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Johnson's Russia List


May 26, 2000    
This Date's Issues: 4324  4325  4326

Johnson's Russia List
26 May 2000

[Note from David Johnson:
2. Ben Aris: Putin's economic policy.
5. W. Arthur McKee: Re: Gvosdev, no. 4321.
6. Timothy Frye: New book: Brokers and Bureaucrats: Building Market Institutions in Russia.
7. Joel Lovell: training for Russia's Olympic athletes.
8. Ed Crane: Analyzing Putin.
9. RFE/RL: Jeremy Bransten, Czech Journalist Evaluates Putin's Policy -- Interview Part 2. (Petra Prochazkova)
10. MSNBC: Boris Zhukov, Are Russians an endangered species? 
Experts examine low birth rate but see hope in immigration.
11. Bloomberg: Russia's Zadornov on Economic Program, Tax Amendments.
12. Moscow Times: Brian Humphreys, Independent Media Launches eStart.
13. Bloomberg: Russia's Gerashchenko on Monetary Policy, Banks.
14. Itar-Tass: Capital Inflow to Russia Totals 9 Bln Dlrs in 2000.



MOSCOW. May 25 (Interfax) - "Relations between the authorities and
mass media will not be unclouded and problem-free in the foreseeable
future," acting first deputy Russian chief of presidential staff Igor
Shabdurasulov has said.
Shabdurasulov expressed this view Thursday in Moscow while
addressing a meeting of the National Association of Television and Radio
Broadcasters (NAT) board, of which he is a member.
Taking questions from journalists during a break of the meeting,
Shabdurasulov said that in his opinion, "fears and gloomy anticipation
are groundless." In his view, there are no sufficient reasons to assess
the situation surrounding the Russian television channel TVTs and Media-
MOST as a threat to democratic achievements.
Shabdurasulov noted with satisfaction that in both cases an
"absolutely correct procedure" is used, that is, a party considering its
rights to be violated appeals to a court and, regardless of whether it
likes a court ruling or not, carries it out. "It is altogether another
issue" the extent to which the judicial system in Russia is independent,
Shabdurasulov noted.
Shabdurasulov said he agrees that the form of the law enforcement
actions taken against Media-MOST was "disproportionate." At the same
time, he noted that the media outlets that make up the holding continue
their work. "One should not find political orders everywhere," he said.
NAT was founded in 1995 and comprises over 260 broadcasting
companies in Russia.
NAT President Eduard Sagalayev pointed out in his message that a
number of State Duma bills depriving the media of privileges, including
the draft Russian Tax Code, "could seriously complicate the media's,
especially the electronic ones', activities." Amendments and extensions
to the federal law "On Advertisement" "are of a purely expedient and
populist nature and pose a threat to all of television's activities."
Sagalayev announced that he intends to meet with the State Duma
leadership, chairmen of the committees on informational policy and
budget and the leaders of major Duma factions in order to prevent the
"economic strangulation of the electronic media."
"Our television is not fully free and independent even now," the
NAT president said, stressing that "if the television and radio
companies are limited in their opportunities to make money and deprived
of the privileges, the situation will be exacerbated" and "virtually all
these companies will find themselves in the authorities', financial
industrial companies' or shady structures' pockets."


Date: Thu, 25 May 2000 
From: "Ben Aris" <> 
Subject: Putin's economic policy

Putin Tax Letter 
Thursday, May 25, 2000

Dear David,

There have been a lot of pieces second guessing Putin¹s autocratic
tendencies on the list recently, but in the last two weeks there has been
some real progress on the economic reform front that is getting buried in
the news.

The debate is still raging over who is going to win control over the
economic portfolio but it already seems that Kasyanov (who is emerging as
the Evil Family creation of the plot) has been contained by the Dynamic Duo,
Kudrin and Gref, for the time being which is good news.

Putin sent a letter to the Duma outlining his ideas on tax this week. It was
very encouraging and as the Putin hand becomes visible it is looking more
and more progressive on this front.

The two tax laws that have already been sent to the Duma are both straight
out of the G-plan: an income tax cut to a flat rate of 13% (income tax makes
up about 20% of the state¹s tax revenues so this is radical and suggests the
MinTax is sure that it is going to up enforcement) and to increase profit
tax from 30% to 35%.

The letter says what is in the pipeline. There are three main goals: 1)
reduction of the gross tax burden, 2) elimination of tax privileges and 3)
simplification of the tax system. All good stuff too.

Overall Kudrin says he wants to reduce the tax burden on the Russian economy
from its current 41% of GDP (which inc federal, regional and off budget
funds) by 2% of GDP each year for the next couple of years.

The key question remains how effective implementation of these plans will be
­ the proof everyone is looking for. Russia has had good plans in the past
and always fallen down on implementation.

The upside of Putin¹s centralising of power in his hands coupled with the
docile Duma is that tax and economic reform is something Putin can usefully
do with all this power. And it looks like this is what he is planning to do.

Loss of civil liberties ­ bad. Pushing through much needed and long-delayed
tax reform ­ good.

How much slack are we prepared to cut Putin? He is an easy target at the
moment, but surely in any big change in regime, such as this, the first
thing the new leader is going to do is consolidate his hold on power,
especially Putin who comes to the job without a real power base.

