June 22, 1999    
This Date's Issues: 3354 • 3355 •

Johnson's Russia List
#3355
22 June 1999
davidjohnson@erols.com

[Note from David Johnson:
1. AP: Judith Ingram, Russia Still Mired in Crisis.
2. AP: Barry Schweid, Clinton, Yeltsin Going Steady Again.
3. CSIS: THE FOREIGN POLICY OF ARMENIA.
4. Announcement of internet conference on sexual trafficking in
Russia.
5. IMF: Michel Camdessus, Russia: In Search of a Vision to Revitalize 
Reform.
6. Washington Post: Sharon LaFraniere, Mother Russia's Poisoned Land.
Polluted Cities Must Choose Between Hunger and Disease.
7. Itar-Tass: Russia Culture Plays Huge Role in the World.]

********

#1
Russia Still Mired in Crisis
June 22, 1999
By JUDITH INGRAM

MOSCOW (AP) - The terrified depositors massed outside closed bank doors
have melted away. Shelves emptied of imported meats, milk and canned
vegetables are filled again, this time mostly with cheaper Russian-produced
food.

The panic has subsided. But it's due to resignation, not to hope.

The economic crisis that began in Asia two years ago caught up with Russia
last August, sending the ruble plunging, virtually shutting down the
nation's largest commercial banks and forcing the state to default since
then on most of its debts.

Unlike some Asian governments that have scrambled to dig themselves out of
the hole, Russia has done little to address the fundamental faults that
destined its markets to collapse.

``Russia stands today in a place not all that different from where it stood
nine months ago,'' said Charles Blitzer, chief international economist at
the U.S. investment firm Donaldson Lufkin & Jenrette.

``The economy is bouncing along the bottom; it's taken virtually no actions
on the structural side, be they to restructure banks, improve corporate
governance, build more effective institutions, or redefine the expenditure
pattern of the government.''

Instead, political leaders and commentators across the spectrum tried to
assign blame - usually pointing the finger at Western organizations like
the International Monetary Fund and at Russia's own post-Soviet market
reformers, who tried to blame the West.

Yevgeny Primakov, who was named prime minister in September, had two broad
economic aims: establishing stability and, in spite of Russian sniping at
the IMF, unlocking a loan from the agency to help service the country's
foreign debt.

The IMF froze a loan package worth $22.5 billion after the August financial
collapse. It has made a new $4.5 billion loan contingent on parliamentary
approval of a package of laws intended to increase government revenue,
combat corruption and restructure the commercial banking system.

Aside for pushing for approval of that legislation, Primakov's government
could claim some marginal economic improvements. Tax collection and foreign
currency reserves increased, while inflation slowed. Industrial production
increased. Barter payments fell. The government paid off back wages for
state workers and military personnel.

Primakov's successor, Sergei Stepashin, vowed to uphold the stability and
to continue working intensively to clinch the IMF loan.

``For a country that experienced a major financial crash ... the country is
in surprisingly good shape from the economic, political and social point of
view,'' said Russian economist Leonid Grigoryev. ``We don't have ... a
populist government or a major danger of inflation.''

Still, about one-third of Russians live below the official subsistence
level, and 14.4 percent of the work force is unemployed - and that figure
doesn't include the millions who are underemployed or who work for little
or no pay.

Russia also faces $17.5 billion in foreign debt payments this year, but can
pay only half that amount at most. About $1 billion is being smuggled out
of Russia each month.

President Boris Yeltsin has pledged repeatedly to turn Russia into a
capitalist economy, but has never formulated or adopted a coherent,
pro-market strategy.

With Russia's revolving-door governments, a Communist-dominated legislature
averse to market reforms and a population weary of the post-Soviet economic
slide, it's hard to imagine who would lead the campaign to correct
deep-seated structural flaws. That would include shutting down inefficient
industries, cutting back social subsidies and ending the sweetheart deals
between the state and tycoons close to the government.

``It's a question of political will and of national consensus. Russia
doesn't have a clear idea of what kind of country it wants to be, much less
how to get there,'' Blitzer said.

With parliamentary elections coming in December and a presidential election
due by next June, the prospects of any meaningful reform become ever dimmer.

``Over the course of the year, we've seen a shift away from any real
attention to economic reform to attention to the handover of power, playing
out the end game of elections,'' said Rani Kronick, senior consultant at
Control Risks Group Ltd. in London.

********

#2
Clinton, Yeltsin Going Steady Again
June 22, 1999
By BARRY SCHWEID

WASHINGTON (AP) - Somehow Boris Yeltsin always finds his way back to Bill
Clinton, and there are good reasons.

Russia needs help for its economy. And that means President Yeltsin needs
help from President Clinton. Russia improved its chances by reaching an
agreement on how its peacekeeping troops would operate in Kosovo.

The Russians even got something out of submitting to a unified NATO
command. A Russian will be commander at the Pristina airport, which Russian
troops had occupied to the surprise of NATO.

But Yeltsin gave as well as received at last weekend's summit of the
world's industrial powers at Cologne, Germany.

For the first time, he offered to talk about rewriting parts of the 1972
Anti-Ballistic Missile Treaty, the sacred bedrock of arms control.

