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Johnson's Russia List


May 8, 1999    
This Date's Issues: 3275 3276   

Johnson's Russia List
8 May 1999

[Note from David Johnson:
1. Moskovskiy Komsomolets: Interview with Doctor of Historical Sciences 
Sergey Rogov, director of Institute of United States and Canada,
"Tomahawks for World Domination."

2. International Herald Tribune: David Hoffman, Yeltsin, at Ceremony, 
Sputters Angrily. Aides Suppress Video of His Anti-U.S. Rambling on Kosovo 

3. Andrei Liakhov: Primakov.
4. Moscow Times: Matt Bivens, Yeltsin, Elite Prepare for Primakov's End.
5. Bloomberg: Russia, on the Rebound, Keeps a Lid on Inflation.
6. Wall Street Journal Europe: Andrei Kozyrev, Why the West Is Losing 

7. Carnegie Moscow Center: Alan Rousso, Kosovo and US-Russian Relations.]


Sergey Rogov on U.S. Kosovo Policy 

Moskovskiy Komsomolets
6 May 1999
[translation for personal use only]
Interview with Doctor of Historical Sciences Sergey Rogov, director 
of Institute of United States and Canada, by Anna Petrosova under the 
"Abroad" rubric; date, place not given: "Tomahawks for World Domination" 

Was the war in the Balkans the [United] States' 
cynical response to the introduction of the euro? Is it true that 
Clinton, the dawdler and roue, yielded to pressure from the frenzied 
rigorist Madeleine Albright, who was demanding that Serbs be shot? What 
kind of world will emerge from the Yugoslav tragedy? Doctor of Historical 
Sciences Sergey Rogov, director of the Institute of the United States and 
Canada, answers these and other questions from Moskovskiy Komsomolets. 
[Petrosova] Sergey Mikhaylovich, in your opinion was the decision to bomb 
adopted on the basis of moral considerations, or is the United States 
concealing its "dark," purely imperial interests? 
[Rogov] Neither. Dozens of conflicts are continuing to smolder in the
in the course of which ethnic purges are taking place, and even though a 
humanitarian problem unparalleled in history undoubtedly exists in 
Kosovo, this was still not the main reason for the U.S. actions. 
After the Cold War Washington conceived the idea that America had become 
the sole superpower. The Clinton administration is trying to realize 
surplus military might in order to consolidate the unipolar structure of 
the world on the eve of the 21st century. The U.S. strategy is aimed at 
becoming the leader in the system of international relations for a long 
time to come. This has been manifested during the past nine months, when 
the Americans have struck with cruise missiles against four countries 
which posed no threat to U.S. territory -- Afghanistan, Iraq, Sudan, and 
Today the Americans are increasingly showing the arrogance of power. The 
so-called escalation syndrome is a consequence: One mistake gives rise to 
another, and reluctance to acknowledge one's error leads to a widening of 
the scale of war. The United States made a colossal miscalculation when, 
by analogy with Bosnia, it reckoned that Milosevic would make concessions 
in Kosovo. It failed to realize that in Bosnia it was a question of 
grandiose plans to create "Greater Serbia," while in Kosovo it is a 
question of preserving Serbia itself and its historical nucleus. 
The adoption of the decision was also influenced by current 
considerations, such as the six-month paralysis of the Clinton 
administration while impeachment was dragging on. Clinton had barely 
extricated himself from that trouble before it came to light that a lot 
of problems required an urgent solution -- Kosovo, for example. 
[Petrosova] Is it true that, when the question of bombing raids was being 
decided, "weak-willed" Clinton was pressured by tough Madeleine Albright, 
who suffers from complexes because in her childhood she lived through the 
Hitlerites' persecution? 
[Rogov] I do not believe that Albright has such an influence over the 
President. She is just a high-ranking official. If need be, she can 
easily be returned to her professorial activity. Clinton is a second-term 
President and, on the one hand, he is finding it very difficult to keep 
control of the various political forces. But, on the other, Clinton 
cannot be pressured by lobbyists, because he does not need to win support 
for the next election. 
Clinton has another problem: How he will go down in history. He has no 
longing to be remembered by his descendants for Monica Lewinski's dress 
but needs other achievements. The entire country was acquainted in detail 
with all the finer points of Clinton's sex life. He has become America's 
most scandalous President. But the country's economy is continuing its 
unprecedented growth by leaps and bounds for an eighth year. What they 
have in their wallets is very important to Americans, nine-tenths of whom 
would be unable to find Yugoslavia on the map. Since the population's 
well-being has increased under Clinton, the public support their 
President in all his "good" undertakings. Some 60-70 percent still 
approve of him, although the situation may change because of Kosovo. 
[Petrosova] It is known that as much as $1.5 trillion has accumulated in 
which runs the risk of depreciating badly if the new European currency 
takes off. Was the war in Yugoslavia not an original response to the euro 
and an attempt to remove the threat to U.S. economic interests? 
[Rogov] Indeed, the United States is threatened today not by Russia and 
China but by its own allies and economic competitors. The emergence of 
the euro marks a serious shift in the world economy and another headache 
for Washington. The Americans have to conduct negotiations with the EU on 
an equal footing -- which is quite difficult for them. It is far easier 
to promote the idea of U.S. superiority through NATO -- which is why the 
United States is bringing this military-political bloc to the fore. But 
it should not be said that in this case the euro is already making 
politics, because it will become a real force only in about five years' time. 
[Petrosova] It is said, is it not, that the United States started bombing
itself of obsolete weapons and to expand the markets for sales and tests 
of new models? 
[Rogov] That is nonsense. On the contrary, the Pentagon budget has shrunk 
because of the reduction in spending on purchases of "commodities" from 
the military-industrial complex. The Americans are economizing on 
purchases of fourth-generation weapons but are spending generously on 
developing the latest arms systems in order to start producing weapons of 
the latest, fifth generation in the next millennium. U.S. troops are now 
equipped mainly with third- and fourth-generation missiles, but there are 
not many "smart" new Tomahawks, because most of them were already 
expended during the first weeks of bombing. Therefore the Americans have 
mobilized high-precision weapons for the first time. Whereas they 
expended 100 cruise missiles on Desert Storm, more than 500 have already 
gone on Yugoslavia. 
[Petrosova] And yet the percentage allocated to the military-industrial 
has increased sharply in the current U.S. budget, has it not? 
[Rogov] In recent years the Pentagon has spent approximately $40 billion on 
buying arms. The program for purchasing the latest arms, which is now 
being drawn up in Washington, will demand $80 billion a year. Back in 
January, before the war, Clinton increased the military budget so as to 
bring annual spending on purchases up to $60 billion a year at the 
beginning of the next millennium. But these billions are not enough, just 
the same! Therefore the Pentagon urgently requested extra money to 
substitute missiles with conventional warheads for cruise missiles with 
nuclear warheads. The new generation of weapons will be purchased only in 
[Petrosova] Do the Americans regard Russia as their main rival in the arms 
[Rogov] That is a myth in which we indulge ourselves. Back in 1990 Soviet 
GDP was five times "skinnier" than U.S. GDP. This is even more true of 
the situation today. The United States controls more than half of world 
arms exports. Both Western countries and former Soviet clients buy from 
it. Russia trades with Third-World countries -- with those with which the 
United States does not do business. Our share is 12 percent. What 
question can there be of competition?! 
[Petrosova] How might the world change after the Kosovo war? 
[Rogov] The world is being divided up by force, and the winners are in a 
hurry to impart a definite form to the hierarchy that has taken shape. 
This is being done at the expense of the side that has lost. 
Unfortunately, the side that lost the Cold War is Russia. The Balkan 
conflict may lead to a new geopolitical split in the world -- the United 
States and the European powers on one side, and Russia, China, India, and 
Third-World countries which feel that they have been done out of their 
fair share on the other. But there will not, of course, be a unipolar 
world headed by a superpower. As we know, no one has ever been able to 
achieve world domination. By the way, sending NATO infantry into Kosovo 
will lead to no good -- Brussels is forgetting that this mountainous and 
forested territory is nothing like a desert. It will be even more 
difficult than Vietnam. [Petrosova] Your prognosis?(more) 6 may dp/owen 
[Rogov] I do not believe that Clinton, in the 18 months that he still has
power, will simply shoot up unhappy Yugoslavia. He will try to resolve 
the conflict by other means. Strong-arm interference may continue until 
they start bringing home the bodies of U.S. soldiers. That will sharply 
change the tenor of public opinion in the United States, which today 
sympathizes with the Kosovars and is indignant at "the Serbs' brutality." 
The conflict may move into a different phase when a different president 
accedes to power. When a different president accedes to power, he will 
have to look for peaceful ways out of the conflict, and it will not be 
possible to do this without acknowledging the key role of Russia -- both 
in diplomacy and among future peacekeeping troops. 


