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

Johnson's Russia List
#2442
21 October 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Washington Times: Bill Gertz, Yeltsin orders probe of security 
for nukes.
2. Reuters: Yeltsin has hospital check-up, IMF checks up economy.
3. AP: Russian Leaders Focus on Economy.
4. Interfax: Gorbachev Says Luzhkov has Best Chance of Being President.
5. Radiostantsiya Ekho Moskvy: Yavlinskiy--Russia 'Needs a Different 
President.'
6. NTV: Lebed Sees Russian Constitutional Power Balance Change Need
(Governors Nazdratenko and Ayatskov also interviewed).
7. Itar-Tass: Russia Loses $10 Billion in World Oil Price Drop.
8. Baltimore Sun: Kathy Lally, Russia whistle-blower is denied public 
trial. Ex-naval officer drew world's attention to military nuclear waste.
9. Journal of Commerce: Frank Cilluffo and Todd Nelson, Russian crises 
unmask 'reforms.'
10. Moscow Times: Julia Solovyova, Nemtsov Uses Web to Start Movement.
11. Marian Dent: More on Russian Fundamentals]

*******

#1
Washington Times
Yeltsin orders probe of security for nukes
October 21, 1998
[for personal use only]
By Bill Gertz

Russian President Boris Yeltsin ordered an inspection of troops at a nuclear
weapons production facility last month after shooting incidents in other
nuclear-related military units.
U.S. intelligence officials familiar with classified reports on the issue
said the inspection -- a review of military fitness -- has raised new worries
about Russia's control over its nuclear arsenal and related materials sites.
"If these troops can't be trusted, things are in really bad shape," said
one official.
An intelligence report said the inspections and shooting incidents appear
to be a reaction to poor conditions for Russian security troops struggling to
cope with conscript hazing, Moscow's failure to pay salaries and harsh
military living conditions, the officials said.
A CIA spokeswoman declined to comment on the inspection and referred a
reporter to Russian press accounts of recent shootings involving troops
guarding nuclear facilities.
According to the intelligence officials, Mr. Yeltsin ordered the
inspection of security troops in charge of guarding the Chepetsky Mechanical
Plant near the Russian city of Glazov in mid-September. The plant, known as
ChMz, processes uranium and other material for the nuclear 
industry.
The intelligence officials said details of the inspection were not known.
But they said it was prompted by the recent shooting involving Russian
MVD Interior Ministry troops in charge of protecting another nuclear materials
productions site, the Production Association Mayak.
The Mayak facility reprocesses nuclear materials for weapons and also
handles spent nuclear fuel as part of the Cheliabinsk nuclear complex, one of
Russia's main weapons-development facilities.
On Sept. 20, an MVD sergeant at the Mayak facility went on a shooting
spree inside a guardhouse and killed two of his MVD comrades and wounded
another before escaping with an assault rifle and ammunition.
The officials said the lack of security at Mayak comes at a bad time for
the Clinton administration. Mayak is expected to play a key role in a joint
U.S.-Russian agreement reached in Moscow Sept. 1 to neutralize 50 metric tons
of plutonium by mixing it with other material or using it as fuel in energy
reactors.
A total of $200 million was added to a supplemental appropriations bill
for the Pentagon that is expected to pass the Senate today.
The incident at Mayak was the third shooting in recent weeks involving
nuclear weapons or facilities in Russia. They have raised new fears about
security at nuclear plants.
On Sept. 5, five soldiers in a Russian border guard unit who were
guarding nuclear sites at the port of Novaya Zemlya -- Russia's main nuclear-
testing facility -- killed a senior guard at the facility.
Armed with four automatic rifles and a pistol, they then took another
senior guard hostage and tried to hijack an aircraft. They later seized more
hostages and demanded to be taken to Dagestan in Russia's Caucasus region.
They were later disarmed by Russian commandos belonging to the Federal
Security Service.
Then on Sept. 11, a 19-year-old sailor went on a rampage in Murmansk,
killing seven persons with a hammer and machine gun aboard an Akula-class
nuclear-attack submarine.
Alexander Kusminykh, the sailor, locked himself inside the submarine's
arms compartment where nuclear-armed missiles and torpedoes and other
explosives were kept. Russia's Interfax news service reported the sailor was
killed by commandos who stormed the submarine. Russia's Northern Fleet
headquarters claimed Kusminykh committed suicide.
Reports of mistreatment within the Russian military have included hazing
incidents. In one case, a sailor based near the Far Eastern port of
Vladivostok was placed inside a missile tube.
The CIA told the Senate Intelligence Committee that nuclear warheads in
Russia are "relatively secure." But in a committee report made public last
month, the CIA stated that "declining morale and discipline in the military,
as well as economic conditions, raise our concerns about the potential for
warhead theft."
"Russian nuclear weapons-usable fissile material -- plutonium and highly
enriched uranium are more vulnerable to theft than nuclear weapons or
warhead," the report said.

