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Johnson's Russia List


August 5, 1999   
This Date's Issues: 3423 •   • 

Johnson's Russia List
5 August 1999

[Note from David Johnson:
1. Moscow Times editorial: Yeltsin's Fears Need Easing So He'll Go.
2. Itar-Tass: Yeltsin Outstrips in Popularity all Foreign, many US Figures.
(DJ: Yes, its not "popularity.")

3. Itar-Tass: Luzhkov Claims His Law Enforcers under Kremlin Fire.
4. George Marquart: Re. Ben Slay's response to John Semlak in JRL 3420.
(Trade figures).

5. Peter Reddaway: A Billion Dollar Food Aid Scandal.
6. Heinrich Vogel: Re: Stepashin in Seattle, Moscow Times, July 30, 1999, 
Did'ya hear the one about...

7. Itar-Tass: Election Commission, Justice Ministry Meet Over Elections.
8. The Times (UK): Richard Beeston, Moscow Mayor joins bid for power.
9. AFP: Russia's Karabash: A town with the air of death about it.

10. Peter D. Ekman: Re: Sucessful Joint Ventures.
11. Moskovskiy Komsomolets: Week's Moscow Political Rumors Eyed.
(Re Primakov, Aksenenko, Yeltsin's pension, Logovaz novel).

12. Moscow Times: Gwynne Dyer, Tsar of All the Russias? 
13. World Socialist Web Site: Nick Beams, UN report on Eastern Europe and 
the former USSR. The 'free market's' social catastrophe.]


Moscow Times
August 5, 1999 
EDITORIAL: Yeltsin's Fears Need Easing So He'll Go 

Assume, for a moment, that Moscow Mayor Yury Luzhkov, NTV television,
human rights activist Yelena Bonner, Yabloko chief Grigory Yavlinsky and a
host of other intelligent observers are right when they say Boris Yeltsin
might need to be shoe-horned out of the Kremlin. 

Assume - entirely for the sake of argument - that this is because Yeltsin
and/or his daughter Tatyana Dyachenko have been involved up to their
eyeballs in various dubious financial schemes. 

Assume that Yeltsin is quite rattled by the prosecutors and auditors who
have been poking around - from Russia's Yury Skuratov to the Communists'
Viktor Ilyukhin to Switzerland's Carla del Ponte. And assume he found it a
mite uncomfortable in June to come so close to being accused of "genocide
against the Russian people" by parliament. 

If you assume all of this, then you must agree that from Yeltsin's point
of view, it would probably be downright dangerous to leave the Kremlin. 

So it was heartening Wednesday to see Yevgeny Primakov addressing this
very problem - the problem that Yeltsin might see stepping down as

Primakov has not yet embraced Luzhkov and entered the new Fatherland-All
Russia political tent. But all the signs are that he will. And on
Wednesday, he took a step toward cooling Yeltsin's fears, with some bland
talk of making sure the new bloc is "not anti-presidential." 

When he was prime minister, Primakov tried to hammer out a retirement
package for Yeltsin. He failed, in part because he handled it clumsily and
in a small-minded way. 

Now Primakov is, it seems, cautiously trying to reopen a Kremlin dialog.
Good. This time, let's not be cheap: Give Yeltsin a retirement package that
includes money, property, lifetime membership in the Federation Council,
ironclad immunity from all prosecution and just about anything else he
wants. Russia is going to need to buy out his contract, and money should
not be an object. 

Money alone, of course, won't do it. Yeltsin will need to feel he can
trust any proffered golden parachute. But how can he trust anything when
his regime has been so corrupt? If the economy tanks again in, say, 2002,
what's to stop a President Primakov or President Luzhkov from deflecting
blame by suddenly unveiling a massive corruption case against Yeltsin? 

It may be hopeless, but Primakov has the right idea. The new
Fatherland-All Russia bloc needs to open a dialog directly with the
president. So does the West, which prefers to whistle and look the other
way on Russia these days. Everyone with Yeltsin's ear should be helping him
to make the right decision. 


Yeltsin Outstrips in Popularity all Foreign, many US Figures.

WASHINGTON, August 5 (Itar-Tass) -- Russian President Boris Yeltsin is
better known in the United States than all foreign and many American
politicians. According to the Harris public poll, 69 percent of respondents
correctly replied to the question about his post. 

At the same time, the poll confirmed a distressingly low level of
Americans' knowledge about "who is who" in their own country and in the
world. Less than 50 percent of the polled know that Madeleine Albright
occupies the post of state secretary in the U.S. administration. 

Only 9 percent of respondents know that Ernesto Zedillo is president of
neighbouring Mexico, while 4 percent know that Jean Chretien is Canadian
prime minister. The situation is slightly better with familiarization with
leaders across the Atlantic. 

For instance, judging by the poll results, British Prime Minister Tony
Blair is known to 34 percent of Americans, while his Israeli counterpart
Ehud Barak -- to 16 percent. 

As for leading American politicians, 89 percent of the polled called
unmistakingly the post of U.S. Vice-President Al Gore, and 56 percent --
his most probable rival at future presidential elections, Texas 
Governor George Bush, Jr. 

Only 32 percent of poll participants replied correctly to the question
about the job of the U.S. chief banker, chairman of the Federal Reserve
Board Alan Greenspan. 

