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Johnson's Russia List
 

 

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


Johnson's Russia List
#2523
17 December 1998
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Kremlin says Iraq raid may wreck START-2.
2. Reuters: Russia slams ``outrageous'' strikes on Iraq.
3. Newsweek: This Russian Is Not A Bear. (Interview with former
prime minister Chernomyrdin).

4. Nickolai Butkevich Article on Krasnodar antisemitic pamphlets.
5. Sofia's Trud: Lebed Views Situation in Russia, Upcoming Elections.
6. Komsomolskaya Pravda: Kiriyenko on Center-Right Political Bloc.
7. PONARS: Stephen Hanson, Breaking the Vicious Cycle of Uncertainty in 
Post-Communist Russia.

8. Rossiyskaya Gazeta: Aleksandr Batygin, "They Were Not Right, But 
They Called Themselves the Right Wing." ('Political Bankrupts' Bid to Form 
Center-Right Bloc).

9. Reuters: Russian Communists blast US on Iraq, want more arms.]

*******

#1
Kremlin says Iraq raid may wreck START-2 -agencies

MOSCOW, Dec 17 (Reuters) - U.S. air strikes against Iraq may have wrecked
chances of the Russian parliament agreeing to ratify the 1993 START-2
nuclear arms reduction treaty with the United States, a senior Kremlin
official said on Thursday. 
``You can forget about START-2 ratification,'' Sergei Prikhodko, President
Boris Yeltsin's deputy chief-of-staff for foreign affairs, was quoted as
saying by Itar-Tass and RIA news agencies. 
He said he was basing his forecast on statements by members of the State
Duma lower house on Thursday. 
Communist leader Gennady Zyuganov, whose party is the biggest in
parliament and has long been reluctant to ratify the START-2 treaty, said
there was now ``no point'' in discussing it. He called for an increase in
arms spending to counter what he called ``state terrorism'' on the part of
the United States. 
But First Deputy Prime Minister Yuri Maslyukov, a moderate Communist who
joined the government in September, was quoted as telling fellow party
members they should ratify START-2 as soon as possible. 
The Kremlin has been urging ratification but the Duma has complained
Russia simply cannot afford the costly process of taking missiles out of
service without more financial help from the United States. Some Communists
also argue Russia should not be reducing its defences. 
Prikhodko was also quoted as confirming that Russia had not been
officially informed of the strikes before the attack on Iraq began, although
he had been told of the plans by French President Jacques Chirac during a
telephone conversation. 

*******

#2
Russia slams ``outrageous'' strikes on Iraq
By Patrick Worsnip

MOSCOW, Dec 17 (Reuters) - Russia's leaders angrily denounced U.S. and
British missile strikes against Iraq on Thursday, and a wave of
anti-American wrath erupted in the nation's parliament. 
President Boris Yeltsin said the strikes, aimed at punishing Baghdad for
failing to cooperate with U.N. arms inspections, ``crudely violated'' the
United Nations charter and he called for them to be halted immediately. 
``It is outrageous that the strike was launched at the very moment when
the (U.N.) Security Council was still discussing this issue,'' Prime
Minister Yevgeny Primakov told his cabinet. 
Yeltsin met Primakov and political and military aides in the Kremlin to
discuss the attacks, which marked a major setback for Moscow's attempts to
solve the crisis diplomatically. He also recalled his foreign and defence
ministers from foreign tours. 
The State Duma lower house of parliament cancelled other business to
discuss Iraq and opposition Communist leader Gennady Zyuganov, whose party
is the biggest in the chamber, said the 1999 budget should now be revised to
increase defence spending. 
Some officials called into question the chances of the Duma ratifying the
U.S.-Russian START-2 strategic arms accord. 
Yeltsin, in a statement issued by his office, said the military action was
``fraught with the most dramatic consequences'' for the Gulf region and that
a diplomatic approach was the only way to resolve the Iraq problem. 
``By taking unprovoked military action, the United States and Britain have
crudely violated the U.N. charter and generally accepted principles of
international law and the norms and rules of responsible behaviour of
states,'' he said. 
Primakov, an Arabist who has mediated in the past with Iraqi President
Saddam Hussein, said the U.N. Security Council would meet again on Moscow's
initiative to discuss the crisis. 
``This action lies fully on the conscience of the Americans,'' Primakov
told his cabinet at the start of a regular meeting. 
U.S. forces in the Gulf pounded Iraq on Thursday after U.N. inspectors
charged with destroying Iraq's chemical, biological and nuclear weapons
programmes reported that Baghdad was not cooperating with their efforts. 
Yeltsin, who has been laid low with illness for much of the past two
months, met Primakov, the chief of the general staff, General Anatoly
Kvashnin, and Kremlin security adviser Nikolai Bordyuzha to discuss the Iraq
crisis. 
Yeltsin also spoke by telephone to Chinese President Jiang Zemin, and the
Kremlin said the two men ``noted with satisfaction that their positions
coincided'' on the Iraq crisis. 
Yeltsin, who went on television to call the strikes ``unacceptable,'' said
Russia demanded that Washington and London put an immediate end to military
action, show restraint and not allow a further escalation of the conflict. 
There was a much stronger statement from Zyuganov, who accused the United
States of ``terrorism'' that could lead to world war and called for more
military spending. 
``Budget spending on national defence should be significantly strengthened
and increased,'' he told the Duma, which is due to begin debate on the much
delayed 1999 budget next week. 
Both Yeltsin and Primakov said the strikes had come just as the Security
Council was getting to grips with the Iraq problem, an implicit accusation
that the United States and Britain were trying to prevent the Iraq crisis
being resolved peacefully. 
Russia, long sympathetic to Iraq, wants to stage a Security Council
``comprehensive review'' of Iraq's progress in scrapping its weapons of mass
destruction, in the hope this will lead to an easing of U.N. sanctions
imposed on Baghdad in 1990. 
Iraq says, however, the United States and Britain are determined not to
lift the sanctions, no matter what Iraq does. 
A major focus of Russian anger in the Iraq crisis has been chief U.N. arms
inspector Richard Butler, who was accused by Foreign Minister Igor Ivanov on
Wednesday of ``grossly exceeding his authority'' by recalling his team from
Iraq. 
``Butler has not played the best role in this story,'' Primakov said on
Thursday. ``He was in Moscow and said three or four files would be closed,
that the work was going fine, and then, without consultation, he withdrew
his personnel and a strike was launched.'' 