International Herald Tribune
May 8, 1999
[for personal use only]
Yeltsin, at Ceremony, Sputters Angrily 
Aides Suppress Video of His Anti-U.S. Rambling on Kosovo War 
By David Hoffman Washington Post Service

MOSCOW - While Foreign Minister Igor Ivanov was deep in diplomatic 
negotiations with his Western counterparts in Bonn, President Boris Yeltsin 
was handing out awards in the Kremlin. 
Suddenly he began to ramble about the war in Yugoslavia.

In words that were disconnected and practically incoherent, Mr. Yeltsin said: 
''No one - just let Clinton, a little bit, accidentally, send a missile. 
We'll answer immediately!''

''We don't want - '' Mr. Yeltsin went on, seeming to struggle with his 
sentence. ''Such impudence! To unleash a war on a sovereign state. Without 
the Security Council. Without the United Nations. It could only be possible 
in a time of barbarism.''

Although television cameras were present, not a word of Mr. Yeltsin's 
disjointed monologue was broadcast that night on Russian television. 

Nor did a hint of it appear in the Russian newspapers. 

The reason is that the Kremlin spokesman, Dmitri Yakushkin, asked Russian 
journalists, and the Reuters news agency, which was acting as the ''pool,'' 
or chosen representative camera for all foreign journalists, not to broadcast 
Mr. Yeltsin's remarks.

The Russian journalists agreed, and none of the three major television 
channels carried the Yeltsin comments. 

Reuters also decided not to broadcast the material. However, Reuters made the 
tape available to others, and it was later shown in a report about the events 
by an NBC correspondent, Dana Lewis.

