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11 April 2000
[Note from David Johnson:
1. Newsbytes: Russian Students Named World Programming Champs.
2. Moscow Times editorial: Let's Share Some Real Intelligence.
3. Reuters: Russia's Putin launches diplomatic offensive.
4. Reuters: Arrogant IMF turned deaf ear to advice-Stiglitz.
5. The New Republic: Joseph Stiglitz, What I learned at the world
6. RFE/RL: Michael Lelyveld, Policy Expert Says Moscow Seeks No
Domination. (Vitaly Naumkin)
7. smi.ru: Review of the Russian Press. ("The President Was
Elected at Voloshin's Dacha")
8. gazeta.ru: Leonid Sborov, Putin Short of Change. (budget could
9. Irish Times Letter: DEMOCRACY IN RUSSIA.
10. Jamestown Foundation Monitor: WILL PUTIN BITE THE BULLET OF
REFORMING FISCAL-FEDERAL RELATIONS?
11. AFP: Russian foreign minister flying into maelstrom of
12. Ira Straus: Council of Europe was always the wrong place for
13. Reuters: Moody's Raises Outlook On Russia Debt To Positive.
14. Joan Seder: RE: 4233- Your observations. (re JRL/Russia
Russian Students Named World Programming Champs
SAINT PETERSBURG, RUSSIA, 2000 APRIL 10 (NB) -- By Eugenia Volynkina, IT
The team from St. Petersburg (Russia) State University has won the Year 2000
international programming championship.
The team left its competitors from many well-known universities - including
Harvard, Stanford, California Technology Institute and others - far behind.
Members of the St. Petersburg team were students of the system programming
division of the school's mathematical and mechanical department.
More than 2,000 teams from universities throughout the world took part in the
competitions this year. The championship final was held on March 15-18, in
Orlando, Fla., under IBM sponsorship.
Before this year's competitions, The St. Petersburg State University team has
reached the final three times and always entered the top 10.
11 April 2000
Let's Share Some Real Intelligence
Germany's intelligence chief has just visited Chechnya, and swapped low-level
intelligence information with his Russian counterparts about the rebels. The
American, French and British intelligence agencies have offered more
substantial intelligence swaps. Even the Israelis have traded anti-terrorism
intelligence with Moscow.
Such are the reports trickling out in German and Russian news media. The
junior partners in Germany's coalition, the Greens, are said to be irate to
the point of thinking of leaving and tearing down Gerhard Schroeder's
But it would be Luddite idiocy to insist on a blanket ban against any
intelligence exchanges with Russia, simply because the war is an outrage.
After all, when apartment buildings were blowing up in September, the Western
governments were quite upfront in saying they were willing to help â€” and
surely included sharing intelligence. The American and Russian governments
also share an obsession with the Taliban, and with Osama bin Laden (although
at times, it has looked more like a purely American obsession that the
Russians manipulate so as to win sympathy for their activities in Chechnya).
So we need to know more before we can judge what has happened. Which, of
course, is why it is heartening to see responsible news media in Germany
ferretting out the story; responsible politicians offering some sort of
accounting; and those news media carefully going back to fill in the blank
spots and insist on a consistent, complete story.
We in fact would like to see that same responsible, methodical approach
applied to getting to the bottom of the war and how it came about. In that
regard, we couldn't help being intrigued by yet another report â€” a Q&A
interview with Boris Berezovsky published last week in Der Stern, and
reprinted Monday in Novaya Gazeta.
Der Stern asks Berezovsky about suggestions in some media that he financed
the August invasion of Dagestan by Chechen rebels, as a way of starting a
politically useful war. Berezovsky is quoted as replying, "That is nonsense,
a hysterical campaign directed against me."
But he continues, "I am in constant contact with the Chechen leadership. Back
in the spring of 1999, when they informed me of their plans, I warned them:
This is a mistake. Then I passed the information further, to the government."
Hmm. Why would the "Chechen leadership" - presumably this means not Aslan
Maskhadov but Shamil Basayev & Co. - inform Berezovsky of their plans to
This is one of many questions we would like to see Western and Russian
parliaments put to Western and Russian intelligence agencies.
- Matt Bivens
Russia's Putin launches diplomatic offensive
By Gareth Jones
MOSCOW, April 10 (Reuters) - The Kremlin on Monday signalled a busy month of
foreign contacts for President-elect Vladimir Putin, including trips to
Britain, Ukraine and Belarus, as well as talks with Japan's new prime
minister in St Petersburg.
Pressing Moscow's diplomatic offensive, officials also indicated the State
Duma lower house of parliament was ready to ratify the U.S.-Russian START-2
nuclear arms reduction treaty on Friday after years of delay.
Putin, victor of Russia's March 26 presidential election, had previously said
he would not travel abroad until after his May 7 inauguration because he also
remains prime minister.
But the Kremlin said Putin was planning to visit London between April 16 and
18 as part of a trip that would also take him to Belarus and Ukraine.
British Prime Minister Tony Blair's official spokesman said Putin would
arrive in London next Sunday, and would have talks with Blair the next day.
Blair met Putin last month in St Petersburg, Russia's second city and
tsarist-era capital, and hailed him as a man the West could do business with.
The spokesman said that during the visit, whose details were still being
worked out, Blair and Putin would discuss Russia's economy, the conflict in
Chechnya, a forthcoming G8 summit, the Balkans and cooperation in fighting
crime and drugs.
