This Date's Issues: 3602 • 3603
Johnson's Russia List
3 November 1999
[Note from David Johnson:
1. Moscow Times editorial: On Winning Battles And Losing Wars.
2. AP: Russia Said Hiding Chechnya Losses.
3. Interfax: CHECHNYA WILL NOT TORPEDO RUSSIAN-U.S.
4. Izvestiya: National Election Peculiarities. Vyacheslav
Nikonov, a political adviser for Yevgeny Primakov's Fatherland-All Russia bloc,
writes about the political characteristics of the upcoming parliamentary elections.
5. Interfax: $150 BLN LEFT RUSSIA OVER PAST 7 YEARS, ENVOY SAYS.
6. Jamestown Foundation Monitor: CEC SAYS DORENKO AGITATED AGAINST
7. Mark Jones: Re: 3600-Foreign Direct Investment Up 60%
8. Albert Weeks: Response to Mr. Ivanov (re missile defense).
9. Yale Richmond: Democratization in Russia.
10. Baltimore Sun: Will Englund, Warring Russia keeps close eye on its
small neighbor Georgia. Leader of pro-West nation wants to break free of grasp,
11. Rossiyskaya Gazeta: Edward Lozansky, Soviet-era Debt: Time to Write it
Off and Give Russia a Fresh Start.
12. Wall Street Journal Europe: Mark Almond, 'Our' Boys In Armenia Are
November 3, 1999
EDITORIAL: On Winning Battles And Losing Wars
When Kommersant newspaper this Tuesday reported how Russian forces had bombed
a convoy of Red Cross trucks, it included a box called "Mistakes of NATO
Aviation." There are two things interesting about this box. One is the
frequent reference to NATO's Yugoslav campaign to rebut critics of the war in
Chechnya; two is the box itself.
The Yugoslav campaign was "a victory," and so, it seems, holds no lessons for
us today, with the exception that it proved "the might of air power." But
read some of the box: "May 1, 1999: While bombing a bridge near Pristina,
NATO bombs struck a passenger bus, killing 47 and wounding 16. ţ May 3, 1999:
NATO rockets hit a bus of refugees near the city of Pec, killing 20 and
wounding 43. ţ May 7, 1999: In the course of a rocket attack on Belgrade,
several cruise missiles struck the Chinese Embassy, killing 3 and wounding
Not so long ago, the West, and the United States in particular, wielded
enormous moral authority in Russia. Many Russians remember the days when the
Voice of America and BBC provided the only truthful news, and when the West
stood up for dissident voices many secretly valued.
Over the years since, the West has signed off on the burning of the Russian
parliament and the first Chechen war; it has praised corruption as "economic
reform;" working with a corrupt regime, it has saddled the nation with
enormous debts; it has pushed NATO to Russia's doorstep; it has waged a war
in Yugoslavia that, whatever the ends, was illegal and immoral in its means;
and it has trashed cornerstones of world security like the Anti-Ballistic
Missile and Nuclear Test Ban treaties.
Amazingly, even today, the United States and Europe retain a smidgen of moral
authority f enough so that Russians who want to bomb Chechnya can cite NATO's
behavior as a moral standard.
That doesn't mean Russia is listening when the West insists there is no
military solution in Chechnya, only a political one. But ironically, the West
didn't listen to Russia either when it said the same about Yugoslavia.
Now Kosovo is de facto partitioned, Albanians won't let Russian KFOR forces
take up their positions, Slobodan Milosevic is as mighty as ever and the
Kosovo Liberation Army has yet to disarm; while Russia is weeding out
terrorism in Chechnya by herding refugees under carpet bombing. And wherever
one looks, there is the illusion of victory. President Bill Clinton and Prime
Minister Vladimir Putin play the role of the world's grave statesmen, and
their governments sacrifice civilians to the greater good. But the horrors
are not exorcised, only deferred to future administrations.
Russia Said Hiding Chechnya Losses
2 November 1999
By ANGELA CHARLTON
MOSCOW (AP) - Hundreds more Russian troops have been killed in Chechnya than
the government admits, the respected Soldiers' Mothers Committee charged
Tuesday after visiting hospitals and morgues near the war zone.
A group of mothers who toured areas near Chechnya said young, untrained
soldiers were being sent into battle and wounded servicemen are suffering in
overcrowded, disease-ridden hospitals.
The group estimates 600 soldiers have been killed, compared with the figure
of 133 given Tuesday by Gen. Anatoly Kvashnin, chief of the military general
The mothers' group said officers in units operating in Chechnya told them
that 305 Russian troops killed in combat as of Sunday had been identified.
That doesn't include servicemen who were wounded in battle and died later or
whose bodies were too badly damaged to be identified, Valentina Melnikova, a
leader of the committee, told a news conference. She said the death toll is
closer to 600.
The Russian military has been reluctant to release casualty figures since the
campaign began against the breakaway republic in September.
In Chechnya, Russian jets and artillery continued bombing the capital of
Grozny and other towns Tuesday in an effort to wipe out Islamic militants
that twice invaded the neighboring republic of Dagestan. Moscow also blames
the rebels for several apartment building explosions in Russia.
With thousands of refugees trapped on the Chechen border, Russian federal
troops and local police scuffled at a key crossing when police demanded that
refugees be allowed to leave, eyewitnesses said. The Russian troops refused
to open the crossing.
