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

Johnson's Russia List


December 17, 1998    
This Date's Issues: 2522  2523  

Johnson's Russia List
17 December 1998

[Note from David Johnson:
Seasons Greetings! Thank you for your contiuing support
and encouragement. It's important.
1. AFP: Street kid numbers soaring in Russia.
2. Bloomberg: Russia Should Join NATO, Opposition Politician 
Yavlinsky Says.

3. Los Angeles Times: Jim Mann, Talbott Taking the Fall for 
Russia's Ills.

4. Reuters: Russia names new ambassador to United States.
5. Christian Science Monitor: Alexei Izyumov, Rebuilding 'authority' 
in Russian.

6. Peter O'Brien: RE Primakov/Improving Investment Climate.
7. Human Rights Watch: Report Documents Brutal Treatment in Russian 

8. Victor Yasmann: re Jerry Hough/Albats/Menshikov.
9. Reuters: Russia Communists blame media for antiSemitism row.
10. Journal of Commerce: John Helmer, WHO'S WHO IN RUSSIA TRADES ON 

11. AFP: IMF tacitly approved Russia's August debt default: ex-tax 

12. Moscow Times: Andrei Piontkovsky, Soros Proves Own Theory In
Russian Lab.

13. AFP: Provinces flock to their favorite villain -- the Moscow

14. Izvestiya: START 2: There Cannot Be Bargaining.]


Street kid numbers soaring in Russia

MOSCOW, Dec 16 (AFP) - Homeless and hungry, life for 14-year-old Yury
Krekovetsky in Moscow is no easy street.
But the adolescent would still rather take his chances in the Russian capital
than return to Vastafiyevo, a small village 100 kilometres (60 miles) away, to
be beaten black and blue by his drunken, jobless parents.
"My father and mother lost their jobs a year ago and started drinking. Every
time they get drunk they start beating me, violently, kicking me all over,"
said Yury, a bruise the size of a large coin on his face silent testimony to
the attack which provoked his latest flight.
"I came to Moscow to ask the police for protection. I don't want to go back
home and if they send me I will run away again," said Yury, his light jacket,
trousers and shabby boots little protection against the bitter cold. "I'm
afraid that my parents will beat me to death one day."
Yury's is an all too familiar story of domestic violence that has seen an
explosion in child homelessness in the past 18 months, a tidal wave of human
misery that has left Russia's hard-pressed social services swamped.
Mikhail Danilin, deputy chairman of a parliamentary committee for children's
and women's issues, says the crisis is a throw back to the early 20th century
when child homelessness was a pressing social problem.
He estimates more than three million Russian children currently live on the
streets, in constant danger of being sucked into an even more brutal life of
drugs and prostitution, crime and punishment.
The figures mean that "one child in 10 in this country has no place to sleep,
doesn't have enough food and may be involved in crime. We have 597,100 kids
who don't have parents," he lamented.
"Just a year and a half ago the figure (for street children) was two million.
A 50 percent increase is incredible growth, I can't even predict how many
there will be in a year's time."
About one-third of Russia's children whose parents no longer care for them are
placed in state-run orphanages.


Russia Should Join NATO, Opposition Politician Yavlinsky Says

New York, Dec. 16 (Bloomberg) -- Grigory Yavlinsky, head of Russia's pro-
market Yabloko Party and a likely a presidential candidate in 2000, said
Russia should eventually join the North Atlantic Treaty Organization and other
Western security arrangements. 
``Russia, in 25 years, will be a European country,'' with the same standards
of freedom, human rights, private property, competition and law and order,
Yavlinsky, a member of the Russian Duma, or lower house of parliament, said in
a speech to the Eurasia Forum in New York. 
As such, Russia should join other former Warsaw pact members Poland, Hungary
and the Czech Republic and enter NATO, the 46- year-old Yavlinsky said. 
``In 25 years, Russia must be a part of the world's security'' system,
Yavlinsky said. ``I want to see Russia as a part of NATO,'' he said. In the
meantime, Russia must reach a common understanding with Europe and the U.S.
over security issues in Europe and Central Asia. 
Russian relations with NATO have often been contentious since the Berlin Wall
fell in 1989, marking the end of the Cold War. Russia initially opposed
including Hungary, Poland and the Czech Republic in the military bloc, and
clashed with NATO over its policy toward Serbia, a traditional Russian ally. 
Recent public opinion polls show 6 percent of Russian voters backing Yavlinsky
in the 2000 presidential election, placing him fifth behind Communist Party
chief Gennady Zyuganov and Moscow Mayor Yuri Luzhkov, among others. 
Yavlinsky said his Yabloko party doesn't have to join a coalition government
in 2000 to further its reform-minded goals, and said he was uninterested in
making an alliance with coalition partners. ``This is not a reasonable thing
to do from the point of victory and from the point of view of reform.'' 
Yavlinsky travels to Washington, D.C., tomorrow to meet U.S. government
officials. Last week, he met with government leaders and business executives
in Germany. 


