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Johnson's Russia List


March 12, 1999    
This Date's Issues: 3086   

Johnson's Russia List
12 March 1999

[Note from David Johnson:
It's too late. Again. Read and find what's here.
Party at Russia House in Washington tonight.]


Primakov soothes trigger-happy generals over Chechnya

MOSCOW, March 11 (AFP) - Russia's ominous threats to the rebel republic of
Chechnya have calmed, in what analysts call a victory by Prime Minister
Yevgeny Primakov over enraged army generals eager to vindicate themselves in

The shrewd Russian premier concluded an emergency closed-door cabinet meeting
on Wednesday by declaring Russia would not be drawn into a "big war" with the
independence-seeking Moslem state over last week's abduction of a Russian

That jittery session came against the backdrop of unconfirmed reports that
Russia was sending rocket forces to the Chechen border and generals were
vowing to release their abducted comrade, Gennady Shpigun, no matter what the

Tensions between Moscow and Grozny, strained at the best of times, approached
breaking point for the first time since the two sides signed an inconclusive
1996 truce ending a brutal 21-month succession war that left some 80,000
civilians and soldiers dead.

Chechnya has run lawless ever since, fragmented by clan warfare and awash with

Armed groups have kidnapped hundreds of civilians and officials, but it was
not until Shpigun was abducted last Friday that Moscow finally started ratling

Observers familiar with the intricate politics of the Moscow-Grozny
relationship agree that the two sides are again on the edge of a war.

"There is a feeling of rage in the military which is itching to prove that it
was not completely defeated in Chechnya," said Thomas de Waal, a war
correspondent who wrote an acclaimed book about the 1994-96 conflict.

"But Primakov has always been very cautious," de Waal added.

"Any intervention in Chechnya is fraught with risk and better left
unattempted. It tends to anger the Chechens quite a lot."

But beyond the pure outrage and humiliation of seeing an unassembled group of
guerrillas put the Russian army to its knees, Russia may also see military
strikes as a way of keeping the relatively pro-Kremlin Chechen President Aslan
Maskhadov in power.

"I think someone is calculating that they can intervene in this Chechen power
struggle," de Waal said.

"They may decide they can launch an attack against someone like (warlord
Shamil) Basayev and destroy other elements of the Chechen opposition."

Basayev and other Chechen war generals who once served in Maskhadov's
government have long-since splintered off and plotted the president's

Many of them believe Maskhadov is a Moscow puppet who does not truly support
Chechen independence. Russia brands these gang-leaders as terrorist who must
be somehow destroyed. It has not yet dared to do so, fearing the consequences.

The leadership crisis gripping the economically ravaged republic however
mirrors the current state of affairs in Moscow.

Several analysts here speculate that a storm has been whipped up around the
current Chechen stand-off in a chess-like strategy to oust Primakov from

"One theory is that this general's case has been blown up so big in order to
sink Primakov," said Alexei Malashenko of the Carnegie Moscow Center. "Few
have managed to solve Chechnya before and few expect Primakov to succeed now."

Nezavisimaya Gazeta, in strong opposition to the current government, said:
"The prime minister in the coming days will have to use all of his diplomatic
skills if he wants to keep the current cabinet intact."

What Primakov has managed to do so far is face down irate Russian generals who
strongly advocate a return to combat and according to defense sources are
already poring over Chechen maps to plot their attacks.

He has further made clear that any order to attack the republic must be made
by the Kremlin, and personally by President Boris Yeltsin.

"The prime minister has taken the most advantageous position, making it seem
like he is only keeping himself subordinate to the president," said the
business daily Kommersant. "The final decision (for a military offensive) will
have to be made by Yeltsin in the hospital."

Yeltsin for his part made his views clear on the stand-off Thursday. Spokesman
Dmitry Yakushkin said the Kremlin chief was first and foremost in favour of
peace in Chechnya, though lawless "bandits" had to be punished. 


Primakov Says Russian Government Has Done "Not that Little".

MOSCOW, March 11 (Itar-Tass) - Summing up the results of the six-month's work
of the Russian government, Prime Minister Yevgeny Primakov said on Thursday
that the government has managed to do "not that little." 

"Over this period, panic had been stopped on the consumer market, we have
managed to hold up skyrocketing prices," Primakov said during his meeting with
leaders of State Duma factions. "We have managed to prevent galloping
inflation which is now decreasing. The rouble exchange rate dynamics has come
to be smoother and has practically stabilized." 


Primakov Says GVT'S Top Task Is to Fight Crime and Corruption.

MOSCOW, March 11 (Itar-Tass) - One of toughest challenges facing the Russian
government is fighting crime and corruption, Prime Minister Yevgeny Primakov
said on Thursday, meeting with leaders of State Duma factions. 

First and foremost, it is vital to take measures to prevent tax evasion, he
said, adding that the AvtoVAZ stock company alone owes 20 billion roubles,
including fines, to the federal budget. 

The prime minister also stressed the necessity to take measures to prevent
unfeasible privatisation since "changing the form of ownership is to be
accompanied by boosting production efficiency," which "has been lacking" in
many cases. 

