March 14, 2000    
This Date's Issues: 4166 4167 4168

Johnson's Russia List
#4166
14 March 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Itar-Tass: Raduyev May Have Info about Blasts in Moscow- FSB Official. 
2. Reuters: Investors beware of Putin euphoria.
3. Komsomolskaya Pravda: There Will Be No Military Training in Schools Until War Breaks.
4. Remarks on Russian politics of Lilia Shevtsova (senior associate, Carnegie Endowment) at American Chamber of Commerce in Russia March 10.]

******

#1
Raduyev May Have Info about Blasts in Moscow- FSB Official. 

MOSCOW, March 13 (Itar-Tass) - Federal Security Service chief spokesman 
Alexander Zdanovich on Monday said Chechen warlord Salman that Raduyev "may 
have information" concerning apartment house blasts in Moscow last autumn. 

"Raduyev and Khattab organised in Chechnya the training school Kavkaz for 
terrorists" and "knew who was training there and what assignments they 
received.... This is why I do not rule out that he has information related to 
the explosions in Moscow" which killed over 300 and injured about 500 people, 
Zdanovich said. 

He told the RTR television that Raduyev has begun to testify about the 
apartment house blasts in Moscow, but said he had left the Lefortovo 
investigation prison before Raduyev began to talk. 

At the same time, Zdanovich said information obtained by the investigators 
provides "almost 100 percent proof of who organised the explosions in 
Moscow". 

He said a "depot of saltpeter was found" in Chechnya on Monday. This 
saltpeter was identical to the one used to blow up one of the houses in 
Moscow. 

Zdanovich said Raduyev was arrested as a result of a special operation 
carried out by the Federal Security Service (FSB). 

Zdanovich told ORT's television news programme Novosti on Monday that several 
special groups are at work in Chechnya, including in the combat zone. Their 
chief purpose is to detain notorious terrorists and people who were involved 
in the apartment house blasts in Moscow, Volgodonsk and Buinaksk. 

"This is not a spontaneous operation. Our people have been there for a long 
time. There are several people there. They are experienced in detective 
work," he said. 

Zdanovich said the arrest of Raduyev was the result of their work. He spoke 
after television showed the footage of Raduyev's preliminary questioning at 
Moscow's Lefortovo investigation prison. 

The first pictures of Raduyev suggest that he is in shock. Raduyev, whose 
face is maimed with scars from wounds, identified himself and named the date 
and place of his birth -- December 13, 1967, Gudermes. 

For the first time in several years the terrorist appeared before the cameras 
without black glasses and camouflage uniform of the "General Dudayev's Army" 
as he called his gang. 

Having rejected any doubts of the "authenticity" of the arrested person, 
Zdanovich said, "It certainly is Raduyev." 

The operation to capture Raduyev had been prepared for several days. 
Initially the use of force had even been considered. But the focus had been 
made on the need to capture him "quietly, unnoticeably for the people who 
guarded Raduyev". It had been known that Raduyev had been guarded by up to 
100 fighters. 

Zdanovich noted that none of the bodyguards had even noticed his 
disappearance. He declined to disclose other details of the operation, saying 
that "no agent discloses his secrets". 

He recalled reports claiming that Raduyev "being heavily wounded" had 
allegedly "written a will before his death" and then tried to escape. 
Zdanovich said this "explains why he looked different" from what everybody 
had been on television. 

******

#2
INTERVIEW-Investors beware of Putin euphoria
By John Paul Rathbone

LONDON, March 13 (Reuters) - Russian investors should take care not to be 
sucked in by the market euphoria fuelled by the likelihood Vladimir Putin 
will win this month's presidential election, a former Russian finance 
minister said on Monday. 

Russian stocks hit a 22-month high last week as investors bet that the 
current acting president would bring Russia long-awaited economic reforms and 
political stability. 

On Saturday British Prime Minister Tony Blair praised Putin, the runaway 
favourite to win the March 26 vote, as an ``impressive man'' with a clear 
view of what he wants to achieve. 

But Boris Fydorov, in London for a Chatham House conference on economic 
crime, told Reuters that Russia's deep-seated fiscal problems would be 
revealed again when current high oil prices fall and the competitive boost 
Russian companies enjoyed after the huge 1998 devaluation wore off. 

``Say by the year-end, when oil prices are lower and tax arrears start 
accumulating, then fiscal problems will arise again,'' said Fydorov, who was 
finance minister in the early 1990s. 

Still, the pro-western liberal reformer who most recently headed the Russian 
National Tax Service, said Putin would be a huge improvement over his former 
boss, Boris Yeltsin. 

``The mere fact the next president will be bodily present in the Kremlin, as 
opposed to appearing there briefly en route between the sanatorium and his 
country house, will make a huge difference,'' Fydorov said. 

``But while there is hope, we still have no proof at this stage and I'd be 
very cautious about claiming that we'll see real economic progress in the 
future.'' 

Fydorov said he hoped Putin might be able to sign a fresh agreement with the 
International Monetary Fund by mid-year. Tax reforms aimed at boosting 
current collection rates from 10 percent of gross domestic product could also 
be on the agenda. 

``The chances of adoption of such reforms is quite high, but implementation 
remains another matter,'' he cautioned. 

