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

Johnson's Russia List


December 16, 1998    
This Date's Issues: 2520  2521  

Johnson's Russia List
16 December 1998

[Note from David Johnson:
1. AFP: Only complete reform can save Russia, UN body says.
2. Summary of Tom Graham's talk at the Kennan Institute on "The Impact 
of the Current Crisis on the Oligarchs." 

3. Vladimir Raskin: re Buzgalin on anti-semitism in #2519.
4. Gordon Hahn: Comment on Tolz in Perspective.
5. Vlad Ivanenko: A contribution regarding food aid to Russia.
6. Helsinki's Helsingin Sanomat: Finnish Foreign Policy Institute on 

7. Reuters: Russian govt, military step up START-2 pressure.
8. Reuters: Russian Communist blames Jews for ``genocide.''
9. Toronto Sun: Matthew Fisher, Russia drifts, rudderless.
10. Itar-Tass: Primakov Names Nine Work Areas To Restore Stability.
11. Text of Yeltsin's Radio Address on Russian Constitution.
12. AFP: Russians still avid tourists despite economic crunch at home.
13. Komsomolskaya Pravda: Duma Move Against Chubays Seen as 'National 


Only complete reform can save Russia, UN body says
[DJ: Full text of report at]

GENEVA, Dec 16 (AFP) - Russia is on the brink of implosion and only profound
long-term institutional reform can get it out of its current crisis, the
United Nations Economic Commission for Europe said in a report published
International Monetary Fund and World Bank aid schemes have been ineffective,
with the cash either misused or embezzled, with ill effects on the economy,
the report said.
Structural reform over a period of some six or even ten years was needed, not
only for Russia but other countries of the Commonwealth of Independent States
like Ukraine and Moldova.
"You have to create institutions, laws and the habits necessary for a market
economy to work," the commission's director of studies Paul Rayment said.
"The more one waits, the more difficult the recovery will be," Rayment said,
criticising the dilatoriness of the government, whose sole concern was to get
through the winter.
A structural reform programme must win the approval of the Russian people and
the leading industrialised countries in the Group of Seven (G-7), the report
It cited the absence of a proper tax administration, an inadequate judicial
system, the existence of numerous insolvent state-owmed firms, the development
of the black market and a barter economy, and expemptions for the energy
sector as among the problems behind the present situation.
Judith Shapiro, co-author of the report, warned that Russia was on the brink
of implosion.
She expressed deep concern at the paralysis of the central government and an
anarchic process of decentralisation. The regions were beginning to keep their
agricultural produce to themselves and governors were behaving like local
lordlings who no longer obeyed Moscow.
"The situation could degenerate as in the former Yugoslavia," Shapiro said.
"There is a real danger of the population turning to extreme nationalistic
The commission said the prospects were very bleak for the whole of the former
Soviet Union next year, with the exception of the Baltic states, enjoying
record growth rates that nudged six percent this year.
In central and eastern Europe the situation was better, with average growth
rates forecast at around three percent this year. Growth would slow in eastern
Europe next year, however, because of the Russian collapse and a slowdown in
western Europe.
In the west growth forecasts have been slashed for 1999 to around two percent,
down from 2.8 percent this year, because of the repercussions of Asian
financial crisis, the report said. 


Date: Tue. 15 Dec 1998
From: "W. George Krasnow" <
Subject: Tom Graham at the Kennan Institute on "The Impact of the Current 
Crisis on the Oligarchs." [DJ: This is George Krasnow's summary.]

The oligarchy will remain a dominant feature of Russia's political and
economic life for the foreseeable future, predicted Dr. Thomas Graham, a
former U.S. State Department official and now Senior Associate at the
Carnegie Endowment for International Peace. Graham called for revamping the
current U.S. strategy toward Russia by "taking away ideological blinders"
which obstructed a realistic appraisal of Russian politics.
Graham discussed "The Impact of the Current Crisis on the Oligarchs" at the
Kennan Institute for the Advanced Russian Studies in Washington, D.C. on
December 14. Although this crisis put the well-known oligarchic coalitions
in disarray, it did not break their hold on major levers of political and
economic power, nor their predominance over the media.
Graham defined "oligarchs" as leaders of large political-economic 
coalitions, which he likened to the oligarchic structures of the Soviet period, 
built around the fusion of power and property in the Communist Party hierarchy. 
If in the former Soviet Union political power took primacy over economic wealth,
the oligarchs of today use their wealth to influence politics.
Graham identified four main coalitions that had taken shape by 1995: 
Chernomyrdin's, based on Gazprom and Lukoil; Luzhkov's, or the Moscow group; 
the Korzhakov/Soskovets coalition, based on control over exports of aluminum 
and arms and influence in the security apparatus (this coalition was routed in 
1996); and the Chubais/Berezovsky coalition, which derived power from control 
over macroeconomics, privatization, and the media. It was the latter
coalition that secured the re-election of President Yeltsin in 1996, said 
Although the Chubais/Berezovsky oligarhic coalition began to faulter soon
after Yeltsin's re-election, "it was not because of opposition from other
such coalitions, nor because of adverse public opinion, but because of
their internal strife, and a clash of personalities," said Graham.
According to Graham, the August 17 crisis destroyed the financial sector as
a basis for oligarchic coalitions and broke the coalitions up into
constituent parts. However, "the fusion of political and economic power
remains and will remain" a key feature of Russian political life.
Graham predicted that new oligarchic coalitions are likely to emerge. When
asked about the oligarchs' contribution to the development of the country's
wealth or social welfare, Graham replied that that is at best a secondary 
concern. He suggested that American efforts should be redirected toward
assisting Russia in shaping up the appropriate environment for the
development of a genuine free market, taking into account the political and 
economic realities of the current situation.


