March 11, 1999    
This Date's Issues: 3084• 3085 • 

Johnson's Russia List
#3085
11 March 1999
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: 6 Months On, Primakov Has Barely Started On Economy. 
2. Itar-Tass: Book About Primakov Brought Out.
3. SKATE Financial: INNOCENTS ABROAD: Russia Develops Bad Habit of 
Cheating West.
4. St. Petersburg Times: John Varoli, Sexual Harassment, Russian Style.
5. Moscow Tribune: Lyuba Pronina, Luzhkov to Continue Stalin's Legacy.
6. The Guardian: Profiteering prophet sees new Marshall plan as key to 
reviving eastern promise. In an exclusive interview with Alex Brummer, 
George Soros talks about his hopes and fears for eastern Europe.
7. Literaturnaya Gazeta: Emil Pain, The Russian Question: Is Russia 
Threatened With the Fate of the USSR?] 

*******

#1
6 Months On, Primakov Has Barely Started On Economy 

MOSCOW, Mar. 10, 1999 -- (Agence France Presse) Russian Prime Minister
Yevgeny Primakov's six-month report card makes curious reading. 

Popular, powerful and an increasingly strong bet for president, Primakov
has earned good grades in politics. But in economics the universal verdict
is "could do better" -- or at least "could do something." 

When he was approved as prime minister on Sept. 11, Primakov inherited an
economy considered beyond repair, a tail-spinning ruble and soaring
inflation and a population panic-stricken by shortages of goods in the
shops and money at the bank. 

Six months on, the situation is calmer but fundamentally unchanged, a
direct result of Primakov's wait-and-see policy. 

"His major achievement is that fortunately he hasn't done anything bad to
make the situation worse," said Aleksei Zabotkin, an economist with the
United Financial Group here. 

"It has been a strategy of sitting and waiting. They are doing nothing and
that is the major achievement of Primakov." 

But inactivity has left a string of broken promises in its wake. 

"We will redeem the debts, both the domestic and foreign ones, we will not
remain in debt to anyone," the new prime minister promised within hours of
his confirmation as prime minister. 

Weeks later Moscow had unilaterally restructured a small part of its huge
foreign debt and was desperately squealing for loans to be rescheduled and
even written off. 

"We needed to create a financial and banking infrastructure," was another
Primakov pledge. Six months on, an agency devoted to cleaning out Russia's
teetering banking system has barely started work. Banks are restructuring
themselves, often through dubious asset-stripping and wholly unsubtle
changes of name. 

As for the financial system and the damaging domestic debt default legacy
that Primakov inherited, it continues to haunt markets, investors and the
Finance Ministry. 

The government has proposed punitive rescheduling terms to foreign
creditors who are extremely reluctant to accept a settlement which gives
them barely five percent of their original outlay. Bond market liquidity
hence remains feeble and the financial system is thus still wretchedly
short of lifeblood. 

The ruble meanwhile has stabilized at around 23 to the dollar, despite the
fact that the country continues to run a massive trade surplus which topped
$2 billion in January alone. 

The surplus however has failed to show up in central bank reserves, which
have slid to three-year lows. For all Primakov's promises to get tough on
those responsible for such glaring 'capital flight,' exporters are clearly
still loath to repatriate their hard currency earnings. 

The government has however stuck by its promise not to print its way out of
trouble and has brought inflation back from more than 40 percent last
September to under four percent in February. Despite such fiscal rigor, it
has still found cash to make good some of the huge wage arrears built up by
previous government. 

Not surprisingly for a former Soviet apparatchik raised on notions of the
preeminence of industry, Primakov anchored his plan for economic renewal on
the renaissance of the "real sector" of the economy, a euphemism for
Russia's wheezing industrial heartland. 

Foreigners would be welcome participants in this program, he insisted,
stressing that "we want to create conditions for them." 

But the reality has been somewhat different. The flagship oil sector
venture between British Petroleum and holding company Sidanko is
foundering on the rocks of legal technicalities and official indifference.
Parliament still balks at agreeing to vital energy sector
production-sharing agreements. 

This combination of economic uncertainty and Primakov's failure to plot a
clear economic course for Russia has soured relations with the
International Monetary Fund (IMF), whose blessing Moscow dearly needs to
restructure foreign debt. 

The rhetoric has sharpened in recent days and time is running out, with
second-quarter foreign debt repayments looming large enough to make a
mockery of the budget which Primakov pushed through parliament last month. 

Without an agreement with the IMF on economic policy which could herald a
debt reprieve, there will be more broken promises in store from the Russian
prime minister, analysts say. 

******

#2
BOOK ABOUT PRIMAKOV BROUGHT OUT.

