September 15, 2000    
This Date's Issues: 4514  4515   4516

Johnson's Russia List
#4515
15 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Reuters: Russian govt upbeat on economy, but still needs IMF.
2. Financial Times (UK): Andrew Jack, Moscow in land reform push.
3. Reuters: Putin's wife goes back to school 25 years later.
4. BBC MONITORING: RUSSIA'S FIRST LADY MAKES PUBLIC APPEARANCE AT 
OLD SCHOOL.
5. Keith Darden: OSCE, Freedom House, and bias.
6. Moscow Times EDITORIAL: Onako Gives Putin Shot at Proving Self.
7. Jerry Hough: press coverage of Russia.
8. Vedomosti: EXPORT CONTINUES TO BE THE MAIN SOURCE OF ECONOMIC 
GROWTH.
9. Vremya MN: Aleksandr Teplyuk, Boris Abramovich Berezovskiy Has To 
Clean Up Putin's Image in Order To Clean Up His Own. (Berezovskiy's 
Motives for ORT Stock Transfer Analyzed)
10. U.S. International Broadcasting Bureau: ON THE LINE: INSIDE 
PUTIN'S RUSSIA. (With Helmut Sonnenfeldt, Jonas Bernstein, and
Michael McFaul)]

******


#1
Russian govt upbeat on economy, but still needs IMF
By Svetlana Kovalyova

MOSCOW, Sept 14 (Reuters) - Russia's economy is riding the crest of a wave, 
but the country still needs the International Monetary Fund to relieve its 
debt burden and attract foreign investment, a senior government official said 
on Thursday. 


First Deputy Finance Minister Alexei Ulyukayev told a news conference 
Russia's macroeconomic and budget performance in the first half of 2000 was 
stronger than in the same period of 1999, but economic growth would slow in 
the second half. 


The Russian economy, largely dependent on revenues from gas and oil exports, 
remains vulnerable to a possible fall in world energy prices and needs 
external support to repay foreign debts. 


``An agreement with the IMF is important for us not so much in the light of 
getting their financing in the next year... but because a valid agreement 
with the Fund is a condition for restructuring Paris Club debt,'' Ulyukayev 
said. 


Russia is due to start talks with the Paris Club of sovereign creditors later 
this year on restructuring about $42 billion in debt inherited from the 
Soviet Union. 


Ulyukayev said an IMF agreement would also help Russia to secure higher 
investment ratings from international agencies, thus speeding up a return to 
international capital markets. 


The IMF put on hold a $4.5 billion loan programme to Russia last year, saying 
the government had failed to implement structural reforms. 


But Ulyukayev said Russia hoped to win approval for its economic programme at 
a joint meeting of the IMF and World Bank in Prague next week. 


Russia's draft 2001 budget foresees up to $1.75 billion in IMF loans. 


TAX REFORM 


Yegor Gaidar, former architect of Russia's liberal market reforms, said he 
was encouraged by progress in tax reform and by the government's overall 
fiscal responsibility, but he warned about the dangers of over-optimism. 


``Russia's economy is very dependent on oil and gas revenues,'' he said. ``It 
is extremely optimistic to think that we will keep GDP growth of four percent 
in 2001 if there is a radical fall in oil prices,'' he told a business lunch. 


The government expects growth in gross domestic product to fall to 5.5 
percent in the whole of 2000 from 7.3 percent in the first half, Ulyukayev 
said. 


The 2001 budget draft, due to be given the first of four readings in the 
State Duma lower house of parliament on October 6, targets even more moderate 
GDP growth of four percent. 


Ulyukayev said budget revenues had dropped slightly in July and August. In 
the first eight months of 2000 revenues slipped to 17.0 percent of GDP from 
17.1 percent in the first half. 


Some deputies have said the budget blueprint should be reworked as GDP growth 
and inflation would be higher than planned due to high international energy 
prices. 


But Ulyukayev said: ``We believe there are no reasons to review the draft 
budget's main parameters. We believe they are realistic.'' 


Gaidar said the government's budget revenue projections may be too 
conservative and he predicted a tough battle with parliamentarians lobbying 
for revisions and regional leaders struggling to boost their share of funds. 


``The budget will not be adopted in a first reading on October 6,'' he said, 
adding that the draft would probably be approved by the end of the year with 
a modest increase in revenues. 


``It will not be a balanced budget, but a budget with a surplus,'' he said. 


*******


#2
Financial Times (UK)
15 September 2000
Moscow in land reform push
By Andrew Jack in Moscow
The Russian government plans to discuss changes to the Land Code next month 
in a move which could lead to the privatisation of agricultural property 
after more than four years of delays. 


Speaking at a Euromoney conference in Moscow this week Alexei Kudrin, the 
finance minister, said amendments to legislation on land ownership were set 
to be discussed in October as part of a programme of liberal reform. 


"This will prove a real litmus test for President Putin," said Yevgenny Volk, 
head of the Heritage Foundation in Moscow. "Land reform was always 
half-hearted under [former President] Boris Yeltsin." 


The purchase of smallholdings has been permitted by presidential decree since 
the start of the 1990s, but more wide-ranging plans to allow the creation of 
private agricultural ownership have long been blocked by political opposition 
in the Russian parliament. 


Some regions such as Saratov on the Volga have taken the process further than 
most, while the Moscow region plans a pioneering land auction in Zelenograd, 
north-west of the city, at the start of next month. Most land is held on 
49-year leases. 


The lack of private farm ownership has been highlighted by a number of 
economists as one reason why Russian agriculture continues to suffer from low 
levels of investment and poor production. 


Most agricultural land is still owned by Soviet-era collective farms, which 
have been nominally converted into joint-stock companies but which are still 
dominated by their former bosses. 


