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Johnson's Russia List


August 17, 1999    
This Date's Issues: 3445 • 3446 

Johnson's Russia List
17 August 1999

[Note from David Johnson:
1. AP: Yeltsin Warns New Prime Minister.
2. Reuters: Ex-PM Primakov heads Russia centrist election bloc.
3. Moscow Times EDITORIAL: Aug. 17 Was About Moral Bankruptcy.
4. Irina Kibina: Veliky Novgorod.
5. St. Petersburg Times: Boris Pustintsev, Putin: The Man To Keep The 
Federation Together?

6. Financial Times: Andrew Jack, DAGESTAN: Yeltsin plays down need for 
special powers.

7. Moscow Times: Leonid Bershidsky, Middle Class's Death Greatly

8. Reuters: Banker recalls unleashing Russian crisis. (Dubinin)
9. Moscow Times: Brian Whitmore, A YEAR AFTER THE CRASH: Battered Middle 
Class to Vote 'Patriotic' 

10. Segodnya: Why Not Tatyana Borisovna?
11. New York Times: Robert Kaplan, Why Russia Risks All in Dagestan.
12. Komsomolskaya Pravda: Stepashin Interviewed on Dismissal.] 


Yeltsin Warns New Prime Minister
August 17, 1999

MOSCOW (AP) - President Boris Yeltsin promised his new prime minister a 
degree of independence, but warned today that he should not stray too far 
from Kremlin policies. 

``Let's not divide the presidential office and the Cabinet,'' Yeltsin told 
Vladimir Putin, who was confirmed Monday as Russia's fifth prime minister 
since early last year. ``When they were divided, it didn't lead to any 

Yeltsin told Putin, in remarks broadcast on Russian television, that, ``A 
prime minister could only lose, and that is natural.'' 

The 68-year old president has fired four prime ministers in the past 17 
months and has frequently reshuffled his aides. The president's approval 
rating is in single digits, and he seems to resent any members of his Cabinet 
who appear too independent or become popular in their own right. 

Yeltsin hasn't given any reason for firing Putin's predecessor, Sergei 
Stepashin, who was considered extremely loyal and never publicly acted 
against the president's wishes. But Russian media have speculated that the 
president and his inner circle wanted a prime minister who was not only 
loyal, but was also willing to take a tough line against the Kremlin's 
political opponents. 

Yeltsin, who has never been deeply involved in the day-to-day running of the 
government, promised Putin some autonomy in decision-making. 

``We shall work together, respecting each other and having counsel on serious 
issues,'' he told Putin during a 30-minute conversation in front of Russian 
journalists. ``At the same time, I'm allowing independence. It's not 
necessary to consult me on small details.'' 

Yeltsin's latest reshuffle has drawn widespread criticism across the 
political spectrum. Parliament leaders said Yeltsin's unpredictability was 
undermining efforts to establish political stability and was also damaging 
the economy. 

Nevertheless, parliament's lower house approved Putin on Monday rather than 
risk a confrontation with the president. If lawmakers reject the president's 
candidate three times, Yeltsin is required to disband parliament. 

Stepashin said today that he would run for parliament in St. Petersburg, and 
would seek to build an electoral bloc, the Interfax news agency reported. 

The new Cabinet is expected to be almost identical to the old one, and 
Yeltsin re-appointed the foreign, defense, interior and emergency ministers 

Putin announced one change - Justice Minister Pavel Krasheninnikov will be 
replaced by the former Acting Prosecutor General Yuri Chaika. Yeltsin has 
criticized Krasheninnikov for not being aggressive enough in investigating 
the Communist Party's activities. 

The ministry investigated anti-Semitic statements made by Communist Party 
officials earlier this year, but there have been no prosecutions. 

Among Yeltsin's opponents, former Prime Minister Yevgeny Primakov planned to 
formally announce today an alliance with Moscow Mayor Yuri Luzhkov. Luzhkov 
and Primakov are two of the strongest potential candidates in next year's 
presidential poll, though neither has formally announced plans to run. 

Luzhkov's Fatherland movement recently united with a powerful bloc of 
regional governors, and Primakov's addition will make the coalition even 
stronger. The alliance plans to campaign for parliamentary elections in 
December, and a strong showing would help either Luzhkov or Primakov in next 
year's presidential poll. 

The Kremlin has tried to thwart the alliance, and Stepashin's reluctance to 
lead these efforts may have contributed to his dismissal last week. 


Ex-PM Primakov heads Russia centrist election bloc

MOSCOW, Aug 17 (Reuters) - Former Prime Minister Yevgeny Primakov, Russia's 
most popular politician, formally agreed on Tuesday to lead a powerful 
centrist bloc into parliamentary elections on December 19, news agencies 

Interfax news agency said Primakov will head the coordinating council of the 
Fatherland-All Russia bloc and lead its election list. The bloc has been 
formed by powerful Moscow mayor Yuri Luzhkov and regional bosses and most 
political analysts have predicted that the inclusion of Primakov would make 
Fatherland-All Russia an election favourite. 


Moscow Times
August 17, 1999 
EDITORIAL: Aug. 17 Was About Moral Bankruptcy 

A year ago today, Russia declared itself pretty much broke. The Central Bank 
had no more dollars to spend propping up the ruble. The Finance Ministry had 
no more rubles to pay interest or principal to holders of Russian treasuries. 
Game over. 

What followed over the next several weeks was a frighteningly rapid 
financial, economic and political collapse. Boris Yeltsin, in obvious 
physical and psychological decline, slunk off into hiding. The nation went 
through three prime ministers. 

