This Date's Issues: 4534• •
Johnson's Russia List
23 September 2000
[Note from David Johnson:
1. Moscow Times: Yevgenia Borisova, OSCE Stands by Putin's
2. The Times (UK): Alice Lagnado, Yeltsin admits becoming a
3. RFE/RL: Michael Lelyveld, Despite Pledges To Reform, Government
Continues To Back Monopolies.
4. The National Interest: Letters to the Editor continuing the
"Tainted Transactions" Debate.
5. Moscow Times: Peter Lavelle, The Drama Unfolds.
6. Business Week: Sabrina Tavernise, Bye-Bye Babushkas.
Freight companies are driving small importers off the streets.
7. The Globe and Mail (Canada): Geoffrey York, Finally, a Kremlin
boss gets Solzhenitsyn's stamp of approval.]
September 23, 2000
OSCE Stands by Putin's Election Win
By Yevgenia Borisova (email@example.com)
Responding to documentation of rampant fraud in this year's presidential
elections, a spokesman for European observers who monitored the March vote
said this week that unless a court proves otherwise, his organization will
stand by its original assessment that the elections were carried out in full
accordance with the law.
"I stick to what we said in our preliminary statement and report," said Hrair
Balian, head of the election section of the Organization for Security and
Cooperation in Europe, which together with the Office for Democratic
Institutions and Human Rights organized the observers.
The OSCE statement reads that the March 26 presidential election "marks
further progress for the consolidation of democratic elections."
The organization's subsequent report also described the elections as "a
benchmark in the ongoing evolution of the Russian Federation's emergence as a
Balian's remarks came in response to a report published Sept. 9 in The Moscow
Times documenting extensive vote falsification in the March elections.
The report (posted at www.themoscowtimes.com/stories/2000/09/09/119.html)
presents evidence of ballot-box stuffing, creation of "ghost" voters, burning
ballots supporting opposition candidates and pressure from federal
administrators. Collectively, the documents suggest that the fraud was
sufficient to conclusively sway the elections in Vladimir Putin's favor.
"We do not have the capacity to investigate the kind of allegations published
in [The Moscow Times]," Balian said.
Should Russian courts begin to rule in favor of the complainants in
election-fraud cases, he added, "we will be very happy to change our view at
Russian observers, meanwhile, have said that elections commissions are in
most cases refusing to accept complaints about violations during the March
Vitaly Konstantinov, legal adviser for the Communist Party, said about 200
lawsuits have been filed with district, city, and regional or republican
courts over presidential election violations.
An additional 1,000 complaints were filed with prosecutor's offices and
police departments, and more than 2,000 complaints were filed with elections
committees of varying levels, he said.
To date, Konstantinov said, prosecutor's offices have admitted election law
violations in only about 10 percent of the complaints. They have denied them
in an additional 50 percent and given no answer in 15 percent. The remainder
are still being investigated, he said.
"The time of the courts' ruling is yet to come," he said.
The impact of international observers like the OSCE monitors on the elections
may be somewhat insignificant. According to Balian, only about 400 observers,
traveling in two-person teams, were present on election day.
Each team was tasked with visiting 10 to 15 polling stations, with no more
than an hour spent in any one place. In total, just 3 percent of the 95,000
stations scattered throughout Russia received brief visits from OSCE
What were the visits like?
"The OSCE observers only spent about five minutes in our polling station,"
said Ramai Yuldashev, head of the Azatlyk youth movement in Tatarstan and a
member of the No. 418 election commission in Kazan. "They took a quick look
around and said that yes, we had desks for the commission, voting booths with
curtains where the voters could fill in ballots and a sealed ballot box. So
they said everything was fine at our precinct. Then they left."
Yuldashev said he expected the observers to stay for a while and watch how
the elections were going, or at least to talk to the Russian monitors about
their concerns, but they did not.
Later that day, Yuldashev said, he caught another member of his election
commission adding ghost voters to a registration form. He tried to intercede,
but the police were called in and he was ultimately fined 50 rubles for
Putin won 68.76 percent of the vote in Tatarstan.
"With the exception of a very few violations reported to us by our teams
throughout the country, and with the exception of some of the regions that we
didn't observe, including Chechnya and Dagestan, we observed absolutely
nothing serious that undermined the electoral process," Balian said.
Election violations appear to be the worst in those two republics, where the
OSCE declined to send observers for security reasons. According to Balian,
only the decision not to send observers to Chechnya was made public in
advance f meaning the Central Elections Commission knew there would be no
international monitors there.
In the end, the CEC claimed about 190,000 people, or roughly half the
population in Chechnya, voted for Putin f a staggering figure for a republic
devastated by an ongoing conflict with Russia.
Documents from Dagestan, meanwhile, indicate that 551,643 of the 877,853
votes officially won by Putin were created out of thin air. This number alone
accounts for a quarter of the 2.2 million-vote margin that ultimately allowed
Putin to win in the first round of the presidential elections.
Could Western observers have detected the violations? Perhaps not, given
their timeframe and limited numbers.
Still, one British OSCE observer said he personally witnessed a number of
procedural violations as the votes were being counted.
Jeff Gleisner, a visiting professor at the Institute of Political and
International Studies at the University of Leeds, was an exception to most
short-term observers f he spent an entire night at the Privolzhsk territorial
commission in Kazan.
An experienced observer who speaks Russian, Gleisner said that during his
time at the commission f from 9 p.m. March 26 to midday March 27 f he
witnessed behavior that runs contrary to the OSCE's report statement that "at
locations where input of protocols was observed, the data entered accurately
reflected the results from protocols."
"My conclusion was that the whole thing was pretty chaotic," said Gleisner.