That could make it easier for Clinton to deploy defenses against Chinese,
Iranian and North Korean missiles, real or merely feared.

Yeltsin's concession just may take the heat off Clinton in Congress, where
several Republican senators want to scrap the treaty and its limits on a
national missile defense.

Helping each other out, Clinton agreed to a new round of weapons reduction
talks, which could spare cash-strapped Russia from attempting to match the
U.S. arsenal. And Yeltsin again promised to push the Duma, the lower house
of the Russian parliament, to ratify the 1993 START II, which requires each
nation to reduce the number of its long-range warheads.

``We need to make up after our fight,'' Yeltsin declared during bear hugs
at the summit.

The jolting dispatch of Russian troops to Kosovo was only the most recent
problem.

Russia had objected vehemently to NATO's use of force against Yugoslavia,
as it had objected to using force against Iraq for turning away weapons
inspectors.

Yeltsin could stop neither assertion of U.S. power, but he got the most he
could out of it, as he did out of NATO's absorption of former Soviet
allies, another move he was powerless to prevent.

For going along with the eastward spread of the alliance, Yeltsin got ties
to NATO that he claimed gave Russia a voice in its decision-making.

On Kosovo, Russia got to play a mediation role with Yugoslav President
Slobodan Milosevic, as well as a peacekeeping role, and the G-7 nations
pledged to reschedule billions of dollars of debt.

Russia may no longer be a superpower, but it is being treated almost as one.

``We can't guarantee peace in Europe without Russia,'' German Chancellor
Gerhard Schroder said.

The big economic prize for Yeltsin is still to be earned.

Russia must step up economic reforms to meet the International Monetary
Fund's requirements for a $4.5 billion loan.

That depends on the Duma approving taxation and other belt-tightening
measures. The omens are not bright. Last week, the Duma refused to raise
gasoline taxes.

The other half of the prize Yeltsin seeks is to have its Soviet-era debts
with several nations rescheduled. And that depends on satisfying the IMF.

Clinton told the Russian people in a television interview Sunday their
country would not prosper ``until your country makes the basic changes
every country must make to function in the global economy.''

Even with the presidential disclaimer, one knowledgeable outsider, Dimitri
Simes, a Russian emigre who is president of the Nixon Center think tank,
says ``it is quite clear Russia is getting a payoff for its cooperation on
Kosovo.''

In an interview, Simes said chances the Duma would pass a package of IMF
reforms ``went down the drain'' when Yevgeny Primakov was ousted as prime
minister in the spring.

Russia is ``a beggar state,'' Simes said, with Yeltsin doing what the
United States wants him to do.

With the Russian people aware of the situation, Simes said, ``you can ask
yourself if the U.S. tactical victory is worth the alienation of the
Russian people from the United States.''

Similarly, Michael Mandelbaum, who directs the Council on Foreign
Relations' East-West project, says Yeltsin caved in on the Kosovo
peacekeeping operation ``in order to get paid; he sells out Russia's
national interest to get a new loan.''

``The thing to remember is there is public opinion in Russia, and this is
not making a favorable impression on them,'' Mandelbaum said.

On the other hand, Spurgeon Keeny, the president of the private Arms
Control Association, says both Clinton and Yeltsin seem anxious to repair
the damage over Iraq and Kosovo.

``I was encouraged they both reaffirmed their commitment to the ABM treaty
as a necessary component of stability, and the necessity of deep reductions
in weapons,'' Keeny said.

``This is a positive development because clearly there are those on the
(Capitol) Hill who want to destroy the treaty and have been using Russian
inflexibility as part of their arsenal in attacking the treaty,'' he said.

********

#3
Date: Mon, 21 Jun 1999 
From: "Amanda Lahan" <ALahan@CSIS.ORG> 
Subject: THE FOREIGN POLICY OF ARMENIA

CSIS
Center for Strategic & International Studies
Russian and Eurasian Program

THE FOREIGN POLICY OF ARMENIA
SPEAKER:
The Honorable Vartan Oskanian, Minister of Foreign Affairs,
Republic of Armenia
June 29, 1999 3:00 * 4:30 p.m.

I hope that you can join us at 3:00 PM on Tuesday, June 29, to hear the
Honorable Vartan Oskanian, the Minister of Foreign Affairs of the Republic
of Armenia. He will survey all aspects of Armenia's external relations.
Minister Oskanian will be speaking in English, on the record, and will take
questions.
Vartan Oskanian was appointed Minister of Foreign Affairs in April 1998.
After receiving a Bachelor's Degree in civil engineering from Yerevan
Polytechnic Institute, he has earned Master's Degrees from Tufts, Harvard,
and Fletcher. He joined the Armenian Foreign Ministry in 1992, and has
headed Armenia's delegation to the Karabakh negotiations since 1995.
We look forward to seeing you on June 29. Please note the unusual time.
If you would like to attend, please contact Jeffrey Thomas or Amanda Lahan
at (202) 775-3240 or fax at (202) 775-3132. 

*******

#4
Date: Mon, 21 Jun 1999 
From: MiraMedUSA@aol.com (Juliette M. Engel)
Subject: announcement of internet conference on sexual trafficking in
Russia

On June 29 from 3 AM to 5 PM Moscow time, MiraMed is sponsoring an All-NIS 
chatroom on sexual trafficking. We would like to invite the international 
community to join women and human rights organizations from across the Former 
Soviet Union and Mongolia who will be coming online to discuss trafficking in 
their regions.

