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Johnson's Russia List


November 29, 1998   
This Date's Issues: 2494 2495 

Johnson's Russia List
29 November 1998

[Note from David Johnson:
1. Reuters: Primakov irked by IMF but urges new credits.

4. Los Angeles Time: Susan Eisenhower, SHARING BLAME FOR GALINA'S DEATH 
Russia: Did we help her enemies equate her pro-Westernism with treason? 
(unabridged version).

5. Anne Applebaum: 2493-Weiler/Ferency.
6. Alexandre Konanykhine: Re NYT "Gore Rejected C.I.A. Evidence of Russian 
Corruption" by James Risen/JRL 2491.

7. Jim Vail: Outrageous Aid.
8. AP: Russia Probes Lawmaker's Murder.
9. The Guardian: James Meek, Russia clings to sick Yeltsin for fear of devil 
it doesn't know.

10. AP: Russia Charities Strapped by Crisis.
11. Business Week editorial: RUSSIA: SO MUCH FOR DUE DILIGENCE.]


Primakov irked by IMF but urges new credits
By Alastair Macdonald

MOSCOW, Nov 28 (Reuters) - Russian Prime Minister Yevgeny Primakov, in
unusually frank remarks, said on Saturday he was irritated at being lectured
on how to run his economy by unworldly ``kids'' from the International
Monetary Fund. 
But he conceded Russia had little choice but to negotiate with them and warned
the IMF, whose managing director is due in Moscow next week, that he would
have no option but to print more roubles if it refused to hand over credits it
has held back. 
In televised remarks during a visit to the western city of Belgorod, Primakov,
who was appointed two months ago after state finances collapsed and the rouble
crashed, said some monetary emission and state planning were now needed. But
he pledged to keep inflation under control and safeguard market freedoms. 
``It irritates me...when delegations come in made up of young kids who've seen
almost nothing in life but have read a lot of books...and who, without knowing
our situation, start to dictate or recommend some kind of development plans,''
he said. ``But -- we are obliged now to act in our own fashion, but also to
The 69-year-old former foreign minister, named by President Boris Yeltsin in
September to appease Russia's Communist-led parliament, rarely uses such
undiplomatic language. 
It was an indication of how far he is vexed by criticism from the West that
measures to tighten state economic controls and relieve a shortage of
liquidity amount to a reversal of market reforms and risk reigniting rampant
An IMF delegation left Moscow last week, criticising the government's budget
plans and giving no indication the Fund was any closer to disbursing a $4.3
billion credit that was due to have been paid in September but has been
withheld until Moscow produces a clear plan of how it intends to pay it back. 
Primakov said he hoped it would be possible to reach agreement on disbursement
of further IMF loan instalments when Fund chief Michel Camdessus visits Moscow
on December 1-2. 
He had a warning too for Camdessus, saying that without IMF money the
government would simply pay debts by printing money. 
``We cannot accept that there should be insufficient money supply in
circulation,'' Primakov said. ``If we don't receive the tranche we've been
promised by the International Monetary Fund, we'd have to move toward a
process of (monetary) emission.'' 
But he also said: ``Of course, we are wary of uncontrolled emission...If it
goes beyond some acceptable limit, then this could turn into a new leap of
very serious inflation.'' 
Defending plans by his first deputy Yuri Maslyukov, a Communist who once ran
Soviet central planning, for more state influence in the economy, Primakov was
quoted by Itar-Tass news agency as saying: ``It's not planning like we had
before...(State regulation) is essential and goes on everywhere in the
``We can't have a closed economy or isolationism,'' he added. 
Primakov announced cuts in sales and profit tax rates in the 1999 budget on
Friday, arguing this will tempt more Russians into making tax returns. But it
has angered his finance minister and may not convince the IMF that revenues
will improve. 
He was quoted on Saturday as saying ministers were also studying ways of
tempting Russians to invest the $30-$40 billion officials believe they hold in
dollar cash in their homes. 
Conceding that, after the financial collapse of August, they had every reason
not to trust Russian banks or the state itself, Primakov said the government
was considering various schemes. One of these would let people to put the cash
in foreign banks which would be obliged in turn to invest the money in Russia.