At the beginning of the evening, Gleisner noticed that protocols being
brought to the territorial commission from the precinct commissions were
being corrected manually if mathematical inconsistencies were found.
According to election law, such protocols are supposed to be sent back to
their precincts for a recount with the original observers.
Instead, Gleisner said, "They Tippexed [whited] out some figures, while you
are not supposed to use Tippex on protocols.
"When I looked at the protocols that they corrected, I did see the Tippexed
figures. They also filled out new protocols, completely new blanks," he
Gleisner did not interfere.
According to election section head Balian, OSCE observers are permitted only
to report violations, not to get involved in the actual procedure. Balian
said he couldn't recall any serious violations being reported in Tatarstan.
Gleisner said the elections commission representatives became visibly
agitated when he began watching a precinct head dictating to a typist figures
off a corrected protocol.
According to Gleisner, the head of the territorial commission quickly shooed
all the precinct heads out of the room, whispering under his breath, "What do
you think you're doing? We've got an OSCE observer here!"
"Perhaps he thought it was a bad or incorrect procedure, I don't know,"
He said the premises were swarming with people. Some were bringing in
protocols placed in their shopping bags. Others f including the Privolzhsk
district police chief and the head of the district administration f were
there for no apparent reason. The police chief spent most of his time in the
room where the protocol figures were being dictated to the typist and was
holding a number of polling station protocols rolled up in his hands,
When the calculations were completed, the computer entries were checked
against the original protocols and inconsistent data were corrected, Gleisner
The territorial commission head then began correcting his computer printout
of the entries against the other corrected printouts. Gleisner described this
move as "quite curious."
"And then the final protocol for the district commission was produced, but
that was not entered into the computer. Why? Because by the time it was
produced, at about 10:30 in the morning, the computer had been taken away to
the district administration."
Gleisner said that the commission's secretary then went to enter the figures
on the computer belonging to the district administration.
"This is in my view a very illegitimate procedure," he said, adding that it
appeared officials were trying to reach some predetermined number of votes
for their candidate.
But he said his observations were not sufficient to cancel election results.
"My view is that procedural irregularities, unsupported by direct evidence of
falsification, cannot also be adduced to support allegations of
"My own observations at the Privolzhsk [territorial elections commission],
while worrying, do not lead me to think there was anything dishonest going
Election section head Balian said he was not aware that there had been an
OSCE observer in Tatarstan.
The Times (UK)
23 September 2000
Yeltsin admits becoming a part-time poet
FROM ALICE LAGNADO IN MOSCOW
IN A country where men drink vodka, hunt bears and jump into icy lakes in
midwinter, Boris Yeltsin, the first Russian President, and veteran KGB and
Defence Ministry officers have admitted that they spend their spare time
Composing rhyming couplets might not seem the likeliest hobby for the
spies, soldiers or Presidents of a fallen super power, but some of Russia's
most hard-bitten men admit to writing reams of poetry expressing their
Mr Yeltsin's verse has been compared to haiku, although the Japanese might
differ. According to Russki Zhurnal, he once wrote: "Snow covered the hut
up to the roof / The snowstorm moans. Wood cracks in the fireplace / Steam
over broth. I recall less frequently: / It seems like I was looking for a
plum flower in this valley."
Although most of the poems are by any standards pompous and crude, these
men show no embarrassment about their compositions.
Colonel Vasili Stavitsky, the head of the press service of the FSB, the
modernised KGB, told The Moscow Times that he has published ten collections
of his verse, mostly about love. "I cannot resist the temptation / of
intoxicating female nudity / My spirit is stricken with orgasm / from this
perfect beauty," wrote the 50-year-old intelligence agent in his
collection, Love Constellation.
Colonel Stavitsky, who sees himself as a poet "from God", has a demanding
day job in the FSB but wakes up in the middle of the night with an urge to
put pen to paper. "I don't want to wake up, but something forces me to,
something shoots me out," he said.
Colonel-General Leonid Ivashov, head of international relations at the
Defence Ministry, writes about the Russian Army and about love. At a
reading last year he recited a poem dedicated to his wife's breasts. He
said reading his poems in public was worse than talking to Western powers
about Kosovo. "I'm even more nervous now than I was talking to our
ill-disposed counterparts," he said.
Colonel Igor Yadykin, 40, who works at the army's official newspaper,
Krasnaya Zvezda, has also published a collection of rather dubious verse.
"The gloomy Valerik lives on / I can hear moans and suffering / With the
shoulder-stripes terribly hardening / On my Russian collar bones," is one
Russia's secret scribblers are the product of a traditional education
system. Russians are taught at school from the age of five to memorise
hundreds of poems. Pages of Pushkin are learnt by heart to improve language
and literary skills. Poetry is still far more popular than in Britain.
During the first Chechen war the body of a young officer was found with a
notebook containing a line by Andrei Vosnesensky, a renowned Russian poet:
"Please snow, cleanse our country of dirty things." The story made
Russia: Despite Pledges To Reform, Government Continues To Back Monopolies
By Michael Lelyveld
After Russian Prime Minister Mikhail Kasyanov promised this week to reform
the country's "natural monopolies," the government has taken steps instead
to ensure that the monopolies continue to operate as tools of the state. In
the cases involving Gazprom and the EES electricity system, the government
appears to be using the terms "reform" and "control" to mean one and the
Boston, 22 September 2000 (RFE/RL) -- Russian Prime Minister Mikhail
Kasyanov's pledge this week that the government will soon address the
question of the country's monopolies is a reminder that little has changed
since former President Boris Yeltsin held power.
Speaking Tuesday in London, Kasyanov called monopolies like Gazprom, the
EES electricity system and Russia's railway "one of the reasons the
development of the economy and its competitiveness is being held back."
