January 24, 2000    
This Date's Issues: 4061 4062 4063

Johnson's Russia List
#4063
24 January 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Russian media scrutinise Chechnya dead figures.
2. Bloomberg: Russia Struggles to Pay Debts as War Costs Grow.
3. Reuters: New poll shows Russia's Putin popularity rising.
4. AFP: Russia's war in Chechnya to dominate Putin's first CIS summit.
5. AP: Chechen Refugees Seek Normal Life.
6. Moscow Times: Igor Zakharov, '99 wrap up. (Best Russian books of 1999).
7. Boris Kagarlitsky: Interview with Anatoly Baranov, journalist and public relations director for the firm ``MiG''.
8. Andrew Miller: Dollars and Rubles and Sense; Cigarette Smoking in Russia.]

********

#1
Russian media scrutinise Chechnya dead figures
By Michael Steen

MOSCOW, Jan 24 (Reuters) - The number of Russian troops killed in breakaway
Chechnya is at least 10 times greater than official figures suggest, NTV
television said on Monday. 

Official statistics usually say two or three soldiers have been killed per
day, but figures are released sporadically and do not include all Russian
troops. 

NTV, in a report first broadcast on Sunday, said the numbers of corpses
passing through the Rostov military hospital in southern Russia frequently
reached 30 per day. 

The hospital is the central processing point for all Defence Ministry
servicemen killed in Chechnya, NTV said. This does not include the sizeable
proportion of Russia's 100,000 troops in Chechnya commanded by the Interior
Ministry. 

Official statistics put the total number of Russian war dead in the
four-month-old campaign against separatist rebels at more than 500. At
least one independent estimate stands at 3,000. 

NTV said it was not allowed inside the hospital but filmed a visitor who
said he had been in the morgue and had seen 30 corpses. A truck piled high
with planks of wood such as might be used to make coffins drove into the
hospital compound. 

CORPSES TRANSPORTED BY NIGHT TRAIN 

The television crew also secretly filmed inside a warehouse at the railway
station where workers said they had unloaded 15 corpses on Sunday and 30 on
Saturday. War dead are often transported on night trains. 

The latest issue of the weekly military newspaper Nezavisimoye Voyennoye
Obozreniye said the ``game of numbers'' being played with statistics of
injured and slain men was losing any relation to reality. 

``Official statistics did not change even when the fighting became
fiercer,'' the paper said. It said both Russian troops and Chechen rebels
were wildly exaggerating their opponents' losses. 

``If you count up the official numbers (of Chechen rebels) killed, around
10,000 of them have been wiped out. Their total numbers last autumn were
estimated to be around 40,000... So why can't federal forces get into
Grozny or the mountains?'' 

Moscow's forces are engaged in a fierce battle to seize the smouldering
bombed-out remains of the capital Grozny and to flush rebels out of
strongholds in the southern mountains. 

The newspaper called on the defence and interior ministries to publish
lists of slain servicemen in its pages. It said the numbers should be
verified by the Union of Committees of Soldiers' Mothers which represents
the families of Russia's mostly conscript army. 

The soldiers' mothers have said their estimate of Russian war dead is
running at least 3,000. Nezavisimoye said: ``Unfortunately the number of
dead is in all probability closer to this level (than the official level).'' 

NTV also filmed inside a military identification office in Rostov. Sitting
next to a pile of red folders, each representing a killed soldier, Zinaida
Sherbakova said she and her three colleagues each transcribed information
from at least six red folders per day onto the military's computers. 

``Normally it's six a day, but that's because there are only so many hours
in the day,'' she said. ``Sometimes I manage 15 or 18.'' 

*******

#2
Russia Struggles to Pay Debts as War Costs Grow

Moscow, Jan. 24 (Bloomberg) -- Russia is struggling to meet foreign debt
payments this quarter without new international loans after spending on the
Chechen war exceeded government forecasts, Finance Minister Mikhail
Kasyanov said. 

``We have no sources of foreign financing and our domestic sources are
limited,'' Kasyanov said after returning from a meeting in Tokyo of the
Group of Seven most industrialized nations. 

Russia spent 5 billion rubles ($175.8 million) on the war last year, 43
percent more than the targeted amount, and analysts said it could be even
higher. Kasyanov didn't say how much the government expects to spend this
year. Russia must make $1.4 billion of foreign debt payments by April and
the situation for making those payments is ``tense,'' Kasyanov said. 

The International Monetary Fund has delayed a $640 million loan payment to
Russia since September and is demanding some changes to the government's
economic program before releasing more loans. The fund also has said that
if spending on the war spirals out of control, that itself could further
delay news loans. 

Islamic State 

Russia is fighting Islamic militants in the southern republic of Chechnya,
whom the government says are responsible for a series of apartment
bombings. The militants are seeking the republic's independence from the
federal government and want to declare it an Islamic state. 

ING Barings estimates Russia spends $180 million to $200 million on the war
monthly, including debts accrued. The government's figures may not include
debts to soldiers and suppliers, said Philip Poole, director of emerging
markets research at ING Barings in London. 

``It's a substantial strain on the budget,'' Poole said. ``If Chechnya
becomes a fiscal problem the IMF will have a reason not to disburse.'' 

The cost of the war will largely depend on the type of settlement reached. 

``If they need to commit large numbers of troops over an extended period of
time is not going to be cheap,'' Poole said. ``The solution will be an
important part of how costs escalate.'' 

Reconstruction of the region will further boost costs. 

