Johnson's Russia List
#6406
16 August 2002
davidjohnson@erols.com
A CDI Project
www.cdi.org
[Contents:
1. The Times (UK): Clem Cecil, Russians discover taste for Soviet chic.
2. The Times (UK) editorial: Soviet chic. A generation yearns for the bad
old days.
3. Moscow Times: Michele Berdy, Three Sartorial Generations of New Russians.
4. BBC Monitoring: Russian ex-president writes a new book, set to live
long -
governor. (Ayatskov and Yeltsin)
5. Interfax: One-third of Russians against country's military actions in
Georgia - poll.
6. Luba Schwartzman: ORT Review.
7. Nezavisimaya Gazeta: Andrei Vaganov, HEAVY DRINKING. Alcohol consumption
rating for the Russian regions.
8. Washington Post: Peter Baker, Putin's Concessions To U.S. Are Limited By
the Bottom Line. Russia Unyielding on Iran Nuclear Project.
9. BBC Monitoring: Russian politicians, artists appeal to Putin over
anti-Semitic TV programme.
10. RIA Novosti: ZHIRINOVSKY CONFIRMS CAR ACCIDENT OUTSIDE BOSTON.
11. Moscow News: Andrei Stepanov, Living without Secrets. Moscow city
authorities want to have the lowdown on each Muscovite.
12. Moscow Tribune: Stanislav Menshikov, PUTIN AND GOVERNMENT AT CROSS
PURPOSES. Praying to different Gods.
13. Reuters: Russian firms rush into IPOs, analysts sceptical.
14. Trud: Sergey Turanov, LEADERS OF RUSSIAN BUSINESS. Update on who's who
in the Russian business world.
15. Kommersant Vlast: WHAT LIES IN STORE FOR THE RUSSIAN GOVERNMENT?
(re Oleg Deripaska and Gref)
16. Russia Business List/Euromoney: Ben Aris, Russia's Chaebols.
17. AFP: Russian mafia extends tentacles across the globe.
18. Interfax: Russia cannot make more concessions in WTO talks.
19. Interfax: Russia's military spending to soar by nearly 50% in 2003.]
********
#1
The Times (UK)
16 August 2002
Russians discover taste for Soviet chic
From Clem Cecil in Moscow
LONG live grandfather Lenin! Russia is reliving the Soviet era through
fashion and a wave of nostalgia. The reopening of a communist-era beer bar
in central Moscow, with waiters in USSR T-shirts, signals the trend for
Soviet chic.
It has taken a mere ten years for Russia to stylise its past. Teenagers who
barely remember communism have transformed Lenin’s legacy into retro
fashion, donning their dads’ USSR T-shirts.
The fashion designer Denis Simachev heralded the craze by creating shirts
with Soviet emblems last autumn. In Paris this year his models’ T-shirts
bore portraits of President Putin framed in flowers, echoing the Stalin
cult of personality.
Mr Simachev fitted out the waiters at the Zhiguli beer bar with their
T-shirts while the cleaners wear housecoats and headscarves, evoking
memories of the Soviet babushka.
Zhiguli, named after the Soviet Union’s cheapest beer, was one of the most
popular bars in the 1980s, a place where non-party youth could drink, as
long as they could afford a five-rouble entrance bribe to the bouncer.
“People miss some things about the old times, and this bar is one of them,”
says Yuri Kabargin, manager of Zhiguli. On Friday nights the bar is heaving
with young and old, drinking beer and listening to records of popular
Soviet songs such as Railway Ticket to My Childhood.
Many older Russians relish souvenirs of their childhoods. Portraits of
Lenin sell like hot cakes in the Moscow antique shop, Roza Azora. The shop
specialises in Soviet memorabilia. Here the nostalgic can find mugs with
the portrait of the astronaut Yuri Gagarin, busts of Marx, and the red
headscarves once worn by young Communists. One customer, Elena Kulikova,
42, said she found having a picture of Lenin in her sitting room “pleasant
and soothing”.
*******
#2
The Times (UK)
16 August 2002
Editorial
Soviet chic
A generation yearns for the bad old days
Lenin smiles down, bald and malign; the cleaners, drab in headscarves and
downtrodden mien, scrub and mop; the waiters give a passable impression of
idle malevolence, slopping down the plates and badmouthing the customers.
Moscow is rediscovering Soviet chic, and the Zhiguli beer bar is thriving
on it. A decade after the collapse of communism, the Russians are yearning
nostalgically for the foibles and frustration, the slogans and stupidities
of a system that was built on fear, ran on hypocrisy and fell apart amid
cynicism and ridicule.
Young Russians do not remember the era. The moment the Soviet Union broke
apart, an iron curtain descended over the past, as an elder generation,
used to leaders suddenly turning into Orwellian non-persons, dropped an
entire system into the memory hole. Anatoli Chubais, architect of Russia’s
privatisation, tells of a friend’s 17-year-old son watching newsreels of
Brezhnev woodenly addressing party gatherings. “You mean this man was
really President for 17 years?” he asked incredulously. “How stupid you
were to keep electing him.”
But Russia misses the jokes. Dictatorships need safety valves, and
political jokes were never funnier than when they were taboo. Arguably
Lenin’s legacy was destroyed long before 1991 by the ridicule heaped on his
doddering successors. And it is human nature to laugh at former misery,
rejoicing at the ability to rise above the awfulness. With the jokes go the
kitsch — the red Pioneers’ scarves, the tired slogans, the busts of Marx
and the adulation of Yuri Gagarin, symbol for a generation of Soviet man
who, if only briefly, triumphed over the Americans.
Nothing is as subliminally nostalgic as scents and sounds. There was a
distinctive, acrid-sweet smell to the Soviet Union that would betray the
presence of Russians even in groups abroad. And the music — the obligatory
Internationale, the clumping proletarian triumphalism, the heroic
soundtracks to all those war films. They all stopped in 1991, as suddenly
as when Soviet music was banned in China in the Sixties after the two
communist giants fell out. Even now, a generation of Chinese cannot hear
the tunes of their youth without tears. Even in Brezhnev’s day Russians
were sentimental for the music of harsher times — the songs of the Gulag
that Vysotsky sang.
There is little that is romantic about deprivation, but it can intensify
memories of shared experiences. Older Britons were nostalgic for the war
years, and Dad’s Army profited. Older Russians remember the days when they
too were deemed a superpower. And if the symbols are watery beer, baggy
clothes and sloppy service, any enterprising restaurant can recreate the
atmosphere.
