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

Johnson's Russia List
#3448
19 August 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Douglas Merrill: Re Eckhard Freyer/3447.
2. Toronto Star: Vladimir Shlapentokh, Yeltsin's Secret Weapon: 
Legitimacy.
3. I.V. McKeehan: Poverty or Alcoholism?
4. Los Angeles Times: Igor Khripunov and Jonathan Tucker, Don't Downplay 
Threat From Moscow's Arsenal.
5. Voice of America: Peter Heinlein on optimism about economy.
6. Izvestia: Yury Golotyuk, Chechnya's Green Corridor.
7. Moscow Times: Igor Semenenko, Aide: World Bank Billions Misspent.
8. Moscow Times: Andrei Piontkovsky, How to Win A Final War In Caucasus.
9. AFP: Russia Accuses U.S. Of Undermining Russian-Turkish Pipeline Project.
10. AP: Moscow Mayor Fears Vote Delay.
11. The Times (UK): Land of cut-throats daunts Russia. An old enmity 
underlies a new war, writes Vanora Bennett. (Dagestan)] 

******

#1
Date: Wed, 18 Aug 1999
From: merrilld@mindspring.com (Douglas Merrill)
Subject: Eckhard Freyer/3447

I can only agree with Professor Freyer. Colleagues of mine at the Center
for Applied Policy Research have been working with Russian authorities on
regional policy, and in the last year and a half have had at least seven
ministers in charge of their section. Sometimes when a shuffle comes along
the relevant ministry is merged with another one dealing with national
minorities, sometimes the two are separated. Sometimes the ministry is in
one location in Moscow, sometimes in another. The times before and after
shuffles are often marked by unoccupied posts or jockeying for position.
You can easily imagine what this does to continuity of policy, even on
noncontested issues. On contested issues, there is every incentive for
someone opposed to change to dig in his heels, await the next cabinet
shuffle, and start again. Some things are indeed getting done, thanks to
energetic individuals, but stability at the top and in the cabinet would
allow much more to be accomplished.

******

#2
Date: Wed, 18 Aug 1999 
From: Vladimir Shlapentokh <shlapent@pilot.msu.edu>
Subject: Yeltsin's Secret Weapon: Legitimacy

Dear David:this piece was published in Toronto Star, August 16.

Yeltsin's Secret Weapon: Legitimacy
By Vladimir Shlapentokh

The Russian people are in an uproar over President Boris Yeltsin's latest
sacking. Valentin Stepashin became the fourth prime minister to be
dismissed since March 1998. He was replaced by former KGB colonel Vladimir
Putin. Only a few days ago, Stepashin completed a rather successful trip to
the United States where he met with President Bill Clinton and other leading
politicians. Besides forging a closer relationship with the U.S., Stepashin
traveled throughout Russia to gain first hand experience of life in the
Russian regions. He established cooperation with many regional leaders, an
essential achievement for a government with weak central authority. His
dismissal befell as a denial of common sense and a departure from Russia's
national interests.

Outrage in Russia is universal. From Kremlin politicians to ordinary
people, to say the least, no one in Russia is happy with the latest
debauchery in Moscow. The population by and large talks about Yeltsin with
the sharpest contempt, though they have differing views of his personality.
Some people focus on Yeltsin's motive to protect his power, wealth and the
security of his family. In this way, Mr. KGB, Vladimir Putin, looks like
the best man for the job. Many suggest that the president has simply lost
his mind and that all his absurd decisions are nothing more than fruitless
attempts to demonstrate his political authority. The former deputy prime
minister Boris Nemtsov described Yeltsin's decision as "madness" and noted
that "The people have grown tired of watching an ill leader who is incapable
of doing his job."

Paging through the history books, one would be hard-pressed to find such a
striking display of governmental shuffling and vaudeville-like political
maneuvers. The sacking of four prime ministers in seventeen months can not
be found in the histories of the Roman and Byzantine emperors, nor among
Arab califs, Iranian shahs, Russian tsars, or Communists general
secretaries. Even during the Great Purge in the mid 1930s, despite Stalin's
personal whims, the government was much more stable with Viacheslav Molotov
as prime minister from 1930 to 1941.

The so called herald of Russian democracy has a rap-sheet a mile long.
Since 1993, President Yeltsin bombed parliament (killing hundreds of
people), initiated a war against Chechnia (which killed many thousands),
ostensibly funded his 1996 reelection campaign with state coffers (costing
the taxpayers one billion dollars), covered up corruption (helping
inglorious bureaucrats and oligarches avoid persecution), presided over the
vast decline in real income (down no less than 30-50 percent since 1991),
confiscated Russian savings accounts on two occasions (in 1992 and 1998),
and lied to his people without hesitation nor constraint. 

The people have a sober image of their president. According to the best
Russian public opinion firms in the country, in July 1999 only 3 percent of
the Russians "trusted" Yeltsin, while 24 percent "trusted" the prime
minister he would sack some three weeks later. In May 1999, 72 percent of
people advocated Yeltsin's impeachment. The Russians were furious about the
impeachment results and convinced that Yeltsin suborned the deputies to win
the vote.

Yeltsin is despised not only by ordinary people, the army, the police, most
media and the Communist opposition, but even liberal politicians. Dozens of
Yeltsin's former aids including his former press secretary Sergei
Yastrzhembski and Sergei Zverev, the former deputy of the head of the
Kremlin administration, abandoned the Kremlin in disgust and joined the
opposition.

