July 9, 1999    
This Date's Issues: 3384 •3385  •

Johnson's Russia List
#3385
9 July 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Yeltsin expects democrats to win Russian election.
2. Reuters: Russia-Belarus union pact nears completion.
3. Itar-Tass: YELTSIN NOT TO BE RUSSIA-BELARUS UNION PRESIDENT.
4. Itar-Tass: PATRIARCH CAUTIONS ABOUT PLANS FOR BURYING LENIN.
5. Reuters: Emerging markets: privatization alone not enough.
6. Jack Schmidt: RE: Investing in Russia/Goyal/Devane.
7. Ray Smith: Lebed Marched Division on Moscow.
8. Jerry F. Hough: Industrial policy.
9. Melvin Goodman: SecState Shultz and CIA Intelligence.
10. Moscow Times: Melissa Akin, Left Tries to Reassemble Humpty Dumpty .
11. Jamestown Foundation Monitor: YELTSIN MEETS AGAIN WITH MILITARY 
LEADERSHIP.
12. Los Angeles Times: Maura Reynolds, Rival Plays Dirty Trick on 
Detergent Giant.
13. The Washington Post: Robert Kaiser, Young, Liberated and Russian.
Self-Reliant Generation Shaking Off Shackles of the Past.]

*******

#1
Yeltsin expects democrats to win Russian election

MOSCOW, July 9 (Reuters) - President Boris Yeltsin said on Friday, his last 
day at work before his summer vacation, that he was confident of calm on 
Russia's political scene and that democrats would win the next parliamentary 
election. 

``The political situation in the country is now peaceful,'' Itar-Tass news 
agency quoted Yeltsin as saying before talks in the Kremlin with Prime 
Minister Sergei Stepashin. 

Looking ahead to December's election to the State Duma, the lower house of 
parliament, he said: ``The democratic wing will be in the majority in this 
chamber of parliament.'' 

The Duma is now dominated by opposition forces led by the Communist Party and 
it has waged many battles with Yeltsin and the government over passage of 
laws needed to push through economic and political reforms. 

The Communists have said they believe they can tighten their grip on the Duma 
and hope, with their allies, to secure a two-thirds majority which would put 
them in a position to try to change the constitution. 

The opposition wants the constitution amended to water down the vast powers 
of the president and give the Duma more teeth. 

Yeltsin said in an newspaper interview this week that guaranteeing peaceful 
and fair elections was now his main task. 

A presidential election is expected in mid-2000, when his four-year second 
term ends and he is due to step down. 

Yeltsin's press secretary, Dmitry Yakushkin, said the president would leave 
to start his holiday on Saturday. 

********

#2
Russia-Belarus union pact nears completion
By Ivan Rodin

MOSCOW, July 9 (Reuters) - Russian Prime Minister Sergei Stepashin said on 
Friday a treaty on forming a union with neighbouring Belarus was almost 
ready, sending the latest signal that Moscow is accelerating moves towards 
the union. 

Stepashin said after a meeting with President Boris Yeltsin that details on 
how to implement the union treaty would be completed by August. 

"I have discussed the matter with (Belarus) President Alexander Lukashenko, 
and we have arrived at a mutual understanding," Interfax news agency quoted 
him as saying. 

Russia and Belarus have been discussing a union for several years, but 
Lukashenko shook Moscow last week by threatening that his former Soviet 
republic would turn more to the West if Russia continued to drag its feet on 
the issue. 

Since then, Yeltsin and Stepashin have signalled they are ready to push ahead 
with the union, despite unease in the West and among Russian liberals. 

The union would commit Russia and Belarus to vaguely defined goals of 
political and economic integration, although both countries would remain 
independent. 

Belarus's top banker said on Wednesday his country of 10 million people would 
be ready to adopt the Russian rouble as its currency, but the Russian central 
bank has suggested an eight-year timetable for this. 

Western leaders and Russian liberals are wary, particularly because they are 
critical of Lukashenko's human rights record and his reluctance to embrace 
economic reforms. 

Grigory Yavlinsky, leader of Russia's liberal Yabloko party, said the union 
was a political pact which would be beneficial to the Russian and Belarus 
presidents, not to their people. 

"Russian and Belarussian people are united as they are," Yavlinsky told a 
news conference. 

"They are united by many centuries of history, by World War Two, by the 
Chernobyl (nuclear) tragedy, and our peoples do not need to be united by 
Yeltsin and Lukashenko." 

He said Belarus was seriously lagging in economic reforms and development and 
this could drag down Russia. He also said a union of this type should be 
formed over many years, and that economic integration should precede a 
political merger. 

Some politicians say Yeltsin may favour the union because he could become its 
head, and thus stay in power after his term as Russian president ends next 
year. 

Commonwealth of Independent States Affairs Minister Leonid Drachevsky ruled 
that out on Friday, saying Yeltsin "cannot be and will not be president of 
the Russia and Belarus Union." 

