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Johnson's Russia List


July 4, 1999    
This Date's Issues: 3378  3379


Johnson's Russia List
4 July 1999

[Note from David Johnson:
1. AP: Human rights commissioner: Psychiatry underfunded in Russia.
2. AFP: Yeltsin eyes uncertain legacy in last year in office.
3. AP: Investment in Russia Drops 40 Pct.
4. Moscow Times EDITORIAL: Information Is a Pillar of Democracy.
5. Steve Kerr: Yeltsin as Revolutionary. (Re 3377-Interview with Gleb 

6. Financial Times: Andrew Mack, RUSSIA: Soviet paper introduces cover 
price. (Izvestia). 

7. AFP: Zinoviev stands up for dead Lenin.
8. St. Petersburg Times: Fyodor Gavrilov, Russian Spirit: Drunkenness Or 

9. Moskovskiy Komsomolets: Aleksey Zverev, Patriots' Games. Red Scraps. 
Map of the CPRF: The Landscape Before the Battle. (Communist Leaders, Groups 

10. Robert Devane: Re: Yale Richmond/Investing in Russia/3376.


Human rights commissioner: Psychiatry underfunded in Russia
July 2, 1999

MOSCOW - AP The treatment of psychiatric 
illnesses is disastrously underfunded in Russia, with less than one percent
the funds budgeted to the sphere being disbursed, the Interfax news agency 
reported Thursday.

Oleg Mironov, Russia's human rights commissioner, described the dire
in psychiatry in a letter to state leaders. Nationwide, he said, only 0.2 
percent of funds earmarked for psychiatric care are made available.

In the Moscow region alone, psychiatric hospitals got only 7 percent of the 
money due them for medicines last year, and only 20 percent of the amount 
required to feed patients.

Mironov said that the number of psychiatric patients who commit suicide out
a sense of abandonment has doubled in the last five years, ITAR-Tass
It did not give any numbers.

Russia's medical system in general has suffered severely from the nation's 
economic slide, as people's health has worsened and financial resources for 
treatment have dried up.

The problem existed long before last summer's financial crisis. Even before
Soviet collapse in 1991, patients were sometimes told to bring their own 
anesthesia, bandages, even plaster for casts if they wanted to be treated. 
Poorly paid doctors regularly demand bribes to perform basic procedures.


Yeltsin eyes uncertain legacy in last year in office
MOSCOW, July 3 (AFP) - Boris Yeltsin steps into his
last year in office Saturday exactly where he started eight years ago when
chosen Russia's first president -- locking horns with the Communists.

He is threatening to bury the mummified corpse of idolized Soviet founder
Lenin. He drops ominous hints about banning the Communist Party.

And he is again painting in characteristically broad strokes a vision of
Russia's chief defender of democracy saving the future from ghosts of its
bloody Soviet past.

But critics warn such tactics are futile because Yeltsin's place in history
is already reserved. His legacy to Russia may be a broke country still
reliant on raw exports and overwhelmed by battles between a band of rich
but not always righteous tycoons.

"The best thing Yeltsin can add to history books now is just to give up
power without a fight," said Russian analyst Andrei Piontkovsky.

Yeltsin on July 3, 1996 crushed Communist challenger Gennady Zyuganov by 10
million votes to win his second term in office.

He did so largely because the business elite, fearing that Communists might
roll back the privatization agenda, rallied around Yeltsin and used their
media holdings to lash Zyuganov without press freedom guilt or mercy.

It would be the last time the so-called Group of 13 tycoons ever saw eye to
eye again. It would also be the last time in months that Russians would see
their own president -- he vanished in hospital to prepare for heart surgery
that would eventually save his life.

The nation started to creep towards crisis. The state was in enormous debt
following Yeltsin's extravagant campaign and a brutal 21-month war in
Chechnya that killed tens of thousands and ended in an uneasy truce.

Russia began feeding itself on debt paper that fetched a handsome return
but ruined the government two years later when Moscow conceded default.

State sell-offs of property did little better. Most went for a song in
fixed sales that worked by a simple scheme: one bank would organize the
auction, set the price, and then proclaim itself the winner.

But as less and less of the state pie remained for the taking the bankers
began to fight. The government became polarized and too busy with
supporting the various clans to honestly concern itself with policy.

Billions of dollars in foreign aid vanished meanwhile without producing any
visible results.

Yeltsin in the meantime would emerge briefly from his hospital to make
foreign visits in which he often stole the show through gaffes and peculiar

The West's unabashed support for Yeltsin began to crack. And the tycoons
started placing money on front-runners to succeed the president.

Sensing this Yeltsin dropped hints he might run for office again by using a
constitutional loophole. He also broke a tentative chain of succession by
firing his favored advisors for being too ambitious.

But Yeltsin's re-election dreams faded when Russia in the face of
bankruptcy devalued its currency and defaulted on internal debts. The
president's chief accomplishments -- a stable ruble and end to inflation --
were dashed.

And so were the fortunes of the very business leaders who carried Yeltsin
to a second term three years ago. Today almost every one of those banks is

A rapid change of governments over the past 14 months suggests an ill at
ease Yeltsin looking to shovel off blame for all the failures.