Under the current circumstances, how can Yeltsin survive? As an answer,
many people refer to the KGB, the Ministry of Internal Affairs and special
divisions of the army. Indeed, Yeltsin has always flirted with the elite
units of the so called "power ministries," offering salary and rank
aggrandizement to officers and ignoring the corruption of generals.
Repressive agencies have always played a major role in the Yeltsin regime.
This role will likely increase in the months to come. It is hardly
coincidental that Yeltsin's last three prime ministers (Primakov, Stepashin
and Putin) were closely involved with these "power ministries."

However, the real shield that protects Yeltsin is far less obvious than
canons, tanks and KGB ties. Though we should not discount the role of this
rather potent survival kit, Yeltsin's most powerful weapon is ironically the
political life-raft which he punches holes in on a regular basis: The
legitimacy of the regime. The fundamental fact is that Yeltsin was elected
two times as president of Russia (in 1991 and 1996). Regardless of his
personal qualities, he was and is the legitimate ruler of the country. This
legitimacy absorbs the brunt of the people's anger just as it protected the
most infamous rulers in history such as Henry the Eight of Britain and Ivan
the Terrible in Russia, both of which were suspected of mental disorders.
Indeed, the Hobbesian postulate endures. The expulsion of a ruler, who
ascended to power according to the existing rules, opens the gates of chaos
and anarchy and takes a far greater toll on the people than the crimes of
any despot.

The observance of governmental legitimacy takes on a new and greater
importance in a country like Russia which has an extremely weak civil
society. In the eyes of the Russian people, major political change leads
dire consequences. The people see Russia as a place with a deficit of
common ground and a surplus of dangerously polarized views on the most
fundamental issues. For instance, there is no consensus on private
property, the market, the role of the state, the relationship between the
center and the regions, social equality, the role of the West, and non
Russians living in Russia. With such a divergent social milieu, the country
looks like a virtual Pandora's box. Under these conditions, how could the
Russians, who live in this vast territory studded with nuclear weapons,
advocate steps that could lead to a vacuum of power?

The country came close enough to complete turmoil in October of 1993, when
Yeltsin confronted the parliament. The people are well aware of the
brittleness of their society. Quite rationally, they selected patience and
forbearance as their policy toward the state, and the political and economic
elites which they hold responsible for their tribulations. No one wants
revolution. Russian politicians of all colors share the same view and
realize that an anti-constitutional removal of Yeltsin would likely result
in a bloodbath.

Whatever the assessments of his intellectual skills, Yeltsin understands
the power of his legitimacy. Evidently he used this weapon to increase the
role of the "power ministries" on the eve of the parliamentary and
presidential election. The president's security agencies and other law
enforcement bodies can be used in various ways to promote the candidates
supported by Yeltsin and prevent the election of his enemies. As the
Russian newspaper Izvestia wrote, Stepashin was indeed intelligent, but he
was too "soft" for the president. Yeltsin hopes that the more resolute,
former KGB colonel Vladimir Putin will better serve his interests. There is
no question, the obstacles to Yeltsin's political continuity are great.
Among other things, he must defeat his current enemy, Moscow Mayor Yurii
Luzhkov as well as the political coalition "Fatherland-All Russia." The
latter was created by Luzhkov and several governors, all of whom have a good
chance of winning in the parliamentary elections. This coalition will
surely support Luzhkov or Primakov at the presidential election.

Almost all the Moscow observers believe that Yeltsin is fully determined to
stay in power directly or through his myrmidon. Accordingly, he will try to
violate the constitution with one or another tricks: either by dismantling
the parliament and canceling one or both elections, or by using "election
technologies" to guarantee a friendly State Duma and the election of a
president that is totally devoted to "the family."

Meanwhile, nobody in Moscow believes that the Russians will vote for Putin,
Yeltsin's anointed heir. The speaker of the State Duma Gennadii Seleznev
reasonably noted that Yeltsin's blessing means instant political death.
Many Moscow political scientists believe that the next year will bring more
of the president's feverish initiatives to maintain his family's place in
society. The important question is this: Will Yeltsin's actions strain his
legitimacy to the point of political collapse? As the popular Russian
newspaper Moskovskii Komsomolets surmised, if the president resorts to
unquestionably illegitimate methods to secure his power, the legitimacy of
this power will vanish and the country will find itself on the verge of a
chaotic abyss.

When Yeltsin announced Stepashin's dismissal last Monday, he also claimed
that the administration would guarantee honest elections. Let us hope that
in the months to come, Yeltsin remains inside the confines of his legitimacy
and honors all his promises.

******

#3
From: "I.V. McKeehan" <mckeehan@bunt.com>
Subject: Poverty or Alcoholism?
Date: Wed, 18 Aug 1999 

Alice Lagnado, JRL 3437, writes in the UK Times, "Alcohol is the prime
cause of the short life expectancy of Russian men." Such a simplification
lends itself very conveniently to "blaming the victim" rather than
resolving the fundamental environmental and socioeconomic causes of the
crisis, as outlined in the recent discussions by Feshbach in JRL 3422 and
JRL 3431. Peter Rutland also pointed out in JRL3437 that relative
inequality between rich and poor households within Russian regions had
reached a ratio of 12:1. The fact that rapid increases in relative poverty
with a concomitant complex of risks and repercussions, rather than
alcoholism, might be the culprit serves only the interests of those who
have something at stake in whitewashing the continued failure of official
economic policy in Russia. 

