November 6, 1998    
This Date's Issues: 2461 •2462• 

Johnson's Russia List
#2462
6 November 1998
davidjohnson@erols.cmo

[Note from David Johnson:
1. Reuters: Gorbachev praises Primakov's Russian economic plan.
2. Reuters: ``Yeltsin's Heart'' film marks surgery anniversary.
3. Moscow Times: Andrei Zolotov Jr., TV Declares War on Communists.
4. Voice of America: Ed Warner, COMMUNISTS IN POST-COMMUNIST COUNTRIES.
5. Financial Times: John Thornhill, Moscow may offer debt-for-equity swaps.
6. Copenhagen's Politiken: Nemtsov: Economy To Worsen Under Primakov.
7. AFP: Russia to Slash 400,000 Military Posts.
8. Transitions: Yegor Gaidar, Russia at Mercy of the Reaction.
9. Itar-Tass: Government Denies Plans To Bring Back Chubays, Nemtsov.
10. Izvestiya: The Health Ministry Warns: Bring Medicine with You.
11. Washington Post: Stephen Rosenfeld, Russia Without Illusions.
12. Los Angeles Times: Tyler Marshall, More Aid for Russia Reforms Seen as 
Political Risk.]

********

#1
Gorbachev praises Primakov's Russian economic plan

MOSCOW, Nov 6 (Reuters) - Former Soviet leader Mikhail Gorbachev on Friday
praised an economic rescue plan drawn up by Prime Minister Yevgeny Primakov,
saying the stronger state role that it proposed was vital to Russia's survival. 
``The strategy chosen by the government of Yevgeny Primakov seems to me
the most adequate,'' Gorbachev, Soviet leader from 1985 to 1991, told the
daily Nezavisimaya Gazeta in an interview. ``The main thing today is to
preserve the country's security.'' 
The Primakov plan, sent to parliament this week, is designed to revive
the Russian economy following a rouble crash and a freeze on debt repayments
in August. It foresees state aid to industry and some printing of money. 
The plan's interventionist approach has alienated the International
Monetary Fund, which last week refused to grant Moscow a much-needed $4.3
billion loan tranche. It has also been dismissed as unworkable by liberal
Russian newspapers. 
But Gorbachev said: ``Without a strengthening of the state role we won't
manage. So I fully support what Primakov says. If we carry out his current
thinking, I think the country will pull through.'' 
While in power, Gorbachev pursued a policy that he called perestroika
(restructuring), aimed at gradual economic and political liberalisation of
the Soviet system. But events spiralled out of control and the Soviet Union
collapsed in 1991. 
Gorbachev has continued to argue that his approach was correct, and has
attacked Russian President Boris Yeltsin for bungling the country's
transition to a free market. 
Primakov was a junior member of the ruling Communist Party politburo
under Gorbachev and a member of Gorbachev's presidential council. 
Gorbachev said he was not advocating a return to communism but noted that
social-democratic parties had come to power in Italy, Britain and Germany
championing what he called a ``social market economy.'' 
Gorbachev said he believed Primakov would make a good president in
future, with Moscow mayor Yuri Luzhkov becoming prime minister. Yeltsin's
presidential term ends in 2000 and he cannot stand again, the Constitutional
Court ruled on Thursday. 

*******

#2
``Yeltsin's Heart'' film marks surgery anniversary
By Alastair Macdonald

MOSCOW, Nov 5 (Reuters) - Doctors at first feared to operate on Boris
Yeltsin's heart, dreading the responsibility, the lead surgeon said in a
documentary film aired on Thursday to mark the second anniversary of the
Russian president's bypass operation. 
``Everyone objected,'' Renat Akchurin told NTV television, referring to his
regular surgical team and recalling how his wife told him his own hand
trembled when he was told he would have to save the ailing Kremlin leader's
life in summer 1996. 
``This was a fairly seriously ill patient and it was a colossal
responsibilty,'' he said in the documentary, screened two years to the day
since he performed a successful quintuple bypass operation on November 5,
1996. 
``But once the decision was taken everyone agreed and worked normally with
me,'' Akchurin added. 
The film, ``Yeltsin's Heart,'' also revealed that tight security around the
operation, for which Yeltsin broke decades of Kremlin precedent by announcing
it in advance, had also nearly thwarted the minutely prepared procedure. 
One of the key doctors on Akchurin's team recounted how police, unaware of his
identity, had refused him entry to the clinic on the morning of the operation
and only let him in after a hasty series of phone calls. 
``They told me I couldn't come in because there was a special event on,'' the
doctor told NTV. ``I told them that without me there wouldn't be any event.'' 
There was little else significantly new in the hour-long film made by a
commercial channel which unashamedly backed Yeltsin in his 1996 re-election
battle against a Communist challenger, a campaign that tested the now 67-year-
old leader's health to the limit -- and finally broke it. 
With heavy media and financial backing, Yeltsin won. But he suffered an
apparent mild heart attack days before the decisive second round of voting.
Six weeks into his second term, doctors concluded only bypass surgery could
save his presidency. 
The tone of the film, however, reflected a change in mood from the days after
the successful operation, which had been marked by a new openness on the part
of the Kremlin that included a willingness to bring in foreign specialists. 
Then there was some hope that an invigorated Yeltsin might return to tackle
the problems of policy drift and corruption that had bogged down his attempts
to build a democratic market economy on the wreckage of communism. 
Two years later, Yeltsin spent the anniversary out of sight and ``resting'' at
Sochi on the Black Sea, recuperating from what the Kremlin, again sounding
cagey, says is ``fatigue.'' Russia seems deeper in crisis and more
directionless than ever. 
NTV began its film reflecting on the extent to which the ill-concealed
illnesses of stubborn leaders, from Lenin through Stalin to Leonid Brezhnev in
the 1970s and Yeltsin in the 1990s had shaped Russia's destiny in its unhappy
20th century. 
When the Constitutional Court ruled on Thursday that Yeltsin could not stand
for a third term in 2000, it caused hardly a ripple. Six months ago, the
possibility Yeltsin might run again was a major factor in Russian politics.
Today, the main question is whether he can even hold on for another year and a
half. 
``The entire chronology of the struggle for power is written in the history of
ailing leaders,'' NTV's commentator concluded. 
``Paying for power with their health, they do not always have the strength to
hold on to it. Yet to part with that which gives their life meaning, with life
itself, is unbearable.'' 