*******

#2
Yeltsin has hospital check-up, IMF checks up economy
By Adam Tanner

MOSCOW, Oct 21 (Reuters) - Russian President Boris Yeltsin visited a hospital
for a check-up on Wednesday, as visiting officials from the International
Monetary Fund began an examination of the sickly Russian economy. 
Yeltsin, 67, has been recuperating from a malady which the Kremlin says is
bronchitis since cutting short a visit to central Asia last week. A Kremlin
spokesman said Yeltsin had eliminated all but the last traces of the illness. 
``Everything is normal,'' a Kremlin spokesman said about the president's
health. 
During Yeltsin's visit to Moscow's elite Central Clinical Hospital doctors
performed X-ray tests. Yeltsin then returned to work at his suburban Gorky-9
residence, the Kremlin said. 
Dr. Rob Niven, a chest specialist at England's Wynthenshaw Hospital, said an
X-ray examination of a bronchitis patient could help exclude the possibility
of another infection in the lungs, such as pneumonia or cancer. Yeltsin had
pneumonia last year. 
``You absolutely definitely don't have an X-ray for bronchitis as bronchitis
is an infection of the airways and they don't show up very well on X-rays,''
he said. 
Yeltsin's infrequent appearances in the Kremlin and perceived lack of
leadership since August, when the government allowed the rouble to collapse
and suspended payments of some debts, have prompted many politicians to call
on him to resign. 
The lower house of parliament is also considering a Communist-led effort to
impeach him. But he has vowed to serve out his term until 2000. 
Also on Wednesday, officials from a visiting IMF team began talks with
government officials on efforts to halt a decade-long economic depression that
has intensified since August. 
The fund in July agreed to lead an international package of bailout loans to
Russia totalling $22.6 billion. But it delayed its next $4.3 billion tranche
after a coalition government including Communists took power in September. 
The IMF is seeking clear proof that the new Russian government is trying to
cut spending and raise revenues to balance its books before it will make
further loans. 
The government of Prime Minister Yevgeny Primakov has yet to come up with a
comprehensive plan to revive the economy. But budget figures for the rest of
the year show the government intends to spend twice as much it expects to take
in. 
The central bank has already started expanding the money supply since
September, a process economists say will intensify inflation. 
The chairman of the central bank, Viktor Gerashenko, who presided over
quadruple-digit inflation in the early 1990s, on Wednesday flew to London to
meet foreign investors. 
The Kremlin also said Yeltsin planned to speak to German Chancellor-elect
Gerhard Schroeder and maybe other officials later on Wednesday. 

*****

#3
Russian Leaders Focus on Economy
October 21, 1998
By GREG MYRE

MOSCOW (AP) -- Russia's new government is focusing on short-term measures to
stabilize the economy and get through the winter, and a comprehensive recovery
plan is not its top priority, a senior official says.
The government is facing growing criticism for not producing an economic
blueprint to deal with the worst financial crisis since the Soviet Union
imploded seven years ago. The crisis hit two months ago, and the government
has so far implemented only stop-gap measures.
Yuri Maslyukov, the first deputy prime minister in charge of economic policy,
said the government's emphasis was on preventing potential disasters such as
food shortages this winter.
``The (long-term) program is still absent because we need time to make it
sound,'' Maslyukov was quoted as saying today in the Komsomolskaya Pravda
newspaper. ``Moreover, it's still unclear how we can stabilize the economy.''
The government is broke and the crisis has made it even more difficult than
usual to collect taxes. Also, foreign lenders have frozen additional loans to
Russia until the government produces a program to address the long list of
economic problems.
The country presently has plenty of food, but a bad fall harvest and sharp
drops in imported foods have raised concerns. No serious food shortages are
expected this winter, but the government has created a $600 million emergency
food reserve that could feed one-third of the population for two weeks.
Russia desperately needs cash to pay its bills for the rest of the year, and
has been counting on disbursement of a $22.6 billion bailout package
negotiated before the latest economic crisis erupted in mid-August.
An IMF delegation is visiting Russia to review economic conditions, but it's
not expected to recommend the release of additional loan installments.
The government plans to spend $7.6 billion in the final quarter of the year,
but expects revenues of only around $4.1 billion, Finance Minister Mikhail
Zadornov said Tuesday.
If the government does not receive foreign help, it may have to make up the
shortfall by printing money, a move that would stoke inflation.
Prices have gone up about 50 percent this year and could rise by 200 or 300
percent by year's end, the government has forecast.
Maslyukov said the government wanted to limit the amount of money printed.
``Printing money that is not properly backed is dangerous for the economy and
may push it into hyperinflation and chaos,'' he said. ``Even rumors about
unbacked money-printing are harmful, since they incite panic.''

