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Johnson's Russia List


August 18, 1999    
This Date's Issues: 3447 • 3448 

Johnson's Russia List
18 August 1999

[Note from David Johnson:
1. Moscow Times EDITORIAL: For a More Humanlike Political Elite.
2. Reuters: Russian economy on hold until elections -Yavlinsky.
3. Eckhard Freyer: Re: 3441- J. Lloyd: Russian Devolution was, is and 
will be a highly charged question in European/German politics.

4. Vlad Ivanenko: Stiglitz on Russian transition.
5. Peter D. Ekman: RE: Veliky Novgorod.

7. Moscow Times: Brian Whitmore, Primakov Jumps Into Campaign Fray.
8. Christian Science Monitor: Fred Weir, A Russian Dream Team?
9. Financial Times: John Thornhill, Opposition gets double boost.
10. Reuters: Burnt US banks a shadow of former selves in Russia.
11. Interfax Details Voting in Putin Confirmation.
12. NTV: Expelled Communist Party Member Comments. (Podberezkin)
13. AP: Mrs. Gorbachev's Slightly Better.
14. Reuters: Gareth Jones, Year after crash life still hard for most 

15. The Post-Soviet Handbook: A Guide to Grassroots Organizations 
and Internet Resources. Revised Edition (1999). 

16. Itar-Tass: There Will Be No State of Emergency in Russia.


Moscow Times
August 18, 1999 
EDITORIAL: For a More Humanlike Political Elite 

It has finally happened: an event that has altered the national political 
landscape. Elections to the State Duma are just three months away; 
presidential elections are 10 months away; and already, for Russians certain 
paths into the future, certain doors of opportunity, have been closed 

Observers saw it coming a mile off. But today, as we are left to survey a 
field of potential candidates for high office that no longer includes Monika 
the painting orangutan, that is cold comfort. 

Monika never handed away the national wealth through rigged privatization 
auctions. Nor did she ever have the honor of building a domestic debt pyramid 
and crashing the banking system. 

But at just 11 years of age, she took the St. Petersburg art world by storm 
with her drawings and paintings. Her boldness in roughing up vested cultural 
interests surely qualifies her as one of the city's famous "young reformers." 

Monika died last week of an intestinal illness. She was just 12, while 
orangutans generally live to 40. 

Her untimely departure leaves us only to speculate what kind of a prime 
minister she might have made in the final days of the Boris Yeltsin bunker 
regime, or whether she could have united Russia's constructive political 
forces into a center-right-left coalition for civil peace and accord. 

Call us naive dreamers, but we can't help wondering wistfully what Monika 
might have done if tapped for the No. 3 position on the Fatherland-All Russia 
Duma list, after Yevgeny Primakov and Yury Luzhkov. 

It's not as crazy as it sounds. For one thing, we firmly reject pessimists 
who believe Russians aren't politically sophisticated enough to be 
comfortable with a lady holding high office. For another, we can't help 
thinking that Monika brings at least as much to the table as the current No. 
3 on the list, St. Petersburg Governor Vladimir Yakovlev. 

Arguably, Monika could have provided that youthful energetic new blood 
Yeltsin is always going on about. She has no Swiss bank accounts and no 
envious dreams of empire; she was never a member of the Soviet Communist 
Party; she has nothing against the Chechens; and in both August 1991 and 
October 1993 she had the good common sense to stay in her cage. 

President Yeltsin has encouraged the nation to spend the next several months 
trying to appreciate the "human qualities" of Vladimir Putin, the ex-KGB 
prime minister du jour. We're, ahem, still waiting to see that human side. In 
the meantime we can't help remembering Monika's human qualities, and 
wondering what might have been. 

After all, if nothing else she could have gotten billions more out of the 


Russian economy on hold until elections -Yavlinsky

MOSCOW, Aug 17 (Reuters) - Russia's economy is unlikely to improve under new 
Prime Minister Vladimir Putin and will only pick up after next year's 
presidential election, leading liberal politician Grigory Yavlinsky said on 

Yavlinsky, speaking on the first anniversary of Russia's economic crisis, 
said significant improvements were not possible under President Boris 
Yeltsin, whose final term is due to end next July. 

He said Russia needed to liberalise the foreign investment climate, establish 
clear and stable private property rights, improve monetary and budget 
policies and boost tax collection. 

``I don't believe that the new government and president are able to do such 
things,'' he told Reuters Television. 

Yavlinsky, leader of the parliamentary opposition Yabloko group, said nothing 
much had been achieved in the year since Russia effectively devalued the 
rouble and defaulted on state treasury bills. 

``We are still in a state of crony capitalism and we are still in a state of 
stagnation,'' he said. 

``Changes can be expected only after the presidential elections a year from 
now...I would be happy if the situation a year from now would not be worse 
than today.'' 

Russia's economy was gutted by fall of the rouble, now worth 25 percent of 
its dollar value a year ago, which nearly destroyed the banking system, 
impoverished the nation and sent foreign investors packing. 