Kasyanov added, "In the fourth quarter of this year or the first quarter of
next year we want to take a major decision on reforming these natural
The very term "natural monopolies" is the result of a key Yeltsin decision
to shield certain monopolies from privatization if they were simply so vast
that the government could not conceive of running the country without them.
Some vital functions seemed to rely "naturally" on monopoly operations. How
could the Kremlin rely on the functioning of petroleum pipeline network,
for example, if there was a chance that it might be broken up?
The temptation to sell shares in old monopolies like the telephone system
was driven by the need for revenue rather than a dedication to reform. The
result were some strange hybrids like Gazprom and EES, which sold some
shares in partial privatizations but which the government continued to
Just as strange was an episode last week in which EES cut off the
electricity to a strategic missile base in Russia's Ivanovo region due to
unpaid bills. Troops from the base then occupied the power plant and turned
the power back on. In the aftermath, the Russian Finance Ministry promised
to transfer 1.3 billion rubles to the Defense Ministry this month so that
the military can pay its electricity bills. EES promised not to cut power
to strategic bases again.
The episode is similar to threatened shutoffs of military installations
during the dark days of the arrears crisis under Yeltsin in 1997 and 1998.
But under President Vladimir Putin, the problems seem to proceed partly
from a broader campaign to collect energy bills, end barter payments and
raise energy tariffs across the board.
The effort would seem to make economic sense if it leads to market pricing
of energy and the establishment of EES and Gazprom as completely privatized
entities with true market valuations. Such moves could create a new
foundation for the Russian economy based on real prices rather than
subsidies. But the continuation of government control and protection of
monopolies makes the collection campaign look more like an exercise of
moving funds from one pocket to another.
Because 52 percent of EES is state-owned, more than half of the electricity
payments from the state-funded military are essentially transfers from the
state to the state. The situation is further complicated because EES is one
of the country's largest taxpayers, so that another portion of the
state-to-state payments go in a circle back to the state.
The real benefit of collecting bills from the Defense Ministry seems
uncertain under such a circular system. Similarly, because Gazprom remains
38 percent state-owned, it is hard to assess the economic impact of the gas
debts that are owed by state-owned EES.
Kasyanov's statement that the government will decide on "reforming" the
natural monopolies in the future seems to ignore a statement by Minister of
Trade and Economic Development German Gref in June that the government
would increase its control of the monopolies. The question is whether the
Putin approach is to control or reform, or whether the two terms are being
used loosely to mean the same thing.
Gazprom's effort this week to gain control of Vladimir Gusinskii's
Media-MOST empire suggests that the government may seek to control the news
outlet through the gas monopoly, particularly in light of a threat by the
Prosecutor General's Office to investigate Gazprom's charges that
Media-MOST assets have been transferred abroad. There seems to be little
change in Gazprom's role as a tool of government power since the Yeltsin
years. Reports on Thursday that a court has frozen shares in Media-MOST
seemed to support the idea that Gazprom is aiding a government power grab.
Likewise, there was intense speculation about the future of EES Chief
Executive Anatolii Chubais during the early days of the Putin presidency,
as other oligarchs came under pressure. But by July, the position of
Chubais seemed assured as he accompanied Putin on his visit to Japan. But
on Thursday, Chubais came under a cloud again with reports that EES is
under investigation for unpaid tax bills.
The Reuters news agency quoted Hartmut Jacob, an analyst at Renaissance
Capital, as saying that the tax probe was "a very useful tool" to make sure
that Chubais does what the government wants. The move was ironic because it
was Chubais who first called for tighter government control over natural
monopolies when he served as first deputy prime minister in 1997.
The web of relations between the government and the monopolies presents a
predicament with no easy way out. Without control, there may be no way to
reform the powerful monopolies. Yet, government power is just as likely to
maintain the monopolies as instruments of the state, preventing further
privatization and reform. It is a problem that the Yeltsin government
proved unable to solve, and so far, it is one that the Putin government
seems to be putting off.
The National Interest
Letters to the Editor continuing the "Tainted Transactions" Debate
Marshall I. Goldman
Wellesley College and Harvard University:
The debate over who bears what blame for what took place in Russia
generates very deep passions. This is not surprising given the distortions
that have resulted and the unfortunate way Russian reforms have evolved.
But such passion frequently leads to intemperate reasoning and unjustified
In "Tainted Transactions: Harvard, the Chubais Clan and Russia's Ruin"
(Spring 2000) and her subsequent rejoinder ("Tainted Transactions: An
Exchange", Summer 2000), Janine Wedel falls victim to just such a reaction,
especially when it comes to evaluating the role of Jeffrey Sachs.
Admittedly, Dr. Sachs makes an easy target. To generate support for his
causes, which in 1990 was the Polish reform and then the Russian reforms in
late 1991 and 1992, he became an outspoken and ubiquitous advocate of
support for these efforts. This brought him praise, sometimes deservedly,
when things went well, but also criticism (also sometimes deservedly) when
reforms became counterproductive. What Wedel neglects to mention, of
course, is that Sachs has made positive contributions in other countries.
This includes Poland, where I am told by officials involved at the time
that Sachs played a key role in convincing the leadership of Solidarity to
support the reforms that were subsequently introduced.
In the meantime, others (call them stealth advisers) who bear real
responsibility for the grotesque privatization of state enterprises in
Russia have so far escaped almost unnoticed. As a consequence, while Wedel
is often right on target in highlighting the serious shortcomings in the
reform process and in the way American support was provided, she all too
often attributes too much importance to the role of foreign advisers and
pinpoints the wrong culprits.
