Febuary 5, 1998    
This Date's Issues: 3043   • 3044 

Johnson's Russia List
#3044
5 February 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Russian PM sees industrial output revival in Q4 98.
2. AFP: Gov't Unveils Signs of Life in Economy.
3. AFP: Criminal Probe Launched into C. Bank Dealings.
4. Matt Roazen: Busse Stop.
5. Financial Times: Andrew Jack, RUSSIA: Is food aid needed?
6. Argumenty i Fakty Chubays May Have Offered To Help Luzhkov's Campaign.
7. The Economist editorial: Russia, financial outcast.
8. Business Week: Patricia Kranz, Is Moscow's Control Falling to Pieces? 
9. Reuters: Russian budget clears final Duma hurdle.
10. Boston Globe: Jean MacKenzie, Russia whistleblower sees security's 
long arm. (Nikitin).
11. Mayak Radio Network: Vyacheslav Nikonov, President of the Politika
Foundation, interviewed on election campaign.
12. Moscow Times: Leonid Bershidsky, MEDIA WATCH: A Nazi a Day's a Nazi
at Bay.]

********

#1
Russian PM sees industrial output revival in Q4 98

MOSCOW, Feb 5 (Reuters) - Russia's industry showed signs of revival in the
fourth quarter of last year, Prime Minister Yevgeny Primakov told the State
Duma lower house of parliament after deputies adopted the 1999 budget on
Friday. 
Primakov said the government would do its utmost to support Russian
enterprise and continue its fight against corruption, a vow which won
representatives' applause. 
"Small symptoms appeared... of some industrial recovery from month to
month in the fourth quarter," Primakov said. Industrial output rose 7.1
percent last December, though it was 6.6 percent below the previous
December's level. 
"Of course we have to do everything to make our industry competitive,"
Primakov said, specially mentioning light industry and machine building. 
He also promised to carry out the socially-oriented policies which have
won him support in the opposition-dominated Duma. "The government will do
everything it can to strengthen the situation in the social sphere," he said. 
Primakov was applauded after saying, "There will be a strengthening in
the fight against crime and corruption. You have already seen that some
people do not like this, but we will stubbornly continue along this path." 

********

#2 
Gov't Unveils Signs of Life in Economy 

MOSCOW, Feb. 05, 1999 -- (Agence France Presse) Russia's government has
finally unveiled its answer to the economic crisis. 
Not a spreadsheet of pie-in-the-sky budget numbers for the International
Monetary Fund (IMF). Not a new multibillion-dollar loan which Moscow won't
be able to pay back in a couple of years. 
Instead it presented a landmark trade fair for the very entrepreneurs and
manufacturers which Prime Minister Yevgeny Primakov hopes will resurrect
the economy from within. 
Cars and caviar, sinks and showers, chemicals and curtains -- and the
inevitable shelves of vodka. 
A five-day production fest which opened Thursday at Moscow's All-Russian
Exhibition Center is designed to demonstrate that despite months of ruble
ruin and banking chaos there are signs of life in Russia's economy. 
"We never doubted that the Russian manufacturer was alive," said
parliament speaker Gennady Seleznyov flanked by a retinue of officials
opening the Russia's Regions-99 trade fair. 
"We never thought that he had thrown in the towel, whatever the
difficulties, and never doubted that he would try to produce his own
goods," Seleznyov said. 
Primakov warned recently that to revive its economy, Russia had to become
more than just a glorified quarry of raw materials to be mined and exported. 
His deputy regional affairs minister Sergei Kruglik admitted that the
five-day production fest was "no coincidence." 
"It will enable us to see the output which regions are producing and the
attractive investment opportunities," Kruglik said. "The exhibition is one
of the main (economic) elements which the government is working on." 
So what do Russian manufacturers produce? 
According to depressing statistics released Thursday, whatever it is,
there is less of it. Gross domestic product (GDP) shrank 4.6 percent in
1998. Car output slumped 13 percent over the year. Russia's economy
produces less than half what it used to in Soviet times. 
The output on display in the exhibition's miles of aisles is diverse if
nothing else. Fish from Kamchatka, furs from Samara, vacuum cleaners from
Tula, industrial cement mixers from Lipetsk, shovels from Mordovia, and a
confusing splash of neon road signs from Irkutsk. 
Of course, quality is the key. Economists have argued that the crux of
Russia's economic malaise is an infuriating ability to produce goods which
are actually worth less than the raw materials which go into them.
Subtracting value in such a way is a recipe for economic implosion. 
Yet a large part of the battle for Russia's browbeaten producers involves
the basics of investment and trade. The former has been choked by high
interest rates and a systemic banking collapse. The latter is hampered by a
breakdown of regional ties and the Moscow bottleneck through which many
trade initiatives must pass. 
The trade fair is designed to ease both problems. The 400-odd producers
can plug their wares to would-be investors, while regional authorities try
to promote a progressive commercial environment in their own republics. 
"We needed the exposure, the advertising," said Vladimir Sushko, 45,
explaining why he had shipped his elegant wood and bone carvings 7,500
kilometers (4,700 miles) from Kamchatka in Russia's far east to Moscow for
the trade fair. 
"If you hear of any Western investors who want to help our projects,
please give them my phone number," urged the one-time pilot-turned small
businessman. "We need equipment, investment." 
There were also signs that the West may not have given up on Russia
totally yet. 
While portfolio investors have fled Russian markets and the IMF has
blocked aid to the government, direct investors are still on the look-out
for joint venture possibilities, said Simon Joseph of the Russia-British
Chamber of Commerce. 
"We just want you to know that we are standing side by side with you at
this time," Joseph said as the fair opened. "It is very important for us to
work directly with all the regions." ( (c) 1999 Agence France Presse) 