The entrenchment of the health care crisis in Russia on the eve of the new
millenium represents a significant challenge to public policy concerned
with the widening health inequities of the past decade. The changes in
demographic, life expectancy, and mortality patterns within Russia and
across Central and Eastern Europe have been extensively documented by WHO.
There have been about 1.3 to nearly 2.0 million more deaths observed than
expected between 1989-1994 within Russia, resulting in a disproportionate
loss of person years for the male working age population through year 2025
as well as a critical demographic imbalance in family structure. The impact
of the mortality crisis has been gender-specific. A greater population
ratio of women to men, diminished marriage and fertility rates, greater
divorce rates among women, more children growing up in single-parent
families, and an increasing number of lone elderly women have all been
projected to affect the future human capital potential and economic
productive capacity for at least the next two decades in Russia. 

The Russian mortality crisis has been associated with various theories of
the east-west health gap: socioeconomic transformation; environmental
pollution; lack of an adequate social safety net; relative poverty and
socioeconomic deprivation; historical, generational effects of a Soviet
heritage; within population differences in gender, ethnic, social status
specific models of health; regional disparities; psychosocial stress; and
individual lifestyle - poor health practices and violent behavior. Most of
the decrease in life expectancy between 1987-1994, however, has been due to
mortality from cardiovascular diseases and external causes of violence,
trauma, and accidents.

A review of 450,000 death certificates in the city of Moscow, for the
period 1993-1995, showed that external causes and alcohol-related deaths
were unequally distributed and greater among certain population groups: the
least educated, blue-collar workers, manual laborers, and the unmarried.
Increased mortality was conjectured to be due to psychosocial stress
related to the inability of individuals to cope with the transition in
Russia, leading to unhealthy behaviors (such as alcoholism) which increased
the risk of premature mortality. However, such explanations are left at the
individual level, precluding an examination of more fundamental social
causes of premature mortality in Russia. 

In seeking to find a public health model of the complex causes of premature
mortality in Russia, a distinction must be made between proximal and
fundamental factors. Focusing on immediate, proximal mechanisms may have
the unintended consequence of minimizing fundamental social causes and
emphasizing personally controlled actions to the detriment of formulating
cogent public policy. 

Policy strategies which inadvertently blame the victim or obscure the
social conditions which "put people at risk of risk" by emphasizing
proximal causes cannot reduce premature mortality due to increasing
inequality within a community or living in an "anti-modern, stressful"
economy like Russia. Social factors have long been associated with
increases in Russia's death rates. A drop in male life expectancy, between
1990-1994, was found to be region specific, associated with the Robin Hood
Index, an increase in the relative income inequality of urban areas such as
Moscow and St. Petersburg, increased rate of labor turnover and crime.
These factors are related to modernization, employment insecurity,
organizational and social change. Decreases in life expectancy were related
to death rates from accidents (1.67 years), alcohol related causes (0.84
years), and cardiovascular disease (0.52 years) in Russia. The relative
inequality of persons in high income areas which exhibited growth in crime,
impoverishment and stress, related to labor market changes, may explain the
greatest fraction of the fall in life expectancy among Russian males after
1992. However, the apportionment of effect size between social factors and
proximal psychosocial factors, such as alcohol abuse, has not yet been
made. Recently, more detailed analyses of interregional patterns of life
expectancy and cause-specific mortality rates between the 49 oblasts of
Russia were conducted. The effects of individual lifestyle, such as level
of alcohol consumption, were found to have had less significant impact on
life expectancy in comparison to sociodemographic factors, such as
abortion, marriage, and birth rates. 

The general relationship between poverty and poor health in Russia has been
well documented by several World Bank publications. Before and up to 1992,
the greatest prevalence of poverty was among families with pensioners and
single heads of household (40%), and families with children (50%). In 1992,
after the disintegration of the Soviet Union, inflation increased by over
1300%, gross industrial output and real wages fell over 40% between 1991
and 1994. In October, 1996, the highest overall poverty rates in Russia
were among children (44.5%). Between the end of 1991 and 1992, the value of
the average pension decreased by 47% and average household income by 39%.
Every third Russian, about 51.7 million in the first half of 1999, was
reported by the Russian government statistics agency, Goskomstat, to live
below the poverty line, in comparison to 22% in 1998. During this same
time period prices increased, there was a 46% drop in imports and 11% drop
in exports, after the August, 1998, financial crash.

Income from employment in state-controlled enterprises dropped from 41.5%
in 1992 to 22.9% in 1996, while cash and noncash income from home
production and the informal sector only rose from 9.4% to 22.4%. Nearly 50%
of Russians, in 1993, were participating in unofficial economic
transactions to supplement their official incomes. Earnings from official
economy jobs did not meet the daily needs of over two-fifths of Russian
workers in 1992, rising to over two-thirds in 1994. Private sector income
sources increased only 6.9% from 2.3% (1992) to 9.2% (1996). About
two-fifths of working age Russians were working without being paid in 1994,
which increased to over 50% in 1996. In 1998, the New Barometer Social
Capital survey of Russia found that more than three in five Russians did
not routinely receive wages, pensions or economic entitlements. 
The impoverishment of the Russian population, after 1992, may be attributed
to the factors cited above: organizational change like privatization
without adequate job security; unemployment, low, and unpaid wages;
increase in single-parent families; and an increase in the number of
families in which dependents exceeded wage-earners. Economic changes have
radically transformed the distribution of incomes and occupations. The
minimum wage lost a fifth of its value by 1992, and the minimum pension was
worth 48.3% of the subsistence cost of living. The Gini coefficient
increased by a fifth in one year from 0.27 to 0.32 at the end of 1992. 

