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Johnson's Russia List


March 2, 1999    
This Date's Issues: 3074    


Johnson's Russia List
2 March 1999

[Note from David Johnson:
1. Yevgenia Albats: Re: 3070-Surovell/Upper Volta.
2. David Schimmelpenninck: Filipov/Anti-Semitism.
3. ECARR News Network: Stanislav Menshikov, Primakov Reforms: They Should 
Do the Trick.

4. Interfax: Maslyukov on Attempts To Discredit Cabinet Members.
5. Moscow Times: Michael McFaul, The Demon Within.
6. Financial Times: RUSSIA: Sharp fall in international debt.
7. AFP: Western banks may agree to reschedule Russian debt: Credit Lyonnais.
8. AP: Greg Myre, Russian Bank Mired in Controversy.
9. Moscow Times EDITORIAL: Russia Needs Democracy Not Money.
10. MSNBC: Magda Walter, Russia’s regions battle with Kremlin.
11. Moscow Tribune: John Helmer, Transport Quandary for Food Aid to Russia.
12. Interfax: Most Russian Poll Respondents Favor Banning Nazis.
13. RFE/RL: Paul Goble, When Democracy And Stability Conflict.]


From: "Yevgenia Albats" <>
Subject: Re: 3070-Surovell/Upper Volta
Date: Mon, 1 Mar 1999

To Jeffrey Surovell:
Thank you! Finally, somebody did say that. Seeing this discussion day after
day, I kept asking myself: is it all written by Americans?
What about political correctness? You do not care about the feelings of
Russians -- fine, we probably deserve it, bur what about Upper Volta? Did
they default in August as well?


Date: Mon, 01 Mar 1999 
From: David Schimmelpenninck <> (
Subject: Filipov/Anti-Semitism

Filipov's article about anti-Semitism
in the Russian provinces in your letter 3073
reminded me of an eerie experience in Moscow back in 1995,
a few months before the Victory Day celebrations to mark the 50th
anniversary of WWII's end.

I was standing on the Leninskii Prospekt waiting for a tram on wet
February everning. The avenue's centre strip was covered by huge
billboards with Marshall Zhukov's portrait and other commemorative
posters. As the tram approached in the distance, from somewhere in the
crowd of Muscovites behind me I heard a cassette tape recorder
begin to play a military tune.

The march seemed disturbingly familiar. When I turned around, I saw a group
of middle-aged women, all holding their shooping bags, and a pair
of clean-cut young men. One of the lads smiled and said, "Vot fashistkii
gimn." Then I realised that he was playing the Horst Wessel Lied,
the anthem of the German Nazi Party. The women laughed good-naturedly,
and I got on the tram.

David Schimmelpenninck van der Oye
History Department
Brock University


Date: Mon, 01 Mar 1999
From: Lucy Webster <> 
Subject: Menshikov article

ECARR News Network
The Newsletter of Economists Allied for Arms Reduction
December 1998
Primakov Reforms: They Should Do the Trick
Stanislav Menshikov, Co-Chair, ECAAR-Russia

Prime Minister Yevgeny Primakov is much respected as a statesman and
consensus builder. But some, mainly former ministers appointed then
dismissed by President Boris Yeltsin, have criticized him for "stopping
reform" and "doing nothing" in the economic sphere. These criticisms are
far from true.
Since his appointment in mid-September, Primakov and his economic team
have initiated two major economic reforms that previous cabinets have
avoided or failed to implement. They are in the process of simplifying and
reducing taxes as well as restructuring or realigning Russia's banking
system in accordance with the principles of modern market economies. In the
initial stages of development, it is far too early to expect results from
these reform efforts. In the context of an extremely precarious economic
and financial situation together with default and devaluation inherited
from the Kiriyenko cabinet, it also seems unfair to criticize Primakov for
Tax reform has proved most controversial. Stanley Fischer from the
International Monetary Fund (IMF) and our domestic opponents have called
the proposed tax reductions untimely, even disastrous. To lower taxes, they
argue, would further reduce government revenues and lead to an enormous
deficit financed largely by printing more money, the result of which would
lead to hyperinflation. But the Primakov team disagrees, believing tax
reductions would encourage firms to pay taxes in full and induce
enterprises to produce more goods thus increasing the real tax base.
Theoretically, Primakov's critics would be correct if the supply side was
unchangeable and not positively affected by tax reductions. They claim
similar tax relaxation efforts in the past have not resulted in larger
output. Such reductions in recent years have been coupled with drastic cuts
in federal expenditures, leading to falling aggregate demand. When
aggregate demand falls, real GDP is not supposed to rise. Tax reductions
lead to worse tax collection.
Mindful of the highly unstable financial situation, the Primakov
Government in 1999 is planning to increase federal expenditures, albeit
cautiously when measured in real terms. Increases in aggregate demand are
limited to the regular payment on time of pensions and wages of federal
employees, both civilian and in the army as well as to financing crucial
investment projects that will result in fast increases in output. The
positive effect of these stimuli combined with tax reductions is expected
to bring about general economic recovery by the second half of 1999-in time
to influence voters on the eve of the December 1999 parliamentary elections
and the presidential elections that would normally be held in June 2000.
Whether these plans materialize depends on the ability of the Government
and the Central Bank to restrain inflation and keep the ruble exchange rate
from undue devaluation. The Government's target for 1999 is a maximum
consumer price inflation of 30 percent. This would be a definite
improvement over the 73 percent upsurge in prices between December 1997 and
December 1998. Apart from maintaining relative balance between aggregate
supply and demand through fiscal policies, it would also necessitate
keeping money supply in check. There are many factors feeding into the
Russian money supply equation, and printing money to finance part of the
budget deficit is only one element in the overall picture. In anbarter by
restructuring its banking system, the process of remonetization would lead
to a steep rise in money supply that would not necessarily be inflationary
but would in fact help increase tax revenues.
Another important factor is the issue of government indebtedness. The
pyramid of short-term treasury bills has ceased to be a decisive factor in
the budget picture after the August, 1998 default. But the much larger
sovereign debt of the former Soviet Union remains a problem as well as the
new debt to the IMF that appeared in recent years. These have become major
destabilizing factors. In the current situation, Russia is not in a
position to honor all these debts that have to be rescheduled. Because the
IMF is partly responsible for the misguided policies of the previous
Russian cabinets, it should take a more realistic attitude toward these
matters. Admitting past errors would not be pleasant, but it would be
better than continuing to err.
On the whole, the chances that the Primakov reforms will work are fairly
high. But more understanding is needed from the international community.
Supporting the present Russian Government today means insuring against the
risk of dictatorship and militarization if its efforts fail. Such dangers
are real. 


