April 7, 2000    
This Date's Issues: 4232 • 4233 •  4234

Johnson's Russia List
#4233
7 April 2000
davidjohnson@erols.com

[Note from David Johnson:
OBSERVATION IN PASSING: I have a sense that the recipients
of JRL are not as attentive as perhaps they once were. Is this
a reflection of information overload, Russia or JRL fatigue,
post-elections blues, or something else?
1. Reuters: Russia set for EU talks after Chechnya rebuke.
2. AFP: Investors pile in to Russian Internet.
3. Julie Corwin: re: straus item today/4231.
4. Ira Straus: Re: "theft" and diversion.
5. Reuters: World Bank says Russian economy still vulnerable.
6. Bloomberg: IMF's Fischer on Russian Economic Reforms, Priorities.
7. Economist Intelligence Unit (UK): Russia Under Putin.
8. Stratfor.com: Russia’s Debt Binge Causes German Hangover.
9. Forbes Global: Heidi Brown, The Hybrid Banker. (re Alexander Knaster, the CEO of Russia's Alfa Bank)
10. AFP: Russia defends Putin's right to administer over Chechnya.
11. gazeta.ru: Oleg Semyonov, Generals Demand Cannon Fodder.
12. New York Times: Michael Gordon, Russian Town Tires of Losing Sons in Chechnya.
13. AFP: Last tsar's execution site becomes a shrine.
14. International Herald Tribune: Arthur Waldron, The Rumblings of 
an Avalanche Threaten China. (DJ: Perhaps an anticipation of the labor 
problems that may be coming to Russia?)]

******

#1
Russia set for EU talks after Chechnya rebuke
By Patrick Lannin

MOSCOW, April 7 (Reuters) - Russian President-elect Vladimir Putin was due to 
meet top officials from the European Union on Friday as his country smarted 
from a fresh rebuke over alleged human rights abuses in rebel Chechnya. 

The parliamentary assembly of the Council of Europe human rights body voted 
on Thursday to suspend Russia if it did not show progress on holding talks 
with the rebels and improving its rights record in the region. 

Russia's delegation walked out of the assembly after its voting powers were 
suspended. The speaker of Russia's Duma lower house of parliament, Gennady 
Seleznyov, condemned the vote as a ``colossal and historic mistake.'' 

Putin, a strong backer of the campaign to defeat what Russia calls terrorists 
in Chechnya, was to meet European Union foreign policy chief Javier Solana 
and Portuguese Foreign Minister Jaime Gama, whose country is current EU 
president. 

The Council vote gave more urgency to the talks, expected to focus on 
Chechnya as well as improving relations between the trade bloc and Moscow. 

The suspension of Russia can only be approved by the governments of the 
41-nation body, which is not part of the EU. 

Officials in Strasbourg, where the Council is based, said member states were 
unlikely to back the assembly's recommendation when they reported back to the 
chamber in June. 

SIGN OF INTERNATIONAL CONCERN 

Gama, speaking after his arrival in Moscow, echoed other comments by the 
officials in Strasbourg that Russia should see the assembly vote as a sign of 
international concern. 

``(It) must be essentially a matter of concern for Russia,'' said Gama. 

``I want to emphasise that the decision which has been taken at the 
parliamentary level is above all a warning message, is not yet the full 
decision, it must be assessed after at the Council of Ministers level,'' he 
said. 

French Foreign Minister Hubert Vedrine and EU External Relations Commissioner 
Chris Patten, who complete the so-called EU troika, should also have attended 
the hastily arranged talks in Moscow but dropped out due to prior engagements 
abroad. 

They will be represented by lower level officials. 

Solana said after arriving in Moscow that the EU wanted to have harmonious 
relations with Russia. 

``We are determined to spare no efforts in developing relations between 
Russia and EU countries in a constructive manner,'' Solana was quoted by RIA 
news agency as saying. 

They meet Putin on Friday afternoon after talks with Foreign Minister Igor 
Ivanov. Ivanov meets the 15 EU foreign ministers on Monday in Luxembourg. 

EU officials said Putin has an opportunity to improve relations with the EU, 
but much depended on his handling of Chechnya, a conflict which many Russians 
support. 

The EU wants a ceasefire and independent investigations into alleged human 
rights abuses. It also wants more access for international officials and 
monitors in Chechnya. 

*******

#2
Investors pile in to Russian Internet

MOSCOW, April 6 (AFP) - 
Surfers are still rare, telephone lines bad and quickly saturated, salaries 
too low to ensure a large-scale electronic consumerism, but despite this, 
investors are piling in to Russia's Internet.

Indeed, since the start of the year, international investors' interest has 
accelerated.

In late March, Orion Capital Advisors and Russian Fonds IG both bought into 
Lenta.ru, one of the country's 10 most popular websites.

In January, the firms acquired Rambler, Russia's most popular search engine 
and the most visited Russian site, for some 13 million dollars/euros, 
according to UFG, an investment firm.

Since then the number of Rambler users has more than doubled, clocking up 
some 970,000 hits in February.

In early March, investment fund Baring Vostok Capital Partners and UFG took 
control of Ozon.ru, an on-line shop selling books and videos, built along the 
same lines as the US' Amazon.

The purchase of this Saint Petersburg company, created in 1998 by three 
Russian designers, was the first foreign investment in Russian electronic 
commerce.

Baring Vostok and UFG then created a joint company, ru-Net Holdings, with an 
initial capital of more than 20 million dollars. Its aim is to buy several 
other companies in the Internet sector.