Date: Tue, 15 Dec 1998 
From: Vladimir Raskin <>
Subject: re Buzgalin on anti-semitism in #2519

There are certain statements in Dr.Buzgalin's article which need some
clarification. For instance, he writes that "in the last five years
natonalism and racism has grown continuously--mainly on the part of the
authorities. From the terrible Chechnya to Alexandr Barkashov's
...Russian National Unity party, this has been the backdrop." And further, 
"...Yeltsin's team launched a campaign of persecution of the "Caucasian
peoples." Why attribute Barkashov to Yeltsin's government? Just
because the government has not been consistent in fighting extremist
movements? As for the "campaign against the Caucasian peoples", it was
solely mayor Luzhkov's undertaking in Moscow further supported by the
local authorities in various cities, but certainly without any endorsement
from the "Yeltsin's team." 
Buzgalin further blames "the liberals and the media" for the
"half-hearted defence" of these ethnic groups compare to "the caurrent
clamor surrounding the problem of anti-Semitism." It gives one the
impression that Buzgalin does not read the Russian press. There were
numerous publications on this subject, especially after the murder of the
Azeri trader on the Moscow market last spring. Buzgalin says that "it is
now easy to see that the liberals and the media instead of raising the
issue of fighting any form of nationalism--are defending... those who have
money." According to Buzgalin, it appears that the media should not have
paid attention to the outrageous events in the Duma and should not have
reacted as they promptly did, thus, in effect fighting nationalism in one
of its extreme forms--anti-Semitism. Really, why defend Jews? They have
money anyway!
Throughout the article, Buzgalin tries to downplay the KPRF's lack of 
reaction to Makashov's notorious statements. In an interesting twist, he
tries to blame the "liberals" for the rise of nationalism and fascism in
the country. He says that "to censure all left-wingers as fascists" means
"provoking a rise in nationalism and anti-Semitism among the majority of
the population." Obviously, there is no need to blame all left-wingers.
But, as far as KPRF is concerned, I would advise Dr.Buzgalin to
attend one of his former party's meetings in Moscow. I hope he will notice
their openly anti-Semitic slogans and ouvertly anti-Semitic speeches. 
Sure, the acute social and economic contradictions of the time should be
addressed, but not at the expense of the fight against fascism and
anti-Semitism, as Buzgalin wants.


Date: Tue, 15 Dec 1998
From: Gordon Hahn <>
Subject: Comment on Tolz in Perspective

A short response to Vera Tolz's short version of her recent article in
Slavic Review, from Boston U.'s Perspective newsletter "'Creating' a
Russian Nation" in JRL 2512: 
Some among the Russian elite support the creation of a Russian Republic
with the Russian Federation to counter what they see as the inordinate
influence of Russians in the federation as a result of bilateral treaties
between the Center and the national autonomies. What particularly galls
proponents of this idea is heightened, even inordinate influence that
bilateral treaties between the non-Russian republics and the federal
government seem to give to non-Russians. They argue that such arrangements
cheat Russians in these autonomies, who make up the majority in 15 of 21
and a plurality in the remaining 6, as well as non-Russians, whose
populations in the autonomies typically comprise only 7-8 percent of the
those nationalities' populations throughout the federation. This idea is
particularly popular among nationalists and nationlist-oriented communists.
[See, for example, Vadim Pechenev, "Federalizatsiya strany - panatseya ili
lovushka?" Parlamentskaya gazeta, 14 Novomber 1998, p. 2.] It may well
become part of a strategy to weaken Yeltsin and the Center he controls much
as Yeltsin used the RSFSR state against Gorbachev and the Center in the
1990-91 political revolution from above.

Gordon M. Hahn
Hoover Inst.
Stanford U.