*******

#3
Newsweek
December 21, 1998
[for personal use only]
Interview
This Russian Is Not A Bear
My country is not collapsing, it is not falling into chaos. The situation
is difficult, but not desperate. --Viktor Chernomyrdin 

On the record, at least, Viktor Chernomyrdin remains stubbornly bullish
about his beleaguered country. Earlier this month the former Russian prime
minister addressed Global Panel, an annual business seminar in the
Netherlands. At a news conference there, he maintained that foreign
investors have not been scared off by the political and economic turmoil in
Russia, and even brushed aside suggestions that the Russian economy is in
chaos. The former head of Gazprom, Russia's huge gas and energy company,
Chernomyrdin, 60, is probably one of the richest men in Russia. But his
political fortunes have fluctuated. Boris Yeltsin made him prime minister
in 1992, fired him in March of this year, reappointed him in August--only
to have the Duma reject the nomination. Chernomyrdin heads Our Home Is
Russia, a center-right political party he founded in 1995, and is a likely
candidate for the presidency in elections scheduled for the year 2000.
While in The Hague recently he talked with NEWSWEEK's Friso Endt. Excerpts: 

ENDT: Can democracy survive in Russia? 
CHERNOMYRDIN: Whatever people in the West are saying or writing, democracy
will prevail in Russia. When I took over the government in 1989 there was
not one private bank in Russia; people had never been educated to run a
private enterprise. When I left, a middle class had been created--counting
20 percent of the population--and we had hundreds of private banks. We
could have achieved more, I agree, but the leftist majority in the Duma,
our parliament, blocked every move to put the economy and monetary
situation on its feet. 
The Russian economy is in deep crisis. How much worse will it get this
winter? How will ordinary Russians survive? 
It is not as tragic as you imagine. Imports fell in September and October.
But today they are back on the same level as last August. Shops are full
again. 
How come? Where is the money coming from? 
I suppose companies and enterprises are making less in the way of profits.
But you can be certain of one thing: there's enough food in Russia. If
there's a food problem, it's a matter of a distribution problem. The 1997
harvest was a record harvest; the 1998 one was less abundant. But really,
there's enough. 
Criminal organizations have grown extremely powerful in Russia. Your mafia
is almighty. Can they be brought under control? Are they a serious danger
to democracy? 
The mafia is not almighty in my country. We have taken steps towards
democracy in the past years. But to go from dictatorship to democracy is an
extremely difficult process. 
Boris Yeltsin is chronically ailing. Is he able to function? Should he step
down? Would you support earlier presidential elections? 
Everybody has the right to be ill once in a while. I know that Yeltsin is
perfectly able to run the country. And earlier elections would be a very
bad idea. 
Do you intend to be a candidate for the presidency in 2000? 
Let's first turn our attention to the parliamentary elections of next year.
After that we'll see. I might be a candidate, yes, but first the outcome of
next year's elections. 
As we approach the millennium, some Western experts fear that Russia's
faltering computers could set off catastrophic explosions in your country's
nuclear plants and missiles in the early minutes of Jan. 1, 2000. 
Our computer systems are our own, Russian-made computer systems. Indeed,
they are a bit old-fashioned compared to the systems in the West. I don't
think anything will go wrong. But of course I am not an expert. 
Do you feel responsible for the crisis in your country? 
Yes and no. Of course we, the government, had a certain responsibility. But
when I came into office seven years ago we still had laws from the Soviet
era. Under these circumstances a free-market economy was introduced. What
can a normal human being do about such developments? We faced a
hyperinflation of 300 percent; when I left last March this figure stood at
11 percent. Of course we wanted to do more, but the damned Duma ... 
You're always hiding behind the Duma. Tell me, do you have grandchildren? 
[Smiling] Yes, oh yes. Three. 
How about your responsibility to their future life? 
That's why I am staying in politics, for the safeguarding of the next
generation's future. 
Russia is in chaos. People may go hungry this winter. It's doubtful the
International Monetary Fund will help you out. Can you explain why Russia
hasn't collapsed completely? 
[Angrily] How do you know all these things? Who told you all this? 
I read my newspapers. 
Don't read the newspapers--I don't! Russia is not collapsing, it is not
falling into chaos. The situation is complex and difficult, but not
desperate. You can compare the situation to traffic rules. A driver may
have a destination, but if he doesn't stick to the traffic rules he will
never reach his destination. That's what the Russian people should do to
reach their objective--stick to the rules. 

