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Johnson's Russia List


August 6, 1999    
This Date's Issues: 3424 •    

Johnson's Russia List
6 August 1999

[Note from David Johnson:
1. Moscow Times: Boris Kagarlitsky, Pact Could Rend Russia.
2. Ray Smith: Feshbach on Russian Demographic Catastrophe/3422.
3. Xinhua: Poll: Primakov, most Trusted Politician in Russia.
4. Reuters: Ex-PM Primakov seen holding key to Russia election.
5. Segodnya: The "Happy New Year!" Operation. JUSTICE MINISTER PROPOSES A 

6. AFP: Above-the-fray Stepashin vows clean national polls.
7. Ben Slay: More on Russian trade numbers/3423.
8. AP: Gorbachev Discusses Wife's Leukemia.
9. New York Review of Books: The US and the World: An Interview with 
George Kennan.

10. EastWest Institute Russian Regional Report: PATTERN EMERGES IN 

11. Moscow Times: Matt Bivens, Can Kremlin Cope With New Bloc? 
12. AP: Russian Business Daily Editor Ousted. (Kommersant)
13. Itar-Tass: Solar Eclipse WON'T Influence Russian Events Analyst.
14. The Economist: Russia's Foreign Debt Negotiations.]


Moscow Times
August 6, 1999 
Pact Could Rend Russia 
By Boris Kagarlitsky 
Boris Kagarlitsky is a researcher at the Russian Academy of Sciences' 
Institute for Comparative Political Studies. He contributed this comment to 
The Moscow Times. 

"It's not important how they vote. It's important how we count." This wise 
phrase is attributed to Comrade Stalin. Many Russian governors are ready to 
repeat it. 

Accusations of falsified elections have been advanced in various places, but 
nobody has ever tried to get to the bottom of them. What is more, the victims 
of the alleged cheating have expressed an almost emphatic indifference toward 
the problem. Violations of electoral law and the direct falsification of 
election results are discussed in the press, and several instances of them 
have been recognized by the official organs, but to this day not one local 
official has been punished. 

When the results of elections are nullified, it is not because a regional 
leadership rigged them, but because a figure inconvenient to the regional 
leader was voted in as a result, as was the case in Nizhny Novgorod and 
Leninsk-Kuznetsk. In these cities, people with criminal pasts were voted in, 
yet members of the same criminal brotherhood are sitting in other locally 
elected bodies. It's just that someone from the local criminal world got too 

Until recently, electoral falsification was compensated for by pluralism in 
the local leadership. One group "guided" elections to favor the left, another 
to favor the right and a third let matters take their natural course. As a 
result, the electoral outcomes more or less corresponded to reality. 

This year, the situation may change cardinally. Moscow Mayor Yury Luzhkov 
needs success in the State Duma elections as a bridgehead for the 
presidential contest. If winning just 5 percent to 6 percent of the vote is 
okay for a new movement, it is catastrophic for a politician with 
presidential ambitions. That everything is decided "correctly" in Moscow is 
understood. But even if the capital goes 90 percent for Fatherland, it is not 
enough for real success nationwide. If each region "decides correctly" for 
itself, Fatherland has little hope. 

The situation is reminiscent of an old Georgian joke. A taxi driver runs a 
red light and explains to the frightened passenger: "Relax, I'm a master." 
Suddenly, seeing a green light, he slams on the brakes: "Another master might 
be driving there," he says. Since acting alone has become dangerous, Luzhkov 
has decided to reach a deal with the All Russia bloc. This bloc includes real 
experts on elections. Just recall how Tatar President Mintimer Shaimiyev, in 
a crude violation of the electoral laws, made himself the single candidate 
for the post of president in Tatarstan and received, Soviet-style, more than 
90 percent of the vote. And just recall how Bashkir President Murtaza 
Rakhimov promised to cut off heat and electricity to regions that did not 
deliver a sufficient number of votes for President Boris Yeltsin. The St. 
Petersburg city council elections carried out by Governor Vladimir Yakovlev, 
another top member of All Russia, were also memorable: a murder, forgeries - 
the works. 

It is not surprising that these governors are uniting in one team, but it is 
interesting to ponder what caused them to unite with Luzhkov. In contrast to 
the Moscow mayor, the politicians who created All Russia have no presidential 
ambitions. Most of them are already presidents of autonomous republics. The 
leaders of these republics have not been noted for great-power patriotism, 
and Luzhkov's imperial rhetoric seemingly should have scared them. 

But they do not believe a word the Moscow mayor says, and thus are ready to 
cooperate with him. In exchange for the regional leaders' support, Luzhkov 
must promise them a level of independence that risks turning the Russian 
presidency into a nominal post. Naturally, these promises can be subsequently 
reneged on, but the autonomous presidents will not allow themselves to be so 
easily tricked. 

The political process is entering a new cycle. The replacement of Soviet 
President Mikhail Gorbachev by Yeltsin resulted in the breakup of the Soviet 
Union. A politician who holds power strives to hold the country together, 
because it is his possession. A politician who is fighting for power is fully 
capable of sacrificing that part of the earth that has not yet become his 
personal estate. 

Today it is Yeltsin who faces the question of handing over power, and the 
stakes are very high. Most likely, the breakup of the country into pieces 
will take place under a din of patriotic rhetoric. 

