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Johnson's Russia List


April 10, 2000    
This Date's Issues: 4237 4238   

Johnson's Russia List
10 April 2000

[Note from David Johnson:
1. Reuters: Elaine Monaghan, Russia sees swift START II approval-Talbott.
2. AP: Shevardnadze Wins Georgia Election.
3. The Russia Journal: Otto Latsis, Can our recovery last?
4. Reuters: Western agents aided Moscow on Chechnya - reports.
6. The Providence Journal: Nicolai N. Petro and Robert Bruce Ware,
It's not just Russia killing in Chechnya.

7. Lucy Komisar: apt & phone in Moscow.
8. Moscow Times: Elizabeth Wolfe, Is There Life After Moscow? 
9. US News and World Report: Mortimer B. Zuckerman,A paranoid power.
10. The Russia Journal: Michael Heath, Hopes in Putin ill-founded, 
expert says. [Piontkovsky]. But forum attendees express optimism.

11. The Independent (UK): Patrick Cockburn, Have roubles, want 
sofa-bed. Napoleon tried it, and failed. So did Hitler. Now the 
Swedes (in the shape of Ikea) want to invade Russia. So what does 
Mrs Melikhova think?] 


INTERVIEW-Russia sees swift START II approval-Talbott
By Elaine Monaghan

WASHINGTON, April 9 (Reuters) - Russia has told the United States its 
parliament could ratify an arms reduction treaty signed seven years ago 
before Foreign Minister Igor Ivanov visits Washington in 19 days, a move that 
would give a big psychological boost to tricky post-Cold War relations. 

Deputy Secretary of State Strobe Talbott told Reuters in an interview on 
Friday that the Kremlin was saying the process of ratifying START II, signed 
in January 1993, was under way. 

Although each side has been assuming ratification of START II -- an acronym 
for Strategic Arms Reductions Talks which would cut nuclear warheads to 3,500 
each by 2003 -- it would end an embarrassing delay and allow talks on deeper 
nuclear arms cuts to begin in earnest. 

``The Russians continue to assure us, including in the last 24 hours, that 
the process for ratifying START II in the Duma is under way ... and that in 
fact there could even be ratification of START II by the Duma before Foreign 
Minister Ivanov comes to Washington,'' Talbott said in his office. 

Clinton and Yeltsin agreed to the parameters of START III talks back in March 
1997. With START II, the number of nuclear warheads would be cut to 
2,000-2,500 by 2007, though Russia would like deeper cuts now. 

Ratification would also provide an encouraging sign that President-elect 
Vladimir Putin, who is also acting president, may have more success at 
working with the Duma than his predecessor. 

At the talks, the United States will bring up the Anti-Ballistic Missile 
(ABM) treaty, which it hopes Russia will agree to amend, allowing Clinton to 
add a National Missile Defence to his legacy when he leaves office next year. 
The treaty bars an anti-missile defence system. 

Ivanov and Secretary of State Madeleine Albright will also discuss the date 
and venue of a Clinton-Putin summit when the foreign minister becomes the 
first high-level official to visit from Moscow since Putin's election on 
March 26. 

Russian and U.S. sources say they want a summit to take place before Putin 
and Clinton cross paths at a Group of Eight meeting in Okinawa, Japan, on 
July 21-23. 

Talbott said the situation in the Balkans and in Chechnya would also be a 
focus of Ivanov's discussions after he attends a review of the 1970 Treaty on 
the Nonproliferation of Nuclear Weapons on April 24-25 in New York. 


Altering the 1972 ABM treaty is particularly close to the heart of Russian 
scholar Talbott, whose friendship with Clinton goes back more than 30 years 
to the days when they were Rhodes scholars at Oxford University. 

Talbott has been conducting negotiations with Deputy Foreign Minister Georgy 
Mamedov in a bid to persuade him that the United States does not seek to 
neutralise Russia's defences or scrap mutual deterrence by developing a 
system to shoot down missiles from what Washington considers ``rogue'' 
states, like North Korea. 

``We want very much to see START III go forward. We would like to see the 
process of reducing offensive nuclear weapons continue and even accelerate,'' 
Talbott said. 

``We think that is quite consistent with another need that we see -- that is 
to make adjustments to the ABM treaty so that both sides can deal with a new 
problem, which is the proliferation of ballistic missiles,'' he added. 

Critics of the National Missile Defence, a thinned-down version of a ``Star 
Wars'' system conceived under former President Ronald Reagan, say Clinton is 
putting politics before common sense by pledging to reach a decision on the 
system this summer. 

They say intelligence assessments have overstated the threat from North Korea 
and that it is no wonder Russia and China are worried about amendments to the 
ABM, which the Russian embassy described as ``the cornerstone of strategic 
stability in the world'' when it announced Ivanov's visit. 

They point to a failed second test and the postponement of a third test of 
the sophisticated missile interceptor from April to June as evidence that 
Clinton should leave the decision to his successor. 


Shevardnadze Wins Georgia Election
April 9, 2000

TBILISI, Georgia (AP) - President Eduard Shevardnadze won re-election
Sunday in this former Soviet republic with an unexpectedly large majority
that left his main opponent charging that there had been massive vote

Central Election Commission chief Dzumber Lominadze said Shevardnadze had
won a second five-year term even though the counting of returns was not
likely to be completed until later this week. 

