July 6, 1999    
This Date's Issues: 3380 •  •

Johnson's Russia List
#3380
6 July 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Moscow Times: Matt Bivens, Yeltsin Says He'll Leave Office in 2000.
2. Itar-Tass: SPOKESMAN DENIES YELTSIN WANTED TO IMPOSE STATE OF EMERGENCY.
3. AP: Russia Has Good Economic News.
4. Alfiya Kulsharipova: Re: Yale Richmond /Investing in Russia/JRL 3376.
5. Victor Kalashnikov: About the JRL and Russia.
6. The Times (UK): Anna Blundy, 'A country that accepts food aid during the 
winter is not about to spend its last drop of waning energy on a nuclear 
stand-off.'
7. The Russia Journal: Tara Warner, Russian press examines its performance.
Top journalists say Kosovo coverage balanced.
8. Reuters: Crisis Hit Russians Turn to Booze and Cigarettes.
9. The eXile: Matt Taibbi, Russian politics at the all-star break.]

*******

#1
Moscow Times
July 6, 1999 
Yeltsin Says He'll Leave Office in 2000 
By Matt Bivens
Staff Writer 

President Boris Yeltsin, in an interview with the editor of the Izvestia
newspaper, said he intends to leave office when his term ends in 2000 and
hand his powers over to a successor elected by the people. 

"The main task [remaining before the Kremlin] is, of course, the elections
- parliamentary and presidential," Yeltsin said in the interview published
in Tuesday's Izvestia. 

"They must be carried out with dignity. Afterward, a new vlast [political
authorities] will appear, one that is young, energetic and with new state
ideas. It should appear through honest and open election campaign battles.
To such authorities I will hand over my powers with, as they say, a light
heart. 

"For the first time in the history of Russia, power will be transferred
not in a revolutionary way but in a constitutional and civilized way. But
that won't just happen on its own, it is a major task, and already today my
administration is working on it." 

Yeltsin, who rarely gives interviews, also said he thought Lenin's body
should be removed from the mausoleum on Red Square and buried, though he
was not sure when. Asked if he had plans to ban the Communist Party -
Yeltsin last week publicly demanded to know why his justice minister hadn't
documented any violations of the law by that party - he replied that the
Communists had already "closed themselves down" and had "failed
politically." 

And asked who influences his decision-making, the president dryly made
clear he is aware of rumors that he is a marionette at the mercy of
advisers referred to collectively as "the family." 

But it was Yeltsin's calm insistence that he will leave office in
accordance with the Constitution that was most noteworthy. Russian media
and politicians have speculated for months - if not years - that Yeltsin
will never voluntarily leave. 

He could stay by announcing the Caucasus are spinning out of control and
declaring a national state of emergency. He could stay by banning the
Communist Party and provoking a similar emergency crisis. He could stay as
head of a newly created Russian-Belarussian state. Or, he - or his chosen
successors - could somehow emerge on top by resigning early and then
navigating the resulting chaos. 

All of those options are still live. On Monday there were calls for a
state of emergency to deal with violence in Chechnya, and Yeltsin ordered
Prime Minister Sergei Stepashin to personally oversee rapid unification
with Belarus. Stepashin said Monday it could be done within the month. 

Some observers saw the Izvestia interview itself as another move in a
devious game of political chess. Citing un-named sources, the Internet
newspaper www.gazeta.ru reported this weekend that the Kremlin had held up
publication of the interview to change it: Asked if he would write his
memoirs, Gazeta.ru reported, Yeltsin originally said he would have time to
do so next year. But later, Gazeta.ru claimed, the Kremlin insisted making
this "early" next year - as a hint of sorts that Yeltsin might soon resign. 

However, the interview published in Tuesday's Izvestia does not include
the word "early." 

"All of that business in Gazeta.ru, they're working on their image and
that nonsense they wrote is on their consciences," Izvestia spokesman
Alexei Kovalchuk said Monday. Kovalchuk said Yeltsin had signed off on a
copy of the interview before publication but had not made any changes in it. 

Yeltsin told Izvestia he already has a successor in mind. But he warned
against assuming that meant he had in mind "a heir to the throne," and when
asked if he could accept a successor he did not personally like, Yeltsin
said he could. "Personal likes and dislikes aren't the point," he said.
"This will be a new head of state who comes to power in a legal way. The
people will choose him." 

"Of course I have my own idea of who might be the next president. But as
soon as I utter his name, he won't be allowed to live in peace. He'll be
smothered," Yeltsin said. 

With elections to the State Duma five months away, Yeltsin said his
Kremlin would help consolidate "a broad coalition of progressive
politicians - both federal and regional." 

He said he hoped the new Duma would see a flood of new faces, and
"criminals" would be prevented from "elbowing their way in." And he said
the law should keep parties from enjoying more weight in parliament than
they deserve. This last was a dig at the Communists, who won less than a
quarter of the national vote in 1995 but, thanks to the math of the
election law, control about half of the Duma.Yeltsin spoke approvingly of
Stepashin, saying he is "literally before our eyes growing in authority."
He also had only warm words for Moscow Mayor Yury Luzhkov and said he hoped
to see Luzhkov's people in the Duma. 

Asked who influences his decisions, Yeltsin responded that the media have
been discussing "a special little word: family." The president countered
that his family was his family, his circle of advisers something else, and
"I don't tolerate pressure, and that says it all." 

Even as Tuesday's Izvestia was rolling off the presses, Stepashin and
Belarussian President Alexander Lukashenko were on the phone discussing
unification. According to Interfax, the two agreed that there would be a
meeting Wednesday of a Russian-Belarussian Ispolkom, or Executive Committee. 

