October 26, 1998   
This Date's Issues: 2445 • 2446• 

Johnson's Russia List
#2446
26 October 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Recluse Solzhenitsyn makes rare public appearance.
2. AFP: Gorbachev Calls on West to Support Primakov.
3. Washington Post: Fred Hiatt, Lots of Bright Ideas For Russia.
4. James Voorhees: A footnote on Russian fundamentals.
5. Peter Clateman: Re Gaddy & Ickes and "value destruction."
6. Moscow Times: Gary Peach and Matt Bivens, NEWS ANALYSIS: Primakov's 
Six Weeks Magically Confused.
7. AFP: Yeltsin's Heart Op to Be Televised.
8. Boston Globe: Charles Radin, Gorbachev lost his empire, but not his 
stardom. Cheers greet ex-USSR leader during a visit.
9. Financial Times (UK) editorial: End game for Yeltsin.
10. Reuters: Paul Taylor, ANALYSIS-Economics trips up U.S. Caspian 
policy.
11. Washington Post: Sharon LaFraniere, Capitalist Reality Comes Home 
to Roost in Russia. (Excerpt)]

******

#1
Recluse Solzhenitsyn makes rare public appearance
By Adam Tanner

MOSCOW, Oct 26 (Reuters) - Russia's most celebrated living writer, the
reclusive Alexander Solzhenitsyn, made a rare public speech on Monday, but
focused on 19th-century writer Anton Chekhov rather than the country's
economic crisis. 
``Yes, I come out only rarely,'' he told Reuters when asked about Russia's
latest troubles. ``But this is not the time or place for that.'' 
Solzhenitsyn, winner of the 1970 Nobel Prize for literature, returned to
Russia in 1994 after 20 years in exile in the United States. He was expelled
from the Soviet Union for his dissident writing. 
He is largely ignored in the new Russia despite his commanding literary
reputation. 
His latest book, ``Russia in Collapse,'' an indictment of post-Soviet
capitalist life and its political leadership published earlier this year, had
a print run of only 5,000 copies. A television talk show he hosted was
cancelled in 1995 for lack of viewers. 
On Monday, Solzhenitsyn, wearing a army green coat and cap, spoke before
several hundred people in central Moscow at a ceremony unveiling a monument to
Chehkov in front of a 100-year-old theatre bearing the the earlier writer's
name. 
With his traditional Russian long beard, Solzhenitsyn looked at home on the
street lined with restored 19th-century buildings. 
Only once did he seem to draw a direct parallel between Chekhov's literary
world and the Russia of today. 
``In 'Svirel' (Reed Pipe) an old man mournfully foresees the destruction of
nature and predicts the end of the world,'' Solzhenitsyn said on a brisk and
sunny autumn morning. 
``This prophetical tale was 70 years before the first ecological alarms and
110 years before our current situation.'' 
Instead of hanging on his every word, the crowd did not seem unusually
enthusiastic about Solzhenitsyn, whose banned works Russians once read avidly
and passed among trusted friends. 
Some people even talked among themselves during the writer's short speech. 
After the tribute to Chekhov came to an end and Moscow mayor Yuri Luzhkov had
led a tour past posh boutiques on the restored pedestrian street, Solzhenitsyn
and his wife Natalia quietly slipped away, declining to speak with well-
wishers. 
The author of ``A Day in the Life of Ivan Denisovich'' and ``Gulag
Archipelago'' turns 80 next month, but has given no indication of any late-in-
life interest in politics or higher-profile involvement in Russian public
life. 
``When you are 80, it's too late to start something new,'' he said in April. 

*******

#2
Gorbachev Calls on West to Support Primakov 

NEW YORK, Oct. 26, 1998 -- (Agence France Presse) Former Soviet leader
Mikhail Gorbachev on Sunday called on Western leaders to support
the government of Russian Prime Minister Yevgeny Primakov in the country's
financial and political turmoil. 
"If half of the support that was given to those who destroyed the economy was
given to this team, it could save the situation," Gorbachev told a press
conference. 
"Any kind of foot dragging by the IMF (International Monetary Fund) and the
West is wrong, and right now we have a team that understands what needs to be
done," Gorbachev said. 
Last week, Russia's broke government rubber-stamped a crash budget to get the
country through the next three months, with a large deficit which ministers
hope will be at least partly filled by IMF money. 
"Those people have chosen democracy and understand the need for market
economy," Gorbachev said. 
Under the accord reached by Russian and IMF officials, on Tuesday Russia will
give the IMF its plan of emergency measures to pull itself out of its economic
crisis. 
Gorbachev and former Israeli Prime Minister Yitzakh Shamir were guests of
honor at a gala dinner here to celebrate the 10th anniversary of Operation
Exodus, the emigration of hundreds of thousands of Soviet Jews to Israel. 
Shamir refused to comment on the Wye River memorandum, the interim Middle East
peace agreement reached last Friday after nine days of intense negotiations
between the Palestinian and Israeli sides, brokered personally by President
Bill Clinton.