Date: Tue, 15 Dec 1998 
From: Vlad Ivanenko <> 
Subject: A contribution regarding food aid to Russia

The American food aid to Russia seems to be an accomplished fact. While it
is still possible to discuss whether Russia needs imported food or not,
this polemic becomes an exercise in subjunctive history. Instead, let me
ask JRL readers about how do they visualize the distribution of delivered
products in that country.
From what could be found at Lexus-Nexus, I anticipate a following scheme. 
USDA procurement agency organizes shipment of agreed products to selected
Russian distributors (recent tender for distribution has been predictably
won by Roskhlebproduct, Prodintorg, and Myasomoltorg). The aid items are
agreed to be exempt from custom and tax duties (I am not sure what taxes
are not paid: VAT?). Russian distributors sell food stuff to regional
wholesale traders (presumably to former *baza otdela pabochego
snabzhenia*) who resell goods to local retailers. The distributors collect
proceeds and channel all income (apart from three percent fee) to Pension
The last link in this scheme strikes me as unreliable, namely the
collection of payments. It is a platitude that there are huge arrears on
all levels of Russian economy. Traders are not exemption: I do not expect
to see many wholesale enterprises without large overdue debts to banks,
local budgets, suppliers, etc. Then after a trading firm has resold
products received on trade credit from, say, Prodintorg, it may not see
money transferred to its bank account at all since it will be
automatically re-directed to the account of, say, a local bank that
happened to be a creditor. As a result, Prodintorg delivers to a Pension
Fund a promissory note issued by its insolvent customer at best. The
information regarding insolvency is hard to get in Russia (or easy to
pretend that it is absent).
I consider an alternative scheme. If the US government has decided to
target primarily Pension Funds as main recipients of food aid, why does it
not send deliveries directly to Pension Funds? Then the Funds could
technically pay pensions in kind charging personal accounts. This
proposition allows those pensioners who cannot wait to get food without
being paid in cash. Also, this scheme is less distorting for Russian
farmers. The demand of pensioners for food is inelastic. What they will
get additionally in cash will not be spent on luxury goods.
Quite possible Pension Funds are not suited better than the Federal
Government to deal with corruption. Still, they are closer to intended
benefactors of the aid and Gaddy/Ickes reported cases when Pension
Funds had paid pensions in kind. And not always with consumer goods!
If this scheme would work, we could see a picture of a pensioner fetching
a sack of flower to home instead of a bureaucrat explaining why pensions 
are still unpaid.


Finnish Foreign Policy Institute on Russia 

Helsinki's Helsingin Sanomat
8 December 1998
[translation for personal use only]
Article by Jouni Molsa: "Russia's Development Is Slower Than
Estimated. New Report by Foreign Policy Institute Warns Finland
And EU Against Excessive Optimism"

The report by Foreign Policy Institute warns Finland and the European
Union against excessive optimism regarding Russia's development. The
report, which was released on Monday, estimates that Russia has more
difficulties than estimated in creating a democratic system and a
functioning market economy. It also emphasizes that the EU membership of
the Baltic countries is an important security issue for Finland.
The report, called Russia's Development Alternatives and Their Effect
on Finland's Choices, gives a general view of Russia's development policies
in the 1990s, the current situation and probable development alternatives.
On Monday, Tuomas Forsberg, one of the seven members of the group that
wrote the report, described the report as "pessimistic, but not alarming."
Forsberg is the deputy director of the institute.