*******
#3
Moscow Times
August 16, 2002
Three Sartorial Generations of New Russians
By Michele A. Berdy
Novye Russkiye: New Russians -- entrepreneurs and businessmen differing in
style and income from the "old Soviet" model; very wealthy, often through
illegal or dubious means.
Where did all the New Russian jokes go? Are they just not funny anymore? Or
maybe New Russians aren't funny anymore. In the fast-forward of post-Soviet
history, New Russians change every few years. Remember the first crop? Guys
in maroon polyester jackets, with gold necklaces so heavy the ocean liner
Queen Elizabeth II could use them for ballast, and a tendency to cross the
line between more-or-less legal and outright fraud. Prikhodit v nash
yuvelirny kakoi-to Novy Russki -- kanaet, pokazyvaet pachku zelyonykh, i
khochet kupit samy dorogoi persten (This New Russian comes into our jewelry
store, swaggering, flashing a wad of greenbacks, and wants to buy the most
expensive ring in the store).
The second batch had a bit more polish: gray suits, smaller chains, but the
same love of spending money. Nepriyatno bylo s nim obshchatsya. On vsegda
paltseval (I didn't like hanging around with him. He was always playing the
Big Shot). U nego dzhentlmenski nabor Novogo Russkogo -- Mers, zolotoi
krest i yevroremont. (He had the usual for a New Russian: a Benz, a gold
cross and European-style remodeling in his apartment.) These are the folks
who brought us biznes po-russki, business Russian-style, a blend of
illegality, absurdity and fraud. They made it hard for the other Novye
Russkiye -- the hard-working ones, who left their research institutes to
open their own shops and production companies -- to do business. And harder
still for them to do business with foreign investors, who thought that
anyone in a decent business suit was a crook. By the late '90s, Novye
Russkiye were a spectrum, not a type.
The newest Novye Russkiye are indistinguishable from their Western business
partners, complete with: kostyum ot luchshego londonskogo portnogo,
"diplomat," zolotye chasy (a suit from the best London tailor, an attache
case, gold watch). (Note that a diplomat in Russian is a hard-sided attache
case; a soft leather case is called a portfel.) They've given their Benzes
to their fathers and now drive Jeep Cherokees. But there's still a bit of
flash: They've gotten bored with the yevroremont in their city apartments
and have abandoned them for their kottedzhi. Nothing could be farther from
a "cottage," which implies a cozy little country house. These are better
translated as "country homes," "country estates" or even "mansions." And
since they've still got money to burn, they build them for their relatives
too. A building foreman once described his latest client: "On stroil sebye
ogromny kottedzh -- tselaya rota mogla tam zhit i drug druga ne videt. A
potom poprosil menya postroit kottedzh pod klyuch dlya svoyei tyoshchi. Nu
i nu! U bogatykh svoi prichudy. " (He built himself a huge mansion -- an
entire company could live there and not see each other. And then he asked
me to build a "ready to move in" cottage for his mother-in-law. I'll be
damned! Rich people have the strangest habits!)
By the way, other countries in the former Soviet Union have their own
home-grown versions of New Russians: Novye Belorusy, Novye Ukraintsy. In
Kazakhstan they have them too, only there the local wits have named them
Kazanovy.
Michele A. Berdy is a Moscow-based translator and interpreter.
******
#4
BBC Monitoring
Russian ex-president writes a new book, set to live long - governor
Source: TVS, Moscow, in Russian 1700 gmt 15 Aug 02
[Presenter] The first president of Russia, Boris Yeltsin, returned to Moscow
today after a 10-day vacation in Saratov Region. He was holidaying in a
residence on the bank of the River Volga, usually used by Saratov governor
Dmitriy Ayatskov. This is what Ayatskov has said.
[Ayatskov, speaking at a press conference] What I am telling you is a secret.
He is writing a book. He reads very much. He goes to bed at about midnight
and gets up at six a.m. He observes a strict diet. He set a goal for himself
to live long. He eats little and lost 24 kilogrammes. It's impossible to
catch up with him when he walks. I could not catch up with him during a
walking tour to the Dalniy island.
[Presenter] The island mentioned by the Saratov governor is located near his
out-of-town retreat in 40 km from Saratov, near the well-known Cherdym
resort. Ayatskov said that Yeltsin liked the place. He was fishing, hunting
and playing billiards. In the evenings he sang modern songs and the songs of
the 1950s and 1960s together with his wife. Ayatskov also said that Yeltsin
was planning to travel a lot in Russia and abroad. "I want to see the real
world. I visited 69 countries, but I don't remember anything except official
meetings," Ayatskov quoted Yeltsin as saying.
[Video shows the Volga]
*******
#5
One-third of Russians against country's military actions in Georgia - poll
MOSCOW. Aug 15 (Interfax)- Thirty-seven percent of Russians say that Russia
should not launch any military actions in Georgia, while 25% believe that it
is possible only if Georgia's authorities give their permission. Twenty
percent of those polled said that military actions should take place on
Georgia's territory irrespective of Georgina authorities' position.
This data was unveiled on Thursday by the Public Opinion Foundation after
a nationwide poll conducted on August 10, 2002 among 1,500 people.
Russia's politicians have recently been discussing the possibility of
holding a military operation against Chechen rebels and foreign mercenaries
in Georgia's Pankisi Gorge. Russian Defense Minister Sergei Ivanov suggested
that Georgia itself would not be able to resolve this problem. For their
part, Georgia's authorities said that they intent to tackle the problem on
their own.
*******
#6
ORT Review
www.ortv.ru
Compiled by Luba Schwartzman (luba_sch@hotmail.com)
Research Analyst, Center for Defense Information, Moscow office
HEADLINES,
Wednesday, August 14, 2002
- The court case concerning the kidnapping of Emily Garmin begins today in
the Federal Court of Ohio. The US embassy granted her mother, Lolita
Garmin, whose ex-husband is accused of the kidnapping, a visa after a
request from the Russian Foreign Ministry.
- Russian border guards destroy nets, and confiscate boats and equipment
from illegal fishers in the Caspian when they can’t catch the poachers
themselves.
- The large-scale military exercises along the Caspian have been completed.
One exercise rehearsed reaction to a vessel that catches fire.
