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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

February 22, 1999    
This Date's Issues:  3065  3066  


Johnson's Russia List
#3065
23 February 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Adam Tanner, Legendary swindler inspires chaotic Russia
(Ostap Bender).

2. James Meek: Upper Volta again.
3. Reuters: Russia mid-term draft econ plan to be ready end Q1.
4. Reuters: Report raps U.S. program to help Russian scientists.
5. Jeffrey Barrie: XC Society in Moscow. (Message from Gorbachev).
6. John Lawrence: RE 3062-Franchetti/Children Left To Die.
7. The Moscow Tribune: John Helmer, THIEVES OF STATE.
8. Janine Wedel in Cambridge, Mass. today.
9. Reuters: Forgive US Our Soviet Debt-Gorbachev.
10. Boston Globe: David Filipov, Amid Russia's gray, a ray of optimism.
11. Moscow Times: Yulia Latynina, INSIDE RUSSIA: Mind the Flies In Your
Soup, Mr. Primakov.

12. RFE/RL: Robert Lyle, Russia: IMF Warns Against Government Control
Of Central Bank.

13. Itar-Tass: Democratic Russia Elects New Leader.
14. Heritage Foundation: Ariel Cohen, The Watershed in U.S.-Russia 
Relations: Beyond "Strategic" Partnership.

15. Itar-Tass: Primakov Vows to Make Russian Army "Undefeatable."]

*******

#1
FEATURE - Legendary swindler inspires chaotic Russia
By Adam Tanner

MOSCOW, Feb 22 (Reuters) - Seventy years after he first made his mark as a
fast-thinking swindler, Ostap Bender is alive and well, at the heart of a
long series of dubious deals and outright theft that have flourished in
post-Soviet Russia. 

When millions of Russians lost their money in pyramid schemes in the early
1990s, Ostap was there. When the government defaulted on its bonds last
year, Ostap laughed at how easily investors were fooled. When the West saw
much of its food aid stolen in 1992-93, Ostap marvelled at how simple it was. 

The exploits of the dashing but touchingly naive con-artist, who travelled
through far-flung Russian towns and villages artfully ripping off the
locals, made the 1927 novel ``The Twelve Chairs'' one of Russia's
best-loved books. 

Yet these days he has become more than just a character from fiction. 

To many Russians, the spirit of Ostap Bender is the driving force behind
the country's ``wild west'' capitalism. 

The book by satirists Ilya Ilf and Yevgeny Petrov, in which Ostap searches
for diamonds stashed inside one of a set of 12 missing chairs, serves as a
sort of guidebook to Russia today. 

``Ostap Bender is kind of a symbol of this anarchy and will to survive,''
Boris Fyodorov, a former deputy prime minister and chief tax collector,
told Reuters. 

Fyodorov estimated that all but one percent of Russians, following Ostap's
tradition, try to skirt the rules. 

THE GREAT SELL-OFF 

In the novel, Ostap hunts down the chairs one by one using a mixture of
charm and deceit. His ultimate goal is to get enough money to go to Brazil
-- although he never makes it that far. 

The book is set during the period of the New Economic Policy (NEP) in the
1920s, a brief and rambunctious experiment with capitalist policies that
followed the Bolshevik Revolution. 

``It's basically about an adventure in a free country, and that's why it
was so popular during the Soviet times,'' said Fyodorov, whose 1998 efforts
to boost tax collection fell victim to well-respected traditions of
deceiving the government. 

The post-Soviet privatisation of public assets provided similar
opportunities to follow Ostap's adage of ``respecting the criminal code''
while exploiting loopholes and human weaknesses for self-gain. 

``We can see this character especially in the period of turmoil and
upheaval when there are more opportunities to express yourself,'' said book
publisher Igor Zakharov. 

Grigory Yavlinsky, a candidate for president in the 2000 election and head
of the liberal Yabloko party, said the vast web of lingering Soviet ways
made Ostap-style cons easy. 

``The book of Ilf and Petrov is about the absurdity of the previous system,
and the previous system is still in place,'' he said in an interview.
``While the Soviet system is in place, Ostap Bender is still in place.'' 

The government's major effort to undo the Soviet system -- privatisation --
mobilised a new army of Ostaps as well-connected insiders snapped up state
assets at often ridiculously low prices. A new class of Russian
``oligarchs'' was born. 

Ordinary Russians, meanwhile, received privatisation vouchers which
privatisation mastermind Anatoly Chubais promised would be worth as much as
a car. Some swapped them for a bottle of vodka. Others put them in
big-talking investment funds which collapsed, leaving them without enough
to buy even tyres. 

The widespread corruption and shady deals that rose in the era of
privatisation have prompted some sociologists to describe Russia as a
kleptocracy, or ``government of thieves.'' 

THE BIG CON 

Ostap is not above using charitable fund-raising for his own gain, a type
of scheme that is practised far and wide today. 

In the novel, he gathers some well-off townspeople for a secret meeting of
the ``Union of the Sword and Plough.'' Using hints of an anti-government
conspiracy, he raises significant sums for homeless children. He promptly
pockets the cash. 

These days some charitable organisations for athletes and Afghan war
veterans have won similar reputations by using tax breaks on imported
cigarettes and liquor. 

