April 17, 1999    
This Date's Issues: 3243• 3244  • 

Johnson's Russia List
#3244
17 April 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Itar-Tass: NATO Operations Lead to Ecological and Economic Disaster.
2. Cameron Sawyer: 3241-Kirkpatrick/Weldon. (Expats)
3. Thad McArthur: 3241-Applebaum/Russia and Yugoslavia.
4. Nathan Stowell: Response to Anne Applebaum in JRL 3241.
5. The Open Society Institute's conference in Washington: A Pause in the 
Boom: What Now for the Caspian? 
6. Mark Jones: Fatherland's evil trio. (Luzhkov).
7. Jerry Hough: Russia, US, Yugoslavia.
8. Argumenty i Fakty: Paper Views Yeltsin, Primakov Relations.
9. Radiostantsiya Ekho Moskvy: Official on New Electoral Rules.
(Interview with the chairman of the Central Electoral Commission of the 
Russian Federation, Aleksandr Veshnyakov).
10. Transitions: John Nellis, Time to Rethink Privatization in Transition 
Economies? 
11. Reuters: Russian envoy rejects NATO troops in Kosovo.
12. Reuters: Russian Fleet to Hold Exercise.] 

*******

#1
NATO Operations Lead to Ecological and Economic Disaster.

MOSCOW, April 16 (Itar-Tass) - NATO operations in the Yugoslav territory 
would lead to an ecological and economic catastrophe in Europe, holds a 
prominent Russian politician. Sergei Karaganov stated this at a news 
conference in Moscow on Friday in connection with the statement on NATO war 
against Yugoslavia, issued by the working group of the Council on foreign and 
defence policy. He said bombings of Yugoslavia, the war unleashed against 
Yugoslavia, bypassing the UN Security Council, fully meets the definition of 
aggression by international law and the existing international practice. 

"Oil storages are burning in Yugoslavia, the atmosphere is being polluted, 
but greens in Germany and in other European countries are silent for some 
reason. Meanwhile environmental pollution and the ecological catastrophe will 
be spreading. Moreover, an economic catastrophe is apparent as neighbour 
countries (Bulgaria, Romania, Hungary, Austria, Italy) began to lose hundreds 
of millions of dollars a week as transport streams and trade have been 
halted. And this stated of things will be affecting the entire region for 
long, and, finally, there is considerable death toll, Karaganov said. 

The statement of the working group has been signed by prominent Russian 
politicians who represent various sections but are united in the opinion that 
"the war against Yugoslavia defies the world order that formed after the 
Second World War, the system of maintaining peace and security for which the 
nations, above all Europeans, sacrificed tens of millions of lives". 

Karaganov said the statement is aimed to assist the Russian government and 
the Russian society in the struggle against the consequences of NATO 
aggression and to prevent Russia's getting involved in the war psychosis 
deleterious to it, Karaganov stressed. 

*******

#2
Date: Fri, 16 Apr 1999
From: Cameron Sawyer <sawyerco@matrix.ru> 
Subject: 3241-Kirkpatrick/Weldon,

Sounds a bit like Nixon's "silent majority": actually expatriates as a group
tend to be much more conservative than the U.S. average, and if I'm not
mistaken a big majority of us Americans living in Moscow voted against
Clinton in '96. There is even a Federalist Society chapter in Moscow, and
the Heritage Foundation has a substantial operation here. The free market
transition was and is quite exciting intellectually for conservatives and
especially libertarians; but simply depressing to those on the left. So I'm
surprised that David would think that it's something unusual for
conservatives to be interested in Russia. I don't know about Russologists
and Russophiles in the U.S., but over here they tend to be a bit rightish,
more often than not, in my experience.

******

#3
Date: Fri, 16 Apr 1999
From: Thad McArthur <thad@co.ru> 
Subject: 3241-Applebaum/Russia and Yugoslavia

I couldn't agree more that the furious reaction (which, believe me, is 
authentic) of the Russian public to the bombings in Yugoslavia does have a 
silver lining if only our leaders in the West would have the insight and 
intelligence to take notice of it then try to make it work in our favor. 
Given the opacity of the thinking on Russia in Washington for the past 
three (four? ten?) years, I don't have high expectations for this.

Russia's leaders are clearly following public opinion on this issue rather 
than leading it, which is a novelty in my experience. The fact that 
something (finally!) has made average Russians angry enough to bring them 
out into the streets could be seen as progress for Russian democracy. The 
vehemence of the public reaction to they Yugoslavia bombings is interesting 
when compared to the public silence on Russia's vast internal problems and 
endless financial scandals. I don't recall who said it, but the opposite of 
love is not hate, but indifference. The Russian public clearly holds the 
U.S. Government and those of Western Europe to a higher standard of 
behavior than they do their own, which means the relationship can be saved 
if we act quickly, decisively, and wisely. Again, there's not much hope for 
this, unfortunately, given the current lineup in Washington.

*******

#4
Date: Fri, 16 Apr 1999 
From: "Nathan Stowell" <nys@aha.ru> 
Subject: Response to Anne Applebaum in JRL 3241

I think Ms Applebaum's submission (JRL 3241) falls wide of the mark in
assessing "authentic" reasons for Russia's reaction to the Kosovo crisis.
Her search for ulterior motives (such as receiving IMF credits) is surely
offensive to those who have a much more plausible reason: a moral objection
to countering violence with violence.