Wedel also has trouble with her logic. While she blames Harvard and the
Harvard Institute for International Development (HIID) and especially Sachs
for much of the failure of the reforms, she questions whether he was really
an official adviser to the Russian government. Well if he wasn't an
adviser, does he really deserve the blame? For that matter, is it fair to
blame the United States for the reforms' failure? In a recent personal
conversation with Yegor Gaidar, who was acting prime minister during much
of 1992, he affirmed that while Sachs was an adviser to the minister of
finance, Boris Fyodorov, he was not the central architect of the reforms.
Wedel also overdoes it when it comes to Harvard. Because it makes such a
juicy scapegoat, she continuously refers to what she calls the
Harvard-Chubais transactors. While this may be an appropriate description
for those from Harvard who worked with Anatoly Chubais in 1992 and 1993 on
his privatization program, Sachs was not part of that group.
The Harvard-Chubais team is such a convenient culprit that Wedel continues
to attack it for what happened even after May 1997, when HIID suspended its
activities in Russia, the U.S. government cut off its funds, and Chubais
disavowed any further association with HIID. Undeterred, Wedel writes, ". .
. in times of crisis for the Harvard-Chubais nexus-such as the ruble crisis
of August 1998 and the Bank of New York money laundering scandals-the
transactors and their associates have sought to bolster their colleagues'
continued clout and standing in both Russia and the United States." This is
Over the years I have had disagreements with Sachs over his analysis of the
transition in Russia and whether or not the United States and the IMF
should provide financial aid. But never has Sachs sought to profit
personally from such advice, or provide insider information for Harvard,
its research centers, its financial management, or for-profit investment
firms. Sachs is a big boy and he is not shy about criticizing the ideas of
others, but implications that he prescribed knowingly flawed advice,
benefited personally, or worked on two sides of the negotiating table are
not true and certainly not fair or responsible.
Carnegie Endowment for International Peace:
Janine Wedel is clearly delighted. After three insignificant publications
of the same article, her lies have been published in a respectable journal.
It is tempting to take her inaccuracies apart again, but why treat her as a
serious scholar? Wedel has accused me of conflicts of interest, but after
several slanderous articles she has proven nothing. Her arguments are
little but repetition of unsubstantiated allegations with a complete
confusion of time. Tellingly, her only new claim is that I did not write
that I was an economic adviser to the Russian government at a time when I
was not. As if to emphasize that her basis of accusation is gossip, she
quotes herself: "[Åslund] was understood by some Russian officials" [my
emphasis], which is close to a definition of a rumor. She repeats her
allegation that "Åslund seemed to speak on behalf of these governments"
[Wedel's emphasis], showing that she pertains to the higher sphere of
illusion, where I think we should leave her.
James W. Brock
Miami University of Ohio:
Janine Wedel's "transactorship" article provides an insightful-and,
ultimately, profoundly disturbing-analysis. . . .
The main alternative approaches to economic restructuring-"shock therapy"
and gradualism-are familiar, and have been thoroughly aired over the past
decade. But what has largely been ignored since then (at least until
Wedel's book and articles) is the critical question of how, in the Russian
case, the "shock therapy" prescribed by Sachs et al. was fashioned and
implemented, and how this process might be directly linked to the policy's
Wedel's exposition of the murky tangle of interests influencing the
central players in this process, and the shadowy netherworld they seemed to
create and operate within-a world in which the principals were neither
public nor private, neither official nor unofficial, neither clearly
representing the United States nor Russia, and who seemed to have a
monopoly over money and access-provides a persuasive diagnosis of how and
why this epic opportunity was mangled.
An accounting for this failure by the principals whom she identifies is
long overdue. And, certainly, they should be afforded full opportunity to
respond to her claims, as it is only through this kind of give and take
that the truth can be ferreted out.
But the nature of the principals' response to Wedel's article, in the
Summer 2000 issue-ad hominem attacks, coupled with lengthy denials of
largely small facts-does little to rebut the case she makes. In fact, the
vehement, narrow nature of their responses adds credibility to the broader
validity of the "transactorship" thesis she propounds.
Donald N. Jensen
Radio Free Europe/ Radio Liberty, Prague:
As Janine Wedel points out, there is little doubt that an army of
economists, academics, bureaucrats and opportunists-both American and
Russian-took part in designing and implementing the disastrous U.S. policy
toward Russia in the last decade. I witnessed this remarkable free-for-all
first-hand, as a diplomat in the U.S. embassy in Moscow from 1993-95. For
whom many of these people-including Jeffrey Sachs and his one-time
confederates-formally worked or where they convened is of little
importance. What matters is that their relationships to each other and to
official Washington and Moscow were close, the money involved immense,
their accountability minimal and their loyalties blurred.
Through much of the last decade the Clinton administration played a central
role in Russian domestic politics. It used its personal contacts with
Russian leaders, financial assistance and political support to promote the
interests of a particular segment of the Russian elite in the view that
this was advancing "reform." In its arrogant insistence that what it was
doing was right-no matter what the social costs-and its indifference to
what was actually going on in the country, the U.S. administration's
behavior strongly resembled that of the oligarchs it now so vilifies. In
fact, as Wedel demonstrates, U.S. policies are partly to blame for the
As analysts sort through this policy rubble, three points of view have
emerged. The first holds that for social, cultural and historical reasons,
the so-called shock therapy was inappropriate from the start as the
centerpiece of the Russian economy. The second is that, whatever their
theoretical merit, these policies foundered because they relied on too
narrow a political base, and neglected the need to strengthen property
rights and develop the rule of law. A third view, apparently still believed
by many members of the Clinton administration, posits that the reforms
would have been more successful had "shock therapy" really been tried-that
is, had the Russian government the "political will" to implement properly
what the United States and international lending institutions wanted it to
do. They were also sidetracked, so the argument goes, because of external
factors such as the Asian financial crisis. To the latter explanation,
Sachs now offers a variant that allows him to defend his policy
prescriptions, while distancing himself from what happened: had the U.S.
offered more assistance to Russia during the window of opportunity in the
early 1990s (that is, when he was closely involved), Russia's
transformation would have been far smoother.
