March 24, 1999    
This Date's Issues: 3107• 3108  • 

Johnson's Russia List
#3108
24 March 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Izvvestia: Vyacheslav Nikonov, The Agnoy. (Re corruption investigation
and Yeltsin).
2. Itar-Tass: Russia Wants Switzerland to Help Get Money Back.
3. Itar-Tass: Albert Gore Received PRIMAKOV'S Decision with Understanding.
4. AP: Primakov Says Airstrikes Won't Help.
5. Reuters: Muscovites blast U.S. for imminent NATO strikes.
6. Baltimore Sun: Will Englund, Prime minister's return signals diminished 
Russian role. Yugoslavia policy failed and IMF loan is no closer.
7. Reuters: Russia to pay Apr/May foreign debt without IMF.
8. Mikhail Volodin: Kontrapunkt Literary Magazine.
9. The Moscow Tribune: John Helmer, DYING SWAN KILLS HUNGRY DUCK -- THE 
REAL STORY.
10. RFE/RL: Robert Lyle, Russia: Mystery Surrounds IMF Loan.
11. The Times (UK): Anna Blundy meets a Kremlin hopeful talking tough on 
crime. (Lebed).
12. Itar-Tass: Shortage of Paper Puts Newspapers on Brink of Closure.
13. Itar-Tass: Russian MP Optimistic About START II Ratification. 
(Lukin).
14. Financial Times: John Thornhill, RUSSIA: Should we support Primakov?]


*******

#1
Izvestia
March 23, 1999
The Agony 
By Vyacheslav Nikonov 

Analyzing the recent chain of events connected with Yury Skuratov's comeback
as Prosecutor General, IZVESTIA says they are linked to a brewing Kremlin
financial scandal that may lead to early presidential elections. 
The Kremlin made an attempt to fire Skuratov not only because he had ordered
an investigation in respect of Boris Berezovsky's empire, says the paper. In
keeping with the Strasbourg anti-corruption agreement, he gave his Swiss
counterparts the legal grounds for starting an investigation into the affairs
of the Mabetex company. Headed by a Kosovo Albanian, one Bezdet Pakolli, the
Lugano-based firm was hired to perform high-cost construction jobs in Moscow
and elsewhere. A share of the funds involved in the deal, which is estimated
at 1 billion dollars, was transferred to foreign bank accounts of persons
constituting President Yeltsin's inner circle. 
After learning about first searches conducted in Mabetex, the Kremlin seems
to have lost all ability to react to events in anything like a rational way,
says the paper. Dubious compromising materials were obtained, with the help of
which Nikolai Bordyuzha forced Skuratov to sign his resignation. But he proved
unable to make the Prosecutor General leave on the quiet. It was sheer madness
to send the compromising video to the Federation Council shortly before it was
due to take a vote on Skuratov. 
What the Kremlin did after the Federation Council meeting does not lend
itself to a logical explanation, says the paper. The presidential press
service immediately came up with a statement saying that both Yeltsin and
Primakov were strongly displeased with the house refusing to accept Skuratov's
resignation (though the Prime Minister failed to confirm in public that he had
had any part in the statement). Next the public television network showed
excerpts from the video tape which supposedly implicated Skuratov, this making
a compromise between him and the Kremlin no longer possible. The next morning
he for the first time mentioned Mabetex in public. 
The Kremlin's next unexplainable move was to create a commission, which was
authorized to look for additional materials compromising Skuratov. But two
days later, Bordyuzha was fired from all his posts, the commission head
included, while two of its top members, Stepashin and Putin, were sent to
Vladikavkaz to investigate the local bomb tragedy. 
The appointment of Alexander Voloshin as the presidential chief of staff
showed that the Kremlin was in a state of utter confusion, says the paper. To
save the situation, the authorities need either a military dictator or a very
good lawyer. Voloshin is neither. He is an obscure character, who has no
connections inside the elite and the armed agencies. Instead, he is notorious
for his links with AVVA and Boris Berezovsky. How can he protect the President
and his family, queries the paper. All of this looks very much like an agony,
adds the paper. 
The Swiss Federal Prosecutor, Carla del Ponte, is due to arrive to Moscow,
whom the Kremlin is unable to fire and who is not impressed by the prestige of
those under investigation. Within a short while, the issue of holding early
presidential elections will become as topical as never before. One should pity
Yeltsin. He may easily fall victim to cupidity and incompetence of his own
entourage, says the paper in conclusion. 

*******

#2
Russia Wants Switzerland to Help Get Money Back.

MOSCOW, March 24 (Itar-Tass) - Russian Prosecutor General Yuri Skuratov and
his Swiss counterpart Carla del Ponte spent over ten hours in two days
discussing "all issues of mutual interest", including the "problem of the
outflow of capital from Russia and the possible Swiss assistance in returning
the funds which were unlawfully transferred abroad", according to a spokesman
of the office of the Swiss Attorney General. 

Dominique Reymond told Tass on Wednesday that "a wide range of issues of the
fight against organised crime and money laundering" was discussed. 

Del Ponte is to meet Russian Interior Minister Sergei Stepashin on Wednesday,
according to Reymond. 

*******

#3
Albert Gore Received PRIMAKOV'S Decision with Understanding.

