Johnson's Russia List #5608 20 December 2001 davidjohnson@erols.com A CDI Project www.cdi.org [Note from David Johnson: 1. RIA Novosti: VLADIMIR PUTIN GIVES INSTRUCTION TO PUBLISH ALL REGULATORY ACTS OF RUSSIAN MINISTRIES. 2. Itar-Tass: Putin deplores stagnation in Russia's small business. 3. Reuters: Russian deputies ditch Soviet-era labour laws. 4. RIA Novosti: PRESENTATION OF SERIES OF DOCUMENTS TOP SECRET: LUBYANKA TO STALIN ON SITUATION IN THE COUNTRY TO TAKE PLACE IN MOSCOW ON TUESDAY. 5. Itar-Tass: Disposable incomes in Russia increase by 5 per cent year-on-year. 6. Luba Schwartzman: ORT Review. 7. Moscow Times: Pavel Felgenhauer, Arms Cash Cow for Whom? 8. Nezavisimaya Gazeta: Vitaliy Sednev, The Economy of Debt. Why things are better in Russia than in Argentina? 9. gazeta.ru: Svetlana Nesterova, Election Officials Plan Controversial Database. 10. Greg Alton: IFC Russian Leasing Development Group - Annual Survey. 11. Vladimir Shlapentokh: Is Putin a pro Western Lone Ranger?] ****** #1 VLADIMIR PUTIN GIVES INSTRUCTION TO PUBLISH ALL REGULATORY ACTS OF RUSSIAN MINISTRIES MOSCOW, December 19, 2001. /from a RIA Novosti correspondent/--President Vladimir Putin has given instructions to publish all regulatory acts of Russian ministries and departments. He demanded that the government work out procedures under which these acts will be invalid unless published in the media. Putin's decision followed a Wednesday session of the State Council /a consultative body under the president/ which discussed the issue of support of small and medium-sized businesses. According to the Russian president, it is essential to provide "information access" to all documents regulating the procedure and terms of activities of entrepreneurs and the powers of controlling bodies. The President also instructed the government to work out regulatory acts on the protection of entrepreneurs' rights while carrying out state control and to draft proposals on the development of consultative centres for entrepreneurs. ******* #2 Putin deplores stagnation in Russia's small business ITAR-TASS Moscow, 19 December, ITAR-TASS correspondents Veronika Voskoboynikova, Mikhail Kalmykov: At a Russian State Council meeting today Russian President Vladimir Putin asked for a list of organizations which engage in extortion when resolving the problems of small businesses. "One has to pay for every step to companies in charge of fire safety, sanitary conditions and suchlike organizations. This is a legalized form of bribery" which should be stamped out, the head of state said. Putin spoke in favour of creating "a qualitatively solid legal environment" at all levels of authority in order to have propitious conditions for small business. At the same time, the president said, a legal base for monitoring the entrepreneurs should be created too. Russian President Vladimir Putin believes that the situation with regard to small business in the country "is uneven and distressing". He stressed that "it's necessary to change the stand of the problem of small-scale entrepreneurship". "If nothing is changed in this sector, the potential for developing small business should be regarded as exhausted. Entrepreneurs will be either closing down their businesses or slip into the shadow economy," the president said. The head of state said that when drafting the principles of supporting and developing small businesses the views of both power structures and entrepreneurs had been taken into account. "Unfortunately we have not yet managed to do everything possible to develop this sector," the president said. For instance, he thinks, federal, regional and municipal authorities bear their share of blame for this. "A fully-fledged middle class has not been formed in the country, almost," Putin said. "At the same time, small business feeds a third of the Russian population." However, he said, more than a half of small businesses are concentrated in eight constituent parts of the Russian Federation, a quarter of them in Moscow. ******* #3 Russian deputies ditch Soviet-era labour laws MOSCOW, Dec 19 (Reuters) - Russian deputies moved on Wednesday to scrap labour laws brought in 30 years ago when the Soviet state was boss, backing a new code that allows private firms to hire and fire workers. The new labour code is also designed to boost job security, locking in workers' rights, penalising employers over delays in paying wages and providing a higher minimum wage. Deputies gave the bill a second hearing in the State Duma, the lower house of parliament, by 283 votes to 125. A third and final reading is due on Friday. If approved by the Federation Council upper house the bill could come into effect on February 1, 2002, coincidentally the birthday of Russia's first post-Soviet leader, Boris Yeltsin. "The old code does not meet the demands (of our economy)," ultra-nationalist deputy Vladimir Zhirinovsky told state-run ORT television. "In the body of a Mercedes we have the engine of a Zaporozhets," he said, comparing existing legislation to a notoriously feeble and cramped Soviet-era car. The new code provides for a 40-hour working week, enshrines the right to paid leave after six months' employment instead of the current 11 months, and sets 28 calendar days as the minimum holiday entitlement. Wednesday's late evening vote came after deputies trawled through thousands of amendments. The previous code dates from 1972 when the Soviet planned economy was at its height. During the debate, communist supporters braved freezing temperatures to protest against the new code outside the Duma building. They argued the new law would leave workers at the mercy of "capitalist" employers. The Duma debate focused on how much of the old protectionist legislation should be retained, with leftist deputies opposing a more liberal labour code that right-wing groups said would lure in foreign capital. The bill is part of a long list of reforms endorsed by President Vladimir Putin's government, including the liberalisation of land sales and an overhaul of the tax system. Ten years after the collapse of the Soviet Union, Russian legislation does not yet recognise private employment, leaving 80 percent of the population outside the legal framework. Russia's largest trade union grouping, the Federation of Independent Russian Trade Unions, supports the new code, but many other labour organisations do not. ******* #4 PRESENTATION OF SERIES OF DOCUMENTS TOP SECRET: LUBYANKA TO STALIN ON SITUATION IN THE COUNTRY TO TAKE PLACE IN MOSCOW ON TUESDAY MOSCOW, December 18. /From RIA Novosti correspondent Valery Yarmolenko/ -- The presentation of the first three volumes of the scientific series of documents Top Secret: Lubyanka to Stalin on the Situation in the Country (1922-1934) will be held at a meeting of the presidium of the Russian Academy of Sciences (RAN). As RIA Novosti was told on the day before at the Public Relations Centre (TsOS) of the Federal Security Service (FSB) of Russia, the book was prepared by the specialists of the Registration and