The well-being of the capital is based on sucking in financial resources from 
the periphery to the center. The centralization of capital allows these 
resources to be used more profitably. So Luzhkov is interested in ensuring 
that a unified economic space is maintained. The paradox is that Yeltsin's 
team in 1991 calculated exactly the same way. Taking as a given Russia's 
economic dominance over the political periphery, and convinced that "the 
republics have nowhere to go," this team was ready to allow the Soviet Union 
to break up. Meanwhile, the logic of political disintegration began to take 

This is by no means the only danger connected to the regional leaders' 
consolidation around Luzhkov. Pluralism is the guarantee of democracy. The 
uniting of the regional elite and their attempt to take control means the 
violation of the existing equilibrium. The pluralism of electoral violations 
until now has been the only real guarantee of free choice. The more the local 
elites are consolidated, the less pluralism depends on the will of the 

The latest developments also have a positive side. The governors' merger may 
be premature. They might fall out with one another. Or they may provoke the 
displeasure of the Kremlin. In this case, the consequences will be 


Date: Thu, 5 Aug 1999
From: (Ray Smith) 
Subject: Feshbach on Russian Demographic Catastrophe/3422

Murray Feshbach¹s demographic analyses of Russia are always worth paying
attention to. I¹d like to make a couple of comments about his analysis and
forecast in JRL3422. He forecasts a Russian population of 80 million and a
US population of 394 million by 2052, which might lead one to infer that he
thinks that more is better. I take his argument to be that for a
demographic catastrophe of this magnitude to occur, the health,
environmental and economic conditions in Russia are, and will continue to
be, horrific. Of the reasons he cites for this demographic catastrophe, it
seems to me that women¹s reproductive health, prenatal care, infant
mortality and childhood disease prevention could be improved with targeted
programs that would not be impossibly expensive. It isn¹t part of his
analysis, but worth keeping in mind that the social and environmental
consequences of almost a 50 percent increase in US population over the next
50 years will also be formidable. 

Maintaining current GDP in Russia while the population drops by some 65
million may not be possible, but isn¹t GDP per capita the appropriate
measure to use in this context? As for the number and quality of cohorts
for the military, it seems to me that the size of a country¹s military
should not be greater than its economy and population can support, and
probably somewhat less in order to increase overall economic efficiency. 
The groundwork for the collapse of the Soviet Union was laid when it tried
for decades to maintain a military establishment far larger than it could
efficiently support. Russia¹s military is still probably larger than it
should be given the economic and demographic base. 

The real geopolitical implication of his analysis is that under the
conditions Murray Feshbach lays out, Russia may be unable to maintain her
borders against pressure from the south. Would this affect US interests? 
If so, what should we do about it? It is not too soon to begin thinking
about this issue. If we don¹t care, a laissez faire attitude may be in
order. If we do, we should be developing long-term programs that will help
Russia maintain an economic and demographic base sufficient to defend its
territorial integrity. 


Poll: Primakov, most Trusted Politician in Russia

MOSCOW (Aug. 5) XINHUA - Former Russian Prime Minister Yevgeny Primakov is 
the most trusted politician in Russia, according to a latest public opinion 

Primakov is trusted by 26 percent of the 2,407 Russians polled by the 
All-Russian Public Opinion Center from July 8 to 24, well ahead of any other 
political figure in the country, the Interfax news agency reported Thursday. 

The margin of error in such polls is less than 2 percent. The people polled 
were asked to name five or six political figures they trusted. The center 
takes such polls once a year. Primakov was not on the list last year. 

The former prime minister is followed by Moscow Mayor Yuri Luzhkov, the 
leader of the Fatherland movement, with 17 percent, significantly up from 
last year's 11 percent. 

Communist Party leader Gennady Zyuganov trails the mayor by only a fraction 
of 1 percent. He was named by 14 percent last year. Yabloko party leader 
Grigory Yavlinsky has improved his standing, up to 15 percent from last 
year's 12 percent. 

Incumbent Prime Minister Sergei Stepashin was named by 13 percent. He is 
followed by Krasnoyarsk territory Governor Alexander Lebed, who dropped to 11 
percent from last year's 17 percent. 

Liberal Democratic Party leader Vladimir Zhirinovsky rose to 8 percent from 
his showing last year of 6 percent. Former Russian Prime Minister Sergei 
Kiriyenko is trusted by 7 percent, down from last year's 10 percent. 

Kemerovo region Governor Aman Tuleyev was named by 5 percent (4 percent). 

One of the Right Cause movement's leaders, Boris Nemtsov, is the last on the 
list of 10 most popular political figures with 4 percent as against last 
year's 8 percent. 

The percentage of those who say they trust "nobody" dropped from 31 percent 
last year to 28 percent, Interfax said. 


Ex-PM Primakov seen holding key to Russia election

MOSCOW, Aug 5 (Reuters) - Russia's former prime minister Yevgeny Primakov, 
sacked by President Boris Yeltsin in May, holds the key to the coming 
parliamentary election, an opinion survey showed on Thursday. 

The findings came as Moscow's powerful mayor, Yuri Luzhkov, tried to persuade 
Primakov to join a newly formed coalition uniting Luzhkov's centrist 
Fatherland party and the All Russia group of regional leaders. 

