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1. Moscow Times: Anders slund, Amnesty the Oligarchs.
2. Reuters: Russia's Duma moves to ease tough capital controls.
3. Reuters: Russian PM calls for 7-8 pct GDP growth by 2007-2008.
4. Vremya MN: Russian Economy Needs Real Reforms To Help Small Business.
5. Rosbalt: Mikhail Kasyanov: Real Income of Population Rose in 2002 by 9%.
6. Prime-TASS: Kudrin proposes journalists be invited to government's meetings.
7. ITAR-TASS: Experts predicting social optimism at next federal elections.
8. BBC Monitoring: Russia's Putin hands out posts to his friends - TV commentator. (Yuliya Latynina)
9. Luba Schwartzman: TV1 Review.
11. Rosbalt: Grigory Yavlinsky: Russia Will Not Veto US Resolution on Iraq.
12. BusinessWeek online: A Russian's Plea to Back America. Billionaire Mikhail Khodorkovsky says working with the U.S. is his country's best economic hope,
and he's pushing Putin to support Bush
13. BusinessWeek online: Moscow: "We Can't Accept Ultimatums." Russian Ambassador to the U.N. Sergei Lavrov on the "seriousness" of the consequences if the U.S. acts against Iraq without U.N. approval.
14. Nezavisimaya Gazeta: Alexander Bovin, TALLEYRAND IS MY CHOICE. The Iraqi crisis offers Russia a difficult choice.
15. Los Angeles Times: Robyn Dixon, U.S. Backs Away From Warnings Over Russia's Possible Veto.
16. Moscow Tribune: Stanislav Menshikov, WAR AND THE ECONOMY.
17. Nezavisimaya Gazeta: Yuri Alekseev, WHY WOULD THE CENTRAL BANK WANT ANOTHER DEFAULT? The ruble rising against the dollar, Sergei Ignatiev following in the footsteps of Sergei Dubinin.
18. Dow Jones: Russia's Banks Remaining Bear Of Country's Bull Markets.
19. Gerry Janco: NRDC's Russia's Nuclear Geography website.
20. pravda.ru: Catching up with the West is Possible, if Russia Reduces 85% of Its Population. Only five percent of the economically active population is referred to the category of high qualification specialists.
21. The Weekly Standard: Hugh Hewitt, Solzhenitsyn, Again. The great Russian thinker foresaw the situation which now faces George W. Bush.  
22. Jamestown Foundation Chechnya Weekly: ZAVTRA INTERVIEW WITH ZAKAEV.
23. gazeta.ru: Chechnya awaits Putin.


Moscow Times
March 14, 2003
Amnesty the Oligarchs
By Anders slund
Anders slund is a senior associate of the Carnegie Endowment for
International Peace. He contributed this comment to The Moscow Times.

Oligarchs are often blamed for corruption in Russia. It is true that they
have a habit of spending large amounts of money on "individualized
government services," but the nature of corruption has changed radically in
the post-Communist period, and overall corruption has undoubtedly declined.

That is evident from personal observations and from major enterprise
surveys conducted by the European Bank for Reconstruction and Development
in 1999 and 2002. Rather than just blaming oligarchs or government
officials, we need to look at the supply of, and demand for, relevant
public goods and services.

In the early 1990s, the main beneficiaries of bribes were the key
regulatory agencies, the Fuel and Energy Ministry, the Foreign Economic
Relations Ministry and the Central Bank. Today, none of these institutions
is perceived as being particularly corrupt. All kinds of licenses and
quotas for energy and foreign trade have been abolished. Officials in these
agencies have little left to sell, and the demand from the private sector
has faded. Deregulation is the quickest and best cure against corruption.

Privatization amounted to a big, one-time grab, which temporarily boosted
corruption but then led to its reduction. Today, it is apparent how
important privatization was for the decriminalization of the economy. Most
state companies were sad stories of management theft with little or no
consideration for the development of the enterprise or the well-being of
their employees. Such problems remain in state or semi-state enterprises,
while for the most part they are history in long privatized enterprises.
While corruption was standard in Soviet enterprises, it is now mainly
considered a plague of the bureaucracy. In hindsight, it is clear that it
is much more important that enterprises were privatized than how they were
privatized. The owners who make them succeed are more often than not the
second or third owners following privatization.

Poland provides a sad contrast in this regard. Many large enterprises there
are still state-owned, notably in the coal and steel industries, while
their counterparts in Russia have been privatized. They continue to make
losses, extract subsidies and their production is not taking off. Russia
was evidently wise to sell off its large enterprises early regardless of
the price. Poland is stuck in a huge corruption trap: State corporations
are patently corrupt, and they corrupt and discredit every government that
tries to manage them. Russia has managed to throw away this poisoned
chalice, with only a few major enterprises remaining in state ownership.

Yet the major state-owned energy corporations pose a problem and should be
privatized as soon as possible to mitigate corruption. The stock market
greeted the recent Slavneft "auction" with relief because the most
important thing was that it took place. Privatization "at all costs" has
ultimately reduced corruption in the Russian economy.

Alas, although deregulation and privatization have gone far, the oligarchs
continue to spend huge amounts of money on the state. The largest sums seem
to be spent on paying off extortioners from the federal authorities,
financing national parties and gubernatorial election campaigns. These
items are closely related, and it is often impossible to distinguish what
is extortion and what is the bribery.

The fundamental problem is that the oligarchs lack secure property rights.
Before each election, they have to fund political parties in order to
secure their property rights for a few more years. The oligarchs typically
fund several parties because some parties are honestly interested in
securing property rights, while others extract tribute for leaving them alone.

At the regional level, property rights are undermined by discretionary
gubernatorial powers over taxation and property. Norilsk Nickel beat
Russian Aluminum in the Krasnoyarsk gubernatorial election in Krasnoyarsk,
reportedly spending much more money on the election because it pays much
more in taxes there than Russian Aluminum.

The current pre-election situation is telling. Politicians are focused on
raising funds from oligarchs while ignoring electoral programs, party
organization and voter mobilization because they depend more on oligarchs
than on their voters.

Although the outcome of the elections appears evident, the oligarchs keep
spending. They must nurture their relations with the governing party, yet
are also anxious that pro-presidential parties not achieve a two-thirds
majority in the State Duma, which would allow them to amend the
Constitution. ("More than eight years of President Vladimir Putin would be
too much of a good thing.")

The symbiotic relationship between political parties and the oligarchs is
surprisingly transparent. Voters see it, and they are disgusted by the
whole political system. This situation is reminiscent of unstable
oligarchic democracies in Latin America.

Attacking the oligarchs only aggravates the problem. Whenever Putin
criticizes them, their spending both on presidential parties and the
opposition appears to rise. And no prohibition can constrain such powerful

Paradoxically, to reduce corruption of the political system Putin needs to
guarantee the oligarchs' property rights. Then they would feel less need to
succumb to extortion or to pay parties to defend their property rights. The
rational approach would be legislate an ironclad guarantee of property
rights starting from a certain date. A natural choice would be Jan. 1,
2000, when Putin came to power declaring that the rules of the game had
changed. Such an amnesty would also revive the housing market and other
property markets marred by challenges to property rights.

The national parties would face financial distress, which would force them
to organize, formulate credible electoral programs and mobilize their
voters, thereby strengthening democracy.


Russia's Duma moves to ease tough capital controls

MOSCOW, March 14 (Reuters) - The Russian Duma lower house of parliament
took the first step on Friday towards scrapping a large part of the strict
exchange and capital controls imposed after Russia's 1998 financial meltdown.

The bill, mandated by the government and the central bank, is designed to
make the rouble fully convertible by 2007 and to boost foreign investment.

In the first of three parliamentary readings, deputies approved the bill by
287 votes to 117, with four abstentions.

The new legislation will allow Russians to open bank accounts abroad,
scrapping the existing practice of granting case-by-case permission for
transfer operations. Both business and normal Russians will be required to
notify authorities.

Russian banks have cold-shouldered the new bill, fearing Russia's banking
industry may not be ready to compete with foreign peers, who can offer
cheaper funds and better service.

"There is widespread concern the bill could negatively affect Russian
banking system," First Deputy Finance Minister Alexei Ulyukayev told
deputies. "We are ready to adress the issue during the second reading of
the draft."

Under the bill, the authorities will until 2007 retain tools to control
short-term capital transfers, in order to ensure financial stability in
case of a sharp decline of foreign currency reserves or severe fluctuations
of the rouble.

The central bank may require money earmarked for such operations to be
frozen for up to a year to maintain stability of Russia's balance of
payments, according to the draft bill.