Archive Funds Administration (URAF) of the FSB of Russia, as well as by scientists of the USA and Canada. The book contains political and economic information in the form of surveys and summaries which was prepared by the VChK-OGPU analysts for the top leaders of the country. The available documents disclose the whole spectrum of the life of the USSR in the 1920s and 1930s. Underlying them is the operational and other information which was closed at that time on the true situation in the country, the FSB TsOS officials noted. The chekists "presented" all the phenomena and events of that time to the leaders of the country in the form of unvarnished summarisations. The materials of the security bodies reflect the NEP (new economic policy) epoch and the tragic pages of the history of the industrialisation and collectivisation. The documents are printed without any cuts, among them sections including information about the situation of workers, peasantry and the intelligentsia, the nationalities problems, strikes, public actions, and manifestations of terror and gangsterism. ******* #5 Disposable incomes in Russia increase by 5 per cent year-on-year ITAR-TASS Moscow, 19 December: Real disposable incomes of Russian citizens, after deduction of mandatory payments and corrected against the index of consumer prices, increased in November 2001 by 1 per cent compared with the previous month, and by 5 per cent compared with November 2000, according to a report from Russia's State Statistics Committee received by Prime-TASS today. According to the report, average per capita incomes of the Russian population amounted to R3,107.20 in November, which is 2.4 per cent higher than the figure for October 2001 and 28.2 per cent higher than in November 2000. Preliminary figures show that average nominal wages [i.e. before tax and other deductions] rose by R140 to R3,655 in November, an increase of roughly 4 per cent compared with the previous month and 46.5 per cent more than in November last year. Real average monthly wages also rose in November, going up by 2.6 per cent compared with October, and by 23.5 per cent compared with November 2000. ******* #6 ORT Review www.ortv.ru Compiled by Luba Schwartzman (luba7@bu.edu) Research fellow at the Institute for the Study of Conflict, Ideology and Policy at Boston University HEADLINES, Wednesday, December 19, 2001 - The Supreme Court of the Russian Federation has reinstated three candidates in the Yakutian presidential election: Afanasy Maksimov, Mikhail Sannikov and the current frontrunner, Vyacheslav Shtyrov, the head of the ALROSA diamond company. The other four registered candidates are Yakutian Vice President Spartak Borisov; the speaker of the republic's upper house, Vasily Filippov; Chief Federal Inspector Ruslan Shipkov; and Fedot Tumusov, a local entrepreneur. - Russian President Vladimir Putin chaired a State Council meeting dedicated to the problems facing small business. The President said that the absence of a Russian middle class is unfortunate and that the environment for small business is unpredictable and disheartening. Only 10 percent of the GNP comes from small and medium-sized business. - U.S. President George W. Bush telephoned President Putin to discuss the effects of the U.S. decision to withdraw from the Anti-Ballistic Missile Treaty. Both presidents agreed that they need to continue a dialogue concerning the strategic stability of Russian-American relations as a whole. - State Duma Deputies are reviewing the new Labor Code in the second reading. Corrections include an increase in the number of state holidays and the matching of the minimum wage to the minimum subsistence level. - At noon on December 24th, President Putin will appear live on the ORT and RTR television channels to answer the questions of Russian citizens. - Polish Prime Minister Leszek Miller is in Russia on an official visit. Today he will meet with Russian Prime Minister Mikhail Kasyanov to discuss the perspectives of economic cooperation and other aspects of bilateral relations. Tomorrow Miller will meet with President Putin. - Federal Security Service (FSB) Director Nikolai Patrushev has arrived in Grozny. He will meet with the local FSB leadership, study the progress of the anti-terrorism operation, listen to the reports of the regional headquarters, and present several FSB officers with government awards. - In Sochi and throughout the Krasnodarsk region, electricity is still in short supply after the recent snowstorms. - Two more bodies have been removed from the Kursk nuclear submarine. - The Russian Orthodox Church is celebrating the day of St. Nicholas the Miracle-Worker. - Defense Minister Sergei Ivanov's visit to Belgium is coming to a close. From Brussels he will fly to London to meet with British Defense Secretary Geoffrey Hoon and Foreign Secretary Jack Straw. - The Moscow Emergency Medical Center celebrates its tenth anniversary today. Thousands of lives have been saved in this time. - In the Central Black-Earth region only 30 people who know how to make "valenki" remain. ******* #7 Moscow Times December 20, 2001 Arms Cash Cow for Whom? By Pavel Felgenhauer The "multipolar world" concept was invented by former Prime Minister Yevgeny Primakov in the mid-1990s and quickly became the foundation of Russian defense and foreign policies. In 1997, Primakov wrote: "One of the basic aims of Russia's foreign policy is to collaborate in the transformation of a bipolar world into a multipolar world ... to counterbalance -- together with Europe, China and Japan -- the trend toward unipolarity." After Primakov was ousted in 1999, the multipolar concept continued to thrive. It was even incorporated into the official Russian military doctrine signed by President Vladimir Putin last year. As with most other nations, Russia's foreign policy reflects its foreign trade. In the last decade, Russia has exported large quantities of oil, gas, steel, fertilizers and timber -- mostly to the West. At the same time, Russia has also exported manufactured products (mainly arms and military and nuclear technologies) to the East -- to China, India, Iran, the Middle East and Africa. Russian arms exporters were always considered a force to be reckoned with in foreign policy decision-making. The multipolar concept not only implied Moscow should have a free hand to play states off against one other while maintaining an equal distance from all, it also reflected the delicate balance between the oil/gas/metals lobbies and the arms exporter lobbies in the Kremlin. Almost all previous attempts by pro-Western forces to alter Russian foreign policy involved schemes to diversify Russian arms exports and to create a pro-Western lobby within the military-industrial complex. In 1997, tycoon Vladimir Gusinsky and Israeli Prime Minister Binyamin Netanyahu launched a project to begin joint production of new armaments, combining Israeli electronics and powerful Russian platforms to make weapons that could compete on the world market. Gusinsky managed to encourage