WASHINGTON, March 24 (Itar-Tass) - U.S. Vice-President Albert Gore has stated
here that Prime Minister Yevgeny Primakov decided to put off the visit to
Washington and to return home after discussing with him by telephone the
"deteriorating situation in Kosovo". We agreed, Gore said, to put off the
meeting of the joint American-Russian Commission, which was to be held this
week. 

I had two talks with Russian Prime Minister Yevgeny Primakov -- on Tuesday
morning and later when he was flying over the Atlantic Ocean towards the
United States, the American vice-president said in his brief statement, which
was ready out by White House Press Secretary Joseph Lockhard. According to
Gore, he informed the Russian premier that Yugoslavian President Slobodan
Milosevic had turned down all the attempts to reach a peaceful settlement in
Kosovo and was intensifying hostile actions against the Kosovo Albanians. 

We are dedicated with the prime minister to the continuation of our durable
bilateral relations, and we are both convinced that the work of the Commission
helps to consolidate them, Gore stated. We shall continue the work of the
Commission when both sides will be able to devote more attention to the
problems facing them, he added. 

Primakov decided to put off his visit to the United States with the consent of
President Boris Yeltsin after Gore informed him that the strikes at Yugoslavia
were inevitable and could be dealt when the Russian government delegation
would be in Washington. 

At the same time, the American vice-president is obviously trying to couch his
official statement on this matter in conciliatory tones. Lockhard also
answered the questions put to him by journalists in the same vein. He stressed
that Gore received Primakov's decision with understanding and expressed hope
that the cancellation of the visit would not harm the "broad" and "strong"
ties between the United States and Russia, which are cooperating on several
"important joint problems". 

The White House press secretary presumed also that this would not affect
Russia's cooperation with the international financial organisations. I think,
Lockhard said, that the Russians will continue the work with the International
Monetary Fund. As to us, we shall urge them as before to put their financial
sector in proper order and to make tough decisions that are necessary to carry
out genuine economic reforms. 

*******

#4
Primakov Says Airstrikes Won't Help
March 24, 1999
By GREG MYRE

MOSCOW (AP) -- Russia's prime minister, who returned home early today after
calling off a trip to the United States, said NATO airstrikes against
Yugoslavia would only raise international tensions.

``I do not think that the strikes will help stabilize the situation in
Kosovo,'' Yevgeny Primakov said today upon his arrival. ``On the contrary, it
will be destabilizing, and damage will be inflicted both on our relations with
the United States and with stability in Europe.''

NATO strikes appeared imminent after Yugoslavia rejected the terms of a peace
settlement in Kosovo, the province where Yugoslav forces are battling ethnic
Albanian guerrillas.

Russian Foreign Minister Igor Ivanov said today the raids could begin within a
``few hours,'' although he did not give the basis for making such a statement.

Ivanov also said that if Yugoslavia is attacked, Russia might push for the
lifting of the international arms embargo against the country. Russia could
even consider withdrawing from the embargo unilaterally, he said.

``Military action against Yugoslavia has no justification, legal, political or
moral,'' Ivanov said.

On, Tuesday evening, Primakov's plane was over the Atlantic Ocean and headed
to Washington when the prime minister spoke with Vice President Al Gore, who
said airstrikes were likely.

``I told Gore, `Think it over once more. You have not calculated all the
consequences,''' Primakov said, according to the ITAR-Tass news agency.

Primakov did not want to be in Washington once it seemed clear his visit would
coincide with NATO raids on Yugoslavia, a longtime Russian ally. His plane
turned around and headed back to Moscow.

Primakov spoke with Russian President Boris Yeltsin by phone early today and
the two planned to meet later to formulate the Russian response.

Yeltsin sent a message to President Clinton on Tuesday saying Russia ``has
been and will be categorically opposed to NATO use of force.''

Meanwhile, Yugoslavia's ambassador to Russia, Borislav Milosevic, claimed his
country was ready to resume peace talks with U.S. envoy Richard Holbrooke.

Yugoslavia wants to ``peacefully solve the problems and continue talks on the
political agreement,'' said Milosevic, the brother of Yugoslav President
Slobodan Milosevic.

However, Holbrooke said Tuesday that the Yugoslav president was not interested
in discussing the main points of the proposed peace settlement.

When the United States and Britain bombed Iraq in December, Russia recalled
its ambassadors to those countries, but they returned to their posts about a
week later.

Russian Defense Minister Igor Sergeyev said Russia would step up its combat
readiness, and ``will respond adequately'' if NATO attacks, but Moscow has no
effective means to prevent the raids.

When planning the Washington trip, Primakov had hoped to focus on winning new
loans from the International Monetary Fund to help revive Russia's ailing
economy. Primakov had planned to meet IMF chief Michel Camdessus during his
time in Washington.

Primakov said he still expected to meet with Camdessus in the next few days,
most likely in Moscow.

******

#5
Muscovites blast U.S. for imminent NATO strikes
By Elizabeth Piper

MOSCOW, March 24 (Reuters) - Muscovites had few good words for the United
States on Wednesday, saying it was to blame for NATO's decision to launch
imminent air strikes against Russia's traditional ally Serbia. 

``The Americans have made an awful decision. Innocent people are going to
suffer,'' street sweeper Igor Volkov told Reuters as he stood around the
corner from the U.S. embassy. 

