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CDI Library > Johnson's Russia List

Johnson's Russia List
 

 

July 12th, 2000    
This Date's Issues: 4397 4398  


Johnson's Russia List
#4398
12 July 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Putin warns uneasy Russian tycoons.
2. BBC MONITORING: RUSSIA CANNOT MIX DEMOCRACY AND ANARCHY - PUTIN.
3. Reuters: Putin sees U.S. missile concerns but no threat now.
4. Reuters: Key quotes from Putin interview.
5. Russia, US spice up lunch with spat over missiles, Chechnya.(Talbott and Ivanov)
6. Rossiiskaya Gazeta: Vladimir LAPSKY, US ABM SYSTEM: PROS AND CONS.
7. RFE/RL: Donald Jensen, Cracks in the Putin Coalition.
8. Stanislav Menshikov: "TOO MUCH MONEY" LIE EXPOSED.Statistics Show Stagnant, Not Inflated Demand.
9. Platt's Metals: John Helmer, NORILSK DEFENDS POTANIN IN NEW MUD-SLINGING CAMPAIGN.
10. The Guardian (UK) editorial: MR PUTIN'S TWO FACES: RUSSIA'S LIKELY FUTURE IS GROWING CLEARER.
11. Pulse Magazine: Interview with Victor Shenderovich of “Kukly”
12. RFE/RL: Andrew Tully, Russia: US Leaders Dispute Moscow's Loan Restructuring.] 

******

#1
Putin warns uneasy Russian tycoons
By Ron Popeski

MOSCOW, July 12 (Reuters) - President Vladimir Putin has forecast tougher 
times for Russian tycoons who thrived in the ``muddy waters'' of post-Soviet 
turmoil, but an aide was quoted on Wednesday as saying a big campaign against 
them was unlikely. 

Authorities have recently launched a tax case against the management of 
Russia's largest carmaker, seized financial documents from the group running 
its only independent television company, launched a criminal case against the 
head of the biggest oil firm, and asked for compensation from the leader of 
the group controlling a major metals producer. 

In an interview with Reuters, Russia's ORT television and Japan's NHK 
television on Tuesday evening, Putin said he wanted to build a market economy 
in which nobody was above the law. 

``There are, of course, people who feel comfortable in conditions of 
disorder,'' he said, apparently referring to those who have made large 
fortunes by exploiting the lack of a regulatory framework during Russia's 
move to a market economy. 

``You know we have a saying about catching fish in muddy waters. Here there 
are fishermen who have already caught a lot and want to keep the situation as 
it is for a long-term historical period,'' he said. 

``I don't think this is acceptable for the Russian people or for our partners 
abroad,'' said Putin, speaking ahead of a July 21-23 summit of the Group of 
Eight nations in Okinawa, Japan. 

OLIGARCHS 

Putin made no direct reference in his interview to Russia's ``oligarchs,'' 
who have combined personal wealth with political clout. The Kremlin has 
denied involvement in previous moves by the tax police and other agencies. 

His deputy chief of staff, Vladislav Surkov, said that he believed a campaign 
to unearth financial misdeeds committed by top business figures would be 
pointless and counter-productive. 

``I believe that the sort of period we are now living through should sound 
something like this: We should forget what happened before,'' Surkov told the 
business daily Kommersant. 

``Or perhaps not so much forget as not to settle accounts,'' he said. 
``People are tired of hatred for one another and recalling matters of evil. 
This applies to the economic sphere.'' 

Prime Tass news agency quoted Tax Police Director Vyacheslav Soltaganov on 
Wednesday as saying that a case had been launched against auto firm Avtovaz, 
based in the Volga city of Togliatti, involving hundreds of millions of 
dollars unreported to authorities. 

There was no immediate comment from Avtovaz, which produces boxy Soviet-era 
Ladas and more modern vehicles. 

On Tuesday, prosecutors had seized financial documents from the Media-Most 
group of Vladimir Gusinsky. Gusinsky was jailed last month on embezzlement 
charges but freed three days later amid protests over what some saw as an 
attack on press freedom. 

Tax police launched a criminal case against Vagit Alekperov, head of LUKOIL, 
Russia's biggest oil producer, over alleged non-payment of taxes. 

A third tycoon under fire was Vladimir Potanin, head of the group controlling 
one of the world's largest metals producers, Norilsk Nickel. He was asked by 
the prosecutor's office to pay the state $140 million in compensation for 
what it said was an underpayment when Norilsk was privatised in the 
mid-1990s. 

The probe into Gusinsky has stirred some fears that Putin, a former KGB spy, 
plans a return to authoritarian rule -- something he denies and referred to 
in his Tuesday interview. 

The daily Izvestia said that other big Russian companies were nervous. It 
suggested that Putin, who has called for a strong state, ``now wants all of 
society to fall in behind him. With no further commentary.'' 

VITAL INSTITUTIONS 

In his interview, Putin pledged that Russia would proceed with creation of 
vital democratic institutions. 

``A liberal economy is impossible without the democratic development of the 
state, impossible without the development of democratic freedoms and civilian 
institutions. 

``Only we should not confuse democracy and anarchy.'' 

Putin, elected in March, has vowed to free Russia's economy of red tape, 
slash taxes and boost foreign investment to end a decade of steep decline in 
living standards. 

He said that Russia wanted no special benefits from its G8 partners -- the 
United States, Japan, Germany, Britain, France, Italy and Canada -- only 
respect and fair treatment. 

In Tokyo, U.S. Deputy Secretary of State Strobe Talbott welcomed Putin's 
economic agenda as set down in a major policy speech last week but stressed 
that Moscow must turn words into deeds. 

Speaking after talks with Russian Foreign Minister Igor Ivanov, Talbott said 
Washington remained concerned about press freedom and Moscow's campaign 
against Chechen separatists. 

