This Date's Issues: 4094 4095
Johnson's Russia ListReturn to CDI's Home Page I Return to CDI's Library
8 February 2000
[Note from David Johnson:
1. The Russia Journal: Andrei Piontkovsky, Putinism: highest stage of
2. Financial Times (UK): The battle for Putin's political soul. As Russia claims victories in Chechnya, the fight to influence the man
set to win the presidency intensifies, writes John Thornhill.
3. Reuters: Putin says Russia needs stability, strength.
4. Moscow Times: Simon Saradzhyan, FSB Says Babitsky Alive, But Can't
5. RFE/RL: Sophie Lambroschini, Chechnya: President Says War Will
6. Kommersant-Vlast: Yelena Tregubova, VLADIMIR THE VAGUE.
7. Vek: Interview with Sergei Glazyev, Chairman of the Duma Committee
on Economic Policies and Entrepreneurship.
8. Moscow Tribune: Stanislav Menshikov, SHOULD WE COUNT ON FOREIGN
INVESTMENT? Let Us Be Cautiously Optimistic.
9. Izvestia: Andrei Stepanov, PRIMAKOV GIVES YAVLINSKY A CHANCE.
Nonetheless the Main Presidential Contender Remains the Same.
10. Anatoly Zabolotny: NEW ENGLISH LANGUAGE DEMOCRATIC DEVELOPMENT
RESOURCE ABOUT SIBERIA.
11. Reuters: Russian economic strategy-ask the people first.
12. Bloomberg: IMF Won't Lend More Money to Russia Without Reforms.]
The Russia Journal
February 7-13, 2000
Putinism: highest stage of robber capitalism
Opinon piece by Andrei Piontkovsky
No discussions are required to define the socio-economic situation that has
taken root in Russia over the last decade. Observers from staunch Communist
Viktor Anpilov to Anatoly Chubais in Russia, and from George Soros to
Laurence Summers abroad, all describe it in more or less the same terms:
crony capitalism, family capitalism, oligarchic capitalism, robber capitalism.
The choice of this or that epithet is a matter of linguistic taste and
doesn't change the essence. The essence lies in a complete merging of money
and power at a personal level, a situation for which even the word
"corruption" is no longer apt.
In classical corruption, there are two players, the businessman and the
government official to whom the businessman gives a bribe. But Russia's
oligarchs -- its Potanins, Berezovskys, Abramovichs and so on -- didn't even
have to waste time and money and state officials. They either became those
same officials or became shadow figures in the president's entourage and
acquired the right to dish out official jobs and functions. Boris Berezovsky
even boasted as much to the whole world in his famous interview to the
Financial Times in October 1996.
Thus this shameless coupling of money and power reached its logical
With this system firmly cemented in place by the 1996 presidential elections,
even some of its own creators realized to their horror that their baby had
grown out of hand and wasn't going to let them deprivatize the state. One of
those creators was Anatoly Chubais. Speaking after his resignation from the
government, he said "In 1996, I had a choice between the communists coming to
power, or robber capitalism. I chose robber capitalism."
Chubais, like many other reformers, thought it wasn't important how to divide
up assets -- the main thing was to create owners who, once they'd stolen all
they could, would turn to effectively developing production. But this won't
happen. In Russia, it wasn't so much assets that were privatized as control
over financial flows, above all budget money. Such a system cannot give
birth to effective owners.
The reformers created a Frankenstein -- a creature that has now tasted
fantastic wealth and, like a drug addict, won't ever come off the injections
of budget money.
When he personally appointed these super-rich, Chubais naively imagined that
at some point, he would be able to feed honest and transparent rules into the
system. The oligarchs' revenge was immediate and pitiless. They ordered their
media outlets to concentrate their fire on Chubais and destroy his moral
reputation. Unfortunately for Chubais, the oligarchs had little trouble
digging up a series of episodes from his past, enough to accuse him of a
"conflicting interests" in the very least.
Timid and inconsistent attempts by subsequent governments (Sergei Kiriyenko
and Yevgeny Primakov) to limit the oligarchs' power, drag them away from the
budget feeding trough and from the state decision-making process met with the
same resolute resistance. Some oligarchs, such as Alexander Smolensky or
Vladimir Potanin would see their influence wane. Others, like Roman
Abramovich or Nikolai Aksyonenko would see their star rise. But the essence
of the system would remain unchanged. And the only genuine concern was Y2K,
not the imaginary computer threat, but the very real problem of having to
face the democratic formality of presidential elections.
Due to a number of constitutional and physiological reasons, the reliably
privatized Boris Yeltsin was unable to run a third time. And the 1996
campaign strategy -- dangling the threat of communism -- had exhausted
Stalinist concentration camps could not serve as a pretext for "democratic"
thievery any longer. It was time to find a new and original idea. The
intellectual lackeys found it.
Continued next week.
(Andrei Piontkovsky is director of the Center
of Strategic Research in Moscow.)