Increasing his control over the country sits badly with us liberal democrats
of the west, but it also means that he can effectively deal with the endemic
corruption and actually make some of these changes work.

So what if all these new Okrugi presidential representatives in the 7
regions are former military and KGB? Primakov was KGB for longer than Putin
and we like him. I don¹t want to get into this debate but clearly it is a
lot more complicated than "Putin Appoints Spooks to Run Regions." From a
purely pragmatic point of view don¹t most Russians want bread, work and
dignity, more than civil liberties at this point? As far as I understand it
the Russian people like the fact that spooks are running the regions ­ they
know that spooks are the only people who got things done under the old

This tax stuff is the first real evidence I have seen of what Putin¹s
economic policy is going to be and I am taking it as a very positive sign.
It still could either way, but much depends on if you take the economic or
political perspective.



MOSCOW. May 25 (Interfax) - Former Soviet president Mikhail
Gorbachev has criticized statements on the possibility of launching
preventive air strikes against rebel bases in Afghanistan.
"The problem of combating international terrorism does exist, and,
undoubtedly, joint effort must be made to tackle it," he told Interfax
on Thursday.
He said, however, that no statements on possible preventive strikes
against a sovereign state must be made. Instead, a coordinated policy
should be developed by the Security Council and other international
organizations, he said. "If this is a replica of what the United State
once did, let us not forget that we all opposed the United States'
decision taken bypassing the U.N. Security Council," Gorbachev said. "As
many countries have facilities to launch bomb strikes, we may turn the
whole world into an improvised battlefield where irresponsibility will
prevail," he said.
Gorbachev also said that the U.S. dropped bombs against rebel bases
in Afghanistan and Sudan which were thousands of kilometers away.
"Afghanistan is our neighbor. It's a country with which we have our own
history of relations and long years of cooperation. There was an
adventure for which we have paid a dear price. We thoughtlessly entered
that country and then got out with enormous losses," Gorbachev said.
He said that civilians mostly die in bomb strikes. "All those
terrorists, including Usama bin Laden, usually continue operating, but
with an argument in favor of building up their terrorist activity. Bomb
strikes are not the best method, therefore," he said.
Gorbachev thinks that the terrorists, including Chechen terrorists,
must be combated jointly by the former Soviet republics, and by the
whole of Europe and the U.N. Security Council. A new scheme of running
Chechnya, involving Chechens themselves, must be launched now," said
Concerning talks with Chechen leader Aslan Maskhadov, Gorbachev
said that they are possible on condition that Maskhadov recognizes
Chechnya as part of Russian territory, frees all prisoners and ends the



MOSCOW. May 25 (Interfax) - Forty-three percent of Russians find it
hard to say if there is any country carrying out a sincerely friendly
policy on Russia yet 16% rank Belarus first in the list of friendly
China is named as a friendly country by 4%, Germany comes third
with 3%, and the United States, Great Britain and India rank fourth with
2%. One percent of Russians thinks that France, Yugoslavia and Cuba are
sincere in their friendly policy on Russia. Other countries are named by
Yet every fifth Russian (20%) believes there are no such countries
at all.
The Independent Agency for Regional Political Studies gave out the
information of a poll of May 20-21 to Interfax on Thursday.
The poll of 1,600 people was done in more than 90 towns and
villages of 49 regions of Russia in all the economic and geographic
The respondents varied by their residence, sex, age, education,
social status, income, election and media preferences. It was a personal
interview taken at the respondents' homes.
The United States was named as the country posing the largest
jeopardy to Russia by 27% of those polled. China came second with 3%,
and Latvia ranked third (2%). Japan came next with 1%, and 7% of
respondents named other countries.
Twenty-five percent of those polled think that there are no such
countries, and 35% find it difficult to answer the question.


Date: Wed, 24 May 2000 
From: "W. Arthur McKee" <> 
Subject: Re: Gvosdev, no. 4321

I agree with Nikolas Gvosdev that Stolypin (and probably Sergei Witte as
well) are lodestars for Putin and his political braintrust.

Gvosdev, however, neglects to point out the key reasons for Stolypin's
ultimate failure as a politician. First of all, as one of the first Prime
Ministers in what had been an autocratic system, Stolypin could only gain
authority at the expense of the tsar. Nicholas II and his court recognized
the threat posed by the Prime Minister's position and constantly undercut
Stolypin even before his assassination. Secondly, Stolypin had no
effective program for dealing with the precociously revolutionary Russian
working class. He did not, as had Bismarck before him in somewhat similar
circumstances, offer the workers anything in the way of a social insurance
program that might have taken the radical edge off their protest. While
the workers could not have overthrown the government on their own, they
remained a constant source of instability.

In the near future, Putin faces neither of these problems. Unless we agree
with Hough and believe that Yeltsin has become a shadowy Paramount Leader,
we cannot identify any one tsar-like figure to whom Putin must answer.
Yes, he is beholden to a certain extent to members of "the family" and
other oligarchs -- but Russian tsars were always beholden to the elite for
their fictitious claim to absolute power. If they were skillful (and Putin
thus far seems as though he is), the tsars were able to bend the reality of
oligarchy more and more to match the myth of autocracy.

