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Johnson's Russia List


May 20, 1999    
This Date's Issues: 3294 3295  3296

Johnson's Russia List
20 May 1999

[Note from David Johnson:
1. Financial Times: John Thornhill, Between rock and a hard place.
Russian PM must face down oligarchs and Communists.

2. Moscow Times: Andrei Piontkovsky, SEASON OF DISCONTENT: Stepashin 
Is A Hard-Liner For All Seasons.

3. Carnegie Endowment: Chubais on Stepashin and the “Irreversibility of 
Russian Reform.”

4. Officer sells scouts to the Chechens.
5. Moscow Times editorial: A Less Than Reassuring Performance.
6. Reuters: Rubin sees no easy economic answer for Russia.
7. W. George Krasnow: Responses to the Open Letter.
8. Christian Science Monitor: Judith Matloff, Kosovo war rallies Muslims 
in Russia.

9. The Russia Journal: Regions Wield Great Power but Still Yearn for More.
10. Segodnya: President Yeltsin Needs Another Primakov.
11. Komsomolskaya Pravda: How to Keep the Premier's Seat for at Least 10 

12. Washington Post letter: Mark Kramer, Bad Management in Moscow.
13. Jamestown Foundation Monitor: PRESS SCENARIOS PROBABLY PART OF A COVERT 


Financial Times
May 20, 1999
[for personal use only]
RUSSIA: Between rock and a hard place
Russian PM must face down oligarchs and Communists. John Thornhill reports

Russia's state television channels yesterday morning showed their usual fare 
of Latin American soap operas charting the love lives of their emotionally 
challenged and silicon-enhanced stars. The schedulers clearly thought this 
more worthwhile than the parliamentary debate over whether to confirm Sergei 
Stepashin as prime minister. And, as it turned out, Russia's parliament did 
indeed prove limp drama.

By a majority of 301 to 55, the lower house of Russia's parliament, the Duma, 
voted to approve Mr Stepashin, sealing a stunning tactical victory for 
President Boris Yeltsin, who was all but written off as a political force 
earlier this year.

In the space of a week, Russia's infirm president has dismissed a dangerous 
rival - ex-prime minister Yevgeny Primakov - fended off an impeachment vote, 
humiliated his Communist opponents, and appointed a loyal security boss as 
replacement premier. This should ensure that, health permitting, Mr Yeltsin - 
and his family - can serve out the rest of his term in relative calm.

Whether it is so advantageous for Russia's 150m other citizens is another 
matter. But that will largely depend on how Mr Stepashin now conducts 
himself. The 47-year-old former interior minister has been praised by the 
president as a highly competent minister who is intent on relaunching 
much-needed economic reforms. The danger is that Mr Stepashin's government 
will be eroded by factions fighting in the Kremlin and political posturing in 
the Duma.

Gennady Zyuganov, the Communist Party leader, said it was largely irrelevant 
who was prime minister while Mr Yeltsin remained in office. "There can be no 
question of an independent government while the state is being steered by a 
man who is unaccountable for his actions," he said.

The Communists, who strongly supported Mr Primakov, argued it was time to 
disengage from government, slip back into opposition, and prepare for 
December's parliamentary ballot. By backing away from an outright 
confrontation with Mr Yeltsin yesterday - following the failure of the 
impeachment vote on Saturday - they avoided an early dissolution of 
parliament and preserved an organisational base in the Duma from which to 
launch their parliamentary election campaign.

Moreover, Mr Zyuganov predicted Mr Stepashin would immediately be dragged 
into a ferocious fight as the financial-political "clans" controlled by 
Anatoly Chubais, the head of the UES electricity monopoly and former leading 
reformer, and Boris Berezovsky, head of the Logovaz business empire, battled 
to appoint their supporters to the cabinet. The Communist party warned 
parliament would reject all tax-raising legislation proposed by Mr Stepashin 
if any "embezzlers" were appointed to the government. That would jeopardise 
Mr Stepashin's chances of pursuing economic reforms and delay fresh credits 
from the International Monetary Fund.

Mr Stepashin's supporters, though, argue the baby-faced former security 
general is tough enough to face down both the Communists and the oligarchs. 
Some are suggesting that Mr Stepashin could emerge as Mr Yeltsin's 
presidential heir. Mr Stepashin might be dogged by his reputation as a 
nationalist hardliner who helped launch the catastrophic war in Chechnya. But 
he retains close ties with the liberal St Petersburg intelligentsia, his 
supporters claim, and possesses a strong "democratic kernel". As such, he 
could serve as the electoral Trojan horse for Russia's pro-market liberals.

Vladimir Mau, a leading economic liberal, said he expected Mr Stepashin to 
make reasonably smooth progress, which could lead to him being the natural 
choice for president next year.

But if the Kremlin's tentative succession plan does not work out - and Mr 
Stepashin would at present appear to hold minimal electoral appeal - then 
some observers fear the prime minister might devise a more forceful solution 
to ensure continuity of power.

Local media have warned Mr Stepashin could become a Russian Pinochet, 
combining authoritarian politics with liberal economics -a suggestion Mr 
Stepashin himself laughed off, saying: "No, I am not General Pinochet, my 
surname is Stepashin." 