Los Angeles Times
December 16, 1998 
[for personal use only]
Talbott Taking the Fall for Russia's Ills 

WASHINGTON--When the history of the Clinton administration's foreign policy
is written, the most tragic figure may well be Deputy Secretary of State
Strobe Talbott. 
For nearly six years now, Talbott has been President Clinton's point man
in dealing with Russia. He is well connected; Talbott has been the president's
friend since the two were Rhodes scholars together. He is knowledgeable; he
was Time magazine's specialist on Russia and its Washington bureau chief. He
is also decent, sincere and hard-working. 
Yet the American policy on Russia for which Talbott has been the driving
figure crashed and shattered on Aug. 17. That was the day when Russia's
economy fell apart, and so did the reform-minded leadership that the Clinton
administration had sought to nurture. 
With foreign capital fleeing the country and the banking system
insolvent, the Russian government was forced to devalue the ruble, making
imported goods prohibitively expensive. It also defaulted on some of Russia's
debt, making future foreign investment all but impossible to attract. 
Within a few days, Prime Minister Sergei Kiriyenko and other leading
reformers in his government resigned, giving way to successors, including
current Prime Minister Yevgeny Primakov, who are far less committed to
economic liberalization. 
It was the end of an era, the seven-year period from 1991 to 1998 in
which leaders in Moscow sought to push the Russian economy toward free markets
and to integrate it ever more closely with the West. Now Russia is behaving in
a way that sometimes invites comparisons with Germany's post-World War I
government, the Weimar Republic. 
Inside Russia, conspiracy theories abound. Russians look for scapegoats:
They blame the West, the International Monetary Fund and Russian economic
reformers for impoverishing the country. Most ominously, anti-Semitism is
rearing its head in Russia once again. 
Outside Russia, experts debate all sorts of dire scenarios. Some
intelligence specialists think Russia is in the midst of a new round in its
historic cycle of deterioration and fragmentation that will end only when some
Russian leader, probably a military figure, reassembles the country by force. 
It would be unfair to say that these recent events occurred because of
Talbott's policies. Even in the 1990s, America doesn't begin to wield that
sort of influence over Russia. There were larger factors at work: The collapse
of oil prices and the Asian financial crisis both damaged Russia's economy. 
Nevertheless, the effect was to devastate the cause of Russian reform,
which the Clinton administration had tried to support. As a result, you can
already see signs that Russia may once again become a political issue in the
United States. 
"We have suffered a huge defeat for U.S. foreign policy," Condoleeza
Rice, who was President Bush's advisor on Russia, told Forbes magazine last
month. Rice announced last week she would step down from her job as provost of
Stanford University; she is widely expected to become an advisor to the
Republican presidential campaign of Texas Gov. George W. Bush. 
Undeterred, Talbott labors on. He was in Moscow last week, along with
Deputy Treasury Secretary Lawrence Summers, seeing whether Primakov's
government might put together an economic program strong and tough enough to
qualify for further IMF aid. 
Recently, Talbott has come up with a new rationalization for the U.S.
policy. In a speech at Stanford last month and in an article in the Economist
expanding upon it, the deputy secretary of State tells us that everything is
still OK in Russia. He urges America to be patient. "Over time, the tug of the
Soviet experience will weaken," he says. "That process will just take a
generation or more." 
This sounds nice, but it seems out of touch with Russia's economic and
political realities. The most devastating critique of Talbott thinking comes
from two scholars, Clifford G. Gaddy of the Brookings Institution and Penn
State University professor Barry W. Ickes, who studied how the Russian economy
is working not in Moscow but in the cities and towns outside it. 
In a trenchant essay called "Russia's Virtual Economy" in Foreign Affairs
magazine, they challenge the very premises of American policy. "Most of the
Russian economy has not been making progress toward the market or even marking
time," they write. "It is actively moving in the other direction." 
The implications of their detailed study run contrary to Talbott's
optimism. Their work suggests that time is not on the side of the reformers.
Russia's younger generation is no more committed to a market economy than was
the older one. Young people, too, profit from the jerry-built system Russia
has evolved to protect its industries from the market. 
Indeed, Talbott's notion that Russia's problems are generational has an
oddly familiar ring. About 30 years ago, when Clinton and Talbott (and this
writer) were in college, this idea was a recurrent theme in the U.S.
opposition to the Vietnam War. The old people in Washington messed up, it was
said; wait until the younger generation takes over. 
But the American failure in Vietnam was one of policy, strategy and
institutions, not a generational failure. And the same can be said about
Russia today. 
"We believe that gloom and doom are no more justified now than was
euphoria a few years ago," Talbott asserts in his article. But given what's
happening in Russia now, gloom seems to be the only rational response. 
Jim Mann's column appears in this space every Wednesday. 


Russia names new ambassador to United States

MOSCOW, Dec 16 (Reuters) - President Boris Yeltsin named career diplomat Yuri
Ushakov Russia's new ambassador to the United States on Wednesday, replacing
the veteran Yuli Vorontsov, who is retiring, the Kremlin said in a statement. 
Ushakov, 51, has been a deputy foreign minister responsible for relations with
the United Nations and other international bodies. Vorontsov, 69, was
previously Russia's envoy to the United Nations and had been ambassador to
Washington since 1994. 


