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Johnson's Russia List


November 25, 2000   

This Date's Issues:   4651


Johnson's Russia List
25 November 2000

[Note from David Johnson:
1. Moscow Times EDITORIAL: Chechnya: Time to Say Enough.
2. AFP: Russian optimism over Middle East initiative tempered by realism.
3. AP: Many Russians Live in Poverty.
4. Reuters: More Russians drinking themselves to death.
5. New York Times book review: Michael Specter, The People's Czar. The third installment of Boris Yeltsin's autobiography.
6. Esther Dyson: Re: Kashkin/New Economy Promises?/4650.
7. Dan Cisek: Re: 4648 Bloomberg's "Indispensable Oligarchs"
8. Wladislaw George Krasnow: Infatuation with Revolutions/re JRL 4644 - Steele/Postcommunist States.
9. The Economist: Boom and gloom. Reform and stability are making Russia's economy look a lot less bad. But keep the vodka on ice for now.
10. Financial Times (UK): Russia hears the gospel of governance. Western leaders are visiting Russia to encourage busineses to clean up their act, says John Plender.
11. Moscow Times: Boris Kagarlitsky, Putting the Genie Back in The Bottle. (re Putin and oligarchs)
12. AP: London Displays Russian Treasures.
13. Ira Straus: Re: JRL 4649/ Bush-Putin.]

Moscow Times
November 25, 2000
EDITORIAL: Chechnya: Time to Say Enough

If the world needed yet another reminder of the scope of horror and suffering
being inflicted daily in Chechnya, it received one Wednesday in the form of
"Chechnya, the Politics of Terror," a report by the Nobe Prize-winning group
Medecins sans FrontiÏres.

"Despite the illusion of normalization upheld by the Russian authorities and
the resignation of the international community," the stark report says, "the
violence against civilians is ongoing." MSF says the war has resulted in
about 300,000 displaced persons who are now entering their second winter "in
appalling conditions."

MSF's report comes less than a month after a Human Rights Watch book,
"Welcome to Hell," which documented cases of torture and bribe-taking by
Russian military authorities at detention camps in Chechnya. Both reports
argue that a reign of terror the Russian military has established throughout
the republic is the main barrier preventing refugees from returning to their

And both reports criticize the international community f especially the
Council of Europe, the United Nations and the Organization for Security and
Cooperation in Europe f for doing so little to confront the Kremlin.

On Tuesday, The Moscow Times reported on a Chechen administration report
condemning the Russian military for "looting" the republic. That report
estimates that more than $2 billion in damage has been done to the Chechen
energy sector in the last year.

It claims that shipments of metals and oil regularly leave the republic on
military transport. It even documents an instance in which Russian troops
fired on Chechen authorities who were trying to stop thieves from siphoning
oil from a well.

While the Russian army is richly profiting from the reign of terror described
in the MSF report, the European Union has announced it will provide an
additional $4.8 million in food assistance to refugees who want to return
home but cannot.

Surely the world can come up with a better solution than this.

In a meeting this week with leading generals, President Vladimir Putin urged
"the anti-terrorist operation must be followed through to the end." When
asked what comes next, he answered, "Chechnya's formal status is not so
important today."

>From this and many other statements, it is obvious the Kremlin has no plan
for Chechnya other than continued warfare and official terror. The Russian
public, which has no access to the truth about Chechnya and little influence
with the authorities in any case, is in no position to demand an accounting.

Only the international community can. Why does it not act?


Russian optimism over Middle East initiative tempered by realism

MOSCOW, Nov 25 (AFP) -
Russian optimism sparked by President Vladimir Putin's dramatic bid to
kickstart the Middle East peace process was tempered Saturday by an awareness
that fine words have to be followed by actions if the latest initiative is to
halt two months of violence.

As Russias media basked in the international attention focused on a
Kremlin-brokered telephone conversation between Palestinian leader Yasser
Arafat and Israeli Prime Minister Ehud Barak on Friday, analysts noted it had
done nothing to staunch the bloodshed in the Middle East.

At a hastily arranged summit with Arafat in Moscow, during which the
Palestinian leader spoke to Barak by telephone -- the bitter rivals first
conversation in three weeks -- the two sides pledged to resume low-level
security contacts.

Not to be accused of underplaying the scale of the apparent breakthrough, the
Russian press waxed lyrical Saturday over Putins achievement, even describing
the president as "a miracle worker".

"It's difficult being God," the Novy Izvestia newspaper opined, suggesting
that the Kremlin had succeeded in breathing life into the long-moribund peace
process, where the United States had failed.

"Russian diplomacy has a softer approach than the Madeleine Albright school,"
the daily trumpeted, referring to the US secretary of state.

"Russia is overtaking the United States in its role as leading sponsor of the
peace process," Vremya MN newspaper said, broaching what many analysts feel
may have been Putins hidden agenda in convening Fridays summit.

A co-sponsor of the Middle East peace process at its inception in 1991,
Russia has seen its influence in the region wane over recent years as the
United States became the main mediator.

Putin is thought to have used the Kremlin meeting with Arafat to repair
Russia's threadbare credibility as a player in the Middle East following its
conspicuous absence from last month's Sharm el-Sheikh summit in Egypt.

"Russia has awoken from a long diplomatic sleep," the daily Izvestia said,
joining the chorus of praise for Putin.

But leading Moscow analyst Andrei Piontkovsky, from the Centre of Strategic
Studies, sought to put the tentative results of Putins telephone diplomacy
into a more realistic perspective Saturday, as violence continued in Israel
and the Palestinian territories.

