June 2, 1999    
This Date's Issues: 3319 •3320•

Johnson's Russia List
#3319
2 June 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Interfax: Poll Shows Majority of Russians Afraid of NATO.
2. Interfax: 'Source': Primakov To Focus on Health Problems.
3. The Guardian (UK): Tom Whitehouse, Kremlin bid for total control.
4. Moscow Times: Valeria Korchagina, No End in Sight to Behind-the-Scenes 
Fighting.
5. Interfax: 'No Real Need' for Western Food Aid to Russia.
6. Itar-Tass: Boris Fedorov to Run for Moscow Region Governor.
7. RFE/RL NEWSLINE: RUSSIA EXPECTS TO SELL MORE ARMS IN 1999 and
'IZVESTIYA' SAYS VOTERS START TO THINK. 
8. Peter Ekman: FIMACO report?
9. Kennan Institute events.
10. Paul Backer: Moscow Times mistakes on Russia.
11. Wladislaw George Krasnow: Buchanan on Russia at National Press Club in 
Washington.
12. Interfax: Poll: 49% of Russians Against Stepashin Being Premier.
13. Russia Today: Rod Pounsett, The Same Old Question: Who's Really 
Running Russia?
14. Reuters: Western firms stick with Russia but cut investment.
15. RFE/RL Poland, Belarus, and Ukraine Report: WHO IS PULLING THE
STRINGS? (in Ukraine).
16. The Russia Journal: Yevgeny Yasin: Wise Old Man of Russian Economics.
17. Interfax: Report of Chubays Interest in Tyumenenergo Deal Denied.]

******

#1
Poll Shows Majority of Russians Afraid of NATO 

MOSCOW, May 28 (Interfax) - Although NATO has 
never directly threatened Russia, Russians are afraid of it and regard 
its actions as a potential threat to their country, according to polls 
conducted by the Public Opinion Fund. The polls of 1500 urban and rural 
residents were conducted in May 1997 and May 1999. 

In the spring of 1997 when "the NATO expansion eastward" was being 
actively debated, 51% of Russians were concerned about it, saying that 
such an expansion "will pose a threat to Russia." Thirty-four percent 
were not worried by the fact that a number of former socialist countries 
have joined the alliance. After Russian President Boris Yeltsin had 
signed an agreement on cooperation with NATO in Paris, 32% of those 
polled said that this document does not abate the threat the alliance is 
posing to Russia. Only 24% of Russians were optimistic about the agreement. 

Two years later, 64% of those polled said that the admittance of 
Hungary, Poland and the Czech Republic to NATO increases the military 
threat to Russia, and only 17% opposed this point of view. 

According to three polls conducted in April 1999, 70%-73% of Russians
consider 
the NATO military operation in Yugoslavia as a direct threat to Russia's 
security. Asked about the reasons for the bombings on Yugoslavia, the 
majority of those polled said that NATO wants to demonstrate its 
strength; however, the second most popular answer (12%) was that NATO is 
trying to take over the Balkans in order to advance toward the Russian 
borders or even to attack Russia. When listing Russia's external enemies 
who would be able to wage a war against it, 16% of those polled mentioned 
NATO. However, the United States was mentioned even more frequently (48%). 

******

#2
'Source': Primakov To Focus on Health Problems 

MOSCOW, May 28 (Interfax) -- Former Russian Prime 
Minister Yevgeny Primakov is very concerned about looking after his 
health, former Deputy Prime Minister for Agriculture Gennady Kulik told 
Interfax Friday. Kulik said he recently had a detailed discussion with 
Primakov "on all topics," but the main subject was his health. There is 
less pain now, however it is too early to speak of complete recovery, 
Kulik quoted Primakov as saying. Primakov is still concerned about his 
back and leg. As reported earlier, in the middle of March, Primakov had 
an attack of acute radiculitis. Primakov would like to receive treatment 
in a clinic abroad, Kulik said. However, it has not yet been determined 
where exactly that will be. The decision will be made soon, he said. It 
will be possible to speak of Primakov's further plans after his recovery, 
Kulik said. 

*****

#3
The Guardian (UK)
1 June 1999
[translation for personal use only]
Kremlin bid for total control 
Tom Whitehouse in Moscow

A new standoff between Russia's parliament and government beckoned
yesterday after President Boris Yeltsin appointed more compromised yes-men
to his team. 

Mr Yeltsin named Viktor Khristenko and Ilya Klebanov as deputy prime
ministers. After last week's resignation of Mikhail Zadornov, the liberal
former finance minister, the government has become a mere extension of the
Kremlin administration - itself accused of being under the thumb of Boris
Berezovsky, the controversial tycoon and Yeltsin family friend. 

Since Mr Yeltsin ignored requests for greater representation from its
ranks, parliament's approval of a new austerity package demanded by the
International Monetary Fund in return for a $4.5bn (£2.8bn) loan is now in
grave doubt. 

The authoritative weekly Novaya Gazeta yesterday reported that Mr Yeltsin
was considering postponing next year's presidential elections by two years.
Quoting Kremlin sources, it claimed Mr Yeltsin could declare a state of
emergency to justify this. 

Commenting yesterday on Mr Yeltsin's reluctance to give up power, the
former Soviet president Mikhail Gorbachev compared him to Stalin. "The
president is a spent force politically, physically, intellectually, and he
still rules despite the fact that he doesn't have any support to speak of,"
said Mr Gorbachev, in Australia on a speaking tour. 

"Protesters in the streets of Russia carry the portrait of Joseph Stalin.
Well, we probably have a Stalin - a Stalin of a different kind." 

