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1. Luba Schwartzman: TV1 Review.
2. Wall Street Journal: Allan Cullison, Putin Shows Resistance To U.S. Pressure on Iraq.
3. Nezavisimaya Gazeta: Alexei Arbatov, RUSSIA COULD DELIVER ITS OWN SOLUTION TO IRAQI PROBLEM.
4. Washington Post: Joby Warrick, Russian Arms Safeguards Found Lacking.
5. Washington Post: Duncan Hunter, Wasteful 'Threat Reduction' in Russia.
6. Reuters: World wrestles with Stalin legacy, 50 years on.
7. Vlad Ivanenko: RUSSIAN ECONOMIC PUZZLES: 3) WHAT HAS HAPPENED WITH THE RUSSIAN PUBLIC DEFICIT?
8. www.fednews.ru: Speech on US-Russia relations by John Beyrle, deputy chief of mission of the US Embassy at the FOURTH FORECAST CONFERENCE ON THE ECONOMY AND INVESTMENT CLIMATE IN RUSSIA ORGANIZED BY THE AMERICAN CHAMBER OF COMMERCE IN RUSSIA AND THE EXPERT INSTITUE, FEBRUARY 26, 2003.
9. New York Times: Sabrina Tavernise, A Bubblegum Duo Sets Off Squeals and Squirms. (Tatu)

********

#1
TV1 Review
www.1tv.ru
Compiled by Luba Schwartzman (luba_sch@hotmail.com)
Research Analyst, Center for Defense Information, Moscow office

HEADLINES
Monday, March 03, 2003
- The Belarusian General Prosecutor's Office has suspended the
investigation of the kidnapping of former television journalist
Dmitry Zavadsky. Zavadsky disappeared from the Minsk airport in
July of 2000.
- About 2 million state employees throughout Russia are protesting
their low salaries. Russia's centrist parties, headed by the United
Russia party, have asked to participate in the negotiations between
the labor ministry and the trade unions.
- A group of Chechen terrorists has been detained in Samara. The
criminals were carrying two makeshift bombs, four machine guns,
a sniper rifle, a grenade launcher and other firearms. Investigators
are withholding the details of the operation, but they say that each
of the bombs was powerful enough to blow up a five-story
building.
- The Moscow Mayor's Office found last Saturday's truck drivers'
demonstration to be a political provocation, and fined its organizer,
Aleksandr Kotov, 1500 rubles. The truck drivers blocked off
traffic on Tverskaya Street for several hours to protest the system
of limitations on transit through Moscow.
- The destruction of chemical weapons in Gorny, in the Saratov
Oblast, has been halted after several violations of environmental
legislation were discovered.
- General Headquarters Commander-in-Chief Anatoly Kvashnin
declared that the withdrawal of over 1000 defense ministry and
interior ministry troops from Chechnya will begin on March 5th.
The Joint Group of Forces in the Republic currently has about
80,000 troops in Chechnya.
- On the last day of his three-day state visit to Bulgaria, Russian
President Vladimir Putin will attend celebrations marking the 125th
anniversary of Bulgaria's liberation from Ottoman domination. He
will travel to the Shipka Pass, climb the 894 steps to place a wreath
by the Freedom Monument and visit the Cathedral of the Birth of
Christ, the 17 bells of which were cast from the shells gathered
from the battlefield.
- The Literature and Film Festival is underway in Gatchino. The
Russian cinema is entering an era of remakes, starring new, young
actors.
- Special service officers arrested rebels transporting Igla shoulder-
launched antiaircraft missile systems to Grozny.
- The Emergencies Ministry will increase control over the
transportation of hazardous cargo. It will introduce an
experimental program tracking vehicles in St. Petersburg and in the
Maritime Region.
- In preparation for the referendum on the republic's constitution,
414 electoral stations have been established throughout Chechnya.
- Large-scale exercises of the Northern Fleet Black Berets will be
held next week.
- The first murder trial with a jury will be held in Daghestan.

********

#2
Wall Street Journal
March 4, 2003
Putin Shows Resistance To U.S. Pressure on Iraq
By ALAN CULLISON
Staff Reporter of THE WALL STREET JOURNAL

MOSCOW -- After a series of retreats from long-cherished foreign-policy
positions, Russian President Vladimir Putin is digging in his heels over
Iraq. His refusal so far to back U.S. military action shows the growing
influence of advisers who say Russia has gotten little in return for
cozying up to the Bush administration.

Since taking office in 2000, Mr. Putin has made partnership with the U.S. a
priority, frequently bucking a foreign-policy and military establishment
still infused with Cold War wariness of American intentions. He has
endorsed a U.S. military presence in former Soviet republics in Central
Asia, accepted Washington's decision to pull out of the Anti-Ballistic
Missile treaty, acquiesced in NATO's proposed expansion into former Soviet
territory in the Baltics and given strong support to Washington's global
campaign against terrorism.

On Iraq, though, Mr. Putin has resisted American pressure. After talks in
the Kremlin last week with German Chancellor Gerhard Schroeder, Mr. Putin
said any United Nations resolution authorizing an attack on Iraq was
unacceptable.

Analysts say Mr. Putin is now feeling the heat from those who say Russia
isn't getting concessions from Washington. For example, the U.S. has yet to
repeal the Jackson-Vanik amendment, Cold War-era legislation that imposed
trade restrictions on Moscow as punishment for its restrictions on
emigration. Washington agrees the amendment is now outdated, and has
promised to repeal it -- as it has promised for several years. The
legislation has little practical impact on trade but is widely seen by
Russia as a galling symbol of Washington's failure to take Russian demands
seriously.

"Putin has been under enormous pressure from his entourage" to resist a
U.S. attack on Iraq, said Andrei Piontkovsky, an independent analyst in
Moscow. "Most of the foreign-policy staff has been against any cooperation
with Americans from the beginning. And now they see this as a golden
opportunity to modify the situation."

Most influential have been Russia's Soviet-era diplomats and military
advisers, who continue to hold government posts. Evgeny Primakov, former
head of the Soviet spy service and now a special envoy for the Kremlin,
flew to Baghdad last week where he reportedly tried to persuade Mr. Hussein
to cooperate with U.N. weapons inspectors. The trip mirrored a 1990 flight
by Mr. Primakov to Baghdad, in which he met with Mr. Hussein and tried to
stave off a U.S. attack on Iraq the following year. Neither diplomatic
gambit was much appreciated by the U.S.: Last week a top Bush
administration official called Mr. Primakov a "pain in the neck."

Russian Foreign Minister Igor Ivanov has also grown more vocal. Over the
weekend he lobbied via telephone foreign ministers from seven temporary
members of the U.N. Security Council. Mr. Ivanov "confirmed Russia's
immutable position in favor of achieving an Iraqi settlement through
exclusively peaceful, political and diplomatic means," the Foreign Ministry
said in a statement.

But the Bush administration is betting that Moscow will, in the end, cave
in over Iraq when it understands that war is inevitable. As a permanent
Security Council member, Russia could veto the U.S.-backed resolution
authorizing force if it comes to a vote. While Russia says it is prepared
to do so if needed for "international stability," the U.S. says Moscow
doesn't want to risk a break in ties over Iraq. Bush administration
officials believe Russia won't cast a veto, especially not alone.

Analysts say Mr. Putin is above all a realist and will take sides based on
a cold calculation of what he stands to gain financially and
diplomatically. The White House, without offering crass quid pro quos, says
it has tried to point to the advantages of being part of a coalition
backing an invasion of Iraq: Russia could help in the country's
reconstruction and lobby more effectively for companies that have contracts
in its oil fields. Russia would also be in a better position to collect its
Soviet-era debts that totaled $8 billion when Iraq stopped paying in the
early 1990s.

