until three days beforehand whether they would have enough
money to play road games in Edmonton and Calgary.
And that it was doubtful that the Senators would be able to buy
airplane tickets to make a one-game trip to Vancouver a few weeks later for
a regular league game.
That's the situation that Moscow Dynamo and most of the 22 other
teams in Russia's premier division have been in since the collapse of the
already pathetic ruble in late August. 
Dynamo's 5,000 kilometre Dynamo round trip by airplane and train
to Tyumen, in the Urals, and Omsk, in Siberia, only became a certainty 72
hours before the games were to be played last week. And a 16,000 kilometre
odyssey 9 time zones to the east to play one game against Amur Khabarovsk,
which is much further away from Moscow than Hawaii is from Toronto, remains
up in the air.
"We're still searching for the rubles to buy the plane tickets to
play in Khabarovsk," said Vitali Davidov, Dynamo's manager and a former
star with some of the greatest Soviet teams.
"The money situation is bad. Yet we don't give up, we stay on
Russia's economy seems locked in a death spiral and like every
other business in the country, hockey, which was already reeling from the
loss of its top 100 players to the NHL and leagues across western Europe,
is being sucked into the abyss.
Cruelly exposed to what everyone in Russians simple calls "the
crisis," are the legendary Moscow clubs, Red Army, Spartak, Wings of the
Soviet and Dynamo. During the Soviet era these clubs which got the biggest
state subsidies and preferential access to almost all of the best players.
This situation was reversed after Mikhail Gorbachev launched
perestroika, or economic reforms, in the late 1980's. The Moscow clubs,
which became dependent on corporate sponsors, fought for their lives, while
factories and regional governors who used sport as a vote-buying weapon
turned teams on the periphery such as Metagallursk Nizhnykamsk and Salavat
Uliev into modest successes.
But even that is now at risk. Many factories and regional
governments have recently gone bankrupt. Not one of the premier division's
farflung teams is thought to be solvent.
The cause of these extreme difficulties is evident everywhere.
Hundreds of thousands of Russia's best paid workers have lost their jobs
since the country began defaulting on billions of dollars in western loans
this summer. Millions of factory workers, miners and teachers still go to
work, but have not received a kopeck for months.
Players such as Nikolai Antropov, who was the Leaf's first round
draft pick four months ago, recently signed a ruble contract with Dynamo
which assumed an exchange rate of six rubles to the U.S. dollar. But it now
takes 16 rubles to buy a dollar.
"Everything depends on the fate of our country," said Calgary
Flames draft choice Dimitri Kokorev who had expected to be paid about
$1,300 (Cdn.) a month this season, but is now getting $800 less. "The team
has promised to make up the difference to all of us by the end of the
season. But nobody thinks they will be able to do so."
To save money, Dynamo's players were stacked
four-to-a-compartment in narrow bunkbeds for the bone-jarring 12 hours
"hard class" overnight journey from Tyumen to Omsk. Unlike in the NHL,
where players seldom have to carry their own gear, Dynamo players lug not
only their own duffle bags, but the rest of the team's weighty paraphenalia
on and off airplanes, trains and buses. 
Asked about this as he waited with this teammates in the mud and
snow at Tyumen airport's shabby outdoor baggage hall after flying in from
Moscow, Dynamo's flashiest player, 19 year old Maxim Afinogenov, who looks
like he may one day be a star with the Buffalo Sabres, turned both his
thumbs down and said: "That's our Russian life."
"Everyone knows the country is broke and hockey is no exception.
Our city has not escaped this reality, either" said 20 year old Ivan
Maslov, who, like his teammates on Rubin Tyumen's second professional team,
hasn't been paid this season.
Games with Dynamo, which is presently 3rd in the league
one-quarter of the way through the schedule, usually sellout in Tyumen. But
only 2,000 of the 3,200 tickets were sold for last Sunday's matinee, which
the visitors won, 5-2, even though adult tickets for games of about the
same quality as those played in the American Hockey League only cost 20
rubles ($2) and kids' tickets were half that. Even those prices were beyond
many fans.
"In view of the crisis, the tickets are much too expensive," said
15 year old Julia Nikitenko, who had come to the match with her girlfriend,
Zoa Chiksheva. "We were only able to come because our parents found enough
rubles for us."
Quite aside from the severe consequences of Russia's financial
meltdown, "the league has far too many teams and is to geographically
dispersed," Dynamo's Vitali Davidov said. "This east - west formula was a
cherished dream, but too many teams and so much geography means too much
travelling. The league must become smaller."
Rubin Tyumen, which represents this city of 670,000 people, is in
a dreadful jam. It has little government support and not one sponsor.
"There is not another hockey team in the league which is entirely
dependent on the municipal government," said 20 year old Yesin Abilkenov
who writes for a local paper. "Over the past three years all our best
players have left and we're now the worst team in the league.
"Hockey only survives here at all because the sport has such deep
roots. Nothing else."
Anatoli Yulyugin's job is to try and keep Rubin Tyumen going.
After genially dismissing Dynamo's financial problems as "an exaggeration"
and "the usual Moscow propaganda," the hockey executive said the entire
league was in a jeopardy.
"As in Canada, hockey and economics are inseparable," Yulyugin
said. "The most important difficulty at the moment is the exchange rate.
All our hockey equipment is imported and the American dollar has gone up
270 per cent against the ruble in just six weeks.
"Look at our box office. We get, say, 20 rubles times 2,500
tickets times 21 home games. That's a little more than one million rubles
(about $100,000 Cdn.). In such a situation, it is impossible for any team
to break even."
Such dark arithmetic points to the death of hockey in Tyumen and
across Russia. But not one of the dozens of fans, players and team
executives interviewed for this article would hear of it. 
"Rumours that the league might not complete the season remain,"
Dynamo's Davidov said. "But we are resolved to play every one of our
scheduled 42 league games and complete the season."
Ivan Maslov, who still dreams of one day playing for a Moscow
team rather than in Tyumen, said: "Hockey must survive. There is no other
option. Russians love this game."