The survey, conducted by the VTSIOM polling organisation, showed support for 
Fatherland in December's poll would jump from 16 percent to 28 percent if 
Primakov joined the party. 

If Primakov threw in his lot with the Communist Party, the largest party in 
the current State Duma lower house of parliament, support for Luzhkov's party 
would slip to 12 percent. Backing for the Communists would rise from 34 
percent to 40 percent. 

Primakov won wide praise for steering Russia out of its political crisis 
following last August's financial crash. His cautious, consensual style of 
government and support for more state controls over the economy struck a 
chord with an electorate wearied by a decade of wrenching changes. 

Yeltsin sacked him abruptly in May, saying he was dragging his feet over 
reforms. Many commentators said the real reason was jealousy, noting that 
Primakov's successor, loyal Yeltsin ally Sergei Stepashin, has made no 
significant policy changes. 

Primakov, a former spymaster who turns 70 this year, has good relations with 
the dynamic and ambitious Luzhkov, 62, but has not yet said whether he will 
join the new electoral bloc formed on Wednesday. 

It is also not clear whether Primakov, Luzhkov or a third candidate would 
head the bloc -- a potential springboard to the presidency. 

Some commentators see a left-centre alliance of Luzhkov, Primakov and 
regional leaders such as Mintimer Shaimiyev as unbeatable. 

Primakov's decision on whether to contest the Duma race or to stand aside 
will also have an impact on Russia's other political parties, the VISIOM 
survey showed. 

These parties, including the liberal Yabloko faction of Grigory Yavlinsky, 
Vladimir Zhirinovsky's nationalist Liberal Democratic Party and the reformist 
parties of Boris Nemtsov and Sergei Kiriyenko would all receive fewer votes 
in the event of Primakov joining the Duma race, the survey said. 

The poll canvassed the views of 1,600 Russians across the country in late 
July, before news of the merger between the Fatherland and All Russia 


Russia Today press summaries
August 5, 1999
The "Happy New Year!" Operation
The Kremlin has found a new way to block its political opponents’ path to
power. Recently, Boris Yeltsin ordered Justice Minister Krasheninnikov to
investigate whether KPRF is acting legally. Now the same justice minister
has been commissioned to check if the parties registered in December 1998
have the right to participate in parliamentary elections scheduled to take
place on December 19. 

The question, raised by the Central Election Commission head Veshnyakov,
was clearly aimed at the Moscow mayor's Fatherland party, registered
precisely on December 19, 1998. The law requires that a party should be
registered for at least a year before the elections to be eligible. Thus,
Veshnyakov proposed Krasheninnikov solve an arithmetical problem: can we
take for granted that the whole year passes between December 19 and
December 19? The answer is far from clear, although Krasheninnikov promised
one would be handed down in ten days. 


Above-the-fray Stepashin vows clean national polls

MOSCOW, Aug 5 (AFP) - Russian Prime Minister Sergei Stepashin vowed to remain 
above the fray in order to ensure upcoming national and presidential polls 
were free and fair, in an interview in the Izvestia daily dated Friday.

"I can tell you one thing -- the government will not allow 'dirty' 
elections," the premier told the paper, the ITAR-TASS newspaper reported.

"Russia needs fair elections, with the strict observance of the law and with 
the agreement of all the main participants on honest and dignified rules for 
the game," he told the paper.

Stepashin said he would take "no-one's" side in legislative polls due in 
December, saying "the cabinet must remain above political strife, especially 
in an election year."

The government "must pass an exam in unquestioning obedience to the 
constitution, serve the interests of the entire nation and strictly carry out 
the will of one person -- the president," he added.

Failure to do so would prevent Russia from becoming a modern, prosperous 
country, Interfax citing the interview as saying: "Becoming the largest 
banana republic without bananas is an unenviable prospect."

Previous premiers had been seen by voters as linked to different political 
movements and industrial-financial groups, said Stepashin, giving politicians 
the reputation of being in the pockets of lobbyists.

"Today, on the eve of important elections, even a hint of such a political 
sickness would be harmful, destructive for the entire construction of the 
Russian state," Stepashin warned.

He dismissed as "completely inopportune all the rumours" about him running in 
presidential polls next summer, an accusation regularly levelled at the 
premier who becomes acting president should the head of state die in office.

"I think any coquetry over the fight for the presidency would be cynical," 
Stepashin said, adding that a statesman should not dream of high office but 
of working to reinforce the weakened authority of the state.

He said the cabinet would not side with any of the business lobbies 
attempting to win influence in the corridors of power.

Political discord and corruption "are generated by the quest of one or 
another group to unjustly acquire the public wealth and illegal monopoly of 
economic, financial and information resources," he added.

"Only the law and common-sense can prevent the arbitrary rule of clans," said 
the premier, who has struggled to impose his authority on a cabinet many of 
whose members are seen as closely linked to rival business groups competing 
for influence inside the Kremlin. 


Date: Thu, 5 Aug 1999
From: Ben Slay <>
Subject: More on Russian trade numbers/3423

Concerning Mr. George Marquart's very helpful point about the problems of
Russian trade data, let me add the following observations.

Russian official trade data -- indeed, all Russian data -- are certainly are
far from perfect. However, two factors suggest that the figures to which we
are all referring may not be utterly meaningless.