``I am going to refuse on principle to clean the streets near their embassy
... I hope we get our weapons ready and show them how it feels,'' he said,
picking up his broom and pointing it like a gun at the yellow embassy
building. 

NATO decided on Tuesday to unleash air strikes on Serb military targets after
Yugoslav President Slobodan Milosevic rejected the latest efforts to settle
the crisis over Serbia's restive Kosovo province. 

``It's a brutal, inhumane decision. The Americans have to understand that
bombs will not solve this problem, they will make it worse,'' Vladimir
Maximov, 54, shouted at Russians queuing outside the embassy for visas. 

Alexei, who declined to give his surname for fear that his visa application
would be turned down, also condemned the decision to bomb ``our religious
brothers.'' Like the Russians, Serbs are predominantly Orthodox Christians. 

But he said it did not change his hopes of one day becoming an American
citizen, ``which would give my children a better future.'' 

But Muscovites were not so sure Prime Minister Yevgeny Primakov had been right
to postpone a trip to Washington which would have included talks with the
International Monetary Fund (IMF) and U.S. President Bill Clinton. 

Primakov turned his plane around and returned to Moscow on Wednesday, saying
air strikes could destabilise Kosovo and harm Russia's relations with the
United States and Europe. 

``(Yevgeny) Primakov had no other choice. The Serbs are our blood brothers. We
would rather go hungry than let them suffer,'' Maximov said, adding that
Russia did not need Western cash. 

Others doubted the move would change NATO's mind on Kosovo. 

``His decision is par for the course,'' said Tanya Beleg, 34. ``I don't know
if it will do any good.'' 

Like people on the streets, leading newspapers were divided by Primakov's
decision. 

The Kommersant business daily attacked Primakov for delaying talks with the
IMF, saying the decision had lost Russia's battered economy $15 billion. The
daily Vremya said he had returned to Russia ``without money but with
authority.'' 

*******

#6
Baltimore Sun
March 24, 1999
[for personal use only]
Prime minister's return signals diminished Russian role
Yugoslavia policy failed and IMF loan is no closer
By Will Englund 
Sun Foreign Staff 

MOSCOW -- In midflight over the Atlantic Ocean yesterday, Russian Prime
Minister Yevgeny M. Primakov decided that the imminent NATO bombardment of
Yugoslavia made his visit to Washington impossible, and he ordered his plane
to turn around and head back to a subdued and diminished Moscow.

Primakov made his decision with his plane over the Atlantic and approaching
Newfoundland. He had just telephoned Vice President Al Gore, demanding
assurances that NATO would not bomb Serbia while he was in Washington for
scheduled meetings with Gore and the International Monetary Fund.

In Washington, administration officials insisted they did not encourage
Primakov's decision, but they readily conceded they greeted the news with
relief.

Russia has resolutely opposed the use of force by Western powers in Yugoslavia
and stood up for the Serbs in international councils, but now Moscow's
Yugoslav policy seems to have come to nothing -- and at the same time Russia
has come no closer to obtaining the loan from the IMF that was the chief
objective of Primakov's trip to Washington.

Several politicians here made the same point last night: Primakov could not
allow himself to be in a position where he appeared to be selling out the
Serbs in exchange for IMF billions.

But his return underlines the end of Russian influence, for now at least, over
international action in Yugoslavia.

Vladimir Lukin, chairman of the foreign affairs committee of the State Duma,
or lower house of parliament, worried in a television interview Sunday that
events might move as, in the end, they did.

"This will very seriously undermine our interests and prestige," he said of
the possibility of NATO strikes. "You see, we have invested too much into that
problem. Everybody sees this and everybody sees that there is nothing to show
for the effort. That would be a most serious defeat of Russia, of our
diplomacy."

The United States, he said, has shown that it is less concerned about Russia
than about the "rogue" states that appear to present a greater threat. And
this is behind what the newspaper Sevodnya yesterday called a "slap in the
face" to Russian diplomacy.

Russian opposition to NATO action and support for the Serbs derive from
several sources. First, and perhaps most important, is a pronounced
unhappiness with the idea that the United States is running the world. Russia
opposed U.S. and British strikes against Iraq late last year for much the same
reason.

Second, Russia feels a genuine tie to the Orthodox Serbs in their clashes with
Muslim neighbors -- although this tie is probably not as profound as public
pronouncements in Moscow would suggest.

A deeper, related factor is Moscow's unwillingness to see post-Communist
states broken up along ethnic lines. If Kosovo can go, what about Chechnya,
Russia's own troubled province? If Serb authority in parts of Yugoslavia is
illegitimate, what does that say about Russian authority in parts of the
Russian Federation?

"A country should not be punished for trying to fight separatism within its
borders," said Lukin. "Even if it is doing this roughly."

Igor Ivanov, Russian foreign minister, said last night that before talks
between the Serbs and Kosovars in France broke off this month, Moscow had
succeeded in ensuring that the draft accord put before the two sides called
for "full respect for the sovereignty and territorial integrity of
Yugoslavia."

"This is the main thing Russia has managed to achieve," he said.

But the talks failed. Russia counseled further attempts at negotiations.
"Unfortunately, our partners within the Contact Group, and first of all
Washington, have sometimes no patience to continue political dialogues," he
said.