MOSCOW, March 10 (Itar-Tass) - The Centerpoligraph publishing house has
brought out the book "Yevgeny Primakov. Record of service" by Leonid
Mlechin, a journalist.
This is the first book about the head of the Russian government. It
includes unique materials about the developments, people and historic
events, which made an impact on the life and career of Yevgeny
Primakov, a specialist in oriental studies and academician, who some
time ago headed the External Intelligence Service, then the Russian
Foreign Ministry and in autumn 1998 became head of the Russian
government.
Primakov's friends and colleagues share in the book their impression of
Primakov. Their recollections give a human touch to the portrait of
Primakov, a politician and an individual.

*******

#3
INNOCENTS ABROAD: Russia Develops Bad Habit of Cheating West 

MOSCOW, Mar. 10, 1999 -- (SKATE Financial) When Russian tourists visit the
West for the first time, they are always amazed by the innocence of
Westerners. What's to stop the tourist going on a spending spree with his
(now-defunct) Inkombank or Uneximbank credit card? Why don't upper-middle
class families living in the suburbs surround their homes with high fences
and install angry dogs to guard their property? And why doesn't everybody
try to cheat the subway, the multiplex cinema or literally anyone on the
street with a simple trick? 

For the curious Russian tourist in London or Chicago for the first time,
the answer is soon obvious. The Western world lives too well to care about
the small inefficiencies, and has powerful yet inconspicuous ways of
protecting itself against the persistent or major offender. The whole saga
of Russian debt restructuring talks for past six months is a perfect
example of how this "Russian tourist" metaphor works. 

For several years leading up to August 1998, the Russian government and
most of the country's corporations played the role of tourist at the
world's capital markets. It was as if they were on holiday, but knew that
the trip must end and they would not be back soon. 

Russians were hungry for almost everything. Trade finance deals? Sure they
wanted them, even if the export financing used as collateral was secured at
terms so punishing as to put companies like KamAZ, Sibneft and MMK on the
verge on bankruptcy. 

Low-level ADR deals? A great way for management to waste a lot of time, but
also to pocket some money from their own stock being sold under the
program. 

Syndicated loans? A thrilling way for Russian local authorities to raise
and waste incredible amounts of cash with close to no supervision on
spending. 

In this grand spending spree, Russians were champions in every capital
market category compared to their emerging Europe peers. Russia had the
most NYSE/LSE-listed companies, the most ADR and Eurobond programs, the
most fixed-income deals between 1996 and August 1998 in the whole of
Central and Eastern Europe. 

Right behind these free-spending tourists were their eager tour guides, the
world's biggest investment banks and their various intermediaries. Well
before the Louvres published Russian-language guides and British Airways
reservationists started to speak Russian, the London, Frankfurt and New
York Stock Exchanges had translated their listing rules into Russian and
investment banks were pouring millions of dollars into expanding research
departments, road shows and investment seminars. 

Some (like Credit Swiss, Merrill, ING Barings and Chase), sincerely
believed that they were building infrastructure for more deals to come,
while others (like Lehman and Goldman Sachs) did the deal but were ready
to pull out at any moment. 

Borrowing like crazy, spending irresponsibly and becoming addicted to easy
money, the Russian economy was anything but competitive and poised for
growth come payback time. The first sign of trouble came not from Russia
(who cared about unpaid wages, barter deals and inefficient management?)
but from far-off Southeast Asia. Nevertheless, the tourist's cover was
soon blown, and now he is back home, deprived of entry visa and credit
cards. 

This is the story everybody knows. But not everybody in the West realizes
just how few choices they have in dealing with Russia right now, how Russia
now considers itself out of range of the creditors pursuing its long trail
of misdemeanors. Yet, after being burned for billions of dollars, it is
very likely that the world's financial institutions will lose even more
once they find the courage to accept that it is almost impossible for
Russia to service most of its debt. 

It is now more than six months since the GKO market was suspended, but
instead of nailing down the Russian government to any serious concessions
on paying its debts, the camp of international creditors is now divided
after Deutsche and Chase chose to come to a unilateral agreement with
Russia, leaving the other 17 banks in an awkward and much weaker position. 

And Russia continues to spit in the face of world financial markets. The
Russian Central Bank chairman has admitted openly to hiding billions of
dollars of Central Bank reserves in an obscure offshore company in the
Channel Islands to avoid seizure by foreign creditors. 

Uneximbank defaults on millions of dollar of rated debt, but at the same
time continues active operations under a different name (Rosbank),
financing gold production in Russia and entering into a variety of other
deals. 

LMZ, Russia's major power-turbine manufacturer, has defaulted on a Deutsche
syndicated loan, while Russian companies connected to it are stealing this
decade's largest nuclear generator production contract (with the Iranian
Buscher power generation facility) from Siemens. 

Dozens of foreign investors now have legal title to controlling equity
stakes in flagship Russian companies, received after Russian borrowers
defaulted on their credits with equity stakes as collateral. But instead
of gaining control over those companies, the foreign investors sit on the
sidelines and "negotiate." 

