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11 November 1998
[Note from David Johnson:
1. Reuters: Primakov vows to fight tax dodgers, capital flight.
2. Anna Blundy: droning on. (Re language purity debate).
3. Reuters: Minister says Russian army starved of funds.
4. Alan Fahnestock: Re Oct31/DJ comment.
5. The Globe and Mail (Canada): Geoffrey York, Siberian radar base.
6. The Times (UK) Higher Education Supplement: Nick Holdsworth,
RUSSIA -- Provinces. (Saratov).
7. Business Week: Patricia Kranz, THE PARTY'S OVER. SO WHY NOT PARTY?
8. Washington Post: Donald Blinken, Message to Moscow.
9. AFP: Lebed Warns of Famine Risk in Russia.
10. Reuters: Russian Grain Union says no need for extra imports.
11. Reuters: No places for liberals in IMF talks, Primakov says.
12. Moscow Times: Julia Solovyova, Coldest Winter in 30 Years Grips City.
13. Jamestown Foundation Monitor: GOVERNMENT SUDDENLY GETS MONETARIST
Primakov vows to fight tax dodgers, capital flight
MOSCOW, Nov 11 (Reuters) - Russian Prime Minister Yevgeny Primakov said on
Wednesday he planned to crack down on corporate tax dodgers and take steps to
staunch the flow of capital out of the country, Russian news agencies
Successive Russian governments have blamed tax evasion and the illegal export
of capital on a grand scale for their inability to finance state spending.
``We will introduce very close scrutiny of exports and imports. We are going
to halt fraudulent schemes whose existence has resulted in capital sitting in
foreign banks,'' Itar-Tass quoted him as telling women members of parliament.
Primakov gave no details of future steps.
Interfax news agency said, however, he recalled that the government had
already tightened requirements on the repatriation of hard currency earnings
by exporters and that he commented that this measure did not go far enough.
He also repeated his position that Russia wanted to restore its credibility
with foreign investors but that his government wished to encourage direct,
long-term investment rather than short-term placements in securities and other
Tass said Primakov wanted to take not just civil legal action against tax
dodgers, especially in the corporate sector, but also start criminal
proceedings against them.
The slump in the rouble that followed a decision by the previous government in
August to freeze some of its debt obligations was accompanied by a sharp drop
in tax collection in September, although there was a recovery last month.
Primakov, aided by his Communist first deputy for economic affairs, has drawn
up an anti-crisis plan that won cautious support from the State Duma lower
house of parliament on Tuesday. The government is due to review a budget for
next year at a cabinet meeting on November 17.
Date: Wed, 11 Nov 1998
From: Anna Blundy <AnnaBlundy@compuserve.com>
Subject: droning on
I was planning on ignoring the bizarre debate going on about my linguistic
capabilities or the lack of same, but since Thomas Campbell insists on
harping on about it I shall have to defend myself, or rather, explain
myself. Incidentally, Mr Campbell spelt my name incorrectly. Blundy.
Actually, I'm now Blundy-Mortimer but I haven't changed it for work
purposes, partly because it sounds so silly. Anyway, that aside, I suppose
I shall have to point out to Mr Campbell that when writing for a newspaper
one does not express one's personal opinion (or at least one tries to
minimise that side of things when filing for the news pages) but ideally
one reports upon events as one sees them. The article in question was about
a meeting I attended of lovers of Russian literature. They were putting
together a law on the purity of the language and their main complaints were
that a) their language was being americanised and b) that their politicians
were illiterate. These were their complaints not mine. In fact my piece
contained many examples of americanisation and a joke about the fact that
they themselves used a vast number of foreign words that had come into the
language over the years, particularly from French. My piece was cut in half
in London. I did not mind this at all since it happens a lot and I, perhaps
unlike Mr 'Avvakum' Campbell (?), am not precious about my pieces. Also, my
translation of Chernomyrdin was pretty accurate and designed to reflect how
ludicrous the man sounds when he speaks. It cannot be possible that Mr
Campbell has failed to notice Chernomyrdin's relative incoherence. Finally
(thank God) I am so baffled by Mr Campbell's irritable little missives that
I feel compelled to add that my modern and medieval Russian are both
passable as is my Old Church Slavonic. I am embarrassed to have written but
it was getting unavoidable. Love, Anna.
Minister says Russian army starved of funds
By Martin Nesirky
MOSCOW, Nov 11 (Reuters) - Russia's defence minister said on Wednesday his
underfunded armed forces were limping along on ``starvation rations'' but
still remained a potent factor in world affairs, helping to avert armed
intervention in Kosovo and Iraq.
Marshal Igor Sergeyev also told Russia's top brass and Prime Minister Yevgeny
Primakov, gathered for a rare defence assembly in Moscow, there were many
shortcomings in the military reform process, including poor discipline in the
But chief among them was chronic underfunding, he said.
``Many branches of the armed forces find themselves on starvation rations and
sometimes without any rations at all,'' Sergeyev said in televised remarks.
