July 22th, 2000    
This Date's Issues: 4417 • 4418   • 

 
Johnson's Russia List
#4418
22 July 2000
davidjohnson@erols.com

[Note from David Johnson:
1. The Russia Journal: Andrei Piontkovsky, Wrong century for little colonel.
2. Jamestown Foundation Monitor: DID GENEVA EVER MENTION ALLEGED 
DIVERSION OF RUSSIAN LOAN?
3. Vlad Ivanenko: Renegotiating the Russian debt.
4. Vlad Ivanenko: Re: 4417-9 Charlton - World Bank in Russia.
5. The Globe and Mail (Canada): Geoffrey York, Literature vs. pulp 
fiction. Winning a prestigious literary prize hardly brought Mikhail 
Butov fame and fortune. But he's optimistic about Russian literary 
life.
6. The Globe and Mail (Canada): Sandra Martin, Literature vs. pulp 
fiction. Crime thrillers were too bourgeois for the Soviets, but
today's Russians demand homegrown pulp.
7. RFE/RL: Paul Goble, Undoing An Old deal? (Russian debt)
8. Edward Lucas/Economist: Chechen wedding.
9. Itogi: Vladimir Mau, PARTING WITH OLIGARCHS. The State No 
Longer Depends on Organised Actions of Business.
10. gazeta.ru: Putin`s First Privatization. (oil company ONAKO)
11. APN: Soccer players ask Putin to restore the USSR.
12. The Russia Journal: Ajay Goyal, For Russia, better virtual 
than real. E-government could be the answer to Russia’s problems.] 

*******

#1
The Russia Journal
July 22-28, 2000
SEASON OF DISCONTENT: Wrong century for little colonel
By Andrei Piontkovsky

The political conscience of Russia’s second president is torn and
contradictory but at the same time follows its own absurd logic and
integrity. For anyone wishing to examine the case of Vladimir Putin, his
address to the Federal Assembly provides excellent material. What stands
out is that the hitherto respectful heir, not naming names, it’s true,
heaped devastating criticism on his predecessor.

The passages about the demographic catastrophe and the imminent extinction
of the Russian people looked directly inspired by the Communist
opposition’s traditional condemnation of Boris Yeltsin’s occupation regime
and accusations of genocide of the Russian nation.

The economic section, written by ultraliberal adviser Andrei Illarionov
also condemned Yeltsin’s criminal regime, though from the other direction.
The previous authorities, it turns out, were liars and populists. They
tried to keep broad-based social programs afloat and failed in their
mission. And it was these attempts at showing false humanity that held back
Russia’s economic growth.

Were Putin better at creating a synthesis of his advisers’ various ideas,
he could have expressed his basic message to his voters far more succinctly:

"The occupation regime of Boris Yeltsin has brought you to the verge of
extinction, but it was a regime of lies and populism, and so you didn’t die
off quite fast enough. Our new patriotic power will be built on honesty and
principle. It will abolish all social guarantees and you will die off much
faster. Future generations, however, will live in a Great and Strong Russia."

This piece of Putin’s absurdity is not without its iron logic and its
passionate, sincere idea – the idea of an economic breakthrough carried out
using the methods of an authoritarian police state. This economic leap
forward is needed to return Russia to the ranks of the world’s leading
nations.

The idea of a strong police regime was not born in the mind of a modest
colonel. It just happened to appeal to his heart when by an incredible
twist of fate he became president of Russia. The idea itself matured over
the last decade in the minds of "intellectuals" dreaming of a Russian
Pinochet, who would lead the country to the radiant free market future with
an iron hand.

When former minister in the Yegor Gaidar government and oligarch Pyotr
Aven, one of those whose greed and stupidity helped bring the country to
today’s lamentable situation, shared his thoughts on TV on the merits of
the Pinochet regime and why it would be a good model for Russia, I always
wanted to ask him who he planned to have shot at Luzhniki stadium – himself
along with Mikhail Fridman?

Putin’s address gives the answer – a hard-line police regime is necessary
in order to carry out "reforms" in conditions of no social guarantees and
no opportunity for the discontented to protest.

This type of project could potentially succeed if the aim of reform were to
have an impoverished population digging the maximum number of canals,
excavating the ground and raising "industrial giants." This was how the
industrial revolution of the 19th century took place and how Russia was
modernized in the first half of the 20th century under the Stalin regime.
Similar methods were used to achieve progress in the Southeast Asian
countries in the second half of the 20th century.

But in this, the 21st century, Putin’s project is doomed to failure. The
Internet represents the 21st century’s economy – an economy of people with
the freedom to create and unlimited access to information. The little
colonel has got the century wrong. 

(Andrei Piontkovsky is director of the Center of Strategic Research.)

