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Johnson's Russia List


December 9, 1998    
This Date's Issues: 2509  2510  

7:07 AM 12/8/00Johnson's Russia List
9 December 1998

[Note from David Johnson:
1. Reuters: Russia tests new missile, raises military budget.
2. Reuters: Solzhenitsyn, Russia's angry old man, at 80.
3. Financial Times letter: Grzegorz Kolodko, RUSSIA: Polish model 
could solve debt relief.

4. Christian Science Monitor: Fred Weir, Letting foreign banks into

5. The Times (UK): Richard Beeston, Russia's Jews in plea to the West.
6. Moscow Times: Larisa Kosova, ESSAY: Dull Days No More Down at Labor 

7. Janine Wedel: Response to Jeffrey Sachs in How Economists Goofed in
Russia --Chronicle of Higher Education.

9. Kirill Kyz'michyov: Re Marina Price/2508.
10. Financial Times: Carlotta Gall and Andrew Jack Moscow warned of 
inflation rise danger.

11. AFP: Read my lips -- no improvement in taxes until 2000: Russian 

12. Jamestown Foundation Monitor: MEDIA AND POLITICAL CONTINUE TO CHEW 


Russia tests new missile, raises military budget
By Patrick Worsnip

MOSCOW, Dec 9 (Reuters) - The Russian military said on Wednesday it had
successfully test-launched one of its new Topol-M ballistic missiles, a weapon
intended to become the backbone of the country's nuclear arsenal in the 21st
Shortly afterwards, Russia's cash-starved armed forces were reported to have
squeezed extra funds out of the state budget despite a general clampdown on
Both moves came as Russian Foreign Minister Igor Ivanov attended a NATO
meeting in Brussels for talks on the future of Moscow's uneasy relationship
with the Western alliance. 
But they may also have had a target audience closer to home -- those in
Russia's lower house of parliament, the State Duma, who continue to oppose
government appeals to ratify the START-2 strategic arms treaty with the United
Prime Minister Yevgeny Primakov, in an interview published on Wednesday,
pledged a major drive to get the treaty, signed in 1993, ratified this month
if possible. He said it was vital to Russia's security. 
Russia's Strategic Nuclear Forces said in a statement the sixth launch of a
Topol-M, described as a ``strategic missile which has no parallels in the
world,'' was carried out at the Plesetsk site in northwestern Russia. 
It quoted rocket forces chief Vladimir Yakovlev as saying the first contingent
of Topols, known to NATO as the SS-27, would be combat ready this year. Some
are already in test silos. 
``The task, set by the Commander-in-Chief (President Boris Yeltsin) and
Defence Minister Igor Sergeyev, to design and introduce the Topol-M complex,
has been successfully accomplished,'' Yakovlev said. 
Top Russian military commanders see the single-warhead Topol-M as crucial to
the leaner, meaner strategic force dictated by pacts like START-2. Many older,
Soviet-era missiles are now becoming obsolete and potentially unreliable. 
Senior managers of Russia's huge military industrial complex have also said
orders for Topols could create more jobs in the struggling sector and help it
survive a harsh economic crisis. 
Interfax news agency said a cabinet meeting agreed military spending in 1999
would be 3.1 percent of gross domestic product, compared with 2.5 percent
envisaged in an earlier draft. Last year, before crisis struck, Yeltsin
pledged the military would get 3.5 percent. 
Sergeyev told Itar-Tass news agency one theme had dominated the meeting: ``The
desire of the...government to return to the army and guarantee as far as
possible its needs for discharging its responsibilities under the
Both the test and the military spending rise could play well with the
Communist Party and other left-wing groups which have blocked efforts by
successive governments to ratify START-2. 
The Communists have repeatedly asked how the government plans to ensure the
defence of Russia if START-2, which calls for cuts of up to two thirds in U.S.
and Russian strategic warheads, goes into effect. 
In an interview with the newspaper Nezavisimaya Gazeta, Primakov said he and
Communist First Deputy Prime Minister Yuri Maslyukov planned television
appearances to try to persuade the Duma to ratify the pact. 
He said if it did not, the United States would build a national missile
defence system which would rule out further arms cuts sought by Moscow and
threaten Russian security. 
Moves to ratify the treaty have gathered pace in the Duma recently. Committees
have drafted a new ratification bill, but the house dragged its feet again on
Tuesday, postponing for a week a scheduled discussion of the measure. 