the Kremlin to sign a decree allowing military cooperation with Israel. In 1997, Israel and Russia signed their first major arms deal to jointly produce a $200 million early-warning A-50 "Falcon" plane for China. Beijing prepaid the full cost of the plane, which was built in Russia and equipped in Israel. The Chinese opted to buy up to five more. However, in 2000, Washington pressured the Israelis to cancel the deal at the last moment. All other proposed East-West joint arms programs (such as the Russia-European missile defense) either never got off the ground or went wrong. Today the United States does not want its friends selling China new weapons that may be used against U.S. troops or its allies in Asia. China is the only major arms market in the world that is not controlled by the United States or its close allies. This year and last Russia sold China nearly $2 billion worth of arms per annum. But should Russia be allowed to continue selling new jets, submarines, anti-aircraft missiles, etc. to China at current volumes if Moscow truly wants to be a U.S. ally? In the last two weeks, Putin has swallowed without much protest Washington's abrogation of the ABM Treaty and U.S. backtracking on closer Russian partnership with NATO. People in the Kremlin now openly say the multipolar concept was a mistake, which in effect means that Moscow is accepting a Washington-dominated unipolar world. But will the Kremlin also be as ready to sacrifice one of its main cash cows -- the arms trade? Russian officials boasted this week that arms exports for 2001 might exceed $4 billion. But recently Audit Chamber chairman Sergei Stepashin disclosed that Russia exported $3.7 billion of armaments in 2000, while government coffers received only $7,000. The Finance Ministry estimates that the budget may have received as much as $70 million in 2000 from the arms trade. In any event, it's clear that vast sums have disappeared somewhere without trace. Perhaps it can be explained away as routine Russian corruption, but some insiders say money from the arms trade is used secretly to finance "special projects" run by the Kremlin. It has been announced that early next year the Audit Chamber will conduct audits of Russia's arms-trading organizations. Maybe these audits will produce no incriminating evidence, as with many other checks in the past. But maybe Putin really is ready to curtail Russia's arms trade, which is only causing problems with Washington (while the proceeds are almost entirely misappropriated) and is using Stepashin as a battering ram. Pavel Felgenhauer is an independent defense analyst. ******* #8 Nezavisimaya Gazeta December 19, 2001 The Economy of Debt Why things are better in Russia than in Argentina? By Vitaliy Sednev (therussianissues.com) A recession which economists had predicted long before September the 11th is becoming a real fact. Production is shrinking in the United States and Japan. The European economies where growth accounts for less than two percent will be unable to make up for that fall. The economic growth in South and South East Asia is not expected to be higher than 1.7 percent in 2001. What impact will the world economic problems have on Russia is not an idle question. We still remember that the 1997-1998 Asian crisis dealt a hard blow to Russia. True, production output has been growing in Russia for the third consecutive year. With a 5.5 percent GDP growth, the Russian economy was one of the most fast-growing in 2001. Whether this growth is stable is another question. Prices for oil, aluminum and gas are falling, while export revenues, and even the Central Bank reserves, are dwindling. However, a lot of factors make the current situation look different from what it was back in 1998. Take a look at the stock markets, for example. In the 1990s Russian indices used to plunge upon receiving any bad financial news. The Russian markets followed suit each time the Dow Jones index went down. Russian shares fell in the wake of the Korean crisis, and low oil prices caused a collapse in Russia. Now, that dynamics has changed. There are factors, the way how the state debt is administered in the first place, which can stabilize the situation from the inside. The actions of Central Bank Chairman Viktor Gerashchenko and the ideas of Andrei Illarionov form the backbone of the state debt policy. Despite the fact that Geraschenko is a conservative and Illarionov is a liberal, President Putin has found a "technological" application to their ideas and proposals. An "anti-dollar umbrella" has been set up to protect enterprises from world instability. Central Bank Chairman Viktor Gerashchenko has closed the internal state debt market to foreign portfolio investors. The Bank has forbidden free conversion and repatriation of revenues from transactions with state securities. As a result, the flight of capitals from developing markets in 2001 did not affect Russian markets because there were very few financial means which could actually flow abroad. Illarionov was the first to suggest a concept that the Russian foreign debt should be administered. He was categorically opposed to debt restructuring during talks with the Paris Club of Commercial Creditors last autumn. His calculations showed that Russia would benefit more from paying its debt now rather than from repaying interest later and repeating the mistakes of the 1990s. Russia has restructured its debt ten times in the last ten years and has brought it to 17 billion dollars. However, many politicians found it hard to give up the logic of the 1990s and continued to insist that the payments would be an excessive burden on the budget and that Russia should ask for more credits. It seems that this year's economic dynamics proved that Illarionov was right. A revival that started in February 2001 was the economy's first positive reaction to Illarionov's decision to pay off foreign debts . The external situation look paradoxical. An industrial growth occurred after dollars had been taken out of the country. It is natural that the old logic should prompt the opposite: "The more foreign currency is accumulated inside the country, the better." However, this is not so! High oil prices and abounding dollar revenues from oil sales are not beneficial to all. They give a chance to earn profit to the oil companies and oil-related industries and undermine the competitiveness of other branches accounting for 90 percent of the Russian economy. Foreign currency inflows increase domestic market prices. The ruble becomes too expensive. Expenses also tend to grow. Imports replace domestic products, which turn out to be too expensive in foreign markets. Only eight million people in Russia have access to profits from exports of raw materials. The rest are employed by "second rate" economy, i.e at enterprises that had been in a unique competitive stalemate before August 1998. The country lacks money was Russia's motto in the 1990s. Anatoly Chubais, Sergei Dubinin and Sergei Kiriyenko wanted to attract more foreign currency