The ``Union of the Sword and Plough'' episode also contains another
familiar theme. Ostap promises ``the West will help us.'' 

``This belief, as Ostap Bender said, that 'the West will help us' that
there will be Western investment and enrichment -- there won't be anything
of the kind,'' Deputy Atomic Energy Minister Bulat Nigmatulin told a recent
news conference. 

``Imagine that you had $1 million. Would you really bring them here with
the risk of losing them?'' 

Yet the West did invest, lend -- and has yet to recover -- tens of billions
of dollars in Russia in the 1990s. 

Yavlinsky credited Chubais, who in 1998 was Russia's chief loan negotiator,
with Ostapian talents in winning billions in International Monetary Fund
loans last summer. 

``Maybe Ostap Bender is a good example to explain the relations between
Chubais and the IMF,'' he said. 

Billions of dollars in loans had melted away by last August when the
government defaulted on its GKO treasury bills and devalued the rouble.
Much of the banking system became insolvent, parting millions of Russians
from their funds. 

``It was the government that was playing the game of Ostap Bender and not
the banks,'' said Vyacheslav Nikonov, head of the Politika Fund, a think
tank. ``The reaction was 'What could you expect from the government or the
banks?'.'' 

Much as the government with its high-yielding T-bills, Ostap also promises
easy wealth to the citizens of Noviye Vasyuki. Posing as a chess
grandmaster, he said he would organise an ``Inter-planetary Chess
Congress'' in their backwater town. 

When he is unmasked -- Ostap can barely play chess -- he ridicules the
locals for their naive trust; a humiliation 1998 depositors felt when their
banks froze their accounts. 

``Fools,'' Ostap told an angry crowd as he escaped. ``I don't think that a
chess grandmaster would visit such idiots as you.'' 

Showing that Ostap has penetrated the minds of the highest ranks in the
government, Prime Minister Yevgeny Primakov recalled the chess scene in
televised comments this month while calling for an orderly parliamentary
election later this year. 

``During the election campaign let's move the pieces on the chessboard. It
would be worse if you stand up and, like Ostap Bender perhaps, throw the
chessboard at the head of your opponent sitting opposite you,'' he said. 

OSTAP'S HONOUR 

Such brazenness, combined with a considerable capacity to charm, has made
Ostap a beloved figure, especially those who came of age during the Soviet
era. 

One fan is Kirsan Ilyumzhinov, governor of the tiny southern region of
Kalmykia and head of the International Chess Federation, who has set up an
entire region called ``City Chess'' with a complex for chess tournaments.
Ilyumzhinov proudly nicknamed it Noviye Vasyuki. Kalmykia's main city even
has an Ostap Bender Boulevard and a monument to the swindler. 

Actor Archil Gomiashvili, who played Ostap in a classic Soviet-era film of
``The 12 Chairs,'' said it is unfair to tar Ostap's name with the audacious
crimes of today's Russia. 

``If Ostap Bender saw what is happening in Russia, he would not go out on
the street, he would be so afraid,'' he said in an interview in his
``Golden Ostap'' restaurant in Moscow. ``Ostap Bender would never have
thought of such things. 

``He would not leave people without a crust of bread as the government has
today.'' 

*******

#2
Date: Mon, 22 Feb 1999 
From: "James Meek" <hamish@glasnet.ru> 
Subject: Upper Volta again

Intrigued by the notion that somewhere out there an exasperated student of
Upper Voltan economic decline was writing off the country as doomed to
become "Russia with bananas", I checked the stats on that small,
landlocked, West African country. It hasn't been called Upper Volta for
many years: it is now called Burkino Faso. Nor does it grow bananas. More
of a peanuts and cotton sort of place.

Unfortunately for Burkino Faso, comparisons with Russia don't look too good
for Ougoudougou - although it's warmer there, of course.

Infant mortality: BF 110 per thousand births, Russia 23 (Germany 5). Life
expectancy: BF 46, Russia 65 (Germany 77). Literacy: BF 19.2 per cent,
Russia 98 per cent (Germany 99 per cent). GDP per capita at purchasing
power parity: BF $950, Russia $4,700 (Germany $20,800). Rockets: BF none,
Russia many.

James Meek
The Guardian
Moscow 

******

#3
Russia mid-term draft econ plan to be ready end Q1

MOSCOW, Feb 22 (Reuters) - Russia's government will finalise a medium-term
draft economic programme by the end of the first quarter, Interfax news
agency quoted a senior government official as saying on Monday. 

First Deputy Prime Minister Yuri Maslyukov said the plan would cover state
strategy in tax, budget, financial, monetary and industrial policies until
2004 or 2005, Interfax said. 

The programme is one of the documents which the International Monetary Fund
(IMF) would like to see as it considers a possible future credit package
for Russia. 

Maslyukov said Russia and the IMF might complete the main stage of their
talks in March, Interfax said. However, Maslyukov said the IMF was worried
that revenues outlined in the 1999 budget would not allow Russia to meet
all spending targets. 

He also described as groundless IMF concerns that a new spiral of the
economic crisis would spur inflation and further rouble depreciation. 

"If we solve the problem of foreign debt restructuring, we do not see any
problem in carrying out the 1999 budget or any reasons for forecasting any
sort of economic crash," Maslyukov was quoted as saying. 

