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April
15, 2000
This Date's Issues: 4250 4251
Johnson's Russia List
#4251
15 April 2000
davidjohnson@erols.com
[Note from David Johnson:
1. Reuters: Clark says NATO expansion good for Russia too.
2. AFP: Russia will soon be second biggest arms exporter: official.
3. Moscow Times editorial: Duma Vote Puts Ball in U.S. Court.
4. Washington Post editorial: START-Up Costs.
5. AFP: Big victory for Putin with START II but problems remain:
press.
6. Boston Globe: David Filipov, Arms vote seen giving Putin
ammunition.
7. Ilya Vinkovetsky: RE Bruce Lincoln's obituary.
8. Moscow Times: Jonas Bernstein, New Econo-Guru Prophetic.
(Andrei Illarionov)
9. The Russia Journal: Andrei Piontkovsky, Putin, the oligarchs and the police.
10. The Russia Journal editorial: Early signs of optimism.
11. US News and World Report: Bruce Auster, The sheep in wolf's
clothing? (Putin)
12. AP: Putin Says Blair Willing To Help.
13. The Times (UK): Giles Whittell, Have a care Blair, this man
could be dangerous. Putin comes looking for friends - but he still knows nothing of true
democracy.
14. NewsBase: Ben Aris, Power Wars.]
******
#1
Clark says NATO expansion good for Russia too
TALLINN, April 15 (Reuters) - NATO supreme commander General Wesley Clark
said on Saturday enlargement of the western alliance would benefit all of
Europe, including Russia.
Expansion would bring the east the kind of stability western Europe had
enjoyed since the end of World War Two, he said in the Estonian capital
Tallinn at the end of a two-day visit.
``We made very clear that we think enlargement is in the interests of all
nations in Europe including Russia. After all, what better insurance of
security and stability could Russia have than an enlarged NATO,'' Clark, who
retires from his post next month, told journalists.
NATO's acceptance in 1999 of three former East Bloc states -- Poland, Hungary
and the Czech Republic -- had been a success and were an encouraging sign for
further expansion, Clark said.
His comments came at a sensitive time in relations between the alliance and
Moscow, and were made in a country that wants to join NATO as soon as
possible. Moscow is opposed to any of the Baltic states becoming NATO
members.
Estonia, Latvia and Lithuania -- which regained independence from the Soviet
Union in 1991 -- say expansion will bring stability and security, and ensure
domination by their larger eastern neighbour will never occur again.
All three have signed a partnership pact with the United States as a step
toward NATO membership. While no timetable has been laid out for expansion,
Estonia has set 2002 as the date to meet requirements for NATO membership.
It will spend 1.6 percent of gross domestic product (GDP) on defence in 2000,
up from 1.4 percent in 1999, and plans to boost spending to 1.8 percent of
GDP in 2001 and two percent in 2002.
******
#2
Russia will soon be second biggest arms exporter: official
MOSCOW, April 15 (AFP) -
Russia will become the world's second biggest arms exporter after the United
States within "two or three years" according to the country's deputy prime
minister in charge of arms sales, Ilya Klebanov.
"At the moment, we are in fourth place after the United States, Britain and
France," Klebanov said Friday upon his return from a trip to Malaysia where
he attended an international arms show.
Klebanov ruled out Russia regaining the top spot, once held by the Soviet
Union, but reaffirmed his January prediction that "arms exports will bring
the country 4.3 billion dollars".
If achieved, that figure would be a record since the collapse of the Soviet
Union in 1991.
"Our target for next year is five billion dollars," Interfax quoted Klebanov
as saying in an interview to be published Saturday by the Kommersant daily.
. "It is a large sum, and if we continue doing as well as we have, we will
rank as the world's second arms exporter after the United States in two or
three years," Klebanov added.
Klebanov hailed the success of the 22 Russian companies presenting their
products at the arms show which is Asia's largest and the world's second
biggest after Dubai.
He said Russia was considering a number of large contracts with Asian
countries, to supply them with arms ranging from the T-90C tank to a variety
of air defence systems.
At the exhibition, Malaysian Defence Minister Najib Razak announced plans to
replace obsolete US S-167 "Sea King" helicopters with Russian Mi-17
helicopters, ITAR-TASS reported.
There has been an increasing demand from the international community for
Sukhoi and MiG fighters, T-90 tanks and destroyers.
Last month a Yemeni military delegation came to Moscow seeking Russian SU-27
fighter jets, modernised versions of the T-72 tank, multiple rocket-launchers
and an anti-aircraft defence system.
And in February, the US company General Dynamics expressed interest in buying
the Arena defence system for its M1 Abrams tanks, which is currently being
tested, Interfax said.
The Arena system destroys attacking missiles travelling at speeds of 50-700
metres (yards) per second.
In 1999, Russian arms sales exceeded the 3.5 billion dollar mark compared
with 2.5 billion dollars the year before.
Russia's largest arms export firm, Rosvooruzhenie controlled 80 percent of
Russia's arms sales to 49 countries last year, with revenues of more than 2.8
billion dollars. Its current order book is filled with contracts worth more
than 10 billion dollars.
******
#3
Moscow Times
April 15, 2000
EDITORIAL: Duma Vote Puts Ball in U.S. Court
It has taken an unconscionably long time, but the State Duma deserves
applause for voting Friday to ratify START II.