While Russians have been generally supportive of the war effort, the
Soldiers' Mothers Committee is a powerful moral force that led public
opposition to the disastrous 1994-96 war in Chechnya.
The group consists of thousands of women whose sons serve or served in the
military. Two years' service is required of young men in Russia, although
many university students and others get exemptions.
The Russian military newspaper, Krasnaya Zvezda, has said that 2,941 soldiers
were killed in the 1994-96 war, although that figure does not include
Interior Ministry troops, who also fought in Chechnya. The overall death toll
from that conflict is estimated at between 30,000 and 100,000, the vast
A group of mothers last week toured the military hospital in Mozdok, about 60
miles from the Chechen border. They described overcrowded wards and
widespread dysentery, tuberculosis and other diseases. In Rostov, they saw
military morgues, but said they were denied access to some areas and were not
told where other bodies were taken.
Galina Lebedeva tracked down a unit of 15 servicemen from her home region of
Nizhny Novgorod. In one mission, she said, three were killed when rebels
fired on their vehicles and six were wounded. Just six returned unharmed.
Spokesmen for the Russian Defense Ministry, Interior Ministry and the
government information center on Chechnya dismissed the Soldiers' Mothers'
casualty figures - but none would give alternative totals.
In the last Chechnya war, the mothers challenged the military for sending
inexperienced conscripts into combat. This time, the government promised that
soldiers wouldn't have to fight unless they had more than a year's experience
and volunteered for combat.
But the mothers said Tuesday that the military is not complying, citing
conversations with wounded conscripts drafted earlier this year.
The mothers aren't the only ones who say the military is hiding the extent of
``Russian casualties have been strongly played down,'' Ruslan Aushev,
president of Ingushetia, a republic neighboring Chechnya, said Tuesday.
``Rebels are well-entrenched, and they are looking forward to engaging
Russians in close combat.''
CHECHNYA WILL NOT TORPEDO RUSSIAN-U.S. RELATIONS-Putin
OSLO. Nov 2 (Interfax) - The federal center's activities in the
North Caucasus will not cause the deterioration of Russian-U.S.
relations, Russian Prime Minister Vladimir Putin said on Tuesday.
"This is Russia's internal affair," he said, responding to an
Interfax question following a meeting with U.S. President Bill Clinton
in Oslo, Norway.
"The United States, like other countries, is concerned about the
humanitarian aspects of the problem. We are prepared to cooperate, to
receive personnel from international organizations," Putin said.
"There is awareness of the problem and the preparedness to tackle
it," he said.
His meeting with Clinton covered the Middle East, the struggle
against terrorism, the North Caucasus situation, the OSCE summit to be
held in Istanbul, the Conventional Forces in Europe treaty (CFE) and
bilateral cooperation in the law-enforcement and economic fields, Putin
Asked by Interfax whether the meeting covered deadlines for
restoring flank restrictions in line with the CFE, the prime minister
said that Russia intends to bring its forces back into line with the CFE
as soon as possible. The treaty does not provide for restrictions on
excess of limits imposed on defense hardware in the south of the
country, Putin said.
Certain differences over the Charter of European Security remain
unresolved, but "we are working together to iron out the document," he
Asked about Interior Minister Vladimir Rushailo's recent trip to
the United States, Putin said that both the U.S. and Russian leaders
believe that the visit had been useful. It will promote contacts in the
field of law-enforcement, and certain plans were made, he said.
"If the issues on the agenda are resolved, you will know," Putin
The prime minister is expected to return to Moscow late Tuesday
Russia Today press summaries
2 November 1999
National Election Peculiarities
Vyacheslav Nikonov, a political adviser for Yevgeny Primakov's Fatherland-All
Russia bloc, writes about the political characteristics of the upcoming
Duma elections are very important for Russia’s year 2000 political situation
because, according to law, the Parliament cannot be dissolved in the first
half a year after it is elected. Thus, the next Duma will be able to make a
vote of no confidence in the government or refuse to confirm the prime
minister without taking a significant risk.
Thus, the election campaign is very tense and even cruel. And Russian
oligarchs contribute much to this tension because they have finally realized
that they will have to live in this country. Previously they believed that if
something did not work out in Russia, they would use their personal planes
and go to their villas in Switzerland. But then new realities emerged: it
appeared that visas can be denied, bank accounts can be frozen and even
criminal lawsuits may be initiated abroad against them. Thus, the oligarchs
will have to stay in Russia and fight till the last bullet.
The present-day campaign is dirty beyond precedent. And it is not the
political parties engaged in battle but the media they control. The state
media and regional administrations are strongly involved in this dirty war of
compromising materials, which is, of course, illegal. The participation of
governors in this parliamentary campaign is also unprecedented.
There are many fewer political parties in this election than there were in
1995. This means that more of them will pass the five per cent barrier for
faction establishment at the Duma. There are only five such factions at the
incumbent Duma, but the next Duma will have many more.
$150 BLN LEFT RUSSIA OVER PAST 7 YEARS, ENVOY SAYS
THE HAGUE. Nov 2 (Interfax) - About $150 billion in capital
has been taken out of Russia by official, semi-legal and criminal
means since 1992, or about $22 billion a year, Russia's envoy to
the G7 group of rich nations said at the 12th annual Global Panel
Foundation conference in the The Hague.
