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Johnson's Russia List
 

 

September 3, 1999   
This Date's Issues: 3479  3480  

 

Johnson's Russia List
#3480
3 September 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Interfax: Poll: Russians pinning hopes on 2000 presidential elections.
2. Reuters: Russia rings alarm bell on drug abuse.
3. Bloomberg: American Chamber's Blacklin on Money Laundering Probe: 
Comment.

4. RFE/RL: Sophie Lambroschini, Russia: Politicians Play Teacher For 
A Day.

5. Stratfor Commentary: Russian Security Service Restructured in Run-Up 
to Duma Elections.

6. Russian Regional Investor: Robert Orttung, LUZHKOV ADDRESSES MOSCOW 
INVESTORS' FORUM.

7. The Russia Journal: Wendy Moore, Russia's new poor. A daily struggle 
for survival.

8. the eXile press review: Matt Taibbi, Avoid the Lloyd.]

******

#1
Poll: Russians pinning hopes on 2000 presidential elections 

MOSCOW. Sept 2 (Interfax) - Public opinion surveys reveal that
Russians are putting a lot of expectations on the 2000 presidential
election.
Despite the unsuccessful impeachment of Russian President Boris
Yeltsin, between 60% to 70% of respondents "support the charges" made
against him, Director of the Center for the Study of Public Opinion Yuri
Levada told Interfax Thursday.
Russia is approaching its presidential elections "with the burden
of problems accumulated since the beginning of the year," Levada said.
The August 1998 crisis "hit three-fourths of the respondents." Moreover,
75% of Russians believe that the country "has not pulled out of the
crisis, which will take many years to overcome," he said.
However, where half of the respondents assessed the situation as
"critical and volatile" last September, only 31% think so now.
The same tendency is observed in attitudes to the West, he said.
The Yugoslav crisis triggered the "condemnation of NATO actions and
anti-Western, anti-U.S. sentiments," he said. However, this trend
reversed in May and June and sociologists recorded a "positive balance
in the population's attitude to the United States," he said.
"Russians have no strong inclination to turn against everyone," he
said.

******

#2
Russia rings alarm bell on drug abuse

MOSCOW, Sept 2 (Reuters) - Russia vowed on Thursday to crackdown on illegal 
drugs, warning that drug abuse was spinning out of control. 

Interior Minister Vladimir Rushailo told a news conference a cabinet meeting 
had backed a drug-busting programme which includes more money for fighting 
drugs and tougher laws. 

``The programme includes proposals to tighten responsibility for drug 
distribution,'' he said. 

The current Penal Code punishes drug dealing with jail sentences ranging from 
two to 15 years. 

Itar-Tass news agency quoted Prime Minister Vladimir Putin, who chaired the 
meeting, as stressing the state had to tackle the drugs problem which was 
exacerbated by Russia's long, porous borders. 

``Moreover, there are some regions (in Russia) where drug production has 
reached dangerous levels,'' he said. 

Itar-Tass quoted Rushailo as telling the meeting that over one third of all 
drugs sold in Russia were smuggled from abroad. 

The number of drug addicts officially registered by the Health Ministry 
exceeds 315,000 but the real figure probably runs at about eight to 10 times 
that number, Rushailo said. 

He added that almost two thirds of all drug addicts were younger than 30. 

Drugs have also boosted crime. Rushailo said that 190,000 drug-related crimes 
were registered in 1998, rocketing to 103,000 in just the first half of this 
year. 

Drug taking, which was rare in Soviet times, has boomed in the past decade 
since Russia opened up to the outside world. Poor social conditions and 
economic instability have contributed to drug abuse. 

******

#3
American Chamber's Blacklin on Money Laundering Probe: Comment

Moscow, Sept. 2 (Bloomberg) -- The 
following are comments by Scott Blacklin, director of the American Chamber of 
Commerce in Moscow, on a U.S. investigation into allegations that billions 
of dollars from Russia was laundered through the Bank of New York Co. No 
charges have yet been filed. 

``It's going to erode the already tenuous commitment to engage Russia. Russia 
needs to be more engaged. I think we're going to be hostage to a lot of 
political childishness. It's truly disturbing and will get much worse. People 
here aren't fully aware. I don't think they see this tidal-wave that's going 
to come from the West, from America, because of the political season. The 
Republicans have been incredibly bereft of good ideas in the last few years 
and for them to come up with this now really stinks, because we've got more 
at stake than a partisan issue here. We have a horrible tendency to pose 
irrelevant questions such as who lost Russia as if Russia is lost or it was 
ours to lose in the first place.'' 

******

#4
Russia: Politicians Play Teacher For A Day
By Sophie Lambroschini

Russian students attending the first day of classes for the new school year
found themselves being lectured by a few well-known faces yesterday.
Instead of speeches about education and teachers' salaries that are the
tradition on the "Day of Knowledge," the country's top leaders tried their
hand at actually teaching a few lessons. It's probably no coincidence that
parliamentary and presidential elections are on the horizon. Our Moscow
correspondent reports. 

Moscow, 2 September 1999 (RFE/RL) -- Russian President Boris Yeltsin, Prime
Minister Vladimir Putin, and Moscow Mayor Yuri Luzhkov traded politics for
pedagogy for a few hours yesterday, communicating their reflections to
bemused children and television viewers.