Christian Science Monitor
December 17, 1998 
[for personal use only]
Rebuilding 'authority' in Russian 
By Alexei Izyumov 
Alexei Izyumov, a Russian economist, is co-director of the Center for
Emerging Market Economies at the University of Louisville, Ky. In the
Gorbachev years he worked on economic reforms at one of Moscow's leading
think tanks.

Russia, they say, is the only country in the world where both communism
and capitalism failed.
With this winter already registering among Russia's most bitter, the
economy and politics paralyzed, and President Yeltsin fading away, forecasts
of Russian apocalypse are the loudest they've been since 1991.
Yet, the recent developments in Moscow might actually be the catalyst for
a constructive change.
The virtual resignation of Mr. Yeltsin in favor of the old KGB hand
Yevgeni Primakov and the latter's mounting anti-crime and anti-corruption
campaign could be the first steps in restoring the principal condition for
an economic revival in Russia - the strong state.
In a broader sense, it may also be the beginning of the end of the
discredited "wild markets" epoch and a prelude to an altogether different
path of economic development, that of authoritarian capitalism.
In Russia, the view that the nation's weak democracy is incapable of
extracting it from the current crisis is rapidly gaining popularity. During
a recent trip there, I heard calls for "a strong hand" from many of my
university friends who, just a couple of years ago, were patent democrats. 
To illustrate just how strong the political whiplash is, consider this:
Gen. Augusto Pinochet, the anti-communist dictator of Chile reviled for his
cruelty has become a role model for many Russian politicians, some of them
communists who compare his "law and order" methods favorably with Stalin's. 
Pinochet speeches about the accomplishments of his regime have been
broadcast on Russian TV recently (even before the former dictator hit the
news again with his arrest in London).
Pro-authoritarian feelings seem increasingly popular among the working
class, the military, and entrepreneurs. A recent World Bank study found that
in terms of people's trust in their government, Russia - and other
former-Soviet republics - rank last in the world, right after the poorest
countries of central Africa.
In the West, such developments are discounted as mere nostalgia for Soviet
This is wrong. 
Russian people are smart enough to appreciate the benefits of the free
market and democracy. What they don't like is the ugly "excesses" of
capitalism and the lack of economic growth. Given the choice between another
decade of stagnation and a promise to get out of it - even at the cost of
curbing some freedoms - their desire for a stronger state is entirely rational.
Today, the state in Russia is so weak that it cannot perform even the
basic duties of collecting taxes, enforcing contracts, and protecting
businesses and citizenry from the onslaught of crime. It has yielded its
alcohol and tobacco monopolies, once a great revenue producer, to the black
market, and gave management of its budget to private banks. The Russian
state is also far less capable than its Soviet predecessor of providing
crucial social services - health care, education, and pensions. Government
inefficiency is legendary, while the ranks of federal employees
unaccountably are growing. At 1.1 million, their number in Yeltsin's
government is almost double that of the government of the last Soviet
leader, Mikhail Gorbachev. 
Thus, today Russia faces the worst of two worlds - a bureaucracy that is
bloated and unwieldy, yet too weak and corrupt to enforce even the basic
rules of the market. With the failure of weak Russian democracy to deliver
on the promises of capitalism, the only workable alternative to the nation's
continuous stagnation, it seems, is to strengthen the state and to place at
its helm a powerful leader who can play the role of a "benevolent" dictator. 
This is not going to be an easy task. At a minimum, it will require
cleaning up the government itself, simplifying the tax system, and
suppression of organized crime. 
The notorious "oligarchs" - the heads of Russia's vast, and in some cases
incredibly wealthy, former state monopolies - have to be subdued. Foreign
investors must be lured back with prize stakes in Russian assets. And a
currency board must be established for the ruble.
The recent moves by the Russian government, such as the anticrime campaign
prompted by the brutal murder of liberal legislator, Galina Starovoitova, in
St. Petersburg, as well as stepped-up efforts at tax collection and
restraining of the restive provinces, may finally set in motion the long
overdue process of restoring power to the battered Russian state.
Clearly, as long as lame-duck Yeltsin remains president, Mr. Primakov's
government can only set the stage for the new course. Most of the necessary
reforms would have to wait for implementation until after the election of a
new president in 2000.
The three leading - if undeclared - contenders are: communist Gennadi
Zuganov, with the troubled legacy of his party to bear; Moscow Mayor Yuri
Luzhkov, whose big-money machine politics are suspect; and the governor of
the Siberian region of Krasnoyarsk, Alexander Lebed, a former Army general
with authoritarian tendencies.
If Russia is limited to these three choices, Mr. Lebed, with his clean
reputation and military prestige, fills the image of a strong and fair ruler
most credibly.
In the early 1990s Russia, unlike Eastern Europe, failed to bridge the
abyss between communism and capitalism by building strong democratic
institutions along with a market economy.
Democracy is still the best option, but a strong democracy, not the weak
and corrupt one Russians are living with now. Under the circumstances,
Russians seem to be gravitating toward the lesser evil - authoritarian rule.
Successful implementation of an authoritarian model might allow Russia to
emulate a variant of the government-led economic growth of Singapore, South
Korea, or Taiwan, and still preserve most of the democratic freedoms
achieved in the last 10 years.
True, the "Asian model" is not very popular these days. But for the
clueless and anarchy-prone Russia, switching to the Asian path would be a
big step forward. 
Russia's tumultuous last century has earned it a dubious reputation as the
world's largest socio-economic laboratory. The latest crisis, however
devastating, gives Russia a unique opportunity to right itself before the
century ends. A strong state and a strong leader are what Russia needs to
enter the new millennium with a sense of dignity and direction. 