>From Sergei Kiriyenko we went to a thankfully brief reprise of Viktor 
Chernomyrdin, whose contribution was suggesting an "economic dictatorship." 

>From Chernomyrdin we went to another less-than-enlightened apparatchik, 
Yevgeny Primakov. Like Chernomyrdin, Primakov suggested Russia drop some of 
this democracy tomfoolery (Why elect governors when the Kremlin could appoint 
them?) and talked of filling the jails with economic criminals. Rumor held 
that the Primakov team was pondering truly Soviet-style measures, including 
outlawing possession of U.S. dollars. 

Throughout, the ruble was sinking faster than any other currency in recent 
world history, and taking the banking system - an institution that wary 
Russians had only just begun to trust - with it. Everyone lost their savings. 
Inflation spiked. Store shelves started looking bare. The nation went 
shellshocked into the winter of 1998-99. 

With spring there has come cause for guarded hope. Oil prices and the 
now-cheap ruble have given an unexpected kick start to the economy, as has 
Western agreement to postpone some Soviet and Russian debt payments. There 
has been no economic dictatorship, nor any other kind. Primakov never did 
jettison democracy or fill the jails. And the costs of doing business in 
Moscow - from travel to telecommunications to office rents - suddenly seem 

Such positive signs, however, pale when one surveys the provinces and finds 
that 35 percent of the nation is living below the official poverty line, and 
the average pension is under $20 a month. 

Or when one surveys the political scene. We are in the twilight of the 
Yeltsin regime - but the regime may not see it that way. Government 
corruption remains as real a threat to national security as ever before. We 
are even wading foolishly into another expensive and pointless Caucasus war. 

When people remember Aug. 17, 1998, they think of an economic collapse. But 
look for first causes. The bankruptcy of Yeltsin's Russia has been moral, 
ethical and political - just like that of the Communist Party's Soviet Union. 
In the post-Yeltsin era, it is this moral and political nihilism that 
Russians must address. 


From: (Irina Kibina)
Date: Tue, 17 Aug 1999 10:18:05 +0400
Subject: Re: 3445-EU's Hahn/Investment Climate

Dear Mr. Johnson:

I have some doubts that really Novgorod on Volga (Nizhny Novgorod) was
meant while speaking about the places with the most pro-business regional
climate in Russia.

It seems to me that again very common mistake is made - there are 2
advanced Novgorods in Russia - one is mostly associated with Boris Nemtzov(
Nizhny Novgorod), and another one (with Governor Mikhail Prusak) -- the
city that until this year was called just Novgorod, but now its historical
name is brought back, and it's Veliky Novgorod (Novgorod the Great),
located between Moscow and StPetersburg, the first capital of the Russian
State (founded 858).

This is Veliky Novgorod, that according to Expert magazine annual ratings
has the most advanced pro-investment legislation, as well as it has one of
the highest foreign investments per capita indicators, also is
traditionally considered as a region with the lowest political risks.

Please, feel free to contact me whenever any questions about Veliky
Novgorod appear.

Irina Kibina
Deputy Chair
Veliky Novgorod City Duma
( Georgetown University Pew Program, Class of 1999)


St. Petersburg Times
August 17, 1999
Putin: The Man To Keep The Federation Together?
By Boris Pustintsev
Boris Pustintsev is the Chairman of St. Petersburg-based Citizens' Watch 
human rights group. He contributed this comment to The St. Petersburg Times.

DO you remember the first words of Sergei Stepashin's farewell speech on 
August 9? It was not about his resignation - this issue (most important for 
him at the moment) came later. His first words were: "The situation is very 
serious. We may well lose Dagestan."

With these words, Stepashin implied that he understood the real reason why he 
was fired. When nominated, he was assigned several missions which he 
evidently vowed to successfully manage - one of the most vital being the 
pacification of the troublesome regions bordering Chechnya. Since then, 
Stepashin has made frequent statements amounting to reassurances that the 
situation in the Russian Caucasus was "firmly under control." When, on August 
2, hundreds of well-armed and trained guerrillas launched an offensive in 
Dagestan and within several days gained a strong enough footing to threaten 
the security of the whole region, the question arose as to who "firmly 
controls" the situation. Definitely not Stepashin, it turned out.

When 60 percent of the territory within a state's borders are uninhabited, 
you are doomed to the constant pressure of centrifugal forces which tug at 
the unity of the country. The only remedies that allow you to more or less 
successfully withstand such pressures are a prosperous economy, developed 
lines of communication and an effective government. Even Canada, a country 
which has many of these assets, experiences serious difficulties trying to 
preserve its federal unity. In the case of Russia, however, the obstacles in 
the way seem insurmountable.

The prolonged economic crisis has paralyzed communications with the far-off 
regions. The mass media are full of reports about impending catastrophes in 
the Far North where inhabitants are completely dependent on the federal 
government for food and fuel supplies to be able to survive the long winter. 
And, this summer, navigation to the north has indeed been disrupted. Families 
who can afford the costs are moving south, but with the absence of effective 
governmental resettling programs and the prohibitive cost of travel, many 
northerners are forced to stay. At the same time, some groups of indigenous 
peoples in the region are on the verge of extinction. There is no banking 
system in Russia in the Western sense of the word: If you send budget money 
from Moscow to the Far East, for example, you are never sure it will land 
where it ought to - local bankers and administrators may be using your money 
to their own advantage and in most cases get away with it.

