This Date's Issues: 3070 •
Johnson's Russia List
26 February 1999
[Note from David Johnson:
"America's Impact on Russia" will be broadcast this
Sunday February 27 in the Washington area on Channel 32
WHUT at 10:30 am on CDI's America's Defense Monitor
television series. VHS video tapes may be purchased from the
Center for Defense Information for $19. Contact me or
call CDI at 202-332-0600.
1. AP: Yelstin Says He'll Serve Until 2000.
2. Reuters: Maslyukov Eyes IMF Deal in March.
3. The Economist letter: GRZEGORZ KOLODKO, Don't Abandon Russia.
4. New York Times editorial: Unfinished Cold-War Business.
5. Jeffrey Surovell: upper volta controversy.
6. Yuri Luryi: Re 3069-Plato amicus est, sed veritas magis.
7. Interfax: Poll Shows 90% of Russians Disapprove of Yeltsin.
8. Reuters: Adam Tanner, Gorbachev still battles over image at home.
9. Moscow Times: Igor Semenenko, Top Tax Official Defends Legislation,
10. Interfax: Nemtsov Notes US Pessimism About Russia's Future.
11. AFP: Yavlinsky to Seek Electoral Pact with Moscow's
12. Itar-TAss: Minister: No Grounds To Ban Russian Communist Party.
13. Argumenty i Fakty: Prime Minister May Go Soon.
14. Tom Adshead: Hough's comment on Bivens/3069.
15. Kommersant Daily: The "Claws" Dig into Bykov (as well as Luzhkov
and Lebed'). (Re Internet site).
16. Mark Jones Re 3069- Hough.
17. Stetson Sanders: Eurasia Foundation, Saratov.
18. New York Times: Louise Shelley, Following the Trail of Rubles.]
Yelstin Says He'll Serve Until 2000
February 25, 1999
MOSCOW (AP) -- President Boris Yeltsin said Thursday that both he and Prime
Minister Yevgeny Primakov were firmly committed to remaining in their posts
until the presidential elections scheduled for summer 2000.
Yeltsin also denied rumors that Primakov intended to compete in the
presidential poll, the Interfax news agency reported.
Primakov said he was ``sick of the speculation'' to this effect in the
media, Interfax said.
``Two firm positions result,'' Yeltsin was quoted as saying. ``My position
is that I will work until the 2000 elections. The position of the
government chief is that he will work as prime minister until the elections
for a new president.''
Yeltsin has been sidelined by a steady string of illnesses, and his
opponents and even former allies have questioned his ability to continue in
However, following a two-week hospitalization with a bleeding ulcer last
month and convalescence at a sanitarium and at home, Yeltsin has been
increasingly active, making frequent forays to the Kremlin to meet with
aides and sign documents.
Maslyukov Eyes IMF Deal in March
MOSCOW, Feb. 26, 1999 -- (Reuters) Russian First Deputy Finance Minister
Mikhail Kasyanov said in an interview published on Friday that he hoped a
deal with the International Monetary Fund (IMF) could be reached in March.
Kasyanov told the business daily Kommersant debt restructuring talks with
other creditors would start after the IMF deal.
"I hope that in March such an agreement will be reached and in April-May we
will hold talks with the Paris Club," he said.
Russia is due to pay $17.5 billion in foreign debt this year, but the 1999
budget allows for payment of only $9.5 billion.
The government wants to restructure or write off debts inherited from the
Soviet Union after its collapse in 1991.
Kasyanov said creditors had not been consulted in advance about the
decision to restructure the former Soviet debt.
"The fact is that the financial situation in Russia was so dramatic that we
could not do otherwise. I think the creditors will understand us," he added.
Kasyanov said the Finance Ministry was now preparing for investors to
return to Russia.
"We want to show all investors, both Russian and foreign, that everything
here is clear and understandable," he added.
He gave no details of what new conditions for investors might be created.
On Thursday, the government approved a range of measures needed to boost
investment, including the simplification and improvement of laws governing
investment and investment conditions in line with international standards.
February 27, 1999
Don’t abandon Russia
SIR—Your suggestion (“Russia, financial outcast”, February 6th) that
Russia should be allowed to default and collapse is entirely wrong, as was
your earlier support of an IMF-led bailout. It was obvious that the money
provided would soon be wasted through crony capitalism and economic
mismanagement. It should now be clear that a comprehensive international
effort is necessary to assist Russia in overcoming the most severe crisis
in the post-communist world.
Abandoning the Primakov government will lead to chaos—not only in Russia
but for the rest of the world. As the current mess is as much due to
ill-advised foreign advice over the last decade as to post-Soviet crony
capitalism, responsibility must be shared by the international community
and the G7. However, any assistance must be on the basis of tough
conditionality, especially with regard to foreign-debt reduction,
institutional reconstruction, and fighting organised crime and corruption.
As former deputy premier of Poland and finance minister in 1994-97, I can
assure you that we were able to succeed. This was not only due to our sound
policies and commitment to liberalisation, privatisation and structural
reforms, but also because Poland was not abandoned by the world when its
support was most needed.
