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

Johnson's Russia List


Febuary 4, 1998    
This Date's Issues: 3041   3042 

Johnson's Russia List
4 February 1999

[Note from David Johnson:
1. Reuters: Russian PM battles businessman, analysts say.
2. Moscow Times: Andrei Zolotov Jr. and Matt Bivens, Will Yeltsin 
Back Primakov Power Play? 

3. Moscow Times: Andrei Piontkovsky: SEASON OF DISCONTENT: Primakov 
Sees A Future Full Of Primakov.

4. Sarah Busse: re Scams, Capitalism and Moral Order.
5. Robert M. Teets, Jr.: memorial reflections.
6. Mark Rice-Oxley: upper volta with nukes.
7. Stephen Blank: Upper Volta.
8. AP: Russia Needs $3B To Fight Y2K Bug.
9. Reuters: Russian tax quest goes cyberspace.
10. RFE/RL: Tony Wesolowsky, World: IMF Economic Model Comes Under 
Growing Scrutiny.

11. Itar-Tass: Prosecutor Cites Versions of Starovoitova Murder.
12. Sovetskaya Rossiya: Nationalist Editors Lambaste Primakov Plan.
13. Interfax: Kiriyenko Setting Sights on Becoming Moscow Mayor.
14. Radiostantsiya Ekho Moskvy: Seleznev Calls Gaydar Russia's
'Main Political Extremist.'] 


Russian PM battles businessman, analysts say
By Timothy Heritage

MOSCOW, Feb 3 (Reuters) - Russian Prime Minister Yevgeny Primakov, trying to
tighten his hold on power, is waging a campaign to remove the political threat
of prominent businessman Boris Berezovsky, analysts said on Wednesday. 
In doing so, they said, Primakov was taking another swipe at the so-called
``oligarchs'' -- businessmen who enjoyed vast wealth and influence until
financial crisis gripped Russia last August. 
Primakov criticised financier Berezovsky in public on Sunday. 
``An attack is clearly under way on Berezovsky to force him off the scene,''
said Andrei Piontkovsky, head of Moscow's Centre for Strategic Studies think
tank. ``Everyone knows Primakov is trying to strengthen the government and his
own position and I don't think Berezovsky has much chance of surviving.'' 
Berezovsky declined to be interviewed or comment. 
The popular Moskovsky Komsomolets newspaper said Primakov and Berezovsky
locked in a ``mortal battle.'' 
``Primakov and Berezovsky...will not be satisfied until one of them is
out,'' it said. 
Although Primakov denies having presidential ambitions, he has strengthened
his grip on power by placing political allies and former intelligence officers
in key positions in the media -- vital tools for waging an election campaign. 
He has also proposed a political truce under which the opposition-dominated
parliament would agree not to impeach President Boris Yeltsin or vote no
confidence in the government, in exchange for Yeltsin promising not to
dissolve parliament. 
Primakov, 69, has left no doubt he wants his government free of any
from the business groups who built up power in Viktor Chernomyrdin's five
years as prime minister from late 1992 until almost a year ago. 
Although Berezovsky's star has waned, newspapers have suggested he could be
about to launch a media campaign to oust Primakov and have Chernomyrdin
reinstalled. His ties with Yeltsin's family also give Primakov reason for
``Primakov's tactic is to gradually force Berezovsky out of his positions to
discredit his rival as a lame duck once and for all,'' the daily Komsomolskaya
Pravda newspaper said. 
Signs of tension grew last week when Berezovsky said the government's credit
of trust was running out, although he works closely with the government as
executive secretary of the 12-nation Commonwealth of Independent States. 
Primakov hit back, saying Berezovsky should not have publicly criticised the
head of government of one of the CIS countries. 
Berezovsky, who gained influence by helping finance Yeltsin's re-election
campaign in 1996, was kept on by Primakov when he became prime minister in
September. But the financier was already badly wounded politically by then. 
Berezovsky suffered a further blow when Yeltsin sacked Valentin Yumashev as
Kremlin chief of staff in December. Russian newspapers had long identified
Yumashev and Yeltsin's daughter and aide, Tatyana Dyachenko, as his main
Kremlin allies. 
The August financial crisis did nothing to help Berezovsky's business
interests, and his problems have grown. 
A court last week appointed a receiver to run ORT television, in which he
a stake. Another court last week annulled the purchase of a stake in Transaero
airline by the trade group LogoVAZ, which is controlled by Berezovsky. 