Basic Assumptions Do Not Seem To Be True

The strategies of Finland and the EU toward Russia are based on
expectations that Russia's political system will become democratic, market
economy will stabilize, the economy will grow, and Russia's foreign policy
will be based on joint European values. According to special researcher
Christer Pursiainen, none of these basic assumptions appears to be true.
"Rather, the political system is becoming authoritarian, market
economy does not seem to stabilize and Russia seems to be sliding deeper
and deeper into an economic crisis. Neither is the foreign policy of
Russia's leadership based on values that respect the rights of small
nations and states to make their own basic decisions on security policy,"
Pursiainen reported.
"The structural changes required in the transition to market economy
have not been made in Russia, either legislatively or otherwise. The
economy seems to be based on a Soviet-era economic system, in which market
economy cannot function efficiently," P ursiainen assessed.
The report notes that Russia's economic problems have not been
properly diagnosed.
"The issue in the problems is not that markets are functioning too
effectively; instead, the issue is that Russia has never committed to the
goal of market economy. There has been kind of semi-commitment, which has
prevented the internal development of the economy and foreign investments,"
Pursiainen notes.
Increasing control, on the other hand, would probably lead into more
and more declines in the economy.Connection Between Finland and Baltics
Also the development of Russia's foreign and security policy seems to
be working against the goals of Finland and the EU. Russia is not adopting
shared values as basis of its foreign policy; instead, during this decade,
it has developed the power politics of a superpower emphasizing national
interests. Today Russia follows the so-called Primakov doctrine.
"In it Russia is seen as a superpower and the world is seen
multipolar. Russia's world is a club of the superpowers consisting of,
besides itself, the United States, Japan, China, India and Germany or the
EU led by Germany. There are not necessarily c onflicts between the
members of the club; instead, Russia tries to have partnership relations
with them," Pursiainen estimates.
"According to this thinking, it is as if the superpowers had a right
to their own interests and the partnership operates to ensure that the
other superpowers would not come too close. For example, for Finland and
the Baltic countries this means that Russia sees a right to have some kind
of buffer region between Russia and NATO. The CIS region, for its part, is
quite distinctly part of Russia's sphere of interest where others cannot
come," Pursiainen describes the thinking.
According to Pursiainen, the Baltic countries are in the most
sensitive position, since Finland's position is currently somewhat secure
through its EU membership.
"In a way Russia does not have the resources to promote superpower
politics as it did within the CIS region. However, it seems to have enough
resources to show that it must be considered. If NATO, for example,
communicates to Russia that it does not c onsider it a particularly
significant superpower, for instance by starting to negotiate about the
NATO membership of the Baltic countries, it might raise the need in Russia
to show its force. It might be, for example, threatening with military
force on the southern border of the Baltic countries. This would suffice
for the situation to become tense on the border regions of Finland,"
Pursiainen tells us.
"For Finland's security policy it would be appropriate to have the
Baltic countries join the EU as soon as possible."
The report begins a publication project of Foreign Policy Institute
called Russia 2000. The purpose of the project is to introduce rational
views and predictions about Russia's development and to offer tools to
assess the policy of Finland and the EU t oward Russia.
The intention is to publish 12-15 more issues.
The next part of the series will be released in February, and it will
discuss the Communists' thinking in foreign policy.
Also Henrikki Heikka, Raimo Lintonen, Hanna Ojanen and Tapani
Vaahtoranta from Foreign Policy Institute and Jouko Rautava from the
research institute of transition economies of the Bank of Finland have
participated in writing the report now released.


Russian govt, military step up START-2 pressure
By Patrick Worsnip

MOSCOW, Dec 15 (Reuters) - Russian political and military leaders stepped up
pressure on parliament on Tuesday to ratify the START-2 strategic arms accord
but the legislature again dithered over the treaty it has held up for nearly
six years. 
First Deputy Prime Minister Yuri Maslyukov said further delays with the treaty
-- which would slash deployed U.S. and Russian nuclear warheads by up to two
thirds by 2007 -- could threaten strategic parity and nuclear non-
Separately, the commander-in-chief of Russia's strategic missile forces,
Colonel-General Vladimir Yakovlev, said he saw no reason why the treaty could
not now be ratified. 
But the leadership of the Communist-dominated State Duma, the lower house of
the Russian parliament, failed earlier on Tuesday to set a date for the
ratification debate. 
A new ratification bill has been drafted in recent weeks, but the Duma
council, which had been due to decide on Tuesday what to do with it, put off
the decision until Thursday saying the Communist Party had not had time to
consider it. 
The decision had already been put off once, last week. 
Interfax news agency quoted Maslyukov, who is a Communist, as saying in an
interview the future of the 1993 pact with the United States, already ratified
by the U.S. Senate, would have a deciding influence on Russia's image abroad. 
The Russian government believes that, if it ratifies the pact, it will help
secure more credits from the International Monetary Fund to fight the
country's economic crisis. 
``Americans have stopped talking about START-2 in the past half-year,''
Maslyukov said. ``It is me, Communist Maslyukov, who advocates that it be put
into effect as soon as possible.'' 
The Russian government has assured Washington the treaty will be ratified this
month, but senior U.S. officials who visited Moscow last week said they would
wait and see. 
The main objection by Duma communists and nationalists to START-2 is it could
weaken Russia's nuclear defences and the country could lack the cash to carry
out the arms cuts needed. 
Maslyukov said Russia could not maintain its ageing nuclear forces and would
inevitably fall behind the United States in a few years' time. 
``Because of chronic cash problems, nuclear deterrence forces and their back-
up systems have degraded to an extent that makes possible their final demise
by 2010,'' he said. 
Delays could also be used by some ``threshold'' countries on the verge of
developing nuclear weapons as a pretext to join the nuclear club. 
``Thus the proliferation of nuclear weapons will speed up,'' Maslyukov said. 
Yakovlev, speaking at a news conference, dismissed a series of arguments by
opponents of the treaty for not ratifying it. 
He said no older-generation missiles would have to be retired before their
natural life was over, that a strategic forces development programme was now
in place, and that a bill to finance the programme was before the Duma. 
``I think that, from the point of view of these factors, there are no problems
here,'' he said. Trying to maintain missile levels, he said, was
``economically inexpedient and impossible, and from the military point of
view, pointless.'' 
Russia's future strategic forces will concentrate on the single-warhead Topol-
M missile, known to NATO as the SS-27. 
Yakovlev said following a sixth and final test launch last week that he hoped
the missile would be able to go into service this month at a base in the
Saratov region, bordering Kazakhstan. 
Yakovlev said he foresaw no problems for Russia's strategic forces from the
``millennium bug'' which could cause malfunctions in computers which fail to
recognise the year 2000. He said his forces had a programme to resolve the
issue and would take appropriate measures during the course of 1999. 