Stepashin met one-on-one with Yeltsin on Monday, and the two discussed the
army and then integration with Belarus. Then their meeting was joined by
FSB chief Vladimir Putin, Kremlin chief of staff Alexander Voloshin and
Defense Minister Igor Sergeyev. 

Afterward, Stepashin emerged to say Yeltsin had directed him to look after
the drive for union. He said the necessary documents were prepared and the
union question would be solved in one month. 

While it is hard to tell what Yeltsin is thinking, Lukashenko has made
plain that he has ambitions of riding the union into the Kremlin someday. 

In Moscow this weekend, Lukashenko attacked the Kremlin for dragging its
feet, and said for his part, he was prepared to cede real power to the
future Russian-Belarussian state. He added that he intended to bid for the
presidency of the new union. 

Lukashenko said the Kremlin had rejected his proposal that the president
of the new union be elected by the people, and had not yet responded to his
proposal that the president of Russia simply automatically become the new
president of Russia-Belarus. 

*******

#2
SPOKESMAN DENIES YELTSIN WANTED TO IMPOSE STATE OF EMERGENCY.

MOSCOW, July 5 (Itar-Tass) - Russian presidential spokesman Dmitry 
Yakushkin denied a newspaper publication alleging that the president 
plans to sign a decree imposing a state of emergency in Russia. 
"I have seen this publication and I regard it as just another 
publication which should attract the attention of the readers but which 
has nothing to do with the reality," Yakushkin told the Ekho Moskvy 
radio station on Monday. 
He referred to an article in Monday's issue of Novaya Gazeta, which 
says that there is a draft decree on the introduction of a state of 
emergency in the country if the State Duma had voted to impeach the 
president on May 12. 
Yakushkin said "such a decree was not prepared, it did not and does not 
exist." 
He also noted that the document imposing a state of emergency could not 
be adopted now because "the country has changed a lot over the last 
years and such coercive actions are simply impossible now." 
"You have to be completely crazy to try to impose such things on our 
society," he added. 
The spokesman stressed that no decree imposing a state of emergency 
exits and "the people who work in the presidential administration are 
busy doing more serious work than preparing some decrees calling for 
the use of force." 
Yakushkin believes that "such publications whip up tension and are 
undesirable, especially since the country is going to have a hot autumn 
to be followed by no less active preparations for presidential 
elections." 
"So we have to spend these two summer months as calm as possible and, 
judging from the opinions of different politicians from different 
sides, there is a desire to do that," he said. 

*******

#3
Russia Has Good Economic News 
By Anna Dolgov
July 5, 1999

MOSCOW (AP) -- A government official issued a string of positive economic
reports on Monday indicating that Russia's monthly inflation was down to
1.4 percent and that foreign currency reserves and tax collections were
rising. 

Government officials have sounded increasingly upbeat since the
International Monetary Fund praised Russia's economic performance last week
and said lending could be resumed. 

But any economic improvement has yet to trickle down to the general
population, and millions of Russians continue to struggle to pay for food
and housing. 

It appeared that the sharp price hikes of last autumn have abated. 

First Deputy Prime Minister Viktor Khristenko said Monday that inflation
for June was estimated at 1.4 percent, according to preliminary figures.
Inflation in May was 2.2 percent, he said. 

Khristenko said that the Central Bank's gold and currency reserves reached
$12.2 billion, up from $10.7 billion earlier this year, the Interfax news
agency quoted him as saying. 

He insisted that the government was also doing well in increasing tax
collections -- a key requirement for new IMF loans. 

Russia collected 44.6 billion rubles ($1.84 billion) in taxes and customs
duties in June, surpassing the target of 41.1 billion rubles ($1.69
billion), Khristenko said. 

Sales of state property and other revenues brought an additional 3.8
billion rubles ($156 million) into state coffers in June, above the
government's target, he said. 

Improved collections allowed the government to finance its expenses in full
in June. It repeatedly fell short in preceding months. But the government
still owes billions of rubles to state workers in wages and pensions for
previous months, Khristenko conceded. 

Russia's most painful problem remains its huge foreign debts. 

Russia intends to allocate $10 billion in next year's budget for foreign
debt payments, or just two-thirds of the $15.7 billion that is due,
Khristenko said. 

Moscow missed a number of debt payments this year and now is desperate for
a new IMF loan to avoid a potentially disastrous default. 

Also Monday, the Fuel and Energy Ministry said Russia produced nearly 150
billion metric tons (1.05 trillion barrels) of oil in the first six months
of this year, down slightly from the same period a year earlier, Interfax
reported. 

*******

#4
From: "Alfiya Kulsharipova (London)" <kulshalf@MLE.CO.UK>
Subject: Re: Yale Richmond /Investing in Russia/JRL 3376
Date: Mon, 5 Jul 1999 

1. Neither expression nor the concept of "caveat emptor" exists in Russian
law. I was taught that this concept is unique for Anglo-Saxon legal system
whereas Russian civil law is based on Roman law and later French Code of
Napoleon. However certain provisions similar to "buyer be aware" concept can
be found in Russian Civil Code and arbitration courts' decisions.

2. Whereas Mr Richmond is absolutely right not wishing to rely on Russian
statistics while making investment decisions, I have to note that it is a
commonly established practice for foreign investors working in Russia to
familiarise themselves with the results of legal and financial due diligence
exercises as well as business surveillance and risk factors reports relating
to Russian target companies in question prior to committing any funds. I
mean direct rather than portfolio investments since the latter was discussed
by Mr. Devane in his reply at JRL 3378. Normally foreign investor would
approach one of the Western law firms and accountancy firms based in Russia
- usually in Moscow - for advice on investment structure and with
instruction to produce legal and financial due diligence reports. These are
the "third parties" foreign investors regard as safe to rely on.