FEATURE - Solzhenitsyn, Russia's angry old man, at 80
By Gareth Jones

MOSCOW, Dec 9 (Reuters) - ``Be careful what you struggle for -- you will
probably get it,'' says an old Russian proverb, quoted by British author D.M.
Thomas in his recent biography of Alexander Solzhenitsyn. 
As Solzhenitsyn prepares to mark his 80th birthday on Friday, the Nobel Prize
winner whose harrowing accounts of Gulag life opened the world's eyes to the
brutality of Soviet rule has indeed achieved his life-long goal -- the demise
of communism. 
But the bushy bearded sage, who is also fiercely critical of the brash new
Russia of crooked capitalists and rampant crime, is not the sort to rest on
his laurels. 
From his country retreat near Moscow Solzhenitsyn routinely lambasts, like
some Biblical prophet, the materialism of modern Russian life and derides its
democracy as shallow and flawed. 
His compatriots equally routinely shrug off his lamentations -- he once
described pop music as ``liquid manure'' -- as those of an eccentric old man
whose time has passed. His latest jeremiad, ``Russia in Ruin,'' ran to only an
initial 5,000 copies. 


In a rare television appearance this week in a documentary about his life,
Solzhenitsyn sounded a serene, philosophical note about his own
``It is as though a higher power has been guiding me, guiding me, by means of
blows, misfortunes, discoveries, and life has turned out not at all as I would
have planned it myself,'' he said in the NTV documentary. 
``And yet when I look back, I am grateful to God because I could not have
devised things any better,'' he said, chuckling. 
But Solzhenitsyn's hatred of the Communists who seized power in 1917, one year
before his birth in the southern Russian city of Rostov-on-Don, remains
``For 70 years they carried out the selective destruction of all that stood
out in any way...Gradually people with any great qualities were simply weeded
out,'' Solzhenitsyn said. 
Few would question the courage and integrity of a man who survived eight years
in the Gulag after making jokes about dictator Josef Stalin, internal
banishment, cancer, KGB harrassment, deportation and 20 years of exile in the
``He was the first man to take on openly and single-handedly a great country
and to win his struggle. He was the first man in Soviet Russia to behave like
a free man,'' popular historian and broadcaster Eduard Radzinsky told Reuters.


Last year Radzinsky worked with Solzhenitsyn on a television programme about
the writer and said he had made a strong personal impression on him. 
``I was struck at how physically strong he is, like a young man. I felt an
incredible power in his eyes, in his handshake.'' 
Solzhenitsyn still keeps up a punishing work schedule and recently set up an
annual literary prize funded by royalties from his classic ``Gulag
Archipelago.'' He spent two weeks in hospital last year suffering from a minor
heart problem but otherwise appears to be in good health. 
On Friday veteran director Yuri Lyubimov, himself an octagenarian who was also
deported by the Soviet authorities, will stage an adaptation of Solzhenitsyn's
novel ``First Circle.'' 
Next week another friend and former dissident, cellist Mstislav Rostropovich,
will give a concert in his honour. 
Solzhenitsyn, awarded the 1970 Nobel Prize for Literature, has also been
invited by the Swedish embassy to a reception on Thursday, December 10, the
day that Nobel prizes are awarded. 
Although Russians may not be hanging on his every word, many commentators say
Solzhenitsyn's message remains as relevant and perceptive as during Soviet


His calls for a return to traditional Christian morality, his attacks on
organised crime and political corruption and his searing denuncation of what
he sees as muddle-headed reforms have all found resonance in a country now
pitched into its worst economic crisis since the fall of the Soviet Union. 
His warning of 1990, one year before the fall of the Soviet Union, that
Russians, once liberated, might end up getting crushed beneath the rubble also
carries great force today as millions struggle in abject poverty and the ghost
of Stalin hovers over the political landscape. 
``He has the most amazing prophetic intuition,'' said Boris Lyubimov, a
theatre critic who once worked with Solzhenitsyn on a Moscow staging of his
play ``Banquet of the Victors.'' 
Lyubimov noted that the essay ``Russia in Ruin'' came out a few months before
the August 17 devaluation of the rouble currency and default on some foreign
debt repayments that triggered Russia's financial collapse. 
Solzhenitsyn also predicted back in 1974, 20 years before his return, that one
day he would live again in Russia. 
Like every prophet, he has been much misunderstood in his own country and he
will not fit into any neat, ready-made political category, Lyubimov added. 
A man who has arguably done more than any other Russian alive to uphold
individual freedom of expression, he scorns liberals for being too pro-Western
and having a poor grasp of history. 
Renowned for his fiery patriotism and Orthodox piety, Solzhenitsyn equally has
no truck with the monarchists or with fascistic groups who have tried to yoke
him to their vision of a powerful, imperialist, racially ``pure'' Russia. 
``He is above all this,'' said Lyubimov. ``In Russia people are always looking
for somebody to blame. Some blame the Bolsheviks for everything, others say
it's the Jews or the tsar. He says we all share responsibility for the
country's plight.'' 
But it is as a writer, not a prophet, that Solzhenitsyn will be best
remembered at home and abroad. 
``His place in the pantheon of Russian literature is assured,'' said Alla
Latynina, an editor at the Literaturnaya Gazeta newspaper who has met
Solzhenitsyn many times. 
``As the author of epic novels focused on the big moral issues of good and
evil, Solzhenitsyn is the direct heir of Tolstoy and Dostoevsky,'' she told
Like many Russians, she will never forget reading in 1962 ``One Day in the
Life of Ivan Denisovich,'' the short but powerful expose of life in the Gulag
which sealed his reputation while earning him the enmity of the Soviet
``It aroused such powerful feelings in our whole generation,'' Latynina said. 
His honesty eventually caused his expulsion from the Soviet Writers' Union --
a byword for political croneyism -- and from the country itself in 1974 after
Leonid Brezhnev's Politburo was forced to concede it could not control or
silence him. 
``Perhaps he is not the most fashionable writer around but compared to all the
others he is like the Himalayas to their Caucasus,'' said Lyubimov. 
``His whole oeuvre stands as a challenge to time, forcing us to remember what
would otherwise so easily be forgotten,'' he said. ``Without him, so much
would have been lost.'' 