Turning from politicians to business, the poll showed that even owner of
the Microsoft corporation Bill Gates, the world's richest man whose name is
closely linked with the process of computerisation, largely determining the
present outlook of the U.S. and the entire world, is a far cry from
100-percent recognition. Only 63 percent of his fellow countrymen replied
correctly to the question about his business. 

Results of the poll threw into the doldrums head of the Harris public poll
service Humphrey Taylor who said that the results, apart from confirming
well-known opinion that most Americans have an utterly poor knowledge of
current events and, in this case, about people outside the United States. 

The results also showed that a lot of Americans are virtually not
interested in the country's political life either, he added. 


Luzhkov Claims His Law Enforcers under Kremlin Fire.

MOSCOW, August 5 (Itar-Tass) - Moscow mayor Yuri Luzhkov, a clear 
presidential hopeful, complained that his men in law enforcement agencies of 
the capital had come under fire from the Kremlin. 

"I am upset because they cause anger of the Kremlin and are subject to 
various oppressions", Luzhkov said in an interview published in the latest 
issue of the "Obschaya gazeta" weekly. 

Among such people he listed head of the Moscow Interior department Nikolai 
Kulikov, head of the Moscow security service department Alexander Tsarenko, 
and head of the anti-organised crime department in Moscow Nikolai Klimkin. 

Among other people who suffered for their sympathies to him Luzhkov listed 
ex-secretary of the Security Council Andrei Kokoshin, former presidential 
spokesman Sergei Yastrzhembsky and ex-Tax minister Georgy Boos. They are all 
now working with the Moscow mayor. 

"When smart and honest people are ousted one can imagine who comes to replace 
them", Luzhkov said and offered the Kremlin administration as an example. 
"The country is actually being run by two men who face criminal cases - 
/media tycoon Boris/ Berezovsky and /Kremlin chief of staff Alexander/ 
Voloshin", he said. 

"There is an impression that the federal authorities have only one task - to 
fight Luzhkov", the mayor said and stressed that "today it is 
impossible to shut the mouth of honest people". "The truth will come out", he 


Date: Wed, 4 Aug 1999 
From: "George A. Marquart" <>
Subject: Re. Ben Slay's response to John Semlak in JRL 3420

There is a fundamental problem when dealing with Goskomstat's trade figures:
the corruption factor. It is very difficult to tell what real exports and
imports are, because so much trade takes place at prices and quantities that
are changed for the benefit of the importer or exporter, as the case may be.
I know of cases where huge quantities of product were brought into Russia at
less than one tenth of the legal duty. Values and quantities were all
changed to be in line with the duty paid. I am certain that, with some
commodities, the actuals differ by more than 50% from the documents.

There is a way to get a handle on this. I am fairly certain that the trade
statistics from EEC countries are quite accurate. If someone were to do a
study, taking the export of several commodities from EEC countries, and
comparing these figures with Goskomstat's import figures for the same
commodities, the cat would be out of the bag. My guess is that someone has
already done this, but not for public consumption. Anyone want to take this
on? Do be careful though; there are millions at stake.


Date: Wed, 4 Aug 1999 
From: "Peter Reddaway" <>
Subject: A Billion Dollar Food Aid Scandal

Letter submitted to "The Washington Post" for publication, but not
July 14, 1999
A Billion Dollar Food Aid Scandal

The cynicism and/or ignorance that seemingly underlie the U.S.
government's $1 billion food aid program for Russia are stupefying. Sharon
LaFraniere's story "Food Aid : Too Much, Too Late ?" (July 12) does not
surprise me : it portrays exactly the sort of fiasco that was widely
predicted last Fall, before the deal was made.

At that time, the proposed aid was opposed with reasoned arguments
for many weeks by, among others, noted economists and politicians in Russia
and the West, the Russian Minister of Agriculture, and the World Bank. It
was publicly supported by very few people, mostly interested parties. Two
of the latter, Agriculture Secretary Dan Glickman and Russian Deputy Prime
Minister Gennady Kulik, ignored all the warnings and went ahead.

Did Mr Glickman really see no clue to Kulik's motives in the
serious corruption charges that had recently been leveled against him in
Russia? Has he now noted LaFraniere's (and the Russian press's) completely
predictable reports that Kulik corruptly awarded a contract for U.S. food
distribution to a personal friend?

To ordinary Russians, the whole saga suggests a calculated U.S. desire to
further damage American-Russian relations, already reeling for too long for
other reasons. To U.S. tax-payers, it looks like a blatant waste of their
money that has harmed the national interest and opened America to mockery -
just to please some U.S. farmers. More specifically, as LaFraniere shows,
the aid has corrupted Russian officials who are already too corrupt; has
increased the Kremlin's foreign debt by nearly half a billion dollars when
Russia is already defaulting on other debts; has undermined U.S.-funded
efforts to develop free markets in Russia; and has met with indifference or
hostility from, it seems, most of the Russians directly involved.

What is our government doing? The stakes are too high for such outsized


Date: Wed, 4 Aug 1999 
From: Heinrich Vogel <> 
Subject: Re: Stepashin in Seattle, Moscow Times, July 30, 1999, Did'ya
hear the one about...