Yavlinsky said the country had to fight to make sure Yeltsin handed over 
power peacefully. 

``We have two fights -- to have the elections, then to win the elections. 
Russia is still moving from the communist past to the democratic future, but 
it's a very difficult path.'' 


Date: Tue, 17 Aug 1999
Subject: Re: 3441- J. Lloyd: Russian Devolution was, is and will be a highly 
charged question in European/German politics. 
From: (Prof.Dr. Eckhard Freyer)

Allocations for transformation in USSR/CIS/Russia came substantially from
Germay/EU in context with German unification, Soviet Army´s withdrawal,...

As a microeconomist and Financial Sector-TACIS-Programme-Manager 1991-93 I
was convinced from the beginning that macroeconomic changes alone and
placing new institutions were not sufficient. 

Contrary to the „Washington consensus“ and creating difficulties in these
days in the Western community indeeed it proved to be more efficient to
reform some of the old institutions, e.g. Sberbank. All efforts from TACIS
to assist/reform Central Bank of Russia...were counterbalanced by permanent
changes of executives and experts in many Russian institutions,
contributing to the decreasing confidence and vision. But in many
institutions still excellent people keep Russia moving and not failing in
an extraodinary hard transition period. 

Based on our own transition task in Germany and my job transforming a
former GDR-academy into a University a.S.I´m still convinced that Russia
will overcome these difficulties sooner than often expected now but after a
longer time than expected by most experts in East and West in the
„romantique time“.

Prof. Dr. Eckhard Freyer, Bonn/Merseburg-Germany


Date: Tue, 17 Aug 1999 
From: Vlad Ivanenko <>
Subject: Stiglitz on Russian transition

The publication by John Lloyd (JRL-3441) warrants an elaboration on
"Whither Reform?" by Joseph Stiglitz since his work appears to be
influential for American readership. 

The appeal of the paper is mostly political. Stiglitz is not only a
distinguished economist; he is a successful politician. The fact that the
former Chairman of the Council of Economic Advisers effectively dumps the
policy of his former chief regarding Russian transition is telling. 

Stiglitz advises to the Russians to emulate the Chinese approach to
transition, particularly changing the ownership structure. According to
the paper, stakeholders should acquire control over the former state-owned
enterprises in the interim period before the market institutions of
private property take roots. In this respect it is important not what
Stiglitz says but also what he is careful not to mention. The suggestion
of communal control amounts to creeping nationalization in Russia, which
may be not a bad idea. Theoretically, there is nothing wrong with public
ownership. In spite of the general belief that public companies are less
efficient, empirical evidence is inconclusive and Stiglitz knows that. 
Yet, he pretends that he does not doubt the correctness of privatization
only favors less "rapid" one. 

>From economic point of view, there is nothing new in the paper. The main
idea of stakeholders' privatization (under a different name) is described
in details in "Market Socialism" by Bardham and Roemer (Journal of
Economic Perspectives, Summer 1992). Stiglitz is familiar with that paper
(he served as the editor of JEP at that time). The ideas behind the
Washington Consensus are better explained elsewhere (e.g. "Understanding
Economic Policy Reform" by Rodrik in Journal of Economic Literature, March
1996). The appeal to Austrian economics (particularly to Schumpeterian
creative destruction) can be viewed as an olive branch that Stiglitz
offers to the Austrians after the latter dismissed "Whither Socialism?" as
the promotion of his own ideas. The bibliography is compiled haphazardly
and cannot serve as a guide to further reading. 

Vlad Ivanenko, Ph.D. candidate in economics
University of Western Ontario


Date: Tue, 17 Aug 1999 
From: "Peter D. Ekman" <> 
Subject: RE:Veliky Novgorod

Irina Kibina's note on the re-naming of Veliky Novgorod has come
at an interesting time. She might have said that the right to call
Novgorod Veliky, or "the Great" - its historical name, was re-conferred
on the city by President Boris Yeltsin on August 14, 1998 in the same
speech when he said the ruble would not be devalued.
This coincidence should not, however, devalue Veliky Novgorod.
I visited a few weeks ago, and it is a beautiful city, with many
tourist amenities. Business, in general, appeared to be healthy.
For those of you in Moscow, I'd recommend a visit. The main sights
are the Kremlin and the 60 or so historic churches. The overnight
train only costs about $10 (one-way coupe) and the Hotel Volkov, where I 
stayed also cost about $10 per night, for basic comfortable accommodations.
I'd personally avoid the ugly Intourist Hotel or the $130 per night Best
Palace, but there are 4 or 5 other comfortable hotels near the Kremlin.