The Kremlin also said Putin spoke by telephone with Japan's new Prime
Minister Yoshiro Mori on Monday and that the two men agreed to hold an
informal meeting on April 29 in St Petersburg, which is Putin's native city.
It will be Mori's first foreign trip since he replaced Keizo Obuchi, who
remains in a coma after suffering a stroke.
NUCLEAR ARMS PACT SET FOR GREEN LIGHT
Moscow and Tokyo are struggling to conclude a peace treaty by the end of 2000
formally ending World War Two hostilities, but their relations remain dogged
by a dispute over four small islands seized by Soviet troops from Japan in
But a spat with Washington over START-2 seemed close to resolution after
talks between Putin and parliamentary chiefs as officials said the Duma was
ready to ratify the pact.
The treaty would slash nuclear warheads deployed by both countries to no more
than 3,500 each by 2007 from around 6,000 now but was blocked by Communist
opposition in the old Duma.
``The chances of the START-2 treaty being ratified are rather high,'' Deputy
Duma Speaker Vladimir Lukin of the liberal Yabloko party told Interfax news
agency. Several Duma committees had already recommended the chamber ratified
Emerging from the meeting of Putin's advisory Security Council which
discussed the issue with parliamentary leaders, Boris Gryzlov, head of the
pro-government Unity party, said the chamber would debate and vote on START-2
Putin backs START-2 despite some reservations. The U.S. Senate ratified the
treaty in 1993.
Ratification on Friday would show at an early stage he can push measures
through the Duma and boost his image abroad even before his May 7
inauguration. It would also help Foreign Minister Igor Ivanov on a U.S. trip
starting on April 24.
Russia remains concerned over U.S. plans to modify the 1972 Anti-Ballistic
Missile (ABM) treaty, which it sees as a pillar of international arms
Ivanov flew to Luxembourg on Monday for talks with foreign ministers of the
European Union where Moscow was expected to come under renewed pressure to
halt fighting in Chechnya.
Last week, Russia was stung by a recommendation from the Council of Europe's
parliamentary assembly that Russia's membership of the human rights body be
suspended over Chechnya.
Duma Speaker Seleznyov said the chamber would back a resolution urging the
start of moves to pull Russia out of the Council of Europe in protest but
Arrogant IMF turned deaf ear to advice-Stiglitz
WASHINGTON, April 10 (Reuters) - An arrogant International Monetary Fund
refused to listen to advice as Asia's financial crisis unfolded and must heed
the message from protesters in Washington this week, a former top World Bank
Former chief economist Joseph Stiglitz, writing in the April 17 edition of
New Republic magazine, said he was appalled at how the IMF and the U.S.
Treasury had responded to the world economic crisis of 1997-99.
``If the people we entrust to manage the global economy -- in the IMF and in
the Treasury Department -- don't begin a dialogue and take criticisms to
heart, things will continue to go very, very wrong,'' he wrote.
Stiglitz, a colourful and controversial figure, has long been critical of the
international response to the financial crisis, which started in Thailand in
the summer of 1997 and spread relentlessly around the globe.
He says the IMF was wrong to tell Asian countries to rein in spending at the
start of the crisis, and was foolish to foist reforms on Russia without first
ensuring that the infrastructure was there to make sure the reforms would
But the New Republic article expanded on these views, accusing the IMF of
ignoring advice from outsiders and criticising the calibre of IMF staff.
``The IMF likes to go about its business without outsiders asking too many
questions,'' Stiglitz wrote.
``IMF experts believe they are brighter, more educated, and less politically
motivated than the economists in the countries they visit. In fact, the
economic leaders from those countries are pretty good -- in many cases
brighter or better-educated than the IMF staff, which frequently consists of
third-rank students from first-rate universities.''
The article appeared at the start of a planned week of protests that the IMF
and the World Bank ignore the needs of the poor in their lending and their
The demonstrations started with a weekend rally calling for deeper debt
relief for poor countries and continued on Monday with a handful of arrests
of activists protesting the World Bank's environmental record.
The main events are scheduled for Sunday and Monday, when protesters vow to
bring Washington grinding to a halt.
Stiglitz, who had infuriated U.S. Treasury Secretary Lawrence Summers with
his blunt comments, announced in late 1999 that he would leave the bank
before his term expired because he wanted to be free to speak his mind
At the same time he expressed concern about falling research budgets at the
bank, which is charged with development and poverty reduction around the
The New Republic
April 17, 2000
What I learned at the world economic crisis.
By JOSEPH STIGLITZ
JOSEPH STIGLITZ is professor of economics at Stanford University (on leave)
and a senior fellow at the Brookings Institution. From 1997 to 2000, he was
chief economist and vice president of the World Bank. He served on the
president's Council of Economic Advisers from 1993 to 1997.
The calamity in Russia shared key characteristics with the calamity in East
Asia--not least among them the role that IMF and U.S. Treasury policies
played in abetting it. But, in Russia, the abetting began much earlier.
Following the fall of the Berlin Wall, two schools of thought had emerged
concerning Russia's transition to a market economy. One of these, to which I
belonged, consisted of a melange of experts on the region, Nobel Prize
winners like Kenneth Arrow and others. This group emphasized the importance
of the institutional infrastructure of a market economy--from legal
structures that enforce contracts to regulatory structures that make a
financial system work. Arrow and I had both been part of a National Academy
of Sciences group that had, a decade earlier, discussed with the Chinese
their transition strategy. We emphasized the importance of fostering
competition--rather than just privatizing state-owned industries--and favored
a more gradual transition to a market economy (although we agreed that
occasional strong measures might be needed to combat hyperinflation).
