November 16, 2000    

This Date's Issues:  4638  4639

Johnson's Russia List
#4639
16 November 2000
davidjohnson@erols.com

[Note from David Johnson:
  1. Rossiiskaya Gazeta: Alexander Babakin, WHAT WILL AMERICA SAY NOW? (re nuclear proposals)
  2. Reuters: Russia to dump Mir space station in February 2001.
  3. The Guardian (UK): Amelia Gentleman, Coke's Russian invasion fizzles out. Drinks giant goes native to halt losses as flavours from Soviet era flourish.
  4. The Independent (UK) editorial: You don't jail your critics in a democracy, Mr Putin.
  5. Bloomberg: Putin Stopped Gazprom Buying Russian Media Group, Managers Say.
6. Moscow Times: Vladimir Sarana, TV Advertising Means Big Money, Big Politics.
7. Reuters: Wife found guilty in Russian general murder-agency. (Tamara Rokhlina)
8. strana.ru: Political fund chief praises five-months-old decree on federal districts. (Pavlovsky)
9. Financial Times (UK): Andrew Jack, Kremlin prepares to take a firm grip on Russia's local barons: Elections for the country's 30 governors are likely to enable President Putin to further centralise power.
10. BBC Monitoring: Russian paper outlines Kremlin ways of losing unwanted governors. (Kommersant-Vlast: Irina Nagornykh, Elections: How To Dump a Governor)
11. RFE/RL: Roy Synovitz, EBRD Report Sees Big Disparities Between CIS And Central Europe.]

******
1
#1
Rossiiskaya Gazeta
November 16, 2000
[translation from RIA Novosti for personal use only]
WHAT WILL AMERICA SAY NOW?
By Alexander BABAKIN, special correspondent
     Russia's President Vladimir Putin suggested to his
overseas partners to reduce nuclear arsenals to 1,500 warheads
each by the year 2008, and then to move lower still. What will
the USA say to this?
    
     A large-scale discussion of the planned deployment of an
NMD system in the USA and the consequences of this had been
going on for a year now. Major-General Vladimir Dvorkin, head
of the 4th Central Research Institute of the Russian Defence
Ministry, the deployment of two NMD systems with 100
anti-missiles each, if no compensation measures are taken,
would reduce the reply-action possibilities of the Russian
strategic nuclear forces.
     Besides, nobody can guarantee that the USA would not
quickly cover its territory with a mass of new ballistic
missile defence regions after that. This will be the end of the
1972 ABM Treaty and the entire system of nuclear security,
created by the international community on the basis of this
treaty in the past decades. But despite the reasonable
arguments against the NMD system, President Clinton signed the
bill on its deployment in July this year. American newspapers
and television joined in in the campaign.
     General of the Army Vladimir Yakovlev, Commander of the
Strategic Missile Force, believes that the American public has
been brainwashed to believe in the need of building up the
available ABM possibilities. Vast sums of money have been
invested in this ambitious project. The powerful Globus II
radar is being speedily built in Norway, anti-missiles are
being tested, giant concrete foundations are being built for
the novel super-radars in the USA, and research is being done
into the placement of laser weapons on satellites and
spacecraft.
     Naturally enough, this worries Russia. President Vladimir
Putin suggested that the US Senate should follow the example of
the Russian Federal Assembly and ratify the START-2 Treaty and
other ABM agreements, and most importantly, slash nuclear
arsenals. The Russian President said about his statement during
his foreign trip that despite the internal political processes
underway in the USA, Russia's contacts on that vital subject
with that country had not stopped and their nature should
convince everyone that Russia was resolved to do everything
possible to lower the risk of large conflicts.
     The US NMD system bears not only on Russian interests and
the current international system of agreements, but also on
China's interests. Colonel-General Valery Manilov, First Deputy
Chief of the General Staff of the Russian Armed Forces, who is
currently in China, discussed this problem with the Chinese
political and military leaders. Russia and China might soon
make new initiatives in this sphere. No wonder that Vladimir
Yakovlev said about Putin's statement that it was based on the
powerful potential of the Russian strategic nuclear forces and
their ability to adequately reply to any development of the
situation.
     It was noted at the recent session of the Military Council
of the Strategic Missile Force that a regiment armed with the
latest Topol-M missiles had been put on combat duty in the
Tatishchevo missile formation and that a missile space defence
system would soon be put into operation under Baranovichi in
Belarus.
     In the past year, the crews of the Strategic Missile Force
launched three missiles from the Topol-M system, and the Satan,
Topol and Stiletto missiles, which are currently on combat
duty, hit the targets thousands of kilometres away from the
launching pad. In short, Russia has a reliable missile shield.
But if it proves insufficient, the possible reply measure could
be the provision of the Topol and Topol-M missiles with MIRVed
warheads and the modernisation of railway missile systems.
     It would be much better if the USA accepted the pragmatic
nuclear disarmament measures, suggested by Russia. In this
case, the equipment created in the USA could well be used for
the peaceful space exploration or a future system of global
control of missiles and missile technology.
    
                          Hot Off the Line
    
     The USA was obviously interested in the statement of
President Vladimir Putin on the reduction of the two countries'
nuclear arsenals, a high-ranking spokesman of the US
administration told journalists when he informed them about the
Putin-Clinton meeting in Brunei. According to the November 15
statement by the spokesman of the Russian Foreign Ministry,
Moscow noted the constructive reaction of the US State
Department spokesman to Vladimir Putin's November 13 statement
on the need for quick and radical reductions of the US and
Russian strategic offensive weapons, while maintaining and
strengthening the 1972 ABM Treaty, which is the cornerstone of
international security.