Russian Communist blames Jews for ``genocide''

MOSCOW, Dec 15 (Reuters) - A leading Russian Communist told a parliamentary
hearing on Tuesday that Jews were responsible for what he called the
``genocide'' of the Russian people. 
Viktor Ilyukhin, head of the defence committee in the State Duma lower house
of parliament, became the latest in a series of deputies from the party to
make openly anti-Semitic remarks. The Communists control the largest bloc of
seats in the chamber. 
``The large-scale genocide would not have been possible if (President Boris)
Yeltsin's entourage and the country's previous governments had consisted
mainly of members of the indigenous peoples rather than members of the Jewish
nation alone, though that nation is without a doubt able, pragmatic and has
done much to benefit the Soviet Union,'' Ilyukhin said. 
He made the comments to a hearing of a Duma committee debating Yeltsin's
impeachment. ``Genocide'' against Russians is one of the five charges the
committee is considering. 
Russia's population has shrunk dramatically amid economic decline and the
collapse of health care during Yeltsin's seven-year rule. Ilyukhin said this
demonstrated a premeditated genocide plot. 
The remarks immediately drew strong fire from the government, including First
Deputy Prime Minister Yuri Maslyukov, who is the most highly-placed Communist
in Russia since the fall of the Soviet Union. 
Maslyukov was quoted by RIA news agency as saying remarks which criticised
officials on the basis of their ethnicity were ``intolerable.'' 
Ilyukhin's remarks followed those of Albert Makashov, another Communist
deputy, who told a rally in October that Jews should be rounded up and jailed.
He has since repeated those and other anti-Jewish statements in print and on
The Communists helped block a Duma motion to censure Makashov and many members
spoke openly in his support, leading to accusations that the party's
leadership is unable to distance itself from the anti-Semitism of many of its
The Kremlin has said Yeltsin intends to lead a crackdown on ``extremism'' in
response to Makashov's and other statements, although no concrete actions have
been taken. 


Toronto Sun
December 14, 1998 
Russia drifts, rudderless
Sun's Columnist at Large

MOSCOW -- Boris Yeltsin finally showed up for work on Friday. That the
Russian president was out of bed for only the second time since mid-November
was such big news it led every radio and television newscast for hours. 
What Yeltsin achieved during his time at the Kremlin on Friday was, as usual,
something of a mystery. Bleary-eyed and bloated, but no more disoriented than
usual, the 67-year-old president was shown nodding grimly again and again as
his new chief of staff spoke to him. After nearly a minute of this, Yeltsin's
lips were seen to move. He may have actually been speaking. 
As has been the practice with such "photo-ops" for some time now, there was
no audio of the meeting, so it was impossible to tell if President Yeltsin's
speech was greatly or only slightly slurred. 
However, true to recent form, Yeltsin looked dreadful. This may be why it was
an aide and not Yeltsin who, a few hours later, had to endure the indignity of
having Alexander Solzhenitsen refuse a Hero of Russia medal. 
Only three weeks ago, Yeltsin promised the nation he would personally lead
the investigation into the murder of St. Petersburg MP Galina Starovoitova,
who was once his ally. 
There was no doubting Yeltsin's sincerity, but even if he was vigorous and on
top of things, such a pledge wouldn't mean much. Seven MPs have been murdered
since Russia abandoned communism. Like just about every significant crime in
Russia today, all these murders are unresolved. 
To a visitor, this lack of success seems hard to imagine. There are, after
all, more uniformed policemen walking around harassing the innocent in this
country than anywhere except, perhaps, China, North Korea and Cuba. 
The official Russian response to Starovoitova's death was to announce yet
another inevitably fruitless crackdown on corruption and organized crime. The
St. Petersburg police reacted to what was undoubtedly a professional contract
killing in a typically brainless, but theatrical way, rounding up 1,500 petty
criminals and raiding 18,000 restaurants and night clubs. 
Starovoitova's assassination struck a special chord here. Part of the reason
was that she was one of the few women in public life in a country where males
still make a lot of chauvinistic noises about protecting the honour of women.
Another factor was that the MP's killers were deliberate and ruthless, waiting
for her in the shadow of a stairwell until she returned from a trip. 

