Center for Defense Information
Research Topics
CDI Library
What's New
CDI Library > Johnson's Russia List

Johnson's Russia List


June 19, 2000    
This Date's Issues: 4375  4376 

Johnson's Russia List
19 June 2000

[Note from David Johnson:
1. New York Times editorial: Tortured Ideas on Missile Defense.
2. New Statesman (UK): To Russia with love. A country that seemed 
to be a basket case under Yeltsin has become a favourite once more 
for western investors, reports Chrystia Freeland.
3. Bloomberg: US-Russian Fund to Invest Up to $100 Million in 12 Months.
4. Los Angeles Times: Maura Reynolds, Moscow Has Chechnya Back--
Now What? Russia: Many expect the deep-rooted conflict in the 
republic to last forever. 
5. Bloomberg: Russia Says It Will Meet Foreign Debt Payments Without IMF.
6. Novaya gazeta: Oleg Lurye, The Superspeed Highway Project Derailed:                              The Undisclosed Part of Putin's Trip to Spain.
7. The Russia Journal: Francesca Mereu, Moscow's colorful yellow journalism.
8. New York Times: William Safire, The K.G.B. Coup.
(re Gusinsky)
11. AFP: Russia, but not China, invited to Warsaw democracy gathering.


New York Times
June 19, 2000
Tortured Ideas on Missile Defense

Clinton administration lawyers have proposed a strained new interpretation of 
the 1972 Antiballistic Missile Treaty to allow Washington to begin building 
missile defenses this year without violating the treaty. The White House 
should reject their advice in favor of a more straightforward approach, 
postponing any construction decision until the serious technological and 
diplomatic questions surrounding the current missile defense program have 
been satisfactorily resolved. 

That approach was recommended to the White House last week by a panel of 
national security experts, including a former chairman of the Joint Chiefs of 
Staff, John Shalikashvili, former Defense Secretary William Perry and former 
Senator Sam Nunn. It would allow the United States to make sure it was using 
the most reliable defensive technology while doing minimal harm to arms 

America and Russia have long agreed that it would violate the ABM treaty to 
pour concrete for missile-tracking radars the treaty prohibits. But 
administration lawyers now claim that construction could proceed well beyond 
this agreed threshold without violating the agreement. Moscow would surely 
reject this interpretation, just as Washington rightly rejected Russian 
attempts to create similar loopholes for building prohibited radars in the 

Besides the ABM treaty, there is another compelling reason to defer a 
decision about building a missile shield until at least next year. Several 
leading missile scientists contend that the defensive system now being tested 
by the Pentagon may not be able to distinguish between decoys and an actual 
incoming nuclear warhead. That is a disabling flaw, for an antimissile system 
is useless if it hunts decoys instead of warheads after both kinds of devices 
are released by a missile in mid-flight. At the least, a series of further 
tests must be conducted against the kind of sophisticated decoys a rogue 
attacker could easily employ. Instead, the Pentagon plans just one more test, 
using unrealistically simple decoys. 

Washington should step back and consider other possible designs for defensive 
systems that might avoid such decoy problems. One alternative would build on 
the proposal made earlier this month by Russia's president, Vladimir Putin. 
The Putin plan, still more of a concept than a set of specific proposals, 
would be designed to intercept enemy missiles soon after launching in the 
so-called "boost phase." 

An ascending missile is a larger, slower and hotter target than warheads 
tumbling through space, and cannot easily be protected with decoys. A system 
based on the Putin approach would also have the advantage of being already 
acceptable to Moscow and hence easily accommodated within arms control 

A number of practical problems would have to be resolved. No system like Mr. 
Putin's has yet been developed or tested. Even if the technology worked, 
Washington would not want to rely on a system of interceptors based mainly on 
Russian territory, as the Putin plan envisions. Additional interceptors could 
be based on American ships off North Korea and in the Persian Gulf. But these 
might be vulnerable to air or submarine attack. 

Still, a boost-phase system may do more to enhance American security than the 
Pentagon's seriously troubled program. The administration should not 
prematurely foreclose that option or the possibility of working out 
amendments to the ABM treaty with Moscow. Instead of trying to finesse 
missile defense choices with lawyerly language, Mr. Clinton should find the 
political courage to postpone the decision until it can be more wisely made. 


New Statesman (UK)
June 19, 2000
To Russia with love 
By Chrystia Freeland
A country that seemed to be a basket case under Yeltsin has become a 
favourite once more for western investors, reports Chrystia Freeland 
The writer is deputy editor of the Globe and Mail in Canada. Her Sale of the 
Century: the inside story of the second Russian revolution, is published by 
Little, Brown (£14.99) 

Anton Chekhov once observed that Slavic women were always either laughing or 
crying, never anything in between. The same seems to be true of the west's 
perception of Russia: we either love the country, or hate it, passing from 
one extreme to the other with the same dazzling speed as Chekhov's 
emotionally acrobatic heroines. We hated Russia during the bloody flowering 
of Stalin's regime in the 1930s; but, during the 1940s, the tyrant became 
Uncle Joe and we were in love with Mother Russia's fortitude in the battle 
against Nazi Germany. The Second World War was hardly over before we were 
swinging back to hatred, and the west's struggle against what was eventually 
dubbed "the Evil Empire" became the defining conflict of most of the second 
half of the past century.

Then came the great reformers - both Mikhail Gorbachev and his arch-rival 
Boris Yeltsin - and suddenly we were once more in love. It was Gorbymania, 
the "end of history", Yeltsin facing down the hardline communists from the 
top of a tank. Western presidents and prime ministers praised the triumph of 
Russian democracy; western investors placed their bets on the triumph of 
Russian capitalism. Before long, though, it was back to hatred. When the 
Russian economy caved in on itself like a vast and fragile pyramid scheme in 
the summer of 1998 - taking with it the rouble, most of the domestic banking 
system and billions of foreign investment dollars - Russia again became an 
object of our detestation. 

