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Johnson's Russia List


November 3, 1999    
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.
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.
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, join NATO.
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 Dead.]

Moscow Times
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 
27. ţ" 

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

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 
majority civilians. 

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 
its losses. 

``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.'' 



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 
parliamentary elections.

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.



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,
he said.
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

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,
October 31).

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" <>
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:

>>during the
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?

Mark Jones
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 <> 
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 <>
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.


Baltimore Sun
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."

Opposition group

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 
to Tbilisi.

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.

Uneasy mood

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 
Shevardnadze's camp.


Date: Tue, 02 Nov 1999 
From: (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 (

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 
hopeless situation.

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 
continuing legacy.o

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

Rampant Corruption 

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
very limited. 

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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