September 20, 2000    
This Date's Issues: 4526  4527   4528

Johnson's Russia List
#4528
20 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Vedomosti: Alexander Bekker, RUSSIAN SOCIO-ECONOMIC SITUATION: 
OUTLOOK BLEAK.
2. Wall Street Journal Europe: Frederick Kempe, When in Russia, 
'Trust But Verify'
3. Rossiiskaya Gazeta - Biznes v Rossii: Irina Kolodina, 
FOREIGN INVESTORS DO NOT FEEL SAFE IN RUSSIA.
4. Dimitri Devyatkin: Subject: Western press coverage on Russia in 
the 90s.
5. Financial Times (UK): Andrew Jack, Russia recovery loses power.
6. BBC MONITORING: HEAD OF RUSSIAN AUDIT CHAMBER SEEKS MORE POWERS 
FOR HIS DEPARTMENT.
7. Baltimore Sun: Kathy Lally, A Russian journey. For impoverished 
peasants along the St. Petersburg-Moscow highway, little has changed 
in the two centuries since a reformer's trek recorded their plight.]


******


#1
Vedomosti
September 20, 2000
[translation from RIA Novosti for personal use only]
RUSSIAN SOCIO-ECONOMIC SITUATION: OUTLOOK BLEAK
By Alexander BEKKER 

The entire Russian population will shrink by 52.5 million 
people by the year 2050. However, the surviving 93.7 million 
Russians will grow richer by 350 percent on present-day levels. 
This conclusion stems from a forecast that was compiled by this 
country's Economic Development Ministry for the national 
Pension Fund, which wants to assess various pension-reform 
options.

On September 21 the Russian Federation's Government will 
examine the projected pension reform's financial resources.
The entire pension reform is to be implemented over the 
2001-2010 period. For his own part, Mikhail Zurabov in charge 
of the Russian Pension Fund will inform the Cabinet about the 
switch-over to the pension-accumulation concept. Yevgeny 
Gontmakher, who heads the government administration's social 
department, noted that the September 21 cabinet session will 
discuss all the main financial parameters, e.g. the traditional 
pension system's appropriations, due to be allocated during the 
next decade, as well as the volume of pension-fund monies. And 
Zurabov is going to cite the annual correlation between 
pensions and wages, as well as that between pensions and 
subsistence-minimum levels. As of today, average pensions make 
up for 35 percent of average wages, with this share apparently 
dropping to 28 percent by the year 2010.
Seven percent will be channelled into the pension-accumulation 
fund. Average pensions, which now tally with 
subsistence-minimum levels, will account for 140 percent of the 
national subsistence minimum over the 2010 period. The Pension 
Fund used to calculate all these proportions on the basis of 
the Economic Development Ministry's projected GDP levels and 
demographic forecasts.
Despite the fact that the Pension Fund predicts possible 
trends a decade in advance, the Russian Federation's State 
Committee for Statistics has compiled a demographic forecast 
until the year 2016, subsequently extending it until the year 
2050 (at the Pension Fund's request). Its forecast implies that 
the Russian population will be shrinking at a rate of nearly 1 
million people each year. This country had a population of 
146.3 million last year. Meanwhile the State Committee for 
Statistics claims that 134 million Russians will remain by the 
year 2016. And the entire Russian population will total 93.7 
million by the year 2050. Russia is being depopulated, First 
Deputy Economic Development Minister Mikhail Dmitriyev told 
Vedomosti.
This trend was first manifested prior to the current 
market reforms. According to Yevgeny Soroka, who works for the 
Human Demography and Ecology Center, nationwide mortality rates 
have been on the rise ever since the mid-1960s. Besides, local 
birth rates used to diminish even during the Soviet period, 
that is, since the late 1980s. Soroka reacts somewhat 
cautiously to specific demographic forecasts until the year 
2050 because he doesn't know anything about their methodology.
Technically speaking, the simple extrapolation method is not 
appropriate here. For instance, the average life expectancy for 
Russian men will total 63.9 years over the 2010 period, 
reaching 65.9 years by the year 2020. However, this doesn't 
necessarily imply something in between for the 2015 period, 
Soroka went on to say. Nevertheless, Soroka, as well as Olga 
Antonova, who serves as deputy department chief with the 
Russian State Committee for Statistics, agree that the 1999 
period and the first few months of 2000 serve to confirm gloomy 
trends that had shaped up some time before. 
President Vladimir Putin of the Russian Federation noted 
recently that this problem now ranks among state priorities.
In his July state-of-the-nation address, Putin stressed that 
the nation would be threatened with extinction, in case 
present-day trends persist. True, the Russian population 
continues to diminish, what with per capita GDP levels and wage 
funds increasing all the same. Real life wages are going to 
swell by 120 percent over the entire 2000-2010 period, the 
Economic Development Ministry predicts. Consequently, it would 
become possible to completely pay all current retirees and to 
form the pension-accumulation fund. The Government intends to 
start indexing local pensions in line with inflation levels 
over the 2002 period and later on. Wages would be expected to 
increase faster than nationwide inflation does. Consequently, 
additional monies will be channelled into the 
pension-accumulation fund. The following tragi-comic conclusion 
suggests itself -- national living standards are inversely 
proportional to the size of Russia's population.
True, the Ministry's long-term forecast makes one think 
that all of us are puny mortals. However, some more pragmatic 
considerations should also be voiced. The Ministry cites 
apparently accurate statistics, thus giving the impression that 
Russia is no less predictable than Switzerland or Liechtenstein 
are. German Gref's department claims that the Russian economy 
will continue to grow steadily until the year 2038, 
subsequently experiencing a smooth recession well until the 
year 2050.