*******

#2
BBC MONITORING
RUSSIA CANNOT MIX DEMOCRACY AND ANARCHY - PUTIN
Text of report by Russian Public TV on 12th July 

[Presenter] Yesterday President Vladimir Putin gave a big interview to ORT,
Reuters news agency and the Japanese TV company NHK in the run-up to the
Okinawa summit of G8 leaders. The summit of the Eight's leaders takes place
next week, from 21st to 23rd July. 

In response to questions from the journalists, the Russian head of state
spoke not only about the forthcoming international meeting, he also paid a
great deal of attention to Russia's domestic problems. 

[Correspondent] The first question to the president came from our TV
company: "What does Russia get from taking part in the forthcoming G8
Okinawa summit?" 

[Putin] We will primarily be discussing, like all the other members of the
club, world problems, problems of international security, problems of
disarmament, certain issues which are topical for all mankind today. 

[Correspondent] Russia asks for no privileges or benefits for itself. 

[Putin] It would be ideal were we able to benefit from "most favoured"
status, were all the other developed countries in the world to relate to
Russia on no worse terms than their other partners. 

[Correspondent] Almost half of the interview was about the changes inside
the country. Putin himself worded a guarded question from a foreign
journalist rather more toughly. 

[Putin] If measures are not put in place to reinforce statehood in Russia,
there could be a return to totalitarianism. I am deeply convinced that
there can be no liberal economy without democratic development of the
state, without developing democratic freedoms and civil institutions. You
cannot mix democracy and anarchy. 

[Correspondent] In Vladimir Putin's words, Russia is not a fragment of the
USSR, but a completely new state. Democratic institutions that are a matter
of course in other countries are still in the initial stages in Russia, and
there are people who do not want the country to progress further. 

[Putin] You know, we have a proverb, to fish in muddy waters. There are
fishermen who have already caught a lot and are keen to maintain the
situation in the long term. I do not think that this suits either the
Russian people or our partners abroad. 

[Correspondent] According to the president, the state cannot now act
otherwise than guarantee institutions of the liberal economy, the right to
property, the fight against corruption and so on, and in no event infringe
civil liberties. Russia will develop along the path followed by Japan and
Germany, the president said. 

******

#3
INTERVIEW-Putin sees U.S. missile concerns but no threat now
By Oleg Shchedrov

MOSCOW, July 12 (Reuters) - Russian President Vladimir Putin said in an 
interview he saw some merit in Washington's concerns about rogue states' 
possible nuclear missile plans, but no threat from any country at the moment. 

Putin -- a staunch critic of U.S. plans to build a National Missile Defence 
against such missiles -- told Reuters, Russia's ORT television and Japan's 
NHK television that efforts to ward off new threats should not damage the 
existing nuclear balance. 

``I believed and still believe that the position of U.S. President (Bill 
Clinton) has some basis to it,'' Putin said late on Tuesday. ``And the basis 
is that we should assume that such threats can theoretically, in principle, 
emerge one day. 

``But we do not believe that there are such threats now nor that they are 
coming from any specific states,'' he said. 

``In every concrete case we should of course clearly assess and make it clear 
to everyone what we are talking about, what threats, what the scale of threat 
is and where it comes from.'' 

The United States, worried by potential threats from so-called rogue states 
like Iraq, Iran or North Korea, is considering setting up a system which 
would allow it to detect and destroy any incoming ballistic missile attack. 

Washington is pressing Moscow to allow changes in the 1972 Anti-Ballistic 
Missile (ABM) pact, under which each state can protect only a limited part of 
its territory against such attacks. 

Clinton is under domestic pressure to quit the ABM pact, which Russia sees as 
a backbone of all subsequent arms deals, if Moscow refuses to amend it to 
allow the new U.S. anti-missile shield. 

MOSCOW FEARS UNPREDICTABLE CONSEQUENCES 

Russia says altering the ABM could bring about unpredictable consequences for 
international stability and has offered the West the idea of setting up a 
multinational non-strategic system which would not violate the pact. The idea 
is to shoot down rogue rockets as they are launched rather than in 
mid-flight. 

``The difference in our approaches is that we offer to move further, 
preserving the level of mutual trust and the balance of strategic arms 
created as a result of the ABM pact, to work together on limiting potential 
threats which in theory may emerge,'' Putin said. 

The Russian military has pointed to a second failed U.S. anti-missile test as 
evidence that the national missile defence will not work. The system may cost 
up to $60 billion, and Russia has said its project could be realised for much 
less. 

Putin reiterated Moscow's position that a further cut in atomic weapons by 
the leading nuclear states could also contribute to a reduction of potential 
threats. 

He repeated Moscow's call to the United States to limit the number of each 
side's nuclear warheads to 1,500 in the next arms reduction pact, rather than 
2,500 as Washington would prefer. 

``What can be better for mankind than reducing the threshold of the nuclear 
threat?'' Putin said. 

``We are proposing that we should follow that road. It is clear to everyone, 
even if the person is not an expert.'' 

******

#4
Key quotes from Putin interview

MOSCOW, July 12 (Reuters) - Following is a selection of the main remarks 
Russian President Vladimir Putin made during an interview with Reuters, 
Russia's ORT television and Japan's NHK television late on Tuesday. 

ON THE GROUP OF EIGHT INDUSTRIAL NATIONS 

``When Russia started working in that club (the G8)...the talk was mostly 
about reviving and improving Russia's relations with leading financial 
international organisations, about credits for the Russian economy and so on. 

``Today we do not subscribe to that format of relations with the leaders of 
the world's main industrial countries and assume that we will discuss first 
and foremost key international problems together with other participants.'' 

ON REFORMING RUSSIA'S ECONOMY 

``There are, of course, people who feel comfortable in conditions of 
disorder. You know we have a saying about catching fish in muddy waters. Here 
there are fishermen who have already caught a lot and want to keep the 
situation as it is for a long-term historical period. I don't think this is 
acceptable for the Russian people or for our partners abroad,'' he said. 