Some opinion polls have shown that less than a third of Russians believe 
privatisation would have any desirable economic benefits. 


******


#3
Putin's wife goes back to school 25 years later

MOSCOW, Sept 14 (Reuters) - Russian First Lady Lyudmila Putin went back to 
school after a 25-year gap on Thursday and found nothing had changed. 


State RTR television showed President Vladimir Putin's wife attending two 
hours of classes at the school where she graduated in 1975 in Kaliningrad -- 
a Russian enclave on the Baltic Sea nestled between Poland and Lithuania. 


``Nothing has changed. It's the same as 25 years ago,'' she told RTR. ``The 
atmosphere, the kids, they're good natured. Wonderful atmosphere, wonderful 
teachers.'' 


Mrs Putin, a flight attendant with the Soviet airline Aeroflot when she met 
the future president, has generally stayed out of the limelight as first 
lady, though she has accompanied him on a number of foreign trips. 


In Kaliningrad, she was shown seated at her old desk at the back of a room 
alongside a teacher. She asked final year students how they felt about 
literature. 


``What is your view about Russian literature and language?'' she asked, 
addressing the class. ``What do you think should be done to raise the 
prestige of the Russian language?'' 


She then signed a guest book, posed for pictures with school staff and 
embraced another visiting pupil from the same year. 


RTR showed her entry in an old gradebook and said she never received poor 
marks. It later showed her visiting a prison school, where shaven-headed 
inmates played accordion. 


Her first official outing weeks after Putin's March election was to a women's 
prison. 


*******


#4
BBC MONITORING
RUSSIA'S FIRST LADY MAKES PUBLIC APPEARANCE AT OLD SCHOOL
Text of report by Russia TV on 14th September 


[Presenter] The Russian president's wife, Lyudmila Putin, arrived in her
home town of Kaliningrad today. She went first of all to the school where
she was once a pupil. 


The head of state's wife attended a Russian language and literature lesson
and then talked for a long time with pupils and teachers. They complained
to her that the current Russian curriculum was not as interesting as the
way in which foreign languages were taught. Lyudmila Putin replied that a
special science centre had already been set up in Moscow with the task of
raising the profile of the Russian language not just at home but throughout
the world. 


Before saying goodbye, the teachers produced photographs they had carefully
preserved through the years. The deputy head even found an old class record
book. The president's wife had only top grades. 


[Teacher] How has our school changed do you think? After all, it's 25 years
ago. 


[Lyudmila Putin] The atmosphere hasn't changed. 


[Teacher] Really, has it not? 


[Lyudmila Putin] You've got really great children, very nice, very kind.
It's a wonderful atmosphere. 


[Teacher] It's something we're always commenting on ourselves. 


[Lyudmila Putin] As well as wonderful teachers, of course. 


[Teachers] [Laughter] Thank you, thank you. 


******


#5
Date: Thu, 14 Sep 2000
From: "Keith Darden" <kdarden@cfia.harvard.edu>
Subject: OSCE, Freedom House, and bias


Dear David,


All of this (justified) criticism of the OSCE recalls the problems with
another set of biased evaluations of democratic progress, the Freedom House
scores. 


For those not familiar with them, the Freedom House scores rank the
"freedom" of countries of the world on a scale from 1 to 7. (The scores can
be found at http://www.freedomhouse.org). I know that I am not alone in
thinking that there are severe problems with the scoring of the post-Soviet
states, and that there is at least some hint of a tendency to rank states
as more democratic if they are more friendly towards the US. I will
briefly review three cases, Georgia, Ukraine, and Latvia, which, for me,
highlight this particular problem with the coding. 

Just to review, answers to the following questions, taken verbatim from
the Freedom House website, are supposed to provide the basis for the
"political freedom" scores:


1. Is the head of state and/or head of government or other chief
authority elected through free and fair elections? 
2. Are the legislative representatives elected through free and fair
elections? 
3. Are there fair electoral laws, equal campaigning opportunities, fair
polling, and honest tabulation of ballots? 
4. Are the voters able to endow their freely elected representatives with
real power? 
5. Do the people have the right to organize in different political
parties or other competitive political groupings of their choice, and is
the system open to the rise and fall of these competing parties or groupings? 
6. Is there a significant opposition vote, de facto opposition power, and
a realistic possibility for the opposition to increase its support or gain
power through elections? 
7. Are the people free from domination by the military, foreign powers,
totalitarian parties, religious hierarchies, economic oligarchies, or any
other powerful group? 
8. Do cultural, ethnic, religious, and other minority groups have
reasonable self-determination, self-government, autonomy, or participation
through informal consensus in the decision-making process? 


These questions seem fairly reasonable criteria for a democracy. There are
some important things left out, but the real problem with Freedom House
appears to be with bias in the answers rather than the questions. 


To get a sense of this, let's start with Georgia. It is hard to imagine
that anyone familiar with Georgian politics could answer yes to any
question other than #7. Freedom House, however, gives Georgia a "3" ("1"
being the most free). This is truly puzzling, as there was nothing fair or
free about the recent round of elections (in characteristic P-R speak, the
OSCE described them as "free but not fair"). The fraud was so rampant it
made the Russians look like boy scouts. [As a side note, I recently met a
US government official who worked on the elections in Georgia. He noted
that Shevardnadze received 80% of the vote, to the embarrassment of the US
government, in part because his lieutenants wanted to show that they were
just as good as Aliev's men at "getting out the vote". As in Central Asia,
a show of strength was even more important than the false show of electoral
competition required to please their Western patrons.]