Sachs and Åslund are wrong, of course. The United States never had the
ability to shape the scope and pace of Russian reforms in any major way.
The fate of post-Soviet Russia has indeed always been-in the U.S.
administration's tired cliché-for the Russian people to decide. Washington
could only be a constructive player at the margins.
Despite all the ink spilled on these issues, there remain, surprisingly,
many unanswered questions. What was the role of Larry Summers, one of the
intellectual godfathers of "shock therapy", in designing and implementing
U.S. policy? His key role has barely been raised in the debate. Which
Western companies profited from U.S. assistance? Why hasn't the U.S.
government more aggressively pursued the investigation into the Bank of New
York scandal, which was a by-product of its policies? Finally, in 1996 the
United States turned a blind eye as its friends in Moscow bent the rules to
re-elect Boris Yeltsin. As odious a Russian president as Gennady Zyuganov
would have been had he been elected, are the policies of Vladimir Putin,
Yeltsin's hand-picked successor, now significantly better?
When was Anders Åslund last in Belarus? Or in saying that its citizens
"suffer under a frightful dictatorship in a Soviet theme park" is he just
citing conventional wisdom?
True, since becoming independent in 1991 the country has conspicuously
shunned the kind of "shock therapy" approach to change recommended by
Åslund (and accepted in a certain sense in Russia). As a result, Minsk may
lack the veneer of Western shops and cars casual visitors make so much of
in Moscow. But it has also avoided the widespread pauperization, decrease
in life expectancy and violent racketeering that have been the main outcome
of the so-called radical economic reforms endured by ordinary Russians.
Over this period, Belarusians have had plenty of opportunities to vote
freely-the only time the international community did not indicate its
approval being when it sent no observers to the 1996 referendum. Compare
that, though, to the referendum held three years earlier in Russia to
legitimize Yeltsin's bombardment of the country's parliament. Western
election monitors, journalists and experts queued up to hail his fairly won
victory-only to have the rug pulled from under them several months later
when the Russian authorities themselves admitted the result had been fixed.
Besides all this, no one can accuse the Belarusian government of having
waged a war of virtual extermination against one of its minorities
(although it has plenty of them), nor of having interfered repeatedly and
often ruthlessly in the internal affairs of its neighbors. Both
policies-which are nothing if not characteristic of the Soviet era-have
been taken for granted most of the last ten years within ruling circles in
Moscow, at a time when Åslund has been all too ready to sing their praises.
Professor Goldman's defense of Jeffrey Sachs demonstrates that passions run
high. Goldman presents no evidence in support of his Harvard colleague. He
appears to agree with the thesis of my article and the facts, excepting
those pertaining to Sachs. Many of Goldman's claims are contradicted by
documents in my possession, including those of Sachs' own consulting firm.
The rest contain refutations of points I never made. To wit:
o Goldman shares my view regarding "the grotesque privatization of state
enterprises", as he puts it. He agrees that the Harvard-Chubais transactors
were involved in privatization but states that Sachs was "not part of that
group." Sachs' own project documents (Jeffrey D. Sachs and Associates Inc.,
1992) tell it differently: "The [Sachs] team has had an extensive
interaction with the [Russian] State Committee on Privatization and has
helped in the design of the mass privatization program legislation recently
enacted by Parliament." The team consisted of Sachs, his business associate
David Lipton and Harvard Professor Andrei Shleifer, as well as Jonathan Hay
and others. Later, as I have pointed out, while being funded by the U.S.
government, the HIID, with Shleifer and Hay at the helm, wrote decrees for
Yeltsin's signature and participated in high-level Russian privatization
decisions. Despite this, Goldman cites "stealth advisers" "who bear real
responsibility." Who are they?
o The issue is not Sachs' official standing. (Some officials said he
had it, while others, including Prime Minister Viktor Chernomyrdin, have
suggested otherwise.) Sachs and Goldman seem unwilling to accept that the
issue is the multiple and sometimes conflicting roles that the transactors
assumed, not the specific official title they held at any given time.
Goldman claims that Sachs never "worked on two sides of the negotiating
table", but documents show that Sachs and Lipton were proffering advice to
the IMF while representing the Russian side and that Sachs offered his
services to the parliamentary opposition of his client, Gaidar.
o My work is not focused on Sachs. Goldman's attempt to defend Sachs
personally by reference to his behavior in other countries is wholly
irrelevant to my article on U.S.-Russian transactors.
o Goldman puts words in my mouth and assumes emotions that are not part
of my work and then says that I am unfair. For example, nowhere do I say
that any of the transactors "prescribed knowingly flawed advice" [my
emphasis] or that Sachs was "the central architect of the reforms" or
"provide[d] insider information" to Harvard. Transactorship does not imply
that all transactors take part in or know of all activities; a division of
labor is at the very essence of the concept. Contrary to what Goldman
suggests, Sachs and some other key transactors (such as Anders Åslund)
continued to work together and defend their earlier actions long after
USAID cut off HIID's Russia money and U.S. investigations into HIID's
In the end, it is the Russians themselves who must bear the blame for the
"reforms", which both Goldman and Sachs characterize in worse terms than I.
But where is the responsibility of Western advisers? Is it not childish to
say that, "Everything I advised was good", and lay blame for everything
that went wrong on others? What concretely can the "big boy", as Goldman
calls Sachs, point to as his success?