******

#4
Moscow Times
June 2, 1999 
No End in Sight to Behind-the-Scenes Fighting 
By Valeria Korchagina
Staff Writer

Although all the portfolios in the new Cabinet have been handed out, the
infighting within and around the new government is likely to continue.
Ironically, while most Cabinet members seem to suit President Boris
Yeltsin's inner circle, there is one little problem - the prime minister is
not on the dominant team. 

The result: The new government will be sharply divided against itself. 

The battle concerns not just lucrative individual enterprises, such as the
Svyazinvest telephone company the oligarchs fought over in 1997. The pie
now to be divided is no less than the Russian economy, especially
government revenue flows and the so-called natural monopolies - oil and
gas, transport and utilities. 

That's the turf staked out by the ambitious First Deputy Prime Minister
Nikolai Aksyonenko, widely considered the inner circle's candidate. 

According to Kommersant newspaper, as many as 13 of the two dozen
government ministers will be reporting to Aksyonenko - including the heads
of three cash-rich ministries: Fuel and Energy Minister Viktor Kalyuzhny,
customs chief Mikhail Vanin and Railways Minister Vladimir Starostenko. 

Stepashin did win some key positions, keeping liberal Mikhail Zadornov, but
only in the less important job of debt negotiator with foreign lenders -
not as a second first deputy prime minister overseeing economics and finance. 

There are also First Deputy Prime Minister Viktor Khristenko and Finance
Minister Mikhail Kasyanov who are likely to take Stepashin's side. 

Stepashin said Tuesday that he managed to create his own bloc in the
government. "Zadornov, Khristenko, Kasyanov, Stepashin are one team, there
is no doubt about it," he was quoted as saying by Interfax. 

Analysts, however, said that the pro-Stepashin group is largely the work of
Anatoly Chubais, currently the chief of the country's electrical utility
and a former chief of Kremlin staff. Evidence of that came Monday from
Chubais when he praised the new team as "professional" and "effective." 

Whether Stepashin's coalition will be able to withstand Aksyonenko's
remains to be seen. Behind Aksyonenko, according to news reports, political
analysts and opposition politicians, stands the inner circle, also known as
"the family" - Yeltsin's daughter and adviser Tatyana Dyachenko,
politically connected tycoon Boris Berezovsky, Sibneft oil company
executive Roman Abramovich, former presidential chief of staff and
continuing confidant Valentin Yumashev, and current chief of staff
Alexander Voloshin. 

Vyacheslav Nikonov, the head of the Politika center, said "the family" has
had a "90 percent success rate" in getting control of the desired ministries. 

Nikonov said that allowing Chubais to place some of his so-called "young
reformer" colleagues in the government was a simple measure of
self-protection. 

"Had they not allowed this they would have faced opposition ranging" across
the entire political spectrum, said Nikonov, "from [liberal Yegor] Gaidar,
to [radical leftist Viktor] Anpilov," Nikonov said. "They just cut off at
least the right wing of this opposition." 

Nikonov was skeptical about Stepashin's future. "He could have left last
week, but he stayed and tried to resist. But I don't think that they will
easily accept him, so at some point some additional restraints could be
applied to him," Nikonov said. 

=== 

Strife Line 

May 12 President Boris Yeltsin fires Prime Minister Yevgeny Primakov and
nominates Sergei Stepashin to replace him. Nikolai Aksyonenko is also
nominated as first deputy prime minister. 

May 19 Stepashin confirmed by State Duma. 

May 23 Stepashin says he wants Alexander Zhukov, the Duma budget committee
chairman, to be first deputy prime minister in charge of finance. 

May 24 Stepashin flies to Sochi and meets with Yeltsin; Aksyonenko also
shows up, unannounced. 

May 25 Former Finance Minister Mikhail Zadornov named first deputy prime
minister; two dozen other ministers appointed. 

May 29 Zadornov quits because he is not given the finance portfolio. 

May 31 Viktor Khristenko nominated as first deputy, final appointments made. 

*******

#5
'No Real Need' for Western Food Aid to Russia 

MOSCOW, May 28 (Interfax) - The U.S. and European 
Union food aid to Russia will deal a tough blow to the country's 
agriculture, Professor Yevgeniya Serova, president of the Agrarian and 
Food Economy Center in the Institute of Economic Problems in a Transition 
Period, told Interfax on Friday. It was obvious as early as last fall 
that asking the West for food aid was a mistake, because food stores have 
proved to be sufficient and there was no deficiency in the winter, she 
said. The import of grain as food aid will add up to 20% and meat will 
equal 11% of the average annual amounts of sales. Because the supplies 
did not begin arriving until the end of March, the fraction of aid in the 
amount of sales in the coming three months will be much above the average 
and will make it hard for Russian producers to sell their goods, Serova 
said. Food aid is also dangerous, because it "reinstates the system of 
massive centralized import of foodstuffs" which could spell out 
centralization and monopolization of the infrastructure, she said. 

Massive imports of foodstuffs will make it impossible for Russian 
producers to use "the unique chance" offered to them by the financial 
crisis and the dramatic decline of food import that resulted from the 
devaluation of the ruble, Serova said. "Foreign supplies will deliver an 
equally devastating blow to the grain market and to Russian grain 
producers," she said. Large-scale imports of grain began exactly when 
Russian producers had finished sowing and selling the remaining grain to 
empty the stores for the next harvest, Serova said. State Statistics 
Committee data shows that the stores of marketable grain from last year 
amount to 2 million - 4 million tonnes. The figures, however, have to be 
revised and increased by at least 5 million tonnes, because the actual 
harvest in 1998 was larger than the official 47.8 million tonnes. "This 
confirms that there was no real need for centralized supplies of foreign 
grain," Serova said. 

