August 14, 1999    
This Date's Issues: 3439 • 3440 •

Johnson's Russia List
#3440
14 August 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Edward Lucas: Back to nature.
2. Sabirzyan Badretdinov: RUSSIA AT THE THRESHOLD OF A "CONSTITUTIONAL 
COUP"
3. The Federal Institute for Russian, East European, and International 
Studies (Germany): Russia's Perspectives - Critical Factors and Potential 
Developments up to 2010.
4. Business Week: Margaret Coker, The Method to Yeltsin's Madness.
5. Business Week: Lawrence Summers on Russia.
6. Moscow Times: Brian Humphreys, Expat Exodus Stage 2 Set to Commence.
7. Boston Globe: Brian Whitmore, Yeltsin's 'Family' ties eyed with
suspicion.
8. Izvestia: Alexander Privalov, Butterfingers. (Re Berezovsky-Gazprom-
Luzhkov) 
9. Andrei Liakhov: Museums and tourism.
10. St. Petersburg Times: Fyodor Gavrilov, New Breed Of Leaders Looks Old.
11. AFP: The unquiet mountains of the Caucasus.] 

*******

#1
Date: Fri, 13 Aug 1999
From: Edward Lucas <cottrell@online.ru> 
Subject: Back to nature

I'm trying to track down, in rather a hurry, a poem, I think by
Mandelstam, which I dimly remember. Its main point is that nature will
eventually reclaim Russia.

Can anyone help?

Regards

Edward Lucas
Moscow Correspondent
The Economist

******

#2
From: Sunset4642@aol.com (Sabirzyan Badretdinov)
Date: Sat, 14 Aug 1999 
Subject: RUSSIA AT THE THRESHOLD OF A "CONSTITUTIONAL COUP"

RUSSIA AT THE THRESHOLD OF A "CONSTITUTIONAL COUP"

It is commonly assumed that the forthcoming parliamentary 
elections in Russia in December 1999 are just little more 
than a prelude to the presidential elections in June 2000. 
The June elections are viewed as crucially important for the
future of Russia. In reality, the December elections to the 
Duma will be incomparably more important than the future
presidential contest. The reason is that between December 
and June the office of the presidency in Russia is virtually 
guaranteed to lose most of the power granted to it by the 
Russian Constitution. In effect, the president will become 
the Russian equivalent of the Queen of England because 
his power will be transferred to the Prime Minister elected
by and responsible to the Duma.

These dramatic changes will happen because the country's
increasingly powerful regional leaders want them to happen. 
Regional electoral blocs, such as "Fatherland - All Russia" 
and "The Voice of Russia" will undoubtedly win a majority of 
seats in the Duma. This victory will allow the governors to 
amend the constitution to strip the President of most of his 
powers. The governors resent the unpredictability and 
unreliability of the president and would prefer to have a 
more pliant and predictable leader in the position of a prime
minister chosen with their direct participation and consent. 
The regional governors also want Duma deputies to be 
accountable to the governors of their respective regions. 
Regional electoral blocs, especially "Fatherland - All Russia"
and its potential allies, will join together to achieve these goals. 

Implementing these goals would be tantamount to a 
constitutional coup, because having the majority of votes
in the Duma would allow the governors (through their
representatives in the parliament) to amend the constitution 
and to overcome presidential vetos if the president decides
to challenge those amendments. 

Of course, there is always a possibility that President
Yeltsin would resort to extra-constitutional means to 
preclude these changes. But he could easily be prevented 
from doing so. Assuming that Yeltsin's ultimate goal is to
ensure his safety after he loses power, the regional leaders 
could offer him guarantees of security, perhaps in the form 
of an "honorary" life-long presidency. As a figurehead, 
Yeltsin would not participate inany decision-making but 
would have safety and material security for his old age.

The transfer of power from the president to the prime 
minister, accountable to regional leaders, would ensure
the greatest degree of autonomy to Russian regions 
but, at the same time, would give more legitimacy to 
the central authorities. 

How should the US government react to such changes
in Russia? Since transfer of power from the central
government to the regions is progressing, Washington
ought to start cultivating direct ties with the Russian 
regional governments as soon as possible. The State
Department seems to concentrate most of its attention 
on Moscow while the political power is steadily flowing
out to the regions. Washington would be well-advised 
to switch its attention to the regions and regional leaders. 
Instead of paying almost exclusive attention to the 
potential presidential candidates (Putin, Chernomyrdin, 
Yavlinsky, Primakov, etc.) the US should start dealing 
more directly with Russia's future king-makers, regional 
leaders such as Luzhkov, Shaimiyev, Yakovlev and Titov. 