*******

#3
YELTSIN NOT TO BE RUSSIA-BELARUS UNION PRESIDENT

MOSCOW , July 9 (Itar-Tass) - Boris Yeltsin cannot be and will not be 
president of the Union of Russia ad Belarus. Russian Minister for 
Affairs of the Commonwealth of Independent States (CIS), Leonid 
Drachevsky, answering a question of Tass at a news conference on 
Friday, said that precisely such a draft treaty on the Union of Belarus 
and Russia was submitted for the discussion of parliaments and endorsed 
by the Russian president. 
Drachevsky said that the discussion of this theme in the Russian media 
is nothing more than speculation. 
"The Russian and Belarussian sides agreed that the supreme leadership 
in the new union state will be exercised by the Supreme Council which 
will comprise two presidents, two premiers, heads of the chambers, 
parliaments, of the two countries," he said. 
The minister said that the draft treaty on forming the union envisages 
that there will be a unified government and parliament of the Union 
state. As to decisions of the Supreme Council, they will be passed 
under the principle of "one side -- one vote". 
Drachevsky believes that neither subjects of the Russian Federation nor 
Russia's neighbours need be concerned over the draft treaty. He said 
that the Union of Russia and Belarus will be a union of two countries 
which will fully preserve their statehood. "This will much rather be a 
confederation," he said. 

******

#4
PATRIARCH CAUTIONS ABOUT PLANS FOR BURYING LENIN

ST. PETERSBURG, July 9 (Itar-Tass) -- Head of the Russian Orthodox 
Church, Patriarch Alexy of Moscow and All-Russia, called for 
circumspection in handling proposals for the burial of the body of 
Vladimir Lenin which has been on display in Moscow Red Square Mausoleum 
for 75 years. 
The Patriarch was speaking at St. Petersburg's airport upon arrival in 
Russia's second largest city on Friday. He stressed that "decisions 
must be made which will not split further our already divided society." 
The Patriarch said he was no less concerned about the fact that Red 
Square, where there are many tombs and common graves at the Kremlin 
wall, has often been made an arena where, as he put it, "people dance 
on bones." He recalled that two years ago, circus performances had been 
organised on Red Square, and later hilarious variety shows were staged 
next to the graves. 
The Patriarch thinks that the Russian government must either fulfil its 
resolution passed in the 1950s on the building of a Pantheon, where the 
remains of all the outstanding people buried in Red Square will be put 
to rest, or forbid "circus and variety shows in the graveyard." 
Governor of St.Petersburg Vladimir Yakovlev, who welcomed the Patriarch 
to St. Petersburg, declared at the airport that during the Russian 
president's meeting with the leaders of a number of Russian regions in 
the Kremlin on Thursday, a proposal was voiced "not to make haste with 
this question," because any haste could play into the hands of "the 
forces which seek to destabilise the situation in the country. 

*******

#5
Emerging markets: privatization alone not enough
By David Chance

LONDON, July 8 (Reuters) - Privatisation has transformed the world, and
in the 10 years since the Berlin Wall fell has taken capitalism deep into
the heart of the former communist empire, yet a new report highlights some
big failures.
According to a study from the International Finance Corp, the equity
investment affiliate of the World Bank, more than 100 countries have sold
assets worth some $735 billion, a figure close to the national income of
Mexico, and generated huge efficiencies in the process.
In Egypt for example, a survey of 28 divested firms reveals that 71
percent increased sales, 68 percent increased earnings and 96 percent raised
salaries.
Yet elsewhere, mostly in the countries of the former Soviet Union,
excluding the Baltic states, Privatisation has been a tragic failure.
Some commentators say that Russia has achieved nothing but the transfer
of assets to insiders because there was no legal infrastructure, according
to the IFC study by John Nellis.
On the face of it, Nellis said, Russia's initial mass privatisation
programme between 1992 and 1994 was a great success as 15,000 firms were
transferred out of state ownership.
But in 1994, Russia opted for its infamous loans for shares scheme,
whereby stock in huge and valuable Russian enterprises such as Norilsk
Nickel, one of the world's biggest producers of non-ferrous and precious
metals, was awarded to banks at bargain prices in exchange for loans to the
state.
"What was supposed to be a programme to distribute ownership and launch
enterprises on a positive restructuring path became instead a transfer of
productive resources to a fortunate few," Nellis said.
Some commentators have even attributed the halving in size of Russia's
economy in the 10 years since 1989 to the privatisation process and
prominent economist Jeffrey Sachs has called on Russia to renationalise its
industries.
The anti-privatisation argument also gains succour from the relative
success of China, which still has a centrally planned economy and is
generating big improvements in productivity and wealth without transferring
ownership to the private sector.
Nellis argues, however, that privatisation itself is not at fault, but
rather the rules which govern the whole process of economic exchange and
society.
"...Capitalism is revealed to require much more than private property; it
functions because of widespread acceptance and enforcement in an economy of
fundamental rules and safeguards that makes the outcome of exchange secure,
predictable and of reasonably widespread benefit," he said.
It is not only Russia's programme which is criticised.
Given the length and intensity of communist rule, Nellis argues that
should not have come as a surprise.
He also notes that some of trailblazers of reform in central Europe have
come unstuck, such as the Czech Republic.
By 1995 some 1,800 Czech firms had been sold for vouchers, enabling Prime
Minister Vlaclav Klaus in 1996 to boast that the transition to the market
economy had almost been completed.
His claim was backed by low unemployment and high growth in the domestic
economy and strong exports.
That has all unravelled and the Czech economy is now officially in
recession while peers such as Hungary and Poland are forecast to achieve
four to five percent growth this year.
Czech voucher privatisation created investment funds owned by banks which
had a vested interest in not writing off debts of companies they had lent
to, which meant the economy was not restructured.
Where there is little or no regulation, weak financial and capital
markets and poor bankruptcy laws, Nellis argues that the simple process of
transferring wealth from the state is unlikely to transform an economy.
"In such circumstances, privatisation is more likely to lead to
stagnation and decapitalisation than to improved financial results and
enhanced efficiency," he said. ((David Chance London Capital Markets Desk,
+44 171 542 6784, email david.chance@reuters.com))