*******

#3
Criminal Probe Launched into C. Bank Dealings 

MOSCOW, Feb. 05, 1999 -- (Agence France Presse) Prosecutors have launched a
criminal probe into senior central bank staff accused of illegal asset
sales, living a luxury lifestyle on credit cards at the state's expense and
questionable financial dealings. 
Top bank managers also placed billions of dollars of Russia's official
foreign currency reserves with an unknown offshore bank in Jersey, the
Interfax news agency quoted a prosecutor's report as saying. 
The document, handed to parliament by former prosecutor general Yury
Skuratov on the eve of his shock resignation Tuesday, catalogued a trail of
abuse of office and improper activities by senior Bank staff, Interfax said. 
Skuratov's dossier listed backdoor sales of Bank assets, including
stakeholdings in a range of financial institutions, and the sell off of
official cars under dubious circumstances, the news agency reported. 
Prosecutors are now seeking the return of funds they say were improperly
placed with Jersey-based Financial Management Company (FMC), which Interfax
said had a registered share capital of just $1,000. 
According to Skuratov's report, over a five-year period the Jersey firm
managed $37.3 billion; 9.98 billion German marks; 379.9 billion yen; 11.98
billion French francs and 662.5 million pounds. 
FMC took a cash commission for its work, a move prosecutors believe was
illegal, Interfax said. Prosecutors are now seeking the return of those
commissions and Central Bank funds still held in FMC accounts. 

*******

#4
From: Matt Roazen <Matthew.Roazen@salans-shh.com>
Subject: Busse Stop
Date: Fri, 5 Feb 1999 

Watching all of this debate about Sarah Busse's recent piece, I was
forced to relive an adolescent trauma which time has apparently not
fully buried: Soc 101 my sophomore year in college. I remember the only
bright spot in a semester filled with two volumes of Das Kapital, two
volumes of Hegel, and another 2000 pages of Talcott Parsons' sadistic
abuse of the English was Max Weber's The Protestant Ethic and the Spirit
of Capitalism, written around the time when he was a guest lecturer at,
of all places, the very college where I was studying. It was Weber
alone who prevented me from exercising what we like to call in the U.S.
"Second Amendment Psychotherapy," that and the lack of a bell-tower at
Quaker-drab Haverford College.

However, I hesitate to discuss its main tenet since, unless rolled in
the dry flour of academic language, it pretty much exacerbates the
unresolved schism between Protestantism and the Roman/Eastern Rite
churches by saying that it is not mere Christianity, but specifically
certain strains of Protestant thought, which best create the moral and
ethical structures necessary to harness and contain -- at least part of
the time -- the Beast of capitalism. Since I do not take Christianity
with or without wafers, it would be inappropriate of me to throw down
the "Orthodoxy versus Enlightenment Christianity" gauntlet on this list
and start, on top of the other debates going on here, a religious war.
However, I urge anyone who wishes to mull over this debate to look at
Weber's work and then look at any history of Russian Orthodox thought to
see whether the latter in any way resembles any of the particular
strains of English Protestant thought on which Weber focuses.

******

#5
Financial Times
February 5 1999 
[for personal use only]
RUSSIA: Is food aid needed?
Gesture of goodwill from US and Europe has sparked arguments over what form
aid should take, writes Andrew Jack

As the US and the European Union finalise plans to ship large quantities
of food aid to Russia, a senior diplomat at a western embassy in Moscow
sums up the situation bluntly: "I don't know of a single person in this
building who thinks it is necessary."
Over the last few days, officials in North America have been finalising
the small print and starting to purchase and ship more than 3m tonnes of
food in a package worth $950m. Their counterparts in the EU are preparing a
further 1.8m tonnes valued at 470m ($534m).
Administrative delays and new measures designed to prevent corruption
have stalled deliveries, originally pledged for the start of the year. They
are now unlikely to arrive before mid March.
However, there is a growing debate about whether the food should be sent
at all. In the last few months, there have been scare stories that Russia
is facing its most severe winter in decades and the prospect of starvation.
The Red Cross has launched a SFr25m ($17m) emergency appeal, and is gearing
up for a smaller, second programme in the far north east of the country.
The European Commission says that Russian production levels for many
crops are at the levels of the late 1940s. The US Department of Agriculture
says the grain harvest last year was the lowest since the 1950s, and down
from 88m tonnes in 1997 to less than 50m in 1998.
"Something has to be done to meet this shortfall," says Asif Chaudhry,
minister counsellor for agricultural affairs at the US embassy. "We are
basically responding to the Russian government's requests to provide food
assistance." Bertrand Soret, spokesman for the EU in Moscow, says: "We came
to the conclusion that the aid was justified."
But others are less convinced. Gennady Kulik, the Russian deputy prime
minister for agriculture who formally requested the aid, said last November
that the harvest was on a par with the average of the last 15 years.
"There is no shortage in this country," says one Moscow-based aid expert.
"The US and the EU have different reasons for sending food, and the
Russians are willing accomplices, but by no means is this a humanitarian
effort."
He says aid would be best spent purchasing food within Russia to
redistribute to poorer regions or on providing credit and assistance to
Russian farmers.
There is no doubt that some Russians will face severe difficulties this
winter: those in remote and poverty-stricken areas, and vulnerable groups
such the elderly, sick and single-parent, multiple-child families. These
are precisely the 1.7m people targeted in the Red Cross appeal. The problem
for them is less the absence of food than insufficient money to buy it.
But the US and EU packages are not so tightly targeted. The latter will
be sent to more than 40 destinations. Both rely largely on distribution by
the Russian authorities, who will use part of the allocation to supplement
the meagre rations in state-run hospitals, orphanages and prisons.
However, much of the aid has been earmarked to be sold at existing market
prices. How that will operate in practice remains unclear. If prices are
high, the food will remain unaffordable; if they are brought down by the
new supplies, there is a risk of destroying what little local production
there is.
There is also concern about corruption, which has brought pledges of
increased monitoring by the US and the EU. Mr Kulik faces allegations by a
judge of personally benefiting from the last important food aid programme
in 1991, although he denies the charges.
Significantly, Canada has chosen to by-pass the process by flying part of
its own more modest C$2.5m (US$1.6m) aid package directly to north-eastern
Russia. But it has given the bulk to the Red Cross in cash, which purchases
food and goods locally and distributes them using its own well-established
networks.
The action is exceptional. Some Red Cross officials fear criticism of the
EU and US programmes has affected its own appeal, which has so far only
raised half the money it sought. It has also twice been turned down by the
EU's humanitarian fund, which pointed to the effort being made separately
by the food programme.
While the US and EU aid programmes will certainly help some Russians in
difficulty, they have left a bad taste in the mouth of many. As one
technical assistance expert puts it: "What was meant to be a gesture of
good will has been hammered. After all the criticism, the results can only
be better than the expectations."