*******

#3
Date: Fri, 13 Aug 1999 
From: "BIOst.Administration/Heinrich Vogel" <administration@biost.de> 
Subject: Critical Factors and Potential Developments up to 2010

Amidst the flurry of gloomy short-term analyses in DJL the longer term
implications of the current mess are almost forgotten. The Federal Institute
for Russian, East European, and International Studies - BIOst - in Koeln
(Germany) ventured on an analysis of these aspects in its "Bericht" No
25/1999:

Professor Heinrich Vogel
Director
Bundesinstitut fuer ostwissenschaftliche
und internationale Studien
Lindenbornstr.22
50823 Koeln
Germany
Tel.: ++49-221-5747-0
Fax: ++49-221-5747-110
e-mail: administration@biost.de
homepage: http://www.biost.de



Russia's Perspectives - Critical Factors and Potential Developments up to 2010
Summary

1. Russia is having major problems fulfilling the expectations of its
partners with regard to be-coming a predictable actor in international
relations. The transformation process has come to a standstill and the
financial basis for structural renewal has shrunk drastically. The loss of
con-trol of those in positions of responsibility is worrying. Nationalist
forces in Russia are blaming the collapse of the Russian economy on a
discriminatory or even subversive policy on the part of the West. At the
same time, financiers and the Western public have run out of patience with
the Russian government's continual demands for the West to keep propping it
up with new financial aid packages. Russian politicians have manoeuvred
themselves into a position of precarious economic dependence on Western
co-operation, which has the effect of limiting the West's political options
as well. The experience of the past few years has shown, moreover, that
appeals from outside to resolve these problems will go on falling on deaf
ears as long as the democratically elected, and therefore legitimate, elite
fails to show a sense of responsibility and consensus-achieving ability.

2. Findings
3. Since August 1998 Russian politics have been in a state of deadlock,
while the backlog of unresolved problems has become so great that it
threatens to upset the country's internal equilibrium. There is no sign of
consolidation - in other words, of a breakthrough to economic growth and
state renewal - in the near future. Even before the most recent crisis, it
was difficult to make predictions about Russia's medium- and long-term
development prospects, above all because of the impasse caused by
unbalanced constitutional arrangements, persisting economic recession and a
level of external debt that threatens to undermine the country's
sovereignty. As the country prepares for the forthcoming elections to the
state Duma and for the office of president, a number of question marks hang
over future developments. An examination of what economic and political
conditions will be most effective in the long-term for Russia's future path
of development therefore seems in order.

4. While a return to Soviet conditions can now definitely be ruled out,
Soviet traditions and the continuing effects of the profound destruction of
Russia's human and material infrastructure that took place during the
Soviet era are still so pervasive that no comparison is possible with other
countries undergoing transformation. Numerous half-baked experiments to
which the state, the economy and Russian society have been subjected time
and again over the past ten years have done much to exhaust the country's
political capital (i.e., people's confidence in a future worth living) and
its economic substance (i.e., readily mobilisable resources) and to damage
its international prestige. Every attempt to turn over a new leaf
politically is hampered by a large degree of accumulated frustration, while
the corruption that has poisoned political life at every level has serious
long-term implications.

5. There are a number of factors that should be regarded as critical in the
long-term. These include: the structure of Russia's foreign debt; the
availability of natural resources; the concentration of exports in the raw
materials sector; demographic developments; halting the "brain drain"; and
the ability of the political system to maintain the necessary consensus and
to implement constitutionally legitimate rulings. In retrospect, the
experience of the early years of transformation in Russia shows that
governance has become the key factor constraining the country's
development. However, earlier models and modes of behaviour dating from
both the Soviet and pre-Soviet eras are also hampering the political elite
in its attempts to get to grips with globalisation.

6. If the trends of the past ten years are anything to go by, critical
issues in the long term are likely to be the damage inflicted on the
country's infrastructure and environment, the failure to adopt a proper
structural policy for the economy - evident in misdirected investments or
indeed no investment at all - and conceptual deficiencies in promoting
research and development. The financial sector will only be able to get
back to normal via a long-term rescheduling of debts and by performing
delicate operations on the taxation system. A realistic estimate of GDP
growth for the ten-year period up to 2010 would be at most an annual
average of 4 percent. At the other end of the scale would be more or less
stagnant economic growth of an average 1 percent a year.

7. In order to ensure that the debts accumulated so far are serviced, net
capital imports would have to stabilise in the years 2002 to 2010 at a
minimum level of 15 billion US dollars. And should the long-running
negotiations over direct Western investment in the energy sector ever
actually succeed, then a capital inflow of roughly 80 to 100 billion US
dollars might be expected. Whereas Russia's natural resources constitute an
important basis for an investment boost of this kind, one can only
speculate about whether the political and legal framework for exploiting
this potential will exist before 2010. The same goes for the involvement of
Western companies in other sectors of the Russian economy as well as for
the repatriation of flight capital, which is estimated at up to 250 billion
US dollars.

8. By their very nature, problems of demographic development cannot as a
rule be influenced, let alone solved via short- or medium-term measures.
Much would seem to indicate that by 2010 the Russian population will have
declined by another several million. Moreover, given weak economic growth
potential it is unlikely that in the next decade environmental protection
will receive the attention it deserves.

9. A shortage of resources continues to be the key issue behind all
decisions to date concerning reforms of the military and armed forces. A
complete reform of the military would require between 150 and 300 billion
US dollars. In the future Russia will only be able to afford a force of
between 550,000 and 600,000 men (half its present troop strength). Russian
research and development has been concentrated in a few critical areas of
dual-use technology, while research and technology for military purposes
continues to be given priority - a strange conceptual deficit given the
fact that civilian research has yielded findings that could well prove to
be competitive.