MOSCOW. Aug 17 (Interfax) - The leaders of Our Home is Russia
(Viktor Chernomyrdin and Vladimir Ryzhkov), Right Cause (Anatoly
Chubais), New Force (Sergei Kiriyenko) and former prime minister Sergei
Stepashin held another round of talks Monday evening. "The negotiations
are very difficult because the participants differ seriously in their
views and approaches to fundamental problems," a source told Interfax.
Nevertheless, meetings with the final goal of forming a single
right-of-center election coalition will continue.
The source said that the main stumbling block is in that most Our
Home leaders and governors in the movement do not want to align with
Chubais or Kiriyenko. However, they do not rule out working with such
Right Cause representatives as Irina Khakamada and Boris Fyodorov.
The source believes there is a possibility of reaching the Duma
elections with two blocs: the Right Cause and New Force in the first;
and with Our Home is Russia, Stepashin, the Transformation of Russia of
Sverdlovsk governor Eduard Rossel, Russia's Voice of Samara governor
Konstantin Titov, and several provincial organizations in the second.
According to the source, if Our Home is Russia runs in the
elections separately the party ballot will be topped by Chernomyrdin,
but if a broader coalition is formed he will not figure on the list.


Moscow Times
August 18, 1999 
Primakov Jumps Into Campaign Fray 
By Brian Whitmore
Staff Writer

After months of silence, Yevgeny Primakov officially entered the Duma 
election race on Tuesday, calling for a weaker presidency, a stronger 
parliament and guarantees of "complete security and a dignified life" for 
Boris Yeltsin after 2000. 

Particularly interesting was Primakov's insistence that Russia also revive 
the office of vice president. If nothing else, that will make it easier for 
the former prime minister and his new sidekick, Moscow Mayor Yury Luzhkov, to 
agree on who gets to run for Russia's top job next summer. 

On Tuesday, a packed hall full of journalists applauded when Primakov made a 
long-anticipated announcement that he was joining Luzhkov's Fatherland-All 
Russia movement and would lead its candidate list in December's parliamentary 
elections. The top three spots on the bloc's party list will go to Primakov, 
Luzhkov and St. Petersburg Governor Vladimir Yakovlev. 

Primakov, who is far and away Russia's most popular politician, also said 
that he was considering a presidential run when President Yeltsin's term 

"I haven't made up my mind yet. Much will depend on whether I feel the 
people's trust, which is very dear to me," Primakov said, suggesting that a 
future presidential campaign would depend on how well he fared in the 
elections to the Duma, the lower house of parliament. 

Previously, Primakov had strenuously denied that he had any intentions to run 
for president. 

Asked how he and Luzhkov - who also has designs on the Kremlin - will decide 
who between them will run for president, Primakov said flatly, "we will 

Luzhkov has said in the past that he would be prepared to forego a 
presidential run to support Primakov. And the former prime minister's 
proposal to reinstate the vice presidency suggests one possible scenario 
those two ambitious men could be considering. The elder and more popular 
Primakov, who turns 70 in October, could run for president with the younger 
Luzhkov, 62, as his running mate - and obvious successor. 

Creating a vice presidency would also leave open a powerful bargaining chip 
in a possible future Primakov-Luzhkov presidential campaign - the post of 
prime minister, which could be offered to somebody like Yabloko party leader 
Grigory Yavlinsky in exchange for supporting that ticket in 2000. On Sunday 
night's broadcast of the popular current affairs show Itogi, host Yevgeny 
Kiselyov suggested that Yavlinsky could emerge as an important kingmaker in 
Russia's next presidential elections. 

The creation of Fatherland-All Russia, which unites Luzhkov with many of the 
country's powerful regional governors, put the Kremlin's collective nerves on 
edge. And Primakov's decision to join them won't make the presidential 
entourage sleep any easier. 

Yeltsin's inner circle - darkly referred to by the media as "the family" - 
reportedly fears the reckoning and possible prosecutions that could ensue 
should somebody like Primakov or Luzhkov come to power. 

"There has been strong pressure aimed at hindering the creation of our bloc," 
Luzhkov said, adding, "we aren't afraid, because we are strong." 

Pavel Krasheninnikov, who was fired Tuesday as justice minister, said he 
believes one of the reasons for his sacking was his unwillingness to ban or 
deny registration to anti-Kremlin parties like Luzhkov's Fatherland and 
Gennady Zyuganov's Communists. 

"Demands were made to ban this or that party ... or block the registration of 
certain organizations," Krasheninnikov said in remarks reported by Interfax. 

In an effort to alleviate Kremlin fears, Primakov said he favored legislation 
that would "guarantee former Russian presidents complete safety and a 
dignified life" - a clear reference to Yeltsin. Primakov also said he would 
gladly meet with Yeltsin if the president so requested. 

In addition to creating a vice presidency, Primakov also proposed amending 
the Constitution in such a way that some of the president's vast powers would 
be turned over to the Cabinet and the State Duma. He suggested that future 
governments be formed not by presidential fiat, but on the basis of a 
parliamentary majority. 

"This would prevent dizzying Cabinet changes," said Primakov, who in May was 
the victim of one of Yeltsin's government shuffles. 