Moscow Times
May 20, 1999 
SEASON OF DISCONTENT: Stepashin Is A Hard-Liner For All Seasons 
By Andrei Piontkovsky 

What was supposed to happen, happened. The State Duma confirmed Sergei 
Stepashin as prime minister on the first vote. At first glance, the behavior 
of the leftist deputies, who just a week ago were thunderously fighting to 
impeach the president of the anti-people's occupation regime, looks somewhat 
strange. Just what did they like about a prime minister named by none other 
than the president of the anti-people's occupation regime? 

As the vote on impeachment already demonstrated, what defines the behavior of 
many deputies is their determination to keep the current Duma alive until the 
next scheduled elections in December, and not to give Boris Yeltsin any 
pretext to dissolve it. In the event of pre-term elections, the deputies will 
find themselves out on the streets, and they will lose their expensive - but 
free for them - electoral headquarters (the Duma offices, communications 
systems, automobiles, secretaries, aides, etc.) 

The presidential administration played on their fears, spreading rumors that 
if Stepashin's candidacy were rejected, the president would, for the second 
vote, present the Duma with a figure it would find completely unacceptable - 
Anatoly Chubais, for example. In this case, the deputies would have been able 
to avoid the Duma's dismissal only by submitting to an unprecedented 

On the final day before the vote, an altogether fantastic version was 
circulated that the president, under pressure from financier Boris 
Berezovsky, planned to withdraw Stepashin's name prior to the first vote. 

But besides these tactical considerations the figure of Sergei Stepashin 
seems to have suited many. The Communists, thanks to their genetic memory, 
automatically stood at attention and saluted at the sound of the words, 
"Colonel-General of the FSB" - the former KGB. For people close to the 
presidential administration, Stepashin is a person who on more than one 
occasion has demonstrated his personal devotion to President Boris Yeltsin. 

Chubais, who has emerged from the shadows and been extraordinarily active 
lately, characterized Stepashin this way: "A doctor of science, a professor, 
a trained lawyer, a genuine Petersburg intellectual." Chubais possesses an 
amazing capacity to lie convincingly and with inspiration for whatever 
strikes him as politically expedient at a given moment. 

As for Stepashin, I remember this "Petersburg intellectual," absurdly dressed 
in loose overalls, at the memorable "drunken" news conference in Grozny in 
January 1995, during which Defense Minister Pavel Grachev uttered the 
monstrous phrase: "Seventeen-year-old boys are dying with happy smiles on 
their faces." And Stepashin, obsequiously addressing Grachev, stated: "And 
now our air force is carrying out the whole program, paying no mind to the 
peacemakers in Moscow, isn't that right, Pavel Sergeyevich?" 

The air force carried out Stepashin's whole program and Russia lost tens of 
thousands of citizens. For how much of this can Yeltsin alone be asked to 
answer? After on-the-record declarations like Stepashin's, a person should 
not be enrolled in the Petersburg intelligentsia, but sent to the war crimes 
tribunal in The Hague. However, as it turns out, he can end up in the White 
House, as a Russian prime minister. 


Date: Wed, 19 May 1999 
From: Elizabeth Reisch <>
Organization: Carnegie Endowment
Subject: Chubais at Carnegie

David, here is the latest Carnegie Endowment Russian and Eurasian
Program issue brief, which may be of interest to your readers. Cheers,
Liz Reisch