Putin is Yeltsin's hand-picked successor for president, while Luzhkov is
himself considered to be a top candidate for Yeltsin's job when voters go
to the polls to choose a new head of state in June 2000.

The longest class yesterday was taught by the only real professor of the
lot, Luzhkov, who reminded his audience that he teaches at the Moscow
Economic University. Luzhkov's lesson on "civic education" took place in a
conference hall of Moscow's state school number 1206. The 45-minute lesson
was transmitted live on the Moscow-controlled TV Center channel.

Luzhkov offered short reflections on the announced themes of a "beautiful
union" and "world culture." Stumbling on his words, Luzhkov started a long,
complicated speech, explaining that "there are unions that choose us. We
are born in a family. We don't choose our parents. We don't choose our
place of birth. We don't choose our family, but the family was still
founded on a voluntary union."

Finally, Luzhkov cut himself short, concluding that the concept a union is
"very complex."

Luzhkov also quoted the writer Lev Tolstoy, reminding the children that
"there is a lot of evil in the world" but that the good will always win.

The students answered Luzhkov's questions with what seemed like
pre-prepared answers, since some of the students read their replies off
pieces of paper. The teacher then quoted an excerpt from a student's
written assignment on the topic "If I Were Mayor..." The winning student
promised to solve problems of spiritual purity and rid Moscow of drug
addicts, drunks, and criminals. Luzhkov nodded approvingly.

Finally, Luzhkov promised his trademark cap or a scarf from Russian fashion
designer Valentin Yudashkin to the best students in the class at the end of
the year.

Meeting with university students at Moscow's prestigious State University,
Putin chose to speak on lessons that must be mastered before the year 2000.
He reminded the students that "the domestic dream of the Soviet paradise
symbolized by freedom and sausage is almost fulfilled." As he put it, "we
have enough of both."

Hinting at the upcoming presidential elections, Putin told the students
that 2000 will be the year when Russians will choose the future direction
of their country. "Are we going to complain about Russia's difficult fate?"
Putin asked. "Are we going to say like masochists that we get the
government we deserve?"

Putin -- who was presented last month by Yeltsin as his favored successor
-- called on his audience to make what he called a "reasonable choice" for
president.

Yeltsin -- who has been shown on television almost daily for the past two
weeks -- didn't miss his hour of professorship. He met his class --
winners of international school competitions -- in the Kremlin. The lesson
took place in the majestic white and gold Catherine Hall, usually reserved
for meetings between the president and government officials or foreign guests.

Speaking from one end of a large oval conference table, Yeltsin towered
over the heads of a dozen teenagers sitting one meter apart. The table
reached mid-breast for the shorter students.

Yeltsin said the students should feel privileged to be having such an
unusual lesson. "You were lucky," Yeltsin told them, "Lucky thanks to your
capacities and talents." He described the Kremlin as a school where the
elite of the country are "studying."

Yeltsin called the students Russia's "young elite" and appealed to their
patriotism by saying he is sure that none of them will "run away," an
apparent reference to the brain drain to the West that Russia's scientific
community has suffered. 

*******

#5
Stratfor Commentary
2 September 1999
Russian Security Service Restructured in Run-Up to Duma Elections

Russia’s recent consolidation of its internal security forces gives the 
government a stronger weapon in its fight against extremism and organized 
crime, but the move could also benefit those in power as they try to keep 
their political rivals at bay.

Russian President Boris Yeltsin merged two Federal Security Service (FSB) 
departments, the anti-terrorism and constitutional security departments, into 
one on August 28. The new department will also include a third division, 
whose mission has not been disclosed. The FSB is the successor of the 
internal departments of the former Soviet KGB.

With the merger of these two departments less than four months before the 
Duma election, the Russian president and government have created a powerful 
instrument for dealing with political extremism and the possible penetration 
of criminal elements in the country’s political system. In its new form, 
however, the FSB could easily be used by the current leadership to pacify and 
even eliminate political opponents.

The merger was implemented "in accordance with Russia’s state defense and 
security doctrine for the next six years," the FSB said in an August 31 
statement. "In current conditions, defending the constitutional structure, 
preserving the country's integrity and fighting terrorism, all forms of 
extremism and the intelligence and subversive work of foreign states' special 
services and organizations are of priority significance for Russian 
statehood," the statement said. The FSB said it would not increase its 
personnel as a result of the structural change.

The former anti-terrorism department was a highly trained and outfitted group 
made up of several specialized anti-terrorist units. It is comparable to the 
U.S. Special Operations Forces in terms of training and armaments, though it 
has a much smaller budget. The department’s responsibilities included 
high-profile hostage rescue and anti-terrorist operations.

Under Russian law, the FSB is responsible for ensuring the public security of 
mass events like elections. As a participant in local electoral commissions, 
FSB examines the financial activities of candidates and ensures adequate use 
of available funds. Prime Minister and former FSB head Vladimir Putin 
recently stressed that FSB agents would control capital flows and "dig up 
information about illegalities" in the pre-election campaign.