Today, it looks as if we're about to fall in love with Russia all over again. 
Compared to the ailing, drink-addled figure Boris Yeltsin cut in his later 
years, his successor, Vladimir Putin, in the eyes of many western observers, 
seems refreshingly direct, decisive and energetic. Within weeks of his March 
election victory, Putin moved to consolidate that image by persuading the 
Duma, the lower house of the Russian parliament, to approve the controversial 
Start II arms reduction treaty, a pact Yeltsin had spent more than six years 
failing to push through the legislature. Tony Blair, who has already paid 
Putin the compliment of a visit to Russia and received the newly installed 
president in Downing Street in return, has praised him as a strong leader 
with a reformist vision. Bill Clinton, who recently hot-footed it to Russia, 
offered the equally sunny appraisal that "when we look at Russia today . . . 
we see an economy that is growing . . . we see a Russia that has just 
completed a democratic transfer of power for the first time in a thousand 

To be sure, some critics have lamented Putin's support for the bloody second 
war in Chechnya, accused him of eroding freedom of the press - a fear 
exacerbated by the recent arrest of the media baron Vladimir Gusinsky - and 
worried aloud that his KGB background and unrepenting loyalty to the honour 
of that institution could jeopardise Russia's fragile democratic 
institutions. But many of even Putin's fiercest prosecutors seem inclined to 
give him the benefit of the doubt when it comes to the economy. Sergei 
Kovalyev, the Soviet-era dissident who is one of the few Russian politicians 
brave enough to speak out against the fighting in Chechnya, fears that Putin 
is likely to build an "authoritarian police state", yet he is also confident 
that the new president will "accept the liberal programme of economic reform 
that the rightists insist on".

Western investors are even more optimistic. After ten years of disastrous 
depression that shrank the Russian economy to less than the size of 
Belgium's, Russia's GDP actually grew last year, albeit by a modest 3.2 per 
cent. This year, forecasters are predicting robust growth of more than 5 per 
cent, an upswing powerful enough to lure back many of those who were most 
badly burnt in 1998. George Soros, the US fund manager who lost a fortune in 
Russia in the 1998 crash, has predicted that Russia will be one of his 
biggest money-making opportunities this year. 

My Russian reporter friends view this latest round of Russophilia with the 
self-mocking cynicism that is one of the most engaging aspects of Russian 
culture. "Russia is never as strong as it looks, but it's never as weak, 
either," Sasha, a Moscow journalist, told me. "That's what you westerners can 
never understand." He's right. Russia is neither lost nor won, but caught 
somewhere in between. This awkward limbo is Yeltsin's bitter-sweet legacy: he 
has left a country both healthier and more diseased than the one he wrenched 
from Gorbachev in 1991.

Yeltsin's great accomplishment, and Putin's most precious inheritance, is the 
destruction of the Soviet Union and of the communist regime that controlled 
it. Yeltsin liberated the non- Russian republics, banned the Communist Party, 
baited regional governors to "take as much power as you can" and transferred 
state property to private owners in a frenzied national car-boot sale.

But Yeltsin's great failure, and Putin's most poisonous inheritance, was his 
inability to build healthy new institutions to take the place of the Soviet 
ones he razed. Yeltsin destroyed the Communist Party's political 
dictatorship, but the democratic system that has emerged in its stead is 
unresponsive to its citizenry and easily subverted by a narrow Kremlin elite. 
Yeltsin sold off the centrally planned economy, but the market system that 
replaced it is corrupt, bound by red tape and ruthlessly manipulated by a 
cabal of robber-barons, known as "the oligarchs". With its increasingly 
deprived underclass and extravagant and parasitic elite, Russia has become a 
sort of capitalist dystopia, a Soviet ideologue's lurid fantasy of life in 
what they used to call the "rotting west". As one sardonic Russian friend 
confided: "Everything Marx told us about communism was false. But it turns 
out that everything he told us about capitalism was true."

The single most important cause of Yeltsin's failures was where he began - 
ruling a country devastated by 70 years of communism and centuries of 
authoritarianism before that. Russian history's most crippling legacy was the 
lack of civil society. Even under tsarism, Russian civil institutions had 
been notoriously underdeveloped. Under the Bolsheviks, they were 
systematically destroyed: political parties were banned, the press was 
severely censored, religion was suppressed and trade unions became arms of 
the Communist Party. In this atomised community, social interaction was 
governed by a Soviet perversion of the golden rule: inform on your neighbour 
as he is certain to inform on you.

Jadwiga Malewicz, a plump Soviet matron with the ghost-white skin of the far 
north, is living proof of just how indelibly that nasty morality was 
imprinted on the soul of every Soviet citizen. In 1937, as a teenage girl, 
she was sent to one of Stalin's Arctic prison camps. Half a century later, 
Malewicz told Angus McQueen, a British documentary film-maker, the worst 
thing the Gulag had done to her. Early on in her ten-year sentence, Malewicz 
had taken pity on one of her fellow prisoners. Stop working so hard, she 
warned the girl, otherwise you'll kill yourself. Someone overheard that 
advice, told on her, and Malewicz was sent to a freezing punishment cell, its 
bars open to the Arctic snows. 

"I nearly died," Malewicz told McQueen. Then, her face twisted with a hard 
contempt for her fellow Russians and maybe even for herself, she made a 
confession: "After that, I no longer trusted anyone. I have never done a good 
deed since then." 