*******

#6
Date: Fri, 9 Jul 1999 
From: Jack Schmidt <razgulai@yahoo.com>
Subject: RE: Investing in Russia/Goyal/Devane

I tend to agree with Ajay Goyal's points on investment
in Russia. I would like to add that any potential
investor in Russia should look as closely at his
advisors' motivations as at the investment itself . 

Moscow's financial community exists nearly entirely on
fraud and amateur hucksterism. From 24 y.o. Russians
talking about "what usually happens in a market"
(uh,right!), to leading brokerages front-trading on
their own clients through the in-house proprietary
account, to "investment bankers" who will promote any
deal just to make their bonuses, to Nick Leeson-style
fund managers taking radical stock punts because they
have no personal downside.

They all advance The Big Lie to secure their own
fortunes: that Russian companies are "undervalued" and
therefore foreigners should invest. Huh? Is a Lada
"undervalued" relative to a Mercedes? No; they are
entirely different cars, technology, quality, etc. 
When a Lada is built and runs like a Merc then it will
be worth a Merc. But like in "The Grinch Who Stole
Christmas", just slap some horns on a dog and voila: a
reindeer!

Will Lukoil or Surgut (much less Tatneft, Tyumen Oil,
or Sibneft) EVER be comparable to a Western oil major.
No. Never. They possess none of the necessary
assets: advanced technologies, sufficient capital,
global scope, lean efficient management, and low-cost
reserves, not to mention a stable investment climate,
transparency, etc. Some may feel this is too harsh,
that in 15 or 20 years they will catch up. Perhaps,
but then choose an appropriate Russian risk factor and
discount the cash flows occurring after 15 years. The
result? Absolutely no impact on current valuation.

So why in hell does anyone say that such companies are
worth more than a small fraction than their Western
counterparts? And what drove people to value them at
their peak to absurd approximations of a Western
equivalent? 

Well, let's take a curious example. The manager of
one of Russia's best-known and (previously) most
successful funds decides to go big for illiquid oil
holding companies, incredibly enough IN FULL KNOWLEDGE
AND TACIT SUPPORT of major violations of shareholder
rights by these very companies on the subsidiary
level. The flight from these stocks plus the
holdings' illiquidity drives his fund to record
levels, his face appears on numerous magazines, he
opens a second fund, and he personally pockets $40
million. 

Fast forward one year: his investors are left with
nothing because, on top of a market crash, these
holdings (surprise surprise) have now taking their
shareholder abuse to the holding level. Note that
this manager still has the $40 million in his pocket,
vociferously blames "the Russians", and amazingly
enough is still welcome in the Western financial
community! In any other country he would be fired,
sued, and criminally indited for financial malfeasance
and stock manipulation (as there is evidence of
collusion with at least one oil company's management
to artificially drive up the price through coordinated
stock emissions and purchases). 

Unfortunately "investment" in Russia to date has been
a simple wealth transfer from Western suckers to slick
Russians, with the Moscow financial community feeding
on the juicy carcass quite nicely, thank you. 

And it will be a long time before Russian companies
appreciate and respect Western investors. In the
meantime, however, investors can at a minimum demand
closer alignment of their own financial interests with
those of their advisors and intermediaries by doing
the following:

1) Don't use any brokerage that has proprietary
trading; the incentives to rip off your own client are
simply too strong. And try to monitor the use of
proxy accounts that hide front-trading. Perhaps the
larger investors should place their own rep inside the
brokerage when they execute trades. Trust? Get real.

2) Compensate fund managers and investment bankers
over time. Only pay success-based fees over 2-3 years
(if there is any success....but that's the whole
point). Perhaps even directly link these performance
payments to investor profit taking. But never allow
your hired hand to walk with money before you do. The
master always eats BEFORE the servants, right?

3) Require some limited liability from legal and
accounting firms. Companies afraid of warranties
usually produce shoddy products.

4) Split advisors' and consultants' payments into
basic and success-based (over time and after
demonstrable success has occured). They may then
think twice about the Russian companies and deals they
are recommending.

5) Exercise restraint: If Russia doesn't meet your
demands, don't invest until it does. There are better
opportunities elsewhere. It is only Russian nationals
and expat Russian specialists who, unable to change
markets, continue to cheerlead and encourage
investment despite the obvious defects and hazards.

Until Western investors force the Moscow financial
community to align its interests with their own, they
will continue to receive bad deals and poor advice, be
ripped off, and continually lose money in each
successive Russian financial pyramid.

Sometimes you should "shoot the messenger" when he
deliberately distorts the message. 

******

#7
Date: Thu, 8 Jul 1999 
From: ray.smith@ndf.org (Ray Smith)
Subject: Lebed Marched Division on Moscow

In JRL 3382, Lebed is quoted in an interview with Hamburg's Die Woche as
saying he marched his division on Moscow in September 1990. Can any JRL
readers provide further information on this?