The second group consisted largely of macroeconomists, whose faith in the
market was unmatched by an appreciation of the subtleties of its
underpinnings--that is, of the conditions required for it to work
effectively. These economists typically had little knowledge of the history
or details of the Russian economy and didn't believe they needed any. The
great strength, and the ultimate weakness, of the economic doctrines upon
which they relied is that the doctrines are--or are supposed to
be--universal. Institutions, history, or even the distribution of income
simply do not matter. Good economists know the universal truths and can look
beyond the array of facts and details that obscure these truths. And the
universal truth is that shock therapy works for countries in transition to a
market economy: the stronger the medicine (and the more painful the
reaction), the quicker the recovery. Or so the argument goes.
Unfortunately for Russia, the latter school won the debate in the Treasury
Department and in the IMF. Or, to be more accurate, the Treasury Department
and the IMF made sure there was no open debate and then proceeded blindly
along the second route. Those who opposed this course were either not
consulted or not consulted for long. On the Council of Economic Advisers, for
example, there was a brilliant economist, Peter Orszag, who had served as a
close adviser to the Russian government and had worked with many of the young
economists who eventually assumed positions of influence there. He was just
the sort of person whose expertise Treasury and the IMF needed. Yet, perhaps
because he knew too much, they almost never consulted him.
We all know what happened next. In the December 1993 elections, Russian
voters dealt the reformers a huge setback, a setback from which they have yet
really to recover. Strobe Talbott, then in charge of the noneconomic aspects
of Russia policy, admitted that Russia had experienced "too much shock and
too little therapy." And all that shock hadn't moved Russia toward a real
market economy at all. The rapid privatization urged upon Moscow by the IMF
and the Treasury Department had allowed a small group of oligarchs to gain
control of state assets. The IMF and Treasury had rejiggered Russia's
economic incentives, all right--but the wrong way. By paying insufficient
attention to the institutional infrastructure that would allow a market
economy to flourish--and by easing the flow of capital in and out of
Russia--the IMF and Treasury had laid the groundwork for the oligarchs'
plundering. While the government lacked the money to pay pensioners, the
oligarchs were sending money obtained by stripping assets and selling the
country's precious national resources into Cypriot and Swiss bank accounts.
The United States was implicated in these awful developments. In mid-1998,
Summers, soon to be named Robert Rubin's successor as secretary of the
treasury, actually made a public display of appearing with Anatoly Chubais,
the chief architect of Russia's privatization. In so doing, the United States
seemed to be aligning itself with the very forces impoverishing the Russian
people. No wonder antiAmericanism spread like wildfire.
At first, Talbott's admission notwithstanding, the true believers at Treasury
and the IMF continued to insist that the problem was not too much therapy but
too little shock. But, through the mid-'90s, the Russian economy continued to
implode. Output plummeted by half. While only two percent of the population
had lived in poverty even at the end of the dismal Soviet period, "reform"
saw poverty rates soar to almost 50 percent, with more than half of Russia's
children living below the poverty line. Only recently have the IMF and
Treasury conceded that therapy was undervalued--though they now insist they
said so all along.
Today, Russia remains in desperate shape. High oil prices and the
long-resisted ruble devaluation have helped it regain some footing. But
standards of living remain far below where they were at the start of the
transition. The nation is beset by enormous inequality, and most Russians,
embittered by experience, have lost confidence in the free market. A
significant fall in oil prices would almost certainly reverse what modest
progress has been made....
Russia: Policy Expert Says Moscow Seeks No Domination
By Michael Lelyveld
Boston, 10 April 2000 (RFE/RL) -- A top Russian policy expert has assured
specialists at Harvard University that Moscow has no plans to restore Soviet
domination in the Caucasus and Central Asian regions.
The assurance comes from Vitaly Naumkin, president of the International
Center for Strategic and Political Studies in Moscow. Naumkin, a professor
and former adviser on foreign policy, painted the issue of Russian influence
as a matter of economics.
Said Naumkin: "I cannot see any serious efforts to rebuild this empire."
He added: "In order to be more active in this region, you have to pay a lot.
These countries, they need investment, they need money. I don't think that
Russia is well prepared to do that at the expense of its interests."
Russia's priorities are security and its own economy, said Naumkin, who also
heads the Middle East Department of the Institute of Oriental Studies at the
Russian Academy of Sciences. Russia previously pursued a "triad" strategy in
the "near abroad" of maintaining CIS border guards, military bases, and
peacekeeping forces. But, he said, its commitments have steadily "eroded."
Naumkin predicted: "Nothing will be left of this triad."
Naumkin's analysis comes at a time of high interest in the future policies of
President-elect Vladimir Putin. The continuing war in Chechnya has kept the
Caucasus on edge, while both Russian and U.S. officials have raised concerns
about potential terrorist threats in Central Asia.
But in speaking Friday to an audience at Harvard's John F. Kennedy School of
Government, Naumkin downplayed reports of an East-West struggle for
influence. Naumkin said Russian policy experts do not see relations in the
region in terms of conflict but as a series of "red-line" issues that should
not be crossed.
