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CDI Library > Johnson's
Russia List |
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May 8,
2000
Johnson's Russia List #4287 8 May 2000 davidjohnson@erols.com
[Note from David Johnson:
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RUSSIAN TYCOON HAILS "CIVILIZED TRANSFER OF POWER"
Moscow, 7th May, ITAR-TASS correspondent Aleksey Agureyev: A civilized transfer of power has taken place for the first time in Russia's history. This view was put forward in an ITAR-TASS interview today by State Duma deputy [and tycoon] Boris Berezovskiy, as he commented on the ceremony whereby Vladimir Putin assumed the post of Russian president.
"It is a very real event," Berezovskiy said. "I agree absolutely with Vladimir Putin's judgment that the transfer of power has occurred in a truly civilized manner, without a fight, for the first time over a long period. It is an amazing development. It is a very significant and substantive aspect, particularly significant for Russia, which is, by its very mentality, a maximalist country. Since it has happened in this way, I think it will not be violated in the future. The form of the transfer of power also differed substantially from that of the past."
Commenting on the question of candidates for the premiership in Russia's future government, Berezovskiy declared that "the prime minister is a the vital matter that merits pondering today because Russia is in a new situation, and the prime minister will, in effect, follow the policy outlined by the president - in other words, the policy of democratic reform in Russia".
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Boston Globe 8 May 2000 [for personal use only] Amid pomp and many questions, Putin is sworn in By David Filipov
MOSCOW - Trumpet fanfares resounded in the ornate, gilded splendor of the Kremlin's imperial throne halls. Goose-stepping soldiers saluted and preened, and cannons fired a 30-gun salute.
In a ceremony that more closely resembled a coronation than some recent US inaugurations, President Vladimir Putin was sworn in yesterday as Russians got a taste of a new tradition: the peaceful transfer of power from one democratically elected leader to another.
But signs that this is a work in progress were everywhere. Putin looked uncomfortable. His predecessor, Boris N. Yeltsin, struggled with his lines. Everyone said the right things about serving the people and safeguarding human rights during the nationally broadcast ceremony. But if you turned down the sound, it looked as though Russia was crowning a new czar.
The confusion was fitting as Putin completed his eight-month rise to power. Just as Russia's democratic transition is uncharted territory, so is Putin's next move. Russians have put their trust in the former KGB officer, but no one has a clear idea of what kind of leader he will be, where his personal and ideological allegiances lie, or how he plans to modernize a country racked by a decade of economic decline, corruption, and crime.
With Yeltsin, 69, standing woodenly at his side, Putin, 47, promised to work openly to help compatriots live better lives.
''We want Russia to become a free, flowering, rich and mighty and civilized country of which its citizens are proud and which is respected around the world,'' he said.
Standing among the marble, gold and crystal of the Kremlin's Andreevsky Hall, Putin said that he had a plan to accomplish this, but that he would reveal it later.
The guest list contained no clues as to whether Putin planned a crackdown on freedoms, as some liberal critics fear, citing his KGB past and his hard-line policies in Chechnya. Putin's old KGB boss, Vladimir Kryuchkov, was present, but so was the former Soviet leader Kryuchkov tried to unseat in a 1991 coup attempt, Mikhail S. Gorbachev, who initiated the changes that led to an end to 70 years of Communist Party rule in Russia.
In addition, there were the advisers who are reportedly preparing a plan for Putin to speed up Russia's transition to a market economy; so were the business elites who have amassed wealth and influence using their political connections, the so-called ''oligarchs'' whom Putin has promised to oust from power.
Another lingering question went unanswered: Is Putin his own man, or the puppet of the same Kremlin entourage whose members were widely rumored to have manipulated Yeltsin during the latter part of his presidency?
Putin's move yesterday to name Finance Minister Mikhail Kasyanov as acting prime minister did little to clarify things. Kasyanov is best known in the West for negotiating Russia's deals restructuring the repayment of billions of dollars in debts. In Russia, he is seen as a close confidant to a clique that includes such Yeltsin insiders as businessmen-turned-politicians Roman Abramovich and Boris Berezovsky, and Alexander Voloshin, who automatically resigned as Kremlin chief of staff when Putin was sworn in. All three were present yesterday.
Putin had said he would avoid a lavish ceremony, but yesterday's inauguration was a far more pomp-laden affair than Yeltsin's swearing in after he was reelected in 1996.
A solemn announcer called the play-by-play as a motorcade slowly escorted Putin's blue Mercedes through the well-guarded streets.
Putin walked through huge, golden doors and ambled in his peculiar gait - best described as a half-swagger, half-shuffle - past more than 1,000 officials, dignitaries and friends.
''I had thought we would be sitting comfortably somewhere,'' said a legislator, Irina Khakamada. ''But if you remember the coronations of the czars, the court always stood.''
Putin looked on tensely as Yeltsin struggled through many long, embarrassing pauses to finish his speech. Yeltsin ended on the same words he had used on Dec. 31, when he abruptly stepped down, making Putin acting president until his victory in March 26 elections: ''Take care of Russia.''
Then Putin read the oath, his hand placed on another ambiguous symbol of Russian commitment to democracy - a copy of the 1993 constitution that Yeltsin pushed through a referendum after dissolving parliament and sending tanks to disband legislatures who resisted.