ON UPHOLDING FREEDOMS 

``I want to assure you that Russia will move towards creation of democratic 
institutions and a democratic state.'' 

``A liberal economy is impossible without the democratic development of the 
state, impossible without the development of democratic freedoms and civilian 
institutions. Only we should not confuse democracy and anarchy.'' 

``No one should doubt that we will not allow anyone to produce anarchy in the 
place of the state and to create a quasi-state.'' 

``Russia will develop along the same lines as Japan and Germany after World 
War Two...But they (reforms) require strength, persistence, patience.'' 

ON HIS GOVERNMENT'S PERFORMANCE 

``The government and the presidential administration are actively working in 
parliament on the whole package of economic bills, including draft tax laws. 
I think that the government could have acted more energetically. Though 
certain decisions have been made by parliament, they could have been more 
radical if the government worked more consistently with the deputies. 

ON U.S. NATIONAL MISSILE DEFENCE PLAN 

``I believed and still believe that the position of U.S. President (Bill 
Clinton) has some basis to it. And the basis is that we should assume that 
such threats can theoretically, in principle, emerge one day.'' 

``But we do not believe that there are such threats now nor that they are 
coming from any specific states. 

``In every concrete case we should of course clearly assess and make clear to 
everyone what we are talking about, what threats, what the scale of threat is 
and where it comes from.'' 

ON JAPAN 

``Japan and Russia are natural partners because we are neighbours. We need 
each other.'' 

``Russia and Japan complement each other from the point of view of material 
needs on the one hand and mineral needs on the other.'' 

ON TERRITORIAL DISPUTE WITH JAPAN 

``The main thing here, it seems to me, is to be patient, not to rush ahead 
but to work, as I have already said, on the basis of the legitimate interests 
of both sides.'' 

``I am absolutely convinced that if we work in this direction, if we develop 
cooperation in all areas, then the problems on the path to a peace treaty 
will cease to be so major and irritating.'' 

ON NORTH KOREA 

``The Democratic People's Republic of Korea (North Korea) is our neighbour. 
We have a shared border, we have a vital interest in establishing peace and 
concord in this region because this has a direct effect on Russia.'' 

``We support the normalisation of relations on the Korean Peninsula. We will 
do everything we can to facilitate this normalisation process.'' 

*******

#5
Russia, US spice up lunch with spat over missiles, Chechnya

MIYAZAKI, Japan, July 12 (AFP) - 
Russia and the United States exchanged accusations over the US anti-missile 
program and war in Chechnya at a lunch here Wednesday, a source said.

Russian Foreign Minister Igor Ivanov hosted US Deputy Secretary of State 
Strobe Talbott on the sidelines of a Group of Eight foreign ministers' 
meeting in the southern city of Miyazaki.

The lunch was held in secret at a hotel restaurant sealed off from the press 
in this Pacific Ocean seaside resort, and details of the content were not 
officially released.

But a source familiar with the encounter said it ranged from Russia's 
objection to the US national missile defence (NMD) program, to the US concern 
about Moscow's Chechnya campaign.

Ivanov protested the missile program and its potential effect on strategic 
arms reduction agreements, the source said.

He made clear that Moscow was "not particularly keen on NMD," the source said.

But both sides agreed to discuss it further when US President Bill Clinton 
meets with Russian President Vladimir Putin on the sidelines of a July 21-23 
G8 leaders' summit in the southern island of Okinawa.

Ivanov's comments came four days after the United States admitted an 
interceptor rocket had failed to shoot down an incoming dummy warhead during 
a key 100-million-dollar test of its prototype NMD system.

The botched test was an acute embarrassment to the Pentagon and Clinton, who 
is due to take a decision on whether to deploy the 60-billion-dollar system 
by the year's end.

Talbott in turn told the Russian side about Washington's worries both "about 
the situation in Chechnhya and the ongoing situation about press freedom," 
the source said.

Putin has been accused of seeking to muzzle media critics of the nine-month 
war in Chechnya following the arrest of the country's top independent media 
magnate.

Talbott told his Russian counterpart that Washington welcomed Putin's debut 
state-of-the-nation address Saturday.

Putin pledged a new "social contract" with Russia's long-suffering citizens 
and vowed to overthrow "the dictatorship of the shadow economy" that had 
plagued the country for years.

The Russian president telephoned Clinton on Monday to say he would travel to 
China and North Korea before heading to the G8 summit, while raising Russia's 
concerns over the NMD program.

*******

#6
Rossiiskaya Gazeta
July 12, 2000
[translation from RIA Novosti for personal use only]
US ABM SYSTEM: PROS AND CONS
Vladimir LAPSKY, Rossiiskaya Gazeta's political analyst 

