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Johnson's Russia List


November 5, 1998    
This Date's Issues: 2460  

Johnson's Russia List
5 November 1998

[Note from David Johnson:
1. Reuters: U.S. plans blunt review of Russia economic plan.
2. AP: Center To Track Russian Nuclear Material.
3. Jacob Kipp: Views of Condoleezza Rice/2458.
4. AFP: Press: Yeltsin's 1996 Quintuple Bypass Fraught with Risk.
5. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Russian Elite 
Sees Itself in Gen. Pinochet.

6. The Guardian: James Meek, Russian left descends into dark well of 

7. Reuters: US says Russia food aid hinges on anti-corruption measures.
8. AFP: 1.5 Million Medics Earn "Just Enough to Survive."
9. Financial Times: SIBERIA: Economy shows its two faces. Arkady Ostrovsky 
visits the Siberian oil towns of Surgut and Nefteyugansk and finds radically 
different moods.

10. Reuters: Russia plays down reports on anti-NATO plans.
11. Business Week editorial: DON'T LET RUSSIA RENEGE ON REFORMS.
12. Nezavsimaya Gazeta: The U.S. Can Still Influence Elections in Russia.
13. Noveye Izvestiya: Will America Save Russia? 
14. Moscow Times editorial: U.S. Aid Saves Face, Not Russia.
15. Sutela Pekka: Re Primakov's economic policies.]


U.S. plans blunt review of Russia economic plan

WASHINGTON, Nov 4 (Reuters) - The Clinton administration is planning its
bluntest public critique yet of Moscow's retreat from free-market economics,
including a warning Russia should expect less foreign investment and support
from international financial institutions, officials say. 
The U.S. assessment will be delivered on Friday in a speech to the World
Affairs Council in Los Angeles by Deputy Secretary of State Strobe Talbott,
the administration's pointman on Russia policy. 
``The economic programme that the Russians have put forward doesn't make
sense, the numbers don't add up and (Talbott) is going to let them have it
publicly,'' one official told Reuters in an interview. 
``They are trying to cure themselves of the disease (of an economic crisis)
with some very potent poison: inflation, currency controls, basically bailouts
for insolvent industries and banks that should probably go under,'' said the
official, who spoke on condition of anonymity. 
The Russians ``are making it...less attractive for client investment and
virtually impossible for the IMF (International Monetary Fund) to come up with
another heavy dose of macroeconomic stabilisation support,'' the official
New Russian Prime Minister Yevgeny Primakov has been defending the economic
plan his government presented last week, despite the chilly reception it has
received from foreign creditors and the Russian press. 
The plan, which envisages greater state control of the economy, was adopted by
Primakov's cabinet on Saturday. An IMF delegation has already expressed its
disapproval by failing to offer a tranche of $4.3 billion of urgently needed


Center To Track Russian Nuclear Material
November 4, 1998

OBNINSK, Russia (AP) -- To keep Russia's nuclear material from disappearing
abroad, Russian, European and American partners opened a center Wednesday to
keep better track of the government's stockpiles of uranium and plutonium.
In theory, scientists say, keeping tabs on the nuclear material should be as
easy as running a supermarket: Stock up with goods, slap a bar code on each
product, and make sure the balance sheet adds up.
``We're not inventing anything new here,'' said Marc Cuypers, deputy director
of the European Commission's Institute for Systems, Information and Safety.
``It's a lot like a supermarket, except that our material happens to be
extremely dangerous.''
The Russian Methodological and Training Center, a joint project of Russia's
Atomic Energy Ministry, the U.S. Department of Energy and the European
Commission, is located in Russia's nuclear heartland, the site of the world's
first nuclear power plant.
The project got under way in 1995, when Russia was rife with reports of
smuggling of uranium and plutonium after the weakening of safeguards with the
fall of the Soviet Union, and the government didn't know how much nuclear
material it had.
Russian officials insist weapons-grade nuclear material has never been stolen
or sold. They do admit there were at least 30 thefts of radioactive substances
in 1992-95.
``Our borders have become for all practical purposes transparent,'' Russia's
Atomic Energy Minister, Yevgeny Adamov, said Wednesday. ``The weakening of our
ability to manage nuclear material has been immeasurable.''
By introducing the center, Russian leaders hope to create ``a radical break in
technology, a change to modern means'' that will close those borders to
illegal and dangerous trade, Adamov said.
The facility trains specialists to accurately measure, to a 0.1 percent margin
of error, the weight, chemical content, and isotope levels of plutonium or
They must learn how to keep track of it, protect it and -- here's the
supermarket part -- how to use computers that assign each piece a bar code.
Participants say the center, and possible facilities like it in the future,
will improve Russia's system of accounting for nuclear material to
international standards, so it can keep track of plutonium and uranium as it
disarms its warheads.
It is unclear, however, when Russia will actually use the specialists it
trains at the center. Russia's parliament still has not passed legislation
requiring nuclear stockpiles to be looked after with the rigid standards of
the West.
Still, participants hope that through international cooperation, the center
will eventually get rid of Russia's old way of keeping track of nuclear
material -- secret cities, armed guards, and little discourse with the West.
Russia must be able to ``assure the general public shown material is accounted
for and controlled,'' said Gordon Adam, a member of the European Parliament
and vice president of its commission on energy. ``The center can only succeed
(if) the countries included ruthlessly pick the brains of the others.''