Projected GDP Levels (Average Demographic Scenario) 
----------------------------------------------------------------
-
Per capita GDP levels, Popu- Active Wage fund,
GDP levels, in percent lation, popu- in actual
in percent to 1999 in mil- lation, prices,
to 1999 lions of in mil- billions
people lions of of people
roubles
----------------------------------------------------------------
-

1999 100 100 146.3 72.4 -
2000 106.1 106 145.5 72.4 -
2001 110.8 110 144.8 72.6 1,550 
2002 116.6 115 144.1 72.7 1,850
2003 123.4 120 143.4 73.1 2,170
2004 129.6 126 142.7 73.6 2,472
2005 136.2 132 142.0 74.1 2,763
2006 143.2 138 141.4 74.6 3,050
2007 150.5 145 140.7 74.7 3,564
2008 158.0 151 140.0 74.9 4,153
2009 165.6 158 139.3 74.9 4,831
2010 173.2 164 138.6 74.6 5,616
2050 351.1 225 93.7 40.5 -


******


#2
Wall Street Journal Europe
September 20, 2000 
[for personal use only] 
When in Russia, 'Trust But Verify'
By FREDERICK KEMPE


The financier on the phone was in a froth.


He was pleased that this column had turned a questioning spotlight on Russian 
gas giant Gazprom and its brewing $250 million loan from the European Bank 
for Reconstruction and Development. He applauded the EBRD's effort to use the 
bait of the credit to demand more transparency and better corporate 
governance from Gazprom, though he doubted how much one Western institution 
could do to alter the behavior of such a powerful and opaque company.


"Doveryat no Proveryat" (trust but verify), said the financier, deploying a 
Ronald Reagan quote from the bad old Soviet days that has come back into 
fashion among Western business folk in today's Russia.


The caller's complaint came in the form of a tip. A more immediate and 
telling case than Gazprom's, he said, was the EBRD's ongoing soul searching 
over whether to release the first funds from a $150 million loan agreement 
with Lukoil that was signed last May to be repayable over three years.


His reasoning was simple. First, unlike the fresh Gazprom negotiations, the 
Lukoil deal had been in the works for nearly two years and was almost 
complete. Second, Lukoil was already more open and known than Gazprom to 
Western banks, who were already depositories of many of its shares. If the 
EBRD couldn't lend to Lukoil, whose bottom line can only improve due to 
rising oil prices, to whom else could it then lend in Russia? And finally 
there was the news peg: My source noted that EBRD President Jean Lemierre 
would be meeting with Russian Prime Minister Mikhail Kasyanov today 
(Wednesday) in hopes, among other things, of breaking the logjam regarding 
the loan.


If the measure of a story's sensitivity is how willingly sources talk for the 
record, then it struck me quickly that Lukoil was too hot for many of its 
participants to handle. No EBRD official would speak for the record about it, 
and the several people who would talk demanded anonymity. Yet the tale they 
told was an intriguing one. It was the story of how a major Russian company, 
seeking respectability and an eventual listing on the New York Stock 
Exchange, was about to swallow an unprecedented dose of conditionality. That 
said, it was also the sobering story about how even the most Western of 
Russian companies is having trouble opening its books and its business 
relationships to outside scrutiny.


At times, EBRD officials have told outsiders that they feel themselves to be 
in the role of Don Quixote these days, fighting, often alone, to change years 
of bad habits condoned by Western banks, business partners, governments and 
international institutions, including themselves. "We have to all work very 
closely and sing the same song if we want to change [Russia]," says one 
person familiar with the Lukoil negotiations.


A person familiar with the talks also spoke of three of the credit's more 
sensitive issues: whether Lukoil would cut out of the deal one of its 
favorite crude oil marketers, whether it would fully abide by International 
Accounting Standards and whether it would tell all about the true 
beneficiaries behind a Cyprus-based company that bought up 9% of its shares.


On the first matter, Lukoil officials are said to have surprised EBRD 
officials with their quick acceptance of the bank's stipulation that Western 
Petroleum, one of their preferred partners, be "carved out" of any oil 
offtake resulting from the deal. EBRD officials felt confident, though they 
lacked documentary evidence, that the "beneficial owners" behind the 
Swiss-based company were either Lukoil officials or closely connected to them 
-- a matter illegal under some Western rules but not in Russian law. 
"Beneficial owners" aren't those necessarily listed on company registers, but 
rather those who in the end profit from the company's activities.


EBRD officials believed this initial Lukoil concession confirmed that the 
company's chairman, Vagit Alekperov, was intent on satisfying them as part of 
a broader strategy of preparing his company for an eventual listing on the 
New York Stock Exchange. That impression was further confirmed by the 
company's willingness to consolidate all its overseas and affiliate 
operations according to International Accounting Standards. (That said, the 
complex task still isn't done and might not be complete before month's end.)


The most difficult matter for Lukoil to satisfy, however, has been the EBRD's 
demand that the company reveal more about its relationship with a 
Cyprus-registered company called Reforma Investment Ltd. Lukoil Vice 
President Leonid Fedun has insisted that the company had no links to Lukoil, 
but people familiar with the situation say that independent EBRD 
investigations couldn't confirm that claim. The little-known company first 
hit the press last November when it purchased 9% of Lukoil through a 
government-run privatization auction. It won with a bid of $200,005,000 -- 
just $5,000 above the government's minimum asking price.


Versions differ about how the EBRD and Lukoil will likely resolve the Reforma 
matter, though most agree that the deal is nearing completion following a 
Sept. 7 signing of security agreements -- collateral being the offtake of oil 
-- and the participation agreement including Raffeisen Bank, Citibank and 
Dresdner Bank.