- Presidential Plenipotentiary to the Southern Federal District Viktor
Kazantsev visited the Ingush settlement of Olgetti. He has taken the
restoration of the settlement under personal oversight. After the visit,
Kazantsev headed to Magasa, to conduct a meeting on the improvement of
economic efficiency in Ingushetia and the socio-economic development of
Ingushetia for the period of 2002-2006.
- Russian President Vladimir Putin met with Belarusian President Aleksandr
Lukashenko to discuss the conception of a united state and the creation of a
mechanism for united government. President Putin noted that much has
already been achieved in the sphere of economics.
- Special Presidential Envoy to Kaliningrad Dmitry Rogozin continues his
trip through the Kaliningrad Oblast. Today he met with the commanders of
the Baltic Fleet and with the Oblast’s government, and visited a checkpoint
on the Russian-Polish border.
- President Putin met with Interior Minister Boris Gryzlov to discuss
crime-fighting measures and the liquidation of the aftermath of the flooding
in the Southern Federal District.
- Anatoly Romanov, the head of the Security Department at the No. 2
Novoulyansk Correctional Facility, is on trial for dereliction of duty. The
Ulyanovsk Prosecutor’s Office finds him responsible for the February 2002
escape of 14 prisoners.
- A major fire at the Shtamp factory in Tula took 10 hours to quell.
Emergency Ministry officials report that there were no casualties.
- A festival of Japanese Culture began in Khabarovsk.
- The officers of the Daghestan special reaction forces and the helicopter
crews of the Federal Border Troops Service continue the search for Doctors
Without Borders mission head Peter Argan Erkal, who was kidnapped in a
settlement outside Makhachkala.
- The Russian Cabinet discussed the primary directions of the
monetary-credit policy for 2003.
- The Russian Orthodox Church celebrates the Transfiguration of the Lord’s
Cross.
- The International “Civilian Aviation 2002” Exhibit has opened at the
Domodedovo Airport; 80 aircraft from 19 nations will be on display.
- Fidel Castro, who is celebrating his 76th birthday, declared that he is
the happiest man in the world.
- Forests and peat bogs are on fire in the Novgorod Oblast. About 350
people and 90 pieces of mechanized equipment are employed in the
firefighting operation.
*******
#7
Nezavisimaya Gazeta
August 16, 2002
HEAVY DRINKING
Alcohol consumption rating for the Russian regions
Author: Andrei Vaganov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
IT IS AN OPEN SECRET THAT RUSSIANS DRINK A GREAT DEAL. HOWEVER, IT
IS STRANGE THAT THERE IS NO OFFICIAL DATA ON HOW MUCH ALCOHOL RUSSIAN
CITIZENS CONSUME. ONE RESEARCHER SAYS THE AVERAGE ANNUAL LEVEL OF
ALCOHOL CONSUMPTION IN 1970-1999 WAS 14.6 LITERS PER PERSON.
The National Alcohol Association (NAA) has released figures on
deaths due to alcohol poisoning for January-May 2002. Over the first
five months of the year 18,224 people died throughout Russia (against
16,858 people over the same period of last year). The Central federal
district recorded the most deaths, with 4,933 people dying there. The
Trans-Volga district was second, with 4,160 deaths; and the Siberian
district third, with 3,122; next was the North-Western district with
2,424; the Urals district with 1,722; the Southern federal district
with 1,074; and the Far Eastern federal district with 789 deaths.
The Moscow region has the highest number of deaths from alcohol
poisoning: 1,111 people (against 1,015 last year). The Perm region is
the second, with 864 (794 last year). In the Nentsk autonomous
district only one person died this year, against 17 in 2001. Just a
comparison: over less than two years of the first war in Chechnya,
35,700 people died, including civilians.
It is an open secret that Russians drink a great deal. However,
it is strange that there is no official data on how much alcohol
Russian citizens consume. According to Dr. Alexander Nemtsov, head of
the informatics and systems research department at the Moscow
Psychiatry Institute, the average annual level of alcohol consumption
in 1970-1999 was 14.6 liters per person. It is no coincidence that
even according to the official figures, there are 1,500-2,000
alcoholics per 100,000 people. Experts say the real number is three to
four times higher.
Sociologists found another very important pattern: deaths from
alcohol poisoning are closely connected with the suicide rate among
alcoholics.
Alexander Nemtsov noted, "The level of both phenomena fell during
the anti-alcohol campaign and sharply rose in the period of the market
reforms. From 1991 to 1994 the number of suicides rose 58.9% and the
number of deaths caused by alcohol poisoning grew by 236.5%."
An increase of one liter in average per capita alcohol
consumption adds eight male suicides per 100,000 men, and one female
suicide per 100,000 women. Overall, it makes 4.5 suicides per 100,000
people.
By the way, some researchers think that in Russia these rates
greatly depend on the social situation. For instance, what is the
explanation for the paradoxical situation in recent years: a
consistently high number of discontented people, but a low number of
people actively protesting? Alexander Kinsburgsky, Ph. D. in
Philosophy, say a possible reason may be that "social discontent is
expressed in various kinds of antisocial behavior, such as alcoholism,
crime, or suicide."
On way or another, the near future appears rather pessimistic.
Nemtsov says, "Unfortunately, we have to admit that the people of
Russia do not realize the scale of deaths due to widespread heavy
drinking, and consider it a natural process. That is the main thing
which kills hope."
(Translated by Arina Yevtikhova )
******
#8
Washington Post
August 16, 2002
Putin's Concessions To U.S. Are Limited By the Bottom Line
Russia Unyielding on Iran Nuclear Project
By Peter Baker
Washington Post Foreign Service
MOSCOW, Aug. 15 -- Over the last year, Russia has given the United States
most everything it could want. It watched quietly as U.S. forces moved into
Central Asia for the war on terrorism. It closed its own bases in Cuba and
Vietnam. It even stopped trying to block development of a missile defense
system and the expansion of NATO.
But in the new and refined relationship between former adversaries, Moscow
seems to have drawn a red line around one area: nuclear cooperation with
Iran. The reason: an $800 million check from Tehran, with more possibly to
follow.
The recent dust-up between U.S. and Russian officials over the issue during
meetings in Moscow demonstrated that the single most defining priority
governing President Vladimir Putin's foreign policy is economic. In making
concessions on strategic issues once unthinkable for a Kremlin ruler, Putin
has shown he expects an economic trade-off from the West and likewise has
evinced little willingness to budge in disputes with an economic cost to
Russia.