In the seven years since presidents Boris Yeltsin and George Bush signed the
agreement, it has become more and more in the national interest to win
parliamentary approval for the deal, which commits the two sides to cut the
number of nuclear warheads in their respective arsenals from a maximum of
6,000 to no more than 3,500 each by 2007.
Put simply, the government can no longer afford to maintain even as many as
3,500 nuclear warheads for much longer. Within five years, it is expected to
have a "mere" 3,000 operational warheads at most.
This level is still sufficient to destroy life as we know it on this earth
several times over. Previous Duma votes against the treaty had more to do
with anti-Yeltsin and anti-Western sentiment than with any sensible
appreciation of thestrategic and economic situations.
As President-elect Vladimir Putin said in welcoming the Duma's ratification
vote, Russia doesn't need another nuclear-arms race, it suffered enough from
the previous one.
More to the point, as long as the Duma declined to ratify START II,
Washington - which can afford more, and nastier, nukes - had little incentive
to restrain itself.
Indeed, Putin was right when he said that the ball is now in Washington's
court. After years of pleading for the Duma to pass START II - and using
attitudes on the treaty as a yardstick for judging Russian politicians - the
United States has now ceded the moral high ground to Russia.
Having passed START II, Russia is now in a better position to argue for the
greater reduction it wants under START III - Moscow wants a 1,000- to
1,500-warhead limit while the United States has said 2,000 to 2,500 warheads
is as low as it can go.
The START II success is also to Russia's advantage as negotiations unfold
over Washington's desire to wriggle free of the 1972 Anti-Ballistic Missile
Treaty.
It is ironic that the Duma should have passed START II in the wake of NATO's
attack on traditional Moscow ally Yugoslavia, an action which released a wave
of nationalism and anti-American feeling here.
If Washington now rides roughshod over Russian objections to an American
missile defense system - after first Kosovo and then START II ratification -
then this will only further fan such flames. If America is to go ahead with
such a nuclear shield, then it needs to win Russia's agreement first, rather
than offer it another galling fait accompli.
- Garfield Reynolds
******
#4
Washington Post
April 15, 2000
Editorial
START-Up Costs
AFTER ALMOST seven years of dithering, the Russian Duma has ratified the
START II strategic arms control treaty that the U.S. Senate signed off on
back in 1996. Arms control by itself does not keep the nuclear peace. In the
waning days of the Cold War, Mikhail Gorbachev's abandonment of Soviet
hostility toward the West made arms control treaties easier to achieve--yet
slightly less momentous. Arms treaties make the world safer to the degree
that they both embody and contribute to effective deterrence and political
comity.
START II, fortunately, fills the bill. It reduces not only the number of
long-range nuclear weapons--from START I's ceiling of 6,000 for each side to
a range of 3,000 to 3,500 each by the end of 2007--but also the incentive to
engage in a first strike. Specifically, it would eliminate both sides'
land-based multiple-warhead missiles. These were the most destabilizing
weapons; being most vulnerable to a first strike, they were most likely to be
launched preemptively.
In a political sense, Russia's ratification of START II shows that despite
disagreements over such matters as Kosovo and Iraq, the two countries can
still do business on big issues. It shows that, in Mr. Putin and his newly
elected, more centrist Duma, the United States is dealing for the first time
in years with a Russian government that can deliver. And it shows that for
all of Russia's griping about its loss of great-power status and the rise of
a hegemonic United States--complaints prominently voiced by Mr. Putin
himself--the Russian leadership remains pragmatic enough to realize that
strategic arms competition is a dead end.
To be sure, the future of arms control is by no means ensured. Washington
wants START II to lead swiftly to deeper cuts in a proposed START III treaty.
But Mr. Putin has signaled his intention to hold further progress hostage to
some form of U.S. restraint on the development of ballistic missile defense,
which U.S. planners increasingly regard as necessary to deal with outlaw
states such as North Korea, but which the Russians see as a potential
violation of the 1972 Anti-Ballistic Missile Treaty and as a threat to them.
It's also true that the Clinton administration countenanced a lot of
destructive behavior by the Russians while Moscow made up its mind about the
treaty--Mr. Putin's rampage through Chechnya being the most egregious
example. Part of the price for reducing the risk of a possible nuclear
holocaust, it seems, was the toleration of an actual massacre carried out
with conventional weapons. It was a high price.
******
#5
Big victory for Putin with START II but problems remain: press
MOSCOW, April 15 (AFP) -
The Russian press on Saturday hailed the ratification of the START II arms
reduction treaty but voiced lingering doubts about its implementation and its
long-term effects on US-Russian relations.
"The ratification of START II is of exceptional importance not only for
Russian defense but for its budget," said Rossiyskaya Gazeta.
The Russian parliament on Friday ratified the Strategic Arms Reduction Treaty
II, slashing nuclear arms stockpiles in both countries by two-thirds, to
3,000 warheads for Russia and 3,500 for the United States by 2007.
Rossiyskaya Gazeta called the ratification "tangible proof that Russia, with
its new president and new Duma (lower house of parliament), is making an
effort to consolidate the system of international arms control accords in its
entirety."
"The ratification is a great success for the executive branch," said
Nezavisimaya Gazeta, noting that the Russian Parliament had delayed a vote on
the treaty for seven years.
The paper also noted that by ratifying the START II treaty, Moscow could
prevent Washington from developing a national missile defense system.