Any move to establish a western military presence in the region would be seen
as a red-line issue, he indicated, although he doubted that there is any
likelihood for such a move. In response to a question from RFE/RL, Naumkin
said the same attitude does not extend to the building of U.S.-backed
pipelines from the Caspian region.
"I don't think that there is a red line for Russia," said Naumkin, speaking
of the Baku-Ceyhan oil line and trans-Caspian gas pipeline.
He said: "Everybody understands that there is a necessity to diversify the
routes of transportation. Nobody is going to rely upon the northern route. I
think that everybody who is serious in his estimations understands this in
The assessment of competition in the region was far milder than the one given
last fall by Russian Defense Minister Igor Sergeyev, who charged the United
States with pursuing policies to oust Russia from the Caspian region.
Naumkin said: "All the problem is that there is a suspicion that by giving
too much weight to different options other than to Russia, that there is a
political desire, not to oust Russia from the region, but to damage relations
between Russia and these states." Naumkin said.
He said: "I think the most reasonable part of the Russian political elite
understands that the diversification of routes is inevitable, that it (does)
not necessarily contradict the interests of Russia. On the contrary, if these
states manage to provide a high economic level of development for themselves
... it will be better for Russia, because we need a stable southern belt."
Naumkin's comments on relations came as the United States has dispatched the
heads of several key agencies to the region. In recent weeks, the directors
of both the U.S. Central Intelligence Agency and the Federal Bureau of
Investigation have visited Central Asian capitals, reportedly to discuss
terrorism, drug interdiction and other issues. U.S. Secretary of State
Madeleine Albright is also scheduled to visit Kazakhstan, Kyrgyzstan, and
Uzbekistan this month.
On a question about Chechnya, Naumkin also discounted the concern among
Caucasus countries about Russian troop presence in the area.
He said: "I don't think anyone wants to pressure Georgia or Azerbaijan."
During recent visits to Middle East countries, Naumkin said he had found
clear evidence that Islamic fighters were passing through Georgia on the way
to Chechnya, using tourist visas. But he also suggested that tensions have
eased because Georgia has reached an understanding with Russia that its
territory should not be used as an access route for the war.
Review of the Russian Press, April 6
"Moskovsky Komsomolets" has published an article headlined "The President Was
Elected at Voloshin's Dacha ". The paper claims that:
- besides Roman Abramovich, Tatyana Dyachenko and Valentin Yumashev, a group
of individuals that has been pulling the strings of Russian politics
throughout the recent years, a person almost invariably appearing at
Alexander Voloshin's dacha every time the fate of the previous government and
the then Prime Minister Sergei Stepashin was being discussed was the new
Kremlin favorite, Vladimir Putin.
The paper comments on materials about the Russian oligarchs - Roman
Abramovich, Boris Berezovsky, Anatoly Chubais, representatives of the "Alpha
groups" - and about their relations with Vladimir Putin in the following way:
- election campaign declarations are one thing and real life is quite
another, so Putin's real plans concerning the super-magnates are so far
safely hidden inside his head.
- most Russians today are convinced that it is the mafia and the oligarchs
that are running the country. In the paper's opinion, Vladimir Putin, with
his claims to be the real leader, may one day dislike this;
- the responsibility of Vladimir Putin for what is happening in the corridors
of power is greater than that of Boris Yeltsin was;
- one can believe that the ailing Boris Yeltsin could be ignorant of many
things, but the theory of the ignorance of the healthy Vladimir Putin is not
likely to convince even an alien from another planet;
- so the President will be compelled to "dispossess" the magnates, even
independently of his own wishes;
- quite another matter is that we may return to an identical situation after
some time, but on a new turn of the historical spiral, or that the changes
may be limited to a slight "redecoration" with strictly PR purposes;
- if Putin so much as makes an attempt to ensure the fulfillment of his own
recommendation, that everybody be put into equal conditions, "the country
should be grateful to him already for that".
"Segodnya" says in its front page story that one can trace "KGB" preferences
in Vladimir Putin's personnel selection policy and claims that the positions
of the special services will strengthen dramatically under his rule.
The paper calls attention to the following:
- any strengthening of the secrete services, any expansion of their powers
must be accompanied with a symmetrical strengthening of state and public
control over them, in particular, over the strictly legal character of using
information obtained by intelligence;
- practice shows that it was precisely weak public control over the secret
services' work that was partly responsible for the pre-election outburst of
the "kompromat war",
- citizen control over the activities of the secret services is
indispensable, otherwise both the "mysterious case of the Ryazan hexogen" and
the "Babitsky case" will forever remain "blank spaces" on the FSB uniform.
April 10, 2000
Putin Short of Change
Leonid Sborov, staff writer
On Friday Duma deputies accepted a new law that will raise the minimum
labour wage. If the Federation Council supports the law, Vladimir Putin will
find himself in a fix. If he signs the law - the country's budget will
collapse. If he vetoes - Putin's reputation as a man of his word will
The Duma's acceptance of the law concerning the minimal labour wage
provides for a gradual elevation of minimum wage in the course of the yea
2000. According to the law, from June 1 the wage will be set at 132 rubles
per month, from October 1 – 280 rubles; and from January 1, 2001 - 300
The existing policy, which places minimum wage at 84 rubles and 93
kopeks, was accepted by the Duma in 1996. From that year only one attempt has
been made to raise the number - towards the end of 1999 deputies sent a bill
for approval to the Federation Council, according to which, from January 1 of
this year, the minimum wage was to be raised to 200 rubles.