Chubais on Stepashin and the “Irreversibility of Russian Reform”
May 19, 1999

Sergei Stepashin represents the “new generation of Russian
politicians,” declared Anatoly Chubais, Chairman of the Board of Unified
Energy Systems (UES) and former chief of Russia’s State Privatization
Committee, at the Carnegie Endowment on May 17. The Russian Duma has
since confirmed Sergei Stepashin as Prime Minister, following Yeltsin’s
May 12 dismissal of Yevgeny Primakov. Although the Western press
portrays Stepashin as an elite spymaster and a chief architect of the
Chechen War, Chubais said, Stepashin is “definitely not a Communist” and
will bring stability to Russian political life. Chubais noted that one
of Stepashin’s most worthy credentials is that his entire political
career since his election to the Congress of People’s Deputies in 1990
has taken place during Russia’s transition, making him one of the first
high government officials not originating from the Soviet nomenklatura.
A major theme in Chubais’ remarks was the irreversibility of the
process of economic reform. If there were ever a time for a rollback on
reform, Chubais said, it would have taken place under Primakov’s
government. During Primakov’s tenure, there was a danger that
“Communist” and “Soviet-era” figures such as Central Bank Chairman
Viktor Gerashchenko and First Deputy Premier Yuri Maslyukov would
respond to the August 1998 financial crisis with backward monetary
policies such as printing money. Instead, the last ten months have
demonstrated that there is “no political room” for backtracking on
reform, nor could leftist economic policies be implemented. The
irreversibility of reform, Chubais added, is evidenced even by recent
statements by Communist leader Gennady Zyuganov, who previously labeled
the IMF an “imperialist institution” yet has recently expressed a
willingness to cooperate with the IMF in order to resume the bank’s
lending to Russia.
Paradoxically, Chubais’ remarks portrayed the Communist Party as
domesticated in the sense that it lacks the power to roll back the
clock, yet it remains dangerous. He explained that Yeltsin fired
Primakov in response to increasing Communist influence in the Duma and
Federation Council. Although emotion rather than logic often motivates
Yeltsin’s decisions, Chubais explained, Yeltsin’s sacking of Primakov
was a “rational and timely political decision” based on his most
fundamental political goal: to design a new Russia in which “the
Communists will never be able to come to power.” Chubais said that
Berezovsky’s role in Primakov’s firing was “much lower than he
[Berezovsky] would hope.” In response to a question about his future,
Chubais answered that he is not positioning himself for a seat in the
new government. He said that he prefers to foster macroeconomic
development in his position as Chairman of UES, where his main task is
to reduce the current level of barter transactions (79%) and increase
the volume of cash transactions (21%).
Asked about his role as privatization minister from 1992-1994,
Chubais conceded that his privatization efforts could be characterized
as “Bolshevik-style” – lacking public support and quickly executed.
Chubais said that he forged ahead with privatization in the face of
universal public and governmental opposition, acknowledging that he is
as a result perhaps the most hated politician in Russia. His strategy
was to privatize as quickly as possible, using every minute of every day
to privatize: “I didn’t speak, I privatized,” Chubais proclaimed. As a
result, there now is private property in Russia, he said, which limits
forces that oppose the country’s emerging market economy.
Chubais admitted that the Stepashin government would have
considerable difficulty getting the Duma to pass the laws required by
the IMF as conditions to receive the next $4.5 billion credit. However,
he suggested that the Russian government might be able to enhance
revenue collection by means other than those contained in the laws
before the Duma. Chubais hinted that it might be necessary to
renegotiate the conditionality on its IMF loan.
Chubais said that NATO’s war against Serbia is undermining the
reform movement in Russia. Zyuganov’s Communist Party and Zhirinovsky’s
Liberal Democratic Party “gain from the NATO bombing more than anybody
else,” he said, asserting that each of these two parties gained 3-5
percent popularity points as a result of the NATO campaign. Chubais
noted that the NATO bombings have severely damaged US-Russian relations,
jeopardizing the passage of START II and further Russian participation
in the Partnership for Peace. The situation in Yugoslavia has not only
damaged high-level relations between Clinton and Yeltsin, and Albright
and Ivanov, he explained, but it has also damaged relations between the
Russian and American people. He warned that a NATO deployment of ground
troops in Yugoslavia would destroy Russia’s relations with the United
States and NATO. Responding to a question about what Russia could do to
stop the war, Chubais said that the key to resolving the Yugoslav
conflict is held by Washington, not Russia. He charged that NATO
bombing against Serbia has made Milosevic a national hero, an outcome
that the West did not foresee but which Russia uniquely understands
because of its history. Therefore, stated Chubais, Russia’s role is to
prevent further escalation of the conflict by “explaining its mistake”
to NATO and working toward a common solution.

Summary by Elizabeth Reisch, research assistant with the Russian and
Eurasian Program.


Date: Wed, 19 May 1999
From: Timothy K Blauvelt <>
Subject: Officer sells scouts to the Chechens

This is the lead story in today's (5/19) Kommersant Digest
( Thought you might find it
of interest. In case it's not available elsewhere in English, here's an
unofficial translation:

Officer Sells Scouts to the Chechens

A savage event has been revealed in an operative batalion of the 99th
Interior Ministry Division, deployed in Vladikavkaz. A unit commander,
Lieutenant Garegin Arutyunov, sold two of his soldiers to the Chechens as
slaves. The two ran away, and have exposed their commander. This is not an
isolated incident: the trade in soldiers takes place all over the North
Caucasus. Proving the guilt of the officers is difficult, however: the
purchasers live in Chechnya and are not accessable for investigation.


Moscow Times
May 20, 1999 
EDITORIAL: A Less Than Reassuring Performance 

It was very reassuring to hear Sergei Stepashin say he will not be a 
strongman like Chile's Augusto Pinochet, and also reassuring that he is not 
planning to declare a state of emergency. And the little joke he made to the 
effect that Duma deputies who voted for him would not be shot was much 
appreciated. It's nice that we can laugh about these things. 

It was less than very reassuring to hear Stepashin state, "Regardless of any 
political situation, I shall never allow myself to leave or betray the 
president." Regardless of any political situation? 

Moving hurriedly onto the economic front, we find that Stepashin on Wednesday 
was making all of the right noises. All of those noises were also 
contradictory, but that is perhaps not surprising given the forum. 

The one economic constant Stepashin returns to, however, is the need to push 
through the Duma a package of bills agreed upon with the International 
Monetary Fund. 

In a deal brokered by Yevgeny Primakov's government, the IMF has agreed to 
roll over some $3 billion that Russia owes it this year, as long as the Duma 
legislates new taxes on alcohol and gasoline, and the Central Bank gets 
serious about bankrupting dead banks. 

Now let's think about this for a minute. When Boris Yeltsin fired Primakov, 
he spoke of the urgent need for pushing ahead with reforms. 

In what must have been a reference to the IMF bills before the Duma, Yeltsin 
expressed concern that crucial economic legislation would have a difficult 
time speedily passing into law in a parliamentary elections season. 

This was the justification for firing Primakov. But the amazing thing about 
it is that it only became true after Primakov was fired. 