Date: Wed, 16 Dec 1998
From: "Peter O'Brien" <> 
Subject: RE: Primakov/Improving Investment Climate

I've been reading JRL for 6 months and have chosen to stay on the sidelines
- today, I forward a short piece for consideration. In way of background, my
first days in Russia were as a member of the Treasury Department in 1993/94
with then Treasury Secretary Lloyd Bentsen and Undersecretary Larry Summers;
more recently, I worked for the Moscow based investment bank Troika Dialog.
I am now in New York with Goldman Sachs. 
Thanks for all your efforts.

In response to Itar-Tass' "Primakov Names Nine Work Areas To Restore
The more I read from Primakov, the more I think he shows much promise. His
internal political skills and lack of bravado seem to have cleared the way
for some sensible, broader based decision making. While the previous
government was often called "the best government Russia has ever had" by
Western experts, it seems this one is less intent on convincing us of the
same in order to avoid defining itself as the communists' natural enemy;
rather, Primakov seems to have already succeeded at changing the focus away
from the reform vs. communist issue and on to a less antagonistic discussion
of the big picture. 
The lack of political consensus, arguably, has been the most debilitating of
factors during the reform process; I believe that much of the ill will has
resulted from a) the way things have been communicated between the executive
and the Duma and b) personalities. Primakov's efforts to build consensus (by
inviting dialogue and avoiding bravado) seem a good start to a patient,
longer term political vision.


Human Rights Watch
Report Documents Brutal Treatment in Russian Orphanages
Thousands of children suffer neglect and cruelty in state institutions 

(Moscow, December 16, 1998)--Thousands of Russian children abandoned to
state orphanages are exposed to appalling levels of cruelty and neglect,
according to a 213-page report released in Moscow by Human Rights Watch. The
report is a year-long investigation accompanied by a series of powerful
color photographs providing further evidence of malign neglect and inhuman
Entitled "Abandoned to the State: Cruelty and Neglect in Russian
Orphanages," the report documents that "children in state custodial
institutions are deprived of basic human rights at every stage of their lives." 
"The abuse in orphanages cannot simply be attributed to Russia's economic
crisis," said Kathleen Hunt, author of the Human Rights Watch report. "The
problem of scarce resources does not justify the appalling treatment
children receive at the hands of the state. It wouldn't take more money for
Russia to change these policies immediately." 
Hunt said that many of these children do not need to be institutionalized
at all, but could be better cared for at home, or in foster homes, at
considerably less expense. "The population of these orphanages is far too
high and it's growing," said Hunt, noting that about 200,000 children live
in state institutions in Russia.
Beginning with infancy, orphans classified as disabled are segregated into
"lying down" rooms of the nation's 252 "baby houses," where they are changed
and fed but are bereft of stimulation and lacking in medical care. 
Those who are labeled retarded or "oligophrenic" (small-brained), face
another grave and consequential violation of their rights around the age of
four. At that time, a state commission diagnoses them as "ineducable," and
warehouses them for life in "psycho-neurological internats." After this
diagnosis, it is virtually impossible for an orphan to appeal the decision.
According to official statistics, some 30,000 children are confined to these
locked and isolated institutions, which are little better than prisons. 
The orphans may be restrained in cloth sacks, tethered to furniture,
denied stimulation and are sometimes left to lie half-naked in their own
filth. In both "baby houses" and "internats," children may be administered
powerful sedatives without medical orders.
In a throwback to the abhorrent abuse in Soviet psychiatric institutions,
orphans and institution staff also told Human Rights Watch of cases when
children who tried to run away were sent to a psychiatric hospital for
punishment or treatment.
Not only disabled orphans suffer violations of their rights in Russian
state orphanages, according to Human Rights Watch. Even 'normal' abandoned
children---whom the state evaluates as intellectually capable of functioning
on a higher level---may be beaten, locked in freezing rooms for days at a
time, or sexually abused.
Public humiliation was one of the forms of punishment recorded by Human
Rights Watch in interviews with children from three different regions of
Russia. "The teacher would punish children by bringing everyone into the
classroom, and then making the ones who did something wrong get undressed
and stand in front of the open window when it was very cold," according to
an orphan interviewed in St. Petersburg. "Several children would be stripped
and have to stand like that while the others had to a threat,"
the orphan said.
Official statistics indicate that children have been abandoned to the
state at a rate of 113,000 for the past two years. This figure is up
dramatically from 67,286 in 1992.
Human Rights Watch points out the wide variation among state institutions
and cites an independent program in one psycho-neurological internat that
has made remarkable progress with disabled children. 
Among its recommendations to Russian authorities and international
community, the human rights organization calls for the state to "immediately
take steps to end the gross neglect, and the physical and psychological
abuse by staff working in the custodial institutions of the three ministries
involved: Health, Education, and Labor and Social Development."
The report also urges the state to develop humane alternatives to huge
custodial institutions by reallocating existing resources to more
family-based care. 
The photographs accompanying the Human Rights Watch report are available
through the Saba Photo Agency in New York, telephone 212-477-7722 or through
the photographer, Kate Brooks, in Moscow at (M) 7095-763-6603, or (P)