Fydorov, now on the board of Russia's biggest bank Sberbank, slammed current 
central bank head Viktor Gerashenko as ``one of the world's worst central 
bankers.'' 

He wondered aloud why it was that, while Western media had splashed a recent 
money-laundering scandal in Russia, his country's authorities had said almost 
nothing. 

``Some 80,000 people work at the central bank, but the effectiveness of their 
supervision is small. It shouldn't come as a surprise that there has been a 
money-laundering scandal.'' 

Referring more broadly to the corruption that bedevils Russian economic life, 
Fydorov said it was unrealistic to expect it to stop at low levels when it 
was so openly practised by senior officials. 

``As the proverb says, fish always rots from the head down,'' he said. 

******

#3
Russia Today press summaries
Komsomolskaya Pravda
March 13, 2000
There Will Be No Military Training in Schools Until War Breaks
Summary

The daily interviewed Lyubov Kezina of Moscow’s [city] Department of 
Education.

The news that mandatory military training will return to schools throughout 
the country under a new government resolution has caused great disturbance 
among parents and students. Parents still remember how they themselves 
studied the despised discipline of "Basic Military Preparation" (NVP) in 
Soviet times.

Lyubov Kezina denied that schools are going to teach the old NVP in Moscow 
schools. The government resolution discusses the foundations of military 
knowledge, to be studied within another course, called "Foundations of Life 
Security".

"I believe that modern education doesn’t need guns or tanks. And who will 
teach the military training? Retired servicemen, as in the past? If the 
Defense Ministry wants to teach military science to our schoolchildren, they 
should send young, beautiful officers who would enjoy the authority and love 
in schools. Currently there is catastrophic shortage of male teachers at 
schools. All the teachers are women. At home as well, education is largely 
the responsibility of mothers. Thus, our boys lack male education up to the 
age of 17. I propose that male teachers in Moscow should be legally exempt 
from the military draft, as they are in rural schools," explained Kezina.

Kezina also said that since surviving an assassination attempt three years 
ago, she is always accompanied by bodyguards. Among the two thousand Moscow 
school directors, she is known as "iron Lyuba", always ready to conduct a 
meeting or to set forth a new program.

******

#4
REMARKS BY LILIA SHEVTSOVA, CARNEGIE MOSCOW CENTER, AT A BREAKFAST OF THE
AMERICAN CHAMBER OF COMMERCE IN RUSSIA (AEROSTAR HOTEL, MARCH 10, 2000)
Copyright ©2000 by Federal News Service,

Moderator: Good morning ladies and gentlemen. I hope everyone has had
an opportunity to indulge in at least a little bit of food and drink before
we get into the actually media portion of our morning. 

It's a real pleasure to have again with us Miss Lilia Shevtsova. For
those of you who were here in December, I believe it was December, just
before the parliament -- the Duma elections, we had one of the most
interesting breakfasts I can remember when Miss Shevtsova presented her
analysis of not only the upcoming Duma elections, but actually the forces
leading up to it and what we could expect afterwards. 

And I must say that having listened to her carefully that day, I've
certainly not been disappointed by her analysis of the things to come, as
we've seen them unfold in those three months since December. 

Before we get on to that, we have some special friends here today. I
want you, folks, to at least recognize them. At our table we have Miss Ruth
Pierce, Ambassador from Australia. Mme Ambassador, would you please rise.
Thank you. And also from north of the border we have Mr. Thomas Mark,
commercial counsellor. He has about 10 other titles at the Canadian
Embassy. Canadians have been good friends to us in our dark moments. And
Tom teaches me how to be a good North American. 
Anyway, a few words about the Carnegie Endowment for International
Peace, of which Miss Shevtsova is senior associate. They Carnegie Endowment
for International Peace was established in 1910 in Washington D.C. It's a
non-government, non-partisan, private foreign policy research institute. It
manages programs of research, discussion, publications and public education
in international affairs and American foreign policy. 

The endowment staff consists of experts who bring to the work
substantial first-hand experience in foreign affairs, government,
journalism, public affairs and overseas service. 

Miss Shevtsova, senior associate, Carnegie Endowment, began her career
as deputy director of the Institute of International Economic and Political
Studies at the Russian Academy of Sciences, and she also served as the
director of the Center of Political Studies. 

In 1993 she taught as a visiting professor at the University of
California in Berkley, followed by a stint as visiting professor and Luigi
Einaudi Chair at Cornell University in Ithaca, New York. She joined the
Woodrow Wilson's International Center for Scholars in the fall of 1994 and
then joined the Carnegie Endowment in June of 1995, where she works today. 

Ladies and gentlemen, please help me and join me in welcoming Lilia
Shevtsova. 

Shevtsova: Thank you. Thank you, Scott. Well, it's always exciting to
be here and it is always exciting to first of all listen to your questions
and to engage into the discussion with very interesting interlocutors. And
personally I anticipate a lot from this discussion because first of all,
you know, I am sorry, Scott, I cannot make this talk specially exciting
because the subject is very boring. 

Now, in comparison to the parliamentary election, where we had a lot
of meat and a lot of mud-slinging, you know it was a very exciting
performance really, a very nasty performance. You had a lot to discuss and
we remember we argued a lot. But now everything is quite certain. We know
the outcome of this election struggle and, you know, among Russian
specialists and Moscow analysts nobody is even discussing the election
struggle and the election. Everybody is quiet about it. 