Here are the details: 

AN INVITATION TO THE INTERNATIONAL COMMUNITY TO ATTEND AN ALL-CIS SEXUAL 
TRAFFICKING INTERNET CHATROOM CONFERENCE 

The international trafficking of tens of thousands of CIS women and children 
for purposes of forced prostitution in over 43 countries of the world has 
become a tragedy which will have immeasurable impact on the population of the 
Former Soviet Union for generations to come.

It is a situation that can only be stopped by a combined strategy of 
collaboration between foreign organizations working on this problem and local 
CIS organizations struggling to find ways to control this cruel practice in 
their communities. 

A major problem always confronting CIS organizations is the difficulty of 
communications between regional boundaries. The post is unreliable, 
telephone service is expansive and with decreasing salaries, travel is 
usually impossible.

However, the internet is accessible to all groups through the free access 
University Internet Centers which are found in 55 regions of the CIS. All of 
these centers offer free access to the internet to community groups and many 
NGO's have computers in their homes or know someone with a computer at home.

Expanding on the use of the internet, MiraMed Institute is sponsoring a 
series of live Anti-Sexual Trafficking chatrooms. The first chatroom will be 
open on June 29 from 3 AM to 5 PM Moscow time so that participation can be 
scheduled in each region of the CIS from 3 to 5 PM local time. The chatroom 
will allow local groups to speak with groups from other regions, oblasts, 
cities and countries. Participation requires that you have an internet ready 
computer. Next week we will send you the private internet address which will 
take you into the chatroom on June 29.

We are looking for participants from the international community with 
computer access who are willing to be moderators for two hours during the 
chatroom. International moderators will be paired with a CIS counterpart. 
The chatroom will be in the Russian language and will require Russian 
internet compability. 

Moderators will be asked to welcome new guests who sign into the chatroom, 
and to keep the flow of conversation going by asking questions that we will 
suggest as well as questions and suggestions of their own. 

Following the conference, we will ask moderators to give us input in the form 
of an e-mail summary after the chatroom to let us know what can be done to 
improve the format so that the next chatroom is better.

This is the first chatroom that most of the participants will have 
experienced and therefore our goals are to begin dialogue between regions and 
between local CIS groups and international organizations via the internet and 
to acquaint participants with the use of the chatroom technology so that they 
can participate in a series of chatrooms that will be sponsored by MiraMed 
Institute on sexual trafficking. The next chatroom is scheduled for 
September.

If you would like to be a moderator, please contact us by e-mail so that we 
can schedule you, send you the special URL that will let you into the 
moderator section of the chatroom and a list of discussion questions.

To participate as a "guest", you can log on any time on June 29 between 3 AM 
and 5 PM Moscow time.

The private URL for the conference is:

http://miramed.glas.net/

We hope to meet you there in Cyberspace on June 29!

Please send responses to both of the following addresses:

julietta@glasnet.ru
puchko@dol.ru

Best wishes,
Juliette M. Engel, MD
MiraMed Institute
julietta@glasnet.ru

*******

#5
From: FWERMARTH@aol.com (Fritz Ermarth)
Date: Mon, 21 Jun 1999 17:18:46 EDT
Subject: Camdessus Speech, 16 June 99, St. Petersburg
To: davidjohnson@erols.com

David: Here is an item on the WC (Washington Consensus) coming around. 
Perhaps someone will wake me up and tell me that the speech was actually 
given in 1993 but got mislaid. FWE

Russia: In Search of a Vision to Revitalize Reform 
Address by Michel Camdessus 
Managing Director of the International Monetary Fund 
at the St. Petersburg Economic Forum, Russia 
June 16, 1999 

Thank you ladies and gentlemen. I take it as a great honor to address this
Economic Forum, whose search for a vision for the future of Russia takes
place in midst of, and hence is symbolically rooted in, the history,
culture, and beauty of this incomparable city, a splendid symbol of the
unique contribution of Russia to the world civilization and of its promise
for the future. 

Coming to St. Petersburg I find myself infected with the fever that has
gripped your country in celebrating the bicentenary of Alexander Pushkin.
Unable, alas, to read him in his own language, I was nevertheless not only
touched by his poetry but was impressed to find that he was also versed in
contemporary economics. It seems that his immortal character, Eugene
Onegin, of whom he said: 

"Theocritus and Homer bored him, 
but Adam Smith restored him, 
And economics he knew well" 

understood that what makes a nation prosper, was not the mere possession of
gold but the capacity to produce goods. By contrast, Eugene's more
profligate father did not quite comprehend these principles, and in the
pursuit of easy money mortgaged all the ancestral land he
could.<#P36_1415>1 Would you not agree that many economic crises of the
last twenty years, not to say of the last twenty months, have demonstrated
that many in the world who pretend to run national economies should read
Pushkin again? As far as we are concerned here today let us examine the
conditions for increasing Russia's capacity to produce more goods and find
"the ways in which a state progresses" while preserving a just and
harmonious social order. 