The talks go on, but call them what you will, the fact remains that foreign
creditors are coming up against total failure to collect their debts. This
is hardly due to the delicacy of these creditors, who have not held back
from dishing the dirt on Russia in the media and through their direct
investor relations contacts. This war of words, as a poor substitute for
legal action, is way of covering for the fact that the Western banks were
too trusting and naive when dealing in a foreign environment, and failed
to do proper due diligence and risk management during investment deals in
Russia. 

This has affected even honest Russian companies and regions, making it
difficult to do business with the West and only aggravating prejudices
about Russian businesses and even individuals. The United States, for
example, now requires U.S. banks conduct particularly intensive due
diligence reports on their clients when these are Russians who are either
owners or officers of U.S. or offshore businesses having accounts with
U.S. banks. 

Naturally, this is counterproductive for both sides. The Russians are in
danger of developing an ever-greater tendency to cheat "innocent"
foreigners unable to enforce their rights their rights and ready to
forgive anything for the sake of "political reasons" and the "long term
relationship." 

Unfortunately for the Russians, the world's international financial
institutions do not need Russia, and can shift their focus to other
countries and regions. Russia, on the other hand, has nowhere else to go
to restore its confidence in its creditworthiness and to become integrated
into the world economy. And unless it does, Russia will continue to slip
into poverty, corruption and overall decline, with not even tourist rights
to a global fiesta of rising living standards and prosperity. ( (c) 1999
SKATE Financial) 

* This article appears on Russia Today through a special agreement with
<http://www.skate.ru/>SKATE Financial. 

*******

#4
St. Petersburg Times
March 9, 1999 
Sexual Harassment, Russian Style 
By John Varoli
STAFF WRITER 

"Imagine being sexually harassed by a foreign employer working for the
European Union," said Tanya, a Russian woman in her late 20s, writing in a
letter of her own personal experience. " I didn't think it was possible
until it happened to me." 

"Imagine your boss showing up in front of you in his underwear, asking you
to come into a small cabin to have a 'serious' talk; asking the company
driver to take you and himself [the boss] to his apartment, then turning on
slow music, and bringing up personal, intimate subjects; asking you to work
nights at his place; asking if you were a lesbian after you refused his
advances; telling you that you need to have sex; as well as inquiring with
whom you are having sex." 

Its hardly news to say that sexual harassment is a problem in Russia. In
fact, it is so commonplace that it is hardly discussed, often accepted as
the natural course of relations between men and women. 

But as the above example makes clear, it is not solely a problem between
Russian men and Russian women. 

It is a phenomenon that crosses cultural, social, and national lines, and
it is fostered by an atmosphere of tacit tolerance in Russia toward the
problem and the idea that women have little rights beyond the "right" to
serve men. 

While many Russian women downplay the seriousness of sexual harassment and
men dismiss it altogether, the issue certainly strikes a sensitive nerve
with women; such that every one interviewed for this article asked that
real their names not be used. 

"Sexual harassment is a serious problem in Russia," said Alexander
Krautsin, a sociologist at the Russian Academy of Sciences, who recently
conducted one of Russia's first empirical investigations on the problem in
St. Petersburg. "According to our research, about one-third of women have
been victims of sexual harassment." 

"We looked at six categories, ranging from verbal comments to actual sexual
relations," Krautsin continued. "The problem, however, is rarely recognized
and admitted by woman. The vast majority, some 80 percent to 90 percent,
prefer to pretend that nothing serious has happened, or to settle the
problem themselves with the aggressor, not asking for any help from friends
or relatives." 

In the case of Tanya, the aggressor - her boss - believed he could get away
with behavior in Russia that he knew he would be unacceptable in Europe. 

"It seems that some Western men have the idea that you can come to Russia
and take advantage of poor Russian women who will do anything for you for
just a small amount of money," said Tanya. 

But Tanya's boss made a big mistake. After living in the United States for
four years, Tanya had long ago come to understand that women need not
tolerate behavior they find humiliating. 

In fact, she almost took her case to court, stopping at the last minute
only because she felt sorry for her oppressor, whom she described as a
pathetic man with "severe emotional problems." 

The standard treatment of women as second-class citizens is a deep-seated
cultural tradition. As the Russian folk saying goes, "A chicken is not a
bird, and a woman is not a human being." 

With such attitudes prevalent, it's hardly surprising that the country's
legal and law enforcement systems pay little heed to the problem of women.
And with the country's dire economic straits, women are thankful for any
job and willing to do whatever it takes not to lose it. 

"Since he paid my salary, he felt he had the power to do anything he
wanted," said Irina, who formerly worked in a private architecture company.
"And when I refused his advances, he then started to delay payment of my
salary, until he just finally got rid of me after finding another girl who
would not refuse him." 

"The aggressor sizes up how vulnerable a woman is," said Natalya Khodyreva,
an assistant professor of psychology and director at the St. Petersburg
Crisis Center for Women. "If she is without a propiska, or residency
permit, or from a family that is not well-off and without connections, then
the aggressor is most likely to take advantage of her. But if her parents
are influential and well-off then he is will be more careful." 

