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Johnson's Russia List


October 22, 1998   
This Date's Issues: 2443 2444 

Johnson's Russia List
22 October 1998

[Note from David Johnson:
1. AFP: Children Die in Russia at Five Times Rate of Europe.
2. AFP: TB out of Control in Russia, Warn Medical Experts.
3. Reuters: Russia economists sees little chance of IMF help.
4. Sovetskaya Rossiya: Vasiliy Safronchuk, "Sneezing Not Allowed..." 
(Yeltsin Health, Primakov Policies Viewed).

5. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Luzhkov's
Bid For Kremlin Is Kitschy, Vulgar.

6. RFE/RL: Robert Lyle, Russia: Financial Crisis Bound To Hit 
East-West Trade.

7. AFP: Aide Says Yeltsin Must Find Himself a Vice President.
8. AP: Moscow Says Loans Are Like Drugs.
9. Elena Sokova: Russian Mass Media and the Current Crisis.]


Children Die in Russia at Five Times Rate of Europe 

GENEVA, Oct. 21, 1998 -- (Agence France Presse) The number of children
killed by accidents, violence and poisoning is five times higher in the
ex-Soviet Union than in the European Union and two and a half times higher
in Eastern Europe, according to a UNICEF study published on Tuesday. 
If the mortality rates could be reduced to the EU average, some 32,000
deaths in the 1-19 age group could be avoided each year, said the study
conducted by the European Center on the Health of Societies in Transition
at the London School of Hygiene and Tropical Medicine. 
Project leader David Leon said he was shocked by the extent of the
phenomenon. The figures are most alarming in the Commonwealth of
Independent States, followed by the countries of southeastern Europe
(Romania, Bulgaria and Albania). 
In Poland, Hungary and the Czech Republic, child mortality rates are only
slightly higher than in Western Europe, according to the report. 
Poisonings primarily affect children under the age of five and are
explained in part by the absence of protective devices on toxic substances
commonly found in households.


TB out of Control in Russia, Warn Medical Experts 

MOSCOW, Oct. 21, 1998 -- (Agence France Presse) Tuberculosis is out of
control in Russia with the number of sufferers rising, medical experts have
They blame increasing incidence of the infectious, often fatal, disease on
the collapse of the health system and a lack of funds for medicines and care. 
Two and a half million Russians now have TB, according to official figures.
The figure rose by 8.5 percent in the first 10 months of the year. 
"We have seen progressive growth in the number of sick people since 1992,"
said Aleksander Khomenko, director of Russia's tuberculosis institute. "We
can no longer control the infection." 
Khomenko said Tuesday: "We can explain the current situation by the fact
that the anti-tuberculosis system has changed. 
"Before, the strategy to deal with the fight against TB was defined by the
health ministry, now this function has been transferred to the regions
which lack professional personnel," he said, adding that they also lacked
Medical staff warn treatment of TB is often hindered by patients who try to
keep their illness secret -- early treatment is often the key to a cure. 
"Tuberculosis is a social disease," said Oksana Ponomarenko, director of
the Moscow branch of the New York-based Public Health Research Institute. 
"Look around us. There are an enormous number of people who have not been
examined for years," she said. "In 99 percent of cases those with
tuberculosis are sacked from their jobs. That is why a large number of
people prefer to hide their illness." 
Russia spends just over a billion rubles ($62 million) caring for TB
patients -- that works out at just $25 per patient. The treatment for
"classic" TB costs between $50 and $100 per patient. 
However, several foreign health organizations have warned of an outbreak of
a new, killer strain of drug-resistant tuberculosis in Russia. Caring for a
patient with this type of TB could cost up to $10,000. 
The Russian republic of Altai in central Siberia on Monday launched an
urgent appeal among its citizens, saying it had run out of money and
medicine to fight tuberculosis among children. 
Altai has given its people until Nov. 30 to make donations to aid its
children's hospital. 
The republic suffers from a high level of tuberculosis, with the adult
average 1.6 times above national norms. 
Health officials said the funding channeled to fighting the disease covered
just 22 percent of needs. 
In 1997, the New York research institute received $12 million from the
Soros Foundation to fight TB in Russia. Since then, it has worked with five
Russian regions with the number of TB patients ranging from 900 in Tomsk to
6,000 in Nizhny Novgorod. More than 100 doctors have been trained in
western techniques for treating TB. 
Under the Soviet system, TB sufferers were sent to sanatoriums where the
emphasis was placed on rest, clean air and nourishing food as much as on
treatment with antibiotics -- the preferred method in the West. 
"The Russians are too attached to old-style methods of treatment, which
cost a lot more than those developed under the World Health Organization,"
said Ponomarenko. 
"The traditional Soviet method consisted of long-term care in hospital. The
doctors have problems renouncing that because their salaries depend on the
number of patients in hospital," she said. 
According to international organizations a major problem is the prison
system, where crowded and unsanitary conditions have created a fertile
breeding ground for the new strain of TB. 
In August, three international medical organizations addressed an open
letter to President Boris Yeltsin to inform him that TB was spreading
rapidly, particularly among prisoners. 
"Russia has 1 million prisoners, 10 percent of whom are carriers of a new
form of tuberculosis. 
"In certain detention facilities, particularly in Tiumen (Siberia), 40
percent of the patients are practically incurable," said Alex Goldfarb, the
Moscow representative of the Public Health Research Institute, whose
organization signed the letter along with Belgium's Medecins sans
Frontieres-Belgique and the British medical group Merlin. 
They warned then that without urgent attention, TB would become harder and
much more costly to treat and control. 
However, Tine Demeulenaere of MSF-Belgique said so far their appeal had
provoked a reaction "only in the press."


