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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

December 1, 1998   
This Date's Issues: 24972498 

Johnson's Russia List
#2498
1 December 1998
davidjohnson@erols.com

[Note from David Johnson:
1 Moscow Times: Nina L. Khrushcheva, Toothless Old Hatreds.
2. The Electronic Telegraph: Hugo Gurdon, US and Russian recruitment 
drive for spies.

3. Sovetskaya Rossiya: Generals, Admirals Urge START-2 Changes.
4. CNN: Russians Cope With Economic Crisis.
5. The Sunday Times (UK): Matthew Campbell, 'Logic bomb' arms race panics 
Russia.

6. IMF's John Odling-Smee: WHAT WENT WRONG IN RUSSIA?
7. Itar-Tass: Stroyev Urges Panel to Elect Russian President.
8. Moscow Tribune: John Helmer, JUMPING THE GUN.
9. Reuters: Russia's Chubais says liberal reforms to prevail.
10. Reuters: Film makers rescued from Russian Arctic.]

*******

#1
Moscow Times
December 1, 1998 
Toothless Old Hatreds 
By Nina L. Khrushcheva 
Khrushcheva is deputy editor of the East European Constitutional Review at the
New York University School of Law and a senior fellow at the World Policy
Institute of the New School for Social Research. 

First it was the Jews. Then the Romanovs, the nobility and the kulaks. After
1991, it was Lenin and the communists. Now, it seems, it's the Jews again.
Like history in the Karl Marx aphorism, Russian hatreds repeat themselves.
Luckily, the rest of that saying also applies, for Moscow's most recent bout
of anti-Semitism is a case of history repeating itself not as tragedy, but as
farce. 
The October Revolution of 1917, with its attractive slogans of
internationalism, multiculturalism and ethnic equality, was a liberating time
for Russian Jews. It didn't last long. With Lenin's death in 1924, Stalin
embarked on another round of chest thumping for "Russia's Greatness." 
This chauvinistic period, however, lasted for more than six decades and was
marked by quotas for all those with not-quite-Russian-sounding names. Jews in
particular were restricted in their numbers at universities, research
institutes, the foreign service and in government. 
The August Revolution of 1991 appeared to undo much of the anti-Semitic
nastiness. Other nationalities, including people of Jewish origin, began to
appear in the political spotlight: Anatoly Chubais, Alexander Livshits, Boris
Nemtsov, Grigory Yavlinsky and Sergei Kiriyenko among the reformers; Boris
Berezovsky and Vladimir Gusinsky among the new plutocrats; and Vladimir
Zhirinovsky among the ranting would-be fascists. 
Russia, freed from its ethnic and mental straitjacket, was letting its most
resourceful, entrepreneurial, vibrant and, yes, cynical citizens climb to the
top. 
With so many "different" names bestriding society, it is no surprise that some
Russians, reared on the endemic paranoia of communism, smelled a conspiracy. 
The hysterical Zhirinovsky, denying his own roots, said, "Jews are the most
powerful, the most talented and the richest" and so were able to take over in
1917 and again after 1991. Communists, too, insisted that the Jews were
conspiring once again to ruin Russia. 
So General Albert Makashov's recent remark that "the Russian government should
impose quotas on hiring non-ethnic Russians" was surprising only for the time
it took communists to trot out this old line and because the echo was so
feeble. 
The two leading "nationalist" candidates for president in 2000 - Krasnoyarsk
Governor Alexander Lebed and Moscow Mayor Yury Luzhkov - were conspicuous in
not picking up this old battle cry. 
That Communist Party leader Gennady Zyuganov didn't immediately rebuke
Makashov and that the State Duma took a while to pass a resolution against
stirring up ethnic conflicts (not mentioning Makashov by name) probably
reflects mental inertia rather than outright support. For many members of the
lower house of parliament, there yet remains the notion that only they
represent the country. 
Here the old Leninist idea is in play: The party isn't just part of society,
it is society. As for Zyuganov, he couldn't publicly disagree with a party
member, again on hoary Leninist grounds: Division within the party will bring
an end to the party. 
What is surprising is the reaction at home and abroad to Makashov's tantrums.
Over a span of more than a month, television shows and newspapers in Russia
and much of the West have been discussing, condemning and thus reinforcing the
incident. 
This sharp focus on Makashov's remarks has, however, smoked out what may be
the real target of communist rage: the media. 
Another Communist Duma deputy, Alexander Kuvayev, the first secretary of the
city of Moscow's Communist organization, called for the formation of a special
organization to deal with journalists who had "sold themselves to the regime
and have become the enemies of the people." 
This time Zyuganov reacted quickly, listening to the voice of reason among his
party peers, and issued a resolution that "prosecution is not the tool
Communists should exercise, and the Communist Party is a party of the future,
not a party of revenge." 
The saddest part of this rhetoric of hate is not that a pogrom is imminent but
that mindsets have changed so little for so many in Russia. People continue to
think in ways typical to authoritarian or totalitarian regimes, where blaming
others is the standard escape for your own inadequacies and where anyone who
is even the slightest bit different may be an enemy. 
So the search for scapegoats proceeds, not in earnest and with energy, but as
a reflex, the death throes of the old ways of doing things. The cries of the
anti-Semites belie the fact that the man the Communists now support as prime
minister, Yevgeny Primakov, who has not published his ethnicity but is widely
believed to be of Jewish origin. 
What is important is not the rants of men like Makashov and Kuvayev, but the
ditherings of Zyuganov and the general silence of the Duma - a sign that, at
the millennium, even the Communists recognize that the vulgar old tricks are
not enough. 