*******

#3
Moscow Times
November 6, 1998 
TV Declares War on Communists 
By Andrei Zolotov Jr.
Staff Writer

Russia's national television stations held a hastily arranged news conference
Thursday to announce what amounted to a full-blown declaration of war on the
Communist Party, a day after top Communists said they intended to mark the
Nov. 7 holidays by setting up a "public committee" to "prepare accusations"
against leading television news anchors. 
Communist Duma Deputy Alexander Kuvayev, who heads the party's Moscow
organization, on Wednesday singled out television journalists and commentators
Nikolai Svanidze of RTR, Sergei Dorenko of ORT, and Yevgeny Kiselyov and
Tatyana Mitkova of NTV and accused them of "collaboration with the regime in
its crimes against society." 
"These people today are maiming and raping public consciousness, they are
among the main provocateurs in Russia," Kuvayev said. "We believe that the
time has come for them to render an account to society." 
To that end, Kuvayev said, the Communists would set up a "public committee"
during protests Nov. 7 - a holiday marking the anniversary of the 1917
Bolshevik Revolution that created the Soviet Union. The committee would
"prepare accusations." Exactly what would happen next remained unclear. 
Seated next to Kuvayev at Wednesday's news conference and visibly
uncomfortable, Communist Party chief Gennady Zyuganov attempted to moderate
his underling's rhetoric, saying the party should "observe ethical and moral
laws." 
"We are not a party of revenge. We are a party of the future," Zyuganov said. 
But that has done little to calm the angry chiefs of Russia's national
television stations. RTR chairman Mikhail Shvydkoi and general directors Igor
Shabdurasulov of ORT and Oleg Dobrodeyev of NTV likened Kuvayev's threats -
and particularly his list of people to be "accused" - to the hate policies of
the 1930s, when political trials and scapegoating were instruments used to
keep the nation in submissive fear. 
The television chiefs also said they saw much in common between Kuvayev's
threats and the unwillingness of the Communist Party to criticize one of its
other Duma deputies, Albert Makashov, for telling crowds that Jews are to
blame for Russia's economic collapse and should be jailed. Wednesday, as
Zyuganov and Kuvayev talked of reining in the media, the State Duma, the lower
house of parliament, voted against censuring Makashov. 
"These events put the Communist Party outside the ethical laws of the
civilized world," ORT's Shabdurasulov said. "We have television cameras, pens
and microphones, and we'll do everything in order to show our citizens and the
whole world community, what in fact yesterday's story means and what the
consequences for the country will be if we continue to treat this as light
political expression." 
Shabdurasulov said that ORT will show programs intended to remind Russians of
their Soviet-era history and of Bolshevik atrocities against the nation. 
That would seem to mean dipping back into archives for documentaries like
those that flooded the airwaves in 1996, when President Boris Yeltsin's main
challenger was Zyuganov and media pulled out all the stops to derail the
Communists. Such reruns have the added advantage of being cheap - important
for Russia's crisis-strapped television stations, which have suffered dramatic
drops in their advertising revenues. 
All three television executives dropped heavy hints that they might also
censor Communists in their programming, although all were careful to say that
they would not entirely deny the Communists media coverage. Dobrodeyev said
that NTV, which prides itself as the only major channel that invites Communist
leader Zyuganov to participate in live broadcasts, will continue to give the
air to Zyuganov, but may ban Kuvayev and similar "marginal politicians." 
Dobrodeyev said that Wednesday was a "black day" in the history of the
Communist Party, one that suggested the party is indeed on the verge of a
schism. "Playing a communist opposition with a human face is over," Dobrodeyev
said. 
The television executives also demanded that Yeltsin, Prime Minister Yevgeny
Primakov and the leaders of the upper and lower houses of parliament speak out
on the Communist's news anchor hit list. 
RTR, which is entirely state-owned, is more dependent on the government than
ORT and NTV. Last month Zyuganov complained about RTR's coverage and demanded
that Shvydkoi be replaced, but the conflict was settled when Shvydkoi and RTR
met with the Communists to hear their concerns. 
- The Duma voted Thursday to override the Federation Council's veto of a law
that would extend existing tax breaks to Russian media for another three
years. The Law on State Support of the Media was originally adopted in 1995
but is due to expire this year. 
But the Duma failed to overcome the veto of another law that would exempt
Russian media from customs duties. Some Russian newspapers and most color
magazines are printed abroad. Editors have said that slapping customs duties
on their publications could drive some of them out of business. 

