May 19, 1999    
This Date's Issues: 3291 •3292 • 3293

Johnson's Russia List
#3292
19 May 1999
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Moscow Politics Leads to Apathy.
2. Financial Times (UK): John Thornhill, Financial oligarch comeback
3. Tate Ulsaker: Where is the Anti-American Sentiment?
4. Fred Weir on Stepashin vote.
5. Transition: Ivan Szegvari, Who Is to Blame for Russia?s Economic Woes?
6. New book: Vladimir Tikhomirov (ed.), Anatomy of the 1998 Russian Crisis.
7. New York Times: Amy Knight, Updating the Russian Who's Who. (Re 
Stepashin; and new book on murder of Kirov).
8. Jamestown Foundation Monitor: STEPASHIN LIKELY TO CONTINUE PRIMAKOV'S 
ECONOMIC "POLICY."
9. Newsweek: Good News for the Pro-Westerners? (Interviews with Yavlinsky
and Chubais).
10. The Times (UK): FAITH IN RUSSIA. Orthodox intolerance is not to be 
honoured.
11. Izvestia: Vyacheslav Nikonov,,Change of All.
12. Christian Science Monitor editorial: Advantage Yeltsin.] 

********

#1
Moscow Politics Leads to Apathy
May 18, 1999
By SERGEI SHARGORODSKY

MOSCOW (AP) -- High Kremlin politics appear to be far away from Babushkino 
neighborhood in northeastern Moscow, a cluster of residential apartment 
buildings built hastily during a 1960s construction boom.

Few seem to care whether Sergei Stepashin is confirmed Wednesday as Russia's 
next prime minister.

The buildings are nicknamed ``khrushchoby,'' after then-Soviet leader Nikita 
Khrushchev. It translates as something like ``khrushch-slums,'' and the view 
from the slums is one of indifference, perhaps amusement.

``A circus, I'm telling you, it's a circus. The premiers keep coming and 
going,'' said Vladimir Vishnevsky. ``How can one be serious about it?''

Vishnevsky, 43, works as an occasional driver for foreign companies and does 
not feel that his life depends on the outcome of Wednesday's parliamentary 
vote. Yevgeny Primakov was fired as prime minister last week.

Stepashin is the third prime minister named by President Boris Yeltsin in a 
year, and many Russians are tired of the constant political leapfrog and too 
busy with their daily affairs to worry about Stepashin's confirmation.

There is disbelief that a change of prime ministers will achieve a more 
fundamental change -- a healthy economy, perhaps, or a society purged of 
pervasive corruption.

``All I know is that I want a normal government and a normal life, and I 
don't care whether it's Stepashin or Primakov,'' said Suzannah Kiryayeva, a 
teen-ager about to graduate from secondary school.

The longing for normal life and political stability also is evident among the 
Babushkino pensioners.

``They don't think about the people, they think only about themselves and 
their pockets,'' said pensioner Nikolai Ostapenko, awaiting a train at a 
crowded subway station. ``In that sense, it is better to have a guy who had 
served in the post. He would not be that greedy. Primakov seemed all right, 
so Yeltsin kicked him out.''

Julia Stern, a secretary, also said she felt sorry for ``poor Primakov, 
thrown out like a dog.'' And, like the others, she directed her frustration 
at Yeltsin.

The 68-year-old president's approval rating already was at an all-time low 
before he ousted Primakov's Cabinet. The dismissal of the popular premier 
appeared to have ended any semblance of popularity for Yeltsin.

``He should just go,'' Stern said.

******

#2
Financial Times (UK)
19 May 1999
[for personal use only]
RUSSIA: Financial oligarch comeback
By John Thornhill in Moscow

Russia's financial oligarchs, shaken by the country's financial collapse
and sidelined during Yevgeny Primakov's eight-month stint as prime
minister, are battling to make a comeback.

Last week's appointment of Nikolai Aksyenenko, the former railways
minister, as first deputy prime minister has alarmed some observers, who
fear Russia's powerful financial tycoons may already be reasserting their
grip.

Mr Aksyenenko has said he wants prime responsibility for running the
economy and it is received wisdom in Moscow that Mr Aksyenenko is the
protegé of Boris Berezovsky, the most influential of Russia's
self-proclaimed oligarchs.

The Kommersant newspaper yesterday reported that several oligarchs,
currently on business in Washington, have been aggressively lobbying Sergei
Stepashin, the prime minister designate, to appoint their preferred
candidates to his new cabinet.

The State Duma, Russia's lower house of parliament, is due to vote on
whether to approve Mr Stepashin's appointment as prime minister today.

Kommersant compared the oligarchs' US conclave with the notorious meeting
they held in the Swiss ski resort of Davos in 1996, where they plotted Mr
Yeltsin's re-election campaign and put Anatoly Chubais, the much loathed
architect of Russian privatisation, in charge of it.

Mr Chubais has also been in Washington meeting US officials, but he said he
would not be putting himself forward for a cabinet post.

How successful the oligarchs can be in regaining the kind of confidence
that once inspired Mr Berezovsky to claim that between them they ran
Russia, is doubtful, however.

Kommersant suggested Mr Stepashin was striving to counterbalance Mr
Berezovsky's influence by appointing Alexander Zhukov, independent-minded
head of the federal budget committee, to an important economic post.