Financial Times
December 8, 1998
RUSSIA: Polish model could solve debt relief
>From Prof G.W. Kolodko. 


Russia is clearly unable to repay its debt, but it should not be allowed to
default. Debt forgiveness is the answer. Western advisers, international
organisations, foreign governments and investors and the Russians themselves
all contributed to the mistakes that have led to Russia's current plight. It
is time to share the rotten fruits of ill-advised policies.
It would be much better for foreign creditors and Russia's government to agree
quickly on a debt reduction programme. Otherwise, Russia will not be able to
service the debt and the west will lose even more. A wisely managed debt
reduction plan should be carried forward in three steps.
First, 80 per cent of the debt inherited from the Soviet Union should be
written off in an exchange for a programme of market reforms. It should be
designed and monitored in a similar way to the recent Polish case. When I was
finance minister, I negotiated a deal with the London Club of creditors in
September 1994, which reduced Poland's debt by 50 per cent. This allowed the
economy to gather momentum and reassured creditors and new investors. Without
this reduction Poland could not have made such remarkable progress in recent
years. Reforms can work only if a country is not burdened by unmanageable
In Russia's case, 50 per cent of the new debt (post-1991) should be swapped
for equities in companies awaiting privatisation. Such debt- to-equity swaps
would be monitored by special joint body of the International Monetary Fund
and the new Russian government. It would be based on strict conditionality,
sequencing and international assistance towards institution building.
Third, part of Russia's commercial debt should be exchanged for special
certificates, maturing over the first quarter of the next century and payable
in energy - mainly Russian gas and oil. The restructuring of commercial debt
ought to be linked to foreign direct investments in the energy sector and
infrastructure. This part of the programme could be executed by the European
Bank for Reconstruction and Development.
Russia must be admitted to the World Trade Organisation now, after which
further trade liberalisation measures could be worked out. The World Bank
should concentrate on overhauling the agriculture sector and alleviating
poverty. And, of course, the international community must support the Primakov

Grzegorz W. Kolodko,
Polish minister of finance and deputy prime minister(1994-97), 
Yale School of Management,
New Haven
CT 06520, 


Christian Science Monitor
December 9, 1998 
[for personal use only]
Letting foreign banks into Russia? 
Fred Weir, Special to The Christian Science Monitor 