What followed was an isolated Kremlin. Top advisors fled to join camps of
other prominent politicians. Parliament finally mustered the courage to try
-- even unsuccessfully -- to impeach the president.

Without tycoons to open their pocket books to Moscow insiders the gravity
of power in Russia has shifted to regional governors. Many of these are now
mulling a run on the Kremlin.

Analysts suggest that without a clear successor to back and a patchy record
to defend before posterity Yeltsin has turned against his old foe the
Communists in the months before a presidential vote.

"But this may only backfire," Piontkovsky warned. "It will only spark the
left into action." 


Investment in Russia Drops 40 Pct.
July 3, 1999

MOSCOW (AP) - Foreign investment in Russia slumped 40 percent in the first
quarter of this year compared with 1998, the economics minister said
Saturday, promising reforms to woo back investors unnerved by Russia's
financial troubles.

Total foreign investment in Russia was $1.5 billion in January-March, down
from $2.5 billion in the same period the year before, Economics Minister
Andrei Shapovalyants told a Moscow forum of foreign investors, Russian news
reports said.

Of that figure, direct investment totaled $600 million, down 20 percent
from the figure for first quarter 1998. The minister did not give a figure
for investment in securities, which apparently accounted for most of the
drop in overall investment.

Many foreign investors - particularly those in the financial markets - fled
Russia after the country succumbed to global economic turmoil last August.
The government defaulted on some debt and devalued the ruble. Many banks
then crumbled and inflation spiked.

The government has stabilized things since then, but has made little
headway in reviving the economy. While Russian stock markets have rebounded
in recent weeks, many investors are still wary of economic and political

Shapovalyants said Russia was drawing up stricter accounting standards and
urged more transparency of Russian companies for foreign investors, the
ITAR-Tass and Interfax news agencies reported.

Deepening economic troubles have made many Russians bitter about foreign
investment, particularly by Americans. A poll released Friday indicated
that nearly half of Russians don't want U.S. investments in their home
regions, apparently because their resentment of U.S. influence outweighs
any suffering from poverty.

But Russian officials are keen to court foreign investors and creditors,
from whom Russia desperately wants new loans.

Prime Minister Sergei Stepashin said Saturday he was confident the
International Monetary Fund would soon release a $4.5 billion loan to
Russia. It would be the first IMF injection since Russia's crisis hit in

An IMF team that visited Moscow this week praised Russia's economic
performance and indicated lending could be resumed, allowing Russia to pay
off debts due this year and avoid a potentially disastrous default.

Stepashin said the IMF loan would be the first step toward economic recovery.

``The rest depends on us, on how we will watch economic indicators, how we
will help the real sector and protect the national producer,'' he said,
according to ITAR-Tass. 


Moscow Times
July 3, 1999 
EDITORIAL: Information Is a Pillar of Democracy 

One of the tragic flaws of every branch and twig of government in President 
Boris Yeltsin's Russia has been a pervasive disdain for providing the public 
with information. 

This can be seen in the Central Bank's tight-lipped response to the 1998 
collapse of the banking system (and in its subsequent contempt for those who 
have questioned its sleazy offshore dealings). It can be seen in the FSB's 
refusal to publish the "secret laws" supposedly violated by environmentalist 
Alexander Nikitin. It can be seen every day in the refusal of major Russian 
corporations to reveal basic information about their ownership structure. 

This disdain is flaunted by the heads of ORT and RTR, who have frankly moved 
to politically skew news coverage on state-owned television. And it is at the 
heart of the government's Cheshire cat smile whenever asked who is managing 
its 35 percent stake in the nation's wealthiest corporation, Gazprom. 

Isn't it obvious that a democracy can't function when its citizens are denied 
all relevant information? 

Unless people demand to know what is going on, demand an accounting, demand 
to be included, then their well-being will remain hostage to corruption, 
graft and court intrigues. 

Russia needs a free press. It needs for the Kremlin to release its chokehold 
on the national television stations. It needs for the Kommersant newspaper, 
one of the nation's finest achievements in recent years, a true national 
treasure, to stay free and independent (particularly from the likes of Boris 
Berezovsky, Anatoly Bykov and Lev Chernoi, an undesirable troika if ever 
there was one). 

And Russia needs to hold its census on time and as planned. 

The Russian government's decision to postpone indefinitely the 1999 census is 
an outrage. The government argues that it is too expensive at about $120 
million. But this is not some debatable white elephant project, like a 
high-speed railway between St. Petersburg and Moscow, or a tunnel to the 
Sakhalin Islands (or, for that matter, a vanity contingent of Kosovo 
peacekeepers at $65 million a year, just so Yeltsin can attend G-7 meetings 
and pretend it is called the G-8). 

Holding a regular census is a basic duty of the state. It's not something the 
Kremlin can ignore on a whim. 

Yeltsin has faced down a Communist-led impeachment charge of "genocide" over 
the dizzying demographic collapse on his watch. So it's not surprising that 
the Kremlin is thinking: "Why tell the people more than they need to know?" 
Because the more they know, the less they like. And if they learn too much, 
they might even demand change. 