The Russian leadership has made it clear in the last months that it would 
rely heavily on FSB assistance during the December Duma elections and in the 
election campaign. In his address to the July FSB conference entitled "On the 
Russian FSB’s Tasks to Maintain Security in the Country during Preparations 
for and the Holding of Elections to the State Duma," then-Prime Minister 
Sergei Stepashin said the election campaign was taking place at a time of 
increased political struggle. "The government was alarmed by the alliances 
being formed by various associations and parties that do not rule out 
forcibly changing Russia’s constitutional system," Stepashin said.

As FSB head, Putin repeatedly stressed that the agency would act within the 
constitution in the run-up to the elections. Now, as prime minister, we will 
see if this is actually the case.

*******

#6
Excerpt
From: RRR@IEWS.ORG
Date: Thu, 2 Sep 1999 17:32:45 -0400
Subject: Russian Regional Investor, (v. 1, n. 33)

SPECIAL REPORT: "MOSCOW INVEST '99"

LUZHKOV ADDRESSES MOSCOW INVESTORS' FORUM. Moscow Mayor Yurii Luzhkov
called for
major changes in Russia's economic policy while addressing Moscow-Invest
'99, a
forum of international and domestic investors working in Russia, on 2
September.
Luzhkov prefaced his remarks with an anecdote, pointing out that a
pessimist is
one who says that the situation can not get any worse. An optimist then comes
along and says that it can. Luzhkov placed himself in the ranks of the
optimists, but stressed the need to take action to prevent a further
decline in
Russia's economic health. Continuing his criticism of President Boris
Yeltsin's
recent behavior, Luzhkov sniffed that it was not sufficient to simply "appoint
the director of the Federal Security Service [the successor to the KGB] as the
prime minister."
Luzhkov's preferred method for improving the situation was encouraging
growth in the Russian economy. He particularly stressed that it was crucial to
increase the buying power of the Russian population. In his statement, he was
harshly critical of the draft 2000 federal budget because it foresees only a
"capitulatory" 1.5 percent Russian growth rate. He blasted the federal
government for pursuing a policy that would not help the population and seemed
aimed only at maintaining a good relationship with the International Monetary
Fund (IMF). He stressed the need to attain a 5 percent level of growth. He
said
that that after the beginning of the financial crisis on 17 August 1998, many
Moscow enterprises were able to register 7 percent growth rates.
To achieve this rapid rate of growth, Luzhkov advocated slashing the tax
burden on Russian enterprises. He argued that enterprises should pay no more
than one-third of their income in taxes. The mayor stressed that the taxes
from
the growing economy would significantly improve Russia's ability to meet its
social needs.
Luzhkov joked that the crisis had brought some positive benefits, just as
in the case when a husband is asked to shell out a large sum of money to
pay for
his mother-in-law's funeral. However, he stressed that the benefits for
domestic
producers from the drop in the value of the ruble could be short-lived. He
warned that if workers' salaries are not increased, then Russian firms would
start to produce too many goods and no one would be able to buy them.
Luzhkov was particularly critical of Russia's oil companies for
"artificially" creating a shortage of gasoline. He said that since the oil
companies are now making large amounts of money selling their fuel on the
world
market, he expected them to lower their prices for domestic consumers. Luzhkov
said he understood the oil companies' desire to increase their profits by
selling abroad and admitted that it made sense for Russian consumers to pay
international prices for gasoline. However, he stressed that before charging
such prices, it was necessary to increase their salaries so they could
afford to
buy the fuel. There are currently no shortages of gasoline in Moscow, but
prices
have gone up considerably in recent months.
Luzhkov also strongly praised the "Chinese" model of reform, which
consists
of pursuing economic liberalization, while maintaining tight political
control.
He said that Russia had tried such policies in the past under NEP and Kosygin
and that today's leaders were afraid to pursue such a policy. He admitted that
China was chasing around some of its dissidents, but emphasized that the
country
benefited from extensive foreign investments and improving living conditions.
Acknowledging that investors like predictability, he indicated that most
western investors will stay away from Russia until after the presidential
elections. However, he pointed out that strong and stable regions, like
Moscow,
Tatarstan, Bashkortostan, Perm, and Samara were still able to attract
investors
despite the problems at the federal level.
The forum was organized by the Moscow International Business Association,
with the direct participation of the Moscow City government. The first
forum was
held in London 21-22 October 1998 and now organizers plan to make it an annual
event. The forum boasted 657 registered delegates, including 183 foreign
firms,
and representatives of 25 Russian regions. - Robert Orttung in Moscow

*********

#7
The Russia Journal
www.russiajournal.com
August 30, 1999
Russia's new poor 
A daily struggle for survival 
By Wendy Moore

Moscow's Red Square hums with glamorous young couples emerging from the
once state-owned GUM department store laden with designer-label bags. 

They barely glance at the stooped women, grubby children and limb-less
invalids begging for rubles in the shadows of the Kremlin. 

Russia's madcap scramble toward capitalism has produced the previously
unknown extremes of new rich and new poor. And that poverty has
devastating effects on the health of the people stricken by it. 

"The new value now is money - nothing else," says one international health
expert, who declined to be named. "You have money, you survive. You don't
have money, you are in trouble." 

Ludmila Krasnova, a health service manager in Moscow region, agrees. "The
health of the people depends very much on how much money they make and how
much money they can spend on their health." 

Russia has already paid a high price for its shift toward free market
values: the deaths of more than 2 million people, above expected trends, in
the years immediately after the collapse of communism. 

