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Johnson's Russia List


July 27, 1999   
This Date's Issues: 3409 3410  

Johnson's Russia List
27 July 1999

[Note from David Johnson:
1. Journal of Commerce: John Helmer, STEPASHIN ADDS UP RUSSIAN ARITHMETIC.
2. Itar-Tass: Russia to Upgrade Nuclear Forces, if US Deploys National Amb.
3. AP:
Enfeebled Russian Cinema on Display.
4. Itar-Tass: STEPASHIN'S Aim Is to Boost Activity, Meet Gore in Person.
5. Moscow Times EDITORIAL: Don't Turn Russia Into A Pay Toilet.
6. Newsday: Michael Slackman, Living Off Land / Gardens called key to 

7. Vlad Ivanenko: Re: 3407-12 Debt forgiveness.
8. CBS' interview with Russian Prime Minister Sergei Stepashin.
9. Jamestown Foundation Monitor: RIGHT CAUSE, NEW FORCE AND VOICE OF RUSSIA 



Date: Mon, 26 Jul 1999
From: (John Helmer)

By John Helmer
Journal of Commerce, to come

MOSCOW. There is a simple bit of commercial arithmetic that Russia's 
Prime Minister Sergei Stepashin will ask the Clinton Administration
this week to add up for him. 
Simply put, the sums lead to the question: Can Russia trade its
way out of insolvency, ever? 
Since the fourfold devaluation of the rouble in August 1998, the ratio
of Russia's foreign debts to its Gross National Product
has jumped from 28% (start of 1998) to 111% estimated by the end of this 
year; 116% projected for next year.
While devaluation has stimulated increased export volumes, as well as 
growth of domestic production (substituting for imports), the crash in
the dollar value of Russia's income, and hence of its ability to
service its dollar debts, is almost unprecedented internationally. Only the
Nigerian crash of 1985 matches the severity of the Russian collapse.
A few days ago, the Russian debt negotiator, Deputy Prime Minister Mikhail
Zadornov, admitted officially what has been obvious to everyone for months, if
not years. If Russia is to keep paying its debt bill -- ranging from
$13 billion to $19 billion annually to 2008 -- it will have nothing left
in the budget, no matter how high world oil and other commodity prices go,
and how hard the Kremlin taxes the exporters. "Any economic growth in the 
next 10 years is absolutely out of the question," Mr. Zadornov said.
His solution? It was a "fatal mistake", he said, for the Russian 
governments of President Boris Yeltsin's first term to agree to take over 
and repay Soviet debts. These totaled $66 billion at the beginning of
this year -- about 45% of Russia's external state debt. 
Mr. Zadornov, who was finance minister ahead of last year's crash, has
never been so bold before. He is admitting that the choice now
facing Mr. Stepashin, and whoever succeeds President Yeltsin, is brutal. 
Either Russia gets forgiveness of the Soviet debt, plus rescheduling of the 
debts run up since 1991, or else it will have no chance to revive its economy.
The Clinton Administration can see the political implications of this 
quite well. Russia will have parliamentary elections in December, and
presidential elections are scheduled for June of 2000. 
In the short term, Washington is almost certain to finance emergency 
shipments of wheat into the Moscow region, along the Volga river, and in other
population centers, where there are already serious grain shortages. By
election time in mid-December, Russian voters will have to be paid, at least 
in bread, or the Communist Party will annihilate the government's candidates.
Washington must also decide which candidate to back next year for president,
if Mr.Yeltsin goes, as he has promised, and as the constitution requires.
Vice President Al Gore, Under Secretary of State Strobe Talbott, and
Treasury Secretary Lawrence Summers all backed the removal in May of the
man who is still, three months later, the most popular candidate to
be president, ex-prime minister Yevgeny Primakov. His policy on debt
the precariousness of his political position. To preserve support from
Germany -- whose banks hold most of the Soviet debt -- Mr. Primakov swore
to keep up repayments, and not to ask for forgiveness. 
If he teams up with Moscow Mayor Yury Luzhkov, and they receive the
backing of the Communist Party, they will win the presidency, whoever
the opposing candidate may be, and however much money the international
community funnels into the campaign.
A Primakov-Luzhkov victory will almost certainly mean the abandonment of
Soviet debt.
Mr. Stepashin needs U.S. support if he is to survive the parliamentary
elections, and run for the presidency next year. Behind him stands Anatoly
Chubais, the former finance minister who dug Russia into the debt
hole deeper than any other official. Mr. Chubais has been Washington's
favorite, and he may be still. But Russian voters hate him, and he is 
As his stand-in, Mr.Stepashin can promise to maintain Russia's
debt repayments, but he cannot avoid reckoning with the "fatal
mistake", as Mr. Zadornov calls it.
As a professional policeman, not as an economist, the prime minister will
explain in the U.S. this week that short-term aid won't resolve the deeply 
destabilizing effect of another decade without growth. He will ask for 
Washington's political backing for a stable transition into the post-Yeltsin 
era. The arithmetic of stability, he will add, adds up to debt forgiveness.
The political choice for Washington, Mr. Stepashin will hint, is who
should administer that -- Mr. Primakov, a Communist alliance with Mr.
Luzhkov, or himself.


Russia to Upgrade Nuclear Forces, if US Deploys National Amb.