This magnitude in the change of income inequality took ten years to occur
in Great Britain, between 1976-1986. The groups most likely to be poor
after 1992 were pensioners, children in large families, and working adults
with low wages. Real per capita income fell to 1970's levels by 40% between
1991-1992, and the distribution of income was less uniform, varying 11-fold
between the highest and lowest deciles in 1993. Impoverishment and economic
uncertainty have been accompanied by a radical shift in the birth/death
ratio of the Russian population: increased mortality among adult
working-age males and a stunting in fertility or the desire to have
children. Both are related to the construction of generational life tables,
which can influence trend estimates of life expectancy. 

A sample of permanent male residents from Moscow and St. Petersburg has
shown that individual survival was the lowest among the least educated in
1990-1994, as compared to the higher educated, who exhibited the best
survival rates. Although cardiovascular diseases still contribute the
largest segment to decreasing life expectancy in Moscow, deaths from
unexplained external and other causes account for a substantial proportion
of total mortality. Of these, the greatest percentage of deaths is due to
the residual category of "other" and injuries of undetermined cause,
largely consisting of people found dead with head injuries where the cause
could not be specified. Given a more socioeconomic perspective, the
premature death of the Russian male no longer can be placed at his doorstep
by the political bureaucracy, which would rather govern by playing with
prime ministers than preserving its social capital.

(an adaptation of an article to appear, as part of my editorial, in a
special issue on Russian health in a UK social science journal; references
available) 
I.V. McKeehan
Faculty of Public health
Bielefeld University, Germany
Mckeehan@bunt.com

*******

#4
Los Angeles Times
August 18, 1999 
[for personal use only]
Don't Downplay Threat From Moscow's Arsenal 
The U.S. should expand, not shelve, plans to help Russia build a plant to 
destroy chemical weapons. 
By IGOR KHRIPUNOV (igokhrip@arches.uga.edu), JONATHAN B. TUCKER
Igor Khripunov Is Associate Director of the Center for International Trade 
and Security, University of Georgia. Jonathan B. Tucker Directs the Chemical 
and Biological Weapons Nonproliferation Project at the Center for 
Nonproliferation Studies, Monterey Institute of International Studies

In the Hollywood thriller, "The Rock," disgruntled soldiers steal chemical 
weapons and threaten to launch them against San Francisco unless their 
demands are met. Although this plot may seem far-fetched, it could become a 
reality in today's Russia. 
Moscow is struggling to destroy a Cold War chemical arsenal that 
includes more than 40,000 metric tons of blister and nerve gases. These super 
toxic agents are stored at seven depots throughout the country, where 
security measures are poor and could be penetrated by terrorists or 
secessionist rebels. Because of Russia's economic crisis, the chemical 
weapons destruction program is underfunded and at a near standstill. 
For the past several years, the U.S. and some of its European allies 
have provided financial assistance to help Russia destroy its chemical 
weapons. The centerpiece of the U.S. effort has been the design and 
construction of a pilot nerve-agent destruction plant at a weapons depot near 
Shchuchie, in an effort to jump-start the destruction program. 
On Aug. 6, however, a House-Senate conference committee voted to 
eliminate all $125 million slated for the Shchuchie project and to reallocate 
$20 million to enhance security at chemical weapons storage sites in Russia. 
The decision was based largely on the premise that, in the words of Sen. Pat 
Roberts (R-Kan.), "Chemical weapons pose more of an environmental threat to 
Russia than a security threat to the United States." 
This is ostrich-like reasoning. Russian chemical munitions are in good 
condition and have excellent agent-dispersal ability. They are portable and 
could easily be stolen by terrorists. Moreover, chemical warheads can be 
placed on Scud-type missiles, which many countries possess. 
The political turmoil gripping Russia is demonstrated by President Boris 
N. Yeltsin's decision to fire the government for the fourth time in 17 
months. The hostilities in the northern Caucasus indicate that the threat of 
terrorism is real. Investing $20 million to enhance security measures at the 
chemical weapons depots is a Band-Aid solution. Only destruction of the 
weapons will remove the threat. 
Beyond the specter of chemical terrorism, failure to begin prompt 
destruction of Russia's chemical stockpile will have other negative 
consequences for U.S. security. It will seriously undermine the Chemical 
Weapons Convention, the main legal bulwark against the further spread of 
chemical arms. Unable to comply with the obligations to destroy its chemical 
stockpile, Russia may have no choice but to withdraw from the treaty. 
For these reasons, U.S. financial and technical support for Russian 
chemical disarmament should not only be kept alive but expanded, with the 
goal of getting the Shchuchie plant up and running. Rapid completion and 
operation of the facility would demonstrate to concerned local communities in 
Russia that chemical weapons destruction is possible in a safe, 
environmentally sound manner. 
Greater U.S. financial involvement at Shchuchie should be conditioned, 
however, on a basic rethinking of Moscow's plan to build destruction 
facilities, costing more than $1 billion apiece, at each of its seven depots. 
In the wake of the August 1998 economic crisis, this plan is no longer 
affordable. The Russian government must implement the first, less costly 
phase of its chemical destruction program, namely, building facilities at 
Gornyi and Kambarka to destroy blister agents stored in bulk tanks, which are 
in danger of leaking and cannot be moved. Nerve agent weapons would then be 
transported from the other storage sites to the destruction plant at 
Shchuchie and possibly another central location. 
Additional foreign assistance would concentrate on designing and 
building dedicated transport routes for moving the weapons safely. These 
routes later could be converted into highways or railways. International 
financial institutions may be more amenable to funding this than building 
several costly weapons destruction facilities that would have little economic 
value once the weapons are gone. 
In sum, U.S. assistance for the Shchuchie facility should go forward 
concurrently with talks with the Russians on restructuring their chemical 
disarmament program to make it more realistic. Failure to destroy these 
deadly weapons could lead to a scenario like that in "The Rock," played out 
by terrorists in Russia or, perhaps, even on American soil. 