*******

#2
Jamestown Foundation Monitor
July 21, 2000

DID GENEVA EVER MENTION ALLEGED DIVERSION OF RUSSIAN LOAN? The 
International Monetary Fund has denied charges made in an Italian newspaper 
that all or part of its US$4.8 billion "stabilization credit" sent to 
Moscow in July 1998 was diverted, and that Prime Minister Mikhail Kasyanov, 
who at the time was a deputy finance minister, was responsible for the 
diversion. Last weekend, Italy's La Repubblica quoted what it said was a 
letter from Geneva magistrate Laurent Kasper Anserment, in which he ordered 
that a number of Swiss banks be investigated for signs of the missing IMF 
money, billions of which allegedly passed through a European subsidiary of 
Russia's Central Bank to the Bank of Sydney, National Westminster of 
London, Credit Suisse and the Bank of New York (BONY). The paper claimed 
that Kasyanov was responsible for the funds' "tortuous" movements (see the 
Monitor, July 17). Martin Gilman, head of the IMF Moscow office, 
subsequently told a newspaper that he was surprised by La Repubblica 
article, given that the Swiss authorities had not approached the Fund in 
connection with an investigation of the alleged diversion of the Russian 
stabilization credit. Gilman said that the allegations in the newspaper 
"almost completely" coincided with charges made earlier by Viktor Ilyukhin, 
a radical Communist Party deputy, and that the accusations had been refuted 
by an audit carried out by PricewaterhouseCoopers. Gilman also questioned 
La Repubblica's claim that Kasyanov was responsible for the alleged 
misappropriation of all or part of the credit, saying that Kasyanov, who in 
1998 was a deputy finance minister in charge of Russia's foreign debt 
negotiations, was not involved in negotiations with the IMF (Vremya 
novosti, July 20).

In early 1999, Viktor Ilyukhin, who then headed the State Duma's security 
committee, claimed he had evidence that part of the IMF's US$4.8 billion 
credit was "distributed, with the participation of the president, among 
Yeltsin's nearest top associates and most trusted officials," and that 
US$235 million from the credit went to an Australian company in which 
Tatyana Dyachenko, Yeltsin's daughter, had a 25-percent stake. Ilyukhin 
offered no proof for his charges (see the Monitor, March 24, 1999). The 
PricewaterhouseCoopers audit which Gilman referred to was ordered after it 
came to light that Russia's Central Bank officials had placed billions of 
dollars of its hard currency reserves in FIMACO, an obscure Channel Islands 
assent management company. The audit found, among other things, that 
Russia's Central Bank had kept a separate set of books for transactions 
involving FIMACO, used parts of its reserves to extend credits to Russian 
commercial banks, used funds from both its hard currency reserves and IMF 
loans to speculate on the Russian treasury bill market, and kept the 
returns from those operations off its books. IMF Deputy Director Stanley 
Fischer later admitted that Russia had "lied" to the Fund about FIMACO (see 
the Monitor, August 2, 1999).

A Russian newspaper today reported that the Swiss Prosecutor's Office has 
launched an internal investigation of the "leak of information" concerning 
Kasyanov's possible involvement in the disappearance of the IMF credit. It 
also reported that prosecutor in the Swiss canton of Tichino had 
"partially" confirmed the leaked information and, further, that the federal 
authorities in Switzerland had not availed themselves of the opportunity to 
refute La Repubblica's report (Moskovsky komsomolets, July 21).

*******

#3
Date: Thu, 20 Jul 2000 
From: Vlad Ivanenko <vivanenk@julian.uwo.ca>
Subject: Renegotiating the Russian debt

Quite a while ago I posted a comment on JRL on the attempts of Russian
debt negotiators to push for a relief. I stated that the objective
contradicted the general trend of Russian-Western relations and
suggested that the negotiation would be more productive if it was tied
up with other issues. One of the possible continuations was to tie the
issue of debt payment with the opening of creditors’ markets to
Russian-made goods. In this respect the experience of war reparations
gained by some nations after the WWI and WWII would be relevant to the
modern Russian situation.

Apart from JRL I planned to publish an extended version of the comment
in an academic journal. Unfortunately, I was disturbed by the reduction
of debt at the next London Club negotiation and, thinking that the issue
would disappear by itself to the time of publication, I dropped the
comment out of the final version of my article. Apparently, Russian debt
is back into the spotlight. Let me repeat the main argument in brief.

Russia was an adversary during the Cold War and, unlike Poland, it
cannot avoid paying in the end in one form or another. This situation is
reminiscent of what happened to Germany in 1923 and Finland in 1946. But
those countries behaved differently: Germany pressed with debt relief
and was finally alienated up to the point of going bellicose, while the
smaller payers after the WWII negotiated their deals with the Soviet
Union. While paying the reparation through barter deals, they developed
contacts with Soviet customers and, for example, even after the payment
stopped Finnish ship-makers continued serving the same market. It is
worth noting that Finland did not produce ships before the WWII.

Russia could follow the suit and to pay its debt in barter. Since
Russian products are routinely discriminated whenever they become
competitive in the West, it would be beneficial for Russian industry if
that country would tie payment with trade. I do not think that any
respectable economist would confront such approach as having no sense.
One might take any textbook on international finance see that curency
earnings are intimately connected with trade.

I think that time is ripe for Russia to think about more ingenious ways
to pay its debt than to put Kasyanov in charge of negotiations. My
impression is that he is able to forge deals only when he has an upper
hand. Now he seems to be at loss how to proceed. (BTW, who has invented
that Kasyanov is a ‘liberal economist’? If a person graduates with a
degree in civil engineering and continues working as a state
administrator with some knowledge of managerial accounting at best, is
he an economist? And if he is not an economist, then definitely he does
not qualify to be called a liberal economist.)

*******

#4
Date: Sat, 22 Jul 2000 
From: Vlad Ivanenko <vivanenk@julian.uwo.ca>
Subject: Re: 4417-9 Charlton - World Bank in Russia

Charlton writes: "Some Russian experts blame foreign aid programs for
feeding corruption and urge the World Bank and other foreign lenders to
clean up or clear out."

After having worked in two projects funded by CIDA (Canadian International
Development Agency) I think the situation is even more disturbing: the
lender has not only closed eyes on indication of corruption on Russian
side but hushed up following criticism of such behavior. Pleasing Russian
counterparts was more important for local bureaucrats than actual results. 