******

#6
Boris Fedorov to Run for Moscow Region Governor.

YEKATERINBURG, June 1 (Itar-Tass) - One of the leaders of the Pravoye Delo
(Right Course) movement, Anatoly Chubais, said on Tuesday that Boris
Fedorov would run for governor of the Moscow region with this movement. 

Chubais, who is also chairman of the Board of Russia's biggest electricity
supplier Unified Energy System of Russia (UES), said he believed the
Pravoye Delo bloc was sure to stage a successful election campaign to the
State Duma lower parliament house. "We have mastered election techniques,
we have one hundred percent effective experience," he stressed. 

He also said he was not going to run for a State Duma seat but would rather
"carry out party commissions, i.e. act as the bloc's general manager" in
his free time. Touching on financial aspects of the election canvassing,
Chubais noted that "there is a wide range of financial structures, except
UES of Russia," that might sponsor Pravoye Delo during all the forthcoming
election campaigns. 

******

#7
RFE/RL NEWSLINE Vol 3, No. 106, Part I, 1 June 1999

RUSSIA EXPECTS TO SELL MORE ARMS IN 1999. Russia's main arms
exporter, Rosvooruzhenie, is predicting increased sales in
1999. Director-General Grigorii Rapota, at a recent briefing
on the company's performance last year, reported that
Rosvooruzhenie sold weapons to 64 countries, netting $2.046
billion. Rapota expects to sell $2.5 billion worth of weapons
in 1999, according to "Novoe vremya." Traditional markets
such as India, a return to trading with old friend Libya, and
possible exports to non-traditional markets such as Brazil
should help boost the total, Rapota commented. JB

'IZVESTIYA' SAYS VOTERS START TO THINK. Commenting on the 30
May Belgorod gubernatorial election, "Izvestiya" on 1 June
wrote that the ballot results disprove the oft-quoted thesis
that Russian voters have become apathetic and that those who
do cast their ballots are increasingly swayed by Communist or
extremist rhetoric. In the vote, incumbent governor Yevgenii
Savchenko soundly defeated the Communist Party candidate as
well as Vladimir Zhirinovskii of the ultra-nationalist
Liberal Democratic Party of Russia (see "RFE/RL Newsline," 31
May 1999). JB

*******

#8
From: "Peter D. Ekman" <pdek@co.ru>
Subject: FIMACO report?
Date: Tue, 1 Jun 1999

Has anybody seen the Central Bank's audit on FIMACO conducted by
PriceWaterhouseCoopers,
or know when it is (re)scheduled for release? I was sure that it was
scheduled to be released last week, but so far I haven't heard a word.
This audit is a requirement for further IMF loans, and I'd hate to think
that the Central Bank would just stuff it under a mattress somewhere. If
anybody has information on the release date please let me know at pded@co.ru.

******

#9
Date: Tue, 01 Jun 1999 
From: "JOSEPH DRESEN" <DRESENJO@WWIC.SI.EDU>
Subject: Business and Economic events (Russia) update

Business and Economic events (Russia) update

Announcement

Upcoming business and economic events at the Kennan Institute for
Advanced Russian Studies for the month of June, 1999. Unless
otherwise noted, events are held in the 6th floor auditorium of the
Woodrow Wilson Center. Please note the address and web site for
directions at the end of this message.

(Please note that the Kennan Institute speakers program concludes on
June 14. It will resume in late September)

June 7 
Monday Noon Discussion, 12:00 to 1:00 p.m.
"The Rule of Law in Russia from a Practitioner's
Point of View"
Randy Bregman, Partner, Steptoe & Johnson, LLP,
Washington, D.C. 

The Russian legal system is a work in progress, especially with
regards to commercial law governing foreign investment and
trade. Reform efforts in areas such as tax legislation and
production-sharing agreements in the energy sector mark
improvements, but there is still a long way to go. Randy
Bregman draws on his extensive personal experience of handling
legal issues for foreign companies trading in Russia, to
demonstrate how the rule of law actually functions in that
country. 

June 14
Noon Discussion, 12:00 to 1:00 p.m.
"The State, the Market, and the Rule of Law: Small
Businesses in Poland and Russia"
Tim Frye, Assistant Professor, Department of Political
Science, Ohio State University 

With the collapse of communism in Eastern Europe and the
Soviet Union, many analysts predicted that the stability and
development of these new states would depend to some extent
on the creation of small businesses. While there have been some
successes, especially with small retail shops and service-oriented
companies, small business have not developed as strongly as
had been hoped. The legal systems in these countries are a
major culprit. Tim Frye discusses the findings of a survey he
conducted on small businesses in Poland and in Russia. 

******

#10
From: "Paul Backer" <pmcllc@email.msn.com>
Subject: Moscow Times mistakes on Russia
Date: Tue, 1 Jun 1999

Devil may not be in the details. But, elementary reporting mistakes by the
Moscow
Times are hard to understand. A recent example, published on the list,
citing Chubais' wisdom to avoid standing for election (aside from omitting
the small detail that Chubais has not made his career in elective office nor
can I recollect him standing for elected office ever in recent Russian
history) contains the following gem:

" ... In any case, Chubais' distaste for the leftist-dominated State Duma -
and the
Duma's distaste for him - makes it hard to imagine him grabbing a tray and
lining up in the Duma cafeteria next to Gennady Zyuganov."

The Duma cafeteria of course does not have trays or lines for deputies. It
is admittedly a trivial mistake, but it is part of a regrettable Moscow Times
pattern of getting small
and large details wrong. A large detail is that it is hard to imagine a
person knowledgeable of Russia expecting Chubais to stand for election to
the Duma.

As an irrelevant aside, the Duma cafeteria is a fascinating place, with its
ridiculous pricing giving an insight into the divide between life on the
streets of Russia and the hardships faced by the Duma. In fact the cafteria
culture of Russia is extremely revealing of the extent to which market
economics has not made inroads into the public and semi-public (large SOE)
sectors.

Factual mistakes and the practice of front running editorials (front page
story that supports editoria within) on highly contentious issues sometimes
opens the work of Moscow Times to questions that may be unfair in light of
the high quality of much of its reporting.

******

#11
Date: Tue, 01 Jun 1999
From: "Wladislaw George Krasnow, PhD" <wgkrasnow@rcn.com>
Organization: Russian American Goodwill Associates
Subject: Buchanan on Russia at National Press Club in Washington

Patrick Buchanan became the first U.S. presidential candidate to declare
the war in the Balkans the greatest obstacle to better relations with
Russia which, he said, would be "priority number one" if he is elected
to the White House. During a luncheon presentation at the national Press
Club on Tuesday June 1, Buchanan criticised the four other Republican
presidential candidates, George W. Bush, Elisabeth Dole, Steve Forbes
and Sen. John McCain for failing to distance themselves from "Clinton's
war."

Buchanan disputed McCain's suggestion that "we must do whatever is
necessary to win lest we be perceived by our enemies as an uncertain foe
and by our friends as an unreliable ally." "If a war is unwise, unjust,
or unwinnable except at exorbitant cost," argued Buchanan, "a
statesman's duty is to end it on the best terms attainable, as
Eisenhower did in Korea, DeGaulle in Algeria, and Gorbachev in
Afghanistan."

According to Buchanan, "the only winner thus far has been Milosevic who
has earned a niche in Serb mythology for defying 'the most successful
alliance in history' rather than surrender Kosovo, the sacred cradle of
the Serb nation." Concluded Buchanan: "Let us cut a deal and end this
wretched war now."

When asked about his vision of the U.S.-Russia relations in the 21st
century, Buchanan said that "the greatest achievement of Ronald Reagan
was not only ending the Cold War but also turning the millions of
ordinary Russians to our friends. Under Clinton, anti-Americanism in
Russia became rampant and reached the lowest pointly after the expansion
of NATO and the start of the war in Yugoslavia."
"If elected, I'd make the reparing of U.S.-Russian relation the
number one priority of my foreign policy to keep Russia from moving
closer to Red China," promised Buchanan.

*****

#12
Poll: 49% of Russians Against Stepashin Being Premier 

MOSCOW, May 28 (Interfax) -- Nearly half of 
Russians, 49%, disapproved of the appointment of Sergei Stepashin to the 
post of prime minister. However, the number dropped to 23% upon the State 
Duma's endorsement of him to the post, according to opinion polls of 
1,500 Russians conducted by the Public Opinion Fund on May 15 and 22. 
Just 12% of the respondents initially liked the candidate. Forty-three 
percent hailed the confirmation of Stepashin as prime minister. Over a 
third, 35%, of Russians did not want the Duma to confirm the appointment, 
while 29% favored him for the post. Pollsters said that the negative 
reaction was triggered by the dismissal of Prime Minister Yevgeny 
Primakov, rather than Stepashin's personality. An overwhelming 81% of 
Russians disapproved of the firing. One third of Russians, 33%, were 
unable to assess Stepashin's previous work, and 32% knew nothing about 
his activity. Stepashin's prior performance was poor, 21% of Russians 
said. Just 14% positively evaluated it. Stepashin made a positive 
impression on 50% of the respondents and a negative impression on 15% of 
them. The number of people who trusted Stepashin grew from 6% to 19% 
between May 15 and 22. Lack of confidence in Stepashin was expressed by 
37% and 26%, respectively. Primakov's dismissal will aggravate the 
economic situation, 70% of Russians said. Of this number, 80% have a 
higher education, and 75% - 76% live in Moscow and St Petersburg. Over 
half, 54% of the respondents do not think that Stepashin's government 
will pull Russia out of the economic crisis. Just 6% expect the situation 
to improve, and 39% are in doubt. The economy will deteriorate, 46% said, 
and another 29% gave up hope for changes for the better. 

******

#13
Russia Today
http://www.russiatoday.com
June 1, 1999 
The Same Old Question: Who's Really Running Russia? 
By Rod Pounsett 

Russia's newly installed Prime Minister Sergei Stepashin has at last got a 
full line up of cabinet ministers. But they are not all his first choice and 
we have yet to see if they can work as a team, and the manner in which they 
have been assembled raises serious doubts about Stepashin's own security of 
tenure. 

President Boris Yeltsin, or at least the small Kremlin clique which these 
days seems to control the still ailing president's every move, has given 
clear signs that Stepashin is not master of his own kingdom. There is every 
sign that he is doomed to accept being a puppet manager or lose his job very 
quickly. And that is more bad news for the suffering Russian population and 
the evolution of democracy. 

Stepashin may not be everyone's first choice to manage the Russian economy in 
its present state but now that he's got the job, he at least deserves the 
chance to have a decent crack at the task. If he has to look over his 
shoulder all the time for fear of Kremlin knives, then he faces a mission 
impossible. 

