May 2, 1999
This Date's Issues: 3268•
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Johnson's Russia List
2 May 1999
[Note from David Johnson:
1. New York Times: Michael Wines, Straining to See the Real Russia.
2. US News and World Report editorial by Mortimer Zuckerman: The big game
gets bigger. Russia will gain wealth and influence if it controls Caspian
3. The Guardian (UK): Isobel Montgomery, Alla be praised.
4. Reuters: U.S. Congress team sees Kosovo breakthrough. (Weldon).
5. Itar-Tass: Further on Russian Security Council Nuclear Discussion.
6. Moscow Times: New Editor Named to The Moscow Times. (Matt
7. RFE/RL: Irina Lagunina, NATO Experts Hope For Resumption Of Contact
8. Chicago Tribune: David Warsh, CHICAGO SCHOOL SIDEWALK TO RUSSIAN
PRIVATIZATION. (Andrei Shleifer).
9. New York Times: Neela Banerjee, Economic Crisis Not Scaring Some
Companies Out of Russia.]
New York Times
May 2, 1999
[for personal use only]
Straining to See the Real Russia
By MICHAEL WINES
MOSCOW -- Believe it: the Russians are hopping mad. For 8, 10 years now, they
followed U.S. advice on how to become capitalists.
They swallowed U.S. foreign-policy handouts urging that Russia be "integrated
into Euro-Atlantic and global communities" and built into "a modern,
market-based economy." They gave up on empire, cut up their missiles and
ceded three of their clients to NATO.
And for what? More than $60 billion in new debt. A beggar, rubber-ruble
economy. A skeletal military. A short leash held tight by the International
Monetary Fund. And now, the leveling of their one remaining friend in all
Last week Washington came back again, beseeching Moscow to help cut a deal to
end the Kosovo crisis, and Russians wonder why. Most of them now believe
Washington gives lip service to free markets and global partnership, but is
secretly just as happy -- no, happier -- to have Ivan face-down on the floor
at last, one arm behind his back.
Could they be right?
Well, no, not literally. It is easy to argue that America has fumbled its
policy of promoting a healthy, democratic Russia -- though the Russians have
fumbled plenty all by themselves. Few would make the case that, in the long
run, the United States would not benefit from a prosperous Russia that shares
at least some of its basic values.
But there's the rub: nobody knows what Russia will be in the long run. Russia
may have lost a Cold War. But as the last eight years have shown, it is no
postwar Germany or Japan, no vanquished foe to be occupied and rebuilt in the
U.S. image. Quite the opposite: the Russia that re-emerged from hibernation
this spring seems at times almost gleefully anti-American and, yearning for
empire, is considering new unions with Belarus and Yugoslavia itself.
If Russia is the country it seemed to be for 10 years after the fall of
communism -- a nation struggling to grow into a modern democracy -- then the
West has a long-term stake in its success. But if the real Russia is instead
the seething fury visible on the nightly news, the glory-mongering defender
of murderous hypernationalism, then its success looms fearsomely as a threat.
So the United States thinks of Russia mostly in the short run. And even in
the short run, it's not easy to noodle out whether U.S. interests are best
served by a Russia that is robust, or one that is weak. For undeniably,
Russia's current sallow state has given the United States license to act in
ways that would have been unthinkable a decade ago, when two superpowers
bestrode the world.
The steady drip-drip of bombing runs by U.S. jets over Iraq would be far
riskier were Russia able to bolster its old ally, Saddam Hussein, or wield
more clout in the United Nations Security Council.
Russia's decline has shifted the balance of power further toward America in
the Middle East. It has opened potentially strategic oil deposits in Russia's
Caspian Sea backyard to U.S. companies, and spawned a game of
pipeline-building politics in which the effect of U.S. policy -- and even
perhaps the intent -- is to weaken Russia's influence with other members of
the former Soviet Union.
Last weekend's declaration by NATO that the alliance had broadened its
mission to battling proliferation and genocide outside its borders would have
been impossible were Russia a force in world affairs.
Indeed, the Russians complain bitterly, they acquiesced to NATO's absorption
of Poland, Hungary and the Czech Republic this year only after being assured
that the alliance was fundamentally defensive -- and that Russia would have a
voice, if not a veto, in its policies.
Yugoslavia, of course, is the marquee example, the epitome of the U.S. policy
conundrum -- and the sum of all Russia's fears. Does a weak Russia serve U.S.
interests? Absolutely. Russians are furious over NATO's decision to intervene
in what they see as a civil war. They are even more furious over Washington's
turning a deaf ear to their objections -- indeed, over the decision to
authorize bombing as Prime Minister Yevgeny Primakov was crossing the
Atlantic to meet President Clinton.
But would a stronger Russia serve U.S. interests? The United States seems to
believe so; bogged down after 40 days of bombing, Washington and its NATO
allies have embraced Moscow as the best hope for getting the Yugoslav strong
man Slobodan Milosevic to the bargaining table.
Russians are exquisitely sensitive to the contrast. Western leaders support
Russia's mediation of the crisis "for a very simple reason -- they want to
convince Russia to put pressure on Milosevic to make him accept NATO's
ultimatum, in order to stop the military action and say that NATO has won,"
said Alexei Arbatov, the deputy chairman of the defense committee in Russia's
lower house of parliament, at a seminar last week. "This is not a request for
Russia to facilitate the peace process. This is pressure on Russia."
