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Johnson's Russia List


July 13, 1999    
This Date's Issues: 3392  


Johnson's Russia List
13 July 1999

[Note from David Johnson:
1. Moscow Times: Andrei Zolotov Jr., U.S. Politicos Ask, 'Who Lost Russia?' 
2. Moscow Times EDITORIAL: Washington's Russia Policy Easy to Slam.
3. Edward Lucas: Oligarchs and libel.
4. Segodnya: A Truck Full Of Compromising Material Is Coming To Russia.
(From Switzerland).

5. Komsomolskaya Pravda: Will They Derail Nikolai Aksenenko?
6. AP: Russian PM Won't Police Media.
7. NTV Carries Poll on Potential Ban of Communists.
8. Informatsionnoye Agentstvo Ekho Moskvy: Popkovich Supports START II 

9. AP: Russia's Computers Not Y2K-Ready.
10. Radiostantsiya Ekho Moskvy: Former Foreign Minister Kozyrev: Russia 
Should Be Tougher With West.

11. Obshchaya Gazeta Elections Initiative Supported.
12. T. S. White: Entreprenuer 3. (Forming a company).
13. NTV: Experts Discuss Stepashin, Primakov, CPRF.] 


Moscow Times
July 13, 1999 
U.S. Politicos Ask, 'Who Lost Russia?' 
By Andrei Zolotov Jr. (}
Staff Writer 

Economic reform, IMF loans, the war in Chechnya, privatization - these are
topics that will figure in any Russian electoral campaign. But across the
Atlantic, the U.S. presidential campaign is also heating up - and there are
signs that Russia's woes may play a significant role in America's debates. 

President Bill Clinton and President Boris Yeltsin have enjoyed a close
association. Each side has touted their personal friendship - they once
went so far as to link their 1996 re-election fortunes by both holding up
hockey T-shirts with their names and the number 96. 

At the same time, Clinton over the years has avoided talking about either
Russia's disastrous intervention into Chechnya or the widespread corruption
that has been obvious since at least the notorious 1995 loans-for-shares
privatization scandals. 

Now Texas Governor George W. Bush, the Republican front-runner so far,
wants those topics and more put back onto the American agenda. 

"I know what I believe in. The big issues are going to be China and
Russia," Bush said in an interview last month with The New York Times. "In
the long run, security in the world is going to be how do we deal with
China and how do we deal with Russia. 

"People ... used to think Russia was not an issue," he continued. "It's a
huge issue." 

For emphasis, Bush has hired a Russia scholar to head his campaign's
foreign policy team: Condoleezza Rice, 44, a former provost of Stanford
University and former member of the National Security Council under Bush's
father, President George Bush. 

A black woman born in segregated Birmingham, Alabama, Rice initially
dreamed of a career as a concert pianist. Later she become a Sovietologist
under the teaching of University of Denver Professor Josef Korbel - who is
also the father of Clinton's U.S. Secretary of State, Madeleine Albright. 

In a telephone interview last week, Rice said that she used to travel to
Russia three times a year, but hasn't been here for two years now. She
plans her next visit to Moscow in October. Asked about whom she sees as
colleagues in the Russian political science community, she named Lilia
Shevtsova of the Carnegie Endowment, State Duma Deputy Alexei Arbatov and
former Security Council Secretary Andrei Kokoshin. Even those who disagree
with Rice on Russia - like Michael McFaul, a senior associate with the
Carnegie Endowment in Washington who is well-connected with Clinton's
Russia policymakers and supports their efforts, - concede that the Bush
campaign has already built a foreign policy team with strong credentials.
Like Rice, many of them have worked for the U.S. White House under Governor
Bush's father. 

The target of the Bush campaign is less Clinton, whose term in office ends
in 2000, than his chosen Democratic successor, U.S. Vice President Al Gore.
Gore was a major participant in Clinton's Russia strategy: For every
Clinton claim of friendship with Yeltsin, Gore would trumpet his friendship
with former prime minister Viktor Chernomyrdin. 

Some Republicans are already impatient for Bush to attack Clinton on
Russia. In a telephone interview last week, Jack Kemp, who ran in 1996 as
the Republican vice presidential nominee with Bob Dole, complained that the
Clinton team had "turned Russia over to the IMF." 

Kemp - one of the International Monetary Fund's most vocal American
critics - also said that not bringing Russia more actively into talks over
Kosovo with Yugoslav President Slobodan Milosevic, and then bombing
Yugoslavia, were together a "severe mistake." 

Rice herself was more circumspect. In a telephone interview she said that
barring the unexpected, she doubted foreign policy was going to be high on
the agenda for either the Bush campaign or the American electorate, but
would rank behind education, the U.S. economy and America's "own sense of
moral decline." 

"But of the foreign policy issues, Russia and, I think, China will
probably be the major ones," she said. 

"There is a growing sense that American foreign policy has been somewhat
unfocused since the end of the Cold War, that we have been doing so many
things in so many places without a clear strategic concept," Rice said.
"And ordinary Americans worry about that, they worry about whether the U.S.
has overextended, [about] how many foreign adventures we are going to get
involved in." 