One person familiar with the matter says Lukoil officials have told EBRD 
officials privately about Reforma's beneficial owners, but have thus far 
balked at putting it on paper. The Russians have sought assurances that what 
they tell the EBRD about Reforma will remain secret. Others, however, believe 
the two parties might still find a way to circumvent the whole issue, perhaps 
by pushing it off until Lukoil moves toward a New York stock listing and 
would anyway need to reveal Reforma's true beneficiaries.


The most troubling scenario in the view of one informed banker is that Lukoil 
would agree to tell the EBRD what it knows about Reforma but that the EBRD 
would agree to the company's condition that the details remain secret. 
Western governments, the bank's shareholders, might well wonder whether 
keeping this problem from public view would violate the EBRD's mandate to 
promote post-Soviet transition.


Yet this Don Quixote can't act alone. Western banks, businesses and 
international financial institutions must all set tougher rules of engagement 
if they are to have a chance at helping Russia clean up its economic house.


******


#3
Rossiiskaya Gazeta - Biznes v Rossii 
No. 37
[translation from RIA Novosti for personal use only]
FOREIGN INVESTORS DO NOT FEEL SAFE IN RUSSIA
By Irina KOLODINA

The macro-economic situation that has evolved in Russia 
now is most favourable for investments. This conclusion was 
made by the participants in the conference called "Russia:
Possibilities in the New Epoch."

In the presence of foreign investors, the finance minister 
Alexei Kudrin promised that the Cabinet would ensure stable 
economic policy for the near future. In Kudrin's words, even 
though, according to forecasts, Russian economy will grow 
slower in the second half of the year than in the first, the 
government has been given an opportunity to pursue the policy 
of repaying debts, especially foreign ones, whose volume has 
reached a critical point by now.
The government is going to take advantage of the respite 
afforded by high oil prices to prepare the basis for structural 
reforms. In particular, it will continue the restructuring of 
loss-making sectors of industry.
While admitting that macro-economic indicators of the 
Russian economy do look tempting, foreign investors still 
express their reserved misgivings. The main thing they demand 
from the Russian government is to ensure stability, since 
investors hate surprises. According to Lord Clifton, deputy 
chairman of the investment bank Robert Fleming Holdings, since 
the time foreign companies began investing money in Russia, 
they have been feeling like on a roller-coaster. Though, in his 
opinion, this is not the reason to avoid making investments in 
the Russian economy. In the 19th century, the then American 
market aroused no more trust in investors than the present 
Russian market. 
What else do investors expect from this country? Firstly, 
the supremacy of law and an opportunity to protect their rights 
in court, which should be equally loyal to both Russian and 
foreign investors. Secondly, they want the economy to be open 
and the international accounting standards to be introduced.
Only then will Russia be able to compete with other 
developing markets.
Meanwhile, Alan Hearst, vice-president of the City Bank, 
admitted that an increase in domestic investments in the 
Russian economy would be a signal for foreigners to step up 
their activities on the Russian market. If Russian banks start 
investing their funds in the real sector of the economy, 
foreigners would follow suit. There is a cause for optimism 
now. According to the latest data, the volume of domestic 
investments has increased by 17 percent.
The question whether investments will flow into Russia or 
not remains open. One thing is clear: they are vital for this 
country. A report on the "Investment Climate in Russia" 
prepared by the Expert Institute in conjunction with the Ernst 
& Young company, cites the following figures: more than two 
trillion dollars in investments will be needed over 20 years to 
raise competitiveness and win positions in international 
markets. Today, the wear and tear of fixed assets at Russian 
enterprises reaches 50 percent, and the share of production 
equipment which has served over 15 years comes to 46 percent.
At the same time, the volume of investments has been shrinking 
for 12 years. Last year's investments accounted for a mere 22 
percent of the 1991 figure. The influx of direct foreign 
investments in this country has been about 10 billion dollars 
since 1993. They account for about 8 to 10 percent of the 
capitals taken out of Russia over these years. 

******


#4
From: "Dimitri Devyatkin" <dimitrid@xs4all.nl>
Date: Wed, 20 Sep 2000
Subject: Western press coverage on Russia in the 90s


In support of Paul Kindlon from JRL 4526, "Journalists did not simply err;
they misreported on purpose." (on Russia in the 90s) his point may be taken
further. The journalists' misreporting served certain parties, who knew
precisely what they were doing, and achieved their desired results.


The current situation, with Russia's vast wealth in the hands of a few
private owners, and the population penniless, cowed and bruised, is clearly
in some people's interest.


>From a geo-strategic point of view, Russia is being plundered of its vast
treasures. Russia will mount no threat to the West, not in industry, not in
science, not in military affairs.


Maybe the US Administration and the IMF had this in mind by supporting Boris
Yeltsin all these years. Along with Chubais, Berezovsky and Potanin, they
have crippled the country for generations to come -- but served their own
interests.


But how can Westerners criticize such tactics? Our rulers also owe their
wealth to similarly ruthless wealth-building tactics and benefit from the
effects to this day.


*****


#5
Financial Times (UK)
September 20, 3000
Russia recovery loses power 
By Andrew Jack


What is good for Russian business is bad for investors, judging by the
effect of high global oil prices on the country's stock market. 


After a strong rally in August, by the end of which the RTS index had risen
by a quarter to a peak beyond 245, September has signalled a sharp drop. 


"The fear is almost tangible in the eyes of our traders," said James
Fenkner, chief equity strategist with Troika Dialog. 


That is not to say there is no interest by investors in the Russian market. 


Brunswick Warburg, the brokerage, held a conference in Moscow this week,
and claimed so many people had accepted its invitation that it did not have
enough space left in the room to allow journalists to attend. 


But interest does not always translate into stock market trades. The
decline during September partly reflected a mathematical adjustment after
prices had risen so sharply during thin trading in August, the result of
optimism about improving prospects in Russia. 