Date: Wed, 04 Nov 1998
From: "Jacob Kipp" <KIPPJ@LEAV-EMH1.ARMY.MIL> 
Subject: Views of Condoleezza Rice/2458

While I respect Professor Rice's views very much, I am hard pressed to
understand her lament for the lost opportunity for a "liberal Russia" which
nationalists Luzhkov and Lebed are going to bury. My own work on Lebed
suggests that he is a populist and nationalist but also a pragmatist.
Regarding Luzhkov, I do not have a solid professional judgment. However,
let's deal with the government that we have.
Right now we have a de facto acting president in Prime Minister Primakov.
Russian state finances -- the combination of GKO pyramid and IMF bailouts --
was a disaster waiting to happen but the implications of the economic
meltdown are far deeper in Russian society and far broader in terms of world
capital markets. Blaming the Russians a la Kokh may be fashionable among
reformers, but it is elitist and dangerous to that elite itself. That we
got Primakov was a gift from Yavlinsky and Yabloko. Without that gift we
would have the crash and the political crisis collide in the streets in
mid-September. Yeltsin loosing the last vote on Chernomyrdin's confirmation
and proroguing the State Duma as the Duma votes impeachment of Yeltsin at
the White House or some "local tennis court." 
When will our political elite figure out that in Russia it is not
personalities but institutions that matter and that a "liberal" answer can
not be built on triage economics of human suffering, corrupt elites, or
concentrations of executive power? Checks on executive power and a strong
legislature, the rule of law and an independent judiciary are not ours to
impose on Russia, but our policies should certainly seek to foster them. 
As to specific issues where nationalists are supposed to make a difference,
I do not see the qualitative change suggested. Tensions over Iran and Iraq
will not be new -- they were there under Yeltsin. The deal on NATO
expansion and the Founding Act was negotiated by Primakov under Yeltsin.
Lack of Russian cooperation on Kosovo seems to have delayed bombing, not
Holbrooke's working settlement. We still have Russian troops serving in
SFOR inside Task Force Eagle. NATO continues to evolve in a context of
multi-institutional framework for European security. Nuclear proliferation
is a real problem. But how does a weak or strong Russian state affect the
equation? Strategic arms control is in Russia's interesting as a way of
managing the free fall of its own decaying arsenal.
Right now Russia is on the edge of a deep crisis that will come this winter.
This will affect some regions more deeply than others and some segments of
the population more than others. Professor's Rice's comments sound like her
recommendation is that the US do nothing to help in this emergency. "The
worst, the better" is fine political strategy for revolutionaries, it is
terrible policy for a great power with global obligations. Simple sanity
suggests that famine and collapse will trigger international consequences,
some of which will be refugee flow, potential pandemics with the collapse of
what is left of Russia's busted system of public health, and endemic
violence [russkii bunt]. What is needed is leadership now.


Press: Yeltsin's 1996 Quintuple Bypass Fraught with Risk 

MOSCOW, Nov. 04, 1998 -- (Agence France Presse) Russian President Boris
Yeltsin's quintuple coronary bypass in November 1996 was fraught with far more
risks than the Kremlin cared to admit, the Kommersant daily newspaper reported
Top-notch surgeons gathered to carry out the bypass at first thought that
Yeltsin's state of health left him impossible to operate on, the maker of a
documentary film of the operation, Svetlana Sorokina, told Kommersant. 
A team of German surgeons were on hand to conduct an emergency heart
transplant if everything went wrong, said Sorokina, who is a journalist with
the NTV television channel which will be showing the film Thursday. 
The broadcast marks the second anniversary of the major heart surgery, which
was carried out on a president who has been dogged with heart problems since
The film also comes in the midst of renewed speculation on his fitness to
govern after Yeltsin, 67, canceled important international meetings this month
and retreated into the country to recover from general fatigue. 
The gravity of Yeltsin's health problems has always been played down by the
Kremlin and exploited by his political opponents, some of whom now want the
president to undergo a medical check, in a bid to prove that he is too unfit
to remain in office. 
Sorokina confirmed to the newspaper that as the film was being made, the
president's real state of health was kept under wraps by the Kremlin and the
team of surgeons, led by the US pioneer in the field, Michael DeBakey.


