March 4, 2001   

This Date's Issues:   5130 • 5131

Johnson's Russia List
#5130
4 March 2001
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: Drink to me only: Russia's battle with the bottle.
2. Leonid Bershidsky: re Traynor/Press freedom JRL5129.
3. UPI: Far reaching dispute on Russian tests. (re underground hydronuclear tests)
4. Kyodo: Experts propose boosting adaptability of U.S. nuke policy.
5. Xinhua: Russia Encourages Business Ties with U.S.
6. Itar-Tass: Isolationism Deadly for Russia in Globalising World.
7. The Sunday Times (UK): Christine Toomey and Mark Franchetti, Kursk was sunk 'by stray Russian missile'
8. The Russia Journal: John Helmer, The biggest rats of the genome world.
9. The Washington Post: Susan Glasser, Russia's Energy Chief Is Feeling Political Heat. (Chubais)
10. Foreign Policy Research Institute: Alexander M. Haig, Jr., & Harvey Sicherman, From Russia Without Love.
11. Executive Intelligence Review: Rachel Douglas, Shock Waves from Foreign Debt, Domestic Energy Rock Moscow.
12. Reuters: U.S. thinks Hanssen told Soviets of tunnel - paper.]

*******

#1
Drink to me only: Russia's battle with the bottle

MOSCOW, March 4 (AFP) -
Russia's ambivalent attitude to the demon drink was on display in Moscow
last week with successive exhibitions, one celebrating 500 years of vodka
consumption and the other charting attempts to stamp out its evils.

"The 500-year history of Russian vodka" is the title of a display that has
just opened at the Manezh exhibition hall, close by Red Square, a hymn of
praise to the pleasures of the silvery spirit.

Every aspect of vodka's role in Russian national life is represented.

An early "samogon" (home-distillery) device, 17th-century glass carafes and
an array of bottle-stoppers and openers are set out alongside postcards,
advertisements, and photographs of famous tipplers such as former Kremlin
chiefs Boris Yeltsin and Nikita Khrushchev.

By an irony of timing, the show opened the day after another exhibition
closed, this a display at Moscow's Museum of Contemporary History of
Soviet-era posters designed by the authorities of the time to frighten or
cajole people into giving up the bottle.

Communist leaders from the teetotal Lenin to Mikhail Gorbachev saw drink as
the people's path to perdition, and the posters range from drawings by the
poet Vladimir Mayakovsky and graphs showing how alcoholism hits industrial
production to the "Sobriety is the Norm" injunctions of the 1980s
perestroika period.

Gorbachev's anti-alcohol campaign had little effect other than to dent his
popularity at a time he was attempting to push fundamental reforms past a
reluctant Communist party hierarchy.

Nowadays, as one observer commented, the only alcohol advertisements on
display are not against but very much in favour.

Russia's drink problem is still very much on the political agenda, with
official figures showing that 28,000 Russians died of alcohol poisoning
last year, many of them having absorbed bootleg vodka, the illegal
production of which now accounts for around half of national consumption.

The death toll was well up on that of 1999, due in part to a sharp rise in
beer consumption assisted by the brash advertising campaigns of the past
decade.

A ban on the advertising of drink on billboards, following a ban on
television advertising last year, clearly expressed the authorities'
concern and that of the distinctly abstemious -- at least in public --
President Vladimir Putin.

With its key role in social rituals and daily life, alcohol is a major
contributor to road and industrial accidents, domestic violence and the
country's demographic crisis. Orphanages are full of children abandoned by
alcoholic parents. Yet vodka remains cheaper to buy than milk.

For the goverment too has its alcohol dependency, with vodka duties
accounting for 470 million dollars in state revenues last year.

Health ministry efforts to combat the country's drinking problem are offset
at every step by the commitment of other state agencies to increasing
production and sales by distillers that form part of a state-controlled
holding company.

The ambivalence was embodied at the 500th-anniversary exhibition -- a
commercial initiative pegged very loosely to the fact that the first
Russian state monopoly on vodka production was created in 1487 -- in the
merry, red-faced person of Orthodox priest Georgy Dolgoruky-Siminsky.

Describing himself as a friend of the Smirnov family -- founders in 1860 of
the famous company that eventually became suppliers to the Russian imperial
court -- the priest said he had agreed to be part of the exhibition in
order to incite people to drink only good vodka.

But he admitted that "ordinary people drink because they don't want to see
what's going on around them."

*******

#2
Date: Sun, 04 Mar 2001
Subject: Re Traynor/Press freedom JRL5129
From: "Leonid Bershidsky" <bear@imedia.ru>

Dear David,

This is in response to The Guardian story on press freedom.

Who needs to buy Western journalists working in Moscow when they are
sometimes unable to report a simple story correctly? Examples are numerous,
and the eXile points out some of them in its "March Madness" series, but Ian
Traynor's piece, because of its subject matter, is an especially ironic case
in point.

I'll leave aside Traynor's trivial self-defense/self-congratulation at the
top of the story ("Russian accuse me of writing paid stories, but I am a
Western journalist, therefore I cannot be bought"). But the way Traynor
covers the Promaco scam is an abuse of the freedom of the press.

Here are the facts as they really happened versus Traynor's version.

Traynor: "Such tawdry practices have just been brazenly and hilariously
illustrated by
a frustrated St Petersburg public relations firm that sent a bogus press
release around the editorial offices of the finest newspapers in Moscow,
then
sat back and waited for the editors to name their price to ''cover'' the
"story".

Fact: A PR agency called Promaco sent a bogus press release to 21 newspapers
and magazines in Moscow, then called them back to check on what terms they
would publish it. Some said they were not interested, others asked for more
information (in these cases Promaco promised to call back again and never
did) and the rest said they would run the press release for money.

Traynor: "It was an expensive wheeze. The agency ultimately doled out around
$10,000 to
13 Moscow newspapers, with one paper charging $2,000 to publicise the
phantom hi-fi store".

Fact: Promaco itself named the exact amount it spent on the stunt, $15,700.

Traynor: "Some of the most prestigious names in the Moscow media were
involved,
including the heavyweight Nezavisimaya Gazeta and one of the most
independent and liberal papers in Moscow, the Obshchaya Gazeta".