Russia economists sees little chance of IMF help
By Brian Killen

MOSCOW, Oct 21 (Reuters) - Russia has little chance of receiving International
Monetary Fund support if the government sticks to policies which are likely to
fuel inflation, liberal economist Yegor Gaidar said on Wednesday. 
Gaidar, who introduced radical market reforms when he was prime minister in
1992, said in a speech at Moscow State University that the government's answer
to its budget problems was to crank up the rouble printing presses. 
``The first steps of the government show clearly that they are not able to
implement liberal reforms and they will lead to a worse crisis,'' Gaidar said.
``With such policies there will be no new credits.'' 
But he said a concrete programme was still lacking. ``The government doesn't
want to say anything concrete about what it plans to do.'' 
An IMF delegation is due to hold talks with government and central bank
officials this week. The Fund has put on hold a $4.3 billion tranche of new
credits pending implementation of agreed policy measures. 
Alexander Shokhin, who resigned as deputy prime minister in September, also
doubted the IMF would help finance a fourth quarter budget deficit estimated
at 55-65 billion roubles ($3.2-$3.8 billion). 
``The chances of receiving money this year are very small, if they exist at
all,'' he told a news conference. Shokhin was briefly responsible for finance
and talks with international creditors in Prime Minister Yevgeny Primakov's
He said it would not be possible to receive the IMF tranche, which had been
due in mid-September, until the start of next year and it would depend on
fourth quarter economic results. 
Another leading economist, former presidential aide and ex-finance minister
Alexander Livshits, told ORT television talks with the IMF would be difficult
and the budget could not count on funds from privatisation in the near future.
``It is possible to assume that this money (to finance the deficit) will come
in one way or another from the central bank,'' Livshits said. 
Gaidar, presenting a robust defence of his liberal economic theories, said the
state's role in the economy had to be reduced, public spending cut and the tax
system simplified. 
He favoured a floating rate for the rouble, but given the lack of faith in the
currency and the danger of hyperinflation, a currency board would be more
Under a currency board, the rouble would be pegged to another currency and
cash in circulation would be linked to central bank reserves. Russian central
bank Chairman Viktor Gerashchenko has dismissed it as ``foolish.'' 
Asked what the chances were of Primakov's government giving the economy a dose
of shock therapy, Gaidar replied: ``That would be a shock for everyone.'' 
Gaidar, who freed prices during his 13 months as acting premier, lamented the
failure over the past seven years to implement liberal, monetarist policies
and get tough on tax collection with big companies like gas giant Gazprom. 
Reformist policies would have to be implemented as tough medicine would sooner
or later be needed, he added. 
Gaidar laughed when asked how he managed to destroy the former Soviet Union's
economy. ``Oh, it wasn't easy.'' 


Yeltsin Health, Primakov Policies Viewed 

Sovetskaya Rossiya
Ocotber 20, 1998
[translation for personal use only]
Article by Vasiliy Safronchuk under the "Review" rubric:
"Sneezing Not Allowed..."