Moscow Times
February 4, 1999 
Will Yeltsin Back Primakov Power Play? 
By Andrei Zolotov Jr. and Matt Bivens
Staff Writers

Former Justice Minister Valentin Kovalyov was unexpectedly arrested
on charges of embezzlement and illegal weapons possession - capping days of
political hyperactivity in which the prime minister has talked apocalyptically
about filling the jails with the corrupt, the president has raced in a panic
back to the Kremlin, the top prosecutor has resigned and Russia's most
infamous robber baron, Boris Berezovsky, has been attacked on multiple fronts.
Only three things so far are clear in all this muddle: 
- One is that after six sleepy months in office, Prime Minister Yevgeny
Primakov is truly taking charge. 
Last week Primakov moved to gain control over politically significant media
like ORT television and Itar-Tass news agency. He also handed the State Duma a
letter proposing, without much explanation, that parliament surrender its
constitutional power to vote no confidence in Primakov's Cabinet. The letter -
which also suggested a retirement package for President Boris Yeltsin, should
Yeltsin ever want it - essentially amounted to Primakov's first acknowledgment
of sweeping personal political ambitions to rule Russia. 
This week Primakov has moved even more aggressively, launching an anti-
corruption drive marked by almost Stalinesque rhetoric - including a cryptic
call to "optimize" the jail population by emptying out sitting convicts to
make room for a coming wave of "economic" criminals. 
The new acting Prosecutor General, Yury Chaika, fleshed this new crusade out
on Tuesday, telling the heads of the army and the police that capital flight
had cost Russia billions of dollars - and then suggesting that those who find
themselves charged with economic crimes could get such charges dropped by
bringing back such assets from abroad. 
An early victim of this crusade was the high-profile yet insignificant
justice minister, who resigned in 1997 after Russian television ran video
clips of what appeared to be Kovalyov cavorting with naked women at a
gangland-run sauna. 
Interfax reported Kovalyov has been charged with stealing $50,000 from a
ministry-run fund. NTV television went further, airing an Itar-Tass
journalist's allegation that Kovalyov's justice ministry extorted protection
money from businesses, who paid into something called the International Fund
for Protection of Civil Rights. NTV reported Kovalyov personally withdrew some
$2 million out of this fund.All those allegations could be true - but Kovalyov
remains a bit player, someone picked up to dress up Primakov's new jail-
filling crusade. 
- Two is that a major target of this new anti-corruption drive has been the
politically-connected Berezovsky. For years he has been close to the Yeltsin
family, and he has bragged in past of being able to dictate Kremlin policy.
Russian media and politicians have alleged that Berezovsky has guaranteed the
financial security of the Yeltsins through various machinations. 
Berezovsky, for example, reportedly brokered the publication of Yeltsin's
memoirs, and arranged for Yeltsin to be paid monthly royalties ($16,000 in
cash delivered in a paper sack, to hear former Kremlin security chief
Alexander Korzhakov tell it). He has also been accused by some Russian media
of obtaining enough control over state-owned Aeroflot to install Yeltsin's
son-in-law as the general director and to siphon off nearly a third of
Aeroflot's annual $400 million in revenue to Swiss shell companies. 
If these or similar corrupt arrangements exist, evidence of them could
theoretically be found in the media seized by prosecutors at the raid on
- Three is that Yeltsin is at this stage deeply frightened by both
and Primakov - and the big question is what he will do next. As always, the
president remains Russia's key political riddle. 
Sorting out who is doing what to who is particularly difficult because
not one
of the major players in this week's drama - neither Yeltsin nor Primakov nor
Berezovsky nor Skuratov - have been seen in public since the weekend. 
But when Yeltsin weighs his choices, he surely sees himself surrounded by
enemies. On the one hand there is Berezovsky - an international embarrassment
who nevertheless has some sort of hold over the president - and on the other
hand there is Primakov, who now seems to be angling to sideline Yeltsin
There is evidence suggesting that Yeltsin and Primakov are at the moment
working together to destroy Berezovsky. Tuesday's raid on Sibneft followed a
report in Moskovsky Komsomolets, or MK, that Berezovsky's people there have
been electronically eavesdropping on the Yeltsin family as part of a blackmail
scheme - an allegation which, true or no, Primakov could have frightened
Yeltsin with. 
"[The MK allegations and Sibneft raid] was a brilliant move to push
and the Yeltsin family head-to-head," said political commentator Boris
Kagarlitsky. "The attack on Berezovsky is now coming not from the [Primakov]
White House, but from the Kremlin. Berezovsky has nowhere to appeal." 
Perhaps. But Berezovsky has a way of turning political defeat to victory. In
November 1997, then deputy prime ministers Anatoly Chubais and Boris Nemtsov
forced Berezovsky out of a top job at the Kremlin Security Council. Days
later, corruption allegations emerged in Berezovsky-friendly media that
ultimately led to the sacking of Chubais. Today Chubais is out of government,
but Berezovsky is back - as executive secretary of the Commonwealth of
Independent States. 
So what must haunt the Yeltsins is the thought of a scorned Berezovsky
his suitcases of ***kompromat,*** compromising materials, and conjuring up a
national trial of the president. Such a trial could be similar to what General
Suharto is now undergoing in Indonesia - another country widely considered
corrupt, but usually rated less so than Yeltsin's Russia. 
It is perhaps revealing that the Kremlin in the past several months has
floated occasional trial balloons about Yeltsin's post-presidential days - and
all include provisions that Yeltsin and his family be granted a blanket
immunity from prosecution. 
One way to keep Berezovsky's theoretical suitcases closed, of course,
would be
to protect him. If that involves sacking Primakov and casting about for a new
prime minister, Yeltsin is just imperious enough to do so. He has sacked many
a top government official for displaying far less of a threat to his rule. 
Berezovsky is already playing on Yeltsin's well-known jealousy. His ally at
ORT, Igor Shabdurasulov, angrily claimed last week that Primakov was trying to
seize control of the station. In comments surely meant to feed Yeltsin's
anxieties over his newly assertive prime minister, Shabdurasulov claimed
Primakov was intriguing with the Communists and Moscow Mayor Yury Luzhkov to
get Yeltsin. 
Interestingly, another politician who loves to get Yeltsin's goat, Mikhail
Gorbachev, called Tuesday for a Primakov-Luzhkov alliance to save Russia. 
Among those politics watchers who believes Primakov's days are numbered is
Yevgeny Volk of the Heritage Foundation. Volk says the only thing keeping
Yeltsin from sacking Primakov at the moment is the fear of plunging Russia
into another political crisis. As Volk added, however, "How long [Yeltsin]
will be capable of thinking soberly [about such matters], I don't know."