First, Goskomstat's trade numbers are not taken simply from the Customs
Office. My understanding is that Goskomstat "corrects" the raw customs trade
data to reflect estimates of shuttle trade and other more illicit trading
activities. In making these corrections, Goskomstat is guided by the
balance-of-payments data on trade that are collected by the Central Bank.
As I
understand it, this is why in Russia -- in contrast to many other countries --
there is almost no difference between the monthly trade figures issued by the
Statistical Office and the Central Bank.

Obviously, the Central Bank trade numbers and reporting practices are hardly
squeaky clean. Still, my sense is that the sum total of the Goskomstat and
Central Bank efforts produce more accurate trade numbers than would be the
if this procedure were not followed. Among other things, the trade figures
that Goskomstat releases are almost always greater -- often significantly
greater -- than what the Customs Office reports quarterly.

Second, as Alec Nove's "law of equal cheating" points out, statistical
shenanigans that bias data levels do not necessarily bias data trends. As
long as the amount of (probably outrageous) data falsification in Russia
remains roughly constant over time, the trends reflected in the official data
-- as regarding, for example, Russia's exports and imports since August
1998 --
should be fairly accurate.

Finally, I heartily second George Marquart's request for a thorough
study of recent Russian trade trends. The OECD in Paris collects trade
data on
all of Russia's major trading partners; perhaps they could be of some

Ben Slay
PlanEcon, Inc.


Gorbachev Discusses Wife's Leukemia
August 5, 1999

MOSCOW (AP) - Looking somber, former Soviet leader Mikhail Gorbachev told a 
Russian television interviewer Thursday that his wife is ``at her limit'' as 
she undergoes treatment in Germany for leukemia.

``Yesterday and today, she was better, but it's too early to say anything 
yet. It's a grave misfortune,'' Gorbachev told NTV television in an interview 
outside the Muenster, Germany, hospital where his wife, Raisa, has been since 
July 25.

Gorbachev has been keeping a vigil at the University Clinic in Muenster, 
where the 67-year-old Mrs. Gorbachev has been undergoing chemotherapy.

``It all goes before my eyes. I am there from the early morning until late 
into the night,'' said Gorbachev, who was wearing blue jeans and a denim 
shirt. He described her treatment as ``very hard.''

``She is brave, keeping up, although she is at her limit,'' he said. However, 
he added, ``Today, her condition is such that it gives hope.''

Gorbachev said he had received telegrams from German Chancellor Gerhard 
Schroeder, U.S. President Bill Clinton and former President George Bush, 
among others.

``Many people have reacted with compassion,'' he said.

Mrs. Gorbachev, a former philosophy instructor, overturned the dour image of 
Kremlin wives in globe-trotting appearances that showcased her poise and 
sophistication. However, like her husband, she was - and still is - strongly 
disliked by most Russians, who regarded her as arrogant and extravagant.


New York Review of Books
August 12, 1999

The US and the World: An Interview with George Kennan 
The following interview with George Kennan took place in Princeton in June,
during the days following the end of the war in Kosovo. 

Richard Ullman: Are you surprised at the role that Russia has played in the
bargaining over Kosovo? 

George Kennan: Not really. It is, for them, largely a matter of prestige.
Precisely because they now have no great military power they fear that the
rest of the world will forget that they are a great people, which of course
they are in many respects, and by no means only the military ones. To be
able to play a useful part in the resolution of the Kosovo crisis is, for
many of them, a much-needed source of reassurance about themselves; and I
see no reason why we should not, on principle, welcome it. Of course, their
involvement will present problems. There will be many disagreements.
Compromise will be required at many points. Such is the essence of
international life. 

R.U.: How do you explain the chaos in Russia? 

G.K.: Chaos? I am not sure that that is the best word for it. Conditions
are, of course, terrible. But life goes on. We seem to have expected them
to change, within a single decade, an entire great governmental, social,
and economic system. Even in more favorable conditions that would have been
difficult. But consider their situation. Since the Thirty Years' War, no
people, I think, have been more profoundly injured and diminished than the
Russian people have been by the successive waves of violence brought to
them by this past brutal century. There were: the Russian-Japanese War of
1904-1905; the fearful manpower losses brought about by Russia's
participation in the First World War; the cruelties and the fighting that
were a part of the consolidation of Communist power in the immediate
aftermath of that First World War; then, the immense manpower losses of
World War II; and finally, extending over some seven decades and
penetrating and in part dominating all these other disasters, there were
the immense damages, social, spiritual, even genetic, inflicted upon the
Russian people by the Communist regime itself. In this vast 
process of destruction, all the normal pillars on which any reasonably
successful modern society has to rest --faith, hope, national
self-confidence, balance of age groups, family structure, and a number of
others--have been destroyed. The process took place over most of an entire
century. It embraced three generations of Russian people. Such enormous
losses and abuses are not to be put to rights in a single decade, perhaps
not even in a single generation. 

You may ask: Was not much of all this the fault of one or another of
Russia's own governments? Certainly it was. But it was not the fault of the
great and essentially helpless mass of the common Russian people. 

R.U.: One of the striking things is the absence of a feeling of common
endeavor. Everyone seems to be out for himself. 