Visiting scholar, IMF
New York Times
February 26, 1999
[for personal use only]
Unfinished Cold-War Business
History will judge the Clinton Administration's foreign policy record
partly by its success in helping Russia reduce the nuclear remnants of the
cold war. Nothing would do more to protect American security in the decades
ahead than insuring that Russia's immense stockpile of nuclear weapons and
materials is diminished and adequately controlled. The modest amount of
money needed to achieve these goals now could save Washington many billions
of dollars in the future to deal with the Russian nuclear threat if it is
Moscow still has 6,000 nuclear warheads poised for long-distance delivery.
Weapons-grade plutonium from dismantled warheads is stored in poorly
secured buildings, vulnerable to theft. Russia also has tens of thousands
of underpaid weapons scientists and workers in 170 scientific institutes
and 10 closed cities that house the Russian nuclear weapons complex. If
President Clinton hopes to leave an enduring mark in international affairs,
he will work on these problems in the remaining 23 months of his term.
Specifically, he should look for innovative ways to further reduce nuclear
weapons and speed the conversion of Russia's nuclear establishment to
The last nuclear arms reduction treaty, negotiated more than six years ago,
has yet to be ratified by Russia's Parliament. That treaty alone would cut
nuclear weapons totals nearly in half. Prime Minister Yevgeny Primakov
recognizes the treaty's value for Russia, both in foreign policy and budget
savings terms. Mr. Clinton should work closely with President Boris Yeltsin
and Mr. Primakov to achieve ratification.
But hopes for deep nuclear cuts need not depend on Russia's
Communist-dominated Parliament. In coordination with Russia's leaders, Mr.
Clinton should initiate steps that go beyond the treaty, including parallel
nuclear reductions and taking more weapons off hair-trigger alert. Such
methods proved effective when tried by Presidents George Bush and Mikhail
Gorbachev a decade ago.
Shrinking Russia's nuclear infrastructure also requires expanding the
cooperative programs developed under legislation originally sponsored by
Senators Sam Nunn and Richard Lugar. These efforts have already supported
the dismantling of some 5,000 Russian warheads. Additional work is needed
now to safely convert as much of the plutonium and enriched uranium from
these bombs into less dangerous forms and to store what remains under much
more secure conditions. The Administration rightly seeks large spending
increases in these programs in next year's budget. It is essential that
Congress approve these requests.
Washington should also press ahead with its efforts to re-employ Russian
weapons scientists in civilian work. Two American programs managed by the
Energy Department are designed to achieve that goal. One, begun in 1994, is
aimed at Russia's scientific institutes. A newer program deals with the
closed nuclear cities. The scientific institutes program has succeeded in
re-employing thousands of Russian scientists at home and keeping them out
of the reach of terrorists or countries eager to make nuclear, biological
or chemical weapons. But a report prepared for Congress this week by the
General Accounting Office called attention to some problems, including
taxation by Russia of some of the aid money and allegations that some
assistance went to institutes and scientists still engaged in weapons work.
However cash-starved the Russian Government is, taxation of American aid
money is unacceptable. Nor should American subsidies support Russian
The G.A.O. report calls for slowing down the nuclear-cities program until
the problems in the institutes program have been resolved. That would be a
mistake. The nuclear-cities agreement is more carefully drawn than its
predecessor and already provides for exemption from Russian taxation.
Tightened project review procedures are in place to make sure that
Washington is not inadvertently subsidizing new Russian weapons
development. These programs, along with Washington's contributions to
Russia's plutonium and uranium conversion and security programs, should go
forward as part of a coordinated drive to substantially eliminate Russia's
cold-war nuclear infrastructure before the Clinton Administration leaves
Date: Thu, 25 Feb 1999
From: Jeffrey Surovell <firstname.lastname@example.org>
Subject: upper volta controversy
The recent discussion of who was first to come up with the
likening of the Soviet Union to "Upper Volta with missiles" has, at
least to my mind, omitted the principal point: that the implied
and even openly stated analogy has racist and elitist implications.
Should we not try to be careful to avoid making poor African
nations the butt of jokes, societies which are still feeling the
vicious and horrific effects of Western colonialism and neo-colonialism
(whose policies are hatched, of course, in Washington)?
This lack of consciousness, however, should not be surprising,
given that the field of Sovietology (and post-Sovietology) has
always been one of the most right-oriented fields, tied as it has
been to the CIA and other agencies of the State Department. And
racism has been the stock-in-trade of the right. Moreover, the
absence of a real left voice in the field makes still more possible such
racist (however conscious or unconscious, overt or indirect)
Date: Thu, 25 Feb 1999
From: Yuri Luryi <email@example.com>
Subject: Re: 3069-Plato amicus est, sed veritas magis.
>#16. Christian Science Monitor: Yuri Luzhkov, A Russian leader on
>porridge, czars, and real estate.]