The bill would also scale down the amount of hard currency firms must sell
on the local market, a rule imposed after the August 1998 financial crisis,
when the rouble crashed and companies became reluctant to hold the currency
in their vaults.

Under current legislation, Russian exporters have to sell half their hard
currency export receipts. Under pressure by the business lobby, officials
hope to lower the ceiling to 30 percent, giving the central bank a right to
vary the rate under that cap.

Required sales of export revenues have helped the central bank build up its
foreign currency reserves, which rose to all-time highs of $54.6 billion at
the start of March.


Russian PM calls for 7-8 pct GDP growth by 2007-2008
By Julie Tolkacheva

MOSCOW, March 14 (Reuters) - Russian Prime Minister Mikhail Kasyanov
blasted his government on Friday for slow reforms and sluggish economic
growth, setting a target of seven to eight percent gross domestic product
growth by 2007-2008.

Kasyanov told ministers to diversify Russia's highly oil-dependant economy
to ease the impact of swings in global commodity prices.

"The economy essentially remains a monoculture," Kasyanov told a meeting of
Economic Development and Trade Ministry officials. "Industries other (than
oil), with rare exceptions, are non-competitive. The problem is deepening,
it is enough to look at the structure of investment to understand it."

He added: "Our main goal is to reach an economic growth rate of seven to
eight percent by 2007-2008. We are expecting such a programme from you next

Russia's economic growth has been steadily sliding since 2000, when it
reached a peak of nine percent. In 2001, GDP growth stood at five percent
and in 2002 at 4.3 percent. This year the government targets 3.5-4.4
percent growth.

The Economic Development and Trade Ministry has worked out a medium-term
economic programme which puts GDP growth in 2008 at 4.5-5.5 percent.

Economic Development and Trade Minister German Gref said diversifying the
economy would be a tough but necessary task.

"To diversify the economy and make its growth sustainable in four years is
an extremely difficult, but not impossible task," Gref told reporters. "It
must be done."

Kasyanov said Gref's ministry, responsible for the overall economic
strategy, should work at removing the red tape, adjusting local legislation
to the demands of the World Trade Organisation, and solve the problem of
the government's excessive interference in the economy. It should also, he
added, support exports and push forward with administrative reform.


Russian Economy Needs Real Reforms To Help Small Business

Vremya MN
5 March 2003
Article by Kakha Kakhiani: "The Reform Wagon Has Gone into the Ditch"

Just recently, discussing the country's
three-year development plan at a session of the government, minister of
economic development and trade German Gref stated that our successes in
tax reform "have not created a more favorable investment climate in
Russia as compared with neighboring countries." It was as if Gref had a
crystal ball. The Statistical Committee of the CIS countries has just
published an article about industrial growth in the countries of the
Commonwealth. Russia is in last place on this list--growth in
industrial production was just 4.9 percent. The leaders were other CIS
states: Moldavia (13 percent growth), Tajikistan (12.8 percent), Ukraine
(11.6 percent), Armenia (9.9 percent), Kazakhstan (8.9 percent), Georgia
(7.9 percent), Belarus (6.3 percent), Kirgizia (5.9 percent), and
Azerbaijan (5.8 percent).
At the same time the survey of Russia's socioeconomic development
for January of this year, prepared by the RF Ministry of Economic
Development and Trade, says with alarm that the growth in GDP [gross
domestic product] was secured by increasing volumes of export (oil,
natural gas, and metals) and end consumption by households. What is
more, specialists at the ministry warn that the potential for stable
growth in this and subsequent years is close to being exhausted--to
maintain and develop growth there must be structural reforms, an
improvement in the investment and entrepreneurial climate, an expansion
of opportunities for small business, the creation of new enterprises, and
the development of progressive technologies.
But even that is not enough. In the opinion of Yegor Gaydar,
director of the Institute of Economics of the Transitional Period, in
order for the country to develop at an accelerated pace, tax reform,
following an intelligent ruble exchange rate policy, and reducing state
expenditures are not enough. In his view an efficiently operating legal
system, property rights that are truly protected, and less corrupt
bureaucracy are essential. "All this presupposes lengthy preparatory
work, but zero growth rates may already appear in the near future," the
prominent economist summarizes.
At the same time, although the primary growth
indicator--investment--did rise by 7.9 percent in January, according to
first deputy minister of economic development Ivan Materov, it is
producing this growth in the raw material sector, not in processing
industry. The investment programs of the large domestic companies that
have been made public only confirm this proposition. For example, YUKOS
intends to increase investment by 36.4 percent in 2003, to $1.76 billion.
Gazprom plans to increase investment by roughly 40 percent, from $4
billion to $5.6 billion. The investment budget of the MPS [RF Ministry
of Railroads] will grow by one-third (from R80 billion to R106.6
billion). It follows from this that the primary investors are again
companies whose investment plans are very strongly subject to energy
price fluctuations in the world market. The primary indicator of
economic growth--development of the service and small enterprise sectors,
which make the economy run in the United States and Europe--is shrinking
every year like shagreen leather.
Part of the tax burden was lifted from small enterprises last year.
But the tax burden is not the main "headache" for small business: if they
have income they can even pay taxes at a higher rate (evidence of this is
seen in the experience of the developed countries). But reducing
administrative barriers and providing access to cheap credit have not yet
begun to play a key part in the development of small enterprises. For
example, last year the "one window" rule was introduced to make it easier
to register enterprises. But it remains just a piece of
paper--entrepreneurs still are forced to run to the bank and to the
pension and insurance funds for additional reference materials, which
again take significant time to obtain. The situation is no better with
issuing loans. Banks are now offering credit to small enterprises at
15-18 percent annual interest in hard currency for terms of no more than
two years (ruble loans start at 20 percent and cover inflation and then
some). How high does profitability have to be to pay that kind of
interest, pay taxes, and still have something left for development?
Indeed, Gaydar is right: in order to achieve high growth rates we
need major changes in many areas of the economy, and not just that. The
government talks about these problems at almost every session, but the
"reform wagon" is moving very slowly. As long as energy prices are high
the cabinet of ministers can permit itself these debates. But what
happens if these prices--as many analysts are predicting--fall sharply
because of the coming war in Iraq? "What growth rates will the country
be getting three years from now?" Prime Minister Mikhail Kasyanov asked
at one of the government sessions. It appears that nobody can give a
confident answer to this question today.


March 13, 2003
Mikhail Kasyanov: Real Income of Population Rose in 2002 by 9%

MOSCOW, March 13. The real income of the Russian population rose in 2002 by
almost 9%. According to the government press office, this was announced at a
government meeting today by Prime Minister Mikhail Kasyanov.

The prime minister also announced some other figures for 2002, including GDP
growth of 4%, a 12% rise in the volume of import and 'only' a 3% increase in
investment. Mr Kasyanov insisted that in 2003 the Russian government should
do more to attract investment in the processing industries in order to
maintain the level of economic growth or even raise it. The prime minister
added that the sale of government shares in Slavneft and Lukoil will
guarantee the stability of government reserves 'which will be used to make
half of the payments on foreign debt in 2003.'


Kudrin proposes journalists be invited to government's meetings

MOSCOW, Mar 13 /Prime-TASS/ -- Russia's Deputy Prime Minister and Finance
Minister Alexei Kudrin has proposed to Russia's Prime Minister Mikhail
Kasyanov that journalists be invited to attend governmental meetings or that
they publish unclassified transcripts of the meetings, he told reporters

He added that it was necessary to make government meetings more open to the
mass media since the journalists currently use inaccurate and incompetent,
anonymous sources, he added.

The move will allow the public to be more precisely informed on decisions
that affect them, he noted.

Kasyanov promised to consider the proposal in the nearest future, Kudrin


Experts predicting social optimism at next federal elections.
March 13, 2003

Russian sociology experts believe the parliamentary and presidential
elections Russia is due to have at the end of 2003 and in the first half of
2004 will be marked by high levels of social optimism, as society has adapted
itself to changes taking place in the country, a high-ranking expert said

Dr Igor Bunin, director general of the Center for Political Technologies,
told a news conference his conclusions were based on a sweeping sociological
research and analysis of the political situation before the kickoff of the
2003 election race.

The research proved President Vladimir Putin's personal popularity, Bunin
said. Coupled with the "positive coverage" of developments by Russian
television channels, it may have formed a positive public outlook of what the
federal authorities are doing, he said.

Bunin noted that the Russians were more inclined to readdress their claims to
regional authorities now.