Date: Sat, 28 Nov 1998 
From: (Renfrey Clarke)
Subject: Kagarlitsky on Primakov government

#By Boris Kagarlitsky
#MOSCOW - From its first days, the Russian government of Yevgeny
Primakov has been the target of fierce criticism from the
national press. The commentators have condemned the government
for inaction, but it is not this that really has them alarmed.
The secret is now emerging: the government is bad not because it
is inactive, but because sooner or later it will have to make
fundamental decisions, and these decisions threaten to open the
way to power for the left.
#There is plenty of real cause for alarm in the condition of
Russia today. If the new government cannot force abrupt changes,
by the end of next year the country could cease to exist as a
unified state, and the bulk of the population could face
starvation. But to the liberal commentators, these are trifles
compared to the real danger - that the prescriptions of the
International Monetary Fund could be rejected, and various
socialist approaches rehabilitated.
#Meanwhile, it is true that Primakov has not been in any hurry.
The number of ministers with left-wing views continues to rise,
but no new course has been announced. As Russia's former chief of
foreign intelligence, Primakov understands that it is better to
be accused of inaction than to have to confront serious
#The government does not seem to have any coherent plans, but
this has not prevented the vice-premier in charge of economic
matters, Yury Maslyukov, or Central Bank head Viktor Gerashchenko
from working 14-hour days. The results are modest, but real: the
exchange rate has been held to 17-18 rubles to the dollar,
imports have somehow been resumed, and the decline in production
has slowed. Mass discontent has not turned into uprisings.
Emission has begun, but not on such a scale as to spur
hyperinflation. The government has begun paying current wages
more promptly, though the position concerning old wage debts
remains unclear. In short, something like stabilisation has
occurred, though it cannot be expected to last more than a few
#The new premier has shown himself to be a virtuoso of apparatus
intrigue, deftly shifting liberal politicians out of contention
for cabinet posts, and inducing those already on board to jump
ship. By early October a right-centrist government had been
transformed into a left-technocratic one. The Communists too had
finished up on the sidelines; party members were in the cabinet,
but the party leadership itself was excluded from decision-
making. All the appointees owed their posts not to party
comrades, but to the premier.
#For journalists, a "closed" government is a disaster. But the
public, which is tired of political squabbles, finds this quality
appealing, just like the "Brezhnevite" style of the premier, who
reads official statements off scraps of paper.
#A man who is rumoured to have organised more than one coup in
the Arab world will not let himself be outmanoeuvred either in
apparatus intrigues or in a propaganda war. But even the most
brilliant apparatus intriguer will not necessarily prevail in the
face of economic setbacks. None of the structural problems
created by the catastrophe of August 17 has been overcome. This
means that by spring, the short-term stabilisation achieved by
the new cabinet may well be overtaken by a new bout of crisis.
#Primakov's opponents are well aware of this, and the press is
full of prophesies about the terrible consequences of left-wing
rule, consequences predicted to hit in about two months' time.
Why this precise date, when the cabinet has not yet taken a
single decision of fundamental importance? The general dynamic of
the crisis was in fact obvious even before Primakov began to be
touted as a potential Prime Minister. After the first August
"shock", a period of relief could be expected to follow (Primakov
can now claim this as his doing), but it was equally predictable
that given the state of the country's reserves of gold and hard
currency, the financial crisis would eventually resume.
#The notorious "oligarchs" calculate that the next bout of crisis
will allow them to take their revenge and put their own person in
the prime ministership. The oil magnate Boris Berezovsky has in
practice declared war on the government. Yury Maslyukov has
already let it be known that renationalisation of part of the
property privatised during the 1990s is a real prospect. Two
drafts of a law which would give the government the necessary
powers have already been introduced to the Duma.
#The hopes of the right wing that the government will suffer a
rapid financial collapse are in fact unlikely to be borne out.
The arguments about the appalling consequences of the rule of the
left are as hypocritical as they are naive. Most people are not
fools, and understand that the government is being forced to
swallow the porridge cooked by its predecessors. More
importantly, the political relationship of forces is not
favourable to the liberals. The social base of the supporters of
the "free market" in Moscow and St Petersburg has shrunk with the
collapse of the financial system, and significant numbers of
people in the "middle layers" are beginning to reconsider their
positions. Meanwhile, the provinces are becoming more and more
"red". If Primakov falls, provincial Russia will not demand the
return of Chernomyrdin or Kiriyenko, but a more radical left-wing
course. Finally, the Duma majority, which is much less inclined
to think about ideology than to keep its eye on the provinces,
will not allow a return to a liberal course. As for the next
Duma, it is not hard to predict its make-up: it will be more
"red" than the present one.
#Finally, in conditions of crisis a return to neoliberalism would
be impossible for purely technical reasons. Market decisions
require a functioning banking and financial system. Any
government this winter would be obliged to think not about a
stable ruble, but of how at any cost to provide heating, keep the