In this connection, he noted that his government had halted privatisation
procedures at a number of strategically important facilities. 

In his words, the government is also taking measures against "pseudo-
bankruptcy, especially following the recently-introduced swifter procedure,
which is extremely dangerous for us." In this context he recalled that the
government had prevented such pseudo-bankruptcy at the Zapsib metallurgical
works, the biggest one in Russia, and thus had "saved it from being


Moscow Times
March 12, 1999 
Primakov: I Was Crazy To Take Premier's Post 
By Peter Graff

Six months after taking office, Prime Minister Yevgeny Primakov said Thursday
that he must have been crazy to take the job. 

But in a rare moment of public self-evaluation, Primakov also took credit for
his government's success in stabilizing a country that last autumn faced
political and economic meltdown. 

"Six months. Six months," Primakov repeated with a chuckle during televised
remarks to a meeting of parliamentary leaders. 

"Some people ask, is it madness or bravery? I imagine it is more likely
madness than bravery. Oh well, no point in whining." 

In comments from the same meeting, reported by Itar-Tass news agency, the
former foreign minister and spy chief made clear he was proud of his tenure. 

"We have accomplished more than a little," Itar-Tass quoted him as saying. "We
have stopped the galloping pace of inflation." 

But Primakov remains dogged by talk that his team has failed to tackle
Russia's problems, only putting calamity on hold. 

Primakov was confirmed as prime minister on Sept. 11 last year as a compromise
candidate after parliament refused President Boris Yeltsin's initial choice in
a showdown that sparked talk of constitutional crisis or even civil unrest. 

He inherited an economic maelstrom. The ruble was in freefall, banks had
stopped letting customers withdraw their savings and the government had
effectively announced a default on $40 billion in treasury bills. 

Many Russians had begun mobbing shops to stock up on food. 

Six months later, the worst seems over. The ruble has been more or less stable
since the new year, street life has returned to normal and, despite rumors of
possible government sackings on the horizon, the Cabinet has remained in place
and unchanged for longer than nearly any other of the post-Soviet era. 

Primakov, 69, a year older than Yeltsin, is now tipped in polls to succeed his
boss, whose term ends in 2000, though the prime minister has never said he
would seek the presidency. 

He and Yeltsin on Thursday both predicted success in talks with the
International Monetary Fund on new credits for Russia, which suspended its
loan program last August. 

But Boris Nemtsov, a former first deputy prime minister, repeated what has
become the tireless refrain of Primakov's growing group of critics: that the
prime minister has purchased political stability at the price of postponing
vital reforms. 

One of the "young reformers" who have been largely replaced by Communists and
their allies in the government, Nemtsov said the calm winter could turn into a
bitter spring as unpaid workers lose patience. 

"[Primakov's Cabinet] has succeeded in establishing political stability at the
cost of an absence of sensible activities, absence of any economic program,
the collapse of talks with the IMF, allowing high inflation and the absence of
any positive outlook," Interfax quoted him as saying. 

Nemtsov said the situation in Russia would worsen by May, when large foreign
debt payments come due. 


Russia's Yavlinsky holds rare talks with Yeltsin

MOSCOW, March 11 (Reuters) - Liberal parliamentarian Grigory Yavlinksy
disclosed on Thursday that he had held rare talks with President Boris Yeltsin
and had briefed him on alleged corruption in Russia's government. 

Yavlinsky, who leads the Yabloko faction in the State Duma lower house of
parliament, told Russian television he had met Yeltsin on Wednesday at the
Central Clinical Hospital where the president is recovering from a stomach

``We in Yabloko felt it was our duty to let the president know of what is
today a very painful problem for Russia,'' Yavlinsky told ORT public

Despite backing Prime Minister Yevgeny Primakov in last autumn's parliamentary
confirmation vote, Yavlinsky has become a strong critic of the premier's left-
leaning government, repeatedly charging several top cabinet members with

Wednesday's meeting triggered speculation in the Russian media that Yavlinsky
might be set to join the government, but the Yabloko leader played down any
such possibility. 

``We did not discuss personnel matters and no proposals (about joining the
government) were made to me,'' he told ORT public television on Thursday

Yavlinsky said he had also discussed Russia's economic situation with Yeltsin
and had repeated that his party was ready with its own programme to help pull
the country out of crisis. 

Yeltsin rarely holds one-to-one talks with leaders of Russia's parliamentary
factions and likes to give the appearance of being above the daily political

Yavlinsky ran against Yeltsin for the presidency in 1996 and has said he will
run again in the next election, due in 2000. 


Moscow Times
March 12, 1999 
Last Chance for Rewrite 
By Boris Kagarlitsky
Boris Kagarlitsky is a researcher at the Russian Academy of Sciences'
Institute for Comparative Political Studies. He contributed this comment to
The Moscow Times. 

