January 25, 2000    
This Date's Issues: 4065 4066 4067

Johnson's Russia List
#4067
25 January 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Putin tries to end Russia parliament row.
2. Reuters: Russian economy grows,govt questions reforms.
3. Interfax: DECREASE IN RUSSIAN POPULATION GREATEST IN 1999.
4. Interfax: NO CHECHENS AMONG HOUSE BLAST SUSPECTS - OFFICIAL.
5. APN: ROMIR center`s polls, Russians are still paternal power oriented.
6. Komsomolskaya Pravda: The Locksmith Mihailov Would Be The Best President. MORE THAN TWENTY PEOPLE ALREADY WANT TO RULE RUSSIA.
7. Newsday: Fyodor Gavrilov, New Chief Will Be What Russia Wants.
8. Los Angeles Times: Mayerbek Nunayev and Richard Paddock, Rebels in Chechnya Are Defending City in Ruins 
9. The Globe and Mail (Canada): Geoffrey York, Betting the farm -- and losing. Ottawa poured millions into a doomed project to break up Russian collective farms. The result is a colossal waste of money and Russian contempt for yet another ineffectual Western aid effort.
10. The Globe and Mail (Canada): Geoffrey York, Shock-therapy program 'an enormous mistake'
11. Interfax: IMF READY TO DISCUSS BUT NOT DISBURSE RUSSIA LOAN.]

*******

#1
Putin tries to end Russia parliament row
By Michael Steen

MOSCOW, Jan 25 (Reuters) - Russian Acting President Vladimir Putin took time 
off from a summit of ex-Soviet leaders on Tuesday to try to end a boycott of 
parliament by key parties. 

Putin got good news from figures showing the largest rise in economic output 
since the fall of the Soviet Union in 1991, but his military campaign in 
Chechnya showed little progress. 

The dissenting political parties, including allies of Putin in December's 
parliamentary election, launched a boycott of the chamber a week ago because 
they were outraged at how jobs had been carved up between the Communist Party 
and the main pro-Putin party, Unity. 

The boycott threatened to create a wider than expected opposition to Putin in 
the State Duma lower house of parliament, although it seems unlikely to harm 
his presidential chances. Putin is favoured to win a March 26 election. 

The head of one of the rebel groups, Sergei Kiriyenko of the pro-Kremlin 
right-leaning Union of Right-Wing Forces (SPS), said he had struck a deal 
with Putin and a leader of Unity on terms under which the SPS could end its 
boycott. 

``As a result of these talks we have a new political configuration in the 
Duma,'' Kiriyenko told Reuters after returning from the Kremlin. 

Putin met Kiriyenko as he hosted a summit of the Commonwealth of Independent 
States (CIS), a loose grouping of 12 former Soviet nations. Terrorism and 
economic issues were the main items on the summit's agenda. 

TRYING TO END BOYCOTT 

Putin said he would meet the leaders of other parties who walked out of 
parliament, the Fatherland-All Russia (OVR) bloc and the Yabloko party, to 
discuss the agreement. 

The rebel parties -- which also include some members of the Russian Regions 
grouping -- control around 140 of the Duma's 450 seats. They say votes last 
week to decide who should hold key posts in the chamber had been fixed by the 
Communists and Unity. 

The row has cast a shadow over Putin's image but his lead over rivals in 
opinion polls ahead of the election has remained wide, even with setbacks in 
the Chechnya offensive. 

On the plus side for Putin was a report from the State Statistics Committee 
saying 1999 gross domestic product rose a preliminary 3.2 percent after a 4.6 
percent slide in 1998. 

The news came as a team from the International Monetary Fund was due to 
arrive in Moscow to examine Russia's economic performance and decide whether 
it deserves more loans. 

But the economy is not the only issue being scrutinised by the West in 
deciding whether Russia should get more cash. The war in Chechnya has also 
led some to call for a suspension of economic cooperation with Moscow. 

Russia's troops remained locked in fierce battles with rebels in the Chechen 
capital Grozny on Tuesday. 

Itar-Tass news agency quoted the military as saying that a total of 900 
Russian servicemen had died in Moscow's military campaign in the North 
Caucasus since last August -- a much higher figure than previous official 
estimates had suggested. 

Political analysts say a turn for the worse in Chechnya could hurt Putin's 
presidential hopes, although reports of rising Russian casualties have so far 
failed to dent his image. 

*******

#2
Russian economy grows,govt questions reforms
By Peter Henderson

MOSCOW, Jan 25 (Reuters) - Russia basked in new-found economic strength on 
Tuesday as officials questioned the purpose of an arriving International 
Monetary Fund team and made clear they would chart their own economic course 
this year. 

Gross domestic product grew 1.5 percent in the first nine months of last 
year, after a 3.3 percent fall in the same period of 1998, paving the way for 
only the second annual growth in a decade. 

The State Statistics Committee, citing preliminary data, said 1999 GDP grew 
3.2 percent after a 1998 fall of 4.6 percent. 

The rosy picture was also reflected in a swelling trade surplus, up to $3.8 
billion in November from $3.2 billion in October, a good sign for the 
government scrambling to pay foreign debts and help finance a costly war in 
rebel Chechnya. 

Exporters and government coffers have both benefited from higher global 
energy and metals prices while the 1998 rouble devaluation has priced imports 
out of the local market, giving domestic producers an opportunity to ramp up 
production. 

Russia has met most economic targets in its IMF programme, and the government 
-- saying structural reform pledges were ambitious -- plans to rewrite its 
economic plan, Deputy Prime Minister Viktor Khristenko told Sevodnya 
newspaper. 