*******

#4
Voice of America
DATE=11/5/98
TITLE=COMMUNISTS IN POST-COMMUNIST COUNTRIES
BYLINE= ED WARNER
DATELINE= WASHINGTON

INTRO: AFTER WORKING TO BRING DOWN THE COMMUNISTS, IS THE WEST 
NOW HELPING TO RESTORE THEM TO POWER? THAT IS THE CONTENTION OF A
SPECIALIST ON POST COMMUNIST COUNTRIES WHO ARGUES WESTERN STYLE 
ELECTORAL SYSTEMS ARE HAVING SOME UNANTICIPATED CONSEQUENCES. 
THESE VIEWS WERE DISCUSSED AND CHALLENGED AT A RECENT MEETING AT 
THE WOODROW WILSON CENTER IN WASHINGTON. V-O-A'S ED WARNER REPORTS. 

TEXT: A STUDY OF TWENTY-SEVEN POST COMMUNIST COUNTRIES SHOWS 
THAT WITH THE SOLE EXCEPTION OF TURKMENISTAN, ALL HAVE HELD AT 
LEAST ONE FREE AND FAIR ELECTION, AND SIXTEEN HAVE HAVE HELD 
SEVERAL FREE ELECTIONS. BUT THESE FIGURES ARE DECEPTIVE, SAYS 
KAREN DAWISHA, PROFESSOR OF GOVERNMENT AND POLITICS AT THE 
UNIVERSITY OF MARYLAND.
AT A RECENT WASHINGTON MEETING, SHE SAID ALL THE ELECTIONS DO NOT
ADD UP TO DEMOCRACY BECAUSE THEY HAVE LARGELY RESULTED IN 
VICTORIES FOR FORMER COMMUNISTS. THE OLD NOMENCLATURA STILL RULES
IN A DIFFERENT SETTING.
WHY HAS THIS HAPPENED? PROFESSOR DAWISHA BLAMES THE ELECTORAL 
SYSTEMS CREATED AT THE URGING OF WESTERNERS. WITH THE COLLAPSE OF
COMMUNISM, A BEWILDERING VARIETY OF POLITICAL PARTIES SPRANG UP 
THAT WERE FULL OF ENTHUSIASM BUT UNABLE TO GOVERN. MAKE IT HARDER
FOR SMALL PARTIES TO WIN SEATS IN PARLIAMENT, ADVISED WESTERNERS,
AND STRENGTHEN THE LARGER PARTIES TO ACHIEVE MORE STABILITY IN THE SYSTEM.
THAT WAS DONE, SAID PROFESSOR DAWISHA, TO THE BENEFIT OF THE 
EXPERIENCED AND WELL ORGANIZED COMMUNISTS: 
// DAWISHA ACT //
WHEN YOU THINK OF THE EXTENSIVE WORK THAT HAS BEEN DONE 
BY AMERICAN POLICY MAKERS, BY AMERICAN N-G-O'S 
(NON-GOVERNMENT ORGANIZATIONS) AND EUROPEAN POLICY 
MAKERS AND EUROPEAN N-G-O'S IN GIVING ADVICE TO 
POST-COMMUNIST ELITES ON HOW TO STRUCTURE THEIR 
ELECTORAL SYSTEMS, IT IS TO ME ABSOLUTELY STAGGERING 
THAT WE NOW HAVE SYSTEMS IN PLACE IN ALL THESE COUNTRIES
IN WHICH THE NUMBER ONE WINNER FROM THESE NEW SYSTEMS 
HAS BEEN COMMUNIST PARTIES AND PARTIES OF POWER. 
// END ACT // 
BY PARTIES OF POWER, PROFESSOR DAWISHA MEANS THOSE THAT ARE 
RIGIDLY CONTROLLED AT THE TOP, AS IN CROATIA, GEORGIA AND 
AZERBAIJAN. IN HER VIEW, THE NEW ELECTORAL SYSTEM HAS THUS 
PREVENTED THE ESTABLISHMENT OF MORE LIBERAL DEMOCRATIC PARTIES 
REFLECTIVE OF THE PEOPLES' WISHES: 
// DAWISHA ACT //
WE KNOW FROM PUBLIC OPINION POLLS NOBODY WANTED THE 
COMMUNISTS TO WIN THE KINDS OF VICTORIES THAT THEY WON. 
WHEN YOU ASK PEOPLE, "DO YOU WANT THE COMMUNISTS TO FORM
THE NEXT GOVERNMENT," "DO YOU WANT THEM TO WIN SIXTY PER
CENT OF THE SEATS," NO ONE IS SAYING, "YES." YET IN SOME
OF THESE SYSTEMS THEY ARE ABLE TO MOBILIZE GOVERNING 
MAJORITIES OR COALITIONS INSIDE PARLIAMENTS OF UP TO 
SIXTY TO SEVENTY PER CENT OF ALL THE SEATS BECAUSE OF 
THE WAY THEY HAVE BEEN ABLE TO MANIPULATE THESE 
ELECTORAL SYSTEMS. 
// END ACT //
THERE IS NO DENYING THE RETURN OF THE COMMUNISTS, SAID JOHN 
KARCH, REPRESENTING THE SLOVAK LEAGUE OF AMERICA. BUT HE ADDED 
SOME OF THE COMMUNISTS HAVE CHANGED, SOMETIMES FOR THE BETTER. 
THEY VARY FROM ONE COUNTRY TO THE NEXT.
HE URGED THE WEST NOT TO MAKE PREMATURE JUDGMENTS ABOUT COUNTRIES
THAT HAVE ONLY RECENTLY ESCAPED FROM COMMUNISM AND ARE STRUGGLING
TO ACHIEVE DEMOCRACY: 
// KARCH ACT //
WE ARE UNFAIR, I THINK, IN EXPECTING THEM TO HAVE 
EVOLVED INTO SOMETHING THAT HAS TAKEN SOME COUNTRIES IN 
THE WEST CENTURIES TO ACCOMPLISH RATHER THAN LOOKING AT 
THEM IN A REALISTIC WAY AND HOW MUCH HAS BEEN 
ACCOMPLISHED IN SUCH LITTLE TIME. SPECIFICALLY IN THE 
CASE OF SLOVAKIA, IT HAS BEEN ONLY SINCE JANUARY FIRST 
1993 THAT IT HAS BEEN INDEPENDENT. FREE AND FAIR 
ELECTIONS HAVE BEEN CONDUCTED. OVER EIGHTY-FOUR PER CENT
OF THE VOTERS VOTED, MUCH HIGHER THAN IN THE UNITED STATES.
// END ACT //
JOHN KARCH SAID AS DEMOCRACY PROGRESSES, THE POST-COMMUNIST 
COUNTRIES CAN MODIFY THEIR ELECTORAL SYSTEMS TO MEET THEIR NEEDS.

********

#5
Financial Times
6 November 1998
[for personal use only]
Moscow may offer debt-for-equity swaps
By John Thornhill in Moscow

Russia may try to restructure its massive Soviet-era debts for the second time
in two years and entice foreign investors into the "real economy" by offering
creditors debt-for-equity swaps, a senior government banker said on Thursday.
Andrei Kostin, chairman of Vnesheconombank, the government's agent for
managing foreign debt, said it was now "extremely unlikely" Russia would be
able to service its $17bn of external obligations in full next year. The
government should therefore open discussions with sovereign and commercial
creditors about alternative methods.
"My personal opinion is that over the next couple of years Russia will not be
in a position to pay all its debt obligations in the same way as we hoped
before," Mr Kostin said in an interview. "The sooner we tell the world about
all this the better it will be for everyone."
Mr Kostin's comments came the day after Yuri Maslyukov, the first deputy prime
minister in charge of the economy, first publicly raised the possibility that
Russia might be forced to default on its external debts.
Russia has already missed $685m of repayments owed to sovereign creditors
belonging to the Paris Club. It is also involved in talks with local and
foreign creditors about restructuring the $40bn domestic treasury-bill (GKO)
market which was frozen on August 17.
Mr Kostin said the government was still drawing up its 1999 budget but would
probably have to prioritise which debts to service next year. IMF loans, post-
Soviet eurobonds, and MinFin bonds (restructured Soviet-era bank debt) would
top the list, he said, but much of Russia's Soviet-era debt might have to be
restructured for a second time.
Mr Kostin said one of the proposals "boiling up" among foreign debt experts
was that the government could offer creditors equity stakes in privatised
companies. "We cannot expect a queue of foreign businessmen to take over these
enterprises but some of them could be profitable under proper management,
especially oil and chemical enterprises with export potential," he said.
Foreign investors said similar debt-for-equity swaps had been used
successfully in some Latin American countries, such as Chile and Peru. But
there was considerable scepticism about whether such a scheme would work in
Russia.
"There are imaginative things that could be done to restructure the debt but
not at a time of desperation," said Dirk Damrau, head of research at MFK
Renaissance, a Moscow-based investment bank. "No-one wants Russian equities at
the moment."
Mr Kostin conceded a debt-for-equity scheme would face practical difficulties
but insisted it could be made attractive for both parties. "If we can
strengthen the rules to protect investors and avoid the mistakes that we made
in previous privatisations then I think this scheme would be possible," he
said.

********

#6
Nemtsov: Economy To Worsen Under Primakov 

Copenhagen's Politiken in Danish
29 October 1998
[translation for personal use only]
Article by Vibeke Sperling: "Things Will Get Worse in Russia
Before They Get Better"

One of Russia's great hopes for reform, Boris Nemtsov, believes that
things will first get worse before they get better in Russia and he regrets
that valuable time is being wasted with Primakov at the helm.
"I do not think there will be any big collapse in Russia but with the
Primakov government, just more valuable time is being wasted that ought to
be spent on effective economic reforms," said Boris Nemtsov, formerly first
deputy prime minister responsible for the economy.
Nemtsov chose to leave the government when Yeltsin fired Kiriyenko,
the reform economist, as prime minister at the end of August after the
devaluation of the ruble.
"Primakov has a lot of experience from his time as foreign minister
and has close contacts with different people such as the American Secretary
of State, Madeleine Albright, and Iraq's dictator, Saddam Husayn He has
valuable international experience but when it comes to the economy, he
leans towards ministers and a central bank director from the Soviet
period," Nemtsov told Politiken after he had talked about "Russia right
now" at this year's management conference at Industry House in Copenhagen.
He expects that Primakov will remain head of the government as long as
Yeltsin is president but that his current Communist ministers and advisers
must go if anything serious is to be done about the economy.
The fact that Nemtsov does not believe there will be a major collapse
in the meantime is due to the fact that "private property has been
guaranteed and the same is true of freedom of expression."
Primakov, according to Nemtsov, does not have other answers to the
deep economic and financial problem other than more international loans and
seeing the rest of the state's deficit covered by putting the money
printing presses to work again.State Secret
"Primakov is talking about an economic program but it is being treated
like a state secret that exists in only 12 copies, as far as I have been
informed," said Nemtsov.
He said that new loans or humanitarian assistance from the outside
were not the solution. Russians themselves must pull themselves up by
their bootstraps but technical help and not least help to train "our
enterprising young generation of up and coming political and economic
leaders" is an important international task, in his view.
Only increased inflation, with the danger of there being
hyperinflation starting next year, can be expected when printing more money
seems to be Primakov's only way of tending to what he presumably attaches
top priority to--namely that wages and pensions be paid out. Russia is well
on its way to hyperinflation "with 15 percent inflation in September and 40
percent in October. Starting in 1999 it will be at least 50 percent per
month and in the short term people can expect an additional 25 percent
decline in the standard of living," Nemtsov said.Populists' Chance
"The social tensions are serious but there is still not a trend
towards the Communists being able to mobilize more than their traditional
support of at most 25 percent. The great majority of the people do not see
Communism as any acceptable alternative," Nemtsov said.
Nor does Nemtsov, who is just 39 years old, and who is considered to
be one of Russia's biggest hopes of reform, expect that the Communists'
leader, Zhuganov, can win a possibly imminent, new presidential election. 
Instead Nemtsov expects that a populist like Moscow's mayor Lushkov or Gen.
Lebed will become Russia's next president.
But what about Yavlinsky, the reform economist, who came in fourth
place in the 1996 presidential election?
"The next time around he can come in in third place at the most," said
Nemtsov, adding that the most important thing was that the reform wing
unite around one candidate. Nemtsov does not think Yavlinsky will consent
to having the reform candidate be anyone other than himself and thus
rejected the prospect that it could be Boris Nemtsov.
"The most important thing now is to guarantee that democrats,
including the Russian social democrats as well, come together in the
parliamentary election next December," said Nemtsov, who believes that this
"liberal wing" has excellent chances of being strongly represented in the
next lower house, the Duma.
"And this is hugely important because of the Duma's great influence on
the finance bill."
According to Nemtsov, the reform wing has now been strengthened
because it is consistently in opposition to the government and can
therefore maneuver more freely.
"That is also true of me, now that I do not have to grin and bear it,"
said Nemtsov.
Of the presidential candidates Nemtsov thinks have the best chances hesaid:
"Gen. Lebed's merit is that he halted the war in Chechnya but not even
Lebed knows what Lebed will do with the economy. Lushkov is of the opinion
that the bureaucrats will liberate Russia. Mayor Lushkov is promising to
expand the enterprising spirit the capital city has experienced to cover
the entire country if he becomes president. Moscow's boom is often
attributed to the dynamic Lushkov but the fact really is that 75 percent of
the state's money is concentrated in Moscow and 80 percent of the private
investment is also in the capital city," said Nemtsov, who said he thought
that with true, real competition in Moscow things could have gone muchbetter.
When the crisis had its impact, Moscow got a half million new
unemployed, among other reasons because the intense construction activity
in recent years came to a standstill.Background to the Crisis
Asked about the background to the deep economic and financial crisis,
the reform economist said:
"The external factors are, of course, the Asian crisis and the big
drop in oil prices. But the true roots of the crisis should be sought in
economic inefficiency, poor leaders in industry and agriculture, and
Soviet-style management principles," said Nemtsov.
In March 1997 Yeltsin brought Nemtsov to Moscow and gave him and
former privatization minister Anatoliy Chubays overall responsibility for
the economy. At that time Nemtsov had been the governor in Nishni Novogrod
to the east of Moscow for almost six years. During that time the region
developed into a true island of reform. In the government Nemtsov was
assigned special responsibility for demonopolizing industry.
He acknowledged that the reform team during his term in the government
made many mistakes or committed sins of omission. The worst thing was that
they did not fire the so-called oligarchs, the industry and finance bosses
who wheeled and dealed in securities and were behind organized capitalflight.
"The absence of competition that emerged from the monopolistic
structure in industry also meant that we squandered valuable time,"
said Nemtsov.
"We shut down banks that enjoyed special privileges in relation to
government finances and we opened up privatization auctions to the highest
bidder but we were not successful in, for example, firing Vakhirev, the
head of Gasprom, the monopoly of all monopolies.
While former Gasprom director Chernomyrdin was prime minister, Nemtsov
could not fire Vakhirev. In March, after Yeltsin had fired Chernomyrdin in
favor of Kiriyenko, it became possible.
"But the powerful oligarchs put a halt to that because if we had
succeeded in firing him, then the others feared they would follow," said
Nemtsov. When he became first deputy prime minister, he promised to
transform Russia's "pirate capitalism into populist capitalism" but the
oligarchs are still running things.
Nemtsov is nevertheless optimistic even if he does not think that
Russia has yet hit bottom. Only at the start of the next century does he
think that the trend can really be turned around, "when the generation of
well educated and dynamic young people, who did not live through the idiocy
of the Soviet period, comes into its own."Barter Economy
Not least among the legacies of the Soviet period's idiocy is the
extensive barter economy and exchanges of services.
Upwards of 70 percent of the transactions between Russian companies
happen on a swap basis, in which, for example, timber is exchanged for food
and food for energy, if the debits between companies have not accumulated.
"This barter economy is often explained by a shortage of currency but
the truth of the matter is instead that it is easier for corrupt industry
leaders to steal when there are not clear books on cash transactions,"
Nemtsov said.A bankruptcy law that has been approved in practice, so that
inefficient companies will not continue to be a burden to the economy, the
firing of industry leaders whose experience dates from the Soviet period
and who do not understand the market economy, a transparent set of tax laws
that will also compel the monopolies to pay taxes, all of these, according
to Nemtsov are sine qua non conditions for the creation of a basis for
economic growth.
He rejected the notion that special controls needed to be exercised on
banks. Banks that only lived off of speculation should also collapse, hesaid.
No ConfidenceForeign banks must have open opportunities to operate because the
Russians do not have confidence in their own banks. A loss of confidence
in both banks and the government is one of the country's biggest problems,
Nemtsov believes.
He also pointed out that in 1997 the reform team in the government, of
which he himself was a part, came up with results, with a 30 percent
increase in private investment, while both domestic and foreign investors
are now holding back. Since Primakov came into office, tax revenues have
been cut in half twice and capital flight has started once again. Capital
flight during the so-called reform years consisted of "between eighty and a
couple hundred billion dollars; that was at least 10 times as much as all
investments combined during the period," said Nemtsov.
But Nemtsov also promised leaders of Danish industry that, despite all
else, it was a good idea to invest in Russia "because those who can go in
with investments in new production and not just for quick profits will gain
together with Russia's enterprising new generation," Nemtsov said.