>By YURI LUZHKOV
>What are your favorite foods...?
>My favorite dish is pshennaya kasha (buckwheat porridge with milk and
Just for the sake of preciseness (for future generation of Luzhkov's
biographers), - "PSHENNAIA KASHA" is NOT a buckwheat! It is MILLET, where
"milk and sweetened pumpkin" are not necessary additions at all (though de
gustibus non disputantur est).
YURI I. LURYI, Home phone: (519) 858-0221;
Professor Emeritus (Law). Home FAX: (519) 858-0837;
712-1510 Richmond Street, Faculty of Law FAX: (519) 661-3790;
London, Ontario N6G 4V2 E-mail: firstname.lastname@example.org
Poll Shows 90% of Russians Disapprove of Yeltsin
MOSCOW, Feb 24 (Interfax) -- Most Russians, 90%, are not satisfied
with Russian President Boris Yeltsin's work, and 6% approve of it, says an
opinion poll of
1,600 Russians that was conducted by the center for the study of public
opinion on February
19-22. In December 1998, 89% of the respondents were not pleased with
Yeltsin's work, and 8%
approved of it.
Prime Minister Yevgeniy Primakov received an approval rating of 56%. Those
disapproving of Primakov amount to 32%. The figures stood at 54% and 30% in
Just 11% of the respondents said that Yeltsin, the government and parliament
will be able to
make changes for the better. This figure is down from 14% in December. Over
half, 59% of
Russians do no think that the authorities can rectify the situation, up from
52% two months before.
Some 34% of those polled said that Primakov's government works more
efficiently than did
previous Cabinets, up from 24% in December.
Gorbachev still battles over image at home
By Adam Tanner
MOSCOW, Feb 26 (Reuters) - When the Russian Orthodox Church threw a big party
for the Patriarch's 70th birthday, it hesitated until the last minute before
Gorbachev quickly cancelled a series of meetings and accepted the hard-won
invitation that was standard issue for other leaders across Russia's political
The episode highlighted Russia's lingering ambivalence towards one of the
world's most significant living men. In contrast to his continued fame abroad
a decade after the fall of the Berlin Wall, Gorbachev remains deeply unpopular
``This is the fate of reformers, people whose fate is tied to such turning
points in history,'' Gorbachev told Reuters in an interview. ``There is no
such thing as a happy reformer. Fate is what God has handed out and I'm not
complaining about it.
``Yes, people want change, but when these changes strongly begin to affect
their interests and lead to instability as happened with our reforms, people
become judgmental and think maybe we should not have even started at all.''
Gorbachev said he has fared well compared with Russian reformers such as 19th
century Tsar Alexander II, who was blown up by plotters, or Soviet leader
Nikita Khrushchev, who was deposed and lived in obscurity until his death.
``Remember how all the reformers in Russian history ended up,'' he said.
``I've not suffered the worst fate. I'm able to talk to you.''
Still energetic and charismatic at 67, Gorbachev falls into in a rare category
of historical giants who changed the shape of human events and then survived
in the subsequent era.
He now heads the Gorbachev Fund think tank and travels abroad frequently to
give lectures. His one foray into post-Soviet Russian politics, a 1996 run for
president, was a dismal failure. He won just 0.5 percent of the ballot.
Since leaving office with the collapse of the Soviet Union in December 1991,
Gorbachev said he has returned only twice to the Kremlin, the walled fortress
at the centre of Moscow that is now the realm of his rival, Russian President
``I could go to the Kremlin, but,'' Gorbachev said before pausing for several
seconds, ``I just didn't think it necessary.''
This month he made a rare return to attend a film premiere. Oscar-winning
director Nikita Mikhalkov noted Gorbachev's presence, earning rare applause in
Abroad, where Gorbachev is hailed as the man who let Eastern Europe go free
and ended the Cold War, adoration is commonplace. At home, many blame him for
the collapse of the Soviet Union which ushered in a decade of instability.
He is still trying to explain why perestroika (restructuring) and glasnost
(openness) were the right policies, and blames Yeltsin and others for many of
the woes that have befallen the country in recent years.
His latest plea for understanding of his reign as Soviet president appears in
a Russian book titled ``Reflections on the Past and Future.'' An English
translation is due later this year.
``I don't think I need to justify myself. But I will present motives and
argumentation why I or my supporters took this or that decision,'' he said.
``I am continuing to present my thoughts as far as interest has not fallen in
the world and in Russia is enjoying a kind of renaissance.''
Even if some Russians are bitter about Gorbachev, he is confident history will
restore his lustre.
``Society will gradually understand as the years pass,'' he said.
``They have started inviting me to programmes again to answer questions from
television viewers or radio listeners. I give interviews,'' he continued.
``This book has come out without any difficulties whereas in the past it would
have been hard or not been published at all.''
OLD FRIENDS IN HIGH PLACES
During the past six months Russian politics have also moved closer to
Gorbachev as Yevgeny Primakov, a junior member of the Communist Party
Politburo under him, became prime minister and took over day-to-day
responsibility of the country's economy from the often-ill Yeltsin.