at any cost. They did that in the form of foreign borrowings. The treasury bills pyramid and "currency corridors" were erected and built to achieve the same goal. In the end, Russia got a lot of money, its foreign debt increased by 55 billion dollars but its own economy did not grow. The Russian industry revived after the August 1998 crisis when the financial bubble blew up. Machine-building, the food and light industries started to develop fast. Employment increased by two million. That proved that investments were the only thing required for normal economic development. Another new positive factor which was totally absent before is the financial discipline of the state. Debts and dependence are the inevitable price of any foreign borrowings. It was not a long time ago that the IMF emissaries dictated how large our taxes should be and what the ruble rate should be like and decided whether a new tranche should be granted to Russia. The current Russian authorities had to make a choice: either to get rid of the credit burden or to leave things as they are. It looks as if the Russian leaders had made their choice. Russia is repaying its debts. That means its policy no longer depends on foreign creditors' demands. Russia's foreign debt has decreased by 22 billion dollars in the last three years. President Vladimir Putin said in October that Russia would pay off foreign debts ahead of schedule. Russia owes about 137 billion dollars on the principal debt. If no new borrowings are made, Russia will have to pay almost 360 billion dollars in the next 30 years on condition that the payment schedule is observed. If we borrow more we will have to pay more. It turns out that paying ahead of schedule is more beneficial. It gives Russia a chance to reduce interest payments and to preserve resources for social programs and salaries to public servants. Young reformers used to claim that paying pensions and salaries to public servants was impossible without borrowing loans from foreign banks and selling state property. As a result, the real wages fell and production kept dwindling every year, while the debt noose was tightening around Russia's neck. Some government officials have recently resumed their talk about new IMF or Paris Club borrowings. Some suggest placing the Euro bonds. However, President Putin seems to have another approach. He believes that Russia should live within its means. Experts often compare Russia with Argentina and Turkey. Turkey that used to be a pet for foreign investors is in permanent crisis and is asking for financial aid. Argentina has literally repeated Russia's 1998 mistakes and is balancing between a default and devaluation. The International Monetary Fund has agreed to grant eight billion dollars worth of aid to Argentina. However, the loan will be in vain, if the government continues to pursue an inadequate policy. Argentina is asking for a new 1.3-billion dollar tranche. Russia is not asking for anything. That means it stands a chance to continue industrial growth next year. ******* #9 gazeta.ru December 19, 2001 Election Officials Plan Controversial Database By Svetlana Nesterova Russia's electoral authority, the Central Election Committee (CEC) has drawn up ambitious plans for managing the next national elections. The CEC intends to compile a list of the entire electorate including detailed information about each and everyone legible to vote. The CEC claims the information will allow voters to find out more about potential candidates, however, if successfully implemented the project could undermine the common voters' right to privacy. On Tuesday, December 18, the Central Election Committee reviewed a programme for the further development and improvement of the so-called state automated system GAS Vybory -- a mechanism for processing ballot papers and counting votes. Presenting the report to her colleagues, CEC official Olga Volkova claimed that in the six years since its introduction the GAS system has proved a success. Reportedly GAS has been used in over 5 thousand polls on federal, regional and municipal levels. However, the CEC officials are convinced GAS requires comprehensive modernisation before the parliamentary and presidential elections in 2003 and 2004 respectively. Over the next two years the CEC plans to drastically automate the whole voting process in Russia in order to facilitate the work of election officials and to limit the possibility of human error or foul play. In addition by 2004 the CEC plans to fulfil an ambition of the Committee's chief Alexander Veshnyakov and create a single register containing personal data on all Russian voters. That register would be an integral part of the GAS Vybory system. The CEC officials did not specify how detailed the personal information would be. It is therefore highly likely that civil rights groups will protest against the CEC's plans, for access to citizens' personal data could violate privacy rights. The CEC officials claim that all data gathered in their register will be used solely in the interests of the state. But that claim is far from convincing for the wording "the interests of the state" is, to put it lightly, ambiguous. The CEC officials say the issues concerning the modernisation of the GAS Vybory system will be spelled out in detail in a special federal law which they are currently elaborating and which they say will be submitted to parliament in the near future. Not without good reason observers are questioning why the CEC should want a whole new law on the registration of voters and why amendments to the draft bill on GAS Vybory would not be sufficient. Some claim that Alexander Veshnyakov wants President Putin's permission to create a detailed database of all Russian adults that not even any of Russiaâ' special services can boast. According to some sources, the Federal Security Service (the FSB) keeps files on no more than 10% of the population and simply does not have the resources to keep the track of each and every citizen. The tax authorities have enormous databases, but by law they are not allowed to gather any information other than details about individuals' incomes. Due to the specific nature of the CEC and the perseverance of its chief Alexander Veshnyakov, it is quite possible that the CEC will be granted the right to collect absolutely any information about adult Russian. The CEC officials insist that the sole purpose of compiling such a detailed database is to enable them to inform the electorate and authorities about any person who expresses an interest in standing for a public post, whether that post be a seat in a regional legislature or the presidency of Russia. But who will guarantee that the CEC's data would not be used for some other, even potentially evil purposes? Veshnyakov has heightened those apprehensions by saying in previous statements that GAS Vybory could potentially be used "with the aim of rendering aid and assistance to the indigent population". Social welfare departments (the so-called "sobes") often fail to help