G.K.: Yes, that is the way things look, but mostly among certain fringe
sectors of Russian society. And one must not forget the positive features
of the situation. Communism has been cast off. They have a constitution.
They have elections, and elected institutions. Of course it is true that
these institutions function extremely badly. But no one has seriously urged
their abandonment. To me, one of the heartening aspects of the recent
period has been the almost pathetic patience of the common people of Russia
in the face of the terrible conditions under which they have been compelled
to live. I think it amazing that there has not been more of a popular
demand for a return to communism, since in many instances much of their
recent condition has been worse than it was in the final years of Communist

R.U.: I am surprised that the public hasn't rebelled against enormous
profits made by some individuals. 

G.K.: Well, I think that is coming. I hope, at least, that with the
approaching elections in Russia you may see a change for the better in that
respect. The outgoing parliament embraced many people who had one foot in
the old regime and one foot out of it, and never knew quite how to behave.
But what is now impending has to be a change in the generations. Younger
people are bound to come more prominently into 
more powerful positions than has been the case in the past. And I am
hopeful that they will bring to their participation in political life many
positive contributions of one sort or another. 

R.U.: One of the striking aspects of the present situation is the degree to
which Russians whom I would have characterized as liberal --indeed,
scholars from the institutes with whom we all interacted for many many
years-- have taken a very hard line against NATO and NATO enlargement and
against NATO's intervention in Kosovo, and I wonder whether they have taken
that line because it really represents what they feel and think, or whether
this is another example of posturing, of aiming at domestic opinion in
Russia. There is great animosity toward NATO on the part of many people
whom I would characterize as liberal. There are few who have the courage to
say that NATO does not threaten Russia and that the ethnic cleansing and
the events in Kosovo are so egregious that they deserve NATO involvement. 

G.K.: If I understand your position correctly, I am afraid that on this
point you and I have a real disagreement. I have never seen the evidence
that the recent NATO enlargement (that brought the Poles, the Czechs, and
the Hungarians into the alliance) was necessary or desirable. We are now
being pressed by some advocates of expansion to admit the Baltic countries.
I think this would be highly unfortunate. I agree that NATO, as we now know
it, has no intention of attacking Russia. But NATO remains, in concept and
in much of its substance, a military alliance. If there is any country at
all against which it is conceived as being directed, that is Russia. And
that surely is the way the Poles and others in that part of the world
perceive it. 

These are sensitive borders these borders between Russia and the Baltic
countries. I will not go into the history of Russia's relations with those
Baltic peoples, other than to ask you to remember that they were 
included in the Russian empire for nearly two hundred years in the two
centuries before World War I, and much of their advance into modern life
was achieved during that time. And then, for a period of almost another two
decades, they were quite independent, and this was accepted by the world
community and, with the exception of the Communists, by most of the
Russians themselves. It took Hitler to virtually compel the Russian
government to take them over in 1939, and then to put an end to their
independence in 1940. And the later entry of Russian forces onto their
territory occurred (and this we should remember) in the process of pushing
the German army out of that region, a process which had our most complete
and enthusiastic approval. 

In other words, the Russian relationship to the Baltic peoples has had many
ups and downs. They have been a part of Russia longer than they have been a
part of anything else. For a time they were fully independent. I never
doubted or challenged the desirability of their independence. I never
ceased to advocate it in the years when they didn't have it. But I don't
think that it would be a good thing for NATO to try to complicate that
historic relationship by taking these countries into what the Russians are
bound to see as an anti-Russian military alliance. 

R.U.: What do you think the relationship between Russia and the former
Soviet republics will look like say a decade or so from now? 

G.K.: Oh, I don't think it will be too troubled. After all, the Russians,
under Yeltsin, took the lead in pushing them into independence ten years
ago. He left them no alternative but to accept it. Why should the present
Russian government wish to reverse it? By and large, Russia has been better
off without them. 

Of course, there are the problems of Russian minorities in two or three of
those countries. In the case of Ukraine, in particular, there was the
thoughtless tossing into that country, upon the collapse of Russian
communism, of the totally un-Ukrainian Crimean peninsula, together with one
of the three greatest Russian naval bases. For that we, too, must accept a
share of the blame. But even in this case, all the recent Russian
aspirations have been limited to the alleviation of the effects of these
blunders; they have not taken the form of any encroachments upon Ukrainian

R.U.: Now, what has the United States done that's right and what have we
done that's wrong in dealing with the problem of Russia since the end of
the cold war? 

G.K.: Well, it certainly has been a record of well-meaning. I think we were
mistaken in believing that a certain amount of money placed in the hands of
the present Russian government would improve things significantly. A large
portion of it has, after all, ended up in the pockets of various
individuals. We should not have put money into that country unless and
until there were real institutional guarantees against its misuse for
purposes we never intended. 

R.U.: How do you assess Yeltsin? 

G.K.: Well, you ask me what our government has done wrong in its relations
with Russia. One thing that falls at once to my mind, in that category, has
been the overpersonalizing of the relationship--treating it as though it
all stood or fell with the fate of one or another individual, Yeltsin or
Gorbachev or whoever. I might point out that this is a weakness in our
diplomacy that goes far beyond Russia. We seem to love to deal with
individual statesmen rather than with their governments. Of all these
so-called world leaders whom we have cultivated, some were real dictators,
some were not. But we seem to have treated them all as though that was
precisely what we expected them to be, and, in a sense, wanted them to be.
Hence all the summit meetings, with the immense wastages of money and of
people's time that they have involved. I submit that governments should
deal with other governments as such, and should avoid unnecessary
involvement, particularly personal involvement, with their leaders. The
leaders, ours included, come and go; governments remain; and for this
reason relations among governments are, in the long term, perhaps less
glamorous, but more dependable. 