Gorbachev is promoting the idea that Primakov, two years his senior, should
run for president in 2000, allied with Moscow Mayor Yuri Luzhkov as prime
minister. Gorbachev said he will not seek elected office, but offered Primakov
help if called upon.
``If they had some need for me to study some problem or establish some contact
in an informal way or to clarify some issue or to solve some problem, I am
ready. I have experience and my health still permits it,'' he said.
Asked about his health -- no small issue in a country where the average man
dies at age 61 -- the last Soviet leader follows a superstitious ritual by
pretending to spit three times over his shoulder and then knocking on wood.
``It's okay,'' he said.
Gorbachev's good health and sharp mind contrasts with Yeltsin, who has
sometimes appeared confused in his recent rare public appearances.
But Gorbachev's self confidence has sometimes gone against him, such as in the
1996 presidential campaign, when he believed he was popular and in tune with
his fellow Russians.
Aides at his think tank say they sometimes advise him to take a lower profile
in Russian politics rather than sully his name, but say he does not want to do
less or become a living historical monument.
For his part, Gorbachev said public slights or criticism do not have much of
an impact on him.
``I'm a well-balanced person, it's hard to set me off keel,'' he said. ``I
don't fall into absent mindedness, into panic, or into some murderous
suffering. I'm a person with a young temperament.''
He was upset, however, about the fate of his money after the August
devaluation of the rouble caused a near meltdown of the banking system. The
bank Gorbachev used, Inkombank, lost its licence and is now facing bankruptcy
``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 and the funds grew over several years
with interest -- until the crisis separated him from his money, probably for
``It's hard of course,'' he said, showing a smile to make light of the matter.
``We are now searching for the money.''
Asked if he faced poverty, he said: ``Of course not. My books still sell and I
earn fees. There is something to live on.''
To enrich his reputation at home, Gorbachev is building a perestroika library
and museum to document his years in power.
``Perestroika was a key moment in our history and for the whole world,'' he
said, repeating the argument that he believes will eventually redeem his
reputation at home.
``If it wasn't for perestroika there would not been changes in the Soviet
Union, or they would have gone very slowly and for a long time,'' he said.
``We would have been tortured by the same situation in East and Central
Europe, and the Cold War would have continued.''
February 26, 1999
Top Tax Official Defends Legislation, Blasts IMF
By Igor Semenenko
A senior tax official on Tuesday defended proposed tax legislation and accused
the International Monetary Fund of being two-faced about the plans.
"When the IMF mission was in Moscow, we managed to convince them that our
proposals are reasonable," Deputy Tax Minister Sergei Shulgin said. "But when
they send letters [about Russia's plans] from Washington, it turns out that
we've been talking to deaf people. It's as if they have not been in Russia at
The IMF has harshly criticized Russia's dismal tax collection rate and said
that adopting a realistic plan to boost revenues was a key condition to
unfreezing desperately needed loans. The fund halted a multibillion-dollar
loan program to Russia after the country devaluated the ruble and defaulted on
some debt in August.
Among its complaints, the fund has rapped the Tax Ministry for wanting to
lower the value-added tax from 20 percent to 15 percent this year and then to
10 percent in 2000. VAT accounted for more than 50 percent of all taxes
collected in Russia last year.
Still, Shulgin defended the VAT cut and other tax proposals Thursday, saying
the new legislation, now before Russia's parliament, would in the end boost
"Recent tax initiatives are aimed at financial stabilization," he said. "We
plan to boost economic growth."
"Lower VAT rate will not affect tax collection," the deputy tax minister said.
"Currently, about 50 percent of VAT [revenues] are on paper only - companies
do not have the working capital to make transfers."
Lower VAT would help untangle the web of nonpayments, he said.
Many companies are unable to pay wages or obligations to each other, leaving
them either making barter deals or in debt.
Another significant tax provision shifts the tax burden from companies to
individuals. If approved, corporate profit taxes would be cut from 35 percent
to 30 percent and a company's overall tax burden would fall 70 percent.
The ministry estimates that annual revenue will grow 20 billion rubles ($880
million) if the entire tax package is approved by the Duma, Shulgin said. The
ministry collected about 20 billion rubles in January, compared to 27 billion
rubles the month before.
The government also wants to hike excise and gasoline taxes and tighten
control over foreign currency transactions, alcohol sales and shuttle trade.
"The Central Bank controls the banking sector only," Shulgin said. "Control
over other institutions' currency transactions should be tighter."
Not all of the tax proposals are controversial. The West has lauded some
measures, such as one that gives foreign investors the option of a three-year
tax holiday if they sink more than 20 million rubles into the economy.
With some amendments, the State Duma, the lower house of parliament, is
expected to pass all of the tax measures on second reading by the end of next
week. Under IMF pressure, the Duma decided to put off implementation of the
VAT law until July.