Apparently, "business as usual" is what unites bureaucrats of all stripes. 
But what should unite the concerned citizenry from around the world
responding to the challenge? 

Vlad Ivanenko, Ph.D. candidate in economics
University of Western Ontario

******

#5
The Globe and Mail (Canada)
July 22, 2000
Literature vs. pulp fiction
Winning a prestigious literary prize hardly brought
Mikhail Butov fame and fortune. But he's optimistic
about Russian literary life.
GEOFFREY YORK
Moscow Bureau Chief

Mikhail Butov won the most prestigious literary prize in Russia last year for 
his first novel, Freedom,an existential study of an unemployed recluse in a 
shabby apartment in contemporary Moscow.

Butov, 35, was the youngest writer ever to win the Russian Booker Prize. In 
the West, an author who won a top prize at such a young age might be 
propelled to wealth and fame. But literature in Russia has tumbled from the 
heights of glory. Now it is one of the least glamorous professions in the 
country.

When his award was announced, Butov had never even received a contract from a 
publisher. His prize-winning novel had been published in two thick issues of 
Novy Mir (New World), the literary journal where he toils as an editor.

When he finally landed a publishing contract for his novel, his cash advance 
was exactly zero. His only compensation was 200 copies of the book, out of a 
print run of 2,000 copies.

Butov won a cash prize of $12,500 (U.S.) for his award, but he was afraid to 
invest it anywhere in Moscow because it could be stolen. He tried to open a 
bank account in Germany but, as a Russian citizen, he wasn't permitted. After 
taxes, Butov had just enough left to buy a Lada. It was the first automobile 
he ever owned. "I learned how to drive a car," he smiles proudly.

Butov, a bear of a man who shambles around the spartan offices of Novy Mir in 
sweaters and sneakers, is a graduate of an electrotechnical institute. He has 
never received any formal literary training. Aside from literature, his main 
passions are jazz, films, poetry and Orthodox church singing.

He survives on his monthly salary of $300 (U.S.) as an editor at Novy Mir, 
plus his small income from moonlighting as a jazz DJ at a Moscow radio 
station. He lives in a suburb in a bleak, five-storey concrete apartment 
block from the 1960s. He and his wife and son are crammed into a tiny 
two-bedroom apartment, which he cheerfully describes as "repulsive."

The usual sources of income for a Western writer -- a teaching job or a 
university position -- don't exist in Russia. The salaries of teachers are 
even lower than those of writers and editors. Butov sometimes remembers with 
amazement the privileged lives of the officially recognized writers of the 
Soviet era. "They had a fantastic life," he says. "They were fully supported 
by the state. They could travel around the world without spending a penny 
from their own pockets. They could go on ocean cruises. They could go to 
places where ordinary Russians could never go -- as long as they totally 
supported the regime."

Butov might have every reason to be bitter and cynical, but he refuses to 
complain. And despite all of its financial hardships, he insists that the 
Russian literary industry is stronger and healthier than it has been for many 
decades.

"Four or five years ago, people thought that literature was doomed, 
literature was dying in Russia. But it wasn't true. We've never had such a 
favourable period in my lifetime. Publishing houses are surviving without 
government subsidies and grants. They're existing on the sales of their 
books. I don't know any talented writer who cannot find a publisher."

What's more, he says, literature exists in an honest space now, free from 
ideology. "It turns out that not every writer who fought the regime or 
emigrated was a great writer," Butov says. "Some writers who conformed have 
remained interesting writers. . . . A new generation has grown up, and it 
doesn't want to continue those old games. You cannot just say, I'm a writer, 
you must respect me. If this new generation needs someone to teach them how 
to live, they'll find their own teachers."

*****

#6
The Globe and Mail (Canada)
July 22, 2000
Literature vs. pulp fiction
Crime thrillers were too bourgeois for the Soviets,
but today's Russians demand homegrown pulp.
SANDRA MARTIN
Books Reporter

Moscow -- Intellectuals sneer at her cardboard plots, but the most popular 
writer in Russia is Marina Alexeyeva, a chain-smoking criminologist with a 
penchant for tight pants, leopard-skin-patterned shirts and long, 
gold-painted fingernails.

Alexeyeva, who uses the pseudonym Alexandra Marinina, has produced 22 
detective novels since she wrote her first one in 1991 in her spare time from 
her job as a police lieutenant-colonel at Moscow's Interior Ministry Academy.

Now 43, she retired two years ago, when her pension kicked in after 20 years 
of service. That's also when she and her husband finally moved out of the 
tiny apartment they shared with her mother and found their own modest place.

"I studied crime and criminals for many years," she explains during an 
interview in her agent's office. "I wrote about it in scientific journals, 
but there came a time when I wanted to write for a wider audience."

Nobody can deny she has achieved her wish. Her novels, which all feature the 
same central character, police investigator Nastya Kamenskaya, have sold more 
than 23 million copies and been translated into 18 languages, including 
Chinese, Latvian, Korean and Swedish -- but not English. "There have been 
many offers," she says, "but so far nothing suitable."

She wrote her first book, almost as a dare, with a colleague. "He was 
Alexander and I was Marina so we combined our names." When she decided to 
continue on her own, she kept the pseudonym in order to separate her 
crime-writing from her professional writing about crime and criminals.

In a society obsessed by crime rates and the Russian Mafiya, her books are so 
popular that it has become a cliché for journalists to report "that does not 
happen even in Marinina's stories." Russian television has produced a series 
called Kaminskaya, based on eight of her novels, and an Italian production 
company has bought the rights to make a dozen of them into films.