*****

#4
Gorbachev Says Luzhkov has Best Chance of Being President 

Moscow, Oct 19 (Interfax) -- Former Soviet president Mikhail Gorbachev
says that Moscow Mayor Yuriy Luzhkov has the best chances of being elected
president in 2000.
In an interview with Interfax, he described the potential alliance
between Luzhkov and the People's Patriotic Union led by Gennadiy Zyuganov
as "very promising". An alliance of "these real political forces" is quite
feasible, whatever its potential members may say about it, Gorbachev said.
"It's not that Luzhkov is more communist-minded than he is thought to
be. Rather, Zyuganov is less communist-minded than he seems," Gorbachev
said. "Zyuganov's position is sober, and he is not calling for revenge. 
For all the misgiving I feel for Zyuganov, I must make mention of this. 
Perhaps this is where (Zyuganov's and Luzhkov's) interests meet," he said.
He quoted Luzhkov as saying in connection with the 100th anniversary
of the Russian Social-Democratic Party that "neither communism nor extreme
liberalism can produce decisions. Only their merger -- social-democracy
--can."
"I share this position," Gorbachev said.
"I would not like to idealize him. I could criticize him for many
things, but I think that Luzhkov's strong points outweigh his weaknesses. 
He is the most likely candidate for presidency," Gorbachev said.

*******

#5
Yavlinskiy--Russia 'Needs a Different President' 

Radiostantsiya Ekho Moskvy
19 October 1998
[translation for personal use only] in Russian 1505 GMT

[Announcer] Before the next presidential election in Russia,
candidates should undergo a medical examination, Yabloko faction leader
Grigoriy Yavlinskiy told our radio station in a live interview. He said
that if his health ever precluded him from working at full strength, he
would be open and frank about it before his electorate.
Grigoriy Yavlinskiy believes that Boris Yeltsin will continue working
until the end of his term of office, that is, until the year 2000. At the
same time he believes the country needs a new man in the post.
[Begin Yavlinskiy recording] I believe Russia needs a different
president. A different president, not Yeltsin, should be elected in a
general election. As for the possibility of President Yeltsin leaving his
post early, it is not up to me to make a decision. This issue should be
decided either by the President himself -- and we have heard his reply to
this question many times -- or by the citizens, the people of the Russian
Federation. [end recording]
[Announcer] I have been and still remain a political opponent of the
president, but I refuse to take part in the persecution of Boris Yeltsin
[referring to State Duma efforts to impeach the president], Grigoriy
Yavlinskiy told our radio station. Any political persecution is disgusting
in itself, particularly when taking part in it are those who helped him to
retain power in 1996, he stressed.

*******

#6
Lebed Sees Russian Constitutional Power Balance Change Need

NTV
October 18, 1998
[translation for personal use only]
From the "Itogi" newscast