******

#4
Date: Wed, 16 Dec 1998 
From: Nickolai Butkevich <nbutkevich@ucsj.com>
Subject: Article on Krasnodar antisemitic pamphlets

Dear David, 
I translated this article for my organization (The Union of Councils for
Soviet Jews) and thought it might be JRL worthy. 
Best regards and keep up the good work! 
Nickolai Butkevich 

Krasnodar Fascists Call for Genocide 
Kommersant 
Tuesday, December 15, 1998 
No. 233 

Russian Fascists have taken action again-- this time in Krasnodar. On Friday,
flyers that called for the killing of all Jews in Krasnodar Krai were put into
local mailboxes. The flyers also contained a call to promote the candidacy of
the Krai's governor Nikolai Kondratenko, who long ago earned fame as a fierce
"fighter against Zionism", for the presidency of Russia. The city prosecutor
has begun an investigation of the incident. 

[Translator's note: The following is the text of the flyer, a copy of which
was faxed to State Duma deputy Iosif Kobzon by the mayor of Krasnodar, 
Valery Samoilenko.] 
----------------------------------------------------------------------
Appeal 

To all residents of this house 

Respected kubantsy [Translator's note: Residents of Krasnodar Krai]. You must
quickly help our dear, flourishing Kuban get rid of the damned Judeo-Kikes! 

Destroy their apartments, burn down their homes! 

They have no place here on Kuban soil. Let us help our beloved leader N. I.
Kondratenko in this difficult struggle. 

Let us begin to actively collect votes to promote his candidacy for
president! 

All those who hide the damn Kikes will be numbered among them and also
destroyed. 

The Kikes will be destroyed and victory will be ours!!! 

----------------------------------------------------------------------

This antisemitic act in Krasnodar does not appear to be coincidental. A month
and a half ago in Krasnodar city, the regional administration funded the
publication of a book by a local writer and philosopher named Seleznev. The
book was entitled "The Secret History of 20th Century Russia." In the opinion
of city officials, the book is, to put it mildly, antisemitic. Nevertheless,
the regional administration recommended that it be included in the
curricula of
local schools. This recommendation created a scandal-the city media sharply
criticized the nationalistic policies of the regional administration and its
leader, Nikolai Kondratenko, who long ago openly declared that one of the
regional government's tasks is the struggle against Zionism. 
A reaction to this media criticism by local fascists was not long in
coming. On
Friday, dozens of homes had flyers placed in their mailboxes. The authors of
these flyers called upon kubantsy to, "get rid of the damned Judeo-Kikes." In
addition, the flyer stated that, "all those who hide the damned Kikes will be
numbered among them and also destroyed" (the original spelling and punctuation
of the document has not been changed). Informing the readers of their flyers
that victory would be theirs, the local fascists called for the presidential
candidacy of their "beloved leader" Nikolai Kondratenko to be promoted. 
By the way, Kondratenko himself has already attracted the attention of the
Prosecutor General when it come to "the national question." After his noisy
speech at the April forum of Kuban youth, when the head of Krasnodar Krai's
administration blamed Zionists for the collapse of the Russian economy and for
trying to destroy the Russian nation, a scandal erupted. The regional
prosecutor undertook an investigation and then issued a resolution
declining to
press criminal charges. But by a decree from Yuri Skuratov, this decision was
changed and now specialists from the Russian State Committee of Publishing and
a council of experts from the Presidential Commission for Action against
Political Extremism are using their expertise to examine the governor's
pronouncements. After that it will be decided whether or not to bring criminal
charges against him. 
Regarding the distribution of the flyers, on the same day they were given out,
city and district officials started getting phone calls from residents
informing them of the antisemitic act. Some residents of Krasnodar sent the
flyers to the mayor. Mayor Valery Samoilenko sent one of them to State Duma
deputy Iosif Kobzon and wrote on it, "Yosif, how good it is that you live in
Moscow." He then went to Yuri Skuratov with the request that he stamp out
"national extremism." But the Prosecutor General has not yet responded, he is
busy celebrating the holidays. 
Translated by: Nickolai Butkevich 
December 15, 1998 