FEARS OF NATIONALISM, WATERED DOWN REFORMS 

Economists say Russia cannot improve much more without structural reforms and 
they are uncertain what Acting President Vladimir Putin plans to do if 
elected to the post on March 26. 

Putin has promised reforms and a stronger state but he has not offered 
details. 

Standard & Poor's rating agency projected 1999 growth would top out at 1.9 
percent but said investment had barely increased. 

``Growth cannot be sustained unless weak institutional and legal 
infrastructures are strengthened to create a better climate for investment,'' 
it said in a statement. 

Khristenko said Russia was writing an economic strategy and would review it 
with the IMF in April. ``The pity is that in our country one can never take a 
completely liberal approach to the problems of infrastructure monopolies,'' 
he said. 

The IMF, relied on by the West to persuade Russia of the value of reforms, 
has refused to release loan tranches, already factored into the budget, since 
last September, saying structural reform obligations have not been 
implemented. 

Central Bank Chairman Viktor Gerashchenko said it was unrealistic to count on 
the IMF to give money this quarter and that central bank reserves could meet 
demand. 

``The talks (with the IMF mission) which begin tomorrow should clear up the 
situation -- either they are businessmen or they are politicians, and I do 
not remember which,'' he said. 

He was referring to the West's opposition to Russia's no-holds-barred 
campaign to regain control over the breakaway Chechnya republic, which Russia 
sees as a main reason the IMF has not released new funds. 

Costs of that war have been higher than expected but still form a relatively 
slight part of the budget, about five billion roubles ($175 million) instead 
of a projected 3.5 billion. 

Russia is counting on Western credits to cover $6 billion of the country's 
$27 billion 2000 budget. 

Gerashchenko said Russia could get by on its own. ``If prices remain the 
same, if trade and political barriers are not erected around us, then I think 
that in theory we will pull ourselves together and get through 2000,'' he 
said. 

($-28.49 roubles) 

*******

#3
DECREASE IN RUSSIAN POPULATION GREATEST IN 1999

MOSCOW. Jan 25 (Interfax) - The population of the Russian
Federation decreased by 716,900 or by 0.49% in the period from January
to November 1999, down to 145.6 million on December 1 last year, the
Russian State Statistics Committee has announced.

******

#4
NO CHECHENS AMONG HOUSE BLAST SUSPECTS - OFFICIAL

MOSCOW. Jan 25 (Interfax) - There is not a single ethnic Chechen
among the suspected organizers of the explosions in apartment buildings
in Buinaksk, Moscow and Volgodonsk but all suspects were trained at
camps in Chechnya.
"At the present time the investigation is aware of the entire crime
mechanism and those who carried out the crimes," Federal Security
Committee spokesman Gen. Alexander Zdanovich told Interfax on Tuesday.
"A total of 14 people are suspected of staging acts of terrorism,
nine of whom are internationally wanted by Interpol," he said. There are
only operational materials of the Federal Security Committee concerning
the other five "but that is insufficient to declare them as
internationally wanted," Zdanovich said. "However, efforts continue in
this direction," he said.
As far as the service is aware, the suspects are now staying in
Chechen territory, he said. "I do not doubt that sooner or later they
will be arrested and stand trial," Zdanovich said.

*******

#5
APN
25 January, 2000, 15:27
Russians are still paternal power oriented
ROMIR center`s polls
Elena BASHKIROVA,
Director of ROMIR
Natalya LAYDINEN,
PR manager

In the context of research dedicated to the March 2000 presidential
elections in Russia, ROMIR independent research center conducted a special
research about the Russians’ attitude towards power. A leader in Russia
traditionally personifies power, that’s why studying the citizens’ attitude
may help to analyze more fully the Russians’ expectations connected with
the new president’s elections.

Characteristics of power for the national research were chosen by ROMIR
analysts on the basis of group discussions of the subject. The all-Russian
research was conducted on a random basis (N=2000) in 41 subjects of the RF
(207 polling stations). In course of the research the Russians were asked a
question what in their opinion is the main characteristic of power and what
it should be like.

As the results of the research proved, 38.3 % of the respondents think that
the power should first of all «think of the people’s interests». The second
place belongs to such an important characteristic of the power as
«fairness» (25.6 % of the respondents). 21.4 % of the respondents think
that the power should be «strong», 9.1 % - «competent», 4.4 % think that it
should have «authority». Only 0.6 % of the respondents could think of any
other characteristics of the power, and 0.5 % couldn’t think of an answer.

These results are very demonstrative. If to take into consideration that
according to ROMIR’s information the Russians can’t tolerate the
presidential candidates’ egoism, caring about the people’s interests is the
key expectation of the Russians regarding a new president and a new power
accordingly. The reasons for such expectations of the population can be
found in Russian history, where tzar traditionally was the essence of power
and «patron of people», and in modern reality as well.

The polls demonstrate Russians` disappointment in the last decade’s
reforms, and dissatisfaction with the lack of the state’s concern about
them. That`s why «concern about people`s interests» runs forth. The fact
that «fairness» and «strength» of the power are key characteristics also
shows that there is still a tendency to «law and order» in Russia which can
be provided by «fair» and «strong» power.

Resolute and active political leader who can take responsibility for the
state`s future personifies such power. When analysing Russians`
expectations regarding the power it is interesting that such important
characteristics as «competence» and «authority» of the power are less
important compared to the above mentioned «concern about people`s
interests», «strength» and «fairness».