Financial Times (UK)
8 February 2000
[for personal use only]
RUSSIA: The battle for Putin's political soul
As Russia claims victories in Chechnya, the fight to influence the man set to
win the presidency intensifies, writes John Thornhill
The battle for the Chechen capital, Grozny, may be largely over. But with
Russia's presidential elections less than seven weeks away, the battle for
Vladimir Putin's political soul is intensifying. And Russia's liberals, once
counted among Mr Putin's most eager early supporters, fear they are rapidly
losing ground in the struggle as the clear presidential favourite surrounds
himself with illiberal former colleagues from the security services.
Once again Russia's liberals are confronting the age-old dilemma: is it
better to press for incremental improvements within an imperfect
administration or stand outside and call for radical change?
The outcome of their deliberations will colour the complexion of any Putin
regime. But it could also influence Russia's relations with the outside
world, since Russia's liberals remain the preferred interlocutors of most
The approval of Russia's liberals could therefore help lend moral legitimacy
to Mr Putin's regime abroad; their condemnation could lead to Russia's
Some liberals simply oppose Mr Putin out of principle. As a former officer in
the repressive Soviet-era KGB, Mr Putin should be considered guilty until
proven innocent, they say.
Moreover, his behaviour since becoming prime minister last August has shown
an alarming streak of authoritarianism.
Grigory Yavlinsky, leader of the liberal Yabloko party, argues that Mr Putin
has turned a legitimate anti-terrorist operation in Chechnya into a brutal
war against an entire people.
Mr Putin is also shielding the corrupt oligarchs, who helped muzzle the press
and manipulate the parliamentary elections in December.
Mr Yavlinsky is determined to carry the liberal standard into the
presidential elections - even though he has almost no chance of victory.
"Since 1991 we have been fighting for an open society, a liberal democracy,
and private property rights. We cannot rely on fantasies," he says. "That is
why we must compete with Putin and oppose him in the elections."
Some other liberals are even more outspoken in opposing Mr Putin.
For example, Andrei Piontkovsky, director of the Centre for Strategic
Studies, a Moscow-based political institute, argues that Mr Putin's ruthless
prosecution of the Chechen war should have exploded the myth that Russia's
acting president could ever be a friend of liberalism.
"People say Putin is the lesser evil but in what units can you measure evil?"
Mr Piontkovsky asks. "Everything that I know about Putin makes me think he is
very dangerous for my country and for the world."
Some of Russia's economic liberals, however, scoff at such "hysteria" saying
it is important to engage - rather than alienate - Mr Putin and help set the
When deputy mayor of St Petersburg, Mr Putin worked in one of the most
liberal administrations in Russia. He is a market-minded manager who wants to
turn Russia into a modern, civilised country, not turn back to some
semi-mystical model of Russia's past, they claim.
The most powerful advocate of this view is Anatoly Chubais, chairman of the
UES electricity company and prime strategist for the liberal Union of Right
Forces movement, which did unexpectedly well in December's parliamentary poll.
He argues that liberals should support Mr Putin's attempts to consolidate the
state and modernise the economy. "I do believe that the liberals will be able
to press the president to follow their basic principles," he says.
But some of Mr Chubais's colleagues are far more ambivalent about Mr Putin.
Sergei Kiriyenko, the parliamentary leader of the Union of Right Forces
movement, has already criticised Mr Putin's parliamentary manoeuvres - even
though he seems likely to back him in the forthcoming elections.
"This is not going to be our government. These are not going to be our
policies. Our time will come in 2003-04 or even 2007-08," Mr Kiriyenko says,
referring to the timetable for the next rounds of parliamentary and
Another leading member of the Union of Right Forces, Konstantin Titov, the
governor of Samara, has even declared he will stand against Mr Putin, saying
Russia must have a contested democratic election rather than a nomenklatura
"It is essential to have a further liberalisation of the economy and give
more rights to the regions in the Russian federation," he says.
However, Yevgeniya Albats, one of Russia's most courageous reporters, says
that liberals should only judge Mr Putin on his future actions rather than
his past associations.
"We should not judge KGB officials by their affiliation because that was how
they judged us in the past. We do not want to repeat their legacy," she says.
Such a view may be commendably high-minded. But, as Mr Piontkovsky argues, it
could also prove fatal for Russia's liberals if it is mistaken about the true
nature of a Putin regime.
Putin says Russia needs stability, strength
By Ron Popeski
MOSCOW, Feb 7 (Reuters) - Acting President Vladimir Putin said on Monday
Russia needed to end its chronic political instability and finish off its
campaign to destroy Chechen rebels to help build a strong post-Soviet state.
Putin, runaway favourite in next month's presidential election, returned to
his favourite theme in an interview with ORT public television of restoring a
measure of Russia's greatness and dealing firmly with its detractors.
Chechen separatists, he said, had been taught a lesson in the Russian army's
four-month offensive. What was needed now was to complete the job and entice
investors by persuading them the country was stable and would offer a fair
deal for all.
"If you go from one coup d'etat to another, if you are always living in
anticipation of the next one and what its consequences might be, just who is
going to invest?" Putin asked.
"There will be no major investment until we have a solid political system,
stability and a strong government defending the market and creating
favourable conditions for investment. It seems to me that the president who
will be elected must be just such a factor."
Russia had no need to go begging to international financial institutions like
the International Monetary and World Bank, he said, though both their credits
and expertise were welcome.