********

#6
Weekly: Chubays May Have Offered To Help Luzhkov's Campaign 

Argumenty i Fakty, No. 954
February 1999 (signed to press 2 Feb 99) 
[translation for personal use only]
Unattributed report in the "Politics" column: "Chubays Is
Looking for a Patron". Passages within slant lines published in
boldface

A meeting took place at the end of last week between two antagonists,
Moscow mayor //Yuriy Luzhkov// and head of the Unified Energy System of
Russia joint-stock company //Anatoliy Chubays//. At first sight, it was a
routine event: two executives met to discuss the issue of power engineering
in Moscow. It is rumored though that they could also have discussed certain
//political issues//. It was Mr Chubays who probably initiated the
rapprochement.
It look as though it is his lot to offer help to prominent politicians
in difficult moments. The best known example came in early //1996//, when
Chubays offered his services to the oligarchs to organize the election
campaign of the "unelectable" //Boris Yeltsin// in exchange for a place for
himself in the government. Today, Anatoliy Borisovich finds himself in a
similar situation. //Luzhkov// is the only presidential candidate, just as
//Yeltsin// was three years ago, who could, once in the Kremlin, guarantee
the former privatization supremo safety and even a chance to engage in
politics. Not for nothing, of course, but in exchange for help in securing
the election of [Luzhkov's political movement] Fatherland candidates to the
Duma, as well as help in the presidential election.
The financial resources of //"Chubays' group"// are still quite good. 
These include the budget of the Unified Energy System of Russia joint-stock
company as well as the funds accumulated in various financial structures
since the era of [Viktor] //Chernomyrdin's// and [Sergey] //Kiriyenko's//
governments and active investments from the IMF. For example, no-one has
yet given us a clear explanation of //where the sum of over 4bn dollars
transferred by the IMF to Russia last summer has dissolved//.
For the Moscow mayor, on the other hand, money is pretty tight. This
year alone, Moscow has to repay debts to Western banks amounting to
//nearly 2 billion dollars//. In this situation, it is unwise to reject
any offers of assistance. One can even make it up with Chubays. Mr
Chubays' regular meetings with the management of the //Sistema// financial
group [Fatherland's main sponsor] testify to the fact that this process is
already under way. Sistema is believed to be the financial foundation on
which Luzhkov is building his political plans.
//PS// According to a report from the //AiF-Novosti// agency, one of
the authors of Yeltsin's 1996 election campaign, //Sergey Lisovskiy//, is
joining //Yuriy Luzhkov's// team.

********

#7
The Economist
February 6, 1999
[for personal use only]
Editorial
Russia, financial outcast 