But while Rice today says U.S. involvement around the world should be
"limited," she advocated the opposite in an August 1998 speech - greater
U.S. military involvement in areas of conflict around the world. In the
interview she said there was no conflict between those two positions. 

"The question for most Americans is: they know that we should be involved,
they just want us to be involved when it's really important for our
interests," Rice said. "There is a concern that we could be pulled into
every conflict everywhere in the world because of our disproportionate
military power. If we can't make choices about our involvement, it will
cause the American people not to be willing to be involved [under any

"There is a sense of drift. That philosophical issue could be an issue of
the campaign," she said. 

That drift is, of course, at least partly thanks to the Republicans. They
never have taken a clear stance on the war with Yugoslavia or on the
peacekeepers now in Kosovo, which is surely the defining foreign policy
issue of the Clinton presidency. And for the first half of this decade,
there was a broad bi-partisan consensus in the U.S. Congress regarding aid
programs to Russia. 

The Republican criticisms, moreover, come against the background of a
general reassessment of America's Russia policy by the academic world.
Conservative think-tanks, such as the Heritage Foundation and Jamestown
Foundation, have held seminars recently that have featured serious
questioning of U.S. Russia policy - and in particular of the billions in
IMF loans that were supposed to help Russia down the road to reform, but
which many now say supported a corrupt regime and a military adventure in

Andrei Piontkovsky, a political analyst and severe critic of Yeltsin's
economic policies, said last week after returning from one such seminar
that attacks on U.S. and Russian policies were so harsh he "had had a
feeling of attending a [Russian] left-wing opposition's rally: 'Down with
Clinton's criminal anti-national regime! Down with the IMF capitalist

Even the World Bank's own new chief economist, the more left-leaning
Joseph Stiglitz, has joined the fray, declaring repeatedly that the
so-called "Washington Consensus" of economic policy advice offered around
the world by the IMF and the World Bank - which includes emphasis on rapid
privatization and on tight federal budgets - is often wrong and even

The Clinton administration is perfecting its counter-arguments. According
to McFaul, the main answers to the question "Who lost Russia?" are to be
that "it is too early to make a judgement about Russia being lost," and
that "it could have been a lot worse had we not engaged." 

U.S. Deputy Secretary of State Strobe Talbott - Albright's No. 2 and the
architect of Clinton's Russia policy - argued in a speech at Stanford
University in November that by "remaining engaged" with Russia "we will be
demonstrating to the Russian government and the Russian people our
determination not to give up on them, even - perhaps even especially - in a
time of troubles." 

Talbott's defenders also readily defend the Clinton team's close personal
relations with Russian officials. McFaul said they "have paid back." 

"The degree of engagement allowed us to bring Russia as a partner rather
than enemy [in the Kosovo crisis]," McFaul said. "A policy of containment
could have resulted in Russia's intervention on the part of Yugoslavia." 

Against this spirited background, Rice so far seems cautious indeed. First
and foremost, she said, "Russia is responsible for its own difficulty." 

"But some of the willingness to give economic aid - IMF money - without
really monitoring economic reform was problematic," she said, adding that
this was particularly so after 1995 and 1996. She said those years marked a
significant "change" in Russia, after which "money became more of problem
than a help." 

The U.S. Administration should have monitored economic policymaking in
Russia more carefully and "should have probably been more attentive to ...
corruption and the flight of capital." 

Perhaps the greatest mistake was that the U.S. administration became too
involved in Russian internal politics, Rice said. 

The Clinton administration has been closely associated with Yeltsin, and
particularly with his best-known "young economic reformer," Anatoly Chubais
- a man U.S. officials over the years have praised as Russia's
misunderstood savior. 

Asked about Yeltsin and Chubais, however, Rice criticized U.S. reliance on
them while avoiding the mention of either man's name. 

"Somehow, we sent signals that these were American reforms, not Russian
reforms, and that we were very closely tied to a particular government,"
she said. "I think that that was problematic." 

Rice also said the Clinton administration did not speak up strongly enough
in criticism of the war in Chechnya. 

If Bush becomes president in 2001, Rice says she will advise him that
U.S.-Russian relations should "revolve much more around security issues"
such as nuclear safety and arms control."We need to step back and we need
to say: when Russia is prepared for real economic reforms, the West should
help. But 'real economic reforms' means doing something about tax laws,
about corruption. It has to be a Russian plan of economic reform, not a
Western plan." 


Moscow Times
July 13, 1999 
EDITORIAL: Washington's Russia Policy Easy to Slam 

Washington under President Bill Clinton began by embracing Boris Yeltsin,
gushing about the booming Russian stock market and bragging about the
millions of "property owners" created by the "dream team" of Anatoly
Chubais and his privatizers. 

Now, just a few short years later, the Clinton team is defensively and
guiltily struggling to ignore the world's largest country, and top U.S.
officials disingenuously profess not to be worried by the sight of Russian
Blackjack bombers flying over Norway in a nose-thumbing gesture at the West. 

A decade ago, Russians listened to the BBC or Voice of America for their
news. A copy of The Economist was treasured samizdat, and visiting
Westerners were met with toasts to "international friendship." 