Let me first, however, place Russia's present problems in a broader, global
perspective. In my frequent visits to Russia and the other countries of the
Commonwealth of Independent States (CIS), I have been privileged to witness
at first hand two major economic phenomena of the 1990s that have converged
in Russia. One has been the explosive growth and increasing integration of
the global capital markets as international investors have sought new
opportunities, especially in the "emerging market economies," at a far
higher level than in previous decades. The other has been the transition of
Russia and its neighboring countries from central planning to
market-oriented economies. However, in the past two years, both these
phenomena were interrupted abruptly. In August 1998, Russia suffered a
major domestic financial crisis-I do not need to remind you of that. But,
in a sequence of events that began in mid-1997, the global economy has
suffered the greatest threat to its stability in the past half-century.
After a long period of remarkable growth, crisis struck some of the
countries in Asia that had shown the strongest growth, and then, it
threatened other countries around the world, not only the emerging markets
in other regions such as Latin America, but even the financial markets of
the industrial countries. 

The two crisesone national, the other globalare not unrelated. Russia's
turmoil has contributed to the severity of the global crisis, and in turn
has been worsened by some of the effects of that same crisis. Among the
pressures that contributed to Russia's financial crisis in August 1998 were
domestic economic imbalances and policy shortcomingsan internal dimension
to the crisis. But there was an external dimension too, that reflected the
deteriorating international conditions of the time, especially declining
oil and commodity prices, a risk to which Russia, due to its still
excessive dependence on energy products for its exports, was particularly
vulnerable. When crisis struck in Russia, the reverberations were felt
around the world, as investors pulled back from lending to emerging market
countries generally, confirming that the world was confronting not an Asian
crisisas we had portrayed it until thenbut a global crisis. 

What is the outlook now? During the last few months, the global situation
has improved considerably, even if risks remain. In particular, the Asian
countries are well on the road to recovery, and those in Latin America are
not far behind. The many policy changes and reforms already launched, give
these countries the opportunity to emerge from the crisis stronger than
before, as long as they keep up the momentum of reform. 

This experience is one of the reasons why I continue to be confident about
Russia's longterm prospects. To be sure, Russia faces a similar range of
economic problemsmacroeconomic imbalances, incomplete structural reform,
weak system of governance, and heavy use of external borrowingthat were
found in differing degrees in other countries in crisis. And it faces
unique economic and political challenges, as it struggles to emerge from
its seventyyear legacy of soviet economic management. Having been close to
those in charge of handling these issues, I know well how hard it is. But,
even if the present crisis is still far from being resolved, the country is
endowed with enormous economic potential. No amount of poor policy or bad
luck can destroy the resources, the land, or the people's education,
talent, energy and spiritual values. Yes, these strengths can be, and have
been, misused or neglected. Yes, the situation you are in now is
particularly difficult. But there is absolutely no reason, given the right
policies, the political will, andof coursepatience and time, why Russia
should not be able to move forward into an era of growth and prosperity. 

And some hope may also be found in the economic performance in the early
months of this year, when the economy has been growing againadmittedly from
a very low leveland the rate of inflation came down quickly to 2 percent in
May. Yet these gains are modest, indicating that Russia's condition is not
hopeless, but that the task has barely begun of establishing sustainable,
high-quality growth in Russia. That will not happen until the extremely
large stock of Russian savings held abroadeffectively one of Russia's most
valuable assetsbegins to flow back into the country. And they will if the
right policies can be found to encourage their repatriation and to promote
new saving. And they will, since capital goes to lands of opportunities,
and the priority task for you is precisely to reveal to the world that
Russia is again a land of opportunity. 

Given today's difficult situation, it is perhaps understandable that there
are some who attribute the country's problems to the failures of the last
decade of reform and blame Russia's woes on the move toward the market
recommended by the IMF. Nevertheless I cannot share this analysis. First,
because it gives too much importance to the IMFsomething I could live
with.....but, more seriouslybecause it just ignores history and if I may
say so, geography. 

History, yes, as it ignores how harsh the 20th century has been for Russia.
The war and revolution literally interrupting the trend of reforms which
had been just initiated at the end of the last century to address problems
which consequently are still with you. In reading recently extracts of a
book by Jean de Bloch, published exactly a century ago, about the finances
of Russia at that time, I had, I must say, the impression of reading a
back-to-office report of an IMF mission in 1999 deploring the "bureaucratic
mechanism" that confronts you<#P50_8071>2. And that analysis ignores also
geography, as it does not recognize that several of your problems reflect
an almost universal syndrome of incestuous relationships between
governments, banks and enterprises. Those who consider that Russia is in a
uniquely desperate shape should refer to the newspapers. Have they not
seen the students demonstrating in Jakarta carrying banners proclaiming
"down with corruption, collusion, nepotism"? What we saw in Asia was
labeled "crony capitalism," but it has other names in other
places"oligarchism" for instance. These are universal risks democracies can
and must overcome. And Russia, which went through this difficult century
giving the world outstanding demonstrations of the heroism of its people,
the outstanding quality of its research and technology and of its capacity
to preserveeven when they were hiddenits religious and spiritual values,
Russia can overcome similar dangerous scourges. Yes, it can regain new,
rapid, sustained momentum in its efforts to integrate itself in the
globalized economy of the 21st century, reconciling the values of
modernity, democracy, and market economy with the admirable heritage of its
patriotic, cultural and spiritual values. 