3. As to visiting the Russian companies, I've done it myself on many
occasions in the process of advising foreign investors and would not
prescribe it for "frequent use". One of the main problems is that Russian
companies are often located in remote industrial areas a long distance away
from big towns and airports. On one occasion I had to travel between
Novosibirsk, Novokuznetsk and another mining town which name I forgot in
overheated Zhiguli - it was February - in the course of four days. Not that
there were no connection flights between those towns; they just did not fit
our tight schedule. Of course, it's not something which one cannot endure if
necessary but I would have much preferred if my eyes were not so painfully
dry from the heat of Zhiguli "pechka" and my back did not ache for days
after the trip. The good thing about visiting the Russian companies is that
people working there are very helpful and friendly. At least I never
encountered any hostilities. Most of people did realise the benefits of
attracting foreign investments into their companies - at least at the
initial stages of such partnerships with foreigners - and were eager to
provide us with requested documents and information as accurately as they
could. Unfortunately they also showed their friendliness by feeding us huge
traditional four-five course meals and insisted on having breakfast with
locally produced fizzy wine which they called "Champaign" at 11 am. Most
importantly, however, is that even if a Russian speaking foreign investor
gets to visit the target company and speaks to its management, I do not
believe that he/she will be able to evaluate the true state of the company's
affairs during such short trip without scrutinising the company's accounts,
constitutional and privatisation documents, contracts, etc and that's where
professional expertise becomes handy. 

Alfiya Kulsharipova

*******

#5
Date: Mon, 5 Jul 1999 
From: machinegun@glasnet.ru (Victor Kalashnikov)
Subject: About the JRL and Russia

For me, to comment on JRL is an easy task. My day starts 
and ends with reading a fresh issue of it. Inbetween, I dig in 
mountains of information garbage to find some valuable 
grains in my office at the ORT TV. Without your assistance 
that torture would become almost unbearable. 

I really don't see any need for changes or improvements at 
the JRL. It provides a coherent reflection of what is said or 
written 
about Russia. The only suggestion may relate to the fact that 
non-American, notably European, experts are 
underrepresented. Meanwhile the transatlantic discussion 
about Russia is obviously becoming a problem in itself. But 
maybe this would go beyond the List's agenda? Though, I've 
heard from some European colleagues that they regard the 
JRL as being primarily an American "tusovka" (eh...a 
"communicating spot"). 

The discussions and personal opinions on the List are quite 
interesting and revealing as well. Still, Americans have a 
common lens to watch at Russia - even though they do it 
from all the different angles. The good old Sovietology - with 
its renown readiness to dismiss itself at any given moment - 
also keeps shaping so many mindsets. I myself, for example, 
miss the real relevance of yet another concept on Russia-US 
relations which couldn't be traced back to the fundamental 
point - continuing nuclear stand-off. What kind of 'friendship', 
'partnership' or big investment projects do fit into that 'sine 
qua non' of both governments? The Cold war isn't over. Its 
theatre has changed only. 

As to Russia herself, it strikes me ever more, how 'essentials' 
are resistant against all the winds. Same nomenklatura 
(even more stable - and hence more rapacious - than the 
Soviet one); a widening gap between establishment and the 
masses; press freedom and democracy abused or 
unfunctional; 'force-structures' reestablished, etc., etc. Of 
course, I mean that too much is discussed about what 
Chubais said, or what Yavlinsky thought, or what 
Yeltsin...well, you know.

The European context for Russia and for everybody else has 
been profoundly altered, that's true. But it seems to be going 
to be transformed even further. Where? And what is the 
proportion between a 'grand dessin' and an ordinary chaos 
within that movement?

I'm busy now with a TV project on the 10th anniversary of 
revolutions in Eastern Europe. The dominant impression 
about them - both politicians and their assistants 
miscalculated on almost everything. That's why they've 
hastily invented a number of myths about the role of their 
brand. And they want us to take it as a basic dogma to treat 
the present times (also mythology-prone in their turn) as well.

Actually, David, I'm thinking whether I could apply for some 
of your readers to participate in a creative exchange of views 
& recollections to look retrospectively at those dramatic 
events ten years ago. Let's extract some lessons from them. 
I'm going to visit several parts of Europe in a week or so with 
a Russian TV team. It would make me a pleasure to share 
ideas and 
assessments then with people still wondering 'how and why 
all that happened'. I'm sure, there's still a lot of enlightening 
stuff in it.

So much about my reflections on JRL which, as I said, is 
fascinating.

*******

#6
The Times (UK)
July 5 1999
OPINION 
Anna Blundy 
'A country that accepts food aid during the winter is not about to spend its 
last drop of waning energy on a nuclear stand-off'

As they swelter under the most intense heatwave in a hundred years, the last 
thing Russians are thinking about is a Cold War. If only it was a bit colder 
here. Tens of people are drowning in Moscow every weekend - hurling 
themselves drunkenly into any water they can find in an attempt to escape 
from the blistering heat. The peat has started smouldering under the earth 
outside the city, forest fires are raging throughout Russia and the traffic 
policemen, red-faced at the best of times, have been burnt to a cinder, to 
say nothing of being asphyxiated by petrol fumes. Most people are just 
pleased that now that Nato has stopped bombing Yugoslavia they can be friends 
with Americans again and sunbathe in peace. It is too hot for a Cold War. 
The recent military exercises that brought tanned Russian generals beaming on 
to the country's television screens and the Americans out in a sweat in fact 
cost the Northern Fleet all its fuel resources for a year. Of course, if 
there were a real war they could presumably scrape out a barrel or two, but 
one of the reasons why the manoeuvres that so terrified the Western press 
were so large is that the military was trying to make up for the fact that 
for some years its pilots have largely been confined to the classroom for 
financial reasons. That this was one of the largest military exercises since 
Soviet times simply means that they have had to save up for it for a very 
long time. 