Ukraine, appropriately dubbed "Kuchmenistan" by some local commentators,
also earned a "3" from Freedom House. A quick perusal of the OSCE reports
on the Ukrainian elections puts this myth to rest immediately. (Bivens'
point about the gap between the detailed criticism in the reports and the
rosy tone of the press releases should be heeded; the OSCE report on the
Ukrainian Presidential elections makes for great reading). Moreover, with
referenda giving overweening power to the President and the forced
"restructuring" of the Parliament, Kuchma's Ukraine is not such a far cry
from Lukashenko's Belarus. Belarus, of course, earns a 6. Ukraine,
mysteriously, is even ranked above Russia (a "4"). 


Perhaps the most disturbing score is the one given to Latvia, a "1", like
the US. One would naturally assume that one would be able to give a
positive answer to all eight of the questions for a country receiving the
top score. But Latvia most obviously fails on question 8. How can a country
that deprives over a third of its inhabitants of the right to vote be
considered a democracy or "free"? Were Latvia not a potential US ally with
a well-organized group of expatriate boosters in the United States, we
might call this a form of Apartheid. But not even _white_ South Africa
earned a "1" from the Freedom House (the score, like the country, was
divided into "white" and "black").


These are not the only cases with severe problems and one certainly gets
the impression that states more friendly or strategically important to the
US tend to get ranked as "more free". The unreasonably large discrepancy
between the scores of Belarus and Ukraine, the willingness to ignore the
repressive ethnic politics of the Baltic states, and the rosy picture of
Georgia (as close as we have to a US client state in the region) do not
instill confidence that there isn't some sort of systematic bias in the
coding.


This type of criticism of the scores is usually dismissed as so much
pedantry on the part of country specialists, and those who rely on the
scores often justify their work on the grounds that whatever errors there
are in coding are randomly distributed and therefore do not affect the end
results. There appears to be some suggestion, however, that the errors are
not random.
It is also commonly said that despite their flaws, the Freedom House scores
are the best measure we have, and that doing large-n quantitative work with
a weak set of indicators is still better than nothing. This argument makes
little sense. Not only do we have qualitative alternatives, but it seems
fairly elementary that one does not to try to sail across the ocean in a
boat full of holes, even if the boat is "the best available". If the scores
are inadequate, the conclusions drawn on the basis of them will be faulty
as well, and there is much to suggest that the Freedom House scores are
suspect. 


That said, the importance of cross-regional studies of post-Communist
politics is undeniable. Perhaps it is time we came up with some data that
is a little more seaworthy. There is a growing army of country specialists
eager to help. 


******


#6
Moscow Times
September 15, 2000 
EDITORIAL: Onako Gives Putin Shot at Proving Self 


Any good salesman will tell you that perception is everything. Who cares if 
my knives are sharp or dull, the callous knife salesman will say. People will 
buy anything f if they think it's good. 


True, customers will come running if the knife sales pitch grabs their 
attention. But they will just as quickly jump ship if those knives don't live 
up to their expectations. 


Likewise, it doesn't really matter how long President Vladimir Putin and his 
government insist that Russia is ripe for foreign investment. Western 
executives, who pricked up their ears after the Kremlin started making its 
pitch, are for the most part still waiting for the Cabinet to cut the 
mustard. 


This week the government blew a chance to put teeth into its rhetoric with a 
dispute over cellular phone frequencies. But it still has time to prove 
itself in a sell-off for its stake the Onako oil company. 


Mobile phone giants Vimpelcom and Mobile TeleSystems bitterly revealed 
Wednesday that the Communications Ministry had f without explanation f told 
them to give up a combined 52 frequencies. Both companies have sold hundreds 
of millions of dollars worth of stock to Western investors, and news of the 
ministry's order sent those shares tumbling. Recognizing its faux pas, the 
Communications Ministry on Thursday fought to stave off any more backlash by 
hastily suspending the seizure of the frequencies. 


The Onako tender, for which bidding closed Thursday, could give the Kremlin 
another chance. On the auction block is an 85 percent stake in No. 11 oil 
company Onako with a starting bid of $425.25 million. 


The sale is the first privatization to be carried out by Putin's 
administration. The government saw its reputation badly tarnished in past 
privatizations, which were widely thought to have been rigged. But Putin now 
has a chance to show the world that buyers can only win one way: by placing 
the highest bid. Those close ties that company executives built up with 
Kremlin and regional authorities over bottles of vodka no longer count. 


Speculation is already rampant that an insider deal for the stake has been 
struck with an alliance between the Sibneft and Yukos oil companies and 
pipeline builder Stroitransgaz. As of late Thursday night, news agencies were 
reporting that only two bids had been placed so far for the Onako stake f one 
by the alliance and the other by an unidentified bidder. The winner is 
expected to be announced Tuesday. 


While the tender is closed to foreigners, the Western community is closely 
watching to see how fairly the Kremlin will play. 


The government must prove itself at the Onako tender if it hopes to draw 
foreign investment. Perception is important f but so is being a little 
shorter on words and a lot longer on action. 