"It would be improper for us to go pleading for anything. We are a
self-sufficient country," Putin said, wearing a casual grey sweater and
reclining on a peach-coloured sofa.
"It is not an end in itself to get credits. Rather the aim is to maintain
good working relations with international institutions...who have experts and
whose aim is to integrate developing economies into the world economy."
PUTIN WELL AHEAD
With less than seven weeks to go in the election campaign, Putin's is well in
front of a field weeded out of nearly all candidates once viewed as a threat
But one poll announced on a Russian television channel at the weekend put his
rating at 48 percent -- less than the 50 percent required to win outright in
the first round of voting.
The acting president has built much of his popularity on a decisive stand
against the Chechen separatists and on an image of youth and vitality -- in
sharp contrast to Yeltsin's slow moving, sometimes incoherent appearances in
his later years.
Critics say he has revealed little of plans to right the economy. The IMF
said at the weekend Russia was lagging on promised structural reforms needed
to win new loans.
Putin said he had had no doubts about the success of the Chechnya operation
which had inflicted a lesson on the rebels.
"The bandits have been taught a significant lesson, we have inflicted serious
damage which will be difficult to repair. We can talk about a breakthrough in
this context," he said.
"What next? Further on, all the large bandit groups should be destroyed and
dispersed and afterwards we will pull out the troops from Chechnya," said
Putin said over the weekend that Russian forces were now in complete control
of Grozny and the military had turned its attention to rebel strongholds in
mountains to the south.
He said the West, which accuses Russia of excessive force, failed to
understand that "if parts of Russia are dragged away then it will lead to the
complete disintegration of Russia."
All countries could be Russia's allies, he said, "if they share our view of a
multi-polar world." But states, he said with half a smile, had better not
offend Russia's honour. "Whoever offends us will last no longer than three
days," he said.
February 8, 2000
FSB Says Babitsky Alive, But Can't Say Where
By Simon Saradzhyan
The whereabouts of Radio Liberty reporter Andrei Babitsky remained unknown
and his colleagues continued to fear the worst despite claims by Russian
officials Monday that the war correspondent was still alive.
The Federal Security Service released a tape last week that they said showed
Babitsky being handed over to Chechens in exchange for two Russian soldiers
on Thursday near the Chechen town of Argun.
But leaders of the Chechen rebels said they know nothing about the exchange
or about Babitsky's whereabouts. "Had he been with us, we would have been
able to guarantee his safety," Chechen President Aslan Maskhadov said in a
telephone call to Radio Liberty over the weekend, station journalist Vladimir
Federal Security Service director Nikolai Patrushev told reporters Monday
that his agency is certain Babitsky is alive. "I don't know where he is -
that is beyond our department," Patrushev said. He would not elaborate.
The Kremlin's Chechnya spokesman, Sergei Yastrzhembsky, told reporters that
Patrushev's claim is based on solid evidence. Yastrzhembsky said he also is
unaware of Babitsky's whereabouts, but is "very interested" in finding out.
Meanwhile, the Prosecutor General's Office announced it will issue an arrest
warrant for Babitsky if he doesn't show up for interrogation.
Radio Liberty editors and journalists said they do not trust Patrushev's
reassurances. "I know Andrei and I'm sure he would have already called us if
[he had been] let go," editor Vladimir Baburin said. "I fear the worst."
Babitsky's colleagues believe officers of Russian power agencies either are
still holding him or have killed him for his pro-Chechen coverage of the war.
They see the filmed exchange as an attempt to shift the responsibility for
Babitsky's safety to Chechen rebels.
Dolin, who recently returned from a trip to Chechnya, said he could confirm
that the taped exchange happened no earlier than Wednesday. Babitsky was
wearing a shirt that Dolin had passed to him Wednesday morning through the
prosecutors holding him in northern Chechnya.
Dolin said he met people who told him Babitsky had been severely beaten
during his detention.
One of them, a Chechen refugee, said he had heard a member of pro-Moscow
Chechen leader Beslan Gantamirov's special police force boasting about
beating Babitsky in Urus-Martan, Dolin said.
Yastrzhembsky said an army intelligence unit seized Babitsky when he was
leaving the Chechen capital on Jan. 16 for failing to have military
accreditation. He was later accused of collaborating with the Chechen
Dolin said he was told that Babitsky was taken to Urus-Martan before being
transferred to a Justice Ministry detention facility in Chernokozovo in the
district of Naurvsky in northern Chechnya.
Dolin said he met the aunt of a man who was being held in the same facility,
who quoted her nephew as saying that Babitsky was beaten repeatedly and
forced to sing loudly for long periods of time.
Dolin went to the settlement last Wednesday morning and met with the head of
the Naursky district prosecutor's office, Vitaly Tkachev, who confirmed that
Babitsky was being held in Chernokozovo.
The prosecutor refused to let Dolin see Babitsky but agreed to have warm
clothes, including the shirt, passed to him. However, when Dolin showed up
later the same day with food for Babitsky, Tkachev said he had been ordered
to hand him over to another government agency. He refused to identify the
Neither the Justice Ministry nor any other law-enforcement agency has claimed
responsibility for the controversial exchange, which has drawn strong
criticism from human rights groups and liberal parties, such as Yabloko.