If Moscow media intelligence is correct and Yeltsin is even further out of 
the loop, Russia could be in for a traumatic period up to the elections, with 
the country being run by a covert dictatorship committee with too many vested 
interests other than the country as a whole -- a sort of mini politburo of 
puppet masters hiding behind Yeltsin's titular throne. 

That behind the scenes power would have to include Yeltsin's daughter and so 
called "image adviser," Tatyana Dyachenko, who clearly has a dichotomy 
problem concerning Yeltsin's preservation and her personal ambitions. It is 
also reported that business tycoon and media mogul Boris Berezovsky has 
wormed his way back in the fold, along with former Kremlin chief of staff 
Valentin Yumashev. Others in the pack are said to be Roman Abramovich the 
Sibneft oil boss and current Kremlin chief of staff Alexander Voloshin. 

There have even been reports that Anatoly Chubias has sorted out his 
differences with Berezovsky in order to be included in this covert policy 
group. 

My bet is that Victor Chernomyrdin may also have a reserved ticket for the 
inner circle, provided he comes out of the Kosovo negotiations with clean 
hands, if not a victory for Russian foreign policy. 

Whatever the truth concerning this backstage power mongering, ordinary 
Russians are still a long way from enjoying open government. They could, of 
course, express their discontent at the general elections -- provided they 
could identify people offering a better way forward. 

No doubt the members of the Right Cause political party, headed by former 
liberal leaders in government, would claim that is exactly what they are 
offering. But if they are to get a second chance they will first have to sort 
out their image problem, which was exposed at their congress in the Hall of 
Columns near the Kremlin over the weekend. 

Mindful of public opinion about the way some of them carried out their jobs 
when in office, Right Cause delegates are cautious about who should front 
their organization. Reform movement heavyweights and former cabinet ministers 
Anatoly Chubias and Yegor Gaidar have already been sidelined because of 
perceived blame for past mistakes while bidding to install various elements 
of a market economy. 

They have decided there is marginally less risk putting forward former 
finance minister and tax chief Boris Fyodorov, former deputy prime minister 
Boris Nemtsov and popular former Duma Deputy Irina Khakamada to spearhead the 
bid for Duma representation following the December elections. 

Right Cause would also like to have former prime minister Sergei Kiriyenko on 
board their coalition with his Novaya Sila (New Force) political movement. 
But the youthful former banker and gas industry executive has so far fought 
shy of a union, precisely because he also fears fallout from the bad public 
reputations of Chubias and Gaidar. 

Saturday's decision by Right Cause to push Chubias and Gaidar out of the main 
frame may yet convince Kiriyenko to climb aboard and strengthen liberal 
chances in the elections by combining resources. 

Even so, the liberal coalition has modest ambitions. At best they think they 
will grab only 10 percent of the Duma seats. But they will need a lot more 
than that if ordinary Russians are to win back some democratic and serious 
reform-minded influences in government. Sadly, many Russians expressing 
anti-Western/anti-NATO sentiments because of the Kosovo crisis may by 
association spurn politicians who advocate further Western-inspired market 
reforms and democracy -- which are at the core of both Right Cause and New 
Force rhetoric. 

*****

#14
Western firms stick with Russia but cut investment
By David Chance

LONDON, June 1 (Reuters) - Western companies are cutting investment in
Russia in the wake of the financial collapse in August, but few have
abandoned the country entirely, according to a survey by the Economist
Intelligence Unit. 

The survey of 75 western companies showed that since Russia defaulted on
its bond obligations in August 1998 and the rouble was devalued, sales have
fallen. 

Overall, 46 percent of the companies surveyed said that sales had fallen by
35-50 percent since the crisis. 

Sixty percent have put investments on hold and one third have cancelled
plans. 

Companies are now positioning themselves for a further contraction in
Russian demand with the economy expected to shrink by 5.5 percent in 1999,
the EIU said. 

Hardest hit have been health and pharmaceuticals, exposed not only to the
weaker spending power of the consumer, but also lower budget allocations
from the state, the report's author Daniel Thorniley said. 

``Corporate headquarters have not over-reacted to the crisis but many
companies will use the spring and summer of 1999 to make further decisions
on the market,'' said Thorniley. 

Surprisingly, a third of the companies surveyed may actually increase
investment in Russia in an effort to boost sales and margins, especially in
the agricultural, food, textiles and paints industries. 

``They want to go for cheaper local sourcing in an effort to compete with
local companies,'' said Thorniley. 

Also surprising is that most companies expect sales to be back at
pre-crisis levels in three years. 

What has happened since the crisis is that local staff are bearing the
brunt of falling sales. 

The survey shows that 65 percent of western companies have cut their
Russian staff and 40 percent have asked local staff to take pay cuts. 

Fourty two percent of the companies have reduced expatriate numbers, with
69 percent of consumer goods firms sending expats home and 72 percent
telecommunications and information cutting posts. 

In addition to cutting staff and investment, 56 percent have also responded
to the crisis by cutting prices, but that has been concentrated in the
consumer goods sector, where more than 68 percent have cut. 

In information technology, engineering, machinery and construction, there
have been no price cuts, while health companies are split 50-50. 

Foreign investors appear to believe that Russia's efforts to stamp out
crime and bribery have borne little fruit, with 63 percent saying Russia is
the worst in East Europe, and 38 percent disagreeing. 