Maslyukov on Attempts To Discredit Cabinet Members 

MOSCOW, Feb 28 (Interfax) -- Attempts to personally discredit 
Cabinet are the last trump card of groups trying to topple the Cabinet of
Russian Prime 
Minister Yevgeniy Primakov, First Deputy Prime Minister Yuriy Maslyukov
told Interfax. 
Anti-government forces "simply have no other means left for attacks,"
because their 
forecasts of a fast and inevitable economic collapse and inability of the
government to agree 
with international financial institutions have failed, he said. In this
context he 
mentioned the agreement with the World Bank initialed on Friday. Maslyukov
said that at talks 
with the IMF "both sides are demonstrating energy and interest." Maslyukov
said that the 
claim of liberal Yabloko movement leader Grigoriy Yavlinskiy that Cabinet
posts had been 
trade found no confirmation. "And there could have been non, it (the claim)
burst like a dirty 
bubble," he said. Nevertheless, the latest anti-government campaign in the
media -- this 
time based on personal insinuations -- continues, he said. According to
him, the rumors and 
inventions contain nothing new. Maslyukov said that the revelations of the
latest wave of 
attacks only repeat inventions refuted earlier. An analysis of some of the
brings to mind the names of several former oligarchs, he said. The names
themselves "are 
symbols of corruption, economic crime and political extremism," he said.
Maslyukov was 
surprised that part of the media assumed in earnest that such insinuations
"clearly ordered 
by certain circles" could have been discussed at the Friday working meeting
of President 
Boris Yeltsin and Prime Minister Primakov.


Moscow Times
March 2, 1999 
The Demon Within 
By Michael McFaul
Michael McFaul is a political scientist at Stanford University. He contributed
this article to The Moscow Times. 

In the wake of the August 1998 financial meltdown, many predicted that
political breakdown would soon follow. Throughout the summer and fall, Russian
analysts of all political orientations began to speak openly and often about
the specter of Russian fascism should the economic crisis continue. Others,
including even Yeltsin, have warned about coup plots aimed at toppling
Russia's fragile democracy. The threat of Russian federal dissolution also
loomed as a possible nightmare scenario as individual regional leaders began
to deal with the economic crisis with little regard for national laws or
national interests. In this new political context, challenges to Russian
electoral democracy have proliferated. Before August 1998, it was taboo to
speak of, let alone advocate, alternatives to elections as the method for
selecting political leaders. After August 1998, discussions of alternatives
have renewed again. Some groups have even begun to prepare to pursue these
non-electoral strategies for achieving (or maintaining) power. 

The threat to elections mentioned most frequently by Russian politicians is
also the scenario with the lowest immediate probability - a fascist or
communist coup d'etat. Militant nationalist groups such as the Russian
National Union have advocated radical solutions to Russia's current desperate
economic situation. In some regions of Russia, including most openly in
Krasnodar where Governor Kondratenko has forged alliances with nationalist
extremist organizations, these ideas are becoming part of the mainstream
political discourse. Some national polls have even recorded support for the
Russian National Union to be as high as 8.4 percent! To date, however, these
groups have yet to demonstrate a capacity to mobilize people on a national
scale. They are also constrained in growing by the lack of an alternative
vision for Russia's future. 

