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Johnson's Russia List


April 21, 1999    
This Date's Issues: 3251•    

Johnson's Russia List
21 April 1999

[Note from David Johnson:
1. AP: Russian Air Force Has No New Planes.
2. AP: Expert Ponders Russian Reaction. (Alexei Arbatov).
3. Moscow Times: Andrei Zolotov Jr., President's Men Show New Kosovo 

4. Boston Globe: David Filipov, Disarming of Russia continues.
5. Vremya-MN: Leonid Batkin, The Third Axial Period. (Re Russia and

6. Ruth Lee: MVD policy.
7. Itar-Tass: Maslyukov Insists on Soonest Approval of Medium-Term 

8. Segodnya: First Deputy Prime Minister Yuri Maslyukov, New competitive 
model. On medium-term program of economic development.

9. AP: Russia Defaults on $1.3 Billion Debt.
10. Reuters: Russia must tackle tax, structural problems-IMF.
11. Itar-Tass: USA Appreciates RUSSIA'S Efforts to Settle Kosovo Issue.
12. Moscow Times editorial: Court Is No Way to Curb Neo-Nazis.] 


Russian Air Force Has No New Planes
20 April 1999

MOSCOW (AP) -- Russia's air force hasn't received a new warplane since 1992 
and doesn't expect to see one until 2001, the commander of the force said 

The comments by Col. Gen. Anatoly Kornukov, which were reported by the 
Interfax news agency, underscored the difficulties facing Russia's military 
eight years after the breakup of the Soviet Union.

Kornukov, speaking to reporters in Monino, just outside Moscow, said he 
thought the air force wouldn't receive any new combat equipment before 2001.

``Because of this, we shall have to upgrade the equipment already available 
and keep it 80 to 90 percent ready,'' he said, according to Interfax.

Russia remains a nuclear superpower, but its conventional military forces are 
barely capable of feeding their troops, much less fighting a war.


Expert Ponders Russian Reaction
20 April 1999

WASHINGTON (AP) -- The longer NATO continues bombing, the more pressure will 
mount on Russian President Boris Yeltsin to intervene by providing arms and 
volunteer fighters to Yugoslavia, a prominent Russian lawmaker said Tuesday. 

Alexei Arbatov, a reformer and deputy head of the Russian parliament's 
defense affairs committee, also said anti-NATO and anti-American sentiments 
have mounted in Russia to unprecedented levels since the bombing began. 

Arbatov told the Atlantic Council the conflict in the Balkans could lead to a 
U.S.-Russian confrontation and is the ``worst, most acute, dangerous crisis 
since the early 1960s.'' That's when installation of Russian missiles in Cuba 
almost led to war. 

He said the allied bombing campaign has failed, but it has put relations 
between Moscow and Washington into a deep freeze. 

President Clinton talked with Yeltsin by telephone for 45 minutes Monday to 
try and involve Russia in a political resolution in Kosovo. It was their 
first talk since the day the NATO air assaults began, March 24. 

Arbatov said because of the bombing, the ``START II treaty is dead. The 
partnership between NATO and Russia is frozen, potential cooperation on 
ballistic missile defenses is not a subject of serious debate and willingness 
to cooperate on nonproliferation (of mass-destruction weapons) is as low as 
it has ever been.'' 

The Senate has ratified START II, a nuclear arms reduction treaty, but the 
Russian Duma has delayed action repeatedly. 

Arbatov said Russia's people are almost unanimously on the side of the Serbs, 
fellow Slavs, ``and anti-American emotions and feeling have reached 
unprecedented levels'' that were never seen even during the Cold War. 

NATO holds 50th anniversary celebrations this weekend in Washington. The 
Russians, who were invited, are unlikely to attend. 

Arbatov said Communists and nationalists in the Duma are urging immediate 
Russian arms shipments to Kosovo, dispatch of volunteer soldiers to join the 
Serbs and admission of Serbia into a new alliance of Russia with Belarus. 

``If the bombing campaign continues, and if ground operations start, then the 
flood of (Russian) volunteers to Yugoslavia to fight would reach tens of 
thousands,'' Arbatov said. ``Fatalities would be horrifying, and Russia would 
be drawn into war.'' 

Arbatov said he realized his audience of foreign policy experts would find 
his message unpleasant, ``but it is my duty as a friend of the United States 
to tell the truth so we can find a way jointly to get out of this mess.'' 

The Atlantic Council is a nonprofit foundation that specializes in foreign 


Moscow Times
April 21, 1999 
President's Men Show New Kosovo Policy 
By Andrei Zolotov Jr.
Staff Writer

Russia put its new more balanced Kosovo policy on display Tuesday, with 
President Boris Yeltsin, his foreign minister and the head of the Russian 
Orthodox Church softening criticism of NATO and decrying the suffering of 
ethnic Albanians as well as of Serbs. 

Patriarch Alexy II celebrated Mass in Belgrade together with the head of the 
Serbian Orthodox Church in a high profile mission aimed at demonstrating 
solidarity between the two churches and appealing for peace. 

The man embodying the new Russian tactics, Viktor Chernomyrdin, Yeltsin's 
Balkan envoy, was busy Tuesday meeting with leaders of other Commonwealth of 
Independent State countries such as Georgia and Azerbaijan. 