*******

#3
Washington Post
October 26, 1998
[for personal use only]
Lots of Bright Ideas For Russia
By Fred Hiatt
The writer is a member of the editorial page staff. 

One of the lowest of Russia's many recent low moments came when Prime Minister
Yevgeny Primakov proudly announced that he had no plan to rescue his country
from economic crisis.
His announcement was an effort to soothe public outrage at his Communist
deputy's economic proposal, leaked to the press, that called for return to
Soviet-style controls. That's not what he had in mind, Primakov assured the
Russian people; in fact, he didn't yet have anything in mind. Now more than
two months after Russia's economic collapse, Primakov still has no plan.
But Russia's drifting does not, as Americans sometimes assume, reflect an
absence of good ideas in Moscow. The problem rather is that no one can agree
to carry out these good ideas. Since 1991, in other words, what has been
missing is political consensus, not economic wisdom. And today, the prospects
of achieving consensus seem dimmer than ever. Capitalism and free-market
reforms have been discredited, but -- and to a large extent we should be
grateful for this -- there is little support for any ideology or strategy to
take their place.
No doubt in many ways Russia has returned to the bad old days of 1991-92. Once
again officials are worrying about winter starvation and social unrest.
Russia's banks have defaulted on some debts, and the government is likely to
default on more soon. Hundreds or perhaps thousands of Russian truck drivers
are stranded across Europe, according to Interfax, because no one can pay for
the goods they are supposed to bring home. The number of people living below
the poverty line swelled from 32.8 million in August to 44.4 million in
September -- 30 percent of the population, according to official statistics.
But in 1991-92 many people at least believed that life would improve shortly.
Today almost no one has hope. It is hard to visualize any plausible scenario,
no matter how unlikely, that would shift the momentum in the next couple of
years.
This is not because no one has any answers. Just the other day, Dmitry
Vasiliev, a young reformer who now heads Russia's Securities and Exchange
Commission, came through Washington touting a recovery plan that is well
thought-out in principle and in specifics. Vasiliev recently tendered his
resignation but was persuaded to stay in office, he says, when Primakov agreed
to three of his four essential principles for short-term crisis management: no
renationalizations; equal treatment for all creditors, foreign and Russian;
and bank rescues to protect depositors, not financial oligarchs. (His fourth
condition -- that Russia should not hyperinflate its way out of the crisis by
printing zillions of rubles -- remains under debate, Vasiliev says.)
But Vasiliev's suggestions go beyond the immediate crisis to a package of
banking, tax and regulatory reform that he says would reduce corruption and
promote economic growth. It's difficult to listen to him without feeling
respect, at the intellectual clarity, and despair, at the odds his plan -- or
any other like it -- would seem to face.
"The problem in Russia is not intellectual," Poland's Deputy Prime Minister
and Finance Minister Leszek Balcerowicz said recently. "There are plenty of
people in Russia who know what to do. The problem is how to create a political
base."
Balcerowicz managed Poland's successful economic reforms after communism in
1990-91, and he is back in office now after a turn in opposition. He is
usually quite sure of himself, and usually with good reason, and he scoffs at
those who argue that Polish-style shock therapy couldn't work in Russia.
"It's not that reform was right in Poland and wrong in Russia," he says. "It's
that reform was only tried in Russia for six months."
He means that political opposition -- from unreconstructed Communists,
managers of unprofitable factories, money-draining collective farms,
pensioners nervous about their future and more -- derailed and diluted Russian
reform early on. But ask what Russian reformers should or could have done
about this, and Balcerowicz, rarely at a loss for an answer, has none.
Poland's reformers, after all, could trade during the early, painful years of
transition on Poles' exuberance at independence, on Solidarity's hard-won
credibility and on the luxury of having someone else to blame -- namely,
Russia. Russians had only themselves to blame; they were not exuberant but
rather mourning or at least bewildered at their loss of empire; and their
dissidents -- particularly after the death of Andrei Sakharov -- lacked the
experience and confidence to become leaders.
Understanding these disadvantages, Russia's reformers pushed rapid, mass
privatization, hoping to create a class of shop owners and stockholders that
would provide political support. But the reformers, who were aloof and inept
at politics, failed to cultivate this potential base. They squabbled among
themselves, and they were deserted at key moments by an ailing and inconstant
Boris Yeltsin. And the absence of political reform -- of a rule of law, clear
regulation, independent courts -- deformed the economic changes in which they
put their hopes.
All of this matters not just for history but also because one day -- perhaps
under Primakov, more likely after the Yeltsin era -- Russia again will face
the challenge of promoting economic reform with dubious political support, or
promoting political reform in difficult economic conditions or somehow making
political and economic reform move in tandem. It is a challenge for many
countries in transition, one that nobody has entirely figured out.