All of this would have been unthinkable in the old Soviet Union. Crime 
fiction was too bourgeois for Soviet tastes. "Nobody would have published 
me," she says emphatically, dragging deeply on a Salem cigarette. "I was not 
a member of the Communist Party and so I didn't belong to the Writers Union. 
And I was not willing to write the way they wanted me to."

After the collapse of the Soviet Union and the end of censorship, Western 
literature, including detective stories, flooded the market. But the novelty 
wore off and Russians began clamouring for homegrown pulp fiction. As soon as 
Marinina felt free to write about the pervasive graft and corruption in 
Russian law-enforcement agencies, she began producing at the rate of half a 
dozen books a year. Her productivity has slowed now to one or two new titles 
a year. "I was younger and stronger back then," she explains.

Marinina considers herself a psychological writer who is primarily interested 
in depicting the ups and downs of everyday life. "It is only after I've done 
that," she says, "that I invent the crime story to tie it all together."

She writes the kinds of books she would like to read. "My heroine is 
practical, like me," she says, "from the same family background and the same 
education." The difference between author and fictional creation, Marinina 
says, with a glimmer of a twinkle from behind her tinted glasses, "is that 
she knows five foreign languages, she can drive, she's younger than me by 
three years and she's one size slimmer."

Jibes from the literati that her books are like toilet paper, or only good 
for reading on trains, sting. "Critics have the right to their own opinions," 
she says, "but those comments show they have no respect for the readers who 
like my books." And there are plenty who do. She receives 20 to 30 letters a 
month on her Internet site from fans. Many of them say that they read her 
books five or six times, even though they know the ending, because they 
identify with her characters and their problems.

"I get lots of letters from readers thanking me for fixing their lives," she 
says. "They use my character as a role model and they improve their relations 
with their families."

Marinina thinks that many Russian writers are still struggling to overcome 
the psychological legacy of the Communist regime. "The Soviet system trapped 
us," she says. "There are great writers in Russia today who cannot write 
anything of interest to ordinary readers because they were taught to write 
something immortal, for the future. So today, few people are reading them."

Although even Marinina wonders at her extraordinary appeal, she knows she has 
tapped into an essential connection with contemporary Russians. "I offer them 
hope," she says, "and I don't have a message to deliver."

*****

#7
Russia: Analysis From Washington -- Undoing An Old deal?
By Paul Goble

Washington, 21 July 200 (RFE/RL) -- The Russian government's drive to get 
foreign governments to write off a portion of its Soviet-era debt appears 
likely to exacerbate Moscow's relations with the West and perhaps even more 
with the former Soviet republics. 

Writing in London's Financial Times on Thursday, Russian Prime Minister 
Mikhail Kasyanov urged the Paris club of Western government lenders to 
forgive more than a third of Moscow's $42 billion in Soviet-era debts. He 
said such debt forgiveness was needed to guarantee the success of his 
goverenment's new economic program. 

That argument has not yet impressed most Western governments, including those 
which have been sympathetic to rescheduling some or all of these obligations. 

German Chancellor Gerhard Shroeder, for example, said this week that Berlin 
is not prepared to write off any of the debt. The Canadian government has 
been equally adamant. And U.S. lawmakers have rejected the idea noting that 
Moscow is pursuing an expensive military campaign in Chechnya and sending aid 
to Yugoslavia's Slobodan Milosevic rather than meeting its financial 
responsibilities. 

On the one hand, Western officials point out that Moscow currently is 
enjoying unprecedented earnings from the export of high-priced oil and gas 
and therefore should be able to pay. And on the other, they argue that Moscow 
must meet these obligations as a precondition to its integration into the 
international community. 

But whatever negative consequences Moscow's effort may have for that 
country's ties with the major powers -- and these may be on public view at 
the G-7 plus Russia sessions on Okinawa this week -- its most serious impact 
may be on the relations between Moscow and the former Soviet republics. 

That is because the Russian Federation assumed total responsibility for the 
Soviet-era debt in exchange for agreements by the other post-Soviet states to 
drop claims to Soviet diplomatic and other property abroad. Indeed, that 
exchange was an important aspect of arrangements which allowed the Russian 
Federation to be legally recognized as the successor state to the USSR. 

Having in almost all cases given up such claims, the non-Russian countries 
often found themselves without the funds to lease or purchase their own 
diplomatic missions even as Russian Federation diplomats continued to occupy 
Soviet embassies and consulates around the world. 

A few of these countries nonetheless have raised certain limited claims. 
Ukraine has continued to seek talks with Moscow about 36 parcels of land 
abroad, but the Russian government has been willing to discuss only ten. And 
politicians in all three formerly occupied Baltic states have argued that 
Russia should as the officially designated successor state assume 
responsibility for the damages the Soviet government inflicted on them. 

Moscow's efforts to secure additional debt forgiveness from the West seem 
certain to cause more people there to consider making claims against Moscow. 
Moreover, Russia's efforts to avoid paying on the obligations it had accepted 
are likely to lead many to question Moscow's reliability as a partner on 
other issues as well. 

At the same time, these countries will be following closely the response of 
the Western creditor nations to Russia's request. If the Western governments 
involved insist that Moscow pay its obligations, governments there will 
likely see such actions as an indication that the West wants to treat 
everyone equally. That will give them new confidence that these states will 
support their rights as well. 