>From the U.S. perspective, ignoring a weakened Russia now seems cost-free.
Sure, Moscow still has 7,000 nuclear warheads, but nobody thinks that even
the craziest Russian nationalist is about to fire them. But there's a long
run in Russia, too, and a Moscow that sees the United States as an its enemy
can play some cards, from weapons proliferation to cozying up to China. Nor
can anyone assume that Russia, with more oil than anyplace, will always be a
Dmitri Simes, a leading scholar of Russia who is president of the Nixon
Institute, a Washington-based foreign policy research organization, says he
understands why Moscow feels used. In his view, the United States sincerely
wanted to enlist Russia as a strategic partner, but its decision to hang its
entire policy on President Boris Yeltsin and his team of reformers -- even as
Yeltsin became more autocratic and unpopular and the reforms were eaten away
by corruption -- left precisely the opposite impression.
"And when these individuals and those policies all collapsed in August of
'98," Simes said, "I think the administration found itself without a policy
-- with a lot of frustration, with an absence of new ideas and, if you wish,
a perverse sense of satisfaction that if Russia didn't quite live up to the
administration's expectations, at a minimum they were in such a mess that
they didn't have to take them seriously.
"I think the Russians have sensed that on a variety of issues -- Iraq,
Kosovo, arms transfers, Caspian pipelines. On all those issues, the
administration is talking about partnership, but in each case its idea of
partnership is that Russia would walk in lockstep with administration
Militarily and politically enfeebled, Russia has swallowed hard and accepted
U.S. policy on many of those issues -- even in Kosovo, where Russia basically
supported United States positions in the United Nations. But on the other
hand, Simes said, "there's a difference between impotence and acceptance of
It is with Yugoslavia that that difference, long concealed under a veneer of
Russian-U.S. cooperation, has burst into view.
"This is a clash of civilizations," said Alexei Podberezkin, the deputy
chairman of the foreign affairs committee of the Russian parliament's lower
house, last week. "They offer us an aggressive and virtually Protestant model
of democracy -- no, they impose it on us. What is happening in Yugoslavia and
what happened in Bosnia and Croatia is an attempt to impose the Western
understanding of values, including democratic ones. But Russia may have other
values -- cultural, historical and democratic."
Leonid Dobrokhotov, a former aide at the Communist Party Central Committee in
the 1980s and now an adviser to party chairman Gennadi Zyuganov, put it more
elegantly in an interview last week.
"As a result of the actions in Yugoslavia, we've again found our natural
enemy," he said. "The problem isn't Milosevic. This is a geopolitical
More and more Russians agree, which underscores one of the dangers of
short-run policies: strung end to end, they become the long run. Some
Russians now argue -- and Simes said he fears -- that with Yugoslavia, U.S.
policy toward Russia may have crossed that divide.
US News and World Report
May 10, 1999
[for personal use only]
BY MORTIMER B. ZUCKERMAN / EDITOR-IN-CHIEF
The big game gets bigger
Russia will gain wealth and influence if it controls Caspian Sea oil
Russia was never as strong as it once looked, but it is not as weak as it now
seems. It is unable to challenge NATO in the west or China in the east. Its
economic malaise has constrained the Kremlin's response to NATO's bombing in
Serbia. But in southern Eurasia, off the political radar of the West, Russia
is making much of its limited resources in a region of weaker states where it
still retains influence and remains welcome. We had all better wake up to the
dangers or one day the certainties on which we base our prosperity will be
certainties no more.
The region of Russia's prominence–the bridge between Asia and Europe to the
east of Turkey–contains a prize of such potential in the oil and gas riches
of the Caspian Sea, valued at up to $4 trillion, as to be able to give Russia
both wealth and strategic opportunity.
Nightmare scenarios. The competition for dominance in the Caspian will be the
21st-century version of the 19th-century covert duel between the Russian and
British empires for control of Central Asia, and thus India, that Rudyard
Kipling romanticized as "the great game." Call this one "the biggest game,"
because it has worldwide, and not just regional, consequences. Russia,
providing the nuclear umbrella for a new oil consortium including Iran and
Iraq, might well be able to move energy prices higher, enough to strengthen
producers and menace the West, Turkey, Israel, and Saudi Arabia. In the words
of Paul Michael Wihbey, in an excellent analysis for the Institute for
Advanced Strategic and Political Studies, the "nightmare scenarios of the
mid-1970s would reappear with a vengeance."
The key question is how the oil would reach world markets. The Caspian, a
body of water twice the size of Oklahoma, is a landlocked sea embraced by
Russia and a group of former Soviet republics–Azerbaijan, Georgia, Armenia,
Kazakhstan, and Turkmenistan. Right now there are two pipelines pumping oil,
one from Baku, Azerbaijan, via Russia to Novorossiysk on the Russian Black
Sea, and another through Georgia's Black Sea port of Supsa. The choice of the
route for the main export pipeline (MEP), which will be developed by the
world's big oil companies and the participating states, will decide the
winner of the biggest game. There are three main options:
Russia wants pipelines laid down through its territory, so that it can profit
from oil and transit revenues–and influence the way this key industrial
commodity is parceled out to the West. The economic and geopolitical
interests of the West require that the oil companies not build pipelines
across Russian territory–and also avoid a course to the south through hostile
Iran. These considerations argue for a "western" route running 1,000 miles
from Baku through independent Georgia to the Turkish port of Ceyhan on the
Mediterranean. This is the option favored by the Clinton administration.