Ms Applebaum's evidence that Russians had other incentives in being "really
angry" seems to be that the amount of angry rhetoric has declined since
"successful" IMF negotiations. Aside from the fact that most regard those
meetings as a proverbial olive branch (no new money tranches have yet to be
released), the amount of rhetoric and threats seem to be escalating, witness
Yeltsin's speech on TV last week hinting at world wars.

While media coverage has certainly been far from objective, I disagree that
Russians have allowed this to taint their views. Russians have long been
cynical and skeptical of their media coverage and politicians as well ( a
healthy habit which more Americans should take up). Nonetheless, Ms
Applebaum comes dangerously close to directly stating that Russians are
incapable of formulating an opinion which differs from that of their
news-anchor's. She supports this by citing presidential elections in which
there really wasn't much of a choice to begin with, yet in which Zyuganov
still garnered a fair share of the votes. For whom would Ms Applebaum have
voted ?

Most Russians I know have formulated their view on Kosovo despite the news
coverage. They don't support Milosevich or ethnic cleansing, but they don't
feel that this justifies NATO's aggression. No wonder that "low numbers [of
Russians] would actually want to go there and fight" if they oppose using
violence to end this crisis in the first place.

I too am encouraged by Russia's not participating in the fighting, but
because it underlines their moral resolve. If Russia does succeed in
brokering a truce, they will be the only real winners. Considering the lack
of coverage on Russia's position in the Kosovo crisis, Ms Applebaum is,
ironically, a better example of someone biased by their own media than any
Russian.

******

#5
From: Katya Nadirova <KNadirova@sorosny.org>
Subject: Washington conference: A Pause in the Boom: 
What Now for the Caspian? 
Date: Fri, 16 Apr 1999 10:39:41 -0400

The Open Society Institute's Central Eurasia Project invites you to attend
Central Asian Open Forum 

A Pause in the Boom: 
What Now for the Caspian? 

Steve LeVine 
The New York Times 

Presider: Anthony Richter 
Open Society Institute

Steve LeVine writes for The New York Times and Newsweek. The longest-serving
foreign correspondent in the Caspian Sea region, he has covered the Caucasus
and Central Asia for most of their seven years of independence, and before
that covered Afghanistan and Pakistan for three years from a base in
Pakistan. One of his recent projects examined the potential impact of
misdistributed wealth on regional stability; another explained the origins
of the Taleban, its foreign patronage, and how the movement came to power.
He works out of offices in Baku and Almaty.

Thursday, April 29, 1999 
12:30 - 2:00 pm 
Carnegie Endowment for International Peace 
1779 Massachusetts Avenue, NW 
Washington, D.C. 20036-2103 

You must RSVP in order to attend. 
RSVP to Katya Nadirova (212) 548-0612 
fax (212) 548-4607 email:<knadirova@sorosny.org> 

Ekaterina Nadirova
Program Associate
Central Eurasia Project
Open Society Institute - NY
400 West 59th Street
New York, NY 10019
Telephone: (212) 548-0612
Fax: (212) 548-4607
E-mail: knadirova@sorosny.org

******

#6
Date: Fri, 16 Apr 1999 
From: Mark Jones <mark@jones118.freeserve.co.uk>
Subject: Fatherland's evil trio

I was interested to see reported Luzhkov's choice of lieutenants
for his Fatherland scam. Artur Chilingarov is a former friend and 
confidant of Ruslan Khasbulatov. A. Vladislavlev is a former pointman 
for Arkady Volsky, whose Russian Union of Industrialists, which is 
actually the old CPSU CC Industrial Department in disguise, helped
Volsky enrich himself and many "Red Directors" during the fire sale
at the end of history (Volsky was also a great promoter of nuclear 
deals with Iran). 

After a rocky start to their business association, Volsky and
Luzhkov, who share the same patrimonialist, cronyist politics,
became firm allies. Now they are bound together by a thousand
dirty deals. Volsky is now also part of the Maslyukov/
Primakov axis of course, as seemingly is the moon-faced "banker"
Misha Khodorkovsky, the prime mover at Menatep and ripper-off of
oil. Menatep was characterised as a gangster
bank by the FBI -- Khodorkovsky BTW also owns a 
controlling interest in those two outspoken beacons of
the fight against criminality and corruption, the Moscow Times
and the St Petersburg Times. 

It is hard to tell which of the two men, Chillingarov or
Vladislavlev, has a higher pile of dirt in their misbegotten pasts.
Vladislavlev was a great friend and confidant of Otari Kvantrishvili,
the Godfather of Moscow's Mafia until someone, most
likely Luzhkov, had him shot to death -- Luzhkov was in league with 
Chechen gangs which acted as his street-enforcers
and kiosk tax collectors. When Kvantrishvili began to get political 
ambitions, that was reason enough to dispose of this unwelcome Georgian
competitor.