Yeltsin and Sysuyev's Mother-in-Law

It can be said without exaggeration that television screens and
newspaper pages in Russia and all over the world last week were dominated
by the topic of President B. Yeltsin's health. The president's resignation
for health reasons was being demanded not only by the opposition but even
by Moscow Mayor Yu. Luzhkov, someone who stands far away from the left
flank of the political spectrum. A clearly discernible trend has emerged: 
The more the president himself, the deputy head of his Staff Sysuyev, and
the Kremlin Press Secretary Yakushkin assure Russia and the world that B.
Yeltsin is in good health, the less they are believed. In order to be even
more convincing, the president -- despite the rest in bed that has been
prescribed for him by the doctors -- sporadically appeared in his Kremlin
office, met with functionaries, and uttered incomprehensible words. At the
same time, judging by everything, the president is even pleased with the
fact that his every sneeze generates such lively interest. So as to
convince the people that questions about the president's health should not
cause alarm, Sysuyev said that he regularly asks about the health of his
mother-in-law who is also frequently ill and that there is nothing unusual
in this. It does not seem that equating Sysuyev's mother-in-law with the
president is quite the right thing to do, but there is more to it than
just that.
The president is the top official in Russia and the problem of his
health should not be the topic of empty talk and idle speculation. V.I.
Lenin -- who, as is well known, showed great concern for the state of
health of the first Soviet government's members -- used to say that a
statesman's health is a state asset and it must be protected. All
civilized countries follow this rule, and reports about the state of health
of their top officials, especially the heads of state, is public property.
Moreover, such information originates as a rule not from press secretaries
or courtiers but from a council of competent physicians who monitor the
head of state's health. It is only in totalitarian states that information
about the head of state's health is a strictly guarded state secret.

Does Russia Need Private and Foreign Banks?

Last week Ye. Primakov's government continued implementing specific
measures to lead the country out of the financial crisis and save it from
bankruptcy. It has become clear that there is no point in expecting the
government to produce any sensational program. The government chairman
declared that he has neither the time nor the desire to write "long and
useless declarations," that he is opting for the tactics of reacting
promptly to the most important economic developments, and that his
government has a general idea of what has to be done. Judging by the
statements made by Ye. Primakov and Central Bank Board Chairman V.
Gerashchenko, they believe that a bank rescue operation, as the experts
call it, is the priority task as regards saving the banking system. They
emphasize that the government intends to support only banks which are
geared not toward financial speculation but toward support for the
economy's real sector. The bank rescue program defines four tasks: 1) 
Restore the banks' efficiency; 2) Restore investors' confidence in them;
3) Safeguard the population's deposits; and 4) Restore the payments and
settlements system.
For this purpose, all Russian private commercial banks have been split
into four groups: 1) Those which managed to avoid major losses during the
crisis; 2) Those which encountered temporary difficulties but do have the
resources to continue operating; 3) Those which will probably close down
in light of their total bankruptcy; and 4) Those which are in a hopeless
situation but are not likely to close down in view of their social
importance. The last group contains only a few banks, but they are
the largest.
This may sound paradoxical, but some of the large private banks would
prefer to be nationalized because they are not in a position to settle with
their depositors. But the prime minister emphasized that he does not
intend to nationalize private banks because this would mean the state
taking on their debts. This explanation does not appear too convincing. 
After all, when banks are nationalized, not only their debts but also their
assets -- real estate, branches, and so on -- become state property.
Furthermore, the state is not at all obliged to satisfy all claims by
depositors against private banks. In addition to all that, and in the
pursuit of higher interest rates on their deposits, private bank customers
ran a risk by entrusting their funds to these banks and must bear the cost
of this risk. Why should the state compensate them at the taxpayer's
expense? This would be tantamount to asking the state to compensate the
losses suffered by citizens who lost out as a result of the MMM affair.
Instead of nationalization, the government suggests that bankrupt
Russian commercial banks should transfer some of their assets to foreign
banks in repayment of their debts.
The government perceives its second important task as being to put an
end to speculative dealings with foreign currency and the illegal outflow
of foreign currency abroad. Ye. Primakov announced that $1.5-2 billion a
month have been illegally flowing out of Russia even during the crisis. A
new trading procedure has been introduced in the foreign currency exchange
for this purpose: There are two trading sessions, one in the morning and
one in the afternoon. During the morning session foreign currency is sold
only by exporters, who are obliged to sell through the exchange at least 50
percent of their earnings, and is bought only by importers to pay for goods
being brought in from abroad. Interbank foreign currency trading is allowed
in the afternoon session for the purpose of effecting settlements between
banks and their clients. Back on 6 October Sovetskaya Rossiya warned that
thus foreign currency trading procedure is only a halfway measure and does
not prevent foreign currency speculations or the outflow of foreign
currency abroad. These fears have been fully confirmed. The morning
trading sessions set a more or less realistic exchange rate for the ruble
against the dollar, dictated by the demand for foreign currency by
importers and its supply by exporters, reflecting the real needs of foreign
trade turnover. During the second session, however, the ruble's exchange
rate is set by speculative market demand and is, as a rule, significantly
lower than the morning session's rate. This, of course, provides a
loophole for speculators and for the outflow of foreign currency. We have
repeatedly stressed that the outflow of foreign currency abroad can be
blocked only by the introduction of monopoly on foreign trade and foreign
currency settlements.