10. Of paramount importance for Russia is the development of its political
system. The current situation does not suggest that it will be possible in
the short term to install the institutional framework necessary for good
governance. Political traditions, habits and modes of behaviour, such as
paternalism, the power of the clans, alternative power centres, nepotism
and so on will, in all probability, persist for some time to come. Today's
administrative and economic elite will not really see their position
threatened over the next five to ten years. The establishment of
functioning structures in the public sphere and a transfer of appropriate
social and political functions to these is hardly to be expected, given the
reigning widespread mood of resignation. On the fringes of society,
however, a tendency towards political radicalism is discernible that could
destabilise the still fragile political system.

11. Even the adoption of optimal technocratic policies cannot immediately
make up for the time lost and economic resources wasted in recent years.
The orientation of Russian policy towards global integration remains an
option, but it would take at least five years. An economic upturn of this
kind would need to be set in motion via state programs and major
investment. The ability of the government to maintain a tough political
consensus would be one of the strategic variables in such a scenario. An
alternative scenario would be to get the economy moving via a combination
of self-sufficiency and protectionism together with partial
re-nationalisation, a state industry policy and a tendency towards a strong
state, possibly run along authoritarian lines.

12. What kind of political system Russia ultimately adopts and what kind of
foreign policy it decides to pursue depends not least on its perception of
Western motives and ambitions. The rouble crisis and above all NATO's
intervention in Kosovo have caused serious damage in this respect that will
probably result in a strengthening of leftist-nationalist forces in the
elections to the state Duma. This makes it all the more important that the
West should demonstratively adhere to a "business as usual" approach in its
dealings with Russia and continue its policy of offering to co-operate with
all credible constitutional forces. Irrespective of which of the two
scenarios is ultimately realised, Russia needs calm at home and a
cooperative international environment in order to regenerate itself. This
is where the West comes in, for in the interests of having peaceful,
predictable, reliable neighbours it cannot afford to engage in a passive
"wait and see" approach let alone in a pre-emptive neo-containment policy.
Of course it has to be realistic as well: following the failure of Russia's
first attempt at transformation, it is clear that making economic and
technical aid programs conditional on adherence to entirely Western models
has no chance of success. Ultimately, Russia has to find its own path into
a "civilized" present. The future of Russia will be later.

P.S.: For the full version of this study contact administration@biost.de,
for further analyses of the Federal Institute of for Russian, East
European, and International Studies - BIOst -see http://www.biost.de

*******

#4
Business Week
August 30, 1999
[for personal use only]
The Method to Yeltsin's Madness
By Margaret Coker in Moscow 
EDITED BY PATRICIA KRANZ 

Russian President Boris N. Yeltsin is predictably unpredictable. But his 
decision on Aug. 9 to fire Prime Minister Sergei Stepashin, the fourth 
Russian Prime Minister to get the ax in 17 months, smacks of desperation. In 
Stepashin's place, Yeltsin nominated Vladimir V. Putin, chief of the Federal 
Security Service, successor of the KGB. Yeltsin also anointed Putin as his 
preferred successor as President.
Yeltsin's erratic decision-making is driven by two somewhat contradictory 
desires. He wants to preserve his legacy as the man who brought democracy to 
Russia and preside over the first-ever transition of power through the ballot 
box when Russians elect a new President in July, 2000. But he also wants to 
make sure his own man wins.
Insiders say Yeltsin thinks it's his right to tell voters which candidate 
he believes can carry on Russia's political and economic transformation. He 
has had several favorites, the most recent being Stepashin. But the President 
grew disappointed when Stepashin failed to counter the growing influence of 
Yeltsin's opponents. So he chose Putin. ``In the mind of Yeltsin, he is a 
czar, and his choice should be enough for the voters,'' says a former Yeltsin 
aide.
But Yeltsin may have other, darker worries motivating him as well. He and 
his aides may face corruption allegations or political revenge if Kremlin 
rivals win the next election. Indeed, Yeltsin fired Prime Minister Yevgeny M. 
Primakov in May, shortly after he launched corruption investigations into 
Kremlin insiders such as financier Boris Berezovsky. Now, Swiss prosecutors 
are investigating 23 former and current Kremlin staffers on money-laundering 
and corruption charges.
THREATENING ALLIANCE. Yeltsin fired Stepashin and elevated Putin after Moscow 
Mayor Yuri M. Luzhkov--a likely presidential candidate--allied with a party 
backed by 10 regional leaders. The new alliance, called Fatherland-All 
Russia, is expected to sweep parliamentary elections scheduled for Dec. 19. 
If the group can woo Primakov to its ranks, it could also win next year's 
presidential race.
Yeltsin doesn't trust either Primakov or Luzhkov, insiders say, even 
though they both generally back the free-market reforms that he launched. 
Although Yeltsin is a champion of democracy, he also comes from Russia's long 
tradition of all-powerful leaders. His political instinct is to fight any 
opponent who competes with the Kremlin. And Yeltsin has often declared that 
Russia's future belongs in the hands of a younger generation--not his 
contemporaries.
Although a political nonentity, Putin emerged as Yeltsin's favorite to 
beat Luzhkov and Primakov because of his experiences as both a spy and an 
administrator. Among Kremlin insiders, Putin is considered tougher than 
Stepashin, who expressed distaste for political dirt and failed to block 
Luzhkov's rising star. Putin, 46, was a KGB agent in Germany, mostly in 
Leipzig, for 15 years, then allied himself with reformers in St. Petersburg 
in the early 1990s. In 1996, he came to Moscow as Yeltsin's deputy chief of 
staff, handling relations with Russia's 89 regions. Unlike Stepashin, he has 
a personal relationship with many governors, including doling out federal 
funds to them.
That's important because Russia's governors could become kingmakers in the 
presidential election. They not only allocate government funds but often 
control much of the media and the biggest businesses in their regions. So 
they can easily swing elections. More than 60 local leaders have yet to ally 
themselves with a political party or a presidential contender. They've been 
waiting for the Kremlin to make its move. That gives Putin a lot of room to 
maneuver. ``The real drama is going to start after the December elections'' 
for parliament, says Mark Urnov, a strategist with the centrist Our Home is 
Russia party.
Kremlin insiders believe Putin can go on to win the presidency thanks to 
their control of key media groups and their readiness to spend liberally on 
the campaign. That worked for Yeltsin when he was reelected in 1996. But 
Putin isn't Yeltsin. He's used to operating behind the scenes and lacks 
charisma. He also faces big problems, not least a war breaking out with 
Islamic separatists in Dagestan.
At this point, few outside the Kremlin believe Putin can build up a 
national profile ahead of next July's election. Still, in Russian politics, a 
year is an eternity. Putin may surprise his compatriots--or Yeltsin could 
always fire one more Prime Minister.