For Further Information:
Kathleen Hunt in Moscow: 7095-265-4448, mobile: 7095-764-5938
Rachel Denber in Moscow: 7095-265-4448, mobile: 7095-764-5938
Lois Whitman in New York: (212) 216-1239


Date: Wed, 16 Dec 1998
From: Victor Yasmann <>
Organization: American Foreign Policy Council
Subject: re: Jerry Hough/Albats/Menshikov

Jerry Hough is right: the West is fooling itself about real size of
politicians like Gaidar, Chubais, Nemtsov and the like (JRL 2517). It is
not a problem that many "young" and "very young reformers" originating
from Komsomol(Evgenia Albats, JRL/2518). It is the problem that even if
the Komsomol was, as many say, the "school of business", it certainly
was not the school of democracy. It is not a problem that many
reformers were ranking members of the CPSU (some of them joined
Communist party as far as in 1988) or were members of Nomenklatura (as
Gaidar was).
It is the problem that they borrowed from Nomenklatura its subculture of
intolerance, inhumanity, incompetence, and corruption. Yet another
problem of the reformers is their own image-makers who distorted beyond
of any recognition both undoubted talents and obvious deficiencies of
the reformers.
Take, for example, Boris Nemtsov. Although we heard lot of about his
administrative talent, it was not him but the governor's deputy, Evgenii
Martynov, who was responsible for administrative and cadres policy
during Nemtsov's first term in office.
Nemtsov turned to Martynov at end of 1991 after Yeltsin promised him
position of governor, if he manage to assemble a "good team".
Inexperienced Nemtsov asked for help the KGB colonel Martynov, who knew
very well "Who's who" in Nizhnyi Novgorod region. Without leaving his
active duty in the territorial state security directorate, Martynov
joined to NemtsovŐs administration as the deputy of the governor. For
more than three years colonel Martynov worked for Nemtsov organizing and
administrating regional personnel and checking up its performance. So
Yevgenia Albats probably shot her foot when she wrote how back in 1996
she had been "amazed by the rationality and effectiveness of his
[Nemtsov's] apparatus" (JRL/2518). With all probability, she dealt with
the product of Martynov and Co. rather than Nemtsov's endeavours. As for
Nemtsov, he was shy enough to mention publicly who was his main aide
(Apropos, the same model had worked in S-Petersburg until 1996; there
we have had "very democratic" mayor A. Sobchak and his first deputy,
"good" Chekist V.Putin.) Only when Nemtsov decided that he did not need
Martynov anymore (Spring, 1995), he eliminated his department and the
whole story went public.
I think this example shows how far away is the image of reformers from
tough reality. As for Nemtsov personally, I have nothing against him.
He is very sweet, indeed.


Russia Communists blame media for antiSemitism row
By Peter Graff

MOSCOW, Dec 16 (Reuters) - Russia's Communist party on Wednesday called for
reporters from the three leading television networks to be banned from
parliament for implying that a deputy who blamed Jews for ``genocide'' of
Russians was an anti-Semite. 
But the Kremlin said the reporters had done nothing but show the Communists'
true colours, and President Boris Yeltsin's chief of staff warned the
Communist speaker of the State Duma lower house of parliament against racism
in the house. 
Viktor Ilyukhin, the Communist head of the defence committee in the Duma, said
on Tuesday at a videotaped hearing that a group of Jews surrounding President
Boris Yeltsin were to blame for what he called the ``genocide'' of the Russian
``The large-scale genocide would not have been possible if 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,'' he said. 
The statement was shown repeatedly on Russia's three main television networks
-- NTV, ORT and RTR -- bracketed with strong criticism from the stations'
On Wednesday, Ilyukhin insisted that his remarks were not anti-Jewish. ``There
was no discussion of anti-Semitism at that hearing,'' he told parliament. 
Communist deputy Tatyana Astrakhankina asked the Duma press centre to consider
revoking the accreditations of the networks' correspondents for
``sensational'' and ``non-objective'' reporting. 
But the Kremlin said Ilyukhin's speech showed the true stripes of the
Communist leadership -- already embroiled in a scandal over anti-Semitic
remarks by other prominent members. 
``This last statement shows that all the earlier statements made by leaders of
the Communist party on this subject were not slips of the tongue or
coincidences, as they wanted them to appear,'' Yeltsin's press secretary
Dmitry Yakushkin said. 
``It is all a system, a system of well thought-out points of view which leaves
nothing of the principle of internationalism proclaimed by the Communist
party,'' he told NTV. 
A Kremlin spokesman said Nikolai Bordyuzha, Yeltsin's chief of staff, met
Communist Duma Speaker Gennady Seleznyov and delivered a letter warning of
harsh consequences if extreme nationalism in the chamber went unchecked. 
The letter said the Duma's tolerance of racism among Communist deputies had
already harmed Russia's image abroad. 
The chief of Yeltsin's public relations service, Yevgeny Molchanov, said the
Communists wanted to ban the reporters for playing back Ilyukhin's statements
word for word. 
``We heard exactly what Ilyukhin wanted us to hear. He knew he was being
taped, knew he would be quoted, and consciously took that step,'' he told
Interfax news agency. 
Ilyukhin's statements came a month after the Communists, who hold the largest
number of seats in the Duma, helped block a motion in the chamber to censure
another of their deputies, Albert Makashov, who said Jews should be rounded up
and jailed. 
That scandal brought accusations that the Communist leadership was unable to
distance itself from the racist views of many of its members. Ilyukhin is
considered a more senior figure than Makashov, adding to the current
Ilyukhin's statements did draw some criticism from some moderate Communists,
including First Deputy Prime Minister Yuri Maslyukov, who is the party's most
senior official in the Russian government since the 1991 fall of the Soviet
Speaker Seleznyov was the only member of the party in parliament to break
ranks last month and vote for the motion to censure Makashov, but on Wednesday
told reporters the press had fed the scandal through unbalanced reporting. 
``I am against such statements. I am against such phrases. But I beg you,
please do not fan flames where there simply are none,'' he said. 