*******

#8
Date: Thu, 8 Jul 1999 
From: "Jerry F. Hough" <jhough@duke.edu> 
Subject: Industrial policy

The bane of thinking about Russia is that the line changes 
regularly, but no one rethinks assumptions.

The new line is that the devaluation last year was good for the 
domestic economy. Of course. But three questions arise. First, why 
have the results appeared only when oil prices rose? Are we just seeing 
another shell game with statistics? Second, why did it not benefit 
agriculture as it did in Indonesia? A large part of the imports were 
agriculture. Prices should have risen and produced an agricultural boom 
this year. Instead prices were flat because they were tightly controlled, 
inputs remained non-existent, and agriculture is a disaster again. Third,
since the relationship between exchange rates and domestic production is
Economics 1, why did the IMF and neoliberal economists not recognize it and 
promote it long ago?

But the basic point is more important. A favorable exchange 
rate is a kind of tariff against imports. It promotes domestic 
production. But if it is desirable, as now is said, why is a real tariff 
not desirable to do the same thing when there are infant industries? 
This was the policy in the US, in Asia, you name it. I hope that 
someone will discuss the Ford decision with Russkii Dizel. If Ford is 
going to export components and produce cars for the domestic markets 
behind an IMF approved tariff on imported cars, that is the model that 
should have existed since the late 1980s? The way to improve 
manufacturing quality is to export behind a tariff wall. Foreign 
investors want that too. Back to Witte and Nikolai II.

But, to repeat, when are assumptions about an industrial policy going 
to be rethought? When are the international organizations finally going to
demand marketization in the one area it is needed--wholesale agriculture 
trade? Since Russia will never be competitive in feed grains, a 
rebuilding of Russian chicken farms and herds will be of great benefit to 
American feed grain producers. Maybe the Iowa primary will focus the US 
on the need to promote the right policy.

But, to repeat a point buried in this comment, I would really be 
interested in information on the Ford decision.

*******

#9
Date: Thu, 8 Jul 1999 
From: Melvin Goodman <GOODMANM@NDU.EDU> (
Subject: SecState Shultz and CIA Intelligence

One last note on my exchange with former colleague Fritz
Ermarth: it is true that Shultz did not block analysis that
he did not agree with. But it is misleading to state that
Shultz had "disdain" toward intelligence analysis. Shultz's
memoir (Turmoil and Triumph) not only tracks the CIA's
analytical failure with regard to the Soviet decline but
records the "bum dope" that DCI Bill Casey and DDI Bob Gates
provided to the president. Ermarth's emphasis on the
so-called debate between the CIA and Shultz is an academic
debate without policy relevance. The important issue with
regard to policy was that Shultz and Jack Matlock and Tom
Simons believed that Gorbachev was trying to change policy
toward the United States. The CIA, particularly Casey and
Gates and their minions, believed that Gorbachev's policies
were just another attempt to deceive Washington. Finally,
the Bush administration was not only skeptical about
"Gorbomania," but Bush and Scowcroft believed that Reagan
had gone soft in his second term and that US policy toward
the Soviet Union, particularly on arms control issues, had
to be slowed down and in some cases reversed. Cheers...Mel
Goodman

*******

#10
Moscow Times
July 9, 1999 
Left Tries to Reassemble Humpty Dumpty 
By Melissa Akin
Staff Writer

Several months ago, the Communists were boasting that the anti-Boris Yeltsin 
vote in this winter's State Duma election would be so massive that they would 
need to split their party into three separate blocs to absorb it all. 

Things have changed since, and the party's leaders are now insisting the 
Communists will run as one. The three-pronged strategy has been f to quote 
the party's No. 2 man Valentin Kuptsov f "eliminated." But Kuptsov and his 
boss Gennady Zyuganov are finding it easier to break Humpty Dumpty apart than 
put him back together again. 

The Duma deputy and former prosecutor Viktor Ilyukhin, who had been supposed 
to head the hard-line bloc of the party, isn't sure he wants back in. Duma 
Speaker Gennady Seleznyov, who was to head the kinder, gentler social 
democratic bloc, had gotten so carried away he was talking of running for 
president. At Zyuganov's orders, he has dropped that idea and returned to the 
party f but for how long? 

Even Zyuganov's leading ideologist and ally, Alexei Podberyozkin, head of the 
Spiritual Heritage nationalist movement, has broken with the Communist Party. 

For years Zyuganov has been struggling to hold together the broadest and 
loosest of leftist coalitions. His includes everything from hard-liners 
disgusted by all "collaboration" with the Kremlin to self-styled moderates 
who are alarmed at their colleagues' anti-Semitism and who have approved 
Yeltsin's austerity budgets and Cabinets. 

Now, just months before the national parliamentary vote, it is coming apart. 

In a late-evening interview at the Duma on Wednesday, Kuptsov put on a brave 
face. Declaring "there are no disagreements in the party," he insisted 
Communists of all stripes would stand shoulder-to-shoulder this winter, as 
they did in the Duma race of 1995 when they took 22.3 percent of the vote. 

"Everyone is trying to break us apart, but we will stand firm," Kuptsov said. 
"There will be no split in the party." 

