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

Johnson's Russia List
#3296
20 May 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Vladimir Brovkin: Wishful Thinking about Russia? Critique of Ivan
Szegvari 
"Who is to Blame for Russia's Economic Woes?"/3292.
2. Sovetskaya Rossiya: Yu. Kachanovskiy, The Main Front; Authorities
Embraced 
By Criminal Element. (Increasing Criminalization of Russia Reported)] 

*******

From: vbrovkin@american.edu (Vladimir Brovkin)
Date: Wed, 19 May 1999 
Subject: Wishful Thinking about Russia? 

Dear David:
I have read today Ivan Szegvari's article "Who Is to Blame for Russia's
Economic Woes?" which you reprinted from Transition. I was so excited by
its arguments that I wrote a critique immediately. I wonder if you would
find it of interest to your readers. I have also forwarded a copy to
Richard Hirschler of Transition. 


Wishful Thinking about Russia? Critique of Ivan Szegvari "Who is to Blame
for Russia's Economic Woes?"
By Vladimir Brovkin
Research Associate Professor at the School of International Service at
American University
Director of United Research Centers on Organized Crime in Eurasia Project
(URECORCE)
Executive Editor of Demokratizatsiya The Journal of Post-Soviet
Democratization. 
Executive Editor of: Organized Crime Watch: NIS
And NATO Research Fellow for 1997-1999.

In his recently published article Ivan Szegvari has formulated eight widely
held propositions, which he goes on to, disprove. What I would like to do
is argue for the validity of those propositions and challenge the arguments
the author has presented.

The first: Market reforms failed in Russia. Let's us leave this
proposition to the end.

The second: 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.

Essentially the author has nothing to say on this score except that the
so-called transition economies tried to combine socialism and capitalism.
And the author admits "Policy-makers 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."

The point of course is that some people know a lot about culture,
traditions and customs and do take them all that into account in
structuring policy. What was wrong then in the approach of the Western
institutions to Russia, since in fact these institutions did not take
Russia's culture or history into account.

First and foremost is the fact that culture, customs and traditions do
matter a great deal. Words used by the participants in the process have
different connotations in a discourse. The very words capitalism,
socialism, accountability, responsibility and integrity have different
connotations in different countries. In Russia the legacy of the Soviet
past is omnipresent in all respects. Attitudes to property, law,
government, political parties, and order were misunderstood by Western
counterparts sand assumed to be similar as in the West or similar to other
lumped together "transition economies."

Property in Russia in fact meant physical possession. The state and the
so-called law enforcement have up to this day not embraced the notion that
their duty is to defend property rights in a court of law. Property can be
alienated by an ukaz of the President or a local despot or a bribed
official. Capitalism cannot be without equal property rights for all.

Attitude to authority. Because of Soviet experience, a widely held attitude
to authority in Russia has been and still is disdain and disrespect
combined with fear. It is a virtue to cheat the state. The immediate
consequence is mass evasion of taxes -- underestimated by Western
institutions and experts who have been advising on transition to capitalism.

The culture of deceit: Soviet economy functioned by deceit. Double
accounting, barter arrangements, falsification of statistical data and
revenue were a norm. This deeply held trait has remained intact and has
been perfected in recent years.

The Western donor institutions dispensed millions and millions of dollars
without adequate accounting procedures. They relied and still rely on
central government institutions. They lack understanding on the inner
working of Russian bureaucracy and they still lack built in mechanism of
verification and control. All this is because they lack the understanding
of Russia's culture, traditions and Soviet heritage.

Three. The International Monetary Fund (IMF) imposed its narrow-minded,
uniform policies on Russia, an approach doomed to failure from day one.
Indeed it had In disproving this statement the author argues that it was
the G-7 not the IMF that made key decisions. The key is in the author's
assertion that "the idea that the West in conjunction with a handful of
Russian reformers imposed a skewed policy package on Russia that led to
disastrous result does not have merit" We shall try to prove that it does.

All the author has to say on this point is that Russia had a poor record of
implementing Western recommendations. This has been the standard
explanation given by Jeffrey Sachs, Aslund and their friends Yegor Gaidar
and Anatoliy Chubais. If only the reforms had been implemented, then
everything would have been all right. 

No one can dispute the fact that in January 1992 Russian prices were
"liberalized." Yegor Gaidar pursued this policy on the advice of official
advisors of the Russian government Sacks and Aslund. Their idea was that
free prices would generate competitive prices, thus establishing a
correlation between what things cost to produce and what the consumers can
afford to pay. It was a so-called "shock therapy" that was claimed to have
worked in Poland. No one can dispute the fact that the shock therapy was a
Western product imposed on Russia by Western advisors and their Russian
students, the so-called "young reformers." 