Fact: The descriptions of Nezavisimaya and Obschaya are Traynor's own
opinions. However, he fails to mention the fact that seven publications did
not swallow Promaco's bait. These seven, unlike most of the other 13, are
included by audience-measuring agencies in the "quality press" category.
They are:
Izvestia, Segodnya and Vedomosti dailies; Dengi, Expert, Kompaniya and Itogi
weekly magazines. For some reason, Promaco did not send its press release to
Kommersant daily.

Traynor: "Kommersant ... exposed the scam".

Fact: Promaco itself blew the whistle on newspapers by publishing ads in two
newspapers, Kommersat and Vedomosti, on Friday, Feb. 23. Those ads alerted
both Kommersant and Vedomosti to what Promaco had done, and both newspapers
ran stories about it in their next issues. In its story, Kommersant admitted
that one of its sister publications, a magazine called Klient, was the only
publication to have published the bogus press release for free. To
Kommersant's credit, it's better-known "sister", Dengi, had refused to
publish it in any shape or form.

Unlike everyone else who reported on the scam, Traynor, it seems, neglected
to talk to Promaco or any of the editors who had been caught. He just read
the piece in Kommersant and liften quotes and facts from it. That, as we all
know, is a convenient way to report from far-off locations. Even so, Traynor
managed to get some facts and a figure wrong, and he failed to mention that
a third of the publications "raided" by Promaco stayed clear of the scam.
The story is designed to give the impression that the Russian press is
universally corrupt. In fact, respectable Russian publications are not, as
evidenced by the results of Promaco's campaign. Thus, Traynor's piece not
only misses the point but smears those Russian journalists -- and there are
many of them -- who do an honest job.

I hope JRL readers are well enough informed not to be misled by Traynor's
biased and sloppy reporting.

Regards,
Leonid Bershidsky
editor
Vedomosti

*******

#3
Far reaching dispute on Russian tests

NEW YORK, March 4 (UPI) -- Caught in the murky counter currents of
information and motives in the American intelligence and scientific
communities, there is a debate under way whether Russia is crossing a line
important to U.S. security in so-called hydronuclear tests underground on a
busy Arctic island, The New York Times reported Sunday.
  The unusually detailed account tells of the efforts of CIA analyst
Lawrence Turnbull and Sandia National Laboratory analyst Charles Craft to
sound a warning while other scientists, representing a State Department
view, throw cold water on their theories.
  However both sides agree, the Times said, that there is a lot of activity
under way on Novaya Zemlya, a frigid island where the Russians conducted
more than 100 nuclear blasts up until 1990 when it and the United States
began to observe the Comprehensive Test Ban Treaty despite that fact it was
never formally ratified.
  American surveillance reveals a rapid pace of resupply and personnel
movement on parts of the barren 500-mile long island east of Murmansk that
extends into the Arctic Circle above eastern Russia.
  Although there is a question whether tiny underground explosions, too
small to be seismically detectable, technically violate the no-testing
understanding by generating very limited amounts of radiation, the larger
question, the Times said, is who will influence the U.S. posture toward
Russia, either by accepting the tests and the accompanying explanations, or
by adopting a skeptical bias that could color a broad swath of issues
between the two countries.
  The Bush administration will solidify its views within the National
Intelligence Estimate and the internal battle is on to have it register a
profile of Russia more negative than during the Clinton administration, the
Times story suggested.
  Turnbull and his allies, the story states, have a history of faulty
analyses in suggesting the Russians are ambitiously using small maintenance
tests, like the "hydronuclear" liquefying of bomb casings, to develop more
sophisticated nuclear weapons. Neither Turnbull nor Craft would comment for
the article.
  The story quoted Frank von Hippel, a Princeton University adviser to the
Clinton administration, saying any charge of outright Russian violations of
test ban understandings is irresponsible.
  In the context of a 1999 U.S. Senate rejection of the test ban treaty, a
public branding of the Russians as violators could actually lessen nuclear
security by giving the Russians an incentive to lessen their support for the
observed ban, according to the von Hippel view shared by the State
Department, the Times said.

*******

#4
Experts propose boosting adaptability of U.S. nuke policy
Kyodo News Service 
 
WASHINGTON, March 4 (Kyodo) - U.S. defense experts have proposed the United
States boost the adaptability of its nuclear weapons strategy and abandon
the bipolar Cold War arms control approach, according to a new report.

''Rationale and Requirements for U.S. Nuclear Forces and Arms Control,'' a
report compiled by the National Institute for Public Policy in January as a
blueprint for President George W. Bush's new defense policy, suggests the
U.S. unilaterally decide on the level of its nuclear stockpile rather than
focus on the balance with Russia.

It also recommends the U.S. and Russia create a new arms control framework
based on close consultation, coordination and transparency to replace the
Cold War-style Mutual Assured Destruction (MAD), which it says is based on
mutual threat, suspicion and animosity.

The experts who compiled the report included Stephen Cambone, a close
adviser to Defense Secretary Donald Rumsfeld, and Stephen Hadley, deputy
assistant to the president for National Security Affairs, who works under
National Security Adviser Condoleezza Rice.

The report suggested five roles for nuclear weapons for current and future
deterrence and in wars, expanding on the scope of the current doctrine that
limits the nuclear force to deterrence against nuclear weapons.

The five roles are deterring use of weapons of mass destruction (WMD) by
regional powers, deterring WMD or massive conventional aggression by an
emerging global competitor, preventing catastrophic losses in conventional
war, providing unique targeting capabilities for locations such as sites
deep underground and biological weapons targets and enhancing U.S.
influence in crises.

The report is opposed to sticking to U.S.-Russian treaties designed to
perpetuate the two countries' capability for mutually assured destruction,
and says the U.S. should have the adaptability to augment or reduce forces
as well as design and build new weapons to fit a changing strategic
environment.

''Because the international environment and operational considerations are
dynamic...the ability to adjust the U.S. offensive and defensive force
posture to a changing strategic environment is critical,'' it said.