MOSCOW -- Millions of Russians who literally keep their savings in mattresses
might finally get the opportunity to deposit them in a real bank. But, as
Prime Minister Yevgeny Primakov tacitly admitted last weekend, it will
probably have to be a foreign-managed bank.
Speaking in Moscow to the World Economic Forum, a gathering of about 200
global corporate and financial chiefs, Mr. Primakov acknowledged that Russia
faces a crisis of confidence brought on in large part by the chronic failure
of domestic financial institutions to extend the most elementary protections
to their clients.
"The Russian banking system proved weak and artificial, able only to feed on
the state budget," he says, referring to bank failures in August that
decimated the savings of millions. "The toughest consequence of the crisis is
a total credibility gap."
That may be stating the problem mildly. For many people, still waiting for
compensation nearly four months after most private banks closed their doors
and froze depositors' accounts, banker is synonymous with bandit.
"I will never again trust a Russian bank, and I will tell my grandchildren
never to trust one," says Yelena Prohovets, an unemployed accountant who lost
her entire savings - about $3,000 in hard currency - in a Moscow branch of
Bank Rossisky Kredit, formerly Russia's seventh largest financial institution.
"This disaster has ruined my family. Our money is gone, and all they do is put
us off with false promises." 
Oleg Nikitsky, a pensioner, says he lost 9,000 rubles in Inkombank, once the
country's third largest. 
Before the crisis about 6 rubles fetched $1; by early September the rate had
slipped to around 15 rubles to a dollar. Today it's more than 20, and falling
"That money was for my grandchildren," says Mr. Nikitsky. "If I could get my
hands on it now, I might be able to buy something worthwhile with it. By the
time they give it to me, if they ever do, I know it'll be nothing."
The country's chances for economic revival may hinge on whether the government
can quickly find solutions that people like Ms. Prohovets and Mr. Nikitsky
might accept.
Although average Russians lost about $2 billion in the August banking crash,
economists estimate the oft-deceived population holds a further $40 billion to
$60 billion in hard-currency savings that remain stuffed in mattresses, hidden
under floorboards, or buried in kitchen gardens. 
That amount of money, if unlocked and injected into the domestic economy,
might go far to nudging Russian industry and commerce into growth after almost
a decade of steady decline.
"Ordinary people are hoarding staggering amounts of dollars. Thanks to the
extreme distrust of the ruble and the official financial system, all that
money remains frozen in economically inert forms," says Leonid Vardomsky, an
economist with the Institute of Economic Studies in Moscow. 
PRIMAKOV's suggestion, unprecedented from a Russian leader, is to remove the
restrictions barring foreign-owned banks from providing retail services -
deposits and loans - to private individuals.
"Inviting big international banks into Russia may be the only way to coax the
savings of the population from their hiding places," says Yevgeny Vittenberg,
an expert with Intelbridge, a Moscow-based financial consulting firm. 
"If globally respected names guarantee bank deposits, it might impress our
people," he says. "As things stand no one is going to trust a Russian bank, or
the government for that matter, for the next three generations."
The obstinacy of average Russians is grounded in bitter experience. During
World War II bond-buying was practically compulsory. Then there was the
Khrushchev currency reform, used as an excuse to dramatically raise prices. In
early 1991 high-denomination bank notes were withdrawn from circulation in an
"anti-black market" measure. The hyperinflation of 1992 wiped out most bank
savings. Then there were the private pyramid schemes and, most recently, the
August banking collapse.
"This is a battle-hardened population," says Mr. Vardomsky. "You will not
easily convince them to trust again. And the present government is doing a
very poor job of handling the problem."
Following the August crisis, Russia's Central Bank promised to guarantee all
deposits stuck in failed private banks "100 percent." That pledge has been
unraveling ever since.
Prohovets, like others, had her money in a dollar-denoted account, a standard
way to hedge against inflation and the unpredictable value of the ruble.
In September the government announced all accounts transferred to the state-
owned savings bank, Sberbank, would be redeemed by Nov. 30 - but in rubles, at
a rate of 9.3 on the dollar.
Last week Sberbank began paying back depositors from four failed private banks
- Menatep, MOST Bank, Mostbusiness bank and Promstroybank. More are expected
to join the list.
Alexander Torkunov, spokesman for the Central Bank, says the government will
provide 5 billion rubles (about $250 million) to redeem some 300,000 defaulted
accounts. That still leaves thousands of depositors out in the cold.
"There are some discussions about including other banks in the list. We are
working on that," says Mr. Torkunov.
Such reassurances hold little comfort for Prohovets. "I have already lost my
dollars. If they would repay me at 9.3 rubles per dollar today, I would have
lost half my money. If they ever get around to compensating me, who knows what
the ruble rate will be at that time?" she says. "So, am I so wrong to call
this robbery?" 


The Times (UK)
December 9 1998 
[for personal use only]
Russia's Jews in plea to the West

LEADING Russian Jews appealed to Britain and the West yesterday to help them
to fight the increasing threat of anti-Semitism. 
After a series of attacks on rabbis and synagogues, and anti-Semitic outbursts
in the Russian parliament, Jewish leaders called on Western legislatures to
halt all contact with Russian deputies who have failed to condemn racism. 
Rabbi Pinchas Goldschmidt, the Chief Rabbi of Moscow, said that British Jewry
had traditionally intervened on behalf of their Russian brethren as far back
as the time of Empress Catherine the Great, and that once again Russian Jews
needed support. 
In particular, they are looking to the parliaments in London, Strasbourg,
Paris and Washington to sever all ties with more than 100 members of the
Russian Communist Party who failed to censure a fellow member when he made
repeated verbal attacks on Jews. 
In October, Albert Makashov, a former Soviet general and a Communist in the
Duma, the lower house of parliament, launched a series of anti-Semitic
outbursts beginning with a vow to "take at least ten yids" with him if
threatened with violence. He accused "yids" of sucking Russian blood,
destroying the Russian military and spitting on a country that "saved them
from the fires and gas chambers of Fascism". He added: "I will round up all
the Jews and send them to the next world." 
The remarks caused outrage and revulsion among many in Moscow, but when a
motion was put forward in parliament to censure the general for his "harsh,
abusive statements" and incitement to racism, deputies defeated it by 121 to
107, with the Communist faction, the largest in parliament, either voting
against or abstaining. 
Other members of the Communist hierarchy have expressed or hinted at similar
opinions, including Gennadi Zyuganov, the party leader, and Nikolai
Kondratenko, the powerful regional Governor of the southern province of
Krasnodar, who accused Jewish girls of seducing Russian boys to control the
country's future race. 
In modern Russia, the 500,000 Jews make up less than 1 per cent of the
population, although prominent members of the Jewish community hold key
positions in politics, journalism and the arts. 
The current Prime Minister, Yevgeni Primakov, is half Jewish, as was his
predecessor, Sergei Kiriyenko. Two of the main political leaders in
parliament, Grigori Yavlinsky, the leader of the liberal Yabloko Party, and
Vladimir Zhirinovsky, the head of the ultra-nationalist LDPR, also have Jewish
In business circles, most of the seven so-called oligarchs who financed
President Yeltsin's successful presidential election campaign in 1996, were
Jewish, including Boris Berezovsky, the high-profile media tycoon who is often
the target of anti-Semitic attacks. 


