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Johnson's Russia List
 

 

May 22, 1999    
This Date's Issues: 3299 3300   

Johnson's Russia List
#3300
22 May 1999
davidjohnson@erols.com

[Note from David Johnson:
What does "#3300" mean? The fourth year of JRL, the 300th message
this year. Yes, that's a lot.
1. Reuters: Russian regional leaders form new party.
2. Washington Post: Robert Kaiser, Letter From Russia. In the Throes Of 
an Identity Crisis.

3. Stephan De Spiegeleire: Breslauer and deterrence.
4. Marcus Warren: revisionist historians and british foreign policy.
5. Itar-Tass: Plenum Said to Look at Communist Talent, Not Impeachment.
6. Boston Globe: David Filipov, Swim against tide. From deep in Moscow
woods 

entrepreneur overcoming odds to build his business.
7. Los Angeles Times: Richard Paddock, Russia's Top Tycoon Regains Lost 
Influence. (Berezovsky).

8. Reuters: Russia denounces NATO on humanitarian aid.
9. Interfax: Poll Shows Primakov Would Beat Luzhkov for Presidency.
10. Moscow Times editorial: IMF Wrong To Pass Tax On to Public.
11. Moscow Times: Andrew McChesney, U.S. Fund Unveils Mortgage Program.]

********

#1
Russian regional leaders form new party
By Konstantin Trifonov

ST PETERSBURG, Russia, May 22 (Reuters) - Russia's powerful provincial 
leaders formed a new party on Saturday to contest general elections later 
this year as Moscow's influential mayor proposed forming an electoral 
alliance with them. 

The leaders told the founding congress of the ``All Russia'' movement that a 
new strategy was needed to hoist Russia out of its protracted post-communist 
crisis and shift decision-making away from centralised institutions in the 
capital. 

``A crisis in mapping out reform strategy has plunged Russia, a wealthy 
country, into a state tantamount to a national catastrophe,'' Vladimir 
Yakovlev, governor of St Petersburg, Russia's second city, told the meeting. 

``Attempts to reform Russia from the top have not worked. It must be done 
from below, from the regions,'' he said. 

The new movement, one of a profusion of parties created in recent months, has 
been dubbed the ``governors' party'' as it throws together powerful figures 
without a single leader emerging so far. 

The meeting was attended by more than 500 delegates from 82 of the 89 regions 
spread across Russia, which crosses 11 time zones from the Baltic Sea to the 
Pacific Ocean. 

Among the figures elected to an 18-member inner council were Yakovlev and 
three influential regional presidents -- Mintimer Shaimiyev of Tatarstan and 
Murtaza Rakhimonov of Bashkortostan, both oil-producing regions, and Ruslan 
Aushev of Ingushetia, next to separatist Chechnya in the volatile North 
Caucasus. 

Moscow Mayor Yuri Luzhkov, widely seen as a contender in next year's 
presidential election, sent a message proposing joint efforts between the new 
movement and his Fatherland party. This was particularly important, Luzhkov 
said, for December elections to the State Duma lower house of parliament. 

``I am certain that if we join forces we will be able to win a considerable 
number of seats and create a powerful, responsible parliamentary group,'' he 
said. 

Officials at the congress did not comment on media speculation that the new 
movement could back Yevgeny Primakov, dismissed as prime minister last week 
by President Boris Yeltsin, for a seat in the Duma. 

Sergei Sobyanin, head of the northern Khanti-Mansiysk region, told Interfax 
news agency that Primakov was free to seek the nomination on one of the 
party's regional lists. 

********

#2
Washington Post
22 May 1999
[for personal use only]
Letter From Russia
In the Throes Of an Identity Crisis
By Robert G. Kaiser

MOSCOW—Early in this century, the great Russian question was, "What is to Be 
Done?" (the title of a book Lenin published in 1902). The answers imparted by 
Lenin and his comrades eventually created the Soviet system, whose wreckage 
is now strewn across this land. Now the great Russian question is, "Who Are 
We?" 

A good answer has not been found. Self-definition is difficult for people who 
don't like what they see around them, and in themselves. 

Perhaps the most-discussed nightmare is the ubiquitous corruption, from the 
constant demands of petty bureaucrats for bribes to senior government 
officials doing the bidding of a few rich people. Everyone complains about 
it--a student whose institute sells both admission and graduation, a 
schoolgirl whose teachers give high grades to each other's children, even 
Evgeny P. Velikhov, director of the renowned Kurchatov Institute of nuclear 
physics. 

Velikhov, who used to be interviewed on subjects like space-based weapons and 
arms control, held forth one morning on the traffic police. "They are just a 
moneymaking business, they don't even try to make the traffic move more 
efficiently," he complained.

That one of Russia's most distinguished scientists would dwell on the traffic 
police suggests the extent of anger and humiliation about corruption. Its 
pervasive nature has forced Russians to ask: Is this really us?

A philologist in her early fifties thought the answer might be yes. She 
recalled a 200-year-old quip by Nikolai Karamzin, a writer and historian. On 
a visit to Europe, someone asked Karamzin, "What's going on in Russia?" 

"They're stealing," Karamzin replied. 

And they still are.

A Shared Nostalgia

One answer to "Who are we?" that resonates for many Russians over 35 is 
"former citizens of the Soviet Union." Those who have suffered the most in 
the new Russia romanticize the Soviet past as a time of calm and plenty. 
Others remember it as a time of lies and arbitrary power. Both camps, and 
many in between, share a nostalgia for a world slipping into history.