The United States has tested its third anti-ballistic 
missile the other day, albeit unsuccessfully. A Minuteman ICBM 
was launched from the Vandenberg Air Force Base in California, 
what with yet another revamped ICBM streaking into the "wild 
blue yonder" from Kwajalein atoll (the Marshall Islands 
Republic) some 20 minutes later. However, the United States has 
failed to knock down one bullet with another in the course of 
this widely advertised global space show. Indeed, such 
uncontrollable technology would spell defeat for America, if 
North Korea, due to be deterred by the projected national ABM 
system, decides to launch its ICBMs in the direction of the 
United States.
Jokes aside, who stands to gain from the NMD system's 
deployment? Besides, I'd like to know whether such a system 
would enable the United States to feel safe and tranquil. The 
answer to the first question seems fairly simple. Billions of 
federal budget appropriations would be transferred to the 
accounts of leading US defense industry concerns.
And now a few words about various security guarantees.
The so-called rogue states are in no position to attack the 
United States from outer space at this stage. Consequently, 
this threat apparently doesn't exist. Still let's assess the 
following scenario. Some unspecified country has decided to 
launch its nuclear-tipped ICBMs against the United States. One 
should keep in mind that any theoretical aggressor would also 
boast the required potential for outsmarting US ABM defenses 
and eventually breaching them. Judging by the results of the 
latest ABM tests, the projected national ABM system won't be 
completely missile proof.
However, all these issues are less important than the 
rest. It has already been noted more than once that the world 
would enter a dramatic period of its history, in case the 
United States decides to build an upgraded ABM system. The 
projected national ABM system would destabilize the entire 
global security system, which had evolved so painfully over the 
last few years. Besides, they have said repeatedly that 
America's intentions to beef up its military potential in the 
Asia-Pacific region would inevitably entail a "retaliatory" 
response on the part of Russia and China, in the first place.
Russia now finds it economically inexpedient to squander 
billions of roubles on specific rearmament programs. However, 
the self-preservation instinct is stronger than the rest.
Therefore one can safely say that Russia and China alike would 
react adequately to such US actions.
The US Administration will decide to deploy a national ABM 
system, as planned, before the year is out, thus abrogating the 
1972-vintage ABM Treaty. It ought to be mentioned in this 
connection that the START-2 Treaty was ratified by the Russian 
State Duma several months ago, thereby paving the road for even 
more drastic Russian-US strategic offensive arms cuts. 
Incidentally, our two countries are now consulting each other 
on the future START-III treaty's parameters. By all looks, this 
issue will also be discussed by Vladimir Putin and Bill Clinton 
during the G-8's Okinawa summit. One gets the impression that 
bilateral disarmament, which is now proceeding without a hitch, 
might eventually be jeopardized, what with yet another arms 
race also looming on the horizon. Strange, as it may seem, but 
the United States has swelled its defense budget a great deal, 
spending much more money on national military programs than it 
used to in the Cold War's heyday.
As is known, Russia advocates the joint development of a 
tactical European ABM system. On July 9 the Russian 
Federation's Foreign Minister, Igor Ivanov, voiced a number of 
proposals dealing with that issue. So, here's what Russia 
suggests: 
-- to jointly assess the nature and scale of missile 
proliferation and possible missile threats;
-- to draft the relevant concept of a tactical European 
ABM system, as well as the required procedure for deploying 
such a system;
-- to establish a multilateral European early-warning 
center;
-- to conduct joint command-and-headquarters exercises and 
to implement joint R&D projects and experiments;
-- to develop a tactical ABM system's elements.
The West used to reproach us only a short while ago that 
Vladimir Putin's proposal to deploy a European ABM system was 
rather vague. However, everything has become clear today.
Should the afore-said tactical ABM concept be implemented, then 
it would benefit all parties to that project. However, nearly 
everyone would lose, if the United States moves to deploy its 
ABM system on Alaska contrary to all those reasonable appeals 
and recommendations.

******

#7
Subject: Cracks in the Putin Coalition
From: JensenD@rferl.org (Donald Jensen)
Date: Wed, 12 Jul 2000 

For the JRL
Cracks in the Putin Coalition
By Donald Jensen
RFE/RL

Although Vladimir Putin's public opinion rating remains high, his effort to
consolidate his rule is meeting resistance from the groups that brought him
to power. How he manages these strains may be decisive for the fate of his
presidency.

Since he took office, Putin has faced a dilemma. One the one hand, he is a
product of the Yeltsin system, where political power was highly personal,
interconnected with property, and fragmented among oligarchs, regional
leaders, and the federal bureaucracy. Until his political and physical
decline, Yeltsin preserved this system and his own authority by balancing
these competing power centers. The centers agreed on Putin as Yeltsin's
heir largely because he seemed likely to preserve their interests.

To become his own man, on the other hand, Putin needed to break with the
past. Many voters supported him because of his promises to rein in the
oligarchs, curb corruption and introduce order. In this they were backed
by elements of the security services, which were appalled the excesses of
the Yeltsin era.

Because of this contradiction -- and due to his own inexperience -- Putin's
first months in office were a muddle. During the election campaign Putin
promised a crackdown on the oligarchs, but he was unwilling or unable to
prevent those magnates close to the Kremlin from strengthening their hold
on the lucrative aluminum industry. The new government is a coalition of
economic reformers and ministers with ties to the business oligarchs or the
Yeltsin family. Although its new economic plan says many of the right
things about reform, infighting helped delay it for weeks. Despite the
plan's optimistic tone, the government has shown no sign of having the
authority or determination to take on the Russia's entrenched economic
interests. Indeed, in important ways it represents them. Meanwhile, the
presidential administration, which under Yeltsin had considerable clout in
its own right, continues to play behind-the-scenes politics. 

Recently, as Russian political scientist Lilia Shevtsova has pointed out,
Putin has begun to create an alternative, more centralized system of
governing the country that may fundamentally change the political rules of
the game. His state of the union speech on July 8 was his strongest break
yet with the Yeltsin legacy. Moreover, after a bleak diagnosis of Russia's
ills, the president prescribed as a remedy "a single, vertical line of
executive power." 

First, Putin has stepped up his campaign to subordinate regional leaders to
the federal center. Most attention has been focused on Putin's use of the
compliant Duma majority to pressure the Federation Council - the upper
house manned by the governors -- to agree to his proposals for political
and financial recentralization. Equally important, however, has been the
Kremlin's chipping away of the governors' authority in law enforcement, a
key element in their ability to rule.

Second, Putin has placed political allies in important businesses such as
Gazprom, Svyazinvest, Rostelekom, and Irkutskenergo. Not only will these
moves increase Kremlin control over these firms; it will dilute the
longstanding influence of federal and provincial officials on their
business activities.