As for Russian workers, they appear, unfortunately, to be relatively
quiescent. However, here Putin's recent economic luck may contain the
seeds of trouble. If he and his cabinet can somehow engineer stable
economic growth (a big if), then one would assume that, just as in 1909
when growth picked up after a long slump, Russian workers would have a
great deal more leverage to use against their employers. Whether they
would use it is another question -- but surely at some point the
inoculation against radicalism that the collapse of 1991 seemed to effect
will wear off.

Straus' recent commentary on the probable outcome of Putin's plans to build
a vertically integrated "federal" state (which, he correctly points out, is
an oxymoron) is right on target. For one can well argue that even if
Stolypin had been lucky enough to work with a passive tsar, his program for
strengthening the state would have ultimately foundered on the problems
that Straus identified as besetting Putin's program. In essence,
industrial and post-industrial society's complexity makes it virtually
impossible for the center to command the periphery in an absolutist
fashion. Even full-fledged democracy in the center (which Russia did not
enjoy in 1910, nor does it now in 2000) cannot make up for puppet-satraps
on the periphery. And the notion that center will be the puppet-master is
a vain hope-- for, as Straus correctly point out, the new
"governors-general" will likely be major players in "court" intrigues and
will in fact wield substantial independent power even as they pay
lipservice to the President's complete authority.

What we are beginning to see is the farcical outcome of the celebration of
pre-revolutionary Russia as a lost golden age. If Putin continues to go
down the liberal-authoritarian path he seems to have set for himself, all
the while mouthing platitudes about Russia's historic reliance on the state
for progress, then he or his successors will reap something from the same
whirlwind that swept through Russia in the early 20th century.

Arthur McKee (
American University


Date: Thu, 25 May 2000 
From: Timothy Frye <>
Subject: Brokers and Bureaucrats: Building Market Institutions in Russia.

I wanted to let readers of the List know about my book that is just out called
Brokers and Bureaucrats: Building Market Institutions in Russia. It traces
evolution of the Russian equities, commodities, and currency futures
markets from
their origins in the early 1990s through the crash of August 1998. It also
recounts the struggle between the Russian Central Bank and the Federal
and Exchange Commission to govern the capital market. It attempts to
explain why
some attempts to create institutions on these markets succeeded, while others
failed. The research is based on extensive fieldwork, some survey data, and
interviews with many of the leading brokers and bureaucrats on these
markets. I
think it should interest Russia-watchers and anyone who follows markets in
transition countries.

It is available in paper from Amazon for $20 and is published by the
of Michigan Press.


Date: Thu, 25 May 2000 
From: "Joel Lovell" <> 
Subject: training for Russia's Olympic athletes

Hello, all. I am trying find out information regarding the current state of
training for Russia's Olympic athletes. How does the funding compare to the
Soviet era? Are the facilities, the researchers, the trainers all a shadow
of their former selves? Or is athletics still enough of a priority that
nothing is radically different post-breakup? If anyone has information on
specific facilities or thoughts on who I might talk to, I'd greatly
appreciate your help. I can be emailed at Many


Date: Wed, 24 May 2000 
From: Ed Crane <>
Subject: Analyzing Putin

Ed Crane, Academy on Civil Society 

Methods for Assessing and Addressing Putin's Formative Period 

David, maybe your readers would like to cooperate in a project to sort out
the better methods for understanding and addressing the nature of the Putin
decision process and hence of the regime. I note one that seems to hold
promise: identify his real options and assess his direction based upon the
one preferred and selected. A srt of these should indicate where he is
going, and how he ought to be addressed by interlocutors in the formative
stages. Overall the emerging picture seems to be preference for
authoritarian methods even when others are (supposed to be) available (e.g.
"federalism"). This requires a realistic analysis of the options.
Comparisons with Clinton's and Lincoln's options would lead to very
different assessments.


Russia: Czech Journalist Evaluates Putin's Policy -- Interview Part 2 
By Jeremy Bransten

Petra Prochazkova arrived in Moscow in 1992 on a three-month assignment for 
the respected Czech newspaper "Lidove Noviny." Eight years later, she remains 
based in the Russian capital and has become a veteran among foreign 
correspondents covering Russia.

Prochazkova spoke with RFE/RL last week in a wide-ranging interview. In part 
one of our selection from the interview, we focused on her views of Chechnya. 
In this second part, she offers her observations on how Russia is likely to 
develop under newly elected President Vladimir Putin. 

Prague, 25 May 2000 (RFE/RL) -- Prochazkova was asked to comment on the 
likely shape of Russia's future administration, given Putin's plans to 
reorganize the internal administrative boundaries. Will the future Russia be 
a highly centralized state or more of a confederation? She responded:

"It will be a state with a centralized administration, everything will be 
decided in Moscow, but perhaps regional leaders will be allowed to think they 
can also have a limited say. If they are obedient and loyal to Putin, they 
will have some influence in what happens in their regions. But I don't think 
there will be a de-centralization in the way the country is run."

Prochazkova noted that the enormous collection of peoples and territories 
that is the Russian Federation remains the world's last great empire. But she 
does not expect it to fall apart like the Soviet Union:

"Russia indeed is an anachronism in today's world because it is the last 
colonial superpower in the world. It has a difficult time falling apart -- 
perhaps due to one 'technical' reason. That is, [in the 20th century,] most 
colonies seceded from their respective empires overseas -- but Russia is a 
fixed land-mass and all its component parts are linked economically. That's 
the main problem. If it were only about a desire to be free or some 
liberation movements, I think Russia would have fallen apart long ago. But 
it's not so easy."

