Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


July 24, 1999    
This Date's Issues: 3404 •    

Johnson's Russia List
24 July 1999

[Note from David Johnson:
1. AP: PM Heading to America.
2. RFE/RL: Michael Lelyveld, Russia: Prime Minister Expected To Renew 
Cooperation During U.S. Visit.

3. Moscow Times: Johas Bernstein, PARTY LINES: Is the Kremlin Banking on a 
Dirty Contest?.

4. AP: Growth Unlikely for Russia.
5. Tom Adshead: Re 3400-Ivanenko/Hough, Shaprio/Hough.
6. Jack Schmidt: RE: 3398 Steel, Chickens, and Overstretched Academics.
7. David R Stone: Re CDI Russia Weekly-#58/Russian Arms Exports Reach 
Record High.

8. World Socialist Web Site: The nature of democracy in capitalist Russia 
(perhaps not in Russia alone?)

9. St. Petersburg Times: Fyodor Gavrilov, Russia's Right Has To Decide 
What's Right.

10. AFP: Pentagon urges Russia to come to nuclear monitoring center 
for Y2K.

11. Moscow Times editorial: 'Media Wars' Are Healthy For Country. 
12. Nixon Center: Paul Saunders, Reality Check: Evaporating Goodwill 
Between U.S. and Russia.

13. Izvestia: Yulia Berezovskaya, Another Europe.]


PM Heading to America 
By Greg Myre
July 23, 1999

MOSCOW (AP) -- With the United States and Russia now cooperating in Kosovo,
rather than feuding over it, Prime Minister Sergei Stepashin's visit to
Washington next week should help patch up relations that were badly
strained during the Balkans conflict. 

Russia's strong opposition to NATO's bombing campaign in Yugoslavia drove
U.S.-Russian relations to their lowest point in the post-Cold War era. But
with the airstrikes over, Russian and NATO forces are jointly maintaining
the peace in Kosovo, and ties between Washington and Moscow are on the mend. 

Stepashin, considered a potential presidential candidate in next year's
election, is making his first trip to the United States since President
Boris Yeltsin named him prime minister two months ago. 

The Russian premier, who arrives in Seattle on Sunday, will be hosted by
Vice President Al Gore, who has held an ongoing dialogue with successive
Russian prime ministers. 

While this round will help re-establish the tenor of U.S.-Russia relations,
it holds none of the drama of the last planned session in March. 

Russia's then-Prime Minister Yevgeny Primakov turned his plane around over
the Atlantic Ocean and returned to Moscow rather than set foot in
Washington just as NATO's bombing campaign was about to begin. 

``This visit will be significant because Stepashin is not well-known in the
United States, yet he could be a leading presidential contender next
year,'' said Sergei Markov, an independent political analyst with Russia's
Institute for Political Studies. 

``It's important for him to meet with the American elite, and to present
himself as a credible figure,'' Markov said. 

The talks are expected to focus on familiar issues that remain unresolved:
Russia's chronic economic woes, prospects for Russian ratification of the
START II arms control treaty, and U.S. concerns about the spread of Russian
nuclear technology. 

>From Stepashin's perspective, the most critical part of his mission could
come when his delegation checks on the status of loan requests at the World
Bank and the International Monetary Fund. 

Russia has been starved of international assistance since its financial
markets imploded last August, and both lenders are reviewing Russia's
economy to determine whether they should proceed with tentative loan

The Russian economy has been relatively stable in recent months. But the
government has not solved any of the serious, long-term problems, such as
the crippled banking system, the huge foreign debt burden, and the state's
inability to collect taxes. 

Stepashin, 47, had spent his entire career as a security and legal
official, serving as interior minister prior to becoming prime minister. He
had no previous experience in economic or foreign affairs and has not
introduced any major initiatives since taking office in May. 

He has sought to portray himself as a competent manager and a stabilizing
force in a country rocked by repeated political and economic upheavals.
Stepashin is staunchly loyal to Yeltsin, and so far has been unable or
unwilling to stake out any strong positions that the president has not
authorized in advance. 

Stepashin will visit the airplane manufacturer Boeing in Seattle before
traveling on to Washington. In the U.S. capital, he is to meet with
President Clinton and other top U.S. officials in addition to his talks
with Gore. 


Russia: Prime Minister Expected To Renew Cooperation During U.S. Visit
By Michael Lelyveld

Boston, 23 July 1999 (RFE/RL) -- Prime Minister Sergei Stepashin is
expected to renew cooperation with Washington next week as he meets with
Vice President Al Gore in Russia's first high-level visit to the United
States since the war over Kosovo.

The summit on science and technology issues will also be the first since
the dismissal last year of former Prime Minister Viktor Chernomyrdin
brought an end to the regular meetings of the group known as the
Gore-Chernomyrdin Commission. A scheduled meeting in March failed to
materialize when former Prime Minister Yevgeny Primakov cancelled his
Washington visit because of NATO's bombing of Yugoslavia.

Despite the long backlog of technical issues between the two countries, the
one-day Gore-Stepashin meeting on Tuesday will be too brief for a full
agenda of agreements that characterized the Chernomyrdin talks, a Gore
spokesman said Thursday. The meeting will touch on economic issues and
trade, as well as arms control, the official said.