But the reality is that seven months after announcing the three-column 
strategy f itself an admission of the schisms among the Communists f 
Zyuganov's team is in a panicky retreat from it. This retreat was prompted at 
least partly by the overnight political arrival of Moscow Mayor Yury 
Luzhkov's Fatherland movement moreover, and while Luzhkov looks ever more 
organized, the Communists seem ever closer to turning their retreat into a 
disorderly rout. 

So far, only one key Communist f Seleznyov f has followed Zyuganov's 
about-face. Seleznyov had been musing aloud about running for the presidency 
at the head of a "broad coalition." Only recently did he announce he was 
setting those ambitions aside out of loyalty to the party. 

Elsewhere, even small parties with little hope of making it in the Duma on 
their own are not hurrying back into Zyuganov's embrace. 

Of the Duma's 450 seats, 225 are parceled out in direct elections fought 
locally between individual candidates. The other 225 are divided up among all 
parties that win more than 5 percent of the national vote. 

There were 43 parties on the ballot in 1995, but only four f the Communists, 
the Liberal Democratic Party of Russia with 11.18 percent, Our Home Is Russia 
with 10.13 percent and Yabloko with 6.89 percent f made it into the Duma over 
that 5 percent hurdle. 

Each of these four was able to fill those seats only according to a batting 
order of hundreds of names filed earlier with the Central Elections 
Commission. The higher a politician's name was written on such a list, 
therefore, the better his chances of getting into the Duma. 

But this time around, even the leaders of tiny parties with little chance of 
passing the 5 percent threshold are snubbing the Communists. 

The Agrarian Party voted unanimously at a plenum Thursday to go 
independently, Itar-Tass said. Another moderate Communist ally, 
Podberyozkin's Spiritual Heritage, has also declared independence f and has 
even disbanded a rebellious splinter group that disagreed. 

The Agrarians and Spiritual Heritagers could just be negotiating f each 
hoping their leaders will be given more names high up on the party list. 

That is certainly the case with the Movement in Support of the Army headed by 
Ilyukhin: He says the Communists have offered his bloc between 40 and 60 
spots on the Communist Party list as a sweetener if he returns. 

"I have to say, that's very attractive," Ilyukhin said at a congress of his 
movement Saturday. But the delegates voted to hold out for more, putting off 
a decision on whether to run alone. 

Kuptsov would not confirm that such offers had been made, saying details 
would be worked out at a party congress in August. Until then, he said, 
nothing is definite. 

"The configuration has not been decided yet, only the contours," he said. 

One possible configuration of a Communist-led bloc would put leaders of all 
three wings f Ilyukhin, Zyuganov and Seleznyov f in the "troika," or top 
three spots of the list. That would amount to guaranteed seats in the Duma 
for those three. But it would also mean forcing mutually hostile factions to 
again play nice with each other. 

Ilyukhin and Zyuganov could not be reached for comment. Seleznyov's 
spokesman, Mikhail Belyat, said he hadn't heard the Duma speaker's opinion on 
the proposal, but in a sign of the tensions of the moment, took a slap at 
Ilyukhin even so. 

"It's a question for the party, as to why they would want to put people with 
extreme views among their top people," Belyat said. 

******

#11
Jamestown Foundation Monitor
9 July 1999

YELTSIN MEETS AGAIN WITH MILITARY LEADERSHIP... In what appeared to be yet
another effort at reining in military hardliners while retaining their
political loyalty, Russian President Boris Yeltsin warned top commanders
yesterday that they must avoid direct confrontations with NATO. In remarks
at the Kremlin before senior officers from both the regular army and
Russia's various security forces, Yeltsin told the generals that "each one
of you must pursue one policy, the policy of the president. We won't have
any outright quarrels with NATO, but we won't flirt [with it] either. We
will be following what NATO is doing and will be working out our tactics
together" (AP, Russian agencies, July 8).

The Kremlin gathering yesterday marked the second time in less than a week
that Yeltsin has met personally with the top brass. On July 7 Yeltsin and a
large delegation of Russian government officials made a rare visit to the
Defense Ministry (see the Monitor, July 7). The unusual attention showered
by Yeltsin upon military leaders appears to have two goals. One is to rein
in those hardline generals who, by many accounts, are responsible for
pushing Russian policy in the Balkans toward confrontation with NATO. The
surprise move by Russian paratroopers to Pristina on June 12 has thus far
been the most notorious manifestation of the policy, which appears to have
also shown itself in subsequent, difficult negotiations between NATO and
Russian military officials over Moscow's peacekeeping role in Kosovo. In
addition, the High Command appeared to use a recent series of military
exercises--in the course of which Russian bombers approached NATO
territory--as another opportunity to do some anti-Western muscle-flexing
(see Monitor, July 2,6).

While curbing the generals, however, Yeltsin is seeking also to keep their
political loyalty by demonstrating his government's concern for their
problems. The two meetings with military leaders is one way he is trying to
convey this message. A series of pledges--albeit it vague ones--are also
part of the strategy. Yeltsin has suggested he will seek to raise military
salaries, ensure the timely payment of wages, and--at the least--hold the
line on overall defense expenditures (Vremya MN, July 6). All of those are
attractive policies to a military command suffering from acute cash shortages.

Yeltsin's sudden wooing of the military leadership--indeed, of the "power
structures" in general--is probably also motivated by political
considerations. As one Russian newspaper commentator observed on July 3,
Yeltsin has always looked to ensure the loyalty of his generals during times
of acute political tension (Kommersant daily, July 3). That is certainly the
case now. Amid growing political uncertainty in Moscow, Russia is looking to
play a major role in the Kosovo peacekeeping operation while simultaneously
gearing up for what could be a fresh armed conflict in the Caucasus. Some in
Moscow have warned that the armed forces--and Russia's paratroopers in
particular--will be hard pressed to conduct both operations at the same time
(Segodnya, June 22). Yeltsin seemed to be suggesting in his remarks
yesterday that a serious confrontation with the West is the last thing that
Moscow needs under such circumstances.

*******

#12
Los Angeles Times
July 9, 1999 
[for personal use only]
Rival Plays Dirty Trick on Detergent Giant 
Siberian factory rides on back of Procter & Gamble's comparison ads with
its Ordinary laundry soap. 
By MAURA REYNOLDS, Times Staff Writer

MOSCOW--You've seen the TV ad a hundred times: Identical garments are
washed in Brand Name laundry soap and Ordinary laundry soap. And of course,
the clothes washed in Brand Name detergent come out looking better. 

The side-by-side laundry test is one of the oldest conventions in Western
consumer advertising, dating to the earliest days of television. Now, a
Siberian soap factory has found a way to sabotage the formula. 

The Angarsk Chemical Factory in Angarsk, Russia, has begun producing and
selling a successful line of laundry soap called Ordinary detergent. The
name and the box the soap comes in are a copy of the no-name detergent used
in a multimillion-dollar TV advertising campaign by Procter & Gamble. 

"It's a good idea," admits Andrei Bader, spokesman for Procter & Gamble in
Russia. "In effect, we are paying for their advertising." 

Angarsk's Ordinary detergent is a good example of the way Russian practices
can undermine Western conventional wisdom. 

The Angarsk factory is in south-central Siberia, about 2,500 miles from
Moscow. About a year ago, the company was searching for a simple but novel
name for a cut-rate brand of detergent when it hit on Ordinary. 

"It's a good name for ordinary people who sometimes wash their ordinary
clothes in their ordinary homes," explains Angarsk commercial director Igor
A. Kuzin. 

Kuzin acknowledges the obvious: One benefit of the name is that Procter &
Gamble has already publicized it in its ads for the high-end Ariel laundry
soap. 

Procter & Gamble is the largest advertiser in Russia. So without spending a
penny, Angarsk acquired a well-known--if maligned--brand name. 

"We can't afford that kind of advertising," Kuzin says. "So if the name of
our brand is used in somebody else's ads, we don't mind. No matter what
context it is used in, it will stick in people's minds." 

In effect, what Angarsk is doing is producing a generic product similar to
those found on the bottom shelves of many American supermarkets. 

And its strategy is legally impeccable. Procter & Gamble doesn't own the
name, and such common words cannot be trademarks. 

Betty Gabbard, a spokeswoman for Procter & Gamble at company headquarters
in Cincinnati, says that "to the best of our knowledge," Angarsk appears to
be the first competitor anywhere in the world to hijack a Procter & Gamble
ad campaign this way. 

Angarsk officials say that Ordinary detergent is selling well but that the
main attraction is the price, not the ads. It sells for about 30 cents a
pound in Moscow; Procter & Gamble's Ariel and Tide brands sell for more
than $1.50 a pound. 

Andrei Fedotov, director of the Russian Public Relations Co. marketing
group, estimates that Procter & Gamble has bought a whopping 7,000 minutes
of national air time to promote Ariel. 

But he too considers the ad campaign less important to promoting sales than
Ordinary's low price. He estimates that it has captured about 20% of the
market around Angarsk, but no more than 1% or 2% nationally. 

"The main reason it sells is that it's cheap," he says. "The second reason
is that it's funny. When something 
makes you laugh, you'll buy it." 

Procter & Gamble officials say they too are amused by Angarsk's marketing
tactics. Spokesman Bader insists that among P&G's three main
brands--low-priced Mif, mid-range Tide and high-end Ariel--Ordinary
detergent has had a negligible impact. 

"At this point in time, we see no harm to our product," Bader says. "We
have no plans to change our advertising." 

He also predicts that Ordinary's bubble may soon burst. 

Last year's ruble devaluation caused many Russian consumers to abandon
fancy brand-name products. Now that the ruble has stabilized and the
economy is showing the first signs of recovery, he thinks many Ordinary
buyers may drift up-market to Tide or even Ariel. 

But if they don't, at some point the company may start thinking about
making changes in its TV ads. Instead of comparing Ariel to Ordinary
detergent, maybe they'll switch to, say, "Common detergent." 

"To work in Russia, you have to have a sense of humor," Bader says. 

Svetlana Y. Safonova of The Times' Moscow Bureau contributed to this report. 

*******

#13
The Washington Post
9 July 1999
[for personal use only]
Young, Liberated and Russian
Self-Reliant Generation Shaking Off Shackles of the Past
By Robert G. Kaiser

MOSCOW-Sergei Komarov, 26, found a way to evade Moscow's legendary rush
hour traffic. He hired a driver, "a man in a uniform," who drove a car with
a blue light on its roof, which permits the car to zoom past stalled
traffic by using the center lane of Kutuzovsky Prospekt -- traditionally
reserved for the most important government officials.

Komarov, who manages the computer systems of a Western company in Moscow,
is an adventurous, post-Soviet Russian. He wasn't sure who this driver
worked for the rest of the time -- it wouldn't be diplomatic to ask. But he
liked the service, which he used to go to and from work.

Russians Komarov's age were 12 years old when Mikhail Gorbachev came to
power in 1985, and 18 when the Soviet Union collapsed at the end of 1991.
Like Komarov, many of them seem liberated from the mind-set of their
parents' generation, which grew up assuming that the Soviet state and the
Communist Party would organize everyone's life. Sergei Komarov is a free
Russian, organizing his own life as resourcefully as he can.

A visitor to Russia curious about how the country is changing nearly eight
years after the end of Communist rule can learn a lot from Sergei Komarov's
generation. Nearly 30 conversations with young Russians in recent weeks
suggest that the passage of time may be the single most effective guarantor
of meaningful change. Komarov and others aged 18 to 28 don't all share the
same opinions, but many do share one telling realization: "We'll become
what we make of ourselves," as Komarov put it, speaking in nearly perfect
English, polished by five years of working for English-speaking foreigners.

For Russia, such self-reliance is unprecedented. "No one could tell us how
to live, we found our own path," said Artyom Lebedev, 24, explaining why he
abandoned his university studies to open his own company, Studio Artyom
Lebedev, Russia's leading designer of pages for the World Wide Web. He and
his 20 employees have designed Russian Web sites for the Russian Central
Bank, Xerox, Hewlett-Packard and Nissan, among many others. Lebedev usually
starts his work day at around 6 p.m. and works through the night.

But if no one can tell him what to do, Lebedev quickly acknowledges that
forces beyond his control -- particularly incompetent and corrupt
politicians -- can make a hash of his hopes for Russia's future. "The
communist elite is still in power now," Lebedev said, referring to members
of the nomenklatura who have remained dominant in the new Russia. Only
after the demise of those old communists will people like him be able to
change Russian reality, he said.

Meanwhile, he tries to ignore them: "Anyone who gives up TV, radio and
newspapers will discover that life is really wonderful!" Only by following
the news, Lebedev said, can that pretty picture be spoiled.

His brand of fatalism seems widespread among younger Russians. It is most
pronounced when the discussions turn to politics and politicians. Young
Russians have no apparent heroes among public figures. Nor do many of them
hold any of society's institutions in high regard.

Leonid Alexeyev, 25, a carpenter who builds theater sets, summed up the
general cynicism with his own proposal for solving Russia's problems: "We
should let every Russian be a member of the Duma [the elected parliament]
for two weeks -- just enough time to fix himself up for life."

None of those interviewed for this article had the slightest interest in
being elected to the Duma, though the group included a disproportionate
number of ambitious and successful young Russians. Politics is utterly
discredited in modern Russia, emphatically so by young people. "I have a
friend who works in the Duma," said Maria Eryomenko, 19, a Moscow State
University student. "She tells us funny stories about . . . the clowns there."

At least clowns don't look very threatening. Ask these young people what
things will be like five or 10 years from now, and the answers are
tentative, vague: "Probably things will be about like today," replied
Tikhon Kotrelyov, 23, an editor for Affisha, a new weekly magazine listing
entertainment and cultural events in Moscow. He emphatically did not expect
a dramatic step backward -- a coup by fascists or communists, say. Why not?
"Everyone realizes that this would require using the kind of force and
violence of the October Revolution [of 1917, which brought Lenin and his
Bolsheviks to power], and that can't happen now. . . . You'd need real
will, real determination, and those just don't exist."

Not in the political arena, anyhow. But signs of determination among young
Russians abound.

Sonya Fetisova, 25, is a an interior designer. She was interviewed at her
latest project, a bowling alley and billiard hall located in an old
industrial building several miles from the Kremlin. The previous occupant,
she said, was a secret military enterprise that made re-entry vehicles for
Soviet ballistic missiles.

"The Big Lebowski," the Coen brothers' movie, set off a bowling boom in
Russia, she explained, and inspired this establishment, which features
Brunswick automatic pinsetters from the United States. She has given it a
bright decor with wavy lines of color along both walls parallel to the
eight bowling lanes.

"I've never had to find a client," she said with obvious pride. "They all
found me. Now people call me out of the blue." She has designed exhibits
for businesses, private apartments and a supermarket. She hopes next to
redesign a nightclub in Brighton Beach, Brooklyn, the most Russian
neighborhood in America.

Her business was clobbered by Russia's economic crash last August, when
many banks failed and the ruble collapsed. For three or four months
afterward all her projects were suspended. "I read books all fall," she
said. But she remained determined. "I heard a new saying after August:
'When everybody's crying, someone's going to make money selling
handkerchiefs.' " Early this year, business began to pick up again.

"In my lifetime, it will never really be calm here," she said, calmly.
"It's truly a country for adventurers. . . . To live and work here you just
have to put fear aside."

Not all her contemporaries can match Fetisova's brash confidence. Like many
of their elders, members of the younger generation are subject to anxiety
about the uncertainties of Russian life, and about its dark sides. Numerous
young Russians worry aloud about narcotics, which have flooded the country
in recent years.

