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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

December 18, 1998    
This Date's Issues: 2524  2525  

Johnson's Russia List
#2525
18 December 1998
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Russian Warns U.S. on Iraq Crisis.
2. Jamestown Foundation Monitor: RUSSIAN PRESS WEIGHS IN AGAINST
U.S.-BRITISH AIRSTRIKES.

3. AP: Russian Panel OKs Tax Reduction.
4. Bloomberg: Yavlinsky Says Russian Government Must Overhaul Taxes, Laws.
5 Ilana Knab: Yavlinsky and the end of the end.
6. Yale Richmond: What Went Wrong in Russia.
7. Moscow Tribune: John Helmer, Russian Charades.
8. Philadelphia Inquirer: Trudy Rubin, Weldon leads needed exchange
between U.S., 
Russian legislators.

9. Kennan Institute meeting report on David Satter's talk on ""The Rise
of the Russian 
Criminal State."

10. Itar-Tass: Kokoshin Comments on Timing of Fatherland Founding Congress.
11. Komsomolskaya Pravda: Starovoytova Aide Says Communists Behind Killing.
12. Mayak Radio Network: Official on Negative Security Impact of NATO
Expansion.

(Colonel General Leonid Ivashov).
13. Ludmila Foster: Banking developments.
14. W. George Krasnow: Alexander Solzhenitsyn and the West.] 

********

#1
Russia Warns U.S. on Iraq Crisis 
By Barry Renfrew
December 18, 1998

MOSCOW (AP) -- Russia's relations with the United States and the West may
be seriously damaged by the U.S. attack on Iraq, wiping out years of
progress since the end of the Cold War, top military leaders warned today. 
President Boris Yeltsin and Russian leaders across the political
spectrum have denounced the U.S. and British attacks on Iraq and demanded
an immediate halt to the campaign. 
The Foreign Ministry said today it had recalled Russia's ambassador to
Britain for urgent consultations -- a day after it did the same thing with
the Russian ambassador to Washington. 
Russia also expressed its displeasure by ordering its defense minister
to skip today's scheduled meeting with NATO in Brussels, Belgium, sending
only an ambassador instead. 
Despite the disapproval, the Kremlin said diplomatic relations with
Washington and London would not be broken. 
The State Duma, the lower chamber of parliament, was to consider calls
today for Russia to unilaterally break U.N. sanctions against Iraq and
provide aid to Baghdad, a longtime Soviet and Russian friend. 
However, Foreign Minister Igor Ivanov cautioned that ``unilateral action
is not a solution to the situation around Iraq,'' the Interfax news agency
said. 
Communist Party leader Gennady Zyuganov met with Iraq's ambassador, and
ultranationalist Vladimir Zhirinovsky planned a visit to Baghdad, the
ITAR-Tass news agency reported. 
In unusually strong criticism, Gen. Leonid Ivashov of the Defense
Ministry said the attack could lead to a rift with the West. 
Moscow ``will be forced to change its military-political course and may
become the leader of a part of the world community that disagrees with the
(U.S.) dictate,'' he was quoted as saying by ITAR-Tass. 
Ivashov warned that the U.S. military might be using the attacks as a
model for a nuclear strike, Interfax reported. 
``Cruise missiles being used in this operation can carry both
conventional and nuclear weapons,'' Ivashov said, according to Interfax. 
The Russian navy was putting some units on alert because of the Iraq
crisis, but the move appeared purely symbolic and there was no deployment
of ships, officials said. The Russian military is not considered an
effective force after years of neglect. 

Russian Defense Minister Igor Sergeyev said today the U.S. and British
strikes ``flagrantly violated the norms of the international law and openly
ignored the world community's efforts to settle the situation.'' 
Sergeyev said Moscow's relations with NATO were threatened. ``How can we
talk about cooperation and partnership with the alliance now, when Russia's
opinion is openly ignored?'' he said. 
Yeltsin is under opposition pressure to curb ties with the West at a
time when he has lost much of his political clout because of health
problems and his failure to handle the country's worst economic crisis
since the 1991 Soviet collapse. 
Yeltsin's press spokesman, Dmitry Yakushkin, said today the president
did not want to damage ties with the West but that Russia could not accept
the attack on Iraq. 
``The president believes that under no circumstances should we slide
towards confrontation, but we should call things by their name. The
military strikes are unacceptable and should be stopped,'' Yakushkin said. 

*******

#2
Jamestown Foundation Monitor
18 December 1998

RUSSIAN PRESS WEIGHS IN AGAINST U.S.-BRITISH AIRSTRIKES. For the last
several days, the Russian media has focused primarily on the U.S.-British
air strikes against Iraq. And, like the Russia's government and its
politicians across the political spectrum, the Russian press was virtually
uniform today (December 18) in its condemnation of the strikes. A newspaper
headline today read: "To escape from impeachment, Clinton committed an act
of aggression." According to the daily, "the chronology of events testifies:
The operation against Iraq was planned before the report of [UN weapons
inspector Richard] Butler, which became the formal pretext for the missile
strikes" (Nezavisimaya gazeta, December 18).