The tax package faces a third reading before being sent to the upper chamber,
the Federation Council, for approval. President Boris Yeltsin must then sign
it into law.
Nemtsov Notes US Pessimism About Russia's Future
MOSCOW, Feb 23 (Interfax) -- Pessimistic views about the future of
Russia prevail in the U.S., former Russian Vice Premier Boris Nemtsov told
has just returned from a tour of the U.S. where he lectured on Russian
economic and political
problems at Harvard University and Columbia University as well as at several
"Unfortunately, very few in the U.S. continue to believe in the success of
he said. "The IMF is in a very delicate situation - it is forced to counter
public opinion, which
does not favor the continuation of aid to Russia," Nemtsov said. "The absence
moves by the current Russian government combined with gloomy forecasts shape a
pessimistic attitude toward Russia," he said. According to Nemtsov, the
the relationship between the Russian Central Bank and FIMACO company caused a
reaction in the U.S. Nevertheless, representatives of several U.S. companies
that despite the general pessimism they continue investing in the Russian
economy. They said
their experience in Russia has shown that they have not lost from continued
Yavlinsky to Seek Electoral Pact with Moscow's Luzhkov
MOSCOW, Feb. 25, 1999 -- (Agence France Presse) Russia's liberal opposition
leader Grigory Yavlinsky said Wednesday he is looking to make an election
campaign alliance with Moscow's populist mayor, Yury Luzhkov.
The Yabloko faction leader said he will seek to coordinate his campaign for
this December's parliamentary elections so that his faction and Luzhkov's new
Fatherland (Otechestvo) movement do not face off against each other in key
"I can say with confidence that Yabloko will seek an understanding with
Fatherland, and I hope that we will reach one," Yavlinsky told Ekho Moskvy
"This may touch on the single-mandate districts and our election campaign
tactics, but we had no negotiations about this so far," he added.
Yavlinsky finished fourth in the 1996 presidential elections and has already
aired plans to succeed Boris Yeltsin in the 2000 presidential vote,
His Yabloko faction is the fourth-largest in parliament and hopes to bolster
its standing in this year's polls for the Duma, the lower house of parliament.
Luzhkov has also suggested he may run for president. The mayor is enormously
popular in Moscow and last autumn positioned his Fatherland as a centrist
party with a nationalist flavor.
Minister: No Grounds To Ban Russian Communist Party
ST. PETERSBURG, February 24 (Itar-Tass) -- There are no grounds to
ban the Russian Communist Party in connection with statements by some of its
particular Albert Makashov, Russian Justice Minister Pavel Krasheninnikov told
here on Wednesday [24 February].
Makashov made anti-semitic statements on behalf of himself, but not of the
Krasheninnikov noted, adding that the Justice Ministry inquired the party over
and the party assured that it did not support the statements.
The Ministry is checking the Communist Party's activities now, including the
that it sets up its organisations at enterprises, which is banned by the law.
Among the aspects being checked are also Communist leader Gennadiy
"negative statements" about the Russian president, the minister said.
"We've drawn attention, including of the General Prosecutor's office, to the
fact," Krasheninnikov noted.
The checking of the Communist Party is not scheduled, it was launched in
response to a letter
from the General Prosecutor's office, the minister said.
Planned checks will be carried out with respect to a number of public
Yabloko, the Democratic Choice of Russia and the Movement in Support of the
Army, in the first half of this year.
The checks will be made in accordance with the law and the plan adopted in
1998, the minister
said, noting that there is not and cannot be any political underlying cause
Zyuganov, in his turn, commenting on the checking of his party, told
in St. Petersburg,
where he is now, that he was ready to provide all possibilities to the Justice
Ministry and the
Interior Ministry so that they might make sure whether there are the party's
organisations at enterprises.
Zyuganov added that his party had been checked for six times, but none of
checks produced a negative result.
Russian Newspaper Says Prime Minister May Go Soon
Argumenty i Fakty, No. 957
February 1999 (Signed to press 23 Feb 99)
[translation for personal use only]
Unattributed report from the "Rumors" column: "Yevgeniy Primakov:
More Action, Less Fuss"
Yevgeniy Primakov's attendance of various presentations became
especially noticeable last week. Figuratively speaking, he has caught up with
in terms of "cutting ribbons." Should we mention that such labor may become
excessive for the
leader of a huge country? At one time, for instance, President Boris Yeltsin
to 25 meetings in his daytime schedule. And that precisely was his undoing --
people, with their serious problems, in such numbers proved too exhausting and
has damaged his health.
Yevgeniy Maksimovich should therefore have a word with those who draw up his
schedules. Why did
he, for instance, have to spend four hours at a film premier or attend endless
receptions? This may be damaging. Our president does not particularly like
those of his
subordinates who appear frequently on television screens. And on top of that,
conflict with Boris Berezovskiy, whose influence on the President's family is
Argumenty I Fakty has already written that the Prime Minister may lose his
job, partly because of
this conflict. Rumor has it that there is a candidate for his post already.