Analysts indicate that the electoral sphere is largely dominated by the
parties having seats in the State Duma now, and the voters seem to have
identified favorites of the race in the early phase of preparations for the

United Russia Party and the Communist Party of the Russian Federation
accounted for 54 percent of projected votes at the end of 2002, according to
opinion polls sponsored by the All-Russia Public Opinion Research Center.

Statistics also indicates that the centrist and pro-presidential United
Russia Party is getting more attractive for the centrist-minded electorate,
while the Communist Party is apparently losing its position of a clear leader
among the leftwing.

Researchers also say that the Union of Rightwing Forces, the liberal
rightwing Yabloko and the Liberal-Democratic Party of Russia are in the tier
below, accounting for 21 percent of projected votes altogether.

This means that any chances of their getting into the upper league are almost
totally ruled out, even though the electoral campaign has not yet begun.


BBC Monitoring
Russia's Putin hands out posts to his friends - TV commentator
Source: TVS, Moscow, in Russian 0425 gmt 13 Mar 03

Russian President Vladimir Putin's main goal in government reshuffles is to
bring true friends closer to him, said Yuliya Latynina, Novaya Gazeta
commentator, in her "Yest Mneniye" (My Opinion) morning commentary slot on
the Russian independent TV channel. Somehow, it reminds her of feudalism. The
following is an excerpt from the commentary broadcast by Russian TVS
television on 13 March:

Three heads of power ministries who started their career at the time of
[former Russian president Boris] Yeltsin have left, namely Konstantin Totskiy
[head of the FPS Federal Border Service], Vladimir Matyukhin [head of FAPSI
Federal Agency for Government Communications and Information], and Mikhail
Fradkov [head of Federal Tax Police Service].

Their departments have been redistributed between agencies already headed by
people close to President Vladimir Putin. The Federal Security Service [FSB]
got back two services which were previously cut off from it, namely FAPSI and
FPS. Something else has fallen into the hands of the Russian Defence Ministry
and the Russian Interior Ministry. The Federal Committee for the Suppression
of the Illicit Traffic in Narcotic Drugs has been set up specially to
accommodate another needed person, namely Vladimir Cherkesov, [the former
presidential plenipotentiary representative in the Northwest Federal

From the very beginning it has not been the reinforcement of the FSB that
Putin was carrying out. He was carrying out a totally different action,
namely surrounding himself with trustworthy people. He did not put the
Defence Ministry under FSB, he placed civilian Sergey Ivanov at the head of
it. He did not put the Interior Ministry under the FSB, he placed civilian
Boris Gryzlov at the head of it. He did not set up an FSB structure
supervising governors, he set up an institution of presidential
plenipotentiary representatives. The FSB interests Putin not as an agency in
need of restoration, but as a personnel reserve full of obsequious people
lacking initiative who know Putin personally and owe their rise to him...

Putin is not strengthening agencies, he is strengthening his friends. That is
why neither bribe-taking, nor inertia, nor corruption are reasons for
dismissal in Russia. This man is my friend, how can one be objective towards
one's friend?

Indeed, not very capable Cherkesov was strengthening the vertical of power in
Russia's northwest. He has not done much, except making the Rosbalt news
agency, which belongs to his wife, the leader in the regional PR market. Many
St Petersburg companies rushed to sign agreements with Rosbalt. Is this a
disgrace? Maybe it shows that he is a trustworthy person who deserves a

Take the Interior Ministry and the FSB that failed to prevent the terrorist
act at Dubrovka [the Moscow theatre hostage crisis in October 2002]. They
were too busy doing other important things, namely interfering in disputes
between business entities. Is this a reason for dismissals? No, this is the
good reason to put Gryzlov in charge of the One Russia party.

There are no departments in Russia, there are friends. There are no laws,
there are personal relationships. Moreover, there is no KGB. This huge
aircraft carrier designed to deliver strategic strikes at dissidents has long
since been idle. Its crew moved to private companies, some taking their
authorized handguns with them, others took surveillance equipment and someone
has pinched a whole MiG fighter from the deck and uses it against disputing
business entities.

KGB was an organization. There are no organizations in Russia now. There are
principalities and feudal lands handed out in exchange for loyal service and
profitability. It was not Putin who set up the system, but he did nothing to
change it. He is just handing out feudal lands to his friends in order to be
able to control other feudal principalities.


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

Wednesday, March 12, 2003
- Russian President Vladimir Putin met with Prime Minister
Mikhail Kasyanov to discuss the national socioeconomic situation.
- Prime Minister Kasyanov spoke in favor of making tax
concessions to reverse negative economic tendencies and promote
economic development.
- A dress rehearsal of the referendum on the Chechen Constitution
was held in Grozny. Grozny students received brochures with the
Russian and Chechen texts of the draft Constution: 79% approved
the law on presidential elections and 85% approved the law on
parliamentary elections.
- Russian Foreign Minister Igor Ivanov ended his visit to
Afghanistan. He discussed international stability with Afghan
officials. He promised them that Russia will provide help for the
reconstruction of the economy and the strengthening of the armed
- The State Duma will review the new draft of the Agreement on
the Strategic Offensive Reductions submitted by the Russian
- The oil and gas industry was discussed at the Russian Cabinet
meeting. Experts believe that there are 0.5-5 billion tons of
deposits in Eastern Siberia, which could be developed and
exported to the Asian-Pacific region.
- Cabinet members also approved the Ministry of Finances
proposal to end control over major purchases by Russian citizens,
effective next year. The recommendation will now be sent for
approval to the State Duma.
- The Tbilisi Regional Court has approved the decision on the
extradition of two Chechen fighters to Georgia. Ruslan Gelogaev
and Rustam Elkhadzhiev were detained in Georgia in August of
2002 for illegally crossing the Georgian state border.
- Pension Fund Chairman Mikhail Zurabov reported to President
Putin that pensions will be increased by 150 rubles in the first
- President Putin met with Emergencies Minister Sergei Shoigu to
discuss measures taken by the emergencies ministry to prevent
spring flooding damage.
- Russian Muslims protested US military actions.
- President Putin congratulated writer Sergei Mikhalkov on his
90th birthday. Mikhalkov wrote many childrens books, fables,
and plays, as well as the Soviet and Russian national anthems.
- Maritime Region customs officers detained a train driver who
was smuggling over a thousand pieces of fur and three live
Himalayan bear cubs. To keep the bears from making noise he
gave them vodka.
- Russian Energy Minister Igor Yusufov met with US Secretary of
Energy Spencer Abraham. They signed an agreement on
cooperation in the liquidation of oil spills. In the near future a
series of joint seminars and training programs will be worked out.
The ministers also discussed investment into Russian enterprises
and the situation on the world energy market.



MOSCOW, MARCH 13 (from RIA Novosti's Elena Titarenko) - The Moscow Kremlin
state cultural historical museum-preserve has improved its web site, says
Alexei Levykin, museum vice-director.

Any user now can see Kremlin expositions, wherever he may be. He will
examine the entire citadel in Moscow's heart, make a virtual visit of all
museum rooms, see all details of any item in its vast collection, and read
its thorough description.

The site www.kreml.ru offers thematic arrangements of items in the museum
depositories-many have to be concealed from public display as there is not
enough room in the museum for its fabulous collection.

Present on the Internet are collections of banners, and clocks and watches.
The renowned Kremlin collection of side-arms will soon appear on the site,
alongside state regalia. The site will be gradually extended.

The museum is determined to enrich the site with information, pioneer
multimedia technologies, and archeologists' and museum custodians' latest
finds. The four-language site is designed following the personal style of
Fedor Solntsev, 19th century artist employed in the Kremlin Armoury Chamber.


March 14, 2003
Grigory Yavlinsky: Russia Will Not Veto US Resolution on Iraq

MOSCOW, March 14. In the next few days Russia will take 'unexpected steps'
regarding the situation in Iraq, according to Grigory Yavlinsky, the leader
of the Yabloko party. Yavlinsky made this prediction yesterday when
speaking to students of the Moscow State Institute of International
Relations. In all likelihood, the unexpected steps will see Russia refrain
from using its UN Security Council veto against the resolution on Iraq
proposed by the US, said Yavlinsky.

'The Russian leadership has recently begun to understand that vetoing this
resolution would be counterproductive for Russia in all respects,' believes
Yavlinsky. He expressed his certainty that the Russian President would soon
take a decision to this effect.