Igor Bunin, director of the Centre for Political Technologies, a Moscow
political institute, said the oligarchs were bound to have regained some
influence following the sacking of Mr Primakov. But this would be limited
by the oligarchs' financial fragility after the country's financial
collapse last August.

"Now in the political centre there is new life, or at least life after
death. This has allowed the oligarchs to increase their influence," Mr
Bunin said. "But I absolutely exclude the possibility that we have returned
to 1996 when the oligarchs gathered together and set the political strategy
for the president."

Several leading MPs predicted the Duma, the lower house of parliament,
would today confirm Mr Stepashin. The acting prime minister's spell as the
former head of the FSB, domestic arm of the former KGB, has been noted by
hardline nationalists.

Mr Stepashin has promised to pursue economic reforms more vigorously than
Mr Primakov and to crack down on the corruption that has impeded Russia's
transition to a free market economy.

Mr Bunin said if Mr Stepashin were quickly approved he would likely pursue
similar policies to the previous government. "There is no other economic
course," Mr Bunin said. "The talks with the IMF will continue, there will
be an attempt to reach an agreement with the Duma on a new package of laws,
and reasonable liberals, like Zhukov will be appointed." 

*******

#3
Date: Wed, 19 May 1999 
From: Tate Ulsaker <directinfo@russiamail.com>
Subject: Where is the Anti-American Sentiment?

Dear Ex-pats,

I just want to ask our foreign community if anyone really feels any
anti-American sentiment. I do not. Occasionally a taxi driver will go so
far as to criticize American policy but I never have received any direct
confrontation of any kind. This might be a challenge to accept by those
who publish Russia from their hotel rooms, so I am directing this question
to foreigners who live here.

Thanks,
Tate Ulsaker
Director of Operations
Direct Info, Inc.

*****

#4
From: "Fred Weir" <fweir@glas.apc.org>
Date: Tue, 18 May 1999 
For the Hindustan Times
From: Fred Weir in Moscow

MOSCOW (HT May 18) -- Russian parliamentarians will vote Wednesday on
whether to confirm President Boris Yeltsin's nominee for Prime Minister,
just days after the Kremlin handed them a stinging political defeat.
Despite the Duma's anger at Mr. Yeltsin for firing the popular and
respected Prime Minister Yevgeny Primakov, and the powerful Communist
Party's humiliation for failing in a weekend bid to impeach the President,
parliamentarians are expected to approve Sergei Stepashin as Russia's next
Prime Minister.
"This is now about the Duma's very survival," says Andranik Migranyan,
an analyst with the liberal Reform Foundation. "Yeltsin has outmanouvered
and defeated them, and he would love an excuse to dissolve the Duma now".
If the Duma turns down the President's candidate for PM three times,
Russia's 1993 Constitution stipulates that the Kremlin must dissolve
parliament and call fresh elections. In the four month interim, the
President may rule the country by decree and appoint whomever he wishes to
government.
Mr. Stepashin, a career security officer and long-time Yeltsin
loyalist, was head of Russia's police forces until Mr. Yeltsin made him
first deputy prime minister a month ago.
In meetings with parliamentary factions over the past two days, Mr.
Stepashin has promised to continue the economic stabilization policies
introduced by Mr. Primakov and to keep "the backbone" of the former Prime
Minister's Cabinet intact.
Analysts say the Communists, who control the Duma, are quite likely to
vote for Mr. Stepashin on the first round, which takes place Wednesday,
because they fear that Mr. Yeltsin may nominate someone far less acceptable
to them before the next vote.
Such nightmare possibilities for the Duma's left-wing majority include
former Prime Minister Viktor Chernomyrdin, whom they noisily and bravely
rejected last September. Mr. Yeltsin could even nominate the left's chief
nemesis, the pro-Western architect of Russia's post-Soviet economic
disaster, former deputy prime minister Anatoly Chubais.
"Above all, the Duma fears dissolution," says Mr. Migranyan. "They
will most probably back Stepashin now, rather than face the terrible
uncertainties of rejecting him".
Had the Duma approved even one of the five impeachment resolutions put
before it last week, it would now have at least some theoretical protection,
as the Constitution forbids the Kremlin from dissolving parliament while
impeachment proceedings are
underway.
Many experts suspect Mr. Yeltsin's firing of Prime Minister Primakov
last week is a clear signal that the 68-year old President has no intention
of leaving office when his term expires in just over a year.
They say the aged and ailing Mr. Yeltsin's best chance of finishing
his term in peace and obtaining a good retirement package for himself and
security for his family was to keep the wily and well-connected Mr.
Primakov in charge.
"Now we shall wait for the other shoe to drop," says independent
expert Nikolai Zyubov. "Yeltsin is planning some manouver to extend his
term, and this is just the beginning of it. It can't be a coincidence that
he has appointed a policeman whose only remarkable credential is his total
loyalty to take over the government just now".
If Mr. Stepashin is rejected Wednesday, the President may re-submit
his candidacy or nominate another person, and the Duma must vote again
within two weeks.
Parliamentary elections are slated for December, but if the President
were to disband the Duma early the deputies would have to hit the campaign
trail without the benefit of their parliamentary offices, staffs and
publicity budgets.
Just a few months ago Mr. Yeltsin seemed to be on his last legs,
politically and physically, but in the battles of the past week he appears
to have recouped all his losses.
The observable deterioration of Mr. Yeltsin's personal health is the
biggest question mark. If he should be struck down by another of his
periodic illnesses at this point, his opponents might quickly return to the
offensive.
But in the traditions of Russian politics, as long as a leader is
still capable of banging his fist on the table he always seems to get his
way.
Communist Party leader Gennady Zyuganov as much as conceded this
Tuesday, saying it hardly matters who is Prime Minister in Russia if Mr.
Yeltsin calls all the tunes.
"While Yeltsin is in the Kremlin every government will be a
transitional one," Mr. Zyuganov said. "He will do things his way, and there
will be no other options on the table".