The paper also said that in arms control negotiations with Russia,
adjustments to U.S. strategic forces ''must not be rendered practically or
legally 'irreversible' via codification.''

It suggested that the U.S. could ''move unilaterally toward significant
nuclear reductions,'' cutting warheads to below the 2,000 to 2,500
contemplated by the START III bilateral negotiations, while ''retaining its
prerogative and capability to reconstitute or further reduce its forces''
depending on the situation.

The U.S. now has about 7,500 warheads for deployed nuclear weapons against
about 6,000 for Russia. Its arsenal would be reduced to 3,500 under the
START II agreement with Russia, which has not been ratified by the U.S.
Senate.

The report also said the U.S. should initiate ''Mutual Assurance Talks''
with Russia to promote transparency and predictability in the two
countries' decision-making concerning active defenses and nuclear forces.

******

#5
Russia Encourages Business Ties with U.S.

MOSCOW, Mar 3, 2001 (Xinhua via COMTEX) -- Russian Foreign Minister Igor
Ivanov on Saturday met U.S. and Russian business leaders on ways to promote
ties between business circles and entrepreneurial associations of the two
countries.

The development of such ties is of great importance to progress in
Russian-U.S. economic relations, said Ivanov while meeting with the
Presidents of the U.S.-Russian Business Council and the Russian-U.S.
Council for Business Cooperation, Eugene Lawson and Yuli Vorontsov.

According to a Foreign Ministry statement released following the meeting,
the participants "had an interested informal discussion on the expansion
and improvement of Russian-U.S. trade, economic and investment ties."

Ivanov stressed the significance to develop U.S-Russian cooperation in the
economic field and reiterated Russia's readiness to help create favorable
conditions for cooperation between Russian and foreign businessmen.

The government will provide political and diplomatic support for the most
ambitious and promising bilateral cooperation projects, he added.

******

#6
Isolationism Deadly for Russia in Globalising World. .

MOSCOW, March 3 (Itar-Tass) - Isolationism is contraindicative to Russia in
conditions of globalisation, according to participants in the 9th Assembly
of the Council for Foreign and Defence Policy (CFDP) held outside Moscow on
Saturday.

Speakers said that Russia needs to get engaged in this process and find its
own path, while assessing and analysing events, trying to minimise its
negative consequences for the country.

The most heated debates that involved prominent Russian politicians,
scientists and businessmen revolved about the selection of strategy for the
development of the country in modern conditions.

It was noted that "Russia has little time left for fit into modern
civilisation and the concept of global development. It is necessary during
the next four to five years to reverse tendencies and direct all effort to
the development of technology and human potential -- one of the main assets
of economic development".

The participants proposed to simplify tax legislation, introduce currency
regulation and step up the fight against corruption as practical measures
aimed at solving economic problems in the country.

******

#7
The Sunday Times (UK)
3 March 2001
Kursk was sunk 'by stray Russian missile'
Christine Toomey and Mark Franchetti, Moscow
 
A RUSSIAN admiral close to the investigation into the sinking of the Kursk
nuclear submarine has claimed the disaster was caused by a cruise missile
misfired from a command vessel overseeing naval exercises.

The admiral, who declined to be named, told The Sunday Times: "It is 100%
certain that a cruise missile went the wrong way." This, he said, set off a
catastrophic chain of events that ended with huge explosions inside the
submarine and the deaths of all 118 men on board.

According to his account, a Granit missile - better known by its Nato
designation, Shipwreck - was fired from the warship Peter the Great and hit
the water directly above the submarine, 30 miles away in the Barents Sea.

The missile, equipped with a dummy warhead, would have disintegrated on
contact with the water. However, the explosion of its liquid fuel could
have been just enough to destabilise the submarine.

This, in turn, is thought to have caused one of the submarine's torpedoes
to shake loose from its mounting, leak fuel and explode. Within minutes the
resulting fireball had set off further explosions of the Kursk's munitions,
sending it plunging to the seabed.

The admiral said crucial documents relating to the incident, one of
Russia's worst peacetime disasters, were missing.

"A lot of documents concerning the Kursk are being hidden, using the
convenient excuse that they have been handed over to investigators into the
accident," he said. "There are those who do not want the exact version of
what happened to the Kursk to come out."

The latest explanation of the accident came as the Russian authorities
faced fresh accusations of a cover-up. The relatives of at least 20 of the
victims are taking legal action against the Russian state in an attempt to
obtain all the facts about the incident.

The families want access to classified documents that could help to explain
what caused the sinking. They also want to establish whether criminal
proceedings can be brought against anyone deemed responsible.

"Of course the navy is doing everything it can to hide the truth from us,"
said Khalima Ariapova, whose husband Rashid died in the accident. "They
know what happened but they are determined to cover it up. They think that
with time we, the relatives, will just fade away and stop pestering them.
But they are mistaken."

The Russian authorities have repeatedly said the results of their inquiry
will not be made public until the Kursk is raised from the seabed - an
operation scheduled for next summer.
 
*******

#8
The Russia Journal
March 3-9, 2001
The biggest rats of the genome world
By John Helmer

If you knew the people I know, it would not require advanced science
to realize there is no fundamental difference between some people and
rats. Don't get me wrong -- I respect rats for their resourcefulness under
pressure, and for the sharpness of their teeth.

I wasn't surprised when the English and American partners in the Human Genome
Project recently announced that their count of 30,000 human genes was about
the same as rats and mice; and only twice as big as the gene count for worms
and flies.

There are only 300 genes in the human genome (as an individual's DNA
sequence is called) which don't have mouse counterparts; the count   
isn't in yet on rats. Still, it is scientifically clear now that the
basic difference between a rat and a man isn't the number of their genes,
but the way in which the genes work to control each other, turning them on
and
off; and in the human case, switching a vaster number of proteins to their
tasks.

If man is superior to the worms, this is not based on the greater number of
human genes, whose sequence will soon be able to be packed neatly on to a
computer disc. Gene numbers don't count anywhere near as much as the
complexity of gene interaction.

Harry Lime, the villain of "The Third Man", Orson Welles's film of corruption
in post-war Vienna, thought he had the moral of this. Pointing down to the
ground from the high point of a ferris-wheel, he explained his trafficking
in adulterated penicillin. "Look at those people on the ground," he said.
"They look just like ants. Who cares if some of them stop moving?"

