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Johnson's Russia List
12 October 1999
[Note from David Johnson:
1. AP: Zhirinovsky's Party Exclude.
2. Reuters: Russia updates military doctrine, sees new threats.
3. Interfax: PRIMAKOV PLANNING LIBEL SUIT AGAINST LARGE RUSSIAN DAILY.
4. Itar-Tass: Primakov Supports Operation in Chechnya, Fears Full-Scale
5. Itar-Tass: Presidential Administration Not to Stand Aside Polls.
6. Moscow Times: Yevgenia Borisova, What Cost to the Taxpayers?
7. Interfax: REPORTS OF YELTSIN FAMILY'S FOREIGN CREDIT CARDS TRUE -
8. Interfax: FUTURE OF RUSSIAN DEMOCRACY NOT GUARANTEED - U.S. AMBASSADOR.
9. Editor of The Russia Journal: Re comments on Tribunsky.
10. Jonathan Sanders: Red Files-Secret Soviet Moon Mission.
11. Stephen Shenfield: Book review of Vladimir Tikhomirov (ed.), ANATOMY
OF THE 1998 RUSSIAN CRISIS.
12. Interfax: RUSSIA MUST PERSUADE U.S. INVESTORS TO STAY - AMERICAN
BUSINESSMAN. (Scott Blacklin)
13. Financial Times (UK): Probe into secretive central bank. Andrew
Jack writes on a probe into one of the more bizarre legacies of the Soviet Union.
14. Michael Launer: Re doing business in Russia.]
Zhirinovsky's Party Excluded
October 11, 1999
By JOHN IAMS
MOSCOW (AP) - A party headed by fiery ultranationalist Vladimir Zhirinovsky
was denied permission Monday to register for December's parliamentary
election because two of its top candidates were disqualified.
The Central Election Commission denied the registration of businessman
Anatoly Bykov and incumbent parliament deputy Mikhail Musatov, who held the
second and third slots on the Liberal Democratic Party's list of candidates.
Under Russian election law, if even one of the top three candidates is
removed from the list, the party's entire list is denied registration.
Zhirinovsky said he would challenge the ruling before Russia's supreme court
and if the appeal failed he would create a new political bloc whose list of
candidates would include ``the hungry, the undressed, the clean, the dumb and
Bykov did not reveal ownership of a house and Musatov failed to admit
ownership of three Mercedes cars when they gave the election commission
information about their property, as required by law, said election
commission spokesman Artyom Golev.
Zhirinovsky had put Bykov in the second slot in September despite his being
wanted by Russian police for alleged financial crimes, including money
Bykov, the head of the huge Krasnoyarsk Aluminum Plant in Siberia, fled
abroad after police opened a criminal case against him in April. He contends
that the case against him is politically motivated.
The Liberal Democratic Party faction currently has about 50 members serving
as deputies in the State Duma, parliament's lower house.
Alexei Mitrafanov, deputy head of the LDPR faction in the Duma, said the
party will ``hold a new congress as an emergency'' to revise its federal list
of candidates, ITAR-Tass said.
He believes that the party will be able to complete the process by Oct. 24,
the final day that the electoral commission accepts documents for
The commission on Saturday registered the Fatherland-All Russia alliance, the
political bloc formed by Mayor Yuri Luzhkov and former Prime Minister Yevgeny
Primakov, even though 21 people had been stricken from its list.
However, none of the top three candidates were removed, meaning the alliance
Russia updates military doctrine, sees new threats
By Martin Nesirky
MOSCOW, Oct 11 (Reuters) - Russia has published a new draft military doctrine
that retains the right to use nuclear weapons first, but defence experts said
on Monday the main surprise was its strikingly anti-Western tone.
President Boris Yeltsin approved the last doctrine in 1993, after the
military reluctantly put down a parliamentary revolt. It was never published
in full, but excerpts on nuclear policy and intervention abroad caused a stir
in the West at the time.
The Defence Ministry newspaper Krasnaya Zvezda published the new draft in
full at the weekend, and it is already grabbing the attention of Russian and
Western military analysts. It also means new NATO Secretary-General George
Robertson will have his work cut out. He wants to convince Moscow NATO is not
``Recent events, including in the Balkans and the North Caucasus, meant that
we had to complete the work on the draft started more than two years ago
under presidential orders,'' Colonel-General Valery Manilov, the General
Staff man in charge of drafting the doctrine, explained to the newspaper.
At the core of the new doctrine is the concept of two opposing trends --
unipolar, meaning U.S. superpower domination, and multipolar, implying many
centres of influence including Russia.
``The Russian Federation considers that social progress, stability and
international security can only be guaranteed in the framework of a
multipolar world and works in all ways to achieve it,'' the draft says.
The United States and its NATO allies are not explicitly mentioned but the
meaning is clear. The doctrine lists among the country's main external
threats attempts to marginalise Moscow in world affairs and the stationing of
troops near Russia.
``Unfortunately it is a return to the Soviet pattern, the Soviet scheme
whereby the West was regarded as an alien entity which always jeopardised
Russian national interests,'' said Yevgeny Volk of the Heritage Foundation
think-tank in Moscow.