*****


#7
Date: Thu, 14 Sep 2000
From: "Jerry F. Hough" <jhough@duke.edu> 
Subject:
press coverage of Russia


When we write books, alas, we write history. I
think Steve Cohen was on the money for the 1990s. I disagree that the press
now is unnecessarily negative, but I think it emphasizes some of the wrong
things. The first key fact is that absolutely none of Yeltsin's key
personnel have been changed, not even the Minister of Defense now. I still
think we have a Deng situation in Russia, but it doesn't matter. Nothing
has changed whether Yeltsin is in power or not. So far as I can tell, I was
right that the super-regions meant nothing more the adding of a new level
of corruption of Putin allies. The "shared production" of which Latynina
writes seems like a new name for the old "inter-enterprise loans,"
"private" banks headed by "oligarchs," and "barter" which the press took
seriously, but were just governmental non-monetary distribution of goods 
and subsidies. Gref's ministry is the old Gosplan, and it is natural he has
the responsibility for "shared production," not a sign that the premier is
in trouble. What is the government going to do with 
its production except distribute it as subsidies, and a huge bureaucracy
like the Ministry of Economy is needed. Why doesn't some correspondent
write an article on the Ministry of Economy based on interviews? Why 
don't they write about this year's harvest, let alone the procuring agents?
The press is negative, but it still is not doing any reporting. (Reuters is
an exception.)


Everyone knows that the Moscow press is highly controlled and/or afraid.
Western correspondents need to understand that this means that, like in the
Brezhnev era, one cannot simply use the Moscow correspondents 
as news sources for things like agricultural non-reform, shared production,
super-regions, let alone inner-Kremlin politics. They are spin agents for
the dictatorship. That is what a repressed Russian press means. Moscow
Times is no more reliable than the English language press of Moscow of the
1970s--that is, worst than the Russian language press because aimed at
foreigners.


******


#8
Vedomosti
September 13, 2000
[translation from RIA Novosti for personal use only]
EXPORT CONTINUES TO BE THE MAIN SOURCE OF ECONOMIC GROWTH
By Natalia RAISKAYA, Yakov SERGIYENKO, Alexander FRENKEL (The 
Economics Institute of the Russian Academy of Sciences)

The Russian economy continues to grow. Although the rate 
of growth is lower, the growth is still significant. According 
to estimates, in the first eight months of 2000, the production 
of goods and services in the base sectors (industry, 
construction, agriculture, transport and retail trade) has 
risen by 8.2% as compared to the respective period in 1999. 
Industrial development dynamics is positive. In 
January-August this year industrial output growth measured 
110.2% in our estimate. Although the real rouble exchange rate 
has strengthened a little and the devaluation effect has 
decreased, the largest growth (33.7%) has been witnessed in the 
light industry - the sector which is largely oriented to the 
internal market. 
At the same time, a trend towards the stronger role of the 
external factors of growth is clearly observed in the economy 
as a whole. Net exports are expected to rise to 19.5-20% of GDP 
by the end of 2000. By the results of the first seven months of 
2000, Russian exports, according to data of the Ministry for 
Economic Development and Trade, rose by 47.4% to $57.2 billion. 
The foreign trade balance equalled $33.1 billion against $16.3 
billion in the respective period of 1999. Especially dynamic 
was the export of energy products, iron and steel, non-ferrous 
metals, timber and chemicals. 
The favourable situation on the world markets and the 
development of exports have conditioned the preservation of 
positive dynamics in the most important branches of industry.
According to estimates, in the first eight months of 2000, the 
production growth rate constituted 120.4% in ferrous 
metallurgy, 113.2% in non-ferrous metallurgy, 117.1% in 
chemicals and petrochemicals, 115.5% in machine-building and 
metal working, 115.6% in the timber, timber working and paper 
and pulp industries, 110% in the industry of construction 
materials and 110.7% in the food industry. 
The growth of economic activity in non-ferrous metallurgy, 
the fuel, chemical and petrochemical industry is also confirmed 
by the dynamics of the index of entrepreneurs' confidence 
which, according to data of the State Statistics Committee, 
rose by 2 percentage points in August. 
However, the summer months were characterised not only by 
the continuation of export-oriented industrial growth. 
A sharp growth of investment activity has become an 
important component of economic dynamics. In the period of 
January-July 2000 the volume of investments amounted to 493.6 
billion roubles and rose by 17.2% as compared to the same 
period of last year. The rates of growth of investments in 
fixed assets exceeded the rates of the GDP growth. As a 
consequence, the share of accumulated fixed capital is expected 
to rise from 14.5% to 15.5% of GDP by the results of the year. 
At the same time, the structure of the sources of 
investing has not undergone any considerable changes. As in 
1999, about 60% of investments are the enterprises' own funds.
The share of bank loans in GDP is observed to drop a little.
This means that the intensification of investment activity is 
directly linked with the results of the current economic 
activity of enterprises. 
In the first half of 2000 the overall corporate financial 
result (not counting small businesses, banks, insurance and 
budget organisations) in current prices equalled 475.3 billion 
roubles and rose by 110 percent as compared to the respective 
period in 1999 (51,700 organisations received profit in the 
amount of 544 billion roubles and 35,800 organisation sustained 
losses worth 68.7 billion roubles). The greatest growth of 
overall profit was witnessed in oil production (by 310 
percent). 
The favourable financial position of enterprises and 
organisations has also facilitated settlements in the economy.
In June the share of cash payments by major Russian taxpayers 
rose from 67.1% to 67.7% over the month in the overall volume 
of paid products, according to data of the State Statistics 
Committee. 
The corporate debt burden did not decrease in summer, 
although the share of overdue debts dropped in its structure.
As of July 1, 2000, overall corporate liabilities equalled 
4,234 billion roubles and increased by 2.8% over the month.
Creditor outstanding increased over the month by 0.7% to 
1,614.1 billion roubles. 
The financial situation and the state of the budget 
largely repeat the dynamics of the development of the economy 
as a whole. According to data of the Finance Ministry, in the 
first half of 2000 the federal budget collected as taxes 443.2 
billion roubles (2.2 times more than in the first half of 
1999). The federal budget surplus in the first half of the year 
constituted 111.3 billion roubles or 3.8% of GDP. 