For more information about the events in the former Soviet Union visit our
website at <http://www.fsumonitor.com> or contact
Lindsey Paige Taxman directly at ltaxman@ucsj.com. 
UCSJ 1819 H St. NW #230 Washington, DC 20006 
Office: (202) 775-9770 Fax: (202) 775-9776 

*******

#5
Lebed Views Situation in Russia, Upcoming Elections 

Sofia's Trud in Bulgarian
15 December 1998
[translation for personal use only]
First part of interview with Krasnoyarsk Governor Aleksandr
Lebed by Dimitrina Georgieva; place and date not given: "Daddy Is
Coming With an Ax"

[Georgieva] Aleksandr Ivanovich, why is it so tense in Russia?
[Lebed] Certain processes, not entirely legal and civilized -- to put
it mildly -- took place in the last seven years. The lion's share of our
huge national wealth has been seized by 5-6 percent of the population. The
middle class decreased to 6-10 percent, and, today, the officers,
engineers, teachers, and physicians are no longer middle class. About 80
percent of the people became lumpen. It is clear that such a situation
cannot continue for a long time. Attempts to restore justice will follow. 
"Justice" is a crucial concept in Russia. One can be cruel but just, and
people in Russia will always understand you. At present, somebody needs a
destabilization of the situation.
[Georgieva] Aleksandr Ivanovich, in an interview prior to the 1996
presidential elections, you denied being a democrat and said: "I am Lebed,
and I hover over the center." It appears that this space has become very
popular among the Russian politicians at the current stage of Russian
political life. For what is your Russian People's Republican Partystruggling?
[Lebed] We already built Communism for 73 years and could not
construct it. This was the bright future, in which we promised an
apartment to every man. Afterward, this label collapsed amidst thunder and
dust, and another was stuck in its place -- democracy. This actually is
another variety of the bright future. What I want to do is to make it
possible for everyone to feel well now, during the 70-80 years God has
given us. Conditions must be created for the achievement of this goal. I
am saying conditions, because the time when it was possible to force the
people with a stick to do something are over. Only slaves can be forced to
dig ditches and carry stones, in short -- to perform uncivilized acts. The
pride and self-confidence of the people must be restored, and conditions
must be created in which the results of their work will be protected, their
hands will be untied, and they will be able to construct alone their life.
[Georgieva] In other words, you are saying that we finally must learn
to work for ourselves?
[Lebed] Absolutely, only for ourselves. We must not be afraid of the
word "my." This concept is deeply inherent in every man from his birth. 
We must not be afraid of the word "interest." Man must be interested in
working and profiting from his work. Therefore, one of the basic goals is
to create a powerful middle class. Every country that wants guarantees
against revolutions, disturbances, shocks, conflicts, and wars must make
sure that its social structure is based on a powerful class of owners --
big, small, and medium-size owners. Owners do not need revolutions.
[Georgieva] The parties in Russia are feverishly preparing for
elections. The next elections are for the Duma. Nothing has been heard
about your party. Are you preparing for the elections?
[Lebed] There are 385 days until the parliamentary elections. Of
course we are preparing, but why should I get exited already? Remember the
old story: the father asks the son "son, what are you doing?" "I am
whittling with the knife, father." "Good, good, carry on, daddy will come
with the ax afterward and repair what you have done."
[Georgieva] Aleksandr Ivanovich, according to you, could the
presidential elections in Russia take place before the elections for theDuma?
[Lebed] It is possible.
[Georgieva] Are you ready for this?
[Lebed] I still have not expressed a willingness to participate in
the elections.
[Georgieva] Aleksandr Ivanovich, as a secretary of the Security
Council, you had the chance to peek behind the government's stage. What
did you see there?
[Lebed] Nothing nice.
[Georgieva] Is it difficult to work near Yeltsin?
[Lebed] On 12 August 1996, I tried to tell him what the real
situation in the country was. He listened to me for about three minutes,
turned around, and left the room. I have not seen him since. He is not
interested in the real situation. He is living in a world of illusions, in
a virtual world. Somebody is whispering in his ear that the reforms are
progressing well, that the people love him, and that everything is fine. 
He likes it that way.

*******

#6
Kiriyenko on Center-Right Political Bloc 

Komsomolskaya Pravda 
15 December 1998
[translation for personal use only]
Article by Nikolay Yefimovich under the "Right-Wing Affairs"
rubric: "Democrats of Every Stripe, Unite!"