Yeltsin's second problem was Russia's collapsing state. The USSR had been one 
of the most authoritarian, centralised regimes in the world and its spine had 
been the Communist Party. When Yeltsin outlawed the party, he also broke the 
backbone of his new state. Signs of the state's incapacity are everywhere. In 
war-torn Chechnya, Russian soldiers were so ill-disciplined, so poorly 
provisioned and had such low morale that they sold their weapons to their 
enemies, the Chechen fighters. In Tver, a once gracious city in central 
Russia's agricultural heartland, the rule of law has become so flimsy that 
uniformed men, a modern version of the private brigands who roamed Europe in 
the Middle Ages, often block the highways into town and require tribute from 
each entering car. Regional governors and businesses refuse to surrender tax 
revenues to a central government that has lost the power either to coerce or 
to cajole.

The third reason why Yeltsin left his successor a flawed legacy is more 
obscure and less forgivable. In 1995, on the eve of presidential elections, 
which the communists seemed almost certain to win, Yeltsin and his liberal 
allies agreed to an audacious privatisation deal known as loans-for-shares. 
The scheme was so brazen and so byzantine that it was months, if not years, 
before the rest of the world woke up to it. At heart, loans-for-shares was a 
crude trade of property for political support. In exchange for some of 
Russia's most valuable companies (including several oil firms and the world's 
largest nickel mine), a group of businessmen - the oligarchs - threw their 
political and financial muscle behind the Kremlin.

At first, it seemed to be a good deal for both sides. Yeltsin gave the 
oligarchs their economic empires, making them the founding fathers of Russian 
capitalism; the oligarchs gave Yeltsin his second term, securing his place as 
the founding father of the new Russia's political order. But, ultimately, 
loans-for-shares turned out to be a Faustian bargain. Once the oligarchs had 
discovered how to extract instant fortunes from the state, they were 
reluctant to learn more tedious ways of doing business. Once Yeltsin and his 
liberal allies had traded state property for political favours, they could 
never again be pure. 

The other obstacles that poisoned the development of the new Russia - the 
communist legacy, the withering state - may have been insurmountable, but 
they were already there when Yeltsin took office. The pact with the oligarchs 
was the president's choice - and his biggest mistake. Putin's challenge is no 
longer to dismantle communism or to create capitalism; it is to fix a 
capitalist system that is broken. 

As a proud veteran of the KGB, Putin may be tempted to solve Russia's 
capitalist problems with communist methods: intimidation, imprisonment and 
exile. His government took an alarming step in that direction when Vladimir 
Gusinsky was arrested and thrown into one of Moscow's disease-ridden and 
violent jails. Although the White House bleated a mild protest at the move, 
most western bankers will have quietly cheered: the foreign investment 
community was hoping Putin would launch a purge of the oligarchs. As one 
banker told me in Moscow: "The best option is major shock. You need to throw 
a lot of people in jail."

His advice terrifies me. It's not that Gusinsky - or any of the oligarchs - 
is without sin. Gusinsky himself told me: "I cannot say I am an absolutely 
honest man, nor can any person who survived in this country before 1985, or 
who built great things after 1985. We all have done things we would not like 
to tell our children." In today's Russia, property really is theft; no one 
with any real wealth is truly clean.

Any Kremlin-led campaign to purge the oligarchs will inevitably be as 
arbitrary - and thus as corrupt - as the Kremlin policies that created them. 
Russia will only free itself of the oligarchs once it has built a vocal and 
energetic civil society and an effective yet democratically accountable 
state. Yeltsin has shown that you cannot create capitalist democracy from the 
top down. We must hope his hand-picked successor does not feel compelled to 
repeat his greatest mistake.


US-Russian Fund to Invest Up to $100 Million in 12 Months

St. Petersburg, Russia, June 19 (Bloomberg) -- The 
U.S.-Russian Investment Fund, a U.S. Congress-financed fund active in Russia 
since 1995, said it will invest between $75 million and $100 million in 
Russia in the next 12 months. 

One-third of the new investment will go to buy shares, while the rest will be 
used for making loans to small and mid-size businesses, especially those in 
Internet development and high technology, and its home mortgage lending 

``We are committed to supporting Russia on its course to a market economy, 
though the transition is truly a hard one,'' said fund President David Jones, 
who is also chief executive. 

International investors are once again looking for opportunities in Russia, 
after the economy grew 7 percent in the past year and almost two years after 
the Russian government defaulted on Treasury debt and allowed the ruble to 

The fund already has invested about $200 million in equity and loans. Its 
largest projects include a $31.5 million investment in TV- 3 Russia, and a $7 
million investment in Nevsky 49, a St. Petersburg hotel that is a joint 
venture with the European Bank for Reconstruction and Development. 

The fund won a court battle last winter against the Russian government, which 
took over the Lomonosov Porcelain Factory in October after the fund bought a 
19.95 percent stake for $4.25 million in 1998. 

Kohlberg Kravis Roberts & Co., the world's largest leveraged buyout company, 
paid the same amount for a similar stake, held by offshore companies. Other 
international investors own about 24 percent. The government ceded control 
back to investors after a series of appeals. 

``The investment is underway but it is too early to judge the results,'' said 
Douglas Boyce, the porcelain factory's general director. ``The most important 
thing is that shareholders are satisfied that their rights as owners have 
been upheld.'' 

About $2.7 million will be invested by the fund in the factory to modernize 
it, and to improve working conditions, Boyce said. 


