June 1, 1999    
This Date's Issues: 3315 •3316 • 3317  3318 

Johnson's Russia List
#3316
1 June 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Bloomberg: Russia's New Cabinet Strategy: to Survive Until 2000.
2. Peter Juviler: Gener Sosin's book.
3. Yevgenia Albats: Re: 3315-Death Sentence.
4. Marcus Warren: re patrick van de coevering #3314.
5. The Straits Times (Singapore): John Helmer, RUSSIA NOW HAS TWO
GOVERNMENTS.
6. Jamestown Foundation Monitor: CHUBAIS GETS A FEW ALLIES IN THE NEW
CABINET.
7. Nikst: MOSCOW LIBERTARIUM.
8. The Open Society Institute meeting: The Emergence of US-Caspian Military 
Cooperation.
9. Chicago Tribune: Colin McMahon, RUSSIA'S NEW PRIME MINISTER CONFRONTS
SAME 
OLD PROBLEMS.
10. AFP: Kosovo brings China, Russia close but not that close.
11. The Russia Journal: Alexander Pankov, Yeltsin's Intrigues May Cost
Government 
$24 Billion.
12. Moskovsky Komsomolets: Roman Arshansky, PATRIOTS GAMES. (Costs of
elections).]

*****

#1
Russia's New Cabinet Strategy: to Survive Until 2000

Moscow, June 1 (Bloomberg) -- Russian Prime Minister Sergei Stepashin's new
cabinet will do the minimum required to win a $4.5 billion International
Monetary Fund loan without tackling the country's fundamental economic
problems, analysts said. 

The new cabinet's main task will be to survive until next year's
presidential elections and that depends in part on securing the IMF loan.
The government may need only to show it is trying to increase revenue and
push new banking and tax laws through the parliament as the fund seems
willing to let Russia slide on some concrete economic measures, analysts
said. 

``The best you can hope for is that Russia will be stable,'' said Alan
Rousso, director of the Carnegie Moscow Center. ``There will be little
progress on reform in an election year.'' 

Stepashin, the former interior minister, probably is the best person to
keep the government intact through December parliamentary elections and the
June 2000 presidential elections to replace President Boris Yeltsin,
analysts said. After two weeks of haggling with Yeltsin, Stepashin
yesterday completed his new cabinet, which includes Finance Minister
Mikhail Kasyanov, formerly Russia's lead negotiator with international
creditors. 

Yeltsin's Will 

How long the government, Russia's fourth in 14 months, can last depends, as
always, on Yeltsin. 

``The obvious aim is for Stepashin to police the situation until
presidential elections next year,'' said Roland Nash, head of credit
analysis at MFK Renaissance in Moscow. ``Whether he will be successful
depends on Yeltsin's will. It's impossible to predict'' whether the
government will last. 

Winning the IMF loan, which the fund pledged in April, will stave off
further debt defaults and allow Russia to begin official negotiations with
foreign creditors over $16 billion in Soviet-era debt due this year and
next. 

Before the fund releases the money, the government is supposed to push a
package of bills through the Duma, the lower house of parliament, aimed at
raising revenue and fixing ailing banks. Legislators will consider
proposals this week, including a tax on gasoline stations, a tax on luxury
cars and new bank legislation. 

Two weeks ago, the budget committee recommended the full house reject the
tax laws unless they are revised. 

``These laws are not written very well,'' said Oleg Morozov, leader of the
Russian Regions Party. ``But I don't see any particular desire by
legislators to chuck out these laws to show contempt for the government.''


IMF Sympathy 

``The IMF will continue to be sympathetic to the Russian government on
legislation,'' Nash said. ``As long as there is some headway,'' the fund
probably will disburse the loan. 

Former Finance Minister Mikhail Zadornov will be key to helping Russia win
the new IMF loan. Yeltsin appointed Zadornov as his envoy to the IMF after
the former minister resigned as first deputy prime minister, citing a power
struggle within the cabinet. 

Zadornov, formerly a Duma deputy from the pro-market reform Yabloko party,
will probably be able to help the government push the IMF legislation
through, along with Alexander Zhukov, chairman of the Duma budget
committee, analysts said. 

``The combination of Zadornov and Zhukov will work with the Duma to push
the laws necessary for IMF loans,'' Rousso said. ``The government seems to
be committed to this and the Duma will not stay in its way.'' 

Zadornov is scheduled to meet with Duma deputies today to discuss the new
legislation. 

First Deputy Prime Minister Nikolai Aksyonenko pledged to support domestic
industry and agriculture, a move that could get a positive reaction from
the left-wing factions in the Duma. He proposed setting up a special fund
to lend to domestic industry. He also proposed levying export taxes for
goods that are being exported and are in demand in Russia. 

``Budget support is needed for domestic producers through an innovation
fund,'' Aksyonenko said. ``What can be produced in Russia should be used,
instead of importing.'' 

`Suffocate' 

Some deputies have already said they will not support the laws because they
will hurt individual consumers. 

``The government is taking the old path on these tax laws -- trying to
suffocate honest taxpayers,'' said Sergei Ivanenko, a Yabloko deputy. ``We
won't support these laws.'' 

He said Yabloko will support the banking legislation. 

Russia has promised the IMF that once it gets the new loan it will
eliminate some of the central bank's currency controls, started after the
government defaulted on most of its domestic debt in August and abandoned
its defense of the ruble. 