The pile of kompromat at Luzhkov's door is even bigger than that 
of the others of course, but it's curious that Luzhkov, who after all
gets elected with Soviet-size pluralities in 'free' elections, should
not fear to choose such tainted partners for his assault on state power. 
It is an open declaration of what the Luzhkov Russia will be: a 
criminalised state capitalism of the darkest and most obscurantist
character. It's tempting to say that they could be clones of Hitler, 
Goering and Goebbels, but those were more dedicated and original
social theorists. Luzhkov's nationalism is just as tacky and
opportunistic as the man himself and he is just as much a pawn
of the west as the Capo di tutti Capi himself, BN Yeltsin. Vladislavlev
and Chilingarov are timeserving scammers whose only merit in 
the perverted circles they and Luzhkov move in, is the utter,
want of principle, honour, conscience and morality.
This makes them ideal spokesmen for Fatherland.

Although Luzhkov's shady past is well known in the West he remains 
popular for the same reason that Hitler was lionised
by the Astors and the Hearsts in the 1930s: as a bulwark against
communism and a 'restorer of order'. If he does come to power,
he will be no more a respecter of Yeltsin's gerrymandered
constitution than anyone else in the "elite"; but he is much
more LIKELY to unilaterally impose his own order than would be
that syncretist of power G Zyuganov, whose crablike manouevrings 
are all about consensus-seeking and satisficing interest groups
where Luzhkov's idea of how you ascend to power is over a heap
of still-warm bodies.

In practice Luzhkov's choices will be limited both by his own 
squalid history and by the external conjuncture. His answer to 
Russia's endemic crisis will be to brutally and bloodily smash 
the Left and the workers' movement. He will no doubt receive, 
and is already receiving, active US support to this end. 
However, Russia is not Indonesia or Chile. The left will fight 
back. There will be civil war. The country will fragment and
conflict will be on ethnic and confessional as well as class 
lines. This is how the US will help foster on a grander scale
the outcome whioch German and French meddling in Yugoslav affairs
has now achieved.

******

#7
Date: Fri, 16 Apr 1999 
From: "Jerry F. Hough" <jhough@duke.edu>
Subject: Re: 3241-Knab/Hough

I generally agree with the comments on my pieces. I begin with 
the paradox that we are fighting for NATO in a war continental Europe 
does not want. It is a time when the creation of the Euro implies 
movement toward United States of Europe that makes American commanders in 
Europe very unnatural. I think our anxiety about this is a major 
driving force for us, but makes it quite possible for us to create what 
we fear. 

I think this country is very complacent about Russia. Our polls 
as early as 1993 found a strong feeling, that has grown, that Americans 
are trying to weaken Russia with its economic advice. I find it bizarre 
to hear people say Russia is too dependent on American aid to resist 
American diktat when we are down to offering IMF loans to pay off IMF 
loans--that is, loans that help the IMF books, but not Russia. I keep 
going back to Germany of the 1920s not because I expect a Hitler, but 
because it reminds us that these postrevolutionary processes often take 
10-15 years. Germany had democracy and a pro-Western foreign policy for 
14 years before it blew. And Germany shows you can get economic growth 
without Western aid if you have an intelligent crisis economic model.

My last letter reacted to people like Odom who say how easy an 
invasion from Hungary would be. We, no doubt, could defeat 
Russian ground forces around Belgrade, but I think Dale Herspring's 
point about the length of time it takes for military buildup is 
crucial. The crisis starts when substantial American (or is it German) 
forces start a big build-up in Hungary. That will make the Russian 
reaction to Kosovo small potatoes. The minute the Russians send a 
regiment to Belgrade in response as a trip wire, I think that will scare 
the Europeans to death, and probably even the Americans. And God knows 
what comes out of Russian politics in such a situation.

What I find particularly crazy is the point made explicitly on 
Nightline last night that we should be glad for Russian cooperation in 
accepting Milosevic's surrender. That is the essence of McFaul's three 
pieces--no real cooperation with Russia, no seeking a compromise that 
involves bringing Russia into a collective security arrangement, but we 
should, of course, use them to try to save our bacon at a later stage. 
If we were cooperating with Russia on an intelligent economic reform 
plan, it might happen, but we are against Primakov because he is 
"left-wing" when his economic policy is the Yabloko Zadornov policy, 
indistinguishable from Gaidar and Chubais. One assumes that it can't be 
as dumb as it seems, but all the evidence is that it is. I quite agree 
with Simes that the problem is not Slavic unity but the economic problem, 
and I fear Kosovo is the catalyst on resentment on the latter.

*******

#8
Paper Views Yeltsin, Primakov Relations 

Argumenty i Fakty, 964
13 April 1999
[translation for personal use only]
>From the "Details" column by Tatyana Netreba and Vitaliy Tseplyayev: 
"The Communists Have Been Deterred" -- passages within slantlines 
published in boldface

According to AiF [Argumenty i Fakty] sources, on 
the eve of 15th April /Boris Yeltsin/ was morally ready for a "strong-arm 
tactics scenario" should the deputies decide to go ahead with his 
impeachment after all. This means that the reasoning of the proponents of 
tough actions in the president's entourage (believed to include [head of 
the presidential administration] /Aleksandr Voloshin/, [Federal Security 
Service Director and Security Council secretary] /Vladimir Putin/ and 
[former head of the presidential administration] /Valentin Yumashev/) has 
gained the upper hand over that of more cautious advisers, [Interior 
Minister] /Sergey Stepashin/ and [Moscow mayor] /Yuriy Luzhkov/. 