*****

#4
Date: Thu, 22 Oct 1998
From: James Voorhees <voorhees@bellatlantic.net>
Subject: A footnote on Russian fundamentals

Jerry Hough and Marian Dent rightly decry the lack of support given by 
AID to the development of political and legal institutions in Russia, 
but there was at least one exception to this. The Congressional Research 
Service ran an AID-funded program of support to the Russian 
parliament--both houses--from 1994 through 1996. (This is not a 
disinterested post--I worked on the program.)
The program was designed to make the legislature more effective, mainly 
by strengthening legislative support services, particularly those that 
provided information to members. It included seminars for members and 
staff about approaches to such matters as legislative drafting and 
procedure that are arcane but essential to how a legislature functions. 
We also supplied computer hardware and software (the CRS program gave 
the parliament its first e-mail connections), and books and serial 
suscriptions.
The program, like CRS, was nonpartisan. It reached members and staff 
across the spectrum of parties represented in the Duma and Federation 
Council, including the LDP (which was anathema to some parts of the US 
government).
The program was small ($2 million in AID funds)and it was unusual in 
that it was run by a legisative branch agency (after all, Congress is 
Washington's 800 pound gorilla) and its roots lay in contacts with the 
Russian legislatures made as early as 1989. It does not, therefore, 
stand as an argument against the conclusions about the inadequacy of the 
US aid program reached by Hough and Dent. It was, nonetheless, a not 
insignificant effort to create the institutional foundations for a 
durable democracy in Russia.

James Voorhees
11219 Orleans Way
Kensington, MD 20895
301/946-4674
voorhees@bellatlantic.net

*******

#5
Date: Fri, 23 Oct 1998
From: "Peter Clateman" <pclatema@skadden.com>
Subject: Gaddy & Ickes

Some more small change on *value destruction*:

I found that Gaddy & Ickes article on Russia's virtual economy, available
on the Brookings Institute website, provides a very good framework for
discussing the Russian economy. However, it does assert without elaboration
that almost all of the Russian economy is value destroying. It¢s one thing
to assert this and leave the evidence for discussion elsewhere; it¢s another
thing, however, to assert this without delimiting the concept of *value
destruction* itself. Perhaps the failure to limit what we are talking about
in the search for value destruction is the reason discussion in the JRL has
become so heated and also unfocused.
The search for *value destruction* really must be given limits if it is to
have any meaning. In its most open ended form, it is a matter of industrial
policy. In this context, we can postulate *world markets* for every good
and service as well as raw material inputs to provide the backdrop for
determining the efficiency of any production, including the opportunity
costs foregone by any seller of finished products or provider of raw
materials. Ultimately, any industry or company in any country which does
not enjoy productive parity or comparative advantage with the same industry
in other countries is value destroying under these parameters. Yet what is
a *comparative advantage* must also be scrutinized, as comparative advantage
may merely be the result of past investments that have not been taken into
account. Even under a broad *industrial policy* analysis, some decisions
must be made to decide what part of the world is *given* to the analysis and
what part of the world is viewed as part of the economic plan.
G&I assume that Gazprom (which I assume is synecdoche for the entire
energy and natural resource sector) is the main value creator in the Russian
economy. However, by the same *value destruction* argument that says that
Russia should get out of manufacturing (Ickes comment in JRL 2435), Russia
should also probably get out of the business of pulling resources out of the
ground itself and just license everything to more efficient foreigners. If
politics were such that the licensing fees and taxes forgone could be viewed
as opportunity costs (and maybe they should be), then Gazprom is a value
destroyer.
I think G&I mean to address value destruction from the vantage point of
enterprise managers operating in the context given to them (value
destruction=losing money), but at times this seems to get out of focus and
veer into the industrial policy realm both in their article and in the JRL
discussion about the article. Nevertheless, I would need some more
convincing to believe G&I¢s main assumption¯that virtually all Russian
enterprises in the non-resource sector are value destroying (losing money)
if accounting tricks based on barter are eliminated. The companies that I
have dealt with (other than those forced to produce without payment¯UES and
the *energos* for example) are either making money or not producing (rather
than racking up losses). Clearly there are many companies that are bankrupt
and cannot produce profitably, yet do not go away. But these seem to be in
the situation of the company described in JRL 2439 (Article 11 on the Rubin
TV factory). Such companies, from what I¢ve seen, don¢t continue to produce
*value destroying* goods, but rather lease out buildings or machine
equipment or use their production facilities in limited ways to produce
marketable goods. Such activity is only *value destroying* if you take
into account the cost of the underutilized fixed capital on its books or if
such activity is conducted while foregoing a real opportunity (once in a
blue moon) to revamp the facility. I¢ve seen plenty of companies renting
out factory or warehouse space for various purposes or producing simple
furniture in their once-high-tech machine shops exactly because this is the
only activity they can do that is not value destroying on even a marginal
cost basis.
In general, I think that G&I do not give proper placement to corruption
and tax evasion (rather than hiding value destruction) for the prominence of
barter. Corruption is also a reason that bankrupt firms that carry on only
marginally value-producing activities are not liquidated¯management can skim
from a positive cash flow without being held responsible for the shameful
waste of fixed capital or missed opportunities to restructure that have been
foregone simply because management may be displaced.
I am also puzzled by another assumption in the G&I article¯that inflated
barter prices contribute to tax evasion. Clearly, if the government accepts
goods in lieu of taxes, if the price of the goods paid is inflated the
actual tax burden is decreased. My understanding is that in-kind payment of
taxes is prominent mainly in the resource sector (so value creation in THIS
sector may be overrated), but I have never heard of it being that widespread
in those areas that G&I consider to be most value destroying¯manufacturing.
More common is barter among private parties. In this context, as I
understand it (and have seen it done), isn¢t it better to put a falsely LOW
value on the goods traded to avoid taxes?