*****

#15
RFE/RL Poland, Belarus, and Ukraine Report
Vol. 1, No. 2, 1 June 1999

WHO IS PULLING THE STRINGS? In April, the Kyiv-based
Institute of Politics, headed by political scientist Mykola
Tomenko, published a list of Ukraine's most important
"oligarchs." The list included people who supposedly "control
or influence at least one parliamentary caucus, group,
political party, public organization, nationwide television
or radio channel, or nationwide newspaper." According to
Tomenko, Ukrainian oligarchs will play a "dominant role" in
the presidential elections on 31 October.
The top five on the list are:
1) Ihor Bakay, who is president of the "Naftohaz
Ukrayiny" Joint-Stock Company, controls the Revival of
Regions caucus, ICTV television, and the newspaper
"Segodnya."
2. Oleksandr Volkov, who is a parliamentary deputy and
presidential aide, controls the Revival of Regions caucus,
the Agrarian Party of Ukraine, part of the Democratic Party
of Ukraine, and the Party of Regional Revival of Ukraine. His
media empire includes Ukrainian Television-1, Studio 1+1
Television, Gravis Television, and Europa+ Radio.
3. Viktor Pinchuk, also a parliamentary deputy, wields
influence through the Working Ukraine caucus and the
newspaper "Fakty."
4. Vadym Rabynovych, the president of the United Jewish
Community of Ukraine, controls part of the Green Party
caucus, the ERA Channel on Ukrainian Television-1, NTU
Television, the Uniar information agency, Super Nova Radio,
and the newspapers "Stolichnyye novosti" and "Delovaya
nedelya."
5. Hryhoriy Surkis, who is a parliamentary deputy and
honorary president of the Dynamo Kyiv Soccer Club, wields
influence through the Social Democratic Party of Ukraine
(United) and its parliamentary caucus, as well as Inter
Television and the newspaper "Biznes."
Initially, the list also included former Prime Minister
Pavlo Lazarenko, who has left Ukraine and applied for
political asylum in the U.S. While in Ukraine, Lazarenko
controlled the Hromada party and its parliamentary caucus,
YuTAR Television, Television Channel 11 in Dnipropetrovsk,
and the newspapers "Pravda Ukrayiny" and "Kiyevskiye
vedomosti." According to the Institute of Politics, the
Lazarenko case is a "textbook case of a struggle between
competing oligarchs or oligarchic associations in Ukraine."

******

#16
The Russia Journal
http://www.russiajournal.com
May 31-June 6, 1999
Yevgeny Yasin: Wise Old Man of Russian Economics
By Vera Kuznetsova/The Russia Journal 

Sixty-five-year-old Yevgeny Yasin helped develop the economic programs of 
every post-Soviet government except Yevgeny Primakov's. He was economy 
minister for two-and-a-half years in Prime Minister Viktor Chernomyrdin's 
government, and people say it was he who won the former Gazprom chief over to 
monetarist ideas. Yasin first trained as a bridge-building engineer before 
moving into economics. He first entered politics 10 years ago, leaving his 
job as head of a research department at the Central Economic and Mathematics 
Institute to head the Council of Ministers' State Commission on Economic 
Reform. As economy minister, he showed more firmness than many thought he 
would, refusing to simply distribute budget money left, right and center. 
When Yakov Urinson was appointed economy minister in 1997, Yasin stayed on in 
Chernomyrdin's government as a minister without portfolio and continued to 
have a guiding hand in economic policy. 

He left the government when Sergei Kiriyenko became prime minister in April 
1998 and now heads the Higher School of Economics. In his interview, Yasin 
says that now is not the time for compromise. But his entire political career 
is an example of constant compromise. Having worked with a range of 
politicians, Yasin frequently had to attempt to reconcile the seemingly 
irreconcilable and has won a reputation as a man able to achieve consensus.

Russia Journal: The president said that the new government should be doing 
something about the economy, but there are always clever people to say it's 
more or less impossible at the moment.

Yevgeny Yasin: Well, I think these people are right, and the president knows 
they're right, but it's his duty to tell (Prime Minister Sergei) Stepashin 
that he should be tackling the economy. (President Boris Yeltsin) is doing 
this, of course, because any improvment in the economy is going to win points 
when the elections come around. It's not excluded, either, that Stepashin 
could upset the political balance. If he wins the fight with (Sibneft head 
Roman) Abramovich and (tycoon Boris) Berezovsky, and manages to hold on to 
the post of prime minister and defend his own point of view, then he could be 
an important figure in the elections, could hope even to become president.

RJ: But Stepashin is losing out because (First Deputy Prime Minister Nikolai) 
Aksyonenko has taken over running the real economy. He's already got his 
hands on the bankruptcy authorities and the State Property Ministry.

YY: Nothing can be solved overnight. Practice shows that people who leap into 
things too hastily quickly find themselves sent flying. Aksyonenko is going 
to have a hard time staying in the saddle if he tries to keep up this pace. 
He's not in the top job, he's really an instrument in the hands of others, 
and his position depends on them. He'll take a tumble and that will be it. 

Until Stepashin came along, no one could have Aksyonenko where he is today. 
He might be Berezovsky's man, but he's not prime ministerial material. He's 
been working in his narrow little field all his life and just doesn't have 
the breadth of horizon needed for the top job. He doesn't realize yet what 
he's going to be up against. 

Some people say he should be keeping control on capital flows, and others say 
he has to ensure some kind of improvement in people's lives. But these two 
tasks are mutually exclusive. He'll be able to keep some kind of control over 
finances, but bringing about general improvements-that's something else 
again. You'd need someone like Anatoly Chubais or Mikhail Zadornov. I don't 
know who's going to work with Aksyonenko and I think that all this talk about 
him isn't very serious.