A Russian daily led today with an article headlined: "War-sex romance--Iraqi
children suffer for Clinton's love." Underneath was a photograph of an Iraqi
mother holding her child in a hospital. The article largely consisted of
straight reporting on the conflict, but added: "Only the lazy are not
talking about the 'strange' concurrence of the strike on Iraq with the
planned vote on impeachment." The same paper featured another article in
today's issue, which noted that because of the air strikes, the State Duma
is likely to refuse to ratify the Start II Treaty. This, according to the
newspaper, will lead directly to Russia defaulting on its sovereign debt,
since Washington has made ratification of Start II a condition of further
credits from the International Monetary Fund, and without the IMF's seal of
approval, Russia will not be able to convince foreign creditors to
restructure its debts (Kommersant daily, December 18).

"Segodnya," for its part, wrote that President Clinton would have bombed
Iraq in any case--impeachment or not--given that he "does not submit to the
new rules of the international game, which are, sad to say, dictated by the
United States." The daily said it was also "sad to admit" that Russia's
"ruling elite" is incapable of opposing Washington either on the diplomatic
or the political level (Segodnya, December 18). "Novye izvestia," which also

led today with reporting on the conflict in the Persian Gulf, included an
article claiming that the air strikes against Iraq were aimed at forwarding
the interests of American oil companies, "whose position became wobbly in
recent months" because of falling oil prices. The daily noted, however, that
oil prices continued to drop on Thursday, after the first wave of air
strikes: "It is obvious that this will hardly suit the United States, which
means that new strikes can be expected" (Novye izvestia, December 18). The
paper wrote that the attacks threatened to create "an unprecedented crisis
in the relations between Russia and the West," one that could become "the
most serious of the whole post-Soviet period" (Izvestia, December 18).

*******

#3
Russian Panel OKs Tax Reduction 
By Vladimir Isachenkov
December 18, 1998

MOSCOW (AP) -- Russia's parliament today approved a Cabinet proposal to
lower two crucial taxes, hoping to aid ailing industries badly hit by the
economic crisis. 
The move is a big risk for the government, which desperately needs money
to pay its obligations now that the financial crisis has left it
practically broke. 
Parliament's lower house, the State Duma, tentatively approved a
government bill that would cut the value-added tax from the present 20
percent to 15 percent in March. 
The bill, approved on the first reading, calls for further reduction of
the value-added tax to 10 percent in 2000. The house didn't immediately set
a date for final approval of the bill. 
The value-added tax is one of Russia's key sources of tax income, and
international lenders like the International Monetary Fund have harshly
criticized the government's wish to reduce the tax. 
Lawmakers also approved the government's proposal to lower Russia's
profit tax from 35 percent to 30 percent. 
The government-proposed package of 19 tax bills also includes revised
personal income-tax tables that take into account the ruble's fall in value
since Russia's markets collapsed in August. 
Some taxes are going to rise. The Duma also approved a bill increasing
the sales tax on alcohol and gasoline. 
Prime Minister Yevgeny Primakov's Cabinet hopes the bills will help
streamline Russia's unwieldy tax system, provide conditions for economic
revival and encourage tax dodgers to pay what they owe. 
But critics warn that tax cuts will only further slash government
revenues for 1999, which are already expected to be far too inadequate to
cover the country's expenditures. 
The ruble continued its steady slide today, trading at 20.75 a dollar
compared to 20.7 Thursday. Before the crisis hit in August, the ruble was
at about 6 to the dollar. 
The ruble's fall has jacked up prices on imported goods, which account
for up to half of Russia's consumer market. The State Statistics Committee
said today that inflation in Russia has reached 73.4 percent so far this
year, after staying at less than 5 percent in seven months before the crisis. 

*******

#4
Yavlinsky Says Russian Government Must Overhaul Taxes, Laws

Washington, Dec. 17 (Bloomberg) -- Grigory Yavlinsky, a likely presidential
candidate in Russia, said confidence in the government can only be restored if

it overhauls the tax and legal systems and finds a way to pay off a crushing
debt. 
``The problem is that the people have no confidence in the government, the
people simply don't want to give the government a single ruble, not through
taxes, not through banking,'' Yavlinsky, head of the key Yabloko opposition
party, said in a speech to the Center for Strategic and International Studies.
``The task is to create confidence.'' 
Yavlinsky, winding up a four-day visit to the U.S., said the keys to
rebuilding that confidence are simplifying the tax system, overhauling the
legal system and the banks, and restructuring debt, all part of his plank to
become Russia's next president. 
Recent public opinion polls place him fifth behind Communist Party chief
Gennady Zyuganov and Moscow Mayor Yuri Luzhkov, among others, for the 2000
election. 
The International Monetary Fund suspended its lending to Russia after the
government defaulted on its domestic debt and gave up its defense of the ruble
in August. The IMF said it won't resume lending until the government begins
implementing a realistic budget. 