Foreign Minister Igor Ivanov, whose harsh anti-Western rhetoric stood out in 
the immediate aftermath of NATO's first airstrikes against Yugoslavia, has 
also altered his tone and Tuesday expressed compassion for Kosovo Albanians. 
"There is violence in Kosovo in all directions, and as a result everyone 
suffers, Albanians, Serbs," Ivanov said after a meeting with a delegation 
from the international Organization of the Islamic Conference. "We are 
insisting that all manifestations of violence, and all forms of repression, 
be halted." 

The foundation of the Russian position, an unequivocal condemnation of NATO's 
bombings, has not changed. But the latest nuances indicate that by using more 
balanced language, Russian leaders are pursuing two goals. They want to 
counter domestic nationalist forces and earn more credibility in the West, in 
a bid to play a role in brokering peace in Yugoslavia and to have a say in 
its post-conflict arrangement. 

Yeltsin laid out the new policy Tuesday at a meeting with regional governors. 
"The longer the bombings are under way, the more the peaceful population will 
die and there will be more of those doubting the justness of NATO's policy," 
Yeltsin said. 

He said Russia continued to oppose a military solution, "but you shouldn't go 
too far [in condemning NATO]. 

"In some regions, an open anti-American and anti-Western mood is thriving. 
Some politicians are attempting to build their electoral campaigns on it. 

"Despite NATO's aggressive actions, we cannot break with the Western 
countries, we cannot find ourselves in isolation. Russia continues to be a 
European power." In Belgrade, Alexy II and his Serbian host, Patriarch Pavle, 
celebrated the Divine Liturgy and led a common prayer for peace. Tens of 
thousands of Serbs, including many dignitaries, government officials and 
leaders of some of Yugoslavia's non-Orthodox faiths, stood with lit candles 
in and around the St. Sava Cathedral. 

Tuesday was Radonitsa, the day when Orthodox Christians commemorate their 
dead in the spirit of the Easter joy of resurrection. 

In his speech after the service, Alexy said he prayed for all the victims of 
the Balkan war, both Serbs and non-Serbs, Orthodox and non-Orthodox. His 
moral assessment of NATO bombings conveyed the essence of Russia's 
frustration with the Washington-dominated new world order. 

"Yes, we have become witnesses to an action of glaring lawlessness as a 
handful of powerful and rich countries, who dare consider themselves the 
measure of good and evil, is trampling upon the will of the people who wish 
to live differently," the Russian patriarch said. 

"Bombs and missiles are pouring down on this land not because they seek to 
defend anyone. The NATO military action has a different goal: the goal of 
destroying the postwar order which was paid for by severe bloodshed." 

What was new in the patriarch's message was that he used strong terms to urge 
Serbs to respect the rights of ethnic Albanians and provide for the return of 

"Only peace with justice can be enduring," he said. "Therefore, I ask and 
beseech you today to do everything to let the nations know the kindness of 
your hearts, so that old Kosovo, this historical and sacred land for the 
Serbian people, may no longer be defiled by fratricide. Help the peaceful and 
well-intentioned people who have left their homes to return there. Then 
nobody will be able to rebuke you for sinful actions in an attempt to justify 
one's own sin." 

After the service, Alexy met with Yugoslav President Slobodan Milosevic. The 
patriarch's aides had said before the trip that he would present his own 
peace initiative, which would involve a simultaneous pullout of Serbian 
forces and the Kosovo Liberation Army from the embattled province. It was not 
known if he did so, or how Milosevic responded. 

The patriarch also met with the Kosovo Albanian leader Ibrahim Rugova, 
Reuters reported. No details were spelled out. 

Milosevic stressed that Russia and its Orthodox Church may have a strong role 
to play in the possible peace arrangement. "Russia will also contribute to 
establishing peace as soon as possible and to halting this aggression that is 
not grounded in a single moral, legal or any other principle," Milosevic 
said.Since the Russian government and the Moscow Patriarchate routinely 
coordinate their international activities, it is unlikely that the 
patriarch's peace plan would differ substantially from proposals being mulled 
by Russian diplomats. 

Chernomyrdin, who briefed the patriarch earlier this week, started what is 
expected to be a series of foreign trips Tuesday with a trip to Georgia and 
Azerbaijan. On Wednesday, he is to meet the Ukrainian president in Kiev. 

Bringing the divergent positions of the former Soviet states closer together 
appears to be at least as important for Chernomyrdin as getting the ear of 
Georgian President Eduard Shevardnadze, who is expected to speak at NATO's 
50th anniversary party this weekend in Washington. 

Winning him as an ally is especially important for Russia since the West 
views him as a like-minded democratic leader and remembers his role in 
dismantling the Soviet empire, in his capacity as Mikhail Gorbachev's foreign 
minister. At the same time, like Russia struggling with separatist Chechnya, 
Georgia faces a challenge from secessionist Abkhazia. 