Date: Tue, 20 Oct 1998 
From: Vlad Ivanenko <>
Subject: Menshikov's comment on RAS letter

Vlad Ivanenko, Ph.D. candidate in economics
University of Western Ontario

In his comment to the open letter of the Russian Academy (JRL #2405/1),
Stanislav Menshikov seconds following economic policy suggestions

* to stimulate aggregate demand, mainly of the lower income group;
* to clear mutual debts arrears with an intention to single out *really
bankrupt agents*;
* to prevent inflation that results from the increase in money supply by
increasing the supply of goods in accordance with demand.

While Menshikov stresses in his comment that the propositions do not mean
a restoration of command economy, I doubt that the proposed objectives can
be achieved through market mechanisms and, hence, leads to the command

1. The aggregate demand increases in response to the increase in real
income. Since Menshikov targets low income group as the main benefactor --
that is conventionally defined as wage earners, presumably he means the
increase in average real wage. It can be done either through hiring of
unemployed labor or by changing the relative price of factors that
benefits labor. Public works do not constitute a return to the command
economy per se. However, I have not heard about public work projects under
way in Russia and apparently it is not by chance: I doubt that there is a
great demand for that. Thus, the only way to increase real wage is to
change relative prices of factors and it can be done only by command.

2. The clearance of arrears is to be done according to the contract
prices. The *virtual economy* thesis postulates that these prices do not
correspond with *real* (or opportunity) prices and Menshikov seems to
agree with the argument. How will a prospective *examiner* distinguish
then between *really bankrupt* and *viable* businesses? This process will
most likely result in arbitrary judgment based upon subjective valuation
and political connections of the firms under examination. If this is not
the command method of separation of *clean* from *unclean*, what is it?

3. In order to achieve *the increase in supply of goods with increase in
money supply*, it is necessary for businesses to increase holding of
rubles. If the government prints and distribute money in some fashion, the
solvent demand increases and businesses end up with higher holding of
money. My question is whether they will increase production or prices. I
am familiar with the argument that RAS advances: there is not enough
rubles in the economy and businesses WILL increase money holding if the
demand for their products will increase. I am not sure why: rubles per se
are good to pay taxes (that Russian firms diligently avoid doing) but are
not suitable to be kept as a store of value. Therefore, the government
should get involved in setting price ceiling and output fixing to achieve
the desired objective.

In short, the proposed plan is almost entirely drawn from the domain of
command (and not market) economics. 