Although many units do struggle to even feed their troops, Sergeyev's remarks
clearly referred to funding in general.
Russia is struggling to trim its armed forces to reflect more realistically
the country's reduced economic circumstances and changed geo-strategic
priorities in the post-Cold War era.
Cutting strength and modernising weaponry in the world's second nuclear power
needs cash. Russia has little to spare, and the result is a once-powerful
military machine that clearly does not fire on all cylinders.
The main domestic factor hampering reform was the ``limited, irregular and
incomplete financing of the army and navy,'' the defence ministry quoted
Sergeyev as saying in his address.
Sergeyev said, according to the ministry, that the armed forces had received
only a third of the amount originally allocated in Russia's 1998 budget.
A deep economic crisis, which has seen prices rise and the rouble fall, has
made a nonsense of that budget.
Despite underfunding and wage delays that have demoralised troops and officers
alike, the armed forces remained an important factor enabling Russia to
influence world events.
``Only thanks to Russia's firm and active foreign policy, based on the
military might of the state, was it possible to avert armed conflicts in Iraq
and the Balkans,'' Itar-Tass news agency quoted Sergeyev as saying.
Russia, one of five permanent members of the United Nations Security Council,
has repeatedly spoken out against armed intervention against Iraq and the
Serbian enclave of Kosovo.
Sergeyev was referring to early tensions over Iraq rather than the latest
stand-off. Foreign Minister Igor Ivanov told reporters on Wednesday using
force now would worsen the crisis.
He was speaking as the chief U.N. arms inspector ordered all his foreign staff
out of Iraq in case of U.S. military action after Baghdad ended cooperation
with teams seeking to scrap the country's weapons of mass destruction.
The defence ministry spokesman said Primakov, a former foreign minister who
knows Iraq well, addressed the military assembly but the spokesman gave no
Russian news agencies quoted Sergeyev as saying the main achievements of 1998
had been to cut military strength to 1.2 million men and women and to shift to
a four-branch structure covering ground, air, naval and strategic nuclear
They also quoted him as saying NATO preparations to accept three former
Soviet-bloc allies of Moscow -- Hungary, Poland and the Czech Republic -- as
members of the alliance had been one of the biggest outside pressures
affecting the pace of reform.
Russia still opposes NATO's plans but grudgingly accepted the inevitable last
year in return for a cooperation deal.
From: Fahnest542@aol.com (Alan Fahnestock)
Date: Tue, 10 Nov 1998
Subject: Re: Oct31/[DJ comment]
Can't particularly argue with you --- my doubts about the man [Yeltsin] date
to the election of 1991, when I was in St. Pete last. I've come across sort
of pro, largely because I come from the "for lack of a better idea" school of
historians. I would probably still back the old coot against the alternatives
if he weren't so clearly ill and dysfunctional. As it stands, I'm completely
at a loss: they have even more goofballs in the running than we do.
As for US backing, again, I don't really see the alternative --- back the
communist opposition, or some well-intentioned but ineffectual and unelectable
goof like Yavlinski? You have to back somebody, if you are going to try to do
anything at all. It's much like those who rail against the IMF for screwing
things up: if you look hard enough, you figure out that everyone screws
practically everything up, everyday, so are we to do nothing at all? Is
someone who watches a tragedy, which Russia has been since time zero, any less
guilty than someone who participates?
Date: Wed, 11 Nov 1998
From: Geoffrey York <firstname.lastname@example.org>
Organization: The Globe and Mail
Subject: Siberian radar base
By Geoffrey York
The Globe and Mail (Canada)
Nov. 9, 1998
YENISEYSK-15, Russia -- Like vultures on a Cold War carcass, scavengers
are picking through the bones of the gutted buildings at the former
top-secret Soviet military base.
The two massive radar towers in the depths of the Siberian wilderness
were once known only by their codenames: Object One and Object Two.
Tightly guarded by high-security barbed-wire fences, the radar station
was one of the most expensive construction projects in Soviet history.
Today the devastated ruins are a testament to the corruption of
post-Soviet privatization and swords-to-plowshares conversion programs.
Allegations of theft and graft surround it. Local inhabitants sneak onto
the site to loot it.
The phased-array radar station, with its transmission and receiving
towers as tall as 30 stories, was built in the 1980s on the grandiose
scale of the Egyptian Pyramids. Detected by the United States at the
height of the Cold War, it soon became one of the hottest flashpoints
between the two superpowers. Its construction provoked outrage and
obsession among Washington's political hawks, nearly killing the first
fragile moves toward detente in the mid-1980s.
More than a decade later, a tractor grinds slowly through the Siberian
mud, dragging away an electricity pole to be chopped up for firewood.
Workers are hauling away concrete slabs, sewage pipes, poles, copper
cables, and anything else of any value.
The radar base is a wasteland of rubble, broken girders, strewn
concrete blocks and a huge toppled crane. Workers are scouring through
the rubble, finding a few more items to be stripped from the crumbling
roads and gutted buildings. Even after a decade of scavenging, they are
still looting the site.