Debt Payments 

One of the problems looming for Russia next year is the $17.5 billion in
debt
payments the government must make. 
It's ``simply impossible'' for the Russian government to make those
payments,
Yavlinsky said. 
The government's draft 1999 budget would require new loans of $7.5
billion to
finance its deficit. The budget also depends on Russia reaching agreement with
government and private creditors on rescheduling about $7 billion of payments
due next year on Soviet-era debt. With access to most international financing
cut off, Russia will have to print more money to finance part of the deficit,
a policy the IMF has warned against. 
Nonetheless, Russia said earlier this month it expects to reach agreement
with
the IMF on a new loan program by as early as February as the government tries
to secure approval for its economic policies from lenders and investors. 
Yavlinsky proposed the Russian government simplify the federal tax system to
include a 20 percent tax on industrial companies, a 15 percent tax on
agriculture companies, and a 10 percent tax on individuals annually. 
He also said he wants the government to develop a transparent,
well-supervised
banking system, invite companies not operating officially as part of the
Russian economy to do so now, and introduce legal reforms to protect
investors, property owners and set out parameters for bankruptcy proceedings. 

*******

#5
Date: Thu, 17 Dec 1998
From: Ilana G Knab <knab@compuserve.com>
Subject: Yavlinsky and the end of the end

On Wednesday, December 16, 1998 PBS in Washington, D.C. ran an
English-language interview with Grigory Yavlinsky. He made the following
interesting analysis: Russia for the last 7 years has essentially been the
end of the end of the Soviet Union. Russia's leadership and leadership
style (including the rise and reign of oligarchs) have simply been
continuations of the Soviet nomenklatura system.
Unfortunately, the PBS interviewer understood so little about Yavlinksy's

message that he did not ask him to explain further. Rather, he made some
cliched reference to Russian governance being uncertain in the "Wild East"
or some similar line, and wound up the interview with a forgettable
flourish. If I may try to extrapolate for Mr. Yavlinsky, it seems he is
saying that Yeltsin's failings, the oligarchs, the corruption, and similar
ailments, all are results of political participants socialized under the
Soviet nomenklatura system carrying their dysfunctional behavior patterns
into the post-USSR period.
Yavlinksy seemed to take offense at the interviewer's suggestion that
Russian reform was doomed. Instead, he countered that most people in
Russia hated life under the KPSS, sought real reform, and as long as they
perservered, they would achieve it. He implies that, for all their great
expectations and yearnings, to date the people have received only more
nomenklatura politics and players, with the same poor results obtained in
the late Soviet period. No wonder many Russians' political enthusiasm has
flagged.
Lastly, when asked who will be the larger historical figure of this period,
Gorbachev or Yeltsin, Yavlinsky answered that Russian history will remember
Sakharov. In Yavlinsky's eyes, Sakharov stood up for what was right
despite the full opposition of Soviet society, never waivered despite
intense pressure, and by doing so hastened the demise of KPSS rule.
Based on Yavlinsky's view of Russia's nomenklatura-tainted leadership to
date and the value of Sakharov's principled lone stance, I understand
better Yavlinky's desire to remain independent. I also saw in his views
the hopeful message not to despair on reform because it has not occurred
yet, because the Soviet leadership system has persisted until now. 
Taking a cue from Mr. Yavlinsky, perhaps we should start trying to identify
signs of the end of the end, and begin planning for the true post-Soviet
period, instead of worrying about who said or advised what in the past.

********

#6
Date: Thu, 17 Dec 1998 
From: yale richmond <yalerich@erols.com>
Subject: What Went Wrong in Russia

THE CULTURAL FACTOR IN THE RUSSIAN TRANSITION

Stephen E. Hanson (in JRL 2523) chastises those Western analysts
who point to the cultural factor to explain what has gone wrong in Russia.
I confess to being one of those analysts, and plead guilty as charged.
My "From Nyet to Da: Understanding the Russians" (Yarmouth, ME:
Intercultural Press, 1992 and 1996 rev.), was remarkably prescient in
pointing out the many cultural factors in Russia that would make for a
difficult transition to democracy and a free market. Among the factors that
I discussed were communalism and egalitarianism, caution and conservatism,
extremes and contradictions, the bureaucracy, statism, crime and
corruption, authoritarianism, disregard for the law, political squabbling,
and the continuing debate in Russian history between Westernizers and
Slavophiles.
Some U.S. experts on Russia who reviewed my draft thought that I was unduly
pessimistic about the prospects for Russia. With regret, I now confess that
I was not pessimistic enough.

Political scientists and economists should pay more attention to the
cultural factor in prescribing cures for ailing nations. 