Last week, the U.S. designated three rebel groups in Chechnya as "terrorist
organizations" linked to al Qaeda and imposed a freeze on their U.S.
assets. While the U.S. said the move wasn't related to the standoff over
Iraq, it is certain to please Mr. Putin, who rose to power on the back of
promises to subdue the breakaway republic.

While Messrs. Ivanov and Primakov were in China and Iraq last week, Moscow
dispatched to Washington Kremlin chief of staff Alexander Voloshin, who
discussed the standoff over Baghdad with U.S. National Security Adviser
Condoleezza Rice. Mr. Bush also "dropped by" the meeting, a high-level
administration official said. In Moscow, where Mr. Voloshin is seen as a
pragmatic deal maker, the visit was interpreted as a sign that the Kremlin
was looking for concessions in return for its acceptance of, or
noninterference with, a U.S. attack on Iraq.

Whatever he decides, analysts say Mr. Putin will try not to alienate either
the U.S. or France and Germany over Iraq. "If and when France and Germany
surrender to this resolution, Russia will not resist alone," said Alexander
Pikayev, of the Carnegie Center in Moscow. "As long as the others oppose
military action in Iraq, Russia will stay in their shadow. It is not in
Putin's style to be the sole resister."

********

#3
Nezavisimaya Gazeta
No. 40
March 1, 2003
[translation from RIA Novosti for personal use only]
RUSSIA COULD DELIVER ITS OWN SOLUTION TO IRAQI PROBLEM
By Alexei ARBATOV
Alexei ARBATOV, a Yabloko parliamentary faction member, is
deputy chair of the State Duma defence committee.

The situation around Iraq has entered the final pre-war
stage. For the whole world, the moment of truth is at hand. The
outcome of the crisis is set to determine not only regional,
but also global politics for years to come, with repercussions
ranging from relationships among the leading powers to the
prospects of global law and order, to the non-proliferation of
mass destruction means and fighting international terrorism.
Among serious experts, there's little doubt the United
States can rout Iraq's army in a matter of weeks, paralyse its
system of state leadership, eliminate or oust Saddam Hussein
and his cohorts and overrun Baghdad.
The problem lies elsewhere: What's to be done in the
aftermath of the military operation and the fall of the ruling
cabal? Who's going to meet the basic needs of life for the
population? Who's going to maintain law and order and stability
in conditions of exacerbated political, ethnic and religious
strife, which is unavoidable in the wake of the collapse of a
totalitarian regime? The US clearly prefers dramatic aerospace
operations to reconstruction, peacekeeping and law enforcement,
leaving it to others to clear up the mess on the ground, as was
the case in Bosnia, Kosovo, Serbia, and Afghanistan. Will many
volunteer to handle that in Iraq when America's chief allies,
Muslim partners, Russia and China are all opposed to
Washington's war plans and a powerful antiwar movement has
overwhelmed Europe and the US for the first time since the
early Eighties protests against US missile deployments in
Europe?

ZONE OF LAW AND ZONE OF ARBITRARINESS

The military operation has the potential to defeat its
officially proclaimed objects. The socio-political chaos and an
explosion of Islamic fundamentalism would be the ideal breeding
ground for a new onslaught of international terrorism - while
the cohesion of the counter-terrorist coalition that emerged in
the wake of September 11, 2001 would have been compromised in
the process. Iraq might emerge as a veritable mecca for all
terrorists, to say nothing of terrorist acts against the US and
its allies. Proliferation of weapons of mass destruction (WMD)
and missile technologies would get fresh impetus from reaction
to the threat of further US military action, perhaps against
Iran or North Korea. Neighbouring countries such as Israel,
Pakistan, India, China, Taiwan, South Korea or Japan will
respond by creating or expanding their own arsenals of similar
weapons.
Iran's relative regional influence will see sharp growth, while
pro-American regimes in Islamic states such as Saudi Arabia,
Pakistan, Egypt and Turkey may be undermined.
It is common knowledge that Iraq is ruled by one of the
most brutal dictatorships of our time. That said, the vexed
question is what a civilised world community is to do about
this regime?
Destroy it just because it's generally "bad" or put value
judgements to one side and concentrate instead on interdicting
concrete threats emanating from it?
If the former is chosen, what kind of international law
mandates that Iraq be punished? More generally, who and by what
criteria is empowered to pass judgements on "bad" regimes and
mete out punishments? Other than Iraq, there are plenty more
countries in Asia, Africa and Latin America that could be held
liable for the kind of things Iraq is now facing. Does that
mean it's necessary to embark on a crusade against them all and
bring them all down by force of arms? And subsequently, implant
democracy and welfare state there? If anything, there are no
grounds for everybody to follow the zigzags of Washington's
likes and dislikes - a strategy like that would require a
serious transformation of international law and the mechanisms
for its implementation.
Going by the second alternative, however, UN Security
Council resolutions provide a strong legal basis for the matter.
But in keeping with it, military action against Iraq is by no
means justified under the present conditions. Lack of
convincing facts of Iraqi violations of UN sanctions cannot be
regarded as proof of concealment by Iraq of relevant activities
warranting use of force against it. The one valid conclusion to
be drawn from the matter is: Continue weapons inspections
without the right to deny their access for Hussein.
Nothing short of sabotage of the inspections on Hussein's
part or an attack on neighbouring countries or foreign armed
forces deployed in the region could possibly constitute a
warrant for use of force and regime change by the outside
world. Even then, military action against Iraq would have to be
sanctioned by a specific UN Security Council resolution.
If the United States were to strike at Iraq without
convincing and legitimate grounds, even a downfall of the
Hussein regime would have regional and global repercussions
well beyond the level of danger emanating from Baghdad right
now. For that matter, under the tough present regime of
sanctions and inspections Iraq is probably the least offensive
nation vis-a-vis the danger of WMD and delivery means
proliferation.

TACTICS OVERSHADOW STRATEGY

On balance it would appear that non-proliferation and
counter-terrorism are not the only concerns for the US in the
Iraq issue. In addition to domestic commitments and general
global ambitions, Washington's prime objective seems to consist
in creating a pro-American regime in Iraq as a major regional
politico-military counterweight to Iran. The latter still
remains an insurmountable obstacle to the assertion of US
hegemony in the region. Iran grows stronger year by year and US
pressure, however intensive, has failed to sever Tehran's
contracts with Moscow on arms deliveries and nuclear power
engineering.
Further, Washington will definitely be betting that world
oil prices would go down after the Baghdad regime changed and
Iraq's oil valve opened. By the same token, the US hopes to
weaken OPEC and lessen its dependency on Saudi Arabia's
petroleum.
But what do Russia's goals consist in - and what must they
be? Up to now, Moscow has been engaged in fairly artful
multilateral diplomacy, but the strategy and the goal
priorities behind shrewd tactics seemed rather obscure. It
looks like Russia is trying to simultaneously preserve its good
relations with the US, France and Germany, Iraq, plus the
nebulous future Baghdad leadership too, if ever it comes to
succeed the present one.
Further developments, however, may render Moscow's various
interests incompatible, forcing it to come down on one side of
the fence or the other. For instance, it is going to be
partnership with the US or prevention of a military strike
against Iraq; a special relationship with Washington or
continued policy coordination with Paris and Berlin;
maintaining ties with Hussein or asserting Russia's interests
after a likely regime change; commitment to the ultimate goal
of having UN sanctions against Iraq lifted and keeping world
oil prices high.
Admittedly, managing the crisis politically rather than
militarily, strengthening the UN and global law and order, WMD
non-proliferation and rallying the anti-terrorist coalition are
all noble goals of a high order. Alongside these, Russia has
other, more pragmatic interests, such as recovering Iraq's
debt, managing the impact of renewed Iraqi crude exports on
world oil prices and developing the West Qurna field Hussein
has promised.
But how exactly do these goals bear on the concrete situation
in the Persian Gulf and the Security Council?