Moscow Times
November 5, 1998 
SEASON OF DISCONTENT: Russian Elite Sees Itself in Gen. Pinochet 
By Andrei Piontkovsky
Special to The Moscow Times

General Augusto Pinochet probably does not even suspect that distant Russia
has virtually become his second homeland. In a way he has shared the fate of
Karl Marx, only while still alive, for nowhere other than Chile has so much
been written about him than in Russia. 
The devil incarnate in official Communist propaganda of the 1970s, Pinochet
gradually became a hero from the late 1980s onwards, a symbol and banner for a
considerable part of the so-called democratic intelligentsia that sees in him
a fearless and irreproachable liberal knight on a white steed. 
Pinochet's recent arrest in London started a fresh deluge of publications and
commentary in the Russian media, most of which resembled analytical articles
from economics magazines, citing growth rates, inflation, foreign investment
and discount rates in the Chilean economy before Pinochet, under Pinochet and
after Pinochet. It is hard to work out just what exactly is being discussed -
Pinochet's arrest or Prime Minister Yevgeny Primakov's anti-crisis program. 
Distracted by discussion not so much about Pinochet but rather about ourselves
once again, we lost sight of the fact that neither the Chilean or Russian
economy has the slightest bearing on what is happening in London. 
At stake here is something far more fundamental, namely the value of human
life and the absence of any justification or time-limit of accountability for
the politicians who trample on this value. Our reaction to Pinochet's arrest
shows that such value, regardless of all of our democratic exercises, still
remains alien to our unique Russian civilization. 
Our leftists, satisfied and gloating over Pinochet's arrest, are of course
right to angrily recall his many crimes - murder, torture, terror. But these
are the same people that attend demonstrations clutching portraits of Lenin
and Stalin, who killed immeasurably more people than the humble Latin American
general, which implies that their only real criticism of Pinochet is that he
didn't kill the right people and in the right numbers. 
Meanwhile, the liberals have sprung to Pinochet's defense, lauding his
economic exploits and secretly or openly dreaming of having their own Russian
Pinochet. It appears they don't even understand how clearly this demonstrates
their fundamental kinship with their left-wing opponents: Their common
contempt for human life and readiness to wield an iron hand to drive people
down the road to happiness, whether communist or liberal, unites them far more
than their differing economic views divide them. 
Not so long ago we elected "with our hearts" a person responsible for the
deaths of tens of thousands of his citizens in a senseless war. At the time,
only human rights activist Sergei Kovalyov reminded us repeatedly, like one
character in Pushkin's play Boris Godunov, "You cannot vote for King Herod,
the Mother of God forbids it." 
But one would hope that in his sickness this person is now feeling the weight
of conscience for all his sins, and will set an example to the rest of us. For
until we learn to feel these pangs ourselves just once in a while, we will
remain barbarians, even if we adorn ourselves with diplomas of distinction
from the London School of Economics. 
Otherwise these things will look on us like pagers and cellphones would
hanging from the belt of a tribal chief from the New Guinea jungle. 


The Guardian
November 5, 1998
[for personal use only]
Russian left descends into dark well of anti-Semitism 
By James Meek in Moscow

