Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


November 10, 1998    
This Date's Issues: 2468 2469 

Johnson's Russia List
10 November 1998

[Note from David Johnson:
I am tempted to comment on the confluence of criticism that 
is apparent in this issue of JRL but will resist. Perhaps its just
my imagination. What do others think?
1. Reuters: Trimmings, variety meats probable for Russia-USDA.
2. AP: Russian Economic Plan Criticized.
3. Reuters: U.S. says time has run out for Russia reform.
4. Moscow Times: Christian Lowe, Liberals Urge Communist Party End.
5. Washington Times: Bill Gertz, Kremlin withholds report on POWs.
6. RFE/RL: Paul Goble, Replacing Skrunda.
7. Moscow Times: Gary Peach, THE ANALYST: Russia Should be Prevented 
>From Going Nationalistic.

8. Thomas Campbell: Bundy Language Purity Debate.
9. Reuters: Russian government to press Duma on economy.
10. Rossiyskaya Gazeta: Alternatives to Foreign Loans Suggested.
11. Wallace Kaufman: Russian situation in the Asian north.
12. AP: U.S., Ex-Soviet Nations Sign Nuclear Pact.]


Trimmings, variety meats probable for Russia-USDA

WASHINGTON, Nov 9 (Reuters) - Although a final decision has not been made, it
is probable that trimmings and variety meats will be sent to Russia as part of
a food aid package, a top U.S. Agriculture Department official said Monday. 
Tim Galvin, special trade adviser to Agriculture Secretary Dan Glickman, said
the United States will probably send meat cuts that can be made into sausage,
not whole carcasses. 
"That's been the assumption," he told Reuters. 
The United States said Friday it will provide long-term, low-interest loans to
provide for the sale of 120,000 tonnes of U.S. beef and 50,000 tonnes of pork
as part of an $885 million food aid package for Russia. 
Meat traders have been anxiously waiting for more information about the


Russian Economic Plan Criticized
November 9, 1998

MOSCOW (AP) -- The Russian government's economic bailout plan will only
worsen its troubles, a leading Russian reformer warned Monday, while another
reformer blamed the International Monetary Fund for aggravating the crisis.
Yegor Gaidar, a former prime minister who launched Russia's first post-Soviet
economic reforms, said that under the government's plan, ``Russia's economic
policies will be weak and their results will be unfavorable. The crisis will
be deepening.''
Gaidar, speaking at a conference in Ukraine's capital Kiev, blamed Russia's
crisis on recent foot-dragging on reforms.
Boris Nemtsov, a former Russian deputy prime minister also at Monday's
conference, said the IMF was partly to blame because it ``was trying to impose
a program that the (Russian) government did not want to implement.''
Nemtsov was fired along with the rest of the Russian government in August
after it stopped propping up the ruble and froze $40 billion in treasury bill
debts, sending the economy into turmoil.
``I think it is absolutely incorrect when IMF experts start imposing their
liberal requirements on governments, because these requirements are impossible
to implement from the very start,'' Nemtsov said.
Russia's economic problems have prompted fears of food shortages -- or at
least serious problems in distributing food to the far-flung reaches of the
world's largest country.
In Brussels, Belgium, European Union foreign ministers were cobbling together
plans Monday to grant Russia $480 million in food aid. The United States
offered Russia food aid worth $625 million Friday.
Also Monday, Finance Minister Mikhail Zadornov was quoted by The Wall Street
Journal as saying Russia would pay off the frozen treasury bills with new
ruble-denominated bonds and a small amount of ruble cash.
Foreign creditors reached an agreement Friday in London with Russian officials
on restructuring the debt. Zadornov said Russia offered to pay 10 percent of
the debt in cash and the rest in bonds.
Foreign investors, who hold nearly one-third of the frozen debt, have said
they agreed to accept some ruble-denominated bonds.
Zadornov did not say, however, what exchange rate would be applied to the new
bonds, which is crucial because of the ruble's volatility.
The ruble was hovering around 6 to the dollar until the August devaluation,
then plunged as low as 20 to the dollar. It has recently stabilized at about
15 to the dollar.