Delayed Reforms 

Analysts are also concerned Acting President Vladimir Putin may delay
economic reforms after he struck an alliance with the Communist Party in
the Duma, the lower house of parliament, to elect a new speaker. 

Putin's actions ``suggest a more nationalist Russia with a strong role for
the state,'' said a report by Moscow brokerage Fleming UCB. 

At the meeting of G-7 finance ministers, leaders urged Russia to adopt a
new program of structural and macroeconomic reforms, which Russia plans to
do, Kasyanov said. 

``We have a complete understanding,'' he said. 

Russia's government has pledged to pay on time all outstanding Russian debt
racked up after the fall of the Soviet Union. Of the debts due in February,
$200 million is owed to the IMF. 

Negotiations with bank creditors on reducing the government's $32 billion
of Soviet-era debts probably will be completed by the presidential
election, March 26, Kasyanov said. Negotiations with government creditors
will resume in the second half of the year. 

IMF Loans 

Russia's government says it has met the IMF's conditions needed to qualify
for more loans. 

Russia's economy expanded 1.6 percent last year, its best performance since
the collapse of the Soviet Union, as the ruble's decline lifted exports and
allowed producers to boost output, Kasyanov said. In 1998, GDP contracted
4.6 percent from the year before. 

The ruble's 77 percent decline against the dollar since August 1998 boosted
Russians' demand for locally made cars and other products while curbing
demand for imports. Oil companies and metals producers, among Russia's
biggest exporters, also have benefited. Industrial output surged 8.1
percent last year from 1998. 

The annual inflation rate reached 36.5 percent in 1999, down from earlier
forecasts of at least 50 percent. Analysts had forecast 1999 GDP may have
grown as much as 2 percent from the year before. 

*******

#3
New poll shows Russia's Putin popularity rising

MOSCOW, Jan 24 (Reuters) - An opinion poll published on Monday showed
Russia's Acting President Vladimir Putin pulling further ahead of his
rivals for the March 26 presidential election. 

The poll by the VTsIOM agency, conducted from January 14 to 17 among 1,600
people, showed 62 percent would have voted for Putin if the election had
been held on January 23, up from the 56 percent who backed Putin in
VTsIOM's previous poll. 

Either figure would have given Putin victory in the first round of the
election. 

Putin's popularity seems undented by setbacks in the Chechnya offensive, in
which Russian troops have become bogged down in attempts to capture the
Chechen capital Grozny. 

Putin, 47, has built his popularity largely on the early success of the
four-month-old Chechnya campaign, though his relative youth and air of
determined leadership also appeal to a nation more used to seeing ailing
former President Boris Yeltsin. 

Putin's closest rival in the pre-election opinion polls is Communist Party
leader Gennady Zyuganov, but the VTsIOM survey gave him only 15 percent of
the vote compared with 18 percent the previous week. 

Former Prime Minister Yevgeny Primakov, another possible rival but who has
yet to confirm his participation, polled five percent, down from eight
percent the previous week, the VTsIOM survey showed. 

A poll by the ROMIR agency carried out on January 8-9 gave Putin 55.1
percent backing, Zyuganov 13.1 percent and Primakov 6.1 percent. 

********

#4
Russia's war in Chechnya to dominate Putin's first CIS summit

MOSCOW, Jan 24 (AFP) - 
The war in Chechnya, which has sharpened tensions between Moscow and
Caucasus states, will dominate discussions Tuesday when Vladimir Putin
hosts his first summit of the CIS grouping of ex-Soviet states.

The arrival of Putin in the Kremlin following Boris Yeltsin's shock New
Year's Eve resignation, could give fresh impetus to the moribund 12-nation
Commonwealth of Independent States, analysts said.

"It is obvious that a number of CIS summits have been put off or cancelled
in recent years because of Yeltsin's health, and that has been responsible
for the lukewarm support for the organisation from some member states,"
said the ITAR-TASS news agency, which usually reflects official policy.

However Yeltsin, granted the title of "Russia's first president," will not
be entirely absent from the summiteering, said Sergei Prikhodko, the
Kremlin's top foreign policy advisor.

"This evening (Monday), in the official presidential residence of Gorky-9,
Boris Yeltsin will host a dinner of CIS heads of state," he said, adding
that Yeltsin could attend some summit events.

The former head of state, 68, has not been seen in public since a visit to
the Holy Land earlier this month that coincided with Orthodox Christmas.

His anointed successor at the Kremlin, Putin, is expected to raise his
favourite theme -- the fight against terrorism -- during a meeting
restricted to heads of state scheduled for Tuesday.

Russia has portrayed its massive military intervention in Chechnya as an
anti-terrorist operation designed to wipe out Islamic extremists blamed for
two incursions into southern Russia and a wave of bomb attacks in September
which killed 292 people.

Georgian President Eduard Shevardnadze said Monday he hoped for a new era
in ties after a bilateral meeting with the new Kremlin master.

"The meeting with Putin may become a breakthrough in the regulation of
Russian-Georgian relations and overcome the differences," said Shevardnadze
on national radio before leaving for Moscow.

Relations between Russia and Georgia have been strained since the start of
the Russian ground offensive into Chechnya on October 1, when Moscow
accused Tbilisi of allowing arms and fighters to pass through its border
with Chechnya.

Similar charges have been levelled at Azerbaijan, whose leader Heydar
Aliyev is also to have bilateral talks with Putin, though with less vehemence.

Alexander Iskandarian, from the Centre for Caucasus Studies, was however
downbeat about the prospects for improved relations between Russia and
Georgia.