Perhaps the main obstacle on the road to fighting sexual harassment is the
lack of any awareness that it is a problem. In fact, the word only recently
entered the Russian language, often translated, rather awkwardly, as
seksualnoye domogatelsva. 

"Sexual harassment is defined as when a woman is in a state of dependence
at work and forced to provide sexual services," said Khodyreva. "If she
refuses she can be fired, or deprived of a raise or a bonus." 

Sexual harassment can take the form of a woman being asked to provide
favors to a boss or colleagues, or even being encouraged by one's boss to
sleep with clients or potential clients of the firm. 

Believing that such behavior is normal and understanding that the
male-dominated legal system will not only not protect men but condemns
their resistance, most women don't bother to put up a fuss. 

"Many women are afraid of revenge from their aggressor, the lack of legal
basis for defense, or that they will lose their job if they fight back,"
said Khodyreva. 

In 1996, only eight cases of sexual harassment came to the courts in all of
Russia, and since then there have been even fewer. 

"Women are not protected in Russia," said Khodyreva. 

"In general, law enforcement agencies have no desire to protect citizens
they are supposed to serve, and as far as women are concerned, sexual
harassment is not even a crime." 

While the situation is certainly dire in Russia, it is not so far behind as
many might believe. While the first U.S. court case on sexual harassment
was held in 1976, the country only began seriously tackling the problem in
1991 when the Senate Judiciary Committee held hearings on Anita Hill's
charges against Supreme Court nominee Clarence Thomas. 

The year after this highly publicized case, the number of sexual harassment
cases filed across America jumped fifty percent. 

Now, sexual harassment victims in America can be compensated not only with
back pay if they had been fired unfairly, but for future pecuniary losses,
emotional pain, suffering, inconvenience, mental anguish, loss of enjoyment
of life, and other nonpecuniary losses. 

Yet, most Russians, especially women, feel that America has gone overboard
on the issue, especially concerning the escapades of U.S. President Bill
Clinton which have lead to his impeachment. 

"American feminism and obsession with stamping out sexual harassment has
poisoned relations between men and women in your country," said one young
women, when asked if sexual harassment is a problem in Russia. 

Some women interviewed for this article see what the West calls sexual
harassment as simply part of the rules of the game, and are satisfied with
it as long as it does not become violent or threatening. They see it as
necessary, and even advantageous. 

"For me sexual harassment was not a problem until I got fired," said Lyuba,
a woman in her early 20s. "Yes, we are willing to use our beauty and short
skirts to get what we want. And why not? It is easier that way to get
something, than having to work hard at it." 

Some women understand that this is the culture in Russia, and that they
have to adapt and use it to their advantage. 

"A lot of woman provoke sexual harassment with their behavior and dress,"
said Katya, a 30-year-old woman working as a business executive. "In
general the level of morality is quite low in Russia now, and girls will go
long with whatever to get what they need." 

But according to Klautsin of the Russian Academy of Sciences, it is a myth
that women are out to ensnare men. 

"Most women react by saying that is just the way men are, they are all
interested in sex. Indeed, half of the women polled say that women
themselves are to blame for the way they dress and act." 

"I think that in Russia women are more vulnerable because they don't
understand that it is wrong to have a personal relationship with people at
work and find it acceptable to have a relationship with the boss for fear
of losing the job," said Tanya. 

"In our society, people feel they have no rights and are not able to speak
up and have to put up with things they don't agree with." 

*******

#5
Moscow Tribune
March 10, 1999
Luzhkov to Continue Stalin's Legacy
By Lyuba Pronina

Josef Stalin's grand plan to turn the Soviet capital into a monument of a
city, with colossal buildings spanning its broad avenues, has found a staunch
supporter after almost 50 years 6 Moscow Mayor Yury Luzhkov. 

The mayor might even outperform the Soviet leader by awarding Moscow with some
60 wedding-cake constructions that will dot the city by 2015. 

The first eight buildings, called vysotki in remembrance of the seven well-
known Stalin sky-scrapers, will adorn the cityscape by 2003. 

The new project, branded the New Ring of Moscow, is aiming to kill two birds
with one stone, says Vladimir Denura, Vice-President of Konti, the company in
charge of the project. 

"It will offer high standard accommodation in between the Garden ring and the
MKAD [Moscow ring road], thus relieving the city centre and at the same time
helping to raise funds to replace the make-shift apartment blocks built in the
Khrushchev era," Denura told The Moscow Tribune. 

Inspired by American sky-scrapers, the rather imposing Stalin vysotki,
constructed in the 1940s and 50s, came to symbolise the new, powerful image of
the Soviet country. Today, Moscow as a capital with international status and a
pet child of the presidentially hopeful mayor does not want to lag behind. The
construction of the Moscow-city business center is yet another example of the
mayor's ambitious projects. 