What happened in real life is well known. Existing monopolies hiked up the
prices and a regime of no competition persisted. Domestic production of
food plummeted and imports rose. Low tariffs on food imports stimulated
more imports and Russian domestic production of food and textiles was
decimated. Soviet monopolies seized the "market" and destroyed other
Soviet monopolies by imports. That was supposed to be a "market reform."

But that is not the worst in the Western advisors' imposed approach. What
was worse for Russian economy was that the Gaydar-Chubais-Chernomyrdin
governments pursued a policy of the so-called macro-economic stabilization,
which meant that the most important economic indicator for them was the
dollar-ruble exchange rate. Since most of the economy was calculated in
dollars, the exchange rate was perceived as a measure of confidence in the
economy. Stable exchange rate guaranteed investments or so it was thought.
In real life, artificially maintained stable exchange rate meant that
imported flood domestic markets domestic production kept declining. As a
result, the tax revenue kept declining too and the economy as a whole kept
shrinking. In other words, the success of so-called reform -- stable
exchange rate of the ruble -- meant shrinking of the real economy as a
direct consequence of the policy recommended by the Western advisors. But
even that is not the worst.

The worst was that the so-called reformist governments up to and including
Kirienko had to cover up the ever-bigger hole in the budget from the
collapsing tax base. As of 1993 on, they invented and used GKOs -- Short
Term Government Treasure Bills -- as a stopgap measure. The government
started to finance budget deficit by selling the GKOs at and per annum rate
the investors perceived as advantageous. The sale of GKOs was not a
measure of financial stability and transition to markets but on the
contrary, a measure covering up the failure of transition to market,
covering up the de-industrialization of the country. The GKOs pyramid
scheme set Russia on a course of disaster by relying more and more on
foreign borrowing which was not invested into infrastructure, not invested
in production, but to cover up the growing deficits, to make it look like
Russia was moving to a market economy. It was a virtual economy, as one
observer put it. It was an illusion for Western consumption.

The so-called reformers were boasting all over the world that now Russia
had a securities market. This was presented as proof that Russia had a
market economy. When Mr. Gaidar came to Harvard in the fall of 1996
claiming that Russia had just successfully launched Eurobonds. I criticized
Mr. Gaidar for his misguided confidence that market reforms took root in
Russia. At about that time that Mr. Aslund and others began writing books
about successes in Russia's transition to a market economy. They claimed
that Russia had millions of property owners and a flourishing securities
market, and solid private enterprise. In reality, it was a mirage. Private
enterprise was conditional on patronage, connections and bribes; securities
markets were a sham to cover up the budget deficits, and stable currency
was a show off piece for foreign consumption to attract more Western buyers
of GKOs to finance the ever growing hole in the budget. 

Fourth: Privatization (mainly the voucher scheme and the loans-for-shares
schemes) was ill conceived and unsuccessful in Russia. Indeed it was. The
author asserts that "voucher privatization was inevitable and that the
outcome was a success." It is only in the "loans for shares" schemes, that
the author admits some problems. For the author, it was only a matter of
recognizing the reality shaped by 1992 - which is the de-facto possession
of enterprises by managers that was the essence of voucher privatization. 

In fact there was nothing inevitable about the way voucher privatization
was carried out. The publicly announced intention was to create a class of
owners in Russia. That goal has not been reached. Firstly, because the
holders of vouchers received nothing for them and secondly because the
managers who bought up the vouchers and became owners of the enterprises
without legitimacy. Precisely because there is a widely held view in
society that voucher privatization was a sham, that it lacks legitimacy and
a recognition that property is real, property is not defensible in the
court of law. The so-called reformers mishandled privatization. As a
consequence, the managers fear for the permanency of their "ownership." In
fact they realize that what they grabbed can be reconsidered. They know
that their ownership is no more than a temporary possession that may be
revised. That is why they try to squeeze as much as possible today and move
it overseas. Lack of domestic investment in Russia, and an appalling
capital flight is a direct consequence of voucher privatization and of
Western advice.

The loans for shares scheme was even worse. It was not just as matter of a
lack of transparency and non-admittance of Western participants to
auctions. The loans for shares was a deal between Yeltsyn's regime and a
few chosen individuals to transfer huge state assets into the hands of some
companies in exchange for financial support in elections. Insider trading
at its worst -- was the name of the game by Western standards. Oneksimbank
loaned money to the state and took shares of a certain plant as collateral.
When the fixed auction came, collateral became property at favorable rates.