~A dishonest man got his hand on this place," said Sergei Shabolin, a
retired Soviet army major who helped build the radar station in the
1980s. ~Half of the population here are shareholders, but they got
nothing. One person got all the wealth. The people have been robbed."
Twelve years after he joined the massive construction project, Mr.
Shabolin still works at the same site today, still enduring the frozen
Siberian winds. But now he is helping to rip apart the military base and
sell the last remaining pieces of it.
Throughout its troubled history, the radar base near the closed
military town of Yeniseysk-15 has been a perfect symbol of its times. It
began as a Cold War icon, a frightening image of Soviet military power.
A few years later, in the glasnost era, the radar base was at the crux
of the arms-control debates, and Soviet reformer Mikhail Gorbachev
eventually agreed to sacrifice the towers to make peace with Washington.
In the early optimism after the Soviet Union's collapse, there were
promises to convert the base to civilian production. Then came the era
of privatization, and the site was given to a businessman who stripped
and sold its assets. Finally came the descent into squalid looting and
stealing, when anything of any value was carted away.
~This is a monument to Gorbachev," Mr. Shabolin says bitterly as he
gazes at the ruined towers. ~There's not a single day when I don't think
of Gorbachev and his deeds."
Many of the local Russians were lured to this remote Siberian village
to help construct the radar base. Now they are trapped here, unable to
afford the cost of moving to another town. ~We are victims of this
object," says Lyubov Malysheva, reverting to the Soviet codeword for the
Her husband, Semyon, was a military construction worker who moved his
family to Yeniseysk-15 in 1984 to help build the radar station. His
salary was paid regularly, his family had plenty of food, and they took
annual vacations to the south. It was a good life, he said.
Today he struggles to survive as a maintenance worker, helping maintain
the 310 occupied apartments in a half-empty town that was originally
built for a population of 3,500. He is one of the lucky handful of
residents who have jobs. But his salary hasn't been paid regularly for a
year. He can't even afford the 70-cent cost of a bus ticket to visit his
daughter in a nearby town.
~I feel desperate and depressed," Mr. Malyshev said. ~I never imagined
it could be like this. We're trapped here. Sometimes we don't have even
a piece of bread on the table. We have a constant feeling of hunger.
Lots of money was invested here, and now it's all been wasted. People
At the time of their construction, the radar towers were among the most
powerful in the world. ~We could have seen America and Canada too, for
sure," Mr. Shabolin boasts.
He acknowledges, however, that the radar base was a blatant violation
of the 1972 ABM treaty between Moscow and Washington, which prohibited
the building of a national anti-ballistic missile defence system by
After detecting the construction of the radar base in 1983, Washington
protested that it violated the ABM treaty. The Soviets claimed that it
was merely a satellite-tracking radar, and the dispute threatened to
block all progress on nuclear arms control. But in 1987, Mr. Gorbachev
halted construction. By then, one of the radar towers was already 95 per
cent complete, and technicians were doing the final tuning of its
equipment, Mr. Shabolin said.
In 1989, Soviet foreign minister Eduard Shevardnadze admitted that the
American complaints were accurate. ~The construction of this station,
equal in size to the Egyptian pyramids, constituted a clear violation of
ABM," he told the Soviet parliament.
A few months later, the Soviets began dismantling the station, and in
1991 their troops withdrew from the base, removing the most
sophisticated equipment as they left. That was the beginning of a wild
First the local government moved in, grabbing the radar base as a
potentially lucrative site. Within a few months, the base was
~privatized" and transferred to a local businessman, Nikolai Yeroshkin,
who promised to build a furniture factory on the site.
At a time when Washington was providing millions of dollars to help
convert Russian military sites to civilian purposes, the furniture
factory sounded like a good idea. In the end, the factory attracted
$10-million (U.S.) in credits from the Russian government, Mr. Yeroshkin
said. Much of this money is believed to have originated in U.S.
conversion funds. But the money quickly disappeared.
Some furniture-making equipment was purchased, but it too mysteriously
disappeared. Mr. Yeroshkin insists that he simply didn't receive enough
money to make the factory successful. ~So the project was frozen," he
Others have a more cynical explanation for what happened to the
furniture factory. ~Some of it got lost along the way," Mr. Shabolin
said. ~Little by little, it was sold. I don't think he really intended
to turn it into a factory."
As another Siberian winter approaches, Mr. Yeroshkin and a business
partner still have 16 workers on the radar site, stripping the last
remaining assets from the station.
Everyone agrees that the radar station has been thoroughly looted over
the past decade. Some of it was legalized asset-stripping by the local
entrepreneurs, who carted away the boilers, the transformer substation,
the copper cables, the concrete walls, and hundreds of tons of steel,
iron and aluminum. The rest was petty theft and pilfering: first by the
soldiers who were stationed at the base, and later by the local
~They loot and steal everything," Mr. Yeroshkin said. ~It was done
mostly by the military, sometimes for a bottle of vodka or a few rubles.