The same dynamic that has created headaches for U.S. officials worried
about nuclear proliferation involving Iran also stands to complicate the
Bush administration's stated goal of a regime change in Iraq. While
Washington would like to win at least private acquiescence from Putin for
the overthrow of President Saddam Hussein, Russia has even broader business
interests in Iraq's oil fields than it does in Iran's nuclear industry.
Putin's focus on economic matters, according to analysts, stems from the
belated recognition that Moscow no longer plays the same muscular role in
world affairs it once did. To restore its influence, Putin believes, Russia
needs to rebuild an economy that today is smaller than that of the
Netherlands.
"Economic policy is dictating all the other aspects of international
relations," said retired Russian Gen. Vasily Lata, who spent years
negotiating arms control agreements. "Putin sees the future of Russia a bit
further. He sees that without positive economic development, Russia has no
future."
With that in mind, Putin has spent little energy lately fighting the
geopolitical battles of the past. While it still rankles traditionalists
here that U.S. forces have been deployed to former Soviet republics in
Central Asia and that NATO will soon offer membership to former Soviet
republics in the Baltics, Putin evidently sees little practical gain in a
major confrontation. Likewise, once he accepted that President Bush was
determined to scuttle the Anti-Ballistic Missile Treaty of 1972, Putin
decided the issue was not worthy of rupturing the relationship.
At the same time, he closed an old Soviet military base at Cam Ranh Bay in
Vietnam and the eavesdropping post at Lourdes in Cuba, moves seen as
gestures to the West but decisions also driven by economics. Closing the
Cuba base alone saved an estimated $200 million a year.
"The Cam Ranh base was militarily useless because it was in such bad
technical condition," said retired Gen. Vladimir Dvorkin, a former leading
strategist in the Russian military. "To reconstruct it would have cost a
lot and it was even more expensive than the rest."
But as Dvorkin noted, "A lot of our military leaders didn't agree with the
decision." In fact, Putin's concessions collectively have generated
substantial resentment within a military establishment less focused on
economic factors.
And so far, Putin has been able to show few tangible benefits to justify
his policy to domestic skeptics. Hopes for early admission to the World
Trade Organization have faded so much that some Moscow analysts now believe
it will not even happen until after the next presidential election in 2004.
While many foreign investors are giving Russia a second look as a result of
the new political climate, the checks have yet to clear; direct foreign
investment decreased by 25 percent in the first half of this year.
Putin's policy is predicated on the idea "that concessions on military and
political issues may encourage economic cooperation, and that's wrong,"
Alexei Arbatov, one of the most influential members of parliament, said in
an interview. "That won't happen and he'll be left with little economic
cooperation and a very weak strategic position after selling out in a lot
of areas."
From the Russian perspective, the Bush administration has not come through
with the payoff Putin deserves. The most it has offered has been official
U.S. recognition that Russia now has a market economy, a designation even
Kazakhstan had already won.
The biggest symbol of Russia's disappointment has been the Bush
administration's failure to push Congress to lift Jackson-Vanik trade
restrictions. Under Jackson-Vanik, a Cold War-era law intended to punish
Communist countries for their repressive emigration policies, Russia must
still win an annual waiver to enjoy normal trading rights with the United
States -- something even China no longer must do, although it is still
governed by the Communist Party.
Bush aides had hoped to repeal that requirement, first last fall and then
by this spring's Moscow summit with Putin, but so far have gotten nowhere.
"America has gotten used to taking Russia for nothing," said Arbatov. "The
administration doesn't consider itself obliged to live up to its very small
commitments."
And so as the Americans come calling for more concessions, the Iran issue,
long a source of tension, has taken on heightened importance in Moscow.
Just days before a U.S. delegation was due to arrive last month to urge
Russia to halt nuclear cooperation with Iran, Putin's government released a
10-year plan for expanding its nuclear assistance to Tehran. Not only would
Russia complete the $800 million civilian reactor underway at Bushehr, it
would build five more reactors under the plan.
Such a program could be worth another $6 billion to $10 billion to Russia's
nuclear industry, depending on the estimate, or roughly equivalent to the
country's entire official annual military budget.
"If one were to calculate the cost of such a plan, it would be quite high,"
said Deputy Atomic Energy Minister Lev Ryabev. "I consider it very
important. These would be respectable, solid financial resources, fairly
beneficial contracts. Of course, we show interest."
The same economic interest motivates other Russian policies that concern
U.S. officials, such as arms sales to countries the United States considers
hostile. Russia, the world's No. 2 arms supplier, aggressively promotes the
sale of tanks, planes, ships and other powerful weaponry.
"Why do we do that? Because no NATO country buys our weapons," said Dmitri
Babich, foreign editor of the Moscow News. "The market for these people is
not with rich Western countries. . . . So where do they go to sell these?
They go to China, India and, at worst, Iran."
The recent American visitors, led by Energy Secretary Spencer Abraham and
Undersecretary of State John R. Bolton, tried to make the point that good
relations with the United States would ultimately be worth more.
"The real question they need to consider eventually is [whether this is]
penny-wise and pound-foolish," said a senior U.S. official. "Do they want
to do business with us or do business with Iran? In the long term it's very
shortsighted."
After Abraham and Bolton complained vigorously, Russian officials backed
off somewhat and described the Iran plan as merely a technical document,
hinting that there were disagreements about it within the government.
In an interview, Ryabev confirmed that his boss, Atomic Energy Minister
Alexander Rumyantsev, did not know about the document before it was
released. "It was coordinated but not at the top ministerial level," he
said. "That goes to show that this document is more of a procedural
direction rather than one of concrete agreements for implementation."
Asked if Prime Minister Mikhail Kasyanov signed it, as reported, Ryabev
said: "The prime minister signed it but I'll put it this way: He signed it
not as a program between Russia and Iran approved by the government. He
signed it as a direction for discussion of this issue for future talks
between Russia and Iran."
Still, like other Russian officials, Ryabev bristled at the implication
that Russia's civilian nuclear assistance would help Iran build nuclear
weapons. "It all remains just an emotional call to stop such activities,"
he said. "What are the complaints? The specific complaints for spreading
proliferation? There were no specific complaints."
******
#9
BBC Monitoring
Russian politicians, artists appeal to Putin over anti-Semitic TV programme
Source: Centre TV, Moscow, in Russian 1000 gmt 15 Aug 02
A group of politicians, artists and sportsmen sent an open letter to Russian
President Vladimir Putin today. The cause is "Antideza" programme broadcast
by Moscow Region Channel 3 on 28 July.