An agreement between Russia and the IMF will pave the way for the
government to start talks with creditors to ease its foreign debt burden,
now around $140 billion. 

Russia is scheduled to pay $17.5 billion this year, but Maslyukov said the
government hoped to pay only $8 billion. 

Interfax quoted Maslyukov as saying talks with Western creditors would
start in April and Russia was counting on writing off and restructuring a
total of $9.5 billion. 

He said Russia raised the issue at a weekend meeting of senior finance
officials from the Group of Seven leading industrialised nations. 

He said G7 finance ministers and central bank heads planned to consider it,
Interfax said. 

*******

#4
Report raps U.S. program to help Russian scientists

WASHINGTON, Feb 22 (Reuters) - The Clinton administration's effort to help
Russia adapt weapons technologies to nonmilitary uses may be supporting
scientists working on weapons of mass destruction, Congress' auditors said
in a report on Monday. 

Congress' General Accounting Office found other problems in two U.S.
programmes to stem nuclear, biological and chemical weapons from the former
Soviet Union by supporting alternative work for its laboratories and
scientists. 

Instead of reaching Russian institutions and scientists, about $40 million
has gone to U.S. Energy Department laboratories to administer the
programme, the GAO report said. 
That is most of the money spent on the programme so far. 

Scientific institutions in Russia and other countries of the former Soviet
Union have received about $24 million, the report said. 

The GAO report said it was uncertain how much of the funds actually went to
scientists to encourage them to work on peaceful civilian projects instead
of potentially more lucrative weapons projects. 

The effort to stem weapons production may cost more than $600 million over
the next five years, and ``likely will be a subsidy programme for Russia
for many years,'' it said. 

While the report said the programme appeared successful in employing
weapons scientists on civilian projects, it said it had not met broader
goals of commercializing those projects to replace weapons production. 

The report also said programme officials do not always know whether key
scientists and institutions are getting funds. But contrary to the
program's goals, it said some scientists currently working on Russia's
weapons of mass destruction programme are benefiting from the funds. 

The GAO also said some defence-related information may have been relayed
unintentionally through some projects. 

``It is absolutely unacceptable for the Clinton administration to donate
the U.S. taxpayer's money to Russian scientists who spend their time
working on poison gas, biological agents and new nuclear weapons designs
for the Russian government. That must stop,'' Senate Foreign Relations
Committee Chairman Jesse Helms said in a statement. 

The North Carolina Republican said the administration should adopt reforms
urged by the GAO, including reviewing the role of the national laboratories
in administering the programme, requiring more data on the scientists and
institutions that get funds and seeing that scientists working on mass
destruction weapons programmes are not eligible. 

********

#5
Date: Mon, 22 Feb 1999 
From: "Jeffrey Barrie" <jbarrie@matrix.com> 
Subject: XC Society

On Saturday, February 20th the inaugural meeting of the XC Society was held
in Moscow for Western business men and women who have worked here
continuously for at least the past nine (XC) years. Mikhail Gorbachev was
invited, but attendance at the premiere of Mikhalkov's new film took
precedence. He sent the following letter, which I share with you:

To the Inaugural meeting of the XC Society

I am grateful for the invitation to be present at the meeting of people who
may rightly be called veterans of foreign business in Russia. You came to
our country at a time when it was going through decisive changes in
politics, economics, culture, and perhaps most importantly and painfully, in
people's minds. You became witnesses of and participants in those changes.

When we launched the process that became known as perestroika, we wanted to
break with all that for decades had separated our country from the
international economy and the community of democratic nations while at the
same time putting to use the best that we inherited, above all the nation's
scientific, technological, educational and cultural potential. We saw our
country's future as a strong partner for other nations, a country playing by
the rules of modern politics and market economics and capable of
participating effectively and independently in shaping a new world order.
The fact that you came to work here during those year, as I understand,
indicates that you agreed with that concept and that your goal was not just
to make money but also to take part in a process necessary and important not
only for Russia and other republics but, without exaggeration, to the whole
world.

Much in these past years did not go along those lines. At some point, the
initiative was captured by those who wanted to score easy success and get
rich quick, to people who preferred shock therapy and treated the people's
traditions and culture with contempt. They accused me of lacking resolve
and of being ignorant of market economics. Unfortunately this approach
found support among many people in the West. Russia was inundated by those
who wanted to "make a fast buck" while many serious cooperation programs
discussed during the years of perestroika were put aside.

Such mistakes cost dearly and as we have seen since August 176, everyone has
to pay for them. It is therefore particularly commendable that you remain
committed to working in Russia. This is a difficult time for us, and it is
unlikely that things will get easier very soon. There are no simple recipes
for improvement but I have advice for you - the same that I keep repeating
both to the Russians and to our Western partners. Support the government of
Yevgeni Primakov. It is capable of stabilizing the situation and resuming
movement toward building a market economy responsive to the needs of the
people. This would create necessary conditions for the success of your
business.

I thank you for the offer of honorary chairmanship of your society and hope
that we shall have a chance to meet soon.