RUSSIAN INTERESTS VULNERABLE

Excluding the unpredictable contingencies of Hussein's
voluntary departure, self-imposed exile, a military coup in
Baghdad, there are different scenarios for the course of events.
One is already being enacted: the US and Britain have
distributed a draft of a new resolution at the UN Security
Council which effectively gives them carte-blanche to launch a
military operation on the basis of existing insufficient
evidence of Iraqi violations. Understandably, Russia can't vote
in favour. Voting against, that is, vetoing the resolution if
France and the People's Republic of China (the other two
veto-wielding permanent Security Council members) abstain would
mean directly defying the US and reviving confrontation with
it. After that, no doubt, a unilateral military action against
Iraq would be mounted, which Russia would be in no position to
forestall politically, let alone militarily. Hussein would fall
fast, while the new regime would be loath to honour either the
debt, the oilfield pledge or crude export restrictions.
In the process, Washington would eventually reach a deal
with its allies, China would stand aside and Islamic countries
would be confronted individually, somewhere with carrots, other
places with sticks. Russia would lose everything it has gained
in relations with the US since September 11, 2001, which would
inevitably tell on its relations with the West as a whole.
In this case, Moscow would do well to abstain, although
that is a weak position that would be damaging to Russia's
prestige.
However, the negative consequences for relations with the US
and the new regime in Iraq would not be nearly as great,
particularly if the resolution did garner a majority in the
Security Council.
Of course, the possibility cannot be ruled out that France
and/or China decide to veto the resolution irrespective of
Russia. In that case, the damage done to Russia's relationship
with the US would be somewhat less.
A unilateral launch of a military operation by the United
States and its allies without an extra UN Security Council
resolution would, in one sense, be an easier way out for Russia
since it would be spared the vote dilemma. Officially, Moscow
would condemn the US military action, as it did when the US
withdrew from the ABM Treaty and moved to enlarge NATO, but for
all practical purposes, Russia's immediate costs would be lower.
If the war proved speedy, Washington would be interested in
Moscow's assistance in post-war settlement and reconstruction.
If the operation bogged down and things spun out of control,
the US would be all the more anxious for Russia's help and it
would be prepared to trade off other issues in the relationship.
Russia's economic interests in Iraq should be explained in
greater detail. Here, it seems, the prospects are dim in any
case. In the event that sanctions against Baghdad were lifted,
whether under Hussein or after the regime change, Iraqi oil
exports would pick up and Russia's budget would lose its main
source of surplus. Only in case of the war this would not
happen until oil wells were rebuilt within a few years, whereas
in the event that sanctions were ended, it wouldn't take that
long.
What is more, Iraq's foreign debt adds up to 62 billion
dollars and neither Hussein nor whoever succeeds him would be
in any particular hurry to pay off the Russian part of it. The
West could write that much off Russia's own debt in exchange
for the latter's support on Iranian issue, but the United
States is not Russia's main creditor and Germany and other
major creditors are reluctant to lose money to pay for dubious
American campaigns.
Anyway, Russia's losses from lower oil prices would be much
greater than the 7-billion-dollar debt recovered. As to the oil
field, Hussein's motivation for its transfer to Russian
companies was clearly a political, not an economic one - that's
why the deal was broken off in late 2002. No one can be certain
he or another Baghdad leaders would have preferred Russian
firms to Western rivals in peacetime.

DIFFERENT TACK NEEDED

What, then, is Russia to do about this double bind? It
would appear that a more worthwhile solution would involve
Moscow quitting its diplomatic manoeuvring and taking instead
the initiative (and the responsibility) of a radically new
approach to tackling the issue.
Namely, a special UN Security Council resolution is to
sanction an expansion of weapons inspections in Iraq, moving
them onto a long-term footing using every technical means
available.
To ensure the inspectors' activities (including protection
against acts of terrorism), an appropriate international
military force would be stationed in Iraq (this idea has
already been put forward by France and Germany in general
terms). To guarantee that Hussein remains compliant, an
international task force would be deployed in the Gulf area on
a long-term basis. If anything, the cost of its upkeep would be
less than the financial costs of war by an order of magnitude.
Insofar as possible, Russia should take part in all of these
operations.
Furthermore, the Iraqi army must be reduced drastically,
limited in terms of its composition and armaments and placed
under international control, as must the secret police. The
same goes for Iraq's industry, which may be involved in the
manufacture of WMD and its delivery vehicles.
In this kind of conditions, Iraq would not represent a
threat even after the sanctions are lifted. Hussein would not
become a "hero" and "martyr" in the eyes of the world's Muslims.
On such a basis the anti-terrorist coalition, including
the moderate Muslim states, could rally, the
international-legal and institutional basis for
counter-terrorism consolidate and political, military and
intelligence cooperation in this area among nations increase.
That would promote a reinforcement of the WMD non-proliferation
regime and denial of terrorist access to such weapons.

********

#4
Washington Post
March 4, 2003
Russian Arms Safeguards Found Lacking
By Joby Warrick
Washington Post Staff Writer

A decade-long U.S. effort to safeguard stockpiles of Russian nuclear,
chemical and biological weapons is faltering because of bureaucratic
obstacles, federal auditors warn in a draft report that faults leaders in
both countries.

The problems already have delayed the destruction of thousands of
Soviet-made chemical weapons, while raising the risk that nuclear bomb
components or deadly germs could fall into the hands of terrorists, the
General Accounting Office concludes in a report due to be released to
Congress this week.

The United States has spent $6 billion since 1992 to help Russia destroy or
secure Cold War-vintage weapons. But basic security improvements still have
not been made at dozens of Russian military installations where more than
60 percent of the country's weapons-grade uranium and plutonium are kept,
the GAO found. The biggest obstacle is Russia's continuing refusal to let
U.S. officials visit the facilities where the upgrades are to take place,
the report says.

"Russia is not providing needed access to many of the sites," the draft
report says. "Unfortunately, there is little reason to believe this
situation will change in the near future."

Congress and the Bush administration contributed to the delays by denying
critical funds or refusing to grant waivers for the awarding of contracts,
the auditors found. The report also criticizes the Defense Department for
the slow pace of security improvements at chemical and biological
facilities where access was permitted.

The report by Congress's independent auditing agency underscores the
practical challenges of containing a vast arsenal considered by many
security experts to be a continuing threat. The collapse of the Soviet
Union prompted fears that Russia and other newly independent states would
lose control of nuclear warheads as well as hundreds of tons of
weapons-grade plutonium and uranium, large stockpiles of chemical munitions
and a network of laboratories where biological weapons were developed.

In 1992, Congress approved the first of a series of measures, known
collectively as the Cooperation Threat Reduction program, that funded the
destruction of bombers and submarines with nuclear capabilities and the
installation of modern security systems at dozens of installations
throughout Russia, Ukraine and other former Soviet republics.

Although President Bush and his Russian counterpart, Vladimir Putin,
publicly embraced the programs at recent summits, the GAO found that
progress at many Russian facilities has slowed significantly in recent years.

For example, Russia's refusal to grant access to sensitive nuclear
installations has prevented the Energy Department from upgrading security
at Defense Ministry facilities where most of Russia's remaining plutonium
and uranium are kept, the report says. As a result, the department's goal
of securing all weapons-grade nuclear material by 2008 is no longer
realistic, the GAO concluded. By contrast, the Energy Department has
secured nearly all nuclear storage sites controlled by the Russian navy and
civilian agencies.

*******

#5
Washington Post
March 4, 2003
Wasteful 'Threat Reduction' in Russia
By Duncan Hunter
The writer, a Republican representative from California, is chairman of the
House Armed Services Committee.

Deep in the heart of Russia stands an enormous, new, empty facility built
with 100 million American tax dollars. It has no purpose or future. It is a
monumental example of U.S. good intentions gone awry and another disturbing
chapter in the history of the Cooperative Threat Reduction (CTR) program.