*******

#6
Moscow Times
October 24, 1998 
NEWS ANALYSIS: Primakov's Six Weeks Magically Confused 
By Gary Peach and Matt Bivens
Staff Writers

The prime minister asked the world to send food; the finance minister said not
to bother. Newspapers reported the government had an anti-crisis program; the
government responded angrily that this was a lie and reassured the world it
had no program at all. And while there has been talk of the most extreme
measures imaginable f from outlawing the U.S. dollar to monopolizing the
alcohol trade to offering cheated Western investors decades-old Nicaraguan-
Soviet debt as a consolation prize f only the most timid and contradictory
steps have been taken at all. 
Six weeks ago to the day on Friday, Yevgeny Primakov was approved as prime
minister. "Do not expect quick results if you confirm me. I am not a
magician," he warned on the eve of his Sept. 11 confirmation vote at the State
Duma. It is indeed still difficult to point to results f assuming that
"results" means "improvements." 
But the performance has been that of a magician f complete with disappearing
ministers, escape artist oligarchs, and an exchange rate sleight of hand at
the Moscow Interbank Currency Exchange, or MICEX, where the government
restricts trading and so can artificially fiddle with the results. The ruble
even strangely and obediently levitates about once a month, always in the days
before batches of dollar forward contracts come due. 
Primakov took charge at a time of absolute chaos. The government, broke, had
just admitted it would not be able to pay the $40 billion in ruble-denominated
obligations it owed by year's end to Russian and Western holders of its high-
yield treasury bills. Nor would it be able to prop up the ruble at its proud
rate of six to the dollar. 
Treasury bills were frozen. The default crashed the Russian banking system,
and scrums of frustrated depositors gathered outside Moscow bank offices. The
ruble plummeted faster than has any national currency in recent world history
f until a September ruble was buying just a third of what an August ruble had
bought. Prices rose, notably on imported food, and grocery shelves became
barer. 
The default also handed Western financial institutions losses of more than
$100 billion, the London-based Fitch IBCA rating agency said in a report last
month. If Fitch is correct, that would make Russia 1998 the largest single
credit loss ever taken by the international banking community f dwarfing even
the Mexican peso collapses and the Latin American debt crises of the 1980s and
1990s. The Mexican and Latin American meltdowns had concentrated huge
potential losses in the biggest banks in the United States and so put the
world financial system in danger. As a result, the International Monetary Fund
and the U.S. Federal Reserve rapidly organized bailouts. 
By contrast, Russia's far larger losses were less damaging to the system
because they were spread across a far broader spectrum of investors, Fitch's
report said. 
But Russia is not necessarily through falling, and it may still take many a
foreign investment down with it. The treasury bill default was about just $40
billion in ruble-denominated debts f but Russia owes another $150 billion in
hard currency to the rest of the world, including another $3 billion by year's
end, and a dangerous crunch awaits in 1999 of $19.2 billion in interest and
principal. Meanwhile, the country's three largest cities f Moscow, St.
Petersburg and Nizhny Novgorod f have their own dollar-denominated Eurobond
debts, and Nizhny Novgorod is also on the verge of default. 
The Primakov Cabinet seems unprepared to deal even with short-term woes, much
less with the muted horror that is this longer-term debt. 
Primakov was always frank that he knew little about economics. In his first
tentative steps he brought in two Soviet-era managers f Yury Maslyukov as his
top deputy on economic policy, and Viktor Gerashchenko to head the Central
Bank. 
Maslyukov was a particularly worrisome choice: A former head of the Soviet
central planning agency, Gosplan, he was a co-author of an economic plan
presented in 1996 by Gennady Zyuganov, the Communist Party chief, that called
for the eventual mass nationalization of the economy. Since his appointment,
barely a week has gone by without Kommersant Daily or Interfax shrilly
reporting that Maslyukov is contemplating some or another coercive measure f
to monopolize trade in the U.S. dollar, to monopolize the banking system, to
monopolize the alcohol industry. 
Maslyukov has denied considering some of the more extreme measures attributed
to him. But according to Kommersant Daily, Maslyukov is actually being
frustrated by a trio of right-thinkers. These are Primakov, the liberal
Finance Minister Mikhail Zadornov f and Kommersant Daily itself, which has
whipped up public hysteria by publishing supposed drafts of wild-eyed
government programs. 
As a counterweight to Maslyukov, the prime minister tapped Alexander Shokhin,
an ardently free-market politician, as another deputy. Shokhin made confident-
sounding noises about wooing back Western investors, but in trial balloons he
offered them boneheaded sweeteners f such as a chance to let them trade
worthless treasury bills for vouchers to use in future Russian privatizations.
He also suggested that other nations Russia owes billions to might instead
accept securities based on Cold War-era debts that the Third World owes
Russia. 
The IMF was unimpressed, and distracted with its own crisis f trying to get a
truculent U.S. Congress to extend it another multibillion credit line. After
just 10 days in office, Shokhin resigned. 
Amidst this chaos, Sverdlovsk governor Eduard Rossel walked out of Boris
Yeltsin's office earlier this month claiming that the president liked his
suggestion that Russia outlaw the U.S. dollar on its territory. Public
reaction was an earthquake. The head of the Kremlin administration, sensing
the first tremors, had to summon reporters back within 15 minutes of
Sverdlovsk's remarks for a damage-control session, and Primakov went on
television to reassure the country the dollar was not to be touched. 
That was actually a rare moment of unified, purposeful action. 
More typical has been the sight of Primakov calling on the European Union to
supply food aid while Zadornov counters that it is not necessary. Or the
claims by the Prosecutor General's Office that the entire financial crisis may
be a criminal plot. "Not everything is clean there," said Prosecutor General
Yury Skuratov last month in announcing his investigation of the Kiriyenko-era
Central Bank. 
Although at first stunned by the crisis, Russia's oligarchs, meanwhile, seem
set to thrive amidst the government's aimlessness. Gazprom has struck
attractive barter deals on its tax debts, while the oil companies have
successfully ganged up to defeat Zadornov's talk of taxing them more heavily. 
Even the bankrupt banks seem unsinkable. When the Central Bank floated them
loans to pay off their depositors, the banks paid no one and with impunity
bought dollars. When the Kremlin sought to impose temporary adminstration on
the two retail banking giants, SBS-Agro and Inkombank, overnight civil court
cases materialized to block that. Since then, the leading oligarch-bankers
have met with the Cabinet f and emerged to express approval for a bailout plan
that looks likely to save the big banks by taking over their liabilities. 