Currently, the president proposes prime ministers, who must be confirmed by a 
majority of the Duma. But lawmakers take such confirmation votes under 
duress: If they thwart the president three times, he is constitutionally 
required to dissolve parliament. Yeltsin has used this prerogative to change 
governments four times in the past 17 months. 

Most of the changes Primakov proposed would require amending the Constitution 
- a complex process requiring substantial majorities in both houses of 

Later in the day, Luzhkov said that he would not take a seat in the Duma 
should he win one. 

"The work of a deputy does not entice me, I like economic activity more," 
Luzhkov said, adding that he has "no presidential ambitions whatsoever, 
except the ambition to carry on as Moscow's mayor." He also is running for 
re-election as mayor in December. 

Whether other regional leaders, like Yakovlev and Tatar President Mintimer 
Shaimiyev - or the bloc's leader, Primakov, for that matter - would take a 
Duma seat is still unclear. 

"These are symbols rather than the figures who will take part in the work of 
the State Duma," Luzhkov said in remarks broadcast on TV Center, referring to 
himself, Primakov and Yakovlev. 

Primakov, who holds no government post, would appear to have no reason to 
reject a Duma seat, and he implied Tuesday that one of his goals in joining 
the bloc was to create a more productive parliament. 

There is a precedent for big names to run for the Duma on a party list only 
to reject their seats after the election. In the 1995 elections, for example, 
then Prime Minister Viktor Chernomyrdin and renowned film director Nikita 
Mikhalkov won seats on Our Home Is Russia's list that they later gave up. 

Also Tuesday, another former prime minister, the freshly sacked Sergei 
Stepashin, announced that he would run for a Duma seat from a district in his 
native St. Petersburg. Stepashin also said that he was still negotiating 
about joining a "center-right" coalition and would announce a decision 
sometime this week. Interfax reported Monday that such a coalition could 
include Anatoly Chubais' Right Cause, Viktor Chernomyrdin's Our Home Is 
Russia and Sergei Kiriyenko's New Force. 


Christian Science Monitor
18 August 1999
A Russian Dream Team?
Russia's most popular politician joined Moscow mayor in coalition Aug. 17. 
By Fred Weir, Special to The Christian Science Monitor

Out of Russia's fractured political scene a Dream Team has emerged, an 
election coalition of leaders with the charisma, ideas, and organizational 
clout to unite the foundering country and lead it into the next century. 

Or so they're saying. 

Russia's most popular politician, former Prime Minister Yevgeny Primakov, 
declared Aug. 17 that he is joining forces with the Fatherland movement of 
ambitious Moscow Mayor Yuri Luzhkov and All Russia, an alliance of powerful 

"I was invited to head the [parliamentary] bloc of Fatherland-All Russia. 
Today I officially confirm my acceptance of this invitation," Mr. Primakov 
told a crowded press conference in Moscow. 

Analysts say Russia would likely see less political upheaval under Primakov's 
leadership, even though it may also mean strained relations with the West. 

"It's a trade-off: With Prima-kov we might have a more stable Russia, but 
also a slightly more anti-West Russia," says Marshall Goldman, director of 
the Davis Center for Russian Studies at Harvard University in Cambridge, 
Mass. "Primakov is a compromiser. But the compromise is usually at the 
expense of the US," he adds. 

Primakov is a former journalist, spy, and Russian foreign minister, who was 
prime minister for nine months until being fired by President Boris Yeltsin 
in May. Primakov appears to have done very little as head of the government 
following the economic crash one year ago. Average Russians think well of 
him, and since his dismissal at Mr. Yeltsin's hand, public opinion surveys 
show him the country's most popular political figure. 

As premier, Primakov worked with and was respected by most factions in 
parliament, including the dominant Communists. The general impression is that 
he is a left-winger who would chart a more anti-Western foreign policy, 
increase state intervention in the economy, and step up social-welfare 

"Some in the West are worried that Primakov is backed by the Communists, but 
this is not a major problem. There is no politician in Russia today who 
doesn't have some scent of communism about him," says Gennady Burbulis, a 
former Kremlin aide, now an independent deputy in the Duma, or lower house of 
parliament. "Perhaps they suspect him because he visibly lacks enthusiasm for 
Western ways of doing things." 

With the addition of Primakov, the coalition appears to have all the elements 
needed to make a strong showing in the parliamentary vote scheduled for Dec. 
19 and put up a champion capable of winning the presidential poll slated for 

Mr. Luzhkov controls the financial resources of Moscow and has influence with 
some national media, crucial for mounting any sustained electoral effort. All 
Russia includes Mintimer Shamiyev, president of the populous Volga republic 
of Tatarstan and Vladimir Yakovlev, governor of St. Petersburg, Russia's 
second largest city. 

But for all its surface strengths, analysts warn the coalition is a mass of 
contradictions bound together by naked ambition. When he was premier, 
Primakov called for strengthening central government by ending local 
elections and letting Moscow appoint governors. This is not likely to sit 
well with the elected governors of All Russia. 

