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Johnson's Russia List


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

Johnson's Russia List
4 February 1999

[Note from David Johnson:
I've been having computer problems which may be resulting in 
eccentricites here and there. I'd like some feedback on how
the JRL messages look at the recipient's end.
1. Reuters: Russian Duma committee recommends budget approval.
2. Reuters: Yeltsin again in Kremlin, budget seen passed.
3. Blumberg: Russian Economy Shrank 4.6% in 1998 on Ruble Decline.
4. Rossiyskaya Gazeta: Daniil Anin, "Why The Oligarchs Have Taken 
Alarm." (Government Paper Defends Stability Pact).

5. Bjorn Kaupang: Small Business Development in Russia.
6. Moscow Tribune: John Helmer, WHAT KIND OF BIRD? (Primakov).
7. Edwin Dolan: Russian Education Today and the Myth of the Soviet
Golden Age.

8. Mark Ames: Re 3041-Busse/Capitalism and Moral Order.
9. Los Angeles Times: Robyn Dixon, The Yeltsin Clan's Onetime Rasputin 
in Hot Water Now. (Berezovsky).

10. AFP: Zinoviev Letter a Fake.] 


Russian Duma committee recommends budget approval

MOSCOW, Feb 4 (Reuters) - Russia's State Duma (lower chamber of parliament)
budget committee on Thursday recommended approval of the 1999 budget draft
in Friday's final reading and the government proposed a compromise in a row
over Kremlin spending. 
Prime Minister Yevgeny Primakov, who is due to attend the debate, was
confident the bill would pass in the Communist-led chamber, which is
largely sympathetic to his government. 
The budget committee's green light for the bill confirms widespread
expectations that the document will sail through the fourth reading, which
is usually a formality. 
But the threat of a presidential veto remains if deputies refuse to
change an amendment approved in last week's third reading which would slash
Kremlin spending by 40 percent, while leaving parliament's finances
relatively unscathed. 
The Duma is due to vote ahead of Friday's fourth reading on a proposal to
return to the third reading and remove the item which has been denounced as
unfair by Kremlin officials. 
Duma speaker Gennady Seleznyov told reporters the government had proposed
an alternative amendment which would see Kremlin funds cut 20 percent. The
budget committee approved the new Kremlin spending level. 
News agencies quoted Primakov as saying at the opening of a cabinet
meeting that he was confident the budget draft would be accepted in the
fourth reading. 
The bill would then be forwarded to the Federation Council (upper
chamber), and if approved, go to Yeltsin for signing. 
The budget calls for total revenues of 473.82 billion roubles ($20.5
billion) and spending of 575.09 billion roubles, giving a deficit of 2.53
percent of gross domestic product. 
The revenue, inflation and rouble exchange rate targets have been
criticised as unrealistic, even by deputies who voted for the draft in the
first three readings. 
However, it has passed through the Duma at lightning speed, with the
Communists and others demonstrating political support for Primakov. 


FOCUS-Yeltsin again in Kremlin, budget seen passed
By Alastair Macdonald

MOSCOW, Feb 4 (Reuters) - Russian President Boris Yeltsin, who has been
convalescing from an ulcer at a country sanatorium, made his second trip of
the year to the Kremlin on Thursday. 
It was not clear if the visit, which followed a first brief drop into his
office on Tuesday, had been planned. 
Prime Minister Yevgeny Primakov, widely seen as the real power in the
land during Yeltsin's repeated absences through illness, as well as the
Kremlin chief of staff had travelled out to the sanatorium only a couple of
hours earlier, suggesting the president might not have originally intended
to go into the city. 
Primakov returned to Moscow to chair a cabinet meeting, where he
expressed confidence that the Communist-led parliament would pass his 1999
budget at a fourth reading on Friday. 
Adding to hopes for a compromise, the Communist speaker of the State Duma
lower house said it was ready to soften its earlier amendment that would
slash spending on Yeltsin's staff by 40 percent. Kremlin aides had said
that the president might veto the budget if the final version included such
a deep cut. 
Russian television showed a brief silent film clip issued by the Kremlin
that showed Yeltsin, in a business suit, listening to Primakov and his
chief of staff, Nikolai Bordyuzha. 
A Kremlin spokesman said the three discussed preparations for a meeting
of the advisory Security Council on Friday, which Yeltsin, who turned 68 on
Monday, is not expected to attend. 
The meeting is likely to focus on efforts to maintain political stability
in Russia ahead of parliamentary elections due later this year and a
presidential vote in mid-2000. 
There has been speculation in recent weeks that Primakov, a former spy
chief respected as a political tactician, has been seeking to reinforce his
own power and position, possibly at the expense of the ailing president and
powerful business and political figures that have been close to Yeltsin. 
At 69, Primakov is more than a year older than Yeltsin and dismisses
frequent suggestions he might run for the succession next year by saying he
is too old. 
He prompted speculation about ulterior motives last week, however, when
he proposed a political non-aggression pact to the Communist-led
parliament, which has generally supported the prime minister since it
forced Yeltsin to drop his preferred candidate for premier after last
August's financial crash. 
Some analysts detected a rift between Primakov and Yeltsin over the issue
when the Kremlin distanced itself from the deal. 
Aides made clear the president was not prepared to give a promise not to
dissolve parliament prematurely, as Primakov had suggested he do in return
for parliament dropping impeachment proceedings and other legal threats
against him. 
Both the Kremlin and Primakov portrayed the proposed truce, to which the
Communists have so far reacted coolly, as a response to rising political
extremism and have vowed to crack down in particular on fascist groups
which foment ethnic hatred. 