That constitution gives the president broad powers at the expense of the legislature. Last week, one newspaper leaked what it said was a document detailing how Putin intended to broaden those powers by merging the former KGB with his administration.
Some analysts saw the report as evidence of infighting for influence in the new administration. But a Moscow Times commentator, Pavel Felgenhauer, said: ''Some people fear that it is more and more probable that Putin's `dictatorship of law' in Russia will in effect simply be a dictatorship, a secret-police state in which the whim of Putin and his administration will be law.'' After the oath, a presidential flag bearing the name of the new incumbent was raised over the Kremlin. As Putin walked out on a red carpet, a 30-gun salute rang out; then Putin and Yeltsin reviewed the Presidential Regiment.
The inauguration took place as Russian warplanes blasted what the military said were Chechen rebel positions, and as police warned about possible guerrilla attacks. Yeltsin's inauguration in August 1996 was ruined by a rebel counteroffensive that led to the humiliating withdrawal of Russian troops from Chechnya in 1997.
It was Putin who took credit for masterminding Moscow's armed campaign to retake control of Chechnya last year, and it was Putin whose electoral ambitions greatly benefited from public support for his tough stance against the rebels. This coincidence has led to uneasy speculation in Moscow about whether the war was somehow provoked by the Kremlin as a tactic to ensure Yeltsin's handpicked successor election.
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BBC MONITORING RUSSIAN PUBLIC FIGURES COMMENT ON PUTIN'S INAUGURATION Text of report by Russian NTV on 7th May
[Presenter] One thousand and five hundred guests attended today's inauguration ceremony in the Kremlin. Here are first reactions from guests at the ceremony.
[Aleksey Mitrofanov, the State Duma deputy and member of the Liberal Democratic Party of Russia faction] The ceremony was very solemn. It was held in an imperial, tsarist fashion, I would say. It was pleasant to see representatives of various political movements, including those who did not very much sympathize with the current president. They, too, were excited. This was a moment which united all, as I see it.
[Igor Moiseyev, People's Artist of Russia, state folk-dance ensemble director] The best thing about today's inauguration was Putin's speech. Brilliant! [Andrey Petrov, People's Artist of Russia, chairman of St Petersburg Union of Composers] I would put it like this. If he tries to put into practice everything he said today, or if he puts it into practice, I will be happy to end my days in my homeland and not somewhere in Brazil.
[Mikhail Lapshin, State Duma deputy, member of the Fatherland-All Russia faction] I think today is a landmark day that divides an indefinite period of anarchy - [changes tack] We heard Boris Nikolayevich [Yeltsin] today and I thought: given all other positive qualities, he spoke forgetting what he had said. How could we live under such a leader?
Here comes a different man, from a new generation, one who thinks clearly and in specific terms. He understands why he has become president. It reminds me of - I think it was [Soviet leader between 1953 and 1964 Nikita] Khrushchev who said at a [people's deputies] congress:"The aims are clear, the tasks have been defined. Let's get down to work, comrades!"
[Ella Pamfilova, For Civic Dignity movement leader] When Vladimir Vladimirovich [Putin] was passing by, I saw that he was very tense and nervous. This nervousness even got across and reached me. This was the sensation, you see.
I am very happy that they did not hang the chain on him. I hope he will break free of all the chains, of this state of doom. Maybe he himself will break loose of it and will drag the country out of it in the end.
I was very happy. Thank God, they did not hang this chain on him.
[Pavel Krasheninnikov, the chairman of the State Duma legislation committee] I realized that the man [Putin] entered the hall in one quality and he left it in another. He entered the hall as acting Russian president and government chairman. When he left the hall, he was no longer acting. Nor was he chairman of the government. Many of the government members who were present in the hall left the hall in a different capacity.
[Yuriy Chernichenko, the leader of the Russian peasants' party, addressing journalists] Come over later tonight. There will be a good booze-up [make a gesture denoting a glass of booze] ******
Newly inaugurated Putin honours war veterans By Ron Popeski
KURSK, Russia, May 8 (Reuters) - President Vladimir Putin, fresh from a glittering inauguration ceremony in the Kremlin, paid tribute on Monday to veterans of World War Two at the scene of the biggest tank battle in history.
Putin, sworn in amid much pomp on Sunday, visited the southern city of Kursk where he unveiled a new war memorial, laid a wreath and met veterans before Victory Day, which Russia celebrates on May 9.
In a short speech at the memorial complex, a triumphal arch and a chapel, Putin defended spending on such projects at a time when money is tight.
``I believe you have done the right thing,'' he told local officials and war veterans.
``The money could have been spent on other things and you who live here know that better than I do, but what is more dear to each of us than our mothers, our fathers and our families and the memory of what has been done by our mothers, fathers and granfathers,'' he said.
``Pride in one's country and one's people, a sense of patriotism, is not simply formed by itself. It must live in the memory and through memorials.''
The memorial complex in Kursk, a city of about half a million people, includes a monument to Marshal Georgy Zhukov, the Red Army commander who orchestrated some of the Soviet Union's key victories against the Nazis.