Let me remind you that we have three Governors, three regional leaders
of national importance, quite important Members of the Federation Council,
speaking live on our program. They are [Krasnoyarsk Territory Governor]
Aleksandr Lebed, [Maritime Territory Governor] Yevgeniy Nazdratenko, and
[Saratov Region Governor] Dmitriy Ayatskov.
The first question I would like to discuss with all the guests of our
program: More and more often we are hearing demands for the President's
early resignation and for early elections. What do you think about it? I
would like to ask Krasnoyarsk Governor Aleksandr Lebed first.
[Lebed] First of all, Yevgeniy Alekseyevich, I would like to use the
occasion to congratulate your company on its fifth anniversary. I would
like to wish health and every success to the most spiteful and venomous
correspondents in the world -- they are definitely the NTV correspondents.
[Kiselev] Thank you very much.
[Lebed] They make life more fun. My attitude to early elections is a
calm one. Everything is unfolding as it should. 
[Kiselev] When you say calm, do you mean it is inevitable or
necessary? Are you looking forward to developments, or do you rather
regret that they are taking such a turn?[Lebed] I think they are inevitable.
[Kiselev] I see. You are being laconic as usual, Aleksandr Ivanovich.
Then I would like to address the same question to you, Aleksandr
Fedorovich [Ayatskov].
[Ayatskov] I have expressed my opinion regarding early Presidential
elections more than once. I am sure -- and many of my Governor colleagues
in the Upper Chamber support me in my opinion -- that we should be working
according to the Constitution, according to the law. We have an
opportunity to change the law now and if it is changed, we shall work along
those lines.The current situation is this. The President was elected for a
term
that ends in the year 2000. No matter what our attitude to him is, no
matter how we criticize him and express our opinions, it is certain that
President Yeltsin will have the last word. It is for him to take the
decision. Throwing slogans around and shouting "Down with Yeltsin" goes
against the Constitution and is illegal. [passage omitted on repetition of
the above]
[Kiselev] What is your position, Yevgeniy Ivanovich? I'm addressing
my question to the Maritime Territory Governor Yevgeniy Nazdratenko.
[Nazdratenko] [passage omitted talking about the problems of the
Territory, as well as the relationship between the Territory authorities
and the Presidential Administration. Nazdratenko supports the current
Government and its anticrisis measures and speaks against riots or any
infringements of the law]
[Kiselev] I would like to come back to the Krasnoyarsk Governor. The
other day you said that you think the Federation Council will support an
initiative on President Yeltsin's resignation. As we can see, your
colleagues do not share your confidence. What was your forecast based on?
[Lebed] Yevgeniy Alekseyevich, did you notice that the session of the
Federation Council did not take place at all? There were plenty of empty
seats. That is why the Senators ducked the issue.
On the other hand, the Federation Council is undoubtedly gaining in
authority and is a most powerful state body at present. The Members of the
Council are face to face with their voters, control the situation in the
regions, and know what consequences the developments are fraught with. 
This is a technical interruption.
Besides, it's so crowded around the seat of power. There's a scrum
taking place there. Some claim to be more centrist than others. Funny,
isn't it?
[Kiselev] But still, you realize what is happening. Only 22 regional
leaders signed the document that wasn't even included in the Federation
Council agenda, the document concerning the President's resignation. Do
you think the situation might change and additional signatures mightappear?
[Lebed] Today everybody is bracing themselves as if they were about to
jump into cold water. That is the psychological situation now.
[Kiselev] Aleksey Ivanovich, what is your attitude to the idea of
changing the Constitution? This is another acute issue. Do you think that
part of the Presidential powers should be given to representative bodies
and the balance of power between the main branches of power should bechanged?
[Lebed] Yevgeniy Alekseyevich, it is no secret that our Executive
power is blown out of proportion, the Legislative power has almost all
dried out, and the Legislative power has practically been destroyed. If a
man can lift a 250 kilogram weight, then let us place the appropriate
number of weights on the bar. Of course, we could make it a tonne, but he
would be rolling it along the floor, at best. That is actually what we're
getting now, under the current Constitution.
We undoubtedly need a Constitutional Council, we need calm and
thoughtful work to be carried out in order to change the Constitution. 
There is no place for panic or hysteria. We are ripe for change.
[Ayatskov] [passage omitted on words in support of a Constitutional
Assembly and a transfer of some Presidential powers to the Government;
there should be a dictatorship of the law, and not of the proletariat]

*******

#7
Russia Loses $10 Billion in World Oil Price Drop 

MOSCOW, October 16 (Itar-Tass)--Russia has lost 10 billion dollars in
a drop of the world oil prices, which has lasted for over a year, member of
the Duma Committee on Natural Resources Aleksandr Lotarev said at a news
conference on Friday.
Other reasons for problems of the oil industry are the financial
crisis, the imperfect taxation system and major lawbreaking in the
privatization, he said.
If nothing is changed, the annual oil extraction will drop from the
current 300 million tonnes to 220 millions in two years. This year the oil
extraction is expected to lessen by 10-15 tonnes.
A wish to "grab the fat" of oil companies can have the most grave
consequences, the law-maker said. "The state does not have the right to
lose control over the oil and gas complex," he said.
Lotarev calls for the immediate drafting of tax, investment, customs,
financial and tariff measures to help the Russian oil industry out from the
crisis.

******

#8
Baltimore Sun
21 October 1998
[for personal use only]
Russia whistle-blower is denied public trial
Ex-naval officer drew world's attention to military nuclear waste
By Kathy Lally 
Sun Foreign Staff 