Moscow Times
February 4, 1999 
SEASON OF DISCONTENT: Primakov Sees A Future Full Of Primakov 
By Andrei Piontkovsky 

I have commented already on this page on some of Yevgeny Primakov's
spectacular statements. Now we can get acquainted with an example of the prime
minister's written work. Last week he sent to the Duma a letter that, once
removed of its crafty and pompous rhetoric, boils down to the following
"Please adopt a law consisting of two points: 
"Article 1: Yevgeny Primakov will never be removed from his post under any
"Article 2: Boris Yeltsin upon his retirement will retain the right to free
rides on all types of city transport, with the exception of taxis." 
It was a surprising move for this 70-year-old super-cautious apparatchik.
Having definitively broken with his image as a wise arbiter of no greater
ambition, Primakov has thrown himself with youthful fervor into the thick of
the battle for Russia's highest office. What's more, he has done so clumsily,
unconvincingly and with legal illiteracy. 
A person who in six months as prime minster has done nothing to pull the
country out of economic crisis, who has offered not a single substantive idea,
is suddenly demanding that a series of articles of the constitution be brushed
aside so as to guarantee his own job security. This would be possible to
understand if the prime minister had offered society a clearly formed anti-
crisis plan and was asking for extraordinary powers to carry it out. But he
hasn't. He is demanding a guaranteed term in power for the sake of power
Having realized the next day what a blunder he had committed by revealing
intentions too early, Primakov tried to downplay the matter, and characterized
his letter as "a working document." But a very dangerous precedent had already
been set. If this strange (to put it mildly) document could appear in
relatively calm political surroundings, it's not hard to imagine the sort of
texts we can expect in a truly extraordinary situation - for example, a
situation involving the unexpected departure of Yeltsin from the political
scene and the necessity of early presidential elections. 
The preamble of Primakov's letter can be recycled in its entirety - all the
same words about "guaranteeing political stability," "overcoming the
consequences of the socio-economic crisis," "consolidating the organs of state
power in such a complicated period" and so on. Well, and the conclusion will
then present itself - in the name of all these higher aims the presidential
elections will be postponed for an undetermined time and Yevgeny Primakov will
remain forever in his post. 
As it was so eloquently put in Primakov's letter, "for the conservation of
civil peace and obedience we can voluntarily oblige ourselves to temporarily
decline to use some of our constitutional powers." 
Of course we can, Yevgeny Maximovich. We understand that power is too
a matter to trust its fate to the voters. And for those who don't understand,
the prime minister reports he has also already "consolidated ... the organs of
judicial power" - "We will free up space in the prisons and camps for those
who we intend to imprison." 
P.S. Having said all this, of course I am on the side of Primakov in his
current battle against financier Boris Berezovsky. We can criticize this and
future governments, but we will never be allowed to criticize the future
tyranny of criminals Berezovsky represents.


Date: Wed, 03 Feb 1999
From: Sarah Busse <> 
Subject: re: Scams, Capitalism and Moral Order

The comment made by Michele Berdy (#-3026-8, 1/22) demonstrates very well
what economists today too often overlook: that capitalism as we have known
it in the West has developed and grown against a backdrop of a moral order.
Too many academics, advisors and other commentators over the years have
favored "laissez-faire" capitalism without recognizing the moral restraints
necessary for capitalism to function through tomorrow. That is, the growth
of capitalism in Britain, the US and Germany, occurred within a social
environment in which Christianity, or at least some tenets of Christianity,
pervaded the public sphere. Even today our US money comes stamped "In God
We Trust," a legacy of a time when public religiosity was commonplace and
membership in a church occassionally a requirement for doing business.
Church or no church, capitalism has developed in countries in which
honesty, loyalty, and fidelity to obligations were seen as the "right thing
to do," NOT simply "good business practice," which of course they have
also been. While the religious background in Japan has been different,
there too honesty, honor, loyalty and public trust have been core tenets of
social life, forming a backdrop for good business practices that have made
the Japanese version of capitalism very successful. 