The episode underscored how fragile Mr. Yeltsin's health has become and the 
anxieties of the Kremlin about his behavior. Mr. Yeltsin, 68, who underwent 
quintuple coronary artery bypass surgery in late 1996, has a long history of 
health troubles, and the Kremlin has repeatedly attempted to cover up his 

In 1995, when Mr. Yeltsin was hospitalized, the Kremlin put out a picture of 
him taken months earlier. In 1996, Mr. Yeltsin suffered another heart attack 
and the Kremlin said he had a cold. He made a three-minute nationally 
televised address then, but, in fact, the address was assembled from repeated 
tapings because Mr. Yeltsin could hardly finish a sentence and the video 
takes were painstakingly spliced together to mask his condition.

Although Mr. Yeltsin announced his plans for heart surgery in 1996, Kremlin 
secrecy has shrouded subsequent illnesses. 

According to numerous sources, Mr. Yeltsin has periods of relative alertness 
punctuated by blackouts and confusion, when he has difficulty recognizing 
even his aides. In addition to his heart troubles, Mr. Yeltsin has suffered 
from respiratory diseases and an ulcer. 

In recent days there have been new signs of Mr. Yeltsin's infirmity.

At a ceremony honoring the Russian press, Mr. Yeltsin remarked that he had 
seen a cartoon showing Prime Minister Yevgeni Primakov as a rat driven into a 

Mr. Yeltsin asked the journalists not to compare Mr. Primakov to a rat. 
According to the newspaper Kommersant, the Kremlin later asked the 
journalists not to report Mr. Yeltsin's ''unhappy wording.''

Wednesday, Mr. Yeltsin attended a ''roundtable'' meeting in the Kremlin 
devoted to planning celebrations for the next century. 

In a showy and clownish moment, Mr. Yeltsin inexplicably stopped his speech 
in midstream, pursed his lips and ordered his deputy chief of staff, Oleg 
Sysuyev, to change seats with the newly promoted first deputy prime minister, 
Sergei Stepashin. 

On Friday, Mr. Yeltsin stumbled at an outdoor wreath-laying ceremony, and was 
caught and steadied by Defense Minister Igor Sergeyev and another aide.

The episode Thursday came as Mr. Yeltsin was speaking from a podium. He was 
finishing words of encouragement for those who had received prizes when his 
words seemed to stumble as he addressed the Yugoslav situation. 

His comments about accidental missile firings were confused, fragmentary and 
difficult to follow.

Immediately afterward, Mr. Yakushkin's press aides asked the Russian 
journalists not to show the tape. The Reuters camera team had already packed 
up and left the room when they were stopped by Mr. Yakushkin's staff, and 
asked not to broadcast the tape.

In a phone interview, Mr. Yakushkin said he told the journalists Mr. 
Yeltsin's remarks were ''unofficial.'' Asked what that meant - since Mr. 
Yeltsin was speaking at an official event - Mr. Yakushkin said: ''It's an 
expression that doesn't need any explanation.''

He added: ''You know that foreign policy issues are very delicate. This was a 
ceremony which didn't have anything to do with Yugoslavia.'' 

Mr. Yakushkin, a journalist who became Mr. Yeltsin's press secretary in 
September 1998, said it was ''absolutely normal'' to make such a request.

Martin Nesirky, chief correspondent here for Reuters, said: ''We took an 
editorial decision not to run the material. This was not connected with what 
the Kremlin said or did not say to us and others.'' While Reuters did not 
broadcast the material, he said, it was not kept from others ''and N


Date: Fri, 7 May 1999 
From: "Andrei Liakhov" <>
Subject: Primakov - comments

David, if you decide to make these public, can you please bear in mind that
I spent almost three years in office directly opposite EMP's (as he was
known among the colleages) and thus I probably know a bit more about the
personality of the man than even an average JRL reader (who as I have
noticed is much better informed and much more intelligent than an average


Will Primakov survive in office until the elections? 

Although there cannot be a ready answer to this question as situation in
Russia develops rapidly and not always seemingly in a predictable direction,
there are signs that Primakov will stay in the office until Presidential
elections (and who knows, may be beyond too). This belief probably would be
not popular with the Russian media which still is in its sensationalis stage
of development but it is based on several quite obvious facts. 

Firstly - one of the requirements which Primakov made the President (BNY) to
agree to prior to accepting the nomination was his ability to appoint civil
servants without BNY's or his Administration's consent. It was reported in
the Russian press that by the end of April Primakov has filled c.65% of
senior civil service posts with his appointees. Some where very visible
(like Kobaladze's move), others not, but one of the main results of
Primakov's policies to date is one of the most radical re-shuffling of the
top level civil service since the break up of the USSR in 1991. Unlike
"young reformers" who did not grasp the importance, potential and power of
the vast Russian bureacracy, Primakov (being to a large extent a product of
this bureacracy and an expert in manipulating people) always realised that
without the help of the "apparat" very little (if anything at all) can be
achieved in Russia. Creation of loyal, supportive apparat (in the widest
sense) which is capable of functioning with as little outside hindrance as
possible (in contrast to the erratic management style of BNY's
Administration) is one of the greatest Primakov's coups. This became
apparent to BNY only recently and he felt the need to restore the balance of
power back in his Administration's favor by a couple of rather clumsy
manuveurs. But it seems that this time too much BNY's authority and power
base has been erased for him to be able to achieve the required results in