******

#2
The Electronic Telegraph
30 November 1998
[for personal use only] 
US and Russian recruitment drive for spies
By Hugo Gurdon in Washington 

A NEW golden age of spying has begun, with America and Russia reversing
recent cuts and hiring more agents to snoop on each other.
Having concluded that the collapse of Soviet communism did not usher in a
peaceful "new world order" but an acutely dangerous one, Congress has given
the CIA an estimated extra £180 million to reverse declining staff levels. At
the same time, Moscow is massively increasing espionage activity in America.
A senior Western diplomat said: "The surge in Russian espionage is
astonishing. It's like the good old days of the KGB." A CIA officer said:
"There was a hiatus for most of the decade, but guess what, we're back in
business." The precise number of Moscow's new agents is not known, but more
and more Russians are turning up in America under the cover of nondescript
jobs. 
There is, by contrast, nothing secret about the CIA's drive to recruit 30 per
cent more staff. Advertisements in newspapers show good-looking young men and
women under the words "integrity", "courage", "intellect" and "patriotism",
and career-minded readers are asked: "Do you have what it takes?" CIA staff
level levels have fallen from a Cold War peak of 22,000 to 16,000 and it has
meant corners being cut. 
Commenting on Russia's current economic and social crisis, one analyst said:
"The Russians see themselves losing their grip and influence, losing their art
works to foreigners, losing ground. The increased espionage is a reaction to
all that." 
Republicans believe that President Clinton has "hollowed out" the intelligence
establishment and they intend to change this. Despite its many recent fiascoes
- the CIA failed, for example, to warn Washington of India's nuclear tests -
the agency still has enormous cachet and is successfully recruiting at the
country's leading universities.

*******

#3
Generals, Admirals Urge START-2 Changes 
Sovetskaya Rossiya
19 November 1998
[translation for personal use only] in Russian 19 Nov 98 p 3

Military Leaders' Appeal to the State Duma of the Russian Federation

Esteemed State Duma Deputies! 

We, Soviet generals and admirals, veterans of the Great Patriotic War, who
have held important posts in the Armed Forces of the Soviet
Union and have worked for the development of the Soviet Army and Navy and
the strengthening of our country's defense, address this
appeal to you. 

Our appeal was prompted by the fact that the RF Government, the State
Duma, and the RF Ministry of Defense are now discussing the
question of ratifying the START-2 treaty. Since this is a question of life
and death for our state as an independent country, we cannot
remain silent and not express our opinion. We believe that our moral right
to do so cannot be questioned by any of you. 

We are greatly concerned at the position of First Deputy Chairman of the
Russian Government Yu.D. Maslyukov. In an interview to
Krasnaya Zvezda on 20 October 1998, he advocates the fastest possible
ratification of the START-2 treaty by the Duma. "If we reject
START-2 now, the world will not understand us." A question immediately
arises: "Who will not understand? US and NATO leaders or
our people?" We, on the other hand, maintain that if START-2 is ratified
by the Duma in the form in which it was signed, Russia's
security will be placed in jeopardy and our people will indeed not
understand you. 

START-2 provides that the Americans keep in full their nuclear potential,
mainly concentrated on nuclear submarines. The structure of
US strategic offensive forces (sea-, air-, and land-based) remains
unchanged and targeted on Russia. 

Moreover, the treaty does not cover sea-based cruise missiles of any range
based on nuclear submarines, ships, and bombers. Because
of this, US underwater missile carriers armed with intercontinental
ballistic missiles, as well as surface ships with cruise missiles, will
always be able to launch a rapid strike at the territory of Russia from
different directions. 

Besides, the treaty does not envisage any reductions in forward-based
nuclear arms stored at numerous US and NATO military bases
close to Russian borders. Hence, the West's so-called tactical nuclear
arms become strategic arms with respect to our country. 

Keeping in mind all of the above, it does not make sense, nor is it
necessary, for the United States to maintain and improve its land-based
ICBMs. This is why it is agreeing to their reduction, demanding the same
of Russia. 

As to our country, START-2 completely bans us from having land-based heavy
SS-18 ICBMs with multiple independently targeted
re-entry vehicles (MIRVs). This is the only effective deterrent against
the United States, capable of penetrating its air-defense system
and delivering a response strike at its territory. According to the
treaty, our heavy ICBMs must be destroyed, and all other ICBMs with
MIRVs replaced by single-warhead carriers, which will make it considerably
easier for American air defenses to foil them. 

START-2 fundamentally changes the structure of Russia's strategic nuclear
forces (SNF) and forces us to shift our main nuclear efforts
from land-based ICBMs to submarine-based ballistic missiles. This is bad
for us from both a military and economic standpoint. Russia's
sea-based strategic nuclear forces, unlike the American, do not have free
access to the expanses of the Atlantic and Pacific Oceans,
which makes it difficult to use them as the main SNF component. 