Contrary to many predictions, former premier Sergey Kiriyenko turned
up at the President Hotel last Thursday [10 December] for the inaugural
meeting of the organizing committee of the center-right coalition. He even
joined the Coordination Council. At the news conference, he sat next to
Boris Nemtsov.
Privately, this is being interpreted in various ways. Some believe
that the former premier has decided not to make a complete break with his
former comrades. Who knows what fate holds in store for his own political
movement? He could end up being a commander without an army. Others feel
that Kiriyenko is prepared to head the center-right bloc. But the former
premier certainly has not abandoned the idea of forming his own political
movement. Moreover, he intends to register this movement with the Ministry
of Justice by 19 December, so that he will be able to contest the 1999 Duma
elections."Everyone wants to know which political leaders will sit down at the
general table and in what order of rank," Sergey Kiriyenko said to your
Komsomolskaya Pravda correspondent. "But the question is really how to
unite people who can vote. Our country is faced with a fundamental choice.
Either we find social accord within the framework of democracy, or we
slide toward a dictatorship."
Sergey Kiriyenko does not regard the center-right bloc as his only
ally. He also sees Grigoriy Yavlinskiy and his Yabloko movement and the
NDR [Russia Is Our Home] as allies. In fact, even Yuriy Luzhkov, if he
would stop looking to the center-left. Admittedly, the former premier told
your Komsomolskaya Pravda correspondent that he has not had any talks with
the Moscow mayor on a political alliance, although he would be prepared todo
so.
"As far as I am concerned, allies are not limited to those who met at
the President Hotel 10 December," Sergey Vladilenovich remarked. Moreover,
he does not rule out the possibility that there will be several lists from
the democratic coalition in the 1999 Duma elections. It is still too early
to say at present whether the former premier will head the center-right
bloc or whether he will try to get elected to the Duma independently.
According to Kiriyenko, the inaugural meeting at the President Hotel
is only the first step toward uniting democrats of various colors: The
process is only just beginning. Possibly for this reason and contrary to
expectation, the organizing committee did not discuss candidates for the
leadership of the new bloc. Boris Nemtsov merely reiterated at the news
conference that the movement would be headed by the person with the highest
rating. So far, the following have said that they are joining the
movement: Democratic Russia; the Forward, Russia! movement; Yuriy
Chernichenko's Peasants Party; Vladimir Lysenko's Republican Party; and
movements such as Sergey Filatov's Congress of the Intelligentsia, the
Guild of Realtors, the Center-Right Youth Organization, and the Valuers
Society.... The initiators of the right-wing bloc have said that they want
to make their liberal movement truly a movement of the people. They are
counting on the emerging middle class, private farmers, enterprising young
people, and anyone who has something to lose and for whom freedom means
more than just extra rations.
"We are destined to get into the Duma," former vice premier Boris
Nemtsov said. "Opinion polls show that, if everyone ideologically close to
us were to unite, our movement would be guaranteed a majority in the Duma. 
The new movement will live on subscriptions. Moreover, the center-right
counts on entrepreneurs with sound judgment. We will not take money from
oligarchs!" Nemtsov solemnly promised.
Like Luzhkov's Fatherland Movement, the democratic coalition has
attracted cultural figures. Writers and artists were present at the
President Hotel. Mikhail Zhvanetskiy refused to settle for the role of VIP
and became involved in the discussion on the organizing committee's
Political Statement. He even introduced the main amendment: To appeal to
the people and to democrats in simple human language. And, if you make a
promise to people, to definitely keep your word. Particularly now, when
the political elite has essentially been discredited in the eyes of the
people. The politicians agreed with the famous satirist.

*******

#7
Program on New Approaches to Russian Security (PONARS)
Davis Center for Russian Studies, Harvard University
program website: http://www.fas.harvard.edu/~ponars

Breaking the Vicious Cycle of Uncertainty in Post-Communist Russia
By Stephen E. Hanson (hanson@fas.harvard.edu)
University of Washington, November 1998

In the wake of communism's collapse in 1991, many Western observers
expected post-Soviet Russia to undergo a relatively smooth transition to
democracy and a market economy. Instead, for the past seven years, the
Russian Federation has lurched from one severe crisis to another: extremely
high inflation in 1992; a near civil war between forces supporting the
president and the Congress of People's Deputies in 1993; a costly, bloody,
and inept military invasion of Chechnya beginning in 1994, disturbingly
strong electoral performances by anti-liberal ideologues in parliamentary
and presidential elections in 1993, 1995 and 1996; and now a devastating
financial crisis that threatens to undermine the political and economic
framework of the current regime altogether. What explains this dismal
record? What can the West now do about it? 
A key but underemphasized factor underlying the political and economic
turmoil in post-communist Russia is the high degree of uncertainty about the
future that has confronted Russian elites and ordinary people alike since
the breakup of the USSR. In the face of such high uncertainty, long-term
investments of every sort, both economic and political, have become
irrational. Unfortunately, a society in which all decision-making is
overwhelmingly short term in nature is bound to generate repeated
institutional crises--which make the future even more uncertain.
Understanding the dynamics of this vicious cycle of uncertainty is crucial,
I argue, if Russia and the West hope to devise effective policies for
breaking out of it. 