Russian Economy Shrank 4.6% in 1998 on Ruble Decline

Moscow, Feb. 4 (Bloomberg) -- Russia's economy contracted by 4.6 percent in
1998, its biggest decline in four years, as production fell after the
ruble's plunge choked consumer demand. 
The decline was highest in agriculture, construction and financial
services. The government forecasts a drop in gross domestic product of
between 1 percent and 3 percent this year, though analysts says it could be
as much as 5 percent. 
``The considerable drop in domestic demand and the fall in capital
investment cuts companies' production levels,'' said Alexei Zabotkin, an
analyst at United Financial Group in Moscow. 
The ruble has fallen more than 70 percent since August, when the
government defaulted on its Treasury debt and gave up supporting the
currency. At the same time, Russia's payment system broke down because many
of the largest banks, which were the main holders of government bonds,
couldn't meet their own obligations. 
``The collapse of the payments system hurt producers and a lot of
investment planned for last year was put off,'' said Peter Westin, an
economist at the Russian European Centre for Economic Policy in Moscow. 

Underground Economy 

The government earlier forecast a 5 percent 1998 drop in GDP, the total
output of goods and services, though analysts said official figures don't
adequately reflect Russia's unofficial economy. The Statistics Committee
multiplies official figures by a coefficient to account for the unofficial
economy, Zabotkine said. 
Analysts said the biggest declines were in services, particularly
financial services, agriculture and construction. 
Many Russian brokerages laid off employees or closed down after trading
on Russia's financial markets was reduced to a trickle. Moscow-based
brokerage MFK Renaissance, for example, cut its staff to 120 down from 240
in September, while many smaller brokerages closed their doors. 
Only a handful of Russia's biggest banks remain in operation after the
government's default wiped out most of their assets. Inkombank, which last
year was ranked Russia's second- largest bank by assets, now has more than
300,000 creditors and is undergoing bankruptcy hearings. 

Financial Sector 

``The financial sector took a big blow,'' Westin said. 
Food output plunged. Russia harvested about 49 million tons of grain last
year, its worst grain harvest since the 1950s. 
The Moscow city government delayed construction of a $13 billion business
center amid dwindling sources of financing. Last year, the city invested
only $55 million of the $155 million planned for the project and is now
seeking international financing. 
Exporting industries, such as oil and gas companies, were among the
industries that had the least decline in output, though lower domestic
costs because of the ruble's decline were offset by the rising cost of
servicing foreign debt and low world oil prices throughout the year.
Russian oil production fell 0.9 percent in 1998 as producers cut investment
to compensate for low oil prices. AO Yukos Oil Co., the second- largest
producer, cut production by 3.7 and AO Tyumen Oil Co., the fifth-largest,
cut output by 4 percent. 
Food processing companies could see a increase in production this year
with the boost in demand for domestic goods increases amid rising import
prices, Westin said. 
Moscow-based AO Red October, the biggest confectionery, reported in
November and December it posted its highest sales volume figures since at
least 1995, according to MFK- Renaissance. The company sold 9,000 tons of
candy and chocolate in December, compared with 7,900 tons during the same
month the previous year. 
Russia's economy expanded 0.8 percent in 1997, its first growth since the
collapse of the Soviet Union. 


Government Paper Defends Stability Pact 

Rossiyskaya Gazeta
2 February 1999
[translation for personal use only]
"Political Commentary" by Daniil Anin: "Why The Oligarchs
Have Taken Alarm"