*******

#5
From: Rhirschler@worldbank.org (Richard Hirschler)
Date: Tue, 18 May 1999 
Subject: Who Is to Blame for Russia?s Economic Woes?

David, the World Bank's new Transition issue is on the web.
http://www.worldbank.org/html/prddr/trans/WEB/trans.htm
The following article from Ivan Szegvari might add new dimensions to the
extremely lively and important discussion JRL is catalyzing.

Richard

Who Is to Blame for Russia?s Economic Woes?
by Ivan Szegvari

In the past few months a number of sweeping--and in my view
unfortunate--statements have been made to try to explain the causes of
Russia?s economic collapse. The essence of these statements is captured in
the following statements:

1. Market reforms failed in Russia.

2. The international finance institutions--and the international community in
general--paid too little attention and afford too little respect to the
national
history, culture, and characteristics of borrower countries.

3. The International Monetary Fund (IMF) imposed its narrow-minded, uniform
policies on Russia, an approach doomed to failure from day one.

4. Privatization (mainly the voucher scheme and the loans-for-shares
schemes) was ill-conceived and unsuccessful in Russia.

5. The sequencing of reforms the West proposed in Russia, including the
precipitate liberalization of capital transactions, was ill-conceived and
ill-advised.

6. Institutional reforms are by their nature long-term tasks, something that
should have been taken into account upfront in designing policy.

7. Lack of liquidity in the system was the main problem underlying the
nonpayment culture and the prevalence of nonmonetary transactions (barter)
in Russia.

8. Russia has made very little progress in its transition to a market-based
democratic society.

Let us now turn to each statement:

1. Market reforms failed in Russia. Market reform or capitalism per se did
not fail in Russia. What failed was the manner in which market reforms and
capitalism were pursued. Even the current Russian government
recognizes--and is keen to assure foreigners--that market reforms should
continue. Having experienced the alternatives and observed the differences
between their economy and the economies of successful market economies,
the Russians understand that the real challenge is to make market reform
work.

The Russian government has emphasized that reforms must be combined
with a strong state. Unfortunately, even in its latest program, the government
did not articulate how it perceives the role of the state. If a strong state
means strengthening the government?s role in ensuring the rule of law,
providing basic social services, enforcing regulations, and, yes,
intervening in
matters that the markets handles inefficiently or nor at all, the
government is
absolutely right. If it means using administrative interventions to replace
market mechanisms, especially regarding prices, exchange rates, or interest
rates--in other words, controlling key market functions and instruments--the
government is fundamentally wrong.

2. The international finance institutions--and the international
community in general--paid too little attention and afford too little
respect to the national history, culture, and characteristics of borrower
countries. In each of the transition economies there was a long and heated
debate about how the transition was to proceed. Initially, an attempt was
made to adopt only those changes that combined the advantages of
capitalism and socialism. Relatively quickly this third way was shown not to
work. Policymakers then sought ways of combining capitalism with a
country?s national characteristics, culture, history, and anything else that
makes a country a place worth living in. The trouble is that nobody knows
what this actually means.

3. The IMF imposed its narrow-minded, uniform policies on Russia, an
approach doomed to failure from day one. To confront the above
statement let us first clear up some misunderstandings:

· The G-7, not the IMF, made key decisions in recent months.

· An emphasis on fiscal and monetary policies was hardly misplaced given
the role of fiscal weaknesses in Russia?s macroeconomic ailments.

· Since early 1996, the IMF?s Extended Fund Facility program has combined
stabilization targets with an impressive set of structural reform
requirements.
These reforms are badly needed regardless of the political leaning or
composition of the actual Russian government.

· These reform requirements were worked out jointly by the Russian
government, the IMF, the World Bank, and to some extent the European
Bank for Reconstruction and Development (EBRD).

· The tough and sometimes unrealistic deadlines or other implementation
details of the program originated in many cases not from the Western
partners but from the Russian government, which wanted to ensure that even
if the targets were softened during the approval and implementation process,
progress would still be tangible and significant. Finding an institutional
bogeyman (the IMF) that reformers could blame played to the domestic
audience.

The idea that the West, in conjunction with a handful of Russian reformers,
imposed a skewed policy package on Russia that led to disastrous results
does not have merit. Since the onset of the transition process, Russia?s track
record in implementing any kind of program has been poor. Between late
1991 and early 1999, none of the almost 30 officially endorsed
macroeconomic programs (with the partial exception of the 1995 IMF
stand-by agreement) was implemented. Designing Russia?s economic
policies and programs has always been highly overpoliticized, and
policymaking has responded only loosely to economic realities. Russia?s
economic policies have evolved as a continued series of forced reactions to
emergencies and short-term windows of opportunities. Actual economic and
reform policies consistently and fundamentally differ from declared policies
and programs.