This is Deputy Prime
Minister Vladimir Bulgak, a quiet and secretive man who has been a member of
since Soviet times. Meanwhile, the Prime Minister himself is preparing a new
the government. People are saying that the head of the customs, Valeriy
Draganov, is a candidate for getting fired.
From: "Tom Adshead" <email@example.com>
Subject: Hough's comment on Bivens/3069
Date: Fri, 26 Feb 1999
I thought I should comment on the piece below by Jerry Hough, as I thought
the Bivens/Bernstein piece was a reasonable account of the rise and fall of
the oligarchs. Having said that, I think that my disagreements with Mr Hough
are only on matters of detail.
First off, most of the shares in the shares-for-loans stayed with the
oligarchs, and were not sold to the West. The only oligarch deal where
shares did end up in Western hands was the Svyazinvest sale, which was, not
a shares-for-loans deal. For instance, most of the shares in oil companies
that were sold in the shares-for-loans schemes were in holding companies,
which are not widely held by Western investors, with the exception of
LUKoil, which, along with Surgut is something of an exception in the oil
sector, in that management now own most of the subsidiaries and the holding
company. Most Western portfolio buying in the oil sector happened in 1994-5,
when only the subsidiary companies could be bought. I'll discuss some of the
history of Western portfolio investment in Russia below.
Second, I would take issue with the statement "The banks were no more
private than the companies whose 'shares' they were acquiring". The oligarch
banks are definitely private entities, as the Russian state was the big
loser in these sales. Certainly most of the owners of the banks are current
or former government employees, but then in Russia, everyone is. And
certainly, most of the owners got their stakes in these banks by exploiting
their links in government. But the whole point about corruption is that it
involves private individuals abusing their position or links in government
for private ends.
Third, I don't really understand what Mr Hough means by "the pyramid" in the
next sentence. Is this GKOs, which have collapsed, or equities, whose prices
have collapsed, but which still represent the same claims on ownership that
they did before the Russian government defaulted on its debt. Buyers of
shares are not seeking recourse to anyone except, in some cases, the people
who advised them to buy, and they are certainly not suing any of the Russian
oligarch banks concerning share purchases. The people who are taking Russian
banks to court are the people who lent them money, and the people who bought
forward contracts from them.
I think that the Bivens/Bernstein piece is good at showing how different the
world was after 1996, and I think that privatisation, and Western
involvement in the Russian equity market, was very different after 1996,
although the shares-for-loans scheme was first mentioned in 1995. Most of
the equities held by Westerners have been bought either directly at cash or
voucher auctions, or from Russians who bought at these auctions, or from
management and employees who acquired shares through the privatisation
process. Pre 1996, most of the trading was in big companies, and was either
Westerners trading amongst themselves, or mopping up those shares which
remained with Russians.
1997 saw a boom in the market, mostly with new Westerners buying from
Westerners who had already bought, and these "pioneer" Westerners then moved
on to smaller Russian companies, with most of the shares being bought from
employees and managements via local brokers. If you visited second tier
Russian companies in 1997, the walls outside the company's administrative
building tended to be covered in advertisements by local brokers who wanted
to buy shares from workers. There was an upsurge in supply in Spring 1997,
because a lot of workers were selling their shares in order to finance
The relevant point here is that the West was duped a little differently from
how I understand Mr Hough sees it. Western financial institutions were duped
by the oligarchs into lending them money, and treating them as honorable
members of the financial community. There was an interview with Potanin, the
President of Oneximbank in, I think, September or October 1998 which puts
the lie to this, as he more or less admits that the bank has no intention of
coming good on its syndicated debt.
I think that the mistake made by Western governments was that they thought
that post-1996 Chubais was the same as pre-1996 Chubais, and what that
implied. Pre-1996, Chubais was pretty much the sole person in the Russian
government with whom the West could communicate and as far as I can
remember, tended to deliver on his promises. The same certainly goes for
Koch, who I worked with when I was working on privatisation in St Petersburg
at the EBRD. I think that both were bought by the oligarchs some time in
1996 and from then on you could forget about transparency or fairness in
I think that most people realised that the whole system was rotten in early
1997, but I don't think anyone really believed that the oligarchs would be
able to bend not just privatisation policy to their own ends, but also the
government's entire monetary policy. Venality and corruption are endemic in
the financial world, but it is mostly checked by individuals being unwilling
to compromise their ability to stay in the game. Every so often, you get a
rogue like Nick Leeson, who does what is known as an "Acapulco trade" (where
you basically steal a lot of money from your firm, and hide out in
Acapulco). What we saw last year was an Acapulco trade by an entire
financial sector, and the victim was not an individual bank, but an entire
So I would agree with Mr Hough that "nothing is going to change for the
better until Americans... have a better understanding of the con game". The
problem is, that last year, the rule book was thrown out the window, and no
one is quite sure by what rules the game will be played in future.
