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Johnson's Russia List


January 23, 1999    
This Date's Issues: 3026   

Johnson's Russia List
23 January 1999

[Note from David Johnson:
1. Moscow Times: Melissa Akin, Albright Can Expect Cold Welcome.
2. Reuters: Russia Sets Up Millennium Bug Body.
3. RFE/RL: Floriana Fossato, Russia: Government Welcomes Debt Restructuring.
4. Washington Post editorial: To Engage Russia.
5. Yale Richmond: GERMANY IN 1945.
6. George Krasnow: Janine Wedel at Borders Books.
7. Lynn Turgeon: Hyperinflation as Bogeyman.
8. Michele Berdy: scams and capitalist progress.
9. Andrei Illarionov at Cato Institute in Washington DC.
10. T. S. White: police experience/3024.
11. Reuters: Russia Turns Relief Aid Debate into Swipes at West.
12. AP: US: Caspian Oil Pipeline Deal Near.
13. Journal of Commerce: Michael Lelyveld, Russia offers trade statistics
to mask double-digit problems. Analyst says economy rlally contracting at a 
10% rate.

14. Moscow Times editorial: A Man Eats Neighbor's Dog World.] 


Moscow Times
January 23, 1999 
Albright Can Expect Cold Welcome 
By Melissa Akin
Staff Writer

U.S. Secretary of State Madeleine Albright arrives in Moscow at about 1
a.m. Monday, according to officials at the State Department and the U.S.
Embassy in Moscow. 
And that's about all they're saying. Maybe she'll meet with Prime
Minister Yevgeny Primakov. Maybe she won't. Likewise with President Boris
Yeltsin, but his aides say a meeting is "problematic" because of his
health. She is supposed to meet with Russian lawmakers - but which ones,
they aren't saying. 
The only one talking Friday was her Russian counterpart Igor Ivanov, who
told reporters she will meet with State Duma Speaker Gennady Seleznyov, and
of course she'll talk to Ivanov himself. 
They have plenty to talk about after a week in which Washington has
irritated Moscow day after day. First it slapped sanctions on institutes
that it accuses of transferring missile technology to Iran, a "rogue state"
in U.S. parlance. Then NATO with the United States at its head threatened
to bomb Kosovo to punish its Serb rulers, setting off howls of protest from
And Albright is winging into town just days behind a letter from U.S.
President Bill Clinton asking Russia to renegotiate the Anti-Ballistic
Missile Treaty - a decades-old document that Ivanov called the
"cornerstone" of disarmament. 
It will be a "broad agenda," said Ann Johnson, the State Department
spokesperson on Russia and the newly independent states, refusing to
comment on the content of Albright's meetings. 
Albright had planned to visit Moscow this winter to attend the triumphant
opening of talks on a START III treaty, a key disarmament document expected
to slash nuclear warhead levels on both sides to about 1,000 apiece. 
After years of stalling by the Communist-dominated Russian parliament and
weeks of pleading by newly installed First Deputy Prime Minister Yury
Maslyukov, lawmakers were just hours from ratifying the START II treaty,
the precondition for negotiating START III, when the U.S. began bombing Iraq. 
Furious at the United States for its sidestepping of the UN Security
Council, where Russia has veto power, the State Duma, parliament's lower
house, refused to consider the document and likely will not touch it for
several months even though it is nominally on the agenda for next week. 
The future of the START treaties has never been more in doubt, with
Clinton asking Yeltsin to tweak the ABM treaty. Yeltsin is "considering
Russia's position" on a renegotiation," Interfax said.The Anti-Ballistic
Missile treaty codifies the so-called doctrine of mutually assured
destruction by banning either country from developing missile defense
For now, the U.S. is taking the line that its intention to develop
limited-scale theater defense systems doesn't violate the letter of the
treaty. But liberal U.S. interpretations of the treaty have not been
received well in the past: When President Ronald Reagan rejected Soviet
President Mikhail Gorbachev's demands to cut back plans for the U.S. "Star
Wars" initiative at a 1986 summit in Reykjavik, U.S.-Soviet relations
suffered a breakdown. 
Now, with the START I treaty ratified and in effect and others on the
table as Russia's missile defense forces disintegrate, far more is at stake. 
"ABM is a basis for all disarmament treaties," Golts, a military analyst
for Itogi magazine said. "If we lose this basis, it means we lose
Golts said that U.S. possession of an ABM system opened the possibility
that it could technically launch a nuclear attack on Russia and expect to
survive a counterattack. That circumstance eliminates all Russian incentive
for ratifying START II - and Clinton's request to renegotiate means the
U.S. administration has lost hope the Duma will ever ratify the treaty,
Golts said. 
Seleznyov, whom Albright is tentatively scheduled to meet, has presided
over the Duma as it has passed three resolutions condemning U.S. policy in
the past month. Seleznyov, who was in Vienna last week meeting with
representatives of the Organization for Security and Cooperation in Europe,
is an outspoken critic of U.S. actions in Kosovo. 
Russian politicians have been accusing the United States of destroying
the credibility of international institutions by acting unilaterally in
common spheres of influence, such as the Balkans. 
Russia, which traditionally supports Serbia in Balkan conflicts, accuses
NATO of giving in to provocations from the Kosovo Liberation Army and
threatening to spark Serb violence across the region with airstrikes on
Serb positions in the separatist ethnic Albanian republic. 
NATO representatives were in the Duma on Wednesday on a mission to
convince deputies to soften their opposition to strikes, the Moscow daily
Segodnya reported. Deputies from the Atlantic Dialogue group attended a
meeting, but the anti-NATO group boycotted, the report said. 
Albright called Russia "a potential great power ... that has to be dealt
with very seriously." She was quoted in a recent interview with the Los
Angeles Times, where she laid out her vision of a new world order in which
the U.S. would marshal the world's democratic forces.But her policies -
beginning with her support of NATO expansion to former Warsaw Pact
countries Hungary, Poland, and her native Czech Republic - have
marginalized Russia and led the Kommersant daily in Thursday's edition to
label current U.S. policy on Russia one of "neutralization." 