According to Yavlinsky, Russia should not use its veto in the forthcoming
vote under any circumstances. 'With this veto we would find ourselves
completely alone and would destroy everything that has been achieved in
international relations since September 11, 2001,' he stressed. The Yabloko
leader said that preserving unity between Europe and America and unity
within Europe itself were currently one of Russia's most important national
interests. Yavlinsky believes that the Russia-Germany-France triangle is an
illusion. 'Europe is married to the US, and they have children together. Of
course, Europe may commit adultery with Russia, but by the evening
everything will be back to normal and Russia will find itself on the
sidelines again, like a discarded lover,' said Yavlinsky.


BusinessWeek online
March 14, 2003
A Russian's Plea to Back America
Billionaire Mikhail Khodorkovsky says working with the U.S. is his
country's best economic hope, and he's pushing Putin to support Bush

If any Russian business magnate personifies the country's efforts to forge
closer political and economic ties with the U.S., it's billionaire Mikhail
Khodorkovsky, the 39-year-old chairman of Moscow-based Yukos, Russia's
second-largest oil company. A frequent visitor to Houston and Washington,
Khodorkovsky has hired top American executives to help him manage Yukos and
views the U.S. as a crucial source of technology and knowhow for
post-Soviet Russia's emerging capitalist economy. He also sees the U.S. as
a vital market for Russia's oil and other exports.

So is Khodorkovsky now worried about Moscow's threats to veto a new
U.S.-backed U.N. Security Council resolution to pave the way for a war with
Iraq? You bet he is. In one stroke, he says, Russia could ruin a historic
opportunity for a long-term strategic partnership with the U.S. -- an
opportunity that he views as far more important than improved ties with
France and Germany, now aligned with Russia on the Iraq question. "It would
be really stupid to let this opportunity slip through our fingers," he says.

Then again, Khodorkovsky's bluntness is his trademark. On Mar. 13, amid the
whirlwind of global diplomacy on Iraq, he sat down for a wide-ranging
interview at his Moscow headquarters with BusinessWeek Moscow Bureau Chief
Paul Starobin. Following are edited excerpts from their conversation:

Q: Why do you view a strategic partnership with the U.S. as such a vital
opportunity for Russia?
A: For economic development, Russia needs investment, Russia needs [highly
trained] people, Russia needs markets, Russia needs technologies. There are
a large number of business areas in which we are behind -- marketing is one
of them, and another is business organization in the broadest sense. When
we take a look and see who would be the greatest benefit to us in all these
directions, the answer is clear: America.

Q: Couldn't Russian look to Europe for these sorts of benefits?
A: Russians are more like Americans than they are like Europeans. We're
always trying to push the envelope, to go outside the box. Europeans tend
to die the moment they do that. Given a choice, a European would rather
work less than earn more.

Then there's the matter of security, which has nothing to do with business.
We've got a lot of regional problems. The only realistic ally is America.
So if we're going to prioritize things, then we have to say the most
important relationship is with America and then, equally important in
second place, Europe and China.

Q: And yet some Russian business leaders, along with others in the
political elite, see the Iraq issue as a good chance to split the West
between America and Europe. Couldn't that be an effective tactic?
A: It's highly unlikely to work because all of the misunderstandings
between Western Europe and the U.S. are like little scratches on a mighty
oak table. It's not pleasant to see these scratches -- they don't add to
the beauty of the table. But the table is no less sturdy for them. We can
try to use our fingernails to scratch a little more on this table, but it's
an unrealistic thing to do.

Q: Many Russian business and political leaders say President Vladimir Putin
has received scant rewards from Washington from his politically risky bid
for closer ties. Don't they have a point?
A: Yes. America isn't proposing anything. We are still not too clear on
what America's position is on Russia's bid for WTO accession and how
America can concretely help on accession. We also aren't sure what role
America sees for Russia in postwar Iraq.

The U.S. also says that maybe it can contract with Russia to participate in
the building of America's national missile defense program. But this isn't
even at a stage of realistic discussion yet. It has stagnated.

Q: If relations between Moscow and Washington get chilly, is that going to
have an impact on U.S. investment in Russian companies and markets?
A: I don't think that Americans who have already bought Russian assets are
going to unload them. We've lived through tougher times than this already.
But the expansion may stop.

Q: Have you conveyed your views to Putin?
A: He knows where I stand. It's not a secret.... I am well known in Russia
for my pro-Americanism


BusinessWeek online
March 14, 2003
Moscow: "We Can't Accept Ultimatums"
Russian Ambassador to the U.N. Sergei Lavrov on the "seriousness" of the
consequences if the U.S. acts against Iraq without U.N. approval

The intense diplomatic battle that has been raging at the U.N. is coming to
a close. A vote may be imminent on a proposed British resolution declaring
that Saddam Hussein has missed his final chance to comply with U.N. demands
to disarm Iraq of weapons of mass destruction unless he meets several final
"benchmarks." They include announcing in Arabic on television that Iraq
possesses such weapons and allowing dozens of scientists to be interviewed
outside of Iraq.

France and Russia have declared that they will veto any resolution that
appears to authorize the immediate use of force against Iraq. BusinessWeek
Senior Writer Rose Brady spoke with Russia's U.N. ambassador, Sergei
Lavrov, about his country's position and its possible impact on the future
of U.S.-Russian relations. Edited excerpts of their conversation follow:

Q: Do you think the U.S. has mishandled the diplomacy in the U.N. on Iraq?
A: Each country has its own diplomacy, and each country has its own
convictions.... [But] we've been saying that we can't accept ultimatums and
the automatic use of force. We're convinced that disarmament can be done
peacefully by continuing inspections.

Q: Will U.S.-Russian relations suffer as a result of the differences over
A: I hope that U.S.-Russian relations are mature enough to survive crisis
situations. Difficult situations have taken place in the past -- when the
U.S. unilaterally abandoned the ABM [antiballistic missile] treaty, which
we believe was a mistake, just as we believe that the expansion of NATO was
a mistake. We said so, but we also said we did have other things to do with
the U.S., and I think we managed to survive those two critical points in
our relations.

Q: How serious is this crisis for the international community?
A: It's serious, no doubt, if the war starts in a situation when it isn't
warranted because the real process on the ground in Iraq is progressing.
You have only to read statements from leaders of the region to sense what
the fallout will be and the very serious consequences [if force is used].

The Middle East situation is deadlocked, and there's the rise of extremist
feelings and actions. [There's the problem of] the Kurds. I hope everybody
understands the seriousness of [the situation], and when a decision
regarding this crisis is taken that we will all fully recognize our

Q: If the U.S. and Britain go to war without the backing of the U.N., what
damage would that do to the U.N. Security Council?
A: This would certainly be against the U.N. charter, and this would be
unfortunate. The charter clearly says the use of force is not legitimate
unless authorized by the Security Council or in self-defense [after a
direct attack].

As far as the future of the Security Council is concerned, I don't think
it's in danger. It's handling a dozen and a half peacekeeping operations in
very crucial areas, and it's leading the international coalition against
terrorism. The council is paying attention in practical terms to such
issues as illegal drug trafficking, organized crime, and other issues that
are of direct interest to all countries -- including the largest countries
in the world.

Q: What is your opinion of President Bush's new national security strategy,
which endorses the notion of preemptive strikes to protect American and
other international interests?
A: This preemptive doctrine is very worrying. [Again], it certainly goes
against the U.N. charter. The [international community's] priorities are
going to be confused. The coalition against international terrorism will
suffer, and other international efforts could [suffer as well].

I hope that we all will [realize] that we need cooperative relations to
fight common threats and challenges.