Down on the ground, in the ruins of a country left behind by Boris Yeltsin,
who cares if the ants stop moving? And in the moral order created by the
International Monetary Fund, the World Bank, the US Treasury Secretary, Yegor
Gaidar, and Anatoly Chubais, what loss can there be to the future of Russia,
if a million worms stop their infernal wriggling every year?

(In a Limean attempt to write its own moral footnote to the devastation of
Russia, the World Bank recently appointed Anders Aslund to inspect the books,
and determine how well World Bank funds were used in Russia in the past
decade. Aslund spent the decade asserting the superiority of himself,
and did financially well out of his relationship with Gaidar and Chubais,
his close friends. The World Bank has sent a moral rat to check if anything
went wrong when the moral worms stopped moving. The new World Bank
representative in Moscow, Julian Schweitzer, says "we don't necessarily take
his advice.")

Those who are impatient with the new Putin administration divide into two
groups -- those who know genome science, and those who don't. Not all of the
former are men, and not all of the latter are rats. Those who don't know
genome science fault Putin for striking at some oligarchs but not others;
for attacking lawlessness in some places but not others; for defending human
and investor rights in general, but nowhere in particular; for protecting
national security, but not social security.

The conclusion of this line of thinking is that Yeltsin left so many rats
behind, Putin must be one of them. The evidence proferred includes the
president's occasional use of vulgar slang; his career record; his sports;
his mistakes; and human catastrophes he should have attended immediately
after they had occurred.

Now resourceful rats under pressure are famous for spotting survival
opportunities when they see them. And so, plenty of the criticism directed at
the president is camouflage for the campaign to preserve themselves.
Naturally, they have a faction in parliament; media editorialists;
sources of financial support; and political patrons in foreign states.

Those who understand genome science don't have to prove it by demonstrating
they believe the opposite of those who don't. Men don't prove themselves
by showing they are not rats. According to one of the leaders of the Human
Genome Project, "there are no good genes or bad genes, merely networks that
exist at various levels and various connectivities, and at different states
of sensitivity to perturbation."

In Russia, there is too much perturbation, and those who have been too
sensitive have been dying out. It's the rats who have prospered.

Those who know genome science need to recognize also that, in order to change
the life-cycle chances of the rat versus the man, the networks and
connectivities have to be reformulated. In human history, the methodology for
doing that has included civil wars, strategic bombing, concentration camps,
mass terror, and genocide. With the sole exception of Canada, all the
G-8 member states are guilty of these practices. That's why those who know
genome science are reluctant to judge Putin so soon, either for what he
hasn't gotten around to doing yet; or for what usually takes time to produce
results.

To be scientific about this requires agreement on what tests and proofs
everyone, even rats and worms, can accept as evidence of what Putin
is doing to the networks and connectivities he inherited from Yeltsin.
The best test of that lies in answers to the following questions:
Who gives orders to whom, and who pays off whom, to what effect, and for
whose
benefit?

If the World Bank thinks Anders Aslund is the man to answer the questions,
some of the rats must be getting frightened. Biologically speaking, rats
usually do worse than men at managing fear. Cornered rats, everyone knows,
will eat each other.

*******

#9
The Washington Post
3 March 2001
[for personal use only]
Russia's Energy Chief Is Feeling Political Heat
By Susan B. Glasser
Washington Post Foreign Service

MOSCOW -- Hardly a day goes by without a new demand for Anatoly Chubais's
ouster.

Politicians on both the right and left denounce his plan for restructuring
Russia's crumbling energy sector. Newspapers are filled with speculation
about his imminent firing as head of the state electricity monopoly. Some
even blame him for a crisis that has left thousands of people freezing
through one of the country's coldest winters in decades.

In short, Chubais is in trouble -- again.

For a decade, he has been the perpetually controversial man in the middle
of Russia's transition to a market economy. Then-President Boris Yeltsin
fired Chubais -- twice -- when the architect of privatization became too
politically hot to handle. Today, Chubais is awaiting a presidential
verdict once more, treading carefully while President Vladimir Putin
decides his fate as CEO of the state-controlled Unified Energy Systems
(UES), which operates the country's power grid.

And yet Chubais still seems to relish the fight. In a recent interview, he
shrugged off the "demonstrations all over the country," the protesters
waving his portrait, and the parliament members who talk about burning him
in effigy. He reminisced almost fondly about being attacked by both "the
Communists and the capitalists at the same time."

As Chubais sees it, he is a reformer who has moved from abstract economic
theories to hands-on execution; UES is nothing less than a laboratory in
which to judge Russia's transition to capitalism. He looks like an Ivy
League economics professor in a brown tweed blazer, but Chubais is playing
high politics, alternating smoothly between rattling off energy sector
statistics and boasting about his direct phone line to Putin.

"What I'm doing here in UES is the same as what I did in the government for
10 years -- that's the market, that's deregulation," Chubais said. "Before,
it was just slogans, speeches, ideas when I was the deputy prime minister.
Now I am actually making it."

Long considered the darling of the West for his free market crusade,
Chubais this time has alienated even that constituency, with embittered
foreign investors charging that his plan to break up the electric power
company and sell off its parts is really a plan to dilute the value of
their shares.

Even his many rivals don't underestimate the scope of the challenge facing
Chubais today. Unless huge amounts of money are invested in the power
company's disintegrating infrastructure -- $20 billion to $50 billion
according to the Chubais team, significantly less according to critics --
Russia, within several years, will no longer be able to meet its own energy
needs.

But Chubais's proposed fix -- raising artificially low energy prices at the
same time he privatizes the local companies that sell the electricity --
has so far generated mostly political heat, with an unlikely coalition of
Western investors and Kremlin economics advisers teaming up to decelerate
the plan. After an all-out political clash in December stalled Chubais's
last proposal, a new version is due by mid-April.

Neither Kremlin infighting nor foreign investors are responsible for
Chubais's latest predicament, however. The weather is.