Construction of the first new vysotka will begin in July close to Victory Park
and will rise 39 floors up with total space of 86838.1 square meters. 

Although more austere than its successors, the first Stalin vysotki -- among
them the Foreign Affairs Ministry, Moscow State University, Hotel Ukraina and
an apartment block on Kotelnicheskaya Naberezhnaya 6 were built to perform a
number of functions. The new vysotki will primarily offer accommodation space
but will also serve a variety of functions, bringing under one roof shops,
restaurants, services and underground parking. The top two floors will house
sports and recreational centres, with swimming pools and restaurant with
panoramic views. 

As the project will be financed through non-budget money, the city government
is planning to set up a joint-stock company -- New Ring of Moscow -- to
attract investment to the project. The company will be 100 percent owned by
the city. 

The eight buildings are expected to net as much as $130 million. 

With the city unable to fully finance the project, the city authorities pin
much hope on investment coming from both domestic and foreign parties.
According to Denura, out of the $47 million cost of the first apartment block,
only 15 percent will be financed by the city -- and this will mainly go
towards the project's launch. Another 15 percent will come from Sberbank
credits and yet another 15 percent will be covered by on-credit deliveries of
building materials. 

"Parallel to that, we are now looking for a contractor that would agree to
supply another 10-15 percent worth of construction works," says Denura. 

According to Denura, negotiations are being held with the Swedish company
Skanska.
"The rest will be covered by investors which we are hoping to get when the
pilot sky-scraper is completed. We are confident that many potential investors
will show interest in the project." 

Part of this interest should come as the project will be covered by the new
Moscow law on special status territorial entities which provide a number of
economic incentives, including tax breaks, for investors. 

With the city having serious plans for the new construction project, fears
have been vented that it won't see the demand forecasted by its authors. The
prices for a square meter in a vysotka will cost the customer anything from
$1500 to $2500. 

However officials sound more than optimistic on the matter. 

"Over 90 percent of Moscow flats are of average or poor quality and one third
of the dwelling sector will exhaust its resources in 3-5 years anyway," says
Denura. "According to our research, there are a lot of people who would not
mind paying $200-300 extra per metre to improve their housing conditions. 

"We are also looking at the possibility of renting flats in future to Russian
families or to foreign businessmen coming to work in Moscow. It will be
cheaper than staying in a hotel." Denura also said that the project will help
attract long-term inexpensive credits from the West. 

"With that we will not only construct better houses for Muscovites but will
also finance the now stagnant mortgage system," he said. 

******

#6
The Guardian
11 March 1999
[for personal use only]
Profiteering prophet sees new Marshall plan as key to reviving eastern
promise 
In an exclusive interview with Alex Brummer, George Soros talks about his
hopes and fears for eastern Europe 

The body language tells all as George Soros delivers his verdict on the decade
since the collapse of Communism. Shifting awkwardly on a sofa in his suite at
the Intercontinental Hotel in his native Budapest, he declares: "On balance I
have to be somewhat on the negative side. I am disappointed. I am more aware
of the failings of the capitalist system than I was when when confronting the
failings of the socialist system." 

Soros believes that capitalism has worked best for those countries where the
communist system was not so firmly rooted. 

"In Hungary, Poland and Slovenia the societies have been moving towards
Western Europe and the economies are catching up with the Europe Union," he
says. "Democracy is functioning well." 

But for countries such as Russia and Ukraine, the change from communism to
free market has been "a horrendous experience".

Soros believes that only the Baltics and possibly Moldova have escaped the
profound traumas of the transition, because "communism was not deeply
ingrained". He also says that Bulgaria is beginning to thrive, despite its
soaring crime rate.

The verdict of one New York-based financier might appear inconsequential set
against the sweeping changes in the the former eastern bloc countries. But
George Soros, more than any other individual working in the West, has been
pivotal in helping to reshape the region. 

Through his Open Societies foundations, he has been working to uphold the rule
of law, protect minorities, improve education, and promote the market economy
throughout the region.

Since 1989 he has disbursed up to $2 billion of his personal fortune, some of
it amassed at the expense of the Bank of England in 1992 when the exchange
rate mechanism collapsed, in pursuit of these goals - not all of it with
success, he accepts. 

In Russia it took several years to weed out the apparatchiks who infiltrated
and undermined his foundations. Last year alone, he was responsible for $428
million in assistance. 

But Soros the person is a far cry from the usual image of a billionaire
financier. Dressed in an open shirt, woolly cardigan and cords, he asks
anxiously whether he will be photographed. "If so I will have to shave," he
says, running a hand over his stubble.

He last came to international attention last summer when he said that IMF
programmes in Russia were falling apart as 'robber barons' took control of the
system. He warned that the Moscow financial structure could implode.

No sooner had he spoken than the economy crashed, with a hefty devaluation of
the rouble and a debt moratorium which sent shock waves through the West. 