The huge tank battle at Kursk in 1943 was instrumental in forcing the slow retreat of Nazi forces from Russian soil. The German side lost 2,900 tanks, the Red Army 2,000.
PUTIN PLAYS ON PATRIOTISM
At a press conference in Kursk, Putin described his inauguration as ``modest but grand,'' but he said he had seen very little of the ceremony. ``Of course, I was nervous, and you feel a greater responsibility after such an event.''
Asked about the situation in Chechnya, where Russian forces have been waging a seven-month campaign against separatist rebels, Putin said: ``There are isolated battles going on. There is no out-and-out fighting but the situation is tense.''
``The remnants of illegal bands are regrouping as you know and they may be planning attacks to coincide with the holidays,'' he said, adding that federal troops were ready for this.
In a sign that Russian forces have not yet brought the region under control, Interfax news agency reported on Monday that a military reconnaissance plane had been lost on Sunday. Guerrillas also attacked military columns at the weekend.
Interfax quoted the Russian command as saying the Su-24MR plane went missing in bad weather and may have been shot down.
Russian Su-24 and Su-25 warplanes flew 16 sorties in the past 24 hours, striking at targets in southern Chechnya where rebels remain active, the agency added.
PUTIN TO NOMINATE PM WEDNESDAY
Putin, who vowed to unite the nation and take care of the country he inherited from Boris Yeltsin, said his new government and presidential administration would be formed by mid-May. But he gave no clues about the new government line-up.
Just hours after Sunday's inauguration, Putin named 42-year-old Mikhail Kasyanov acting prime minister. Kasyanov, the outgoing first deputy premier and finance minister, is almost certain to be nominated for approval by the State Duma, the lower house of parliament, and to win it.
Duma speaker Gennady Seleznyov said on Monday that Putin would submit his candidate for prime minister on Wednesday.
``It is not yet known whose name will be in the president's letter,'' Interfax quoted Seleznyov as saying. He said he had not discussed the candidacy for premier with Putin but ``we can guess who it will be.''
The president has two weeks to offer his candidate for prime minister to parliament. The Duma then has one week to consider the nomination and vote on it. The candidate must win a simple majority in the 450-seat chamber to be confirmed.
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BBC MONITORING RUSSIAN PRESIDENT SPEAKS AT RUSSIAN VE DAY COMMEMORATION CONCERT Text of report by Russian Public TV on 7th May
[Putin] Dear veterans, comrade officers, esteemed colleagues and friends. Accept my most sincere, warm and heartfelt congratulations on the approaching celebration, great victory day [9th May in Russia].
There are dates which are unaffected by time, distance or even political change. One such holy day for us is 9th May. This is a holiday for ever in the hearts of our people. The pride in the achievements of those years and the pain of the losses are handed down from generation to generation.
Victory day is a special Russian holiday. It unites and reconciles everybody in Russia. It is so great that all disagreements, both of ideology and of age, defer. It is the glorious history of our mother country which becomes the most important thing - which touched the history of every family and the fate of every individual in Russia. Today, as incidentally we do quite often in our country, we are looking for support, looking for something for our society to hang on to. But we do not need to look far for this: it is here next to us. It is in the fates of our fathers and grandfathers - in how they were able to work and live, how they were able to defend their hearth and home and how they defended their motherland, how they were able to be united and support each other at a time which was difficult for the country and for every individual.
These spiritual values and moral positions should serve as parameters for life for us as well. For you, dear veterans, not only knew how to fight and win. In effect you rebuilt the whole country from new. You reconstructed it from ruins, and gave us, your children, the opportunity to study, to get an education, to gain experience, and as a result to compete as equals with the leading states of the world.
There is another special thing about the 9th May holiday. It makes our veterans young. Perhaps not for long, perhaps only for the duration of these meetings of friends, but youth returns to them with each May spring. I think nowhere have we seen such energy, such kindness, such openness as at regimental reunions.
Veterans are especially worried about our country, and you are right to do so, dear veterans, to call our generation to the strictest account over what is happening in Russia and to Russia. It is in many things thanks to your demanding standards, I would say even to your moral civic stance, that the integrity of the Russian state has been retained, and today its foundations are being reinforced. We are returning to a true feeling of the motherland and an understanding of the essence of patriotism. And even today we are in many things living on the basis of what you did, on your account. You achieved so much in victory that, thank God, it was sufficient for several generations. It is now time for us to add our real contribution.
Dear friends. Every time has its own soldiers, soldiers on whom everything depends. But whoever they may be, they are all soldiers of the motherland, soldiers of Russia, soldiers who have promised and carried out their promise, who will not betray and will not sell, who are always in front at the difficult moment.
You, veterans, were soldiers in the Great Patriotic War. You were soldiers at the front and in the rear. Today's Russia also has soldiers devoted to it. They are already worthy of the deeds of their fathers and grandfathers. Fate has placed many difficult tasks before them today. At times it seems that these tasks cannot be overcome, but they tackle them with honour, with honour.
I congratulate you on the holiday, on the day of great victory.
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Stratfor.com May 5, 2000 Shock Therapy ¡ Russian Style
Last week former government officials from Chile and New Zealand visited Moscow to brief officials on reforming the economy. This, and the increasingly liberal makeup of Russian President-elect Vladimir PutinÆs new economic team, indicates that the new leader is contemplating economic shock therapy as part of his economic plan.