You know, recently I don't even remember any exciting conference
devoted to the issue of the election and the outcome of the election
because everybody is quite certain that Mr. Putin, current acting
president, will have a landslide victory. So, nobody even is worried about
any kind of discussion of this issue. 
And really, Mr. Putin now has around 54, 59 and even 60 percent of
approval rating. Mr. Zyuganov is following with his 16-19, sometimes 20
percent of approval rating. The third is Mr. Yavlinsky with his 5-6 percent
of approval rating. And so everybody is quite certain that Mr. Putin will
win in the first round. 

Although there is at least 2-3 percent of uncertainty and I would like
to mention this: 2-3 percent of uncertainty. The problem is that everything
this time depends not on Mr. Putin's contenders because he is definitely a
front runner and he is a winner already. But everything depends on the
turnout. If less than 50 percent of the Russian electors take part in the
elections, in this case elections are being considered non-valid and in
four months' time you'll have another election. And in this case not a
single current candidate has the right to participate. 

A second uncertainty . If there are much more people who are voting
against everybody, against each candidate, then voters who are voting for a
certain candidate, in this case also the elections are considered to be
non-valid and will have in four months' time a new set of elections. And
current political figures are not participating. 

The majority of Russian analysts, you know, say that probably this
option although not very plausible, not viable, all the same it has a 2-3
percent degree of probability. So, it's quite understandable why Mr.
Putin's team is not fighting with Mr. Zyuganov or any other of the
contenders that are running. But Mr. Putin's team is thinking hard how to
make the elections exciting, how to put the election in the center of
public interest, how to increase the turnout. 
Well, I will turn to, I will try to mention at least several points
that should be interesting for us. First point. What are being major
factors or prerequisites of Putin's popularity and Putin's success? I would
like to at least mention briefly five points, five factors of Putin's
success. 

Factor No 1, which, in my view, is very important. For Russian
audience significant is the fact Mr. Putin was appointed by the previous
Russian president. You know for us, liberal-minded people, the fact that
the previous czar appoints his heir, his successor is abominable fact. But
for 70 percent of Russian audience very important is the fact that the
official Kremlin, official and legitimate Russian president appointed his
successor, because the Russian audience still is unaccustomed to the idea
that the oppositional leader might win and might become next Russian
president. So, Russian audience is still unaccustomed to the idea of
divided, split power. 

And second factor which is important in this context is the fact that
Putin, being heir, successor to Yeltsin, simultaneously presents
alternative to Yeltsin's pathetic and inadequate leadership, that Putin
presents absolutely different type of political leadership and naturally
this type is tough, harsh, dynamic, adequate, vigorous, straightforward.So,
what is very anticipated and expected by the Russian society. 

Second factor of success. The fact is that Putin's image is
intentionally still ambiguous and very amorphous. Putin escapes, avoids
definite answers to definite questions and he makes it intentionally. In
order to appeal, to address various groups of electorate and various social
and political groups. He wants to appeal and address the communist
electorate and he really can hope that he can take at least 10-15 percent
of Zyuganov's supporters during the election. 

He wants to address nationalists, statists, liberal, democratic,
centrist electorate and he succeeds in this. His base, you know, is a kind
of conglomerate, consisting of absolutely different political forces.
Nearly all representatives of political scene participate, you know, take
part in Putin's base. 

And before the elections, before March 26, he is not going to be
definite, he is not going to open himself and he is not going to answer the
question who is Mr. Putin because he is trying hard to keep these very
amorphous and controversial, incompatible elements of the electorate
together. 
So, this amorphous image is one more prerequisite of his success
because everybody is trying to hope or everybody is hoping that they would
have an opportunity to privatize Mr. Putin afterwards, after the elections. 

Factor No 3. Putin is using the existing in the Russian society demand
for a stronger state, for a stronger and effective leadership and for the
dictatorship of law or dictatorship of order. And this demand has increased
tremendously, especially after the Dagestan incursion made by the Chechen
separatists and after the Moscow blasts, which is a separate topic. You
know, no perpetrators have been found. 

And one more, I would say, fourth factor of success is the fact that
the Russian political class and all various political groups, elite groups
still are leaning toward the strongest leader. Now we see how the people
from the Fatherland -- All Russia movement, those who supported Luzhkov and
Primakov previously, they are already jumping out of the boat and trying to
kiss Putin's hand. 

It's a kind of tradition, you know. Regional elite, oligarchic elite,
economic, political and intellectual elite and cultural elite in Russia has
the tradition to move toward the strongest, toward the pole of power. 

And the final factor of Putin's success, the last factor which is very
important, is that Putin raised within the Russian political class,
intellectual establishment and also within the Russian society tremendous
hopes. In this situation, in this context, Putin even resembles Yeltsin in
1991 because the scale of hopes is tremendous. Everybody is hoping that in
the end of the year -- I am talking about the results of the polls -- Putin
will succeed either in the establishment of some kind of stability because
everybody is hoping for some kind of different goal. 

One group is hoping for stability. Second group is hoping for order,
third group is hoping that Putin will emerge as a reformer. But we all know
that hope is simply a delayed disappointment. And we anticipate that in the
end of the year Putin will have a lot of problems and troubles. 