In India, the Russian defense minister, Igor Sergeyev, predicted yesterday
that strikes in Yugoslavia will escalate into a war that will spread
throughout the Balkans. It will be, he told the Itar-Tass news agency,
"another Vietnam."

Russia, he said, will take whatever measures it deems necessary. "All of them
will include a rise in the combat readiness of the Russian armed forces," he
said.

*******

#7
Russia to pay Apr/May foreign debt without IMF
By Svetlana Kovalyova

MOSCOW, March 24 (Reuters) - Russia will service its foreign debt in the next
two months even if International Monetary Fund credits are not made available
soon, Deputy Finance Minister Oleg Vyugin said on Wednesday. 

"It is clear that Russia would pay in April and May even without IMF credits,"
Vyugin told Reuters following a decision by Prime Minister Yevgeny Primakov to
cancel a trip to the United States where he was expected to discuss the
credits. 

Vyugin said Russia might have to dig into its own resources to service the
foreign debt if a planned meeting between Primakov and IMF Managing Director
Michel Camdessus does not take place in the near future. 

Primakov, who had been due to meet Camdessus on Wednesday, returned to Moscow
after U.S. Vice-President Al Gore told him in mid-air that NATO air strikes
against Yugoslavia were imminent. 

But Primakov told reporters on his return to Moscow that he had spoken by
telephone to Camdessus and that a meeting could take place within days. 

"If it is a question of a week, that does not matter too much. If it is a
question of a month, that is another matter altogether. We have to wait for
information," Vyugin said. 

Russia needs to reach an agreement with the IMF to pay about $4.5 billion
which it owes to the Fund itself this year and to restructure debts to other
creditors. Vyugin said foreign debt payments in April-May totalled about $2
billion. 

First Deputy Prime Minister Yuri Maslyukov said Russia had paid too high a
price for what he called "a pseudo market." 

"We are already like drug addicts who cannot get away from the IMF's needle,"
he said in an interview published on Wednesday by the weekly Argumenty i
Fakty. 

"This year we have to pay back $17.5 billion (in foreign debt), but we only
have $9 billion," he said. "We are almost begging on our knees to restructure
the remaining $8.5 billion or reschedule the payments." 

Eric Kraus, fixed income analyst at Dresdner Kleinwort Benson Moscow, said
Primakov's return was a major disappointment as progress had been expected in
the planned Washington talks. 

"But Mr Primakov didn't have much choice in the matter," Kraus said, referring
to domestic political pressures. Russia vigorously opposes the use of force
against Yugoslavia, with which it has strong traditional links. 

But Kraus was encouraged by the prospect of a meeting with Camdessus soon.
"Primakov is cogniscant of the tremendous importance of getting a deal with
the IMF, thereby freeing up some other money from the World Bank and Japan,"
he said. 

Kraus said an uncontrolled escalation in rhetoric could not be ruled out. "But
the cynical view would be that the IMF is going to be particularly forthcoming
in the negotiations to soften the blow (of the cancelled meeting)." 

*******

#8
Date: Wed, 24 Mar 1999 
From: Mikhail Volodin <editor@k-punkt.com>
Subject: Kontrapunkt Literary Magazine

In January of 1999 in Boston, USA a new literary magazine began its new
life. "Kontrapunkt: Russian Literature, a View from America" is a monthly
Russian language publication. 

From the beginning the magazine became a good source of information and a
guide into a world of contemporary Russian literature and arts. 

In the first issues appeared previously unpublished works of Boris
Strugatsky, Alexander Kushner, Leonid Zhukhovitsky, Lev Anninsky, Igor
Pomerantsev, Igor Irteniev, Igor Guberman, Eugeny Seltz, Yulia
Nemirovskaya, D.A.Prigov, Alexander Genis, Sergey Mirny, Vyacheslav
Pietsuh. As well as reviews of books, magazines, films and art exhibitions. 

In this year's future issues readers will meat with Daniil Granin, Veronika
Dolina, Timur Kibirov, Yuli Kim, Naum Korzhavin, Novella Matveeva, Valery
Popov, Dina Rubina, Nina Sadur, Genrikh Sapgir, Tatiana Tolstaya and many
more not so well-known authors. 

Kontrapunkt has taken upon itself the goal of bridging the gap between
literature in Russia and the Diaspora. At this time manuscripts of authors
from some eleven countries are being readied for publication. 
You can find additional information about the new magazine at:
<http://www.k-punkt.com>

******

#9
Date: Wed, 24 Mar 1999 10:04:32 +0300 (WSU)
From: helmer@glasnet.ru (John Helmer)

The Moscow Tribune, March 24
DYING SWAN KILLS HUNGRY DUCK -- THE REAL STORY
John Helmer

Notoriety and bad publicity were very good for a four-year old
Moscow business created by Canadian entrepreneur Doug Steele, until his hungry
duck ran into a dying swan. 

That describes what happened recently when Olga Lepeshinskaya, now 82 
years old, one of Russia's most famous ballerinas, decided to close down 
Steele's Hungry Duck dance-bar in Moscow. 

According to Steele's version, his is a tale of sacrificing
profitability to a concept which made him a tourist attraction for
countless western visitors to Moscow, but offended one Russian too many. The 
reach of her contacts illustrates one of the rarely discussed pitfalls of 
doing business in a capital more famous for its criminal excess than for its 
moral propriety.