MOSCOW, July 27 (Itar-Tass) -- The signing by U.S. President Bill Clinton
of a bill on the development of a national anti- ballistic missile system
is a sign of double standards in the American diplomacy, according to a
high-ranking expert of the Russian defence ministry. 

The expert who spoke to Itar-Tass on condition of anonymity noted that the
U.S. president has repeatedly confirmed in unilateral statements and the
statements made jointly with the president of Russia since 1995 his
commitment to the AMB treaty between the two countries and stressed the
desire to raise its effectiveness and viability in the future. On the other
hand, the United States has been "working and taking practical steps which
do not simply contradict the spirit and aims of the ABM treaty but openly
lead to its destruction." 

The defence ministry expert drew attention to the fact that the national
ABM system which is being developed in the United States is a system
designed to protect the territory of the country against missile strikes.
The deployment of such systems is forbidden by the fundamental provision
laid down in Clause 2, Article 1 of the AMB Treaty, according to which the
signatories commit themselves not to deploy AMB systems protecting the
territory of the country and not to create the grounds for such defences.
The AMB treaty banned any such system, limited or unlimited. 

According to expert estimates, the system designed for deployment in the
United States is intended to provide surveillance and data support from
space, including with regard to the targeting of the combat equipment,
which is also in direct contravention to the ABM Treaty. 

The so-called modification of the AMB treaty, on which the United States
insists in an effort to make its practical activity in the field of the
anti-ballistic missile defences legal in character, means in actual fact
the emasculation of what the treaty was signed for and what it has duly
served to secure for more than 25 years, the Russian expert said. 

"In fact, the destruction of the AMB treaty will result in the situation in
which it will be difficult to speak in the first century of the third
millennium about the maintenance of strategic stability in the world. A
blow will be dealt to the entire systems of accords on arms control and the
entire system of international relations, the disarmament process will
begin to be curbed and an arms race whose scale is unpredictable will
begin, including in space," the Russian expert said. 

The experts said a new impulse will be given to the process of
proliferation of the weapons of mass destruction and vehicles for their
delivery. This will become an objective process independent of the wishes
of any individual politician or state. "And all this will take place
against the background of re- thinking of the events related to the
airstrikes against Iraq and Yugoslavia unsanctioned by the United Nations,
as well as NATO's new military-political ambitions. This is exactly the set
of the negative factors about the neutralisation of which the U.S. is now
speaking in an effort to substantiate the "stabilising role" of its ABM
system," the expert said. 

The Russian defence ministry representative expressed the hope that the
United States was also fully aware of the negative consequences of the
dismantling of the AMB treaty. 

"If, in defiance of the common sense, the United States continues its line
of deployment of a national AMB system, which we do not want, Russia will
be forced to engage in the perfecting of its strategic nuclear forces and
the taking of other asymmetric measures designed to raise its national
security in new military-strategic conditions," the expert declared. 

"Russia was and remains a country of high technologies. No one should have
any doubts on this count," the Russian expert said. 


Enfeebled Russian Cinema on Display 
By Angela Charlton
July 26, 1999

MOSCOW (AP) -- In Vladimir Khotinenko's latest film, a soft rumble
accompanies the sex scenes -- the sound of portable heaters brought in to
warm the unclad actors during wintertime shooting because the studio, one
of Russia's largest, couldn't pay its energy bills. 

``It was like a comedy. Those heaters sounded like an airplane,'' said
Khotinenko, among the cream of Russia's film industry and one of only two
Russian directors chosen to participate in this month's 21st Moscow
International Film Festival. 

Yet, money problems mean his film, ``Strastnoy Boulevard,'' may barely be
ready for its Tuesday premiere. 

Khotinenko's hardships, and those of the bedraggled festival, reflect the
sorry state of Russia's movie industry. Lack of cash is their most obvious
problem; they're also hobbled by a surge in piracy, foreign competition and
the collapse of the centralized Soviet distribution system. 

Soviet directors artfully survived Communist censorship, producing
poignant, sometimes piercing commentaries on love and war. Some critics
even credit daring, perestroika-era films -- including ``Repentance'' and
``Little Vera'' -- with helping bring down the Soviet Union, by laying bare
its faults and giving voice to viewers' fears and frustrations. 

But those filmmakers owed their survival to funding from the same
government that sought to restrict them. Generous state support for the
arts has now evaporated, and private sponsors are scarce in a country that
has been in economic decline throughout this decade. 

Many Russian adolescents have never been to a movie theater. That's partly
because they cannot afford the $4 ticket. The average salary in Russia is
estimated at $50 a month. 

But it is also because of an entrenched pirate industry, which sells videos
of Hollywood films for about $2 sometimes before they're even released in
U.S. theaters. ``Star Wars: The Phantom Menace'' is premiering in Russia at
the Moscow Film Festival -- but it's been available on video since early
this summer. 

Hollywood, which complains its studios lose about $300 million annually to
piracy in Russia, boycotted the Moscow Film Festival in the early 1990s in
protest. Yet piracy is even more devastating for Russian films, for whom
the domestic market is the key chance to make money. 

Russian filmmakers also cannot compete with the allure of foreign films.
After years of being denied access to many Western movies, Russian viewers
are now devouring them, especially those with expensive special effects. 