ST. PETERSBURG, Russia -- Aleksandr K. Nikitin climbed a cracked, dark city
court stairway to answer charges of espionage yesterday, but his defenders
argue that Russia itself is on trial here as a resurgent and unchecked secret
police culture tries to impose silence and fear on its citizens.
Nikitin, a 46-year-old retired Russian Navy captain, was arrested for helping
a Norwegian environmental group research and write a report about nuclear
dangers around Murmansk, the Russian nuclear fleet's headquarters.
The area above the Arctic Circle may have the world's highest concentration of
nuclear materials stored under deteriorating conditions.
"In this case we clearly see elements of criminal investigation reminiscent of
what the KGB used against its opponents," said Diederik Lohman, the Human
Rights Watch's Moscow representative, referring to the old Soviet secret
police. "Even if Aleksandr Nikitin is acquitted, we are looking at major
damage to environmental research and to an increased likelihood of nuclear
disasters."
The first hour of Nikitin's trial was open yesterday, then the proceedings
were closed to the public.
Observers who This line is longer than measure/can't be broken were slow to
leave were shoved out by more than a dozen camouflage-clad police, who acted
as if they were breaking up a group of street rowdies rather than clearing an
orderly courtroom.
"Why are you pushing me?" asked a middle-aged woman from a soldiers' mothers
group. "I could be your mother."
Lawyers and human rights activists say the case has already frightened
Russians who are concerned about the environment and has seriously delayed
solutions to complicated, costly and dangerous problems.
"There are 274 nuclear reactors in the north of Russia and 11 different dump
sites for spent nuclear fuel," said Frederic Hauge, managing director of
Bellona, the Norwegian environmental group.
"One area, Andreyeva Bay, has 24,000 spent nuclear fuel assemblies stored in
very bad conditions. You'd have to explode 5,000 nuclear bombs to create the
same radioactivity. This is what this case is about."
If such issues cannot be discussed openly, he said, the prospects are poor for
resolving them.
"This case has had a chilling effect on this work. A lot of people in the
region now are afraid to work with these issues," he said.
Nikitin said he became involved with Bellona because he knew impoverished
Russia could never improve storage and handling of nuclear fuel and equipment
without international help.
"We weren't trying to create a scandal," he said. "We were trying to resolve
it quietly."
During the open session, Judge Sergei Golets described basic courtroom
procedures and informed Nikitin of his rights in answering the charges. His
lawyers argue that many of his rights have already been violated beyond
remedy.
Nikitin has been charged with violating secret government decrees, which
prosecutors refused to specify and which may have gone into effect after
Nikitin was charged. The judge, who ordered the Defense Ministry to show him
the secret decrees, agreed yesterday to allow the defense to read them.
Golets has the assistance of two judicial consultants to advise the judge on
his verdict.
Nikitin's lawyers say that because only individuals with security clearance
from the FSB -- the domestic successor to the KGB -- can serve as consultants
when secret decrees are at issue, the consultants may well be under FSB
control. Though the consultants' names were announced yesterday, defense
lawyers could get no information about their background or expertise.
"Permission to listen to state secrets can only be granted by the FSB," the
judge said when Nikitin objected to the assessors.
Nikitin, who retired from the Navy in 1992, started working in 1995 for the
Bellona Foundation, which was established in 1989 as Norwegians began to fear
another nuclear disaster on the scale of Chernobyl in neighboring Russia.
Scandinavian scientists were the first to report the 1986 Ukrainian accident
after they observed that radioactive particles were blowing their way. They
also worried about Russia's Northern Fleet after the nuclear submarine
Komsomolets caught fire and sank in 1989.
"I had been interested in nuclear questions for a long time," Nikitin said in
an interview, "and Bellona's work coincided with my convictions."
Though Nikitin and his Bellona associates assert that they gathered their
information from public sources, the FSB charged Nikitin with treason by
espionage and disclosing state secrets. The FSB says that Bellona recruited
Nikitin with the help of Robert Bathurst, identified as a member of the
Norwegian World Problems Institute who earlier worked for U.S. intelligence.
Some of Nikitin's defenders say that the FSB apparently was outraged because
he had served on nuclear submarines and had been assigned as leader of one of
the teams inspecting nuclear safety in the Northern Fleet.
"They lay claim to issues of nuclear storage and chemical weapons, especially
when you're talking about former officers," Lohman says. "They find it
impermissible that someone who was part of that system could talk about it.
They see him as a traitor to the system."
Above all, Nikitin says, the FSB wants to conceal the nuclear dangers.
"If the situation is exposed," he said, "they will have to answer for it, and
it's not very convenient for them to reply."
Since Nikitin was arrested in February 1996, the FSB -- an acronym for Federal
Security Service -- has harassed or arrested two other people involved in
environmental research.
Last year, Grigory Pasko, a military journalist, was arrested after he helped
Japanese television and newspapers report a story accusing the Russian navy of
spilling nuclear waste into the Sea of Japan.
Pasko's trial in Vladivostok on charges that he sold state secrets abroad was
postponed last week after his lawyers filed a motion asking a higher court to
dismiss the case.
In January, the FSB began to harass Sergei Volkov, an environmental activist
from southern Russia who had spent the last few years doing epidemiological
field work in Yekaterinburg, trying to get to the bottom of the 1979 anthrax
outbreak there.
He accompanied a German television crew to the site in December, and after
that he was unable to find work and his wife was fired from her teaching job.
The FSB threatened Volkov with prosecution, he said, if he refused to serve as
an informer.
Lawyers say they have no idea how long Nikitin's trial will take, but they say
its significance cannot be overestimated.
"We will judge Russia and its commitment to the rule of law by what happens in
this case," said Stephen L. Kass, a New York lawyer and Human Rights Watch
board member who attended the trial. "Every country has environmental
problems. It's not a national shame. What is disgraceful is prosecuting
someone for trying to do something about them."