I've written letters to the head of the local police, and I've reported
to the governor's office, but nothing has been done about it."
Yet even as he complains about the thefts, he acknowledges that the
crimes are easy to understand. ~It allows the people to make ends meet,"
he said. ~They practically don't have any other income."
From: "Nick Holdsworth" <email@example.com>
Subject: RUSSIA -- Provinces
Date: Tue, 10 Nov 1998
>From Nick Holdsworth, Moscow Correspondent, The Times Higher Education
(For personal use only.)
RUSSIA -- Provinces
There's an independent air about Saratov, capital of one of Russia's leading
The Volga River city, 500 miles south-east of Moscow, is proud of its 400
year history as trading centre at the crossroads of the ancient routes
between Siberia and Central Asia.
An agricultural and industrial region covers an area the size of Belgium and
its government, which supports a rash of experimental policies including
land privatisation, boasts "ministeries" rather than departments.
The independence extends to the city's 11 universities and higher education
colleges: the federal education ministry may be located in Moscow, but its
influence is barely felt in practice these days.
"Personally I don't believe in Moscow at all," declares Alexander Slepukhin,
vice-rector for academic affairs at Saratov Technical University, when
talking about the challenges faced by provincial universities as Russia's
economy sinks rapidly beyond recession and into a full-scale depression.
"Only the universities here in Saratov can help each other; regional and
local self-reliance and support is the key to our future."
But his words -- unthinkable a few years ago when Moscow's vice-like grip
remained strong, are not those of one resigned to Dunkirk-like survival
against the odds. A dapper man who speaks precise, barely-accented English,
Slepukhin welcomes September's appointment of Vladimir Filippov as new
federal education minister.
Filippov, the rector of Moscow's People's Friendship University, promises a
stronger voice for universities within the government, Slepukhin says, but
no one is kidding themselves that he'll be able to swing more money or
resources their way.
"The current economic crisis has had very little impact here. Since October
1994 the federal ministry has paid only for staff salaries and student
stipends and we've not received a penny for heating, light, maintenance or
repairs. We've had to develop new ways of finding the funds to cover the
rest of our needs."
The financial crash of August, when the rouble slumped against the dollar,
halved the value of Saratov Tech's tuition receipts from the 600 students
who pay annual fees of 7,400 roubles -- worth more than $1,200 when paid
before the summer, but less than $500 today.
But a strong relationship between the university and its bankers,
Promstroibank and Econombank -- old established banks with Soviet industrial
roots which have weathered the storm better than many, has safeguarded its
foreign currency accounts, where money from European programmes such as
Tempus/Tacis is held.
"We didn't lose any money in our banks during the crisis and even now our
dollar account is working quite normally because we have an understanding
with the banks that they won't block it. They know we're runninig several
international courses and are receiving funds in dollars and Deutchmarks,"
In a country where billions of dollars have been lost by ordinary people as
well as banks and investors and hole-in-the-wall cash machines -- common at
newer banks such as MostBank -- have been closed since August, this is no
Saratov Tech's prescription for the provinces boils down to forging strong
international links -- the university has two Tempus programmes in
institutional management and economics education reform, with a third on
energy savings technology in the offing; working with, rather than against
other universities through a strong, regional-government backed association
of rectors; and promoting links with industry through its vigorous science
park. An appeal for funds from university alumni this summer was a dismal
flop, but undeterred the university plans to try again next year.
A leader in Russian universities' innovation and movement, Saratov State's
Volga Teknika science park involves 30 university-supported small businesses
producing more than 70 products, ranging from precision-finished industrial
bearings to highly-engineered pedestrian and traffic suspension bridges.
Last year the science park, which receives a quarter of its budget from the
federal ministry, turned over $6 million and regional university leaders see
it as the biggest single element in income generation for the future.
Tight university finances are circumvented by a sophisticated system of
barter and off-sets dubbed "vzaima zachot" within regional public sector
institutions -- universities, power companies, government suppliers etc, and
science park members such as macaroni manufacturer Roso sell goods to the
university at a discount for profitable retail through campus shops.
Valery Adamov, deputy head of the credit and business reform division of the
regional economics ministry, said the science park's role was critical both
to the universities future and the region's.
"The governor sees developing innovation technology as one of the most
important economic tasks of the region. The oblast government understands
that without the development of science there will be no tomorrow for
There are rumblings of greater autonomy and independence from Moscow
throughout Russia's regions and Saratov is leading the pack. Provincial
universities which tie their colours to the local mast are betting that the
wind blowing through the regions is set fair.
November 16, 1998
[for personal use only]
Letter From Moscow
THE PARTY'S OVER. SO WHY NOT PARTY?
BY PATRICIA KRANZ (Patricia_Kranz@businessweek.com)
Not so long ago, Eric Jayaweera and his compatriots balanced 80-hour workweeks
with nightly drinking and dancing stops at Moscow's clubs. An American,
Jayaweera, 29, was a researcher with investment bank MFK Renaissance, a big
player in Russia's high-flying financial markets. He mingled at the Jazz Cafe
with Russian rock stars and leggy models from Red Star Agency. Lesser guests
paid a $500 membership fee, but Jayaweera merely flashed his Renaissance
business card at the doorman. ``Money didn't matter at all. Morale was sky-
high,'' he says.