Moscow Times
December 9, 1998 
ESSAY: Dull Days No More Down at Labor Exchange 
By Larisa Kosova 
Larisa Kosova is a free-lance journalist working in Moscow. She contributed
this essay to The Moscow Times. 

A few years ago, the only place on our quiet street in the southern Moscow
suburb of Tsaritsino that used to draw crowds of strangers to its doors was
the Pinetree Bathhouse. Nowadays, the main object of pilgrimage into our part
of town is found next door, where the district labor exchange is located. 
For decades the staff of this organization sat around contentedly drinking
tea, and the only occasional interruption was when someone who had just been
released from prison had to find employment somewhere. But since 1991, when
unemployment acquired official status, things at that backwater beside the
bathhouse have changed. 
One late afternoon shortly before closing time, I went into the office to meet
the staff for an article I was thinking about writing. Or rather I forced my
way in using my elbows. 
"I've been here since 8 o'clock this morning and I'm afraid they are going to
slam the door in my face now," sighed one woman huddled in a white sweater as
she neared the front of the line. "You have to get here at six to be sure of
being seen." 
The jostling people can be divided into two main groups: those who want to
find work there and then, and those who want to be registered and apply for
welfare benefits. There are of course some who receive benefits and who
genuinely hope to find employment later. 
If there are no vacancies going, those who have stood for hours on end in the
stuffy premises can expect to qualify at least for the minimum monthly welfare
allowance of 84 rubles. I would not be so bold as to advise people how best to
spend this money. The people "sentenced" to this sum are usually young first-
time job seekers like high school graduates and people who must be registered
within six months of officially becoming unemployed, so that their other
entitlements like pensions remain unaffected. 
The luckier ones may come away with the maximum allowance of 75 percent of
their last salary - limited to no more than the average Moscow wage, currently
about 1,900 rubles - which is paid out for three months before it is reduced
in a few abrupt stages to the unhappy 84 rubles. 
You won't find any fired bankers here, let alone any that come out with a job,
but for teachers or mechanics it can possibly lead to work. 
"And do you often get members of some strange or exotic profession?" I asked
Svetlana Sterlikova, the office's head welfare payment specialist. "Someone
from a long family line of chimney sweeps, say, who has moved to Moscow from
She thinks hard. "Not long ago we had a man come in from the Surikovsky school
for demonstrators of artificial poses, or an artist's nude model, if you like.
Of course he had to forget about the romantic nature of his previous work. All
he can do is retrain. So I guess one day a chimney sweep will show up here,
Since the welfare pot is far from bottomless, considerable effort is spent on
sifting out those who want to cheat the system. The walls are plastered with
posters reminding would-be fraudsters of the penalties for using fake
documents. Since the office has a special department that spends all day
checking out the piles of documents submitted to support claims, that's pretty
straightforward. But what about those who work but still claim benefits? A
veritable army of them exists, I was told. 
"Well, anyone who wants to cheat the system will usually get away with it. But
here, too, there are odd exceptions," Sterlikova said, and told the tale of a
woman who came to the office and calmly presented her trudovaya knizhka, or
workbook, for inspection before collecting her next welfare payment. It
clearly indicated that she was still working, long after her unemployment
benefit payments started coming through. There turned out to be a perfectly
straightforward, if not honest, explanation for this discrepancy, however: She
had simply handed in the wrong trudovaya knizhka from her collection. Many
people like to have at least one spare one bearing different information for
just such sundry purposes, especially since it's easy enough to buy blanks in
underpasses and metro stations around town. 
I was somewhat taken aback by the enthusiasm of the fraud department staff
when I heard that in their lunch hour they often run over to the nearby market
and scour the stalls for familiar faces. 
Sometimes people are accidentally given away by their relatives. The inspector
calls the person at home and a child's voice helpfully informs them that mama
or papa is at work. Thanks very much. 
Sometimes, said Sterlikova, the neighbors blow the whistle on false claimants,
signing statements confirming that someone goes off to work when they are
officially unemployed, 
Brrr. I suddenly felt the cold wind of 1937. 
There are those who ask not to be entered into any unemployment register when
they come asking about work opportunities. These people gladly forfeit
whatever benefits they are entitled to, just so long as they don't get branded
as being unemployed. Surprisingly, it turned out that not so many people say
they would do any type of work, as one might expect. Looking through the
classified advertisements in the local newspapers, there are only a few such
inserts there, which contrasts greatly with newspapers I recently read while
in Kiev, where an unqualified plea for any work is pretty much the norm. This
would appear to say that in Moscow we still have a way to go before we hit
rock bottom, only I'm not so sure if that is cause for celebration or not. 
Once again I headed back to the line. "... all in the same handwriting and in
block capitals. And make sure you copy the specimen document carefully - I had
to go back to my old workplace twice!" said White Sweater as she drilled the
newcomers to the line on the procedure for getting documents from old
employers confirming their salary. I had the feeling I had seen it all before
somewhere, and then I remembered that it was the same runaround back in
Brezhnev's time to get a foreign travel visa. 
A gray face, gray hat and a child clinging onto the tails of a gray overcoat.
"I am looking for work," was written on a sign hanging around the person's
neck. This image was once printed in millions of copies of a certain
children's book and was used to illustrate the life of a simple citizen of
some abstract Western country. For me the irony is that I learned to read from
that book. A couple of years before I went to school, I thought that the Gray
Man, who was supposed to be an American-Italian-French unemployed person, was
holding a newspaper in front of him, not a sign, and that the desperate plea
"I am looking for work" was the headline. 