"And the collapse of the Soviet Union proved it. You have to realize that the 
republics which are currently part of the Russian Federation also wanted 
something similar and their local czars wanted to be president and to have 
their seat in the UN. But then they saw what happened elsewhere. They saw the 
enormous problems these newly independent states encountered. They saw what 
happened in Tajikistan, they saw what happened in Belarus, which today -- 
thanks to its 'wonderful' president -- wants to return to the Russian empire. 
I don't think we'll see the total de-colonization of Russia anytime soon." 

Turning to foreign policy, Prochazkova was asked to comment on the ties 
between Moscow and Belgrade, and Russia's opposition to NATO's military 
campaign in Kosovo. She believes that, unfortunately, the West's actions in 
Kosovo have allowed Russia to justify its own policies in Chechnya:

"The Balkan conflict was of great use to the Russians. That's one of the 
reasons I really regret that it took place. Because when the war began in the 
Caucasus, their main argument -- aside from the fight against terrorism -- 
was: 'But you did the same thing and applauded yourselves, so we can also do 
what we want. And you invite the foreign minister of Chechnya -- or the 
pseudo-foreign minister -- of Chechnya to Prague and Paris. So why can't we 
have [Yugoslav President Slobodan) Milosevic's brother as ambassador [in 
Moscow]. We follow the same policies you do -- it's just that you claim to be 
right while you accuse us of violating human rights.'"

Respected for her experience in covering conflicts in the Caucasus, 
Prochazkova was asked what role this region plays in Russia's foreign policy:

"Russia's position in the Caucasus is very special. It's unfortunate that few 
people in the world are interested in this area. If the world at large knows 
anything about the Caucasus region, it usually is -- at most -- that there is 
oil in Azerbaijan. For Russia, the Caucasus is a crucial piece of territory. 
And of all the countries in the region, Armenia for the moment is absolutely 
the most important. Russia has installed its military bases there and is very 
glad to have Armenia."

Prochazkova elaborated on Armenia's importance to Russia:

"Armenia is important to Russia because it has military bases there and 
because it is the only country which does not protest against Russia's 
presence and even accepts it with a big smile. That's because of Azerbaijan 
and Turkey, of course. Russia also has bases in Georgia, but it's starting to 
have big problems with them. And it is possible that we will reach a very 
interesting geo-political situation, which is that Russian forces will have 
to leave Georgia some day. 

"They will leave [the Georgian enclave of] Abkhazia because their 
peacekeeping mandate will end there. There are no Russian bases in 
Azerbaijan, so all of a sudden Armenia will become their only [Caucasus] 
base. It will not be linked to Russia geographically, but will harbor an 
even-greater concentration of military power than there is now -- under many 

"One of those pretexts will be [the enclave of Nagorno-] Karabakh. The 
Russian will say: 'We are here to ensure the conflict in Karabakh does not 
spread further.' The Armenians will also quietly hope that the Russians will 
protect them against Turkey. But in reality the Russians will be there 
because they will have been thrown out of all the surrounding states, and the 
Caucasus could find itself under the influence of NATO or Turkey -- in this 
case, the same thing. Right now, there is a quiet struggle going on to see 
who will have the greater influence. And in this light, I think the Karabakh 
conflict is extremely important and unfairly forgotten by the world."

President Putin's recent visit to Central Asia, which came on the heels of a 
visit by U.S. Secretary of State Madeleine Albright, underscored the 
international battle for influence now going on in this region. Prochazkova 
believes that here, too, Moscow is using the fight against terrorism as a 
pretext for assuring itself a continued role:

"The Russian have a great argument, which they have already used in 
Tajikistan. If you recall, it was: 'The Taliban is getting closer and 
everyone is threatened, so it would be best to deploy the Russian army along 
the entire frontier with Afghanistan to protect the rest of the world against 
this danger of fundamentalism.' The fight against terrorism is another 
argument. These are 'wonderful' arguments that allow the Russian military -- 
and after it, let's say, the Russian economy -- again to occupy the space 
once taken up by the Soviet Union."

I think Putin understands that this cannot be achieved by using force against 
these countries -- they have their own rulers. These are proud men -- with 
Asian characteristics -- so they must be persuaded by means other than 
threats. So he chose this way. Another way will be through economic leverage."

Prochazkova also said that in its relations with Ukraine, Russia is making 
especially effective use of its economic leverage. She pointed to Ukraine as 
another key country for Russia, due to its transit status for Russia's oil 
and gas pipelines:

"It is for Russia, simply, a very important transit country. On the other 
hand, Ukraine desperately needs Russia because it has no money and it needs 
to steal Russia's natural resources from those pipelines -- which it has been 
doing successfully for many years -- and this is where Ukraine's enormous 
indebtedness comes from. So Ukraine and Russia have a better starting 
position to be close to each other, especially economically, than a new 
player in this area. On the other hand, Ukraine very much more wants to be 
part of Europe than Russia does -- and I understand this. As a result, there 
is a basic conflict between Ukraine's political ambition and its economic 

Russia's own economic position is considered by many analysts to depend to a 
great extent on the continued high price of oil -- its biggest export. But if 
world oil prices drop and the alleged wholesale theft of Russia's other 
natural resources continues, how can the country prosper? Prochazkova was 
asked to comment on the likelihood that Putin will follow through on his 
promise to put an end to corruption in the economy:

"From Putin's speeches and his image and his psychology -- if a person 
observes him for a while -- it is clear this is a man who wants to be a great 
leader. And he cannot be the great leader of a half-collapsed, criminalized 
state. He has to create something. Yeltsin was laughable because the state 
was crumbling in his hands and he himself was falling apart. Wars began all 
around and everyone stole from him and Russia collapsed economically."