The panic that seemed to sweep the West was unwarranted. Yes, the operations 
evoked memories of the Cold War and may have sent a shiver down the spine for 
that reason, but as to whether the Russian Army is currently a threat - it is 
not, or not intentionally at least. Nobody in their right mind would put a 
disastrous slip of the finger past them. 

For if Russia is dangerous it is only from the point of view of horrific 
accidents. Stockpiles of chemical weapons are buried here nothing like far 
enough beneath the earth's surface and they are extremely casually guarded, 
basically by a barbed wire fence. The copious nuclear power stations are not 
in ideal shape, to say the least, and there have been enough near-misses with 
nuclear weapons to prove that the command and control systems are far from 
sufficient. Essentially, the army is the least of our worries. 

There is no question that the Russian military is indignant at the lack of 
respect it has lately been shown by Nato, and nobody would deny that a 
handful of unhinged senior generals would relish the opportunity of a brief 
and apocalyptic war with America, but will they really threaten it? No, and 
it is irresponsible to suggest that they might. The hysteria that the media 
are capable of whipping up could easily cause much-needed investors to think 
again about Russia. A country that accepts food aid during the winter, that 
desperately needs Western loans to survive and that cannot provide the fuel 
to heat homes in Kamchatka is not about to spend its last drop of waning 
energy on a nuclear stand-off. For this is not the beginning of a new Cold 
War. The political situation in Russia is far too complicated for that these 
days, much to the disappointment of the world's conspiracy theorists and 
tabloid newspaper editors. Back then there was a veneer of unity: we, the 
Communists of the Soviet Union, hated the West. Simple. They, the evil 
empire, were on one side of the Iron Curtain. We, the righteous, were on the 
other. 

Now things are not quite as straightforward. The Communists who dominate 
parliament most definitely hate the West and back the jingoistic generals who 
would fly into the airspace of Nato aggressors. But Boris Yeltsin's attitude, 
and that of his Government, is far more complex. He might allow a bit of 
flag-waving to appease his humiliated people, but he is not likely to risk 
irritating his new G8 partners more than is entirely necessary for national 
pride. 

Quite apart from which, the Russian people have not the remotest interest in 
a Cold War or a real one. True, they do not like it when the Americans appear 
to be lording it over them, but they do, oddly, seem to like going to the 
Costa del Sol on package tours and reading about Madonna's love life in 
trashy magazines. So it is unlikely that the military would be able to rustle 
up much support for its in any case non-existent plan for empty aggression, 
especially in weather like this. Right now Russians are lying in parks and on 
beaches, growing things at the dacha to pickle for winter, drinking beer and 
dreaming of the snow.

******

#7
The Russia Journal
July 6-13, 1999
Russian press examines its performance
Top journalists say Kosovo coverage balanced
Tara Warner/The Russia Journal 

Modern wars have become media events, as exemplified by the recent conflict 
in Yugoslavia, which one Russian journalist called "a test for the free 
press." 

The coverage of Yugoslav President Slobodan Milosevic's ethnic-cleansing 
campaign in Kosovo, the Kosovo Liberation Army's struggle for the province 
and NATO airstrikes gave rise to debate on the objectivity of those reporting 
the events. Now that the bombing has ended, many journalists are starting to 
look back and examine the performance of the Russian media during the 
campaign. 

Russia, as Serbia's self-proclaimed traditional ally, came under particular 
fire for its coverage of Kosovo, with some Western critics saying Russian 
media accounts were heavily skewed toward the Serbs. 

But many Russian journalists deny the charge of overall bias, saying it is 
not possible to place all Russian media into one category.

"You can't speak of a single Russian media standpoint. The media in this 
country today are so varied," says Alexander Golts of the weekly magazine 
Itogi. 

Maxim Yusin, who covered events in Yugoslavia for the daily Izvestia, says 
the Russian media were no more or no less objective than their Western 
counterparts. 

"Yugoslavia was a test for the free press," he says, "and the free press 
failed it." He argues this applies not only to Russian media but to their 
Western counterparts as well - particularly in English-speaking countries. 

Yusin singles out Russian television, particularly the state-run channels, 
for broadcasting biased accounts of events in Yugoslavia. "Essentially, they 
let themselves become vehicles for Milosevic's propaganda," he says, adding, 
however, that coverage by the NTV channel was more balanced.

Newspapers, he said, fell into different categories, with some publications 
taking a one-sided approach and others, such as the dailies Izvestia and 
Kommersant, striving for more objective coverage.

"The opposition press was biased, but, otherwise, Russian media coverage was 
reasonably objective," says Gennady Sysoyev of Kommersant. "The quality 
papers, both here and in the West, made an attempt to give a balanced 
portrayal of events," he says.

Asked to comment on the highly emotional tone of initial Russian media 
coverage following NATO airstrikes, Sysoyev put it down to shock. "Certainly, 
there was more emotion at first, but then it isn't every day you have a war 
break out in Europe." 