No more. On Sept. 11, Jayaweera was let go, and three days later, he was
back in New York. MFK Renaissance is crashing along with Russia's markets. And
it's far from alone. Virtually every investment bank, accounting firm, and
real estate brokerage in Moscow is slashing staff. Entrepreneurs are closing
shop and going home, multinationals scaling back. ``Our world has been turned
upside down,'' says Buck Wiley, 32, who left Moscow in October after five
years as an investment adviser. Some 25% of Moscow's 40,000 expats are gone.
The rest are in shock, their euphoria at working in an exotic boomtown
replaced by anxiety over the future.
The remaining expats cope by partying hard. The Jazz Cafe, Chesterfield's,
Papa John's, and other popular bars are still crowded. Many foreigners feel
their days are numbered, and they're trying to make the most of the time left.
Camaraderie has become the key to survival--drinking with friends beats
drinking alone. The markets are so dead that still-employed bankers and
brokers, who once worked until 10 p.m., now take off at 4 p.m. to work out at
trendy Gold's Gym.
To be sure, there's some frenzy in the merriment. It's unnerving to be
invited to three going-away parties a week. Vinlund, a moving company, says
orders to move foreigners back home tripled from August to October. ``We're
getting as good at saying goodbye as Clinton is at saying he's sorry,'' says
one still-employed American. The expatriate exodus is so swift that the My
Place Cafe is trying to drum up business by giving 40% discounts to those who
vow they'll be in Moscow for at least six months. Wiley hosted his going-away
bash at a down-home bar where bare electrical wires hang from exposed-brick
walls. The owners had planned a posh club but lost all their money when the
ruble crashed in mid-August. They opened the half-finished club anyway,
calling it the Crisis Club.
BIG DEALS. For Wiley and other expatriates, the past two years were heady.
Boris N. Yeltsin's reelection in July, 1996, gave a sense of long-awaited
political stability. Foreign investment boomed. Foreign bankers, brokers, and
consultants crowded into Moscow. MBAs in their 20s did million-dollar deals.
The stock and bond markets boomed, with everybody getting dizzying returns.
Expats moved into company-paid $4,000-a-month flats with views of the Kremlin
and bought fresh caviar by the kilogram at black-market prices.
``Expats had it all--well-paying and interesting jobs, jet-setting European
lifestyles, the stimulation of having some of the most dynamic people in the
business world around us constantly, and a social life dictated by our work-
hard and play-hard personalities,'' says Jessica Adelman, 23. When the markets
were booming, there was a big demand for expats such as Jessica, who spoke
Russian. Adelman worked in Moscow's pharmaceuticals and real estate industries
for two years until returning to Washington, D.C., in October.
Cracks started appearing last fall, with the financial crisis in Asia,
falling oil prices, and doubts about Russia's commitment to reform. The stock
market sank. Government debt ballooned, and ruble reserves plummeted. On Aug.
17, the government issued the coup de grace: It defaulted on its domestic
debt, devalued the ruble, and prohibited Russian banks from making payments on
foreign loans. Western banks and investors lost billions. The default put old
guard, Soviet-style bureaucrats back in power. The expat party is over; the
Communist Party is making a comeback.
Of course, it's hard to feel too sorry for the hotshots who came for easy
money and, in some cases, ``easy'' women. Says one investment banker: ``There
were a lot of overpaid, sub-30 millionaires running around Moscow. All of a
sudden, they got wiped out.'' For many young men, Moscow had been a fantasy
come true. They considered young Russian women more exotic than American
females and to be untainted by tHe women's liberation movement or religious
scruples. Many hung out at the Hungry Duck bar, notorious for its ladies'
niGht, when young females got sloshed on free beer and jumped onto the bar for
an impromptu striptease.
``NAIVE.'' But others were dedicated Russophiles with a sense of mission: They
thought they were helping Russia become a ``normal'' country with a democratic
system and rule of law. Now, their dreams are shattered. The new Russia seems
just as corrupt as its tsarist and Communist predecessors. ``We knew it was a
hoax when officials devalued the currency to buy their banker friends a little
more time to get their money offshore,'' says one American banker. ``We were
naive,'' says Wiley. Even die-hard supporters of reform lost faith when
Anatoly B. Chubais, a key leader, admitted he lied to the International
Monetary Fund about Russia's budget as a ploy for more money. Adds Adelman:
``The Russian crisis exposed Russian capitalism and the Russia of the '90s as
nothing more than one of the most ubiquitous phenomena in Russian history--the
Young entrepreneurs, too, are shattered. Stacy and Rick Komendera, both 28,
came straight from Tulane University to Moscow in 1992. They formed their own
company, USA Apteka, to sell Western over-the-counter medicines in Russia
under their own label. Annual growth exceeded 20%--until this August. They had
sold hundreds of thousands of dollars' worth of medicines to Russian
distributors on credit. When the ruble crashed, the value of these receivables
plummeted 30%. On top of that, many of the distributors are asking them to
give further discounts or write off the debts completely. ``In three weeks, we
saw all of our five years of hard work disappear,'' says Stacy. Now the couple
is deciding whether to start over or head home.