Secondly - Primakov for many years occupied what was always one of the most
frustrating jobs in the country - external intelligence chief. This gave him
access to mountains of information most explosive of which he could not
legitimately use without trespassing on someone else's territory. Until the
famous Skuratov saga he was probably the only person which had a more or
less full picture of the scale of corruption in Russia. When he became the
PM Primakov quickly understood that in absence of relatively quick economic
results his Government is doomed. As no such results were in sight to
survive he needed something, "a theme" if you like, of his premiership.
That's when all these mountains of information came in very handy and his
anti-corruption crusade began. BNY made one gross miscalculation when he
agreed to Yavlinsky's proposal to appoint Primakov PM - he did not forsee
how far the new PM (who was not involved in any of the high profile scams of
the decade and thus did not fear to get tainted) was prepared to go in his
anti corruption probes. Primakov, being a very experienced diplomat had to
realise that his anti corruption activities will yield no or very little
results in terms of prosecutions, but at the same time he needed to balance
BNY's power to sack at any time and protect himself and the apparat (thus an
obvious parallel between Skuratov saga and Gdlian/Ivanov case a decade ago).

Thirdly - Primakov's past has taught him the importance of propaganda. He
realised that to stay in power any substantial period of time he needs
people to see that he has an idea he stands for (again unlike "young
reformers" who failed to produce an all Russian positive idea). The
circumstances of the crisis dictated the choice of the idea: "revival of
Great Russia". Kosovo conflict helped to cristallise it and to boost the
raitings of the PM to the unprecedented heights.This also allowed him
(ironically with the help of the Clinton Administration) to seriously
undermine liberal reformers' chances of getting back to the top any time
soon. It's very difficult to imagine a pro-Western politician becoming a PM
in today's Russia.

Although he seems to have dealt relatively successully with the three
biggest obstacles to his survival ("swinging moods" of BNY, apparat sabotage
and pro Western politicians) Primakov can hardly take a breath and relax.
Even the recent economic information is of little consolation. A combination
of his actions and pointless Duma impeachement process created increasingly
volatile situation. It also seems that BNY's increasing worries about his
and his family's fate after he retires add to the volatility. In addition
the irony of the situation largely created by Primakov is that it would be
in the Communists' interests for BNY to sack the Government and the Duma now
while Kosovo is still fresh in Russian mind and thus KPRF may count on some
additional votes. To stay on top (provided that he really wants to) Primakov
will have to come up with some new tricks (of which he is a great master)
quick to keep the balance such which would allow him to continue.


Moscow Times
May 8, 1999 
Yeltsin, Elite Prepare for Primakov's End 
By Matt Bivens
Staff Writer

Next week the Duma is scheduled to take up its on-again off-again impeachment 
hearings against President Boris Yeltsin, and already there is talk that this 
could mark the beginning of the end of Yevgeny Primakov's Cabinet. 

Predictions of Primakov's firing - or a Kremlin-led gutting of his Cabinet - 
have been around for months. But the signs are that Yeltsin is gearing up to 
do just that. 

This has nothing to do with impeachment, except insofar as an affront from 
the Duma is as good a reason as any to do what Yeltsin already wants to do. 

Yeltsin has gone from insisting Primakov will be in power through 2000 to 
saying last month that Primakov is "useful at this stage, and then we will 
see." This week Yeltsin sacked one of Primakov's first deputy prime 
ministers, Vadim Gustov, and appointed Interior Minister Sergei Stepashin in 
his place. 

Stepashin - a longtime Yeltsin ally who has often been named as a possible 
replacement for Primakov - was a hawk who helped bring about the disastrous 
charge into war with Chechnya. 

On Wednesday, Yeltsin demonstrated primitively but effectively that he 
considers Stepashin to be the No. 2 man in the Cabinet - a role Primakov has 
awarded to someone else, Communist Yury Maslyukov. At a televised meeting, 
Yeltsin made a show of rearranging the seating at the table to put Stepashin 
at Primakov's side. "Stepashin - he is the first deputy," Yeltsin growled 
threateningly. As usual, he was not contradicted. 

"No prime minister is indispensable, including Primakov," said Oleg Sysuyev, 
deputy chief of the Kremlin staff, in an interview this week. "I think the 
president has a number of names of people who, when necessary, can replace 
anyone, including the prime minister." 

Talk like that had everyone from Communist chief Gennady Zyuganov to Mayor 
Yury Luzhkov to former prime minister Viktor Chernomyrdin on record this week 
saying Primakov ought not to be fired. It also dampened a rally on the stock 
market, Reuters reported. 

"On record" is the key phrase: Future presidential candidates like Luzhkov 
and Chernomyrdin might well want to see Primakov's wings clipped - though 
Primakov insists he has no designs on the Kremlin, few believe him, and he 
could probably win an election. 

But no one wants to be associated with Yeltsin's mercurial and 
erratic-seeming behavior. 

On Friday the president - who at times over the years has been chronically 
ill, publicly drunk, clearly confused or some days just strange - could 
barely make it up a short flight of steps to put flowers on a World War II 

Yet Yeltsin may not see things that way. He may not be ready to give up power 
- to Luzhkov, Primakov or anyone else. How else could one explain the 
decision by the savvy Kremlin doctor, Sergei Mironov, to shill for Yeltsin 
beyond 2000 in an interview just over two weeks ago with Komsomolskaya 
Pravda, the nation's most widely read newspaper? 

"Today Boris Nikolayevich is in good enough shape for him to run [for a third 
term] in the year 2000," Mironov was quoted as saying. 