Last week, telecoms company Golden Telecom (GTI) said it had acquired two 
sites, mostly used by young students, offering games, news and educational 
material.

Analysts expect a wave of investment over the next few years. Even if the 
country has spawned some of the world's best programmers, including the 
inventor of arcade game Tetris, and ingenious hackers, cyber surfers are 
still few and far between.

Out of a population of 145 million only 1.8 million are thought to surf the 
web. A figure that contrasts sharply with the 70 million surfers in the 
Internet-savvy United States.

"The Russian Internet market is the most attractive that can exist in the 
world. It will grow for the next 50 years," said Modest Kolerov, a founder of 
several Russian Internet sites.

His on-line newspaper, polit.ru, created two years ago, has some 20,000 daily 
readers and is being prepared for flotation in New York.

"Today, those who invest do not do it for immediate profits, but to position 
themselves. What they buy today for a dollar will one day be worth 10 
dollars, whatever happens," Kolerov said in an interview with Business Review.

"What I bought in spring 1999 for only one dollar is already worth three 
today," he added.

Experts estimate there will be 12 million surfers in Russia within four 
years, with development in all regions, even those far away from information 
centres and supplies.

Internet salaries in Russia already outpace national averages.

"They have reached 7,000 dollars a month and will grow to 10,000 dollars by 
the end of the year," predicted Pavel Tcherkachine, head of Actis Systems, a 
website creator.

*******

#3
Date: Thu, 06 Apr 2000 
From: "Julie Corwin" <CorwinJ@rferl.org> 
Subject: re: straus item today/4231

Re: straus item of 6 April 2000 "small is ugly"

Dear David, Ira, Just to clarify, I didn't mean to imply that the 3 trillion
ruble figure was embezzled, etc., often regional officials will use money from
the center for things they consider more pressing. For example, they might
purchase fuel and decide to let teachers' salaries slip for a while. Also,
that
figure is definitely pre-1998 devaluation. I probably should not have
included a
conversion -- it is just our style to give readers some kind of rough measure
but it was probably more misleading than enlightening. Regards, Julie

******

#4
From: IRASTRAUS@aol.com (Ira Straus)
Date: Thu, 6 Apr 2000
Subject: Re: "theft" and diversion

Julie, 

Thanks for your clarification. Just to clarify on my part in turn:

I, too, did not mean to say that the R3 trillion ($ c.500 billion) was all 
stolen in the popular sense of the word, i.e. the sense of being stolen for 
private use. It was mostly diverted for other public uses. But under some 
definitions -- including the ones the West has implicitly been using for 
describing diversions of aid by the Russian central government -- that too 
counts as "corruption" and "theft".

It is not just episodic but chronic that our press and politicians use the 
word "theft" (and also "waste" and "corruption") to describe the uses made 
within Russia of aid money that we have given. By these standards, most of 
the diversions by the regions of Russian Federal funds would equally qualify 
as "theft" (and "waste" and "corruption"). If we allow it to pass 
unchallenged for our media and politicians to speak demagogically about 
"theft" of our aid and to throw all the mud for this on the Russian central 
government, then maybe the regions should get the same treatment. :)

More seriously, what I suggest is that, whatever the terms that we use, we 
should be trying to measure the extent of the "theft" done by Russian regions 
against comparable forms of "theft" done by the Feds. This won't be easy, but 
it needs to be done if we want to get a focus on the locus of corruption in 
Russia. The information that Putin collected and you summarized, and for 
which I am grateful, is only some of the material that is needed for such a 
comparison.

Maybe we should stop letting our politicians and media get away with using 
the word "theft" so carelessly when it comes to Russians. It has given 
ordinary Americans a grossly distorted impression of the Russian people. In 
this sense, I very much agree with the point of your note and I prefer the 
word "diversion" as an overall categorization.

******

#5
World Bank says Russian economy still vulnerable

MOSCOW, April 6 (Reuters) - Russia's macroeconomic situation looks healthy 
due to the devaluation of the rouble in 1998 and higher oil prices, but the 
recovery is still fragile, World Bank Vice-President Johannes Linn said on 
Thursday. 

"Macroeconomic stabilisation is not enough and is not sustainable without 
significant deep structural, social and institutional change," Linn told an 
international investment conference in Moscow. 

He said Russia had made progress in moves to a market economy in the last 10 
years and the government should take advantage of the favourable economic 
environment to make economic recovery irreversible. 

Linn said the government needed to deal urgently with weak fiscal control and 
massive capital flight, which amounted to $10-$20 billion per year according 
to various estimates. 

"The main challenge that Russia, we believe, faces is to attract new 
investment, raise productivity...and remove obstacles to competition," he 
said. 

He said monopolistic market structures tended to hinder competition and thus 
discourage new businesses. 

"I believe that Russia faces a great wind of opportunity now -- external 
conditions are favourable, there is a new leadership which is assuming a key 
and leading role, and I believe there is a new opportunity for gaining 
popular support," Linn said. 

He said the government should address four key issues: 

* Improvement of macroeconomic management, which is instrumental for 
sustained growth. 

* Structural policies, which would encourage competition and increase 
productivity. 

* Social protection policies. 

* Public sector management. 

*****

#6
IMF's Fischer on Russian Economic Reforms, Priorities: Comment

Moscow, April 6 (Bloomberg)
-- The following are comments by International Monetary Fund Acting 
Managing Director Stanley Fischer on Russian economic reforms. The comments 
were made in a speech at an academic conference in Moscow. 