4. Privatization (mainly the voucher scheme and the loans-for-shares
schemes) was ill-conceived and unsuccessful in Russia. Effective control
over medium and large-scale companies was handed over to enterprise
managers during the perestroika period, while formal ownership and the
inherent need for subsidizing inefficient industrial giants remained with the
state, creating an unsustainable drain on the budget.The voucher privatization
(carried out between 1992 and 1994) simply formalized what had already
happened. Russia?s reformist government realized early in 1992 that to cut
this Gordian knot they needed to privatize as soon and as quickly as
possible, give managers and workers stakes in the privatized enterprises (in
order to make privatization politically feasible and palatable), and
depoliticize
decisionmaking at the enterprise level.

The idea was that once voucher (insider) privatization was over, product
competition and hard budget constraints would bring about the concentration
of shareholding. And, if supported by a new round of cash-based
privatizations, the corporate governance problem would be solved.

Voucher privatization was inevitable--there was no other feasible option at
that time--and the outcome was a success. In contrast, postprivatization
reforms--in particular, efforts to impose hard budget constraints and
establish efficient corporate governance--faltered.The loans-for-shares
scheme was a blunder. The idea for the scheme did come from the West,
although in a very different version. It called for transparent tenders,
open to
everyone, including foreign bidders. Russian adaptation of the scheme
banned foreign participation and eliminated the requirements for
transparency. Many supporters of reform, including the EBRD, protested.
EBRD even wrote a letter to the authorities, asking them to revise the new
rules, but to no avail.

5. The sequencing of reforms the West proposed in Russia, including
the precipitate liberalization of capital transactions, was ill-conceived
and ill-advised. Since mid-1996 the local authorities (in full agreement with
the West) have gradually liberalized foreigners? access to the GKO (Russian
Treasury bond) market. The objective of the move was to lower the extremely
high real interest rates, thereby encouraging lending to the enterprise sector
and mitigating the debt servicing burden of the state, and to build confidence
by increasing the openness of Russia?s capital markets, thereby providing a
self-imposed disciplining factor for policymaking in order to speed up long
overdue fiscal adjustments. In most aspects, the strategy worked remarkably
well. GKO yields fell to 16-18 percent by October 1997, bank lending to the
real sector started to grow, and Russia was on the verge of qualifying for an
investment grade from the rating agencies.

At that stage, the Asian crisis began to play havoc with investor confidence,
sharply intensifying Russia?s fiscal woes. The sharp and sustained fall in
commodity prices exacerbated the situation in terms of both macroeconomic
performance and investor confidence. After some initial hesitation, the
government and the Russian central bank reacted to the crisis in a
professional and market-oriented manner. To shore up weakened investor
confidence, they fully liberalized the exit mechanism for foreign GKO holders
and took decisive measures to improve the government?s finances (tax offsets
were banned from early 1998 and the primary budget balance was turned into
a surplus throughout the first half of 1998). Russian policymakers also
renewed and strengthened their commitment to the stability of the ruble by
introducing a flat exchange rate corridor for 1998-2000. Although that move
proved to be excessively risky, it was not ex ante a mistake.

This policy package worked well for several months. Massive outflows of
foreign portfolio investment did not occur. The monetary reform of early 1998
was carried out in a smooth and orderly fashion. GKO yields fell again, albeit
not quite to the precrisis level. What really brought down the Russian
financial markets was neither the liberalization of capital account
transactions
nor the Asian crisis but shattered investor confidence provoked primarily by
President Yeltsin?s still unexplained sacking of the
Chernomyrdin-Chubais-Nemtsov government in March 1998 and the
weakening of the policy implementation capacity of the executive branch.

6. Institutional reforms are by their nature long-term tasks, something
that should have been taken into account upfront in designing policy.
Proposing a carefully structured policy sequencing requires a well thought-out
and comprehensive policy program and a committed government with strong
policy implementation capacity. Reforms in Russia have always been made
as emergency reactions to crisis situations. Moreover, the implementation
and enforcement capacity of the government has been very weak throughout
the transition process. Establishing a rule of law takes a long time, perhaps
even generations. Should the government, then, slow stabilization and other
reforms--even the thinking process--and permit the authorities to operate
with administrative controls (thereby inducing even more corruption), or
should it push ahead vigorously with institutional reforms?

Russia?s problems are exemplified by the way it has dealt with bankruptcies.
The inability to enforce bankruptcies has been one of the single greatest
institutional failures in the Russian transition process. The few thousand
bankruptcies have been insignificant, largely providing a channel for
embezzlement. What was missing? Definitely not the legal framework, as
Russia has adopted two full-fledged bankruptcy laws since 1993 and an
amended third law was recently sent to the Duma. The necessary legislative
and regulatory framework for implementation is also in place. A federal
agency for insolvency and bankruptcy exists, and its qualified staff
understands what should be done. Courts, receivership, and other
institutional players have also been set up. What has been lacking
throughout the reform process has been the political resolve to allow this
market selection mechanism to operate in earnest. Political resistance to
bankruptcy has become more and more explicit. A series of decrees and
government resolutions came out recently to prevent the bankruptcies of
defense enterprises, energy distributors, other strategic enterprises, and
agricultural farms. Is this problem related primarily to the time-consuming
nature of institutional reforms? Hardly so.

7. Lack of liquidity in the system was the main problem underlying the
nonpayment culture and the prevalence of nonmonetary transactions
(barter) in Russia. The value of money is based on confidence--confidence
in contracts, interest rates, exchange rates, regulations, government
policies,
and everything else that matters in economics. It must be frustrating to see
that the more money you pour into the system, the less confidence (money)
you really have.