Primakov's team came up with this IMF deal and seemed likely to push the 
agreed-upon bills through a cordial Duma. In fact, if Yeltsin had not sacked 
Primakov, or had at least held off a few weeks, impeachment most likely would 
have been postponed - and the IMF legislation that Yeltsin and Stepashin both 
insist is so urgent might even be law by now. 

This is not to defend Primakov, who was obviously running out of ideas and 
steam. But it is to challenge Yeltsin's claim to be concerned with economic 

The Stepashin appointment is a political appointment. Insisting the IMF bills 
are urgently needed is just another way of putting positive political spin on 
Stepashin. And in general, Russia's so-called economic problems are really 
Russia's political problems - and these are likely to remain with us until 
political power peacefully changes hands. 


Rubin sees no easy economic answer for Russia

WASHINGTON, May 19 (Reuters) - There is no easy answer to Russia's deep 
economic problems and any new money approved by the International Monetary 
Fund will only be used to repay old debts, U.S. Treasury Secretary Robert 
Rubin said on Wednesday. 

Rubin, testifying to a Senate panel, admitted that Russia's decision to 
channel previous IMF funds through an offshore bank was "a matter of great 
concern" and he said the IMF was waiting for an independent auditors' report 
on the issue before agreeing to release new money. 

Russia's problems centered on corruption, structural and legal issues and the 
troubled financial sector, he said. 

"These are vast problems," he said. "There is no simple answer and there is 
no short-term answer. There are going to be ups and downs and if this is 
going to work it is going to work over a long period of time." 

Russia, the IMF's biggest single borrower, reached a framework agreement with 
the IMF last month under which the fund would lend Russia $4.5 billion over 
18 months. 

But the IMF said its board would only approve the loan program if Russia 
meets promises on bank reforms and new laws and if the auditors' report 
confirms what happened to the money in the offshore fund, which was based in 
Britain's Channel Islands tax haven. 

"This money will never actually go to Russia," Rubin said. "The money that is 
going to Russia is less than the money that Russia owes the IMF and it will 
be disbursed as the payments become due to the IMF and will be used for that 

Russia's new prime minister, Sergei Stepashin, has promised to work to 
resolve remaining difficulties with the IMF, although he wants to ensure 
people are not hurt by tough economic conditions surrounding any deal. 

He urged parliament to approve the new laws demanded by the IMF quickly and 
said Russia would be unable to ease its crushing debt burden if this 
legislation was not agreed. 

Stepashin, confirmed in office by parliament on Wednesday, also said he would 
set up a special commission to investigate what happened to previous 
international loans. 

"It is necessary to correct the situation whereby resources that are 
attracted with difficulty are being spent ineffectively and are often being 
openly stolen," he told parliament. 


Date: Wed, 19 May 1999
From: "Wladislaw George Krasnow, PhD" <>
Organization: Russian American Goodwill Associates
Subject: Responses to the Open Letter

As a number of JRL subscribers endorsed the Open Letter to President
Bill Clinton and other US government officials (Albright, Rubin,
Berger, Gore, Dennis Hastert, and Trent Lott), it is my duty to report
on the responses I received since the Letter was mailed to the above
addressees on March 24.

Here is one from the National Security Council:

"Dear Dr. Krasnow:

Thank you for your letter to Mr. Berger regarding Russia's economic
transition. I have been asked to respond on his behalf.

I agree that the United States has as much at stake today in Russia
overcoming the challenges of transition as we did in checking its
expansion during the Cold War. In this spirit, we remain committed to
support Russian reform to the fullest extent possible.

It is vital to remember that success in Russian economic reform will
depend first and foremost on Russian commitment and political will. The
Russian government must pursue assiduously sound economic policies in
order to ensure the effective use of Russia's vast resources and of any
external assistance.

Regarding your concerns over our role in aiding Russian economic reform,
the United States has worked closely with Russia since its initiation of
market and democratic reforms in 1991. We have provided humanitarian
aid, encouraged foreign investment in large and small enterprises,
supported the independent media, and provided incentives to keep
Russia's nuclear weapons and expertise falling into the wrong hands.
Serious, dedicated individuals from U.S. public and private
organizations will continue to address these problems from every level.

While there are no easy solutions to Russia's economic problems, we are
committed to provide support where it is in both the Russian and U.S.
national interest.


Carlos Pascual, 
Special Assistant to the President and Senior Director for Russian,
Ukrainian and Eurasian Affairs"

>From The Secretary of State I received the following message:

"Thank you for writing and sharing your thoughts and concerns. I value
your opinion and will take it and the views of all Americans into
account. President Clinton and I are committed to making the world a
better place for all Americans and all people. With your support and
encouragement we can achieve this goal together." Signed: Madeleine

What conclusions shall we draw from these responses and non-responses?
As the initiator and the author of the Open Letter, I conclude:

1. By failing to address the key demands of the Letter--that current
U.S. policy toward Russia should be replaced by a new one, "letting
Russians, nor our State or Treasury Departments,decide what constitutes
reform in Russia," the Executive branch spurned all of the signatories,
including a number of specialists in Russian Studies and economics.

Timed to coincide with the Gore-Primakov meeting in Washington, the air
war against Yugoslavia has bombed out the central demand of the Letter:
the need for a speedy revision of the entire U.S. policy toward Russia.
Had the U.S. government followed recommendations contained in the
letter, that tragic, dangerous and misbegotten war could have been

2. By failing even to acknowledge the receipt of the Letter, the U.S.
Legistative branch, the Republican House and Senate leaders, failed in
their oversight duty as they fail to lead the nation out of the quagmire
of the Balkan war.