Mikhail Gorbachev

*******

#6
From: "Lawrence, John J" <LawrenceJJ@navair.navy.mil>
Subject: RE: 3062-Franchetti/Children Left To Die
Date: Mon, 22 Feb 1999 

Why can this government not negotiate an agreement to bring these children
to this country? There are many families here who would enthusiastically
adopt children born with handicaps. As the article notes, some things are
correctable. In any case, the 40 to 50 thousand dollar cost of adopting a
child from other countries, such as Russia, is immoral. The money paid for
"fees" could best be spent on the children by the adoptive family. 

*******

#7
Date: Sat, 20 Feb 1999
From: helmer@glas.apc.org (John Helmer)

>From The Moscow Tribune, February 23, 
THIEVES OF STATE 
John Helmer

Suppose, just suppose, that the real reason for running $50 billion
in Russia's Central Bank cash reserves through the accounts of a shelf 
company registered in the Channel Islands, was not to hide the money from 
foreigners intent on seizing state assets, but rather to hide from 
Russians trying to steal them.

And suppose, just suppose, that those Russians were high officials of the 
state.

How awkward indeed it would be for Victor Gerashchenko, current and
former chairman of the Central Bank, to write a letter to Michel
Camdessus, managing director of the International Monetary Fund (IMF)
to explain what he'd been doing in the Channel Islands.

'You see, dear Michel' -- the pen would falter, as Gerashchenko commenced to
write -- 'since 1992 the Russian state has had no security to speak of. You 
know yourself just how well informed you and your representatives were
kept in those amiable chats you had with Yegor Gaidar, Anatoly Chubais,
Sergei Dubinin, Alexander Shokhin, Boris Fyodorov, and Sergei Kirienko. 
Remember the strolls in the woods, the kaffeeklatches, and those after-
hours dinners... Remember how much George Soros and Jeffrey Sachs were able 
to relate from their chats with the same people, how well they'd read our
files.'

'You see, dear Michel' -- Gerashchenko would be mustering up his courage
now -- 'there was nothing you and your Washington friends couldn't 
discover, simply by asking. And if that didn't work, a few well-placed,
well-stuffed envelopes would do the trick, opening any file, any secret,
any bank account anywhere on earth.'

'And, of course, dear Michel' -- Gerashchenko now had to be careful --
'a country so vulnerable to being robbed of its state secrets is a country
that is already being robbed of its state assets.'

'Forgive me, dear Michel' -- Gerashchenko wrote in case his own secret
paragraph was leaked -- 'for having to point out that the ease with which you
penetrated our government and bank reflected the ease with which those
entrusted with the state's assets stole them. To reestablish law and
order in our state is an uphill task, you've said yourself many times.
But to do that, we were obliged to create mechanisms so secret, and
also so obscure, none of the thieves of state would be able to uncover
them. Had they been revealed to you, I confess that with the secret would
also have been lost the money itself.'

What an embarrassment for Camdessus to receive such a letter, and with
what awkwardness he would have to pick up his pen to reply.

'Dear Victor' -- but there Camdessus would have to stop. He must consult
the U.S. Government on what to say next. Gerashchenko
insinuated as much. More, Gerashchenko was reminding Camdessus and
the men at the US Treasury of the most awkward secret of all. He knew that 
they knew just how much had been stolen by officials whom the US -- even 
now -- prefers as Russia's rulers to Prime Minister Yevgeny Primakov.

So what can be said by the IMF and the US Treasury in reply? Nothing.

The gauntlet that was thrown down by Procurator-General Yury Skuratov, when
he exposed the use of a Channel Islands front by the Central Bank, 
was a challenge to foreigners, like Camdessus and the Americans, to
admit that of all the money laundering by Russians officials they knew
about, whose ill-gotten gains they could have traced and seized, there 
hadn't been a single penny they had either exposed, or threatened with legal
action.

The explanation for that is so embarrassing to Washington, and so damaging
to the prospects of Gaidar and Chubais ever returning to power, Camdessus
and the Americans must be deeply troubled about what next Prime Minister
Primakov might order exposed. Right now, Washington (the collective noun
that embraces Camdessus) cannot risk complaining too loudly at the Channel 
Islands deception, for fear the file on that one will be followed into
the open with other files. They are the ones about billions of dollars that 
didn't return with interest paid to the last kopeck. 

Try to suppose, just suppose, what those files disclose, and about whom.

'Dear Michel', the head of the Russian government might soon pick up his pen 
to write, heading a letter to send Camdessus scurrying over the US Treasury
swifter than he's ever run before.

*******

#8
Janine Wedel will be be in Cambridge, Massachusetts on Tuesday
February 23 discussing her new book "Collision and Collusion: 
The Strange Case of Western Aid to Eastern Europe 1989-1998"
at the Harvard Coop, 7pm

*******

#9
Forgive US Our Soviet Debt-Gorbachev

MOSCOW (Reuters) - The West should forgive Russia part of its Soviet-era
debt to lift the country out of economic doldrums, Mikhail Gorbachev, who
took out billions of dollars in loans as Soviet president, said in an
interview Monday. 

"We must free Russia from what it cannot do. It's clear to everybody that
it cannot pay its debts," Gorbachev told Reuters. "The whole budget is $20
billion and the debt is $17 billion." 

"I would write off part of the Soviet-era debt and put off the rest." 

Russia owes Western governments and banks $140 billion and $17 billion in
interest and principal is due this year. Moscow inherited $90 billion of
the debt from the Soviet era -- tens of billions of which was taken on
under Gorbachev. 