THE jar is all but empty, and once again Russia is looking to the West
for more honey. Once again, the spectre of bankruptcy looms. Once again,
Russia’s apologists present the prospect of the bear, once rebuffed,
sinking even further into resentful degradation and nerve-racking
unpredictability, and bristling all the while with nuclear missiles. This
time, however, the rich countries should steel themselves and say, “Sorry,
not until you’ve put your house in order.” Unless Russia gets a radically
new economic regime, any further western money is likely to be
squandered—at best used to prop up a system that does not work, at worst to
find its way into the pockets of corrupt politicians, officials and
businessmen. 
Since the rouble’s crash last August, many of the tentative gains of the
preceding few years have been blown away. Misfortune has been piled on
misfortune. Last autumn’s worst harvest in 45 years means that even bread
may soon be in short supply. The price of oil, Russia’s main earner of
foreign exchange, has tumbled. Investors, bruised by the collapse of Asian
markets, do not wish now to be crushed in Russia. The inflation rate,
judging by December’s figures, may rise to 100%, or even higher if the
government decides to pay off wage arrears by printing money. As it is,
many public-sector workers—teachers, for instance, who are supposed to get
a princely $20 a month—have not been paid for a whole year. Much of
Russia’s nascent middle-class has been pulverised. The monetised economy is
barely half the size of the Netherlands’. The murder rate may be the
world’s highest. Male life expectancy has fallen to African levels: 58
years is now the average life-span, and the population is contracting by
800,000 souls a year. The country seems to be dying on its feet. 
True, Russia now has in Yevgeny Primakov a prime minister who, as a
former head of the KGB, is gathering power and has the experience to make
use of it. But he is not a man with a vision of the future or the
determination to make changes for the better, more someone to manage the
country’s decline. With Boris Yeltsin yet again shoved to the margin by ill
health, Russia has no presidential guidance. The federation threatens to
fragment. It has no real leader, no moral compass, no tangible hope that
things material will soon improve. 
Mr Primakov has chosen the path of least political resistance, eschewing
virtually anything that smacks of economic risk or reform. He has hired old
sweats from the days of Soviet central planning to run the central bank and
what passes for economic policy. He has salvaged a shred or two of national
pride by continuing to behave awkwardly abroad. Above all, he has managed
to avert civil strife, at least tempering Russia’s steady decline with a
measure of political stability. 
Soon Russia will face some big bills for the repayment of various loans
(see article). It has no chance of paying them all without more borrowing.
The argument for helping it out rests mainly on the belief that a refusal
to do so could upset whatever equilibrium exists. A general default on
debt, of which some $17 billion falls due this year, would mean Russia’s
exclusion from the world’s financial markets. In the short term, Russia
wants “only” $7 billion, partly to roll over repayments to the IMF that
fall due throughout this year; it is not asking for budgetary support. 
A bankrupted Russia, say those who would give it the money, would become
an economic outlaw deprived of any incentive to co-operate on many issues,
foreign and financial. It would turn its back on democracy. It could bully
its neighbours with impunity. It would topple backwards into nostalgic
communism or forwards into Slavophile fascism. 
Really? The benefit of the doubt that the West has repeatedly granted
Russia on a range of questions, from abiding by IMF conditions to rooting
out corruption or behaving better on such matters as Iraq, Kosovo and the
sale of nuclear technology, has reaped but the scantest of rewards. Why
should the record change? Mr Primakov, after all, is a past-master at
reassuring the West of Russia’s good intentions at one moment and then
abetting the West’s enemies at the next. 

When the importuning has to stop 

Not that the West should turn its back on Russia for ever. It is still a
land of magnificent opportunity. Once it has begun to create a workable
financial system, a tax base, a set of laws that people respect and obey,
above all a modicum of honesty in public and private dealing, western
interest will revive. And even in the shorter run all is not lost. For all
his faults, Mr Primakov has afforded his country a breathing-space. So long
as the Russians’ extraordinary stoicism continues to put off a social
explosion, their latest prime minister may succeed in carrying the country
forward to two big elections—one parliamentary, the other
presidential—which might provide it with a new lease of proper politics and
leadership. 
The election to Russia’s lower house of parliament, the Duma, due in
December, is likely to produce much the same bloody-minded mix of
nationalists, communists and regional bigwigs as before. The presidential
contest, due in June 2000 if Mr Yeltsin lasts that long, is more important. 
Here there is a flicker of hope. In the past, Mr Yeltsin’s adversarial
heroics have saved the democratic day. But, since his re-election in 1996,
he has failed to build the consensus for reform that Russia’s rough system
of largely presidential, partly parliamentary government crucially needs.
Of those who might follow him—Mr Primakov (though he denies such
ambitions); Moscow’s mayor, Yuri Luzhkov; and ex-General Alexander
Lebed—none can win the presidency without building alliances. The sooner
Russia has a proper president, the better. 
In the meantime, the West can still do some good, even with the Kremlin
in a sulk. It can continue to offer money to help decommission nuclear
weapons and clean up the contamination they are causing. It can provide
humanitarian aid, including cash for food and medicine, and give support to
groups struggling to strengthen the press, the protection of human rights
and other aspects of the building of democracy. It should pay for cohorts
of young Russians to come to western countries to learn about decency in
business. It can engage directly with Russia’s ever more powerful regions,
rather than concentrate entirely on leaders and institutions in Moscow. And
it should help neighbouring countries, whether democratic Balts or
stumbling Ukrainians, to step out of the shadow of a menacing bear. 
All of this would be evidence that the West was still ready to support
the things it believes in. But a profligate dependency, with no will to
reform, is not one of them. In the end, whatever help is offered, only
Russians can make their country work. They may as well realise this sooner
rather than later. 