Bringing the SNF structure in Russia into compliance with START-2 will
require of us exorbitant and essentially impossible financial and
material expenditures. As a result of compliance with the treaty, we lose
the most effective launch silos and are left with obsolete
missile-carrier submarines. 

Overall, START-2, after its ratification and Russia's compliance, fully
ensures US security, making its territory impenetrable to a response
nuclear strike. It is precisely for this reason that the US Congress
ratified this treaty so quickly. Russia's security in this case is nil,
and
hence the United States will be in a position to dictate to us any line of
behavior favorable to it and choose "punishment measures" for
Russia just as it does for Iraq and Yugoslavia, while remaining completely
safe. 

START-2 may be ratified if substantial corrections are made to it. The
condition should be an agreed-upon quantity of nuclear
components on all types of carriers, while SNF structure and carrier types
must be set by each side independently, taking into account
the potential and the specifics of geostrategic position. Essentially, in
the current conditions of NATO expansion and the bloc's armed
forces approaching Russia's borders, as well as its increased
aggressiveness, we need a new approach to START-2 and to fundamentally
rewrite it on the basis of our interests. 

We are ready to take part in this work. 

[Signed] Army General V.F. Yermakov, Fleet Admiral G.M. Yegorov, Fleet
Admiral I.M. Kapitanets, Colonel General V.A. Achalov,
Colonel General F.F. Gayvoronskiy, Colonel General A.S. Goryainov, Colonel
General V.M. Kaskovskiy, Colonel General A.M.
Makashov, Colonel General I.M. Maltsev, Colonel General V.S. Nechayev,
Colonel General M.N. Tereshchenko, Colonel General V.P.
Shilovskiy, Colonel General G.P. Yashkin, Admiral V.V. Mikhaylin, Admiral
V.I. Panin, Admiral N.I. Khovrin, Lieutenant General N.K.
Beloborodov, Lieutenant General V.A. Bogdanov, Lieutenant General V.V.
Gorbachev, Lieutenant General V.V. Demyanenko,
Lieutenant General G.K. Dubrov, Lieutenant General Yu.I. Duk, Lieutenant
General Yu.N. Kalinin, Lieutenant General G.I. Kireyev,
Lieutenant General V.I. Konstantinov, Lieutenant General K.Ye.
Kortelainen, Lieutenant General A.I. Kuzmenko, Lieutenant General
A.A. Kurushin, Lieutenant General I.G. Novoseletskiy, Lieutenant General
Yu.I. Pankratov, Lieutenant General V.A. Ponomarev,
Lieutenant General V.M. Prilukov, Lieutenant General V.R. Ryabtsev,
Lieutenant General G.F. Samoylovich, Lieutenant General V.V.
Solovyev, Lieutenant General O.A. Spirin, Lieutenant General M.G. Titov,
Lieutenant General Yu.L. Fotinov, Vice Admiral V.V.
Vazhenin, Vice Admiral S.P. Vargin, Vice Admiral R.A. Golosov, Vice
Admiral V.P. Denisov, Vice Admiral M.M. Krylov, Vice Admiral
L.P. Kucherov, Vice Admiral V.T. Losikov, Vice Admiral L.A. Matushkin,
Vice Admiral Yu.F. Spirin, Vice Admiral A.M. Starikov, Major
General I.P. Abramov, Major General E.I. Alekseyev, Major General K.A.
Balakirev, Major General M.A. Borshchov, Major General
N.G. Ganotskiy, Major General V.S. Gerasimenko, Major General B.S.
Golyshev, Major General V.V. Gradoselskiy, Major General
Yu.V. Ditin, Major General V.D. Zabolotin, Major General V.P. Zaplatin,
Major General N.S. Kazavayev, Major General P.M.
Kalmykov, Major General V.M. Kanayev, Major General Yu.V. Koloskov, Major
General Ye.I. Kopyshev, Major General V.I. Kopyev,
Major General E.A. Krasnorutskiy, Major General N.N. Kuznetsov, Major
General V.V. Kurbatov, Major General V.K. Lozovoy, Major
General V.P. Lysov, Major General V.A. Manshikov, Major General V.K.
Morozov, Major General M.V. Osin, Major General P.F.
Pavlenko, Major General I.G. Padchenko, Major General P.T. Plakhotnyuk,
Major General V.N. Skabelkin, Major General V.N.
Smirnov, Major General I.P. Smirnov,, Major General V.I. Sosnin, Major
General V.F. Suslov, Major General D.P. Syrkashev, Major
General V.P. Tkachenko, Major General L.V. Fomenko, Major General N.A.
Chebotarev, Major General A.A. Chernyavskiy, Major
General A.A. Chinarev, Major General Yu.V. Yarygin, Rear Admiral N.N.
Belozer, Rear Admiral V.F. Berezin, Rear Admiral V.I. Bets,
Rear Admiral A.G. Vinnik, Rear Admiral V.M. Guryanov, Rear Admiral G.A.
Deryugin, Rear Admiral A.M. Yevdokimenko, Rear
Admiral A.I. Karlin, Rear Admiral G.G. Koptev, Rear Admiral V.P.
Polikarpov, Rear Admiral A.P. Prisyazhnyuk, Rear Admiral V.M.
Sivogarkov, Rear Admiral I.K. Tataritskiy, Rear Admiral V.P. Udalov, Rear
Admiral N.N. Kharlamov. 