The West would gain when Russian markets expanded on the back of a lighter
Russian debt burden, said Gorbachev, who was Soviet president from 1985-91. 

"We would all win. Russia is a colossal, huge market," he said. "Does the
West really want Russia to get on its feet, so that Russia would be a
democratic country? 

"If our Western partners delay and avoid taking decisions under various
pretences, pretend that they are concerned about Russia and then do
nothing, a second scenario will happen," Gorbachev said, hinting at a grim
future he did not detail. 

Famous for his policies of perestroika and ending the Cold War, Gorbachev
is now held in low regard by many Russians because he permitted the
collapse of the Soviet Union. He won just 0.5 percent of the vote during a
1996 run for president. 

Yet Russian politics over the past six months have moved closer to
Gorbachev with the rise of Prime Minister Yevgeny Primakov, once a junior
member of the Communist Party Politburo under Gorbachev and a member of his
presidential council. 

Today Gorbachev is promoting the idea of a President Primakov after 2000
elections, allied with Moscow Mayor Yuri Luzhkov as Prime Minister. 

"Primakov is a serious, responsible person. We've got to do business with
him," said Gorbachev, who at age 67 looks a decade younger and retains the
considerable charm that won over the West in the 1980s. 

"When I met Margaret Thatcher she said you can do business with Gorbachev,"
he continued, referring to a well-known 1984 remark by the former British
prime minister. 

"Now with her words I want to tell everybody, in Great Britain, and Bonn
and especially in Washington: you can do business with (Primakov), and you
need to do business with him." 

The former Soviet leader said Western suspicion toward Primakov stemmed
from his efforts in the days before the 1991 Persian Gulf War to reach a
deal with Iraqi leader Saddam Hussein. 

"What, did Primakov follow his own policies? No, he was following my orders
to find a peaceful solution to the problem," Gorbachev said at his think
tank in Moscow. 

Primakov came to power last September after the devaluation of the ruble
and near collapse of the banking system. 

The banking woes hit Gorbachev personally when his Russian bank, Inkombank,
had its license withdrawn. "For my memoirs, I received a million-dollar
advance," he said. "I paid 30 percent in taxes and put a third in the
(Gorbachev) Fund to support it." 

He kept $400,000 in the bank for himself. That was a huge sum in a country
where many do not earn even $1,000 year, and the funds grew over several
years with interest -- until the August crisis hit and Inkombank teetered. 

"We are now searching for the money," he said with a broad laugh,
acknowledging that prospects are not good. 

Asked if he faced poverty, Gorbachev said: "Of course not. My books still
sell and I earn honorariums. There is something to live on." 

******

#10
Boston Globe
Feb 22, 1999
[for personal use only]
FOREIGN JOURNAL
Amid Russia's gray, a ray of optimism 
By David Filipov

MOSCOW - The aroma of buttery blini filled the air. A band of strapping
lads in traditional garb displayed their prowess at Russian-style
wrestling. Gaily dressed maidens belted out merry folk melodies.

''Eh, winter go away, take away our sadness,'' they sang as they set fire
to a hay-stuffed scarecrow, a symbol of winter's imminent end.

Czar Yuri beheld the scene before him, and it was good.

This was ''Forgiveness Sunday,'' the last day of Maslenitsa, or ''Butter
Week,'' a traditional Russian holiday to mark winter's passing that dates
back to pagan times. Like a Slavic Mardi Gras, modern Maslenitsa allows
Orthodox Christians to stock up on calories before Lent, which starts here
on Wednesday.

This was also a chance for Mayor Yuri Luzhkov, the omnipresent, but usually
unapproachable, scion of Moscow, to hang out with some foreign reporters.

It was not a bad idea. Luzhkov's transformation of post-Communist Moscow
into Russia's island of prosperity has given him a fair chance to become
the country's next president. But the Western press, this paper included,
frequently chides Luzhkov for Moscow's shortcomings: apparent crony
capitalism, rights violations against minorities, a sense that the ''Moscow
Miracle'' is actually a Potemkin village that could soon crumble like the
rest of the Russian economy did last August.

But this was Forgiveness Sunday, and for now, all was forgiven. This was a
chance to see Luzhkov's human side.

''OK, Yuri Mikhailovich, can you fight like that?'' one sleuth inquired as
the two watched the brawling youths.

''I've boxed a few rounds in my day,'' Luzhkov remarked. 

Well on the roly-poly side of burly, the mayor is a robust 61. He
demonstrated his skill as a horseman while the rest of us munched on blini.
He swims in ice water each winter. He is a teetotaler, which meant that
fruit juice replaced the vodka Russians usually swill to wash down all
those blini.

For a country badly in need of dietary moderation, Russia could do worse
than Luzhkov's team. His foreign affairs adviser, Sergei Yastrzhembsky, is
a fitness nut whose physique recalls another Yaz in his prime. Luzhkov's
spokesman, Sergei Tsoi, has slimmed down noticeably, perhaps spurred on by
his wife Anita, who lost 80 pounds so she could be a pop singer.

For a country whose leaders tend to be distant, Luzhkov has a certain
populist touch. He took obvious pleasure in leading Maslenitsa songs and
dances, and refereeing a tug-of-war between the reporters and the strapping
lads. He heartily joined in the eat-bliny-with-no-hands contest, then
scrubbed a stain off a reporter's coat with salt (''Russian dry-cleaning,''
Luzhkov deadpanned.)