The Russian press was close to unanimous in taking the line that bombing 
Yugoslavia was a mistake. "Yes, we criticized NATO. We said that bombing 
wasn't a solution, but we did not hide the facts," Itogi's Golts says.

As for allegations that the Russian press showed only one side of the story - 
dwelling on civilian Serb casualties during the bombing but reporting little 
on the plight of Kosovo Albanian refugees - journalists do not think the 
picture was so black and white.

Golts and Yusin agree that strong-er emphasis was placed on certain aspects 
of the Kosovo crisis in Russia but say the same was true of the West.

Golts, who covered NATO's 50th anniversary summit in Washington, says he was 
struck by the way U.S. television presented the NATO bombing campaign only in 
a positive light, glossing over the hiccups and failures.

He questions Western objectivity, not just in regard to the bombing. "Of 
course, the tragedy of the refugees had to be shown, but American media built 
it up into something on the scale of the Holocaust."

Sysoyev points out that Russian media did not ignore the Western view of 
events, with some Russian publications reprinting material from Western 
papers.

Some Russian newspapers still hold the view that the criticism of NATO's 
bombing has been proven valid in light of problems the peacekeepers are 
facing with disarming the KLA, the reprisals against the Serb minority and 
the fact that Milosevic remains in power in Belgrade.

But all three journalists deny a smug attitude on the part of the Russian 
media.

"There's no gloating and saying 'I told you so,'" says Golts. "We're all in 
the same boat now, and our soldiers are taking the same risks in Kosovo [as 
NATO troops]."

Sysoyev says it is natural for there to be some degree of a "we-were-right 
syndrome" when post-conflict problems surface. He also notes that many 
journalists, not just Russians, criticized the bombing campaign, or pointed 
to the presence of criminal elements in the KLA.

Like his colleagues, though, Sysoyev says there is no point in arguing about 
who was right or wrong. The most important task is simply to have Russians 
and Westerners working together effectively in Kosovo, he adds. 

Yusin said he believes that, in the final analysis, the bombing campaign was 
a victory for NATO, but he stresses the need for a long-term vision for 
Kosovo. 

"We are perhaps writing less about the atrocities against Albanians [that 
are] coming to light, and more about what is happening to the Serbs. But we 
must not let these differences in emphasis divide us," he says.

*******

#8
Crisis Hit Russians Turn to Booze and Cigarettes

MOSCOW, July 5 (Reuters) When crisis hits Russia, as it does with monotonous 
regularity, Russians have a ready response: pick up the vodka bottle and 
light a cigarette. 

And the country's alcohol and tobacco producers have been enjoying a windfall 
since the rouble was devalued last August, dragging Russia into a 
merry-go-round of banking, economic and political crises. 

``People aren't drinking and smoking less because of the crisis. They're 
doing so more, they've lost their money in the banks,'' said Dmitry Makhanko, 
head of VinExpo, organiser of the Drinks and Tobacco '99 trade fair, held in 
Moscow recently. 

``But people are trying to buy our own produce, because it's become cheaper 
than imports,'' he told Reuters. 

Prices are extremely low by international standards. Vodka is easy to find 
for $1 for a 50 cl bottle, while cigarettes start at around $0.25 for a 
packet of 20. 

The aim of the trade fair, well supported by Russian companies and by 
producers from the former Soviet republics of Moldova, Armenia and Belarus, 
was simple, Makhanko said. 

``It's to help our own Russian producers, producers from the fatherland, to 
find their place on the market.'' 

He said the financial crisis had effectively made it impossible for many 
Russian companies to afford advertising, but this was offset by the fact that 
heavily-promoted Western brands were becoming too expensive for average 
Russian consumers. 

Tatyana Kuznetsova of the Kristall-Lefortovo trading house, a distribution 
company dealing in produce from Moscow's famous Kristall vodka distillery, 
agreed that the crisis had given a boost to the company's output. 

``People stopped drinking imported drinks and turned to local produce,'' she 
said, at a stand displaying a range of liqueurs flavoured with coffee and 
lemon, chocolate and nuts and other improbable combinations, as well as the 
classic Kristall vodka. 

RUSSIANS HAVE A TASTE FOR THE HARD STUFF 

Companies selling vodka in Russia do have a huge inbuilt advantage: people 
drink a lot of it. 

Vodka is the mainstay of Russia's drink trade. Data from the State Statistics 
Committee show that Russians drank 7.32 litres of pure alcohol per head in 
1998, not particularly high by international standards, but this ignores 
illicit moonshine. 

By comparison, the industry publication World Drink Trends, cited by Alcoweb, 
a European Commission-funded body, shows that Portugal tops the global list 
of drinkers, with 11.3 litres per head. Officially, Russia does not even make 
it to the top 20. 

But what makes Russia unusual is the volume of strong drinks consumed. 

The State Statistics Committee showed that of all alcohol drunk in Russia 
last year, a whopping 80.9 percent was swallowed in the form of vodka and 
other spirits. 

Wine accounted for a trifling 6.9 percent of the total, and even beer made up 
just 8.9 percent of all alcohol drunk. 

By contrast, data from the London-based Wine and Spirit Association showed 
that in 1997, British drinkers consumed 1.37 litres of pure alcohol per head 
in the form of spirits, a modest 18 percent of the 7.7 litres of pure alcohol 
consumed in total. 

Another unusual feature of the Russian market is that while there is a global 
trend away from strong drinks and towards consumption of lighter alcohol, the 
reverse is true in Russia. 