``The IMF and the international community stand ready to help support a 
serious Russian economic reform program, who's seriousness is demonstrated by 
progress in its implementation. The sustained growth that is needed will 
require an acceleration in economic reforms to spur investment and strengthen 
exports as well as comprehensive tax and expenditure reforms. The goal of 
many of the needed structural reforms is to improve the investment climate 
primarily for Russian investors but also and importantly for foreign 
investors. The large amounts of Russian capital now abroad will begin to 
return only when the investment climate changes. And as it comes back and 
investment picks up so too will growth.'' 

Fischer outlined six priorities for Russia: 

--industrial restructuring, including privatization and strengthening the 
rule of law 

--eliminating non-payments 

--restructuring the banking system, including reforming the central bank 

-- tax reform 

-- strengthening the social safety net 

--agricultural and land ownership reform. 

``What is needed now is to translate this knowledge and energy into a 
coherent reform strategy that is backed by strong public consensus and 
leadership and that is implemented. If that happens the IMF will be ready to 
do what it can do to support and strengthen the program in Russia's 
economy.''

******

#7
Economist Intelligence Unit (UK)
Russia Under Putin
March 2000
Key Findings

Vladimir Putin’s ascent to the presidency was fuelled by a popular desire for 
strong and energetic leadership after the drift of Boris Yeltsin’s second 
term. But what does Mr Putin actually stand for? Russia under Putin looks 
beyond the rhetoric to act as an invaluable guide for companies doing 
business in, or with, Russia. It combines detailed political and economic 
forecasts with clear analysis of the outlook for business in key industries. 
Among the crucial, and so far unanswered, questions examined in Russia under 
Putin are:

Is Mr Putin an economic reformer?

We expect economic policy to follow approximately the pattern that has been 
pursued since 1992. Monetary and fiscal policies will remain relatively 
prudent with a view to maintaining relations with the IMF and other 
international creditors, but microlevel structural reforms will be shunned 
for fear of their social and political consequences. 

Will he seek to centralise power at the expense of Russian’s regions?

Building a business-friendly environment requires political stability, 
minimal corruption, and an effective state that at the very least can collect 
taxes. Achieving these basic goals is particularly hard in a country as large 
as Russia, which famously stretches across 11 time zones and 89 republics and 
regions. How Vladimir Putin deals with the issues of federalism will help 
determine how effective he is as Russia's leader. 

Will he be able to establish a constructive relationship with the Duma?

Even as a moderately reformist president, Mr Putin should be able to achieve 
more than Mr Yeltsin, as he will not have to battle with the deep antagonism 
that characterised relations between the legislature and the executive during 
the Yeltsin era. 

What should foreign investors expect in a post-election Russia?

The most immediate answer is nothing fast. Mr Putin’s apparent grasp of the 
problems facing foreign investors--a weak legal system, corruption, shoddy 
corporate governance and the need for tax and land reform--shows that he has 
at least done his homework. But in Russia, being a reformer does not 
guarantee reform.

*******

#8
Stratfor.com
April 6, 2000
Russia’s Debt Binge Causes German Hangover

French Foreign Minister Hubert Vedrine and French Finance Minister Laurent 
Fabius issued a joint statement calling upon the Group of Seven (G-7) to 
enact more stringent conditions for aid to Russia. The G-7 finance ministers, 
due to meet in Washington April 15, are expected to further tighten what 
credit is still available to Moscow. This official reduction in the amount of 
loans available exacerbates Russia’s continuing budgetary problems. With 
expenses rising and revenues falling, Russia will eventually be forced into 
default on some portion of its existing debt. The pain of default will be 
borne by Russia, in the form of increased economic isolation, and by Germany, 
in the form of a force-fed multi-billion dollar tab. 

Russia’s finances are in an atrocious state. Between the ongoing cost of the 
Chechnya campaign, rising debt payments and lower oil prices, Russian income 
is dropping while Russian outlays are rising. Few domestic funds are 
available. The Kremlin already owes the Central Bank $6.3 billion. Total 
Russian gold and hard currency reserves are only $15.1 billion, about the 
same level as the Philippines and Venezuela. 

All this is occurring against a background of crushing Russian debt. As of 
the first of the year Russia owed international lenders $158 billion, $103.5 
billion of which it inherited from the Soviet Union. Under current 
arrangements, Russia is expected to pay back $10.2 billion in debt in the 
year 2000. Net debt will be unchanged at the end of the year, according to 
Russia’s first deputy finance minister, and future payments will be even 
higher – $11.5 billion in 2003. Russia’s overall debt burden is about six 
times its budget revenues – almost triple that of most developing economies. 

Russia must find a way to grapple with this debt. Barring flexibility on the 
part of Russia’s creditors, the simple response would be to default. However, 
Standard & Poor has already given Russia the lowest possible credit rating – 
selective default – and a CCC+ rating on Russia’s Eurobonds, lower than that 
of Bolivia and Suriname. 

A total default would seal Russia off from all international capital markets. 
Russia threatened to default before. It nearly defaulted on its entire debt 
burden after the 1998 financial crisis. Even a partial default would 
seriously hamper Russia’s efforts to attract direly needed foreign capital, 
especially since the European Bank for Reconstruction and Development (EBRD) 
just began to encourage investment again. However, a Russian default would 
also harm Russia’s creditors – $158 billion is quite a loss to swallow. 
Therefore, to ward off complete and permanent isolation Russia will instead 
threaten defaults as a negotiating tactic with specific creditors to arrange 
for debt deferrals. 