"Russia's interests are completely opposed to those of Georgia. No
breakthrough is possible," he said, pointing to Georgia's attempts to draw
closer to NATO which have angered Russia.

Aliyev was also cautious about the results to be expected from the summit:
"We meet and appear to reach agreement on some points, but nothing gets done."

The conflict in the breakaway province of Nagorno-Karabakh, an Armenian
populated enclave within Azerbaijan, will be the focus of a three-way
meeting of Putin, Aliyev and President Robert Kocharian of Armenia.

Abkhazia, a separatist region of Georgia, also will be discussed during the
meeting, said Shevardnadze. Tbilisi has regularly accused Moscow's
peacekeeping troops stationed in the zone of exacerbating tensions.

Moldova's breakaway Transdniestr province will also feature in the debates,
officials said.

********

#5
Chechen Refugees Seek Normal Life
January 23, 2000
By NICK WADHAMS

SLEPTSOVSKAYA, Russia (AP) - Grammar class at the makeshift school for
Chechen refugees starts like it does anywhere in Russia: the children
stand, say a polite hello to their teacher and promptly sit down. 

Beyond that, very little is the same. The class at the Sputnik camp takes
place in a large plastic tent where January temperatures hover around
freezing, children study bundled in winter coats and the sound of a plane
overhead sends some students diving under their desks in fear. 

Many Chechen refugees are determined to bring some normalcy to their
children's lives, creating camp schools and trying to help them cope with
memories of bombing and death in breakaway Chechnya. But damp conditions
and poor nutrition leave many children sick or weak, while the scars of
years of war leave them scared or deeply cynical about the future. 

``The children in these refugee camps are spending their lives in war,''
says Lamara Umarava, a psychologist who works with the children at the
Sputnik camp in Sleptsovskaya, just west of the Chechen border. ``They
don't have the experience of life in normal living conditions.'' 

According to the U.N. High Commissioner for Refugees, children make up 30
percent to 40 percent of the estimated 240,000 refugees who have fled
Chechnya, where the Russian military has been fighting militants since
September. Many of the children also fled Chechnya during the 1994-96 war
between Russian troops and Chechen separatists. 

Children at the camps do what kids do anywhere: they play tag, they tease,
and when there's snow on the ground, they sled down nearby hills or build
snowmen. 

Some camps have schools. At the Sputnik camp, refugee teachers instruct
children on Russian grammar, mathematics, Russian literature, English and
history. 

But many parents don't send their children to school because they don't
have winter boots or coats, or for fear they will catch infections from
their classmates. Other children appear to have more on their minds than
learning. 

Eleven-year-old Zendi Alikhan, meandering alone around a snow-covered field
near the tent where his family lives, fled the Chechen capital Grozny after
two months of living in a basement to hide from Russian airstrikes. He says
he spent part of the time staring at the mangled bodies of several
neighbors killed in a bombing raid. 

``There was a basement, we sat there with our dead neighbors. One of them
didn't have a throat because a piece of a bomb hit it,'' Alikhan said. He
couldn't remember when he got to the refugee camp he now lives in, called
Severny. 

Like many children interviewed at refugee camps in Ingushetia, a republic
on Chechnya's western border, Alikhan said he is desperately bored,
spending his days cutting wood and fetching water. 

``It's not interesting at all,'' said 16-year-old Zaurbek Versayev, who has
lived in the Sputnik camp for two months. ``Every day we go cut wood, go
look for coal. What else is there to do?'' 

Doctors say the children are particularly susceptible to illness because
they rarely get fruits or vegetables, and that a flu epidemic going through
some of the camps has left many bedridden. 

``We had 58 come in today, 72 yesterday, and 108 the day before - all under
the age of 15,'' said Ilza Khaidara, a doctor from Grozny who works at a
clinic set up in a train car at one camp. 

Khaidara said medicines often have limited effect on the children because
they are under massive stress. Many become frightened by sounds that remind
them of what they saw during the bombings. 

``All children fear the sound of an airplane engine,'' said Umarava, the
psychologist. ``When they hear a plane overhead, they'll squint their eyes,
some kids will even hide under tables.'' 

The fear has left many kids deeply distrustful of the Russian government,
and some seem extremely cynical for their age. 

``What if the Russians unexpectedly launch rockets at us here?'' asked
13-year-old Murtaz Tashayev. ``They launch them where they want to, and
they could do it here, saying, 'Those weren't ours, the terrorists did
that.''' 

*******

#6
Moscow Times
January 22, 2000 
BOOKWORM: '99 wrap up 
By Igor Zakharov 

With literary critics (along with everyone else) gradually regaining their
senses after the holidays, an amazing number of best-of lists has appeared
- all different, depending on the periodical in which they surface, or,
more precisely, on the tastes of the staff book reviewer. As a result, the
seven most authoritative lists of "The 10 Best Russian Books of 1999"
include a whopping 47 titles. 

I want to make my own contribution. But so as not to go on mixing - as we
say in Russian - fried eggs with a gift of God, I've divided the "best"
into different categories. And lest I be accused of excessive subjectivity,
I assure the reader that most of "my" titles appeared at least three times
in other lists as well. 

Also, most of the following works have been featured in this column over
the course of the past year. (All "nominated" titles were published in
1999.) 

Hippest Novel - "Generation P" by Viktor Pelevin. 

Most Popular Novel Among Russia's More Sophisticated Readers - "Blue Lard"
(Goluboye salo) by Vladimir Sorokin. 