Anders Åslund's letter is a condescending ad hominem attack. The last
refuge of someone whose troubling conduct has come to public light is to
attack the credentials or character of the individuals who helped bring the
public scrutiny to bear. Åslund's attack is particularly unpersuasive given
that he ignores the other experts who wrote letters that echo my findings.
If Åslund wants "rumor" and "gossip", he and the other transactors whose
activities are detailed in my article have left a whirlwind of that behind
them. My work is based strictly on facts that I carefully document with
myriad named sources. Tellingly, in his letter above, Åslund fails to
challenge a single finding or source, let alone the central thesis of the
September 21, 2000
The Drama Unfolds
By Peter J. Lavelle
Peter J. Lavelle is the head of research at IFC Metropol. He contributed this
comment to The Moscow Times.
Since most modern histories, particularly of revolutions, are often rendered
through the discursive idiom of dramaturgy f "actors," "movements,"
"dialogue," "stages" f I proffer an understanding of Putin and Putinism in a
similar vein. While certainly not my favorite means of explaining politics, I
would nevertheless have to agree that this approach gives politics and the
concept of change itself a sense of "drama." Using this form of expression,
the pre-modern, modern and the most illusory post-modern mind can all
appreciate contemporary Russia.
Most people would agree that the nation has experienced some kind of
revolution since 1991. Acknowledging this, my explanation of this country's
recent past and future should be no better or worse than any other. Most
certainly, it follows the routinized flow of events f and an ever so familiar
I claim that President Vladimir Putin and Putinism are "Romance" in this
theatrical scheme of things, the bridge between former President Boris
Yeltsin's "Comedy" and the nation's future "Tragedy." And please forgive me
here. Since my crystal ball gets a little clouded 10 years f possibly longer
f down the line, I don't yet know the name of the actor who will take on the
starring role of "Tragedy," a semantic appellation that is not as calamitous
as it may appear at first blush.
The Yeltsin "Comedy" was what everyone wanted at the time. Boris was
everybody's favorite; under his rule, markets were created, polities
established. It could be no different; following the "transition script" in
every detail, no rehearsals were required, and Yeltsin was a natural.
Everything was supposed to be very easy, according to the (West's) formula.
Yeltsin played his role to Oscar stature. I will never forget the smirk on
his face during the inauguration of Vladimir Putin, the expression of
self-satisfaction that he had pulled it off yet one more time. And, indeed,
he had; he is a genuine political genius.
But why is Yeltsin "Comedy"? The revolution had established itself, though it
is still illusory for most. It was there in form but not in content, much
hope and rhetoric without substance. The "communist king-father" had been
beheaded without his casting a pathological and haunting spell. Yeltsin will
be remembered as an actor who hypnotized his audience, though never
convincingly or for very long; his authenticity was as meaningful as a used
Yeltsin's successor is reaping the cost of his shallowness, but, in the
scheme of things, it cannot be otherwise. Yesterday's name-attraction was in
need of a replacement with some real, hard-core political talent. Comedy is
merely a spoof on what the world should be; it is about turning the world on
Enter Putin to center stage. On first inspection, he is only an upstart
understudy. Putin was given the starring part by a roll of the dice; as an
actor, he doesn't even have a pretty face. With the advent of Putin, we have
But what is "Romance" in terms of this revolution? Putin's task is to bring
the revolution into full force. Now the rhetoric of the revolution is taking
on flesh, expressed in terms of battle and a life-and-death struggle. The
language of the revolution is rendered as a quest of heroic proportions. For
the most part, his task will appear to be a thankless journey: so much
demanded, so hard to deliver. Returning to the past is no longer an option.
It is he who has the ultimate responsibility in an all-embracing sense for
the nation's fate, he who is the mediator for the hopelessness of so many.
Who could ever envy his task? "Romance" is the hope that the world might be
moving forward, departing from the past. Will history be generous regarding
his legacy? Which of us would ever even attempt to make right what is so
wrong in this country? Putin is a historical actor faced with many questions,
confronted by seemingly insolvable problems. The revolution is one that he
himself may not fully understand. But he will continue to have to answer for
all the Kursks, Ostankinos and bombings for years to come.
"Tragedy" means accepting the world as it is and putting the revolution into
perspective. The person who assumes this part will have a less glorious f
though no less important f role to play. Ruling a normal (or normalizing)
polity is about negotiating identified social interests. This tragic hero
will be the one who contemplates a break with many past political practices,
bringing the turbulent revolution to fruition, a "Russian modernity" of
sorts. This figure is tragic because the revolution will finally be
crystalline and triumphant, with elements of the past severed from present
consciousness and becoming nothing more than rendered memory, an academic
historian's paradise. Friedrich Engels' famous dictum of politics as the
"administration of things" could even have some ironic relevance.
Most traumatic histories eventually end with sensational tabloids, late-night
reruns of mind-stifling "what should/might have been" conspiracy theories.
Alas, when will Russia's most recent revolution enter the sphere of
triviality, like most of the Western world? The success of this final stage
of the revolution will be defined if the average pensioner can at least
resort to old films for succor, instead of standing in the metro with an open
A successful revolution, at the end of the day, is the world of armchair
intellectuals debating the meaning of the present. Thus, "Tragedy," in this
sense, should be understood as merely a coming to terms with the present and
its ultimate banality.