Vodka's and spirits' share of the market was actually higher in 1998 than in 
1997, when it accounted for 77.6 percent of the total, the State Statistics 
Committee said. 

SMOKING RATE AMONG THE WORLD'S HIGHEST 

Tobacco sellers in Russia also have an unfair advantage over those in almost 
every other country, given that it has one of the highest levels of smoking 
in the world. 

World Health Organisation data from 1997 showed that around two thirds of 
Russian men and one third of Russian women smoke, putting the country on a 
similar level to China, Vietnam and South Korea among the world's heaviest 
smokers. 

Tobacco producers from Russia, and from other CIS republics which were 
affected by the knock-on effect of the rouble crisis, are enjoying a boom 
similar to that enjoyed by distillers. 

``People aren't smoking less, they're smoking cheaper,'' said Dumitru Albu, 
promotions manager of Tutun-CTC from Moldova. 

His company sells 7.5 billion cigarettes per year, of which 60 percent are 
sold in Moldova and 40 percent abroad. Russia is an important market, he 
said, without giving further details. 

``The influence of the crisis was very direct,'' he said. ``We made a profit 
we had not expected. It was advantageous for us.'' 

Importers in post-crisis Russia face a tough time, but some still cope. 

Andres-Leonardo Bogdan of Surte SA, representing several exporters from 
Argentina, said sales of unfermented Argentine grape juice, which is turned 
into the ubiquitous 'Soviet champagne' in Russia, were holding up well. 

``In the first few months after the crisis there were problems. But big firms 
sat tight and waited, and the market is now stabilising.'' 

Such is the lure of Russia for drink and tobacco firms despite the crisis 
that new players are still entering the market. 

Sergei Antonov of the 138 year old Neman tobacco plant in Grodno, Belarus, 
told Reuters Neman would start selling cigarettes in Moscow in September. 

The plant sold 6.8 billion cigarettes last year, all in Belarus, where they 
accounted for every second cigarette smoked. 

Antonov said quality and price advantages should allow Neman to sell around a 
billion cigarettes a year in Russia, but he added that there was another 
advantage in his favour: Belarus will lend state support to penetrate the 
juicy Russian market. 

There is, of course, a health implication to Russia's orgy of smoking and 
drinking. 

The World Health Organisation says tobacco causes 280,000 deaths a year in 
Russia, or 32 percent of all male deaths and five percent of all female 
deaths. 

Drinking creates its own hazards. In the first half of June alone, 61 people 
drowned in rivers and ponds in and around Moscow while swimming to escape the 
searing heatwave convulsing the city. Many were drunk, a city official said. 

Russia's population is in decline, with the State Statistics Committee 
showing that the 8.8 births per thousand people in 1998 were heavily 
outnumbered by the 13.7 deaths per thousand. The population fell by 635,200 
in the first 11 months of 1998. 

``In terms of life expectancy Russia trails behind the world's developed 
countries by 10 or 15 years,'' the World Health Organisation notes. 

******

#9
The eXile
July 1-15, 1999
www.exile.ru
Russian politics at the all-star break
By Matt Taibbi (exile.taibbi@matrix.ru)

First week in July... the All-Star break. Time to step back a little and
assess things. If you're more than a few games back of first, maybe you
need to make another deal for a starting pitcher. Maybe, if your team is
losing badly, it's time to give up on this season and trade away your big
contract stars for minor-league prospects. And if you're a Moscow-based
hack, it's time to think--are you going to go the rest of the journalistic
season with the same cast of metaphors? Or will you toss out half the team,
and cast around for new acquisitions in time to make a run at the year 2000
elections? 

Here at the eXile, we think it's time to deal. We're keeping Boris
Berezovsky and Anatoly Chubais in our five-man rotation, but we've been
noticing lately that some of the other oligarchs are playing with tired
arms. Vladimir Potanin, Mikhail Khodorkovsky, and Alexander Smolensky are
hanging a lot of sliders lately. Viktor Chernomyrdin has lost a lot of
range at first. You get what we're saying: Russia needs a new metaphor. The
whole banker-oligarchy thing is old news. Time for a rebuilding phase. Time
to start thinking--as so many baseball teams in the States are these
days--about what rhetorical team you're going to field when you move into
the new stadium. And with the Belarus Union deal looming on the horizon, a
new ballpark probably isn't far off. 

A couple of years ago, the eXile gave its readers a broad layout of the
Russian political scene with a piece called "Baldfellas." The oligarchy was
in full swing then, and bios of the bankers made sense. Now we've got a
different scene unfolding. President Yeltsin, insane and barely alive, is
clinging to power, and has surrounded himself with a tight squad of evil
henchmen determined to keep him in the Kremlin at all costs. Almost all the
former insiders (i.e., most of the '90s new rich) have been at least
partially shut out of the Kremlin and are now conspiring in scattered
groups, like packs of wolves or sharks, for a way back in. 

No more Chicago of the '30s, like in '96; no more commies vs. mobsters
storylines. This is Nero's Rome: addled, absolutist Caesar vs. the
scheming, wealthy Senate. Or, to put it another way, it's the Loyalists vs.
the Traitors, just like in the Ishmaelia of Evelyn Waugh's Scoop. Come year
2000, one or the other team is going to win out--and it'll be winner take
all. Here's how the teams line up: 

THE LOYALISTS

The thing to remember about the Loyalists is that it is both correct and
incorrect to assume that the team dynamic revolves entirely around Boris
Yeltsin's pathological desire to remain in power at all costs. On its face,
this is true; the team around Yeltsin is indeed attempting to pull off a
thoroughly illegal, unconstitutional power play on the rest of the country,
and they've been forced to take the extralegal path primarily because
Yeltsin can't legally stay in office after next year. However, make no
mistake about it: this group would be going the illegal route anyway. The
ideological makeup of the Yeltsin squad is firmly monarchist, absolutist,
and non-republican: its actions of late, particularly its response to the
Yuri Luzhkov "threat," suggest a deep philosophical commitment to the
establishment of an unrestrained dictatorial state. 