The letter says that the programme was announced as an attempt to look into
the recent anti-Semitic incidents [in Russia], but in fact became
anti-Semitic in character and was reduced to a simple conclusion that
anti-Semitism plays into hands of Jews themselves and moreover that Jews
generate the phenomenon by their own behaviour.
The letter says that the map of Russia is like a multicoloured blanket -
representatives of over 140 ethnic groups are living in Moscow alone and if
those stirring up enmity between people living in the country are not
stopped, it may lead to ethnic clashes. The authors of the letter are
surprised at the fact that the Press Ministry did not produce any reaction to
the obviously provocative programme although it is within the ministry's
duties to make sure that TV channels and peoples' minds are not polluted by
such products dangerous for society.
The letter was signed by 17 people. Among them are president of CSKA
basketball club Aleksandr Gomelskiy, Marshal of the Soviet Union Viktor
Kulikov, Moscow mayor Yuriy Luzhkov, editor-in-chief of Literaturnaya Gazeta
newspaper Yuriy Polyakov, president of the Chamber of Commerce and Industry
Yevgeniy Primakov and pop singer Alla Pugacheva.
******
#10
ZHIRINOVSKY CONFIRMS CAR ACCIDENT OUTSIDE BOSTON
MOSCOW, August 15, RIA Novosti - Controversial Russian politician Vladimir
Zhirinovsky, who is deputy speaker of Russia's lower house of parliament, the
State Duma, and leader of the not-so-aptly named, ultranationalist
Liberal-Democratic Party of Russia (LDPR), confirms that his car has been
involved in a road accident outside Boston, Mass., the press service of the
LDPR faction in the State Duma told RIA Novosti, citing a phone call from the
man.
The flamboyant politician indicated "an experienced driver was behind the
wheel." Nonetheless, according to Zhirinovsky's account, "they tried to cut
in" on his car several times, before "one particularly obstinate driver
finally did succeed in creating a road accident." "The car pulled out of the
lane and into the shoulder, hitting into the parapet while the guilty party
sped off," the nationalist leader recounted.
He went on to say he had "suffered the least as [he] sat on the side opposite
the crash." But his advisor Pavel Chernov got his arm broken and his leg
twisted, and therefore had to be hospitalized, Zhirinovsky noted.
He added, furthermore, that the head of the party's central office, Oleg
Malyshkin, was also staying in hospital."He's got a suspected skull fracture,
his face is bruised, and his arm paralyzed," Zhirinovsky explained.
He did not rule out that the accident had been a set-up affair. According to
him, neither did "the police officers who arrived at the accident scene." The
LDPR leader accused unspecified local groups of playing up "negative
information and propaganda" about him in a bid to ruin his US tour. He
pointed out "there were even protest pickets." In the face of all this,
Zhirinovsky seems determined to carry out a presentation of his book "Ivan,
Zapakhni Dushu," or (roughly) "Ivan, Button Up Your Soul." He also wants to
meet with a delegation of the local Russian-speaking community.
He pointed out that the great majority of Boston's Americans of Russian
origin "have quite friendly attitudes." However, it seems an ill-starred trip
to Boston for Zhirinovsky, because the accident is his second this time
around. Yesterday, a crate of Zhirinovsky Vodka (named after the man) was
dropped and shattered. Zhirinovsky, who had intended to serve that vodka at
the presentation, estimated the damage at $3,000.
*******
#11
Moscow News
August 15-21, 2002
Living without Secrets
Moscow city authorities want to have the lowdown on each Muscovite
By Andrei Stepanov
Moscow city authorities are planning to create, by late 2003, a data base
featuring personal information on all city residents, including residence
registration, housing, official income and access to social benefits such as
pensions and medical insurance programs.
"City fathers" have yet to explain what they are going to do with this
information. Neither is it entirely clear to what extent the creation and use
of such regional data bases conforms with the RF Constitution.
Still, data collection is in full swing while the Moscow City Duma is working
on a bylaw to give the project a semblance of legitimacy. Duma Deputy Stepan
Orlov is head of the relevant working group. In a comment for MN, he said
that after consultations with lawyers (including at the Russian Academy of
Sciences Institute of State and Law), it was decided not to wait until
federal authorities issued guidance as to what personal information
Federation components may gather. In other words, the city mayor and a pliant
city Duma will not wait until the State Duma dusts off the draft law On
Personal Information, but will simply appropriate the necessary powers.
Mr. Orlov's explanation provides little clue to the reason for this haste.
Asked bluntly why Moscow city authorities need such exhaustive information on
city residents, he said that this would be instrumental, say, in handling
citizens' requests and correspondence. But the main objective is to
"establish information sharing" between regional divisions of federal
agencies and metropolitan authorities. Now this is purportedly hindered by a
diversity of different departmental systems. But once "technological"
impediments have been removed, "this will allow us to address serious tasks
concerning demography and migration - who bought or sold an apartment, etc."
Although none of these reasons explain why city authorities need information
about citizens' financial and housing status by the end of 2003, the deputy's
comment points to at least one possible reason. Thus, Yuri Luzhkov is on
record as trying to identify "rich people" in his city. This was necessary
for implementing the housing and utilities reform Moscow-style - to reform
nothing but increase revenues to the city treasury. If the mayor had the
relevant information, he could deal with the problem without citing the
housing and utilities reform: It would be enough to slap on a number of
special local taxes.
The major impediment to the daring plan is not the differences in methods
used by federal agencies. The fact is that under the law, the majority of
them may not share their information. Under the existing procedure, an
appropriate official may receive information about an individual citizen, but
not on all citizens living in a particular Federation component. This
"technological" flaw is not easy to correct by adopting a local bylaw.
And still the designs by Moscow city authorities could be translated into
reality, even if briefly. In the absence of a federal law regulating a
particular sphere of relations, the gap may formally be filled by a local
enactment. In this case, however, Viktor Pokhmelkin, a member of the State
Duma Legislation Committee, believes the Moscow plan could become a subject
of examination at the Constitutional Court. Protection of individual rights,
enshrined in the Constitution, does not fall under the jurisdiction of local
authorities. Furthermore, federal laws only allow officials to seek personal
information on individuals that is related to the specialization of a
particular agency.