October 2, 2000
Bye-Bye Babushkas (int'l edition)
Freight companies are driving small importers off the streets
By Sabrina Tavernise in Moscow
Svetlana Goncharova is a survivor. The 52-year-old widow has earned $1,000 to
$2,000 a month as a ``shuttle trader'' over the past five years. She buys
sweatpants and sweaters in Turkey every few months, then carts them back to
Moscow to sell in open-air markets. Goncharova and other shuttle traders
accounted for 20% of the 66 million Russian workforce in 1996, according to
the Russian Academy of Sciences.
Now, shuttle traders are a dying breed. Those who have been successful are
opening new businesses with the profits they made from trading. Others, like
Goncharova, are being thwarted by a customs crackdown, new taxes and
regulations, and a weak ruble. And the quality of locally-made goods now
rivals or surpasses the imported Turkish stuff. So, however painful the
decline in business is for traders, the phenomenon is also a measure of
Russia's economic development. ``There has been a big shift by Russian
consumers to domestically made goods after the devaluation,'' says Al Breach,
an economist with Goldman Sachs in Moscow. ``It's undoubtedly a healthy
Sophisticated, efficient shipping companies--about a dozen of them--are
replacing the small shuttle traders. In the face of this competition, goods
imported by shuttle traders into Russia plunged from $20 billion in 1996 to
$8.7 billion last year, official statistics indicate.
The biggest winners in this shakeout are sleek companies such as East
Line, Russia's No. 1 air-freight company. At first, the seven-year-old
business transported goods merely from airport to airport. Now, it provides
door-to-door service from eight countries worldwide for customers such as
international air-freight carrier Chapman Freeborn Airmarketing. ``The market
is more developed, the money is longer-term, and companies work on contracts
instead of just stuffing a suitcase,'' says Leonard Blinov, head of marketing
at East Line.
Shuttle traders, though disappearing, have left their mark on the nation's
memory. For much of the '90s, ordinary Russians journeyed to China, Turkey,
Poland, and the United Arab Emirates, buying up everything from chewing gum
to panty hose. They lugged hundred-pound bags through grimy airports and
train stations. Consumers got cheap goods--some counterfeit, admittedly--that
Russian industry couldn't supply. ``They compensated for shortages, and at
first there were tremendous profits,'' says V.M. Titov, a sociologist at the
Russian Academy of Sciences.
``SO CIVILIZED.'' No longer. When Russia devalued the ruble in 1998, it dealt
a blow to all importers. Goncharova was stuck with a load of jeans no one
could afford after their price quadrupled in rubles. She sold at a loss and
now goes on buying trips only sporadically. At $600 a month, her income from
trading is less than a third of her take in 1996. She has a second job
cleaning a department store and, to make ends meet, is looking to get out of
the business altogether. ``Now it's all so civilized,'' sniffs Goncharova.
Indeed, localities are keeping traders on an ever-shorter leash. Last
year, Moscow imposed a 5% sales tax, and many other cities followed suit.
Moscow also requires vendors to install cash registers and is shutting down
outdoor markets. Of Moscow's 224 bazaars, the city closed 27 last year and
plans to shutter 43 more over the next two years. The intent is to move the
markets into heated--but more expensive--facilities.
Some traders are putting the past behind them. Oleg Ryabov, a 39-year old
Muscovite, started his business with profits he earned by peddling women's
underwear bought in Poland. Now, he runs a small sewing company with 50
workers in northern Moscow. He and his wife, Tanya, established it last year
with help from friends and $50,000 of the couple's savings. While his annual
sales of blouses, at $200,000, don't compare with the $800,000 he used to
gross, Ryabov predicts the figure will grow to $500,000 next year.
In Russia's tough business environment, shuttle traders are not the only
ones under pressure. East Line was raided Sept. 19 by federal agents for
allegedly smuggling contraband goods from China into Russia--charges that
East Line managers deny. For the new shipping companies as well as the
shuttle traders, the challenge is to keep adapting to an ever-changing
INTERVIEW-Russian businessman gets support to opppose Putin
By Andrew Priest
NEW YORK, Sept 22 (Reuters) - Boris Berezovsky, one of Russia's most
influential businessmen, said on Friday "very powerful people" support his
bid to create a political party that would oppose President Vladimir Putin's
moves to control business and regional leaders.
Berezovsky, who caused a political stir in July by resigning from the Duma to
protest what he called "brazen and dangerous" actions by Putin's
administration, told Reuters reaction was favorable to his attempt to
organize opposition in a new party called Constitutional People's Power.
"There are very powerful people who are prepared to support this idea," he
said in an interview in New York.
Berezovsky, once closely allied to Putin's predecessor former President Boris
Yeltsin, said he approached political leaders including Kursk regional
governor and former Vice President Alexander Rutskoi, Sverdlovsk Governor
Eduard Rossel and Tatarstan President Mintimer Shaimiyev.
He said he was getting support from two groups: "First the intellectuals who
have for a long time thought about the future of Russia. The second are
regional leaders ... I have had a favorable response from these governors,"
Berezovsky also said he had talks with Boris Nemtsov, leader of the liberal
Union of Right-Wing Forces in the State Duma lower house of parliament.
An alliance of Nemtsov's and Berezovsky's forces could create a stronger
opposition against Putin's dominance and split right wing forces that helped
sweep Putin to power in March.
"Russia needs an opposition because in any liberal country there must exist
at least two powers which compete," said Berezovsky, owner of interests in
Russian media, airline, oil and communications companies. "It's useless just
to discuss (forming an opposition). There are very powerful people prepared
to support this idea."
Berezovsky, who said he had no plans to run against Putin in the next
presidential election, said he and Putin share a similar vision of a liberal
Russia but they differ in how to achieve Russia's future. "He thinks
democracy is arrived at through authoritarian ways. That's impossible,"
Berezovsky, who resigned from the lower house of parliament shortly after
being elected, assembled his fortune in the volatile days after the Soviet
Union collapsed in 1991, backing Yeltsin's reelection campaign in 1996.
