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Johnson's Russia List


July 31, 1999   
This Date's Issues: 3416 •   • 

Johnson's Russia List
31 July 1999

[Note from David Johnson:
1. AP: Study: 1/3 of Russians in Poverty.
2. AP: U.N.: Former Soviets Hardest Hit.
3. Komsomolskaya Pravda: Gleb Pavlovsky: Boris Yeltsin Will Not Wait 
Till 2000.

4. St. Petersburg Times: Fyodor Gavrilov, Corruption Is The Equalizer In 
Russia Today.

5. Moscow Times letter: Tom Cochran, Nuclear Fuel Storage: A Net Plus for 
Russia; Michele Berdy, Russian Cinema Is Reviving.

6. Interfax: Poll Shows Stepashin 'Steadily Winning Support' 
7. Carnegie Endowment for International Peace: U.S.-Russian Relations and 
the Stepashin Visit. (Talks by Tom Graham, Michael McFaul, and Anders

8. Rossiyskaya Gazeta: Vladimir Lapskiy, Russia-United States: Thaw After 
Cold Spell.

9. RFE/RL: Floriana Fossato, Media Wars Intensify Before Upcoming

11. Moskovskiy Komsomolets: HIV Cases Up Twelvefold in Moscow and 


Study: 1/3 of Russians in Poverty
July 20, 1999

MOSCOW (AP) - More than one in three Russians is living below the official 
poverty line, according to government figures released Friday, the latest 
sign of the wreckage left by last year's economic meltdown.

About 35 percent of the population, or 51.7 million people, received monthly 
salaries below Russia's minimum subsistence level of 872 rubles ($36) during 
the first half of the year, the Russian Statistics Agency said.

That figure was up from 22 percent living in poverty during the same period 
last year, when the minimum monthly subsistence level averaged out to about 
429 rubles ($71 at the time).

Some economists say the figure overstates the poverty problem somewhat 
because many Russians make money in the economy's informal sector and don't 
declare their income to the government.

Still, the figures reflect the dramatic decline in living standards that has 
been taking place throughout this decade.

The financial crash last August resulted in widespread job layoffs and pay 
cuts, sent inflation soaring, and pushed millions more into poverty.

In more fallout from the crisis, imports crashed by 46 percent in the first 
six months of 1999, while exports fell by 11 percent, the agency said.

After the ruble devaluation, many imports became prohibitively expensive for 
Russians. The agency didn't give exact foreign-trade volumes, but monthly 
figures show exports totaled $34.4 billion against imports of $19.6 billion, 
for a trade surplus at around $14.8 billion for the first half of the year. 
Russia's trade surplus was just $900 million from January to June of 1998.


U.N.: Former Soviets Hardest Hit 
July 29, 1999

UNITED NATIONS (AP) -- Men in the former Soviet block have been hit hardest
by the transition to market economies, with rising suicide rates and
declining life expectancies, a U.N. report said Thursday. 

``A human crisis of monumental proportions is emerging in the former Soviet
Union,'' said ``Transition 1999,'' a report by the U.N. Development Program. 

The report found that the biggest single cost of the so-called transition
years from state-run to market economies has been the loss of lives among
young and middle-aged men. 

This has been reflected in an abnormally low ratio of men to women in the
total population. When compared to ``normal'' male-to-female ratios, for
example, Russia comes up 5.9 million men short, the report said. 

``There is an urgent need to focus on the social fallout and inequalities
that the transition has brought if we want to see the countries in
transition turn into a success in the 21st century,'' Anton Kruiderink,
director of UNDP's regional bureau for Europe and the former Soviet bloc
known as the Commonwealth of Independent States, said in a forward to the


Russia Today press summaries
Komsomolskaya Pravda
30 July 199
Glen Pavlovsky: Boris Yeltsin Will Not Wait Till 2000
Komsomolskaya Pravda interviewed Gleb Pavlovsky of the Efficient Politics
Foundation, the supposed "brain center" of Kremlin administration policy. 

Commenting on the political ambitions of Moscow Mayor Yury Luzhkov: "The
strategists from Tverskaya (the street where the Mayor's office is located)
believe that they can ride into the Kremlin on the neck of the protesting
crowd. This is a destructive election strategy. Besides, it is not a
winning strategy because voters are protest against the weakness of the
state and not against the state itself.” 

On ‘The Family’: "‘The family’ (Yeltsin's closest allies, which include his
family members and a number of oligarchs) is nothing more than propaganda.
Previously we had the Jewish and Masonic conspiracies and the hydra of

On Yeltsin: "Yeltsin will leave very soon, and all Russian Bonaparts,
Brezhnevs and Pinochets are already in a hurry to seize his legacy. In this
situation, when voters are all stoned with anti-Yeltsin propaganda, public
leaders and non-political public organizations should say their words in
defense of state power. The worst outcome would be if Russia goes into next
century with a weak, indistinct and half-recognized power. Then it may turn
into another Yugoslavia.” 


St. Petersburg Times
July 30, 1999 
Corruption Is The Equalizer In Russia Today 
By Fyodor Gavrilov 

MOSCOW will host a strange event in early August. On the eve of the Russian
election marathon, our country's PR firms have announced that they will
gather in the capital to sign a "Charter of Professional Ethics for
Political Consultants." In the draft version of the charter, the
imagemakers agree "to conduct [their] work in accordance with ... the norms
of a democratic society, and to combat the use of electoral technologies
... that promote the interests of corrupt bureaucrats and organized crime."
There is a lot of talk these days about the potential for "clean" and
"dirty" elections in our country. In reality, though, the people most
worried about clean elections are those who have - and have always had -
the power to make them dirty. 