Night after night during this record-cold winter, Russian television
viewers have watched the energy crisis in the Far East play itself out,
with the people of the Primorye region left freezing in blackout-darkened
concrete apartment buildings. Earlier this month, Putin forced out the
governor of Primorye, Yevgeny Nazdratenko; Chubais, for the time being, was
spared.

Today, Chubais blames Nazdratenko for the disaster, saying his "absurd
populist policies" meant that UES was unable to hike rates in the region
for the last 3 1/2 years -- and thus collect enough money to keep
generating electricity. He also faults a coal shortage that caused power
plants to shut down in mid-winter. "That's the main mistake of my company,"
he said. "We needed to foresee it and we didn't."

What the energy crisis means for Chubais's job is unclear. Last month,
Putin told his top aide to "strengthen the management" of UES. "If that had
been said in Soviet times, it would have definitely meant to fire Chubais,"
said political analyst Vyacheslav Nikonov. "We still don't know what it
means in Putin's vocabulary. But it's fair to say that Chubais is in
serious trouble, as always."

To Nikonov, the question of Chubais's future has emerged as a test case of
the president's still-evolving political style. "So far, what this tells us
is that Putin is not in a hurry to make critical decisions," he said.

In the interview, Chubais acknowledged that Putin has been slow to decide.
But, he said, "I don't think Putin's style is divide and conquer. What
Putin doesn't like is a radical, fundamental decision which changes
everything. It's not the Putin style."

Unlike his previous political fights, this time Chubais cannot count on the
West's adulation. "He's not the man we thought he was," said Charles Ryan,
whose brokerage firm United Financial Group has led the investors' revolt
against the West's one-time hero. "He's not a reformer at all. It's been a
big fall from innocence for us."

The Western investors contend that Chubais is guilty of the same
anti-market behavior he has spent years criticizing. They say his reform
plan is really about "asset-stripping" -- selling off UES's most valuable
pieces at below-market prices.

"He came up with a plan to liquidate the company under the guise of
restructuring it," said William F. Browder, managing director of Hermitage
Capital Management and another leader of the anti-Chubais group. "He's just
like the other oligarchs -- the only difference being that he's interested
in political power, not in getting rich himself."

No matter where his restructuring plan goes, Chubais has already had one
success as a practitioner of capitalism. Buoyed by an improving economy and
ruble devaluation, he has overseen at UES the end of the practice of barter
under which the electricity monopoly -- and virtually all other large
Russian businesses -- accepted noncash payments. When Chubais took over,
UES received $8 billion a year -- more than 80 percent of its revenue --
that way. According to economists, the barter system has constituted a
major obstacle to development of a market economy.

"The single most striking aspect of the Chubais regime is the extraordinary
improvement in cash collection. Right now, UES is receiving about 85
percent in cash. That was thought to be impossible in Russia," said Eric
Kraus, the lead analyst for Nikoil, an investment bank. "It's a huge
success, and it's unprecedented here."

To Chubais, the experience is real-world confirmation of his ivory tower
economic theories.

"When I was in the government, I pressed the CEOs and factory directors to
stop the barter. They told me no. . . . I saw then that they were just
stealing money," he said. "But now I know they're just stealing money."

*******

#10
Date: Sat, 3 Mar 2001
From: Foreign Policy Research Institute <fpri@fpri.org>
Subject: From Russia Without Love by Alexander M. Haig, Jr., & Harvey
Sicherman 

FROM RUSSIA WITHOUT LOVE
by Alexander M. Haig, Jr., and Harvey Sicherman
March 2, 2001
Alexander M.  Haig, former  Secretary of State, is a trustee
of the  Foreign Policy Research Institute.  Harvey Sicherman
is President of the Foreign Policy Research Institute.

The FBI's  discovery of  a still-active  long-time  spy  for
Russia reminds us that U.S.-Russian relations are not nearly
as good  as many people presume. Indeed, the last sixty days
have been  marked by  a more openly anti-U.S. policy than we
have seen in sometime from Moscow. In December, for example,
Russian President  Vladimir Putin,  unlike  his  predecessor
Boris Yeltsin,  found it necessary to visit Fidel Castro and
to extol  his progress. Then Putin betook himself to Canada,
where amidst  negotiations over  trade, he tried to persuade
the Canadian  Prime Minister  to oppose  American plans  for
missile defense.  Finally, word  leaked that  a  treaty  was
being  negotiated  between  Russia  and  China  intended  to
counter U.S.  influence. A similar document had already been
signed by Russia and Iran.

These excursions  were surely  not intended  to  please  the
United States.  They are  instead  characteristic  of  post-
Yeltsin  Russia:  a  reassertion  of  Moscow's  interest  in
playing a  global role  increasingly opposed  to Washington.
This is  the international  counterpart to a domestic policy
of recentralizing political authority, controlling the media
and reviving the secret police.

While recently,  in response to a CIA report highly critical
of the  relationship, Moscow  denied any  malice and offered
instead a  "partnership for  stability," these words ill-fit
the situation.  Instead, the Bush Administration will find a
plate piled  high with  unsavory  leftovers  from  the  last
decade of  U.S.-Russian relations. At the top is a strategic
misconception in  Washington; the  notion that  Russia is  a
democratic partner whose main objective is to become part of
the West.  This ignores  the  tortured  history  of  Russian
attitudes toward Europe, ambiguous at best and belligerently
hostile at  worst. American boasts about victory in the Cold
War fueled the natural resentment of a proud people suddenly
cast down  from global  eminence to international beggar. We
banked instead (quite literally) on Boris Yeltsin and a thin
strata of  would-be reformers  to transform Russia in record
time, offering only modest international support overseen by
the supposed wise men of the IMF.

The results  are fairly plain to see for those who would see
it.  Both  democracy  and  capitalism  now  appear  to  many
Russians as  synonyms for  chaos and crime. President Putin,
whose style  might be  best  described  as  "KGB-lite,"  has
skillfully used  these views  to reassert the primacy of the
State. To  his credit, he has been brutally frank in telling
Russians that  they are  in terrible  trouble, and that they
can be  rescued only by their own efforts. To his discredit,
he has  associated Russia's recovery of self-respect with an
increasingly  anti-American  tone,  often  only  an  updated
version of  the Soviet play book. NATO has once again become
the  enemy,  and  once  again  Americans  (and  others)  are
suffering arrest on trumped-up charges. The Russian military
continue  to   blame  the   Kursk   disaster   on   "foreign
submarines." The  theme throughout  is that  U.S. "hegemony"
must be  cut down a size or two in the name of international
"balance."