Chernomyrdin said he and Shevardnadze have worked out a common approach on 
Yugoslavia. "Russia and Georgia - we are partners here," the special envoy 

Chernomyrdin supported Shevardnadze's own five-point plan, which differs from 
NATO's objectives in that it involves a cease-fire, to be followed by a 
military pullout from Kosovo, deployment of international peacekeepers not 
under NATO command, return of refugees and immediate negotiations on the 
future political status of Kosovo within Yugoslavia. 

Chernomyrdin's support of the plan confirms that Russia is moving closer 
toward recognition of some form of international military presence in Kosovo, 
as was reported after Yeltsin's telephone conversation with President Bill 
Clinton on Monday. 

Western observers have said in the past weeks that NATO's thinking is also 
developing toward a compromise version of international policing in 
post-conflict Kosovo, which would include Russian troops. 


Boston Globe
20 April 1999
[for personal use only]
Disarming of Russia continues 
By David Filipov

SERGIYEV POSAD, Russia - Relations between the United States and Russia may
have reached their lowest point since the fall of the Berlin Wall, but
remarkably, that has not stopped a US-funded program to dismantle the
decaying, but still deadly, nuclear arsenal of the former Soviet Union.

At a secret defense factory in this industrial town north of Moscow,
Russian submarine-launched ballistic missiles, which were once aimed at US
cities, are being disarmed and dismantled - with American equipment and

A nearby training center for Russia's strategic rocket forces uses
techniques and equipment supplied by US specialists to weed out Russians
unfit to work with Moscow's nuclear weapons.

Even as Moscow wages a war of words with Washington over the conflict in
the Balkans, more than $1 billion in US-funded projects to reduce the
threat posed by Russia's weapons of mass destruction have continued almost

The hardiness of these projects, commonly referred to as the ''Nunn-Lugar''
program after its Congressional sponsors, former Senator Sam Nunn and
Senator Richard Lugar, provides a measure of geopolitical comfort despite a
chill in US-Russian relations not seen since the end of the Cold War.

The staying power of these joint projects despite hard times in the
relationship even suggests a model for how the West could have better used
the billions of dollars it spent to support Russia's sporadic, and so far
largely unsucessful, attempts at economic reform.

''The Russians see real results from Nunn-Lugar money,'' said Pavel
Felgenhauer, defense analyst for the Moscow daily Segodnya. ''Unlike other
aid, where all of the money was spent and nothing changed, with Nunn-Lugar
money concrete things did happen. So the Russians want to keep these
programs, despite their suspicions.''

Russian politicians, and many ordinary citizens, are upset at the
bombardment of a fellow Slavic, Orthodox Christian nation by NATO, an
alliance that until a decade ago was the Cold War arch-enemy of the Soviet

The Kremlin has consistently portrayed the United States as the aggressor
in the Balkan conflict, and Yugoslav President Slobodan Milosevic, whom the
West accuses of atrocities against ethnic Albanians, as the victim.

''Bill Clinton hopes to win, he hopes Milosevic will capitulate, give up
the whole of Yugoslavia, make it America's protectorate. We will not allow
this. This is a strategic place, the Balkans,'' President Boris N. Yeltsin
said yesterday to a meeting of Russian editors and publishers. ''We simply
cannot ditch Milosevic. We want to embrace him as tight as possible.''

Such sentiments have led to cancellation or postponement of dozens of joint
initiatives between Russia and NATO because, in the words of one senior
Russian commander, General Leonid Ivashov, ''they are no longer appropriate
at this time.''

But across Russia, a number of Nunn-Lugar programs - which allow Americans
access to highly sensitive and until recently, top-secret, technology - are
still underway.

They include:

construction of a new storage site in the Ural Mountains to keep 6,000
bombs' worth of nuclear material out of the wrong hands;

a laboratory that will make it easier to keep track of Russia's 42,000
metric tons of chemical weapons, a stockpile capable of destroying all life
on Earth many times over;

equipment and funding to help destroy ballistic missiles, missile
launchers, strategic bombers and nuclear submarines under the 1991 Start I
arms reduction treaty.

In the first days after NATO began its airstrikes, Russia asked that a
planned review session of the program in Moscow be postponed.

''But nothing else has been canceled,'' said an American official close to
the project. ''This is an incredibly tense and difficult time for us, and
there are things to work out on both sides. They had to ask themselves a
few questions. But we're moving forward.''

The Nunn-Lugar program was initially created when the Soviet Union
collapsed and it became clear the successor states did not have the
resources to eliminate the cold war arsenal. Since 1991, over $2 billion in
US funds has gone toward eliminating 3,800 nuclear weapons in Kazakhstan,
Ukraine, and Belarus - the entire nuclear arsenals of those countries -
plus reducing Russia's arsenal by 96 submarine missile launchers, 50
missile silos, 273 strategic ballistic missiles and 30 bombers.

Under agreements already reached, an additional 711 missiles and many more
submarine missile launch tubes will be eliminated. Other programs, such as
improving security at 50 nuclear weapons sites, training personnel, and
safeguarding transport and storage of fissile materials - are aimed at
preventing the export of weapons of mass destruction from Russia.

At first, the Russian military had a difficult time getting used to the
idea that Americans would pay to dismantle Russian weapons.