Such moral tenets need not arise from religious influences on social life,
although historically they usually have. Any moral framework encouraging
cooperation, trust, honesty and fidelity will provide the necessary social
environment for capitalism to develop and function. Unfortunately, part
of the Soviet legacy has been a lack of trust and honesty in public life.
Not the official atheism, but rather the "accepted business practice" of
Soviet officials and the entire Soviet command economy by the 1980s
encouraged prevarication, seeking personal advantage to the detriment of
the total good, and adhering to personalistic rather than legal agreements. 

Fortunately, ethics of honesty, trust and loyalty remain important in the
private lives of many Russian citizens. Anyone having personal
acquaintance with Russians has recognized that many people in that country
have a sense of honor, of rightness, of loyalty, and know to whom they
should lie (the officials) and to whom they should not (their friends). In
these private ethics is a basis for the moral order which capitalism
requires, if people can be persuaded to extent their sense of honor and
truthfulness from the private to the public realm. This is a decision only
Russians can make for themselves. 

However, one mistake of which Western advisors and observers have often
been guilty in regard to Russia has been to neglect explaining that a
particular moral order is a prerequisite for capitalism. Business courses,
training sessions, and advice offered by the West has focused on the
methods of capitalism, accounting practices, how "for profit" organizations
are structured, while ignoring the religious and moral components which are
just as essential for the proper functioning of capitalism in our own
countries. The effect is similar to that of marriage counselors who teach
couples having difficulties skills of communication--without changes in
attitude, people only become more skillful and effective fighters, rather
than reconciled to each other. Understanding business practices without
morality only make thieves more effective. 

Obviously solely faulting Western advisors is a misrepresentation of
reality. Certainly there would be scams enough without Western
intervention. Certainly Russian ingenuity itself can run to thousands of
ways to make money without US lectures in accounting or profit-sharing, as
Berdy's example so dramatically demonstrates. 

Perhaps Western observers did not mean to encourage criminality in Russian
society by purposely neglecting the moral component of capitalism. Perhaps
we ourselves had forgotten from what source our "good business practices"
have come. Perhaps it is time to remember the other half of Adam Smith's
theory: that the "invisible hand" which makes nations wealthy operates
against a backdrop of _moral sentiments_, in which self interest "properly
understood" is tempered by honor, duty, loyalty and a concern for the
well-being of others. Without this moral order, capitalism is merely
institutionalized crime, with the rich preying on the poor. 

Sarah Busse
Department of Sociology
University of Chicago


Date: Wed, 03 Feb 1999
From: "Robert M. Teets, Jr." <>
Subject: memorial reflections

RF, 119034 Moscow
Gagarinski Pereulok 23
Podbezd 4, Etazh 5, Kv. 63
(7-095) 201-59-72

As an expat lawyer living and trying to make a go of it working on
environmental reforms in the CIS, I have benefited from the excellent
contents of your list for approximately six months now. Your recent loss of
your Mom touched me although of course death is something profoundly
personal and permanent and, in my experience, words of condolence are
inevitably awkward and flat. 

Yet anniversaries of deaths are something which our culture marks and it is
such a context that I found myself musing upon the deaths of Pushkin and
Brodsky. From the investment which you have chosen to make to matters
Russian and from what your mother's obituary noted of her commitment to
social reform and activism—these are ideals which you both share and shared
with Brodsky and Pushkin.

With my best regards.

Wednesday, 13 Jan 1999-Old (Julian Calendar) New Year's Eve

For a significant portion of his years after receiving the 1987 Nobel Prize
for Literature, Joseph Alexandrevich Brodsky, who died in New York City not
quite three years ago just this month,, devoted himself to the cause of
proselytizing Americans to increase their reading and appreciation of
poetry. An obvious impetus for his crusade was, of course, his metier as an
author whose poetry and prose ranks high in the pantheon of this century's
contribution toward justifying, if not redeeming, humankind's conflicted
record as a so-called "intelligent" life form in this solar system.

As an American, now in my middle years, I have long admired the rigor which
humanity's poetic tradition and corpus represents: first of all as a reader
and only infrequently, in a cherished "fit" of inspiration­a glimmer of the
music which words can magically evoke­as a writer. Since my memory feels,
too often, as if it carries more advertising jingles of America's
commercial television than the "golden prose" much less poetic treasures of
our English language­I readily applauded Brodsky's undertaking and wished
his notion of an anthology of poems to join the Gideon Bible in its
ubiquity­every success.

Now as a denizen of Russia in its capitol, I live not far from the museum
which will be a physical focal point of some poetic significance during
this calendar year. Devoted to the works and life of "the" literary giant
of this nation and people­the Pushkin Museum on Prechistenka has been
undergoing a major expansion as well as remodeling of its rich collection
of manuscripts, art works, and other physical trappings which were part of
early 19th century Imperial Russia, i.e. the world of Aleksandr Sergeevich
Pushkin (1799-1837). This year is the bicentennial of his birth. It is a
fact and an event of which every Russian is fully conscious.