Russia Sets Up Millennium Bug Body
January 22, 1999

MOSCOW (Reuters) - Russian Prime Minister Yevgeny Primakov approved the
creation of a government commission Friday to combat the threat of the
millennium computer bug.
The commission will combine efforts by central and local government, the
Central Bank, state and private organizations to ensure computers do not
malfunction at the turn of the century, a government statement said.
Russia has been criticized for being slow to react to the millennium bug, a
fault in which computer software first developed in the 1960s and 70s fails to
recognize the year 2000 and thinks it is back in 1900.
``The commission has been asked to study and learn the experiences of
in other countries in trying to solve the '2000 problem' and work on
recommendations for use in Russia,'' the statement said.
Russia late last year dismissed U.S. concerns that the bug could trigger an
unintentional nuclear attack by blanking out command computers and by
panicking officers into suspecting an enemy first strike. 


Russia: Government Welcomes Debt Restructuring
By Floriana Fossato

Moscow, 22 January 1999 (RFE/RL) -- Russian government officials have been
encouraged by a decision made public earlier this week by the London Club of
creditors to continue talks on restructuring part of Russia's $28 billion in
Soviet-era debt to international commercial banks.
The officials called the London Club decision an important precedent for
future negotiations with Russia's other creditors --including, notably, new
talks with an International Monetary Fund mission that opened in Moscow
yesterday. The outcome of these talks will indicate whether Russia has
succeeded in restructuring some $4.5 billion of debts to the IMF, which come
due this year. An agreement between Moscow and the IMF would give a powerful
signal to all of Russia's creditors.
Despite the breathing space provided by the London Club decision, critics of
the economic policies of Prime Minister Yevgeny Primakov's government say the
risk of Russia's defaulting on foreign debts still exists. They argue that
private foreign investors have simply adopted a wait-and-see attitude until
the IMF's position on restructuring becomes clear.
The London Club agreement to continue talks with Russia came after Russia
defaulted last month on a $362 million payment of restructured interest. At
the time, the Bank of America -- the London Club's paying agent, along with
Deutsche Bank -- asked holders of the debt to vote on whether to press for
full and immediate payment of overdue debts, or to continue talks with the
debtor, Russia's state-owned Vnesheconombank. A decision to press on would
have effectively pushed Russia into default, a dreadful prospect for both the
Russian government and investors worldwide.
Finance Minister Mikhail Zadornov was quoted by Bloomberg news agency as
describing the London Club decision as "the best [possible] deal for
investors." The government's top economic official, First Deputy Prime
Minister Yuri Maslyukov, told journalists that he is confident of reaching
agreement with the IMF on new support.
Maslyukov said, "obviously, the London Club decision is a powerful argument"
for an accord with the IMF. He had been sure from the beginning, Maslyukov
added, "that the [Club's] decision would be positive." He also said that,
among Russia's creditors, "there is a will to help... Otherwise, we would fall
again under an iron curtain that this time will not have been built by
ourselves -- but by others, who might decide we are an insolvent and
uncommitted partner."
But IMF officials have recently been quite critical of Russia's draft 1999
budget. IMF First Deputy Managing Director Stanley Fischer said the draft is
"neither sufficiently ambitious nor realistic." 
After talks last week in Washington with Fischer, Maslyukov acknowledged a
number of differences with the Fund over Russia's budget. But he ruled out any
substantial revisions of the government's economic policies. Critics say those
policies, including planned tax cuts that will reduce budget revenues, are
based more on maintaining political consensus than on dealing with the
According to Maslyukov, the government and the IMF mission now in Moscow
have to revise some budget calculations and, he said, "this could entail major
[budgetary] changes." But he said he believed that "this would not be the
The government's draft budget, approved in a second reading by the State
this week, also optimistically assumes the release of yet-to-be agreed upon
IMF credits. Maslyukov said any money Russia would receive from the IMF will
be used to pay the country's debts to the Fund itself.
But it is not the IMF's usual practice to refinance debts. When asked about
possible refinancing this week, IMF senior Moscow representative Martin Gilman
declined to comment. Gilman did say, however, that the objectives of the IMF
mission, which will be in Moscow for the next two to three weeks, are "to
continue discussions on the authorities' economic program for 1999 that could
be supported by a new arrangement from the IMF."
Russia is due to pay a total of $17.5 billion in foreign debt this year, and
Maslyukov described that as a huge task. The government has forecast it will
be able to meet its obligations on more than half of this sum (some $9.5
billion). But this will be the case only if international agencies like the
IMF agree to provide new loans to Russia to pay its debts -- the precise
scenario that Maslyukov has described.
According to a leading critic of the Primakov government's economic
reform economist Yegor Gaidar, this scenario is unlikely. He told a Moscow
news conference: "Of course, the IMF will keep talking with Russia. It will
try to find opportunities for compromise and will try to draft programs with
the government that have some chance of success. But the minimal precondition
is that the Russian government does not contribute to the collapse of its own
Gaidar said that what he called the government's "unrealistic budget," as
as the increased printing of rubles already under way, are not positive signs.
But Gaidar added that political pressure is likely to be exerted on the IMF in
order to influence the organization's economic assessment. Political decision-
making, he suggested, could heavily determine international economic decisions
on Russia. 