******

#7
Yeltsin's Heart Op to Be Televised 

MOSCOW, Oct. 26, 1998 -- (Agence France Presse) Russian television is to
broadcast a quintuple heart bypass operation undergone by President Boris
Yeltsin in November 1996, the daily paper Segodnya said Saturday. 
The 52-minute report will also present interviews with members of the
president's family, his personal doctor, former Prime Minister Victor
Chernomyrdin and his former spokesman. 
The program, called simply "Heart Operation," comes at a time when speculation
about the 67-year-old president's health is rife. 
Yeltsin himself is fed up with the constant speculation over his ailments and
feels hurt that even close former allies have deserted him and fanned the
flames of gossip about his health, an aide said Friday. 
Kremlin spokesman Dmitry Yakushkin told journalists that the rumors, according
to which the president is on his last leg and has suffered from everything
from another heart attack to brain spasms, cancer and a stroke, were only
making it harder for Yeltsin. 
The president appeared puffy and tired, with huge bags under his eyes, on
Russian television Friday as he was pictured meeting officials in the Kremlin.
Yeltsin often vanishes from view for long periods and this year he has mostly
abdicated daily management of Russian affairs to his ever-changing
governments.

******

#8
Boston Globe
26 October 1998
[for personal use only]
Gorbachev lost his empire, but not his stardom 
Cheers greet ex-USSR leader during a visit
By Charles a. Radin, Globe Staff