Now, here's the interesting thing about the Yeltsin camp, whose principals
are daughter Tatyana Dyachenko, Nikolai Aksyonenko, Sergei Stepashin, Boris
Berezovsky, Viktor Khristenko, Roman Abramovich, Viktor Chernomyrdin, and
(separately) Anatoly Chubais and Alexander Voloshin: unlike the Yeltsin
camp in '96, this one is overtly statist and aligned against the "private"
sector. Of course, the big 7 bankers in 1996 had also won their fortunes
through state favors, but this time around, the effort will be to seize
industry under direct state control, and suck out funds directly, rather
than extort campaign funding kickbacks from private bankers made rich
through privatization. 

The effort to place Yeltsin henchmen at the reigns of the nation's
industries is moving on several different fronts. The first and most
successful move to shore up state support of industrial money came just
last week, when an effort to unseat Anatoly Chubais as the CEO of RAO-UES
failed, and Yeltsin chief of staff Voloshin was elected chairman of the UES
board. Those commentators who were on the Chubais "reform" bandwagon in the
mid-90s should take note that this "hero of privatization" is now staying
close to power through his rule over a massive, corrupt, and hugely
inefficient state enterprise, whose coffers will no doubt be raided between
now and next June in an effort to keep Yeltsin or his camp's chosen
successor in the Kremlin. The placement of Voloshin on the board was widely
seen as an assurance that Chubais is safe there, and that the Kremlin will
have access to UES money when it commences its next great political battle. 

Secondarily, there is the issue of Gazprom. It's no secret that Gazprom is
now and will remain the mightiest, richest conglomerate in Russia, and that
its support--and its money--will be needed by anyone who wants to occupy
the Kremlin. The Yeltsin camp realizes this and has, accordingly, taken
plenty of steps already to ensure that it will have Gazprom in its pocket
in time for the 2000 showdown. The first move in that direction comes this
week. By the time this issue hits the newsstands--after a meeting of the
Gazprom board on June 30--Viktor Chernomyrdin will probably have retaken a
seat on the board of directors. If that happens, and it probably will, this
will be a clear sign that Rem Vyakhirev is a marked man, and that Viktor
Stepanovich, who has consistently demonstrated his fealty to the Czar, will
soon be trying to take his place. Vyakhirev, no fool and a canny operator
himself, actually met with Stepashin this past week, probably in an attempt
to talk the PM out of the plan. But the eXile's bet is that Chernomyrdin
retakes control of Gazprom and uses company money to push through whatever
evil plan for Total Power Seizure the Yeltsin camp dreams up. Yeltsin
certainly remembers what a cozy relationship Vyakhirev had with Yevgeny
Primakov, who helped the Remster avoid paying taxes last year, and
experience has proven that Yeltsin has no tolerance for anyone still
bearing the Primakov scent. That's particularly true given the rumored
upcoming announcement of an alliance between Luzhkov and Primakov. The mere
possibility that Vyakhirev would consider tossing Gazprom's weight behind a
Luzhkov candidacy should be enough to ensure Yeltsin's permanent enmity. 

There have been other murmurs of Yeltsin-camp clamoring at Gazprom. For
instance, Versiya this week reported that Boris Berezovsky is pushing the
candidacy of former Yeltsin deputy administration chief Ruslan Orekhov for
the post of deputy director of Gazprom. We'll see how that plays out, but
if it comes off, that's another definite sign that Vyakharev is out. 

Another interesting Gazprom-2000 factoid: one of the leading candidates so
far for the St. Petersburg gubernatorial elections next year is one Vitaly
Mutko, formerly deputy mayor under Anatoly Sobchak and currently president
of the "Zenit" soccer team. Mutko's financial backing for the campaign is
Zenit's sponsor--Gazprom. If Mutko stays a candidate after Vyakhirev is
axed, mark him as a Yeltsin team player. 

Now, for the real kicker, state-industry-financing-wise: according to
several Moscow newspapers, a plan is underfoot to create a massive state
oil monopoly called "Gosneft." Novaya Gazeta this week speculated that the
Aksyonenko-Abramovich axis was thrust into Yeltsin's inner circle precisely
with this goal in mind--specifically, the Kremlin hopes to lump together
Rosneft, Slavneft, and ONAKO, plus the state's stakes in Tyumen Oil and
LUKOil, and create a true petroleum death star. NG claims the idea was
first born late last year, when then-Energy Minister Sergei Generalov
lobbied for a form of the plan, which wouldn't have included LUKOil or
Tyumen Oil. Now, with Abramovich crony Aksyonenko keeping close watch over
the Energy Ministry, the idea seems--although insane on its face--not
entirely outside the realm of possibility. The names of KomiTEK chief
Grigory Beryozkin and Abramovich buddy Andrei Gorodilov have been bandied
around as possible candidates to take charge of the new state holding,
which would put a giant share of the country's oil-based cash in direct
control of the Yeltsin camp (monies augmented, no doubt, by Abramovich's
Sibneft). The Gosneft story has been popping up enough lately to suggest it
may actually be true; look for someone in the Kremlin administration to
"deny" it publicly soon, or for a low-level Kremlin aide to put forward the
idea in a Kremlin-friendly newspaper. 