"They need Primakov to paper over the cracks in what is essentially a very 
artificial alliance," says Mr. Burbulis. "But there are too many strong 
personalities in this group. The chances are they will fall out among 
themselves before the presidential elections." 

There is an old Russian saying, "Two bears cannot share the same lair." 
Luzhkov, who has spent several years preparing his own Kremlin bid, has said 
that he would be willing to accept Primakov as the group's candidate for 
president. Primakov made such a compromise more likely Aug. 17 by calling for 
reform of the state power structure, transferring some current presidential 
powers to the prime minister and the legislature, and possibly recreating the 
post of vice president. Luzhkov might be content with such a position, if it 
leads to the top. 

"If power is divided more evenly between the Kremlin and the government, it 
might not matter who is the presidential candidate and who is promised the 
prime minister's post," says Andrei Kortunov, director of the Moscow 
Scientific Fund, a private think tank. 

One view of the new coalition's potential says it can go the full distance 
and capture the Kremlin because its key figure, Primakov, is disinterested in 
personal power. 

"Primakov is a patriot who wants to save his country, not a power-grubber," 
says Vladimir Shtol, editor of The Observer, a left-wing news weekly. "He has 
a set of definite ideas about what he wants to do. He has joined this 
coalition because it can create the possibility to implement his program." 

The threat of a Primakov-Luzhkov axis has prompted panic in the Kremlin. 
There is widespread speculation that Yeltsin fired Prime Minister Sergei 
Stepashin earlier this month for failing to prevent Luzhkov from hooking up 
with the governors in All Russia. Yeltsin named Stepashin's replacement, 
Vladimir Putin, as the Kremlin's candidate for president. 

But few analysts believe that Mr. Putin stands much chance of winning in a 
free and fair contest. His only allies so far are a handful of liberal 
politicians who are blamed in the public mind for the ill effects of market 
reforms culminating in last August's economic crash. 


Financial Times
18 August 1999
[for personal use only]
RUSSIA: Opposition gets double boost 
By John Thornhill in Moscow

Russia's former justice minister alleged yesterday that one of the reasons
he lost his job was because he obstructed the Kremlin's plans to ban the
Communist party, which forms the biggest parliamentary faction.

Pavel Krasheninnikov, who was told yesterday there was no place for him in
the new cabinet, suggested he had further antagonised the Kremlin by
registering the Fatherland electoral bloc in time to compete in
parliamentary elections in December.

The Fatherland movement is headed by Yuri Luzhkov, Moscow's mayor, who has
recently joined forces with several other powerful regional governors in
defiance of the Kremlin.

This broadening anti-Kremlin coalition was given a significant boost
yesterday when Yevgeny Primakov, the popular former prime minister, agreed
to lead the movement into the parliamentary elections.

Mr Krasheninnikov said the justice ministry had investigated allegations
that the Communist party was encouraging extremism but had found no legal
justification for closing it down. Several politicians had called for it to
be banned after it failed to dissociate itself fully from anti-Semitic
statements made by two of its leading MPs.

"It is not possible to say that there are no violations [of the law] in the
Communist party. But we did not find grounds to take a decision to
liquidate the party," Mr Krasheninnikov said on the Echo Moskvy radio station.

He added that unnamed officials in the Kremlin had told him: "You have one
problem: you always cite the law."

Mr Krasheninnikov's comments have fuelled fears that the forthcoming
parliamentary and presidential elections may be marred by scandals and
provocations. Opposition politicians have claimed the presidential
administration is seeking an excuse to postpone the elections - an
allegation fiercely denied by the Kremlin.

Valentin Kuptsov, one of the Communist party's leaders, said it was under
constant pressure from the authorities. But he said he was certain "they
will find nothing on us and we will not allow any provocations".

Meanwhile Mr Primakov, who was sacked by President Boris Yeltsin in May,
said it was essential to rebalance the constitution by shifting more power
from the presidency to the government and recreating the post of

"Enough of strife, attacks on each other, threats to ban parties that are
against somebody's liking, enough of muckraking. We must move towards
consensus in society," he said at a press conference.

"We must all ensure that there will be no cheating, including electronic
vote rigging, and that elections will be held on time, as declared by the

Mr Primakov said the electoral bloc's first priority was to ensure it won a
solid representation in parliament, enabling it to pass much- needed
legislation. "We should make sure that neither the police nor the tax
authorities nor entrepreneurs nor foreign investors nor the customs
services have any reason to say they cannot work because there is
insufficient legislation," he said.

Mr Primakov said he had not yet decided whether he would contest the
presidential elections.


Burnt US banks a shadow of former selves in Russia
By Mary Kelleher

NEW YORK, Aug 17 (Reuters) - A year after Russia's devaluation and default 
sent investors running for the exits, U.S. banks remain leery of lending in 
the country and operations there are a shadow of what they once were. 