However, Yastrzhembsky said Monday that the exchange had been sanctioned by
the Prosecutor General's Office and the Interior Ministry.
An official at the North Caucasus directorate of the prosecutor's office said
in a telephone interview Monday that Babitsky was released on condition that
he reports to investigators. The official said his agency has found more
evidence of Babitsky's involvement in the activities of Chechen rebels, but
would not elaborate.
The liberal Yabloko party issued a statement Monday condemning the exchange
of Babitsky even if it had been carried out with his consent, as
Yastrzhembsky has said.
"You cannot exchange one citizen of your country for another. A dangerous
precedent has been set," the Yabloko statement said.
Chechnya: President Says War Will Continue
By Sophie Lambroschini
The Russian military has raised flags over the Chechen capital of Grozny and
is reporting that many Chechen fighters were killed fleeing the capital. But
Chechen President Aslan Maskhadov, in an interview with RFE/RL's Russian
Service, says there is no end in sight to the hostilities with Russia.
Moscow, 7 February 2000 (RFE/RL) -- Chechen President Aslan Maskhadov tells
RFE/RL that Grozny held no strategic value for the rebels and that they will
now switch to a strategy of partisan warfare.
In an interview with RFE/RL Sunday, Maskhadov said the casualty rate on both
sides is higher in this war than in the previous one -- but that this
increased savagery will only make it last longer. He said Chechen ranks are
being replenished by ordinary Chechens, motivated both by a longing for
revenge for fallen friends and by a distrust of the Russian government, which
he said has promised amnesty for Chechen men but then thrown them into
Maskhadov said that those broken Russian promises have ensured that there
will never be a mass surrender of Chechen fighters.
"Not only for Chechen fighters but also for an ordinary person who doesn't
take any part in the war -- [they know] what it means to become a prisoner,
what a filtration camp is. We heard, we saw during the previous war. And
[because of that] not one fighter would decide to give himself up even if he
wanted to. And those [missing fighters], who were probably gravely injured
while they were trying to leave Grozny, may have been made prisoners. I don't
envy a Chechen who ends up in a filtration point, or ends up missing like
those 1,500 we're still looking for."
The Chechen president said that what he called Russian "barbarism" in the
Russian-occupied zone is motivating new recruits.
"We cannot give an exact number of the number of fighters. If there are up to
10,000 in position right now, the reserve can count up to 20,000. For
example, [see] what happened in Bochay-Yurt. It was announced that the Duma
voted an amnesty, and some of our short-sighted fighters decided to wait out
[the war] at home. But they were caught and sent to filtration camps. There
has been an enormous demonstration going on in Bochay-Yurt for a week
already. The people are out on the streets, demonstrating against the
[Russian] military commandant's office, whoever. That is [our] reserve. And
then it just continues like the last war, it is becoming a long partisan war,
where every Chechen considers it to be his duty to kill one Russian soldier."
The Russian government has said the fight in Chechnya is being funded and
fought largely by foreign influences. But Maskhadov says the number of
mercenaries fighting with the Chechens has been highly overstated -- both for
the previous and the present war.
"I'll tell you frankly about the previous war. There were Lithuanians, two or
three people. One Pole, I think. Around 12 Ukrainians. About 80 Arabs.
Kabardinians -- five, six. Many Ingush. During this operation it's the same
-- a few dozens. The rest is lies and politics."
Maskhadov said the current casualty rate is much higher than during the
"If we compare the present war with the previous one for the same period --
five months, six months, the harshness of the military operations, the
strained atmosphere, the casualties on both sides are about ten times higher
than during the previous one. So in numbers, that's 7,000 or 8,000 for the
Russian side. On our side, 1,500 to 2,000."
Maskhadov said that 2,000 Chechen fighters withdrew through a corridor out of
Grozny and escaped into the mountains last week. He denied the Russian
reports that thousands of Chechen fighters were killed by landmines, lured by
false information to a supposedly safe corridor out of the city.
But he said his men did suffer heavy losses during the retreat. He said two
important field commanders had been killed and a third, Shamil Basayev,
gravely wounded. Yesterday, Russian television aired footage of a wounded
Basayev having his foot amputated.
Kommersant - Vlast No. 4
[translation from RIA Novosti for personal use only]
VLADIMIR THE VAGUE
By Yelena TREGUBOVA
Vladimir Putin was appointed the acting
president a month ago. He signs decrees, makes programmatic
statements and meets with citizens. Nobody seems to doubt that
Putin will be voted into office on March 26 or April 16 at the
Nevertheless, the past thirty days have failed
to clarify his presidential traits.
Vladimir Putin does not, nor will, have rivals any more.
He has covered a third of the road leading to the presidential
election with no big losses.
The "small" Chechen operation has turned into a bloody,
protracted war, and the friendship with the Right liberals has
been marred by the Duma "collusion," but Putin's rating is as
high as ever.
It is true that one public opinion pollster said last week
that the popular trust in Putin had dwindled 7%. But his
presidential rating did not suffer: sociologists say that 55%
to 60% of the voters are prepared to vote for him. This
percentage is big enough to last Putin until the March 26
voting, even if Unity, a.k.a. Medved, or Bear, chooses to team
up with the Communists every day of the week, and Grozny's
Minutka Square has to be taken again as many times.