Occupying 240 square meters of low-grade space, leased from the Central
House of Workers in the Arts (TsDRI), Steele's establishment generated 
US$2.8 million in gross sales per annum. He says he paid $1 million in rent 
over three years, plus $120,000 in bribes to former directors of the 
property owner to keep renewing his lease.

Selling mostly imported beer and liquor, Steele says he decided
last July to switch to Russian draft beer he bought for the equivalent of 12
cents a glass, and sold to his customers for $6. Even before the switch to the
new markup, Steele said his profitability was "a little above average"
for the dozens of bars and restaurants which United States and European
investors have established in Moscow. "The concept didn't allow us to 
maximize our potential profit," he acknowledges.

Steele's concept made him so well-known, a Washington newspaper
reported The Hungry Duck was the only bar of its kind in the world.Steele's
concept was to invite women to drink as much as they wanted for free for
two hours, while the doors were closed to male customers. When they
were finally allowed in, they were obliged to pay for their drinks, but got 
to view a bachannalian orgy of drunken women for free.

With a stroke of public relations genius, Steele invited journalists 
from North America's leading media to act as barmen for the Ladies' Nights. As
they televised and published the goings-on, the fame of The Hungry Duck 
far outstripped its revenue per square meter.

According to Moscow police, the lurid atmosphere attracted under-age 
females, criminally minded males, and drug traders. A Russian parliamentary
delegation was shocked one evening to witness, during one females-only
session, a black man stripping to the music of the national anthem of
the former Soviet Union.

Steele says that police precinct reports, claiming non-existent crimes, 
were ordered by high-ranked city officials. He claims a city fire marshal 
told him that his boss had been ordered back to Moscow from vacation, in order
to sign a blank order closing down The Duck. 

"Not four days have gone by in the past year," says Steele, "when there
wasn't a major incident -- health inspectors, special police task forces,
dog-sniffers and drug raiders."

"My friends in the police said, 'Doug, you have big enemies.'"

Steele said he believes it was prima donna Lepeshinskaya who, on
taking charge of the board of TsDRI, was his biggest and most effective
enemy. She told Steele that when his current lease expired at the end
of March, it would not be renewed.

According to Steele, Lepeshinskaya also managed to persuade the 
city government to annul the sale of the property, which had been transacted 
before her takeover at TsDRI. The dancer of "The Dying Swan" and other 
celebrated pieces for the stage apparently realized The Hungry Duck had 
served its purpose. The leasehold could be renegotiated for a higher
price, but only if the nightly orgies stopped.

A veteran of Moscow's retail sector and expert on the hidden costs of 
staying in business, Steele claims his troubles are not part of an 
extortion of larger and larger bribes to keep his lease. After meeting 
Lepeshinskaya and hearing her views, he describes her motives as impeccable. 

Blaming the collapse of Russia's liberal reform policies in last
year's financial troubles, Steele acknowledged: "Half the country is
starving. Seeing (The Hungry Duck) going on offends people. It's time to
do a re-think."

******

#10
Russia: Mystery Surrounds IMF Loan
By Robert Lyle

Washington, 23 March 1999 (RFE/RL) -- Does U.S. Treasury Secretary Robert
Rubin know something about the Russian financial crisis that no one else
does? 

That was the question being asked around Washington going into the week-end
after Rubin was quoted as saying that most of the $4.8 billion in loans
sent to Russia by the International Monetary Fund "may have been siphoned
off improperly." 

Rubin reportedly made the comment while testifying last week before a House
appropriations subcommittee looking at the Treasury department budget for
the next fiscal year. 

Reports of the comment sent journalists as well as U.S. Treasury and IMF
officials scrambling to find out what Rubin seemed to know. 

U.S. officials say they are always concerned about any impropriety in
dealing with IMF money. "It's something we don't take lightly," commented
one. 

The IMF is currently conducting its own investigation into what happened to
the last tranche or two of it's loans which were apparently lost in the
Russian Central Bank's futile attempts last summer to protect the value of
the ruble on foreign exchange markets. 

The story of Rubin's comments, as pieced together from U.S. Treasury and
IMF sources, is not very exciting and only shows the danger of taking
remarks out of context. 

While being questioned by House of Representatives subcommittee members
last week, Rubin was asked about Russia's financial situation and what
Moscow really did with the IMF money. 

According to the sources, Rubin responded clearly that he had no idea what
actually happened in Russia, especially in the month leading up to the
August debacle. 

However, in further questioning, Rubin said there were a lot of
possibilities. "It's hard to know what happened to the money," he said. "I
don't know, it may have been siphoned off improperly for all we know yet." 

U.S. Treasury officials explain that since the Russians were defending
their currency -- attempting to keep the ruble stable against the dollar --
it could only have been done by spending large sums of money. When a
Central Bank is defending its currency, it must spend another currency --
in this case dollars -- to buy rubles off the market and try to use the
normal market force of rising demand to keep the ruble's value up. The
dollars the Russian central bank had at hand were those just transferred in
by the IMF. 

When a currency defense action is going on, it is normal for large amounts
of money to be leaving the country -- investors seeking to diversify their
risk, currency sellers taking their money elsewhere for buying
opportunities, and anyone who decides to keep his or her money in a safer
place. 