As a result, Soros is now seen as a prophet as well as a profiteer, though he
still faces fierce criticism.

In east Asia, he is seen as the precipitator of the economic crisis because he
took huge positions against Asian currencies. In the West there is speculation
that his philanthropic activities are simply a mask for a man who has used his
ability to move markets to make profits for the investment funds he manages.

But Soros believes that even the new Europe's worst problems - civil strife
and economic difficulties in the Balkans and Russia's monetary and
institutional chaos - can still be solved. 

As far as the Balkans are concerned Soros says that the West is making a
fundamental mistake by relying on the International Monetary Fund to trigger a
transformation in the area's fortunes. 

Soros believes that the huge sums that the United States, Britain and Nato
have sunk into military operations in the region should have been ploughed
into the area's economic institutions just after the fall of Communism - on
the same lines as the Marshall Plan, in which the US funded post-war
reconstruction in Europe.

"I think you need a regional plan," he says. "I hate to use the words Marshall
Plan because I was laughed at before (it was his suggestion for Russia in
1989). But it would include something like the Marshall Plan rather than the
political interventions. 

"There are people in some of the western European countries that think in
those terms." 

Soros expects these allies to go public soon. "We need new structures for
south-eastern Europe, a more co-operative approach," he adds. 

The financier believes that the acute problems of Bosnia, Kosovo and Macedonia
- which will never be able to function as economic units on their own - could
be resolved by the creation of a "common market" similar to that created by
the Benelux countries after the second world war. Soros says that the European
Bank for Reconstruction and Development (EBRD) could be the key to this
because it has already proved its effectiveness in avoiding the big losses
made by the private sector. 

"They have lost less money than I have," he says. He suggests that the EBRD
could "have another tranche, an increase in capital, to the Balkan region'
which could be spent on improving the area's infrastructure. 

"There is very little in the way of east-west communications. Everything goes
north-south where it is stopped by Serbia," he says.

He also calls for the new regional structure "to be anchored in the European
Union" with a political association forged between Greece, Austria, Hungary
and Slovenia and the Balkan states.

The final part of the stabilising equation would be "a very strong civil
society component". 

Soros's own mission in eastern Europe started in his native Hungary, in 1984
Born in Budapest in 1930 to well-to-do Jewish family, Soros spent much of the
war in hiding from the Nazis. In 1947, he left for Britain to study at the
London School of Economics. 

It was at LSE than he fell under the influence of the philosopher Karl Popper,
whose 1945 book Open Society and its Enemies provided the model for much of
his work in eastern Europe.

"In Hungary, where the foundation started in 1984, we didn't play any part in
the collapse of the system,' Soros says. 

"The system basically collapsed because the Soviet Union and its empire
collapsed. But I think we did play a role in preparing Hungary socially and
politically for the change of regime."

His efforts in Russia, however, proved less successful. . 

"Our biggest problem was in the Soviet Union where the foundation failed to
lead towards an open society... it was part of the problem, instead of being
part of the solution," he says. 

"We had our putsch in the foundation and had to get rid of an apparatchik who
was abusing his position."

He rejects suggestions that his criticisms of the IMF approach in Russia were
irresponsible and triggered the crash of 1998. 

"Imagine if I had not intervened - it would not have made any difference to
the outcome. (The criticism) is a typical attempt at finding a scapegoat. 

"But I have to accept that my public announcement of what I was advocating did
have a negative, adverse influence." 

Soros currently has serious concerns about the direction in which Russia is
heading, and is particularly concerned about rising anti-Semitism. 

Despite the failure thus far to bring a functioning market economy to Russia,
Soros does not believe the game is up. In his view, much depends on the
willingness of those in power to tackle corruption. 

However, to win Western investors' confidence, Russia will need to repay its
outstanding debts. 

Soros believes that his original idea - a "currency board" of the kind used
successfully in Argentina and Bulgaria to halt the outflow of outflow of
capital - would have to be instituted and the West would have to help. 

Soros believes that the IMF, originally unsuited to the task of easing eastern
Europe towards a market economy, now has the experience and the funds to turn
Russia around. He says the main problem is a political one - finding a prime
minister "who would know how to deal with the economic situation".

Meanwhile, Soros would now like to reduce his own involvement in the former
Soviet bloc. "Spending has increased every year. I don't have a bottomless pit
of resources," he says. 

Despite the profitability of his investment activities, he admits he is
feeling the pinch and wants to make his network of foundations "self-
sufficient and self-sustaining", ending the work of his foundations by 2010.

Some of the slack already is being taken up by others including the World
Bank. 

"I have already spent more than I have," one of the world's richest men
observes. 

Tomorrow: how euphoria following the fall of Communism gave way to
disillusionment among Russia's artists, film-makers and musicians.