KREMLIN BATTLES TO CONTROL MEDIA
Berezovsky, 49 percent owner of ORT television network, is embroiled in a
political shoving match with the Kremlin over the independence of Russian
He and Vladimir Gusinsky, owner of Russia's only fully independent television
network NTV, say they have been pressured to sign over their media assets to
Kremlin-controlled interests. Gusinsky left Russia after being briefly jailed
on embezzlement charges. His detention was widely seen as an attempt to
silence NTV's frequent criticism of the Kremlin.
If Gusinsky and Berezovsky sign over their stakes, the Kremlin would be in
charge of all three main television networks that are by far the most
influential sources of information in the world's largest country.
Berezovsky has previously said Putin was unhappy with ORT's coverage of the
sinking of the Kursk nuclear submarine with the loss of 118 lives and wanted
to take control of the channel.
Berezovsky said he is trying to compromise with the Kremlin and preserve
ORT's independence by transferring his ORT stake to a group of journalists
"For sure they will face the same oppression I did," said Berezovsky who has
accused the Kremlin of threatening him with jail if he did not relinquish his
Berezovsky said Putin's allies were calling these journalists and
entertainers in the middle of the night "trying to make them afraid."
He said despite giving up ownership he would continue to fund half of his
former stake in ORT out of his other business interests. ORT is also 51
percent owned by the Russian state.
The Globe and Mail (Canada)
22 September 2000
Finally, a Kremlin boss gets Solzhenitsyn's stamp of approval
Putin reflects ideas of dissident nationalist
who suffered for assailing Russian leaders
MOSCOW -- For half a century, from prison camp to exile, Alexander
Solzhenitsyn has been thundering his disapproval of every Kremlin boss who
came along. He denounced them as traitors, thieves, dictators and murderers.
But this week, after months of secret Kremlin courtship, Russia's most famous
ex-dissident finally softened and allowed himself to be seduced by a former
KGB officer: Vladimir Putin.
Mr. Solzhenitsyn, the 81-year-old author of The Gulag Archipelago,novelist
and moral beacon of the nation, went on state television yesterday to lavish
praise on the Russian President.
A day earlier, for the first time, Mr. Solzhenitsyn and his wife, Natalya,
were cheerful hosts to a Kremlin visitor. They accepted a large bouquet of
flowers from Mr. Putin and his wife, Lyudmila, at their spacious villa near
Moscow, and then invited them to their dining table to share a pot of tea.
The surprise endorsement from the former Soviet dissident is a major coup for
Mr. Putin, who has been fending off accusations he is an authoritarian who
crushes the media and violates human rights.
"The President understands the enormous difficulties, both internal and
external, that he has inherited," the winner of the Nobel Prize for
literature said on state television yesterday.
"I have the impression that the President is very cautious and careful in his
judgment. He has a lively mind and he has no thirst for personal power. He is
guided by the interests of the state."
Mr. Putin has been ardently wooing Russian nationalists for months. He has
held Kremlin meetings with hard-line Communist and ultranationalist newspaper
editors, and he seeks an image as a patriot who will revive Russia's
It was perhaps this image that appealed most to Mr. Solzhenitsyn, whose
conservative Slavic nationalist beliefs were out of fashion during the reign
of Mr. Putin's predecessor, Boris Yeltsin.
Mr. Solzhenitsyn seems persuaded that Mr. Putin will fulfill his election
promises to fight corruption, reduce crime, rejuvenate Russian culture and
roll back the excesses of the Yeltsin era.
"Under Yeltsin, the main slogan of our country was to steal as much as you
can swallow," Mr. Solzhenitsyn said. "This state is saturated with theft. Our
state is based on an ideology of theft. It is one of our biggest problems."
He said he was grateful for the President's two-hour visit, which he
described as a lively and useful dialogue. "I agree with most of what the
President says. I'll give you one example: We both think that Russia suffers
from a lack of cultural communication. Television has replaced everything.
People watch television all the time. This situation must be changed."
Some analysts say Mr. Putin has been greatly influenced by Mr. Solzhenitsyn's
hostility to the privatization of state assets.
"Solzhenitsyn's sincere and deep conviction is that the privatization results
must be annulled," former Yeltsin chief-of-staff Anatoly Chubais said last
"It's a paradox, but it's a fact: Solzhenitsyn's ideas today fully coincide
with the most reactionary part of the Russian secret services and the
While the writer and the President may have similar ideological beliefs,
there were many ironies in their meeting. It was Mr. Putin's long-time
employer, the KGB, that harassed and persecuted Mr. Solzhenitsyn in the
Soviet era. The KGB once jailed the dissident in Moscow's notorious Butyrsky
prison -- the same place where Mr. Putin's police jailed media baron Vladimir
Gusinsky this year.
Even as the respected novelist was meeting Mr. Putin, the President's
government was seizing the shares of Mr. Gusinsky's media company, in a move
that could help destroy the last remaining independent TV channel in Russia.
After returning to Russia from exile in 1994, Mr. Solzhenitsyn loudly
condemned the Yeltsin government. He called it an oligarchy run by a handful
of corrupt thieves who abandoned their Slavic brothers and ruined their
country as they enriched themselves.
After Mr. Yeltsin's resignation last winter, Mr. Solzhenitsyn criticized Mr.
Putin for giving his predecessor a guarantee of immunity from prosecution.
The deal was shameful, he said.
Even as recently as May, the novelist complained that Mr. Putin had failed to
move swiftly enough to reverse Mr. Yeltsin's policies. But all of those
complaints seem to be abandoned yesterday in his rush to support the
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