The five months of political stability which began with Prime Minister
Yevgeniy Primakov's confirmation in office in the State Duma seem to have
come to an end with the attempt to enshrine this stability on paper with
the "Pact of National Accord."
Of course, the White House is aware that the road to hell is paved
with good intentions, but scarcely anyone in the cabinet suspected that a
proposal for the mutual limitation of political ambitions up to the
presidential election in 2000, a proposal that is innocuous and in today's
conditions of financial and economic crisis perfectly appropriate, would
have generated so furious a response in the hearts and speeches of Russian
What is the problem? Why should a Duma which has sworn to support the
Primakov government express such consternation at a document, 90 percent of
which consists of proposals that were made by the parliamentarians back
last fall? Why should CIS Executive Secretary Boris Berezovskiy, who was
previously silent toward the government and has managed during his time in
office only to integrate the most beautiful young women of the post-Soviet
area under the "Miss CIS" banner, suddenly start denouncing Primakov so
desperately, accusing him of, at best, introducing the State Committee for
the State of Emergency Mark Three or, at worst, conniving at communist
revenge. Why suddenly should almost all the participants in the political
process decide to demand that the "government of national accord" render an
early account?
There are at least three explanations: an emotional one, a
party-based one, and a rational one. The first is based on the experience
of Russian politics of recent years when each spring has seen an
intensification of mutual aggression between the branches of power, the
opposition, and the authorities (the president and the government, which
previously were one and the same). In general, the spring is the time the
radical reformers arrive in the White House. That is how it was in 1997,
when the "young reformers" Chubays and Nemtsov arrived in government; that
is how it was a year later when Sergey Kiriyenko became head of the council
of ministers.
Today Yegor Gaydar, leader of Russia's Democratic Choice, says
perfectly openly from the party rostrum what Boris Nemtsov said when
leaving last year: The Primakov-Maslyukov-Gerashchenko pro-Communist
government has become bankrupt during its five months in office and must,
in the opinion of the radical reformers, resign, vacating the place for
them. Here, naturally, it is not said that the aforementioned supporters
of liberal market reforms have themselves been in office more than once,
bringing considerable satisfaction to themselves but little joy to a
population which has year on year become more impoverished.
The "right-wing" opposition's plan in today's slanging match is
simple: To show Boris Yeltsin that Primakov is trying to encroach on the
rights and obligations of the elected representative of all the people, and
he, demonstrating once again his presidential mettle, will then dismiss the
premier and clear the way for the old-cum-new draft of radical reformers.
Fortunately, the head of state, unlike others who keep making the same
old mistakes, knows how to learn from the mistakes of others as well as his
own, and has, it seems, no wish to give way to mundane political jealousy
on this occasion.
The party explanation has its roots in the Duma. Whereas Grigoriy
Yavlinskiy, leader of the non-Communist opposition in the Duma, states
today that Primakov's sole merit is that he has prevented Communist revenge
from being exacted in Russia as one of the consequences of the August
financial crisis, the Communists, on the contrary, consider that the
present council of ministers is one of the Communist Party of the Russian
Federation's real achievements during the years of struggle against the
"anti-people regime." Despite this, both one and the other are united in
one thing: As they see it, the present cabinet is only a political buffer
between the waxing left-wingers and waning right-wingers. It is clear that
any political force in Russia is the hub of the universe, but only people
too much in love with themselves (politicians?) can so underestimate the
White House. The Primakov team has long been an autonomous political force
with which both right-wingers and left-wingers have been forced to reckon
in fact rather than merely in words. If it were only a "buffer" what point
would there be in seeking to undermine it?
The appearance of the "pact of national accord" has coincided
paradoxically with a deterioration in the sociopolitical situation in
Krasnoyarsk. Aleksandr Lebed did not disguise his links with certain
Moscow oligarchs during his election campaign for the governorship of the
kray (later the newly elected head of the kray administration's staff was
filled with people who included inhabitants of the capital). Incidentally,
Boris Berezovskiy also repeatedly boasted "I support Aleksandr Ivanovich." 
To the displeasure and surprise of the oligarchs, not so long ago the
general entered into a scrap with them, albeit only their local
representatives (Krasnoyarsk Aluminum Plant leader Anatoliy Bykov and
associates), but connected to their "big brothers" in the capital through
class ties. At a session of the council of ministers and later during a
personal meeting with Lebed the prime minister effectively supported the
governor of Krasnoyarsk in his useful undertaking and thereby lined up
alongside him. For Berezovskiy & Co. these people are now as much
class enemies as the Communists, with one difference: The oligarchs have
often managed to persuade the deputies in the Duma to side with them, but
not Premier Primakov and General Lebed. We are not talking just about the
oligarchs' private fear of losing their so rapidly and not altogether
justly gotten gains: The premier has effectively confirmed his wish to
smash the pernicious sociopolitical system in spite of the disagreement
with it of a class which has regarded itself as the ruling class since July
1996. It is possible that many of them have become seriously convinced
that the promise to fill the thousands of places being freed up in
corrective labor establishments under the 1994 amnesty with those found
guilty of economic crimes is not a joke at all.


From: "Bjorn Kaupang" <>
Subject: Small Business Development in Russia
Date: Tue, 2 Feb 1999 

It could maybe be of interest for readers of JRL to read my opinion about
"Small Business Development" in Russia.
My name is Bjorn Kaupang, and I have been working in Nizhny Novgorod
since 1992, with frequently visits to the city. The last two years, I have
most of my time in Russia. Our work is mainly based on the forest industry,
and for export.