Date: Wed, 16 Dec 1998 
From: (John Helmer) 

JOURNAL OF COMMERCE, December 16, 1998, page 6A
Moscow. In July, Andrei Maximov, a young research economist turned Moscow
Moscow entrepreneur, had a funny feeling the Russian government, headed
by Prime Minister Sergei Kirienko, wouldn't last. By playing that hunch,
a month before President Boris Yeltsin sacked Mr.Kirienko, he managed to 
save his business more than $100,000 in costs.
Very few people in Moscow can claim to have made or saved money,
during the mid-summer crisis that sliced the rouble, bankrupted most of
the country's commercial banks, and toppled Mr.Kirienko from power.
But Mr.Maximov, whose name has become the brand-name for a telephone
directory and guide to who's who in government, has emerged with enhanced
reputation, and growing market share.
Publisher since 1995 of "Maximov's Companion to Who Governs the Russian 
Federation", Mr.Maximov trades on the value of knowing who is in charge
of what in Russia's vast bureaucracy, and of what that person's telephone
number is.
During the Soviet period, state secrecy rules were so zealously
enforced that there were never any telephone books in Russia -- not for 
individuals, nor for organizations, and certainly not for government. Knowing 
who was who, and how to call him up, was power. Finding it out cost the 
Central Intelligence Agency, MI5, and other international intelligence 
agencies billions of dollars in eavesdropping charges every year.
In the last years of Soviet administration, the rules began to loosen.
Bootlegged telephone directories from the Central Committee of the
Communist Party, or from individual ministries, began to find their
way on to a market composed, primarily, of western businessmen and
journalists. The trickle of information became a flood, when
President Yeltsin took charge in December 1991.
But Mr.Yeltsin changes his officials frequently, and with every new
reshuffle there have followed bureaucratic reorganizations. 
"It's difficult for us," acknowledges Mr.Maximov. "When governments change,
that reduces our sales period by four months or longer." Sackings
and reorganization not only create uncertainty. They create demand for
Mr.Maximov's "Companion". By mastering the market, he has also been able
to drive competing directories out of business.
"I use it every day," reports the president Mr.Yeltsin replaced, Mikhail
Printed in both desk and pocket sizes, Mr.Maximov's directory appears twice
yearly. The text is in both English and Russian. Twenty thousand copies are 
published, and revenues have divided evenly between advertising and copy 
sales. The price is from $150 to $175, depending on the format.
"Political turmoil and reorganization are a problem," Mr.Maximov 
notes. "Some ministries, like Fuel and Energy for example, say they can't
us their structure, because they don't have one yet. In some cases, we have
ministries in the book that were liquidated months before. But the
bureaucrats don't leave. The offices and telephones stay the same. In one
case, the book stayed the same for a year, while the ministry was abolished,
and then revived again."
Although President Yeltsin has repeatedly promised to cut government
spending, and reduce the size of the federal bureaucracy, Mr.Maximov's 
directory gets larger and larger. The summer 1996 issue contained
540 pages. It is up to 850 pages in the issue going to press this month.
Mr.Maximov's caution, and the political instability surrounding Mr.
Yeltsin -- he sacked his chief of staff and sveeral other advisors on
Monday -- have delayed this year's publication schedule until now.
"I missed it for six months," commented Andrei Shapovalyants, a deputy
minister until his promotion in September as Minister of Economy. "I'm 
very glad to have it on my table again."
Mr. Maximov's company used to publish in England. However, the devalued
rouble has forced him to find a Russian printer, and cut other costs
to the bone. But he is also expanding staff to keep pace with the number
of regions and business sectors where demand for directories is growing.
Guides to Moscow and St.Petersburg are already out. Guides to the Volga 
region, to television in Russia, and to telecommunications in Russia, are on 
their way.
Mr.Maximov still heads the economic department of the Institute of
Oriental Studies at the Russian Academy of Sciences. He gets paid
the norm for a top-flight Russian academician these days -- about $50
per month. But the success of Maximov's Companion has meant that he 
pays the Institute $4,000 per month for space he leases.
(Maximov's Companion is at