Federal power has been weakened to such a degree that for many regional 
governors it has already turned into a fictional idea. They often issue 
orders that openly contradict federal policies. Some of them feel and behave 
as if Russia is already a confederation, not a federation. In regions where 
ethnic Russians are minorities, like Tartarstan, outright separatist 
tendencies have been adding to the tensions.

Since perestroika, we have heard the incessant lamentations about the lack of 
a "national idea" that would lead to a resurgence of the nation. But nobody 
wants to admit that an all-embracing national idea does exist - and has since 
the collapse of the empire. That national idea is the striving to keep Russia 
intact, to prevent its disintegration.

To admit this means to announce that the danger is real and is a shift in 
national priorities, concentrating more on regional cooperation than, for 
example, on being strongly engaged in former Yugoslavia. We are not ready for 
this yet. But, there is a general comprehension of the problem, quite often 
at the level of an instinct, and a readiness to unite around anyone who will 
be able to implement this idea.

There is not much logic in this: The concept that the federation may be still 
too vast for its own good, that it is unmanageable within its present 
borders, is unthinkable for most. Russia may turn into a confederation in 
some 10 to 15 years, but few people are ready to discuss this even as a 
long-term perspective. A man in the street may forgive the government and the 
president for any hardship he experiences today, but what he would never 
forgive them for is their inability to preserve the federation.

But there is one exception: Chechnya. Many Russians were so shocked by the 
all-out hostility the majority of Chechens demonstrated to our intrusion 
there, that they have quickly reconciled themselves to the idea that the 
mutinous republic would never again be part of the federation.

But the situation in Dagestan is quite different: No Caucasian leader in his 
right mind would wish his countrymen the fate of the Chechens. The locals, 
who suffer almost daily from looting and kidnapping performed by bandits from 
Chechnya, stay loyal to Moscow and expect it to protect them. Now the 
Chechens are the intruders, and for the Russians it is an act of open 
aggression that must be dealt with accordingly. This time, popular sympathy 
will be with the army, but is the still-unreformed army ready for the task? 
Is the government ready to do away with its monopoly on information so that 
the army and the public-at-large understand what is really going on?

The secession of Dagestan, and perhaps other territories as well, will give a 
mighty impetus to extremist parties and movements. In this case, we will 
undoubtedly see the national-communists as real masters of the State Duma 
after December 1999. As for the 2000 presidential elections, no moderate 
candidate with the slightest shade of liberal leanings will have any chance.

President Yeltsin, with his lupine instinct, has defied all logical reasoning 
many times during his reign and more often than not proved to be the winner. 
The unanimous cry in mass media that changing Stepashin for Putin was a sure 
sign of Yeltsin's unpredictability or dictated mostly by considerations of 
personal safety for "the family," is misleading. The last issue has always 
been present, but the main reason for the change was the president's 
conviction - grounded or not (that is another question) - that Putin is 
probably the only man today who can prevent Russia from falling apart. All 
other considerations were ignored. Yeltsin does not want to go down in 
history as the man who presided over the destruction of the Russian 


Financial Times
17 August 1999
[for personal use only]
DAGESTAN: Yeltsin plays down need for special powers 
By Andrew Jack in Moscow

Boris Yeltsin, Russia's president, and Vladimir Putin, his new prime 
minister, yesterday both played down the prospect of introducing a state of 
emergency while promising tough action to bring an end to the festering 
conflict in the Caucasian republic of Dagestan.

But their comments came against a backdrop of speculation that the Kremlin 
may be manipulating the conflict for its own political ends.

The prospect of intensifying conflict with rebels demanding that Dagestan be 
made an independent Islamic republic and even terrorist attacks could trigger 
the conditions for a state of emergency, providing the government with 
additional powers without the need to consult parliament, and offering a way 
for Mr Yeltsin to postpone parliamentary and presidential elections.

"There will be tough measures in the North Caucasus and we will restore order 
there in Dagestan and other regions," news agencies quoted Mr Yeltsin as 
saying. "But once again, I state firmly as president, there will be no state 
of emergency."

Mr Putin was a little more circumspect, telling the Russian parliament during 
his confirmation hearings that special legal regulations were set to be 
introduced in the "hot spot" along the Dagestan-Chechnya border.

He confirmed that proposals were being discussed with the Federation Council, 
the upper house of parliament.

Few journalists have been able to gain access to the region to verify 

"We will have confirmation of whether the Kremlin is turning the situation on 
and off if the conflict is resolved within the next two weeks," said Andrew 
Russo, head of the Carnegie Foundation in Moscow, suggesting that a swift and 
decisive victory for Mr Putin would help boost his popularity.

However, Nikolai Petrov, a Carnegie scholar, said the Kremlin was more likely 
to be exploiting a situation that had occurred than responsible for its 
instigation. He stressed it might prove "very complicated" to bring the 
conflict in Dagestan to an end.

The Russian parliament is set to examine a new law on the introduction of a 
state of emergency next month, after a recent request by President Yeltsin to 
update the existing legislation, which dates from May 1991 - before the 
creation of the Russian Federation.

The current law allows the president to introduce a state of emergency for a 
period of 30 days across the whole country, or for 60 days in a local region, 
if he has the support of the majority of the Federation Council.

It was used in localised form during the mid-1990s on several occasions in 
the Caucasian republic of North Ossetia, which has also been subject to a 
outbreaks of rebel activity since the collapse of the Soviet Union.

Meanwhile, Chechnya yesterday declared its own state of emergency following 
the build-up of military activity on its border which has included Russian 
troops passing through its territory.