The authoritarian threat from the far left also does not live up to the
rhetoric and print accorded to it by Moscow elites. Radical groups such as
Working Russia have assumed a higher profile since the August 1998 meltdown
and, perhaps even more importantly, the radical wing of the Communist Party of
the Russian Federation has assumed much greater prominence within the party.
Led by Viktor Ilyukin, the ascendency of these militants has weakened
Zyuganov's hold on the party and may result in the split of the party before
the 1999 parliamentary elections. Yet, the rise of leftist radicals either
from inside or outside of the party has not translated into greater
revolutionary fervor within communist ranks as a whole. Communist-sponsored
marches in the fall were smaller than in previous years suggesting that
popular support for another Bolshevik coup is low. Within the party itself,
the specter of extremists comingto power has made the party's leaders more
accountable in assuming responsibility for resolving the economic crisis.
Zyuganov and his allies no longer adhere to the philosophy, the worse it gets,
the better. Instead, they fear revolutionaries as much as the Kremlin. 

The immediate threat to electoral democracy comes from within the government,
not from without. Most disturbingly is Primakov's idea of reintroducing the
practice of appointing governors rather than electing them. 

This is the most regressive proposal that has emanated from Russia's post-
communist leaders. That it is even being considered is a negative sign for the
development of democratic institutions in Russia. 

The Russian Federation has severe problems today. Well before August 1998, the
center had struggled to accomplish the basic functions of a federal government
such as maintaining a single national currency, keeping open a common trade
zone, and securing tax transfers from regional governments to the federal
government. After August 1998, the center has become even weaker as Moscow has
few incentives to offer to promote compliance and little capacity to coerce
behavior whilst individual regional leaders have responded to the economic
crisis with little regard for national laws or national interests. 

The solution to this disturbing trend, however, is not a return to
authoritarianism and the recreation of a unitary state. Obviously, this change
would be a major setback for democracy as the appointment of regional heads
would make them even less responsive to their constituents and more beholden
to their Moscow bosses. 

The appointment of regional executives would set a dangerous precedent. If the
governor of Sverdlovsk region can be appointed, why not the president of
Russia as well? 

Ironically, the financial crisis has yielded several positive outcomes for
democratic stability in the short-run. The weakening of Russia's oligarchs
must be seen as a positive development for democracy, as these economic elites
will not be able to dominate the electoral process as they did in 1996. 

The crisis has also weakened the institution of the presidency, another
positive development for democratic consolidation. De jure, the constitution
still accords the president extraordinary executive powers. De facto, however,
the financial crisis has triggered a major shift of power away from the
presidency and to the parliament, the government and regional executives. 

Perhaps, most impressively, Russian politicians played by the rules of the
game outlined in the constitution in responding to the economic crisis in
selecting a new prime minister and government. 

As he prepares to come to the United States this month to ask for financial
support for his government, Primakov could cite these positive developments
for Russian democracy to build his case for future support. However, to be
credible, the prime minister must refrain from floating ideas that support the
view held by many in the West that Russia is creeping towards dictatorship. 

Renouncing this silly idea of appointing governors would be a good first step
towards rebuilding Primakov's democratic credentials both in the West and in


Financial Times
2 March 1999
[for personal use only]
RUSSIA: Sharp fall in international debt
By Arkady Ostrovsky in London and John Thornhill in Moscow

Fears that Russia might be forced to restructure the terms of its
international bonds, coupled with the latest crisis in talks with western
banks on its defaulted domestic bonds (GKOs), have sparked a dramatic drop in
its international bond prices. The price of the most liquid Russian bond,
maturing in 2007, has fallen by 19 per cent in the past two weeks and is now
worth 25 per cent of its face value.

This follows speculation that Russia's post-1992 debt might be included in a
comprehensive restructuring package.

The Russian government is fiercely opposed to including international bonds in
any such scheme, arguing it would open a Pandora's Box of legal complications.

The sell-off in Russian bonds was sparked by demands by the Paris Club of
government creditors that Pakistan restructure the terms of its international
bonds as part of an overall foreign debt reorganisation.

That move was seen as presaging a similar demand on Russia, which has $16bn of
outstanding bonds.

"The example of Pakistan shows that the Paris Club could be pushing for Russia
to restructure its eurobonds," said Kasper Bartholdy at CSFB.

A Russian finance ministry official said Russia stood by its commitment to
service all its international bonds while seeking restructuring of Soviet-era
debt. The cost of restructuring its bonds would outweigh the benefits, he
said, and speculation of Paris Club demands to do so "had no foundation".

Economists have argued that private bond holders, including US banks, would
have to share the costs of a comprehensive debt restructuring plan. In
particular, the German government, the biggest holder of Soviet-era Paris Club
debt, seems likely to insist other commercial banks share the pain.