those who really need help and Veshnyakov claims the electoral authorities could provide such information to social workers. At the CEC session on Tuesday Veshnyakov refused to discuss other possible uses of the register, saying that the only purpose it would serve would be to ensure voters' rights. On Tuesday the CEC officials announced that they plan to spend a total of 2,916 billion rubles (approximately 100 million USD) on modernising the state automated election system. They say that some of the money will come from the federal budget, but "extra-budgetary sources" will also be used. On Tuesday Veshnyakov said he hopes that the draft law on GAS Vybory's further development will be submitted to the president for consideration before the end of this year and that the State Duma will pass the bill in the first half of next year. And as is now the political status quo in Russia, if Putin likes the draft law, the State Duma will almost certainly give it their seal of approval. After the CEC meeting, Alexander Veshnyakov appeared before the press to deliver a couple of important political statements. Firstly the chief election official commented on the proposal put forward by certain parliamentarians and state officials to amend current electoral legislation to abolish the minimum turnout requirement. The idea has been widely discussed after elections in many regions elections were nearly disrupted due to low turnouts. For examples, in the elections to the Moscow city legislature last Sunday, only 28% of those legible voted, and if less than 25% had voted the results would have been declared void. Veshnyakov firmly asserted that the minimum turnout provision must be preserved. "That measure," he said, "constitutes a guarantee of citizens' rights to take part in elections and is a guarantee of the representative nature of elected bodies". According to the CEC chief, if the minimum turnout requirement is abolished, "it could considerably isolate voters from the authorities". Veshnyakov's other statement concerned the forthcoming elections for the presidency of the Republic of Yakutia. The intrigues and scandals surrounding the election campaign in the enormous diamond rich Siberian republic have been at the forefront of Russian news for several weeks now. Veshnyakov dismissed the claims from some areas that by election day in Yakutia on December 23, there will be no candidates left on the ballot papers because they will all have been barred. "Those reports are not true," Veshnyakov said. "There will be real candidates and a real choice for voters". Alexander Veshnaykov stressed that by law candidates who wish to withdraw from elections are required to do so not later than three days prior to the opening of the polling stations. Thus, the CEC chief hinted that the deputy chief prosecutor Vasily Kolmogorov had only one day left to submit his withdrawal to Yakutia's election authorities. Kolmogorov flew to Yakutsk on Wednesday and submitted his application to be withdrawn from the elections on time. ******* #10 Subject: IFC Russian Leasing Development Group - Annual Survey From: "Greg Alton" Date: Wed, 19 Dec 2001 David, The following publication may be of interest to your readers. I'd appreciate if you could include the following announcement in the JRL in due course. The International Finance Corporation's Russian Leasing Development Group (LDG) has published its annual survey of the Russian leasing market. The survey is available in its entirety in English at the address below in PDF form; the Russian edition is expected shortly. http://www.ifc.org/russianleasing/eng/analit/leas2001.pdf The survey and the LDG's work may be of interest to those interested in enterprise finance (particularly for small and medium enterprises), financial intermediaries and financial markets, and equipment sales and acquisition in Russia. More information about the IFC and the Leasing Development Group, including how to subscribe to electronic versions of the LDG's publications and electronic archives of the LDG's publications to date, are available at: http://www.ifc.org/russianleasing/ ******* #11 Date: Wed, 19 Dec 2001 From: Vladimir Shlapentokh Subject: Is Putin a pro Western Lone Ranger? Is Putin a pro Western Lone Ranger? By Vladimir Shlapentokh On October 20, 2001 I arrived at Pulkovo, the international airport in Petersburg, and to my Russian friends in waiting I jokingly exclaimed, "Ah, we are now allies!" To my surprise, their reaction was lukewarm at best, and in spite of my further cajoling they declined to talk further on this subject. Later I understood why. In the last five or six years, during my trips to Russia, I watched anti-Americanism flourish among the country's intellectuals, politicians, and, to my dismay, my close friends. In most cases I found their critiques of the United States unfair. They made America a scapegoat for the failure of the economic reforms and Russia's fall from superpower grace. In the same period, I met many ordinary Russians who seemed more friendly toward America than my friends and colleagues. The polls confirmed these impressions. The All-Russian Center of Public Opinion Studies reported that 70 percent of the Russians have "friendly" attitudes toward America. Unfortunately, it is the position of elites that matters most in the Russian-American relationship. One of my colleagues, a close adviser to Putin, explained that the president, amid his rise to power, held the idea of restoring Russia's greatness close to his heart. This personal goal of his played out in his public statements and fomented anti-Americanism among Russian elites who, as a Moscow sociologist said, "hoped that the former KGB man could rebuild Russia's independence, keep its distance from the West, and strengthen its military power." In the first year of Putin's rule, Russian newspapers ran harsh anti-American headlines. I could only sigh when I saw the names of famous liberals among the bylines of these articles. Amid such an anti-American backdrop, Putin's mild reaction to Bush's National Missile Defense plan (declared by the White House in June 2001) and particularly his firm support of the U.S. after September 11 signaled a radical shift in the Kremlin's policy. It was becoming apparent that Putin had decided to abandon, at least for now, his pursuit of Russian greatness and become, in the words of the prominent Moscow military analyst Feldenhauer, "a strategic ally of the United States." In light of Putin's shift in foreign policy, I thought that my liberal acquaintances among the Russian intellectual elite, many of whom had previously concealed their pro American views, would be happy about the president's decision. Considering the many threats to the country-its vulnerability to terrorism, the evident Muslim threat from the South, Chechen separatists, the spread of Chechens, Azers and other people across the country, who are resented by most Russians, as well as the potential Chinese threat-I also supposed that some nationalists, despite