One attempt to preserve some of it is an emporium of irony called Club 
Petrovich, a basement restaurant near the old center of Moscow. Petrovich is 
a cartoon character who appears daily in Kommersant, one of the best 
newspapers here. He is a sort of Everyman who has brought his Soviet-era 
sensibility into the wilds of the new Russia.

Petrovich's creator, Andrei Bilzho, also created and designed the club, which 
opened last year. It is decorated with Soviet kitsch, from old-time radio 
receivers to portraits of Leonid I. Brezhnev, who ruled for nearly 20 years 
until 1982, and Yuri Gagarin, the first man in space.

The menu at Petrovich comes in an old-fashioned Soviet file, two pieces of 
cardboard tied together by a shoelace. The dishes all evoke the Soviet past. 
"Friendship of the Peoples" salad features cheese from the former Republic of 
Georgia, now an independent nation. Another salad is called "He Just Ate 
Grass and Wouldn't Touch the Insects," a line from a beloved 1950s children's 
book by Nikolai Nosov. A "Communal Apartment Soup" features a hodgepodge of 
ingredients, a reference to the once-common (and still extant) living 
quarters in which multiple families shared an apartment and its kitchen.

Club Petrovich reminds its members (whose membership cards list all of their 
middle names as Petrovich, or "son of Peter") where they came from, and also 
of where they have arrived. There was no restaurant like this when the items 
on the walls were new--that is, no restaurant in communist Moscow with good 
food and music, polite waitresses and a friendly atmosphere. The club seems 
to be saying: We are who we were, but we're much more than that now.

Another version of the same message comes in performances of Peter Weiss's 
"Marat/Sade," staged brilliantly at the Taganka Theater by its 82-year-old 
founding director, Yuri Lyubimov, now back in Moscow after years in exile. 
Lyubimov has inserted many references to the Russian present into Weiss's 
play, which is set in post-revolutionary France. In one, an actor plays on 
the title of Alexander Solzhenitsyn's "The Gulag Archipelago," the name he 
gave to the string of Stalin's prison camps that dotted the old Soviet Union. 
"Gulag" was an acronym for the camp administration.

In the play, the actor speaks of an "Archipelag Gulyak." This means, roughly, 
an archipelago of idlers or goof-offs--another answer to "Who are we?"

Lenin Redefined

The image and myth of Lenin hovered over the old Soviet Union like permanent 
cloud cover. One answer to "Who are we?" in the Soviet era was "Lenin's 
children." Students were taught that Lenin was the kindest, finest, greatest 
man who ever trod the earth. So a Moscow newspaper recently sent a reporter 
to an ordinary elementary school to ask 10- and 11-year-olds who Vladimir 
Ilyich Lenin was.

"He was well-regarded until recently," wrote Misha L., "but now people want 
to remove him [from the mausoleum in Red Square, where a mummified Lenin lies 
in a place of honor] because people have realized he was actually a bad 
person."

"He was a communist. He could execute anyone who said anything bad about him, 
or who wrote his name incorrectly, etc.," wrote Oleg O.

"He was bald. And sort of intelligent. He's still lying in the mausoleum. In 
short, he was a total monster. But I don't know anything more about him," 
answered Dima P.

On May 9, yet another answer to "Who are we?" was evident in Moscow, most 
dramatically in the mammoth new Victory Park that celebrates Russia's victory 
over Germany in World War II--"the great patriotic war" in Russia.

This month brought the 54th anniversary of that victory, and scores of 
thousands gathered in Moscow parks to see fireworks to mark the 
occasion--"The only holiday we have about which there is no argument," said 
Sergei Rogov, 21, a senior at Moscow State University. The traffic around 
Victory Park was backed up for miles before and after the fireworks.

The atmosphere that night was joyous and a little drunken. Entrepreneurs with 
tanks of helium sold balloons for 35 rubles ($1.40). The park was one of a 
dozen locations where fireworks were set off, and one could see them all from 
a hilltop there, all over the vast Moscow skyline. The fireworks lasted only 
10 minutes, but the crowd was wildly appreciative of every rocket. You could 
hear families in the crowd actually discussing the war. A half mile of 
fountains, lit vividly in red spotlights, recalled the Russian blood that 
flowed from 1941 to 1945.

Conversations with Russians of many backgrounds and ages suggest that pride 
in the victory of 1945 is as strong today as it was 30 years ago, when 
communist propaganda made the war almost as important as Lenin in the 
pantheon of official myths.

On Victory Day, Varvara Baranskaya, 21, a ballet dancer, said emphatically 
that the men running Russia today are fools, but she added equally 
emphatically: "I am a patriot. I don't like the fact that everyone else is 
looking down at us in Russia."

*********

#3
Date: Sat, 22 May 1999
From: Stephan De Spiegeleire <sdspieg@csi.com>
Subject: Breslauer and deterrence

I quite liked George Breslauer's attempts to 'rationalize' the Duma's 
voting behavior last week, and especially his use of what smelled to me 
remarkably like a rational choice explanation... (could his current 
distance from Berkeley explain this???)