Russians take a more blase attitude. A people who have endured more than
their share of crises, they have a word for the combination of depression,
melancholy, nostalgia, anguish, and boredom being experienced by many expats:
toska. Moreover, they--and some expats--see an upside. Rents are dropping.
Restaurants and clubs are cutting prices. ``The crisis thins out the expat
herd to those people who really care about Russia and are not here just to
party. It's still wacky, with a melancholy feel,'' says Earle W. Pratt III at
management consultant A.T. Kearney Inc.
Like Camelot, Moscow had its shining moments. For me, it has been the beat
of a lifetime. I have covered coup attempts, Russian robber barons, and the
rise and fall of Russia's tumultuous capital markets. Never again will I get
scoops from people I meet dancing in a club at 3 a.m. I, too, grieve for the
loss of a way of life. But even more, I'm angry at the Russian elite for
wasting the past seven years. They blew a unique opportunity to create a
better life for all Russians. Capitalism, even democracy, are now discredited
concepts. Unwillingly, I have become as much a cynic as the average Russian.
Yet like many expats, I have a love-hate relationship with Russia. At the
first signs of a recovery, many of those who fled to London and New York will
be back. Expats call it the boomerang syndrome. After Moscow, life in the West
is too boring.
EDITED BY SANDRA DALLAS
November 11, 1998
[for personal use only]
Message to Moscow
By Donald Blinken
The writer was U.S. ambassador to Hungary from 1994 to 1997.
Recent accounts of the failure of international bond underwritings to
stabilize Russia's economy remind us that ignoring the distinction between
"emerging markets" and "emerging societies" can be financially lethal.
Throwing money in the form of bond underwriting or portfolio investment at
Russia or similarly unprepared Asian countries produces fees but little in the
way of sustainable economic gain. And blaming our government for encouraging
this activity does not relieve the underwriter or investor from exercising its
I am prompted to comment by my recent experience in Hungary, whose political
evolution and hospitality toward direct Western investment stand in marked
contrast to its giant eastern neighbor. Warning bells should long ago have
sounded on Wall Street with the simple observation that whereas Russia (a
nation of 150 million) since the end of the Cold War has attracted only $8
billion in direct investment, Hungary with a population of only 10.2 million,
has already digested more than $20 billion from Western companies. Russia
should not be force-fed financial assistance before internal conditions are
conducive to long-term direct investment. Societal reform must precede
While all is not perfect in Hungary, its economy is doing well, fueled by
direct investment bringing real technological and productivity gains and a
surge of exports to the West. Fundamental to this achievement is investor
recognition that the rule of law prevails and that the political system and
societal institutions (i.e., the media) offer companies reassurance that, on
the whole, they will be treated fairly and consistently. Thus, relatively
large direct investment coupled with real, not paper, privatization in turn
has enabled Hungary to right its economy by bringing its foreign debt, balance
of payments and budgetary deficits well under control.
In the case of Russia, attempts to bring about societal and institutional
change through financial aid so far have not succeeded in doing what only the
Russians can do for themselves: build law-abiding and transparent societal
standards and institutions. Then direct investment can be the catalyst leading
to the restoration of Russia's financial credibility. This, by the way,
explains why many of us who favored NATO enlargement dismissed the argument
that NATO moving east would "upset" Russia. If one had to list 50 problems
facing Russia today, inviting Poland, the Czech Republic and Hungary into NATO
would rank about No. 49.
What we should focus on, then, are not "emerging markets" but rather "emerging
societies." When nations achieve acceptably flexible democratic and law-
abiding domestic conditions, soundly based direct and portfolio investment
will follow. This takes time and perhaps generational change. We should
encourage these efforts in Russia and Asia, offering assistance where it
demonstrably can make a difference. Putting the market before the society,
however, is an invitation to trouble and disappointment.
Lebed Warns of Famine Risk in Russia
MOSCOW, Nov. 11, 1998 -- (Agence France Presse) Russians run the risk of
starving this winter in the wake of the worst harvest in decades, record-low
temperatures and wavering over aid from the European Union, Aleksander Lebed
The presidential contender and governor of the enormous Krasnoyarsk region in
Siberia, told Interfax he did not rule out the possibility of famine in
Russia's destitute regions, where the coldest winter in decades has begun to
Just last week, Russia signed a landmark deal with the United States to
receive millions of dollars in food aid, marking the most massive humanitarian
package extended to the poverty-stricken country in five years.
However, talks with the EU over food aid in the form of European commodity
loans could remain stalled until the start of next year, Russian officials
said on Tuesday.