Next point. Who is Putin as a political personality? Putin is not a
mystery any longer. We know a lot about our acting president. We know a lot
about his background, about his career in St. Petersburg, about even his
activity in Moscow. He made a lot of statements. We see him constantly on
TV. He has made already some actions that allow us to make conclusions
about at least some of his views, about some of his constraints,
possibilities. 

Putin really presents himself as a very cautious, very disciplined,
straightforward and at the same time very modest, well yes, decent guy. We
don't know anything nasty or strange about him. And those evidences that
are coming from St. Petersburg about at least his participation in illegal
activities are not proved by anybody. 

At the same time, Putin is probably the first among the latest Russian
leaders who has absolutely no charisma, who, to put it mildly, still is
awkward of the audience, shy, who cannot behave, you know, when he sees a
lot of people and it probably takes a lot of willpower to go and to see the
journalists. Putin is very loyal and faithful to his friends. He cried at
Mr. Sobchak's funeral. He proved that he can be even courageous in very
difficult and awkward situations. After Mr. Primakov was fired -- we don't
know this fact, but this fact really took place. Primakov told about this
himself -- Putin took all people from Collegium, from Presidium of the FSB,
Russian KGB, and went, the next day went to Primakov's dacha to pay respect
and homage. And this in the situation when Primakov was hated by the
Kremlin and Russian President Yeltsin himself was a very courageous act. 
Well, at the same time we know about Putin that he is not a visionary.
Definitely not. He is an operational person who can operate, function on a
day-to-day basis. He is not interested, you know, in the strategic agenda.
And he is the man who -- because of his background, education -- got
accustomed to manipulate with different sets of the rules. He can move
swiftly from one idea to another, from one set of rules to another,
absolutely controversial set of rules, because he was accustomed, he was
trained to do this way. 

Who Mr. Putin is relying upon? Because this is a very important litmus
test. Who is behind Mr. Putin? Whether Mr. Putin is independent now? Is he
going to be independent after March 26? Well, unfortunately, I must
emphasize the fact that Putin desperately is trying to loosen his links and
ties with the previous Kremlin entourage, with Yeltsin's advisers,
supporters, oligarchs. But he has failed to cut his ties. He still is
surrounded by the previous team. He still is under surveillance. He still
is in the embraces of Yeltsin's clique. 

Several facts. Everybody hoped that with Putin's ascent to power, the
representatives of notorious oligarchic Kremlin clans will be squeezed out,
forced out of the government. But those representatives are still in
control and they are either close or they dominate or control the levers of
administrative, financial and economic power. Mr. Aksyonenko is within the
government. Mr. Kalyuzhny is responsible for the energy sector. It's our
major pocket, financial pocket is still in the government and exerts the
influence. Mr. Kasyanov -- and I don't know why some representatives of the
foreign community consider him independent. He is so dependent and he is
one of the most important representatives of the major Kremlin clan. 
The old strategic Yeltsin's team is in place. Not a single important,
crucial decision is being taken without Mr. Voloshin, the head of
administration and, I would say, one of the most important strategic minds
within the election team. He is still in place. 

All election campaign and strategy of Mr. Putin's behavior is being
formed, corrected, edited, devised within the very close Kremlin entourage,
and Mrs. Dyachenko, Yeltsin's daughter, is still part of this entourage.
Mr. Yumashev is still part of this entourage. And Mr. Voloshin is still
mastermind. And the important oligarchs like Mr. Abramovich are still there. 

Yes, Mr. Putin understands the, I would say, vulnerability of his
position. He tends to create his own political and personal base. He is
taking, you know, in his guys from St. Petersburg from power structures,
the people he knows from St. Petersburg University. We see on this bench.
The bench is very narrow and very short, I would say. We see on this bench
Mr. Kozak -- simply I want to emphasize some names who are becoming
important and who, I believe, would probably dominate after March. Mr.
Kozak, the head of government administration, who tries to exert at least
some influence on Mr. Kasyanov's activity. Mr. Sechen (sp.?), who is head
of Mr. Putin's staff, who is controlling the door that leads to Mr. Putin.
It's very important in Russian position. Mr. Surkov, Mr. Abramov, deputy
head of the presidential administration, Mr. Medvedev, the Chairman of Mr.
Putin's election club. So, you see, they have already young, dynamic,
aggressive, straightforward and very pragmatic guys who do not belong to
the old Moscow political Tusovka (establishment, coterie, clique). But
there are few of them, they are inexperienced and they cannot compete with
the old guys, with the old guard, still. 

So, a litmus test for us, for those who are watching Russian reality
and for those who depend on the Russian political process will be, what
kind of government Mr. Putin is going to form after March 26 in the
beginning of April. And here are four models. Not everything depends on who
is going to be prime minister. Everything depends on what kind of model,
pattern of government Mr. Putin is going to form. And there are four models
of possible governments in Russia. 
One model, the government is independent, absolutely responsible for
economic tactics and strategy, is a kind of equal partner, a kind of French
model. The President is above the fray and the government is absolutely
responsible for the economic policy. And that's why you can easily, you
know, fire the prime minister for every failure and be honest, decent and
above everything. And not responsible. 

This is one model of the government. 

But this model demands as a prime minister, for instance, Chubais, or
another political heavyweight, I would say. 