Described in one Russian newspaper as "genocide" and by Western academics
as unprecedented in peace time, the rocketing death rate and diving life
expectancy in the early 1990s have been blamed on poverty, political
upheaval and binge-drinking. Many victims - who were mainly young men -
literally drank themselves to death. 

Life expectancy has since begun climbing again, although at just 61 for men
(and 73 for women last year) it remains at its lowest level for 20 years,
and 14 years below that of British men. Meanwhile, deaths from TB and AIDS
are soaring, childhood deaths are rising and births continue to fall. 

Now Russian and international experts are predicting that the same horrific
pattern could be repeated, and deaths again begin to rise, unless Russia's
financial problems improve. 

"Life expectancy will drop five years from now if the economic situation
does not change for the better in the next three to five years," warns Yury
Komarov, head of the state-linked health monitoring institute
MedSocEconomInform. 

A report for the World Health Organization also sounds alarm bells, warning
that last autumn's economic meltdown is likely to worsen health in Russia. 

At the same time, it says, the financial crisis threatens the future of
Russia's new insurance-based health system, which is already teetering on
the edge of collapse. Now the WHO, which along with the EU and the World
Bank recommended Russia jettison its state health service in favor of an
insurance model, acknowledges it may have made a mistake. 

Komarov blames widening divisions between rich and poor, coupled with
extreme psychological stress caused by the political upheaval, for the huge
death toll between 1992-94, when life expectancy plummeted by six years to
57.5 for Russian men and by three years to 71 for women. 

"People couldn't survive," he says. Many lost jobs they expected to keep
for a lifetime, while distinguished professors were reduced to selling
goods in local markets. 

Life expectancy began to recover in 1995, due to the simple fact that the
weakest - those who could not adapt to the changes - had died, argues
Komarov. Effectively, there had been a cull of the most vulnerable. 

Western analysts agree inequalities and instability played major roles in
the deaths but some also point to alcohol as a central cause. Martin McKee,
professor of European public health at the London School of Hygiene and
Tropical Medicine, believes much of the excess mortality, especially among
working age men, was due to alcohol poisoning and alcohol-related problems
such as accidents, homicides, suicides and heart disease. 

"People are going on binges, getting extremely drunk and doing so in
settings where there are no mechanisms to protect or rescue them from any
harm they might come to," he says. 

The alcohol theory is backed by Alexander Nemstov of the Moscow Research
Institute of Psychiatry. His studies show alcohol-related deaths closely
track the general mortality trend. Deaths fell sharply when Mikhail
Gorbachev's anti-alcohol campaign severely restricted supplies in 1985 -
saving one million lives - but rose as market reforms made alcohol
relatively cheaper. 

Deaths fell again in 1994 as alcohol prices overtook food costs, but
unofficial figures for last year show that decrease now reversing, says
Nemstov. Binge-drinking, he says, is "just a Russian problem, which has
become worse under new capitalism". The Russia Journal For many, life is a
daily struggle to survive and maintain their dignity. 

With finances still precarious, health prospects are poor.
MedSocEconomInform's figures show Russia's population is shrinking as
deaths continue to outpace births. The birth rate has almost halved since
1985 and continues to fall, mainly - analysts believe - because Russian
women simply do not want to bring children into such circumstances. 

There are twice as many abortions as live births. Although deaths of
under-fives have dropped since 1985, deaths are rising among children aged
five to 19. "Teenage boys at 16 had a better probability of living to 60,
100 years ago," says Komarov. 

Meanwhile, funds for healthcare more than halved from 1997-98, due to
inflation, he says, citing figures that ministry of health officials were
"too ashamed" to give when asked. 

But while many Western health economists now fear Russia's shift to an
insurance-based system is doomed, Komarov sees it as the only hope. At
least insurance funds are more stable than state resources, he argues. 

At Voronovo hospital in Podolsk district 50 miles south of Moscow, doctors
and managers agree. "The insurance system is much better because it
guarantees salaries for the doctors and managers and everyone else working
in the hospital," says Ludmila Krasnova, head of the district's healthcare. 

Previously, salaries were paid two or three months late. But she confirms
the hospital's budget is half that of the previous year, leading to severe
shortages. 

Theoretically, medicines in hospital are free, although in polyclinics
patients have to buy all drugs. Yet patients at Voronovo have to pay for
drugs to treat cancer, diabetes, psychiatric problems and heart disease
because the hospital simply cannot afford them, says Krasnova. 

There are no funds to replace diagnostic equipment, like the 25-year-old
X-ray machine, nor for modern technology like ultra-sound scanners and
endoscopes, and no furnishings to improve the bare, cramped bedrooms.
Although she says the fabric of the 1970s building is satisfactory, the
walls are moldy, corridors unlit and stairs crumbling. 

Krasnova believes the reforms should motivate doctors to reduce
traditionally long hospital stays and high hospitalization rates, because
they will now have to account for spending. Patients at Voronovo seem happy
enough with their care and say the new system has made no difference. 

But these are the lucky ones. Opinion polls show dissatisfaction with
healthcare growing, while beyond Moscow many hospitals are in dire straits. 

Under Western guidance, Russia has ditched its centralized state health
service for an insurance system devolved to regions. New health insurance
funds have to raise money through a 3.6 percent tax on all payrolls,
supplemented by municipal funds for non-working people. 