******

#4 
CNN
World Report
Russians Cope With Economic Crisis
Aired November 29, 1998 - 2:40 p.m. ET 

ASIEH NAMDAR, CNN ANCHOR: Russia's economic pinch is being felt from
Moscow to the eastern port city of Vladivostok. 
RALPH WENGE, CNN ANCHOR: This week, the streets of Vladivostok were closed
off by protesting residents, who haven't received heat or hot water for days. 
NAMDAR: Vladivostok marks the eastern end of the Trans-Siberian Railway
which spans more than 9,000 kilometers across Russia. 
On a recent journey along this railway, Britain's ITN saw how ordinary
Russians are dealing with economic crisis. 
(BEGIN VIDEOTAPE) 
GABY RADO, ITN REPORTER (voice-over): All good things come to end. For the
Nikitienko family, the good thing lasted six cramped days. They picked up
granny in caucuses more than 4,000 miles and five times zones away, and
traveled via Moscow. 
(on camera): We have just got off the train at a stop just outside
Irkutsk, which is where the Nikitienko family live. They very kindly invited
me to go and look at their apartment, which standing nearby, I'm going to
help them back with their luggage. 
(voice-over): A crisp Siberian morning, 15 degrees below. Their flat is in
a reasonably well built housing estate by Russian standards. 
(on camera): I have got the large toy tiger here. 
(voice-over): Slava Nikitienko, a fireman, hasn't been paid since July.
Even when he gets a wage, it's only 40 pounds a month. How their family and
millions of others like them survives, is one of the enduring mysteries of
Russia. The answer is to do with cooperation -- getting things via friends
and contact with family also chipping in. But it's all getting worse. 
ALEXANDRA ROMANOVA (through translator): Because of the decrease in
salaries and pensions, the crime level rise considerably in area, because
people are -- they're struggling to survive. Most of them grow their own
vegetable and fruit. But some people literally starve, and still and -- try
to manage as well as they can. RADO: The Nikitienkos are fortunate by
Russian standards. They live in Siberia for a start. There are always
subsidies to make life bearable, though even that system is collapsing.
Slava took (UNINTELLIGIBLE) fire station. We walked past the hulk (ph) of
fire engine on caterpillar tracks bought from Canada. 
UNIDENTIFIED FEMALE: Well, the moment it was sparked here, everything
started to be stolen from it. 
RADO: Who stole the things from you? 
UNIDENTIFIED FEMALE (SPEAKING IN RUSSIAN) 
SLAVA NIKITIENKO (SPEAKING IN RUSSIAN) 
UNIDENTIFIED FEMALE: Nobody knows. Just everybody who was passing this
car, which by the way, costs half a million dollars. 
RADO: Wow. 
UNIDENTIFIED FEMALE: Just helped himself, or herself to bits and pieces of
this car. 
RADO (voice-over): His wife blames the culture of corruption on Moscow,
and wants the Irkustk legion to run its own affairs. 
SVETA NIKITIENKO (through translator): We have nothing do with Moscow. Our
business mind to go in there -- it's only them who make money out of it.
Moscow gives us nothing, only takes from us. 
RADO: Later, the Nikitienko family got together again for the tiger to be
unveiled. 
Real life tigers inhabit these virgin forests. The idea of a vast region,
rich in timber and minerals, like that around Irkutsk having independence,
is gaining support. 
I went to the shores of nearby Lake Bical (ph). Although the climate is
harsh and fishermen, at present, just scrape a living, the potential of the
untapped resources is huge. By rights, Russia should be world's richest
country. People are waking up to gap between that fact, and reality. Those
who care about the great natural treasure in Siberia blame the creaky,
corrupt leadership in far away Moscow, which just takes and gives nothing back. 
VYACHESLAV KUDRYAVTSEV: We are all, obliged to Moscow. It's such a strange
-- very strange system. I cannot understand it. 
RADO (on camera): For it's the capital city. 
KUDRYAVTSEV: It's the capital -- a mafia (ph) city. 
RADO: A mafia city? 
KUDRYAVTSEV: Yeah. 
RADO: Is there sign that there are clear and concerned people coming up
through the ranks? 
KUDRYAVTSEV: Our governors, how to say -- how to call them, came from the
Soya (ph) times, and still they don't understand what we need -- really
need. We should have new politicians. We have new everything, I think. 
RADO (voice-over): On my way across Russia, I've come across people
disgusted with corruption; people with a sense of helplessness; also those
who think the economic crisis might have a cleansing effect. Here in
Siberia, there is more of a sense of independence, and pride in the nation's
resources. 
(on camera): Russia, in some ways, seems never to change. But in the eight
years since I have been coming here, people have become far more aware of
what's gone wrong around them, and why. And perhaps that's not a bad way of
ending Russia's most violent century. 