Like rival gangs of schoolchildren planning vicious pranks, the imagemakers
reassure each other that they have nothing up their sleeves. But the oath
of friendship is forgotten minutes later, and the rotten eggs begin to fly.
Whatever pacts of nonaggression Moscow's spin doctors sign, it's no mystery
to anyone that the coming elections will be dirty. The early days of the
election campaign have been marked by a series of scandals which show that
the muckrakers and agents provocateurs are already hard at work. In the
last two weeks we've been treated to an all-out war between the media
empires of Boris Berezovsky (ORT) and Vladimir Gusinsky (NTV); to the FSB's
quite intentional investigation of a company headed by Elena Baturina, the
wife of Yury Luzhkov; and to billboards in Moscow that mock Roman
Abramovich, a businessman rumored to be close to the so-called Family. 

The most obviously underhanded campaign tricks will likely fade away all by
themselves - not because their inventors will suddenly become proponents of
the Golden Rule, but because they are capable of harming the reputation of
even the most gung-ho politician. I have in mind the methods widely
practiced during last year's elections to the St. Petersburg Legislative
Assembly: the payoff of voters (thousands of Petersburgers were offered up
to 150 rubles - i.e., seven dollars - if they promised in writing to vote
for the "correct" candidate), or the registering of ringer candidates with
the same names as well-known politicians. 

But the most dangerous problem - corruption in the mass media - won't go
away so easily. Media wars like the one between Gusinsky and Berezovsky are
being fought everywhere in Russia these days, albeit on a smaller scale. At
the height of last year's Legislative Assembly campaign, one Petersburg
newspaper published a disgusting "expose" on a certain democratic
candidate. How did he react? He called the newspaper's editor, who offered
to publish the candidate's repudiation of the charges in the next issue.
The editor quoted a price that was more than reasonable - one hundred
dollars. The candidate eagerly agreed to the offer. 

It's clear, then, no peace treaty or code of professional ethics can be
effective in a society still in the early stages of its formation. The only
thing that works in today's Russia is simple corruption, which, like a
Smith & Wesson revolver in the Wild West, equalizes everyone who has a
spare hundred dollars in his pocket. 

Fyodor Gavrilov is the editor of Kariera-Kapital. 


Moscow Times
July 31, 1999 
MAILBOX: Nuclear Fuel Storage: A Net Plus for Russia 
and Russian Cinema Is Reviving 

In response to "Minatom Sees Cash in Taking Spent Fuel," July 27. 

As an adviser to and supporter of the proposed Non-Proliferation Trust 
project, I am concerned that your recent story contained so many errors and 
omissions that the main purposes of the project f improving nuclear security 
and funding environmental cleanups f were completely lost. 

The Non-Proliferation Trust Inc. project does not propose "dumping the 
world's spent nuclear fuel in Russia." It instead proposes to raise 
substantial funds for a variety of environmental and other worthy projects by 
bringing a limited amount of spent nuclear fuel into Russia, storing it in a 
state-of-the-art facility similar to one currently in use in Western Europe 
and guaranteeing that the spent fuel is never reprocessed. 

It is not surprising that the Russian environmental community opposes the 
amendment to the Russian environmental law that is currently being sponsored 
by Minatom and its supporters in the Duma. These critics should offer and 
support an alternative amendment that would limit the amount of spent fuel 
that could be imported and carefully regulate how the revenues are to be 
used. Such an alternative amendment would have my support and that of other 
backers of the NPT Inc. project. 

Under the NPT Inc. proposal, $1.5 billion raised from the spent fuel storage 
would be used to improve the security of weapon-usable fissile materials not 
needed for Russian national security purposes, and more than $2 billion would 
be used to develop a permanent geologic repository for Russian nuclear waste 
and the imported spent fuel. Another $2 billion would be used to provide 
alternative employment opportunities for nuclear industry workers, $3 billion 
would be used to fund the cleanup of contaminated sites, $2 billion would go 
to Russian invalids, pensioners and orphans and $500 million would be used to 
improve infrastructure in the region where the spent fuel storage facility is 

Like any project, the NPT Inc. proposal should be viewed in terms of its 
benefits versus its risks. Your story focuses almost exclusively on the risks 
associated with spent fuel storage. As a scientist and the director of the 
nuclear activities of a major U.S. environmental organization, I am fully 
cognizant of these risks. In my view, however, NPT Inc., working with its 
Russian partners, can safely transport and store the limited amount of spent 
fuel that will be required to raise the funds to do all these good works. 
Spent fuel transport and storage is not risk free, but these risks are 
greatly overshadowed by the enormous good that can be rendered simply by 
spending a portion of the revenues to clean up existing contaminated sites in 
Russia. When all of the other worthy projects are included, supporting the 
NPT Inc. project is a "no brainer." 

The NPT Inc. proposal represents the best real prospect Russia has right now 
for raising the money necessary to properly safeguard a major stockpile of 
nuclear weapons materials and to begin much needed environmental restoration 
projects. Moreover, from the Russian standpoint, it makes good sense to use 
foreign revenues to fund its own much needed geologic repository for storing 
Russian nuclear wastes. 