*******

#9
Journal of Commerce
21 October 1998
[for personal use only]
Guest Opinion
Russian crises unmask 'reforms'
BY FRANK J. CILLUFFO & TODD NELSON
Frank J. Cilluffo is a senior policy analyst at the Center for Strategic and
International Studies, where he also directs the Russian Organized Crime Task
Force. Todd Nelson is a research analyst for the task force. This article was
distributed by Scripps Howard News Service. 

The current political and economic crises in Russia punctuate the failings of
the so-called "reform process" in that country. They expose the Yeltsin
government for what it is, not what the Clinton administration and other
resilient optimists keep wishing it to be.
It is impossible to divorce the economic quagmire in Russia from the
stranglehold crime and corruption have on Russian society. Repeated attempts
to do so have only prolonged and intensified the anguish of the Russian
people, while allowing the coffers of the oligarchy to swell.
The international community would be wise to recognize the disease in Russia
and stop coming up with prescriptions that merely treat the symptoms.
Last month's summit between President Boris Yeltsin and President Clinton was
a summit in name only. Mr. Clinton reiterated his concerns about deviating
from the "market economy" in Russia and made further financial assistance to
Russia dependent on continued progress towards the market economy.
Of course, the fact that the Russian "market economy" has thus far consisted
of little more than institutionalized seizing of Soviet assets and
privatization victimized by corruption continues to escape the attention of
many Western policy makers.
The problem is the fact that Russia needs to begin a market economy, not make
"continued progress" towards it.
The fact that the United States has continually supported a man and his
regime, to the detriment of the processes of legitimate reform, has now left
America in a poor position to help: the recent International Monetary Fund
pledge of $22.6 billion merely bought some time -- and not much of that,
either.
Currently, the U.S. is taking a wait-and-see approach to the situation in
Russia. It has made the second proposed $4.3 billion installment of the
$22.6-billion package contingent upon continued market reforms.
On the Russian side, First Deputy Prime Minister Yuri Maslyukov, the man in
charge of the economy, has blamed the IMF for Russia's current troubles, and
insists that it help Russia find a way out of them.
The first installment of $4.8 billion to Russia, however, did absolutely
nothing to bail out the grossly mismanaged banking system, nor was it able to
prevent the devaluation of the ruble.
If anything, the lion's share of the first IMF installment was used to charter
luxury aircraft in the French Riviera, or to finance real estate deals on
beachfront property along the coast of Spain. It most certainly was not used
to pay wage arrears, support the ruble or much of anything else for which it
was intended.
Crime and corruption also have been the greatest impediments to attracting
foreign direct investment, which cannot be treated in isolation of
infrastructure modernization, shareholder rights, contract enforcement and
Russian customs, taxation and licensing issues.
Russia has been placed in the unpalatable position of depending on foreign
investment, given massive capital flight and the wholesale plundering of its
natural resources by Russia's oligarchs.
Attracting foreign investment (outside of high-risk speculative fields) is
arguably the quickest path Russia can take to recovery. This requires
nurturing a more transparent business climate, which subsequently generates
investor confidence.
Mr. Yeltsin will be lucky to survive, politically and physically, until the
presidential elections in 2000. Even if he endures to that point, he most
certainly will not be the president of the Russian Federation again.
The United States needs to examine who Mr. Yeltsin's likely successor will be,
and, perhaps most importantly, it needs to realize that Russia is not, and has
not been, on the path to reform. It has been on a road straight to economic
ruin and the criminal exploitation and usurpation of state structures.
The solutions to these problems cannot be found in textbooks at Harvard's
business school. Rather, they must be based on the ushering in of a culture
and process based on the rule of law, insulated from politics, so that
Russians can better help themselves.
This will require the professionalizing of the bureaucracy and the galvanizing
of a political will to evenly enforce the law.
If, or rather, when, the walls come tumbling down in Russia, its people are
likely to vote for anyone who has managed to disassociate himself from Mr.
Yeltsin and the farcical processes he calls "reform." This means that the
United States needs to prepare itself to deal with a new regime, and needs to
be aware of its past mistakes in dealing with Russia.
International leaders are learning a tough lesson about a Russian leadership
that continues to whisper sweet nothings such as "democracy," "free market"
and "liberalization" into receptive ears. 