Date: Tue, 08 Dec 1998
From: Janine Wedel <>
Subject: Re: [How Economists Goofed in Russia --Chronicle of Higher

In the Chronicle of Higher Education piece about my book,
Jeffrey Sachs called my characterizations "repulsive" and
"inaccurate." He said "This is the first time I have read
I wasn't an adviser to the Polish government."
With regard to (1) "repulsive," this appears to be an
emotional response. People who read about Sachs'
real role in the book will now have the information
to make up their own mind as to whether that adjective
With regard to (2) "inaccurate," and his not having previously
read that he was not an advisor to the Polish Government, Sachs
apparently did not read the June 15-16, 1991 Financial Times
which contained a short article that in its entirety read:
"Professor Jeffrey Sachs
In response to an article in the Financial Times on June 13 the
Polish government's press office issued the following statement:
'Professor Jeffrey Sachs of Harvard is not an economic adviser
to the Polish government. Professor Sachs visits Poland often
and his visits are welcome but he has no official role with the
government.' "
This was reported on page 236 of my book.
It is important to bear in mind that the
issue is not Jeffrey Sachs' reading habits or even
his misrepresentation of his role over the last decade.
The underlying problem is massive cultural ignorance
and distance on both donor and recipient sides. Without
a good deal of cultural innocence on the U.S. side about the
recipient sides, econolobbyists such as Sachs could
not so easily have created the image in the Western
press of playing official policy roles. In the West,
the econolobbyists wrote op-ed pieces, delivered
speeches calling for aid, and thereby helped define
the "reform" agenda. In the East, the econolobbyists'
value was seen in their ability to deliver Western money
and access and sometimes to help local policymakers "sell"
controversial reforms in the transitioning economies.
Whatever his credentials or achievements in economics,
when it comes to his "role" in eastern Europe, Sachs should
be recognized for what he is: an extraordinarily skilled public
relations person.


Date: Tue, 08 Dec 1998
From: John Wilhelm <> 

(A comment on Anatol Lieven's Article "History is Not Bunk" in
PROSPECT, October 1998)

While there is much in Lieven's article with which I agree, there are
two statements towards the end of the article that trouble me a great
deal and on which I would like to comment. The statements in question
are as follows:

The point is that, given the country's communist legacy, there
may in fact be no "solution" to Russia's problems; none, at 
least, that in any foreseeable future will allow Russia to
achieve the kind of society, democracy and standard of life
which approximates to that of western Europe and North America
in the 1990s.

Unfortunately, it now seems that the decline of the state has
gone so far that little repair may be possible, certainly not
from a regime so closely tied to the magnates