Thomas B. Cochran, Ph.D., 
Director of the Nuclear Program 
Natural Resources Defense Council 

Russian Cinema Is Reviving 
In response to "Russian Film Fading From View," July 28. 


I would like to take issue with Angela Charlton's article. Her implied claim 
that life was better for filmmakers under the old regime would surprise a 
great many scriptwriters and directors, whose films were not made, or put on 
the shelf, or butchered by the censor or even resulted in a jail term. 

"Soviet directors artfully survived communist censorship, producing poignant, 
sometimes piercing commentaries on love and war," she writes. I wouldn't mind 
that sentence so much if she prefixed it with "A handful of" f because a few 
directors like Eldar Ryazanov, Nikita Mikhalkov and Andrei Tarkovsky did 
manage to make masterpieces. But I suggest Ms. Charlton view the "five or six 
films" made by the studios each year to see how many of them were "artful, 
piercing or poignant." Most of them were junk. 

I wish I had a dime for every article bemoaning the demise of the Russian 
theater, cinema, intelligentsia or even beer! If "Russian films are fading 
from view," how come every time I go to my local video store I buy a newly 
made Russian film? I'll also take a nickel for every article with an implicit 
nostalgia for the "good old days." It's true that most Moscow film editing 
suites are not air conditioned f but I assure you that in the "good old days" 
of the Soviet regime, they weren't climate-controlled either. 

Of course, conditions are extremely difficult for Russian filmmakers. Of 
course, many good films are not being made for lack of money, or the 
directors' and producers' lack of experience in getting money. Of course, 
there are a great many bad Russian-American hybrids. Of course, the 
distribution system is a mess and piracy is rampant. But life was never easy 
for Russian filmmakers! And one could make the case that after a rocky period 
of transition, Russian filmmaking is starting to enter a renaissance. I have 
certainly seen more good Russian films in the last two years than in the 
previous 10. And judging by the renewed activity at local film studios, we 
can expect more "fade-ins" than "fade-outs" in the near future. 

Michele A. Berdy, Media Consultant 


Poll Shows Stepashin 'Steadily Winning Support' 

MOSCOW. July 29 (Interfax) - Russian Prime 
Minister Sergei Stepashin is steadily winning public support: 45% of 
Russians had a favorable opinion of his work in July up from 37% in June, 
while 31% and 34% held the opposite opinion respectively. The figures 
come from polls of 1,562 persons conducted by the All-Russian Public 
Opinion Center on July 26 and at the end of June. The statistical error 
in such polls is 4%. The public attitude to President Boris Yeltsin 
remained unchanged: 7% of Russians approved of his efforts in both cases 
and 90% disapproved. Popularity figures for Duma speaker Gennady 
Seleznyov were 34% in July and 36% in June, disapproval 43% and 41% 
respectively. Federation Council chairman Yegor Stroyev won praises from 
29% in July and 27% in June, and criticism from 42% and 43% respectively. 

Support for First Deputy Prime Minister Nikolai Aksyonenko went down from 
20% in June to 16% in July and the number of opponents grew from 41% to 
45%. While in June 12% of Russians believed that the Stepashin Cabinet is 
handling Russia's problems better than the previous one, in July the 
opinion was held by 16%. Now 52% of Russians see no difference up from 
50% a month earlier. Asked how long Stepashin would remain in power 13% 
said - until autumn, 21% - until the Duma elections, 29% - until 
presidential elections, and 8% said he would be prime minister even after 
presidential elections. Only 3% said Stepashin will not survive even 
until autumn, and the remaining 26% did not try to predict his future. 


Carnegie Endowment for International Peace
July 29, 1999 
U.S.-Russian Relations and the Stepashin Visit 

On the occasion of Russian Prime Minister Sergei Stepashin’s visit to the
United States this week, the Russian and Eurasian Program hosted a panel
discussion on July 26 featuring Carnegie Senior Associates Tom Graham,
Michael McFaul, and Anders Aslund, who spoke, respectively, about the state
of the U.S.-Russian relationship, the prospects for Stepashin becoming a
contender in the presidential election in June 2000, and recent positive
developments in the Russian economy. We provide below excerpts from each of
their presentations. 

Tom Graham -- The State of U.S.-Russian Relations 

Sergei Stepashin’s meetings with Vice President Gore provide the
opportunity to take a close look at Stepashin, to take measure of his
character and determine whether he could become the next president of
Russia, as Anatoly Chubais clearly hopes he will. The Clinton
administration is going to praise him, although they will do this
discretely, so that they do not arouse Yeltsin’s jealousy. The last Russian
prime minister to come to Washington – Viktor Chernomyrdin – looked so
presidential that Yeltsin felt compelled to sack him a few weeks after he
returned to Moscow. 

Stepashin’s visit is going to be a "success." The question is: Why do we
care? Why do we need Russia? I don’t think the answer is obvious;after all,
Russia is a country that has been in decline for well over a quarter
of a century. Moscow now oversees an economy that is, by my calculation,
one-third of the economy that Moscow controlled in the mid-1980s, just
fifteen years ago. 