But if Western governments should accede to Russian requests for debt relief, 
at least some non-Russian regimes are likely to conclude that the West is 
prepared to defer to Moscow's interests at the expense of those countries 
located around Russia's borders. 

And should the governments of these countries reach that conclusion, they 
almost certainly would strike a less cooperative posture toward Russia and 
toward the West as well. 

******

#8
From: "edward lucas" <esl@economist.com>
Date: Fri, 21 Jul 2000 
Subject: Chechen wedding

First of all, here is a slightly longer version of the piece about 
the Chechen wedding in this week's Economist. The reference to 
Captive Nations week got cut out of the published version for reasons 
of space at the last minute, which was a pity as this event is still 
celebrated and rarely gets much attention these days. Also a rather 
hurried piece about events in Moscow (written from steamy Baku). I 
will try to send some personal thoughts later.

Have a nice weekend
Regards
Edward


A Chechen machine-gun wedding 
pankisi gorge, georgia 

DRIVING towards the wedding, the partially-built roadblocks became 
more and more frequent. Most were flimsy affairs, constructed by 
mischievous looking children. The last one was more serious, being 
put together by big, bearded men, their automatic weapons propped 
against a tree. "They're for later," explained Zia, a black-clad 
Chechen widow, who was bringing a vast cake, along with your 
correspondent, to the wedding. "It's our custom to make the 
bridegroom pay before he can bring his wife home." 

The Pankisi Gorge is a sliver of land on the Chechen-Georgian border, 
populated by Kists, Georgia's Chechen-speaking minority. Even by 
Georgia's anarchic standards, it is wild. Russia claims that there 
are hundreds, even thousands of Chechen fighters based there. There 
are certainly many refugees, no Georgian police, and, barring a few 
aid workers, no foreigners. 

The wedding showed little trace of the war. Hundreds of people, 
sitting on benches beneath a vast awning stamped with the United 
Nations refugee agency logo, guzzled roast meat, fiery pickles and 
home-made white wine. A toast-master versified in both Georgian and 
Chechen. Chechnya's unofficial ambassador to Georgia was a guest of 
honour. The presence of a westerner attracted mostly friendly 
attention: one grizzled Chechen, a retired teacher, wanted to discuss 
Samuel Huntingdon's theory of the clash of civilisations. Chechnya 
and the Caucasus, he argued, were European; Russia was not. Why would 
the West not understand this? 

The conversation was interrupted by the arrival of the bride, 
daughter of a local chieftain, wearing a frilly white dress that 
could have been bought in Macy's. After a final toast, the bridal 
convoy left to the sound of gunfire. 

The first roadblock proved indeed to be serious. It was manned by 
Wahabis, as Chechnya's fiercest Muslims are termed. They wanted 
$1,000 from the happy couple. There was some apparently good-humoured 
shooting into the air; then a heavy truck tried to ram the barricade, 
and, to general enjoyment, toppled off the narrow road into a ditch. 
The standoff seemed likely to continue until late into the afternoon, 
and there were at least a dozen more road-blocks to go. Your 
correspondent's dinner engagement in Tbilisi, the Georgian capital, 
was a good three hours' drive away. 

Wahabis tend be very prickly about westerners, and sometimes kidnap 
them. Explaining the problem and hoping for a laissez-passer seemed a 
bad idea. The Georgian taxi driver, a tiny old man from the nearest 
town, visiting Pankisi for the first time in his life, was upset. "We 
don't do this in Georgia," he said feebly. "It's not normal." Nearby, 
four more burly, bearded men in flak-jackets peered through the 
tinted windows of their jeep, enjoying the scene. "They're from the 
local Chechen special forces," said Zia, beaming at them. "They'll 
take us through the river." 

Our Niva, a rugged little Russian-made jeep, which takes four adults 
at a pinch, had six on board, plus weapons, as it hurtled down a 
footpath towards the river. Timurlane, a gaunt refugee from Chechnya, 
was keen to discuss "Captive Nations' Week", set up by the US 
Congress in 1959, and still celebrated by some old cold-warriors [ie 
me--EL] on the third full week in July. "All the Christian nations 
are free now, but the Muslim ones, us Chechens, the Tatars and East 
Turkestan [the Muslim part of western China] aren't. Why?" 
Water swirled around the windows as the jeep churned across the 
river, then on to a village mercifully free of Wahabis and 
roadblocks. After some tickly kisses and hugs, the Chechens went back 
up the valley. Zia went on to another wedding. This one, she 
explained, had been boring. 

*******

#9
Itogi
No. 29
[translation from RIA Novosti for personal use only]
PARTING WITH OLIGARCHS
The State No Longer Depends on Organised Actions of Business 
By Vladimir MAU, head of the Working Centre of Economic Reform

One of the most popular topics during the discussion of 
Russia's economic and political situation is the role and fate 
of oligarchs. Moreover, the attitude to the problem is quite 
contradictory. On the one hand, everyone dreams about the end 
of the epoch of "oligarchic capitalism" in Russia considering 
this phenomenon to be the product of the transitional period of 
trouble. On the other hand, the unpleasant things which are 
happening to some concrete oligarchs are perceived as the signs 
of the growing threat to political freedoms, especially in the 
context of building a new vertical power structure. 
With the completion of the period of revolutionary 
upheavals, changes in the political landscape are, in 
principle, inevitable. Consolidation of economic and political 
life is the most characteristic feature of getting out of any 
revolution, and is taking place as a new public consensus is 
being formed. The formation of the latter is clearly seen - it 
will suffice to say that the programme of German Gref was 
unanimously supported at the recent government session (even by 
Communist economists). The most important manifestation of such 
stabilisation is a considerable weakening of the role and 
influence of oligarchs. Some of them are quitting voluntarily, 
others under coercion. Some of them are sinking into oblivion, 
others are going down into history. 
This change has not only subjective (political) but also 
objective (economic) grounds. The role of particular 
participants in the economic and political process is changing, 
sometimes inconspicuously for the players in this field. In my 
opinion, this is what has happened to oligarchs.
Amidst all these disputes about the fate of concrete persons 
bearing this glorious name, everyone somehow failed to take 
into account the fact that the oligarchs in that meaning of the 
word, which existed in the mid-1990s, no longer exist in 
Russia. 
The notion of the oligarch as applicable to the 
post-Communist Russia emerged at the end of 1995 and the 
beginning of 1996 in connection with the approaching 
presidential elections and the threat of a Communist come-back. 
A weak and poor state struck a deal with a number of 
entrepreneurs by offering them attractive industrial assets in 
exchange for political and financial support to be provided by 
business. The terms of loans-for shares auctions were extremely 
simple: business would give money and, if everything went off 
successfully in June, it would receive by the end of the year 
the respective assets for ownership. Since then the loans-for 
shares auctions have become a subject of severe criticism; 
however, even today I am convinced that this was a justified 
price for preventing Communists from coming to power again 
since otherwise this would have brought a revanchist chaos for 
many years to come. 
Further on, power continued to be weak and dependent on 
business. Its inability to balance the budget and the need to 
constantly make borrowings on the financial market made power 
exclusively vulnerable to the basic players of this market, 
which, in practice, actually meant its submission to several 
owners of major financial structures. Their actions on the 
financial market, first of all, the decisions to buy or sell 
GKOs (short-term treasury bills) could lead to the fall of the 
rouble, the dismissal of the government and even to the 
collapse of the entire political system of Yeltsin's Russia.
This is what made them oligarchs. 
The dependence of the state on oligarchs was of 
institutional rather than subjective-personal nature. The 
problem consisted not in the degree of smartness of some and 
corruptness of others but in the nature of emerging 
institutions and their respective interests. Moreover, with 
each new deficit-based budget, the real control exercised by 
these oligarchs over the actions of the state also increased.
There is no surprising in that: everyone knows that at earlier 
stages of history the borrower who could not repay the debt on 
time would fall into the creditor's servitude. 
Today all this has gone. The point is not only that the 
financial crisis has undermined the resources of banking 
structures. After all, it would not be so difficult to restore 
political and financial influence: in the early 1990s the 
process of the formation of new oligarchs also developed 
rapidly. However, the main thing consists in the radical change 
of the macro-economic environment: the zero-deficit budget has 
done away with the dependence of power on business and the 
political role of banks has weakened considerably.
Revenues of the state exceed its expenses and debts are being 
reduced. The government has finally turned out to be able to 
promise only what it can do really. 
Thus, the state is getting much freedom of manoeuvre. Now 
it has a possibility to rely on various groups of interests and 
use contradictions between them to stabilise political power. 
It is not accidental that measures for political stabilisation 
(which today are called measures for strengthening the 
executive vertical power) have immediately followed the 
macro-economic stabilisation. 
Naturally, this does not at all mean a dramatic 
strengthening of the state. Power still remains weak. However 
now the problem is of personal rather than institutional 
nature. That is, separate politicians and officials can be 
dependent on specific entrepreneurs and financed by them, and a 
no easy struggle has to be carried out with this. However, the 
state as an institution is not directly dependent on organised 
actions of business any longer. Briefly speaking, power will 
continue to be strengthened and gain ever greater independence. 
This, in general, is a natural process. 

******

#10
gazeta.ru
July 21, 2000
Putin`s First Privatization
Ivan Chelnok, Pyotr Ivanov 

On Thursday, July 21st, the Russian government launched the sale of an 85
per cent stake in the state-controlled oil company ONAKO, Russia’s 12th
largest oil producer. It is the first privatization process of Vladimir
Putin’s presidency. 

Analysts believe the results ONAKO bid results will significantly influence
the investment climate in Russia. However, there are entities willing to
get the ONAKO stake without making bids at all. 

ONAKO’s annual oil production amounts to around 8 million tons, 1.6 million
tons of which it sells abroad. 

ONAKO produces 2 billion cubic metres of gas annually. ONAKO’s key
production units are Orenburgneft, Orenburggeologiya and Orsk Refinery. The
company employs over 22 000 people. When Viktor Chernomyrdin was Prime
Minister, ONAKO was considered one of ‘his’ companies. 

The government is selling an 85% stake in ONAKO, i.e. 328 036 000 shares.
The opening bid for the package is $425,25 million. The winner will be
required to pay a sum of 125 thousand rubles ($4500) to Dresdner Kleinwort
Benson, the company commissioned by the State Property Ministry to evaluate
the stake. 

Bid applications will be accepted starting July 21st till September 5th and
the results will be known by September 8th. 

Among potential ONAKO buyers there are at least three major oil companies –
Lukoil, Yukos and Sibneft. All of them assured Gazeta.Ru, they are
interested in buying a stake in ONAKO but refused to give any details. “At
the moment our specialists are make necessary calculations of the economic
expediency of the ONAKO stake purchase and before those are finalized, we
cannot say whether we will participate in the bid,” a Lukoil spokesman told
us. 

Yukos gave us approximately the same response, which is quite explicable,
for, according to the experts’ estimates, Yukos has already paid over the
odds for state owned shares when it bought the East Oil Company (VNK). 

Sibneft’s press-secretary Alexei Firsov also confirmed that his company “is
potentially interested in buying ONAKO”, however, when asked whether 85% of
ONAKO shares is worth $425 million, he said: “if we think $425 million is a
decent price, we will make the bid, if we decide it is to much, we will
give up participation.” 

Foreign investors’ participation in the bid is not limited, and that is
vitally important for Putin’s government. ONAKO sale is the first
privatization project under Russia’s new president Vladimir Putin, and
foreign investors’ attitude towards the Russian market will depend hugely
on the way the project is implemented. 

On July 20, the day before the bid was announced, Lukoil’s vice president
Leonid Fedun granted an interview to the Financial Times in which he hinted
that the way ONAKO bid is due to be conducted is somewhat dishonest. Lukoil
was accused of tax evasion by the head of tax police this month, but Mr
Fednun said the charges were groundless and were part of the publicity
campaign aimed at discrediting the company. 

He said Lukoil was considering suing the tax authorities for damaging the
company’s reputation. He claimed the attack from tax police had already
affected the company making it more difficult to arrange new credit lines
from foreign banks. Banks are demanding more information from Lukoil now,
he said. 

The attack was the combined result of a ferocious struggle for influence
and assets between powerful business clans and the incompetent actions of
overzealous bureaucrat; “Some oligarchs are rubbing out others,” he said.
Vladimir Putin could become a hostage to the situation. 

So far the tax police have discovered a negligable underpayment not
exceeding 2 million rubles. At a first glance, nobody was robbed. So what
did Leonid Fedun want to communicate to the West? 

Fedun hinted that the tax police’s actions were incited by Lukoil’s rivals.
Fedun described it as a PR campaign against his company. But who initiated
that campaign, then? 

Some observers have suggested that the attack on Lukoil could have been
instigated by Sibneft, noted the FT. 

Perhaps, Fedun is over emotional, but the recent tax attack on his company
came as a complete surprise: “Three days before those accusations, Vagit
Alekperov had a meeting with Putin which lasterd more than an hour.” Fedun
said that charges against LUKoil and other companies “are hitting the whole
Russian equity market, creating the impression of chaos and uncertainty
among investors.” 

But, after all, at that meeting Alekperov could have told the president the
true reasons for the recent attacks against Lukloil. He could have drawn
the president’s attention to the fact that those attacks were intended to
prevent Lukoil from participating in the ONAKO bid, given the fact that the
ONAKO purchase is an episode in a big game with far higher stakes in view
of the upcoming privatization of Transneft. Transneft is Russia’s pipeline
monopoly. 

Most likely Transneft’s president Semyon Vainshtok and not Roman
Abramovitch, will get his hands on the ONAKO stake. 

Semyon Vainshtok has long dreamt of becoming a genuine oligarch. Not so
long ago Vainshtok and an Israeli diamond baron Lev Levayev, joined
Abramovich’s group. The contract marriage was sealed with financial
obligations: last week Transneft reported it was transferring its accounts
to Alexander Mamut’s MDM-Bank, the same bank that holds Sibneft’s accounts. 

******

#11
APN
July 21, 2000
Soccer players ask Putin to restore the USSR

A group of Moscow “Spartak” soccer players and Russian combined team made a
request to Putin for the national anthem to have been changed, “Spartak”
team (Moscow) and combined team press-attach? Alexander Lyvov told the mass
media.

Soccer players consider inadmissible the fact when the Russian national
anthem is performed before matches they, in contrast to their foreign
colleagues, can not sing to encourage millions of their fans since there
are no words in the Russian anthem. The signatories called on Putin to
give, at last, a real anthem to Russia people.

Glinka`s “Patriotic Song” which is the Russian anthem at the moment, in
recent months has come in for intense criticism from expert community. It
is difficult to remember the tune, and to compose appropriate words for it
is practically impossible as its musical style hampers it. A commission at
Culture Ministry of the RF headed by Mikhail Shvydkoy has been working for
several years to find words for the current anthem. The activity of the
commission, however, resulted in nothing. A number of poets, however, tried
to compose words. In particular, alive classic Yevgeny Evtushenko composed
words. But his text, as other poets` ones failed to become words for the
Russian anthem.

It was already during election campaign that the Kremlin thought about
restoration of the USSR anthem (new words are clear to be composed.)
However Putin doesn`t want to introduce the idea himself: those who do not
wish to return to the Soviet Union may feel hurt by the President. Under
the circumstances he can just meet wishes of leading domestic soccer
players who are idols of millions of people. It is difficult to suspect the
young players in their sympathies with totality revenge.

According to experts, Spartak and combined team of Russia seem likely to be
involved in subtle political and technological combination aimed, however,
at a noble deed.

******

#12
The Russia Journal
July 22-28, 2000
For Russia, better virtual than real
By AJAY GOYAL 
E-government could be the answer to Russia’s problems.

If the words President Vladimir Putin spoke to the joint session of
parliament a fortnight ago are to be believed, the Russian government is
about to embark on a truly revolutionary course, one making the state more
transparent, less bureaucratic and more democratic. 

In what would be a dramatic break with Russia's history, Putin, perhaps
without realizing the full implications of it, outlined a plan to limit the
Russian State's authority and, in turn, its ability to transgress on
individual freedoms. His actions to date, or the way his rhetoric has been
interpreted and acted on by underlings, seem to have aimed at an opposing
policy, leading some to wonder whether he understood the depth of his
statement. 

It is obvious now that the attempt to bring order to Russia is being
executed in the usual hackneyed way, by unleashing a campaign led by
bureaucrats (read criminals) against the country's leading businessmen
(also read criminals). 

Still, whoever wrote Putin's speech, or the bulk of it, has set great
challenges for the presidency. Essentially, what Putin laid out was the
blueprint for a well-functioning, well-governed, liberal and democratic
state. One with the utmost respect for private property, individual and
press freedoms, and one that leaves only a minimal number of levers of
control in the state's hands. 

That is where reality and fine words take different paths. If Putin
reflected on his current position regarding the hopes outlined in his
speech, he would see that even his tentative efforts to construct a road on
which to drive through reform are flawed. The president's attempt to
overturn corrupt and powerful bureaucracy at regional and local levels – a
system resembling one of well-entrenched feudal bosses – and to stem the
abuse of federal laws and institutions through his appointment of governors
general, are unlikely to produce the desired results. 

These governors general are likely to find themselves heavily dependent on
local and regional intelligence stations and the assistance of uniformed
officers to ensure that federal orders are obeyed. This is a flawed scheme
and one doomed to fail. Indeed, it is likely to produce the opposite
results to those desired. 

To exercise any of his authority and carry out even a fraction of his
agenda to improve the administration and governance of the country –
economic, social, constitutional, legal and sovereign – Putin will need to
begin with reform of administrative practices at the top. In fact, he will
need to install a completely new system, because the rot in present
institutions has rendered them beyond repair. 

Although it sounds wild, in reality, Russia could simply sack
three-quarters of its bureaucrats and shut down their offices. Those
bureaucrats, of course, with their connections through the insidious
Russian administrative system, would no doubt attempt to ensure the maximum
amount of misery and chaos for ordinary citizens. They have prepared for a
capitalist onslaught like this one for 70 years and are well stocked with
supplies, cash and ample connections within the enemy territory. Such is
their penetration into the new system that the reformers frequently hire
Trojan Horses sent by these regional apparatchik gangs to lead reform
charges that fail miserably at each attempt.

In Russia, to expect such a miracle, one would have to be a deep believer
in, well – miracles. 

So what options does Putin have in relation to administrative reform? There
could be a simpler answer. In fact, the president alluded to it in the
course of his speech. 

Instead of wasting time and energy on reforming the current system, Putin
could attempt to create a new, parallel, cheaper and more transparent state
structure. A structure built to the standards of the 21st century and
endurable through the coming decades of colossal change. A few selected
administrators could be transferred to this new system of administration
and management and then switch over when it matures. 

Along with fresh trainees, a new class of civil servants, prepared over the
next three to four years, and with the prospect of high salaries, could
then be groomed to take over Russia's administration and Putin's dream
system of governance. 

To push this idea to an extent that may initially appear absurd, this new,
parallel administration would be virtual, not real.

This idea makes sense only to few within Russia today. But to those
familiar with the power of information technology, knowledge-management
based systems of management and governance, their implications for future
government and potential to expand into all reaches of life, it is no
laughing matter. 

What I am proposing is the building of a completely new comprehensive
system, creating a form of governance through the construction of a
telecommunications infrastructure that would facilitate the implementation
of what is popularly known as e-governance.

Experiments in this field in some of the world's poorest countries and
cities – from Brazil to India – have shown not only that it works, but that
it is a way of overcoming entrenched social and political problems. The
accompanying and inherent openness, transparency and democratization of
decision-making processes, and the spread of knowledge and information
across frontiers, can empower people to tackle even the most vexing
problems themselves. 

The State (and its corrupt functionaries), as Putin wishes, would then
largely step out of people's way. E-governance provides the opportunity for
a country to bring corruption levels down as well as offering a unique
chance to assimilate into global society.

Countries with well-developed civil societies have the option of taking
existing systems of governance to higher levels of efficiency and
transparency through these new technologies. But in Russia, it would be
much more sensible to simply sideline the existing archaic system and
construct a parallel one. Then, once laws and legislation are in place, the
country could have a new system literally at the push of a button. The
system of Putin's dreams would see Russia governed by a new, hipper and
more modern class of functionary.

Any expenditure made in laying high-bandwidth cables, giving free or
low-tariff connections to individuals, NGOs and educational institutions,
and creating information-kiosks at every street corner, would be better
spent than paying the current bureaucrats.

One community, city, state and region at a time, Russians need to be
brought online with their government, as every government department starts
interacting with people through the Internet. People will need to be
motivated to use e-kiosks in post offices and other community centers to
settle their issues with the administration. 

There is no doubt that dozens of foreign governments, organizations and
charity funds would be willing to come to Russia’s aid, along with global
telecommunication giants and their limitless capital, should the president
show a willingness to turn his words into real action.

True, it would bite deep and hard into a well-entrenched bureacracy that
will offer all kinds of resistance. Other social priorities will be cited
as being more important than putting citizens online. "People are dying of
poverty and disease," they will claim. But just as transcontinental rail
lines and roads, long distance flights, radio and TV shaped the world in
previous centuries, information technologies will change the way leading
countries live and are governed.

Russia will soon have to make a choice: join this global revolution or find
itself lagging behind the poorest Third World nations in e-governance.

Virtual government would also make Putin the virtual president for a while
– and the butt of many jokes. But if Putin fails to take radical action
relevant to the new century and the new world, he will end up being trapped
inside the system that produced him; a system that continues to retard
Russia and hold back its revival. That way he would be reduced to being a
virtual president of a virtual country.

******