The money goes to insurance companies that contract with local hospitals
and clinics for care. 

But huge flaws are crippling the system. Insurance monopolies have led to
abuse, corruption and incentives to increase costs. Many regions are unable
or unwilling to provide adequate funds, so patients frequently have to pay
for basic care and bring their own food, sheets and bandages. 

Doctors, who officially earn only $20 a month, are still paid in arrears in
many regions and subsist by the widespread tradition of "under the table"
fees, which are estimated to form up to 17 percent of all healthcare
spending. 

Galina Skvirskaya, head of healthcare at the Ministry of Health, admits the
reforms have hit problems but insists the insurance model is best for
Russia. 

"Out of the two possibilities of Bismarck and Beveridge, we took up
something in between," she says. "This new system helps us improve the
situation with healthcare in our country." Once the economy improves, wages
will increase and health finances improve, she predicts. 

But Western analysts make more gloomy predictions. Several argue Russia was
not ready for a market-based system, which may lead to two-tier care and
worsening health. The WHO, which previously supported insurance-based
systems, now argues universal cover is the critical factor. 

Mikko Vienonen, the WHO's representative in Moscow, agrees advice provided
by WHO and the World Bank on health systems was flawed. "They admit their
advice was appalling. They said go ahead and privatize everything," he
says. Now it is accepted that insurance models offer choice only for people
with money, while being expensive to run and weak at promoting health, he
says. 

The tiny WHO Moscow office is battling to help Russia tackle its desperate
health problems in the face of inadequate services and minimal foreign aid.
Universal healthcare no longer exists in Russia, says Dr Vienonen. "If you
don't pay, you don't get it." 

*******

#8
Date: Thu, 2 Sep 1999
From: "Matt Taibbi" <exile.taibbi@matrix.ru>
Subject: press review

Avoid the Lloyd
eXile Press Review
Matt Taibbi

IN REMAINING faithful to its habit of always arriving fashionably late on
the Russian political analysis scene, the New York Times—actually the Times
magazine—finally published its own definitive “Who Lost Russia” article last
week. Written by former Financial Times Moscow bureau chief John Lloyd (no
relation to the famous tennis mediocrity of the same name), the article is
8,000 words of everything you’d expect from the New York Times in a serious
eulogy of the Russian reform movement: presumptuous posturing,
long-windedness, the occasional factual inaccuracy, and suspiciously
enthusiastic apologies on behalf of the guilty. 

For those of you who don’t remember the ‘Who Lost Russia’ pieces, they were
soporific essay/features in which the hack/author weightily surveyed the
wreckage of the Russian reform movement after the August crisis, asked aloud
Where the West Went Wrong in its handling of postcommunist Russia, and went
on to blame everyone but himself. 

Humorously, most of the press outlets which throughout the Yeltsin era most
enthusiastically cheered on the West-friendly heroes of the Russian reform
movement (i.e. Chubais, Gaidar) changed their tone in these post-crisis
essays, lambasting the excesses of “crony capitalism” as a key reason the
West’s best laid plans for Russian democracy were undermined in the 1990s. 
This new Lloyd/NYT magazine piece is a good example of the revisionist
tradition. At first read, it appears to say a lot of the right things—
namely, that the privatization process in Russia was corrupt from the start,
and that the West suffered a profound failure of vision in its approach to
postcommunist Russia, among other things. 

But in the end, the article goes out of its way to avoid linking anyone by
name with any kind of conscious wrongdoing, leaving readers with the
impression that all the mistakes made by the West and its allies were of the
well-meaning variety, and that all the bad deeds were done by mysterious
villains and wreckers still at large.

Lloyd starts off his tale of the Russia reformers’ journey into the heart of
darkness with a melodramatic scene-setting paragraph — a description of a
1991 meeting of high-level economic reformers Lloyd attended at a dacha on
the outskirts of Moscow:
‘Within three months of the meeting, many of these men were ministers in the
first Government of an independent Russia in more than seven decades. Pyotr
Aven.. Konstantin Kagalovsky... Anatoly Chubais, a former academic
researcher, was Minister for Privatization. My guide and their chairman,
Yegor Gaidar, director of a small academic institute, was soon to become
acting Prime Minister. Their mission: to make Russia a free, democratic,
capitalist state.”

Lloyd here is painting a picture of a sort of reformers’ Garden of Eden, a
snapshot of the magic dacha before the fall of man, when hearts were pure
and the aim was true. It sounds like a nice story.

But how does Lloyd know—what emboldens him to assert not as opinion but as
plain fact— that the Gaidar/Chubais “mission” was to “create a free,
democratic capitalist state”, as opposed to something else? How can he be
sure, for instance, that they weren’t just out for power and money? 

Lloyd’s answer to that would probably be that that’s what Gaidar and Chubais
told him themselves. This would be, needless to say, not a good enough
answer... I can imagine Gaidar, cocktail in hand, siding up to Lloyd in the
middle of this dacha conference and whispering matter-of-factly: “See, the
thing is, Jack, our mission here is to create a free democratic state.
Right, fellas? Isn’t that what it is? [grunts, hoots in the affirmative,
“Yeah, right, Yegor, that’s it”, etc.]. You see... Listen, you want another
drink?” 