From: "Steve Kerr" <>
Subject: Yeltsin as Revolutionary
Date: Sat, 3 Jul 1999 

3377-Interview with Gleb Pavlovsky on Next President's Tasks:
"First of all, he should not be a second Yeltsin, he should not be a 
revolutionary. After replacing Gorbachev at the end of the eighties and 
beginning of the nineties and destroying the old system, [Russian 
President] Boris Nikolayevich [Yeltsin] carried out a democratic 
revolution. And he has had to remain the leader of the revolution up 
until the present day, because none of the revolutionary achievements of 
the Yeltsin era - freedom of speech, the press, private ownership and so 
forth - has been consolidated. They only exist because Yeltsin, as the 
leader of the revolution, likes freedom. The next president must consolidate 
what has been achieved and resolve the tasks of building a normal, dull 
state. Someone has to stop the revolution in order to secure its fruits." 

The only 'revolutionary' thing Yeltsin ever did was get himself
photographed on a tank. The above comments cannot possibly be serious, or
else they come from someone who gets delerious notions from his proximity
to the great stink emanating from the 'centre'. 

One might ask what freedom Yeltsin and his apologists like so much that
they feel it necessary to ban their only credible opposition just before an
ellection? One might also ask what gains for ordinary people the so called
revolution has acheived? 

I have read the comments posted to the list on the status of ordinary
persons in Russia with great interest, having lived there as an ordinary
person for years on a Ruble salary. Yes, conditions in the Metropol are
definately better. Whatever would ordinary Muscovites do without a BMW
dealership close by? What about Krasnoyarsk? Perm? Khabarovsk? Ulan Ude?
Omsk? or the countless little villages? Conditions there were terrible
when I visited them, with crumbling infrastructure and desperate, bored
people, and by the accounts of friends who live in such places, and with
whom I'm in touch often, are still poor despite the acheivements of the

Recent comments posted to the list regarding how good things are thanks to
Yeltsin reflect the situation for the greatly expanded Nomenclatura, but
not for people in general. Russia has become the Brazil of the east.
Ordinary Russians understand this very well thank you, without the need
for ludicrous explanations like 'botomless Russian pessimism'. Russians I
know have equal capacity for hope and an ironic appreciation of their
situation. Much like we Canadians actually. 

Capitalism in Russia has been a total and complete failure, if it is
conceived of as a global system for producing general prosperity.
Conditions for ordinary people in 'the west' have only been tollerable
since the 50's because of the gross exploitation of peoples and theft of
their resources in the 'colonies', which now includes Russia. This false
prosperity was built on an untenable basis, and is now crumbling. It is
crumbling in Russia, as it is crumbling everywhere else. However, if
capitalism is thought of as a system for enriching the powerfull, and
entrenching the subjugation of peoples in a system no better than outright
slavery, capitalism is doing just fine. 

The problem the elites who read and use this list have is that Russians
understand this perfectly, thus the growing desperation in the ranks of
those elites about the coming ellections, and how to steer them toward an
outcome which will safegaurd their position. Yuk. 


Financial Times
3 July 1999
[for personal use only]
RUSSIA: Soviet paper introduces cover price 
By Andrew Jack in Moscow

One of Russia's best-known newspapers, Izvestiya, former official organ of
the Supreme Soviet of the USSR, yesterday put a price on its front page for
the first time since Soviet days, when it cost just 3 kopecks.

The introduction of a recommended retail price of Rbs2 for the Moscow
edition of the paper is an attempt to recoup profits for the newspaper
rather than its distributors, some of whom were charging customers as much
as Rbs5. Prices will be kept relatively low to boost readership.

The pricing strategy is one of a number of changes being implemented by its
recently introduced management team.

The daily newspaper, with a circulation of 400,000, remains one of the
country's most widely purchased publications and one of the few with a
distribution network across the country. It has made a rather happier -
although far from painless - transition over the past decade than the
financially troubled Pravda, the voice of the Communist party.

While foreign Kremlin-watchers recall the Soviet-era prose of Izvestiya as
extremely turgid, Russians say that it was a symbol of linguistic purity,
that it was more lively and critical than Pravda, and that it built a
reputation for investigative reporting.

In 1991, as the Soviet Union collapsed, managers and journalists on the
paper unilaterally and illegally declared themselves the owners, fighting
off attempts by the conservative Supreme Soviet to win back control and use
it as an instrument of influence in its campaign to maintain power.

Mirroring the turbulent post-Soviet era, its new owners eventually
preferred to cash in their stakes. The managers sold their 49 per cent
share to Lukoil, the oil giant, only to be outdone by the journalists, who
agreed to dispose of their 51 per cent controlling stake in 1997 to
Oneximbank, controlled by Vladimir Potanin, the politician and businessman.

Mr Potanin made no secret of his desire at the time to have a reform-minded
newspaper that would help support him, his views and his group, after the
"information war" in 1996, in the build-up to the presidential elections,
when several influential business figures took control of much of the media.

One economics journalist from a rival paper was sceptical of the effect of
Izvestiya's latest decision. "Coca-Cola puts a recommended price on its
bottle caps, but that doesn't stop me from having to pay much more," he
said. "People will continue to buy Izvestiya because it is Izvestiya."

But Mikhail Kozhokin, the chief editor appointed by Mr Potanin and formerly
public relations manager for Oneximbank, said the policy should help cut
down a wide variation in prices with profits kept by its distributors.