In a turning point for Russia's increasingly xenophobic parliamentary
opposition, Communist Party deputies yesterday blocked a censure motion
against one of their senior members who publicly called for the extermination
of the country's Jews. 
The debate in the Duma over the conduct of a retired general, Albert Makashov,
exposed the depth of anti-Semitism among Russia's Communists and the
fundamental schism between them and socialists in the rest of Europe.
General Makashov, a notorious ultra-nationalist who commanded parliamentary
irregulars in street fighting with presidential loyalists in Moscow in 1993
and subsequently received amnesty, made a series of lurid election speeches
early last month in which he blamed "Yids" for Russia's troubles.
Chunks of his rhetoric were broadcast by Russian television. At one point, he
rallied his audience with the cry: "To the grave with all the Yids!"
A motion censuring Gen Makashov for his "harsh, abusive statements" and for
inciting racial hatred was defeated yesterday by 121 votes to 107. The votes
of the Communists and their allies, who control almost half the seats in
parliament, were decisive. Among the Communist MPs, 83 voted against censure,
and 43 abstained.
"If comrade Lenin could have heard the anti-semitic comments being made by
people calling themselves Communists, he'd be turning in his grave," said one
horrified party worker in the Duma, who asked not to be named. "I'm afraid
that if Gennady Zyuganov (the Community Party leader) fell asleep and woke up
in 1917, he'd say that comrade Lenin had too many non-Slavs around him."
Gen Makashov, a member of the Communist Party's central committee, has
received no more than a mild ticking-off from Mr Zyuganov, who said yesterday:
"We took note of the impermissible form of his remarks and condemned his
Mr Zyuganov did not speak in the debate, but in a press conference earlier
repeated his increasingly frequent complaint that there were not enough ethnic
Russians on television - meaning too many Jews.
Ethnic Russians make up more than 80 per cent of the country's population
while Jews make up less than 0.5 per cent - there are thought to be fewer than
500,000 in a country of 146 million.
In a measure of the psychological oddness of the debate, the main sponsors of
the motion criticising Gen Makashov were one of Russia's best-known
intellectual nationalists, the film-maker Stanislav Govoryukhin, and one of
the best-loved Russian singers, the Frank Sinatra of Russia, Iosif Kobzon -
who happens to be of Jewish parentage.
The nationalist leader, Vladimir Zhirinovsky, whose father was Jewish, sided
with Gen Makashov. "He doesn't go to the Canary Islands for his holidays and
the Jews do. They're rich. So they have good compensation for their suffering.
The Jewish people are very talented but it's necessary to approach this talent
with caution, because it can be used against us."
Behind the farcical nature of much of yesterday's proceedings in parliament is
the rapid degeneration of the remnants of the old Russian left into a
primitive, pre-revolutionary nationalism which draws on a dark well of Tsarist
anti-Semitic savagery - the culture that created the bloody pogroms in which
thousands of Jews were slaughtered.
It was the Tsarist secret police who forged the Protocols of the Elders of
Zion, the bogus document later used by Nazi ideologists to justify their
murder of the Jews. The massacre of millions of Jews by Nazi Germany has less
resonance in Russia than in the West because Russians feel they suffered as
much, or more, at Hitler's hands.
Anti-Semitism is not yet as active in Russia as yesterday's debate might
suggest, though its traces can be seen in paradoxes such as the fact that
while the country's past and previous prime ministers, Sergei Kiriyenko and
Yuri Primakov, changed their surnames to conceal their part-Jewish origins,
they also rose to the second highest office in the land.
Mr Zyuganov is not an enthusiastic anti-Semite, but has done nothing to
counter those promoting the notion of a Jewish menace. In this he is
dangerously close to the passivity of Russians as a whole, who might not be
actively racist, but have seldom looked ready to oppose a racist regime if one
came to power.


US says Russia food aid hinges on anti-corruption measures
By Doug Palmer

WASHINGTON, Nov 4 (Reuters) - The United States will provide at least $500
million in grain and meat to help Russia through the winter, provided Moscow
promises the aid package will be fairly distributed, President Bill Clinton
said on Wednesday. 
The offer of the 3.1 million tons of food came at a time when the Clinton
administration has become increasingly impatient with Russia's economic
recovery plan. The United States has prodded Russia to make reforms to attract
foreign investment as well as to qualify for International Monetary Fund
Russian officials said earlier Wednesday that the nation had nearly run out of
food because of the crumbling value of the rouble, heavy government debts, and
severe economic problems. 
Clinton said the United States was prepared to offer more Russian aid to
supplement an initial $500 million in wheat, meat and other commodities. 
"This program will help sustain Russians through a serious food shortage this
winter," Clinton said. "We will be prepared to consider additional assistance
if necessary." 
Russia will harvest only about 52 million tons of grain this year, the worst
crop since the 1950s, because of drought. 
But a final agreement for the food aid hinges on Russian assurances that the
commodities will not fall into the wrong hands nor be taxed as it moves
through the country, Clinton said. 
That means making sure there is a "sound system for distributing, monitoring
and counting the food," a White House spokesman said. 
The U.S. expects to receive those assurances in time for an agreement by the
end of this week. If that happens, U.S. food aid shipments could begin in
December, U.S. Agriculture Secretary Dan Glickman told reporters. 
"This is obviously not only a food aid and food assistance issue but it also
is a very significant foreign policy issue as well," Glickman said. "There are
a lot of people in government who are interested in the political and economic
stability of Russia." 
The package would be a combination of 1.5 million tons of wheat donations,
100,000 tons of food aid for the most vulnerable groups in Russia and 1.5
million tons of meat and other grains to be purchased by Moscow with long-
term, low-interest loans. 
The USDA is also exploring a separate credit package to jump-start poultry
sales to Russia, officials said. Until the Russian financial crisis, the
country ranked as the biggest buyer of U.S. poultry. 
The food aid also will benefit U.S. farmers, who are facing a near-record
harvest and ten-year-low prices for wheat, pork, beef and other commodities.
Chicago futures prices for wheat fell more than three cents a bushel following
the announcement, however, because traders had hoped for a larger package. 
In Moscow, there were more signs of the severity of the country's economic
First Deputy Prime Minister Yuri Maslyukov said food stocks had fallen to
levels sufficient for only two or three more weeks. He also said the country
needed to restructure its huge foreign debt payments due this year and next,
marking the first time the government admitted it would have problems
IMF negotiators, unhappy with the government's economic plan, last week
refused to release a new $4.3 billion loan tranche sought by Moscow. 
A senior Clinton administration official, Deputy Secretary of State Strobe
Talbott, is expected to sharply criticize the Russian economic plan in a
speech on Friday. 
"The economic program that the Russians have put forward doesn't make sense,
the numbers don't add up and (Talbott) is going to let them have it publicly,"
a senior administration official told Reuters. 