Those calling for tough military intervention gained a surprising new ally 
yesterday in Grigory Yavlinksy, leader of the centrist Yabloko faction, who 
opposed the Chechen war.


Moscow Times
August 17, 1999 
FIFTH COLUMN:Middle Class's Death Greatly Exaggerated 
By Leonid Bershidsky
Staff Writer

A year ago to the day, the Russian middle class reportedly died. Well, those 
reports were clearly nonsense. 

Western reporters who had failed to predict the Aug. 17 financial collapse 
then jumped belatedly on the bandwagon and proceeded to "kill" the 
Westernized Russian with his plastic cards, his Skoda, his Friday night 
clubbing and his job at a Western investment bank. 

The cards were no longer accepted anywhere. Oh, those lines at the surviving 
ATMs! Oh, the disappointment at Ramstore! The Skoda, of course, would have to 
go because the job at the investment bank was gone. All those poor bond and 
equity analysts were getting what they deserved. 

And the club was closed or empty and expecting to go out of business once 
expats stopped booking their farewell parties. 

Only a year has passed, and the clubs are full again. It's the same old crowd 
in there, maybe with fewer foreigners. There is Russian beer on tap, but then 
in the past year formerly unknown breweries have started putting out stuff 
that compares favorably to established Western brands. There is a band every 
night - playing for kopeks, sure, but when have true musicians ever done it 
for money? 

Skoda is hardly selling any new cars in Russia anymore. But used imports and 
Ladas are dirt cheap and I know more people who bought cars in the past year 
than those who sold theirs. 

Investment banks have started hiring analysts again. The Russian equity 
market, though very small, is performing better than other markets. It is 
purely speculative, sure, but then it should always have been. 

Internal emigration has not really turned into real emigration en masse. Even 
Sergei Kiriyenko, who devalued, defaulted and then left for Australia, came 
back and is running for mayor of Moscow. Of course, there are rumors that he 
got a new passport down under, but at least he kept his Russian one, or the 
election commission would have raised hell. 

Plastic is accepted everywhere again. Moreover, foreign banks are opening 
retail branches - an unattainable dream before the August crisis. Turkey's 
Bank Garanti has taken over the exchange office at Ramstore from bankrupt 

The three major Russian firms that were writing software for banks have moved 
from their downtown offices to modest quarters on the outskirts of Moscow. 
But the representatives of the middle class who work there say the market is 
picking up: Reasonable banks that did not play the government bond roulette 
are now expanding into the provinces and looking for new, heavy-duty 

Which just shows that Russia, even though it did without real banks for 70 
years, could not survive without them for 12 months this time around. 

Westernized Russians are infrastructure fanatics. And, as the year since 
"black" Aug. 17 has shown, infrastructure does not die from natural causes. 
It takes a Communist revolution to kill it off. And revolutions are much more 
rare than financial crises. 

It took just two or three years to get used to the idea of having a nice car 
to drive, a bank to keep your money in, a card to pay for purchases, a club 
at which to have a beer on Friday. Now the habits just will not go away, and 
neither will the infrastructure. 

As a member of that materialistic, pro-Western, anti-Communist middle class, 
one has to ask oneself the question, "Why leave when it's all still here?" 


INTERVIEW-Banker recalls unleashing Russian crisis
By Peter Henderson

MOSCOW, Aug 17 (Reuters) - It was a Friday afternoon just over a year ago 
when Sergei Dubinin, the central banker who presided over Russia's economic 
crisis, understood he had failed. 

Dubinin had borrowed, and spent, billions of dollars to back the rouble he 
had sworn not to devalue, staking Russia's future on the central bank's 
ability to keep the rouble steady against the dollar, in the face of global 

His own Russian people finally told him he was done for. 

"That was Friday, August 14," he said in an interview a year after he 
effectively devalued the rouble, ending years of stability and starting a 
crisis which soon spun out of control -- and which has not finished. 

"We saw the result of the trading day and then we had the information about 
the behaviour of Moscow residents -- the people were in lines and they wanted 
to buy dollars at any prices. That was the start of the real devaluation, 
uncontrolled by any market measures." 

Dubinin, who had told Russians to spit in the face of anyone who said the 
rouble would be devalued, said the decision to do so was tough, but clear. 
"We lived in the process of the crisis for several months. So there was no 

The government met central bankers at the weekend and on Monday, August 17th, 
now simply "the 17th" in Russia, they announced the first of a series of 
disastrous changes in the policy which had held the rouble to the dollar and 
said Russia would not pay about $40 billion in rouble treasury bills. 

The rouble, six to the dollar, plunged as much as 20 percent in one day as 
panic buyers of dollars besieged exchange booths. It was at 20 to the dollar 
in weeks. Banks said they could not pay depositors. Small as the Russian 
economy was, its implosion renewed an emerging markets conflagration. 

Dubinin, who soon resigned, says he still believes he made the right call at 
the right time and his summer gamble, spending an International Monetary Fund 
loan to convince foreign and local investors the rouble was sound, had been 

The stakes -- a normal economy almost in reach -- had been too high not to 

"I am sure that last year we (had to) struggle for a strong rouble," he said. 
"It was a real chance to have economic growth.... But we failed," he said. 

The central bank under Dubinin was also accused by IMF officials of lying 
about its reserve levels in 1996, which Dubinin denies. "We operate, the 
central bank, in accordance with our obligations," he said. 