transport system functioning, and stave off hunger. The more
acute the crisis, the greater the need for tough administration.
In such a situation, serious liberal figures would not even try
to take power, and non-serious ones would fall not after two
months, but after two days.
#Meanwhile, what about the Primakov government? There are three
roads it might follow. The first and most likely is that of
radicalisation. Faced with an increasingly acute crisis, the
cabinet might decide to enact a whole series of measures which
until now it has only talked about: nationalisation of the oil
companies; of the gas monopoly Gazprom; of non-ferrous
metallurgy; of the brewing and distilling combines; and of a
number of banks. About twenty large enterprises would be
affected. Most such companies have substantial hoards of hard
currency, and this money would be accessible to the state in the
event of nationalisation. #Paradoxically, the nationalisation of
key enterprises would make it possible to meet the main demand
put forward without success by liberal economists - for the
lowering of taxes. The danger lies in the prospect that the
nationalisation of companies capable of quickly topping up the
budget might be followed by the takeover of loss-making ones.
Maslyukov could be faced with a queue of enterprise directors and
even owners demanding nationalisation. It stands to reason that
some enterprises must be returned to state ownership for
restructuring, but the ability of the state to provide such help
is now quite limited.
#Without reform of the state apparatus any set of policies will
be implemented very inefficiently. Plans for the reform of the
state apparatus are now being prepared; in the view of the people
drafting these plans, the state apparatus is so demoralised that
to break its resistance will not be difficult. If the quality of
administration is to be raised, administrative reform in the
regions is also indispensable, along with amalgamation of the
subjects of the federation. #Working in semi-conspiratorial
fashion, the government is almost invulnerable to its enemies,
but is also incapable of mobilising mass support. In clashes with
the oligarchs, such support will be indispensable.
#Primakov will most likely reshuffle the government repeatedly.
But where will he find new cadres? The resources of talent in the
Duma "talk-shop" have largely been exhausted. The authorities do
not rest on a political movement, and consequently it is hard to
foresee a massive influx of fresh forces "from below".
#If the government does not decide on radical measures, or if it
implements them inconsistently or incompetently, the outcome
would be woeful. The downfall of the Primakov cabinet would lead
not to the return of the liberals, but to chaos. Sensing the
helplessness of the central authorities, the regional leaders
would begin taking key measures without reference to the centre.
Mass discontent would assume the character of a spontaneous anti-
Moscow movement. Only a dictatorship could normalise the
situation, and not every dictator would be able to cope.
Everything would be carried out for the sake of saving the
homeland and democracy. But after unsuccessful attempts to
implement dictatorship, neither the homeland nor democracy would
necessarily remain intact.
#This is not the whole sum of the choices before the government.
The authorities might well take radical decisions quite different
from those now anticipated. The apparatus will partly sabotage
decisions, and partly implement them. The reform of the civil
service will yield certain results, but less than hoped. Some of
the oligarchs may be expropriated, while deals are likely to be
struck with others. The financial crisis is unlikely to be
overcome, but will not necessarily grow into catastrophe.
#Popular discontent will grow in any case. An experienced
intriguer, Primakov will most likely try to gain from the popular
anger. In Russia, it is the president who ultimately answers for
everything. We are ruled by a sick old man, who should long ago
have been packed off into retirement. And if Yeltsin departs
early from the scene, the constitution states clearly that he is
to be succeeded by the prime minister.
#For the armed forces and the interior ministry, the current
premier is a familiar and reassuring figure, and for the security
forces even more so. Unlike Yeltsin, he enjoys respect in the
Duma. Why should he not be the national leader? In a meeting with
heads of the subjects of the federation, Primakov spoke of the
possibility of removing elected officials who were not fulfilling
their responsibilities. Instead of becoming indignant, his
listeners nodded approvingly. All of them, for some reason,
thought not of themselves but of their neighbours - and of a
particular official, the most important of all, who manifestly
cannot cope with his duties.
#As interim president, Primakov might well stay in office not for
the prescribed three months, but for much longer. Rather than
flagrantly rewriting the constitution to his own advantage, he
would readily agree to expand the powers of the parliament and
the government (thus insuring us against the ambitions of new,
hungry power-seekers). Then, as a concession to the crisis,
elections for the head of state would be postponed or handed over
to some special college.
#Ultimately, however, the outcome of the struggle will not be
decided by the premier's political manoeuvres. The strength of
the new government lies in its readiness to reject the heritage
of the Yeltsin period and the economic prescriptions of neo-
liberalism. Its weakness is its lack of a political base, of a
powerful mass movement supporting it. Hence also the irresolution
of the ministers. The weaker the pressure from below and from the
left, the more dangerous the attacks from the right. If a broad
political movement does not demand real changes, and if the
masses of workers cannot become a real political force, there is
no reason to hope that the Primakov cabinet will perform