Right now, the oil companies are expected to provide the development and
financing. But the western route is costly, and Russia is stacking the deck
by not too subtly emphasizing to investors the menace of the region.
Of course, if Iran were friendly, financing would be forthcoming for a
pipeline across Iran to the Straits of Hormuz, from which the oil could be
easily exported to the world. A friendly Iran would also enable the West to
project military force to the shores of the Caspian Sea and shore up the
former Soviet republics as potentially stable governments independent of
Little wonder Moscow is so solicitous of its relationship with Tehran and
anxious to drive any wedge it can find between Iran and the United States.
That is the real purpose of Russia's willingness to engage in the dirty
business of providing Iran with the know-how and personnel to build nuclear
plants and ballistic missiles; it is supplying high-grade alloys to reduce
the weight of Iranian Shihab missiles, as well as technology that enables
Iranian missiles to carry bacterial agents and evade antimissile defenses.
There are about 10,000 Russian technicians working in Iran, and Iranians are
studying rocket construction at institutes in and around Moscow. Dealing with
Iran is tricky for anyone, but Russia exploits the fact that for the last 20
years Iran has seen America as the great Satan and Russia as a steadfast
ally. The Iranians are not allowed to forget that Russia financed the
anti-shah revolution and trained its foot soldiers, as well as many of its
Russia's other ploy in the biggest game is to put pressure on Azerbaijan, a
country of 7.9 million, roughly the size of Maine, and on Georgia, in order
to deter a pipeline through Georgia to Turkey. The attempt to appease Russia
by offering production-sharing deals, through its oil companies, has not
seemed adequate to assuage Russia's ambitions. It is playing for higher
The Russian technique being demonstrated is straight out of Al Capone:
generate threats to induce the victim to ask for protection. This is why
Russia has been giving military help to Armenia, Azerbaijan's neighbor and
enemy. The aid includes missiles with a range sufficient to threaten
Azerbaijan's oil fields, along with $2 billion in arms and T-72 tanks,
supplemented by Russian troops. Azerbaijan faces an estimated
12,000-to-15,000 Russian troops in both Georgia and Armenia, along with
ground and naval bases. The buildup is also a message to the West, to
discourage the notion that we might try to rescue any of the beleaguered
former Soviet states from a possible Russian squeeze play.
New energy cartel. The immediate Russian objective is control of the main
pipelines. But Wihbey makes a convincing case that the larger objective is to
join Iran with Russia's other undemocratic friends in the region, including
Iraq and Syria. This new alliance would pressure Saudi Arabia to join a new
energy cartel, led by Russia. Iraq and Saddam Hussein have been diplomatic
and military beneficiaries of Russian intrigue. Russia is also reaching out
to its former ally, Syria, as well as to the Palestinians, while Russian
Prime Minister Yevgeni Primakov continues to stonewall Western and Israeli
officials when confronted with intelligence on Russia's assistance for Iraq's
outlawed nuclear and ballistic-missile programs.
Russia's efforts are beginning to bear fruit. Despite previous hostilities,
Saddam has now welcomed Iranian Shiites to Shiite holy sites and discussions
are going on about terminating the state of conflict between Iraq and Iran.
Even Saudi Arabia has seemed willing to compromise with Iran. In the recent
OPEC production cutbacks, Saudi Arabia gave Iran a bonus by agreeing it could
"cut" from an artificially high base. Now Iran's President Mohammad Khatami
and Saudi Arabia's Crown Prince Abdullah are cozying up to each other.
Khatami is invited to Saudi Arabia, the first visit to the kingdom by an
Iranian president in 20 years. Meanwhile, the two countries are working out a
defense cooperation agreement, and Prince Sultan, the influential Saudi
defense minister, will soon visit Tehran–another 20-year first.
The specter stalking Eurasia, therefore, is Iran, Iraq, Syria, and Saudi
Arabia joining in a new cartel, and even in an alliance, led by Russia,
sucking in the Caspian Sea littoral countries and the remaining gulf states.
What are we doing about it?
The first and most critical strategic step is clearly for the United States
to ensure that multiple pipelines will be built out of the Caspian region,
including at least one main export pipeline that would go through Turkey, a
crucial ally. This might involve OPEC contributing to the costs of the
pipeline, supplementing the funds that can be provided both by Turkey and the
private oil companies.
Congress has paid only fitful attention. The administration's leadership has
been as muted and confused as it was over the Balkans. And there are
persuasive voices that urge us to do nothing for fear of alienating Russia,
including some in the administration who are nervous about an American
commitment to bolster Turkey and the Caspian states. There is anxiety that
American opposition to Russia might play into the hands of the even more
undemocratic and anti-Western nationalist politicians waiting for a crisis in
These are reasonable arguments–but make no mistake about it, the risks pale
by comparison with the risks we run if Russia wins the biggest game while we
sit on the sidelines.
The Guardian (UK)
May 1, 1999
[for personal use only]
Alla be praised
Alla Pugacheva came 15th in the Eurovision Song Contest. But can this Russian
granny fill the Hammersmith Apollo?