Colonel-General Manilov noted the draft even saw foreign hands in funding and
training rebel groups, such as those in Chechnya, where Russia is battling
Islamic militants. He did not say who Moscow thought was behind these groups.
NATO ENLARGEMENT SEEN AS SPARK FOR CHANGE
A Western defence expert said he traced the change in overall mood back to
Russia's post-Cold War anger at NATO's enlargement to include East European
states as members. NATO's bombing of Yugoslavia and Western doubts about the
country's economic reforms had served to deepen a disillusioned mood.
``What really amazes me is that the views expressed by the General Staff are
shared by quite a lot of civilians in the political establishment,'' the
Western defence expert said. ``I'm afraid this is a change we will feel very
heavily in future.''
He said the shift was more profound than a simple pre-election change of
mood. Russians elect a new parliament in December and a new president in
mid-2000. The 1.2 million-strong military remains a key slice of the
Manilov said Yeltsin would get a final version of the military doctrine for
approval next month. The draft says Russia reserves the right to use nuclear
weapons first in specific circumstances, for example if faced with an
Volk said this strategy, reintroduced in the 1993 doctrine after a Soviet
no-first-strike pledge, pointed above all to the weakness of Russian
conventional forces. The draft doctrine says Russia will still need
conscription but will aim to shift the balance more towards a professional
Volk also said the military and political establishment, as well as the
defence industry, needed external threats to justify increasing defence
spending during an economic crisis.
The Western expert noted a broader security concept adopted last week by
Prime Minister Vladimir Putin's government similarly homed in on threats from
beyond Russia's borders.
``It is no longer taboo to be anti-Western,'' said one Russian military
analyst who knows the workings of the General Staff well. ``In 1993 it was
impossible to write our enemy is the West. Now it is there, albeit between
the lines. But it is there.''
PRIMAKOV PLANNING LIBEL SUIT AGAINST LARGE RUSSIAN DAILY
MOSCOW. Oct 11 (Interfax) - Former Russian Prime Minister Yevgeny
Primakov said Monday that he plans to bring a libel suit against a large
The daily Noviye Izvestia carried a story that was headlined
"Primakov's List" in which it said Primakov, leader of the center-left
Fatherland-All Russia (OVR) coalition, had asked law-enforcement
agencies for information on 163 leading politicians and that the
Prosecutor General's Office had replied they were all corrupt.
"This is a typical provocation. I have never sent any inquiries,"
Primakov told Russia's NTV television.
"I'm going to file a lawsuit for the first time in my life and sue
for a large sum. The newspaper is apparently not poor, so let all that
money go to kindergartens."
Primakov also said again that he did not believe that OVR could
ally with Unity, considered a pro-Kremlin coalition. But he does not
want the two groups to become "antipodes."
He also does not want the Kremlin to back any of the groups during
December's parliamentary elections, as this would "contradict the
constitution and common sense." The Kremlin should guarantee equal
chances to all groups instead, he said.
On the subject of a draft law on presidential elections, Primakov
said the bill should include "guarantees for an outgoing president." "He
must have guarantees for his future," the ex-premier said. "This would
lend more stability" to the nation's political situation.
Primakov also said he thinks anyone who wishes to run for president
should undergo a medical checkup.
He said he still has not made up his mind whether to run for
president in 2000.
Primakov Supports Operation in Chechnya, Fears Full-Scale War.
MOSCOW, October 11 (Itar-Tass) - Russia's ex-premier Yevgeny Primakov, who
heads the powerful election bloc Fatherland-All Russia, said on Monday that
he supported the operation by federal troops in Chechnya against Islamic
"I fully support what is being done," Primakov told the Hero of the Day
programme of NTV commercial television, adding that he feared that the
operation could grow into "a full-scale war in the entire Chechnya".
According to the former prime minister, he was against such a development as
it could tell on peaceful population and cause many casualties among the
Primakov, who is seen as a possible successor to President Boris Yeltsin in
next year's presidential polls, stressed that Russia must seek to avoid
"converting the entire Chechnya in a base for terrorists."
Presidential Administration Not to Stand Aside Polls.
MOSCOW, October 11 (Itar-Tass) - The Russian president's administration will
take its clear stance in Russia's upcoming elections, first deputy
presidential chief of staff Igor Shabdurasulov said at a news briefing on
He said the administration stance on which political camps to back or not to
back would be quite definitive.
"It is surprising to hear that the administration of the Russian president
should not take any political position in connection with the elections to
the State Duma (lower house of parliament), the presidential elections and
elections of administrators of regions," Shabdurasulov said.
As for the State Duma elections, to be held concurrently with gubernatorial
elections in some regions on December 19, Shabdurasulov said "the
administration of the Russian president has its position regarding how and
whom to back up".
Shabdurasulov said the presidential administration, like other authorities,
has possibilities to give various forms of support to parties or electoral
blocs, adding that it did not contradict the election law in any way.
"We are not going to agitate for anybody, but the Russian president's
administration will not stay aside pre-election processes," he said.
October 12, 1999
What Cost to the Taxpayers?