Editing Khotinenko's film last summer took longer than planned because the
sweltering cutting room had no air-conditioning and the machinery kept
overheating. He had to abandon plans for an original score because he
couldn't afford it. 

A few Russian directors are prospering, notably Nikita Mikhalkov, who won
an Oscar in 1994 for Best Foreign Film with ``Burnt by the Sun.'' 

Following that success, Mikhalkov rounded up $40 million -- a
heart-stopping sum in Russian film circles -- to make his latest movie,
``The Barber of Siberia.'' He even persuaded the government to pitch in
several million dollars. 

The film opened this spring in Russia to mixed reviews, and it's unclear
whether box office receipts at home will justify its huge cost. 

Mikhalkov may be hoping revenues outside Russia will take up the slack.
Russian critics complain the film aims too blatantly at Western audiences,
with British actors Julia Ormond and Richard Harris in starring roles and
70 percent of the dialogue in English. 

But Mikhalkov is a vocal and popular nationalist who shows no sign of
forgetting the Russian viewer. He is president of the Moscow Film Festival
-- and has hinted he could run for president of the country. At the
festival's opening, Prime Minister Sergei Stepashin joined Mikhalkov on
stage and playfully saluted him. 

Despite Mikhalkov's tutelage, the festival isn't the topnotch forum its
organizers wish it were. 

The last festival, in 1997, featured Robert de Niro and entries from major
foreign studios. This year, many stars snubbed the invitation, and festival
planning was hampered by funding delays from the Moscow government. 

Vitaly Wolf, a Russian culture critic, called this year's film entries
``second- and third-rate'' films that couldn't make it into other festivals. 

The industry's troubles have stirred up some unsettling questions. One
panel discussion at the film festival asked why moviemakers thrived
artistically under totalitarianism but failed when they won freedom. 

``We are not advanced enough in capitalism to achieve a balance between
commercial and artistic film,'' Wolf said. 


STEPASHIN'S Aim Is to Boost Activity, Meet Gore in Person.

WASHINGTON, July 27 (Itar-Tass) -- Visiting Prime Minister Sergei Stepashin
said the activisation of the work of the Russian_U.S. intergovernmental
commission for economic and technological cooperation and the establishment
of personal contacts with Vice-President Albert Gore were the main aims of
his current visit to the United States. 

"First of all, we will resuscitate, in the good sense of this word, the
Gore-Stepashin commission. Two sets of questions will be examined, the
economic part and questions relating to interaction between Russia and the
United States as a whole. And secondly, a personal contacts with the
Vice_president. I think it is very important in the political aspect," the
Russian Prime Minister told journalists upon arrival in the Washington
government residence. 

Stepashin said the agenda of his forthcoming meeting with Al Gore will
feature discussions of the situation in Kosovo, Russian-American investment
programmes, existing restrictions on trade relations between the United
States and Russia, START-2 ratification and a number of other questions. 

"I would not say that these questions are sensitive but elements of
incomplete understanding appear. They can be resolved much more easily when
people meet personally," Stepashin said. 

He expressed the hope that the presence in the Russian delegation of a
number of leaders of the Russian ministries and government departments will
help in the course of talks to eliminate some lack of understanding on both


Moscow Times
27 July 1999
EDITORIAL: Don't Turn Russia Into A Pay Toilet 

Yevgeny Adamov says Russia doesn't need International Monetary Fund loans or 
other Western financing - it can make money importing and storing the world's 
nuclear waste. 

That's right: The nuclear power minister is volunteering to turn Russia into 
the world's radioactive garbage dump. Why? Because there is a little bit of 
money in it, much of it for Adamov's ministry. 

Why don't other countries want this supposedly sexy business as an 
international pay toilet? Because, Adamov says, they lack Russia's vast 
technical expertise. Adamov's ministry, unlike the rest of the world, really 
knows what it's doing when it comes to handling nuclear waste. 

Not according to Alexander Nikitin, who co-wrote a report for the Norwegian 
environmental group Bellona arguing that the area around Murmansk is a time 
bomb of badly stored nuclear waste. Not according to Grigory Pasko, who has 
documented the navy's dumping of nuclear waste into the Sea of Japan. For 
that matter, not according to the Kremlin, which itself has documented such 
dumping in the world's oceans. 

In fact, there is not a single major environmentalist group that doesn't 
believe Moscow has a horrific record on nuclear issues. From the steppes of 
Kazakhstan, where babies are born deformed thanks to decades of nuclear 
testing, to the outskirts of St. Petersburg, where the Leningrad Nuclear 
Power Plant has suffered repeated mini-disasters, to the rusting and 
radioactive submarine docks of Murmansk, to the post-Chernobyl illnesses 
still spreading in Belarus and Ukraine, the Russian government has displayed 
criminal incompetence when it comes to nuclear power. 

Adamov's answer? Trust us. And if you don't, you're a spy and should be in 
jail, adds the Federal Security Service. 

Not exactly a convincing argument. Particularly when what Adamov is calling 
for would, in our opinion, be the height of colonial humiliation. The rest of 
the world will have nuclear power, free of worries about waste; Russia will 
have a big radioactive hole in the ground. 