Economic Effects of Uncertainty 

The original strategy for rapid marketization of the post-Soviet economy
in Russia was based upon the theory that macroeconomic stabilization, price
and tariff liberalization, and privatization of state property would, after
a painful but relatively quick period of adjustment, generate increased
efficiency and economic growth. By 1997, substantial progress had been
achieved in these main policy arenas: inflation was down to single digits
for the year, price controls had largely been abandoned, and around
two-thirds of state property had been formally transferred to the private
sector. 
As the decade comes to a close, however, Russia still suffers both from a
continuing dramatic decline in GDP and a renewed threat of hyperinflation.
Why? Analysts have identified several economic reasons for these bad
outcomes: comparatively low levels of foreign and domestic direct
investment, a very limited degree of enterprise and farm restructuring,
capital flight amounting to tens of billions of dollars per year, severe
problems with tax collection, and, as a result of all the above factors, an
increasing dependence on unsustainable short-term debt to finance basic
government operations. 
Each of these problems flows directly from the choices of rational actors
in a society facing extraordinarily high levels of uncertainty. The paucity
of large-scale direct investment in the Russian economy by foreign and
domestic actors alike is quite easily explained: given the political and
social turbulence of the past decade, only a fool would sink substantial
resources into projects that might require years to yield positive returns.
Russia's inheritance of a crumbling and technologically outdated
infrastructure exacerbated this dilemma, since, as a result, even light
industry and consumer goods production often require significant initial
capital outlays that no rational actor will make. It is understandable that
Russian entrepreneurs have concentrated on sectors with low start-up costs,
like "shuttle trading" (buying goods abroad and selling them on the streets)
and the export of raw materials through old Soviet distribution networks. 
Nor should economists have been surprised to discover that the new
"owners" of rapidly privatized state factories and collective farms didn't
often sink scarce resources into full-scale restructuring. To do so would be
rational only if one expected the rules of competitive capitalism to be the
"only game in town" several years from now--but such confidence about the
future of market institutions in Russia is itself hardly rational. A prudent
factory manager is forced to hedge his bets, leasing some parts of his
enterprise to market-oriented entrepreneurs and stripping other factory
assets to sell for cash, but also cultivating personal ties to local and
national politicians, pleading for continued state subsidies, and leaving
large numbers of workers on the payroll (even if there are no funds to pay
them with) so as not to diminish the factory's political clout in case of an
anti-market political backlash. It is rational, too, to put at least a
certain percentage of the enterprise's liquid assets into dollars or
personal offshore accounts: given high social uncertainty, the costs of
possible future prosecution for this sort of corruption must be discounted
heavily and weighed against the benefits of having a "nest egg" in case of
economic meltdown. The same sort of reasoning applies to decisions to pay or
evade taxes: to the extent that a state which may not exist much longer must
rely on personal reporting of income, rational actors will quite
understandably conceal whatever they can. 
Certainly Western economists were right to warn against the inflationary
effects of printing money for government spending in the economic
environment described above: when revolutionary change is a real
possibility, the value of large quantities of government-issued paper is
likely to decline especially rapidly. IMF advice to raise tax revenues
substantially, however, was also unrealistic under the circumstances.
Finally, given high social uncertainty, basing government finance on
short-term bonds couldn't work either: rational actors invest only when
offered absurdly high interest rates, but the resulting debt burden made
subsequent government pledges to preserve low inflation and a stable ruble
exchange rate even less credible. Arguably, then, it was the inability of
the Russian Federation to escape the vicious cycle of uncertainty, and not
so much bad economic policy decisions per se, that underlay the financial
collapse of 1998. 

Political Effects of Uncertainty 

As more and more economists have begun to see how the warped incentives
of an uncertain society can undermine economic reform, increased emphasis
has been placed on the need for "good governance" during market transitions.
Governments, we are told, must observe and implement the "rule of law" in
order to reduce uncertainty about the sanctity of contracts and the
inviolability of property rights. A well-functioning judiciary is the
crucial foundation for this. Supporters of reform also call for the
formation of a stable electoral system based on political parties that truly
represent their constituents. Above all, bureaucratic corruption must
somehow be brought under control so that economic policy is made consistent
and credible. 
Unfortunately, such well-meaning advice also ignores the vicious cycle of
uncertainty. In extremely turbulent societies, rational actors are no more
likely to invest in long-term political institution-building than in
long-term economic projects. While everyone would undoubtedly be better off
in a society with stable legal procedures, truly representative democratic
institutions, and uncorrupted public officials, no single individual can
contribute anything significant to ensuring such an outcome. Indeed, in a
society where everyone assumes that the government may collapse within a few
years or months, individuals who respect the rule of law inevitably lose
out: they get neither the benefits of a law-governed society nor the payoffs
from corruption. Under highly uncertain conditions, then, rational citizens
should ignore laws when they can and organize only when directly threatened;
rational judges should worry more about pleasing powerful patrons than
upholding abstract legal principles; and rational politicians should fight
for control over state assets rather than pay the high cost of developing
genuine national organizations to represent ordinary people. Attempts to
create special government bodies to control corruption in such an
environment just recreate the problem on a higher level, since every
watchdog agency is, by definition, in an even better position to extract
bribes. In short, under conditions of high uncertainty, general and
perpetual corruption is precisely what standard economic theory would predict. 
Environments of high uncertainty have another perverse political effect:
they tend to promote radical ideologues while punishing moderates. In an
environment of repeated political crisis, ordinary, pragmatic politicians
are forced to change their public positions every few months. Over time,
then, avowed "centrists" lose all credibility. The only consistent people in
chaotic societies are radicals with inflexible views of the long-run future.
The persistent uncertainty in Russia since 1990 has made extremists like
Vladimir Zhirinovskii and Gennadii Ziuganov--both of whom had by 1993
already published quite explicit and detailed manifestos calling for the
resurrection of empire and warning of a supposed global conspiracy to
destroy Russia--seem relatively principled and credible to their supporters.
To be sure, the majority of Russian voters continue to reject extremism. But
as long as significant minorities vote for anti-liberal ideologues, the
stability of Russian electoral democracy will remain in doubt, further
deepening uncertainty about the political future. Given Russia's significant
arsenal of biological, chemical, and nuclear weapons, this is a dynamic that
should be of direct concern to the West. 