As opposed to the snippets of "sing-song" and trite commercials which were
engraved upon my childish brain, today I do regard with satisfaction the
fragments of Mother Goose, A.E. Milne, and Dr. Seuss which I can sometimes
call-up and declaim. But to my envy, my Russian friends and acquaintances
have a far more precious inheritance which they have at a far more ready
and full command.

This Russian reality manifests itself in everyday life when tribulations as
well as joys come upon us. Consider a couple of his stanzas (1825), as a
quick example, albeit in my own poor translation:

When life brings you disappointment,
Neither be sad nor angry;
On dejectful days, resign yourself
­Believe that days of joy will have their season.

The heart lives for what will be:
The sad present,
Is only an instant and it will pass
­Believe that which shall come will be dear.

These thoughts in Russian have a strict geometry and pure music which
elevates their intrinsic consoling wisdom to such a height that Pushkin
reigns close to the surface of "New" as well as "Old" Russians; the kids
together with their elders; the political right along with the left. He
ties together a Russian identity which like the economy has become tattered
and fractious. The disparate and dis-spirited Russian soul of today, upon
the intonation of his familiar words, miraculously congeals and
crystallizes into something eternal and beautiful.

As the countdown proceeds to his 200th birthday­on 06June 1999­one of the
two Russian public television channels, the first channel­ORT, is proving
the foregoing factual characterization with its broadcast of a daily
reminder of the number of days left. This simple notice is stunningly
accompanied by a rapid-segued series of Russians­on the street; at home; in
the office­each spontaneously picking-up from the previous speaker and
reciting the following line from a variety of Pushkin's astonishing poetic
corpus until the recitation is complete.

To my great embarrassment and frustration, I cannot find anything
comparable to say about the American soul. Oh, perhaps we could manage the
first part of "Casey at the Bat" or "The Night before Christmas" and those
are somethings quite neat. But might they be proclaimed as virtuoso
performance or an epitome of the American spirit?­I hope not.

Contemporary Russians may or may not understand money the way their Western
European and American counterparts do, but they do understand somethings
exceedingly dear which it would very much behoove us to learn from as well
as emulate. Aleksandr Sergeevich Pushkin is a superlative one but not the
only one of those things Russian and priceless.


From: "Mark Rice-Oxley" <> 
Subject: upper volta with nukes
Date: Wed, 03 Feb 1999

Surely it was Kissinger on the Soviet Union circa 1973? 

mark rice-oxley
afp moscow 


From: "Stephen Blank" <>
Subject: Upper Volta
Date: Wed, 3 Feb 1999 

my sense is that the phrase upper volta with rockets originated with
Ambassador Malcolm Toon in the 1970s


Russia Needs $3B To Fight Y2K Bug
February 3, 1999

MOSCOW (AP) -- Russia needs up to $3 billion to tackle the Year 2000 computer
glitch -- six times the original estimate -- a top official announced
Wednesday as he appealed to the United States and NATO to help fix computers
that control Russia's nuclear weapons. 
While many countries have been working on the so-called Y2K ``millennium
problem for years, some key players, including Russia and China, have been
slower to address it. 
Last month, U.S. Deputy Defense Secretary John Hamre acknowledged ``some
nervousness'' in Washington about potential computer problems in Russia.
``They don't seem to have the same level of urgency that we have had over
it,'' he said. 
The man leading Russia's efforts to solve the Y2K finally responded
by asking NATO and the U.S. Defense Department for advice -- and money. 
Russia wants all sides to ``speak the same language,'' Alexander Krupnov,
chairman of the Central Telecommunications Commission, said Wednesday. ``We're
in a critical situation in several areas'' -- including the Defense Ministry. 
The problem arises because early programmers trying to save memory space
only two digits to identify the year -- meaning that 2000 looks the same as
1900, throwing off calculations involving dates. 
Russia has already agreed to let NATO experts investigate the potential
to Russian weapons systems. While an errant missile launch brought on by a
computer clock failure would be highly unlikely, computer snags could sabotage
radar and telecommunications networks that are the backbone for Russia's
system to detect foreign launches. 
Radar screens could go blank, and the bug could throw certain nuclear
into a test pattern, which is apparently difficult to stop, making the
computer system inaccessible. 
``It's not that nuclear missiles are going to pop off out of silos,'' said
Paul Beaver, an analyst with Jane's Information Group in London. 
U.S. defense agencies want to place American officers in Russian nuclear
control rooms and Russian officers in American control rooms to monitor the
changeover, Beaver said. 
In Washington, Navy Capt. Michael Doubleday, a Pentagon spokesman, said
Wednesday officials from the two countries, including Defense Secretary
William Cohen and his Russian counterpart, have met many times over the past
year on the topic. The discussions will continue in about two weeks, he said. 
Doubleday said the Defense Department has not received any official request
from Russia for financial assistance to address the problem. 
The cost of tackling the problem is staggering, especially for Russia,
overwhelmed by mounting debts. 
The latest estimate is $3 billion, Krupnov said Wednesday. That's in a
so broke that this year's draft budget foresees just $21 billion in revenues
-- none of which is earmarked for the Y2K problem. 
Krupnov said it was up to government agencies, including those that control
military bases, air traffic and oil pipelines, to come up with their own cash.
Weapons aren't the only danger. 
``The nuclear plants won't be able to get accurate temperature information,
and you could have another Chernobyl,'' Beaver said, referring to the world's
worst nuclear accident, at a Soviet plant in 1986. ``And that would not just
affect Russia.'' 
Meanwhile, in China, a survey of the country's most crucial enterprises
that more than half didn't even know how to detect the computer glitch in
their systems, the official Beijing Morning Post reported Wednesday. 
Chinese officials doubt government ministries can meet an October
deadline for
fixing their systems. Little assistance is being provided to agencies and
enterprises outside crucial finance, aviation, telecommunications and
transport sectors. 
Still, many analysts say Russia and China have less to worry about than
countries like the United States, because they have far fewer computers and a
lower overall level of technology. 
Krupnov insisted that his commission was doing everything it could. 
``Who knows if the country will be ready,'' he said. ``I can't give any