Third, the President has packed the previously unimportant Security Council
with intelligence and KGB officers loyal to him. Putin clearly hopes to
transform the council, which includes the so-called "power ministers" -
defense, foreign, interior, and emergency situations, as well as the seven
governors general he appointed to reign in the regions -- into an important
decision making body that will be a counterweight to the Presidential
Administration. Under a bill approved by the Duma in its first reading
last month, the council would run the country if the president declared a
state of political, criminal, or environmental emergency. 

Although Putin currently has the political momentum, it is unclear that his
initiatives will work. The governors' resistance has been greater than
expected, and, no matter what compromise emerges, they will be difficult to
control, let alone dislodge. Media magnate Vladimir Gusinsky's ability to
rally enough support to force his release from jail shows that the
oligarchs can directly challenge the security services. The Security
Council remains a talk shop for now at least and is far weaker than the
Presidential Administration, which can call on a large bureaucracy,
considerable political skill and financial resources. Finally, senior
members of the military can only be privately upset by the rare and
humiliating public reprimand Putin gave them earlier this month after more
than 50 people were killed by suicide bombings in Chechnya. These points
of resistance are far from an organized opposition. Despite oligarch Boris
Berezovsky's recent announcement that he intends to form a political party
to counter Putin, they have few common interests and public opinion is
still strongly behind Putin. Nevertheless, the president needs the support
of some of them to govern and bolster his own political base. As Shevtsova
correctly notes, Putin also appears ambivalent himself about how he intends
to proceed.

Yet for all the attention Putin has given to political maneuvering, he
seems to have done little more than verbally acknowledge the country's
acute economic and social problems. Widely-respected Kemerovo governor
Aman Tuleev, for example, generally praised Putin's July 8 state of the
union address, but wondered why the government has not done enough in
recent months to help his constituents.

******

#8
From: "stanislav menshikov" <menschivok@globalxs.nl>
Subject: "TOO MUCH MONEY" LIE EXPOSED
Statistics Show Stagnant, Not Inflated Demand
Date: Tue, 11 Jul 2000 

"MOSCOW TRIBUNE", 11 July, 2000
"TOO MUCH MONEY" LIE EXPOSED
Statistics Show Stagnant, Not Inflated Demand
By Stanislav Menshikov

When Mr. Putin announced the other day that too much money in the economy
explained higher inflation in June many took it as an undeniable truth. But
whoever put those words in the president's mouth should be ashamed of
themselves. The lie was quickly refuted (albeit vaguely in order to save
Kremlin's reputation) by both Mr. Geraschenko and Mr. Kudrin who know
better than to parrot textbook monetarist formulas with little connection
to reality. The true story is worth telling in plain language.

The monetarist explanation runs as follows. Because oil prices in world
market are high Russia earned many more petrodollars this year than it can
spend for imports. Because its balance of trade surplus is large the
Central Bank has been accumulating a lot of extra dollars and its foreign
currency reserves have shot up close to record levels. Because the
government "stupidly" keeps in force the requirement that 75 per cent of
exporters' dollar earnings have to be exchanged into roubles, their
domestic bank accounts have swollen so much that excessive money supply is
hanging over the economy creating strong inflationary pressures.

To see how little of this is true let us, first, check the figures. In
January-May, this year Central Bank currency reserves increased from $12.5
to $19.6 billion, an addition of $7.1 billion. In rouble terms, this is a
whopping 202.4 billion roubles. But total money supply in the same period
rose by only 95 billion roubles if measured by M2 (total cash in
circulation plus deposits) or by 37.9 billion if measured by the monetary
base. It follows that the Central Bank issued less than half extra roubles
than were earned by the exporters, i.e. was actually following a very
restrictive policy which was working against inflation, not in favour of
it. The Bank also kept the rouble-dollar exchange rate stable around the
28.5 mark with a tendency to fall rather than to rise. This means that
there were no extra roubles chasing the dollar and that prices of imported
goods were stable and not contributing to inflation.

Excessive money supply can translate into more inflation in various ways.
One way is through lower interest rates. But lending rates remained
practically unchanged in the same period and loans to the private sector
lagged behind the rise in nominal GDP. Too much money creates more
inflation only when translated into excessive money demand. But this was 
stagnant and, more importantly, fully covered by adequate supply. No supply
shortages worth mentioning emerged and there was therefore no demand-pull
in the economy.

There is also the complex issue of sterilising excess money supply but this
is a subject to be dealt with separately and at some length. 

Nor was there any pressure from the federal budget to print more money.
Actually, federal expenditure was much smaller than federal revenue
yielding a record primary surplus at 5 per cent of GDP. This also has the
effect of restricting aggregate demand and works against inflation by
creating in fact a deflationary situation in the economy. All domestic
components of GDP on a quarterly basis are stagnant and the same is true of
industrial production. In fact, the economy could benefit from more demand
due to large unused production capacity.

Why then some (in fact, very weak) surge in inflation and why all the
panic about it? There have been steep rises in prices for electricity, gas,
public transportation, rents, communal services, and some food necessities,
including bread. Most of this is explained by actions of the natural
monopolies and explained by cost-push, not demand-pull. The effect on the
cost of living would be even stronger were it not for the seasonal
reduction in foodstuffs. The government has not been monitoring the natural
monopolies as it should and has given a free hand to types like Mr. Chubais
and Mr. Viakhirev who are using any pretext to inflate prices.

The government also added to inflationary expectations by sharply raising
excise taxes on tobacco, alcohol and gasoline. Increased oil export duties
also contributed to efforts of oil companies to raise their domestic
prices closer to world levels. The Russian oil market is an oligopoly which
works much the same way as a monopoly.

Why then all this panic about excessive money supply creating inflation?
The reasons are simple and have nothing to do with monetarist beliefs.
Export companies which are awash with money are reluctant to increase their
investments preferring instead to stash money abroad and want some
"objective" substantiation to increase profits even more. Also, there is an
attempt by rivals in the government and enemies in big business to get rid
of Mr. Geraschenko who is seen as the main barrier to a new devaluation
drive.