******


#9
Berezovskiy's Motives for ORT Stock Transfer Analyzed 


Vremya MN
9 September 2000
[for personal use only]
Article by Aleksandr Teplyuk: "Boris Abramovich Berezovskiy Has To 
Clean Up Putin's Image in Order To Clean Up His Own"


B. Berezovskiy's decision to turn his block of 
ORT stock over to journalists and members of the artistic intelligentsia 
is not only an indication that he does not categorize journalists as part 
of that artistic intelligentsia (he apparently would be more likely to 
relegate them to the service sector), but also a sign of an inventive 
attempt to kill two birds with one stone--or perhaps even three. 
Only a simpleton would believe that Boris Abramovich Berezovskiy 
wants to butt heads with Putin. The transfer of the stock is in their 
common interest. Berezovskiy is simulating a confrontation with Putin 
and the Kremlin. This benefits Vladimir Vladimirovich Putin too. 
After all, he, the "only legitimate heir and successor," does not need 
any "family" skeletons. It would not be right for an upstanding former 
KGB officer, especially one who is now the president, to have any 
connection to Berezovskiy. And what about Berezovskiy's recent 
"confidential" negotiations with all of those governors? They all 
confirmed that the meetings did take place, but they denied that they 
would be supporting Berezovskiy. Berezovskiy is too smart, however, to 
act like a pest for no good reason. 
Why would Boris Abramovich Berezovskiy want to become a dissident? 
He has even been seen in the company of prominent Russian-American writer 
V. Aksenov! It would be naive to assume that the oligarch is doing this 
to clean up his image. No amount of washing will turn a black dog 
white. Besides, does Boris Abramovich Berezovskiy really care about the 
opinion of the general public? 
Boris Abramovich could have a much more banal reason for his 
political activity. He could be doing this to ensure his own safety. 
It is not that anyone here is threatening him directly, and he is not 
facing any prison sentences--at least not until the next election. 
But what if Berezovskiy were to arouse the Kremlin's genuine wrath 
instead of the mere pretense of animosity? What if prosecutors were to 
start "taking care of old business" in earnest--or new business, for that 
matter? Where could he go? 
No, Berezovskiy is not worried that he might not be able to leave 
this country. He is worried that he might be denied entry to another 
country. That is why he needs proof of his harassment in Russia. 
That proof should be fairly easy to create. In the case of the 
fugitive banker Konanykhin, a Miami court decided that he should be given 
a resident visa instead of being sent back to Russia. This happened 
after a prominent official of our state publicly announced that 
Konanykhin had stolen $300 million. The bank, meanwhile, was trying to 
collect only a few million from the fugitive. In one of our newspapers 
(now controlled by Berezovskiy), another prominent official declared that 
"Konanykhin's life is not worth a plugged nickel." The court decided 
that the charges were groundless (because no one in Russia seemed to know 
exactly how much money the man had taken), and that his life would be in 
danger at home (now that it was being threatened openly in the press). 
In other words, a couple of mutually exclusive quotations and an excerpt 
from a newspaper article took care of the entire matter. 
If Berezovskiy has to start packing his bags, he will have a whole 
suitcase full of these excerpts and quotations. He might even get some 
kind of international prize--as a fearless champion of freedom of speech. 
Stranger things have happened. That same Konanykhin, for example, 
now has a reputation in the United States as a big authority on 
corruption in Russia. He even has a special site on the Internet.... 


*****


#10
From: "Ariel Cohen" <ariel.cohen@heritage.org> 
Subject: Heritage
Conference on Russia
Date: Thu, 14 Sep 2000 


The Heritage Foundation
A tax-exempt public policy research institute


YOU ARE CORDIALLY INVITED TO A DISCUSSION ON 


LOST OPPORTUNITIES? 
U.S. POLICY TOWARDS RUSSIA DURING THE CLINTON-YELTSIN YEARS


FEATURING


THE HON. CHRISTOPHER COX (R-CA)
Chairman, Speaker's Advisory Group on Russia


WITH COMMENTS FROM:
ARIEL COHEN
Research Fellow, Russian and Eurasian Studies, The Heritage Foundation


The long-awaited release of the Report of the Speaker's Advisory Group on
Russia is scheduled for the week of September 18. In March 2000, Speaker of
the House Dennis Hastert appointed Rep. Cox as the Chairman of this
blue-ribbon committee to evaluate U.S.-Russia policy during the
Clinton-Yeltsin years, and make recommendations for the future. The
committee includes as its members the chairmen of the House Committees on
Armed Services, Appropriations, Banking, International Relations,
Intelligence, and the Joint Economic Committee. Their 220-page report,
which follows months of hearings, interviews, and research in the United
States and Russia, will be presented to the Speaker in a Capitol ceremony
and will be immediately available on the Web. 


MONDAY, SEPTEMBER 25, 2000
12:00 NOON 
REFRESHMENTS SERVED
THE HERITAGE FOUNDATION'S LEHRMAN AUDITORIUM
214 MASSACHUSETTS AVENUE, NE
RESERVATIONS REQUESTED
PLEASE CALL (202) 675-1752
OR SEND YOUR E-MAIL TO: lectures.seminars@heritage.org
VIEW LIVE ON THE INTERNET AT WWW.HERITAGE.ORG


******


#11
Date: Thu, 14 Sep 2000 
From: Bob Reilly <breilly@IBB.GOV>
Organization: U.S. International Broadcasting Bureau
Subject: ON THE LINE: INSIDE PUTIN'S RUSSIA


DATE=09/16/2000
TYPE=ON THE LINE 
NUMBER=1-00883 
TITLE=ON THE LINE: INSIDE PUTIN'S RUSSIA
EDITOR=OFFICE OF POLICY - 619-0037
CONTENT=
THEME: UP, HOLD UNDER AND FADE


Anncr: On the Line - a discussion of United States policy and contemporary
issues. This week, "Inside Putin's Russia." Here is your host, Robert Reilly.