Supported minority rights 

Starovoitova had earned a special place in the hearts of her compatriots
because she remained above, or, more often, outside the political process.
Unlike most elected officials here, she was not obsessed with using politics
to make her fortune. She supported causes such as minority rights and economic
and political reform in a country where those who aren't ethnic Russians are
often treated abominably and reform of any kind is ferociously resisted by the
ruling elite. 
Although she spoke English, which automatically made her a favourite of
American and British television crews, Starovoitova was not very well known
outside Russia - until she died - because the western media prefers its
leading players here to be much more flamboyant and easier to caricature. 
Given her anonymity, the reaction to Starovoitova's death in the West was out
of all proportion. The great newspapers and politicians of the day expressed
shock and outrage. They painted her as a saint and declared her death as
tangible proof democracy in Russia was in deep trouble. 
As much of a tragedy as Starovoitova's murder was, it is the brutal truth
that nothing she had to say inside or outside Parliament was ever taken
seriously by anyone of consequence here. It was hardly her fault, but even
before the post-Soviet reform process got stuck in reverse a couple of years
ago, Russian democracy was a shambles. 
Because the West doesn't have a clue what do with Russia, it continues to
pretend the country has evolved into a quasi-democratic state and that with
sufficient encouragement it will eventually become truly democratic. Such
delusions encourage lawlessness by politicians because, as in Communist times,
those at the top of the food chain are supremely confident their misdeeds will
never result in any personal consequences. 
What Russia needs to make the giant leap from bandit capitalism to capitalist
democracy is hundreds more Galina Staravoitovas. What Russia is far more
likely to get is a lot more Boris Yeltsins.


Primakov Names Nine Work Areas To Restore Stability 

Moscow, December 14 (ITAR-TASS)--Prime Minister Yevgeniy Primakov has
named key areas in which his government will seek to bring about
macroeconomic stability in the country, create a favourable investment
climate and restore investors' confidence in Russia.
Speaking at a meeting of the Consultative Council for Foreign
Investments in Russia on Monday, Primakov identified the following nine
priority areas:
Shifting priorities in the implementation of the monetary policy
from quantitative restrictions on money supply to the management of
interest rates and international reserves;
resolving the crisis of non-payments and normalising the system of
settlements in the economy;
restructuring overdue debts of enterprises in the real sector;
reducing the tax burden on manufacturers;
enhancing the investment aspect of tax reform;
creating a special development bank, in which the state will have
controlling interest, in order to accumulate assets from external and
internal sources for crediting enterprises in the real sector of the
economy irrespective of the form of ownership; the main criterion will be a
high level of a project's effectiveness;
using mechanisms of the development banks, the development budget, a
competitive placement of state investments and provision of state guarantees;
implementing an active industrial policy designed to support export and
create large corporations;
supporting high-tech industries and high technologies, manufacturing
highly-processed products, including through deeper cooperation with
foreign companies.
He said that "the main task facing the government in 1999 is to get
out of the financial and economic crisis and achieve economicstabilisation."
Primakov said that "the Government is planning a set of measures to
fulfill this complex task. Special attention will be given to measures
which stimulate external and internal investments."
Primakov noted that the Government considers foreign partners who
offer long-term investments in Russian enterprises as allies.
"You, just as the government of Russia is, are interested in the
openness and truthfulness of financial accounting procedures, in
suppression of various manifestations of criminal business and
normalisation of payment relations," the Prime Minister said.
He said that an important aspect of investment activities in Russia is
"bringing foreign investments to regions which have considerable autonomy
in the adoption of corresponding decisions."
He stressed that "there are at least two main directions in which work
to restore foreign investors' confidence in Russia will proceed."
Primakov said that "first of all, we will need to overcome the
consequences of the crisis. Secondly, it will be necessary to create a
sound legislative and institutional basis for attracting investors."
He stressed that favourable investment conditions should be created
for both foreign and Russian investors because "the investment process
should be based not on artificial and temporary benefits, but on economic
rationalism, competition and a sound legal footing."
To this end, the Government will insist on a speedy adoption of
federal laws on foreign investments, on investment activities, on
concessions, on agreements reached with Russia and foreign investors, and
on free economic zones.
Primakov said that Russia will also simplify bureaucratic mechanisms
which hamper the attraction of foreign investments and introduce changes in
the customs and tax sectors.
Speaking at a press conference after the Council's meeting, Primakov
said that many bureaucratic systems will be simplified to make foreign
investors "feel better in Russia."
Primakov said that customs practices will also be simplified. "Many
things will be done so that we could consider the difficulties our foreign
partners have constructively," he added.
"There will be changes in the insurance sector too," the primeminister said.
He pointed out that there are plans to create "a strong state
insurance company which would also insure against political threats."
Primakov stressed that the Council's meeting that "everywhere in the
world insurance and especially political risks of foreign investors and
creditors are insured with the participation of the state," and Russia
"will not be able to do without creating a powerful state insurance
body--an Agency for Investment Guarantees."
Primakov stressed that there is no question of foreign investors'
"coming to the Russian economy. Foreign investors are already in Russia."
"None of the major foreign investors who have made direct investments
in the real sector of the economy has withdrawn from our market, despite
the crisis," he said.
"We see this as their confidence in our country and the president, and
as an understanding of Russia's potential and of how vast the Russian
market is," the Prime Minister said.
"We welcome the presence of Western banks on the Russian market and
Western capital investments. We are grateful to the members of the
Consultative Council for Foreign Investments, who head major Western
companies, for not leaving us when the crisis broke out in Russia in
August," he said.
Primakov stressed that the implementation of these measures is only
part of the path to be travelled by Russia in order to restore its position
on the world capital markets.