*******

#5
The Sunday Times (UK)
November 29 1998
[for personal use only]
'Logic bomb' arms race panics Russia 
by Matthew Campbell 
Washington 

FEARING it has slipped behind America in an arms race involving secret
weapons of the future, Russia is proposing an international treaty to
control "information warfare", an invisible but deadly threat that could be
used as effectively as missiles and bombs. 
It may sound like science fiction, but around the world military planners
are acknowledging that "cyber warfare" will play an important role in
future conflicts. Not since the advent of nuclear bombs half a century ago
has the world confronted weapons with such potential for altering the way
in which warfare is waged. 
Already secret army research departments in Russia and America are racing
to perfect "logic bombs" and computer viruses designed to create havoc in
an enemy country by destroying computer networks controlling weapons
systems, financial transactions and even traffic. 
Igor Ivanov, the Russian foreign minister, wrote to Kofi Annan, the United
Nations secretary-general, last month warning that the effect of
information weapons "may be comparable to that of weapons of mass
destruction". 
In another development the Russians presented a proposal for "international
legal regimes to prohibit the development, production or use of
particularly dangerous forms of information weapons" to the UN. 
According to Peter Feaver, an information warfare expert at Duke
University, North Carolina, the secrecy and lack of official guidelines
surrounding the research are reminiscent of America's early years as a
nuclear power "before the political leadership understood what nuclear
weapons could do". A military official once told him: "If we waited around
for political guidance, we wouldn't be able to do anything." 
The full extent of America's information warfare capabilities is a closely
guarded secret. According to some reports, the American military has been
developing ways of implanting "worm viruses" in foreign computer networks
to spread confusion. The Pentagon fears that Russia, China, Iraq and Libya
have similar programs. 
An announcement by President Bill Clinton in May of measures to build
ramparts against the threat of a "digital Pearl Harbor" made no mention of
America's capacity to conduct its own attacks. But George Tenet, director
of the Central Intelligence Agency (CIA) has told Congress: "We're not
asleep at the switch in this regard." 
He testified last year that information warfare techniques were already
being deployed in the battles against terrorism and drugs. Computer hacker
technology, he said, had been used to disrupt international money transfers
between Arab businessmen supporting suspected terrorists. 
Clinton has pledged to make America safe within five years from
"asymmetrical" threats, a term used by experts to describe the theoretical
danger of a relatively weak and insignificant adversary taking on - and
defeating - a superpower with a few taps on a laptop computer. America's
extreme dependence on computer technology makes it the most vulnerable
nation on earth. At the same time, however, its technological advantage
renders traditional adversaries wary. 
Russian anxieties about being left behind in the information weapons race
have been heightened by reports that the CIA has sabotaged some computer
systems exported from America to the former Soviet Union. This involved
putting "bugs" in computers that could be activated by CIA hackers
thousands of miles away. 
The Russians are pressing for a UN debate about information warfare, urging
Annan to submit a report at the 54th session of the general assembly next
year. 
"We cannot permit the emergence of a fundamentally new area of
international confrontation, which may lead to an escalation of the arms
race based on the latest developments of the scientific and technological
revolution," Ivanov wrote to Annan. 
With its political instability, low military morale and lack of resources,
Russia is in no position to compete with America in the field of high
technology. It has already fallen behind in tackling the "millennium bug",
expected to cripple computer systems at the start of the next century. 
Russia's ineffectiveness in making its imported computer systems immune to
the bug has raised fears in the White House that the Kremlin might
misinterpret any disruption over the millennium as an information warfare
attack and retaliate with nuclear weapons. 
A US defence department report earlier this year described how an
information warfare attack might unfold. It starts with an unexplained
power blackout in a large city. Telephone systems across the country become
paralysed. Freight and passenger trains collide. Civilian air traffic
control systems go haywire. Malfunctioning pipeline-flow control mechanisms
trigger oil refinery blasts. 
As alarm spreads, "logic bombs" disable the financial system, disrupting
money transfers and causing stocks to plunge on world exchanges. Automatic
teller machines randomly credit or debit customers' accounts. Sensitive
weapons systems malfunction. 
"[An] information war has no front line," says the study. "Potential
battlefields are anywhere." 
In a military exercise involving senior Pentagon and intelligence officials
last year, a scenario was mapped out in which India and Pakistan were on
the verge of using nuclear weapons. 
The participants were asked whether America should interfere, using
information warfare techniques to alter the capability of both countries so
that neither had a clear picture of the battlefield. The debate was
inconclusive. 