There is also an American corporation pushing this scenario and it happens to 
be headed by a former CIA director. One might think the U.S. White House 
would try to prevent such an arrangement - if only to avoid the obvious 
Russian demagoguery about how the CIA is poisoning Russia. 

Then again, this White House's top treasury official once called for moving 
polluting industries to the Third World, on grounds that the lives of people 
in those countries are already miserable. So perhaps this awful idea will end 
up blessed by awful officials on both sides of the Atlantic. 


25 July 1999
[for personal use only]
Living Off Land / Gardens called key to survival

Balabanova, Russia - At the very first hint of spring, Nina
Fomichenko trudged down four flights of stairs and made her way across a
courtyard of dirt and weeds to begin tending a small vegetable garden
ringed by a makeshift fence of sticks and twigs.
For the disabled, 68-year-old pensioner, working on her hands and
knees in the dirt and a blazing hot sun is anything but a hobby. It's a
matter of survival, providing her main source of food.
"I don't know what would happen if I didn't have my garden,"
Fomichenko said as she plucked green cucumbers from the vine one recent
In October, Fomichenko stood in the mud outside her dilapidated
apartment building and sobbed. As her shoulders heaved, she told a
reporter she was terrified of starving to death, alone in her two-room,
unheated apartment. She had little money, and food prices were out of
her reach.
But Fomichenko survived - primarily because of her garden. And now,
while the summer sun is still scorching Russia with a record-breaking
heat wave, she is anxiously preparing for the next winter, pickling,
salting, canning and praying for as long a growing season as possible.
"Can you just imagine? I do this to have my own," she said as she
pulled a carrot from the ground, wiped it off and tucked it beneath her
If the quality of life in Russia is starting to feel better, it is
primarily because the people have grown accustomed to their
circumstance, honing personal strategies of survival rather than waiting
for the government to remedy society's underlying social and economic
troubles. This is most evident when it comes to the production of food.
Russia is barely producing any. Instead, its people are feeding
themselves. Russians have long grown vegetables to supplement their
diets. But not since World War II, when Russia was invaded by the
Germans and its economy geared entirely toward the war effort, have the
people here had to rely so exclusively on their own gardens, cows and
chickens to feed themselves. Even in relatively well-to-do Moscow, many
families rush to the countryside to tend their gardens as much out of
necessity as desire.
"We have a situation now where this seems to be the only way to
avoid hunger," said Marina Krassilnikova, an economist and specialist in
Russian living standards. "Food produced on your land is the last
opportunity to have something to eat."
Last winter, officials in Russia and throughout the West predicted
that this nation's economic crisis, coupled with a collapsed
agricultural system, would lead to widespread famine. The wheat harvest
was at an all-time low, imports were far too expensive and the winter is
always long and brutal. This year, the situation in some ways appears to
be even more perilous. While the wheat crop is expected to be slightly
better, it will fall far short of actual need. And after last year's
poor crop, wheat reserves are down from 30 million tons to just 3
million tons.
But like last winter, it's unlikely that famine will strike.
"There is no food shortage," said Dimitri Vermel, professor of the
All-Russian Scientific Research Institute of the Economy of Agriculture.
"From this point of view, we are similar to other civilized countries."
And the main reason, experts agree, is because the people are
producing record levels of food themselves - up to 80 percent of fruits
and vegetables, 56.6 percent of meat, 48.1 percent of milk, 91 percent
of potatoes.
Galina Puzikova is a typical example. She lives with her husband, a
retired army officer, on the outskirts of this city. Her husband has not
found any work since leaving his military base in Siberia more than a
year ago, so they invested their meager savings in a cow. The animal
lives in the front yard of their wooden house, behind a rickety wooden
fence, and provides them with milk, which they consume and sell to
neighbors. This one cow is the main source of dairy products for many in
the area, including Nina Tepleykh and her husband, Boris.
"It is what we have," Boris said as he poured himself a glass of the
raw milk.
Balabanova, once a vibrant industrial city, is today a rundown
low-income housing project. About 30,000 people live in concrete
apartment blocks that look as if they were built in a hurry, huge slabs
pieced together, one identical to the next. The hallways are urine
stained, with no working lights and plaster crumbling from the walls.
But all around Balabanova, as well as in the city center and
throughout the surrounding woods, there are gardens, some more elaborate
than others, but each one containing some of the essentials of survival:
Potatoes, beets, cabbage and cucumbers. Many are just plots of land, 66
by 99 feet, with rows of vegetables. Others are slightly larger, located
in summer communities, where individuals built their own small, unheated
homes, with well water, outhouses and metal mansard roofs.
The story of Nina and Boris Tepleykh is typical not only of
Balabanova but also of Russia. Like Fomichenko, they panicked as last
winter approached, and like their neighbor, they survived on the foods
from their own garden.
"I don't do this for recreation," said pensioner Nina Tepleykh, who
spends the spring and summer working full time in their garden. "Without
this, we can't survive."
Even before the snow was off the ground in Balabanova, the Tepleykhs
had planted seeds on their bedroom window sill - tomatoes, peppers and
eggplants. Nina is a retired laboratory worker, and her husband is a
retired driver. Together they earn about $45 a month, enough to cover
their housing, electric and phone bills and to give their children some
help. But that leaves almost nothing for food.
When he was still working, Boris had begged his employer to give him
a small piece of land to grow vegetables and build a small house, called
a dacha. For decades, even though land ownership is not permitted,
employers have allocated small plots to their workers. The best
connected, particularly government officials, received the choicest
Boris only received his patch of land after his retirement 10 years
go. It is about 10 miles from his home, a long, hot drive in his 1976
Moskvich car, located just at the edge of the woods. There, he and his
wife built a tiny A-frame house, leaving the rest of the land for their
garden. The minute the weather started to break, they rushed out, with
the seedlings in the back of the car, and began to plant.
"Not every man can cope with the amount of work my wife does," says
Boris, who can barely help because of arthritis in his leg.
"We have to do this," she said as she inspected the peas growing
beside the house. "It is getting worse. Prices go up every day."
But there is also an intangible benefit to all this work, something
the people rarely talk about but that is evident in the flowers that
grow beside the fruit and vegetables, the chamomile that spreads beyond
the gates of the gardens and mixes a sweet scent with the dirt and
weeds. In the midst of their dreary, difficult lives, these gardens
provide a chance to take control, to get out of tiny, stuffy apartments
and to experience the creative fulfillment from watching something grow.
"It's true", Nina said, gently rubbing a tall purple flower with her
hand. "I have 50 different kinds of flowers. It gives me pleasure."
Nina's garden is robust, with everything from pumpkins to garlic
and beet root. But the unusually hot weather this year has only made it
more difficult, threatening to dry up the well that she uses not only to
water the plants but also to cook and drink. Weather officials say this
was the longest sustained heat wave since the meteorological service
here began collecting data more than 110 years ago.
Nina Fomichenko is facing the same problem with the weather. She has
been working her small plot, about 100 yards from her apartment, for 20
years, ever since a brick factory closed down and stopped dredging mud
from the area. Her garlic is already turning yellow, from the heat, and
her cucumbers are small. She fears that a nearby pond, from which she
drags buckets of water, will soon dry up. She would then have to lug
buckets of water from her apartment.
Nothing here seems to come easy.
"It is impossible to bear this life," Nina Tepleykh said, looking at
her hands, callused and stained from the garden.