He said he had finished a management restructuring, which had made
Izvestiya profitable since April, and promised other "creative" changes,
including greater regional information and an attempt to make the paper
more readable.

He said the paper would remain democratic, liberal and help to promote
civil society in Russia, but stressed its readership stayed "new
conservatives" and ruled out too rapid and too fundamental a change.


Zinoviev stands up for dead Lenin

MOSCOW, July 2 (AFP) - Newly returned Russian polemicist Aleksandr Zinoviev
added his two cents to the country's emotional Lenin debate Thursday,
saying the embalmed body of the Soviet revolutionary should stay put on Red
Square, Interfax reported.

Zinoviev, the erstwhile Soviet dissident who returned to Moscow Wednesday
after 21 years in exile, fiercely opposed plans to remove the body, but
cynically dismissed the notion that a burial would result in public uproar.

"One must fight for Lenin and Stalin!" he said, calling the 1961 decision
to remove Stalin's body from the mausoleum a "gross mistake."

But, a one-time outspoken critic of Stalinism himself, he added, "I think
that if Washington tells (Russian President Boris) Yeltsin to remove Lenin
he will be removed and nothing serious will happen in Russia."

All-out civil unrest should Lenin be removed has been threatened by
Russia's Communists, the major opponents of the Kremlin-backed plan to bury
the body of the man they call their "religion."

"Lenin is the last symbol of communism," said Zinoviev, who has
paradoxically traded in the anti-Communist ideology that got him exiled,
siding instead with the remainders of the Soviet legacy in Russia.

Zinoviev, whose 1977 critical work "Yawning Heights" garnered dispproval
from Soviet authorities, said he made the decision to return to Russia to
fend off the "western colonisation" that has been allowed to flourish under
the Yeltsin administration.

Yeltsin sympathizers form the core of the pro-burial movement, which
includes the Orthodox church and supports removing Lenin as a largely
symbolic means of finalizing Russia's departure from its Communist and
atheist past.

Lenin's embalmed body has been on display in the Red Square mausoleum since
the leader's death in 1924.

For decades Soviet citizens queued outside the mammoth construction jutting
against the Kremlin walls for a glimpse of the founder of the Soviet state.

The issue of whether or not to bury Lenin has grown from a public debate to
a largely political tool that could figure into December parliamentary
elections and presidential elections next year.

The body's removal, an idea which the Kremlin floats from time to time in
apparent Communist-baiting, could seriously undermine support for the
nation's hard-liners.

More than half the country supports burying Lenin's body, according to the
most recent public survey conducted in April. 


St. Petersburg Times
July 2, 1999
Russian Spirit: Drunkenness Or Divinity? 
By Fyodor Gavrilov

DO YOU know how Russia became Christian? According to the medieval 
chronicle, Prince Vladimir of Kiev announced a kind of confessional auction: 
Representatives of Islam, Judaism, and Christianity were invited to his court 
to promote their faiths. The prince almost gave the nod to Islam. He 
particularly liked its tolerance of polygamy. But Islam was found wanting on 
one count: Alcohol was forbidden. Learning this, Vladimir uttered his famous 
bon mot: "In Rus, we drink to make merry."

Christianity's tolerance of this vice suited us more. As early as the 18th 
century, drunkenness was recognized as a national ill, and the mid-19th 
century saw the emergence of grassroots anti-alcohol campaigns, but Russians 
from all walks of life didn't cease their merrymaking for even a minute. 
Women resisted, of course. Warned of his mother's approach by the rustle of 
her skirts, Tsar Alexander III hid his flask in a riding boot and pronounced, 
"Necessity is the mother of invention."

And although Bolshevism reduced the selection of hard beverages, the alcohol 
department was one of the most colorful in the monochrome world of Soviet 
shops. We drank as much under the Communists as under the tsars. No wonder 
that Gorbachev began perestroika not with the introduction of glasnost but 
with an attempt to root out alcoholism. The general secretary promoted a 
sober lifestyle by gulping down glasses of milk in public. We know the 
consequences of this last Soviet-forced march to happiness. Vodka profiteers 
got rich and formed the first well-developed Soviet mafia. Ancient vineyards 
were hacked down. Bottle manufacturing plants were closed, making way for 
bottle disposal plants.

Shortly thereafter, you could buy vodka only by turning in your empties. 
"Sober" weddings were broadcast live on television. Kolkhoz workers 
"unanimously voted" to surrender their moonshine stills and ban the sale of 
alcohol in village stores. I remember celebrating Red Army Day in 1988 in the 
company of Soviet military advisors in Angola. Fearing a spot-check by Party 
bosses, we poured our vodka into a soup tureen and dished it out with a 
ladle. We got so rip-roaring drunk that the anti-communist UNITA guerrillas 
could have captured us with their bare hands had they so desired.

But the proletariat responded to the pressure from above by brewing moonshine 
in ever-greater quantities - completely draining the supply of sugar from the 
shops. The state's attempts to combat this met with utter failure, and Soviet 
citizens saw for the first time that their government wasn't invincible. 
Total defeat was only a question of time.