Twelve years and more than $7 billion later, it is worth revisiting the
original purpose of this program. Designed as a temporary, focused effort
to shrink Moscow's vast strategic arsenal with American funding and
know-how, the CTR program has, over time, morphed into an open-ended,
unfocused and sometimes self-defeating venture.

On balance the initiative has achieved a respectable measure of success, in
the process earning the support of many members of Congress, including
myself. Since its 1991 inception, the Department of Defense-funded
initiative has eliminated nearly 500 ballistic missiles and 370
submarine-launched types, as well as 25 missile submarines and 100
nuclear-capable bombers.

The program initially focused on such strategic nuclear systems, most of
which were aimed at American territory, because they posed a grave threat
to U.S. national security. But CTR money eventually gave chase (rather
unsuccessfully) to a slew of other projects that few would characterize as
meeting a similar standard.

The results of this drift are evident in remote Krasnoyarsk, Russia, where
American taxpayers, at Moscow's request, built a $100 million-plus facility
to convert rocket fuel from nuclear missiles into chemicals useful for
making consumer products. The immense plant was finished last year, but it
will never be used for its intended purpose, because Russia, before the
plant was completed and without telling us, used most of the volatile
liquids to gas up its space program and pad its satellite-launch profits.
Useless now, the high-priced compound will recoup the United States only
about $1 million after its valuables are gutted.

In an equally wasteful example of CTR mismanagement, the United States
dumped $100 million into a plant that will not even be built. Again at
Moscow's behest, Washington committed to build a state-of-the-art,
environmentally sound disposal facility (the blueprints alone cost $80
million) to burn off missile engines indoors. This time, Moscow stood idle
while a small-town politician from Votkinsk blocked the necessary land-use
permits to exploit groundless environmental fears during a local campaign.

The United States could have bankrolled vital nonproliferation projects
with these wasted funds -- about $230 million combined; more than half of
this year's total CTR budget -- but a lack of accountability, transparency
and sound planning prevented it. In Krasnoyarsk, the Department of Defense
bet on a handshake that the rocket fuel would be there when the time came,
even though Russia has been launching missiles with the same fuel for more
than 30 years. At Votkinsk, U.S. officials erroneously and naively assumed
that Moscow would produce the critical permits.

Amazingly, program officials may not have learned the obvious lesson. They
are currently considering a plan devised by Russia to dispose of the same
missile engines with refurbished outdoor burners, even though this approach
would be much dirtier and there is no guarantee of securing land-use
permits. This project could run another $80 million.

At the same time, for every dollar the United States commits to helping
Russia destroy these weapons, we run the risk that Moscow will use the
savings to fund military programs that are contrary to U.S. national
security interests. For example, the White House told us in January that
Russia maintains a biological weapons program and may keep -- at great
expense -- an ability to mobilize its chemical weapons production
facilities, in violation of its treaty obligations. We were also told that
the Kremlin is procuring new intercontinental ballistic missiles it brags
can defeat American missile defenses (even though the forthcoming U.S.
system is not designed against Russia).

The Department of Defense does not make the United States appreciably safer
by disposing of surplus rocket fuel and stationary missile engines. These
materials cannot be easily carted off by would-be terrorists, who could not
use them anyhow. The fuel and engines instead represent an environmental
challenge -- one that might warrant a good many Russian rubles but
certainly not hundreds of millions of already overstretched U.S. defense
dollars.

If the Cooperative Threat Reduction program is to once again benefit U.S.
national security, it must refocus its resources on real threats and ensure
real Russian cooperation. Moscow's leadership has to understand that it
cannot stand by as CTR projects fail, $100 million at a time, and still
expect U.S. assistance. Either way, the stakes are high enough that
Congress must maintain a strong continued oversight role to ensure that
this program and others like it remain true to their original principles
and that every U.S. dollar invested yields tangible and verifiable results
in reducing any remaining threats to America.

********

#6
FEATURE-World wrestles with Stalin legacy, 50 years on
By Richard Balmforth
March 4, 2003

MOSCOW (Reuters) - He died half a century ago, but the world is still
trying to defuse the time-bombs Soviet dictator Josef Stalin left behind.

Almost every Russian past retirement age recalls where he was when news
broke on March 5, 1953, that the Soviet Union's "man of steel" had breathed
his last.

His death ended nearly 30 years of iron-fisted rule, unparalleled in 20th
century European history, marked by mass purges, arbitrary arrests by the
secret police, executions and deportation.

"It meant for us that my father might be coming home," said 64-year-old
Olga Trifonova, referring to Roman Khiroshychenko who was later freed after
eight years in the camps.

Later "de-Stalinization" drives only partly dismantled the myth of the
mustachioed Georgian who enjoyed god-like status thanks to a huge
personality cult whipped up by his henchmen.

Even today, many Russians of the older generation, marginalized in the new
capitalist Russia and with rosy memories of a well-structured, if bleak,
childhood, react ambivalently to mention of his name.

They argue that his role in leading Soviet forces to victory over Nazism
and turning Russia into an industrial world power outweigh the terror he
waged against the Soviet population.

"He was the greatest statesman not only of the 20th century but of all
Russian history," declared Communist Party leader Gennady Zyuganov.

But as the drama of Chechnya and unresolved conflicts elsewhere in the
former Soviet Union show, history is still picking up the pieces.

Russia's planners bump up against his legacy daily in their attempts to
restructure industrial behemoths left over from a world of five-year plans
and well-massaged production statistics.

His forced collectivization ripped the peasant heart out of Russia. Small
wonder that President Vladimir Putin's reformers find little rural
tradition to tap into as they seek to turn the clock back to land
ownership.

FATHER-FIGURE

Stalin was born Josef Dzhugashvili in Georgia in 1879 and trained briefly
for the priesthood before joining underground revolutionary movements. He
took over the communist leadership on the death of Soviet state founder
Vladimir Lenin in 1924.

In the years following, millions died in his mass purges and millions more
in famine and the forced collectivization of farm lands. Arbitrary arrests
and mass deportations of ethnic groups to distant reaches of the Soviet
Union turned lives upside down.

Stalin surrounded himself with the immoral and the weak.

Take for instance Lavrenty Beria, Stalin's dreaded secret police lieutenant
and a serial rapist who preyed on young women snatched from the streets of
Moscow.

There was Mikhail Kalinin, nominal head of state from 1919 to 1946 whose
face beams from thousands of photographs alongside Stalin. He stood by as
the dictator sent his wife to a Siberian labor camp.

Despite the havoc wrought by Stalin, his long period in power and
reputation as a strong wartime leader meant many Soviet citizens genuinely
felt the loss of a father-figure when he died.

At his lying-in-state in central Moscow there were scenes of near hysteria.
Stampedes, caused by bad policing, led to hundreds being killed in the
crush, city residents say.

As a teen-ager, Trifonova took the advice of a kindly stranger on the
streets and turned back home that day. "The police caused the deaths by
trying to channel people," she said.

But Trifonova, author of a book on Stalin's luckless second wife who died
in a bizarre shooting incident in the Kremlin in 1932, disputes accounts of
universal grief.

"My mother was a teacher. She said she cried just like everyone else at
school. When I asked 'Why?' she said 'Because I knew others were watching
me'."

A Moscow exhibition shows the aura that surrounded him. One exhibit is a
set of large dolls presented to him by factory workers in 1949. The dolls
-- all radiating chubby-cheeked health that jars with the deprivation of
the post-war years -- hold aloft a banner thanking Stalin for a happy
childhood.

BIG WAS BEAUTIFUL

Hundreds of public monuments and busts of the dictator were destroyed after
his successor Nikita Khrushchev launched the first tentative moves to
"de-Stalinize" society.