With 81 percent of the vote counted, Shevardnadze had 82.5 percent, and
ex-Communist leader Dzhumber Patiashvili trailed far behind with 17
percent, election officials said. Four other candidates received small
numbers of votes. 

Shevardnadze, who first gained international attention as Soviet foreign
minister under Mikhail Gorbachev, promised to tackle the country's economic
problems during his second five-year term. Shevardnadze has been criticized
for failing to revive the economy and deal with widespread unemployment and

Opposition leaders alleged there had been ballot stuffing by government
officials and said they were considering a protest. An international
election observer was ejected from a voting station by officials who said
he exceeded his authority. 

Patiashvili acknowledged his defeat, but said the election had not been fair. 

``There were gross violations of law and voting rules, and it was
impossible to win under such conditions,'' he said. 

Election officials rejected the opposition's charges. 

Most of the country's 5 million people saw little choice besides
Shevardnadze, who has brought relative stability to the country since the
1991 collapse of the Soviet Union. The only real question going into the
election Sunday was whether Shevardnadze would get more than 50 percent of
the vote and avoid being forced into a run-off. 

Still, Shevardnadze's victory margin was much larger than had been
suggested by pre-election opinion polls, which showed him with approval
ratings of about 50 percent. He said Sunday that he was confident the
election would be fair and there would be no vote rigging. 

``I exclude falsification,'' he said while casting his vote at a Tbilisi
polling station. 

International observers had no immediate comment on the fairness of the

In the city of Martvili, an observer from the Organization for Security and
Cooperation in Europe was ordered to leave a polling station after election
officials said he overstepped his authority. Konstantin Kotia, head of the
Martvili Election Commission, said he told Hans Gutbod to leave after he
tried to examine documents in the office and used a flashlight to look
inside a ballot box. 

``Observers only have the right to be present and watch the process of
voting,'' Kotia said. 

Shevardnadze's key political advantage over his competitors was his
international prominence. His calls for closer ties to the West have helped
bring foreign loans and world attention to the tiny, mountainous republic
in the Caucasus. 

Dmitry Oragvelidze, a 30-year-old lawyer, said earlier Sunday that he was
casting his vote for Shevardnadze. 

``He is a well-known politician, not only in Georgia, but throughout the
world,'' Oragvelidze said. ``He'll get things done.'' 

But Shevardnadze did not outline any major new initiatives during the
election campaign. His government has failed to tackle widespread
corruption, which has stifled economic development. 

The main complaint from residents who said they did not vote for
Shevardnadze was the poor state of the economy. Workers and pensioners
sometimes go months without being paid, electricity supplies are erratic
and the country's rich agricultural sector is falling apart. 

Iosif Kutzishvili said he was voting for Patiashvili. 

``Shevardnadze has destroyed everything,'' the 60-year-old economist said.
``I have a job, but there is virtually no work to be had in Georgia.'' 


The Russia Journal
March 10-16, 2000
Can our recovery last?
By Otto Latsis

Economic analysts, it seems, all agreed that the main factor behind
Russia’s economic successes over the past year was the unprecedented rise
in world oil prices, which brought Russia an extra $6 billion in export
earnings for 1999 alone.

It would be logical to expect that the recent OPEC oil-producing countries’
decision to increase export quotas and thus bring down prices would unleash
a flow of pessimistic economic predictions for Russia. But nothing of the
sort happened, indeed, forecasts looked more optimistic than ever.

The latest statistics back up this optimism. Last year’s sensation was an 8
percent increase in industrial output. Neither the Soviet Union nor Russia
had obtained such a result for more than 20 or even 30 years. True, the
picture was spoiled by the fact that this growth was also making up for the
5 percent drop in 1998. This makes for an increase of little more than 3
percent and an average annual growth rate of 1.5 percent. 

Many were expecting the acceleration effect obtained by four-fold
devaluation of the ruble to come to an end. Devaluation put a damper on
imports, thereby giving a boost to domestic producers and agriculture. But
figures for January-February this year show industrial output growth at 13
percent compared to the same period last year. 

Agricultural output has risen by 0.9 percent – a modest result, but last
year’s output only fell. Investment in main capital grew by 6.3 percent –
perhaps the most significant result of the beginning of the year. The
preceding decade saw only decline in investment, and though last year the
fall was stopped, there was virtually no growth.

Last year’s manufacturing successes came hand in hand with negative
consumer trends as real incomes fell considerably. This was the price to be
paid for the fact that economic growth was stimulated by devaluation of the
national currency. 

But noticeable change took place here, too. At the beginning of the year,
output growth continued and even sped up, while real incomes for January
and February were around 4 percent higher than in the same period last
year. This is modest growth, and it hasn’t compensated for the drop in
incomes over the past two years. But it is the reversal of the trend that
is important. It indicates an upturn in retail trade, which also fell last

The State Statistics Committee has not yet given economic results for the
first quarter, but First Deputy Prime Minister Mikhail Kasyanov announced a
sensation April 3 – federal budget income for the first quarter was 17.7
percent of GDP. 