U.S. says time has run out for Russia reform
By Glenn Somerville

WASHINGTON, Nov 9 (Reuters) - Time has run out for Russia to implement
economic reforms and its fate is now in its own hands, U.S. Deputy Treasury
Secretary Lawrence Summers said on Monday. 
In a toughly worded speech, Summers said the United States was still willing
to help the Russian people, such as with emergency food aid announced last
week. ``But ultimately, Russia will make her own destiny,'' Summers said. 
Speaking to a chemical industry group, Summers said Russian reformers had lost
the race against the forces of oligarchy and crony capitalism and
``retrograde'' members of the legislature. 
``In August the government's time ran out,'' he said, when Moscow devalued the
rouble, interrupted foreign debt repayments and restructured government bonds.
The hard line echoed comments made last week by Deputy Secretary of State
Strobe Talbott, who warned that U.S.-backed financial help to Russia was on
hold until Moscow showed it was willing to make structural reforms to promote
Summers said reform efforts were stymied by a dramatic oil price drop, Asia's
financial crisis, President Boris Yeltsin's ill health and the government's
failure to reform banks and improve tax collection. 
``The new government of Prime Minister (Yevgeny) Primakov will have to make
its way as it deals with the problems which that failure has wrought,''
Summers said. 
Primakov's recently unveiled plans include greater state control over the
economy and the rouble, tax breaks for industry and some financing from the
central bank through printing more money -- policies the United States opposes
and that may jeopardise an international bailout. 
A recent International Monetary Fund mission to Moscow failed to agree on
disbursement of a previously promised $4.3 billion payment from a $22.6
billion bailout package agreed on in July. 
``While we can do an enormous amount with the support that we and the rest of
the international community provide... We cannot want change more than the
country itself does,'' Summers said. 
Last week, Moscow announced it would not pay its foreign debts next year and
said it wanted to renegotiate its loans. 
Russia has $17 billion in foreign debt payments due early next year and owes
its own citizens billions of roubles in back wages, pensions and other debts. 
Without IMF financing, it is unclear how Russia can pay the bills unless it
prints so much new money that the roubles it pays out become virtually
Summers noted that Poland and Czechoslovakia, in contrast to Russia, have made
progress in moving toward a market economy. 


Moscow Times
November 10, 1998 
Liberals Urge Communist Party End 
By Christian Lowe
Staff Writer

The row over anti-Semitism within the Communist Party leadership deepened
Sunday as influential businessman Boris Berezovsky called for the party to be
Berezovsky's appeal was echoed by Anatoly Chubais, the former deputy prime
minister who now heads Russia's electricity monopoly, and by former Prime
Minister Yegor Gaidar. 
The Kremlin, too, was drawn into the spat, issuing a statement in which it
said it was vehemently opposed to any form of racial discrimination. 
At a parliamentary hearing last week, Duma deputies declined to pass a
resolution censuring Communist lawmaker Albert Makashov for speeches he made
at two separate rallies last month, in which he blamed Jews for Russia's
economic collapse and urged that they be rounded up and jailed. 
Several Communist deputies appeared to give tacit support to Makashov's
comments during that debate, while Communist Party leader Gennady Zyuganov let
Makashov off with a gentle reproach. 
Berezovsky, who earlier this year was reported to be courting the party as a
possible political partner, said the Communists' apparent intolerance of other
races threatened to destroy Russian unity. 
"Communism should be overcome, and the first step to that is to forbid it on
the state level," he said in an interview with Ekho Moskvy radio station
Sunday. "The problem is not in the anti-Semitic utterances, which are
supported by the official leadership of the party, but in their position,
which sets up [ethnic] Russians in opposition to all the other races living in
Though he did not mention Makashov by name, President Boris Yeltsin issued the
Duma deputy a sharp rebuke. "We will fight all attempts to cast aspersions on
national sentiment, to limit the rights of citizens due to their nationality,"
he said in a statement released Sunday. 
Zyuganov dismissed the comments by Berezovsky, who in addition to his
extensive business interests is executive secretary to the Commonwealth of
Independent States, the loose association of former Soviet republics. 
The Communist leader appeared to defend Makashov's comments, saying that "at a
rally, every person has the right to make their own statements." 
At Saturday's procession through Moscow to mark the 81st anniversary of the
Bolshevik Revolution, Makashov, decked out in an army uniform, marched
separately from the Communist leadership. But he shared a podium with
Zyuganov, from which he briefly addressed protesters. 
Gennady Seleznyov, Communist speaker of the Duma, parliament's lower house,
slammed Berezovsky's call for the Communist Party to be banned as "the
statement of an extremist." Seleznyov added: "There is no basis for the
outlawing of the Communist Party and Berezovsky has no business talking about
banning any parties." 
Under Russian law, "inciting interracial hatred" is a criminal offense. But it
was unclear Monday whether the Communist Party could be outlawed under current
legislation. Officials at the Justice Ministry and the Prosecutor General's
Office Monday could not be reached for comment Monday because of the public
The party has been banned before. President Yeltsin signed decrees banning the
Communist Party after he emerged victorious from the abortive putsch against
Soviet leader Mikhail Gorbachev in 1991. The party re-emerged in its current
form when the Constitutional Court lifted the ban in November 1992. 
Berezovsky's condemning Makashov was echoed by liberal politicians. 
The Communists "are transforming themselves not into a social-democratic party
but a Nazi party, as testified to by the way the party's Duma faction rallied
behind the anti-Semitic animal Albert Makashov," RIA Novosti quoted Gaidar as
Chubais, chairman of Unified Energy Systems and a member of Gaidar's party,
said in an interview Sunday on TV-6: "After the Communist Party ... covered
itself in shame by, in effect, closing ranks behind the anti-Semitic
utterances of Makashov, we should examine very seriously the legal questions
of closing [the party] down." 
While the public furor over Makashov's comments is likely to subside, the
affair could do serious and permanent damage to the Communist Party's hopes of
forming an electoral coalition with moderate leftist parties. 