Right-Wing Policy With Left-Wing Orientation 

An analysis of the initial steps taken by Ye. Primakov's cabinet shows
that its policy is hypocritical and inconsistent. On the one hand, it seems
to be aimed at limiting the omnipotence of oligarchs, curbing their greedy
appetites, consolidating the state finances, and encouraging growth in the
economy's real sector. Addressing the Federation Council 14 October,
Primakov declared the government's intention to settle with the
budget-funded sector through the treasury, bypassing the banks, and thus
solving the nonpayments problem more quickly. He warned bankers and
entrepreneurs against tax avoidance. Ye. Primakov also promised to
instruct the Prosecutor's Office to investigate the most blatant abuses
committed during the course of privatization. Yet a day before that,
during his meeting with 28 bankers, the prime minister sharply asked them
to answer the question: How will they settle with their creditors, when,
and in what form? His question to the bankers sounded somewhat naive: What
proportion of dollars flowing abroad is transferred legally, and what
proportion is transferred illegally? They told him, of course!
On the other hand, some of the government's measures cannot but put us
on our guard. Specifically, doubts are engendered by the call for further
dollarization of the Russian economy and social sphere and by the claim
that "the more dollars there are in the country, the stronger the ruble
will be." It is estimated that the country's citizens are holding more
than $40 billion. The ruble will hardly become stronger if this amount is
doubled. It will most likely become necessary to gradually withdraw the
dollar from domestic circulation, build up the population's dollar savings
in Sberbank accounts, and guarantee their inviolability and their free
exchange into rubles within certain limits. The call to foreign banks to
accept the assets of Russian private banks in settlement of debts and gain
a foothold in banking services for the population is highly dangerous. 
Reference is made to the West's experience. Yes, there are many branches
of foreign banks in developed Western countries, especially the United
States. But they mainly service corporate accounts and conduct operations
involving foreign capital investment. They are not allowed to service the
population. The largest U.S. and European banks also have offices in
Russia, and they are doing exactly the same business as foreign banks in
other countries. If they are allowed to service the population, the
Russian currency holders will run to the foreign banks, thus opening yet
another channel for the outflow of foreign currency abroad.
Generally speaking, some of the steps taken by Ye. Primakov are
reminiscent of the advice offered by Marxist legal expert Petr Struve: 
Pursue left-wing policy with right-wing orientation. The only point is
that the current Russian Government is doing the exact opposite: It is
attempting to pursue right-wing policy with left-wing orientation. It is
universally admitted that Ye. Primakov's cabinet is a center-left coalition
government. The government chairman won the Duma's powerful backing in
September. He was thus given a vote of confidence, but only conditionally.
If he carries on leaning more and more to the right in the sphere of real
politics, this conditional vote of confidence may be wasted. A. Livshits,
former deputy head of the Presidential Staff, speaking on Radio Ekho Moskvy
12 October, revealed that "the first generation of oligarchs is receding
into history" and is being replaced by new representatives of the financial
elite. According to him, Russia is now left with no more than two oligarchs
capable of influencing policy. But they will be replaced by a group of new
oligarchs, about 10 of them, which will be formed by early 1999. It would
be nice to hear Ye. Primakov's explanations of this.


Moscow Times
October 22, 1998 
SEASON OF DISCONTENT: Luzhkov's Bid For Kremlin Is Kitschy, Vulgar 
By Andrei Piontkovsky
Special to The Moscow Times

The foggy English air seems to have a mysterious effect on Russian
politicians. After visiting Britain in December 1984, andwinning Margaret
Thatcher's approval, somebody named Mikhail Gorbachev broke off from the pack
in the race for power, and made for the finishing line. Three months later, he
became the Soviet Union's last general secretary. 
Fourteen years later, in October 1998, another British prime minister,
Labour's Tony Blair, was host to a different pretender to the Russian throne,
Moscow mayor and newly fledged social democrat Yury Luzhkov. While still in
Britain, Luzhkov publicly announced for the first time his possible
participation in the presidential elections. 
Back in Moscow, with every passing day the mayor stepped up the intensity of
his evidently well-planned campaign. Initial indications of the concept and
style of this campaign, and the level of professionalism of its organizers do
little to reassure. 
Most striking is the vulgarity and, paradoxical as it may seem, the extreme
provincialism of the mayor's team. Much has been said about Luzhkov's peculiar
aesthetic urges, as he portrays himself as a contemporary Medici, bestowing
his patronage upon sculptor Zurab Tsereteli in place of Michelangelo, and
artist Ilya Glazunov instead of Leonardo da Vinci. This passed as a forgivable
foible from a man who has generally done a good job sorting out the city's
sewage and heating systems. 
But Tsereteli's sculptures, the underground boutiques of the Manezh shopping
center and the union leaders hailing "our new president Luzhkov" from their
tribunes at the Oct. 7 protest are all organic elements of the kitsch so
characteristic of Luzhkov's team, comprised of former third-ranking
secretaries of regional Soviet Communist Party committees and nouveaux riches
who made their mint from municipal subcontracts put out by the mayor's pet
holding company, the Sistema corporation. 
They set their boss's presidential campaign rolling in the same tone. Luzhkov
now expresses his concern over President Boris Yeltsin's health on a daily
basis, showing increasing harshness and lack of respect for the floundering
president. In an interview with the BBC last Thursday he said he was still
willing to "tolerate" the president until 2000, but by the next day his
patience appeared to have reached its limits. Luzhkov spoke of the impeachment
process now under way in the State Duma and the need for Yeltsin to "find
within himself the courage to make the right decision." 
It is natural for political foes like Communist Party leader Gennady Zyuganov
to call for Yeltsin to voluntarily step down f they ran against him in the
1996 presidential elections and never hid their enmity. But people still
remember the television shots of Luzhkov throwing himself at the president
with ritual servility whenever they met, and how he used to roar "Yeltsin!
Russia! Victory!" 
It is easy to mentally splice these images together, including a close-up of
Luzhkov's eyes as he speaks about Yeltsin for the BBC with not even a hint of
warmth or sympathy, as if discussing a troublesome obstacle that must be
cleared to the roadside as soon as possible. Some blunderer in the mayor's
team decided to show the full interview at prime time on Moscow television.
That was another PR mistake, because people in Russia do not like seeing
someone being kicked by his own people while lying on the ground. It is
stylistically wrong. 