R.U.: How would you conduct these relationships? 

G.K.: I would urge a far greater detachment, on our government's part, from
their domestic affairs. I would like to see our government gradually
withdraw from its public advocacy of democracy 
and human rights. Let me stress: I am speaking of governments, not private
parties. If others in our country want to advocate democracy or human
rights (whatever those terms mean), that's perfectly all right. But I don't
think any such questions should enter into our diplomatic relations with
other countries. If others want to advocate changes in their conditions,
fine, no objection. But not the State Department or the White House. They
have more important things to do.....


Date: Thu, 5 Aug 1999 
Subject: Russian Regional Report, (v. 4, n. 29)

EastWest Institute
Russian Regional Report
Vol. 4, No. 29, 5 August 1999

Center at Hokkaido University, Japan, held a symposium on regional
in Russia, with a special focus on Sakhalin. Professor Philip Hanson gave the
keynote speech, in which he reported the findings of a three-year, European
Union-funded project on Russian regional development that he has been
heading at
the United Kingdom's Birmingham University.
Hanson noted that regional differences have increased sharply since 1991,
but he argued that most of the growing inequality is due to the initial
shape of
the regional economy in 1991 rather than subsequent policy choices by regional
elites. The ratio of real income in the richest 10 percent of regions to the
poorest 10 percent is now about 4:1. However, the ratio between the richest
poorest households is 12:1, so inequality within regions is three times more
important than inequality between regions. Migration from the poorer
regions has
been an important factor ameliorating the rise of unemployment. He also
an "agglomeration effect," with more jobs being created in large cities (1
million plus) than in smaller towns.
Despite the inequalities between regions, Hanson noted a consistent
sad pattern. Russia is "a bankrupt country composed of mostly bankrupt
While most regional leaders still look to Moscow for political support and
reassurance, regional dependence on Moscow for money is often exaggerated by
Western observers. Hanson noted that federal transfers to the regions amounted
to a mere 1.2 percent of GDP in 1995-97 - only a tenth of total regional
government revenues, which were 15.5 percent of GDP.
One surprising finding was that some regions that earlier looked
well-placed for growth -- because they were gateways to Western markets, or
because they had natural resource endowments -- did less well than expected.
Elites in many gateway regions with external borders (such as Primorye,
Krasnodar, and Kaliningrad) have been suspicious of foreign involvement, while
resource-rich regions have been vulnerable to shifts in world commodity
and to battles over ownership. - Peter Rutland in Hokkaido


Moscow Times
August 6, 1999 
Can Kremlin Cope With New Bloc? 
By Matt Bivens
Staff Writer

If Yury Luzhkov and Yevgeny Primakov join to create a single political 
steamroller, what will "the family" do? 

That's the question Russian media and politics watchers are mulling these 
days. Former Prime Minister Primakov has not yet joined Moscow Mayor Luzhkov 
in the new Fatherland-All Russia coalition, but his participation is widely 
regarded as all but inevitable. 

It is also regarded as all but unbeatable: A Primakov-Luzhkov movement - one 
packed with other lesser but nevertheless powerful regional leaders, such as 
Tatarstan's Mintimer Shaimiyev and St. Petersburg's Vladimir Yakovlev - would 
walk away with dozens of seats in the State Duma elections in December, and 
be well positioned to put either Primakov or Luzhkov into the Kremlin in June 

This is what must be worrying "the family" - the Kremlin coterie whose power 
hinges on having the ear of President Boris Yeltsin. If Yeltsin goes, so do 

What's more, if he goes Yeltsin will probably be able to cut an 
immunity-from-prosecution deal - just in case, of course - but expect no such 
leniency for "family members" like the oil tycoons Boris Berezovsky and Roman 
Abramovich, or the Kremlin chief of staff, Alexander Voloshin. 

Prosecution is by no means hypothetical for many Kremlin habituÎs. Swiss 
prosecutors say they are investigating Kremlin property-management chief 
Pavel Borodin and 22 other unnamed top officials on suspicion of money 

Berezovsky had charges of embezzlement from state-owned Aeroflot and money 
laundering dropped when his enemy Primakov lost the Cabinet in May - but what 
happens under, say, President Primakov? 

Media in recent days have also revived old allegations tying Berezovsky and 
Voloshin to the All-Russian Automobile Alliance, or AVVA, a company that sold 
shares to the public and then collapsed amid charges that it had been a 
pyramid designed to swindle. 

The Moskovsky Komsomolets newspaper this week upped the ante with an article 
tying Yeltsin himself to AVVA. MK reported that Yeltsin had granted AVVA 
massive tax and customs duty exemptions with a 1993 presidential decree. That 
allegation called to mind the now-defunct National Sports Fund - which 
earlier in Yeltsin's reign used such presidential decrees to import duty-free 
alcohol and cigarettes, in a business that cost Russia hundreds of millions 
of dollars in lost revenues and irked the International Monetary Fund. 