Nezavisimaya Gazeta
March 13, 2003
The Iraqi crisis offers Russia a difficult choice
Author: Alexander Bovin
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

Unfortunately, contrary to many people's assumptions, this matter
doesn't involve a choice between the United States and Iraq, or
between Bush and Saddam. The options offered are a choice between
international law and international lawlessness, between the trends of
building up a multipolar world supported by the interaction of several
centers of force and an attempt to extend the existence of the Pax
Americana, the unipolar world.
Let's now descend from the heights of principles into the depths
of more specific concerns.
Saddam Hussein is doomed, in historical terms, and so is his
regime, which is among the most hated in the world.
There was a time when, like Washington, Moscow used different
methods. The Americans had their favorite tyrants and despots, and we
had ours. Saddam Hussein was among them. Since that remote time (the
Friendship and Cooperation Treaty between the Soviet Union and Iraq
was signed on April 6, 1972 in Baghdad) we have had a multitude of
threads linking us to Iraq.
For a start, Iraq's debt to Russia is worth approximately $9
billion. Moscow doesn't give up hope (in vain, however) that Saddam
will repay the old debts. We resume supplying equipment to Iraq,
constructing railways, power plants, other objects of the
infrastructure. Iraq continues purchasing our uncompetitive products
(for instance Volga cars). We are actively concerned about the
development of Iraqi oilfields (Iraq has 73 oilfields; only 24 of them
are developed, so there's scope for business activity). Russia is
involved in the Oil For Food program, which is yielding billions in
revenues. Preparation of a five-year agreement envisaging contracts
worth up to $40 billion began last year. In short, if we continue
opposing war (Hands off Iraq!) - and war breaks out nevertheless -
Russia does have something to lose.
Let's change the point of view and imagine that Russia is
actively supporting Bush, blessing the military decision and the
subsequent replacement of the regime. It would then be logical to
assume that the United States will agree to minimize the damage which
Russia might suffer. The new regime will perceive Russia as a country
which contributed to overthrowing the dictator, rather than supported
him, with all the ensuing consequences.
Turkey is sometimes given as an example. So Moscow is being
advised to give Washington a clear indication about the price for our
support. However, we don't wish to take Turkey's approach seriously.
Hopefully, Putin is not selling his beloved "state sovereignty" for a
mess of pottage (even though it is from America).
Given above are the two extreme options. There's the only chance
of avoiding their grip - to thwart the war.
If the opportunity specified above is not implemented, we'll have
to fish in troubled waters of half-made decisions and forced
Presumably, Blix informs the UN Security Council that despite all
his tricks Saddam is aiming to avoid the honest and complete
fulfillment of the UN resolution. This will provoke a situation, in
which the memorandum of the three (Germany, Russia and France) permits
application of the "extreme measure," i.e. a military strike on Iraq.
If that's the case, Russia (as well as other participants in the
memorandum) will have to support the United States, vote in favor the
tough American approach. This means that the "extreme measure" will
have be legally backed.
Supposedly, having noted positive alterations in Saddam's
conduct, Blix once again demands resumption of inspections and the
majority of UN Security Council member states disagree Blix and will
be prepared to sanction the war. This is the point where the problem
of veto arises.
If China and France insist on the veto, for some clear reasons
Russia will be compelled to join them. A veto would mean a slap in
America's face, and it will offer a proper response. Everything seems
to be fine here, but, in view of our interests, this is the most
unsuitable option for Russia.
If China and France decide in favor of abstention, in no
circumstances should Russia resort to the veto and it must abstain,
i.e. approve the America's option and thus legitimate the military
actions. As is said nowadays, the principles are having a rest, but
there appears a hope to at least partially defend our interest not
going into an open clash with America.
Even though it doesn't sound quite decent, it makes sense to try
attaining an agreement with Beijing and Paris on unanimous abstention
instead of going into extremes.
As Talleyrand was teaching, politics is the art of cooperating
with the inevitable. If no attempt of thwarting the war or
legitimating it through the UN is a success, if we see that the war is
inevitable in the end, it would be unreasonable to claim to be a
defender of the international law. The political losses will evidently
exceed the moral gaining.
I foresee rebukes, accusations of timeserving and cynicism. This
is hardly disputable. The wish to keep one's hands clean is so
strong... Sometimes, however, one needs to retreat in order to
preserve forces for a future attack.
"Half-measures are detestable!.." wrote Valery Bryusov. By the
highest standards, he is undoubtedly right, especially taking long-
term strategy into account. However, looking at contemporary Russia,
its position in the present-day world, I choose Talleyrand's position.
(Translated by Andrei Ryabochkin)


Los Angeles Times
March 14, 2003
U.S. Backs Away From Warnings Over Russia's Possible Veto
Robyn Dixon, Times Staff Writer

U.S. officials Thursday softened their warning about the possibility of
long-term damage to relations with Moscow if Russia vetoes a new U.N.
Security Council resolution on Iraq.

One senior U.S. official said Washington still hoped to persuade Russia not
to use its veto but conceded that, "if anything, the indications are more
in the other direction."

Russia is eager to avoid a war in Iraq that it regards as being against its
interests. President Vladimir V. Putin sent a top envoy, former Prime
Minister Yevgeny M. Primakov, to Baghdad last month to urge Iraqi leader
Saddam Hussein to step down and go into exile. Hussein rejected the idea.

"It's my understanding that the Russians have been floating that idea," the
official said, confirming rumors that have circulated for some time. The
official added that Moscow regarded the possibility of Hussein's going into
exile as a chance to end the crisis peacefully.

U.S. officials were confident weeks ago that Russia would not block
military action against Iraq. But with the threat of a veto now in the air,
U.S. officials are pondering how they misread Moscow's mood, and weighing
how serious the fallout would be.

"We will certainly try to minimize any damage," said the U.S. official, who
spoke on condition of anonymity. The official added that a Russian veto
would not lead to any strategic shift in the relationship, which has been

The official said President Bush's phone call to Putin on Wednesday was "a
friendly conversation" that reflected the leaders' determination to keep
the relationship on track.

"The leadership of both sides want to minimize the damage because there are
so many things that we want to do together," the official said. "But you
can't completely insulate the relationship from an issue of this importance."

"I think at the end of the day, the U.S. relationship will remain paramount
in Russia's calculation, and certainly in Putin's calculations," the
official said.

Putin and French President Jacques Chirac, who is leading the effort to
block a Security Council resolution authorizing war, spoke by phone
Thursday and pledged to make further efforts to find a diplomatic solution
to the crisis, Putin's news service said.

Part of the difficulty for Washington has been Putin's relative silence on
Iraq. He has left public pronouncements largely to foreign ministry
officials. When Putin lined up in the antiwar camp last month with the
leaders of Germany and France, U.S. officials were taken by surprise.

Washington had calculated that Putin, a pragmatist, valued Russia's
relationship with the United States above all other foreign policy issues.
U.S. officials also thought that Moscow's interests in the Iraqi oil
business and its desire to see Iraq repay $8 billion of debt would be
enough to ensure Russian compliance.

There have been some veiled threats, however, notably from a senior Bush
administration official in Moscow recently who warned Russia of the
economic costs of blocking U.S. objectives.

"What we have said is that if you're concerned with recouping your $8
billion in debts and if you're interested in economic opportunities in
liberated Iraq, it would be helpful if you were part of the prevailing
coalition," that official said at a background briefing for reporters last

"The Americans failed to understand that in order to make Putin change his
position on Iraq, it was necessary to offer and actually give him
something," said one Moscow analyst, Viktor A. Kremenyuk of the USA-Canada
Institute. "In fact, the Americans have done nothing real to attract Russia
and win it over to their side."

While Putin's actions have underscored his commitment to relations with the
United States, he also has spoken frequently of his desire for a multipolar
world not dominated by Washington.

Putin acquiesced to a U.S. military presence in the Central Asian states of
the former Soviet Union as the United States geared up for war in
Afghanistan after the Sept. 11 terrorist attacks. And despite strong
domestic opposition, he also recognized the inevitability of the Bush
administration's moves to dump the 1972 Antiballistic Missile Treaty, build
a national missile shield and enlarge the North Atlantic Treaty Organization.

While those moves did not dent Putin's popularity or pose a political
threat, they left him with critics among hard-line anti-Western elements in
the military and security agencies.

"Putin realizes that he cannot keep forgiving the Americans and making
concessions to them indefinitely," Kremenyuk said, arguing that Russia's
position was a reaction to U.S. unilateralism and a sign of dissatisfaction
with its policies.

While Kremenyuk said Putin cannot afford to back down now, other analysts,
such as Liliya F. Shevtsova of the Moscow Carnegie Center, say Russia might
be content with sending a strong message of displeasure and then abstaining
from the Security Council vote.

"Russia levies all this psychological pressure on the U.S. for exactly the
same reason as France: Both countries do not particularly want the U.S. to
dominate the world too much," she said. "It is not at all impossible that
Russia abstains in the end."


Moscow Tribune
March 14, 2003
How will Russia fare?
By Stanislav Menshikov

Many economists are convinced that a US war against Iraq will be a shock for
the economy. In a statement just published, a group of US economists
including seven Nobel laureates warn that war would lead to growing budget
deficits, high oil prices and interest rates, falling output, investment,
and jobs. It would "unleash a major consumer retrenchment in the US,
overwhelming the added government military spending". Losses are estimated
as large as 2.4 percent of GDP and 1.6 million in jobs.