Date: Mon, 26 Jul 1999 
From: Vlad Ivanenko <> 
Subject: Re: 3407-12 Debt forgiveness

Service of the state debt is one of the major items of public outlays in
virtually all countries. Modern Russia is no exception. However, due to
the lack of credit, the country cannot easily roll over maturing debts and
needs to pass through tough rescheduling negotiations.

The proposition has recently surfaced that Russia has to ask for debt
forgiveness like Poland did. It is argued that the country is too weak
economically and cannot start afresh with reforms because of the burden of
Soviet-era debts. However, this proposition is impractical by two reasons.

First, unlike Poland, Russia is considered by its creditors as a partially
defeated enemy. It is not politically expedient in the West to forgive
Russian debts while the Western countries suffered economic losses during
the Cold War. Therefore, any hope of getting by without paying is wishful
thinking on the part of Russian policy-makers similar to one that Russia
might eventually join NATO.

Second, Russia cannot hide itself behind the facade of an inherently weak
and poor country unless it really disintegrates. Neither it is viewed as
such abroad. (German Chancellor mentioned in Cologne last June that it is
inappropriate for a great country not to pay debts.) Zadornov may play a
good negotiator's role scaring Western creditors by the image of Russia
stagnating under the burden of sovereign debts but there is no rationale
to believe that it is true. 

The debate on debt forgiveness in Russia is reminiscent of the similar
debate in the US after the Independence War. The argument was that the
government of a new nation might annul sovereign debt once without
wrecking its credit. Fortunately, the motion on sovereign default was
defeated and as a result, next governments were tied in their public
finance policy. It is advisable for Russian government to establish
long-term credit now and to avoid asking about debt forgiveness.
Unfortunately, the Federal government is too weak politically and may be
tempted to ask forgiveness formally (like it did last year requesting
unnecessary food aid).

Having established the fact that debts are to be paid the next question is
how to manage debt payment. The Federal government does not have
sufficient hard currency revenue. Fortunately, there are alternatives to
payment in cash that are widely used in Russian economy, namely barter
deals and output-sharing agreements. It is not a secret that much of
Russian tax revenue is collected in kind with hospitals getting linens and
cities - subways. This practice can be eventually extended to holders of
Russian debt, which know as well that it is feasible. In 1920-s France was
happy to get German coal and locomotives in payment of reparations. 
Several Eastern European countries paid to the USSR in kind in the late
1940-s. Now it is Russian turn to make good out of its promises. 

There are positive externalities in such approach. Through payment in kind
Russia may get a convenient avenue of breaking through trade barriers that
the West, especially the Western Europe, has imposed against Russian
products. In this way a kind of economic symbiosis between Russia and
Europe may eventually emerge. If negotiations on payment in kind start,
Russians can learn in the process what goods they offer have comparative
advantage on the Western markets and advise Russian producers to fill
detected niches. It is instructive to remember that through the payment of
Soviet reparations Finland developed successful shipbuilding industry that
did not exist there before. Russia can at least attempt to follow the same
path because it might benefit economically from seemingly bad situation
with sovereign debt.