******

#7
Date: Thu, 17 Dec 1998
From: helmer@glas.apc.org (John Helmer)

>From The Moscow Tribune, December 18, 1998
RUSSIAN CHARADES
John Helmer

Those who grew up in England, or in corners of the British Empire, 
when it was big enough to have corners, can remember that between Christmas 
and New Year, the family and its visitors would gather in the parlour to play 
a game called Charades.
The players would form teams to act out, one syllable, word or clue at a 
time, a well-known verse, line or aphorism. The team that detected the hidden 
meaning quickest won.
We are fortunate in Russia, because it's possible to play this game all year
round: 
-- January: Prime Minister Victor Chernomyrdin announced he was putting
First Deputy Prime Minister Boris Nemtsov in charge of "communal reform".
First clue: reform really meant abolition of rental subsidies. Guess
how well Nemtsov did at that?
-- February: President Boris Yeltsin announced a grand inquisition of
his ministers, but when it convened, he said three ministers were to be
fired, but didn't name them. Next clue: what were their first names?
-- March: Tatiana Dyachenko, the President's daughter, arranged for the 
business friend of a business friend to become prime minister. The first
three syllables of his family name is the clue. 
-- April: The Kremlin's regional early-warning system fails when General 
Alexander Lebed leads the field in the Krasnoyarsk gubernatorial election 
with an unbeatable margin.
-- May: The president's boon companion and closest aide, Pavel Borodin,
is told he's been sacked, but when Yeltsin finds out in a telephone
call, the president says he didn't know, and reverses the action.
-- June: France's Consul-General Pouchepadass puts desks outside
the French Embassy gate in Moscow to collect insurance premiums from
Russian tourists bound for France. He claims it's a Europe-wide rule,
only it isn't. Guess what it really is?
-- July: Yeltsin vetoes a law on bankruptcy for Russian banks, blocking 
any move by creditors or depositors to take insolvent banks to court.
It's in the nick of time.
-- August: Prime Minister Kirienko has a plan to save the treasury
from defaulting on its bonds, but he isn't in power long enough to implement
it. The Harvard University audience that hears this, when it's too late,
applauds sympathetically.
-- September: The new prime minister Yevgeny Primakov said to the lady: 
"Since you know what I did before, you know I know everything about you."
-- October: Which of the most hated men in Russia looks like the Kolobok,
and sounds like him, too: "My only mistake was not having enough confidence 
that I was right." (In the Russian version of the fairy-tale, the Kolobok
is a boy-pie, baked by his mother, who runs away and is eaten by a fox. How 
many foxes vote in Russian elections?)
-- November: In a feral voice, trembling with emotion, Anatoly Chubais 
declared in St.Petersburg "us or them." In an unusually high turnout, the
city's voters replied by voting "them".

-- December: 1,258,113,518.45. That's the lucky number of the year -- not a 
secret Swiss bank account, not a safe-deposit box in Monaco. It's 
the officially recorded salary of the former Central Bank chairman, 
whose name provides the clue that ends this year's charade.
And the secret meaning of 1998? Reverse the order of the clues, and
you end up with: Du-bi or not to be, that is the election -- whether 'tis
nobler in the mind to suffer the slings and arrows of outrageous fortune, or 
to take arms against the sea of troubles, and by opposing end them? To die:
to sleep no more; and by a sleep to say we end the heartache and the thousand
natural shocks that communal apartments are heir to.

*******

#8
Philadelphia Inquirer
December 11, 1998
[for personal use only]
Weldon leads needed exchange between U.S., Russian legislators 
They talked of economics, trade policy, home mortgages and human rights. 
By Trudy Rubin

MOSCOW -- The Russian parliament stopped its work the other day to applaud
Delaware Valley Rep. Curt Weldon and eight colleagues who were sitting in
the visitors gallery.
They were taking part in the first Duma-Congress study group that gets U.S.
and Russian legislators together. If you think that sounds hokey, think
again. As Russia heads toward desperate economic times that threaten seven
years of democratic gains, it is more important than ever for Americans to
engage Russians at all levels.
With Western investors pulling back and Russia's thin middle class
shrinking, the danger rises of this country turning inward. So contacts
among U.S. and Russian institutions, students, young leaders, anyone, are a
blessing. More such programs should have come sooner. Right now, we need
all the exchange programs we can get.
Weldon's group is particularly useful because it links two bodies that need
to get better acquainted. Many House conservatives have little interest in
foreign affairs, and they still view Russian politics through a Cold War
prism.
As for the fractious Russian Duma, it is led by a speaker from the
Communist Party, and most of its members are either Communists or strong
nationalists. Few Russians take the Duma seriously: too many parties, too
much fragmentation, too few constitutional powers. This is a country in
which the whip has always been wielded by the man at the top.
Weldon, who studied Russian in college, says he hopes the contacts can
strengthen the institution of the Duma. He contends that "democracy can't
rely just on a strong president" and argues that the Clinton administration
has paid too much attention to President Boris Yeltsin and ignored the Duma. 
That may be a bum rap. Until Yeltsin fell ill, most U.S.-Russian issues had
to be solved at the Kremlin level.
But Weldon is right about the value of building relations for the future
because the next generation of Russian leaders will emerge from both houses
of the Duma. The Pennsylvania Republican hopes to expose Duma Communists to
Western views ("if they're elected, we have no choice"), while working with
rising stars such as 32-year-old deputy Duma speaker Vladimir Ryzhkov from
the centrist party of former Prime Minister Viktor Chernomyrdin. 