Most Widely Read Book - Alexandra Marinina's detective drama "The Seventh
Victim" (Sedmaya zhertva), with an initial print run of 250,000 copies. 

Best Literary Project - "The Adventures of Erast Fandorin" (a Russian
Sherlock Holmes), a series written under the pen name B. Akunin; the latest
is "Councilor of State" (Statsky sovetnik). 

Most Talked-About Novel - the 750-page "new Russian" thriller "The Big
Soldering" or "The Big Ration" (Bolshaya paika) by Yuly Dubov, a colleague
of Boris Berezovsky. 

Most Controversial and Enigmatic Novel - "Mythogenic Love of Castes"
(Mifogennaya lyubov kast) by Pavel Peppershtein and Sergei Anufriyev. 

Best Short Story Author - Vladimir Tuchkov and his "Russian Book of People"
(Russkaya kniga lyudei). 

Best Historical Novel - "Bestseller" by Yuri Davydov. 

Best War [WWII] Novel - "The Merry Soldier" (Vesyoly soldat) by Viktor
Astafiev. 

Best Russian Fantasy - Mikhail Uspensky's saga starting with "Where We Are
Not" (Tam, gde nas net). 

Three Most Interesting and Widely Read Modern Russian Poets - Timur
Kibirov, Lev Losev, Vera Pavlova, each published last year. 

Two Best Essayists of the Decade - Alexander Genis and Pyotr Vail, who rose
to fame as a duo but now write separately. Last year saw the publication
of Vail's "Genius of the Place" (Genii mesta) and Genis's "Dovlatov and
Environs" (Dovlatov i okrestnosti). 

Best Memoirist - Emma Gershtein, on her life with the Mandelstams and the
Akhmatovs in "Memoirs" (Memuary). 

********

#7
From: "Renfrey Clarke" <renfreyclarke@hotmail.com>
Subject: Interview with Anatoly Baranov
Date: Mon, 24 Jan 2000

Boris Kagarlitsky
Interview with Anatoly Baranov, journalist and public relations director
for the firm ``MiG''.

Last year we reported that Anatoly Baranov, a long-time activist of the
Russian left, had gained a prominent post in one of the country's leading
military-industrial corporations, which produces the famous ``MiG'' fighter
aircraft. Earlier, Baranov had been deputy chief editor of the newspaper
Pravda. 

For a journalist with this record to be appointed public relations director
for a large corporation might seem quite logical. But in post-Soviet
Russia, it was unthinkable until recently for political reasons. Then,
after the financial crash of August 1998, the geriatric Yeltsin was forced
to name Yevgeny Primakov as prime minister, and to agree that the role of
first vice-premier in charge of the economy should be taken by Communist
Party parliamentarian Yury Maslyukov. From that point, it became possible
to make new appointments to a number of key industrial posts previously
held by right-wing liberals who in practice had played the role of
liquidators. Eventually, it also became possible to speak of a rebirth of
Russia's near-moribund industries. 

Almost a year after our last interview with Baranov, we have the chance to
find out from him what has happened during this time in Russia's largest
military-industrial corporation. 