But how? I should be the last in this room to answer this question.
Indeed, you are the ones who will answer it. But, I understand that you
want me to speak since you welcome me as a friend whose job is full of
opportunities for dialogue with people around the world confronted with the
urgency of similar reconciliations. So be it! But please take my words
only as suggestions for your own reflection and debate, and of course,
forget them if you have the feeling that I, too, need to learn more about
Russia's history and sociology! 

How? Understandably the crisis of 1998 has led to a reevaluation of the
strategy of reform, and some deceptively easy solution have of course been
suggested. 

One is to return to the command economy. I understand that for many, life
is so hard that such nostalgia could manifest itself. But, I believe this
is not the answer, as it would mean isolation, and deeper economic
stagnation and social collapse. 

Anothernot that differentis to become more isolationist, to protect Russia
from the cold winds of international competition. But this would ignore
the universal experience showing that countries that integrate fully with
the world are the ones that prosper the most. And, please tell meare not
the very splendours of this city an illustration of the capacity of your
people to produce not only adaptable and unique Russian masterpieces, but
also prosperity, out of its openness to the world? 

A third dead end is for the government to borrow more: your experience
with foreign borrowing, which has now been largely cut off does not need
commentary. And Russia's bitter experience has shown also just how
inflationary recourse to borrowing from the central bankprinting moneycan
be. Then what? 

* * * * 

Mr. Chairman, there are no easy answersno quick fixesfor such formidable
challenges. An economic stalemate exists that calls, no doubt, for
profound changes in the way in which economic policymaking, lawmaking,
public administration, business, and the people's needs are reconciled.
Though I hesitate to use the language of an 18th century French philosopher
who had almost everything wrong in his philosophy and who, furthermore, had
not the privilege, as did Voltaire and Diderot, of the friendship of your
Catherine the GreatI talk about Jean Jacques RousseauI would say that your
basic challenge now is to put together a new "contrat social," a genuinely
Russian social contract among the different sectors and institutions of
societygovernment, enterprises, individualsthat establishes arm's length
relationships among them and fosters quality, efficiency, integrity, good
faith, and transparency in their relations. These are values you can find
in your traditions and which precisely characterize the relationships in
most well-functioning economies, where they did not come about by accident
nor are they maintained without effort and vigilance. I see with sympathy
and admiration many Russian leaders in the Government, in the Parliament,
and in civil society taking initiatives which seem to be converging toward
a consensus among all key groups in society to create something very
similar to such a new social contract. What might be its key economic
elements in a democratic market economy context? Let me mention just a few. 

First, the state must complete the process of transforming itself from
being the central economic actorplanning, producing, setting pricesto being
the originator and upholder of the rule of law and of basic social
protection. Its task is to focus on creating an environment in which
private enterprise can flourish. Its legitimate role is to set the legal
framework for the operation of the market; to act as regulator and
supervisor of essential standards and practices, and to formulate broad
economic and social goals and policy. It must withdraw from day-to-day
business activity, from granting dispensations and waivers to the law. And
it must withdraw from promising what it cannot deliver anywheredecent
social protection for allif the budget is unable to collect the resources
needed for this most legitimate purpose. 

Equally fundamentally, the basic reorientation of the economic structure of
the country should be completed to make it more open and competitive, a
point succinctly conveyed by President Yeltsin in his March 1999 speech to
the Federal Assembly when he said, "The motto of the [21st] century is
competitiveness and integration into the global processes." This will
entail undertaking the long-term task of restructuring industry, including
privatization. It will also mean trade reform and a well-sequenced approach
to liberalizing capital flows that is supported by appropriate structural
reform and macroeconomic policy. 

Second, productive and financial enterprises need to complete the process
of delinking themselves from government while behaving as exemplary
citizens. 

They should no longer spend their time in ministerial offices seeking
favored treatment, import protection, tax breaks and subsidies, but to do
their job of building businesses that increase production, exports and
income for the country. This will mean accepting the international
standards of corporate governancein other words to cultivate a culture and
style of management that values transparency, and accountability. It will
also mean, operating within a legal system that defines property rights,
enforces the honoring of lawful contracts, and actively imposes the
sanctions of bankruptcy and tax diligence when necessary. The financial
system must make itself effective in order to provide a medium for payments
and for channeling resources from savers to productive investors in the
country. In return, all enterprisesprivate or public, domestic or
foreignshould expect to receive even-handed treatment by the authorities. 

Third, nowhere in the world do we find a well-performing economy that works
on the basis of barter and non-monetary transactions. So it is urgent to
rid the country of the culture of non-payment, to move back to a monetized
economy, and to root out corruption. For that the government should ensure
that: 

In all public institutions transparency and accountability prevail, and,
alas, we are not yet there! 

The rule of law is fostered through a central body of legislation backed
up by an effective and independent judicial system and a set of standards
and codes of practice, supported by strong regulatory and supervisory
bodies, 

Its debts are paid and arrears eliminated be it for wages, pensions,
supplies or foreign creditors; 

The tax system is simple, fair and efficient, based on transparent laws
and an effective administrative system, 

A clear demarcation is established between the federal government and
regional governments, ensuring that their respective responsibilities are
clearly established and that adequate resources are available to perform
their respective functions. 