Mr. Stepashin was probably unaware of ugly memories among Germans when he
told American businesspeople "I love you all": 1989, in one of the dramatic
last sessions of the "Volkskammer der DDR" (the GDR's parliament) the
Minister of State Security Erich Mielke countered the deputies' criticism
of his
past activities by exclaiming emphatically ".. but I love you all!". The
deputies were not amused.
Yes, love is a many spendored thing, particularly if money is involved.
(Again a German proverb comes to mind: "Kasse macht sinnlich" - roughly
translated by "arousal by cash".) I suspect that Stepashin's true feeling is
dispair in view of Russia's financial situation. 


Election Commission, Justice Ministry Meet Over Elections.

MOSCOW, August 4 (Itar-Tass) - Leaders of the Russian Central Election 
Commission and the Justice Ministry met on Wednesday to discuss the 
cooperation of the two agencies, commission chairman Alexander Veshnyakov 
told reporters. 

He said the Central Election Commission had sent an inquiry to the Justice 
Ministry asking for information about public groups and parties that are 
likely to claim the electoral status and had been through registration at the 
Justice Ministry a year before elections of the Duma lower house of 

"According to legislation, it will be clear after the expiry of the nearest 
ten days which social-political movements will be able to take part in the 
elections of the third-convocation Duma," Veshnyakov said. He said a joint 
project of assistance of the executive to election commissions during the 
"big parliamentary elections" was drafted to be submitted to the government. 

"We have a full understanding in this question," Veshnyakov said. He 
expressed the hope that the government would sign a corresponding decree 
immediately after the Russian president issues his decree setting the date 
for Duma elections, December 19. 

However, the deadline for re-registration of public groups and parties -- 
December 18 or 19 -- remains at issue. 

"Jointly with the Justice Ministry, the Central Election Commission must 
analyse the re-registration date and look at founding documents of various 
socio-political movements," Veshnyakov said. 

As for electoral blocs, he said he was sure that they could be set up only 
after announcing the dates starting their pre-election campaigns. 

Veshnyakov said at least two members of an electoral coalition should be 
registered not later than a year before the day of the Duma elections. 

He cited as one of problems to be discussed with the Justice Ministry the 
voting arrangements in pre-trial detention centres, where over 300, 000 
inmates are kept. 


The Times (UK) 
August 5 1999 
[for personal use only]
Moscow Mayor joins bid for power

YURI LUZHKOV, Moscow's powerful Mayor, yesterday launched a new party which
is set to become the dominant force in Russian politics in the forthcoming
parliamentary elections and next year's presidential race. 

In a move regarded by the Kremlin as a challenge to its authority, Mr
Luzhkov cemented an alliance between his Fatherland party and the All
Russia Movement, made up of other influential regional bosses stretching
from St Petersburg in the north to Tatarstan on the Volga river. 

The tough Moscow city boss has played a patient but masterly game in
building up his powerbase over the past few years before making his
challenge nationally. Moscow is the richest, most populous and influential
region in Russia and the mayor has assembled a formidable team of
businessmen, media magnates and politicians for his campaign. 

As a Moscow civic chief his greatest obstacle was the traditional mistrust
of the regions towards the capital, something he sought to overcome through
his alliance yesterday with regional bosses. 

His next move will be to lure Yevgeni Primakov, the former Prime Minister
and now the country's most popular politician, into the alliance even if it
means offering him the top slot in the party's electoral list for
December's polls. 

"I am ready to concede my own place so as not to become a stumbling block,"
said Mr Luzhkov, a populist politician who won more than 90 per cent of the
vote in Moscow during elections three years ago. He also predicted that
many other prominent political figures would defect to his party. 

The centrist movement was greeted with scepticism by the main parties in
the Duma, the lower house of parliament, although privately the biggest
blocks such as the Communist Party and the liberal Yabloko Movement are
fearful that they could be seriously hurt in the polls. 

Mintimer Shaimiyev, the leader of oil-rich Tatarstan, said that the new
party should aim to capture an overall majority in the 450-seat Duma. "We
expect to win (at least) 226 seats, otherwise there is no point in making
all this noise." 

While parliamentary elections are important, the real prize comes next year
with the challenge for the Kremlin, where the fledgling party will face its
toughest test. President Yeltsin and the powerful figures around him say
they intend to find a rival candidate. 

Even before Mr Luzhkov launched his party, two of the central figures
behind the scenes have been involved in an ugly "media war". The battle has
been conducted by Boris Berezovsky, a powerful businessman close to Mr
Yeltsin, against Vladimir Gusinsky, a media magnate who backs Mr Luzhkov.
Both have used their television and newspaper outlets to attack the other. 


Russia's Karabash: A town with the air of death about it

KARABASH, Russia, Aug 4 (AFP) - The town of Karabash in the Russian Urals has 
the unpleasant distinction, according to the United Nations, of being one of 
the most polluted places on the face of the planet.

This town of 17,000 inhabitants, is slowly dying, choking on the fumes from 
the copper foundry around which it was built.

The birth-rate is low and death at 45 is the norm, thanks to the 
all-pervasive toxic fumes which have also taken their toll on the local flora 
and fauna.

"Here death at the age of 45 is normal, with all that we are breathing in," 
local doctor Vladimir Makarevitch explained.

Last year, Krabash's mortality rate stood at 17.9 per 1,000 people, against 
14 per 1,000 for Russia as a whole. Its birthrate was 6.9 per 1,000 against 
the national average of nine per 1,000.

The figures are even more stark when compared to a Western country like 
France where the figures are nine deaths per 1,000 residents and 13 births.