By Yevgenia Borisova
How much Russia's war in Chechnya will ultimately cost the budget is
anybody's guess - and guess they do. Estimates vary wildly, from several
hundred million dollars to several billion.
Already a parliamentary-governmental commission hammering out a compromise on
the 2000 budget has agreed on a 26 billion ruble ($1 billion) boost in the
defense budget - up from the 110 billion rubles originally planned to 136
billion rubles - to help deal with Chechnya.
That's against an overall Russian budget for 2000 of $23 billion, not
including debt servicing.
Duma Deputy Roman Popkovich, who heads a parliamentary defense committee,
says even more funding will be needed. He is calling for a boost of up to 37
billion rubles. Finance Minister Mikhail Kasyanov has held out hope that
Popkovich will get his way, saying last week that all branches of government
now agree that military spending is priority No. 1.
The daily newspaper Vremya MN, citing unidentified Russian government
officials, reported last week that the Cabinet is already prepared to spend
an additional 40 billion to 60 billion rubles on the war - just for the
remainder of 1999.
Some idea of what the overall war will cost can be had by looking at some of
the line-item details. For example:
-Assuming a soldier is paid $300 a month and an officer $800, and given
reports of 50,000 troops stationed in northern Chechnya, Izvestia's military
observer Alexander Chuikov calculates that it will cost $25 million each
month - or $300 million a year - just to cover food and salaries for the
(Prime Minister Vladimir Putin, however, has promised to pay soldiers in
combat zones more - $1,000 a month, which is what Russia's KFOR forces in
-Setting up checkpoints, mine fields and other infrastructure along the
534-kilometer Russian-Chechen border could cost anywhere from $200 million to
$650 million, said General Andrei Nikolayev, a former head of the Federal
Border Service. Neither Nikolayev nor anyone else has offered an estimate on
what it will cost to maintain once it's established.
-Putin has called for spending more money on conventional weaponry, and
Deputy Prime Minister Ilya Klebanov was quoted by Itar-Tass as saying that
the government will spend an additional 4 billion rubles in 1999 on arms
Klebanov said the money would go to everything from new planes and
helicopters to communications equipment and night-vision goggles.
-Aside from military outlays, the government has also promised, according to
Russian news agencies, to pay 340 million rubles to civilian victims in
Dagestan of the Chechen-led invasion force.
In addition, there are about 155,000 refugees from Chechnya, most of them in
The Federal Migration Service chief, Vladimir Kalamanov, was quoted as saying
by Interfax that his service had already paid 147 million rubles as a
one-time assistance payment, and would seek another 300 million rubles from
the 1999 budget to tide the refugees over to year's end.
So all told, just helping civilians injured or displaced by the conflict will
this year cost about $30 million.
Where Russia will get this cash remains a mystery. As it is, the Finance
Ministry reports that soldiers and officers are already owed 8.7 billion
rubles in wage arrears, and last year the Defense Ministry suggested officers
collect mushrooms to supplement their diets. This year's military budget was
supposed to allocate 91.7 billion rubles to defense - but so far, only about
two-thirds of that, 65.4 billion rubles, has been paid out.
Putin met with Defense Minister Igor Sergeyev and Central Bank chief Viktor
Gerashchenko to discuss funding for the war.
Afterward, Gerashchenko appeared on an RTR television talk show and said the
war would probably be funded by new state securities.
These war bonds would be aimed at teasing money out of Russia's ailing
commercial banking sector, Gerashchenko said, "because banks have cash which
anyway is not invested in the real sector."
Gerashchenko offered no elaboration on the new securities - neither their
volume nor interest rates nor when they would appear.
Vremya MN reports that the government is planning to wring the additional
cash out of the oil companies with new taxes. World oil prices - and profits
for Russian oil companies - have been soaring.
Another possible source of revenue is the International Monetary Fund, which
is debating sending another $640 million loan tranche to Russia. Chechen
President Aslan Maskhadov has appealed to the IMF not to lend now, and
Reuters last week quoted unidentified IMF officials worrying privately about
sending more money to Russia during a war.
The last war in Chechnya, between 1994 and 1996, saw the IMF come under heavy
criticism for its lending to Russia. Some economists, including Harvard
University's Jeffrey Sachs and Marshall Goldman, charged the Fund with
indirectly subsidizing the war.
In the unlikely scenario that the IMF cuts off funding this time, the war
will continue anyway at the cost of unpaid wages and pensions, and spiralling
inflation, said Parvoleta Shtereva, an economist at the Moscow brokerage MFK
But now IMF is delaying the release of a would-be disbursed in September of
the second $640 million tranche of a $4.5 billion credit agreed in July.
"If they don't have the money, they'll print money," Shtereva said.
REPORTS OF YELTSIN FAMILY'S FOREIGN CREDIT CARDS TRUE - SKURATOV
MOSCOW. Oct 11 (Interfax) - Russia's suspended Prosecutor General
Yuri Skuratov has said that the reports about the Yeltsin family's
credit cards in foreign banks published in the Western press are true.
The president himself and his daughters Tatyana Dyachenko and
Yelena Okulova figure prominently in this case, Skuratov said at a press
conference at Interfax's main office on Monday.