It was suggested that on 14th April Boris Nikolayevich [Yeltsin] would 
make a /TV address/ in which he would issue a veiled threat to the 
deputies, saying he would produce a "commensurate response" to the 
impeachment using his "mandate as the popularly elected president". 
One official in the corridors of power lamented the fact that [leading 
reformer and former head of the presidential administration] /Anatoliy 
Chubays/ was no longer in the Kremlin: "Anatoliy Borisovich would surely 
have found a way to do away with all this Duma clique." Meanwhile Chubays 
did indeed become a welcome guest in the Kremlin. It is not known for 
certain, however, what his secret discussions with Voloshin, [deputy head 
of the presidential administration] Oleg Sysuyev and the others were about. 
It looks as though the threat has worked. According to the estimates of 
CPRF [Communist Party of the Russian Federation] analysts, the left-wing 
forces were likely to muster no more than /150-200/ votes on Thursday in 
favour of Yeltsin's dismissal, falling short of the necessary /300/. The 
secret ballot opened the way to unpunishable breaches of party 
discipline. This would have dealt a crashing blow to the Communists' 
reputation. Foreseeing a fiasco, the opposition agreed at the last moment 
to put off the impeachment debate for a month. 

"The president longs for forceful decisions"

The Kremlin people shudder when uttering these words, remembering the 
day when State Duma speaker /Gennadiy Seleznev/ walked out of Boris 
Nikolayevich's office. At that time, "forceful decisions" relating to the 
president's pet subject of retargeting nuclear warheads nearly caused a 
international row. Administration staffers are now saying repentantly 
that they were caught unprepared by this "show of vigour" by their chief, 
languishing in /Gorki-9/ [country residence]. 

Looking at a cheerful president, who resemble someone having emerged from 
hibernation, his entourage are still utterly amazed by his ability to 
"rise from the ashes of ill health". And yet it was only recently that we 
saw a very different Yeltsin. People talk of an incident that happened 
one day during an awards ceremony in the Kremlin. At the ceremony, Boris 
Nikolayevich suddenly started referring to one of those receiving an 
award as a posthumously decorated hero. The sad pathos sounded 
particularly comical when the baffled holder of the decoration walked up 
to the president in person. Those present obviously tried their best to 
ignore the gaffe. There was nothing of the sort at the latest ceremony to 
honour the cosmonauts, held on Monday [12th April]. Except that Yeltsin 
"snubbed" [his former aide and member of a recent space mission] /Yuriy 
Baturin/, awarding him /the Order of Courage/ instead of the customary 
Hero's Star. 

Telephones in the Kremlin have fallen silent

What has of late been worrying the president no less that the threat of 
impeachment has been Prime Minister /Yevgeniy Primakov/. On the one hand, 
B. N. [Yeltsin] realizes perfectly well that Primakov is the only prime 
minister with whom he can be sure of serving out his term in the Kremlin 
in peace. On the other hand, the White House master's ostentatious 
independence induces poorly concealed irritation in Yeltsin. 

It is said that one of the reasons for this irritation is the fact that 
his contacts with /Western leaders/ have become less extensive now that 
Primakov is around. They telephone him and confer with him on pressing 
international matters less frequently than they used to. The president of 
a nuclear power, who has got used to seeing himself as one of the pillars 
of international politics, can't help feeling hurt by this. His direct 
telephone links to the leaders of Western countries rarely come to life 
even at the height of a /war in the Balkans/. Instead, as his aides 
report, similar telephones in Primakov's office are buzzing busily. They 
say the prime minister is touch now with /Al Gore/, now with /Tony Blair/ 
or [IMF Managing Director] /Michel Camdessus/. 

The president's irritation with the prime minister was discernible 
during his official meeting with /the heads of Russian republics/: his 
voice was distinctly hoarse. It is known that this characteristic 
hoarseness appears in his voice when Boris Nikolayevich is nervous. The 
next day, however, when the president spoke to the senators at luncheon, 
his voice acquired its more usual timbre again. 

Meanwhile Yevgeniy Maksimovich [Primakov]'s evident desire to stay away to 
the 
last from both the impeachment and the [beleaguered Prosecutor-General] 
/Yuriy Skuratov/ problems has simply added heat to the nervous atmosphere 
in the Kremlin. /Voloshin's/ attempts to woo Primakov into issuing a 
statement on the dangers posed by the impeachment and by /Skuratov/ led 
to an angry exchange between the head of the administration and the prime 
minister. The next day Primakov suffered from lumbar pain. 

As far as Skuratov is concerned, the belief in the Kremlin is that "the 
peak of the problem is now over". This does not apply to Yuriy Ilyich 
[Skuratov] himself because, as people here have observed, "the odds 
against him going to jail have dropped sharply" now that so much 
compromising material against him has been collected. This may even 
happen before the next Federation Council debate on his case. The Kremlin 
people pin their hopes on this very outcome. 

Meanwhile the possible return to Russia of another potential detainee, 
[businessman and former CIS executive secretary] /Boris Berezovskiy/, is 
seen as utterly undesirable in the [presidential] administration. People 
here believe that Boris Abramovich [Berezovskiy] is trying to stir things 
up. The Kremlin people are convinced that "he may end up in handcuffs, 
but even then he has no chance of becoming a popular hero".