By Isobel Montgomery
Alla who? Alla Pugacheva, heroine to millions of Russians and eastern
Europeans but a total unknown to most Britons, is playing London. Her
audacity is astounding: this woman who came 15th in the Eurovision Song
Contest two years ago and sings only in Russian hopes to fill the Hammersmith
It just might work. Pugacheva has sold millions of records at home and played
70,000-seater stadiums across the former Soviet Union. And tomorrow's concert
will give fans a chance to wish Alla Borisovna, as she is known to
Russian-speakers, a happy 50th birthday.
Pugacheva is the queen of Russian pop, indisputably glamorous and a
grandmother. She rides around Moscow in a white stretch limo, puts her name
to perfume and shoe brands, and this month made the cover of Russian Vogue.
On her birthday, April 15, the newspaper Komsomolskaya Pravda asked fans to
lay single red roses outside her Moscow flat in deference to her 70s hit A
Million Scarlet Roses. Pugacheva joked that they should come back when she
Meanwhile, radio stations plundered her 13-disc collected works for a
non-stop tribute, and a documentary produced by her third husband, singer and
sex symbol Filipp Kirkorov, was screened for a second time. (In 1996 it drew
record viewing figures: 85% of the population).
Even president Boris Yeltsin has toasted Pugacheva, throwing a champagne
reception for her birthday. Awarding her the Order of Service to the
Fatherland, Second Class, he joked: 'Many of us can claim to have lived in
the Pugacheva era' - a reference to a quip that geriatric leader Leonid
Brezhnev would be best remembered for sharing his nationality with the
flame-haired, vivacious singer whose huge voice has made her Russia's
best-loved star for more than a quarter-century. Even Mikhail Gorbachev
appointed her People's Artist of the USSR.
Communism has come and gone, but Pugacheva has remained. She has been likened
to Barbra Streisand for her ballads, and to Shirley Bassey for her gutsy
throatiness and her gay following. Her longevity and penchant for
thigh-skimming skirts draw obvious comparisons to Tina Turner. Even her most
devoted fans, however, would say that the time has come for Pugacheva to act
with more dignity.
But the singer, who punctuates speech and songs with a gravelly laugh,
refuses to compromise with age. And while many of today's teenagers see her
as a dinosaur who should retire gracefully, or at least restrict stage
appearances to her regular new year concerts, Pugacheva has rarely heeded
advice. Her whole career has been in defiance of accepted behaviour.
When she made her debut in 1965 with a song about a robot, the Soviet pop
scene was strictly controlled. Klavdia Shulzhenko, voice of the postwar
generation, was still singing nostalgic ballads, stirring marches and the
occasional melancholic love song. A younger singer, Edita Pekha, performed
the same kind of material but with a Polish lisp. Pugacheva, the gap-toothed
prima donna, broke the rules less as a protest against the straitjacket of
official culture than because she wanted the limelight all to herself.
By 1975, when she wowed the jury at Bulgaria's Golden Orpheus festival,
Pugacheva had spent a decade playing workers' clubs, beach resorts,
provincial palaces of culture and the occasional stadium. She played first
with an agitprop brigade from the Yunost radio station, then with a series of
bands, succeeding in upstaging them all.
At last, the men in grey suits at the ministry of culture allowed her to
launch a solo career. When her first album appeared, she was a single mother
living in a one-bedroomed Moscow flat, earning less than 20 roubles per
concert. But however fantastic it seemed in the grey days of Brezhnev,
Pugacheva knew what she wanted: a Mercedes, a good fur coat and the adoration
of every Soviet citizen.
Her massive popularity - she is estimated to have sold more than 150 million
records officially, plus millions of bootleg recordings - was sparked in the
early seventies, when televisions appeared across the Soviet Union. Her
enduring status as Russia's premier pop ambassador has been enhanced by her
complicated love life and battles against weight and ageing; she is rumoured
to have had liposuction, breast implants and numerous other nips and tucks at
Pugacheva has trodden a careful path, rarely directly opposing the political
leadership, though when one love song was banned for its narrowly personal
theme, she defiantly sang it at a Polish pop festival. Her concerts were
televised during religious festivals, in a deliberate attempt to keep
citizens glued to the screen and away from church. And she has been shrewd in
eschewing western tastes, creating her own uniquely Russian brand of pop.
When she was finally let loose on the world in 1988 - she toured the US, then
North Korea, Spain, Italy, Canada and Australia - she was reportedly
disappointed that the west found her old-fashioned, even a comic parody. Now,
she insists, she is beyond caring. To smooth out her backcombed hair, tone
down her make-up and swap her voluminous kaftans for elegant clothes is just
Admittedly, it takes a Russian to truly appreciate her emotional ballads. But
her songs, with lyrics by Russian poets, are far from banal. When the
50-year-old takes the stage at Hammersmith, the audience will be clutching
red roses, ready to throw them at the feet of their idol. Undoubtedly, they
will award the grandmother of Russian music a standing ovation or two.
• Alla Pugacheva plays the Labatt's Apollo, Hammersmith, London (0870
6063400), at 6pm tomorrow.
U.S. Congress team sees Kosovo breakthrough
By Mark Thompson
VIENNA, May 2 (Reuters) - A U.S. Congressional delegation said on Sunday it
had secured the agreement of a team of senior Russian lawmakers and an
adviser to Yugoslav President Slobodan Milosevic on a framework to resolve
the Kosovo crisis.