"Eurobond holders have not so far been affected by the principle of
comparability of treatment" under which commercial creditors share the burden
of debt relief given by the Paris Club, said Andrew Kenningham at Merrill
Lynch. "But there is a growing view in G7 countries that eurobond holders
might have to take a hit some time."

"Everything depends on whether the Paris Club of creditors is prepared to
recognise the distinction made by the Russian government between Soviet-era
and Russian-era debt," said Eric Fine, bond strategist at Morgan Stanley Dean

The Paris Club was unlikely to restructure Russian debt for more than one
year, Mr Fine said, given the lack of long-term funding from the IMF. This
would mean bonds would be exempt from a deal because Russia does not have any
bonds maturing until 2001.

Richard Gray, at Bank of America, said the fact that some banks were prepared
to take a "haircut" on their GKO investments reduced the chance of Russia's
bonds being repaid at par value or of London Club bank debt being serviced on


Western banks may agree to reschedule Russian debt: Credit Lyonnais

PARIS, March 1 (AFP) - Western banks holding Russian government bonds may
agree to reschedule loan repayments as requested by the Russian government,
Jacques Kosciusko, Credit Lyonnais' official in charge of the issue, said
A proposal to restructure Russia's sovereign debt in rubles is being finalised
by the Russian government, and it should be accepted by the "vast majority of
international banks," Kosciusko said.

Russia decided seven months ago to default 250 billion rubles' (40 billion
dollars') worth of domestic (eds: correct) debt, 15 billion dollars of which
was held by foreigners.

Under a government proposal, 10 percent of the frozen sum laid out by
investors is to be returned gradually in cash form, while 20 percent will be
turned into investment and tax offset bonds and 70 percent restructured into
new long-term paper. 


Russian Bank Mired in Controversy
March 1, 1999

MOSCOW (AP) -- In a murky saga, Russia's Central Bank secretly routed billions
of dollars through a British offshore account for several years and never
bothered to tell anyone.

The mystery surrounding the Central Bank's handling of Russia's scarce
currency reserves is still unfolding, and no wrongdoing has been proven since
the country's top prosecutor made the bombshell revelation a month ago, then
vanished from public life.

At a minimum, the episode is a major embarrassment for a government that has
been accused of widespread corruption for years and is desperately seeking
billions of dollars in foreign loans to pull the economy out of recession.

The Central Bank has insisted there was no wrongdoing and all the money was
returned -- ``with interest, and to the last kopeck,'' the Central Bank's
Deputy Chairman Oleg Mozhaiskov said recently, without providing figures.

However, one parliament member, Nikolai Gonchar, has gone as far as to accuse
top Central Bank officials of siphoning off investment profits from the
offshore account.

``Russia created a system under which the high-ranking financial elite of the
country received personal income by making the country indebted,'' Gonchar
told a news conference last week.

The Central Bank's terse explanations -- and a lack of details about how much
money or interest was involved -- have raised more questions than they
answered. More importantly, the country is unlikely to get loans from the
International Monetary Fund or foreign banks until the clouds clear.

According to the Central Bank, it shipped money from 1993-97 to the small,
obscure Financial Management Co., or FIMACO, based in Britain's Channel
Islands but effectively under Central Bank control.

It says it channeled the money through FIMACO -- and kept it secret -- because
it feared Russia could default on debts and international creditors would be
looking to seize the country's assets.

Central Bank officials insist there was never more than $1.4 billion in the
account at any one time, and that FIMACO received just $1.7 million for
managing the money for several years, a sum well below usual market rates.

The operation was analogous to Federal Reserve Chairman Alan Greenspan sending
large sums of the U.S. Treasury's money to a secret account on a Caribbean
island, and afterward providing no explanation about the size of the
investment profits -- or where they went.

Russia's foreign reserves currently stand at $11.5 billion, a small sum for a
country of Russia's size, and not enough to handle large foreign debts that
are falling due this year.

Central Bank Chairman Viktor Gerashchenko has not spoken out on the
controversy and the statements by his deputies strike many as incomplete at

The Central Bank's secret account was so well hidden that even the most senior
Russian government officials were not told about it.

``I had heard about irregularities in the Central Bank, but no information was
given to the government,'' said Yegor Gaidar, who briefly served as prime
minister in 1992, when the FIMACO account was open, though not yet in active

Gaidar, a free-market liberal who is now a harsh government critic, said the
Central Bank operation may have been perfectly legal. But, he added, ``it was
strange. A serious investigation is needed.''

Prosecutor General Yuri Skuratov made the FIMACO operation public a month ago
in a letter to parliament, alleging that a total of $50 billion passed through
the account before it was closed two years ago.

Skuratov resigned a day after his announcement, citing heart problems, and has
vanished from public view.

Details have been trickling out slowly, and the Russian media and public,
perhaps inured after years of scandals and corruption allegations, seems
little moved.

Still, Gonchar, the parliament member, has pressed ahead and claimed Friday he
had evidence of wrongdoing.