Host: Hello and welcome to On the Line.
Despite the continuing war in Chechnya and a crackdown on the press,
Russian President Vladimir Putin remains popular with the Russian people.
But the accidental sinking of the Kursk nuclear submarine and the shocking
deaths of some one-hundred Russian sailors have raised serious doubts about
Russia's competence. Some took the incident as evidence that Russia's
infrastructure continues to decline and its government is not fully in
control. Observers wonder whether President Putin can carry out further
economic reform, fight corruption, and make more progress toward a
genuinely democratic system. 


Joining me today to discuss Russia under Putin are three experts. Helmut
Sonnenfeldt is a guest scholar at the Brookings Institution and a former
Counselor of the U.S. State Department. Jonas Bernstein, a former columnist
for the Moscow Times, is a senior Russia analyst with the Jamestown
Foundation. And Michael McFaul is a senior associate at the Carnegie
Endowment for International Peace. Welcome to the program. 


Helmut Sonnenfeldt, is the Kursk disaster symptomatic of some even deeper
problems in Russia of which we were unaware?


Sonnenfeldt: Well, yes. I think it is symptomatic although we didn't need
the Kursk disaster to know that there are all sorts of problems in the
military, with infrastructure, with safety, environment, and so on. The one
thing that perhaps we didn't have occasion to learn about quite as much as
we did in the case of the Kursk is that the president of Russia, Mr. Putin,
doesn't quite know how to manage a crisis. And it's not surprising. He's
come up to the top very quickly and has not had experience before this, of
being the boss. He's always had one or more layers of bosses on top of him. 


Host: What did he fail to do?


Sonnenfeldt: Well, he did nothing, initially. And perhaps he was trying to
set things up so that he could blame others. But he seemed to be at a loss
and he's acknowledged this to some extent. How genuinely does he really
understand what leadership means even if it's the kind of leadership that
he is trying to build, which is one with accumulated power, and so on? But
it's a skill, a talent, and in some ways it requires an instinct that in
this instance he didn't go on. Since then, there have been a few other
instances.


Host: Well, let me ask Jonas Bernstein, since you were a member of the
Moscow press. Some say that the reaction of the press against Putin for his
failure to handle this Kursk incident with some sign of leadership has
turned Putin even more against the press, that it's an enemy of the state,
and it has to be controlled.


Bernstein: Well, I think his instincts are basically that of someone who is
very distrustful of the press and probably doesn't understand the function
of the free press in a free society. After all, it is the way he was
trained as a veteran K-G-B officer. And I think that, obviously, the
incident with the Kursk made him more ill-disposed toward the press,
particularly the independent press that exists outside of the state sector.
Vladimir Gusinsky's Media Most being one in particular.


Host: And how else is that playing itself out would you say, Michael
McFaul, in terms of an independent free press in Russia? There were
certainly signs before the Kursk tragedy, but there are also statements
from President Putin as recently as his visit to New York, that a free
press is essential to a free society and that's what we're trying to
construct in Russia. Does he understand it, or was that just for public
relations purposes?


McFaul: I don't think he understands it. I agree with Jonas. That's not
part of his training. That's not part of his worldview. I think he
understands certain fundamentals, that is, to be a normal Western European
power necessitates that you have a free press. And he wants Russia to
become a normal Western European power. The problem is it's not deep in his
roots. He wasn't brought up with it. And when the press becomes difficult
for him, when it gets in the way, then he takes actions against the press.
It's not that he is a dictator in waiting, that he's dreamt about becoming
the next Stalin of Russia. I don't think that's true. But it's also not
that he's going to fight to defend the principles of a free press or
democracy more generally.


Host: Well, it's interesting that, when he was in New York, a dinner was
held for him with the leaders of the American media. And one of them asked
him: what kind of democrat are you? And he asked them if they had been
members of the Soviet Communist Party. And I quote him here: "We had
twelve-million members of the Communist Party. The biggest problem we face
is the poisoned consciousness of our people. It will take a long time for
our people to realize that the quality of their lives will depend on their
own effort." You're shaking your head. 


McFaul: The problem is not the people. The problem is the leadership. It's
the poisoned leadership's mentality. If you look at opinion polls, which I
do often -- I do my own opinion research in Russia -- the people support a
free and independent press. We can't blame the Soviet mentality anymore. We
have to [look to] the leaders themselves. I think he's really talking about
himself and his comrades in the Kremlin.


Host: Do you agree with that, Helmut Sonnenfeldt?


Sonnenfeldt: I think in large part I do. Given his specific background and
then the more general fact that practically all the people in positions of
leadership in Russia come out of the old system, they didn't have a bench
to draw on. They had no dissidents. They had very, very few exiles who came
back. It's quite different from the situation in other former Communist
countries, at least in Europe. It's different from the German situation and
even the Japanese situation after World War Two. These people are the
products of the old system, however disenchanted they became with Communist
ideas and ideology. I don't think that's Putin's problem so much. I don't
think he's an eager Communist. 


Host: You're saying that the problem is still the nomenklatura?


Sonnenfeldt: Well, I think that not only is he physically a product of a
nomenklatura, and he didn't quite make it into the nomenklatura himself,
but, in any event, there has not been a real turnover of the elite running
the government. And I think that we've had expectations, and many outside
people in government have had expectations, about the development of
democracy and the genuine rule of law, not the kind of dictatorship of law,
or by law, meaning law-givers, that Putin has talked about. 