Russia: Financial Crisis Bound To Hit East-West Trade
By Robert Lyle

Washington, 21 October 1998 (RFE/RL) -- The latest U.S. trade figures paint
the picture up to the Russian financial crisis. They show that two-way
trade with the nations of Central/East Europe and Central Asia through the
end of August grew a healthy 20 percent compared to 1997. But the future
may not be so bright. 
The latest figures show that bilateral trade of over $17.72 billion was
heavier on exports to the U.S. than purchases from America. U.S. imports
from the countries of the region grew by 13 percent while U.S. exports to
the region rose just 8.8 percent. 
Broken down more specifically, however, the picture begins to change. U.S.
trade with Russia in the first eight months of this year rose nearly 40
percent to $6.629 billion and Russia's exports to the U.S. rose by 41
percent compared to the year before. 
But U.S. trade with the other nations of the former Soviet Union declined
one percent to $1,908 billion. Most of that loss was a decline in American
exports to the region. The former Soviet countries saw their sales to the
U.S. actually increase by 24 percent compared to 1997. 
Similar differences show up in the two-way trade with the nations of
Central and Eastern Europe, not including Russia, Ukraine or Belarus. Total
trade with the non-soviet East Europe countries rose 7.6 percent, but that
was made up of a nearly 21 percent increase in sales to the U.S. and a 6.8
percent decline in American imports. 
What interests everyone, however, is what will happen when the next trade
figures begin to reflect the first full month after the Russian financial
crisis, which hit August 17. 
The Director of the U.S. Chamber of Commerce's International Division for
Eurasia, Gary Littman, says it will surely be worse. He said in an RFE/RL
interview that U.S. trade with Romania, the Czech Republic, Poland and
Hungary will probably flatten or fall somewhat in the next year due to
indirect impacts of the Russian crisis: 
Littman says these countries will find it far more difficult to get trade
financing as international sources have been drying up. He says some
specific companies in the region with large exposure to Russian markets
will also be feeling a ripple effect. 
Littman says that in all the countries of East and Central Europe and
Central Asia, imports of American goods will certainly fall: 
Littman says U.S. exports to the region will decline considerably, not so
much immediately, but in November and December. At the same time, Russian
exports to the U.S. will rise because Russian producers, especially of
commodities like aluminum and steel, are rushing to unload their
inventories to quickly gain dollars. 
Littman says Russian imports of American goods will certainly drop
dramatically as well. Russia's neighbor, Ukraine, is another serious case.
Ukraine's trade with the U.S. is much smaller -- just under $715 million in
the first eight months of this year -- but that was still a solid 17
percent increase over 1997. That included a rise in exports to the U.S. of
nearly 24 percent and an increase in imports of U.S. goods by nearly nine
percent. But the outlook with Ukraine is not good, says Littman: 
Littman says Ukraine is a really difficult case because 40 percent of the
country's trade is with Russia, mostly barter and not transparent. Ukraine
has lost its major market for sugar (Russia), so it will be less able to
buy goods from other countries like the U.S. 
U.S. trade with countries such as Armenia, Georgia, Kazakhstan and
Uzbekistan is tiny when compared to that even of Ukraine, but Littman says
that it will feel some impact: 
Littman says Georgia and Armenia have successfully reoriented their trade
toward western Europe, but they do not have very diverse trading patterns
-- they depend on only one or two products like wine or cotton -- but still
should not be hit hard by the Russian crisis. 
A far bigger problem for all of the former Soviet countries, says Littman,
is the fact that the financial crisis has dramatically altered the image of
these countries in the eyes of U.S. business. 
Littman says U.S. investors and traders see all of these countries as
constituting a much greater risk than 10 months ago. So people will be more
cautious in selecting trading partners, deals will slow down and trade
volume will probably go down for the entire region just because of the
business thinking. 
Unmentioned so far is the expected additional damage to the exports to the
U.S. from most countries of the region that could be caused by the recent
expiration of a special program known as GSP (General System of
Preferences). GSP allows 149 designed developing countries to sell over
4,500 specified products in the U.S. free of tariffs. 
In 1996, the last year for which statistics are available, 15 countries in
the region sold at least 75 percent of their exports into the U.S. under
the GSP program.(Czech Republic, Slovakia, Latvia, Lithuania, Poland,
Russia, Kazakhstan, Kyrgyz Republic, Uzbekistan, Croatia, Macedonia,
Albania, Romania and Bulgaria) 
Several of those, including Uzbekistan, Macedonia and Albania, sold over 98
percent of their exports to the U.S. under the duty-free program. 
The program expired on June 30 and a bill pending in the last hours of the
U.S. Congress' session, would extend it another year, retroactive to July
1. That pending legislation has allowed goods to continue to flow into the
U.S. duty free. But if congress does not approve, the benefit will end
immediately and many countries of Central and East Europe and Central Asia
could see their exports to the U.S. hit by another serious blow. 


