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Johnson's Russia List


January 15, 1999    
This Date's Issues: 3017  3018   

Johnson's Russia List
15 January 1999

[Note from David Johnson:
1. Debra Javeline: Who Protests in Russia.
3. Paul Fiondella: Re Lake Baikal.
4. The Economist: Alexander Lebed, generally at sea.
5. Newsday: Michael Slackman, The Ruble Is Down and Out.
6. Financial Times: John Thornhill, IMPEACHMENT: Yeltsin and Clinton 
share worries.

7. Itar-Tass: Growing Drugs Trafficking Poses Threat to RUSSIA'S 

8. Interfax: Zyuganov Sees Liberals' Comback as Greatest Danger.
9. Itar-Tass: Journalists Union Chief Summarizes 'Very Difficult' Year.
10. Jamestown Foundation commentary: Unhinged Persistence.
11. Moskovskiy Komsomolets: Aleksandr Budberg, Our Politics Is a 
Pipeline. Where To Steal Money for Elections. (Politicians' Funding Sources 


Date: Thu, 14 Jan 1999 
From: Debra Javeline <> 
Subject: Who Protests in Russia

In "Analysis from Washington - Why Don't Russians Rebel?" (JRL #3015),
Paul Goble summarized a USIA report entitled, "Who Protests in Russia."
As the author of this report, I would like to clarify some of Goble's
interpretations. These comments are my own and do not necessarily reflect
official positions of USIA or the US government.
First, any assertions about future increases in protest and strike
behavior in Russia are purely speculative and rest on very shaky ground.
The data were collected at a single point in time and therefore cannot
support statements about trends. In the only questions where respondents
were asked to recall past behavior (Did you participate in the nationwide
strikes/protests in March 1997? in April 1998?), the low level of
participation was pretty constant. Here is the opening statement of the
"Only 7 percent of respondents claim to have participated in the
nationwide strikes of March 1997, related protest activities, or both, and
only 5 percent claim to have participated in similar activities in April
1998. ...There is attrition among both strikers and protesters from 1997
to 1998."
Since the majority of Russians think things have gotten worse from 1997 to
1998, and individual rates of protest have either stayed the same or
decreased, it is hard to see a direct relationship between economic
decline and protest activities, as Goble suggests. He writes that "if
conditions deteriorate, as now seems likely, and if people learn about
strike actions or public protests, then ever more Russians will fall into
this personal desperation' and, thus, may take to the streets." But there
are two reasons to be skeptical: (1)Roughly 90% of Russians who experience
extreme wage delays or nonpayment have NEVER protested in the LAST THREE
YEARS. We need to factor these individuals into our projections as much
as the 10% of unpaid Russians who do protest. (2)As I say in the report,
"As of last October, activism in Russia seems to be petering out rather
than gaining momentum." Here, I am talking about the aggregate data as
well. The turnout for this last attempt at nationwide strikes (October 7,
1998) was pretty weak, yet it followed ruble devaluation and the
subsequent economic fallout.
Second, I don't think there is any support for Goble's statement that "as
more Russians focus on politics during the upcoming parliamentary and
presidential elections, an increasing number of them are likely to
participate in public demonstrations." The survey question asked whether
the respondents were generally interested in politics, and it is this
_general_ interest that correlates with strike/protest activity. Sure,
elections inspire public gatherings and demonstrations, but in the USIA
report, we provide no evidence that people who are not otherwise
interested in politics become more interested at election time and
_therefore_ more inclined to protest.
In my opinion, the difficulty of attributing blame for the wage arrears
crisis holds the key to explaining the low level of strike and protest
activity in Russia. Wage arrears are a complex issue requiring time,
energy, and a tremendous amount of information to understand. A valid
case could be made for blaming almost anyone and everyone: the central
authorities and their many component individuals and institutions, the
local authorities and their many component individuals and institutions,
the managers of various enterprises and organizations, international
organizations and foreign governments, as well as the people themselves
and a variety of other institutions and circumstances. As a result, the
source of blame or accountability for wage arrears, and thus the target of
any attempt to redress grievances, is confused. Individual Russians who
can make sense of the origins of the crisis, or who _think_ they can make
sense of the origins of the crisis, are more likely to protest than
individuals who cannot. Groups of Russians who share views on the origins
of the crisis are more likely to overcome collective action problems than
groups who do not. Since most Russians _cannot_ make sense of the origins
of the wage arrears crisis, I suggest (contrary to Goble) that the
prospects are low for a violent nationwide response.
I am in the process of writing more about the importance of blame
attribution for motivating human behavior and particularly for motivating
political activism. My preliminary analysis of the data supports the
claims above.