Washington Post
January 21, 1999
To Engage Russia

RUSSIA FIGURED in President Clinton's State of the Union speech only as a
headache -- a nuclear threat, a potential source of nuclear materials and
technology falling into "the wrong hands." Mr. Clinton's concern, and his
proposal to spend more to safeguard Russia's nuclear weaponry, are welcome.
But they also show how far the U.S.-Russia relationship has slipped. Early in
his presidency, Mr. Clinton saw Russia as a challenge and an opportunity. Now
he describes it only as a problem to be managed. This is understandable, but
Certainly Russia has not developed as Mr. Clinton hoped in those early post-
Soviet days. While the U.S. economy has grown in each year of his presidency,
Russia's has steadily declined. Its economy now accounts for little more than
one percent of world economic activity, compared with a U.S. share of more
than one-fifth. With such an imbalance, the kind of equal partnership that Mr.
Clinton and Russian President Boris Yeltsin once spoke of is not conceivable.
But it is wrong to assume that Russia's troubles are bound to last forever.
The Clinton administration finds it easy to justify engagement with the one-
party dictatorship that runs China, not so much because China is important
today but because it may grow into an economic and military powerhouse. How
much more important, then, to engage with a struggling democracy such as
Russia that also, over the long term, may develop into a constructive and
prosperous player on the world scene.
What does this mean in practice? Russia's most pressing international
is its external debt. It cannot possibly meet its obligations this year, and
creditor nations and banks are going to have to work out a rescheduling. The
United States could take a leading role by urging that Soviet-era debt be
written off. Without rewarding Russia's poor economic performance, this would
underline America's hope and belief that post-Soviet, democratic Russia is a
new nation in a new era.
The administration also should not act as though all is lost in Russia.
has come so quickly that it is easy to forget the progress of just the past 10
years. Political parties, a free press, environmental lobbies and other civic
organizations, millions of Russians traveling abroad -- all of this was
unimaginable not long ago. Now, with some newfound freedoms under threat and
Russia's economy reeling, support from the United States for grass-roots
democracy is all the more important. Student exchanges, business education,
journalism training -- these kinds of efforts matter now, and matter even more
for the coming generation.
The administration faces many obstacles to a policy of engagement with
-- its own disappointment, the suspicion of many in Congress, the
counterproductive behavior of Russia's current rulers in many parts of the
world. But those obstacles should not obscure the longer-term goals that
remain. America's Russia policy has to consist of more than loose nukes, and
Mr. Clinton has to lead the way. 


Date: Tue, 19 Jan 1999 
From: yale richmond <>
Subject: GERMANY IN 1945

Does history determine that democracy is not in the Russian tradition? If
that is true, asks Patrick Armstrong (in JRL 3022), then how did Germany,
Japan, and other countries with non-democratic pasts become democracies?

There is a simple answer to this provacative question, at least for Germany
where I served in the early post-war years. From 1945 to 1949, West Germany
was governed by the three occupying powers--the United States, Britain, and
France--who took steps to ensure that a new and democratic Germany would
arise from the ashes of the war. We called it "democratization," and we
worked hard at it, first by decree and then by encouragement. An
educational reform ended the two-track school system under which a few
students prepared for university study and leadership while the remainder
prepared to be workers and followers. A free trade law opened small
business and the crafts to all and ended the monopolies exercized by trade
associations and guilds. Independent newspapers and radio stations were
established, run at first by Allied officers but eventually turned over to
German editors. Political parties were established early on, ranging from
right to left (including the German Communist Party), based on parties that
had existed in Weimar Germany, and local and state elections were held. In
the U.S. Occupation Zone, we introduced town meetings where citizens could
speak out on local issues and challenge their elected officials. Initial
steps were taken to bring Germany into a European community of democratic
nations. These and other measures taken by the occupying powers, or
encouraged by them after Germany became independent in 1949, ensured that
Germany would break from its past and become a democracy. 