Today, Western media and governments snootily ask why the Russians have
been so slow to straighten up and get on board for the big win in
Yugoslavia. This after that same Western elite for years downplayed the
disastrous corruption of the Western-leaning Yeltsin regime, and insisted
that when the Kremlin handed the oil companies to its friends, this was -
drum roll - reform. Imperfect reform, of course, but as Chubais has so
eloquently explained, Russia was in something called "the transition
period" and could not do better. 

As Andrei Zolotov reports, this is a case waiting to be made by opponents
of Clinton's chosen successor, Vice President Al Gore. (It was Gore who
sent a CIA report alleging corruption on the part of Viktor Chernomyrdin
back to Langley with what The New York Times described last year as "a
barnyard epithet" scrawled across the cover.) 

But then again, Republican front-runner George W. Bush so far does not
seem to have the stomach for what is really required on Russia: an American
apology (of the sort Clinton so loves to hand out for the long-dead
practice of American slavery, for genocide in Rwanda and for other U.S.
moral lapses) and a rebuilding, from the ground up, of this key strategic

Done properly, this would involve renouncing the so-called Washington
Consensus - the International Monetary Fund's cookie-cutter advice that
claims to meet the needs of any nation's economic problems. This consensus
is based on Republican-dear dogmas that assume the overwhelming need to
privatize everything immediately, from Mexican telecoms to Russian nickel
producers to U.S. social security, and to balance all national budgets no
matter what. Until Bush runs against this consensus, he has little new to
offer Russia by way of advice. 

Then again, it's amazing how much has been accomplished in the past with
stupid grins and toasts to international friendship. 


Date: Mon, 12 Jul 1999 
From: Edward Lucas <> 
Subject: Oligarchs and libel

We have received a lawyer's letter, threatening a libel action, about an
article we published about one of the oligarchs.

I'd be interested in hearing, in confidence, from anyone who has had a
similar experience.

Edward Lucas
Moscow Bureau Chief
The Economist


Russia Today press summaries
July 12, 1999
A Truck Full Of Compromising Material Is Coming To Russia
The daily commented on the criminal investigation connected to Aeroflot,
Russia's national air carrier. 

Investigator Nikolai Volkov told the daily they are expecting two
truckloads of documents from Switzerland, containing material confiscated
from the Andava and Forus Service companies, which accumulated gains from
Aeroflot's foreign representatives. 

The investigators hope to learn who the real owners of Andava were and
whether it was allowed to spend Aeroflot funds. Both Andava and Forus
Service have ties with Russian oligarch Boris Berezovsky, but he has denied
owning Andava. If they find that the money was spent inappropriately, the
prosecutors may add to the charges against Berezovsky and Aeroflot leaders,
who are already facing charges of illegal business practices. 

Swiss law enforcement bodies said that they received a request for legal
aid from Russian Deputy Prosecutor General Mikhail Katushev. On the same
day Katushev was dismissed and replaced by Yury Chaika. Still, the Swiss
side intends to fulfil the request. "The persons involved in the case
performed large-scale illegal operations and got personal profits from
state money," the Swiss federal prosecutor's representative, Dominic
Reymon, told the daily. The daily wrote that one of the suspects in the
case is Aeroflot General Director Valery Okulov - who is also President
Boris Yeltsin's son-in-law. 

Swiss prosecutors realize that the investigation in Russia is being
conducted for political rather than legal reasons. Nevertheless, the daily
concluded, they intend to cooperate with their Russian counterparts,
because this will allow them to understand the system of corruption among
top officials in Russia. 


Russia Today press summaries
Komsomolskaya Pravda
July 12, 1999
Will They Derail Nikolai Aksenenko?
First Deputy Prime Minister Nikolai Aksenenko may face a big problem soon,
the daily wrote. 

He will have to explain to the Prosecutor General several discrepancies in
the finances of the Railways Ministry, which he formerly headed. State
auditors have found compromising material in their inspections and have
already passed the documents on to prosecutors. 

The Railways Ministry is one of the least transparent ministries in the
country, the daily wrote. Recently, a top ministry official was badly
wounded, most likely in connection with the tariff privileges that the
ministry gives to companies. 

One privileged company is the Russian-Swiss Transrail, which the ministry
paid $5 million to collect its debts of $131 million. In reality, the
recovered debts were not passed to the ministry, the daily wrote. It also
noted that some of transport companies that enjoy special privileges are
headed by the sons or nephews of top ministry officials. 

Aksenenko will also have to explain why all the rails were bought from
foreign producers, leaving Russian metallurgists without work. 

Bureaucrats in the ministry enjoyed great financial support from the state,
the daily added. First Deputy Minister Kovalev bought an apartment for
$660,000, and the apartment for a railroad trade union boss cost the
ministry $427,000. 


Russian PM Won't Police Media 
By Mitchell Landsberg
July 12, 1999

MOSCOW (AP) -- With national elections looming, the Kremlin has gone back
to the Soviet playbook to create a ministry that will oversee the country's
news media. 

Prime Minister Sergei Stepashin insisted Monday that the new ministry will
enhance a free press, not hobble it. But others see the move as a return to
the bad old days of state control. 

Sergei Markov, an independent political analyst with the Institute for
Political Studies, said the new ministry was intended to put the Kremlin in
control of the news media before parliamentary elections in December and
next year's presidential election. 