He said FIMACO invested $143 million in Russian government treasury bills in
1996 when interest rates were sky-high. The investment earned a return of
$38.9 million. But Gonchar said he can find no information showing the profit
was returned to government coffers, and believes it was stolen.

``The Central Bank issued a special regulation that allowed it not to show
these amounts on its balance sheets. They were recorded on special accounts''
that have not been made public, he said.

Prime Minister Yevgeny Primakov has vowed to crack down on endemic corruption
that has bedeviled Russia's attempts to develop a working market economy. Yet
he has not signaled any plans to investigate the Central Bank.

``If the government has really started a war on corruption, it should have
looked first of all at itself,'' said Grigory Yavlinsky, a leading liberal
member of parliament. ``It always looks somewhere on the periphery, far from


Moscow Times
March 2, 1999 
EDITORIAL: Russia Needs Democracy Not Money 

Bill Clinton is right. The problems facing Russia are enormous. If it is in
the world's interest to seek peace in the Middle East or in Yugoslavia, surely
it is all the more crucial to guarantee it here. 

The U.S. president spoke well of the successes of Russians in building a free
society and a democracy, even if they were stock phrases that overstated those
successes. To protect those gains, he said he was willing to help Russia line
up "international support" - a code phrase that means International Monetary
Fund money is surely not far behind. 

That weekend saw a report in The Washington Post that wondered if Russia was
now "a failed state" - defined as "simply ceasing to function as a federal

If that sounded like America in 1776, the report did not go on to offer much
support for Russian democracy. Instead, it offered a sympathetic hearing to
Prime Minister Yevgeny Primakov's call to scrap gubernatorial elections,
saying this was because Primakov "has become so concerned about the ebbing
powers of the central government." 

And it said former Kremlin chief of staff Anatoly Chubais was motivated by
similar concerns about a weak federal government in 1996 - a year that saw
Chubais, on the eve of President Boris Yeltsin's heart surgery, announce his
emergency tax collection committee would replace "public discussions" about
how to run Russia with a program of "consolidating power" in its own hands. 

The article called to mind the Western reaction in September to then-acting
Prime Minister Viktor Chernomyrdin's call for an "economic dictatorship." From
Reuters to The Times of London, it was suddenly reasonable to talk of state
repression as Russia's best economic reform hope. 

These then are the two intellectual currents in U.S. attitudes toward Russia:
One vision gives up on democracy, while the other suggests sending billions of
dollars to keep it afloat. Neither is compelling. 

No one can honestly argue a dictatorship in Russia would be more economically
efficient. On the contrary, it would be a more corrupt and closed society - a
reprise of the Soviet Union. But shoving billions of dollars into the hands of
a corrupt government is also unlikely to help anyone - and will certainly be
corrosive of democracy. In America, sensible voters are struggling to drive
big money out of national politics. 

Clinton is right, the dangers are enormous and the solution is a better
quality of democracy. Friends of Russia, the U.S. president included, could
begin by condemning calls - whether from old apparatchiki like Primakov and
Chernomyrdin, or young self-styled liberals like Chubais - to curtail
democracy in the name of the people. 


Russia’s regions battle with Kremlin 
Moscow mismanagement angers powerful governors 
By Magda Walter
Magda Walker is NBC’s Moscow bureau chief.

MOSCOW, Feb. 28 — Ever since last summer, when a ruble devaluation and a
political crisis crippled Russia, the specter of a break-up of the federation
has loomed over this vast country. In the past 10 years, powerful Moscow has
lost Eastern Europe and then the vassal republics that once made up the Soviet
Union. Now the world’s largest country may be facing yet another challenge to
its territorial integrity: the drifting away of many of its outlying regions. 
KEEPING RUSSIA together is not a new headache for
its rulers. It’s been a particularly sore point since 1994, when Moscow sent
troops to Chechnya to keep the restless, predominantly Muslim region within
its fold.
But in the last six months noises from many of the regions — with non-
Russian, non-Orthodox majorities in particular — have grown louder and
increasingly impatient with Moscow’s failure to deliver services and goods to
the provinces.
It was in the weeks following the Aug. 17 ruble devaluation as Russia
was spinning out of control when regional governors had no choice but to take
matters into their own hands. They became infected with the autonomy bug.
As the ruble tumbled, regions took unilateral steps to ensure adequate
food supplies and contain skyrocketing prices. Arkhangelsk governor Nikolai
Malatov ordered local food production stepped up, saying the federal
government could not be relied upon to assure food distribution and stable
Kaliningrad, the small Russian enclave nestled between Poland and
Lithuania, declared an “emergency situation” which alarmed Moscow bosses.
In the Omsk region, governor Leonid Polezhayev introduced price
controls, threatened to punish speculators and put an embargo on food and
goods manufactured out of the region. In the huge Siberian territory of
Krasnoyarsk, governor and presidential hopeful Alexander Lebed took similar
Others began food rationing and withheld payments of taxes to the
federal government.