Ryzhkov, who fondly remembers a two-week tour of Philadelphia in 1992, says
it is especially important for Duma members to have informal contacts with
U.S. legislators. So far, Weldon's study group has held four sessions: two
in Moscow and two in Washington, D.C.
And Weldon also is pushing joint U.S.-Russian projects that could bolster
Russia's middle class, such as helping Russians set up a national mortgage
program (in a country where mortgages are almost nonexistent and home
ownership much less common than in the United States). With a nod to Fannie
Mae, the program would be called Natasha Mae.
Inside the Duma, replete with marble and chandeliers (it was the old Soviet
central planning headquarters), the study group meets in a room trimmed not
with hammer and sickle but with the blue, gold and red Moscow lion crest.
Things do change.
The previous day's agenda touched on security issues. Today, it's on to
economic issues and human rights. Maryland Democrat Steny Hoyer asks about
the recent Duma vote to rebuild the statue of the dreaded Bolshevik secret
police chief, Felix Dzerzhinsky, and also, about the call by deputy
Communist Party leader Albert Makashov in the Duma for a clampdown on
Russia's Jews.
Ryzhkov downplays the statue fuss as political posturing (the vote had no
legal standing) and says Russia's "main political forces" reject the
Makashov rhetoric. But a Communist study group member argues that Makashov
was provoked by "Jewish threats" against his life. Some things don't change.
But the Communist participants are drawn into the mainstream when it comes
to economics. One asks why the U.S. government should threaten to ban cheap
Russian steel exports when American officials rejected Russian arguments
that cheap U.S. poultry exports were destroying Russia's poultry industry.
With righteous capitalist logic he asks, "In a market economy, shouldn't
the cheapest product win?" 
It's on to Russian criticism of the International Monetary Fund in terms
that aren't so different from those of Capitol Hill critics. Then comes a
complaint that U.S. food aid to Russia is likely to be stolen and a strong
plea for help with the mortgage program.
These are points that it's useful for the Americans to hear. More exchange
is needed. Weldon would like to start a program to bring 15,000 Russians to
study at U.S. business schools, provided that they promise to return to
their homeland. The funding would come from corporations and universities.
That kind of exchange is even more urgent than Duma-Congress meetings.
Personal contacts between legislators can help eliminate dangerous
misunderstandings while Russia is going through its time of troubles. But
it will take a new generation to build Russia into a normal country.
Trudy Rubin's column appears on Wednesdays and Fridays. Her e-mail address
is trubin@phillynews.com

*******

#9 
Kennan Institute for Advanced Russian Studies
Washington DC
NEWS/Meeting Report
>From "Criminal Communism" to "Criminal Capitalism"

"Russia's problem is not economic and it has never been economic it is
basically a moral problem and until that problem is solved, no reasonable

economic system, no market economy...has a chance of taking root there,"
remarked David Satter, Senior Fellow, Hudson Institute, and Visiting
Scholar, School for Advanced International Studies, Johns Hopkins
University, at a Kennan Institute lecture on 9 November 1998. According to
Satter, when the time came to create a new democratic society in Russia,
the failure of both the West and Russia to understand the true nature of
communism--its denial of universal morality--led instead to the rise of a
criminal state.
The communist regime systematically abolished normal criteria and promoted
the view that universal values did not exist, only class values, noted
Satter. The idea that without legal and moral rules it is impossible to
create a just society was ignored. The communists maintained that once
private property was abolished and production socialized, a classless
society would result. In a similar vein, Satter commented, the young
reformers of the 1990s argued that once state property was put into private
hands, a state based on law, as well as a democratic and prosperous
society, would evolve. In Satter's view, it was this lack of legal and
moral rules that prepared the way for the creation of a criminal state in
Russia.
Satter said that Russia's transition from "criminal communism" to "criminal
capitalism" had occurred in three stages: hyperinflation, privatization,
and criminalization. Hyperinflation began on 2 January 1992, when the
Gaidar government freed virtually all prices, consequently wiping out the
life-savings of millions of Russians. According to Satter, this same
government also chose to ignore a law passed by the Supreme Soviet calling
for the indexation of savings accounts in the event of price
liberalization, deeming it the responsibility of the old regime. Yet while
the majority of the population was being driven into poverty by inflation,
a group of well-connected insiders was becoming very rich.
Satter mentioned several ways in which people with access to the state
budget and ties to state officials were able to amass wealth including:
establishing and fooling the public into investing in pyramid schemes,
speculating in dollars, obtaining lucrative licenses to export raw
materials, and appropriating and collecting interest on state credits that
were supposed to support industry. Satter asserted that by the time
privatization got underway, the country was already divided into haves and
have-nots.
This hyperinflation had been briefly preceded by "wild privatization,"
during which government and party officials began to privatize whatever
they could get their hands on, noted Satter. Former government officials
who had once been in charge of state resources became the new owners and
proceeded to sell off these resources. In addition, an amendment to the law
on cooperatives allowed factories to create cooperatives within the
framework of the factory, which encouraged massive theft as factory
directors were now given the means to establish cooperatives through which
to write off and sell factory supplies.
However, according to Satter, the real theft of the state's most valuable