Reporters in general obviously should not be in the business of ascribing
mythical ambitions to celebrities. It builds them up in readers’ minds,
makes it harder for people to believe it if and when they do base things
later on. And Lloyd, as he wrote this passage, definitely knew the Base
Things were coming, later in the piece. He was softening his audience up.

The mythmaking continues later on, as Lloyd describes the early struggles of
the reform effort:
“Gaidar, assailed on every side by enterprise managers screaming for a
continuation of subsidies, gave in inch by inch. But he was determined to
proceed with the privatization of state assets, which all the reformers
agreed would break the power of the Communist-era bosses and was,
accordingly, at least as much a political as an economic policy. It was an
article of faith that privatization would foster honest dealings and civic
behavior by creating a middle class with a stake in the country, while
cleaning out the Augean stables of the bureaucracy. “

In one short paragraph, Lloyd here has described squalid, bald little Yegor
Gaidar—who just moments before was Adam to Anatoly Chubais’s Eve in the lead
of the piece— as both a Christ-like martyr punished for his “faith” (one can
almost imagine the “assailed” ex-Premier Gaidar bleeding stigmata-like
wounds suffered from the attacks of the “screaming” enterprise managers),
and as Hercules, the hero of heroes, ridding Russia’s “Augean stables” of
filth. I am confident that this exceeds the U.S. R.D.A. for heroic imagery
in a single paragraph. If this is what the Times gives us for cool,
impartial analysis, I’d like to see them when they’re hysterical.

There’s no mention, of course, of the fact that it was Gaidar’s freeing of
the ruble, and his judicious handing out of banking and currency trading
licenses, which single-handedly created the real Augean Stables of
postcommunist Russia, the transparently corrupt banking elite. 

Lloyd was similarly sympathetic in his piece when it came time to discuss
the role of the International Lending Institutions in the Russia mess:
“Much later than the radicals had hoped, the I.M.F. and the World Bank began
substantial lending. So long as Yeltsin was President and a few reformers
remained in Government — Chubais was the constant figure until 1995,
sporadically thereafter — the official view in the West was that reform was
on track and our money was keeping it so. In background briefings from World
Bank and I.M.F. officials, I was told of the anguish they felt when money
disappeared and public silk purses had to be made out of private sows’ ears.“

Bullshit. If they were so fucking “anguished”, why did they keep giving
Russia money? And if they’re so “anguished”, why won’t they go on the record
to say so? 

This on-the-record/off-the-record thing is an important distinction. No one
should get credit for having a heart in private if he won’t have a heart—
and a conscience— in public. For example, if you decide to bomb Kosovo, you
can’t take public credit for feeling sorry for the civilian casualties.

After all, YOU KILLED THEM. 

The World Bank anguished? Those guys made eight percent on every dollar they
lent— even the ones that vanished. Again, it just isn’t Lloyd’s job to play
character witness to public figures. This is supremely disgusting reporter
behavior, giving people credit for their off-the-record emotions. That’s
what p.r. people are for, not reporters.

But this is all a warmup for the real show. Lloyd ventures enthusiastically
into the realm of factual inaccuracy when he goes on, in the body of the
piece, to reconstruct the history of loans-for-shares. In it, he rewrites
the entire timetable of the loans-for-shares story, and allows the central
villains in this catastrophe to come out looking...well, not all that bad. 

It doesn’t seem that way at first. Here’s his lead-in to the
loans-for-shares segment:
‘In this febrile atmosphere, as Russia veered between a success always just
around the corner and the reality of a plunging economy, there emerged,
in1995, the bones of a plan that became the most important element in the
reform process — what has come to be called “loans for shares.” Regarded
today almost universally as an act of colossal criminality, it has defined
the Russian economy and Russian business to the world. It completed Boris
Yeltsin’s retreat into an isolation from his country and created
billionaires without the tedious process of building wealth from below. For
Anatoly Chubais, it was a “pact with the devil.”’

“Colossal criminality”, “pact with the devil”, fine... But Lloyd never goes
on to say which “devil”. And he undermines completely the “pact” aspect of
the quote by avoiding the suggestion that loans-for-shares was conceived
from the very start as a deal to secure financial support for Yeltsin’s 1996
re-election campaign. The way Lloyd tells it— and I’ll cite his article
every step of the way to illustrate his argument— the sequence of events was
as follows: 

1. Loans-for-shares is conceived in good faith by bankers anxious to run
state assets more efficiently; 
‘Potanin had built up a bank, Uneximbank, from the ruins of the Soviet
Vneshtorgbank. Norilsk Nickel was a client, and he thought he could run it
better than the managers who kept it going...In the mid-1990’s, he conceived
the idea that the state would give him the right to manage it.’

2. A reluctant [!] Chubais agrees to the idea, apparently convinced by the
‘better manager’ theory;
‘Potanin was persuasive, and Chubais, at first scornful of the idea, agreed
to it at a Cabinet meeting in March 1995.’ 

3. The communists win big in the Duma elections; 
‘But there was — as always in Russia — a catch. The deal presupposed a
continuity of Government. By the end of 1995, Yeltsin remained deeply
unpopular, as well as remote and ailing, and 1996 was a presidential
election year. His rival for the presidency was Gennadi Zyuganov, leader of
a Communist Party he had built up from near extinction to win a strong
representation in the parliamentary elections of December 1993 and a
dominant one in the elections of 1995.’ 