*******

#5
Excerpt
Business Week
August 30, 1999
Summers on the State of the Economy 

Higher interest rates are rippling through the economy. But in his first 
extended interview since taking over as Treasury Secretary, Lawrence H. 
Summers insisted the U.S. expansion will stay on track. On Aug. 9, the 
Treasury chief talked to Business Week's Howard Gleckman and Laura Cohn and 
spelled out his views on rising rates (not worried), tax cuts (the smaller 
the better), and the dollar (he likes it strong). This is an online-only 
extended version of the Q&A that appears in this week's printed edition of 
Business Week....

Q: So what about the rest of Asia? Stock markets are going up in other 
nations. Which countries do you think are ready to handle that cash?
A: It's encouraging that those countries that have been most successful in 
carrying through on their commitments to the IMF -- Korea, Thailand, the 
Philippines -- have seen the greatest return flow of capital and have seen 
the greatest upward revision in economic forecasts. Whereas some countries -- 
Indonesia, Brazil, and even Russia -- that have been less successful in 
carrying through on their commitments have been less fortunate.

Q: How bad are things in Russia?
A: In retrospect, perhaps some of the highest hopes were too optimistic. 
[Reform]) is a process that the U.S. will continue to support. But it is 
crucial that our support be disciplined. It may be that we will have to await 
the Russian election before a sustained program of economic reform can be put 
in place.

Q. What about Russia's recent agreement with the International Monetary Fund?
A: Russia and the IMF just reached an agreement in which the IMF will 
refinance a portion of the debt that Russia owes. But there will be no new 
flow of money into Russia under that agreement, only a refinancing of the 
portion of what Russia owes the IMF, which seems appropriate in light of the 
difficulties in the current Russian economic situation.

*******

#6
Moscow Times
August 13, 1999 
Expat Exodus Stage 2 Set to Commence 
By Brian Humphreys
Staff Writer

For those expatriates still bemoaning the departure of their friends and 
colleagues for calmer shores last fall after Russia's financial collapse, 
there is more bad news to report: The initial exodus was only the beginning. 

The mass downsizing of the expat work force that began last August is nearly 
complete. Now, say observers, the expat community is set to be further 
downsized in a second, slower, but more far-reaching wave of exits and 
expulsions. 

This wave is not a product of the direct economic effects of the August 
crash. Rather, it is being driven by the general loss of faith in Russia's 
future. 

"Before the crisis, people were trying to grow the market, and you often felt 
as if you could see light at the end of the tunnel," said Timothy Tigner, a 
senior manager at Johnson & Johnson's Moscow office. "Now it is back to 
business as usual, except that we are starting from a smaller economic base." 

Multinationals that were once willing to invest almost unlimited sums in 
bringing in expats to lead an expansion on the ever-promising Russian market 
of last year are now concentrating on restructuring to survive in the smaller 
and stagnant market of this year. 

Hans Jochum Horn, managing partner in the Moscow office of accounting firm 
Arthur Andersen, said that the number of foreigners declaring their intention 
to file a tax return next year has dropped by 50 percent. "It may not be an 
entirely accurate figure, but it is a clear indicator that the number of 
expats is going to be going down for at least the next couple of years," he 
said. 

"After the crisis, businesses were panic-struck," Horn said. "Now they are 
discovering that the crisis is not a temporary phenomenon, and that they will 
need a longer-term plan beyond emergency cost-cutting if they are going to 
stay here." 

For many firms, Arthur Andersen included, the plans tend to focus on 
replacing their foreign management staff with local talent. After the crisis, 
Arthur Andersen doubled the number of Russian employees it sent abroad on 
internships. This, Horn said, was done as a means of ensuring that the 
company would have a ready supply of foreign-trained locals to replace 
foreign staff with over the next couple of years. 