Los Angeles Times
June 19, 2000 
[for personal use only]
Moscow Has Chechnya Back--Now What? 
Russia: Many expect the deep-rooted conflict in the republic to last 
By MAURA REYNOLDS, Times Staff Writer

MOSCOW--War, the adage goes, is the pursuit of political ends by other 
means. But the Chechen war breaks the rule. 
After nine months of fighting, Russia's military offensive against its 
southern republic of Chechnya is all but over. Russia controls more than 90% 
of Chechen territory, having pushed the separatist rebels to bases burrowed 
deep in the mountains. 
By now, most countries would have used such a military advantage to 
force their adversaries to the negotiating table, launching peace talks to 
ensure that their political goals prevailed. 
But in Russia, no negotiations are underway and none are in the offing. 
The reason is simple: The Russians don't have clear political goals in 
Chechnya, so they can't negotiate a political settlement. 
"Russia doesn't know what to do with Chechnya," says Alexei Malashenko, 
an expert on ethnic conflicts who is affiliated with Russia's Institute of 
Oriental Studies and the Carnegie Moscow Center think tank. "It has never 
known, and it still doesn't know. This is why you can say that they've won 
the war but lost the conflict. And no one knows how to end the conflict. The 
conflict will never end." 
The best that Russia can manage is half-steps. Earlier this month, 
President Vladimir V. Putin signed an order establishing an interim civilian 
administration in Chechnya that will report directly to the Kremlin. The 
decree formally erased the legal fiction that Chechnya is a functioning part 
of the Russian Federation, but it contained no glimmer of a vision for 
establishing a new government. 
Presidential aides estimate that this "temporary" arrangement--in which 
elections and other trappings of democracy are formally suspended--will last 
at least two years. 
Russian forces, meanwhile, are preparing for a long-term, low-intensity 
conflict. Every night, Russian soldiers come under attack, and commanders 
acknowledge that hundreds of armed rebel fighters have managed to 
re-infiltrate territory ostensibly controlled by Moscow's forces. Just 
Sunday, the Interior Ministry said two police buildings in Grozny, the 
Chechen capital, had come under fire overnight, although no injuries were 

'There Will Be No Peace Agreement' 

Most Americans would have a hard time accepting the prospect of a 
drawn-out war of attrition on their own territory with no apparent political 
purpose. During his visit to Moscow two weeks ago, President Clinton made 
just that point, asking "whether any war can be won that requires large 
numbers of civilian casualties and has no political component bringing about 
a solution." 
But that's not the way Russians see the situation. They don't like the 
war but they accept it as both inevitable and unwinnable. 
"There will always, always, always be fighting in those hills," 
Malashenko says. "Chechens have a traditional society that will not change. 
And in the meantime, there will be no peace agreement." 
The Chechen conflict bears little resemblance to recent wars fought by 
Western powers, which have been characterized by narrow goals and 
overwhelming firepower. 
"This conflict isn't as neat and clean as a bunch of well-armed Western 
nations unleashing their power on a tin-pot dictator and then forcing their 
terms of the peace," says Alan Rousso, director of the Carnegie Moscow 
Center. "This should be likened more to a situation in the Third World where 
you have long-term clan warfare that drags on for decades with occasional 
The Russians see their options as limited, Rousso says. They aren't 
willing to exterminate the Chechens, so they have little choice other than an 
extended military engagement. In their view, granting the Chechens 
independence isn't a realistic prospect: That would, in effect, reestablish 
the situation that existed before the current conflict, when warlords used 
Chechen territory as a launching pad for kidnappings and other crime raids on 
Russian territory. 
"I think the Russians think a low-level pacification mission is the best 
outcome they could hope for," Rousso says. 
Another complication is that Russia's interests in Chechnya are murky. 
Malashenko says the situation was clearer in 1994, the first time Russia sent 
in troops to reclaim the rebel region. Then, he says, the political goal was 
to preserve what remained of the Russian empire. 
But in the intervening years, Russia's national image has moderated. 
"Why is Russia interested in Chechnya?" Malashenko asks. "If you think 
of yourself as an empire, then there is a certain logic to it. But Russia is 
not an empire anymore." 
Alexander Iskandarian, director of Moscow's Caucasus Studies Center, 
agrees. When the Kremlin sent in troops last fall, he says, its primary aim 
was to rally support for the new prime minister, Putin, who rode the war's 
popularity and was elected president in March. Now that he's been safely 
inaugurated, he and his supporters aren't quite sure what to do next. 
"This was a war fought on TV screens to boost the popularity of the 
president," Iskandarian says. "There was no political plan associated with 
it. They are just beginning to try to come up with one." 