Aide Says Yeltsin Must Find Himself a Vice President 

MOSCOW, Oct. 21, 1998 -- (Agence France Presse) Ailing President Boris
Yeltsin must swallow his pride and find himself a vice president who can
attend to state affairs on a daily basis, a top Cabinet official declared
The suggestion by First Deputy Prime Minister Vadim Gustov cut at the very
heart of Yeltsin's constitutional powers. The Russian president in 1993
abolished the post when it belonged to arch-rival Aleksander Rutskoi, and
later attacked the parliament with tanks for disagreeing with his decision. 
"The constitution is not dogma," Interfax news agency quoted Gustov was
quoted as saying on a visit to the central Russian town of Vladimir. 
"We have taken the American constitution as a model, but they have a vice
president who works with a parliament. But we cut that part out," Gustov
Gustov, in charge of state and regional policies, said Russia must take a
"reasonable approach" to amending its constitution and endowing the
government with some powers currently resting in the presidency. 
His comments came as Yeltsin, suffering from a reported bout of bronchitis,
made a flash visit to the hospital for what the Kremlin said had been a
scheduled medical checkup. 
Yeltsin often vanishes from view for long periods and this year he has
mostly abdicated daily management of Russian affairs to his ever-changing
But while Yeltsin has ruled out running for a third term as president in
2000, he has ignored opposition calls for him to step down on health
grounds or correct the constitutions strong tilt in favor of the executive. 
Yeltsin in October 1993 ordered Rutskoi, elected vice president on the
Yeltsin ticket in June 1991, imprisoned for four months for challenging the
president's authority. 
In particular, Rutskoi denounced Yeltsin's reform program and along with
former parliament speaker Ruslan Khasbulatov, led parliament into almost
permanent opposition to the president and government. 


Moscow Says Loans Are Like Drugs
October 21, 1998

MOSCOW (AP) -- Foreign loans are like drugs that give Russia a short-term
``high'' but do nothing to develop the economy, Moscow's mayor said Wednesday
as the Russian government began new talks with the International Monetary
The finance minister, meanwhile, acknowledged the battered ruble is not likely
to strengthen this year, and a deputy prime minister admitted a comprehensive
economic recovery plan has been shelved in favor of measures to prevent a food
shortage or other crises this winter.
``These injections (of foreign loans) made our country high for a while,''
Moscow Mayor Yuri Luzhkov said.
But the IMF's failure to monitor how the money was spent meant the loans were
``totally useless for the government and the country'' and allowed the
government to ignore problems in the economy, he said.
Luzhkov, a presidential hopeful in 2000, spoke at a conference in London
promoting investment opportunities in the Russian capital.
Back home in Moscow, IMF officials began talks with Finance Ministry officials
about a $22.6 billion bailout package that was frozen after the worst economic
crisis since the collapse of the Soviet Union erupted in mid-August.
Russia has received only $4.8 billion of the loan and says it is counting on
more to pay its bills for the rest of the year. The IMF insists it first wants
to see the government's plan to cope with the crisis, and signs that it is
being implemented.
First Deputy Prime Minister Yuri Maslyukov said Wednesday that a comprehensive
recovery plan was not the government's top priority. Instead, it was focusing
on short-term measures to stabilize the economy and see the country through
the winter without food shortages or other disasters, he said.
Finance Minister Mikhail Zadornov made similar comments earlier this month.
Zadornov told Echo Moskvy radio Wednesday he expects the IMF will release some
more money this year, but not the full $4.3 billion payment that was held back
in September.
``The (long-term) program is still absent because we need time to make it
sound,'' Maslyukov was quoted by the Komsomolskaya Pravda newspaper.
``Moreover, it's still unclear how we can stabilize the economy.''
``We should first take a series of emergency steps that would allow us to
stabilize the situation, live through the winter and avert hunger,'' Maslyukov
Russia has plenty of food, but a bad 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 also has appealed for humanitarian aid from the European Union and
subsidized grain from the United States. The finance minister said Wednesday
he is very cautious about such aid, but ``maybe it will be important.''
Zadornov also said the Russian currency was not likely to rise above 17 to 20
rubles to the U.S. dollar for the rest of the year, ITAR-Tass reported. The
ruble was trading Wednesday at 17.3 to the dollar, compared to 6.2 in August.