The soil here has been poisoned for decades by high concentrations of lead, 
arsenic, nickel, cobalt, cadmium, copper and zinc, up to 150 times permitted 

"Hundreds of tonnes of sulphur are belched into the air each day by the fumes 
from the foundry's chimneys," foundry director Oleg Ranski told AFP.

"We don't have the money to build air purification units," explained the 
town's deputy mayor Viacheslav Yagodinets.

The nearby black mountains which form part of the local countryside are 
actually made up of some 18 million tonnes of copper slag, built up since 
1914 when the foundry, and its little village, were first built.

The wind carries the copper dust onto the nearby fields. "Nobody knows what 
the consequences are," bemoans Yevgeny Shram, head of the town's ecology 

The real mountains near Karabash are called "bald" by the locals. The 
foundry's sulphurous emanations have denuded them of all plants and grass.

At the other end of town it looks like a lunar landscape; nothing but dust 
for hundreds of metres (yards).

In 1992 the United Nations Environmental Programme (UNEP) designated Karabash 
as one of the world's most polluted towns.

The same year the foundry was closed for "ecological reasons" according to 
the town authorities, only to be reopened in February 1998.

That was after it had been taken over by an industrialist from the nearby 
town of Kyshtym, a man well-enough connected to get the foundry running again.

"Since the plant was reopened, our hospital has seen a sharp rise in 
pneumonia and bronchitis cases," said head nurse Natalia Charando.

The number of blood illnesses have doubled and skin complaints are also up, 
she added.

The death rate from cancer was 25.8 out of 1,000 in 1997 and 39.1 in 1998.

"I'm only 25 and I've already lost all my teeth," said local resident Alexei 

A government commission which came here three years ago merely verified the 
parlous state of affairs. Karabash is the only Russian town officially 
recognised by the government as an "ecological disaster zone".

That doesn't help the people living here: "The government promised financial 
aid, but we haven't seen a single ruble," complains deputy mayor Yagodinets.

The foundry's directors have promised to build air purification units by 
January 1, 2000.

"We strongly doubt that will happen. For the time being there isn't even a 
concrete proposal," said a foundry employee under cover of anonymity.

"We hope to have the problem solved in two-and-a-half years," said an 
optimistic Ranski.

"We are in the process of getting rid of 10-15 percent of the copper slag" 
produced by the factory as waste," he added. 


From: "Peter D. Ekman" <>
Subject: Re:Sucessful Joint Ventures
Date: Thu, 5 Aug 1999 

G.Krasnow (3418) and A. Liakov (3420 and 3394) have reminded
me of the question I asked several weeks ago - are there any examples
of "joint ventures that have actually worked out?" Frankly, I didn't 
take Liakov's list of 10 "successful JV's" very seriously. His contribution
seemed argumentative, rather than providing any real information.
Nobody else, either privately or on JRL has provided me with any examples.
Perhaps the problem lies in the definition of a successful joint 
venture. I think most businessmen would define it as one that results 
in a profitable, on-going business, but I suppose that a "one-time shot"
that makes money could also be considered successful. But a JV that meets
some milestone, say a producing test oil-well, shouldn't be considered 
successful until it actually produces some profit.
I don't claim to be an expert on all the companies mentioned 
in Liakov's list, but I have taught finance in Moscow for 5 years and 
closely watched the local business news. The Saint Springs bottled water
company seems to be the best example of a successful JV on the list, but
it hardly seems to be what most people consider to be a JV. As I understand
it, a diocese of the Orthodox Church provided the spring, and the
blessing on the label, and remains a silent partner. Otherwise the firm
seems to be run by the American partner.
Sun Brewing, as far as I can tell, is not a joint venture, but is
completely run by its Anglo-Indian majority owners.
Perm Motors seems to be an example of a one-shot deal
motivated entirely by politics (although I doubt that Pratt Whitney
would want to be on record saying that.) The deal here was that
Aeroflot would buy Boeing planes with U.S. gov't export financing,
but only if the engines were manufactured in Russia. Neither Boeing, nor
PW need any Russian help in finding or making aircraft engines, and
this JV will only be on-going as long as the political influence holds out.
I'm not aware of any profitable on-going business at
Gulfstream-Tupolev and Kato Aviation, but I'd suspect that if there
is any profit it has to do with the political nature of the aviation
I don't know anything about the Compass/Microsoft JV.
The 2 examples from the oil industry don't seem to pass
muster. Sakhalin 1 and 2 have their successful test wells, but are they
exporting in any volume? Haven't the original foreign investors
been forced out? Isn't Chernogorka the bankrupt subsidiary of bankrupt
Sidanko? The oil industry in general has seen lots of investment by
foreign companies, with almost no profits yet reported. Everybody
seems to be just sitting and waiting for real production sharing agreements
to be passed by the Duma.
I don't trust the 2 examples from the gold mining industry.
The precious metals industry has the reputation of being the most
crooked part of Russia's economy. The Lenzolota fiasco is the most
discussed JV in this industry. In fact, wasn't Star Mining part of
the Lenzolota mess?
Well - I readily admit that I don't have all the facts needed to
properly judge Liakov's list of 10 successful JV's, but I don't see any
clear outstanding examples of a profitable on-going business in the list.