Small Business Development

As Richard Helbig wrote in October last year in "An Open Letter To The
Of All Russian Production Enterprises", foreigners are welcome - as long as
they give money and don't demand for more involvement.
Small business' are some of the pillars in the economic development of the
society, and not only in developed countries, maybe even more important in 
countries like Russia.

Most people start being entusiastic when you tell about investment-projects,
especially politicians, but what happens when it comes to reality ?
I will tell about our last case in Nizhny Novgorod Oblast (County) ;
For the last year we have been working together with investors for to
establish new furniture factories in the region, using one of the county's 
main raw material resources - Birch. The plan was to re-equip two factories 
with new machineries, for production of
massive Birch furniture for export, estimated annual turnover USD 7 mill. at
each. In addition two sawmills would get huge increased production, delivering
raw material - glued laminated panels ( which is new production for those
enterprises, with investment of approx. USD 2 mill. by foreigners for new 
equipment). The perspective for the future (a five years period) was to 
establish 10 factories, where the investor also will be the buyer of the main

The positive side with this project was - investor ready to invest, buyer
(the same as investor) ready for to sign up agreement for purchasing
for the next five years.

The negative side of the project - very close tie to one group.

What happened when all seemed to be ready - after one years investigation,
negotiating and preparing ? Yes, suddenly the sites we had been looking at,
and also made drawings for installation of new machines, was decided for
another purpose, with bigger investment. 

It had been no talks in front about this situation - of course competition
is ok, but all parts have to know the situation, for to make their decisions 
of how much time and money it is worth to put into the pre-project.

This I believe the Russian management, political and business, have to
understand and respect if they want to attract new investors.

Nizhny Novgorod Oblast lost the possibility for investment of approx. USD
50 - 70 mill. for the next five years period, and more important productional 
output for approx. USD 125 mill. when all investment was done. And it was all
cash - business, no barter deals.

Conclusion for the investor-group is then that they turn to another
Oblast/county, or put investment in Russia on hold, at least for a while.


Date: Thu, 4 Feb 1999
From: (John Helmer)

>From The Moscow Tribune, February 5, 1999
John Helmer

What kind of bird is Russia's prime minister, Yevgeny Primakov,
or is he a fox?
Aesop once tried to explain the difference with the fable of a jackdaw, who 
was sitting on the branch of a fig-tree. Hungry though he was, the bird 
could see the fruit was still green. So he decided to wait. 
A fox came along, and seeing the jackdaw sitting and waiting, he asked
him why. When the jackdaw explained he was waiting for the figs to ripen, the 
fox replied he was mistaken. "You're just living off hope. Hope feeds the
illusions, not the stomach."
There are many people in Russian politics, who, believing Primakov is the
alternative among the current flock of candidates to rule Russia, say they 
are waiting for the figs to ripen. It's their view that Primakov is obliged
to do the same.
There are many who have known Primakov a long time, and who say
he's no jackdaw. They think he's a fox, clever enough to take both the figs
and the bird.
The prime minister's recent proposals on power-sharing between the executive
and the parliament, and the resignation of Procurator-General Yury Skuratov
help to sort out the matter.
Supposing Primakov to have been the fox, he would have prepared his power-
sharing plan carefully in advance with the president and his family, as
they are most directly involved in the benefits and immunities the plan 
offers. Someone had to think slowly and painstakingly, probably for months, 
about a plan that says President Yeltsin shall be entitled to free 
transportation after his retirement from office, except for taxi-rides.
The same supposition suggests the plan for non-dismissal
of the Duma and government, in exchange for dropping the Yeltsin 
impeachment process, was worked out with the Federation Council speaker,
Yegor Stroyev -- because he came out and explicitly endorsed it.
The Communist leadership in the Duma says one thing in public, another in 
private, especially about its confidence or no-confidence in the government.
Almost certainly, though, they nodded in advance. Of all people,
they know the most unpredictable party to the deal is Yeltsin, and
securing his word not to do something is extremely difficult. Valentin 
Kuptsov, the cleverest of the Communist strategists, said the no-impeachment
pledge was "the biggest and most painful question" in the deal. He omitted 
to say what answer he'd given to that question.
Were all these birds living off hope and illusions? Not likely. But those
who were cut out of the deal showed it by reacting through
the media mouthpieces they control. If Yeltsin's future could be
secured without Boris Berezovsky, Anatoly Chubais, Gazprom, LUKoil,
and Vladimir Potanin, then their future begins to look decidedly unripe and
This is where Prosecutor Skuratov comes into the story. He's been sitting 
long enough to know not to act on illusions. A great many of his 
investigations have been ripening, while he waited on the foxes above,
and the foxes below, to settle what was to be done. 
It's now clear that Skuratov's investigations were closing in on the
Central Bank's financial dealings last August, and on those, including
Chubais, who guided them. It's obvious too that Skuratov
was moving against Chubais's Unified Energy Systems, against Gazprom, against 
Berezovsky, and against the other notorious transactions that gave the 
oligarchs their wealth and power. There is no secret about the details. They 
have been unearthed carefully and comprehensively for years by the 
Accounting Chamber.
Public trust in the honesty of this body was demonstrated in the recent
St.Petersburg elections. The bloc led by Yury Boldyrev, the co-chairman of
the Accounting Chamber, won hands down, trouncing the erstwhile reformers
led by Galina Starovoitova, Yegor Gaidar, and Chubais. 
Boldyrev, it's well known, was once in a position comparable to Skuratov's,
inside the Kremlin inspectorate. He was dismissed for uncovering corruption,
and trying to prosecute it. He's persisted through the years, and Russian
public opinion respects him for that.
Whether Primakov was playing jackdaw or fox, waiting is something he
afford not to do, until those most likely to want to do away with him
had lost their power. But for the prime minister to wait required one hope -- 
and that rested on the Procurator-General. Was Primakov under the illusion 
Skuratov could take his investigations to indictments? Was Skuratov so
unsure of Primakov's authority or intention that he leaked a letter to
the prime minister, seeking the green light for his attack? Or were the
targets intended by Primakov and Skuratov able to go over their heads,
and neutralize them both?
Skuratov's resignation, and the appointment of his successor, are now
the touchstone, not only of Primakov's political survival, but of Russia's
future. Those who are silent about who or what brought Skuratov down
are either in on the plot, or have the duty to speak out.
How to explain the fact that the Clinton Administration,
which has lectured the Russian government so thoroughly every week
recently on the economic verities, should be so dumbstruck when it comes 
to the truths of law and order? According to the spokesman of the US Embassy 
in Moscow yesterday, no statements on the Skuratov matter have been made by 
the White House, the State Department, or the Embassy. At least not yet.