Treasury and IMF officials say there is no question that huge sums of money
moved out of Russia just ahead of the August crisis, but whether there were
actual thefts or illegal actions has not yet been determined. 

Rubin did tell some people later that his choice of words might have
contributed to some misunderstanding. "It may have been careless to use the
word 'improper'", he said. "There is nothing improper about moving money
out of Russia or any other country." 

"Money is fungible," said the treasury secretary, "so it is hard to say
exactly what happened to it. I can't tell you what happened." 

At an appearance late Friday, Rubin said he had been misquoted because
reporters frequently look for the simple black and white that some action
was either good or bad. "There are people who have reported that the
Russian decision (by the IMF) was wrong because it didn't work," said
Rubin, but that is incorrect because in the framework of the time, it was
absolutely right. 

What went wrong in Russia was that the Duma and the government failed to
act to implement the necessary reforms, Rubin said. 

Treasury and IMF officials reiterated that at this stage, nobody has an
accurate picture of precisely how all of the money was used. Eventually,
they say, they want the answers. But it is premature to assume anything
good or bad, they say. 

******

#11
The Times (UK)
March 23 1999 
[for personal use only] 
Anna Blundy meets a Kremlin hopeful talking tough on crime 
Aleksandr Lebed, still busy freeing Russian hostages in Chechnya, is
embroiled in a power struggle with a local tycoon that he must win if he
wants to be President 

RUSSIA is a brutal country and people need to be taught what they can and
cannot do. So growls Aleksandr Lebed, gritty Governor of Krasnoyarsk and a
key presidential contender. He adds: "Why do people kill wolves? Because
the wolves interfere with and threaten their way of life." 

General Lebed, 48, is a fervent believer in the death penalty and a
passionate opponent of Russia's two-year moratorium on capital punishment.
"The murderer is not a man, but a beast who should be shot," he says - a
view many crime-weary Russians are likely to support. 

As the present regime sets about destroying itself with a depressingly
familiar round of scandals and in-fighting, the general, with his military
abruptness and no-nonsense air, is beginning to seem an attractive
alternative to some. 

It is a tense time for the general, who is head of the Independent
Organisation for Bringing Peace to the North Caucasus. Peace there is
fragile and events have conspired to shatter it - not least a television
report that a recently freed Russian soldier, taken hostage in 1991, was
bought and sold as a slave during his eight years of captivity. 

As the man who signed the peace with Chechnya after its disastrous war with
Russia in 1996, General Lebed is naturally worried by the mounting threat
of conflict. 

Just as President Aslan Maskhadov and Yevgeni Primakov, the Russian Prime
Minister, agreed to meet, a bomb in Vladikavkaz, the capital of North
Ossetia, killed 80 people, and an assassination attempt was made on Mr
Maskhadov. 

Both events have made the freeing of Russian hostages from Chechnya - one
of General Lebed's principal goals - more difficult. Not the most
charismatic of men, his strong point is action, not conversation. As he
discussed the hostages, his desk in Russia's Upper House of Parliament is
strewn with letters and photographs from the families of some 100 Russian
servicemen missing in Chechnya. 

He clearly feels a deep responsibility for those left behind. They are not
high-profile hostages and little publicity is given to their plight. 

General Lebed controls two groups of hostage-seekers, each comprising five
men. Hostages are taken usually for money or as a bargaining tool to win
the release of Chechens imprisoned in Russia. The job of his men is to
negotiate ransoms down to a "reasonable amount" - 6,000 to 12,000 - and
then bargain. 

He says that he has never paid a kopek for a hostage, but his people do
arrange for payment to be made. If one group of Chechens has demanded a
ransom for a hostage and another has no hostage but is willing to pay for
the release of a relative held in Russia, his men encourage them to do a
deal, then effect the exchange. 

The general's chances of gaining the presidency are debatable and his
springboard governorship has proved less successful than he might have
liked. In Krasnoyarsk he has become embroiled in a power struggle with a
local tycoon. "Nobody has won the battle yet," he says. "It remains to be
seen who is stronger - the law or the criminal." 

Analysts agree that, only if he proves victorious, will his presidential
aspirations - he is currently trailing fourth in presidential succession
polls - be taken seriously in 2000. 

*******

#12
Shortage of Paper Puts Newspapers on Brink of Closure 

MOSCOW, March 22 (Itar-Tass)--The shortage of 
newsprint in Russia can raise the price of newspapers and magazines and 
put many of them on the brink of closure, the head of the Guild of 
Periodicals Publishers, Aleksandr Oskin, said. 

Oskin told Itar-Tass on Monday that many mass media in the Samara region, 
where over 60 magazines and 300 newspapers are published, faced the risk 
of closure in the beginning of March. Subscribers did not get their city 
newspaper Samarskaya Gazeta for a week. 

A similar situation is in St. Petersburg, Novosibirsk and some other 
parts of Russia, he said. 

Oskin noted that the Guild of Periodicals Publishers began "sounding the 
alarm" about growing problems in the cellular and pulp-and-paper industry 
and the shortage of newsprint last autumn. 

Last December, this concern was voiced by the editors-in- chief of 
leading Russian periodicals. 

"However, all our appeals remained unnoticed," Oskin said. 