Week's Moscow Political Rumors Eyed 

Moskovskiy Komsomolets
2 August 1999
[translation for personal use only]
"Rumors Rated" feature "prepared by" Mariya Fedorina 

Primakov Will Become Political Lone Wolf. Ill-Wishers 

While numerous parties and movements are intriguing over Yevgeniy Primakov 
in an attempt to lure him under their wing and exploit his "standing" in 
the election battles, there are persistent rumors that Primakov has long 
been pursuing his own game and has no intention of joining any blocs and 
parties. He is not giving a definitive answer because the ballyhoo over 
him is very advantageous as free publicity. The reason is simple -- 
Yevgeniy Maksimovich has now decided on his future political career. It 
is rumored that he will definitely run for the Duma. A single-seat 
district, most likely in cultured Moscow or intellectual St. Petersburg, 
will suit his purposes. Then, according to the plan, Primakov, as a 
deputy for a single-seat district, will seek the job of speaker. Then the 
process will be under way: The presidential elections are just around the 
corner, and anyone with any grounding in politics will tell you that 
there is no better springboard for a presidential contender than the post 
of speaker. Especially for someone with such political clout and 
experience. In general, the Kremlin, which is attempting to place 
barriers in Yuriy Luzhkov's way, has apparently almost forgotten about 
the danger stealing up from the rear. 

Aksenenko Back on the Offensive Against Stepashin. Government Rumors 

Any major war always involves local battles and insurgency. Even if it 
is a media war. Thus against the backdrop of the battle of the giants 
Vice Premier Aksenenko has started his own military operations. The 
target is Premier Stepashin. It is rumored that in order to conduct 
combat operations Aksenenko has set up a full-blown staff that is 
tracking all the enemy's movements around the clock and collecting 
together his remarks, casual phrases, and inappropriate jokes. The task 
is to hit him where it hurts as hard as possible, creating a negative 
image. For instance, if Stepashin is vigorously pursuing the idea that 
the position of the Russian ruble is strong and stable, Aksenenko 
elsewhere contends in a more reasoned fashion that the Russian currency 
is on the verge of swift decline. Specialists from the "staff" are 
working fruitfully with certain mass media, kindly providing 
out-of-context remarks by Stepashin and slips of the tongue or, even 
better, "leaks" from off-the-record conversations like the "slip of the 
tongue" in America to the effect that after his fruitful trip the 
Americans will at long last realize that Russia can be represented not 
only by idiots in wheelchairs. This creates the image of a rather 
inarticulate person with, to put it mildly, an unorthodox sense of humor 
and excessive, poorly concealed presidential ambitions. The picture is 
clearly not in the premier's favor. Meanwhile Aksenenko is playing the 
role of a sound economic manager and taciturn workaholic. 

Yeltsin Readies Himself To Become a Pensioner. Kremlin Rumors 

If rumors are to be believed, Yeltsin has at last firmly decided to go 
out to grass. It is said that the inner circle has decided not to torment 
its decrepit guarantor, and all efforts have now been devoted to staging 
a worthy send-off into well-earned retirement. Boris Nikolayevich himself 
is gradually growing accustomed to the image of pensioner and has even 
begun to take an interest in the living conditions of ordinary elderly 
citizens. It is said that his amazement knew no bounds when comparative 
figures concerning real pensions and the cost of the minimum consumer 
basket landed on his desk. It is not for nothing that at his meeting with 
Mikhail Zurabov, chairman of the board of the Pension Fund, he said that 
neither the government nor the president is satisfied with the level of 
pensions. The president's natural caution prevailed (who knows how 
everything will turn out -- at one time Gorbachev was receiving a pension 
of $2 per month) and he decided to cover himself in advance and to index 
pensions. And to do this not immediately before his departure, in order 
to prevent unwanted connections being made, but a year before the 
official time. The president's goodwill gesture immediately became the 
lead news item on all channels. Zurabov reported that pension indexation 
will now run ahead of inflation. Nobody said where the money is going to 
come from for this noble deed -- maybe they will lease out the Fund's new 

New "Book Affair" in Prospect. Publishing Rumors 

It is rumored that a new bestseller will soon appear in bookstores. It 
will be an audaciously plotted detective novel with chases, shooting, 
explosions, and other necessary attributes of the genre in which the 
protagonist will be the notorious Boris Abramovich Berezovskiy and the 
action will unfold around the Logovaz affair. The publisher of the 
masterpiece, the Vagrius publishing house, is rumored to be hoping for 
unprecedented profits, to which end a record print run has already been 
planned. In fact everything is rather more prosaic. The novel is indeed 
being readied for publication. The author -- Dubov, one of the founders 
of Logovaz -- has decided to tell the world how their creation was 
established and, using it as an illustration, to reveal the main 
financial mechanisms operating in contemporary Russia. In the publishers' 
opinion, this will be not a thriller, but a novel like Dreiser's "The 
Financier," and everyone will find it of interest: new Russians, 
specialists, and the ordinary man in the street. Because it graphically 
demonstrates how you can get it all when you start out with virtually 
nothing. I would like to add that with that kind of blurb the law 
enforcement agencies may also take an interest in the novel. 


Moscow Times
August 5, 1999 
Tsar of All the Russias? 
By Gwynne Dyer 
Gwynne Dyer is a London-based independent journalist. He contributed this
comment to the Moscow Times. 

The Russian president is a spent force politically, physically and
intellectually, and he still rules, despite the fact that he doesn't have
any support to speak of," Mikhail Gorbachev, the last president of the old
Soviet Union, said in June. "Protesters in the streets of Russia carry the
portrait of Josef Stalin. Well, we probably have a Stalin - a Stalin of a
different kind." 