Gas, electricity, oil: if the Yeltsin camp manages to get all three under
its control, its opponents will have a tough time mounting any serious
opposition to whatever plans the Kremlin cooks up. As far as those plans
go, there appear to be two main political schemes emanating from the
President's inner circle: the Belarus Union plan, and the lesser, more
legal, Stepashin-based "Rossiya" political party plan. 

The Belarus plan looks like the real deal. Segodnya made a big fuss this
past week about the planned merger of the Russian and Belarussian armies,
which sources (including bureaucrats from various "Belarus Union Council"
organizations--apparently already in existence and having offices
somewhere) say will come off in the fall. The basic idea is simple, based
on the Milosevic model: declare a new state and a new constitution, and
simply nominate a President (Yeltsin) who will not have to run for election
in the year 2000. If Yeltsin stays alive into next year, we may find out
then that this deal will already have long ago been a fait accompli. The
legal machinations--as even The Moscow Times has noted already--are
probably silently going on as we speak; the only "announcement" will be a
formal cancellation of the Presidential elections for the old Russian state. 

Secondarily, the Kremlin is preparing to deal once and for all with the
problem of the "obstinate" Duma. A new Kremlin-based political party with
Stepashin as its head, called "Rossiya," is under way and will put forward
candidates for the upcoming parliamentary elections. "Rossiya" will run as
a blok of Yeltsin-friendly parties: Our Home is Russia, All Russia, New
Force, Right Cause, and the Aman Tuleyev party. The latter group will be a
major factor in the elections, with Alfa-Group money backing it. If the
group gets in and assumes a dominant place in the Duma--not unlikely given
the funding and media support it will get (don't forget that ORT and RTR
have recently announced a program of formal political censorship, and one
belligerent show, Sovershenno Sekretno, has already been yanked), its main
role will probably be to sit by quietly as obedient patsies while the
Kremlin subverts the Presidential election process and welcomes Alexander
Lukashenko and the rest of Belarus to the table. And--to steal a line from
Goodfellas--that will be that, and there will be nothing anybody could have
done about it. Not even: 

THE TRAITORS

This group is easy to identify. Just look at the above list, exclude them
from the general population, take the remainder, and you've basically got
"the other side" in the upcoming political struggle. The central figure
here right now is Yuri Luzhkov, who's had to endure no end of humiliations
from a Yeltsin camp that has been feeling its oats in a big way ever since
it disposed of Yevgeny Primakov. The Kremlin fired a nasty shot across da
mayor's bow last week when it refused to let him take a helicopter ride
over Moscow oblast territory; there's no way to interpret that incident
except to see it as a demonstration that the military is on board with the
Kremlin and whatever its future plans may be. The mayor has furthermore had
to endure the irritating harangues of diminutive mayoral opponent Sergei
Kiriyenko, who despite his recent call for Yeltsin's ouster is clearly
playing possum for the Kremlin, and doing its bidding by slinging mud at
Luzhkov. Yevgeny Kiselyov a little while back coyly suggested that the Duma
would look a lot better in its original home in St. Petersburg, a clear
message that even the notion that Luzhkov is boss in the seat of Russian
power can be altered at any moment. 

Luzhkov is fighting back: this past week, in a clear announcement of
potential kompromat hostilities, he hired, through his TV station
TV-Center, the much-loathed Sergei Lisovsky. Lisovsky immediately made a
series of cryptic public statements about his presumably thorough knowledge
of Yeltsin's 1996 campaign irregularities. He hinted, among other things,
that much of Yeltsin's '96 campaign money was "Western"--a subject that
will be of interest to the people, who of course don't matter, and to
Western journalists, who in Russian domestic politics matter even less.
Herein lies a central problem for the Traitor forces: an international
uproar over Yeltsin corruption has been rendered a virtual impossibility by
NATO's blundering in Yugoslavia. It is almost certain that Yeltsin made
Western political and financial support for his plans to remain in office a
condition for Russian support of the Yugoslav "peace" plan. The Yugoslav
war was really manna from heaven for Boris Nikolayevich. Bill Clinton will
still be in office when the 2000 deal goes down here in Russia, and you can
bet the United States will do everything in its power to make sure its
buddy Yeltsin--who was just given a permanent place at the G-8 table for
his efforts in Yugoslavia--stays put. 

Money will decide this whole affair, and the simple truth is that the
Traitors may not have enough of it to get over next year. Yeltsin will
still be getting his IMF money for the next year, anyway, and as for other
sources, well... times have changed. The crisis impoverished Russia, and
there are fewer and fewer barons out there capable of influencing state
politics. Not a single Russian made the Forbes billionaires list this year;
the banks are insolvent. And if the Kremlin gets its hands on Gazprom, the
deck will be firmly stacked. 

The polls, of course, favor the traitors right now: if one were to combine
the public support for potential anti-Yeltsin candidates like Alexander
Lebed, Luzhkov, Grigory Yavlinsky, Gennady Zyuganov, and Yevgeny Primakov,
and unite them against the President, it would be a blowout. But even in
the unlikely case that all those people settle their differences and get
together, their victory will only be an abstraction. There either won't be
an election, or it will be fixed in some way, like the '96 ordeal. The only
question is whether or not Yeltsin will get away with his end run. A few
months ago, it looked unlikely. Now, it looks like the Traitors will have
to make a move, and a drastic one, to put a halt to the inevitable--a
"family" dictatorship. 

*******