When the authors of the Russian Constitution announced its introduction in
1993, they promised it would last at least 150 years, without alteration, if
not th e more than 200 years that the U.S. constitution has endured. Its
critics predicted that the constitution would last as long as President Boris
Yeltsin retained power. Now it would seem that both sides were wrong. Yeltsin
is still president, but discussion of constitutional reform has begun and will
be a key political questions of 1999. 

Whatever contradictions and holes legal specialists found in the text of the
basic law of the land, it more or less worked while Yeltsin was firmly at the
helm. But as he weakened, in addition to the communists in the State Duma, the
center right and even members of the presidential administration raised the
question of redistributing power. 

The problem is not that Yeltsin is unable to handle the powers he gave himself
with the Constitution. Rather, the overall system of personal power that is
reinforced by the Constitution in its current form guarantees the country's
leader freedom to conduct unrestricted cadre politics without being
accountable for his actions, which cements clientism and corruption as facets
of the state order. 

Parliament is impotent and the government has been placed in a notoriously
ambiguous position where it is appointed and dismissed by the president but
is, at least theoretically, accountable to parliament. A system of weights and
counterweights is set in place, where all components are powerless before the
will of the president. 

The 1993 Constitution reflected the balance of power in the country at the
time, following the violent quashing of the opposition grouped around the
Supreme Soviet. Subsequent events have shown that this opposition enjoyed the
support of at least half of the population but from then on was deprived of
all influence in the nation's development. Just as undemocratic was the
division of the enormous state property among a few groups of oligarchs. But
at the same time, in setting course for capitalism and "joining the world
community," the ruling powers had to make some concessions, and so this
"compromise" constitution came into being, designed to reinforce the
authoritarian system while decking it out with civilized, Western trappings. 

The 1993 Constitution largely resembled that which existed from 1905 to 1917,
the difference being that now the autocrat is no longer hereditary but
elected, and that provincial governors are elected, thus giving the regions a
certain degree of independence. Both differences should be regarded as
concessions to the democratic accomplishments of the 20th century.
Paradoxically, the tragedy is that the autocracy becomes more dangerous
because of these republican features. Decentralized authoritarianism allows a
greater degree of arbitrary rule than does centralized authoritarianism. 

In the case of the latter, citizens have to reckon with one tyrant, in that of
the former, with 89 potential tyrants ruling over the territorial subjects of
the Russian Federation. When authoritarianism is centralized, the power of the
one master contains the excesses of the local bosses; when decentralized, it
merely compounds them. But through all the talk of federalism, we have
received a peculiar accumulation of the shortcomings of both systems. 

Hereditary monarchs weaken with time, and their power is gradually assumed by
state institutions. But the Russian constitutional system requires that the
regime is regularly renewed, and a new leader appears, greedy for power. This
is not to say that the monarchy should be restored, or that a totally
centralized administration be reintroduced, but it is fair to argue that
elements of democracy in an authoritarian system are likely to have a
destructive, not constructive effect. 

The system in Russia now is such that citizens are required to elect a new
dictator every four years. The less authoritarian a candidate, the less are
his chances, not because the population craves a dictatorship, but because it
knows that the post of dictator must be filled by a fitting candidate. And as
far as the money behind the elections is concerned, oligarchs eager to have
their president in power will back the person who will return the favor by
appointing the right people to key posts. 

And while the majority of the population see things differently than a few
hundred oligarchs and privileged bureaucrats, the 1996 presidential elections
and many of the governorship races across the country in 1997 and 1998 showed
that these groups generally have the final say. 

The Yeltsin regime without Yeltsin will probably be worse than with him. In
his repeated absence due to illness, a new practice has spontaneously started
to form where the government answers to parliament, the judiciary functions
independently of the Kremlin, and parliament, having acquired some real
weight, is slowly coming round to the fact of its responsibility to the
nation. But the appearance of a new, powerful ruler may easily shatter this
frail balance once again. A new president will have to reward his sponsors,
signaling a fresh round of corruption and political arbitrariness. 

We now have a unique chance to dismantle the system of personal power in
Russia, and this may feasibly be accomplished if amendments to the
constitution are prepared and approved by the State Duma and the Federation
Council and the presidential administration. The mechanism and aims of
constitutional reform are clear enough. The task is to form a government on
the basis of parliamentary majority, making the Cabinet fully answerable to
the parliament and putting a formal end to the strange practice where
ministers are subordinate not to the prime minister but the president. (And
beyond simply curbing presidential powers, direct presidential elections would
best be done away with altogether, leaving the parliament to elect the
president, as in Germany.) 

But if this unique window of opportunity is missed in 1999, then in 2000 we
will face a younger and more aggressive autocrat. The consequences are not
hard to predict. They will be dire. 


Date: Thu, 11 Mar 1999
From: (Ray Smith) 

For what it's worth, I just got back from a trip to the Baltics where some
of the intelligentsia believe that Mikhalkov will be Russia's next
President. They say he is widely known and popular and that his lack of
government experience is a positive for many voters, not a drawback. I was
initially pretty skeptical, particularly since he lacks the kinds of power
bases that people like Luzhkov and Lebed have. On the other hand, if he is
backed by some of Berezovskiy's money.....? I haven't been back to Russia
for awhile and wonder what JRL readers there are hearing on this subject? 