The Constitution limits the president to two terms. But if the constitution 
were changed - for example, if it were dramatically rewritten to create a new 
united Russian-Belarussian state - that might clear Yeltsin's way. 

Obligingly, the Russian-Belarussian union has gathered sudden momentum in 
recent days. Vladimir Putin, who heads both the Kremlin Security Council and 
the post-KGB security services, last weekend informed viewers of RTR 
television that new decisions had been taken on union: In Putin's 
explanation, Yeltsin would be the president of the new state, and Belarus 
President Alexander Lukashenko the vice president, and both men want "maximum 

It is curious indeed to talk of ***concrete personalities*** plugged in to 
the highest offices of a state that does not yet exist - the more so when 
this future state is in theory supposed to be a democracy, where officials 
are chosen through elections. 

The situation is reminiscent of 1996, when Yeltsin's best friend and Kremlin 
security chief, Alexander Korzhakov, publicly called for canceling the 
presidential elections. The world waited anxiously for Yeltsin's response. 

Eventually Yeltsin rebuked Korzhakov, and said the elections would go ahead. 
But his remarks amounted to a less-than-ardent embrace of democracy: "I still 
believe in the wisdom of Russian voters. That is why the election will take 
place," Yeltsin said then. In other words, they went forward because Yeltsin 
believed, correctly, that he'd win. 

Will Yeltsin rebuke Putin, as he did Korzhakov? Not likely: the world is not 
watching anxiously these days. 

Yet in theory, democracy is just as much at stake. This is so even though 
Yeltsin seems to sincerely value - and jealously guard - his role in helping 
democratic processes grow here. For example, he has criticized Primakov's 
talk of having the Kremlin, and not local voters, select the powerful 
governor of each region. 

But Yeltsin may also understand democracy as "democrats" like himself in 
power instead of Communists - which is roughly how Yeltsin the memoirist 
justifies the events of 1993 leading up to parliament in flames. 

Or, he may sincerely prefer democracy - but personally no longer be able to 
afford it, if it involves leaving the Kremlin. 

Yeltsin has ruled over one of the world's most corrupt governments. So it 
would not be an unreasonable act to lend an ear to the Communists - who say 
Yeltsin himself is corrupt. 

Prosecutor General Yury Skuratov, a man Yeltsin clearly fears, talks vaguely 
of having ***kompromat*** on the Kremlin's "inner circle" - a coy term that 
seems to include at a minimum Yeltsin's daughter. And while Skuratov is 
something of a windbag, his credibility has been shored up by the support of 
Swiss Prosecutor Carla del Ponte, who says she has shared materials with 
Skuratov about Kremlin corruption and Swiss bank accounts. 

It is perhaps relevant that the first signs of rift between Yeltsin and 
Primakov appeared when Primakov offered a vague "political peace pact" to the 
Duma. One part of the pact laid out what a Russian president should expect 
upon retirement. It stated specifically that former presidents could ride for 
free on all types of public transport (except taxis) - but said nothing about 
presidents enjoying the sort of immunity from all prosecution that is held 
by, for example, members of the Russian parliament. 

Russian press reports said at the time that the Kremlin was floating its own 
retirement packages, all of them specific on immunity, some even granting 
Yeltsin lifetime membership in parliament. The Kremlin attacked Primakov's 
plan. It was withdrawn, redrafted and resubmitted - complete with, 


Russia, on the Rebound, Keeps a Lid on Inflation

Moscow, May 7 (Bloomberg)
-- Russia has pulled back from the brink of economic collapse and is 
avoiding runaway inflation following a debt default last year that sent 
stocks and bonds tumbling around the world. 

Nine months after defaulting on Treasury bonds then worth about $40 billion, 
``the government has surprised pretty much everybody,'' said Philip Poole, 
director of research at ING Barings in London. ``They've managed to keep 
things from completely breaking down.'' 

Consumer prices rose 3 percent in April, little changed from a 2.8 percent 
increase in March, chiefly because the central bank was able to keep the 
ruble steady with controls on foreign- currency trading. It's a far cry from 
last August, when the government allowed the ruble to begin a 70 percent 

Analysts now extrapolate an annual inflation rate of 42.5 percent -- high by 
most countries' standards but much better than the 70 percent predicted by 
many economists and even below the government's 50 percent estimate. 

``The economy is looking better and better,'' said Peter Westin, an analyst 
at the Russian European Centre for Economic Policy, which is funded by the 
European Union. ``There are cautiously optimistic signs, in economic growth 
and revenue collections. We don't know how sustainable it is, but the signs 
are quite remarkable.'' 

The budget deficit narrowed in April, beating the government's own 
projections as it cut spending to meet the requirements of loan agreements 
with the International Monetary Fund and the World Bank. The deficit, at 1.9 
billion rubles ($79 million), was down from 5.1 billion rubles in March. 

Muddling Through 

``Russia has a talent for muddling through,'' said Sonja Gibbs, chief 
strategist for Nomura International. ``They managed to get some money from 
the IMF, and they managed to avert disaster. People had forecasts of 200 
percent inflation by the end of this year,'' she said. ``They could have 
easily just cranked up the presses, which they haven't done.'' 

Russia's stock market, too, reflects the optimism. The benchmark RTS index 
has gained 73 percent since Jan. 4, making it one of the best performers this 
year after an 85 percent drop in 1998. Russian oil companies, in particular, 
are benefiting from higher crude prices and a lower ruble. 