Date: October 19, 1998
From: "Anne Williamson" <> 
Subject: Ludmilia Foster/JRL #2427 concerning “Russian Fundamentals”

Certainly Ms. Fosters’ ancestors OWNED a house and Alfred Noble OWNED his
investment in the Chechen oil fields, etc. But where are these assets
today? Clearly, they are under “new management”, have been for quite some
time and repeatedly so. Neither Noble’s blat with the Romanov dynasty
(power) nor that of Ms. Foster’s family was sufficient to fend off Lenin’s
Bolshevik confiscators. One reason why the Bolsheviks succeeded initially
in their program whose ideological tenets elevated private property to the
level of a Satanic tool of economic exploitation ­ was because the culture
of ownership was weak, as was the legal infrastructure that began to emerge
centuries earlier when the Tsar began distributing estates and commercial
properties as concessions to foreigners and court favorites. One large
reason why the culture of ownership was so weak was because the property
right and the ownership of significant income producing assets were
restricted by class on a de facto basis ­ and in a pinch, the Tsar was
always capable of changing his mind about specific distributions already
accomplished within his realm. And I must confess it is rather challenging
to discuss private property at all in the context of a country in which for
much of its history a large swath of the population was held as the personal
chattel of a privileged minority.

The “average” Ivan didn’t own much of anything of interest in the eyes of
the state and its judicial officers beyond his percentage of the obrok
(collective tax payment). In such conditions it is unsurprising that the
mass of Russian people suffered little initially after 1917 on account of
property being wrenched from private hands where it did exist; long-term
they were made miserable. (Usage rights for average Ivans were
well-developed by custom, as I mentioned. Even in the Soviet era, citizens
did not fear being tossed out of communal apartments by the state, though
they were always alert to the scheming of their neighbors, associates and

In fact, the redistribution of property under Tsarist direction was the very
point of the Muscovite princes’ program to drive out votchina holdings,
which Ivan Grozny and his oprichnina managed most successfully. Russia was
under the Mongol yoke at the time of the princely drive for consolidation,
and it was understandable that for the development of the country (national
defense being an immediately desired benefit) the princes were obligated to
gather up the lands so as to amass the power and wealth which were necessary
to throwing off Tatar domination. It was, in part, the wild freedom of the
Russian people under the votchina system which had left them vulnerable to
the Mongols. This lesson was not lost upon the princes nor Ivan who
co-temporaneously saw the value of social consensus to their purpose (it's
tough to persuade any group into consensus - far easier to bully it out, and
that is done in part by retaining the power of controlling all assets).

Thereafter, the Tsar distributed estates and commercial concessions
according to a family’s or an individual’s service to the crown, the monarch
alone being the one to define what constituted “service”. Peter the Great’s
chin system of hierarchy tried to bring some order, some objectivity to the
process, but only served to organize the civil order along military lines.
Only in the latter part of the 18th century did the property right begin to
take shape ­ but, again ­ only for the most privileged. There was further
evolution and the reforms of Aleksandr II were a very great stimulus to the
development of the property right. And we all know where the rising
expectations of the Russian people, subsequently thwarted, ended up in 1917.

It is my point that it is the Harvard advisers’ crime that they failed to
introduce the crucial intellectual capital of de jure property rights
guaranteed across the entire spectrum and the accompanying necessary
infrastructure into Russia ­ and that that is what the West truly had to
bequeath. (And after Jeffrey Sachs’ recent, utterly shameless interview
with Novaya Izvestiya in which he made such a pitifully fraudulent attempt
to rewrite history, most especially his own, I am concerned for an honest
record.) But well you might ask, why would I be so concerned with the
property rights of Staraya Rossiya’s privileged? And why would I say that
the property right is unique capital the West even had to bequeath?

First, I am not particularly concerned with the restoration of property to a
now dispersed group of noble families and 19th century nabobs. I am
concerned with their history of ownership as a cultural indicator, that is
all. (Though I suspect Ms. Foster, were the family holdings returned to her
or other heirs, would do a fine job by those properties and the individuals
dependent upon them were she so obliged and interested.)

Secondly, for there to be a true property right in the Roman and Anglo-Saxon
tradition, three conditions must apply; the owner is entitled to the use of
the property, he is entitled to whatever earnings or product the property
might provide, and third, the owner is free to transfer the property ­ to
heirs, to buyers, to creditors, or to other beneficiaries ­ as he sees fit.
It is this third condition in which the Russian property right has been
consistently insufficient throughout history and which has led to Russia's
economic constipation. When Yeltsin’s Russia first began to address the
possibility of private farming in 1992, attentive Russian observers will
recall, an initial condition was that the property could not be sold for ten
years ­ and then only with the approval of local authorities! So this, as
we see, is a very old story, but one with which the taxpayer-funded Harvard
whiz kids - phony, purely rhetorical “free marketeers” - couldn’t be
bothered despite the once-in-a-millenium opportunity they had within the
context of their own “reform”, i.e. equities markets, to right the wrongs of
misbegotten time.