*******

#9
Russia: Official on New Electoral Rules 

Radiostantsiya Ekho Moskvy
14 April 1999
[translation for personal use only]

[Presenter] Its 1535 Moscow time. The "Midday" 
programme with Vladimir Varfolomeyev is on the air. Our observer Petr 
Zhuravlev is also in the studio. Good afternoon. We welcome our guest, 
the chairman of the Central Electoral Commission of the Russian 
Federation, Aleksandr Veshnyakov. Aleksandr Albertovich, good afternoon. 
Our listeners are probably aware that you had a meeting with the 
president in the Kremlin yesterday [13th April] [Passage omitted: recap 
on the meeting] Speaking about yesterday's meeting, whose idea was it - 
yours or the president? Was it because you had some problems which could 
be resolved at the highest possible level only or was it initiated by 
Boris Yeltsin himself who is concerned about a campaign? 
[Veshnyakov] Both sides were interested in holding the meeting. I don't 
really 
know how to word it better: whether the chairman of the Central Electoral 
Commission or the Russian president was more interested in holding the 
meeting. I think there was a desire on both sides for this meeting to 
take place. So it happened. 
[Q] Was is just a courtesy call or did you discuss things? What are the 
results? 
[A] The results of the meeting are as follows: when the first part of 
the meeting ended with the participation of journalists, we had a 
half-hour long conversation on a one-to-one basis. This is when Boris 
Nikolayevich asked me about the plans of the new composition of the 
Central Electoral Commission and about preparations for the forthcoming 
parliamentary elections - so I began answering questions. 
[Q] Was he interested in the financial, organizational or maybe 
political aspect? The composition of the Central Electoral Commission has 
changed. Let me recall that representatives from the State Duma, the 
Federation Council and the president himself are being nominated there. 
[A] Speaking about aspects, the Russian president's address sets a task: 
to prepare and hold honest and fair elections. Incidentally, 10 out of 
the 80 pages of the address were devoted to the elections. Therefore, it 
is only natural that interest was shown in the Central Electoral 
Commission, which is one of the main agencies, responsible for conducting 
and preparing the elections. I thought that the question was what the 
Russian Federation should do for the elections to be fair and honest. So 
I answered that question as I understood it. 
[Q] What was your answer? 
[A] I spoke about this topic many times. [Passage omitted: he recaps on 
an earlier meeting of the commission where he spoke about preparations 
for the elections]. The first thing that we should do is to upgrade the 
legal basis for the forthcoming elections. Something has already been 
done in this area. Literally a week ago the `Rossiyskaya Gazeta' 
published a law, which has come into force, under the title: "On 
amendments and changes to the federal law on the basic guarantees of 
electoral rights and the right of citizens of the Russian Federation to 
take part in a referendum." 
What is the essence of these changes which should be made more specific 
in other laws at a later stage? In essence these changes are aimed at 
preventing criminals getting into power. This is to start with. Second, 
we should prevent the use of dirty electoral tricks. Third, we should 
regulate and at times toughen up the regulations on funding election 
campaigns. Fourth, we should raise the responsibility of those persons 
and agencies which are still making some mistakes during the elections. 
[Passage omitted: on Yeltsin's remark that he is not happy with the 
current composition of the State Duma and on the changes to the funding 
regulations, and a break for news] 
[Q] It's 1548 [Moscow time]. Aleksandr Veshnyakov is in the studio. 
Vladimir Varfolomeyev and Petr Zhuravlev are also in the studio. 
Aleksandr Albertovich, the next question is about the following: you have 
just said that various barriers should be set up to prevent criminals 
from getting into power. Are you planning to make any other amendments to 
the law on the elections of deputies, apart from toughening control over 
the funds? In what other ways can you contribute to barring criminals 
from getting into the State Duma since we are now preparing for the 
elections to the Duma? Are you just planning to publish reports about 
someone's conviction? 
[A] Yes, this is envisaged. 
[Q] Are you planning any other steps in this direction? 
[A] We are planning to do the following here: each candidate deputy to 
the State Duma should submit to the electoral commission a copy of his 
tax return. 
[Q] This sounds interesting. [Passage omitted: Veshnyakov says that the 
tax returns will be checked and published and the presenter says that the 
law-enforcement and tax agencies should help the electoral commission in 
this, on an upper funds limit and on greater responsibility of deputies 
and parties] 
[Q] Aleksandr Albertovich, we have two or three minutes more and I have 
a question to ask which I have been interested in for a long time, a 
question which is quite in keeping with the time. I am sure that you have 
already looked at or tried to calculate the number of parties - I am not 
even talking about individual deputies - how many parties will submit 
applications for the elections. 
[A] By December we expect not just an application. Ballot papers will 
have to be ready by then. [Q] Yes, what I mean is... 
[A, interrupting] I think we might have about 20 electoral associations. 
The logic is as follows: four years ago there were some 250 various 
public associations which were entitled to take part in the elections. 
Now there is a possibility that 139 [parties] will take part in the 
elections. 
[Q] Is this figure based on this year's results and registration? 
[A] Yes, yes. These are the ones which registered their charters and 
made appropriate amendments one year before the elections. There are 139 
of them. There cannot be more than that during the elections on 19th 
December. This date is envisaged by our legislation. If we draw another 
parallel here; only 40 of the 250 [parties] have survived - this means 
that out of the 139 [parties], which is half on the previous figure, we 
will have just 20. [Passage omitted: confirms that a smaller number of 
parties will take part in the elections] 
[Q] Another question which involves figures and since we are pressed for 
time it has to be short. How much will it cost the state to hold the 
parliamentary elections this year, 1999? 
[A] The budget envisages the sum of 1.4 billion [roubles]. 
[Q] Will that be enough? 
[A] Yes this should be enough, Aleksandr Veshnyakov, chairman of the 
Central Electoral Committee, was interviewed by Ekho Moskvy live. We wish 
you and your colleagues success. [Passage omitted: more concluding remarks] 