On Sept. 11, the day he was confirmed as prime minister, Yevgeny
Primakov vowed that keeping Russia from falling apart would be his priority. A
few weeks later he called unilateral actions by regional governors illegal and
warned of serious consequences.
The great match of Russia’s regions vs. center reached a climax in
November. Kirsan Ilyumzhinov, the eccentric president of the semi-autonomous,
mostly Buddhist territory of Kalmykia denounced the central government’s
inability to deliver services and funds on time. He threatened to seek
“associate membership” in the Russian Federation. Other governors mumbled that
similar ideas had crossed their minds, too. All this drew angry howls from
Moscow, and Ilyumzhinov backpedaled a few days later.
With regional governors no longer appointed by Moscow but chosen by
popular vote, the center’s grip on its far-flung regions had to loosen. Since
1993 Moscow has veered from carrot to stick to enforce territorial obedience.
It woos some of the most powerful governors with federal posts and perks,
giving them an advisory role in running Russia.
Many ambitious regional politicians have taken advantage of the
Moscow’s paralysis, carving out a a more autonomous local, and sometimes even
international role for themselves. They talk of changes to the constitution
which will amend local election laws and give regional leaders more say in
running Russia.

Some regions have established initiatives to channel foreign investment
directly to their patch. One of the boldest governors, Eduard Rossel, leads
the five million-strong province of Sverdlovsk in the Ural Mountains and has
ambitions to build a larger constituency by heading the Urals Economic
Rossel has championed such far-reaching measures as issuing separate
currencies. His Urals association says Russia’s 1999 budget “completely
ignores the interests of Russia’s regions.” 
With soldiers wages unpaid, fuel and food supplies disrupted or delayed and
enlisted officers demoralized, analysts point out that many Russian army units
have already become regionalized. 
Rossel also favors withholding regional taxes payments from the
center. In a Russian TV interview recently he complained the austere 1999
federal budget cuts nearly $100 million from federal payments to his region.
“That’s enough to shut down the Sverdlovsk health ministry, or the
education ministry,” he told an interview on a popular show.
”[The Kremlin] owes us for the defense complex, for the federal power
organs, the support of the whole judicial system.” Sverdlovsk is one of a
handful of rich provinces that actually pay more into the federal budget than
they receive, subsidizing poorer regions.
Russia’s best known governor, Lebed of Krasnoyarsk warned just last
month he will push for “redistribution of relations between the center and the
“The principle of running all things from Moscow is still prevalent in
Russia,” he said. “The Federation has been increasingly shifting more
responsibilities to regions without backing them financially.”

Adding to the fragility of the federation is the virtual breakdown of
the Russian army. With soldiers wages unpaid, fuel and food supplies disrupted
or delayed and enlisted officers demoralized, analysts point out that many
Russian army units have already become regionalized.
“The internal security forces, too, belong to those who feed them,”
says Andrei Kortunov, a political analyst with the Moscow Social Science
Foundation think tank.
Even in Moscow, the very seat of federal power, the police are more
loyal to their mayor, Yuri Luzhkov, than to the president or prime minister,
Kortunov notes. That’s because Luzhkov makes sure they’re paid on time.
Primakov in recent weeks issued more stern warnings about
disintegration on one hand, while soothing restless regional leaders on the
Meeting with Siberian governors last month, the prime minister said he
would not let Russia split up like the Soviet Union did, and urged them to
drop their separatist ambitions.
Primakov has also issued vague promises of a comprehensive review of
taxes paid by regions and has lent his support to a proposal for a future
house of nationalities in the Russian parliament (the initiative of Governor
of the Tomsk region Viktor Kress), which would give ethnic concerns a voice.
Moscow pundits concede Primakov’s political and diplomatic skills have
brought a degree of political stability to Russia — for now. That includes
calming separatist eruptions in the regions.
But should the political and economic crisis deepen, the most
significant end-result might not be a popular uprising by the hungry masses or
an army revolt as many believe, but rather a gradual unraveling of the fringes
of Russia. In the words of analyst Kortunov, “In times of chaos, it’s every
man — in this case every governor — for himself.”


Moscow Tribune
March 1, 1999
Transport Quandary for Food Aid to Russia
By John Helmer 

American shippers are in a quandary over how to plan the delivery of more than
3 million tonnes of commodities that are included in the massive U.S. food aid
program for Russia. 

With more than $200 million in estimated transportation costs for the six-
month program at stake, shippers say they have yet to learn from the Russians
what ports have been selected, what volume of commodities will be delivered to
each; and whether break-bulk or containerized delivery will be designated. 

The uncertainty regarding the American food aid program is compounded by a
growing suspicion that the Deputy Prime Minister in charge of agriculture,
Gennady Kulik, is stalling because of second thoughts the government has had
that the volume of commodities it agreed to import from the U.S. and the EU
are as needed now, as officials claimed they were last Autumn. 

American and Russian commodity specialists in Moscow say that if the delay in
delivery persists, the promised meat and milk-powder will hit the Russian
market, when local consumption starts its seasonal fall, and when domestic
producers start to fill the market. 