But there was also a human element. West Germany was fortunate in having
three strong leaders from its pre-war years who were convinced
democrats--Chancellor (Prime Minister) Konrad Adenauer of the Christian
Democrats, Kurt Schumacher of the opposition Social Democrats, and
President Theodor Heuss of the Free Democrats. They often disagreed but
they knew how to compromise and work together. The situation in Germany was
therefore quite different from that in Russia today.

Yale Richmond
Retired Foreign Service Officer 


From: "W. George Krasnow" <>
Subject: Fw: Janine Wedel at Borders Books
Date: Thu, 21 Jan 1999

"We have to reverse our present policy toward Russia, if we want to
avert further deterioration of Russian-American relations," said Janine
Wedel during a discussion of her newly published book at Borders Bookstore
in Washington, DC., Wednesday night January 20. Ironically, that
deterioration was largely caused by U.S.-sponsored economic assistance
programs aimed at making Russia an economically viable, democratic and
market-oriented country.
Associate Professor of Anthropology at George Washington University,
Wedel is no novice in the field as she had extensive experiences in Poland
as a Fulbright scholar both before and after Communism's collapse and
described them in two previous books. Wedel's new, provocative Collision
and Collusion: The Strange Case of Western Aid to Eastern Europe 1989-1998
(St. Martin's Press) describes the failure of the West to effectively
assist former Communist countries in their transition to democracy and free
market. In her presentation at Borders, as in the book itself, she
particularly focused on the failure of U.S. assistance to Russia. 
According to Wedel, the poor track record of U.S. assistance to Third
World countries to woo them away from Communism during the Cold War did not
improve since 1989 when the United States had to redirect its efforts to
assist post-Communist countries. The major reason for the failure was the
inability to overcome considerable cultural barriers fortified by the
vestiges of Communist mentality common among bureaucrats of the recipient
countries. However, while our assistance to such countries as Poland and
Hungary went through the stages of Triumphalism (illusionary and high
expectations) and Disillusionment to eventual mutual Adjustment, in Russia
no adjustment has occurred, and the result is the current financial crisis.
Arguing that, instead of learning from our mistakes in Central Europe,
we only exacerbated them in Russia, Wedel described U.S. assistance to
Russia as "political interference disguised as economic help." It was
political interference because the United States let a "gang" from the
Harvard Institute of International Development" (HIID) and their Harvard
Project monopolize assistance delivery to Russia.They, in turn, colludeded
with the Anatoly Chubais "clan" to monopolize the assistance on the
receiving end. Ignorant of Russian culture and the intricacies of Russia's
politics, we sided with a tiny clique of the so called reformers against
numerous post-Soviet elites who originally were well disposed toward both
democratic and market reforms, and were just as pro-American. 
Instead of our stated goal of promoting free market and democracy, we
helped to create the rule of oligarchs who plundered Russia, as we
encouraged President Yeltsin to rule by decree to circumvent the Duma. In
the final account, our policy resulted not only in Russia's present
economic troubles. It also discredited the notions of democracy and free
enterprise among the majority of the Russian people. Wedel reminded the
audience of some seventy people that major players of the Russo-American
"collusion" are now being investigated for possible criminal wrong doings.
She also suggested that Harvard Project would not have been able to
monopolize the "macro-economic" contracts with the U.S. government, if the
laws and the rules on competitive bidding were followed. However, the rules
were waived for "foreign policy consideration" by high-up authorities at
the Treasury and the National Security Council. 
According to Wedel, the "lethal fallout" of our assistance to Russia
might be just "a foretaste of things to come," including a growing
possiblity that "a strong man unfriendly to the U.S."might emerge in Russia
which, in turn, might lead to the resumption of arms race. As an indication
of the gravity of the Russian situation, Wedel cited Clinton's State of the
Union address in which he expressed a concern over the safety of Russia's
nuclear stock piles.
Judging by the incisive discussion that followed, the audience agreed
with the Publishers Weekly conclusion that "Wedel's bold, invaluable report
is frightening for its revelations and political implications, both in the
U.S. and the ex-Eastern bloc."