*******

#10
Date: Wed, 14 Apr 1999 
From: "Adil Rustomjee" <a_rustomjee@hotmail.com> 
Subject: on recantation

Some time back - before the August financial crisis - in JRL #2300, I 
wrote an article on the role of foreign advisors in the Russian 
privatization program. In it, I mentioned that it would be too much to 
expect the institutional advisors - notably the IMF and the Bank - to 
recant in the short term on the disasterous advice they've dispensed 
in Russia. I was wrong. The hand wringing has started a lot earlier 
than I expected.

The article that follows was written in the February issue of 
Transitions. Transitions is a World Bank publication dedicated to 
reform issues in transition economies. One way of looking at 
Transitions is as a mouthpiece of the "Washington Consensus" - the 
standard policy mix that the Bretton Woods twins have dispensed to 
transition economies. The author is one John Nellis, one of the 
resident grandees of privatization at the Bank, and himself involved 
in developing much of the Bank's position on Russian privatization. 


Time to Rethink Privatization in Transition Economies? 
by John Nellis

Almost everywhere in the world, including Central Europe, 
privatization has succeeded to improve firm performance. Nevertheless, 
early and albeit fragmentary evidence from Armenia, Georgia, 
Kazakhstan, the Kyrgyz Republic, Moldova, Mongolia, the Russian 
Federation, and Ukraine so
far shows that:

· The association between private ownership and restructuring (changes 
positioning the firm to survive and thrive in competitive markets) is 
weak or nonexistent.

· Firms that are partially owned by the state perform better than 
privatized companies.

· Few differences are discernible between the performance of 
state-owned and private firms.

· Clear performance improvements are evident only in the few firms 
that have been sold to foreign investors. 

The farther East one travels, the less privatization has improved firm 
performance. The first and largest disappointment is Russian 
privatization that has not lived up to the expectations and 
pronouncements of its architects. There and in other transition 
countries, mass and rapid privatization has turned over generally 
mediocre assets to people who have neither the skills nor the 
financial resources to run them well. Most high-quality
assets-sometimes by "spontaneous privatization" that preceded official 
schemes, sometimes by manipulation of voucher schemes, perhaps most
often and acutely during the non-voucher second phases of 
privatization or during secondary trading-have gone to the 
resourceful, agile, and politically well-connected few. And only 
rarely have these new owners embarked on the deep restructuring that 
might justify their acquisition of these assets.

Faced with these sobering results, many policymakers and observers, 
particularly in the smaller or more geographically isolated transition
economies, have begun to question the wisdom of rapid mass 
privatization. Several factors have made them question this policy: 

· First, the failure of privatization to improve performance in Russia 
has convinced many decisionmakers that privatization is unlikely to 
succeed in their countries, where the quality of industrial assets and 
the business environment is as bad or worse than in Russia. 

· Second, recognition has become widespread that the administrative 
and legal mechanisms needed to transform rapacious grasping into 
tolerable and productive acquisitiveness are almost entirely lacking. 

· Third, policymakers in the former Soviet republics recognize that 
many aspects of their economies are still under the influence if not 
the control of Russian supply, transport, energy, and sometimes 
criminal networks. 

· Fourth, several countries that tried mass privatization schemes, 
such as Kazakhstan, Mongolia, Moldova, and Albania, have concluded 
that they gained little from the effort. In those countries, divesting 
ownership to inexperienced investors has not led to effective 
governance of firm managers, many of whom failed to implement change 
and remain largely unaccountable for their actions. 

What Went Wrong?

Critics place part of the blame on the international financial 
institutions, since they required governments of transition economies 
to privatize rapidly and extensively before competitive policies and 
institutional safeguards-recognized as important but thought to be 
secondary-were put in place. 

These institutions believed that the immediate need was to rapidly 
create a constituency of property owners. Private ownership by itself, 
they believed, would provide sufficient incentives to shareholders to 
monitor managerial behavior and push firms to good performance. 

But capitalism is revealed to require much more than private 
ownership. It functions because of the widespread acceptance and 
enforcement of fundamental rules and safeguards that make the outcomes 
of exchange secure, transparent, and predictable. Where such rules, 
safeguards, and institutions are absent-fairness, equity, and firm 
performance suffer. In an institutional vacuum none of the players in 
a privatized firm-workers, managers, creditors, investment fund 
shareholders, civil servants managing the state's residual share-is 
interested in or capable of maintaining the long-run health of the 
assets. In such circumstances, privatization is more likely to lead to 
stagnation and decapitalization than to improved financial
results and enhanced efficiency.