Only two or three months ago, experts concurred that the budget’s target
income for 2000 of 14.5 percent of GDP was absolutely unrealistic and that
it would be a big success if a target of 13.5 were attained. Before then,
no budget had ever got more than 12.5 percent, and anyone who suggested a
figure of 17 percent would have been a laughing stock. 

Russia has made all its compulsory debt payments for the first quarter even
though it got no new refinancing loans from the International Monetary
Fund, and the government did not resort to borrowing from the Central Bank. 

In May, the government expects it will have to borrow to cover about $1
billion in foreign debt payments. But the Central Bank is prepared for
this. In January and February, it increased its currency reserves by more
than $1.1 billion. 

Kasyanov also said the dollar exchange rate through to the end of the year
would not exceed 30 rubles. This represents an increase of no more than 5
percent compared to the current exchange rate. The most optimistic
forecasts put the annual inflation rate at not less than 18 percent. But if
the dollar increases its value slower than the inflation rate increases,
the ruble’s real exchange rate would increase.

The current successes indicate that neither the government nor the economic
experts understand everything about Russia’s economy and the factors
promoting its development. This means that a new crisis could be just as
unexpected as the last.

Moscow is still looking for outside financing for its budget. A rational
step, given the size of Russia’s foreign debt and the fickle nature of the
world economic situation. But domestic sources of financing were and will
remain Russia’s principal support – something that should be reflected in
the government program.


Western agents aided Moscow on Chechnya - reports

BERLIN, April 8 (Reuters) - Western agents provided Moscow with intelligence 
on the Chechen rebels whom Russia blames for last year's bombing campaign on 
its population, German media said on Saturday. 

Quoting German government sources, the Sueddeutsche Zeitung newspaper said 
agents from Germany, the United States and other Western secret services 
supplied their Russian counterparts with information on the suspects' 
international links. 

News magazine Der Spiegel said German and Russian agents swapped low-grade 
intelligence on whether the Chechens were being financed by international 
Moslem groups but that other countries provided more detailed information. 

``It was not much, certainly nothing decisive,'' it quoted an unnamed German 
operative as saying of the information supplied by Germany's Federal 
Information Service (BND). 

``The Americans, the British and the French gave much more precise data,'' 
the agent added. 

The German government's secret service coordinator Ernst Uhrlau said on 
Friday that Moscow asked Western governments for help last year after a 
bombing campaign killed over 300 people. He did not say whether or how the 
request had been met. 

Asked to comment on the reports, a government spokeswoman said she had 
nothing to add to Uhrlau's statement. 

Although the West and Russia have agreed to cooperate on fighting 
international terrorism, little hard evidence has been found on who was 
behind the attacks and Moscow's justification for the Chechen war has met 
with scepticism abroad. 

The Council of Europe, the club of European democracies, stripped Russia of 
its voting rights in the assembly on Thursday for allegedly gross abuses by 
its troops in the Caucasus republic, prompting a walkout by the Russian 

Evidence Western agents helped Russia over Chechnya could be politically 
explosive in Germany. Junior government partners, the left-wing Greens, have 
consistently condemned the war. 

Unconfirmed media reports that BND chief August Hanning travelled to the war 
zone in Chechnya last month to pass on German information to Russian agents 
have already provoked anger among the ecologist, pacifist party, to which 
Foreign Minister Joschka Fischer belongs. 

Greens parliamentary chief Rezzo Schlauch said the reports ``raised serious 
questions in view of our opposition to the war.'' 



Moscow, 9th April: An opinion poll carried out on 15th March suggested 66 per 
cent of Russians supported Russia's war in Chechnya and 24 per cent 
disapproved of it, pollsters said on Friday [7th April]. 

The Public Opinion foundation also said 45 per cent of those questioned did 
not expect the war to be over this year, 12 per cent believed the campaign 
would end in autumn this year and 9 per cent thought it would go on until 
this summer, while 24 per cent were undecided. 

Public Opinion polled 1,500 people, both urban and rural residents. 


Date: Sat, 08 Apr 2000 
From: "Nicolai N. Petro" <>
Subject: Petro and Ware on Chechnya

The Providence Journal (Providence, RI)
April 8, 2000 (page B6)
"It's not just Russia killing in Chechnya"
By Nicolai N. Petro and Robert Bruce Ware

Nicolai N. Petro was a State Department policy adviser on Soviet affairs
during the Bush administration. He currently teaches political science at
the University of Rhode Island.
Robert Bruce Ware is an assistant professor of philosophy at Southern 
Illinois University at Edwardsville. He has done extensive field research 
in the North Caucasus.

THIS PAST WEEK the Council of Europe's parliamentary assembly voted to 
suspend Russia for human-rights violations in Chechnya. The decision has 
been met with predictable outrage by all sides of the political spectrum in 
Russia. As the influential liberal daily Sevodnya writes, ``Europe has used 
up its chance to influence the situation in the North Caucasus; now the 
main thing is for both sides to avoid taking the confrontation towards an 
Iron Curtain.''

The assembly's ham-handed efforts may have ended Western Europe's ability 
to influence this crisis, but the same need not be true for the United 
States. While Moscow and Washington remain far apart on their understanding 
of what caused the war -- the United States emphasizes criminal actions 
against civilians by Russian troops, while the Russians point to the long 
pattern of abuses that civilians have suffered at the hands of criminal 
gangs in the region -- recent pronouncements by Washington have been far 
more nuanced in their assessment of blame.