True, Moscow is just one of the 89 Federation components - moreover, not the
most backward in terms of communication between governor and the local
population. It is not difficult to imagine what would happen if other
regional leaders followed Luzhkov's example. Personal data bases there will
most certainly be used by governors to perpetuate their powers and secure
control over local businesses. Worse, such information will be in great
demand among such small-time users as commercial and criminal organizations,
rival "information" services, and so forth. And this demand will most likely
be met: Before long personal data bases will start being sold on Pushkinskaya
Square or on the Mitino outdoor electronics market.
Actually, the idea of monitoring the movement of peole across the country and
integrating the data banks of various agencies belongs to Central Electoral
Commission Chairman Alexander Veshnyakov. He proposed building it on the
basis of the GAS-Vybory, or Elections, system.
Why are Moscow city authorities interested in personal data on all and
sundry? At one time the mayor's office set up an obscure structure called the
Moscow Regional Analytical Center. Its covert purpose was to collect data
that could help keep regional and even federal-level businessmen on a short
leash. To that end, local executive authorities empowered the center to
request information from law enforcement agencies (customs, tax services,
police, etc.) Furthermore, the center could sell the information it obtained
at a profit.
It is not ruled out that the Moscow Regional Analytical Center has fulfilled
its purpose. And so the time has come to keep tabs on ordinary citizens.
*******
#12
Moscow Tribune
August 16, 2002
PUTIN AND GOVERNMENT AT CROSS PURPOSES
Praying to different Gods
By Stanislav Menshikov
As summer draws to a close the Russian president and government resume
their discussions about economic plans for 2003. It is not a usual year.
Parliamentary elections are coming in December and the president’s Unity
party needs a good performance in order to win and lay a foundation for a
presidential triumph the following March.
Russia’s economy today reminds one of a tired horse that is going at its
own speed and does not wish to respond to the passenger’s will. The
president wants it to run much faster but Mikhail Kasyanov, the coachman,
says the horse might have a heart attack if he slashes the whip too hard.
Herman Gref, the assistant coachman, insists that at 3.5-4.5 growth per
annum the economy will reach Portugal in a couple of decades. But the
president has other, more current worries on his mind.
One worry is that the coming winter will be another cold one and that the
Chubais gang will again leave half the country freezing in their homes
under some pretext. The other day Vladimir Putin reminded his ministers
that they should make special pains to prepare for the heating season. He
swept aside arguments that in a market economy keeping the population warm
is the job of the Invisible Hand, not the government. That made bureaucrats
grumble that he was restoring bad old Politburo times.
But to keep his personal rating high, Putin cannot leave the population in
the cold every winter. It is handy to have a Chubais and “lazy” governors
to blame for these deficiencies. But this cannot go on forever. Sooner or
later the popular ire will take its toll on Putin himself. He must at least
show that he cares. However, making the government worry about heating is
useless because it is against their deep-rooted neoliberal faith. Also,
their vested interest is in winning more votes for Chubais’s Union of
Right-Wing Forces and thus curbing the dictatorial ambitions of the
president. Keeping Putin out of economic management today could work for
elevating Chubais to the Kremlin in 2008.
The president is loosing his fight with Kasyanov on other fronts as well.
His recent revolutionary proposal to relieve the oil and metals oligarchs
of their licences to exploit mineral deposits was rejected by the
government and had to be modified after talks with leading figures in Big
Business. The latter are now willing to translate their de facto property
rights into concession agreements provided that the tax on mineral rent is
not too high. Our guess is that the president will probably agree with
their arguments in exchange for their unlimited financial and media support
in the elections.
Another battlefront is Putin‘s attempt to curb the natural monopolies,
particularly Chubais’s electric company RAO UES. Their insistent pressure
to raise tariffs is ruining the president’s fight against inflation and is
another factor endangering his popularity. On his instructions, the
monopolies were ordered to submit by August 1 their annual budgets for
inspection and approval. None of them obliged, so far. Gref’s people are
privately calling this Putin initiative another of his “Gosplan tricks” and
are working hard to let it die.
The other day, Paul Thomsen, head of the International Monetary Fund’s
mission in Moscow, lent a hand to Putin’s opponents by publicly speaking in
favour of accelerating reforms in natural monopolies (i.e. privatising them
faster) and curtailing excessive government interference in the economy.
This, he said, was the way to ensure a stable, fast rate of economic growth.
As usual, IMF experts are famous for putting their feet in their mouths.
Privatising natural monopolies is the best way of raising their tariffs and
promoting general inflation, which would certainly slow down the economy
instead of having it grow faster. By making itself independent of IMF
financing after 1998 Russia also managed to get rid of the Fund’s advice,
which was helping ruin its economy. It looks like the Fund today is back at
its tricks. Hopefully, without chances of success.
The trouble with the Putin administration is that it speaks in different
voices leaving the impression that it does not really know which path to
take. On the one hand, Mr. Thomsen’s ideas about curtailing government
interference in the economy closely correspond to what the president’s
economic adviser, Andrei Illarionov, has to say. On the other hand, Anton
Danilov-Danilian, who is deputy chief of the president’s administration in
charge of its economic department, has just spoken strongly in favour of
formulating a distinct government industrial policy aimed at promoting some
of the most important sectors of the manufacturing industry. His office has
been telling the government to do so for the last two years, he said in an
interview, but nothing happened. Which is one reason why the economy grows
so slowly.
It looks like high officials in the government and Kremlin, as well as
their bosses, Putin and Kasyanov are praying to different economic Gods.
Whatever the reason, by working at cross-purposes they are leaving the
economy without an efficient management.
******
#13
FEATURE-Russian firms rush into IPOs, analysts sceptical
By Julie Tolkacheva
MOSCOW, Aug 16 (Reuters) - A slew of Russian companies, inspired by a
recent successful Initial Public Offering by dairy firm Wimm-Bill-Dann, is
rushing to do the same in a flashback to 1997 when issuing a Eurobond was
the fashion.
The 1998 economic crisis killed the Euromania. And those who managed to
make issues before the crisis had problems trying to service their debts
after the rouble was devalued.
Russia's largest aluminium producer, RusAL, one of the country's top steel
producers, Magnitogorsk Iron and Steel Works, the chain store The Seventh
Continent, the CTC television channel, MGTS (MGTS.RTS) fixed-line operator
and Sistema financial-industrial holding have all announced IPO plans.