Washington Times
9 November 1998
[for personal use only]
Kremlin withholds report on POWs
By Bill Gertz

Moscow is refusing to turn over a secret KGB document suggesting captured
Americans were taken to the Soviet Union in the late 1960s for "intelligence-
gathering purposes," The Washington Times has learned.
Secretary of State Madeleine K. Albright earlier this year appealed to
Russian Prime Minister Yevgeny Primakov, a former KGB chairman, to release the
document that the Pentagon discovered in January and has been trying to obtain
since then, said Clinton administration and congressional officials familiar
with the matter.
The Russian government has told U.S. officials the plan was never carried
out, and Moscow recently turned down U.S. government requests to study the
intelligence document, saying it is classified and will not be released, the
officials said.
Discovery of the KGB document has raised hopes among Pentagon POW
investigators that information is in the KGB archives about the fate of some
8,000 Americans still missing from the Korean War, Vietnam War and other Cold
War conflicts. Because of the date, "it could be about Vietnam," said one
person involved in the issue who declined to be identified.
The document was first mentioned in the recently published memoir of
Russian historian Gen. Dmitri Volkogonov, who died of cancer in December 1995.
It also was disclosed in the general's personal papers 
that were donated to the Library of Congress last year.
"I can confirm that senior U.S. government officials, including Secretary
Albright, have raised this important matter with Russian counterparts and
continue to seek further clarification from them," State Department spokesman
James Foley told The Times.
Gen. Volkogonov described the document in his book as "sensational" and
said he uncovered it while working as co-chairman of the joint U.S.-Russian
commission set up in 1992 to resolve prisoner of war and missing in action
(POW-MIA) issues from Korea and Vietnam, and the Cold War, when scores of
Americans were lost on spying missions.
Norman Kass, a Pentagon official who is executive director of the U.S.
side of the joint POW commission, said investigating the KGB document is "the
highest interest" of the commission. The commission will meet in Moscow
tomorrow when the KGB document will be discussed, he said.
"We consider it significant," Mr. Kass said. "After all, the people whose
names appear in the papers were at the apex of the Soviet leadership."
According to Gen. Volkogonov's book, the KGB document outlining the
program to exploit Americans was signed by Vladimir Semichastny, head of the
KGB secret political police from 1961 to 1967.
Gen. Volkogonov wrote that immediately after discovering the report he
asked the KGB chairman at the time, Mr. Primakov, to investigate. The document
was located, but Mr. Primakov said there was no information about the program.
There is no mention in the book or papers of what the KGB planned to do
with the captured Americans. According to Russian defectors, the KGB used
Americans to train Russian undercover agents how to speak and act like
Americans, as portrayed in Nelson DeMille's 1989 novel, "The Charm School,"
about American POWs from Vietnam who were forced to teach at a secret KGB
training school.
Americans also could have been forced to supply information on U.S.
military weapons systems, doctrine and tactics for Russians who might have to
fight against them.
According to Gen. Volkogonov, the POW commission resolved many cases
since 1992. But many were not because "quite a few documents were destroyed,"
he wrote.
"However, one document, probably sensational, is still in storage. I have
a copy of it," he stated in his book. "Its content is as follows: at the end
of the 1960s the KGB (external foreign intelligence) was given the task of
'delivering informed Americans to the USSR for intelligence gathering
"When I found this sensational paper in a 'special pouch,' I immediately
went to Y.M. Primakov (Director of Foreign Intelligence). He called in his
people. They brought in a copy of this project signed; it seems to me, by
Semichastny. ..."
Gen. Volkogonov said the KGB searched for "traces" of the intelligence
operation. "These, the traces, as I had expected 'were not found,'" he wrote.
"This remained a secret which I could not penetrate," he stated. "I also
did not report this to my much-esteemed Ambassador [Malcolm] Toon. I am
speaking about this now in the hope that these notes will make it into my book
Reflections." His Russian-language memoir published in September is titled
"Study of Time." Mr. Toon is the commission's co-chairman.
"History, especially Soviet history, is full of secrets, and very often
evil," Gen. Volkogonov wrote. "With the exception of this incident, I can say
that I have done something in order to raise the mysterious curtain from
A recent CIA report on Vietnamese government cooperation on American POWs
stated that "a few reports of transfers of U.S. POWs to Russia and other
countries are unexplained and the books remain open."
Former Czech intelligence officer Jan Senja told Congress in 1996 that he
supervised the transfer of some 200 American POWs from Vietnam to the Soviet
Union between 1961 and 1968. He also claimed Soviet bloc intelligence services
performed medical experiments on American POWs.
Asked if President Clinton would mention the KGB document when he meets
Mr. Primakov later this month at the Asian economic summit in Malaysia, White
House National Security Council spokesmen David Leavy said the agenda for the
talks has not been set.
A congressional aide said the administration stopped pressuring Moscow
for the document after the economic crisis in August led to leadership


Russia: Analysis From Washington -- Replacing Skrunda
By Paul Goble

Washington, 9 November 1998 (RFE/RL) -- In yet another indication that Moscow
can still find the funds for activities it deems essential, the Russian
military will soon open a radar base in Belarus to replace the Skrunda site in
Latvia that was shut off last summer. 
According to a report in the Moscow newspaper "Nezavisimaya gazeta" last
Thursday, construction of the new base, located near the Belarusian city of
Baranovichi, was delayed for five years because of "insufficient funding." And
as a result of these delays, much of the equipment for it was no longer in
working order. 
But, the paper reports, Moscow recently found the funds, ordered construction
carried out at "forced march tempos," and will soon be able to put this early
warning radar system on line in the service to protect Russia's northwest. 
"Nezavisimaya gazeta" suggests that this project reflects the growing military
cooperation between Moscow and Minsk. Indeed, it published this story under
precisely that rubric. But in fact, the opening of what the paper called an
"alternative" to Skrunda points to three other and much larger issues. 
First, Moscow's construction of a new site in Belarus undermines Russia's
longstanding claims, supported by many in the West, that the Skrunda site was
integral to East-West arms accords and that Moscow had no choice but to
continue to operate the Skrunda site in Latvia long after Soviet power fell
Indeed, it was largely on the basis of these Russian claims that the Latvian
government was pressured into allowing the Russian military to continue to
operate the Skrunda site until this summer, four years after the last Russian
soldier left, and to have eighteen months more to dismantle that site. 
Second, Moscow's ability to find the funds needed for this plant at a time
when the Russian government faces so many financial problems seems certain to
raise a number of questions in Western countries to which Moscow has applied
for assistance. 
On the one hand, some in these governments seem likely to ask, just how cash-
pressed is the Russian government if it can construct such expensive bases?
The Baranovichi installation is not the only one: The Russian military is
putting on line a variety of new weapons systems even as some of its units are
forced to open soup kitchens for soldiers and officers. 
And on the other, these Western leaders may inquire, where did the Russian
authorities get the cash for this installation? Money is fungible, that is,
funds designated for one purpose can easily be shifted to another. Did the
Russian government divert some Western assistance intended for shoring up the
Russian economy into strengthening the Russian army? 
While the answers to these questions may never be known, the fact that they
will be asked seems certain to generate additional resistance in the West to
any plans for providing assistance to the Russian government. 
At the very least, Russian military construction of the kind taking place at
Baranovichi almost certainly will cause Western governments to conclude that
they should supply only non-cash aid to Moscow because such assistance, be it
food or medical supplies, is far less easy to divert to other purposes. 
And third, Moscow's decision to build this site in Belarus points to one of
the ways the Russian authorities are able to cope with their loss of control
over the Baltic states. And it underscores just how important Belarus now is
in Russian security thinking. 
Russia's willingness to live up to its commitment to shut off the Skrunda site
in Latvia demonstrates that most in Moscow are coming to accept that Estonia,
Latvia and Lithuania are no longer part of what some in Russia call its
natural "sphere of influence" in the same way that they view the former Soviet
Such a distinction does not mean that Moscow will avoid using a variety of
non-military means to put pressure on the governments of these countries. 
Rather it suggests that the Russian authorities recognize that any direct use
of military power in that region would almost certainly be counterproductive. 
But Moscow's acceptance of this new reality in the Baltic states makes Russian
interest in Belarus and other former Soviet republics along its western
borders all the greater. 
And that in turn suggests that Moscow is likely to press for additional forms
of military cooperation with these countries, either bilaterally or under the
cover of the Commonwealth of Independent States. 
To the extent that happens, replacing Skrunda with Baranovichi appears likely
to reverberate through the new security architecture of this still-unsettled


Moscow Times
November 10, 1998 
THE ANALYST: Russia Should be Prevented From Going Nationalistic 
By Gary Peach 

Russia's communists, members of an intellectually bankrupt and morally deca
dent movement, have found their domicile behind the aegis of economic
nationalism. Now that Marxism is dead and buried, a fact that no communist has
the courage to admit, it is behind this shield they will stay. 
Nationalism, together with liberalism and communism, is one of the three broad
economic systems defined by political scientists. It has in the past been
referred to as mercantilism, statism and protectionism, but as Robert Gilpin,
professor of international affairs at Princeton University, writes, "all
nationalists ascribe to the primacy of the state, of national security and of
military power in the organization and functioning of the international
system." The interests of the state - and not of capital or a particular class
(i.e. the proletariat) - are given priority in a nationalist economy. 
It is important to note that nationalism, as opposed to capitalism and
Marxism, has strictly defined limits: Whereas capital knows no boundaries, and
drifts to where risk is lowest and profit highest, and communism represents a
future societal ideal uniting proletariats throughout the world, nationalism
maintains a vision that ends abruptly at the border. For nationalists, the
international arena is filled with deceit, greed and war, and all efforts
within an economy should be directed at protecting the state. As Gilpin
explains, this "protection" is normally achieved through coordinated policies
of industrialization and militarization. 
Marxism, a natural reaction to the excesses of 19th-century industrial
England, has long ceased to be a viable economic system and deserves an
epitaph as "a ephemeral system of thought created by an overrated German
philosopher and taken too seriously by the Russians and Chinese." The
emergence of welfare-state capitalism, deemed impossible by Lenin and his
apologists, has rendered Marxism impotent. 
For Russia, this indisputable verdict has left its communist leaders - a
prosaic pack no more inspiring than church pews - with no place to run other
than behind the wall of nationalism. The fact that Yury Maslyukov, a hard-core
central planner and incorrigible Marxist, can so readily rub shoulders with
Sergei Glazyev, a pure-bred nationalist and a leading author of the nation's
economic recovery program, shows how far these two ideologies have come toward
unification. (Glazyev, contrary to what some analysts have been writing, is
not a left-wing economist; he is quite far to the right.) Fifteen years ago,
two such individuals wouldn't have been able to sit in one room together. 
But now they make wonderful soul mates. Together with their like-minded
cohorts, Maslyukov and Glazyev aim to build nationalism's wall high and thick
around Russia's perimeter. The economic program leaked to Kommersant Daily on
Oct. 1 is an exact reflection of their original nationalist agenda: a ban on
the U.S. dollar; nationalization of banks and strategic industries; and a
grandiose industrial policy. A nationalistic novelty in the program: the
creation of the State Bank for Reconstruction and Development - the Europeans
have theirs, so why shouldn't we have one? Maslyukov's flitting from one
rocket factory to the next fits in perfectly with the idea of militarism as a
basic tenet of nationalism. 
One of the central principals of the nationalist economic philosophy - and why
foreign investors in Russia have reason to be vigilant - is that economic
activity between two states is regarded as a "zero-sum game." What is good for
one country is harmful to another. Nationalists such as Glazyev distrust the
global economy, since they believe it fosters interdependence (when the
primary goal of any nation should be independence). For them, trade and
investment can only be conducted if Russia benefits more than its partner. If
we take this thought to its logical conclusion, then we may assume that Russia
will not see a significant rise in foreign direct investment in the near
future and therefore economic recovery is years away. 
The inherent danger is a steady drift towards fascism, a possible extension of
nationalism's wall. Granted, nationalism can assume either a benign or
malignant form, but with the Communists now involved in planning policy, we
would be wise to expect the worse. Maslyukov's press secretary publishes
articles in Zavtra, a radical daily that has suggested the need for violent
rebellion; Communist deputies have declared war on the mass media, and will
attempt to wage it over the winter; and an anti-Semitic general has openly
called for pogroms, and gone unpunished for doing so. Moral degradation is
spreading in Russia. 
In the popular psyche, fascism (malignant nationalism) and communism are often
lumped together in the same mold, a worrisome albeit understandable tendency.
The two systems maintain directly opposite assumptions about human nature and
international relations, although their methods - totalitarianism - are the
same. Russia is no stranger to one system, and appears to be headed directly
into the other, no less terrifying mode. 
It is our duty, as free thinkers and Russophiles, to do everything in our
power to prevent this from happening. 


Date: Tue, 10 Nov 1998
From: Thomas Campbell <>
Subject: Bundy Language Purity Debate

I would like to publicly apologize to Ms Anna Blundy of The Times for
questioning the fluency of her Russian. Two JRL readers have vouched for Ms
Blundy's skills, and I have no reason to doubt them.
But now that we've established that Ms Blundy is fluent, would anyone care
to explain her gross misrepresentation of Viktor Chernomyrdin's diatribe
against Gennady Ziuganov? Or the stunning tendentiousness of her article?
Ms Blundy's defenders argue that she writes for "a wider audience" and thus
should be forgiven - does that mean she is at liberty to write whatever she
likes? Or are we to assume that Ms Blundy's London readers are too
thickwitted to handle the least bit of subtlety?
The facts remain. Ms Blundy's translation of Mr Chernomyrdin's remarks is
misleading and inaccurate. "The Russians" aren't sick of "linguistic
colonisation" - some Russians (though we never learn from Ms Bundy who they
really are) are sick of what they perceive to be linguistic colonisation.
Many Russian politicians have a hard time negotiating their native tongue,
not all of them. (Or it could be argued that many Russian politicians are
the sort of regular blokes many Russians can identify with.) Ms Blundy
alleges that the Russian language is suffering from Americanisation, but -
except for "Beeg Mac i fraiz" - she offers no other evidence.
Ms Blundy could have written an interesting and accurate article in the
space allotted by her editors (who really also should be taken to task for
letting such vagueness pass). Why does the "wider audience" deserve
anything less?


Russian government to press Duma on economy
By Timothy Heritage

MOSCOW, Nov 10 (Reuters) - Russia's government sets out its economic plans in
the lower house of parliament on Tuesday in the hope of winning support for
measures that have alienated foreign creditors. 
RIA news agency said Prime Minister Yevgeny Primakov was expected to go to the
State Duma for closed hearings in which the government will spell out the need
for rapid passage of moves intended to pull Russia out of economic crisis. 
First Deputy Prime Minister Yuri Maslyukov, who is also expected to be in the
Duma, has promised the government will publish in full its final package of
anti-crisis measures. 
``On Tuesday the programme will be published in its final version, complete
with the figures that have been drafted by the government,'' Maslyukov, the
main architect of economic policy, said in a weekend interview with ORT
``In 10 days, approximately, we will have a schedule of what has to be done,
be it presidential decrees, government resolutions or amendments and draft
laws to be approved by parliament.'' 
Maslyukov has made clear the state role in the economy will increase and has
said the government's programme will put Russia on the road to a ``socially-
oriented'' market economy. 
He says the government will work closely with the Duma to ensure swift
approval of laws and amendments, although the annual battle is looming over
setting the state budget. 
Unlike in previous years, the opposition-dominated Duma is largely behind the
prime minister. Primakov is a compromise figure approved by the chamber after
President Boris Yeltsin was forced to drop his first choice to end a political
Many deputies favour steps back from the reforms in the last few years, which
they say were too painful for ordinary people. 
But the United States and the International Monetary Fund (IMF) have
criticised the moves to increase the state's role in the economy and fear
Russia will print large amounts of new money in its efforts to end the crisis.
U.S. Deputy Secretary of State Strobe Talbott said last week that repeating
what he called old mistakes, such as printing more money, could only make
matters worse. 
U.S. Deputy Treasury Secretary Lawrence Summers also criticised Russia on
Monday. He said Washington was willing to help Moscow but only if it carried
out reforms. 
An IMF mission, expressing similar feelings, left Moscow last week after
failing to agree on the disbursement of a previously promised $4.3 billion
payment from a $22.6 billion bailout package agreed in July. 
Despite this, Moscow has signed a deal with Washington that will provide
Russia with food supplies and the European Union is preparing to ship cereals
and meat to Russia. 
Yeltsin, 67, is expected to monitor events from the Kremlin or a state
residence outside Moscow. He returned on Sunday after more than a week by the
Black Sea recuperating from what the Kremlin said was exhaustion and high
blood pressure. 


Alternatives to Foreign Loans Suggested 

Rossiyskaya Gazeta
30 October 1998
[translation for personal use only]
Article by Aleksandr Velichenkov: "We Cannot Afford To Live in
Debt" The government has approved the first draft of a program of
anti-crisis measures, but no one knows how much money the economy will need
in the near future.

Why Is There Such a Need for "Real" Money?