******

#6
http:/www.imf.org
WHAT WENT WRONG IN RUSSIA?
A top IMF official says the West's generosity may have only made the
situation worse.
He calls for tougher standards in future lending. 
By John Odling-Smee
Director of the International Monetary Fund's (IMF's) European II Department,
which supervises the progress of Russia's IMF-sponsored stabilization program.
Central European Economic Review
November 1998
Reproduced with permission of the Central European Economic Review,
©1998 Dow Jones & Company, Inc. All Rights Reserved Worldwide

On Aug. 17, a reformist Russian Government and the Central Bank jointly
announced an extraordinary package of measures. In a single stroke, they
abandoned their commitment to a broadly stable exchange rate. And they
unilaterally froze some of the country's external and internal debt. The
move dealt a major blow to the reform effort and sent shockwaves through
global capital markets. These measures came less than one month after the
International Monetary Fund's Executive Board had approved an $11 billion
financing package to support the Russian reform effort (of which $4.8
billion was disbursed before the program went off track).
What went wrong? And what are the chances that the reform process will
restart? 
The immediate cause of the crisis was the collapse of the financial
markets' confidence in Russia. By July, the Russian government had lost its
ability to roll-over maturing treasury bills when they matured. Investors
were growing fearful of the default and devaluation, and they were opting to
pull their money out of their ruble-denominated investments instead of
routinely reinvesting them, as they had done up to that point. Problems
were mounting in the banking sector as well, mainly because asset prices
were falling. And global investors were growing increasingly risk-adverse
after the spectacular collapse of some once dynamic Asian economies. Taken
together, these developments led to a mounting conviction that the fiscal
situation in Russia could be unsustainable.
After six years of effort, the push to scale back public-sector spending
and gathering more taxes had not progressed as quickly as had been hoped. To
avoid inflationary financing, the government's budget deficit was being
covered through external and internal borrowing. As a result, the interest
burden on the budget was growing ever larger. Nevertheless, it should be
appreciated that by mid-1998 the government had made significant progress in
cutting its reliance on domestic borrowing. Improvement should have been
enough to permit the government to avoid defaulting on its treasury bills.
But the loss of confidence was already too great. In August, investors
refused to continue rolling over their treasury bill investments. Their
decision pushed the government into default.
The fundamental question is not why investors got nervous, but why the
underlying fiscal problems proved so intractable. The Russian government
certainly did not lack advice and technical assistance, which were
generously provided by the IMF, World Bank, and many bilateral donors
(especially from the US and the EU).
The bottom line is that Russia's problem in financing its government
spending was really a symptom of a deeper malaise. In particular, there was
insufficient agreement and will among the leadership of the country -
broadly defined - to impose the fiscal discipline needed to pursue
successful reforms. The Government granted widespread tax exemptions to its
friends, and failed to pursue tax evaders aggressively, especially large
enterprises and the energy sector. This policy, together with the
government's willingness to run-up arrears, contributed in an important way
to a culture of non-payment and barter, which spread throughout the economy
and made tax collection even more difficult.
Even when Government decisions were taken and supporting legislation
passed, difficult measures were still often not being implemented by
regional governments. Municipalities often wanted little more than to keep
their local businesses afloat.
However, it must be emphasized that prior to the Aug. 17 decisions, the
Russians were making serious progress in stabilization and reform. The
inflation rate had fallen to an annual rate of about 7% by mid-1998, and
there were signs of some modest growth in gross domestic product as early as
1997. There was also movement on the structural front. The Central Bank had
developed a serious capacity for implementing monetary and exchange-rate
policy and the Ministry of Finance was in the final stages of putting a
treasury into place to improve expenditure control.
At the same time, it should also be noted that many of the structural
problems encountered in Russia - especially the weak government and
corruption - could be said to be inherent in the process of institution
building in any transition economy.
With the process moving forward, albeit slowly, and a declared
willingness on the part of the Russian Government to implement stabilization
and reform measures, the international community deemed continued support
warranted.
The key lesson from the crisis is the central role played the need to
make rapid progress in scaling back the size of the state. This involves
major and often painful reform of the budget on expenditure side - including
rationalizing social benefits, restructuring the military, and eliminating
subsidies to inefficient state enterprises. On the revenue side, it involves
ensuring that the natural resource sectors and the newly emerging
enterprises pay their fair share of taxes.
More broadly, it requires a willingness by the government to enforce
financial discipline in its own operations and throughout the economy. This,
in turn, will lead to the fundamental micro level restructuring that soft
budget constraints postponed.
In an environment like the one in Russia today, external financial
support is not enough. The crucial ingredient is a government and parliament
genuinely committed to structural reform and willing to implement measures
that may be politically unpopular. In other words, the government must be
prepared to assume full "program ownership". In this sense, it is clear that
the ready availability of international financial support was only partly
effective in encouraging the reform process in Russia. Regrettably, it has
also permitted the postponement of some of the tough measures necessary to
plug fiscal gaps.
Meanwhile, private investors in both the Russian equity and bond markets,
poured many billions of dollars into Russia. This also served to reinforce
the feeling in Moscow that the economy could be made successful without a
need for deeper structural reforms. Indeed, some Russian politicians even
thought that the reform effort spearheaded by the IMF could be abandoned
altogether, since sufficient finance from private sources was readily
available with no strings attached. 
Despite the severe setback to both international and domestic credibility
occasioned by the Aug. 17 measures, significant headway has been made in
building a market economy--although it is not always apparent given the
turbulence today. Progress has also been made in creating a political class
with a stake in the continuation of the reform process. This allows for some
confidence that a serious determination to press ahead with transition will
return to Russia.
As for the IMF, future programs will have to tilt the balance sharply in
the direction of actual measures to improve the fiscal situation, and not
just promises that these measures will be taken in the future. The role of
borrowing, especially short term borrowing, to fill fiscal gaps will also
have to be rethought so that governments do not make themselves vulnerable
to sudden changes in investor sentiment. In Russia, serious structural
reforms will also need to be implemented, including genuine transparency in
the privatization process, improvements in corporate governance, and the
creation of an effective bankruptcy mechanism. Finally, the leadership of
the country must demonstrate genuine "ownership" of the next reform program
and be prepared to undertake serious, sweeping, and potentially unpopular
reform measures. 