******

#2
Russia to dump Mir space station in February 2001
 
MOSCOW, Nov 16 (Reuters) - The Russian government decided on Thursday to dump
its ageing Mir space station in the Pacific Ocean in late February next year,
Yuri Koptev, the head of the Russian space agency, said.

"The government has agreed that (Mir) be taken out of orbit and brought down
into the Pacific Ocean in a pre-determined area off Australia between
February 26 and 28," Koptev told reporters after a government meeting.

Much of the giant spacecraft will burn up on re-entry into the Earth's
atmosphere before most of the remainder ditches into the sea. Officials have
said that parts of the craft could hit land.

Prime Minister Mikhail Kasyanov told the government meeting it was important
to make sure the debris from Mir did not fall back to Earth in an
uncontrolled fashion.

Interfax quoted Anatoly Kiselyov, head of the Khrunichev centre which
designed and built Mir, said ballistic experts reckoned pieces of it would be
scattered over an area up to 10,000 km (6,250 miles) long and 200 km (125
miles) wide.

He said there was no way to guarantee that all sections would fall safely
into the ocean.

"To calculate precisely the mathematical model of the process... of passing
through the atmosphere and falling into the ocean of a 130-tonne multi-module
orbital complex with enormous panelling is not feasible," Kiselyov said.

He said it would be advisable to send up a new crew to Mir to disconnect a
network of cables laid across the station over its 14 years of existence and
to take out clamps holding together its various modules.

Koptev said Mir was in too poor a state of repair to remain in orbit much
longer. Another transport craft would have to be sent to the vessel in
January to prevent it from falling out of orbit, he said.

Thursday's decision signals the end of an era for Russia's cash-strapped
space programme, and defeat for the private MirCorp firm which had tried to
raise millions of dollars to keep Mir in operation.

During an eventful life Mir helped Soviet and Russian cosmonauts set a string
of space endurance records.

But in recent years its reputation has been tarnished by accidents including
a near catastrophic collision with a cargo craft, an on-board fire and
computer failures which sent the station spinning aimlessly through space.

******

#3
The Guardian (UK)
16 November 2000
Coke's Russian invasion fizzles out
Drinks giant goes native to halt losses as flavours from Soviet era flourish,
writes Amelia Gentleman in Moscow

Kvas is the real thing - or so beleaguered Coca-Cola executives in Moscow
have persuaded themselves. Production lines in Siberia, which once spewed out
sparkling fountains of Coke, have been converted to make a new line of
traditional Russian soft drinks - such as kvas, a cloudy brown, alcohol-free
yeast drink with the peculiar aroma of fermented stale rye bread.

In a reverse of the cultural imperialism of Coca-Cola's aggressive invasion
of Russia in the early 90s, the firm has been forced to make concessions to
local demand as it struggles to recoup huge losses in the region. Last
month's announcement of a move into nostalgic Soviet-era drinks marks the
business's latest attempt to squeeze a profit out of Russian consumers who
are increasingly apathetic towards Coke itself.

In addition to the fizzy, sugary version of kvas already under production,
the company's management is reproducing tarkhun, also a Soviet favourite (and
an acquired taste with its electric emerald colour, acrid herbal flavour and
strange chemical smell) and buratino, another old recipe. The venture is a
practical response to difficult times. The past 18 months have been
unspeakably tough for the company's Russian arm. Staff in the Moscow
headquarters are believed to have been cut back to about 35, from 300 in the
mid-90s. Between 40% and 60% of Coke's workers across Russia have been laid
off in 16 months, say company sources.

Russian enthusiasm for Coke has dwindled to such an extent that most of the
11 factories are not working to full capacity. Last summer a franchise plant
in Voronyezh ceased production of Coke altogether, saying it was far more
profitable to make beer. Six years after the company triumphantly opened its
first Russian factory, management is realising that the brand's appeal -
perceived from behind the Iron Curtain as a glamorous symbol of Western
freedom - has faded.

Moscow's kiosks illustrate the problem. A bewildering variety of bottles are
labelled with a bemusing range of prices: 1.5 litres of a black liquid called
FanCola costs 9 roubles; a smaller 1.25-litre bottle of Coca-Cola costs more
than double that. A bottle of Russian beer costs the same as a can of Coke,
and for most Russian teenagers (the target buyers for colas) the choice is
simple: with beer you have the added excitement of getting drunk. The beer
market has doubled in the past four years.

The company explains that the "state-of-the-art technology" and the
high-quality sugar and water which go into making Coke explain why it is more
expensive. But Russia's increasingly sophisticated consumers are no longer
infatuated with Western goods as status symbols, and will not pay extra for
American colas when Russian ones cost so much less. No one within the company
will confirm what everyone suspects - that after investing around $750m in
the country, Coca-Cola's Russian arm is running at a loss. "Our initiatives
are long-term," a spokesman said.

The reason for Coca-Cola's sagging fortunes in Russia are manifold - the 1998
economic crisis, the growing strength of local products, and the inability of
big companies to respond quickly enough to the rapidly changing Russian
market. Initially the company's attack on Russia went smoothly. Sales rose
steadily as huge areas were seized by distributors. Popular Russian drinks
such as tarkhun and kvas were virtually killed off by Sprite and Fanta.