Vlad Ivanenko, Ph.D. candidate in economics,
University of Western Ontario


Date: Mon, 26 Jul 1999 
From: Beth Knobel <> 
Subject: Stepashin Interview

Dear David:
Here are some excerpts from CBS' interview with Russian Prime Minister
Sergei Stepashin, made on the eve of his departure for the US. I've tried
to pick the questions most of interest to JRL readers. 
Cheers, Beth

CBS NEWS CORRESPONDENT DAVID HAWKINS: Thank you very much for taking the
time out of your schedule to 
meet with us. I appreciate it very much.

RUSSIAN PRIME MINISTER SERGEI STEPAHSIN: I think that in view of my trip to
the States, this interview will be 
interesting not only for your audience but for me as well, because we have
many mutual interests.

CBS: This is your first trip to the United States [as Prime Minister]. What
do you hope to achieve on this visit?

STEPASHIN: First of all, the very fact that the Russian Prime Minister is
visiting the U.S. is very important, as I mentioned 
earlier, keeping in mind the difficulties we encountered during the
Yugoslavia crisis.

Second, it is very important that I personally meet [US Vice President] Al
Gore. I have had several phone conversations 
with him, which were very constructive for both sides. I think that in the
world of top-level politics, personal relations and 
mutual understanding between partners is extremely important. This way we
can solve the most difficult questions. . .

Third, there is a practical aspect of my trip - it is the economic package:
concerning space projects, steel exportation 
projects (as you know we have made huge progress concerning the steel export
issue). We are deeply concerned that 
Russia is not being considered a country with free market economy. This
conception places many restrictions on us. 
Definitely, I would like to meet during my visit to the United States with
the largest potential American investors, and 
explain to them what is really going on in the country, and what guarantees
the Russian government is willing to provide 
American investors. 

As part of my trip I will also touch on the military issues that our
presidents have been and will be discussing, including 
such military issues as START-II ratification, and the American anti-missile

CBS: You mentioned the war in Yugoslavia. The war in Yugoslavia heightened
tensions between the US and Russia, 
between Russia and the West. How bad do you believe the damage was and what
can be done to fix it?

STEPAHSIN: Relations had definitely suffered a blow during the war. I would
say there was a period when we had a very 
difficult time in our relations, though I am very glad that a dialog ever
stopped for a second at any level--not at the level of 
presidents, nor between the prime minister and vice president, nor between
our foreign ministers, that is between our 
foreign minister and your secretary of state, nor between our militaries. I
am glad that the foundation we have built stood 
up to the blow--the fundament of Russian-American relations-- and though the
situation was full of conflicts, we managed 
together--let me stress together--to out of a dead-end situation together.
That is very important.

As for lessening the tension between the United States and Russia, I think
that we have made several steps. The first one 
was in Cologne during the [G-8] summit, which is very important, when we had
a chance to clarify our position and were 
able to reach an agreement that such international decisions should be
coordinated very carefully on all levels - in the UN, 
OSCE - not only in by the alliance. This was the first step.

Second step is the trip to be made by the Prime Minister under the framework
of the Gore-Stepashin commission.
Third, and this is very important, is to find ways to improve cooperation
between the militaries of our countries. We must 
not put this issue off till the year 2000 or 2001. The damage done by the
war, in terms of the Russia-NATO partnership, 
was more significant than we expected and wished it to be. In this aspect
the role both countries play in these relations 
and military contact is very important.

CBS: I wanted to ask just one more question about Yugoslavia--then we can
move on to other things. Many in the west 
saw the rush of Russian troops to Pristina as a provocation or a
double-cross, and perhaps a troubling sign of a new 
antagonism between the United States and Russia. And the flight of bombers
during Russian exercises in the North [near 
Iceland] seems to exacerbate that to a certain degree. Is there any threat
of a chilling of relations of this kind? Are we 
going to go back to a time when our ships shadowed your trips and visa
versa, and there's a tit-for-tat response, a cat and 
mouse game between the two countries?

STEPASHIN: Why do you think it was a provocation?

CBS: I'm not saying that I necessarily do consider it a provocation. But
there was much made of it. It goes back to the 
question I asked about exaggeration. It raised alarms in Washington and
many words were written about this in the 
papers back in the United States, and so obviously, it is of concern to
them. And so I am asking you if you see this as a 
sign that there will be this kind of antagonistic relationship in the future?

STEPASHIN: I think that the problem of the battalion in Pristina is a common
problem for both the alliance [NATO] and 
Russia. You know that in Helsinki and in the UN Security Council, we have
outlined a plan - approved by both presidents - 
on synchronising military activities in Yugoslavia: troops deployment,
sectors, etc. When the alliance [NATO] unilaterally 
decided to move in to Kosovo, Russia appeared to be put out of the process--
Russia, the country which, according to 
many presidents including Clinton, had played a significant part in solving
the Kosovo crisis.

I would call it not a provocation or demonstration of force, I would call it
falling out of step. Fortunately, this was quickly 
solved by the military after both presidents took part in the process. Prior
to that a very open and serious dialog took place 
between Minister [of Foreign Affairs Igor] Ivanov and Madeleine Albright. I
think this falling out of step was a good lesson 
for both sides, which stresses that if we are partners we must act together,
that there should be no competition in 
peacekeeping issues. As for Kosovo, you can take my word, there will be
enough work for more than one American and 
Russian battalion.