Congressman Curt Weldon told Reuters he was sure the accord, hammered out
during two days of talks in Vienna and including deployment of an armed
international force in Kosovo -- previously opposed by Belgrade -- had
``What we have achieved today is an extremely historic breakthrough... that
can guide our governments with them filling in the details and doing the
negotiation of a way to settle this crisis in a very quick manner,'' Weldon
The Pennsylvania Republican, who led the 11-member delegation with Hawaii
Democrat Neil Abercrombie, said the framework stuck to NATO's five key
demands while also taking account of Russian and Serbian concerns.
``Shortly after we concluded our discussions at 2 p.m. (1200 GMT on
Saturday) the document was faxed to President Milosevic and we were told by
his representative that he saw no reason why Yugoslavia would not accept
the basic framework we have outlined here as parliamentarians,'' he said.
Dragomir Karic, a Yugoslav businessman and close personal friend of
Milosevic, attended the talks as an adviser to the Russian delegation of
Vladimir Ryzhkov, a party colleague of Russia's Balkans envoy Viktor
Chernomyrdin, Vladimir Lukin of the Liberal Yabloko party and Communist
``Karic was a part of this and... I believe he has total credibility,''
Weldon told Reuters. Karic spoke directly to Milosevic three times during
the nine hours of talks.
The joint Congress-Duma statement calls for ``a parallel solution to three
tasks'' -- an end to NATO bombing of Yugoslavia, withdrawal of Serbian
troops from Kosovo and the cessation of the military activities of the
separatist Kosovo Liberation Army (KLA) guerrillas.
``We know it can be done. We have to stop saying 'who should do what
first','' said Weldon.
The five permament members of the United Nations Security Council, together
with Macedonia, Albania, Yugoslavia and the ``recognized leadership of
Kosovo'' would then agree on the make-up of armed international forces to
administer the province.
The framework document was agreed as Chernomyrdin returned to Moscow on
Saturday after apparently fruitless talks with Milosevic in Belgrade and
just hours before Yugoslavia said it would release three captive U.S.
Members of the delegation, who briefed the White House and U.S. State
Department about the outcome of the Vienna talks, were advised not to
travel to Belgrade in an attempt to win public support from Milosevic.
Abercrombie and other members of the Congress group said the release of all
prisoners was one of the main confidence building measures mentioned in the
``We believe that the impetus provided by the release of the prisoners,
which was among the first recommendations that we had, should be followed
through upon, utilising this document,'' Abercrombie said.
Further on Russian Security Council Nuclear Discussion
MOSCOW, April 29 (Itar-Tass) -- Russian President
Boris Yeltsin, in his opening remarks at a meeting of the country's
Security Council here on Thursday, stated that "the nuclear forces have
been and remain the key element in the strategy of ensuring national
security and military might of the country".
Yeltsin said the Council meeting is to deal with only one item on the
agenda: the state of and prospects for the development of the nuclear
weapons sector of Russia.
"For half a century, the nuclear forces have been one of decisive factors
of stability of the situation in the world as a whole. This is why,
maintaining the combat readiness of nuclear potential at a high level is
among top priorities in Russia's State interests," Yeltsin said.
The Russian President recalled that in July last year the national
Security Council had determined a structure and composition of Russia's
nuclear deterrent forces and materiel for the period ending in the year
2010. Besides, the basic principles of Russia's nuclear deterrence policy
were approved at the end of December.
"These major documents determined the strategy and tactics of our actions
in the field of nuclear deterrence from an aggression against Russia in
the long term. Today we are make next step in this respect. We shall
consider the state of and prospects for the development of Russia's
nuclear weapons sector, which constitutes the material basis of our
nuclear policy," Yeltsin said.
The President pointed out an inadmissibility of "any gap between the
ensurance of the safety of nuclear weapons and their reprocessing".
"Today we must consider in detail the entire technological cycle of the
nuclear weapons sector, including research in the field of nuclear arms,
the conduct of tests, the production and storage of such weapons with the
ensurance of their safety and reprocessing," Yeltsin pointed out.
"No gaps are admissible between these two notions either now or in the
future. One should not allow a situation when nukes would be reprocessed
and the country would have nothing left," Yeltsin said. Herein is the
task of "science, the military, politicians, and production workers --
everyone", the President emphasised.
In the field of nuclear arms, no one has the right to err, Yeltsin
stressed. "Nuclear weapons are a sphere in which we have no right even to
a single error. Anyone would be fully answerable for an error, even the
President," he said.
Yeltsin underlined that the consequences of an error in the sphere of
nuclear arms "may turn out to be fatal to both Russia and the entire
In conclusion of his opening remarks prior to the commencement of the
national Security Council meeting, Yeltsin underscored that the forum "is
of strictly closed-door nature".
Taking part in the meeting, in particular, are Prime Minister Yevgeny
Primakov, Foreign Minister Yevgeny Ivanov, Defence Minister Igor
Sergeyev, and Chief of the Presidential Staff Alexander Voloshin.
May 1, 1999
New Editor Named to The Moscow Times
Now established as Russia's only daily English-language newspaper, The
Moscow Times on Friday marked a new stage in its seven-year history as Matt
Bivens [firstname.lastname@example.org] replaces current editor Geoff Winestock.