The agreement by Arafat and Barak to renew security coordination had been
quickly undercut by deadly clashes and rocket attacks that killed five
Palestinians and two Israelis, he observed.

"Formally speaking, Russia is a co-partner in the peace process, and so
Putin's initiative is only natural. But from a symbolic view, it is a very
advantageous move for Putin personally. It is a theatrical coup, if you like.

"But if the Americans with their immense financial power to influence the two
parties have failed to make headway, how can Russia with its slender means be
expected to step into the breach. With fine ideas? If you ask me, I don't see
the point."

Other analysts noted that Putin had exploited the hiatus in the US Middle
East initiative resulting from the prolonged uncertainty as to who would
become the next occupant of the White House following November 7 elections.

Meanwhile, UN Secretary General Kofi Annan, in congratulating Russian Foreign
Minister Igor Ivanov late Friday for the "positive steps", stressed the
importance of putting the initiative into practice.

However, Vladimir Pribylovsky, of the Moscow Panorama think-tank, warned that
few of the interested parties were any longer able to halt the wave of
violence that has left more than 270 dead since late September

"None of the interested parties is able to impose their will on the Middle
East. Not Washington, not Moscow, not even the conflicting parties themselves.

"But Russia all the same has a chance to boost its role in the process, to
re-establish itself as a player in the game, and it has clearly grabbed that
chance with both hands."


Many Russians Live in Poverty
November 24, 2000
MOSCOW (AP) - More than one-third of Russians live below the official poverty
line, according to government figures released Friday, but the number of poor
Russians is actually less than a year ago.

Some 46.3 million Russians, or 31.8 percent of the population, receive
monthly salaries that are less than the official subsistence level of $45 a
month, according to a government report.

The figure indicates a small improvement from July 1999, when 51.7 million
people, or 35 percent of the population, received salaries below the
then-subsistence level of $36.

The government has been unable to pay Russia's retirees what it says they
need to survive. Monthly pensions for the elderly were increased to $29
earlier this month, but still far below subsistence levels.


More Russians drinking themselves to death
MOSCOW, Nov 24 (Reuters) - More than 20,000 Russians died of alcohol
poisoning in the first seven months of this year, a rise of more than 43
percent from the same period last year, Finance Minister Alexei Kudrin told
reporters on Friday.

Russia has raised taxes on vodka over the past year, but one result appears
to have been a continuing flood of potentially deadly moonshine.

Kudrin, who heads a government task force on regulating the alcohol market,
said that by "conservative estimates," illegally distilled alcohol makes up
20-25 percent of the liquor consumed in the country, Russian news agencies


New York Times
November 26, 2000
[for personal use only]
Book Review
The People's Czar
The third installment of Boris Yeltsin's autobiography.
Michael Specter, a staff writer at The New Yorker, was a Moscow correspondent
for The Times from 1994 to 1998.

By Boris Yeltsin. Translated by Catherine A. Fitzpatrick.
Illustrated. 398 pp. New York:
PublicAffairs. $26.

By the last days of the last millennium, there was very little left that
Yeltsin could do to astonish the people of Russia. He had embraced more than
a half-dozen prime ministers and scores of senior aides during his decade of
power -- only to toss them one by one from the Kremlin bell tower. In 1991,
when he stood on the top of a tank to stare down a coup, his impulsiveness
was heroic. Two years later, when he shelled a mutinous parliament into
submission, it still seemed understandable.

Things got more complicated after that: Yeltsin waged a long war in Chechnya
that brought honor to no one and death to tens of thousands. His health was
so bad, and he was absent at so many critical moments -- including at the
height of his 1996 presidential campaign against his Communist challenger,
Gennady Zyuganov -- that his aides were caught doctoring an old video to
present to the press as new.

By the end of his tenure, Yeltsin's speeches, once stirring, no longer meant
a thing. He frequently confused major countries and in one much-noticed
address he referred to Japan as a nuclear power. When he warned Bill Clinton,
in 1998, that American aggression against Iraq could start a world war, State
Department officials actually laughed at a comment that once would have
frozen them, and half the world, in fear.

Yet, last December, addled by illness, deeply unpopular and six months short
of retirement, Yeltsin had one big card left, and, as he writes in ''Midnight
Diaries,'' the third volume of his autobiography, he was determined to play
it. He called his chief of staff and informed him that his annual New Year's
speech to the nation, which had already been taped, would have to be shot
again on Dec. 31. He didn't tell anyone, not even his wife. Yeltsin's
resignation came as a genuine shock, and he says in this book that he did it
because ''the new century must begin with a new political era.''

An honorable gesture and possibly even a true statement. Yeltsin also writes,
however, that ''it was important not to have any slip-ups or leaks.'' And he
leaves no doubt about what would have happened if his surprise had been
ruined. ''If the news got out there wouldn't be a resignation,'' Yeltsin
writes. If he couldn't go out his way, the new era would simply have to wait.

That is about as candid as Yeltsin gets in ''Midnight Diaries,'' which
focuses most specifically on the last few years of his presidency. The
earlier volumes, not unlike the young Yeltsin, were vigorous, salty and
forthcoming. This one is none of that. Rather, it is a flat and ultimately
sad book, written by a man who played an essential, if contradictory, role in
the history of the last century.