A new IMF agreement has been signed, but the chance for economic growth is 
far away, and Dubinin, now at Gazprom <GAZP.MO><GAZPq.L>, Russia's largest 
company and natural gas monopoly, sees the same problems as a year ago. 

"Really the default of the Russian government on the internal debt was two 
months before August 17, that was the middle of June and the central 
government was unable to pay GKO (treasury bill) investors their regular 

"The main reason for this bad situation, I'm sure now even more than before, 
was the situation in the Russian budget." Taxes were not being collected, and 
the deficit was too high. 

"At this stage we can see some positive changes in the budget policy, but 
this is not enough to support stable currency, even nowadays." 

Today Dubinin says the economy overall is in decline despite the government's 
proud announcements of industrial growth, which rose 3.1 percent year-on-year 
in the first half of 1999 on the back of strong exports and a cheap rouble. 

"Nowadays we have no economic growth in Russia, so the crisis is continuing," 
he said. He saw the rouble, now 25 per dollar, falling softly to 28 in 
December, and said Russia to end economic crisis needed political stability, 
which was possible after next summer's presidential election. 

"Nowadays the political part of the environment in our economy maybe is more 
important even than concrete economic decisions, for the political structure 
can support or can destroy any economic programmes and policies," he said. 

"I'm sure that we'll overcome all the crises, political and economic -- in 
two or three years." 


Moscow Times
August 17, 1999 
A YEAR AFTER THE CRASH:Battered Middle Class to Vote 'Patriotic' 
By Brian Whitmore
Staff Writer

Olga Andreyeva, 31, was doing quite well. A senior account executive at the 
St. Petersburg branch of the employment agency Kelly Services, she had a good 
paying job, money in the bank, took two vacations a year to places like Italy 
and Greece, ate out twice a week and was planning to buy a new apartment. 

Then the crisis hit. 

Andreyeva lost $4,000 when MOST Bank, where she held her savings, went under. 
Her income - between $2,000 and $3,000 a month before Aug. 17 - disappeared, 
like her savings, literally overnight. 

"I was depressed," she said. "I realized that no matter how hard you worked 
to win in life, in this country nothing really depends on you." 

Stories like Andreyeva's - at least in major cities like Moscow and St. 
Petersburg - are common. Prior to last August's crash, the germ of a middle 
class was emerging in Russia. 

The new class, mostly men and women in their mid 20s to late 30s, was small. 
Although precise numbers are not available, sociologists say it numbered 
fewer than 100,000 people and was mostly concentrated in Moscow, and to a 
lesser extent other large cities such as St. Petersburg and Nizhny Novgorod. 

Comprised mostly of middle managers, these other New Russians emerged in the 
mid-1990s, as Western firms and joint ventures began replacing expatriate 
employees with young - and often, but not always, Western-educated - 
Russians. Soon the smartly dressed 30-something manager in a tasteful 
business suit tapping away at a laptop was replacing the crewcut sporting 
thug shouting into a mobile phone as the symbol of the new Russia. 

"They were not self-employed like the so-called New Russians, but were not 
dependent on the state like the old Russians," said sociologist Alexei 
Levinson of the All-Russia Center for Public Opinion Research, or VTsIOM. 

"The middle class existed and the best proof of its existence was its death 
after the crisis," Levinson said. "This class was the hope for the new 
Russian economy and the crisis decimated it." 

The political effects of the middle class's demise could be dire, especially 
for the so-called liberal "young reformers" who dominated Russia's economic 
policy prior to the crisis. 

Levinson says that the middle class, prior to the crisis, was the main 
electoral base for liberal politicians like Anatoly Chubais and Yegor Gaidar, 
and, to a lesser extent, Grigory Yavlinsky of Yabloko. 

"These people were very important for Gaidar and Chubais," Levinson said. 
"They were counting on winning the votes of these young people who managed to 
create better lives for themselves during the transition. Now there are less 
of these people and they are earning less." 

According to Levinson, between 45 percent and 65 percent of the pre-crisis 
middle class has more or less recovered - finding new jobs in the service 
sector, although they are earning less. If before the crisis "middle class" 
salaries ranged from $500 to $2,000 a month, the depleted middle class now 
earns from $300 to $1,000. 

Levinson says that while Chubais and Gaidar - who weren't exactly widely 
popular before it - were the biggest political losers from the crisis, 
support for Yabloko, which steered clear of the policies that led to the 
crisis, remained stable. 

The big winners, he says, were former Prime Minister Yevgeny Primakov - today 
Russia's most popular politician - and Moscow Mayor Yury Luzhkov. 

"You can say that part of the pre-crisis middle class went patriotic and this 
helps both Primakov and Luzhkov," Levinson said. 

Vladislav Friedman, a spokesman for Right Cause, the bloc Gaidar and Chubais 
belong to, isn't convinced. 

"The middle class took a hit after Aug. 17, but whether or not this means 
that we will lose supporters is still unclear," he said. "There have been no 
national elections since last August and only an election will reveal the 
level of our support. 

"We understand that as the election approaches we will be asked many pointed 
questions about how our members conducted themselves in government," added 
Friedman. "We plan to answer all of these questions very concretely." 

Friedman further pointed out that since the crisis many middle class people 
have bounced back. 

Andreyeva, indeed, is one of them. Although she never got to buy her new 
apartment, needs to economize on eating out and on vacations - Turkey instead 
of Italy, for example - she is working and making a living wage. 

"The first months after the crisis hit were the most difficult," said 
Andreyeva, who now runs her own employment service in St. Petersburg and is 
planning to pursue an MBA in the West. "I was living on what was left of my 
savings. But starting in January, things started to improve." 