*******

#7
Stroyev Urges Panel to Elect Russian President 

Moscow, 26 Nov (ITAR-TASS) -- Federation Council Speaker Yegor Stroyev
reiterated that he shared the view that the Russian Constitution is not an
icon and is subject to reasonable change, a statement dating back to the
times of President Boris Yeltsin's cardiac surgery.
Stroyev said in an interview published by Komsomolskaya Pravda
newspaper on Thursday [26 November] that the Constitution can and should be
changed by convening the Constitutional Assembly for it.
He said he agreed that Russia's presidential election system as it is
should be changed.
"Today, no sensible person is left in doubt that our Constitution
needs correction. Our state authority system is hamstrung like cabbage in
the autumn," Stroyev said.
"On the one hand, there is a stream of accusation addressed to the
president, that he has huge powers that no president in the world has. On
the other, these powers end at the Kremlin wall. There is no further
vertical of executive power," he said.
"Hence is the obvious failure with fulfillment of decrees, laws and
ordinances and the prowess of clan structures - political, nationalist,
mafiose," Stroyev said.
He cited as an example the parliament's twice passing an anti-
monopoly law on alcohol sales which was "not signed twice", to advantage of
crime mobs and disadvantage of the state.
"So to avoid such discomfitures, the system of state authority should
be designed in such as way that concrete issue are solved closer to real
processes, to the people. Therefore, a vertical of power is needed
envisaging a separation of competences and ensuring single government of
the country, which would allow not to bring all issues to the premier or
the president, but to raise the aurhority of the local leadership," he went
on to say.The Constitution has other "blank spots" - "the procedure for
enactment of federal laws is not laid out", "functions of the parliament
are unjustifiably tapered - it is deprived of the right of control",
"nothing protects the government - the procedure for its appointment and
dismissal should be changed".
Stroyev cited as another reason for changing the presidential election
system the financial considerations and public calm.
He said the pre-election presidential campaign "is accompanied by
uncontrolled spending of giant sums" and "the existing system of electing
the head of state engenders rival structures that are ready to go into any
option, including a forcible one".
"You don't like the elections (of the president) by the Constitutional
Assembly - for God's sake. The world has several systems for electing the
head of state. For example, by "members of parliament and a collegium of
electors" or by a "collegium of electors only", Stroyev said.
Which option suits Russia, "our present-day reality - that is a cause
for pondering", he said.

*******

#8
Date: Tue, 1 Dec 1998 
From: helmer@glas.apc.org (John Helmer)