*******

#10
Moscow Times
October 21, 1998 
Nemtsov Uses Web to Start Movement 
By Julia Solovyova
Staff Writer

Boris Nemtsov has taken his first step back onto the political scene, calling
on "all decent people who have a head on their shoulders" to form a movement
to counter the Communists and prevent the country from "sliding back into the
past." 
Forget old-fashioned leaflets and rallies f the so-called young reformer found
the fastest way to the hearts of the next generation of voters: the Internet. 
In an appeal posted on his personal web site Friday, he said it was useless to
expect those now in power to listen to the voices of the younger generation. 
"That's why þ we, the young Russia, have no choice but to go into politics and
squeeze out people of the past," wrote Nemtsov, 39, who lost his post as
deputy prime minister in August. 
"I believe we can help ourselves and won't have to try our luck in other
countries, escape in an intellectual underground or once again become a
'generation of janitors and night guards,'" he continued, quoting the rock
musician Boris Grebenshchikov. 
Nemtsov, who has announced plans to run for a State Duma seat next year,
invited like-minded people to e-mail proposals for the platform of his
movement, which he called Young Russia. 
Analysts had conflicting opinions on his chances of success. 
"There is a ready niche [for him]. He appeals to young, pro-Western and
liberal part of the population þ managers, bank employees and all kinds of
"white-collar workers" whom the economic crisis hit worst of all, said Andrei
Ryabov, an analyst with the Carnegie Moscow Center. "There is no doubt there
is a strong demand for a strong, flexible, right-of-center movement." 
Andrei Piontkovsky from the Center for Strategic Studies said he doubts
Nemtsov will be able to put together an effective political movement. 
"I don't see a niche for him in our political spectrum. I think this plan will
end up at the same place where all his projects as deputy prime minister are
now," Piontkovsky said. "He is starting out with mistakes." 
Nemtsov, the former governor of Nizhny Novgorod, failed to push through his
main projects during his time in the federal government. 
He advocated cleaner government, including open and competitive tenders for
government contracts and privatizations. He also ordered Russian officials to
patriotically trade in their Mercedes and BMWs for domestically produced
Volgas, and to declare their incomes. 
Official income declarations were perhaps the biggest farce of all, in no
small part thanks to evidence that Nemtsov himself was circumventing them. For
"The Provincial," an autobiography rushed into print upon his government
appointment, Nemtsov was advanced $90,000 from a publishing company owned by
Sergei Lisovsky, an advertising mogul with links to Anatoly Chubais, Boris
Berezovsky and, reportedly, organized crime. The 25,000 copies published
retailed for less than $1. 
Nemtsov, once Russia's most popular politician, was being groomed as President
Boris Yeltsin's likely successor, but he has seen his popularity plummet. 
"There is some kind of frivolity to him. He has this image of a cute playboy,"
Piontkovsky said. "He'll have a hard time in the cruel business of building
political coalitions." 
Nemtsov has invited former Prime Minister Sergei Kiriyenko, liberal lawmaker
Grigory Yavlinsky, former Cabinet member Irina Khakamada and even Kiriyenko's
predecessor Viktor Chernomyrdin to join his new movement, according to Russian
news reports. 
Analysts said it was unlikely any of them would accept his offer. 
The liberal, right-of-center forces need to be consolidated, Ryabov said, but
he questioned whether Nemtsov was the right person to be the leader. 

********

#11
From: "Marian Dent" <pericles@glas.apc.org>
Date: Tue, 20 Oct 1998 
Subject: More on Russian Fundamentals