Text of Yeltsin's Radio Address on Russian Constitution 

Russian Federation President Boris Yeltsin on 12 December made a radio
address to the Russian people that was broadcast on Ekho Moskvy radio
station at 0700 GMT. Here is the full text of the address:

Dear people of Russia.
The Russian constitution is five years old today, our main law is five
years old. It was on the constitution that I took the oath when I assumed
the office of president of Russia.
All future presidents of this country will take their oath on this
thin but extremely important document. They will assume the obligation to
serve their people honestly and to safeguard their interests.
Because of the hustle and bustle of everyday life, it may well be that
not everyone thinks about the constitution, and those who do, do so seldom.
Some people do not know it well and think that the constitution is only
for politicians and lawyers. I do not think that is correct.
Every citizen should have read the constitution of his country at
least once. This should not be done out of curiosity, but in order to
understand how the state in which they live is organized and, most
important, to know their rights. It is precisely thanks to the
constitution that Russia is currently moving along the path of freedom and
democracy. It has proved a reliable barrier against people who wanted a
return to the omnipotence of the party apparatus, to the persecution of the
church and believers, and to unwarranted levelling and a system based on
administrative distribution of resources. That is precisely why people who
feel nostalgic for the old rules have now launched a discussion about
changing the constitution. They are urging for all power to be given to
parliament. In fact, they are proposing a return to a republic of soviets.
I strongly disagree with it. I believe this will ruin the country. A
huge state like Russia must always have strong power at the top. Without
it, we cannot deal with the acute problems Russia is facing now. But
however firmly and decisively this power acts, it must always stick to the
spirit and letter of the constitution. Only the constitution can protect
the free press from censorship, provide reliable protection against
extremism, prevent the collapse of the market, and preserve the unity
of Russia.
The constitution has helped us maintain stability in the country on
many occasions in the past five years. That we managed to overcome the
serious political crises that have befallen Russia this year is also solely
due to our strict and consistent adherence to our constitution.
Of course, the constitution is not dogma. Life keeps setting new
tasks for the state and society. To solve them, the constitution sometimes
needs to be adjusted to reflect the new realities. But, in amending the
constitution, we must be very careful to ensure that the structure of the
constitution is not destroyed.
Dear people of Russia. Constitution Day is a very important national
holiday. In terms of world history, five years is a mere second, but for
our young Russian democracy it is a considerable period of time. We have
been through a lot during these years: the struggle for the redistribution
of property, instances of serious political confrontation, scandalous
election campaigns, and much more. But Russia has survived all these
trials thanks to our constitution, thanks to the constitution that we must
rigorously uphold for the sake of peace, stability, and prosperity in Russia.
Happy Constitution Day, dear people of Russia. Thank you.


Russians still avid tourists despite economic crunch at home

MOSCOW, Dec 15 (AFP) - Gloom and doom merchants who said the current economic
crisis in Russia would kill off the burgeoning tourist industry are being
proved wrong.
Russians, deprived for years under the Soviet regime of taking holidays
abroad, have not lost their appetite for travel. 
A recent survey by the financial information service Banko found that only
nine percent of tour operators in Moscow had scaled down their activities in
response to the financial climate, while 57 percent had made no changes and 34
percent said they were still expanding.
Rumours of an imminent collapse of the tourism industry are wildly
exaggerated, Banko experts say. While 15 percent of the travel agents have
gone to the wall in recent months, they attribute most of the failures to
seasonal variations.
"At the end of every season, quite a number of small agencies disappear only
to be born again before the summer. This happens every year," Banko's chief
Alexander Ivanov told AFP.
But all tour operators are feeling the pinch, with slashed advertising
budgets, fewer staff and the need to restructure to face up to competition.
"The middle classes have been hardest hit by the current crisis and this
winter demand for mid price-range holidays has gone down significantly," Roman
Ribakov, a marketing manager for the tour operators Academservice, one of the
biggest on the Russian market, acknowledged.
"But demand for the luxury resorts in the Austrian and Swiss alps has even
gone up," he said.
"Five star hotels in Paris are very sought after, every bit as much as before
the crisis," Vladimir Kantorovich, the managing director of the KMP-group of
tour operators said.
"Tourism is an extravagance, and those who can afford expensive trips are
still rich. The Russians who go abroad in winter are well-off. The people who
have to save up to travel go abroad in the summer."
"Tour operators hope that everything will sort itself out because trips over
the New Year are selling fairly well and in some travel agencies, demand has
even gone up by 20 percent," Banko chief Ivanov said.
"But next summer will be the moment of truth for Russian tour operators," he
predicted. "At the moment, there are more optimists than pessimists in the
industry. People have got used to going abroad and will not be prepared to
make do with just boring old Russia any more."
"I'm not giving up my plans to go to Egypt for my Christmas holidays even
though I don't get paid very well," 22-year-old Tania Efimova told AFP, who
works in a job centre for a paltry 1,400 rubles (70 dollars) a month.
"The 400 dollars I expect to spend on the trip won't sort out my problems
here. But the week I'll spend in the country of my dreams will at least let me
live another life for a while and forget all my worries."
A survey by the Russian news agency Interfax found that Russian tourists spend
more money abroad than any other holidaymakers, chiefly because of the poor
state of the leisure industry at home. 