Yeltsin has always been maddeningly hard to cram into a box: a despot, a
drunk, a megalomaniac. Yes. A liberator, a reformer and a visionary. That
too. There were astonishing acts of bravery, but also of alcohol-induced
buffoonery (such as the ceremony to mark the Russian military withdrawal from
Berlin in 1994, when he grabbed a baton and conducted the band).

In this book, Yeltsin says accusations about his drinking were overblown, but
he acknowledges that alcohol was ''the only means'' at his disposal to get
rid of stress quickly. ''I remember that the weight would lift after a few
shot glasses. And in that state of lightness I felt as if I could conduct an

Still, Yeltsin cannot be dismissed. He is the only Russian leader to run for
re-election (an election his most conservative advisers urged him to cancel).
We take it for granted, but we shouldn't, that Yeltsin retired without a gun
in sight. He never turned his back on the free press, and while scholars will
debate for decades over his stewardship of the ruinous post-Soviet economy,
he believed in market capitalism, and in a freely convertible currency.
That's more than we can say for the guys who came before him. A few rich
people benefited obscenely; but so did tens of thousands of hard-working
young Russians.

Overcoming Communism, peaceful relations with the West, freedom of worship
and movement -- Yeltsin's legacy should be assured. It is not, however,
because what the president stitched together one day he ripped to shreds the
next. He might have used this memoir to make a reasoned case for some of his
more controversial actions. But there is no reason in ''Midnight Diaries.''
Time and again, Yeltsin shows how his pettiness got the best of him. He has
at least a few bad words for nearly every servant who ever toiled in his
government. Anatoly B. Chubais, the man most Russians associated with the
most painful economic reforms, was controversial in everything he did and too
brash in much of it; but he was searingly loyal to his chief. The boss
decided ''he was using the new rules of the game as a political club,''
though, and fired him. (Actually, he fired him twice.)

When it was convenient -- and it usually was -- Yeltsin relied heavily on the
murky and problematic banker-industrialist Boris A. Berezovsky. He was one of
the president's most powerful allies. Until, that is, he wasn't. ''I never
liked Boris Berezovsky, and I still don't like him,'' Yeltsin writes of his
longtime associate today. ''I don't like him because of his arrogant tone,
his scandalous reputation and because people believe that he has special
influence on the Kremlin.'' Those are reasonable objections. One wonders,
though, why Yeltsin kept appointing him to the most senior posts in Russia
while permitting him to retain control of a giant empire of companies that
included the nation's biggest television station and Aeroflot, its national

Yeltsin spent much of his time in office, and spends most of the pages of
this book, playing with his power. ''Midnight Diaries'' reads like a sort of
Russian retelling of ''The Princess and the Pea.'' It is a book about a good
czar named Boris and his desperate attempt to find somebody who could qualify
to carry his heavy mantle into the future.

As Yeltsin's longest-serving prime minister, Viktor S. Chernomyrdin was the
president's most reliable ally. ''All these years he had stood behind me as
an exceptionally decent, conscientious and devoted person,'' Yeltsin writes.
Still, he had to go. ''Probably at some earlier point, I had not given him
the opportunity to blossom as an independent politician. But it was too late
to regret it now.'' Yeltsin is far more vicious about Aleksandr I. Lebed, the
blustery general who negotiated the end of the first Chechen war and who
helped ensure Yeltsin's re-election by joining forces with him in the 1996
runoff against Zyuganov -- a fact Yeltsin never mentions. Lebed was simply
''like a little kid, he would stop at nothing,'' Yeltsin says. It is true
that Lebed was an immature politician. But it also can be argued that he
saved Yeltsin's presidency. About Lebed's critical role in ending the carnage
in Chechnya, Yeltsin has nothing to say. But that isn't surprising because he
had nothing to say at the time either.

It's fair to argue that the Chechen leaders never truly wanted peace; they
certainly didn't know what to do with it when they got it. But Yeltsin's
justification of the war is disingenuous. He refers to two years of official
savagery as ''military struggles against terrorists, not a war against a
people.'' He presents his version of the domino theory -- that if Chechnya
went, then the Caucasus would go and then on to Siberia and before you know
it Russia would be Yugoslavia.

To describe other world leaders, Yeltsin simply assembles clichés. After he
resigned, he invited the heads of most of the former Soviet states to his
home for a meal of Siberian dumplings. He describes Islam Karimov, the
president of the repressive government of Uzbekistan, as ''a subtle man in
the Oriental tradition.'' The president of Kazakhstan, Nursultan A.
Nazarbayev, was also there. He said nothing, though, because he possessed ''a
modern sensibility with an Oriental caution.'' Emomali Rakhmonov, the leader
of Tajikistan, was seated not far away. And, Yeltsin tells us, despite the
violence that governs the country Rakhmonov manages to maintain ''his
Oriental charm.''

In the end, only Vladimir V. Putin had the will and the resolve Yeltsin
sought in a successor. Putin's victory in March was due largely to support
for the newest war in Chechnya and the people's desire to see order restored
to their government. A former K.G.B. colonel, Putin certainly is orderly. His
first year has been consumed with more war on the Chechens, flagrant attacks
on the news media and the relentless pursuit of his enemies. For many
Russians, Putin has already accomplished the impossible: he has made them
miss Boris Yeltsin.


From: (Esther Dyson)
Subject: Re:Kashkin/New Economy Promises?/4650
Date: Fri, 24 Nov 2000

Okay - time to defend myself!  This article contained some brief, somewhat
out-of-context quotes from a much longer discussion where I did indeed
express the requisite degree of skepticism.