On a more serious note, though, I would like to partially take issue with 
some of his points and maybe expand on some others. On the 
Stepashin-appointment, I think 'faulty predictions' Breslauer attacks (that 
Stepashin wouldn't be confirmed) was not nearly as widely accepted as he 
made it out to be. Most analysts predicted that one quite correctly. Even 
JRL (which does not always present a 100% reliably representative sample of 
Russian media opinion) did - just reread the ones on the days before the 
vote (e.g. JRL #3286). And on the impeachment vote, again most analysts 
agreed that it was too close to call. I'd say that in general, many 
predictions by Russian specialists about Russian politics have actually 
become quite sophisticated (with the possible exception of the president's 
behavior).

As to Breslauer's explanation why the Dumtsy voted the way they did, I 
think he's quite right on the deterrence-bit. Yeltsin did up the ante by 
using the 1993 'script' (to use the social psychological jargon). But while 
that might explain why they would ultimately vote in accordance with 
Yeltsin's wishes, it really does not explain why they did so already in the 
first round (on Stepashin's nomination). Yeltsin couldn't really have 
'retaliated' until the third vote (i.e. for another two weeks), during 
which the Dumtsy could have bargained for more goodies (whether financial - 
there is no doubt in my mind that Vladimir Volfovich had a good week last 
week, and he even said so quite openly - or political). So the general 
'rational deterrence' argument should really only have kicked in at the 
third vote, and yet, as we now know, it worked already in the first round. 
Yet here I would propose another twist to the general argument, which I 
think is closely related to what we used to call 'intra-conflict 
deterrence'. I am referring here to the threat that was publicly leaked 
that Y. would in the last minute withdraw Stepashin's name and propose 
Aksyonenko (alleged to be a Berezovskiy-crony - and, whether correct or 
not, a couple of Duma members I talked to last week clearly believed it) 
for confirmation as Prime Minister. This threat was made more credible by 
two developments that looked strange at the time, but from hindsight 
certainly strengthened the deterrence idea: 1) the fact that Aksyonenko was 
already mentioned in the initial decree proposing Stepashin - there was 
really no other demonstrable reason for that; and also 2) what seemed 
initially as a 'lapsus' that Yeltsin made over the phone to Seleznyov in 
the Duma when apparently he proposed Aksyonenko instead of Stepashin as his 
nominee (despite the fact that Kotenkov - who's clearly out of the loop - 
appeared to have written confirmation from the Kremlin about Stepashin's 
name). Now that entirely changed the calculus for the Dumtsy: at least with 
Stepashin, they (at least the leftist majority) felt they could live: it 
would make sense for them to refuse him two times, to collect more goodies, 
and then to miraculously approve him the third time. In that case they 
could have their cake and eat it too. But if the choice was to be 
Aksyonenko or Chernomyrdin (he was suggested as being Yelstin's third and 
final candidate) or another 'unacceptable' candidate, then the cost of not 
voting for an even semi-acceptable person like Stepashin became too high, 
and therefore they were willing to take the goodies in the first round and 
not escalate. It was actually quite visible - in the morning of the vote, 
Seleznyov (hardly known for his punctuality) was really rushing the 
proceedings (even cutting off speakers), in a clear illustration of how 
afraid everybody was that the president would pull another 'Yeltsin' in the 
last minute. Even the vote itself lasted only a couple of minutes... So in 
that sense, both the general deterrence strategy _and_ the 'intra-conflict 
deterrence' worked beautifully. I would just like to point out that 
Yeltsin's reputation for unpredictability is actually a great asset for 
such deterrence strategies. Much of this stuff is straight out of Schelling 
and the rational deterrence literature. Ah, Russian politics: you've got to 
love it!!! I don't know whether 'political technologies' are just more 
developed in Russia than in the West, or whether they are just more visible 
(arguably, because in the West they are more hidden in our partocracic 
games), but this type of 'raw politics' is certainly a delight for anybody 
interested in politics...

BTW and 'pour la petite histoire', to me, this suggests another big 
turnaround in Yeltsin's entourage. I don't think the bland crowd that 
Yeltsin had been left with over the past months could have come up with 
such a masterstroke. The temptation to conclude that Boris Abramovich is 
'back' is certainly getting pretty strong again... And apparently Yumashev 
and Chubais are back as well.

Let us not, however, forget the bigger picture: while Yeltsin may have 
scored some political points, it still seems to me that too high a price 
was paid economically. It'll now take at least some time for " moya 
familiya - Stepashin" to get his team together, and then some more time to 
get those damn IMF-laws before the duma. At least with the 
Primakov-Maslykov team, they stood a chance. But apparently, the 
Presidential administration is now pushing for a number of new appointees 
who might once again spoil the relationship between Okhotnyy Ryad and the 
White House (e.g. apparently Stepashin told Lapshin that he could live with 
Kulik, but Yeltsin made it clear before he left for Sochi that Kulik was 
persona-non-grata). So behind all the political pyrotechnics, was this a 
Pyrrhic victory? (I know, I know, bad pun...)