Moscow’s capacity to mobilize the resources of Russia has eroded steadily
and drastically over the last decade, which is well illustrated by its
continuing inability to collect taxes. Some of Moscow’s power has devolved
out to the regions; most of it has simply dissipated. In a world where
trade and investment are now top priorities, Russia is certainly not going
to become a major trade partner, nor a major region for investment, anytime
soon. In short, this is a Russia that can help us very little as we try to
manage the global economy and build enduring security relations, whether it
be in Europe, East Asia, or the Middle East. 

In fact, Moscow can do very little to thwart our activities. If you look at
the options available to Moscow, any steps that Moscow might take to
undermine us in fact work to their disadvantage more than to our own. 

So I come back to the question: why do we care? In the short run, our
concerns arise out of the consequences of Russia’s weakness, coupled with
the Russian elite’s difficulties coming to terms with its reduced
circumstances in the world. We worry about the breakdown of command and
control of nuclear weapons, of loose nukes, about proliferation. 

We should, if we do not already, worry about the consequences of Russian
weakness for the United Nations system. There is a growing disparity
between Russia’s real weight in the world and its veto in the UN. This is
going to tempt us, as it did in Kosovo, to circumvent the UN on
increasingly frequent occasions. 

This administration’s rhetoric of partnership cannot cover up the fact that
over the past decade Russia has not transformed itself from a dangerous
enemy of the United States to a constructive partner. Rather, it has become
a troublesome problem. However, the rhetoric of Russia’s greatness has been
a central part of the Clinton Administration’s policy in dealing with
Russia as a problem. Indeed, I would argue that the Administration has been
aware for some time of the growing gap between its rhetoric and the reality
of Russia. The rhetoric has been a way of giving Moscow what it wants in
symbols, without the Administration being compelled to yield much in
substance. Over the past several years the Administration has flattered
Yeltsin’s ego and vanity to soften his position on a number of issues that
are important to us, whether it be NATO expansion, or the recent crisis in

The problem with this tactic, even though it has been successful in many
regards for some time, is that it is reaching the end of its useful life.
To be sure, there was always a cost. The Administration felt compelled
to talk about Russia’s greatness when it was clear that Russia was no
longer a great power. It presented a much rosier version of what was
happening in Russia domestically than was warranted by the facts on the
ground. The Administration continually exaggerated what Yeltsin could and
had delivered in the relationship. As a result, domestic support in
the United States for the Administration’s policy has eroded, as it became
clear that Yeltsin could not deliver on his promises, such as START 2
ratification, and as events in Russia fell too far out of sync with the
Administration’s rhetoric. 

Any plausible successor to Yeltsin -- whether it be Primakov, Luzhkov, or
Stepashin -- is not going to be as susceptible to Washington’s rhetoric. He
will be more attuned to the growing anti-American sentiment within the
Russian political elite, and will not simply want a voice at the table of
world affairs, but will want Russia’s views heard and incorporated into
whatever policy the United States pursues. 

Thus, managing Russia’s decline will be one of the chief tasks of the next
administration. It is time that we began to rethink the rhetoric about
Russia, what we say about Russia publicly, and be prepared for a more
limited relationship over the next several years. 

Michael McFaul -- Stepashin for President? 

The most important event for the U.S.-Russian relationship in the near
future is the Russian presidential election in June 2000. Other issues are
either not as important, or will be seriously influenced by that election.
No one understands this more than prime minister Sergei Stepashin, who is
touted as a potential presidential candidate. 

Could Sergei Stepashin become the next president of Russia? We do not know
him particularly well; he has never visited the United States as a prime
minister, and few people in the West have followed his career. Stepashin is
a viable presidential candidate for many reasons, a few of which I present
now, not as an advocate for his candidacy, but rather from the perspective
of a political campaign organizer. 

First, his approval ratings are going in the right direction. 

Second, the present economic stability is good for his candidacy. The
economic turmoil of last August has subsided, allowing Stepashin to work as
prime minister in a time of relative economic stability. 

Third, Stepashin is a politician, an aspect that we underestimate in the
West. He is a person who has run for and been elected to public office.
Stepashin is not merely a bureaucrat from Yeltsin’s administration, but has
been an influential political actor in Russia for over a decade. Those who
know him well say that he is extremely ambitious, that he wants to be

Fourth, Stepashin is the right age; he is not too young, like Boris
Nemtstov, nor is he of pension-age, as are his likely competitors Yevgenii
Primakov, Yuri Luzhkov, and Gennadii Zyuganov. His campaign organizers
could urge the Russian electorate to elect a young and energetic person to
lead the country in the new millenium. Age will be an excellent cleavage
issue, and could in fact become Stepashin’s greatest asset. 

Fifth, as a general who has headed the MVD and FSB, Stepashin can run for
president as a "strong man." Despite these credentials, he does not have a
strong record on battling crime and corruption. In a campaign, however,
especially if his competitor is Luzhkov, one can foresee another cleavage
issue developing – the anti-corruption leader Stepashin versus the mayor of
Moscow, who many view as corrupt. 

Sixth, Stepashin is a national-level politician who has held national
office for a decade. In pure electoral terms, this could be another way to
distinguish Stepashin from men like Zyuganov and Yavlinsky, who are
associated with a parliament that has been largely impotent. Stepashin
could also distinguish himself from Luzhkov by portraying the Moscow mayor
as a local leader who is ill-suited for leadership of an entire country. 