But his mark is still plain to see on the streets of the old Soviet Union.

When it came to buildings, big was beautiful. Gargantuan structures still
dominate the skyline of many Russian cities. The distinctive "wedding cake"
skyscrapers make night-time Moscow look like Batman's Gotham City to an
outsider.

The wide multi-laned highways of today were built by Stalin when virtually
no Soviet citizens had cars, but they were perfect channels for communist
demonstrations. His mark can be seen too in the ornate Moscow metro
stations, decorated with stone reliefs of epic communist moments.

But there is a more intangible legacy in Russia today.

In the provinces, a suspicion of foreigners lingers on in the older
generation, a hangover from a time when to know outsiders was dangerous and
to be "cosmopolitan" meant you were selling out the Motherland to the West.

"The main aim of Stalinism was to surround the country with a wall not to
allow in foreign influence," said Eduard Radzinsky, a historical
commentator on the period, arguing this struck a natural chord among many
Russians.

The survival instincts from an often cruel age translate today into a
subservience to hierarchy and officialdom, and a respect verging on
obsession for bureaucratic red-tape that foreign investors find maddening.

Many older Russians hanker after the "poryadok," or order, a virtue
fostered by Stalin's regimented society but which often had a sinister
sub-text of repression.

WORLD PROBLEMS

Meanwhile, the world wrestles with the fall-out from his ruthless
re-engineering of the Soviet map.

He played a hand in giving the Armenian-populated region of
Nagorno-Karabakh to Azerbaijan in the early 1920s in a gesture motivated at
the time by a desire to appease Turkey.

It was Stalin too who sowed the seeds of the secessionist crisis in
Georgia's Abkhazia region, by transporting thousands of Abkhazians to
Siberia in the late 1930s and 1940s.

Both breakaway regions now have de facto independence after wars in which
tens of thousands were killed, but both conflicts defy a long-term solution
despite big power mediation efforts.

And then there is Chechnya, the bugbear of the Kremlin.

The mass deportation of Chechens to Kazakhstan in February 1944 by Stalin
who saw them as Nazi collaborators lighted the fuse in the separatist
dispute that haunts Russia to this day.

The Chechens were not alone. Among other ethnic groups, he deported Crimean
Tatars, Ingushis, Volga Germans. Many such groups have been able to return
but some, like the Meskhetian Turks, are still in exile.

"He was always playing these games with nationalities. He moved peoples
around so that they would lose any sense of their own nationhood,"
Radzinsky told Reuters. "He followed a single formula: a day without
repression was wasted for the country."

********

#7
From: "Vlad Ivanenko" <vivanenk@uwo.ca>
Subject: WHAT HAS HAPPENED WITH THE RUSSIAN PUBLIC DEFICIT?
Date: Tue, 4 Mar 2003

RUSSIAN ECONOMIC PUZZLES: 3) WHAT HAS HAPPENED WITH THE RUSSIAN PUBLIC
DEFICIT?

One of the major problems that the Russian government faced in the
transition was a stubborn fiscal deficit. In spite of numerous orders, the
use of crack force of tax police, blocking of bank accounts of enterprises
in tax arrears, there was never enough money to pay for public expenses. The
government accumulated large debts by delaying payments to pensioners,
public workers, and its suppliers.

It was generally believed at the time that the blame for deplorable
situation with the public finance lay with dishonest taxpayers, particularly
large companies. Economists claimed that the government was weak and unable
to resist the pressure from interest groups. When the latter lobbied for tax
exemptions or paying taxes in kind, the government was quick to agree. Thus
a more assertive approach dealing with taxpayers was a must: large firms,
like Gazprom, had to learn that playing tricks with taxes would not work.

There was a bit of logical inconsistency with this line of reasoning. How
can it be that all special measures undertaken to ensure tax compliance did
not work? The quick way to validate the statement was to introduce one more
assumption that seemed to be plausible: it is easy to go around any
regulations because Russian bureaucrats are corrupt.

After the default of August 1998, many economic observers expected that the
situation with the public finances would grow even worse. Given that foreign
funds stopped coming, they predicted that the government of Primakov, being
sympathetic to the ideas of state support (subsidization), would resort to
outright monetization of ever growing deficit. Technically, it meant that
the government would order the Central Bank of Russia to provide unsecured
loans.

Without going into details, let us state that in reality the deficit of the
Federal Budget has declined and turned eventually into a steady surplus (see
below).

Federal Budget deficit/surplus (-/+), in percent of GDP at current prices:

1992 -- (-6.41)
1993 -- (-7.43)
1994 -- (-10.69)
1995 -- (-4.57)
1996 -- (-3.58)
1997 -- (-2.31)
1998 -- (-4.49)
1999 -- (-1.19)
2000 -- 2.38
2001 -- 2.93
2002 -- 2.46

The difference between expectations and reality is startling. What has
happened with the budget deficit?

Existing explanations of why the situation with public finance improved are
unsatisfactory. Some economists claim that the Russian government tolerated
tax arrears deliberately. After the default the government realized that it
could not maintain this practice forever and instructed tax authorities not
to grant exemptions anymore. This argument suggests the governmental
attempts to collect taxes in 1992-8 were essentially a smoke screen.

Other researchers point to the growth in international fuel prices as the
answer. They explain that as Russian fuel exporters got more revenue, they
paid more in taxes and the government was able to balance its books. This
logic leads to the conclusion that when the world prices of fuels decline,
Russia will run into the public deficit again.

Both explanations are of ad hoc origin and suffer from factual
inconsistencies. There is evidence that tax penalties were real and more
severe prior to the default. For example, the pre-1998 surveys persistently
indicated that managers preferred paying taxes than running into tax
arrears. Some regions experimented with collecting taxes in kind instead of
bankrupting non-payers to discover to their dismay that they received more
than expected and spoiled perishable tax "proceeds". The other fact is that
when the Primakov government moved to clear mutual arrears, tax compliance
improved and taxes were paid predominantly in money.

Regarding the state's dependency on export revenue of the fuels sectors,
their importance for the budget appears to be overestimated (see below).

The share of the fuels sector (oil and gas extraction, coal and other fuels
mining, and oil processing) in the total tax revenue for the consolidated
budget, in percent:

1991 -- 4.7
1992 -- 8.8
1995 -- 17.2
1997 -- 14.6
1998 -- 11.7
1999 -- 14.0
2000 -- 16.3
2001 -- 17.8
2002 -- 17.7 (1st half)

There should be other explanations for the improved fiscal performance that
are related to internal Russian processes, potentially unleashed by the
default.

One plausible answer to this puzzle refers to changes in monetary policy.
When the monetary authorities became unable to keep money supply tight,
additional credit was injected in the economy. Firms acquired money and paid
their taxes. This explanation is consistent with our previous conjecture
that non-payment of taxes was involuntary. In that case, the policy of
crackdowns on tax non-payers that the government pursued in 1990s was
misconceived.

Unfortunately, this explanation sounds alarming because of its monetary
implications (about which we will talk later on) and does not sound
convincing. There is another answer more agreeable for economists. The
disappearance of the budget deficit can be found in the dynamics of the
exchange rate. After the sharp depreciation of the ruble in the end of 1998,
import became expensive and Russian consumers turned to domestically
produced goods (this effect is called "import substitution" in economics).
As local firms responded to increased demand, their financial situation
improved and they paid more in taxes.

Note that the main difference between the explanations for fiscal troubles
prior to and satisfactory -- after the default is that the former considers
that the government policy was right but implementation -- wrong (due to
corruption, lobbying, etc.) while the latter emphasizes that the government
policy was misconceived from the beginning (wrong emphasis in monetary
policy, adverse relationship with taxpayers, etc.).