As usual, Gorbachev was less than half right. The protesters carrying
Stalin's picture are almost all pensioners, sad but without political
significance. And Yeltsin is no Stalin. He doesn't kill people, and unlike
Stalin - who remained clever and alert to the day he died - Yeltsin is in
steep physical and mental decline. 

But Yeltsin is not a spent force politically, because he has the support
of "the family." 

Russia is an economic wreck, and the primary aim of most government
ministers is to loot the ruins one more time. There will be elections for
the State Duma in December, and then for the all-powerful presidency in
summer 2000, and Yeltsin should be doomed to defeat. But far from it: His
strategy for hanging onto power is getting clearer by the day. 

"The family" are not blood relations, although Yeltsin's daughter,
Tatyana, plays a major coordinating role. They are a loose circle of
cronies who include Yeltsin's most loyal political aides and some of the
country's richest men, like Boris Berezovsky and Roman Abramovich. 

These men owe their wealth in large measure to favors granted by the
Yeltsin government, and they stand to lose everything they have not hidden
abroad, if the next government favors a rival faction. Since Yeltsin has
become almost unelectable, their strategy is directed more at avoiding the
election than winning it. 

The model is provided by Belarus, a post-Soviet state where a fragile
national identity, much eroded by long-time immersion in the Russian and
Soviet empires, collapsed under the pressure of economic decline. In 1994,
voters in Belarus elected a former state farm boss, Alexander Lukashenko,
on a platform that basically promised to bring back Soviet times -
including reunification with Russia. 

Lukashenko never managed to interest Moscow in this proposal. Why would
150 million struggling but resource-rich Russians want to take on 10
million impoverished and resource-poor Belarussians? So the Belarussian
boss resorted to increasingly suspect measures to hang onto power,
including a 1996 referendum that rewrote the constitution to give him
semi-dictatorial powers - and postponed the next presidential election from
1999 to 2001. 

There were protests in Belarus in July on the date when the presidential
elections really should have been held, but Lukashenko's police broke them
up with clubs and tear gas, a usual practice. Lukashenko's rule is secure
enough - and now he's going to get his union with Russia as well. The
announcement was made in late July. 

You can see what's in it for Lukashenko. He gets to be vice president of
the new federation of Russia and Belarus, whatever it will eventually be
called, and Moscow is implicitly committed to defending his rule in order
to preserve the union. But what's in it for Moscow? 

If Russia becomes a part of a bigger federation (even one whose citizens
are 94 percent Russians), then presumably it will need a new constitution.
That document might well declare that the existing Russian president, Boris
Yeltsin, automatically becomes president of the new federation. It might
also transfer most of the powers of the Russian president to this new
office, and set the date for the first popular election for president of
the new union five years hence - in 2004. 

That would solve all of "the family's" problems, if it worked. But it
won't. Russia is too far gone. 

An immense reservoir of patience, goodwill and sheer inertia has held
Russia together for the past eight years, since the end of the Soviet Union
in 1991. The population has borne every insult to its intelligence and
every theft of its patrimony that the new elite - which is mostly the old
elite in new clothes - has heaped upon it. But, they can't get away with
this one. 

It might get by in Moscow, where some people are still making money and
where Yeltsin's leading rivals are allowed a certain space within which to
operate. But in the provinces, where almost everyone is desperate and their
patience is exhausted, it simply will not be accepted. Many regions will
simply cut their ties to Moscow. It doesn't require a rebellion; it
requires a simple repudiation of Moscow's authority and a refusal to
forward tax revenues. 

Last spring, the Council on Foreign and Defense Policy, which includes
many of Russia's leading politicians, warned that the "magic glues" that
hold the vast Russian state together were beginning to dissolve, and urged
immediate elections to give back to the government its political
legitimacy. "To wait until the elections in 2000 is extremely dangerous,"
it warned. So how will Russians react to a maneuver that negates the
elections entirely? 

One of the monarchy's official titles before 1917 was "Tsar of all the
Russias." The time when we talk of 'the Russias' in the plural again may
not be far away. 


World Socialist Web Site
UN report on Eastern Europe and the former USSR
The 'free market's' social catastrophe
By Nick Beams
August 5, 1999

The collapse of the Soviet Union and the East European regimes at the
beginning of this decade was hailed around the world as the triumph of the
“free market.” The abolition of state-owned property was, it was claimed,
about to provide a practical demonstration of the historical superiority of
capitalism, and supply the proof that it was the only possible form of
economic and social organisation.

Ten years on the results are in. They are documented in a United Nations
Development Program report released this week which details that what has
taken place is nothing short of a human catastrophe.

The murder of 6 million Jews by the Nazis is rightly described as a
Holocaust and regarded as one of the great crimes of the century. But one
wonders what words can be used to characterise a process which has led to
the premature deaths of some 9.7 million men in the countries of the former
Soviet Union and Eastern Europe directly attributable to the introduction
of the “free market”.

The facts and figures of this disaster leap out from almost every one of
the more than 100 pages of this document—economic output cut by more than
one half, poverty rates rising more than eight-fold, an escalation in
suicides and alcoholism, the return of previously-conquered diseases like
tuberculosis and the rapid spread of new ones such as AIDS, the
displacement of millions of people and the growth malnutrition among
children, coupled with the enrichment of a tiny minority and the takeover
of whole areas of the state apparatus by criminal mafias.