The consequences of this corrupt practice was not the establishment of a
few oligarchy -- of powerful property owners as is customarily believed.
The so-called oligarchs know very well that they are no more than
provisional custodians of the property they seized. At any time a new Prime
minister or a new President can review the terms by which they had obtained
the property and revise it. Therefore it is not property. It is a temporary
possession as long as the oligarch is in favor with those in power. Like
in the 18th century, the Tsar can confiscate all the estates and property
of the landlord and exile him to Siberia. And no court would be able to
defend the so -called property rights. 

Fifth: The sequencing of reforms the West proposed in Russia, including the
precipitate liberalization of capital transactions, was ill conceived and
ill advised. Indeed it was. 

The author is trying to debunk this proposition by defending the Western
sponsored policies in GKO borrowing. Specifically, the author argues that
positive things happened, such as that the access of the Western investors
to GKO market was liberalized. That means that the Western investors were
encouraged to buy Russian GKOs. And that is seen as a good thing. Why?
Because the author argues Western access was supposed to lower Russian
interest rates increase openness of Russian capital markets, thus imposing
self-discipline. The author argues that this Western strategy had worked
choosing as proof that the rate of GKOs yields was only 18 per cent in
October 1997.

Let us pause for a minute to respond to this reasoning before we address
the author's explanation of what went wrong later. The author's argument is
an excellent illustration of what was wrong with Western approach to
Russian economy. Even now when one would hope things have become clearer,
the author still, defends the approach which has failed so manifestly. So
what was wrong?

Liberalizing Western access to GKO market did not lead to lower interest
rates. On the contrary, it fueled speculative rush to make a quick buck on
GKO market because the Western investors were buying ever more GKOs. They
were buying them because Russia was paying incredible 20 and up to 60 per
cent interest rates. So, instead of stabilizing Russian "emerging market"
Western investors in their rush to make money fast in Russia were fueling
destruction of Russian economy and pushing it to an inevitable crash.

There was no lending to enterprise sector. All the money that was coming in
from Western buyers of the GKOs was absorbed like by a vacuum cleaner by
the Russian banks. These were uninterested with such rates of return in
investment in production but in buying more GKOs and borrowing money in the
West to buy even more. 
In June 1998 I talked to brokers specializing in emerging markets in New
York in one very large, huge investment firm. I asked them about GKOs and
they said that they were advising their clients, Western investors to buy
Russian GKOs. I asked them why and they gave as a reason the fact that the
GKOs were paying 60% per annum. I tried to explain to them what was obvious
as I thought to everyone: that Russian economy was collapsing, that the
government could not afford paying those rates and that investors would
loose their money sooner or later. That did nit matter. What mattered was
that then and there one could make money fast.

Let us proceed with the author's reasoning. Essentially, the reformers did
nothing wrong, according to the author. It was the Asian crisis and the
fall in commodity prices, that rocked Russian economy. The Russian
reformers' government, according to the author, renewed and strengthened
their commitment to the ruble." To shore up the weakened investor
confidence they fully liberalized the exit mechanism for foreign GKO
holders. 

In fact what the so-called reformers' government did was create conditions
for more borrowing from Western investors. They were digging themselves
deeper into trouble and that is presented as sound economic policy. Stable
ruble was the cause of the problem, despite the author's misguided praise
for that policy. Stable ruble meant dependence on more GKO sales to finance
the budget deficit. Stable ruble for the sake of investors' confidence
meant Russia's sinking into ever-larger deficits and ever-larger foreign
debt in conditions of falling production and falling investment in the
production sector.

The author sees the he calls the real reason for the trouble in a shattered
investor confidence caused by Yeltsin's sacking of the Chernomyrdin's
cabinet. How can one be so blind as not to see that continued policies of
Chubais-Chernomyrdin -- the so-called "dream team" of market reformers
could have led only to one thing: imminent bursting of the bubble. There
was no way any country could sustain paying 60% on its Treasury bills amid
collapsing domestic production.

When Kirienko visited Washington last fall, I asked him at a public Forum:
"Why did you not stop the GKO pyramid scheme in June 1998 rather than
increasing interest rates to 120%?" Kirienko mused and said: "That is a
good question." His answer is remarkable showing the mentality and the
exit strategy of the so-called market reformers in Russia. He said that he
realized that the GKO was a pyramid ready to consume them. As he put it,
"we were up to our neck and little more and we would sink." The strategy
for getting out of the crisis Kirienko saw in using the money from the IMF
loan to shore up the ruble. That is exactly what he did and as a result,
the inevitable crash came and billions were wasted. 