8. Russia has made very little progress in its transition to a market-based
democratic society. Let me contradict this statement with a surprising
assertion: Russia has already become a market economy and a democratic
society. True, it is a badly built, badly managed, and hence badly operating
market economy and a chaotic democracy. Even so, what has happened in
Russia is an extraordinary development of historic proportions. What Russia
needs now is a stronger state (but not more civil servants, as there are
currently more than there were under the Soviet regime), reform of the civil
service, institution and authority building, and firm establishment of the
rule
of
law. An environment must be created in which profit is a measure of success;
the incentives for creating small and medium-size enterprises, primarily in
the
official economy, are strong; and bankruptcies represent a credible threat to
inefficient managers.

How to start? By providing strong political backing for those who know what
can and should be done. Russian citizens will have a great opportunity to do
so, perhaps in a few months, when the joint parliamentary and presidential
elections take place.

The author is senior economist at the Office of the Chief Economist,
European Bank for Reconstruction and Development (EBRD). The views
expressed here are the author?s and do not reflect the official view of the
EBRD.

*******

#6
Date: Tue, 18 May 1999 
From: Vladimir Tikhomirov <v.tikhomirov@cerc.unimelb.edu.au>
Subject: New book on Russia

Dear David,
Can you please make information below available to subscribers of your
list? Thank you!
With best regards,
Vladimir Tikhomirov

NEW BOOK ON RUSSIA

Title: Anatomy of the 1998 Russian Crisis
Author/Editor: Vladimir Tikhomirov (ed.)
ISBN: 0 7340 1728 6
Publisher: Contemporary Europe Research Centre
Year: 1999
No. pages: 295+6 pp.

This book is a collection of articles by leading experts on the Russian
economy and politics. The study analyses the reasons for and developments
behind the August 1998 financial crisis in Russia, including the dynamics
of Russia's economic performance, escalation of its financial and budgetary
problems, growth of lobbyism, clan politics and regionalist pressures, the
future of Russian federalism, and the dilemmas of post-Soviet industrial
restructuring.

Contributors include Silvana Malle (OECD), Pekka Sutela (Bank of Finland),
Bill Tompson (University of London), Stephen Fortescue (UNSW), Wladimir
Andreff (University of Sorbonne), Yuri Tsyganov (University of Melbourne),
Akira Uegaki (Sienan Gakuin University), Barbara Lehmbruch (University of
California at Berkeley) and Vladimir Tikhomirov (University of Melbourne).

Price:
Australian orders: AU$24.95 (including postage by surface mail)
International orders: US$24.95 (including postage by surface mail)

To order please contact:
Dr Margareta Olsson
Administrator
Contemporary Europe Research Centre
University of Melbourne
234 Queensberry Street, 
Carlton VIC 3052
Australia
Fax: (+61-3) 9344-9507
Tel.: (+61-3) 9344-9502
Email: m.olsson@cerc.unimelb.edu.au
Internet: http://www.cerc.unimelb.edu.au

********

#7
From: AKnight703@aol.com (Amy Knight)
Date: Tue, 18 May 1999 
Subject: article/book
To: Davidjohnson@erols.com

As for my new 
book, it is entitled Who Killed Kirov? The Kremlin's Greatest Mystery and is 
published by Hill and Wang/Farrar, Straus, Giroux. It should be in the book 
stores by the end of May or early June. As the title suggests, it is a 
re-examination (based in large part on newly available archive materials) of 
the murder in December 1934 of Leningrad party chief Sergei Kirov. It 
actually goes beyond the murder in that it is also a study of Kirov's early 
life, his rise to power, his relationship to Stalin and the Stalinist 
political system. I also have a couple of chapters on the aftermath of the 
murder--the purges and the show trials. The book is intended for both 
academics and general readers. It is a History Book Club selection.
Thanks, Amy Knight


New York Times
May 13, 1999
[for personal use only]
Updating the Russian Who's Who
By Amy Knight

Boris
Yeltsin's sudden dismissal of Prime Minister Yevgeny Primakov may seem like
an ill-conceived move by an impulsive and frail leader who has been backed
into a corner by the Communist-dominated Parliament threatening to impeach
him.

The move may be ill-considered, but some of the Russian President's
opponents see a calculated plot. If his past behavior is any indication,
they say, he may be deliberately courting a political confrontation with
Parliament.

Mr. Yeltsin said that he fired Mr. Primakov for his failure to turn around
the Russian economy. If that was his real motive, Mr. Yeltsin would not
have elevated First Deputy Prime Minister Sergei Stepashin, who has no
experience in economic matters, to the prime minister's post. Mr. Stepashin
has spent his entire career in the internal police and security apparatus.

Ever since 1991, when Mr. Yeltsin came to power, Mr. Stepashin has loyally
backed him through crisis after crisis. Although Mr. Stepashin portrayed
himself a liberal reformer when he joined the Yeltsin camp, he has played
an important role in passing laws to re-establish the powers of the former
K.G.B. 

In 1993, Mr. Stepashin was serving under Nikolai Golushko, the Security
Minister, when Mr. Yeltsin first confronted the Parliament. Mr. Golushko
refused to call out security forces on Mr. Yeltsin's behalf, a move that
Mr. Stepashin disagreed with. The President ended up dissolving Parliament,
declaring a state of emergency and storming the Duma building using other
Government troops. Unsurprisingly, Mr. Golushko lost his job and was
replaced by his less hesitant deputy in early 1994.