And who is she going to vote for in December's parliamentary elections? 

"Gaidar and Chubais," she said. "They are the only ones who actually tried to 
do something. All the others do is talk." 


Russia Today press summaries
August 17, 1999
Why Not Tatyana Borisovna?
Vladimir Putin has become the new prime minister of Russia as the Duma 
confirmed his candidacy yesterday with a vote of 233 to 84 (17 abstentions). 
It became clear at the Duma meeting that the deputies do not care even the 
slightest bit who is the prime minister. All they desired was the 
preservation of their Duma headquarters until the scheduled parliamentary 
elections on December 19. The Kremlin could have nominated "young reformists" 
Gaidar or Chubais or even Yeltsin's daughter, Tatyana Borisivna Dyachenko as 
the head of the government.

If Putin stays in office until the parliamentary elections, he will most 
probably preserve his post for another half-year. According to law, the 
president cannot dissolve parliament within the first half-year of its work. 
The new Duma will hardly confirm a new candidate for this post because the 
threat of dissolution is far from menacing.

If Putin survives until December, which is questionable given the fact that 
the president has taken up the habit of dismissing prime ministers quite 
often, the coalition majority at the next Duma will inevitably set forth the 
question of replacing the premier. Putin, thus, may be dismissed in spring, 
and the next prime minster will become Yeltsin’s real successor.

However, yesterday the president stated that he is in excellent health. He 
commented, "My heart works like a clock. My Blood pressure is 120 over 80 in 
the day, at night or under stress. My pulse beats 64 times a minute." Can he 
be thinking about resignation with health like this?


New York Times
August 17, 1999
[for personal use only]
Why Russia Risks All in Dagestan
Robert D. Kaplan is a correspondent for The Atlantic Monthly and the author 
of "The Ends of the Earth." 

STOCKBRIDGE, Mass. Russia's assault on Chechen and Dagestani rebels in its 
southern republic of Dagestan is but one new chapter in the larger, 
bloodstained history of the Caucasus and the Caspian Sea. As the Russians 
resume their centuries-old battle with Muslim warriors in the North Caucasus, 
many in the region believe they are also trying to destabilize Georgia and 
Azerbaijan, two former Soviet states, to the south. These are strategically 
important countries, future conduits for large quantities of oil from the 
Caspian Sea. Their regimes are sufficiently unstable that it might not take 
much to topple them, especially if the West fails to pay sufficient 

The Caucasus is Russia's Wild West; Russians have been fighting Caucasian 
Muslims since Cossacks entered the Terek River region on the 
Chechen-Dagestani border in the 16th century. For the Russians, the Caucasus, 
bordering Turkey and Iran, is both a defensive wall and a listening post that 
they are desperate to maintain. 

>From 1994 to 1996 the Russians carpet-bombed Chechnya, Dagestan's neighboring 
republic in Russia, to put down the rebellion there. But the Chechen 
guerrillas, who fought with all the resourcefulness and ferocity of the 
Vietcong, humiliated the Russian army and exposed its many weaknesses. 

The stakes in the region are high because of the Caspian oil boom. Dagestan 
shares a long border with Azerbaijan, which is emerging as the junction for 
an oil and natural gas pipeline network that will one day extend from the 
Caspian westward through Georgia and Turkey to the Mediterranean, and 
southward through Iran to the Persian Gulf. In a decade, Western companies 
could be pumping as many as four million barrels of oil daily from the 
Caspian, making it almost equivalent to the North Sea. If the Russians lose 
Dagestan, it would significantly hurt their leverage over neighboring Georgia 
and Azerbaijan. 

Russia, though, still has military bases in Armenia, Azerbaijan's enemy. 
Russia also has various ways to influence Georgia and Azerbaijan politically 
and economically. For example, Russia backs the separatist Georgian province 
of Abkhazia, and smuggled goods, which are not taxed, flood into Georgia from 
Russia via South Ossetia. 

Since 1992, there have been 19 reported plots and at least two full-fledged 
attempts -- a gun-and-grenade attack and a car bombing -- on the life of 
Eduard Shevardnadze, the President of Georgia. Many in the region believe 
that Russian forces have been behind all of them, at least indirectly. 

Mr. Shevardnadze has rescued Georgia from the civil war and lawlessness that 
characterized the early 1990's. His benign despotism has given Georgia a 
semblance of democratic rule, with a Parliament that has real meaning. Still, 
outside of Tbilisi, the capital, Georgia is a mass of breakaway warlordships 
and scruffy militia posts, and bribery and corruption are the life support 
system of its economy. 

Thus, the assassination attempts against Mr. Shevardnadze are seen as 
flagrant attempts to undo a nascent democracy. The battle is on: can he 
survive until democratic institutions are better established and until more 
Caspian oil is flowing through Georgia to the Black Sea? 

Georgia is a model of stability compared with Azerbaijan. Whereas Mr. 
Shevardnadze was a member of the Gorbachev politburo, Heydar Aliyev, the 
Azeri leader, is a Brezhnev-era man, and the difference shows. In the 
mid-1990's, Mr. Aliyev withdrew Azerbaijan from its disastrous war with 
neighboring Armenia and restored minimal stability to the country after the 
chaos of the brief democratic rule. Unlike Mr. Shevardnadze, however, Mr. 
Aliyev has made no attempt to restore democracy. He presides over a 
kleptocracy that is destroying the country. While luxury hotels, boutiques 
and fancy restaurants have sprung up in Baku, Azerbaijan's capital, to serve 
foreign oilmen, most Azeris live in desperate poverty. 