- Nikolay Nikitin, the new head of the Russian Aircraft Construction
Corporation ``MiG'', as our organisation is now known, came into the firm
with his own program for restructuring production and management. When the
new team took over, the situation was simply catastrophic - we owed the
state the equivalent of US$400 million, the workers had not been paid for
six months, only one contract for the export of military technology had
been concluded and paid for in the previous four years, and our own
government had not ordered a single new aircraft from our firm for six
years. Moreover, for approximately three years the defence ministry had not
paid us even for work on modernising equipment that was already in the
hands of the armed forces, work that was within the framework of the state
defence order. But even this wasn't the worst of it....
- What, was there something even more catastrophic for the firm than what
you've just described?
- Unfortunately, the firm as such scarcely existed - the top management
structure was for practical purposes a holding company that concentrated
the foreign trade functions in its hands. Almost nothing trickled down from
them to the factories, and as a result, the people on the production side
weren't in any special hurry to make export deliveries. As well as that,
the former chiefs of the construction bureau that was part of the firm, as
well as various generals from the defence ministry who had been involved in
making arms purchases, had set up an affiliated firm, a joint-stock company
called ``Russian Avionics''. It was this firm that was formally engaged in
modernising the MiG fighters, and in practice it acted as the main
intermediary between the defence ministry and the production wing. As a
result, the state orders designated in the state budget went to this
"Russian Avionics", to which the world-famous construction bureau became a
contractor. Meanwhile, we should note, both the joint-stock company and the
state enterprise were headed by one and the same person! Naturally, in such
a condition the firm was completely ready for privatisation, and it was
listed in the privatisation plan. For MiG, destatisation would
unquestionably have meant the end of the road.
- What could be done in such a situation?
- In the initial period, until May 1999, we relied on the support of the
Primakov cabinet. They helped us restructure the debts to the budget,
postponing repayment. They also allowed us to reorganise the whole complex,
so that from a number of corporate entities there remained only one, a
unified state enterprise that combined management, marketing, servicing,
and most important, the Mikoyan construction bureau and three serial
production plants. We got rid of structures that had only ``historically''
been part of the complex, but a number of allied bodies - enterprises
developing and producing engines, instruments and weapons systems -
remained with us as associated structures. A number of them had already
been privatised, and so our state company owned a number of packets of
shares in enterprises of various property forms. 
We'd mainly completed these processes when the Primakov cabinet was
sacked. It's absurd that this happened at a time when there was a
noticeable economic recovery, and more important, industrial revival.
However, the logic of the oligarchs was understandable; they were
reconciled to the existence of a left-wing administration only so long as
things in the system were thoroughly bad. As soon as the situation began to
improve - the moor has done his job, let the moor depart.
- Critics of Primakov and Maslyukov are now saying that there simply was
no industrial policy, that the cabinet simply made use of the effect of the
devaluation of the ruble, and of a certain accompanying increase in the
competitiveness of Russian goods on export markets. 
- I've already explained that the debt to our enterprise wasn't
cancelled, it was only restructured; it still had to be repaid, in just the
same way as wages had to be paid to the workers and engineers. We, of
course, acted in classic left fashion, starting by explaining the situation
to the personnel. Every month, General Director Nikitin meets with the
plant workers; anyone can come freely to these meetings and ask any
question. We devote a lot of time to developing our corporate ideology; we
publish plant newspapers, we're starting up plant radio broadcasts again,
and we're doing a lot of other things. But without real successes, who's
going to believe us? The fact is, though, that the wage debt was paid off
in the middle of last summer, and since autumn, wages have been paid on
time. On top of that, we twice raised wages during 1999, we paid small
bonuses, and we plan to raise wages again. Plus we're already paying back
the debt to the treasury bit by bit. All this has become possible because
thievery has been stopped. In the past year we've concluded five contracts
for the export of our products, and these aren't only military machines,
but also civilian ones. The workers have felt the difference.
- It's argued that the plans for conversion to civilian production under
Gorbachev and subsequently have merely been a cover for plans to destroy
the Russian military-industrial complex. And here you are talking about
your own plans for conversion.
- We design and produce what are really the world's best fighter
aircraft. During the conflict in Yugoslavia six MiG-29 aircraft, produced
in 1986 and 1987, managed to cause problems for an armada of 450 NATO
aircraft, and the losses in that war were three NATO machines and three
Yugoslav MiGs. Neither Boeing nor Lockheed-Martin dreamed of such results.
But in foreign markets there is less interest now in our main commercial
offering, the MiG-29. The geopolitical defeat which Russia suffered in
voluntarily changing its social system from socialist to bourgeois has been
catastrophic. Russia willingly supported the neoliberal globalisation which
presupposes the monopoly domination of the world by the US. We've simply
been forcibly driven out of various markets. Our new project, a
fifth-generation fighter which is now ready for flight testing, is being
delayed as a result of foreign pressures. Only the US has such a machine,
the well-known Raptor, which is now undergoing testing. It seems to me that
the development of such a machine in Russia is a blow to clan interests in
the US, since they've already spent around eight billion dollars on the
Raptor, a sum quite unthinkable for modern-day Russia. But with
expenditures an order of magnitude, even two orders of magnitude less than
the Americans, we've created an experimental machine not worse than the
American one. I don't think that's going to go down well with American
taxpayers, with the opposition in Congress, and so on. A scandal is
brewing, and circles in the US that have a stake in this are exerting all
their efforts to make sure that the ``Russian Raptor'' doesn't fly before
the presidential elections in the US. It's possible that pressure has been
placed on Kremlin figures who fear for their investments in the US and
Western Europe after the change of regime in Moscow. So when circumstances
are like this, is there any better proposition than a sizeable civilian
project?
- A lot of people take the view that a military firm should make military
aircraft, and that civilian aircraft made by a defence enterprise won't be
of the same quality as those built by an enterprise that specialises in
this area. 
- It's strange that Boeing produces both civilian and military aircraft,
while we're supposed to have trouble doing the same. During the Soviet
period a construction plant that was part of our firm produced the Il-18
airliner, the best Soviet machine in its class. If you upgraded the
avionics, it'd be competitive on cost grounds even today. So when the
government assigned us the production of the middle-range Tu-334 aircraft,
which is analogous to some of the newest products of Airbus and Boeing,
they were taking into account our quality plus our clear ability to get the
job done. We have colossal excess capacity, and we can accommodate any
reasonable number of orders. Not long ago our chief Nikolay Nikitin even
announced that after making personnel cuts in previous years, we were ready
to take on new workers! After this, who's going to fling stones at the
defenders of the new industrial policies?
- You said that the sacking of Primakov was an unpleasant surprise for
you. Does this mean that your relations with the new cabinet aren't going
smoothly? 
- Over this period there have been two cabinets. We simply didn't succeed
in developing relations with the Stepashin government, which lasted less
than three months. Now, everyone from Zyuganov's Communists to Kirienko's
liberals is trying to win favour with the Putin government. Putin's
presidential prospects are a special question. But we're a state
corporation, and we have to work with the government. We're managing to do
this. For the first time we've seen the appointment of a vice-premier
responsible for defence industries - that's Ilya Klebanov, who for many
years was head of the giant LOMO production combine in St Petersburg. It
was Klebanov who, at the celebration to mark the sixtieth anniversary of
the Mikoyan Construction Bureau, announced publicly that the plans to
privatise the MiG corporation had been dropped, saying ``The national
estate is not for sale''. It was this government that made the decision to
assign us the production of the Tu-334, a decision that will breathe new
life into us. It's true that all these decisions are the result of a shift
that took place when the government was headed by Primakov and Maslyukov.
- You give the impression that there are no major clouds on your horizon,
but not long ago a whole scandal burst out around your firm.
- The scandal didn't burst out on its own - it was prepared over a long
period. Back in September a certain young man who headed a small ``research
centre'' supported by structures close to the well-known oligarch Boris
Berezovsky tried to blackmail me with confidential information he had that
was prejudicial to us. Some time later, a member of the Communist Party
whom we had implanted in this ``centre'' gave us a detailed description of
a plan of provocation that was aimed at preparing public opinion by
mid-January for a change of management at MiG. Then, before the sixtieth
anniversary, when public attention was already concentrated on our firm,
the ``scandal'' burst - six senior constructors announced their
resignation, or more precisely, that they were transferring to the private
firm Russian Avionics. According to information we have, some of them were
already shareholders in that firm. That is, even earlier on they'd been
helping it to rob their workmates.
This all coincided as well with the height of the Duma election campaign,
so we had the situation where on the first TV channel, belonging to
Berezovsky, there were two whole stories to compromise our firm, and also
to embarrass Yury Maslyukov, who was running for the Duma. The main role
here was played by a journalist who acts as a mouthpiece for the most
extreme neoliberal ideas. This individual appears on the first national TV
channel, actively propagandising the experience of Chile and the personal
contribution made to the neoliberal cause by Augusto Pinochet. It's curious
that according to our information, during the Brezhnev era, when this
journalist was merely a failed man of letters who worked as a furnace
attendant in the writers' cooperative at Peredelkino, he was recruited by
the KGB to report on dissidents, of whom there were more than a few in that
creative, literary milieu. Later, in the new period, he was taken under the
wing of the media magnate Gusinsky, whose relations with the state organs
had also been anything but usual. Later, this man worked in one place and
another before settling in Berezovsky's media holding company. At the same
time a series of articles came out in quick succession in the newspaper
Kommersant, which Berezovsky had recently purchased. However, we were
warned in time, and managed to organise media reports putting our point of
view. The culmination was that Vice-Premier Klebanov declared on the state
television channel that the government was satisfied with the situation in
the MiG corporation, that the information campaign against us had been
artificially inspired, and that through this affair a number of people were
trying to escape responsibility, perhaps even criminal responsibility, for
their misdeeds in the past. So we think we've been able to stand up to an
adversary who has considerably more resources than we do, and to answer him
effectively in the information field. It's true that all this created
problems for Maslyukov in his election campaign, but he nevertheless topped
the poll in his constituency, and will have a well-deserved place in the Duma.