Best regards,
Debra Javeline
Social Science Research Analyst, Office of Research and Media Reaction,
Postdoctoral Fellow, Davis Center for Russian Studies, Harvard University
(as of February 1, 1999)


Date: Thu, 14 Jan 1999 
From: Mike McFaul <> 


Nikolai Petrov and Michael McFaul. Eds., THE POLITICAL ALMANAC OF
RUSSIA, 1989-1997 published by the Carnegie Endowment for International
Peace. This three volume, 1,700 page study compiles together a unique
collection of analysis, data, and maps on Russian politics. Volume One
examines Russia’s political history from the 1989 elections to the
Soviet Congress of People’s Deputies to the 1997 governor’s elections,
with especially detailed sections on the 1995 parliamentary elections,
the 1996 presidential election, and the 1996-1997 regional elections.
This volume also provides the complete results of all national elections
at the regional and electoral district level. In addition, this
volume provides ratings of deputies in the Soviet and Russian Congress
of Peoples Deputies and the Russian Duma. Volumes two and three turn to
the regional level, providing basic demographic, economic, political,
and electoral information on all of Russia’s regions. The Almanac
includes over 100 maps and over 200 tables. It is an invaluable
resource for anyone studying, analyzing or doing business in Russia.
This study is available only in Russian. Cost $100. To order, contact
Nataliya Udalova at the Carnegie Endowment for International Peace by
phone at 202-939-2283, by fax at 202-483-3389, or by email at


Date: Thu, 14 Jan 1999
From: (Paul Fiondella)
Subject: Re: Lake Baikal

I read with some amazement the report of Mark Maslin's value laden
remarks concerning Lake Baikal. I think the readers of JL are entitled
to a more objective understanding of the Lake's ecology.
According to Maslin, a marine geologist, "we concluded that the
ecology of Lake Baikal had been unaffected by all the pollution the SU
could throw at it because of the Lake's immense size." "Our study shows
the environmentalist's assertions (that the Lake is in danger) to be
Apparently Mr. Maslin's study couldn't find concentrations of heavy
metals in the Lake sediment where he looked. But this should not
surprise anybody since environmentalist have been pointing to the food
chain for concentration of dioxin type chemicals not the water or the
For those unfamiliar with Lake Baikal, it is a minerally deprived
and organically deprived lake holding 20% of the world's fresh water.
The concentrations of chemicals and organic compounds in the water is so
low that water quality approaches that of distilled water. You can't
find chemicals or organic matter in any concentrations except near point
source pollution sites. It is no surprise therefore that you would find
no concentration of polluting chemicals filtering out of the water into
the sediment.
The place to look for these chemicals is in the food chain. If you
fall into the water of Lake Baikal you should last about five to ten
minutes before dying of hypothermia. The fishermen on the Lake will tell
you what happens next. In two days nothing will be left of your body. It
will be eaten to the bone by the fish. There is tremendous competition
in these waters for anything organic to ingest. The very thin layer of
organic matter is recycled again and again through the Lake's food
Heavy metals from the aluminum industries in the Angara river basin
(which make the air in Irkutsk unbreathable during the Summer) and
dioxins from the obtuse Soviet effort to treat wood pulp on the Lake
with heavy concentrations of chlorine end up in the food chain. The
concentration of these chemicals in the food chain is the main
ecological problem worrying environmentalists.
Of course the stress on Lake Baikal as a result of other decisions
taken by Soviet administrators has also undermined the ecology of the
lake. For example the shallow waters along the shores of the Lake,
including the enormous wetlands at the North end, have been flooded due
to the building of an enormous dam near Irkutsk. This has had an effect
upon fish reproduction and food supply.
With the collapse of the Soviet Union the system for controlling
poaching of rare animal species also collapsed. Endangered and rare
species including musk deer are being exterminated for the simple reason
that there is no money to support the rangers who catch the poachers.
Lake Baikal is certainly a beautiful place. It would however be made
more beautiful if the aluminum plants were forced to reduce their
noxious emissions and if the Baikalsk Pulp Plant were forced to close
Last I heard this plant was producing toilet paper for export to
Korea. What an irony --- from making rayon for jet tires under the guise
of national security (the real reason was that the Minister of the Paper
Industry wanted a plant in a place where he could invite other officials
to go hunting) to toilet paper for the Koreans.
Incidentally I am not a member of any of the environmental groups
with which Mr. Maslin appears to be at war, but I do know from three
visits to Baikal including many discussions with local scientists that
Siberians are not happy either with the internecine quarrels that riddle
the various Western NGO's divvying up the environmental aid dollars nor
with the lack of progress being made to protect their Lake by their own
Russian "democrats".


The Economist
January 18, 1999
[for personal use only]
Alexander Lebed, generally at sea 
K R A S N O Y A R S K 
A leading presidential contender is failing as a regional governor 