In particular, he said, the ministry would try to put the Kremlin's stamp
on the output of regional newspapers and broadcast stations, which now tend
to be controlled by local governors. 

The Communist Party, which knows a thing or two about controlling the
press, is also suspicious of the ministry. Valentin Kuptsov, the party's
second in command, said it would be used to ``launch counter-propaganda
against the leftist opposition.'' 

The exact powers of the ministry -- officially called the Ministry for
Press, Broadcast and Mass Media -- remain unclear. The presidential press
service has said its functions will include ``development of state policy''
on the media and advertising, and control over the use of broadcast

Stepashin took pains Monday to insist that the ministry, established last
week, would ``perform managerial, technological and legal rather than
ideological functions.'' 

But few people are likely to believe that. And in fact, Stepashin's
comments appeared to contradict statements he made July 6, when he said the
government was ``starting to create a federal strategy that would
consolidate all of the state's capabilities in -- pardon the old-fashioned
word -- ideological work.'' 

Pavel Gusev, chief editor of the popular newspaper Moskovsky Komsomolets,
said he thought the new ministry was studying his newspaper to see how it
might be influenced. So far, he said, Moskovsky Komsomolets -- one of the
few newspapers considered financially and politically independent -- has
been ``absolutely'' free of government interference. 

The editor also said he's worried about the new ministry's chief, Mikhail
Lesin, a former presidential public relations chief who quit in 1997 for an
undisclosed reason. Lesin worked for President Boris Yeltsin's re-election
campaign in 1996 and took the PR job after Yeltsin won. 

``Considering that Lesin is a very significant figure, and an intelligent
man who can calculate his moves and who knows the mass media, I think this
is a real danger to an independent press,'' Gusev said. 

Yeltsin, who established the ministry, has been a supporter of media
freedom and has not in the past punished media outlets that criticized him. 

At the same time, he made sure in his 1996 campaign for re-election that
the major newspapers and television stations were on his side. Much of the
news coverage of that election was brazen boosterism for Yeltsin, partly
because many editors and journalists saw a possible Communist victory as
the end of a free press. 

Russian news media tend to be owned by powerful business leaders who have a
strong interest in gaining political influence. Markov compared it to the
United States in the 19th century, when many newspapers were the organs of
political parties. 

In Russia, with a poorly developed political party system, some media are
organs of interest groups, not parties. ``These groups are competing,''
Markov said, and that has led to some diversity of views -- including some
that are critical of the Kremlin. 


Moscow NTV Carries Poll on Potential Ban of Communists 

July 11, 1999
[translation for personal use only]

Most Russians do not agree with a possible ban on the 
Communist Party but would not participate in street protests, according 
to a poll shown on Russian NTV "Itogi" at 1700 gmt, 11th July 1999. 

The poll conducted by the Public Opinion Foundation shows that 57 per 
cent of those interviewed are negative about the ban, while 19 per cent 
would approve it and 25 per cent are neutral. 

At the same time 70 per cent of those questioned said that they would 
not get involved in protest actions like rallies and demonstrations if 
President Boris Yeltsin decrees the ban, 17 per cent expressed their 
readiness for that and 13 per cent gave no definite answer. 

The Public Opinion Foundation poll was conducted on 3rd and 4th July in 
56 towns and villages in 29 constituent parts of the Russian Federation. 


Popkovich Supports START II Ratification 

Informatsionnoye Agentstvo Ekho Moskvy
9 July 1999
[translation for personal use only]

[No dateline as received] The Russian State Duma 
should examine the matter of the ratification of the START-2 Treaty "in 
September or even earlier before breaking up for its recess," State Duma 
Defence Committee Chairman Roman Popkovich said live on the Ekho Moskvy 
radio station. 

He also said he backed the idea of applying as soon as possible the law 
on financing Russia's defence complex in the interests of the strategic 
nuclear forces - a law which contains a programme for the creation of 
nuclear forces up to the year 2010 and which is currently waiting to be 
signed by the president [Boris Yeltsin]. 

Popkovich is of the opinion that the adoption of these documents will make it 
possible to resolve the task of developing Russia's anti-missile defence, 
the necessity of which has increased because of the conflict in the 

The deputy said that "if we ratify START-2, the this will be a very 
great blow to those in the USA who see us unwilling to disarm" and by 
doing so "we shall knock out of their hands the trump card of creating an 
anti-missile defence system and we shall be able to pull the USA's 
nuclear potential up to the nuclear potential which we shall have in the 
year 2010". 

He also noted that in the event "that we are unable to bring the USA 
back to respecting the obligations they have undertaken in various 
treaties, then a decision will be taken and we shall have to follow a 
different path to develop our own strategic missiles" by developing new 
projects, including missiles with nuclear warheads. 

He said he supported the development of a "completely new and unique 
Topol-M [missile] system and said that the idea of using missiles "not 
only as carriers of nuclear weapons" but also "for air and space 
operations and as multi-target missiles" held out much promise. 

"It is now necessary to examine the possibility of the presence of 
nuclear and conventional warheads for all airborne, sea and terrestrial 
missiles," he said. 