their hatred of the U.S., would support the alliance with America as dictated by long-term Russian interests. As for the Communists, I expected them to completely reject Putin's move toward a rapprochement with the U.S. As it turned out, I was right about the Communists and nationalists, but quite wrong about the liberals. The Communists did indeed maintain their deeply anti-American feelings. I was confronted by many of them during my lectures in Petersburg and Moscow, where I discussed the importance of the September events to the relationship between America and Russia. These people attacked me with the most absurd conspiratorial theories, ascribing the terrorists acts in New York and Washington to American special services and describing Osama bin Laden as a CIA agent. Some Russian nationalists changed their views on RussianAmerican relations. Among these nationalists was Alexander Tsipko, an old acquaintance of mine and a leading political scientist. Only a few months ago he had denounced "the Washington obkom" (an allusion to the regional party committee), accusing it of pushing Russia toward catastrophe. But now he seems convinced that it is necessary for the country to forge an alliance with America. It was a different story altogether with my dear liberals. Why weren't they pleased now that their sympathies for America won approval from above? Of course, there were some liberals who vehemently supported the new foreign policy. They voiced their opinion mostly through a few consistently pro liberal, pro Western media, such as TV channel 6, the newspaper "Kommersant," and the weekly "Itogi." However, most of those who call themselves liberals, the advocates of the free market and democracy, did not budge from their adverse views of America. Their gut hatred and contempt for America is so strong that they do not want to recognize America as a victim, a just revenger, nor as a victor. Indeed, these liberals felt little compassion for the American tragedy of September. Certainly, as they watched the horrendous pictures on television they felt pain and empathy for the victims and their families. But a month later, in their discourses about the U.S., they forgot about the victims and labeled America as ultimately responsible for the September events. Of course, these liberals also fiercely disapproved of the war against the Taliban. They submitted that the ultimate outcome of these events would be the collapse of American dominance in the world. Later, as the American successes in Afghanistan became evident they tried to downgrade the achievement by declaring that "Americans simply bought their victory." In the aftermath of September 11 the most liberal newspapers, Obshchaia Gazeta and Novaia Gazeta, published a number of nasty anti-American articles, some of which nearly gloated over the American disaster and regarded it as necessary redemption for America's arrogance. One such article was written by Nina Khrushcheva, granddaughter of the Soviet leader, whose contempt for America was seconded by her uncle Sergei Khrushchev, a recently confirmed U.S. citizen who published a scathing article about America in another supposedly liberal newspaper, Izvestia. It is remarkable that Russian liberals simply do not believe (and who knows, perhaps their familiarity with the Kremlin's Byzantine intrigues entitle their scepticism) that Putin's move toward a rapprochement with the U.S. will be long-lasting. Rather, they perceive it as a temporary manoeuver and in no way a radical shift from the age-old anti-Western policy. Liberal Russian journalists often cite previous episodes of rapprochement between the two countries (during the times of Khrushchev, Brezhnev, Gorbachev and Yeltsin), all of which ended with an outburst of mutual animosity. Moreover, many liberals do not believe that Putin will relinquish the Eurasian ideology with its focus on the alliance with China against the West; the ideology is also supported by many generals. During my stay in Russia, it was announced that Putin would close two miliary bases-one in Cuba, another in Vietnam. This was evidently another powerful sign of the president's determination to abandon the struggle for equality with the U.S. in the international arena. In the Russian TV program Vremia (October 21), this decision was hotly attacked by former generals, but defended by some political analysts. However, the people around me were totally indifferent to this event and refused to see it as another milestones in the new relations between America and Russia. None of my interlocutors paid great attention to the landing of American troops, with the Kremlin's full endorsement, in Central Asia, a territory that had been under Russia's control for roughly two centuries. This event infuriated Communists and their allies among the nationalists. In each of my lectures at the leading sociological and economics institutions in Moscow and Petersburg, I prodded my audience by praising Putin. I spoke of the president as a great leader who showed that he understood the deep national interests of the country by proclaiming Russia as an ally of America. To make my point even more provocative I compared Putin to Stalin, who had joined the anti-Hitler coalition. I displayed the famous picture from the Yalta conference in 1945 that recently reappeared in the French magazine Nouvelle Observateur, only the heads of Roosevelt, Churchill and Stalin had been replaced with the heads of Bush, Blair and Putin. In each audience my praise of Putin was received with sly smiles or total indifference. During the hot debates over the content of my presentation none of the participants made positive comments about Putin's shift in foreign policy. With one of Putin's advisers on public opinion I developed my idea that Putin is a great Russian leader, that he decided to stop chasing the specter of greatness, and that he now pursues the true national interests of the country. The advisor mentioned in an ironic tone that no one in his office, which is visited by some of the highest Russian dignitaries, including the head of the presidential administration, has spoken as highly of Putin as I did. It is quite curious that many Russians who have visited the U.S. many times, who have entertained close ties with their American colleagues and even those who have children living in the U.S., Israel and other Western countries are no less (or perhaps even more) hostile toward the U.S. than those who have no experience of life in America. In Soviet times as well as in the first fives years of the post-Soviet regime there was a positive correlation between one's level of education and social status and one's friendliness toward America. Now, it is quite easy to see (and the survey data supports my personal impressions) that the inverse is true. The more socially active and educated a person is the more they dislike America. Only members of the lowest strata of Russian society are close to the cream of society in their negative attitudes toward America. In