But the Russian daily Kommersant called the move a double-edged sword.
"Friday, Moscow decided that it had been more wicked than Washington. If now
the Americans violate the ABM agreement, if they refuse to pursue
disarmament, they will be the cause of the start of a new arms race," the
daily said.
Putin put Washington on notice that the Duma vote on ratification would only
be valid if the United States respected the 1972 Anti-Ballistic Missile (ABM)
treaty banning construction of nuclear missile defense shields.
US Secretary of State Madeleine Albright has said that the United States does
not want to unilaterally pull out of ABM, but is seeking to revise its terms
to allow Washington to deploy a limited national missile defense system.
Kommersant warned Saturday that Putin's ultimatum could prompt US officials
to cut off all future arms control talks.
The daily also said that Russia lacked the funds needed to keep its current
arsenal operational, even after START II cuts went into effect.
"Experts must now answer two questions: will this ratification serve Russian
interests, and what will happen now with US-Russian relations and in the
greater context of strategic stability?" asked Nezavisimaya Gazeta.
*******
#6
Boston Globe
15 April 2000
[for personal use only]
Arms vote seen giving Putin ammunition
By David Filipov
MOSCOW - Funny how Russian and American nuclear weapons have evolved into
little more than the world's most dangerous bargaining chips.
Take yesterday's long overdue vote by the Russian lower house of Parliament
to ratify the 1993 START II strategic arms reduction treaty. On the surface,
this was a watershed decision that finally will clear the way for the United
States and Russia to halve their nuclear arsenals, to about 3,000-3,500
warheads.
In reality, Russia did not need a 7-year-old arms control agreement to start
reducing its nukes. Time, rust, and lack of cash are already taking care of
that.
What the approval did do was to give President-elect Vladimir V. Putin a
chance to go on the offensive in Russia's bitter diplomatic dispute with the
United States over the arms control issue Moscow really worries about. It
also gave the rest of the world a glimpse at Putin's meaning this week when
he said Russia would pursue its national security from ''a position of
strength.''
Wasting little time after yesterday's 288-131 ratification vote, Putin
proposed slashing the countries' nuclear stockpiles even further, to about
1,500 warheads each. He also warned that Russia would abandon all nuclear and
conventional arms control agreements if the United States went ahead with its
plans to build national missile defense system. Instead, he said, the United
States should follow Russia's good example.
''Our partners should make the next steps. The ball is in their court,'' said
Putin during a surprise appearance at the Duma, accompanied by his two aides
who carry the briefcases that contain the launch codes for Russia's nuclear
forces.
START II must now be ratified by the Federation Council, the Russian
Parliament's upper chamber, easy approval is expected. Putin, who leaves for
London tomorrow for a meeting with British Prime Minister Tony Blair, said:
''We are now in a very good position diplomatically and politically.''
The Duma vote won immediate approval from the Clinton administration, which
has been pushing Russia to follow the example of the US Senate, which
ratified the agreement in 1996.
Secretary of State Madeleine K. Albright, on a visit to neighboring Ukraine,
welcomed the vote as a ''big step forward'' and expressed hope that she and
Russian Foreign Minister Igor Ivanov would make progress on arms control in
talks set for later this month. But she remained firm on her goal to get
Moscow to alter the antiballistic missile treaty to allow for a US missile
defense system.
President Clinton is expected to decide this summer whether to build such a
system to protect the country from potential attacks by ''rogue'' states such
as North Korea and Iraq.
Moscow sees such a defensive shield as a potential threat to the rough
strategic balance that has existed between Russia and the United States for
two generations that took seriously the threat that these weapons could end
mankind. Moscow views the planned US defensive shield as a direct violation
of a 1972 pact on antiballistic missiles that provided the cornerstone for
all later arms control deals.
The national defense system has strong bipartisan support in the United
States and it is unlikely that Russia can stop it.
But yesterday's events in Moscow gave Putin the political high ground over
Clinton before a United Nations conference this month on halting the spread
of nuclear weapons. Russia could further upstage Washington in the coming
weeks if the Duma also ratifies the global nuclear test ban treaty that the
US Senate did not pass last year. Clinton failed to persuade the
Republican-dominated body to approve it.
In getting the Duma to ratify START II, Putin accomplished what his
predecessor, Boris N. Yeltsin, was unable to do after signing the treaty with
George Bush in January 1993. Every time Yeltsin sent the treaty to the Duma,
his Communist opponents who used to dominate the house would find an excuse -
NATO expansion in 1997, the US-led airstrikes against Iraq in 1998, NATO's
assault on Yugoslavia last year - to refuse to vote on Start II.
Tensions with the West are again high, this time over Chechnya. The
Communists, who lost ground to pro-Kremlin parties in elections last
December, opposed ratification. But the majority went along with Putin's line
that START II is a boon for Russia's cash-poor military.
Putin said the treaty would allow Moscow to modernize its nuclear arsenal and
divert scarce funds to conventional forces.
''Our nuclear forces, after the ratification of START II, will still be able
at any moment and any point on the planet to destroy any enemy several times
over and guaranteed,'' Putin told lawmakers.
At the moment, Russia cannot afford to maintain and protect its existing
nuclear stockpile of about 6,000 weapons, nor can it find cash to destroy old
warheads and fissile material without US assistance.