Mr. Stepashin is best known for the prominent role he played in the
unpopular war in Chechnya. As chief of the security service, he was
mastermind of the disastrous invasion of the rebellious Russian territory
in 1994. Although Mr. Stepashin resigned as security chief in the summer of
1995 because of a mishandled hostage crisis, he soon re-emerged as a
negotiator with the Chechens and later as Justice Minister.

His appointment as Interior Minister in 1998 gave him the command of
thousands of special troops, including the famed Dzerzhinsky Division,
trained in suppressing unrest. Two weeks ago, when Mr. Yeltsin gave him the
additional post of First Deputy Prime Minister, it was widely speculated
that the President was preparing for a showdown with Parliament. 

The recent appointment of Vladimir Putin as head of the President's
Security Council, which makes key domestic and foreign policy decisions,
only reinforced that impression. In an extraordinary move, Mr. Putin will
hold onto his old job leading the security apparatus, in particular the
elite Alpha troop unit. Again, Mr. Yeltsin's opponents saw dark forces at
work.

No one, however, knows whether troops would follow Mr. Stepashin's and Mr.
Putin's orders in a political crisis. Mr. Yeltsin has lost almost all his
credibility in the eyes of the Russian people, and even the
well-disciplined internal security troops could refuse to support him.

The Parliament is unlikely to approve Mr. Stepashin's candidacy as prime
minister, especially since one of the proposed impeachment charges against
Mr. Yeltsin involves the ill-fated campaign in Chechnya. It is also
unlikely that Mr. Yeltsin will come up with another candidate. The
Parliament may have little choice but to proceed with impeachment. 

Mr. Yeltsin's opponents fear he may decide to act first, dissolving
Parliament and declaring a state of emergency, a move that could throw the
country into political turmoil.

In the past, Mr. Yeltsin has counted on Western leaders to be restrained in
their reaction to events in Moscow. And now they are depending on Russia to
help find a way to end the war in Kosovo. 

Will Mr. Yeltsin test the West's tolerance once again?

*****

#8
Jamestown Foundation Monitor
May 18, 1999

STEPASHIN LIKELY TO CONTINUE PRIMAKOV'S ECONOMIC "POLICY." A number of
observers have already noted that Stepashin, if confirmed, is not likely to
carry out radical economic reforms, but instead a policy which largely
continues those carried out--or, at any rate, given lip service--by the
Primakov cabinet. Like Primakov, Stepashin, in his current role as acting
premier, has already been sounding off about "economic crime"--promising to
strip banking licenses from a group of banks (whom he has not yet named),
which he accuses of illegally moving capital out of Russia while defaulting
on depositors and creditors. More substantively, Stepashin has stressed both
the need to push laws through the Duma which would meet the International
Monetary Fund (IMF)'s conditions for its latest promised multibillion-dollar
credit. Such laws include raising gasoline and alcohol taxes, postponing a
reduction of the valued-added tax and bankrupting insolvent large banks. The
rumored nomination of State Duma budget committee chairman as economics tsar
would suggest that Stepashin, if confirmed, will view getting these and
other laws demanded by the IMF through the parliament's lower house as a
priority.

Anatoly Chubais, meanwhile, now on a visit to the United States, was quoted
today as saying that Russia may end up receiving the IMF's latest promised
credit without having to fulfill the Fund's conditions--specifically,
without having to get various revenue-enhancing measures through the Duma
(Russian agencies, May 18). Chubais may be hinting that his close
relationship with Lawrence Summers, the new U.S. Treasury secretary, will
make such leniency possible. Summers reportedly played a key role in pushing
the IMF to disburse funds to Russia just prior to the collapse of Russia's
financial system last August. Just before he made that decision, Summers was
visited in Washington by Chubais, who was then Yeltsin's special emissary to
international financial institutions. Chubais may also be angling to get
named to that post again.

Meanwhile, Aleksandr Shokhin, an independent Duma deputy and former
economics minister, said today that Russia may have an easier time getting
the IMF money if the Duma is disbursed. Shokhin argued, first of all, that
the required legislation will never pass the Duma, but that the Fund could
refuse to send the money if the laws are enacted by presidential decrees or
government orders, given that taxpayers could legally challenge them. Once
Stepashin is confirmed, Shokhin continued, he could demand that the Duma
pass the IMF-related legislation and resign if it refuses, after
which--according to Shokhin--the president will have the right to dismiss
the Duma if it continues to refuse to pass these laws. Thus with the Duma
disbursed, Shokhin argued, the IMF may very well decide to hand over the
money (Russian agencies, May 18).

*****

#9
Newsweek
May 24, 1999
[for personal use only]
Good News for the Pro-Westerners?
INTERVIEWS Two takes on the upheaval in the Kremlin. 
By Lally Weymouth 

Grigory Yavlinsky, the head of the liberal Yabloko Party, is one of Russia's 
leading voices for economic and political reform, and a likely presidential 
candidate in 2000: 

WEYMOUTH: Why did President Yeltsin fire Prime Minister Primakov? 
YAVLINSKY: Because he became very close to the communists. [And] because he 
had no economic program. 

What do you think about the choice of Sergei Stepashin to be prime minister? 
This is not a very good choice. He was very active in Chechnya. 