"The macro-economic situation is fantastic, and everyone knows the
fundamentals are good," says James Henderson, head of research at
Renaissance Capital. 


Like Mr Fenkner, he points to sustained economic growth, a stable rouble, a
rise in investment and other positive signs. 


But both argue that external factors - notably the sharp rise in oil prices
beyond Dollars 30 a barrel - played a large part in the fall. 


While high prices help Russian commodity exporters and swell government tax
revenues, there is a downside. 


Mr Henderson says: "What's good news for Russia is bad for the rest of the
world, and that in turn drags the Russian market down because, as a
high-risk market, that's where the money disappears from first." 


There have also been Russia-specific factors at work, in particular fresh
concerns about corporate governance and the respect of law. 


Earlier this month, the telecommunications ministry unilaterally withdrew
some frequencies from Moscow's two leading mobile operators, MTS and
Vimpelcom, which it had allocated last May for one year. 


In a sign of the chaotic nature of the Russian administration, when the
telecoms minister returned from a foreign trip and discovered what had
happened - or noticed the strongly negative market reaction - he ordered
his department's order to be suspended. 


Now analysts are waiting not only for that situation to be clarified, but
also for more signs that the government's economic programme is being
implemented. 


Meanwhile, while arguing that the worst may be past, some are beginning to
downgrade their projections that the RTS would reach 300 by the end of this
year. 


*****


#6
BBC MONITORING 
HEAD OF RUSSIAN AUDIT CHAMBER SEEKS MORE POWERS FOR HIS DEPARTMENT
Text of report by Russian newspaper 'Izvestiya' on 19th September 


Sergey Stepashin, chairman of the Audit Chamber, continues to seek a
broadening of the powers of his department. The Audit Chamber is to change
from being an abstract control body into a specifically punitive body. From
the "red auditor" in opposition to the president and the government into an
instrument of power. For this, aside from regional subdivisions of the
office, Sergey Stepashin has formed "under himself" an expert-advisory board. 


The board is made up of 64 persons - as observed at the first session of
the board - "prominent and experienced economists, lawyers, specialists in
the budgetary process, and representatives of the judiciary and the
law-enforcement authorities". They include Sergey Glazyev, Aleksandr
Zhukov, Mikhail Prusak and Aleksandr Shokhin. This board is Stepashin's
second real step en route to a strengthening of the position of the Audit
Chamber. 


The first step was the "agreement" with President Vladimir Putin on the
formation of regional branches. "The president has made an amendment
concerning the competence of branches of the Audit Chamber. But in no way
will they be substituting the current regional auditing authorities. Our
branches are federal control," Stepashin said at the session of the board. 


The main thing which the chief auditor seeks to achieve with the new body
is the possibility of direct appeal to the courts. At present the Audit
Chamber may only collect documents and study them. After which the auditors
send the material to the Prosecutor-General's Office and cannot influence
the course of the proceedings in any way. 


To achieve his purposes, the chairman of the Audit Chamber is conducting a
constant dialogue with the president. According to the chief auditor,
Vladimir Putin has set aside a certain amount of time and agreed on a
schedule of meetings with him. Stepashin intends at these to report on the
results of his inspections. The list of priority "clients" for
investigation was determined at the first session of the board. This
includes the Unified Energy System of Russia joint-stock company (the
matter involving this company, according to Izvestiya's information, is by
no means closed). "Our inspection is complete from the viewpoint of the
competence of the corporatization. Now, as they say in such cases, all the
material is with the Prosecutor-General's Office. Because the company has
its position, we have ours. But we have come to the common conclusion that
our legislative system is imperfect. Many laws are mutually contradictory,
alas," Stepashin said. 


An inquiry into the 35 per cent of the shares of Gazprom's government-owned
block being put in trust with Rem Vyakhirev has already been conducted.
This case also has been passed on to the Prosecutor-General's Office and is
awaiting continuation. Of course, Stepashin's new body intends to take up
the gold and diamond industry, which produced big profits for the Soviet
treasury and which has ceased to support Russia's budget. And the formation
of the budget itself was subjected to the most severe criticism - according
to members of the board, in all countries the budget is composed 30 per
cent from the economic activity of the state, and only 60 per cent from
taxes. In Russia, as we all know, almost the entire economy is built on the
activity of three or four companies. 


*****


#7
Baltimore Sun
September 20, 2000
A Russian journey
For impoverished peasants along the St. Petersburg-Moscow highway, little has 
changed in the two centuries since a reformer's trek recorded their plight.
By Kathy Lally
Sun Foreign Staff

KRASNY MAI, Russia - The little wooden houses sit dark and modest under a 
gray summer sky, their shelves heavy with the cut-glass champagne flutes, 
vases, bowls and tumblers that hold the inhabitants prisoner. 


Nearly everyone here works for the Krasny Mai - Red May - glass factory. They 
work, but most haven't been paid for five years. Instead of money, the 
factory doles out cut glass every month and a loaf of bread every day. Too 
poor to leave town, the people stay and work and dream of freedom, held in 
bondage by their cut glass. 


Russians know servitude well. The czars enslaved them for centuries, then 
communism arrived to prolong their captivity. Today, despite freedom and 
education, life remains a misery for many people of the villages and small 
towns. They feel little different than the serfs of old, bound now by the 
laws of the economy instead of the state. 


Two centuries ago, a member of the gentry with a social conscience drove 
along the road that passes Krasny Mai, taking notes on what he saw. He turned 
his reporting into an impassioned polemic demanding social reform. Every 
Russian knows his name - Aleksandr Nikolayevich Radishchev - and his book, 
"Journey from Petersburg to Moscow." The Communists proclaimed him the first 
revolutionary, requiring every schoolchild to study his book. 