******

#8
From: "andrew miller" <andrewmiller@mail.ru>
Subject: Dollars and Rubles and Sense
Date: Sun, 23 Jan 2000 

Topic: Cigarette Smoking in Russia
Title: Dollars and Rubles and Sense

For my money (what little I have of it), the best single English-language
voice reporting on the essential facts as they happen in Russia today
belongs to Yevgenia Borisova, a journalist working for The Moscow Times
whose brilliant work also appears in The St. Petersburg Times, both
English-language papers which are available on the Internet as well as on
the street in Russia. Ms. Borisova's is the voice of someone, a Russian
most critically, who lives a Russian s life in Russia and sees things
happening at ground level, and reports them with a profound command of
English in precise, unbiased, reliable and fascinating accounts. I would
like to take this opportunity to encourage The St. Petersburg Times, which
I read (and whose editors I know read the JRL) to offer Ms. Borisova it's
op-ed columnist position, which recently became vacant, in addition to her
other duties. It would be a privilege to read the insights of such a
person, a valuable resource for those who study Russia abroad.

Only after ten years of lending to Russia has the International Monetary
Fund discovered the indescribable quagmire that is the Russian tax system,
and realized that Russia s ability to repay the fund relies upon that
system, and instructed Russia to reform it. Readers of Ms. Borisova knew
this long ago, and those who read her January 18 report learned that the
Russian government is incapable of calculating Russian per capita income
based on taxation or other direct financial information and therefore it
simply tries to count how much they buy, assuming that they spend
everything they earn (not adjusting its figures for income saved or savings
spent). This primative device reflects the primative incomes of the
Russian people whom the government serves, which Ms. Borisova reports
shrank markedly this year despite alleged growth in the overall economy.

With this background, let me proceed to my own discussion of Russian
economics.

* * *

Disclosure. I have occasionally done some per diem work for the Phillip
Morris corporation, about which I'm now going to say something you might
consider positive. I teach English to some mid-level PM managers at the
company s giant cigarette factory outside St. Petersburg (called Izhora
for the small river it s near). Sometimes, though rarely, I receive as
much as $40 per week from PM (never more, but this sum is half the mean
monthly income for an ordinary Russian). Last month, I didn t receive a
penny, and I don t expect to receive anything soon. It's a bad job that
requires very inconvenient travel to a remote location, often in bad
weather, and working with students in the late evenings who are tired out
from work and not inclined to more, and I m very poorly paid to do it. But
money is hard to come by in Russia these days, so it s an offer I can't
refuse. You can now judge for yourself whether anything I say is out of
pro-PM bias or simply the truth.

* * *

If in April of 1999 we had calculated the average monthly value of the U.S.
dollar measured in Russian rubles for the first three months of the year,
and plotted those three values on a graph, we would have seen a straight
line. That is because the average gained value at the constant rate of 50
kopecks per month.

If we had then extrapolated that line over course of the next nine months,
we would have predicted that the value of one U.S. dollar would rise from
22 to 28 by year's end.

Which is almost exactly where the dollar s value is today, though we are
now into 2000 so the dollar arrived a bit late (this is nothing to worry
about in Russia, it's par for the course).