I fully agree with Jerry Hough's reply to my letter, that laws are 
not of much use unless the positive incentives to their effectiveness--a 
political and economic system that supports those who obey the 
law--is created. I too, do not believe that any kind of Russian 
national character is responsible for the corruption that now reigns. 
That corruption far predates any IMF or other Western 
policy; but it is a shame that the said Western policies did little 
to rein it in. 
The point I was making however, was not that no blame could be 
attached to anyone in the process. The point I was making was that 
there were many worthwhile programs which had the administration's 
support. 
Indeed, as Mr. Hough states, support for rule-of-law reform tended 
to go to those who were outside the institutions that might have political 
clout, or to those who were connected with the Yeltsin administration. 
Tackling the latter catagory first, meet and greet trips were frequently 
offered to some of Yeltsin's administration members; 
but then again, in every government policy it is wise to spend a 
little time getting to know those in political power and making sure 
they get to know you. And such trips are a drop in the bucket of an 
aid budget (they should have been more considered diplomatic 
expenditures). 
Regarding the former catagory--the unconnected reformers--a 
distinction needs to be drawn between those government programs aimed 
at supporting established institutions, and those that weren't. The 
rule-of-law program was an institution supporting program. Programs 
were directed to, for example, the Constitutional Commission 
of the State Duma--which Yeltsin disbanded, and the Ministry of Justice, 
which could not, as a whole, be labeled anything but conservative--as 
well as to groups that Yeltsin supported. Thus, the rule-of-law programs 
were not all anti-institutional. On the other hand, there were programs in 
civil society that, by definition, were geared to building new, 
grassroots, civil institutions. There have also been several 
programs working with regional governments, and there have been 
programs geared to training. Altogether there was a rather complete, 
across-the-board program. 
There are individuals within every institution that were/are worthy 
of support. Not every institutionally connected scholar who deserved 
it got the favor of the Western governments, but a good number did. 
I fully believe that Mr. Hough knows a worthwhile program at Moscow 
State University that did not receive support because of a blanket label 
someone applied to the university. I have known such programs too. 
Some short sighted decisions were made based on such labels. Although many
informed decisions were also made, there was definitely a problem there.
If we are looking specifically at AID as an example (which is not
to pin blame on AID but simply because I have more experience there) 
non-support to institutional programs that needed it was not in any 
concerted plan of non-support for organizations unconnected with 
Yeltsin. There were several problems that caused this. The first problem 
was the need to expand quickly by hiring on-the-ground people from among 
security cleared individuals present in Moscow at the time. Those people 
hired often had no time available to develop knowledge of Russia's 
exceedingly complex and secretive institutions before being asked to 
evaluate a program from such an institution. Without prior knowledge 
and experience in Russia to call upon, AID program officers were forced 
to use blanket labels until they had time to develop the needed expertise. 
Moreover, while in principle, the assistance providing firms to 
which AID granted money were expected to hire experts and make informed 
decisions about the institutional programs to support, in practice, 
the more AID got pressure from Congress and the American press, 
the more AID wanted to micro-manage. The initial pressure not to support 
institutions that might function "against American interests" came 
not from the Clinton administration but from its detractors.
The micro-management problem was compounded by the fact that, 
based on a few outrageous cases and the need to find a politically popular 
issue on which to criticize government spending, AID contractors were all 
pressured not to use "highly paid consultants." Thus, many of the people 
who really had the Russia expertise needed to ensure support for worthwhile 
institutions were dissuaded from taking on the job or were driven from it. 
It was often an uphill battle to convince AID that particular programs were 
worthwhile. And frankly, the experts who were under seige from the US 
press had little incentive to rock the boat by pushing for programs that 
AID had initially naysayed. 
While the government grant giving situation was extremely 
frustrating, and Yeltsin was too strongly supported, I still do not see any 
concerted scheme in it against particular institutions. If anything, the 
blame lies in the fact that AID spending became a hot press and political 
issue back home and thus more heavily micro-managed and politically oriented
in the field. If the Clinton administration had not gotten that pressure, 
more of Mr. Hough's worthwhile programs may have been supported. 
Moving on to a new topic, I agree with Mr. Hough, and was glad he 
made the important point, that programs in law and economics need to be 
coordinated. This point causes me to recall discovering, with shock, 
that two huge economic reform programs had no lawyers on staff. 
Alternatively, there was not one rule-of-law program that I recall 
consulting with economists. Mr. Hough is absolutely correct that better 
coordination among all assistance providers was/is needed. I would be 
interested to know how anyone else views that issue. 
Also, if we are seeking out areas for improvement, more 
rule-of-law support was needed than ever occurred. The entire amount 
of money spent by Western governments in promoting democracy and 
rule-of-law, would have paid for only one or two of the 
investments made by the economic reform people. I recall that one 
year several prominent rule-of-law organizations were competing for 
the grant to be given to run AID's entire rule-of law program in Russia 
for two years. It seemed like a big deal at the time until I discovered 
that the entire amount of money awarded was less than the money made 
available to Ben and Jerry's for training ice cream factory managers in 
Karelia. 
While those assisting with democratic reform and training projects 
were pinching pennies and struggling with micro-management from their 
home governments, outrageous sums of money were poured into economic 
assistance by the IMF and others with much less concern given to the 
direction and use of the funds.
I agree with Mr. Hough's conclusion that "until . . . people with 
connections with serious institutions, come within our definition of 
supporting democracy and legal institutions as well as small groups 
and people, we are wasting our money." I think, however, that people with 
connections to "serious institutions" are already within our definition of 
supporting democracy and legal institutions. I stand by my point that we 
should not, as Ms. Williamson suggested in the letter that spurred this 
stream of correspondence, simply stop funding and take a hands-off attitude 
to Russia. We should restructure programs to provide more support for legal 
institution building, and to provide a coordinated 
effort of legal and civic reform in combination with economics. We also 
should not stop the support for grassroots/civic initiative and training 
projects that Mr. Hough criticizes. Even those relatively powerless young 
people we train today are the leaders of Mr. Hough's important institutions 
tomorrow. 

Marian Dent
Pericles International 
ABLE Project 
(American Business & Legal Education Project)
phone: 7-095-229-4940
fax: 7-095-229-1443
e-mail: pericles@glas.apc.org

********