''At first there was a big psychological problem,'' said Igor Safranchuk of
the Center for Policy Studies, a Moscow think tank that monitors strategic
arms control issues. ''Russian scientists didn't believe that Americans
would help. But when equipment and money started coming, the mood changed.
There was a sense of humbled national pride, that Americans were financing
disarmanent by Russia, but it passed.''

Commented the US official: ''It took time to build trust, to get on that
base where you would have been shot dead a few years ago.''

US and Russian observers acknowledge that the Nunn-Lugar programs have only
made a dent in Russia's legacy of the nuclear arms race. But sources on
both sides call the program a success.

As recently as February, Gen. Igor Valynkin, who heads Russia's department
for nuclear safety, praised the US aid, which he said included special
containers for transporting Russian warheads, computers for keeping tabs on
atomic weapons, emergency kits, and screening equipment such as polygraphs
for the training center in Sergiyev Posad.

''All the computers [provided by the US] have been certififed by Russian
specialists,'' Valynkin commented. ''They have no bugs or any other hidden
devices to obtain secret information.''

Valynkin's remarks point to another success of the Nunn-Lugar program.
While the officials in charge of economic reform in Yeltsin's governments
have almost all been young economists who professed pro-Western views, the
same could not be said about the old-line military officials and defense
factory directors the US has dealt with under Nunn-Lugar programs. But it
is the way Nunn-Lugar has worked, not the Russian participants' political
leanings, that has made it successful.

''When the International Monetary Fund gave Russia credits, they would say,
`now, restructure the economy','' said Safronchuk. ''Nunn-Lugar didn't work
like that. They would say, `build this facility' or `destroy these
missiles.' And when the work was done, then the Russians would get their

The program has also established direct contact with Russian companies,
said Russian and US sources, providing jobs and business at a time when
most factories are at a standstill. This, too, is a reason why Nunn-Lugar
has continued.

''Why should Russia refuse hundreds of millions of dollars? That would be
foolish,'' said Alexander Pikayev, an arms control analyst at the Carnegie
Moscow Center. ''Because Russia receives American money and technology, the
US in return receives more transparency of the Russian nuclear
infrastructure, and maintaining this is very important for the US.''


Date: 14 Apr 1999 
From: "Kim Wiesener" <> 
Subject: Batkin

Dear David,

I would like to draw your attention to an opinion piece by the Russian
historian, Leonid Batkin, published on page seven of today's (April 14)
issue of the the newspaper "Vremya MN". It is one of the few articles in
the Russian press I've seen which fully supports the NATO action in
Yugoslavia, and I find many of his arguments quite interesting.

Dr. Batkin is not a politician and certainly not a warmonger - there is no
doubt in my mind about his personal integrity. He was one of the sharpest
brains of the democracy movement of the late 80s and later became pretty
desillusioned - but I believe he continues to live in the hope that Russia
will some day become a "European" country. 

Kim Wiesener
Berlingske Tidende
Moscow Bureau

14 April 1999
The Third Axial Period
by Leonid Batkin
[translated by Rachel Dubin]

I support NATO’s military action, sympathize with its aims, and wish it
success. And I am ashamed of those who condemn it; my friends are among them,
too. But it is no aggression whatsoever. I have not seen for many years such
an amount of lies and stupidity, which has generally poured forth in the last
two weeks Chatter about brother Slavs, and imperial chatter, seems to me
to be
a continuous lie. There are brother Slav Serbs. But there are other Slavs
too–brother Croats, brother Macedonians, brother Slovenes, brothers in
For some reason, Russia has behaved entirely differently when it comes to
Bosnia. There are brother Bulgarians, who are bursting into NATO; brother
Czechs and brother Poles, who are already in NATO. Therefore, when we shout
about NATO aggression, about the role of the world policeman, it concerns
and Czechs, too. In general, we must realize that we have business not with
NATO, but with all of Europe. Even Ukraine looks at it differently than
Russia. We are staying in complete isolation from all of Europe by being in
Lukashenko’s [Belarusan president–R.D] company.

We are supporting the last communist regime–that bloody ulcer–in Europe. The
West and especially united Europe could not relate to this indifferently. But
by an extreme measure, negotiations have been conducted for more than a year. 
They [the Serbs–R.D.] were persuaded not to drive the Kosovars from Yugoslav
command, and not to infringe on its territorial integrity. Only one thing
remained–for Milosevic to agree to grant wide autonomy, and as they were
already shooting there and hating each other for 10 years, neutral troops,
which would not shoot at this or the other side, of course had to be brought
in. What kind of troops? Right away, an answer suggested itself–UN troops,
or, shall we say, troops with the sanction of the UN Security Council. 
Milosevic refused the presence of what would be foreign soldiers on the
territory of Kosovo.

NATO is accused of breaking international law. But the persecution of people
for their beliefs, based on ethnicity or religion, is not some country’s
internal matter. Russia’s guilt lies in its UN veto decision and in the fact
that NATO military forces, not UN peacekeeping forces, the so-called “blue
helmets,” are acting in Yugoslavia. This is a result of Primakov’s policy,
which is a direct continuation of Soviet imperial policies. In general, the
right of veto has become obsolete. Stalin, Churchill and Roosevelt
it. It was reasonable at that time. For there were two opposing world
a situation in which one of these powers could, by a simple majority, use the
UN like an instrument had to be precluded. Now, the right of veto must be
changed and decisions made, for example, by a three-fourths vote. 
Incidentally, a four-fifths vote of those who voted for an action has taken
place in recent Security Council voting. The only thing Russia has to do now
is to convene the UN Security Council to propose a cessation of military
actions and an introduction of UN “blue helmets.” Milosevic would be driven
into a corner; the West would heave a sigh of relief. For the Western
countries do not entirely feel like continuing to be tied up in it. And
Russia would earn respect.