Date: Thu, 11 Mar 1999
From: "Kim Turgeon" <>
Subject: Lynn Turgeon

I apologize for the medium of this message. This is the only way I can
think of to notify the many people who were important to my father. Lynn
Turgeon died late last night in Ann Arbor, Michigan. He was in no
distress\; I was able to be with him at his bedside. 

He spent the last four months here in Ann Arbor with our family,
enjoying his grandchildren and the many ethnic restaurants in the area.
He continued to be active on the Post-Keynesian Network. Last month he
received an overture from a book publisher for a new book on the IMF.

My father remarked about how Galbraith has continued to be productive
after retirement, writing books and essays, and that he wanted to do the
same. His last article (written in mid-January) on \"The Checkered
Background of the IMF and the World Bank\" was published in the March
issue of Economic Reform (COMER - contact 

The last work he did on his laptop was this email list\; I think that he
would have wanted each of you to know of his passing.

I'm sorry I couldn't notify each of you personally. Please feel free to
call me at 734-995-3809, and to forward this note to his colleagues and


Date: Thu, 11 Mar 1999 
From: David M Rowell <> 
Subject: A poignant postscript

My rather lengthy piece in JRL 3084 (Teaching/training Russian students)
attempted to conclude that Russia's needs revolved more around the
establishment of a basic moral society, rather than a shortage of MBAs. 
It was my suggestion that the various "Intern" type programs that bring
young bright capable Russians over here for a month or so were a better
way of addressing these needs than bringing Russians over to get two
year business school degrees, particularly when you consider that the
same funds could pay for probably forty times as many interns as
b-school graduates.

We recently concluded hosting a Russian intern for a one-month period,
and just received the following e-mail from her. I post it unedited
here so that the starkness and brutality of the "real" Russia can be
seen by all, and use it as an eloquent example in support of my
contention that Russia needs law and order, social morality, etc etc,
much more than it needs B-school graduates.

Privet from Ekaterinburg!

I can say that I have already used to another climate and time schedule
but it is still difficult to sleep at nights. All the flights were in
time and my friend met me in Moscow.

Yesterday was my first working day in the office. I had a talk with the
director about staying in your company and everything I’ve obtained
during this training program (but very briefly). She liked some ideas
(especially the idea of organizing ?travel club” and ?Travel evenings”
for our tourists). We decided to think over some of them after my return
from China where Ill stay for 5 days (6-10 of March).

There was an accident in the company in the middle of February. When we
have a flight we usually send someone from our staff to the airport to
be sure that everything is O.K., and some tourists buy tickets and make
payments there. And we change each other every time. But one day a
driver and a guard dropped one girl off near her house and went back
(with money) to the office. Now we know that she was followed and
criminals decided she had money in her bag. She was shot at the head…
Now she is in the hospital. She’ll be alive but she can’t see anymore
because bullet destroyed her eyes. She is alone and she has a little

My colleagues decided not to inform me about it when I was in the US.
First days I was really shocked ­ it could have happened to everyone in
our company!!! I can’t believe it’s true. I can’t stop thinking about
her, about her future. As you know it is difficult to find a job for
invalids in this country.

Sorry for bad news but this is our reality (especially comparing with 
wealth and stability in the USA).


Date: Wed, 10 Mar 1999
From: Gunars Reinis <> 
Subject: Russian-American Goodwill Ass (?)

Having read the morning’s(March 10) list ,I find myself in nearly
complete agreement with the contributions of Messr’s Gary Peach and
Michael D.Intriligator, and equally complete disagreement with Vladislav
G.Krasnow et. al.
Instead I would propose a message incorporating a program of
demonstrated success. In 1945 Germany was in a far worse situation than
Russia in 1991. The joint efforts of the Western occupying powers and
the German people got West Germany out of this hole in short order. A
similiar program would likely work in Russia as well. I am old enough to
have lived in Germany during the 1945-49 period and clearly recall what
the principal components of that program were:
1. Abolish the Nazi party
2. Prohibit Nazi’s from taking any leading role in government and
3. Completely liquidate(not rename) the SS, the SA, the SD, the Gestapo,
the Wehrmacht, the Luftwaffe and the Kriegsmarine
4. Indict, try,
convict and punish the Nazi bigwigs,KZ kommandants, leutenants and the
cruelest guards, as well as the generals responsible for atrocities in
the occupied lands
5. Liberate a dissident from prison and make him chancellor
6. Absorb in West Germany the colonists Germany had scattered in the
occupied territories ( these returnees made a major contribution to the
7.Establish cordial relations with Germany’s neighbors. Do not threaten
them , but cooperate economically.
8.Allocate a modest portion of Marshall plan funds to Germany.
Obviously, this helped, but the Germans would likely have made it
without it.
The rest, as they say, is HISTORY.
Any one agree? Hey, it worked once! Spectaculary, and then some.