But let me once again applaud George Breslauer's (implicit) exhortation 
not to jump too quickly to 'ideational, affective, and
emotional' explanations for Russian politics; and to at least try to 
identify the incentive structure of the key players to see how far that 
takes us. For those willing to do this, there are still many largely 
unexplored treasure troves in the field of Russian politics (such as the 
voting records of both Duma and Federation Council, to which many of the 
methodologies we know from the field of American Politics could be 
applied), a more systematic exploration of which could be of enormous value 
in improving our analytical (and arguably even predictive) capabilities on 
what remains one of the politically most important objects of inquiry in 
international relations. Unfortunately the funding structure in this field 
(increasingly even in Europe) barely allows us to start scratching the 
surface...
-Stephan
Stephan De Spiegeleire Western European Union
Tel. 33-1-53672200 Institute for Security Studies
Fax. 33-1-47208178 43, avenue du Président Wilson
75775 Paris CEDEX 16
weu_iss@compuserve.com France
Homepage: http://ourworld.compuserve.com/homepages/sdspieg

*******

#4
From: "Marcus Warren" <markusw@rinet.ru>
Subject: revisionist historians and british foreign policy
Date: Sat, 22 May 1999 

[re 3299/Anthony D'Agostino/Notes on the Legacy of Primakov]
i have just deleted the last jrl with its assertion that british
revisionist historians are "partly" responsible for uk attitudes towards
the balkans and security policy in general. i apologise in advance if i
have taken this remark out of context and i acknowledge that this is
hardly the time and place for a debate on the topic. but i cannot let this
one pass without comment. i do not think any suggestion could be wider of
the mark. john charmley and niall fergusson are respected historians with a
nice line in journalistic polemic as well. i think even they would be
surprised to hear that they have had much influence - even indirectly - on
forming British attitudes towards current security issues, esp the
Balkans. the blair govt is profoundly ahistorical. by that i mean that
none of its leading figures have evinced any interest in the subject and
many of its supporters seem to think that history began in may 1997 when
labour was elected. the defining historical era for New Labour is their
experience of being out of power for 18 years, unelectable and for some of
that period at least advocates of unilateral nuclear disarmament. hence
labour's priorities as far as security policy is concerned: 1. ensuring
that it is electable in the future and thus refusing to confront public
opinion with anything unpalatable; 2. exorcising the ghosts of the past by
being even more militant on the Balkans than the US. (Was it Noam Chomsky
or the Exile who recently referred to the UK as "the US's European
attack-dog"?) that's it. period. historians don't get much of a look-in.
and there is no point in arguing that Charmley, Fergusson et al have
influenced the "Establishment", as opposed to the politicians. even if it
had, blair etc. are running the show and will do so for years to come. and
the "Establishment" is mainly interested in maintaining its favoured
little brother status in diplomatic, defence and intelligence matters
vis-a-vis Washington. marcus warren daily telegraph moscow
correspondent. 

*******

#5
Plenum Said to Look at Communist Talent, Not Impeachment.

MOSCOW, May 22 (Itar-Tass) - A regular plenum of the central committee of the 
Communist Party of Russia, or KPRF, opened in Moscow on Saturday in the 
building of the Institute for Plant Breeding. 

The plenum, working behind closed doors as usual, meets over the agenda of 
Tasks of Party Branches in Enhancement of Responsibility of Communists 
Working in Legislative, Executive Authority Bodies and Local Self-Rule. 

A main report was presented by Leonid Ivanchenko, chairman of the Duma lower 
house of parliament's committee for federation affairs and regional policy. 

Communist Party leader Gennady Zyuganov told reporters on Friday that the 
plenum was very important even though it meets on a regular basis. 

"We are interested that the most gifted representatives of the party work in 
local power structures, that they go through the school that is necessary for 
the work in the coalition government of national patriotic forces," Zyuganov 
said. 

The plenum is working in a "constructive spirit," the Duma's Communist 
Speaker Gennady Seleznyov told reporters during a break. 

He said another matter on the agenda was pre-election strategies and 
principles of forming electoral lists in the elections of a new Duma in 
December. 

Seleznyov said the plenum is not in position to decide how many "columns" of 
national patriotic forces, or the leftwing camp, will go into the elections. 

He said participants in the plenum made their assessments of the botched 
impeachment proceedings in the Duma, but did not criticise KPRF leaders. 

*******

#6
Boston Globe
22 May 1999
[for personal use only]
Swim against tide 
>From deep in Moscow woods entrepreneur overcoming odds to build his business
By David Filipov

GORKI, Russia - At a well-guarded naval base deep in the woods north of 
Moscow, Reserve Lieutenant Captain Alexander Malyugin and his staff of highly 
motivated specialists are running a risk-filled race against their Western 
adversaries.

In their underground compound, skilled technicians work on state-of-the-art 
equipment. Designers pore over imported computers. It sounds like some 
ultra-secret weapons factory, but Malyugin is making something far more 
improbable for crisis-stricken Russia: swimwear.

Malyugin's company designs and manufactures women's swimsuits, fitness 
clothing, and ballet leotards. His race is against the German and American 
imports that dominate Russia's market for quality sports apparel. To finish 
this year's line, Malyugin and his 40 employees are pulling double shifts in 
their factory in the basement of the officer's club in this walled 
naval-training facility, located curiously far from any body of water.

It is a most unlikely of settings. Then again, Malyugin has made a habit of 
breaking stereotypes as he has built the kind of successful small business 
that was supposed to power Russia's economic transformation, but instead 
ended up being the rarest of exceptions.

Malyugin has navigated the perils of Russia's post-Communist economy - a 
stifling and arbitrary bureaucracy, confiscatory taxes, vicious extortion 
rackets and a debilitating financial crisis - that have forced many other 
local entrepreneurs out of business.