The main opposition to that bill came from the government, which
explained that it had no sufficient funds to carry out the change
successfully. As a result of discussions in which both government officials
and members of the Federation Council participated, there were not enough
gubernatorial votes for the bill to pass in December: 62 senators voted for,
26 against; 26 abstained.
This time it is in Putin's direct interest for the senators to turn
down the bill, for if the bill passes the Council, Putin will be forced to
either sign or veto it. And there is little hope that the Council will turn
it down - the present bill is a result of efforts by a commission which
contains as members both deputies and senators.
Putin's support of the bill would destroy the federal budget. As
stated by the Deputy Finance Minister Aleksei Kudrin, the bill is of an
entirely declarative and populistic nature. According to government
considerations, in this year alone, to realize the plan, it would take a
spare 59 billion rubles; and no less than 185 billion in 2001. The country's
budget and the budgets of all the Federation republics do not have such means
at their disposal, - stated Kudrin.
Also, a passage of the bill would raise a mass of citizens' complaints
about the actions of the government administration, concerning its failure to
completely fulfill its promises; and this would in the end lead to a social
eruption. There is sense in this - to make payments according to the new
standards, the government will need $8.5 billion, a number one and a half
times greater than what Russia owes this year to IMF- a debt which it indeed
can scarcely pay.
Vetoing the bill will be no simpler for Putin, considering his
pre-election promises to workers. He will at least have to explain them that
money which the Duma suggested to spend on elevation of wages, has to go
instead to IMF. In the case of a veto, Putin will stir indignation not only
in the lower classes, but also in those groups more comfortably off.
According to present regulations, when income tax is calculated, the
sum which is excluded from the citizen`s gross revenue is measured in minimum
wages. Calculations show that if the bill is passed in its current state, the
tax which appears on a purchase of, for example, on a three-room apartment in
Moscow, will be halved. No doubt the Duma has given Putin something to think
10 April 2000
DEMOCRACY IN RUSSIA
Sir, - Seamus Martin (Opinion, March 28th) raises some interesting questions
about the nature of democracy, in Russia and in 'the West'. he refers to the
media campaign against President Putin's rivals and particularly against
Grigory Yavlinksy, whom Mr Martin refers to as 'the democratic candidate'.
The implications is that this campaign helped Mr Putin into power. There are
three points to be made about this:
1. Putin was elected democratically, by a majority of Russian voters, to the
2. Media bias in the electoral process is not a uniquely Russian phenomenon.
Newspapers in this country have their own political agenda too, and in
Britain the News International corporation owned by Rupert Murdoch can claim
to have influenced the outcome of the last two general elections there ('It
was the Sun wot won it!').
3. If Mr Martin is referring to Putin's past career in the KGB, let's not
forget that George Bush wasn't all that long out of the CIA when he was
elected President of the United States. The CIA is no more known for its
commitment to democracy than the KGB.
Mr Martin also points to the existence of 'strong' support for 'the concept
of a liberal democracy in which human rights are strictly observed' in
Russia, and he applauds the 'sophistication' of this part of the electorate.
Does he mean a liberal democracy like the United States, where policemen are
apparently free to murder working-class black men at will and where the
foreign policy doctrine justifies the legalised slaughter of thousands of
Iraqi children? Or a liberal democracy where human rights are strictly
observed like Britain, with its track record of shoot-to-kill policies and
institutionalised racism in the judicial and law enforcement systems?
Or could he mean liberal democracy as we know it in Ireland, where we have
consistently shown a complete disregard for the human rights of the poorest
people in our society, whether settled or Traveller? And does Mr Martin stop
to consider that Mr Putin may have been elected in part despite the crude
nature of some of his electioneering rather than because of it, and that the
Russian electorate as a whole is 'sophisticated' enough to see that the
advocates of 'free market reform' in Russia have been disastrous for their
Of course we have to condemn the use of anti-Semitic propaganda in election
campaigns or any other context, and Mr Martin should be loudly praised for
his reference to the fraudulent nature of the so-called 'Protocols of the
Elders of Zion' - valuable ammunition for those who seek to limit the spread
of this evil garbage in the writings of people like David Icke. But instead
of lecturing Russians about the man they have democratically elected, he
might be better off pointing up how the same abuses of the electoral process
he targets as existing in Russia exist, in perhaps more subtle forms, in the
'liberal West' as well. - Yours, etc., Shane Kirwan,
Kilmannon, Murrintown, Co Wexford.
Seamus Martin writes: Mr Kirwan appears to be under the impression that
Russians voted for Mr Putin because he was against ''free market reform'. In
fact Mr Putin strongly advocates this policy. He is right in saying that
newspapers all over the world have their political views. What I was
referring to was the use of the two state-run TV channels as election tools
for Mr Putin.
Jamestown Foundation Monitor
April 10, 2000
WILL PUTIN BITE THE BULLET OF REFORMING FISCAL-
FEDERAL RELATIONS? President-elect Vladimir Putin has
indicated that he sees reform of fiscal relations as a means of
strengthening the center's control over Russia's wayward regions.
This will be a difficult exercise with an uncertain outcome. Some of
the pitfalls are outlined in the latest survey published by the
Organization for Economic Cooperation and Development (OECD),
which offers a detailed analysis of budgetary relations between the
center and the regions (Economic Survey of the Russian
Federation, OECD, Paris, March 2000).