Winestock, 36, took over the paper in March 1997 after serving for 10
months as its managing editor. Prior to that, Winestock had worked as
Moscow correspondent for The Journal of Commerce of the United States, as
business editor of The Moscow Times and as a reporter for The Melbourne Age
in Australia. Winestock has worked in Russia since 1992.
Bivens, 30, has worked for small community newspapers in the United States
and for The Associated Press. In 1991, he was a reporter with AP in London.
Since 1992 Bivens has lived and worked in the former Soviet Union f first
as a freelancer based in St. Petersburg, writing frequently for AP and the
Los Angeles Times, then in Moscow as political reporter for The Moscow
In 1995 Bivens covered the war in Chechnya with the Los Angeles Times. In
1996 he became editor of The St. Petersburg Times, which had just been
acquired by Independent Media, parent company of The Moscow Times. In July
1998 he left The St. Petersburg Times to become managing editor of The
Moscow Times. Bivens is married and has two daughters, aged 3 and 10 months.
The period in which Winestock ran The Moscow Times marked the first years
in which the paper, which was founded in 1992, traded profitably. The paper
continued to make a profit, despite the effects of last year's financial
crisis, and is now well positioned to retain its dominance in its market.
The Moscow Times has evolved in the past two years, adding an Internet
edition that has grown quickly to have more than 700 paid subscribers and
that attracts about 300,000 hits a month.
The paper has also developed a monthly glossy business magazine, The
Russia Business Review, which is distributed in The Moscow Times and to
Winestock leaves The Moscow Times to take up a reporting position with The
Wall Street Journal Europe in Brussels. He is married with two children.
The Moscow Times is the flagship English-language publication of
Independent Media, which also has a range of Russian-language periodicals
including the glossy magazines Cosmopolitan, Playboy, Men's Health,
Harper's Bazaar, Yes!, Drive and the food trade publication Vitrina.
This summer, Independent Media will also launch a new Russian-language
daily financial and business newspaper in a joint venture with the
Financial Times and The Wall Street Journal.
Russia: NATO Experts Hope For Resumption Of Contact With Russia
By Irina Lagunina
Brussels, 30 April 1999 (RFE/RL) -- The abrupt cooling in relations between
Russia and NATO -- prompted by the bombing campaign in Yugoslavia -- came
after a period of some small but steady cooperation between the two sides.
Two NATO experts told our correspondent in Brussels this week that the
contacts between the Western lliance and Russia had begun to prove fruitful
in a number of areas, from peacekeeping in Bosnia to helping the transition
of unemployed military personnel.
The two experts said that despite Russia's decision to formally withdraw
cooperation with NATO, they believed that future cooperation was inevitable.
The NATO officials who spoke with our correspondent are John Lough,
information officer for Central and Eastern Europe, and Michael Duray, an
administrator in the economic analysis and cooperation section.
Lough called Russia's decision to withdraw cooperation unfortunate. He said
an overwhelming majority of the representatives from Russia's Defense
Ministry who have visited NATO headquarters in Brussels have supported
widening cooperation with the alliance.
Lough noted that an information center set up by NATO in Moscow -- the
first victim of the decision to break off contact -- had become important
for collaboration in science and exchanging information. It had particular
significance providing understanding of military topics because the
military terminology used by NATO and Russia was in some cases very
different. He said that even the term "military doctrine" has a special
meaning in Russia which has no equivalent in the West.
Lough also said the information exchange was useful in alleviating problems
associated with the Y-2K bug in computers, and in dealing with unemployment
among former personnel of the armed forces. Lough noted the importance of
Russia's decision to participate in the international force in Bosnia:
"We launched the first operation, with the participation of Russia, in
Bosnia. Russia took part in the contingent of those countries which sent
troops, at first for IFOR, then the SFOR force for stabilizing the
situation in Bosnia. This was a big step in beginning new relations."
The cooperative efforts in Bosnia was partially aimed at helping the
population in times of natural disasters, such as earthquakes and floods or
urban disasters such as explosions and large fires.
Duray, the economic analyst for NATO, also noted the important work of
NATO's Moscow information center. Duray said of particular importance were
the retraining programs NATO was funding, especially for officers leaving
military service. This is especially valuable now that Russia has announced
that it will make large cuts in armed forces personnel over the next few
Duray noted that even long-term enlistment usually means only 15-20 years
in the army, so it necessary to offer retraining in skills for civilian
life as a person enters the military and not after they leave. He said many
servicemen are faced with losing not only their jobs but also their
housing, in some cases with only months notice.
Duray said knowledge of using the internet could prove especially helpful
in easing the transition from military to civilian life. According to a
plan agreed upon by both parties but not yet implemented, training in
internet use would be provided to service personnel. NATO and Russia's
Ministry of Defense planned to set up a center and provide stipends for
officers to learn how to use the internet. Duray described the internet's
potential for those soon to leave military life.
"This center will use the technological possibilities of the internet. One
will be able to find several web pages where information on housing,
employment, and legislation on retraining is available. Because today, it
seems to me, there is very little information to be found but the internet,
which is almost everywhere in Russia, will help disseminate information for
Duray also said the Ministry of Defense must play a stronger role in the
retraining process. He said that Russia has only five or six officers who
provide information about retraining programs while in Germany, by
contrast, there are 1,000 such people.