Hefty trading losses and writedowns on Russian bonds stung banks like Chase 
Manhattan Corp. <<A HREF="aol://4785:CMB">CMB.N</A>>, Bank of America Corp. 
<<A HREF="aol://4785:BAC">BAC.N</A>> and J.P. Morgan & Co. Inc. <<A 
HREF="aol://4785:JPM">JPM.N</A>> when the country defaulted on its debt and 
devalued its currency last August. 

Scarred, banks say they have eliminated staff in Russia even while keeping 
offices open. They also have drastically reduced lending there, overhauled 
risk measurement standards and pulled away from trading for their own books. 

"We pulled back in terms of the size of staff in Russia, cutting it by about 
60 percent," Herb Aspbury, Chase Manhattan's regional executive for Europe, 
Africa and the Middle East said. "The doors are open and we are doing a very, 
very modest amount of business there but we are taking no risk really...We 
don't want to abandon the country because it is too important but based on 
the experience of last year, we are not going to be in risk-taking mode." 

Banks that last September warned of weaker results because of losses in 
Russia now are hanging back and doing business only to meet clients' demands, 
instead of piling up loans and adding employees in Russia as they did prior 
to the country's default. 

The cash-strapped country, which on August 17 last year effectively devalued 
the rouble and defaulted on billions of dollars in loans, is trying to hammer 
out an agreement to reschedule some $32 billion owed the London Club of 
commercial creditors. Separately, it owes the Paris Club of nations $38 

The International Monetary Fund, which recently approved a $4.5 billion loan 
to Russia, has said Russia's economy still faces considerable risks and that 
the government must revive structural reforms. 

While Russia negotiates, global banks have kept a low profile. Bank of 
America, the biggest U.S. bank, has lowered its staffing levels in Russia 
after the devaluation, and its loan exposure to the Russian Federation now 
stands at $33 million, substantially below $432 million last year, it said. 

Part of its global strategy now is to reduce its risk profile and curtail 
proprietary trading in emerging markets. 

CS First Boston, the investment banking arm of Credit Suisse Group Inc. 
<CSGZn.S>, now employs about 200 people in Russia, about 100 less than 
before. Last year's collapse of the Russian market left the firm, which had 
been the largest holder of defaulted Russian treasury bills, with provisions 
and net write-offs of $1.3 billion in 1998. 

Other banks also were hit. Chase estimated it would write off about $200 
million for commercial loans it believed were not recoverable in last year's 
third quarter, mostly reflecting fiscal turmoil in Asia and Russia. That same 
quarter, Bank of America said it had $330 million in trading losses. 

J.P. Morgan had trading losses in last year's third quarter as it wrote down 
Russian trading assets. And Republic New York Corp. <<A 
HREF="aol://4785:RNB">RNB.N</A>> said losses on its Russian investments 
forced it to take a charge of $110 million in the third quarter of 1998 and 
wiped out its earnings for the period. 

"As far as the banks are concerned, there has not been any return of 
investment capital into Russia," Raphael Soifer, an analyst at Brown Brothers 
Harriman, said. "By and large, they haven't closed up and gone away...but 
staff has generally been cut back and business expectations certainly have 
been radically reduced." 

The loan losses in Russia were magnified by banks' investments in hedge funds 
like D.E. Shaw and Long-Term Capital Management, which had quietly placed 
bets on Russia and global bond markets and then suffered punishing losses. 

The surprising exposures that emerged from hedge funds compounded banks' 
pain, prompting them to rethink how they measured lending and trading risks, 
executives said. 

"The traditional way of thinking about Russia was how much exposure is there 
to the Russian government directly or indirectly or to Russian companies," 
said Joseph Sabatini, vice chairman of J.P. Morgan's risk management 
committee. "But the market learned that a lot of the exposure was 
sophisticated financial institutions dealing with hedge funds who were 
investors in those securities. The question became 'Am I exposed to Russia or 
am I exposed to a North American financial institutions?'" 

The banks operating in Russia also said they now do business at the request 
of multinational corporate clients in Russia, rather than placing their own 
trading bets on the country's stock and bond markets. 

"We are accommodating our multinational clients who are still active in the 
market but we are really just sort of waiting until the day there is a proper 
legal structure and environment for doing business on a conventional basis 
there," Chase's Aspbury said. 

Another senior executive at an investment bank said the bank's risk position 
was less concentrated and its mix of trading business had shifted towards the 
flow of customer business and away from proprietary trading. There were fewer 
resources devoted to that market now than before, he said. 


Interfax Details Voting in Putin Confirmation 

MOSCOW. Aug 16 (Interfax) -- The Russian State 
Duma confirmed the nomination of Vladimir Putin for prime minister on 
Monday. A total of 232 deputies voted in favor of Putin's nomination in 
electronic balloting, with one deputy expressing his support verbally. 
Eighty-four voted against the presidential nominee and 17 abstained. 

According to the electronic vote count, 47 members of Vladimir 
Zhirinovsky's Liberal Democratic faction backed Putin, none voted against 
or abstained and one member, Alexander Vengerovsky, did not vote at all. 