So far (1992-2000), government at all levels--federal, regional and
local--has been chronically prone to make spending commitments
which have exceeded revenue-raising capacity. At the same time,
most tax bases and rates remain centrally determined; tax
collection is by federally controlled tax services, tax police and
customs; and a federal treasury system, through which the moneys
flow, operates in all regions except Tatarstan.
Until 1994, division of the revenues between federal and regional
budgets was highly politicized: a matter of discretionary deal-
making by the center through a series of bilateral negotiations with
individual regions. Since 1994, a slightly more rule-governed
system has been in place. In principle, all regions now remit to the
center uniform shares of revenue from the main taxes and duties.
The center then transfers some funds back to the regions, chiefly
to prop up regions which would otherwise run particularly large
The OECD identifies several problems in this arrangement. While
there is a general lack of transparency in Russia's budgetary
process as a whole, it is especially true at regional and local levels,
where it is often unclear which budgetary level is responsible for
which area of expenditure. Most social-welfare spending has been
delegated by the center to subnational levels of government
without adequate funding. Those revenue transfers made from the
federal to regional budgets aim only to reduce regional budget
deficits, not to cover objectively assessed local needs. Regions
therefore have little incentive either to collect tax vigorously or to
rationalize and account properly for their spending.
Regional and local administrations have coped with these problems
by widespread use of barter, money surrogates and tax offsets,
and by hiding resources in off-budget funds. Such stratagems have
enabled regional leaders to hold back funds from the center and to
avoid interest costs. They have also facilitated the surreptitious
bailing out of failing enterprises at the expense of regional
electricity companies. These concealed subsidies have hindered
the restructuring of the Russian economy. Barter and money-
surrogate transactions also provide scope for corrupt, crony
dealings from which regional and local officials benefit to a large
The OECD view is that the federal authorities should take back
responsibility for much of the social-welfare spending that they
have delegated to the regions without supporting revenue. By the
same token, the federal government should take a larger share of
revenue, while spending responsibilities should be clarified and
subnational authorities given a clear tax base of their own. Present
Russian plans for fiscal reform are considerably less radical than
this. The present budgetary arrangements between the center and
the regions are not at all transparent. As outlined above, this has
adverse consequences for the restructuring of the economy as a
whole. It also (a) enables regional and local officials to make
money on the side, (b) helps factory bosses to avoid the pain of
restructuring and (c) enables the federal government to divide and
rule by playing individual regions off each other.
This last point could turn out to be of crucial political importance.
The OECD argues that a more transparent fiscal system would be
good for the Russian economy in the long run. Yet it could also
remove each regional governor's uncertainty about other regions'
bargaining positions and thereby make it easier for groups of
regions to gang together in negotiating with the center. In such
circumstances, the center could lose its cherished ability to divide
and rule. If that proved to be the price the federal government had
to pay for greater transparency, Putin might be deterred from biting
the bullet of radically reforming fiscal federal relations.
Russian foreign minister flying into maelstrom of criticism
LUXEMBOURG, April 10 (AFP) -
Russian Foreign Minister Igor Ivanov was flying into a maelstrom of criticism
here late Monday as his 15 EU counterparts readied broadsides on trade,
quotas, market access and Moscow's heavy-handedness in Chechnya.
"We will ask for respect for human rights and humanitarian law in Chechnya,"
said Portuguese Foreign Minister Jaime Gama, whose country holds the EU
presidency and was chairing the General Affairs Council (GAC) here.
"The Russians will talk to us," because this is included in the political
dialogue that we have set up with them," he said, briefing reporters ahead of
Ivanov's arrival, expected around 6:30 p.m. (1630 GMT).
The European Union sees Russia entering a period of political stability after
the last elections and is seeking to forge a long-term trade partnership with
Moscow, but Chechnya has been a persistent sticking point in the dialogue.
"The Chechnya crisis should not stand in the way of a coherent political
dialogue with Russia," said French Foreign Minister Hubert Vedrine. "What we
need now is to maintain dialogue with Russia. This is a long-term strategy."
His German counterpart, Joschka Fischer, said the 15 were agreed on keeping
up pressure on Moscow to get "a substantial improvement" in the Chechnya
situation, but he added they also agreed there was nothing to be gained in
Gama, and EU security and foreign policy chief Javier Solana, visited Moscow
last week with Vedrine and Chris Patten, European Commission for external
relations, the so-called EU "troika."
"We will be talking to the Russians about free access (in Chechnya) for human
rights and humanitarian organizations, accountability for those violating
human rights and humanitarian law, and also a search for a political solution
and not for the continuing of exclusive military options," Gama said.
Patten said that on the trade side "we'll express our particular concern that
there isn't a resolution to the dispute about the steel agreement on which
we've had to take specific measures."
Russia last month said it might retaliate against a reduction by the EU of
quotas on imported Russia steel, holding that all disputes with the EU should
be settled through negotiation.
The Russian foreign ministry said then that unilateral action could lead to
tough retaliatory measures and could worsen relations between the EU and
Russia to no useful purpose.
Permanent representatives (ambassadors) of EU countries decided in Brussels
at the beginning of March to cut the EU quota for steel imported from Russia
by 12 percent, a reduction widely interpreted as a protest against Russian
military action in Chechnya.
But it was presented officially as a response to a decision by Moscow to
extend a tax of 15 percent on exports of Russian scrap metal to the EU.