1.5 Million Medics Earn "Just Enough to Survive" 

ST. PETERSBURG, Nov. 04, 1998 -- (Agence France Presse) One and a half million
Russian medical workers are earning between 200 and 300 rubles ($15-20) per
month, just enough to survive, Health Minister Vladimir Starodoubov said 
The minister told the opening of a three-day congress of medical personnel
that nurses, medical aides and midwives were poorly regarded by the
authorities and said he would "change the situation," not only by raising
salaries but by improving relevant laws. 
Salary arrears in the field total 4.2 billion rubles ($265 million). 
The some 500 delegates at the congress also heard of an upsurge in some
illnesses in recent years, with 8,867 AIDS cases, a 8.6 percent rise in
tuberculosis cases last year and a fall in the birth rate. 
On Monday, Deputy Prime Minister Valentina Matyienko announced that the
government could not pay the salary arrears for doctors and teachers this
Meanwhile Moscow Mayor Yury Lujkov announced Tuesday a 12.5 percent rise in
the minimum pension for Muscovites from 400 to 450 rubles from December. The
presidential candidate blamed the former Russian government for problems in
the economy, as it "strictly executed the orders of the International Monetary
Fund and was not prepared to boost the national economy." 
"This provoked a financial crisis and a sharp worsening of living conditions
for the population," he said in a statement from the mayor's office. 
The ruble has fallen 62 percent against the dollar since the currency was
devalued in August. On Monday it was changing hands at 15.57 rubles to the
dollar, against 6.29 rubles previously.


Financial Times
4 November 1998
[for personal use only]
SIBERIA: Economy shows its two faces
Arkady Ostrovsky visits the Siberian oil towns of Surgut and Nefteyugansk and
finds radically different moods

Two oil towns face each other across the river Ob, which divides east from
west Siberia. They look similar - grey and depressing monuments to Soviet
industry built on the swamps of Taiga forests - but as harsh winter and
harsher economic times tighten their grips, the mood in each is radically
In Surgut, on the east bank, a Siberian oilman dressed in Soviet-style grey
suit and tinted glasses, dubbed the "general" by his employees, has built up
the oil company that takes its name from the town and is considered the best
managed in Russia. Surgutneftegas, is debt-free and analysts believe it should
be proof against the storm of economic uncertainty that broke across Russia
this summer.
Across the river in Nefteyugansk, people rail against a slick Muscovite
banking tycoon dressed in a Marlboro Classics shirt who bought their company,
Yuganskneftegas, and milked it for profit, impoverishing the town in the
Queuing recently outside a bank for their wages, which they had not received
in full for three months, Nefteyugansk workers complained bitterly about
Mikhail Khodorkovsky, one of the new class of bankers, the so-called
"oligarchs". Some counted themselves lucky to receive Rbs200 ($12.50) - or 10
per cent of the wages due three months earlier.
Alevtina Kosareva, 43, says she has been forced to exchange her sewing machine
for vegetables. "He [Khodorkovsky] keeps us on a drip-feed so we do not starve
and continue to work for him. Khodorkovsky simply laughs at us. He does not
even think we are people . . . In the past, masters fed their slaves, but the
new masters do not bother."
In the past two years Yukos - the loss-making oil company that owns 51 per
cent of voting shares in Yuganskneftegas - has reduced wages by 30 per cent,
cut its drilling programme, and laid off about 15,000 people, reducing the
workforce to 39,000. It has transferred the old Soviet social responsibilities
to the municipal budget, in line with advice from western consultants.
But industry analysts fear Yukos's short-term approach is jeopardising the
long-term interests of the oil giant.
"Khodorkovsky has killed the goose which was laying golden eggs," says Ivan
Mazalov, a senior analyst at the broker CentreInvest.
Disgruntled investors claim Yukos milked money from Yuganskneftegas by using a
mechanism known as transfer-pricing. Yuganskneftegas was obliged to sell all
its oil at a fixed rouble rate to Yukos, which would then re-sell it at market
prices and use the revenues as it saw fit.
The growing economic crisis has seen the pressure on Yuganskneftegas increase.
Recently the company - the second largest in Russia in terms of oil production
- had its telephones cut off because it had failed to pay its bills.
With oil prices falling, and Yukos reluctant to pay taxes to the Nefteyugansk
authorities, tension in the town has escalated. Roads have been neglected,
nursery schools have closed and hospitals handle only emergencies. Four months
ago, Vladimir Petukhov, the mayor and a vocal critic of the oil company, was
shot dead. His funeral turned into a protest demonstration against Yukos, one
witness said.
Residents of Nefteyugansk long to cross the river. According to Vladimir
Nozhin, chief engineer of Yuganskneftegas, the company has lost 700 top
specialists to Surgutneftegas following the recent wage cut, but now Surgut
needs no more workers. Whereas it is hard to sell a one-bedroom flat in
Nefteyugansk for Rbs60,000, the same flat in Surgut would cost Rbs 200,000.
Surgut may not be prosperous by western standards, but its oil company is one
of the few in Russia where workers have benefited from market reforms and
display no signs of nostalgia for the Communist era. "Nobody here wants to go
back to the Soviet days, to deficits and empty shelves," says Oleg Plaksin, a
drilling master at Surgutneftegas.
In Nefteyugansk, that seems to be exactly what is happening.
Imported products which once filled the shops have been replaced by old-
fashioned glass jars filled with potato soup and preserved vegetables. "We
took them off the shelves four years ago, but now we have nothing else to
sell, so we put them back," said Olga, saleswoman at the proudly named Europa
Tsentr (Europe Centre). Apart from its name, however, the shop is a spitting
image of any Soviet supermarket.
"We have no sugar, no rice. God knows what we are going to eat in winter.
There is no master in this town. We have the same resources as Surgut and look
how we live," says Olga.
Zoya Nikolaevna, a pensioner in Nefteyugansk, often goes to Surgut to buy
food. "I was in Surgut last week, they have 30 kinds of sausage there. But
here the shops are empty - just like in the Soviet days."
Surgut's comparative prosperity is partly due to the president of
Surgutneftegas, Vladimir Bogdanov, who until recently was criticised as an
old-style Soviet-era manager with xenophobic views. But his hands-on style
management has paid off.
Contrary to the advice of some western consultants, Mr Bogdanov continues to
pay for schools and accommodation for his staff. In return he gets the loyalty
of his workers, who have more faith in their management than in the central
"When you pay your workers and give them something to do they simply do not
have time to talk about politics," says Andrei Atepayev, an energetic 38-year-
old manager. "People start waving flags and slogans when they have nothing to
do at work." "
Not only are workers at Surgutneftegas happier, the company is investing up to
$1bn a year in production and exploration and has among the lowest counts of
idle oil wells of any Russian company in the sector.
"We always counted money here and never splashed out on fast cars and lavish
offices. We did only what was economically prudent and as a result we are
still drilling new wells, while most of our competitors have almost stopped,"
says Mr Atepayev.
Surgutneftegas is not an island, however. The company's investment programme
could be jeopardised by the collapse of the banking system - it has $1.5bn
locked in various Russian banks crippled by the government's default on its
debt. It has also had to cut 1,000 jobs from its total staff of 68,600.
But such is the paradox of recent Russian history that it is Mr Bogdanov, a
local "red" director, who has used his Russian know-how to build a profitable
enterprise in which the workers are the most effective advocates of capitalist
"Of course we can curse the government and complain about the crisis," says
Tatyana Nikolaeva, who works at Surgutneftegas's nursery school, but "I always
say to my staff - do not whine that it is dark in the room - turn on the