"The role of the Ministry of Defense is very important. If it will give
information about retraining, the morale of servicemen will be higher than
if servicemen don't know or know that the Ministry of Defense is not doing
Despite some of the initial progress made in working with the Russian
military, Lough said Russia faces problems in cooperating with NATO that
are distinct from other former Warsaw Pact countries.
"First, Russia has come out strongly against NATO expansion and as a sign
of protest visibly reduced its participation, and for a while did not
participate at all. Second, the non-participation of Russia is due to its
financial problems in Russia, especially in the military. And third, maybe
to some degree in Russia, especially in the Ministry of Defense, they
didn't believe that those programs which were offered by the partnership
were tailored to Russia's needs."
Both Lough and Duray stressed the cooperation and exchange of information
has been enlightening for both sides. Both also said there is little
alternative to renewing cooperation between NATO and Russia.
(This piece was translated from Russian by RFE/RLís Bruce Pannier).
2 May 1999
[for personal use only]
CHICAGO SCHOOL SIDEWALK TO RUSSIAN PRIVATIZATION
By David Warsh, The Boston Globe.
Thirteen years ago, when Andrei Shleifer was an assistant professor
fresh out of graduate school, a postcard arrived one morning in his mail in
On the front was one of of the iconic images of modern economics: a
photo of Milton Friedman and George Stigler strolling together along a
shady Hyde Park street. Seen from the back were the long and the short of
the Chicago school: two men who organized a movement that had worn away the
Iron Curtain through sheer force of intellect.
Penned onto the sidewalk next to the famous pair was a small circle with
an x in it. On the back was a note from Stigler. "There is room for more on
That summer Shleifer left Princeton for Chicago. He remained there for
nearly four years, long enough to prove Stigler right. At the age of 29, he
decamped to Harvard and a full professorship.
Last week Shleifer found himself in the news when, as expected, he won
the John Bates Clark Medal, which is awarded every two years to the most
distinguished U.S. economist under 40. Shleifer is 39.
Shleifer first set foot in the United States at the age of 15. His
parents emigrated to Rochester, N.Y. in 1976, among the very first Jews
permitted to leave the Soviet Union under a set of new agreements. His
father is an engineer.
By 1978, Shleifer was headed for Harvard; his test scores were off the
map. A freshman friend, J. Bradford De Long, remembers an introductory
economics section led by an expert on the Soviet economy--and attended
regularly by the alum of Moscow Math and Science High School Number Two.
"Andrei has very good social skills," says De Long.
The next year, Shleifer struck up an association with young Lawrence
Summers, then just starting out as an assistant professor at MIT--by citing
five errors in a Summers paper, according to legend. Shleifer graduated in
math in 1982, and went straight on to MIT.
Of his enduring work, the theory and practice of the transition from
planned to market economies around the world, has been Shleifer's greatest
contribution, says MIT's Olivier Blanchard, adding that "he may well be the
most influential researcher in the field." Of the Russian privatization in
particular, Shleifer was the intellectual father.
It was he who hit on the idea of selling Russia's largest firms to
insiders at a discount, in the hope that managers later would sell their
windfall gains and surface further value.
If envisaging the Russian privatization is Shleifer's greatest
accomplishment, surely his role in its implementation is his greatest
private sorrow. From 1991 to 1997, he served as official adviser to the
Russian government, often supported by funding from the U.S. Agency for
International Development. During the latter part of the period, Shleifer's
mentor Larry Summers oversaw U.S. economic policy towards Russia as deputy
secretary of the Treasury.
In Chicago, Shleifer had married a young derivatives trader, Nancy
Zimmerman, who became a well known hedge-fund manager, making investments
in, among many other things, Russian debt. A student, Jonathan Hay, had
become deeply involved in rewriting the Russian securities laws. Hay's
companion, Elizabeth Hebert, had won a license to sell mutual funds to
This web of palpable opportunties and possible conflicts tore apart in
1997 when political maneuvering in Moscow led to accusations in Washington:
Shleifer lost his government contracts, his official engagement to the
Russian government, and Harvard restructured its consulting activities.
Since then, he has thrown himself into research and publishing
activities; he remains a principal of an asset-management firm.
As MIT's Blanchard says, "his value is neither in brilliant theoretical
insights nor in sophisticated models. He is very much in the old Chicago
tradition of building simple models, emphasizing basic economic mechanisms
at work and looking at the evidence."
New York Times
May 1, 1999
[for personal use only]
Economic Crisis Not Scaring Some Companies Out of Russia
By NEELA BANERJEE
TOSNO, Russia -- Caterpillar had just cleared away a patch of spindly trees
this town outside St. Petersburg and begun building a new $50 million factory
when, one day last August, the Russian financial system collapsed.
Overnight, the Russian government devalued its currency and simultaneously
defaulted on $40 billion in domestic debt. Prices doubled over the next seven
months, and the spending power of ordinary Russians decreased 40 percent.
The ruble, worth around 15 cents before the crisis, has fallen to about 4
cents. Many smaller companies, such as those Caterpillar had envisioned as
customers for its Russian-made construction equipment, were ruined.