*******

#7
Russia to Slash 400,000 Military Posts 

MOSCOW, Nov. 05, 1998 -- (Agence France Presse) Russia's Army and Navy plan
to slash 400,000 personnel from their ranks in an effort to reform the
demoralized military into a lean and cost-effective force, Itar-Tass news
agency reported Thursday. 
Another 75,000 officers will be transferred into the reserve, a Defense
Ministry spokesman told the news agency. 
Russia's Army and Navy are currently slightly more than 1.2-million strong,
the defense official said. President Boris Yeltsin last year signed a
decree launching an intensive reform of the Army by 2000. 
The military has been left demoralized after waging a brutal but
ineffective 21-month war in the North Caucasus republic of Chechnya. 
The Interior Ministry, which did much of the fighting in Chechnya, in June
announced plans to slash its force of 250,000 troops in half over the next
two years. 
Yeltsin has pledged that what once was the feared Soviet Red Army would be
changed into an armed force of volunteers by 2000. Most defense officials
now admit however that goal is unrealistic because of cash constraints. 

*******

#8
Transitions
November 1998
http://www.omri.cz/transitions/nov98/opingaid.html
Russia at Mercy of the Reaction
by Yegor Gaidar 

Moscow--The majority in the State Duma has done all it could to destabilize
the financial situation in Russia over the past few years. If one pauses to
analyze the results of the activity of the current legislature, he will
stumble upon a vast number of financially unwarranted acts, which, as was
clear from the very beginning, would be impossible to implement. 
Moreover, the Russian parliament has refused to pass laws that are crucial
to the normal functioning of a market economy, such as those on tax
collection, land ownership, and means-tested social security. It was only
thanks to the executive--several more or less reform-oriented governments
or ministers--that elements of a market economy introduced in 1992 have not
been completely destroyed. 
For example, the government of Sergei Kirienko, which was in power from
March to August, had embarked on the correct course and made attempts to
formulate a reasonable program. It was eager to introduce some order in the
Russian economy and, overall, it did not perform all that badly. True, the
Kirienko team made some mistakes, but its main problem was its political
weakness. The Duma majority had no need for its program because it was not
interested in curing Russia's financial problems. Kirienko's program also
was not palatable to the so-called oligarchs for a simple reason: its core
was aimed at making the rich pay their taxes and preventing them from
further squandering the state budget. 
Which courses of action does the Yevgenii Primakov government have at its
disposal? Since it is by definition incapable of implementing a liberal
agenda, it can only opt for one of the following alternatives: do nothing
at all or turn on the money-printing presses. 
The hodgepodge political composition of the current government precludes
any efficient performance, so Primakov and his ministers may simply choose
to shut their eyes to the current problems, all the while getting
increasingly scared and ultimately failing to undertake anything
meaningful. The problems will continue to mount, especially in the banking
sector, along with wages and pensions arrears. (The only ways to alleviate
those are the imposition of budget austerity and the broadening of tax
collection.) So, sooner or later, the government--with its eyes firmly shut
and simply waiting for events to unfold--will find itself under the
pressure of the very forces that originally brought it to power. Then, a
large-scale budget funding through an unbridled monetary emission will start. 
I have no doubt whatsoever that our society will not like the economic
realities that the current leftist-Communist government is going to create.
But I do have doubts as to whether freedom of the media will be maintained,
whether we will be spared mass repression, and whether we will have free
elections next time around. 
--Translated by Victor Kalashnikov. 
Yegor Gaidar, Russia's former prime minister and author of its initial
economic reforms, is the director of the Institute for the Economy in
Transition in Moscow. 