*******

#8
Business Week
February 15, 1999
[for personal use only]
Is Moscow's Control Falling to Pieces? (int'l edition)
As the ruble falls, local authorities grab power
By Patricia Kranz in Moscow 

In Kalmykia, a Buddhist region on the shores of the Caspian Sea,
President Kirsan N. Ilyumzhinov is refusing to pay $10.3 million in taxes
owed to Moscow. Local officials in the Volgograd region, part of Russia's
Southern grain belt, are banning railroad authorities from transporting
grain outside of its borders. And far to the east, Mikhail Nikolayev,
president of the resource-rich region of Sakha, is trying to seize control
of gold production from Moscow.
Russia's regions are grabbing economic power. Spurred by the fiscal
crisis and a political near-vacuum in Moscow, the leaders of many of the 89
regions are doing everything they can to keep tax revenues, natural
resources, and food in their own territories. The power shift is putting an
even tighter squeeze on Prime Minister Yevgeny M. Primakov's floundering
government. The economy is expected to contract 10% this year, and the
ruble, now trading at just 22 to the dollar, has plunged 11% since Jan. 1.
Says Nikolai Petrov, an analyst at the Carnegie Moscow Center: ``Regions
are becoming used to solving problems on their own. It's very dangerous.''
BARTER. As regions take matters into their own hands, the use of barter and
other nonmarket mechanisms is growing apace. With little cash coming from
Moscow, money surrogates, such as ious issued by the local government or
major enterprises, are becoming an even greater part of economic life.
Although sellers of food and other consumer goods still demand cold, hard
cash from the average citizen, enterprises use the ious to clear debts with
each other or to pay local taxes. Petrov estimates that money surrogates
account for 60% to 80% of the economy in many Russian regions--compared
with 40% a year ago.
Barter is growing because the federal government doesn't have enough
money to pay its bills. It is not sending money to the regions to pay for
services such as electricity, or to pay the wages of state employees.
Primakov's policies are only making the problem worse. For example, he is
allowing natural gas giant Gazprom to pay off nearly $400 million in
federal taxes with food that it received in barter deals with customers.
Local leaders are taking advantage of the growing virtual economy to
buttress their power, too. Regional banking empires are growing and
elbowing aside national banks that were owned by Moscow tycoons. For
example, Omskpromstroibank is picking up business from Inkombank and
SBS-Agro Bank in the central Siberian city of Omsk. Some governors, such as
Yuri Goryachev in the city of Ulyanovsk, are trying to grab control of key
enterprises by swapping tax debt for equity.
Others are using bankruptcy courts. Almost every business owes back
taxes and is technically bankrupt. That means enforcement is often
arbitrary, based on political relationships rather than hard finance. And
the use of noncash mechanisms also spawns corruption by making it easier to
mask payoffs or asset-stealing. ``In barter deals, the value of tax offsets
depends on how close you are to the governor,'' says Yulia Latynina, an
analyst at the Moscow weekly Expert. ``And if he has a bad relationship
with an enterprise and wants to bankrupt it, he will demand immediate tax
payment in cash.''
POLITICAL HAY. In the midst of this bleak scene, there are a few rays of
light. The ruble's plunge in value has made Russia's exports, particularly
raw materials, more competitive. Russian industry, primarily consumer goods
and food processing, has rallied as imports became prohibitively expensive.
Industrial production in December was 7.1% above its November level. But
unless Russian companies use this devaluation-driven window of opportunity
to restructure and become more efficient, the gains will be short-lived.
Overall, though, the newest explosion of barter rolls back even further
any gains that Russia made in its six years of trying to create a market
economy. What Russia has now is ``a nonmarket economy, even though you
can't call it communist,'' says Dirk Damrau, head of research at Moscow
investment bank Renaissance Capital. With his eyes on upcoming elections
for the Duma and the presidency, Primakov has decided to sacrifice reform
to preserve political peace in Moscow. Away from the capital, local leaders
see this decision mainly as an opportunity to amass more power--and perhaps
wealth--for themselves.

******

#9
FOCUS-Russian budget clears final Duma hurdle
By Ivan Rodin

MOSCOW, Feb 5 (Reuters) - Russia's State Duma lower house of parliament on
Friday passed the controversial 1999 budget in its final reading and Prime
Minister Yevgeny Primakov pledged to support industry and fight crime and
corruption. 
``I think that this historic act of accepting the budget not only shows
political support for the government but opens new scope for our
activities,'' Primakov told MPs after the vote to support the finance bill
in its fourth and final reading. 
The budget is the toughest passed by Russia since the collapse of
Communism but has been criticised as unrealistic by many, including the
International Monetary Fund (IMF). 
The government sees fast approval of the bill as a sign of political
stability returning to a country struggling desperately to drag itself out
of a deep economic crisis. 
The Duma passed the bill with 308 votes in favour, 58 against and six
abstentions after MPs earlier added an amendment to end a row with the
Kremlin that threatened to draw a veto for the finance bill from President
Boris Yeltsin. 
The amendment means spending by the president's administration will fall
20 percent this year instead of the 40 percent originally approved by MPs
in the third reading. 
Primakov pledged to continue his government's support for the real sector
of the economy, meaning industry, which he has consistently said is one of
the main ways to end the crisis. 
He said forming a Russian development bank to support industry as well as
an agency to support a restructure of the bank sector, shattered in the
economic crisis, were priorities. 
To applause, Primakov also talked tough on law and order. 
``There will be a strengthening in the fight against crime and
corruption. You have already seen that some people do not like this, but we
will stubbornly continue along this path and no one will turn us from it,''
he said. 
He repeated pledges to boost social supports, which he says was ignored
in market reforms after the fall of Communism. 
He said the government had demonstrated it was meeting its pledges in
this area by being up-to-date on payments of pensions and wages to state
employees and clearing up past debts. 
The budget draft will now be forwarded to the Federation Council (upper
chamber), where it faces a single reading, and then to Yeltsin for signing. 
The budget calls for total revenues of 473.82 billion roubles ($20.5
billion) and spending of 575.09 billion roubles, giving a deficit of 2.53
percent of gross domestic product. 
The revenue, inflation and rouble exchange rate targets have been
criticised as unrealistic, even by deputies who voted for the draft in the
first three readings, and the IMF. 
The budget is expected to be part of negotiations between the government
and the IMF, whose mission was to leave Russia on Saturday after more than
two weeks of talks. 
($-23.12 roubles) 