Russia’s debt is held by a variety of institutions and countries, with 
Germany being the single largest creditor. The bulk of Russia’s debt falls 
into three main categories: London Club ($32 billion), Paris Club ($38.7 
billion) and the IMF ($15.2 billion, according to Interfax). Russia has 
already struck a deal with the London Club. Russia will next have to convince 
the Paris Club and the IMF. 

Moscow first targeted the London Club, a group of 600 international banks 
that loaned money to the Soviet Union. In February, pleading financial 
insolvency, Russia convinced the London Club to reduce its outstanding debt 
from $32 billion to $21.3 billion and extend the terms of repayment to 30 
years. Despite the official loss of income, the stocks of London Club 
creditors barely budged at the news. Most investors were happy simply to 
salvage anything from what they felt would be total losses. 

Russia hopes to use its success with the London Club as a model for upcoming 
negotiations with the Paris Club, which is composed of governments, not 
private financial institutions. As such, political maneuvering figures into 
their decisions. More importantly, the loans are far more concentrated – 
about 40 percent of them are owed directly to Germany. The amount is roughly 
the same amount as the entire German defense budget. 

Collectively, the Paris Club has decided to dodge the issue for now and link 
its fortunes to that of the IMF. In the past the IMF has stalwartly refused 
debt renegotiation, but attitudes have been shifting. The IMF recently 
tinkered with debt relief for highly-indebted countries. The West bent the 
rules when it relieved Poland’s Soviet era debt purely for political reasons, 
why not Russia? Austria and Spain, two Paris Club members, seem to agree – 
they have already reached independent deals with Moscow. Russia hopes to seal 
similar deals with Australia, France and Switzerland this month. 

Next week’s G-7 finance ministers meeting will set the tone for the IMF. To 
prevent a total default and salvage what’s left of the Russia-West 
relationship, the United States, the United Kingdom and France will pressure 
Germany into accepting some sort of a debt reduction. Germany will resist, 
hoping to spare itself the expense. But the rest of the G-7, along with other 
several Paris Club creditors and the precedent of the London club, will 
likely force Germany to accept the multi-billion dollar loss. 

The IMF will follow the G-7’s lead and restructure Russia’s debt repayment 
plans, although it will still withhold funding for at least the rest of the 
year. The new IMF chairman Horst Koehler at his old job with the European 
Bank for Reconstruction and Development (EBRD) saw loan after loan disappear 
into the Russian financial maelstrom; he will remain wary of new commitments. 
While Koehler, being German, may be tempted to ease the way for new IMF loans 
in order to lessen Germany’s overall financial risk, such tactics would face 
near total resistance from other IMF creditors. New IMF restrictions on 
borrowing – designed specifically with the IMF’s Russian experience in mind – 
will further restrict new lending. 

Once the IMF seals a deal with Russia, Germany will be able to read the 
writing on the wall, and the Paris Club will also cut a deal. Germany can 
look forward to losing at least one-third of the value of its Russian loans. 
But this will still leave Russia with around $100 billion in debt and murky 
economic prospects. A cycle of defaults will become standard economic fare in 
Russia. 

All Western taxpayers will need to dole out a fair bit of cash to cover the 
loss, but Germans will be the hardest hit, and in more ways than one. Germany 
remains the big loser among Western countries with regard to Russia. Of the 
West it is Germany that is the most exposed geographically, economically and 
militarily – and now, financially as well. 

*******

#9
Forbes Global
17 April 2000
[for personal use only]
The Hybrid Banker
By Heidi Brown 
Alexander Knaster, the CEO of Russia's Alfa Bank, is not waiting to see 
whether the newly elected Russian president will be a reformist. He's 
building the most successful bank in Russia. 

The election, on Mar. 26, of Vladimir Putin as president of Russia is likely 
to make the country more stable and enable the economy to grow faster. Both 
improvements, if they materialize, will help Alexander Knaster, the CEO of 
the nine-year-old Alfa Bank, the country's third-largest bank (measured by 
deposits) and probably its most profitable. 

Knaster, 41, has the qualifications and the experience to do well in a 
frontier post of capitalist banking. Born in Moscow, he left Russia when he 
was 16 and gained an MBA from Harvard Business School. In 1995 he joined 
Credit Suisse First Boston in Moscow. 

He joined Alfa on Aug. 1, 1998, just 16 days before Russia devalued its 
currency. It was the perfect time to seize the business initiative. Alfa has 
increased dollar deposits by 116% to $820 million since the end of 1998 and 
increased the number of corporate clients from 16,000 to 26,000. It's the 
largest issuer of Visa cards in Russia. Net profits, in accord with American 
GAAPstandards, were approximately $140 million, and Alfa's asset base grew 
55%, to $1.2 billion, from 1998 to 1999. That's a very high ratio of profits 
to assets; Alfa makes a lot of its money from investment banking and 
corporate advisory work. 

We caught up with Knaster in New York ten days before the election. 

FORBES GLOBAL: How optimistic are you about Russia's economic prospects? 

Knaster: Let's see some real structural reforms; if those happen, then I 
would guess that things will improve quite dramatically. The Russian stock 
market has moved up in anticipation of these reforms. 

Will Putin will make the needed reforms? 

I don't have an opinion. He's a strong person, but when people get this sort 
of responsibility and this sort of authority, it changes them and their 
priorities. 

How is Alfa able to expand? 

We do so mostly by growing the deposit base. Even in 1999, we paid back most 
of our debts. We replaced the funding from those debts with the deposits. 

How did you tackle the financial crisis of 1998? 