Host: Is that exactly why the popularity of Putin in the opinion polls was
so stratospherically high, because they expected this young man to be that
turnover?


Sonnenfeldt: You study these things more closely than I do. I think that to
some extent that popularity had to do with the desire for order and some
sense that there's somebody at the top that knows what he's doing because
Yeltsin became not only an embarrassment but a demoralizing influence on
people's lives. So I think that the Putin position here as, in a way, the
savior from this rather terrible situation built up his popularity, as well
as some of the gimmicks about the Chechen war and things of that sort.


Host: Well, given the problems that all of you seem to generally agree
upon, what happens next in Russia and how does Putin proceed, or does he
proceed, with the next steps of economic reform, which everyone seems to
agree must take place if Russia is going to be a viable economy in this
global world?


Bernstein: I would add a strong note of skepticism here and caution in
terms of the possibilities for further economic reform because I'm not even
sure what economic reform was carried out in the previous ten years. 


Host: What about the thirteen percent flat tax that was passed by the Duma?


Bernstein: That's interesting that you mention that. Having spent eight
years in Russia, I have seen many a good initiative come out, be passed,
even in the Duma -- some haven't, some have -- be signed into law by
presidential decree. It's in the area of implementation where it sort of
falls by the wayside. I might add one thing on the thirteen percent flat
tax. It came out and they pushed it through the Duma; the Duma passed it.
The idea of the thirteen percent flat tax is that it's going to allow
people to come out of the shadow economy. But then Deputy Prime Minister
Ilya Klebanov comes along and says, hints strongly, that this is only a
temporary measure and that, after the people come out of the shadows and
announce what their sources of income are, that they're then going to
change the tax system back to something the way it was in the past. Just by
doing that, that basically has taken away the effect of the thirteen
percent flat tax already. I know Russia. Russians, when it goes through the
rumor mill that the government is planning to pull another scam, that's the
way they look at it, they will not declare that income, whether it's
thirteen percent or not. 


Host: I just want to take a moment to remind our audience that you're
listening to On the Line and we are discussing Russia under President Putin
today with Helmut Sonnenfeldt from the Brookings Institution, Jonas
Bernstein from the Jamestown Foundation, and Michael McFaul from the
Carnegie Endowment. Mr. McFaul do you agree with what Mr. Bernstein just said?


McFaul: Yes and no. Yes, most initiatives of market reform in Russia have
failed in the implementation. I don't think there's much argument about
that. But if you step away for a bit -- and not just looking at the actual
trees, is it thirteen percent, fifteen percent, what is the actual balance
day-to-day -- and you take a step back and look at the entire decade, I
think it would be wrong to say that there hasn't been fundamental economic
transformation in Russia. The question to me is not about economic reform
right now, to be quite frank. I think that, if you look around the team
that Putin has assembled, they are some of the best and brightest. We can
debate whether we like what their policies are, but they have an agenda
that they want to do. 


Host: And also haven't they achieved some success with a seven percent
growth rate, and inflation down to almost twelve percent?


McFaul: Well, they most certainly have been helped by thirty-five dollars a
barrel of oil. And in many ways what I would say right now is my sense, in
speaking to some of these people doing these reforms, is that there is
actually a sense of complacency, that they don't have to do anything
because of that. But the problem is not that. The problem is what does
Putin want to do with the political regime. And some people around him say
this: look, Russia's in a mess. We've got to slam down the throats of the
people of Russia a real economic reform process, a neo-liberal, a radical
reform process, not this namby-pamby stuff of the early nineties. And the
only way to do that is through dictatorship. And they point out Chile; they
point to South Korea; they point to Singapore as their models. What I'm
nervous about is that metaphor, because, when they look at those places,
they forget about Uzbekistan, Zaire, or the Soviet Union, which after all
had dictatorship, but not this market growth. And that worries me a lot
because in the attempt to create a kind of quasi-dictatorship in the name
of economic reform, one, it will fail, but, two, when you don't get the
economic reform, then I think that Putin will throw out the neo-liberals
and bring back the K-G-B apparatchiks because power is the end, not
economic reform.


Sonnenfeldt: I agree, as I said earlier. I think that Putin's main impulse,
and by now strategy, is to accumulate power, not just for himself, but at
the center. He's talked about that long ago. He has an easy target in the
regions because of the corruption in the regions. But he clearly doesn't
like elected people outside Moscow in the regions. That's another question
whether you can govern Russia from the center.


Host: Right there is a good question because, as Jonas Bernstein pointed
out, one of the big problems in Russia over the past ten years is that the
Duma has passed all kinds of laws and they're never implemented because
there's not an executive authority that can do it. 


Sonnenfeldt: I think that there's executive authority, and there's
executive authority. That also gets to the question of who limits power?
Who distributes power? What is the role of the judicial system? Putin and
his people think that they can go out and negate something that's done in
the regions by an elected governor, or by an elected legislature in the
regions, that they say is contrary to federal law. Now in more or less
normal places, that's a judicial issue, not an executive issue. So I think
that this accumulation of power in different dimensions is very much on his
mind. The question will ultimately be whether, in fact, he can impose it
and how far he has to go to use methods that go back to czarist times, and
even Communist times in order to impose it. What happens then?


Host: Michael McFaul?