If these statements turn out to be true, then I believe that we have
had a historical failure that ought to trouble us all, not only the
peoples of the former Soviet Union, but those of us who care about
Russia, in the historical sense, and her fate as well. In thinking
about Russia and her fate, too many in the West have negative views
of Russia and her history that I do not believe are supported by the
During the last century and into the early part of this century before
the terrible disaster of 1914, Russia made great progress in terms of
modernizing, in an European sense, her society and political system.
In addition the Russian peoples (Rossiiskie narody), especially the
Russians (Russkie) and the Ukrainians, made considerable contributions
to European civilization in the areas of literature, music and science.
While the communist system left a legacy to the peoples of the former
Soviet Union that has engendered Russia's current problems, there are
also the legacies of the 114 years prior to the disaster that can be
drawn from to help heal the situation. Given what is at stake, it
would be a tragedy for the peoples there, as well as for ourselves, to
lose the possibility of doing so. And it would be a terrible tradegy
for all of us to lose what a people with a lot of potential talent
have to offer our civilization in the future because nothing can be
done about the situation that has developed since the fall of
It is my contention that something can be done about this. I believe
that the key lies in the political system. It can and should be
restructured to give the people a system which can respond better to
their needs. Looking at the postwar experience in the latter half
of this century, it is very clear that changes in political structures
can make an important difference in the performance of a country's
political system. As examples, I would cite cases such as the postwar
West German constitution and the constitution that Charles de Gaulle
gave France in 1956.
In Russia's case, I doubt that one could find a de Gaulle to sort out
the situation. And we certainly do not have an occupying power to do
so. But these are not the only means that have been used to improve
political structures so that they better serve the needs of the
people. As I pointed out in a talk to a class of students in
St. Petersburg in 1995, in a similar situation of political chaos, the
United States in 1787 used a Constitutional Convention to
successfully sort out its own political problems. And of course,
there is precedent in Russian history for this, the Constituent
Assembly that Lenin forcibly closed down.
In July 1991, I suggested in a talk I gave to a group working in the
Academy of Sciences that such an assembly was essential to working out
the country's problems. And I still believe this to be the case. At
the time I proposed this, I also suggested that it would be very
useful to adopt a device to limit participation of, by now former,
members of the Communist Party of the Soviet Union in such an
assembly. To do this, I proposed using a system of approval voting to
elect delegates to a Constituent Assembly. With such a system, it
would be easy to limit the participation of former communists. This
could be done by vetting those communist candidates with the lowest
winning approval ratings that would exceed the global limit allowed
for communists in the assembly and replacing them by the non communist
candidate in each district with the highest approval rating. I
suggested, for obvious historical reasons, limiting communist
participation in such an assembly to the proportion that the
Bolsheviks had in the 1918 Assembly.
A Constituent Assembly constituted along similar lines today could
achieve two things that are sorely needed if Russia is to get out of
her current situation. One is a more consistent de-sovietization of
the political system than has occurred. And the other is to work on
developing a consensus on a desirable and feasible economic system.
With the communist legacy to which Lieven refers in his article, it
would make sense for such an assembly to engage some of the resources
and advice that could be offered by experienced people from the outside
Given the situation in much of the former Soviet republics, I believe
that it would also be useful to elect an "all union" constituent
assembly to work on proposals for dealing with some of the problems
that have arisen from the dissolution of the Soviet Union. Such an
assembly could come up with a proposal for a more substantive
community of nations in the former Soviet Union than currently exists.
And it could be a precursor to the creation of similar assemblies in
each of the former Soviet republics where, as may be the case, they
could be useful devices for achieving desirable political restructuring.


Date: Tue, 08 Dec 1998 
From: "Kirill Kyz'michyov" <>
Subject: Re: Marina Price/2508 

> As a Russian myself, I can assure that even before perestroika we never 
> needed permission to travel within USSR 

You did need a permission to go to certain border regions.
You also couldn't settle wherever you wanted. (You probably can't do
it even now, but the restrictions are at least unconstitutional.)

> (unlike now - I had to get a visa to go to
> Lithuania this summer), conversations with foreigners did not have to be
> reported - unless one worked for KGB, 

All students of LIAP in 1989 Leningrad had to sign a paper that they will
report all their conversations with foreigners to the "First Department", that
is the KGB.

> which was not as widespread as often assumed

How do you know?

> and access to typewriters was not "tightly controlled"

True, but access to xerox and fax machines was.

> But real Russians I know do want to return to
> stable and relatively prosperous society it once has been.

I don't know if I am a "real" Russian, but I don't remember the "relatively
prosperous" society you are talking about. I do remember my grandmother with
her 47 (or was it 35?) ruble pension (the average salary was 150) running
all day, trying to find very basic goods, and having found them standing in
lines for two or three hours. She was 70 years old at the time. She lived in a
communal flat almost all her life, too. Together with seven or eight other


Financial Times
DECEMBER 9 1998 
[for personal use only] 
ECONOMY: Moscow warned of inflation rise danger
By Carlotta Gall and Andrew Jack in Moscow

The Russian government has limited the inflation rate to just under 60 per
cent for the first 11 months of the year but runs a strong risk of triggering
hyper-inflation in 1999, a leading group of Moscow economists warned
The Russian European Centre for Economic Policy said in its monthly report
that there was "a real danger" of indiscriminate money printing in response to
the country's budget deficit and absence of alternative ways of raising
financing to bridge the shortfall.
It called "less than credible" the government's estimate that 50 per cent of
its draft 1999 budget deficit of Rbs105bn ($5bn) would be financed by external
sources, and labelled as "over-optimistic" its estimates of annual inflation
of 30 per cent and a rouble exchange rate of $21.5.
It argued that tax revenues are likely to drop in line with planned reductions
in their rates, that wage arrears of Rbs22bn were accumulating and that there
was a lack of clear priorities and controls on expenditure.
The warning backs up Tatyana Paramonova, first deputy governor of the central
bank, who told the Russian parliament on Monday that it had printed Rbs20.5bn
since the start of September and more than Rbs2bn this month would have a
"very serious" effect on the currency.
Julia Shvets, a researcher with the centre, said inflation was set to grow in
December now that the government had started to print money to pay depositors
of four ailing commercial banks.
The central bank has already transferred Rbs1.17bn to the state savings bank,
Sberbank, in order to pay depositors this week.
Ms Shvets said that by assuming the liabilities of some banks, the government
was opening itself to enormous demands.
Sberbank has in theory taken over assets of the banks as well as their
liabilities, but she expressed doubts about the authorities' ability to seize
the assets of the banks concerned.
The state statistical agency Goskomstat stopped publishing gross domestic
product figures in October, but the centre estimated that the Russian economy
would shrink by 5 per cent this year. 