Some far-flung Russian regions are already feeling the sting of the year's
poor harvest and sharply dropping temperatures. The White Sea region of
Murmansk cut through diplomatic delays over two months ago by appealing
directly to its Scandinavian neighbors for food.
In the near uninhabitable northeast, local authorities have begun mass
evacuations as ports freeze over, blocking what are often the regions' only
reliable shipment routes.
The EU has prepared a proposal amounting to up to $480 million in aid, for
which Russia still has not made a formal request. EU officials said Monday
they expected an appeal to arrive from Moscow before the end of the week.
Russian Grain Union says no need for extra imports
MOSCOW, Nov 11 (Reuters) - Russia does not need additional grain imports this
year as the harvest was higher than officially announced, the chairman of the
country's Grain Union, Arkady Zlochevsky, was quoted as saying on Wednesday.
``This year we see no need for grain imports in excess of traditional
volumes,'' Tass news agency quoted Zlochevsky as saying at a conference of the
union, whose membership consists of Russian grain producers, processors and
He said in the last eight to 10 years grain producers had not been officially
declaring up to 15 percent of their crops.
This undeclared surplus was used for barter deals or exported for cash
including through the Commonwealth of Independent States, the Interfax agency
The State Statistics Committee said last Thursday that Russia had threshed a
total of 51.5 million tonnes of all types of grain by bunker weight this year,
54.3 percent of the volume at the same time last year.
But the union estimated the real grain harvest at 65 to 68 million tonnes and
put the stocks remaining from last year's bumper harvest at 8.7 to 14 million
``Russia has sufficient stocks of both food and feed grain,'' Tass quoted
Zlochevsky as saying.
Russia last week concluded a deal for a big U.S. food supply package,
involving a credit of more than $600 million to buy U.S. food products
including 1.5 million tonnes of grains as well as an outright gift of 1.5
million tonnes of wheat.
EU officials said on Monday they were ready to disburse another aid package
for Russia which would include a million tonnes of wheat, 500,000 tonnes of
rye and 50,000 tonnes of rice.
No places for liberals in IMF talks, Primakov says
MOSCOW, Nov 11 (Reuters) - Russian Prime Minister Yevgeny Primakov on
Wednesday criticised liberal reformers from previous governments, saying he
would not invite them to head talks with foreign donors because they had lost
In comments reported by Russian news agencies, Primakov said it was not his
fault there were few liberals in his government -- those he had invited had
either refused to join or quit.
Speaking to a gathering of women members of parliament, he said he would not
replace Communist First Deputy Prime Minister Yuri Maslyukov with members of a
previous liberal team in talks with the International Monetary Fund, RIA news
Maslyukov has so far failed to win the release of a much- needed $4.3 billion
dollar tranche of a $22.6 billion package of bailout loans and there has been
some speculation that Primakov might turn to members of the previous team.
But Primakov, a former foreign minister appointed by President Boris Yeltsin
in September to appease the Communist-led parliament, said the liberal team
that secured the initial promise of the loans in July had lost its credibility
in the West.
``Exchange (Maslyukov) for whom? For those who in an interview with the Los
Angeles Times said we tricked you out of $20 billion?'' he said, referring to
Anatoly Chubais, the head of the previous government's loan talks team.
``We know that nobody will talk with them.''
Chubais was quoted by the U.S. newspaper in September as saying the Russian
government arranged for the loans despite knowing in advance that it would not
be able to meet its obligations under the deal.
Chubais has maintained that he was misquoted and meant no such thing. But in
August, a month after the loan deal was arranged, Russia announced it was
suspending payments on some foreign debts. Chubais on Sunday said he did not
expect to receive any invitation to return to government service.
Primakov also said he had invited key liberal opposition leader Grigory
Yavlinsky to join his coalition government, but Yavlinsky refused. Alexander
Shokhin, a liberal economist, quit after one week as first deputy prime
Primakov's government includes regional leaders and members of most of the
main factions in parliament. But the only notable member of a liberal group is
Finance Minister Mikhail Zadornov, a former parliamentary deputy from
Yavlinsky's Yabloko party.
November 11, 1998
Coldest Winter in 30 Years Grips City
By Julia Solovyova
Temperatures across Russia plummeted Tuesday, killing homeless people, closing
schools in Vladivostok and prompting a swan rescue operation at Moscow's
And it will get worse before it gets better: Meteorologists say the week will
just get colder - and over the next few months Moscow will sink into its
coldest winter in 30 years.
"Winter has finally arrived," said Alexander Vasilyev, director of
Gidromettsentr, the federal weather forecast agency, in a telephone interview
Tuesday. Vasilyev predicted average temperatures this winter in Moscow will be
1 degree colder than last year's, which would make it the coldest winter since
The average daily temperature in Moscow has been hovering below zero since
Sunday, and Tuesday it fell as low as minus 10 degrees Celsius during the day.
Tuesday night, temperatures were expected to dip far lower, to minus 15 C in
Moscow and minus 19 C in the surrounding Moscow region.