Prochazkova concludes that, if Putin has learned anything, then "he has to do 
something now. The first thing he must do," she says, "is limit the 
criminalization of the economy." Noting that he often talks about corruption, 
she is convinced Putin knows this very well. "The only thing that remains," 
she adds, "is for him to find a way to accomplish this [that is, the 
decriminalization of the country]." 

(RFE/.RL's Jolyon Naegele and Milan Nic of the Slovak Service took part in 
the interview with Petra Prochazkova.) 


May 22, 2000
Are Russians an endangered species? 
Experts examine low birth rate but see hope in immigration 
By Boris Zhukov
MOSCOW, May 22 — Russia’s demographic realities dramatically illustrate how 
difficult it is to generalize about such things: while Russia has an 
obscenely low life expectancy for a developed country, it simultaneously 
suffers from the problems of an aging population. With each passing year the 
number of young people entering the workforce lags further and further behind 
the number of new pensioners, as the generations born during the era of 
multiple-children families give way to children who came into the world 
during a demographic transition. In the face of such numbers, who will feed 
the aging Russia of the 21st century? 
EXPERTS PREDICT that the absolute number of Russians of able-bodied 
age will decline in the next ten years by 500,000 a year. 
In the face of this threat, utopian projects for “stimulating the 
birth rate” are resurfacing -sometimes spiced up with warnings that “Russians 
are dying out.” Former Moscow Mayor Gavriil Popov recently proposed 
increasing the birth rate among Russians so that their population grows by 
100 to 200 percent. He could have just as easily proposed raising the average 
height of Russians to 17 feet — no country that has pursued a policy of 
stimulating the birth rate has been able to achieve any significant success. 
Costly incentives merely resulted in the fact that the average statistical 
woman would not have more babies, but rather earlier babies — and initially 
this looked like some increase in the birth rate. But it has not been 
possible at any price to go further or even maintain the level that was 

Some economists propose solving the labor-shortage problem by raising 
the pension age and easing restrictions on the use of labor by minors. These 
measures might have some impact-just as, say, the long-awaited abolition of 
the army draft would-but at best they could alleviate the problem but not 
solve it. Some people are pinning hopes on surging productivity growth. 
Indeed, there is a chance right now in Russia to produce a sharp spurt in 
this indicator, just by taking ready-made technologies. 
We will not discuss the fact that labor productivity depends not only 
on the origin and year of release of an automated production line, but also 
on many other factors-from the transportation network to the labor standards 
of the personnel. Suffice it to recall that when the countries toward which 
we are now orienting ourselves were laying the groundwork for their 
economies, labor productivity there grew quickly, the birth rate was 
relatively high, but almost none of them managed without encouraging 

Russia also has reason for hope in this regard: as long ago as the 
mid-1970s, arrivals in Russia exceeded departures. Of course, at that time 
the arrivals consisted almost entirely of populations migrating from other 
[Soviet] republics. But neither the new opportunity to leave for the “far 
abroad” nor the breakup of the U.S.S.R. fundamentally changed the picture: 
every year recently, 350,000-400,000 more people have moved to Russia than 
have left it. In reality these numbers refer only to registered migration, 
and while official statistics reflect the departures of Russians from the 
country fairly accurately, all that is known about the number of illegal 
immigrants to Russia is that it is at least as high as the number of legal 
The principal sources are the former Soviet republics (Russia has a 
positive balance sheet in the exchange of population with all of the other 
post-Soviet countries except Belarus). Among other countries, China and 
Vietnam make a noticeable contribution.
Who moves to Russia, and why? Departures from post-Soviet republics 
because of interethnic strife have basically ended; most of those who faced 
the necessity of choosing a homeland for themselves have done so. Arrivals 
for educational reasons have also dropped sharply (which will probably lead 
in the future to a gradual diminution in Russia’s influence on the 
intellectual elite of neighboring countries). The bulk of people arriving 
today are those coming to make a living-in commerce, as a hired worker or by 
criminal methods. A sizable proportion are simply refugees.