******

#5
Voice of America
DATE=8/17/1999
TITLE=RUSSIA ECON
BYLINE=PETER HEINLEIN (pern2pete@co.ru) 
DATELINE=MOSCOW

INTRO: It has been one-year since Russia's financial 
meltdown. Last August 17th, the government devalued 
the ruble and defaulted on billions of dollars in 
debt, touching off what economists predicted would be 
the worst economic downturn of the post-Soviet era. 
But one-year later, signs of crisis are fast 
disappearing. As V-O-A's Peter Heinlein reports from 
Moscow, a new optimism is taking hold among those 
hardest hit by the financial collapse.

TEXT:
/// SOUNDS OF SHOPPING CARTS ///
Opening time at Ramstore, a Turkish-owned supermarket 
chain that recently opened its second location in 
Moscow. Customers are waiting to get in. Ramstore is 
the equivalent of the huge western supermarkets where 
shoppers can find everything from groceries to 
clothing to household appliances. 

It boasts a huge free parking lot and 30-checkout 
stands.
/// SOUNDS OF CASH REGISTER ///
Cashier Lyuba Grimova spends hours every day checking 
out customers, most of who pay in cash, even for the 
expensive items. She says except for a brief period 
immediately after last August 17th, the store has been 
consistently busy.
/// GRIMOVA ACT ONE - IN RUSSIAN - FADE 
UNDER ///

With a laugh, she says -- either we have too few 
cashiers or too many customers. 

Ms. Grimova estimates business is the same as it was 
one-year ago, and says customers do not mind paying a 
few rubles more for the convenience of western-style 
one-stop shopping.
/// GRIMOVA ACT TWO - IN RUSSIAN - FADE 
UNDER ///

She says the middle class can afford things here. But 
she notes that people like her mother, a teacher, and 
others on government salaries, still have little 
choice but to shop at traditional markets, where 
prices average about five rubles, or 20-cents an item 
less. 

Experts are quick to note that the Ramstore phenomenon 
is still relatively rare in Russia. For one thing, 
the median income in Moscow is far above the national 
average.

But economist Andrei Illarionov, one of the first and 
certainly the loudest to predict last year's crash, 
says he thinks the worst of the crisis is over. He 
told V-O-A the devalued ruble is fueling a turnaround 
by effectively reducing the real level of government 
spending.
/// ILLARIONOV ACT ///
The most people think that the main roots of 
economic recovery in Russia now is the 
devaluation of ruble and it is true. But 
devaluation of ruble is only one symbol of 
lowering of tax burden on Russian economy, and 
that is why the real root, the real reason of 
the economic recovery in Russia in 1999 is 
substantial reduction in effective tax rate, in 
effective government expenditures in Russia.
/// END ACT ///
Mr. Illarionov's optimistic forecast is that 1999 may 
be the year of strongest economic growth in Russia 
since the end of the Soviet Union.
/// SOUNDS OF CASH REGISTER TOTALLING 
///
And there is evidence to back up his prediction at the 
cash register. Russia's middle class, thought to have 
been hardest hit by last year's crisis, is making a 
comeback.

That is not to say the crisis is over. The State 
Statistics Committee says 51-million people, 35-
percent of all Russians, report incomes below the 
poverty line, as opposed to 33-million one-year ago. 
And that poverty level is about 38-dollars a month.

A large proportion of those are people on pensions, 
which average about 18-dollars a month.

/// OPT /// There are also some worrying signs of 
inflation, and possibly a further ruble devaluation, 
on the horizon. For one, gasoline prices shot up more 
than 15-percent in July, and shortages have caused 
long lines at the pump.

But as with so many things here, there is another, 
positive side to the gasoline price hikes. 
Ironically, the jump in world oil prices may be the 
best thing that has happened to Russia's heavily oil-
dependent economy all year.

A local industry analyst estimates the oil companies' 
after-tax profit has soared from three-million-dollars 
a day last year to 22-million-dollars a day at 
present. /// END OPT ///

Economic experts say that on the whole, the Russian 
government's decisions of last August 17th did serious 
damage to the country, and to its international 
reputation. They say that damage that will take years 
to repair, but one-year later the hardy Russian 
people, used to adversity, are charging back. 