Popkovich was of the opinion that "if 5-6 districts with 100 anti-missile
complexes are created then no defence will be able to adequately affect
such an offensive system." [as received] 


Russia's Computers Not Y2K-Ready 
July 12, 1999

MOSCOW (AP) -- Only one-third of Russia's vital computer systems are ready
for the millennium, and the government probably won't have the money to fix
the rest in time, officials said Monday. 

Finance Ministry officials told a Cabinet meeting on Monday that Russia
needs at least $187 million to prepare its computers for the year 2000, the
ITAR-Tass news agency reported. 

The new estimates were dramatically lower than previous figures, which said
Russia would need $1 billion to $3 billion to fight the millennium bug. The
Finance Ministry did not explain the discrepancy. 

Still, the money will be hard to find, and Moscow will probably have to
give priority to defense and security sectors while withholding money from
other agencies, Finance Minister Mikhail Kasyanov said, according to

The Defense Ministry needs $13 million to fix the problem, and the Interior
Ministry needs $6 million, Kasyanov said. 

Russian government agencies have 28,000 vital computer systems, one-third
of which are ready for the Year 2000 changeover, said Alexander Ivanov,
head of the State Communications Committee. 

He said many of Russia's government agencies don't fully appreciate the
risks. ``The situation with resolving the Y2K bug in Russia provokes
concern,'' Ivanov told the meeting, according to the Interfax news agency. 

Russia plans to reduce the number of airplane flights on Dec. 31, halt some
hazardous industrial processes and switch others to manual control, ``just
in case'' anything goes wrong, Ivanov said. 

But the Russian Central Bank and most fuel and energy companies are
prepared, he said. 

Russia has been slow to address the millennium bug because of more pressing
problems, including a severe cash shortage. 

The problem may occur if older computers that use two figures to designate
a year mistake the year 2000 for 1900 and shut down or produce erroneous


Former FM Kozyrev: Russia Should Be Tougher With West 

Radiostantsiya Ekho Moskvy
9 July 1999
[translation for personal use only]

[passage omitted: presenter's introductory 
remarks] [Begin Ex-Foreign Minister Andrey Kozyrev recording] Finally our 
president has stated plainly and clearly that he wants to see a 
democratic Duma or more precisely - he simply wants to see democrats in 
the Duma. 

In this case why are we spitting thunder in our foreign policy? We are 
spitting thunder, while aiming it not at all at [Yugoslav President 
Slobodan] Milosevic, although thousands of demonstrators in Yugoslavia 
itself are demanding his resignation. 

Those demonstrators have realized that this man launched four wars that 
Serbia lost, and that now he is the main obstacle to receiving economic 
and financial aid for the restoration of the country. That is, they have 
realized that his entire policy is anti-Serbian and essentially 
anti-Russian, since we are really brotherly nations strongly tied to each 
other. It is sad that we seem to haven't realized that yet. 

Several years ago our authorities as well as our democrats decided that they 
could cope with the difficult situation they had got into by giving the 
foreign policy to the cloak-and-dagger people or simply to the 
anti-Western forces, thus obtaining the freedom to conduct economic 

It did not work at all. Instead, the Communists and the so-called 
patriots simply put foreign policy in their pocket. They used 
anti-Western hysteria, which reached its peak during the events in 
Kosovo, to launch an attack on the president himself. Concessions made in 
foreign policy yielded nothing that could help limit impeachment demands 
and similar moves 

Now it would be a huge mistake to keep to the same kind of policy aimed 
at countering the West and NATO while trying to bring democrats to power. 

Fighting with democratic states while advocating democratic ideas at home 
is a mistake. This is what they call conflict of interests. 

And the final point. Our diplomats and our leaders demonstrated a high 
grade of flexibility and common sense at recent meetings with Westerners, 
for instance - at the G8 meeting. They spoke about partnership, 
friendship and common interests. 

Now [Prime Minister Sergey] Stepashin is going to the USA. It looks like 
that during that visit he will speak about pragmatic issues in a 
civilized manner. For that glory be to him. And glory be to him for 
following a sensible line in his public speeches made in the West. 

But the thing is that speaking about the West in a civilized manner and 
without spitting thunder is expedient not only with the Westerners but 
with our own nation. That is, we should show our human face in the West 
and a patriotic mug at home. 

Doing otherwise would be even better. We should speak in a civilized 
manner about cooperation with the West to help democrats enter the Duma. 
We should not accelerate anti-democratic hysteria. 

While speaking to the Westerners we could be even stricter, since, 
firstly, it won't do them any harm and, secondly, there are issues over 
which we disagree, and we should not be inhibited about raising them. 
We should do everything in exactly the opposite way. We should speak 
positively about the West, while being much tougher when speaking to the 

This lesson should learnt in order to fulfil the task set forth by the 
president - democrats in the Duma, democracy in the country. [end 


Obshchaya Gazeta Elections Initiative Supported 

Obshchaya Gazeta
8 July 1999
[translation for personal use only]
Unattributed report: "Eye of the People: Who Will Keep a Watch on the 
Cleanliness of the Elections?" 

