August 23, 2001

This Date's Issues:   5406

Johnson's Russia List
#5406
23 August 2001
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: Putin back in harness after brief summer break.
2. Chicago Tribune: Colin McMahon, Black Sea resort seeks better days. Fewer Russians make trip to Sochi.
3. Luba Schwartzman: ORT Review.
4. strana.ru: Russian flag changed four times over 300 years.
5. Moscow Times: Valeria Korchagina and Kevin O'Flynn, Only SPS Raises
the Flag on Flag Day.
6. Reuters: Olena Horodetska, ANALYSIS-Little cheer a decade after
Ukraine's independence.
7. Lera Korchagina: Re: 5405-Stephen/Moscow Poison Map. (pollution)
8. John Squier: 5404/Dolan re: retrospectives.
9. Tom Moore: missile defense.
10. Itar-Tass: Russian Audit Chamber chief says fight against corruption
yields results.
11. Financial Times: Robert Cottrell, Russian bank chief hits at government
policy: Economic programme 'not properly thought through', says Gerashchenko.
12. Argumenty i Fakty: Tatiana Netreba, GLEB PAVLOVSKY: RUSSIA AT THE
PEAK OF STABILITY. A civil society is starting to emerge, and Putin is its leader.
13. Ekspert: Aleksei Makarkin, WHAT AWAITS PUTIN ON THE ROAD OF LIBERAL
REFORMS. The new political year opens: What will it mean for President Putin?]

*******

#1
Putin back in harness after brief summer break

MOSCOW, Aug 23 (AFP) -
Russian President Vladimir Putin wound up his summer holidays Thursday,
returning to Moscow ahead of a visit to Kiev where he is to attend
celebrations of the 10th anniversary of Ukrainian independence.

Putin was due to arrive in Kiev in the afternoon, with meetings with
Ukrainian President Leonid Kuchma and Polish President Alexander Kwasniewski
scheduled later in the day.

He was also due to meet Macedonian President Boris Trajkovski, at the
Macedonian leader's request, probably Thursday.

Trajkovski is also attending the independence celebrations which begin on
Friday.

Putin spent a week in the Russian northwestern region of which his native
Saint Petersburg is the capital, notably visiting the Solovki islands in the
White Sea.

Accompanied by the patriarch of the Russian Orthdox church Alexy II, he
visited a 15th-century monastery on the islands which in 1923 became the
Soviet Union's first forced labour camp, attending services in what some
commentators saw as a gesture of reconciliation.

He spent several days visiting towns and villages in the Karelia region
bordering Finland, usually accompanied by cameramen, appearing informal and
relaxed.

He noticeably refrained from commenting on the 10th anniversary of the
abortive hardline coup that precipitated the collapse of the Soviet Union, a
silence widely interpreted as an unwillingness to alienate the large segment
of the Russian population that mourns the passing of that era.

And though he visited a military base Wednesday, he made no mention of Flag
Day, the August 22 holiday that marks the adoption 10 years ago of the
tsarist-era tricolor in preference to the red hammer-and-sickle Soviet flag.

The Russian leader adopted a reduced work schedule during the holiday month,
hosting an informal, shirt-sleeved summit of leaders of the Commonwealth of
Independent States, a loose association of former Soviet republics, at the
Black Sea resort of Sochi at the start of August.

He followed that with two meetings highlighting Russia's resolute opposition
to US plans to set up a "son of star wars" missile defence shield.

On August 4 he met North Korean leader Kim Jong-Il in Moscow and signed a
joint statement asserting that the so-called "rogue state"'s missile
programme had "peaceful" objectives, countering Washington's argument that
the shield was necessary to counter a threat from the likes of Pyongyang and
Baghdad.

And a week later he was back in the Kremlin to meet US Defence Secretary
Donald Rumsfeld and rebuff US arguments that the 1972 Anti-Ballistic Missile
treaty, which Washington wants to sideline in order to build its defence
shield, has outlived its usefulness.

Last week Putin attended the fifth Moscow Air Show to fly the flag for
Russian aircraft constructors, announcing that Russia was preparing to make a
significant impact on international air sales markets.

However he kept a low profile as another key date passed, the August 12
anniversary of the sinking last year of the Kursk submarine in the Barents
Sea, when 118 seamen died.

Apart from presenting the widow of the submarine's captain a Hero of Russia
medal to honour her husband posthumously, he made no comment on the disaster
which has marked the low point of his presidency to date.

The Kursk tragedy, during which he was filmed by a news team at Sochi, tanned
and in shirt-sleeves, declining to cut short his holiday while the seamen
drowned in the Arctic waters, was a public relations fiasco which the Kremlin
since then has done everything possible to correct.

*******

#2
Chicago Tribune
August 23, 2001
Black Sea resort seeks better days
Fewer Russians make trip to Sochi
By Colin McMahon
Tribune foreign correspondent

SOCHI, Russia -- From behind a sprawling desk in the somber library of his
summer dacha, Josef Stalin is calling Russians back to Sochi.

The dictator's wax replica is one of the attractions of this Black Sea
resort, once a playpen for the Soviet elite but now struggling to remake
itself in the new Russia.

Stay at Stalin's former dacha and enjoy the 110 acres of greenery, the
dictator's own wood-paneled billiards room, the oval swimming pool where he
frolicked after long days of diabolical plotting.

"There are no ghosts here," said a dacha staff worker who professed
puzzlement over why an homage to Stalin might unnerve anyone. "This place is
in demand."

The same cannot be said for all of Sochi.

Known as the Russian Riviera, Sochi has regained favor in the Kremlin. But
vacationers are down from last year. Their numbers, which are expected to
exceed 1.1 million for 2001, cannot match the 4 million people who used to
pack Sochi in the 1980s.

Where the elite meet

President Vladimir Putin visited the resort six times last year, and local
sources say he wants to build a winter home at the nearby Krasnaya Polyana
ski resort in the foothills of the Caucasus Mountains. This month, Putin
played host to an informal summit of regional leaders in Sochi. Prime
Minister Mikhail Kasyanov and other high-ranking politicians are spending
their August vacation in Sochi.