"By 2005, we should have an almost entirely Russian operation here," he said. 

Measuring the size of the expat community, or the scale of its exodus, is 
difficult, said Scott Blacklin, president of the American Chamber of 
Commerce." The most reliable estimates you could get on the number of 
Americans in Moscow at the peak of the boom was around 70,000, but that 
seemed awfully high to me, even then," he said, giving 50,000 as a more 
reasonable figure. 

"Now I think we are down to 55 or 60 percent of where we were then," he 
added. "What I hear just about everywhere is that companies have cut back 40 
percent across the board - that includes budgets, sales and people." 

The Federal Migration Service keeps records of the number of foreigners 
working in Russia, but the figures are considered inaccurate because few 
foreigners have official work visas. The service did not answer requests for 
figures. 

Moving companies have reported an upward spike in the numbers of foreigners 
leaving Moscow this summer. However, this is largely attributable to seasonal 
variations in the moving industry, said Sipa Sikaulu, director of executive 
services for Crown Worldwide Moving. 

"Summer is always a time when diplomats leave, and families pack up because 
the kids are out of school," he said. 

Members of the expat business community say that corporations often decide to 
replace imported workers with local talent as their operations take root in a 
new market. 

However, most interviewed for this story agreed that the August crisis had 
prompted companies to act more quickly in this direction than they might have 
otherwise, given that Russia is still an emerging market. 

Caspar Appeldoorn, manager of Henkel-Ecolab, a German cleaning products firm 
in Moscow, said that since the crisis, companies have been either making 
compromises for the sake of economy, or taking steps to bring Russians 
through the corporate ranks faster. 

"The market today is a young market," he said. "The job foreigners have is to 
train people so that they can fulfill tasks after we leave. This was 
happening anyway, but the crisis accelerated the process." 

This process may well benefit Russia's young professional class, despite 
reports of its destruction in the wake of the August crash. 

"There are no ceilings for Russians now," said Grigory Okun, of Antal 
International, a Britain-based executive search firm. "If before the crisis 
40 percent of our orders were for expats, now that is down to 20 or even 10 
percent. There are great opportunities out there for Russian professionals - 
the trend is toward replacing top-level expats with locals." 

He said that even with comparable salaries, local hires are much more 
economical, because they do not require expensive benefit packages that 
expats usually receive. 

"It is difficult to get foreigners to come to Russia, especially now," he 
said. "The package a company needs to offer is much the same as it was 
before: a company car, moving allowances, housing allowances, hardship 
bonuses, home leave, free kindergarten." 

Money and benefits packages aside, Russia no longer has the aura of limitless 
possibilities it did before the crisis. 

"There was a general, genuine interest in Russia, with or without GKOs," the 
high-yield treasury bills that help fuel the financial-markets boom, Horn 
said. "Russia was considered the place to be if you wanted an international 
career in business. It was good to have Russia on your CV, and that is no 
longer the case. I see it myself when I try to attract people to work in 
Russia." 

Given the current economic situation, and the changing attitudes of 
foreigners toward Russia, it seems possible to say that the mid-1990s will be 
remembered as the expat community's heyday. 

"The expat boom was driven by banks that imported foreigners to use some very 
specific financial instruments, which were being offered to a foreign 
clientele," said Kim Iskyan of Renaissance Capital. "After the crash, these 
instruments ceased to exist - not to mention the fact that demand for them 
evaporated." 

It remains to be seen whether Russia will mourn the loss of the expats as 
much as the expats themselves have. The financial crash and ruble devaluation 
that caused the exodus had the effect of reviving the fortunes of entire 
sectors of domestic industry. 

Blacklin, for his part, believes Russia may yet regret the expats' departure. 

"It's fun to kick the old expats around as soulless cretins who were just 
here for the money, but any loss of talented people and attention from abroad 
is a loss for Russia," he said. 

******

#7
Boston Globe
14 August 1999
[for personal use only]
Yeltsin's 'Family' ties eyed with suspicion 
By Brian Whitmore, Globe Correspondent

MOSCOW - When the president of the world's second largest nuclear power wants 
to make an important political decision, he consults the family.

Not his family, but The Family, a collection of business tycoons, cronies, 
and Kremlin bureaucrats who wield enormous - and many say destructive - 
influence on Russia's President Boris N. Yeltsin since his reelection three 
years ago.

In Russia, The Family has taken on legendary proportions, with many of the 
country's ills being laid squarely at its doorstep.

Some media here speculated, for example, that The Family's hand was behind 
last August's financial meltdown, when Russia's currency lost 70 percent of 
its value in a matter of weeks.

The oil business of prominent Family member Boris Berezovsky's, reports say, 
stood to benefit from a weak ruble to increase his export earnings, and he 
allegedly lobbied for a devaluation that devastated the savings of ordinary 
Russians.

Many observers also say that Yeltsin's decision Monday to sack his government 
was The Family's dirty work. Former prime minister Sergei Stepashin was seen 
as not tough enough to fight off the president's - and The Family's - 
enemies. So, steely former spy Vladimir Putin, who helped throttle an 
investigation of Yeltsin by testifying to photos that showed the chief 
investigator cavorting with naked women, was brought in as prime minister to 
get the job done.