A personality cult defines Mr. Aliyev's one-man rule. In bad health after 
heart surgery, the 76-year-old leader is trying to orchestrate the succession 
of power to his unqualified son, Ilham. The democratic opposition in 
Azerbaijan, meanwhile, is no better. It engages in irresponsible rhetoric 
about liberating the millions of ethnic Azeris living south of the border in 

With a dysfunctional opposition, a decadent regime and no civil institutions, 
Azerbaijan faces a power vacuum. The Russians, with their ability to create 
unrest, recently moved advanced fighter jets and anti-aircraft missiles to 
its bases in Armenia. Countering the Russians are the Turks, who have 
increasing influence with the Azeri military through training and 
officer-exchange programs. 

Iranian influence is growing, too. The mosques Teheran has built in rural 
Azerbaijan function as real community centers, and are sometimes the only 
signs of development. 

Despite the region's instability and the Caspian's oil riches, the Caucasus 
does not get sufficient attention from the West. In the early and mid-1990's, 
the West focused on the plight of Bosnian Muslims, and paid little attention 
to the simultaneous violent expulsion of at least a million Azeris from the 
Armenian enclave of Nagorno-Karabakh and ethnic Georgians from breakaway 
Abkhazia and South Ossetia. 

This does not mean the Caucasus needs the same level of Western intervention 
as in the Balkans. Special forces units to protect regional leaders from 
assassination, more cooperation with the Turkish military, normalized 
relations with Iran and constant engagement with Armenia to help wean it from 
Russian military support are some of the things that can project power 
without shedding blood. The West virtually ignored the Balkans until war 
erupted in 1991. Now is the time to think ahead regarding the Caucasus and 
Caspian Sea. 


Stepashin Interviewed on Dismissal 

Komsomolskaya Pravda
13 August 1999
[translation for personal use only]
Telephone interview with Sergey Vadimovich Stepashin, recently 
retired RF prime minister, conducted by Aleksandr Gamov: "Sergey 
Stepashin: I Was Removed Because I Do Not Sell Myself"; date and 
place not given 