Russians have started drinking even more since the advent of the Yeltsin era. 
With general elections around the corner, I would advise our politicians to 
pay attention to one class of voters - drinkers. A poll conducted by the 
All-Russian Center for Public Opinion Research (VTsIOM) has shown that they 
are staunch supporters of reform. When asked whether market reforms should be 
continued or halted, non-drinkers were split almost evenly. But the more 
alcohol a person consumed, the more likely he was to give a thumbs-up to 
so-called reform. Drinkers are less awed by the state and more in love with 
their own liberty; they respect entrepreneurs more than doctors.

In short, Prince Vladimir was right. He found the ideal balance between 
spiritus vini and spiritus sanctus.

Fyodor Gavrilov is the editor of Kariera-Kapital. 


Communist Leaders, Groups Viewed 

Moskovskiy Komsomolets
25 June 1999
[translation for personal use only]
Article by Aleksey Zverev: "Patriots' Games. Red Scraps. Map of the 
CPRF: The Landscape Before the Battle" 

Gennadiy Zyuganov will celebrate his 55th birthday tomorrow. 

What will his colleagues give him? He already has the post of 
chairman, a foreign car in the driveway, an "Aurora" (a toy one, 
true) on the windowsill, and he has probably had his fill of red 

The best present for Zyuganov would be the presidency. But 
there are possible variations on this theme. The Congress that will 
take place approximately at the end of next winter will approve a 
"single candidate." But even now the CPRF has several figures in 
addition to Zyuganov who, if the circumstances are right, intend to 
become official contenders from the "left" opposition for the 
highest post in the country. Their bids are backed up by the forces 
of intraparty groupings into which the CPRF comrades are divided. 
The party increasingly reminds one of a patchwork quilt... 

The "Zyu" Team 

Gennadiy Zyuganov is the leader of the "patriot-statesmen" 
group. In spite of the fancy name, the ideological views of this 
group's members play a secondary role. Actually, it is not a group 
at all but something like "Zyuganov's team," his permanent election 

In addition to the general secretary himself, the "team" 
includes the Central Committee secretary for election campaigns, 
Viktor Peshkov, the chief of Zyuganov's security service, Aleksandr 
Tarnayev, the lawyer-deputy Yuriy Ivanov, one of the creators of the 
People's Patriotic Union, Aleksandr Uvarov, and the leader of the 
Patriotic Information Agency, Ivan Markushok. Gennadiy Andreyevich 
came under Kuptsov's influence and actually "turned over" the 
campaign to him (several weeks before the voting he stopped 
traveling through the regions, and after the results were made 
public, he did not react at all to the obvious violations). But 
next year he will be forced to fight like a lion--the stakes are too 

The "patriot-statesmen" intend to fight more actively to 
reinforce their master's positions. Several films about Zyuganov 
are being made. Negotiations are being conducted with ORT and TV-6 
to show advertising clips of the CPRF leader. During the past month 
Gennadiy Andreyevich himself has visited St. Petersburg, Tula, and 
Orel, and he has traveled through several Moscow area rayons. And 
for the second week in a row he has played volleyball in the 
presence of journalists. 

It is quite possible that in the next Duma session Zyuganov 
will submit his candidacy for the post of speaker in order to have a 
daily podium and an election staff paid for by the state... The 
Communist's chances of again becoming the sole candidate from the 
opposition are great as usual. Now, judging from sociological polls 
of Russians conducted by the Center for Study of Political Culture, 
Zyuganov's ratings are still higher than the ratings of the party 
itself. Gennadiy Andreyevich's views also have a considerable 
number of supporters among rank-and-file Communists. 

The Dream of the Eternal Second 

But in terms of their degree of influence in the CPRF, the so- 
called "pragmatists" take first place: First Deputy Chairman of the 
CPRF Central Committee Valentin Kuptsov, Central Committee Secretary 
for Organizational Work Sergey Potapov, Central Committee Manager of 
Affairs Yevgeniy Burchenko, faction coordinator Sergey Reshulskiy, 
"red economists" Yuriy Maslyukov and Yuriy Voronin, and "red 
directors" Georgiy Kostin, Viktor Vidmanov, and Petr Romanov. 
Almost all the other groupings try to make friends with the rich 
"pragmatists." "Kuptsov is the pocketbook of the Communist 
Party!"--the Communists say. 

The "pragmatists'" relations with one another are based on 
common economic interests (and not as in other intraparty groups--on 
ideology or personal devotion). The leader of the apparatus of the 
CPRF faction, Kuptsov, by manipulating the votes of the Communist 
deputies, provides the state orders needed by the "red enterprises." 
They, in turn, donate money for party construction. 

Maslyukov plays the role of a link between the financial- 
industrial circles and the party apparatus, which also brings a 
certain amount of income to the Communists. As we know, when 
Maslyukov was a State Duma deputy he received Anatoliy Chubays in 
his office many times. And the chairman of the board of Alfa-bank, 
Leonard Vid, came to visit the candidate after he was 

The "pragmatists" think that it is better for the party to 
remain in the opposition. It should not take over the executive 
power but utilize all the advantages and prospects of a "Duma seat." 
(Kuptsov regards Maslyukov's campaign for the White House as a 
mistake, which he said at the central committee plenum devoted to 
the fate of the "Communist ministers.") In the presidential campaign 
the apparatus headed by Kuptsov will officially back Gennadiy 
Zyuganov, but because of the aforementioned reasons this group does 
not want the general secretary to win the presidential elections, 
and therefore it will do everything it can to impede his 

Although Kuptsov's group is fairly monolithic, under certain 
circumstances it could "lose" Maslyukov and Romanov. The former has 
close ties with Seleznev, and the latter--with Tuleyev. Both 
Seleznev and Tuleyev intend to run for the post of president, and 
this contradicts the interests of Kuptsov, for whom it would be 
better to have next to him the "eternal second" whom he knows like 
the back of his hand, Gennadiy Andreyevich. 