While the two evasive official responses are superficially conciliatory,
they are also obfuscatory. The recent actions of U.S. government are
exactly the opposite of what we have recommended in the Letter.

Instead of welcoming Primakov as a Prime Minister with the strongest
popular mandate and thus capable of carrying out a mutually agreeable
program of reforms, the U.S. government did everything to undercut his
standing. It openly snubbed him by timing the bombing with his visit in
Washington. To all the injuries visited upon Russia via IMF's dogmatic
economic "diktat," the U.S.government added the insult of starting the
war against Russia's historical ally on the day of Primakov's arrival.It
infuriated all Russians, including pro-Western "reformers."

Instead of encouraging Primakov's subsequent mediating effort in
Belgrade, this Administration turned a deaf ear to him.

True, it allowed the IMF to release the loan we insisted upon, but only
to placate the intensity of anti-American protests that the war in
Yugoslavia unleashed in Russia.

Symbolically, the day Primakov was fired by the erratic Russian
president was the day when Larry Summers, the chief patron of Chubais
and other "young reformers" in Russia, was promoted to replace Robert
Rubin (whose reply we are still awaiting) as the Secretary of the
Treasury. Does it mean that we got stuck with the failed Russia policy
as we got stuck with the failed Balkan policy?

Are we to expect now more U.S. bombardment of Russia with disastrous
macroeconomic advice?

The way I read the above responses, the U.S. military misadventure in
Yugoslavia is not only the greatest obstacle to better U.S.-Russia
relations, but is a piece of the same cloth, namely, a new conception of
U.S. world hegemony and the NATO as a self-appointed policeman of the
world. That's why, in addition to the Open Letter, we have posted, on
our website, a petition to Bill Clinton to stop that war. 

What do you think?

W. George Krasnow,
Russian American Goodwill Association


Christian Science Monitor
20 May 1999
[for personal use only] 
Kosovo war rallies Muslims in Russia
Islamic men in Tatarstan sign up to fight, but officials oppose it 
By Judith Matloff

Way back in the 17th century, so the legend goes, the Russian czar wanted to 
marry Syuyumbike, queen of the Tatar people. She agreed, but only on 
condition that a tall tower be built. 

And the tower was erected, dutifully. But as her wedding day approached, 
Syuyumbike couldn't face being the wife of the Russian Slavic king who had 
subjugated her people, the Muslim descendants of Genghis Khan. So she climbed 
to the top of the tower and leapt to her death. 

Three centuries later, the slender watchtower with its gold crescent moon is 
the most revered monument in what is now the semiautonomous region of western 
Russia known as the Republic of Tatarstan. The Tatar people are still chafing 
against Moscow's yoke - and its policies in the Balkans. 

In the same spirit of self-sacrifice as Syuyumbike, scores of young men here 
have volunteered to fight for their Muslim brothers in Kosovo. Such gestures 
contradict the Russian federal government's condemnation of NATO attacks on 
Yugoslavia and its determination to remain neutral in the conflict. 

"We did not invite them to sign up. They just appeared after we published 
newspaper ads in favor of NATO," says Nabi Nureyev, who mans the desk at the 
Tatar Public Center. 

He says more than 100 men have stopped by to offer their services for Kosovo 
since NATO's Balkans campaign began. 

As far as he knows, it is mainly a show of solidarity and none have actually 

A former officer in the Russian Army, the elderly Mr. Nureyev adds that if he 
were younger, he would be willing to fight for a Muslim nationalist cause. 

"I am a Muslim and proud of my Tatar traditions. Because of that I identify 
with Kosovo," he says. 

Such views are in the minority in this republic of 3.7 million people, where 
Muslims make up about one-fourth of the population. Tatars themselves only 
slightly out-number Slavic Russians. 

But the emotions raised by Kosovo show just how deep the sense of ethnic 
identification with one another runs among Tatar nationalists. 

The regional government has shied away, however, from the violent separatism 
of another ethnic Muslim republic, Chechnya. 

Tatarstan's President Mintimer Shaimiev frowns on mercenary activity of any 
sort. When the Balkans war began, he raised the unsettling prospect that 
Muslim volunteers from Tatarstan might one day battle Russian mercenaries who 
support Belgrade. 

This is not the first time Tatarstan has gone its own way from Moscow, 500 
miles to the west. Since it declared semiautonomy in the waning days of the 
Soviet Union in 1990, the republic has regularly clashed with federal 
authorities over finances. Tatarstan's red, green, and white flag flutters 
through the regional capital, Kazan, rather than the Russian banner. 

Mr. Shaimiev is one of Russia's most powerful men, and he makes the most of 
the region's strategic importance, with its endowment of oil and defense 
plants. Tatarstan's claim as an intermediary between East and West is 
supported by the abundant minarets and faces with Asian features. 

An ambivalent relationship with Slavic Russia has existed ever since Mongols 
thundered in from Asia in the13th century and invaded. Kazan, nestled in the 
Volga River region, was for some time their capital. 