After the government meeting
on 22 October, Finance Department Chief Aleksandr Pochinok said 50 billion
rubles in new currency would be printed before the end of the year, Mikhail
Zadornov came up with another figure--under 20 billion, and Central Bank
First Deputy Chairman Tatyana Paramonova sees no need to issue any
unsecured currency.
By that time the latest mission from our chief lender, the IMF, had
already been shown the government and Central Bank program for the
stabilization of socioeconomic conditions in the country. The anti-crisis
program and the budget for the fourth quarter are meaningless without IMF
loans, but the IMF is in no hurry to resume the extension of credit to us
without this "set of measures." In short, we have to decide which came
first, the chicken or the egg?
We should recall the well-known paradox that loans are more readily
available to countries with no particular need for them--i.e., to countries
capable of paying their debts. Because of this, it is logical to wonder
whether Russia can get along without the IMF loans today. If it can, then
the credit will be extended at the normal rate of interest and for a fairly
long time. If not, then Russia probably still will get some money, but
only for a short time and at an exorbitant rate. Of course, this does not
apply directly to the IMF: The fund grants its loans at extremely moderate
rates, but only after the borrower agrees to comply with its terms, which
are not always beneficial to our economy.
Can we get along without foreign loans, or are our economy and
financial system so feeble that they will be helpless without crutches and
a boost? This question was of crucial importance to the government of
Sergey Kiriyenko in May, when he was deciding whether he should send
Anatoliy Chubays to the IMF to request an emergency loan to support the
ruble exchange rate or to devalue the ruble right away. At that time there
was still some hope (unjustified, as it turned out) that an emergency loan
from the IMF would secure our economy"s evolution toward solvency. 
Unfortunately, the first installment of almost $5 billion was squandered
within a month. After the government and Central Bank announcement of 17
August, the IMF decided not to release the second installment. We have to
admit, however, that although the August memorandum may have sounded
awkward and unsophisticated, it did solve our economy"s main problem
this year--exports became profitable again. Now that the value of the
dollar has risen so dramatically, and after imports were reduced by almost
half in the last two months, the Central Bank has had to buy up the dollars
importers do not need on the Moscow Interbank Currency Exchange. The
addition of this hard currency (around a billion just recently) to the
Central Bank supply, however, does not mean that the government"s
supply of rubles is growing.
Why does the government need "real" money? Who (other than the IMF,
obviously) is keeping it from using a variety of financial
instruments--barter, bills of exchange, offsetting, payment in goods, etc.?
In the past Russian Minister of Finance Aleksandr Livshits used offsetting
transactions to settle accounts for at least 100 billion a year. 
Meanwhile, fewer treasury bonds were issued and the pyramid stood firm. 
Why is there one set of rules for the government and another for the
economy as a whole? The ability to turn shortages into advantages is a
great talent. We have a chance to test this strategy now. Treasury bond
debts totaling almost 100 billion have been frozen. If these are exchanged
for Bank of Russia bonds and the bonds are accepted in payment for taxes,
and if the Ministry of Finance authorizes the use of the bonds to finance
budget expenditures, there will be a payment medium in the economy, and
there will be no trigger for inflation because the Central Bank will not be
printing any new currency.

We Should Divide Our Rubles by Dollars

Finally, we have to ask whether
anyone anywhere has ever proved that the issuance of totally unsecured
currency has to cause inflation. The idea that "currency emission is opium
for the economy" has been elevated to the level of an absolute truth. Our
seven years of reform proved something else, however: We were crushed by
endless loans and a chronic shortage of money in the economy. The
inflation in August and September, after all, occurred when the quantity of
rubles in the economy was dwindling, and certainly was not caused by the
issuance of new currency. In the United States, tens of billions of
unsecured dollars have been put into circulation each year for more than 60
years. Just last year, for example, the supply of money in the U.S.
economy was augmented by almost 200 billion unsecured dollars--and without
any inflation.
If we divide our money supply by the dollar exchange rate and compared
the result to our gold-backed hard currency reserves, we find that Russia
has enough hard currency to cover half of the money in circulation, but
U.S. reserves are equivalent to only 2-3 percent of the money supply (the
figure is 20 times as high in our country).
We conducted this exercise to prove that "just in case" a
budget-carried entity does not have enough "real" money to pay wages, a
little currency could be printed without producing any horrible effects. 
The money will return to the treasury anyway in the form of excise tax and
other taxes.
We have good reason to mention excise taxes. At this time the tax is
charged almost exclusively on alcohol. Oil companies are still resisting
the excise tax on exports of oil, but estimates indicate that our companies
will get $12-15 in additional income for each tonne of oil they sell abroad
because of the devaluation of the ruble. Even if only half of this amount
is collected for the treasury, the government will get almost a billion
dollars a year.
We also have gold. We have it in so-called non-liquid forms in the
Central Bank and the State Precious Metal Repository. Many ways of
converting this metal into legal tender have already been proposed. The
value of gold is at its lowest point in the last 20 years now. It would be
pointless to circulate it in the form of coins at the current rate. After
the anticipated rise in prices, the coins would be collected (and withdrawn
from circulation) by those in the know. The institution of a gold standard
for the ruble (as backing in place of the dollar) is simply dangerous. A
rise in the cost of gold in dollars would quickly inflate the value of the
ruble, and we would have unprofitable exports again.
The choice of any solution before summer 1999 will be accompanied by
two processes--a rise in the value of gold and a drop in the exchange rate
of the dollar in relation to world currencies. The processes could be
quite intense after the introduction of the euro in Western Europe.
In the event of the devaluation of the dollar in relation to the euro,
the "greenback" will suffer considerable shrinkage and a loss of its
earlier appeal. It is even possible that the euro bills that will start to
be printed in 2000 could become savings instruments here. Then gold would
have a chance to become the "ultimate asset" and justify all of the hopes
that are invested in it now.