Breaking the Cycle

Fortunately, there are potential methods for breaking the vicious cycle
of uncertainty that do not require the victory of extremist ideologues. One
possible solution is to design and publicize a more realistic long-term
strategy for Russian integration into the peaceful and wealthy West, instead
of demanding impossible short-term transformations. For those post-communist
countries closest to Western Europe, widespread calculations about the
feasibility of eventual membership in NATO and/or the European Union have
done much to extend time horizons and make cooperative political and
economic behavior individually rational. Indeed, in East-Central Europe,
early individual decisions to build national democratic institutions and to
sink resources into long-term investment have generally paid off. A
widespread desire to be accepted as a part of "Europe," it appears, has thus
helped to moderate both short-term corruption and long-term extremism in
almost every post-communist European country. 
Another method for reducing social uncertainty involves the generation
and promotion of grass-roots networks of mutual trust and support. Even in
the most chaotic environments, ties of family, of friendship, and of mutual
experience keep social life from degenerating entirely into a "war of all
against all." People in established communities everywhere tend to develop
an acute sense for who can be trusted to engage in long-term cooperation and
who cannot. Where state institutions and formal economic laws cease to
function, informal ties of this sort become all the more important--as
indeed they are in Russia today. In time, such communities can become the
basis for the recruitment of committed activists interested in pooling their
resources on a national level to create effective political parties and
organized interest groups. As we enter the 21st century, we can expect that
such grass-roots mobilization in Russia will further rather than hinder the
progress of liberal institutions. Russians have already suffered through one
anti-liberal ideological experiment, and given any sort of workable
alternative, most would be very unlikely to support another one. The goals
of civil society activists in Russia today--better protection for small
business, more consistent law enforcement, more responsive local and federal
government, and so on--are generally highly compatible with Western ideals. 
However, US policy since 1991 has tended to short-circuit both Russian
faith in its long-term prospects for integration with the West and the
process of grass-roots political and economic organization, while
inadvertently encouraging the sorts of crises that deepen the vicious cycle
of uncertainty. IMF-sponsored economic reforms have been predicated upon the
mistaken idea that rapid transformations of Soviet institutions were crucial
to make reform "irreversible." Thus elites and masses alike have been
subjected to unsettling revolutionary changes in their daily life that were
bound to upset social confidence in the future. These initial shocks have
been followed in recent years by official Western recommendations to the
Yeltsin government to raise utility prices for domestic consumers to world
market levels within a few years, to fire huge numbers of workers in
important sectors of government and industry, and to impose stricter
bankruptcy laws on failing enterprises. All of these policies, once
proposed--even if never implemented--have tended to force average Russians
to think about their economic survival in the near term rather than their
best strategies for attaining wealth in the long run. At the same time, the
West has introduced a new source of uncertainty in the international arena
by proposing a policy of rapid NATO expansion that implicitly envisions the
potential incorporation of every country in Europe but Russia. To be sure,
the problem of uncertainty in post-communist Russia would have been enormous
in any case, and the inconsistencies of the Yeltsin administration itself
obviously haven't helped matters. Still, Western policy toward Russia has
demonstrated a remarkable insensitivity to the pernicious dynamics of social
uncertainty outlined above. 
One final implication of the analysis presented here is that "cultural"
explanations for what has gone wrong in Russia are at best partial and at
worst pernicious. It is far too easy for Western analysts to blame the poor
results of reforms in Russia on a supposed "authoritarian and collectivist"
mentality that has prevented citizens and entrepreneurs from behaving as
predicted by Western democratic and economic theory. Actually, as we have
seen, standard rational actor theory explains outcomes in Russia perfectly.
If so, it is outrageous to announce now that Russians have somehow "failed
to understand the market economy" and must be left to figure it out for
themselves. It is we who have failed to think through the logical
implications of the theoretical assumptions about human behavior upon which
the Russian reform strategy was originally predicated. 