enterprises began with money privatization in 1994. At "public" auctions
for state property, the bidders for the most desirable enterprises were
well-connected to local officials, with the results of these auctions being
largely determined in advance. The loans-for-shares program, in which the
government exchanged shares of enterprises for loans, greatly benefited the
banks empowered by Yeltsin in 1993 to handle government accounts. These
banks used government money to make short-term loans at extremely high
rates of interest. Then, having made a profit using the government's money,
the banks were able to loan it back to the government in exchange for
valuable enterprises. This is how the much-talked-about oligarchy came into
being and eventually began to dominate the political and economic scene,
explained Satter.
Satter then commented on the final stage of the rise of the criminal state
in Russia--criminalization. In short, the first cooperatives were
established at a time when all property in the Soviet Union belonging to
the state was completely unprotected. It was also illegal to have a private
security service. Both of these factors made the first Russian businessmen
attractive targets for criminals. As the number of independent businessmen
grew, the underworld experienced phenomenal growth. With no one to protect
them, Russia's new economic elite, composed largely of corrupt insiders,
had no choice but to turn to criminal gangs for protection. Eventually,
Russian businessmen found gangsters useful in other aspects of business,
including curbing the growing epidemic of non-payment of debt.
According to Satter, as these groups became more interwoven, the entire
commercial and political apparatus in Russia was poisoned. On a final note,
Satter reflected that the only rule in business and political life in
Russia continues to be the rule of force and that without the rule of law,
Russia has no hope of resurrecting itself.
--Allison Abrams

"The Rise of the Russian Criminal State" sponsored by the Kennan Institute,
was presented 9 November 1998 by David Satter, Senior Fellow, Hudson
Institute, Indianapolis, and Visiting Scholar, School of Advanced
International Studies, Johns Hopkins University. Allison Abrams is
Editorial Assistant, Kennan Institute for Advanced Russian Studies.

*******

#`10
Kokoshin Comments on Timing of Fatherland Founding Congress 

Moscow, December 16 (ITAR-TASS)--The organising committee of
Otechestvo, or Fatherland, does not plan to lay the policy statement of the
movement before its founding congress due on December 19, said committee
member Andrey Kokoshin, acting vice president of the Russian Academy of
Sciences and former Security Council chief.
He said at a press conference on Wednesday the congress' delegates
will be shown only slates of the movement's programme to be filled with
substance later in its activity.
Kokoshin, one of the programme's writers, said its generation involves
large groups of specialists and politicians of note, without elaborating.
He said the idea of forging Fatherland did not arise "spontanesouly",
but was prompted by the old quest of industrialists, regional leaders and

scientists to join forces in solving Russia's crucial economic challenges.
Kokoshin said initiators of the movement were those "who see the
industry as a backbone of the economy, believe Russia's power based on the
creation of a powerful research-intensive industry".
He cited "human capital" as a crucial prerequisite for economic growth
and tapping this potential as a key task.
Kokoshin said the evolution of all developed nations was related with
an "aggressive export policy", and many of Russia's products remain
competitive, in particular in the rocket industry, nuclear energy and heavy
energy machine-engineering, which is Russia's code name for the defensesector.
As for Fatherland's foreign policy planks, Kokoshin said Russia "is
called to be a world power".
Given the growing role of the military factor in the system of
international relations, Russia needs to be a powerful country in military
terms, Kokoshin said.
Asked about Fatherland's prospects should it fail to register for the
1999 elections to the Duma lower house of parliament, Kokoshin said there
are "different forms of participation in elections".

******

#11
Starovoytova Aide Says Communists Behind Killing 

Komsomolskaya Pravda
16 December 1998
[translation for personal use only]
Report by Roman Popov: "Have the 'Red Brigades' Started
Shooting Democrats? Ruslan Linkov Believes Galina Starovoytova
Was Killed by Communists"

St. Petersburg -- The investigation group working to solve the murder
of Galina Starovoytova has at its disposal about 10 identikits put together
on the basis of eyewitness testimony. It is not yet known, however,
whether these include any portraits of the possible murderers. The FSB
Directorate is refusing to comment.
Meanwhile, Ruslan Linkov, an assistant of the mudered State Duma
deputy, has stated that he considers the Communists to blame for Galina
Starovoytova's death.
"They are already creating groups like the Italian 'Red Brigades,'
which shoot activists prominent in the democratic movement. And Galina
Vasilyevna was the first on this list," Ruslan stated.
Ruslan confirmed that he does not have amnesia (loss of memory), he
feels fine, and that the doctors are "playing safe."
"They do not know that I am a real conspirator and am capable of a
great deal," he said.