We Need an Honest Approach to Gold

The many experts who assert that
gold has completely lost its monetary function and has already turned into
a common exchange commodity frequently substantiate their point of view
with the sale of gold by the governments and national banks of various
countries. This is true, but there is one important consideration. The
gold has been sold either by gold-producing countries or by West European
states in the euro zone. The two largest collectors of gold in the
world--the IMF (30,000 tonnes of gold) and France (8,000-12,000
tonnes)--have not sold a single kilogram. This confirms our belief that
gold will remain a reliable asset for citizens and sound backing for new
currency issued by the state.
...It would not be that difficult to convert the gold of the Central
Bank and government into actual rubles. In other words, the treasury
should start buying and selling gold in bars and coins at rates equal to
world prices by posting daily purchase and sale prices with a minimum
spread. Plans to mint coins containing 2,000 rubles" worth of gold
and to sell them for 5,000 rubles apiece are doomed to fail from the start.
In an honest and open gold market, this financial instrument could add
30-50 billion rubles to the treasury quite soon. This is even more than
the IMF has promised to give us before the end of the year.
Of course, gold can never serve the same function here as the U.S.
federal treasury bonds that are used to regulate the money supply in the
United States.
In short, Russia does have a chance--and a good one--of getting along
without foreign loans, but it must be used wisely.


From: "Wallace Kaufman" <>
Subject: Icebreakers
Date: Mon, 9 Nov 1998

Some quick thoughts and a very rough outline of Russian situation in the
Asian north. Filipov's Boston Globe article tells us Russia cannot supply
the arctic regions because the icebreakers are out of commission: " But six
of Russia's eight ice-breakers have been retired or laid up for long-term
repairs. The Murmansk Shipping Co., which operates the two remaining ships,
has no money to pay for fuel." At least two nuclear powered ice breakers
are scheduled to be giving tours of the arctic and antarctic. I have
mislaid the name of one, but the other is the Kapitan Khlebnikov. Prices
run from $9000 to $50,000. Even if the working icebreakers are devoted to
money-making tourism, most of the small arctic towns can be supplied with
food, but not fuel, by air since they have good landing strips. 
Pevek and Chersky, the largest cities in the Asian arctic tundra regions
accessible by icebreaker also have good landing strips because they had or
still have military bases. Same for Cape Schmidt. These places now have
fewer than 5,000 people each is a good guess. Bilibino and its attached
village presumably have nuclear power from the prefabbed plant that was
hauled there over the permafrost in winter. Many of the small mining
villages have been all but abandoned and probably can be evacuated more
easily than supplied. The major Far East City of the north, Magadan, can be
supplied from the pacific by convoy but may need a lead ice breaker. The
Chukchi peninsula, as well as some settlements in the Magadan Oblast have
their own coal supplies, Beringovsky being one of the largest suppliers on
the peninsula. 
Magadan, still over 100,000 people has lost population but its economy
has not been devastated like other regions. It is in an area warm enough for
extensive dacha plots where people grow potatoes, cabbages, carrots, and
berries. Huge numbers of people preserve salmon, wild berries, and
mushrooms all across the arctic. 
The small livestock oriented settlements, mainly reindeer herding, can
probably survive on their traditional skills and their herds. 
The more intractable problems are larger communities, from 500 to 5,000
along the Kolyma River. Most have airfields usable in winter and the
populations are not too large to supply by air with food. Smaller
individual houses will probably find enough scrap coal and wood to survive.
The Soviet era concrete apartments will become like the concrete mausoleums
they resemble. 
Finally one should remember that while rivers freeze in this region, they
often become highways. If motor fuel exists, supply by truck convoys is
feasible and has been a traditional way of supplying smaller settlements and
even Bilibino during the winter months.
On the international front, US-Soviet-Canadian supply and rescue
operations have a long and honorable history beginning in the 19th century.
The best way to get information directly from arctic villages is by amateur
radio contacts. These are generally good from the West Coast of the U.S.
Almost all settlements in the arctic still have active amateur radio
operators and probably military and commercial operators. 


U.S., Ex-Soviet Nations Sign Nuclear Pact
November 9, 1998

GENEVA (AP) -- Negotiators from the United States and countries from the
former Soviet Union signed new accords Monday to ensure that medium-range
nuclear weapons stay out of their arsenals.
The accords are follow-ups to the Intermediate Range Nuclear Forces treaty
that former President Reagan signed with Mikhail Gorbachev at the White House
in December 1987.
Since then the 2,700 medium- and short-range missiles covered by the INF
accord have been destroyed.
The new agreements make amendments to inspection procedures needed to ensure
that all sides stick to the accord.
The United States continues to inspect a Russian plant in Votkinsk where
medium-range missiles used to be produced. The plant is now used to build
longer-range single-warhead missiles and commercial satellite launchers, a
U.S. official in Geneva said on condition of anonymity.
The Russians likewise are allowed to make sure the United States continues to
observe the ban on producing Pershing II missiles at a plant in Magna, Utah,
the official said.
Joining in the signing were representatives of Belarus, Kazakhstan, Russia and
Ukraine -- the four former Soviet republics most concerned with the class of


Return to CDI's Home Page  I  Return to CDI's Library