We decided early on to honor all our obligations. When there were big lines 
in front of all the branches to get money, we stayed open for three extra 
hours a day. After a couple of weeks the run on the bank stopped. Having 
weathered the crisis, unlike a lot of our competitors, we saw a big opening 
and started very rapidly to grow our franchise. So we doubled our network 
from 24 branches to 50. We're opening a new branch every two weeks. 

We also had better risk management than our competitors. We didn't write 
insurance policies for hedge funds investing in Russia. The head of the risk 
management department is an American with 15 years of experience. Our finance 
director is an Irishman. Our treasurer is Finnish. 

How do you attract them? 

You have to pay a lot. Several foreigners receive a base salary of $400,000 
to $500,000, plus a substantial bonus. 

What banking business is there to do in Russia these days? 

One function of the banking system is making payments; the volume has gone up 
over the last couple of years. The second, lending money to industry, has 
never really flourished in Russia, because collecting on loans and enforcing 
property rights is pretty hard. We have 38 lawyers to support our lending 
business, which is approaching $500 million. Many of those loans don't get 
paid on time, but they all get paid eventually, with interest and penalties, 
so it's quite profitable. 

We don't run Alfa like a Western bank but like a hybrid. We borrow the best 
practices from Western banks for our internal processes, but in dealing with 
customers and regulators, where politics and business merge, we're very much 
a Russian bank. For example, we received about 300 audits by various 
government departments. 

How do you keep track of what your branches are doing? 

We have 2,500 different procedures described in our operations manual, which 
is online. We have a large internal control department headed by a very tough 
guy who was in charge of internal control at the Central Bank. We've got 
internal security--people in every branch who do not report to the local 
branch--to make sure that things are conducted in accordance with 
regulations. Loan officers in a regional branch need approval from the guy 
who oversees regional lending in Moscow. It's cumbersome, but it enables us 
to control what's going on in nine different time zones. 

*******

#10
Russia defends Putin's right to administer over Chechnya

MOSCOW, April 6 (AFP) - 
The Kremlin used constitutional loopholes and Soviet-era laws on Thursday to 
defend plans to implement direct presidential rule over the separatist 
republic of Chechnya.

A top aide to President-elect Vladimir Putin argued that many undefined 
points in Russia's 1993 constitution allowed the Kremlin to appoint 
representative in the war-torn republic who answer directly to Moscow.

Alexander Kotenkov added that elected Chechen President Aslan Maskhadov 
cannot be considered as a legitimate ruler -- recognized as such by Moscow in 
1997 -- because he is leading an "unconstitutional revolt.

"Maskhadov may be legitimate in Europe. But in Russia, against whom he is 
leading an armed resistance, he is not."

The Kremlin's latest defense of direct presidential rule came against the 
backdrop of fresh reports that government forces were suffering heavy 
casualties from a coordinated rebel counter-attack across Chechnya.

"The president's constitutional duty is to secure law and order, and there is 
neither now in Chechnya," Kotenkov told a press briefing.

"Therefore, the president must appoint a government in order to secure order 
and fill out his constitutional responsibilities. We have neither an elected 
nor an appointed government in Chechnya at all."

Russia's hastily written basic law does not permit for direct presidential 
rule over any republic accept in cases when a state of emergency is declared.

However there is no current law in Russia which explains how, when or where 
such a state of emergency may be pronounced, he said. A bill has been 
floundering in parliament for years.

There is, however, old Soviet legislation which Kotenkov said has not been 
overruled by modern law and which can be applied.

"The state of emergency law -- there is none in the constitution yet -- 
exists in the Russian Soviet republic legislation. I do not want to say for 
how long (it can remain in force), but at a certain stage the emergency 
situation can be lifted."

Putin throughout his presidential campaign had floated the idea of 
implementing Kremlin rule over Chechnya for several years, until the last of 
the rebel resistance is destroyed.

Many observers saw Putin's comments as a signal that the Kremlin trusts few 
of the local elders or other influential leaders in the region.

Kotenkov, a member of the Kremlin administration who serves as Putin's 
spokesman in the State Duma lower house of parliament, painted various 
scenarios in which Moscow could legitimately implement Kremlin rule there.

One, said Kotenkov, is that the constitution allows the president to pass 
decrees which do not contradict Russia's basic law.

His arguments boiled down to a revelation that the Kremlin is currently 
weighing two options -- either Putin issues a decree appointing his own 
government onto Chechnya, or he waits for the appropriate law to be passed by 
parliament.

Kotenkov said he personally prefers the first choice: "Chechnya will not be 
prepared to elect its own leader for several years."

*******

#11
gazeta.ru
April 6, 2000
Generals Demand Cannon Fodder
By Oleg Semyonov 

On April 7th the spring conscription campaign begins. The General Military 
Headquarters intend to turn 191 612 men into soldiers. The number of spring 
conscripts is almost the same as it was last autumn, many of who were sent 
straight to the war. The new conscripts will almost certainly have to 
participate in military operations too. 

The according order emerged from the depth of Genshtab’s Chief 
Recruitment Department. Genshtab has instructed recruitment committees to 
summon over 190 thousand conscripts, which is only by 15 thousand less than 
the amount requested in the autumn of 1999. 

Last autumn the Genshtab demanded recruiters to enlist over 205 000 
young men. In spring last year the army’s recruitment target was only 169 
000, and they were sent to serve at barracks. And in autumn 1998 the number 
was even less, only 158 000 conscripts were sent to the army. 

Thus the latest conscript quote equals the record number of young 
Russian men conscripted last autumn. It is quite obvious that last autumn’s 
record amount of conscripts was due to the military operation in Chechnya 
and the Genshtab’s realization that the war would last for months beyond the 
New Year. 