Seventh, Stepashin can run as a reformer and a democrat, framing the vote
as a choice between the past or the future, an issue that resonated with
the Russian electorate enough to re-elect Yeltsin in 1996. Polling in
Russia shows that stability is the single most important thing that voters
care about. Stepashin has devoted his life to law and order, so he can
position himself as a candidate of stability, in contrast to Zyuganov, who
would likely change the rules of the game should he come to power. 

Finally, Stepashin can run as a candidate who is least likely to throw
President Yeltsin in jail. Of all of the presidential candidates, Stepashin
is the least likely to go after Yeltsin, whom he has known and been loyal
to for many years. In turn, "the family" and other supporters of the status
quo could provide the Stepashin presidential campaign vast resources in
terms of money and television. 

What are the impediments to Stepashin’s candidacy? First and most obviously
are other presidential candidates, whom we do not have time to discuss
today.What is more worrisome to me in the short run, however, is whether or
not Stepashin will continue to be prime minister and whether there will be
elections at all in Russia. The elite is not unified behind Stepashin. In
particular, that group of people around Berezovsky called "the family," who
backed Nikolai Aksyonenko (First Deputy Prime Minister and former Railways
Minister) over Stepashin for prime minister, has done much to destabilize
the Stepashin government. This Berezovsky grouping believes, erroneously in
my view, that they can use their wealth and media monopolies to elect
anyone they want. Based on their success in re-electing Yeltsin in
1996, Berezovsky and other oligarchs think that they can influence Yeltsin
to appoint figures like Aksyonenko or Aleksandr Lebed as prime minister,
and then they can get elected this person as president. I think they are
absolutely wrong in that calculation. 

This group may also be tempted to hold onto power through
extra-constitutional means. Rumors in Moscow about such scenarios have
surfaced with increasing frequency as we get closer to the election. The
probability for an extra-constitutional coup in Russia is low. However, the
consequences of a coup for Russian stability and U.S.-Russian
relations are so high that we need to focus on further reducing that low
probability number. I’m also confident that a coup attempt would fail. No
political actor in Russia has the resources available to actually undertake
a successful coup. 

Al Gore will be attacked on his record on US-Russian relations no matter
what happens in the Russian presidential elections next summer. But the
greatest potential problem for Gore, and the legacy of the Clinton
Administration on Russia more generally. would be the collapse of democracy
in Russia. Therefore, the Clinton administration should work toward
insuring that the elections in Russia are held freely and fairly. If Russia
does not have a presidential election next year, then all accomplishements
of the bilateral relationship over the last decade will be quickly

Anders Aslund -- Positive Trends in the Russian Economy 

There are some rather surprising developments in Russia’s real economy.
Last September, industrial production fell by 15 percent in comparison with
September 1997, and Russia seemed to have entered economic free fall. Both
GDP and industrial production fell by 5 percent last year, and the IMF
forecasted a 9 percent decline in GDP for 1999. The Institute for
International Finance offered even gloomier predictions, estimating that
GDP in 1999 would fall by 15 percent. The Russian government, which is
always overly optimistic, predicted a 4 percent decline in GDP this year. 

Current economic trends do not correspond with these dire predictions.
Since March, industrial production has not fallen, but grown. By May, it
had grown by 6 percent in comparison with May 1998; in June, that figure
was 9 percent. Given that industrial production fell as much as 15 percent
in September 1998, the current trend points toward a 20 percent growth rate
in September. 

Industrial production in Russia this year will grow by approximately 7
percent. What are we to make of this? Is this serious or not? The most
widespread explanation is that this is an effect of devaluation and oil
price increases, which have indeed been substantial. Although one would
then expect raw materials to do well, the production of oil and gas is
falling. Instead, certain manufacturers, particularly in the microbiology,
pharmaceuticals, machinery, textiles and shoes industries, are doing very

Today, Moscow shops are stocking domestically produced goods that Russians
have not seen in open trade since the 1960s. Russian producers are now
trying to penetrate the market, rather than merely striving to skim the

You have all heard about the "virtual economy" and that Russia is
hopelessly barterized. However, since August 1998 the share of barter
transactions between enterprises has fallen by 1-2 percent each month. We
have long been concerned about arrears of all kinds. Now, they are all
falling month by month -- enterprise arrears, wage arrears, and indeed, tax

Something is changing in the Russian economy. One can say that these
statistics do not indicate a clear tendency if they represent only a few
months. However, when industrial growth and diminishing arrears are evident
for almost an entire year, it suggests that something more fundamental is

Concerning government finances, this year the Russian government is
embarrassingly over-performing. Federal-state revenues that have usually
been around 10-11 percent of GDP were 15 percent of GDP this June, while
the target for this year is only 12 percent. Therefore, public
finances are doing very well, a remarkable trend considering that not long
ago it seemed impossible to cut public expenditures in Russia. This year
they are being cut by 5 percent of GDP. 

How can we understand this? I believe that this is thanks to the financial
crash last fall. You might think that this statement sounds terrible;
indeed, living standards fell by approximately 30 percent in real terms.
This was the worst shock that the Russian economy has faced. The August
financial collapse caused the greatest decline in living standards since
Russia began its post-Soviet economic transition. 