*******

#9
Government Denies Plans To Bring Back Chubays, Nemtsov 

Moscow, Nov 4 (Itar-Tass) -- The Russian government's information
department on Wednesday [4 November] denied there are plans to invite
"young reformers" to the government, including Boris Nemtsov and Anatoliy
Chubays."There are no plans to invite Nemtsov and Chubays to work in the
government," the information department said.
The announcement followed ex-Prime Minister Sergey Kiriyenko's remarks
published by the German weekly Die Zeit that the return of "young
reformers" to the government is possible within months.
Kiriyenko believes that there are "indeed good chances" that Nemtsov
and Chubays will be offered posts in the government.
He claims that "there is no alternative" to such a decision in the
present circumstances.
"Even if reforms are being slowed down in Russia now, they have to be
completed," he said.
Kiriyenko severly criticised the system of anti-crisis measures
proposed by the government and described it as "a political paper which
contains promises to everybody."

*******

#10
Russia Today press summaries
http://www.russiatoday.com
Izvestiya
November 5, 1998
Lead Story
The Health Ministry Warns: Bring Medicine with You 
Summary

The situation in Russia's health care system is growing worse every day,
the daily wrote on Thursday. 
Funding for hospitals from budget sources or health insurance companies has
been greatly reduced. Izvestiya did its own research into the supply of
drugs and medical materials at some hospitals in Volgograd, St. Petersburg,
Kazan and Krasnoyarsk. It found that the situation in these cities is
similar. 
Hospitals have only enough medicine and drug supplies to cover emergency
cases, while other patients have to buy prescribed medicine themselves.
Very often people do not have the money to pay for medications, which have
become very expensive since the devaluation of the ruble. 
In pharmacies, the selection of drugs available for free has become very
limited. But this is the only medicine that most elderly pensioners can
afford, the daily noted. Supplies are limited, and so usually only one
packet is given to each patient, regardless of whether the prescription
calls for more. (By law, people with disabilities can get certain drugs for
free with doctors' prescriptions. The list is compiled by the Health
Ministry every year). 
The health care sector has been hard-hit by the financial crisis and the
fall of the ruble. The cash-strapped government lacks the funds to provide
free medical care. In addition, about 60 percent of the country's medical
supplies are imports. Western firms have cut back on supplies to Russia in
the face of uncertainty over the ruble. 

*******

#11
Washington Post
November 6, 1998
[for personal use only
Russia Without Illusions
By Stephen S. Rosenfeld

A notable casualty of the crash of the ruble and of much else in Moscow
is the post-Cold War ambition of the Bush and Clinton administrations to
help make Russia over as a free-market democracy -- and as a partner in
managing global disorder. It is a particular kind of casualty, less a death
than a wounding, and a wounding of uncertain gravity. American policy has
backed off the grand approach, but it remains engaged in specific projects
with the Russians. Washington is reluctant to offer any word or deed
suggesting anything faintly resembling the recontainment of a Moscow regime.
The Clinton team never sat down and decided formally that a more modest
approach was now appropriate, or unavoidable. Rather, it has been in the
position of adjusting to Russian circumstances measurably less malleable
than before the ruble crashed. It has had to step back and come to grips as
best it can with a new Russian high command of blurred competence and purpose.
Over the past few months the administration has been assembling a
response to three simultaneous, unforeseen and in the official view unearned
and entirely unfair Russian miseries: collapse of the world price of its
crucial commodity exports, infection of its would-be foreign investors by
the Asian flu, and collapse of its currency and its banking system, too.
My Post colleague Tom Lippman was first to put together the pieces of a
policy that Secretary of State Madeleine Albright made public last month in
a speech the rest of us missed at the time.
Describing herself as a "short-term realist" but a "long-term optimist,"
Albright outlined an effort to stand with Russia "as long as it is moving on
the right track." The plain implication was that the United States would be
the judge.
American officials close to Clinton's early attempt to use the
International Monetary Fund as a lever for reform rebuff the charge by
Russian and American critics that the administration jumped in without a
careful plan and was inattentive to implementation. By their own account,
they saw risk but also opportunity and hurled themselves into it. They tend
to acknowledge some underestimating of how Russia's size and cultural drag
would burden modernization in a country that has seen modernization
campaigns for three centuries, up and down. As against foreign policy where
states interact with each other, it was always going to be hard in a country
weak in the rule of law to guide Moscow's domestic choices. Still, the
officials feel that bad luck, as in the drop of world oil prices, dealt the
really savage blows.
Now, under the fading Yeltsin presidency and the groping new Primakov
government, Russia is credited at least with preserving the forms of its
novel political democracy. But it is visibly and disturbingly backing off
market reform. The turn has harsh implications, and first of all for Russia.
The economy may get worse. An economic meltdown risks a political meltdown.
Russia's retrograde economic policies make IMF budgetary support ever more
difficult. Still, these contingencies are not fated to ripen into terminal
crisis, in the administration's judgment.
In the current passage, the administration believes, the United States
must remain engaged with Russia -- in, for instance, cooperation in
nuclear-threat reduction, food relief (American farmers like it), promotion
of energy deals and encouragement of contacts supporting a civil society in
an emerging democracy. The "Gore-Chernomyrdin" channel, a structure meant to
add political heft to bureaucratic dealings, remains available if not at the
moment particularly active.
The prevailing American effort is not to let disenchantment deflect
Washington from formulating a credible view of where Russia is going and how
the United States might help. It is considered the better part of realism to
put a broad approach to democracy- and free-market-building indefinitely on
the shelf. Russians are being advised that they must make their own choices.
In Washington you can hear unenthusiastic calls for Russian generational
change, and no calls at all for the formation of an American grand strategy.
What administration could fail to be disappointed by the frustration of
what was, after all, its signature foreign policy initiative -- to bring
Russia into the charmed circle of the free world as a successful convert and
a reliable compatriot? A retrenchment in our perception and policy was
inevitable. But we are defined by our aspirations as well as our
achievements, and this one is not over yet. 