******

#2
Date: Tue, 1 Jun 1999
From: Peter Juviler <pjuviler@barnard.edu>
Subject: Gener Sosin's book

Though without Yuri Luryi's first hand experience of hearing Radio Svoboda
in the USSR as a dissident defense attorney, I second Yuri's praise (27
May) of Gene Sosin's new book, "Sparks of Liberty: an Insider's Memoir of
Radio Liberty." The book and Yuri's recollections once again affirm the
finding of the importance of foreign broadcasts by Donald Shanor in
"Between the Lines."

******

#3
From: "Yevgenia Albats" <albats@glasnet.ru>
Subject: Re: 3315-Death Sentence
Date: Tue, 1 Jun 1999 

# 12 Peter Graff, Reuters:

Robert Tsivilev is not the head of the presidential Pardons Commission -- he
is the head of the Pardons' Department , i.e., bureaucratic apparatus of the
Pardons ( or Clemency) Commission of the Russian Federation.
It is Anatoliy Pristavkin who is the Head of the Clemency Commission since
it has been established back in 1992.

Clemency Commission is a public body, i.e., none of its members receives
any payment , and reports to nobody but to his ( her)conscience.
Pardons Department carries a burden of the routine paperwork for each
Tuesday's Commission's meeting , but none of its employees, including the
Head of the Department, takes part in the voting procedure.

Best,
Yevgenia Albats,
Member of the Clemency Commission of the Russian Federation.

*******

#4
From: "Marcus Warren" <markusw@rinet.ru>
Subject: re patrick van de coevering #3314
Date: Tue, 1 Jun 1999 

i do not know the answers to the questions raised by patrick van de
coevering re sorm and internet privacy in jrl#3314. but one colleague who
shall remain nameless has suggested a way of sabotaging the FSB's efforts
to keep track of email traffic which i pass on for free. he works on the
assumption that, if they have any proper kit at all, the FSB will have
programmed their computers to look for keywords in email. examples would
be chechnya, dollars, terrorism, uranium, weapons, tanks, launder etc. he
tells me he sprinkles such words gratuitously through perfectly innocuous
emails in the hope that they will clog up the whole system. perhaps
someone with more expertise in these matters could suggest whether this is
likely to work - and what about suggestions for a few more keywords?
marcus warren daily telegraph 

******

#5
Date: Tue, 1 Jun 1999 
From: helmer@glasnet.ru (John Helmer)

The Straits Times (Singapore), to come
RUSSIA NOW HAS TWO GOVERNMENTS
>From John Helmer in Moscow

This week Russia has two governments, one directed by President Boris 
Yeltsin's daughter, Tatiana Dyachenko; and a second, headed by Prime 
Minister Sergei Stepashin. Each has its own fortified headquarters,
security guard, spies, financiers, and media. Each has its own candidate to 
replace the president, should he die or become incapacitated before his term 
runs out in a year.

"Never in Yeltsin's time has the double-headed eagle, Russia's state
emblem, so plainly depicted what has happened to state power," commented
a politician. "The eagle is looking in opposite directions at once,
clawing for power and cash wherever it can."

Parallel government, with one official from the Kremlin and one from the White
House (as the prime ministry building is known) posted to watch each other
in the vital areas of the economy, has been condemned by most
of the Russian parliament, the business lobbies, foreign investors,
and western embassies.

Their assessment is that Yeltsin himself has lost most of his mental powers,
but none of his tenacity in holding on to power through his family and
his subordinates.

According to Anatoly Chubais, the Kremlin advisor and head of Russia's
electricity monopoly, Stepashin is fully in control and is "presidential
material". That means he is Chubais's candidate to succeed Yeltsin.
"The lineup is strong and will work well," Chubais claimed after days
of bitter infighting over cabinet appointments.

Over the weekend, politicians in Moscow, along with their financiers
and business lobbyists, speculated on whether Stepashin would be forced to
resign, after Yeltsin's family pushed through a series of appointments
against the prime minister's will. The most important of these, former railway
engineer and Rail Minister, Nikolai Aksyonenko, is the Yeltsin Family's
choice for Yeltsin's successor. He was also Yeltsin's first pick
as prime minister, until Chubais intervened at the last minute on Stepashin's
behalf.

There were veiled warnings too from the circle around Moscow Mayor Yury
Luzhkov against plots to force Stepashin out, or to force Yeltsin's
resignation. Luzhkov controls Moscow, and has the means and forces to
prevent the Kremlin or the White House acting without his authority.
He is also the most likely winner of the presidential election, if
the Yeltsin succession cannot be arranged by Dyachenko or Chubais. 

Speculation about a palace putsch has been rife since
Yeltsin sacked the popular prime minister Yevgeny Primakov on May 12,
allowing his daughter to assemble a government on her own.

"A piece of fluff -- a political Barbie doll", is the way former Yeltsin
confidante and head of security, Alexander Korzhakov has characterized
Dyachenko, the younger of Yeltsin's two daughters. According to
Korzhakov, who has published intimate memoirs of the Yeltsin family,
Dyachenko is the channel through which others pressure Yeltsin to
act. One of these is Dyachenko's husband, Alexei Dyachenko, an oil
trader who is in league with Sibneft, a major Russian oil company run
by Boris Berezovsky and Roman Abramovich through a network of offshore
front companies. Russian media reports, as well as Korzhakov, allege
this network has channelled cash and expensive European real estate
to Dyachenko and Yeltsin himself over many years. Dyachenko, Berezovsky,
and Abramovich have never answered the allegations. 