Stepashin will also address U.S.-Russian trade groups at a dinner Monday
night in an appearance aimed at restoring business confidence following the
frequent government changes since the ruble crisis of last August 17. A
meeting with President Bill Clinton in the Oval Office is also planned.

Although the trip will nearly coincide with a vote on new loans by the
board of the International Monetary Fund next Wednesday, an IMF official
said this week that no meetings with Stepashin are expected. But if all
goes well, the IMF may approve $4.5 billion in new financing for Russia by
the time Stepashin returns to Moscow.

The broad assurance of cooperation may be the biggest accomplishment of the
Gore-Stepashin meeting at a time when Russia has tentatively moved to
restore its broken liaison links with NATO. Stepashin may be eager to
portray an image of superpower status and stability, while Gore as a
presidential candidate may assume the statesman's role.

But arms control advocates in the United States are demanding some serious
and difficult policy decisions from the meeting. Alan Kuperman, a senior
policy analyst for the independent Nuclear Control Institute in Washington
called for a change in a key plutonium agreement in an op-ed page piece
published Thursday by The Boston Globe.

Kuperman told RFE/RL that a 1997 Gore-Chernomyrdin agreement to halt
Russia's production of weapons-grade plutonium could have dangerous
consequences because Russian reactors would convert their operations to use
highly-enriched uranium instead.

The two reactors at Seversk, previously called Tomsk, and one at
Zheleznogorsk, formerly Krasnoyarsk, would stop producing plutonium, the
key fuel for nuclear bombs. But because the reactors also make electricity
and steam for local use, they would be kept going with supplies of
highly-enriched uranium, which is also a nuclear weapons material. The
distribution and transport of the bomb-grade uranium from old weapons and
stockpiles represents a major security risk, Kuperman said. Zheleznogorsk
also processes the spent fuel from Russian and Ukrainian nuclear power plants.

Small pellets of the highly-enriched uranium can be easily stolen or
diverted to bomb programs in other countries. The solution would be to
convert the reactors to use low-enriched uranium, which cannot be used in
bombs. But Kuperman said the idea is being resisted for political reasons.

Although scientists of Russia's Ministry of Atomic Energy have supported
the conversion to low-enriched uranium, top Minatom officials reportedly
remain committed to using an old plant at Novosibirsk, which can only
produce highly-enriched uranium. Minatom chief Yevgeny Adamov is expected
to travel with the prime minister to Washington.

A more versatile plant at Elektrostal near Moscow could be used to turn
weapons material into low-enriched uranium for reactor fuel. But Minatom
has stuck to its plan that would allow it to extract some highly-enriched
uranium from the fuel even after it is used, perpetuating the proliferation
risk, Kuperman said.

In a letter to U.S. arms control groups seeking the change, Gore reportedly
agreed to pursue development of the low-enriched uranium alternative but
said he has decided to go ahead with the original reactor plan initially,
rather than risk losing the agreement. A spokesman for the vice president
had no immediate comment. The United States plans to spend $300 million to
upgrade the Russian reactors.

The difficulty seems to reflect the high value placed by both sides in
avoiding further setbacks. Although the pace of new agreements and the
implementation of old ones has slowed since the days of Gore-Chernomyrdin,
Russia recognizes that there are continuing economic benefits from keeping
cooperation alive.

While Stepashin may wish to show his leadership on his first visit to
Washington as prime minister, he is also likely to be wary of achieving
major breakthroughs. After Chernomyrdin made headlines with his last trip
to Washington in March 1998, President Boris Yeltsin fired him within a
matter of days. 


Moscow Times
July 23, 1999 
PARTY LINES: Is the Kremlin Banking on a Dirty Contest? 
By Jonas Bernstein 

Perhaps I'm just insufficiently jaded, even after nearly seven years in
Russia. But the events of the past week were, for my money, noteworthy. It
isn't every day, even in Russia, that a top tycoon (Boris Berezovsky) goes
on his own television station (ORT) and warns that a victory by one of the
likely candidates in next year's presidential contest (Moscow Mayor Yury
Luzhkov) will lead to "bloodshed." Nor is it every day that one of the
country's main television channels (NTV) charges that the presidential
administration chief (Alexander Voloshin) was implicated in various
financial scams that ripped off thousands of people. 

The amount of mud already in the air makes it a safe bet that the walk-up
to the December parliamentary vote will set new records for dirtiness. The
basic battle lines have been drawn, with Luzhkov and Vladimir Gusinsky,
head of Media Most (which includes NTV), on one side; the Kremlin "family"
Ä including Berezovsky (and thus ORT) and Voloshin Ä on the other. 

Neither side gives the slightest indication it is ready to blink. On the
contrary: The Kremlin reportedly sics the Federal Security Service on a
business run by Luzhkov's wife, and the Moscow mayor immediately slugs
back, accusing Berezovsky and the Kremlin of being behind the probe and
calling for the removal of the authorities. NTV, meanwhile, airs Luzhkov's
accusations and launches a few of its own and, the very next day,
Gusinsky's publishing house gets a visit from the tax police. 

On one level, the Kremlin's blatant attacks on Luzhkov seem ill-considered,
since they let him re-fashion himself as an outsider taking on the
establishment. The image of Luzhkov fighting City Hall, of course, is
ludicrous, but the Kremlin's attacks may make it plausible to the
electorate Ä just the way the Politburo's attacks on the Moscow Party boss,
Boris Yeltsin, made him a man of the people. 