From The Moscow Tribune, November 27, 1998
JUMPING THE GUN
Bt John Helmer

Novice law students used to get their first introduction to
the concept of a tort by an old case in which a child's eye was blinded by
a firecracker carelessly let off at a fair. 
For the court to hold someone liable for the tort -- a civil rather
than a criminal wrong -- intention to do harm had to be proved; or failing 
that, proof the person playing with the firecracker could have, and should 
have, anticipated the harm that firecrackers, once lit, can cause. 
The killing of Russian parliamentarian Galina Starovoitova a few days ago
was more than a tort. It was a crime. And even novice law students know that 
to charge and convict anyone of a crime, proof of intention is more 
important than establishing a link between the gun and the fatal wound. 
That's what makes it especially difficult in Russia to unravel contract 
killings of the Starovoitova type.
So far, from the outpouring of commentary in the Russian and western press, 
there has been hardly a single lawyer, nor even a policeman, among them. 
There has been a great deal of pseudo-legal reasoning, and the nastiest
possible innuendos have been stretched between the paltry evidence to the 
outcome. Reuters elevated the importance of the matter to the deaths
of Princess Diana and President John Kennedy. The New York Times was
sure the crime was a political assassination. The Kremlin spokesman,
Oleg Sysuev, explained that the killing of a politician was "political
by definition". A Washington academic judged that "thieves do not
typically leave behind automatic weapons with silencers."
From these faulty premises, it wasn't far for the firecracker of
opinion to be tossed by ex-government leaders, Anatoly Chubais and Yegor 
Gaidar. Ms.Starovoitova's death, they claimed, was a showdown between "us" 
and "them" -- between "our people", Mr.Chubais said, and "Communists and 
bandits." "The scoundrels wanted to scare us," added ex-deputy prime 
minister Boris Nemtsov. 
Like Ms. Starovoitova, they are out of power, and have little chance in 
Russia's current economic straits of recovering it. That's because the 
overwhelming majority of Russians regard them as to blame for bringing on the 
economic disaster, and also for profiting personally from it.
The Heritage Foundation made the mistake of identifying the machinegun
that was one of the weapons used as a Kalashnikov. A London newspaper
corrected that by identifying two weapons, a Beretta pistol, and
an Argan-2000 machinegun. The latter, according to the English report,
was an American-designed weapon that was also manufactured under licence
in Serbia. Confident the murder weapon was from Serbia enabled
the English reporter to draw a double-bunger link between Russian supporters
of Serbia and whoever contracted for Ms.Starovoitova's murder.
As even novice lawyers are supposed to learn, a chain of carelessness,
once started, can make the initiator culpable, and liable for the
harm that results -- however indirect the chain of causation.
In the Starovoitova case, it is those who accuse most loudly who may 
ultimately be judged most liable, not for the crime, but for the
tort her death also represents.
If this was a death for democracy, as the accusers say today, then what 
exactly did they call the deaths of not less than 146 people, killed in
October 1993, when tanks and soldiers, on Kremlin orders, fired on the 
popularly elected Russian parliament, illegally dismissed (according to the 
highest Russian court of the time)? 
The media have been quick to add Ms.Starovoitova to the body count of 
Russian parliamentarians killed. But that counts only 6 since 1994. The
much larger number of those who died inside the parliament building in 
October 1993 aren't counted. If Russian politicians like Mr.Chubais and Mr.
Gaidar didn't count them then, they took the risk of lighting a firecracker 
that can change direction unpredictably. That was negligent five years ago. 
It is even more obviously so today.
Only there is no evidence that Ms.Starovoitova's murder was motivated
by any of the political and ideological reasons being tossed around today. 
Since October 1993, not a single murder of a Russian public figure, or
of ordinary folk, has been tracked down to "politics", or even to the
gang Mr.Chubais calls "them". Not unless you count state-ordered killing
(and include the thousands of the Chechnya War casualties). 
Do we need forensic evidence or the firecracker test to identify
who was responsible for those killings? Are those who 
levy charges of responsibility for the Starovoitova crime exempt themselves
from the chain of culpability that led to those deaths? Or do we 
sanctimoniously believe that it was Russian democracy that came out of the 
barrel of a tank-gun in 1993, 1994, and 1995; and something totally 
unconnected that came out of the Argan and Beretta a few days ago?
Those who are lighting firecrackers for Ms.Starovoitova do themselves more 
harm than the good they intend for her memory. They are obliging everyone
to draw the line between the lawlessness and disrespect for human life,
which is everywhere in evidence in Russia today, and those who have
commanded Russian politics since 1991. Those who would deflect that
line are reaching for an alibi.

*******

#9
Russia's Chubais says liberal reforms to prevail

MOSCOW, Dec 1 (Reuters) - Anatoly Chubais, one of Russia's best-known
reformers, said in comments published on Tuesday he was sure the country's
government would become more liberal. 
Asked by the daily newspaper Sevodnya whether Prime Minister Yevgeny
Primakov's government, which advocates greater state control in the economy
and the printing of more cash, meant the end of liberal reforms, Chubais said:
``Not at all.'' 
``There is an iron rule which always is true: the more responsible the
government gets, the longer it stays in power and the more liberal it gets,''
he said. 
He noted a recent example when First Deputy Prime Minister Yuri Maslyukov, a
Communist, proposed to the parliament, among other versions, a tough
monetarist budget plan for 1999, despite opposition demands for more cash to
help the economy. 
``If I only could have proposed something like that,'' said Chubais, who
served in previous governments as finance minister and deputy prime minister.
He now heads Russia's national electricity company. 
``The government has to act so its expenditure matches its revenue, which
means this very 'bourgeois monetarism','' said Chubais, who remains a hate-
figure for many in Russia because of his role in privatising the Communist-run
economy. 
He said his optimism depended on whether lobbying for more spending or common
sense should prevail in the cabinet. 
Under the first scenario, the government would be destroyed soon. A team
keeping up a tough budget would have better chances of survival. 
Primakov recently lashed out at his liberal predecessors, including Chubais,
complaining the West was only criticising his new team because it was
listening to ``false prophets,'' among them ``so-called reformers.'' 
Recalling an effective default on Russia's foreign debt announced by the
government of liberal former Prime Minister Sergei Kiriyenko in August, just a
month after Chubais had won big new Western credits, Primakov said the
reformers ``had cheated the West.'' 

******

#10
Excerpt
Film makers rescued from Russian Arctic
By Adam Tanner

MOSCOW, Dec 1 (Reuters) - Three international film makers were plucked to
safety from an Arctic wilderness island on Tuesday after surviving six weeks
of blizzards while fast running out of food. 
``Everybody is healthy and in good humour,'' Nikita Ovsyannikov, a Russian
wildlife expert on the team, told Reuters by telephone from the town of Pevek
on the Russian mainland, about 350 km (200 miles) north of the Arctic Circle. 
``We were in a warm cabin with enough fuel, quite safe and everybody was
healthy. The only real problem was that we were running out of food.'' 
Ovsyannikov, Australian cameraman Rory McGuinness and Japanese producer
Tatsuhiko Kobayashi were rescued by helicopter from remote Wrangel Island,
where they had been trapped since mid-October, waiting for a break in the
weather....

****** 

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