Majority of Russians Appear to Back War 

At the moment, the majority of the Russian people still appear to 
support the war. In a recent poll by the Russian Center for Public Opinion 
Research, 56% of respondents said they favor continuing the military 
But there are signs that public support may be wearing thin. Approval of 
the war was much higher for most of the spring--about 70%. And there has been 
a sharp rise in those who favor beginning peace talks--35% in the recent 
poll, up from 23%. 
While most Russians say they see no alternative to the war, their 
enthusiasm might wane in coming months if casualties mount with little sign 
of progress. The official Russian death toll has already topped 2,000. 
Even if the government decided to open peace talks, it wouldn't know 
whom to invite to the table. 
Chechen President Aslan Maskhadov was elected in 1997 in a ballot 
recognized by Russia and international observers as free and fair. But he has 
lost much of his former authority in recent years; field commanders have 
become far more powerful, and they openly defy his orders. At this point, 
moreover, Russian leaders are trapped by their own propaganda, which has 
demonized Maskhadov and the top rebel commanders as "bandits and terrorists." 
That leaves Russia able to negotiate only with "friendly" Chechen 
leaders--but they obviously have little or no influence with the rebels and 
little or no standing with the Chechen people. 
An alternative would be to convene a round table of Chechen elders to 
draw up a plan for the republic. But it's not clear that any elders would be 
willing to participate, since any Chechen who agrees to work with Russian 
authorities risks being branded a traitor. 
In the meantime, the government's lack of political vision is putting 
the Russian military in an increasingly difficult situation. 
The army's approach to the war has been to overwhelm the rebels with 
firepower, and that method has largely succeeded, albeit with massive 
civilian casualties. But now that the Russians have regained control of so 
much territory, they have to hold it--and that is likely to prove far harder. 
The rebels are clearly eager to fight a guerrilla war. They have grown 
ever bolder in recent weeks in attacking Russian checkpoints. In addition, 
suicide bombers have killed at least four Russian servicemen, and the rebels 
have even fired on medical vehicles, in one instance killing three doctors. 
Such hit-and-run attacks are demoralizing, but Russian leaders fear 
something even worse: a surprise rebel offensive. In the 1994-96 war, after 
the Russians were lulled into thinking they were in control on the ground, 
the rebels launched an August 1996 blitzkrieg on Grozny and seized it in a 
matter of days. Deeply humiliated, the Russians agreed to a hasty cease-fire 
that gave the Chechens de facto independence--and set the stage for the 
current war. 
Russian military commanders have been saying repeatedly that the 
"military phase" of the operation is over--an apparent hint that the Kremlin 
should make some plans for the republic's political future. But the brass 
seems as much at a loss as everyone else. 
"Politicians start wars," sniffed Russia's commander in Chechnya, Col. 
Gen. Gennady Troshev, when asked recently about the state of the conflict. 
"So they should finish them." 


Russia Says It Will Meet Foreign Debt Payments Without IMF

Moscow, June 19 (Bloomberg)
-- Russia said it can meet all foreign debt payments this year without 
new loans from the International Monetary Fund, after central bank reserves 
climbed by about a third this year to $20 billion. 

The government, helped by high world oil prices and improved tax collection, 
has increased revenue this year and still can borrow as much as 30 billion 
rubles ($1.1 billion) from the central bank to meet debt payments. The 
reserves climbed $7.5 billion this year to a three-year high and probably 
will rise further, said central bank Chairman Viktor Gerashchenko. 

``This gives us confidence we can meet our obligations whether or not we get 
IMF loans,'' Gerashchenko said at a foreign investment conference organized 
by Renaissance Capital brokerage. 

Russia, which has a total $10 billion in foreign debt payments due this year, 
has been in talks with the IMF to resume a loan program stalled last year, 
and is scheduled to present its economic program to the fund by the end of 
June. An IMF agreement is necessary for the government to start talks with 
Western governments on rescheduling $42 billion in Soviet-era debt, after it 
rescheduled $8 billion in payments due this year and last. 

The IMF estimates central bank's reserves will rise to about $25 billion by 
the end of this year, Gerashchenko said. He would disclose the central bank's 

The central bank lent the government about $7 billion since the second half 
of 1998 for foreign debt payments. 

The government is hoping to get the IMF to endorse economic policies that 
have kept the ruble stable, lowered inflation and created a budget surplus, 
rather than to provide more loans, analysts said. 

Russia earlier budgeted about $5.6 billion from the IMF, World Bank and other 
lenders this year to help it meet about $10 billion in foreign debt payments. 

Gerashchenko also said the government plans to overhaul the central bank 
system, which employs about 88,000 people. 

``I am forced to admit that the central bank system is very large,'' 
Gerashchenko said. ``The system will be reduced.'' 


Novaya gazeta
June 19, 2000
Oleg Lurye
The Superspeed Highway Project Derailed:
The Undisclosed Part of Putin's Trip to Spain
[translation for personal use only]

Why were president Putin's eyes so sad during his official visit to Spain?
Was he worrying about [Vladimir] Gusinsky? Or was it because of his
inability to reach Prosecutor-General by phone? Not necessarily. The real
reason of Mr.Putin's anxiety may have been his failure to engage the
Spaniards into a project that reflected the interests of some of his friends
and fellows from St.Petersburg, the interests that he was lobbying for in
As many people remember, six years ago a group of government officials and
affiliated entrepreneurs founded a joint-stock company under the name of
Superspeed Highways (in Russian abbreviation, VSM). The company was supposed
to take upon itself a new project of the century - to build a superspeed
levitation railroad between Moscow and St.Petersburg.
In the period of 1993-1997, VSM was the Kremlin's favored infant company,
somewhat reminiscent of the 1980s project of diversion of Siberian rivers.
The company was receiving enormous funds from the state treasury, it was the
designated target of large-scale Western borrowings which were secured with
government obligations. Yet in five years no railroad was built. The remains
of the billion-dollar project amount to the construction of a terminal in
St.Petersburg which is in its incipient stage.
VSM turned out to be a routine business trick that served to enrich some
entrepreneurial Russians at the expense of the state budget. Nothing
special. The source of the VSM managers' spectacular success in this regard
was the government position of the VSM General Director - Aleksei Bolshakov
[from St.Petersburg] who, at the same time, was First Deputy Prime Minister
in Viktor Chernomyrdin's government, the right hand of the Russian prime
minister. As a consequence, according to Valeri Streletsky, who then served
in the presidential security service, "no one dared even to say anything
negative about the superhighway project. Too many things in this life
depended on Bolshakov, although his presence on the board of VSM while
serving in the government was an outrageous violation of the law."
By now, it is almost four years since Bolshakov ceased to be First Deputy
Prime Minister, and the VSM project was buried, together with another few
billions of federal budget funds. One would expect that this public-private
adventure would be put to rest. And yet there turns out to be a sequel to
this story.
Last week, Putin brought to Madrid a rather concrete proposal in the form of
a project. The project's title was: "Agreement Between the Government of the
Russian Federation and the Government of the Kingdom of Spain on the Joint
Creation of a Superspeed Railroad on the Territory of the Russian Federation
Between St.Petersburg and Moscow."
The project, whose text happens to be in our possession, is a unique
document manifesting the Kremlin resolve to reanimate the Bolshakov
adventure, this time at the expense not just of the Russian federal budget,
but also of Spanish funds. Perhaps, with all their supposed concomitants -
corridas, flamboyant Spanish women, castles in Torrevieja and other life
It didn't work. The Spaniards declined to sign Putin's draft agreement. They
scrupulously found out facts not just about the financial abyss looming
large but also about the ecological one. The construction of the
superhighway would require the cutting down of protected forest preserves
which would completely destroy the environmental system around them. The
Greens would not forgive this to the Spanish government.
Some readers may reproach me for writing about it after the game is over.
Apparently, now it is advisable to forget about VSM, this time forever.
Alas, one suspects that the president may offer the aforementioned project
on his visits to some other Western powers. And there are reasons to worry
about a hypothetical possibility that one of Vladimir Vladimirovich's
counterparts may not be as far-sighted as were the Spaniards.