Reported by W. George Krasnow, <>


Date: Fri, 22 Jan 1999
Subj: Hyperinflation as Bogeyman

The Hyperinflation Bogeyman

When I was in Graduate School in the late forties the conventional
wisdom was that creeping or double-digit inflation would inevitably lead to
hyperinflation which had been a problem in some countries where wartime
destruction had been significant. By 1961 there were two countries at about
same stage of development that were developing different approaches to
inflation. Argentina was following IMF policies which put the goal of fighting
inflation above promoting growth. Brazil was doing the opposite getting
double-digit growth accompanied by double-digit inflation. In 1961 I had a
long letter published in the NYT supporting Brazilian macro policy which was
answered by a top IMF executive.
In the intervening period, we have seen a number of countries manage a
combination of growth with double-digit inflation, notably Israel and several
Latin American countries. An interesting analysis of how these countries have
managed this anti-IMF policy is the Arne Ryde Memorial lecture by Axel
Leijonhufvud, the unorthodox Keynesian and the Argentinian Daniel Heymann,
published in 1995 under the title "High Inflation."
Both Brazil and Argentina have had bouts with hyperinflation. The
Brazilians have recently followed an orthodox IMF policy while the
have had a currency board, albeit with double digit unemployment rates nearing
20 percent. The Brazilians have followed orthodox IMF policies like the
Russians with interest rates of 50 percent or more and emphasis on reducing
budget deficit. which is incorrectly assumed to be inflationary.
The assumed relationship between government deficits and domestic
inflation in developed countries seems a bit old-fashioned.. The best example
of the opposite relationship occurred during the Reagan years. Reagan
Bastardized Keynesianism produced the largest budget deficits on record at
same time that the rate of inflation came down, almost disappearing in 1986.
Walter Heller, who had headed the CEA under Kennedy, coined the term "Passive
deficit" to describe these deficits coming from the supply side.and
unemployment. Active budget deficits coming from the spending side of the
budget are still correctly regarded as inflationary.
Thus, when the Primakov government decided to reduce value added taxes,
the IMF incorrectly considers the presumed increase in the passive deficits to
be inflationary. In fact, the Russian economy is suffering from deflation
similar to that of the United States during the Great Depression. Most of the
recorded inflation in Russia is imported and the decline in the external value
of of the ruble assures rising inflation to the extent that the "New
continue to buy foreign products. Thus the fears of hyperinflation are
unwarranted in an economy subject to serious deflation, whether it be
Russia or


Date: Fri, 22 Jan 1999 
From: "Michele A. Berdy" <>
Subject: scams and capitalist progress

It's good that Nick Holdsworth didn't go down into that alley with the guy
holding the wad of "found" dollars. They wouldn't have just mugged him.
The scam goes like this: you spot the wad of cash, decide to split it with
another guy (or, more usually, he draws your attention to it). It's $1000.
The guy disappears... and five seconds later the guy who dropped the wad
appears and demands the money. You sheepishly offer the $500. He says:
"Whadya mean, five hundred bucks?! (or Russian equivalent thereof) I had
$30,000 in that bag!!!" When you say you can't pay it back, he offers to
take your apartment. When you object, he offers to break your kneecaps...

I have become something of a specialist in scams, since last year seems to
have been the Official Rob Mickey Year (maybe it was announced in the
papers and I just missed it). The best scam was the year's last. To set
the scene: snowy, cold Moscow, shopping for my first planned trip Home for
the Holidays in a couple of years. A few days before I'm set to buy and
ticket and head home, I decide to call my bank in the NYC to find out the
exchange rate on some rubles I withdrew from an ATM -- and hear the tinny
computer voice tell me that my entire checking account has been emptied
out: stripped bare, negative balance, overdraft, panic. I navigate voice
mail hell and reach a human being, who says the account was emptied with my
American Express card. I call AM EX and find out that these withdrawals
have all happened at ATMs in Manhattan. We establish that this is fraud,
since I haven't been there and my card hasn't left home without me. They
cancel my cards and start the procedures to return the funds; I start
whining to my bank to help me get my money back, since it is now five days
before Christmas and I have no money and no credit cards -- with a plane
ticket to buy, etc.

But amid my panic and whining, I can't figure out how this was done, since
they had to have not only my credit card number, they need my PIN,too.
How'd they do it? My colleagues here in Moscow enlighten me: FAKE ATMs.
That's right -- there are fake ATMs in Moscow that look just like regular
machines, except their only task is to copy down the information off the
magnetic strip and get your PIN. ("Please enter your personal code
now...") Then the machine tells you it is out of cash, or can't reach your
bank, or whatever. I have no idea which machine this was, but during the
crisis, when most machines were not hooked up to the Western World, I
tended to put my card in any machine I passed to see if maybe this one,
please God, would have cash and I could forget that trip to Estonia and its
functioning AM EX office.

This story is, I think, also something of a comment to the running
dialog/argument about Russian history, mentality and progress. Think of
the organization of this scam: they had to build the ATM, devise and
install the computer program to read the card, pull out the information,
make fake plastic cards with authentic magnetic strips, send the cards and
codes abroad. I assume these were "sub-contracts." The whole thing had
to be managed so no one stole the stolen funds and the profits got
distributed -- probably through banking accounts and transfers. They must
have "crunched the numbers" first to make sure the scam was going to get
"cost effective." (Can't you hear it: "Vasya, I figure we break even at 25
cards, assuming an average take of $10,000 per card. At 50 cards you can
join our profit-sharing scheme...") This is a very sophisticated,
technically advanced, well-organized enterprise. Nothing backward about
it. It's a perfect capitalist business (except for being fraud, that is). 

In any case, I assure you all that the problem here is NOT that Russians
don't grasp something in the mentality of business or are hostile to progress!