However, a record number of nearly 215 thousand conscripts will soon 
be discharged, having completed the term of compulsory military service. One 
day of service in the war zone officially counts for two days of ‘normal’ 
service. Obviously the number of conscripts discharged next year will be a 
record high, and consequently the following conscription will again set a new 
record. And this cycle will continue as long as the guerrilla war in Chechnya 
continues. Still it is possible the Genshtab will declare the complete 
finalization of the military phase of operations in the republic, and that 
would mean that conscripts would have to fight against Chechen partisans for 
the full 2 -year term of military service. 

Unfair, isn’t it? There is a precedent. When the autumn conscription 
campaign was launched in October 1999, the Military Service Instructions, 
issued on September 16th, stipulated that the military recruiters were 
entitled to send to Chechnya only those soldiers who had already served for 
no less than 12 months. The situation changed drastically in November 1999: 
in view of the forthcoming key battles with the rebels, the military 
officials simply rewrote the instructions. Following those amendments 
soldiers who had served only 6 months, were obliged to go to Chechnya. 

In any case local conscription offices (voenkomaty) are going to 
encounter difficulties in recruiting 191 000. Recent public opinion polls 
show that the attitude in Russia towards military service is very negative. 

According to an opinion poll conducted in February by VTsIOM, 75% of 
respondents claim they would be unwilling to serve and they would not let 
their relatives be enlisted. The respondents were not concerned by either 
dedovchshina (fagging - older conscripts and higher ranks bullying new 
recruits) hunger, or other facets of army life. 48% said they would be scared 
of being killed or wounded. These sentiments are symptomatic. After the 
first war in Chechnya in 1997 the Defense Ministry conducted a similar among 
poll among fresh recruits. Only 10% of them expressed a positive attitude 
towards army service. Since then the Defense Ministry abstained from this 
kind of research work. However, the statistics on draft evaders are even more 
telling: their number increased from less than 20 thousand in autumn 1998 to 
around 38 thousand in Autumn 1999. 

During the first war in Chechnya a new kind of draft evader emerged - 
soldiers who refused to fight in Chechnya. In their letters addressed to the 
president and the General War Prosecutor they claimed that participation in 
military operations against citizens of their own state contradicted 
international law, and consequently they were transferred to units not 
involved in combat. Over 500 soldiers thus avoided being sent to the war. 
This time the war in Chechnya has officially been called an anti-terrorist 
operation. The official status of the current war makes refusal on legal 
grounds far harder. 

Under the present circumstances many simply run away. Since 1992 over 
40 thousand conscript soldiers have deserted. The authorities have applied 
various methods to fight desertion. Frequent hunts are carried out, amnesties 
proclaimed and other stick and carrot policies have been tried. Since 1992 
the military has managed to get back 25 000 AWOLs. It was not without reason 
that the Head of the Central Recruitment Department when he said the other 
day that 100% fulfillment of the spring conscription quota cannot be 
fulfilled. 

*******

#12
New York Times
April 6, 2000
[for personal use only]
Russian Town Tires of Losing Sons in Chechnya
By MICHAEL R. GORDON

BEREZNIKI, Russia, April 5 -- When the Russian military roared into Chechnya 
in late September, most people in this factory town in the Urals were 
convinced that the Kremlin had begun a just and triumphant war. 

But that was before the bodies arrived, the flags were draped with black 
ribbons and a local sports complex was turned into a hall of remembrance for 
16 policemen killed in an ambush in Chechnya last week. 

Now lust for revenge, irritation with Russia's bumbling generals and anxiety 
that the nation is enmeshed in an open-ended guerrilla war dominate the talk 
here. 

"Until recently I thought we should fight until we win," said a 56-year-old 
pensioner named Yuliya. "But the way the military is running things today, I 
don't think victory can be achieved. There is no sense sending our boys 
there." 

As the war against Chechnya, the breakaway region in the Caucasus, enters its 
seventh month, there has been a subtle but unmistakable shift in the public 
mood in Russia. 

Most Russians still seem to think that the nation has every right to 
re-establish its control over Chechnya, and Russian enmity toward the rebels 
there seems greater than ever. But an increasing number of Russians worry 
that their nation has plunged into a military quagmire. 

Public opinion polls show that a majority of Russians no longer believe their 
generals' assurance that the militants are on the verge of defeat. And there 
are growing fears that the military's approach is costing too many Russian 
lives. 

The swing of mood is evident in Berezniki, an industrial town of 180,000 that 
is a three-hour drive from Perm, the regional capital. Surrounded by forests 
of fir trees, frozen lakes and fields of snow, Berezniki seems as far from 
Chechnya as one can imagine. It is a town with a history of quiet fealty to 
the state. 

Berezniki may be the one place in Russia that is proud of its connection to 
former President Boris N. Yeltsin, who graduated from the local secondary 
school, and his handpicked successor, Vladimir V. Putin, did well here in 
last month's presidential election. 

As Chechnya dissolved into chaos after the first war there in 1994-96, there 
was a lot of discussion here about whether Russian troops should again get 
involved. But after Mr. Putin decided to take the fight to the rebels, 
Berezniki did its part. 

Along with other specially trained riot police -- a SWAT-like Interior 
Ministry force known as OMON -- from the Perm region, Berezniki's militia was 
sent to Chechnya to take charge of areas that the regular army was supposed 
to have secured. The policemen were local heroes. 

By March the militia was in Vedeno, the hometown of Shamil Basayev, one of 
the most notorious Chechen warlords. 