Estimates of the amount of capital spirited out of Russia
every year range from $7 billion to $70 billion, Alexander
Livshits said. He said he based his report on estimates done
jointly by the World Bank, the International Monetary Fund, the
Central Bank of Russia and the Russian Finance Ministry.
Livshits said "gray" capital flight [meaning capital flight
to evade taxes] amounted to about $25 billion last year.
But he said that some of the money taken out of the country
by "gray" means has already returned to Russia in the form of
foreign credits, capital used in privatization tenders and funds
invested in the domestic debt market. According to Central Bank
estimates cited by Livshits, up to 25%, or $35 billion, of all the
"gray" money taken out of Russia has already returned to the
country. So there is currently about $115 billion in Russian money
abroad that was taken out of the country by legal or shady means,
Livshits said that in the first half of this year there has
been a dramatic decrease in capital flight, with "gray" exports of
capital down by half year-on-year to no more than $7.5 billion.
But he said that Russia could not fight the problem alone.
"International efforts and the development of cooperation within
the G8 [the G7 plus Russia] are necessary," he said.
The key principles of joint efforts are set out in the
communique issued by the recent G8 conference in Moscow on
fighting cross-border organized crime, Livshits said. These
principles imply that banking agencies should cooperate "with the
aim of regularly exchanging data on suspicious firms, payments,
depositors," and include cooperation between the finance
ministries and central banks of G8 countries in tackling the
problem of offshore zones, he said.
Russia's main task, Livshits said, is to "improve the
investment climate, pass a law on capital flight, as well as a law
to fight the legalization of illegally gained income."
Jamestown Foundation Monitor
2 November 1999
CEC SAYS DORENKO AGITATED AGAINST PRIMAKOV. Russia's Press Ministry
yesterday received a complaint from the country's Central Election
Commission (CEC) against Sergei Dorenko, anchor of the Sunday evening news
analysis program on Russian Public Television (ORT). The CEC charged that
Dorenko had violated Russia's electoral laws by "agitating against" former
Prime Minister Yevgeny Primakov. The CED was referring to Dorenko's October
24 show, when he aired comments made by William Odom, former head of the
U.S. National Security Agency, in which Odom appeared to accuse former
Prime Minister Yevgeny Primakov of plotting to kill Georgian President
Eduard Shevardnadze (see the Monitor, October 25, 29). Odom made his
comments during an interview with Radio Liberty (ORT, October 24; Moscow
Times, November 2). CEC Chairman Alexander Veshnyakov defended his decision
during a live appearance on Dorenko's program this past Sunday (ORT,
Russia's Press Ministry, headed by Mikhail Lesin, is to rule on the CEC
complaint by the end of this week. Given that the CEC's complaint would
seem to imply that journalists are forbidden from criticizing any candidate
to higher office during an election campaign, the CEC complaint has been
strongly criticized by journalists, editors and press freedom advocacy
groups. Russia's press ministry, however, looks set to rule against the
CEC. Lesin was quoted today as saying that his ministry has not found any
"concrete" evidence that ORT violated the existing election laws, and that
interpreting any criticism of a candidate as "election agitation" would
"paralyze" all of Russia's mass media. The newspaper that quoted Lesin
noted that the CEC is also preparing to lodge complaints against TV-Center,
the channel controlled by the Moscow city government and thus loyal to
Moscow Mayor Yuri Luzhkov, also for violating laws by engaging in
"agitation." The press ministry is likely to decide against a strict
interpretation of these election laws (Kommersant, November 2).
From: "M A Jones" <firstname.lastname@example.org>
Subject: Re: 3600-Foreign Direct Investment Up 60%
Date: Tue, 2 Nov 1999
Wow, this is a defining moment, no?
According to Moscow Times' Catherine Belton, foreign direct investment in
the Russian economy just jumped 60 percent.
In Soviet times, people had wages and pensions paid on time, housing, jobs,
universal education and health care, personal security and the dignity of
being citizens of a real country; their forebears in the 1920s and
1930s had attained literacy and even, in the case of some nomadic
peoples like the Kirgiz, an alphabet (benefits not bestowed on
American First Nations, who tended to be given smallpox-
infested blankets or just shot out of hand). And the Soviet peoples
also enjoyed enough democracy to be able to exercise the right to
vote to dissociate their republics from the USSR, something most of
them now regret doing.
What they got in exchange was 'freedom to travel', as a result
of which Russian women are sold as sex-slaves in London
and Washington, and Russian criminals find western sponsors to
help loot the place and take the proceeds elsewhere.
Yesterday a friend wrote me from Buenos Aires about a
pitiable situation concerning:
'a group of Russians and Ukrainians, sailors in a
merchant ship of the f-SU who have been stranded here in Buenos
Aires for years now. They are literally living in the
streets, the Russian embassy gave them no help, the local
Orthodox Church didn't either. They are living on gathering
and selecting refuse (these "cirujas" are a new outcome of
neoliberalism, there is a tango "El ciruja", from early in
this century, but one would hardly imagine this local
Buenos Aires adjective ever predicated of a former Soviet
citizen!). Now, they have managed to assemble some old
plastic bags and some cartons, and have made a "tent" just
across the street. I can see them all the time from my
living-room window. I have been trying to get in touch with
them (they are elusive, the tent is usually alone though
nobody touches it, the solidarity of the poor people is so
moving!), and I finally succeeded this week.