Russian diplomats  have also  revived a  perennial favorite,
the "spheres  of influence"  concept. In  their reading, the
end of  the Warsaw  Pact should  have meant the end of NATO,
not its  expansion; and  the end  of  the  Soviet  Union  in
Central Asia means not independence for the new states there
but rather a "soft" Russian domination of the "near abroad."

Washington has  largely ignored  what seems  to many to be a
tragicomic pantomime  of ghosts from the Soviet and imperial
Russian past.  But we  should not  underestimate it. Russia,
even in distress, can make a great deal of trouble.

The United  States will soon confront three areas of serious
friction with Russia. The first is missile defense. Moscow's
objective is  to oppose  any American  plan that renders the
U.S. less  vulnerable to  missile attack and the best way to
do that  is to keep us pinned inside the obsolete ABM treaty
and the  hoary theology of mutual assured destruction. For a
Russia  unable  to  sustain  its  current  nuclear  arsenal,
increasingly preoccupied  with its  conventional force,  and
unable to  deploy the fruits of its own advanced research on
missile defense,  this makes  sense. But  does it make sense
for the  U.S.?  Before  entangling  ourselves  further  with
Moscow, the  U.S. should  take two  steps: (1)  confirm  the
technical feasibility of a missile defense for ourselves and
our allies  and (2)  make the  effort to persuade our allies
that it  should be  done. These  steps will  also create the
conditions for a useful discussion with Russia.

The second  contentious issue  is the  Persian Gulf.  Moscow
wants continued  high oil  prices, not least to keep its own
finances buoyant.  The Russians  have renewed their alliance
with Iraq  and favor  the end of many constraints on Saddam.
They are  also cultivating  Iran. If  the Mullahs  acquire a
nuclear weapon  anytime soon,  they  will  do  so  primarily
because of  Russian assistance  for  a  supposedly  peaceful
nuclear power program. Putin has thus cast Russia's lot with
the two most powerful and violently anti-American regimes in
the region.

A third  trouble is in the Caucasus. The U.S. and its allies
have hardly  restrained the  savage Russian  war to  destroy
Chechnya.  Our  major  achievement,  to  facilitate  an  oil
pipeline that promises an independent future for some of the
Central Asian  states, may  now be  compromised  by  Russian
pressure on  Georgia.  That  state,  led  by  former  Soviet
foreign minister  Eduard Shevernadze,  fears  quite  rightly
that its  refusal to align its foreign policy with Moscow on
regional politics and the oil pipeline make it a key target.
The Russians still have military bases on Georgian territory
and they  have  used  the  Chechnya  war  as  an  excuse  to
undermine Georgia's  independent ways.  This is a "red line"
for the  U.S., so our diplomats say and indeed it should be.
The very independence of the states born in the aftermath of
the Soviet  regime is  at stake, not only oil. But what will
we do  about  it?  Or  do  we  want  Moscow  to  resume  its
domination of  the region in the name of our common interest
in opposing  the spread  of fanatical  Islam,  such  as  the
Taliban of  Afghanistan? Have we really calculated the costs
of such  collusion? Washington's  unwillingness  to  call  a
spade a  spade on that and other issues has only discouraged
the reformers  in Moscow  and encouraged their -- and our --
adversaries.

To sum it up, Putin's Russia is neither a democratic partner
nor a  strategic partner  of the  U.S.  We should not assume
that Moscow  aspires to  be simply  one more  part of a West
whose  traditions   and  institutions  it  does  not  share.
Instead, Russia  is on the hunt to reduce American influence
wherever and  whenever it  can. This  is  the  substance  of
Moscow's foreign policy today -- a sorry outcome to a decade
of extravagant American hopes for the better. Russia's brief
and occasionally intense love affair with the West following
the failure  of communism  is over.  The reality  is Russia,
once again "without love."

*******

#11
From: "Rachel Douglas" <cmgusa@intrepid.net>
Subject: Shock Waves from Foreign Debt, Domestic Energy  Rock Moscow
Date: Sat, 3 Mar 2001