Moscow's manic rumor mill even speculated that recent tension in Dagestan, 
where Russian forces are battling Islamic militants, was organzed by The 
Family.

On Thursday, the respected newspaper Segodnya reported that Kremlin chief of 
staff - and Family member - Alexander Voloshin met recently with rebel leader 
Shaimil Basayev, fueling speculation that the tension in the Caucuses was a 
made-to-order pretext to declare a state of emergency and cancel next year's 
presidential elections.

Whether these sinister allegations are true, few doubt that The Family wields 
power in the Kremlin. Yeltsin has scornfully denied that he is beholden to 
anything but his political intuition, but all sides have pointed to The 
Family's influence, particularly in recent moves.

So just what is this Family, which has caused so much trouble for this vast 
country?

At the center of The Family is an actual member of Yeltsin's family: the 
president's eldest daughter, Tatyana Dyachenko.

She burst on to the public stage during the 1996 presidential vote when she 
signed on as an image consultant for her father's campaign. Dyachenko was 
credited for softening Yeltsin's image - ordering his security guards, for 
example, to stop wearing sunglasses on campaign stops so as to not intimidate 
voters.

And the other Family members? The Russian media regularly names the 
following: oil tycoons Berezovsky and Ramon Abramovich; Valentin Yumashev, 
the ghost writer of Yeltsin's autobiography; and Kremlin Chief of Staff 
Voloshin, a former busness partner of Berezovsky. 

All of them built fortunes for themselves during Russia's controversial 
privatization auctions in the early 1990s, and they were all part of a group 
of tycoons who - fearing a Communist revival - used their industrial and 
media empires to make Yeltsin's reelection a foregone conclusion. Dyachenko 
is the conduit. The others lobby Yeltsin through her. 

''The Family acts in the way similar to a court in a monarchy,'' said Andrei 
Riabov, a political analyst at the Moscow Carnegie Center. ''In its current 
form, The Family appeared during the 1996 presidential election when some of 
those who engineered Yeltsin's victory decided to stick around and keep the 
spoils.''

But to do so, they needed to depose a powerful competitor for the president's 
ear. Before the election Yeltsin's closest adviser was Alexander Korzhakov, 
the chief of the president's security. Korzhakov, an ex-KGB officer, had been 
Yeltsin's bodyguard, driver, drinking buddy, and confidant. He was blamed for 
many of Yeltsin's more disastrous decisions, such as the one to wage war 
against Chechen separatists, which eventually cost 80,000 lives. Korzhakov 
was also the president's gatekeeper and jealously guarded access to Yelsin.

''Korzhakov was The Family before the Family existed,'' said Moscow-based 
political analyst Andrei Piontkovsky. When Dyachenko decided to enter 
politics, she was able to break Korzhakov's monopoly on Yeltsin, engineering 
his firing shortly before the election. This opened the door for Berezovsky 
and other members of The Family. 

Tales of shadowy behind-the-scenes influence are nothing new in Russia and 
are even the subject of lore. Rasputin, the legendary 19th century monk, had 
the ear of Nicholas II, Russia's last czar, and that of his wife, Alexandra. 
Rasputin gained access to the royal family after he cured the czar's son of a 
severe illness, convincing Alexandra that he had divine gifts.

Today's aides reached the Kremlin inner sanctum with more banal means: money. 
Yamoshev wrote Yeltsin's memoirs and Berezovsky organized the overseas 
publication, and delivered the profits.

In his kiss-and-tell book ''Boris Yeltsin: From Dawn to Dusk,'' Korzhakov 
wrote that Berezovsky handed over $15,000 a month to Yeltsin in the early 
1990s.

******

#8
Izvestia
13 August 1999
Butterfingers 
By Alexander Privalov 

IZVESTIA dubs Boris Berezovsky's attack on Gazprom and his charge that
Gazprom is using its finances against the President and Government [see
previous item] a gross disservice to the Kremlin and the "Family" [to which
he is supposed to belong]. In a Le Monde interview Berezovsky suggested
that Gazprom's chief Rem Vyakhirev should be fired for his [alleged]
support of Yury Luzhkov. 
If Vyakhirev indeed harbours plans to align himself with Luzhkov, this
means the Kremlin clan is very close to defeat, and the last thing it
should do is declare this for all to hear. As long as it is a Kremlin team
not only in name but also in substance it has a fair chance of coming to
terms with Vyakhirev who presides over one of the nation's most powerful
companies. By declaring that Vyakhirev has no intention of finding modus
vivendi with the Kremlin (whether this is true or not makes no difference),
the Kremlin is sending an unambiguous signal testifying to its
helplessness, and there is no doubt that the signal will be given due
attention and correctly understood by thousands upon thousands of ranking
bureaucrats across the country. A better method of denigrating the regime
and bolstering Luzhkov's nomenclature party could not have been devised
even by the most malicious dabbler in political intrigue. 
The reason why many governors and their vassals yearn to join forces with
the bloc led by Luzhkov, Shaimiyev and Yakovlev is not their desire to make
their voice heard on Federal level. The bloc's leaders pay little attention
to regional affairs. Simply Fatherland's leaders are dropping broad hints
to the effect that they will soon be emerging at the very top of the
political establishment, and regional leaders had better jump on the
bandwagon without delay. It is obvious that such arguments can work only if
the Federal authorities show convincing signs of their political impotence. 
Assuming that Berezovsky was expressing the views of the President when
he accused Sergei Stepashin of failing to display enough toughness in his
struggle for gubernatorial sympathies and against Luzhkov, it is an odd
situation where, on the one hand, the President invites governors to get
hold of as much power as they can and, on the other, orders his Prime
Minister to line up all governors to prevent them from defecting to another
camp [Luzhkov et alia]. 