In other words, Primakov and Luzhkov are coming for the family, and the 
family knows it. So what can it do? Here are some of the options now being 
discussed in the media: 

***Cut a deal with Luzhkov and Primakov:*** This works for Yeltsin, and 
perhaps his daughter and image adviser Tatyana Dyachenko. As a condition for 
going quietly, Yeltsin could get real estate, money, government security 
protection, immunity from prosecution, and perhaps even the honor of a 
lifetime seat in the Federation Council, the upper house of parliament. 

But Luzhkov and Primakov have shown no inclination to offer such sweet terms 
to Berezovsky or Voloshin. 

And even if Yeltsin is offered this deal, what happens if the ruble crashes 
again in 2003? What's to stop the Primakov-Luzhkov Kremlin from reneging and 
dragging Yeltsin out of retirement and into the dock, as a way of deflecting 
popular anger? 

***Fight to win fair (more or less):*** People assume Primakov and Luzhkov 
are unbeatable. But December is still far off, and June is an eternity away. 
Why not pick a plausibly electable candidate - Prime Minister Sergei 
Stepashin? Krasnoyarsk Governor Alexander Lebed? - and back him to win. 

The Kremlin family controls major media - including the ORT and RTR 
television stations and the newspapers Kommersant and Nezavisimiya Gazeta - 
and could command the obedience of many more, through everything from tax 
audits to pressure from the new Press Ministry of Mikhail Lesin. 

It controls money - key Kremlin loyalists are plugged in at natural-gas 
monopoly Gazprom, at weapons exporter Roosvoruzheniye and at national power 
company Unified Energy Systems, among other things. 

It even has a small stable of modest political properties at its side, 
including the former prime ministers Yegor Gaidar and Sergei Kiriyenko, the 
UES chief and former privatization tsar Anatoly Chubais and the 
market-oriented Samara Governor Konstantin Titov. 

None of those names heads a winning presidential ticket; probably the only 
winning possibility is Lebed, the popular ex-general who opposed the war in 
Chechnya - and negotiated an end to it. With enough money and media, Lebed 
would be truly formidable. 

But while Lebed is apparently beholden to Berezovsky - who reportedly helped 
fund his Krasnoyarsk election - the general is also an unpredictable loose 

***Fight to win - period.*** 

If the family feels it can't trust any of the above options, it might try to 
hold onto power extraconstitutionally. 

Former Kremlin aide Sergei Zveryev, who was sacked this week - he says for 
trying to convince chief of staff Voloshin to compromise with Luzhkov - 
announced at a press conference this week that the Kremlin was plotting this 
very scenario. 

A tidy way to make this scenario work would involve putting unification with 
Belarus on the agenda: Why have Russian Duma elections in December if the 
Russian Duma will be gone by, say, March, to be replaced by the 
Russian-Belarussian Duma? (Or something like that.) 

A quicker and dirtier route would be calling a state of emergency - most 
likely to combat rising violence in the violent Caucasus. If he declared a 
state of emergency, affectionately known as a ***cherezvychaika***, Yeltsin 
could rule by decree, unrestricted by constitutional deadlines for elections. 

A third option would be to sack Stepashin and replace him with someone the 
Duma will never confirm as prime minister - national security chief Vladimir 

Moskovskiye Novosti finds this an intriguing possibility; it speculated this 
week that Yeltsin could use the constitutional rules to disband the Duma if 
it refuses to confirm Putin, then quickly resign. Power would remain in the 
family because Putin would be acting president, and there would be no 
parliament - an ideal situation for planning a next move. 

Like all of the other options, this one is grim for the family. The family 
could easily find itself in the same position as the August 1991 
***GKChPisti*** - the coup plotters who tried to restore Soviet Communist 
Party rule, and failed.a 


Russian Business Daily Editor Ousted
August 5, 1999

MOSCOW (AP) - The editor of Kommersant, a leading business newspaper partly 
owned by Kremlin insider Boris Berezovsky, has been fired, a news report said 

Kommersant shareholders dismissed Raf Shakirov on Tuesday, the Interfax news 
agency said. Shakirov said his ouster was part of Berezovsky's effort to gain 
full control of Kommersant before presidential elections in 2000, when 
President Boris Yeltsin is required to step down.

Berezovsky, one of Russia's richest and most influential tycoons, owns stakes 
in several media outlets and has made no secret of his intention to gain 
control of Kommersant. Russian media reports say Berezovsky recently acquired 
a 15 percent stake in the paper.

``We continued to act as we thought best, and this naturally could not suit 
the new owner,'' Shakirov told NTV television. ``He could no longer tolerate 
what we write.''

Media reports said Berezovsky was also behind the buyout of the remaining 85 
percent stake in Kommersant this summer by U.S-based American Capital, a 
little-known firm established in May - around the time negotiations were 
underway to sell the paper.

American Capital announced when it bought Kommersant that the terms of its 
contract forbade high-level editorial changes at the paper for a year.

Shakirov was among 14 prominent journalists and media executives who last 
week openly accused the Kremlin of trying to suppress the media in order to 
strengthen its grip on political power.


Solar Eclipse WON'T Influence Russian Events Analyst.

MOSCOW, August 6 (Itar-Tass) - The solar eclipse of August 11 will have no 
influence on the developments in Russia, a staffer of the Analysis and 
Forecast Center of the Era of Aquarius newspaper who introduced himself as 
Yuri Yuriyev told Itar-Tass on Thursday. 