The thing is, though, that between April and now the dollar has in fact not
gained value at anything like a constant rate, but rather has ridden
something of a Super Duper Looper of a roller coaster, and its average
weekly value actually LOST ground against the ruble during 20 of the
remaining 38 weeks. So it s hard to say whether we should kick ourselves
for not being able to correctly predict the dollar s value or kick the
dollar and hope its engine will start running more smoothly.

How did the ruble manage to gain ground on the dollar more than half of the
time from April through December of 1999? After all, the Russian economy
is famously not doing very well while the U.S. economy, famously, is.
Well, the answer is as simple as it is predictable in Russia these days:
The Russian government bribed the ruble to do it.

If the Russian government wanted the ruble to rise, why didn't it end the
year up from its March low of 4.25 cents rather than down half a cent at
3.75 cents, as it actually was? Again the answer is simply predicable:
things didn t work out exactly as the government planned.

Now what exactly do I mean when I say bribed? Well, the Russian
government took its savings, which like any careful Russian it keeps in
dollars (which it gets by demanding them for things it sells abroad, like
oil and gas and gold and diamonds) to guard against deflation of the ruble,
and the government went into the currency markets and bought its own
rubles. This created demand for the ruble. This demand increased the
ruble's price, and consequently reduced the price of dollars, which were
now flooding the market.

I know what you're thinking: But the Russian government didn't want
rubles, it wanted dollars, the better to protect its savings from deflation.

Yes, I agree, this is Through the Looking Glass stuff we re talking about
here. Welcome to Russia.

Because you see, if the government hadn't spent its savings in this way,
then NOBODY would have wanted the ruble, and it s price would have fallen
through he floor.

Why wouldn't anybody want it? Well, the only thing you can do with a ruble
is buy a Russian product. Name one. No, I mean one you'd want. To pay
money for. Can't, can you?

Well then, you are saying, what would be so terribly bad about the ruble
falling through the floor? Good question! In fact, in some sense, that
not only wouldn't be bad, it would be good.

A falling ruble would mean Russian products would be cheaper for foreigners
to buy a discount that should increase demand and sales and thereby
greatly assist Russian domestic industry (at no actual cost to it). Plus,
it would make foreign products more expensive in Russia, defending Russian
producers from cheap (or better) foreign stuff, and thereby also helping
Russian factories.

Yes, all that is undeniable. But remember when I asked you to name a
Russian product you wanted to buy (for money) and you said you couldn't?
Well, there s the rub. For a normal country a falling currency would
have an up-side, a silver lining. But in Russia it just doesn't. And in
the very few cases where Russia actually does make something somebody wants
to buy (like steel, for instance) and could sell at a discount, folks like
the U.S. government slap a protective tariff on their stuff to protect U.S.
producers. Kinda like Catch-22, isn't it?

But why, you say, can't Russia start making some products and export them?

Try to imagine I'm sighing, deeply and soulfully, the way a Russian would
(I haven't actuall got this quite down yet, but I'm close).

You see, for all the big talk around, it turns out that Russia is still, de
facto, a Communist country plagued by a fundamentally corrupt government.
It can t and won t allow private business to flourish. In one way or
another, the Russian government still directly employs or supports most of
the population (including the teachers at all the major universities). It
still owns radio, TV and newspapers. It imposes arbitrary and unworkable
tax law, and indeed law of any kind is still basically a foreign concept.
The KGB has the power to read any e-mail without a warrant (theoretically,
there's nothing to stop it from sending one and signing your name to it).

Why don't Russians do something about this, change the situation when they
can see it isn t working? Well, now you've got me. I don t know. But I
think that unless somebody figures it out, history will decide one of these
days that Russians are simply masochists, that they like things this way,
like suffering, and then history will turn its page on them.

This is my perhaps roundabout, or hopefully not so, way of coming to the
following point:

Before I came to Russia, I used to think of cigarette smoking as an
unabashedly negative thing. Which, in America, it may well be. The
companies themselves seem to be saying as much these days. I, for one,
have never tried it.

But in Russia, it just isn't. If you've ever read the brilliant Quiet Don
stories by Nobel laureate Mikhail Sholokov, you remember how everybody
(during World War I and the Russian revolution, two bloodbaths) smoked like
chimneys. And you didn't begrudge it or worry about them, because, after
all, any one of them could be brutally killed (or worse) at any moment and
it was the only earthly pleasure most of them could both afford and get.
You felt for them, you were actually glad when they lit up, you never
though for a second about potential adverse health consequences down the line.

Russia is really no different now. Russian people are dying like flies
from every imaginable cause and then some, as documented by demographer
Murray Feshbach of Georgetown, among others. The Russian population gets
smaller every year, and then there's emigration. Russians are dirt poor,
with a per capita GDP of $1,000 that is dwarfed even by backward economies
in Mexico and Brazil.

And in Y2K Russia, cigarettes have a marked up-side in addition to their
relatively minor marginal health risk. For example, the Phillip Morris
company has built a giant cigarette factory outside St. Petersburg,
investing $100 million in the Russian economy at start-up. Then there s the
people who get jobs. Then there s the fact that the company is making
filtered cigarettes, and many Russians are still smoking filterless models
like the Prima and Belomorcanal (now owned by R. J. Reynolds). This factory
looks like a giant gleaming spaceship, out in the middle of a landscaped
acreage surrounded by birch trees. It has offices which are modern in
every respect, in which the Russian staff is proud to work.

With its significant investment and economic presence, Morris now has a big
economic stake in Russia, especially as it watches its market shrink in the
USA. It's employees have an even bigger stake in Morris, especially as
they watch the Russian economy shrink. Maybe, just maybe, this interest,
if both sides are willing to defend it (which knowing big American
companies Morris probably can be relied on to do) against all manner of
encroachment by the Russian state. If its products are viewed as desirable
and high quality and affordable, it may even have a large army of consumers
on its side as well.

Phillip Morris provides all kind of training to its employees, from English
to Business, and the employees get practical application. Phillip Morris
is a far more valuable educational source for Russians than, for example,
most state universities in Russia. On their business faculties, for
example, are hardly any teachers who have actually worked in a private firm
under conditions of market economics successfully. The government does
nothing to attract such teachers from Russian business or from abroad.

Then there s the taxes. Phillip Morris pays them. Lots of them, piles and
piles. It dots its i's and crosses it's t's and pay every penny on
time in cash. It retains an expensive staff of accountants just for this
purpose. The Russian government, you probably know, needs money. For
things like paying doctors who treat sick children, and paying teachers who
teach well children, and paying pensions to starving babushki. Admittedly,
it s a pity that the product behind this has to be a dangerous one, as even
the makers themselves seem to freely now admit, but the cold fact is that
the brocolli growers and the thigh-master makers haven t yet made it to
Russia. Think they ever will?

So I say, such an army as Phillip Morris is building on the Izhora maybe be
Russia's only hope of defense against the creeping forces of totalitarian
power. Every other means of reform in Russia has, palpably, failed. I'm
actually, in this sense, proud to work for Morris.

Go figure. Russia is full of surprises.

Do you disagree?

Do you disagree with Russian Tsar Peter I ("the Great") who believed that
Russians couldn't govern themselves and spent his entire life trying to
drag the Russian bear out of what he believed was its dark cave and into
the sunlight of Western civilization and enlightenment (by means, of
course, of brutal authoritarian force)?

Do you disagree with Soviet dictator Vladimir Ulyanov ("Lenin") who
believed and did just the same things three centuries later, Peter having
failed rather gloriously, except of course that Lenin's lamp had a
Communist shade on it? The bear, as we know, ate both the shade and the
lamp in the event, which brings us to the year 2000.

Do you believe that Russians can govern themselves, and build a viable
economy on their own (that is, without the likes of Phillip Morris)? OK,
then, Mr./Ms. Quixote, are you prepared to grapple with December 19? Not
as an outsider (that would be being to hard on Russia) but simply by the
standards of the Russians themselves?

OK, then, take this little quiz and find out how "up" you are on recent
Russian history:

1991: Who was responsible, if anyone was, for the military coup d'etat
against Gorbachev and perestroika? (clue: the Chairman of the Supreme
Soviet)

1992: Who's appointment as Prime Minister was swiftly followed by the
dissolution of the first parliament and the subsequent bombing of the
Russian White House? (no clue, too easy)

1993: Who was responsible for, if anyone was, that is who benefitted
personally from, to the tune of millions, the rigged privatizations that
frittered away the nation's wealth (what there was of it)? (clue: oligarchs)

1994-1995: If anyone did, whose ultraextremist policies created the
atmosphere of paranoid corruption and corrupt paranoia in the Russian armed
forces, and the country generally, which were exposed by TV journalist
Vladislav Listyev, and resulted in his subsequent murder? (clue: Politburo
bad boy)

1996: Who was responsible, if anyone was, for Russia's humiliating defeat
in Chechnya? (clue: Minister of the Interior)

1997: Who's book betrayed the presidential confidence and portrayed Boris
Yeltsin to the world as a drunken deviate? (clue: bodyguard)

1998: Who was responsible, if anyone was, for Russia's horrific currency
and stock market implosion, which resulted in a humiliating debt default?
(clue: Finance Minister)

1999: Who was elected to the Russian Duma on December 19, 1999?

The answer to the last question is the answer to the others. In order they
were: Anatoly Zukyanov; Victor Chernomyrdin; Boris Berezovsky and Roman
Abramovich; Yegor Ligachev; Anatoly Kulikov; Alexander Korzhakov; Mikhail
Zadornov. Yes, all these "people" were elected to Russia's parliament by
the people in a free and fair election.

The first few weeks after the election were equally eventful in Russia.

The president resigned, a former KGB field operative and director took the
helm.

The ruble plummeted, from 27 to 28.5 to the dollar, and the average weekly
value fell below the "50 kopecks per month" rate for the first time since
late May. The dollar still has a chance to eclipse its greatest one-month
rise on the ruble (2, from 23 to 25 in late March).

Former Prime Minister Sergei Stepashin, now also in the Duma (all the
former PM's are there, it's quite a sight), admitted in Novozavisimaya
Gazeta that Russia decided to invade Chechnya in March of 1999 (as the
ruble was plummeting), not following Dagestan or the Moscow bombings as
previously alleged.

And to round things out, new president Putin entered into a condominium
relationship with the Communist party, forming a powerful majority with
fifty more seats than needed for a majority whose first order of business
was to reelect the Communist speaker - conclusively proving how very
progressive Putin is.

Here in St. Petersburg, the temperature (I'm talking literally now) dropped
to near zero and stayed there. But still, I know few who are looking
forward to spring, which implies the passage of time, presidential
elections, that sort of thing.

Andrew Miller
St. Petersburg

********

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