Yet such treatment for the ailing economy ¡ under the last president ¡ triggered an eight-year erosion of Russian wealth. It appears that PutinÆs idea of reform will be different: economic liberalization accompanied by nationalization of certain industries, enforced by much stronger security services.
Over the past few weeks RussiaÆs new leader has hired a number of liberal economists to staff the Center for Strategic Research, the think tank he established to produce RussiaÆs next economic plan. Several of PutinÆs new advisors are close associates of former Russian Prime Minister Yegor Gaidar, architect of the disastrous shock therapy of the early 1990s. Chief among them is PutinÆs new personal economic advisor, Andrei Illarionov, a member of GaidarÆs team and long-time critic of the Yeltsin administration.
Illarionov appears to be gearing up to recommend another round of shock therapy. He has invited former government officials from other nations ¡ such as Chile and New Zealand ¡ that completed some of the most drastic economic restructuring in recent history. IllarionovÆs statements suggest a desire to implement several aspects of extreme restructuring: slicing the federal budget in half, releasing currency controls and drastically reducing the governmentÆs role in the economy. Other members of PutinÆs economic team have made similar statements. In particular, German Gref, head of the Center for Strategic Studies, wants to replace the vast, extra-legal involvement of government officials in business with strict, impersonal ¡ and apolitical ¡ oversight.
Shock therapy faces even greater challenges now than it did in the 1990s. At the beginning of his term at the countryÆs economic helm, Gaidar estimated that the reforms would take two to three years. In the end, President Boris Yeltsin abandoned them after about 18 months because they caused hyperinflation, broke down traditional Soviet trade ties and triggered massive capital flight. The Russian standard of living plummeted. But the problems did not end there.
Complicating an already difficult social transition, Yeltsin simultaneously attempted two ambitious reforms. He set out to reform the economy while dismembering the state security apparatus. The KGB and its sister agencies were certainly responsible for repression of Russians; but they were the only institutions capable of maintaining order in Russia. Force and fear maintained order throughout most of RussiaÆs history; justice was arbitrary. RussiaÆs legal code was not ¡ and still is not ¡ coherent and comprehensive, much less modern.
When Yeltsin gutted the secret police, any semblance of order vanished. Disruptive economic reforms and a lack of law enforcement mixed in a culture that had just lifted the lid of totalitarianism. The result was a messy cocktail of corruption and outright theft. Former communist officials took advantage of the political chaos to ôprivatizeö much of the Soviet economy into their own hands. Officials-turned-oligarchs now control not only the press, but the oil and natural gas industries as well, currently the bulk of RussiaÆs tax base. After eight years of what Illarionov has described as ôinsane policies,ö the situation is now far worse.
Yet Putin is preparing to institute his own version of shock therapy anyway. But this round would not be all Western-style reform. Putin is unlikely to abandon the tools Yeltsin nearly abandoned. Strategic industries such as oil, gas and arms manufacturing will be brought back under government control. The process has already begun with Gazprom, RussiaÆs natural gas monopoly.
Nationalizing the energy industry will serve an important political purpose, too: knocking the feet out from under the oligarchs while ensuring that Russia can play energy politics with the other former Soviet republics. Tightened control of arms manufacturing makes weapons trade a better foreign policy card.
As to the reforms themselves, Putin has a far steadier hand than Yeltsin. At IllarionovÆs prompting, Putin will probably revise the way the federal government relates to the economy. This should further cut the power of the oligarchs and free up the private sector from government interference.
But the new leader will also stick to what he knows: intelligence and security. Ever since taking over for Yeltsin in January, Putin has methodically strengthened the security services, including the FSB (successor to the KGB). To balance out the governmentÆs withdrawal from the economy, Putin must have security services on hand to vigorously enforce the laws and keep another generation of oligarchs from spawning.
The implications for Russian democracy will be dire. Already the International Institute of Strategic Studies expects Russian democracy to rate somewhere between that of Turkey and Egypt. Russia will experience an economic opening but will implement much harsher methods of dealing with those who get out of line.
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BBC MONITORING RUSSIA'S PUTIN CONTRADICTS ECONOMIC AIDE OVER ENERGY MONOPOLIES Source: 'Kommersant', Moscow, in Russian 5 May 00
Vladimir Putin has reportedly sought to play down the significance of his economic aide Andrey Illarionov's insistence that Russia's two major natural monopolies - its Gazprom gas giant and Unified Energy System of Russia power utility - should be cut down to size, according to the Russian newspaper `Kommersant'. Far from idle talk, Illarionov's remark, at a regional forum on 3rd May, is a sign of the things to come, the newspaper concluded. Follows the text of Konstantin Levin's article on 5th May:
Andrey Illarionov has finally emerged from the shadows. Before his trip to Belgorod with Vladimir Putin he did not like to talk about what advice he gives the president. Though he did not conceal his extremely liberal views. But in Belgorod Illarionov effectively expounded his economic programme, which is based on two ideas: the total rejection of state regulation of the economy, and elimination of the natural monopolies. Putin did not like this programme. The time is not yet right for it.