Last but not least and certainly central to a solid social contract,
Government and Parliament must establish a clear and unambiguous commitment
to equity in society. The concept of equity, is to a large extent, tied up
with national culture, but it should be self-evident that commitments in
this area are an essential ingredient for defining any national vision of
the future. It starts with a very straightforward requirement: to put an
end to the ability of unscrupulous people to take for themselves revenues
and assets that belong to the State or to other people. Nothing has created
so much inequity, or undermined popular support for reform so much, as the
sight of large-scale misappropriation of public revenues and assets. Any
social contract worthy of the name, and any society with Russia's
traditional concern for community, must overcome this canker. The
population should be assured also of equal access to opportunities for
education, health care, and provision for the elderly. And clearly in
Russia's situation, with a long road of reform lying ahead, it is essential
that there be an adequate social safety net to assist those vulnerable to
the costs of economic change. This is basically a matter of giving greater
weight in government budgets at all levels to the social needs of the
population than to the demands of particular economic interest groups. But,
for that, Mr. Chairman, the state must be endowed with sufficient resources. 

When talking about the social element of a "social contract" in a
democratic country, we should not lose sight of the cornerstone on which a
democracy is built: the consent to and compliance with taxation. This is
not only a basic requirement of democracy but also of a soundly working
social market economy. The state cannot face its social responsibilities
if citizens and enterprises evade their duties as taxpayers, or pretend to
wait till the moment the tax system will be fair in their own eyes to start
complying with this primordial duty of free citizenship. Hence our
insistence and support for Russia in resolving its fiscal problem so as to
be able to build its own brand of a successful social market economy. 

* * * * 

Mr. Chairman, talking about "social contracts" brings us, in a manner of
speaking to "day one" in the history of countries. And there is something
of this for your country, despite its already immense role in the history
of humanity, as you contemplate your challenges, your resources and your
ambitions for the future. On "day one" it is the society that defines
itself with less significant reference to the rest of the world. But at a
time when interdependence is so crucial, is there perhaps a role for the
international community to assist you in implementing your strategies, in
reducing the pain and duration of the initial adjustments? If you believe
so, then remember that the IMF has created for that and is ready to
continue its task here. 

The IMF has been in an active dialogue with the Government throughout the
period of the transition. I fully expect this dialogue to continue in a
constructive and mutually respectful spirit, with a realistic understanding
of what needs to be done. Our roleand that of the wider international
communityas you define your vision of the future; will be to help you find
the specific instruments that are needed to implement this vision; to
continue offering technical assistance for building the institutions of a
market economy; and to provide financing that is relatively short-term in
the case of the IMF and longer-term in the case of other agencies. But we
should not overestimate the importance of external financing. 

In short our aim is to help Russia help itself. The new Government's
economic program can be regarded as providing guidance for the first few
steps on the long journey. This program aims at overcoming the negative
economic and social consequences of the August 1998 crisis. If the program
is fully and steadily implemented, macroeconomic stability will be firmly
re-established through appropriately tight financial policies, and in
particular through a fiscal policy that enforces statutory tax liabilities
and government control over its spending commitments. At the same time, key
structural problems will be addressed through a comprehensive
programdesigned in collaboration with the IMF and our colleagues in the
World Bank and in the EBRDto restructure the banking system, as well as an
array of measures aimed at addressing the pressing problem of nonpayments.
The essential goal of external viabilitynothing can happen without thiswill
hinge on finding a solution to the external debt problem based on
cooperative relations with Russia's creditors. I note with pleasure that
some of the agreed actions have been taken, and this makes me confident
that Russia will now make rapid progress in the huge task implied by a
program designed to continue addressing your historic challenges. 

* * * * 

Mr. Chairman, those who are familiar with the IMF may be struck that in the
many measures that I have identified today, I have left it to very late in
these remarks to mention the concept of macroeconomic stability. I have
taken it as a sine qua non for progress, that a well-governed country will
have a sound fiscal and monetary framework as the foundation for all other
policies. I know that this is generally accepted in Russia, even though the
fiscal leg of the support for macroeconomic stability has yet to be
successfully constructed. 

My intention today has been to try to take the long-term view, to share
with you in your search for the long-range vision that could motivate the
development of Russia and to find the policies that are needed to realize
the vision. Growth in the economy and in living standards will come only
from a commitment of enterprises and individuals to their country, from
their willingness to invest their savings in Russia and to build for the
future rather than grab all that is available today. This in turn requires
a fair, stable, and safe environment for private business. And it is to
create this, as well as a just and harmonious society, that I have tried to
find in your own values the elements of a new Russian social contract. By
re-establishing the momentum of reforms the country can strengthen its
economy, increase stability, and raise the level of prosperity that the
people richly deserve. The task that you face is immense. And it is urgent
as your people need to see a strategy in place towards a better future. But
have no doubt that once momentum is reestablished, this great country has
the potential and the endurance to rebuild itself and to bring itself again
to occupy its place in the world at the forefront of the human progress,
culture and civilization. 