"We asked ourselves some hard questions," said Stu Levenick, general director
of Caterpillar Overseas in Moscow, "mainly about whether this was the right
time to invest $50 million."
The economic collapse confirmed the worst corporate fears about Russia: It is
too unstable to operate here. Companies such as Pizza Hut and Hershey have
pulled out, and many that had considered entering Russia shelved their plans.
Caterpillar could have easily followed the conventional wisdom. Yet a number
of Western multinationals -- not just Caterpillar but Nestle, Lucent
Technologies and others -- are coping with the economic crisis by settling
deeper into Russia rather than pulling out.
They are not blind to the problems, so they have developed a variety of
strategies to cope. Most have started by picking areas where the local
government now supports business, regardless of broader upheaval in Russia.
This is one such area. In St. Petersburg and the surrounding region, six
American projects are expected to bring more than $500 million of direct
foreign investment over the next 18 months.
Caterpillar is pushing ahead with its plant, and production there should
begin on schedule in December. Up the highway from Tosno, the Wm. Wrigley Jr.
Co. opened a new factory this winter, and Gillette is building one next door.
Philip Morris is constructing a $330 million plant, and International Paper
recently paid an estimated $65 million to acquire controlling interest in a
local paper mill.
Meanwhile, Ford Motor is in final negotiations with the Russian government to
invest more than $150 million in an auto plant in the region surrounding what
was once the city of Leningrad.
Beyond this region, still known by its old Leningrad name, Bayerische
Motorwerken recently announced a joint venture in the far western Kaliningrad
region. Lucent Technologies began to produce fiber optics in the Voronezh
region of central Russia. And Nestle will be investing $30 million in six
existing factories throughout the country.
Many of these companies had bucked the prevailing corporate trend before,
coming to Russia in the mid-1990s while competitors hesitated. That
experience has made them less skittish than they might have been five years
ago about the turmoil that can damage emerging market economies.
Attracted by Russia's enormous potential to consume and produce their goods,
these corporations have made a long-term commitment regardless of short-term
"When will the crisis end?" Nigel Brackenbury, general director of Ford's
operation in Moscow, asked. "It won't. It's the challenge for all of us in
Russia to put together strategies to promote growth in the conditions we
have. It's not time to wait around for external circumstances to change and
Indeed, while Western executives are relieved that Russia reached agreement
this week on a $4.5 billion loan from the International Monetary Fund to
avoid default on its existing debts to the international agency, they are
paying much more attention these days to the action closer to the ground.
"From New York or Washington, Russia looks hopeless," said Scott Blacklin,
president of the American Chamber of Commerce in Moscow. "But you can have a
successful business here and not at all be tied to reforms."
Even before the collapse, few foreign investors had the nerves for Russia.
The government treats most businesses, domestic and foreign, equally poorly,
burdening them with onerous taxes, hostile and corrupt bureaucracies and
ever-changing regulations. Direct foreign investment in Russia totaled a
paltry $2 billion last year, according to the American Chamber of Commerce in
But the chamber expects direct investment in 1999 to at least stay at that
level. One reason is that some places in Russia are easier to work in than
others, and the willingness of certain regional and local authorities to
cooperate with investors has been critical to keeping Western money here. The
economic crisis has not made regions historically wary of foreigners any
friendlier, but it has made fence sitters like the city of St. Petersburg
"Before, the city's attitude was something like 'Kiss our ring, and maybe
we'll do a deal with you,"' said James T. Hitch, managing partner at the St.
Petersburg office of Baker & McKenzie, the law firm. "Now, it's like: 'You've
decided to stay in Russia after the crisis? You're dedicated to us? Well, how
can we work together?"'
The city understands that it faces competition for scarce investment from its
neighbor, the Leningrad region. Two years ago, the regional government
developed a set of laws and tax breaks to attract investors.
The region attracted about $290 million in foreign investment in 1997 and
1998 and is expected to get another $350 million this year. "No crisis
influences us," said Sergei Naryshkin, head of the region's committee on
external economic relations. "We won't step back from our investment politics
or from our commitments."
That attitude has seeped to the local level. Tosno, at a passing glance,
could be any small Russian town. Old wooden shacks that have begun to list
toward the swampy earth line its outskirts. The main road that cuts through
the center of town is still called Lenin Prospekt, and one mild Saturday
residents were out raking leaves in the parks and squares as they had during
the many springs spent under Communism.
Unemployment is widespread among the 30,000 people of Tosno, and people pack
the suburban trains to St. Petersburg to seek work there.
The town's young mayor and his staff are eager to draw foreign investment. As
part of the Caterpillar deal, the town reduced the local portion of the
profit tax. It helped win federal permission to cut the trees at the site. It
worked with the local utility company to get Caterpillar the electrical power
it will need, and it offered the Americans a 49-year lease on the site, since
private ownership of commercial land is still not allowed in Russia.
"What's most important to investors is the good will of the authorities,"
said the deputy mayor, Galina Karpova. "We're willing to help them solve
Many multinationals realize that Russia, stable or not, is ultimately too big
a market to be ignored. In Russia, there's still great unmet demand for
everything from chewing gum and beer to trucks and bulldozers. And when the
ruble weakened badly, imports -- paid for in dollars and other foreign
currency -- were suddenly out of reach for most Russians, who get their
skimpy wages in rubles. That made local production look better....