Late on the evening of 3rd May Illarionov made a speech in Belgorod at a conference on the agro-industrial complex. He decided to immediately get the agricultural sector on to his side, talking about the intolerability of the price disparity between agricultural goods and energy resources. This was necessary in order to ensure that his proposal for the free purchase and sale of land was not sharply rejected in the heart of the "Red Belt". In Illarionov's opinion, the price disparity problem can be resolved in two ways: "Either by introducing monopoly prices for agricultural output, or else by taking steps towards demonopolizing the energy resources market, in other words by reforming Russia's biggest monopolies - the Unified Energy System of Russia joint-stock company and Gazprom."
Illarionov dismissed the first option immediately: "It is well known what a monopoly on agricultural output could lead to." Putin's adviser did not mention the word "deficit", but the agricultural sector representatives took the hint. Incidentally, they themselves do not want a state monopoly on their output. They are well aware that, although our state can sell their output at a high price, it always buys it at deflated prices and pays for it extremely irregularly. Incidentally, in the recent past the agricultural sector received fuels and lubricants from oil companies as commodity credit (the fuels and lubricants were supplied to agricultural enterprises on credit, and the government then paid the oil companies under a complicated scheme of mutual debt offsets). This attempt to eliminate the price disparity proved unsuccessful: The oil companies suffered losses because the government did not pay them on time, while the peasants did not receive the necessary quantity of fuel. Two years ago commodity credits died a quiet death.
But the agricultural sector will not say no to a reduction in the prices of fuels and lubricants, of course.
However, Putin did not approve at all of Illarionov's statement that this can be done only by doing away with the natural monopolies. The president corrected his adviser: "The Russian authorities will adopt an extremely cautious approach to resolving issues linked to the demonopolization of energy resource prices." He described Illarionov as clever but cunning. This is an unusual contradistinction: Cunning is no bar to cleverness. Though some people are cunning without being clever. At any rate, it is clear that Illarionov simply spilled the beans about the presidential staff's plans concerning [Unified Energy System head] Anatoliy Chubays and [Gazprom head] Rem Vyakhirev. This is why he was publicly reprimanded by the president. As a rule, functionaries are dismissed for such blunders, though possibly not immediately and possibly on other, more acceptable grounds. However, all this may have happened for another reason: Putin may have instructed Illarionov to launch a trial balloon in order to see how the governors, Chubays and Vyakhirev would react.
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Ekonomika i Zhizn No. 15 [translation from RIA Novosti for personal use only] WHAT DOES BUSINESS EXPECT FROM AUTHORITIES? Who knows the real situation in the national economy better than managing directors and marketing managers of industrial enterprises, commercial companies and other major players on the Russian market? Who else may have a better understanding of what must be urgently done to make sure that enterprises keep going,people receive adequate pay and the state collects enough taxes? Yet nobody asks them. The Ekonomika i Zhizn weekly jointly with the Consultative Centre 'Research and Development Agency' under the RF Chamber of Commerce and Industry ventured to narrow the gap in the relationship between business and the authorities by conducting an opinion poll among the country's business community. The Economy and Life published a questionnaire for its readers in issues Nos. 5 and 11 for this year. Answers still keep coming in. All responses are duly processed by professional staff. Below you may find the initial results of the poll.
Social Profile of Those Polled
* - Most respondents - 80.6% - are senior business executives. Middle level managers comprise 11%, stock holders -17.4%. Top-level executives-cum-stockholders make up 11.9%. * - 66% of all respondents work at firms and enterprisesestablished before 1970, 11.3% - at those established from 1970to 1990, and 20.9% - at enterprises set up after 1990. Of the total number of enterprises 59.3% are privately-owned, 10.1% arestate-owned unitary enterprises. Companies with the state's stake in shareholding comprise 22.9%, those incorporating foreign capital - 6.5%. * - with reference to the number of employed personnel, the above enterprises fall into the following categories: less than 500 people employed - 39.1%, 500 to 2000 people employed - 29.7%, 2,000 to 10,000 people employed - 24.6%, over 10,000 - 6%. * - Most respondents - 68.2% - work in the industrial production sector; 12.4% of all those polled are employed in the services sector; 8.5% - in the construction industry; 8.2% - intransport and communications.
There Is Still Light at the End of the Tunnel
A recent opinion poll conducted among representatives of thenational business elite fetched very interesting results. Itappears that despite numerous difficulties, most businessmen tendto hold a rather optimistic than pessimistic outlook for thefuture. In response to the question: "How do you assess thecurrent situation in the national economy and its prospects?" 48.8 percent of all those polled answered that the situation isnot very good but there are prospects for improvement; 31.7percent regard the situation as bad with vague prospects. It isindicative that the optimistic outlook was expressed mostly bymanagers of private companies, whereas their counterparts fromthe state unitary entities proved to be much more pessimistic.
Table 1 The Situation in the Russian Economy. Prospects. ---------------------------------------------------------------- - 1. The situation is not very good but prospects are promising 48.8% 2. The situation is good but prospects are not very promising 1.2% 3. The situation is bad and prospects are uncertain 31.7% 4. Everything depends on the economic policy of the new President and Government 79.0% 5. Good situation and good prospects 0.4% ---------------------------------------------------------------- - The fact that there are lots of optimists in the country's business elite is very gratifying. Particularly, because as manyas 80.6 percent of all those polled are top managers who aresimply bound to demand that the Government's economic policy becompetent and effective. At the same time, 79 percent of the respondents believe that everything will depend on the course chosen by the new President and Government. (The total sum of responses exceeds 100 percent because many chose to give more than one answer.) Most frequently the respondents combined optimistic outlook for the future with hope pinned on the new President (29 percent). Interestingly, 18.2 percent of the pessimists also believe that future developments will to a large extent depend on the course preferred by the President-elect. But why does the overwhelming majority of the most socially active people in the country pin their hopes for revival of the Russian economy on actions of a good President? Does it not testify to the fact that the decades-long transition period is not going to end soon? Does it not provide sufficient proof that the future of this country still wholly depends on decisions made by those at the very top? One cannot help wondering in this connection if such attitudes are ever going to pass.
Official Is More Fearsome Than Bandit
As many as 86.5% of the respondents have had to deal in oneway or another with what is often labeled as "arbitrary actions"of the authorities. It is indicative that our respondents faced up to threats of criminal extortion four times less frequentlythan to arbitrary checks and audits purposefully engineered by diverse administrative bodies (11.6% and 45.5%, respectively). In general, arbitrary checks and audits rank first among answers to the question: "What problems does an enterprise come across while doing business?" The percentage of those who specified thisparticular problem does not depend on whether the respondents represent new or old, private or state-owned, large or small enterprises. The divergence of opinion throughout all these categories never exceeds 3 percent. Opinions diverged in a muchwider range when representatives of the aforesaid categories were to state if they had ever been targeted by officials for extortion (averagely, 34.4% of those polled answered affirmatively). Naturally, respondents from recently established privately-owned enterprises reported a much higher (nearlytwo-fold) incidence of this factor in their business practices. Surprisingly, the attitude of the majority of ourrespondents to the practices of bureaucratic extortion proved tobe quite loyal. Only 34.4 percent of those polled gave anaffirmative answer to the question: "Has your firm or enterprise ever been the target of extortion by officials?" Only 22.8percent of the respondents specified such issue as having toengage in underhand dealings with officials as a major problemfor their businesses, with officials' arbitrary actions being amajor concern for just 21.9 percent of the respondents. This lends proof to the fact that many entrepreneurs have grown so accustomed to the state officials' racket that they no longer perceive it as an insurmountable obstacle in the way of business development. At the same time, most analysts assume that the racket widely practised by official extortioners ranks second among the most pressing challenges of the Russian business environment. Only fundamental improvement of the existing legislation aswell as the judicial system may put a halt to the arbitrarypractices of bureaucrats. Some 56.7 percent of the respondentsbelieve that this task should be one of the most vital on the new Government's agenda.
The Rule of Law
The respondents' answers offer little hope for an early triumph of the rule of law in Russia. But maybe Russian laws are not so bad after all, and most our problems stem from poor compliance? Our respondents think differently. Most of them believe that the weakest links of the country's legal system are the draconian tax legislation (79.6%)and the unwieldy mess of numerous by-laws (71.1%). Only 21.1% and 28.1% of our respondents respectively believe that the major flaws of the current legal system are rooted in improper judiciary practices and inadequate execution of decisions passedby the court of law. However, as many as 52% of those respondents who have hadthe sad experience of dealing with ill-disguised bias of many judges consider the judiciary practices as the weakest link of the national legal system. Some 32.2 percent of those polled think that the state must take immediate measures to ensure unconditional enforcement ofthe law.
Taxes, Taxes and Again Taxes
The notorious tax burden is undoubtedly the biggest obstacleto business development. Such is the opinion of 87.6 percent of our respondents. High cost of credits ranks second in the list of business impediments, causing serious concern of 40.1 percent of those polled. Tax burden was also mentioned in answers to such questions of the poll as 'What are the weakest links of the national legal system?' (answer: tax legislation) and 'Wha tmeasures are to be taken most urgently?' (answer: change the system of taxation). As many as 66.4 percent of our respondents gave all three of the above-mentioned answers; 96.1 percent mentioned at least one of those. Of course, the crucial necessity of easing the economy-stifling tax burden is evident without this poll. At the sametime, the unanimous opinion of a multitude of people personally suffering from the tax overload is very impressive.
Unequal Conditions of Competition
The most active representatives of the Russian business community do not share the much publicized notion of unequal conditions of competition being a major impediment of business development. Only 2.2 percent of our respondents specified the "system of Government's preferences" as a tangible factor in this connection. Sparse response to a few 'test' questions in the poll meant to gauge up the respondents' negative attitude towards various forms of the government's support for select enterprises also proved that the problem is unduly exaggerated. None of these 'touchstone' questions drew a response of over 28 percent of those polled. Thus, contrary to the widespread notion concerning the peculiarities of Russian mentality, the overwhelming majority of our businessmen are much more focused on problems of their own organizations than on privileges granted to their competitors.
Legal Vulnerability
The respondents' attitude towards the problem of legal vulnerability of entrepreneurs in Russia also came to be rather surprising. Only 19.4 percent of those polled indicated it as a major obstacle to business development. At the same time, it was legal vulnerability that 31.7 percent of our respondents referred to answering the question "What problems of your business cause you major concern?" Still more respondents (46.7 percent) readily agreed with the statement that in Russia "law is used not to protect but to suppress business." All in all, the problem of inadequate legal protection was referred to by 62,9 percent of those polled. The seemingly contradictory logic of such response can be accounted for by the fact that most entrepreneurs perceive their legal vulnerability as an imminent threat. For the time being, however, they succeed in staying out of any real legal troubles. It would be wrong to interpret such attitudes as a sign ofdistrust for the authorities. It is actually a sign of genuine concern about the country's economy as a whole and the business prospects of the domestic producer, in particular. The majority of those polled (63.7 percent) consider support and protection ofthe domestic producer as one of the most important responsibilities of the state.
---------------------------------------------------------------- - 1. Tax burden 87.6% 2. Low solvent demand 39.7% 3. Legal vulnerability of businesses 19.4% 4. Government's failure to honour its financial obligations 26.2% 5. System of Government's preferences 2.2% 6. High cost of credits 40.1% 7. Arbitrary actions of officials 21.9% 8. Instability of the rouble 16.0% 9. Political instability 27.1% ---------------------------------------------------------------- - Table 3 What Problems Does an Enterprise Come Across While Doing Business? ---------------------------------------------------------------- - 1. Extortion by officials 34.4% 2. Criminal racket 11.6% 3. Checks and Audits Purposefully Engineered by Authorized Bodies 45.5% 4. Cheating Business Partners 41.9% 5. Pressure Exerted by Some Influential Politicians 10.9% 6. Unlawful Actions by Law-Enforcement Agencies 18.2% 7. Payment for a State Order with Promissory Notes of Private Companies 2.6% 8. Walkouts of Personnel Instigated by Competitors 2.6% 9. Corrupt judges 11.5% ---------------------------------------------------------------- - Table 4 What Needs to Be Done Immediately? ---------------------------------------------------------------- - 1. To Meet All Obligations of the State 21.3% 2. To Change the System of Taxation 83.8% 3. To Settle the Problem of Non-Payments 39.0% 4. To Nationalize All Socially Important Enterprises 24.9% 5. To Reform the Banking System 12.3% 6. To Enhance Control over Enforcement of the Law 32.2% 7. To Reform the Accounting System 17.0% 7. To Declare Amnesty for Economic Crimes 5.9% 8. To Take Legal Action Against All Crooks Involved in Economic Crimes 20.4% ---------------------------------------------------------------- - Table 5 Economic Obligations of the State ---------------------------------------------------------------- - 1. To Protect Domestic Producers 63.7% 2. To Improve Legislation and Judiciary System 56.7% 3. To Render Support for Priority Industries and Enterprises 28.3% 4. To Ensure Effective Management of State Property 25.4% 5. To Provide Government's Guarantees to Attract Investment 25.1% 6. To Ensure Adequate Living Standards for Disabled People 23.9% 7. To Finance Education, Science, Health Care, Arts 23.9% 8. To Plan and Regulate Development of National Economy 23.9% 9. To Finance Development of Business Infrastructure 9.9% ---------------------------------------------------------------- - Table 6 The State Must Never Do the Following: ---------------------------------------------------------------- - 1. To interfere into relations between individual businesses 36.9% 2. To distribute resources 15.7% 3. To reconsider the outcome of privatization 25.4% 4. To allow offsets of taxes and other mandatory payments 7.6% 5. To subsidize loss-making enterprises 30.1% 6. To withdraw from the task of regulating the economy 57.6% 7. To provide state guarantees for individual businesses 15.8% 8. To grant tax benefits to individual businesses 27.7% 9. To declare tax amnesty 9.3%
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The Russia Journal May 8-14, 2000 Can we believe the government on Chechnya? Sergei Kovalyov, former Soviet dissident and human rights champion, is a State Duma Deputy with the Union of Right Forces (SPS) faction.
In examining the war in Chechnya, we have to learn to see the difference between bandits and the state. There have certainly been violations of human rights in Chechnya. It is a fact that banditry flourished in Chechnya between the two wars, and that is clearly one of the main reasons why the current war has gained such broad support in Russia.
The points on which this support is based are the trade of hostages and the cruelty shown them, the invasion of Dagestan and the apartment block bombings. President Vladimir Putin also draws his support from these sources. Without the war and manipulative campaign tactics, heÆs nobody, just a very average KGB colonel.
But can we really imagine, as official propaganda suggests, that the Chechen authorities in their entirety, or the citizens of Grozny, Shali or Argun are responsible for all these things?
Can we imagine a military professional stupid enough not to know what happens to towns subjected to fire from weapons specially designed to destroy areas measured in hectares? What about cassette bombs and vacuum bombs designed to annihilate everything living within a large radius? The soldiers, if theyÆre professionals, are supposed to know what these things are for. And they know that if a village is subjected to fire like this, they will kill everyone.
To see the hypocrisy of Gen. Vladimir Shamanov then, telling voters there probably were civilian casualties ¡ he saw a womanÆs body, and there were maybe one or two other corpses ¡ is repulsive. He is lying; he knows how many bodies there are. And Putin also knows.
But regarding these points, first letÆs take the hostage trade. Anyone informed about this bloody business knows that hostages arenÆt freed without ransom ¡ in money or in kind ¡ being paid. Much has been written about many hostages being freed with Boris BerezovskyÆs help, and Berezovsky hasnÆt denied this. Does Berezovsky look like the sort who canÆt live in peace knowing that hundreds of miles away, some stranger is languishing in a dirty basement waiting for his finger or head to be chopped off? I donÆt know Berezovsky well, but he doesnÆt strike me as the type. So why the money?
To keep the business going, perhaps. If one bandit gets a million, others will want the same. And then you have the intermediaries, those who tell you who to pay, how, where to pick up the freed hostage, etc. One of these intermediaries, Salaudi Abdurzakov, is a well-known figure, a wealthy man who rented planes and flew with a protection squad of about 30 people. He moved freely around Russia and Chechnya before being lured to Sleptsovsk and arrested there.
It would be interesting to know what heÆs saying now in prison. Everyone knew what business he was involved in for years, and no one touched him so long as the hostage business was flourishing. Another interesting detail ¡ informed sources say that Abdurzakov used satellite communications and that the channel he used was allocated to him by none other than FAPSI, the Federal government communications and information agency. If this is so, how does the hostage business look then?
Looking back, the invasion of Dagestan at the start of the conflict really was not supported by Dagestanis, who do not approve of wahhabite Islamic extremists. And the federal forces reacted in perhaps not the best but in a nonetheless unavoidable way.
But here, too, are interesting details ¡ Berezovsky publicly said he gave Shamil Basayev $2 million to build a cement factory and provide work for unemployed Chechens. I donÆt know how Basayev builds factories, but I do know how he buys weapons and wages wars. So why did Berezovsky choose Basayev? Everyone knows Basayev is a terrorist. His disputes with [Chechen President Aslan] Maskhadov, his intrigues and adventurism are well known.
Another interesting fact is that the initial invasion into DagestanÆs Botlikh region was repelled after a couple of weeks. That was followed by a couple of weeksÆ pause during which everyone was saying that the next invasion would be in the Novolaksky region. This was the case, only the invading forces didnÆt encounter any federal troops in their way.
I asked Gen. Viktor Kazantsev, commander of federal forces at the time, whether he had known of the impending invasion. "Of course," he replied. When asked why the slowness of the federal response, he gave what for Russians was a perfectly convincing answer about the pitiful state of his military technology and the lack of money for repairs. But no sooner did the war begin for real, than the helicopters flew, and the ground vehicles got underway. So what was happening earlier?
Finally, the apartment bombings. What is the proof that this was the work of Chechens? Now, if I were head of some secret service seeking to stir up anti-Caucasian feelings, I would solicit Chechens to blow up buildings, giving Russians a concrete reason to hate them.
There is no direct proof and not even any clear answer as to why Chechnya would have needed to blow up buildings in Moscow. I know that terrorists blow things up, and they usually make statements, too, saying itÆs all in revenge for something or making some kind of demands. But these buildings were blown up and even Salman Raduyev, who always claimed responsibility for all terrorist acts even when he wasnÆt the slightest bit involved, said he had nothing to do with these bombings. I donÆt deny that the Chechens might have done it, but thereÆs no proof. And there are other versions, too. For example, that federal secret services were behind the explosions. This version also remains unproven.
The law states the presumption of innocence, and it also obliges investigators to thoroughly and without bias investigate all possible versions of the crime.
I wouldnÆt say that this is exactly what is happening at the moment. In other words, no one knows who carried out these bombings, but we can all see how they are being used to the advantage of official propaganda.
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Russian Interior Opposes Talks with Maskhadov- Source.
MOSCOW, May 8 (Itar-Tass) -- The Russian Interior Ministry considers in inexpedient to negotiate with Chechen rebel leader Aslan Maskhadov, a high-ranking official of the ministry told Itar-Tass on Monday.
"Maskhadov is not the man to negotiate with," the official said. Such negotiations would have been possible "if he had earlier denounced the militants' aggression against Dagestan and taken proper measures to distance himself from bandits and release hostages, he stressed. According to him, Maskhadov "did nothing of that."
The ministry's leadership is sure that "Maskhadov does not exercise sufficient influence on the field commanders, such as Basayev and Khattab, and the experience shows that negotiations with him will be used by the militants for regrouping and regaining the initiative."
"The Maskhadov regime has fully discredited itself, and a dialogue with it would mean a step back for Russia," the official noted.
Asked to comment on the departure of Maskhadov's wife for Malaysia, the official said "it was primarily a political action," which aimed to "reinforce diplomatic and economic pressure on Russia."
The same day, Moscow Mayor Yuri Luzhkov said the anti-guerrilla operation in Chechnya should be completed and rejected any possibility of negotiations with the rebels.
According to him, a new force should emerge in Chechnya to say that "Chechnya is a part of Russia, and the policy of Chechnya is the policy of peace, rejection of terrorism and separatism."
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Web page for CDI Russia Weekly: http://www.cdi.org/russia
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