The gap between the indices is significant: 9.1% of respondents want to
have a competent power, and only 4.4% - authoritative. It is essential that
percentage of those found it difficult to answer those questions was low
(0.5%). That means major demands towards the power in Russians` social
consciousness are very pronounced.

Thus, the reasons that the Russians want to see «concern about people`s
interests», «fairness» and «strength» among characteristics of those in
power may be easily explained. As the polls show these characteristics of
the power are important for the most numerous and socially active groups of
population.

Such characteristics as «competence» of the power are important mainly for
people with higher education and the youth while «fairness» or «strength»
are important for all population groups. Both the youth, old people and
employed people of various ages want the power to take care of them. This
cardinal demand is equally actual for different groups of population.

«Fairness» and «strength» are not less actual characteristics of the power,
there are many of those among all age groups who consider these
descriptions important: persons with secondary and secondary special
education, employees, retired people and individuals with average income -
in short, a large part of active voters. Therefore, it is quite logical
that most of the Russians would prefer to have a strong resolute president
who is capable to establish «law and order» in Russia and to be anxious
about Russians` interests.

******

#6
Russia Today press summaries
Komsomolskaya Pravda
25 January 2000
The Locksmith Mihailov Would Be The Best President
MORE THAN TWENTY PEOPLE ALREADY WANT TO RULE RUSSIA

Summary
Everyone can become president of Russia. To do this, you will need an 
initiative group to nominate you as a candidate, conduct a meeting on your 
nomination and prepare documents for your candidacy's registration at the 
Election Committee.

If everything turns out well, the whole country will know about your 
existence the following day, as it happened with locksmith Mihailov from 
Medvezhegorsk in Kareliya, with the unemployed Masar Aduyev, with Krasnodar 
entrepreneur Valery Nemtse-Petrovsky, of whom no one heard anything before. 
Apparently these people and a couple of other candidates "from nowhere" have 
a greater quotient of decisiveness and ambition than the average Russian.

Other candidates are not timid either. Not quite dismissed Prosecutor General 
Yury Skuratov is an example of this. To win over corruption in the country, 
he needs to take the highest office in the Kremlin. And film director 
Stanislav Govorukhin still thinks that "One Cannot Live Like This" [his 
famous film] - not like we lived in the USSR, not like we live now. When he 
is registered as a presidential candidate and gets free television time, we 
will finally know how we SHOULD live.

Former minister Ella Pamfilova, who failed to make it to the Duma, wants to 
grab the presidency to spite men in such a manner. Her namesake, Anatoly 
Pamfilov, leader of the ecological party Cedar and also a Duma failure, has 
decided to run too. And the owner of the Radisson-Slavyanskaya Hotel, Chechen 
Umar Jabrailov wants to become another Caucasian in the Kremlin, like Stalin.

So far, over twenty people are competing for the presidential post. The names 
of the favorites are well-known - Putin, Zyuganov, Yavlinsky, Zhirinovsky and 
Tuleev, but there is only one vacancy, unfortunately.

******

#7
Newsday
25 January 2000
[for personal use only]
New Chief Will Be What Russia Wants
By Fyodor Gavrilov. Fyodor Gavrilov is editor of Career Capital, a 
Russian business weekly in St. Petersburg. This was translated by Newsday's 
Moscow bureau chief, Michael Slackman. 

successor of Boris Yeltsin? Is he a hawk? A Russian Pinochet? Can he be a 
secret liberal? Or a KGB agent who has come out of the shadows? What awaits 
Russians in the future?

There are a huge number of suppositions, but Putin himself does not make a 
big secret out of his presidential strategy, and to that extent he comes 
into focus.

Putin suggests that Russia is now on the main road of its political and 
economic development, with no alternative. Moreover, he remarks, Russians 
should reject the few achievements of communism. 

Putin is against restoration of state official ideology in any form. "In 
democratic Russia there should not be any forced civil accord," he has said.

The Russian people, he has also said, "wish to use those opportunities and 
perspectives which are opened by multiple forms of ownership, freedom of 
entrepreneurial activity, market relations. They have accepted such values as 
freedom of speech, traveling abroad and other civil rights and freedoms. The 
vital task is the search for a new national idea which would connect world 
values with traditional Russian values."

Putin sees these values quite clearly. The first is patriotism. However, in 
the modern world the sovereign might of the country is manifested not so 
much in its military force, but in the ability to be the leader in creation
and 
application of advanced technologies, provision of a high level of well being 
for its citizenry and the ability to properly protect its own security and 
defend national interests in the international arena. 

In general, the state in Russia has always played a vitally important role in 
the life of the people. A strong state for Russians is not an adversary, is 
not
something against which one should fight. On the contrary, it is the source 
and the guarantor of order, the initiator and the main moving force of any 
kind of changes.

In Russia, the inclination for collective forms of life has always dominated 
individualism. Paternalism is deeply rooted. The majority of the Russians are 
used to associating the improvement of their position, not so much with their 
own initiative, but with the support of the state. "This habit is dying very 
slowly," Putin once said. 

This is not surprising as the state has always played a special role in the 
fate of Russia. It is necessary to make the Russian state the coordinator of 
economic and social forces of the country-balancing interests, defining 
optimal aims and goals of public development. 

Of course, this extends the role of the state beyond the formula practiced, 
and considered acceptable, in the West. And Putin understands this. "In the 
course of time we very likely will come to this formula," Putin has said.