The collapse of the rouble in August 1998 marked a turning point, although
problems had emerged earlier. Consumers were suddenly poorer and sugary
drinks were not a necessity. Russian rivals fought back, making cheaper
drinks. They realised there was money to be made in reviving Russian
flavours. "For a while Coke represented the winds of change in Russia. It was
a key investor and the name carried great authority. It no longer does," a
former employee commented. "Coca-Cola ignored the local market," he added.
"And it reacted too slowly to change. If we wanted to put a new label on a
product we'd have to wait for permission to come through from Atlanta, which
could take six months. By the time permission had come through, Russia's
government, its banking system and its president would all have changed."

Other big manufacturers also suffered from the crash, but responded quickly.
Pepsi has already diversified into kvas-like drinks. There was uncertainty
about whether Coca-Cola's new flavours would reverse the company's fortunes.
"If there are problems with the sales of Coke, they should sort those out,
not start making something new," said Greg Thain, a Moscow retail analyst.
But nostalgia for Soviet tastes has worked for the British drink Irn-Bru, a
surprise success. "We discovered that Irn-Bru tastes very like the famous
Soviet soft drink, buratino," said Jerry Labour, the company's Moscow
director.

******

#4
The Independent (UK)
16 November 2000
Editorial
You don't jail your critics in a democracy, Mr Putin

The refusal by the Russian media tycoon Boris Berezovsky to return to Moscow
for a court hearing yesterday means that two of Russia's most powerful
billionaires are now in self-imposed exile. On Monday, Vladimir Gusinsky,
another media magnate, failed to turn up for questioning in Moscow, prompting
the prosecutor to issue a warrant for his arrest on embezzlement charges. Mr
Gusinsky remains abroad "in Europe". Both men are out of the country for the
same reason: they do not trust the Russian courts.

Mr Berezovsky said it was "a difficult decision" when he refused to testify
in connection with a profits-skimming case involving the Russian airline,
Aeroflot.

In normal circumstances, one would have little sympathy for super-rich
businessmen who feel entitled to ignore a prosecutor's summons. If the
businessmen have been rumbled in some aspect of their dubious practices, then
it would seem to be their absolute duty to return to Russia to face the
music.

These are not, however, normal circumstances. It is true that Messrs Gusinsky
and Berezovsky became rich in dubious circumstances (and with the connivance
of the government) in what has been described as the sale of the century,
when much of Russia was privatised. But few can doubt the tycoons' essential
point: that the accusations levelled against them have more to do with the
settling of political scores than with business malpractice.

Like America's robber barons a century ago, the oligarchs â?" as Mr
Berezovsky,
Mr Gusinsky and their wealthy ilk are collectively known â?" wield huge
political clout. They have also, however, helped push forward the reforms
that Russia so desperately needs. The real problem is that Mr Gusinsky's
empire includes NTV, the main independent Russian TV station â?" which is
often
at odds with the Kremlin. Mr Berezovsky controls 49 per cent of one of the
two main state television networks. Both men own influential daily
newspapers.

It is no secret that the Kremlin loathes all criticism. President Vladimir
Putin talks about the need for economic reform â?" "liberalisation in all
areas" as he put it yesterday. But if Mr Putin is ready to take steps against
media that dare to criticise the government â?" for that is what the latest
legal action is all about â?" then the prospects for a saner, more stable
Russia are dim.

Mr Gusinsky and Mr Berezovsky may not be perfect heroes. But nor are they
villains. Mr Putin must understand: seeking to jail your critics is no way to
run a country.

******

#5
Putin Stopped Gazprom Buying Russian Media Group, Managers Say
 
Moscow, Nov. 16 (Bloomberg) -- Russia's biggest independent media group
said President Vladimir Putin stopped an agreement to sell the holding to
OAO Gazprom because it wouldn't give immediate control to the
state-controlled natural gas monopoly.

The allegation escalates a battle between Putin and Media Most, a group
that includes the nationwide NTV television station, The company is
controlled by Chairman Vladimir Gusinsky, who fled Russia after he was
jailed in an embezzlement case that later was dropped, and has refused to
return to face new fraud charges.

Media Most executives, in a meeting with foreign journalists in Moscow,
said the agreement Gazprom signed -- then reneged on -- this week would
have given the gas company control next July only if the group couldn't
sell a minority stake to international investors via Deutsche Bank AG. The
accord would have cleared more than $500 million in debt Media Most owes
Gazprom, they said.

``This open war is turning into a cold war,'' said Sergei Parkhomenko,
chief editor of Media Most's Itogi magazine. ``The only possibility to get
protection is by getting a reputed Western partner. After that, the
authorities would find it difficult to harm us.''

Putin's office wouldn't comment. The president has said he backs an
independent media and has been pressing Gazprom to reach agreement with
Media Most to recoup loans.

In September, Putin said he wouldn't intervene in the conflict between
Media Most and Gazprom, in which the government owns the largest single
stake of 38 percent. One of Putin's deputies is Gazprom's chairman.

``I consider it wrong to interfere in a conflict between two commercial
entities,'' Putin said then.

Sudden Reversal

Media Most said Monday it had reached agreement with Gazprom to settle the
debt. The following day, Gazprom asked a Moscow court to cancel the pact.

The agreement mostly concerned $504.5 million Media Most had borrowed from
Credit Suisse First Boston, backed by guarantees from Gazprom, which took
over the loans earlier this year.

The accord called for giving Gazprom 25 percent plus one share of all
companies in the group, excluding NTV, Media Most officials said. Another
25 percent was to be set aside for Gazprom to cover part of the debt that
comes due in July 2001. The company would try to sell that stake through
Deutsche Bank to one or more international investors, Media Most officials
said.