Industrial output in March posted its greatest monthly gain in at least three 
years as domestic products replaced imports made expensive by the ruble's 
drop. Industrial production rose 11 percent in March from February and was up 
1.4 percent from a year earlier. 

Ruble Support 

Inflation's retreat from a peak rate of 84 percent owed much to government 
action to slow the ruble's decline. In March, the central bank imposed new 
controls, and the currency is now worth 24.04 to the dollar, from a low of 

Still, rising production is mainly the result of the ruble's devaluation last 
year, and keeping a lid on inflation isn't enough to boost the economy, 
analysts said. 

``They've stopped any efforts at structural reform,'' said Poole of ING 

Russia must accelerate economic reforms, including improving tax collection 
and reorganizing banks, to secure the release of $4.5 billion in loans 
pledged by the IMF. 

The government needs the loans to repay earlier borrowings. The start of 
talks on restructuring Russia's Soviet-era debt with the London and Paris 
clubs of corporate and sovereign creditors also hinge on the IMF releasing 
new loans. 

The government of Prime Minister Yevgeny Primakov, which contains several 
communists, has been slow to tackle structural reforms. 

Political Danger 

And recent political upheavals make the process more difficult. The Duma, the 
lower house of parliament, is scheduled next week to vote on whether to 
impeach Boris Yeltsin, one of a series of votes needed to fire the president. 
Yeltsin in turn could fire the government to disrupt a vote, analysts said. 

``There is a real danger political events could spiral out of control,'' 
Poole said. ``It could put in jeopardy the government's ability to get 
legislation through parliament needed to meet IMF conditions.'' 

The good news on inflation may not last, either. The monthly rate could reach 
4 percent in May, said Denis Rodionov, an analyst at the Brunswick Warburg 
brokerage in Moscow. 

Companies are strapped for cash, with few new foreign investment projects on 
the horizon. With $63 per person in foreign investment, Russia lags behind 
other countries in the region: Hungary has $1,668 per person, while 
Kazakhstan has $365. 

``If there isn't a fiscal improvement, then the pressure to print money will 
increase,'' Poole said. ``The Russian Federation still has a social and 
welfare system based on Soviet captive ruble revenues. The revenue base 
realistically cannot support the existing payments base.'' 


Wall Street Journal Europe
May 6, 1999
[for personal use only]
Why the West Is Losing Russia
By Andrei Kozyrev (, a member of the Russian Duma. 
He was foreign minister of Russia from 1990 to 1996. 

Russia's strong official condemnation of NATO's action against Yugoslavia
as "flagrant aggression" and its early threats to take military
countermeasures have dramatically revealed the anti-American, anti-Western
sentiments prevailing in Russian foreign policy. The Russian government
explains the need to meet NATO with an iron fist not by reference to the
idea of "Slavic brotherhood" but in terms of opposition to the American
policy of "world domination." There is something rotten in the kingdom of
Russian-Western relations. 

It didn't have to be this way. There were three basic strategies the West
might have chosen for relations with Russia after the breakup of the Soviet

The first was simply to foster mutually beneficial relations in a
competitive environment, the type of ties that would have made sense in the
new capitalist world that Russia was to join. This strategy would also have
corresponded to the new rules of the game to be introduced in Russia itself
should its economy be transformed from socialist to market-oriented. 

Such an approach to Russia from the West would have meant a degree of
disappointment to some "free-world" romantics who expected that the new
eastern democracy would be embraced by the old western ones. But it would
have helped to create the sense of self-respect and self-reliance so badly
needed in Russia. It would also have helped Russians understand that after
so courageously and peacefully beating the communist system, they had to
win their place in the capitalist world. There is no other way to achieve
that goal but to follow the same strategy they used to get rid of the red
monster--solidify, step by step, the basics of democracy and the free
market. Gradually the "invisible hand" would have helped Russia and the
West come to a new type of partnership based on mutual respect and benefit.
Being potentially one of the richest countries of the world, Russians would
inevitably find themselves in the G-8. But they would have done it in the
old-fashioned way--they would have earned it. 

A second option for the West was to follow a well-defined and clear
strategy of assistance to make the transition easier, speedier and less
risky. But this could have worked only if based on a strong leadership able
to sacrifice large political and economic resources of the West to help the
East. It's a kind of reversed Cold War doctrine: After sparing no effort to
contain the Soviet communist threat, spare no effort to assist post-Soviet
democratic promise. 

In the West the second option would have required the vision and strength
of Churchill and Truman; the first at least the honesty and
straightforwardness of Ronald Reagan and Margaret Thatcher. On the Russian
side, a leader like Erhard or de Gaulle would have done. But no such luck. 

The made-for-TV hugs between the highest American officials and their
Russian counterparts, be they reformers or not, concealed till recently a
third type of relationship. American diplomacy was a provocative mixture of
paternalistic overtones and rivalry to be first even in those cases where
Russia could score through a positive contribution to a joint effort.
Giving a role to Russian cooperative diplomacy in the Middle East or the
Balkans could be both helpful to the peace processes and to Russian
democrats domestically, compensating for a feeling of humiliation and loss
of superpower status exploited by nationalists in Moscow. 

But that type of sophistication was never even contemplated by those
Westerners who kept irritating everybody from Moscow to Paris with
unrestrained self-congratulation for global leadership. At the same time,
serious issues were overlooked. 