I support NATO’s action. But this does not mean that I am ecstatic over this
action. They cannot be ecstatic themselves, either. This is an emergency
action. It is risky and has turned out to be considered impossible in the
end. Meanwhile, as a result, we have in Kosovo a tragedy called a
catastrophe. Bringing in or not bringing in ground troops is also an open

>From the point of view of world history, the totalitarian regimes, world wars,
and all other cataclysms created by the 20th century, are convulsions, so
frightening and tragic, of a tormentous transition to new forms of existence.

We have entered a third axial period. The axial period is a term suggested by
Carl Jaspers [German Existentialist philosopher, 1883-1969–R.D.] during the
emergence of the first civilizations in ancient China, India, Sumeria, Egypt,
and others. I am suggesting that the term “second axial period” relate to the
emergence of a new European civilization in Western Europe in the 15th-18th
centuries and the “third axial period,” to the consolidation of this
process in
the 19th century. And although I can chatter about it with a perfect
spirit, I
believe, however, that this is a time that will lead to world government, to
the unity of humanity. This is an old dream, Kant’s dream of an eternal
of one humanity, which not long ago was called an ironic smile. However,
Sakharov, for a long time looking forward, inserted the memory of world
government into a project of the Russian constitution. It is illustrated by
the process of the European Union, the European Parliament, and the Schengen
agreement. After two years, the franc, the mark, and the lira will disappear;
a single currency, the euro, will appear in their place. England’s island
posture has lost its meaning. Because England will no longer fight with the
French, as during Napoleon’s time, or with Germany, as during the two World
Wars. People have always dreamed of a world without wars. So, therefore,
there will be no more wars in Europe. There cannot be war in North America,
either. And what is happening now are final outbursts connected with backward
enclaves. These are the last squalls of those storms which have raged in
Europe for thousands of years. There will be no more of them. In which
volumes wine should be produced or beef should be exported will only be argued

What we have now is happening not only on account of events in Yugoslavia,
creation of absurdity, lack of logic, nonsense, thoughtlessness, of absence of
a needed scale for addressing these questions, and if possible, the
shortage of
patriotism. The understanding of patriotism changes, like everything in the
world. I think that in these times, a Russian patriot is a person who is
acutely aware of the history of his country and of how it changes over time,
not only comparing the present with the past, but also looking at the future. 


From: "Ruth Lee" <>
Date: Tue, 20 Apr 1999 
Subject: MVD policy


I am a research assistant at the Scarman Centre for the Study of 
Public Order at Leicester University, UK, and am currently working 
on funded links with several Russian and Ukrainian Law and 
Police Institutes. I would be very grateful for:
- information about sites and journals/articles describing current 
and recent thinking on policing strategies for 
Russia/Ukraine, especially MVD/MIA policy and strategy. These could 
be of a general nature, could address police structure and 
organisation or address specific problems such as crime prevention, 
police-public relations, policing minorities or police powers and 
procedures. Sites on victim support and repeat victimisation would 
also be very useful.
- information about project funding for applied research in the 
spheres of criminology, public order and risk management in Russia 
and Ukraine


Maslyukov Insists on Soonest Approval of Medium-Term Program.

MOSCOW, April 20 (Itar-Tass) - Russian First Vice-Premier Yuri Maslyukov 
insists on the approval of the medium-term program of the Russian 
socio-economic development in 1999-2002 within the next one or two weeks. 

The program is almost ready but "major changes have been made and it is 
necessary to discuss it at a sitting of the Government Presidium" on Tuesday, 
he said. 

In the words of Maslyukov, they are also working on a program of the 
long-term socio-economic development for a period of 10-15 years. "Blocks of 
that document are now being formed" by the same drafters who did the 
medium-term program, he added. 


Date: Tue, 20 Apr 1999 
From: "Robert Devane" <> 
Subject: "New competitive model. On medium-term program of economic 

The following is an unofficial translation of an article titled "New
competitive model. On medium-term program of economic development". The
article, authored by the First Deputy Prime Minister Yuri Maslyukov,
appeared in the Segodnya daily newspaper on Wednesday, April 14th.

The State understands that the momentum, which Russia has held onto over
the past several years, is close to exhaustion. The people can bear it no
longer. If we want to live under the conditions of a market and democracy,
we must implement qualitative deep transformations. It is necessary to
elevate the quality of life. We must create a massive middle class,
reestablish the population's consumption at least to the pre-reform level.
To solve these problems, it is necessary to increase real consumption by
more than fifty percent just in the next ten years. To reproduce the basic
capital, which provides for an adequate volume of energy, agricultural
products, and transportation services it is necessary to increase
investment by a factor of 1.8, while conducting an appropriate structural
maneuver. To support normal development in the remaining social sphere and
science, even considering the development of budget substitution and a
partial transfer of these spheres onto commercial basis, it is necessary to
increase the corresponding government expenditures by a factor of 1.6. To
service external debt, in addition to its restructuring and the reduction
of illegal export of capital, it is necessary to have an active trade
balance of not less than US$17 billion per year.