First, President Clinton remarked that the Chechen militants share 
responsibility for civilian casualties. Even more recently, in testimony to 
the House International Relations Committee, Secretary of State Madeleine 
Albright advocated continued U.S. "engagement" with Russia, saying that a 
resurrection of the Russian enemy would be a colossal error.

In contrast to the confrontational stance adopted by the Europeans, it 
seems that Washington is slowly coming to grips with the true complexities 
of the war in Chechnya, namely that since its de facto independence from 
Russia in 1996 Chechnya has imploded into social chaos.

Because of an entrenched system of clans, the Chechens have been unable to 
organize an authoritative political structure capable of securing and 
supporting a viable economy. In its absence, a criminal economy, 
specializing in everything from auto theft to livestock rustling to drug 
smuggling to gun running to a hostage industry amounting to a modern slave 
trade, has sprung up.

This shift in tone offers the United States a rare opportunity to support 
human rights in the region while simultaneously improving U.S.-Russian 
relations. Given that the central focus for both sides is the welfare of 
the civilian population of the region, Russia and the United States should 
not really be that far apart.

Why not make the welfare of the entire civilian population of the North 
Caucasus region the real focus of American policy?

To do this in a credible way the United States must do two things.

First, it must publicly acknowledge the moral basis of Moscow's efforts to 
end the criminalization of Chechnya's economy and restore law and order to 
the region (as Spain and Israel have done in somewhat similar situation in 
their nations).

Second, it should be as insistent on an accounting for the atrocities 
committed by Chechen warlords during the years of Chechnya's de facto 
independence (1996-1999) as it is of similar demands of Moscow.

In return, the United States should demand full Russian cooperation on 
exposing and preventing abuses by its military personnel in Chechnya.

Acknowledging the legitimacy of Russian human-rights concerns in no way 
diminishes concern for current abuses by the Russian military in the 
region. It does, however, offer a vehicle for overcoming Russian suspicions 
of bias in the U.S. approach, and gives America leverage in pushing for 
respect for human and civil rights toward all peoples in the region.

Such leverage is all the more urgently needed because Russia's military 
presence seems destined to be there for a long time. Correcting the 
omission of past human-rights abuses by the Chechen leaders would also 
bolster human-rights protections inside the rest of Russia by broadening 
its application to more than just war crimes.

By taking this important step at a time when Russia feels vulnerable and 
isolated from the international community, we can promote human rights in a 
way that actually improves, rather than damages, relations with Russia.

We can much more effectively engage Russia in peace and proper treatment of 
Chechen civilians when we take also seriously Russian concerns about the 
welfare of its citizens in the region.

If we wish Russia to attend to our perspective, there is no better way to 
start than by calling upon the Chechens to release the 872 civilian 
hostages (including eight foreigners) that they are holding, and to 
forswear such hostage-taking in the future. Peace in the region will be 
attained only when both Russians and Chechens accept their fair shares of 
responsibility for the suffering that has occurred. Only through a policy 
that is balanced and fair will Washington be able to play a role in that


From: "Lucy Komisar" <>
Subject: apt & phone in Moscow
Date: Sun, 9 Apr 2000 

Can anyone provide leads, information about 1. a well-located apartment
to rent/share in Moscow from about May 10 to the end of June, 2. the
best/cheapest short-term cell phone rental, and 3. the best/cheapest
short-term internet connection. 


Moscow Times
April 8, 2000 
Is There Life After Moscow? 
By Elizabeth Wolfe 


One is the hub of the gazillion-dollar technology revolution, while the other 
is still learning to tie its capitalist shoelaces. So where's the connection 
between sunny central California and Moscow? 

For a handful of Americans who rode this city's wild ride through the 1990s, 
the capital of yesteryear and the realm of today have a lot in common 
- it's all about where the action is. 

"There was this enormous sense of limitless opportunity," Daniel Wolfe said 
of Moscow circa 1992, when he arrived for a 7-year stint on the front lines 
of Russian business. Starting off as a lawyer, he ended his tour of duty as 
the chief operating officer for three years at Troika Dialog. 

Now, he added, "It feels the same here: The world is changing irreversibly." 
"Here" is his office at in San Francisco's SOMA (South of 
Market) district, a hotbed that has been dubbed the "new media 

Wolfe was among the nearly 25 former "moskvichi" who gathered recently in San 
Francisco for cocktails and a chance to reminisce about the good old days. An 
overwhelming majority of those on hand are currently involved in Internet 
projects, said Nikolai Krivoruchko, another former Moscow expat, in an e-mail 

Now director of sales at the startup, Krivoruchko worked in 
Moscow until early 1997 - first for the Sun Group and later for Philip Morris 
- and was Wolfe's first client. 

"The reason why many expats from Russia want to go into businesses 
and startups is because it is a new frontier, much like a developing market 
like Russia's," said Krivoruchko, who studied Russian in college and is of 
Russian descent. "There are a lot of unknowns, there's a lot of potential, 
excitement, newness, the challenge." 

For the young or inexperienced who revel in taking on responsibility, the 
unchartered territories of Moscow and cyberspace are ideal. But for these 
former expats, getting their feet wet in a developing economy was only part 
of it - just as thrilling was living in a place where Kraft cheese and 
Cheerios weren't on every shelf and the language wasn't their own. 