I have offered them some help. They do not want to have
anything to do with politics, but some among them long for
the lost homeland. There is one, in particular, who came
from Vladivostok (truly the antipode of Buenos Aires, or
Naturally, I have no idea what to suggest to my correspondent
in Buenos Aires, who asked my advice. I am not a USAIDer, am I?
I don't have glib solutions. But I think they probably should
re-read Lenin and get back to basics.
No doubt their children back home are also now enjoying the
'freedom' of all Russian orphans to do drugs, get AIDs, live rough
and not get educated.
And their grandparents have the freedom to starve, or beg for
second-hand US footwear, clothes, even second-hand catheters
(as JRL recently reported), from those bushy-tailed USAIDers
and their wretched NGO-clones.
According to Belton these unfortunate Russians should
ignore the brutal, bloody lawlessness of the quislings
set over them by the US and they should even welcome
back those 'well-intentioned' looters who have decided
it's profitable to return as bona fide 'investors', as Belton reports:
second fiscal quarter compared to the same period last year and offshore tax
haven Cyprus ranked as the nation's fourth largest investor<<
So now in place of social security, they'll get foreign investment in
such essentials as: German yogurt ; Dutch babyfood; Danish candy;
Wrigley's chewing gum; a $330 million Philip Morris cigarette
plant; more beer factories; and a new Pampers plant.
God Bless America and all it stands for, hey?
PS The BBC just reported that Cuba has invented a cure for cancer. They must
be well overdue for some democracy themselves, in that case, with reopened
Bacardi plants, brothels and Havana gambling dens, and, that most important
test of the 'success' of transitional states, a doubling of car ownership.
Date: Tue, 02 Nov 1999
From: Albert Weeks <AWeeks1@compuserve.com>
Subject: Response to Mr. Ivanov
Foreign Minister Ivanov predicts that the U.S.,
once it has anti-missile defense, will, from its
newly-won "invincibility," seek to "dictate" to Russia
and China. This is simply recycled, anti-American
nonsense. When the U.S. had a monopoly on nuclear
weapons, before 1949 vis-a-vis Russia and
in China's case, before 1964, did it try to "dictate" to
those powers from its position of "invincibility"?
When, in fact, did the U.S. ever act like a "hegemonist"?
Say, in agreements made at Yalta, Helsinki, or Camp
Ivanov's predecessor, Andrei Kozyrev, is right: The
sooner Russia discards old Molotov-like Soviet lines,
themes and policies, the better. Such positions are
counterproductive in today's world. Moreover, they only
whet the ambitions of assorted potential aggressors and
troublemakers worldwide who seek to exploit divisions
between the major powers of the type Mr. Ivanov, et al.,
handily create for them
Date: Tue, 02 Nov 1999
From: Yale Richmond <email@example.com>
Subject: Democratization in Russia
As the first person to comment on Jerry Hough's controversial visa
posting to JRL, let me be one of the last.
Hough says he can think of many ways to democratize Russia but they
must be cost effective and reach large numbers of people. Fair enough.
But I wish he would send some of his ideas for democratization to JRL
and share them with us and with those who fund democratization programs
in Russia. He might have some ideas that have not yet been considered.
This reminds me of the old PPBS program--Program Planning and Budgetary
System, I believe it was called--dreamed up by MacNamara and his whizz
kids at the Defense Department in the late 1960s. I was in our Moscow
embassy at the time and we were asked to figure out how much each of our
programs cost in dollars and cents per targeted person in the USSR. So
we had to figure out what it cost to distribute our America Illustrated
magazine per reader, the cost per listener of the Voice of America, the
cost per visitor to one our big USIA exhibitions in the Soviet Union,
etc. Then, planners in Washington were supposed to determine where to
get the "biggest bang for the buck." Our small USIA staff in Moscow put
in about one month's work to do all those figures but it didn't cause
any big bangs in Washington, and PPBS soon fizzled out.
The problem with such exercises, as Hough must realize, is that change
in Russia has always come from above, and it is much more cost effective
to target the intelligentsia and other leaders rather than the broad
masses. For that reason I was always a strong supporter of people
exchanges--the International Visitor Program, IREX, and Fulbright,
rather than programs which targeted mass audiences.
Even in a country as large as Russia, with a population of 147 million,
it is possible to be influential by targeting those who make decisions
or shape public opinion. And that's why student exchanges--senior
scholars and graduate students not high schoolers--are so important, and
should be given the benefit of the doubt and issued visas if they
satisfy all the other requirements under the law.
2 November 1999
[for personal use only]
Warring Russia keeps close eye on its small neighbor Georgia
Leader of pro-West nation wants to break free of grasp, join NATO
By Will Englund
Sun Foreign Staff
MOSCOW -- At war in Chechnya, Russia has spent the last month ratcheting up
the pressure on Georgia, just across the border, with not very subtle hints
that the time has come for the little mountain nation to curb its independent
streak and fall into line.
Georgia better be sure not to provide a haven to militants, Moscow warned, or
to let arms pass through to Chechnya. And Georgia's voters were told they
ought to think twice about their flirtation with the West -- the election of
a new parliament was portrayed in the Russian press as nothing less than a
choice between NATO and Moscow.
A Russian general said a victory by the foes of President Eduard A.
Shevardnadze would be good for Russia and ensure a Russian military presence
in Georgia for the next 25 to 30 years.