Obshchaya Gazeta's initiative--for the formation of 
the For Fair Elections grassroots committee--enjoyed new development last 
week. The idea of independent citizen monitoring of the cleanliness of 
the 1999-2000 election campaigns was supported by a whole number of 
long-standing friends of the newspaper--well-known public figures, 
scientists, and masters of our culture. Their consent to be a part of the 
committee that is being formed was announced by, inter alia, Mikhail 
Gorbachev, former president of the USSR, Yuriy Ryzhov, member of the 
Russian Academy of Sciences, the producer Yuriy Lyubimov, the writer 
Boris Vasilyev, the actor Mikhail Ulyanov, the sociologist Yuriy Levada, 
Nikolay Shmelev, corresponding member of the Russian Academy of Sciences, 
and others. 

Thus a public jury, whose authority is backed by the high personal 
reputation of its members, is taking shape. The people on the committee 
will undertake, naturally, not to participate in the upcoming elections 
either as candidates or as part of a group supporting this contestant or 
the other, are not members of any political party, and are prepared to 
defend the interests of any candidate and any electoral association whose 
legitimate rights are violated. 

A pool of information sponsors of the For Fair Elections grassroots 
committee is beginning to take shape also. The first to announce his 
agreement to grant the future committee air time was Yevgeniy Pavlov, 
director of Mayak Radio. He said in an interview with Obshchaya Gazeta: 
"What sort of Russia enters the new millennium will depend on the results 
of these elections. If we accept as the rule the proposition that all 
means are good as long as we break through to power, we will, as a 
result, get a monster state. The elections must be fair, despite the fact 
that we have inwardly reconciled ourselves to the fact that criminals are 
straining after the levers of control of the country and carrying with 
them a whole set of criminal methods. How is this to be resisted? The 
main hope is that the citizens will keep a close eye on the progress of 
the elections and that the news media will regularly make public all 
instances of 'black PR,' outright fraud, swindling, and vote-rigging. 

"Radio Mayak supports the Obshchaya Gazeta initiative, and we undertake to 
inform listeners as to who is intending to gain power and by what means. 
Lest we are subsequently left beating our breast, maintaining that we did 
not know whom we were electing. 


Date: Sun, 11 Jul 1999 
From: "T. S. White" <>
Subject: Entreprenuer 3

The problem of forming a company in Russia presents itself after the
western entreprenuer has identified a market, resolved problems with the
language barrier, and completed a feasibility study. In Russia
foreigners are not permitted to conduct business as individuals. Thus
it is necessary for them to establish a company before they begin
business. In Russia none of the activities mentioned above are defined
as business activities. Therefore, the formation of a company should be
approached only after completetion of a feasibility study. To open a
company before completing a feasibility study would be at best premature
and at worst a waste of assets.

It will be educational to discuss the cost of organization, for a
western businessman, before launching into a discussion of the forms of
business organizations in Russia. The western businessman must realize
from the outset that forming a company in Russia is not something that
will be accomplished without the use of Russian assistance at some
level. At any point where Russian involvement becomes necessary the
entreprenuer must realize, that in terms of cost, there is shakey ground
ahead. In the case of forming a company the range of prices can begin
at as little as five hundred US dollars and go as high as five to seven
thousand US dollars. The lower range of prices will be for Russian
companies that specialize in registering foreign entities to do business
in Russia. The higher end of prices will be for the assistance of a
western consulting firm to handle the complexities of the registration. 
In the lower end of the scale the businessman is subject to an array of
deceitful advice, incompetence, graft, and manipulation. In the upper
end the businessman must realize that ultimately the registration will
be accomplished by Russians and it is costing assets that could be used
more effectively elsewhere. 

In the decision of which registration alternative to use it is
imperitive that businessman avoid relying on the advice and counsel of
the interpreter, travel agent, attorney, or any other Russian adisor. To
rely on advice from a Russian advisor will guarantee that the
businessman ends up in the hands of a company that pays a commission to
the person making the referral. This commission is the only reason the
company is recommended. The referral has nothing to do with the
competence of the company or it's experience in the area. It is at this
point in time that the intuitive business skills of the entreprenuer
will get their first real test in Russia. The decision of which
registration company to use will influence not only the cost of the
process but whether in fact the regisitration is actually completed. 

When the western entreprenuer approaches the formation of a company it
is necessary to define the nature of the activities required within the
borders of Russia. The nature of these activities will help guide the
businessman in the selection of the proper form of company to open. 
There are generally three accepted forms of business organization in
Russia. The type most commonly referred to in the media is named a
"Joint Venture". The Joint Venture is a company formed with two or more
partners, one of which is Russian. The next most popular form of
organization is a "Representative Office". The representative office is
a sattelite office of a western company that may conduct a restricted
level of business in Russia. The third form of organization is the
"Foreign Branch Office". The Foreign Branch Office has some advantages
over the Representative Offive but remains a somewhat retricted form of
organization. Depending upon the level of business activity required in
Russia one of these three forms of organization will be of more benefit
than the others. 