Among the top economic priorities of Russia, Putin sees the stimulating of 
dynamic economic growth, increasing investment activity and pursuing an 
active 
industrial policy. In general, the measures he proposes are most liberal: 
Implementation of tax reform, guarantees that salaries will be paid, 
elimination of the barter system of doing business, keeping inflation low and 
the ruble stable, the formation of civilized financial and stock markets, 
implementation of modern agricultural policy.

Putin also thinks that in the economy of Russia, as in other industrially 
developed countries, there is room for financial-industrial groups and 
corporations as well as small businesses; for former state-owned farms as 
well 
as private farmers. Any attempts to restrict or supress development of one 
and 
artificially accelerate the other forms of the economy will only hamper the 
growth of the Russian economy. 

So who is he? A liberal? Apparently, yes. Centrist? Of course, centrist as 
well. To a certain extent his nature is undeniable. He tries to be everything 
to everyone and as a result can be fit into no one category. 

"Let us not try to give the answer to the question, whether it is good or 
bad. What is important is that such moves do exist," Putin said about the 
inclinations of the Russians for paternalism. 

In time we will have real clues as to Putin's character. His course will be 
defined by the obstacles he must confront. The main task, therefore, in 
trying 
to interpret where Putin will lead Russia is to foresee those problems that 
lay ahead.

Putin today is the Boris Yeltsin of the 21st Century. Though he comes from a 
different generation, politically he is woven from the same contradictions as 
his predecessor.

My attitude toward Yeltsin is very positive. But I wouldn't deny the fact 
that the ex-president never had any consistent or firm ideology. His
successor 
does not have it either. 

And, thank God, these contradictions play a special role. They make the basis 
for "democracy from the top," which Yeltsin had been developing. The 
existence of these contradictions, which presuppose compromises between the 
interests of different social and political groups, gives us the chance to 
develop without facing a civil war. The absence of consistency is productive 
for today's Russia.

In a word, one shouldn't expect any radical political changes from Putin. And 
one shouldn't forget that in Russia, with all its problems, there are two 
mechanisms functioning at a satisfactory level: Freedom of speech and free 
elections. The Russian society itself, which so far is supporting Putin, will 
to a great extent push him either into the role of decisive reformer or 
severe tyrant.

******

#8
Los Angeles Times
January 25, 2000
[for personal use only]
Rebels in Chechnya Are Defending City in Ruins 
By MAYERBEK NUNAYEV, RICHARD C. PADDOCK, Special to The Times

GROZNY, Russia--Rebel fighters here live in the basements of bombed-out 
buildings and travel underground through a network of tunnels. Doctors 
operate on the wounded without anesthetic. Civilians, afraid to venture out, 
bury their dead in the courtyards of their apartment buildings. 
Daily bombardment by Russian aircraft and artillery has so devastated 
the capital of Chechnya that when the war ultimately ends, there will be few 
homes left standing for those who wish to return. 
For the rebels, life is guerrilla warfare. For civilians, it is a test 
of survival. 
Despite heavy losses, morale appears high among the 2,500 to 3,000 rebel 
fighters encamped in this ruined city. They swear they will not give in to 
the "Russian aggressors," and they predict the war will continue for many 
months. 
"The Russians can destroy our city, they can reduce it to rubble, but 
they will never be able to seize it and control it," said Vakha Israilov, 27, 
commander of a Chechen battalion fighting in Grozny. "We will never lay down 
our arms." 
The battle for Grozny began when Russian troops launched their assault 
Dec. 25, but federal soldiers have made little progress in driving out the 
rebels. As Russia attempts to retake the separatist republic it lost in a 
bloody 1994-96 war, it risks repeating costly mistakes. 
The Russians regularly claim they have captured various districts of the 
city, but it is unclear how much of it they actually hold. 
Acting President Vladimir V. Putin, who rose to popularity while prime 
minister last fall by leading Russia into the second Chechen war, is banking 
on a successful military campaign to help him win election to the presidency 
this spring. That is not lost on the Muslim rebels, who are doing their best 
to wreck Putin's plans. 
"It is clear that the Russians are bogged down up to their ears in the 
war in Chechnya," said Ruslan Makhmayev, 35, a unit commander. "And there is 
no chance the war will be over before March 26, the day of the presidential 
elections in Russia. What Putin expected would bring him to power will in 
fact become his undoing." 
Putin portrays the Chechen rebels as "terrorists and bandits" who engage 
in kidnapping for profit and behead their victims when ransom is not paid. 
The rebels cast themselves as freedom fighters battling to liberate their 
republic from 150 years of repressive rule from Moscow. 
In Grozny, the fighters appear upbeat and cheerful. They seem well fed 
and well groomed, given their circumstances. In one basement fortification, 
they have built a sauna. They obtain water from natural springs nearby and 
heat their subterranean dwellings with wood-burning stoves. 
Many of the Chechen rebels fought in the first Chechen war, unlike most 
of the young Russian soldiers they are facing. They say they are well 
prepared for a long siege and have enough food and ammunition to last 
indefinitely. They add to their stores with munitions they take from the 
Russians. 
The biggest shortage is of anesthetics and medicine in the three city 
hospitals where doctors operate on the wounded. 
"The only thing that we do not have in abundance is anesthetics," 
Makhmayev said. "Our hospitals are in need of medications. Over the past few 
days, our doctors have had to perform surgeries without any anesthetics." 
In the city's Oktyabrsky district, which is under the control of Chechen 
forces, no building has escaped damage from Russian bombs. Many have been 
reduced to cement hulks. 
Smoke rises from scattered fires, and a haze hangs over the city. 
Falling snow mingles with ash and turns gray before it reaches the ground. 
Stray dogs and cats roam the streets in search of something to eat. 
An estimated 8,000 to 25,000 civilians remain in the city, most of them 
hiding in basements. There is little food. Those who venture onto the streets 
do so only because they have to. Most of the civilians are elderly Russians 
who lack the means or clan ties that would help them escape the city. 
"The losses among civilians are tremendous, and most of them are ethnic 
Russians," said Avalu Saydayev, 30, commander of a rebel reconnaissance 
platoon. "The federals are killing their own people." 
The rebels have turned apartment blocks and government buildings into 
fortresses, strengthening their hide-outs with concrete and logs. Within each 
city block, they have connected adjoining buildings by breaking through the 
first-floor walls, allowing the fighters to move freely from one building to 
another without going outside. They travel around Grozny through a maze of 
utility tunnels built during better times, popping up in unexpected places to 
ambush Russian soldiers. 
"The Russians can't understand why they keep pounding the city but 
nothing happens to us," Saydayev said. "The federal troops have turned the 
city into a pile of rubble--the people who used to live in Grozny will have 
nothing to return to. City courtyards have been turned into cemeteries." 
While the Russians measure their success by the districts they claim to 
have captured, the Chechens are fighting with the aim of inflicting maximum 
casualties. Their strategy is to yield territory to the Russians and then 
pick them off as they advance. Russia says it was a Chechen sniper who shot 
and killed a top Russian general a week ago as he exhorted his nervous troops 
to move forward. 
Both sides claim to have inflicted huge losses on their enemies while 
suffering few casualties themselves. Chechen commanders say they sustained 
the worst losses in a single day a week ago, when 63 guerrillas were killed 
in intense fighting. 
For the rebels, the most devastating losses have come from the Russian 
bombing, not combat, Makhmayev said. 
"Russian troops prefer not to engage in close combat with us," he said. 
"As soon as a firefight starts, they immediately back off and call in 
aircraft or artillery. They prefer to bomb and not to fight." 
During the first Chechen war, the Russians stormed Grozny and seized the 
city, but at a huge cost in lives. They held the city for more than a year, 
but the outnumbered rebels returned and drove them out. 
The Chechens are preparing for this war to follow the same pattern. 
Sooner or later, they expect government troops to gain the upper hand in 
Grozny. Then the surviving rebels will retreat into the Caucasus Mountains to 
the south, where other rebel forces also are battling Russian troops. They 
will regroup and strike when the time is right. 
The Islamic fighters scoff at Russian claims that federal troops have 
Grozny surrounded. 
"We will suffer no losses while pulling out of Grozny because we know 
the roads that are not controlled by the Russians," said Israilov, the 
battalion commander. "Their statements that Grozny is encircled and sealed 
are nothing but a figment of the imagination. We can enter and leave the city 
whenever we want. We send our wounded warriors out of Grozny every day." 
Abusalman Akhyadov, 49, head of Chechnya's National Security Service, 
the equivalent of the local KGB, said pulling out of Grozny will not 
constitute a rebel defeat. Rather, he said, it will mark the beginning of 
"the real war." 
"With the fall of Grozny, the war will enter its main stage, and this is 
when the Russian aggressors who have stayed alive will envy those who were 
already killed in combat," said Akhyadov, who was a top commander during the 
first war. "We will turn this land into real hell for Russians. The Russians 
should remember their lessons from the previous war--Chechens never 
surrender." 

Special correspondent Nunayev reported from Grozny and Times staff 
writer Paddock from Moscow. 

******

#9
The Globe and Mail (Canada)
19 January 2000
Betting the farm -- and losing
Ottawa poured millions into a doomed project to break up
Russian collective farms. The result is a colossal waste of money
and Russian contempt for yet another ineffectual Western aid effort
By GEOFFREY YORK

Berestyanki, Russia -- For the peasants who toiled at the Forty Years of 
October collective farm, the arrival of the mysterious Canadians was the 
biggest sensation in years.

Some whispered that the Canadians were spies. Others said their briefcases 
were stuffed with dollars to buy up the farmland secretly for foreigners.

When the Canadians announced that their mission was to break up the 
collective into a group of smaller privatized farms, the Russians were 
skeptical. Only a handful allowed themselves to be seduced by the strange 
rhetoric of freedom and private property.

A few months later, on a cold February morning in 1995, the peasants were 
surprised by another odd visitor: a fast-talking auctioneer in a white bow 
tie, standing in a village schoolhouse and slamming his gavel on the bids of 
the four brave farmers who dared to believe the Canadians.

Nikolai Fedulov, who had worked on the collective all his life, was among the 
puzzled spectators at the back of the schoolhouse. He watched the unfamiliar 
capitalist ritual and wondered why they bothered. "I don't have any hopes for 
this," he muttered.

Almost five years later, the project is a distant memory. The Canadians are 
long gone. So are the cattle, the fields of grain, the tractors and even the 
roofs and walls of the cow barns. The buildings are gutted and looted.

Gone, too, is a large amount of Canadian government money. More than 
$3.6-million from the Canadian International Development Agency was invested 
in the breakup of collective farms in the Ryazan region of Central Russia. 
Most of the farms are now dead or dying.

A local Russian newspaper put it cruelly: "Wherever the Canadians passed, 
there is only emptiness."

Federal documents obtained under the Access to Information Act show that the 
government had been told that the privatized farms had little chance of 
success. Yet Ottawa continued to pour money into the doomed project for 
almost three years.