"When you live in a foreign country, it's vivid," Kimberly Hill, brand 
director at navigation tool, said by telephone. "Like when you 
wake up in the morning and the roof's leaking, and some man is pounding on 
your door. Or when you open the window and some guy is smoking and hacking 
right there. Then you go to work and have completely different challenges." 

"You have constant stimulation," said Hill, a self-proclaimed "experience 

In June 1998, after three-and-a-half years working for various firms in 
Moscow, including the Ogilvy & Mather advertising agency, she returned 
stateside in search of another "vertical learning curve." When she went 
looking for work in cyberspace - another foreign arena for her - Hill touted 
her Russian experience. 

In one job interview, they asked if she coul d handle a startup environment. 
"I told them, 'I've lived in a start-up economy!' A pretty appropriate 

"There's a feeling you had [in Moscow]," Hill added. "Really pioneering, 
leading edge of change, making a difference. All of those things are here [in business]." 

. . . .

For Wolfe, who stayed aboard until November of last year to help steer his 
company through the crisis, Russia's economic collapse was just another 
thrilling twist in the road. "As painful as it was, it was a tremendous 
opportunity," he said. 

But for all the hoopla over plunging headfirst into new trends, whether it's 
Russia or the web, a few words of caution were issued. 

"There's definitely a gold-rush mentality [surrounding the Internet]. In the 
same way, in Russia, you had people making lots of money without adding lots 
of value," Wolfe said. 

"Nobody sits down to think over whether the changes taking place are morally 
appropriate for the world. The world is changing and you've just got to get 
on. Success means making the greatest money in the shortest time," he said. 

While the e-commerce boom has been built on a stronger market foundation than 
the changes in Russia, concern is increasing over the bursting of the 
"Internet bubble" - and the techno rollercoaster ride may be slowing down. 

. . . . Krivoruchko said he might one day bring 
his new Internet expertise to Russia, where only 1 percent of the population 
is regularly hooked up but with forecasts that put the numbers at double that 
in only a year's time. 

"Most of us are the adventurous types," Krivoruchko said. "Restless souls 
looking for the next challenge. We could not go back to work for a big 
company and be another cog in the wheel. No way!" 


US News and World Report
April 17, 2000
A paranoid power
By Mortimer B. Zuckerman editor-in-chief 

Many Americans would like to forget about Russia, but we cannot afford to. 
The Cold War may be over, but Russia's nuclear arsenal is more threatening 
because the command and control system is crumbling. Russians simmer with 
resentment about America and the Western alliance. They believe they saved 
the world from fascism and got little in return. They spent the last decade 
Westernizing their society and then, as they see it, the West turned its back 
on them when the going got rough. What we have to deal with, in short, is a 
still proud giant that feels poorer, weaker, misunderstood, humiliated, 
neglected, and betrayed. A dangerous mix. 

Recent Marttila polls provide a snapshot of national paranoia. Some 69 
percent of Russians believe that the West is hoping their economy will 
completely collapse; 87 percent believe that the United States is taking 
advantage of Russia's economic decline to strengthen its own influence in the 
world. Russians think Belarus and Ukraine are their only true allies. Only 13 
percent of Russians described America as a friend or an ally; only 10 percent 
described Bill Clinton as a true friend; 28 percent described the United 
States as their enemy. 

It is some consolation that a weakened Russia will not be the archrival that 
the Soviet Union was during the Cold War. But it is not likely to become the 
strategic partner the United States once hoped for. The new president, 
Vladimir Putin, faces the challenge of managing a superpower in decline. That 
is why he so frequently invokes patriotism as a way to stabilize the 
political foundation of his regime. Putin is trying to create the sense that 
he is dedicated to returning Russia to its international eminence. But 
Russian nationalism may well provoke a backlash against the West, a backlash 
abetted by Western moralizing over Chechnya. 

Whatever was necessary. The Russians have a very different view of their war 
with Chechnya. They signed military agreements with the Chechens in 1996 that 
effectively handed over control to the warlords. Their record of crime, 
abuses, kidnapping, slave trading, drug trafficking, and murder since the 
1996 agreement rightly enraged the Russians. I was told by former Prime 
Minister Yevgeny Primakov that the leader of Chechnya told him that he wanted 
an independent Chechnya and that his chief deputy wanted a separate Muslim 
country made up of all the Muslim areas of Russia. The chief deputy then led 
an invasion of a neighboring Muslim state, Dagastan. Given that and the 
outrage over the bombing of apartments that killed some 300 people in Moscow 
and other cities, the Russian response, which the West perceived as a brutal 
overreaction, was deemed by the Russians as doing whatever was necessary to 
end Chechnya's insurgency and terrorism. The war was so popular that when 
Putin publicly announced that Russia would bury the Chechens in "their own 
crap," his popularity rose dramatically. 

The chief point of tension between Russia and the United States will now be 
over American plans for a national missile defense (NMD) to be decided by the 
administration this summer. In theory, NMD would protect most of the United 
States from limited ballistic missile threats emerging from rogue states like 
North Korea, Iran, and Iraq. It means amending the 1972 ABM Treaty so the 
United States and Russia can each have more than 100 interceptors and one ABM 
site. The Russians are resisting. They fear that this new missile-defense 
system would threaten the deterrent value of Russia's nuclear forces. So we 
must reassure Russia that we do not want to throw our basic nuclear 
relationship out of balance.