These conditions are very tough, but from the point of view of the nation's
survival they are necessary. In order to fulfill them, the GDP must be
increased by a factor of 1.6 over a ten-year period, concurrently
implementing necessary changes in its structure. Thus, it is necessary to
enter the growth trajectory by 2000-2001 with an average rate of growth of
not less than 4-6% per year. [Renegade Capital wishes to point out that
according to out calculations, sixty divided by ten is equal to six. Thus,
it appears that Mr. Maslyukov range of 4-6% per year lowballs his own call
for a 60% increase in GDP over a ten-year period.] However, the raw
commodity model of the Russian economy, which has historically developed,
cannot in principle be accelerated to these speeds. It is tied to the
trends of the world commodities markets and the supply of raw materials
within the country. Even under the most favorable conditions, the rate
growth cannot exceed 2-3%, and considering deterioration in the conditions
of external trade growth might not occur at all. Therefore, in order to
enliven the trends, it is necessary to formulate a new competitive model of
the economy, which would have the potential for long-term growth. The
government's medium-term program is aimed precisely at solving this

Russia has the necessary resources. First of all in the processing industry
70% of capacity is idle. Of this, 35-40% can be utilized upon an increase
in demand. The availability of this reserve permits concentration on the
qualitative renovation and restructuring of capacity, rather than its
increase. The growth in efficiency of utilization of main capital and labor
between 1999 and 2002 is estimated at 4-5% of GDP. Reduction of the share
of barter and the monetization of the economy will allow an increase in the
revenues of the federal budget from 11.8% in 1999 to 13% by the year 2002.
Each percent of decrease of barter increases tax collections by 0.1% of
GDP. For the enterprises, growth will ensure additional revenues of 3-4% of

Finally, normalization of the population's real income and savings,
reestablishment of confidence in banks will permit the expansion of
investment resources by 3-4% of GDP on the basis of savings over the period
in question. Additional investment of 1-2% of GDP will come from the
federal budget. Thus, he potential for increasing investment is 13-18% of
GDP, which in perspective will permit the near doubling of gross savings.
But this potential may only be realized under the condition of creation of
an effective system of governance.

The realization of Russia's potential to undergo a transition to a new
competitive model of development is projected to be implemented in three
stages. The main content of the first stage, which must be passed in 1999,
is the encouragement of import substitution, including by way of
utilization of idle capacities of large enterprises and the development of
small and medium business. The main factors constraining production will be
traditional: shortage of working capital, low consumer demand due to the
population's poverty, the narrowing of the production base of
consumer-oriented sectors due to the ponderous state of agriculture and
increasingly expensive imported parts. Therefore, in the first stage the
State will concentrate its efforts on actions, which soften these
limitations. First of all, it is the unwinding of the non-payments, support
of demand of the population through the settlement of arrears and
indexation of social payments, and formation of state infrastructure to
support investment, including the Development Bank, the resolution for the
creation of which has recently been signed. 

The government places special emphasis on stimulating the export of the
processing industry, first of all – machine building. Therefore, among the
primary measures for 1999 is the growth in the efficiency of government
guarantees for debt financing of enterprises that produce exports, and
extension of the terms of guarantees to two or more years in accordance
with world practice.

With that, in 1999 consistent reduction of inflation levels will be
conducted, which, evidently, will come to 50% for the year, less than 3%
per month during the remainder of the year. This level is relatively safe
from the point of view of attracting investment. Besides providing for the
necessary stringency of financial policy, the lowering of inflation will be
accomplished through increase of the coverage of demand by the population
and enterprises with goods, thereby preventing abrupt jumps in the exchange
rate, and through effective regulation of prices for the output of the
subjects of natural monopolies.

The second stage – the year 2000. The task – creating a financial base for
the normal development of the economy. During that year, on the basis of
unfolding structural reform, it is necessary to create channels of
non-inflationary supply of money, oriented towards production. Through
these channels, the monetization of the economy, the squeezing out of
barter, surrogates, and nonpayments with a fully valuable ruble will begin.
It is precisely at this stage that a key problem of the entire economic
policy will be solved – creation of a mechanism for the flow of credit
resources into the production of competitive goods, rather than into the
currency or other speculative markets.

The third stage – the year 2001, when on the base of a monetized economy,
demand will expand, an investment-oriented environment will be created, and
a system of large financial-industrial groups will be formed, including
unified technological chains. Formation of large corporations, capable of
taking the brunt of revitalizing industry and restructuring production
capacity, will create the more complex investment prerequisites for
economic growth. During this state, extensive renewal of the country's
stock of capital equipment, without which there can be no talk of any
long-term competitiveness, will commence.