"From the end of May until the end of August," a leading American meat
importer said, "Russian consumption of meat starts to drop to its lowest level
for the year, while Russian farmers start supplying the market." 

"By May 1," comments Leonid Kompaniets, production director at Russia's
largest milk producer, Lianozovsky of Moscow, "we will have a surplus of milk.
When the aid starts, it won't be needed. If it's high-priced, the plants won't
buy it. If the price drops by 50 percent, it will hurt domestic producers. It
is an idiotic decision of the government." 

When U.S. Agriculture Secretary, Dan Glickman, announced the American program
in November, he anticipated that shipments would start in December. At the
time of his announcement, the refrigerated cargo requirement was for 120,000
tonnes of beef and 50,000 tonnes of pork. This month, the U.S. department of
Agriculture added 50,000 tonnes of chicken to this part of the program. 

Large tonnages of wheat, corn, soybean meal, wheat, rice and dry-milk powder
are also to be delivered to Russia at the same time. 

In December, representatives of Sea-Land, Maersk, and American President Lines
gave the U.S. Maritime Administration their estimates of container delivery
volumes and timing for the meat and milk. Washington's supply and financing
programs require 75 percent of the shipments to be made on U.S.-flag vessels. 

American shippers are expecting ocean transport tenders will be issued ahead
of the product supply tenders. At the moment, they are concerned that
Prodintorg, the Russian distributor of the meat and milk products, hasn't
designated which ports to use. 

Yevgeny Sosnin, an aide to Deputy Prime Minister Kulik, said that
transportation decisions are being considered and settled now "on the level of
the government agents in charge of distribution, not Kulik's level." He added
that he doesn't know what exactly has been decided. 

Leonid Tikhomirov, the president of Prodintorg, the Russian government agent
for the meat and milk supplies, referred questions to his deputy, Aleksander
Zikov. "Whether cargoes will be transported in containers or in break-bulk
form isn't decided by us," Zikov said. "This is to be defined by the

Asked which ports are being considered, Zikov said meat deliveries for Russia
west of the Ural mountains should go to the ports of St. Petersburg,
Kaliningrad, and Murmansk. For deliveries to regions east of the Urals, Zikov
named just two ports, Vladivostok and Nakhodka. He claimed that Novorossiysk,
on the Black Sea, will receive only wheat and rice. 

American meat and transportation executives in Moscow say that refrigerated
container (reefer) delivery of cargo should lead the Russian government to
designate two ports - St. Petersburg to supply western Russia, and Vostochny,
to supply Siberia and the Russian Far East. 

American shippers believe containerization of other commodities would be
better than break-bulk delivery in preventing wastage, theft, and other cargo
losses. While this may be the preferred option of the U.S. government, which
is paying for transportation, the Russian government may limit the extent of
containerization by designating ports where break-bulk cargoes are handled. 

At Vostochny, where Sea-Land has a 21 percent stake and P&O 25 percent, an
American shipping official says "there is no capacity constraint. Vostochny
can handle massive amounts of cargo." He adds that, so long as the Russians
organize the logistics carefully, there should be enough refrigerated rail
wagons to move the containers inland, without bottleneck delays. 

But it will be Vladivostok, Tikhomirov said in December, and Zikov said this
week, that is likely to be designated to receive most of the American cargo.
Zikov declined to say why Vostochny has not been included in the program. 

"It is in the ports that work worst," observed an American shipping expert,
"that Russian organizations like Prodintorg operate best. There, stream of
facilitation payments is necessary to cut through the confusion." 


Most Russian Poll Respondents Favor Banning Nazis 

MOSCOW, Feb 26 (Interfax) - A vast majority of Russians - 78% - say that 
pro-Nazi organizations, their newspapers and their symbols must be banned.
A poll of 1,600 
people taken by the All-Russian Public Opinion Center during February 19-22
says that 12% of 
respondents said there is no need for a ban, and 10% were undecided. People
over 40, having an 
average income, having voted for Boris Yeltsin in 1996 and living in small
towns are likely to 
support the ban. The poll asked about the attitude toward Aleksandr
Barkashov's Russian 
National Unity [RNE]. One percent of the respondents said they are active
supporters of the 
party, 3% sympathized with the party and its leader, and 15% said they have
a neutral attitude 
toward the party. The view that the party has a right to operate legally
was shared by 13% of 
respondents. Thirty-five percent of Russians wanted RNE to be banned; 22%
knew nothing about 
it; and 11% had no opinion on the subject. Men, people over 55 and people
under 25 were more 
likely to sympathize with RNE. Middle-school dropouts outnumbered
people 6 to 1 as RNE sympathizers. Residents of the southern part of
European Russia 
outnumbered those of the Moscow region, Siberia and the Far East 5 to 1 as
RNE sympathizers. 
People who supported Communist Party leader Gennadiy Zyuganov in the second
round of the 1996 
presidential elections are three times as likely to sympathize with RNE as
those who 
supported Boris Yeltsin. Another question in the poll was about the
attitude toward the 
Communist Party of Russia (KPRF). Eight percent of respondents called
themselves active 
supporters of the party, 23% sympathized with it, 38% were neutral about
it, 18% did not like 
the party but believed that it had a right to act legally, and 5% wanted it
Surprisingly, 2% knew nothing of the party's existence, and 11% were
undecided. Men 
outnumber women 2 to 1 among active supporters of the KPRF, while there
were slightly more 
women among the sympathizers. KPRF supporters younger than 25 add up to
just one twentieth of 
supporters older than 55. Only among pensioners was the fraction of
supporters and 
sympathizers above the average. KPRF supporters predominantly came from the
northern part 
of European Russia and predominantly live in towns and villages.