The Ministry of Economics responded by saying that there were no 
problems with paper production in the country and that it had increased 
by 203,000 tonnes from the 1997 level. 

The problem is that cellulose and pulp-and-paper factories export over 
two-thirds of their products, often at prices lower than those offered on 
the domestic market. Besides, they are reluctant to sell paper directly 
to publishers and printing shops and prefer to work through 
intermediaries, which increases the price by 30 percent and more. 

*******

#13
Russian MP Optimistic About START II Ratification. 

MOSCOW, March 22 (Itar-Tass) - A Russian MP on 
Monday sounded optimistic about possible ratification by the State Duma 
lower house of the START-2 treaty. 

"The chances of the START-2 treaty being ratified by the State Duma are 
now higher than ever before," said Vladimir Lukin, head of the house 
committee for international affairs. 

Earlier on Monday, President Boris Yeltsin sent a message to the Duma, which 
contains a federal bill for START-2 ratification, Kremlin spokesman 
Dmitry Yakushkin said. 

The presidential version is "either identical or very close" to what the 
Duma sent to Yeltsin a couple of weeks ago, Lukin said. 

The Duma's working schedule sets April 2 as a date when a plenary 
session is to consider the treaty, but Lukin said he doubted the lower 
house would meet that deadline. 

After a session of the Duma Council on April 1, the bill will be submitted 
to factions and groups for discussion, and it will take MPs seven to 10 
days to study the document. 

Only after factions and groups come up with their conclusions, will the 
Duma Council resume discussing a date for a plenary session. 

Lukin did not rule out that START-2 might have been ratified before the 
lower house considered a bill on financing the strategic nuclear force 
for the period till 2010. 

*******

#14
Financial Times
March 23 1999 
[for personal use only]
RUSSIA: Should we support Primakov?
As Russia's prime minister arrives in Washington, John Thornhill asks whether
the US Treasury and IMF will put their reservations aside once again and come
to his country's aid

The latest joke in Moscow has it that the light at the end of the tunnel has
been temporarily switched off because of an electricity shortage. Today,
Russia's small, portly prime minister, arrives in Washington DC in the hope of
switching it back on again.

Yevgeny Primakov wants to persuade the International Monetary Fund to resume
its lending programme, suspended in the wake of August's economic crash. He
will also upbraid the US for the expansion of Nato and for US policies towards
Iran, Iraq, and Kosovo - without (he hopes) fatally alienating the US
government. Tough though the mission may seem, Russia's artful premier has
grown skilled at reconciling the seemingly irreconcilable.

Mr Primakov's visit is already being described by the Russian media as the
defining moment in his six-month premiership. Since being thrust into office
last September, Mr Primakov has restored a semblance of stability to Russia -
remarkable in a country that has seen 22m people slip below the officially-
defined subsistence level during his time in office.

If he can claim any kind of victory, following his talks with the US
administration and the IMF, he may well emerge as the successor to the ailing
President Boris Yeltsin. Mr Primakov has passed the toughest budget Russia has
had for years and, by reducing the power of the rich Russian oligarchs, has
made a start on tackling cronyism and corruption.

But Mr Primakov himself concedes that Russia would be in a dire position if he
returned from Washington empty-handed. Russia cannot possibly make the $17.5bn
of public debt repayments due this year out of total budget revenues of $22bn:
it must seek an orderly debt restructuring. If it does not get it, it is hard
to see how Russia can avoid defaulting on its IMF debt. That would mean it
could not borrow on world capital markets again for decades, casting itself
into international financial oblivion and wrecking Mr Primakov's assertions of
"great power" status. The government would almost certainly then have to
finance spending -by printing more money, fuelling high - if not hyper -
inflation.

That would lead to greater social and political upheaval, irreparably damaging
Mr Primakov's reputation and hastening the further dissolution of the federal
government. That would not necessarily mean the replacement of Mr Primakov by
a militantly-aggressive nationalist: Yuri Luzhkov, the mayor of Moscow, might
well be the initial beneficiary. Nor would it inevitably entail the complete
collapse of the government, which would continue to receive energy and other
taxes. But Russia would have taken one more lurch along its downward spiral,
at the bottom of which the country would be, in the words of one of Mr
Primakov's advisers, no more than a "shape on a map".

So what are the chances of coming to an agreement? "The central problem for
our public finances is somehow to solve the problem of foreign debt. The only
way for this to happen is to negotiate a new programme with the IMF," says
Alexei Ulyukayev, deputy director of the Institute for Transition Economies.
"We may dislike them but we must reach an agreement with them."

After months of tortuous - and at times acrimonious - talks, the IMF appears
to be softening its rhetoric. And, in spite of deep misgivings, the US
administration appears ready to help.

Last week, Robert Rubin, the US Treasury secretary, expressed frustration that
the Russian government was not pursuing reforms more energetically but
revealed a greater sense of alarm about the risks of economic collapse. "If
Russia destabilises, the costs to the US are going to be vastly greater than
anything we can possibly think of," he said. "We have to hope that they can
continue to wallow through."

That would appear to mean putting faith in Mr Primakov, who is the master
wallower. His government may not have drawn up a coherent economic programme,
yet it has muddled through the winter more or less intact. The finance
ministry has somehow succeeded in balancing the budget - although many wages
and pensions remain unpaid. The central bank has refrained from large-scale
money printing and preserved some exchange rate stability without yet devising
an explicable monetary policy.