Should Privatized Firms Be Renationalized? 

Some observers thus have suggested that further privatization be 
postponed until competitive forces and an enabling institutional or 
governmental framework are in place. Others have even called for the 
renationalization of divested firms, which would or could be 
"reprivatized" at some later date. 

Despite its prima facie (obvious) appeal, renationalization of 
privatized enterprises would be a desperate measure, with a high 
likelihood of failure, particularly in those institutionally weak 
settings where the idea has been most strongly endorsed. To 
successfully renationalize (and then reprivatize) previously 
state-owned firms, the state would have to select some or all of the 
most egregiously mismanaged enterprises, put them back
in its portfolio, manage them while there, and eventually sell them in 
a responsible manner. Unlike the sales transacted the first time, 
these reprivatizations would have to be conducted in an open, 
transparent manner. Standard, internationally accepted valuation 
procedures would have to be adopted, and internationally recognized, 
financial and transaction advisors would have to be involved. All 
relevant information would need to be disclosed to bidders, and 
bidding would have to be open to all interested parties. No 
restrictions (such as maintaining the same line of business or 
retaining a certain number of employees) could be placed on the 
management of the business after the sale. 

The problems with such a plan are obvious: how many transition 
governments outside (or even within) Central and Eastern Europe could 
reasonably be expected to undertake this process and handle it well? 
How many have the capacity to prevent asset stripping in state-owned 
companies, or the technical and political capability to divest firms 
according to this set of procedures? Regrettably few. The irony is 
that a country with the skills and will to run state-owned firms in an 
effective and efficient manner is usually the very same country that 
can privatize successfully. Conversely, the forces and conditions that 
lead governments to botch privatization also hinder efficient 
management of state-owned enterprises. 

The slightly less drastic argument runs as follows: in institutionally 
weak and politically fractured transition economies, long removed from 
or never fully integrated into the Western commercial tradition, the 
government should halt privatization of the remaining portfolio. 
Instead, it should shift efforts to strengthening market-supporting 
institutions (mainly public but some private as well), with the goal 
of channeling present "wild East" commercial activity into socially 
productive and acceptable modes. Discipline and competition should be 
imposed on and in the remaining public enterprises, accompanied or 
followed by staged, incremental shifts in ownership patterns, in a 
more or less evolutionary manner, "Chinese-style." 

Once again, the idea has a prima facie appeal. But once again, the 
solution assumes the existence of an effective state mechanism and 
institutional framework. Where such a framework does not exist, the 
options-unsuccessful privatization or maintenance of inefficient 
enterprises in the hands of a weak and venal state-are bleak. The 
medium- to long-term solution is to build up the government's 
administrative, policymaking, and enforcement capacities. Exactly how 
this can be done and what the role of external assistance is in this 
process remains unclear, however. 

Can anything be done in the shorter term? Several transition 
governments have tried to compensate for managerial and institutional 
deficiencies and lack of political consensus by contracting out much 
or all of the privatization process to private agents and advisors. 
Estonia, Poland, Bulgaria,Armenia, and Uzbekistan have tried or are 
contemplating this approach. Although proved successful in Estonia, 
this method is far from being a universal or speedy solution (as the 
Poles can attest). And the effectiveness of the effort still depends 
heavily on the capacity of the government. 

As a consequence, reformer elements in the transition governments and 
the international assistance community-international financial 
institutions, the European Community, bilateral donors-abandon speed 
as the priority. They shift their efforts to a necessarily slower form 
of case-by-case or tender privatization, a more cautious, more 
evolutionary, more government-led path of ownership transfer.

What Should Policymakers Do Now?

Yes, it is time to rethink privatization; but only in those transition 
settings where history, geography and politics have channeled 
seemingly laudable economic policy into less than optimal outcomes. In 
Russia and elsewhere, both reformers and external advisors, 
aid-providers promised too much of privatization. Reformers seemed at 
first to view ownership change as a sufficient condition to bring 
about a new liberal order. Judgement of external advisors and aid 
providers-less forgivably-may have been clouded by hopes for fast and 
relatively simple solutions. 

But the admission of error should not be overdone. When it can be 
carried out correctly, privatization is clearly the right course of 
action. In most of Central and Eastern Europe and the Baltic States, 
privatization has proven its usefulness. Difficulties that 
privatization had to face in institutionally-weak settings were not 
clear at the outset of transition-and those who claim they have long 
perceived this did not come forward with a clear alternative strategy. 

One must continually ask, what was and is the alternative to 
privatization? Is it not clear that Russia would be better off today 
had it not undertaken the mass privatization program of 1992-94? 
Several other institutionally-weak transition economies-Belarus, 
Bulgaria, Romania, and Ukraine, for example-that eschewed, delayed, or 
approached privatization more cautiously, have little to show for it 
(though in no case, of course, is privatization or its absence, what 
explains the "whole story"). States that delay privatization usually 
find that enterprises make irresistible claims on nonexistent 
resources, threatening the whole of the reform process.