What happened? You can say that this was the "real shock therapy," what the
reformers failed to deliver in 1992 because they were not sufficiently
credible. Hard budget constraints became credible, as there was no money
left. The IMF and the World Bank did not provide anything, nor did
portfolio investors whose funds had comprised 10 percent of GDP in 1997.
The banking system stood still and it was impossible to raise more taxes.
Paradoxically, it seemed fortunate to have the communists in government,
because they failed to issue much money and actually enhanced the
credibility of a policy of fiscal restraint. 

So what did the poor entrepreneurs do? They realized that they would not
get any money from the government and started working. They did the
restructuring that they had not done before. We are now seeing that the
number of bankruptcies has multiplied, while the number of profitable
enterprises has increased sharply. There is a growing distinction between
bad and good enterprises, when previously the good enterprises subsidized
the bad through the government. 

What this suggests is that the Russian economy might actually be turning
around. Is this sustainable without investment? During the first two years
of a turnaround you don’t really need investment because there are such
large resources that are underutilized. The issue is to use the resources
that are out there, not to get new resources. 

So what should the IMF and the World Bank do in this situation? For the
first time, with the exception of 1995, Russia is actually performing on
its IMF agreement. This year Russia will have a budget deficit of around 3
percent of GDP, which is perfectly decent and makes Russia deserving of the
IMF funds. I think that the IMF is acting correctly. Last year, it pulled
the plug when it became clear that Russia was not going to undertake what
it had promised it would do in July. Now, the IMF is about to give money
when Russia is performing. So you can say that the IMF is acting as an
economic organization, while in 1996 it acted as a political organization
when the G7 used the IMF to give Yeltsin money toward re-election. 

The World Bank is in a much more difficult situation. Russia does not
really pursue any economic policy. On the positive side, you can say that
this makes Russia far more predictable, because previously the economic
policy changed all of the time. Now we can say, almost for certain, that
for one year virtually nothing will happen in economic policy. We know what
the government will do on the big issues – nothing – which is better than
disasters. Of course, the best policy would undertake serious reforms, and
they are unlikely. As the World Bank is intent on financing reforms,
it is very difficult for the World Bank to justify any loans to Russia.

Summary by Elizabeth Reisch, Research Assistant with the Russian and
Eurasian Program 

Carnegie Endowment for International Peace
1779 Massachusetts Avenue, NW
Washington, DC 20036
Phone 202-483-7600
Fax 202-483-1840 


Stepashin U.S. Visit a 'Pure Success' 

Rossiyskaya Gazeta
29 July 1999
[translation for personal use only]
"Commentary for the Issue" by political observer Vladimir Lapskiy: 
"Russia-United States: Thaw After Cold Spell" 

Russian Prime Minister Sergey Stepashin's visit to 
the United States is over. It is probably still too early to draw up its 
final results. Much was discussed and much was planned for the near and 
longer term, but it is possible to say with certainty right now that the 
visit was a pure success. 

The head of the Russian government met with U.S. Vice President Albert 
Gore in Washington as cochairman of the Commission for Economic and 
Technological Cooperation. A joint statement was adopted which notes the 
commission's great importance in ensuring stability in Russian-American 
relations. Sergey Stepashin and Albert Gore agreed that the Russian side 
will prepare for the next full-scale session a draft memorandum on the 
recognition of Russia as a country with a market economy under American 
laws. They resolved to convene the session in Moscow this fall and intend 
to hold the one after that in Washington in the spring of 2000. The 
decision to convene sessions on a regular basis is already in itself a 
very important result of the meeting of the cochairmen of the commission. 
Key questions of international security and arms control were the 
subject of discussion. The cochairmen stressed the special significance 
of the accords achieved by Presidents Boris Yeltsin and Bill Clinton in 
Cologne on starting discussion of the START III Treaty and the ABM Treaty 
at the end of this year while simultaneously making efforts to ratify the 
START II Treaty. The Russian prime minister and the American Vice 
President agreed to speed up the work of implementing the accord reached 
by Boris Yeltsin and Bill Clinton last fall on the exchange of 
information on missile launches and early warning. Sergey Stepashin said 
that his government will again try to put the ratification of the START 
II Treaty to the vote in the State Duma this fall. 

Missile armaments, the Russian premier said, pose a universal threat today, 
including a threat to Russia. Moreover, the United States is raising the 
question of creating a national air-defense system, given the danger that 
stems not from Russia but from "countries with rogue [slozhnyy] regimes" 
and from unsanctioned and accidental missile launches. This is also 
dangerous for Russia. Moscow and Washington could therefore cooperate on 
the air-defense problem -- and not just in the technical sphere but in 
the political and psychological spheres too, including dispelling the 
mistrust between the two countries which still persists. 

Sergey Stepashin was received in the White House by President Bill Clinton 
and discussed with him the most important problems of international and 
bilateral relations, including the situation surrounding Yugoslavia. Both 
of them are to take part this week in the summit on the Balkans, which 
will take place in the Bosnian capital of Sarajevo. At the press 
conference held after the meeting the head of the Russian government said 
that the US president and vice president had showed understanding toward 
Moscow's stance on Yugoslavia. He confirmed that Russia is providing 
humanitarian aid to the FRY and urged that people "not confuse the 
Slobodan Milosevic regime with the Yugoslav people, who are suffering 
from it and the bombing." With the onset of winter the threat of a 
humanitarian disaster will arise in southeast Europe. "Therefore," Sergey 
Stepashin said, "I do not favor having the problem of providing 
humanitarian aid to the population of Yugoslavia so rigidly linked to the 
existence of the Milosevic regime." He expressed the hope that the 
international conference in Sarajevo will make it possible for all 
interested parties to find points of contact and work out general rules 
for the provision of aid in the whole geographical area of former Yugoslavia. 