Another model of government. The government and the whole system of
governance is a conveyor belt mechanism. In this situation the prime
minister is simply a coordinator. He is simply the guy who fulfills the
orders from the Kremlin administration. Just like it is now. Kasyanov is a
coordinator. Okay? This is a second model. In this case the prime minister
will be some kind of clerk. Kasyanov, Shoigu, whoever. Some guy whose name
is probably not even discussed. 

The third model of the government is the government formed in such a
way that it would emphasize only financial macro-economic activity. Then,
of course, Mr. Kudrin or somebody who knows -- maybe Mr. Kasyanov, who
deals with the West, knows how to deal with the West, knows the financial
issue and replaces Mr. Gerashchenko as a political heavyweight on the
Russian financial scene. 

And the final model of the government is the government which plays
the role of coordinator, first of all, of the military- industrial complex.
The emphasis is being put on the military- industrial complex. Then in this
case we will have an absolutely different prime minister. Now the
dominating talk and dominating speculation within the Moscow analysts is
that Putin probably will be forced not wishing, but will be forced, to put
Kasyanov, especially after the so-called successful negotiations with the
London Club, he will be forced to put Kasyanov, to appoint Kasyanov as
prime minister. But in this case everybody expects that Mr. Putin will
create a counter balance just like Yeltsin did always and will appoint, for
instance, Mr. Kudrin, a representative of the Chubais team, as a
counterbalance to Kasyanov, who is representing the Abramovich- Berezovsky
clan. 
So, this is the major speculation of the day. But I would say that
this kind of scenario is not final. There are probably a lot of scenarios
and options that are being discussed within the Kremlin team. And I would
say, that if Mr. Putin appoints Kasyanov as the next prime minister,
already independent prime minister of the Russian government it would be a
very nasty, a very bad sign. It would be a sign that Mr. Putin cannot be
independent. He cannot brush aside, you know, the influence of several
important and very powerful groups that still continue to rule Russia. So,
it's a very bad sign for Russia. 

What are Mr. Putin's views? Well, his views are contradictory, of
course. On the one hand, he is talking about liberal and market democracy.
On the other hand, he is talking about a strong state, he is talking about
the necessity of dictatorship of order, dictatorship of law. But you
remember that dictatorship of law and dictatorship of order were the
favorite slogans and rhetoric of Mr. Lebed. On the one hand, he is talking
about preservation and keeping intact of the natural monopolies. On the
other hand, he is talking about the necessity to implement the bankruptcy
law which is incompatible. So, of course, it's the double speak of the
campaign and you understand it. 

But judging from Mr. Putin's previous experience, judging from the
fact that at least four of Mr. Putin's team which are now working and
elaborating on the future economic strategy of the government, Putin is
close to the liberal-minded people if you are talking about the economy. He
is, I would say, a market-oriented person. Maybe he would be forced under
the influence of the military-industrial complex which is much stronger
politically now, he would be forced to bring much more state interference
atmosphere. But he is a very pragmatic guy. He understands that it would be
a disaster for the economy. 
So, I would say that there is a much more plausible and viable option
that Mr. Putin will be insistent, for instance, especially in the
relationship with the Duma, insistent in pushing the land reform, the tax
reform, the Criminal Code reform and all other very necessary measures,
market-oriented measures. 

What about his political views? He is absolutely indifferent, as far
as I can understand, to the issues of political democracy. Yes, he is
talking about civil society, the civil contract, about the fact that the
state should guarantee the rights of the individual and political freedom
and freedom of the press. But as you know, statements are not always
parallel to his actions. And we know his policy in Chechnya, we know how he
rejected absolutely all options that have been offered to him by Primakov,
by Stepashin, you know, more or less cautious, centrist options to deal
with Chechnya using the peaceful settlement. So, we know how he deals with
Chechnya. We know how he respects civil rights, and the freedom of the
press in Chechnya, the case of Babitsky. 

So, his position on political democracy, his position on human rights
really creates a lot of concerns and a lot of worries. Well, what is his
position in the relationship to the West? Here at least there is one
definitely positive trend. He said from the very beginning that he is not
going to close the window or door to the West, that he is going to fight
with the trend, with the current trend when the relationship between Russia
and the West is declining and from the very beginning, beginning from
November, when he sent first signals and messages, first of all, to the
German political establishment, to the Chancellor, and then to the American
political establishment -- this message was quite clear, I want good
relations, 
I want cooperation. I want to recreate the honeymoon of 1991-1992. And
in all, all those who watched the relationships between Russia and NATO,
how strong was the resistance on the part of the Russian generals and
especially the Defense Ministry, resistance so that Mr. Putin should not
invite George Robertson to Moscow, he should not make courageous statements
about NATO. 

But he did it, contrary to very strong resistance and contrary to the
fact that the participation within the Russian society of the whole visit
of George Robertson and of the whole statement that Russia is nearly ready
to join NATO, this kind of statement can create within the Russian
electorate a very ambiguous reaction. Nobody was quite sure that this kind
of step, action and statement would be supported by the Russian electorate
and at the same time Putin did it before March 26. 