It looks like there is a definite effort by vested interests to dominate
Mr. Putin's decision-making in the interests of a rich few rather than in
the national interest. So far, these attempts have been only partly
successful. But the danger remains and should be resisted by all means.

******

#9
From: "John Helmer" <helmer@atom.ru>
Subject: NORILSK DEFENDS POTANIN IN NEW MUD-SLINGING CAMPAIGN
Date: Tue, 11 Jul 2000 

>From Platt's Metals, current
NORILSK DEFENDS POTANIN IN NEW MUD-SLINGING CAMPAIGN
>From John Helmer in Moscow

Norilsk Nickel told Platt's today there is no truth in reports 
the Russian government is pressing for additional payments and for an audit
of 
its trade operations, as the Kremlin's price for settling a court case 
challenging the privatization of the mining company in 1997.

"This is pure nonsense," Larisa Zelkova, a director of Norilsk Nickel, said
in 
an interview. Zelkova also heads the public relations department of Interros,
the financial group headed by Vladimir Potanin, which controls Norilsk 
Nickel, Russia's leading mining company, and one of the world's leading 
producers of nickel and palladium.

Zelkova was reacting to last week's report by Platt's from a source familiar 
with the meeting which Potanin had with President Vladimir Potanin on June
29. 

At that time, the source said, Potanin was told the Kremlin was
far from satisfied with the way Interros and its associated trading 
companies, and Rosbank, conduct the export operations of Norilsk Nickel, and 
account for its trade revenues. Potanin was told the legal challenge to the 
privatization might be settled without changing Potanin's control of more
than 
40% of the mining company. But the Kremlin's condition is that Potanin hands 
back part of the profits the Kremlin calculates he has taken from Norilsk 
Nickel.

Putin's meeting with Potanin followed by a fortnight a move by Moscow city 
prosecutors to ask a city court to rule on the legality of 
the government's loans-for-shares scheme of 1995-1997. This was contrived by 
Potanin to seize control of Norilsk Nickel, Russia's leading mining company, 
at below-market price, using funds provided by the federal government.

On July 6, according to a press leak, the first deputy general prosecutor
Yury 
Biryukov sent Potanin a letter in which he proposed a settlement of the 
privatization claim. Biryukov accused Potanin of conspiring with the then 
state ministry in charge of privatization to rig a sale price for Norilsk 
Nickel shares well below their market value. Biryukov proposed Potanin pay 
$140 million as the difference between the price paid in 1997 and the market 
price.

"In the event of voluntary compensation of losses amounting to $140
million," the prosecutor's letter stated, "you will not face any claims in 
court in future."

At the time of the privatization auction in August 1997, Potanin won control 
of Norilsk Nickel with a bid of $284 million. This, plus the unpaid loan 
Potanin extended to the government two years earlier for $171 million, 
represent an effective price of $455 million. Valuations of the market price 
of the shares Potanin acquired at the time range up to $719 million. 

The prosecutor's letter does not elaborate on the calculation it now proposes 
for the price differential as a loss to state revenues.

Potanin responded by publishing as a paid advertisement in the Moscow press
a reply to Biryukov claiming the only place to resolve the conflicting claims 
is in court. The settlement offer, Potanin said, suggests that "the case
won't 
make it to court... I consider the results of privatization of Norilsk Nickel
unshakable. But if the prosecutor's office has a different view, I propose 
that this matter is considered in court hearings in arbitration court."

Zelkova told Platt's she thinks the Biryukov letter "was motivated by an 
ill-natured belief in the omnipotence of the prosecutor's office."

Russian newspaper reporters have aired a variety of rumors, suggesting that 
other Russian metal magnates may be behind the attack on Norilsk Nickel's 
privatization, and on Potanin personally. Potanin's allies in the State Duma
have formally requested a government inquiry into several of those accused.

However, Zelkova denies that Norilsk Nickel or her group is behind the 
mud-slinging. "We don't think any concrete person or group of people is 
behind the attacks on the results of privatization of Norilsk Nickel. It is 
just that, at the moment, there are many different points of view concerning 
the defence of state interests among the law enforcement agencies. At
the same time, there are no established legal standards for operations of
the law enforcement agencies, which lead to such inadequate and
unprofessional actions as the letter Potanin got."

******

#10
The Guardian (UK)
12 July 2000
Editorial
MR PUTIN'S TWO FACES: RUSSIA'S LIKELY FUTURE IS GROWING CLEARER

Four months after his landslide poll victory, President Vladimir Putin of
Russia has belatedly produced an election manifesto. His state of the
nation address last weekend, coupled with recently promulgated foreign
policy, national security, and military 'doctrines', have finally shed some
light on how he intends to run Russia. Our pre-election question, 'who is
Vladimir Putin?' may now be confidently answered. It transpires he is two
quite different people wrapped into one. 

To the world at large, Mr Putin presents a plausible if unlovable face.
Sidestepping the vexed question of Nato enlargement, and burying the Kosovo
hatchet, his administration now says it wants a constructive relationship
with the US and the west. On arms control, Mr Putin has deftly gained a
moral advantage, pushing through Duma ratification of the Start II accord
while leading the charge against America's treaty-busting national missile
defence plans. Far from alienating the west, these and similar initiatives
have impressed European governments, who have their own concerns about NMD
and proliferation. 