McFaul: And what will the reaction of those individuals and societal
organizations be? I think that if we were talking on the eve of Putin's
election -- I know because I sat on several panels just like this and
talked about who Putin's going to be, what's he going to do -- the kind of
conventional wisdom, at least in this town, was that he's not going to do
anything. It's going to be the status quo. It's going to be the
continuation of the Yeltsin regime. What is striking to me is how it's not
the continuation of the status quo, that in every single front he has
punched first against the oligarchs, against the regional authorities,
against the Duma. We forget that. There has been fundamental redistribution
of power between the president and the Duma, and against the press. The
question now is: they have all reacted, they've all kind of moved back. The
question now: will there be a counter reaction to it? And I think it's
important to realize that many people believe that there were no
countervailing powers under Yeltsin. We now see that, at least, there was
something. 


Bernstein: I would actually disagree on there being a radically great
difference between rule under Putin and rule under Boris Yeltsin. I think
there is more of a continuum there. After all, for instance, if we take the
attacks on some of the independent, non-governmental press, like Media
Most, those actually began when Boris Yeltsin was still head of state last
year. 


McFaul: That's just not true.


Bernstein: It most certainly is. 


McFaul: I just had lunch Mr. [Vladimir] Gusinsky and he praised Yeltsin for
being for being the first Russian leader to ever defend an independent press. 


Bernstein: I know that's what he says now. But as a matter of fact, the
first tax raid on Media Most's publishing house was last year in the fall
when Boris Yeltsin was still the head of the state. 


McFaul: And Putin was the prime minister.


Bernstein: And not only that, I would also add that, if you're looking for
authoritarian tendencies, the first Chechen war was 1994-1996 under Boris
Yeltsin, and it was also launched last year when Boris Yeltsin was the head
of state and he defended it publicly. I think that there is much more of a
continuum. And I would also add that the attack on the oligarchs, which
Putin is also ostensibly carrying out, must also be taken with an extremely
large grain of salt.


Host: I need to ask one question that plays into what you last said, Helmut
Sonnenfeldt. And that is something historic happened recently in Russia and
that is the Supreme Court ruled that Alexander Nikitin was innocent of the
espionage which the Russian government attempted to prosecute him for over
a period of almost five years. That's the first time that's ever happened.
Is that at least a hopeful sign that there is a countervailing center of
power, an independent judiciary, evolving?


Sonnenfeldt: I'd like to think that it was hopeful. I like to see two or
three or six more cases of this kind. I don't know how much of this was
show, how much of it was voluntary, or to what extent there was influence
exercised to get this off their hands. But yes, if this is going to become
a pattern, and you really move towards some sort of independent judiciary,
and find the people that can be independent as another case here of the
manpower pool, the womanpower pool, to staff the court system with people
that came up in the old system. But I'm prepared to except this particular
case as a hopeful sign, but with the cautions that I've just mentioned. 


Host: There were other things that went wrong aside from the Kursk tragedy.
The fire of the television tower in Moscow which raged for several hours
before they got permission to turn the electricity off. The shutdown of a
power grid to nuclear power plants the other weekend. And also an electric
power company shutting off electricity to a Russian missile instillation.
Again, the impression, at least as it's conveyed in the press in the West,
is of a place that's just not functioning, not in control. Is that overplayed?


Bernstein: I think you have a combination of two things. A: the crumbling
infrastructure that's been inherited from the Soviet period, and one
wonders where the tens of billions of dollars that came in from
international lending institutions and from foreign governments in the
forms of loans and credits, where they went to. 


Host: They went out again, right?


Bernstein: Well, to Switzerland and other places like that for the most
part. That's one problem. The other problem is that there are still
elements of a centralized command and control system. In the case of the
Ostankino Tower fire, the head of the Moscow fire brigade said that they
couldn't, they wouldn't cut off the power to the television tower because
it's what state television is broadcast over, until they got Putin's
permission. Again, I think it's an emblem of the degree to which, in fact,
there has been much less change over the last ten years than a lot of
people think. 


Host: Michael McFaul, your reaction?


McFaul: We're arguing about Yeltsinism and history. I'm not that interested
in that. What I think is fundamentally different between Yeltsin and Putin
is that the old checks and balances, whether we liked them or not is a
different thing, the oligarchs versus the president, the regional
governors, the independent press and even the Duma. Let's not forget they
did some important things to check Yeltsin. All those institutions are
weaker today than they were twelve months ago. And I think that's the
important thing when we think about President Putin. This is a guy with a
very aggressive agenda and he's a very young, healthy man. That's
something, also, Boris Yeltsin was not. 


Bernstein: I think a lot of that is true, particularly about the
parliament, etcetera, although I still have very, very strong questions
when it comes to the relationship between Putin and the oligarchs because,
while I think some oligarchs are in Putin's gunsights, so to speak, I'm not
sure that all of them are. As a matter of fact, I'm not sure to what degree
Putin is an independent player. 


Host: Mr. Sonnenfeldt:


Sonnenfeldt: I agree with that. He might find other oligarchs to work with
and who are eager to work with him. I think there are big questions, in my
mind at least, about whether what Putin is about, to the extent we
understand this and in terms of building a powerful center with himself at
the center of the center, whether that's in fact feasible, and what it will
take to do that and then, of course, the implications of all of that for
Russia's relations with the outside world. I don't doubt that he wants to
become part of the industrial, advanced West. But whether he has it in
himself, either by instinct or training or comprehension of what's
involved, to steer Russia in that direction, I think, is a very open
question. I think that we in the West, in the U.S. and elsewhere, ought to
be careful to give him some benefit of the doubt, but not too much because
I don't know that we can really tell where this is headed given what appear
to be his impulses regarding power. 


Host: I'm afraid that's all the time we have this week. I would like to
thank our guests --Helmut Sonnenfeldt from the Brookings Institution; Jonas
Bernstein from the Jamestown Foundation; and Michael McFaul from the
Carnegie Endowment -- for joining me to discuss Russia under Putin. This is
Robert Reilly for On the Line. 

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