Read my lips -- no improvement in taxes until 2000: Russian taxman

MOSCOW, Dec 9 (AFP) - Russia will have to wait until 2000 for a boost in tax
collection, the perennial headache for the cash-strapped government, the
country's tax chief said Wednesday.
Defending a package of sweeping tax cuts designed to encourage Russians to pay
their dues, state tax service head Georgy Boos said that the measures were
important to stimulate growth but would not alone be sufficient to fill
Russia's empty public coffers.
"Tax measures are extremely important, but not enough on their own," Boos
said, referring to 19 bills overhauling the cumbersome and punitive taxation
system which were put to parliament on Tuesday.
"If government forecasts are borne out then the slump will stop in the second
half of next year and the economy will start to grow a little," he said.
"So we think tax receipts will start growing in the second half of next year,"
the taxman said. "As for significant increases (in tax collection) then that
will not occur until 2000."
Boos, who admitted he had clashed with Finance Minister Mikhail Zadornov over
the tax cuts, has already produced positive results since his appointment at
the end of September.
Tax receipts in November were given Wednesday at 18 billion rubles (880
million dollars), a 29-percent increase from the figure for the previous
More than 70 percent of the tax had been collected in cash, Boos said.
But in dollar terms the November receipts were just half those of July, before
the ruble was devalued.
Boos' radical tax-cutting plan, which if passed by parliament will come into
effect from March 1, provides a new fiscal basis for the key 1999 budget which
the government was preparing to submit to parliament Wednesday.
The measures include slashing value-added tax to 15 percent from 20 percent
and profit tax to 30 percent from 35 percent. Zadornov and officials from the
International Monetary Fund (IMF) had argued that the reductions would merely
leave the government even less solvent than ever, but Boos disagreed.
"Those who think that reducing tax from 120 percent to 50 percent will bring
about a 70 percent reduction in tax revenues are mistaken," he said. "We
cannot have such a mechanical approach to the matter."
The official added that IMF managing director Michel Camdessus said during a
Moscow visit last week that the Fund was not implacably opposed to the tax
The debate will be picked up in January with the IMF, Boos said. The
government needs IMF funds to help balance a 1999 budget weighed down by
Moscow's huge foreign debt commitments. 


Jamestown Foundation Monitor
9 December 1998

"versions" of President Boris Yeltsin's decision to shake up his
administration have been making the rounds. According to Vyacheslav Nikonov,
head of the Politika Foundation, Yeltsin may have fired his chief of staff,
Valentin Yumashev, because the presidential administration had been moving
toward backing the new center-right coalition set up by Yegor Gaidar and
Anatoly Chubais. Nikonov called Gaidar, Chubais and the other members of the
new coalition--which includes former Deputy Prime Minister Boris
Nemtsov--"discredited politicians who have minimal support in society and do
not have the levers of power at their disposal." Nikonov said the
presidential administration's move toward the Gaidar-Chubais coalition
offended Grigory Yavlinsky's Yabloko and Viktor Chernomyrdin's Russia is Our
Home, "which have a far greater reason to consider themselves to be the
center-right." It also alienated both Moscow Mayor Luzhkov and Prime
Minister Yevgeny Primakov, who have openly criticized the so-called Young
Reformers on more than one occasion (Izvestia, December 8). Oleg Sysuev,
first deputy head of the presidential administration, has joined the
Gaidar-Chubais coalition. Yumashev, however, just prior to his sacking, said
he would personally support Chernomyrdin's presidential bid and that the
presidential administration would not back the Gaidar-Chubais coalition.

Meanwhile, "Moskovsky komsomolets" (M-K) published an article today which
speculated that Boris Berezovsky may have been an initiator, not a target,
of Yeltsin's shake-up. According to this version, Berezovsky, who was
reportedly closely allied with Yumashev, decided to have him fired when
Yumashev began flirting with the Gaidar-Chubais coalition. Berezovsky fears
the communists, Luzhkov and even Primakov, because they might reverse the
results of privatization, but at the same time fears Chubais and Gaidar, who
are allied with rival oligarchs, M-K reported. Berezovsky, the newspaper
added, would like to see Krasnoyarsk Governor Aleksandr Lebed as prime
minister (Moskovsky komsomolets, December 9). Berezovsky reportedly helped
finance Lebed's gubernatorial race.



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