Date: Thu, 4 Feb 1999
From: "Edwin G. Dolan" <>
Subject: Russian Education

Russian Education Today and the Myth of the Soviet Golden Age

Rod Pounsett (JRL 3039) laments the decline of Russian education and
compares the situation today unfavorably with a Soviet Golden Age when
(aside from a little forced Marxism) education was free and of high quality.
Of course, there is some truth in what he says, for education, like all
other institutions in Russia, has suffered from the country's economic
decline. Nevertheless, there are some points to which I would like to take
exception, based on my own nine years' experience teaching in several
undergraduate and graduate programs in Moscow, and occasionally lecturing at
universities in other parts of the Former Soviet Union.
The main point I would like to make is that the seeds of most of what is
wrong in Russian higher education today were sown in the Soviet period. I
believe that the apparent success of Soviet higher education was a result of
the same approach--in fact, literally part of the same approach--that
produced the mighty Soviet military machine. That approach was the so-called
"extensive model" of development in which problems were attacked by throwing
vast resources at them with little concern for efficiency, or for the number
of defective rocket parts, computer chips, or whatever that had to be thrown
away for every working model that was produced.
In the case of Soviet higher education, the basic idea was to channel vast
numbers of the brightest kids into science, math, and engineering, so many
that some of them were bound to come out with good educations. But a lot of
"defective chips" were produced as a result of some characteristic features
of the system that are well known to anyone who has been a part of it.
(1) Any visitor from America is immediately struck with the enormous number
of hours of lectures, seminars, and laboratories included in a typical
Russian university program, regardless of the field of study. If the norm at
a US university is 15-18 classroom hours per week, the norm in Russia is
30-36. This creates an obvious problem: when do the students have time to
study, that is, to read, do independent research, write papers, and so on?
There are two parts to the answer. One is that Soviet and Russian
university education does not put much emphasis on independent study or
research. For example, most of the students in our Moscow MBA program,
graduates of some of the very best Russian undergraduate institutions, have
never written a term paper and have literally no clue as to what things like
sources and citations are all about. They are also baffled at first
(although they catch on quickly enough) by Harvard-type cases that have no
"right" or "wrong" answers but instead just aim to get the student to think.
These students' prior education has consisted primarily in learning facts.
The other part of the schedule puzzle is that attendance at lectures is
low, so that the students really don't spend those 36 hours in class after
all. For example, I once taught a course in the economics department at MSU
(by reputation one of the strongest such departments in the country) where
average attendance at my lectures was 20 students. Yet 119 students were
officially enrolled, and they all showed up for the final exam. Not only was
this a required course, but the novelty of an American lecturing in Russian
on the hot topic of banking probably drew a larger than usual attendance.
(2) Any visiting teacher soon also learns that, although some departments
in some schools are very hard to get into, they are even harder to flunk out
of. There is a tradition that everyone must move "lockstep" through the
program with his or her group. No retaking a course next year if you fail it
the first time. To ensure this, you need to have everyone pass every exam.
What if the student has never come to class or studied? The solution is to
allow the exam to be repeated as many times as needed until it is passed.
I well remember my own induction to this system. During my second year of
teaching here (this time not at MSU or our own school), the rector and the
business school dean invited me to lunch just before my final exam. After
softening me up with some excellent Armenian cognac, they dropped a hint
that one of my students was the son of the then-speaker of the Russian
parliament, and that it would be nice for everyone concerned if he passed
the exam. Well, even I could understand that such a situation might make the
rector nervous, so I promised to see what I could do. In fact, the student
in question was quite capable of getting a passing grade without special
help, and did so. However, another student, whose name meant nothing to me,
not only cheated, but was dumb enough to cheat from someone who had the
wrong answers, so I gave him a failing "dvoika." Oops. That one turned out
to be the son of the Russian ambassador to a major Western European country!
Another conference with the rector followed, at which it was suggested that
I give the exam over again. I protested that I had a ticket back to the
States the next day, so that I not only could not administer such an exam, I