When the Russian government tried bold reforms, billions of dollars of aid
were promised, but much less came. When that aid opened gates to
corruption, and an oligarchic capitalism supplanted a liberal one, the West
paid little attention. When the Russian government painted NATO as an enemy
in response to the legitimate right of former Soviet satellites in Eastern
Europe to join the Western alliance, the West signed a fig-leaf declaration
of good intentions with Moscow. 

Today we are about to see the culmination of this partnership of the third
kind. Western help, never enough to be a real factor in a country as huge
and problematic as Russia, was unmarried to any promises of reform or
reciprocity. In fact, the International Monetary Fund and the World Bank
credits are negotiated with the Communist deputy-head of the Russian
government, Yuri Maslyukov, and the grain and food humanitarian grants with
his colleague Gennady Kulik, leader of the Communist-allied "agrarian"
party. Not to mention the fact that the current head of government has for
years been identified as a friend of Saddam Hussein and Slobodan Milosevic.
It is no surprise that his foreign minister now calls for NATO leaders to
be sent to the Hague Tribunal for aggression against Serbia. Under these
circumstances a pretense of "business as usual" could hardly be seen in
Russia as anything but proof of political corruption of the West. 

Western aid, however well intended, boils down to a payoff to the
hard-liners, and creates a smoke screen to avoid the unpleasant question,
"Who lost Russia?" The top of the Russian government, supported by a
Communist and nationalist majority in the Duma (the lower chamber of the
Russian parliament), uses these "working relations" with aggressors to calm
democratic opposition, pay the bills of "red" directors opposed to
restructuring their ineffective industries, and, most cynically, as final
proof that there is no need for reformist domestic or foreign policy if
only one knows how to blackmail and outfox the Western enemy. 

Of course, aid to Russia should not be stopped and Moscow should not be
regarded in a Cold War light. But the relations should be honest and
robust. If the Russian people need help, it should be only to promote
genuine market-oriented reform. If they need money from the West (and first
of all they need the billions of dollars kept abroad by the "new
Russians"), it is investment in real domestic services and industries.
There are lots of possibilities of this kind, especially in the regions.
Many Russians, particularly in the far north of the country, like in my own
constituency in Murmansk, do need humanitarian assistance. But there should
be ways to deliver it to them while avoiding the corrupt bureaucracy. 

What Russians need the least though is anything that covers up domestic and
foreign realities and tough choices to be made in the forthcoming
parliamentary and presidential elections. So if somebody in the West has
been woken up recently by the threat of Russian nuclear missiles retargeted
against NATO countries and is looking to a sober policy toward Russia, the
advice is simple: Learn to respect Russians and indeed yourself. If the
second type of strategy is not available, offer the first one. But stop
playing with the third. It has proven to be immoral and shortsighted. 


Date: Fri, 7 May 1999 
Subject: Kosovo and US-Russia Relations

Kosovo and US-Russian Relations: A View from Moscow
by Alan Rousso
Director, Carnegie Moscow Center

Russia’s central role over the past few days in accelerating efforts to
find a diplomatic solution to the crisis over Kosovo stands in stark
contrast to the role Moscow played at the outset of the conflict. After
being ignored by NATO when the bombing campaign began, Russia is now seen
by many in the West as the best hope for brokering a diplomatic solution.

In late March, things were quite different. Prime Minister Yevgeny
Primakov’s decision to turn his plane around as it headed for Washington on
the eve of the NATO bombing campaign was a poignant metaphor for the
emerging Russian consensus on its relations with the West. Anyone who has
closely watched the evolving US-Russian relationship over the past eight
years could have seen the writing on the wall, but the uniformly hostile
(and occasionally hysterical) reaction in Moscow to the NATO air-strikes
caught even some of Russia's foreign policy veterans unawares.

Every category of Russians could find a reason to hate this war -- whether
it was fear, rage, or anxiety over American unilateralism, resistance to
NATO’s supplanting the United Nations, failure to operate according to
international legal standards, or the more jingoistic calls to support
Russia's Orthodox Christian Brother Slavs. At last Russia seemed to have
found its new national idea: anti-Americanism.

Russia's immediate reaction to the air-strikes was dyspeptic. President
Yeltsin warned vaguely of "measures of a military character" he was
contemplating in response, followed shortly thereafter by an impromptu (and
later toned-down) reference to re-targeting of Russia's strategic missile
force. All cooperation with NATO was halted (predictably) and NATO
representatives in Moscow were discharged. The Communist and Liberal
Democratic parties used the issue to rally supporters among Russia's young
and restless by signing up volunteers to fight alongside their brother
Slavs, while they together with other normally less extremist voices argued
for breaking the UN weapons embargo by sending arms to the Serbs. And the
American embassy in Moscow almost immediately became a rallying point for
the most angry and frustrated Russians, who joined in anti-American chants,
hurled paint and ink bombs at the main embassy building on Moscow's ring
road, burned US dollars, and watched as a mysterious gang of masked gunmen
emerged from an official Russian police vehicle (apparently stolen) and in
a final paroxysm of violence attempted to launch grenades at the building
and sprayed it with machine-gun fire.