Russia plays down reports on anti-NATO plans

MOSCOW, Nov 4 (Reuters) - Russia's Defence Ministry moved swiftly on Wednesday
to play down reports that Moscow had changed the way it deploys forces on its
western borders to counter NATO's planned eastward expansion. 
RIA and Itar-Tass news agencies quoted Colonel-General Yuri Baluyevsky as
saying NATO's plans and cooler relations with the Western alliance over the
crisis in Serbia's Kosovo province had prompted the re-think. 
``These plans are to be corrected of course,'' they quoted him as saying. 
Asked to confirm his comments, a Defence Ministry spokesman said: ``I would
say they were not quite correctly interpreted. They have been somewhat
compressed and are not quite right.'' 
Baluyevsky heads the Main Operations Department at general staff headquarters
and was speaking to Russian reporters during a ceremony to mark his section's
80th anniversary. 
The spokesman told Reuters that Baluyevsky had simply spoken about closer
military ties with western Slavic neighbour Belarus, which will have a border
with NATO when Poland joins the Western alliance along with Hungary and the
Czech Republic next April. 
Russia is hypersensitive about its relations with NATO, enshrined in a treaty
agreed last year but still on shaky ground because of Moscow's continued
misgivings about the alliance's decision to allow former Soviet satellites to


Business Week
November 9, 1998
[for personal use only]