******

#10
Boston Globe
5 February 1999
[for personal use only]
Russia whistleblower sees security's long arm 
By Jean MacKenzie, Globe Correspondent

MOSCOW - The Supreme Court yesterday denied an appeal to drop treason and
spying charges against the environmental activist Alexander Nikitin.
International observers saw the decision as evidence of continuing security
agency control over Russia's legal system. 
The ruling leaves Nikitin, a 46-year-old retired Russian navy captain,
confined to his home town of St. Petersburg, though he was neither
convicted nor acquitted. The country's security organs, meanwhile, will be
given a second chance to marshal a case against him. 
''I am disappointed,'' Nikitin said after the judges had announced their
verdict. ''Now the most important thing is finding the moral and physical
resources to go on.''
Nikitin and the Federal Security Service, a successor to the KGB, have
been locked in a bitter struggle since February 1996, when Nikitin was
arrested on charges of espionage and treason. He was accused of handing
classified information to a Norwegian environmental group, Bellona, that is
trying to clean up nuclear waste in Russia's far north. 
The Russian north has become the repository for spent reactor fuel, and
poor storage facilities pose a danger of radioactive contamination of air
and water. 
Nikitin's lawyers have argued that all materials given to Bellona had
come from open sources, and that he is being charged on the basis of secret
decrees rather than legislation. 
The Federal Security Service has countered that the charges against
Nikitin are so secret that the security organs cannot let the judge and
lawyers see them. This assertion has earned the service a rebuke from the
prosecutor general's office, and a threat of a contempt citation from the
St. Petersburg court, which heard the case originally. 
In October, the lower court ruled that the case against Nikitin had not
been proven, and it referred it back to the Federal Security Service, ''for
additional investigation.'' 
''This is legal nonsense,'' said Genri Reznik, one of Nikitin's lawyers.
''If the prosecution cannot prove its case, the defendant should go free.''
Both the prosecution and the defense appealed the October decision. 
The judges conceded that the Federal Security Service's case had
problems, but they refused to let Nikitin go free. 
Legal experts and human rights activists have attributed this decision to
fear of the security organs. 
''We have felt pressure from the FSB all through the case, direct and
indirect, right up to today,'' Yuri Shmidt, lawyer for the defense, said of
the Federal Security Service. ''Of course the court did not want to take
any responsibility on itself, and just sent the case back.''
The Federal Security Service now has one month to prepare its case, but
Nikitin's lawyers say that this time period can be prolonged indefinitely. 
''I would not be surprised if this case never went back to court,''
Shmidt said. 
Nikitin spent 10 months in prison, and since he was released in December
1996, he has complained of repeated harassment. On the eve of the trial
Nikitin sent his wife and daughter to Canada, and he has hinted that he may
be thinking of joining them. But, he added, ''This case must be finished in
Russia.'' 
International legal advisers and human rights activists also voiced
disappointment at the ruling, and many said privately that they were
worried by the intensifying influence of the Federal Security Service over
the Russian legal system. 
''We are concerned that Russia is returning to Soviet days,'' said
Ragnhild Astrup Tschudi, of the Norwegian Helsinki Committee. 
But the most dangerous consequence of the Nikitin case, according to
Frederic Hauge, general director of Bellona, is the effect it is having on
environmental workers. 
''Everyone is waiting to see what will happen,'' he said. ''They are
afraid that, like Nikitin, they may then be charged or put in prison. But
we have to do something. We have no time to waste.''

******

#11
Russia: Analyst on Election Campaign 

Mayak Radio Network
2 February 1999
[translation for personal use only]