Date: Sat, 28 Nov 1998 
From: (John Helmer)

>From The Moscow Tribune, November 27, 1998
John Helmer

A report just completed by Russia's independent state auditor, the
Accounting Chamber, accuses the Central Bank of Russia, under its
previous chairman, Sergei Dubinin, of profiteering from its transactions
with precious metals, including gold, silver, platinum and palladium.
Profits from metal sales have not gone into government coffers, the 
Accounting Chamber has reported. Instead, they have been spent on remuneration
for Central Bank officers, construction of housing for them, and a range 
of other perquisites and benefits.
A Russian press leak, before the audit was completed, revealed that
the Central Bank's officers paid themselves huge salaries.
The latest disclosure confirms previous speculation that Central Bank 
officials have profited personally from metal trading and swap deals in 
international markets for several years. The Bank has persisted in these
dealings, despite recommendations from the state auditor to stop in
1996, and again in 1997.
The Accounting Chamber's auditor, who conducted the investigation, also
accused the new Central Bank management, headed by Victor Gerashchenko,
of aiming to retain its metal profits and trading prerogatives, and
block any legislative change in the Bank's procedures and accounting
The latest details, provided by Accounting Chamber auditor,
Eleonora Mitrofanova, help explain the intensity of the competition
between the Central Bank, the Finance Ministry, the State Metals Fund
(Gokhran), the state precious metals trader, Almazjuvelirexport, and 
Norilsk Nickel, the mining company. This competition was the main reason
for a five-month delay this year in government approval of exports of
platinum group metals (pgm). That delay caused worldwide shortages of 
platinum and palladium, and drove the metal prices to record highs.
Mitrofanova's revelation that Chairman Gerashchenko refuses to accept
the changes recommended by the Accounting Chamber reinforces the view
among Russian officials that the government will be unable to avoid
another round of internecine competition, causing delays for pgm exports in 
Sergei Kyshtymov, the head of the Central Bank's precious metals
department, refused comment, claiming the Bank had introduced new
rules for contact with the press.
German Kuznetsov, head of Gokhran and deputy minister of finance, also
refused comment, cancelling a prior promise for an interview. Kuznetsov
is currently at war with Gerashchenko, who has called for the Central
Bank to take over the remaining precious metal and diamond stockpiles
still managed by Kuznetsov's agency.
Sergei Gorny, who heads the pgm trade for Almazjuvelirexport, avoided
responding to questions. His organization, which is nominally state
owned and under Finance Ministry control, has sought to preserve its
right to exclusive trading of Russian pgm abroad. The organization has
been separately audited by the Accounting Chamber, and accused of 
profiteering for its own benefit.
According to auditor Mitrofanova, detailed results of her investigation
won't be released unless the Central Bank and the collegium of the
Accounting Chamber agree. "This will happen next month," she said. "The 
[details] promise to be quite interesting."
She blamed the unaccountability of the Central Bank, and the lack of
transparency in its accounts, on the current law on the Bank. This, she said,
allows Bank expenditure on houses and dachas for its officials to be
classified as "spending for field organizations." 
"We are raising this issue constantly," Mitrofanova said. "From the point of 
view of the accounting and pure commonsense, it shouldn't be done like that, 
but according to the law, this is exactly how it can be done."
"As for the methods of accounting the prices for precious metals, 
yes, they are being counted at the price at which they were 
purchased (at different times), but are being sold at the current 
market prices. The margin goes into profit of the Central Bank. We think, 
and this was indicated in our reports on Central Bank audits in 1996 and 
1997, that given the situation in the country, the value of 
precious metals should be recalculated according to some 
average market price for the year, or in some other way. The 
profit on sales of precious metals should go directly into the 
The Dubinin management of the Central Bank was often at loggerheads with
the Accounting Chamber, and tried to block the access of auditors to
Bank documents. Dubinin attacked the Chamber in correspondence with
the then prime Minister, Victor Chernomyrdin.
According to Mitrofanova, Gerashchenko isn't behaving much better. "So far 
the Central Bank doesn't support our opinion," she noted. 


Date: Sat, 28 Nov 1998
From: Susan Eisenhower <>
Subject: Starovoitova

Russia: Did we help her enemies equate her pro-Westernism with treason? 
Los Angeles Times, November 27, 1998 
(unabridged version) 