*******

#9
Date: Fri, 13 Aug 1999 
From: "Andrei Liakhov" <liakhova@nortonrose.com> 
Subject: RE: 3438-Lagnado/Tourism

Museums and tourism.

Although I am not professing to be a specialist in the museum or tourist
business, having read the article on tourism in JRL3438 I just like to share
an experience I recently had in Russia. 

Background: I'm a "black sheep" in the family which is involved one way or
the other in Russian aviation for three generations now. But although I do
not fly, design or produce aircraft like the rest of the Family, I remain a
very keen aviation enthusiast. Professionally my Firm is deeply involved in
aviation and I'm trying to be involved too.

The Experience:
My visit to Monino Russian Airforce Museum.
I visited the museum this summer after 17/2 years (previous visit in '82).
Way back then it was just an exhibition of well preserved historic military
and civilian aircraft, the majority of which were then in the flying
condition at the RusAF Academy airfield. The main purpose of the exhibition
was not to be a museum, but rather a short reference guide for aircraft
design and aviation history courses at the Academy. 
17 years later it purports to be a museum open (albeit with difficulty as it
is within the territory of a military base) to the public.
The exposition contains samples of absolutely unique aircraft, like the
fastest plane that ever flew (SU100 - over 3.500km/h) or the largest
helicopter ever built (V-12). However save for some of the very old W.W.II
or pre W.W.II aircraft, the rest of the exhibition is in the very poor
technical state, there is no gift shop, amusement areas, and other
facilities usual for a large aviation museum anywhere else in the world. The
majority of the aircraft is kept in the open air with no
preservation/protective coating (in Russian winter too!!). The declining
nose of SU100 broke off some time ago under the weight of the snow and now
is taped with the scotch tape(SIC!!) to the fuselage. I'm not even
mentioning the state of paint on some of the aircraft!!
Even having this in mind the museum is a fascinating place - where you
suddenly discover a whole new world - for example that it was not the Wright
brothers who flew first but a Russian colonel Mozhaisky in 1898, etc, etc,
etc. Some of the displays are magnificent and prepared with great care and
skill.

Unless you know of the place you will not find its advertisement anywhere in
Moscow (unlike Duxford or the Paris Air Museum). Same can be said about the
tank museum in Kubinka and museum of the Space Centre in Chkalovsk. The
Russian museums generally, it seems, consider that every intelligent person
in the World MUST know where and what they are - why bother to advertise?!
I
'm sure that part of the problem is lack of funds, BUT a very large part of
the problem in my view is that museum business and tourist business is not
viewed as a really serious business in Russia yet. Taking the same Monino
example - all it will take to get it into reasonable shape is a young
enthusiastic management team and co-operation of the designers, RusAF and
manufacturers (and a little bit of money of course). People have to realise
that just babushkas will not manage to preserve the history and the art -
museum and tourist business is business like anything else, but probably
with a more humane face, and irrespective of the value of your collection if
you don't "sell (i.e. viewing services)" it - you will die out. Russia will
not become a mainstream tourist destination until it will be able to
present/sell itself to its people and to the world properly - and money is
not all that is required to achieve this. Care for the client, advertising,
management are probably much more important. Unfortunately I can't see it
happening any time soon for very obvious reasons.

As to Monino - in case this posting is published by David - I would
passionately like to invite JRL readers to think how we can help save
probably the best collection of historic aircraft in the world. All
suggestions and comments are very much welcome!!

******

#10
St. Petersburg Times
August 13, 1999
NOTES OF AN IDLER
New Breed Of Leaders Looks Old 
By Fyodor Gavrilov

IN Russia you should always be alert or you'll miss something. That's exactly 
what happened to me this week. As I was returning to the city from places 
where it's easier to catch well-fed lake fish than an airwave, I heard the 
news at a roadside kiosk: Sergei Stepashin had been replaced by Vladimir 
Putin. I learned the details back in the city from newspapers and TV reports, 
whose tone (as is usual in Russia) was mostly sad.

It's always amusing to what extent a simple facial expression can affect a 
person's public image. Former fireman Stepashin will be missed because, it 
seems, many people fell in love with his open, pleasant "Russian" face. But 
do we know much about Mr. Stepashin? Somehow we have already forgotten a 
shady story from the mid-'90s, when then-Security Minister Stepashin sent 
tanks manned by anonymous volunteers to storm the well-fortified Chechen 
capital of Grozny. And, for a long time refused to take responsibility for 
failing to backup these anonymous volunteers, thereby setting a false tone 
for the whole war to follow. 