Also on the IPO bandwagon are the MCT Corp mobile phone operator, Russia's
largest meat firm Cherkizovsky Meat Factory and Silovyye Machiny, which
makes equipment for power stations.
Many have been encouraged by the Wimm-Bill-Dann (WBD.N) February issue in
New York, which was five times over-subscribed and raised $134 million.
"Wimm-Bill-Dann tried and succeeded. Maybe we'll succeed too," said
Valentin Zapevalov, a spokesman for The Seventh Continent.
Anton Yevstigneyev, head of the audit department at Cherkizovsky, said
foreign interest was strong.
"The success of the Wimm-Bill-Dann project and other companies' planned
placements has spurred interest to issue on the American market,"
Yevstigneyev told Reuters.
"Foreign interest in the Russian food industry was spurred by
Wimm-Bill-Dann. It is one of the most dynamically developing industries."
REASONS FOR FASHION
Analysts said an IPO was a cheap way to raise funds for a firm from Russia
because banks are desperately in need of reform and not viable places to
seek credit.
"A bank credit is a difficult thing. You have to constantly monitor it, pay
interest," Yevstigneyev said.
Alexander Korchagin, head of research at the Prospect investment company,
said it was more expensive to place Eurobonds than issue shares.
He said Eurobonds were in vogue in 1997 because at that time Russian shares
were even more under-valued than they are now and would earn less money
than a bond.
Another reason was that most businesses were not fully formed at that time,
making it difficult for an investor to understand what company he was buying.
In recent years many companies have completed asset consolidation, created
holdings and issued unified shares.
Managers have decided to find out how much their efforts were worth and
decided to use the IPO tool, Korchagin said.
"After the crisis many companies acquired a more sensible approach to the
creation of their business models and the assessment of perspectives for
their development," said Konstantin Chernyshov, deputy head of research at
NIKoil investment house.
"Companies are not only focused on short-term profits but on the building
up of a normal long-term business."
GRAIN OF SALT
Analysts view most IPO plans with scepticism.
"Some companies see an IPO as a PR action rather than a serious statement,"
Chernyshov said.
"They still do not fully realise what an IPO is and have illusions about
their ability to place their securities."
Korchagin said few Russian companies could hope for serious foreign
interest in their shares as the markets for them are small and illiquid
with little room for speculation.
"Size matters in such cases," he said. "A small company is of little
interest to anyone. There are not many companies in Russia which could be
interesting for investors. There are some such firms, but they seldom make
IPO announcements."
Wimm-Bill-Dann placed 25 percent of its capital, but analysts said the
market for the shares was small.
They added that many Russian firms should opt for private placements to
raise funds rather than IPOs.
But Russian companies are not ready to place a large chunk of shares for
fear of losing control.
Russian businesses are in many cases built on personal relationships and
semi-legal schemes under which profits are channelled to off-shore
companies controlled by management.
"Such schemes mean that you yourself do not know the size of the profit you
put in your pocket," Korchagin said.
"Investors would fight against such schemes and that would mean a blow to
personal income of management. Under the current business practices IPOs
may never happen."
But Yevstigneyev of Cherkizovsky said his company was ready to offer 25
percent to the market and was open for serious investors.
"We have been developing our business for many years, we have our own
vision of how it should develop," he said.
"But if the potential investor can help us with additional resources and
technologies, we shall more than welcome him."
*******
#14
Trud
August 16, 2002
LEADERS OF RUSSIAN BUSINESS
Update on who's who in the Russian business world
Author: Sergey Turanov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
THE ECONOMIC NEWS AGENCY HAS PUBLISHED ANOTHER RANKING OF RUSSIAN
BUSINESS LEADERS. THIS TIME IT WAS DONE ACCORDING TO THE RESULTS OF
THE SECOND QUARTER OF THIS YEAR. SOME OF THE COMPANIES STUDIED ARE
LUKOIL, GAZPROM, AEROFLOT, AND SEVERSTAL.
The Economic News Agency continues its regular study of the
ranking of Russian business leaders. This time it was done according
to the results of the second quarter of this year. The criteria are
complex. The tycoons' activity is assessed on four important
characteristics: extent of their influence on the Russian economy;
extent of their influence on the Russian political life; possibility
of using their ties with the purpose of realization of different
projects, which is depended on the effectiveness of projects' lobbying
in the state and legislative authorities; activity and stability of
their companies.
The results of the companies for the past year were released in
the second quarter and this fact influences the ranking. So, LUKoil's
net profit fell by $500 million in comparison with the results of
2000; and its head Vagit Alekperov moved from second place to fifth.
Gazprom's net profit on the contrary increased more than twice during
the same period of time and its CEO Alexey Miller took third place.
Kakha Bendukidze (the United Engineering Plants holding company)
continues to lead the field. The analysts consider the purchase of the
American company Friede & Goldman Ltd. in the second quarter as a good
buy, because the latter is one of the leaders among the world
introducers of the sea drilling rigs.
Boris Yordan (the Sputnik investment group, Gazprom-Media)
continues its upgrade too.
Valeriy Akulov (Aeroflot-Russian Airlines) on the contrary fell
in this ranking. To all appearances, it is a corollary of the
limitation of his authority. The new version of the Aeroflot by-law
provides for the strengthening of the role of the Board of Directors
and the release of the influence of the administration and director
general in the company.
Head of the Interros holding company Vladimir Potanin fell in
this rating too. According to the mass media, this holding company
intends to sell its shares in the Perm motor plant and some other
enterprises of the Perm auto plant. Some analysts connect this
information with the fact that Interros didn't manage to create a
joint with the state holding company Permskiye Motory.
Alexey Mordashov (Severstal) left this rating. However, the
metallurgists' representation didn't change. Andrey Kozitsin (director
general and a joint owner of the Ural mining company) entered the top
30 for the first time. This company controls about 20 mining
enterprises and its annual turnover is $1.5 billion. It produces about
40% of all Russian copper.
(Translated by Gregory Malutin )
******
#15
Kommersant Vlast
No. 31.
August 2002
[translation from RIA Novosti for personal use only]
WHAT LIES IN STORE FOR THE RUSSIAN GOVERNMENT?
Recently, Oleg Deripaska, a well-known Russian
businessmen, sharply criticised Gherman Gref in public.
Usually, businessmen take the liberty of attacking ministers
only when they feel that the country's top leadership will
support them. Below, Konstantin SMIRNOV, a Commersant
commentator, dwells on the above situation.