Executive Intelligence Review
Vol. 28, No. 10
March 9, 2001

Shock Waves from Foreign Debt, Domestic Energy
Rock Moscow
by Rachel Douglas

If the mid-February financial earthquake in Turkey
could pull the Russian stock market down by 10% in
one day, as investors liquidated assets in their Russian
portfolios to cover losses in Turkey, what will happen in
the heavily dollarized Russian economy when the United
States makes its hard landing and the dollar collapses? In
the words of one well-placed economist, that will unleash
the proverbial ``ninth wave,'' the one the sinks the ship,
onto Russia.
     The Russian government and Parliament are already in
an uproar over debt and revenues. On Feb. 13, a few days
before the tremors at the Turkish epicenter of the world
financial crisis touched off vivid recollections of
Russia's default in 1998, the Russian government had
announced the end of expectations of reaching agreement on
rescheduling its Soviet-era ``Paris Club'' debt to Western
governments, during this year. Therefore, Minister for
Economic Development and Trade German Gref said that day
in Berlin, Russia will service its foreign debt in full
during 2001, paying {$7 billion in Paris Club debt service
alone, out of total budget spending that is equivalent to
$40 billion}. (The Soviet-era London Club and Paris Club
foreign debts of Russia total to $105 billion, out of a
total official foreign debt of $149 billion.)
     Gref was in Germany, according to {Kommersant-daily},
to hand German negotiators a list of seven projects in
which German investors could participate, in exchange for
writing off Paris Club debts (of which Germany holds 40%).
The next week, Prime Minister Mikhail Kasyanov sought
similar arrangements in Italy. These negotiations are far
from complete. In the meantime, talks with the
International Monetary Fund, which has, once again,
dangled a $1.7 billion so-called ``precautionary'' credit
for Russia--a loan that Russia would not have the right to
draw upon, unless a financial emergency occurred, but for
which it would have to meet conditionalities--ended
inconclusively on March 1.
     It emerged, in a {Wall Street Journal} article of Feb.
16, that the Russian government's will-pay announcement
came two days after U.S. Treasury Secretary Paul O'Neill
sent a nasty letter to Finance Minister Aleksei Kudrin, in
which he said that Russia ``clearly has the resources'' to
make payments due this year, ``in full and on time.''
O'Neill added, ``Nations of the good-faith club do what
they said they would do.... For us, this is a financial
and economic issue, not a political issue.''
     In Moscow, however, it is a very hot political issue,
in the setting of a high level of hostility toward the
United States. State Duma (lower house) Budget Committee
Chairman Aleksandr Zhukov said Feb. 14, that Russia could
end up in technical default (for the first time, on
{foreign} debt payments; the 1998 default was on
ruble-denominated government bonds), if the Duma refused
to adjust the 2001 budget to cover the payments. The
original budget assumed the Paris Club debt would be
restructured. Without Duma approval, Zhukov said, ``the
government will have no legal right to pay the Paris
Club.''
     On Feb. 13, Prime Minister Kasyanov formally sent
budget amendments to the Duma, defining the sources for
extra revenues, to be used for debt service. He warned
that otherwise, ``inflation may go out of control, bank
lending rates spiral upwards, industry will have no chance
to receive credit, and wage increases will have no
impact.''
     In talks with Kudrin on Feb. 15, only the Yedinstvo
(Unity) bloc in the Duma was ready to back the allocation of
surplus budget revenues, for purposes of debt service. The
National Patriotic Union, of which the Communist Party is
a member, declared on Feb. 13 that it would be ``immoral and
unacceptable'' to pay, while Vladimir Lukin of the Yabloko
party said that there was still political leverage with
which to achieve restructuring. On Feb. 22, the Duma
approved the intended allocation of new revenues to debt
service, but deep-sixed Kasyanov's main proposed means of
obtaining those revenues--privatization of more
state-owned companies--thus leaving the whole proposition
in limbo.

                  - Serious Mistakes -
     In an interview with {Nezavisimaya Gazeta}, dated
Feb. 13, former Prime Minister Yevgeni Primakov suggested
that skipping the January Paris Club payment had been ``a
serious mistake,'' especially ``in light of the shock of
August 1998, when confidence in our country was destroyed.
We have barely recovered from that shock, and we are
having a hard time restoring trust, step by step.''
Primakov went on to list ``food procurement'' and ``the
energy sector'' as problems just as severe as the foreign
debt crunch, if not more so. He endorsed President Putin's
recent acknowledgment that, as the interviewer put it,
``the life-support crisis, provoked by the cold throughout
half of Russia's regions, gave us a warning of a systemic
crisis.'' Primakov drew attention to a pressing debt
crisis of a different sort, namely, the failure to
``upgrade our fixed assets'' (plant and equipment, and
infrastructure) during the past decade.
     After the Duma vote on Feb. 22, Primakov welcomed the
exclusion of new privatization auctions from the
revenue-raising plan. ``Common sense has prevailed,'' he
said, as the troubled energy sector will remain in
government hands.
     Brutal Winter weather in Siberia and the Far East,
with which the country's under-maintained infrastructure
could not cope, has already occasioned serious government
shake-ups in Russia. It is evident that the firing of V.
Nazdratenko as Governor of the Maritime Territory,
Russia's Far East, did not, in and of itself, mark a
watershed in economic policy, but was an urgent move to
discipline at least somebody, for the freezing winter the
residents of Vladivostok have endured.
     Nazdratenko, summoned to Moscow, conferred with
President Putin in mid-February, and then was named
Minister of Fisheries. Just before meeting Putin, he gave
a polemical interview to {Kommersant-daily}, published on
Feb. 15. The ex-governor laid the blame for the Far East's
horrible fuel shortages, squarely on the International
Monetary Fund. ``The problem is not in the personalities
of today,'' he said, ``but in the serious economic
management mistakes during the period of `democratic
romanticism.' There were legends about us: that we steal
coal, we have no emergency coal reserves, we have plenty
of coal but don't send it to the power plants, etc....''
Yes, coal is mined in the Far East, Nazdratenko explained,
but ``it is destined for export.'' So, ``organized crime
lives well, because all forces are mobilized to combat
Nazdratenko, who says: `Don't close the coal mines on
orders from the IMF!'|''
     Nazdratenko said that he was the one who had warned,
seven years ago, that if Russia stopped fishing the Sea of
Okhotsk, it would be invaded by foreign fisheries, and it
was. ``Now this sea is empty as a drum.''
     On Feb. 16, President Putin did fire more energy and
financial officials: Andrei Zadernyuk from the post of
director of the Federal Energy Commission (FEK), and
Georgi Tal, head of the State Committee for Financial
Bankruptcy Proceedings. The new head of FEK, Georgi
Kutovoy, is a deputy of Nuclear Energy Minister Yevgeni
Adamov, and a strong opponent of the plan to break up the
national electricity grid, UES, promoted by its CEO
Anatoli Chubais.
     In his Feb. 13 interview, Primakov praised Putin for
having backed off from Chubais's British
Commonwealth-modelled plan for the sale of chunks of UES,
calling the plan ``counterproductive.'' According to
Primakov, ``The power grid must cover the entire country;
splitting it into several parts would be fatal. As for its
condition, its fixed assets are obsolete.''
     Presidential adviser Andrei Illarionov said on Feb. 14
that a three-day meeting of the working group on reform of
the Russian power industry had just received nine
different blueprints for this critical policy matter. The
group is chaired by Tomsk Province Governor Viktor Kress.
On Feb. 16-17, Putin took the train to the freezing cities
of Tomsk and Omsk, in West and Central Siberia, visiting
apartment buildings without heat, gas, or water.
     Back in Moscow, rumors sweep the press and Parliament
every other day, that the next head to roll, will be
Kasyanov's. The liberal paper {Segodnya} published a
scenario, under which ex-Prime Minister Gen. Sergei
Stepashin would resume that role.