1 The full stanza is : "Theocritus and Homer bored him, 
But Adam Smith restored him, 
And economics he knew well; 
Which is to say he could tell 
The ways in which a state progresses - 
The actual things that make it thrive, 
And why for gold it need not strive, 
When basic products it possesses. 
His father never understood 
And mortgaged all the land he could.

Alexander Pushkin, Eugene Onegin, translated by James E. Falen,
(Carbondale, Illinois: Southern Illinois University, 1990), Stanza I.7., 

2 Jean de Bloch, Les Finances de La Russie au XIXe Sicle, (Paris, France,
1899), cited in Politique Etrangre, January 1999. 

*******

#6
Washington Post
22 June 1999
[for personal use only]
Mother Russia's Poisoned Land
Polluted Cities Must Choose Between Hunger and Disease
By Sharon LaFraniere (lafraniere@glasnet.ru) 

KARABASH, Russia—The mind-set of the residents of this small town in the
birch-dotted foothills of the Urals Mountains is summed up by a big black
headline in the multicolored brochure that city fathers hand out to
visitors: "Karabash -- Black Spot on the Planet."

Their log dwellings and small apartment buildings are literally surrounded
by black heaps of industrial waste 45 feet high. Vegetation is sparse, the
air smells acrid, and in the winter the snow is flecked with black grit.

More than the landscape is devastated. Two-thirds of the children suffer
from lead, arsenic or cadmium poisoning, according to health experts here,
near Russia's southern border with Kazakhstan. Studies also show high rates
of congenital defects, central nervous system disorders, cancer and other
major diseases.

Regional officials blame all this on a 90-year-old copper-smelting plant,
whose five tall chimneys loom over a polluted pond that schoolchildren trek
over when it is frozen. The plant's emissions are so hazardous that the
government shut it down in 1987.

But in April of last year, the Karabash Copper Smelting Works reopened. The
town's residents were desperate for jobs, and the government was desperate
for tax dollars from industries that needed Karabash's copper. "We didn't
have any alternative," said Alexander Gavrilov, chief of the region's
sanitary epidemiological service.

Such is Russia's unpalatable choice. A cleaner environment was one of the
main promises of the post-Soviet era. Soviet President Mikhail Gorbachev
pledged an ecological about-face, repair of the environmental destruction
of Soviet times, and enforcement of strict environmental laws by a new
environmental protection ministry. "We must make up for our negligence,"
proclaimed Foreign Minister Eduard Shevardnadze in 1989. 

But 10 years later, federal environmental programs are as bereft of funds
as Russia's Aral Sea is of water. Factories are dirtier than ever, and
workers are more afraid of losing their jobs than losing their health. The
only difference in some towns like Karabash is that residents now know the
factories are sickening their children. "If you are dying of hunger, what
do you care if you will die of cancer in 10 years?" said Vladimir
Tsirkunov, an environmental specialist with the World Bank. "Environment is
an abandoned child."

Russia is home to the unparalleled Siberian forest, the world's purest body
of water, Lake Baikal, and other ecological wonders. But the bulk of its
factories are obsolete, the sewage and water treatment systems are breaking
down, the oil pipelines leak, and the fast-multiplying number of cars on
the road -- one of the benefits of the new market economy -- is creating a
new and potent source of pollution. About a third of drivers still use
leaded gasoline.

The air is somewhat cleaner simply because so many factories have closed.
But about 44 percent of the population -- 65 million people -- live in
cities that exceed the Russian government's strict limits on air pollution,
according to its latest report on the environment. Most major rivers and
their tributaries are heavily polluted. The government says it cannot
guarantee the quality of the drinking water. Even the kitchen gardens on
which many Russians depend for food may be unsafe. More than 13 percent of
the soil tested is contaminated with heavy metals, oil, pesticides or other
harmful substances.

How pollution affects Russians' health is hard to gauge. Russians are the
exception to worldwide health trends: In most countries, people are living
longer and better, but Russians are sicker and dying sooner -- the average
male before age 60. But researchers blame the decline in health on the
breakdown in medical care and rise in poverty that came with capitalism,
not on pollution. Boris Revich, chief researcher with the Center of
Demography and Human Ecology in Moscow, estimates that 14,000 Russians a
year die from air pollution -- not a high figure. Twice as many die in car
accidents.

Nonetheless, pollution is clearly adding to Russia's public health burden.
Residents of heavily polluted areas suffer from higher rates of diseases of
the blood, lungs and glands, as well higher rates of nervous system
disorders and congenital defects, the government's report says. In
Chepaevsk, a town of 82,000 clustered around a chemical plant, a study
showed men are twice as likely to get cancer and more than twice as likely
to die of respiratory disease as in the rest of the province.

The Environmental Protection Ministry was set up to tackle such problems,
but Yeltsin reduced it in 1996 to an almost voiceless committee, and
funding has been drastically cut. The government devoted only a fraction of
1 percent of its 1998 budget to the environment, and spent even less -- by
some estimates, no more than $250 million. The U.S. Environmental
Protection Agency, by contrast, spent more than $7 billion.

Many Russian cities, left to finance their own cleanup projects, find the
cheapest fixes too expensive. Lori Freer, director of environmental
programs for the Moscow office of the U.S. Agency for International
Development (USAID), estimates low-cost antipollution devices -- covers for
factory furnaces and cement plant filters -- could save 1,700 lives a year
in Volgograd, an industrial city of 1 million. But the $100,000 price tag
is out of the city's reach. 