These Turkic people adopted Islam in AD 922 and the republic remains one of 
several Muslim centers in Russia. In 1552 Russian Czar Ivan the Terrible 
ravaged Kazan and tried to force Orthodox Christianity on its citizens. 
Moscow's famed St. Basil's Cathedral was erected to celebrate the event. 
Suspicion of Islam continued through the Soviet era, when like other 
religions it was discouraged. But many Tatars continued worshiping in secret. 

This all changed with the creation of the republic, and an accompanying 
Muslim revival that has seen the number of mosques jump from 16 to 1,000. 

Sheikh Valuallah Hazrat Yakubov, the deputy head of the Muslim Religious 
Board of Tatarstan, is against his flock fighting for Kosovo. But he 
understands the strong emotional link with that fellow Muslim minority 
dominated by Slavs. 

"Certainly we feel a connection with Kosovo," he says. "As we're Muslims from 
an autonomous region in Russia, it would be the same tragedy for us if 
someone began to persecute us, too." 

The willingness of some men to serve in Kosovo has caused consternation for 
local authorities who were already trying to quell fundamentalism imported 
from abroad. Shaimiev recently warned of attempts by Muslim schools to 
mobilize young people for military training outside the region. 

There was an outcry in the Tatarstan Parliament a few months ago when it 
transpired that one such college had sent three youths to Chechnya to learn 
guerrilla techniques. 

Raphael Khakimov, a presidential aide, says it was necessary to be on guard 
against extremism. 

"We're completely against any participation in such [armies]. We believe 
Islam can be a unifying force, but a peaceful, nonideological one." 


The Russia Journal 
May 17-23, 1999
Regions Wield Great Power but Still Yearn for More
Territorial governors seek more influence and power in the central government.

The last 10 days of April have produced unprecedented events in Russian 
politics. A few days after the president's team was defied at a Federation 
Council meeting - with Prosecutor General Yuri Skuratov retaining his post 
despite the president's wishes - several regional leaders then moved to 
consolidate power on a national level. 

The founding congress of the gubernatorial bloc, "Voice of Russia," was held, 
and the "All Russia" bloc and Moscow Mayor Yuri Luzhkov's "Fatherland" 
movement announced they had forged a coalition. The heads of the most 
powerful regions of the Russian Federation were flexing their muscle, with 
the declared goal of establishing power on the federal level.

It used to be very different. Before 1996, the heads of regional 
administrations were appointed, and any public political initiative on the 
federal level had to be approved by the Kremlin. An attempt by three Siberian 
governors to establish an independent political organization, "Siberian 
Covenant," ended for two - Novosibirsk head Vitalii Mukha and Irkutsk 
governor Yuri Nozhikov - in lightning fast retirement. They later resumed 
their positions but "Siberian Covenant" was effectively reduced to something 
amorphous and inactive.

But in 1996 and 1997, office-holders in regional government received the same 
status and immunity as federal politicians. The Federation Council, Russia's 
upper house of parliament, began to be populated by appointed rather than 
elected officials, with regional executives and lawmakers automatically 
becoming members. Following the August 1998 crisis, in order to stabilize the 
government and garner support, former Prime Minister Evgenii Primakov gave 
many of these influential regional leaders positions in his government. The 
heads of associations for inter-regional economic cooperation now enter the 
highest levels of national power by appointment.

Having founded their bloc, the governors announced their intention to 
increase regional representation in the State Duma, the lower house. 

"The Duma does not have to be over politicized, we want deputies to 
assiduously apply themselves to the creation of laws, not bickering. We want 
laws created and we want the promotion of economic development, social 
welfare programs and international and inter-denominational relationships," 
Ingushetian President Ruslan Aushev, a member of the "All Russia" bloc said. 

To attain these goals, the governors are preparing to form a faction in the 
Duma. They have yet to make any announcement on a more concrete economic 

The fundamental direction of their activities is clear, though. For most of 
the regions, active participation in the formation of gubernatorial blocs 
means actual change in the character of inter-budgetary relations. The 
strongest regions naturally play the key roles in these unions of regional 
leaders, which have simultaneously appeared on the political stage. 

"All Russia," includes Tatarstan and St. Petersburg. In "Voice of Russia," 
Samara Region. Samara Region Governor Konstantin Titov and St. Petersburg 
Governor Vladimir Yakovlev are proposing a change in the existing system of 
inter-budgetary relationships. They claim the greater part of tax revenues 
must stay in regional budgets and be applied toward the payment of budget and 
other regional needs, and not become part of the federal budget to be 
distributed equally among the regions by Moscow.

Governor Mintimir Shaimev inspires many governors in the stronger regions, 
because he was able to implement this budgetary model in the Tatarstan 

Tatarstan transfers only 50 percent of its VAT revenues (VAT is the most 
successfully tax in Russia ) to the federal budget, while other regions pay 
75 percent of their VAT revenues to the federal government. Tatarstan retains 
revenue from excises on alcohol, oil and gas, while other regions send this 
money straight to Moscow. If a gubernatorial faction appears in the Duma, it 
will move to change these tax and budget codes.

Another aim of the governors will be attaining independence regarding foreign 
economic activities, most importantly, free access to foreign loans. 
Currently, all regional Eurobonds are placed by a presidential decree. The 
regions want unrestricted access to the world loan market.

Despite Russia's low overall credit rating, regional powers are optimistic 
about attracting foreign loans, and compared to Russia, federation regions 
are more open to auditing and accounting controls. 