RJ: What about the possibility that Aksyonenko could be next dictator?

YY: Our dictator? How? It's not possible in Russia today.

RJ: If the Duma is dissolved, Aksyonenko appointed to head the government, 
elections cancelled...

YY: It's not possible. It would mean that the country capitulates, goes over 
to the Communists, and the government loses all control of events. It could 
happen if everyone, right and left, puts himself firmly in the opposition 
camp. If everyone opposes the president or prime minister, it'll be 
impossible to run the country. You can't just send in the police every time 
there's a problem. Eventually, you just have to give up.

RJ: Do Berezovsky and Abramovich have any other way of hanging on to power?

YY: They still have some people serving their interests in this government, 
but at some point, this is all going to come to a head. Things could go 
either way. Either we let the genie out the bottle now and let them feed like 
parasites on the government-but that would be playing into Yury Luzhkov's 
hands and Stepashin wouldn't be able to count on anyone anymore, no one would 
take him seriously-or Stepashin stands firm and if need be, resigns. But that 
would also guarantee victory for Luzhkov, and Abramovich and Berezovsky are 
more afraid of Luzhkov than of death itself. They're birds of a feather, you 
see. They all want to have their hands on the flows of money and there's no 
way they'd be able to share the pie amongst themselves.

RJ: And you think that Zadornov and Stepashin have won?

YY: It would seem at this point that they haven't yet obtained a real 
victory, but they have won the first round at least.

RJ: Do you think that Zadornov really has the right stuff to tackle 
macroeconomic issues?

YY: No, but then we'd need a minister of finance who would work with Zadornov 
and not try to pull him in the opposite direction. Or he'd need a first 
deputy who'd be able to deal with the budget. He would have been able to work 
with Alexander Zhukov as finance minister, but I doubt it will be possible 
with Mikhail Kasyanov. Kasyanov isn't a budget specialist.

RJ: With things as they stand, how do you rate Zadornov's chances of success?

YY: One hundred percent. Why do I say that? Because Zadornov sticks to his 
principles. If he asks for certain conditions in order to be able to work, 
and gets them, then he will work. If he doesn't get the conditions he asks 
for, he'll leave. This is only to his advantage. He's got a clean reputation, 
he's decisive, he can say "no." No one has ever accused him of dishonesty. 
Aman Tuleev insulted him because he wouldn't just cough up money. I think 
that's worthy of a medal. It shows that he understands the task at hand and 
gets on with his job. Anything good that came out of the Primakov government 
has to be 80 percent attributed to Zadornov. And I'm not just saying that 
because he's my friend, I'm just saying things as they are.

RJ: He's not been tempted by demagogic tactics?

YY: He's got no need for such tactics. If he loses now, he'll come back to 
win at a later date. He's only 36 and there'll be plenty yet for him to do. 
He's not on the blacklist of people like me, Yakov Urinson, Yegor Gaidar and 
others who carried out reforms. There's last year's crisis connected with his 
name, but it's clear now that the crisis was a blessing for the country. The 
people suffered, but the economy will be the healthier for it all.

RJ: What should Zadornov be doing now?

YY: He should do just what he's been doing up to now. There's only a limited 
range of options. We need an agreement with the International Monetary Fund, 
and we need to start talks on restructuring our debt. We also need to balance 
the budget and meet our planned target for a primary budget surplus. 

We have to stick to our guns. The future of the Russian economy depends on 
winning the confidence of both foreign and Russian capital. If we can't build 
this confidence, we may as well all just pack up and leave, because it won't 
be possible to survive in this country. If there's no growth, we won't be 
able to solve our problems, and there'll be no growth without investor 
confidence. 

It's a logical chain, you need a climate of confidence, you win confidence by 
having a sound budget, when you have confidence, you can pay your debts. To 
win confidence, you need to show your willingness to pay your debts by 
improving the general economic situation-cut back the use of barter, improve 
tax collection, pay off wage and pension arrears. These are really the 
minimum conditions for restoring confidence. 

The world economic climate is coming right now-we mustn't forget that the 
Russian crisis was part of a world crisis. If there are signs of recovery on 
the markets of Brazil and Southeast Asia, then we too should expect to 
benefit. But we mustn't forget, either, the importance of confidence. We went 
under not because of an unfavorable economic climate, but because of an 
absence of confidence. 

Last year, I met with Claude Trichet, one of the world's best economists and 
chairman of the French Central Bank. I told him about our problems and asked 
him what he would do. He wasn't able to give me any clear answers. You'd get 
the same reaction from many of the world's top economists, or else they'd 
just tell you a load of nonsense. Everything was nonsense in our economy 
until the GKO pyramid collapsed, and then there was less barter, fewer 
non-payments, because the pump that was siphoning off all the money had 
broken down.

RJ: Now, Zadornov is going to have to get his economic reforms through the 
Duma. Most likely, they won't get through. What then? Will talks with the IMF 
break down?

YY: They could. But I think the government should stand firm, because what is 
at stake is not these $4 billion that we hope to get from the IMF, but $70 
billion-the amount of our $150 billion debt that we hope to have either 
restructured or written off. Without this breathing space, our economy won't 
see any growth for at least the next 10 to 15 years, because a third of our 
savings will be used to service our debts.

RJ: So the government will insist on these laws being adopted?

YY: That's raising the issue of confidence again.

RJ: The Communists say the confidence issue can be resolved, but the proposed 
laws are a separate issue.

YY: The laws and the confidence issue are linked. If the laws are adopted, it 
resolves the confidence issue. If not, then we go to the president and ask 
him to accept our resignation. Let him decide: either them or us.