A critical turning point is approaching in Russia: President Boris Yeltsin's
health seems to be deteriorating by the day, sharply increasing the chances
that he will resign early rather than see his term through to 2000. If that
happens, under Russia's constitution, Prime Minister Yevgeny Primakov would
immediately become Acting President. And he would be required to call new
presidential elections within three months. 
While Russia's economic progress has disappointed many, the U.S. and other
Western nations should stand behind Russia during this period of political
transition. Russia has many problems. The country is desperately short of cash
and unlikely to be able to compensate the investors it jilted by defaulting on
domestic debt in August anytime soon. At home, Russians must worry not only
about rising inflation and joblessness, but even the possibility of food
shortages this winter. Against this chaotic backdrop, the one achievement of
the Yeltsin regime that does stand out is Russia's shift to a democratic
system based on free and fair elections.
Indeed, the race to succeed Yeltsin has already begun. The two top
contenders are the popular Moscow Mayor Yuri Luzhkov and Krasnoyarsk Governor
Alexander Lebed, the gruff former general who placed third in Russia's
presidential race in 1996. Luzhkov favors a brand of state capitalism in which
the government controls key industries. Lebed wants to crack down on crime and
corruption. Neither are likely to be as friendly to the U.S. as Yeltsin was.
But both are offering new ideas about Russia's relations to the global
financial community. Luzhkov would offer shares in renationalized enterprises
as compensation for Russia's short-term debt default. Lebed wants to set up a
fund of diamonds and other gems and precious metals to collateralize foreign
The two men have different approaches to the domestic economy as well.
Luzhkov would likely reverse the privatizations done under Yeltsin, especially
for the companies sold off cheaply to tycoons. Lebed would leave those
privatizations untouched and go forward with more sales of state assets.
Political and business leaders around the world should thus begin preparing
to deal with a new set of players at the top in Russia. And even though
international financial institutions and individual governments are in no mood
right now to extend more money to Russia, they should insist that Russia's
experiment with democracy and free markets not end when Yeltsin retires. Prime
Minister Primakov and other Russian leaders should know that their connection
with the West depends on their commitment to these principles. 


Russia Today press summaries
Nezavsimaya Gazeta
4 November 1998
The U.S. Can Still Influence Elections in Russia 

The daily interviewed Igor Malashenko, the president of NTV television
company, on the eve of his visit to the U.S. 
Malashenko said the United States still has a very important role in Russia.
However, Americans act on the basis of simplistic schemes and stereotypes,
which lead to errors. One recent example was how the American press viewed the
fight between the reformers and Communists as a battle between good and evil.
Now, he said, they have started to blame all ill in Russian society on the
Malashenko said his trip has two main objectives: to try to persuade the
United States to put its stake in the right Russian politician in future
elections; and to try to draw a more complicated and realistic picture of
Russia for the American elite. 
Malashenko said that now the danger of isolation is very great, because the
existing Russian government cannot make the economy competitive. He said the
only remedy against this is the election of Grigory Yavlinsky as president.
Yavlinsky is the only politician who has his own team, Malashenko said. 
Besides, he added that Yavlinsky has changed greatly since his illness. (In
September, Yavlinsky, age 45, had a heart attack.) When he left the hospital,
Yavlinsky said that if he has to pay such a price, it can only be justified if
the presidency is at stake. Yavlinsky has gained the decisiveness that he
lacked in the 1996 elections, Malashenko concluded. 


Russia Today press summaries
Noveye Izvestiya
4 November 1998
Lead Story
Will America Save Russia? 

The daily interviewed two high-profile American politicians from recent years
-- former Defense Secretary Caspar Weinberger and former CIA chief James
Commenting on the current Russian crisis, Weinberger said that for the United
States, Prime Minister Yevgeny Primakov is the worst person for his post.
"Wherever this person appears, problems arise for Americans. He is a friend of
Qaddafi, Hussein and Milosevic. He does not know anything about the economy
and shuns potential investors, because Communists occupy key posts in his
government," he said. 
Weinberger, who worked in the Reagan administration, added that U.S. President
Bill Clinton's main error was supporting Yeltsin. "There is no democracy in
Russia, only crime and corruption," Weinberger said. He said that all aid to
Russia should be either stopped, or stipulated with tough political demands.
He concluded that American politicians should admit that Russia is a state
which is unfriendly to the United States. 
Woolsey, in turn, said that anti-Americanism has become popular at all levels
in Russia. He said that is obvious with, for example, Moscow Mayor Yury
Luzhkov. He said Grigory Yavlinsky would be the best Russian presidential
candidate in the view of the United States, but added that Yavlinsky does not
have much chance of winning. 
The daily noted that the two interviews were published with the aim of
"dissolving the illusions" about America's attitude toward Russia. 