24 February 1998
[translation for personal use only]
The "Claws" Dig into Bykov (as well as Luzhkov and Lebed')
By Igor' Pichugin, Nikolai Poluektov, Mariia Rozhkova
New tools for political warfare are under development in Russia. On
Saturday, anonymous authors launched the site "Kogot'-2" [Claw-2] in
the internet. Like its predecessor, the site "Kogot'" [Claw], which
created a furor in November 1998, it contains compromising materials
on well-known politicians and businessmen. The major players in
"Claw-2" are Anatolii Bykov of Krasnoyarsk, regional governor
Aleksandr Lebed', and Iurii Luzhkov.
The project "Claw" appeared in the Russian internet on November 26,
1998. The site contained decoded telephone conversations and pager
messages of Tat'iana D'iachenko, Boris Berezovskii, Oleg Boiko,
Nikolai Svanidze, and other influential individuals. The site was
shut down within hours after its appearance. But some managed to copy
and save the information, which can still be found in abridged form in
"Claw-2" appeared in the internet on February 20. The site --
www.krasnobykow.com -- is registered outside of Russia, so it will not
be quite as simple to close. The site was announced in a two-step
operation. First, ad banners leading to a certain posting on the server
List.ru appeared in the most frequently visited locations in the
Russian-language internet. That posting reports the appearance of a
new site and links users to "Claw-2".
"Claw-2" contains "analytical and law-enforcement materials" on the
structure of organized crime in the Krasnoyarsk region and on the
activities of Anatolii Bykov, chairman of the board of directors of KrAZ
[Krasnoyarsk Aluminum Factory]. Furthermore, the site presents materials
on relations between Bykov and Lebed' during the gubernatorial
campaign, and also on Bykov's ties to people from the camp of Iurii
The internet is an ideal place for the publication of such
compromising materials. While the authors need not burden themselves
with a search for proof, they immediately gain for themselves a wide
audience: since its appearance, "Claw-2" has drawn over 6000
visitors. And thanks to the media, the compromising materials found
on the site will be brought to the attention of those without access to the
The overwhelming majority of the incriminating materials are
anonymous. Only the "Statement on the role of Bykov in the
Krasnoyarsk region" is signed: "Director of the
analytical-consultative committee on problems of national security to
the chairman of the State Duma". In fact, such a committee exists,
but its representatives do not know whether it prepared the
"Statement". At KrAZ, the refutation of anonymous materials was
It is likely that no one will ever learn the identities of the real
organizers behind "Claw". But the topic has already evoked much
discussion. Thus, a certain Agency of economic news, which lists
neither an address nor telephone number, in reporting the new site's
appearance to the media, speculated that it may be the work of "Pravoe
Delo" (led by Anatolii Chubais, chairman of the board of RAO EES),
Oleg Deripaski (president of "Siberian Aluminum" and a rival of Bykov),
and Gleb Pavlovskii (president of the Foundation for Effective Politics).
Kommersant was told by RAO EES that they "see no point in going
after Bykov, and to speak of RAO's involvement in 'Claw-2' is absurd."
German Tkachenko, vice-president of "Siberian Aluminum", remarked:
"In my view, 90% of the information on the site is the truth. But
'Siberian Aluminum' had nothing to do with the site's creation. We
don't have time for things like that." Gleb Pavlovskii announced on
Monday in the electronic "Russkii Zhurnal" that he has no connection
However matters may stand, the chief goal of the project has been
acheived: attention was attracted and future voters are quietly
forming their own opinions about the individuals featured in the
internet publication. By all appearances, "Claw-2" is an indication
that new internet-based political techniques are under development.
Date: Thu, 25 Feb 1999
From: Mark Jones <firstname.lastname@example.org>
Subject: Re: 3069- Hough
Jerry F. Hough said:
> I think that Matt Bivens does not understand the loans-for-shares
> deal. The real crime of Chubais and especially Nemtsov at this time was
> their swindling of America.
Jerry, I was eating a soft-boiled egg when I read this, and now I had to
shirt. You ought to warn people some way, when you plan to say things like
You know, the Polish government, so I just learned, is justifiably proud
call its bonds 'investment' grade and it only has to offer 0.006% spread
over Bundesbank base rates to raise money. In the real world of banking,
people look at spreads the way microbiologists look at the AIDs virus,
attentively. However, when Russians in dogtooth check jackets and gold
size of golfballs came around offering these same dudes GKO's by the
with a guaranteed return of 75%, said circumspect bankers turned into lemmings
quicker than Cinderella's coach into a pumpkin. Voltaire said, if you see a
jump from a window, be sure to do the same, but in this case I think you
conclude that there is no need for us to show any pity. Especially when
banks are no more private than Russian ones: when they go bust taxpayers
pay, don't they?
Date: Thu, 25 Feb 1999
From: Stetson Sanders <email@example.com>
Subject: Eurasia Foundation, Saratov
Dear Readers of the Johnson List,
The Southern Russia Regional Office (SSRO) of the Eurasia Foundation,
located in Saratov, is now able to send its monthly bulletin "Panorama"
through e-mail. If you would like to receive this free publication (in
electronic or "real" form), please contact me.