IT WAS meant to be Alexander Lebed’s springboard to Russia’s presidency,
not his political tombstone. But after eight months as governor of
Krasnoyarsk, the retired general has failed to dent the region’s economic
problems, lost some support, and shown a striking lack of organisational
skill. If he stood for re-election today, he would find it hard to win. 
The region’s problems mirror those of the rest of Russia. It is vast,
more than four times bigger than France. Its minerals and timber ought to
be making it rich, yet it remains poor. Mr Lebed won a much-watched
election in May as a political outsider, promising prompt payment of wages,
a better deal with Moscow on tax revenues, and foreign investment. 
Admittedly, Russia’s financial collapse in August has made such promises
hard to keep. The disintegration of the banking system has drained cash
from the economy: Mr Lebed’s economics minister, Svyatoslav Petrushko,
estimates that, all in all, the crash cost the region $150m. Any foreign
investment that still trickles into Russia is devoted to producing goods in
the richer parts of the country, not in thinly populated Siberia. The tax
base, and therefore revenue, has all but disappeared, for both federal and
local government. 
Still, Mr Lebed has been making a poor showing, locally and nationally.
His advisers change with bewildering rapidity: on most estimates, his
current team is already his third. “The problem is not that he’s no
economist, but that he can’t organise a team. His people aren’t interested
and don’t have time,” says Mikhail Tyumenev, a local financier who used to
be one of Mr Lebed’s keenest supporters. 
Others are even more scathing. Anatoly Bykov, once probably the
governor’s most important local ally and boss of KRAZ, the region’s giant
aluminium business, calls the Lebed lot “little boys who go running home to
mummy in Moscow every weekend.” He broke with Mr Lebed last month. 
Mr Lebed’s team is indeed largely composed of youngish outsiders, who
until recently were to be seen on the Friday-afternoon flight to Moscow.
And they tend to be hopelessly disorganised. Meetings are hard to arrange,
and often cancelled at short notice. In mid-November, Mr Lebed hastily
broke off a visit to Germany, leaving his hosts—and potential
investors—fuming. The excuse, that a three-month moratorium on bank debts
was about to expire, made matters worse. Why, the Germans asked, had Mr
Lebed, or at least his staff, not noticed the date when planning the trip? 
Apart from jailing some officials from the previous administration for
alleged corruption, there has been little to show for the general’s first
200-odd days in power. Policies tend to be made on the trot, and then
forgotten. An early response to the economic turbulence that struck last
year was price control, which—luckily, perhaps—never took effect. A more
recent one was to ban the “export” of food from Krasnoyarsk to other
regions. “Stupid—the problem here is not lack of goods, but lack of money,”
says a shop assistant. 
Mr Lebed’s aides (when they can be found) admit his lack of economic nous
but stress his gutsy appeal to ordinary voters—“like Ronald Reagan,” says
one. Yet the Californian analogy hardly stands up. Good work in local
politics, à la Governor Reagan, may not, after all, be Mr Lebed’s main aim.
“Lebed doesn’t connect this territory with his future,” argues Sergei Kim,
a local television journalist. “Beforehand he was nobody—just a retired
general with a tiny political party.” Now, Mr Kim points out, Mr Lebed is a
member of the Federation Council, Russia’s upper house, thanks to his
Krasnoyarsk governorship. Heading the Siberian region may be no more than a
means for the former general to stay close to power in Moscow. 
To be sure, Mr Lebed’s reputation for decency, incorruptibility and
bravery—as a nationalist in Moldova and peace-broker in Chechnya—may still
win him a lot of votes in a national election. But his performance in
Krasnoyarsk, his dearth of ideas about the economy, and much else besides,
have been doing him no good at all. 


January 14, 1999
[for personal use only]
The Ruble Is Down and Out / In '99, currency has dropped 8%

Moscow - Imagine, on New Year's Eve you had $100 in your pocket and
even though you never spent a kopek, by the end of the week it was worth
about $90. That's the reality in Russia, where the new year wasn't even
weeks old before the value of the currency dropped by more than 8percent.
But the ruble losing part of its value was only the latest economic
slap in what promises to be a difficult year. Since the new year, the
cost of electricity doubled in some areas and rents have risen. Heat
prices went up 10 percent. The fare on the Metro, Moscow's subway
system, doubled, and, as the ruble lost value, the cost of importing
food rose beyond the reach of most Russians.
"It's going to be another hard year in Russia," said Peter Westin, a
western economist with the Russian-European Center for EconomicPolicies.
The government has moved quickly to help shore up the sagging
currency, imposing new financial controls and using funds from the
Central Bank to help buttress the ruble. That and the changing market
have helped improve the situation a bit so that by today, the ruble will
be worth 21.80 to the U.S. dollar, an improvement over the record low of
23.06 just three days ago. But the value is still less than officials
assumed when they drew up the proposed budget for 1999 and far lower
than the rate of 6.7 rubles to the dollar before the August economiccrisis.
Still, the government put on an optimistic face, insisting that it
will succeed in stabilizing the ruble, and with that the nation's
devastated economy. "The ruble's fall against the U.S. dollar will
slow," said first Deputy Prime Minister Yuri Maslyukov. "Individual
hitches may arise, but most importantly, we have solved the problems
regarding the social sphere," and defense investments.
But on the streets, where people are quietly enduring these tough
economic times, the sliding value of the ruble is having very tangible
results. Just outside Moscow it is, for example, impossible to buy a
toothbrush. It appears none are being made locally, and imports are so
expensive that shopkeepers don't stock them because they won't be sold.
Inside the city, prices at the markets are changed twice a day to
reflect the changes in the currency. So when the ruble went down 8
percent, shoppers found prices on cooking oil and sugar and other
essentials had risen by the same amount.
At the same time, the government's money problems have led to
increased prices. In many instances, price hikes do not pinch, since
people without money simply do not pay their bills. But most everyone,
except the rich and homebound, is affected by the decision to double the
fare on the Metro, the elaborate subway system that millions of riders
depend on every day to travel around the city. The one-way fare has
increased from two rubles to four.
"It's disgusting that they have raised our prices," said
68-year-old Lidia Grishina, who complained the trains are crowded and
stuffy as she boarded one for her ride home yesterday evening.
"I don't want to complain, but life is really hard and difficult
for us to live," said Nikolai, 50, another Metro rider who declined to
give his family name.
Last year the ruble lost 246.5 percent of its value, creating the
kind of complex economic problems that are difficult to solve.
As a short-term solution, the government has turned on the printing
presses, cranking out new rubles by the billions. This year, the
government has printed $8.3 billion worth of rubles, and there are
plans to print in excess of $30 billion more. Printing money stokes
inflation, further eroding the purchasing power of the ruble.
Hoping to stop the ruble's continued devaluation, the government
this week imposed regulations on Russian exporters requiring they use 75
percent of the hard currency they earn for sales overseas to buy rubles
- an increase of 25 percent over the current requirement. But Westin
said that solution, too, will be short-lived. "Exporters will find a way
around this so that they can keep more of their money," he said.
And in the end, many experts said that as the year progresses the
ruble will continue to slide, losing another half of its value until it
reaches a rate of around 40 rubles to the dollar.
Officials at the Central Bank declined to comment yesterday. One
bank official said that the situation is so troublesome, "I don't know
who would wish to talk about it."