It is hard to believe, however, that the Kremlin is unaware of the backfire
potential in its attacks on Luzhkov, Gusinsky & Co. Is it possible the
Kremlin is deliberately trying to instigate a super-dirty,
super-confrontational campaign? Note the comments Thursday from Mikhail
Lesin, Yeltsin's recently appointed press minister. While making all the
usual obligatory noises about respecting press freedom and so on, Lesin
said: "There is no doubt that mass media today have a lot more ways to
influence the state than the other way round. That is why protection of the
state from free mass media is a very pressing issue today." 

This comment is open to various interpretations. Lesin might mean the state
is ready to limit "free mass media." Or perhaps to invalidate the results
of an election sullied by press excesses. 

In addition, a dirt-strewn, polarized electoral campaign could also help
legitimize Yeltsin's continued presence after June 2000. This week,
political consultant Gleb Pavlovsky, who reportedly has the ear of the
"family," said Yeltsin might stay on in some sort of official or
quasi-official role concurrently with a newly-elected president. 

In Pavlovsky's account, "the old system is impossible without Yeltsin"
while "the new [system] cannot simply appear as a result of elections."
Hence Yeltsin can play a role similar to that of late Chinese leader Deng
Xiaoping Ä for "a brief period," of course. 


Growth Unlikely for Russia 
By Anna Dolgov
July 23, 1999

MOSCOW (AP) -- Russia will see no economic growth in the next decade unless
it is able to reschedule foreign debt payments nearly equal to the
country's expected revenues, a top official was quoted as saying Friday. 

Even if debt is not rescheduled, foreign creditors may not get their money
back; Russia cannot spend everything it earns on debt payments and may be
forced to default, said Mikhail Zadornov, the state envoy to international
financial organizations. 

Russia is supposed to pay between $13 billion and $19 billion to foreign
lenders each year until 2008, Zadornov said, a yearly burden nearly
matching this year's budget revenues of about $20 billion. 

Russia was to pay $17.5 billion this year, but Zadornov said creditors
won't get more than $9 billion. Even that amount will be hard to find if
the International Monetary Fund does not come through with another loan it
had tentatively promised. 

Russia has missed scores of payments this year, mainly on its Soviet-era
debts. But it has tried to stay current on its IMF and Eurobond debts. 

Zadornov said Russia made a ``fatal mistake'' when it agreed to take over
the $100 billion in Soviet debt obligations when the Soviet Union collapsed
in 1991. Russia has since run up half that amount on its own. 

A government report released Friday shows the nation's vital economic
statistics remained grim. The report was part of an IMF condition for a new
$4.5 billion loan. 

Gross domestic product is expected to shrink 2 percent this year, and
inflation may soar to 50 percent. The Central Bank's hard currency
reserves, now at a paltry $11.5 billion, are not likely to grow much,
according to the report. 

The IMF is scheduled to decide Wednesday whether to release the new loan. 

Russia's economy was propped up recently by the growth of world oil prices.
Seeking to take further advantage of the higher oil revenues, the
government raised the export duty on crude from the current $5.25 a metric
ton, Prime Minister Sergei Stepashin said Friday. News reports gave
conflicting figures on the new tax, some saying the euro-set duty would be
near $8 a ton, and some saying it would be $10.5. 


Date: Thu, 22 Jul 1999 
Subject: 3400-Ivanenko/Hough, Shaprio/Hough.
From: "Tom Adshead" <>

I went back and read Jerry Hough's original posting on this list about the
need to move away from a moralistic view on the US protectionist policies
against Russian steel. His point there was that this is modern capitalism
and would be helpful for Russia because it would mean that the steel would
stay in Russia where it is needed.

I just wanted to make a couple of comments:

I still think that the US, and the rest of the West, has a very twisted
morality about exports from the former Soviet bloc. Time and again we found
at the EBRD that our potential borrowers did not have access to the markets
they needed to repay our loans. And yet our shareholders, and the US
government prominently, would reject loans if they did not show strong hard
currency income!

We had one great shipyard project, where the company had managed to turn
itself from a producer of warships to a producer of civilian vessels that
were very competitive because Ukrainian steel was cheap, as was Russian
labour. When we brought this project to the board, we had to jump through
all kinds of help, because of heavy lobbying by the shipyard industry in the
countries of our shareholders.

We were told to go off and draw up a full strategy for the shipbuilding
industry - i.e. put this project off as long as possible. The reason was
that the governments did not see why they should be helping Russian
shipyards, when they were helping their own. And yet this was one of the few
examples I know of where a Russian defence factory had really managed to
convert itself into a competitive producer.

Which brings me to a more general point about industrial policy. In the
above example we had run up against our shareholder countries' industrial
policy. This was not really an industrial policy of the type that was
successful in Asia, but really a reactive policy of propping up lame ducks.

My experience in the last eight years of trying to either lend money to
Russian industrial companies, or finding ones worth buying, is that a lack
of capital is not the issue as far as Russian industry is concerned. It is
true that the capital markets, and especially the banking system, are in
their infancy. Banks do not make a lot of long term loans, because most of
their funding is short term, and also because they put their best people
into the trading department, rather than the lending department.

But the other side of the capital markets is the demand side. Russian
industrials are poor borrowers - they are unwilling to do the sort of
business planning and provide the kind of information that lenders require.
I have got used to hearing "Why are you asking all these questions? Just
give us the money, and let us get on with it. We'll you back".

The key here is that Russian managers are very poor users of the capital
that they have been given. They mostly prefer to buy a new machine, rather
than reorganise their production practices, or reduce their costs. There was
an industrial policy in the later Gorbachev era, when the government took
out huge loans to finance the import of capital goods - much of this was
poorly used because of management failure.

My understanding of the Primakov industrial policy was making loans
available to industry, via a Russian development bank, according to a long
term plan that Maslyukov was to draw up. The problem is, it is very unlikely
that this plan would admit that any of the decisions taken in the last
twenty years were wrong. My guess is that the bank would have made loans to
the producers of capital goods, who would have squandered them, just as they
have squandered everything else that has been given them.

The problem here is that Primakov's arrival in power was seen as a golden
opportunity by the nomenklatura to go back to the good old days. We even saw
the possibility that Arkady Volsky could come back into power. It is vital
to understand that this is not about rational government policy towards
industry, but the preservation of a management class that has conspicuously

A real industrial policy would sack half the managers in Russian industry,
but I suspect that this is not what Primakov and Maslyukov had in mind. The
Exile piece on the coal industry last year admirably demonstrates this.

An industrial policy works best when the ground is fertile, as does a
"neoclassical" economic policy. I have no argument that many of us in the
West failed to understand that the policies we suggested lacked the
infrastructure necessary for their success. Yes, we did take it for granted
that the courts would work, and that the businessmen would be honest.

The same is true of industrial policy - the Asian industrial policies worked
well, because they had managers and workers who were prepared to work in the
social rather than the individual interest. This is conspicuously not the
case in Russia - it was the case in the fifties and sixties, when Russia had
a rather successful industrial policy.

But now, well, any money that makes its way near industry will be stolen or
wasted, unless you change the managers. But the old nomenklatura would be
even worse than the market at deciding who are the bad managers.


Date: Fri, 23 Jul 1999 
From: Jack Schmidt <>
Subject: RE: 3398 Steel, Chickens, and Overstretched Academics

Would both Jerry Hough and Judith Shapiro stop playing
in their little intellectual sandbox and get back to
the issues? US limitations of Russian steel imports
are fully justifiable by US trade law. If the
producing country is not a market economy, the cost of
production cannot be reliably and accurately
determined, and therefore, it is the full right (and
necessity) of the recipient country to estimate the
cost of production and what constitutes dumping.

Now are there any gunslingin' economists out there
prepared to intelligently defend Russia as a market
economy. A country in which 70% of the economy is
mired in endless chains of barter and where the top 50
enterprises which produce 57% of the GNP have fixed
the prices for all their products? If there are,
please catch the next plane to Cherepovets and go look
at Severstal's books. You'll find incomprehensible,
near-infinite barter chains: steel pipe for crude oil
for diesel for grain for pigs for meat for …..add
another 500 transactions….for electricity and iron ore
to make steel pipes. Even a Cray XMP3 running full
throttle can't determine the cost of production
(despite the big-5 GAAP-standard audit for window
dressing). But it's amazing how academics drinking
mint julips under the shade tree on their summer
vacations can.

And concerning chickens: high import tariffs would
only help domestic Russian chicken production if:

1) Russia had an honest customs service;
2) Russian chicken farms had working capital to ramp
up production;
3) Russia had enough grain and premix to feed the
4) Russia implemented a number of major agricultural
5) Local management has the desire to use the
protection benefits effectively to develop and not
relax and take it easy.

Point 1 is obvious: criminal structures will import
without paying the tariffs. With no Russian banking
system, Point 2 is pretty clear also. With another
disasterous harvest coming this year, Russia will need
to import 5-10 million tons of grain just to feed its
PEOPLE, not chickens. Pretty clear here too. Point 4
will be argued only by those who have never worked in
the Russian agricultural sector. Point 5 is a toss
up based on my experience.

Following the ruble devaluation, there was and still
is a window of opportunity for Russian domestic
chicken production. Production took a sharp jump but
leveled off as the above structural problems took
their toll. And prices have already reached 25-30
rubles per kilo (40 rubles in Moscow), already back to
the price levels where Tyson and company can once
again come in and dominate. And what are the
Russians' chances once they have to import American
grain to feed their chicken?

Unfortunately, this is a small ray of hope being
quickly extinguished and an overall metaphor for the
Russian economy. To compete in the global
marketplace, Russia can either produce goods
efficiently and add value, or continually devalue its
currency and impoverish its citizens. The numerous
past and inevitable future devaluations clearly
indicate which path Russia prefers.

So guys, save us all the theories and academic
pitter-patter. If you haven't lived it, don't talk
about it. And please, please don't try to show your
Russian street cred by saying that you "have visited
Russia 3-4 times a year since 19__". 

Regards, and enjoy the mint julips.

PS. David, now that "Investing in Russia" is in vogue
again, please re-run my JRL 3385 piece on how an
investor should try to protect himself not from Russia
but from the Moscow financial community (who tellingly
kept quiet and hope the issue will be forgotten.)


Date: Fri, 23 Jul 1999 
From: David R Stone <>
Subject: CDI Russia Weekly-#58/Russian Arms Exports Reach Record High

Did anyone else find the figures in this Interfax report (from CDI 
Russia Weekly # 58) strange?

> Russian Arms Exports Reach Record High
> MOSCOW, Jul 22, 1999 -- (AFP) Russian weapons exports hit an all-time 
> high for the first half of the year, and revenues were expected to climb
> higher with the opening of new markets in the Middle East, Interfax
> reported Wednesday. 
> Russia's official arms exporter Rosvooruzheniye has already seen profits
> reach 1.3 billion dollars, a figure nearly triple all previous highs 
> that could climb to 2.5 billion dollars by the end of the year, defense
> experts said. 
> Arms traders Promexport and Antei were likewise expecting record annual
> profits, which could bring the sector's total export revenues to 3.2
> billion dollars, said Konstantin Makiyenko, head of the nongovernmental
> Center for Strategic and Technological Analysis.

On the most basic level of internal consistency, how can Rosvooruzhenie
hit _profits_ of $2.5 billion by year-end, if total _revenues_ for the
entire sector are going to reach $3.2 billion? That's a profit margin
Microsoft doesn't enjoy. 

Moreover, since when is $3.2 billion any kind of dramatic jump in Russian
arms exports? US Congress figures on Russian arms have always been higher
than the Russian figures themselves, but Russian sources have put their
own arms export sales at $3.1 billion in 1995, $3.5 billion in 1996, $2.5
billion in 1997, and $2-3 billion (I have conflicting figures) for 1998. 

SO--I'm hoping someone on JRL will have an idea what's going on here. Are
Interfax's figures incorrect, or cited incorrectly? Have Rosvooruzhenie's
profits in fact jumped as dramatically as claimed, and if so how? Is
Rosvooruzhenie's current management trying to win a little job security by
claiming record results?

Dave Stone
Kansas State University


World Socialist Web Site
The nature of democracy in capitalist Russia (perhaps not in Russia alone?)
23 July 1999

The Financial Times carried a report July 14 on the fact that the well
known Russian billionaire Boris Berezovsky intends to run for a seat in
parliament this December. Berezovsky made a mint during the past ten years
as a leading participant in the looting of the Soviet economy, which was
conducted under both Gorbachev and Yeltsin. 

Large numbers of quick-footed entrepreneurs snapped up the various pieces
of Soviet state property (factories, mines, oil and gas pipelines, resorts
and hotels, airlines and railroad stock, transportation companies, research
and engineering institutes, banks and other businesses) and transferred
these to their ownership. One needed very close connections to the
government officials, who legally controlled these properties in the past,
in order to swing these inside trading deals. 

Even among the ranks of the unscrupulous and ruthless Russian "biznesmeny"
Berezovsky stands out as a "first among equals" in his astute handling of
government protection (krysha in Russian means literally "roof") from
Yeltsin on down. For a time, his influence on Yeltsin was strong enough to
get him a position as the deputy head of the Presidential security council,
a body subordinate not to the Cabinet of ministers or the Parliament, but
only to the President. 

Now he owns a major TV network, newspapers, banks, and other assets in
Russia and according to various reports has spirited hundreds of millions,
perhaps billions, of dollars to secret bank accounts in the various
international offshore banks. 

The extent of the total illegal capital flight from the USSR and Russia is
naturally impossible to determine, but the Bank of International
Settlements and the IMF estimate it at well over 100 billion dollars over
the past ten years. This flood of proceeds from both legal and illegal
sources (oil and gas exports, sales of raw materials and commodities,
drugs, prostitution, other contraband, etc.) has actually grown in the
aftermath of the August 1998 financial crash and is now estimated at 2-3
billion dollars per month. 

It would appear that now Berezovsky's "krysha" is weakening since the
impotent and tottering Yeltsin regime is about to throw him to the wolves
to play the role of the last of Boris Yeltsin's scapegoats. 

Earlier this year the government prosecutor general had even issued an
arrest warrant for him in connection with money laundering. The warrant has
been dropped due to behind the scenes pressure, but many accusations
remain, and the wolves are closing in. Hence, Berezovsky's interest in
gaining a deputy's mandate, and the immunity from prosecution that goes
with it. 

In interview with the Vremya MN newspaper this leading representative of
New Russia said: "It is clear that if I became a deputy it would be
impossible to buy me". Berezovsky is absolutely correct: nobody in Russia
has more money than him. In the past period it was Berezovsky who would buy
and sell elections, deputies, judges, police and ministers. 

Then Berezovsky explained to the readers the nature of political power
under "democratic" capitalism: "Crudely put, capital hires the authorities
for work. The form of hiring is called elections. And, so far as elections
take place in a competitive way, then this choice is rational". 

Need we say more? 


St. Petersburg Times
July 23, 1999 
Russia's Right Has To Decide What's Right 
By Fyodor Gavrilov

ON Tuesday, the news agency Interfax reported that the Petersburg branch of
the Right Cause coalition had asked party central to make ex-mayor Anatoly
Sobchak "number one" on its regional list for State Duma elections. "Mr.
Sobchak," the report stated, "enjoys the solid support of 15-20 percent of
Petersburg voters." 