At the moment it is still unclear what explanation will be generally
adopted. It appears that economic consensus moves towards accepting the view
that the pre-1998 government policy was wrong. This development has
long-term consequences for international financial organizations that need
to defend their role in the Russian transition. Yet, to conclude that the
pre-default policy was wrong and the default was a blessing in disguise one
needs to prove that the budget deficit of 1992-9 was driven by the factors
that the government could control.

*********

#8
[excerpt: Speech by John Beyrle, deputy chief of mission of the
US Embassy]
TITLE: MAIN SPEECHES AT THE FOURTH FORECAST CONFERENCE ON THE
ECONOMY AND INVESTMENT CLIMATE IN RUSSIA ORGANIZED BY THE
AMERICAN CHAMBER OF COMMERCE IN RUSSIA AND THE EXPERT
INSTITUTE (ANDREW SOMERS, ANATOLY CHUBAIS, ALEXEI KUDRIN)
[RADISSON SLAVYANSKAYA HOTEL, 9:00, FEBRUARY 26, 2003]
SOURCE: FEDERAL NEWS SERVICE (http://www.fednews.ru/)

Andrew Somers [President of the American Chamber of Commerce in Russia]:
We'll have to close the questions session now because
of time constraints. I'd like to again thank the deputy minister
for his excellent presentation on the options facing the Russian
government going forward.
Our next guest is John Beyrle, deputy chief of mission of the
US Embassy. He assumed his position in August of 2002 and has had
a distinguished career in the US government and the diplomatic
corps specializing primarily in Russia and the former states of the
Soviet Union. His most previous position was special adviser to the
Secretary of State Powell on Russia and Eurasia. And he had
previous positions in the National Security Council, again
specializing in the Russian economic and political area. And he had
also significant staff positions with former Secretary of State
George Schultz and Secretary of State Baker. With that I would now
like to invite to the podium John Beyrle.