"All information about the credit cards and other things published
in Italian and Swiss newspapers are true. This is already not a little,"
He said, however, that there are a number of suspicious features of
this case, including "the transfer of $1 million to Hungary by the head
of the Mabetex firm Behgjet Pacolli." "How this capital is to be used is
not clear yet. There is also other information which needs to be looked
into," he said.
Concerning the Bank of New York accounts belonging to Tatyana
Dyachenko's husband, Skuratov said that he does not have comprehensive
information about this as he has been suspended for six months now. The
suspended prosecutor general is "inclined to trust American sources." he
The president's family must be interested in clearing up all of
these issues, said Skuratov. "Some of these reports may not be
confirmed, while others may prove to be overly exaggerated. The truth
may lie in a part of this information. But they must be interested in
clearing all this up," he said.
But when attempts are made "to disregard everything, the well-
founded suspicion arises that everything is true," Skuratov said.
Skuratov dismissed as nonsense Pacolli's assertions that Mabetex
has bought him fourteen suits worth about $60,000, and announced that he
would file a libel suit against Pacolli.
He said he had never asked Mabetex for anything. "I am not crazy
[enough] to ask for anything from Mabetex. My conscience is absolutely
clear," Skuratov said.
FUTURE OF RUSSIAN DEMOCRACY NOT GUARANTEED - U.S. AMBASSADOR
MOSCOW. Oct 11 (Interfax) - The U.S. ambassador to Russia voiced
his concern Monday about the future of Russian democracy.
Russia's current military action against Chechnya seriously
undermines the process of stabilization in Russia, James Collins said
during a gathering marking the fifth anniversary of the American Chamber
of Commerce in Moscow.
Collins said Russia should not give priority to the use of armed
force in fighting terrorism and hinted that there was a racist dimension
to Moscow's anti-terrorist efforts.
He also called on Moscow to take urgent measures against crime and
Stronger democratic political institutions in Russia are crucial to
better Russian-U.S. relations, and Russia and the United States should
meet future challenges together, Collins said.
He said that reducing weapons of mass destruction weapons and
fighting organized crime and terrorism should be priorities in joint
He also took issue with widespread claims that the U.S. no longer
believes economic stability is possible in Russia.
The diplomat urged Russia to take an active part in negotiations to
stop nuclear weapons from spreading to Iraq or other non-nuclear
From: "The Russua Journal/Mark Najarian" <RJ@norasco.com>
Subject: From the Editor, The Russia Journal
Date: Mon, 11 Oct 1999
This refers to the opinion piece by Alexander Tribunsky (JRL #3550) and the
storm of responses it has generated through e-mails and letters to me and on
I would first like to mention that in the same issue of The Russia Journal
(Issue #32, Oct. 4, available on
http://www.russiajournal.com/start/opinion/article.cgi?ind=1452 on Opinion
Page 7), we published an opposing view from another member of our staff, Jon
While his piece is worth reading, too, I should mention that these
opinions -- as is the case with all opinion pieces that appear weekly on
that page -- are those of the writers and do not necessarily reflect The
Russia Journal's editorial line. We have indeed published various editorials
on the subject .
Our editorial line as well as the opinions of many in the media --
including, I must underline, many in the Russian media -- has been similar
to those expressed in letters by JRL readers. But in opinion polls, street
polls and discussions with many Muscovites, I have found, as one of your
readers put it, that "the mood is quite ugly here."
There has been much debate on this subject. I decided, therefore, to give
the floor to the opposing opinions. It is necessary for our readers to know
the opinions of a majority of Russians on the matter. It is my duty as
editor and our collective duty as a newspaper to publish criticism, even if
it comes from within our newspaper.
It is important to know the extent and depth of xenophobia that is being fed
by Moscow authorities. It is important to know the depth of fear and anger
that has been turned against Chechens and Caucasian nationals.
Mr. Semlak in JRL#3552 called it disgusting that we published this piece. I
do not agree. Publishing an opinion that represents the view of many
Russians is precisely what the press here should do.
We in the media seem interested in imposing our views, telling our point of
view, giving our opinion. We have published the opinion of an ordinary
person, a Russian -- and his opinion corresponds to that of most Russians we
have talked to.
Finally, I must say there are deep divisions within Russian society on the
subject. There are emotional, constitutional, administrative and legal
ramifications of the actions of city officials in registration, deportation
and search of Caucasian people. But we must not pretend that Western
writers and media are the only defenders of human rights. Hundreds of
well-respected Russian intellectuals, jurists, activists, politicians and
ordinary people also have spoken out against the measures of the Moscow
All sides of the issue are worth listening to. As always, JRL has proven to
be a most useful platform for a discussion on an issue as important as this.
The Russia Journal
From: Jonathan Sanders <email@example.com>
Subject: FW: Red Files-Secret Soviet Moon Mission
Date: Sun, 10 Oct 1999
A Socialist Moon Program Made by Moscow's Mystery Man
This week's episode of RED FILES focuses on Sergei Pavlovich Korolev.