In most official publications, the countries of the so-called Commonwealth
of Independent States (CIS) and Eastern Europe are described as being in
“transition”—the implication being that they are on their way to reaching a
situation where privatisation and the “free market” will lead to rising
production and living standards. Such descriptions are aimed at concealing
what is really taking place.

In the words of the report: “The ‘transition' in most of the countries in
the former Soviet bloc in Central and Eastern Europe and the CIS is a
euphemistic term for what in reality has been a Great Depression. The
extent of the collapse in output and the skyrocketing nature of inflation
have been historically unprecedented. The consequences for human security
have been calamitous. By conservative estimates, over 100 million people
have been thrown into poverty, and considerably more hover precariously
just above subsistence.”

The turn to a market regime was supposed to improve economic efficiency and
accelerate economic growth. But it had exactly the opposite effect as
“investment collapsed, output and incomes fell sharply and growth rates
become negative.”

On average, gross domestic product in Central and Eastern Europe in 1997
was nearly 12 percent lower in 1997 than in 1990. But in many countries the
situation was much worse. In Latvia and Lithuania, for example, GDP was
only 59 percent of the 1990 level. Worse still was the situation in the CIS
(including the most populous countries, Russia and the Ukraine) where GDP
in 1997 was only 55 percent of the 1990 level.

In some countries, including Kazakstan, Armenia, Georgia, Lithuania and
Moldova, the decline in investment has been so great that it has been
impossible to maintain even the initial stock of capital.

Social polarisation

The precipitous fall in income has been accompanied by a “remarkable
increase in inequality in the distribution of income.” Before the process
of “economic reform” began the distribution of income was relatively
egalitarian. “During the transition period, however, income differentials
have widened considerably and in a number of countries the degree of
inequality ... now approaches that of the most inegalitarian of the
developing countries. This is conspicuously the case in the largest
country, the Russian Federation, where inequality is now comparable to that
in some Latin American countries.”

The net result of privatisation has been to “create a small and wealthy
capitalist class and a highly polarised society” with a shift in the
distribution of income “from labour to capital, as well as a sharp widening
of the wage and earning differentials.”

Summing up the impact on living standards, the report notes: “The
combination of a fall in average incomes and a rise in inequality resulted
in a very substantial increase in the incidence of income poverty. Using a
poverty line of $4 a day (in 1990 purchasing power parity dollars), the
UNDP estimates that poverty in Eastern Europe and the CIS countries
increased from 4 percent of the population in 1988 to 32 percent in 1994,
or from 13.6 million to 119.2 million. In other words, prior to the
transition to a market economy, mass poverty was unknown: all able-bodied
people had a job and hence a source of livelihood and an elaborate system
of social services ensured that the elderly, the ill and the handicapped
were protected from hardship. During the transition, however, the system of
social protection became much weaker, unemployment increased and real wages
fell. The inevitable consequence was the emergence of widespread poverty
and destitution.”

The consequences of this income collapse are detailed in a series of
statistics. In Moldova, for example, between 1990 and 1996 there was a
decline in the per capita consumption of meat of 57 percent, of milk and
dairy products 48 percent and of sugar 60 percent.

In Poland, which together with Slovenia are the only countries to have
experienced an increase in GDP, a recent study has found that some 60
percent of children suffer from some form of malnutrition, with 10 percent
permanently malnourished.

Poor nutrition is a serious problem in countries such as Belarus, the
Russian Federation and Ukraine. In Russia, the prevalence of stunting among
children under two years, an irreversible condition caused by
protein-calorie deficiencies in early childhood, increased from 9.4 percent
in 1992 to 15.2 percent in 1994.

The report found that iron deficiency is one of the most common nutritional
problems in the region.

“From 1989 to 1994, for example, the number of Russian women suffering from
anemia at the end of their pregnancies nearly tripled. In Ukraine, the
percentage of pregnant women with anemia rose from about 11 percent in 1990
to about 34 percent in 1995. A survey in Uzbekistan in 1994 showed that
anemia affected about 65 percent of all females between 15 and 50 years of
age, 59 percent of all preschool children, 82 percent of toddlers and 75
percent of infants.”

Increased mortality rates

One of the most significant effects of the introduction of the market
economy is the increase in mortality rates. While the biggest increase has
been among middle-aged men, teenage mortality is also on the rise.

Between 1980 and 1995 in Russia, life expectancy for Russian men fell by
four years, more than in any other country and today life expectancy for
males in the Russian Federation is just 58 years. Birth rates are also
falling with the result that “corresponding to their economic collapse, the
countries in the region confront a dramatic demographic contraction.” By
1995 ten of the so-called “transition” countries experienced a decline in

In seeking to quantify the demographic impact of the shift to the market
economy, the UNDP report noted the abnormally low proportion of men in the
population. Defining as “missing men” the difference between the numbers
present in the population if the sex ratios were normal and the number
actually present, the study found that there were 5.9 million missing men
in the Russian Federation and 2.6 million in the Ukraine. The figure for
the CIS was 9.0 million and that for the region as a whole 9.7 million.

“The transition,” the report went on to note, “has imposed a heavy cost on
the people of the region not only in terms of increased illness, higher
mortality and lower life expectancy but also in terms of social breakdown,
as reflected in increased alcohol consumption, a dramatic rise in drug
addiction and an increase in the suicide rate.”