The agreement also called for raising Gazprom's 30 percent stake in NTV,
while keeping it below a majority. A separate 19 percent stake in NTV would
be set aside to cover loans due in July and again an attempt was to be made
to sell the shares abroad.

`Putin Interfering'

The executives said the interference of the president's office shows it's
not interested in resolving Media Most's financial problems. Gazprom said
today it resumed negotiations with the media company to resolve the dispute.

``We hope the agreement someday will be signed,'' said Alexei Venediktov,
chief editor of Ekho Moskvi, a Media Most radio station. ``Even if we sign,
that will not relieve us of our financial and political problems. The
attacks will continue. We will have the same president.''

Putin also is facing increased criticism from Boris Berezovsky, another
media tycoon being pursued by state prosecutors. Berezovsky, owner of the
Kommersant newspaper, and Gusinsky -- both now out of Russia -- refused to
show up this week for questioning in separate fraud cases.

Berezovsky, who faces questions concerning allegations regarding
embezzlement of state-controlled OAO Aeroflot airline's foreign currency
earnings, this week alleged a political party allied with Putin benefited
from Aeroflot funding in his campaign for president. Earlier, he said the
government forced him to transfer a minority holding in ORT television
station to a group of journalists and writers.

Media Most officials said they expect Putin to step up attacks against a
free press through legislation that could make it harder for international
investors to buy stakes in Russian media companies, force journalists to
divulge sources of information, ban certain types of advertising and place
new regulations on licenses for satellites.

``They will try to frighten possible strategic investors of ours,'' said
Yevgeny Kiselyov, general director of NTV.

******

#6
Moscow Times
Thursday, November 16, 2000
COMMENT: TV Advertising Means Big Money, Big Politics
By Vladimir Sarana
Vladimir Sarana is the editor of the web site All About Advertising in Russia
(www.rwr.ru). He contributed this comment to The Moscow Times.

Perhaps more than any other single indicator, the attitude of average
Russians to advertising reflects their views on the country's present
transition. According to figures produced by the well-known research company
Comcon-2, 34 percent of Russian consumers "have a negative opinion of
advertising." Twenty-eight percent are neutral and just 38 percent claim to
enjoy exposure to advertising.

Analysts at the All About Advertising in Russia web site have several
explanations for this phenomenon. Most importantly, many consumers are turned
off by any kind of advertising, as they cannot afford the products on offer.
Also, the reputation of the advertising industry still suffers from its role
in promoting the pyramid schemes that robbed many Russians in 1995 and 1996.

As might be expected, the Communists in the State Duma have been quick to
seize on the offended feelings of Russian consumers and to introduce new
legislation that would severely restrict television advertising. This draft
passed the Duma in its first reading this summer. However, since then the
opposition of organizations such as the Anti-Monopoly Ministry and a public
organization called the Advertising Council has kept the draft from
proceeding further. Interestingly, the State Press Committee has so far not
openly participated in this discussion either way.

Advertisers have obviously come out against this initiative. Nikolai
Romanenko, deputy director of the advertising group BBDO, said, "If the law
is passed, of course we will obey it. But we are hoping that the Duma will
show some common sense and rewrite it after taking into account the opinions
of the advertising industry."

However, it is a fact that "cheap" tv advertising has attracted a large
percentage of the overall advertising market. Estimates are that the Russian
television advertising market will be worth about $230 million to $240
million this year. An advertiser can conduct a national campaign on tv for as
little as $10,000, or about as much as it would cost to place two or three
small ads in a big national newspaper.

"This is an idiotic and parasitic situation, from which all other media are
suffering," commented Dmitry Korobkov, president of the Advent advertising
group. Korobkov believes that this state of affairs is connected with the
fact that the sale of television advertising time is a virtual monopoly run
by Video International, which has close ties to Press Minister Mikhail Lesin.

That connection perfectly illustrates that advertising is at the very nexus
of big business and big politics. Therefore, it is impossible to say what
will happen when the draft law once again comes up for a vote.

******

#7
Wife found guilty in Russian general murder-agency
 
MOSCOW, Nov 16 (Reuters) - The wife of the general who led the Russian
assault on the Chechen capital Grozny in 1995 was found guilty of his murder
on Thursday and sentenced to eight years in prison, Interfax news agency
said.

Police had said after the murder more than two years ago that Tamara Rokhlin
confessed to shooting 51-year-old retired General Lev Rokhlin, a member of
parliament and outspoken critic of former president Boris Yeltsin, with his
own pistol.

He was found dead in his country house by local police .

But a few days later, relatives of the dead man said his wife had called them
on the day of the murder and said she was under pressure to take
responsibility for the crime.

She was quoted by Itar-Tass news agency as saying in court on Wednesday that
her initial statement had been given under pressure. Rokhlin looked pale and
drawn as she sat in court.

Opposition politicians had been quick to allege a political plot behind the
murder, before the police said Mrs. Rokhlin had confessed. The Federal
Security Service (FSB) said at the time it had no reason to suspect any
political motive.

Rokhlin won prominence by commanding the troops that stormed Grozny during
Moscow's ill-fated 1994-96 attempt to subdue separatist Chechnya.

The gruff general was one of the few senior Russian officers to emerge from
the first Chechen war with his reputation enhanced. He later won a seat in
Russia's State Duma, the lower house of parliament, where he represented the
pro-government Our Home is Russia party. He also became chairman of the
chamber's defence committee.

He later quit Our Home in protest at Yeltsin's planned military reforms.

******

#8
strana.ru
November 15, 2000
Political fund chief praises five-months-old decree on federal districts
By Aram Yavrumyan
 
Commenting for Strana.Ru on the effects of the five-months-old presidential
decree that created the seven federal districts, Gleb Pavlovsky, President of
the Fund for Effective Politics, claimed the decree was timely and necessary.