This, of course, depends on how long and devastating the war will be and on
the reaction in the world. If Iraqi oilfields are destroyed the price of oil
skyrockets to $50 or more per barrel, such a shock could produce a
full-fledged recession in most industrial and developing countries.
According to the Washington based Center for Economic and Policy Research
(CEPR), "If war leads to increased hostility to the United States throughout
the developing world, it could lead to formal or informal boycotts of U.S.
goods". Watching the succession of protesting non-aligned countries'
speakers at the UN Security Council, one can easily imagine how political
statements could translate into economic boycott action of global

The current special meeting of OPEC countries in Vienna illustrates the
point. Despite pressure from visiting US Energy Secretary Spencer Abraham
and lobbying by Saudi Arabia and Kuwait, the meeting refused to rescind or
raise quotas thus leaving the world oil market without co-ordinated measures
of stabilisation. Motivations of most countries participating were political
and in protest against US war plans.

As CEPR also observes, the war "could lead to a rise in the interest rate
that developing nations pay on their debt. This will take an especially
large toll on nations, which are heavily indebted. Latin America is
especially vulnerable". Consider possible reactions by such countries as Bra
zil and Venezuela. Venezuela has already refused to ban oil quotas despite
its recent losses in the market. And Brazil, led by another leftist
president, could be an important factor in turning the tide against imported
US goods.

So far, Russia has expressed little official concern about economic effects
of the Iraqi war. For a while, it seemed that Moscow was genuinely
interested in getting US guarantees for protecting its interests in that
country. However, as Yuri Shafranik, Chairman of the Russian Oil and Gas
Industrial Association, put it the other day, it would be stupid to believe
in any such promises. If US occupies Iraq, Russian oil companies might well
consider their concessions there lost. The same is true about trading its UN
veto power for repealing Jackson-Vanik and other possible US handouts.
Moscow will gain no material benefit for supporting Washington's crusade
against Saddam.

The only possible dividend from the war could be another year or two of very
high oil prices. Russia is already benefiting from the atmosphere of
uncertainty that has raised prices beyond $30 per barrel. Not only Russian
companies (and BP!) have profited from the rise, but the federal government
is increasing its export duty on crude from $25.9 to $40.3 per ton hoping to
net an additional $550 million in the next quarter alone.

If Iraqi oil disappears from the market, other exporters, Russia included,
could benefit not only on price but also on volume. Currently its oil
exports are constrained not so much by production capacity but by the
inadequacy of pipeline infrastructure. Oil companies that want to build
their own pipelines are in conflict with the government on this issue, and
US Ambassador Alexander Vershbow, not unexpectedly, has lately said a few
words in support of business. But the pipeline bottleneck is genuine, and
the extent to which Russian oil exports can benefit from an Iraqi war is

A new set of factors has emerged recently in the same equation. Because US
companies are expecting to gain positions in a post-Saddam Iraq, they seem
to be loosing interest in Caspian oil. Chevron-Texaco has recently indicated
its intention to quit its concession in Azerbaijan. Baku and Tbilisi are is
worried that the new pipeline being built all the way to the Mediterranean
will not have enough oil to be worth finishing. They want Kazakhstan to ship
its oil across the Caspian Sea and fill their pipeline for them. But Putin
expects Nazarbayev to keep pumping his oil west via Russian territory. That
puts another brake on what Russian companies can effectively export.

High oil prices for Russia are also a mixed blessing. They help create a
sense of false euphoria, which keeps the economy on the "oil needle"
strangling efforts to diversify and increase competitive power of other
domestic industries. Expensive oil is also a temporary phenomenon because
restoring Iraqi oil industry will eventually lead to much lower prices. Any
price lower than $20 per barrel will create problems for the Russian federal
budget and a price below $15 might spell financial disaster.

With such a perspective looming over the horizon, it is only logical that
Russia wants no part of that war.


Nezavisimaya Gazeta
March 14, 2003
The ruble rising against the dollar, Sergei Ignatiev following in the
footsteps of Sergei Dubinin
Author: Yuri Alekseev
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

An analysis of the current state of the ruble

A currency revolution in Russia has been underway for 63 days.
The ruble has been rising against the US dollar since January 9, 2003,
supported by the Central Bank. Another record was set this week: it
took only four days for the ruble to rise against the dollar by 0.21
kopecks. The Friday exchange rate was 31.38 rubles to the dollar: a
return to a level registered last year. Central Bank reserves
increased by $1.5 billion last week.
It is a quiet revolution. Changing currency policy was never
discussed by the government, the general public, or even professional
economists. However, the decision to stop keeping the ruble down
against the dollar is highly controversial. Sure, a rising ruble may
generate a feeling of pride in the Central Bank and its top
executives, but it is not making life any easier for the national
economy or the public. What is there to take pride in, when the
economy could collapse and the people's savings could be devalued?
Dollar savings are not the only ones to be devalued. Rubles will
be eaten up as well. A rapidly-rising ruble may induce the public to
start selling their dollars, and the Central Bank would be forced to
buy them en masse. Experts say this could result in high inflation. In
fact, the inflation rate is already considerably exceeding the figures
specified in this year's budget.
All this resembles 1998. To all appearances, Central Bank chief
Sergei Ignatiev is learning from one of his predecessors, Sergei
Dubinin. After all, Andrei Kozlov from Dubinin's former team is still
with the Central Bank. If Ignatiev is a fast learner, we can
reasonably expect a collapse of the ruble after a lengthy period of
firming against the dollar... By the way, both Ignatiev and Kozlov
have been silent for over a month already, refusing to comment on the
situation in the hard currency market. It is Ignatiev's deputy Oleg
Viyugin who inevitably finds himself under fire from the media.
No catastrophe is imminent yet, but the markets are feeling less
and less secure. Officials aren't saying to what extent the ruble will
be fortified. No one can say with any degree of confidence whether the
Central Bank has any specific objectives in mind, or is just reacting
to events. For the time being, no one can give any reasonably coherent
forecast of what is going to happen to the ruble a week from now, much
less venture a long-term prognosis.
The impression is that the Central Bank is incapable of doing
anything; or that Ignatiev is so dissatisfied with the regime that he
is trying everything in his power to do as much harm as possible -
particularly in the lead-up to federal elections. In other words,
there are questions for the Central Bank, regardless of what the
problem is: incompetence or a conspiracy. In any case, we would not
want President Vladimir Putin to find himself in the position of Boris
Yeltsin - who declared on August 13, 1998 that there would be no


Russia's Banks Remaining Bear Of Country's Bull Markets
By Angela Pruitt
Dow Jones
March 14, 2003

NEW YORK -- Russia's weak banking system continues to be the Achilles heel
of a country that has done wonders in luring investors back to its
financial markets almost five years after its financial crisis.

As a cross-section of companies and banks descended in New York on Thursday
to drum up new investments, the most frequently cited barrier to Russian
financial markets reaching their full potential was undernourished banks.

"There has to be banking reform (by) the end of this year," said Chris
Weafer, chief equity strategist at Alfa Bank (R.ALF) during a presentation
at an investing in Russia conference. Such reform was "critical" in terms
of affecting investments in Russia , Weafer said.

Russian banks have been in an unhealthy condition ever since the country's
1998 financial meltdown left most of them insolvent. Low deposits, shaky
public confidence and poor capitalization has hindered the industry's

While the banking system has atrophied, other financial sectors in the
oil-rich country have thrived, particularly the bond market. A boom in oil
prices, strong economic growth and relative political stability has
investors flocking to Russian bonds, which have consistently outperformed
the market. A series of ratings upgrades and optimism that Russia will be
crowned investment grade in the near future has created even more buzz
around the country.

The banking system, however, is "still a Soviet system in many respects,"
said Maarten Pronk, first deputy chairman at NIKoil Investment Bank
(R.NIB), during a presentation. He noted that some 72% of the capital in
Russia's retail banking sector is concentrated in state-owned Sberbank and
that bank assets equal only one third of gross domestic product. Pronk said
that with the industry dominated by a huge pseudo-monopoly, "the sector
seems hardly poised to become competitive and cost-efficient."

In a research report distributed by Dresdner, Kleinwort and Wasserstein,
the firm noted that banking sector credit has doubled as a proportion of
GDP, but from a very low base.

"The underlying financing constraints of the banking sector itself is
reflected in a low level of savings deposits," the report said. As a
consequence, external markets are set to remain an important source of
financing for Russia's corporate sector, it added.

Standard & Poor's said earlier that Russian banks are one of the weakest
among rated sovereigns and that the country will not become investment
grade until bank reform is implemented.