His answer to my question and the record of his policy demonstrates that
the reformers had gotten used to relying on borrowed money to solve their
problems. Their stated policy was to keep the course of the so-called
"financial stabilization" which meant maintaining artificial exchange rate
with the dollar for the sake of producing an impression of stability on
Western investor so that he would buy more GKOs and so that the government
could pay its bills on borrowed Western money. That means the government
was not pursuing the policy of restructuring industry, or of market reform.
It was engaged in deceit and speculation calling it macro-economic
stabilization, blessed by the IMF and the huge firms specializing on
"emerging markets." 

Sixth: Institutional reforms are by their nature long-term tasks, something
that should have been taken into account up-front in designing policy. 

This broad question the author narrows down to the problem of bankruptcy
laws. He argues that Russia had the necessary legislature for bankruptcy,
and that bankruptcy is a "market selection mechanism" and that the only
problem was the political will of the authorities to implement this "market
selection mechanism." The implication is that the non-market forces were
resisting implementation of market reforms.

The reasoning of the author once again demonstrates his narrow and formal
approach to Russian conditions. In deed on the face of it by measurements
of international financial organizations, bankruptcy is a good thing. 
So let us push Russia towards having this wonderful tool. The author claims
that legislature for that was already in place and just a little bit of
political will was needed to get things rolling again. Everything is wrong
with this reasoning. 

First of all, there is not adequate bankruptcy law in Russia. More
important is the fact that bankruptcy in Russia is not a regulatory
"market selection mechanism", as the author prefers to see it. Bankruptcy
in Russia is often used as a tool in the hands of organized crime to obtain
possession of enterprises, precisely because there are no markets or
competition. How is that done? Very simple. Suppose there is a potentially
profit-making enterprise. Organized Crime group wants to have it and have
it cheap. The easiest way is to bribe local officials into suffocating this
enterprise by taxes and regulations for a fee, thus pushing it into
bankruptcy, thus obtaining the enterprise for nothing. This means that
everything the author asserts is misplaced: bankruptcy is not a market
selection mechanism, there is no legislative framework and if there is
political will to interfere, it is often to protect assets of the chosen
few, either by forestalling bankruptcy or by promoting it. 

The larger question is of course about institutions. Surely they cannot be
changed overnight. Surely institutions must naturally grow out of the
country's history rather than being imposed by the arrogant few claiming to
have superior knowledge. New Institutions can only then work when they are
attuned to the existing practices of a country. Otherwise they would be
absorbed into the existing cultural practices and rendered useless. 

Seventh: Lack of liquidity in the system was the main problem underlying
the non-payment culture and the prevalence of non-monetary transactions
(barter) in Russia. Here the author praises confidence in money, exchange
rates, etc. as the key to success. 

But of course. Nobody denies that. However this answer does not even come
close to addressing the problem of 
barter and non-payments in Russian economy. One reason we have already
touched upon. Barter was a direct consequence of GKO interest rates. To
transact in money was expensive; as a result, barter took the place of
money. Secondly, taxes were too high. Barter makes it easy to avoid taxes.
Third: Tradition of duping the state from Soviet times played a role in
reverting to barter as a way to beat the system and to survive.

Eighth: Russia has made very little progress in its transition to a
market-based democratic society. The author simply states that Russia has
already built a market economy and a democratic society. We've heard it
before from Messieurs Aslund and Sacks and Gaidar and Chubais. Where is the
beef? How can you back this naked assertion?

Let us return to the first proposition: Market reforms failed in Russia: 

Indeed they have. If by markets we understand a place where peasants are
selling potatoes grown on tiny plots of land as in the Middle Ages, than
yes, Russia has the market. These kinds of markets have existed in Russia
for centuries and there was nothing to transition to. If my market economy
we understand a modern system of private enterprise defensible in a court
of law, equal for all citizens in an economy based on modern market
mechanisms, controlled by the people through elected representatives who
are accountable to the people in a set of institutions, than Russia not
only has not made progress to that kind of a system but in some respects
has degenerated further, even in comparison with the Soviet period.

Briefly the problem with Russia's so-called capitalism is that large
enterprises of the Soviet era have remained mostly inefficient and
unproductive, loss making as some economists assert. The ruling class of
Russia is made up of entrepreneurs who have come out either of the criminal
world or of the corrupt and rotten communist nomenklatura. The populace has
been taught to dislike private property, to distrust the government and to
expect social services.