Then the news broke last week that a convoy of militia from the Perm region 
had been ambushed on a road outside Vedeno and that 25 Russian dead had been 
recovered. 

The ambush was a terrible blow for the Perm district, which has lost 181 men 
in the two conflicts in Chechnya, compared with 142 who perished in the 
10-year Soviet war in Afghanistan. 

It was a catastrophe in Berezniki. Its small militia accounted for 16 of the 
dead in the ambush. And the toll is certain to rise, since 11 members of the 
Perm militia are still missing and Mr. Basayev asserted today that his 
fighters had captured and executed 9 of them. 

Compounding the grief were accusations that senior Russian commanders had 
dispatched the lightly armed police convoy on a road that was not under 
Russian control and then failed to provide a proper military escort. The 
ambush was a virtual repetition of a rebel attack near Grozny just a month 
ago against an unescorted militia unit from the Russian town of Sergiyev 
Posad. 

"The city is in shock, and there is a lot of talk that the war needs to be 
brought to an end," said Aleksandr Moshkin, Berezniki's mayor. "When corpses 
arrive, it always sparks debate about what has to be done and why our guys 
died there. But at the same time, Russia's territorial integrity should be 
preserved." 

On Tuesday a violinist played a funeral dirge as thousands of the town's 
residents filed past the row of bodies, which were laid out in an indoor 
track-and-field complex here. The families of the dead policemen sat on small 
wooden chairs grouped around the open plywood coffins, which were wrapped in 
red fabric. 

Some wives stroked the heads of their slain husbands, whose foreheads were 
covered by paper bands bearing a Russian Orthodox prayer. A gun-toting sentry 
stood at attention at the head of each coffin. 

A senior Interior Ministry official gave a speech, proclaiming the men 
martyrs in the battle against terrorism. But the governor of the Perm region, 
Gennadi Igumnov, was closer to the public mood when he described the deaths 
as the result of incompetence by Russia's military officers, who had failed 
to protect the convoy. It was the first time that a governor has been so 
critical of the military's conduct in the war. 

"Some of the guilt for the death of our magnificent guys is the result of our 
commanders' negligence," he said. "The names of these people will be made 
public, and they will get the punishment they deserve." 

Then, after prayers by several priests, there was a clatter of hammers as the 
coffins were nailed shut. 

Each was loaded onto the back of a light truck, which carried a tombstone 
bearing the likenesses of the slain policemen and a red five-pointed star. A 
long procession of shiny government Volga sedans and humble Lada compacts 
then snaked its way to the cemetery. 

Although such setbacks have not led to a substantial drop in popular support 
for continuing to fight the rebels, polls show a growing skepticism about the 
claims of Russia's generals that victory is imminent. 

A nationwide survey of 1,500 adults by Romir, a Russian polling organization, 
carried out before the ambush of the Perm militia, found that about 60 
percent of the Russian public thought the war would go on for a long time, if 
not forever. a 

In Berezniki the percentage is probably far higher. Many people here appear 
to have conflicting thoughts. They want the war to be finished as soon as 
possible. They do not want to make concessions to the rebels. And they do not 
want any more Russian casualties, especially among their own friends and 
relatives. 

Viktor Seryodkin, 50, a chemical equipment operator, represented one pole in 
the debate. He said the only hope was to gather the Chechen population and 
deport it, much as Stalin did in 1944. 

"They should be divided up in groups and gradually sent to different parts of 
Russia," he said. "We have so much land in Siberia and in the north." 

Oleg Malyavkin, 44, has been in a wheelchair since he was wounded when he 
served in the Soviet Army during the invasion of Czechoslovakia in 1968. He 
said too many Russians had died in Chechnya to pull out now. 

"Revenge is not the solution to the problem," he said. "But this has to be 
completed." 

Oleg Ryashev, the deputy commander of the Berezniki militia, has a different 
view, perhaps because he has been chastened by experience. He has served in 
Chechnya, though he was not there at the time of the latest attack. 

He cautioned that the Russian authorities would not succeed if they depended 
entirely on military force. Moscow, he argued, needs a political strategy. 
And he said it would have a better chance of success if it managed somehow to 
forge an alliance with one of the Chechen clans. Even so, he doubted that 
doing do would stop all the fighting. 

"There are just too many weapons there," he said, "and all the kids have been 
taught to hate Russia since childhood." 

But what everybody seems to agree is that the war is not going according to 
plan and that Russia's strategy needed to be changed. 

"Something is wrong in Chechnya," said Mestnoye Vremya, a weekly newspaper in 
the region whose name means "Local Time." 

"Everybody feels it," the paper said. "And the death of our guys, or to be 
more correct, the way they died, makes this feeling stronger." 

*******

#13
Last tsar's execution site becomes a shrine

EKATERINBURG, Russia, April 6 (AFP) - 
Many Russian Christians believe the the site here where the last tsar of 
Russia, Nicolas II, was executed by the Bolsheviks is just as holy as calvary 
in Jerusalem, the hill where Christ was crucified.

The house of engineer Ipatiyev, situated in the centre of Ekaterinburg, in 
the Urals, was requisitioned by the revolutionaries to hold the imperial 
family for 78 days before they were executed during the night of 16-17 July, 

The house no longer exists. It was destroyed in 1977, when former president 
Boris Yeltsin was first secretary of the city's Communist Party, and the plot 
where it was built is today hidden from the street by panels of grey cement.

But since the collapse of the Soviet Union, a religious service is staged 
there every day in the presence of a few orthodox Christians, said Kulakov, 
48-year-old head of a photography club in the town, and who often attends the 
service.