IMF tacitly approved Russia's August debt default: ex-tax chief

MOSCOW, Dec 16 (AFP) - Senior IMF officials were informed of Russia's
impending domestic debt default in August and tacitly approved the move,
former tax czar Boris Fyodorov told the Kommersant business newspaper on
Fyodorov said Russia's then premier Sergei Kiriyenko, 36, had told him of the
plan to default on 250 billion rubles of treasury bills, known as GKOs, at a
dacha summit of key decision-makers two days before the August 17 decision.
The ex-tax chief said he immediately rushed to a plush Moscow hotel to tell a
visiting International Monetary Fund (IMF) delegation, led by the Fund's top
Russia official John Odling-Smee, of the planned move but found them
"I told them that something suicidal was in the works. Our prime minister is
young, intelligent, but he must be protected from wrong decisions," Fyodorov
said in a front page interview.
"They listened to me but did not react. I understood that they had been
informed of everthing before me and tacitly supported it," he said.
"Of course they did not give written approval, but the fact that they were
already informed" made him believe they approved the August 17 decision to
freeze the GKOs, then worth some 40 billion dollars.
"Now they can say what they like," said Fyodorov, who was sacked as head of
the state tax service in the wake of Yevgeny Primakov's confirmation as
premier in September.
The Kommersant article, headlined "How the default was prepared -- the IMF
knew beforehand," gave a detailed account of how Kiriyenko consulted with a
raft of senior government officials and leading reformers before taking the
fateful decision.
Fyodorov said the decision was taken by Kiriyenko, the then Central Bank chief
Sergei Dubinin and his two deputies, Finance Minister Mikhail Zadornov and his
deputy Oleg Vyugin, and leading market reformers Anatoly Chubais and Yegor


Moscow Times
December 17, 1998 
SEASON OF DISCONTENT: Soros Proves Own Theory In Russian Lab 
By Andrei Piontkovsky 

Just recently, a new book by financier George Soros titled "The Crisis of
Global Capitalism" was presented worldwide. I have always read Soros texts
with great interest. They are a unique mixture of academic treatise, diary of
a stock market speculator and political and sometimes moral prophesying. And
even if as a moral philosopher Soros is not particularly original, his
analysis of financial markets' behavior still carries the full authority of an
exceptionally successful practitioner. 
The central tool of Soros' analysis of financial markets is his concept of
reflexivity, in which he argues that contrary to the situation in natural
sciences, where a scientist doesn't affect the object of his research,
economic and social phenomena are characterized by two-way interaction, or
reflexivity. In the case of financial markets this means that by exploring,
predicting and commenting on their performance, we directly influence their
Soros thinks this reflexivity phenomenon leads to imminent instability of
global financial markets. He admits that it is not a widely accepted concept
and devotes tens of pages to elaborating his view of reflexivity as a key
factor determining financial markets' behavior. 
Ironically, however, the most convincing illustration of market reflexivity
was given by Soros just when he hadn't slightest intention to do it - in a
small chapter in his latest book headed "Russia. A Real-Time Experiment." 
Soros gives a day-by-day account of his desperate attempts from Aug. 9 to Aug.
26 to save the Russian currency and state bond markets from the meltdown,
interacting daily with senior Russian and U.S. officials trying to avert the
looming disaster. 
Exasperated with the politicians' slow reaction, he decided to publicly
intervene by sending on Aug. 11 his famous letter to the Financial Times:
"Sir, The meltdown on Russian financial markets has reached the terminal
phase." The main thrust of his letter was an appeal to the Group of Seven
governments to put up another $15 billion standby credit in addition to $17
billion already promised by the International Monetary Fund. Together with
Russia's own reserves it would be enough to introduce the currency board
system, which would restore confidence in Russian markets. 
It was an interesting and reasonable suggestion. But naturally when you are
introducing a currency board you should set a level at which you peg your
national currency. Simple calculation showed that if the G7 provided the $15
billion standby credit a currency board could be introduced, as Soros put it,
"after a modest devaluation of 15 to 25 percent." 
This technical, arithmetical statement destroyed any chance the project might
have had. This reference to possible devaluation alone, taken out of the
context of Soros' letter, immediately influenced markets negatively and
irreparably. The main idea of the letter turned out to be too sophisticated
for immediate market reaction, and "Soros wants to devaluate the ruble" and
"Soros is playing against the ruble" was the unanimous reaction of investors. 
Two days later, Soros issued maybe the most humiliating statement in his
career: "The turmoil in Russian financial markets is not due to anything I
said or did. We have no intention of shorting the currency. In fact our
portfolio would be hurt by any devaluation." But it was too late. The
reflexivity theory played a cruel joke on its creator. And with the Russian
currency too. 