Date: Mon, 19 Oct 1998 
From: (CRES) 
Subject: Russian Mass Media and the Current Crisis, by Elena Sokova

Russian Mass Media and the Current Crisis

Elena Sokova, Senior Research Associate and former librarian of the Center
for Russian and Eurasian Studies at the Monterey Institute, recently
returned to her native Russia. She prepared these notes on the current 
situation there on October 15, 1998.

In an earlier article, I mentioned that Russians like to complain and tell
anyone who will listen that life is incredibly hard and everything is
The media participates in the favorite national pastime and is complaining as
well. Not without reason, of course, but, as is typical in Russia, things are
not always exactly what they seem. 
There is no need to prove that most of the Russian mass media is sponsored by
the financial oligarchs in one way or another. As you can easily imagine, many
of the mass media sponsors who are in trouble now can't spend the same
money on
their media "children" any more. The processes that take place in financial
structures are repeated by those who depend on them. 
The near future will show who will remain an oligarch, which new coalitions
will be created, and which existing structures will merge. Eventually this will
lead to a redistribution among the owners of newspapers and TV channels as
well as
mergers of some publications and publishing houses. Some activity in this area
can already be seen. The first example is the extinction of Russkiy Telegraph
and the consolidation of the Izvestiya group, which now includes the finances
and human resources of Russkiy Telegraph. There is more to come. 
Editors and boards of newspapers and journals should have thought about
diversifying their sponsors beforehand, of course. Or at least learned to use
them efficiently. Despite the rise of prices for paper, cuts in advertisement
profits, and other problems created by the current crisis, I think that
newspapers and journals have had and still have a unique chance not only to
minimize losses, but to use the situation to become more independent and
In other words, the crisis provides a unique environment for the selection of
the fittest. Professionals will survive and ultimately benefit. Those who
comfortably relied on their sponsors' money are likely to perish. 
The crisis has revived public interest in the printed word and TV news
programs, and this attention has increased over time. Newspapers claim that 
they lost pre-paid subscriptions and a large part of their subscribers; I 
wouldn't argue with that. But overall circulation has increased. Even before
crisis, a very large proportion of periodicals was sold from the stands in the
streets rather than through subscription. Novaya gazeta claims that it has 
increased its circulation by 60 percent. This particular
newspaper was actually one of the more popular during the crisis. I do not
have the statistics for each newspaper or journal, but I buy newspapers every
day at the same time and the same place. Sometimes you do not need statistics 
to come to a conclusion. 
It is enough to compare the number of newspaper distributors and the choice of
newspapers that they offer to say that overall circulation of newspapers has
almost doubled since August 17. During the first week of panic it was actually
rather difficult to find newspapers, especially the more popular ones. It took
probably a week or even longer for most of them to realize that they should use
this momentum and increase the run. The prices for most newspapers went up as
well, generally by about 50
percent. Only the newspapers funded by city or federal budgets didn't change
their prices. Surprisingly, the "independent" Nezavisimaya gazeta (the name
means "independent" in Russia) joined their ranks. It still costs one ruble
even as Communist and opposition newspapers had to adjust their prices. 
Television news programs are attracting more viewers as well, compared to the
pre-crisis period. I bet that if someone had counted the number of viewers
during the second and the third votes on the prime minister this fall, the
number would have been on the same order as the number of viewers of the first
Congresses of Peoples' Deputies or the August 1991 events. In 1989 everyone was
glued to their TV sets, afraid to miss the first free parliamentary debates in
70 years and, actually, the first-ever televised free debates (after all, there
was no television before 1917). In 1991 everyone was trying to guess which
way the country was going. 
This craving for information is very high. Expert opinions and competent
recommendations are in great demand. Those who can capitalize on this craving
efficiently will not only survive, but have much better prospects than they had
before. This is also true for the "establishment" newspapers and journals with
professional staff. 
Above all, we probably do not need so many periodicals. From 1993 to 1997, the
number of periodicals grew from 13,576 to 21,025. Some of them are of such
poor quality that probably no one will notice if they disappear. But in Moscow
alone you can count about 15 newspapers that have potential and already
claim to be
national papers-analogs of the New York Times or the Wall Street Journal in
the United States. I don't think anywhere else in the world has such a large
number and variety of
newspapers claiming to be of national scale in one city. I like the
variety, but I don't think we can afford to have it at the current rate. 
On October 14, the Upper Chamber of the Federal Assembly passed a bill on