Mr Putin's desire to create a 'multi-polar' world free of American hegemony
has appeal in capitals as far apart as Paris and Beijing. The Russian
leader will use a coming visit to China (and North Korea) to explore other
areas of cooperation. One is a shared abhorrence of anything that smacks of
interference in their internal affairs. For Russia, this means Chechnya;
for China, Taiwan and Tibet. They also agree on the need to uphold the
primacy of the UN in international affairs and, for example, the necessity
of lifting sanctions on Serbia and Iraq. But such convictions will not
prevent the pragmatic Mr Putin attending the G8 club's summit in Okinawa on
July 21, where he will hope to exploit his recent acquaintance with Bill
Clinton and Tony Blair. Mr Putin's canny message to the outside world is
that his post-Yeltsin Russia will be a stable, business-friendly democracy,
committed to open markets, lower taxes and state sector reform; a Russia
with which the west would do well to engage through trade, aid, investment
and common-sense realpolitik. It is in fact the message he knows the west
badly wants to hear. How else to explain its silence over still unchecked
atrocities in Chechnya, and the EU's sickening, cynical decision this week
to resume Dollars 90m of suspended Russian aid? 

To the Russian people, however, Mr Putin presents a very different face.
Since taking office he has sought swingeing powers enabling him to suspend
political parties, impose emergency rule, close down independent media and
monitor email and internet traffic. He has placed his old KGB/FSB and St
Petersburg cronies in key jobs, moved to reduce the autonomy of elected
regional governors, and secured a rubber-stamp Duma majority. Mr Putin's
apparatchiks have targeted in particular the Media-Most opposition media
group, arrested its boss, Vladimir Gusinsky, and gravely harassed brave
reporters like Andrei Babitsky. 

In his national address, the president resurrected the age-old Russian
ideal of strong state, strong leader, while warning of fearsome chaos if
his will were thwarted. Authority, he said, 'should rely on the law and a
single, vertical line of executive power'. At last, all is clear! Here is a
true Platonic solution. Mr Putin and his pals in his unelected security
council will be the unfettered arbiters of the laws, while ultimate
decision-making rests with him alone. For those in the west who have not
already turned a blind eye, Mr Putin's two-faced, tsarist tendencies will
bear close watching. 

*******

#11
From: "Andrew Miller" <andcarmil@hotmail.com>
Subject: Interview with Victor Shenderovich of “Kukly”
Date: Wed, 12 Jul 2000 

Topic: Pulse Magazine
Title: Interview with Victor Shenderovich of “Kukly”

The only English-language source in St. Petersburg for engrossing, edgy 
interviews in English with the movers and shakers of Russian politics and 
culture is the monthly color tabloid PULSE (also published in Russian). 
Unfortunately for those outside Russia, I don't think PULSE has a website 
and it is probably otherwise unavailable to them.

This month’s issue contains an interview with Victor Shenderovich, 
one of the creative forces behind the Russian version of SPITTING IMAGE, the 
political satire using dead-on rubber doll copies of politicos. The Russian 
version is called "Dolls" (“Kukly”) and several serious attempts have been 
made to remove the program from the air and label the creators traitors to 
the Mother/Fatherland.

The following is a verbatim excerpt of the first two questions and answers 
from the interview (for personal use only) by staff reporter Nadya 
Kozhevnikova:

KOZHEHVNIKOVA: FILM DIRECTOR ANDREI KONCHALOVSKY HAS SAID THAT RUSSIA HAS 
TASTED UNLIMITED FREEDOM UNDER YELTSIN AND NOW ITS TIME TO GIVE AND TO OBEY 
ORDERS, ADDING THAT THIS IS A GOOD THING. WHAT DO YOU THINK?

Shenderovich: There’s freedom and freedom: freedom in the democratic 
sense and freedom of outlaws. Our choice is always between Pugachev and 
Paul I. None of these choices has anything to do with freedom or democracy. 
Yeltsin’s decade won only one thing for us – freedom of speech, and that’s 
exactly what they are about to take away again. In every other way the 
Russian citizen is still as unprotected from the horrors of living in this 
country as he ever was, and this is not likely to change any time soon. 
They are trying to sell us patriotism, statehood and Great Russia in 
exchange for freedom of press and our right to make life decisions 
independently. Marvelous specimens of creative bureaucratic phraseology are 
already in circulation: “anti-state television” and “anti-state press” and 
so on. I’ve heard these phrases from the Tsar’s henchmen many times, 
they’re anything but new. They were in circulation in Germany in the 
1930’s. We know who used them and how it ended. I’m not sure it’s in 
Russia’s interests to try it all again. They have effectively divided 
society into “good guys” and “bad guys”. They can do whatever they want to 
the bad guys since they are anti-state and since the state is the people, 
those forces and the media are also the people. We were force-fed this 
spiel in the Soviet Union till we choked. We’ve been through that. Now 
we’ve proved Bernard Shaw right once again. He said that the only lesson of 
history is that no one ever learns any lessons from history.

KOZHEVNIKOVA: IN RUSSIA, IT’S A TRADITION TO STEP ON THE SAME RAKE OVER 
AND OVER AGAIN.

Shenderovich: Remember when Sharikov, the dog-turned-man from Bulgakov’s 
Heart of a Dog, started drinking alcohol and using profanity, and Professor 
Preobrazhensky said, resignedly: “Well, what can you do, knowing where his 
pituitary gland came from!?” They tried to create a new breed of man, but 
ended up with an idiot. Russia has a murky genetic heritage. We’ve never 
been a democracy. We’ve made some feeble attempts at democracy: 
Alexander’s cautious reforms, the abolition of serfdom in 1861, and a few 
months after the February 1917 bourgeois revolt. Here we go again. Note 
the fact that no real liberal has been in power a single day. The biggest 
lie of the 1990’s is that “democrats have ruined the country, they’ve stolen 
everything.” We’ve seen an ex-Komsomol president and an ex-Central 
Committee Prime Minister. Now we have an ex-Central Committee parliament 
speaker and an ex-KGB president. Who forms the bulk of the bracket we call 
“New Russians” who’ve got their fingers in different pies, perks and 
freebies? They all used to be high-ranking communist party or Komsomol 
bureaucrats. Do you know who chairs Moscow’s English Club? Victor Mishin, 
ex-First Secretary of the Central Committee of the Komsomol. Who’s 
editor-in-chief of the Moskovsky Komsomolets national daily newspaper? It’s 
Pavel Gusev, former ideology secretary of the Krasnopresensky District Party 
Committee in Moscow. Wherever you look, the top person is a reincarnated 
former party or Komsomol functionary. When freedom set in it suddenly 
transpired that the whole country is just a big chunk of no-man’s-land, and 
it’s up for grabs. You and I were fairly far away from where the grabbing 
happened, but those people were smack in the middle of it. They carved the 
pie between themselves and decided to call themselves “liberals.” Now 
everyone is really mad at those “liberals”. I suggest that people use 
what’s left of their alcohol-drenched brains to take a closer look at the 
situation. Those people have nothing to do with democracy or liberalism.