Cato Institute
Washington DC

WHAT: Policy Forum
How the Russian Crisis Was Manufactured

WHY: When the Russian ruble collapsed in August 1998, many Western
saw it as a failure of capitalism. Andrei Illarionov, who predicted the
currency's fall, will explain how the policies of post-Soviet governments
have kept Russia far from establishing a market economy and how they
culminated into the current financial crisis. Dr. Illarionov will
the perverse relationships between the state, Russian banks and private
enterprises and their influence on monetary and fiscal policy. He will
discuss the International Monetary Fund's role in creating the current
turmoil and why official Russian economic statistics-upon which the
mass media and international organizations rely-are highly misleading.
Please join us for this analysis and to hear what Moscow should have on
its agenda.

WHEN: Noon, Friday, January 29

WHERE: F. A. Hayek Auditorium
Cato Institute
1000 Massachusetts Avenue, NW
Washington, DC

WHO: Andrei Illarionov
Institute of Economic Analysis, Moscow

HOW: RSVP to Jenyé Patterson at 202-789-5229, or email to


Date: Tue, 19 Jan 19990
From: "T. S. White" <>
Subject: police experience/3024 

Article #12 in volume 3024 was cited as "police experience in St.
Petersburg" and was actually about a police experience in Moscow. 
This is evident if you read the article as the author names

I have had two experiences with the police in St. Petersburg. The
first was the night I arrived in St. Petersburg for me first
visit. I was out walking, looking for Pizza Hut, late in the
night. I had taken a wrong turn and near the Church of the
Spilled Blood I stopped to rest. As I leaned back against the
wall acroos the street from the church a Militia car pulled up and
three officers rushed over to me. They began questioning me. My
repeated attempts at conveying ignorance of the Russian language,
"Ya ne gavaru pa-ruskie", did little to stem the tide of their
questions. Then the leader hailed three civilians, two women and
a man all in their mid twenties, the officer said something to
them and the older of the women began speaking to me in English
and translating for me. When I explained that I was just tired
and not under the influence the officers instructed me to stay
with the three civilians and return to Nevsky Prospect. The three
strangers took me untder their wing, gave me advice on where to
get a good Russian dinner, and escorted me back to Nevsky

The other experience was late at night returning to my flat from
the Mayakovskaya metro station. I came out of the station and
walked half a block when a Militia car pulled up to the curb. Two
officers got out and the lead officer walked up and saluted. I
had an involuntary response, one that had not happened in thirty
years, and returned the salute. They began to guestion me about
my passport and visa. I replied with "Ya ne gavaru pa-ruskie". 
They then asked about drugs and I adamantly denied any. The lead
officer motioned to search me and was giving me a very cursory
visual search when a filthy, drunken, old man stumbled up to the
second officer and began speaking to him. The lead officer
thanked me and saluted again, this time I did not return the

In both instances I felt far safer in the hands of the St.
Petersburg militia than I would have in the hands of most
metropolitan American police forces. They were doing their job
with reasonable pursuit given that they are not constrained by
search and siezure laws. Now I feel very secure about contact
with the police in St. Petersburg.


Russia Turns Relief Aid Debate into Swipes at West 

UNITED NATIONS, Jan. 22, 1999 -- (Reuters) Russia nearly derailed a Security
Council debate about how to protect civilians in the world's civil wars by
arguing against armed intervention without council approval. 
Saying sovereignty and territorial integrity needed to be respected, Russian
Ambassador Sergei Lavrov on Thursday used the occasion to criticize
the United States and Britain on Iraq and scorn NATO threats of air strikes
against Yugoslavia over its troubled Kosovo province. 
The existence of a humanitarian crisis "is in itself insufficient grounds
unilateral armed intervention without any decision by the Security Council,"
he said on Thursday. 
Envoys from both countries departed from their scripted speeches to object. 
The session featured Sergio Vieira de Mello, the U.N. undersecretary-general
for humanitarian affairs, who urged the 15-member body to consider stronger
peacekeeping missions, stopping the arms flow and combating hate radio
With civilians constituting 90 percent of war casualties in the 1990s, he
argued for means to protect them and punish their killers. Otherwise, he told
reporters, relief aid convoys amounted to delivering goods to the "well-fed
The Security Council, however, has cut back considerably on peacekeeping
operations in the past five years, due mainly to U.S. political and financial
On the other hand, several members, including Russia and China, have refused
to approve outside military action, whether in Iraq or in Kosovo, to enforce
council decisions. 
Brazil's ambassador, Celso Amorim, said that with the end of the Cold
War, the
world's major powers interfered far less in civil wars. While that was a good
thing, it also meant that many conflicts "became orphaned," with the Security
Council dealing with the most intractable crises. 
He agreed with Russia that force should be used as a last resort and then
with the council's approval if the United Nations was to preserve any
Slovenia's ambassador, Danilo Turk warned, however, against hiding national
interests behind the rhetoric of respecting sovereignty. "These are important
principles but not absolute," Turk, a human rights expert, told the council. 
British Ambassador Sir Jeremy Greenstock, in response to Lavrov, said that
"verbal outrage" at violations was not "good enough." 
"How can we both ensure higher humanitarian standards and fulfil our (U.N.)
Charter obligations to respect the sovereignty and territorial integrity of
states, especially when they are led by murderous regimes, and in the worst
case when those regimes have used chemical weapons against their own people?"
he said. 
He was referring to Iraq's use of chemical arms against the Kurds in 1988
U.S. Ambassador Peter Burleigh said Washington believed there were
circumstances such as crises in Kosovo or in Iraq "when the international
community must be willing to act to protect civilians against their own
"We don't believe that such extreme examples of government mistreatment
be tolerated," he said. 
But Lavrov argued that the Security Council should ensure that political
did not guide humanitarian assistance. 
He said the Western-declared air exclusion zones over Iraq were imposed
unilaterally, purportedly for humanitarian purposes and without the consent of
the Security Council, whose resolutions "contained no reference" to such
It was the first time he had mentioned the zones at a public meeting of the
council, whose members have turned a blind eye to their imposition for nearly
eight years. 
The no-fly zones over the north of Iraq were first instituted after the 1991
Gulf War when Iraq fired from the air on Kurds rebelling against Baghdad.
Western allies later added a zone in the south after Shi'ite Moslems rebelled.