As a result, military specialists say, many weapons are rusting away. Under
START II, Russia will be decommissioning missiles which would otherwise
become obsolete. The United States will have to destroy newer weapons.
Putin's proposal of new, drastic cuts for what would be START III reflect the
growing realization here that Russia probably cannot support more than
1,000-1,500 weapons, according to Pavel Felgenhauer, an independent
Moscow-based defense analyst. The Clinton administration has said it wants to
keep about 2,000-2,500 weapons.
Putin said Russia had to avoid a new international arms race.
''Our main task is to force the USA to reduce its actual nuclear potential,''
Putin said before the vote. ''If we don't ratify this treaty, Russia will be
15 times weaker than the USA by 2010.''
By ratifying START II, deputies also approved motions that give Putin a free
hand to abandon all arms pacts if the United States goes ahead with its
defense system.
The Duma also approved a 1997 US-Russian protocol to START II that extends
the deadline for Russia to scrap nuclear weapons from 2003 to 2007. The US
Senate has yet to approve this amendment.
Felgenhauer, for one, thinks it never will. And that is the whole point.
START II does not have to actually work for Moscow to use it to gain
concessions in other areas from a Clinton administration that needs, in an
election year, to be able to claim successes, and avoid trouble, in its
dealings with Russia.
******
#7
Date: Fri, 14 Apr 2000
From: Ilya Vinkovetsky <vintik@uclink4.berkeley.edu>
Subject: RE Bruce Lincoln's obituary
David, The NYT obituary for W. Bruce Lincoln mentions that Jacqueline
Kennedy Onassis did some editing work on one of his books, but neglects to
point out that Lincoln's own wife, Mary E. Lincoln, is one of the finest
editors in the field of Russian history. Under her leadership, the Northern
Illinois Press has blossomed into a great place for young as well as
established scholars to get their work out. Some remarkable books have seen
the light of day thanks to Mary Lincoln's dedicated work. The two of them
together -- Bruce and Mary Lincoln -- have made a lasting beneficent imprint
on the way that Russian history is presented to the American audience.
Bruce Lincoln will be sorely missed.
******
#8
Moscow Times
April 15, 2000
PARTY LINES: New Econo-Guru Prophetic
By Jonas Bernstein
The most interesting event in politics this week was President-elect Vladimir
Putin's appointment of Andrei Illarionov, the economist, as a presidential
adviser. "Interesting" should not be mistaken for "hopeful." In fact, the
odds are good that the appointment won't amount to much in the grand scheme
of things. Still, Illarionov's record is worth examining in its own right.
Illarionov entered public service back in 1992, joining Yegor Gaidar's
government as the first deputy head of the Working Center for Economic
Reforms. But he is probably best known for the comments he made as a private
economist in the summer of 1998 concerning Russia's debt crisis. Having
warned back in 1996 that the growing debt "pyramid" would exact a heavy
future price, Illarionov declared in June and July of 1998 that the ruble's
devaluation was inevitable. He urged the government of Prime Minister Sergei
Kiriyenko to devalue immediately, under controlled circumstances, or face the
consequences.
For this he earned the wrath of his erstwhile pals among the "energetic young
reformers," like Anatoly Chubais. Then-deputy Central Bank chairman Sergei
Aleksashenko accused Illarionov of "deliberately distorting facts."
Aleksashenko's boss, Sergei Dubinin, called Illarionov a liar, and suggested
he might have a personal financial interest in calling for devaluation.
Just prior to the Aug. 17, 1998 meltdown, Illarionov also argued that the
$22.6 billion promised by the International Monetary Fund would only postpone
the inevitable, and only briefly. Indeed, unlike the "energetic young
reformers," he has consistently spoken out against Russia carrying out market
reform on the West's dime (hundreds of billions of dimes) - a stand for which
the West's taxpayers, at any rate, are grateful. Illarionov, in fact, argues
that foreign aid has had a harmful effect on the economy, and should be
ended.
The new presidential adviser has been prescient on other issues.
"The country has already chosen its model of development - it is close to the
pre-reform Latin American economies," Illarionov wrote in Kommersant daily at
the start of 1996. "It will be a highly monopolized economy with large and,
as a rule, incompetent state interference. Gigantic financial-industrial
groups will be formed, which will tear up the remaining national wealth. ...
The strength of these groups will be defined not by their competitiveness,
but by their proximity to the state."
Illarionov, who predicted that Russia's economy by the year 2000 would
resemble that of Argentina under Juan Per×n, wrote this analysis in the
immediate wake of the notorious loans-for-shares privatization process, in
which major industrial enterprises were handed over to the "oligarchs" in
rigged auctions. That process was a prime example of what Illarionov would
later call the "privatization of the state."
"The state is not a single entity - it has been privatized in the sense that
the officials are being used to further private interests of specific private
groups," he told The Moscow Times in October 1996. "This is the biggest
obstacle not only to reforms but also to any purposeful government policy."
Illarionov is, as Russian observers have been calling him this week, an
"ultraliberal," who believes that the less the state intervenes in the
economy, the better it performs. Oddly, he shares with an ideological
opposite like Joseph Stiglitz, the former chief economist at the World Bank,
an enthusiasm for China. But while Stiglitz has praised China for carrying
out economic reform gradually, Illarionov has argued that China's reforms
have actually been more radical than Russia's. According to Illarionov's
numbers, state spending in Russia from 1993 to 1997 was 42 percent to 50
percent of gross domestic product, compared with 16 percent to 18 percent in
"communist" China.