*****

#6
Izvestia
August 18, 1999
Chechnya's Green Corridor
By Yury Golotyuk 

There is a very serious threat that Islamists will get away from
Daghestan and withdraw to border areas of Georgia and Azerbaijan, something
that is fraught with a full-scale regional conflict on account of a dozen
or so flashpoints smouldering in the region [since the late 1980's], writes
IZVESTIA. 
Russia is currently unable to provide for the security of its
Transcaucasian neighbors, says the paper. The latter, for their part, are
categorically against any Russian aid in this matter. According to deputy
director of the Federal Border Service, General Alexander Manilov, who has
just returned from talks in Tbilisi, the Georgian side resolutely declined
an offer of Russian help in guarding the stretch of the border separating
Chechnya and Georgia. 
Running high in the mountains of Chechnya, this 80-kilometers- long
border has for years posed a serious problem. During the 1994 - 1996 war it
was guarded from the Georgian territory by a Russian border group called
Georgia. But in keeping with the November 1998 intergovernmental agreement,
the group was disbanded, with Georgian border guards taking over in the area. 
But Moscow kept ready a reserve plan, which envisaged the mining of the
Chechen stretch from the air and with the help of multiple rocket
launchers. Judging by all appearances, the conflict in Daghestan served to
reanimate the plan. The result proved not very successful, however, since
Russian planes mistakenly dropped several canisters with anti-personnel
mines on the Georgian village of Zemo Omalo, says the paper. 
In Chechnya itself in the meantime, writes another paper,
KOMMERSANT-DAILY [08/18/99, pp. 1, 3], President Aslan Maskhadov announced
yesterday [August 17] that Russian forces had invaded his republic.
Somewhat later, head of Chechnya's border and customs service, Khumid
Dalayev, went on record as saying that the President had been misled by a
provocative radio transmission that came in on the wavelength of the
Chechen secret services from outside of the republic. In actual fact, there
was no invasion. A column of Russian armor appeared in the vicinity of the
border, which, Russian military sources later said, was being redeployed in
order to reinforce troops in Daghestan. 
But the fact remains that in the course of the campaign in Daghestan the
Russian aviation has made attacks on the terrorists' bases in Chechnya,
which many field commanders regard as an aggression. Aslan Maskhadov is
clearly unwilling to get embroiled in the conflict. But he lacks strength
to keep the situation stable and avert a rebellion. If he gets toppled in a
coup, power in the republic will fall into the hands of Shamil Basayev,
Hattab and other odious personalities. In that situation, Russia will be
unable to avoid a war. It looks like the Russian brass are aware of this
danger too and are urgently building up forces in North Caucasus. 
The war in Daghestan in the meantime seems to be drawing to an end, says
the paper. First Deputy Interior Minister Vladimir Kolesnikov has promised
that the Chechen terrorists, who have entrenched themselves in the Botlikh
area, will be destroyed within the next couple of days. They are encircled,
with their supply routes cut. All roads have been mined and are controlled
from the air. There is a powerful federal force standing on the border with
Chechnya. Just before the start of the decisive stage in the liberation of
Daghestan, the commander of the federal forces, the Interior Ministry's
Vyacheslav Ovchinnikov, has been replaced by the Defense Ministry's Viktor
Kazantsev, Commander of the North Caucasian Military District, reports the
paper in conclusion. 

*****

#7
Moscow Times
August 19, 1999 
Aide: World Bank Billions Misspent 
By Igor Semenenko
Staff Writer

The Russian government has "grossly misspent" billions of dollars from the 
World Bank on salaries, offices and public relations, according to a former 
top economic official. 

"There is no control over the disbursements of World Bank money in Russia," 
said Mikhail Delyagin, who has been a former economic adviser to President 
Boris Yeltsin and to First Deputy Prime Minister Boris Nemtsov, at a news 
conference Wednesday. 

The allegations were the latest attack on the Kremlin's credit-worthiness, 
which suffered a body blow earlier this year when government officials 
admitted Central Bank reserves - including International Monetary Fund money 
- had been stashed in an offshore account, loaned to oligarchical commercial 
banks and used to play Russia's lucrative treasury bill market. 

The charges come from an official with an extensive government background. In 
addition to advising Yeltsin and Nemtsov, Delyagin has been an official 
adviser to former First Deputy Prime Minister Yury Maslyukov and is currently 
an adviser to First Deputy Prime Minister Nikolai Aksyonenko. 

The World Bank's Moscow spokeswoman, Marina Vasiliyeva, said the bank's 
director for Russia, Michael Carter, would discuss the allegations in detail 
with reporters Friday. 

Among other things, the World Bank has funded projects to restructure the 
unprofitable coal sector, to upgrade the nation's roads, to build 
infrastructure in downtown St. Petersburg and to develop the nation's 
securities markets. 

But Delyagin told reporters Wednesday that most of the money is spent on 
swank offices and generous salaries for foreign consultants. 

"The amount of money provided to finance a project itself was often reduced 
to infinitesimal levels," Delyagin said. 

For example, he said, 75 percent of World Bank funds allocated to develop the 
Russian securities markets were disbursed to public relations companies. 

Delyagin said generally up to 30 percent of World Bank funds disbursed to a 
project have gone to pay salaries, while another 20 percent to 30 percent go 
for office rent and overhead expenses. A separate problem, Delyagin said, is 
that Russia has not been able to find uses for the funds the World Bank has 
been offering. Of the $11 billion the World Bank has allocated to Russia so 
far, $3 billion remains in the bank's Washington account, he said. 

Government officials reached Wednesday denied all allegations that funds had 
been misused. 

"There is no evidence to support all of the facts as stated by Delyagin," 
Alexander Shamrin, director of the Federal Center for Project Finance, said. 
He added, "The government has tightened control over the disbursal of the 
World Bank money in the past years." 