Duma Move Against Chubays Seen as 'National Sport' 

Komsomolskaya Pravda
10 December 1998
[translation for personal use only]
Report by Nikolay Yefimovich: "Will Things Become Brighter
for Everyone Without Chubays? Why the State Duma Is Trying to
'Suppress' a Politician It Does Not Like"

Our country has a national sport. Once a year without fail the State
Duma removes Chubays from office. No matter what rank he occupies. 
Anatoliy Borisovich once admitted that for the first five years he
carefully collected all State Duma decrees on his dismissal. But after
that he stopped caring about it. After all, the name of Chubays is a red
rag to a bull as far as the majority of deputies are concerned. For the
Communists, fighting the hated "godfather of the [privatization] voucher"
is a kind of Russian political bullfight.
Therefore, when the former vice premier became head of the YeES
[Unified Energy System] Russian Joint-Stock Company, it immediately became
clear that he would have no peace. So Chubays became really brazen: 
Instead of sitting quietly and just working on fuel oil, he started
cobbling together a political bloc as well and calling the Communists all
kinds of names. He has become really aggressive!
Yesterday the Duma carpeted the head of YeES and Fuel and Energy
Minister Sergey Generalov and demanded that they account for the shortage
of heat and light in the country. Even before the Duma session, Gennadiy
Zyuganov, head of the Communist Party of the Russian Federation [CPRF]
faction, had already reported that Chubays must be removed immediately,
otherwise he will freeze the whole country. It has always been like this
-- as soon as Anatoliy Chubays's shadow appears, the Communists start
having hysterics. They are allergic to redheads. I wonder how they will
behave when they examine next year's budget, which bears the name of their
loyal comrade-in-arms, First Vice Premier Yuriy Maslyukov? After all, it
is already known that this budget will be tougher than even the monetarist
Chubays could have dreamed.
Incidentally, the Duma has already tried to strengthen YeES. And at
the beginning of this year it adopted a law banning foreigners from owning
more than one-fourth of the company's joint-stock capital. After that,
there was an unbelievable collapse of prices both in the major energy
corporation and in many Russian enterprises connected with the company. It
has long been known that no one is so good at shooting themselves in the
foot as the Communist faction. The Bolshevik genes cannot be eradicated
just like that.But now, in the middle of winter, once again evidently in the
interests of the people (the Communists have no other interests!), Zyuganov
and Co. have decided to decapitate the Russian joint-stock company. 
Although it has long been known that any change of the head of the company
paralyzes its work for a long time. And YeES has already had two changes
of leadership in the past 18 months. Particularly since if Chubays is
removed, members of his team will probably also leave with him. But the
governors of destitute regions such as Kamchatka and Magadan have already
stated that they will not support the political games of the Duma
Communists -- they have become convinced that when the country's chief
power industry worker goes on trips he really does so in order to work,
rather than going fishing like other high-ranking Moscow officials. They
simply know that amid the crisis of non-payments, keeping up working
relations with Gazprom, the coal industry, oil companies, and the Ministry
of Railways is possible only thanks to Chubays's personal contacts.
In the Russian joint-stock company itself, people are convinced that
if the current head of the company leaves, they can certainly forget about
several major YeES investment export projects. Money was provided
exclusively on the strength of Anatoliy Chubays's name, as he is known for
his connections with Western capital.
But for the deputies, something else is most important -- to put out
"Chubays's light" no matter what. They are prepared to even accuse the
head of the Russian joint-stock company of energy vampirism. As the State
Duma draft decree makes clear, with the arrival of Anatoliy Chubays at the
company, the "frequency of the electric current in the Russian Unified
Energy System has fallen to an impermissibly low level..."
The response to this at the Russian joint-stock company was laughter: 
This is ridiculous, the country's entire energy system has been working
with normative currency frequency for 96.2 percent of calendar time, like
last year.



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