Stiglitz and Illarionov, however, also share an antipathy to the mutant
capitalism that has emerged since 1991.
The real question, of course, is what effect Illarionov will have on Putin's
policies. What, for example, is his view of the recent merger that reportedly
put 60 percent to 70 percent of the aluminum industry under the control of
two large financial-industrial groups? Ilya Yuzhanov, the minister for
anti-monopoly policy, said Friday he hadn't seen any evidence of
monopolization in the aluminum industry. Anyway, Yuzhanov added, the creation
of "Russian Aluminum," a vertically integrated holding controlling around 70
percent of the country's aluminum market, is in the national interest.
Is it, Mr. Illarionov?
******
#9
The Russia Journal
April 17-23, 2000
SEASON OF DISCONTENT: Putin, the oligarchs and the police
By ANDREI PIONTKOVSKY
First Deputy Prime Minister (and most likely soon-to-be Prime Minister)
Mikhail Kasyanov beamed with optimism at a press conference where he summed
up Russias economic results for the first quarter.
The primary budget surplus comes to 3.8 percent, while inflation, at 0.6
percent, has been practically crushed, the ruble exchange rate is stable
and the Central Banks currency reserves are increasing. This is the truth.
But only part of the truth.
The other part of the truth is that the activity, or rather, inactivity of
Vladimir Putins government has only the most indirect relation to these
objective results, as does that of the Sergei Stepashin and Yevgeny
Primakov governments. The tonic effect on the economy was a result of the
four-fold devaluation of the ruble and the tripling of world oil prices.
The oil boom of the 1970s kept the stagnating Soviet economy afloat and
prolonged its agony by 20 years. Of course, these days, the lulling comfort
of positive economic indicators wont keep the stagnant Russian economy
going for two decades, but it could last two or three years, putting off
urgently needed structural reform.
These favorable macroeconomic results provide just a thin layer covering
fundamental problems like lack of protection for property rights; the
privatization of the states functions by oligarchs and bandits; the
incompetence and corruption of state officials; an underdeveloped market
infrastructure (particularly in banking and the stock market); and an
absurd and constantly changing tax system, especially at regional level.
Hopes are high both in Russia and especially in the West that Putin, using
the vast powers given to him by the Constitution, will be able to raise the
Russian economy from its knees and finally see through long-awaited liberal
reforms.
These hopes strike me as ill-founded. For a start, the foundation of these
reforms must be the separation of money and power. But can Putin distance
the oligarchs from power? Take a look back at how the previously obscure
president-elect rose to political power. Was he a rebel, taking a valiant
stand against the oligarchs, throwing down a challenge to fight them at the
elections and conquer the nations support?
Nothing of the sort. Putin was a man chosen by the oligarchs, or more
precisely by one oligarchic clan Yeltsins family. Putin proved his
loyalty to this clan and was brought to power by this clan through a
thoroughly dirty election campaign that ran from September to March and
used a bloody war in Chechnya as its principal instrument.
I would imagine that those who brought Putin to power did everything
necessary to ensure their own security and guarantee that Putins loyalty
would continue after his election victory.
Another no less weighty reason why Putin will not become the father of
future liberal reforms lies in his own convictions. He does not understand
economics, but he has clear instincts that come through every time he
strays from prepared speeches to talk about economic issues. These are
statist, dirigiste instincts.
As is normal for a man who has spent a lifetime in police structures, Putin
has heightened confidence in the effectiveness of police and administrative
measures in running the state as a whole and running the economy in
particular.
Now, Putin is actively bringing his former colleagues into the upper
echelons of power. In part, this is because he wants to see more
like-minded people at the top, and in part, it is an attempt to balance the
dependence on the oligarchs that he clearly doesnt relish.
It would be more realistic, then, to expect that Putins presidency will
bring not radical liberal reform but rather a gradual transformation of
oligarchic capitalism into a blend of oligarchic capitalism and a police
regime with some of the external attributes of democracy formally kept in
place.
(Andrei Piontkovsky is director of the Center of Strategic Research.)
******
#10
The Russia Journal
April 17-23, 2000
Editorial
Early signs of optimism
Two significant moves relating to foreign policy and the economy although
not very widely publicized came out of Vladimir Putin's administration
last week.
The first was the announcement that the president-elect's first
international visit (a brief stint in Belarus aside) will be to London to
meet British Prime Minister Tony Blair. The second was the announcement by
the Kremlin on Wednesday that Putin had appointed economist Andrei
Illarionov to the post of presidential adviser.
If Putin is looking for a mentor or partner in Europe, then he could have
chosen no better than Britain and Blair. For all of the British prime
minister's faults perhaps smarminess being the most notable he is by
far the most impressive leader in Europe and undoubtedly a politician of
great skill.
Blair is a leader of the next generation, and Putin could learn a lot from
him. Britain, meanwhile, as Europe's best performing economy and one of its
oldest democracies, will also be of interest to the president-elect.
The choice of Britain shows a healthy streak of pragmatism in the Kremlin.
Putin could not really turn to Germany, a country with which he has some
history. French President Jacques Chirac, who was close to Boris Yeltsin,
seems now to have gone cold on Russia. U.S. President Bill Clinton,
meanwhile, is in his lame-duck year, so there is little point in expending
a lot of energy courting the United States.