Therefore, the governors believe investors who have in their portfolios 
high-yield but risky securities will consider the regions before Russia as a 
whole in making investment decisions.

One of the most soughtafter prizes of the governors is the redistribution of 
valuable property. Ex-Yeltsin aide Leonid Smirnyagin says less than 30 
percent of state property lies in the hands of the regions. But it is the 
regions, chronically underfunded by the federal government that are forced to 
pay the federal government for public utilities and other services. 

The regions have an even greater need to exploit natural resources, which 
today fall under joint management. Here the "two keys" rule operates (as in 
for launching a rocket), in other words, regional powers must obtain federal 
approval before they can begin mining or harvesting projects. And securing 
this approval is not always simple. Especially annoying for the regions is 
the current situation regarding production-sharing agreements, which do not 
demand significant investment from the central government, but guarantee it a 

These projects require special approval from the Duma. But the Duma demands 
investment conditions that are practically impossible to meet.

Beyond economic questions, a gubernatorial bloc would be able to block laws 
on constitutional and governmental structures.. Lawmakers have been 
developing a law to regulate the formation of the Federation Council for over 
two years. 

The law would ban the current model, by which executive members of the 
regional government automatically become members of the Federation Council. 
This is only one of the legislative time bombs carefully created by Duma 
deputies preoccupied with the growth of regional separatism.

Despite the many announcements by regional leaders regarding founding a 
gubernatorial faction in the Duma, the chances of its success are slim. The 
ability of the governors to carry their people into the Duma in the upcoming 
elections has been greatly exaggerated.

In the 1995 and 1997 Duma elections, barely half of the regional 
administrative heads held their seats. Furthermore, the ability of regional 
government structures to offer support for their candidates in Duma elections 
will be significantly reduced because they will be trying to get themselves 
elected. Thus, if the faction is reduced in size - as it probably will be - 
it will not be able to control the Duma.

The regions have too many divergent interests to form a real bloc in the 
parliament and it is unreasonable to expect them to agree on national 
economic and political questions - even those directly affecting their own 
interests and relations with the federal government. 

The government will want to retain current levels of contributions, while the 
regional Duma deputies will demand that the maximum amount of revenues be 
left in the regions. 

Regional leaders are intensifying their activities. Even Yeltsin, moving to 
secure support on the eve of the Federation Council vote on Skuratov, 
proposed that the governors "take for themselves some more authority." 

The president met with 10 of the most influential governors and promised he 
might assist them in revising agreements about regional authority. He even 
hinted that he was prepared to abolish the institution of presidential 
representatives in every region. 

This would do little real good for the regions, however, because although 50 
of the regions have already signed the document, it represents nothing. It 
binds neither the federal center nor the regions to anything. Besides, 
regional presidential representatives, in most cases, are already loyal to 
the governors. 

But the president has made a gesture at the bargaining table and many 
federation regions may not really need this agreement revised, but they are 
very interested in changing the conditions of inter-budgetary relationships, 
property and natural resources. 

And as Duma and presidential elections approach, bargaining between the 
regions and the federal government is again heating up.


Russia Today press summaries
May 19, 1999
Lead Story
President Yeltsin Needs Another Primakov 
Russian politicians were so busy commenting on Saturday's failed impeachment 
vote that they almost forgot about the president himself. 

Nobody even noticed that President Boris Yeltsin failed to voice any opinion 
on the vote. Rumors surfaced on Monday that the president was ill again and 
staying outside of Moscow, and that his meeting with the Spanish premier had 
been cancelled. 

This rumor was accompanied by another that the bed-ridden president may 
re-think his candidate for prime minister. Some said talk that acting premier 
Sergei Stepashin could be replaced by Nikolai Aksenenko was leaked on 
purpose, as a signal that Yeltsin does not want a prime minister who would be 
on too good of terms with the Duma. 

The fact that the Duma seemed pleased with Stepashin alarmed the Kremlin, 
because they did not want a repetition of the situation with Primakov. 
According to the daily, Primakov was basically dismissed for being too 
cooperative with the leftist Duma -- which did not, however, result in the 
adoption of concrete laws, like the IMF package. 


Russia Today press summaries
Komsomolskaya Pravda
May 19, 1999
How to Keep the Premier's Seat for at Least 10 Months 
The daily listed a number of recommendations for acting Prime Minister Sergei 
Stepashin to follow, in order to avoid the fate of his predecessors Sergei 
Kiriyenko and Yevgeny Primakov, who were sacked within a few months. 

1. Strengthen the bonds of friendship with President Boris Yeltsin and his 

2. Never say the name of Prosecutor-General Yury Skuratov or the Swiss 
Mabetex company, and especially avoid mention of "foreign bank accounts," "a 
villa in Italy" or Swiss Prosecutor-General Carla del Ponte. 

3. Never scare Yeltsin with any independent actions or display any 
independent policies. Always conciliate any action with the president's 

4. Avoid contact with old-style professors or academicians, who believe 
themselves to be knowledgeable about economics or the structure of the state. 
Anything that hints at the restoration of the previous regime makes Yeltsin 
nervous that he might not have fulfilled his historical mission of burying 

5. Be very friendly with the oligarchs and with other oppressors of the 
working people -- Boris Berezovsky, Vladimir Gusinsky, Rem Vyakhirev and 
other capitalists -- and show deep respect for their hard work. 