The Russia Journal
June 17-23, 2000
Moscow's colorful yellow journalism
By Francesca Mereu 
Media columnist Francesca Mereu gives a brief history of the “zhyoltaya
pressa” in Russia.
Forget for a moment Moscow's politically oriented newspapers, and have a
look at the so-called "zhyoltaya pressa" ­ yellow press. The term zhyoltaya
pressa comes from American press history of the late 19th century. It was
originally coined to describe the journalistic practices of publishers
Joseph Pulitzer and William Hearst. 

Hearst's New York Journal hired away the artist who drew the popular comic
strip "The Yellow Kid" for Pulitzer's New York World newspaper. The strip
was named for the main character's colorful clothes. Pulitzer, annoyed,
hired another artist to continue producing "The Yellow Kid." The
competition of Pulitzer and Hearst, each with its own colored comic strip,
was coined "yellow journalism" ­ a term now synonymous with a scandalous

In Russia, before the October Revolution, a few yellow papers were
published, but they were not popular. In Soviet times, the most horrible
offense for a paper was to be classified as yellow, but that label was
often used to describe some serious papers from "bourgeois countries."
Today, anyone is able to pick and choose from the colorful yellow press ­
also called bulvarnaya pressa, or gutter press, by Russians ­ in any Moscow

Lev Kulakov, editor of one of the most popular Moscow yellow weeklies,
Megapolis Express, differentiates the gutter press from the yellow press.
"The gutter press writes [in a sensational way] about anything it wants,"
he said. "For example ­ economics, politics or art. The yellow press is
more concentrated on [show business] star scandals."

He added that the yellow press "loves to exaggerate facts. It does not
verify information and frequently breaks media law. ... The yellow press
sometimes publishes only one point of view concerning a fact and does not
bother about listening to the other person involved."

Kulakov explained that some yellow papers take advantage of the country's
slow court system and wait until the offended party gets tired of the
procedures and gives up.

Kulakov said his paper tries not to break media law ­ "It is a matter of
quality." Within limits, Megapolis Express uses proper Russian language and
tries to avoid swearwords, although harsh language is used "just sometimes
­ because it is more communicative." The paper's readers range from the
working class to the new rich and "bandits," Kulakov said.

During a recent visit to a kiosk near the Aleksevskaya metro station,
Irina, 45, a newsagent, recommended Megapolis Express, because "it is very
entertaining." But, she added, "Sometimes it seems [the journalists] sit at
their offices and make up the stories they write."

Kulakov said that, at most, he might write his own "letter to the editor."
But, he said, he does this rarely and only if he hears an interesting story
from someone he knows who wants the story to be published under another
name. "This is not, of course, 100 percent correct, but the story is true."

Kulakov said he is sure readers believe the stories published in the paper.
"Otherwise, they wouldn't buy it," he said. And Megapolis Express, with its
circulation of 500,000, is the most sold yellow paper in Moscow. 

Moscow's "serious" papers are mostly concentrated around the country's
political life. In the yellow press, such names as Vladimir Putin and
Anatoly Chubais are not mentioned. The yellow press finds its favorite
topics in the capital's criminal world, in prostitution and in other
sensational areas.

One story ­ "Poltergeist declares war on the capital" ­ warned Muscovites
about the danger of meeting a supernatural creature. As proof, Megapolis
mentioned a certain Mr. K. M., who saw tin cans being thrown around by a
mysterious power in a Moscow market. A Megapolis journalist interviewed a
real "ghostbuster" who spoke about his battle against Moscow’s ghosts. The
article's only shortcoming is that there's no phone number mentioned. Who
you gonna call?

(E-mail Media Watch at


New York Times
June 19, 2000
[for personal use only]
The K.G.B. Coup

WASHINGTON -- I had breakfast recently with the deputy chief of Media-Most, 
the last major Russian TV-and-newspaper company to dare criticize or satirize 
the men who have "democratically" seized power in the Kremlin. 

Igor Malashenko was at first unusually guarded, speaking as if being 
overheard by the new K.G.B. I asked: What's with the clamming up? He 
responded by asking if I carried a cell phone. Sure, I said, but it was 
turned off; I prefer to be out of touch. 

He asked to see it. "To be powered off is not good enough," he said, and took 
out the battery. "Now it cannot be used to bug either of us." 