The center monitors execution of the World Bank's projects in Russia, and 
advises an inter-ministerial commission headed by the first deputy prime 
minister that selects projects to be financed by the World Bank. Over the 
past years, that commission has been headed by government officials ranging 
from privatization chief Anatoly Chubais to Uneximbank founder Vladimir 
Potanin to Maslyukov to AvtoVAZ chief Vladimir Kadannikov. 

Firm denials were the public position. But in private, some government 
officials agreed with Delyagin that money had often been allocated to favor 
politically connected interests and used inefficiently. 

"The World Bank funding program for Russia is the result of the lobbying 
efforts of various interest groups," said a Finance Ministry official who 
asked not to be identified. 

An Economics Ministry official agreed. Speaking on condition of anonymity, he 
said federal ministries often continue to push projects that they believe 
will not work simply because they don't want to halt the cash flow. 

The Economics Ministry official also blamed the government for "very often" 
ruining World Bank-approved projects. As an example, he cited 1993 plans to 
import medical equipment and municipal buses. Those projects collapsed before 
being implemented, he said, because the government slapped import tariffs on 
medical equipment and on buses, and then refused to ease them for the World 
Bank. 

The World Bank's Vasiliyeva said the bank conducts "annual country portfolio 
performance reviews" in cooperation with the Russian government. She said 
according to those reviews, the number of projects that were judged as having 
been satisfactorily implemented increased from 30 percent in 1996 to about 80 
percent by mid-1998. 

But she did not have information about reviews following Russia's Aug. 17 
financial collapse. 

World Bank representatives said Wednesday that projects worth $228.5 million 
have been cancelled over the past few years, in response to Russia's volatile 
economic situation. 

******

#8
Moscow Times
August 19, 1999 
SEASON OF DISCONTENT: How to Win A Final War In Caucasus 
By Andrei Piontkovsky 

Just two months ago, the General Staff chief, army General Anatoly Kvashnin, 
was in his glory - planning a paratrooper march into Kosovo and strategic 
bomber flights around Iceland as a warning to NATO. Two weeks ago, Kvashnin 
was singing a different tune: His helicopter was shot up in a godforsaken 
ravine in the mountains of Dagestan, and he survived only by a miracle. 

There is a war going on in the south of Russia. To the accompaniment of 
military music, young men are being buried once again in Russian towns. And 
we have to understand that we are not "driving hares from one mountain 
village to another" and will "clear them altogether in two weeks." We are 
engaged in two extended and exhausting wars in the Caucasus. We already lost 
one of them, but we still have a chance to win the other one. 

The first one is the war between Russia and Chechnya for "Chechen 
independence" or "Russia's territorial integrity." Several dozen such wars 
have been fought on the planet in the second half of the 20th century. 
Experience shows that they are won or lost in the hearts and minds of people 
who live in the territory, the "integrity" of which the "center" tries to 
protect. When, as a result of the central authority's mistakes or crimes, the 
idea of secession captures the minds of the absolute majority - when hatred 
of the "center" reaches a critical point - nothing other than genocide can 
preserve territorial integrity. That was the case in Chechnya as a result of 
federal military operations that caused the deaths of tens of thousands of 
civilians. 

The Dagestan war is of a completely different nature. It is a conflict 
between Islamic radicals and secular authorities, of which there are many 
examples throughout the modern Moslem world. So far, the Islamists are backed 
in Dagestan only by an insignificant minority. But we should not forget how 
swiftly the fire of Islamic radicalism can spread, particularly where secular 
authorities are corrupt and where poverty and unemployment reign. Islamic 
radicalism cannot be uprooted by wiping out several mountain villages. It is 
a long-term social problem which the center can only tackle with a great deal 
of spending and constructive effort. At the moment, the smoldering hotbed of 
war in Dagestan, which can explode at any time, is kept alive by outside 
influences - not the least of which is Chechnya's hatred of Russia. One war 
feeds the other. 

If we want to remain in the Caucasus, we have to break this connection and 
end our war with Chechnya by recognizing that its people will never be 
citizens of Russia. There is only one definition of victory in the war 
against Chechnya's secession from Russia: to exterminate the entire 
population of Chechen men over 12 years of age. Fortunately, our society is 
not ready for such a victory. Unfortunately, it is not ready yet to draw the 
necessary conclusions of this conflict. 

We will be able to keep Dagestan only by recognizing that we have terminally 
lost Chechnya. In dealing with Chechnya - including the support that 
breakaway republic is currently offering Dagestan's radical Islamists - we 
should treat it as we would any other independent state. The nationalities of 
the North Caucasus should be convinced that we are fighting not for our 
"territorial integrity" but for their "human integrity;" that we are not 
conquering the Caucasus but defending those who need our help and protection. 
Only then will we be able to win our last Caucasian war. 

******

#9
Russia Accuses U.S. Of Undermining Russian-Turkish Pipeline Project

MOSCOW, Aug 18, 1999 -- (Agence France Presse) Russia on Wednesday accused 
the United States of trying to block the construction of a pipeline designed 
to carry gas from Russia to Turkey.

US officials "are increasingly resorting to political and other pressure to 
discredit and prevent the Blue Stream project being put into operation," the 
Russian foreign ministry said in a statement.

"We are worried about comments that Russian deliveries of hydrocarbons to 
certain countries in the region could endanger their political and economic 
independence," the statement added.

Moscow called on Washington to avoid using such tactics, which it said 
endangered "commercial freedom, commercial ethics and Russian-US relations."

The 1,213-kilometre (750-mile) Blue Stream pipeline is due to be laid under 
the Black Sea, linking the southern Russian gas plant of Izobilnoy to Ankara.