The collapse of the farm project is symptomatic of the larger failure of 
Western efforts to promote capitalist reforms in Russia. The West has spent 
billions to boost capitalism and democracy here, yet it now faces a hostile 
country where it is despised, war is raging, capitalism is a dirty word and 
foreign investors have suffered huge losses.

On both sides of the divide, politicians are debating how to salvage a badly 
soured relationship.

Many Western politicians say aid to support Russian reforms was a colossal 
waste of money, while many Russians accuse the Western reformers of 
sabotaging the country's economy. 

Forty Years of October, named in honour of an early anniversary of the 
Bolshevik Revolution, was a typical Soviet collective farm. With about 1,400 
cattle and 2,000 hectares of land, it supported about 60 workers and 100 
pensioners in the early 1990s.

For anyone who remembers the dreams of the Ryazan auction bidders in 1995, 
the sight of the farms today is a shock.

The barns are gutted, the floors are strewn with rubble, clumps of roof 
insulation and broken pipes and tiles. Everything of value has been stolen. 
Even the bricks and concrete slabs have been looted.

The fields are full of weeds and bushes. There has not been a harvest for two 
years. Farm equipment is rusting and idle.

The peasants are still here, waiting patiently for someone to decide their 
fate. Nikolai Fedulov subsists on a small plot of land in the village, 
knowing that his gloomy 1995 prophecy came true. Now, he waits for a 
wage-paying job. "It doesn't matter to me where I work," he shrugs.

The auction bidders still live in the same village, but their dreams are as 
empty as the barns.

Tatyana Doseikina, the wife of one of the bidders, sits in her small kitchen 
and remembers the brave hopes of 1995. Tears fill her eyes and she begins to 
weep. "I feel so sorry for all of this," she says. "Probably it was a mistake 
to break up the farm." 

To the Canadian government, the farm-privatization project was always an 
ideologically attractive scheme. The plan was to take a key sector of the 
Russian economy and reform it along capitalist principles, showing that it 
could become efficient and productive if Russians were allowed to run their 
own farms and keep the profits.

To do this, the large collectives (which had already been nominally 
privatized after the collapse of the Soviet Union) would be broken into 
smaller farms, each run by shareholders.

The Ryazan region, south of Moscow, was chosen as the Canadian contribution 
to a national $50-million farm-privatization project, largely funded by a 
British government agency.

The Canadian project was launched with great fanfare in 1994. Glossy 
brochures were printed and press tours were held.

To the project's insiders, however, the problems were obvious from the very 
beginning.

A team of inexperienced young Canadians had been sent to the collective farms 
as "consultants" to organize the auctions of the assets and launch 
"information campaigns" to build support among the farmers.

But "none of us had enough farming background to know what we were getting 
into," said one of the Canadians who was dispatched to a collective farm in 
1994 and 1995. "The project was heavily staffed by Western urban kids who 
happened to speak Russian. It was our first time on a farm anywhere in the 
world, let alone a collective farm in Russia. It was all a little pretend. It 
was an enormous boondoggle."

The Canadian, who spoke on condition of anonymity, said the consultants were 
fully aware of the poor chances of success.

"We knew from the start that Ryazan was ambivalent about the project and they 
only gave us weak farms. When you talk about a weak farm in Ryazan, that 
means a really desperate farm. And reorganizing it doesn't create a 
miraculous change."

One expert described the farms as "in an advanced stage of economic collapse."

Theft and alcoholism were massive problems. Supplies and equipment were 
continually pilfered. During harvest, a farm manager had to sleep near the 
hay piles to guard them from theft.

Much of the project's budget was eaten up by the heavy cost of travel and 
other expenses among the Western consultants. Some travelled in 
business-class airline seats and spent weeks in hugely expensive luxury 
hotels in Moscow.

This generated resentment among the project's Russian staff. And the farmers 
were equally resentful when they heard foreigners telling them what to do.

In other regions, peasants were also resisting the project. Opponents set 
fire to the headquarters of a team of Westerners who were trying to break up 
a collective farm in the Rostov region in 1995, causing about $75,000 in 
damage. 

Ryazan was one of the worst possible places for a farm-reform project.

It had never fully recovered from a corruption scandal in the Soviet era that 
had triggered the collapse of its rural economy and widespread hunger in the 
early 1960s.

The documents obtained by The Globe show that within a few months of the 
project's beginning, officials were acknowledging that the farms were 
"financially weak" and overloaded with debts that threatened their survival.

"The newly reorganized farms in Ryazan . . . [will be] in need of all the 
help they can get," a Canadian official in Moscow warned in an internal memo 
in February, 1995.

But the Ryazan regional government and the Russian government failed to 
provide any significant loans to the reorganized farms.

After the auctions, the farms continued to collapse. Harvests dwindled, and 
the cattle became malnourished and were slaughtered.

In a June, 1995, memorandum, a Canadian official said the Ryazan project was 
"fraught with difficulty" and "in many ways less successful than hoped."

Despite these warnings, Ottawa announced in the fall of 1995 that it was 
allocating a further $2.3-million to renew the project and try to rescue the 
near-bankrupt farms with training and technological help.

By the spring of 1996, another memo said the Canadian officials were "deeply 
concerned" by the likelihood that the privatization project would fail. Few 
farms were interested in it any more, and the heavy expenses (about $250,000 
to break up each collective) were "unacceptably high," the memo said.

One official said the Canadian efforts were "Sisyphean" and "doomed." The 
head of the Ryazan land committee said the project was reorganizing "farms 
that had almost ceased to exist."

By this point, Ryazan was increasingly hostile to Western reform projects, 
and Soviet nostalgia was growing. Some regional officials were trying to 
scuttle the Canadian project, even forbidding district heads from attending 
meetings on the project.

A new Communist governor, opposed to farm privatization, was elected in 1997. 
The Communist revival was symbolized by the reappearance of a huge statue of 
Lenin. The monument, removed from Ryazan's capital when the Soviet Union 
collapsed, was restored to its central place of honour in the city in 1997.

A few weeks after his election, the Communist governor met Anne Leahy, then 
Canada's ambassador to Russia. With television cameras recording the entire 
scene, the governor blasted the farm-privatization concept, saying he was 
tired of "foreigners who had all the solutions."

The deputy governor in charge of agriculture, Sergei Salnikov, told Ms. Leahy 
that the project had failed to improve the productivity of the privatized 
farms.

Faced with such hostility, the ambassador urged Ottawa to pull the plug, and 
the Ryazan project was terminated.

Mr. Salnikov has no regrets about the collapse of the Canadian project. "This 
policy of breaking up the farms was no good for us," he said. "It was done 
artificially, from above. They shouldn't have destroyed the things that 
existed for many years."

Buying and selling farmland would only benefit the corrupt and the wealthy, 
he said. "All of our natural resources have gone abroad. We only have our 
land left, and now they want us to pawn it."

Alexander Chervakov, head of a farm consulting firm in Ryazan, said the 
Canadians failed to understand the psychology of Russian peasants. "Their 
communal feeling is very strong," he said. "They don't want their neighbour 
to have more than them. If someone buys the land, they'd have to work for 
another person, and they think that's slavery."

The Westerners assumed that the Russians would be happy to leave the 
collectives if they were told they could make a profit on a private farm.

But by the early 1990s, virtually any entrepreneurial Russian farmer had 
already abandoned the collectives and moved to the cities to make money. 
Those who remained behind were the least educated, the least ambitious and 
the least willing to take risks. Most were pensioners and alcoholics.

At the Forty Years of October collective farm, the peasants are stunned when 
a visitor tells them that Canada spent millions of dollars on the reform 
project. "It didn't come to us," one man says. "It must be somewhere high up."

Alexander Doseikin, a 35-year-old former chairman of the Forty Days of 
October collective, was one of the four bidders at the 1995 auction.

Today, he feels it was a mistake. "Maybe the idea was good, but people didn't 
understand it," he said.

At the auction, Mr. Doseikin bought up most of the farm equipment, while 
another farmer bought the livestock. They refused to co-operate with each 
other, and the cattle were eventually slaughtered.

Mr. Doseikin's farm survived for three years after the auction, but it lacked 
cash and ended up strangled by the rising burden of unpaid wages and tax 
debts.

The farm workers went to court to demand their wages. Then the tax police 
began seizing tractors in lieu of unpaid taxes. They took the concrete 
pillars and wall slabs of the cattle barns. The peasants began stealing 
everything that remained: the bricks, planks of wood, pipes and roofing 
materials.

Mr. Doseikin said fewer than a dozen of the 55 members of his bidding group 
did any work on the farm.

"Now, they've lost their jobs, their wages, everything. Some are in despair. 
Some are drinking. They're like a flock of sheep without a shepherd."

One peasant, Yelena Krivonogova, says she supported the privatization project 
in the beginning. "We believed that life would be better and everything would 
be good. But we got only promises. It got worse and worse, and now we're 
sitting at home doing nothing."

Mrs. Krivonogova supports her family with a vegetable garden, three cows, a 
monthly pension of about $16 and a part-time job as a cleaner in a bar for 
$10 a month. Sometimes she does not have enough money for bread.

But still she waits for someone to revive the farm. "This can't last 
forever," she says. "We can still hope."

******

#10
The Globe and Mail (Canada)
January 19, 2000
Shock-therapy program 'an enormous mistake'
By Geoffrey York

More than $55-billion (U.S.) in international aid has poured into Russia in 
the past eight years. Yet its economy is still mired in depression, its 
poverty has deepened, and its hostility to the West has steadily increased.

This combination of massive aid and perverse results has triggered a furious 
debate over the Western role in the Russian reform process. Many politicians 
now believe the aid was wasted, stolen, misdirected or spent on misguided 
economic advice.

Much of the Western aid was blatantly political or self-interested. A 
$10-billion loan by the International Monetary Fund in 1996 was, at least in 
part, aimed at helping Boris Yeltsin win re-election as president. Another 
major IMF loan was approved in 1998 after pressure from Western investors who 
feared a stock-market crash.

But much of the aid was stolen or disappeared, including a U.S. food-aid 
program in 1993 and a coal-industry loan from the World Bank in 1996.

Another large chunk was spent on the army of Western advisers and consultants 
who descended on Moscow in the 1990s to promote the "shock therapy" policies 
of their free-market ideology.

Their prescription -- massive privatization, rapid liberalization and tight 
monetary discipline -- became known as the "Washington consensus" because it 
was promoted by the Washington-based chiefs of the IMF, the World Bank and 
the U.S. government.

Critics say these policies have led to high inflation, deep depression, a 
collapse of investment and massive capital flight of more than $140-billion 
(U.S.) since 1992.

Joseph Stiglitz, the former chief economist of the World Bank, says the 
Western advice to Russia was "an enormous mistake." He argues that the West 
should have begun by creating a deeper institutional foundation for reform 
that could have prevented the looting of state assets.

David Kotz, an economist at the University of Massachusetts, says the swift 
privatization of Russia's lucrative state assets "was bound to set off a 
brutal and corrupt scramble for that wealth" by shadowy businessmen who were 
more interested in sending their profits abroad than in investing in the 
development of their industries.

On the other side of the debate, many scholars and analysts say the Western 
policies of shock therapy were successful in Eastern European countries such 
as Poland and Hungary. A slower approach in Russia would have led to worse 
problems, such as those in Ukraine or Belarus, they say.

Canada, for its part, has spent about $145-million on technical assistance 
programs in Russia since 1991. The Canadian embassy in Moscow was an 
enthusiastic supporter of the "young reformers" who gained power in the early 
and middle years of the 1990s.

One former Canadian diplomat said he was treated frostily by his superiors 
when he raised questions about corruption in the Russian cabinet. "There was 
an institutional attitude of 'We only want to hear good news,' " he said. 
"The result was a lot of bad projects and wasted money."

Western governments (and many Western journalists) generally tended to 
portray Russian politics as a battle between noble young reformers and evil 
Communists. In reality, the "reformers" were often as corrupt and autocratic 
as the Communists.

In 1995, for example, Kremlin reformer Anatoly Chubais supervised a series of 
rigged auctions to sell some of Russia's wealthiest state companies, 
including major oil and mineral producers. The winning bidders paid a small 
fraction of the true value of the companies. The bid-rigging was so blatant 
that some auctions were won by the same companies that had been chosen to 
organize the auctions.

In the past few years, the debate over Russian reform has been fueled by 
revelations that as much as $10-billion (U.S.) in Russian money may have been 
laundered through the Bank of New York in 1998 and 1999, and that some of 
this money may have been stolen from Western aid.

James Leach, chairman of a Congressional committee that held public hearings 
on Russian corruption last fall, charged that Russia had become "the world's 
most virulent kleptocracy." And the House majority leader, Richard Armey, 
said the American policy toward Russia was "the greatest U.S. foreign policy 
failure since Vietnam."

Even the U.S. administration's top Russia defenders have begun criticizing 
Russian corruption and capital flight with unprecedented vigour. Last fall, 
after years of ignoring the issue, the White House began complaining that the 
Kremlin's response to corruption was inadequate. It threatened to block 
further IMF aid to Russia unless it cracked down on corruption.

*******

#11
IMF READY TO DISCUSS BUT NOT DISBURSE RUSSIA LOAN
By Interfax analyst Pyotr Antonov

MOSCOW. Jan 25 (Interfax) - The prospects of Russia getting IMF
money depend not so much on the Fund mission coming to Moscow on
Tuesday, but on who becomes the next Fund managing director and when.
Michel Camdessus is retiring from the top post in the Fund on
February 15, but leading countries have so far failed to reach agreement
as to his successor.
It is quite possible that the seat will remain vacant for some time
with Camdessus' first deputy Stanley Fischer being the acting managing
director.
The disbursement of a loan to Russia is a political matter and only
a political figure, which the IMF managing director is, can decide it.
When the IMF suspended the disbursement of a loan tranche approved
in 1999, it said Moscow had failed to carry out the program of
structural reforms. However, there is little doubt that the true reason
was the very critical attitude of key Fund shareholders to the Russian
operation in the North Caucasus.
The current visit of the IMF mission to Moscow clearly only
indicates the willingness of the sides to carry on the almost
interrupted dialogue but leaves the question of the resumption of
lending to Russia open.
Formally, Moscow has failed to carry out the structural measures
that were the official reason for the refusal to continue lending in
December.
The Duma has not started passing amendments to bank and company
bankruptcy laws. Neither has the share of cash in settlements for output
and services of natural monopolies grown to the promised size.
Moreover, IMF experts, if they wish, may point to other additional
conditions of the September 31 economic program, which were to be
fulfilled by the end of the year.
However, the mission is likely to recognize the fulfillment of the
1999 coordinated monetary program that was, by the way, the main
component of the understandings between Moscow and the IMF.
"The paradox of the situation is that in the past, we could hardly
boast of fulfilling the monetary program for any reported period which
was always strictly checked by IMF experts, still there was no halt in
bilateral relations. Now that we can confidently say that the government
overfulfilled the 1999 monetary program, we do not feel overly
optimistic about it," chief of the macroeconomic department of the
Russian Finance Ministry Anton Siluanov told Interfax.
Central Bank chairman Viktor Gerashchenko seems the most
pessimistic about the prospects of receiving IMF money. He does not
expect any loans until the end of March at least.
"To a certain extent we have fallen victim to American domestic
political games," he said referring to the presidential race in the U.S.
First Deputy Prime Minister and Finance Minister Mikhail Kasyanov
is more optimistic. Last week he voiced hope for the resumption of talks
with the IMF on loans to be disbursed immediately after the Moscow
meetings with the IMF mission this week. He said Russia did not regard
the military operation in Chechnya as an obstacle to another IMF loan
tranche.
In general the IMF can revise its political decision and meet
Moscow halfway.
From this viewpoint the arrival of the mission is undoubtedly a
good sign. The IMF can make a decision, even a political one on loan
disbursement without losing its face and in keeping with all
formalities, only on the basis of the mission report enumerating the
formal reasons for a change in the Fund's stance.
However, only a person with formal powers to head the Fund, even
temporarily, can undertake this responsibility.

*****

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