Should we grieve for Stepashin's career? Hardly. In any case, his 
reassignment in a pre-election year offers him more opportunities, among 
which we will note is a vacancy for a strong alternative candidate for 
governor of St. Petersburg in next spring's election.

At the same time, stoic kagebeshnik (KGB officer) Putin is rather alarming. 
We do not know much about Mr. Putin, although it's clear that he is also an 
officer, always loyal to his bosses, and differs from his predecessor only in 
his type of arms.

But hidden behind Stepashin's smiling humanity, which was offered to us in 
May, was an attempt to optimize the animal-like charm of Gen. Alexander Lebed 
of the 1995-96 model. There is no mystery about Putin - in my opinion, he is 
a continuation of the creative work of improving the Russian political breed. 

Why do Russians like Primakov so much? For outward correctness, carefully 
chosen words and loyalty to the imperial idea, but in an export version. 
Smooth out the wrinkles on Primakov's face, take away a decade or two and 
membership in the Communist Party of the Soviet Union's Central Committee, 
and what do we get? I reckon Putin.

One outwardly warm, the other outwardly stern, Stepashin and Putin are 
essentially former Soviet officers who have chosen conformity as the highest 
form of discipline. For decades the Communist Party rooted out any attempts 
at independence. The struggle was serious and for a talented general it 
usually ended in execution, prison, or, at best, exile. 

As a consequence of this struggle, we can see today that the most efficient 
Russian units more resemble groups of daring guerrillas than a real army, 
while their officers look like field commanders - that's how unnatural taking 
the initiative is to them.

In a word, I am skeptical about the latest personnel scheme of the aging 
playwright, which is basically a search for a new iron arm. For better or 
worse, the Russian Pinochet is not yet born. The other matter is, as another 
"ex," Sergei Kiriyenko, slipped in an interview recently, there is one former 
premier for each electoral bloc. Which is not a small thing, either.

Fyodor Gavrilov is the editor of Kariera-Kapital.

*******

#11
The unquiet mountains of the Caucasus

MOSCOW, Aug 14 (AFP) - The Russian Caucasus, currently the scene of a 
military intervention against Islamic militants, has been a constant source 
of instability since the collapse of the Soviet Union in 1991.

Following are the predominant trouble-spots in the south of the Russian 
Federation in the mountainous region between the Black and Caspian Seas.

CHECHNYA: Predominantly Moslem republic, 13,000 square kilometres (5,500 
square miles), population 1.2 million. Capital Grozny, recently renamed 
Dzhokar-Ghala.

Enjoys de facto independence following a devastating 20-month uprising 
between December 1994 and August 1996.

The military commander of pro-independence forces during the uprising, Aslan 
Maskhadov, has been president since February 1997, having negotiated the 
August 1996 peace deal with Moscow.

However he is contested by many of his former companions and now controls 
only part of the territory, the remainder being a largely lawless region 
under the sway of warlords.

Chechnya, like neighbouring Dagestan, is traversed by a strategic pipeline 
carrying crude oil from the Caspian shores of Azerbaijan to the Black Sea.

DAGESTAN: Also a mainly-Moslem republic, 50,000 square kilometres, population 
2 million, but divided ethnically into more than 30 communities, of whom the 
largest are the Avars (around 500,000), the Dargins (270,000) and the Lezgins 
(200,000). Capital Makhachkala.

Russian military forces have launched an offensive against Islamic 
separatists who have seized control of several villages in the west of the 
republic, close to the Chechen border.

As in Chechnya, radical Wahhabi Islamists have been present in Dagestan for 
several years.

NORTH OSSETIA and INGUSHETIA: Formerly a single republic, now separate.

In 1944 Joseph Stalin deported large numbers of Ossetians and Ingushetians to 
Kazakhstan for supposed collaboration with invading German forces. On their 
return in 1957, 40 percent of Ingushetian territory was transferred to North 
Ossetia.

North Ossetia (capital Vladikavkaz) is a republic of 8,000 square kilometres 
with a population of 600,000 Ossetians and Georgians.

Ingushetia (capital Nazran) is a republic of 2,700 square kilometres with a 
population of 200,000 inhabitants.

Both republics were placed under a state of emergency from November 1992 to 
February 1995 following clashes between Ossetians and Ingushetians that left 
hundreds of people dead. 35,000 Ingushetians were expelled from North Ossetia.

In December 1994 Ingushetians attacked Russian troops heading for Chechnya.

KARACHAY-CHERKESSIA: Republic of 14,000 square kilometres. Population 
370,000. Capital Cherkessk.

The Karachay, Cherkess, Abaza and Russian ethnic groups which make up most of 
the population came close to splitting into separate territorial entities in 
1991 as the Soviet Union disbanded.

Since presidential elections last May, when neither General Vladimir Semenov, 
a Karachay, nor Stanislav Derev, a Cherkess, succeeded in obtaining a 
majority, the republic has been subject to increasing tension.

The interim president designated by Moscow, Valentin Vlassov, has little 
support among the local population.

Other former Soviet republics in the Caucasus have also been disrupted by 
wars over status or territory, notably Georgia, faced with an uprising in the 
autonomous republic of Abkhazia, and Azerbaijan and Armenia, which went to 
war over the mountainous enclave of Nagorno-Karabakh. 

*******