Perhaps we should ask our friends in American studies to try a
counter-factual exercise: without the jolt Korolev provided with Sputnik
would the internet/knowledge/ economy centered on American research
universities exist today?
See Abamedia's Four part Red Files series on National PBS Mondays,
September 27 - October 18, 1999 9:00 p.m. (check local listings)
Secret Soviet Moon Mission: OCT 11
The Kremlin revealed the identity of the Twentieth Century's greatest
mystery man only after his death in 1966. Before that, the 'rocket
scientist' who kept the Soviet Union ahead of the
United States, as well as every other nation on earth, in the quest to
explore outer space was
know publicly as "The Chief Designer" His very name was a secret
whispered among a knowing few.
At mid century Sergei Pavlovich Korolev (pronounced: Kor-ol-YOVh) may have
obscurity, but his work had rattled the world awake to the Soviet Union's
Date: Mon, 11 Oct 1999
From: Stephen Shenfield <Stephen_Shenfield@Brown.edu>
Subject: Review for JRL of book on Russian crisis
BOOK REVIEW by Stephen D. Shenfield:
Vladimir Tikhomirov (ed.), ANATOMY OF THE 1998 RUSSIAN CRISIS
Published by Contemporary Europe Research Centre,
University of Melbourne, Australia, 1999
Readers of JRL might not have noticed the appearance of
this collection of essays on various aspects of the Russian
financial crash of August 1998, produced by a research
center in Australia. But I would highly recommend it.
Most of the writers demonstrate a detailed empirical and
theoretical grasp of the workings of the Russian economy and
polity. One emerges from reading this book with a heightened
appreciation of the complexities and ambiguities of contemporary
An introductory overview is provided by Silvana Malle, head of
the Non-Member Economies Division of the OECD Economics
Three of the most valuable essays examine the crisis at the
sectoral level: William Tompson (University of London) on banking,
and the role of the Central Bank of Russia in particular; Stephen
Fortescue (University of New South Wales) on the mining and
metals industry; and Barbara Lehmbruch (University of California
at Berkeley) on the timber industry.
Other essays focus on the economic or political system as a
The Finnish economist Pekka Sutela (Bank of Finland) presents his
view of the roots of the economic crisis in the special kind of
capitalism that has developed in post-Soviet Russia, marked by
the dominant position of insider ownership. While many of Sutela's
points are valid, I find his treatment somewhat dogmatic and
one-sided. He does not make full use of available empirical
research, such as Kathryn Hendley's study of the behavior of
Russian enterprises (see Post-Soviet Affairs, July--September 1999).
Yuri Tsyganov (University of Melbourne) provides a well-informed
view of the political background to the crisis. Andreas
Heinemann-Gruder (University of Pennsylvania) focuses on
Russia's system of asymmetrical federalism. Vladimir Tikhomirov
(University of Melbourne) discusses the central problem of state
finances, while Akira Uegaki (Seinan Gakuin University, Fukuoka,
Japan) analyzes Russia's balance of payments. Wladimir Andreff
(Sorbonne, Paris) considers the crisis from the perspective of
multinational corporations and their global strategy.
The book can be ordered from the Contemporary Europe
Research Centre, University of Melbourne, 234 Queensberry
Street, Carlton VIC 3052 Australia. Tel.: 61 3 9344 9502.
Fax: 61 3 9344 9507. E-mail <firstname.lastname@example.org>
International orders are US$25.00 (includes delivery by
surface mail) or US$35.00 (airmail delivery). Pay by check,
made out to "University of Melbourne."
Further information about CERC publications is available at
RUSSIA MUST PERSUADE U.S. INVESTORS TO STAY - AMERICAN BUSINESSMAN
MOSCOW. Oct 11 (Interfax) - President of the American Chamber of
Commerce in Russia Scott Blacklin thinks that Russia must persuade
foreign investors to work in its economic field.
Russian laws must be changed if investment is to be attracted to
Russia, he said at a meeting marking the fifth anniversary of the
American Chamber of Commerce in Moscow and the 40th anniversary of the
first national American exhibition in Russia.
The U.S. cannot put money into Russia for nothing or to allow its
capital to be managed inefficiently, he said.
He said that foreign investments will flow into Russia if Russian
accounting standards are brought in line with the international
standards and order is restored in the sphere of bank and other lending
He said that the work of prosecutors and courts must become more
efficient. The State Duma sometimes approves draft laws detrimental to
foreign investors, he said.
Speaking about most-favored nation status, he said he recognizes
that even in such a democratic country as the United States, the
Congress has preserved the Jackson-Vanick amendment envisioning the
annual prolongation of this status for Russia.
The American Chamber of Commerce has been subject to deep
disillusionment in the course of working with Russia over the past seven
years, he said.
He said, however, that U.S. investors do not give in to cynicism
and continue to broaden spheres of cooperation.
Russian Trade Minister Mikhail Fradkov said that most American
companies, despite the 1998 financial crisis, have not curtailed their
operations on the Russian market and are interested in even broader
He announced that the Russian-American trade turnover came to $9.5
billion in 1998, 2.5 times more than in 1992. The United States was
Russia's second largest trade partner last year, he said.