I couldn't help recalling physicist Niels Bohr's aphorism: "Optimism is a
lack of information." Although Right Cause officially denied later that any
such appeal had been made, the problem doesn't end there. Right Cause will
have a tough time garnering 20 percent of the vote even in Petersburg. 

Whether they like it or not, Russia's so-called right-wingers will have to
mobilize all the resources at their disposal, even if that means working
with controversial figures like Anatoly Sobchak. 

The "right" has several difficulties, the first of them purely linguistic.
The coalition's name in Russian, Pravoe Delo, is a play on words. In
Russian, the word pravoe not only locates the movement on the political
spectrum but also indicates the rightness, the justness of its "cause."
Right Cause's goals are just, and I wholly sympathize with them. 

The first sense of the name is more problematic: as defined by Yegor Gaidar
and Anatoly Chubais, the coalition's ideology is anything but right wing,
and the sooner Right Cause thinks up a new political "coloring" for itself,
the better. The terms "rightist" and "leftist" became meaningful only
during perestroika - earlier, right-and left-wingers alike risked a trip to
Siberia. Then it became fashionable to dub pro-communist politicians
"right-wingers" or "conservatives", since they insisted on preserving the
Soviet order of things. After 1991, Russian politicians decided to change
roles. The communist conservatives wanted to be called "leftists," while
those who were popularly known as "democrats" had no choice but to call
themselves "rightists." The newly made "rightists" find themselves in a
pickle because they're forced to defend a certain set of "traditional"
values, only one of which they really care for-namely, the free market. 

All the rest - religion, morality, patriotism - is of little concern to the
democrats themselves, and, more importantly, to their voters. The average
democratic Russian voter is a textbook social democrat. He's in favor of
the market, but with broad social guarantees. He's for civil rights, but as
long as they're vigorously enforced by the state. He supports the family,
but he's for the right to abortion and divorce. 

Russia's political future belongs to the party that can package and sell
this contradictory wish list, which is partly dictated by our socialist
past. A party able to deliver all these goods would be a powerful
alternative to the weakened Communists and extremists of all stripes, and
would have a good chance at pulling the country out of its rut. 

The funny thing is that this party exists: Yavlinsky's Yabloko, Chubais'
and Gaidar's Right Cause, and even Luzhkov's Fatherland all are scattered
shards of this future social-democratic and populist mirror. I would even
say that one of the biggest factors in the current political gamesmanship
is the slow, natural convergence of these shards. I believe that one day we
as a nation will smile at ourselves in this mirror. And then it will be
time to create a genuinely right-wing party. But for now, however, our
cause is both rightist and leftist. 

Fyodor Gavrilov is the editor of Kariera-Kapital. 


Pentagon urges Russia to come to nuclear monitoring center for Y2K
WASHINGTON, July 22 (AFP) - The Pentagon is urging
Russia to send officers to an early warning monitoring center in Colorado
to help prevent nuclear misunderstandings that may arise from Y2K computer
failures, defense officials said Thursday.

Russia backed out of plans for a joint center in March in anger over the
NATO air campaign against Serbia, but the Pentagon wants to have it in
operation by December with Russian participation, the officials said.

"We have an offer on the table to the Russians right now and we are
expecting a reply sometime hopefully in the next couple of weeks," said
Peter Verga, deputy undersecretary of defense.

"We'd like to get restarted in about August in order to get that in place
by mid-December," he said.

Under the plan, US and Russian military officers working at computer
consoles in the center in Colorado Springs would monitor real-time data
derived from US early warning data on missile launches.

US officials are worried that misunderstanding may arise if Russia's
computerized command and control systems are suddenly hit by glitches or
failures on New Year's, when the year 2000 threatens to create havoc in
some computer systems.

The Pentagon hopes to offset that danger by giving the Russians access to
information from US early warning systems during the critical millennium
bug dates.

Verga, however, minimized the risks involved if the Russians decide not to
participate in the center.

"We've been assured by the Russians that their systems, just like our
systems, are not totally dependent on computers, and therefore not subject
to failure on Y2K (Year 2000)," Verga said at a Pentagon press conference.
"It's more a matter of confidence."

"We have in place the hotlines which have been in place since the '60s that
allow the exchange of information directly with Russian command
authorities," he said.

US Defense Secretary William Cohen, meanwhile, said the Pentagon has fixed,
tested and verified fixes on 92 percent all its "mission critical" computer
systems for Y2K bugs, and expects to have them all completed by December.

"It is literally a race against time," he said.

All but two of 198 nuclear-related mission critical systems have been
fixed, and work-arounds have been devised for the remaining ones, said
Admiral Richard Mies, commander-in-chief of the US Strategic Command.

"I want to make it clear there is no risk of accidental launch," said Mies.

"Procedures for launching our nation's nuclear weapons involve multiple
safeguards, such as code verifications and human interactions, to verify
and authenticate an order from the president," he said.

"Computers by themselves cannot launch nuclear weapons," he said.

The Pentagon, which has 10,000 separate computer systems and 1.5 million
computers, will have spent 3.7 billion dollars by March fixing the Y2K

It is feared that computers programmed to read the calendar year as two
digits will be stumped on January 1 when the year 2000 registers as "00." 