any case, my personal experience in Moscow refutes an idea that is deeply ingrained in the American mind: "If they knew us they would love us." Meanwhile, the bulk of the population is quite friendly toward the U.S. If Moscow was the hotbed of pro American feelings in the past, the province is now more congenial toward America. The results of a Fund of Public Opinion survey published during my stay in Russia showed that the relative number of Muscovites who considered the bombardment of Afghanistan as "a means to consolidate the American dominance in the world" was one-third higher than the relevant number for Russia as a whole. A comparison of Russia's attitudes toward America with that of other countries engenders some interesting results. As explained, in Russia the elites are much more hostile toward the U.S. than the masses, but in Pakistan the opposite is true. The ruling class is more pro American than the rest of society. In Eastern European countries we see unity among the elites and the masses in their support for the U.S. in the wake of September 11, while China probably serves as an example of a country in which both the elites and the masses are suspicious of the U.S. even after its terrible tragedy. While there are some commonalities, the causes of anti-Americanism vary from one country to the next. According to the theory of one of my colleagues, Russia's enmity toward the U.S. is deeply rooted in the unwillingness of ambitious people to reconcile themselves to the fact that they are successful only in a rather provincial country and that they are not on par with their American counterparts. One of my old acquaintances-a prominent scholar who often visits America and has two children living in the West-was surprisingly inimical toward the U.S. The rejection of Osama bin Laden as the main suspect of the terrorist acts is an almost irrefutable indicator of deep anti-Americanism, a device often used by educated people who try to cover their true feelings toward America by citing their respect for the assumption of innocence. This scholar, like many other Russian scholars, believed that America's accusations against Osama bin Laden were suspicious. He also said that America was guilty for the failures of economic reforms in Russia and fumed about the arrogance of American foreign policy. I met several other intellectuals, most of them with experience of life in the U.S., who shared practically the same views. Even more interesting was my contact with a group of students in a prestigious postgraduate school of advertisement in Moscow. I attended a class where the instructor, at my request, linked all of the day's tasks to the developments of September 11. One of the tasks was to invent three titles for articles about the horrific incident. To my great surprise most of the proposed titles were ostensibly anti-American: "A card house," "The collapse of America and globalism," "The hypocrisy of political correctness," "The power of the dollar," "The triumph of America as the symbol of the end of the world," and so on. Only one student, a Georgian, emerged as a true friend of America. When I shared my perceptions of the students views and mentioned that I was astounded by their almost unanimous anti-Americanism nobody protested against my generalization. At the same time, I discovered in intellectual circles total indifference toward the fate of Russian democracy. Intellectuals have witnessed the evident decline of democratic institutions since 1993 and the acceleration of this process under Putin. In our conversations, they did not deny that the State Duma was somewhat similar to the Supreme Soviet, that there were no serious political oppositions in the country, and that self censorship in the media was almost universal. They also did not deny that the Kremlin was trying to shutdown TV-6, the last independent television station in Russia. However, none of my interlocutors expressed even the slightest concern about these developments. The major subject of my conversations in both capitals was not the miserable status of Russian civil society (nobody took seriously the fuss about "the forum of civic organizations" arranged by Gleb Pavlovsky, Putin's main adviser on public relations), but the deep conflict inside the political establishment and the fight for control of the bureaucracy and corporations. The struggle between two groups, "Kremlin I" and "Kremlin II," to use the terminology of the Moscow press, captivated the people I talked to. "Kremlin I" was made up of the old team of officials that Putin inherited from Yeltsin. "Kremlin II" consisted of the "gray wolves," as also termed by the press, for their obscurity and aggressiveness; the members included Leningrad's KGB men, and Putin's acquaintances from his native city. Both teams were deeply anti-Western and anti-democratic. With sharp interest some intellectuals discussed the gossip about an exotic political issue-the growing role of the gay faction in the ruling elite, particularly in the Ministry of foreign affairs. While displaying their coolness about Russian democracy the same liberals with almost sadistic pleasure attacked the attempts in America to diminish some civil liberties as necessary for the fight against terrorism. One journalist, whom I had always regarded as a friend of America (he has visited the U.S. several dozen times), venomously rebuked the White House for Press Secretary Ari Fleischer's criticism of the American comedian Bill Maher's insensitive comments about the September events. This journalist called it "the end of the freedom of speech in America." During my stay in Moscow I came across a very interesting and important political development: the ideological and psychological conflict between Putin and most of the political establishment. As the prominent political analyst Sergei Karaganov formulated, "Putin is now far away from his obsolete foreign policy establishment." Karaganov also contended that "people in Russia simply do not understand what the president is doing." He was seconded by Viacheslav Nikonov, his Moscow colleague, who asserted that "Putin has assumed a position that is more pro Western than 90 percent of the Russian electorate and the elite are prepared to tolerate it." Certainly, the conflict between Putin and the elite has not been made fully public. Putin's authoritarian rule and the corrupt elites' fear of arousing the ire of a vengeful Kremlin explains why the voices of critics have been muffled. Adjusting to the new views of their boss, Sergei Rogov suggested in his article published in Nezavisimaia Gazeta that it was not Putin who was pushed to change his foreign policy, but Washington that began to "grovel" before the Kremlin, looking for its support in the war against the Taliban. Another journalist suggested that Putin's forthcoming relations with the American president made "Russia a superpower" again. Only Gennadii Ziuganov dared, in an open letter in Sovietskaia Rossia, to directly equate the president to Gorbachev