For countries such as Russia and Ukraine, says Soros, the transition from
Communism has been a horrendous experience

Soros would now like to scale down his work. "I have already spent more than I
have," observes one of the world's richest men 

******

#7
Emil Pain on Nationalism 

Literaturnaya Gazeta
3 February 1999
[translation for personal use only]
Article by Emil Pain: "The Russian Question: Is Russia Threatened 
With the Fate of the USSR? Third Article" 

After the collapse of the USSR, the question of 
whether Russia 
would return to the path of the Soviet Union became almost 
rhetorical. And there were certain grounds for gloomy predictions. 
But one cannot fail to note Russia's peculiarities that distinguish 
it from the USSR and determine the great probability of its 
preserving its territorial integrity. 

The prospects of preserving Russia's integrity are linked in 
no small degree to the peculiarities of its ethnic composition. The 
Russian Federation, as distinct from the USSR, on the whole is 
ethnically rather homogeneous. 

The Russian population makes up the majority not only on the 
scale of the entire country but also in the majority of components 
of the Federation. The Federation's non-Russian population is 
extremely heterogeneous. The majority are people (approximately 
two-thirds are so-called "Diaspora minorities"--Ukrainians, 
Belarusians, Poles, and so forth) who in their ethnological 
expectations never even dreamed of creating their own autonomous 
territorial entities within Russia. 

Theoretically, it is most probable that demands to secede from 
Russia would come only from those non-Russian peoples that make up 
the majority on the territories of their republics. These peoples 
(less than 3 percent of the country's population) live in eight 
republics. They are the republics of the Northern Caucasus (with 
the exception of Adygea), Kalmykia, Chuvashia, and Tyva. 

But of the potential separatists one must immediately exclude 
North Ossetia as the only Christian autonomous entity in the Muslim 
Northern Caucasus. It is not likely that such multinational 
republics as Dagestan, Kabardino-Balkaria, and Karachayevo- 
Cherkessia will leave the Federation. The majority of the 
population and political forces here are aware that even to raise 
the question of these republics' independence would immediately 
cause an explosion of internal contradictions among the numerous 
ethnic communities in these formations. 

For reasons other than those on the aforementioned list, one 
should rule out the withdrawal of Chuvashia from the Federation. 
There simply are no political forces here that would proclaim a 
desire to fight for this republic's independence. But even if such 
forces were to appear in Chuvashia, still the probability of this 
republic's withdrawal from the Russian Federation would be very 
insignificant. Chuvashia is among those republics (and they are the 
majority in Russia) that do not have independent external boundaries 
with other states and, consequently, can be completely blocked by 
Russia. It is easier for those republics that are on the outskirts 
to withdraw from Russia, and this means that in the worst-case 
scenario Russia would only "shrink" around the edges, but it would 
not break into parts. 

The specialists are undoubtedly right who assert that "no 
ethnically homogeneous state in the modern age has ever fallen 
apart. There are hardly grounds to assume that Russia will be the 
first example of this." 

Of course, it would be wrong to say that by now all the 
contradictions between the federal authority and the national 
republics have been resolved, if only because the majority of them 
still have laws in effect that contradict the Constitution of 
Russia. But the threat of Russia's collapse has undoubtedly 
decreased, and practically the only source of separatism left on 
Russia's territory is the Chechen Republic. 

But can the "independent Chechnya" bring other republics along 
behind it? This scenario is almost incredible since in the near 
future the prospects for even simply restoring the economy or 
establishing some sort of stabilization of life in Chechnya are 
extremely problematic. 

The circumstance that helped the Chechen forces supporting 
Dzhokhar Dudayev and his accomplices to achieve military successes-- 
this same circumstance will impede the establishment of a peaceful 
life. Namely: the existence of militarized settlements and a 
population that is universally armed. Under the conditions of 
destruction, this circumstance will push people to criminal actions, 
including outside the Chechen Republic itself. 

None of Chechnya's current leaders is in a condition to remove 
his own field commanders, to suppress those who just yesterday were 
the elite and nucleus of the armed forces. And the existence of 
these uncontrollable individuals creates insurmountable obstacles to 
any plans for restructuring the Chechen Republic and generates great 
dangers for their neighbors. 

Under these conditions, when anti-Chechen sentiments are 
growing in the neighboring republics, it is not very likely that 
Dagestan or any other republic of the Northern Caucasus will 
voluntarily join Chechnya or follow its example. In the foreseeable 
future Chechnya will not be able to conquer any other territories 
either, since it will have to work mainly on solving its own 
extremely difficult domestic problems. 

But could Russia fall apart because of economic 
factors? 

The economic crisis of August 1998 once again revived 
discussions about the idea that Russia was rapidly approaching a 
collapse. 

Strange as it may be, the first to touch upon this problem was 
Cuba's Fidel Castro. As early as 24 August he warned the world 
community of the threat of a collapse of Russia brought to the point 
of destruction by capitalist reforms. A little later, on 2 
September, CIS Executive Secretary Boris Berezovskiy warned of a 
real danger of "losing" Russia. After him, on 3 September, 
Krasnoyarsk Governor Aleksandr Lebed, who is especially inclined to 
describe dramatic scenarios, spoke of this same threat. 