Most surviving Russian small businesses are still reeling from the economic 
meltdown that ensued when the government unexpectedly defaulted on its debt 
and devalued the ruble last August, a move that wiped out banks and their 
depositors in a matter of days. Malyugin has not only managed to right his 
business - sales, nonexistent at the peak of the crisis last fall, are back 
to their 1997 level of about $30,000 a month - this year his company, 
Malyugin Mills, is expanding.

Malyugin has succeeded as a manufacturer at a time when ''Made in Russia'' is 
almost an oxymoron. Russia's economy has been contracting all decade, and the 
decline has been particularly acute in light industry output, which is 
expected to plunge another 21 percent this year, according to Russia's 
Economics Ministry. And whatever modicum of stability might have been 
emerging was dashed by President Boris Yeltsin's decision to fire his prime 
minister, Yevgeny Primakov, last week.

Ask Malyugin how he has managed to survive, and thrive, and the trim 
35-year-old flashes his easy smile.

''If everyone in Russia worked as hard as I do, we'd live in a flourishing 
society,'' Malyugin says. ''I'm my own marketing manager, distributor, and 
advertiser. I work day and night and night and day. I don't even think about 
getting discouraged.''

Economic change in other former Communist countries in Europe was powered by 
small businesses that took the place of huge, ineffective state enterprises. 
But in Russia, despite a decade of economic reforms, small business 
constitutes just 7 percent of gross domestic product, according to Russia's 
State Statistics Committee. In Western countries it accounts for more than 40 
percent. 

Irina Khakamada, former head of Russia's disbanded Committee on Support to 
Small Businesses, recently cited numerous administrative barriers to small 
businesses, including the long wait to be registered, the high cost of 
licenses, and meddlesome inspectors from such agencies as the local fire 
safety office, the sanitary and health department, and tax collecters.

Of these, the taxman does the most harm to small business. Desperate for 
revenue, the government taxes Russian entrepreneurs heavily. Taxes are 
calculated on the money he spends, not the money he makes, so that a 
company's tax burden can amount to more than 100 percent of earnings. That 
is, if anyone paid everything they owe. No business can, which means just 
about every business operates illegally, which in turn provides an opening 
for racketeers, who know their ''clients'' cannot turn to the authorities. 

Tax authorities, meanwhile, have been known to take advantage of this 
situation. In 1997, Malyugin avoided paying a $7,000 ''fine'' after a court 
ruled that inspectors had wrongly assessed the charge.

As for organized crime, Malyugin says he has avoided it by keeping a low 
profile, something of a blessing in disguise of his business's unique 
location at a closed military base two hours of bad roads from Moscow.

Back in 1991, Malyugin got tired of living off an officer's paycheck about 
the same time he sensed a demand for decent women's bathing suits - always 
hard to find, especially ones that fit.

He proved an intuitive businessman and a quick learner. Working out of his 
modest apartment at the Gorki base - the basement factory came later - 
Malyugin started by making inexpensive suits from whatever fabrics he could 
find in old state-run stores. The suits, designed by his wife, Olga, and 
stitched on a home sewing machine, were not much better than what Soviet 
industry made, but they sold well. Malyugin borrowed $4,800 from the Navy to 
purchase imported stretchable fabrics and better sewing equipment. Olga 
studied up on designs.

Another unexpected benefit of the remote location was that Malyugin was 
forced to drive his wares to stores in the city, where he got his own 
firsthand lessons in marketing. At first, he had to pay disbelieving store 
administrators to let him sell his merchandise. This, he says, forced him to 
develop practices that laid the groundwork for his future success, such as 
tough quality control and the development of his own brand name, Solo.

He installed a bar-code system that allowed him to keep track of inventory 
and shipments - a common practice in the West, but almost unheard of in 
Russia. And he started requiring payment on delivery to retailers. This 
policy has allowed him to avoid the perils of an economy where most 
businesses cannot pay for goods and service because they are owed by their 
clients. This nationwide web of mutual debts has forced most businessmen to 
accept barter for services and goods. Most companies pay workers' salaries 
late, or in kind; Malyugin pays in cash and on time.

By producing a quality brand name that sells for less than similar imports, 
Malyugin Mills has managed to carve out a 15 percent share of the Russian 
swimsuit market, according to a report on the company done by MBA students at 
Wharton Business School's Lauder Institute. He has done this, the report 
said, despite lacking a clear marketing strategy, or even a sense of whether 
Russian buyers associate swimwear ''Made in Russia'' with quality.

Malyugin's share stands to grow. Malyugin's main domestic competitors, were 
dealt a knockout blow by last year's crisis. Several formerly state-run, 
Soviet-era textile factories still formally exist, but they are essentially 
bankrupt shells, producing and selling nothing. One of the goals of reform 
was that large state factories would gradually give way to small businesses 
like Malyugin's. But his four smaller competitors have ceased operations 
altogether.

Unlike his competitors, Malyugin did not let the crisis halt his plans. He 
opened a Moscow office, started a marketing campaign, and increased output. 
It was a risky move that forced him to use up earnings he had saved up from 
previous years. 

''But if I hadn't done this, we would be crying now like everyone else,'' 
Malyugin says. ''I see that times are hard, but this is a chance for things 
to get better for us, to get a larger part of the market, to turn this into a 
plus. This is what gives us hope.''

*******

#7
Los Angeles Times
May 22, 1999 
[for personal use only]
Russia's Top Tycoon Regains Lost Influence 
By RICHARD C. PADDOCK, Times Staff Writer

MOSCOW--Last month, Russian tycoon Boris A. Berezovsky was facing corruption 
charges, an arrest warrant and the prospect of exile on the French Riviera. 
Today, Berezovsky is back in good graces at the Kremlin, helping to map 
out President Boris N. Yeltsin's political strategy. And the man who wanted 
to rid the country of oligarchs such as Berezovsky--Prime Minister Yevgeny M. 
Primakov--is out of a job. 
The sudden reversal of Berezovsky's fortunes demonstrates again the 
resilience of Russia's leading oligarch--a modern-day Rasputin who holds 
extraordinary influence over the presidential family. With Primakov out and 
Yeltsin exercising formidable powers, the tycoons often blamed for the 
country's economic ruin appear to be regaining a significant role in 
government. 
"The sacking of Primakov was masterminded by Berezovsky, and I think his 
influence over the Kremlin is still enormous," Duma Deputy Vladimir N. 
Lysenko said. "Berezovsky and his influence will remain one of Russia's 
biggest problems until the end of the president's term." 
The oligarchs, who made their fortunes by dividing up the spoils of the 
Communist system, are now battling for influence in the government, political 
leaders said. Wednesday's confirmation of Prime Minister Sergei V. Stepashin 
by the Duma, parliament's lower house, has touched off a back-room scramble 
among rival oligarchs seeking to place their supporters in Stepashin's new 
Cabinet. 
"The government is being formed in the lobbies and behind the scenes by 
means of intrigue at the Kremlin," said pro-market Yabloko faction leader 
Grigory A. Yavlinsky. "It is a confrontation between old and new 
oligarchs--some people who consider themselves politicians just because they 
can buy someone." 
Nikolai Kharitonov, head of the pro-Communist Agrarian Party, agrees. 
"Even though I am at the State Duma, I can hear the crunching of vertebrae 
from across the Kremlin wall. A fight for influence over the Cabinet of 
ministers is in full swing. And it seems to me, despite everything, 
Berezovsky is gaining the upper hand at this initial stage." 
Berezovsky said in an interview Friday that his role in influencing 
recent events is overstated by his critics and that the Cabinet is being 
formed by Yeltsin in accordance with the constitution. 
"Today, Russia's oligarchs are interested in stability and in the 
economic recovery of the country more than anyone else," the tycoon told The 
Times. "The value of the property they own in Russia is measured not only in 
natural deposits, factories and plants, but also in the current political 
situation. If there is political instability, all this property is not worth 
anything." 
The clearest sign of Berezovsky's leverage was Yeltsin's appointment 
Friday of former Railway Minister Nikolai Y. Aksenenko to first deputy prime 
minister, where he will wield great power over the economy. Aksenenko is 
widely perceived as an ally of Berezovsky; the respected Kommersant Daily 
newspaper called him Berezovsky's protege and said the tycoon had introduced 
him to the president's family circle. 
Yeltsin named to the interior minister post Vladimir Rushailo, a former 
deputy to Stepashin who also is widely believed to have ties to Berezovsky, 
although the Kremlin played down any connection Rushailo might have to the 
tycoon. 
In another sign of the oligarch's returning influence, Yeltsin 
reportedly was considering appointing banker Petr O. Aven to the post of 
special envoy to the International Monetary Fund and other foreign lending 
institutions. 
Aven, president of Alfa Bank, is one of the original seven oligarchs led 
by Berezovsky who helped finance Yeltsin's 1996 reelection campaign. 
Afterward, two members of the group were given key government posts and 
the oligarchs profited handsomely from the privatization of state-owned 
holdings. 
Berezovsky, a mathematician who made his initial fortune by taking over 
a profitable chain of car dealerships, often operates through allies and 
subordinates. His financial interests are not always apparent, but he is said 
to have a stake in a number of prominent Russian enterprises, including 
Aeroflot airlines. 
Last month, Russian prosecutors charged him with money laundering and 
illegal business practices. Russia issued an arrest warrant while the tycoon 
was in France. Berezovsky voluntarily returned to Moscow to answer 
prosecutors' questions. Officials agreed to drop the warrant. 
Meanwhile, Prosecutor General Yuri Skuratov, who initiated the case, was 
suspended by Yeltsin after state television broadcast a video showing a man 
who looked like Skuratov having sex with two prostitutes. 
Prosecutors also recently dropped an arrest warrant filed against banker 
Alexander P. Smolensky, another of the original seven oligarchs, after he 
returned from Vienna to answer questions on money laundering charges. 
"Berezovsky may celebrate quite a victory," said Duma Deputy Valery V. 
Greshnevikov. "The criminal investigations started against him and other 
oligarchs are in limbo. People who tried to oppose them in the government and 
the prosecutor's office are all replaced or suspended from their duties. The 
oligarchs now have received a chance to escape all responsibility for what 
they have done with the country." 
Some attribute Primakov's downfall to his taking on the oligarchs all at 
once to try to extract some of their wealth to help finance the struggling 
government. Some analysts said he would have had more success focusing on one 
at a time. 
"The oligarchs hate Berezovsky so much they would have drowned him with 
tremendous joy," observed the Moskovsky Komsomolets daily. 
"But by having attacked everyone at the same time, Primakov in fact 
doomed himself to failure, while Berezovsky again managed to come out 
unscathed." 