In the past week, this faction, abetted by Yeltsin's chief of staff,
Alexander Voloshin, has placed its appointees in charge of the Fuel
and Energy Ministry, Customs, the Trade Ministry, and the Pension Fund. 
Aksyonenko has claimed he will chair the cabinet committee on
operative issues, the key decision-making group regulating the government's
cashflow, including taxes, tariffs, and privatization of state assets.

Stepashin and Chubais responded by naming Victor Khristenko, a colourless
finance bureaucrat as Aksyonenko's double, and with the same rank. To out-gun
Aksyonenko, they also put the former finance minister Mikhail Zadornov in
charge of negotiations with the International Monetary Fund. The Stepashin-
Chubais faction has also captured control of arms sale revenues, and of the
sale of Russia's precious metals and diamond stockpiles. Agriculture
and Social Welfare, two vote-buying portfolios at election time, are also
in their hands for the time being.

According to Vladimir Isakov, head of the legal department of the Duma
(lower house), Yeltsin is close to the situation "when it will be 
necessary to rule on his behalf when he himself is absolutely unable to 
perform." Isakov said he expects the circle around the president to
fight among themselves for their personal and business interests.

Isakov also believes the Dyachenko faction may try to intensify confrontation
with the Duma, in order to trigger an early dissolution of the chamber,
and then rig parliamentary elections ahead of their scheduled date in 
December.

Isakov said this was more likely than a palace intrigue that forced
Yeltsin to resign and hand over his powers to Stepashin. "The transfer of 
power that we have seen lately can only occur in the event that Yeltsin 
remains nominally the president. If he is replaced, the entire circle will 
be swept away as well."

*******

#6
Jamestown Foundation Monitor
1 June 1999

CHUBAIS GETS A FEW ALLIES IN THE NEW CABINET. The new Russian cabinet, in
its final form, does not appear to represent a total victory for the
Berezovsky-Dyachenko-Abramovich group. Yesterday Yeltsin appointed Viktor
Khristenko, first deputy finance minister, to occupy the position of first
deputy prime minister in charge of economics vacated on May 28 by Mikhail
Zadornov. Mikhail Kasyanov, another first deputy finance minister who has
been negotiating with the Paris and London clubs of creditors, was confirmed
as finance minister, pursuant to a presidential decree of last week.
Zadornov was made the government's representative to international lending
institutions. Khristenko, who began serving in the finance ministry in 1992,
is viewed as being close to Anatoly Chubais. Another Chubais ally, Ilya
Klebnov, a former optics factory director and city official from St.
Petersburg, was named to fill the new post of deputy prime minister for
defense-related industries. One newspaper said to be controlled by Boris
Berezovsky characterized the pro-Chubais appointments as merely "small
concessions by the presidential administration" (Nezavisimaya gazeta, June
1). Anatoly Chubais said that the government line-up was "strong" and would
"work well." He specifically praised Khristenko, who he said "has a unique
experience as deputy finance minister on all levels" (Reuters, May 31).

NTV reported on May 30 that Chubais, who currently heads United Energy
Systems (UES), Russia's electricity grid, had cut a deal with Sibneft's
Roman Abramovich, by which UES would trade one of its most profitable
sub-units in exchange for 10 percent of Sibneft. The channel further claimed
that Chubais had rejoined the Kremlin inner circle after Abramovich forced
Berezovsky out--he having become, according to this version, too
controversial. It should be noted that NTV's campaign concerning the alleged
takeover by Abramovich and Company resembles the campaign launched in 1997
by Berezovsky-affiliated media against Chubais and his allies, who were
accused of trying to monopolize power. During NTV's "Itogi" May 30 program,
host Yevgeny Kiselev went so far as to quote rumors that Yeltsin was no
longer capable of functioning independently, and noted that Russia's
Constitutional Court is soon to take up a request to clarify the
constitutional provision concerning the removal of the president for health
reasons (NTV, May 30).

Media-MOST chief Vladimir Gusinsky, meanwhile, is rumored to be angry that a
key ally, Vladimir Bulgak, lost his job as deputy prime minister in charge
of communications during the recent cabinet reshuffle.

******

#7
From: "nikst" <nikst@glasnet.ru>
Subject: MOSCOW LIBERTARIUM 
Date: Tue, 1 Jun 1999 

Re: 3313 #9 Patrick van de Coevering: coverage of SORM. 
(FSB and internet).

Here are URLs of Moscow Libertarium, where they collect all the
documents on the SORM problems:

In Russian:
http://www.libertarium.ru/libertarium/

In English
http://www.libertarium.ru/eng/

Moscow Libertarium is primarily a Russian language resource
created to support Russian-speaking people in their efforts to build
a free and prosperous society in Russia. But there are also English
translations of several important documents. I think, that readers of 
JRL will be able to know more about main issues, problems and 
current situation in this very sensitive area.

******

#8
From: Katya Nadirova <KNadirova@sorosny.org>
Subject: "The Emergence of US-Caspian Military Cooperation: PFP, CentrAzBat 
and Beyond" 
Date: Tue, 1 Jun 1999 09:27:26 -0400 

The Open Society Institute's Central Eurasia Project invites you to attend 
Central Asia Open Forum 
"The Emergence of US-Caspian Military Cooperation: PFP, CentrAzBat and
Beyond" 
Dr. Jeffrey M. Starr 
Deputy Assistant Secretary of Defense
for Russia, Ukraine and Eurasia 

Presider: Anthony Richter 
Open Society Institute

Dr. Starr has served as the Deputy assistant of Defense for Russia, Ukraine
and
Eurasia in the Office of Strategy and Threat Reduction, OSD Policy since March
1998. His office is broadly responsible for the development of security
relationships with all of the states of the former Soviet Union. From 1994
till
1997 hold several positions at the State Department including Acting Principal
Deputy Assistant Secretary of Defense for International Security Policy,
Principal
Director of Threat Reduction Policy in International Security Policy. Dr.
Starr was
educated at the University of Illinois and the Massachusetts Institute of
Technology in mathematics and international security affairs and was a
recipient of
the 1993 Council on Foreign Relations International Affairs Fellowship to
work on
nuclear issues pertaining to the former Soviet Union. 

Monday, June 7, 1999
12:30 pm - 2:00 pm 
Carnegie Endowment for International Peace 
1779 Massachusetts Avenue, NW 
Washington D.C. 
RSVP to Katya Nadirova (212) 548-0612; fax (212) 548-4607
email:<knadirova@sorosny.org> 

*******

#9
Chicago Tribune
1 June 1999
[for personal use only]
RUSSIA'S NEW PRIME MINISTER CONFRONTS SAME OLD PROBLEMS
By Colin McMahon

MOSCOW -- Having been confirmed last week as Russia's latest prime minister, 
Sergei Stepashin must wonder what he has gotten himself into.

His task for Russia: Avoid fiscal default, revive the economy, restore 
military prowess and safeguard democratic reforms. And do it all while 
dealing with a sometimes hostile legislature on one side and an often 
baffling Kremlin on the other.

The challenge better suits a miracle worker than a former interior minister 
with no economic background. Yet Stepashin has this going for him: By now few 
Russians expect anything.

For years Russian prime ministers have touted bold changes to make the 
economy more productive, more prosperous and more equitable. Yet average 
incomes continue to drop. Foreign investment remains a mere trickle, and 
domestic capital continues to leave in a flood.

In the past 1 1/2 years alone, Viktor Chernomyrdin promised to level the 
playing field for business, Sergei Kiriyenko vowed to reform the banking and 
tax systems, and Yevgeny Primakov pledged to build up Russia's domestic 
industry.

Chernomyrdin and Kiriyenko failed outright. Primakov's tenure saw some 
Russian industry emerge from its slumber, but the weakness of the ruble had 
more to do with that than any government initiative.

Chernomyrdin was fired in March 1998 and then rejected by the legislature 
when President Boris Yeltsin tried to restore him as prime minister last 
summer. Yeltsin fired Kiriyenko last August. Primakov was pushed out this 
month.

With parliamentary elections scheduled for December and a presidential vote 
coming in the summer of 2000, many Russian politicians already have dismissed 
Stepashin's chances of changing the way things are done.

"It will be a transitional, technical Cabinet," said Vladimir Ryzhkov, a 
centrist deputy in the lower house of parliament, known as the Duma. "No 
government can carry out an efficient economic policy in the present 
conditions."

Stepashin has turned to so-called technocrats to fill his team.

Like Stepashin, the three previous prime ministers all talked of forming 
professional teams whose members would rise above political interests. Yet 
past Cabinets were riven internally, with some rivalries fed by external 
pressures. Cabinet members were accused of serving certain financial tycoons 
or working solely for their own political faction.

Such intrigues already threaten Stepashin's team, critics say. The other 
first deputy prime minister, Nikolai Aksyonenko, reportedly has close ties to 
the controversial business mogul Boris Berezovsky.

"It is such an obviously dirty, under-the-carpet game that I do not want to 
say anything on this score," said Communist leader Gennady Zyuganov in a rare 
display of reticence.

More than just personnel disputes stand in Stepashin's way. He and his 
government have some of the same weaknesses that led to previous failures.

Like Kiriyenko, Stepashin has no independent power base. Duma legislators do 
not know him well or show much interest in seeing him succeed.

Like Chernomyrdin, Stepashin owes his political success to Yeltsin,

who remains the ultimate authority in Russia but is weakened by poor health 
and resentment among the people and political elite.

Like Primakov, Stepashin wants to spend more on defense and on certain social 
needs, even as the government continues to bring in less money than it pays 
out.

Some popular backing would help Stepashin take on the Duma and tackle the 
corruption that strangles Russia's potential. But as Kiriyenko warned the 
nation last year, the political leaders who impose the sacrifices that Russia 
needs to foster long-term growth will not be popular.

Tough decisions lie ahead, on closing down banks, on raising taxes, on 
cutting expenditures.

Expecting a breakthrough from Stepashin, who already is being promoted as a 
possible presidential candidate next year, could be expecting too much.

"Stepashin's task is almost impossible," said political analyst Andrei 
Kortunov. "Someone has to take unpopular and painful decisions. . . . How can 
you do that and at the same time develop a popular standing?"

On Monday, Yeltsin and Stepashin finally filled out the new Cabinet's 
economic team, appointing Mikhail Zadornov to be Moscow's chief liaison with 
the International Monetary Fund. Zadornov originally was appointed first 
deputy prime minister but withdrew after he was denied the finance minister's 
portfolio. Taking that job will be Mikhail Kasyanov, formerly Zadornov's 
deputy. Viktor Khristenko, another former deputy finance minister, will be 
the new first deputy prime minister.

But even with a team in place, the timing does not favor Stepashin's chances 
for success.

Now Duma members, facing a re-election campaign, are being asked to raise 
taxes on vodka and gasoline, among other unpalatable measures.

"The moment for carrying out radical market reforms is hopelessly past," the 
newspaper Kommersant wrote. "A new favorable moment for reforms will come 
about, at best, after presidential elections in 2000."

By then, Sergei Stepashin could be just about anywhere. Perhaps even in the 
Kremlin. But odds are good, even great, that he will by then be a former 
prime minister.

*******

#10
Kosovo brings China, Russia close but not that close

BEIJING, June 1 (AFP) - Historically uneasy relations between China and 
Russia have received an unexpected boost through both countries' fierce 
opposition to Western action against Yugoslavia, analysts say.

But while Beijing and Moscow are suspicious of US domination of world 
affairs, their opposition to the NATO campaign in Kosovo is not expected to 
result in any common pact against Washington.

"The Kosovo conflict has brought the two former socialist allies closer 
together, but this has not yet lead to common initiatives," said a Western 
diplomat in Beijing.

The 24-hour visit here by Russian Foreign Minister Igor Ivanov beginning 
Tuesday, to prepare for a presidential summit, will also deal with the Kosovo 
crisis when he meets Chinese counterpart Tang Jiaxuan.

"They will bring up the roles that Russia and China should play in case the 
situation worsens, future international relations, the role of the United 
States and the efforts of Moscow and Beijing to reconstruct a new world 
multipolar order," Deputy Foreign Minister Grigory Karasin was quoted by 
Interfax news agency as saying.

A Russian diplomat in Beijing said the stress was on a "multipolar" world 
system.

"It is out of the question for them to recreate a united anti-US pact, that 
doesn't interest either Moscow or Beijing as we are no longer fighting the 
Cold War," the diplomat said.

Jin Junhui, a researcher at the foreign ministry's Chinese Institute for 
International Relations, agreed.

"China doesn't want an alliance (with Russia), she wants a multipolar world," 
he said, while noting the Kosovo crisis had found the two countries on common 
ground.

China and Russia have called for an end to the NATO campaign, saying it is an 
attack on Yugoslavia's national sovereignty, and illegal without a clear 
mandate from the United Nations Security Council, of which both are permanent 
members.

Beijing in particular is concerned the campaign sets a precedent for US-led 
international military action, as it eyes with concern possible intervention 
over Tibet or in its long-running dispute with Taiwan.

Chinese hostility to the Kosovo intervention has hardened since NATO bombs 
hit its embassy in Belgrade on May 7, killing three Chinese journalists and 
sparking nationwide anti-US protests in China.

Russia, on the other hand, has been working hard for a diplomatic resolution 
to the conflict through its special Balkans envoy Viktor Chernomyrdin, who 
visited Beijing after the NATO embassy attack.

Russian sources say Ivanov will bring to Beijing a plan to establish an 
international "presence" in Kosovo under the aegis of the UN. The plan has 
reportedly been accepted by Yugoslav President Slobodan Milosevic.

Beijing, which has insisted on a halt to the NATO campaign before it will 
discuss any peace plan, has yet to react to the Russian proposals agreed in 
talks with the Group of Seven leading industrialised nations.

The shared hostility to NATO could result in increased military cooperation 
between Moscow and Beijing, although talk of a grand defence axis bringing 
India into a Sino-Russian pact was dismissed by a Western military analyst 
here.

"There is still too much animosity in Beijing against India," he said.

Russia's shaky economy also presents an obstacle to any military strategic 
pact with China, observers noted.

China's trade with the United States is far more important than its commerce 
with Russia, so Beijing will be reluctant to delve too far into Moscow's 
embrace, said Rafic Aliev of the Russian Academy for Military Sciences. 

*******

#11
The Russia Journal
http://www.russiajournal.com
May 31-June 6, 1999
Yeltsin's Intrigues May Cost Government $24 Billion
By Alexander Pankov 

Twenty-four billion dollars-that is the estimated total of the financial 
agreement negotiated by the Russian IMF delegation in Washington in late 
April. Russia will have to pay this huge sum over the next 18 months unless 
something is done to address the consequences of influential billionaire 
tycoon Boris Berezovsky's latest revanche.

The International Monetary Fund and the World Bank are gradually getting over 
their shock following the dissolution of the government of former Prime 
Minister Yevgeny Primakov and the seizure of key Cabinet posts by cronies of 
one of Russia's most notorious oligarchs. 

In the six months following the replacement of Prime Minister Sergei 
Kiriyenko's government of young reformers with the cautious Primakov, 
international financial organizations waited for the new government to 
collapse. 

By March, however, it became clear that contrary to American prophecies, 
Russia was not going to collapse. Indeed, the economy even began to show 
signs of a timid recovery as the ruble devaluation stimulated domestic 
industrial output. Despite printing money-at least 74 billion rubles from 
September 1, 1998 to April 1, 1999-the government managed to keep inflation 
within tolerable limits and stabilize the forex market.

Payments of wage arrears markedly reduced social tensions, and the number of 
labor strikes in Russia fell from 5,300 in January to 95 in March. Real 
incomes dropped by 30 percent, but even so, Primakov-though loathed by the 
West-proved remarkably popular with the Russian people.

Not only did Russia begin to assert its national interests, in itself liable 
to shock the IMF and U.S. Federal Reserve, it even dared reject a number of 
IMF demands deemed likely to have a negative impact on the economy. The 
end-result, however, was a compromise acceptable to the IMF and extremely 
useful, despite its harshness, to Russia. That outcome was sealed in the 
agreements reached in Washington in April. 

The head of the Russian delegation and former First Deputy Prime Minister 
Yury Maslyukov, whom the West associated with the most abhorrent features of 
the Soviet regime-communism, the state planning system and the 
military-industrial complex-successfully pursued a policy similar to that of 
liberal reformer Anatoly Chubais. Maslyukov used pressure exerted by the IMF 
as an instrument to control domestic lobbyists, monopolists and oligarchs.

The Russia-IMF April agreements were worth some $22 billion to $24 billion to 
Russia, including $7.5 billion in credits from the IMF, World Bank and the 
Japanese government. The remaining sum is the most modest estimate of the 
value of the restructuring of Russia's Soviet-era debts.

But in gaining the confidence and support of the IMF, the Primakov government 
built up unmatched political capital at home. President Boris Yeltsin could 
tolerate the liberals, who enjoyed unconditional support from the West and 
none at home, as well as Primakov, as long as he was popular at home and 
disliked in the West. But once Primakov gained the support of both the West 
and the Russian population, he became too dangerous a rival. The Duma 
impeachment motion was a good pretext for the president to take action.

Berezovsky's ensuing revanche-putting his own people in positions of power 
with the sole aim of gaining control of the government's financial flows-is 
not welcome either by the IMF or the World Bank.

The new appointees, whose knowledge of modern economics and statecraft is 
highly dubious, make their Soviet-leftover predecessors-Yuri Maslyukov and 
Gennady Kulik-look like Harvard professors.

The IMF and World Bank are now waiting to see if the Stepashin government 
will pull off a Primakov trick and show certain unexpected economic sense. 
But at the same time, the international lending organizations are not going 
be party to any frivolous acts on the part of the new Russian government.

Anatoly Chubais, whose recent visit to the U.S. turned out a flop, served 
mainly as a source of information on the new government for the financial 
bodies. 

The proposals Chubais made-ranging from softening conditions for extending 
loans to Russia, the dissolution of the Duma (lower house of parliament) and 
pushing through reforms by presidential decree-seem to have met with little 
sympathy or understanding. As was made plain in the Russian press, Chubais 
lacked the appropriate official status.

In theory, Russia can still receive the agreed-upon loans. But to achieve 
this goal, the Duma will have to pass a first package of laws by June 30.

The Central Bank, which remained cool toward the negotiations, chose to bow 
to the IMF and cancel of its own accord its system of two MICEX exchange 
rates (whereby the morning session is only open for exporters, and the 
afternoon session to everyone else). 

The Duma will now play a crucial role since the fate of the proposed package 
of legislation is in its hands. The Communist-dominated opposition in the 
lower house is hoping to take revenge on the president and the government for 
Primakov's ousting and the impeachment failure.

As a result, Russia will most probably have to struggle on without IMF or 
World Bank loans until the Duma breaks for its holidays. But Russia will not 
receive a default verdict either; it is in no one's interests to further 
isolate Russia with NATO action against Yugoslavia in full swing. 

That is why Russia's failure to fulfil its side of the agreement will only 
cause a delay in terms rather than an outright default. But Russia will most 
probably miss getting the IMF and World Bank loans by fall even under this 
scenario. Fall is traditionally a time of seasonal crisis, and will be 
further aggravated by the crash of regional budgets, rising tension on the 
currency market, social unrest and pre-election hysteria.

If Russia does not get the funds by the end of this year, it may quietly 
depart from the international financial scene. If this were to happen, there 
would be no more exerting outside pressure on Russian policy decisions, 
effectively eliminating a vital lever, which, for the past five years has 
been the only means to check the corrupt rule of Russian monopolists.

******

#12
From: "Christian Nadeau" <CNadeau@ifes.ru>
Subject: Campaign Finance - Duma 99
Date: Tue, 1 Jun 1999 

David -
Attached is a translation from an article which appeared in MK on May 11.
A journalist, posing as a political adviser for a deputy, tries to figure
out the cost of promoting a deputy for the duma elections through PR firms.
Thought this may be of interest to the list.
Regards,
Christian Nadeau


PATRIOTS GAMES
By Roman Arshansky
Article from the Newspaper “Moskovsky Komsomolets”, May 11, 1999

The argument about millions of dollars released for campaigning “rather
than for our boys to get fresh leggings” appears to hold no water.
Leggings, indeed, are made available, but not for all. They are mostly
dealt out to those who are known in Russia as image-makers. Image-makers,
for their part, have to pay to sociologists, psychologists, signature
collectors, computer operators, etc., etc. In the end, the lucky voters
might each receive either a sack of free flour or a ticket for a rock
concert. Admittedly, the principal electoral delicacies are cooked in the
main kitchen made by the operating image-making firms that are now truly in
for a golden season. Clearly, one just cannot resist from peering into that
cookhouse. 
On entering the spacious holding room in an old downtown Moscow mansion,
the visitor received an appraising look from a charming young girl
managing a set of three telephones.

You have an appointment? … Very strange. All right. Wait here. I’ll go and
check if you are to be received. …
That happened to be the way an assistant to a candidate running for a State
Duma seat, an “MK” staff correspondent at the same time, set out on a tour
of Moscow-based PR agencies. 

A whirlpool of the electoral race for the State Duma is seen to
incrementally gain momentum. Those bent on winning soft Duma seats have
already started the inconspicuous-for-the-voter effort to build up the
right images for themselves. Within just a few months, looking at us from
television screens, posters and newspaper pages will be the noble
personalities commanding the best knowledge of what we all want and how to
get there…
Sergei Viktorovich, deputy director of the PR agency, clearly failed to cut
a powerful figure amidst quite impressive furnishings. Being rather small
in size, he desperately tried to look important. But just as word came that
a prospective customer was at the doorstep, he got miraculously
transformed. He suddenly grew affable and well-mannered vis-a-vis the
young man that he had passed impassively just a minute ago.
Would you like a cup of tea, or coffee? Verochka, please. 

The coffee was excellent. The atmosphere - informal. I just did not feel
like leaving the most comfortable armchair I was relaxing in. The
bookshelves in the office displayed their tastefully arranged backs.
However, I failed to spot any fiction there. The selection mostly included
reference books, handbooks, and readers on the issues of philosophy and
social sciences.

Sergei Viktorovich was without any doubt as interested in the client’s
financial status as “the young man” appeared to be captured by the books in
the office. To admit, the host made a very cautious approach to clarify the
question that obviously was on his mind. According to the tale, my
candidate was a businessman residing in the Voronezh oblast. He was about
to be running in a single-mandated electoral district. To my surprise,
Sergei Viktorovich happened to be pretty well in the know of the Voronezh
realities. So, I had to engage all of my resources to play-act the part
believably and avert an exposure. As a matter of fact, the host’s
awareness about the region came from his agency sending out last summer a
focus group (an analyst, psychologist, and a couple of sociologists) to
Voronezh to carry out some study. The admission about my “boss” operating
a range of filling stations in the area in no way made Sergei Viktorovich
look happy. 

However, mention of my “candidate” recently appropriating a sugar-producing
factory immediately put my interlocutor at ease. As I looked at him, I was
tempted to please him even more by adding that my “boss” was about to
purchase a candle-making workshop… in Samara. But I forced myself not to do
that. My host’s readily verbalized complimentary remarks about my virtual
boss made me positively respectful of the person I have never met. 

>From what I can judge, your candidate is really a can-do manager. He
appears to clearly understand that securing a win in the elections takes a
certain amount of funds. Insufficient financial inputs would never make you
a winner. You are lucky to have turned to the proven professionals. We have
been in this business for nearly seven years now, and we have not had a
single flop. I believe you have some idea of the costs involved and are in
a position to pay for the services that we are ready to provide. Roughly,
the amount would stand in the area of 500 thousand ….dollars.

He took out a sheet of paper and got down to making costing calculations
to take care of all must-have engagements: the standard range of
activities, focus-group trips, commercials and adverts, … It amounted to a
huge sum. As he took notice of my slightly frightened look, Sergei
Viktorovich switched to take a more gentle attitude and explained that
there was always room for economizing and that his agency had had the
experience of conducting effective campaign drives for just 300 thousand
dollars. Then he added that that was the minimum. “No victory could be had
for less money”, he concluded. 

Can one be assured of a win for 500 thousand dollars? 
Oh, no. I don’t think anybody can guarantee anything in these matters. All
we can do is promise. We will complete our job, but the final say is
always with the voter. ..

As the experience shows, the “already-spinned” deputy, intending to be
reelected, can safely launch his campaign drive some three months before
the elections. The new runner for the State Duma is another matter. He who
has chosen to run for a Duma seat for the first time in his life needs to
turn to professional political consultants as early as nine months before
the scheduled elections for the latter to have the time to “bear” and
produce a nicely packaged candidate for a political office. 

The sequence was largely replicated as I went to visit two more PR
agencies, the only slight difference between the two being that speaking
for the first one was a heavily degreed lady-scientist pushing a purely
scientific approach to the matter, while the other agency just could not
accommodate me on account of being already fully engaged. When I proceeded
to try my fourth agency and inquired if a candidate for a Duma seat could
not be properly spinned for 150 - 300 thousand USD, I was merely given a
hearty mocking laugh. Admittedly, 150 thousand USD might certainly be
useful extreme conditions. But serious political consultants are clearly
not to be tempted by that amount. The responsible PR experts, that get
contracted for that money, will only run a focused study in the targeted
electoral district. To generalize, that amount of funds normally stands
against the line item “Other expenses” in the financial statement or
report. That is normally the cash that changes hands past the taxmen. 

In the days of campaigning one can surely achieve some economies through a
variety of schemes and arrangements. For example, on could very well
release 500 posters rather than a thousand. However, coming out the winner
usually is the one with the largest financial backing. Exceptions have been
extremely rare only to confirm the rule. One million “greenbacks” is known
to be the amount that can provide a 90-percent assurance of a candidate
securing a win in the Duma elections. Given that an electoral district is
on average populated by 500 thousand people, each voter comes to be worth
in the area of two USD. 

At one PR agency I ventured to ask: ”And what if the money used to back the
candidate has not been quite legally received in the first place?” The
response was not long in coming. The question apparently was mentally
applied by the responder to a concrete candidate. Anyway, when the reply
finally came, it was rather cautious, though in no way ambiguous. Before
committing itself, any PR agency runs a check on the given customer. Should
he/she turn out to have no record of convictions for odious robberies or
burglaries, he/she gets readily signed up. Should one really be surprised,
given this particular circumstance, that high political offices are
oftentimes filled by individuals that either had a brush with the law or
continue to maintain links with the criminal world? 