Where, then, does this leave policymakers? What policy prescriptions 
can be drawn from this experience?

· Privatization is generally the preferred course of action. But the 
institutional underpinnings of capitalism must be in place if 
privatization is to be effective and socially acceptable in the short 
term. Where they are present, privatization should proceed.

· If these underpinnings are not in place but the government is 
effectively working to create or reinforce them, it may make sense to 
delay privatization until this effort bears fruit. Hungary and Poland 
offer cases in point.

· Where the government is unwilling to or incapable of creating the 
necessary institutional framework, the long-term course of action is 
to support measures enhancing will and capacity. In the short term, 
case-by-case and tender privatization as well as reprivatization 
should proceed, in cooperation with the international assistance 
community, in the hope of producing success stories that will lead by 
example. 

John Nellis is a senior manager in the Private Sector Development 
Department. He has worked extensively on the restructuring and 
privatization of state-owned enterprises in the Russian Federation, 
Morocco, Kenya, Estonia, Moldova, Egypt, and Vietnam. This article is 
based on a presentation he gave at the IMF Conference "A Decade of 
Transition: Achievements and Challenges," held in Washington D.C. in 
February 1999. A longer version of the presentation will be published 
in the June issue of the IMF Quarterly, Finance and Development. 

*******

#11
Russian envoy rejects NATO troops in Kosovo

BONN, April 17 (Reuters) - Russia is prepared to send troops to Kosovo under 
a United Nations or OSCE peacekeeping mandate but would not do so alongside 
forces from NATO countries engaged in bombing, a Russian diplomat was quoted 
as saying on Saturday. 

``Under a mandate from the U.N. or OSCE, Russia would take part in a Kosovo 
peacekeeping force,'' Germany's Focus magazine quoted Moscow's ambassador to 
Bonn, Sergei Krylov, as saying in an extract of an interview to be published 
on Monday. 

``But not together with soldiers from NATO countries which are now taking 
part in the air offensive. There are enough neutral countries.'' 

NATO countries, and notably the United States which has provided the bulk of 
the firepower for the attack on Yugoslavia, have insisted that, while a U.N. 
or Organisation for Security and Cooperation in Europe (OSCE) mandate would 
benefit any peacekeeping force, NATO must provide the main military muscle. 

Krylov said the United States had thwarted attempts by Germany and Russia to 
assemble foreign ministers from the Group of Eight industrial powers in order 
to find a common solution the Yugoslav crisis. 

German Foreign Minister Joschka Fischer, who has strongly supported the NATO 
air attack in which German forces have taken part in their first combat since 
World War Two, launched a peace plan this week and urged Russia to back an 
international peacekeeping force once a ceasefire could be arranged. 

In an interview with Der Spiegel magazine, released on Saturday, Fischer 
reiterated the importance of winning over Russia for a joint peace plan with 
NATO. 

He said he believed some form of joint NATO-Russian peacekeeping operation in 
Kosovo would be possible, as it had been in Bosnia. 

``The Russian foreign minister seems ready and willing to work on overcoming 
the differences,'' Fischer said. 

But he also rejected any suggestion that NATO should send in ground troops to 
Kosovo before a peace had been achieved. 

``I argue for sticking to the current strategy,'' he said, referring to 
NATO's three-week bombing campaign. 

He also rejected suggestions that Kosovo could be partitioned or made fully 
independent of Yugoslavia, saying the NATO goal was to achieve a peace based 
on the failed Rambouillet accords, under which Kosovo would remain in 
Yugoslavia but with considerable local autonomy. 

********

#12
Russian Fleet to Hold Exercise
April 16, 1999

KIEV, Ukraine (Reuters) - More than 30 vessels of the Russian navy's Black 
Sea fleet will hold large-scale exercises in the Black Sea from Monday until 
April 28, a fleet spokesman said Friday. 

The spokesman, Andrei Grachev, declined to say if the planned exercises had 
any connection with NATO's continued air strikes on Yugoslavia. He said only 
that it would be the second largest military exercise of the Russian fleet in 
recent few weeks. 

Grachev added that there were no plans to send the ships into the 
Mediterranean through the Bosphorus strait. 

Earlier this month, Russia sent a reconnaissance ship, the Liman, to the 
Mediterranean to monitor the situation over the conflict in Kosovo, and the 
navy has said it would ready to send nine other warships by the end of this 
month. 

"About 30 warships and military aircraft of the fleet and Russia's 
North-Caucasian military region will take part in the exercises," Grachev 
told Reuters by telephone from the fleet's base in the Crimean port of 
Sevastopol. 

More than 700 Russian marines will participate in the exercises. Grachev said 
the crews of the warships were planning to train in cannon firing and would 
launch about 20 cruise missiles. 

Some Ukrainian warships deployed in the area are also expected to take part 
in the exercises. Ukrainian officials were not immediately available for 
comment. 

Grachev said there had been no order for the ships to leave the Black Sea. 
But he added: "Our ships are ready to fulfill any order, if there is one." 

Russia, Yugoslavia's historic ally that shares with the Balkan country Slavic 
culture and Christian Orthodox religion, has sharply criticized NATO air 
strikes but has officially said it would not allow itself to be dragged into 
the conflict, which began on March 24. 

******