The Russian ministry called the EU decision on steel quotas a "gross
violation of procedures for settling disputes."
Patten said the GAC would also be expressing "concern about other specific
measures in which the Russians don't seem to us to have moved a millimeter in
our legitimate directions."
He said those included trade disputes involving Russian market access to
commodities like alcohol and eggs, intellectual property rights including
clothing trademarks, and trans-Siberian overflight charges on EU flight to
Japan and other far east destinations.
"Our general concern," said Patten, "is that despite fact we've tried to
pursue these issues in a very constructive way we don't feel the Russians are
taking our legitimate concerns about economic issues with sufficient
An EU spokesman said the evening session promised to be "rather firm."
Earlier Monday, the GAC took a firm stand on land seizures in Zimbabwe and
agreed that sanctions against Myanmar should be "extended and reinforced."
Date: Mon, 10 Apr 2000
From: IRASTRAUS@aol.com (Ira Straus)
Subject: Council of Europe was always the wrong place for integrating
With the Parliamentary Assembly of the Council of Europe (PACE) having
suspended Russia's voting rights, Komsomolskaya Pravda has prepared a list of
what Russia would gain and lose by leaving the Council of Europe altogether
(April 8, 2000; JRL 4238). Significantly, the gains are specific, flowing
from the Council of Europe’s actual work; the losses are all generic, bearing
no relation to the Council of Europe’s work.
What the losses flow from is simply the fact of the Council of Europe’s
titular status as a European institution. Membership in the Council serves
Russia’s interest in being thought of as European, attracting investment, and
gaining a voice in the West. But so would membership in any other European or
Western institution, and without the specific drawbacks that come from
Russia's being in the Council of Europe.
One of the gains that Komsomolskaya Pravda foresees from leaving the Council
of Europe would be: "The right to lift the moratorium on capital
punishment--a prerequisite of membership in the PACE--which the majority of
Russians want to see lifted." This is a good measure of how inappropriate the
Council is for Russia at the present time. It is the height of unwisdom for
Western institutions to be trying to impose on Russia a decision on whether
and when to end capital punishment.
It should be Russia that decides on capital punishment in Russia. This
decision should be seen in Russia as a decision that it has made freely for
the sake of the country's better self-governance, not for the sake of meeting
standards for being called "European". Bringing crime down to European levels
will do far more for Russia becoming European than abolishing capital
punishment. If Russians believe that capital punishment helps them in
reducing crime -- and obviously a majority of them do believe that this is
necessary at the present time, in order to reestablish the hegemony of the
state over the criminals, who as yet are able to punish their enemies far
more effectively and decisively than the law can -- then that is their
judgment call to make. Even if the Council of Europe thinks that they are
mistaken, it is counter-productive to impose its view through international
obligation; it only encourages Russians to blame their crime problems on
Europe rather than on themselves. The problem gets compounded when, having
supported the alternative of life imprisonment in overcrowded, tubercular,
epidemic-ridden prisons, Westerners proceed to urge Russia to let people out
of prison. What good can possibly come of an approach that enables Russians
to believe that their country's anarchy and misery are being perpetuated and
deepened for the sake meeting European standards on capital punishment? It
only discredits Westernism in Russia. Far from integrating Russia with
Europe, it actually undermines the popular foundations for integration with
The moratorium on capital punishment is virtual Europeanization, not the real
thing. The real thing would consist of coming down to European standards on
crime and corruption and building a healthier society. After Russians have
done this, they might be ready to drop capital punishment of their own
volition. Then and only then would the step contribute to sustainable
integration with Europe.
It made no sense in the first place to include Russia in the Council of
Europe at this stage. It doesn't meet the standards, and setting standards is
just about the only thing that the Council does. Russia's business with the
West is far more logical and intense in other fields than in the Council's
field. It was a divorce waiting to happen.
Russia was brought into the Council of Europe as a compensation for the
expansion of a NATO from which Russia was excluded. NATO was not trying to
find any serious way of integrating Russia with itself; there were too many
people in NATO who were dead set against any such integration, and for that
matter against anything except a 100% powerless voice for Russia in NATO
affairs. In reality, NATO was the place where integration would have made the
most sense: NATO and Russia inherently have a lot of serious business to do
with one another, and this is vital business in the here and now, not just a
matter of future standards for a future Russia. The NATO-Russia relationship
is inherently intense, for better or for worse, and it needed to be organized
for better. But, lacking the vision to do this, the West shopped around for
lesser venues for including Russia, even if they were also less appropriate.
The Council of Europe popped up as a most convenient venue for this purpose:
powerless, yet carrying a lot of symbolic prestige. Still, the U.S. had to
put pressure on the Council to accept Russia. The Council found the idea so
threatening that it insisted on first getting a closer link to the U.S. for
balance vis-a-vis Russia.