FEATURE - Russian tax quest goes cyberspace
By Patrick Lannin

MOSCOW, Feb 4 (Reuters) - ``Do you love Russia? Yes. Do you pay your taxes?
Well...'' runs a series of television adverts by the Russian tax police,
appealing to patriotic but tax-shy people to pay up and keep the bankrupt
country running. 
The success of the campaign, accompanied by street posters proclaiming :''No
one can save Russia except we ourselves,'' may be in doubt but its goal is
deadly serious: with a huge debt mountain, the government needs every tax cent
it can get. 
Emotional blackmail, forceful policing and an incursion into the Internet
cyberspace world are all in the plan to boost tax income and help repay $145
billion of foreign loans and break a chain of 2.2 trillion roubles ($100
billion) of internal debt. 
``It is such a big and strategic task that we understand that the result of
what we are doing will come only after several years. It's the next
generation, when people understand that taxes are part of life,'' said Renat
Dos-Mukhamedov, head of public relations at the State Tax Ministry. 


As well as appeals to save Russia there is the loudly-proclaimed warning on
posters in Moscow and other big cities and towns: ``Every Russian is obliged
to pay taxes which are legally set by the state.'' 
The tax ministry also has a series of TV adverts which show pensioners
appealing for people to pay up and hospitals with shelves bare of medicines. 
The tax police have also run adverts showing their officers storming
companies' offices wielding AK-47 automatic rifles. 
All this effort is aimed at reversing a situation where tax receipts in
are among the lowest in the world. 


The tax police and tax ministry have an uphill task to persuade people to
-- many simply believe that their money is siphoned off by corrupt officials
-- and there is also a huge shadow economy that is difficult to track. 
The fact that much of the official economy is also run on a cashless barter
system also makes things incredibly difficult. 
Added to the equation is the latest financial crisis, which has pushed many
banks close to collapse, seen people thrown out of work and the economy
Many have seen their savings frozen in collapsing banks amid rumours that
state officials benefited from the crisis and banks sent huge sums abroad. 
In sum, a recipe for cynicism. 
``The fundamental problem is the psychology of tax in this country. People
don't trust the government or what they will do with the money nor do they
trust how they will be treated,'' said Scott Antel, a tax partner at
accountants Arthur Andersen. 
Antel also highlighted problems with the tax rules, which mean companies and
individuals are faced with a big tax burden. 
``It is not an economically stimulative system. It is not geared to allow
businesses to succeed and encourage productivity and growth,'' said Antel, in
Russia for five years. 


All these problems have led to a huge backlog of owed taxes. 
The statistics office said that as of October 1, 1998 the total budget
had tax arrears of 253.9 billion roubles ($11 billion) while the federal
budget had 146.4 billion of arrears. 
The debt problem has led to continuous battles between the government and
tax payers such Gazprom, the world's largest gas firm, oil companies and the
Unified Energy System company, which runs Russia's giant electric grid. 
The companies themselves are not entirely to blame, as they are also owed
money for their services by their consumers, other industrial customers and
the state. This has led to a backlog of unpaid debt in Russia of 2.2 trillion
With Western guidance, a new tax code was drawn up and came into force on
January 1 this year. Aimed at laying out definitions and rules for the tax
system, it is still lacking a section in which tax rates would be set. 
Analysts said the new code is an improvement in assuming the innocence of
tax payer in cases of dispute with the authorities and that the courts seemed
to be heeding the laws. 
However, Antel said simple changes would improve the system and bring in
which in the West are considered standard. 
He cited in particular that items deductible for tax purposes such as
training, interest payments and advertising are not deductible in Russia,
meaning companies were considerably more weighed down with tax. 
He also mentioned a four percent turnover tax, which meant that even if a
lost money it would still have to pay tax. 
``The fundamental problems of the system are not being addressed,'' he
Cyberspace has been called into the fight as tax police in the second
city of
St Petersburg use their Internet page to post pictures of tax offenders. 
``We are waiting for help from those who care about the fate of teachers and
doctors, miners and soldiers, students and pensioners,'' the web site says. 
``And we can put a price on it,'' it adds significantly. 
These letters are underlined and in bold red print, linking to a page
where a
reward of 10 percent of the amount recovered is offered to informants. 
($-22.8 roubles) 