This makes Blair the logical choice, and it is fortuitous for Russia.
In relation to Putin's own administration, the naming of Illarionov is also
extremely encouraging. Illarionov is known as a straight-talking and highly
intelligent economist who is not beholden to any special interest group a
rare thing in Russia.
This newspaper has great respect for Illarionov and we hope he will be
very influential on economic policy in the Putin administration.
This is the man who warned prior to the August 1998 crisis of the danger of
the government practice of resorting to domestic borrowing to finance the
budget deficit and called for a devaluation of the ruble before it
crashed. Illarionov has also long held that the IMF could better help
Russia by drafting economic policy rather than distributing new funds.
In 20-20 hindsight, this looks like nothing special, but these predictions
and assessments show significant intellectual rigor.
For Putin to have Illarionov as the man he turns to when it comes to
economic matters is very good news indeed. He will receive unfettered
assessments and well thought out analysis of the economy. This is exactly
what Putin will need.
The president-elect could not be in better hands.
If Illarionov is Putin's top adviser, then this could be even more
significant, given that it is increasingly likely Russia will be run from
the Kremlin, while the White House will be tasked with implementing policy.
Devising policy in the Kremlin makes sense in that the current government
much of which seems likely to remain in place is one of technocrats with
few ideas of its own. The White House is also extremely prone to lobbying
of the worst kind.
Good indications of Illarionov's rational analysis were his first comments
to the media after being appointed. He told ORT television: "In the
long-term, we will not get very far if we remain addicted to the oil needle."
This is nothing new. But has anyone heard the Russian government stating it
quite so directly?
One positive aspect of Putin's early days has been an apparent willingness
to learn. Putin is finding his feet as the leader of a nation facing huge
social and economic problems as well as searching for its place in Europe.
If he is prepared to be guided by a leader such as Blair and to take
economic advice from a man of Illarionov's ilk, then these are very
positive signs. There are grounds for optimism that the new president is
headed in the right direction.
******
#11
US News and World Report
Outlook 4/24/00
The sheep in wolf's clothing?
By Bruce B. Auster
Meet the new boss, same as the old boss. Vladimir Putin will not be
inaugurated as Russia's president until May 7, but he has already formed a
government in waiting. And if private meetings between American investors and
the shadow cabinet last week are any indication, the new president's agenda
offers many of the market reforms that Boris Yeltsin promised but never
delivered. Look for changes in the tax code and protections for investors,
moves that the likely next prime minister, Mikhail Kasyanov, predicts will
mean steady, though unspectacular, economic growth. Other initiatives could
include deregulation and the restructuring of monopolies. Of course, powerful
vested interests, from giant energy companies to well-connected tycoons and
regional leaders, are already lining up to defend their turf. Putin also
plans to revive arms talks with the West. Last week, Russia's parliament
ratified START II, the 1993 arms deal designed to cut U.S. and Russian
arsenals to between 3,000 and 3,500 warheads apiece.
The White House bets it can get a new deal before President Clinton leaves
office. Russia wants to reduce warheads to 1,500 in a third START pact. The
United States would go to 2,000 a side, perhaps lower. In return, it wants
Russia to modify a 1972 treaty and permit U.S. deployment of a small-scale
national missile defense system. Deal with me, Clinton warns Moscow, or a
Bush administration may junk the treaty entirely.
******
#12
Putin Says Blair Willing To Help
April 15, 2000
MOSCOW (AP) - President Vladimir Putin said on Saturday he chose Britain for
his first visit to a Western country as president because Prime Minister Tony
Blair had shown a willingness to work with Russia.
Putin said when he met Blair in St. Petersburg in March, the British leader
demonstrated ``a willingness to cooperate with Russia,'' the Interfax news
agency reported.
``We should respond likewise,'' Putin told reporters in the Kremlin.
``Therefore, my first visit to Western Europe should be to Great Britain.''
Although he will be granted an audience with Queen Elizabeth II during his
brief stay in Britain, which begins Sunday, Putin said the trip was mainly a
working visit.
``We strongly hope that this will not be simply a visit of courtesy, but it
will help advance the solution of a number of key problems of cooperation,''
Putin said, according to Interfax.
Putin and his wife, Lyudmila, are expected to meet the British monarch, who
is distantly related to the Romanov imperial family, at Windsor Castle on
Monday afternoon.
Buckingham Palace said the meeting would be simple, without any pomp and
ceremony, since Putin is a head of government and not a head of state.
It will be the first visit by the Russian leader to a Western nation since he
overwhelmingly won the presidential elections last month.
******
#13
The Times (UK)
15 April 2000
[for personal use only]
Have a care Blair, this man could be dangerous
Putin comes looking for friends - but he still knows nothing of true
democracy
By Giles Whittell
If Lyudmila Putin had told her friends last April that within a year she
would be taking tea with Queen Elizabeth, they might reasonably have checked
for hallucinogens in the jars of salted mushrooms that help so many Russians
through their long winters.
But Mrs Putin's husband has been busy. He started 1999 as head of the secret
police. He was then, in short order, named Prime Minister, joked about as the
latest nobody to stand in for Boris Yeltsin and hailed as the saviour of
Russian pride as he deployed a vast, bored army to flatten most of southern
Chechnya. He has also won a presidential election, launched a new era in
nuclear arms control, and found a friend in Tony Blair.