4. Chubais is fired by Yeltsin under pressure from the communists simply for
being a free-marketeer who was “too hot” for their tastes; 
‘Too hot, after a huge parliamentary victory by the Communists, to keep in
the Government, he had seen his loyalty to Yeltsin rewarded by being fired.’

5. Chubais, “depressed” and out of work, decides on a whim to go to the
Davos conference; 
‘Hanging out in Davos was Anatoly Chubais, by now an out-of-work
politician.’

6. At that same Davos conference, the loans-for-shares winners are
approached by an apparently omniscient George Soros, who informs them that
the communists are going to win the presidential election and arrest them
all, and that they better ready their private jets and follow their money
out of Russia;
‘The financier George Soros reportedly told them over coffee that the
Communists were going to win and that they should ready their private jets
for takeoff.’ 

7. The banker-savages, apparently having never considered this possibility
before, fall into a panic, clutching frantically at the bones in their noses
at this revelation by the God-like pith-helmet-wearing white man (read:
famous American investor);
‘The bankers were horrified. They had a habit of putting their money abroad,
but they did not want to follow it. Yet what to do?’

8. Chubais, apparently having overheard Soros talking to the bankers, has a
lightbulb-over-the-head insight, deciding that it might be wise to organize
the bankers behind Yeltsin’s re-election campaign;
‘Sitting there, solitary and depressed, his spirits began to revive as he
sensed a new political opening.’ 

9. The bankers, liking the idea, decide to pay Chubais $3 million to lead
the effort;
‘Desperate to avoid a Government that would threaten their wealth, they made
him an offer: lead the campaign against the Communists, and we will open our
purses and our influence to you. He was paid, some of the bankers told
Freeland, a $3 million fee in the form of an interest-free loan.’ 

10. It works, and Yeltsin wins;
‘Yeltsin, through Chubais, called in the chips. And he won.’ 

11. The bankers’ morals unexpectedly go into remission, and they “revert” to
their previous habit of asset stripping and thievery;
‘The bankers — or oligarchs, as even they call themselves —consolidated
their power, but they did not invest, reverting to their past practice of
asset stripping and banking abroad.’ 

12. Chubais’s well-meaning “reforms” are sunk by unspecified anti-market
forces and an uncooperative population;
‘Reforms, which Chubais and others pushed from a position of, at first,
unrivaled power after the elections, once more foundered on a recalcitrant
bureaucracy and a sullen country.’

13. The government is unable to collect enough taxes;
‘Successive Governments grappled in vain with a tax system that could not
develop a reliable framework for taxing the new capitalism.’ 

14. The Asian crisis occurs, sending shock waves through the Russian
economy, and causing the firing of Anatoly Chubais;
‘Last August, the financial crises in Southeast Asia touched off a collapse
in Russia; the currency fell 40 percent, and with it the Russians’ already
miserable living standards.’

15. Crisis.

There are so many things wrong with this version of Russian history that I
don’t know where to begin. 

First of all, there’s no mention of the fact that the auctions were fixed.
The New York Times Magazine reader unfamiliar with the facts might conclude
from all of this that the state was duped by bankers who only showed their
true colors after the fact, which is insane. Chubais and the bankers
conspired to divvy up the auctioned properties at rock-bottom prices, and
this was well-reported even at the time. In some cases, government funds
were used to make the bids. 

Lloyd tells his reader none of this. In his version, loans-for-shares was a
questionable idea that simply went wrong later on— not an overtly criminal
scheme that was obviously criminal in both its conception and execution, as
well as in result.

Secondly, Lloyd here contradicts himself. If loans-for-shares was a “pact
with the devil”, what did the state get in its end of the deal? The obvious
answer is that the auctions were conceived with the elections in mind, that
it was a payoff in advance. But Lloyd avoids saying this. In his version,
the bankers only thought to get on board with the Yeltsin campaign at the
Davos conference— long after loans-for-shares was over. 

And Jesus, what’s the deal with the passage which suggests that the bankers
only thought to worry about the elections when George Soros pointed out the
communists to them? How racist can you get? Lloyd all but has the bankers
shuffling around in blackface, thanking Soros for his insights. “We’s gonna
right on that, boss!” Does Lloyd seriously think that people like Potanin
and Mikhail Khodorkovsky needed George Soros to fill them in on the
intricacies of Russian state politics? It’s really shocking, when you think
about it— and what’s more shocking is that the Times thinks, or maybe knows,
that very few of its readers will see anything unusual in such a passage.

The instinctive condescension of American readers is now so pronounced,
apparently, that most of us actually believe the whole world looks to us to
be arbiters of Ultimate Wisdom. Amazing.

Lloyd also blows the bit about the $3 million loan. He makes it sound like
it was a legal fee for services rendered, rather than a bribe for the
rigging of the AgPromBank auction, which is what it really was. Also, it
wasn’t his colleague Freeland, whose book Lloyd plugs in the piece (the two
both worked for the Financial Times)— who got that story. Lloyd said that
“some of the bankers told Freeland” about the “fee”. That’s not true.
Freeland, like everyone else, read the story in Izvestia, in a 1997 story by
reporter Leonid Krutakov. 