In his words, no natural or technogenic catastrophes threaten central Russia 
in that period, and the political life will not be turbulent. "There will be 
no uprisings or revolutions," he remarked. 

Yuriyev, however, forecasts a cabinet reshuffling in fall but says the 
premier will keep his post. He does not exclude some dismissals in the near 
future and says the President "will again show who the master is" to his 
circle. As for Boris Yeltsin, he will keep working till the end of his 
office, Yuriyev said. Nothing menaces the President and "he has perfect 
physicians who support him," he added. 

The future parliament elections will not change the composition of the State 
Duma much, the analyst said. "The only thing clear is that the communists 
will not gain the majority of votes and will never rule Russia again," he 
added thus agreeing with Prime Minister Sergei Stepashin. 

In the words of Yuriyev, the Otechestvo-All Russia bloc has "the brightest 
prospects" and a candidate supported by the bloc in the presidential 
elections "will have many chances" to be elected. 

As for the future cabinet reshuffling, Yuriyev connects it to another 
financial crisis. "The dollar will go up by the end of this year," he said. 
The situation in the Northern Caucasus will deteriorate, especially in 
October, through the fault of Chechnya, the analyst said. 

The Russian economy is improving, however, he noted. The Russian trade and 
economic relations with Western partners will develop more successfully. "We 
will live better since spring," Yuriyev said. 

He does not regard himself as an astrologist or a numerologist. "It is rather 
clairvoyance," the analyst said. The surname "Yuriyev" is a pseudonym, but 
editor-in-chief of the newspaper Grigory Pyatov assures Itar-Tass that "Yuri 
Nikolayevich is a serious person and different institutions listen to his 


The Economist
August 7-13, 1999
[for personal use only]
Russia's Foreign Debt Negotiations
The waiting game 
M O S C O W 

WHEN nobody really wants to bankrupt you, renegotiating your debts is a 
matter of using good timing to play on your creditors’ nerves. Russian debt 
managers are masters of the art. Already they have secured a highly irregular 
$4.5 billion loan-renewal from the IMF, despite having been caught out lying 
to the Fund about their reserves. Now they are moving quickly to persuade 
other creditors of the wisdom of a patient and generous approach to a huge 
bankrupt country—especially one with elections near and bristling with 
nuclear weapons. 

For government creditors in the Paris Club, which met last week, the least 
bad way out is procrastination. Nobody expects Russia to pay back every penny 
(or even many) of the $40 billion that it owes. But it is embarrassing to 
admit that. Small creditors, such as the United States, want a write-off. Big 
ones, chiefly Germany, which lent some $20 billion, are more hawkish. 

The solution is to wait. Nothing will be forgiven. But Russia’s de facto 
default since last summer’s crisis is now officially acknowledged and 
sanctioned. Russia will pay only $600m in coming months. The $8.1 billion in 
debt service that was due last year, this year and next is to be repaid over 
two decades. More important, Russia and its creditors will meet late next 
year to find a solution for the rest. 

That lets both sides off the hook for now. By then it is theoretically 
possible that Russia will be enjoying a wonderfully honest and determined 
government, able to tackle the country’s finances properly. At the least 
there will be some new faces uttering marginally more plausible promises to 
win another round of concessions. 

Russia’s other financial headache is former Soviet debts, with a face value 
of around $32 billion, owed to the London Club of commercial banks. Most 
trade as bonds called PRINs (for principal) and IANs (for those reflecting 
overdue interest). Russia has defaulted on both sorts. Talks in Frankfurt 
this week went well without producing a deal; one is expected by the end of 
the year. 

Here the likely solution is an offer to switch the debt into something less 
unattractive: the Russian government would become the obligor, instead of 
Vnesheconombank, a state-owned bank, which is now responsible. That would 
make the ex-Soviet debt trade more like a Russian Eurobond—and so worth more 
(see chart). In return, investors would accept a hefty write-off. Given that 
the alternative is suing a bank (whose assets could, in the best Russian 
traditions, quickly be stripped if creditors got too close), investors are 
likely to settle for what they can get. 

But the negotiations will not be entirely one-sided. Russian voters may 
ascribe little importance to the paying of foreign debts, but residual 
delusions of superpower grandeur mean that Russian officials still find it 
worthwhile to explain at length that the country is merely in tekhnicheski 
defolt, and not the fakticheski kind. Avoiding an embarrassing lawsuit, even 
a toothless one, is probably politically worthwhile. 

There are also grounds for believing that Russian institutions and 
well-connected individuals have been buying up debt at bargain prices. “There 
is a substantial cash incentive for the government to do a quick deal,’’ says 
Parvoleta Shtereva, a bond analyst in Moscow, who estimates an agreement 
would double the price of PRINs and IANs by the end of the year. 

As with the Paris Club negotiations, cynics suspect that nobody is 
particularly bothered about the underlying sustainability of any agreement. 
Given that Russia shows no readiness to live within its means, it is 
reasonable to suspect that the main priority is to clear the way for another 
borrowing splurge after the elections. The government may even hope that, by 
pursuing union with Belarus, it may transform itself into a new debtor. As Ms 
Shtereva notes, the past year has shown that “the Russian government and 
corporate borrowers view debt not as a promise to pay at a future date, but 
as an option on a future roll-over.” 


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