Date: Thu, 11 Mar 1999
From: Tom Wiseman-Clarke <> 
Subject: RE: 3083- Peach/FIMACO

Pointing out the obvious - In response to Peach on FIMACO

I must confess that Mr Peach's article was very cathartic to read, but I
hope he will now return to the task of constructive criticism and
proposing ways forward. The crime of FIMACO was against those who might
otherwise have benefited from the local investment of that money- namely
Russian industry, transport infrastructure, pensioners and so on- and
they should not be punished further by a withdrawal of international
support. As Mr Peach points out, Gerashchenko and Dubinin walk on
water- they are not going to be damaged by the IMF etc. turning their
backs at this stage.

Assuming the international community does not cease all financial
support, the questions must now be a) where further investment would be
directed and b) how might it be kept away from the claws of
Gerashchenko, Dubinin etc now that we have unequivocal proof that they
cannot be trusted. As I said, pointing out the obvious.


Date: Thu, 11 Mar 1999 
From: ray finch <> 
Subject: Ivan Denisovich

David, an acquaintance, Ivan Denisovich, asked that you print this

Dear Mr. Camdessus,

Have you ever built a brick wall? If you want the wall to stand for
more than just a couple of years, you've got to ensure that there is a
solid foundation. If the base is not square and strong, the wall will
collapse in only a few years. 

A large wall collapsed here in August 1998. It was not a question of
bad bricks or thin mortar. The foundation was rotten and will have to
be replaced. While more bricks will allow the wall to be rebuilt, it
too will fall if the current base remains. 

My friend Boris is an alcoholic. Every six months or so, he swears
he's going to hit the wagon and give up drink, but because his foolish
friends are constantly forgiving his indulgence and giving him money
(he swears that he needs the money for his family), he loses his
motivation to quit. Instead he takes the money and drinks until he's
in a stupor. Often when he is drunk he says many stupid things,
sometimes even swearing against those who lent him money. His wife is
sick with consumption and his children, whose names he barely
remembers, are hungry and have no shoes. Is it a crime to lend Boris
any more money? 

Have you ever flushed a toilet? This image comes to mind when I think
of your lending more money to this government. Let me tell you a
story. In 1991, I had my life's savings in the bank. In a matter of
weeks, this money was flushed away by inflation. Seven years later,
the toilet flushed again. And you are about to lend more money to the
government who is responsible for flushing the toilet.

Mr. Camdessus, have you ever noticed during your trips to Moscow the
number of dollar exchange points? These are the truest indicator of
the Russian people's trust in the currency and the government. We
don't have any banks, where money is saved and invested back in the
country. We have banks for laundering money. Most of our wealth is
being stolen and siphoned offshore. Even our Central Bank has no
faith in the ruble. 

I'm no economist, but why doesn't the IMF pay Russian creditors
directly? If the IMF is merely loaning more money to Russia so Russia
can use this same money to pay back other creditors, why not just cut
out the middleman? This will prevent the well-fed Central Bank (and
the legions of corrupt bureaucrats) from taking their usurious cut.

Let me tell you what will likely happen if you don't lend the money. 
Our "liberal and democratic" government will first resort to printing
more rubles to appropriate the billions of dollars saved in mattresses
of the Russian populace. They will do this under the guise of paying
foreign creditors like yourself and avoiding default (so they might be
able to borrow more money in the future). The real reason is simpler.
Having stolen what they could abroad, our "liberal" government will
now turn on its own people. 

This will lead to a high rate of inflation, which will hopefully lead
to popular dissent and ultimately a change of government. I know that
many of you in the west fear that in such a scenario the communists
will return to power. This fear demonstrates your lack of faith in
the Russian people. First, we've been down that road and know where
it leads. Second, forget about the political labels. Russia has
never had, and will never have a communist government. Nor has it had
a democratic government. What we have had for the better part of the
past century is a quasi-criminal government. IMF credits are merely
helping to maintain this status quo. The foundation needs to be

For us in the bottom 80% of the population, it makes very little
difference whether you give this aid or not. We still won't get paid.
Whatever monies were earmarked for helping the Russian people will be
stolen long before it ever reaches our level. You talk about Russia's
need to improve tax collection. Let me fill you in on a little
secret. This aid-dependent government of ours is running a little
scam. They pretend that they are taxing the people, and we pretend
that we are paying. Don't believe the budget figures. We are
forever filling the 5-year plan in four. Sometimes I think that this
IMF aid is used solely to pay the salaries of the bloated Russian

A long time ago, I served time as a political prisoner. Though I can
now read a newspaper (if I can afford it), or watch TV (if I'm not too
exhausted from work), the kasha tastes the same today as it did 40
years ago. True, the barbed wire has been removed and I now can
complain out loud, but the guards are as surly and injustice still
reigns. An equally onerous economic chain has replaced my political

You are deceiving yourself if you believe that by providing more
credit to the current Russian government you are helping Russia. 
Russia does not lack wealth. It lacks honesty and a sense of justice,
and more IMF monies will do little to correct this shortage. 