couldn't even put one together. Gotcha! In the blink of an eye, the rector
kindly offered to find another faculty member to compose and administer a
make-up exam, and everyone was once again all smiles.
(3) This leads into the endemic problem of cheating on exams and other
work. Yes, I know there is cheating at American colleges. For example, once
when I was teaching at Gettysburg College in Pennsylvania, an anonymous
survey was conducted to examine the school's honor code. It found that about
half of students had cheated on an exam at least once in their college
career, and 5 to 10 percent cheated every time they thought they could get
away with it. But in Russia the numbers are higher, so high, in fact, that
copying on exams is the norm, not the exception. Our students report that
professors at their undergraduate institutes, far from discouraging
cheating, encouraged it to make sure everyone got through with the group.
Our students are often the bright ones who were cheated from in their
undergraduate days, and report being asked by their professor to leave room
beside them for Vanya, because poor Vanya would never pass unless he had a
good paper to copy from.
In my above-mentioned class at MSU, when the 119 students showed up for the
final I handed out 4 variants of the exam in a checkerboard pattern to
discourage copying. The students quickly discovered this and began quite
openly forming little committees to work on each variant. "Hey, Stas, do you
have Number 4?" That kind of thing. When I became upset at this, the
students were amazed. "You have to understand, this is the Russian way of
doing it," they told me.
(4) While cheating involves nearly all students in the copying or the
copied-from mode, I want to make clear that this next problem applies only
to a minority. This is the problem of the corrupt professor who sells
grades. Such behavior is not really accepted or condoned, yet it is reported
to be frequent enough that it can make a difference for a student who really
needs to get through some tough point in the program. I have even been told
of professors who extort bribes by systematically refusing to give a "5" (or
A) unless they are paid for it.
When all of these elements are combined, the result, even in the Soviet
golden age, was a system that did not prevent a bright, motivated student
from getting a good education, but one which also did not prevent a dull,
lazy student from getting an identical diploma in the same field of study
from the same school. For example, our MBA entrance exam attracts many
absolutely brilliant candidates, but every year it also attracts kids with
diplomas in math and engineering from perfectly reputable schools who cannot
solve even the most elementary problems in calculus or statistics. Perhaps
our entrance exam is the first exam they have ever taken that is given under
conditions where copying is not only not permitted, but is not physically
Now that the Russian educational system is under strain, it is harder than
ever for even the self-starters to learn as much as they would like to, and
easier than ever for the weak students to pass on through. Physical
facilities are crumbling. The best faculty members are leaving for
commercial work. Low pay, or late pay, increases temptations for corruption
are grade selling. With stipends nearly nonexistent, there is great pressure
on students to take jobs that reduce class attendance and study time even
more than in the past. And, with application rates down for many programs,
the average quality of students passing through the system is lower, so
standards have to be reduced even more than in the past to keep the
throughput rate at an acceptable level. However, it needs to be stressed
that all of these serious problems are not unique to the "New Russia," but
rather, have roots in the structure of a system that was formed in Soviet
It is an exaggeration to say that Russian higher education today is in a
state of complete collapse. For example, many talented teachers are sticking
to their dilapidated lecture halls despite low pay. A number of new schools
are starting up to fill the demand for education in needed fields like
finance and economics, which were weak points in the Soviet curriculum.
These new schools are not entirely free of some of the old vices (such as
unrealistic schedules and the pressure to stay with the group), but they
have greater freedom to pick quality instructors and a greater degree of
financial independence. Most important of all, students do still seem to
understand the value of a good education. Given a program that repays their
effort, they will spend their own hard-earned money on tuition even if Papa
isn't a banker, and even if it means riding the Metro to class instead of
buying a BMW. They will also work hard and successfully on their independent
study and research if it is demanded of them. Finally, we are encouraged
that graduates of our own MBA program, after landing the jobs they want,
have contributed thousands of dollars to an alumni financial aid fund so
that students whose families are not wealthy can attend our program. So even
in these difficult times, not quite everything has descended to the level of
"Upper Volta with blackboards."

