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Johnson's Russia List


December 13, 2000   

This Date's Issues:   4684  4685  4686



Johnson's Russia List
13 December 2000

[Note from David Johnson:
1. Jamestown Foundation Monitor: PUTIN'S APPROVAL RATING BACK UP TO
2. Moscow Times: Sarah Karush and Valeria Korchagina, Ambivalence as Constitution
Turns 7
3. Too early to introduce changes to Constitution.
4. History of Russia's Constitution.
5. BBC Monitoring: Russian Liberal Democrats leader praises authorities, attacks US political elite. (Zhirinovsky)
7. Mikhail Kazachkov: re 4671-Kindlon/Intelligentsia. (anthem)
8. AP: US General Downplays Russia Incident.
9. UPI: Julia Watson, Endangered caviar may be saved by US-grown sturgeon.
10. Postimees (Estonia): Marko Mihkelson, THE ERA OF PUTIN HAS COME. The power of democracy on the background of Stalin´s notes.
11. St. Petersburg Times: Anna Raff, The Price of Advice, or How Consultants Cleaned Up in Russia.
12. Newsweek: Candy Schulman, E-mail: The Future of The Family Feud? Misunderstandings, delayed responses. When we fight online, we miss our chance for real resolution.]

Jamestown Foundation Monitor
December 12, 2000

PUTIN'S APPROVAL RATING BACK UP TO 70 PERCENT. Recent polling data suggest
that while President Vladimir Putin retains the support of an overwhelming
majority of Russians, fewer of them are convinced that his initiatives will
bring about improvements in the country. A poll taken among 1,600 Russians
over November 24-27 by the All Russian Center for the Study of Public
Opinion (VTsIOM) found that 70 percent of respondents approved of Putin's
performance and 22 percent disapproved. The president's approval rating was
up from October, when 64 percent of respondents said that they approved of
his performance and 26 percent said they disapproved. The improvement may
be due to a possible fading of memories of the summer's disasters--the
sinking of the submarine Kursk, the fire in the Ostankino television tower
and the bombing at Moscow's Pushkin Square. Since assuming the presidency
at the beginning of this year, Putin's highest rating came in May, with 72
percent approving and 17 percent disapproving.

In November, in answer to the question of whether the current Russian
government would be able to change the situation in the country for the
better in the near future, the responses were 25 percent saying yes, 35
percent waffling with a "maybe yes, maybe no" and 36 percent saying no. In
October, it was 30-28-34.

Another sign that faith in Putin's endeavors--if not in the president
himself--may be fading came when respondents were asked which party they
would vote for if State Duma elections were held now. Most of Russia's main
parties, including the Communist Party of the Russian Federation (KPRF),
the Union of Right-Wing Forces (SPS) and Yabloko showed little change in
support since last May. However, Unity--the pro-Putin party lead by
Emergency Situations Minister Sergei Shoigu--showed a sharp drop in
support: 26 percent of those polled last May indicated that they supported
Unity, only 19 percent did so in VTsIOM's November poll. Both Unity and
Shoigu have been the subject of controversies in the press recently. Shoigu
is rumored to be in political trouble, while the tycoon and erstwhile
Kremlin insider Boris Berezovsky has claimed that Swiss firms which
allegedly embezzled money from the state airline Aeroflot helped to finance
Unity's election campaign last year. VTsIOM also found in November that 4
percent of those polled believed Putin had dealt "very successfully" with
the problem of imposing order on the country (4 percent answered the same
way when the question was asked in July), while 34 percent said "rather
successfully" (41 percent in July), 47 percent said "without much success"
(43 percent in July), and 9 percent said "totally without success" (5
percent in July). At the same time, only 24 percent of those polled in
November said that Putin's creation earlier this year of seven federal
districts headed by presidential representatives would help bring about
order in the country. Thirty-five percent said the initiative would have
"no serious consequences." Last June, 44 percent of those polled said they
thought the new districts and presidential representatives would help bring
about order in the country, and only 17 percent predicted the initiative
would have "no serious consequences."

VTsIOM's November poll had a 4 percent margin of error.


Moscow Times
December 13, 2000
Ambivalence as Constitution Turns 7
By Sarah Karush and Valeria Korchagina

When it comes to the Constitution, Alik knows his rights have been violated.

"Freedom of movement - isn't there a paragraph [in the Constitution]
promising us all that?" the 48-year-old Dagestani mused Tuesday. "I
certainly fit the description of a 'person with origins in the Caucasus.'
So you can imagine how often I get harassed by the police."

But Alik said he never considered standing up for his rights in court.
Instead, he found a simpler solution.

"For the past couple of years I have been working as an aide to a State
Duma deputy. Showing my Duma pass usually solves all my problems," he said.

As the nation took Tuesday off for Constitution Day, ordinary citizens said
they knew little about what the country's highest law actually contains,
and were skeptical about its ability to protect them. Meanwhile, political
leaders praised the Constitution and called for stricter adherence to the
seven-year-old document.

"Living according to the Constitution and the law is not only a necessity
and a matter of civic responsibility," Interfax quoted President Vladimir
Putin as saying. "It is the privilege of a free people."

Viktor Sheinis, one of the authors of the Constitution and a member of the
Yabloko party's central council, said adopting the Constitution in the
early 1990s was a major achievement for Russia. "You can argue about
whether it is a good constitution or a bad one . but passing the
Constitution saved us from civil war," he said in a telephone interview.

Calls to revise the Constitution have been mounting in recent months.

"I will risk making the assumption that the Constitution may be changed in
2001," State Duma Deputy Vladimir Ryzhkov told Ekho Moskvy radio on
Saturday. Ryzhkov said legislation pushed through parliament this year by
Putin had already "eroded" the Constitution.

After his inauguration in May, Putin set to work revising the structure of
government, notably in the relationship between the federal government and
the regions. Putin has hinted that amendments to the Constitution could be
in the works.

Just in case, the Duma is preparing for that. Bills establishing the makeup
of the constitutional assembly, the only body with the authority to revamp
the Constitution completely, are awaiting the approval of the State Duma.
Itar-Tass on Saturday quoted Duma Speaker Gennady Seleznyov as saying the
Duma may consider one of those bills in January or February.

But whatever else it may be, the Constitution is widely seen as having been
written to secure the power of then-President Boris Yeltsin - and many are
equally skeptical about the motives behind new calls to change the document.

"I would probably believe in the power of the Constitution if only somebody
could guarantee that the Constitution itself will not be changed at any
given moment to match the needs of those in power," said Nikolai Chiplakov,
a 66-year-old labor safety specialist.

Sheinis said there was room for improvement in the Constitution, but urged
against a complete overhaul.

"I think it would be better not to even pass the law on the constitutional
assembly that they are trying to pass now, so as to avoid the temptation to
rewrite the Constitution," Sheinis said.

Amendments to most chapters of the Constitution can be made without calling
a constitutional assembly. They require parliament's approval, followed by
the approval of two-thirds of the nation's 89 regional legislatures.

Chapters 1, 2 and 9 - which outline the major principles of governance, the
rights of citizens and the procedure for amending or rewriting the
Constitution - can only be changed by a constitutional assembly.

Sheinis singled out a handful of issues on which he said constitutional
amendments are in order.

For one thing, he said the reform of the Federation Council that was begun
this year could be taken a step further. The law passed this summer
replaces regional leaders, who currently double as federal lawmakers, with
appointed representatives to occupy their seats in the upper house.

Sheinis said he would support a constitutional amendment that would require
the direct election of such senators.

Another area for revision is the division of powers, Sheinis said, adding
that parliament's functions should be strengthened.

"Our Constitution is sometimes called over-presidential. This is not the
case. It is not so much over-presidential as under-parliamentary," he said.

Seleznyov said the Duma had passed one amendment in the first reading that
would give the legislature more levers.

"We are still insisting that we get [the right to form] special commissions
to investigate corruption cases," he was quoted by Itar-Tass as saying.
"The amendment is now ready for the second reading and we would hope that
the pro-government factions support it."

Despite the discussion in political circles on the holiday, ordinary
Muscovites remained skeptical about the role the Constitution could play in
their lives.

"As far as I remember, the old Soviet Constitution also guaranteed rights,
but somehow this never really mattered," said Marina Buravtseva, 43. "And I
don't think much will change any time soon, or even in our lifetime."

December 12, 2000
Too early to introduce changes to Constitution
Russia's 1993 Constitution has by far not exhausted its potential, declares
Mikhail Mityukov, the President's representative in the Constitutional Court.

Although it was adopted essentially in the transitional period that marked
the emergence of a new state, only in 20-30 years will it be possible to
seriously think about changing it.

In Mityukov's opinion, only half of the federal constitutional laws
envisaged by the Constitution have been adopted, while three vectors for
developing constitutional legislation have yet to be worked out. The reform
of the judiciary has to be completed yet. There are no laws concerning the
procedure for altering the composition of the Federation, or for accepting
new subjects and changing their status. And finally, it is necessary to
solve a number of problems connected with consolidating statehood. The
matter concerns laws related to emergency situations and martial law that
every country needs "just in case," Mityukov emphasized.

By the end of the year, he explained, another three laws will be added to
the list of existing federal constitutional laws. Specifically, this
concerns the laws on state symbols that has already been passed by the
State Duma, but which yet has to be approved by the Federation Council that
is to meet on December20. In his opinion, the adoption of the package of
laws on the state symbols was the result of a big political compromise.
"History and the Constitution are fond of continuity and compromises,"
declared the President's representative in the Constitutional Court.


December 12, 2000
History of Russia's Constitution

The first attempts to create a Constitution in Russia were undertaken by
the Decembrists - Pestel and Muravyov. In reality, the process of forming a
constitutional system in Russia dates back to the middle of the 19th
century - especially during the reign of Alexander II. This included the
legal founding of the liberties of the peasantry, autonomous municipal
self-government (zemstvo), and democratic judiciary. By the end of
Alexander II's reign, the first draft of the Constitution was penned by
Loris-Melikov. The Emperor himself intended to grant the country an elected
parliament that would have the right to limit his powers. However, on March
1, 1881, three days before the signing of the manifesto for introducing a
constitutional system in Russia, Alexander II was assassinated.

Under the pressure of the revolutionary events in 1905, Emperor Nikolai II
signed the manifestos (August 6 and October 17) that formed the State Duma
and endorsed "The Statute on Elections." These manifestos were seen as the
first steps on the way to a system based on law.

After February 1917, the Provisional Government took upon itself the
function of running the country until a Constituent Assembly was convened.
The Assembly was to establish the foundations for a law-governed state in
Russia. However, the Constituent Assembly that had been created at the
beginning of January 1981 was dissolved following a decision by the
All-Russian Central Executive Committee.

The first Constitution of the RSFSR was adopted at the 5th All-Russia
Congress of Soviets on July 10, 1918.

The next Constitution of the RSFSR was adopted on May 11, 1925 on the basis
of the 1924 Constitution of the USSR.

The third Constitution of the RSFSR was adopted on January 21, 1937 on the
basis of the 1936 Constitution of the USSR.

The last Soviet Constitution of the RSFSR was worked out on the basis of
the 1977 Constitution of the USSR and adopted on April 12, 1978.

On June 12, 1990, the First Congress of Peoples Deputies of the RSFSR
proclaimed state sovereignty over the entire territory of the country by
adopting the Declaration on State Sovereignty of the RSFSR. That document
proclaimed the need to adopt a new Constitution reflecting the new
political realties. However, the process of adopting such a Constitution
dragged out. The then Supreme Soviet of the RF took a confrontational stand
in respect to the President and delayed the adoption the Constitution. In
1993 Russia's President Boris Yeltsin convened a Constitutional Conference
to draw up a new Constitution. Such a draft was worked out as a result of
many months of work. The confrontation between the executive and
legislative branches of power reached its peak during that period. On
September 21, 1993 the Russian President signed a decree dissolving the
Supreme Soviet and announced a referendum on the adoption of a new
Constitution. That referendum was held on December 12, 1993 with the
overall participation of 58,187,755 people. 32,937,630 people voted in
favor of adopting the Constitution.

To commemorate the adoption of the Constitution of the RF by popular vote,
December 12 has been proclaimed a state holiday - Constitution Day.


BBC Monitoring
Russian Liberal Democrats leader praises authorities, attacks US political
Text of report by Russian TV6 on 12th December

[Presenter] There have been few events in Russian cities and towns to mark
the state holiday [Constitution Day]. The Liberal Democratic Party of
Russia [LDPR] was the only political organization which decided to mark
this day with a holiday demonstration. The Liberal Democrats did miss yet
another chance to draw attention to their organization, which, by the way,
will mark its 11th anniversary tomorrow. Maksim (?Rogavenkov) has more

[Correspondent] The Liberal Democratic Party of Russia was the only
political movement whose activists took to the streets in order to mark
Constitution Day by staging a demonstration and a rally. [LDPR leader]
Vladimir Zhirinovskiy describes it as the most serene holiday - the triumph
of the freedom of choice.

[Zhirinovskiy] Thanks to the freedoms which it [constitution] guarantees we
have the right to praise whoever we want and to criticize whoever we want.
The law allows us to do all this. It only bans violence directed at
individuals, buildings and vehicles.

[Correspondent] The LDPR leader is praising the current authorities,
particularly because they are being formed of employees of special
services. Zhirinovskiy criticizes the Communists, [ex-USSR President
Mikhail] Gorbachev and those who ruled the country under Yeltsin.

[Zhirinovskiy] But this time has come to an end. A different kind of
leaders are slowly entering the Kremlin, the State Duma, the government and
the hearts and souls of Russian citizens.

[Correspondent] The LDPR will mark its birthday tomorrow - the party will
celebrate its 11th anniversary. Over these years, the Liberal Democratic
movement has encountered both internal and external enemies who, according
to Zhirinovskiy, are also the enemies of Russia.

[Zhirinovskiy] The current enemy - and we will openly name it - the US
political elite are dreaming of destroying precisely the Russian people,
being well aware that as soon as the Russians as destroyed the entire
country will be brought to its knees and it could then be cut into pieces
like a Christmas pie.

[Correspondent] In a bid to raise more enthusiasts ready to fight against
these enemies, the LDPR has decided to set up two new youth organizations -
Russkiy Proryv [English: Russian Breakthrough] and Slavyanskoye
Pravoslavnoye Dvizheniye [English: Slavic Orthodox Movement].


December 12, 2000

State Duma depute Andrew Klimov told correspondent that,
according to his information, "commercial value" of the post of the head of
the region went up because of the laws introduces by RF President recently.

The point is that now a head of any region (if he is not a member of upper
chamber of Parliament) can appoint his protege for this post and, besides,
can influence the course of elections of State Duma depute candidates.

Andrew Klimov says that a whole industry appeared now, "one can pay money
to become a head of a territory, and, consequently, obtain a place in the
State Duma and, thus, control two senatorial places. In particular, in
Moscow such place cost up to $ 600,000."

There are a lot of groups in RF which, using modern PR means, take part in
the elections and promote their deputies. One cannot disagree with Andrew
Klimov, stating that these people do not care about "wise governing the
nation", but only make money. In particular, he thinks that representatives
of "May" group, led by Anfalov, tried to go in for such business in his
electoral district (Komi-Perm autonomous region).

Besides, Andrew Klimov did a lot to prevent violations of election laws in
the district. His activity caused his personal security threats. Such
"warnings" were not only addressed to him, but to other people, who stood
in Anfalov's way, too.

Andrew Klimov is sure that all of these things are evidence of the fact
that criminal structures go in for politics in Russia.

Komi-Perm FSB department investigates the case of Anfalov's group now. If
the fact of the threats is proved, this crime will be classified as an act
of terrorism towards public official. There is no need to mention that it
is a very serious crime.


Date: Tue, 12 Dec 2000
From: Mikhail Kazachkov <>
Subject: re 4671-Kindlon/Intelligentsia,

I had to make an effort not to wish Mr. Kindlon what has been my personal
experience with the Soviet national anthem. Specifically, to be woken up
with this "best piece of music compared to the other alternatives" at 5 am
for 15 years, day in, day out.

For the tens of millions of Russian GULAG prisoners the brutality of every
day -- to this day -- invariably has begun with the national anthem
blasting out of coarse and very loud speakers. Something tells me Mr.
Kindlon could start  begging not to "strike up" that particular "band"
very, very soon.

As a bilingual person I may be entitled to remind Mr. Kindlon that
knowledge of a language is but a first step towards knowledge of a country
with the profundity of its history and culture. In Russia, where some 50
million perished to the sounds of the Soviet anthem, some symbols are
heavily loaded. Perhaps because they are soaked with blood. 

Mikhail Kazachkov,
the last political prisoner released by the Soviet Union


US General Downplays Russia Incident
December 12, 2000
MOSCOW (AP) - The chairman of the U.S. Joint Chiefs of Staff on Tuesday
dismissed the recent buzzing of an American aircraft carrier by Russian
planes, saying Washington does not view the incident as a threat.

``We do not view Russia as an adversary,'' Gen. Henry H. Shelton said after a
meeting in Moscow with his Russian counterpart, Gen. Anatoly Kvashnin.

Russian officials said the carrier Kitty Hawk was caught by surprise by
flyovers Oct. 17 by Russian fighter jets in the Sea of Japan. The Pentagon
insisted the U.S. ship had picked up the Russian planes on radar, but it put
the Kitty Hawk on higher alert after the incident.

``As there were no violations, it was a non-incident from our point of
view,'' Shelton told reporters in the Russian Defense Ministry. ``We don't
need to have any kind of rhetoric associated with this kind of operations or

Russia, whose military has declined dramatically in size and funding since
the 1991 collapse of the Soviet Union, billed the Kitty Hawk incident as a
sign of Russia's strengthening military.

Commenting on increased Russian military training flights around the Chukotka
peninsula, across the Bering Strait from Alaska, Shelton said, ``That is
within Russian sovereign territory. There have been no violations and
therefore there is not a perceived threat.''

Kvashnin also played down any political significance to the Kitty Hawk case
or the flights. ``We are partners, not opponents. There is no politics here,
just professional work,'' he said.

Shelton reiterated U.S. opposition to Russia's plans to resume weapons sales
to Iran. ``It is an area of concern for us, as we could see it as an area
that could be destabilizing in the region,'' he said.

The Russian government recently alarmed Washington by announcing it would no
longer abide by a 1995 agreement between Vice President Al Gore and
then-Russian Prime Minister Viktor Chernomyrdin on Russian-Iranian arms
trade. Gore had promised that Washington, which believes Iran sponsors
terrorists, would not penalize Moscow for selling weapons to Iran through

Kvashnin shrugged off the U.S. concern. ``We have no problems in this sphere.
We will work only in the interest of the international community and in the
interests of bilateral relations.''

Tuesday's meeting was the first between Shelton and Kvashnin since the
Russian general was in Washington in late 1998, shortly before the start of a
four-day U.S.-British air attack on Iraq.

Russian opposition to that attack, followed by tensions over U.S.-led NATO
airstrikes on Yugoslavia in 1999, put a damper on military relations.


Endangered caviar may be saved by US-grown sturgeon

WASHINGTON, Dec. 12 (UPI) -- How much are you prepared to pay for a
spoonful of caviar?

 If it's Persian Beluga, the most highly prized of the three sturgeons that
roam the Caspian Sea, a single ounce will cost you about $100. Half-kilo
tins (17.6 ounces) are going for more than $1,700 on the Internet.

 And at that price, you had better stock up. By next summer, you could be
looking back at that price and thinking it's a snip.

 Sturgeon are becoming an endangered species. It's not just pollution and
over-fishing that are threatening them, but another culprit -- organized

 Russian gangs are said to be responsible for the 97 percent drop in
official catches of sturgeon in the Caspian Sea. This is the area that
supplies the world's elite with 60 percent of its caviar. With the Caspian
shoreline too measureless to be easily patrolled and sales of caviar so
lucrative, it is not surprising that much of the smuggling is done with the
compliance of corrupt officials in the countries that border the sea.

 In the late 1970s, official catches of sturgeon from the Caspian were
recorded at 20,000 tons a year. The figure for the year 2000 is 550 tons. In
1994, caviar poachers caught in the Caspian Delta numbered 248. By 1996, the
number jumped to 623.

 Iranians in the southern part of the Caspian are working to increase
numbers by raising sturgeon fingerlings to restock the Caspian. Early this
year, 25 million were released into the sea's cleaner, deeper southern
waters. The country has also ended its state monopoly on the export of
caviar in an attempt to revive the industry.

 But given that it takes 18 years for the female Beluga to mature and yield
its eggs, the reduction in numbers is a situation that can't be quickly

 An alternative source for caviar might well become the United States.

 Until 1900, about 150,000 pounds of caviar a year was produced in the
United States, most of it fished from the Delaware River at Penns Grove, New
Jersey. It was so cheap, that bartenders would offer it like peanuts, to
provoke more drinking among patrons.

 Now it's coming back. On the Stolt Sea Farm in Elverta, California, the
eggs of the white sturgeon are being fresh-farmed for sale in four grades of
Sterling caviar, its brand name: Sterling Classic, Premium, Royal Black and
the top category, Imperial. Between $30 and $60 an ounce, the eggs are the
same size as Beluga, but not always the same color -- ranging from deep
black to blond.

 Coming from the same fish as the imported varieties, it takes the same 8
to 10 years for caviar eggs to mature. But the harvest will not be as great,
since farmed sturgeon weigh less than half the average 500 pounds of those
caught in the wild.

 It's not the only caviar being produced in the United States. The
spoonbill or paddlefish, one of five different types of American sturgeon,
is also being farmed. It looks and tastes like Sevruga -- the least
expensive caviar, with the smallest eggs and the strongest flavor - but
lacks its underlying subtlety.

 At a price far lower than that for Iranian and Russian imports and U.S.
white sturgeon caviar, paddlefish caviar can make up in generosity of
portion size for want of complexity of character.

 According to Mark Grobman, marketing director of Browne's Trading Company
in Portland, Maine, one of the United States' largest suppliers of imported
and local caviar to restaurants and retailers, "It's Sevruga-like, but a
little saltier, a little strong, not as refined as Iranian. But it's good on
hors d'oeuvres."

 Just the thing to make an impression on your friends and relatives,
without frightening your bank manager this holiday season.


Date: Tue, 12 Dec 2000
From: "Marko Mihkelson" <>
Subject: The Era of Putin has come

Postimees (Estonia)
December 13, 2000
The power of democracy on the background of Stalin´s notes
By Marko Mihkelson,
Baltic Center for Russian Studies

The undisputed approval of the state symbols of Russia by the lower chamber
of the Parliament last week inevitably leads to a thought that the ear of
Putin has from now on got its real start. The question only is how vital it
will prove to be and how it will end.

Probably for the first time in ten years the first president of Russia,
Boris Yeltsin, felt what it meant to be an ordinary citizen. The declaration
of Jeltsin of the illicitness of the restoration of the Stalin hymn remained
unheard in the Kremlin. Putin did not even take the trouble to comment on it
more seriously. In the winning euphoria of the Duma the communist chairman
Gennadi Seleznjov did not spare any colors, calling Jeltsin the old sick
person suffering from sclerosis and marasmus. If you are not the czar, you
are a nobody.

But Yeltsin was not the only one the opinion of whom the Kremlin ignored. In
essence the major part of high intelligentsia (Solt¾enitsõn, Plissetskaja,
©edrin and others) and liberal politicians (Nemtsov, Hakamada and others)
considered the restoration of the Stalin hymn a very dangerous mark. But
their vote remained in the minority.

Following the announcement made by Putin that under the melody by
Aleksandrov, the coat of arms of the eagle and the tricolor the nation may
finally feel united, the "aggressive majority" of the Duma as one man voted
in favor of the solution offered by the Kremlin. As far as one can remember
the term "aggressive majority" was first used in 1989, when under the
conducting of Mikhail Gorbachev the majority still loyal to the party of the
Congress of the Deputies of the former Soviet Union voted down everything,
which could have been dangerous to the dictatorship of the communist

By today it seems that the circle has closed. A new elite using decorative
democracy as the covering for its power has grown out of the communist
nomenclature. Putin is a vivid example of this nomenclature or power elite.

Having been trained at one of the foundations of the communist regime, the
KGB, he made his way to the top only climbing the bureaucratic service
ladder. Nobody has ever elected Putin to be the leader. To tell the truth,
the last presidential elections cannot be considered nothing more than the
formal confirmation of the decision made in the corridors of the Kremlin.

Sergei Dorenko, the kingmaker withdrawn from the air of the television
channel ORT, made a couple of very interesting observations about Putin
performing in NTV television broadcast "Voice of the Nation" last week. He
recalled some of his discussions with the president behind the stage. If we
believe Dorenko, Putin had told him directly that it would take only one
more antiterrorist operation to ensure his reign. One has to think how to
govern the country and the nation, said Putin and patted Dorenko on his

Or another episode. Dorenko had asked Putin what was his attitude toward the
dangerously praising attitude towards the president. Immediately before

this, one interview had provided Putin with the title of the most
acknowledge businessman of the country. After a pause Putin had answered:
the nation is always just.

The comments seem to be excessive. One of the most determining factors of
the Putin phenomenon may be considered his extremely closed and mysterious
nature. In reality until now no one knows what Putin actually thinks and

The elite managed by Putin is characterized by a total lack of ideas
(chauvinism is not an idea), corruption and unlimited pursuit of personal
profit. The essence of the power lies in strictly "managed democracy", which
serves the interests of only the elite. The engine of power is the fear
governing in the bureaucratic hierarchy.

The era of Putin marks the restoration of a bureaucratic, strictly
hierarchical power under the new slogans. This is referred to by the
creation of federal circles, decreasing of the power of the governors, the
changing of the elections into a farce, creating of bureaucratic
subordination in open political life and so on.

It would be wrong to think that all this was born this year. The formation
of such a power system got a start already years ago, when Jeltsin started
to pay a toll to the old nomenclature.

More precisely it could be even said that already at the falling into pieces
of the Soviet Union the more flexible part of the old nomenclature managed
to see the opportunities of the new situation and through this maintain
their positions. The new elite (liberally minded politicians) proved to be
toothless and could not turn the situation in its favor. The hindrances were
definitely their own inevitable connection with the old elite and management

If in political struggle the new elite turned out to be weaker than the
bureaucracy, then this is not entirely true for economy. Andrei Illarionov,
the economic counsel to Putin is known for his very liberal views, whereas
Yegor Gaidar together with German Gref is one of the ideologists of the new
economic program.

One of the main peculiarities of Putin´s era may become liberal economy in
the condition of managed democracy. This is the direction in which
everything is moving right now. The liberal politicians (Jabloko and the
Association of Right-Wing Forces) have admitted their confinement and
helplessness, at the same hoping that liberal economy will also help the
political system to grow.

Irina Hakamada, the leader of the Russian democrats, directly admits "Russia
is until now a Byzantine state. Until the social psychology of people
considerably lags behind the democratic procedures, it is not possible to
rigidly copy what is happening in the West".

Hereby it is important to note that nothing will change with the changing of
the government (rumors about which are presently afloating about the
Kasjanov cabinet). This is simply one element of the bureaucratic power
system. The government does not change with the elections. The government
will change if another intrigue reaches its peak in the high nomenclature.

Upon the bureaucratically centralized system the first responsibility will
inevitably fall on the leader. This is a dangerous tendency. The

responsibility for everything inevitably increases the risk to make a
mistake. Especially in risk abundant Russia.

Nikolai Fjodorov, the president of Chuvashia, one of the most courageous
criticizers of Putin has referred that the present policy of the Kremlin may
lead to the decay of Russia. "In the XXI century it is not possible to hold
together an empire. In order to preserve a country, a smart decentralization
and federalism is necessary", claims Fjodorov.

Fjodorov may be right. The history of Russia has shown that a centralized
state does not stand forever, although it may seem to be the only suitable
power system. The era of Putin or the bureaucratic system establishing
itself may be longer than it is anticipated, but despite this may once again
lead to another collapse.


St. Petersburg Times
December 12, 2000
The Price of Advice, or How Consultants Cleaned Up in Russia
Anna Raff

A company in transition will turn to consultants in order to help it get
through the process in one piece. So when the whole market is in transition,
consultants have a field day. Anna Raff reports on how Western auditing firms
profited from Russia's economic problems of the 1990s.

THE Arkhangelsk Paper Mill was on the brink of bankruptcy in the early '90s
when Western shareholders acquired a large portion of the company's shares -
literally saving the company from demise.

These new shareholders, from Austria and other parts of Europe, brought in
fresh ideas and young management with their money; they also brought a set of

They wanted to understand the companies' finances, which were expressed using
Russian Accounting Standards, and which are indecipherable to many Western

This called for radical measures in an otherwise traditional industry. This
called for systems integration and modernization. This called for consultants.

"When we first started figuring out what we wanted to do, it provoked a lot
of discussion within the company," said Sergei Dubov, assistant director of
the mill, who oversees the transition.

Some employees came out against the changes, not understanding the need. But
as the Jan. 1 start date for the new system approaches, Dubov said everyone
has come on board.

Arthur Andersen won the tender to automate processes such as bookkeeping and
payroll. That wasn't the expensive part, said Germa Freyman, the mill's chief
accountant. The price tag for the software that would automate all systems,
provided by SAP AG, made Freyman do a double take.

"I couldn't believe that one program could cost well over a million dollars,"
Freyman said.

Stepping In

Even during Soviet times, the country's forest and paper industries were
hungrily eyed from abroad, and after the fall, foreign investors jumped at
their chance to grab a piece of one of the country's most profitable sectors.

Their opportunity to enter the market came during the transition period when
many Russian industries - including the forestry and paper sectors - were
thrown into chaos, and years of inherent inefficiency were beginning to take
their toll on the new market economy.

Implementing real-time financial reporting systems is one way that these
structural weaknesses are being alleviated.

The success of such projects depends on the quality of management, said
Stephen O'Sullivan, head of research at United Financial Group. If top
managers have a strong aim and are willing to use the information these
integrated systems provide, the company will benefit. If not, there is a high
probability that things could go awry.

"If you are a Russian manager and you know that more information is power,
would you want those above you to know more about what you're doing?"
Sullivan asked rhetorically. "These people don't cooperate when they see
these systems posing a threat."

So, much of the push for reorganization, systems integration and streamlining
has come from outside investors, rather than Russian management.

"Companies hire an auditor the way they hire doctors and lawyers, only in
situations of extreme necessity, without any particular satisfaction or
happiness," wrote Eduard Grebenschikov, who formerly worked for Deloitte &
Touche, in the Vedomosti newspaper.

"You could say this: If you are being audited according to international
standards, somebody wants [to take] you [over]," Grebenschikov continued.

Or to paraphrase one of the commandments of the consulting industry:
Consultants thrive when things aren't looking very good.

And based on available indicators, the decade following the collapse of
communism is no exception.

Because the Big Five U.S. accounting firms - Andersen Consulting, Ernst &
Young, Deloitte & Touche, KPMG Peat Marwick and PricewaterhouseCoopers -
often coordinate projects among a multitude of offices, revenue figures for
their practices here are almost impossible to come by.

But for the industry as a whole, the numbers point to steady growth.

According to an Expert magazine survey last year, the country's management
consulting revenues totaled 2.27 billion rubles ($81.5 million) in 1998, and
this figure doesn't take into account the activities of Andersen Consulting,
Ernst & Young, Deloitte & Touche CIS and KPMG.

Worldwide, 40 percent of financial-services companies' revenue comes from
auditing. Consulting services make up the other portion. In Russia, as in
many other developing economies, the demand for auditing services surpasses
that for consultants. Here, auditing services account for about 75 percent of

Also, it is estimated that there are about 1.5 million mid-size and large
companies in Russia that are fodder for financial consulting.

The Big Five came to Russia in the early '90s when its market was opened up
to the West. Their primary mission was to support Western firms that opened
Russian representative offices, and for these Western firms, the choice was
easy. They picked the auditing firms that their parent companies used

Technically, Arthur Andersen was the first to set up an office in Moscow,
doing so in 1974. But it closed in 1983 because its performance didn't meet

Ernst & Young and PricewaterhouseCoopers arrived in 1989. Arthur Andersen
came back in the form of a joint venture in 1990. Deloitte & Touche opened
their representative office in the same year. KPMG came in 1992.

Heavy Competition

The Big Five dominate market share in the management consulting industry
because they are the ones who introduced the concept, industry insiders say.
However, their share of the tax and auditing sector is substantially lower.

This can be attributed to many things. For one, there are some clients that
the Big Five will never vie for, said Karl Johansson, managing partner of
Ernst & Young.

"Russian auditing firms should have market share," Johansson said. "We will
not go for small businesses that are very domestically oriented. We will not
go for every new industry that pops up; we will choose them carefully."

In big industries, where domestic companies such as LUKoil are making global
headway, there is fierce competition among the Big Five for contracts, and
"native" Russian professional services are preparing to join the fray.

"Soon, we're going to be playing on the same level as the Big Five," said
Ivan Glushkov, head of the newly formed financial consulting group
Information Business Systems.

Energy pulsates from Glushkov's rigid, pensive form as he leans over the
table, eloquently espousing ideas that have been brewing - in his head and in
the industry - for some time.

The dark shadows under his eyes betray the fact that Glushkov has been up
since 3 a.m., when he flew out of the Siberian city of Kemerovo, where IBS is
working on a project with an electro-energy client.

"There's a lot of energy around here because we are in the midst of creating
something," he said. "It's a great feeling as well as a lot of

In the past year, IBS has been putting extraordinary effort into developing
its financial-consulting group, because, company officials said, this is
where the market is going.

IBS is not alone in marking the consultancies' development. "I've noticed
that consulting firms and systems-integration companies have been coming
together," said Sergei Romanenko, with consulting company PAKK, Izvestia
reported last spring.

IBS, a domestic company, is known mainly as a systems integrator and
developer of business-to-business e-commerce projects. According to the
Financial Times, IBS expects to earn profits of $3.7 million on sales of $250
million this year.

In an effort to raise capital in Western markets, IBS announced in September
that it is planning an initial public offering of its shares on the Nasdaq
market next year. If the listing goes through, it will be the nation's first
international tech offering.

Amid all the to-do about the offering, IBS's consulting arm remains lost in
the shadows.

Glushkov isn't ready to brandish his sword quite yet. He said he needs to get
a few more clients under his belt before he can be confident about changing
the company's techie image.

He holds his hands parallel, one just above the other, and talks about the
"gap" in the country's consulting industry.

"On one hand, you have huge multinationals who are very strong in information
technology, but they are having problems fully adapting textbook methods to
the Russian market," Glushkov said. "On the other are the Russian consulting
firms, who might have great insight but don't have the IT know-how of the Big

"We will fill in this gap."

At the beginning of the year, IBS made a conscious decision to develop in
this direction, diversifying their imagination, which many perceive as
"strictly IT." By the middle of 2001, Glushkov plans to have about 100
consultants working under him.

And even though IBS isn't really recognized as a competitor in the financial
services market, they are making themselves known in discreet ways.

Glushkov said he poached his recent hires from PricewaterhouseCoopers and
Russian rival Yunikon and that he will continue to skim the cream from other

IBS is uniquely positioned to grow in this niche. Not only does it have
clients like industry major Gazprom, IBS also says it has close government
relationships, including an agreement to integrate the Railways Ministry's
information systems.

According to Romanenko, the demands for audits of government-owned and
-controlled companies will increase. And for patriotic reasons, many of these
contracts will probably go to Russian firms.

"The government is aiming to better leverage its property, and we predict an
increase in orders not only for auditing, but also for consulting from these
companies," he said.

Alexander Slesarenko, head of the system-integrations department at Yunikon,
a leading domestic financial services firm, said he isn't convinced his
potential rival will successfully broaden IBS's profile.

"IBS is coming to this industry from a completely different angle,"
Slesarenko said. Because IBS has always been an IT company, the technology
will steer the consulting and not the other way around, which is the approach
Yunikon takes.

"We already have people working as financial advisers for companies like
Rostelecom and Surgutneftegaz," he said. "For these companies, we decide the
details of a tender, and companies like IBS will be the ones bidding. It will
never be the other way around."

But industry insiders say that if IBS succeeds in remaking itself as a
financial and management consulting firm, then it could turn the pecking
order inside out.

Pyotr Medvedev of Arthur Andersen's tax and legal service said he doesn't see
IBS as a real threat because the market is still far from saturated.

"First of all, I'm happy for them," Medvedev said. Perhaps foreign
consultancies used to brush away the thought of local competition with a
flick of the wrist, but now up-and-coming Russian firms are taken more

Going Global

According to Medvedev, Russian firms have some domestic advantages, along
with international drawbacks. In some niches, these firms know the players
and the companies inside out, because many boutique consultancies are built
around employees who formerly worked in these sectors for decades.

But when it comes to issuing American Depositary Receipts or stock abroad,
Russian consultancies don't have the international resources, the managers
standing by in London or New York, to help pull the deal through.

"For something on a worldwide scale, a client will come to a multinational
player," Medvedev said.

Alexander Verenekov, deputy director of Yunikon, agreed, saying the strength
of domestic consulting and auditing firms is directly proportional to the
strength of the country's companies.

Yunikon posted revenues for the first half of this year of 166.7 million
rubles ($6 million), and it plans to go global as an accompaniment to the
international forays of the nation's industry.

"The Big Five became 'big' because they went after the blue chip firms in
their respective countries," Verenekov said. "When these clients like
Coca-Cola and Hewlett-Packard opened offices around the globe, the Big Five
followed suit.

"When AvtoVAZ starts selling cars out of Detroit, then we'll set up house in


December 18, 2000
E-mail: The Future of The Family Feud?
Misunderstandings, delayed responses. When we fight online, we miss our
chance for real resolution
By Candy Schulman
Dec. 18 issue - A few months ago I had my first e-mail argument. I've heard
about e-mail romances, but I didn't know how common e-mail fighting
is-until I mentioned it to friends, who readily confessed their own online
tiffs. MY FORAY INTO Internet madness began with a disagreement between one
of my relatives and me. We had never bickered before. As our barbs zapped
through cyberspace, I became increasingly alarmed at how modern technology
is affecting human relationships.
     My twentysomething relative, a.k.a., was
born A.C. (after computers) with a mouse in his hand. I am a bit of a
technophobe, viewing computers with trepidation but knowing I must log on
if I am to move forward in this fast-changing world.  
     Our fight was a misunderstanding involving ego, self-esteem,
you-hurt-my-feelings, I'm-right-you're-wrong. The altercation began over
the antiquated telephone. We both hung up in a huff. Disturbed that issues
were unresolved, I transferred our argument onto the Internet, where our
family does almost everything these days, from sending birthday cards to
sharing recipes.
     We all know that e-mail makes communication immediate, but in the
modern e-mail argument, discourse is actually slowed down-with painful
consequences. When my first e-mail went unanswered, I wrote a second the
next day. No new mail! Then a third, with a plea, "I can't believe we can't
talk about this. I've been crying every night."
     I couldn't know whether quarrel2000's lack of response meant he was
angrier than I'd imagined. Or was he simply nonplused about my hurt
feelings? Or had my e-mail disappeared someplace in cyberspace and not even
reached its destination?
     And then, I logged on at 12:06 p.m. and there was mail from
quarrel2000! My fingers shook as I clicked on read new mail. Quarrel wrote,
"This isn't something to cry over. I don't even care anymore." "You don't
care about my hurt feelings?" I typed. send mail. Click.
     Eighteen hours later: "I meant I don't care about whatever it is we
were fighting about. I'm over it. You should be too."
     Oh. Misunderstandings and days of delay before clarifications can be
heard make these conversations (if I dare to call them that) very
unsatisfying. As a writing professor, I've often felt optimistic about
e-mail because it makes writers out of everyone, renewing our enthusiasm
for the moribund written word. But as a family member with hurt feelings, I
can't always read messages with emotional clarity. Not to mention the risk
of screen words' being misinterpreted. Is the writer of this e-mail
argument taking on an angry tone? An ironic one? Conciliatory? Only the
most highly skilled writers can make these nuances clear.
     When arguments occur face to face, we're more likely to hear each
other, sit through silences and think about what's transpired. I don't know
if quarrel2000 ever read my lengthy e-mails trying to justify my actions
and words-he might have said, "Oh, no! Not another angry e-mail from my
obstinate relative!" and simply pressed delete.  
    I've watched people's interpersonal skills steadily decline since the
advent of answering machines. Rather than having conversations with each
other, we leave one-way messages, never risking retribution. Talk into a
recording and you expediently do the job: cancel a dinner reservation,
terminate an employee, send a message of condolence after a death. Nobody
says "It's Susan, call me back" anymore. Now it's "I can't go out with you
Saturday night..." Beep! End of message.
     And now, we don't even fight in person anymore. I can imagine a new
dot-com company being launched to sell accouterments to online arguments:
written scripts to download into your computer with guarantees to prove
your point of view, flower services for making up with your loved one.
     Right now, my online argument with Q2000 is in remission. We e-mail
each other in polite, concise, guarded messages. Our altercation briefly
spread, however, through our family on the Web, as other family members
heard about our feud and began sending their own commentaries back and
forth to one another. As our disagreement catapulted into a
multigenerational group e-mail debate, its original premise became
increasingly unclear, even distorted.
     As we move farther away from human interaction, I am making a
resolution that the next time words between relatives or friends explode in
anger, I'm going to demand that, whenever possible, we climb in the ring
together and spar it out in person. It might sting, but there's a prize at
the end of the match: we can hear each other say "I'm sorry," then fall
into each other's arms in a reassuring, forgiving hug.
Schulman lives in New York City

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