He also announced that the volume of accumulated U.S. investments
in Russia had increased to $4.1 billion by the middle of 1999, making up
32% of the direct accumulated foreign investments in Russia.
Financial Times (UK)
12 October 1999
[for personal use only]
RUSSIA: Probe into secretive central bank
Andrew Jack writes on a probe into one of the more bizarre legacies of the
More than a decade after communism crumbled, the country's central bank, one
of the most influential institutions of the Soviet era, is facing a challenge
to its secrecy and power.
In response to international political pressure following allegations of
corruption and deceit at the centre of the Russian state, PwC, the auditing
firm, is putting the finishing touches to an examination of the bank's
foreign subsidiaries - one of the more bizarre legacies of the Soviet Union.
The central bank remains "a law unto itself", says Eleonora Mitrofanova, a
senior official at the Russian parliament's auditing chamber. Shielded in the
past by secretive party apparatchiks, it has survived the transition to
capitalism with its autonomy enhanced and some of its most senior officials
"The people who work there behave as though they are the owners of its
assets," she says.
The bank's independence from the Russian parliament - and its resistance to
the scrutiny of parliament's auditing chamber - is in step with the growing
worldwide belief that monetary policy should be shielded from political
interference. But the result has been to safeguard an institution that is
accountable to no one.
It controls two powerful domestic banks, Vneshtorgbank and Sberbank. But the
bank's most surprising operations are not within Russia at all. It has
inherited a network of five sovzagran, or foreign commercial banks, from
Gosbank, its Soviet precursor. Ms Mitrofanova's efforts to gain access to
their accounts have been unsuccessful.
Public attention was first drawn to the network earlier this year, when Yuri
Skuratov, general prosecutor, singled out an obscure Jersey-based company
called Fimaco, itself owned by Eurobank, a Paris-based subsidiary of the
He discovered that the central bank had channelled billions of dollars
through Fimaco during the 1990s to conceal the size of Russia's foreign
currency reserves, and to discreetly purchase Russian GKOs, or government
A subsequent investigation carried out after pressure from the International
Monetary Fund was criticised because it demanded only a low level of
scrutiny, and because it was conducted by PwC, which is auditor of both the
central bank itself and several of its subsidiaries.
That investigation did not identify what happened to the high short-term
profits made from these deals, but it did confirm Mr Skuratov's suspicions.
"We were lied to," as Stanley Fischer, the IMF's first deputy director,
bluntly put it. Hence the further probe by PwC.
The history of the banks is very much the history of the secrecy and intrigue
of the communist state. Founded in 1921 by refugees from St Petersburg who
fled the revolution, Eurobank was taken over by the Soviet authorities. The
same happened to Moscow Narodny Bank (MNB) in London, founded in 1915.
With the expansion of Soviet trade in the 1970s, Ost-West Handelsbank was
created in Frankfurt, Donau Bank in Vienna and East-West Bank in Luxembourg,
as well as numerous representative offices these banks opened in the US, Asia
and the USSR.
The role of the network in the post-Soviet era is another matter. For one
thing it provides several thousand dollars a month in extra income to the
central bank's deputy governors, who hold positions as non- executive
directors. It also provides a range of prestigious international posts
between which a group of élite civil servants can move.
Yuri Ponomarev, for example, the chairman of MNB who was recently appointed
to head Vneshtorgbank, worked in both institutions and was chairman of
Eurobank at the time Fimaco was created. Victor Gerashchenko, head of the
central bank today and of Gosbank at the end of the Soviet period, spent much
of his career at MNB.
Thus the subsidiaries present the Russian central bank with considerable
conflicts of interest as well as the potential for some curious financial
operations. For instance, Eurobank has purchased 10 per cent of Moscow
International Bank, which was chaired by Mr Gerashchenko during the four
years he worked outside the central bank from 1994 to 1998.
Eurobank's Moscow subsidiary Eurofinance has acquired a 25 per cent in Media
Finance, a company that controls Vremya, a liberal daily newspaper with which
Sergei Dubinin, the former central bank governor, is linked.
"It was both a political and a business decision," says Andrei Movtchan,
chairman of Eurobank. "We decided to create a paper that did not simply
reflect the ideas of a single financial group."
Now there is growing political pressure for the central bank to sell off its
subsidiaries, or at least set up tight "Chinese walls" to keep its interests
The PwC study is expected to confirm that, in the words of one individual
close to the inquiry, the foreign banks are "less [geese that lay] golden
eggs than albatrosses [around the central bank's neck]".
Date: Sun, 10 Oct 1999
From: "Michael Launer" <email@example.com>
Subject: Re doing business in Russia
My wife, Marilyn Young, is a subscriber to The Johnson List. Some time ago
she printed out a number of messages regarding the perils of doing business
in Russia. The attached message is a response to one of those messages that
dealt with interpreters. I hope that the information in my comments will be
of use to the people who subscribe to your list.
Back in July T. S. White offered this list a series of memoranda on the
difficulties and hidden traps that must be overcome when setting up a
business in Russia and then actually conducting business there. One of the
difficulties identified was interpreting. Mr. White highlighted the
following issues: price; linguistic com-pe-tence-both specialized and
conversational; kickbacks; cultural problems including loyalty to Russia
vs. the US in all its guises (the classic problem known as “Kak obdirat’
inostrancev” [How to rip off the foreigners]).