It demonstrates that probably personally he wants to be a member of
the Presidents' Club, just like Yeltsin did. He understands the importance,
the significance of the West for Russia. And he doesn't want to be isolated
personally and he doesn't want Russia to be isolated, which is a positive
sign. Which means that probably through the West, through Western position
we have possibility to make a pressure, a kind of, I would say, to give a
message to Mr. Putin that a civilized state and civilized society is not
society based only on market, on market reform. But that society is based
and should be based on political democracy as well. 

And final, simply very final, note. What options or scenarios of
further Putin's evolution and development? Development of his political
leadership we are discussing in Moscow. The most I would say, the most
important for us, for the majority of analysts, are three options. And we
thing that three options are viable and possible after March 26. 

One option. This is yeltsinism without Yeltsin. So Putin is not
courageous enough, has no power, no strength to get rid of all those
regional and oligarchic economic groups around him and he continues to
bargain with the lead groups: "Give me, please, your loyalty and power and
I will give you a possibility to behave as you want". So it is, in fact,
the impotent importance model. There will be a continuation of the Yeltsin
degradation only with a (inaudible) leader. The outcome, well, further
decay in political and economic life. 
Second option. And we discuss it rather lively and energetically.
And for us this option creates a lot of concern whether it is possible or
not. The Russian Pinochet option. The majority of analysts are coming to
the conclusion that this option, even with Putin's straightforward
performance, is impossible in Russia. Not due to Putin's personality but
due to numerous various constraints that we have in Russia on the way of
any kind of dictatorship. Fragmented society, you know, already some habit
to live in a pluralistic society. Also resistance on the part of the
regional clans. They would never agree to a re-centralization of power. You
know, a fragmented bureaucracy, a not very loyal army. The army is the
question mark. How the army thinks, what the power structures want? They
are disintegrated after Chechnya. 

Well, Chechnya is forever, that is why we will probably have a Chechen
complex syndrome within the army. Well, so this option is not viable in our
view. But we cannot absolutely exclude at least some steps in this
direction at the beginning. 

And the third option. It is the reformist option. But this option
depends only on one thing. 

There is a litmus test whether Mr. Putin is ready to reform the so-
called elected monarchy that he got as Yeltsin's legacy. Whether he is
ready to create an independent government responsible for the economic
policy, whether he is going to give much more power to the parliament, make
parliament responsible for the economic policy and whether he is going to
curb the presidential powers. 
Just at the moment he says: I am not ready to do this, I am not ready
to proceed with any parliamentary government or presidential reform, I
think that the presidency is the best option for Russia, and I am even
thinking about expanding the presidential tenure to seven years. 

So now the movement is rather in a less than pleasant direction. But
he is still open. He is open for discussion and he definitely shows, sends
a message -- I don't want to be isolated. Even from the democratic and
liberal sectors. I understand that I am dependent on them as well, he says.
Around 70 percent of Russian liberal-oriented audience is going to vote for
Putin. And afterwards they will wait, they will anticipate from him also
liberal-oriented policy. 

So Putin is still demonstrating that he is still open for any option.
He has not decided a lot for himself yet. He hasn't decided, first of all,
to what extent he wants to go with the crackdown on journalists. This is
definite. He is discussing this option. He hasn't decided what to do with
Chechnya afterwards. And he is now looking behind the curtains for some
peaceful decision. He wants to distance himself from Chechnya. He
understands the disaster of Chechnya for himself. He wants to be open with
the West. 

Well, but at the same time he is dependent on the forces around him
and we do not know how he will succeed to get rid of this kind of, I would
say, political sin that surrounds him. And he is hostage. He is their
hostage. We do not know who will be his partners in April and May. These
will be two crucial months for him. Because he is going to select the team,
the course, the environment and the rhetorics even. 

So I can't answer all the questions because Mr. Putin, probably, has
no definite answer for himself. So, perhaps, time will... With time we will
see, perhaps, only in September will we be able to draw some preliminary
conclusions about the nature of Mr. Putin's leadership. 

Thanks a lot. I took a little bit more of your time. 

Moderator: Lilia, you went back on your word. You told us it was going
to be a boring presentation. Certainly it was anything but. 

I am sure, probably I am slower than most, but I am trying to digest a
lot of the things that you were saying to us. And I am sure we will have
some very good questions. 

If I can take the liberty to start off with one, however. We in the
business community have been subject to, I think, a sense of optimism
lately. And I think, obviously, the facts on the ground, in terms of an
economy or how each of our members has to manage their day-to-day work,
nothing has changed. Nothing has changed in that regard, but the departure
of Yeltsin, if not his apparat, and the prospects for good governance seem
to be there, whether this is public governance or private governance. 
Now, again, we see into things like we would want to see, but we do
end up speaking, both as members and as AmCham, to some of the liberal side
that surrounds Mr. Putin. Obviously, there is another side to him. There is
no denying that he was born of a very dank and festering political wound,
but is there a chance that he can reach beyond this, can he transcend this
"krysha"? Is it fair to judge in April or May whether he has escaped this,
could he do it? I mean, would he not have to shed these folks one at a
time? It sounds like a high political art to escape this "krysha". And is
there a chance that the expectations that we are beginning to nurture...
The other part is the creation of law. Yedinstvo is not a party, it is a
bloc. It is a rather messy bunch at that, I would suggest. 