Daytime temperatures will hover around minus 13 C on Wednesday and Thursday,
meteorologists say. Friday will bring some relief, with temperatures rising to
somewhere between minus 7 C and minus 2 C.
The cold has been brought in by a massive front drifting down from the Arctic
Ocean. Unhindered by Russia's flat northern plains, freezing winds are
sweeping across the country, from Murmansk and St. Petersburg to Moscow, then
to Central Russia, and eventually to the North Caucasus and Kazakhstan.
Such severe Arctic cold fronts have been given names in Russian folklore. When
they come in January they are called the Christmas Frost; when they come in
early May they are the Bird Cherry Frost.
But temperatures this low in early November are rare indeed, coming just once
every 20 years or so, Vasilyev said. It is so rare that there is not even a
picturesque name for it: It's just cold.
Every year the onset of winter kills homeless and drunk Muscovites. This
week's cold snap has already claimed nine lives, according to Lyubov Zhomova,
a spokeswoman for the city ambulance service. Another 67 people, many of them
homeless, were hospitalized for hypothermia, she said.
In addition to human casualties, two frostbitten white swans had to be
forcibly rescued from a pond near the Novodevichy Monastery on Tuesday, said
Nina Tolmachyova of the Moscow Rescue Service. The swans were left shelterless
when their wooden houses mysteriously disappeared from the monastery's grounds
the night before, apparently stolen.
Rescuers spent three hours chasing the scared birds, Christina and Edward,
around a pond covered with a layer of ice too thin to walk upon but too thick
to break through with a boat. Eventually a Rescue Service diver, Levan Agarov,
had to break a path through the ice with his body for the boat to follow.
In the end the two were lassoed and evacuated to the Moscow Zoo, away from
hungry stray dogs and freezing cold.
In the Pacific port city of Vladivostok, temperatures were dropping below
freezing but the city's central heating has not yet kicked on, which forced
citywide closures of schools and daycare centers, Interfax reported.
Vladivostok Mayor Viktor Cherepkov appealed to the local prosecutor's office
to file charges against local energy supplier Dalenergo for not turning on
heat to the city.
Dalnergo said the heat would come on later this week. Company officials also
told Interfax that the city has not paid its debts, and that has left too
little money to buy fuel for the winter or to repair some heating pipes.
So far, the cold hasn't caused any other damage. There has been no increase in
traffic accidents, said Tolmachyova of the Rescue Service.
This year's harvest was poor but not because of the cold, as it was collected
long before the frost set in, said Leonid Kholod, a former ministe r of
agriculture - and a man clearly authorized to discuss winter weather, as his
last name means "cold" in Russian.
If this week's temperatures are unusually severe, snow on Nov. 7 is nothing
special. It traditionally accompanies Moscow's Revolution Day celebrations, as
longtime Muscovites well know.
A Soviet-era anecdote even held that the tribunes above the Lenin Mausoleum
were heated so that geriatic Kremlin officials would not freeze - even though
their only movement as they spent hours watching marching crowds stream past
was to wave phlegmatically.
Jamestown Foundation Monitor
November 11, 1998
GOVERNMENT SUDDENLY GETS MONETARIST RELIGION... According to leaks from
Tuesday's closed parliamentary session devoted to the government's
anticrisis economic plan, the cabinet, represented by First Deputy Prime
Minister Yuri Maslyukov, made the case for a super-tight 1999 budget
envisaging a 2 percent budget surplus. Such a budget would apparently win
Russia US$4.5 billion in aid from the IMF and the European Bank for
Reconstruction and Development. Maslyukov reportedly told the legislators
that without such aid, annual inflation would reach 300 percent. This, he
said, citing what might be seen as obvious, would cause big problems with
external debt servicing and a sharp drop in living standards. With the aid,
Russia is likely to see annual inflation of only 30 percent and no abrupt
decline in living standards. Russian agency sources in the parliament called
Maslyukov's presentation a "joint statement" of the Russian government,
Russia's Central Bank and the IMF. Vladimir Ryzhkov, first deputy speaker of
the Duma and a member of the Our Home is Russia faction, said that Tuesday's
Duma session meant that the 1999 budget will be very tough. One observer
commented that the government was suggesting a budget so austere that even
free-market icon Anatoly Chubais would not have dared suggest it (Russian
agencies, November 10).
On the other hand, Maslyukov brought no budget numbers or draft bills with
him to the Duma. Indeed, several key players said there was little point in
presenting a budget for the upcoming year before the government comes to an
agreement with foreign investors on restructuring the domestic debt it
defaulted on last August. As Finance Minister Mikhail Zadornov noted, the
government cannot present a budget before it knows how much it will have to
reimburse the holders of frozen treasury bills. Aleksandr Shokhin, head of
the Our Home is Russia faction in the Duma, predicted that the budget will
not be passed until the middle of next year. Further, while the government
of Prime Minister Yevgeny Primakov and the leftist majority in the Duma
appeared to be getting along well on Tuesday, some observers predicted the
romance would end when--and if--the government actually produced a tight
budget and then asked legislators to approve it (Russian agencies, November 10).