The decree was conceived quite correctly, he said. It staved off a
possibility of an open political and administrative opposition to the reform
of power. The federal authority operated solely within the framework of its
powers; it was just streamlining its own structure, creating political
opening positions - protected platforms of federal jurisdiction outside of
the old "shadow authority."

Yet another important aspect, in his opinion, is that "constitutional
asylums" of sorts have emerged locally in the districts' format, or what he
calls "supporting platforms" for citizens to dare the unconstitutional
regimes that have formed in the regions, particularly in so-called republics.
In many cases, we have precisely local regimes, he said, quasi-dictatorships
controlled by groups espousing ethnocratic views. It is not nationalism but
precisely ethnocracy that constituted the dominant mood in a number of
regional republican staffs. In effect, citizens of Russia were subjected to
segregation on the ethnic principle in Volga-area republics, Adygei, and some
other places, which is banned by the Constitution and the Criminal Code pure
and simple.

In some places, the discrimination has become simply crypto-fascist in
nature, Chechnya being the extreme but not the only instance thereof. Thus,
the system that has been created is above all a system for the restoration of
Russia's sovereignty in its entire territory, that for the restoration of the
rights of man and citizen under the protection of the sovereign Russian
State, he said.

The presidential representatives in the federal districts are due to create
locally constitutional platforms for an attack on what he called state #2, a
confederation of systems of shadow authority. The institution of presidential
representatives has been created as a tool protected from local oligarchic
elites. They are no angels, but at least they are not corrupt, he said.

The Russian gubernatorial corps has had enough time to corrupt all local
federal systems. But they just lack time for corrupting the newly created
federal districts before the center launches a peaceful constitutional
offensive on shadow state #2, he said in conclusion.

******

#9
Financial Times (UK)
16 November 2000
Kremlin prepares to take a firm grip on Russia's local barons: Elections
for the country's 30 governors are likely to enable President Putin to
further centralise power, writes Andrew Jack:

>From Kaliningrad in the far west to Kamchatka in the extreme east, Russia
is gearing up for elections that will help determine the changing relations
between President Vladimir Putin's administration and the country's 89
regions.

Between late last month and early January elections of more than 30
regional governors - more than a third of the total - take place across the
country. The results will show what voters believe should be the stance of
their local representatives towards Moscow; and what the Kremlin in turn
will tolerate.

After a decade during which former president Boris Yeltsin gave the
regional governors considerable autonomy in exchange for loyalty, Mr Putin
has begun to take a much more centralised approach in his efforts to impose
control from the Kremlin and to clamp down on local corruption and dissent.

The new wave of regional politicians will be arriving into positions of
power just as their influence is on the wane. "The prize is not as valuable
as it used to be," says Vyacheslav Nikonov, head of the Fond Politika, a
Moscow think-tank. "Governorships are less desirable."

Since his inauguration in May, Mr Putin has considerably weakened the
powers of the governors. They are to be limited to two terms in office and
are to lose their seats in the Federation Council, the upper house of
parliament, receiving instead places on an ad hoc State Council that has no
constitutional role and which places them more directly under the
president's influence.

He has split the country into seven districts, appointing in each a
"super-governor" with the remit to survey the governors in the district and
to ensure that federal policy is implemented. And from next year Mr Putin
will have the power to dismiss or suspend governors accused of corruption
or taking decisions that contravene federal law.

Furthermore, the regions have come under financial attack. The draft 2001
budget, which is moving swiftly through parliament, cuts down on both the
money and tax-setting authority of the governors.

However, the Kremlin is taking no chances and is intervening more directly
in the regional elections. Mr Putin's initial attempts at interference had
patchy results. His preferred candidates over the past few months - in
Moscow city and region, and even in his native St Petersburg - all lost.
Since then, with his power consolidating, he appears to be using a range of
fresh tactics with more effective results.

Last month Alexander Rutskoi, the popular governor of the Kursk region and
a critic of the Kremlin, was banned from standing for re-election by a
court decision on the eve of the regional poll. The judgment, widely seen
as politically inspired, served as a warning shot to other governors.

A second group of governors who had fallen from the favour of Mr Putin's
circle of advisers have simply announced over the last few weeks for a
variety of vague reasons that they would not stand for office again.

The Kremlin has also been forcefully pushing its own candidates, most of
whom have a background in the security services and the armed forces. In
Kaliningrad, for example, Vladimir Yegorev, the admiral of the Baltic
Fleet, is poised to take power in a second round of voting this weekend.

However, Rostislav Turovsky, who studies regional policy for the
Moscow-based Centre for Political Technology, stresses that the Kremlin has
focused its efforts on a number of regions which are rich, influential or
strategic.

It is not actively involved in the majority of the governors' races. More
typically, he expects to see the election - or usually re-election - of
many governors linked to local "oligarchs", or businessmen. "Money will
determine the outcome," he says.

Where the Kremlin has become involved it faces two challenges. The first,
as Mr Turovsky stresses, is that while the new wave of governors is likely
to swear their loyalty publicly to Mr Putin, that may not prevent them
working in an entirely different direction behind the scenes.

The second, highlighted by the case of Mr Rutskoi, is that anti-democratic
tactics may be being used in order to achieve "democratic" results. Such an
approach may backfire. Implementing Mr Putin's pledge for rule of law on
such shaky foundations is likely to prove very difficult.

*******

#10
BBC Monitoring
Russian paper outlines Kremlin ways of losing unwanted governors
Source: 'Kommersant-Vlast', Moscow, in Russian 31 Oct 00

Article by Irina Nagornykh, headlined "Elections: How To Dump a Governor",
enumerates a number of methods used by the Kremlin to get rid of undesirable
regional leaders. The article also contains a list of regional governors who
have already been struck off the Kremlin's good lists. The following is the
text of report by Russian newspaper ' Kommersant-Vlast' on 31st October.
Subheadings have been inserted editorially:

Kommersant-Vlast conjectured on 10th October that the Kremlin would do
everything in its power to get rid of current Kursk governor Aleksandr
Rutskoy. We were not mistaken. Several hours prior to the voting, the
absolute favourite in the election race lost his registered status by
judgment of the regional court. This is far from being the only means,
however, that may be used by the federal centre to get rid of an
objectionable regional leader.

Force of conviction

The most reliable method of eliminating a governor is to persuade him not to
run for the office. Any argument may be used in this regard: convincing the
regional leader that such a course of action would be best for the region and
for the leader himself; offering him a good position in Moscow; enticing him
with the prospect of remaining a Federation Council member, being delegated
as such by his successor; and finally, intimidating him with accusations of
violations and abuse of authority. One need not be overly concerned about the
means chosen. In no case will the governor want to talk about the proposal in
question - there is no desire to wash anyone's dirty linen in public.

The Kremlin has used this basic method with varying success. For example,
Krasnodar Territory Governor Nikolay Kondratenko, an irreconcilable fighter
against world Zionism, has already renounced his participation in the
election. Also bowing out are the not very successful Ivanovo governor,
Vladislav Tikhomirov, and Kamchatka governor Vladimir Biryukov, who has been
unable to cope with the unending energy crisis.

The will of the people

The most democratic method is to pit a strong competitor against the existing
governor. The rival must simultaneously be unconditionally loyal to the
Kremlin and must enjoy great popularity among the voters. This is not a
simple task but it can be done. In Kaliningrad Region, for example,
successfully fighting against governor Leonid Gorbenko is one of Russia's
most prestigious naval officers - Adm Vladimir Yegorov, commander of the
Baltic Fleet. In Ulyanovsk Region, Yuriy Goryachev is being opposed by Gen
Vladimir Shamanov, hero of both Chechen wars. Vladimir Kulakov, head of the
Voronezh directorate of the Federal Security Service, will surely be able to
overcome the efforts of the Region's governor, Ivan Shabanov. In Chukotka,
gubernatorial ambitions were unexpectedly declared by businessman Roman
Abramovich, who was elected State Duma deputy there. According to certain
information, during his tenure as deputy, Abramovich has already invested
about 15mn dollars of his own funds in the economy and social sphere of the
autonomous area. According to all the forecasts, he can confidently expect to
win the election.

It is far from impossible to find a suitable candidate. It then becomes
necessary to settle on a candidate who is not all that authoritative and
popular, but who is loyal. True, this makes it necessary for the Kremlin to
significantly assist its prot\eg\e. The most graphic example of this is the
election situation in the Mari El Republic. Moscow is thoroughly dissatisfied
with current President Vyacheslav Kislitsyn, suspected of having ties with
the criminal circles. But the Kremlin never did manage to find a clearly
"promotable" contender. It then set its sights on republic Minister of
Internal Affairs Anatoliy Ivanov. The candidate himself acknowledged that "I
would not have made the decision to run had I not received certain guarantees
from the federal centre". Such guarantees found their expression in the
institution of criminal proceedings against the chairman of the republic
Central Electoral Commission (who previously worked as head of the personnel
directorate of President Kislitsyn's administration), the arrival in
Yoshkar-Ola of a Ministry of Internal Affairs investigative team to verify
published materials on ties between the republic's leadership and the
criminal world, and a special report from Valentin Stepankov, the president's
deputy plenipotentiary in Privolzhskiy District, on the catastrophic state of
the republic's economy.

The registration barrier

If none of the above-mentioned efforts have been successful, it is necessary
to resort to extreme measures - to remove the governor-candidate from the
election, i.e., revoke his registration. This method has already been
perfected by election commissions of various levels and is carried out in
several versions.

To start with, an attempt may be made outright to deny the governor
registration by uncovering defects in the signature lists collected in
support of the candidate. Sometimes a very thorough check of the signatures
is sufficient. Central Electoral Commission officials acknowledge that the
procedure for signature collection is quite labour-intensive, and the lists
contain a great many errors and corrective marks, as a rule. These may or may
not be noticeable. For insurance purposes, the discrepancies may be
prearranged. People may be assigned to the signature collection teams whose
job it is to fill up the forms with falsified signatures. It remains very
difficult, however, to catch a governor in office in the act of manipulating
the signature lists. Resources available to the regional administration are
usually capable of handling the task of collecting the necessary number of
"clean" signatures.

A governor-candidate may also be eliminated for violating the rules of
election campaign activity. It is an extremely simple matter to catch a
governor here - any television spot, any newspaper article covering one of
his trips or meetings may be viewed as illegal campaign activity if not
officially paid for out of the candidate's campaign fund. Moreover, there is
no precise legislative wording to define the concept of "rules for campaign
activity". An electoral commission may therefore decide as it sees fit
whether or not a violation took place. For example, Albert Makashov, a
candidate for State Duma deputy who ran in 1999 from one of the election
districts in Samara Region, lost his registered status for using cash
(outside his campaign fund) to pay for election campaign leaflets. While
Grigoriy Yavlinskiy, against whom grievances were filed by year-2000
presidential candidates Vladimir Zhirinovskiy, Umar Dzhabrailov, Ella
Pamfilova, and Aleksandr Govorukhin (whose calculations showed that his
expenditures on television advertising exceeded his campaign fund budget
several times over), was not denied his registered status.

One of the grounds used to justify revocation of the registration of Kursk
governor Aleksandr Rutskoy was the accusation of having organized a Filipp
Kirkorov [pop artist] concert as a election event.

But the most convenient method of fighting a candidate remains inspection of
his declaration of income and assets. The Central Electoral Commission has
used this method to remove dozens of candidates to the State Duma and even an
entire electoral association - the LDPR [Liberal Democratic Party of Russia].
Over 25 per cent of the LDPR slate turned out to have violated this
provision, resulting in revocation of its registration. It has been possible,
with assistance from the State Inspectorate for Road Traffic Safety, to
retract the registration of almost any automobile-driving candidate who has
ever sold his car through power of attorney. Officially the car continues to
be registered with the previous owner, who has mentally long since parted
with the vehicle and therefore does not declare it. A Volga sold in 1994 and
a Land Rover all-terrain vehicle Aleksandr Rutskoy gave to his wife as a
wedding gift (though it was registered in the governor's name) also played a
role in Rutskoy's fate. Then too, Rutskoy exhibited amazing carelessness in
filling out his declaration. For some reason, he incorrectly stated the
square footage of his Moscow and Kursk apartments.

The Kremlin may soon approve an entirely new mechanism for "eliminating"
governors - a prohibition against running for a third term. This prohibition
is stipulated in the Law on General Organizational Principles Governing the
Bodies of Executive and Legislative Authority in Russian Federation
Components and has not yet been applied. It will have its debut in Bryansk
Region prior to the 16th December elections. Governor Yuriy Lodkin and the
president's administration have differing views on how to calculate the
period of Lodkin's tenure in office. Lodkin first won the gubernatorial
election in April 1993. But in September he supported the Supreme Council
dissolved by Yeltsin and was removed from office by presidential edict. The
governor disputed the legality of this edict in court. In 1996 Lodkin again
won the gubernatorial election. Following this the court issued the judgment
that his dismissal in 1993 was unlawful. As prescribed in such instances, the
governor was paid the official salary for 1993-1998. It is this circumstance
that the Kremlin now considers proof of the fact that Lodkin served not one,
but two terms as governor of Bryansk Region. The governor has already
announced his intention to run again. But officials in the president's
administration openly hint that one of his rivals will most certainly dispute
the legality of Lodkin's registration in court.

This innovative approach will continue to suit the Kremlin in the future.
Beginning next year we will see a great many instances of expiration of the
second term of office of governors, many of whom will surely resort to a
variety of artful legal manoeuvring to try to retain their posts. Right now,
for example, Tyva's President Sherig-Ool Oorzhak is attempting to introduce
amendments to the republic constitution that would eliminate the office of
president and make the chairman of the government the highest ranking
official in the republic. Sherig-Ool's thinking is understandable. He
believes the time frames governing presidential tenure will not be applicable
to the premier.

Last chance

If all the above-enumerated measures fail to yield the desired result, it
will be necessary to resort to the prospect of undermining the elections.
This will at least provide the opportunity to start over from the beginning.

According to Russian legislation, elections may not be held unless there are
at least two candidates vying for the office. But it is a very simple matter
to get around this. You have to persuade all the candidates to withdraw their
candidacies following the registration process. Prior to this, however, you
have to lull to sleep the victim-candidate, so that he does not register
someone else as a candidate - his own man, who would refuse under all
circumstances to withdraw his candidacy. This possibility existed, for
example, during the election of Aman Tuleyev in 1997, when Tuleyev's only
rival, State Duma Deputy Viktor Medikov, decided to withdraw his candidacy.
Tuleyev therefore registered as a companion candidate Nina Ostanina, an
adherent and member of the CPRF [the Communist Party of the Russian
Federation] Duma faction, which was at that time friendly to the governor.

In certain regions, local laws stipulate that elections may be declared valid
only if a certain number of voters take part (usually 25 or 50 per cent). Of
the current governors, Nikolay Kondratenko suffered as a result of this in
1996 in Krasnodar Territory. The participation of 50 per cent of the
electorate was required in this election, and only 48 per cent went to the
polls. In a runoff election, however, Kondratenko solidly defeated Nikolay
Yegorov, former head of the Russian president's administration. But the
scenario may be repeated. An election campaign may be waged under the slogan
"Don't Go to the Polls", or the Central Electoral Commission may be requested
to destroy a certain percentage of the ballots.

These measures provide a six-month reserve of time. The Law on Guarantees of
the Electoral Rights of Citizens prescribes that "a repeat election shall be
conducted not later than six months from the time an election is declared
null or invalid".

However, the course of action outlined here is extremely dangerous. Appeals
to avoid participation in elections are illegal, not to mention the
destruction of ballots, for which election commission members face criminal
prosecution.

The extreme case

Finally, we consider the most extreme variant - removal of the victor from
the office he has won. If an enemy has succeeded in winning the election,
only one choice remains - to declare the elections invalid. In other words,
the election commission will have to uncover violations during the actual
course of the voting. This is not difficult when you take into account the
fact that there is no control, for example, over voting through the use of
portable ballot boxes (a service afforded the ill and the aged). Candidates
often use this circumstance to falsify results. Falsification may be arranged
close to evening on election day and then suddenly discovered. The federal
authorities already have experience in this regard. In 1998, with direct
participation on the part of representatives of the Russian president's
administration, the election of the mayor of Nizhniy Novgorod was declared
invalid. Andrey Klimentyev, on trial at the time, won this election.

As under the previous circumstances, this affords the Kremlin a six-month
deferment.

This entire arsenal loses its exclusive significance in February 2001, when
amendments to the Law on General Organizational Principles Governing the
Organs of Executive and Legislative Authority in Russian Federation
Components will enter into force. These amendments give the president the
opportunity to remove governors from their position for issuing normative
enactments not in conformance with federal legislation (in accordance with a
court judgment) or when suspected of having committed a grave or particularly
grave crime (upon the recommendation of the general prosecutor).

However, in no way does this mean that the Kremlin will not resort to their
use. It will. First of all, because following the discharge of an unsuitable
governor it will be necessary to win a new election. And secondly, because it
is still easier to win an election in most instances than to spend months
litigating with the regional heads or years gathering evidence of their
guilt.

Here we present the list of comrades who share Rutskoy's misfortune:

Nikolay Kondratenko, governor of Krasnodar Territory; Vladimir Tikhomirov,
head of administration of Ivanovo Region; Vladimir Biryukov, governor of
Kamchatka Region; Leonid Gorbenko, governor of Kaliningrad Region; Yuriy
Goryachev, governor of Ulyanovsk Region; Ivan Shabanov, governor of Voronezh
Region; Aleksandr Nazarov, governor of the Chukotka Autonomous Area;
Vyacheslav Kislitsyn, president of Mari El; Yuriy Lodkin, governor of Bryansk
Region.

******

#11
East: EBRD Report Sees Big Disparities Between CIS And Central Europe
By Ron Synovitz

The European Bank for Reconstruction and Development today released its
annual Transition Report. The report studies how each country in Central and
Eastern Europe and the former Soviet Union is progressing in its transition
to a market economy. The bank says strong regional disparities persist
between the states of the former Soviet Union and the countries in Central
Europe. It says those differences may take generations to overcome.
Correspondent Ron Synovitz has the story.

Prague, 14 November 2000 (RFE/RL) -- The European Bank for Reconstruction and
Development, or EBRD, said today that countries in the Commonwealth of
Independent States, particularly in Central Asia, will need at least a decade
of high growth to recover from the economic decline experienced since 1989.

The statement is part of the EBRD's Transition Report 2000, the bank's latest
annual survey of economic transition in the former Eastern bloc.

The report says the economic recovery that began in Russia and Central Asia
around the middle of last year is now progressing rapidly. But EBRD Chief
Economist Willem Buiter tells RFE/RL the former Soviet republics will still
need to implement reforms to ensure that their growth is sustainable in the
long term.

"There's no doubt that we need a decade or more of sustained growth in the
CIS to make up for the output losses they've suffered since the transition
began."

Buiter says much of the economic recovery seen in Russia and Central Asia
since last year is based on relatively high international oil prices -- which
have caused income from energy exports to soar.

"Net exporters of oil (and gas) have benefited greatly from this tripling,
almost, of the price of oil since the beginning of 1999. We're talking here
about Russia, Azerbaijan, Kazakhstan, Turkmenistan, Uzbekistan. They've
gotten a gift. Russia's budgetary performance, Russian export performance,
would be adversely affected if oil prices came down. [The value of Russian
exports] will at some point [decline] because the current oil price is not
sustainable."

The EBRD says that a series of currency devaluations in the former Soviet
republics since the Russian financial crisis of 1998 have helped local
producers. The Bank says all CIS countries, except for Armenia, have
experienced a drastic depreciation of their currencies in recent years. These
devaluations have increased the prices of imported goods, thus protecting
local producers from cheaper imports.

But the EBRD warns that one adverse effect of the devaluations has been an
increase in the burden of government debts that are denominated in Western
currencies, such as U.S. dollars and German marks.

The Bank's report says the rising cost of servicing such debts is putting
pressure on state budgets. It says countries will have to compensate for the
higher debt payments by improving their systems for collecting taxes -- and
broadening tax receipts to include more sectors other than oil and gas.

In comparative terms, the EBRD says the economies of the more advanced
transitional countries of Central and Eastern Europe have on the whole
rebounded to 1989 levels.

A table in the EBRD report compares each country's gross domestic product
(GDP, or the total value of all goods and services produced in a given year)
in 1989 with GDP at the end of last year (1999).

According to the Bank, economic output in Poland and Slovenia is now greater
than it was in 1989. Slovakia's GDP is now approximately the same as it was
in 1989. The bank says Hungary and the Czech Republic, the other successful
reformers, have almost caught up to 1989 levels.

The situation is different in the Balkans, where economic output in Bulgaria
and Romania is still well below that recorded before the fall of communism.
Output in Bulgaria has fallen by a third since 1989, while Romania's economy
has contracted 24 percent during that time.

Reliable information on Yugoslavia (Serbia and Montenegro) was not available
to allow the EBRD to make comparisons between 1989 and 1999. But the EBRD
estimates the Yugoslav economy contracted about 50 percent during the past 10
years.

In the Baltic states, the numbers show a mixed bag. Output in Estonia, the
Baltic region's best-performing economy, is about 25 percent below 1989
levels. The Bank says Latvia and Lithuania have both contracted by around 40
percent since 1989.

The EBRD says growth in the CIS will have to exceed that in Central and
Eastern Europe for several generations if the former Soviet republics are
ever to catch up with Poland, Hungary, Slovenia, and the Czech Republic.

******

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