How does he begin to craft a political party out of that? And let me
throw out just a wild idea, that certainly is alien to the traditions of
Russian leadership, and that is reaching out to the people. Could they, at
least symbolically, play a role as Putin transforms from a larvae into a
butterfly, if that is conceivable? Can he reach out to them? Not with the
ideology but the methodology of Ronald Reagan to kind of bully the Duma or
create his own party so that we do have a mechanism and a methodology for
law-creation and a liberal program? 

I know its a long question. 

Shevtsova: Well, thank you for this stimulation, intellectual
stimulation. First of all, let me begin with the end of your comment, I
would say. About the party-building, about reaching to the people. 

Unfortunately, I do have only negative signs. Because it seems to me
that according to Mr. Putin's mental architecture he is probably a
supporter of the conveyer-belt system. He probably thinks: Why should we
have so many parties that I am not going to control? 

You know, even for the best goal, you know, in order to push the land
reform, the new Tax Code he wants to command, to be the only commander in
the Duma. That is why, you know, he forced his Unity to bargain with the
Communist Party, but not with the liberals. He simply demonstrates that for
him the goal justifies all mans. And sometimes this pragmatic approach is
good, but sometimes it becomes cynical and it is bad. Because he has
aroused a lot of frustration among the liberal and democratic circles after
he so to say squeezed the Duma, you know, during the previous parliamentary
crisis. What he is, in fact, doing, he is creating a new party state
because he wants a two- party system to be created, one is the Communist
Party, the second is Unity Party, the presidential party. In fact, it's the
continuation of the presidential bureaucracy and if you take into account
that the Communist Party is also a kind of systemic bloc of the
bureaucracy, especially in the regions, you know the situation doesn't much
differ from the situation that existed in the Soviet times. 

So, if you are talking about political liberal democracy, I am very
much concerned. But if you are talking about the first part of your remark,
if you are talking about his possibility to become a liberal butterfly, I
do think that it is possible, it's possible because he surrounded himself
either with pragmatic people or with people who already got accustomed with
the know-how in the market sphere. The problem emerges afterwards, how he
is going to combine this liberal market approach with I would say, a
statist and rather dogmatic approach in the political field. 

Q: (off mike)... 

Shevtsova: From what I know, Mr. Putin already is intent, somewhere in
the beginning of fall to bring pressure on Unity and on other factions that
are loyal to him in the Duma, first of all, the Union of Right Forces and
on the regional deputies and to push forward the tax reform. Land reform,
he is very cautious about that. He doesn't want to split his base, but with
the tax reform he is really intent. And he has every possibility, with
Unity, with YABLOKO, with loyal regional groups and especially with all
these factions that he controls, he has the possibility to -- he has every
possibility to succeed with the tax reform. And he has every possibility to
succeed with the approval of START-2. He controls the Duma. But with the
land reform it will be different. 

But at the same time you know what? I am absolutely sure that he has
decided to proceed at least with these laws. He is not going to issue
decrees because he understands that a decree means nothing. Remember
Yeltsin's decrees. But at the same time he demonstrates absolutely amazing
acquiescence, maybe it is the right word, when he looks and watches this
aluminum deal and all other deals, when he calmly watches what is going on
in Slavneft. You know all these signs. We analyzed 1,000 of the decisions
that have been signed by Mr. Putin, decrees and everything else. We didn't
find among these decrees, beginning from September, any decree that would
be strongly lobbyist in favor of some oligarchic group. But you know, so he
avoids, he tries to distance himself, he tries to find some point above the
oligarchic fray, but you know, some previous decisions -- Slavneft, -- some
decisions that have not been taken by him, aluminum. The President is not
going to be involved in this. 
He cannot control, he knows probably, because he should know about
this, and he takes it rather calmly because he doesn't have enough power to
stop it. 

Q: (off mike) ... 

Shevtsova: About Kasyanov there are many publications in the Russian
press. I rely in my conclusions not upon speculations and rumors. 

There is information, for instance, in Novaya Gazeta and in some other
periodicals, with exact documents that have been demonstrated with
Kasyanov's signatures and so on, that prove his connection to Mamut and
Abramovich. I don't need to discuss links between Abramovich and
Berezovsky, but the links between Mamut and Abramovich and participation of
Kasyanov in solving the problem of the Soviet and Russian debt and where
the money flew. The newspapers discuss it quite actively. And if the
discussion becomes even more lively, probably, Putin will consider the
appointment of Mr. Kasyanov as a new prime minister. 

As for the second question, sorry, this is about Gerashchenko? Well,
every month either the media or the financial Russian community discuss the
destiny of Mr. Gerashchenko. And Gerashchenko probably already got
accustomed to discuss the candidates for his replacement. I still do think
that Gerashchenko will not be replaced until the new cabinet is formed and
until Mr. Putin is quite sure that we have a strong Finance Ministry which
can become the pole, the center of activity. Until then I think that
Gerashchenko will survive until the end of this year. Gerashchenko is not
going to be replaced. 

He proved to be a kind of very comfortable person for any Russian
president and prime minister. He can deal with all political forces.
Besides, Gerashchenko has very good contacts with the Duma and you know
that to replace Gerashchenko they need at least the agreement from the
Duma. I don't think the Duma will easily agree to replace Mr. Gerashchenko
with anybody of the existing candidates. And the list of candidates is very
long. 