Such precautions are now taken by many in the Russian media who know they are 
under surveillance by Vladimir Putin's K.G.B. no matter where they go. 

Westerners who never worked or covered events in the former Soviet Union 
consider that paranoid. They have not been afflicted with the stifling 
feeling of being watched and listened to in hotels, offices, parks and cars. 
But after a decade of blessed free speech in Russia, repressive days are here 

Step One in the K.G.B.'s coup took place last year, as the last of Boris 
Yeltsin's string of somewhat reformist prime ministers was replaced by an 
unknown K.G.B. apparatchik. Vladimir Putin was hand-picked by the band of 
oligarchs who wanted to maintain iron control of Russia's economy; they made 
a deal with the corrupt "family" around Yeltsin, which wanted a promise of no 
prosecution if their figurehead handed over power to a Kremlin-loyal K.G.B. 

Step Two was a get-even war against the hated Chechens. Its popularity was 
ensured by the mysterious blowing-up of Russian apartment buildings, for 
which the secret police promptly blamed Chechen terrorists. Some defector may 
one day reveal it was a classic K.G.B. active-measures propaganda operation; 
if so, the explosions did the trick of catapulting the K.G.B.'s Putin to 

Step Three was to avoid a genuinely contested presidential election. With his 
amnesty deal made, Yeltsin resigned and named as acting president the K.G.B. 
man chosen by the kingmaker Boris Berezovsky and approved by family and 
generals. Putin then ran for election from the seat of power in the Kremlin, 
in control of government-owned media and able to sprinkle back pay on 

It worked. Most of the media were cowed; politicians outside Kremlin walls 
were inundated with vilification. In the West, those whom Lenin reportedly 
called "useful idiots" were enlisted to embrace the coup's choice as a 
much-needed strongman to do business with. As opposition was systematically 
discredited and crushed, Berezovsky's selection was called an election. 

Mopping up followed. A Radio Liberty newsman, Andrei Babitsky, reported all 
too accurately about continued Russian casualties in Chechnya. Putin's men 
seized him and turned him over to quislings for quieting; the new president 
passed public judgment that the reporter was a "traitor," and ever since the 
framed-up Babitsky has been a victim of prosecutorial silencing. 

This emboldened coup leaders to turn on a far more powerful media figure: 
Vladimir Gusinsky, head of Media-Most. His channel's newscasters do not hew 
to the Kremlin line and his satiric puppet show aims barbs at the new 
strongman and the Kremlin palace guard. 

Best of all for Putin's persecution purposes, Gusinsky is a Jew; unlike 
Berezovsky and some partners in Oligarchy Inc., he is not the self-hating, 
religion-denying kind. Anti-Semites applauded the K.G.B. raid on Media-Most's 
offices to grab files and cheered last week when the stiffnecked Jew was 
arrested and thrown in jail. 

Putin, who surely approved the general order to break press resistance, 
professed ignorance. The Blair-Clinton-Schröder thirdwayniks issued mild 
bleats of "concern." Oligarchs next on Berezovsky's list complained. 

With its chilling point made, Putin's repression crew has let the bothersome 
Jew out of jail for now but ordered Gusinsky to stay in Moscow while an 
embezzlement case against him is trumped up. 

Farewell, freedom of speech. Thirdwayniks take note: When doing business with 
the K.G.B. coup's chosen leader, better take the batteries out of your cell 


June 19, 2000
[translation from RIA Novosti for personal use only]
By Svetlana GAMOVA, Chisinau

President Vladimir Putin proved to be a welcome guest in 
Chisinau, where he announced at a press conference the creation 
of a Russian commission to step up the settlement of the 
Trans-Dniestrian conflict. The commission will be established 
at the request of President Petru Lucinschi and will be chaired 
by ex-Premier Yevgeny Primakov. 
Local newspapers wrote in 1997 that Foreign Minister 
Primakov precipitated a breakthrough in relations between 
Chisinau and Tiraspol. He encouraged the Moldavian head of 
state and Trans-Dniestrian leader Igor Smirnov to sit down at 
the negotiating table and sign an agreement on "the common 
home" and common borders (by the 1990 map, which gives the 
borders of the Moldavian Soviet Socialist Republic). 
Since then either side has offered its own interpretation 
of the term coined by Yevgeny Primakov. Chisinau regards "the 
common home" as a unitary (in accordance with the constitution) 
state, where Trans-Dniestria enjoys "broad autonomy." But 
Tiraspol demands that it should be an equal subject on a par 
with the territory on the right bank of the Dniester. Now that 
Primakov has been appointed chairman of the Russian state 
commission, he will have to search for new compromise 
Returning a veteran politician into the business of 
shuttle diplomacy is like organising paralysis. Here is how the 
Russian President outlined the critical point of possible 
"We regard Moldova as the only possible subject of 
international law. (...) It is Russia's national interest to 
have Moldova as a self-sufficient and independent state 
enjoying territorial integrity. But the attainment of this goal 
calls for taking into consideration the interests of the whole 
population, including the Trans-Dniestrian population." 
In fact, Putin has charged Primakov with keeping the 
wolves satiated without feeding sheep to them. The Chisinau 
authorities are convinced that Primakov will fulfil this task, 
the more so that the Tiraspol leaders have always trusted him. 
But the first Tiraspol reaction to the Putin-Lucinschi meeting 
was far from optimistic. 


(NTV'S SEGODNYA PROGRAM, 10:00, 06/14/00)

Anchor: The leaders of three factions at the State Duma -- the
Union of Right Forces, YABLOKO and Fatherland-All Russia -- will be
meeting in two hours time to work out a common stand on the arrest
of Media-MOST holding owner Vladimir Gusinsky. With us in our
studio in Red Square is one of the YABLOKO leaders, vice-speaker of
the State Duma Vladimir Lukin. Good morning. 