Edwin G. Dolan, President
American Institute of Business and Economics
An independent, not-for-profit MBA program in Moscow.


From: "Mark Ames" <>
Subject: Re: 3041-Busse/Capitalism and Moral Order,
Date: Thu, 4 Feb 1999

Did Sarah Busse really mean all that hokey, pious, Saving Private Ryan
garbage about honesty and honor and respecting your fellow man as the
reasons for capitalism's success in England, France and America? Is she
running for PTA chairwoman? Or is that the rigorous assessment of a
professor from the U. of Chicago? Yikes! "The Dumbing of America" indeed!
The American Mind isn't just closed--it's out of order!

There are about sixteen million ways to refute her, but I'll just throw out
a few, just in case her argument was meant to be taken seriously.
1. Russia was a devoutly Christian country right up to 1917, but it's
problems with corruption, politics and economics were oddly similar to
2. By every health and economic standard, the average Russian's quality of
life was far better under Communist Brezhnev than under Christian Yeltsin;
3. The Church here is the largest duty-free importer of cigarettes,
alcohol, and I understand that they're big in the oil trading business too;
4. England did not become wealthy by encouraging its citizens to hug each
other on the streets; its wealth was made by brutally subjugating and
exploiting less-technologically advanced and less aggressive peoples across
the globe, from fellow Christians in Ireland to China (where they forced
the population to become opium addicts), India, Malaysia, South Africa,
etc., etc. It was Christian England that first invented the modern
concentration camp during the Boer War. Ever since England ceased to be
able to brutally control and exploit these colonies, it has been in
decline, and has ceased to matter as a nation;
4. America's rise to power also is directly tied to war--first, the Civil
War, which turned us into a world-class military-industrial power, then
through a string of major victories this century; after WWII, we were
responsible for some 50% of the world's industrial output; after the
collapse of the Soviet Union and our victory in the Cold War, America's
prosperity and world-dominance in the 90s is almost unparalleled in human
5. Christian Switzerland's wealth is largely dependant on the fact that
it's the world's largest money laundering island for drug lords and 3rd
world tyrants;
6. China;
7. I have actually worked in the investment banking world, spending time
between Russia, London and America, and I can ASSURE you that the reason
Americans excel over the others has NOTHING to do with our honor and
honesty, but rather, because we're the most ruthless people in the world
(at least in finance I can say that), and we have the financial might to
back that ruthlessness up. I have seen many instances of American
businessmen taking Russians for an absolute ride; the myth of the good
American getting reamed by the sly, cunning Russian is a fiction created by
Westerners themselves to mask what really went on here--no one was
innocent, that's for sure. Also, the going prejudices in the investment
banking world were that Brits have absolutely no honor and will stab you in
the back at the drop of a hat; the French are equally duplicitious and
notoriously cheap; the Danes are straight-up but ruthless; the Americans
never play fair, are heartless, totally unconcerned with anything but a
quarterly-earnings mentality, disgustingly selfish, and shockingly rude.
These are all of course just prejudices, but in my two years in that world,
these prejudices dominated.

All right, that's enough. My advice to Ms. Busse is, go home and bake some
cookies, start a car pool for your local church, but for god's sakes, don't
embarrass yourself by publicly wrapping yourself in pious platitudes that
no one, not even Adam Smith, ever really meant to be taken seriously. He
said them the way people say "Take it easy" or "Have a good day".

Take it easy, 
Mark Ames
the eXile


Los Angeles Times
February 4, 1999 
[for personal use only]
The Yeltsin Clan's Onetime Rasputin in Hot Water Now 
By ROBYN DIXON, Times Staff Writer