Financial Times
January 15, 1999
[for personal use only]
IMPEACHMENT: Yeltsin and Clinton share worries
The steps being taken against the Russian president may follow a similar
path to those in the US, writes John Thornhill

Boris Yeltsin and Bill Clinton like to present themselves as bold,
reforming presidents who have discarded old ways of thinking and steered
new courses for their countries. But the Russian and US leaders have
something else in common: they are both under threat of impeachment by
their opponents.
While Mr Clinton battles to defend his presidency in the US Senate, Mr
Yeltsin is trying to fend off attacks from the Duma, the lower house of the
Russian parliament. This week, a parliamentary commission resumed its
investigations into Mr Yeltsin's alleged offences, promising to conclude
its work next month.
Mr Yeltsin's enemies led by the Communist party - claim he is guilty of
five treasonable charges: destroying the Soviet Union in 1991; forcibly
dissolving the Supreme Soviet in 1993; conducting an illegal war in
Chechnya; undermining the country's armed forces, and presiding over the
"genocide" of the Russian people.
The impeachment process has to overcome several procedural obstacles and
is unlikely to succeed. Two-thirds of the Duma's 450 deputies must first
vote for Mr Yeltsin's removal. The Supreme Court must then confirm that the
president has committed an act of treachery or a state crime.
The Constitutional Court would then review the legality of all these
proceedings before handing the matter over to the Federation Council, the
upper house of parliament, for a final decision.
Gennady Seleznyev, speaker of the lower house of parliament, predicts the
impeachment moves against President Yeltsin may follow a similar path to
those in the US. The lower house of parliament may vote for impeachment -
if only on the issue of Chechnya - but the initiative will be killed in the
Federation Council.
"Talk about this matter is one thing. Providing legal justification for
each article of impeachment is quite another," Mr Seleznyev says.
As in the US, the impeachment proceedings appear to have been driven by
political hatred as much as the compulsion to observe constitutional
propriety. Most of the charges against Mr Yeltsin are political slogans
rather than legal accusations.
The Duma set up the impeachment committee as a "defence mechanism" last
year when Mr Yeltsin was threatening to dissolve parliament if it did not
approve Sergei Kiriyenko as prime minister. Under the terms of the
constitution, Mr Yeltsin would have been prevented from disbanding
parliament had he been subject to formal impeachment proceedings.
However, the appointment of Yevgeny Primakov as a consensus-seeking prime
minister has helped defuse these tensions between president and parliament.
The liberal Yabloko faction, which had clamoured for Mr Yeltsin's
impeachment over his conduct of the Chechen war, now appears to have lost
interest in the process.
Without Yabloko's support, the Communist party cannot muster the 300
votes needed to launch formal impeachment proceedings.
"There is no chance that Yeltsin will be impeached," says Boris
Makarenko, deputy director of the Centre for Political Technologies, a
Moscow research institute. "But the game will continue as long as the
procedural rules allow."
Mr Makarenko argues that the Communist party will keep hammering away at
Mr Yeltsin to reaffirm its own credentials as an opposition party. Calls
for impeachment may also flare up if Mr Yeltsin seeks another confrontation
with parliament or suffers a further deterioration in his health.
"The members of the Duma are not interested in the legal validity of the
accusations as much as their political utility. The closer it gets to the
December parliamentary elections, the more controversial the process will
be," he says.
Mr Seleznyev argues the impeachment process is a useful means of testing
the limits of Russia's nascent constitution, helping to entrench the rule
of law in a country which has provided few checks on the power of the
executive. But other observers point out the striking contrast between the
popular will and the probable political outcomes in the US and Russia.
Even though opinion polls show that the majority of American voters
support Mr Clinton, he still remains hostage to an unpredictable Senate
vote. By contrast, Mr Yeltsin has lost almost all his support among the
Russian electorate but appears in little danger of being removed from
office before his term expires in the summer of next year. 


Growing Drugs Trafficking Poses Threat to RUSSIA'S Security.

MOSCOW, January 14 (Itar-Tass) - Incessantly growing drugs trafficking
poses a threat to Russia's national security, said Department chief in
charge of the struggle against Customs violations Sergei Trofimyuk at a
press conference on Thursday. 
The expansion of drugs into Russia accounts for mass growth in the number
of drugs addicts and poses a real threat to the present generation and the
generations to come, Trufimyuk stressed. Besides, the tendency that Russia
might turn into a drugs consuming country results in increasing sums of
money in foreign currency taken away from Russia to drugs producing
countries, which negatively affects Russia's economy, Trofimyuk said. 
A growing scale of illicit drug business leads to a higher level of
criminalization of society, worsens the situation in the area of
credit-financing relations, produces a destructive effect on economic
stability and worsens social tension in society, the State Customs
Committee believes. Over the past year, the amount of heroine illegally
brought into Russia increased fivefold against 1997, Trofimyuk said. 
Last year alone, 1,719 attempts to smuggle drugs totally worth 30.7 million
dollars were prevented. Russian Customs officers confiscated 47.3 kilograms
of heroine, 50,1 kilograms of cocaine, 128,9 kilograms of opium, almost six
tons of marijuana, hashish and poppy. Besides, a large amount of drugs was
found in humanitarian cargoes, including 12,8 million pills, ampoules and
capsules containing psychotropic substances and strong medications. Around
141,9 tons of chemical products used as raw material for illegal drugs
production were confiscated, Trofimyuk said. 
Around two-third of all drugs consumed in Russia are brought to Russia from
abroad, Trofumyuk said. Around 10 percent of drugs detained go via Russia
"in transit," while 90 percent of drugs are intended for the Russian
market, he said. According to estimates made by Russian and foreign
experts, 10-15 percent of illicit drugs are detained at Russian Customs,
which is rather a high percentage, the press conference was told. 


Zyuganov Sees Liberals' Comback as Greatest Danger 

Moscow, Jan 13 (Interfax)--The greatest danger in Russia today is the
possibility of a comeback by liberal forces, Communist leader Gennadiy
Zyuganov told a Wednesday news conference in Moscow.
"Those who have driven the country to its present state are now trying
to regroup to return to power," he said. Still he quoted a recent meeting
of the Communist Party leadership as saying that 1999 may become the year
of a crucial turn in Russian history when patriotic forces could come to
power, providing the hope that the future president will represent
Zyuganov said the party leadership believes there are two influential
political forces in Russia--the People's Patriotic Union and the Fatherland
movement of Moscow mayor Yuriy Luzhkov. Not only the composition of the
future Duma but Russia's future depend on their interaction in the coming
parliamentary elections.
Zyuganov said that the party leadership discussed the possibility of
patriotic groups participating in the elections "in two-three coalitions to
win over as many voters as possible."
He quoted a public opinion poll conducted by U.S. analysts in Russia
with the help of intelligence services as saying that about 55% of voters
currently support Communists and some 200 movements of the patrioticforces.
Zyuganov said the party presidium approved the efforts of the
parliamentary commission for impeaching President Boris Yeltsin and thinks
that when the commission completes its work in February the Duma may
support all five charges brought against Yeltsin, including the currently
discussed charge of genocide of the Russian people. "The Yeltsin regime has
burned 8 million citizens already," he said.
The party presidium criticized the Government for procrastination in
the drive against crime and corruption. Neither has the Cabinet fulfilled
its promise to pay wage arrears to federal employees, primarily educational
and scientific workers by the beginning of January, Zyuganov said.


Journalists Union Chief Summarizes 'Very Difficult' Year 

MOSCOW, January 12 (Itar-Tass) -- Last year proved a very difficult
one for Russian journalism, Chairman of the Russian Journalists' Union
Vsevolod Bogdanov told Tass in an interview he gave on the occasion of
Press Day. The economic crisis had "carried out an aimed strike at the
Russian mass media," cutting back the advertising market which could not
but entail the reduction of staff in many media outlets, Bogdanov said.
Situation is rapidly deteriorating in regions where reporters and
journalists have been long working out of sheer enthusiasm without being
paid for their work. Nevertheless, Bogdanov believed there were "some
grounds for optimism." He expressed hope that "faith in common sense has
not been exhausted yet." He further added that "the authorities should
sooner or later realise that human society needs truthful information no
less than it needs daily bread."
The career of a journalist is still one of the most dangerous ones in
the country. In 1998, Russia saw ten of its journalists killed. The media
community was shocked by the atrocious murder of chief editor of the
"Sovetskaya Kalmykia Segodnya" newspaper Larisa Yudina. Russian
journalists launched a broad campaign of solidarity and did not limit
themselves to words only. They decided to continue Yudina's business, and
to keep publishing the newspaper with their own funds. Bogdanov said that
the Russian Journalists' Union had set up an association for the killed
journalists' orphans. Many of them had followed in their fathers' footsteps
and were now studying journalism at the Moscow State University.
Bogdanov also said that National circulation service would soon start
working in Russia. According to Bogdanov, it would mark the first step
towards creating independent public experts' control over the media.


Date: Thu, 14 Jan 1999 
From: Jamestown Foundation <> 
Subject: 14 January 1999 Jamestown Commentary - Vol.I, No.1


The essay below marks a significant departure for Jamestown. For fifteen
years we have eschewed editorializing, or otherwise expressing institutional
opinion. Recently, however, the foundation's board of directors decided that
we should make an effort to "connect the dots" for our readers' benefit,
especially the considerable number among you who occupy policy-making
positions. We expect "Unhinged Persistence" to be the first in an series of
commentaries in which we provide you with the consensus viewpoint of our
senior analysts, and thereby impart valuable perspective.

Bill Geimer


Unhinged Persistence

When the West won the Cold War, it was a bloodless victory, but Russians may
be forgiven if some days they feel less liberated than just plain beaten.

In 1980, per capita income in the Soviet Union was $4,550, about 38 percent
of what it was then in the United States. Per capita income in Russia now
is about $1,240, or about four percent of the United States level, having
fallen in all but one of the last seven years. The International Monetary
Fund projects a further steep decline in 1999, together with inflation
approaching 60 percent. As the ruble continues to lose value, Russia's per
capita income next year could easily fall below $1,000. The old Second
World has fallen into the Third World and, like a cartoon coyote, keeps on

At the heart of Russia's economic collapse is the "payments crisis" -- the
vicious circle of unpaid bills that has left the country essentially without
money. The crisis has many causes. The privatization program stripped the
state of assets but brought in neither present cash nor future taxes. That
left the government to finance its expenditures with a pyramid of debt,
running up arrears to suppliers, employees, pensioners, and others, and
selling notes to unregulated, barely capitalized banks. (About a third of
the Communist Party caucus in the Duma, the lower house of parliament, calls
themselves bankers. What kind of communists are these? What kind of
bankers? What kind of legislators?)

When Western investors -- the last mugs in this mugs' game -- pulled out
last summer, the pyramid collapsed and the banks as well. That left much of
Russia curled in an economic fetal position, relying on barter and
greenbacks rather than rubles and living without savings or investment. So
enfeebled is the Kremlin now that in its 1999 draft budget, total proposed
spending by the central government amounts to just $185 per capita. The
United States federal government, by contrast, spends about $6,300 per
capita. Anyone who doubts the weakness of Russia's central government
should contemplate these numbers.

Many Russians think a strong man can fix a weak state. Place all "power in
one fist" says President Boris Yeltsin (coughing into it discretely).
Moscow's Mayor Yuri Luzhkov, a presidential hopeful, says that in times of
economic crisis, it is too early to talk of parliamentary democracy.
General Aleksandr Lebed, another presidential candidate who earned his
tough-guy reputation jumping out of planes over Afghanistan and shooting
into crowds of mutinous civilians, asserts that "in order to establish
democracy in the country, there must be dictatorship in the executive." His
model is Chile's General Augusto Pinochet, who "brought his country.back to
a normal life" while killing "no more than 3,000 people."

In Russia today, the call for a strongman is not surprising. There is
nostalgia for the less bad old days -- the middle years of the somnolent
Brezhnev era, during detente with the United States and before the war in
Afghanistan, seem to be the favored period. There is a search for a foreign
cause for Russia's wretched situation: the United States, the International
Monetary Fund, and the ever-handy international Jewish conspiracy all
receive attention. The Communist Party of the Russian Federation tries to
capitalize on these backward-looking trends with a rhetoric of Russian
nationalism, veiled and unveiled anti-Semitism, and a contrast between the
security of the communist past and the lawlessness of the "capitalist"

One definition of insanity is doing the same thing over and over and
expecting different results. Russia's fascination with autocracy has this
quality of unhinged persistence. If a strongman at the top could do the
trick, Russia by now would be a peaceful, prosperous, and happy land. For
surely there are few nations with as long a history of strong leaders as
Russia -- from Ivan to Peter to Catherine to Nicholas to Alexander to
seventy-five years of communist dictatorship, including almost thirty years
of the incomparably strong Joseph Stalin. Not a limp-wristed,
pointy-headed, flabby-minded weakling among them.

Russians would be wrong to confuse the weakness of the state with the
weakness of the leader, or to believe that an autocratic personality will
set things right. The constraints on the government are fiscal, not
personal. Without profound institutional reforms, the government will
remain incapable of raising money or providing basic public services. A
bankrupt government means desertion and suicides in the military; strikes in
schools and hospitals; security failures in nuclear plants; energy failures
in Siberia; and a police and bureaucracy for rent to the highest bidders.

In the face of Russia's calamitous government, in the face of a torrent of
communist-nationalist or "red-brown" rhetoric, in the face of the strongman
myth, what is remarkable is the continued resilience of Russian democracy.
Signs of a coup are absent. Governors have been elected in all of Russia's
89 sub-federal regions. Parliamentary elections are scheduled for December,
1999, and presidential elections for June, 2000. Although Boris Yeltsin's
health could prompt an acceleration of that schedule, there is no talk now
(as there was in 1996) of canceling elections. Would-be strongmen like
Lebed and Luzhkov ran for and hold elective offices and give every
indication of preparing for future electoral campaigns. In the words of
Sergei Medvedev: "A new form of legitimacy, totally alien to the local
political tradition, has been born in Russia, and now any politician or
political movement, save a few marginal radicals, feels compelled to take
the test of the ballot box."

Russia failed its first attempt at transition from a command to a market
economy. The way back to economic stability will be long and difficult. For
a government that lacks the consent of the governed, it may be impossible.

Harry Kopp, Editor
Copyright (c) 1999 The Jamestown Foundation.


Politicians' Funding Sources Assessed 

Moskovskiy Komsomolets 
5 January 1999
[translation for personal use only]
Article by Aleksandr Budberg: "Our Politics Is a Pipeline.
Where To Steal Money for Elections"

The nearer the elections get, the more fiercely the contenders attack
one another. That is understandable. But in our remarkable country, where
the most interesting things often hide behind the most boring names, even
an election struggle has a trace of a struggle for the opportunity to steal
with impunity. Judging by the character assumed by the struggle with
[former Prime Minister] Kiriyenko's team, in which completely different
mass media are trying to expose them simultaneously, it is worth once again
thinking about the main secret of any election race -- the secret of
Historically in Russia not that many ways have been thought up of
exchanging "something" for money for elections. All kinds of individual
concessions on imports and exports were one of the first and most
beneficial "debut ideas." Suffice it to recall the National Sports
Foundation, which had the right to import duty-free alcohol and tobacco. 
The state lost around $5 billion a year from this. The foundation was run
by one Boris Fedorov, while Aleksandr Korzhakov provided "monarchical"
patronage. As can be gleaned from his book and from several interviews, in
spring 1996 the Presidential Security Service leadership was indignant that
the National Sports Foundation was unable to provide money to fund the
election campaign. Consequently Fedorov was removed. Subsequently an
attempt was made on his life but he miraculously survived (the general
prosecutor and his deputy do not even recall the investigation of this
case). Korzhakov's subordinate Strelitskiy was appointed in place of the
foundation's seriously wounded leader, but this did not recover any money.
Because the main rule of "earning money at the treasury's expense" was
encapsulated in this case: No matter what programs it is collected for, at
least 90 percent goes into the pockets of individuals.
It is practically impossible to return to concessions in 1999. In 1995
[Anatoliy] Chubays [then first deputy chairman of the Russian Government]
essentially buried them. It was then that he was "to blame for everything"
as far as the press as concerned, it was then that a presidential adviser
threatened him with physical violence right outside the vice premier's
elevator. But what has already been done cannot be undone. If just a word
were breathed right now about the concessions from which the state is
losing billions and billions, a most awful furor would erupt. The IMF would
immediately terminate all aid, because even in the budget now compiled
two-thirds of receipts directly depend on the West's position.
The Rosvooruzheniye company could be the second place where money for
elections could easily be obtained. The point is that the specific nature
of this company's activity is not at all transparent. According to some
estimates, up to $500 million could be taken from it, which is enough for
any Duma and presidential campaign put together. (After the crisis
everything has become cheaper in our country). But if even $500 million
cannot be extracted for the country, it will be easy to take $100-200
million. There is one problem: Premier Primakov has taken very firm
control of the situation. To whom he will give this gift and whether he
will give it at all is a huge question.
In the absence of Rosvooruzheniye's concessions and incalculable
money, realistically money can be obtained either by transferring valuable
state property to somebody or from the fuel and energy complex. But the
point is that all the state's really valuable property is in this very
sector of the economy. That is why the battle for election money will to
some extent or other definitely turn into a battle for the fuel and energy
complex. But it was this sphere that had the biggest number of
restrictions imposed on it in 1997-1998, when the "young reformers" and
their ally Kiriyenko who had entered government tried to implement the
slogan: "Guys, let us steal less; the country cannot go on living like
Money in the energy sphere can also be taken from strictly assigned
places. One such "place" has already been announced -- property. Let us
assume that the state transfers (does not sell!) the management of its
property to somebody. In exchange for this the firm that receives this
slice without any responsibility funds whomever it is told to. In a few
short months of the new left-wing government's work, people have appeared
who have already proposed that management of the remaining
government-managed stakes in Rosneft, Slavneft, and Onako be transferred to
them. (Officially nobody is discussing the possibility of paying anybody
anything). Speaking plainly, the Lukoil company came out with this
proposal, seeking to obtain all these oil stakes in exchange for 8 percent
of shares in Lukoil itself. According to the most modest estimates, the
yield on such an exchange would be 200-300 percent. In addition, it must
not be forgotten that the state owns 27 percent of shares in Lukoil. 
Therefore any additional issue of shares to cover any deal would
essentially erode the state's holding. If before the issue of a new
quantity of shares the government controls 27 percent, after such an issue
it would control, let us assume, 23 percent. That is, essentially, having
lost some of its influence in the Lukoil company, the state would be
financing at its own expense the purchase from itself of Rosneft, Slavneft,
and Onako, which is affiliated to them.
Undoubtedly a fine move. Since all kinds of privatization come under
too close public scrutiny, the procedure is laid down right down to the
last comma, and the capture of the last-named without any tender has been
brilliantly conceived. The trouble is that the Fuel and Energy Ministry
leadership will firmly reject this project. Moreover, Minister Sergey
Generalov has even proposed the organization of a special state company to
which the management of all shareholdings should be transferred. And he
cannot be outsmarted on this question.
The second "place" where money can be obtained is the boring word
combination of "additional quotas." Let us try to explain. The price of
oil abroad for our great motherland is on average $20 more per tonne than
the price inside the country. Obviously it is very advantageous to buy
inside the country and sell abroad. But the trouble is that pipeline
capacity is strictly limited. It is simply impossible to pump more than a
set amount of oil. Every year the government has announced what percentage
of pipeline capacity it is taking for "its own reserve." It has usually
been around 30 percent. This 30 percent is distributed among various firms
and small intermediary firms by officials. One can imagine what is at
stake. Obviously profits have been "carved up" into strictly agreed
proportions. Often firms have used some important program to justify their
"additional" pipeline access. For example, the reconstruction of the
Kremlin or shipments to the North. True, practice shows that instead of
the $50 million for the purposes described in the program no more than $4-5
million is received. This has been explained easily: Oil has simply been
sold unsuccessfully. One can only guess the fate of the remaining $45-46
One of the best examples is Kamchatka, which for many years has had an
additional quota for northern shipments. When in 1997 [then first deputy
prime minister Boris] Nemtsov and Kiriyenko secured the abolition of
additional quotas, the local government did not get indignant. Because
Kiriyenko promised to carry out a review of the funds that the northern
oblast was receiving through additional quotas. Naturally, they turned out
to be about 10 times less than the calculated quotas. (Incidentally, there
is an interesting story about Kamchatka in general. For example, this year
the Kamchatka governor demanded direct funding from Moscow for the purchase
of fuel in order to acquire fuel oil only abroad. For information, a tonne
of fuel oil costs $210 abroad and $60 in Russia. A maximum of $100
including delivery. For some reason the governor would on no account agree
to carry out offsets between budget-funded organizations so that fuel oil
would be bought with budget funds inside the country and sent directly to
Kamchatka. Evidently at that time he was not frightened by the threat of a
cold winter. He even thought it possible to spend the whole (!) of August
on vacation).
Kiriyenko and Nemtsov killed this business simply and effectively. 
They forced through the signing of a presidential edict according to which
only the actual firms extracting oil are allowed access to pipelines, in
volumes proportional to that extraction. The middlemen were cut out.
After the departure of Kiriyenko's government there was only talk of
the return of the institution of additional quotas. Officials are eagerly
looking forward to this because there will be something to "carve up." But
in order to do this it is once again necessary to change the leadership of
the ministry and Transneft and, most importantly, to compromise the people
who abolished these additional quotas. Otherwise the ploy will not work.
Another "place" where good money can be obtained is the offsetting of
taxes and debts for enterprises. Above all this applies to the power
industry. It turns out that it was not a bad business for firms associated
with communists. The simplest scheme involved collecting the debts of
enterprises (electricity systems which still have real money) at a huge
discount of, say, 90 percent. And then flooding the energy system with
these bills of exchange, but at 100 percent. This naturally required good
relations with the energy system's leadership and local governors. Simply
insane amounts of money went on this alone. But once Chubays arrived this
business started to decline rapidly.
The conclusion that flows from all the foregoing is a very simple one.
The fuel and energy complex leadership must be drawn together. It is
being attacked on various sides because too many forces are interested in
this. The main watchword is that the current fuel and energy sector
leadership intends to surrender the sector to the democrat swine. 
Moreover, surrender evidently means not allowing others to steal. Above
all Minister Generalov, Transneft leader Savelyev, and Kiriyenko himself
are under attack.
The former premier is accused, in particular, of "awarding" $54
billion to the KOPF [Project Financing Company] bank. Kiriyenko does not
deny this -- moreover, he is proud of it. The point is that when he
arrived to manage NORSI, Europe's largest oil refinery, he immediately
checked the books and saw that one day the refinery received a credit from
the KOPF and the same day it transferred all that money to the bank's
incorporation capital. After which it paid interest on debts for two and a
half years. Kiriyenko, himself a banker, knows full well how false
incorporation capital is organized. Therefore he immediately told the guys
from the KOPF that he would not pay. (Incidentally, the record of the
transfer of $54 billion from NORSI back to the KOPF disappeared from the
computer the next day -- but it was too late. Kiriyenko had already managed
to take a copy). The latter agreed but demanded that $9 million in
accumulated interest be paid. Kiriyenko refused and won all arbitration
hearings. That is why it is not surprising that he is so proud of what he
"awarded" to the KOPF.
Kiriyenko is not yet very upset that he has almost become his
opponents' main target. Especially as he is absolutely convinced that
right now it is not politics that people are playing. People are playing
with money. This requires the removal of people who were appointed by him
during his premiership. They are simply hindering the work of the
"carvery." And politics will develop from the money which can be "carved



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