Radishchev ignored the two grand cities, St. Petersburg and Moscow. Then, as 
now, they hardly reflected the true Russian condition. In the 18th century, 
city noblemen traveled in fancy carriages, ate their oysters on fine 
porcelain and gossiped in French. Ninety percent of Russians were serfs, 
bought and sold by their masters, trying to feed themselves by working the 
land at night and on Sundays. 


The barons of today - the new elite enriched by grabbing up the post-Soviet 
spoils - travel by Mercedes, eat their caviar on fine porcelain and gather on 
the French Riviera. More than half of Russians live well below the poverty 
level. Even the better-off, who live in the cities, have mostly achieved only 
a sort of genteel poverty. 


Today, Radishchev would surely notice the people of Krasny Mai. Many of them 
stand, dejectedly, on the shoulder of the highway connecting St. Petersburg 
and Moscow, trying to sell their glass. 


"Certainly this isn't freedom," says Zoya Ivanova, 64. "No one has any money. 
They can't leave. We have to keep working. If the factory closed, there would 
be no hope at all." 


Once, they were hero-workers who created a potent symbol of Soviet power. In 
1937, they produced the 1.5-ton red glass stars that sit atop the towers of 
Moscow's Kremlin. 


Ivanova had a job cutting glass until about 10 years ago, when her hands gave 
out. Then she worked as a cleaner in the factory. Now, she says, the average 
worker earns about $17 a month - paid in cut glass at retail value. 


"Life was better once," she says. The factory could support a town of 12,000. 
"Now we're going back to Radishchev's day. Who can say we're anything but 
serfs?" 


Radishchev visited 24 settlements, reporting on the way serfdom corrupted 
peasant and master, the way the system tied landowner to government and serf 
to land. He spoke of harsh laws and capricious punishment, corrupt judges, 
burdensome taxes and suffocating censorship, prostitution and venereal 
disease. He could have written much of his book today. 


His journey was as much philosophical as physical. Though written as one trip 
and published in 1790, he actually worked on the book over 10 years. It 
reflected several trips, including one made after 1773, when rebellious 
peasants swept through eastern and southern Russia, murdering landlords and 
burning their estates. 


Radishchev, born in Moscow in 1749, grew up on his father's country estate in 
central Russia and was sent to the Petersburg court as a page. In 1766, 
Catherine the Great dispatched him to Germany to study at the University of 
Leipzig. He returned, educated in law, languages and the French philosophers, 
dreaming of liberty and equality. 


The reaction to his book was immediate. Catherine accused him of fomenting 
revolution, sentenced Radishchev to death and ordered his book burned. Only 
18 copies of the original survived in Russia. Two weeks after sentencing him, 
Catherine commuted Radishchev's term to 10 years of exile in Siberia After 
the empress died, Catherine's son pardoned Radishchev, and he returned home 
in late 1797. 


Appointed to a commission to revise the legal code, he began talking once 
more of liberty, equality and freedom of the press. "Didn't you have enough 
of Siberia?" a colleague demanded. It was 1802. Despairing of change, 
Radishchev killed himself. He was 53. 


His book lives on, and so do his observations. Today's traveler can easily 
make the 424-mile journey in a day, but Radishchev urges otherwise: "The 
slower you travel, the farther you'll get." 


The Departure 


"Having supped with friends, I took my place in the post chaise. As was his 
custom, the driver urged the horses on to the utmost, and in a few minutes I 
was outside the city." 


Thus Radishchev describes the beginning of his trip. Today in St. Petersburg, 
Nikolai Ivanovich Yarov, a 58-year-old epidemiologist at the city's respected 
Pasteur Institute, finishes breakfast of tea and buckwheat porridge and puts 
on a camouflage jacket, uniform of the Russian man heading toward adventure. 
. Outside, his carriage awaits - a boxy and well-worn 9-year-old Zhiguli, the 
ubiquitous Russian car. 


Yarov, a retired navy doctor, has a wife who works as a dentist, a grown 
daughter and a comfortable apartment on a beautiful street. He is also poor 
enough on a combined pension and salary of $122 a month that he is eager to 
enter service as a weekend driver. 


He drapes the seatbelt across his chest, taking pains to make it look as if 
it is fastened while scrupulously refusing to actually do so. 


We are under way, passing the grand St. Petersburg hotels, a busy McDonald's, 
chic cafes, a shoe store with a sale on Hush Puppies. Even on discount, one 
pair would cost Yarov a third of his monthly salary. The elegant city begins 
to segue into high, gray, deteriorating apartment buildings. They give way to 
green fields lined with birch trees. Women, their heads wrapped in kerchiefs, 
men wearing caps, are bringing in the hay, armed with the rakes and 
pitchforks of old. 


The landscape persists to Moscow, interrupted by clumps of wooden houses, 
high-tension wires, the occasional rambling factory and, here and there, a 
city. There's even a village named Radishchev. 


Yarov complains of his asthma, and lights another cigarette. 


Sofiya 


"A few kopecks, Master, for a drink?" Although such exactions are not legal, 
everybody pays willingly to avoid vexatious travel regulations. Twenty 
kopecks served me well." 


A driver at the post station has confronted Radishchev with a thinly veiled 
demand for a bribe so he'll be able to get horses. A kopeck is one 
one-hundredth of a ruble and in those days the sum was a handsome tip. 


Yarov, of course, quickly becomes acquainted with the modern equivalent when 
he makes the mistake of sliding slowly through a traffic police checkpoint 
instead of coming to a full stop. 


The peeved policeman motions sharply with his black and white baton. 
Negotiations ensue, resulting in an exaction of 20 rubles. Today, that's 
about 75 cents. In two centuries of bribery, inflation has visited the 
highway. 