One approach would be to significantly reduce our nuclear arsenal. By doing 
so, we would acknowledge Russia's status and reassure the Russians that we do 
not seek to eliminate their nuclear deterrent and transform the United States 
into a world hegemon. Reducing the negotiated ceiling on the number of 
nuclear warheads from upward of 3,000 to 2,000 or less would still leave us 
with a more than adequate deterrent. 

The political consensus in the United States, which includes both 
presidential candidates, favors a limited missile defense. George W. Bush has 
indicated that he would proceed come what may. Given the need to protect 
against rogue states, it might come to that, but given the need to dissipate 
Russian paranoia, it will be best if a treaty modification can be worked out. 
It will be a test of American diplomacy and a mark of Putin's qualities of 


The Russia Journal
April 10-16, 2000
Hopes in Putin ill-founded, expert says
But forum attendees express optimism

Russia is likely to see a more benevolent environment for foreign investors
under a Vladimir Putin presidency, but little else is likely to improve in
the country, a foreign business forum sponsored by The Russia Journal was
told last week.

Dr. Andrei Piontkovsky, director of the Center for Strategic Studies, told
foreign and Russia company representatives that Putin, as a product of the
oligarch system established under Boris Yeltsin, would be unable to change
Russia – even if he wanted to.

Piontkovsky argued that the hopes people have in Putin – mainly that he'll
implement a radical market-reform program – are ill-founded because doing
so would jeopardize the interests of those who supported his rise to power 

"Putin was selected and groomed from inside the system and was discovered
by the Yeltsin family during a desperate time for it. A time when the
Yeltsin clan was being challenged by the rival clan of oligarchs led by
Moscow Mayor Yury Luzhkov," he said. "Putin is their creation."

He said that on March 27, Putin became all but an absolute dictator, with
more than the super-presidential powers inherited from his predecessor.
Yeltsin, Piontkovsky said, had two checks on his power: an opposition
parliament and a free press. Putin, by contrast, now has the parliament in
his pocket and has cracked-down on the press. He cited the Babitsky case as
an example of the latter

He said that despite all the power at his disposal, Putin will not attempt
to use it positively. 

"History shows us that leaders in other countries in a similar position to
Putin would crack down on those who brought him to power. But Berezovsky,
Voloshin, Dyachenko and so forth are all very clever. We can see this by
the way they managed to survive in the worst circumstances," Piontkovsky
said, referring to Putin, the chosen successor, winning despite the
country's social and economic crisis. "Now, we see Berezovsky telling the
Russian media that Putin's comment that all oligarchs will remain equally
distant from power was simply a campaign tactic designed for the voters."

Piontkovsky said given the direct challenge thrown down to Putin by
Berezovsky, and the latter's failure to respond, there was likely to be
continuity with the Yeltsin system – one involving murkiness and corruption
surrounding institutions like the court system as well as the continued
mixing of business and government.

Piontkovsky said the hopes in the economic strategy being devised for the
government by the Center for Strategic Research headed by German Gref were

"We have been told that [head of Presidential Administration Alexander]
Voloshin and [First Deputy Prime Minister Mikhail] Kasyanov are overseeing
every detail of the plan produced by Gref’s group," Piontkovsky said. "Both
of these officials are known to be direct representatives of the oligarchs,
so there is unlikely to be anything ground-breaking in the final plan
coming from Gref's group."

In contrast, he said there could be some improvement for foreign business
in the short-term, and that the Putin regime could be efficient in that
regard because the president realizes the need for foreign investment.

"He is quite pragmatic and understands the need for foreign money and
technology, so the Putin regime is likely to use administrative measures to
try to protect foreign business," he said. But he added that this would be
done administratively, rather than through real reform.

"The government can't create a judicial system because that would hurt its
own people [the oligarchs]. But it could use administrative measures to
change the results of court decisions in favor of foreign investors." He
cited the reversal of initial rulings against foreign investors such as the
Lomonosov plant and BP over Sidanco as examples of how Putin's government
might operate.

Asked about the suggestion by the head of Alfa Bank Pyotr Aven that Putin
could become a Russian version of Gen. Augusto Pinochet, Piontkovsky noted
the difference with the situation in Chile in 1973 and Russia in 2000.
"There is no Communist threat in Russia and, as I said, serious market
reform cannot be implemented because that would mean tackling an elite that
installed the president and benefits from the current system.

Piontkovsky said there was one area in need of serious reform that Putin
could tackle, and this was probably what Aven was referring to when he
spoke of the need for a Russian Pinochet – that of "the Red Directors." 

The Red Directors run the inefficient Soviet enterprises that survive
through government subsidies. He said this system continued because of a
social contract between the Red Directors, their employees and the
government. By this, workers retain a job, though with a pitiful salary,
and the directors siphon the majority of the government subsidy out of the
enterprise for their personal enrichment. The government turns a blind eye
to what the Red Directors do because it allows it to avoid the one negative
phenomena of capitalism Russia has yet to experience – mass unemployment.