The most restricted form of organization is the Representative Office. 
The Representative office constitutes a sattelite office of the foreign
company and amounts to a sales office. It is not allowed to engage in
commerce, i.e. manufacturing, purcahsing, contracting, or other local
business activities. The function of the Representative Office is to do
marketing and take orders for the foreign company. Any contracts
established are between the foreign company and a Russian customer. The
Representative Office does not import or export goods. Any goods
exchanged have title transferred from the foreign company to the Russian
customer and importation is the responsibility of the customer. 
Conversely any goods the foregn company contracts to export, through the
Representative Office, must be exported by the Russian company selling
the goods, not the Representative Office. One advantage to the
Representative Office is that the transactions it facilitates will
generally avoid being subject to a twenty percent value added tax. 
However, like the vast majority of foreign organizations the
Representative Office will be subject to a full spectrum of Russian
business taxes.

The most commonly mentioned form of business registration, in Russia, is
the Joint Venture. The moment the foreign businessman mentions the idea
of forming a company every Russian he knows will insist that a Joint
Venture is the only way to accomplish the desired goals. Every Russian
within ear shot will suggest they know the perfect partner for a Joint
Venture. The partner they wish to suggest will be someone extremely
knowledgeable and with the kinds of "Conections" that will allow the
businessman to be an overwhelming success. This suggestion is of course
motivated by the commission they expect to receive from the Russian
partner. However, in the case of a Joint Venture there is more
deception at work. When the western entreprenuer forms a Joint Venture
with a Russian partner the guarantee is that the Russian partner will
end up with the entreprenuer's business and assets. The time will come
when the western businessman is offered the choice of being bought out
or forced out of the business. That is, if the businessman is lucky, he
will be offered the choice. In Russia business execution is just
another decision for the Russian businessman. The fact of the matter is
that there is little justification for the formation of a Joint Venture,
with a Russian partner, for any legitimate business reason. All of the
aspects of business conduct can be achieved through one of the other
forms of organization with the exception of the legal right to sue. If
the entreprenuer considers the right to seek legal recourse in the
Russian courts an important factor in the business plan then a Joint
Venture has merit. The fact is seeking legal recourse against a Russian
partner, in any jurisdiction, has historically proven to be a hollow
victory. The Russians simply ignore any verdict against them. The
Joint Venture is subject to a full range of Russian business taxes.

The Foreign Branch Office constitutes a compromise between the
Representative Office and the Joint Venture. When the western
entreprenuer forms a Foreign Branch Office, of a western company, the
Branch has the right to conduct business in Russia at all levels except
that of legal recourse. The Branch Office can engage in manufacturing,
purchasing, import/export activities, employment, and all the other
activities normally associated with the conduct of business. Thus if
the entreprenuer is willing to abandon the right to seek legal recourse,
in Russia, then the Foreign Branch Office is a promising alternative. 
The promise it holds in comparison to the Representative Office is that
it has the right to conduct a vastly wider ranger of activities. The
promise it holds compared to the Joint Venture is that it does not
require a Russia partner. It also does not require, and should not
have, a Russian director. The Foreign Branch Office is subject to the
full spectrum of Russian taxes. 

During the registration of a foreign company, of any description, the
suggestion will be made that the business needs to have a Russian
director. This is not the case. A westerner can be the director of his
own foreign office. It may be suggested that the businessman needs a
"Work Permit" before becoming director of the office. This is not the
case. The business must be registered before the entreprenuer can
obtain the work permit. Once the business is registered and the proper
documents are copied it takes one day to get a work permit. To install
a Russian as director of the Foreign Branch Office or the Representative
Office will defeat all the precautions the businessman has taken. If
the western entreprenuer wishes to succeed in Russia, retain ownership,
and enjoy the benefits of business operations then western personnel, at
the management level, is a must. 

To apply for, and complete, the registration of a foreign company in
Russia requires the presentation of specific documents. The documents
required also need to have certain certifications. The documents, also,
need to be translated into Russian. A discussion of these documents and
the processes necessary to certify and translate them will be the
subject of the next essay.


Experts Discuss Stepashin, Primakov, CPRF 

July 11, 1999
[translation for personal use only]
Studio interview with Igor Bunin, director of the Center of Political 
Technology; Dmitriy Oreshkin, leader of the Mercator group; and Leonid 
Radzikhovskiy, political observer from the Segodnya, by announcer 
Yevgeniy Kiselev--live 