Washington Post
May 19, 1999
Bad Management in Moscow

David Hoffman's May 9 news story on the financial woes of the Moscow 
government featured a dubious statement by Peter Boone, director of research 
for Brunswick Warburg. Mr. Boone claims that Moscow's financial troubles do 
not "reflect bad management on the part of the city" or its mayor, Yuri 
Luzhkov. Instead, according to Mr. Boone, the problems are simply a 
reflection of the general disarray in Russia and are "clearly beyond 
Luzhkov's control."

These assertions are far too generous to Mr. Luzhkov. Moscow was the dominant 
beneficiary of the short-lived (and largely fictitious) economic boom in 
Russia in 1997 and early 1998. Moscow received the bulk of foreign investment 
during that time and was the site of many joint ventures and foreign 
start-ups. There was no justification at all for Mr. Luzhkov to have buried 
the city under $2 billion in hard-currency debt.

I certainly can understand why Western investment bankers were eager to 
persuade the Moscow city government to issue Eurobonds. The bankers earned 
lucrative fees and did not have to worry about the consequences. But it was 
irresponsible for Mr. Luzhkov and his government to have become so 
debt-ridden. If this isn't "bad management" (to use Mr. Boone's phrase), I 
don't know what is.

Even though Mr. Luzhkov and his supporters may now argue that he had no 
alternative in 1997-98 but to seek money from abroad in the hope that it 
would spark economic growth, this is disingenuous. The Moscow city government 
maintains a large number of subsidies for consumer goods and services that 
could have been eliminated if Mr. Luzhkov had truly been concerned about the 
city's financial situation. Telephone service in Moscow is heavily subsidized 
by the city government, and riders on the sprawling Moscow subway still pay 
almost nothing.

A "good" municipal government would have bolstered its financial position by 
cutting subsidies for these sorts of services, but Mr. Luzhkov chose instead 
to accumulate a crippling foreign debt. Now he is finally paying the price of 
what can only be described as "bad management."

Cambridge, Mass. 


Jamestown Foundation Monitor
May 19, 1999

Yesterday, an analysis by the Interfax news agency stated that President
Boris Yeltsin really wanted Viktor Chernomyrdin, his special envoy on the
Balkans crisis and a former prime minister, to again head the Russian
cabinet. In this "version," the Kremlin was deliberately trying to undermine
Stepashin's chances for confirmation so that it could put forward Nikolai
Aksenenko, the railroads minister who was named a first deputy prime
minister last week. The Kremlin knows, however, that Aksenenko, widely
reported to be an ally of the tycoon Boris Berezovsky, would never pass the
Duma. This, according to the account, is what the Kremlin really wanted:
After Aksenenko was rejected, the Kremlin would put forward Chernomyrdin
(Russian agencies, May 18).

It is likely that this report was an attempt by those opposed to
Berezovsky's ambitions to prevent him from exerting control over the new
cabinet or stacking it with people of his choice. It is also possible that
some members of Yeltsin's inner circle were hoping to scuttle the Stepashin
nomination and put Aksenenko or Chernomyrdin in as cabinet chief. Some
Russian media have reported that a fierce under-the-carpet battle is raging
between the "clan" headed by Berezovsky and that headed by Anatoly Chubais
over nominations both to the new cabinet and within the Kremlin
administration (see the Monitor, May 18). In previous such battles,
Berezovsky backed Chernomyrdin, and that might be the case this time. In any
event, the rumors, apparently, forced Berezovsky to state publicly that he
was not trying to shape the new cabinet, calling such reports a
"provocation" by his enemies--meaning, presumably, the communists and their
allies in Russia's special services.

Meanwhile, Russian media reported today that Berezovsky--whose business
empire was the target of criminal investigations earlier this year,
reportedly with the tacit approval of then Prime Minister Yevgeny
Primakov--has been working with Lev Chorny--head of the Trans World Group,
the metals company which reportedly controls a significant chunk of Russia's
aluminum industry--to put people into high posts and create a political bloc
in the next Duma. The paper, citing information from the Russian Interior
Ministry's main anti-organized crime directorate, claimed that Chorny had
promised Berezovsky US$100 million to organize a parliamentary faction which
"would represent the interests of the former oligarchs," and was already
paying each of Berezovsky's media holdings, which are in bad financial
shape, US$500,000 a month. The report also said that the two wanted to get
Dmitri Bosov, the head of Trans World's Moscow office, into the new cabinet,
and that Bosov had been introduced to Tatyana Dyachenko, Yeltsin's daughter
and image adviser, and former Kremlin chief of staff Valentin Yumashev, in
France. The paper quoted both Chorny and Bosov as denying these reports
categorically (Kommersant, May 19).

Trans World reportedly controls the Krasnoyarsk aluminum factory in
partnership with Anatoly Bykov, the main enemy of Krasnoyarsk Governor
Aleksandr Lebed. Bykov has recently been investigated by the Interior
Ministry, which has launched fifty-eight criminal cases involving
Krasnoyarsk businesses. It should be noted that the Kommersant report
concerning the alleged Berezovsky-Trans World ties was based on Interior
Ministry information, and that Sergei Stepashin, until today, was serving as
Russia's interior minister.



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