RJ: No attempts to reach a compromise then?

YY: No, we can't say there would be no discussion at all. But we need to 
clear the situation up. It's all the same to the IMF whether we have excise 
duties on petrol or an imputation tax, they just want to see the money coming 
in. Some compromise is possible, but I don't think it would be right. 

It just astounds me to see people taking Maslyukov more seriously than 
Aksyonenko. We have to stand firm. We can't forget that Russia is in a 
critical state, we don't have time to play around. The need to take a tough 
stance could undermine Stepashin's position, but then, I think no one is 
undermining Stepashin's position more than Abramovich and Berezovsky. On the 
other hand, if Stepashin does something like Primakov, when he turned the 
plane around over the Atlantic, that could win him some popularity. People 
will say that he's decisive. 

At the moment, he can show openness and tolerance, but that can't extend to 
questions of principle. We can't bargain about the IMF and debt restructuring 
because that would ruin our chances for the next 15 years. We can't deprive 
our children and grandchildren of their future. We have to find solutions to 
our problems, not reach agreements with the IMF. What do we need an agreement 
with the IMF for? In order to solve our problems. It's not agreements we need 
now, but action. We don't have the internal resources to fight, so let the 
IMF help us out. Let them say "You get these laws passed in parliament or 
through some other procedure which will enable them to be implemented, and 
that's that." 

RJ: Including by dissolving the Duma?

YY: Well, why not? That's not exactly what they want to happen, but what can 
we do if that's what it comes to? Of course, the IMF will want everything to 
be in full compliance with the constitution. The Duma could be dissolved, 
elections would be held 3 months later and then the laws would be adopted by 
the new Duma.

As a Russian patriot, I say that if I were Michel Camdessus, I wouldn't 
accept any compromises. We've already spent so much time wasting time, saying 
we've got a liberal regime, complaining about how the Communists and 
nationalists are hindering us. But what have we achieved? All these 
compromises have done us a disservice. It's like with Gorbachev when he went 
begging for loans. He got them, and now we have Soviet debt amounting to $100 
billion, two thirds of our total debt. But the lending organizations kept on 
giving in and handing out the money. 

RJ: If Stepashin's government has some success, will the right have any hope 
in the elections?

YY: The right as such, Right Cause, for example, doesn't have much hope of 
success. As for Stepashin's government, they don't have the time to really do 
the necessary promotion before parliamentary elections. They're not known 
yet, they don't have any base to rely on. Stepashin could try promoting 
himself as a candidate for the presidential elections, but only if he's able 
to reach an agreement with the governors and draw them away from Luzhkov, 
something it will be difficult to do, but nonetheless possible. 

RJ: Stepashin could try and rally the Right, give someone like Vladimir 
Ryzhkov a chance, if Viktor Chernomyrdin is got out of the way, and unite 
with Sergei Kiriyenko and Right Cause.

YY: They wouldn't get more than about 6 or 7 percent and that's not much.

RJ: But if everyone united behind the government, that would increase the 
Right's chances.

YY: Yes, it would.

RJ: A last question about the Central Bank. Do Stepashin and Zadornov have 
sufficient powers to make macroeconomic decisions, or will Viktor 
Gerashchenko get in the way?

YY: That's a difficult question. So far, Gerashchenko has been reasonably 
effective on macroeconomic issues. I don't know what the consequences will 
be. I'm worried about what's happening with our currency policy, but so far, 
the ruble is holding firm. The main problem, though, is capital flight, and 
nothing is being done to solve that particular issue at present.

RJ: What about the restructuring of the banking system?

YY: That's the most important issue. We're looking at a big failure here. 
Restructuring of the banking system, banking supervision, it's not working, 
despite all the measures that have been taken. And, coming back to our talks 
with the IMF, we keep forgetting that the proposed tax reforms are only one 
part of the overall package of laws. The other part is the restructuring of 
the banking system. I don't know which is more important. 

Revoking the licenses of 22 banks was an important measure, but we can't 
achieve much without a well-organized system of banking supervision. The 
system that we have hasn't improved, it has got worse since the time when 
Sergei Dubinin was chairman of the Central Bank. So I can't draw any clear 
conclusions about Gerashchenko, whether he should stay or go. Perhaps it 
would be a good thing to have someone else in that post, but you have to 
remember that there is a whole legal procedure to go through, and it is 
harder to remove a Central Bank chairman than a head of government. The Duma 
would have to approve it, as would the Central Bank's board of governors. 
This would all be problematic, so I think that for the time being, we could 
leave Gerashchenko where he is and try to work with him.

*******

#17
Report of Chubays Interest in Tyumenenergo Deal Denied 

MOSCOW, May 31 (Interfax) -- The media reports 
that Tyumenenergo will be detached from Russian Unified Energy Systems 
(UES) and sold to Sibneft and that UES board chairman Anatoly Chubais has 
vested interests in this deal are untrue, UES public relations chief 
Andrei Trapeznikov said in a report made public on Monday. Keeping the 
Russian power grid an integral whole is one of UES' guiding principles, 
he said. UES strongly opposed the Duma bill providing for detachment of 
Tyumenenergo, Trapeznikov said. He quoted Chubais as saying that he, 
Chubais, will not allow the detachment of Tyumenenergo or any other 
energy system from UES while he chairs the company's board. Valentin 
Bogan, Tyumenenergo general director, supports this view, Trapeznikov 
said. Trapeznikov said that he was pleased that the Duma will not debate 
the said bill after all. 

******