For a country seeking direction after seven years of post-Communist blight,
Luzhkov offers a prescription of Russian pride. His nationalism has a
chauvinistic dark side that worries Moscow's former Soviet dominions,
especially when Luzhkov claims parts of Ukraine for Russia or accuses
Latvia of ''genocide'' against Russian-speakers. 

But Russian voters may be attracted by Luzhkov's upbeat style. Other
leading presidential candidates - Communist leader Gennady Zyuganov, former
paratrooper Alexander Lebed, economist Grigory Yavlinsky - always seem to
be grumbling about how bad things are. 

A patch of blue sky peeped out of Moscow's near-perpetual gray. Those
tireless lads - God bless 'em - were now playing king-of-the-hill.

One more dance, one more sleigh ride, and then it was back to the motorcade
and off to another event for Luzhkov. For the reporters, back to work.
Maybe some would later write scathing profiles of Luzhkov's favorite
company, AFK Sistema, a shadowy oligarchy that reputedly controls city
finances. 

But not on this day. For this was Forgiveness Sunday. 

David Filipov is chief of the Globe's Moscow bureau.

******

#11
Moscow Times
February 23, 1999 
INSIDE RUSSIA: Mind the Flies In Your Soup, Mr. Primakov 
By Yulia Latynina 

The outline of the economic system the new government is trying to build in
Russia is emerging ever more clearly. It's an economy regulated by the
state but free of corruption. In the State Duma recently, Prime Minister
Yevgeny Primakov described a real market as one "free from corruption and
crime." Presumably he had his heroic struggle against tycoon Boris
Berezovsky in mind. 

But Berezovsky is not the only economic virus plaguing Russia. Why, for
example, is Primakov not taking a stand against the government decree
transferring the high-liquidity Indian debt without a tender to the
financing of the agricultural sector - and therefore to the disposal of
Gennady Kulik, first deputy prime minister in charge of agriculture? 

Here's another odd story: After First Deputy Prime Minister Yury
Maslyukov's intervention, the $500 million contract for the supply of the
Tor-M1 anti-aircraft rocket systems to Greece fell not to Rosvooruzheniye,
which spent about $3 million on the presentation of the systems, but to the
Antey concern. Shouldn't Primakov be called upon to counter the evil rumors
emanating from the democratic camp, which claim that Maslyukov's profit
from this deal was in the region of Rosvooruzheniye's outlay mentioned above? 

And, finally, why does the prime minister not raise a protest against a
budget that includes, in the opinion of competent economists, around 30
articles that give scope for theft, not least the unprecedented article No.
106 on the possibility of apportioning federal budget funds to commercial
organizations? 

Primakov's definition of a "real market" presents other problems too. In
America, as we know, there's also crime - organized, petty and juvenile.
But a market, so the rumor goes, also exists and the reason for this is
simple. In America, the mafia plays risky games and controls prostitutes,
but the list of services it provides does not include searching for
unscrupulous debtors or protection from the tax police. Individual,
irresponsible tax dodgers do exist in America, but people do not have to
resort to tax evasion to survive. In America, people trade in cocaine, not
government posts. The level of the regulation of the economy provides the
reason for this considerable difference in crime levels. 

"State regulation" and "corruption" are two sides of the same coin.
Corruption festers in a regulated economy as inevitably as maggots in meat
left out in the sun. 

To keep meat maggot-free it's enough to stick it in the fridge. That's what
they do in America. In Russia they appoint a platoon of soldiers to look
after the meat with orders to open fire with their Kalashnikovs at any
flies that come near it. They're expensive, these soldiers, and there are
plenty of flies. Some flies strike up high-level acquaintances and even get
appointed as deputies of the lord of the meat. Or as head of the guards.
Complicated issues arise: Which flies can be killed and which still yield a
definite tactical gain? Sometimes a fly that has already deposited its eggs
is caught amid great celebrations, and the action passed off as a stage in
the heroic struggle against meat-hygiene problems. 

But the real issue at stake is something different. A regulated economy is
not an economy in which something is regulated. It's an economy in which
everything is sold. "Regulating the economy" with one hand and "struggling
with corruption" with the other is like curing burns with boiling water. 

*******

#12
Russia: IMF Warns Against Government Control Of Central Bank 
By Robert Lyle

Washington, 22 February 1999 (RFE/RL) -- The full impact of the
International Monetary Fund's concerns about the status of the Russian
Central Bank are expected to be felt this week in Moscow as the parliament
mulls the IMF's warnings about proposals to bring the bank more under
control of the government.

The Deputy Director of the IMF's department dealing with Russia, Jorge
Marquez-Ruarte, wrote a letter to Russian Central Bank Chairman Viktor
Gerashchenko on February 12, expressing concerns about parliamentary
proposals to "seriously compromise the independence" of the Central Bank.

RFE/RL obtained a copy of the letter, which also began circulating around
the parliament last Friday.

In the letter, Marquez-Ruarte warned that proposed amendments to the law on
the central bank could both rekindle inflation and further undermine the
stability of the ruble.