US: Caspian Oil Pipeline Deal Near
January 21, 1999

WASHINGTON (AP) -- Negotiations involving Azerbaijan, Turkey and major oil
companies on building a pipeline to carry Caspian Sea oil to the West are
progressing and may soon bear fruit, a senior U.S. official said Thursday.
Richard Morningstar, the Clinton administration's special adviser on Caspian
Basin Energy Diplomacy, also said that despite a growing number of dry wells
drilled in the Caspian, he believed there was sufficient oil to make it a
productive region.
He said at a briefing he expected that in the next 12 months companies and
governments involved in the pipeline negotiations ``will reach some kind of
agreement on guidelines that will set out a clear roadmap'' for building the
1,400 mile line that the administration favors.
It would run from Baku, Azerbaijan, to Ceyhan on Turkey's Mediterranean
Administration officials say a pipeline along this route would help stabilize
the region and serve long-term U.S. interests.
Morningstar said realistic estimates put the cost of the pipeline at $2.3
billion to $3 billion, or more than $1 billion less than previous estimates.
The United States is giving NATO ally Turkey $823,000 to plan its part of the
The discovery of large amounts of gas and oil under and around the
Caspian has
attracted dozens of energy companies in search of a new bonanza. Because the
nations in the region are unstable and wedged between Russia and Iran, they
also have become an arena for big power competition. A decision on where to
build the pipeline thus has geopolitical as well as economic effects.
The Clinton administration has pressed the oil companies, among them Exxon
Corp., BP Amoco PLC and Unocal Corp. to support the Baku-Ceyhan pipeline. But
the companies have been reluctant to proceed, given the low oil prices that
are forcing them to scale back activity in the Caspian.
Azerbaijan President Geidar Aliev was supposed to have announced a
decision on
the pipeline route in December, based on recommendations from the 11 oil
companies involved in a consortium. But the announcement was postponed for a
second time.
Alternative routes would go from Baku through Iran, which Washington
or to the Georgian Black Sea port of Supsa, which Turkey opposes for
environmental and safety reasons.
U.S. officials have welcomed past delays in announcing a decision, saying it
was a good sign for the route through Turkey.
Morningstar said he realized economics would be the main factor in any
decision ``but I believe there will be an agreement on costs'' and design and
engineering projects will continue.
Asked about 25 dry holes that have been drilled in the south Caspian in
months, Morningstar said the oil companies did not seem concerned because they
had similar experiences when North Sea fields off Scotland were being
``Some of the original predictions the Caspian being a new Middle East may
have been overstated but the companies are moving forward with exploration,
not backing away, Morningstar said. ``There is sufficient oil in the Caspian
to make it a productive area.''
In a report last year the State Department estimated that the Caspian
possible reserves could reach 178 billion barrels. But several independent
consulting firms now place total probable reserves in the region at about one-
tenth the original U.S. government estimate, or 17.8 billion barrels.


Journal of Commerce
January 21, 1999
[for personal use only]
Russia offers trade statistics to mask double-digit problems
Analyst says economy really contracting at a 10% rate

Russian statistics showing a 5% drop in the economy last year are masking
a far more serious double-digit decline since devaluation began Aug. 17,
economists say.
The Russian figures come as some officials are predicting a quick
recovery if the Parliament passes a budget that the International Monetary
Fund has called unrealistic.
The Russian State Statistics Committee has reported a 5% decrease in
gross domestic product and a 5.2% fall in industrial production for all of
That would be bad enough. But Anders Aslund, senior associate at the
Carnegie Endowment for International Peace in Washington, said the economy
has been contracting at about a 10% rate since the currency plunged and
Russia defaulted on $40 billion in ruble-denominated debt.
The 1998 averages were buoyed by a slight recovery in the first quarter,
but the faltering progress was quickly wiped out.
Industrial production collapsed in the third quarter, falling 11.8% from
the year-earlier period, according to the Russian agency. It slumped by
8.9% in the fourth quarter as December showed a milder year-on-year drop.