Moscow Times
November 5, 1998 
EDITORIAL: U.S. Aid Saves Face, Not Russia 

In the 1920s, as famine gripped the newly created Union of Soviet Socialist
Republics, the American government arrived with food aid. 
Back then, the U.S. government's American Relief Administration was able to
wring key concessions from as mighty a historical personality as Vladimir
Lenin. The ARA demanded and got complete control of the process - which meant
American citizens working at distribution points across the length and breadth
of the officially paranoid Soviet Union. 
This food aid program was a triumph that saved arguably millions of Russian
lives - a triumph undiminished by the fact that the Soviet Union was quietly
exporting grain even as its citizens starved. 
In 1992, the Americans again arrived with offers of food. This time, the food
was to be bought from U.S. farmers with U.S. loans; the Russia being helped
was not in any real danger of famine; the subsidized exports smothered Russian
domestic producers; and the aid was ripped off on a massive scale. 
Now the Americans are again offering food, much of it again in the form of
commodity credits - loans the Russian government will take out from the
Americans for use in buying exclusively from American farmers. As in 1992,
there are no guarantees the aid will get to anyone who needs it. Some are even
proposing that the private Roskhleboprodukt company, which oversaw the flawed
aid distribution of 1992, again be trusted with the task. 
The West does not want to give Russia money. But after seven years of
participating deeply in the Russian economic reform process, it can't entirely
walk away without being seen as callous. America's farmers are also hurting.
Hence today's negotiations. 
Food aid is a bad idea for Russia, which already has enough grain, just not
enough money or will to get it to isolated rural regions where it's needed.
But it's a nice face-saver for Washington, a boost to the American Midwest -
and, of course, a potential festival of government theft and corruption. 
If the Americans are going to plow ahead anyway, they ought to insist on top-
to-bottom control of distribution. The Americans are sitting across the table
from as insignificant a character as Deputy Prime Minister Gennady Kulik -
this is not exactly Lenin. If the Americans can't win this basic concession,
the talks should be broken off. They have subsidized enough Russian corruption
over the years. 
If America really wants to help Russia, it could always drop its trade
barriers to Russia's competitive steel exports. That would be consistent with
the Clinton administration's stated free trade policies. Of course, it won't
win any votes in Kansas. 


Date: Wed, 04 Nov 1998 
From: Sutela Pekka <> 
Subject: Re: Primakov's economic policies

Primakov's economic policies will fail, I think, for three fundamental

First, the government and the political class as a whole seem to be all
too divided to be able to decide upon and to implement any consistent
policies. Just read the economic policy programme drafts that have been
published. It will be muddling down, therefore. 
Second, the government really does not have an alternative to printing
money. It has promised to increase spending; it will be unable to suck
more monetary tax revenue out of the economy (and anyway persistent
attempts to do so have contributed to some of the worst deformations of
the Russian society, including demonetisation, corruption, capital
flight etc); it is in default and unable to borrow more; there is no
economic case for financial assistance in the foreseeable future;
therefore, the only ways to close the equation are either to print money
or indeed to cut spending contrary to all promises and intentions. The
only possible question is whether there is a thing called "controlled
emission" -- not in theory but in todays's Russia.
Third and most important, the Primakov et al comparison with Roosevelt
in the Great Depression is thoroughly nonsense. In the early 1930's, the
USA had the largest, the best, the most up-to-date and the most
competitive production capacity in the world. Due to the depression,
large parts of it were unused, and it made prominent sense for the
government to pump up aggregate demand in the economy. There would be
and there was a supply response, and soon the depression was over. 
This is definitively not the case of Russia. Value-destroyers or not,
the capital stock that Russia inherited from the USSR was smaller and
older than one might think. Read what Vladimir Faltsman of the Academy
of Sciences, Abram Bergson, Phil Hanson and others wrote back in the
1980's. It is also often in the wrong places (built in times when
transport costs did not count), it guzzles energy, materials and labour
(all of which used to be so much cheaper) and it produces wrong kinds of
goods (like any numbers of tanks that are no longer in demand). In
economic terms and as a crude approximation, one should think of all
that bricks, steel and vaults as being worthless. Yes, it can still
often produce some cash flow to be transferred abroad, but that is no
proof of economic rationality of any kind when you have gotten the
capital stock free of charge in privatisation.
Any sustainable Russian growth has to be based on new investment, not
on higher capacity utilisation ratios.
Therefore, applying Roosevelt's policies of the early 1930's in Russia
will not produce a true supply response. It will produce high inflation
and possibly some commodities that few will want. Take an example. It
used to be often complained in Russia that domestic video recorder
production has been destroyed by Asian imports. Now, it is in theory
feasible that Primakov et al will issue money backed state orders for
such domestic produce. Or they simply apply huge subsidies (but they
never tell where the money would come from). But does anybody think that
Russians who have been given the freedom to choose Korean or Japanese
electronics would ever switch back to the Russian version? In any
economic sense, the newly-born Russian video recorder production would
be worthless. For this policy to make any sense, Russian produce would
have to be forced down the Russians' throats. Primakov's intended
Rooseveltian policies would only make sense if he also closed the
economy, took away the people's economic freedoms and instituted huge
state controls. That would be bad enough, but it would also be
infeasible, given what the people are already accustomed to and what the
Russian state can manage in any orderly way. 
And there are supposed to be elections coming. This is a government of
losers with a totally mistaken economic analysis of the Russian
situation. Happily, they are probably too weak to even try and implement
their philosophy. But even if they end up doing nothing (the
optimistical variant), they will produce great damage to Russia.

Pekka Sutela


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