Several of the most polluted cities are in Russia's heavily industrialized
Urals region, known for the mountains that divide Russia's European sector
from the vast eastern territory. In Karabash, a town of 15,000 about two
hours south of Yekaterinburg, residents have all but given up hope of
government help. 

>From a distance, in the winter, their town resembles a Swiss hamlet. But
once the snow melts, there is no disguise for the towering black heaps of
slag that line the main road, encircle the factory and spill over into back
yards.

Slag, laced with lead, arsenic and cadmium, is the waste from the copper
smelting furnaces after raw copper is extracted from ore. Slowly, over the
decades, the town has been overwhelmed by it, as the Karabash Copper
Smelting Works turned out copper for ammunition in the 1940s and later for
foil, electrodes and terminals. The plant's chimneys also pour out
particulates that rain down into the soil.

A 1995 government study found children in Karabash suffer from at least
twice the rates of congenital defects, disorders of the central nervous
system and diseases of the blood, glands and the immune and metabolic
systems as kids in a nearby town. Health officials also suspect a high rate
of mental retardation among children, although the rate has not been
determined. The death rate is more than twice the birth rate, miscarriages
are common and only a third of deliveries last year were normal.

Gavrilov, who runs the region's epidemiological service, said physicians
won't stay long in Karabash. Nadezhda Ryabitseva, curly-haired and exuding
warmth and competence, has stuck it out for a year as chief pediatrician. 

The case of Yana Fomina, in particular, brings tears to her blue eyes. A
beguiling 8-year-old with a magenta ribbon twisted through her dark braid,
Yana wobbles through her grandparents' apartment on twisted legs, and
cuddles her plastic doll in warped arms. Her language is limited to words
like "come" and "mama." Ryabitseva, gently disengaging her hand from Yana's
clinging fingers, said Yana suffers from both a central nervous system
disorder and mental retardation. 

Yana's mother, a plant worker who doted on the little girl, died of cancer
last year at the age of 26. Her grandfather suffered a stroke at 51 after
three decades as a crane operator at the plant. Now he drags his right leg
as he watches Yana, and struggles to write his name for a visitor with his
left hand. "This is how we get by, day to day," he said. "We limp around
together."

Is the plant to blame? "For sure," he answered. "I think everything here is
connected with the plant. I think it should be closed forever and ever." 

Ryabitseva's files are full of such cases. The physician also sees
alcoholic, unemployed parents who neglect their children, and knows how
badly Karabash needed the 1,000 jobs that the reopened factory provided.
Not a single new enterprise opened up in Karabash in the past decade,
according to the mayor. 

But "the price is too high," Ryabitseva said.

Regional officials hoped for a better outcome in Karabash when they shut
the factory down in 1987, throwing as many as 3,500 people out of work. The
idea was to stimulate the owners to modernize it, while the government
relocated families who live closest to the chimneys and handed out food
supplements to help counteract the effects of heavy metal poisoning in
children. More ambitious plans called for replacing the contaminated top
layer of soil. 

"But you know what happened in our country," Gavrilov said. The program,
denoting Karabash as an environmental disaster zone, never amounted to much
more than a document. Regional officials finally decided the only potential
source of funds was the plant itself, and allowed it reopen, with somewhat
more efficient filters.

"Maybe you can help get some humanitarian aid for the people," Gavrilov
said. "The problem is almost unembraceable." 

Not every city in the Urals is so hopeless. In Nizhniy Tagil, a city of
390,000 about four hours due north, city officials are slowly, painfully
forcing metallurgical factories to modernize, relocating families from
neighborhoods that border the plants and refurbishing the water treatment
plant. 

Town officials don't underestimate their task. Even if they can clean up
the air and water, they face a huge public health problem. A 1992 study
found the rate of disease was four times higher than in nearby cities. The
rate of tumors in children was 12 times higher. Only about a fifth of the
city's children are considered healthy. Perhaps most worrisome, the level
of congenital defects is rising.

The federal government can claim little credit for Nizhniy Tagil's
progress: It came up with only 2 percent of the clean-up funds it promised
four years ago. USAID, in a pilot project, gave the town three times as
much, or about $9 million. 

To USAID official Freer, Nizhniy Tagil is one of the bright spots. But
there are three dozen more such cities in Russia, just as badly polluted
and just as much in need of funds.


Researcher Nathan Abse in Washington contributed to this report.

******

#7
Russia Culture Plays Huge Role in the World .

MOSCOW, June 22 (Itar-Tass) - The role of Russian culture in the world is
large, even larger than we can imagine, Viktor Loshak, editor-in-chief of
Moskovskiye Novosti (The Moscow News), a participant in the world congress
of the Russian press, told Tass on Tuesday. 

"The interest in everything Russian increased sharply in the world in the
eighties," Loshak said. He believes that any person approached in a street
of any country can name at least three great Russian figures. 

Loshak believes nothing gave greater popularity to Russian culture than
theatrical art. There exists no system more perfect than the Stanislavsky
acting system and there is no theatre in the world without works by
Chekhov, Gogol, and Ostrovsky on its repertory, he said. 

********