and Yeltsin as a potential traitor, while the rabid nationalist Mitrofanov mocked Putin's intention to replace Tony Blair as "the first deputy mayor of the global village." The contempt of most Russian military generals for Putin's friendship with America is conventional wisdom in Moscow. The open letter of "the generals and admirals of the Soviet armed forces and the Russian army to the president of the Russian Federation, the deputies of the State Duma, the members of the government, and governors (presidents) of the Russian Federation" (published on November 10) harshly critiqued Putin's military policy and confirmed this conviction. It is not amazing that many members of the Russian elite-for instance, political analyst Dmitry Gornostayev-underscored that even if Moscow and Washington achieved, during Putin's visit to the U.S., an understanding on nearly all of the issues on their agenda they have failed to accomplish a rapprochement on strategic issues per se. Confronting the clearly spiteful feelings of the elite in relation to his new foreign policy (these feelings are reflected in the grim faces of Russian dignitaries at televised meetings with Putin in which he explains his new friendship with America), Putin deemed it necessary to say on November 20 that the critics of the new rapprochement with the West are "deeply deluded" if they think that this new move is a tactical ploy. Of course, the future of Russia's relationship with the U.S. depends on a host of factors, both domestic and international. I will not discuss the different prognoses and I am far from excluding the chance of a complete reversal of Russia's friendly stance toward Western foreign policy, but I do believe that the political and intellectual elite, whatever the extent of their anti-Americanism, will not be able to force Putin to revoke his new stance toward the West. I discussed this question with a few respected social scientists in Moscow. Most of them dismissed the idea that Putin is taking a serious political risk with his turnabout in foreign policy. Ironically, they believe that Putin's risky friendship with America can not hurt him because of the character of his authoritarian rule, his control over the media, the spreading of fear among those who are at odds with his policies, and the complete demoralization of the Russian generals. As for the masses, they should be ignored as an actor in foreign policy issues. Putin continues to be the only Russian politician who is supported and trusted by the majority of the population. After Putin's trip to the U.S., the public's willingness to reelect him as president was higher than before his proclamation of the new course in foreign policy (compare 53 percent on November 17-18 against 44 percent in July 2001). At the same time, two-thirds of the Russians endorsed the alliance with the U.S. on the eve of Putin's trip to America. Similar to several leaders and regimes of the past, Putin is a popular leader who runs an authoritarian (though not totalitarian) society, which shares several elements of a Bonapartist regime. One of the sources of Putin's popularity is the clear difference between him and Yeltsin, who was openly corrupt and often drunk. Several regimes in history belonged to this group (for instance, the regimes of Napoleon I and Napoleon III in the nineteenth century, the Peronist regime in the twentieth century, leaving aside the Caesarism in Roman history). In such a regime the head of state enjoys high popularity among the masses, which is often due to his attacks against elites and promises to ordinary people to bring order in society and satisfy their basic needs. He combines this support of the populace with the use of the army, or in Putin's case the political police, as his major instrument of power. Under these circumstances he is not restrained by any political body-democratic or nondemocratic, such as the Politburo or a military junta-and feels mostly free from the influence of the regime's political and economic elites, and especially enjoys his independence in matters of foreign policy. Putin now has the West as an ally and a weak and craven elite as an opposition. His position, no doubt, has been fortified. He has shielded himself from the foreign critiques of his mimic democracy and the cruel behavior of his troops in Chechnia. What is more, with his alliance with America he can now be more confident in diverting the threat of Islamic fundamentalists to Russia, a threat much more important for the survival of Russia than the American presence, even in the long term. He can also hope to get assistance from the West in the case of an emergency. A threat to Putin's regime lies only in the potential change of the mood of the masses and the drastic decline of Putin's popularity, which could happen only with a new economic crisis as a result of a continued decline in oil prices. Only in this case (and if Western aid was not sufficient to overcome the economic adversities) could Putin's popularity fall drastically and the specter of mass riots emerge. In such a case, he would be confronted by rivals. Under certain circumstances these rivals might have a chance, though very slim, for success. At the same time, it would be difficult to dislodge Putin in almost any case. By the end of my visit to Russia, I found myself in a strange mood. In the last year, I had watched Putin's behavior with mixed feelings. I recognized that he helped stabilize the society, but I also saw in him a ruler who used lies and demagoguery consistently. He systematically destroyed Russia's fledgling democratic institutions, without speaking about the suspicious circumstances of his arrival to power. And now, as it seems, he has sincerely joined America in the fight against a very dangerous enemy of Western civilization. In my hierarchy of values, Putin's involvement in the war against international terrorism is much higher than my genuine concern for democracy in Russia. What is more, I could not escape the thought that this turnabout in the Kremlin's policy (so beneficial for America and the West) would not be possible if democracy was triumphant in Russia and the State Duma had clout in foreign policy decisions. Reflecting on Putin's new foreign policy, I sometimes think of my grandfather. He had been an owner of a few pharmacies in Kiev before the revolution. By all means he hated the Bolsheviks who confiscated his property and introduced a repressive regime in the country. And yet, when Hitler attacked the Soviet Union and Stalin headed the fight against the Nazis my grandfather reconciled with the Soviet regime and wished it victory with all his heart. In the same fashion, in spite of the dubiousness of comparing Putin to Stalin, I have moved from being a harsh critic of Putin to a bourgeoning supporter. It seems clear to me that the war on terrorism is too serious for America to discard Putin as an ally. Acknowledgment: The author wishes to thank Joshua Woods for his editorial contribution to this article. *******