Poor Provincials 

The group of "regional leaders" consists of the first 
secretaries of oblast committees and "red governors." The leader of 
the Omsk Communists--Aleksandr Kravets, Rostov--Leonid Ivanchenko, 
Kursk--Aleksandr Mikhaylov, and the administration heads, in the 
past also "first secretaries"--Chernogorov, Shabanov, 

They are held together by a common animosity toward the 
Center. Almost all the oblast committee secretaries participated in 
the gubernatorial elections. Those who lost began to blame the "arm 
of Moscow" for this. For example, in the Kursk elections, to 
satisfy "party interests," at the last moment Mikhaylov was replaced 
by Rutskoy. And as soon as he won he disowned the CPRF and the 
entire people's-patriotic opposition. Ultimately Mikhaylov's 
justifiable indignation against Zyuganov-Kuptsov was reinforced by 
an awareness that Moscow's decision was the strategic 

It was no less difficult for the first secretaries who became 
governors. Zyuganov and Kuptsov regard them as local chieftains who 
should sacrifice everything to the party to the detriment of their 
own oblasts. 

The desire of the "regionals" to protect themselves and adapt 
the Center's policy to their own local interests has been raised to 
the rank of the strategic task. But the "regionals" do not agree on 
tactics. The first secretaries feel hurt and abandoned, far removed 
from the real political battles. They are more ambitious, but they 
achieve their personal goals in various ways. Kravets, for example, 
tries to maneuver between Zyuganov and Kuptsov. Mikhaylov openly 
expresses his discontent: "Before the end of the year I will move to 
Gennadiy Andreyevich's office!" 

The "red governors," on the contrary, are the least 
politicized; they have already set themselves up in power. Now they 
have to think about remaining there. They need a leader who is 
"understanding" and "more liberal" toward components of the 
Federation. Gennadiy Seleznev is now regarded as such a person. In 
the post of speaker of the Duma he is experiencing pressure from the 
Zyuganov-Kuptsov side, and after the next parliamentary elections it 
is possible that he will be left overboard completely. Seleznev's 
"unemployment" should actually become a signal for the beginning of 
a "velvet revolution" in the Communist Party... 

Penetrating Muscovites 

The Moscow CPRF organization is not a group either but the 
real team of the "capital general secretary," Aleksandr Kuvayev. It 
includes all the management personnel of the capital party 

At a higher level, in the presidium, Kuvayev's group is 
supported by the Central Committee's secretary for international 
affairs, Ivan Melnikov. 

In the presidential elections the "Muscovites" will support 
the person selected by the Congress. But they would be reluctant to 
support Zyuganov or Seleznev. Kuvayev himself would not be against 
controlling the party. ("Zyuganov should fear me instead of 
Seleznev," he once hinted in an interview with Moskovskiy 

The great importance of the city committee comes from its 
"geopolitical" situation. It was the Muscovites who withstood the 
attacks from the Yeltsinites during 1991-1993. They are the largest 
CPRF party organization with 25,000 members. And what other obkom 
can boast of so many celebrated members? Yuriy Nazarov, Nikolay 
Gubenko, German Titov, Iona Andronov, Svetlana Savitskaya... 

Kuvayev skillfully takes advantage of Moscow's special 
position, maneuvering among the various party centers. He 
communicates with other "first secretaries" (with the exception of 
Kravets, with whom he "does not get along") and does favors for the 
"wealthy Kuptsov"--he votes mainly as Valentin Aleksandrovich tells 
him to. And at rallies, to the joy of the people, he frequently 
shows up in the company of Ilyukhin or Makashov. Only a blind 
person could fail to see Sanych's ambitions to be general 

"Has Beens" and "Leftists" 

The "moderate radicals" are a group of "has beens": Anatoliy 
Lukyanov, Valentin Varennikov, Yegor Ligachev, Oleg Shenin, Viktor 
Zorkaltsev, Viktor Shevelukha... There is no need to list their 
current positions. They will pale anyway in comparison to the high 
posts these people once held. Their "active life" remains in this 
"once upon a time." Their objectives? As one incredibly cynical 
young Communist put it: "To wait until Vagankovo and enter there 
accompanied by an orchestra..." In the presidential elections they 
will place their bets on Zyuganov, and in the internecine struggle-- 
on Kuptsov. But for now the "moderate radicals" now and then 
criticize the leadership of the CPRF and the Yeltsin regime 
listlessly, as in the old days. The 50-year-old "youth" listen 
attentively at the plenums and then laugh among themselves in the 
corridors. The group of "moderate radicals" is truly huge! They 
are not only former members of the Politburo of the CPSU Central 
Committee but also retired generals with gold stars, ex-kolkhoz 
directors, rural writers, heroes of the Stakhanovite movement, and 
so forth. This group consists of Communists who are pushing 60. 
And they make up almost 80 percent in the CPRF. 