One can figure out without looking at the statistics that most of the 
people moving to Russia are men. The age distribution of the immigrants is 
more interesting. Usually young people account for the major segment of any 
migration (from the young adulthood to the creation of their own families), 
and the second, much smaller surge is recorded among people of pension age. 
Both young and old people are moving to Russia today, but in addition to 
them, middle-aged family people with school-age children. This age group is 
traditionally regarded as the most settled, and they usually need some 
extraordinary reasons to move to another country, but apparently our 
neighbors have them. Finally, it is interesting that the proportion of people 
with a higher education among the arrivals is 50 percent higher than the 
average for Russia’s population.
“This is one of the indirect indicators that the people with the most 
initiative, who are enterprising and self-confident, are coming here,” says 
Zhanna Zaionchkovskaya, president of the Center for the Study of Problems of 
Forced Migration in the C.I.S. “Statistics can’t show this, but it’s obvious, 
if only because migrants who have become established begin with time to 
outperform local residents in their professional careers, even though their 
starting conditions were much worse.” 
The latter point applies not only to specialists with higher degrees; 
a high level of economic activity is typical of all categories of migrants. 
In the village of Novo-Vasilyevskoye (in the Lotoshino District of Moscow 
Province), for example, an uncompleted cottage settlement that was allocated 
to house refugees from the Caucasus quickly became the main source of milk 
and vegetables for the surrounding dacha residents: while the men travel to 
buy and sell merchandise or do business in the district center, the women 
engage in farming and gardening. And although the refugee families have 
multiple children, for some reason they end up with more foodstuffs to sell 
than the households of the village’s indigenous residents.

Then again, the very fact that migrants are sent to villages is a 
specific feature of the Russian state’s migration policy, which is as 
inhumane as it is improvident. On the one hand, it proclaims not only concern 
about refugees but a virtual readiness to accept 25 million Russian-speakers 
from the C.I.S. and Baltic countries (the overwhelming majority of whom, 
fortunately, are in no rush to respond to this call, which has no economic 
basis). On the other, arrivals run into a heap of purely artificial 
restrictions with regard to citizenship, getting a job, choosing a place to 
live, schooling for children, etc. “Experience shows,” says Ms. 
Zaionchkovskaya, “that an immigrant knocks around a large city for about two 
years, then either finds a job that matches his social demands or creates one 
for himself, and sometimes several more for local people. But in a village or 
small town he cannot find a social niche for himself, and on top of that he 
becomes hostage to the housing problem for a long time.” Nevertheless, the 
government persistently tries to settle refugees (it pretends not to see 
other immigrants at all) as far as possible from big cities, and as tightly 
as possible. Things are reaching the point where school teachers for the 
lower grades are bussed to one of the refugee settlements from the city every 
day. This is a special case, of course, but it reflects the general attitude 
toward the “outsiders”: all that is expected of them is trouble, and there is 
an effort to remove them as far as possible from the local population and 
deprive them of their own sources of income. The notion is that they create a 
“criminogenic” environment, distribute drugs, etc.

Of course, people who are out of touch with their own social milieu 
and live in surroundings with a different culture are always more inclined to 
create “mafia” communities, and in general get involved in criminal activity 
more easily than members of a stable society (especially since concepts of 
what is criminal may differ radically between locals and new arrivals: for 
example, to many people from Asia, hashish is as traditional an item as 
alcohol is to Europeans). But mafia “associations” are primarily established 
to provide mutual assistance against xenophobia and discrimination, and 
immigrants are often pushed into a criminal business by artificial 
restrictions. (When the authorities of Primorye Territory limit the length of 
a “tourist” visa for a shuttling Chinese merchant to three days, knowing 
perfectly well that he needs at least two weeks to sell off his merchandise, 
it is hard to view this as anything but deliberate coercion toward mass 
bribery of the police.) And the only real way to fight both is to integrate 
the “outsiders” into Russian society, which also meets the economic interests 
of the state. After all, a nation is not a biological system: during its 
history the Russian ethnic group has “digested” innumerable Finno-Ugric and 
Turkic tribes. In genetic terms, modern Russians are as much descendants of 
those tribes as they are of ancient Slavs, which does not interfere with 
their remaining Russian. General [Aleksandr] Lebed used to like to tell of 
the mulatto soldier by the name of Ivanov who served under his command and 
who would punch in the face of anybody who claimed that he, Ivanov, was not 
Russian. The method of ethnic self-identification chosen by the dashing 
paratrooper may not merit approval, but in essence he was absolutely right: 
there are no anthropological features that define a person as a member or 
nonmember of a certain people. 
As long as Russia’s need for imported workers is still relatively 
small, and the opportunities for active assistance to immigrants extremely 
limited, there may not be a need to pursue a special policy of encouraging 
immigration. But already now we can develop a clear-cut procedure, consistent 
with the principles of an open society, for entry into the country, obtaining 
a permanent residence permit, citizenship, etc. This does not require any 
significant financial resources-good will and freedom from tribal prejudices 
are enough.
This would show real concern for the historical future of the Russian 


Russia's Zadornov on Economic Program, Tax Amendments: Comment

Moscow, May 25 (Bloomberg)
-- The following are comments by Mikhail Zadornov, Russia's former finance 
minister and chairman of the Duma subcommittee on budget and tax policy, on 
amendments to the tax code, a proposed economic program and President 
Vladimir Putin's order to create seven districts in Russia. The comments were 
published in Vremya MN. 

On tax code, budget: 

``I think the most important steps that will be made in the Russian economy 
in the near future will concern adoption of the new tax code and the balanced 
budget for 2001. As for carrying out administrative reforms, we will have to 
adopt and make a reality of President Putin's bill on the creation of seven 
federal regions. 