Mikhail Gorbachev was undisputed ruler of 290 million people. He headed the
most powerful political organization in the world, and his countrymen thronged
the streets to cheer when he passed. 
Then he lost it all. In the 1996 elections for the Russian presidency, he got
less than 1 percent of the vote. The last leader of the Soviet Union became,
historically speaking, a dead man walking. 
But another Gorbachev - Nobel Peace Prize recipient, Pizza Hut pitch man,
terminator of the Cold War - is very much alive, and, despite his unpopularity
at home, still very much a hero to Americans. 
From his unannounced arrival at Logan International Airport late Friday night
for a conference hosted by Northeastern University, through his departure
yesterday for New York, he evoked awe and applause wherever he came in contact
with the public. 
``The dog is barking, the wind is blowing, but the caravan is pushing ahead,''
the 67-year-old Gorbachev said in an interview, using a proverb to acknowledge
and dismiss the idea that he has been rejected at home. ``I've taken my blows,
and I've made my mistakes ... but I have kept to my commitment to freedom and
democracy. ... I have experience, I have strength, and I believe I have a lot
to say.''
Gorbachev looked little changed from his days at the center of the world
stage, from the mid-1980s to the early 1990s, except that the distinctive
birthmark on his head was muted by his Miami Beach suntan, and he is balder.
He still projects a persona at once imperial and charismatic, determined but
sensitive. 
His grueling pace, his principal themes, and his passion suggest a man stung
by the notion that his time has gone, and driven to prove it false.
Northeastern's conference center in Weston was Gorbachev's 10th US stop since
Oct. 8; the itinerary has been packed with speeches, town meetings, and
awards. 
``You have to grow into being the ex-president of the United States or the ex-
leader of the Soviet Union,'' says Douglas Brinkley, professor of history at
the University of New Orleans and author of ``The Unfinished Presidency,'' a
biography of Jimmy Carter. ``The change is so extreme. [Ousted leaders] go
from the pinnacle of power to the basement of private citizenry. ... They go
through despair, withdrawal, bitterness, particularly if they leave the way
Gorbachev or Jimmy Carter did. Gorbachev and Carter were in their 50s, they
had a lot they wanted to do, and they were driven from power.''
Both Gorbachev and Carter were in financial distress when they left office,
too, he notes, and had to reorganize and refinance their lives. 
``Gorbachev didn't do the Pizza Hut commercial because he likes thin crust and
Pizza Hut toppings,'' Brinkley said. ``He knew it wouldn't reflect well on his
record. He did it because he needed the money if he was to stay active
internationally and develop his foundation.''
Reports indicate Gorbachev received nearly $1 million for the Pizza Hut ad,
which aired starting last January. His speaker's fee is rumored to be well
over $50,000. All of it goes to the Gorbachev Foundation, which has about 70
employees in Russia, according to those in his eight-member entourage. The
Gorbachev Foundation of North America, headquartered at Northeastern, has
three employees and is funded through donations. 
After an ousted leader gets his house in order, ``then comes the legacy
part,'' Brinkley says. ``You start telling yourself: `Journalists don't get
it, but historians will treat me better.' Once you believe that, it gives you
the power to pick up and go on. From then on, you're doing things with history
in mind.''
Gorbachev clearly has current politics as well as history in mind. 
``By what I did, I left a trace,'' Gorbachev said, sitting on the edge of his
seat, intent, gesturing frequently with his hands. ``People value that the
Cold War is over, that the nuclear arms race is over.''
He hopes this gives him some ability to encourage Americans to embrace his
country - not by giving money, he says, but by extending cooperation and
understanding. 
``The Russian issue is not just for the Russians,'' he said, making an appeal
for support of the new government being formed by Prime Minister Yevgeny
Primakov that surprised some American participants in the conference. 
``If the government of Yevgeny Primakov fails, then we could get on our hands
a dangerous team,'' Gorbachev cautioned. ``If [the embattled Yugoslav region
of] Kosovo is important and serious, then Russia is a thousand times as
serious.''
Russians and Americans alike say Gorbachev has changed as he has learned to
cope with his post-leadership role. 
``He is more reasonable, more effective, probably more tough,'' says Oleg
Bogomolov, who was an economic adviser to Gorbachev and now advises Primakov.
Bogomolov and Victor Kuvaldin, a longtime political operative for Gorbachev,
both believe Gorbachev's popularity is beginning to recover in Russia. 
``Now is not the best time to make judgment, because we are living in the
aftermath of a catastrophe,'' Kuvaldin said. ``Some people blame him because
he started the transformation. But more people are starting to say he was
basically right.''
Marshall Goldman, associate director of Harvard's Davis Center for Russian
Studies, does not see that turnaround yet, but he says Americans should pay
their respects and give their attention to Gorbachev nevertheless. 
``Why should we care? In part out of gratitude, and in part because they are
calling in his people,'' Goldman said, pointing out that allies like Bogomolov
seemed headed to renewed prominence in Russia even if Gorbachev does not. 
``Gorbachev, I criticized him, I disagreed with what he was doing, but he
deserved the Nobel Prize,'' Goldman said, ``and he still has interesting
ideas. I want his ideas to have exposure and for him to have respect. I wish
Harvard were doing something like this. 
``He's made all our lives, my children's lives, my grandchildren's lives
different, and better.''
That was clearly a widely held view as Gorbachev made his way across the lobby
of the Westin Hotel in Waltham yesterday, en route to an Israel bonds dinner
in New York. He did not get a dozen steps out of the elevator before he was
stopped, first by Russians who spoke quietly and warmly with him, then by
cheering Americans. 
``Gorbachev!'' ``Gorbachev? You're kidding.'' ``Wow!''
Heads turned. ``That's incredible,'' said one woman, giving a boy who looked
to be her son a poke in the ribs. ``Take his picture!''
Gorbachev wowed 'em as he made his way to his black stretch limo, smiling and
waving. 
``That was pretty neat,'' a woman in a sweatshirt said to her friend as the
limo turned out toward Route 128. ``He's very approachable.''
``Yeah,'' her friend said, ``and what a nice-looking man. His pictures don't
do him justice.''