Lloyd talks about the bankers “reverting” to their habit of asset stripping.
If you revert to a habit, that must mean you’d stopped at some point. But
there is no evidence that the bankers ever stopped, and Lloyd doesn’t
provide any. Still, Lloyd uses the word because it helps along his “good
faith” argument about the reformers’ motives going into loans-for-shares.

Also, of course, the idea that someone would go all the way to the Davos
concert to “hang out” is just... well, it’s comedy. Only a power-worshipping
lackey like Lloyd could conceive of the Davos conference as being a cool
place to hang with the in-crowd. One can detect Chubais’s highly advanced
sense of humor at work in that passage— clearly he himself told Lloyd that
he was “hanging out” at Davos, probably out of curiosity, to see if he would
be believed.

Another thing: how can one write as fact the assertion that Chubais was “at
first scornful of the idea” of the auctions? Lloyd doesn’t even go so far as
to say “Chubais says he was scornful”. He just writes it that way, in the
guise of objective fact. This is just one more example of Lloyd’s narration
not keeping sufficient distance from it's subject.

Also:
Lloyd doesn’t mention that Chubais was fired in 1995 in the wake of public
outrage over loans-for-shares. He suggests he was fired for being a
capitalist.

Lloyd doesn’t mention that Chubais was fired in 1998 after being implicated
in repeated corruption scandals. He suggests he was fired because the
economy was performing poorly.

Most shocking of all was the fact that Lloyd had the balls to blame the
failure of reform on a “sullen” population, which apparently couldn’t get
excited about not being paid its wages and losing all of its social
protections. This is worse than incorrect, it’s just heartless. 

You’d almost wonder why Lloyd would write these things, until you get to a
passage later in the piece which lays bare Lloyd’s own narrow and
arrestingly ugly colonialist personality: 
‘What happens in the Kremlin happens in the street. In Moscow researching
this article, I was arrested for drunk driving, given a Breathalyzer test
whose “positive” results I was not allowed to see and confronted with the
threat of a disruption to my work so large that I took the usual way out for
a foreigner or New Russian. I paid the fine on the spot — with a $100 bill
for which no receipt was issued — and I was allowed to drive off in a
“dangerously drunk” condition. (To add piquancy to the sting, I was lectured
by the traffic policeman who “fined” me on NATO’s criminality in bombing the
Serbs.)’

Kremlin corruption, which has resulted in the grotesque humiliation and
impoverishment of the majority of the Russian population— resulted in hunger
and misery and premature death— wasn’t made real for Lloyd until he was
annoyed on the way home by a cop looking for a handout. That impressed him:
things really must be bad, if even he, John Lloyd, is forced to sit through
lectures about NATO. Damn those Russians! Why can’t they just be good sports
and let us bomb whoever the fuck we want? How dare they...engage us in
conversation? What insolence! No wonder reform didn’t work.

Incidentally, that’s a pretty funny revelation about the drunk-driving
incident. Somebody ought to set up a public awareness committee, a Mothers
Against Boozing Hacks, to protect us from this guy. It seems to me only fair
that the Times fund this effort. Volunteers are encouraged to call. 
I heard a lot about Lloyd’s piece when it came out. People seemed to think I
would like it. The reason for that, I suppose, is that Lloyd tosses around a
lot of words which hint at insightful analysis— “collossal criminality”,
“pact with the devil”, etc. He gives Jeffrey Sachs leave to suggest that
maybe “somebody” in the West wanted Russia to fail. He quotes Konstantin
Kagalovsky, Yukos president, as saying that “what Chubais did” to secure
Yeltsin’s re-election was questionable. He has a CIA vet asserting that what
the IMF did was use an old playbook for developing countries that in Russia
essentially resulted in “financing the great grab”. 

It all sounds like truth-telling, but upon closer inspection, the criticisms
are all hopelessly vague. Lloyd lets someone say that the IMF financed the
“great grab”, but Lloyd himself insists they didn’t do it on purpose, and
were “anguished” about it. Lloyd lets someone talk about “what Chubais
did”, but in his actual retelling of the facts, he doesn’t really tell you
“what Chubais did”, except to say that he made a deal with some bankers who
turned out later to be corrupt. 

In fact, if you read through the piece, you find blame foisted most of the
way through on unnamed, elusive villains— a “recalcitrant bureaucracy”, a
“sullen country”, “Communist-era bosses”, “Augean stables”, etc. All the key
players named by name— Chubais, Gaidar, even Potanin— come out of this
“in-depth” analysis relatively unscathed, seeming like well-meaning market
ideologues who made some regrettable but understandable political decisions
which, unfortunately, backfired. And some of those people ended up in places
they would never have imagined themselves in back in the old Garden of Eden
days— Chubais, an “oligarch in his own right” at UES, or Kagalovsky, the
ex-reformer whom Lloyd calls a friend, who made a few personal compromises
and is now “a little thicker around the waist” after a tour with Yukos. 

Ultimately, that’s what Lloyd’s piece is— a kind of Big Chill for reformers.
Hey, we didn’t end up where we thought we’d be, we made a few mistakes,
we’ve got some regrets, we made a few “pacts with the devil”... but that’s
life, we’re adults now, and let’s move forward. Sounds like a good movie,
but it’s not much of a political essay.

*******

 

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