>From the Yabloko group, 18 members voted for, eight against, four 
abstained, 15 did not vote. Grigory Yavlinsky, leader of Yabloko, 
supported Putin. From the Communist faction, 32 members cast their ballot 
for Putin, 52 against, four abstained, and 41 did not vote. 

Faction leader Gennady Zyuganov did not participate and Duma speaker Gennady 
Seleznyov cast a 'yes' vote. 

Our Home is Russia members voted 59 for, one against, and two did not 
vote. Among Russian Regions deputies, 33 voted for, two against, two 
abstained and seven did not vote. Group leader Oleg Morozov cast a 
supporting vote, and deputy speaker Artur Chilingarov did not vote. 

Popular Rule voted as follows: 19 members for, 11 against, and 16 did not 
vote. Group leader Nikolai Ryzhkov gave Putin a supporting vote. Among 
the Agrarian party deputies, 16 voter for, nine against, three abstained 
and seven did not vote. Group leader Nikolai Kharitonov voted 'for'. And 
among the independents, eight voted for, one against, four abstained and 
18 did not vote. 


Expelled Communist Party Member Comments 

August 16, 1999
[translation for personal use only]

[INTRODUCTION Following his expulsion from the 
State Duma Communist faction on 16th August, Spiritual Heritage leader 
Aleksey Podberezkin said that there was a "very serious crisis" in the 
left-wing opposition. He predicted a split in the ranks, with radical 
Communist Viktor Ilyukhin next to be expelled, and said that the 
Communist Party was trying to divide smaller parties within the faction. 
Podberezkin also ridiculed the official explanation for his expulsion of 
"anti-Communism". He said that he was expelled for criticizing the 
"dictate of regional party secretaries". Excerpts from the interview, 
broadcast on Moscow NTV at 1000 gmt on 16th August, follow: 
[Presenter Andrey Norkin] Yevgeniy Revenko reports live from outside the 
Hello, Yevgeniy. 
Have you detected any profound changes in the mood of deputies since our 
last bulletin? Or does everything look the same - Vladimir Putin's 
appointment to the post of prime minister will be approved by the very 
first vote. 
[Correspondent] Hello again, Andrey. No profound changes have been
[Passage omitted: correspondent's resume and excerpts from proceedings] 
[Correspondent] The Communist faction today expelled Spiritual Heritage 
Aleksey Podberezkin. It was so unexpected that journalists were simply 
astonished. We are going to ask Aleksey Ivanovich Podberezkin about the 
events. Hello, Aleksey Ivanovich. Did you know that you were going to be 
expelled from the faction? 
[Podberezkin] Of course not. Moreover, I had a conversation with Zyuganov 
morning. We agreed at 0900 [0500 gmt] to meet after lunch and discuss the 
formation of a bloc. But it does not matter now. These are just the usual 
little party intrigues. 
The problem is different. In fact, I opposed the dictate of regional 
party secretaries. One could not call it a bloc when in fact it is the 
Communist Party list of candidates containing politicians they believe 
are loyal to the Communist Party. 
[Passage omitted repetition] 
Their tactics were to destroy the Agrarian Party, to try to destroy the 
Spiritual Movement and to select a small number of loyal people from 
there who could fulfil the will of the party presidium and the Central 
[Passage omitted: repetition] 
[Correspondent] What was the official reason for your expulsion? 
[Podberezkin] One could not invent anything sillier - anti-Communism. 
[Passage omitted: says he has never been an anti-Communist; agrees that
will pass the vote today] 
[Presenter] Excuse me, Yevgeniy. I also have one question for Podberezkin. 
First of all, hello, Aleksey Ivanovich. 
Several minutes after your expulsion [radical Communist deputy] Viktor 
Ilyukhin said he couldn't rule out the same happening to him, since his 
Movement in Support of the Army does not want to join Zyuganov's new 
bloc, For Victory. Taking into account the intention of the Agrarian 
Party to unite with Fatherland-All Russia, don't you assume that there is 
evidently a complete split in the left-wing opposition? 
[Podberezkin] Yes, there is a very serious crisis. 
[Passage omitted: Podberezkin says he warned of this] 
Ilyukhin and his comrades are not ready to accept these conditions, which are 
beyond any logic, either. The very manner of conducting talks, with 
intrigues, delays and hypocrisy, does not inspire trust. I think that the 
same thing will happen to Ilyukhin as to me. 
[Passage omitted: Podberezkin says the decision was unjustified] 
[Presenter] Thank you very much. 
[Passage omitted: correspondent rounds up the information given above] 


Mrs. Gorbachev's Slightly Better
17 August 1999

MOSCOW (AP) - Raisa Gorbachev, the wife of former Soviet leader Mikhail 
Gorbachev, was in slightly better condition today at the hospital where she 
is being treated for leukemia, a spokesman at her husband's foundation said.