In passing through these main stages, we will modernize Russia and lead her
onto a new road of development. In 2002, as planned, GDP will exceed the
1998 level by 4-6.5%, industrial production by approximately 10%,
agricultural production by 7%. Export will increase by 12% and import by
6%. Investment, whose physical volume will increase by 14%, will be growing
at outstripping rates.

However, key problems must yet be solved now, in 1999.


Russia Defaults on $1.3 Billion Debt
20 April 1999

MOSCOW (AP) -- Russia defaulted Tuesday on $1.3 billion in bonds, the latest 
debt on which the country has reneged and a setback that could further erode 
confidence in Russia's economy.

The money was owed on dollar-denominated bonds known as MinFins, short for 
Ministry of Finance. MinFins, held by both Russians and foreigners, were 
issued to compensate companies and individuals whose hard-currency accounts 
were frozen in 1991.

The third installment is due on May 14. But Russian First Deputy Finance 
Minister Mikhail Kasyanov announced Tuesday in London that the government 
didn't have the $1.3 billion it was supposed to pay.

Russia is in one of the deepest depressions ever suffered by an 
industrialized nation, and the government has already defaulted on domestic 
and foreign debts. However, it wanted to stay current on the MinFins.

``Unfortunately, as hard as we tried to accumulate money and stabilize the 
situation, we can't do this,'' Kasyanov said at the annual meeting of the 
European Bank for Reconstruction and Development, according to the Interfax 
news agency.

The first two MinFin installments matured and were paid off. But that was 
long before Russia's economic crisis hit last August.

The announcement came while an International Monetary Fund team is in Russia 
assessing the country's suitability for a new loan. The IMF has agreed in 
principle to give Russia the loan, but the size and the terms have not been 

``Any failure by the country to meet payments on its obligations undoubtedly 
damages creditors' attitude to Russia,'' the head of parliament's budget 
committee, Alexander Zhukov, told Echo of Moscow radio station.

Russia defaulted on $40 billion in Treasury debt in August, missed a $362 
million Principal Note payment to the London Club in December, and has more 
than $2 billion in arrears to the Paris Club.

After the default on the MinFins, Russia will have only one class of debt on 
which it has stayed current, the Eurobonds.

Russia's total foreign debts have reached $150 billion, two-thirds of which 
are from the Soviet-era. In addition, the country has sizable domestic debts, 
including the MinFins.

Russia struggled to meet its debt payments in the first four months of the 
year, when $4 billion was due, according to financial experts. But May sees a 
dramatic spike in payments, with $2.5 billion due in less than a month.

In addition to the $1.3 billion MinFins payment, the Russian government has 
to meet an additional $300 million in coupon payments on later MinFin 
installments. Kasyanov didn't say whether the government was prepared to make 
the coupon payments.

Prominent economist and former Finance Minister Alexander Livshits suggested 
the government may dip into the Central Bank's already slim gold and currency 
reserves to make the coupon payments. The reserves are down to less than $11 
billion, a small sum for a country of Russia's size and population.


Russia must tackle tax, structural problems-IMF
By Janet Guttsman

WASHINGTON, April 20 (Reuters) - Russia must tackle deep fiscal and 
structural problems to avoid prolonged recession and a protracted period of 
high inflation, the International Monetary Fund said on Tuesday. 

The IMF, in a scathing assessment of the Russian government's response to 
last year's financial crisis, said the authorities had eased tax policy, 
slowed reforms and stalled on a much-needed bank restructuring program 
instead of stepping up their efforts to deal with the fiscal crisis. 

"The agenda of structural reforms that Russia still needs to implement is 
formidable, particularly given the regression that has occurred since August 
1998," the IMF wrote in its twice-yearly World Economic Outlook. 

It complained that the central bank had extended credits to the government 
and the financial sector, and the authorities had suspended bankruptcy 
procedures and frozen fees for energy and other utilities. "The authorities 
have also failed to address fully monetary and financial market issues," it 

"Russia faces the prospect of protracted high inflation and prolonged 
recession unless determined and coherent efforts are made to address the 
country's underlying fiscal and structural problems and the additional 
challenges arising from the August 1998 crisis," the IMF added. 

Russia devalued its currency, the rouble, in August 1998 and defaulted on 
some domestic debts, draining already-weak confidence in emerging markets and 
unleashing problems elsewhere in the world. 

The fund is currently in negotiations with the Russian government about a new 
program of loans and economic reforms, but IMF officials want to see firm 
action on spending, tax collection and other issues before handing over more 

The IMF said Russia's economic uncertainties made it hard to make new 
forecasts for growth or inflation in a country where output has halved in the 
last 10 years. 

It issued a "tentative" projection of a 7 percent decline in output this 
year, followed by zero growth in 2000, but said this assumed the government 
would meet key elements of a reform program being negotiated with the IMF. 

This would include a primary budget surplus of 2 percent of gross domestic 
product and new efforts on structural and financial sector reform, the fund 

"On the assumption of such policies, IMF staff tentatively project an output 
contraction of some 7 percent in 1999, followed by a stabilization of 
activity in 2000," it added, noting that the international community needed 
to stand ready to back such a reform program. 

Russian economic output fell a preliminary 4.8 percent last year, while 
inflation rose to 84.5 percent at the end of 1998, from 11.0 percent at the 
end of 1997. 