The problems are compounded by the fact that governors of eighty-nine
entities that make up the Russian Federation regard large enterprise in
their domain as theirs, regardless of their productivity. They join in a
united front with the managers in tax evasion, duping together the Federal
State. The governors attack the managers the so-called owners with all
kinds of administrative regulations, to get control over their enterprises
as sources of revenue regardless of efficiently. They regard these
enterprises the way a peasant regards his plot of land. He can not move it.
He has to live with it. That is the only thing he has. So he would not
count his own labor as long as he can survive. Governors prevent bankruptcy
at their enterprise, prevent transparency, and prevent foreign investment,
because they may have less control in the end.
Instead of a capitalist Russia, the so-called market reforms have created a
medieval Russia. The governors are kingmakers. They have the upper house
of parliament in their hands to block any measure curtailing their power.
They control the electoral and the taxing mechanisms in their domain. Some
of them have their own customs policy and export policy. Federal laws and
regulations are ignored. In fact it is legitimate to ask: 

Is there a Russia as one country with one set of laws and one government
for all? There certainly is not any democracy or capitalism in the modern
sense of the word.

Property is just as tenuous as in Soviet times. It can be revoked at a
moment's notice by fiat not the law as in the 18th century.

Today, Russian government is more unstable than at any time since the
endless coups d'etat in the 18th century. Use of public office for
personal gain is certainly more not less widespread than under the Soviets.
Organized crime controls certain regions of the country and certain
segments of the economy. Women are underpaid and sexual harassment is worse
than under the soviets. The state is consistently failing to provide even
the most basic services to its populace and is failing to collect any
taxes. The political system is inherently destabilizing and unworkable. The
people are as deprived of the rights against arbitrariness as under the
Soviets. How can anyone in his right mind liken this reality to market
reforms and democracy? Russia is in its deepest crisis in decades:
spiritual, economic, and political. There is no quick fix. 

The first thing the West should do is to stop pretending that everything is
fine, stop looking for a quick fix, acknowledge the extent of its misguided
policies and start a serious consideration of what could be done to help
Russia help itself. 


******

Increasing Criminalization of Russia Reported 

Sovetskaya Rossiya
13 May 1999
[translation for personal use only]
Article by Professor Yu. Kachanovskiy: "The Main Front; Authorities 
Embraced By Criminal Element" 

The main front of the Third World War is inside of Russia.

Utilizing the fifth column (its paid agents and agents of influence), 
the enemy has been waging an informational offensive for many years now. 

It has managed to win the leading political positions within Russia, to 
undermine our economy, to undermine the state and the system of law 
enforcement. 

Although our potential has been undermined to a significant 
degree, we can still go on the counter-offensive and defend the country. 

For this we need: 

First of all, a unified political will of the people and their 
leaders; 

Secondly, we must master the methods of the Third World War. We 
must understand that the main thing in this war is not bombs, and not 
even highly accurate missiles. The main thing is the informational, 
political, ideological and economic struggle. We must restore law and 
order in our own house. Without this, we are doomed. 

On 10 March 1999, the Government of the RF [Russian Federation] 
adopted Decree No 270 and ratified the "Federal Target Program for 
Intensifying the Struggle Against Crime for the Years 1999-2000." This 
document states: "...despite the efforts which have been undertaken, 
crime in Russia is ever more taking on the character of a real threat to 
the country's national security." 

What is the reason for this threat? Along with Russian reasons, 
the government document speaks also of foreign ones--about the "goal- 
oriented activity of trans-national and domestic criminal associations, 
certain foreign special services, political and other forces--primarily 
of extremist directionality--in weakening and disintegrating Russia, and 
in utilizing the territory, resource potential and citizens of the 
Russian Federation in their own interests." 

Thus, criminalization of Russia is one of the fronts of the Third 
World War. The criminal element, with its international ties, controls 
40 percent of the production in our country and 60 percent of the 
banking and commercial structures. The government document states that 
there is reason to predict a deterioration of the situation: Criminal 
groups will establish control over entire sectors of the economy, the 
criminal element will seize key positions in state power, inter-ethnic 
conflicts will be incited and the territory of the country will be 
divided up. (Same source). 

If we do not take the counter-offensive on this front, Russia will 
be doomed. 

The decisive struggle against crime has first priority importance 
also because, on this front, we will be able to forge a unified 
political will of the peoples and the leaders. 

Minister of Internal Affairs Stepashin, who in recent days also 
became First Prime-Minister, and on 12 May--Acting Prime Minister, 
stated: "For 1999, we are specifying one task--to make a strict and 
decisive breakthrough in the situation with the fight against 
crime...". 

Sergey Vadimovich! Allow us to give you some advice: Do not toss 
about empty words. Under Yeltsin's leadership, and not without your 
participation, conditions have been created which rule out an effective 
struggle against crime. You state that the rate of solving crimes 
increased in 1998. But, on the other hand, as noted at the MVD 
[Ministry of Internal Affairs] collegium meeting, in 1998 crime also 
increased by 7.7 percent. Out of 2,582,000 crimes (for 1998), 60 
percent were grave or especially grave crimes. 

Prior to the start of the liberal "reforms," the number of 
intentional murders in Russia comprised around 12,000 per year. Last 
year, 1998, this number was 30,000. Previously, the USA was considered 
to be the most crime-ridden of the major countries, but today it is 
Russia. Today in the USA there are 8.2 intentional murders a year per 
100,000 members of the population, while in Russia there are 19.9--i.e., 
almost 2.5 times more! Russia is now first in the world in the number 
of intentional murders... 

According to the MVD statistics, in 1990 there were 785 organized 
criminal groups in Russia, while at the present time there are around 
10,000 of them. 

The liberals say: "We are building a legal state." But that is 
empty prattle! In fact, they have built a criminal state. 
A bomb exploded at a market in Vladikavkaz. It was a sack of 
"potatoes" with 7 kilograms of explosives, nails, bolts, and pieces of 
thick wire. It had been placed in a crowded area, so that there would 
be as many victims as possible--women, men, children. Dozens were 
killed, and over a hundred seriously injured. 

This was not a random episode--it is a regular occurrence under 
the regime of the liberals. 

There was an explosion on a trolley in Moscow, an explosion in the 
Moscow metro, an explosion in the Leningrad metro, an explosion in an 
apartment building in Kaspiysk (at night, when everyone was asleep), an 
explosion at Kotlyakovskiy Cemetery, an explosion at the train station 
in Pyatigorsk. Where will the next one be? 

Why did these things not happen under the Soviet socialist regime? 

There was one case in 1977: An explosion in the Moscow metro, organized 
by Zatikyan's group. But the USSR Committee on State Security quickly 
solved this crime. Its organizers were sentenced and executed. They 
had planned an explosion at the Kursk train station, but the state 
disposed of the killers and protected the people. 

Sergey Vadimovich! How do you intend to make a "strict and 
decisive breakthrough in the situation?" How will you increase the rate 
of solving crimes? It is a necessary matter, but it will not accomplish 
anything by itself. What we will have, I believe, will be a 
"competition"--the criminals will increase the crime rate... 

In order to take the counter-offensive on the front of the fight 
against crime, we need principally new approaches on an entire series of 
problems: 

On combining socio-economic, informational-educational, 
preventative and punitive measures; 

On the death penalty; 

On the Constitution of the Russian Federation and protection of 
human rights; 

On trial by jury; 

On legality in Russia. 

And we will not solve a single one of these problems as long as 
Yeltsin is in the Kremlin! 

Article 2 of the Constitution of the Russian Federation states: 
"Man, his rights and freedoms, constitute the highest value. 

Recognition, adherence and protection of rights of man and citizen are 
the obligation of the state." Thus, the state is obligated to protect 
the rights of man. The regime of the liberal-reformers headed by 
Yeltsin has negated this article of the Constitution. The criminal 
state which has been created does not protect man--it is on the side of 
the criminals. I am not reproaching the officers, sergeants and rank- 
and-file members of the MVD, the FSB [Federal Security Service], the 
criminal-executive system, the judges and the prosecutors. Under the 
most difficult conditions, they are fulfilling their duty, holding back 
criminal lawlessness as best they can. But presidential authority, to 
which all the power structures are subordinated, ultimately negates all 
their efforts. 

"The President's Notes." This is a wonderful publication. It 
contains many photographs. There is Boris Nikolayevich himself, his 
family, his inner circle, associates and assistants. On pages 288-289, 
next to Yeltsin, is Shamil Tarpishchev. Who is he? The President's 
trainer and tennis partner. Yeltsin calls him his friend (page 270). 

On page 410: "Tarpishchev, Shamil Anvyarovich... advisor to the 
President of the RF on physical culture and sports. From 1993--chairman 
of the Coordinating Committee on Physical Culture and Sports under the 
President of the Russian Federation." 

Let us open another book--"Russian Crime. Major Criminal Groups. 
Modern Killers." (A. Maksimov, Moscow, 1998, pp 35-36). "The majority 
of the most prominent criminal scandals of 1996 were in one way or 
another associated with the National Sports Fund and its former leader, 
ex-Minister of Physical Culture and Sports Shamil Tarpishchev..." 

Perhaps it was an accident. Boris Nikolayevich did not get to the 
bottom of the matter. But... criminal "accidents" around the Yeltsin 
family seem to occur one after another. We open the book entitled, 
"Criminal World of Russia." (M. Dikselius, A. Konstantinov. Moscow, 
1995, p 127). "In the Summer of 1993, President Yeltsin signed a 
document which allowed Otari Kvantrishvili to organize a sports center 
of the joint-stock company type... The sports center was fully exempted 
from payment of taxes and custums fees..." This allowed it to make huge 
profits on the import of tobacco and alcohol--at the expense of the 
budget, at the expense of the doctors, teachers and officers who were 
not receiving their salaries. 

Who is this man, to whom Yeltsin gave the opportunity to amass big 
money at budget expense? "He (Otari Kvantrishvili--Yu.K.) could not 
aspire to the status of crime boss, because in 1968 he was convicted of 
rape (according to the laws of thieves, that is an inadmissable crime). 

But, from an ordinary Moscow thief, he turned into a sort of 
representative, into a person who maintains contacts with the apex of 
society." (Same source). 

Despite the kindly attitude of the President, poor Otari was 
unlucky: Like his brother Amiran, he was killed in a mafia shoot- 
out. 

The man closest to the Yeltsin family was Boris Abramovich 
Berezovskiy. 

The newspaper, The Moscow Times (January 12, 1999, p 15), 
published photos of our oligarchs, headed by Berezovskiy. The caption 
read: "Russia's robber capitalists" Translation: "Capitalists are the 
plunderers of Russia." 

An order was issued for Berezovskiy's arrest in connection with 
the misappropriation and unlawful export of capital from the RF. Boris 
Abramovich returned from Paris to Moscow, announced that he is clean 
before the law, and checked in to the TsKB [Central Clinical Hospital]. 
We will not be hasty with in conclusions--let the investigators sort out 
the matter. However, there are some indisputable facts. Berezovskiy 
controls the profitable company, Sibneft. This company is not paying 
what it owes to the Pension Fund. The government newspaper announces: 
"...Sibneft will continue financing its expenditures at the expense of 
money taken away from the elderly. Not in a single one of his angry 
rebuffs regarding the 'organized persecution' does Boris Abramovich say 
a word about his debts to the most destitute category of the 
population." 

And so, crime has surrounded the Yeltsin family from all sides. 

But perhaps the family is not guilty of anything? It is, so to speak, a 
victim of circumstance? In order to sort out this question, let us 
clarify what kind of "living expenses" the Yeltsin family has. 

The grandson of the "publicly elected official" and son of madame 
advisor, Tatyana Dyachenko--Boris Yeltsin Jr., studies at Winchester 
College (England). A year of tuition there costs 14,544 pounds 
sterling. The exchange rate as of 23 April of this year was 1 pound 
sterling = 40 rubles (R). Let us add this up. Every month, they must 
pay R48,500 for Borya. But what lawful earnings do his grandfather and 
mother have? According to Edict No 309, the salary of the President of 
the RF is R10,000 a month. That of his advisor is no more than R8,000. 
And so: Together, they receive R18,000 a month, yet for Borya alone they 
pay R48,000... Where do they get the money? What "good uncle" is 
helping them? 

On 11 March of this year, State Duma Deputy Yu. Chunkov asked the 
"head fighter against corruption" Stepashin the following 
questions: 

For what funds did Tatyana Dyachenko purchase the very expensive 
architectural monument of Europe--the German castle 
Leitenshlessel? 

For what funds did the Yeltsin family buy the luxurious villa, 
Chateau de la Garon, on the French Riviera? 

For what funds was a deluxe stable built at the President's 
residence, Gorky-9, where 40 thoroughbred horses are boarded? 

The question of payment for Borya Jr.'s tuition was also 
posed. 
(Cf: "Where Does the 'Loot' Come From?" Pravda, 1999, No 
36). 

Boris Nikolayevich says in his speeches: "We are living rather 
poorly." What depends on whom we are talking about!.. 
During all the years of being in power, Yeltsin has purposefully 
undermined the agencies of state security and the law enforcement 
system. 

On 23 August 1991, by Gorbachev's edict, the liberal Vadim Bakatin 
was appointed chairman of the USSR KGB [Committee on State Security]. 
Yeltsin gave him the assignment: To "break up" the Committee on State 
Security. In his book entitled, "Ridding Ourselves of the KGB," Bakatin 
writes: "The organization which I was to head up in order to dismantle." 
(M., 1992, pp 22-25). Yeltsin oversaw this process of continuous 
reorganizations: The MB [Ministry of Security], FSK [Federal 
Counterintelligence Service], and FSB. In the cadre re-shuffling, the 
directors changed every year. Professionals of the highest class were 
driven out. And so, the result of "ridding themselves of the KGB" was 
evident at the market in Vladikavkaz... 

Recently, Mr. Putin, in accordance with Yeltsin's edicts, 
conducted one more "reorganization"--several dozen professionals from 
the central apparatus of the FSB were dismissed. 

In the MVD, Yeltsin also performed cadre re-shuffling on a regular 
basis. Who is Minister Stepashin? A professional? The topic of his 
candidate's dissertation was "Party Leadership of Fire Prevention 
Formations." His merits: "...he spoke out in favor of ratification of 
the Belovezhskiy Agreements. And he repeatedly demonstrated his 
devotion to the President. In the office of director of the FSK, 
Stepashin performed a feat which became property of the public: Without 
the knowledge of the army commanders, his associates recruited 
volunteers for Chechnya. And when the latter were taken as prisoners of 
war, he disavowed them... Formally, Stepashin is a doctor of juridical 
sciences. Yet jurists do not consider him a prominent specialist in his 
field. ("Who's Who In Russia." M., 1998, p 617). Thus, the 
"professionalism" of Sergey Vadimovich consists of his devotion to 
Yeltsin. At first, the "guarantor of the constitution" appoints 
Stepashin director of the Federal Counterintelligence Service. In this 
post, Stepashin undermines operations on freeing the hostages seized by 
Chechen terrorists. Then Yeltsin appoints him Minister of Justice, and 
then--Minister of Internal Affairs. And now, for his "outstanding 
achievements," Stepashin is already acting Prime Minister. It is quite 
probable that "his Majesty" will try to seat the specialist on party 
work among firemen in the Prime Minister's chair! 

When Stepankov was appointed Procurator General of Russia, Yeltsin 
announced: Now we have "our own" prosecutor. Yeltsin needs people in 
the law enforcement agencies who are devoted to him personally and to 
his family. Everything else, pardon the expression, can go to hell. 
This is specifically why Yeltsin tried three times to impose Ilyushenko 
to the office of General Prosecutor--a man who later found himself on 
the defendant's bench, accused of mercenary crimes. 

Now, Yeltsin has staged the disintegration of the General 
Procuracy. Rossiyskaya Gazeta puslished the message of the President of 
the Federation Council (1999, 22 April) in which he demanded Skuratov's 
dismissal. The message does not contain a single conclusion or argument 
on the essence of the question. The Federation Council voted against 
it. 

In a normal (legal) state, if the President believes that the 
General Prosecutor is unsuitable to hold his office, then he acts 
strictly in accordance with the Constitution. But in our country? 
Having negated Article 129, Section 2 of the Constitution, Yeltsin 
removed Skuratov from his duties. At 2 a.m., they got Deputy Prosecutor 
of Moscow Rosinskiy out of bed, brought him to the President's 
Administration, and forced him to "file a criminal case" against 
Skuratov. Two days later, on 4 April, the press service of the Moscow 
procuracy disseminated the statement of Sergey Gerasimov (the city's 
prosecutor), which emphasized that the procuracy did not and does not 
have any materials in this case. 

Then they tried to put pressure on the Main Military Procuracy, 
but it also came to the conclusion that there were no grounds for filing 
a criminal case against Skuratov. 

Gentlemen liberals! I would like to hear the answer to the 
following question: So, what do we have--a lawful state or arbitrary 
will of "His Majesty," who tramples the Constitution and the law as he 
sees fit? 

Yeltsin is destroying the General Procuracy because it tried to 
crack down on the criminals associated with his family. 

In the nearest days, the State Duma, in accordance with Article 93 
of the Constitution of the RF, must adopt a decree on the question of 
removing Yeltsin from his duties. Impeachment. Voices are being heard: 

We should not do this, or, they say, "stability" will be undermined. 
Unfortunately, Luzhkov, whom I consider to be a smart politician, spoke 
out in this vein. However, evidently Yuriy Mikhaylovich became so 
carried away with the conditions of the moment that he sunk to political 
intrigues!... 

Yuriy Mikhaylovich! Have you forgotten about the terrorist acts 
in Moscow? Let us remind you. On 11 June 1996, there was an explosion 
in the metro between the Tulskaya and Nagatinskaya stations. There were 
4 killed and 13 wounded. Well, and then there was the trolley, and 
Kotlyakovskiy cemetery... Yuriy Mikhaylovich! Can it be that you do 
not understand that this is the result of Yeltsin's destruction of state 
security? Today, terrorist acts threaten Moscow and other cities. 
Consequently, we must immediately begin strengthening the agencies of 
state security. 

Alas, as long as Yeltsin is in the Kremlin, this problem cannot be 
resolved. 

********