Thirdly, and this is really key, the property right matters most of all not
to the rich who are insulated by their wealth and the power that naturally
accrues, but to the POOR. The property right is the poor man’s ticket into
the game of wealth creation. I went blue in the face making this argument
to the sweet smelling, pathetically supercilious and fantastically ignorant
aid crowd that so quickly entrenched itself in Moscow. Again ­ the entire
scam was based on Russian assets not Russian needs ­ so fiddle-dee-dee!
With the per diems, luscious perks and lifetime guarantees they enjoy, who
cared? And who cared for what? Only that their parasitic lifestyle
continue into perpetuity and if Russia was to pay the price along with G-7
taxpayers, why fine, fine, they’d surely manage some good over time. Or so
they flattered themselves. The main thing for funding to continue was that
the US president and his hoped-for consitituency centered around bond
markets, foreign and domestic, were well-satisfied. Soon, perhaps, if there
is a God, the entire corrupt crowd will be gone with the wind just like
those GKO yields.

Meanwhile, Harvard’s social engineers soldier on, saturating the American
body politic with their socialist poisons using the monetary tricks of
neo-Keynesianism and monopoly banking, exporting same abroad even as they
manage to keep their mouths firmly plastered around the public teat courtesy
of the US Congress (and their wooly-heads prominent amongst the lamestream
media pundits). I am reminded of a 19 year-old Twiggy exclaiming upon first
learning of the holocaust, “Men! They are despicable!”

In closing, now that you are all exhausted, I will just mention one
correspondent who brought to my attention NEP which did allow for the
commercial usage of individual property such as a car that could be hired
out. Again, it was not my purpose in “Russian Fundamentals”, a brief and
tightly argued essay, to address in toto the rich subject of property rights
and their many vagaries in Russia (a subject about which I can go on and on,
but being by nature a kindly sort, I won’t), but rather to address a
deeply-held cultural reality the West just sailed by, ever steady on its
leadership’s chosen course to intellectual oblivion and state corporatism.
Nonetheless, point taken ­ and readily so, if for no other reason than that
it allows me to remind this audience that by the evidence, it is quite
possible to conclude Harvard’s collective best and brightest lacked the
depth and innovation of so much as one Vladimir Illyich Lenin.


Moscow Times
October 21, 1998 
Russia Names Top 100 Local Producers 
By Sujata Rao
Staff Writer

One hundred products ranging from ice cream to textiles were named the best
Russian-made goods Tuesday, but at least one of the winning companies has shut
down due to a lack of funds. 
State quality certification organization Gosstandart and the Russian Academy
of Quality unveiled at a news conference Tuesday what they declared to be the
cream of domestic industry f a diverse group that included Stinol
refrigerators from the Lipetsk region, black caviar from Astrakhan and Krasny
Oktyabr candy from Moscow. 
But the best television, Sadko, is no longer being produced, according to a
spokesman for the Kvant factory in Novgorod. The television maker, formerly
part of the vast defense-industrial complex, was forced to halt production
after the state stopped paying back its debts. 
"If only we could get that money and find an investor or a loan, we could
start production again," said company representative Vladislav Shaklin. 
Gosstandart President Gennady Voronin praised the winning companies Tuesday
for producing quality goods, saying their efforts were helping make home-grown
products more competitive in the global marketplace. 
"The chronic shortages of Soviet times made consumers as well as producers
indifferent to quality," Voronin said at the news conference. "As a result,
our goods were unable to compete with imports when the economy opened up." 
"Now finally, companies are realizing they must improve the quality of their
goods or lose the market," he said. 
The winners, which received framed certificates, were culled from a list of
350 enterprises nominated by regional governments across Russia, officials
said. More than 1,000 firms from 60 regions took part in the contest, which
started last summer and is the first of its kind. 
Officials said each product in the contest underwent extensive testing at
Gosstandart and the Academy of Quality. Testers also took into consideration
the products' prices and reviews made by consumer organizations. 
According to the winners' list, the finest red caviar comes from the Tunaicha
company in the Far East, the tastiest bread is Boyarsky, baked in Tver by the
Khleb company, and Ochakovo and Klinsky Pivkombinat are the best Russian
After the conference, winners showed off their goods and expressed hope that
the weaker ruble would help them compete against foreign-made products. A
devaluation of the currency in August has slowed imports to a trickle. 
"We hope to expand our internal market," said Alexander Belov, marketing
manager of textile maker Tverskaya Manufaktura. "More people will probably buy
Russian goods now." 
The 150-year-old company, which employs 1,600 workers, is among Russia's
success stories, exporting more than half its production to Europe. 
Other companies said that despite the recognition Tuesday, they were
encountering a number of problems amid the financial turmoil. 
Edward Bagiryan, deputy marketing director of Moscow ice-cream maker Ice-Fili,
said his company has been forced to jack up prices 30 percent because of the
growing cost of buying imported food additives and packaging. Ice-Fili sells
ice cream domestically for rubles, which it needs to exchange for dollars to
buy the imports. 
Bagiryan said Ice-Fili is considering substituting imports with domestically
produced ingredients to avoid raising prices further. 
Meanwhile, contest organizers are confident that the event, which they hope to
conduct again next year, will give domestic industries some positive attention
while giving them a moral if not financial boost. "It is hoped that such
contests will stimulate pride in Russian goods and help attract investments,"
said Alexander Glichov, president of the Russian Academy of Quality. 