Russia was also brought into the G-8 in this period, for the same reason of
compensation for NATO expansion. This made a lot more sense. Russian
inclusion in the G-8 has played a very useful role, for the West as well as
for Russia. It provided the venue within which Russia and the West worked out
the formula for ending the war in Kosovo; this saved NATO's neck and
extricated it from a war that had no good end in sight. That the West
proceeded to cheat on the deal and impose a purely one-sided solution in
Kosovo is another matter; we are still paying the price for this on the
ground in Kosovo. If we had carried out our side of the bargain, the KLA
would have had to compromise and be more careful about reverse ethnic
cleansing, and NATO would be in a much better position of supreme mediator
rather than having to act itself as the sole balance to the KLA. And Ivashov
wouldn't have made his dash to the Pristina airport, the Russian security
forces wouldn't have threatened Yeltsin with disobeying his authority,
Stepashin would likely be President now, the war in Chechnya would have
likely stopped at the Terek River... But be that as it may, at least, thanks
to the G-8, Russia was able to get for NATO a successful end to the war. And
at least Russia was able to salvage its own dignity through this G-8 process,
calming the dangerous anti-Western hysteria that had been raging in Russia
during the war in Kosovo. The success in the G-8 put Yeltsin in a position
ditch Primakov and replace him the pro-Western Stepashin (even if a short
time later the cheating over Kosovo and the autonomous response of his
military had left him little choice but to accept a compromise figure,
Putin). All this adds up to a huge benefit that the West has derived from
having Russia in the G-8.
Despite this benefit, anti-Russian forces in the West now are pushing for
kicking Russia out the G-8. A pro-Chechnya-independence committee has gotten
the most prestigious old cold warriors in the U.S. -- people from some of
whom one would have expected better, now that a decade has passed since the
end of the Soviet Union -- to sign off on an appeal for excluding Russia from
the G-8. This is only one of the many clever ways it has in mind for
punishing Russia. It amounts to cutting off our nose to spite our face. It
would be a real disaster for the West.
Russia leaving the Council of Europe, by contrast, would not be such a
disaster. The losses would be mostly symbolic: the loss of a link with the
word "Europe". The loss of face in this regard has already taken place, by
virtue of the action of the Parliamentary Assembly of the Council of Europe.
What is important at this juncture is to compensate for this intelligently,
by upgrading Russia's role in the places where her role does make sense,
specifically the G-8 and the NATO-Russia Permanent Joint Council.
Committee on Eastern Europe and Russia in NATO
Moody's Raises Outlook On Russia Debt To Positive
LONDON, Apr 10, 2000 -- (Reuters) International rating agency Moody's
Investment Services said on Monday it had raised its outlook on Russia's debt
to positive from stable.
The change in outlook applies to Russia's B3/Caa1 country ceilings for
foreign-currency bonds and bank deposits and to B3-rated Eurobonds and
Caa2-rated ruble-denominated bonds of the Russian Federation.
"Moody's believes that political stability has been enhanced by the recent
elections," the rating agency said in a statement. "Major indices for 2000
and 2001 will exhibit significant improvement over recent economic
performance: growth rates will be positive, there will be a surplus on the
current account and a primary surplus on the consolidated budget."
Moody's said because of the recent history of default and rescheduling of
various debt instruments, maturities have lengthened at the same time as
foreign exchange reserves have risen.
Although some of the improved economic performance was due to higher oil
prices, the agency said more of the fiscal improvement was due to the effects
of ruble devaluation and the consequent import substitution. It said it would
continue to monitor the exchange rate regime and its influence on the trade
From: "Joan Seder" <firstname.lastname@example.org>
Subject: RE: 4233- Your observations
Date: Sun, 9 Apr 2000
Perhaps we are just waiting for our own election! Lately, JRL seems to have
an overabundance of why we should re-invent the Cold War postings. I am
tired of talking heads. We all know the problems, what we now need to hear
about are what solutions Russians outside the power clique are applying and
if there is any inclination from the US State Department or government to
pay these problem solvers any attention. Who gets my vote in November will
depend a great deal on their stand regarding US policy towards Russia.
Perhaps there are other JRL readers who want to make an informed choice over
which candidate is least likely to get us into WWIII.
Months ago I sent you a valid contact for finding out what some Russians are
doing to work within the system to change government attitudes regarding
taxes and support for small and medium businesses. Since there was no
contact made, I assume you want JRL to remain an academic clearinghouse. If
so, I'd like to hear about what happens to the research Russians are posting
about youth-in-peril, etc. Are they getting any response from the
applicable ministries? What strategies are they trying/not trying to address
the warnings such research reveals?
We all know our Russian friends are having a hard time -- but, they still
get up in the morning and try to do something productive while they wait it
out. Aren't we doing the same?
Through my acquaintances I know that legitimate businesses employing Russian
intellectual capital to compete in the U.S. market fear the mafia too much
to have anyone write about it. Also, my small business incubation friends
remain convinced that China contacts hold more importance for Russia than
does networking with Americans. All the doom and gloom articles just
reinforce American attitudes that Russia no longer matters. Obviously, the
Russians know this as well.
While I continue to find JRL an important source of information, I admit to
page-downing much more often these days. I do wonder why there are fewer
postings from non-academics.
I apologize for the bluntness, but I assume you did throw out the question
to all of us. And, of course, I respect your work to keep JRL going. Thanks.
I'm also thinking many JRLers may be living in rural and urban areas where
the last ten+ years have been spent rebuilding their own post-Cold War
transition economies. I emigrated from the east coast to Appalachian Ohio
30 years ago and still find my neighbors trying to find out how to expand on
small successes. This is our own permanent transition and third-worldly
economy; the U.S. is littered with small cities, urban neighborhoods and
rural areas that are grappling with job creation and business development
issues within a legitimate and sophisticated support infrastructure. We
never told the Russian people that most Americans don't eat, wear or live in
stock certificates. Perhaps a sign of respect would have been to let them
know it's not easy to create a job -- let alone a few million.
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