The IMF's "baseline scenario", assuming the government adopted an IMF-backed 
plan, said year-on-year inflation could fall back to 50 percent by the end of 

Russia is the IMF's biggest single borrower, although loans have been halted 
several times because of IMF concern about the dismal record of tax 
collection and half-hearted reforms. 

The fund made its last payment -- $4.8 billion in July last year -- a month 
before the crisis broke. The government spent the money in a futile attempt 
to defend the rouble, and negotiations now center on offering Russia enough 
cash to allow it to repay previous debts. 

The IMF said Russia needed to find ways to make people pay their bills. 

"Without early progress in this and other structural reforms, Russia seems 
unlikely to see sustained economic recovery in the near term, since 
maintaining obsolete production facilities will further drain resources and 
financing for new investment will be lacking." 


USA Appreciates RUSSIA'S Efforts to Settle Kosovo Issue.

WASHINGTON, April 20 (Itar-Tass) - The United States welcomes any mediation 
efforts to normalise the situation in Kosovo if they pursue the purpose of 
persuading Yugoslavian President Slobodan Milosevic to accept the terms drawn 
up by NATO and the international community. This is how a spokesman for the 
U.S. State Department commented to Itar-Tass on Monday President Boris 
Yeltsin's statement that "Russia is ready to mediate between the United 
States and Yugoslavia". 

The U.S. diplomat stated on condition of anonymity that these terms were well 
known and that only their scrupulous fulfilment could stop the NATO air 
raids. The U.S. and NATO stand on this point remains immutable. He admitted 
that the main disagreement between Washington and Moscow was over the 
deployment of international security forces in Kosovo. 

Speaking about Russia's mediation efforts, the spokesman for the State 
Department noted that the U.S. administration had positively received the 
appointment of Viktor Chernomyrdin to the post of presidential special envoy 
for settlement the conflict in Yugoslavia. This decision was made by the 
Russian president and the Russian authorities, he stressed, and we regard it 
as a positively step since, after all, it is up to Moscow to appoint a 
person, who will be responsible for the situation in Kosovo. Asked whether 
there were plans to shortly hold a meeting between some U.S. official and 
Chernomyrdin, the diplomat said that he had no information on this score. 

As to the possibility of holding a G-8 meeting on Kosovo at the level of 
foreign ministers as insisted by the Russian side, the diplomat said that the 
U.S. stand on this question remains unchanged. We don't believe that such a 
meeting would be the most suitable forum at present to discuss the situation 
in Kosovo, he stated. At the same time, the spokesman noted, U.S. Secretary 
of State Albright and other U.S. officials are keeping up constant contact 
with all the G-8 foreign ministers, including Igor Ivanov, and these contacts 
will certainly be continued. 

He said that at present the main attention of the ministers was focussed on 
the NATO summit in Washington, scheduled for the end of the week, where the 
Kosovo problem will be among the key items on the agenda. 


Moscow Times
April 21, 1999 
EDITORIAL: Court Is No Way to Curb Neo-Nazis 

The decision by a Moscow city court to de-register the neo-Nazi Russian 
National Unity group, RNE, is no victory for democracy. 

This is not to defend RNE, a movement that is a grotesque fusion of all the 
half-baked fascist, anti-semitic and militaristic views from the darkest 
fringes of political life. 

But why take them to court and harass them? Monday's decision will not 
actually shut RNE down but it will make their life difficult. 

A democratic society should fight to defend the rights even of those groups 
who are most abhorrent to democratic values. The best way of opposing 
extremists is not to drive them underground but to expose them to the full 
light of day and let them be seen for the sad people they are. Instead, RNE 
will now have the cachet of martyrdom. 

Apart from waving flags that looked provocatively like swastikas and wearing 
camp, SS-style uniforms, RNE had done nothing to merit de-registration. Since 
1993 when they played a role in the violent political riots of Oct. 3 and 4, 
they have done little except parade about. 

In the court case decided Monday, the group was convicted for such petty 
administrative infractions as distributing literature in the metro, operating 
in regions where it was not officially registered and recruiting minors. 

The first two charges are completely trivial and barely even merit a 
reprimand. The latter charge sounds a little insidious - corrupting the young 
and so forth - but it is hardly unusual. The Russian Communist Party, the 
biggest in parliament, still maintains its Komsomol youth organization, which 
also preaches a thoroughly despicable neo-Stalinist ideology. Should the 
Communists be banned too? 

The judge's decision Monday gave few insights into the reasoning behind the 
verdict except for referring to a few laws governing social groups and to the 
Constitution. Yet the Constitution also guarantees rights of free assembly, 
which should in general take precedence. 

The witch hunt against RNE exposes deep confusion about how to consolidate 
democratic society in Russia. 

President Boris Yeltsin launched the idea of "getting tough" on extremism a 
couple of years ago with the bizarre initiative of setting up a committee to 
fight the problem. Moscow Mayor Yury Luzhkov jumped on the bandwagon last 
year, launching the campaign against Russian National Unity. 

Yet this is playing with fire. Russia has a terrible tradition of suppressing 
political pluralism, which Yeltsin and Luzhkov must remember only too well. 
That is the big danger for Russia, not RNE's antics. 



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