World: IMF Economic Model Comes Under Growing Scrutiny 
By Tony Wesolowsky

Prague, 3 February 1999 (RFE/RL) -- The economic crisis in Brazil and
continuing problems in Asia and Russia formed an uncomfortable backdrop for
many policy-makers attending the World Economic Forum this week in Davos,
It wasn't long ago that Asia, Latin America and Russia were held up as
stories to prove that strict monetarist policy, modest government intervention
and the free movement of capital across borders was the best formula for
economic development. That was the recipe most often chosen by the
International Monetary Fund and its main member countries.
That model has come under increasing scrutiny, however, as one country after
another is forced to stifle its domestic investment with high interest rates
and weaken its domestic exporters with high currency valuations -- all to
satisfy the needs of increasingly remote foreign investors. 
If the Davos conference is any judge, the number of voices calling for
corrective measures, if not a complete overhaul of this development model, is
clearly growing. 
In theory, markets serve to match investment capital with prospective
in the hopes those ventures will eventually add trade and investment to the
real economy. In the 1980s and 90s, world markets were pried open with the
theory that free roaming capital would guarantee maximum efficiency. But, as
events in Asia and Brazil show us, the freedom also brings instability and
That's because the amount of capital employed for speculative purposes far
exceeds the amount invested in the real economy. The amount spent every day on
currency markets, for example, amounts to 1.3. By comparison, the turnover on
the U.S. stocks markets, by far the world's largest, amounts to just 10,000
million a day. Only five percent of the world's capital is employed in real
economy, the rest is speculative.
Nobel prize-winning economist James Tobin wrote in the Washington Post in
that it's too easy these days for banks, governments, businesses and
speculators to buy and sell huge blocks of a country's currency. Such capital
flows, he said, can throw a country literally overnight into a crisis.
This is painfully evident now to people in Thailand, South Korea, Indonesia,
Malaysia, Russia and now Brazil, all of which were regarded only 18 months ago
as models of new development.
The best example of the problems of this capital-led development can be seen
in Mexico in the earlier '90s. Mexico had become a magnet for financial
speculators. Under U.S. pressure, the country opened up its markets to
foreigners, reduced its deficit, privatized key branches of industry and
raised interest rates to reduce inflation. The reforms were praised by foreign
investors, who poured some $30 billion into Mexican financial markets in 1993
But the flood of money caused problems, artificially inflating the value of
the currency and consequently making exports unattractive. Fearing a
devaluation, investors started pulling their money out. As panic grew, the
drain of funds quickly turned to a hemorrhage, sparking the peso crisis of
The current volatility would not have surprised the architects of the
Bretton Woods financial system, which contributed greatly to growth in the
1950s and '60s. These planners feared that floating currency rates were
unstable, undermining trade through uncertainty and market overreactions.
The system collapsed in the 1970s after the U.S. could not maintain its
currency peg to gold and floating currencies were instituted. In the 1980s and
90s, under U.S. direction, the focus turned to deregulating national economies
and opening up financial and capital markets. This later led to today's range
of speculative and hedging instruments like options, swaps and futures.
Joseph Stiglitz, a senior vice-president and chief economist at the World
Bank, is now leading the turn away from free market development models.
Stiglitz, a former chairman of the U.S. Council of Economic Advisors,
that the economies of South Asia were built up with a guiding hand played by
the state in promoting economic growth, including controls on capital flows.
Stiglitz also notes that every developed country, from Britain to the United
States, followed a similar path.
The nations affected by the current economic crisis are increasingly
questioning and then rejecting the prescriptions of the IMF and other world
bodies in favor of more state-led measures. Last September, Malaysian imposed
capital controls after declaring "the free market has failed disastrously."
Russia has imposed a moratorium on some debt payments and has threatened to go
back to a regime of fixed prices and capital controls.
While the IMF is clearly suffering from a tarnished reputation, the people
paying the most are those living in the affected countries. The International
Labor Organization estimates that 15-20 million people will lose their jobs in
Asia this year alone. Then there are the taxpayers who are asked to fund
organizations like the IMF. 
Tobin says that speculators and investors, the ones who should pick up the
pieces when their investment plans don't work out, often don't lose much.
Tobin says the main beneficiaries of bailout funds and loans — which make good
these nations' debts — are big banks, investment houses and speculators. 


Prosecutor Cites Versions of Starovoitova Murder.