Date: Thu, 11 Mar 1999
From: "Peter D. Ekman" <> 
Subject: Re: Ames/Peach/FIMACO

Like Mark Ames (JRL 3084), I was surprised by Gary Peach's writing off all
of Russia for 30-40 years. Nevertheless, I'd like to defend Peach from
Ames's ad hominum attack, even if I agree with Ames in some ways.
The FIMACO scandal that Peach wrote about is a very complex matter. It
involves scapegoating by the Prosecutor General's office, fears about not
getting a new IMF loan, central bank policies of the type that are often
kept secret in many countries, technical financial matters, incredibly bad
public relations, and, undoubtedly, some very serious wrong-doing by the
central bank. I feel a bit sorry for journalists who must explain this
difficult material to the general reader in a short column.
Peach's reaction that "if the entire system is so [...] hopelessly corrupt
[...], then let Russia wallow in its own misery for another century. The
country deserves no better," is certainly understandable in this context.
Corruption in the central bank is the worst possible corruption - at least
for a financial analyst - and the cover-up of the scandal only makes it
worse. Peach's admittedly emotional piece seems to simply be an
overreaction by somebody who believed in a Russian economic miracle being
on the horizon, but who has seen this belief smashed.
Peach's piece does raise three important issues: 1) What future does
Russia have if corruption is not eradicated? 2) How long will it take for
Russia to recover from the series of financial debacles it's going through?
and 3) Who, ultimately, is responsible for this mess? Peach's apparent
answers [1) none, 2) 30-40 years, and 3) the Russian people] are among the
possible reasonable set of answers to these questions, though I think that
they need to be examined more thoroughly (especially #3).
In short, the article could have been more professional.
Ames, however, sets himself up as the arbiter of journalistic
professionalism in Moscow and follows with a personal attack on Peach.
Ames lecturing on journalistic professionalism? Unbelievable, but true.
Mark, please leave the serious work to Taibbi. Ames's goal in his articles
in The eXile seems to be to tell his readers how to get drunk and get laid
in Moscow. This goal may not be very challenging, but it fits Ames's
talents very well. Venturing outside of his special area, Ames only shows
his own unprofessionalism. 


Yeltsin Said Mulling Replacement of Bordyuzha by Chubays

Moskovskiy Komsomolets
March 10, 1999
[translation for personal use only]
Article by Aleksandr Budberg: "Kremlin Miscalculations. Comeback by Chubays?" 

The analysts who explain to us about politics on TV 
are fond of describing complicated gambits and well thought-out actions 
by the sides. But in fact experience suggests the reverse -- few people 
think even a move and a half ahead. The events now unfolding in the 
Presidential Staff merely confirm this. 

When he was secretly preparing the edict on Boris Berezovskiy's dismissal 
did Nikolay Bordyuzha think that he might be the second victim of this 
edict and literally in a few days end up in the Central Clinical Hospital 
with a heart attack? He probably did think this. This is by no means down 
to the "terrible specter" of Boris Abramovich [Berezovskiy] -- Yeltsin 
had long been unhappy with him, appointed him to the CIS Executive 
Committee under pressure from the other presidents, and recently had 
repeatedly given orders to prepare for his dismissal. It is down to the 
excessive quickness off the mark shown by Bordyuzha himself. He imposed a 
ban on showing the draft edict to anyone, including lawyers. And this 
draft which no one had vetted was taken to B.N. [Yeltsin] to be signed. 

And as soon as the edict was signed -- without delay at 2300 hours, so 
that nothing could be corrected and it was impossible to backtrack -- it 
was immediately relayed to a news agency. But as a result Yeltsin found 
himself in a ridiculous position -- he had done something he was not 
entitled to do without consulting with his CIS partners. It was a total 
fiasco -- the sick Yeltsin was forced to spend the whole weekend calling 
the indignant Commonwealth leaders to mollify them. His edict had to be 
turned into a letter to the CIS presidents and the Foreign Ministry, and 
signatures had to be collected from them. It was a worldwide scandal. 

Of course, when matters turned out as they did, a question arose: Did 
Bordyuzha deliberately place the president in an awkward position, 
believing this to be an acceptable price for ensuring that no one had 
even the slightest possibility of preventing Berezovskiy's dismissal? 

However, even this is only half the story. B.N. and his entourage were so fed 
up with Berezovskiy that the chief of staff could have gotten away with 
this move. If it were not for one point. On the morning of that same day 
the /Kremlin/ [word between slantlines printed in boldface] had called 
the Duma and warned that the dismissal of Maslyukov and Kulik for 
corruption was in the pipeline. Once they received the tip-off, the 
Communists created a terrible outcry. The Duma was paralyzed by meetings 
the whole day. In the end the CPRF [Communist Party of the Russian 
Federation] leaders promised to create strike committees and even called 
for disobedience by "power" structures. But since the removal of the vice 
premiers was not in the pipeline, the entire presidential entourage spent 
the whole day sincerely reassuring deputies: "Calm down, we have talked 
with the president, there is nothing in the pipeline, this is pure 
provocation and disinformation." 