As for bombers - ours were flying, yours were bombing. This is a very
serious question and I can return the question to 
you, too.

Once again, I would like to underline that we should not go back, we must
move forward -- forward in trust, in cooperation...

CBS: the presidential elections are less than a year away. Do you plan to
run for president next summer?

STEPASHIN: Every citizen in Russia will participate in the elections as a
potential voter. But as far as the elections are 
concerned, I'm more concerned about the elections to the state Duma [the
lower house of parliament, scheduled or 
December 1999]. This is a very important stage of the parliament and the
relationship between all the branches of power. I 
would say it is a very important launching grounds, and if you would it's a
trampoline to the next president elections. I 
have agreed with Boris Nikolayevich [Yeltsin], and he instructed me to have
the government actively start working on the 
campaign to the Duma. 

I think that the role of the prime minister, not only regarding the
elections to the State Duma, 
should have the following concrete results: there should be concrete
results-- social, economic, in the area of stabilization 
of the situation, in those concrete measures and programs which have been
prepared by the government. If--and I am 
sure it will be like that, I have no grounds to doubt it--by the end of the
year, we will succeed in keeping up the tempo of 
the programs which have been put in place by my government. Then, we can
start talking about serious perspectives. 

It is very important that next year--and at the end of this year when there
will be elections to the State Duma--that they take 
place alongside good economic results, with the improvement of peoples'
living conditions, with salaries being paid on 
time, when the ruble is stable, when prices aren't growing, and when there
is no fear of inflation or other bad expectations. 
Then Russia will choose both with heart and mind and reason and pick worthy
people to serve in the Duma and 
undoubtedly as president. And for me, as the chairman of the government,
under these circumstances, I see this task as 
the most important. And then, I think closer to winter, we'll see ---time
will tell.

CBS: You mention the economy. What's your plan to fix the ailing Russian

STEPASHIN: First of all, it is stabilizing. That's not only our
estimation, which could seem too rosy, but also of all foreign 
specialists. That's the opinion of experts from the International Monetary
Fund, of the World Bank, of the London and 
Paris Clubs [of Russia's creditors]. Otherwise, we would not have a chance
to resolve the problem of our debt to the IMF 
and World Bank. Actually, this problem is almost resolved. I will see Mr.
Wolfsenson on the 27th, just one day prior to the 
meeting of the IMF's board of directors in Washington. 

We are getting out of the serious crisis situation which started in 
August of last year much quicker than anyone predicted, including ourselves.
First of all, the ruble has been stabilized. 
Second, during the past few years we have done a serious reconstruction of
the banking sector, which will continue for a 
few years into the future and be very strict. Third, we are succeeding the
problems of revenues. Fourth, we have achieved 
serious results in cutting down the tempo of inflation. It is now the lowest
it's been in the whole post-Soviet period. Fifth, 
we have stabilized the ruble and it is not being maintained artificially, as
it had been for a long time and as it had been prior 
to the default last year. The economy is alive. For the first time during
for the last few years, we have the first indications 
of economic industrial growth--about one and half or two percent, by the end
of the year we expect by two and half 
percent, and next year -- of course this is the most optimistic forecast --
up to three percent growth in Gross Output.

As a matter of fact, domestic industrial production is growing, which is
extremely important for filling the local market with 
domestic goods, and the possibilities for good competition in Western
markets, and of course the most important is to 
create jobs for people. People want to work, they can work, and they are
getting their salaries. Maybe in the United States 
people take this for granted, and it should be for us as well, but today it
is the most important problem that we are trying to 
solve. We don't have any interruptions in the payments of salaries from the
federal budget--pensions, subsidies. By the 
end of the year, the government will pay off all its debts to our
pensioners, which have piled up during the last five years. 
We regularly and timely pay off and will pay off Russia's debts. As far as
the Soviet Union's debts, it's a matter for 
separate discussion. 

These are a few signs which make it possible for me to say that Russia is
coming out -- I would say, 
is guaranteed to come out -- of its crisis in which it happened to be. And
most importantly, most principally, that in this, we 
didn't turn backwards. We avoided the temptation to return to an
administrative, state-planned or however you call it 
economy--that is, to the stagnation of our society. We are still moving
forward--forward toward a market economy, but to a 
civilized market, an understandable market, an adequate market in relations,
including in foreign trade. And we making our 
economy more and more transparent. That is very important for our western

CBS: Let me change the subject a little bit. The Kremlin insists that
President Yeltsin is in good health, although when he 
appears on television, that appears to almost everyone not to be so. You
meet with the president. Can you tell us 
anything about the status of his health?

STEPASHIN: A person who is 69 years old, who has for many years been active
in politics, a person who has 
experienced so much stress--it would be naive to say that he is ready to go
into the ring with [boxer Mike] Tyson, for 
example, although I would not recommend to anyone to come up against Tyson
in the ring. I'd feel sorry for their ears. But 
the President is capable of working, he is firmly controlling the situation
in the country, he is capable of making the most 
complicated decisions, as we could see during the Kosovo and Yugoslav
crisis. I speak with Boris Nikolayevich [Yeltsin] 
almost every day on the phone. Tomorrow at 8 am, and I want to stress 8
o'clock in the morning, I will meet with him to 
report to him about my trip to Ukraine and our plans that I have already
described to you for my trip to the United States. 