support of the mass media that keeps current tax, customs, and other financial
privileges for the mass media until 2001. I do not think that the Russian mass
media, which also used to live off the money of their sponsors, needs to have
such privileges. Both these factors, privileges and sponsors, are addictive
and lead to financial infantilism. In the long run, it will be bad for them. --
Yesterday I attended a news conference at the National Press Institute that
was devoted to the crisis in the Russian mass media. The main thesis of the
dialogue that took place at the conference was: "More than anything else, the 
current crisis is a crisis of mass media management, or the lack thereof." 
Periodicals that have solid management are more flexible, they have already 
found ways to redistribute their budgets, and are using new opportunities to 
offer new products to satisfy the information hunger, making a profit from it. 
Others, like Russkiy Telegraph, which I personally liked a lot, are history
The above reflections are true mostly for the central press, though. The
situation is different for regional and local newspapers. They are less
dependent on big commercial money, on the one hand. On the other hand, as a
result of the devaluation of the ruble, they can't afford information
agencies' news services, Internet access, and quite often they even cannot 
buy paper. Thus, they have become less informative and are losing customers. 
The National Press Institute proposed a plan to solve some of these
problems. It offered to serve as a liaison among newspapers to accumulate 
and spread information about effective solutions and possible ways to overcome 
the problems that have emerged under the crisis conditions. At the same time, 
the Institute offers some Soviet-style prescriptions, such as "we'll find you
the cheapest paper in your region" or "we'll try to convince Interfax and other
news agencies to provide you services
for free or at discount rates." The Institute would probably do better to
provide them with knowledge and expertise in anti-crisis management and
grants to support access to the Internet and news agencies for regional and
local media. The grants should be provided only to periodicals that can prove
they work professionally and have good management. Those who lack the latter
should be offered management classes first. This is, in my opinion, an area
where the Institute and other
organizations and foundations that operate in that area can and should help.
Besides, I do not think Interfax is immune to the crisis. Why should it
serve as a charity organization? 
Generally speaking, poor management or the total lack of management is,
probably, the main problem in Russia. This is not a new idea. The problem has
been urgent for quite a while. Unfortunately, it is still high on the agenda.
Different Western foundations and organizations that generously paid for the
education of Russian professionals in Western universities were and are doing a
lot in this area. But, first of all, the numbers of graduates of Western
schools is not sufficient, given the total illiteracy
of the entire country in market management. Second, those graduates in most
cases find jobs at Russian branches of foreign firms or foundations instead of
going to remote places and businesses. Or, after the required two years of
employment in their home country, they find jobs in the West. 
To change the situation, education should be shifted to the territory of
where it could reach a much broader audience. The professors and teachers,
though, should be highly professional. The times when Russians viewed any
foreigner as a wise prophet capable of teaching the infinite wisdoms of market
economy is long past. More and more, people can tell a good professional
from an amateur. The latter are either chased out or, more likely, used to
"suck" the money out of Western foundations or governments. I recall an 
article in "Fortune" about so-called American experts in business training
who worked in Central Asia. The author, a
recent US graduate in an area that had nothing to do with business
administration, was hired to teach the locals things he had no knowledge of
himself. He was paid a salary he could probably expect after 20 or 30 years
of a successful career in his home country. 
Such cases are becoming increasingly rare, but they have already had their
effect. In addition, an increasing number of Russians have acquired education,
or experience, or both. If you want to be of real help and affect the
course of things, you should take it seriously and use the same standards as
you would for your own country and citizens. Otherwise, you just waste time 
and money and spoil and mislead your students. 
The changes in ownership and management in mass media can also put an end
to the
information war many newspapers and journals have engaged in since the fall of
1997. Mass media in Russia used to be considered as a fourth branch of power,
especially in the late 1980s and the early 1990s. It is still very influential,
but is trusted much less. It became an outlet for misinformation and
compromising materials to discredit political and business opponents. If such
material is published, few would regard the journalist as a muckraker any more: 
the first question to be asked is qui bono, who benefits. From that point of 
view, as one of the participants of the above mentioned press-conference said, 
"if there weren't a crisis, one should have been created." 



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