*******

#9
Financial Times (UK)
OCTOBER 23 1998 
[for personal use only]
Leader/editorial 
RUSSIA: End game for Yeltsin

Russia has a moribund president and a bankrupt government. It now faces the
prospect of renewed hyperinflation and yet further economic decline. The
threatened combination of a collapsing state with thousands of nuclear
warheads is terrifying. The challenge it poses to the outside world is also
evident. What is not so clear is how to meet it.
No case can be made for further assistance from the International Monetary
Fund. In the case of Russia the IMF has stretched its principles to the very
limit, arguably for good reason. But if the credibility of that institution is
to be preserved, it must now be removed from the fray.
If IMF assistance cannot be justified, what of more politically motivated
financial support direct from western governments? It would seem insane to
have refused to save the frail reformist government of Sergei Kiriyenko, only
to succour Yevgeny Primakov's muddled replacement.
But the alternative might be worse. Mikhail Zadornov, the finance minister,
forecasts the revenue of the federal government in the fourth quarter at a
risible 6 per cent of gross domestic product, almost certainly insufficient to
sustain any kind of Russian state.
The leading industrial countries could well decide that even a corrupt and
incompetent government is better than none - and if Mr Primakov cannot (or
will not) raise the revenue he needs, it may be in the west's interest to help
him. Yet the justification for this would have to be worries about security,
the quid pro quo being international control over Russia's vast nuclear
arsenal.
What Russia most needs, however, is not outside assistance, but a working
government. Any attempt to run a coalition among the political forces is
doomed to failure. Russia has to have a credible president, instead. Boris
Yeltsin is no longer such a leader: even he has run out of the opportunities
he so loves to throw away.
The clear danger is of 20 months of drift under a frail and discredited
president. What the country needs, instead, is a leader capable of exercising
authority. Western heads of government should try to persuade Mr Yeltsin that
the greatest service he could now do to his legacy and his country would be to
resign.
The likely winners of an election all seem highly unattractive. But even an
imperfect government would be better than what is, in effect, no government.
The priority is not outside aid, but a legitimate and effective domestic
authority. Mr Yeltsin could still leave his country one invaluable bequest:
timely election of a desperately needed replacement.

*******

#10
ANALYSIS-Economics trips up U.S. Caspian policy
By Paul Taylor, Diplomatic Editor

LONDON, Oct 26 (Reuters) - By trying to turn economics on its head for
strategic aims, the United States has tripped up in its quest to bring Caspian
Sea energy resources to market. 
Washington's determination to sideline Russia and exclude Iran from
transporting Caspian Basin oil and gas has collided with commercial reality:
international oil companies won't pay for a major pipeline from Azerbaijan
across Georgia and Turkey. 
When the presidents of Turkey, Azerbaijan, Georgia, Kazakhstan and
Turkmenistan meet on Thursday at celebrations marking the 75th anniversary of
the Turkish republic, they will not be able to announce a financed deal to
build the 1,700 km (1,080 mile) Baku-Ceyhan pipline. 
The lengthy corridor through unstable areas prone to separatist violence is
expected to cost up to $4 billion. 
Oil executives told the Clinton administration last week the route was not
commercially viable, despite the offer of U.S. and Turkish subsidies, at a
time of economic slowdown when the world is awash with cheap oil. 
Members of the Azerbaijan International Operating Company said they would only
build a section from Baku to Supsa on Georgia's Black Sea coast. 
Turkey, keen to win the lucrative Ceyhan outlet, has tried to move them away
from the Supsa option by calling for a reduction in tanker traffic through
Turkey's Bosphorus straits, the only sea route for Black Sea oil exports. 
Turkish Foreign Minister Ismail Cem issued the warning on Saturday, citing
environmental dangers, but it appears that the 1936 Montreux Convention, which
guarantees free passage to all vessels, would not allow Ankara to set such
limits. 
The oilmen's thumbs-down represents a serious blow to one of President Bill
Clinton's key foreign policy initiatives. 
Oksana Antonenko of the International Institute for Strategic Studies said
U.S. backing for the project was ``based on geopolitical gamesmanship rather
than economic common sense.'' 
Yet despite recent signs of a cautious thaw in the 20-year standoff between
Washington and Tehran, it is not clear whether the setback will prompt a
fundamental policy rethink. 
U.S. officials are still saying they hope the Baku-Supsa pipeline will
eventually be extended across Turkey to Ceyhan by the Mediterranean coast. 
Ambassador Richard Morningstar, Clinton's special advisor on Caspian Basin
energy diplomacy, told Reuters: ``I feel quite comfortable where we are right
now. We are going to have an east-west corridor and multiple pipelines and the
various options right now do not include a southern route (via Iran).'' 
Strategists argue that making Baku-Ceyhan the primary route for all Caspian
energy exports, while using sanctions and political pressure to veto proposals
to transport any Caspian oil and gas across Iran, is a blueprint for regional
tension. 
``The U.S. objective of keeping Russia down and Iran out of the control of the
flow of oil is unrealistic and it is risky for regional security,'' Antonenko
said. 
``The U.S. policy is built on a false promise to make a long-term commitment
to actively torpedo major Russian and Iranian influence in the region. This
implies a much stronger economic and military commitment to the Caspian states
than the United States really intends or even is able to keep,'' she said. 
By making Caspian energy development a zero-sum game with powerful losers and
relatively weak winners, the experts argue, Washington is storing up trouble
for the future. 
``Both Russia and Iran have the ability to pose major obstacles to the
TransCaspian Corridor and slow down the pace at which Azerbaijan, Turkmenistan
and Kazakhstan can exploit their energy,'' said Geoffrey Kemp of the Nixon
Centre for International Peace in Washington. 
Russia, which vitally needs the revenue from transit fees through its own
ageing pipelines, has a peacekeeping force in Georgia's rebel province of
Abkhazia and has shown it can determine the instability or stability of the
Soviet republic. 
Winning a share in the Caspian energy bonanza is a key goal for Iran. Asked
what the single most important barrier to U.S.-Iranian relations was, a senior
Iranian official who accompanied President Mohammad Khatami to the United
Nations last month said without hesitation ``pipelines.'' 
More ethnic Azeris live in Iran than in Azerbaijan and Iran has good relations
with Armenia, which occupied part of Azerbaijan in their war over Nagorno-
Karabakh. Experts say Tehran could do a lot to destabilise its fragile
northern neighbour if it chose to make mischief. 
Some U.S. officials have hinted that Washington's exclusion of Iran from the
Caspian game is just a tactic to force Tehran to engage in a direct dialogue
and moderate its behaviour. 
Although it has stopped branding Iran a ``rogue state,'' the Clinton
administration is not yet convinced that the moderate Khatami can prevailed
over anti-American hardliners who control the country's security apparatus. 
Oil industry sources suggest the administration may simply want to keep the
Iranian back-door to the Caspian closed until the oil companies build the
Baku-Ceyhan corridor, and an even more economically dubious pipeline under the
Caspian Sea to link Kazakh and Turkmen oil and gas fields to the Baku
pipeline. 
Antonenko suggested the United States should promote a cooperative framework
in which all parties interested in hosting pipelines could address the legal,
environmental and economic aspects of Caspian energy development. 
``A new organisation would provide a practical forum for dialogue with Iran,
reduce Russia's fears of isolation and marginalisation, reduce Caspian states'
fears of Russian domination, and address China's concern that its oil supply
may be at risk,'' she said. 
``If the United States merely backs the Baku-Ceyhan pipeline, it will have
committed itself to higher costs and greater regional rivalry,'' she added. 