The Russian premier met with World Bank President James Wolfensohn. They 
discussed the prospects for the bank's collaborating with Russia as an 
active participant in the world economic process in the 21st century. 
After the meeting the president of the bank said: "I confirmed to Prime 
Minister Stepashin that we regard the actions of the government which he 
heads very positively. What it has already done has made a big impression 
on us." 

Sergey Stepashin's visit to the United States is regarded in Washington and 
Moscow as a major step forward in Russian-American relations, which had 
been undermined by the NATO attack on Yugoslavia. The pause in our 
relations, which took so much effort to establish, is over and today it 
can be said that the almost four-month-long cold spell has been replaced 
by a thaw, a thaw so necessary for the world climate as a whole. 


Russia: Media Wars Intensify Before Upcoming Elections
By Floriana Fossato

The battles between Russian media groups and the Kremlin are intensifying.
Kremlin chief-of-staff Aleksandr Voloshin has joined in the information
wars between media tycoons Boris Berezovsky and Vladimir Gusinsky. RFE's
Moscow correspondent Floriana Fossato says that with parliamentary and
presidential elections looming in Russia, the disputes are acquiring dark
political overtones ... 

Moscow, 30 July 1999 (RFE/RL) -- Russian Prime Minister Sergei Stepashin
has asked Finance Minister Mikhail Kasyanov to sort out what he called the
"financial relationships" of Media Most, the country's biggest and most
influential private media holding company.

Stepashin's move follows a bitter war of words between Kremlin
chief-of-staff Alexandr Voloshin and Media Most's top managers in the past
few days. Earlier this week, Voloshin said that liberal media outlets
controlled by Media Most were pressuring the government. Voloshin said
their propaganda campaign coincides with a routine tax inspection of the
Russian media.

Media Most -- controlled by financier Vladimir Gusinsky -- has openly
backed Moscow mayor and potential presidential candidate Yuri Luzhkov.
Media Most accuses Voloshin of harassment in ordering probes into its
finances in order to force the powerful holding company to change its
political allegiance and back the Kremlin's efforts to get the results it
wants from December parliamentary elections and the June 2000 presidential

The latest round in Russia's information wars has been fought by media
controlled by Gusinsky, in response to attacks launched by media controlled
by controversial Kremlin insider Boris Berezovsky.

Previously, Russian Public Television ORT -- influenced by Berezovsky --
said that the commercial channel NTV -- which often criticizes Russian
President Boris Yeltsin and the Kremlin -- is deep in debt. NTV, controlled
by Media Most, responded by saying it is the victim of a campaign conducted
by Berezovsky and Voloshin.

Last week (July 23), the editors-in-chief of the most influential media
assets forming Media Most -- including NTV, Radio Ekho Moskvy, the weekly
"Itogi" magazine and the daily "Segodnya" -- sent an open letter to
President Boris Yeltsin. The letter complained that top Kremlin officials
-- under Voloshin's leadership -- are using their influence on organs such
as the tax police to put pressure on the country's independent media.

Earlier this week, Yeltsin interrupted his vacation and returned to the
Kremlin. Following a meeting with Yeltsin that day, Voloshin said that
Yeltsin was "alarmed by the continuing pressure" being placed on the
government by such an "influential and respected" media organization as
Media Most.

Voloshin also said Media Most has "received more state financial help than
the entire group of state media." He called the letter to the president by
Media Most's top editors "an attempt to obtain fresh money, using blackmail

A second Media Most letter to Yeltsin immediately followed Voloshin's
remarks. It accused the chief-of-staff of lying, saying that Media Most has
never received financial assistance from the state. Most also accused
Voloshin of something that is considered a very serious matter in Kremlin
circles: manipulating Yeltsin and providing him with distorted information.

The letter said that "Voloshin's comments regarding the position of the
president make us suppose that in other cases the president receives
distorted information about what is going on in the country." Two days ago
(July 28), Media Most's top editors reiterated their positions during a
well-attended Moscow press conference.

Andrei Tsymailo is chairman of Media Most's board of directors. At the
press conference, he explained why -- in the holding company's view -- the
"financial help" that Voloshin said Media Most receives from the state
needed a more precise explanation. In fact, Tsymailo said, Media Most has
received no subsidies and no irredeemable loans from the state:

"Were there other, hidden, forms of help? For instance, companies sometimes
do not pay various bills to state institutions for a certain amount of
time. The state does not take any action, it does not try to collect the
money and does not start bankruptcy procedures, despite debts that in some
cases reach millions of dollars. This can be called help. But NTV has
always paid the communications ministry for the broadcast signal. And we
pay taxes, including state taxes, punctually enough."

Television experts present among the journalists, however, remembered a
presidential decree Yeltsin signed after his re-election. The decree said
that NTV, a fully private company, together with formally state-controlled
RTR and ORT, should be considered what was termed "all-national" TV companies.