So it was with some pleasure that Shevardnadze, the "white fox" of Tbilisi,
went on the air yesterday to announce that results from Sunday's balloting
showed his Citizens Union of Georgia winning an overwhelming victory and a
solid majority in the new parliament. And, as if to take up Moscow on its
dare, he said he hopes to usher Georgia into the Western military alliance
before his second term would end in 2005.
Shevardnadze, the former foreign minister of the Soviet Union, hasn't been
elected to a second term yet -- the vote is scheduled for April -- but he
expects to be around when "we will knock on NATO's doors."
Declaring a Western orientation and maneuvering free of Russia's grasp,
however, are two very different things.
Georgia has been trying to squirm out from under Russia's thumb since the
Soviet Union fell apart eight years ago. It has looked east, to the hoped-for
oil riches of the Caspian, and west, where the oil markets are, in its
efforts to break free of its huge neighbor to the north. Essentially, Georgia
wants to sell itself as one big pipeline between the Caspian and Europe -- an
idea that the Russians don't care for at all.
Defiant, proud, maybe reckless, Georgia's voters overlooked the country's
stalled economy, iffy electric supply, and stubborn corruption to keep
Shevardnadze's allies in power.
"I congratulate everybody with the victory of Georgian democracy -- without
exaggeration, it is a national victory," the president said.
"It's not democracy in full swing," Alexander Rondeli, director of research
and analysis for the foreign ministry, said in a telephone interview from
Tbilisi yesterday, "but it's at work."
The Citizens Union's chief opposition was a group called Revival, under the
leadership of Aslan Abashidze, the strongman of the southwestern region of
Ajaria. Abashidze, known to some of his subjects as Pasha Aslan, brooks no
dissent in his fiefdom and it therefore enjoys an enviable stability, not to
mention a steady electric supply. As much as 70 percent of Georgia's foreign
trade moves through the Ajarian port of Batumi, on the Black Sea, and it has
been regularly reported that Abashidze sends none of the customs duties back
A sizable Russian military base is located in Batumi to guard the borders of
the moribund Commonwealth of Independent States against an incursion by
Turkey. Abashidze has called the Russian troops "a guarantee of stability and
peace," and when Moscow fell behind in paying soldiers' salaries Ajaria made
up the difference.
David Dzhincharadze, an aide to Abashidze, said yesterday that it was
"ridiculous" to accuse Revival of being pro-Russian, "because it's clear that
there is no longer such a thing as a Russian empire."
Abashidze has declared that he will be a candidate for president in April, so
in many ways Sunday's vote was seen as a warm-up to the presidential election.
Yuri Lysenko, who teaches at the diplomatic academy of the Russian Foreign
Ministry, warned yesterday that Shevardnadze's ambition to remove the Russian
military presence from Georgia would spell more trouble. Russian peacekeepers
were sent in four years ago to supervise a cease-fire with the secessionist
region of Abkhazia, and if they are sent home the war will be sure to break
out again, Lysenko said.
And if the border guards should leave, he argued, it would clear the way for
Chechen fighters to open a corridor to the Black Sea.
It is over Chechnya that relations between Russia and Georgia have recently
started to turn spectacularly sour. Russian newspapers, apparently with
sources inside the military, have reported that Chechen fighters are
operating bases in northern Georgia while Tbilisi looks the other way.
"It's a complete lie, an absolute lie," Rondeli said, but there would seem to
be a threat that the Russian military could move forces into Georgia as a
result of such allegations.
The Georgian government says it refuses access to Chechen fighters -- who,
after all, fought on the side of the Abkhazians against Tbilisi. But
overcoming what Rondeli called Moscow's "paranoidal vision of everyone
around" could prove a formidable task.
The mood in Tbilisi is uneasy. The assassination last week of the prime
minister of neighboring Armenia and seven other politicians made a strong
impression on Georgia, which has its own inclination toward conspiracy
theories. Armenia is closely allied with Russia and Iran. The Georgians feel
squeezed between them.
For hope, they look to the "international community," which means the West.
But doubts are being raised about the extent of the untapped Caspian oil
fields. Without oil, Western interest in what is, after all, Russia's back
yard may evaporate.
Georgians, though, aren't the sort of people to be cowed by threats, and for
now Russian bullying has had the result of keeping the country firmly in
Date: Tue, 02 Nov 1999
From: Lozansky@aol.com (Edward Lozansky)
Subject: Soviet-era Debt: Time to Write it Off and Give Russia a Fresh Start
Soviet-era Debt: Time to Write it Off and Give Russia a Fresh Start
Rossiyskaya Gazeta, Saturday, October 30
By Edward Lozansky (Lozansky@aol.com)
Russia's huge debt makes it practically impossible for the country to get out
of its severe economic crisis which was inflicted on the Russian people by
their incompetent and corrupt government working in tandem with their Western
advisors. The debt adds up to $160 billion -- eight times the annual budget
of the country. Russia cannot even afford the interest payments on it. Like
the huge debt imposed on Weimar Germany, it hangs over the country like a
thick fog that never lifts. It makes it impossible for the society to develop
a hopeful perspective and, until a proper solution is found, Russia has no
chance of becoming a prosperous democracy.
Two-thirds of Russia's debt -- $106 billion to be precise -- is inherited
from the Soviet era. When the USSR collapsed, Russia, in a noble but unwise
gesture, agreed to assume the Soviet debt. The new Russia deserved a chance
to grow up without this albatross around its neck, but it never , got it.
Poland's debt, at least, was cut in half, but Russia got no relief. The Bush
and, especially, Clinton administrations showed total incompetence in
handling a unique historic opportunity to transform Russia into friendly pro
- western democracy. Fortunately, new people are expected soon both in the
White House and the Kremlin, and here are the options from which they can
The first, is the present way: the West keeps lending money to Russia, and it
goes immediately to pay the interest on the debt. This keeps up the
appearance of a loan, which will someday be repaid. It staves off the moment
of painful realism for Western creditors, when they will have to write off
the debt and register the loss on their books. Meanwhile it keeps Russia in a
The second way is to continue to push Russia to repay the money, and,
meanwhile, cut back the loans to it and force it into bankruptcy. Then we
might try to seize its property abroad -- gaining the repayment of, at most,
a small fraction of the debt. The cost of this approach would be prohibitive.
It would confirm the worst fears and suspicions that Russians hold of the
West. The anti-Western assumption would be burnt deeply into their
convictions. In this climate of opinion, anti-Americanism would not only be
inflamed; it would endure long enough to do us severe damage. The ultimate
ramifications would be dangerous and -- to use the diplomatic term for
something that is just too risky -- "unpredictable". Anyone who knows the
forces at work in Russian politics nowadays could easily envisage, in the
face of a bankrupting Russia, a violent nationalist group or coalition coming
to power, similar to the Nazis who came to power on the heels of the
financial crises of the Weimar Republic.
There is a third way. I admit that it is unconventional and requires a
measure of courage, but it certainly makes more sense than the other two. It
is to write off the Soviet-era debt completely, but conditionally. Russia
would have to meet certain requirements.
Before we go over the conditions, let us stress that in no sense should this
be treated as a humanitarian or altruistic measure. Writing off the
Soviet-era debt is first of all a good business and political deal for the
Financially, the deal is sound because the Soviet-era debt, if it were all
placed on the market, probably would sell for less than 20 per cent of its
face value. At the same time, we need to take into account the fact that many
countries owe Russia money -- tens of billions of dollars. Some of them also
should have their debts written off. A carefully conceived program for
multinational debt credits and relief would strengthen the stability of the
entire world economy and enhance its growth.
To calculate the balance properly, let us think for a moment about the
contributions that Russia has made to our economy. Several hundred billions
of dollars -- at least $200 billion, possibly as much as $500 billion -- have
fled Russia during the last decade. This money is sitting in US and other
Western banks and financing our growth. The capital flight has been going on
for years, but most Americans only became aware of it during the recent
scandals; and while they were told that it was inadmissible for Russians to
be sending their money abroad while we were giving them money for aid, there
is one thing that no one preferred to talk about: that Russia's capital loss
has been our gain because this money went into Western banks, which invest in
Western industries not in Russia.
One small example. "New Russians" who are buying luxurious real estate
properties in the West, ranging from southern France to Beverly Hills, CA and
Potomac, MD pay very little if any taxes in Russia, but they pay lots and
lots of dollars in real estate taxes here.
Then there is the value of the brain drain. Among Russians who have
immigrated to America, a disproportionate number are qualified specialists.
Demographers and economists are able to estimate the value of a specialist
immigrant; it turns out to be equivalent to the investment of about a million
dollars into the economy of the country of destination. During the 20th
century, more than a million such specialists have emigrated from Russia to
the United States, which means that Russia has in effect invested a trillion
dollars in the American economy. If we take into account the offspring of the
émigrés, who also tend to be well educated and highly skilled, the trillion
dollars get multiplied several times. And I am talking not necessarily about
Baryshnikovs or Rostropoviches. Try to find a medical institution or a
university campus, a firm on Wall Street or in Holywood, a high tech or space
industry, where there is not a Russian émigré, or a descendant of one on a
managerial level. It will not be an easy search! These people are America's
gain and Russia's loss.
Then there is the peace-with-victory dividend. Ronald Reagan, Gorbachev, and
Yeltsin delivered to the West a victory over Communism without firing a
single shot. They have already saved the West more than a trillion dollars by
eliminating the Soviet threat, and the amount goes up every year. Back in
1995, I was working with Senator Jon Kyl to bring a group of Russian
parliamentarians to America for meetings with our Members of Congress. We had
a very open exchange of ideas, and everyone agreed with Congressman Tom
Lantos when he said that, if in 1988 or 89 Gorbachev were to have come to the
Congress and offered to dissolve the Warsaw Pact and the Soviet Union, ban
the Communist Party and start building a free, democratic and pro-western
Russia, and had said that he would need a trillion dollars to achieve this
goal, Congress would have voted overwhelmingly in favor of it. And during the
debate on it, some congressmen would have stated that Gorbachev was a poor
businessman because he could have gotten more for the deal.
Well, as we know, Gorbachev was indeed a poor businessman. He delivered the
whole package for nothing. One might say it was a bargain for us, since we
saved the trillion dollars. But being cheap always has a cost. By not making
a full-scale effort to transform Russia into a free and prosperous country,
we can see now that we have been running the risk of ending up in a new cold
war spiral or worse, which would be far costlier than the saved money.
The wise thing to do is to let the Russian people share equally in the
benefits of the peace dividend. The defeated party in the cold war was not
them but the Communist ideology and Soviet way of life. Many Russians fought
against Communism during the long hard decades when it required real courage
to oppose the totalitarian system. When the people as a whole got enough
freedom to make their own choice, they rejected Communism. And, they have
kept rejecting it ever since, despite tremendous hardships and
disillusionment with the course of the reforms.
So why is it a good business deal for America and the West to write off the
Soviet debt? Because the cost is only the moral effort it takes to admit that
the debt is bad and to register the loss on the books. Because it means
ending the agony -- the hellish condition in which Russia's future looks
hopeless, and the West looks like just a big international bank that sucks
the Russian people into debt slavery and will never let them free. Because it
is obvious that the world will be a much safer place if Russia is a friend
not an enemy.
Parliamentary and presidential elections are coming up in Russia in the
course of the next eight months. If a serious plan for writing off the
Soviet-era debt were announced in advance of the elections, this would give a
big boost to the pro-Western forces. And after the election, with the debt
overhang removed and the moderates surviving in power, Russia would have
another chance to correct the failings in its reforms and set the country on
a course of growth.
A free and prosperous Russia would be a reliable source for the West of oil,
gas and other vital minerals and raw materials, as well as a major market for
Western goods. It would be a bulwark of global economic stability and growth,
rather than a threat to it. It would not need more loans from our government;
it would be a producer of IMF loan funds rather than a consumer of them.
Now, what conditions shall we ask of Russia in return? We could, of course,
come up with a laundry list of everything our heart desires. But we will get
a more workable deal if we limit our appetite to the things that are really
needed to make this a good bargain.
What we need from Russia, more than anything else, is a cooperative spirit in
foreign policy. This doesn't mean that Russia has to agree with us on
everything, or for that matter, that we have to agree with Russia on
everything. But Russia has to stop going out of its way to oppose us. It has
to stop flirting with rogue states and with anyone we happen to be fighting
against. You can't ask for loans and debt forgiveness, and meanwhile look for
allies to balance against America. Or provide nuclear technologies to our
potential enemies, and threaten to start a new arms race if America tries to
defend itself from the missiles developed by those enemies.
All this goes for America in its treatment of Russia as well. We should be
less prone to say that everything Russia does is a mistake or a crime or a
Foreign policy cooperation is a matter that we need for the long term, not
just temporarily. It can be started immediately, but no one could at first be
sure how long it would last. So there would have to be a plan for writing off
the debt in stages, as long as cooperation continued. The final write-off
would come when the two countries felt themselves bonded for the long term as
Meanwhile the plan itself would need to be presented up front and agreed upon
at the outset, along with the first stage of the debt write-off. The later
stages of the write-off would be stipulated as a commitment on the part of
the West, to be fulfilled as long as Russia continued to meet the basic
>From the very start it would be important to take a couple of major steps on
cooperation, of the sort which would tend to lock in the cooperative
approach. The first step is fairly obvious: for Russia to stop objecting the
SDI effort and, instead, commit its vast pool of technical experts to help
develop it as a joint US - Russian initiative.
Such joint U.S.-Russian efforts would achieve better results in a shorter
period of time. It would save U.S. taxpayers far more than any repayments
that banks may still hope to get from the Soviet-era debt. Presently, America
needs at least 300,000 computer experts. Russia can, to a considerable
extent, fill this gap. Its youth have learned about computers in the same
Wild West spirit that makes their lives insecure in other respects. Russian
hackers and software writers are as good as American. We need them hacking on
our side, not against us. And they need to see from the inside that SDI is
not directed against their country. Otherwise, all Russians would see is the
SDI forces going into operation and subtracting from their own retaliatory
power. Seeing is believing.
President Reagan held forth in the 1980s the promise of sharing with Russia
the technology and results of SDI. He was ridiculed for that idea, just as he
was ridiculed for so many of this other "eccentric" ideas -- about the need
to promote democracy even in the Soviet world, the evil of nuclear weapons,
the vulnerability of Communism, and the virtues of Gorbachev. Each time, he
went against all the ingrained assumptions, bureaucratic and academic; and
each time, his instincts proved right and we ought to recognize the wisdom of
his instincts on SDI, too. He saw the potential of SDI for integrating
Russian and American strategic objectives into a common perspective, one of
mutual defense rather than mutual destruction. Ronald Reagan foresaw the
technological and economic opportunity in this and this idea lies within his
Let us admit to one another, Russians and Americans, that we both have made
big mistakes since 1991. Let us agree to try again with new faces in the
White House and the Kremlin. Let us plant this idea in the minds of the U.S.
and Russian presidential and parliamentary candidates that writing off the
Soviet-era debt, if Russia agrees to work with us on SDI research and
deployment, is good for all of us.
Let us make a fresh start, enabling Americans and Russians to look forward to
a future of peace, prosperity and cooperation.
Wall Street Journal Europe
November 1, 1999
[for personal use only]
'Our' Boys In Armenia Are Dead
By Mark Almond, distinguished visiting fellow at the Hoover Institution
(Stanford, California) and lecturer in modern
history at Oriel College, Oxford.
Since the great crash of the Russian ruble in 1998, many have complained
that Washington and its allies have put all their
post-Soviet eggs in Boris Yeltsin's basket. Western leaders have recently
paid lip service to depersonalizing their
approach to the region. But throughout the whole former Soviet Union, and
not least in the trans-Caucasus, Western
policy has remained fixated on making deals with a handful of politicians
regardless of their political legitimacy at home.
The inherent contradiction between Western rhetoric about promoting
democracy and the rule of law, and the West's
backing for compliant supporters of Western interests, is now coming into
the open after last week's televised massacre
in the Armenian Parliament.
Although it is clear that Russia's interests in blocking U.S. domination of
its old stomping ground in the Caucasus stand to
gain from the murders in Yerevan, Russia's secret services may not have had
a hand in the mayhem on Wednesday. A lot
of people stood to benefit from the murders of the dominant parliamentary
leaders in Armenia. And, tragically, the
explanation offered by the assassins for their deed rang true for many
Last time I was in Yerevan, in May, locals accused the murdered men of all
sorts of corruption. It was striking that even
inside his own campaign headquarters the slain prime minister Vazgen
Sarkisian was accompanied by five bodyguards.
However shocked most Armenians will have been by the violence, the absence
of an outpouring of public grief since
Wednesday is palpable. Even if they disapprove of murder, so many Armenians
have lived in worsening poverty
throughout the years of independence that their sympathy for Sarkisian is
Despite the resumption of the savage war between the Russians and the
Chechens, Western policy makers seemed to think
that the three small states to the south of the Caucasus could avoid the
backwash of instability. Indeed, Washington
sometimes gave the impression that if the Russians had their hands full in
Chechnya, then Western goals of stabilizing the
south Caucasian states could be more easily achieved. By knocking the heads
of Armenia, Azerbaijan and Georgia
together, Western policy makers hoped to resolve local disputes and thereby
to facilitate the great project of linking the
fabled oil wealth of the Caspian basin with Western consumers via a pipeline
bringing benefits to all three states in the
It was for that purpose that key U.S. Administration officials like
Deputy-Secretary of State Strobe Talbott and regional
expert Stephen Sestanovich were in Yerevan on the day of the massacre. The
State Department has been putting a lot of
effort into tailoring a deal between Armenia and Azerbaijan over the
disputed region of Nagorno-Karabakh.
For the West, with its focus on the pipeline issue, Sarkisian had become an
unlikely ally and his domestic sins were
overlooked. Back in February 1998, as Armenian defense minister, Sarkisian
had been a key figure in the palace coup
that forced Armenia's president since independence, Levon Ter-Petrossian, to
resign. Mr. Ter-Petrossian was considered
too willing to compromise with Azerbaijan over Nagorno-Karabakh. At that
time, U.S. officials and Western oil interests
were deeply alarmed that the new power constellation in Yerevan would block
any deal with Azerbaijan. The fact that
the former leader of the Armenians in Nagorno-Karabakh, Robert Kocharian,
was the likely successor to Mr.
Ter-Petrossian, only added to Washington's alarm about the political
upheaval in Armenia.
Short of plausible alternatives to a hardliner over Nagorno-Karabakh --
since they had put all their trust in the ability of
the authoritarian Mr. Ter-Petrossian to push through any deal with Baku --
Western diplomats in Armenia found
themselves talking up the candidacy of the former leader of the Communist
Party, Karen Demirchyan. He had, after all,
shared many years of comradely cooperation with ex-regional Communist bosses
like Haydar Aliev and Eduard
Then quite suddenly, Sarkisian shifted his ground and turned against Mr.
Kocharian, uniting his power-base with Mr.
Demirchyan's in this May's parliamentary election. It was a winning
combination, even if enthusiasm among ordinary
Armenians for an alliance of the old and new nomenklatura promoted cynicism
rather than enthusiasm. Despite his
nationalist past, Sarkisian's role in toppling Mr. Ter-Petrossian had made
him a more valuable interlocutor for the West.
For all the rhetoric about supporting democracy in the former Soviet Union
since 1991, the West in general, and the
United States in particular as the West's most powerful representative, have
tended to fall back on Cold War principles
in the power game in the Caucasus. Democracy is good, but having "our sons
of bitches" in charge is better.
Now the price of Armenian cooperation in the so-called "deal of the century"
for Azeri oil looks more expensive.
Suspiciously, key allies of President Kocharian were not in the chamber for
the shooting. And Russian military aid to
Armenia was already being stepped up before the killings with the delivery
of Mig 29 fighter planes. Russia's strategy for
restoration of control of the northern pipeline route from Azerbaijan
through Chechnya seems on track.
At the same time, U.S. supplies of helicopters and other military aid to
Georgia, which offers an alternative to the
long-planned pipeline from Baku to Turkey via Armenia, looks less likely to
bolster President Shevardnadze in his on-off
conflicts with two autonomous regions on the Black Sea coast, Abkhazia and
Adjaria. Russian success so far in Chechnya
even seems to be causing that cynical old weathervane in Baku, President
Aliev, to tack away from Western oil
companies and drop a few advisers too closely associated with a pro-American
An Irony of History
All the while genuine democratic forces in the region have been starved of
Western support as our focus has been on the
leaders willing to cut deals. Now, by an irony of history, the only
beneficiary of political upheaval in the region is likely
to be Russia. Perversely, its local allies enjoy more popular support than
the West's regional partners.
Eighty years ago British Foreign Secretary Arthur Balfour declined to get
involved and to support the anti-Bolshevik
forces in the internal struggle for power in the trans-Caucasus because "If
they want to cut their own throats why do we
not let them do it? We [should] protect, Batumi, Baku, the railway between
them and the pipeline."
In the end, of course, Balfour failed to protect either the West's
democratic principles or its oil interests. The West may
now be about to lose out in the same place for the same reasons at the dawn
of a new century.
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