[Stepashin] How goes it, Sanya? So you didn't 
manage to work as my helper this time, as you once did at the MVD 
[Ministry of Internal Affairs]? 
[Gamov] I think everything is still in the future for us. 
[Stepashin] I hope so too. 
[Gamov] But to help, I am ready right now! 
[Stepashin] Thank you, dear friend... What are you calling about? 
[Gamov] To convey words of support from our many readers. 
[Stepashin] Tell them I am sincerely grateful. 
[Gamov] The people are worried: how are you feeling, what is your mood? 
[Stepashin] Everything is all right. 
[Gamov] Some people would like to know: why was Sergey Vadimovich so
in front of the television cameras when he talked about his resignation. 
After all, it came as no surprise to him, right? 
[Stepashin] It was and it wasn't at the same time. On Thursday I had a 
preliminary talk with the president. And after this 
to-me-simply-remarkable conversation with Boris Nikolayevich (it had been 
a long time since we had talked that way and a long time since we had 
understood each other that way), I left for a very good work trip to the 
Russian regions, at his instigation, by the way. And when I returned, I 
just was not prepared for such a turn of events right away on Monday. And 
the second thing was that I had several drafts of the statement. And 
quite harsh ones, to be frank. But all the same, I said what I thought 
was necessary, what my internal convictions and, if you like, what 
decency suggested. 
[Gamov] And can you describe Boris Nikolayevich's condition when he told
about his decision to send you into retirement? 
[Stepashin] I think he had a great deal of difficulty making this decision. 
When I came to him in Gorki early in the morning, he was not alone. That 
already suggests that he needed some additional support to get this 
decision made. Then, after I had already bid farewell to the government, 
I called Boris Nikolayevich from my office and laid out several 
recommendations, especially in regard to the North Caucasus. That 
situation continues to disturb me even now. And on a purely human level, 
I said thank you for 10 years of working together. 
[Gamov] And was Boris Nikolayevich greatly agitated that day? 
[Stepashin] He does not betray his emotions, but I think he was, of course. 
[Gamov] When you and he parted, what was said? 
[Stepashin] The president said to me: "Sergey Vadimovich, you and I are
on the same team." I answered him: "Boris Nikolayevich, I am on no other 
team, and I am still with you, that is a fact." Then I said, as an 
officer should: "Your humble servant!" 
[Gamov] Your resignation outwardly seems a result of some intrigue 
undertaken by the Kremlin for a very simple reason: they said Stepashin 
is "untrustworthy, so he should be removed..." 
[Stepashin] Just who thinks I am untrustworthy? Sash, do you believe that? 
[Gamov] I have never doubted Stepashin. 
[Stepashin] But who thinks I am untrustworthy? People in government? The 
country? The president? Those who trusted me, including the governors--I 
have already traveled half-way around the country?! Or foreign partners 
with whom I managed to steer a course with enormous difficulty? Enormous 
difficulty! Few people know that with the International Monetary Fund, 
everything was decided at the last hour during my talks with Clinton and 
Gore. I managed to get approval to restructure an enormous, $170 billion! 
debt of the USSR. No one wants to talk about that for some reason. 
The reason I was removed is that I was indeed trustworthy... I never 
wanted to serve anyone, no one ever bought me. Not everyone will sell out 
and not everything can be bought in our country. 
[Gamov] There is also a story that Stepashin behaved improperly when an 
attempt was made to put him into the Fatherland-All Russia bloc. That you 
distanced yourself from that. 
[Stepashin] That is not quite true. I have never hidden my sympathies for
Russia. But the current prime minister cannot be second on the list, or 
third, or sixth, only first! And the lineup that they suggested was 
unworkable. That is all. 
[Gamov] There are two stories which the political folks are now actively 
discussing. The first is, they say that everything was supposedly 
carefully thought out. Putin and Stepashin are put forward in the 
elections as two figures. Stepashin appears to be hurt, and in our 
country we love people who have been hurt. And then together they get the 
result the Kremlin needs out of the pre-election campaigns. 
[Stepashin] I think that is a very complicated move. A purely imaginary
its seems to me. Everything is a great deal simpler... 
[Gamov] The second version is that you refused to participate in the 
political game because they told you openly: join Fatherland and then 
leave, and Fatherland will collapse. By law if one man leaves one of the 
top three positions on the federal slate, everything collapses. 
[Stepashin] That did not happen. I actually supported and do support All 
There was the story that Stepashin would become the leader of this bloc 
and would not participate directly in the elections, but it would be 
obvious to everyone that All Russia was a bloc headed by the current 
chairman of the government. A large number of the governors were the 
initiators of this formula. 
There is one more version, and Boris Nikolayevich approved it even before 
my resignation--to revive, to really bring back the Union of Governors. 
Its next session was set for 31 August... 
[Gamov] After retirement you immediately called your parents. How did they 
take the president's edict? 
[Stepashin] They were upset. My mama is a direct person, she lived through 
entire blockade. She said: "Serezhenka, I don't understand anything, just 
why were you removed?" They are waiting for me to visit and want me to 
come home as soon as possible... 
[Gamov] And your household, how did your wife and your son react? 
[Stepashin] My Tamara, as is proper for the wife of an officer, supported
in everything. I had not seen Volodya for a month; my son is an independent 
person. That very evening he came to the dacha, we had already been 
thinking about what to do next. (But so far that is parenthetical.) My 
son embraced me and said what mistakes had been made. I agreed with him. 
But for the most part he supported me. 
[Gamov] Sergey Vadimovich, how do you manage to stay so optimistic and 
cheerful in spirit? Who helps you other than the people close to you? 
[Stepashin] My friends, of course. But these days there are a great many 
around me in general. Sympathy and support from certain people was an 
absolute revelation to me. Just as it was a revelation that some very 
close people did not even call. 
And where does such perseverance come from? In fact this is not the 
first time I have been removed. So I am always psychologically prepared 
for such a turn of events. When a man holds a top post, he must 
understand that it is not forever. If the top man or the second top man 
believes that the post is forever, it is very bad both for him and for 
the country. 
[Gamov] Despite everything, it is already decided that you are to remain in 
big-time politics. Aren't you trying to free yourself of that somehow? 
[Stepashin] I am now working on two tasks. The first is that I am slowly 
collecting my things, since I will have to leave the premier's dacha. 
That is good distracting therapy. And the second thing is conducting very 
vigorous consultations with our leading politicians. I am going to meet 
with my friend Yevgeniy Maksimovich Primakov, with Yuriy Mikhaylovich 
Luzhkov, and with Mintimer Sharipovich Shaymiyev. I had a long talk with 
Anatoliy Borisovich Chubays. My former vice premiers came. Volodya 
Rushaylo was there, at a difficult moment, early in the morning... 
[Gamov] What do you think you will do? 
[Stepashin] I assume I will make the final decision for myself sometime 
before Monday. 
[Gamov] Will it be state service? 
[Stepashin] No. 
[Gamov] Then politics anyway? And just what forces do you intend to join? 
[Stepashin] Above all, the people who understand what is going on in the 
country, and for whom the most important thing is not their personal 
ambitions but the fate of Russia. And then there are those whom I simply 
like to work with, whom I respect. It is impossible to work in a team if 
you are uncomfortable with the people next to you. The work won't be a 
[Gamov] What was the biggest mistake you made in the post of premier? 
[Stepashin] Whether it was a mistake or not a mistake, you simply cannot 
me. I would not serve the interests of a particular group, who believed 
that in that case I was not trustworthy. I stand by that, and I will 
continue to stand by it as long as I am able. 
[Gamov] When you became premier, many people saw that Stepashin was a
educated man and a cultured one who knows Pushkin and Shukshin by 
heart... These days aren't you turning to the classics for support? 
[Stepashin] I don't feel like reading Pushkin right now, or Shukshin. But 
starting tomorrow my son Volodya and I have agreed to start working on 
English. I want to bring it back faster. I recognized the need for that 
during my visits abroad. That is also good therapy. 
[Gamov] Are you expecting a phone call from Boris Nikolayevich? 
[Stepashin] It would appear he and I discussed everything. But if he
he wants to, naturally I would respond to his phone call as any person 
would. But I do not think there will be any phone call now. He has to 
make sense of everything too. 
[ Gamov] What awaits Russia? 
[Stepashin] Russia is people. And the country's fate is indeed in their 
hands. I 
am confident that Russia's citizens will make the proper choices both 
this winter and next summer. 
[Gamov] Will you help us do that? 
[Stepashin] Certainly. Well then, thank you, Sasha, for the phone call.
[Gamov] Bye. 
[Caption to photograph] [photograph not provided]: "What will I do now?
tell you on Monday..." 


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