******

#12
Official on Negative Security Impact of NATO Expansion 

Mayak Radio Network
15 December 1998
[translation for personal use only]

The State Duma has held hearings on the threat to European countries
as a result of NATO's expansion trend. Our correspondent Igor
Degtyaryuk reports:
[Begin recording] [Degtyaryuk] NATO is not an ideal organization for
solving interethnic conflicts. Their own analysts talk about this. Its
structures are now extensively discussing a new organization which may be
able to act more effectively. Russia's position in this situation must be
extremely cautious and balanced. This is a viewpoint expressed by Colonel
General Leonid Ivashov, head of the Main Directorate for International
Military Cooperation of the Russian Defense Ministry.
[Ivashov] In order to enter NATO, many countries are prepared to

support any viewpoint, including on Kosovo, when the countries of eastern
and central Europe provided unconditionally their territory and stated
their support--this is the result of the policy of lining everybody up in a
queue. With NATO's expansion, the range of states with different levels of
security widens. There are elite states which NATO defends--there are 16
of them, 19 soon. There are states aspiring to join NATO and are waiting
to do so. There are countries which do not know what to do with themselves
because there is little hope of being accepted into NATO. A number of
those countries are now beginning to try to form some regional security
structures. There are also countries, including Russia, Belarus, and other
European and CIS countries, which oppose NATO's expansion.
The process of NATO's expansion has had a considerable demoralizing
effect on the CIS and our integration processes. Discord is emerging
between the countries. Ukraine, in particular its Ministry of Foreign
Affairs, is clearly proclaiming its aim of joining the alliance. The same
in Georgia. Discord has been brought into these countries, of both Europe
and the CIS.
The issue of strengthening the military aspect in creating a European
security system has arisen. An opinion is being formed in Europe that,
without a military structure, without a military organization--powerful and
manageable--some appearance is created that, in future, European countries
will do nothing but fight with one another, and that peacemaking structures
will be necessary all the time. Even NATO mentality is being applied.
As for Russia's security, the NATO military machine has moved to
within 750 km of our borders. Today, NATO's planes with full ammunition
load can reach some areas of our border--St. Petersburg, Smolensk, and
Bryansk are coming within the range of NATO aviation and some planes can
fly even further. The Baltic countries' joining NATO radically changes the
military and strategic situation for Russia. NATO possesses nuclear
weapons. Readiness for NATO planes appearing on Baltic airfields is
approximately six hours. The range of tactical nuclear weapons becomes
such that this becomes a strategic factor. For us it means giving
ourselves up to the victor's mercy.
[Degtyaryuk] On the other hand, I would like to say that Russia
maintains intensive relations both with NATO countries and countries not
belonging to this structure. Benefit from these relations is extremely
high. Therefore, one should think about what is dearer. [end recording]

********

#13
Date: Thu, 17 Dec 1998 
From: "Ludmila A. Foster" <ludmila@erols.com> 
Subject: Banking developments

David: your readers may be interested in the latest banking developments
in Russia. Reprinted with permission from the Bretton Woods Committee
Fall Newsletter.
1. Excerpt from "Continued Investigations of Corruption at the World
Bank." (p.4)
"The World Bank is looking into charges of whether Russia misused money
the international lending agency provided. Johannes Linn, vice president
for Europe and Central Asia, said, "We would take any evidence of misuse

seriously and look carefully at any evidence. To my knowledge, there is
no particular target" of such an investigation." 
2. Excerpt from "New and Noteworthy." (p.6) 
EBRD in Loss.
"The crisis in Russia has pushed the European Bank for Reconstruction
and Development into its first loss for six years. The bank said it
would be forced to make provisions of around Ecu 159 million ($181
million) in the third quarter against its exposure to Russia, where it
is the world's biggest foreign direct investor in the private sector.
The scale of the provisions was expected to plunge it into a net loss of
around Ecu 150 million for the first nine months of 1998, compared with
a net profit of Ecu 29 million in the first six months. A bank spokesman
said that the bank's AAA credit rating was not endangered, and that its
Ecu 20 billion authorized cappital was "fully adequate" to sustain all
of its operations throughout east Europe and the former Soviet Union."