MOSCOW, February 3 (Itar-Tass) - Investigators are handling two versions of
the murder of Galina Starovoitova, Russian Deputy Prosecutor-General Mikhail
Katyshev said at a press conference on Wednesday. 
"At present, there are two major versions of the murder of State Duma deputy
Galina Starovoitova - a political and a commercial one," he said. 
Starovoitova, a democracy champion, was killed by hitmen near her
doorstep in
her Saint Petersburg house on November 22. 
"All is not very simple in the case: there are financial moments in the
activity of deputy Galina Starovoitova and her aides," Katyshev said. 
The investigation is under control of the Russian Prosecutor-General's
Katyshev said investigators questioned 188 potential witnesses, carried out
eight searches and 50 expert studies and "rendered harmless" a 14-member gang
of killers including one woman. 
"There are suspicions that members of this gang participated in the
murder of
the State Duma deputy," Katyshev said. 
He said the murder could not be said solved. "There are no concrete persons
who could be charged. The work for solving the crime is actively continuing,"
he said. 


Nationalist Editors Lambaste Primakov Plan 

Sovetskaya Rossiya
2 February 1999
[translation for personal use only]
Statement "From the Patriotic Informburo": "When the
Authorities Speak of Harmony..."

When the authorities speak of harmony, expect arrests. When they
speak about the "course of reforms," expect devastation. When they speak
of "Russian fascism," expect suppression of the Russian people. The
Primakov " accord pact," under which the Duma drops impeachment, the
president allows the Duma to be, and the government preserves itself on the
threshold of a social explosion, is like an attempt to ban Darwinism or the
law of universal gravitation, in other words, an attempt to remove
fundamental contradictions of society in a typically sterile bureaucratic
Satarov-style way [Satarov is a former aide to President Yeltsin for
political questions].
This cunning pact, created within the walls of the Central Clinical
Hospital, is an indication of the rapid decline of Yeltsin, who wants to
protect himself and his naughty family from just trial and retribution for
their historically unprecedented misdeeds. According its authors, this
ineffectual pile of paper is supposed to make up for the destruction of the
USSR, the genocide of the nation, the Chechen war, the extermination of the
Russian Army and industry, the boundless thievery, and the bringing of
gangsters and rogues into power. This naive and stupid "pact" is ridiculed
even among those who might seem to need it and who are among those
responsible for the "democratic" destruction of Russia, even Sysuyev's
mother-in-law. And the attitude toward these pieces of paper of some
figures in the parliamentary opposition who have been expressing their
ingratiating approval of the peacekeeping initiatives and taking time to
think the "documents" over are especially incomprehensible. That
ingratiating attitude and caution smack of garden-variety conciliationism
-- a persistent affliction of the "systemic opposition" that caused so much
harm in the times of Chernomyrdin and Kiriyenko.
The election campaign is gaining momentum at a fast pace. The
authorities are retreating and trembling with fear. The patriots'
offensive includes radically precise and incorruptible positions. The
"hunters for extremists" are those who have robbed the people and do not
want to return the spoils. The "social peacekeepers" are those who shot at
us from tanks in October 1993. The fighters against "Russian fascism" are
those who are to blame for the disappearance of 4,000 of the Russian
population a day.
Esteemed deputies, it is you whom Gaydar had in mind when he spoke
about a "brown snout creeping out from under a red banner!" So try to be
more discerning and squeamish in considering documents you receive from
power structures. Put on rubber gloves before you start considering the
government " nonaggression pact." And after you reject it, make sure that
you wash your hands thoroughly.
[Signed] V. Chikin, Sovetskaya Rossiya editor in chief
Prokhanov, Zavtra editor in chief


Kiriyenko Setting Sights on Becoming Moscow Mayor 

Moscow, Feb 2 (Interfax)--Russia's ex- prime minister and leader of
the New Force political movement Sergey Kiriyenko has set up a working
group which will reportedly run his preparations for mayoral elections in
Interfax has learned that this group has been registered as a
commission for drafting a program for the development of Moscow, attached
to the Kiriyenko movement's leading bodies. This commission was set up at
the New Force movement's closed inter- regional conference held outside
Moscow recently.
According to an Interfax source, the commission has been instructed to
work out a concept for Kiriyenko's mayoral election campaign in case
current mayor Yuriy Luzhkov decides to run for president.
Kiriyenko's spokesman Andrey Serov, in an interview with Interfax,
confirmed that such a commission had been established, but said that he had
no information on Kiriyenko's plans to run for Moscow mayor.


Seleznev Calls Gaydar Russia's 'Main Political Extremist' 

Radiostantsiya Ekho Moskvy 
2 February 1999
[translation for personal use only]

Russian State Duma Speaker Gennadiy Seleznev today called Yegor Gaydar
the main political extremist in the country. The speaker said he was
shocked by a television report from the Russia's Democratic Choice congress
on Sunday. You have all seen the picture and the statement, as well as
what these democrats were doing to the youths, Seleznev said. I think they
were good guys. They did not start the fight. It was Gaydar's democrats
who were giving them a thrashing, the State Duma speaker stressed.


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