Mr. White expressed the opinion that the only solution to this problem was
to play one Russian interpreter off against another, relying on their greed
to engender a financial, if not personal, loyalty to the client. I would
like to comment on this situation, both generally and specifically. I do so
from the perspective of an American who has taught Russian in the US for
nearly 30 years, has provided professional translations of technical and
business texts for even longer, has been a State Department interpreter
since 1987, and has run a successful translation and interpreting company
(RussTech Language Services, Inc.) for over five years. So this doesn’t
sound too much like an advertisement, let me assure you that any reputable
transla-tion company specializing in the Slavic languages could provide the
expertise and services that our com-pany can provide. RussTech is one of
the largest companies in this category, but there are others.
First, regarding language services in general. Anyone with international
business experience will tell you that effective communication on all
levels and in all media is crucial to success. If you can provide
poten-tial clients and partners information in their native language, you
will be much more successful than if you rely on their knowledge of
English. No matter how expensive it is to do business overseas and no
matter what the constraints on startup budgets may be, language services is
not the area in which to skimp. Does it really make sense to jeopardize a
multi-million dollar deal just to save a few thousand dollars on the
trans-la-tion of a complicated contract proposal? What about the needless
expense involved in repairing or replac-ing equipment that has been misused
or serviced incorrectly because the operator or mechanic had to make do
with English language manuals? The replacement cost of some valves or
printing presses is over $250,000, so your warranty expenses due to a
single avoidable incident could exceed any reasonable profit expectations.
RussTech has participated in major international construction projects
during all phases of a business venture-initial contact, negotiating a
deal, bidding on projects, creating design drawings and operating manuals,
and the actual conduct of the business activity. We tell our clients going
in that they should budget 4% of total project revenues for language
services, then work with their provider in the attempt to keep those costs
nearer to 3%. Getting close to 3% means organizing the document production
process in the client’s offices so that there are as few revisions and as
little ‘rush’ work as possible. We had one client who never seemed to have
enough time to do things right the first time, but always had enough time
to do things over. More commonly, however, the client’s staff would work to
‘monolingual’ deadlines: if the plane left JFK on Friday evening, then
finishing a set of blueprints on Wednesday was considered plenty of time.
But they were traveling to Kiev and beyond, not to Cleveland-and Wednesday
just won’t be enough time for the translation company to do its work properly.
Still, think about those numbers. On a two-year, $30 million project, that
comes to between $900,000 and $1,200,000 for all language services,
including travel and living expenses for the interpreters. I know that this
seems like an inordinately high price. But how much of a real-world $30
million budget is spent on legal services, how much on marketing, and how
much on flying business class, staying in the best interna-tional hotels,
or schmoozing the client in Paris? All the best lawyering in the world
won’t be worth a penny if the interpreters or the translators don’t do a
good job. The services of a skilled translation/interpreting team
con-sisting of people who know their linguistic job, who know the culture
of the country in which you plan to operate, and who know how you operate
in the US can be the best bargain in your whole budget. It is, ulti-mately,
the quality of the product or service you are selling plus the quality of
the translation / inter-preting team representing your interests that will
determine the profitability or the futility of all your efforts.
On more specific matters....
Like costs. Remember that all services obtained overseas will be cheaper.
But sometimes, as they say in the Fram commercials, it’s a situation of
“Pay me now or pay me later.”
Translating. Whenever possible, have translations done by people who are
native speakers of the target language. And have them edited by a native
speaker of the target language. That is the only way to ensure that the
document will sound right. Of course, if the text is fairly trivial, and
all you really need to know is “Did he say yes or no?”, then it doesn’t
matter who translates it. Also, keep in mind that a translation you obtain
directly from a free lancer, especially one in Russia, has been seen by one
set of eyes only-the translator’s. [One caveat: in my experience, working
with many translators both here and overseas, it is much more likely that a
Russian will not understand the meaning of an English sentence than that an
Ameri-can will not understand the meaning of a Russian sentence. This is
true more or less irrespective of their translation skills. The rea-son for
this situation is very simple: Russian engineers write literate Russian,
whereas many US engineers write such cryptic, slangy text that only a
native speaker of American English has a chance of figuring out what they
really meant to say.]
Serious documents need to sound right in the target language. The best
chance of obtaining such a docu-ment is to have both the translator and the
editor working into their native tongue. Furthermore, if a high volume of
documents is envisioned, only an agency can provide the staffing and the
configuration manage-ment you will need. A company like RussTech that
builds and maintains its own electronic glossaries will produce more
consistent documents over the duration of a major project. Moreover, it
takes really close cooperation with the client to get top notch (i.e.,
publishable quality) documents. Either the client’s tech-ni-cal expert or a
representative of the client’s client must be available to answer questions
from the translator or editor. No matter what anybody may think, there is
no way a translator-even if (s)he has a degree in the appropriate field-can
know what the technical expert has learned over the course of a career. At
our university, the plant biologists can’t talk to the marine biologists or
the human physiologists. And in the case of new or emerging technologies,
dictionaries won’t provide even the marginal assistance one nor-mal-ly
derives from them.