In almost all countries, the suicide rate for men is higher than the
average for the European Union. In Hungary it is almost three times as high
and in the Russian Federation, Latvia and Lithuania, more than three times

While the reports notes that causes are multiple and complex, they stem in
the main from widespread insecurity with the most important factors being:
a loss of earnings, increasing economic uncertainty, especially in the
period of hyper-inflation, rising unemployment and the loss of purchasing
power of pensions and the decline in the coverage of health services. In
short, as the report puts it: “The transition to a market economy has
literally been lethal for a great many people.”

The incidence of disease is on the rise. In Russia the occurrence of
tuberculosis doubled between 1993 and 1994 and is reported to have
increased in Ukraine and Georgia. The incidence of sexually transmitted
diseases has exploded. In Russia, the incidence of syphilis rose from 4 per
100,000 people in 1989 to 172 per 100,000 in 1995. Between 1994 and 1997
HIV infection rates in Eastern Europe rose at least six-fold with a 70-fold
increase in some of the worst affected areas.

The problems of drunkenness and drug addiction have become rampant
throughout the region. A report prepared in 1997 on Kyrgyzstan declared
that “drunkenness and drug addiction are acquiring the proportions of a
national tragedy. It is widely recognized that the high incidence of infant
and children's illness and death is linked to the alcoholism of the
parents. ... The prevalence of drug addiction in the last five years has
increased by over 300 percent.”

Rise in organised crime

The report noted that “one of the most striking and ominous byproducts of
economic collapse during the transition in many countries of the region has
been the dramatic rise in crime.”

“In sharp contrast to conditions before the transition, people now find
themselves deprived of personal safety and security—often at the mercy of
organised criminal forces that have arisen on the basis of collusion with
corrupt government officials.”

Recorded crime saw a substantial increase after 1989. But here the official
figures considerably understate the true position. According to one
estimate no more than one quarter to one third of crime in the Russian
Federation was reported. So-called white collar crime, involved in the
export of and transit of goods and other business activities, is on the rise.

In Estonia for example: “Crime has grown more organised and professional;
new types of crime have appeared (e.g. credit card fraud) ... As a general
trend, criminals seem to be redirecting their interest from violence and
assault against property (theft) into the economic sphere, i.e. former
‘street criminals' try to continue their illegal activities in business.”

In Kyrgyzstan: “The market for criminal services is growing due to hired
killings and the racket. In the opinion of experts, the members of
different criminal groups are constantly undertaking attempts to penetrate
the authorities, including the legislature. Economic, official and general
crime in Krygyzstan is influencing the course of economic and legal
reforms. ... The new economic relations in Krygyzstan are leading to new
types of crime.”

A similar report on Tajikistan pointed out that: “By 1996, organized crime
became widespread, with the network of criminals forming a
state-within-a-state and seizing certain sectors of the economy. ...
Criminals have not only improved their skills, but have graduated from
committing theft, forgery and other petty crimes into murderers for hire,
hostage-taking and other violent crimes ... (there is) politicisation of
crime and criminalisation of politics. ... Dushanbee is the centre of
organized crime and corruption.”

In summing up the “costs of transition” the UNDP report notes the “dramatic
and widespread deterioration of human security. Employment is no longer
secure, nor are incomes. The old system of full, guaranteed employment is
gone, with no prospect of its return. For many people, income poverty has
become a way of life for the foreseeable future. People's place of
residence is also no longer stable, with mass migrations occurring within
the countries in transition, among them, and to countries outside the
region. Regional conflicts and tensions have also augmented the numbers of
internally displaced persons and refugees. There has been a tragic
breakdown in human security with respect to access to social services and
social protection. There is no longer any secure entitlement to a decent
education, a healthy life or adequate nutrition. With rising mortality
rates and new and potentially devastating epidemics on the horizon, life
itself is increasingly at risk.”

Confronted with this unprecedented social catastrophe, two responses can be
anticipated from the apologists and defenders of the “free market.”

There will be those who simply deny that it exists. That response was
typified in recent comments by Johannes Linn, the World Bank's
vice-president for the region, who declared at a recent conference that
“market-oriented reforms, combined with social reforms and institutional
strengthening have worked to turn former socialist, centrally planned
economies around and can put them on a sustainable path of economic growth
and social inclusion.”

Another, insidious, argument will be to assert that the blame for the
situation lies with the Russian Revolution itself. Such an approach was
displayed in a recent article by the Financial Times economics columnist
Martin Wolf. After drawing attention to the economic collapse across the
states of the CIS, he concluded that roots of the problem lie in the
“ruthless revolution” of 1917 “intended to create, by force, a selfless
human being” and that “Lenin's insane ambition has ended up in its
opposite—in a capitalist economy more ruthless, more corrupt and more
unequal than anything even he could have imagined.”

Such explanations will no doubt satisfy those who have lost all capacity
for independent thought.

But they will not pass muster before the more critically minded. They will
note that all the economic and social processes now unfolding in the former
USSR—falling living standards, declining health services, economic and
social insecurity, deepening inequality and social polarisation—are present
to one degree or another everywhere and are nothing other than the most
concentrated expression of the universal consequences of the workings of
the capitalist “free market”.

[DJ: For more information and to obtain copies of "Transition 1999 - Europe
and CIS Human Development Report" visit the UNDP Regional Bureau for
Europe and the CIS' website at]


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