The pebbled beaches of the Black Sea are not the white sands of tourist
brochures, but the waters are soothing and the settings can be spectacular.
The pace is languid, fitting for Sochi's subtropical heat. The diet is a
healthy mix of the best tomatoes in Russia, fresh greens, and grilled fish
and meats. The beer is served cold.

And during the winter, visitors can ski the Caucasus by day and stroll by
night under palms and magnolias.

But like the old copies of Pravda laid out before the wax figure of Stalin,
much of Sochi is faded. Many sanatoriums have not been renovated for decades.
True Soviet creations built during the 1970s and 1980s, visual insults of
glass and concrete, these structures should be razed rather than repaired,
many tourism experts and Western consultants say.

The reasons for Sochi's drop in tourism say much about what has happened, for
good and bad, in Russia over the last decade.

The good is that Russians with money have been free to travel to the places
they always dreamed of but never could under the Soviets: Turkey, Greece,
Spain and Italy, the real Riviera.

Have-nots left in the cold

The bad is that fewer Russians can afford a month's holiday in Sochi. Not
only have salaries dried up, so have many of the benefits--including
all-expenses-paid trips to Sochi sanatoriums--that went with a job at the car
factory or the coal mine or the local railway office.

Development plans start big but fizzle. Budget funds disappear. Foreign
investment has been nearly non-existent, though Russian conglomerates have
built hotels or taken over some former government sanatoriums and remodeled
them.

Ten years after it was begun, a major renovation of the regional airport is
far from finished. A line of ramps leads from a new terminal building to
nowhere. Sochi is Russia's biggest resort by far and there is not a single
scheduled arrival from beyond the former Soviet Union.

"We don't need Western tourists," said Gleb Gutiev, a spokesman for the new
mayor who only minutes earlier was insisting that Sochi could compete with
any Mediterranean resort for European tourist dollars.

"Look at the map of Russia," Gutiev said. "So huge, and with just a tiny
thread of green down here in the south. After getting their fill of tourism
in Europe, the Russian tourists have been forced back here."

City officials say the 4 million tourists of old were a catastrophe for
Sochi. Yet they cannot say what the optimal number would be.

The city's biggest concern is trying to bring under control small-time
entrepreneurs who have started up scores of private hotels and
bed-and-breakfasts. The hotels do not pay taxes, city officials complain, and
contribute to the trash and infrastructure problems that can make summer in
Sochi trying for the city's 420,000 residents.

During Soviet times the government provided off-season subsidies to get the
locals through once the tourists left. Most of those payments have gone away,
and many Sochi residents struggle to make it through the winter.

Officials promise that a major development of Krasnaya Polyana will bring
needed winter jobs to the region. The government is pushing a $15 billion
development plan over 10 years, a remarkable sum in a nation whose annual
federal budget barely exceeds $40 billion.

So far, Sochi residents are not getting excited. They've heard other grand
plans before.

"Krasnaya Polyana, Krasnaya Polyana," said Valery Sotnikov, the chief doctor
at one of Sochi's larger sanatoriums. "Everybody is just promising, but
nobody is doing anything. It's still only a project. Let's live and see."

******

#3
ORT Review
www.ortv.ru
Compiled by Luba Schwartzman (luba7@bu.edu)
Research intern at the Center for Defense Information
Research fellow at the Institute for the Study of Conflict, Ideology and Policy
at Boston University

HEADLINES
Wednesday, August 22, 2001

- State Duma deputy and the coordinator of the Russian council for the
development of education, Andrei Kokoshin addressed the issue of the
"brain drain" at a press conference dedicated to education reform. He
noted that education in Russia should be viewed not only as part of the
scientific and cultural sphere, but also as an important factor of
economic development.

- President Putin continues visiting the cultural attractions of Russia's
North. Today he visited Great Novgorod - the memorial military cemetery,
the Novgorod Kremlin (a UNESCO site), and the Sofiisky cathedral.

- The number of miners confirmed to have died in this weekend's Zasiad'ko
mine explosion has grown to 38.

- Emergencies Minister Sergei Shoigu will hold an on-site meeting of the
governmental commission for the reconstruction of housing damaged in the
flood. Work is supposed to be completed by 15 September, but only 18% of
the damaged apartments in Lensk have been restored, lists for housing
distribution have not been presented, there is not enough drinking water,
and transportation problems have not been resolved.

- A digital message board with running information on the radiation levels
around the Kursk nuclear submarine has been set up in the settlement of
Rostliakovo.

- Russian-American consultations on strategic stability continue in
Moscow.

- The Russian Ministry of the Interior has refuted rumors that the US has
put forward an unofficial ultimatum to Russia regarding the ABM treaty.

- Twelve different special operations have been conducted by the military
in Chechnya over the last 24 hours. According to unofficial information,
in the course of one of them, paratroopers found Shamil Basaev's criminal
group, killed six of his bodyguards, and wounded the notorious rebel
commander.

- A unique exhibit of ball gowns and uniforms from the late XIXth and
early XXth century has opened in Moscow.

- Russian-Belarusian military exercises are being held near Kaliningrad.

- The "Pabuk" tropical storm is approaching Sakhalin and the Kurile
Islands.

- Five soldiers died when a military truck came under fire in the
Shelkovsky region of Chechnya.

- Two soldiers died and four were wounded during military exercises in the
Moscow region.

- A ceremony was held in Moscow initiating 220 young "Suvorovites" -
students at the prestigious Suvorov military academy.

- Children in Chechnya will receive 80 school kits for the upcoming school
year from the Tiumen branch of the OMON.

- Two men suspected of being involved in the marketplace bombing in
Astrakhan are on the wanted list.

- The search is on in Irkutsk for four men, considered to be extremely
dangerous, who escaped from a Tuluna prison.

- Schools in Mari El are earning funds for the school year by cultivating
26 hectares of land: carrots, cabbage, beets, flowers are grown and sold
to pay all expenses other than teachers salaries - the only part covered
by the state.