On the president's administrative reform: 

``I don't think the creation of seven federal regions will have a serious 
impact on the Russian economy. The idea of Putin's administrative reform is 
to transfer to Kremlin's plenipotentiary regional representatives two major 
functions. First, personnel coordination of all representatives of federal 
power in the territories, from law enforcement agencies to prosecutors. And 
second, control over regional legislation, carrying out presidential decrees, 
as well as control over regional governors and governments 

``This reform is possible nowadays first of all because the president has got 
a maximum political resource of trust. Second, presidential administration 
realizes that without strong levers of management it will be impossible to 
carry out any reforms, including economic restructuring. And finally it 
became obvious that regional authorities violate federal legislation. 

On adoption of amendments to the tax code: 

``Of course there will be opposition from communists in respect to so-called 
flat income tax. They believe it is done in favor of the wealthiest layers of 
population. By I think that finally decisions worked out by the government on 
the Duma Budget committee will be passed. 

On Gref's economic program: 

``I think that there are no any alternative programs to that worked out by 
the Center for Strategic Research. Kasyanov is trying to distance himself 
form Gref's program in order to preserve space for political maneuvers. If he 
had supported the economic program it would have aroused dissatisfaction form 
leftist factions in the lower house. Besides it would have humbled Kasyanov's 
reputation. What do we need a prime minister for if Gref's program is being 


Moscow Times
May 26, 2000 
Independent Media Launches eStart 
By Brian Humphreys
Staff Writer

The country's biggest publisher of lifestyle magazines is betting at least $5 
million that in can turn its large stable of print publications into every 
surfer's first stop on their way into the Russian net. 

On Thursday, Independent Media launched eStart (, a 
Russian-language Internet portal offering original news and entertainment 
content - as well as articles from its Russian-language versions of 
Cosmopolitan, Playboy, Men's Health and other publications. 

EStart will capitalize on the unrealized potential of the local Internet 
market by using its existing print publications to attractusers to its 
portal, and vice versa, said Derk Sauer, CEO of Independent Media, which 
publishes The Moscow Times. 

"This is why it is such an interesting possibility," he said. "The 
demographic groups which read our print publications and will use our portal 
are made up of almost the same people. They are younger, educated, read 
magazines and also use the Internet." 

In addition to The Moscow Times, Independent Media publishes numerous 
Russian-language lifestyle magazines, as well as Vedomosti, a daily 
Russian-language newspaper it produces as part of a joint venture with the 
Financial Times and The Wall Street Journal. 

"There are no other real [Russian-language] portals here," Sauer said. "If 
you start getting into these other web sites, you find that they have no real 
editorial content because they don't have their own editors or newspapers." 

Industry observers largely agreed with Sauer's assessment of the project's 
potential, saying Independent Media was in a unique position to combine 
editorial content with the usual services web portal's offer, such as chat 
rooms, search engines, free e-mail and online polls. 

"Independent Media has access to advertisers, editorial content, experience 
developing editorial content and tying it into other publications, and access 
to capital," said Ron Lewin, managing director of Terralink, a Canadian IT 
firm in Moscow. "It is a very competitive formula." 

Sauer told journalists that 270,000 Internet users had visited the eStart 
site since it was opened to the public on Wednesday, the day before the 
official launch announcement. 

Independent Media and its Dutch partner VNU will invest $5 million in the 
project this year through Novanet, a joint venture created to run the eStart 
portal. VNU is a major international media company that publishes over 100 
consumer magazine titles in Holland and Belgium, as well as 30 titles in the 
United States, including Billboard and Adweek. 

In its initial phases, eStart will rely on advertising for revenue. 

Advertisers are being offered the opportunity to sponsor chat rooms and 
editorial content categories focusing on the interests of various demographic 

Some analysts cautioned that the Internet market remains undeveloped here. 

It is unclear whether any site, no matter how popular, will be able to turn a 
profit anytime soon, said Tom Adshead, a telecoms analyst with the Troika 
Dialog brokerage in Moscow. 

"There is a fairly finite number of current and future Internet users," he 

About 2.2 million Russians, or less than 3 percent of the total population, 
use the Internet, according to a poll released by the Comcon-2 market 
research agency last month. 

So far the profits of most domestic Internet ventures have been negligible 
compared to the millions invested in launching the sites, Adshead said. 

"There are a lot of eyeballs looking at the Internet here, but it has been 
very difficult to turn that into revenue," said Lewin, citing the 
underdeveloped domestic electronic payments market as one of the main reasons 
for this. 

Sauer dismissed such concerns, saying future growth and the lack of any 
comparable Russian-language product on the Internet would assure eStart's 

"This is not about getting 50 percent of the market today because the market 
is so small that even if we did get that, it would be meaningless," he added. 
"We want to get the people who are coming online now because they will be 
part of the real boom." 

Yevgeny Moldavsky, of Renaissance Capital, told journalists present at the 
launch announcement that 9 percent of the country's population will be using 
the Internet by 2003. National Internet ad revenues, which were only $1 
million in 1999, would increase to $45 million by 2005. 

Renaissance Capital, a Moscow-based brokerage, was a consultant on the eStart 
project along with the U.S.-based McKinsey Consulting. 