Beyrle: Thank you very much, Andy. Mr. Minister Kudrin, thank
you very much for your remarks. It's a pleasure to be here
representing the US Embassy. Ambassador Vershbow was scheduled to
be here, but he had actually had a long-scheduled trip to our
consulate in Yekaterinburg. He'll also be visiting Perm and
Snezhinsk.
As we look at developments in Russia and we see that 70
percent of Russia's oil and 90 percent of Russia's gas are located
in the areas that the Ambassador is going to visit for the next two
or three days, we decided that we are probably not spending quite
enough time out there. So, I think you can expect us to be making
more trips to that region.
The context of the conference today is a focus on investment
climate and economic forecasting. But I hope you will allow me to
take a couple of steps back from that landscape and look at the
broader US-Russia relationship as what we would like to see develop
as a real strategic partnership. Now, economic issues are paramount
in that relationship, but they can't be divorced from the political
context.
We recently in the Embassy completed our strategic plan for
the next two years. Embassies, like businesses, also do strategic
plans these days. So, I thought maybe what would be most useful
would be for me for the next 10 or 15 minutes to take you inside
the strategic plan just a little bit and sketch out for you what we
see as the chief priorities in US-Russia relations from the point
of view of the US government, from the point of view of the US
Embassy in the three priority areas -- security, supporting
democratic reform and constructive external relations and finally,
promoting economic growth.
In the first area, in the security area, I think our chief
priority clearly is the non-proliferation of weapons of mass
destruction and the war against terrorism. The Moscow Treaty and
the new strategic framework that presidents Bush and Putin signed
in St. Petersburg last May are going to allow the US and Russia to
make big, dramatic reductions in our strategic offensive nuclear
weapons and we want to put a special accent this year on
cooperation to work jointly on developing missile defenses against
the new threats that we face.
I think it is indicative of how much this relationship has
changed if we look at how we've actually gone about negotiating the
agreement which we hope will be ratified by both legislatures in
the next few weeks. I go back to a day when US-Soviet, US-Russia
relations, when it took years to negotiate these treaties. They
were hundreds, even thousands of pages long and the hallmark was
trust, but verify. Now we've negotiated a very brief agreement with
Russians and we'll spend most of this year working on verification
and monitoring provisions after the treaty's already been signed.
So, the slogan has changed from "trust but verify" to "trust
and then verify". That's a major priority for us this year. We are
also obviously actively engaged with Russia in promoting
non-proliferation of weapons of mass destruction. We continue to
urge Russia to sever its cooperation with Iran and other countries
that are trying to acquire weapons of mass destruction.
Let me stop on just a couple of those countries and speak
briefly about how we see the situation. I won't speak long about
Iraq. That could be a separate conference in and of itself,
obviously. I'll say only that it's been, I think, clearly
demonstrated that Iraq is pursuing a weapons program in violation
of Security Council resolutions, numerous Security Council
resolution over the last twelve years. And we very much hope that
we can urge and succeed in getting Russia to support our efforts to
work through the UN Security Council on disarming Iraq so that the
UN Security Council does not become irrelevant. That's, I think, as
much in Russia's interests as it is in ours.
On Iran, we think it's unfortunate that Russia continues to
provide nuclear assistance to Iran. We have undersecretary of State
John Bolton who's been in town for the last couple of days making
those points in detail and sharing information in detail with the
Russian side to make clear our concern on that score. We know that
the knowledge and the materials from a civilian nuclear program are
very easily divertible and transferable into a clandestine weapons
program. We think that Russia needs to crack down more effectively
on other transfers of technology to Iran as well, both in the
weapons of mass destruction field and regarding ballistic missiles.
Here the status quo is only going to lead to pressures from
new sanction and cause new political tensions. And I think it's
important for this group to understand that a new approach by
Russia could and in a very real sense would unlock a lot of very
profitable cooperation in the field of aerospace technology and
nuclear technology which is currently blocked by US legislation.
Just to give you one example. In the area of spent nuclear
fuel storage there are tens of billions of dollars that Russia
could realize if its trade with Iran is reversed and comes out from
under the sanctions in the US legislation. I think the choice here
is or should be very obvious.
On North Korea, also in the area of weapons of mass
destruction, we very much hope that Russia and Beijing will join
with us in playing a more substantial and positive role in dealing
with Pyongyang. The North Koreans say they want to sit down with
the United States and we say, fine, we are willing to sit down with
the North Koreans, but the reality is we don't really speak the
same language and it's very difficult to deal with the regime in
Pyongyang. It's hard to make sense sometimes of what the policies
are, and so I think in a very real sense without the help of Russia
and of China it's hard to imagine a resolution of the North Korean
situation. So, we are focusing very much on bringing Russia and
China into that equation to help us.
In the area of counter-terrorism, here we have obviously a
great deal of cooperation underway. It's another major priority for
us this year. We are working with Russia to strengthen bilateral
and multilateral counter-terrorism efforts to reduce support for
state sponsors of terrorism, to reinforce our efforts on
Afghanistan, in the Middle East. We want to develop a NATO-Russia
counter-terrorism capability. We need to upgrade our
military-to-military cooperation in this sphere and we need to cut
off terrorist financial flows. Working together on this Washington
and Moscow can achieve great things because there is a great
conversion of interests here.
We've shared a fair amount of intelligence, we've cooperated
in Afghanistan because we have a common enemy here. It's an enemy
that threatens Americans and Russians and people of all civilized
countries. But another big enemy that we face here is old
suspicions, especially in the area of intel-sharing we find that
some people are still fighting the Cold War. The Cold War, in our
view, is over. There is a new war and only by shedding the old
suspicions, the old mistrusts, which I have to say, exist on both
sides to be fair, but only by shedding those old suspicions and
getting past that Cold War mindset are we really going to be able
to cooperate effectively to counter and defeat terrorists.
The second broad area of priority for us has to do with
supporting Russia's democratic transition. We are satisfied with
the extraordinary expansion of strategic cooperation with Russia
that I described at the outset. But I think we have to keep our eye
on the development of democracy and civil society inside of Russia
as well. Shared values, in our view, shared values are the
foundation of any enduring US-Russia partnership. And the extent to
which Russia is able to solidify the democratic transitions and
institutions which are starting to put down roots here will
determine to a great extent how much leeway Russia will have in
integrating itself into the Western and international structures
that it is quite rightly seeking to join.
I think we see over the past year, the past two years that
Russia has taken some very positive steps in, for example,
revamping the code of criminal procedure and promoting judicial
reform. As we look to the future, the question of how Russia
ensures the freedom of independent media will be increasingly
important. How it conducts itself in the upcoming election cycle.
Even how it treats religious minorities in its own country. All
these are bellwethers of the future of Russia's democracy and the
factors that, like it or not, will affect the direction of the
US-Russia relationship.
Now here as an Embassy of the US Government we decide and work
on how we can be the most influential. We don't have any illusions
that we have a lot of direct influence here. The days of
large-scale American programs that came in and talked democracy and
exposed Russian institutions and Russian people to democratic
principles are probably past us. In fact we are looking at ways to
start phasing out some areas of developmental assistance in that.
The key for us now is to recognize that there are very many people
in Russian society who understand how things need to be in the 21st
century in this country, people who, as we say in English, who get
it.
And our goal is to help support those people with resources,
with ammunition, so that they can win the internal battle, the
internal debates that are going on in this country with the people
who still don't get it, who still see the world through a 20th
century or even 19th century prism.
In that regard, regarding external policies, especially
Russia's relations with its nearest neighbors, I think we see that
there are still too many people in Russia who measure her strength
relative to the weakness of her nearest neighbors. And again we see
that as a very 19th or even 20th century notion. In our view, and
in the view of many, many Russians that we talk to, the best
environment, the best neighborhood for Russia is a group of
sovereign, prospering, confident nations on her borders that simply
want to have good economic relations with this very big neighbor,
this very large market.
This is a challenging issue, it's one that can also affect the
greater bilateral relationship. We've invested a lot of time and
energy and will continue to do so in helping improve relations,
trying to help improve relations between Russia and Georgia, for
one example. That leads inevitably to Chechnya, an area in which we
still have concerns. I have to say that we are encouraged to see
that the Russian government is starting systematically to lay out
a plan for political regularization of the conflict in Chechnya,
starting with the vote that will be held on a new constitutional
referendum next month. It's not a perfect situation, but if it is
the first step towards a serious political dialogue, then we'll
welcome it and we'll support it. But in the meantime we still
believe there has to be accountability for some of the abuses that
Russian security forces have perpetrated down there if there is to
be a full regularization of that long-running conflict.
The third chief priority that we focus on as a government and
as an embassy is the focus of your conference here, and so I'll
close with that: promoting economic growth and bilateral trade.
We are happy with our emerging partnership in energy trade
with Russia, but we feel that a stable relationship requires a much
broader and a much deeper trading relationship. So we want Russia
to become stronger as a bilateral partner and also as a full
partner in the world economy and the world trading system.
So our focus here is really twofold, lands in two areas:
first, to help Russia continue the domestic economic reforms to
create a more robust and lasting economic growth at home; and,
secondly, to help Russia with the goal of accession to the World
Trade Organization to help tie it in, bind it, with the world
economy much more closely.
On the question of reform, internal reform, we think that
Russia has made very good progress on a number of reforms,
including land reform, the amendments to the labor code, the new
tax laws that Minister Kudrin told us about, de-bureaucratization
efforts. We still a major -- in that connection -- a major
challenge as the implementation of reforms that would remove
administrative barriers, decrease the number of permitted
government inspections, and simplify the registration procedures.
Here, we think the challenge simply is to demonstrate the necessary
political will to overcome what is still -- and you all recognize
this more than I do -- tremendous institutional resistance to this.
There's a lot of inertia and a lot of old thinking that still
persists out there, especially at the regional and local level.
On WTO, the talks between Russia and WTO potential partners
have really accelerated in recent months. It seems like our
economic section of the embassy is usually half-depleted on any
given day with people traveling either to Geneva or to Washington
or other places to work with the Russian side, because WTO
accession for Russia is a huge priority for the United States.
Russia has said it wants to finish the process this year. That's
a very ambitious goal. It's one that we support.
On specifics of WTO, I think we see that Russia has taken some
very necessary steps on protection of intellectual property rights,
but a lot more needs to be done on that score. Russia's adopted
some of the necessary legislation. It's created the Task Force on
IPR lead by Prime Minister Kasyanov, and it's launched what's
really a long overdue, but very welcome crackdown on the sellers
and producers of pirated CDs and DVDs. The recent raids of CD
warehouses and plants are extremely important signals that have to
be replicated across the country, because I have to tell you from
reading the reports coming in from Washington, Western industry
remains very critical still of the state of IPR protection in
Russia.
From our perspective, it also remains to be seen if Russia is
ready to make the necessary compromises on market access to meet
not only the United States, but also the EU half way in some very
key areas. Financial services, telecommunications, and civil
aviation are the three that come to mind that head the list.
Meeting WTO standards will affect very powerful monied interests in
Russia. We recognize that fact. And this is especially doubly
challenging in an election year. We are to proceed as fast and as
far as Russia is willing to go, but we simply acknowledge that the
task, as I said, is going to be twice as difficult the closer we
get to December 2003, the closer we get to March of 2004.
Expanding American and foreign investment in Russia -- also a
top priority for the US government and for the US embassy. Both
the ambassador and I likely spend 30 to 40 percent of our time
working on expanding foreign investment in Russia in one way or
another. It's a great challenge, and it's still a source of great
frustration. Even in the oil and gas sector, which is so very
promising, Russia has still not taken the necessary steps that we
think would ensure the full development of its own resources.
We need to see more liberalization, which will promote a more
rational investment climate, more rational investment decisions.
New pipelines are needed to facilitate expanding Russian exports to
world markets, and workable production sharing agreement
legislation is needed to attract investments that number in
multi-billion dollars, especially to develop the remote offshore
and arctic preserves, which again promise to bring Russia so much
in the way of resources over the next decade.
Now, you know there are several major US investments over the
past year that are signals that things are changing, that attitudes
here are becoming conducive to welcoming investment. Two examples
are the opening of the Ford and GM plants. The BP announcement of
the deal with TNK just over the last few days indicates a very
favorable trend. We see this as far more positive even than two
years ago, but if Russia wants to attract even more investment,
Russia needs to do much more to protect the rights of investors and
uphold the sanctity of contracts, and those two areas -- protecting
investor rights, upholding contract sanctity -- are two areas that
we will continue as an embassy and a government to work closely to
promote and move forward in the Russia context.
The recent study -- many of you are familiar with the survey
by the World Bank and CEFIR of Russian small and medium enterprises
indicates that reforms are beginning to improve the business
environment for Russian small- and medium-sized enterprises. But
a lot more needs to be done. I meet probably with one or two
potential US investors per week; the ambassador at least that many,
if not more. And bureaucratic red tape still discourages many of
these companies, many of these potential investors, from really
developing the kind of relationship with Russia that we would like
to see in Russia's own interest.
I think it's a very favorable sign that President Putin and
Minister Gref recent spoke of the need to address the problem of
official corruption and bureaucratic barriers. This shows that the
issue of corruption is on the radar screen. It needs to become
part of the political dialogue in Russia -- not for partisan
purposes, but simply to say there's going to be a break with past
practice; Russia will be a more welcoming place for investment
because it's taking steps to deal with the corruption issue.
There's a growing awareness here that these problems have to
be dealt with if the goal of growth at 6 to 8 percent per year can
be realized.
Let me make a couple of brief comments. I was reminded, when
the question was asked of Minister Kudrin on health, that we in the
embassy and as the US government will be focusing especially over
the next year on an issue which we think has gotten too little
attention here in Russia itself, and that's the problem of the
growth of HIV/AIDS as it impacts on Russia's potential economic
growth over the next decade. I think it's shocking, but it's a
fact, that the highest rates of growth of the HIV infection in the
world are in Russia and Ukraine. I'm not talking about absolute
cases. I'm talking about the rate of growth of the infection is
greater in Russia or Ukraine on any day than anywhere else in the
world, and as we project the figures to the end of this decade, we
see that, if it's left unchecked, starting to eat at -- eat away at
the economic base here, starting to take away half percentages and
percentages of growth. So we want to try to focus a great deal of
attention on that.
Finally, Jackson-Vanik. This is where we in the US government
are light. This is where we in the US government are determined to
see 2003 as being the year that we deliver on Russia's graduation
from Jackson-Vanik. It's a relic of the Cold War. It deserves to
be retired. The demise of official anti-Semitism, the open
emigration here are the reasons that we can seriously talk now
about getting Jackson-Vanik off the agenda. The ground is littered
with the promises of US officials who have, at one time or another,
predicted the end of Jackson-Vanik, but I sense from my own visit
back to Washington just two weeks ago a real determination this
year to get out from under Jackson-Vanik.
In conclusion, I'd say that the US and Russia still have some
very important differences -- nothing strange about that -- on some
very big issues. But in my 25, 26, 27 years of working in the
Soviet Union and working on Russia starting as a student in
Leningrad in the 1970s through a tour here at the embassy in 1983
and the work in the Clinton and now Bush administrations on Russia
policy that Andy mentioned, I have never seen a more encouraging
period in US-Russian relations, and I've never seen more promise
for the future. We have an exceptionally close relationship
between our presidents. We have very close and productive ties
between -- at the ministerial level between ministers, for example,
Gref and Evans or Rumyantsev and Minister Abraham and dozens of
officials beneath them. These relations make managing the
differences between us a lot easier, and it's also easier to keep
the momentum in the relationship moving forward.
This relationship requires a lot of hard work. We have a big
embassy here. We work very hard. We don't have any greater goal
as a US government in serving our own interests than ensuring that
Russia is a peaceful country, a stable country with a functioning
democratic institution and a dynamic market economy, a country that
works constructively with its neighbors and with its partners. And
we pursue this goal not simply because it's good for Russia and
good for Russia's neighbors, but because in a very real sense it
serves our own vital US interests to do so.
Thank you very much.