For starters, I would say that the market cannot work unless you have
transparency, rule of law (not of law enforcers!), effective payment
systems, and of course broader access to that market in the first place.  I
do not think Russians are like Americans in all ways; just that in many ways
they are closer than either group is to the Japanese.  and of course  I knew
about the Telecom Ministry when we visited; it was the US official I went
with who was naively optimistic.

There is a lot more to say, of course, but it has all already been said. I
for one am too busy doing something about it, and I am happy to have sent
out a message of optimism.. My optimism is not naive and uninformed or
impatient; it is the result of having worked with people who *have* actually
achieved something, in tough conditions, and are willing to keep working to
do even more.  They have the self-respect and dignity that comes from
achievement rather than inheritance, luck or favors.  These colleagues are
the cause of my optimism, and I intend to keep working with them....even
though it would be far easier just to stay in (or move to) the US, and to
criticize others for their foolish hopes.  I don't hope to save the world,
but I do want to contribute my share to a small part of it. It's through
individual efforts that most things happen. Please come join us, instead of
screaming warnings from the sidelines.


Date: Fri, 24 Nov 2000
From: Dan Cisek <>
Subject: Re: 4648 Bloomberg's "Indispensable Oligarchs"

Bravo, Bloomberg editors. I wouldn't put a by-line on
this story either. Who would want to take credit for
this walking abortion of an article? I nominate it as
most disgusting hack apologia of the year for the
loans for shares debacle.

The idea that because some employees of the oligarchs'
companies are doing well, the country should ignore
the fact that they were privatized for a fraction of
their real value, is unbelievably offensive. The
audacity of the argument is breathtaking. Sure, if
Ivan up in Norilsk has a VCR and decent salary, what
does it matter that the way his company was privatized
added to the impoverishment of the state and further
eroded its ability to provide any kind of basic
governmental functions to the population at large?
Hey, he gets three months of vacation a year! We
wouldn't want to endanger that by looking into how a
small clique of insiders perpetrated the largest theft
of state property in the history of the world.

As for the oligarchs' supposed business acumen, one
might have thought the rise in world oil and natural
gas prices had something to do with the fact that they
can achieve a profit with companies that sell...oil
and natural gas. The funny thing is, you wouldn't
learn that by reading good ol' Bloomberg.

Ah, forget it. Everything is fine in Russia. Ivan in
Norilsk is happy surfing the net on his new computer.
If the rest of the country is starving and freezing
and drinking itself to death in despair, well, they're
just too lazy to get a job with a good privatized
company, aren't they?


Date: Fri, 24 Nov 2000
From: "Wladislaw George Krasnow, PhD" <>
Subject: Infatuation with Revolutions/re JRL4644-Steele/Postcommunist States

Jonathan Steele is right when he challenges the "strange myth"
(advocated by Michael Dobbs and Timothy Garton Ash, among others) that
"the pupular uprising" which toppled Slobodan Milosevic was "the last of
eastern Europe's great anti-communist revolutions ( The Guardian, UK,
Nov. 20, JRL 4645)." After all, Steele argues, the demonstrators in
Belgrade "last month were not shouting slogans against communism," but
against "corruption and a collapsed economy."

Instead, Steele describes the recent events in Serbia as "Europe's first
post-communist revolution" and predicts that it is likely to be followed
by similar revolutions, "against corruption, crony capitalism and flawed
democracy," in Azerbaijan, Belarus, Kazakhstan, Georgia, and Russia.

To be sure, Steele allows that "Serbia's revolution was prompted by
special factors, in particular 10 years of pointless and lost wars." But
he fails to mention that it was also "prompted" by up to $37 million
that U.S. government had spent to support anti-Milosevic forces, a fact
that U.S. government didn't even try to conceal.

It is hard to tell whether the American money was decisive in helping to
topple Milosevic or whether any concessions from Vojislav Kostunica were
obtained. But the fact remains that the U.S.- led  Western alliance
"prompted" the Serbs to behave "democratically" by throwing at them,
first, bombs then dollars.

The only regret U.S. officials have expressed is that, perhaps, as a
result of Russia's "meddling," the Kostunica government made some sort
of compromise with the Milosevic forces and failed to deliver the "war
criminals" to the West.

As far as the prospect for "postcommunist revolutions" in the countries
Steele names--Belarus, Azerbaijan, Kazakhstan, Georia, and Russia--God
forbid, especially when such revolutions are prompted by American bombs
and dollars. While it might be true that in all these countries the
conditions of "corruption, crony capitalism, and flawed democracy" are
as bad or worse than in Milosevic's Yugoslavia, none of them should be a
target for Western fomenting of "postcommunist revolution" in complete
violation of the concept of national sovereignty and the U.N. charter.

The most significant revolution that took place in these countries was
not the phoney one, celebrated in the West and symbolized by Boris
Yeltsin standing on top of a tank--in a parody of Lenin--but a
revolution in the minds of the people, a revolution against the use of
revolutions, uprisings, and rebellions as favorite Marxist tools of
societal development.

More than anything else, these countries need evolution, gradualism,
home-grown reforms through consensus, a careful and steady cultivation
of democracy and free enterprise, not their imposition with Western
"prompting." And, yes, they need the spirit of compromise through
negotiations which the West prides itself on practicing at home
(Northern Ireland, e.g.), but somehow fails to include in its
"globalizing" and "democratizing" mission abroad.

W. George Krasnow
Russia & America Goodwill Associates


The Economist
November 25-31, 2000
The Russian economy
Boom and gloom
Reform and stability are making Russia's economy look a lot less bad. But
keep the vodka on ice for now

SINKING, adrift and on fire in bad weather, Russia looked like an
unsalvageable ship two years ago. The captain seemed incapable-drunk, said
many; the officers quarrelsome and thieving; the crew demoralised, mutinous
and incompetent. Now a surprising amount has changed. There is a new
captain, a new bunch of officers and firmer discipline. The ship is still
in dire straits, but the immediate danger of shipwreck is over.

That, roughly, is Russia's economic position. The country has its most
united, effective government since the collapse of Communism, committed to
a coherent reform programme that enjoys popular support. The economy is
growing by around 7% a year; inflation is down; the budget is balanced.
Russian businessmen seem to be investing more and stealing less, and
foreign direct investors are taking another look, spurred by a sprinkling
of success stories about modern factories and willing, cheap workers
producing competitive goods.

The main cause of the recovery, however, is a high oil price and the
after-effects of a 75% rouble devaluation in 1998. Roland Nash of
Renaissance Capital, a Moscow investment bank, reckons that about one-third
of the credit for the recovery in GDP since 1998 is due to the trebling of
world energy prices, and the rest to the weak rouble. "Little was due to
good government," he says. But this is not the whole story. In the past,
Russia has squandered any windfalls-such as the billions of dollars lent by
the West-whereas this time there has at least been an attempt to use the
latest good fortune sensibly.

Perhaps the biggest achievement is an inconspicuous one: simply giving up
the most capricious, damaging habits of the past. The new rulers realise
that confidence at home and abroad matters a lot, and that it depends on an
image of stability and respectability. That alone is a big help for
business. Russian and foreign businessmen alike say that they can live with
bad rules, so long as the rules do not keep changing.

Even better, of course, would be rules that were not just stable, but also
good. And here the government is talking a lot of sense. Reform of the tax
system, of the customs service, of the courts, of the banks, of the
bureaucracy: its programme is full of things that the rest of the world has
been urging it to do for years. A few quibbles aside, it is hard to find
any bit of government economic policy that looks truly wrong-headed.

So far, however, it is mostly talk. Laws are chugging through parliament,
but there has been only one really big practical change-a flat-rate 13%
income tax, and a greatly simplified fiscal regime for businesses, to take
effect in January. The huge unanswered question here, as with other
reforms, is how the nice new rules will look after a thorough chewing by
the country's corrupt and ill-paid bureaucracy. A visit to the tax office,
for example, can be a humiliating or indeed frightening experience even for
a law-abiding person with a clear conscience. Anyone who has dodged tax in
the past-ie, most of Russia's middle class-will think three times before
taking the risk of going legal now.

Niina Pautola, an economist at a Moscow think-tank, says it will take at
least a year to see whether the tax reform is influencing economic
behaviour. Capital flight, one of the best indicators of Russians'
confidence in their own country's fairness and attractiveness, dipped
sharply earlier this year, but it has since risen back to around $2 billion
a month.

Other essential changes, such as a new land code and a clean-up of the
banking system (and of the government bureaucracy itself), will face
greater opposition than did the tax reform, and will take even longer to
have an effect. But Russia does not have much time. The biggest danger is
that energy prices will fall before the country has established a better
credit rating.

Investment bankers, who once said they would rather eat nuclear waste than
lend to Russia, are now trying to sell Russian shares and bonds to
forgetful speculators. But the government is still a long way from being
able to borrow serious money abroad, should it need to. A team from the IMF
left Moscow this week after failing to reach agreement on structural
reforms. Without an IMF seal of approval, Russia will be unable to
reschedule its old debts to western governments via the Paris Club, let
alone to borrow new money.

Another danger is that monthly inflation of 2%, coupled with a stable
exchange rate, is steadily eroding manufacturing industry's
competitiveness. Despite some limited improvements in industries such as
textiles, this is still far too poor for most Russian companies to compete
on world markets. Russia's exports-mainly raw materials, basic chemicals
and weapons-are pitiful for somewhere that sees itself as an advanced
industrialised country.

Worse, some aspects of Russia's competitiveness are deteriorating:
investment in fixed assets, although up by 18% in the first nine months of
the year, is not nearly enough to keep the roads, bridges, power systems
and so forth from crumbling. That imposes ever greater costs on businesses.
Human capital-perhaps the country's greatest single asset-is inevitably
devaluing as corruption, poverty, emigration and the passage of time erode
the Soviet education and science systems.

New hope lies in the fact that reform has accelerated this year, not
slowed, and a government reshuffle in the new year could give it a further
boost. But Russia's rulers still seem to flinch at the consequences of
their own logic. Real reform would mean less secrecy and paranoia, and more
opening up to the outside world. It would mean more poor-country modesty
and less superpower grandeur. And these changes, for the moment, still seem
far away.


Financial Times (UK)
November 24, 2000
Russia hears the gospel of governance
Western leaders are visiting Russia to encourage bussineses to clean up their
act, says John Plender
In Russia corporate governance is a phrase with a faintly surreal ring.
Ownership of companies can change hands at gunpoint or through enforced
dilution of outside investors. Managerial kleptocrats routinely divert
company cash flow into their off-shore bank accounts.

So for westerners to try to persuade Russian business to clean up its act may
seem quixotic to the point of folly. Yet last week in Moscow Ira Millstein, a
leading US lawyer who chairs the OECD-World Bank private sector advisory
group on corporate governance, attempted to do just that.

Mr Millstein led a team of western financial folk, responsible for nearly
$3,000bn of investments, into a meeting with eight senior executives of
Russian companies. The aim was to persuade the Russians that they shared a
common interest in improved governance.

If the risks of a wasted meeting were high, the potential rewards beggared
belief. Statistics in the briefing pack prepared for the team by officials in
Washington offered striking proof of the value that markets attach to good

The most impressive concerned Gazprom, the huge energy producer. In September
1999 its market capitalisation stood at $4bn. Had it been valued on a
western-style multiple, it would, according to an estimate from Troika
Dialog, the Moscow investment bank, have been worth $1,960bn.

That was on the basis of $13 a barrel of oil or gas equivalent. With oil at
$33 a barrel the potential is vastly greater in a company with more than 10
times the reserves of BP Amoco.

The numbers imply that investors make allowances, rightly or wrongly, for
Gazprom conforming to the usual standards of governance in Russia. They also
worry that Vladimir Putin's government may reassert influence over its
minority stake at their expense.

Mr Millstein's group included executives from fund managers such as Fidelity,
Templeton, Capital Group and the California Public Employees Retirement
System, Calpers. And sure enough, last Friday, the Marriott-Tverskaya Hotel
filled up with the Russians' private security guards, followed by the

According to fund managers at the meeting, Mr Millstein began by distributing
charts showing the discrepancy between the economic potential of Russia and
its paltry stock market. One of these indicated that Russian equities were
worth less in total than Disney, thus inadvertently hinting that Russia was a
Mickey Mouse economy. There were one or two angry Russian glares. But Mr
Millstein's pitch was not to lecture. The meeting was, he said, about
"capital meeting the need for capital".

Those present already understood the tenets of good governance as set out in
the Organisation for Economic Co-operation and Development Principles of
Corporate Governance, he suggested. The Russian legal framework was good.
What was needed, he said, was a voluntary commitment to progress. Those on
the western side would like to work with the Russians on improving

Peter Dey, chairman of Morgan Stanley Canada, said Russia's integration into
the global economy was inevitable. Why not capitalise on the process, in the
mutual interest of both sides, by removing obstacles to inflows of foreign

Some Russians saw little point in raising equity capital. Mikhail Noskov of
Severstal, Russia's largest steelmaker, noted a vicious circle. With many
companies valued at less than one year's profits, the cost of capital was

Severstal is restructuring under professional management rather than leaking
cash flow to the oligarchs, the politically well-connected business victors
of Russia's privatisation process. Yet a company such as this still suffers
from the governance taint that hangs over the Russian market.

For those such as Gazprom and Sibneft, the oil group, which are controlled by
oligarchs, the dilemma is more fundamental. The oligarchs have a choice
between increasing the company's value or appropriating value that already
exists - and belongs to other shareholders. This second approach offers far
greater short-term profit potential, especially with a high oil price. Taking
the longer-term view means gambling on benign politics and applying
management skills that the oligarchs lack.

Western participants say no one put it that bluntly. But Eugene Tannenbaum of
Sibneft did ask rhetorically what the return on good governance was for
management. Governance was not a priority for Russian business, he implied.
But because capital would have to be raised for oil and gas development,
behaviour would have to change. It sounded, said one attender, like the
prayer of St Augustine: make me chaste, but not yet.

The biggest problem, said Shiv Khemka, a director of SUN Group, which is
active in private equity and venture capital in Russia, was that nobody had
been punished for bad corporate governance. Until that happened and until
Russians themselves put money into equities, the market would lack
credibility with foreigners.

The meeting threatened to turn nasty when Kakha Bendukidze, who runs
Uralmash, Russia's biggest heavy machinery company, declared that he had not
come to be taught how to wash his hands and brush his teeth. The fact that
there were no incentives to good behaviour in the Russian system did not mean
he misbehaved, he said.

Yet Mr Millstein smoothed the waters. And Dimitry Zimin, chairman and leading
shareholder in Vimpelcom, the mobile phone group, concluded: "We need you."

Mr Zimin echoed Mr Millstein in arguing that while there were national
features to Russian governance, the main principles were universal. "Don't
sit and wait - come now," he urged.

Vimpelcom had, in effect, validated Mr Millstein's pitch. It was the company
with the most immediate need for external capital. And there was a readiness
on the Russian side to consider a continuing dialogue on governance reform.
Mr Millstein's group offered assistance on governance for Russian business if

Most westerners felt their time had not been entirely wasted. For his part,
Mr Millstein is convinced that henceforth "the curve is up". At the very
least, western capital has stated its terms and made a brave step down a long
and difficult road.


Moscow Times
November 25, 2000
Always a Dissident: Putting the Genie Back in The Bottle
By Boris Kagarlitsky

Boris Berezovsky thinks that merely by fleeing abroad he has entered into the
great Russian tradition of exiles embodied by people like Alexander Hertzen
and Alexander Solzhenitsyn. Or perhaps he prefers to be compared to Prince
Ivan Kurbsky, who in the time of Ivan the Terrible fled "the tsar's wrath."

However, unlike all these heroes of Russian history, Berezovsky's conflict
with the authorities is not grounded in principle, but in the unmitigated
greed of both sides.

In the first year of his rule, including his months as prime minister (or
"acting tsar") and his term as the "duly elected" president, Vladimir Putin
has demonstrated that he is ready and able to actively defend the interests
of the oligarchy, if not those of specific oligarchs. As a result, it is
certain that the makeup of the Russian elite is about to undergo some serious

Putin was put into the Kremlin for the purpose of preventing any
"redistribution" of property in Russia. Berezovsky boasts that by creating
Putin he was doing nothing more than protecting his own property interests.
Broadly speaking, the oligarchs fear just one thing f renationalization.

In their meetings with Putin, the oligarchs demanded guarantees of their
property rights and received exactly what they asked for. The problem is that
they didn't formulate their request quite right. They forgot to ask for
guarantees of their personal safety as well. Now, like the hero of some
oriental fairy tale who has let the genie out of the bottle, Berezovsky is in
the position of standing by while the president literally and precisely
fulfills the oligarchs' wish.

In Russia today, the questions of property rights and personal rights
contradict one another. Acknowledging one means denying the other. Since the
process of redistributing property is constantly going on anyway, the only
choice is either nationalization or confiscation. Having eliminated the
former option, Putin is proceeding with the latter.

It is just a matter of putting a particular oligarch in prison and then
asking him to sign an agreement concerning his property. Or you can just kill
him. Or you can just threaten him with one or the other if he doesn't behave

The liberal press is constantly going on about the oligarchic nature of
Russian capitalism, but it also is immediately up in arms every time there is
any threat to anyone's property rights. As a result, the public is left with
the naive hope that by some miracle the process of de-monopolization of the
economy will occur and a paradise of free competition will be created. But no
one has any idea how to de-monopolize the economy without violating anyone's
property rights.

The main problem of the Russian oligarchy is not that it is monopolistic but
that it is isolated. The U.S. economy is also oligarchic (in the sense that
it is characterized by concentration of capital and political influence in
the hands of a small number of magnates). However, in the West, the ruling
class formed over a period of many centuries and this is a crucial

You cannot create an entrepreneurial class by command from above. Creating
private capital by denationalizing state resources precludes the possibility
of the formation of democratic capitalism, in which small businesses develop
and grow under market conditions and develop organic ties to civil society.

Russia has no ruling class, just a collection of isolated oligarchs who are
organically connected to the state bureaucracy. Russian business simply
cannot survive without the bureaucracy.

This being the case, no major shift within the bureaucracy can occur without
a major shift in the business realm as well. When Putin came to power, he
brought with him the so-called Leningrad group. Under the new administration,
the old system will workto maintain the old status quo by bringing in new
individuals. Since there is no legal way for this to happen, it will be done
by force and by extra-legal means.

Boris Kagarlitsky is a Moscow-based sociologist.


London Displays Russian Treasures
November 25, 2000
LONDON (AP) - Five rooms in London, decorated in Russian imperial style and
displaying hundreds of treasures from the Hermitage Museum's vast trove,
offer visitors a permanent window on the Russian state collection of art and

``It's wonderful to have done it, to realize a dream and a plan,'' said the
Russian museum's director Mikhail Piotrovski during final preparations for
Saturday's opening of the Hermitage Rooms at Somerset House, a huge 18th
century building by the River Thames.

``It shows goodwill to Russia after so many bad things have been written
about us, that our country is run by criminals and rotten with corruption,''
Piotrovski said in an interview. ``Those who think there is nothing good in
Russia can now see something else.

The Hermitage, its state subsidy cut by half since the collapse of the Soviet
Union, badly needs money for building work and to conserve the 3 million
objects that comprise one of the world's greatest art collections.

It has long wanted foreign museum locations to attract help and tourists.
Similar links have been forged in Amsterdam and New York.

With the influence of British banker and arts patron Baron Rothschild and
with a team of Russian workers, Piotrovski has turned five small rooms and a
corridor into permanent replica galleries of the Hermitage to stage annual

The first, to last 10 months, includes 500 of the richest pieces collected by
Empress Catherine II in the 18th century.

The vast Hermitage, with 350 rooms, is one of the surviving glories of
imperial Russia, built when St. Petersburg was the ``window looking out on
Europe'' as envisioned by the city's founder, Peter the Great.

In June, the Hermitage and the Solomon R. Guggenheim Foundation in New York
signed a long-term agreement to develop an international network of museums
and share some of their vast collections.

The Guggenheim Foundation operates art museums and exhibition spaces in New
York, Venice, Berlin and Bilbao, Spain, specializing in contemporary art.

The Hermitage is to have a presence at a proposed new Guggenheim museum in
lower Manhattan.


From: (Ira Straus)
Date: Fri, 24 Nov 2000
Subject: Re: JRL 4649/ Bush-Putin

Judging from the replies of John Christmas, Roger Hamburg and Albert Weeks, I
seem to have touched a nerve, although the responses are so blurred by heat
that it is a bit unclear which nerve it is. It does appear that they are
offended by thought of my comparing anything done by the Bush campaign with
anything done by Putin's people. Specifically, I had compared some arguments
used by the Bush campaign (regarding why there should not be a hand recount
of votes and why the Electoral College is good) and some used by the Putin
entourage (regarding why it was vital to win a first round absolute majority
in the Russian presidential elections). But the replies seem to talk around
this specific comparison, and concentrate on blasting various other
comparisons which I did not make. How, I wonder, can one deal with that kind
of response?

It seems that Mr. Weeks supports the efforts to get a serious recount in
Florida to deal with the problems created by an evidently flawed ballot
(although his wording is a bit ambiguous on this point and could give an
impression of blaming the victim). I applaud his good sense and his support
for a basic element of democracy. Where I am baffled is when he thinks it
necessary to reassure me that the "struggle to reach the truth amid our form
of glasnost' is actually testimony to the strength of our democracy". If he
will re-read what I wrote, he will surely understand that that is exactly
what I was saying. He may also notice that I was criticizing those people who
have been saying that we ought to shut down the recounts because our
democracy is too fragile to withstand such scrutiny. I would have thought he
would be aiming his criticism at those people.

Mr. Christmas is apparently offended in his partisan sensibilities; perhaps
he mistakes me for a Democrat (capital D). He is very very sure of one thing
-- that Mr. Bush's proposed policies are good for democracy -- and adduces
this as a reason for finding it incomprehensible that one could see anything
anti-democratic in the legal and procedural arguments being made by the Bush
camp in the present electoral dispute. I am at a loss to see the logic in
this argument. (He also is angered that recounts are not taking place in
Republican counties as well as in Democratic ones; perhaps he is unaware that
the Gore people have repeatedly agreed in public to such a solution, while
evidently the Bush people have failed to take the necessary step of asking
for it.) He may be reassured, however, to know that I am also a Republican. I
mention this, not because it has any logical relevance to what we are
discussing, but because it seems to be the only point of contact available.
One might think that we who are Republicans bear a special responsibility for
keeping our own house in order, especially when our party oversteps the
bounds to such an extent as in the last couple weeks. The contest, after all,
is not with a mortal enemy, but with the party with which we have been
changing power for more than a century. I have some difficulty with the kind
of partisanship that would hold that our party is so extraordinarily correct
and so very good for democracy in its policies as to be ready to swallow
whatever rationales it might give for whatever methods it might use to try to
get into power.

Mr. Hamburg gives me nothing at all to respond to; virtually his entire
comment consists of attacks on comparisons that I do not make. However, I am
duly instructed that he takes the trouble to say twice that he finds my
points "odious in the extreme." Certainly it is a passionate nerve that has
been struck with him, even if an obscure one as long as his response is
limited to straw men.

All three writers might be asked to read a bit more carefully the second and
third paragraphs of my article, where I specify what it is that I am
comparing and also specify the limitations of the comparison. They all appear
to have failed to grasp what was said quite plainly there.

If I may be permitted a speculative remark, it seems to me that the anger and
misdirection of the responses may have something to do with a situation that
is common in our field of work. We all (or most of us, at least) learned to
dislike "moral equivalency" comparisons during the Cold War. Many of us put a
lot of energy into combatting the moral equivalency mentality. I get an
impression that, with some people, this became a fixed point in their
thinking and argumentation, to the extent that any comparison of any practice
in America with any practice in the Soviet Union (or at this late date,
Russia) gets pegged mentally as a "moral equivalency" argument, i.e. an
attempt at equating the moral standing of the Soviet and American sides in
general, and gets denounced as such; no matter if the comparison is often
made for a completely different purpose, and no matter if it happens to be
accurate and could be needed for sound public thinking. It seems to me that
this kind of denunciation has attained a knee-jerk character, and it does a
disservice to everyone, not least to those who use it. To throw out the
entire genre of comparative analysis, except for analyses that emphasize
differences, would seem to me unwise. I suppose it is a defense mechanism,
the sort of thing one might expect in response to a traumatic experience; but
if so, it is a defense mechanism that has spread far beyond the bounds of the
original source of trauma.

I get the impression that this defense mechanism against comparisons is still
floating around quite a bit in the field of Russian studies and
Russia-discussion, despite the end of Communism and of most moral equivalency
discourse with it. It may be worth taking the occasion to think our way out
of this particular paper bag.

A peculiar logical, or anti-logical, mechanism seems to come into play
whenever someone wants to express the posture of getting offended on
principle against some comparison. It consists of taking the specific
comparison and treating it as if it were a generalized equating of the two
countries; in other words, exaggerating a comparative comment to the point of
absurdity in order to be able to respond with a triumphant reductio ad
absurdum. To this is added an assumption of neutralist or anti-American
intent, which might indeed have been present in many generalized comparisons
of the two sides in the Cold War era, but usually is not present in specific

Apparently such a mechanism was also at work in the spate of attacks that
came in to JRL about a month ago, most of them quite overheated, in response
to another writer's very careful and gentle comparative comments on this
list. Those comments had been aimed at getting Westerners to take a more
normal view of Russian influence and Russian imperialism, and to consider the
actual interests of the West in relation to it; as opposed to, say, taking
the view that anything bad that's happening in the former Soviet space should
be blamed on Russian imperialism, or that Russian influence is always to be
opposed. These were sensible points, quite pertinent to the West's ability to
comprehend its own interests; a pertinence that was perhaps confirmed by the
apparent inability of some people to grasp what they were about.

One might get that impression of a similar problem in the current spate of
replies, given the way they drag in and refute various extraneous
comparisons, and the seeming unanimity in feeling offended that any
comparison was made at all. It is hard to understand, rationally, how such
clever writers could have unanimously failed to understand the passages at
the beginning of my article where I made quite clear what were the areas and
limitations of my comparisons. Also the various passages which explained the
actual purposes of the article, which had nothing whatsoever to do with moral
equivalency talk. The actual article was directed against those who accept an
anti-democratic interpretation of America's founding; and against those, from
neutralists on the left to some realpolitiker theorists in the center and
isolationists on the right, who have used this interpretation as another
argument against the appropriateness of America's upholding democratic norms


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