As a result, when that evening Bordyuzha persuaded Yeltsin to 
immediately sign the edict dismissing Berezovskiy, the president did not 
have even a theoretical possibility of playing his favorite game of 
checks and balances. He could not take the opportunity to dismiss the two 
vice premiers who are apparently successfully finishing off our economy. 

This second maneuver was so neatly combined with the secret preparation 
of the edict on Berezovskiy that the president and his "inner circle" 
(that is, Tatyana Dyachenko and Valentin Yumashev, who are there solely 
to watch over the president's interests) also saw the "handiwork" of 
State Security General Bordyuzha behind all this. And the conclusion 
seemed inescapable: The chief of the Presidential Staff is not playing on 
the president's side. He is deliberately placing the president in a 
position where he cannot realize his advantages. In other words, in all 
probability he has decided to entirely "take his cue" from Primakov and 
his government. 

Your Moskovskiy Komsomolets correspondent has learned from extremely 
well-informed sources that this is approximately the conclusion that was 
drawn -- and not in Bordyuzha's favor. After this the general himself had 
to be urgently taken to the Central Clinical Hospital. And then the 
Kremlin strategists had another "brilliant" idea about how to rectify 
matters. Since, in their view, Bordyuzha has proved to be an "outsider," 
there is a need for someone who, first, will not betray the president 
under any circumstances and, second, will be strong and tough enough, 
even when he possesses extremely limited levers of influence (even the 
power ministries are now looking to Primakov more than to Yeltsin), to 
shield the sick B.N. and somehow balance the influence of the premier. A 
simple calculation showed that there is only one man capable of 
attempting to do this -- Chubays. But Yeltsin and his team apparently 
totally refuse to consider what will happen in the event of such a 
"reshuffle." Whereas previously the government could write off any 
failings as being down to the "fight against Berezovskiy," once Chubays 
joins the Staff the name "Berezovskiy" will simply be replaced with the 
name "Chubays." Chubays will effectively take the place of Berezovskiy as 
the "screen" behind which the government and the Communists who actually 
formed this government will be able to write off all mistakes. The Duma 
and the government will unite once and for all and will start to fight 
against the "fiend" from the Kremlin. This is all the likelier in that 
Chubays will scarcely be able to keep from interfering in the economy -- 
it is simply impossible to imagine him coexisting peacefully with Maslyukov. 

All this may lead to unpredictable consequences. And while strike 
committees in support of Maslyukov are simply ridiculous, a massive 
propaganda campaign will certainly be mounted against Chubays and 
therefore against the president and his entourage. Bearing in mind the 
alliance between the government and the Duma, matters may end in the 
total destabilization of the situation in the country. Matters may even 
end in early elections of either the president or parliament. 
If high-ranking sources are to be believed, we will know in the next 
few days whether Yeltsin has adopted a decision on Chubays. But the very 
situation shows how badly Yeltsin miscalculated in replacing Yumashev 
with Bordyuzha, and how badly he is now miscalculating in considering the 
possibility of replacing Bordyuzha with Chubays. 


Yakushkin Denies Chubays To Replace Bordyuzha 

Mayak Radio Network
10 March 1999
[translation for personal use only]

[Presenter] Our bulletin now goes over live to the 
Kremlin. The deputy head of the administration and the president's press 
secretary, Dmitriy Yakushkin, is on the line. Our political observer 
Yuliy Semenov asked him to talk to us. 
[Semenov] Dmitriy Dmitriyevich, I hope you can hear us. [Yakushkin] Yes,
[Q] We decided to ring you about the latest rumour. Our quick-witted 
`Moskovskiy Komsomolets' [newspaper] has, among others, put it about that 
the president was beginning to have doubts about the loyalty of the head 
of his administration, Nikolay Bordyuzha;that he [Bordyuzha] who was 
forced urgently to head for the Central Clinical Hospital; and that, and 
that [chief of the Unified Energy System of Russia and former a deputy 
prime minister] Anatoliy Chubays is going to be summoned to the Kremlin 
to replace him. What can you say about these rumours? 
[A] Quite frankly I don't have any idea what this all about. Chubays, as 
far as I am aware, is working normally at the Unified Energy System of 
Russia joint stock company and plans to continue working there. Nikolay 
Bordyuzha has been and remains head of the administration. Incidentally, 
he gave quite a extensive and interesting interview for `Argumenty i 
Fakty' [weekly] today, in which he speaks in detail about his work and 
his plans. 
On the whole, I think it is rather unethical to put out an article like 
this at such a time because, first of all, it is based on completely 
unbelievable explanations, it gives completely unbelievable explanations 
of events and is completely unverified. In this case, it seems to me that 
the correspondent failed to do even the most basic homework. What is 
more, it is all built out of nothing and without any reason. All the 
arguments set out in the article arise out of absolutely nothing. 
In fact, to call the article unethical is to put it mildly. I would 
call it unpardonable, given that Bordyuzha is at this moment in hospital. 
He suffered cardiac fatigue, an attack of angina - this is fairly 
unpleasant - and at such a moment to put out an article that calls into 
question, that effectively calls into question the loyalty of someone who 
is, so to speak, the president's most important political aide at this 
time, I would call rather mean and unpardonable. To be quite frank I 
think this is despicable. 
[Q] So, with your help, we can assure our listeners that Nikolay 
Bordyuzha's illness is in no way political or diplomatic. 
[A] It is not and cannot be political or diplomatic. He had an attack of 
angina and was hospitalized and is now at the Central Clinical Hospital - 
[Q, interrupts] Well, let us wish him a full recovery and thank you very