Though Galina V. Starovoitova was not a household name outside of
Russia, the
world is a lonelier place with her passing. One of the brightest lights
of the Russian independence
and reform movement was extinguished a week ago when Starovoitova and
her aide were gunned down in the stairwell of her St. Petersburg
apartment. The rain of bullets felled one of the
bravest, most principled people to rise to prominence on the carcass of
the decaying communist state, a woman who persisted even in the most
difficult days of reform. I was privileged to count her among my
Americans like to talk about our country as the "land of the free
and the home of the brave," but most of us will never know what it is
like to have our principles tested in life or death terms.
Starovoitova did and yet she chose to stand up and be counted, to oppose
hatred and scapegoating--even as the economy collapsed, the crowd
thinned, daylight dimmed and dark, ominous forces gathered to seek her
demise. Her bravery, in the end, cost her her life. 
Starovoitova was not naive; she knew the risks of taking on
monopolistic interests. In the last years of the Soviet Union, she
supported the national aspirations of many of the U.S.S.R.'s indigenous
peoples. In 1991, as the Soviet Union was poised on the precipice,
Starovoitova, the lawmaker and ethnographer, told me that ethnic
nationalists were not "hooligans" as the regime had suggested, but
"ancient nations with their own value systems and cultures." She urged
the U.S.S.R. "to find legal mechanisms 
that will take into account their historic and cultural imperatives, as
well as the
human right of self-determination." This radical approach was
controversial to say the
least. At that time, Starovoitova was, she told me later, under KGB
surveillance and her 
car had been run off the road more than once by people sent to warn
her--or silence her forever. 
Not since that time was she in as much jeopardy as she had been of
late. With the social, political, military and economic fabric of Russia
in shreds, Starovoitova persisted in articulating her "westernized"
views. This she did while challenging opponents of reform, including
ultra nationalist Vladimir V. Zhirinovsky, whom she announced she'd
oppose in the up-coming elections in the Leningrad region, an
increasingly corrupt area. At the same time, she pressed the Yeltsin
regime to censure hardline communist Albert Makashov for his
anti-Semitic remarks. Not long before her death, Starovoitova told
friends she'd received a spate of telephone threats. Despite this
however, she continued her crusade, without bodyguards, without letup. 
In Russia, Starovoitova's death is being compared with the
assassination of John F. Kennedy. Many recognize that it could be some
kind of a turning point, yet no one knows if it will be for good or for
ill. Perhaps her death will catalyze democratic forces. We can only
But just as her killing has wracked Russia's conscience, it should
also sting ours.
What have we done in our U.S. policy toward Russia that has prompted
the architect of it, Deputy Secretary of State Strobe Talbott, to admit
that Russia has been seized by anti-Western sentiment? Wrote Talbott in
the November 21 Economist, even before Russia's monetary collapse
"'[r]eform' and 'market' had gone from being part of the vocabulary of
triumph and hope to being, in the ears of many Russians, almost
four-letter words. The noun kapitalizm came increasingly to be modified
with the adjective dikyi (savage). Accordingly, the "West" went from
bring an object of emulation to a target of resentment..."
Starovoitova is now at peace, but the Russians and we are not. Her
death begs the question: did US policy support Russia's true democrats,
or did we leave them defenseless by undermining their case for
cooperation with a range of measures from expanding NATO, a military
alliance, in their direction, to enacting anti-dumping restrictions on
the few things that this fledgling market economy could competitively
export? Did we help Starovoitova's enemies equate her pro-Westernism
with treason? 
The Russians have even tougher questions to ask themselves. To
Russia's democrats her death taunts them: did they try hard enough or
fight long enough for Russia's new future? And what forces in society
were responsible for killing this modest woman who lived frugally
without any embellishment at all, a woman who spoke quietly yet firmly
but never displayed arrogance, self-righteousness, nor true malice? 
Perhaps it was her uncorrupted nature that in the end proved to be
so threatening to her enemies. Unlike so many others, Starovoitova spoke
as she lived, with honesty and courage. 
A light has indeed gone out for us all.


Date: Sat, 28 Nov 1998 
From: Anne Applebaum <>
Subject: 2493-Weiler/Ferency

Jonathan Weiler's question about the way in which Poland's past
"experience" in market economics was transferred to a younger generation is
an excellent one. In fact, it is a mistake to assume that Poland was
better prepared for market economics in 1989, simply because Poland had a
market economy before the war and Russia's last experience of capitalism
was in the 1920s. What made Poland different from Russia - and different
from the Czech republic too, for example - was the fact that Poland did
have a functioning market economy, albeit a small and frequently illegal
one, all through the years of communism. This private economy grew
enormously in the 1980s. There were private farmers, small private
manufacturers, people who privately provided services. Most importantly, in
the 1980s, when Poles were allowed to travel and many other East Europeans
weren't, Poles became the region's traders: there were huge Polish markets
in Berlin, there was constant trading on the Czech border. I spent a few
days in Brest, Belarus, in 1990, and discovered the city's main hotel was
stuffed with Poles, all there doing business, quite a lot of it in the
lobby. When, later, it became possible to open small shops and businesses
in Poland, these traders were the people with the experience and the
capital to do it. That millions of Poles already knew quite a bit about
trading and markets by the time communism collapsed is a factor often
overlooked in explaining Poland's relative success. Yet in my view, it
accounts for a great deal of that success. 