*******

#11 
Excerpt
Washington Post
October 26, 1998
[for personal use only]
Capitalist Reality Comes Home to Roost in Russia
By Sharon LaFraniere

BRYANSK, Russia—The white brick building where Valentina Savina works is
silent and dark, abandoned except for her office at the end of a long corridor
of closed doors and dusty nameplates.
A bare light bulb dangles above the building's front door, its cable strung
through the window. There is no heat, and soon, Savina fears, there will be no
electricity either.
Her building was once the hub of the Velyaminovskaya chicken factory, whose
600 workers processed 200 tons of chicken meat a month from a half-million
birds. But the last chicken was killed two years ago, except for a small egg
farm that remains. Now, in the nearby city of Bryansk, stores sell out of
locally produced chicken almost as soon as they get it, and there is no more
to be had.
"What happened?" Savina wondered aloud, sitting at her desk in her threadbare
blue coat one afternoon two weeks ago. "What happened to the country?"
The ruin of Velyaminovskaya is the story of Russia's potholed road to
capitalism. Left by the wayside are hundreds of factories like Velyaminovskaya
that could not adapt to the free-market forces loosed in 1991. 
Just eight years ago, Russia produced three times as much chicken as it does
now. Much the same is true for most other products, from sugar to soap, shirts
to shoes, refrigerators to razors. Overall production has declined by half
since 1990. 
No one expected the transition to capitalism to be painless after 80 years of
government-controlled industry. But more and more Russians are asking why,
after most of a decade, the only results are ruined factories and why a
country that once fed, clothed and outfitted itself is now at the mercy of
foreign suppliers.
The question is particularly compelling now, because the exporters who were
all too happy to flood the country with goods when the ruble was stable
canceled shipments en masse when Russia hit the financial skids this summer.
Those who continue to ship products have jacked up prices far beyond what most
Russians can afford. For instance imported chicken -- fully two-thirds of the
market -- has doubled in price at Moscow grocery stores.
Why so few Russian factories managed to survive a free market is an intricate
question. One group of free-market economists says the government left too
much of the old system in place, including collective farms and the old
communist factory managers. They also blame the government for allowing
criminal rackets to flourish and failing to revise a punitive tax structure.
Factories suffered most from "useless managers," said Anders Aslund, an expert
on the Russian economy with the Carnegie Endowment. "They were not
sufficiently beaten over the head. They just sat on their hands, hoping for
subsidies. They had no economic sense at all. They just demanded money." 
Another group of economists argues that the reforms were too harsh and the
government should have controlled how enterprises were privatized, rather than
engage in "shock therapy." Leonid Abalkin, director of economics for the
Russian Academy of Sciences, said the state sold off its factories before
there was a source of capital to modernize them or even a good idea of what
they were worth and who wanted to buy them.
Among some Russians, dismay over the wreckage of factories is coupled with a
suspicion that their country is a victim of a cruel hoax and that the West led
Russia down the free-market path to reduce it to a mere supplier of raw
materials....

******