********

#8
'Political Bankrupts' Bid to Form Center-Right Bloc 

Rossiyskaya Gazeta
15 December 1998
[translation for personal use only]
Report by Aleksandr Batygin: "They Were Not Right, But They
Called Themselves the Right Wing"

Leaders whose parties and movements are clearly political outsiders
last week spoke about forming a coalition: Russia's Democratic Choice,
Common Cause, the Peasant Party, and others intend to present themselves
under the banner of the new association.
Radical reformers have always emotionally called for coordinated
actions in the hour of need, but each time it has all ended in a lack of
coordination, mutual recriminations, fights to show who is more important,
and so on and so forth.
What happened at the constituent assembly of the center-right
coalition's organizational committee is in the same category, but is only a
statement of intent at the moment. The confident statement by one of the
participants in the gathering in the President Hotel, Boris Nemtsov -- "the
new coalition is bound to find its way into the Duma" -- is not based on
anything yet. This is like the assertion by the same author that the new
Russia should start driving Volga cars. Grigoriy Yavlinskiy, whose
movement would be a desirable addition to the bloc, commented skeptically
on the event as follows: "The number of this bloc's voters is equal to the
number of its organizers."
Those who have reduced Russia to its current sorry plight are putting
on the mantle of Russia's saviors again. Today those who love reforming by
Bolshevik methods are again declaring themselves to be prophets bringing
happiness to the people. Only are their wishes sincere? They have always
had one aim -- power. Gaydar and Chubays deprived millions of people of
their last savings, Kiriyenko even contrived to bankrupt the bankers 17
August. Today the political bankrupts continue to be convinced that
everything that they have done is correct and they are getting ready to
fight for power again. Truly "the dead have returned to haunt the living."
In Russia such things have always been described briefly and clearly: 
"They are fooling the people!" The Russian political club has not bothered
to wait for the New Year but has already started a real scuffle. Every day
another clique announces its far-reaching plans. Fatherland flirts with
the Communists, the weakened Russia Is Our Home [NDR] is not averse to
joining Fatherland on condition that "the boundaries are established
first." Lebed condemns Luzhkov -- the mayor has started an election
campaign before one has been announced; Oleg Sysuyev, first deputy head of
the President's Staff, publicly distances himself from organized structures
of the center-right bloc, but is being named in the corridors as the future
leader. The NDR and Yabloko are on the right, Fatherland is on the left,
others are vacillating, wondering whom to join so as not to disappear from
the political map...
Indeed, whom are our democrats fooling as they play their political
games? They will likely get so carried away that they will not notice when
a salvo from the Aurora takes first place again.
But when will we start working, gentlemen and comrades?! So as to
create Russia, rather than ruin it.

*******

#9
Russian Communists blast US on Iraq, want more arms

MOSCOW, Dec 17 (Reuters) - The head of Russia's Communists, the biggest
party in parliament, accused the United States of ``terrorism'' that could
lead to world war in bombing Iraq and called on Thursday for an increase in
Moscow's defence spending. 
``Budget spending on national defence should be significantly strengthened
and increased,'' Gennady Zyuganov told the State Duma lower house of
parliament, which is due to begin debate on the much delayed 1999 budget
next week. 
Russia is in the depths of its worst economic crisis since the collapse of
Soviet communism and the armed forces are so short of funds that Prime
Minister Yevgeny Primakov recently said they were no longer capable of going
to war. 
Zyuganov also said there was no ``no point'' in the Duma ratifying the
1993 START-2 nuclear weapons reduction treaty with the United States.
Washington and the Kremlin have been pressing the Communist-led chamber to
ratify the document for years. 
President Boris Yeltsin and other officials strongly condemned the U.S.
and British missile strikes against Iraq. But Zyuganov's comments were much
tougher and he accused Yeltsin of allowing the United States to dominate
world affairs by abandoning Moscow's role as a superpower. 
However, representatives of all seven parties in the Duma condemned the
missile strikes. 
Zyuganov described the action, intended to force Baghdad to comply with
United Nations demands that it give up weapons of mass destruction, as ``an
act of state terrorism against the independent sovereign state of Iraq.'' 
``Gorbachev, Yeltsin and all those who helped them destroy the Soviet
Union, bear responsibility for this vandalism,'' he said referring to former
Soviet President Mikhail Gorbachev, who was forced from office in 1991 as
the union fell apart. 
``If the USSR still existed, this wouldn't have happened,'' Zyuganov said,
calling for a ``global front against those who are stirring up World War
Three.'' 
Even liberal members of parliament expressed outrage. 
Vladimir Lukin, a former Russian ambassador to Washington and the liberal
head of the Duma's foreign affairs committee, called for Moscow to
immediately restore economic relations with Baghdad, effectively abandoning
U.N. sanctions. 
Roman Popkovich, the chairman of the defence committee and a member of the
pro-Yeltsin Our Home is Russia party, said Russia should now review its
commitments under the 1990 Conventional Forces in Europe (CFE) Treaty, which
laid down the post-Cold War balance of forces on the continent. 

*******

 

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