The most regrettable and perhaps most pernicious factor in the Kosovo
mission is the timing: the Russians were already in an anti-American mood
following the humiliating circumstances of the August 1998 crisis, which
many blamed on the West. American indifference to Russia and Russian
suspicion of the US was already a fact of life when the bombing of Serbia
began in March. A second aspect of the same timing problem was the
official enlargement of NATO, which occurred only weeks before the
beginning of operation Allied Force. Although undoubtedly coincidental,
Russians saw the NATO aerial campaign as part and parcel of a new, more
interventionist, and possibly threatening strategic concept for an
expanding organization from which they were excluded.

A final aspect of the timing problem was the political atmosphere in
Moscow, where a recovering and notoriously capricious President Yeltsin was
fighting for his political life against a rebellious parliament and
persistent charges of corruption from the country's General Prosecutor,
while in the background election-year political posturing had already begun
in earnest. All political forces were competing for the prize of who could
seem the most outraged by NATO's attack on a sovereign nation historically
and culturally linked to Russia. Russian domestic politics, not to mention
Russian pride and national character, mandated a strong rebuke to the
United States and NATO.

Reading the Russian press and talking to Russians of every stripe reveals
strikingly how widely shared and deeply felt anti-NATO sentiments are here.
Those given to emotional outbursts -- like nationalist leader Vladimir
Zhironovsky -- were characteristically fiery in their response, but even
the more sober-minded, liberal voices expressed feelings of genuine
frustration and outrage at the decision. So too did average Russians,
partly, one suspects, out of feelings of humiliation at being sidelined,
partly out of fear, and partly out of incomplete understanding of the
conflict thanks to unbalanced reporting by the local press. The situation
became uncomfortable but fell short of seriously threatening for Americans.
Nevertheless, the American embassy, on heightened alert after the
attempted grenade attack, issued a warning to US citizens to avoid wearing
clothing that identifies you as an American, refrain from speaking English
loudly in public, leave cars with diplomatic plates at home and take public
transportation instead, and stay away from large gathering spots like
Moscow's markets where youth gangs are known to congregate.

Even during the height of the Cold War, when US and Soviet official
rhetoric vilifying each other reached a fever pitch, Russian and American
citizens preserved a certain decorum, even curiosity toward each other.
Eight years of cultural and commercial assault by the West have done away
with that quaint disposition, but it was only with the recent bombing that
it was turned into something closer to suspicion or even hostility.

It is important to keep in mind that despite the poisoned atmosphere
currently prevailing in Moscow, the Russian government has maintained its
equilibrium and engaged in ongoing diplomacy with the West. Primakov, for
example, lambasted NATO and expressed solidarity with Milosevic while
continuing his negotiations with IMF officials for a new loan package.
Similarly, while Yeltsin was raving about a "third world war" and sending
an intelligence gathering ship to the Adriatic, his Minister of Atomic
Energy was completing a deal with the US over spent uranium disposal; and
while Foreign Minister Ivanov labeled NATO's actions as unwarranted
aggression, he pushed ahead with delicate talks over revision of the
Conventional Forces in Europe (CFE) treaty. Even Russian press coverage
has settled into something more even-handed, which has led to a more
complex understanding of the crisis and created a more constructive mood
among the general population.

Last week’s visits to Moscow by a number of Western officials and UN
Secretary General Kofi Anan returned the spotlight to Russia and the
potential role it can play to mediate an end to the bombing. The
appointment of Viktor Chernomyrdin as special envoy on Kosovo, in addition
to the domestic implications this had for Primakov, was also a positive
gesture to the West given the former prime minister’s good standing among
Western leaders. Russia’s pledge to stay out of the fray in Kosovo can be
taken at face value, for Russia cannot afford to become isolated from
Europe and the rest of the world -- its economic need for foreign
investment and assistance is too great. Similarly, the West cannot afford
to isolate Russia, though its earlier dismissal of Russian opposition to
the bombing campaign heightened tensions. Bringing Russia into the picture
now, however, can create unrealistic expectations given that Moscow’s
leverage is weak and Milosevic's will is strong. Should the current
diplomatic efforts fail, moreover, and NATO move -- albeit reluctantly --
to a ground invasion of Yugoslavia, Russian cooperation will quickly
dissolve. While Russia is unlikely to enter the fighting, the Yeltsin
government will be under tremendous pressure to support the Serbs at least
through arms transfers, thereby breaking the UN embargo and casting Russia
into the role of an adversary. The unintended consequences of such a
development are unpredictable, to say the least.

It is too soon to judge the long-term damage this standoff is likely to
inflict on US-Russian relations, but without doubt it represents a major
turning point. Even if the door is kept open to Europe, as most Russian
policy elites believe it must, Russia will continue its Primakov-era
attempts to split the West and adopt a posture of anti-Americanism while
working constructively with the Europeans. Regardless of the outcome of
Russian diplomatic efforts, there is talk in Moscow of a new Cold War, or
at the very least a Cold Peace -- of having reached a point of no return in
the bilateral relationship which will sabotage efforts at rebuilding a
constructive partnership. From the American perspective, the greatest
obstacle the two countries face is the imbalance in the relationship
(Russia's GNP is smaller than that of Holland today, and its military is a
thoroughly demoralized and under-funded force). The US must resist the
temptation to marginalize Russia any further than it already has, lest it
push the country and its 10,000 strong nuclear arsenal further into the
camp of rogue states; and Russia must continue to pursue its true national
interests -- those which place the country on the path toward becoming a
"normal" democracy which plays a constructive international role -- despite
domestic pressures from a warmongering and isolationist minority.



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