A cursory glance at the PR market has been enough to conclude that about
twenty truly professional providers of these services are currently
operating in Moscow. Understandably, they seek to cover the whole of
Russia. Each agency is known to be working an average of five candidates.
Overall, they have the capacity to handle the numbers of candidates that at
best might produce nearly half the State Duma’s 225 at-large deputies. Out
of those prospective winners, some two dozen are expected to put in at
least a million USD each for their campaigning drives. Other winners are
likely to provide between 200-500 thousand USD each for their victories.
Now, here is a question for a school-kid: “How many honest deputies will
the next State Duma have, providing a candidate’s electoral fund shall not
go beyond 800 thousand … rubles as stipulated by the current Russian
electoral legislation?”


A PRICE-LIST FOR THE RUNNING CANDIDATE

“Our crazies” even have their socks chosen for them. 

Having mixed with a good number of PR experts, we not only managed to form
an idea about the candidate-spinning cost totals, but also succeeded in
coming up with rather a detailed price-list of relevant services. This is
how our stunning findings look.

Tentative costs of promoting a candidate in a single-mandate electoral
district, Moscow or Moscow oblast.

I. Researching the scene

1. Conducting polls to reveal voter preferences (two polls, each covering
1500 respondents) - 30,000 USD.
2. Researching the poll results. Looking into how the people voted in the
last elections. Drafting first recommendations on molding the candidate’s
positive image - 60,000 USD.
3. Defining the candidate’s strengths to be focused and determining the
best formats for campaign propaganda materials -10,000 USD.
4. Conducting scheduled polls to track shifts in the public opinion
throughout the campaigning period (four polls, each covering 1000 voters) -
40, 000 USD.
5. Analyzing the voter sentiments revealed in the polls and providing the
advice on immediate corrective action in the course of campaigning - 25,000
USD.

II. Promoting the candidate

1. Drafting a plan for the campaigning drive and introducing updates as
needed. Creating the candidate’s image. Building up a financing plan, a
detailed schedule of campaign activities, and a plan for relevant
PR-functions - 40,000USD.
2. Developing targeted mockups for propaganda materials and producing
photographic materials - 8,000 USD.
3. Collecting voter signatures to secure the candidate’s registration (1%
of the electorate; 6,000 signatures for a dollar) - 6,000 USD.
4. Producing propaganda materials (leaflets, stickers, posters) - 84,000 USD.
5. Distributing propaganda materials in the days of campaigning - 39,000 USD.
6. Making personalized mailings and telephone calls - 200,000 USD.
7. Fabricating and installing promotional billboards - 40,000 USD.
8. Making arrangements for pickets in support of the candidate (20
two-person pickets for a space of 15 days) - 12,000 USD. 
9. Providing for the candidate’s PR support in the local media - 100,000 USD.
10. Providing for the candidate’s PR support in the central media - 150,000
USD.
11. Making arrangements for meet-your-candidate meetings (leasing the
premises and providing for a team of arrangers; holding about 10 meetings
overall) - 2,000 USD.
12. Specialized functions - 50,000 USD.
13. Providing for legal tracking in support of the candidate - 60,000 USD.
14. Arranging presentation gatherings, collecting information, and
maintaining the research effort - 100,000 USD.
15. The electoral campaign HQ’s administrative costs - 35,000 USD.
TOTAL: 1,091,000 USD or roughly 1.94 USD per voter. 

This campaign-spending plan has been put together by one of the most
well-to-do PR agencies. Most of the other PR agencies are reportedly
seeking to achieve this standard.

Understandably, a major blunder in the research stage might derail the
whole campaign effort. Given this perception, a professional PR agency is
unlikely to carry on with the job launched by some other provider. Many
operators are reported to have been achieving savings in the area of one
third of the budgeted resources, economizing on polls and campaign
propaganda functions. Notably, few PR providers have reduced allocations
for the enigmatic “specialized functions”. The meaning of this budget item,
as if it were part of the most sensitive information never to be made
public, was divulged to me with some reluctance. For the most part, the
“specialized functions” stand for the efforts either to gather and use
compromising bits on the rival candidate or engage in “double-dealing”(like
making late-night or very-early-morning telephone calls to voters and
urging them to vote for the rival for fear of being blown out of their
apartments).

Interestingly enough, even the most thoroughly-conceived and elaborate
effort undertaken by a team of professional PR experts might come to naught
in the course of any campaign stage. Either the candidate might lose
control of himself (like indulging in a drinking bout) or destroy his
public image (that took so much effort to create) through some stupid
escapade. (Admittedly, the PR-engineers are as hateful of their “wards” as
they are dependent upon them. They might even refer to their customer as
“our crazy”. The “crazies” are usually given the “harsh-consulting”
treatment, meaning that the customer is directed not only what to say and
when to produce a smile, but also what color socks to wear. Conversely, the
“soft-consulting” treatment implies a candidate that is now and again
allowed to speak his/her mind). And then, if it happens to be raining on
the election day, the voters might prefer not to go to the polls at all.
Just imagine! Millions of “greenbacks” might end up as totally wasted? Not
quite. The candidate’s lunching pad will still be there. 

His/her name will at least continue to be in the people’s memory. When such
candidates spend their millions in a new election campaign, they are
certain to be more confident of achieving a win…

*******