Lyuban 


"Tremble, cruel-hearted landlord! On the brow of each of your peasants I see 
your condemnation written." 


Radishchev comes upon a serf, plowing a field on a hot Sunday. Six days a 
week, the peasant works in his master's field, though lackadaisically, 
Radishchev observes, because he gets no profit or thanks. On Sundays and 
evenings, he works to feed himself and six children. "If a fellow isn't 
lazy," he tells Radishchev, "he won't starve to death." 


Lyuban was nearly 300 years old when Radishchev's carriage rumbled through. 
This weekend, the village of 14,200 people is celebrating its 500th 
anniversary. 


People here have jobs now, in a furniture factory, at the hospital, in the 
local palace of culture. And nights and weekends, they work furiously to feed 
themselves. 


"Life is going on, there's progress," says Irina Ivanova, a 23-year-old 
maternity nurse and mother of a 10-month-old son. "But we're obliged to work 
for ourselves every spare minute." 


Right now, the maternity home is closed for lack of business - Russia's 
birthrate has been plunging precipitously in the post-Soviet years. 


"Under socialism things weren't that good either," says her cousin, Marina 
Rumyantseva, 30. "Now, we're hoping they'll get better." 


Rumyantseva, a singer who organizes concerts at the House of Culture, earns 
$25 a month and has a 10-year-old son. Her husband, an engineer, earns $44. 
Wearing a stylish black suit - her only one - Rumyantseva is all freshness, 
youth and optimism. Her mother, Raisa Aleksandrova, stands next to her, 
looking worn at 59, wearing mismatched jacket and dress. 


Aleksandrova remembers that only a few years ago, she had to make regular 
trips to St. Petersburg in search of food or clothes. Now, you can buy 
anything in Lyuban from Coca-Cola to a suit made in Turkey - if only you can 
find the money. 


Outsiders have trouble understanding how Russians can live on so little money 
when food and clothes cost nearly as much as they do in the West. "We use 
most of our salaries to buy food," Rumyantseva says. "We have to plan and 
save to buy clothes." 


In small towns, rents are modest. She and her husband pay $5.50 a month for 
their tiny two-room apartment. Their building doesn't have telephones. Their 
utilities cost about $3.50 a month. The town doesn't provide hot water in the 
summer. They can't dream of owning a car. After expenses, they have $60 a 
month for food and clothes. 


They stay alive because, like most Russians, they have been allotted a piece 
of land 60 feet by 60 feet. On this earth, they grow most of their food, with 
some to spare. 


"People here are very good," Ivanova says, "only poor." 


Out on the highway, a bright yellow house catches the traveler's eye. Though 
houses in the countryside are often decorated with fretwork, this one is 
covered with fussy, intricate designs, and it's in perfect repair. 


Yevgenia Petrova, 71, and her grandson, Misha, 13, stand in the adjoining 
potato field, picking off the Colorado beetles that voraciously eat the 
leaves. Petrova's husband died 10 years ago, and now she lives with her son, 
Anatoly, 48. The two men built the house 23 years ago, culling the wood from 
a nearby forest after a storm. 


Anatoly, who graduated from Radishchev High School, once worked in the local 
wood factory but saved his money and four years ago rented a small general 
store. Today he has three, allowing his family to live far better than most, 
with a car, frequent trips to St. Petersburg and a television antenna that 
pulls in numerous channels. 


"He can do anything," his mother says proudly. "He's very industrious. He can 
do construction work, welding and electrical work. And he doesn't drink." 


Anatoly's sobriety is unusual in the countryside, where many generations have 
endured long winters and bleak lives locked in the embrace of vodka. "Drunk 
in the morning, free all day," Russians cheerfully say to this day. 


Life has never been easy here. The Germans took Petrova prisoner during World 
War II and used her as a slave laborer. Everyone nearly starved in the 
post-war years. 


Perhaps the future will be kinder to her grandson, a grinning tow-head 
blessed with an industrious and lucky father. Misha is captive only to 
American cartoons dubbed into Russian and Titan Wrestling tuned in by the 
tall antenna on the house. 


His fingers are blue-black from picking berries. And his T-shirt proclaims 
his world view: "California Sun," it says. 


Chudovo 


"Hope, which follows man in his extremity, now gave us strength, and we 
encouraged one another as much as we could." 


At the Chudovo post station, a friend tells Radishchev about being part of a 
group caught on a lake in a storm. Their boat is nearly shipwrecked, but when 
one of the party makes land and tries to get help, the local authorities 
refuse to act - their commander is asleep. The men urge each other on, and 
they miraculously escape death despite the indifference of the officials - a 
metaphor for an uncaring czarist government. 


More than 200 years later, Yevgenia Grebyenova, 68, and Yevgenia Nosova, 72, 
sit on a bench at the side of their narrow street in Chudovo, contemplating 
their own indifferent officials. 


"We worked all our lives," says Grebyenova, "and we don't even have a decent 
pension." 


Grebyenova wears a white kerchief, tied peasant-style around her head. It's a 
warm evening, but she wears a sweater over her faded dress. She remembers 
going to work on a farm at age 7, after the secret police came for her father 
and took him away at the height of the Stalinist round-ups, when anyone could 
be guilty of anything. She remembers, some years later, hiding from the 
Germans. 


At age 55, she retired from her job of 23 years in the local plate-glass 
factory down the street. Now the factory makes glass insulation. A German 
company owns it. Grebyenova doesn't mind, despite the war. 


"Maybe if ours owned it, it would be much worse," she laughs. "We have shares 
and they pay us dividends - 60 rubles a year." That works out to $2.33. Her 
pension is $32 a month. Her son visits to help with the potatoes planted 
around her house and to cut the wood. 