Russia: Analysis From Washington -- When Democracy And Stability Conflict
By Paul Goble

Washington, 1 March 1999 (RFE/RL) -- Many Russian leaders are urging the use
of authoritarian means in order to ensure the stability of their country. And
many Western analysts and officials appear to have accepted their logic. 

But any return to authoritarianism, the historical record suggests, would be
unlikely to promote genuine stability. Over the long haul, democracies have
proved to be more stable than authoritarian systems. They provide governments
with the legitimacy any regime needs to do its job, they respond more promptly
and thoroughly to popular demands, and they establish rules for orderly
transitions from one leader to another. 

Nonetheless, the reasons behind both the Russian proposals and Western
acceptance of them are compelling: if democracies are more stable once they
are in place, transitions from authoritarian rule to a democratic system often
are more unstable than either the authoritarian past or the democratic future.

That such demands should be put forward by leaders interested in expanding
their own power or by populations suffering from the tensions of the
transition is hardly surprising. But what is surprising and even disturbing is
the increasing willingness of some Western observers to accept or even
advocate that a little -- supposedly temporary -- authoritarianism may be not
only necessary but acceptable. 

In the last month alone, Russian Prime Minister Yevgeny Primakov has argued
that the governors of Russia's widespread regions should be appointed by
Moscow rather than elected by the people in their areas. Such an arrangement,
Primakov suggests, is necessary to ensure that the governors will obey
Moscow's orders rather than respond to the views of their immediate

While such a change would require amending the Russian constitution and would
be opposed by many Russians, some in Russia as well as in the West see
Primakov's proposal as a necessary if potentially problematic step given
Moscow's current inability to run the country. 

In both places, such views are likely to be reinforced by Russian and Western
press coverage of recent statements by Sergei Karaganov, the chairman of
Moscow's Council on Defense and Foreign Policy, a grouping of business and
political leaders, and a scholar who over the last decade has regularly
attracted much attention in Russia and the West. 

According to Karaganov and his council, Moscow is no longer able to impose its
will on the regions or even to insist on a general policy line. It cannot pay
its military, it cannot pay its judges, and it may soon fall into the category
of a failed state "like Angola, Somalia and others" which "are in the process
of factual disintegration even as they formally retain their integrity." 

Such a situation is especially terrifying to Russians who have rarely lived
through a period when Moscow is weak and largely ignored by the rest of the
country. And thus an increasing number of them are willing to listen to
Primakov, Karaganov and others who argue that Moscow must take back power lest
the country fall apart. 

But this situation is also terrifying to many in the West. If the
international community has largely come to terms with failed states in Africa
and Asia because they pose few challenges to outsiders, it is much less
comfortable with the idea of a failed state in Russia. 

On the one hand, there are still enormous numbers of weapons of mass
destruction on the territory of the Russian Federation, and no one wants to
see such weapons fall into the wrong hands and possibly be used against the
West. On the other, ever more people in the West have accepted the idea of
Weimar Russia, the notion that Russia could slide toward a red-brown fascism
much as Weimar Germany did in giving way to Adolf Hitler's regime. And
consequently, they are prepared to accept, even back authoritarian measures by
Primakov in order to prevent that from happening. 

But there are three compelling reasons why anyone who accepts that logic in
the Russian case may be making a serious mistake. 

First, Primakov will not be in office forever, and any authoritarian
arrangements he introduces might be used by his successors in ways that no one
committed to democracy or stability could want. 

Second, any effort to impose order in the ways Primakov is suggesting could
backfire, triggering the very collapse of the state that he says he opposes.
After all, the Soviet Union fell apart eight years ago less because of Mikhail
Gorbachev's loosening of the reins than because having loosened them, he tried
to take back power and no one in the republics wanted to yield it. 

And third, as Yeltsin's spokesman Dmitri Yakushkin said recently, free
elections in Russia both across the federation and in the regions are a
remarkable "achievement for democracy" and a step forward that is "hard to
renounce and should not be renounced." 
Or Benjamin Franklin, one of the founders of American democracy put it even
more sharply: "Those who would sacrifice essential liberty for a little
temporary safety deserve neither liberty nor safety." 



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