It would lead to a slight increase in the amount of gas supplied by Russia to 
Turkey in 2000.

Under the terms of a deal signed between Turkey and Russia in 1997 sales of 
Russian natural gas to Turkey will increase from seven billion cubic meters a 
year to 30 billion by 2010.

Moscow and Washington have clashed over the construction of pipelines to 
transport Azerbaijani oil from the Caspian Sea. One of the two planned 
pipelines would pass through Russia. ((c) 1999 Agence France Presse) 

******

#10
Moscow Mayor Fears Vote Delay
August 18, 1999
By VLADIMIR ISACHENKOV

MOSCOW (AP) - Moscow Mayor Yuri Luzhkov, a potential presidential candidate, 
said Wednesday that he still fears the Kremlin may try to postpone elections 
by introducing emergency regulations.

``Power must be legitimately transferred,'' Luzhkov said. ``This process must 
not be obstructed, or legal elections interfered with.''

Russian politicians and the media have speculated that President Boris 
Yeltsin might impose emergency rules to put off December's parliamentary 
elections or the presidential vote in mid-2000.

Yeltsin, who cannot run for a third term next year, has insisted that 
elections will take place as scheduled.

Luzhkov said Yeltsin's behavior - he has fired four prime ministers in 17 
months - was grounds for concern.

``Even gloves are not removed as frequently as our prime ministers,'' Luzhkov 
said. ``This creates conditions that evoke anxiety and nervousness.'' Luzhkov 
is a former Yeltsin ally, but the two have become increasingly bitter rivals 
in recent months.

In preparation for the elections, the mayor has built a coalition that 
includes former Prime Minister Yevgeny Primakov and several leading regional 
governors. A strong showing in parliamentary polls by the new bloc, called 
Fatherland-All Russia, would strengthen Luzhkov's position if he decides to 
run for the presidency next year.

Luzhkov and Primakov are considered two of the leading presidential 
contenders, though both said Tuesday that they had not yet reached a decision 
on whether to run.

Yeltsin abruptly sacked former Prime Minister Sergei Stepashin last week 
after less than three months on the job without giving any reason, and 
replaced him with former national security chief Vladimir Putin.

Yeltsin and Putin are now assembling a new Cabinet, with most of the old 
Cabinet members expected to retain their jobs.

The appointment of Putin, a former KGB agent who spent most of his career in 
the secret services, is seen as a signal that the Kremlin plans to make a 
tough stand against its opponents.

Putin met Wednesday with three former prime ministers - Viktor Chernomyrdin, 
Sergei Kiriyenko and Stepashin. Their agenda wasn't immediately clear, though 
Russian media speculated they would discuss forming an election bloc of their 
own.

Putin said the meeting came at his predecessors' request, but Kiriyenko said 
it was the other way around.

``The main issue is that Putin work as prime minister for more than three 
months,'' Stepashin told reporters before the meeting, according to Interfax.

******

#11
The Times (UK)
August 18 1999 

Land of cut-throats daunts Russia 
An old enmity underlies a new war, writes Vanora Bennett 

IF THEY mention the place at all, Russians will describe Dagestan as a place 
of appalling savagery: a ghetto of southern hoodlums with guns and gold 
teeth, speaking harshly-accented pidgin Russian, muttering imprecations in 
Arabic, and slitting foreigners' throats almost as a matter of course. 
The occasional snippets of news from Dagestan sustain the impression that the 
poorest part of the country is a Third World disaster area, complete with 
cholera epidemics, avalanches, failed coups and assassinations. 

Western journalists and aid workers, almost the only foreigners to visit 
Russia's Deep South, may flinch at the way that fair-haired Slavic Russians 
caricature the ethnic minorities on their southern borders as "primitives" 
and "darkies". But their own recollections of Dagestan are seldom much more 
favourable. Usually based on memories of hasty visits to neighbouring 
Chechnya, during its miserable 20-month war for independence, their stories 
are full of rip-offs by dishonest drivers, road ambushes narrowly averted, 
and oceans of mud. 

Yet the mini-republic is full of wild beauty and romantic contrasts. In the 
south, the 800-year-old Persian city of Derbent, its honey-coloured fortress 
walls baking in the sun, is still a centre for carpet traders from as far 
afield as Iran and Iraq. 

Pale Caspian Sea beaches run 200 miles along Dagestan's eastern border, the 
oily water home to caviar-bearing sturgeon; the towering mountains of the 
Caucasus rear up towards Chechnya. In those mountains, a century and a half 
ago, Dagestani and Chechen horsemen fought an invading Russian army. Under 
the leadership of Imam Shamil, they waged guerrilla war for a generation but 
abandoned their hopes of uniting under Muslim leadership when Shamil 
surrendered. 

Most Dagestanis, reluctant to upset the ethnic balance they have achieved, 
feel uneasy about the crime wave that has ripped through the whole south 
since the war in Chechnya ended in 1996, leaving the region awash with guns. 

A tiny minority is turning its back on what it sees as the corruption of 
elders and is espousing a radical form of Islam, Wahhabism, imported from 
Saudi Arabia and banned in Dagestan and Chechnya. Those few, equipped with 
guns and purist ideology, seized a few remote hill villages two years ago. 
Now, to the dismay of the Dagestani majority, they have won support from the 
radical, politicised, Wahhabi-sympathising warlords just over the border in 
the Chechen hills - and drawn down a massive military response from Russia. 

******