"Miracles are starting to happen here," he said, referring to rumours of the 
sudden healing of sick people who have come to pay homage at the place where 
Nicolas II was killed.

Local authorities have frequently promised to build a cathedral on the site, 
but for the moment there is only a floor of wooden boards, with a roof 
surmounted by cupolas placed on pillars.

The wooden structure was privately paid for and erected by volunteers. The 
wall-less edifice, described as "a temporary cathedral," was built around a 
cross of solid wood erected over the cellar where the tsar, his wife, five of 
their children and three relations were killed.

Close by, there is a small wooden chapel that can hold up to 15 people.

"After the house was demolished, the site was dug up and the street was 
re-made to try to hide the scene of the crime. But geologists managed to 
localise the site of the cellar," said Lyubov Dmitrieva, 45, who looks after 
the chapel.

Many people pay homage at the site, crossing themselves or kneeling before 
the cross, but few are willing to talk about their feelings.

"Every time I have a look. What happened there was obviously horrible for the 
children," said Galina Petrovna, 48, who however is not sure whether the 
execution of the tsar was a good thing or bad.

"When I was in the Pioneers, they brought us here to show us where the tsar 
was killed, saying it was a good thing. But with the tsar, Russia is today on 
the bottom rung of the nations, while other countries, like Britain have kept 
their queen and are prospering," she said.

"After the executions, the Ipatiyev house was turned into a museum of the 
Bolshevik revolution, and the killers came in person to recount what they had 
done," said Lyubov.

Recently, schools bring entire classes to visit the site. "There has been a 
transformation of people's minds," she said.

She recalled that Christians from all over Russia, but also from Spain, 
France and Canada had attended ceremonies marking the 80th anniversary of the 
killings.

*******

#14
International Herald Tribune
April 7, 2000
[for personal use only]
The Rumblings of an Avalanche Threaten China
By Arthur Waldron, Washington Post Service

WASHINGTON - Had CNN and the press corps been on the spot as the story
unfolded, it would undoubtedly have dominated the news: days of protest by
20,000 miners discharged from their jobs in China's northeast rust belt,
protests that saw roads blocked, windows smashed and cars burned and that
finally ended only when the army fired shots.

The story might even have forced the Clinton administration and its
specialists to confront true issues in China: issues about the Beijing
regime, its policies, its competence and its viability. But because China's
media suppressed the story, we are learning of it more than a month after
it happened.

The protests were at Yangjiazhangzi, just off the main railway line,
roughly 400 kilometers (250 miles) from Beijing, but they could have been
almost anywhere in today's China.

Like tens of millions of other Chinese, the protesting miners were as angry
about corruption as about poverty. What outraged them, along with the
derisory severance pay offered, was a murky ''privatization'' in which
''parts of the mine were transferred to people believed to be friends and
relatives of local power brokers,'' The Washington Post has reported (IHT,
April 6).

The story would have provided an illuminating perspective on the China
story that did occupy the headlines in February - Taiwan. Pundits and the
Clinton administration focused on the hoary mysteries of the one-China
policy, cross-straits military balance and dangers posed by the looming
Taiwan election, without even suspecting that something else might be going
on.

China is nowhere near as transparent as it may seem. You can visit dozens
of cities, move about normally and have candid discussions with a whole
cast of Chinese interlocutors, but your hosts can still keep you blindfolded.

Was there even a hint about the protests from China's leaders when Deputy
Secretary of State Strobe Talbott met them in February? Did the CIA know? I
doubt it. Domestic social issues are not an administration or agency
priority, and even Beijing journalists, a well-connected and resourceful
group, took a month to discover the story.

Taiwan is not the key issue in China policy. We hear regularly that
''China'' is ''growing impatient'' with Taipei or is ''angry'' about
something its government has said or done. But the anger of protesting
workers in Yangjiazhangzi was directed at abuses by their own government.

Beijing's increasingly hard line against Taiwan is at least in part an
attempt to divert popular hostility away from itself and into channels of
assertive and anti-foreign nationalism. The temperature of Beijing's
rhetoric charts China's domestic political state.

Domestic reform is the key to China's future, and Beijing is flubbing it.
More than 11 million workers will lose jobs in state industries this year,
according to official Chinese estimates. If even a small fraction react as
the Yangjiazhangzi workers did, no amount of gunfire will be able to save
the Beijing regime.

This is the fundamental fact about China today, to be faced squarely by
Chinese and foreigners alike.

Instead of attacking this challenge, President Jiang Zemin is attacking his
critics. In the past few days he has begun a purge of the elite Chinese
Academy of Social Sciences to remove respected scholars who, in widely
circulated articles, have argued the pressing need for genuine political
reform.

Those scholars are right. The Chinese president may rule out (as he did yet
again last week) ''bourgeois democracy'' as unsuited for China, but in fact
the only way forward now is to open the political system so that workers
and the rest of China's citizens will have a decisive say about who governs
them and what policies are followed. The continuing attempt to rule by
force is leading to a dangerous dead end. 

The West must face these facts. Upbeat assessments of the Beijing
leadership and uncritical interactions with them, washed down with bromides
about trade eventually bringing democracy and the Internet being the key to
freedom, should no longer be acceptable. The Yangjiazhangzi protests may
well be the rumblings of an avalanche. It is time to pay attention.

The writer is Lauder professor of international relations at the University
of Pennsylvania and director of Asian studies at the American Enterprise
Institute. He contributed this comment to The Washington Post.

*******