The Central Bank, said the IMF official, must be free at its own initiative
to engage in all market operations, including buying and selling assets. It
must not, he said, be constrained by other government departments having
"right of economic administration" over state capital (money) and property.

Marquez-Ruarte went through a long list of proposed amendment's to Russia's
central bank law, pointing out for example that a proposed statement of
policy objectives be given the force of law would be "counter-productive."
In carrying out its responsibilities, he said, a central bank has to be
able to react to unforeseen market developments and judiciously use its
monetary policy instruments to handle the situation.

The IMF official said the fund was "particularly disturbed" by the
implications of a proposed amendment which would restrict the bank's
ability to set interest rates. "Any guidelines prepared at the outset of
the year cannot fully predict the evolution of market interest rates,"
wrote Marquez-Ruarte, and it would be "impossible" for a central bank to
stick to any pre-specified levels and still conduct an effective monetary
policy.

Limits on open market operations (buying and selling currencies), he added,
would be "very dangerous" because they would leave the bank unable to cope
with unforeseen threats to overall economic stability.

The IMF letter went on to warn against the parliament mandating inter-bank
borrowing rates, or legislating incomes, expenditures and profits of the
bank. "A central bank needs to stand ready to incur losses, if necessary,
in fulfilling policy objectives," said the IMF.

However, the letter said, the government must ensure that the capital of
the central bank is protected and that if the bank's expenditures exceed
its income, the government should stand ready to provide the necessary
capital.

Another proposed amendment which the IMF found disturbing would give the
central bank control and the auditing function over the government's
budget. That function, said the IMF, belongs only with the government's
treasury.

Marquez-Ruarte did not address the controversy about the bank's secret use
of a self-created private offshore firm to handle large amounts of the
country's foreign exchange reserves in the mid-1990s. He did say the IMF
comes down very much on the side of "increasing transparency and
accountability of the central bank without placing limits on its
independence in exercising monetary policy."

He told Gerashchenko that continued independence of the central bank is a
"key element of an economic program that could be supported" by the IMF.
Russian officials have not yet reacted. 

*******

#13
Democratic Russia Elects New Leader.

MOSCOW, February 22 (Itar-Tass) - The Democratic Russia party has elected
Yuly Rybakov as its leader. 

Rybakov, a human rights campaigner, member of the Duma lower house of
parliament and former member of the board of Russia's Democratic Choice,
was elected by the party's conferennce which was held in Moscow on February
21-22, to take the leadership over from Galina Starovoitova, a prominent
democrat Duma member who was assassinated in November. 

The conference also decided that Democratic Russia joins the coalition
Right Cause. 

Rybakov told reporters on Monday that Democratic Russia issued a policy
statement which announced its "opposition to the government of Communist
trust headed by (Prime Minister Yevgeny) Primakov". 

The party's statement said the "party of power, obeying to pressure of
national-Communists and its own immediate interests is leading the country
to complete improverishment, collapse, into another historic blind alley". 

The conference of Democratic Russia posthumously elected Starovoitova as
its honorary chairman and founded a Starovoitova prize for contributions to
the human rights cause, and decided to create a Starovoitova museum in
Saint Petersburg. 

Rybakov said the key taks of the Right Cause is to forge a coalition and a
large pro-democracy faction in the Duma. 

Andrei Frolov, a member of the Democratic Russia board told reporters that
Petersburg's former mayor Anatoly Sobchak and former presidential advisor
Sergei Stankevich were made party members in January. They sent to the
conference their greetings and their programmes which are 90 per cent in
the vein of the policies approved by conference delegates. 

Democratic Russia is going to place Sobchak and Stankevich on the party's
public board and, after they return to Russia, to assign them to more
activism. 

*******

#14
Date: Mon, 22 Feb 1999 
From: "Cohen, Ariel" <ariel.cohen@heritage.org> 
Subject: Watershed in US-Russian relations

The full text of the Heritage Foundation Backgrounder #1252 The Watershed in
U.S.-Russia Relations: Beyond "Strategic" Partnership is available on The
Heritage Foundation website: www.heritage.org 

The Watershed in U.S.-Russia Relations: Beyond "Strategic" Partnership
Ariel Cohen, Ph.D.
Executive Summary