The SRRO is responsible for administering EF activities in Southern Russia,
Nizhny Novgorod and Tartarstan to Astrakhan and Stavropol Krai. The
monthly bulletin describes current activities and programs, such as our
competitions "Developing Alternative Dispute Resolution" and "Civic
Journalism Development", as well as existing grants and new developments in
the NGO sector. Anyone working in Southern Russia will find it to be a
good additional resource.
Wishing you all continued success. And remember, "odin v polye nye voin".
Peace Corps Volunteer
Consultant, Eurasia Foundation
PO Box 3321
(8452) 73 41 87
21 01 59
24 28 64 (fax)
New York Times
February 26, 1999
[for personal use only]
Following the Trail of Rubles
By LOUISE I. SHELLEY
Louise I. Shelley is director of the Center for the Study of Transnational
Crime and Corruption at American University
WASHINGTON -- The newspaper Izvestia once described Russian mobsters and
corrupt officials as "unpatriotic." What it meant was that unlike Colombian
and Mexican crimelords, who repatriate most of their profits, Russians send
their ill-gotten money in only one direction: out.
That accusation was confirmed last month when Russia's Attorney General,
Yuri Skuratov, revealed that from 1993 to 1997, billions of dollars from
the Central Bank had been transferred to an offshore company on the Isle of
Jersey. Russian news reports suggested that the money has been generating
interest and management fees for the benefit of high-level officials, who
have resisted outside scrutiny of the account.
Whatever the facts in this case, there is no doubt that Russian corruption
is very much a global game, and only a few other nations have begun to
assume any responsibility for stopping it. The United States has taken the
lead. In Washington this week, Vice President Al Gore is the host of a
conference for international law enforcement authorities on corruption, and
Russia is one of the main topics under discussion.
If the participants needed any further evidence that the Russians can't be
left to fight corruption on their own, it came on Feb. 2, when Mr.
Skuratov, in an announcement that recalled the Soviet era, said he was
resigning from his job because of sudden illness. Some officials suggested
that he had been forced out because he wasn't moving quickly enough in
fighting corruption. Others said the opposite was true.
In any case, Mr. Skuratov's accusations against the Central Bank managers
were left unresolved, and it is unclear if they will be pursued by his
If Mr. Skuratov's resignation was indeed related to his anticorruption
efforts, he was not alone. Russian authorities who fight corruption often
face reprisals, from salary cuts and political interference to beatings and
even assassination. The same is true for journalists who report on abuses
and judges who sentence offenders.
Prime Minister Yevgeny Primakov recently began attacking high-level
corruption in the military, regional governments and port authorities. But
for the most part, anti-corruption campaigns have merely been used to
attack political enemies and protect monopolistic fiefdoms, rather than as
serious attempts to deal with institutional and economic problems. Most
investigations have aimed at low-level officials, and prosecutions for
official corruption have declined by more than 90 percent since the
Evidence suggests that even low-level corruption in Russia is part of a
larger crime network. A 1998 survey of inmates in a Siberian prison camp
created exclusively for former police and government officials found that
40 percent of those convicted of taking bribes had been on the permanent
payroll of criminal organizations.
Of course Russia is not alone. Estimates by the International Monetary Fund
suggest that from 6 to 8 percent of the world's economy now consists of
money involved in drugs, capital flight and capital evading taxes. But
Russia's failure to stem the flow of graft has carried a comparably heavy
Between $150 billion and $350 billion of Russia's assets now lie overseas,
its Government estimates. In many cases, documents show, payments for
Russian Government commodities and products are made directly into
privately controlled foreign accounts.
But the transnational nature of corruption can be turned against it. While
corrupt officials exploit international gaps in legislation and
enforcement, they can also be attacked with coordinated global action by
governments, businesses and nongovernmental organizations.
One Russian-American success story shows how effective this approach can
be. Last summer the Federal Bureau of Investigation announced that, in
cooperation with Russian law enforcement, it had uncovered hundreds of
millions of dollars in gems and gold coins looted from the Russian treasury
and transferred to a front company in San Francisco.
The bureau is now investigating another case of similar size, and
investigators say that other inquiries may recover many more of Russia's
billions invested in American banks, real estate and securities markets.
Attorney General Janet Reno recently declared such cases a priority for the
organized-crime strike forces of the Justice Department.
A s looted assets are located, we must insure that they are not sent back
to Russian authorities who cannot protect them from being diverted again.
A special trust fund -- administered by an international oversight board in
which nongovernmental organizations participate -- could see to it that the
money recovered ends up benefiting the Russian people rather than ending up
in the hands of the same corrupt officials again.
Countries serving as havens for stolen money have a responsibility to the
citizens of the looted state. Effective law enforcement in one country must
also include the fair restitution of assets in another. Otherwise, these
billions of dollars will be endlessly plundered, and Russia's downward
spiral into economic chaos will never be stopped.
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