This year has witnessed the launch of dozens of new portals and web sites in 
this country as companies rushed to capitalize on the worldwide Internet 
boom. Most of the new ventures have attracted investments of between $1 
million and $10 milion. Many of the sites are designed to operate either as 
search engines, or else provide services, such as online banking, shopping or 
free e-mail. 

Adshead said that even if optimistic projections for the Russian Internet's 
growth proved accurate, the jury was still out on which portals would 
eventually prove winners. 

"I don't think the market has yet decided what the ideal portal is anywhere 
in the world, much less Russia," he said. "Nobody really knows whether it is 
content, gaming or searches which will provide the key everybody is looking 


Russia's Gerashchenko on Monetary Policy, Banks: Comment

Moscow, May 25 (Bloomberg)
-- Below are comments from Russian Central Bank Chairman Viktor 
Gerashchenko made in an interview with Russian daily Vedomosti. 

On banking system restructuring proposal by Economy Minister German Gref's 
team of economists: 

``I haven't read it. I don't want to talk on that topic. They took 
God-knows-who - (Alexei) Ulyukaev, (Vladimir) Mau, (Sergei) Aleksashenko, and 
are trying to create something. All of that was seen before. They can't come 
up with anything new. I don't mind other people's business, even though I am 
very hurt. 

On the ruble's exchange rate: 

``We are not making (the ruble) stronger. These are all ill- timed and 
careless statements by some responsible and some irresponsible persons. If we 
weren't buying foreign currency, it would strengthen even more. Through 
buying foreign currency we are increasing our reserves, which is an important 
indicator for any economy, a certain guarantee fund in case of some negative 
economic development, sharp fall of prices. 

``Besides, we are, of course, providing additional money for the economy -- 
foreign currency is being sold that was earned for goods already made, which 
was produced by spending rubles. We are sometimes told -- `You are buying 
more (foreign currency than necessary.)' How can we buy more if more is not 
being offered? We just want the ruble not to be fluctuate sharply. We are not 
doing anything artificial.'' 

On Vneshtorgbank bonds: 

``Of course these are bonds of a corporate issuer (not state bonds.) 
According to legislation, since 1990 the central bank shouldn't be a 
shareholder of private companies. Sooner or later we will be forced to stop 
being a shareholder in Vneshtorgbank, and we don't regret this. Vneshtorgbank 
was set up in 1990 by the Russian government during the Soviet Union. They 
didn't, of course have money in the budget, that is why the central bank was 
essentially forced, against the law, to invest in the capital of 

On timeframe for central bank selling its stake in Vneshtorbank. 
Vneshtorgbank is planning to sell two-year ruble bonds: 

``These bonds are being issued to improve its (Vneshtorgbank's) liquidity and 
be able to lend to companies that are coming to them asking for loans. Of 
course, if investors see that over time these are normal bonds, that they pay 
interest, when the bank starts to increase its capital and will offer shares 
for sale, then investors will move from bonds to shares. Everything is 

On central bank issuing its own bonds: 

``We think that the Ministry of Finance should be first of all resuming 
borrowing in the market, and we will, as they say, wait. We definitely don't 
need it (selling bonds.)'' 

On foreign banks' competitiveness in Russia: 

``As the population keeps part of its savings in foreign currency, these 
savings could be the funds any bank would want to attract. Given the fact 
that the banking system is still in a crisis situation and that the main bank 
that attracts deposits is Sberbank, which doesn't naturally want to pay high 
rates, foreign banks can have a certain competitiveness. Especially in 
foreign currency deposits. Foreign banks also give the option to have 
(credit) card accounts. 

``Based on the fact that their headquarter banks have developed networks in 
many other countries, one can be sure that by depositing money in one of 
these banks, one would be able to withdraw it at any time. Even in the event 
of any number of silly things debated in the media, that something would be 
banned . . . This is all nonsense, because the law banning foreign currency 
on Russian territory can be approved only by the parliament and such a 
decision cannot ever be taken secretly.'' 

On limits for foreign bank participation in Russia: 

``Let the parliament decide this.'' 

On government's involvement in the banking sector: 

``I wouldn't say that the role of the state is being increased. The state in 
essence doesn't have any banks. In Sberbank, we have a 57 percent stake. The 
rest are private shareholders. Yes, in Vneshtorgbank we have an almost 100 
percent stake, but it is again us (the central bank), not the government. And 
the fact that the government is dreaming of creating a bank for 
reconstruction and development for the past 10 years . . . this is the 
government's problem. Such a bank hasn't been founded. 

Capital Inflow to Russia Totals 9 Bln Dlrs in 2000. 

WASHINGTON, May 25 (Itar-Tass) - The capital inflow to Russia totalled around 
nine billion U.S. dollars in the first four and a half months of the current 
year, the Russian president's economic adviser Andrei Illarionov told 
reporters in Washington on Thursday. "There was nothing like that in the 
country over the past few years," he noted. 

The expert could not specify which part of the above sum is made up by direct 
and portfolio investments by foreigners and which part is a return of 
currency resources by Russians. 

However, according to Illarionov, it is evident in any case that foreign 
investments in Russia "are virtually doomed to growth" this year. Illarionov 
called "the increase in hard currency reserves of the Central Bank while the 
country services the foreign debt", is an indirect confirmation of his words. 

According to the economist, reserves of the Bank of Russia rose by around 
five billion dollars over the above-mentioned period. 


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