Q: (off mike)... 

Shevtsova: I never make mistakes by making forecasts of this type
because I never make these forecasts. The litmus test for Mr. Putin is
whether the investigation of Andava, Aeroflot, Mabetex, at least these
three most important political corruption cases will be defreezed and
whether the investigators will return to do their business, whether they
will be more receptive to the information that is coming from Manhattan
district attorney and from the American sources and the English sources
about the BONY scandal. We are not receptive. So, the litmus test for Mr.
Putin is to resume the investigation of these several cases. And, of
course, this would be a blow not only to the Family, but to Mr. Berezovsky
and to the important oligarchs. 

If these cases are not resumed because they are frozen, this will mean
a definite policy. But the problem is not corruption, in my view. Because
you can even punish Mr. Berezovsky. If Putin is strong, of course, he will
strike back against the so-called "surrogate Family" -- Berezovsky and the
other oligarchs. He will never pursue against the "biological Family"
because he gave some obligations. And he is loyal, he is faithful. And he
signed a decree. 

But much more important is the problem of the so-called "shadow
economy," shadow rules, because you know -- well, corrupted may be 1, 2, 5
percent of political officials, bureaucrats are corrupted. The problem is
that the whole Russian economy and politics are working in the shadow, in
the field that is not strictly criminal but simply illegitimate. This huge
shadow field. And the problem is that if he begins to demolish, destroy the
second set of rules of the game, I am very much afraid the whole structure
will be demolished because Russian stability is based not on the political
institutions but on the quasilegitimate shadow rules. 

Everybody is involved somehow. When the militia, for instance, when
they are serving the oligarchs by guarding the bazaars or serving the
mafia, it's their only way of survival. How to cut this? It's impossible.
That's the problem. And it seems to me it's not the task for one person or
for one tenure. 

Q: (Off mike). 

Shevtsova: It's very interesting. Mr. Putin pointed German Gref (sp.?)
on Yakimanka. It's the Center for Strategic Studies. There are several
teams that are working first of all on the problem of moral values for
Russia, second, on the problem of economic agenda, and also on the problem
of effectiveness of the state. 

For what I saw, because I read the data, the materials, from what I
see, probably they will never succeed. They failed already to prepare any
kind of program for him before March 26. Where they succeeded? They
succeeded in preparing two materials. One is Russia on the Verge of
Millennium in December, before Putin, by the way, was appointed a
successor. And the second is a letter to the electorate. 

These two letters, I would say, suggest that Putin is rather intent to
hide his views and convictions rather than put them on the strategic
agenda. I don't think any agenda would succeed. But I do suppose that at
least four teams that are working on his economic platform -- not his
economic platform, but platform for the future government -- they will
partially succeed at least with emphasis. And this agenda will be declared
by the new government I hope somewhere in April or May. And then we'll see
at least what is important for us, the degree that Putin wants to
implement, the degree of state interference into the economic relations,
because this is the most important aspect. 

And the second aspect we are looking for, hints at least, how he is
going to combine the order with liberties, because this issue is crucial
for his presidency. 

Q: I feel that Putin's level of independence is a critical issue, and
it's probably one that we'll better understand after March the 26th. But it
would seem to me, when you consider the fact that he kept much of Yeltsin's
team around him, that might have been good politics for purposes of winning
the election, because these people have proven that they can win things and
manipulate things and that doesn't necessarily suggest that he won't be his
own man when he has the legitimacy of the election. 

Shevtsova: It's quite possible, but he cannot be his own man just
after the election because he has no team still. He has no team, he has no
his old oligarchs, his old financial pockets that he can rely upon. Chubais
and Deribasko from Siberian Aluminum, they are still weak partners. He
still has no political base in the West. He still has very, I would say,
ambivalent attitude on the part of regional elites. One day they betrayed
Primakov and Luzhkov. Any day they can betray him. 

He cannot still rely upon power structures. Why? Because they still
have no success in Chechnya. And he absolutely cannot have guarantees with
what intentions the generals will come from Chechnya. 

So, I do understand his cautious stand and his inability to get rid of
the old team. Simply he has nothing and nobody to replace with. 

Q: He definitely has Yeltsin's old team, whereas on the other side
there are all sorts of rumors that he was brought into power or he was
settled on as the candidate powered by the army, the FSB and the MVD.
Anything to that? 

Shevtsova: I don't think so. He was brought to power first of all by
one structure, by presidential, biological and surrogate family. He was
taken care of beginning from spring when still Primakov was in power.
They'd been looking at Putin. When they took Stepashin as prime minister,
Stepashin was considered as a temporary, you know, bird, in the White
House. They'd been looking at Putin, they'd been watching him closely. So,
he was already a mature candidate. He was the candidate that was close to
them for quite a long time. 

And as for, I would say, other power structures, I would say, for
instance, that Mr. Berezovsky and Interior Minister, Mr. Rushailo, the name
you know, they had been trying to push their own candidate. Mr. Rushailo
was the candidate on the part of power, on at least of part of power
structures. So, Mr. Putin is a candidate of one structure only. 

Moderator: Thank you very much, ladies and gentlemen. And once again
I'd like you to join me in thanking this wonderful speaker, Lilia
Shevtsova. It's been brilliant. We really enjoyed it. 

******

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