- National Flag Day is being celebrated in Russia. It was ten years ago
today that the Soviet red flag was substituted by the Russian tricolor. A
concert in honor of the revived flag was held near the Moscow White House.

*******

#4
strana.ru
August 22, 2001
Russian flag changed four times over 300 years
Russian flag turns 300

August 22 was declared Russia's State Flag Day by the country's president in
1994.

A state flag first appeared in Russia at the turn of the 18th century, at the
time when Russia was becoming a powerful state. The white-blue-red flag was
hoisted on the first Russian warship Oryol (Eagle) during the reign of Czar
Alexei Mikhailovich, the father of Peter the Great.

A decree issued by Peter the Great on January 20, 1705, said a white-blue-red
flag should be hoisted on all ships, and he drew a sketch of a flag with
three horizontal stripes.

In 1958 Alexander II approved black, yellow and white as colors of the empire
for banners, flags and other articles of adornment in the streets to be
displayed on solemn occasions. And on January 1865 he ordered that black,
orange (golden) and white be named "the state colors of Russia."

The black-yellow-white flag existed until April 1883, when Alexander III
returned the Russian flag of three horizontal stripes of white, blue and red.

In 1896 Nicholas II, the last Russian emperor, called a meeting at the
Justice Ministry to consider a matter about the Russian national flag. The
meeting arrived at the conclusion that "the white-blue-red flag is to be
called a Russian or national flag and its colors - white, blue and red - to
be called state colors."

The three colors were given an official explanation. White signified freedom
and independence; blue is the color of Our Lady under whose protection Russia
is; and red is state sovereignty. These colors signified also the community
of Belarus, Ukraine and Russia.

After the February 1917 revolution the Provisional Government used the
white-blue-red flag as a state one.

It was not at once that Soviet Russia rejected the tricolor symbol of Russia.
On April 8, 1918, Yakov Sverdlov, Chairman of All-Russia Executive Committee,
in fact the first President of Russia, suggested that a red banner be adopted
as a national Russian flag, and it remained such over 70 years.

Viktor Yaroshenko, member of the Russian parliament, proposed even before the
August 1991 coup that the "revolutionary" red flag be replaced with a
white-blue-red one.

The extraordinary session of the Supreme Soviet ruled on August 22, 1991,
that the tricolor be regarded as Russia's official symbol.

In August 1994 President of Russia Boris Yeltsin signed a decree declaring
August 22 the State Flag Day.

The debate over the state symbols, and in particular over the State Flag of
Russia now subsided now erupted with new force. In January 1998 it was
decided that the problem of an official approval of state symbols be removed
from the agenda, as diametrically opposite views on the issue existed in the
Russian society.

In December 2000 President Vladimir Putin declared at a meeting of
parliamentary factions that the state symbols should finally be confirmed by
the law. Before that the state symbols remained "suspended" - they had been
introduced only by a presidential decree).

On December 4, 2000, President Putin submitted a draft law on Russia's state
flag among the other draft laws on state symbols to the State Duma, the lower
house of the Russian parliament. Both houses adopted the draft early in
December, and on December 25, it was signed by the President.

According to the law, the State Flag of the Russian Federation has three
horizontal stripes - white, blue and red.

*******

#5
Moscow Times
August 23, 2001
Only SPS Raises the Flag on Flag Day
By Valeria Korchagina and Kevin O'Flynn
Staff Writers

Boris Yeltsin turned down an invitation Wednesday to celebrate the 10th
anniversary of his victory over a hard-line Communist coup. Vladimir Putin
was too busy vacationing in Novgorod.

But a couple hundred people in Moscow marked Flag Day with a solemn
memorial at noon for three men killed during the 1991 coup and thousands
turned out for an evening rock concert sponsored by the liberal Union of
Right Forces party.

"The state has not done anything to celebrate this holiday," Valery
Borshchev, a human rights activist and a former State Duma deputy, said at
the concert outside the White House. "Hopefully, one day it will eventually
be recognized as a cause for celebration."

Wednesday was the 10th anniversary of the collapse of the coup — a tense
three days best engraved in the minds of millions by the image of Yeltsin
facing down the hard-liners from atop a tank at the White House.

When the coup ended on Aug. 22, the Supreme Soviet declared the imperial
white, red and blue tricolor as the Russian flag. Yeltsin in 1994 confirmed
that decision and decreed Aug. 22 Flag Day. But the tricolor was only
officially made the national flag at Putin's urging last December.

SPS head Boris Nemtsov told flag-waving crowd at the concert Wednesday that
he had visited Yeltsin around noon and presented him with a silver statue
of a larger-than-life likeness of himself with his foot on a small tank and
a flag in his hand.

"It's unbelievable how much strength, how much energy this person lost for
the sake of freedom," Nemtsov said.

He earlier said that Yeltsin had declined an invitation to attend the
evening festivities but that he had spoken "very warm words about those
Muscovites who did everything possible to thwart the coup," Interfax reported.

NTV quoted Nemtsov as saying that Yeltsin was "very ill." But Nemtsov said
on TV6 that the former president was not sick.

Yeltsin, whose health deteriorated throughout his second term as president,
has largely remained secluded since stepping down at the end of 1999.

Putin on Wednesday was wrapping up a weeklong vacation in northwestern
Russia. He took a tour of Novgorod and visited a military base. He made no
mention of Flag Day.

The presidential press service said Putin would not send out a
congratulatory message in honor of the day, unlike the usual protocol on
any national holiday.

Political observers said Putin does not want to alienate the segment of the
population still mourning the collapse of the Soviet Union.

Russia discarded the red, hammer-and-sickle Soviet flag a decade ago when
it adopted the tricolor, which first appeared during the reign of Peter the
Great's father, Tsar Alexei Mikhailovich.

A 200-member procession kicked off Flag Day on Wednesday with a march to a
memorial over the underpass at Novy Arbat where Ilya Krichevsky, Dmitry
Komar and Vladimir Usov died in the early hours of Aug. 21, 1991, in a
clash with armored personnel carriers. The marchers carried a 20-meter-long
tricolor, much like one that White House defenders carried through Red
Square in a victory celebration on Aug. 22, 1991.

In the evening, the concert began with pop groups including Chaif and Chizh
& Co. taking the stage. The crowd was a mix of White House defenders and
teenagers, who were too young to remember the events 10 years ago.

"It was my duty to come here," said Vladimir Kiryanov, a 44-year-old
hairdresser proudly wearing a Defender of the White House medal. "It is
kind of painful that we are now ignored and that there was not even a small
greeting from the president."

Between songs, documentary footage of the August 1991 events was rolled
across a three-meter-wide screen — tanks rolling through Moscow, civilians
building barricades, Yeltsin passionately addressing the crowd.

Some of the younger participants expressed skepticism about SPS's motives
for the concert.

"I don't think any of it is sincere. It is all organized for getting
support for the party," said Oleg, 15, who refused to give his last name.

"I came to listen to the music," he said.

But Kiryanov shrugged off the ambivalence of the teens.

"There is no need to teach them history here and now. They should just be
allowed to have some fun," Kiryanov said. "The learning should be done in
the school."

********

#6
ANALYSIS-Little cheer a decade after Ukraine's independence
By Olena Horodetska

KIEV, Aug 23 (Reuters) - Ukraine will celebrate the tenth anniversary of its
declaration of independence amid pomp and ceremony on Friday, but many people
in the nation of 49 million have only one question: How did it all go so
wrong?

Independence, a cherished dream during 70 years of Soviet rule and three
centuries under Russian tsars, has been soured by poverty, corruption, and a
rapidly shrinking population.

"For the majority, today's reality is a big and unpleasant surprise. It is
not the country they had in their dreams in 1991," said political analyst
Mykola Tomenko.

"We have built a formal Ukraine, a state which has flags and symbols, but it
is a country for the governing elite, not for people, an autocratic country
ruled by powerful businessmen."

A walk down the capital Kiev's tree-lined streets illustrates Tomenko's
point: police halt traffic for scores of Mercedes limousines with blackened
windows which scream past pensioners looking for empty beer bottles to sell.

A recent poll by the Institut Polityki, an independent think tank, said
nearly 84 percent of Ukrainians were disappointed in their country and
believed independence had not brought them what they expected.

The current mood is in a sharp contrast to the mass enthusiasm 10 years ago
when parliament proclaimed Ukraine independent on August 24, 1991, three days
after the collapse of a hardline Communist coup in Moscow.

Nine out of 10 Ukrainians endorsed independence in a referendum three months
later.

Hopes were high then that Ukraine, the breadbasket of the Soviet Union and
home to a huge coal and steel industry, would quickly surpass its former
Soviet brothers and join more developed countries in Western Europe.

REALITY BITES

But the reality proved to be more challenging.

The need to pay for energy supplies from abroad and a difficult transition
from central planning to a market economy led to economic collapse,
hyper-inflation and poverty for many.

Early privatisations played into the hands of a new elite who became known as
oligarchs, businessmen with financial power matched by political influence
which allowed them to buy up industries at knock-down prices.

The murky dealings at the top of Ukrainian society -- one former prime
minister is facing trial in San Francisco and has been convicted of massive
money laundering by Swiss authorities -- are matched by petty tax crimes
lower down.

This unofficial economy is estimated to be about the size of the official
economy. Ukraine is rated as one of the 10 most corrupt countries in the
world by Transparency International, a Berlin-based graft watchdog which
publishes an annual Corruption Perception Index of more than 90 countries.

Following the meltdown sparked by Russia's financial crisis in 1998, the
country has finally started to pull itself out of the mire after almost a
decade of economic recession.

Last year it posted its first ever gross domestic product growth on the back
of strong exports and what analysts said was a decisive effort to reform the
financial sector and stamp out corruption in the energy sector.

MURDER SCANDAL ECLIPSES ECONOMIC GROWTH

Growth continued this year with GDP rocketing 10.5 percent in January to
July, year-on-year, albeit from a very low base.

But that positive news was all but eclipsed by a political scandal sparked by
the murder of journalist Georgiy Gongadze, a harsh critic of incumbent
President Leonid Kuchma.

The discovery of his headless corpse late last year and subsequent
publication of tapes on which a voice similar to Kuchma's ordered his
kidnapping rocked the country.

Kuchma denies any involvement and survived months of political protests
during which thousands took to the streets.

Serhiy Makeyev, an analyst at the Institut Polityki said polls showed 60
percent of Ukrainians were ashamed of their country, many citing the Gongadze
case as a principle reason.

Nearly a year after the murder, authorities have not made a single arrest.
Opposition activists often accuse them of bungling cover-ups, including
several attempts to declare the case 'solved' without any apparent evidence.

"We started in a democratic parliamentary republic, but now we live in an
autocratic presidential state," said Makeyev.

The Council of Europe, a club of democracies, has threatened to revoke
Ukraine's membership and the United States has cut aid, citing concerns over
press freedom and democracy.

The chill in relations with the West pushed Ukraine, which spent most of the
last decade balancing the opposing currents of Russian and Western influence,
back into Moscow's embrace.

Without apparent irony, Russian President Vladimir Putin flew to Kiev to
participate in the independence festivities.

"I feel as if we were back to the good old Soviet Union. The Russian master
comes to his Ukrainian province and we are eager to show off," said Tatyana,
46-year-old teacher. "I won't celebrate. I will go and dig potatoes at my
dacha."

********

#7
Date: Wed, 22 Aug 2001
From: Lera Korchagina <korchagina@imedia.ru>
Subject: Re: 5405-Stephen/Moscow Poison Map

Contrary to widespread belief, fuel in Moscow is largely unleaded and
has been so for quite some time.
I drive a Russian-made LADA, that has a big warning sign on it:
"Unleaded fuel only" it reads.
True, there are serious problems with pollution including the
pollution that comes from cars. However, air in Moscow is actually
better than it used to be during the Soviet times when Moscow was
also a major industrial center and produced everything including guns
and parts of submarines.
And finally, one shouldn't really expect to have a large capital to
have all the perks of a very big city but also combined with Alpine
air. Should one?

Regards
Valeria Korchagina
Staff Writer
THE MOSCOW TIMES

*******

#8
From: John Squier <Johns@NED.ORG>
Subject: 5404/Dolan re: retrospectives
Date: Wed, 22 Aug 2001

In her comments on retrospectives on the collapse of the USSR, Kitty Dolan
says that "a perusal of all this material leads to the interesting
conclusion that no one is very happy with the outcome." I have to say that,
thinking about what Russia was like fifteen years ago--the first time I went
there--makes me personally quite happy with the outcome, thanks! I remember
the entire country seeming impoverished and frightened--huge long lines for
even the most ordinary food and consumer items and people who were reluctant
to have even the most trivial conversation with me because I was a
foreigner. These memories are relatively pleasant ones. I have Russian
friends who remember getting ten years' hard labor for having the wrong
books or saying the wrong thing too loudly.

Now, don't get me wrong. Right off the top of my head, I can think of a
long list of things that should have been done differently. We all could,
and most of us would be right about what's wrong with Russia. But we should
not ignore the enormous progress which has been made. Soviet Communism,
which to my mind is right up there with cold fusion and the theory that HIV
is not the cause of AIDS in the pantheon of profoundly stupid
twentieth-century ideas, is dead. Dead, dead, dead. Not even the most
pessimistic scenarios imagine that Russia will turn completely back into a
totalitarian society, that a revived Soviet Union will re-conquer the
Baltics and Eastern Europe, that a new Cold War will break out. Recent
backsliding notwithstanding, Russia is freer, more open to the outside
world, and even in many ways more prosperous than it ever was under Soviet
Communism. It will take a lot of authoritarian backsliding and economic
bungling before things get to be nearly as bad as they were when I was a
college student.

John E. Squier
Program Officer for Russia and Ukraine
The National Endowment for Democracy
1101 Fifteenth Street NW, Suite 700
Washington, DC 20005
(W) 202-293-9072
(F) 202-223-6042

*******

#9
Date: Wed, 22 Aug 2001
From: Tom_Moore@armed-services.senate.gov (Tom Moore)
Subject: Am I the only the person who saw it?

I grow very tired of the constant din of Missile Defense opponents
who cite the recent agreement of friendship between the Russian
Federation and the PRC as a response to US testing of a ground-based
interceptor and other defensive technologies.

I would refer all of you to the very clear statement from Putin
last July:
"As for a possible answer, a joint answer of Russia and
China, to the US withdrawal from the 1972 ABM treaty, every
state determines for itself what to do and how. It is
possible in theory. In practical terms, Russia is not
planning any joint actions in this sphere with other
states, including China." (JRL #5354)

It has not been a contention specifically cited here on JRL
(lately), but I feel the above needs repeating. Given Putin's
statement, any argument that we have somehow driven them closer
together is purely based on perceptual interpretation, which is of
course a far cry from fact.

*******

#10
Russian Audit Chamber chief says fight against corruption yields results
ITAR-TASS

Panama, 23 August: Russia has put an insurmountable barrier to corruption,
Russian Audit Chamber Chairman Sergey Stepashin declared here on Wednesday
[22 August]. According to him, tangible results have been yielded by active
efforts made over the past 18 months.

Stepashin was addressing the 11th general assembly of the leaders of the
controlling and audit bodies of Latin American and Caribbean countries which
is taking place in the Panamanian capital.

He said in a report about the struggle waged against corruption by the
Russian Audit Chamber that "while the conceptual approaches to combating
corruption are the same in all the world, the forms and methods of countering
this dangerous phenomenon differ from country to country depending on their
specifics".

Stepashin said that "the corruption issue in modern Russia should not be
overestimated" judging by the growing effectiveness of the struggle against
it. He said his optimism was fed by the fact that "at the level of the
country's top political leadership, the president and the government, a firm
line has been adopted that combines stronger government control methods with
the simultaneous liberalization of the economy and greater transparency of
financial flows".

*******

#11
Financial Times
23 August 2001
Russian bank chief hits at government policy:
Economic programme 'not properly thought through', says Gerashchenko
By ROBERT COTTRELL

The tenth anniversary of Russia's August 1991 putsch is provoking a tide of
reminiscences and reflections from public figures.

Yesterday it was the turn of Victor Gerashchenko, now governor of the central
bank, who gave a long interview to the newspaper Kommersant. It was
remarkable less for its historic content than for its robust critique of
government policy, considered unusual for a central banker.

"The sense of democracy and freedom we have today comes at too high a price
for the majority of the people," Mr Gerashchenko said. "The people worry
about a limited number of things - and they don't include the exchange rate
or the inflation rate. Will there be work? What about health care? Who will
pay the pensions?"

"I don't think we have a properly thought-through economic policy," he
continued. "We busy ourselves with structural reforms in the economy. And to
what end? What do we want to achieve?"

As for his own forecasts, he had only one firm offering. "In the next 10
years, I am going into retirement," he said. "I guarantee that."

After yesterday's interview, many will put the timeframe somewhat shorter.

Mr Gerashchenko regained his job as central bank governor - which he had lost
in 1994 - after the Russian financial crash of August 1998. Memories of that
event are vying this week with recollections of the putsch.

Yesterday the popular weekly, Argumenti i Fakti, invited Sergei Dubinin, the
previous central bank governor, and now deputy chairman of Gazprom, the
state-controlled gas monopoly, to recall events.

According to Mr Dubinin: "All the time from October 1997 to August 1998 we
were trying not to panic, trying not to let the press know what was going on.
At any moment a single word could have brought the house down - and it did."

Lacking the money both to service its domestic debt and to prop up the
rouble, Russia decided on August 17 to stop doing either. It defaulted on
Dollars 40bn of Treasury debt, declared a moratorium on foreign commercial
debt, and abandoned the rouble to a four-fold devaluation.

The way Mr Dubinin tells it, nobody was to blame - except perhaps George
Soros, the US-based hedge-fund investor, who called for a rouble devaluation
in a letter to the Financial Times the week before the crash. That frightened
off foreign investors, set the rouble wobbling, and so caused a nervous
Russian public to dump roubles for dollars.

A darker view of events is given, also in Argumenti i Fakti, by Yuri
Skuratov, Russia's chief public prosecutor until his sacking in 1999. Mr
Skuratov tried to investigate the fate of Dollars 4.8bn that the
International Monetary Fund lent to Russia in July 1998, and which the
central bank insisted was used to prop up the rouble.

Mr Skuratov backs the critics who say most of the hard currency never reached
the Russian market. It was sold to a handful of Russian and foreign banks at
special rates, he says. The banks parked the money outside Russia, used some
of it to reimburse favoured clients, and kept the rest of it for themselves,
he states.

As to why the Russian government issued so much domestic debt at cripplingly
high interest rates, Mr Skuratov has a strictly non-economic explanation. "It
happened because of lot of officials responsible for financial policy were
playing the debt market themselves," he says. He names three senior ministers
of the day, six vice-ministers, and two relatives of President Boris Yeltsin
as examples.

Mr Dubinin insists he did not play the debt market. But those who did broke
no law, he says. "The law says a civil servant cannot engage in commercial
activity, but he is allowed to buy government securities."

Overall, in Mr Dubinin's view, "you can argue there was ineffective
leadership at the central bank, but there was no criminality."

*******

#12
Argumenty i Fakty
No. 34
August 2001
GLEB PAVLOVSKY: RUSSIA AT THE PEAK OF STABILITY
A civil society is starting to emerge, and Putin is its leader
Author: Tatiana Netreba
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
AN INTERVIEW WITH POLITICAL CONSULATANT GLEB PAVLOVSKY, KNOWN FOR HIS CLOSENESS TO THE KREMLIN. HE DISCUSSES THE BALANCE OF FORCES IN THE DUMA AND THE POSSIBILITY OF AN EARLY ELECTION. HE ALSO COMMENTS ON BORIS BEREZOVSKY AND PUTIN'S PROSPECTS FOR THE PRESIDENTIAL CAMPAIGN IN 2004.

Question: Rumor has it that you recently sent a memo to the
president on the need for early parliamentary elections...

Gleb Pavlovsky: I have never concealed my point of view on this
issue. We are running out of time if we want to prevent another
overlap of presidential and parliamentary elections. They have
overlapped since 1995-96. The presidential campaign is launched when
the parliamentary campaign is not yet over, and together they last
more than a year. Instead of ideas and concepts, the nation spends the
whole year studying popularity ratings. All this makes the
parliamentary elections a period of hysteria.

Question: Does the president agree with your opinion?

Pavlovsky: His words about political stability as the top
priority indicate that he is aware there is a problem. Russia is at
the peak of political stability now. No one wants to jeopardize
stability, and elections are always a crisis.

But stability is not only jeopardized by crises. Successes
threaten it as well. Continued economic growth whets the appetites of
forces which naturally enough will want more and more from Putin. This
is bound to affect the interests of pensioners and other social groups
which are dependent on the budget, another component of the pro-Putin
majority. A conflict of interests within the majority is inevitable,
and the president has a choice. Either he can act to end this period
of political calm and steer it in the direction he wants; or he can do
nothing, and wait for circumstances to end the period of stability.

Question: But surely a political crisis is needed to call an
early parliamentary election. Duma deputies themselves are unlikely to
take any initiative implying dissolution of the Duma.

Pavlovsky: Yes, most members of parliament would prefer to make
the most of their time in the Duma, and would not want their terms
interrupted. All the same, a spontaneous crisis in the lower house is
likely. It may happen, for example, when the Duma discusses next
year's budget. The Cabinet is stronger now than it was a year ago. I
do not think it will tolerate any Communist dictates on the matter of
the draft budget.

Question: But what if the Communist faction emerges stronger and
larger from an early parliamentary election - while Unity, on the
other hand, fails?

Pavlovsky: Strength and weakness of political parties exist only
in the heads of the voters. These days, a pro-presidential coalition
does not need popularity ratings or state resources. The citizenry
values what Putin has given it - peace in society, moderate
prosperity... And what can the Communists offer?

Question: Could you please describe the correlation of forces in
the political arena on the eve of a parliamentary election?

Pavlovsky: The power coalition centered around Unity and the
Union of Right Forces takes up a major part of the political arena. On
the one hand, this coalition depends and relies on moderate voters. On
the other hand, it relies on assertive groups of people who are sure
of their potential and therefore demand action from their leaders...

As for Yabloko and the LDPR, they are unstable. Their electorates
are too amorphous. As I see it, Vladimir Zhirinovsky may actually
disband his party to have it absorbed by a large coalition. This would
make our parliament much less picturesque, but more European. As for
Yabloko, it will not get any seats in the next Duma if it keeps on
waiting for a war, a drought, or a disaster as usual. Or it may shift
into the niche currently occupied by Zhirinovsky and Co.

The Communist Party will remain alone on the left of the
political spectrum.

At the same time, the demand for a so-called civilized left and
social democrats has been growing. I'm not sure at all Gennadi
Seleznev and his Rossiya movement will fit the niche.

Question: What would you say this year has been like for Putin?
What dangers or political pitfalls await him in the new political
season?

Pavlovsky: Putin has ensured Russia's independence. It took the
Kursk disaster to do that. But this stress was necessary for the
president and for the elites that form the state. Politics is becoming
more sober. In my view, some shoots of a civil society are emerging,
and Putin is its leader.

At the same time, there is no guarantee at all about Putin's
political lifespan as leader. Remember how everyone was so very
grateful, first to Gorbachev and then to Yeltsin? And what happened
next...

Question: Boris Berezovsky has promised to form a substantial
opposition by this autumn, and even to topple Putin from power. What
do you think of his threats?

Pavlovsky: Berezovsky's major problem is that he's so
predictable. This is not his first threat of this kind.

Question: When would you say the Kremlin should begin
preparations for the presidential campaign - and who might challenge
Putin in the next presidential race?

Pavlovsky: The next parliamentary-presidential campaign begins in
February 2003, and the presidential campaign as such begins in
November 2003. It is this situation that costs Putin's presidency
almost a year. And the eighteen months that remain will be too short a
time to achieve everything the president has planned.

I do not expect any revolutions in 2003 or 2004. Putin has no
significant rivals among the group of people who usually run for
president. All the same, the problem does exist. External interference
in the election campaign will pose a serious threat to Russia. Putin
has become an international-caliber politician. I think the West will
try to find a politician or two in Russia to support in the next
presidential race. Berezovsky was careless enough to say that a rival
for Putin is being sought among the regional elites. Such a candidate
might act on behalf of the several regions, allegedly "promoting the
interests" of the Urals or Siberia. Neither do I rule out the
possibility that a more controllable leader will be offered to the
pro-Putin majority...

*******

#13
Ekspert
No. 30
August 2001
WHAT AWAITS PUTIN ON THE ROAD OF LIBERAL REFORMS
The new political year opens: What will it mean for President Putin?
Author: Aleksei Makarkin
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
OUTWARDLY, PUTIN'S POLITICAL REGIME IS STABLE; BUT THE CIRCLE OF HIS
SUPPORTERS WHO UPHOLD RADICAL REFORMS IS SMALL. HE CANNOT RELY ON THE POLITICAL PARTIES OR THE SECURITY SERVICES. PUTIN HAS CHOSEN TO PURSUE RADICAL LIBERAL REFORMS, AND NOW HE MUST GAIN PUBLIC SUPPORT FOR THEM.

Russia and the rest of the world finally learned the answer to
the question "Who is Mr. Putin?" in the political year just past.
Putin has made his political choice: right-wing liberal reforms. It
seems that the upcoming political year will be restricted to power-
struggles between the advocates and opponents of these reforms.

Throughout Russia's history, liberal reformers have never had the
respect of their compatriots. Mikhail Gorbachev gained only 1% of the
vote in the presidential race of 1996. And take the attitude of most
Russian citizens and the elite toward Boris Yeltsin: his decision to
step down generated a broad spectrum of responses - from the
enthusiasm of the majority to the distress of an insignificant
minority.

Vladimir Putin is surely aware of the political fates of his
predecessors.

Hence the question: why would Putin opt for the path of reforms
in its most radical form? The answer is quite simple. He had no real
choice in the matter. Solutions to the long-term problems
(modernization and development, catching up with the rest of the
world), medium-term problems (debts, technology, and demography), and
urgent problems require common rules of the game for everyone: more
liberal laws, and a more active civil society.

Gorbachev and Yeltsin rose to the top with the support of broad
coalitions. Those coalitions started to break apart as soon as the
national leaders initiated liberal reforms. It certainly seems that a
similar process may begin with the pro-Putin coalition during this
political year.

The elites whose interests were threatened during the Yeltsin era
play one of the leading roles among the groups and strata that support
Putin. They include the security structures and politicians from
Baburin to Podberezkin, alert enough to have displayed their loyalty
to the Kremlin.

Former members of parliament may be safely ignored these days
(after all, their role in big-time politics is purely instrumental;
they only have to remain close by in order to enable the regime to
unseat Gennadi Zyuganov), but the security structures and their
representatives require more subtle handling and closer attention. It
is widely thought that Putin is the favorite of the security
structures. In fact, he can rely only on a rather small group of
people from St. Petersburg, comprised of his old friends and
acquaintances. All the rest of the security structures back the
president as long as he doesn't encroach on their collective
interests. These interests were threatened in the past political year
- not to any great extent, but nevertheless - and there is every
reason to expect the process to continue soon.

Let's start with the Interior Ministry. New Interior Minister
Boris Gryzlov eliminated the regional organized crime directorates,
the elite of the Interior Ministry, whose positions had grown stronger
under Gryzlov's predecessor Vladimir Rushailo (who established the
regional organized crime directorates in the first place).

Nikolai Bobrovsky has become head of the Crime Police Service,
the key structure of the Interior Ministry. Bobrovsky comes from St.
Petersburg, where he had made his career within the KGB, the perennial
rival and antagonist of the police force. Gryzlov initially intended
the post for Alexander Dementiev, a career police general, but the
Kremlin apparently had different plans for the structure which is in
charge of the crime police main directorates, handling economic and
organized crime.

The Defense Ministry situation is no less complicated. When Putin
had only just taken office, many senior officers in the Defense
Ministry congratulated themselves and each other on finally having
"their" president in the driver's seat. A number of Putin's moves
seemed to reinforce this idea: he untied the army's hands in Chechnya,
and encouraged plans to rebuild the navy. Then the Kursk disaster
dispelled all illusions. At his news conference which coincided with
the culmination of his first political year, Putin was sharp with a
hapless journalist from Astrakhan who expressed a longing for the good
old days when the Russian navy sailed the oceans. Needless to say,
this nostalgia fully shared by Russian admirals.

The missile forces have their own problems. They have always
regarded the Anti-Ballistic Missile Treaty of 1972 as a kind of icon.
Neither Gorbachev nor Yeltsin managed to get the icon off the wall.
These days, Russia has only two options with regard to the ABM treaty:
bargain for some kind of settlement, or watch the United States
withdraw unilaterally. In other words, Moscow may exchange the old
treaty for more drastic cuts in nuclear arsenals (the Americans do not
object) and, for example, abolition of the Jackson-Vanick amendment.
The situation will be resovled one way or another this autumn; but the
military will not like the abolition of the ABM treaty. On the other
hand, the Kremlin may keep to its present stand on the issue, and risk
jeopardizing the whole system of strategic partnership with the United
States. So it is reasonable to expect the bargaining to end in a
compromise - for instance, at President Bush's Texas ranch. All this
will be followed by reminiscences about how such things were done
under Gorbachev and Yeltsin. After all, START II was ratified under
Putin - after a lengthy battle.

As for the conventional forces, they must like the fact that the
hostilities against Chechen separatists are dragging on. Moreover, the
carte blanche the security structures were given in Chechnya is about
to be revoked. Search operations incur the wrath of prosecutors, and
the local authorities can now appeal directly to the federal
government. Despite the military's clear displeasure, these opinions
and complaints are occasionally heeded.

The prosecutor's office has even more reason for frustration than
the Interior Ministry and the military. The new Criminal-Procedural
Code strips prosecutors of a great many prerogatives - the right to
issue arrest warrants, search warrants, confiscation, and so on. The
prosecutor's office helped the president so much in the "Vladimir
Gusinsky case" - but now it is to lose its status of a super-agency.
All attempts to defend its prerogatives under the slogan of a more
effective fight against crime have failed to impress the president.

The situation with the Federal Security Service (FSB) is more
complicated. At first sight, the FSB enjoys advantages and privileges
other security structures do not have. But... The logic of the reforms
cannot bypass the FSB. The president has already indicated a certain
distance between himself and his former colleagues on some occasions,
doing so tactfully and unobtrusively. At the abovementioned news
conference, he disassociated himself from the information security
doctrine drawn up by the Security Council and FSB specialists.

It is also important that like three-fourths of the population of
Russia, all security structures the FSB included follow the Old
Testament principle of an eye for an eye. Unlike them, the president
has advocated abolition of capital punishment. The Duma will have to
ratify the appropriate European protocol this political year. The FSB,
hunting down terrorists, is not going to like it.

All these collective "inconveniences" are compounded by a certain
psychological effect which will surely annoy the security structures.
The president has opted for a dialogue with the big business groups
integrated into the Russian Union of Industrialists and Entrepreneurs.
It follows that the "anti-bourgeois" ideology so popular with the
middle and upper echelons of the security structures will be rejected
by Putin.

"Reconciling the irreconcilable" therefore becomes the
president's top priority for the new political year. It means Putin
will have to implement the reforms while carefully playing down and
smoothing out the discord within his coalition, primarily the
dissonance between the generally liberal nature of the reforms and the
specific mentality of the security structures. Gorbachev failed here.
Yeltsin was relatively successful only because he drove the security
elites out to the margins, and never touched them. For Putin,
Yeltsin's model of dealing with the security structures is
unacceptable. At the same time, he will do his best to avoid following
in Gorbachev's steps.

By setting his course for radical reforms, the president made it
plain that he did not want any far-reaching compromises with the
leftist political forces. So it is only logical for the Communists to
demonstrate their oppositional stance.

Putin has refused to make concessions to the Communist Party on
virtually all the major issues to be handled in the new political
year. The pro-Putin majority in the Duma voted for the Land Code and
Tax Code despite bitter objections from the Communists. Moreover, the
president made it clear that he would like to see the Communist Party
renamed as social-democratic, something Zyuganov and Co. cannot afford
to do - because many Russian citizens vote for the label, not for
Zyuganov as such.

At first sight, the Communists' refusal to accept the president's
policy and course should not worry Putin too much. The left electorate
did not vote for him in the presidential campaign. It backed Zyuganov.
At the same time, Putin got 52% of the vote; while polls show that his
policies have 65-75% support. The difference is there for all the
world to see. It follows that the left electorate is a major
contributor to Putin's presidential approval rating. If the president
challenges the Communist Party openly, this element may diminish.

Gubernatorial elections in the Russian provinces show that the
Communist Party remains a force to be reckoned with. Four communists
have been elected as regional leaders over the last twelve months - in
the Kamchatka autonomous district and the Kursk, Ivanovo, and Nizhny
Novgorod regions. The Communist Party has monopolized the left of the
political spectrum. In the new political year it is bound to continue
its struggle for the protest vote, people who are frustrated by rising
prices and apprehensive about planned reforms to housing and
utilities.

Unlike the Communists, the right lacks a coherent and clear-cut
political position. They are trying to maintain a precarious balance
between loyalty to the regime and criticism of the less liberal
aspects of its actions. This explains the regime's attitude toward
them. It seems that the Kremlin has not yet made up its mind on
whether it should continue the political experiment with Mikhail
Prusak's party or continue its relations with Boris Nemtsov.
Unfortunately, every now and then Nemtsov recalls his harebrained plan
for resolution in Chechnya and tries to force it on the regime.

The center as a real political force does not exist in Russian
politics. Unity has branches in all Russian regions, and rapprochement
of Power Party 1 (Unity) with Power Party 2 (Fatherland) will continue
this political year. The People's Party of Russia is being formed on
the basis of the People's Deputy group in the lower house.
Unfortunately, the center's potential at this point is restricted to
"correct voting" on reformist bills. Centrist parties are too weak,
and cannot mobilize the masses to support the reforms or assist the
authorities in their relations with the elites.

It means that the president will not be able to rely on the
structure of political parties in the new political year when the law
on political parties is adopted. The only truly powerful political
party, the Communist Party, condemns the very idea of the reforms; and
the remaining parties cannot become a solid foundation for the
president to rely on, for a number of reasons.

Outwardly, Putin's political regime is stable; but the circle of
his supporters who uphold radical reforms is small. A small team of
liberal economists and lawyers, plus several "comrades in arms", and
that's all.

Does this mean that the reforms will inevitably lead Putin into
political isolation? No. As a reformer, Putin does have a chance. His
reforms may get mass support outside the traditional institutions -
the parties, the parliament, and the security structures.

The coming political year is meant to give at least a preliminary
answer to the question whether the Kremlin can succeed in getting the
most active social groups to approve of the reforms. It is these
groups that should become the foundation on which the liberal reforms
will rest.

Nothing is known as yet about the form this support will take.
Gorbachev never discovered it, because of his obsession with the
hopeless idea of reforming the CPSU. Moreover, the people promptly
gained an alternative - Yeltsin - who immediately won the support of
the most active social groups, who did not want to live under even the
most humane and democratic socialism. Gorbachev was a stranger to the
security structures, and did not understand them. Putin knows all
about the security structures. If anyone can correctly gauge their
readiness - or lack thereof - to fit the context of the reforms, Putin
can.

There are no real alternatives to Putin. No such alternatives are
likely to appear in the coming political year. It follows that the
president does stand a chance of retaining the support of the majority
of the population. All he has to do is find a way of doing so. It
seems that this is what the presidential team will be doing in this
political year.

******

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