Russia outlines budget plans as IMF arrives
By Brian Killen

MOSCOW, Oct 20 (Reuters) - Russian Prime Minister Yevgeny Primakov's cabinet
considered a revised budget for the rest of 1998 on Tuesday and a separate
near-term economic programme was due to be presented later in the week. 
Finance Minister Mikhail Zadornov said the fourth quarter budget, still
preliminary, envisaged spending of 130 billion roubles ($7.68 billion) and
revenues of only 65-75 billion. 
Zadornov told reporters he hoped the huge deficit would be partly covered by
external financing and that rouble printing would be kept to a minimum -- no
more than 20 billion roubles. 
``We are counting on mutual understanding with international financial
organisations,'' he said. 
A delegation of International Monetary Fund experts, most of whom arrived in
Moscow on Tuesday, was due to hold talks with government and central bank
officials later this week. 
The IMF has said it will not release the next $4.3 billion tranche of a credit
package agreed this summer until steps are taken to correct major fiscal and
structural problems. 
Zadornov said Russia would spend less than previously anticipated on foreign
debt servicing in the fourth quarter. 
An official source said the government was counting on an agreement with the
Paris Club of creditor states to delay until the end of the year payments on
debt contracted before the 1991 collapse of the Soviet Union and inherited by
The source said this would leave Russia with foreign debt obligations of
$2.0-$2.1 billion to pay until the end of the year and the central bank would
cover this from its reserves. 
Deputy Finance Minister Mikhail Kasyanov told Reuters earlier that Russia paid
only $115 million of about $800 million in interest payments to the Paris Club
due in August and September. 
``The government's position is to pay everything,'' he said. 
The Paris Club is now waiting for Russia to work out its economic programme to
see how the debt would be financed. 
The official source said the government was also hoping to receive credits
from Japan and the World Bank, and further financing might come from
Gas monopoly Gazprom (GAZPq.L) could buy about $1 billion worth of its shares
from the state, the source added. 
First Deputy Prime Minister Yuri Maslyukov told reporters priority economic
measures had been worked out and should be presented at the government meeting
on Thursday. ``The document is ready but wasn't discussed today,'' he said. 
Another official source said the priorities included supporting the rouble,
partly through requiring commercial banks to have obligatory reserves in
foreign exchange and partly through increasing mandatory hard currency sales
by exporters. 
Exporters, which now have to sell half of their hard currency revenues on
licensed exchanges, will be obliged to sell another 25 percent to the central
bank. Foreign trade controls are to be tightened and the period for
repatriating export earnings reduced. 
The plans also call for stepping up gold purchases to boost central bank
reserves and a crackdown on capital flight. 
Another priority is to restore confidence in the banking system by using
precious metals to back accounts. 
The plan aims to ease food and fuel shortages by creating a special state
reserve, as called for last week by Primakov, and by improving the meat supply
network, the source said. 
Other measures included a plan to levy import tariffs in foreign exchange and
lower tariffs for essential imports. 
Central bank profits would be transferred to the budget, which would in turn
finance the central bank. 
The priorities also cover bank restructuring. A plan for this, involving
liquidation of about a fifth of the country's 1,550 banks, was sent to
parliament on Tuesday. 



Return to CDI's Home Page  I  Return to CDI's Library