Alexei V. Kuznetsov and Sergei L. Loiko of The Times' Moscow Bureau 
contributed to this report. 

******

#8
Russia denounces NATO on humanitarian aid

MOSCOW, May 22 (Reuters) - Russia's Foreign Ministry on Saturday blamed NATO 
for the Kosovo refugee tragedy and denounced what it said were attempts by 
the Western alliance to control the flow of humanitarian aid. 

Diplomatic sources, meanwhile, said U.S. Deputy Secretary of State Strobe 
Talbott would return next Tuesday to Moscow for what could be a resumption of 
talks on the Yugoslav crisis involving three or more parties. 

``The main reason for the biggest post-war humanitarian catastrophe in Europe 
is NATO's action, undertaken in violation of the U.N. Charter and 
international law,'' the Foreign Ministry said in a statement. 

It said NATO had been distributing ``recommendations'' asking the U.N. High 
Commission for Refugees and other humanitarian groups to inform it of any aid 
convoys destined for Yugoslavia. 

It said the NATO instructions amounted to an attempt to evade responsibility 
for the ``ever increasing numbers of 'mistakes' in hitting schools, hospitals 
and convoys of refugees.'' 

``NATO cynically cites reducing risks to humanitarian workers as the reason 
for such concerns about people risking their lives... while at the same time 
it never tires of stressing that there will be no pause or break in the 
bombings,'' the Foreign Ministry said. 

Alliance officials have expressed concern that aid sent to Yugoslavia be 
channeled to civilians and not Serb forces. 

Diplomatic envoys arrived in Moscow in waves throughout the week, with the 
focal point a meeting between the Kremlin's Balkan envoy Viktor Chernomyrdin, 
Talbott and Finnish President Martti Ahtisaari, a European Union mediator. 

Talbott said the talks had been sufficiently constructive to return to 
Moscow. But Russian politicians expressed frustruation at slow progress and 
said major differences remained with NATO, particularly on the make-up of a 
force to enable refugees driven from their homes to return to Kosovo. 

Russia has repeatedly demanded a halt to NATO's bombing campaign against its 
fellow Slav and Orthodox Serb allies. 

It is unhappy about NATO's insistence that Belgrade withdraw all its forces 
from Kosovo and also wants any future international force operating firmly 
under United Nations auspices. NATO says alliance members must play the key 
role. 

The West has encouraged Russia to intensify its efforts in resolving the 
Kosovo crisis. Chernomyrdin appeared to make little progress in lengthy talks 
with President Slobodan Milosevic in Belgrade this week but is widely 
expected to undertake another trip, his fourth since NATO began its bombing 
campaign two months ago. 

******

#9
Poll Shows Primakov Would Beat Luzhkov for Presidency 

MOSCOW, May 20 (Interfax-Moscow) - Moscow Mayor 
Yuri Luzhkov would win a presidential election in a run-off with 
Communist leader Gennady Zyuganov, Krasnoyarsk Territory Governor 
Alexander Lebed or Yabloko leader Grigory Yavlinsky, according to the 
poll of 1,500 respondents conducted by the Public Opinion Fund on May 1 
and May 8. The poll shows that in the run-off with Zyuganov, Lebed or 
Yavlinsky, Luzhkov would get 25%-38% of the votes. Luzhkov would lose 
only to former Russian prime minister Yevgeny Primakov, who would be 
supported by 46% of voters. Asked whether they prefer that Luzhkov 
remains the mayor of Moscow or becomes the president of Russia, the 
majority of those polled - 61% - favored his current position, and 19% 
wanted him to become president. 

*******

#10
Moscow Times
May 22, 1999 
EDITORIAL: IMF Wrong To Pass Tax On to Public 

Does anyone other than the International Monetary Fund believe that what the 
Russian economy really needs to get it going is ... a new tax on gasoline at 
the pump? Or a vodka tax? 

These are among a handful of demands the IMF has put forward as conditions on 
it agreeing to roll over some of Russia's crushing debts. 

The IMF also wants restructuring of the financial system, including the 
shutting down of de facto dead banks. And it is demanding an explanation 
about the infamous FIMACO, the offshore shell company that has been used to 
opaquely manage billions of dollars of Russia's national reserves. 

Bank reform and answers on FIMACO are long overdue, and the fund deserves 
credit for pushing for them. 

But because these are enormous tasks, they are also vague tasks - and so it 
will be easy for both the Russian government and the IMF to claim victory. 

Consider bank reform. The Central Bank has pulled the license of Bank Menatep 
and is aiming at other former giants. This is fine, as far as it goes. But 
Viktor Gerashchenko has been content to sit on his hands for months as 
commercial banks have stripped assets and stiffed creditors. Where is the 
triumph in pulling a bank's license now, when all of its assets are safely 
stripped off and handed over to a "new" bank? 

The same goes for FIMACO. Gerashchenko has promised to publish a 
PricewaterhouseCoopers audit next week. "The auditors will come to the 
conclusion that no violations were committed," the Central Bank chairman has 
said. 

Even if that turns out to be true in a technically narrow sense, this is 
lawyerly doublespeak. We already have answers enough to make the obvious 
judgment about FIMACO. 