MOSCOW--In a tantalizing episode of palace intrigue, the man long
considered the most powerful of Russia's tycoons because of his cozy
friendship with President Boris N. Yeltsin's family appears to have fallen
foul of the Yeltsins amid allegations that one of his companies bugged and
spied on them. 
The manipulative and energetic Boris A. Berezovsky, so much one of
Russia's so-called oligarchs that he practically invented the term, once
commanded a $3-billion empire with interests in the media, oil, automobiles
and the airline Aeroflot. But now the glitter is wearing off the star of a
man once tagged a modern-day Rasputin because of his influence over the
first family. 
At his peak, Berezovsky was credited with the power to make and break
prime ministers, and he boasted that he led a group of seven oligarchs in
bankrolling Yeltsin's 1996 election victory. But he lost out last year when
Yeltsin, in a compromise with Communist lawmakers, was forced to appoint as
prime minister Yevgeny M. Primakov, who doesn't let the tycoons call the
Russian prosecutors said Wednesday that a raid the day before on an oil
company linked to the tycoon had uncovered evidence that phone
conversations of presidential family members were tapped. Deputy Prosecutor
General Mikhail B. Katyshev hinted that some "important people" will face
After details of the alleged bugging came to light Wednesday, the
Yeltsin family turned on Berezovsky. In a swift move, the president's
son-in-law, Valery Okulov--the head of Aeroflot--fired top officials of the
company who were loyal to Berezovsky. 
"Now that the family has publicly denied him protection, Berezovsky may
be in for a lot of nasty surprises, the nastiest of which could be ending
up behind bars," political analyst Andrei A. Piontkovsky said. 
Authorities said Tuesday's raid was prompted by a recent report in the
Moscow daily Moskovsky Komsomolets that said that police last year found
tapes of conversations in the office of Atoll, a security firm that the
newspaper said is owned by Berezovsky. The tapes were labeled "The Family"
and "Tanya"--an apparent reference to Tatyana Dyachenko, Yeltsin's younger
daughter and his closest political advisor. 
Amid the murky, eddying waters of Kremlin intrigue, analysts have been
left guessing whether the recent events signal a clear break between the
first family and Berezovsky, whose influence reportedly comes from his
financial ties to the Yeltsin clan. Some suggest that Berezovsky's public
humiliation is a sign that Primakov is asserting his power over Berezovsky
after a recent war of words between the two. 
Either way, the once-untouchable Berezovsky appears more vulnerable than
ever before. The Russian economic collapse has taken a heavy toll on his
But it may be too early to write off Berezovsky, who in the past has
escaped assassination attempts and weathered political setbacks. Alexei A.
Mukhin, the author of a book on the Yeltsins, said the family obviously
wanted to punish Berezovsky publicly. But he predicted that Berezovsky will
"The family cannot just get rid of the tycoon like that," he said.
"There is too much money involved in their common deals." 
On Tuesday, Yeltsin left the sanitarium where he has been recuperating
from a bleeding ulcer and made an appearance at the Kremlin to accept the
resignation of Prosecutor General Yuri I. Skuratov. 
The move touched off speculation that Yeltsin had dumped the prosecutor
because he had been soft in pursuing charges against Berezovsky. The
prosecutor's office said Skuratov, 47, was resigning because of heart
With Skuratov's removal, the prosecutors immediately staged a raid with
elite Alpha anti-terrorist troops on Sibneft, an oil company associated
with Berezovsky. During the raid, authorities said, they found evidence
that conversations involving the Yeltsins had been tapped. 
Berezovsky, whose affairs are wrapped in secrecy, insists that he has
disassociated himself from Sibneft and remains only an "advisor." 
Some analysts said they see the recent attack on Berezovsky as part of
an attempt by Primakov to consolidate his power. 
"In this conflict, Primakov demonstrated that he is a far stronger
fighter than Berezovsky," said Andrei V. Kolesnikov, political editor of
the newspaper Izvestia. "He [Berezovsky] was just trampled on and left
behind to lick his wounds and to weave new schemes to try to regain his
rapidly diminishing influence over the Kremlin." 
Sergei L. Loiko of The Times' Moscow Bureau contributed to this report. 


Zinoviev Letter a Fake 

LONDON, Feb. 04, 1999 -- (Agence France Presse) The Zinoviev Letter, an
inflammatory Soviet call for a Communist revolt in Britain which was blamed
for Labor's 1924 election defeat, was a forgery, an inquiry has concluded,
press reports said Thursday. 
The letter, supposed to have been written by Gregory Zinoviev, president
of the Comintern, the man in charge of Soviet efforts to spread communism
worldwide, urged the Communist Party of Great Britain to foment armed
rebellion and class war. 
Leaked to the Daily Mail newspaper, it was linked to the Labor
government's rapprochement to Moscow: it was about to sign a treaty that
included a loan to the Bolsheviks. 
The furore contributed to the fall of Ramsay MacDonald's administration,
which was Britain's first Labor government. 
The Foreign Office's head historian, Gill Bennett, concluded that the
letter was probably faked by White Russian émigrés based in Riga, Latvia,
who were angered at the Labor government's new policy towards the Soviet
The inquiry, ordered by British Foreign Secretary Robin Cook, dismissed
suggestions that the letter was part of a plot by British intelligence
chiefs to discredit the government and the Bolsheviks. 
Neither was it likely that Zinoviev wrote the letter, said the historian
-- who was granted access to British and Soviet files -- as Russia wanted
the British loan and was therefore holding back on fomenting discontent. 
However, when the letter emerged in London, intelligence staff released
it even though they knew it was a fake because they were happy for Labor to
be destabilized by its inflammatory message, she concluded. 
Bennet suggested that Maj. Desmond Morton, of Britain's overseas
intelligence agency MI6, who immediately confirmed the letter's
authenticity, had decided to use it for political means. 
There were members of the intelligence services "whose allegiances lay
firmly in the Conservative camp," the historian observed. 
As to who leaked the letter to the Mail, there were many suspects, she
said, including Morton or someone else in MI6, or a senior figure at
Conservative Central Office, which had been sent a copy of the letter. 



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