As opposed to this group of "has beens," the "left radicals" 
embody that part of the Communists who under no conditions want to 
compromise with Yeltsin, Zyuganov, or Kuptsov... According to them, 
these three are practically inseparable. The real dictator and his 
stooges! The "left radicals" call themselves the "Leninist- 
Stalinist platform," hold positions of "internationalism," and 
maintain close ties with Communist parties of the ex-countries of 
the Soviet Union. 

The leaders of this group--Teymuraz Avaliani, Richard 
Kosolapov, Leonid Petrovskiiy, Tatyana Astrakhankina--at the present 
time, however, are weak to the point of indecency. The first was 
fired from the post of secretary of the Kemerovo obkom of the CPRF, 
the second was expelled from the Central Committee, the third was 
relieved of the position of chairman of the Central Control-Audit 
Commission. All kinds of obstacles are placed in Astrakhankina's 
way--right down to the point of being denied a voice in any of the 
plenums. There is no possibility that the majority of the 
"leftists" will end up on the Communist Party's federal 

"Radical Fugitives" 

Among the "national radicals" are the "most inveterate 
Commies," crazily fighting the battle against Jew-Masons: Albert 
Makashov, Vasiliy Shandybin, Georgiy Chekhoyev, Georgiy Tikhonov. 
Zyuganov and Kuptsov do not like them and are rather afraid of 

This group's plans are Napoleonic. They recently approved "as 
a candidate for president" General Makashov... But the real leader 
of the "national radicals" at the "opening up the 1998 political 
season" was Viktor Ilyukhin. This group was established when he 
became established as a politician. For six years he was in charge 
of the Duma Committee on Security. During this time Ilyukhin 
established close cooperation with all the enforcement structures 
and considerably increased his committee's authority, taking charge 
of questions of information and technological security. 

Approximately in the middle of last year he began to instill serious 
fear in Kuptsov, who is the party's purge master and is trying to 
prevent any group from becoming too strong. Since Ilyukhin took 
charge of the radical patriotic structure--the Movement to Support 
the Army--and essentially took the baton from Rokhlin in "splitting 
up the Communist Party," Valentin Kuptsov has tried to steal back 
from the DPA [Movement in Support of the Army, the Defense Industry, 
and Military Science] everyone who was disloyal, such as Shandybin 
and Makashov. But then "deep pockets" realized that if the 
apologists for nationalism were to make it to the Duma and form a 
faction there, the lower-level CPRF structures, which are more 
tolerant for the regime and then the Duma leadership, would follow 
the "fugitives." 

The appearance of Ilyukhin's group is another miscalculation 
on the part of the leaders--Kuptsov and Zyuganov (as in the case 
with the support for Rutskoy). They are so afraid of a split that 
they weed out beforehand those that stand out from the great 
background of the party masses. And these "left and right 
deviationists" are mainly charismatic and active people. Would they 
really split up the group? No, they would go to the Duma and steal 
about 5 percent of the voters away from the CPRF... 

The CPRF is now on the verge of a split caused by that very 
Ilyukhin-Makashov group. It has decided to invite its leaders to be 
on the federal list of the CPRF. A place has been prepared for 
Ilyukhin in the top dozen, and Makashov too has been tucked into an 
adjacent position. But Kuptsov refused to accept Shandybin. If the 
"national-radicals" do not accept these offers, the CPRF will 
completely cut off aid to the DPA electoral association. 

So far it is hard to tell what kind of picture all these 
"scraps" will make by the time of the 2000 elections. The 
Communists themselves even see an advantage to this kind of 
variegation. Internal disagreements, they say, are normal for a 
real party. The others--Fatherland, Our Home, LDPR [Liberal 
Democratic Party of Russia], Yabloko--have typical election staffs. 

They determine their presidential candidates ahead of time and none 
of their comrades-in-arms have any doubts about their leadership. 
But when it comes to election brawls, the leftists might still envy 
the "one-man parties"... 


From: "Robert Devane" <>
Subject: Re: Yale Richmond/Investing in Russia/3376
Date: Sat, 3 Jul 1999 

I'd like to thank Mr. Richmond for attributing words to me that weren't my
own and then criticizing them. Be that as it may, I think that the issue of
investing in Russia is important enough, and will therefore offer some more

First, let me clarify that I have no intention of somehow defending
"Western investment advisers" as a class -- Homo Advisicus, if you will.
I'll be the first to say that there were plenty of shady personalities in
the market since day one. However, these are not the people that are really
worth discussing, since at the end of the day they did not do a significant
share of the business in Russian capital markets. That business was done by
asset managers and brokers that were regarded as worthy of respect,
professional, qualified, and honest. 