In this sense, the popular opinion that Putin is a
full-fledged, rather than acting, president, is absolutely
justified. Still, even though he has no rivals, his is a civil
marriage to the nation--primarily because he is being led to
power by Yeltsin's team whose rules of the game he has been
forced to adopt.
To be more precise, Putin is conducting two election
campaigns: one for the nation and the other for his new, or
rather old, Yeltsinist entourage.
Understandably, Putin will be heavily dependent on the old
Kremlin staff which has appointed him the successor, until the
election: he has to rely on the team for its election
experience, something he does not have, if he wants to become
On the other hand, the "popular" election campaign forces
Putin to demonstratively part his ways with the "family." But
then, the narrow circle of Kremlin insiders is well aware of
this circumstance. This is why Yeltsin's resignation was
narrowly followed by the sanctioned dismissal of Tatyana
Dyachenko from the Kremlin and Nikolai Aksenenko's deposition.
On the other hand, Putin has kept Alexander Voloshin as
his chief of staff. Shadow Kremlin helmsman Valentin Yumashev
continues to play a key role in the making of an absolute
majority of political decisions. And Tatyana Dyachenko
continues to keep a close watch on Putin's election campaign.
There have been no radical personnel changes in the
government, either: Viktor Kalyuzhny, the old Kremlin masters'
proxy, is still in charge of the fuels complex, while Mikhail
Kasyanov, the de-facto premier, was believed to be close to the
"Family" in Yeltsin's days.
Putin cannot but understand that keeping company with such
"friends" may cost him points in the "popular" election
But jettisoning them would be counter-productive for his
election campaign as the "Family" sees it. He is therefore
"fighting on two fronts."
Asking which side he is really working for incorrect--just
like in the case of any double agent. More probably than not,
he is working for a third side, his own.
The Kremlin's strategists who did not have to sweat to win
the parliamentary elections and force Putin's presidential
victory in parallel will certainly find it hard to believe that
they may be asked to vacate the Kremlin by polite men in
uniforms either around VE-Day or the International Children's
Day--if Putin wins the election in the first round, he will be
sworn in on May 8, and if in the second round, on May 28. But
this is possible theoretically.
"He has no team of his own. The ones he has placed in the
second echelon is all he has in his personnel reserves,"
Kremlin old-timers insist. But practical experience indicates
that a team of one's own, just like a sky-high rating, is
something one can gain in time...
Once they found themselves in mortal peril, the
ex-president's men have managed to muster forces and prove they
are the dream team of election managers. But they have never
been the dream team of economic managers. And once the voting
is over, Putin just may find it easier and more reliable to run
the country with the help of his former colleagues.
But God alone knows Putin's post-election choice. His
election rhetorics, at least, are indicative of absolutely
Interview with Sergei Glazyev,
Chairman of the Duma Committee on Economic Policies and Entrepreneurship
Vek, No. 5 (370) 2000
[translation for personal use only]
Almost immediately after settling in their new Duma offices, some CPRF
deputies began to speak about the legislators' need to correct the mistakes
that occurred in the course of privatization.
- Sergei Yuryevich, would you mind to clarify the meaning of your statement
about the review of the privatization results?
- The most grave consequence of our privatization campaign is the emergence
of a class of property owners that bear no responsibility for the use of
their property. The present owners of enterprises are interested only in
the fastest ways to convert their rights of ownership into liquid assets -
such as cash, securities, real estate at home and abroad. The new owner is
not held responsible for anything. He obtained control over his enterprise
without running into serious expenses, through personal connections with the
godfathers of privatization, who were handing out property on behalf of the
government, with severe violations of the law. As a result, the newly
emerging proprietors view the companies that they acquired often as milking
cows: they expropriate current assets, take credits that they know they
cannot pay back, and end up driving their companies to bankruptcy. In a
healthy market economy, in which a proprietor earns his ownership legally,
he is interested in accruing property and in its efficient use.
<...> When the legality of the ownership rights is questionable, the owner
who ripped it off will hardly invest in its development and strive to
achieve high efficiency. He will rather prefer to squeeze maximum profit out
of it, to launder it and hide it abroad in a reliable place. This is the
principal cause of the colossal capital flight out of Russia, which has been
going on for almost ten years.
Even those industries that are potentially profitable - oil, metals,
chemicals - are virtually bankrupt. As a rule, revenues from the use of the
privatized property were not invested in the development of production, but
circulated in financial speculation and exported abroad. As a result, the
privatization of these industries led to the decrease rather than increase
in efficiency, decline of investment and production.
Not only did the procedure of denationalization that was used create
difficult problems with regard to formation of an efficient property owner,
but it also led to severe organizational consequences. Namely, complex
networks of production and technology were fragmented, which led to colossal
rise in production costs in such comples industries as production of
aircraft. The cooperation among producers became very difficult to achieve,
the links of research and development with production were destroyed. The
remains of previously integrated industries that became independent as a
result of privatization are doomed to looting and decay. <...> Tens of
millions of people who lost their salaries and jobs became victims of this
<...> Meanwhile, the revision of the privatization outcomes has become by
itself a permanent process. Large-scale predators swallow small fish, use
the procedure of bankruptcy to take over the property of small holders. The
institute of temporary property administrators has become a permanent one,
while property holders see their positions as short-term. The program that
we propose is not about revising the results of privatization, it is about
the restoration of legality. We will achieve the ultimate clarity as regards
the legitimacy of property rights, with the purpose of increasing the
efficiency of management in the privatized companies.
<...> Citizens who acquired items of former government property on a legal
basis, must be confident that it will not be confiscated at the discretion
of bureaucrats. At the same time, the violations of the law committed in the
course of privatization ought to be corrected, and those guilty ought to be
punished. With this purpose, we will conduct a review of the privatization
results and will go to court in order to overturn illegal decisions.
- The intentions of the Duma faction that you represent, namely to revise
the privatization results, contradict the statement by Vladimir Putin who
ruled out any new redistribution of property. Does it mean that the
Communists declare their opposition to government policies from the first
days of the new Duma?
- Let me repeat: we demand the restoration of legality. We rely on the
principles of economic efficiency and social justice. I don't think the
Prime Minister is against that. At the same time, I have to observe that so
far the government does not have a ny consistent policy as regards the
management of government property.
- You mentioned the facts of collusion between government agencies and
property owners in the course of privatization. Would you mind specifying
your claim of collusion?
- I am not a judge, therefore I must yield to controlling authorities. As
concluded by the Accounting Chamber, the Ministry of Finance deposited
federal budget funds in the accounts of commercial banks, in the amount of
$603.7 mln., which is virtually equivalent to the sum total of federal
budget revenues from the notorious loans-for-shares auctions.
More than a half of these funds - $337.1 mln. - was deposited in the three
commercial banks that soon became winners in these auctions. In other words,
the government provided a virtually interest-free credit to commercial
banks, so that they be able to buy the juiciest chunks of government
property. Some episodes of the loans-for-shares auctions were recognized as
facts of collusion. The General Prosecutor's Office has enough material to
demonstrate the scale of looting of the national wealth.
- How efficient is government management of its own share of property, for
example in the natural monopolies?
- There is little government management to speak of. Government property is
being managed by people who appointed themselves to their positions and who
seek personal enrichment only. In order to stop the looting of the treasury,
we must increase the personal responsibility of individuals who act on
behalf of the government. To this effect, we have prepared a proposal
package. I hope it will be soon reviewed by the State Duma and by the new
From: "stanislav menshikov" <email@example.com>
Subject: SHOULD WE COUNT ON FOREIGN INVESTMENT?
Date: Mon, 7 Feb 2000
SHOULD WE COUNT ON FOREIGN INVESTMENT?
Let Us Be Cautiously Optimistic
February 8, 2000
By Stanislav Menshikov
I liked Mikhail Kasyanov's recent accent on economic and social
predictability as a major factor in the new administration's emerging
medium-term strategy of growth. Among other things, predictability means
creating optimistic business expectations about the ability of the
government to help increase aggregate demand. The recent decision to raise
pensions and wages of government employees will add many billions of
roubles to lagging consumer demand while larger defence expenditure should
give a powerful boost to the ailing machinery and associated industries. An
important psychological barrier was crossed when the traditionally
conservative Finance Ministry finally realised that there were no great
dangers in spending more if growing output was providing more revenue to
the Treasury. The task at hand is to maintain that attitude and keep
business reasonably sure that markets will expand, not shrink.
But a demand policy has to be supported by an active supply policy. Mr.
Kasyanov is right to put his finger on promoting capital investment. The
existing reserve of spare capacity will be adequate for maintaining growth
for some time to come. But only investment in new plant, equipment and
technology will create a sound basis for sustainable medium- and long-term
However, the First Deputy Prime Minister is too optimistic in assuming, as
he did in Davos, that most of new investment should come from outside the
country. "Most" means more than 50 per cent. But statistics presented, for
instance, in the annual UN World Investment Report, indicate that there is
hardly a country on the planet (except for some less developed economies of
Africa) that can boast of foreign direct investment (FDI) exceeding half
of their gross fixed capital formation. The typical figure is between 10
and 25 per cent.
The same goes for former centrally-planned economies. In that category the
largest share was reached in Hungary (an average of 30 per cent) and in
China (in some years it was as high as 25 per cent). Poland and the Czech
Republic were behind averaging respectively 15 and 10 per cent. In Russia
the highest mark was set in 1997 at 8 per cent and has since collapsed. In
the near future, given correct policies, it could rise to 15-20 per cent,
at the most. It would be an excellent result if that happens. In dollar
terms, a good benchmark to be reached in the next five years would be $20
billion per annum, twice as low as in China but more than three times
better than in 1997.