"So when Aven talks about Pinochet and market reform, he can't mean
fighting oligarchs – because he is an oligarch himself. What he means is
probably cutting subsidies and destroying the Red Directors and inefficient
Soviet industries through bankruptcy. Putin would then use force to
suppress the inevitable social explosion that such action would trigger."

Those attending the forum generally concurred with Piontkovsky's analysis
of the current situation in Russia.

David Lewis, senior analyst with the Control Risks Group, a consultancy
firm advising foreign businesses preparing to invest in Russia, said he
generally agreed with Piontkovsky but thinks Russia is a mixed bag.

"The thing is that both optimists and pessimists can make an equally strong
case about the situation in Russia, and neither would be wrong because
there are good arguments in both sides," he said. "Russia is not going to
become Denmark overnight, but there are encouraging signs. At the very
least there will be some stability in the country."

He said most people in Russia simply ignore the political games and just
get on with their lives. 

"So you see companies successfully doing business here without being
totally corrupt and bright young people getting jobs in good fields, in
Moscow at least. 

But he also noted some disturbing early signs in Putin's presidency. 

"There is the situation with Berezovsky so openly challenging Putin's
authority [when Berezovsky said Putin was only telling voters what they
wanted to hear when he said ‘the oligarchs would be distanced from power’].
That and the recent backdown by Putin over the St. Petersburg governorship
[where Putin backed down from supporting a rival candidate to incumbent
Vladimir Yakovlev]. Yakovlev obviously knows that Putin needs him," Lewis

He believes these two events call into question Putin's power. "Certainly,
he is constitutionally powerful, but in reality he has no party, and it is
uncertain how much support he'll have from the bureaucracy, particularly if
he begins to tackle them."

"Putin could find himself with a lot of enemies very quickly if he is not

Despite this, Lewis, who operates out of London, said there is quite a bit
of interest in Russia on the part of foreign investors, though he thinks
they will wait a few months before committing themselves.

Lewis agreed that the government will make serious efforts to protect
foreign businesses operating in Russia, or at the very least, those it
wants in the country. He said Putin's government will attempt to convey a
sense of security for foreign money in Russia.

"But the first joint venture that fails, in Buryat for instance, that Putin
is unable to save, will make people stand back and think," he added.

Igor Galperin, general director of IGK Intercredit Information Holding, who
began a cooperative business in the Soviet Union in 1988 when such
businesses became legal, said much of Piontkovsky's analysis "more or less
corresponds to his version." 

"But I disagree with the talk about the business environment in Russia.
Although it is still difficult, there’s been progress since 1988 and I am
hopeful things will get even better."

He said there are two main reasons for his confidence. First, that business
still exists in Russia, that it has not died and is determined to grow,
despite all of the difficulties of the last decade. Second, the relative
stability of the country at the moment.

"Additionally, there is the Russian mentality that one must take into
account," he added. "If we Russians begin something, then we have to see it
through to the end, no matter how difficult it is. That is why business in
this country will inevitably be successful," he said.

(Andrei Piontkovsky writes a column for The Russia Journal.)


The Independent (UK)
10 April 2000
[for personal use only]
Have roubles, want sofa-bed 
Napoleon tried it, and failed. So did Hitler. Now the Swedes (in the shape of 
Ikea) want to invade Russia. So what does Mrs Melikhova think? 
By Patrick Cockburn 

"The problem is that you can't find Russian stuff that is small enough," said 
Lyudmila Melikhova, a 36-year-old language teacher who is on her way to Ikea, 
the Swedish furniture giant which last month opened a superstore just outside 

Eighteen months ago, she and her husband Dmitri, a computer specialist, 
bought a two-room apartment for the equivalent of £23,000 on the outskirts
Moscow. They share it with their three-and-a-half year old daughter 
Anastasia, who has a cot in their bedroom. They do not have much money to 
spare and are saving up to buy a second-hand car for £350. But they are on 
the look out for some new furniture. 

On 22 March, Ikea opened its doors to Russia for the first time. On the first 
day of trading, 37,500 customers poured into its showrooms, peering at 
glistening kitchen equipment and sofa beds priced at 20-30 per cent less than 
they would cost in Russian shops – even if they were available. Cars backed 
up along the main road for three miles, to the dismay of passengers trying to 
catch their flights at the nearby Sheremetevo airport. Demand was so much 
greater than expected that just two weeks after Ikea opened, its stockroom
a vast warehouse – was almost empty. To cope with demand, the company was 
forced to run daily convoys from Sweden to Moscow carrying new supplies. 

What do ordinary Russians – men and women like Lyudmila – make of it all? 
Since the fall of Communism, most people have seen only a limited improvement 
in their standard of living. This is particularly true of the furniture in 
their flats. Under the Soviet Union these were furnished in a curious mixture 
of styles. There was usually solid 19th century-style cupboards and tables, 
often far too large for little apartments. These were supplemented by small 
but essential items such as shelving or stools, which had to be home-made. 

Buying furniture often absorbed several month's salary, partly because 
customers wanted something that was tough and durable, and partly because 
Soviet furniture factories found it easier to fulfill their five-year plans 
by producing heavy-duty items. They had much less interest in selling smaller 
pieces such as stools, though Ikea has found that these are in great demand 
among Russians – who like to drink tea and vodka with their friends in 
kitchens too small for more than one or two regular chairs. 