From: "Alexandre Konanykhine" <>
Subject: On November 23, 1998 New York Times Article "Gore Rejected C.I.A. 
Evidence of Russian Corruption" By JAMES RISEN
Date: Wed, 25 Nov 1998 

Dear Mr. Risen,

In my opinion, unwillingness of the Clinton's administration, well described
in your article, has already resulted in many blunders, which has caused and
continue to be causing enormous damages to the United States. Here are a few
1/ The United States was well respected by Soviet citizens despite
consistent KGB and Party propaganda aimed to portrait the USA as an Evil
Empire. What KGB and Communist Party failed to achieve over decades of
trying hard, the Clinton's administration achieved by virtually imposing in
1996 the corrupt Yeltsin's regime for 4 more years. Yeltsin had 4% approval
rating a few months prior to his 1996 re-election, now it is reported to be
under 1%. Sure, the billions of dollars provided by the Clinton's
administration and its other support proved to be sufficient to secure his
re-election, but now the USA is widely perceived in Russia as the accomplice
of all wrongs committed by Yeltsin's pack of oligarchs and corrupt
officials. Thus, in Russia your country now shares the same 1% approval
rating of Boris Yeltsin.
Add here the stupid IMF recipes (rightly perceived as the U.S. recipes)
which are widely and correctly believed in Russia to be one of the major
reasons for the current dismal state of economy and you can see how the
willful blindness of the Clinton's administration created serious danger of
the USA again becoming the number one enemy of Russian Federation. There are
many populist politicians in Russia, willing to explore the anti-US
sentiment of the population. And there still those nukes out there.
2/ In Russia, MVD (Ministry of Interior) is know as a totally corrupt
organization, widely engaged in protection racket and extortion. Hardly
anyone in Russia considers it as a law-enforcement agency which protects the
citizens and their rights; some consider MVD as just one of the largest and
most dangerous Mafia groups. Yet, your FBI director goes into great length
telling just how similar the FBI and MVD are. ( "...We are truly
comrades--linked beyond our nationalities by our commitment to public
service and by our professionalism as law enforcement officers" and so on --
see ) Unfortunately, the FBI
Director did not stop at making "We are truly comrades" speeches - the FBI
now provides the MVD with many favors, and -- surprise, surprise! -- the MVD
need favors not in prosecuting criminals, but in persecuting people on
behalf of the organized crime and on behalf of corrupt officials. On I described an example of such a favor,
which involved me personally. It's very ironic and very dangerous, when the
willful blindness of the Clinton's administration enables the organized
crime to manipulate U.S. law enforcement agencies into persecuting a person
who since 1992 has been trying to attract attention to the Russian Mafia
activities which costed the USA billions in stolen money.
3/ By aggressively promoting false image of Russia as a newborn democracy,
run by "young reformers" of prominent democrat Boris Yeltsin, the Clinton's
administration made it possible for corrupt Russian officials and its
organized crime associates to embezzle reported 200 billion dollars from the
Western investors. As I tried to show in my article, the notion that Russia
was headed towards democracy or market economy is completely false. However,
apparently the Clinton's administration saw not was there, but what it
wanted to see, as you well described in your article.

Sincerely yours,
Alexandre Konanykhine
KMG International, Inc.
575 Lexington Ave 4th floor
New York, NY 10022-6102
Tel: 212.371.5522
Fax: 212.572.9637


From: (Jim Vail)
Date: Thu, 26 Nov 1998 
Subject: Outrageous Aid

Dear David,

I hope you print Mark Ames great feature story in the latest issue of the
Exile summing up the food aid the US government is shipping to Russia once
again. He hits it on the nail as to what this whole aid thing is really about.
I was absolutely outraged after I read in one of several press reports
questioning the food aid which quoted a US government official stating that
the aid will obviously help American farmers. Will it help the Russians? His
answer was so vague I don't remember it.

The US government has guaranteed the food aid sham will continue by having one
or two officials oversee distribution in a country considered one of the most
corrupt in the world. Let me put the last 'humanitarian aid' sent to Russia a
few years ago in perspective: I help run an organization called the Center for
Humanitarian Aid in which we purchase food from the market and then cook it
and serve it to the needy. My manager of operations Namrud Nagash told me he
saw in the basement of the Church where we serve the food several food
containers marked USDA Aid shipments. Who collected these huge containers? Who
else but a group of 'former' bandits, one who just got out of prison and was
overseeing the reconstruction of the Church. That, my fellows, sheds some
light onto who is really benefiting from our 'good intentions.' 

Jim Vail
Center for Humanitarian Aid


Russia Probes Lawmaker's Murder
November 28, 1998

MOSCOW (AP) -- Detectives are making headway in their probe into the killing
of a prominent liberal lawmaker and expect soon to locate witnesses, the
country's prosecutor general said Saturday.
``This is the first time we've had such a situation on our hands, when people
are helping us very actively, and there is a large amount of information that
we immediately analyze,'' Yuri Skuratov said in a television interview.
Parliamentary leader Galina Starovoitova, 52, was gunned down by unidentified
assailants on the stairs of her apartment building in St. Petersburg on Nov.
20. Her killing is believed to have been a contract hit, a crime that is
common yet rarely solved in Russia.
Skuratov said detectives are poring over evidence left at the scene and are
close to finding people ``who could have witnessed this crime,'' according to
the ITAR-Tass news agency.
Starovoitova was one of the most prominent victims of violence in post-Soviet
Russia. Her death has serve as a rallying point for the country's liberals and
prompted calls for a crackdown on lawlessness.


The Guardian
November 29, 1998
[for personal use only]
Russia clings to sick Yeltsin for fear of devil it doesn't know 
By James Meek in Moscow

The way his bitter ex-bodyguard Alexander Korzhakov tells it, Boris Yeltsin
fell ill not long after he heard about the assassination of his old friend,
Galina Starovoitova. She was murdered late Friday night: next day a helicopter
blew up a cloud of snow as it landed near the President's hunting lodge at
Zavidovo, 60 miles north of Moscow, to pick up the sick leader and fly him to
another country residence, Gorky-9.
From there, the President was rushed along specially cleared roads to the
Central Clinical Hospital. Only two days later did the Kremlin announce he had
been hospitalised, officially with pneumonia.
There is little evidence that the worsening of Yeltsin's enigmatic illnesses
was caused by news of Starovoitova's death. They had been estranged for a long
time; he abandoned her six years ago when someone had to take the fall for
North Caucasus troubles. 
The coincidence of Yeltsin's emergency admission to hospital and the death of
Starovoitova sharpened fear among Russia's political elite about Yeltsin's
departure. Many took the spectre of mysterious assassins killing a grandmother
not as the way things are in Russia but as the way things might be: a violent,
murderous future where execution of political dissenters would be as common as
the murder of businessmen is now. In this view, whoever was behind it, the
shooting of Starovoitova was as significant as the burning of the Reichstag.
After the killing of TV boss and entertainment superstar Vlad Listyev in 1995,
Yeltsin appeared in public and promised vengeance.
The murderers were never caught, but he showed himself in tune with popular
mood. Last weekend, when the democratic movement he once purported to lead
looked to him after the death of one of its last crusaders, he wasn't there.
Back in 1995, no matter how unwell he already was, Yeltsin was an active
political player as the ultimate arbiter. Now, his role is different. Everyone
understands he is seriously ill, and that to all intents and purposes his
Prime Minister, Yevgeny Primakov, is running the country. Yet as long as
Yeltsin could make occasional public appearances and go through the motions of
being head of state, there was no need to embark on the process, terrifying
and unfamiliar to the establishment, of formally handing power to someone
else. Now there are doubts about whether the President can even manage his new
monarchic role.
What the Russian establishment fears is that Yeltsin will die or retire
without warning, the succession will move out of its control and an
unpredictable, relatively young leader will become elected dictator of Russia.
"There's a feverish search now going on to find a mechanism for the transfer
of power," said Oleg Morozov, leader of the centrist Russian Regions bloc in
parliament. "Yeltsin's biggest problem with power now is how to part with it."
Meanwhile, two senior Kremlin aides, ex-spokesman Sergei Yastrzhembsky and
former security council secretary Andrei Kokoshin, are working for a leading
presidency contender, Moscow Mayor Yury Luzhkov.
"Yeltsin was exceptionally reluctant to see Luzhkov as Prime Minister, let
alone President," Morozov told The Observer. "Their appearance in Luzhkov's
team shows their real political loyalties, no matter how correctly they talk
about their former boss."
It might seem curious that the country's elite is so alarmed over Yeltsin's
ill health. Why not hold elections? The truth is that no one knows.
The motley group of economic liberals, the one-time "young reformers" who
gathered around a vague right-wing democratic banner after the Starovoitova
funeral and declared their intention to unite for elections, stand little hope
of success.
"What's going on in Russia?" said Yury Afanasyev, Rector of the Russian
University of the Humanities. "I think you can make a fairly precise
diagnosis: a fusion of criminality, capital and power."
"Why are the voters voting for unknown names? Why aren't they afraid of
bringing thieves and bandits to power? Because, they blame the existing
authorities for the harshness of their lives, and in such conditions the very
word 'democracy' becomes completely devalued."