Second, it is important to distinguish between the various types of
participants in capital markets, which Mr. Richmond hadn't really done. I
note for the record that the article by Sandeep Goel that I criticized,
talked about INVESTORS in Russian securities. I've responded by saying that
investors (for the most part) had acted on information that was made
available to them by brokers, companies, third parties, etc. That is
perfectly normal. I maintain that in most cases there is neither the need
nor any benefit for an investor to have direct contact with the company
whose shares s/he is buying. Mr. Richmond states that "even more unwise is
not visiting the sites of the manufacturers, verifying that they indeed
exist, and conversing with the staff in Russian. ". Can you imagine what
investing would be like if only people who spoke Russian and went to
Norilsk to kick the tires would buy shares in Norilsk Nickel???
Ludicrous!!! The people that need to go to Norilsk are analysts who value
the companies, and in some cases portfolio managers that invest other
people's money. It certainly makes a huge difference if they speak Russian,
but I think George Soros, Marc Mobius, Nancy Herring, and a few others have
done just fine with interpreters. These people are called intermediaries,
agents, or middlemen. They add efficiency to the market by relieving Mr.
Richmond of the need to go down to Primorsky Krai to check out the scene
(and risk getting handcuffed by Governor Nazdratenko's thugs). If one is
unable to find intermediaries that one is comfortable with, one should
probably NOT invest in Russia.

Third, I think that the validity of Mr. Richmond's assertion that "the
popularity of Swiss, Brazilian, and German products are based on their
well-established reputations for quality, a virtue which many Russian
manufacturers do not yet have" is questionable. If you really think about
it for a moment, you will undoubtedly realize that (a) most of the
portfolio investment in Russian companies has gone into oil, gas,
utilities, telecoms, metals, transportation, retailers, foods & beverages,
and banks (Sberbank). What, does someone have concerns about the quality of
Gazprom's gas? Are there questions about the quality of Red October's
chocolates? Issue's with Aeroflot's service (which I might say has become
better than Delta's on the Moscow-New York route)?, and (b) if you look at
most of the new high-tech, franchising, pharmaceuticals, and such companies
that make debuts in the US IPO market all the time, in a lot of cases you
will find that these companies are no less of a "pie in the sky" that any
Russian company. Insofar as the reliability of Russian statistics is
concerned let me point out that statistics and company information are
different things. Russia's statistics may indeed be poor, but that doesn't
man that one cannot do a thorough and complete valuation of Baltica Brewery
(whose product incidentally is quite good). So, please let's not mix apples
and elephants. In addition, the quality of statistics is what it is. Does
that mean that we ought not do analyses at all? No. It means that we SHOULD
do analyses, but with the caveat that there is a greater element of error

Fourth, anyone who understands the mechanics of capital markets and the
basic tenets of asset pricing understands that such things as lack of
Western accounts, lack of transparency, inadequate marketing info,
management that wears white ties over black shirts, etc. -- all these
things are reflected in the assets prices. Why do you think that a company
in Russia is worth only a fraction of the value of a similar company in the
West? Because higher risk (risk=uncertainty) translates into lower

Finally, I fully believe that investing in emerging markets, including
Russia, is a highly specialized high-risk activity. I fully discourage most
people from doing so, because unless you REALLY know that you want do this
and you understand and accept the risks, you will probably be disappointed
somewhere down the line, and become a pain in the %^$*$ for those of us who
prefer to deal with qualified investors, and who work insane hours to give
our clients high-quality on the ground coverage of Russian capital markets.

This reminds me of the movie "A fish called Wanda". If you've seen he
movie, you will recall how Kevin Kline's character keeps on driving on the
right side of the road in London, and after each near-hit yells "Asshole!"
at the other driver. I think the morale is that if you come to England, you
should drive on the left side, lest you be the [the seven-letter word
above]. Or, don't drive at all. When I lived in England, I didn't even
think about getting behind the wheel. But, back to our story...

If you're convinced that you'd like to invest in Russia, the MOST IMPORTANT
thing is picking the right intermediary. This is just like going to a
surgeon for a major operation (or a lawyer for a major divorce fight).
There is a laundry list of questions you should ask. If you find that your
intermediary looks like a duck, quacks like a duck, and walks like duck --
it's probably what? You guessed it -- a duck! Having covered the Russian
securities market professionally since 1993 and having lived here full-time
since 1996, working in the market, I can honestly say that there are a
number of highly qualifies, competent, multilingual, multicultural, etc.
intermediaries, who take their clients' interests very seriously, and
provide high quality, professional, reliable services. I won't mention any
more names, lest I be accused of plugging people, but JRL readers who are
interested can e-mail me separately. Once you've found the professionals
with whom you feel comfortable, you can get to work. But remember, it is up
to you to ask questions. If you don't like the answers, that's a sign about
your relationship with your intermediary. If you don't UNDERSTAND the
answers, that may be a sign that you're not qualified to be here (in the

That's all for now. I'm glad that there is discussion in JRL about this
subject, and I encourage people to write in with their questions, comments,
and opinions. I've found that misconceptions about the Russian market
abound, and it would be useful to start to gradually clear them up.

Robert Devane
Managing Director
Renegade Capital
Investment Research and Management



NEW YORK, July 3 (Itar-Tass) - Russia's oil-to-media tycoon Boris 
Berezovsky said business in Russia cannot be outside politics. 
He said in an interview with Blumberg business news agency during his 
attendance at the World Economic forum in Salzburg that he was going 
"to concentrate his energy" on elections of the State Duma lower house 
of parliament due in December and presidential elections in June of 
"Politics is the most important investment that I can make in Russia 
today. Without stable politics, all other investments will not have 
value," Berezovsky said. 
"We need a Duma that will play a role of a constructive opposition," he 



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