Moscow Times
July 24, 1999 
EDITORIAL: 'Media Wars' Are Healthy For Country 

We have heard a lot of tsk-tsking about the "media wars." They are
destructive, they are divisive, they are bad for the nation, they should

Prime Minister Sergei Stepashin has complained that ORT and NTV are
beating each other over the head while the nation's problems go unstudied.
President Boris Yeltsin has called on politicians to refrain from heated
rhetoric. New Press Minister Mikhail Lesin worries aloud how he will
protect the state from the savage free media. 

Communist chieftain Gennady Zyuganov says, "We are tired of these stupid
media feuds." Across the political spectrum, privatizer Anatoly Chubais
says that NTV's Vladimir Gusinsky and ORT's Boris Berezovsky "are carried
away into a brawl which is, in my view, harmful." 

Such unanimity! The Kremlin has searched for years for a unifying national
idea, and we think we have found it: No media wars. 

This is because not just the Kremlin, but the entire political elite, is
nervous about the idea of a real democratic political battle for the
Kremlin. Much better if the elite can largely agree among itself, and then
present the nation with a fait accompli - as in 1996, when Berezovsky and
Gusinsky and Chubais, along with all major media, merrily backed Yeltsin,
pumped up Zyuganov as his Potemkin opponent and marginalized the rest. 

That friendly sort of arrangement isn't working out this time. Gusinsky,
by giving an NTV platform to Moscow Mayor Yury Luzhkov, is bucking the
backroom deals. At this rate, if the elite does not do something soon, we
might have a political contest where the people are involved as actually
informed actors, instead of just manipulated sheep. 

After all, what is a "media war" anyway? It's simply rival political clans
going public with their differences. That's a healthy process. We would
like to see more "media wars," not less. 

For that matter, we would like to see more, and more serious, discussion
of corruption allegations. Yes, kompromat, to use the smirking Russian
slang for "compromising materials." 

We have sympathy for those who wring their hands at how much corruption
evidence has surfaced in recent years. But the problem is the corruption
itself - not that we are finally learning its scope and depth and details.
If the Kremlin chief of staff is tied to a swindle, let's hear about it. If
the chief of the presidential property management directorate (and 22
other Kremlin officials) are implicated in money laundering by Swiss
prosecutors, let's talk about that too. And if more "media wars" shake
more of this loose, let's have war. 


From: Nixon Center Bulletin <>
Subject: Reality Check: Evaporating Goodwill Between U.S. and Russia
Date: Fri, 23 Jul 1999 

Reality Check: Evaporating Goodwill Between U.S. and Russia
by Paul J. Saunders

Although U.S.-Russian relations have rebounded somewhat from the low point 
reached during the NATO air campaign against Yugoslavia, several obstacles 
to more cooperative ties will confront Vice President Al Gore and Russian 
Prime Minister Sergei Stepashin during their July 27 meetings in 

Of course, serious tension is unlikely to be visible during the meetings; 
after all, each side is eager to put a good face on the trip - to 
demonstrate, as Presidents Clinton and Yeltsin attempted at the G-7 summit 
in Cologne, Germany, that the dialogue between Washington and Moscow is 
back on track. To this end, as in the case of previous Gore sessions with 
Russia's various prime ministers, the talks are almost sure to result in a 
number of relatively minor (but still useful) agreements on cooperative 

It would be a mistake, however, to view these agreements as a sign of real 
progress in the relationship. It is nearly always possible to come up with 
something to sign in such circumstances and, moreover, the meetings would 
not have been scheduled in the first place if both sides were not confident 
that they would have something to show for it afterward. But on more 
substantive issues - the role of NATO and the future of the Anti-Ballistic 
Missile (ABM) Treaty, for example - the two sides are very far apart.

NATO's attacks on Yugoslavia laid bare the fundamental flaws of the 
Founding Act, the agreement between NATO and Russia in which Moscow 
acquiesced to NATO enlargement in return for a role in its deliberations 
through the NATO-Russia Permanent Joint Council. The final formula reached 
by the Clinton Administration to explain Russia's participation in the 
Alliance's deliberations - "a voice but not a veto" - may have seemed to be 
creative ambiguity at the time, but in fact almost guaranteed a major 
rupture in relations. Given that both sides already had clear and 
incompatible positions on the conflict in Yugoslavia and that Yugoslavia's 
ethnic patchwork virtually assured further fighting in Bosnia, Kosovo, or 
elsewhere, it was very likely that at some future time and place, NATO 
would decide to intervene in Yugoslavia without a U.N. mandate (which 
Russia and China would clearly block) over Russian objections. Russia's 
reaction to such a development was very predictable.

Because of the NATO action, which most Russians saw as an illegal 
intervention in the affairs of a sovereign state, Russia is now deeply 
skeptical of the Alliance and its new, more broadly defined mission. This 
skepticism is only enhanced by the fact that the Clinton Administration 
repeatedly assured Moscow that the new, enlarged NATO would remain a 
strictly defensive alliance. As a result, Russia has cut off all 
discussions with NATO save on the narrow issue of coordinating its 
participation in KFOR, the Kosovo peacekeeping force. Taking into account 
that Russia is about to begin several months of election campaigns 
(parliamentary elections are in December and presidential elections follow 
in July, 2000), a NATO-Russia dialogue is unlikely to resume any time soon.