This is the Political Olympus program and this is Lidiya Podolnya in
the studio, conducting today's program, together with Vyacheslav
Alekseyevich Nikonov, President of the Politika Foundation. Let us turn to
the very latest events in Russian political life. [passage omitted
Podolnya recaps recent developments]
[Nikonov] In my view a major political game is being played by all the
participants, and not least by Yevgeniy Primakov. The most recent media
reaction to Primakov's proposal to conclude a sort of non-aggression pact
between the branches of power recalled, first of all, a warning to the
President that Primakov himself intends to become president; and these
accusations acquired their final form in Sergey Dorenko's Sunday Vremya
program, when he virtually stated that Primakov is planning a plot aimed at
removing the president from power by establishing, in alliance with the
Communists, control over the mass media, the power-wielding structures, and
so on.
[Podolnya] The confrontation between Primakov and Boris Berezovskiy
has become more acute and it seems that the fate of the first channel of
Russian Public TV has been placed on the cards.
[Nikonov] The fate of the first channel of Russian Public TV really
is, more than ever before, a question of relations between Primakov and
Berezovskiy. Of course, however, this is not the main thing. When
Primakov made his statement it was not Berezovskiy he had in mind. In my
view he had three things in mind.
First, despite the abundance of political figures and state
institutions in the country, Primakov is the one who really rules Russia. 
And, of course, in these conditions he would like to share responsibility
for what is happening in the country, and for what will happen in the
country in future, with other political forces. Otherwise he will be the
natural scapegoat and the candidate for resignation if something goes wrong
in the country.
Second, Primakov is well aware of the words that Boris Berezovskiy
uttered recently, that the wrong people were removed and Berezovskiy is
really very dissatisfied with Primakov because Primakov does not allow him
anywhere near. However, this reflects not only the opinion of one person,
it reflects the opinion of the President's closest entourage--the family
circle--which considers that Primakov is a person who is too independent
and too inclined to compromise with the left-wing forces.
Finally, Primakov in this case made a play from which he really could
not lose, because of the ideas of accord between the branches of
power--accord in Russian society enjoy support from public opinion, they
are supported by the governors, by the regional elites--and therefore to a
certain extent he was appealing to the people.
At the same time, Primakov is risking little. In the present
situation it is very difficult to imagine him resigning. Yeltsin cannot
fail to understand that, in the present conditions, a major political
crisis would by no means improve the situation in the country.
In addition, there are various scenarios, all the more so if Yeltsin
does not appear in the Kremlin, in which the President may experience
technical difficulties by removing Primakov. The Duma might simply not
agree with the decision of the President, with the candidate which he
proposes in exchange, and so on. [passage omitted: there can be no return
to the past]
[Podolnya] What you have been saying brings to mind another article
written by Yevgeniy Yasin, the former economics minister, in the Kommersant
newspaper, in which he asserts that the period of liberal economic reforms
has ended and that he does not know whether the Primakov government will
carry them out. Yasin also considers that we are entering a time of
political uncertainty until the presidential elections. What do you think
about that?
[Nikonov] I do not agree with Yasin's first statement. His article
was preceded by an article by Petr Aven.
[Podolnya] We shall return to that later.
[Nikonov] Aven said that liberal reforms have not yet begun in Russia.
I am more inclined to agree with that viewpoint. What has happened in our
country is more a process of removal of state control and privatization
carried out by administrative and not market methods. However, I
absolutely agree with Yevgeniy Yasin that, indeed, until the presidential
elections there will be a time of political uncertainty.
There is one very major factor of uncertainty. This is President
Yeltsin and the political and physical form he is in. At present many
people are trying to predict what Yeltsin can do before the next
presidential elections, but no one can predict this exactly. Boris
Nikolayevich is well known as a man who makes decisions independently and
all attempts to predict his behavior up to now have ended in total failure.
In my opinion, in the present situation the worst thing that the
President could do would be to sack Primakov, as is being insisted on by
many people in his closest entourage. That would cause a very major
political crisis. However, if the President does not do this then an
element of predictability will appear in Russia. [passage omitted: Nikonov
replies to listeners' questions about extremism, treaty with Ukraine]
[Unidentified listener, on telephone] Svetlana Mikhaylovna [surname
indistinct] from Yekaterinburg. I would like to ask this question. 
Primakov wrote a very polite, very complimentary, very gentle, and very
peaceable letter to Seleznev. Why did Seleznev react in the way he did?
[Podolnya] Thank you for your question, Svetlana Mikhaylovna. In
fact, the explanation is a very simple one. In his letter Primakov
proposed to the State Duma that it, in exchange for the guarantee that it
would not be dissolved--and it is a myth that the State Duma cannot be
dissolved in the final year of its work, it can indeed according to the
Constitution of the Russian Federation--so, in exchange for not being
dissolved, the State Duma should renounce any plans to impeach President
Yeltsin, and any moves to introduce a vote of no-confidence in the
government.
However, we are already in a pre-election year, the pre-election
cycle. It is natural that the opposition forces in the State Duma-- the
People's Patriotic Union and the Communist Party--intend to construct their
tactics in the coming election campaign on criticizing the anti-popular
regime.
Primakov has invited that same opposition which controls the State
Duma to sign a non-aggression pact with the President and the government. 
However, if the Communists were to support Primakov they would lose their
whole pre-election game. Hence their sharp reaction and the rejection of
Primakov's proposal by Seleznev and by Gennadiy Zyuganov, who yesterday
came out with such a harsh statement against Primakov on this subject. The
Communists do not want to have their hands tied.
[Podolnya] What about Yavlinskiy and Yabloko?
[Nikonov] Just the same. Yavlinskiy is now one of the main opponents
to the powers that be. He criticizes both the policy of the President and
the policy of the government. Therefore, a non- aggression pact in these
conditions would tie his hands and hence the rather harsh reaction. 
[passage omitted: Nikonov says oligarchs now have little influence on
national policy]
[Podolnya] At a local level, at the regional level, in Krasnoyarsk for
example, a major squabble is developing between Lebed and the local fat
cats.
[Nikonov] The local fat cats have not yet grown into oligarchs.
[Podolnya] But they control the whole territory.
[Nikonov] Of course, there are industrial-financial groups which
control the economies of considerable regions, and Lebed has come up
against this. Many governors try to resolve this problem by trying to
reach agreement on dividing up spheres of influence between the various
financial-industrial groups and the authorities. Lebed decided to break
with them and as a result he has quarrelled not only with the small local
oligarchs but with the whole political elite of Krasnoyarsk Territory. The
problem is not that this political elite has been bought up by oligarchs. 
There really are very serious political clashes on the principle of
division of powers.
[Podolnya] At present in many publications, literally over the past
few days--and I have even seen this today--there is discussion of the
thought that the fight between the various political forces has not yet
begun and we are only approaching it. In this fight, who will possess the
greatest strength? Who will reach the finishing line the strongest,
capable of laying claim to the victory?
[Nikonov] Although everyone says that the election campaign has
already begun, in my view it has not even begun yet. Who will be the
strongest? It is evident to me that there will be five politicians who
will be the strongest. These are: Gennadiy Zyuganov, whose rating remains
stable at about 20 percent; Yuriy Luzhkov and Yevgeniy Primakov, whose
ratings now stand at about 15 percent; Aleksandr Lebed and Grigoriy
Yavlinskiy at about 10 percent. I do not think that any sixth person could
force his way into this group of leaders.
[Podolnya] In the time remaining to us, Vyacheslav Alekseyevich, what
is your forecast about the near future in Russia's political life? What
will we come up against?
[Nikonov] This is a very complicated question because, I repeat, we
have one unknown variable in the shape of President Yeltsin. All the rest
is rather predictable. Primakov will try to conduct a low profile policy,
maintaining the situation, and not declaring his presidential ambitions. 
The opposition, I think, will increasingly distance itself from the
government. This was shown during the discussion of the budget,
particularly in the second reading when the split first became noticeable
in relations between the government and the left-wing opposition in the
State Duma. The other political players will play their traditional
political game.
Of course, many people are worried by the question of whether there
will be a social explosion in Russia, a revolution.
[Podolnya] There is an opinion that a new spiral of confrontation is
brewing.
[Nikonov] My feeling, and what is shown by public opinion research, is
that no such danger exists in Russia at present. People are at present
displaying a mood in which the dominant word is survival. As a rule, when
people are trying to solve the problem of how to survive, they do not rise
up in active protest. That is a law of social development.
[Podolnya] So, we will not have an explosion?
[Nikonov] There is no sign of a social explosion yet. [passage
omitted: Podolnya signs off]