[Presenter Yevgeniy Kiselev] Besides unification 
with Belarus, a lot of issues have been discussed in the last week, in 
particular, all kinds of pre-electoral alliances, rumours on Sergey 
Stepashin's supposed sacking and allegations about some sophisticated 
Kremlin scheme aimed at banning the Communist Party. 
We shall talk about these issues with leading political analysts. Our 
guests are director of the centre of political technology, Igor Bunin, 
leader of the Mercator group, Dmitriy Oreshkin, and 'Segodnya' newspaper 
political observer, Leonid Radzikhovskiy. 
[Bunin] Rumours of this kind have been dogging Stepashin's cabinet from the 
very first moment. 
[Passage omitted: details] 
[Bunin] At the same time, I have a feeling that this cabinet will last much 
longer than expected. 
[Passage omitted: details] 
[Bunin] If this cabinet demonstrate at least a minimal efficiency and 
manages to prepare well the Duma elections, which is basically its main 
task, it will stay in office until December. No one can forecast the more 
distant future in Russia. 
[Presenter] Dmitriy Borisovich Oreshkin, what is your opinion? Is
Stepashin really possible? 
[Oreshkin] Who needs it, we should ask? Nobody except one of the groups
the presidential team. Both the president and the country need stability 
[Passage omitted: repetition] 
[Oreshkin] Stepashin is a proper person in a proper place and it seems to
that the majority of the voters sympathise with him. He is tough on the 
Chechens, who irritate everybody, and at the same time he is rather soft 
and proper in his relations with regional leaders. He seems to be the man 
we need now. 
[Presenter] I would like to discuss the same issue with Leonid
What is your opinion? 
[Radzikhovskiy] If Stepashin is sacked in September or October, the
result would be 
quite evident. It would increase Stepashin's popularity, as in the case 
with [Yevgeniy] Primakov, and do more damage to Yeltsin's prestige. On 
the eve of the elections parties and electoral blocs that are relatively 
loyal to Yeltsin would have to distance themselves from the Kremlin and 
the new cabinet. 
[Passage omitted: details] 
[Radzikhovskiy] All present bids to create some pro-presidential bloc
would go 
[Presenter] Primakov has been recently mentioned many times. What is
Maksimovich going to do, in your opinion? 
[Radzikhovskiy] It is hard to decide or guess for Primakov, but there are
arguments in favour [of his coming back to politics] and one against. The 
latest is quite apparent, and that is his age and state of health. 
[Passage omitted: repetition] 
[Radzikhovskiy] Primakov, as people say and as we could judge by his
behaviour, is 
very sensitive and touchy in cases related to his human dignity. He will 
never forget about his undeserved sacking and the humiliating way Yeltsin 
treated him. 
[Passage omitted: repetition] 
[Radzikhovskiy] Moreover, Primakov has enormous moral and political
support. It is 
hard to imagine a politician who would not make use of that. 
[Passage omitted: repetition] 
[Presenter] What is Igor Bunin's opinion? 
[Bunin] I think that Yevgeniy Maksimovich is now profoundly thinking over 
this very important step. 
[Passage omitted: repetition] 
[Bunin] On the one hand, he cannot waste time. Public opinion surveys show 
that his popularity is shrinking little by little. 
[Passage omitted: details] 
[Bunin] There are three options for him. The first one is to be at the head 
of the Communist bloc, which is ruled out for Primakov because of his 
views. The second one is to head the All Russia bloc. In this case All 
Russia would be in fierce confrontation with the president. 
[Passage omitted: repetition] 
[Bunin] All Russia probably would not dare to offer him a top position in 
the list of candidates. The only remaining option is [Luzhkov's] 
Fatherland. But what can Luzhkov offer to Primakov except the position of 
[Duma] speaker, which is obviously not enough for Primakov? Is he ready 
to abandon his own presidential ambitions? Is he ready to join a party 
that is not his own? 
[Passage omitted: repetition] 
[Presenter] Why not to consider the option of a lone politician like
Yeltsin was 
in 1991? 
[Passage omitted: details] 
[Bunin] Of course, he can ignore the parliamentary election. 
[Passage omitted: repetition] 
[Bunin] But in this case he would miss the most important stage of the 
battle when the stakes are defined. If Primakov does not participate in 
the parliamentary elections, his chances at the presidential election 
would be much worse. 
[Presenter] Moreover, if Primakov is elected to the Duma, he would be the
possible candidate for the speaker's seat. OK, let us pass over to 
another issue being widely discussed now. I want to ask Dmitriy 
Borisovich [Oreshkin] whether the ban on the Communist Party may become a 
[Passage omitted: repetition] 
[Oreshkin] I think this is unrealistic, for several reasons. The president 
never does what is expected from him. 
[Passage omitted: repetition] 
[Oreshkin] Moreover, the Communist Party is being slowly but consistently 
squeezed off the political arena now. 
[Presenter] How can you prove this? 
[Oreshkin] In fact, from 12 to 15 million ballot papers are being put into 
boxes by regional governors and presidents of republics in this country. 
A large part of them always went to the left-wingers. 
[Passage omitted: details] 
[Oreshkin] Now the governors are absolutely not interested in a Communist 
[Passage omitted: details] 
[Oreshkin] Three or even five million ballots cast for the Communists in
previous elections this time will go to anybody except them. It might be 
Luzhkov's Fatherland, or some governors' party, but not the Communists. 
[Presenter] If so, how many [votes] will [the Communists] win in the
[Oreshkin] I think they will lose about five per cent. 
[Passage omitted: repetition] 
[Presenter] Now I to Leonid Radzikhovskiy. What would you say about alleged 
plans to impose a ban on the Communist Party? 
[Radzikhovskiy] I think Yeltsin really can remove Lenin from the
Mausoleum. It would 
be an eye-catching step which is very typical of our president. 
[Passage omitted: repetition] 
[Radzikhovskiy] But he will never ban the Communist Party, because he
remembers very 
well his own biography. The popularity of the persecuted always grows. 
[Passage omitted: repetition] 
[Radzikhovskiy] I agree with Oreshkin that the situation is getting worse
and worse 
for the Communists, mostly because of the position of the governors. 
[Passage omitted: repetition] 
[Radzikhovskiy] Meanwhile, Communist voters have supported their party at
the polls 
for many years, but they have got nothing in return except empty words. 
[Passage omitted: repetition] 
[Presenter] Thank you. 


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