"I don't have anything to look forward to," says her friend Nosova, who is 
wearing her dead husband's suit jacket. "My health won't be getting any 
better." 


The future lies at the other end of the street, where Cadbury has built a 
chocolate factory. "The newspaper says they pay good taxes," Grebyenova 
reports. "Now our pensions arrive on time. There used to be long delays." 


The street sign nailed to the side of her house comes in Russian and English: 
Bournville Lane, reminiscent of an English village. 


"The signs are very beautiful," Grebyenova says, "and you can see them from a 
distance. They don't fade, either." 


The road winds back to the highway, past traditional wooden houses and the 
five-story, crumbling apartments built in the Khrushchev years of the late 
1950s and early '60s. A few stores are now painted in Cadbury purple. 


On the highway, a vision of the future appears, mirage-like: a gas station 
with a convenience store. Diet Coke, Lays potato chips or microwaved hot dog, 
anyone? A sparkling little pre-fab building offers clean-as-a-whistle pay 
toilets. A new motel advertises a sauna. Can this be Russia, where the most 
reliable roadside toilet is a hidden spot behind a bush? 


Novgorod 


"The ancient saying, 'Who can stand against God and Great Novgorod?' may 
serve as proof of its power. Trade was the cause of its rise. Internal 
discord and a rapacious neighbor brought about its fall." 


Radishchev meditates on the rise and fall of Novgorod, which dates to the 
year 859 and became the center of a powerful religious and political empire. 
Novgorod was ruled democratically, and it had close trade ties to the West. 


This section of Radishchev's journey infuriated Catherine the Great more than 
any other. Radishchev describes the destruction of the city in 1471 by Ivan 
the Terrible, who came from rival Moscow. He laments that might prevails over 
right. And he has some nasty words for Ivan and the despotic system he 
created - for Catherine and the other czars to inherit. 


Today, Moscow is as jealous of power as ever. And, after all these centuries, 
says Mayor Aleksandr V. Korsunov, Novgorod still harbors dreams of trade and 
close ties with the West. 


"The spirit of our ancestors has been preserved," the mayor says firmly. 


In the last year, Novgorod has done the impossible by creating attractive 
conditions for investors in a country notorious for keeping foreign 
businessmen at bay with smothering bureaucracy and rapacious corruption. 


Here, the city and district have passed laws forgiving all local taxes until 
a businessman recoups his investment. Big-time bribery and extortion have 
been suppressed. 


"If we have problems," says Andrei Komov, director of a German company called 
Sommer Novtruck, "we call the mayor or his deputy, and they solve it. They 
set up a department to support business. If we need help finding supplies, 
they help us do it. I haven't heard of this happening anywhere else in 
Russia." 


The company builds tractor-trailer bodies and containers, and business has 
been improving. "Now is a good time to come here," Komov says. "Wait, and it 
will be too late." 


Valdai 


"This town is famous for the amorous inclinations of its inhabitants, 
especially of its unmarried women. Who has not been to Valdai, who does not 
know the Valdai painted wenches? The bold and shameless Valdai girls stop 
every traveler and try to kindle his passion in order to exploit his 
generosity at the cost of their chastity." 


Today, says Police Major Yevgeny Naskov, there is little such shameless 
behavior among Valdai's young women. Residents of this town of 32,000 would 
recognize them, and it would be too embarrassing. The painted wenches who 
stand on the highway near Valdai trying to kindle the passion of passers-by 
come from the neighboring Tverskaya district, he says. 


Driving along the St. Petersburg-Moscow highway in the evening, it seems as 
if there are prostitutes scattered along the entire 424 miles. Close to 
Moscow, young women stand in groups of half a dozen, lining up and preening 
while drivers, making their choice, shine their headlights along the row. 


But not Valdai girls, at least not in Valdai. 


"I should say Radishchev was very lucky to find them here," Major Naskov 
says. 




Torzhok 


"Let anyone print anything that enters his head. If anyone finds himself 
insulted in print, let him get his redress at law. I will close with this: 
the censorship of what is printed belongs properly to society, which gives 
the author a laurel wreath or uses his sheets for wrapping paper." 


Radishchev comes upon a young man heading to St. Petersburg to ask permission 
for a printing press and discusses at great length the harm that censorship 
has imposed on the country. 


There is no censorship today, declares Oleg I. Vishnyakov, editor of the 
Torzhok paper, Vestnik. The only thing is, the paper gets money from the 
local administration, and when the mayor or governor wants to place an 
article in the paper, of course the editor acquiesces. 


He does so, he says, even though the articles usually aren't true. 


"We know that in reality things are quite different than the way they are 
describing them," he says. The paper never criticizes the mayor or governor, 
though Vishnyakov says he can get by with a few complaints about education or 
social services. 


Recently, the paper went after the hospital because of its long lines and 
fees for services that are supposed to be free. The administration ignored 
the article. 


"We never got any answers," Vishnyakov says. "There is no one who can oblige 
them to respond." 


Radishchev, who looked to America as an example, would be disappointed. He 
wrote: 


"The State of Delaware, in its Declaration of Rights, says: 'That the liberty 
of the press ought to be inviolably preserved.' The State of Maryland uses 
the same language." 



Mednoe 


"Twice every week, the whole Russian Empire is notified that N.N. or B.B. is 
unable or unwilling to pay what he has borrowed or taken or what is demanded 
of him." 


So Radishchev begins his description of an estate auction, serfs and farmland 
up for sale because of bankruptcy. Such failures were common at the time, 
when dissolute owners lost their holdings to gambling debts or poor 
management. 