Finally, if you ever have to choose among minimally competent translators,
choose an individual whose native language is the same as yours.
Regarding “local” interpreters. Any substantial language company can
provide local interpreters whom they have screened for reliability and
linguistic competence. And they will cost less than sending inter-pre-ters
from the US, but more than it will cost if you use your connections to find
someone locally yourself. But keep in mind the fact that rates in the CIS
are less stable than in the US; there is a fair amount of upward pressure.
Some experienced interpreters are even asking for ‘international rates’ but
not having much success. Currently, the going rate for well qualified
interpreters in Moscow is $200-250/day. In Ukraine, the price is about
$50/day less. Using an agency in the US, you should always be able to
obtain the services of a good local interpreter in Russia or Ukraine for
$350-400 per day (the agency will clear about $100-150 out of this sum).
Don’t even think about the students, teenagers, moonlighters, girlfriends
of your travel agent, or anybody who works for Chernobyl Union. What it may
cost you in the long run (and the short run, too) is much more than you
could possibly save.
VERY IMPORTANT. Whatever your budget, for your first meeting with a
potential client or partner, and for any serious negotiations, you need to
have an interpreter ‘on your side of the table’-someone you can trust,
someone who will represent your interests alone, someone who will tell you
what is happening when the other side caucuses or starts ignoring you,
someone who understands and respects the importance of confidentiality.
Remem-ber, your interpreter is going to hear and interpret all sorts of
proprietary informa-tion, trade secrets, pricing proposals, and other
information about your company or your capabilities that you certainly
don’t want divulged to outsiders. For your peace of mind, that person
almost certainly needs to be American born or an immigrant who been in the
US long enough to have become fully assimilated into American society. It
is simply a fact that many recent immigrants haven’t let go of the Soviet
way of doing things, and this is one time when it is better to be safe than
Using US-based interpreters. Even here, all things being equal you are
better off with someone you got from an agency than from someone you found
yourself, despite the possible additional cost. By the time you can assess
the quality of the interpreting, it may already be too late to salvage your
deal. The agency, however, has a vested interest in your continued
business, so it won’t ever use anybody it can’t vouch for [at least, not
more than once!]. I know that we screen all interpreter candidates and use
only those that pass our review. Then, we rely on client feedback: was the
individual friendly, helpful, hard working, willing to go sight-seeing or
participate in souvenir hunting? Some interpreters-both US and foreign
based-think that interpreting is a 9-to-5 job: either they can’t be
bothered helping you order dinner overseas or they think you should pay
them extra for the inconvenience!! We have even had interpreters insist on
extra pay if they are asked to drive foreign visitors around town.
In addition, a full-service agency can provide a wide range of other
services, not the least of which is taking advantage of time zone
differences to provide overnight translations of draft documents or meeting
minutes you will need the next day. You do yourself a disservice if you ask
your interpreter to translate docu-ments ‘in her spare time.’ First of all,
very few interpreters are also competent translators; secondly, the
document may have to be translated from the interpreter’s native language;
thirdly, a perhaps most important, you will have a very sleepy interpreter
working for you the next day.
US agencies charge $550-650/day, plus expenses, generally keeping no more
than $100 out of this fee. With the pass through of so much expense money,
the margin on interpreting just isn’t very high. You won’t neces-sarily
save a lot of money by going directly to a free-lancer yourself. There are
two reasons the agency makes so little from an interpreting assignment. The
first deals with market factors: inexplicably, officials in an American
high-tech company who think nothing of paying an ‘architect & engineering’
firm upwards of $1250/day for a consulting engineer some-how believe that
anybody who can speak a language can interpret, so why should they pay a
lot of money. Secondly, almost nobody can afford to keep W-2 interpreters
on the payroll [remember, inter-preters seldom translate], so they engage
contractors. Thirdly, most companies provide interpreters as a service in
order to get the translating work, where the margins are better because you
can afford to keep translators on your payroll.
In the ideal situation, once you find an interpreter you like, you should
strive to work with that one indivi-dual only. This is directly contrary to
the advice given by T. S. White, but he had in mind the random Rus-sian
interpreters foisted upon him by those more intent on taking advantage of a
situation than provid-ing real services. Still, there are many reasons for
sticking with one person. First of all, the interpreter will get better
over time as (s)he learns the jargon of your industry or discipline.
Secondly, once you find someone you like as an individual and care to
travel with-you can be on the road with your interpreter for weeks at a
time-those qualities may become more important to you than always getting
exactly the perfect transla-tion from someone whose presence you can barely
Conclusion. Think long and hard about the language services you will need
to function in an international business environment. The interpreters and
translators you engage are the people who will present your company and you
personally to all potential customers, suppliers, and partners. As T. S.
White implied, they can make or break any international venture-and not
just in Russia or the FSU.
Please address any comments, criticisms, or inquiries to:
Michael K. Launer, Ph.D.
Web page for CDI Russia Weekly: