Johnson's Russia List
#5603
17 December 2001
davidjohnson@erols.com
A CDI Project
www.cdi.org

[Note from David Johnson:
1. Reuters: Top Russian official warns of arms legal vacuum.
2. The Times (UK): Clem Cecil, Russian ban on euro will cause havoc.
3. Reuters: Russia expects U.S. to consult over war - Putin.
4. Financial Times (UK): Putin under pressure. The president knows what
needs to be done to make Russia an attractive partner for the west. Andrew Gowers, 
Robert Cottrell and Andrew Jack find him patient and pragmatic.
5. Financial Times (UK): Transcript: Interview with Vladimir Putin.
6. Moscow Times: Andrei Zolotov Jr., A More Conservative SPS Emerges at Congress.
7. Wall Street Journal: Thaddeur Herrick and Jeanne Whalen, OPEC, Russia 
Are Moving Back To Stalemate Over Output Cuts.
8. The Times (UK): Roger Boyes, Yeltsin to have heart surgery.] 

*******

#1
Top Russian official warns of arms legal vacuum
  
MOSCOW, Dec 16 (Reuters) - A top Russian official said in an interview
broadcast on Sunday that Moscow and Washington had to work hard to draft
agreements to fill the legal vacuum created by the U.S. intention to
withdraw from the ABM treaty. 

Igor Sergeyev, President Vladimir Putin's adviser on strategic issues, said
world stability depended on both sides coming to an agreement on a new
framework for relations setting limits to the anti-missile system
Washington wanted to build. 

"The most dangerous thing now is the legal vacuum in which we now find
ourselves up until what I think will be June 13 under the six months'
notice period," Sergeyev told RTR state television. 

"In this period until the United States withdraws from the treaty, I
believe both sides should do their utmost to replace ABM, to lay out
matters, to draw up a new framework for relations with the United States
and come up with concrete elements to safeguard stability throughout the
world..." 

Sergeyev, a former defence minister, said agreements would have to
establish "agreed approaches to offensive and defensive systems. I believe
limits to anti-missile systems must be set down so that we understand that
they are truly set down." 

Russia had long opposed U.S. President George W. Bush's contention that ABM
was outmoded and had to be abandoned to take account of missile threats
from "rogue states" like Iran, Iraq and North Korea, 

Putin described Bush's announcement last week as a mistake, but said it
would not affect Russian security and renewed proposals to cut Moscow's
strategic nuclear arms arsenal. 

Foreign Minister Igor Ivanov has since described the move as a purely
political decision. 

In his interview, recorded on Saturday, Sergeyev said U.S. planners could
not say what form the missile shield would take, but it was safe to assume
it would involve the use of space. 

That, he said, meant that negotiators would have difficulty "producing a
framework for imposing limits." 

Yevgeny Primakov, former Russian prime minister and foreign minister, told
the same television programme that the U.S. move was "a serious error"
which failed to take account of Russia's support for the U.S. anti-terror
operation in Afghanistan. 

"The events of September 11 created a new situation which should have been
put to good use and assessed once again," Primakov said. "This is going
along an old path." 

Primakov said Russia would now be fully entitled to revise its commitments
to fulfil other international arms pacts, including the START-2 treaty on
reducing strategic arsenals. 

"I don't think we should be in any hurry to do this," he said. "But in any
event, they are pushing us towards retaliatory measures of some sort. And
that is not reasonable. 

*******

#2
The Times (UK)
December 17, 2001
Russian ban on euro will cause havoc 
FROM CLEM CECIL IN MOSCOW 
 
THE arrival of the euro looks likely to cause havoc in Russia because of
the failure by the country’s Central Bank to lift a ban on importing the
currency, leaving millions of coins and notes stockpiling on the border. 

Only now is Russia waking up to the prospect that from January 1 the German
mark, a favourite currency of Russian business and tourism along with the
US dollar, will cease to be legal tender. The mark is the only currency
that will cease to be legal tender on the stroke of midnight on December
31. Although a special arrangement will enable German shops to continue to
take the currency, its status in Russia is unclear. 

One German bank, Commerzbank, has resorted to importing the euro in
diplomatic bags — a breach of the Vienna Convention, which prohibits the
bags being used for anything that is illegal in the receiving country — in
order to get around the customs ban. 

The Central Bank said last week that it would apply for an injunction, but
has failed to do so. “This is messy co-ordination between the authorities,”
Aleksei Zabotkin, chief economist at United Financial Group investment
bank, said. 

Even if the ban is lifted there may not be enough time to get the euro
notes and coins to where they are needed. 

Up to $30 billion in savings is believed to be in foreign currency kept by
people at home, much of it held in marks. 

Russia feels neglected in the European Commission’s campaign to raise
awareness of the euro, even though it has been allotted a large slice of
the Commission’s external euro educational budget — 53,000. 

Exchange offices are wary of the new currency. “I won’t be taking euros
until we have the means to check for counterfeits,” the manager of one in
Moscow said. “I have no idea what a euro looks like.” 

“The people who will really benefit from the euro are those who make the
currency-exchange signs,” Steven Buscher, an American businessman based in
Moscow, said. “There will be no major shifts in the short-term.” 

European officials say that the euro will be cheaper to import than the
dollar, but until the Central Bank has resolved the confusion on its
country’s borders, Russia will not benefit from the new notes and coins
until well into the new year. 

*******

#3
Russia expects U.S. to consult over war - Putin
  
LONDON, Dec 17 (Reuters) - Russian President Vladimir Putin said in an
interview with the Financial Times he expects the United States to consult
Moscow before taking the "war on terrorism" beyond Afghanistan. 

He was quoted in Monday's edition as saying the top priority should be
blocking the financing of terrorism and he specifically warned against
military action in Iraq. 

Asked if he expected Washington to consult him before embarking on any
further military actions, Putin said: "Yes, we expect this." 

With the Afghan war now winding down, there are growing signs that the
United States may consider expanding its anti-terrorism offensive to Iraq. 

After the September 11 hijack attacks, President Bush vowed to destroy
"terrorist" groups with a global reach -- and Putin appeared to support
that stand. 

"We believe the fight against terrorism will not be over with the military
operation in Afghanistan. It cannot be finished by this," he said in the
interview. 

"Primarily we should talk about ways to block the financing of terrorist
activities. And so far I have no confirmation, no evidence that Iraq is
financing the terrorists that we are fighting against." 

Putin said the international community was concerned about Baghdad creating
weapons of mass destruction. 

"We should convince the Iraqi leadership to allow United Nations observers
and controllers to sites and facilities inside Iraq...in exchange for
lifting of sanctions," he said. 

But he openly questioned the effectiveness of past bombings of Iraq by
British and American warplanes. 

"As for possible use of force, we should look at the productivity of what
has been done in this regard so far," he said. 

"I don't know if any (sites) have been destroyed. The bombing has been
there but the results have not been there," he added. 

*******
 
#4
Financial Times (UK)
17 December 2001
Putin under pressure
The president knows what needs to be done to make Russia an attractive
partner for the west. Andrew Gowers, Robert Cottrell and Andrew Jack find
him patient and pragmatic
 
Behind the high red Kremlin walls and the barred gates, beyond the domed
lobbies and the endless pink-carpeted corridors, it comes down to this: a
small waiting room with a television and a kitchenette, a reception desk
with a big old-fashioned telephone switchboard, and a pair of double doors
leading through to the private office. 

The plaque on the wall declares the office belongs to "V. V. Putin,
President of the Russian Federation". But few people who get this far can
be ignorant of that detail. 

Vladimir Putin is courteous, soft-spoken and very tired indeed. His
conversation with the Financial Times begins at 9.30 in the evening and
ends after 11.00. He talks readily and extensively. But there are few, if
any, moments of relaxation or improvisation. He has had a long and
difficult day. 

In the afternoon, the US had announced it would withdraw unilaterally from
the anti-ballistic missile treaty of 1972. In doing so it rode roughshod
over months of Russian counter-arguments. 

Mr Putin says his response will be "very calm, very constructive". There
will be no immediate counter-threats, either to build up Russia's nuclear
arsenal or to withdraw from other arms treaties. The US has a legal right
to opt out of the ABM treaty, he notes. But at the same time, he is clearly
puzzled that US President George W. Bush chose not to find some more
accommodating formula. 

"We were prepared for certain modifications of the treaty," he says. "We
asked to be given the specific parameters that stood in the way of US
desires to develop defensive systems. We were fully prepared to discuss
[them]. But nothing specific was given to us ... We heard only insistent
requests for bilateral withdrawal from the treaty. To this day I fail to
understand that insistence." 

These are trying times for Mr Putin. He has placed two bets big enough to
make or break this first term of his presidency, and he is waiting for the
results. 

His first bet is that the terrorist attacks on the US have created the
conditions for developing new relations of trust and common purpose between
Russia and the west. 

His second bet is that he can carry the rest of Russia with him in this
fundamental shift towards the west. 

Mr Putin may well be right on the first one. The US wants Russia as an ally
in its war against terrorism. And Europe, always worried about tensions
between the US and Russia, welcomes almost anything that draws them
together. The conditions for changed relations are there. 

The second bet is the riskier. For the past decade Russian policy towards
the west, and in particular towards the US and Nato, has been a volatile
mix of envy, opportunism, anger and incomprehension. 

A cynical, even hostile, view of the west is still widely held within the
Russian political and military establishments. For all his popularity with
the public, Mr Putin will struggle to impose a durable pro-western shift in
foreign policy on his generals and his ministers and his parliament unless
he has some concrete gains to show for his efforts. So far he has precious
little. 

His main gains have come in his personal relations with other world
leaders. They include Tony Blair, UK prime minister, whom Mr Putin looks
forward to seeing again when he visits Britain this week. Twice in the
conversation Mr Putin dwells enthusiastically on Mr Blair's recent support
for a new Russia-Nato council where all countries could sit as equals.
Given such a council, the "overall question of confrontation [between
Russia and Nato] will lose its relevance", he says. 

The warmth apparent in Mr Putin's relations with Mr Bush seems to have come
as a pleasant surprise to both. "He always does what he says, and in that
respect he is a reliable partner," Mr Putin says. But the gains to Russia
from such friendships are less clear. The US did still withdraw from the
ABM treaty, angering many Russians if not Mr Putin. The US might yet take
its war against terrorism into Iraq, horrifying Russia, where Iraq is
viewed more as a wayward friend than as an enemy. 

As for the idea of a new Nato council, it has been delayed for several
months by other countries' reservations. Mr Putin insists he is not dismayed. 

"All disappointments and frustrations are born out of undue expectations,"
he says. "We have to be patient, proceed cautiously, and act in a
professional way." 

The next big issue on the US-Russian security agenda concerns cuts in
offensive nuclear weapons. Russia may not get what it wants here, either. 

In principle, Russia and the US already see eye to eye. Each wants to cut
back its stocks from about 7,000 strategic warheads to about 1,500-2,200. 

But they cannot decide how this should be done. The US wants an informal
arrangement. Russia wants a formal one. According to Mr Putin: "We believe
the accords we reach should be translated into legal treaty form. They
should be transparent, they should be verifiable." 

Yet, as with the ABM treaty, Mr Putin seems already to be bracing himself
for defeat. 

Asked whether confidence between Russia and the US would be damaged if the
US refused a legally binding treaty, he replies: "It will depend on the
final result we achieve. It will depend on the way we develop our relations
across the board. If relations between Russia and the west, Russia and
Nato, Russia and the US continue to develop in the spirit of partnership
and even of alliance, then no harm will be done." 

These are pragmatic, even admirable words. But they are not quite what one
expects from the leader of a nuclear power at an early stage in a long and
complicated arms negotiation. They add to the impression that Mr Putin is
more the hostage than the master of his policy. Having set Russia almost
single-handedly on its new pro-western course, he has no choice but to put
the best face on any outcome. 

There is, of course, another reading of Mr Putin's tactics. It holds that
he is offering little more than verbal support for the US "war against
terrorism", while manoeuvring to extract concessions from the west in
exchange. These would include a free hand for Russia's own much- criticised
war in Chechnya, accelerated Russian entry into the World Trade
Organisation, and an understanding that Russia's foreign debt could be
restructured if necessary. 

Mr Putin would be a poor politician if such things were not on his mind.
But in practice, he is winding the war in Chechnya down, not up. There are
plenty of reservations about WTO membership yet to be overcome within
Russia's own industries. And, for the moment, far from needing debt
restructuring, Russia is pre-paying some of the debt that it owes. 

Besides, these are small issues compared with what Mr Putin really does
want from the west. He wants something that is not limited to particular
transactions. What he wants, he says, is for the west to start treating
Russia as it does any other friendly country. "Deal with us as a partner,"
he says. "Give us the same standard terms as anybody else." 

To make the most of that relationship, Russia must be "more predictable,
more transparent, and more manageable", says Mr Putin. 

Those qualities will come more easily, he suggests, with increased
prosperity - but that, in turn, is coming only slowly. "We cannot be
satisfied with the level [of development] we have achieved," Mr Putin says. 

The impression is that Mr Putin knows what needs to be done. The question
is whether he has the strength and resources to do it. 

At best, there is immense work ahead, for a man already burning the candle
at both ends.
 
*******

#5
Financial Times (UK)
17 December 2001
Transcript: Interview with Vladimir Putin
Mr Putin was interviewed on December 13 in Moscow by Andrew Gowers, Robert
Cottrell and Andrew Jack
 
Editorial note: this is a transcript of the consecutive translation given
in the course of the interview by the Russian government's interpreter.
Ellipses indicate points at which the recording is unclear, a tape has been
changed, or, a phrase has been omitted to avoid repetition or digression.
Mr Putin's remarks on the press, in his penultimate answer, came at the
very end of the interview. But he indicated that they were a continuation
of that earlier answer, so they have been appended to it. 

FT: You said today the US decision to withdraw from the Anti-Ballistic
Missile treaty was mistaken, but it seems that you do not want it to affect
other aspects of the Russia-US relationship. 

Mr Putin: I said what I think. What is more, even earlier I stated that, in
our view, unilateral withdrawal from the treaty would be a mistake. But I
also said, should that happen, we would have no intention of raising any
anti-American hysteria. 

Nor do we think this step could result in the emergence of new threats to
Russia's security - for several reasons. First of all, a nationwide missile
defence system is not in existence. Second, it is not known whether it
could be created. And third, if the attempt to establish it is successful,
it is not clear when that could happen. 

I will go on to observe the fact that Russia, even today, has all the
necessary means to penetrate any ABM defences. Therefore, the principal
imaginable negative consequence of this unilateral withdrawal could be in
upsetting the balance of forces. This is of no major concern to us. 

Although we speak of defensive weapons systems, they also have a certain
offensive aspect to them. They are closely related to strategic offensive
arms, and they enhance the potential of offensive strategic arms. Therefore
we speak of them as being closely inter-related. Actually, there is little
difference between defensive systems and offensive systems from that point
of view. 

Finally, there is one other consideration which we cannot fail to take into
account. I do believe the world has changed in recent years, and the change
has been fundamental. 

If we intend to change the nature of our relationship between Russia and
the West, Russia and the US, and if we take the road suggested by the
British prime minister, Tony Blair, concerning changing the relationship
between Russia and Nato, then this overall question of confrontation will
lose its relevance. 

It is true we were opposed to a unilateral US withdrawal from the treaty.
But that was not because we were afraid, or we feared for our own security.
It was simply because we are proponents of a different concept, a different
philosophy, of how international security should be built. 

We did believe that this treaty was one of the fundamental pillars of the
overall security and stability system in the world as established in recent
decades. More than 30 other international agreements were based on that
foundation - agreements in areas of arms control and arms reduction. That
is why we insisted it should be maintained. 

In principle, we were prepared for certain modifications of the treaty. We
asked to be given specific parameters that stood in the way of US desires
to develop defensive systems and implement programmes. We were fully
prepared to discuss those parameters. 

But nothing specific was given to us, no specific parameters to be
negotiated. We heard only insistent requests for bilateral withdrawal from
the treaty. To this day I fail to understand this insistence, given our
position, which was fairly flexible. 

I am very much concerned in the face of the most negative development or
implication of this step, that is, the extension of the arms race to outer
space. If the leading nuclear powers embark on this road, we will not be in
a position to say "no" to any other country. 

But on the whole, as I said earlier, our US partners had the right to
withdraw under the treaty. We recognise this right. They acted in
accordance with the treaty. They did not violate anything and they did not
do anything surreptitiously. 

Their position can be contested, one can disagree with that position, as I
do. But one cannot say that in acting the way they did, they violated
anything or did anything on the sly. On the contrary they acted in a
consistent way and quite openly. So there is a certain logic to that
approach, we were aware of that logic, there was nothing surprising. 

My response was very calm, very constructive, and it was in line with the
overall approach pursued by the Russian Federation. I believe the
US-Russian bilateral relationship is of major importance for our two
nations. But it is also of great importance, taking into account that these
are two leading nuclear powers in the world, for overall international
security. We will try to profit from the level of relationship we have
achieved so far to resolve all the outstanding issues on which we have not
yet reached agreement. 

FT: You say that you have no intention of raising anti-American hysteria,
that the US has acted within its rights, that US-Russian relations are very
important. But will it be more difficult now to pursue the close relations
with the US that are clearly your objective? 

Mr Putin: No I don't think so and I will explain why. 

In the course of our contacts with President Bush, on no occasion did he
deceive me or mislead me. He always does what he says, and in that respect
he is a reliable partner. 

I repeat, of course, we have differences of opinion on some issues. But
nevertheless on some issues, even complicated and difficult issues, we
succeed in convincing each other. The fact that our opinions sometimes
diverge on major issues is only natural. 

If we treat each other as partners, solutions can be found - as with the
reduction of strategic offensive arms, where we have reached agreement in
principle. I think this is a major issue, not just for our two nations but
for the entire world - whether we will have 7,000 nuclear weapons, as now,
or 1,500-2,000 weapons. It is a difference. 

Of course, here too, we do have some questions that need to be discussed
further, to be negotiated. And we do believe that the accords we reach
should be translated into a legal treaty form. They should be transparent,
they should be verifiable. 

I believe these agreements should have legal treaty form. I think without
that, it could so happen that partners would have suspicions and misgivings
about what was happening with the other party's weapons - whether they had
actually been reduced, what were the actual numbers, where the weapons
were, had they been destroyed or had they just been dismantled and put in
storage somewhere. If they are stored they constitute so-called
"reconstitution potential". In other words, the possibility would remain
that those weapons could be put back on missiles. 

In other words, if we do have such a legal treaty, legal agreement, a
transparent one with proper verification measures, the entire world could
be safer and feel calmer. 

FT: How can you obtain that, when the US wants something much more informal? 

Mr Putin: It is subject to negotiation. So we have to convince and persuade
our partners, find a convincing argument. We have to be convincing enough
in adducing arguments and getting them to understand that compliance with
the principles we suggest will meet not only benefit us, not only meet our
interests, but theirs as well. We have to be persuasive [in arguing] that
the principles we suggest will meet the national security interests of US
itself. If we have no such agreements, it could imply that Russia would
have its own reconstitution capability. 

Of course, other arguments could be produced. For example, the reason we
did not agree to withdraw bilaterally from the [ABM] treaty was because the 

arguments provided by the [US] side to justify their position to us looked
unconvincing. 

After all, what were the arguments they used trying to convince us? The
first argument was the possibility of terrorists' using nuclear weapons.
The second was that so-called 'rogue states' could use nuclear weapons. 

But the object of the 1972 ABM treaty is strategic ballistic missiles, and
that is something that neither terrorists nor rogue states have at the
moment and are hardly likely ever to have. 

A justified position, a well substantiated argument, is the best foundation
for any agreement. I hope that the arguments that we will use in our
further negotiations with our US partners will be convincing. 

But the most important thing that underlies any sort of agreement is the
level of mutual trust, mutual confidence. That is why I would very much
like to have our current level of mutual confidence with the US maintained.
It is a basic foundation for agreement of any kind, particularly in this
field of strategic stability. 

FT: If you fail to get a legally binding treaty on arms reduction, will
that damage confidence between Russia and US? 

Mr Putin: It will depend on the final result we achieve. It will depend on
the way we develop our relations across the board. If relations between
Russia and the West, Russia and Nato, Russia and the US continue to develop
in the spirit of partnership and even of alliance, then no harm will be done. 

But given the present state of international relations, given the
international situation, we do believe that our proposals, our suggestions,
are more justified and more substantiated. And there is yet another
important point: the actual level of our nuclear deterrent. The state of
our deterrence is such that we feel safe and secure, and this is the most
important thing to us. 

FT: The Russian foreign minister, Igor Ivanov, said Russia had contingency
plans if the US withdrew from the ABM treaty. Does that mean Russia may put
multiple warheads on its missiles, as has been discussed? 

Mr Putin: As a result of the ABM treaty's being abrogated, and all the
relevant constraints being abolished, Russia will have the right to install
multiple independently targeted re-entry vehicles (Mirvs). But this is not
to say we will actually do that. Because in the foreseeable future there is
no point, no sense for Russia to do that. 

If we are talking of a missile defence system, then we may have a "success
ratio", a capability of such a system to intercept, one, two, 10, 20, or -
a most fantastic option - 100 missiles. But even if Russia goes down to a
level of 2,000 weapons, from a current level which is much higher, it is
unimaginable, totally unrealistic, to think that such a number of missiles
could be intercepted. 

[Missile defence] is like hitting a bullet with a bullet. The velocity of a
ballistic missile in flight is about 7 km per second. An interceptor
missile should have at least the same velocity. It is as unrealistic as
expecting to hit a bullet with a bullet. 

If we add to that the fact that [incoming] missiles could be equipped with
Mirvs, and they would have special systems enabling them to penetrate
missile defences, then we can easily understand that defensive systems of
this kind could not be regarded as a serious obstacle ... 

But now we are talking, following the line of a logic that could be called
a logic of confrontation. If we do not pursue this line, if we do not talk
in terms of confrontation, but rather come back to a point I made in the
beginning, then the main principle which could inspire a sense of calm and
security and safety in the hearts and minds of Russians and Americans and
people all over the world would be a changed quality in relationships
between the major nations of the world. 

This means primarily the leading nuclear powers of the world, a changed
relationship between Russia and the West, Russia and Nato, Russia and the
US. This is the main thing from the point of view of strengthening
international security. That is why I want to re-emphasise how much we
appreciate and how positively we view the initiative taken by the prime
minister of Great Britain with respect to changing the nature of relations
between Russia and Nato. 

FT: How can these hopeful signs with regard to Nato be turned into
political reality? Are you disappointed by the lack of progress on that
front? Do you need something to show for your readjustment towards the west
in the past three months? 

Mr Putin: All the disappointments and frustrations are born out of undue
expectations, exaggerated expectations. But I didn't expect anything
extraordinary We have to be patient, proceed cautiously, and act in a
professional way. 

As regards things that could be presented as the results of the policies
pursued by the Russian leadership, let me say the following. 

The most important thing for us is to create safe and secure conditions for
the people of our country, for the people of Europe, for all mankind, and
also to develop and establish favourable conditions for economic growth in
this country. 

The evolving nature of relations between Russia and the West is already
creating favourable conditions for international security, for stability,
and for positive economic growth in this country. This is quite obvious,
quite evident. 

Second, in pursuing this policy, we are not asking for some kind of
preferential treatment. We are not asking for any indulgence. We are simply
drawing the attention of our partners to the simple fact that it is in
their interests to treat Russia as an equal partner. The earlier our
partners come to understand this logic, the better it will be both for
ourselves and for our partners. And in pursuing these policies we do not at
any time prejudice the national security interests of Russia. 

One of the best cases in point is our position on the ABM treaty. From the
very outset we were in favour of maintaining it and we consistently
defended this position. To this day we believe this is the right position. 

Russia still has fresh in its memory the hardships and sacrifices of the
second world war. Our people still remember it quite vividly. Russia is a
peace-loving nation. The people of Russia share a policy that is designed
to achieve friendly relations with Russia's neighbours, with the major
countries of the world, and generally speaking with every country of the
world. Therefore we have a well considered and well balanced position which
is designed on the one hand to safeguard our national interest, and on the
other hand to achieve normal, good neighbourly relations with other
countries. This policy is fully supported by the people of the country. 

When everything is going well in the area of security, people focus their
attention to the economy. They expect positive results there. It is from
this point of view they judge the results achieved by the leadership of the
country. 

We still have many difficult outstanding issues. But still, it is quite
obvious that there is movement, and it is movement in the right direction.
This is something that inspires confidence in us. 

We are not asking for debt relief or debt write-offs, we are paying
everything back. This year we are repaying our debt to the International
Monetary Fund ahead of schedule. 

We are developing our market-oriented institutions and seeking membership
of the World Trade Organisation. We are very actively pursuing economic
reforms. 

We have paid back all our debts to the people of the country. In the recent
past, wages to workers went unpaid for periods of months. And of course
that caused very serious social tensions. Today we have succeeded in paying
all those debts, everywhere, including in the armed forces. 

Not only that, we are enhancing, modestly but confidently, the living
standards of the population. The real incomes of our pensioners have
increased by 22 per cent. Wages have grown roughly by 19 per cent. Real per
capita incomes have grown by 6-7per cent. GDP growth is expected to reach
5.7per cent. 

The most important thing is to have a favourable external situation,
something we would seek to create and ensure for our country. But of
particular importance is positive development of the economy. This is
something we will seek to attain. We believe this is a most important thing. 

FT: One indicator of international confidence in an economy is foreign
investment. You are not attracting as much as you probably want. What are
the two or three big things you have to do in the coming year to keep the
economy on course and to attract more foreign investment? 

Mr Putin: This year we are witnessing major growth in investment - both
domestic investment and foreign investment. It should be noted that foreign
investment has been growing much faster than domestic investment. We are
making our economy more attractive. But a lot still has to be done. And we
envisage a whole package of measures in this regard. 

We are going to keep pursuing our liberal tax policy. We have significantly
alleviated the tax burden of our economy. Our flat rate of income tax is
now the lowest in Europe, at 13 per cent. The profit tax is going to be 24
per cent... We have pretty much done away with the sales tax and with the
turnover tax. 

We have adopted a number of measures to de-bureaucratise and liberalise our
economy. The range of activities subject to licensing has narrowed in
number from 2,000 to a little over 100. Recently we adopted a whole package
of laws on legal reform. This should make our legal system more efficient
and help it meet the needs of the market economy. 

We are also adopting the new labour legislation. And we have adopted the
tax code. All this should start working beginning from next year. 

That is not all. We are planning further measures to make our economy more
dynamic and efficient. These are primarily measures for restructuring,
including the areas that we call the 'natural monopolies' [editor's note:
mainly gas, electricity and rail freight].If we pursue and implement this
whole range of policies comprehensively, only then will the economy become
more attractive. 

There are no magic wands to wave here. This all calls for systematic work.
We are full of resolution to pursue this plan. What we expect from our
partners is only that they deal with us on partner-like terms, and treat
Russia on standard terms like everybody else... 

It is high time we stripped our economy of the political content of years
gone by. High time both for us and for our partners. I recall my last
discussion with colleagues from the European Union. Also I recall the
discussion among experts regarding Russia's adhesion to the WTO. 

The logic of the last discussion was as follows. Russia is not granted
market status. I asked my colleagues, why did you grant market economy
status to the Baltic States? They were recognised as market economies a few
years ago. How are they different from the Russian economy? 

I asked them to explain to me the difference between the Russian economy
and the economy of these countries. I was told: when they were making this
decision they were proceeding from the following logic. These countries
have very small economies. And Russia has a huge economy. 

Naturally I asked them, are we discussing the quantitative or the
qualitative aspects of the economies? And the reply was: we should change
the subject. 

I'm quoting our discussion almost verbatim. I will not say exactly who said
this, but present were delegations of Russia and the European Union. 

Pretty much the same is true of Russia's accession to the WTO. It is still
a question who will benefit more from Russia's accession - Russia itself or
the industrialised countries. Our experts are naturally still arguing about
this. Some experts believe, quite firmly, that some industries in the
Russian economy are not ready to compete with the cheap and high quality
products produced by our partners. 

In such a situation, perhaps our partners from the WTO should try to draw
Russia into the WTO. But strange as it may seem, nothing like that is
happening. And I believe this is also due to political considerations that
were characteristic of the times of the cold war. It would be hard to
explain otherwise why it is demanded that Russia brings all of its
legislation into conformity with WTO standards before we start negotiations
on Russia's accession. Such demands have not been posed for any other
country ever. 

But I also think it is good that Russia is not yet a party to the WTO,
because in this manner we are not tied up too far with the world economy
and we are not drawn into recession with whole of world economy. This has
allowed Russia to achieve rather good figures for economic growth. Last
year it was 8.4 per cent. This year it is more than 5 per cent. 

Seriously speaking, we are resolved to continue our negotiations with WTO,
but only on standard terms. 

FT: You are implying that Russia is being treated worse than China? 

Mr Putin: I am implying that Russia is being treated like no other country.
Such conditions have not been posed for any other candidate country. In
this I can see a politicised approach that would be more characteristic of
the cold war era and [western] prejudice. 

FT: It is clear Russia can now play a central role in the international
politics and diplomacy of oil. How do you plan to use that power? In your
view are oil prices too low at the moment? 

Mr Putin: I always fear conversations about Russia playing a central role
in something - because it may be followed by persistent requests to do
something that we may not feel like doing. 

Russia has always played a well known role in this sector of the world
economy. Its role is going to increase. First of all because we have a
stable situation in this country. And also because the world economy is
interested in diversifying risks in the energy sector. 

I should say in this regard, that in this sector of the world economy we
are interacting especially intensively with the United Kingdom. Of course,
we are working with other partners. But in terms of the energy sector,
relations between Russia and the UK are especially strong. British
Petroleum and some other oil companies are involved in major energy
projects in Russia. 

We have a lot of oil fields that are explored, that are new, and we are
going to develop this area further. But in carrying out this policy we will
do our best to maintain the price corridor that will be fair both for
producers and consumers. And the fair oil price in our understanding would
be between $20 and $25 per barrel. 

As for the fall in prices, we are not especially happy about it, but nor
are we especially concerned about it. Unlike some other oil producing
countries, for us the oil sector is important but it is not the only source
of our profit... There are some experts, some economists, who believe a
price drop will result in a redistribution of the economic structure of
Russia. However, a prerequisite for this will be making our economy more
attractive. But judging by what I said before, you can draw the conclusion
that this is exactly what we are pursuing. 

FT: Where is the war on terrorism going to go next? What would happen if it
move on to Iraq? 

Mr Putin: In what sense? That Iraq would be involved in this as a fighter
against terrorism, or that somebody would fight against Iraq? 

FT: The latter. 

Mr Putin: We believe the fight against terrorism will not be over with the
military operation in Afghanistan. It cannot be finished by this. 

Primarily, we should talk about ways to block the financing of terrorist
activities. And so far I have no confirmation, no evidence that Iraq is
financing the terrorists that we are fighting against. Judging by
information that we have at our disposal, financing comes from other
countries, and we know what countries these are. 

As for Iraq, the international community is still concerned about the
possibility that weapons of mass destruction may be produced on the
territory of Iraq. In terms of our relationship with Iraq, we should tackle
precisely this problem . 

Our proposal is as follows. We should convince the Iraqi leadership to
allow United Nations observers and controllers to sites and facilities
inside Iraq that are of interest in this regard, in exchange for a lifting
of sanctions. 

As for possible use of force, we should look at the productivity of what
has been done in this regard so far. If you can name facilities inside
Iraq, that are of interest in this regard, that have been destroyed by the
bombing, I will be grateful to you. I don't know if any have been
destroyed. The bombing has been there, but the results have not been there. 

We believe we should act within UN framework. I've explained the option
that we think would be most effective. However, our proposal has not met
with understanding on the part of the Iraqi leadership. We have not
received any positive response from them so far. So we are going to
continue our joint work, our consultations with our partners in Europe, in
the US and in the UK. And of course we are going to continue this work
within the UN framework. 

FT: For the war on terrorism, do you expect more support from the
international coalition in Chechnya? 

Mr Putin: We believe that this would be well grounded, and fair. And we
should state honestly what has been happening there all this time, what is
happening there now. 

In 1996 Russia withdrew all its military and law enforcement forces from
the territory of Chechnya. Thus de facto, if not de jure, we granted
independence to Chechnya. So nobody can accuse us of suppressing the desire
of the Chechen people for independence. Once already we have given them
such an opportunity. 

And you know what the result was. What happened was that this legal and
ideological vacuum was filled immediately with international terrorists and
fundamentalists. What we got instead of a new state entity was a
quasi-state of a terrorist nature. 

As of today our armed forces are not pursuing any large scale military
operations there. What is happening there is the rehabilitation of peaceful
life, of the social sphere. This is a complex process that will call for
much more time. Of course this will call for the continuation of our
dialogue with the Chechen people. 

Within the framework of the constitution of the Russian Federation,
Chechnya can be granted rather broad autonomy. But we cannot afford to make
the same error a second time, we cannot repeat what happened in 1996 when
an enclave was created which destabilised the whole Russian Federation. We
cannot afford this any more. The vast majority of the Chechen people want
to live peacefully, in harmony with each other, they want to have normal
conditions to rear their children. 

The best example of the fact that we are pursuing dialogue with all groups
of the Chechen population is that fact that the head of the current Chechen
administration is someone who before 1996 fought against Russian federal
forces with arms in his hands. 

As for disruptive forces, there are two major groups there. They are not
numerous but they are there. There are international terrorists, mostly
from Arabic countries. And there is the residue of separatist bandit
formations. 

As for the international terrorists, it is clear that these are people
raised and trained in Afghanistan in military camps run by Al Qaeda,
financed by [Osama] bin Laden, and neither the Russian nor the European nor
the US intelligence services have any doubt about it. 

As for the second group, the separatists, they are certainly linked up to a
great extent with the first group. Russia does not support separatism in
other countries and we hope that no other countries will support separatism
in the Russian Federation. If we allow people to try to redelineate
borders, especially in Europe, then Europe will tumble into an abyss of
continuous confrontation and ethnic wars. 

There is a humanitarian aspect to [Chechen policy], the support for human
rights. In this regard we are ready to co-operate with international
organisations and do our best to prevent problems. A lot is being done in
this regard. The judiciary is operating in Chechnya. The prosecutor's
office is in operation there. Our law enforcement agencies are fighting not
only terrorists and separatists but also the military who commit some
crimes. Criminal actions have been instigated against 20 Russian
servicemen. They have been sentenced to various punishments. 

We will do our best to provide everything necessary to prepare the public
for parliamentary elections and the elections of an executive. 

FT: Would you expect the US to consult you before embarking on any further
military actions beyond Afghanistan in the war against terrorism? 

Mr Putin: Yes, we expect this. And if this is the case then the decisions
will be more mature, they will be better grounded, and the implementation
of such operations will be more effective. 

FT: If you have two terms in office, eight years, what sort of Russia would
you like to have created at the end of that time? What sort of evolution do
you foresee in the role of the regions, of political parties? 

Mr Putin: Let us not look too far ahead in terms of the number of my
presidential terms. I still have to cope with my first term. But of course
this does not prevent me from entertaining some ideas about the future
development of this country. 

Of course the most important thing is to ensure a developed market and
socially-oriented economy. And to ensure within the next few years a
reasonable pace of economic growth in this country. Based on this, we would
seek to resolve Russia's social problems. 

I have told you what we can be proud of in terms of Russia's economic
development in the past two years. But I have to say honestly we cannot be
satisfied with the level we have achieved. We should at least maintain the
current pace of economic growth, and that will be hard to do. 

The second thing that has to be said is that the level of national well
being looks not bad in terms of percentage [growth]. However, in absolute
terms it is rather low and we cannot be satisfied with it. 

Of course I want people in Russia to be better off, to enjoy a better
quality of goods and services at lower prices. I want the development of
democratic institutions, without which the future of Russia is unthinkable.
I want Russia to be more predictable, more transparent, more manageable. 

It is based on this rationale that we have introduced such new tools as
authorised representatives of the president in the regions. Their
responsibilities include co-ordination of the activities of federal
authorities in the regions. By no means are they allowed to intercept
responsibilities and privileges of the regional authorities that have been
elected by the regional population. 

I want Russia's civil society to develop further. I want our new laws on
political parties to be translated into real practice. I want the people to
have the choice in the elections not among personalities who they may like
better or worse, but among representatives of political parties that adhere
to a certain vision of the development of the country, a certain theory of
the development of the nation, a certain political movement. 

All of this should make Russia more organised, more stable and more
prosperous in economic, political and social terms. 

I would also like to add a further point. We should create economic
conditions for the development of a free press... If you look at the
economics of any major media organisation here you will see it cannot exist
on its own without any external influence or investment. This is impossible
for a mass media organisation here. If you look at the expenses that any
media organisation bears in renting premises, utilities, communications,
taxes, then you will see it is unable to pay a decent salary to its
journalists. It can only pay a few cents to them. Without major outside
investment, national and even regional media organisations simply cannot
exist. They are normally run by major energy companies or by trading firms.
The objective of the state is to create the right conditions. 

FT: How would you describe you leadership style? It is said that you always
hire people from St Petersburg, and that you are reluctant to fire people. 

Mr Putin: If we look at the percentages of representatives of various
regions in the government and the presidential administration you will not
find many natives of St Petersburg there. Of course there are some. But not
all of them were invited to their current office by me. When I came to work
in Moscow a few years ago there was a pretty large group of people from St
Petersburg here already. Of course I know all of them. But they had got
their jobs in the government, or in the capital in general, through
channels that had nothing to do with me at all. 

I try to hire people for jobs in the central authorities based on their
moral and professional qualities. I am trained to adhere to this principle. 

Frankly speaking, I have been here in this capacity for less than two
years. Of course I would hire people with pleasure not only from St
Petersburg but from other regions. But to this end I have to know these
people well. I need to see how they work, the results of their activities.
And of course it is much easier for me to take decisions about hiring
people based on what I know about these people from our joint work in St
Petersburg. 

This is the only reason why you find here natives of St Petersburg. Of
course they attract some attention. But this has nothing to do with their
origin. The point is that I know they are fit for making decisions in this
sphere. I know there professional qualities. That is why they are here. 

******

#7
Moscow Times
December 17, 2001
A More Conservative SPS Emerges at Congress
By Andrei Zolotov Jr. 
Staff Writer   

The Union of Right Forces, or SPS, a political faction of nine liberal
groups that often haven't seen eye to eye, projected an image of increased
unity and conservatism as its delegates gathered for a congress Friday.

Although some members -- mainly those from Yegor Gaidar's Democratic Choice
of Russia -- are likely to leave later this month for an opposition liberal
party backed by Boris Berezovsky, SPS founders praised the party's progress
over the past year and its growing influence on Kremlin policies.

"SPS is becoming more and more a unified party," said Anatoly Chubais, an
SPS founder and the head of Unified Energy Systems.

The tone of the speeches reported by Russian media signaled a shift toward
greater conservatism on the part of SPS politicians, once considered the
country's leading liberal reformists. 

Gaidar said he is looking forward to the time when the "systematic reform"
of Russian economics is over and SPS can "become a normal conservative
party." 

Boris Nemtsov, who was re-elected chairman of SPS's political council, said
the party "should not be ashamed of being a patriotic party."

The party's co-chairs -- Nemtsov, Chubais, Gaidar, Irina Khakamada and
Sergei Kiriyenko -- were all re-elected to their posts, Interfax reported
from a resort outside Moscow where the congress took place. 

The main agenda item was a vote to transform SPS into a political party as
required by a new law on political parties. The measure was easily passed.
Delegates also voted for a plan to boost SPS membership from the current
17,686 to 40,000 by 2003, garner 10 percent of seats in the next State Duma
and nominate a presidential candidate in 2004.

Gaidar touted the party's economic platform, saying the government is, in
fact, carrying out SPS's economic policy. 

"When a government emerged willing to and capable of doing something, our
[reform] projects turned out to be in demand," Gaidar said. 

"We can consider the government's work satisfactory," he added wryly, in a
nod to the language used by the ruling Communist Party at Soviet-era
congresses.

The only display of discord came when Nemtsov criticized some of President
Vladimir Putin's picks for government positions and state-run companies,
saying the president was appointing the "St. Petersburg mafia." Over the
past year, Putin has promoted officials from his hometown such as Boris
Gryzlov as interior minister, Alexei Miller as head of Gazprom and Sergei
Mironov as speaker of the Federation Council.

"Dear Vladimir Vladimirovich [Putin], there are good people not only in St.
Petersburg," Nemtsov told the congress, Interfax reported.

Speaking after Nemtsov, Chubais, who is himself from St. Petersburg, said
that despite obvious "mistakes," both Gryzlov and Miller are "decent people."

"Boris Yefimovich [Nemstov], not everybody in St. Petersburg is a complete
idiot, either," Chubais said.

On a more serious note, Chubais singled out "Russia's place in the world"
as the major issue for the country for the next five to seven years. He
said Putin's increasingly pro-Western policies are likely to create major
domestic tensions that will require SPS's support. 

"There will be a huge, historical turnaround in this field that will change
the country's political landscape, the president's internal policies and
his ratings," he said. "Our party is so far very weak in this field -- we
have a low presence among the defense, intelligence and foreign-policy
elite, and expansion in these areas should be a key aspect of SPS activities."

Against the backdrop of a possibly closer alliance with the Kremlin, some
SPS members in the Duma are planning to form the liberal opposition party
Liberal Russia, which has Berezovsky's blessing. State Duma Deputy Sergei
Yushenkov, who plans to hold a congress for Liberal Russia next Friday,
said in a telephone interview that SPS is becoming less liberal. 

"SPS policies are far from the principles they proclaim," Yushenkov said.
"They advocate a strong regulatory role by the government and a highly
centralized budget. They back the concept of government intervention [in
the economy], which is halfway between liberalism and socialism."

Yushenkov said that regional SPS chapters in Pskov, Perm, Belgorod and
Khanty-Mansiisk are expected to join Liberal Russia after the party's
congress. 

State Duma Deputy Viktor Pokhmelkin will also quit SPS once the congress is
held, he said.

*******

#7
Wall Street Journal
December 17, 2001    
OPEC, Russia Are Moving Back To Stalemate Over Output Cuts
By THADDEUS HERRICK and JEANNE WHALEN 
Staff Reporters of THE WALL STREET JOURNAL

OPEC and Russia are edging back toward the brink of a price war.

Russia has pledged to cut its oil exports by 150,000 barrels a day to meet
demands by the Organization of Petroleum Exporting Countries that non-OPEC
producers join the cartel in reducing output to prop up crude prices.

But senior OPEC officials unconvinced Russia really intends to act, now say
there's an even chance that the cartel won't cut production Jan. 1, as has
been expected. OPEC previously said it would cut 1.5 million barrels of oil
a day from world markets, but only if non-OPEC producers undertake a
sustained cut of 500,000 barrels a day.

Senior OPEC officials say they aren't satisfied with the details Russia is
providing about its cuts, in particular, what actual production will be and
how long the reductions will last. Underscoring this concern, OPEC members
are considering a late December meeting in Cairo, to coincide with a
meeting of the Organization of Arab Petroleum Exporting Countries.

"Time is becoming critical," said Adnan A. Shihab-Eldin, OPEC's chief
economist.

Though OPEC produces about 40% of the world's oil, it is worried about
losing market share to Russia, which produces more than seven million
barrels a day and is expected to add another one million barrels a day in
the next few years.

Russia's oil exports normally dip in the winter, when the country needs
more fuel to heat homes, and OPEC officials doubt Russia's cuts will last
through the spring.

Russia, the world's second-largest producer, first said its cuts would
apply only to the first quarter. But during a visit to Canada last week,
Prime Minister Mikhail Kasyanov said they could be extended to the second
quarter.

Two of Russia's oil companies say the country's cuts will be made from
third-quarter export levels, when Russia's exports are at their peak,
making the cuts less painful than from fourth-quarter volumes.

But senior OPEC officials say Russia's plans are vague, and communication
between the two has faltered. The situation is especially tense between
Russia and Saudi Arabia, the world's largest oil producer and OPEC's most
influential member, and the two are said to be in contact only through
third parties.

Still, OPEC is nearing its goal of winning reductions of 500,000 barrels a
day from non-OPEC producers. Mexico, Oman and Norway have agreed to cut
output. On Friday, Angola pledged to slice 22,500 barrels a day from its
exports.

Oil prices closed higher Friday, as traders saw the news as pushing OPEC
toward a January cut. The U.S. benchmark crude oil for January delivery
closed at $19.23 (21.27 euros) a barrel, up $1.11 on the New York
Mercantile Exchange. But obstacles remain. Norway has pledged to cut
between 100,000 barrels a day and 200,000 barrels a day, with a decision
likely before Christmas. But OPEC officials say Norway is waiting for
further details from Russia before committing.

Nor is Russia sending signals that it necessarily wants to work with OPEC.
On Friday Prime Minister Kasyanov, visiting Venezuela, an OPEC member, said
Russian oil policy would be decided independently of other nations.

Statements from Russia's independent oil producers also have OPEC worried.
Mikhail Khodorkovsky, head of OAO Yukos, says his company intends to push
ahead with a 12% increase in production next year, and also suggests
Russian oil companies will increase exports of oil products to offset the cut.

OAO Sibneft, meanwhile, said it would boost its output next year by 22%
next year, to 495,000 barrels a day.

*******
 
#8
The Times (UK)
December 17, 2001
Yeltsin to have heart surgery 
FROM ROGER BOYES IN BERLIN 
 
BORIS YELTSIN, the former Russian leader, is to undergo open-heart surgery
in Berlin after complaining of chest pains, medical sources said yesterday . 

The exact nature of the operation is still unclear. The former President
has a history of heart trouble, including two heart attacks in 1995. The
following year he underwent a quintuple bypass operation. 

Mr Yeltsin, 70, is already staying at the German Heart Clinic, which is
attached to Berlin’s renowned Virchow Clinic. Some 4,500 cardiac patients
are operated on every year there under the supervision of Professor Roland
Hetzer, Germany’s leading open-heart surgeon. 

Professor Hetzer has contacts throughout Eastern Europe and within the
Russian Establishment, where German heart surgery is well regarded. German
doctors operated on Lenin and the tradition seems to have persisted, with
many wealthy Russian patients flying to Berlin and Munich for treatment. 

Professor Hetzer has also worked closely with the American cardiologist
Michael DeBakey, who performed Mr Yeltsin’s bypass surgery in 1996. 

Mr Yeltsin is said to be comfortable. It is not known when the surgery will
take place.
 
*******