                 - A Policy Shake-Up? -
     The more interesting question, is whether there will
be a shake-up of {economic policy} in Russia, not merely
personnel. Several leading analysts seized the occasion of
the Paris Club debt debate in the Duma, to publish bold
proposals for a global shift.
     {{Dr. Leonid Fituni}}, writing in {Nezavisimaya
Gazeta} on Feb. 22, argued that ``Russia has nothing to
lose,'' by defaulting on Soviet debts. Fituni, now
director of the Center for Strategic and Global Studies of
the Russian Academy of Sciences, titled his commentary
``Default as a National Idea.'' He proposed to consider
the $1,100, which each Russian man, woman, and child would
have to pay on the foreign debt, as illegitimate. That
debt ballooned from $48 billion in 1988 to $68 billion in
1991, then $122 billion by 1994, but those credits were
not issued for economic development. They were tied to
dismantling the Soviet military machine, privatizing
industry, and splitting up the former U.S.S.R. Since the
Russian Orthodox and Islamic faithful, who constitute the
main segments of the Russian population, are morally
opposed to usury, the legitimacy of the debts should be
open to question in the minds of a majority of the
population.
     People who argue that Russia should pay the debt,
warn that a default would scare away investors, Fituni
pointed out, but there are no significant foreign
investors to scare away. Therefore, he concluded, Russia
should prioritize its debts to the Russian
population--which take the form of unpaid salaries and
pensions, stolen bank deposits, and unfulfilled state
obligations for free education and medical care.
     {{Nikolai Baibakov}}, Chairman of the Soviet State
Planning Commission (Gosplan) from 1965 to 1985, marked
the 80th anniversary of that agency with an interview
in {Nezavisimaya Gazeta}, in which he emphasized the
failure of ``the market'' to shape the Russian economy in
any productive direction. Noting that a group of regional
governors has recently appealed to President Putin to
study the successes of Gosplan, Baibakov reviewed the
agency's productive allocation of funds and physical
resources, which made it possible to build up Soviet
industry, create a vast cadre of engineers and
technicians, and prevail during World War II. A new state
agency, he proposed, could combine the workable elements
of Gosplan's experience, with successful approaches tested
in the economic reform process in China, which has
combined state planning with the development of markets,
and has realized an average real growth of 8% per annum
for the last 20 years.
     Economics Minister Gref has just made a visit to
China, to study that experience of reform.
     {{Academician Aleksandr Nekipelov}}, Director of the
Institute of International Economic and Political Research
at the Russian Academy of Sciences, published in the Feb.
23 {Izvestia}, his analysis of the ``mutant and ugly''
economic relations, resulting from ``the illusion that
Russia's progress toward democracy and a market economy
would bring about idyllic relations with the West.'' The
Western officials who promoted reforms, he charged,
actually launched the corruption and money-laundering, for
which they subsequently tried to ostracize Russia.
     Nekipelov wrote that Russia should ``derive
appropriate lessons from this experience ... [and] get rid
of the specific inferiority complex, which is expressed in
the assessment of any economic decision, not approved by
the West, as {a|priori} erroneous. Russia has too often
faced recommendations from Western authorities which
brought nothing but damage.''
     Specifically on the banking system, Nekipelov echoed
arguments of the Ishayev Report (excerpted in {EIR} of
March 2, 2001), of which he was one of the co-authors:
``An idea is being promoted now that Russia's banking
system is good for nothing, and therefore, we should leave
the doors for foreign banks wide open. There is no doubt
that capitalization of Chase Manhattan alone is larger
than that of all our banks together. But is it true that
Russian banks have no resources for financing economy? On
the contrary, specialists are aware of the fact that they
can't efficiently invest their assets, and keep part of
them on the accounts of the Central Bank.'' The Ishayev
Report elaborates, how such resources can be harnessed for
purposes of investment in the real sector.

******

#12
U.S. thinks Hanssen told Soviets of tunnel - paper
 
WASHINGTON, March 3 (Reuters) - The United States built a secret tunnel under
the Soviet Embassy in Washington, but investigators believe the operation was
betrayed by the FBI agent arrested last month on charges of spying for
Moscow, The New York Times reported on Saturday, citing current and former
intelligence and law enforcement officials.

The secret tunnel operation, which officials indicated was run jointly by the
FBI and the National Security Agency, was part of a broad U.S. effort to
eavesdrop on Soviet -- later Russian -- facilities and personnel operating in
the United States, the paper wrote in its Internet edition on Saturday.

Spokesmen at the FBI and the White House declined to comment to the Times on
the tunnel operation.

Current and former U.S. officials estimated that the tunnel construction and
related intelligence-gathering activities cost several hundred million
dollars, apparently making it the most expensive clandestine intelligence
operation that the agent, Robert Hanssen, is accused of betraying, the Times
said.

The tunnel was reportedly designed as part of a sophisticated operation to
eavesdrop on communications and conversations in the Soviet Embassy complex,
which was built in the 1970s and 1980s.

In the 1980s, at about the time the tunnel operation was under way, the
United States and the Soviet Union argued bitterly over their respective
embassies in Moscow and Washington, with the United States accusing Moscow of
spying at both locations, the paper said.

The U.S. government has never publicly disclosed the existence of the tunnel,
but in an FBI affidavit in the Hanssen case, the government said that Hanssen
"compromised an entire technical program of enormous value, expense and
importance to the United States government," the Times report said.

The Times said officials told them that that referred to the tunnel operation
and related intelligence activities.

U.S. News & World Report magazine reported in its March 12 issue, out on
newsstands on Monday, that officials blamed Hanssen for compromising at least
two highly sensitive FBI counterintelligence programs.

Hanssen, arrested on Feb. 18, has been accused of spying for Moscow since
1985. He has been accused of giving Moscow secrets that included names of
double agents, as well as U.S. electronic surveillance methods.

The Times said it could not be determined when the government believed
Hanssen betrayed the tunnel operation.

*******

CDI Russia Weekly:  http://www.cdi.org/russia

Johnson's Russia List Archive (under construction):  http://www.cdi.org/russia/johnson