The ascendancy of Prime Minister Evgeny Primakov, the former Foreign
Minister and once head of the Russian Foreign Intelligence Service (SVR), in
Moscow should alarm Washington. Because of President Boris Yeltsin's ill
health, Primakov is acting as the de facto president, and he is positioned
to become a serious contender in the next presidential elections. His
current policies, which are supported by a communist-nationalist majority in
the Russian legislature, are being implemented by a cabinet that includes,
as key economic policymakers, leaders of the communist party and former
high-ranking Soviet officials. Under Primakov, Moscow is reverting to a
zero-sum approach toward Washington that is more adversarial, and
reminiscent of Russia's czarist and Soviet roots. And yet Russia continues
to demand U.S. support for economic assistance from the West. 
The Clinton Administration, which until recently considered Russia policy
the crown jewel of its diplomacy, personalized its support of Russian
reforms by backing President Boris Yeltsin. Consequently, it overlooked
serious flaws in Yeltsin's policies. Important economic and political
reforms that would promote the transition to democracy and a free-market
economy were either not attempted or badly bungled. Corruption and
mismanagement in the government's attempts to privatize the state
enterprises were ignored. President Clinton supported Yeltsin even when the
war on Chechnya led to the deaths of 90,000 Russians, and when the
government failed to pay millions of Russians their salaries and pensions
for months, driving many into poverty. Now, Primakov's efforts to establish
a "strategic triangle" with China and Iran to counterbalance America's
superpower status, as well as his opposition to U.S. efforts to rein in
rogue regimes in Iraq and Serbia, are bringing President Clinton's policy
weaknesses to a head.
Russia is more economically desperate, politically unpredictable, and a
greater contributor to the proliferation of weapons of mass destruction than
at any time since the collapse of the Berlin Wall in 1989. It has
transformed its post-communist policies from those of an aspiring ally of
the West to those of an aspiring rival. Neither friend nor foe, Russia today
often challenges U.S. leadership and policy, setting itself up as a
potential and sometimes real counterbalance to American influence. 
Russia is providing China with pivotal assistance to modernize its strategic
weapons systems; it is selling ballistic missile and nuclear technology to
Iran; it defends Saddam Hussein in the U.N. Security Council, and is
supporting Slobodan Milosevic in the Kosovo issue. The Duma persists in
rejecting the Strategic Arms Reduction Treaty II (START II) on nuclear
weapons. And the Russian government, with support from the Clinton
Administration, is clinging to the terms of the 1972 Anti-Ballistic Missile
(ABM) Treaty between the former Soviet Union and the United States. The
threat from Primakov's policies became clearest last October, when Russia
conducted its first massive nuclear war games since the end of the Cold War.
In sum, Russia's actions today are more anti-American and anti-status quo
than at any time since the Cold War ended. As U.S. House of Representatives
International Relations Committee Chairman Benjamin Gilman (R-NY) observed
in September,
"I believe our government has not only been lied to by high
level Russian officials, but has ignored important signals over the last few
years that all is not well, both in Russia and in our relationship with its
government . . . The success story of our foreign policy . . . [as] was
portrayed by our administration just two years ago has now changed into the
dismal failure of our foreign policy that appears to be today . . . Our
policy toward Russia appears near collapse." 
A watershed point in U.S.-Russia relations has been reached: The idealistic
hope for a democratic Russia that has driven Administration policies must be
reconsidered, and a new approach based on realistic assessment of U.S.
interests must be adopted. If the Administration does not address the
threats that Russia's activities pose to U.S. and global security, then
America's relations with Russia will deteriorate. Yet, containing or
isolating Russia is not the solution. Despite Primakov's hostile policies,
the Russian people are not America's enemy.
The Administration must design a more effective policy to keep Russia
engaged, to demonstrate to its people that America cares about their future,
and to promote reforms that allow Russia to integrate into the international
community. At the same time, U.S. assistance and cooperation should be
conditioned on Russia's willingness to cooperate with America. The United
States should link U.S. support on issues, such as the rescheduling of
Russia's massive foreign debt, to Russia's actions on issues affecting U.S.
security, values, and interests. Specifically, the United States should:
* Recognize that Russia has abandoned its policy of strategic
cooperation with the U.S., and use all available leverage, including the
denial of international economic assistance, to encourage positive changes
in Russian foreign and domestic policy. 
* Establish conditionality between debt rescheduling and progress in
Russia's economic reforms and Moscow's international activities. Russia must
demonstrate that it can behave responsibly in the economic and security
areas before the United States and the international community agree to
reschedule its debt.
* Focus assistance on technical advice and support if Russia proves to
be cooperative. To fully integrate into the global community, Russians need
market-oriented, analytical, business, and legal skills. Businesses,
universities, and non-profit organizations should be encouraged to offer
academic and professional training in Russia. Russia also needs help in
building institutions of democracy and civil society.
* Conduct a bottom-up re-evaluation of U.S.-Russia policy through a
congressionally appointed blue ribbon panel, which includes former U.S.
policymakers who have not been involved in devising and conducting U.S.
policy toward Russia in the last six years. 
While Russian's integration into the international community should remain
an important goal of U.S.-Russia relations, Russia must be encouraged to
make the necessary changes to avoid its further decline.
Ariel Cohen, Ph.D., is the Senior Policy Analyst in Russian and Eurasian
Studies at the Kathryn and Shelby Cullom Davis Center for International
Studies in The Heritage Foundation.

******

#15
Primakov Vows to Make Russian Army "Undefeatable".

MOSCOW, February 22 (Itar-Tass) - Prime Minister Yevgeny Primakov said his
government will do its best to support the armed forces. 

Speaking at a solemn meeting at the Kremlin Palace devoted to Fatherland
Defenders' Day in Moscow on Monday, Primakov said that "we will take all
measures to make sure that the Russian armed forces are as undefeatable as
they always been." 

The prime minister noted that "this is a holiday for those who fought in
the Red Army and for those who served in the Soviet Army and for those who
are serving now." 

"This is holiday for those people who have served not some person or
regime, but their homeland," he added. 

Primakov stressed that "we should do everything we can, primarily the
government of Russia, to ensure that the armed forces are the most
authoritative part of our society." 

"We have lived through the time when the army was respected and loved by
everybody and we must make sure that it stays this way. And it will," he
said. 

*******

 

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