Provinces flock to their favorite villain -- the Moscow mayor

VLADIVOSTOK, Russia, Dec 16 (AFP) - Anna Fyodorova is baffled by which of this
isolated port's two self-declared mayors is the real thing. But she aches to
see pugnacious Moscow chief Yury Luzhkov become her next president.
"Look at this mess," said Fyodorova, pointing sceptically at the gray mayor's
building. Holed-up inside are two men -- Viktor Cherepkov and Yury Kapylov --
each of whom claims Vladivostok's top office for himself.
"They are lunatics, both of them," the city native explained. "Nothing like
this ever happens in Moscow. They have a real master who knows how to pave
streets and keep order. But look at our streets. Look at our houses."
Conventional wisdom suggests that Russian provinces' greatest villains are
Moscow bureaucrats who hoard all of the country's wealth at the expense of the
neglected and poorer regions.
Luzhkov's chances in the 2000 presidential polls are thought to be weakened by
this inherent provincial distrust of all things Moscow.
But the bumbling performance of many regional administrations and Luzhkov's
frequent and vociferous criticism of the Russian government have made Moscow's
bullet-headed mayor into something of a provincial hero.
As Fyodorova puts it: "Luzhkov would kick both of our mayors out and finally
make something of this place."
Cherepkov and Kapylov are battling for supremacy in a port that currently sees
500 apartment buildings standing without any heat. The streets Fyodorova
complains of are sloshing in thick mud and rarely lit at night.
Police have mostly abandoned their patrol cars because there is almost no cash
left in city coffers to pay for gasoline.
And services that still function are split in allegiance between Cherepkov --
who refuses to recognise a presidential decree firing him last week -- and
local governor appointee Kapylov.
"The situation is catastrophic. We live from day to day. Even in the war years
we had energy supplies," said Alexander Lutsenko, deputy head of regional
energy provider Dalenergo.
"When the center does not solve our problems, our local leaders begin clashing
heads," Lutsenko said. "Now I don't even know which of our two respected
mayors should be collecting the electricity bill."
Dalenergo is itself flirting with bankruptcy and can no longer afford to
provide the city with heating on credit. Lutsenko is urging either self-
declared mayor to pay the energy bill or the entire city will go dark next
But neither has, leaving Vladivostok with sporadic power outages this winter
that has locals contemplating the warm and well-lit apartments of Moscow.
Although Vladivostok offers a stark example, infighting between competing
factions in local government have also disrupted life in other regions,
including Saint Petersburg and Nizhny Novgorod.
Many of them are suddenly stretching for support to the Moscow mayor, who they
credit with running a tight ship that has made the Russian capital into a
Luzhkov's critics point out that any city raking in 90 percent of all foreign
investments in Russia would flourish in no time, adding that Moscow has
progressed despite Luzhkov's autocratic rule, not because of it.
But Luzhkov's one-month-old political movement -- Otechestvo, or fatherland --
has snowballed into the provinces and has already enlisted 20 regional heads
into its ranks.
These included Nizhny Novgorod mayor Ivan Sklyarov and Yekaterinburg mayor
Arkady Chernetsky, heads of two districts that have twice helped bring
President Boris Yeltsin into power.
The mayoral dispute in Vladivostok meanwhile should be decided next month when
the city holds an election.
But pensioner Fyodorova flatly ruled out showing up to the polls.
"There are two of them now and it's still no good," said said. "When Luzhkov
runs, I will vote." 


>From Russia Today press summaries
December 15, 1998
START 2: There Cannot Be Bargaining 
On Tuesday, the Duma council failed to make a decision on consideration and
ratification of the START 2 arms-reduction treaty. 
Parliamentarians instead chose to again postpone discussion of the issue
indefinitely. The daily said the Communist Party is responsible for the delay,
because the Communists have not yet come to a decision about the treaty. 
Vladimir Lukin, head of the Duma's Foreign Affairs Committee, said the "delay
tactics resulted from a serious controversy among the Communists over START 2
ratification." All other Duma factions except for the Communists have already
agreed on their stance regarding the treaty. For example, the Liberal
Democrats are unanimously opposed to START 2, while Our Home Is Russia,
Yabloko and the Russian Regions factions are prepared to ratify it. 
This position of the rightist faction is a result of government's work with
the Duma, Izvestiya wrote. On Dec. 8, Prime Minister Yevgeny Primakov met with
Duma leaders and discussed the economic and military aspects of the treaty.
The premier managed to persuade them of the need for START 2 ratification, the
daily wrote. 
The daily also printed the article "The Treaty and the Future of Strategic
Nuclear Forces of Russia," written by First Deputy Prime Minister Yury
Maslyukov. The article discussed the arguments regarding the treaty and
demonstrated the government's logic in supporting it. The daily noted that
Maslyukov, a member of the Communist faction, has become a proponent of START
2 ratification. 
RUSSIA TODAY Notes: The U.S. and Russia inked the START 2 treaty in 1993.
According to the agreement, each side pledges to cut deployed nuclear warheads
to 3,500 by the year 2007. However, the Duma has dragged its feet on
ratification, fearing the country lacks the funds to do so and that compliance
with the treaty would hurt the cash-strapped military's defense capabilities.
The Russian government, however, has been pressing for ratification, hoping
the move would encourage the IMF to provide further credits to Moscow. 



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