Lukin: Good morning.

Q: So, what is your reading of what is happening?
A: Well, it is a philosophical question. If you mean
yesterday's arrest of Gusinsky, then I regret to say that there are
very many signs to show that it is not a legal but a political
case. Far too many signs, I should say. I don't think I need recap
all this, the subject was dealt with extensively on your channel
and other channels yesterday and today. But if it is so, it is a
very important link in the chain of events when criminal cases are
not substantially criminal, but are acquiring more and more of a
political flavor and when some cases are swept under the rug
precisely due to political motives. 
All this taken together is extremely dangerous. We seem to be
back to where we started. We should resist it. 

Q: Will the State Duma take a common stand on the situation?
A: I don't know if the State Duma will take a stand on this
issue, considering the way the Duma has been formed. There are
conflicting interests in the Duma and many deputies depend heavily
on the authorities. One thing I can say is that all the people who
are concerned about the destiny of the country, all those who have
linked their political careers and their lives with turning Russia
into a law governed state should respond to these events. Besides,
these people have got a powerful incentive to unite and it would be
politically infantile and irresponsible if all the forces do not
unite under one simple slogan, "For a law governed state, against
criminal license." 

Q: As I see it, this development adds relevance to the issue
of unification between the Union of Right Forces and YABLOKO.
A: You are right. This issue has been decided by the YABLOKO
Central Council and the forums of the Union of Right Forces also
decided to sign an agreement on a long-term coalition. It will be
implemented soon and I think that this coalition should provide a
nucleus for a broader coalition in favor of a rule of law state.
All the rest is now secondary. 

Q: I would like to take you back to the meeting today between
Fatherland-All Russia, the Union of Right Forces and YABLOKO. What
will be the common position?
A: The common position should be that first, the truth should
be established. How, why and at whose initiative the action was
taken, the action which looks uncomfortable like lawless political
persecution. I am not suggesting that Gusinsky should be immune to
prosecution on criminal charges if there are valid suspicions, but
the way it has been done -- and not for the first time either --
reeks or rather stinks of dirty politics. Such things should be
made impossible. That is the main thing. 
More seriously, we should not just scream, legal guarantees
should be created to prevent such things happening. Our Criminal
Procedural Code is outdated because it allows of all these antics.
It should be quickly replaced with a modern and civilized code. The
role of the Prosecutor's Office should be defined more clearly and
much else. So, there is a vast field of work to put up a dam in the
way of such intrigues. 

Q: Doesn't it seem to you that the authorities can just ignore
such an alliance if they have ignored the possible consequences on
the eve of the events? 
A: The authorities cannot afford to ignore this unification
because it represents millions upon millions (of voters)...


Russia, but not China, invited to Warsaw democracy gathering

WARSAW, June 19 (AFP) - 
Poland, backed by a decade of post-communist freedom, will host an 
unprecedented conference of 100 countries here next week on the theme of 
democracy and how to make it work.

Those attending will include Russia, Ukraine and Indonesia. But the world's 
remaining major communist state China has not been invited.

Poland's acting foreign minister Bronislaw Geremek said the gathering would 
adopt a Warsaw Declaration outlining basic principles of democracy and 
calling for their universal recognition.

Co-organisers are India, the United States, the Czech Republic, South Korea, 
Chile and Mali. US Secretary of State Madeleine Albright and United Nations 
Secretary-General Kofi Annan will attend.

The idea of the conference, already in preparation for some months, was first 
thought up by Geremek and Albright, informed sources said.

Old-established democracies and countries "struggling for democracy" had been 
invited, Geremek told journalists. 

They include Bosnia, Algeria, Bulgaria and Nepal.

But neither the Chinese People's Republic nor Taiwan was on the invitation 
list given to the press for the gathering on June 26 and 27. 

Likewise missing were Iraq, Iran, Libya, North Korea, Cuba, Vietnam, Malaysia 
and the former Soviet republic of Belarus.

The conference is entitled "Towards a community of democracies."

A major aim was to strengthen links between countries which have chosen the 
path of democracy. "We should build a relationship of confidence," Geremek 

"Our community should be considered as an open community," he stressed. 

"A fee, even modest, should be paid to enter it," the minister said: "There 
is no free lunch for those who refuse democracy."

But Geremek said he hoped countries not invited "will see it as a positive 

"We do not want to condemn anyone," he added.

An interview on video with Aung San Suu Kyi, head of the democratic 
opposition in Myanmar whose movements have been restricted by the military 
junta in power, will be shown to participants.

Russia has accepted the invitation but will be represented as second-tier 
delegation. Russian Foreign Minister Igor Ivanov has already said he will not 

The gathering gives Poland a high profile 20 years after the creation of 
Solidarity, the union which launched the political opposition to Polish 
communist rule, and a decade after Poland's prominent role in changes leading 
to the communist collaps in eastern Europe.

The choice of Warsaw for the conference sent "a very important message about 
the achievements made by Poland in social, political and economic spheres on 
the path to democracy," Geremek stressed.

More than 60 foreign ministers have confirmed their attendance. Others wil 
send deputies or other officials.

Czech President Vaclav Havel, prominent in the Czechoslovak civil rights 
movement under communism, was originally to give the opening speech, but has 
cancelled his visit because of health problems.

This will be Geremek's last major engagement as Polish foreign minister. He 
will leave the Polish government immediately afterwards after his party, the 
Freedom Union, decided earlier this month to quit the coalition.


Web page for CDI Russia Weekly:


Return to CDI's Home Page  I  Return to CDI's Library