"I know a whole group of people who have died from drugs," said Irina
Sarokina, 20, a professional model who is studying opera at the Institute
of the Vocal Arts in Moscow. Everyone knows where to buy drugs, she said --
outside Apteka (Pharmacy) Number One on Lubyanka Square, or on the campus
at Patrice Lumumba University, among many other markets.

Varvara Baranskaya, 21, a ballet dancer, recounted stumbling across a young
man who had apparently collapsed from a drug overdose in the entryway to
her scruffy apartment house near Belorussian Station in Moscow. The
emergency medical personnel who responded to her call said she had saved
the young man's life by finding him.

A total breakdown of predictability is an important change distinguishing
the lives of younger Russians from those of their parents. "We don't feel
in control of the situation," said Dmitri Dunilov, 20, who just graduated
from the foreign languages institute in Nizhny Novgorod, 240 miles east of
Moscow. Communism provided "predictability and order. We've lost that now."
Dunilov has no clear plan for his future after a summer job as a camp
counselor -- on Long Island.

In the Soviet Union there was a clear connection between education and
work. Those who went to a college or university picked a specialty at 18,
studied it then worked in it. "You were guaranteed a job, and in your
specialty," said Nadezhda Vtyurina, 27, who studied at a chemistry
institute and now works in the marketing division of a firm in her hometown
of Vladimir, 100 miles east of Moscow. At least it's a chemical company,
she grinned.

Young people are now using education to prepare for careers in the
stumbling market economy. At Moscow State University, the country's most
esteemed, the hierarchy of departments has changed profoundly in the '90s.
Once physics, mathematics, literature and history were the most
prestigious. Today, according to Sergei Rogov, 22, who graduated in June,
the most sought-after departments are economics, law, sociology, psychology
and foreign languages -- all subjects that can lead to jobs in the business
world.

Education is one of many realms in which young Russians are exposed to
their country's now ubiquitous corruption. At Moscow State University,
Rogov said, "everyone knows who will get into the law faculty before the
exams are taken," beginning with the sons and daughters of judges and
prominent lawyers.

Mikhail Romanov, 20, a student at the Moscow State University of Commerce,
said it was possible to buy admission to his school by hiring a faculty
member as a personal tutor to prepare for the entrance exams. Lessons can
cost $50 each, and six months of lessons guarantee admission, he said. Once
in, you can buy your way through. "It costs $100 to pass any exam," Romanov
said.

Alexander Solnikov, 26, a professional body builder and personal trainer at
a Moscow health club who spends his spare time on the computer, explained
some economic facts of life: You can go the movies and (in a handful of
theaters) enjoy a big screen and Dolby sound, or, for the price of one
movie ticket, you can buy two or three pirated videos of Hollywood movies.
You can pay $500 for a legal copy of the Adobe Photoshop computer program,
or you can pay 60 rubles (about $2.40) for a compact disc that contains a
pirated copy of Photoshop plus several other nifty software programs.

"Of course that's bad," Solnikov said, "but it's normal economic
development. The people who need the programs just couldn't afford them" at
legal prices.

Videos, computer software and music (also pirated in vast quantities) are
close to the hearts of many young Russians. This is the first generation
freely able to participate in the international youth culture, and it
eagerly seized the opportunity. Olga Artyomeva, 24, a journalism student
and published short story author, said her 16-year-old brother and his
contemporaries don't realize how quickly things have changed. "They can't
imagine that once I could only dream of owning a pair of jeans," she said.

At her age, Olga's parents could not have imagined the scene at Propaganda,
one of Moscow's most popular discotheques, at 2 o'clock on a recent Sunday
morning. Built in a two-story industrial space in a building near the old
KGB headquarters, Propaganda is famous for its all-night partying. People
were jammed onto the dance floor like so many spears of asparagus squeezed
upright into a tin can. The funky music blared; dancers only had room to
bounce up and down in place to the relentless beat. The bar, 20 yards away,
served up vast quantities of beer and other beverages, but the crowd seemed
relatively sober and extremely good-natured. This did not look like a scene
from a country in crisis.

But Russia faces many crises, from a declining population in poor health to
crime and corruption almost everywhere to a discredited political
structure. These and other problems have convinced some young Russians to
seek their fortunes abroad, and the possibility of emigration is much
discussed by young people with language skills and professional experience
that might be attractive to foreign employers.

Even those who say they wouldn't dream of emigrating have settled into a
view of their country's future that implies only slow change for the
better, or maybe for the worse. "It's going to be a very corrupted country,
like Italy," said Konstantin Chernozatonsky, 24, a journalist who is now
co-editor of the Russian edition of Playboy.

"The population is depressed -- to me that's the biggest problem," said
Andrei Sheleg, 26, the son of a coal miner now working as a trader for a
foreign investment bank. Sheleg saw a large gap between the successful,
ambitious young and other Russians. He thought that many older people were
very uncomfortable with a reversal of generational roles that leaves people
like him supporting their parents.

"Not we, but our children will benefit fully" from a democratic,
capitalistic Russia, predicted Sonya Fetisova, the decorator.

Irina Usatcheva, 27, trying to make a living in the movie business,
wondered how anyone could predict the future after living through the
amazing changes of recent years, but she too shared the view that a better
Russia may lie somewhere ahead.

"We have some kind of strange hope," she said.

******