From: Gerry Janco (gjanco@nrdc.org)
Subject: Russia's Nuclear Geography website 
Date: Thu, 13 Mar 2003

For those Researchers interested in Disarmament and Nuclear Security Issues:

At the recent Carnegie International Non-Proliferation Conference in
Washington, DC, the Natural Resources Defense Council (NRDC) demonstrated
the prototype of its "Russia's Nuclear Geography" website and we invited
prospective users to sign up to get access.

Because of the sensitive information that will be available on the
website, access to this website will be limited. We will authenticate access
by two means: a username/password that we will provide later, and allowed
host IP addresses. This email is to request some additional information that
we need to configure our system and grant access to you beginning in early

Most importantly, we need to have the public IP address range of
your office network. Knowing that IP address range allows us to configure
our system and grant access to the website from any computer in your office
network, but not from outside your office. Please ask you system
administrator for this information. It is very important that you provide us
with the public IP address range as it appears outside your office, as
opposed to a possibly different IP address range used inside your office.
These two IP address ranges will be different if your office has a Virtual
Private Network (VPN) or uses Network Address Translation (NAT).

Alternatively, if you wish to access the website from the same
computer all the time, and your are absolutely sure that your office network
uses static public IP addresses and is neither a VPN nor NAT-based, then you
may provide us with the static public IP address that you can find in your
computer settings (on Windows-based computer, go to Settings, Network and
Dial-up connections, Local Area Connection, Properties, Internet Protocol
(TCP/IP), Properties. Note that this is not possible if the "Obtain an IP
address automatically" option has been selected in the Properties menu
(because the IP address may change every time you logon), and you will have
to provide the IP address range instead. If you are not sure about any of
this, please ask your system administrator.

Furthermore, we would like to know the complete street address (not
a P.O. Box) of the office location associated with the public IP address
range that you provide. We will use this information for our own records

We understand that these requirements have limitations as it will
not be possible for you to access the Russia's Nuclear Geography website
from home (using a dialup, DSL or Cable modem) or when you are traveling.
This, however, was exactly one of our considerations in setting up a secure

SEND INFORMATION TO: gjanco@nrdc.org
NRDC Washington, D.C.


March 13, 2003
Catching up with the West is Possible, if Russia Reduces 85% of Its
Only five percent of the economically active population is referred to the
category of high qualification specialists

Wonderful suppositions of Russias opportunity to jump into the
post-industrial stage of development get shattered when it comes to real
life. The Russian Ministry for Labor and Social Development warns of a
considerable decrease of Russian peoples qualification level in the
country. Pursuant to the information of the ministry, only five percent of
the economically active population of Russia can be categorized as high
qualification specialists. This index makes up 56% in Germany, and 43% - in
the United States of America. The situation on the Russian labor market is
characterized with the excessive level of employment. The Gross Domestic
Product dropped by 42.5% in Russia during the period of 1990-1998, while
the number of employed people reduced by only fifteen percent. This
information testifies to the considerable reduction of industrial output in
the country.

One may have an objection that the huge number of people from the
production field moved to the field of services and business. This is
considered to be an indication of the post-industrial stage of the
countrys development. On the other hand, what did those people start
doing? Which kind of services did they start rendering and what businesses
did they run exactly? The majority of them started dealing with trading or
mediation businesses. This is the economic sector, where the majority of
people moved over to. They can hardly be found amid scientists,
programmers, microbiologists, hightech specialists. These branches suffer
from a very serious lack of personnel.

Qualification goes down, while demand goes up. The roots of the process can
be traced back in the USSR era, during the prosperity of the idle cult amid
Soviet people. That was the time, when the revolution of consumer demand
was launched, although there was no labor contribution added to that. These
sentiments were grounded ideologically in the 1990s, they achieved the peak
of their development. The society has a false conception of the fact that
some chemists with messy hair, sweaty programmers and underground hackers
can make the country prosper. As far as the West is concerned, one should
bear that in mind that its post-industrial organization is possible only
owing to the existence of the rest of the industrial and pre-industrial
world, where they take raw materials and power from, where they move their
production to, where there are tons of cheap labor force that is a lot
cheaper than it is in Russia, by the way. In addition to that, production
costs are a lot lower there against the ones that can be noticeable in
Russia. The post-industrial West rules the world de facto, getting a lot of
money for that, like any boss does. This is the undeniable success of the
Western civilization. Russia does not have such an opportunity; nothing
like that is going to occur in the nearest future either. Needless to
mention that Russia is not going to experience the breakthrough in the
post-industrial epoch, leaving all the devastation behind.

To be more precise, such a great advance is theoretically possible only in
one case if the population of the country decreases to the level of five
percent of highly qualified people, plus those, who extract, process, and
transport export goods , as well as those, who control and administer them.
Fifteen percent of the population is very unlikely here. All the rest will
have to go.

The Russian leadership is actively looking for a way out of the situation,
realizing, that there are several very serious, almost unsolvable problems.
Russian authorities try to alienate themselves from the failures of the
past. Authorities try to be very optimistic about it, alluding to the fact
that they know a way out. They offer an absolutely splendid way out to
leap from bursting water pipes and freezing apartments to the world of high
technologies and space communications. They say that there are certain
prerequisites for that, allegedly. One shall assume that Russia will
quickly learn how to make fuel of water, or how to build houses in a couple
of days. Myths are usually dispelled, though.

Sergey Mikheyev
Translated by Dmitry Sudakov


The Weekly Standard
March 12, 2003
Solzhenitsyn, Again
The great Russian thinker foresaw the situation which now faces George W.
By Hugh Hewitt, contributing writer

THE HARVARD COLLEGE CLASS OF 1978 meets in Cambridge in three months to
celebrate its 25th reunion. Among the events, lunches, panels, and dances, I
hope time has been allocated to remember the most significant event of the
1978 ceremonies: a commencement address by Nobel Laureate Alexander I.

Solzhenitsyn delivered his remarks in Russian. There was an intermittent
drizzle, and the odd dual delivery of speaker and translator made an overcast
day even more gloomy. The speech the Russian gave did little to lift spirits.
A day earlier Rodney Dangerfield had keynoted the Class Day festivities. We
knew immediately that this speech would be different when, in his third
sentence, Solzhenitsyn explained that "Harvard's motto is 'veritas.' Many of
you have already found out and others will find out in the course of their
lives that truth eludes us as soon as our concentration begins to flag, all
the while leaving the illusion that we are continuing to pursue it. This is
the source of much discord. Also, truth seldom is sweet; it is almost
invariably bitter. A measure of truth is included in my speech today, but I
offer it as a friend, not as an adversary."

He titled his address "A World Split Apart," and put out as his premise that
the then-dominant split between the West and the USSR masked even deeper
divides: "The truth is that the split is both more profound and more
alienating, that the rifts are more numerous than one can see at first
glance. These deep manifold splits bear the danger of equally manifold
disaster for all of us, in accordance with the ancient truth that a
kingdom--in this case, our Earth--divided against itself cannot stand."

Solzhenitsyn listed the camps: the West, the USSR, China, India, the Muslim
world, and Africa, "if indeed we accept the approximate viewing of the latter
two as uniform." A quarter century has confirmed his hesitation on this last

There is a great deal to be mined in his prophecy. It was not well received
in 1978 and its application to today's events is just as jarring. But perhaps
someone will assemble a score of thinkers to rake over the words. There are
two sections which deserve a quick read today, however, as we stand on the
eve of war.

First, Solzhenitsyn asked whether the West possessed enough courage to defend

"A decline in courage may be the most striking feature that an outside
observer notices in the West today. The Western world has lost its civic
courage, both as a whole and separately, in each country, in each government,
in each political party, and, of course, in the United Nations. Such a
decline of courage is particularly noticeable among the ruling and
intellectual elites, causing an impression of a loss of courage by the entire
society. There are many courageous individuals, but they have no determining
influence on public life.

"Political and intellectual functionaries exhibit this depression, passivity,
and perplexity in their actions and their statements, and even more so in
their self-serving rationales as to how realistic, reasonable, and
intellectually and even morally justified it is to base state policies on
weakness and cowardice. And the decline in courage, at times attaining what
could be termed a lack of manhood, is ironically emphasized by occasional
outbursts and inflexibility on the part of those same functionaries when
dealing with weak governments and with countries that lack support, or doomed
currents which clearly cannot offer resistance. But they get tongue-tied and
paralyzed when they deal with powerful governments and threatening forces,
with aggressors and international terrorists.

"Must one point out that from ancient times a decline in courage has been
considered the first symptom of the end?"