The two sides also have widely divergent positions on the ABM Treaty. The 
U.S. seeks changes in the treaty to permit the development and eventual 
deployment of a national missile defense (NMD) system - seen as an 
essential protection against attacks by "rogue" states, unauthorized or 
accidental missile launches, or terrorist strikes - while Russia is firmly 
opposed to any changes in the treaty. Although Boris Yeltsin agreed to 
discuss the treaty during talks at the Cologne summit, he grows physically 
and politically weaker with each passing day. Few others among Russia's 
political elite are willing even to discuss the treaty - especially in 
advance of crucial elections, when no one dare risk being branded 
insufficiently attentive to Russian security interests. At the same time, 
however, the revision or abrogation of the treaty has become an important 
political issue in the U.S., which is entering its own presidential 
campaign. The likely result is an escalation of unproductive rhetoric in 
both countries.

These are just two of the key issues that must be tackled if today's shaky 
relations are to be maintained, let alone improved. There are many others 
- the START II arms reduction treaty, a potential START III treaty, and 
nuclear non-proliferation also come to mind. Unfortunately, however, these 
and other security issues are becoming only more difficult to address as 
the goodwill generated on both sides by the collapse of communism rapidly 
evaporates. In fact, the loss of that goodwill (especially on the Russian 
side) may well be the greatest single challenge to improving ties between 
Washington and Moscow - and overcoming it must therefore be among our 
highest priorities.

Tragically, it is much easier to lose goodwill than to win it back. 
Repairing our relations with Russia will take much more than a few summit 
meetings and cooperation on projects like the international space station 
(although both are constructive). Ultimately, it requires a fundamentally 
different view of our relationship - in both countries. Russians need to 
realize that despite its overzealous, messianic foreign policy, the United 
States is neither interested in nor capable of global hegemony (an 
aspiration frequently cited to explain NATO's evolution) and should change 
their rhetoric, and their behavior, accordingly. The thought that the 
Yugoslavia operation was a prelude to attacks on Russia is understandable 
from a certain point of view but still ridiculous. For its part, Americans 
have to recognize that Russia has always recovered from periods of weakness 
and chaos and will do so again. While it may seem easy to ignore Russia 
now, we will pay a heavy price down the road if we fail to take Russian 
interests and perspectives into account. The U.S. should not make 
unnecessary concessions to Russia where truly important interests are at 
stake, but should be prepared to compromise in other areas to make an 
investment in the relationship. The dividends of cooperative ties between 
America and Russia could be very important to U.S. foreign policy in the 
21st century.

The Nixon Center Bulletin is a periodic e-mail publication of The Nixon 
Center. The contents do not necessarily reflect the institutional position 
of The Nixon Center. All material is copyrighted and cannot be reprinted
without permission.

Users may unsubscribe by replying to this message with the word
"unsubscribe" as the subject line. All comments and suggestions should be 
mailed to


July 23, 1999)
Another Europe 
By Yulia Berezovskaya 

The Kosovo conflict really shook up United Europe. It will now have to
try to fathom the essence of integration anew and to reassess its place in
the structure of the world. In this respect, Europe does not experience a
deficit in political will, and therefore, Russia will have to adapt the
European vector of its foreign policy to the swiftly changing realities,
IZVESTIA writes in its analysis. 
United Europe has received a new powerful impetus following the Kosovo
campaign. Contrary to the widespread misunderstanding, it was precisely the
countries of the European Union, retaining practically flawless unity, that
insisted on the use of armed force in Yugoslavia. Today the EU is tackling
the formidable task of achieving stabilization in the entire Balkan region.
Two of the most obvious Kosovo lessons have already been defined: united
Europe must expand so as to avert conflicts, and it must create its own
military mechanism in order to extinguish the conflicts. The slogans of the
EU today are: solidarity, European defense and expansion. 
Following Poland, Hungary, Czechia, Slovenia, Cyprus and Estonia which
are already holding negotiations to acquire EU membership, Lithuania,
Latvia, Malta, Slovakia, Rumania and Bulgaria are also knocking on the door
of Big Europe. 
In case of a change in the regime of Belgrade, the list of possible EU
candidates may be enlarged with Yugoslavia, independent Montenegro, and
then it may become the turn of Macedonia, Albania, Moldova and even Ukraine. 
Russia's attitude towards the EU today is paradoxical. A Russian diplomat
has put it this way: "...we denounce the European countries as members of
NATO, but not as members of the EU." Declares another Russian diplomat:
"NATO's strategy divides us, while the EU's strategy brings us closer
together," even though the majority of EU members are also members of NATO. 
The Russian political elite are confused, and it is this that prevents
them from closely following the most important changes in Western Europe,
the expansion and deepening of integration. Russia's leaders are obviously
nervous, the author writes. Suffice it to recall Prime Minister Sergei
Stepashin's appeal in Salzburg "...not to push Russia to the sidelines of
general European processes." 
And even though in the foreseeable future, NATO will remain the
"foundation" of European security, the leading EU members have, for the
first time, expressed their readiness to reject this important component of
their national sovereignty, so that some time, they will have the
possibility to fight without the help of the Americans. The post of "super
Minister of foreign affairs and defense" of the EU will be occupied by the
well-known European political Javier Solana. Moscow has received this new
appointment with unconcealed irritation, and views the new initiatives, in
general, with great suspicion. 


Return to CDI's Home Page  I  Return to CDI's Library