Russia Today press summaries
Nezavvisimaya Gazeta
11 March 1999
The Agenda for Russia 
Nezavisimaya Editor-in-Chief Vitaly Tretyakov commented on recent events and
political rumors in Moscow and offered his prediction of possible reshuffles
in Yevgeny Primakov's government. 

Events of note this week include Primakov's early return from vacation in
Sochi and the sudden reappearance of Prosecutor General Yury Skuratov, who was
dismissed last month by the president but not by the upper house. 

Rumors have it that the International Monetary Fund has finally agreed to give
Russia $2.1 billion in credit, and that First Deputy Prime Minister Yury
Maslyukov will be dismissed from his post and put in charge of the defense

According to Tretyakov, in the past months power has gradually been passing
from President Boris Yeltsin's hands to Primakov's -- and on to the leftist
opposition, on which the government depends. He suggested that Yeltsin, who is
allergic to Communists, will not put up with this any longer. Yeltsin could be
considering a government reshuffle, and candidates for the prime minister's
post include rightist politicians such as Anatoly Chubais or Grigory
Yavlinsky, or Moscow Mayor Yury Luzhkov. 

But Tretyakov noted that Yeltsin's game is already lost. The Communists will
win a decisive victory in the next Duma elections, taking about 70 percent of
the seats in parliament. And if this is the case, Yeltsin must do his best
just to prevent the complete collapse of democracy in Russia. 


Business Week
March 22, 1999
[for personal use only]
Economic Trends
Russia in Wonderland
Yeltsin's budget just doesn't add up

Curiouser and curiouser! That's the way Standard & Poor's analysts seem to
view Russia's 1999 federal budget, signed into law a few weeks ago. According
to Russia's budgeteers, the deficit will fall to 2.5% of gross domestic
product, down from 4.8% last year, as tax revenues surge from 8.8% to 11.8% of
GDP and as expenditures hardly rise.
Trouble is, the revenue surge doesn't jibe with Russia's current economic
contraction. S&P expects GDP to shrink by 8% this year rather than the 3%
projected, a trend that undercuts the assumption that cuts in the value-added
tax (VAT) rate and the corporate rate will be more than offset by a wider tax
base. Indeed, previous rate cuts in the VAT, which is Russia's most
effectively collected tax, resulted in lower receipts.
To be sure, high inflation could trim real government expenditures, while
the devaluation will increase the ruble value of energy taxes, which are paid
mostly in foreign currency. But energy taxes account for only 2.2% of total
tax receipts, and the budget doesn't include the heavy cost of restructuring
the banking system, which would easily add 3% to 4% of GDP to spending.
In sum, Russia's budget makes sense only if you step through the looking
glass. Assuming a big slide in economic activity, S&P expects the accrued
deficit this year to approach 8% of GDP--though the cash deficit could be much
lower if authorities continue to hold back on wage and pension payments.



Business Week
March 22, 1999
Russian Riddle

Russia's Struggle to Free Its Economy
By Rose Brady
Yale 289pp $30

Russia is a land of contradictions. Blessed with a wealth of natural
resources, it is on the verge of bankruptcy. Last August, it defaulted on $40
billion of domestic debt. Now officials say the government will default on
$17.5 billion owed to foreign creditors unless it gets an emergency loan from
the International Monetary Fund by the end of March.
What happened? To understand fully, one must examine Russia's seven-year
experiment with capitalism. That's the subject of a new book by Rose Brady,
BUSINESS WEEK's former Moscow bureau chief and now editor of its European and
Latin American editions.
In Kapitalizm, Brady describes the progress achieved--and the pain
endured--as the former communist giant zigzagged toward a market economy.
Russia's version of capitalism developed out of compromises made by Boris N.
Yeltsin and privatization chief Anatoly B. Chubais. To gain support for
privatization, the government granted Soviet-era managers rights to acquire
control of their state-run plants in 1992. That sabotaged efforts to install
new owners who would make Russian industry more competitive. Three years
later, when it looked as if the Communists might return to power, Chubais sold
off to well-connected banks the remaining gems of Russia's state assets. By
1997, Russia's economy was dominated by a handful of tycoons. Meanwhile, with
meager progress toward tax reform, the government got hooked on borrowing.
When emerging markets and global oil prices plunged, Russia couldn't pay its
bills. Today, Brady concludes, the transition to capitalism will take many
more years.




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