Today, poor management of latter-day estates - big state farms - is as common 
as ever. Only today, when the 12,000-acre farm that once supported Mednoe 
fails, no one bothers to bid. 


"They tried to declare the farm bankrupt," says Aleksandr Semyonov, walking 
along the roadside on his way to cut hay, "but no one would buy it. We're all 
working, we just don't get anything for it. Maybe if someone buys us, we'll 
have something." 


Tver 


"Superficial luster may grow dim, but true beauty will never fade. ... 
Shakespeare ... will be read until the human race is destroyed." 


Radishchev's mind turns to the state of Russian poetry and literature, which 
he determines to be in decline, and he complains that writing about themes 
such as liberty is prohibited. He laments the limits on the Russian 
intellectual. 


Alla Monakova, 22, has just graduated with a degree in literature from Tver 
University. She's selling books in the city's main department store - it pays 
better than writing or teaching. And Shakespeare, she says, is very much in 
demand, especially "Romeo and Juliet" and "Hamlet." 


The great Russians - Tolstoy, Chekhov and others - are also sought after, 
even though many intellectuals worry about the cheap romances that sell so 
well and shoddy, second-rate American movies that fill up the airwaves. But 
such cultural concerns hardly dominate daily conversation. The quality of 
life does. 


"Serfdom is gone, but in other ways we are going back 200 years," Monakova 
says. "You see the same poor, haunted people. People are of no value. They 
are sad, living one day at a time, thinking about how to eat today." 


Gorodnya 


"A levy of recruits was the cause of the sobs and tears of the people crowded 
together there." 


Radishchev watches the village's serfs sobbing as sons and husbands are sent 
off to the army, fulfilling military service for their masters. 


When she talks about her only child, Sasha, being taken by the army at the 
end of May, Nadezhda Yevdokimova also starts sobbing. 


"I would give anything to keep him beside me," she says, reproaching herself 
for being too poor to pay the bribes that would have protected him. 


Yevdokimova, 41, lives on the third floor of a shabby five-story building in 
the village of Gorodnya. Her apartment looks old but clean; outside, the 
stairwell stinks of urine and cabbage. 


She is terrified that after six months of basic training, her 18-year-old 
Sasha will be sent to the war in Chechnya. She feels as betrayed and helpless 
as the peasants wailing in this village 200 years ago. 


"It costs one thousand bucksov to keep him here," she says, putting the 
American expression "bucks" into proper grammatical form by adding "ov" at 
the end. "To earn $1,000, I'd have to work more than three years without 
eating or buying anything." 


As a saleswoman in a store, she earns $25 a month, but hasn't been paid the 
last three months. Her husband works at the local chicken enterprise as a 
tractor mechanic, earning $18 a month. Last month, he was only paid $9. 


"It's exactly the same as in Radishchev's time," Yevdokimova says. "We are 
tied here just like serfs. Maybe there are those who are masters of their 
fate, but I don't know any of them." 


Klin 


"I walked up to him and placed a ruble in the beggar's trembling hand." 


The beggars so common in Radishchev's day disappeared in the Soviet era. Now 
they are back, the young, the old, the sick, out on the streets looking for 
money. 


Pull into the modern post station - a McDonald's appears as Moscow nears -and 
two small boys run up asking for money before you have time to order a Big 
Mac and chocolate shake. 


A beggar stands outside the Church of All Mourners nearby - today it's rare 
to find a working church without attendant beggars. Aleksandr Yegorov, 50, 
says people who go to church are kind and give a beggar money. 


"The Communists spoiled the country morally and in other ways," Yegorov says. 
"Now it's the same as 200 years ago. That's not good, either. But I think 
when the children grow up, things will improve." 


Chyornaya Gryaz 


"Here I saw another fine example of a nobleman's arbitrary power over the 
peasants. A wedding was taking place. But instead of a joyous procession, one 
could see only grief and despondency." 


Then, a landlord was forcing two peasants to marry. Not so today, no, not at 
all. Sasha, 22, and Tatyana Lovygin, 21, are all smiles and champagne toasts 
on their wedding day. 


After waiting for an hour in a line of brides, grooms and guests that 
stretches down a corridor and out to the parking lot, they are about to enter 
the Wedding Palace in Zelenograd (Green City), a town that was built next to 
Chyornaya Gryaz (Black Dirt) in 1958 as the new administrative center. 


The Wedding Palace consists of a few plain offices in the back of a squat, 
five-story yellow brick building, also home to the prosecutor and a sports 
school. Sasha wears a light gray suit, Tatyana a long white wedding gown. She 
carries pink roses. 


As they enter a spare, wood-paneled office room, a string quartet starts 
Lohengrin's wedding march. A registrar waits behind her simple wooden desk. A 
philodendron decorates the room. 


"Your mutual consent gives me the right to register your marriage," the 
official announces. "I declare you husband and wife." 


After kisses and photographs, they are dispatched across the hall, to watch 
their ceremony on instant video replay. 


Then, Sasha swoops up Tatyana and carries her down the crumbling cement 
steps. They stand about in the parking lot, drinking champagne out of plastic 
cups in front of a borrowed Audi, which is adorned with two golden rings and 
a spray of flowers. 


"They'll be happy together," says a friend Sasha Zharov, who graduated with 
them from the Electronics Institute. The cost and scarcity of apartments 
require them to live with her mother, but they've already bought their own 
sofa bed. 


A guest offers champagne to a visitor, who declines because she's driving. 


"I'm driving, too," the bearer of champagne announces, "and I'm drinking." 


Zharov laughs. 


"Russia has changed," he says, "but the people are still the same." 



Our version of Radishchev's "A Journey from Petersburg to Moscow," translated 
by Leo Wiener, was published in 1958 by Harvard University Press. 


*******