>From this ruthless performance many have decided that Mr Putin is an evil
genius. He is not. In the country of Stalin and Beria, bypassed by the
Renaissance and the Enlightenment, evil in a political sense is a word robbed
of most of its meaning. And for the past two centuries its geniuses have
confined themselves to art, literature and music.
Mr Putin is no Russian Machiavelli, but Mr Blair is nevertheless taking a
colossal risk in so eagerly becoming his closest European partner. This is
not simply a matter of swapping and accepting invitations while Mary Robinson
is being snubbed by a country under suspicion of atrocities in Chechnya as
she tries to do her job as the UN High Commissioner for Refugees. It is also
the risk of doing business with a stranger.
In an attempt to rationalise the trip that starts tomorrow at Heathrow,
diplomats talk privately of Blair's and Putin's shared youth and energy. The
two men start, it is said, with at least some common ground, giving Blair an
opportunity to influence the new Russian leader early in his term. This is
mandarin-speak for the idea that Mr Putin is a blank sheet waiting to be
written on, and there is some sense in it. By the standards of other
democratically-elected world leaders, his range of experience is alarmingly
narrow.
Mr Putin has a law degree, but from a country that has never known the rule
of law. He has spied on his fellow citizens, recruited foreigners to spy on
their fellow citizens, made murky deals in St Petersburg city hall in the
chaos of the early 1990s, and impressed his superiors as an effective
troubleshooter for the Kremlin.
Of the rigours of real democracy, the global economy and international law,
Vladimir Putin knows next to nothing. But he has considerable flair for
timing and a clear if unsophisticated sense of what Russia needs from him.
He has cajoled his country's parliament into ratifying the Start 11 nuclear
disarmament treaty, apparently approved a draft economic plan that would
welcome foreign investors, and made his first concrete pledge to investigate
human rights abuses in Chechnya. There is even talk of a negotiated
ceasefire.
All these steps are welcome. They may even prove historic. But none of them
has much to do with what currently passes for Putinism - a low-intensity
brand of Russian nationalism that seems reasonably inclusive unless you
happen to be male, Chechen and of fighting age.
Mr Putin is a patriot. He believes that he has an overriding duty to prevent
the Russian Federation falling apart in the face of threats from
foreign-backed extremists, and that to do this he must restore the
traditional strength of the State. To recover, the State needs money. For now
it has enough to survive and fight an ugly war thanks to oil exports at $30 a
barrel, but Mr Putin knows that price will fall. He knows, too, that most
Russian industry remains horribly uncompetitive, and that borrowing is, well,
unpatriotic.
Hence the strong emphasis on business in his timetable on Monday. Mr Putin,
briefed by his own pro-market economics think-tank, will promise to protect
British investors in Russia from crime, corruption and punitive taxation.
BP-Amoco and others will nod approvingly, but they should be under no
illusion that their presence will swiftly improve the lives of ordinary
Russians. First of all, it will strengthen Mr Putin.
There is nothing wrong with fighting terrorism, nor with protecting your
country's "territorial integrity". Problems arise when such language becomes
code for a thinly-disguised race war, and sometimes Mr Putin seems not to
know the difference.
Last year he set out in The Times his reasons for invading Chechnya, drawing
parallels with Britain's long struggle with terrorism in Northern Ireland. Mr
Blair should point out, without overt condescension, that for all their
errors in the Province, neither he nor his predecessors have seen fit to
level Belfast with squadrons of supersonic bombers.
The day after Mr Putin's election victory, one commentator noted that it
presaged a major change in Russian politics: for the first time in three
years, the President can be relied on to show up for work. Beyond that,
public expectations of Mr Putin are wildly overblown.
In the Caucasus, the rebels are on the move again. In Moscow, the newspapers
are already dropping their former reverence for the iron-handed Wunderkind
who had bewitched them since last August. ("Time to surface," said Izvestia
after his recent sleepover aboard a nuclear submarine kept a top IMF
executive waiting in Moscow.) In the Kremlin, the new man at the wheel is
learning as he goes along.
Mr Blair is no expert on Russia, but he knows something of modern democratic
leadership. His task on Monday is to coach his visitor without seeming to. If
he can get Mr Putin to swallow Russia's injured pride and listen - no mean
feat - the trip will have been worth it.
*******
#14
Date: Fri, 14 Apr 2000
Subject: Power wars
From: "Ben Aris" <ben@glasnet.ru>
Power Wars
By Ben Aris
NewsBase
April 14
Moscow
Spring has arrived in Moscow and the season opened last week with an "energy
crisis." United Energy System accused Gazprom of drastically cutting
supplies of gas and as a result trams and subways stopped working and some
regions could be plunged into the dark. A funny time of year to have an
energy crisis, is Gazpromıs attack on UES all it seems to be?
Energy crises usually happen in the winter, but the first shot in this
battle of the titans was fired at the start of April when Gazprom began
cutting gas supplies to UES. UES accounts for 40% of Gazpromıs domestic
sales. Gas makes up more than 60% of UESıs fuel requirements; a percentage
that has been creeping upwards in the last year.
The stated reason was that Gazprom is fed up with subsidizing Russiaıs power
sector and backed their threats with action. Gazprom has reduced average gas
supplies to federal stations by two thirds and to regional energy companies
(energos) by 40% since April 1.