********

#9
New York Times
March 4, 2003
A Bubblegum Duo Sets Off Squeals and Squirms
By SABRINA TAVERNISE

MOSCOW, March 3 They pout and strut on stage. They strip and kiss between
songs. They are Russia's biggest musical export since Shostakovich, and
surely its most controversial.

Russia's new pop sensation two teenage girls called Tatu reached No. 1
on the charts in England in January. In all, they have hit No. 1 in 10
countries, a first for a Russian band. They were closing in on the American
Top 20 as they began a tour in the United States last week.

But their image is making people squirm. The duo, Yulia Volkova and Elena
Katina, were discovered by Ivan Shapovalov, a Russian child
psychologist-turned-advertising executive. To the horror of children's
advocates, the singers were 14 when Mr. Shapovalov chose them from among
several hundred young women he auditioned when creating the band. They
dress in schoolgirl uniforms with short skirts.

Mr. Shapovalov, 36, plays coyly on references to youth. He acknowledges
that he selected the English school uniforms to emphasize the girls' youth.
He also says he has seen child pornography while surfing the Internet, the
main objection in England, where the band's video caused an uproar in
January.

But Mr. Shapovalov denies that Tatu's image is based on pornography. The
performers, now 18, are not children. Nor are they being forced, he said.
In his view, Westerners, put simply, are prudes.

"All our inspiration is from childhood," Mr. Shapovalov said in a telephone
interview from Los Angeles last week. "Why should this be hidden? Social
organizations are afraid of violence, but what kind of violence is there
with Tatu? They are two teenagers singing about love."

The scuffle goes to the heart of a major cultural divide between Russia and
Western countries like England and the United States. Most Russians see the
West as sexually repressed. During President Bill Clinton's impeachment,
Russians admired his manliness instead of judging his morals. In Russia,
feminism is a dirty word, despite the Soviet era's emphasis on women's rights.

Some Russian intellectuals argue that, though the girls may not be musical
powerhouses as far as talent is concerned, they have already helped improve
Russia's image abroad. In Eastern Europe, where anti-Russian sentiment is
still strong, young people are singing Tatu's Russian songs. They have
brought Russia into the American mainstream, as guests on the Jay Leno show
this week with a top-playing single on American radio.

"People are saying that it's a pity the country that gave the world Pushkin
and Gagarin is now represented by lesbian nymphets," said Artyom Troitsky,
a music critic and founder of Russian Playboy. "But that's garbage.
Compared to how Russia is usually seen the dirty war in Chechnya, Russian
mafia, corruption, money laundering these two teenage girls are nice and
clean."

The group is the product of the sexual free-for-all that ensued after the
fall of the Soviet Union. After the strait-laced Soviet state collapsed in
1991, sex exploded onto city streets, television shows and advertisements.

"In the Soviet Union, anything erotic, and particularly nontraditional, was
completely banned," said Igor S. Kon, a well-known Russian sex therapist.
"That which is forbidden is all the more desirable. In that sense, these
girls have a very well- thought-out image."

But the new freedoms that brought openness in sexual relations also carried
economic woes. The Soviet economy collapsed and a raw, new capitalism
emerged, plunging millions of Russians into poverty. In the scramble to
survive, prostitution and human trafficking jumped, as did production of
child pornography.

In England last month, child rights activists deplored Mr. Shapovalov's
approach. Channel 4 in London called it "sick" and attacked the record
label for supporting their "open pedophile message."

"What we objected to and didn't find funny was Ivan marketing them as an
underage sex fantasy," said Michele Elliott, director of Kidscape, a
children's protection group. "These girls are talented. It's a shame they
were marketed off the backs of hundreds of thousands of sexually abused
children."

Mr. Shapovalov, in the interview, condemned the child pornography industry,
but said Western countries, in particular England and the United States,
are equally responsible for it as some of its biggest consumers. One of the
reasons, he said, is sexual repression.

"I am getting calls from England asking if I really went to children's
pornography sites, when half of England is sitting on the Internet looking
at them," Mr. Shapovalov said. "It's too bad that Russia is paying with its
image for open relations, but that's life. Russia makes it and the whole
world watches."

Cultural differences aside, the band was built to shock. Ms. Katina and Ms.
Volkova combine a sometimes baffling mixture of kissing and embracing with
school girl uniforms that often appears more male fantasy than lesbian
love. It was as if Mr. Shapovalov, having studied MTV, drew up a list of
exactly what would be most likely to catch the attention of both Western
and Russian audiences.

"They were 14 when I found them," he said, adding that his friends "looked
at me as if I was a maniac."

Bob Guccione Jr., founder of Spin, an influential music magazine, and
currently publisher of Gear, a men's magazine, said Tatu was "a timeless
success gimmick of someone that has found a button to push.

"This is not a problem that will bring down civilization," he said. "It's
like getting worked up over Kabuke."

America, it seems, has not taken offense. The girls were unruly as Jay Leno
guests, kissing lustily in defiance of a request that they not and wearing
T-shirts that used a potent Russian expletive to denounce the possible war
in Iraq. In short, their tour has been a success, said David Junk, the head
of Universal Records in Russia, the American record label that represents
the group.

"I've been trying to get Russian bands to break out of Russia for years
now, and finally we've done it," Mr. Junk said. "Hopefully it's the
beginning of the Russian invasion."

Mr. Troitsky disagrees.

"From the point of view of music, it is nothing," he said. "There are
plenty of serious things going on in Russia right now. This is just a
pleasant little nonsense."