*******

#14
Date: Tue, 15 Dec 1998
From: "W. George Krasnow" <krasnow@compuserve.com
Subject: Solzhenitsyn and the West 
Alexander Solzhenitsyn and the West 
By W. George Krasnow, former professor of Monterey Institute of International
Studies and now president of Russian American Goodwill Associates. He is the
author of: Vladislav Krasnov, Solzhenitsyn and Dostoevsky (University of
Georgia Press).
As Russia celebrates the 80th birthday of her literary giant, the Nobel
prize
winning writer Alexander Solzhenitsyn, it behooves people in the West to
reflect on the meaning of his enduring message for us. 
Didn’t he open the eyes of the free world to the evils of Communism? A
resounding Yes, more than any person alive. And he did so at a time when
Communism held sway over one third of mankind and threatened the rest. 
Didn’t he strengthen the resolve of the United States and the free world to
resist global Soviet expansion? Yes, on a par with such American patriots as
Ronald Reagan. He did it at the time when we needed it most, after the
debacle
in Vietnam, when Communist ideas were popular among the intellectual
establishment here. And the “best and the brightest” of the West falsely
denounced both him and Reagan as “trigger happy Cold Warriors.”
Didn’t he tell Soviet leaders in 1973 that their political and economic
system was antiquated, that they should set the captive nations free and start
reforms ­ for the sake of Russia’s own spiritual and physical health? Soviet
leaders procrastinated for nearly twenty years, and when, under Gorbachev,
they
started their reforms, they did so only in the vain hope to save Communism.
Didn’t he warn Soviet leaders again, in 1990, that Communism is neither
redeemable nor reformable, that instead of trying to save it they ought to
think about how to protect the people from the falling debris of the
collapsing
Soviet Union. They ignored his warning again only to see the Soviet Union
collapse the following year. 
Of course, he was no lap dog of the “capitalist” West either. He was not
blind to the defects of the West and at times harshly criticized them. In his
1978 Harvard commencement he railed against crass materialism, the loss of

spiritual compass, and the lack of moral courage in the United States. And,
yes, he deplored the tendency to indulge in excessive litigiousness and
hairsplitting legalism. Now the White House is mired in exactly the resultant
moral morass.
Well, if Solzhenitsyn was provident so many times, it is hardly an
overstatement to call him a modern prophet. Yet, on the threshold of the 3rd
millennium the leaders of the two great powers have remained just as deaf to
Solzhenitsyn’s warnings as the kings of ancient Israel to Biblical prophets.
But then ­ one of the two great powers is gone. And both presidents face an
impeachment.
In 1994 Solzhenitsyn left his house in Cavendish, Vermont, and returned to
Russia with his family, exactly as he predicted he would (when he predicted
this in 1974, leading American sovietologists ridiculed him as a senile old
man
out of his wits). Although writing, not politics, remains his main mission, he
does not insulate himself from the life of ordinary Russians. In the past four
years he traveled to 26 Russian regions, visited dozens of cities, and was a
guest of honor at over a hundred town hall meetings. He keeps notes of what
people tell him.
What is his verdict on a new post-Communist Russia? “After all those
superficial changes of flags [from a red to tricolor], coat of arms and
slogans, the current regime has not rid itself of the chief trait of its
Communist predecessors: their total isolation from people and total lack of
accountability. [For,] all the democratic appurtenances are being used to
cover
up for the greedy oligarchy [that rules the country] and to deceive world
public opinion.” He made the conclusion in his latest book appropriately
entitled Russia in Collapse (Rossia v obvale). Not only is the title
appropriate, but the timing was on a cue. The book came out last May when the
financial crisis began to unravel.
Solzhenitsyn is dismayed at how wrongheaded the “reforms” have been and how
much destruction and misery they have left in their wake. Bear in mind that
Solzhenitsyn has been committed to the notions of private property and free
enterprise for a long while. He is convinced, however, that the reforms
advanced neither. They advanced only crime and corruption. He is appalled at
the way the “reforms” were carried out. According to him, privatization was
more like a grand theft of public property, and the reformers behaved more
like
neo-Bolsheviks and Stalinists than liberal democrats as they are known in the
West. For, they pursued their reforms “with the same reckless madness and
devastating haste, as the nationalization in 1917-1918 [by the Bolsheviks] and
the collectivization of farms [by Stalin] in 1930.”
And the results? The results are clearly visible in the rule of the
oligarchs, especially the Big Seven that control the banks, the media, and,
often, the executive branch. According to Solzhenitsyn, Berezovsky boasted
that they cast lots for cabinet posts. 
What is at stake? Not only whether Russia will be a free-market democratic
country. Not only whether it could safely manage its nuclear arsenal. At stake
is the very survival of the Russian sovereign state and of the Russian nation

as a contributor to global “cultural biodiversity.”
It has been reported that, as part of his 80th birthday celebration,
Solzhenitsyn snubbed President Yeltsin by refusing to accept Russia’s highest
honor, the order of St. Andrew the Apostle. “I cannot accept an award from the
supreme authority which brought Russia to its current disastrous state,” he
said, holding the Yeltsin government responsible for the current misery of the
nation. 
In view of the extraordinary contribution Solzhenitsyn made to the free
world
and especially to this country, one wonders whether the White House sent him a
birthday greeting. If it did, one wants to see its full text. In my humble
opinion, Solzhenitsyn deserves the highest award of this land, the
Congressional Medal of Honor. But then one is also afraid that he might snub
it as harshly. After all, President Clinton’s policy of exclusive sponsorship
of the failed course of Russian reforms has surprisingly enjoyed a bipartisan
Congressional support, every law maker toeing nicely the two-party line. And
who wants to be snubbed by the stubborn Russian prophet? 

*******

 

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