This is firstly, and secondly, for American journalists-- it was more
complicated between you and Clinton -- but 
nevertheless, I recall that many great American presidents had problems with
their health. But Americans always judged 
their presidents by what they did for the country through their ability to
govern. That's first of all, and second, you have to 
respect the opinion of the voters who elected that president. It's not very
tactful to criticize your president and thus become 
the president or head of state yourself. That will not result in anything
good. In that respect, I would like us to be in 
solidarity in this matter.

CBS: When you were appointed, many said it was mainly due to your loyalty to
the president, particularly in times of crisis. 
Do you think that's why President Yeltsin chose you for the job? Do you
think Russia is headed for times of trouble?

STEPASHIN: As far as hard or not-so-hard times are concerned, I've already
answered. These are hard times, but not 
dramatically hard. These are interesting times. Each year is interesting
in its own way--you could write a book about 
every single year. As far as loyalty is concerned, in principle, I believe
that if you join a team--if you got to work with 
someone*you shouldn't betray him, as a matter of humanity, independent of
the post you hold. This is my credo in life. 

... And as for the second part of your question--why the President offered
me the job of prime 
minister-- I feel a little bit hurt, I'll tell you frankly that the country
would have a very bad future if the president appointed 
his prime ministers based only on loyalty. A person can be loyal, but if
you are a loyal fool, it's very dangerous for 
someone holding a big job, take my word for it.

CBS: Thank you, Mr. Prime Minister, for finding the time to talk with us. -
I wish you a pleasant journey.

STEPASHIN: Thank you.


Jamestown Foundation Monitor
26 July 1999

center-right electoral blocs planning to participate in December's
parliamentary election agreed on July 23 to form a coalition and put forward
a single slate of candidates. The three are Right Cause, which was
represented at the meeting by United Energy Systems chief Anatoly Chubais;
New Force, led by former Prime Minister Sergei Kirienko; and Voice of
Russia, headed by Samara Governor Konstantin Titov (Russian agencies, July
23). In a July 24 interview, Chubais said that the "programmatic goals" of
the three blocs are virtually identical. He also said that it was possible
that the new coalition will back Kirienko's attempt to unseat Yuri Luzhkov
as Moscow mayor. Earlier this year, Luzhkov moved up the date of the mayoral
vote to coincide with the federal legislative elections.

The new coalition marks a significant step toward uniting the fractious
center-right of Russia's political spectrum. On the other hand, at the
meeting, the fourth major center-right group, Russia is Our Home (headed by
former Prime Minister Viktor Chernomyrdin), was conspicuous by its absence.
According to the Moscow rumor mill, Chernomyrdin is said to be unable to
envision himself on the same ticket with such figures as Chubais, former
Premier Yegor Gaidar and former Deputy Prime Minister Boris Nemtsov, all of
whom have been critical of Chernomyrdin, or of Kirienko, who replaced
Chernomyrdin as premier in 1998. In addition, even the younger, more liberal
leading member of Russia is Our Home, Vladimir Ryzhkov, has evinced
skepticism about rushing into an alliance with Chubais, Gaidar and Nemtsov,
all of whom served in high posts under President Boris Yeltsin and are in
some measure damaged goods in the eyes of the electorate. On the other hand,
Chubais said on July 24 that he was sure that Russia is Our Home would not
contest the December parliamentary election alone, suggesting that the
bloc's failure to join the coalition would be "a tragedy for Russia" and
that to join would demonstrate its "maturity" (Ekho Moskvy radio, July 24).

Meanwhile, attempts to form a rival center-left coalition have reportedly
hit snags. According to a report today, problems have cropped up in
negotiations between Fatherland, the movement headed by Moscow Mayor Yuri
Luzhkov, and All Russia, the bloc of regional leaders whose de facto leader
is Tatarstan President Mintimer Shaimiev. The Tatarstan leader again
emphasized on July 24 that he saw Fatherland as a potential ally, but added:
"This movement was created earlier and it has incorporated different parties
and movements--differing in their goals, programs and, shall I say,
ambitions of their leaders," he said. Speaking in more general terms about
the impending electoral campaign, Shaimiev said that the ambitions of some
leaders was hampering integration into a bloc. Shaimiev would reportedly
support a merger if the resulting coalition were led by former Prime
Minister Yevgeny Primakov, meaning that Shaimiev and Luzhkov would be equals
in the coalition's hierarchy (Vremya MN, July 26). Primakov again called for
uniting "healthy forces of the center," naming Fatherland, All Russia and
the Agrarian Party (TV Center, July 24). He has not, however, said what his
own political role, if any, might be.


RFE/RL NEWSLINE Vol. 3, No. 143, Part I, 26 July 1999

"Russia May Be Without a Navy by 2010, " Izvestiya" on 24
July detailed those conditions that it believes may lead to
the force's demise over the next decade or so. The newspaper
bemoaned wages in the 180,000-strong force, noting that
assistant officers receive on average 1,300 rubles ($54) a
month, captains 2,600 rubles, and admirals 3,500 rubles. It
pointed out that officers and warrant officers are only now
receiving ration allowances for 1997-1998. And it noted that
on average, every fourth officer lacks accommodation or has
housing in need of improvement. JC


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