Will your party support him? 
This is an open question. It's very hard for us to forget that he was the 
head of the KGB while the war in Chechnya [was going on]. 

Will he pass the Duma? 
It's very hard to predict. 

It's reported that reformers like Anatoly Chubais and Sergei Kiriyenko, a 
former prime minister, will come back under Stepashin. Is this so? 
They are not reformers. They are completely discredited. The country will not 
accept them, and they will not be able to implement reforms. If Stepashin is 
confirmed, does he pose a threat to Moscow Mayor Yuri Luzhkov's candidacy for 
the presidency? Does he become a presidential candidate? 
He would be a threat for me, because I'm going to run for the presidency. He 
would [also] be a threat for Luzhkov. 

When Yeltsin was in the hospital in March, didn't he interview you as a 
possible prime minister? 
This was a discussion about presidential elections—not the prime minister's 
office. 

Does he want you to be his successor? 
Nobody knows what Yeltsin wants. 

Is President Yeltsin well enough to make a decision? 
Yes. He always was in the same mood as now. Simply, Yeltsin is such a man. 
[Between] 10 years ago and now, there is no difference. 

Will he turn to someone like you? 
He's thinking about that. 

What's standing in his way? 
There are some strong, corrupt groups around him, and they have an influence. 

Does Yeltsin believe in democracy and freedom? 
In his guts, yes. 


Anatoly Chubais is a longtime Yeltsin adviser. A former first deputy prime 
minister, he has been fired twice and rehired twice by the Russian president. 
Still, he remains very close to the Kremlin chief: 
WEYMOUTH: How do you feel about the impeachment vote? 
CHUBAIS: I am deeply satisfied. 

You went to President Yeltsin last week and argued the case for Stepashin. 
Why? 
I consider the appointment of Stepashin a strategic and reasonable step by 
President Yeltsin. 

Why? 
I know that in the West, they talk about his KGB past and his participation 
in the Chechnya war. But to me, Stepashin represents the new generation of 
Russian politicians. His entire career occurred after the beginning of 
Yeltsin's reforms. He's definitely not a communist and will never become a 
leader of the left, which is absolutely fundamental. 

Did Yeltsin want to get rid of Primakov because he did not fight hard enough 
against impeachment? 
That's true, that's one of the reasons. But the background of the decision is 
the fundamental difference in attitude toward the communists between Primakov 
and Yeltsin. That is the fundamental reason for Yeltsin's decision. 

How is President Yeltsin's health? 
The worse the political situation, the better Yeltsin's health. 

Can he make rational decisions? 
Definitely. He's able to make sensible decisions, and this is proven by his 
last decision. 

Will Stepashin pass the Duma? 
I think so, but it completely depends on the Duma. My understanding is that 
President Yeltsin and Sergei Stepashin are not determined to fight the Duma. 
But if the Duma does not support Stepashin, I have no doubt that Yeltsin will 
dissolve the Duma [and call for new elections]. 

What policies will Stepashin pursue if he's confirmed? 
I think he will be a reasonable prime minister. It doesn't mean he will 
support a Western mistake like the Yugoslav decision, the biggest Western 
mistake of the last 40 years. 

How much has that helped the communists and nationalists? 
It is the biggest gift that [communist leader Gennady] Zyuganov and 
[ultranationalist Vladimir] Zhirinovsky could ever dream of. They will 
definitely have additional votes in the parliamentary elections in December, 
and that is the gift of Mr. Clinton. I never saw such anti-American feeling 
in my life. 

******

#10
The Times (UK)
May 18 1999
[for personal use only]
LEADING ARTICLE 
FAITH IN RUSSIA
Orthodox intolerance is not to be honoured 

In every way but one, it could scarcely be a more admirable story. Ian 
Barbour, a physicist in the heyday of research into the bomb, grew so 
concerned about the moral questions raised by that work that he began 
studying theology in the 1950s. Barbour's work since, pondering the morality 
of nuclear power or cloning, has bridged religion and science. Yesterday, at 
a ceremony in the Kremlin, Barbour was rewarded with the Templeton Prize for 
Progress in Religion, worth £750,000. 

This prize is the world's biggest award for achievement in any field. Its 
creator, John Templeton, gives away £20 million a year. Completing the 
virtuous circle, Barbour has promised to plough most of his award back into 
endowments for his discipline. Even the venue for the prizegiving carries a 
moral message: Sir John chose Moscow out of respect for Russia's move from 
enforced scientific atheism towards toleration of faith. 

Everything for the best in the best of all possible worlds, it would seem, 
but for one thing: it is almost too late to honour religious freedom in 
Russia. That freedom, based on a 1991 law recognising the right of citizens 
to worship as they choose, is being stifled by ultra-conservative hierarchs 
in the Russian Orthodox Church. 

Even within the Orthodox Church, dissent has become dangerous: since the 
liberal priest Alexander Men was murdered by anonymous axemen in 1990, his 
followers have been menaced. The Moscow Patriarchate has also lobbied against 
freedom for "non-traditional" religious groups, not only for the wilder-eyed 
American preachers who flocked to save Russian souls from communism, but also 
for Russia's own underground religious groups. These Russian Baptists and 
Pentecostalists heroically rejected the Orthodox leadership's furtive 
symbiosis with the Soviet police state but their virtue has gone unrewarded. 
Instead, a new law on religion gave Orthodoxy clear precedence and threatens 
the minority groups which emerged from underground after 1991. 