*******

#12
Moscow Times
February 5, 1999 
MEDIA WATCH: A Nazi a Day's a Nazi at Bay 
By Leonid Bershidsky
Staff Writer

Nazis are bad. Or are they? 
Let my Jewishness protect me when I say they can be good - in the right
doses
and when used correctly. After all, what is penicillin if not mold? 
When the boys from Russian National Unity, or RNE, marched down the
streets of
Moscow this week, they did more for liberal and anti-Nazi causes than even
Duma Deputy Albert Makashov did with his recent anti-Semitic remarks. To get
people to recall how and why World War II was fought, someone has to wear a
swastika armband before a few TV cameras. 
So here's a little manual on how to use the Nazis correctly. 
1. Do not dispel their first illegal march. In fact, assist it by holding
off
the rain or snow, the way Moscow Mayor Yury Luzhkov does on major city
holidays: The weather must be good for the cameras. 
2. Alternatively, if the Nazis cannot get enough people together to stage a
march, sign up a bunch of them to try to disrupt your party congress, black-
tie reception or soccer match. Look at the publicity some shouting from a
bunch of National Bolsheviks generated last weekend for the latest congress of
Russia's Democratic Choice, the dogged but feeble liberal party. It is highly
doubtful that the congress would have made the evening newscasts without the
"fascists" trying to shout down Yegor Gaidar. 
The National Bolsheviks' leader, Eduard Limonov, would have ended up in a
concentration camp under the real Nazis - if only because he has documented
his own homosexual dalliances in his popular writings. But for PR purposes,
that is totally irrelevant, and Limonovite Nazis will be happy to help: Like
Gaidar, they are not on TV often enough. 
3. Blame the police for not dispelling the march/not preventing the
disruption
to the party congress. Most people think the cops are no better than the
Gestapo, anyway. Then get the police to crack down on Nazis, question RNE
leader Barkashov and catch the crazies who made a home video of themselves
making an anti-Semitic speech against the backdrop of a burning synagogue.
(They did not actually burn a synagogue, it was just a video trick, but for PR
purposes that's just as well). 
4. Immediately arrange for more people with cameras to come around. Start
making speeches about how bad Nazis are. Try to be the first one to do that.
After that, the speeches get repetitive and the people with the cameras get
bored. 
5. If you were not directly involved in the previous four steps for some
worthy reason, such as a shortage of Nazis in your town, take credit for that
too. 
Take your cue from Yaroslavl Governor Anatoly Lisitsyn, who declared in the
daily Kommersant a few days after the RNE march, "In Yaroslavl, such extremist
actions are practically ruled out. For eight years, we have been working
actively and we have learned to counteract extremism in its early stages." 
6. Keep the press interested. Never let on for a moment that the Nazis are
incapable of taking over your town and the rest of the country anytime they
want. Get the police to arrest a Nazi wacko a week. But be careful not to
exhaust your supply of Nazis. 
From the above, it is easy to conclude that there already are some people in
Moscow who know how to use the Nazis correctly. Luzhkov is definitely one, and
Gaidar is another. 
For example, if Luzhkov had just sent in the police before the RNE boys
had a
chance to start marching, and if the police had quietly arrested those
extremists, the mayor could hardly have advanced his presidential campaign by
being the first to denounce the rise of Nazism - no one would be frightened
enough to pay attention. The same goes for Gaidar's congress: If security
people had properly checked the IDs of those entering the meeting, the
congress would never have been on TV. 
From the perspective of someone who hates Hitler as much as Luzhkov does but
who is not running for president, Nazis should be in jail. There should be a
law that allows Nazis to be put in jail immediately after they are seen
wearing swastikas or giving the straight-arm salute. There is no such law
simply because everyone who passes laws in this country is either running for
president or a Nazi himself. And the laws that exist are not applied be cause
their quiet application has no PR value. 

******