Then Solzhenitsyn pondered the struggle of a leader who would accomplish
great things:

"Today's Western society has revealed the inequality between the freedom for
good deeds and the freedom for evil deeds. A statesman who wants to achieve
something highly constructive for his country has to move cautiously and even
timidly; thousands of hasty (and irresponsible) critics cling to him at all
times; he is constantly rebuffed by parliament and the press. He has to prove
his every step is well founded and absolutely flawless. Indeed, an
outstanding, truly great person who has unusual and unexpected initiatives in
mind does not get any chance to assert himself; dozens of traps will be set
for him from the beginning. Thus mediocrity triumphs under the guise of
democratic restraints."

President Bush is attempting to do what Solzhenitsyn argues cannot be done,
depending upon a latent courage that the great Russian could not see because
he did not conduct his survey in a wide enough fashion. Solzhenitsyn may have
known his French, but underestimated his Americans.

Hugh Hewitt is the host of The Hugh Hewitt Show, a nationally syndicated
radio talkshow, and a contributing writer to The Daily Standard.


Date: Thu, 13 Mar 2003
From: Jamestown Foundation <brdcst@jamestown.org>
Subject: Chechnya Weekly; 13 March 2003


The Moscow-based Center for Journalism in Extreme Situations reports that
Russia's Ministry for the Press has issued a formal warning to the
newspaper "Zavtra" ("Tomorrow") for its publication of an interview with
Akhmed Zakaev, representative of Chechnya's underground separatist
government in western Europe. What makes this case unusual is that "Zavtra"
is an organ of Russia's ultra-nationalists, who if anything would be
inclined to criticize the Putin administration's policies toward Chechnya
as too mild. Nevertheless, the Ministry accused the newspaper of
"disseminating extremist materials" and of "inciting ethnic discord and
justifying extremist activities" by publishing an interview with an
"international fugitive."

Aleksandr Prokhanov, editor of Zavtra, said that the warning was the result
of "instructions from above" to close his opposition newspaper in advance
of Russia's parliamentary and presidential elections.

A spokesman for the Press Ministry, Aleksandr Shaburkin, explained the
warning in terms which suggest that anyone who tries to publish a history
of Russian-Chechen relations will now have to practice self-censorship. He
said that Zakaev's comments in the interview had repeatedly cited conflicts
between the Russians and the Chechens extending over several centuries, and
had alleged the existence of a primordial enmity between the two peoples.
These comments, he added, had therefore illegally incited ethnic discord.


March 14, 2003
Chechnya awaits Putin
By Artyom Vernidub

That Vladimir Putin may visit the volatile southern province on the eve of
a constitutional referendum became clearer on Thursday, when the head of
the Kremlin administration Alexander Voloshin himself unexpectedly showed
up in Grozny. He confirmed the Kremlins promise to grant Chechens so much
independence that it would satisfy even Shamil Basayev.

Voloshin declared on Thursday that once the referendum was over work would
begin on a draft treaty delimiting the powers between the Chechen Republic
and the federal centre. The chief of the Kremlin administration was
speaking after returning from Chechnya. For security reasons Voloshin
travelled to the volatile region in secret. Despite all the preparations
for the referendum and the widely publicized withdrawal of ''excessive''
troops from the republic, the security situation there remains alarming
on Thursday one soldier was killed and three wounded when rebels attacked a
convoy of army trucks in the Staropromyslovsky District of Grozny.

The news of the senior Kremlin officials visit to the warring province
became known only after his meeting with the head of the pro-Moscow Chechen
administration Akhmad Kadyrov.

Afterwards, Voloshin met with other Chechen officials and advised them to
thoroughly consider the possible variants of the treaty on delimiting
powers. ''In general, we are trying to bring down the number of such
treaties in Russia, as there are always those who are unhappy with the
distribution of powers,'' Voloshin said. ''But Chechnya is a special case.
Here, we consider it important that work on the draft should begin
immediately after the referendum.''

Indeed, in the past three years the Kremlin has been consistently
eradicating agreements that Putin inherited from his predecessor Boris
Yeltsin. The former president generously allowed the regions ''to take as
much sovereignty as they could take'' and entered into federal-type
treaties with them. Vladimir Putin, after winning the presidency in March
2000, altered the Kremlins course towards a strengthening of the federal
centre and the building of the so-called power vertical.

The Chechens, it is worth noting, have not actually asked the Kremlin for
any kind of federative treaty, and the draft constitution elaborated by the
pro-Kremlin republican government does not even mention ''sovereignty''
(unlike the constitutions of other internal Russian republics of Tatarstan
and Bashkortostan). But as the referendum approaches, officials in Moscow
have obviously decided that Chechnya is, indeed, a special case. President
Putin instructed the military to dismantle checkpoints; Prime Minister
Mikhail Kasyanov pledged to compensate Chechen families for property lost
in bombing raids; the Chief of the General Staff Anatoly Kvashnin announced
a new stage of troop withdrawals, and the top electoral official Anatoly
Veshnyakov personally visited Grozny to inspect preparations for the
referendum and to look for visual signs of campaigning, such as posters in
the streets.

But in the run-up to referendum the most generous gift to the people of
Chechnya was prepared by the Kremlin administration. On February 28
Voloshins deputy, Vladislav Surkov, appeared in Grozny, in the company of
the Kremlin aide for Chechnya Sergei Yastrzhembsky. Surkov rarely goes to
the regions publicly, and his arrival in Grozny aroused great interest. But
even more sensational was his statement made at a meeting in Grozny with
the Chechen leadership and the heads of Chechnyas districts. It was then
that Sourkov said that Vladimir Putin is ready to grant Chechnya extensive
autonomy within Russia.

''In future, an agreement to be concluded between the federal centre and
the Chechen Republic may stipulate extremely flexible schemes for the
existence of the Chechen Republic as part of the Russian Federation.
Acceptable forms can be found even for those who haven't until now wanted
to see themselves as part of Russia,'' Surkov said.

The latest words could be perceived as an invitation to the rebels to take
part in the referendum. But those who really do not see Chechnya as a part
of Russia were skeptical about the idea of ''extensive autonomy''.
''Voloshins statement is of the same populist and propagandist nature, as
the earlier statement by Sourkov,'' an aide to Aslan Maskhadov, Akhmed
Zakayev, told Gazeta.Ru on the phone from London, where he is awaiting a
court ruling on his extradition case.

''Those officials have no authority to speak of a relationship Russia could
have with anyone. The Chechen side could back their proposals if they came
from the president, the chairman of the State Duma or the speaker of the
Federation Council. Therefore, we have heard nothing new today. All this is
aimed to deceive public opinion in Russia, the world, and to deceive the
Chechens themselves. The referendum will bring nothing. Such things are not
held at the height of armed conflicts. The Chechen side has said many times
that it was ready to abandon the armed struggle. I make it something like
22 times Maskhadov has proposed talks.''

Chechens, loyal to the federal centre, are not rejoicing at the prospect of
freedom either.

What kind of flexible schemes of co-existence are Moscow officials talking
about if even the Chechen leader Akhmad Kadyrov has no power to appoint the
head of the republican government, and has to accept the candidate
nominated by the Kremlin? Most likely, the Chechen officials will treat
Voloshins promises merely as campaigning ahead of the referendum. Besides,
the head of the Kremlin administration made many other promises that cannot
be perceived as anything but undisguised campaigning. For instance, he
promised to earmark funds for the restoration of the drama theatre in Grozny.

Now that several high-ranking federal officials, including Voloshin and
Surkov, have visited Grozny, some observers believe that Vladimir Putin
himself will visit the republic soon.

Logically, he might arrive in Chechnya 1 or 2 days before the vote on March
23, so that his trip becomes the decisive argument in favour of the new
constitution. Possibly, the president will make some even more radical
statements concerning the future relationship between Russia and Chechnya.

Unlike the head of his administration, Putin has already made sorties to
Chechnya. Even before he was elected, Putin travelled to the republic on
board a fighter jet, celebrated his first New Year in power at the Khankala
military base near Grozny, and in summer went by helicopter to the Chechen
highlands to pay homage to killed paratroopers. Incidentally, his
predecessor Boris Yeltsin visited Chechnya only once, during the
presidential campaign in 1996.

At the same time, going to Grozny now is anything but safe. Last year the
rebels gunned down three helicopters near Khankala. And several weeks ago
special-purpose police in the Vedeno Gorge detained a Gazel truck laden
with portable anti-aircraft complexes, wrapped in linoleum. The law
enforcers said that with those weapons the rebels had planned to down
another helicopter near Grozny.