Lyudmila looked with some longing at the kitchens in Ikea. At the moment she 
and her family sit on rough wooden stools made by Dmitri. Beside the sink 
there is a heavily loaded shelving unit which sways dangerously at the push 
of a hand. In the sitting room is a well-made oak desk from Belarus, but the 
sofas are old. She says: "Many Russians don't have a separate room for a 
bedroom, so we want sofa- beds which fold up in the daytime. But these are 
not usually of good quality here." 

For Lyudmila, the attraction of Ikea lies in its variety: "You can walk 
around here. You can see how you would design your house." It is also cheap. 
Wooden stools cost some £3 each. Lyudmila points out that there are lots of 
small, inexpensive items such as simple metal brackets to hold up wooden 
shelves, which would cost £8 in a Russian store – when they can be found

Johannes Stenberg, the marketing manager of the superstore, says that he 
always thought small items costing a few pounds would sell well, because most 
of his customers "have thin wallets". He had expected that they would be much 
more cautious before they spent serious money. In fact they started buying 
whole kitchens from the moment the store opened. 

Lyudmila was attracted by the restrained but elegant style of the smaller 
items, and ended up buying a coloured lamp. But mostly she liked furniture 
that was compact and functional. She spent several minutes lingering over a 
double-decker child's bed with a small wooden ladder, which was on sale for 
about £250. She looked at a bookcase, but decided that she preferred the
"with glass covers, because otherwise they collect dust". In the children's 
section she bought a holder for drawing paper for her daughter. 

Back at her apartment Lyudmila said that she would like to buy the Ikea 
kitchen, but she did not think she could afford it just yet. Glancing at the 
gloomy wallpaper which had come with her new apartment, she said: "Every 
family moving into a new place starts repairing it immediately. Often they 
throw out the doors and get new ones." Her neighbour had evidently done just 
that. Propped against the wall beside the lift was an old deal door which had 
been roughly torn off its hinges and discarded. 

So does the arrival of Ikea mean a new deal for the long-suffering Russian 
consumer? Almost certainly not – or at least not for the moment. The
superstore at Khimki only opened after extraordinary efforts and frequent 

A tank trap made out of enormous steel girders marks the furthest point 
reached by German patrols in their advance on Moscow in the winter of 1941. 
Sixty years later it caused a bitter quarrel between Yuri Luzhkov, the 
all-powerful mayor of Moscow, and Ikea, which had built its superstore just a 
few hundred yards from the monument. 

Ikea planned to build a bridge over the main road to St Petersburg, which 
runs past their store, to enable customers to reach their parking lot without 
adding to the already horrendous traffic jams. Unfortunately, the company had 
already offended Mayor Luzhkov when, after failing to agree a price for a 
site in Moscow, it went ahead and built its enormous shop at Khimki, just 
beyond the city limits. 

Too late Ikea discovered, when their bridge was half-completed, that they 
were still not beyond Mayor Luzhkov's reach. He may not control the site on 
which the superstore is built, but under an obscure regulation, he does 
control the road itself. He suddenly forbade Ikea to build a central support 
for its bridge, on the patriotic grounds that it would obscure the view of 
the tank-trap monument. 

"We are in an absurd situation," says Johannes Stenberg. "Moscow city says we 
mustn't build a bridge, and Moscow oblast (the governing body of the region 
outside the city) says that we have to. Whichever way, we are breaking the 
rules." Nor were Ikea's problems with the mayor confined to its half-built 
bridge. Mr Stenberg says that his company was saddened to read in a Russian 
newspaper "a copy of a secret protocol from the mayor's office ordering a 
campaign against Ikea in papers and TV channels controlled by Moscow city". 

The Swedish company also faced other unexpected difficulties. Ikea had spent 
heavily on an advertising campaign. It planned to place advertisements in the 
Moscow underground system showing brightly coloured pictures of its furniture 
with the slogan: "Every tenth European was made in our beds." Another 
advertisement showed the Ikea catalogue with a yellow sofa on the cover and 
the words: "The most read book. After the Bible, thank God." Although Moscow 
is one of the raunchier cities in the world, and only two per cent of 
Russians go anywhere near a church, the officials in charge of advertising in 
the Metro said that they were deeply shocked, and forbade their display. 

Then the Russian customs decided that it would levy custom charges on 
incoming goods by weight rather than by value (this is a little less lunatic 
than it sounds, because Russian companies routinely undervalue imports). 
Johannes Stenberg says that this obstacle set back the project by six months 
while Ikea was obliged to negotiate "with three different ministries during a 
period when there were three changes of government. We now pay an average of 
28 per cent on the value of goods imported while the international average is 
3-4 per cent." 

Ikea is a family-owned company and, fortunately for itself, can therefore 
afford to take a long-term view on profits which a publicly quoted company 
could not. Its managers in Moscow seem a little bemused by their own success. 
Moscow papers and television are even reporting sympathetically the company's 
activities, despite their initial demands for money in return for favourable 
publicity being turned down. 

Nevertheless, foreign companies trying to satisfy the need for cheap but 
high-quality goods felt by middle-class Russians like the Melikhov family, 
may find, like the German patrols of 1941, that it is easier to look at 
Moscow than to enter it. 


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