Apart from improving inadequacies of political, legal and other
infrastructure there is the more serious issue of Russia's capacity to
accommodate that level of FDI and the capacity to provide it. So far, the
main interest of transnational companies was centred in oil, metals,
telecommunications, some food and tobacco. Neither automobiles, aircraft,
machinery and equipment, computers, nor other modern industrial leaders
have attracted foreign investors on a major scales. Also, FDI has been
largely in existing producer facilities rather than in new, greenfield
projects. It looks like the transnationals are more interested in
exploiting the country's mineral resource than in creating strong
competitors. If this trend continues, Russia will have to rely mainly on
domestic sources of investment to build up and modernise its industrial
If growth continues at a satisfactory rate and if domestic financial
markets recover, foreign portfolio investment (FPI) could make an important
additional contribution. In 1997, inward moving FPI amounted to $45.6
billion, seven times as much as direct investment. But portfolio investment
is by nature speculative and unstable. It collapsed to only $8 billion in
1998, contributing to the financial crisis, and to practically zero in
The lesson is that to revive capital investment, internal sources will have
to dominate. According to Goskomstat, gross profits in the economy
(including depreciation), after profit taxes, amount to 30 per cent or more
of GDP. At least a third of this huge amount fled the country last year.
Another fifth goes into financial investment which do not add to GDP.
Enough savings are created inside Russia. The problem is to use it
properly. Inducing domestic capital to stay at home and invest in the real
sector is equivalent to attracting $15 billion in foreign domestic
The government could help by providing direct financial support for
investment in the currently depressed industries, particularly high-tech.
It could also help much more by promoting the long-needed banking reform,
which is at a standstill, and creating a more favourable climate for bank
loans to industry. It should also be very careful in reforming taxes. In
1999, it collected taxes way in excess of what was planned. In January
2000, the same trend continued. Nothing new happened to change the
allegedly negative traditional attitude of Russians towards paying taxes.
Yet, business and individuals are paying much more in taxes than ever
before. Why? Because incomes are rising, barter is shrinking, and it is
therefore EASIER to pay. Changing the tax system at this particular moment
could create a new mess and spoil the current picture. Don't repair an
engine when it is working well. Remember - better is the enemy of good.
February 7, 2000
[translation from RIA Novosti for personal use only]
PRIMAKOV GIVES YAVLINSKY A CHANCE
Nonetheless the Main Presidential Contender Remains the Same
By Andrei STEPANOV
It seemed at first glance that the political Olympus
situation has been determined. It turns out, however, that
accidental changes, including those which can trigger serious
changes in the popularity ratings of the main presidential
hopefuls, are still possible. Experts from the All-Russia
Centre of Public Opinion Studies, or VTsIOM, claim that more
than half Russians (55%) are not sure that they will vote for
the candidates whom they regard as most suitable for the post
of president at present. Part of them (14%) are not sure that
their present choice is right and 41% say that they can change
their opinion if something out of the ordinary happens.
Yevgeny Primakov's withdrawal from the presidential race
is not an astonishing step. However, it will inevitably result
in changes in the pre-election line-up. To judge by VTsIOM's
polls, only 38% of the ex-Premier's followers are now going to
vote for Vladimir Putin, whereas 9% will support Konstantin
Titov (the Union of Right Forces, or SPS), 8% communist Gennady
Zyuganov and 6% Yabloko's Grigory Yavlinsky. While these new
votes do not matter much for Titov (his rating is almost around
1% at present), the additional percentages will give a
noticeable boost to Zyuganov's and Yavlinsky's ratings. The
effect will be stronger if Primakov hints the public that he,
for his part, is on the side of one of the main contenders.
Primakov's decision is a sudden gift of the fate for
Yavlinsky. If he succeeds in explaining the voters who are
going to vote "against all" that the best way to express their
protest is to vote for him and if he has Primakov's support,
his election results can be very serious. According to opinion
polls, today only 1% of Russians are going to vote "against
all". But as electioneering gains momentum, their number can
tangibly grow. It is only natural that Yavlinsky will be unable
to be a serious rival for Zyuganov and Putin. But he will have
a much higher rating than today's 3% and command the reputation
of a prominent political leader. To achieve this, however, he
will have to take into consideration the results of opinion
polls on the Chechen operation and change his stand on this
Of great importance for Samara Governor Titov is to have
assurances of support from the SPS. He cannot expect any
favours from Primakov. However, he can count on the growth of
his popularity rating to the level of Vladimir Zhirinovsky,
thanks to which he would stand out among the mediocre failures
of the race and acquire the repute of a famous politician on a
The line-up of popularity ratings is to change by the end
of next week. Putin, who has stayed still at the 58% mark is
likely to gain 2% to 3%. The present approval ratings of
Zyuganov (15%) and Yavlinsky (3%) may not grow right away. But
the sure boost the rating of one of them is to have will show
who has inherited Primakov's votes.
Putin Zyuganov Primakov Yavlinsky
December 50% 15% 9% 4%
6-10 56% 18% 8% 3%
January 14-17 62% 15% 5% 2%
January 21-24 58% 16% 6% 4%
January 28-31 58% 15% 6% 3%
Date: Mon, 7 Feb 2000
From: Anatoly Zabolotny <firstname.lastname@example.org>
NEW ENGLISH LANGUAGE DEMOCRATIC DEVELOPMENT RESOURCE ABOUT SIBERIA
The Siberian Civic Initiatives Support Center, a five year old network
of 12 NGO resource centers across the region, has expanded it's
English language web-site to include translations of selected articles
from our quarterly bulletin "The Effect of Being". We believe this
information will be of interest to Westerners involved in studying
democratic transition issues or Russian regional democratic
development. Articles deal with such issues as successful mechanisms for
encouraging transparency in local government spending through
competition and efforts towards stimulating a culture of business
philanthropy. The address is http://www.cip.nsk.su. In addition, we
are available to provide or collect information and statistics about
the region on request.
Siberian Civic Initiatives Support Center
off. 702, 57, Karl Marx pr., Novosibirsk,
Russian economic strategy-ask the people first
MOSCOW, Feb 7 (Reuters) - A Russian think tank asked by acting President
Vladimir Putin to draft an economic reform strategy is taking the unusual
step of finding out first what people want, NTV television reported on
It said the Centre for Strategic Research had so far found Russians wanted
order not dictatorship, echoing statements by Putin, the favourite for the
March 26 presidential election.
NTV reported some social scientists working with economists were looking at
what the nation wanted in more detail.
``They work on the main question -- determining the values of Russian
society. The strategy for economic reform will be built around those social
values, so the nation does not refuse them,'' the commercial network's
The head of the think tank, German Gref, is also a first deputy privatisation
minister and former St Petersburg colleague of Putin. He repeated that there
were no plans for any kind of dictatorship in Russia, although he gave no
``If you mean a return to a state system of administration, then of course
not. Absolutely not,'' Gref told NTV.
Putin has not offered details of his economic programme but has broadly
outlined that he favours the free market with a strong role for the state.
IMF Won't Lend More Money to Russia Without Reforms
Moscow, Feb. 7 (Bloomberg)
-- The International Monetary Fund delayed making further payments to
Russia, leaving the government of Vladimir Putin to continue struggling to
pay its debts and finance its war in Chechnya with no external loans.
The IMF probably won't provide more financing until after the March 26
Russian presidential election at the earliest, investors said. The fund isn't
going to risk backing Putin while he's in the middle of a political campaign,
as it did when it made a loan to Russia in the midst of President Boris
Yeltsin's 1996 campaign. Yeltsin promised to use IMF funds to fulfill
``The IMF, having been burnt once, is probably being as cautious as they can
be,'' said Kevin Moore, portfolio manager for the $315 million USAA Emerging
Markets fund, which has holdings in Russia. ``Politicians tend to promise a
lot of things.''
The fund has delayed payment of a $640 million loan installment since
September. In November, Managing Director Michel Camdessus said the payment
was delayed mainly because of pressure by the U.S. and other member nations
over Russia's war in Chechnya. Before the war started, it was delayed by
calls for more oversight of Russia's finances following newspaper allegations
that Russian businesses were laundering money through Western banks.
The fund also has called for legislative changes that probably won't be
possible until after the election. They include new bankruptcy laws, a bank
restructuring program and laws to stem capital flight, as well as increased
collection of cash payments for electricity and natural gas.
A team of IMF officials last week finished a visit to Moscow to monitor
Russia's compliance with conditions for receiving the next installment of its
$4.5 loan agreement signed in July. So far, it has received the initial $640
Since September, the government has made about $2.2 billion in payments to
the fund on previous loans. Russian officials said the government and
parliament must work together to approve laws to meet the IMF's conditions.
``On some targets we didn't move at all, and on others, very little,'' said
Alexei Mozhin, Russia's delegate to the IMF, in an interview with Russian
daily Vremya. ``It is about passing laws. All of these conditions remain and
we just confirmed we intend to fulfill all of them.''
Russia plans to resume talks on the loan in April after the presidential
election, Mozhin said.
Parliament is considering several laws to prevent capital flight that would
include registering companies and allowing banks to suspend suspicious
foreign exchange transactions for five days.
The IMF praised the government for exceeding macroeconomic targets, including
economic growth, inflation, and external reserves.
Russia's gross domestic product expanded 3.2 percent last year after
contracting 4.6 percent in 1998. The annual inflation rate fell to 36.5
percent last year, from 84.4 percent in 1998.
``This positive outcome reflects both prudent fiscal and monetary management
as well as favorable terms of trade owing to significantly higher energy
prices,'' the IMF said.
Much of that progress, however, was a function of higher world oil prices,
which boosted export revenues. In addition, the ruble's devaluation of more
than 78 percent over the past 18 months drove up the cost of imported goods,
helping domestic producers.
Russia boosted collections of tax and customs duties last year by increasing
tax rates for oil, metals and gas exporters.
The government must depend on its own revenue to cover about $3 billion in
foreign debt payments in the first quarter without new loans. Central bank
reserves totaled $13.1 billion on Jan. 28.
The IMF recommended the government seek financing from commercial banks and
``non-bank sources'' to cover its budget deficit, rather than borrowing from
the central bank ``in order not to strain the central bank's capacity to
manage liquidity in the economy.''
The government plans to borrow from the central bank in March to cover the
budget deficit, Russian news agency Interfax reported citing Finance Minister
Russia will pay the IMF $200 million tomorrow in payments on previous loans,
the agency said. Russia paid the IMF $434.7 million in January.
Russia is due to pay the IMF $640 million in February. The government's total
debt to the IMF is about $15 billion
Web page for CDI Russia Weekly: