July 27th, 2000    
This Date's Issues: 4425 • 4426   • 4427 

Johnson's Russia List
#4427
27 July 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Bloomberg: Russia Drops Embezzlement Case Against Gusinsky.
2. Boston Globe: Brian Whitmore, Russia, facing tax scofflaws, 
changes law; poor face bigger bill.
3. Washington Post: Jim Hoagland, Gore's Long View.
4. RIA: UNITY LEADER ARRIVES IN NEW YORK, OUTLINES VISIT'S AGENDA.
5. BBC MONITORING: ACADEMICIAN PREDICTS LARGE INCREASE IN NUMBER 
OF AIDS-INFECTED PEOPLE IN RUSSIA.
6. Izvestia: Andrei Kokoshin, CONFLICTS THAT AWAIT RUSSIA IN THE 
21ST CENTURY.
7. Izvestia: Andrei Kolesnikov, SETTING NEW TRAPS FOR THE KREMLIN.
8. New York Times: Paul Lewis, Alexander Dallin, 76, Dies; Precise 
Historian of Russia.
9. Bloomberg: Russia Revises GDP Growth Outlook to 5.5 Percent 
>From 4 Percent.
10. Bloomberg: UES CEO Chubais on Board Meeting, Putin and Business.
11. Bloomberg: UES Board to Challenge Management on Confidentiality.
12. Los Angeles Times: Robyn Dixon, Hope Built on a Castle in the Air. 
A small ethnic group in the Caucasus sees its future in the ruins of an 
ancient fortress it wants to turn into a hotel--just across the border 
from the war in Chechnya.] 

*******

#1
Russia Drops Embezzlement Case Against Gusinsky

Moscow, July 27 (Bloomberg)
-- Russia gave up its embezzlement case against Media-Most Chairman 
Vladimir Gusinsky because of a lack of evidence, just six weeks after the 
47-year-old tycoon was jailed in a high-security Moscow prison, the company 
said. 

Russian prosecutors also lifted a travel ban on Gusinsky, who is now in 
Spain. Media-Most, whose flagship NTV television station has been critical of 
the government's war in Chechnya, published a letter on its Web site, signed 
by a top investigator in the Prosecutor General's office, saying the probe 
was dropped and restrictions on travel revoked. Prosecutors wouldn't comment. 

``This shows the Russian legal process is working properly and it is being 
followed, not abused as some people have said,'' said Andy Wiles, who helps 
manage about $450 million in Eastern European funds at Regent Europe Asset 
Management Ltd. 

Gusinsky's June 13 arrest without formal charges, following a raid by masked, 
machine gun-wielding police at Media-Most offices, prompted concern that 
President Vladimir Putin was prepared to undermine democracy and curb press 
freedoms to carry out investigations against the so-called oligarchs, the 
nation's wealthiest businessmen who gained political influence under former 
President Boris Yeltsin. 

Gusinsky was formally charged with embezzlement on June 16. He denied the 
charges. 

The benchmark RTS stock index fell 17 percent in the two weeks after 
Gusinsky's arrest. The RTS index today fell 0.8 percent to 185.89. 

First Case 

The media tycoon was the first among the oligarchs to come under 
investigation in recent weeks. Prosecutors also have started probes against 
some of the biggest companies and their directors, including RAO Norilsk 
Nickel, the world's No. 2 palladium producer, OAO Lukoil Holding, Russia's 
No. 1 oil producer, and AO AvtoVAZ, the country's No. 1 car producer. 

The probes have focused on allegations of tax evasion and improper state 
asset sales, though none have involved the sort of extraordinary measures 
used against Gusinsky. 

The decision to drop Gusinsky's case ``is good,'' said Vladimir Merkushev, an 
analyst at Centreinvest Securities. ``It looked like Gusinsky was being 
punished for criticism of Putin's policy in Chechnya. It looked like someone 
was out for Gusinsky's property.'' 

NTV has criticized the government's actions in Chechnya, reporting high 
casualties on both sides, uncovering corruption and showing footage of the 
devastated republic where Russia started attacking rebel bases 11 months ago. 
That contrasted with the footage of other Russian channels, which were more 
favorable to Kremlin policy. 

Media-Most, comprising more than 20 units, including daily newspaper Sevodnya 
and Radio Ekho Moskvi, is 30 percent owned by OAO Gazprom, Russia's natural 
gas monopoly. 

Prosecutor's Letter 

The letter on Media-Most's Web site, which included the prosecutor's office 
stamp, was dated July 26 and signed by senior investigator on the case, 
Valery Nikolayev. 

``Your criminal case. . . has been closed,'' the letter said. The Prosecutor 
General's office said it couldn't confirm the letter was genuine. 

Gusinsky flew to Spain either Wednesday night or Thursday morning, Media-Most 
said. The Prosecutor's Office said they were aware Gusinsky left the country. 

President of the Russian Jewish Congress, Gusinsky is a dual citizen of 
Russia and Israel, where he owns a stake in Ma'ariv, Israel's second-biggest 
daily. 

Prison 

He spent three days in Moscow's Butyrskya high-security prison in June and 
was charged with embezzling about $10 million from the state, during the 1997 
sale of a St. Petersburg television production company know as Russian Video. 

The Prosecutor General's office said the investigation against Russian Video 
is continuing. 

Though Gusinsky's arrest spurred protests from politicians across Russia and 
from as far away as Israel and the U.S., the government's move against the 
oligarchs has won Putin praise for trying to undermine their influence. 
Gusinsky's case showed ``the oligarchs are no longer untouchable,'' Merkushev 
said. 

Putin plans to meet with a group of Russia's oligarchs tomorrow, at the 
request of business leaders, though Gusinsky is not expected to attend. 

``The recent moves against the oligarchs can now be seen as a warning shot to 
keep the oligarchs in line,'' Wiles said. ``Putin is trying to make a 
different kind of Russia -- the kind of Russia that foreign investors could 
support.'' 

*******

#2
Boston Globe
July 27, 2000
Russia, facing tax scofflaws, changes law; poor face bigger bill 
By Brian Whitmore, Globe Correspondent

MOSCOW - This onetime capital of the world's workers approved an income tax 
yesterday that seems more regressive than anything American conservatives 
could ever hope to see at home.

Russia's move to roll back taxes to a flat 13 percent, one-third the top US 
federal rate, says less about political ideology than it does about Moscow's 
desperation to change a tradition of tax evasion.

The measure, championed by President Vladimir V. Putin and the International 
Monetary Fund and passed by Russia's parliament, would scrap Russia's 
graduated income tax, which starts at 12 percent and tops out at 35 percent.

Supporters say the change will put more revenue in state coffers because it 
will be easier to calculate and collect. They also say lowering and 
simplifying the tax system will dramatically improve Russia's business 
climate, attract investment, and ignite economic growth.

Tax evasion has been a chronic problem in Russia, and the tax system has 
stifled investment.

The change was passed despite criticism from politicians and labor groups 
that the flat rate was unfair to the poor. The change in fact raises taxes 
for Russia's lowest income earners - from 12 percent to 13 percent - while 
lowering taxes for the wealthy.

The upper chamber of Parliament, the Federation Council, also slashed the 
rate of a corporate tax on revenues, regardless of profits, from 2.5 percent 
to 1 percent. Both changes were passed this month by the lower house, the 
State Duma.

Reductions in the corporate revenue tax had been opposed by many regional 
leaders, because the tax financed a fund to build and repair roads.

One of the harshest critics was Moscow's mayor, Yuri Luzhkov.

''We will get nothing; no region will be without a deficit,'' he said in 
floor debate. ''Everyone will be confined to a stall, with the state 
proffering handfuls of hay.''

Putin has criticized the road fund as unaccountable and rife with corruption. 
In an interview last month with the newspaper Izvestia, Putin pointed out 
that the road fund is worth $5 billion a year.

''I am sure that if these $5 billion were spent only on building roads, we 
would now have only highways,'' said Putin, who had sought to eliminate the 
revenue tax altogether, but was forced to compromise.

*******

#3
Washington Post
July 27, 2000
[for personal use only]
Gore's Long View
By Jim Hoagland

Vice President Gore will not merely defend his visible and controversial 
involvement in U.S. policy toward Russia on the campaign stump this autumn. 
He will cite that involvement as an example of "forward engagement," the 
global strategy he would pursue as president. 

That is the impression I gleaned in a 90-minute conversation this week with 
Gore's longtime national security adviser, Leon Fuerth. While staying away 
from any discussion of campaign strategy, Fuerth's remarks sketched the 
foreign policy themes Gore is likely to sound in his battle with Texas Gov. 
George W. Bush.

The Bush camp sees Russia and its corruption-ridden economy as a target of 
opportunity: Gore can be portrayed as naive or unconcerned about corruption, 
and ineffectual on financial reform, there. The vice president is also linked 
to Bill Clinton's overly personalized and manipulative Kremlin diplomacy and 
its uneven results.

But Fuerth, who has served as a one-man brain trust for Gore on foreign 
policy since joining his staff in Congress in 1980, reacted vigorously when I 
brought up published reports that Gore had scathingly dismissed an early CIA 
report warning of corruption in Russia because it did not fit policy needs.

This is a devastating accusation against a presidential aspirant. It says he 
would pressure his subordinates to cook the books on intelligence to avoid 
unpleasant realities. So I asked Fuerth if either he or Gore had written "bs" 
or any other derogatory epithet across such a report and then sent it back to 
the espionage shop.

"No. And [CIA Director] George Tenet says that he has searched the agency to 
see if such a document with such a notation exists. Nobody has come up with 
it," Fuerth said with an air of settling the controversy.

"The vice president is known to be an intense consumer of intelligence 
products. So am I. We expect that when we disagree with analytical 
conclusions and say so, as we do from time to time, the agency will come back 
at us with more analysis and argumentation, which they certainly do."

Throughout the interview Fuerth was passionate on topics that most government 
officials treat mechanically. But on intelligence he was especially fervent, 
revealing long experience on intelligence matters in Congress and showing why 
a President Gore would likely choose Fuerth as national security adviser or 
CIA chief.

Fuerth acknowledged that "there have been a lot of charges and innuendo" 
about Gore's principal Russian interlocutor, former prime minister and energy 
czar Viktor Chernomyrdin. "But there has been no proof, no smoking gun, and 
certainly no indictment in a Russian court" of Chernomyrdin and nothing in 
their dealings for Gore to be ashamed of.

Their close relationship enabled Gore to push practical programs in Russia to 
reduce the danger of nuclear accidents, halt a diphtheria epidemic, resolve 
trade deadlocks and expose a traumatized, chaotic nation to democracy and 
free markets as practiced in the West.

"We had to quickly come to grips with a society that could have been entering 
a death spiral," Fuerth said. "People were dying in Russia because there were 
no drugs available in some places. We had to rush emergency food there the 
first year. In part because of what we did, at their request, they are now 
past such dire circumstances, and our policy toward Russia can adapt."

It is through such formulations that bridge the past and the future that Gore 
seeks to liberate himself gradually from the Clinton years and to enunciate 
his own programs. Fuerth introduces some distance by making the point that 
Gore did not run Russia policy "like some outside operation. The decisions 
about Russia policy never left the president's hands, as it should be." Gore 
believes "that you have to assemble the political responses and resources 
needed to confront problems before they are at the gate," Fuerth said to 
explain his concept of "forward engagement," which borrows on the idea of 
"forward deployment" of troops abroad. "The further out you are looking the 
more difficult that is. But the further out you begin to deal with the 
problem, the less the cost will eventually be."

Helping Africa fight AIDS as a national security problem is one example. 
"Some of the best parts of the national security culture can be useful. We 
have to get to the point of having a plan, of saying here's the coordinated 
response. We need to be able to name the number [of dollars] it will require 
to fight this problem."

This is an expansive view of America's role in the world, far more expansive 
than anything Bush has outlined. On foreign policy at least, this will be a 
campaign with a choice.

*******

#4
UNITY LEADER ARRIVES IN NEW YORK, OUTLINES VISIT'S AGENDA
Russian news agency RIA 

New York, 27th July: Russian President Vladimir Putin approved the idea of
"Unity's trip to the USA" when "I told him about it during one of our
meetings", Boris Gryzlov, the head of the Unity faction in the Russian
State Duma, told Russian journalists when arriving in New York. A Unity
member Vladislav Reznik and the chairman of the Russian Information Centre,
Mikhail Margelov, are also members of the delegation. 

Gryzlov said that the main purpose of the trip is to take part in the
congress of the US Republican party. Apart from that the delegation plans
to meet prominent political leaders, in particular, presidential candidate
George Bush. They may meet on 31st July in Philadelphia with Bush. 

They also intend to see senator Edward Kennedy, New York state governor
George Pataki and New York City governor Rudolf Giuliani. 

Gryzlov said that they also plan to see other representatives of the US
political and business circles interested in developing and strengthening
mutual and beneficial cooperation with Russia. 

Speaking about the present stage in the relations between Unity and the US
Republican party Gryzlov said: "For the first time in history two parties,
which claim to become leading parties want to set up a bridge which will
become a reliable conductor of the ideas that can't be settled at the level
of executive authorities". 

He said that before his trip he had had a meeting with representatives of
the Russian president's administration and members of the government. He
said that during the trip to the USA "we would like to make our
contribution to the development of successful results achieved by "the G8
summit on Okinawa". Gryzlov added that the delegation would conduct serious
talks about the USA ratifying the START-2 treaty, refusing the creation of
the National Missile Defence System and the human rights situation in
Russia "the way it is, not as it is seen by the West". 

******

#5
BBC MONITORING 
ACADEMICIAN PREDICTS LARGE INCREASE IN NUMBER OF AIDS-INFECTED PEOPLE IN
RUSSIA
Source: 'Kommersant', Moscow, in Russian 26 Jul 00 

Up to 300,000 people in Russia are HIV-positive, according to Academician
Vadim Pokrovskiy. Speaking at a news conference in Moscow on 25th July, he
described AIDS as "a national threat", predicting that the rate of growth
in the number of HIV-infected people would be similar to that witnessed in
South Africa during the past 10 years. The following is the text of a
report on the news conference, published in the Russian newspaper
`Kommersant' on 26th July: 

At a news conference yesterday Academician Vadim Pokrovskiy called on all
citizens to take preventive action against AIDS, namely, after shooting up,
not to pass on their needles to someone else, and to use condoms (which
were distributed to reporters at the entrance). But the most important
thing is to coopt the president into the fight against AIDS. 

Pokrovskiy intended, as a matter of fact, to talk about his trip to the
international AIDS conference in Durban in South Africa. But the
academician began by working his way up to the subject in order to remind
those present of the essence of the problem. He said that AIDS was first
discovered in 1981, but it was only in 1984 that researchers established
that a particular virus that came to be called HIV is the trigger of the
disease. This virus, according to Pokrovskiy, proved very insidious since
it was transmitted predominantly by sexual intercourse. The virus is
further insidious, Pokrovskiy believes, in that it is spread imperceptibly.
And then, zap, in 10 years' time you have an epidemic. He gave as an
example the United States, which at the end of the 1980s had 100 AIDS
patients, and at the end of the 1990s, 1 million. 

Pokrovskiy believes that there were few AIDS patients in Russia at the
start of the 1980s thanks to our isolation from the rest of the world.
"Just as bananas and oranges were a rarity, narcotics and sexual services
were not widespread," the academician explained. Now the situation is
fundamentally different: "AIDS is for Russia a national threat. At this
moment 300,000 persons are HIV-infected." The academician observed that the
main route of infection is the use of narcotics. In second place are
heterosexual contacts: "Addicts continue to have a sexual life with female
addicts, who earn money by prostitution," Pokrovskiy explained. The
epicentres of the infection are Moscow, Moscow Region, Irkutsk and Irkutsk
Region. Pokrovskiy believes that this has to do primarily with the addict
migration routes. 

Based on the personal forecast of Academician Pokrovskiy, by the year 2015
the number of people in the world who will have died of AIDS will have
reached 1 million. 

As far as the AIDS situation in South Africa is concerned, then, in
Pokrovskiy's opinion, "we have already just about approached it, but there
are a few other reasons for the growth of the disease there - primarily
political. Only white homosexuals, according to the academician, contracted
AIDS in South Africa up to 1990. After the civil war [i.e. the war against
apartheid] ended, the black population began to contract it also. "Drivers
and truckers and the special tour-of-duty working method at the mines
played a part here, of course. Twenty per cent of the population in South
Africa is now infected. The same thing awaits us," Vadim Valentinovich
frightened those present. 

The epidemic is developing in Africa against the background of a high birth
rate there. For this reason international assistance to combat AIDS will be
channelled there. We, though, according to Pokrovskiy, cannot look for
international help. "The AIDS problem has not been and will not be
resolved," the academician distressingly summed up. "Death can only be
delayed for an uncertain length of time with prescription drugs, treatment
with which would cost up 1,000 dollars a month. And the R46m allocated by
the budget is a very small amount. We cannot treat everyone; only some,
and, as you can understand, there will be discrimination here," Pokrovskiy
gestured helplessly. 

Vitaliy Zverev, corresponding member of the Russian Academy of Medical
Sciences, is more optimistic. He believes that, when there is a vaccine, a
successful fight against the disease will begin - as happened with
smallpox, measles and polio. According to Zverev, the United States has
already spent 10bn dollars on developing a vaccine. "One vaccine, which has
passed the first two phases of clinical trials in the United States, is
called VaxGen. But it will be a long time before it comes to be applied in
practice," Zverev said. 

Academician Pokrovskiy took issue with his colleague: "A vaccine is a
vaccine, but we do not have plague, although there is no vaccine against
plague either. Nor do we have cholera. The main thing is prevention and,
once again, prevention. AIDS has to be fought at the national level - as in
the United States or Brazil. The presidents themselves are involved in all
this there." 

*******

#6
Izvestia
July 27, 2000
[translation from RIA Novosti for personal use only]
CONFLICTS THAT AWAIT RUSSIA IN THE 21ST CENTURY
Andrei KOKOSHIN, Director of the Institute of 
International Security Problems, non-voting member of the 
Russian Academy of Sciences 

The world entered its second nuclear age after India and 
Pakistan test exploded nuclear charges and China stepped up its 
nuclear programme. This age will have largely different rules 
of the game than those by which the countries played since 
1945. 
The development of the nuclear potential of India and 
China was largely encouraged by the NATO operation against 
Yugoslavia in 1999. The political elites of these countries 
wondered if they could become the next victims of such 
"humanitarian intervention." The US NMD plans gave another 
impetus to the nuclear missile programmes of India and China. 
There is a growing threat of the proliferation of other 
mass destruction weapons, especially biological ones, including 
based on the latest achievements of gene engineering. 
The military-political map of the world will change even 
more dramatically by 2010. For example, China plans to become a 
second-rank superpower by the year 2025-2030. By that time, 
India will most probably catch up with China in terms of 
population and have higher [demographic] growth rates than 
China, where a progressive aging of the population will begin 
in the next few years. 
By the end of this decade, China will have five or six 
times more nuclear warheads on strategic intercontinental 
delivery vehicles than today. Until recently, China was 
increasing its strategic nuclear arsenals of intercontinental 
range rather modestly. According to Western estimates, it has 
16-18 (20 at the most) warheads on strategic delivery vehicles. 
Compared to 6,000 Russian and American warheads, this is a drop 
in the ocean. But this is a very rational drop. John Kennedy 
refrained from delivering a pre-emptive nuclear strike at the 
Soviet Union during the Caribbean crisis, because his generals 
could not promise him that the strike would liquidate all 
nuclear-tipped Soviet missiles capable of reaching New York or 
Washington.
It is quite possible that China will also rise as an 
ocean-going naval power in this decade, too. 
There is a large probability of India acquiring 
intercontinental nuclear missiles within 7-8 years, although 
initially it would have considerably fewer warheads on such 
delivery vehicles than China has. Both China, and a bit later 
India, will acquire the ability to break through the US NMD 
system, which is the point at issue today. 
The probability of a war between India and Pakistan will 
remain high in the next 10-15 years. We should not exclude the 
probability that China would use military force to ensure its 
sovereign rights to Taiwan. Tensions between Iran and the 
Taliban in Afghanistan, backed by Pakistan that has nuclear 
weapons now, is another knot of conflicts fraught with a war. 
Many experts agree that this problem, rather than its strained 
relations with Israel and some Arab countries, is the main 
impetus to the nuclear missile aspirations of Iran. 
Russia can and must play an active, and sometimes leading, 
role in preventing such wars and armed conflicts. Like the USA, 
Russia is a nuclear superpower, although its nuclear might will 
soon begin to plummet for logical reasons. 
The window of possibilities, which ensures this status of 
Russia, will remain open for another six to eight years. And we 
must use to the best of our ability. We should not rattle the 
saber or threaten anyone with a nuclear stick, but 
energetically use this potential and status to form a new 
balance of forces in the world. And not in the name of the 
balance as such, but also in order to create better conditions 
for the integration of Russia in the world economy. We could 
draw on the experience of China, which is cleverly using the 
growth and ease of tensions around Taiwan to gain economic 
concessions, for example to ensure its admission to the WTO.
We should develop relations in the India-China-Russia 
triangle without expecting this configuration to develop into a 
union. 
A standing political-diplomatic mechanism should be 
created to resolve the problem of the creation of nuclear 
missiles in North Korea, with Russia, the USA and China playing 
the main role. Only the joint efforts of at least these three 
countries can resolve the problem, which many regard today as 
the trigger mechanism that could explode the entire system of 
strategic stability, because the USA is using it to justify the 
creation of its NMD system.

*******

#7
Izvestia
July 27, 2000
[translation from RIA Novosti for personal use only]
SETTING NEW TRAPS FOR THE KREMLIN
Andrei KOLESNIKOV

President Vladimir Putin of the Russian Federation didn't 
have any opponents only a short while ago. Frankly speaking, no 
one wanted to confront a legitimate leader, who boasted really 
impressive popular support. Well, such an opposition does exist 
today, despite the fact that its leaders, who mostly belong to 
the administrative and business elite, apparently oppose 
Putin's entourage, e.g. the presidential administration, the 
Government, etc., rather than him personally. In other words, a 
situation reminiscent of Boris Yeltsin's family tends to repeat 
itself. To cut a long story short, this country has a good 
President, whose cronies are really bad.
All this entails endless oaths of allegiance to the 
President, who is also being asked to stop that attack against 
territorial governors now being conducted by the bad guys, to 
tell his prosecutors and police officers not to molest local 
businessmen, etc. It therefore turns out that the apparently 
monolithic Russian establishment is now cracking apart.
Some traps deal with the very method for tackling the 
problem of Russian elites' controllability and subordination.
As a result, it turns out that regional governors and our 
business tycoons have now turned into a veritable opposition.
In a nutshell, regional authorities and oligarchs now oppose 
the federal center.
Liberal economists are inclined to think that all current 
troubles can be attributed to the lack of a social contract 
involving Russia's powers-that-be, business tycoons, elites and 
the people of Russia, too. Quite possibly, such claims are 
justified. At the same time, most oligarchs believe that all 
problems are rooted in people, who keep making unprofitable 
decisions (as far as the business community is concerned), 
rather than inside an erroneous political philosophy. This 
purely "underworld" mentality implies that one Deputy 
Prosecutor-General and one Deputy Chairman of the State Customs 
Committee are guilty of masterminding attacks against some 
big-league companies. Quite a few oligarchs believe that their 
removal from office would replace an all-out economic war with 
complete peace.
Part of our business elite bear grudges against the Prime 
Minister, who, in their opinion, is responsible for the 
selective attitude toward local businessmen. Strange, as it may 
seem, but some rumors have it that influential oligarchs and 
St. Petersburg's FSB officers will apparently join hands in 
order to fire Mikhail Kasyanov by the fall of 2000.
Nevertheless, all these rumors enable one to say that, instead 
of consolidating the corridors of power, yet another reshuffle 
in high places has once again put our ruling elite's members at 
logger-heads.
However, administrative and political traps don't 
constitute Putin's only headache. Considering all those 
present-day optimistic economic surveys, some very serious 
economic problems should not be overlooked either. Such 
problems, which can't entail an all-out crisis reminiscent of 
the August 1998 economic-and-financial melt-down, can, 
nonetheless, impede Russia's economic development a great deal.
First of all, it's crystal clear that the very foundation 
of Russia's economy can't be altered without implementing the 
Government's initial tax reform. Nor would it become possible 
to scale down the black-market economy. A "controllable" State 
Duma has okayed a truncated tax-bill package. Meanwhile an 
uncontrollable Federation Council has entailed the senators' 
vindictive discontent with the Cabinet's initiatives. This 
political "double-bottom" trap thus features an economic 
component, as well.
Second, the rouble will continue to become stronger at a 
time when this process is deemed inexpedient. Our monetarist 
authorities, who still manage to cope with excessive 
money-supply volumes with the help of debt-servicing payments 
and the repayment of the Finance Ministry's Central-Bank debts, 
should chart their long-term strategies in the given field.
Third, the Cabinet of Ministers would be expected to 
tackle various budgetary-discipline problems. Despite its 
determination to thwart unauthorized spending on the part of 
state-run organizations, one finds it pretty hard to imagine 
that the federal center will shut off power networks, heat and 
water mains at those specific "high-ranking" departments being 
found guilty of casting money to the wind.
And now the most important thing of them all. Russia's 
law-enforcement agencies have seriously aggravated the national 
investment climate, after publicly confronting the alleged and 
real violators of tax, financial and other legislation. 
Consequently, Putin has found himself inside yet another trap. 
Excessive money-supply volumes tend to encourage inflation in 
conditions of an unfavorable investment climate.
The very same factor also prevents the economy from obtaining 
real-life investment, e.g. private domestic and foreign 
capitals. All this serves to impede economic growth, impairing 
its quality.
Traditional economic theory implies that the establishment 
of law and order by any conceivable methods would ensure 
additional investment. But the thing is that common and 
immutable rules of the game, rather than such law and order 
itself, are more important. By the way, Putin has been talking 
about the aforesaid rules of the game for several months in a 
row. Nobody would believe in the Government's possible decision 
to pardon tax evaders, what with market players continuing to 
abide by the black-market economy's rules (just for safety's 
sake).
Lack of economic trust for the new regime, rather than the 
opposition's presence or absence, is seen as the main trap now 
facing Putin. Besides, sky-high ratings won't be of any help 
here.

*******

#8
New York Times
July 27, 2000
Alexander Dallin, 76, Dies; Precise Historian of Russia 
By PAUL LEWIS

Alexander Dallin, an American historian of the Soviet Union whose family took 
part in the Russian Revolution but who was widely respected for the scholarly 
detachment with which he viewed Communism, died of heart failure on July 22 
in Stanford, Calif. He was 76. 
He had a stroke the day before, Stanford University said in announcing his 
death. 

Mr. Dallin was a former director of the Russian Institute at Columbia 
University. 

He also directed the Center for Russian and East European Studies at 
Stanford, and was the Raymond A. Spruance professor of international history 
at Stanford from 1987 to 1994. 

Mr. Dallin exercised wide influence on other students of Russian history, 
said Timothy Colton, director of the Davis Center for Russian Studies at 
Harvard University. 

Marshall D. Shulman, another former director of the Russian Institute, 
emphasized Mr. Dallin's objectivity, saying, "In a field riven by political 
controversy, he was universally respected as a voice of common sense and 
scholarly detachment rooted in a solid historical backing." 

Born in Berlin on May 21, 1924, Mr. Dallin was the son of David Dallin, a 
Russian revolutionary leader who belonged to the moderate Menshevik faction, 
which had broken away from Lenin's Bolsheviks in 1903. After the Bolsheviks 
seized power in 1917, the Mensheviks sought to play the role of opposition 
party, but David Dallin was forced into exile in Germany in 1921, the year 
before Lenin formally banned the movement. 

As a Jewish revolutionary, David Dallin was then forced into exile a second 
time, fleeing Hitler's Germany in 1940 for the United States where he wrote 
hostile books and articles about the Soviet Union and its Stalinist rulers. 

His son completed graduate studies at Columbia University and went on to 
build a reputation for exacting Soviet scholarship and a deep understanding 
of the Communist Party. He became the Adlai Stevenson professor of 
international relations at Columbia in 1965 and was director of its Russian 
Institute from 1962 to 1967. 

After the fall of the Soviet Union, Mr. Dallin devoted his energies to 
reviving the social sciences in Russia, where they had had been eclipsed by 
Marxism-Leninism as academic disciplines under Communism. 

In 1994 he helped found the European University in St. Petersburg, which 
specializes in political science, sociology and economics, as well as the New 
Democracy Fellows Program at Stanford, which brings over students from the 
post-Communist world for graduate work in social sciences. 

"Dallin had a profound and beneficial influence on the field of Soviet and 
East European studies," said David Holloway, who now holds the chair that Mr. 
Dallin held. "For him the study of the Soviet Union was not a question of 
confirming an already held point of view but rather a matter of seeking to 
understand a complex and changing reality." 

As a scholar Mr. Dallin was something of a maverick, tending to concentrate 
on aspects of Soviet history and policy making that were neglected or viewed 
as irrelevant by other academics. 

In 1957 he published "German Rule in Russia, 1941-45," a study of Hitler's 
occupation of parts of Russia during World War II, which remains the 
definitive work on that subject and won the Wolfson Prize for history. 

Five years later he produced "The Soviet Union at the United Nations: an 
Inquiry into Soviet Motives and Objectives," a searching examination of 
Moscow's approach to the United Nations at a time when the Soviet Union 
appeared to have turned its back on international cooperation. 

In 1964, long before the United States had embarked on the strategic arms 
limitation talks, he published "The Soviet Union and Disarmament," which 
suggested a negotiated halt to the arms race would be in America's national 
interest. 

He published many more books, including "Women in Russia" (1977); "Black 
Box"(1985), a study of the Soviet shooting down of Korean Air Lines Flight 
007 concluding that the United States may have engineered the plane's 
deviation into Soviet strategic airspace; and "The Gorbachev Era"(1986), 
written with Condoleezza Rice, Gov. George W. Bush's foreign policy adviser. 

He is survived by his wife, Gail W. Lapidus, herself a political scientist; 
by three children from a previous marriage, Linda, Natasha and Andrew; and 
four grandchildren. 

A large shambling figure who spoke with a slight German accent, Mr. Dallin 
was capable of pithy judgments. He once began a New York Times review of a 
book blaming Stalin, rather than Hitler, for World War II with the 
observation, "This book does not deserve to be taken seriously." And then 
went on to write a thousand words explaining why. 

******

#9
Russia Revises GDP Growth Outlook to 5.5 Percent From 4 Percent

Moscow, July 27 (Bloomberg)
-- Russia revised up its forecast for economic growth this year as high 
world commodities prices spur more production at petrochemical and steel 
companies. 

The government expects gross domestic product to expand 5.5 percent this 
year, the fastest growth since the Soviet Union collapsed in 1991, compared 
with the earlier forecast of 4 percent. Russia also raised its estimate for 
industrial production growth to 7.5 percent from 6 percent and said the trade 
surplus may total $45.6 billion, higher than $42 billion in 1999. 

``This is fully realistic,'' said Denis Rodionov, an analyst at Brunswick UBS 
Warburg brokerage, which estimates GDP growth of 6 percent this year and 
industrial production growth of 8 percent. 

Russia has continued to benefit from high prices for commodities that make up 
a half of its total exports, including oil, natural gas and metals. Domestic 
producers, helped by a weaker ruble that made their products more competitive 
against imports, also have lifted output. 

Output growth has slowed in some industries such as paper and cellulose 
production and is falling in power and some metals industries, said Economy 
Minister German Gref. 

Industrial production growth year-on-year slowed in June to 9.8 percent from 
10.6 percent in May, Gref said. 

``The overall tendency remains good,'' Gref said. ``This is largely due to 
high oil prices, but there is a gradual improvement of the investment climate 
in the economy.'' 

State Asset Sales 

Gref, responding to investors' concerns, said President Vladimir Putin has no 
plans to reverse Russia's state asset sales State prosecutors have started an 
investigation into the 1995 sale of a stake in RAO Norilsk Nickel, a Siberian 
metals producer. 

``There should be no untouchables, but this doesn't mean we should reverse 
asset sales,'' Gref said. ``That would be a bomb that would lead to an 
overall explosion.'' 

The government said the economy grew 7.3 percent in the first half, after 7.9 
percent growth in the first quarter. Gref said he didn't have second-quarter 
figures. The economy grew 3.2 percent last year. 

Russia adjusted its forecast for the annual inflation rate to 20 percent this 
year from a previously forecast 18 percent. Gref said he expects July 
consumer prices will rise about 1.8 percent after climbing 2.6 percent in 
June. 

Gref said yesterday's passage by the upper house of parliament of the 
government's tax laws will help provide lagging industries with more money 
for investment. He also said the tax reform should stimulate foreign 
investment. 

``It is a serious economic and political signal to the economy,'' he said. 

******

#10
UES CEO Chubais on Board Meeting, Putin and Business: Comment

Moscow, July 27 (Bloomberg)
-- Anatoly Chubais, chief executive officer of RAO Unified Energy 
Systems, Russia's power monopoly, spoke in an interview to Russian daily 
Kommersant about tomorrow's meeting between President Vladimir Putin and some 
of Russia's top business leaders. Chubais also commented on the government's 
inquiry into the legality of UES shareholder vote in June. 

On comments made by Deputy Energy Minister Viktor Kudryavy that there were 
irregularities in a shareholder vote at RAO Unified Energy Systems in June. 

``The company's management intends to look into this and analyze Kudryavy's 
accusations. So far, I can't disclose any conclusions.'' 

On who should attend the meeting with Putin tomorrow: 

``I would be incorrect to limit attendance to just oligarchs. It is necessary 
to minimize the number of those who have been personally offended. . .because 
then they will just talk about themselves. There should be more of those who 
weren't personally affected. None the less the principle (of attendance) 
should be based on importance.'' 

On groups that influence the president: 

``Putin is surrounded by different people. Of course, they are thought to 
belong to different groups, each of which has their own positions and is 
trying to influence Putin. 

``All of this can be described in harsh terms: as ``three competing groups, 
pushing for power, trying to get to Putin: `liberal economists from St. 
Petersburg', `the family' (family of and people close to former President 
Boris Yeltsin), and `St. Petersburg Federal Security Service.' '' 

``It also could be described in completely different terms: Putin is just 
surrounded by different people, with different backgrounds, people who are 
doing their job. 

``Security service agents run security services. Free-market economists from 
St. Petersburg run the country's economy. And `the family' (if we choose to 
use this term and include in this group Alexander Voloshin, Kremlin chief of 
staff) is running the political process, including the reform of government, 
which is a very complex process. 

That is why it is incorrect to explain everything as the struggle between 
different interest groups. Moreover, because Putin isn't inclined to follow 
the first advice he gets or the last word he hears.'' 

On future relations between state and business: 

``The main threat is if the business as a whole loses confidence in the 
government. Not just big business, but also medium-size companies. There 
already are signs of nervousness which are growing into panic. If they are 
not heard this will completely undermine confidence of this entire social 
group in the government. The worst result out of this will be capital flight, 
which will make the entire tax reform meaningless. 

On how Putin can prevent this: 

``By stating his position publicly.'' 

``The president has previously said there won't be a reversal of asset sales. 
Did he change his mind? Or he didn't? An answer to this is needed. The 
president can again say `Prosecutors are independent.' This will be an 
answer, but an answer which could bring an even greater blow to business and 
the entire country.'' 

On independence of prosecutor's office: 

``It never was (independent), it is not now and will not be for a long 
time.'' 

``There are certain situations where the lack of a position on an issue 
represents a position. If the president tells (law enforcement authorities): 
`You are independent,' they reply `Understood, tomorrow we will arrest them 
all!' '' 

(Kommersant 7/27 www.kommersant.ru) 

******

#11
UES Board to Challenge Management on Confidentiality

Moscow, July 27 (Bloomberg)
-- RAO Unified Energy Systems managers may come under attack by the board 
of directors, which will discuss today whether the Russian monopoly power 
utility's management broke confidentiality rules at a shareholders' meeting. 

The board of directors could also press management on its worsening relations 
with minority shareholders, some of whom are urging the dismissal of UES 
Chief Executive Anatoly Chubais. The probe into alleged confidentiality 
violations during the June meeting was initiated by the Energy Ministry. 

Chubais, a former deputy prime minister, has been under fire for months from 
a group of shareholders opposed to his proposal for breaking up the power 
monopoly. UES shares have fallen 38 percent in the four months since Chubais 
first outlined the plan, compared with a 23 percent drop in the benchmark RTS 
stock index. 

``This could be another attack on Chubais,'' said Dmitry Vinogradov, a 
utilities analyst at brokerage Brunswick UBS Warburg. ``On the other hand, 
the government remains quiet.'' 

The government, which owns 52 percent stake in UES, has the most leverage 
over management, including the potential dismissal of Chubais, which would 
require support of 75 percent of shareholders. 

Dismissal to Be Discussed 

Chubais yesterday said he is prepared to discuss his dismissal at an 
extraordinary shareholders meeting and he will raise the issue at today's 
board meeting, Prime-Tass agency reported. He also said two shareholders 
asked for an extraordinary meeting to discuss a range of issues, including 
his work. 

``I think it is meaningless to continue intrigue-type relations with 
shareholders,'' Chubais said. ``It should be stated clearly that I came to 
company and I will be implementing its reorganization.'' 

President Vladimir Putin's government hasn't yet made a final decision on the 
proposed reorganization plan, though it gave its support to Chubais in June 
when it nominated him as one of the candidates to the board. Chubais was then 
re-elected to the board. 

A group of foreign investors is expected to meet Kremlin Chief of Staff 
Alexander Voloshin today to discuss the planned reorganization of UES, which 
they fear would hurt the value of their holdings. The same group met Voloshin 
in June. 

UES shares fell as much as 1.6 percent to 12.61 cents. 

******

#12
Los Angeles Times
July 27, 2000
[for personal use only]
Hope Built on a Castle in the Air 
A small ethnic group in the Caucasus sees its future in the ruins of an 
ancient fortress it wants to turn into a hotel--just across the border from 
the war in Chechnya. 
By ROBYN DIXON, Times Staff Writer

SHATILI, Georgia--In a high valley in the Caucasus Mountains, a place so 
remote it's cut off for six months each winter, an ancient towered fortress 
of stone juts heavenward like a bunch of clustered crystals. 
The locals, 22 families with the same surname, are descendants of a tiny 
highland ethnic group called the Khevsuri who lived in and around the 
fortress for centuries. After decades in which they were exiled and their 
fortress fell into neglect, the Khevsuri have decided to repair their home 
and move back in. 
And, sensing that they have something special to share, they want to 
open part of it as a hotel for adventure tourists. 
The people of Shatili have made a list, which they pull out to show 
visitors, detailing which family owns each of the 62 fortress "towers," as 
they call them--actually chunky stone blocks three to four stories tall. Nine 
of the towers have fallen down. 
Irakli Chincharauli, the excitable chief of the local border guards, 
waves the list, which shows that his family owns 11 of the towers, more than 
any other family. 
"I had more ancestors," he explains proudly. "Everybody in the village 
knows which families own which towers. Our ancestors lived there, and the 
elders who are still alive learned it from their elders." 
The Khevsuri should have all but disappeared after authorities drove 
them from their home in 1952 at the end of the Stalin era--as happened to so 
many of the Soviet Union's small ethnic groups--and resettled them on arid 
land on the plains of eastern Georgia. 
But they came back. These were tough, spartan people with the fiercely 
independent highland mentality that is shared by their closest neighbors, the 
Chechens, whose territory lies just a few miles away. 
Both were warrior tribes. The Chechens' resistance to Russia continues 
to this day, and they pay for their dream of independence with blood. 
But the Khevsuri fight no more. The tumbledown Shatili fortress is just 
a quaint symbol of past battles. 
They cherish a simpler dream: that their fort might offer an economic 
future for the village, and a meaningful role in the world. 
To visitors last century, before the road into the Argun Gorge was 
built, the Khevsuri were an intriguing and mysterious tribe. Khevsuri women 
used cows' urine to dye their hair blond and sacrificed animals in 
purification rituals. The men wore chain mail, carried small round shields, 
fenced with swords and drank beer as a holy rite. 
Their features were considered European. That and the intricately 
embroidered crosses on their costumes--like those of the Crusaders--spawned 
the theory that they descended from the religious warriors, an idea that 
acquired legendary status but apparently has no basis in fact. 
Their lives were harsh. Mothers washed their new babies in the cold 
mountain waters. To give birth, they retired alone for three or more days to 
small stone huts away from the settlement, where they were not allowed to 
burn fires, even in the deep of winter. Their husbands, meanwhile, would walk 
around the hut firing shots into the air. Khevsuri women who lost their 
children were not supposed to weep. 
The society put great emphasis on restraint and abstinence. People 
married late, at about age 30, and having many children was frowned upon. But 
before marriage, romances with cousins, sisters, brothers and other relatives 
were allowed. 
Vazha Chincharauli, 42, an architect from Shatili, is leading a two-year 
emergency restoration project to prevent the collapse of the fortress, which 
was built in the 7th or 8th century. With a World Bank grant of $270,000, 
chunks of missing walls that had been bitten away by time were rebuilt last 
year, foundations were restored and work was begun to repair the nine ruined 
towers. When completed, several of the towers will have their original 
beehive roofs. 
The work is being done by the Shatili people themselves using local 
stone. So far, $60,000 has been spent, and structural repairs to roofs and 
interiors will continue this summer. 
In a painstaking search of Soviet archives to determine ownership of the 
fortress, Vazha made a wonderful discovery. Although Soviet authorities 
designated the fortress a historical monument in 1971, it seems that they 
forgot to transfer it to the state. 
With no document to prove state ownership, the Khevsuri have negotiated 
an agreement with Georgia's Committee of Cultural Heritage that the monument 
be given back to the people. Under the agreement, yet to be stamped and 
signed, the residents of Shatili will own the fortress but will be forbidden 
to carry out any work without approval. 
Vazha, who claims ownership of two towers, is developing the plans for 
the hotel and a museum. 
"I'm a restorer, and I believe that to keep the castle going you need to 
make it functional. It has to have a purpose, or it will die," he says. 
David Ninidze, director of the Georgian Cultural Heritage Protection 
Fund, which was set up in Tbilisi, the capital, by the World Bank, says the 
bank approved a two-year restoration program and will consider another phase 
later this year. 
He says the agency seemed to like the idea of turning some of the old 
towers into a hotel. The idea could attract funding, he adds. 
Even if no investment and no tourists come, the Khevsuri say, they will 
be satisfied to live bound by history to these high mountain slopes, like an 
ancient tree hanging on in a modern world. 
In the small wooden house in Shatili of Irakli, the local border guard 
chief, there is little to distract the eye. For heat and cooking, a rough tin 
stove squats in the middle of the main room. Behind it, a single 
smoke-stained shelf holds a row of books. The furnishings are sparse and 
simple. 
But the windowpanes frame a view of breathtaking peaks tumbling down to 
a burbling river. It's full of trout, says Irakli, who can't seem to help but 
promote the mountains--some of them 12,000 feet high--that he loves so 
passionately. 
In a trip along the river track, Irakli's four-wheel-drive rears and 
bucks through the ruts as he shows off the local sights. He stops on the road 
above a group of low stone huts where people stricken with the plague came to 
die many centuries ago. In one hut, the doorway is barred and bones are 
visible within. 
Another hut serves as a lookout for snipers watching for Chechen 
fighters who might illegally cross the border about a mile away. 
Farther on, Irakli points out the skeleton of a Chechen helicopter, 
which crashed in the ravine before the 1994-96 Chechen war. Farther still is 
the hill that divides Chechnya and Georgia. A clump of what seem to be 
stick-like trees planted on the crest of the hill turns out to be Russian 
border guards. 
For centuries, wars have surged along this valley. The history of the 
Caucasus Mountains is so full of violence and sorrow that one Georgian poet 
last century, Vazha Pshavela, saw the peaks as tragic men never admitting the 
rocks of sadness clamped to their hearts. 
"In the gorge below, the river roars, its seething, inward wrath. The 
mountains bend down, wash their faces in the spray, the souls of dead men 
living on their flanks," he wrote in a poem called "Host and Guest." 
The Khevsuri were fierce fighters able to hold their own against the 
mighty Chechen warriors who lived in the northern part of the Argun Gorge 
lying across the border in Chechnya--the scene of some of the heaviest 
fighting in the current Chechen war. 
Khevsuri military traditions were often violent and cruel. The tribe 
carried on blood feuds through generations, and when Khevsuri men vanquished 
an enemy, they cut off the arm of the defeated chieftain and nailed it at the 
entry of their fortress. 
The battles live on in the memories of the proud descendants. Today's 
Chincharaulis boast that Khevsuri warriors always served in the personal 
guard of the Georgian king, or mepe. 
Irakli Chincharauli tells of a battle in the 1840s against the Chechen 
and Dagestani warriors of Imam Shamil, the charismatic leader who fought for 
30 years to resist Russian domination. 
As Irakli tells it, the Khevsuri of Shatili refused to let the Chechens 
through the Argun Gorge to attack the Russian garrison at Telavi in eastern 
Georgia. 
But the Khevsuri and Chechen tribes had enough in common that they often 
used the same places of worship. The Khevsuri practiced a mix of Orthodox 
Christianity and paganism, while the Chechens practiced a mix of Islam and 
paganism. 
They often fought on the same side to repel invaders. In 1813, they 
united against the czar's troops in Georgia. Russian cannons, never before 
seen in the Argun Gorge, ripped holes in the Khevsuri fortresses dotting the 
valley, including the Shatili fort. 
Because of their isolation, the Khevsuri were still using swords and 
shields, daggers and flintlock rifles--the same weapons they used to resist 
the Russians--through the end of the 1930s. 
In spring, when the snow recedes and the damp earth sprouts a carpet of 
mountain crocuses, it is easy to forget the violent legacy of the Caucasus. 
But just as war touched the Khevsuri in centuries past, it could ruin their 
dreams today. 
Vazha Chincharauli, the architect, is worried about the impact of the 
Chechen war on his project. 
He bought a house in the gorge three years ago, which he opened as a 
hotel last year. Quite a few foreign tourists made it to Shatili along 
challenging roads last summer--15 to 20 a day on the busiest days. 
"The road is difficult and quite exotic," he says with an enigmatic 
smile. 
But in December, a Russian helicopter fired rockets at the village, and 
a Russian missile was fired at the Shatili border post. With the guerrilla 
war just across the border likely to drag on, Vazha fears that tourists--and 
the investors whom locals hope to attract--will shy away. 
Vazha believes that the hotel would help improve life for the people of 
Shatili. 
"But if it doesn't go ahead, life will go on. It's the Khevsuri's 
spirit. You can never change that," he says. 

*******