This law is an indication of the close ties between President Boris Yeltsin 
and Patriarch Aleksei II, whose Soviet-era ties to the KGB earned him the 
informant's codename "Thrush". Russia's regression to rule by cronies, and 
the revival of religious intolerance, undermine the very notion which the 
Templeton Prize aims to reward. 

******

#11
Izvestia
May 18, 1999
Change of All 
By Vyacheslav Nikonov 

The Primakov Cabinet was a unique government in the modern history of 
Russia, which relied on the majority in the Russian society and in the 
Parliament, writes IZVESTIA. It was in the interest of the country to retain 
the Primakov government, as nothing is more useful in Russia than political 
stability which it maintained. 
But that model of rule suited not all. It weakened the role of the 
presidential Staff and reduced the Kremlin's possibility to decide who will 
be President Yeltsin's successor. Many of the oligarchs who are close to the 
Kremlin found themselves pushed aside from the "budget tap" and felt close 
attention to them on the part of the Prosecutor General's Office. 
Nor did that power model suit the election interests of the Communist Party, 
which had come close to acquiring a status of a "party of power." This came 
in conflict with the interests of the protest-minded left-wing electorate, 
and the Communist decided to build up the tensions in the country by 
launching the useless impeachment campaign. 
That irritated President Yeltsin and he changed the rules of the game in his 
usual manner and established a new model of rule. It is a conflict model 
designed to increase to the utmost the Kremlin's influence on the election 
battles. Now the government, no matter who heads it (Stepashin has the best 
chances for becoming Prime Minister), will not, for some time, play a role 
independent of the Kremlin. The President's Administration, the Government, 
and the leaders of the oligarchic financial-industrial groups will act in 
concert to weaken the influence of the other power centers. This will result 
in extremely strained relations between the executive power branch and the 
State Duma. And if the Duma is finally dissolved, the banning of the 
Communist Party is not ruled out. 
The new model of rule under a new cabinet is going to be tough, the paper 
writes. The first sign of it is that the Interior Minister has been appointed 
at the head of the Government. Other signs are that the main media express 
surprisingly unanimous views and that journalist Alexander Khinshtein (from 
MOSKOVSKY KOMSOMOLETS) who examines dirty linen in the upper echelons of 
power, has been detained. 
The losses for the country caused by the dismissal of Yevgeny Primakov are 
tolerable, so far, so long as all the power centers keep within 
constitutional limits. But if the Kremlin build up greater confrontation, 
poor prospect lie in store for Russia, the paper warns in conclusion. 

*******

#12
Christian Science Monitor
19 May 1999
Editorial
Advantage Yeltsin

For the moment, russian President Boris Yeltsin has once again
outmaneuvered his Communist opponents. But the political drama currently
playing in Moscow shows no sign of ending soon. 

For the West, the stakes are high: NATO wants a friendly Russia and help in
bringing Yugoslav leader Slobodan Milosevic to heel. Russia still needs
billions in loans to stave off default on foreign debts. The safety of
Russian nuclear weapons remains a concern. 

Mr. Yeltsin's abrupt dismissal of Yevgeny Primakov, his third prime
minister in a year, typifies his erratic behavior of late. At the same
time, the move was entirely predictable, given Yeltsin's tendency to lash
out when cornered and to move against any subordinate he perceives as
stealing the show. 

The Communist-dominated Duma, motivated purely by (undemocratic) politics
and a deep enmity for market reform, drove Yeltsin into this corner. It
brought to a vote a hodge-podge of impeachment counts - accusing Yeltsin of
everything from dissolving the old Soviet Union to "genocide" against the
Russia people because his economic half-measures (which the lower house has
done everything it could to sabotage) have come up short. All five counts
failed. 

Many believed Yeltsin gave the impeachment effort a boost with his rash
firing of Mr. Primakov, who was popular in the Duma and rumored to be a
candidate in the next presidential elections in June 2000. Primakov's
record was mixed: He brought the country a needed-political stability, but
was unable to develop a viable economic policy. Part of the problem was
Primakov's own anti-free-market tendencies; part was the Herculean task of
getting the lower chamber to approve any serious market reforms. 

But Yeltsin's victory showed that if he cannot have his way in the Duma
without a fight, neither can the Communists. Momentum seems to have
shifted: After initial reports that lawmakers would reject Interior
Minister Sergei Stepashin, the president's nominee to replace Primakov, it
now looks likely the Duma will acquiesce. If it votes down Mr. Stepashin
three times, Yeltsin can dissolve the Duma, something legislators want to
avoid. 

If Stepashin is confirmed, he'll face the same problem as Primakov: How to
move economic-reform legislation through parliament that will satisfy the
International Monetary Fund and ensure a $4.5 billion loan to help Russia
pay its foreign-debt interest. Much will depend on his Cabinet team. 

More instability may lie ahead. Parliamentary elections are set for
December, with the presidential elections to follow six months later. Under
current law, Yeltsin cannot run again. It's not at all clear who will
replace him and which forces will control the new Duma, but the prospects
for democratic market reformers aren't bright. They've been set back, both
by Yeltsin's failures and Russian reaction to NATO's air strikes in
Yugoslavia. 

The West's challenge is to stay engaged with both government and opposition
while the Russian political future gets sorted out. It must be prepared to
work with whomever comes to power over the next year. 

********