Pretty bad

"If you say this is a decline of about 10% on an annual basis, it's
pretty bad," said Mr. Aslund.
The gravity of the recession highlights Russia's problem and the
inadequacy of the tools that it has brought to the task. This week, the
parliament, or Duma, easily passed a 1999 budget in its second of four
required readings, despite IMF warnings that the deficit spending plan is
far too lax.
"It has become non-controversial because it's not serious," said Mr. Aslund.
Some believe the budget will simply be ignored within a few months and
that spending will be sequestered when revenue falls short, as in previous
"Absolutely, it's a joke," said Marty Kohn, director of the Asia
department at economic consultants WEFA Inc. in Washington. "It's just a
bunch of play-acting. It's nonsense." The budget has been attacked for
assuming that inflation will slow to 30% this year, although it hit 84.4%
last year. Prices rose 4.5% in the first 18 days of January, implying
annual inflation of well over 100%.
The assumed exchange rate of 21.5 rubles to the dollar has also been
criticized. It has already fallen to 22.4 to the dollar at the central bank
WEFA noted that the revenue projections may be even further out of whack.

A cut in VAT

The government is calling for revenue equal to nearly 12% of GDP,
although it has never collected much more than 9%. At the same time, it is
planning a cut in the value-added tax, despite opposition from the IMF.
The funding gap could force the central bank to inject 150 billion rubles
of inflationary credits and currency into the economy, swelling the money
supply by nearly 80%, WEFA said.
Some Russian forecasts are rosy.
Alexander Zhukov, chairman of the Duma's budget committee, said this
month the country will end the year with 2% growth and that the downturn
will end by July.
Growth may be possible to claim, but only by comparisons with dismal
quarters from last year. Western forecasts range from a 3% to a 15% decline
this year, Mr. Aslund said.
But not all Western economists disparage the Russian effort.
John Hardt, associate director of the Congressional Research Center at
the Library of Congress, said the budget can be considered successful if it
allows the Russians simply to cope with the crisis.

Trying to cope

"The optimal outcome is coping," Mr. Hardt said. He defined the term as
"staying alive politically and economically."
One of Russia's best hopes is an effort to deal separately with $100
billion in inherited Soviet debt. The old debt accounts for $3.9 billion in
interest alone out of $17.5 billion in debt service due this year.
The Russians have been deliberately cagey about whether they are seeking
another rescheduling or a total write-off. But Mr. Aslund said the Soviet
debt trades at only 6 cents on the dollar. 


Moscow Times
January 23, 1999 
EDITORIAL: A Man Eats Neighbor's Dog World 

Nelzya, no yesli ochen khochetsya, to mozhno. That popular humorous
Russian saying translates roughly as, "It is forbidden, but if you really
want to, do it anyway." It perfectly captures the sardonic attitude of
anyone who stands confronted with a bureaucratic denial - whether a net, no
or verboten - and chooses to ignore it. 
But can it really be applied to ... eating somebody else's dog? 
Apparently so. Last weekend, two 22-year-old students at Novgorod State
University, Alexander and Alexei, made soup and steaks out of Rex, a
6-year-old boxer belonging to an employee of the dormitory where they
lived. The two were caught in the act by police and confessed. 
Everyone agrees that it's wrong to eat another person's dog. The dog's
owner, Galina, has been bed-ridden for a week in grief, and herfamily of
four is reportedly in mourning. 
But as the students explained, they were hungry and they were poor.
Nelzya ... no ochen khotelos. That was good enough for the police, who
opted not to charge them. 
"They are just poor students," Major Yevgeny Khvatov, a deputy chief of
Novgorod's 2nd police precinct, told The Moscow Times. "We have decided to
pity them." 
In a bit of tortured logic, Khvatov also said charging the two students
would not be possible because eating someone else's dog wasn't necessarily
cruelty to animals, wasn't quite theft and generally didn't seem to fall
under any of the articles of the criminal code. That's obviously nonsense:
If the dog belongs to someone else and you eat it, that's as much theft as
if you stole someone's groceries or potted flowers. 
A slightly more logical reason for such leniency is that the police -
like millions of other Russians on pathetically insufficient salaries - are
near to the end of their rope. 
This is particularly true outside of Moscow, which remains an oasis of
privilege. In the provinces, far too many Russians understand the sinking
desperation that would drive a person to eat someone else's pet. And as
Major Khvatov snapped in an interview, the Novgorod police themselves are
not far from eating other people's cats. 
It's dangerous to read too much into isolated incidents. The man who
drove his explosive-rigged car into the Kremlin's Spassky Gates late last
year is so far an isolated actor, and Major Khvatov's gallows humor aside,
pet poaching is not yet a national concern. 
But life is not getting better, prices are rising, the ruble is sinking -
and millions of desperate Russians were watching this week as an army of
Romanian miners plowed through police on their march toward Bucharest. 



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