Nevertheless, the IMF and Russia will wave around the FIMACO audit and the 
annulled Menatep license and a few other props, and there will be talk of 
"limited successes." 

If that's what everyone needs to save face and avoid a default, so be it. 

But leave the vodka and gasoline taxes out of it. Why should the Russian 
government be urged to squeeze more cash out of ordinary people with such 
regressive taxation? This won't - this can't - be good for the economy. 

It may be good for the IMF, of course, because the fund wants Russia to pay 
it back. Soaking the poor is one way to get that money together. A better way 
might have been to say something a few years ago, when, for example, the oil 
companies were being hijacked and billions were being wasted on destroying 
Chechnya. 

*******'

#11
Moscow Times
May 22, 1999 
U.S. Fund Unveils Mortgage Program 
By Andrew McChesney
Staff Writer

Thousands could soon own their own homes under a groundbreaking 
multimillion-dollar mortgage program backed by U.S. tax dollars that plans to 
extend its first loans in June, officials said Friday. 

The program, set up by The U.S. Russia Investment Fund, or TUSRIF, and 
stretching from St. Petersburg to the Far East island of Sakhalin, is the 
first large-scale residential mortgage lending scheme in Russia that aims to 
put loans into the hands of people with average incomes, said James Cook, 
senior vice president at the fund. 

"Anyone off the street is eligible for these loans," Cook said, adding that 
about 50 people in Moscow and 200 in St. Petersburg have already applied. 

Russians and expatriates alike are eligible to receive the five-year loans of 
up to $100,000, which will be disbursed through Russian banks and bear 15 
percent annual interest. Borrowers also are required to make a down payment 
of 30 percent toward the cost of the home. 

The $400 million U.S. Russia Investment Fund, a private organization set up 
with U.S. government money in 1994 to promote investment in Russia's economy, 
plans to sink at least $50 million in the mortgage program this year but 
could invest tens of millions more if demand is strong, Cook said. 

The mortgage program comes as the Kremlin itself slowly starts to study the 
issue. President Boris Yeltsin last month ordered the formation of a 
commission to create a nationwide mortgage system, the realization of which 
is not expected for at least a year. The order was made after a previous $500 
million mortgage deal with Western investors and the U.S. government failed 
to materialize. 

Mezhprombank in Moscow and Itorup Bank on Sakhalin island signed up for 
TUSRIF's program in late April, and negotiations are being held with 10 other 
banks, Cook said. Six banks in St. Petersburg and a second bank on Sakhalin 
are expected to join within the next two weeks, while talks are in the final 
stages with three more banks in Moscow. 

Mezhprombank, with a $1 million loan from the U.S. Russia Investment Fund, 
plans to start handing out loans in mid-June. The bank said in a statement 
that it is plans to offer well over $1 million this year in mortgage loans, 
the funds for which will be received in individual tranches from TUSRIF. 

Bank officials were unavailable to comment Friday. 

Meanwhile, Itorup is underwriting six loan applications. 

Real estate experts welcomed the mortgage program, calling it a vital move 
toward setting up a working mortgage system for Russia. 

"It's a great step in the right direction," said Jack Kelleher, director at 
Noble Gibbons. 

"It's very important for the development of democracy, for the development of 
an open market," he said, crediting the U.S. mortgage system as part of the 
backbone of the booming U.S. economy. 

John Lee, project manager at the Hines real estate agency, agreed, adding 
that the mortgage program could bring much needed liquidity into the market. 

But he cautioned that defaults could be a big issue. "Russians still need to 
deal with the issue of borrowing money and paying it back," he said. 

Program officials said, however, that they were not worried because they are 
hedging their bets. "The key is how you underwrite borrowers and to pick good 
borrowers," Cook said. 

Under fund guidelines adopted by partner banks, borrowers must have a stable 
income and each loan must carry property, title and mortgage life insurance. 

TUSRIF's mortgage program, based on the traditional U.S. model, works like 
this: The fund extends loans to partner banks at a rate determined by their 
cost of funds and the current market rate. The banks add a spread for 
servicing that is determined by the market in each city. To join the program, 
banks must take training courses and be approved by TUSRIF. 

The size of each loan is expected to total about 35 percent of the borrower's 
income and the property will be used as collateral. 

Until recently, the right to evict the nonpayer of a mortgage was 
questionable. 

"The civil code, which guaranteed each citizen housing, was widely 
interpreted and had not yet caught up with the economic changes taking place 
in Russia," said Cook, who also holds a degree in mortgage banking. "While 
lenders had the right to foreclose on a property, it remained unclear whether 
they also had the right to evict a tenant." 

However, legislators passed the Law on Mortgage last July that gave lenders 
greater rights for eviction if a loan was used for the purchase of housing. 

But the law has never been tested in court, and it is not clear how 
determined the government would be to evict nonpayers. 

St. Petersburg is going an extra mile in backing the mortgage program by 
putting up $30 million to guarantee the loans made through city banks, Cook 
said. And, just in case of defaults, the city is setting aside 1,000 
apartments to provide temporary housing to borrowers. 

TUSRIF, which also provides credits to small businesses and makes direct 
investments in industry, held a pilot mortgage program last year in which $1 
million was disbursed through SBS-Agro. The fund said that despite the 
financial crisis last August, the program has maintained a 100 percent 
repayment rate. 

*******



 

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