*******

#12
Los Angeles Times
November 6, 1998 
[for personal use only]
More Aid for Russia Reforms Seen as Political Risk 
Economics: The West's consensus on how to propel Moscow's transition to
free-market capitalism shatters amid turmoil and corruption. 
By TYLER MARSHALL (Tyler.Marshall@latimes.com)

WASHINGTON--The turmoil in Russia's economy after years of Western-backed
reform has so shaken the international development community that its entire
approach to aiding Moscow has become an open question. 
Amid signs that billions of dollars in international aid have been
squandered in Russia, some experts in the private sector are questioning
whether it is still politically possible for the United States and other
Western governments to provide new public money to help underwrite Moscow's
economic transition. 
Equally significant, some believe that events in Russia signal a major
blow to the "Washington consensus," a school of economic thought popular
within the Clinton administration and international lending institutions
based here. The approach calls on nascent free-market economies to allow
capital to flow freely while reining in government spending and inflation. 
The Russian government took these goals so seriously that it frequently
stopped paying workers in order to meet them--one of several moves that
eventually undermined popular support for reforms. What remained of that
support unraveled in August after devaluation of the ruble and a freeze on
foreign debt payments deepened the current economic crisis. 
Any step back from the Washington consensus would mark a fundamental
shift in post-Cold War thinking among U.S. policymaking elites, who have
held out stringent fiscal discipline as the path to success for Europe's
post-Communist countries making the transition to capitalism as well as for
the emerging economies of Asia. 
The debate has largely drowned out any new grand ideas from Western
experts who have influenced the course of economic change in Russia since
the collapse of communism there seven years ago. 
"There is a kind of intellectual morass in the United States on this
issue," said Arnold Horelick, director of Russian and Eurasian studies at
the Washington-based Carnegie Endowment for International Peace. "For those
who feel Russia is important, there is a dilemma: They believe it's
important to help, but they don't know what to do." 
Distractions have also sapped the West of leadership at a key time. The
scandal enveloping President Clinton has consumed Washington for months. And
Germany's longtime ruler, Chancellor Helmut Kohl--who arguably knows Russia
and its president, Boris N. Yeltsin, better than any other Western
leader--lost a reelection campaign. 
But even with strong, experienced leadership, the West's response to the
financial crisis would have been slow, Russia specialists argue, because
there are few easy answers amid the debris of Russia's initial experiment
with free-market capitalism. 
"I don't think you can stand around and wring your hands, but there's not
a lot they [the Clinton administration] can do until Russia sorts out its
own direction," said Arthur Hartman, a former U.S. ambassador to Moscow.
"People are led to believe we have a lot more power than we really do." 
Even longtime critics of Washington-style reform measures admit that
there are few obvious alternatives. 
"It's difficult to decide what a new policy should be," acknowledged one
critic, George Washington University political scientist Peter Reddaway. 
Reddaway characterizes the administration's Russia policy as fatally flawed
in several respects, including what he calls "unthinking, uncritical"
support for Yeltsin and a reform strategy that Reddaway says ignored
Russia's unique history and culture. 
Despite the debacle in Russia, senior administration officials still
defend their policies. 
"What has happened is not a failure to pursue the right strategy or
policies, but a failure in the strength of the [Russian] government to get
those policies through," said one senior White House official who declined
to be identified by name. 
"There was nothing radically Western" about the policies, the official
continued. "In some ways, it was basic arithmetic. An attempt to change tax
policy ran into the buzz saw of [Moscow's] relations with [Russia's other]
regions. That's not West versus Russia; it was center versus the regions." 
In the wake of Russia's crisis, a growing number of U.S. analysts believe
that it will be politically difficult to mount new initiatives for Moscow
that require significant amounts of public money. There is now evidence to
indicate that at least some of the billions of dollars in foreign aid aimed
at supporting reforms was either wasted or stolen. 
"We have checked a fair proportion of the loans, and I am ashamed to say
that several billion dollars has not been used for its intended purpose--and
some of it was simply stolen," Russia's chief auditor, Venyamin Sokolov,
told a BBC interviewer in late September. 
Stephen Kotkin, director of Russian studies at Princeton University,
believes that the United States should continue to fund programs that keep
Russia's nuclear arsenal secure and its scientists working. However, he
argues, Washington should not back Russia's civilian reform efforts at all
because of the endemic corruption. 
"Congress won't swallow it, and people will get angry--and rightfully
so," he said. 
Kotkin contended that private, direct foreign investment--targeted at
specific industries or regions and bypassing Moscow--offers the best chance
because it could revive the country from the grass roots. Western
industrialists invested in Josef Stalin's Soviet Union when there was money
to be made, and they will do it again for the same reason, Kotkin said. 
According to the U.S.-Russia Business Council, there has been no
discernible flight from Russia of U.S. investment. 
Last month, international financier George Soros launched an $80-million
program using private money to protect Russian media organizations whose
future is endangered by the financial chaos. 

********