Russia Charities Strapped by Crisis
November 28, 1998

MYTISHI, Russia (AP) -- Each time the church door swings open, chants and the
heavy perfume of melting candles spill into the snowy courtyard. A beggar
leans on a walking stick, reaching out his hand for a few coins.
Much of life at St. Vladimir's revolves around this courtyard, the center of
the church's social action campaign.
While worshippers bow and pray before icons inside, 200 or so down-and-out
folks eat in the soup kitchen each day. The church outside Moscow also has 30
homeless men doing construction work on its buildings.
Like other welfare efforts in Russia, St. Vladimir's is struggling to cope
with the three-month-long financial crisis: sharply rising costs and shrinking
financial support; frozen bank accounts; and the ever-widening ocean of need.
But it is more seriously hampered by the mistrust most Russians hold for
charities, which keeps donations low and most charity work small-scale and
``If a person isn't honest, he assumes no one else is either,'' said St.
Vladimir's administrator, Andrei Fomichev.
Charity's bad name in Russia dates from Soviet times, when workers had
``contributions'' automatically deducted from their wages and put in huge,
centralized funds. They never saw their money doing any good.
``So Russians don't believe in organizations. They believe in helping their
friends and family, and the occasional bum or babushka on the street,'' said
Jenny Hodgson, co-director of the British-based Charities Aid Foundation.
The tradition of giving in Russia was further tarnished by some embezzlement
scandals in recent years. Some so-called charities seemed more interested in
the tax breaks on imported humanitarian goods than in distributing aid.
As a result, just 2 percent of the income for Russian non-governmental
organizations comes from private contributions, Hodgson said. By contrast,
individual donations provide 90 percent of U.S. charities' budgets, she said.
Most of the 50,000 charities active in Russia avoid the news media and labor
largely in obscurity because of the public mistrust.
``In Russia, people look askance at charity appeals. They consider them some
sort of scheme,'' said Svetlana Ivanchenko, a lawyer who works at Novy Dom
(New Home), an organization that offers job referrals and legal and
psychological counseling to the homeless.
Amid all the suspicion, many charities do all they can to avoid even the
perception of abuse. St. Vladimir's asks donors to directly pay specific bills
on the church's behalf, or provide tools and machinery that can keep its
construction and feeding programs going.
The private Russian Aid Fund has taken a similar approach during its two-year
existence, coordinating the delivery of more than $620,000 worth of aid but
avoiding any contact with donated money, director Lev Ambinder said.
The fund was born out of the Soviet tradition of letters to the editor
highlighting corruption, injustice and just plain need.
``With a letter, you could get a powerful bureaucrat fired, get someone an
apartment, restore someone their job if they were fired unfairly,'' said
Ambinder, who worked as a correspondent for a number of newspapers across
Soviet Russia.
Each month, Ambinder and his assistant pore through hundreds of letters in
their attic office at the publishing house that puts out Domovoy (House-
Spirit), a slick monthly magazine aimed at well-off women. They choose the
most compelling letters, call local welfare agencies to verify the contents,
and publish about 10 in each issue.
The letters are written on behalf of individuals or families: a child who
needs money for a prohibitively expensive operation; a paraplegic who wants a
computer so he can make a living as a bookkeeper; food and clothing for
children orphaned by a mine disaster.
Ambinder had expected that with the economic crisis, ``we would take a serious
hit and all this would end.''
But while Domovoy is now giving the fund just two pages instead of four
because of a drop in advertising revenue, Ambinder hasn't seen a falloff in
Almost all of the donations are made anonymously, he said.
That aspect is part of Russia's Orthodox Christian tradition.
"According to our faith, every act of charity will be blessed by God, and he
will forgive our sins in return,'' said Father Yevmeny, the priest who heads
St. Vladimir's homeless program.
``But we also have this understanding: If you do a good deed and then tell
everyone what you did, the good deed evaporates.''


Business Week
December 7, 1998

For the last five years, the U.S. government and international financial
organizations have sent scores of Western bankers to Russia to teach former
Communists how to make commercial loans. They patiently explained concepts
such as transparency and due diligence to Russians who had never studied
Western-style accounting.
But Western bankers didn't follow their own advice. Over the last two
years, foreign banks lent $12 billion dollars to Russian companies, which now
cannot make payments. They lent to companies that invested loan proceeds in
risky Russian bonds and squandered money on shaky investments.
For their part, Russian companies didn't worry about how to repay the
loans. They thought that the 1997 stock-market boom would last forever. When
stock prices started falling a year ago, banks stepped in with offers to
underwrite Eurobonds or grant commercial loans. The party ended in August when
the Russian government devalued the ruble and defaulted on domestic debt.
Borrowers couldn't keep up payments. Now Western banks and Russian companies
are engaged in restructuring talks.
Both sides were done in by greed. Western banks made the same mistakes in
Russia that they made in Asia. Russian companies thought they could get easy
money without any accountability. They wasted money that should have been used
to improve productivity. Now, both sides must take a hit. Western banks have
enough resources to recover quickly. But Russian industry faces tough times
for years to come.


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