As one newspaper commentator wrote, it is almost as if Mr Primakov has
"anaesthetised" the country, dulling its problems without resolving them.

Vladimir Ryzhkov, the parliamentary leader of the moderate Our Home is Russia
party, says he would personally award Mr Primakov a score of three on the
five-point scale used to grade Russian schoolchildren. "Things could be better
but they are not as bad as many had feared," he says. Coming from a member of
the party led by Viktor Chernomyrdin, whom Mr Primakov displaced as prime
minister, this is slightly more than faint praise.

Mr Primakov's supporters claim that the appearance of masterly inactivity
belies a more serious intent, which the prime minister will unfold in
Washington. Previous Russian governments may have been long on rhetoric but
they were short on delivery. The publicly lugubrious Mr Primakov will
privately promise to deliver the reverse. Russia's chief problem is a lack of
political authority, rather than a dearth of sensible economic ideas. A
consensus must first be forged before any real economic reforms can succeed.

To this end, the 69-year-old Mr Primakov has pacified Russia's unruly,
Communist-dominated parliament by forming a coalition government and
championing a "socially-oriented market economy". This has enabled the
government to pass its toughest budget in years and enact new laws such as
internationally-recognisable Production Sharing Agreements (PSAs), designed to
unlock investment in Russia's oil and mining industries.

Mr Primakov has also stemmed the erosion of the federal government's authority
by bringing several regional governors to heel, cracking down on corruption,
and taming the influence of Russia's over-mighty "oligarchs". In a fierce
battle, Mr Primakov has largely neutralised the influence of Boris Berezovsky,
the business tycoon and adviser to the Yeltsin family. "For this victory alone
they should set up a statue of Primakov on Red Square," says one
industrialist.

Yet others point out the many flaws of Mr Primakov's handiwork. The IMF argues
the government has not yet taken the steps needed to raise more tax revenue.
Indeed, the IMF remains alarmed by some of the government's tax-cutting
proposals and its tolerance of big companies paying their tax bills with IOUs
rather than hard cash.

Mr Primakov has ignored seemingly well-founded allegations of corruption
within his government while targeting "economic criminals" elsewhere. The
absence of banking industry reform has allowed troubled "oligarch" banks to
siphon off their assets while abandoning their liabilities to their creditors
- a practice hard to distinguish from theft. A punitive restructuring plan has
been imposed on holders of Russia's frozen domestic debt.

In Washington, Mr Primakov will be attacked by the Republican right. As a
former Soviet Middle East expert, Mr Primakov developed uncomfortably close
relations with Saddam Hussein, the Iraqi leader. As head of Russia's espionage
service in the early 1990s, Mr Primakov ran Aldrich Ames, the spy at the heart
of the CIA. In recent weeks, the Central Intelligence Agency has warned the
White House about the "authoritarian creep" of Mr Primakov's regime. The
appearance of Mr Primakov's former colleagues from the revamped KGB in
influential posts has fuelled US concerns about Russia's civil rights and
freedom of speech.

However, Al Gore, the US vice president who is acting as Mr Primakov's formal
host, seems likely to play down these concerns. As he gears up for his own
presidential bid next year, Mr Gore will be desperate to keep bad news from
Russia off the front pages of US newspapers and will doubtless appreciate the
attractions of Mr Primakov's appeal for stability.

Politically, the most convenient outcome for the US administration would seem
to be for the IMF to resume lending to Russia, perhaps with tough new
conditions, such as making the loans back-loaded (ie, money is not released
until late in the day). Then, Mr Primakov will be able to claim a partial
victory, Russia's foreign creditors will be appeased, and the US
administration can defer a tricky debate about "Who Lost Russia?".

However, no one pretends that this would be anything other than a palliative.
An IMF agreement may be vital to allow Russia to reschedule its foreign debts
but it will not provide much of a cash injection this year. The IMF, which is
owed $4.6bn by the Russian government this year, will pass any new loans from
one Washington bank account to another. The Russians will still end up with
some extra cash, because an IMF agreement could unlock various loans from
Japanese creditors and the World Bank which are now on hold because of the IMF
dispute. But whether the economy will benefit even then is a moot point:
Russia is suffering from capital flight, so the extra money could still end up
abroad.

Above all, there seems little chance of long-term reform, even with an IMF
agreement. "For the past 10 years I have been of the view that foreign money
has only helped incompetent people to buy time to do nothing," says Boris
Fyodorov, Russia's former finance minister. "Giving this government more money
will not solve a single economic problem in Russia."

Yet perhaps it is unrealistic to expect Mr Primakov - or the IMF - to deliver
more, trapped as they are between an unruly parliament and an unpredictable
president in the run-up to the election season - arguably in both countries.

Mr Ryzhkov argues Russia can never become a responsible law-based state while
it retains an irresponsible legislature. The only solution is to change the
"absurd" 1993 constitution ensuring that the government is formed by
parliamentary majority, not presidential whim.

But with typically Russian fatalism, Mr Ryzhkov concedes that the only
possible solution to the country's ills is impossible to achieve - at least
this side of next year's presidential elections.

Wallow seems set to continue. 

******