The main occasion for such resolute statements from the 
politicians were the measures for economic self-isolation of the 
regions, introduced by the leaders of many Russian republics and 
oblasts in order to protect them from the consequences of the August 
crisis. Shipments of their own agricultural and food products were 
restricted by the authorities Astrakhan, Volgograd, Voronezh, Samara 
Oblast, Stavropol and Krasnodar Krays, the Bashkir and Tatar 
Republics, Moscow, and St. Petersburg. 

Bashkiria arbitrarily curtailed tax payments to the federal 
budget. Kaliningrad and Tomsk Oblasts, Tataria, and Khabarovsk Kray 
completely stopped transferring taxes to the Center. 
Kalmykia went further than others down this path. This 
republic's parliament (Narodnyy Khural) adopted a decree to write 
off in favor of Kalmykia funds intended to be transferred to the 
federal budget. 

All these actions on the part of regional authorities 
literally stirred up the panic in the country. Fortunately, the 
society sobered up rather quickly. 

Not even a month passed from the time the regional leaders had 
introduced economic restrictions and bans before life itself 
demonstrated their complete ineffectiveness. It turned out that the 
ideas the regional leaders had carried over from Soviet times that 
the state could and had the right to make anyone it wanted to do 
anything it wanted them to do are not always correct today. First 
the heads of the Northern regions, which ship in practically all 
their consumer goods, were convinced that they could not force the 
merchants to bring them in and sell them at "firm" or "frozen" 
prices. Then the governors of the southern provinces, who were the 
first to introduce restrictions on shipping agricultural products 
out of the region in which they were produced, discovered that their 
neighbors responded in kind and refused to ship them their coal and 
oil. Under these conditions the regional authorities began to speak 
about the unacceptability of violating the integrated economic 
space. Therefore even in the first half of September many price 
restrictions and also bans on the shipment of goods were 
removed. 

The development of federative relations at the end of 1998 
showed that the situation that had arisen in Russia by that time was 
more reminiscent not of the time right before the collapse of the 
USSR but of a quite different time--1992-1993, when the regions, 
having experienced the shock of a radical introduction of market 
mechanisms and the price explosion, tried to use administrative 
barriers to separate themselves from the federal government that had 
begun the reform. But the federal authority managed by 1994 
basically to overcome the economic autarky of the regions through 
the use of economic and administrative sanctions. 

It apparently gained from the experience, and in 1998 the 
reaction from the federal Center was much more rapid than during the 
period of the first crisis. While in the former case the federal 
authority took two years to decide to apply sanctions against the 
regional authorities, under the current conditions these measures 
were taken only a month after the well-known August events. As 
early as 23 September, Russian Federation Procurator General Yuriy 
Skuratov instructed the procurators of all components of the 
Federation to check on the legality of the actions taken by those 
regional authorities that had encroached upon the unity of the 
country's economic space and the free movement of goods and 
services. These instructions were carried out by the regional 
procurators. But the most striking thing of all is that even before 
receiving instructions from Moscow, many oblast procurators 
protested the actions of the local authorities. And the local 
police were guided by these protests and not at all by the decisions 
of the governors. 

Of course, the country's integrity cannot be maintained by 
punitive measures alone, but the very fact that Russia's law 
enforcement system is still able to maintain common legal conditions 
over a large part of the country's territory tells us 
something. 

A much greater role than that of the enforcement structures in 
preserving the integrity of the Russian Federation is played by such 
economic buttresses as the unified fuel, energy, and transportation 
systems. It is also important that the federal Center owns property 
in all the regions in amounts much greater than the regional 
property (this is not only because of facilities included in the 
aforementioned natural monopolies, but also enterprises of the 
military-industrial complex). Because these enterprises require for 
their existence immense resources that the regions do not have, even 
the most inveterate separatists do not call for their 
nationalization. 

But still the main factor in maintaining Russia's integrity is 
the public awareness of the majority of Russians, who have an 
extremely negative attitude not only toward the idea of the 
country's disintegration but also toward the prospect of its 
confederalization. 

I cannot but agree with those specialists who asserted that 
even under the conditions of mass panic there was almost no economic 
basis for separatism in Russia, or else it was minimal. This 
conclusion should not be regarded as a call for complacency and 
inaction. The entire foregoing analysis was meant to show that 
there are plenty of problems in interethnic relations in Russia. 

Only the relative significance of these problems changes with time. 
While during 1991-1993 the main danger was ethnic separatism that 
broke out on the country's periphery and came from a number of 
republics, today the greatest danger involves the increase of mass 
xenophobia in the largest cities in the center or Russia. This 
xenophobia, without our complicity, could become a nutritive 
environment for the development of the most terrible forms of 
nationalism. 

*******