Like the other two companies, NTV pays a fee for its broadcast signal that
is well beneath the commercial rate. For Russian TV companies, the
broadcast signal accounts for 50 to 70 percent of their budget.

Commenting on the issue, the prominent Russian daily "Kommersant" wrote
this week that average Russian citizens have no more grounds to believe NTV
than the Kremlin, and vice versa. NTV, the newspaper wrote, accuses the
Kremlin of pressuring it. The Kremlin answers that it is NTV that is
putting pressure on the state. Voloshin accuses Gusinsky of blackmail, and
Gusinsky returns Voloshin's accusations. Gusinsky says that Voloshin
arranged the tax inspection of Media Most for political reasons, and
Voloshin responds that, on the contrary, it was Gusinsky who arranged
political actions in order to avoid tax inspections.

"Kommersant" concluded that the Russian media information war risks are
reaching what it called the "point of no return."

It remains to be seen whether Russia's new media ministry, set up earlier
this month by President Yeltsin, will have any influence on the media battles.

Mikhail Lesin -- head of the new Ministry for Press, Broadcast and Mass
Media -- told "Kommersant" last week that the government must be protected
from a free press, although he promised to refrain from imposing censorship
or editorial control. He said the government could protect itself by hiring
skillful public-relations agents who would portray government policies and
methods in a favorable light.

Russia's Communist politicians say the new ministry is only a government
attempt to manipulate the media ahead of the upcoming elections. 



MOSCOW (July 30) XINHUA - Industrial output was up in eight of the 
12 member countries of the Commonwealth of Independent States (CIS) in 
the first six months of the year, according to the CIS Interstate 
Statistics Committee. 
The biggest increases were recorded in Tajikistan at 7.9 percent, 
Belarus with seven percent, and Uzbekistan with 5.6 percent. Industrial 
output was up 2.8 percent in Armenia, two percent in Azerbaijan, and 
3.1 percent in Russia. Ukraine posted a 0.2 percent increase while 
Georgia registered a 0.6 percent rise, the Interfax news agency 
reported Friday. 
Industrial output fell by 4.1 percent in Kazakhstan, 10 percent in 
Kyrgyzstan, and 15.2 percent in Moldova. The CIS Interstate Statistics 
Committee released no statistics for Turkmenistan. 
During the same period, gross domestic product (GDP) was up 5. 6 
percent in Azerbaijan, 4.9 percent in Armenia, two percent in Belarus, 
1.7 percent in Georgia, 3.8 percent in Uzbekistan, and 0. 4 percent in 
Kyrgyzstan. Ukraine reported a drop of three percent. 
GDP was up 1.3 percent in Tajikistan in the January-May period. 
Kyrgyzstan, Moldova, and Belarus reported the highest inflation rates
in June at 7.9 percent, 7.2 percent, and 7.1 percent respectively. 
Inflation was 4.8 percent in Kazakhstan last month, 1.9 percent in 
Russia, and 0.1 percent in Ukraine. 
Prices in Armenia remained unchanged in the month while Azerbaijan, 
Georgia, and Tajikistan reported deflation of 0.8 percent, 1.4 percent, 
and 1.6 percent, respectively. 


HIV Cases Up Twelvefold in Moscow and Environs 

Moskovskiy Komsomolets
28 July 1999
[translation for personal use only]
Unattributed report: "Aids Infection Cases Become 12 Times More 
Frequent in Moscow and Its Environs" 

The Moscow region this year became the absolute 
leader in Russia for the speed of the spread of...AIDS. 

Moskovskiy Komsomolets was told in the Russian Federation Ministry of Health 
Russian Center for Preventive Measures and Combating AIDS that, in the 
first six months of 1999, 4,867 people were infected with the HIV virus 
in the country as a whole. This figure exceeds last year's figures for 
the same period, when only 1,867 inhabitants of Russia caught the 
terrible illness, by a factor of 2.5. 

Formerly, this sad statistic grew mainly at the expense of inhabitants of 
Kaliningrad and Rostov Oblasts and Krasnodar Kray. However, this year the 
ranks of those living under a death sentence have been increased by 55 
percent (!) by people living in the capital and its environs. 

In the first six months of the year 2,672 inhabitants of the Moscow 
region (1,299 Muscovites and 1,328 people registered in Moscow Oblast) 
[figures as published] were infected with the AIDS virus. By way of 
comparison: In the same period of 1998 only...223 people -- 12 times 
fewer -- were found to be carrying the deadly illness. 

According to the data of the center's specialists, AIDS is usually carried to 
Moscow by people from other cities, including inhabitants of Tver Oblast, 
where 1,263 carriers of the virus live today. 

In all, according to the figures as of 30 June 1999, 15,819 
HIV-positive persons, of whom 526 are children, have been detected in 
Russia. One hundred and seventy-three children were infected with the 
incurable illness while still in their mother's womb. The overwhelming 
majority of adult virus carriers (74.9 percent) are men. 

As before, young drug addicts between the ages of 17 and 23 are 
infected most frequently. But AIDS has started to fall among homosexuals. 
In the past few years medical staff registered around 90 HIV-positive 
gays per year. However, last year the number of such patients fell to 40. 
It was not so long ago that doctors began to register the first cases 
of fatalities from the incurable illness. According to the figures for 30 
June, 406 people have already died from AIDS in Russia, 110 in Moscow, 
and 21 in Moscow Oblast. 


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