Mrs. Gorbachev has been at a clinic in Muenster, Germany since July 25 and is 
undergoing chemotherapy.

Vladimir Polyakov, a spokesman at the Gorbachev Foundation, said doctors had 
reported ``certain positive changes'' in her condition. He refused to give 

Mrs. Gorbachev, 67, was one of the most unpopular figures of the former 
Soviet Union, widely resented for her perceived flamboyance. A former 
philosophy teacher, she was the first wife of a Soviet leader who refused to 
stay in her husband's shadow and led a public life at home and abroad.


Year after crash life still hard for most Russians
By Gareth Jones

MOSCOW, Aug 17 (Reuters) - Marking the first anniversary of Russia's 
financial crash on Tuesday, members of what remains of Moscow's middle class 
said they still saw few signs of any improvement in the country's plight. 

But predictions made last August about the demise of Russian capitalism and 
of its fledgling bourgeoisie have proved excessively grim, they said. 

``People with middle-class ideas and aspirations still exist in Russia, they 
just don't have the money to realise them,'' said advertising copywriter 
Andrei Amlinsky. 

``Now we drink Russian beer, not foreign brands, and we spend our vacation at 
the dacha (country home) rather than on foreign beaches,'' said Amlinsky. 

On August 17, 1998, the Russian government defaulted on billions of dollars 
of debt and effectively devalued the rouble. Banks closed, prices soared and 
the rouble currency, which had been stable for several years, slumped from 
around six to the dollar to 25 in a matter of weeks. 

The crisis destroyed Sergei Kiriyenko's six-month old government, discredited 
in the eyes of many the cause of ``liberal reforms'' he and others had 
championed, and stoked fevered talk of ``economic dictatorship'' or much 

``The crisis was very damaging to the psyche of Russia's new middle class and 
generally those companies who had invested most ended up losing most,'' said 
Leonid Shutov, managing director of another advertising agency. 

Svetlana Zaitseva, who sells foreign-made medical products, said she was just 
grateful that the rouble had recovered some stability in recent months after 
last year's dramatic fall. 

``This stability is probably temporary, though,'' she told Reuters outside 
Moscow's bustling Kievsky station. 

``We live on top of a volcano, just as we did before the crisis. You cannot 
predict from day to day what will happen next,'' she said, adding that some 
of her friends had gone to live or work in the United States or Germany since 
the crash. 

High taxes, rampant corruption and political instability remained as pressing 
as they did before last August, she said. 

``Governments keep changing. They are not allowed to stay in office long 
enough to make a difference,'' said Zaitseva. 

Ironically, Tuesday's anniversary coincided with the first full day in office 
of Prime Minister Vladimir Putin, Russia's fifth in little more than a year. 
Putin has said he will avoid repeating the mistakes which led to the 1998 

Despite the shock of last August's events, most Russians adapted to the new 
circumstances with their customary resilience and stoicism. Talk of riots, 
even civil war or revolution, proved wildly exaggerated. 

``Nobody starved. Life went on but at a lower level for most people,'' said 

He said many colleagues and friends sacked immediately after the crash had 
found new work but that it generally paid much less or was not in their 
chosen field of expertise or interest. 

``We are in a period of stagnation and nothing is likely to improve until at 
least after the presidential election (due next summer),'' he added, echoing 
a view shared by many newspapers. 

Some of the Muscovites quizzed by Reuters struck a more optimistic note about 
the prospects for the economy. 

``The devaluation of the rouble has given a big boost to domestic production 
(by making imports more costly),'' said Shutov. 

``Before the crisis, smart young people were much more likely to be involved 
in non-productive work like finance, which in Russia was just a speculative 
tool. Now they start up new businesses,'' he said. 

Such talk is still a long way from the daily reality of most Russians, who 
would never describe themselves as middle class. 

``Prices just keep going up and our pensions keep getting smaller. The rich 
get richer, the poor get poorer. The crisis did not start last August and it 
certainly has not finished yet,'' said pensioner Stepan Savich, munching a 


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There Will Be No State of Emergency in Russia.

MOSCOW , August 17 (Itar-Tass) - Speaker of the State Duma lower house of 
Russian parliament Gennady Seleznyov expressed the confidence that a state of 
emergency will not be introduced in Russia. He said this at a news conference 
in Moscow on Tuesday. 

The speaker is sure that the executive authorities do not want a state of 
emergency throughout Russia. "I believe they are sincere in this," he said. 

The speaker of the Duma also believes that "nobody is interested in 
dissolution of the Duma -- neither deputies, nor the president, nor Russia". 

Asked about the possibility of amendments in the Constitution regarding the 
sharing of powers, Seleznyov said the idea of such amendments which he has 
long been trying to introduce finds support even among those who initially 
had objections. He believes there may be a number of such amendments, above 
all, in restricting presidential powers to appoint premier and form a 
cabinet. "Such amendments have a chance to be endorsed by the required 300 
votes of deputies," Seleznyov said. 


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