UES countered by saying that power supplies to companies may fall by a
quarter as a result. In St Petersburg and Yekaterinburg the tram and metro
services have already been halted. Other regions have had their supplies of
electricity cut.
UES owes Gazprom more than $2bn in non-paid bills and Gazpromıs economic
argument is a strong one. Because the state has failed to bankrupt Russiaıs
industrial white elephants both companies are in effect subsidizing Russiaıs
floundering industrial sector.
At the same time Gazprom demanded that not only did it want these bills
paid, it wanted 100% of payment in cash. Barter and mutual debt swaps have
been the norm for Russia for years. All companies are making progress in
eradicating barter payments but Gazprom is lagging the rest. UES finished
the first quarter receiving over 50% of its bills in cash. Gazprom got 35%
in cash, despite a promise made at the start of the year by UES to pay half
its bills in cash.
However, Gazpromıs attack on UES was not absolutely necessary, as
President-elect Vladimir Putin had already issued a decree at the beginning
of the month kicking off the new executiveıs efforts to solve the energy
sectorıs problem. Putin ordered all budget-funded entities to pay their fuel
bills in full (one of the main sources of both non-payment and barter).
Analysts are speculating that although the payment issue is a bone of
contention between the two companies in fact the CEOs of Gazprom and UES,
Rem Vyakhirev and Anatoly Chubais were teaming up to solve a series of
problems.
One of UESıs goals is to get Fuel and Energy Minister Viktor Kalyuzhny
kicked out of the new governmental line up, which is expected to be
announced following Putinıs inauguration on May 7.
Kalyuzhny is generally agreed to be UESıs main enemy and the Fuel and Energy
Ministry opposes the companyıs recently unveiled restructuring plan. For
Chubais the row also serves to prepare the ground for tariff increases and
dealing with the worst of UESıs debtors.
For Vyakhirev, allying with Chubais also makes sense. With Putin in power
but without much of a power base his first job will be to consolidate his
position. The presidential privileges enshrined in the 1993 constitution can
only be exercised if he has the tools.
Reaching into nearly every aspect of economic life, Gazprom is the perfect
tool. It is believed that Putin wants to gain greater control over the
company, which can put nearly every large company in Russia into bankruptcy
by dint of their unpaid bills or bring entire regions to a grinding halt by
cutting off fuel supplies. With Gazprom in his pocket Putin has a big rod to
beat everyone from regional governors to oligarchs as they all depend on
gas. As Vyakhirev must feel threatened the "energy crisis" is a convenient
way of forcing Putin to negotiate with him.
>From a business perspective the crisis also fits nicely with Vyakhirevıs
agenda. Both companies receive far less from domestic supplies of power and
gas then they can earn from exports. In Gazprom case the less gas its sells
domestically the more it can export. UESıs problem is more difficult as it
has no choice but to try and wring more money out of Russian companies.
For both companies cutting off power and heat in the spring provides a
convenient excuse to achieving all these ends without actually killing
anyone the result of cutting off heating in the winter.
By April 11 Chubais told the press that he had reached a compromise with
Vyakhirev. Gazprom will deliver 24.2 bn cu m in the second quarter (less
than the 26 bn cu m UES had asked for, but tellingly Vyakhirev has dropped
the condition of increased cash payments he initially asked for).
Chubais also said that, as there is still a shortfall, UES will cut off some
enterprises beginning with their worst payers. The regions of Nizhnii
Novgorod, Samara, Yaroslavl, Kostromo, Tver, Tula, Volgograd, Rostov,
Chuvashiya, Orenburg, and Sverdlovsk are all to get less power.
In practical terms the compromise means that Gazprom gets more gas to export
and UES can cut off enterprises which donıt pay their bills without getting
the blame.
Politically the whole show was a success too. A few days after the first
shots were fired acting Prime Minister Mikhail Kasyanov told both Kalyuzhny
and Deputy Prime Minister Viktor Khristenko to settle the dispute. UES has
effectively shifted at least part of the ire of companies who now find
themselves in the dark to the Fuel and Energy Ministry.
The issue of non-payment of bills between Gazprom and UES remains unsolved,
but the decline of barter in the economy in general means that this one is
solving itself, albeit slowly. In the long run it is in Gazpromıs interests
to see UES hike tariffs and cut off debtors.
Chubais is considered to be a consummate player of the Russian political
game and certainly this row came at a convenient time. A UES restructuring
plan was presented to the Kremlin two weeks ago but skipped over the key
issue of barter and tariff hikes. Politically unpalatable, power tariff
hikes and payment reforms canıt be simply announced. A mini-crisis which
started around the same time that UESıs plan was presented has been the
perfect cover.
As if to underline the point Chubais was back at the lectern a few days
after a compromise with Gazprom was reached pushing home his advantage. He
announced on April 14 that exporters and industrial companies with a high
turnover (ie those with cash) would not only have to pay 100% of their bills
in cash, but pay in advance as well. His justification was that the 300
largest enterprises buy 20% of all power generated in Russia, but pay only
62% of their electricity bills.
All indicators are that Chubais has mounted a major campaign to reform UES
and he has won the first battle handsomely. The next battle will be for
influence over (or curbing the power of) the Fuel and Energy Ministry.
Rumours in Moscow continue to swirl that Kalyuzhny is for the chop next
month. At this point it looks like Chubais is well placed to win the next
fight too.
*******
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