Andrew Miller
St. Petersburg

*******

#12
Russia: US Leaders Dispute Moscow's Loan Restructuring
By Andrew F. Tully

Russia still owes the U.S. government nearly $5 billion in debt dating back 
to the World War II. Moscow owed a payment on that debt at the beginning of 
July, but the U.S. administration is allowing Russia to postpone the payment 
to ease pressure on that nation's cash flow. RFE/RL's Andrew F. Tully reports 
that some leaders in the U.S. Congress say Washington should not be indulging 
the Russian government, given the war in Chechnya and Moscow's support of 
Slobodan Milosevic.

Washington, 11 July 2000 (RFE/RL) - A leader of the U.S. Congress is 
retaliating for the decision by the administration of President Bill Clinton 
allowing Russia to postpone a $155 million payment on a loan that is decades 
old. 

Senator Jesse Helms (R-North Carolina) says he will suspend Congress' 
consideration of all pending ambassadorial nominations until Clinton changes 
his mind. 

Helms, chairman of the Senate Foreign Relations Committee, is joined in his 
opposition to restructuring Russia's debt repayment to the U.S. by 
Congressman Benjamin Gilman (R-New York). Gilman is chairman of the House of 
Representatives' International Relations Committee. 

Helms and Gilman argue that such help on Moscow's loan repayment would only 
reward the government of Russian President Vladimir Putin for the war in 
Chechnya and its continued support for the government of Yugoslav President 
Slobodan Milosevic. 

Russia still owes a total of $485 million to the United States. Some of this 
debt was incurred nearly 60 years ago when the Soviet Union and the U.S. were 
allies against Nazi Germany and Washington loaned it money for food, 
machinery and other material necessary to fight the war. The $155 million 
payment on the debt was due on July 3. 

One June 30, the Clinton administration notified Congress that it was 
allowing a postponement of the payment. 

A spokesman for Helms' committee (Mark Thiessen) says the chairman finds it 
"unacceptable" that the Clinton administration would give Russia financial 
help that could only help Moscow pursue its war against Chechen separatists. 

And Helms wrote in a June 14 letter to Madeleine Albright, the U.S. secretary 
of state, that Russia recently made a $150 million loan to the government of 
Yugoslavia. The amount is nearly the same as the postponed payment. 

The Clinton administration has cited two primary reasons for allowing the 
payment to be postponed. It notes that the Russian government is still 
feeling the effects of the country's financial collapse of nearly two years 
ago, and to make the July 3 payment would have been a hardship. And if Moscow 
had defaulted on the payment, Russia automatically would have lost its normal 
trade status with the U.S., and its exports would have been assessed higher 
import duties. This would have further hurt Russia's fragile economy. 

Second, the administration argued that postponing the payment was part of a 
larger agreement between Moscow and what is known as the "Paris Club" of 
nations that are Russia's creditors. These countries -- including Britain, 
Germany and Japan -- decided last August to delay $8 billion worth of 
payments for the years 1999 and 2000. State Department spokesman Richard 
Boucher says the U.S. could not unilaterally withdraw from that agreement 
without causing the entire agreement to collapse. 

Helms dismisses these arguments, and says they would not even be at issue if 
Russia were to call a unilateral cease-fire in Chechnya and end its support 
of Yugoslavia. 

Ian Vasquez, an economist at the Cato Institute, a Washington think tank, 
says it is irrelevant whether the Paris Club agreement collapses. He told 
RFE/RL that the U.S. has been wasting money on Moscow -- whether as the 
capital of a totalitarian Communist state or a fledgling democracy -- for six 
decades. And after all this time, he says, there is nothing to show for the 
investment. 

Vasquez dismisses the argument that the current Russian government must be 
given leeway in paying a debt that was in large part incurred by the Soviet 
Union. 

"I consider that an odious debt. You have a dictatorship that indebted its 
own citizenry, and now it's being forced -- the citizenry is being forced to 
pay back those debts. That money is lost," he says. 

Vasquez says it is time for the West in general and the U.S. in particular to 
scrap its current policy of helping Russia and replace it with one that would 
drastically reduce aid or eliminate it altogether. 

Harley Balzer, a professor of Russian studies at Georgetown University, 
disagrees. He says much of the dispute between Clinton and his opponents in 
Congress focuses on the election-year politics. Americans will vote on a new 
president in November. At the same time, one-third of the Senate's 100 seats 
is being contested, as are all 435 seats in the House of Representatives. 

Balzer told RFE/RL that forcing Russia to make its debt payments on time 
would have no meaningful effect on Russia's support for Milosevic or its war 
in Chechnya. He says: "Nothing is going to solve the Chechnya problem, right 
now. They haven't solved it in 200 years. Northern Ireland isn't solved, the 
Basques aren't solved. You know, Russia's just going to have to get used to 
living with the kind of things that Northern Ireland has lived with." 

Balzer says he believes Clinton's policy of giving limited help to Russia 
seems preferable, especially since his political opponents have little to 
offer as an alternative. 

*******

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