Businessman Oleg Deripaska, head of the Bazovy Element
company, accused the economic development minister Gherman Gref
of time-serving at the negotiations on Russia's entry into the
World Trade Organisation (WTO). He claims that agreements
reached by Gref with WTO member countries will put serious
restrictions on the future Russian government's work.
The businessman's enviable boldness cannot conceal the
obvious fact: Deripaska would have hardly dared make such a
step had he not counted on support of a political figure which
is more powerful than Gref. Since the president is placed too
high for Deripaska, we can assume that this figure is the prime
minister.
However, this does not at all mean that Mikhail Kasyanov
personally asked Deripaska to attack Gref. However, experienced
people feel the direction in which the political vector is
shifting in Russia: the thing is that the prime minister is
interested in weakening his assistants' positions, i.e., those
of Gherman Gref and, probably, Alexei Kudrin, another newcomer
from St. Petersburg.
Why should Kasyanov seek to weaken his subordinate? The
thing is that the fight for the prime minister's seat has
sharpened of late. The battle is unfolding on the field of the
so-called administrative reform.
In fact, the fight for premiership has never stopped under
Vladimir Putin. Despite the fact that Kasyanov's position seems
more than stable, Vladimir Putin's Petersburg associates still
hope that he will soon resign, or his powers will be limited.
Kasyanov's opponents had to find a weak spot in his
position, and they managed to do this recently. Kasyanov was
accused of hindering the administrative reform. This reform is
a very tricky thing. The premier's survival under the present
political regime depends directly on the apparatus scheme of
decision-making the premier will manage to create. If his
deputies and leading ministers appointed, as is known, by the
president, coordinate their decisions only with the Kremlin
bypassing the House of Government, the premier's stay in office
will not be long. In that case, he can be painlessly replaced
any time. In the Kasyanov-led government, some of its members,
for instance Kudrin and Gref, meet with the president as often
as the prime minister himself. At the very start of Kasyanov's
premiership, a number of vital economic decisions were adopted
by the Kremlin without heed taken of his opinion, so that
Kasyanov had only to implement them.
However, later the prime minister managed to perform an
old bureaucratic trick - to turn the government apparatus into
a super-department controlling every step of any minister and
even vice-premier.
As a result, Alexei Kudrin, vice-premier and finance
minister, has nothing else to do but complain to the president
that the papers drafted at his department are being re-written
from the beginning to the end. Meanwhile, despite his
vice-premiership, Kudrin cannot follow every finance ministry
document's "travel" around the House of Government's corridors.
However, it's of no use to complain to the president about
Kasyanov's apparatus. What should be done is to find a way out
of the existing situation. Kudrin has found it: to step up the
administrative reform. It is proposed that the ministries' role
should be enhanced (primarily, that of the finance ministry),
while the government apparatus should be sharply reduced and
brought down to the level of a usual prime minister's office.
Then Kasyanov will have to implement just other people's
decisions. He will still be prime minister, but this will be a
different post then.
Aware of the danger of a Kudrin-style reform, Kasyanov
managed to persuade the president to make the premier, instead
of one of his deputies, responsible for the administrative
reform.
The reform will take a long time to be implemented, all the
more so that the business community, it seems, is warning the
president against hasty reformist measures.
******
#16
From: Ben Aris <benaris@online.ru>
Date: Fri, 16 Aug 2002 15:55:46 +0400
Subject: [RusBizList] RBL374 -- Aug 16
Russia Business List
#374
Friday, August 16, 2002
1. Russia's Chaebols
Euromoney
Ben Aris
Moscow
16/8/02
BA - my 2cents worth in the round of pieces on this topic. BA
From no growth at all in the 1990s economists now worry that Russia's
biggest companies are growing too much. Eight industrial groups dominate
private enterprise and between them account for 85% of all wealth created by
the country's nascent free market.
A study by Peter Boone and Denis Rodionov of Brunswick Warburg, a
Moscow-based investment bank, found that Russia's companies had total sales
of $109bn in 2000. The leading state-owned companies generated $47bn in
sales - mostly from the two natural monopolies of Gazprom and United Energy
Systems - while privately owned companies generating $62bn or a quarter of
GDP. Of these private companies a mere eight account for 85% of these sales.
The concentration of wealth creation is so small that some economists are
starting to talk about the "Chaebolisation" of the Russian economy, similar
to South Korea's experience.
South Korea's chaebol system produced rapid growth between the early 1960s
and the late 1990s by mobilising investment and importing management skills.
According to the IMF the 30 largest Chaebols owned two thirds of 100 biggest
manufacturers in the mid-90s and accounted for 16% of GDP
This is the second time that modern Russia has created large industrial
groups. The first were formed in the now infamous loans-for-shares deals of
1995-6 where the Russian government sold off its industrial jewels for
pennies on the dollar and created a business elite - the so-called
oligarchs.
In 1996 business tycoon Boris Berezovsky famously claimed that he and the
other six oligarchs controlled half the economy. Berezovsky was exaggerating
for political reasons, but at their height the seven leading
financial-industrial groups controlled about 11% of Russia's GDP.
A few of these groups survived the 1998 financial crisis - notably Mikhail
Khodorkovsky's Yukos, Vladimir Potanin's Interros and Mikhail Fridman's Alfa
Group -- and more have been set up in the last few years. The metal, oil and
automotive sectors are all largely under the control of Russia's biggest
industrial groups and they continue to add the best companies in other
sectors. More recently the new and old oligarchs have been expanding into
agriculture, timber and coal businesses.
And they have been growing fast. Without a working banking system the big
industrial groups are the only entities with the resources to invest in
themselves and can take their pick of Russia's undervalued assets. The
Brunswick report shows that new eight industrial groups have doubled their
share of economy and now account for 21% of GDP.
"These groups are at their height," says Peter Boone. "If these assets were
under state-ownership it would be a disaster. We are not going to see
dispersed ownership in Russia for some time."
The big eight's share of the economy is boosted by the fact that small- and
medium-sized enterprises are still struggling. While oligarchs have the
money and political clout to cut through the endless red tape, smaller
entrepreneurs don't. If president Vladimir Putin successfully pushes through
planned structural reforms and gets the strong growth he is hoping for, the
industrial groups' share will be diluted again.
"At the moment exporting raw materials is profitable because the ruble is
cheap," says Boone. "But as the ruble continues to appreciate against the
dollar exporting metal and oil will become less profitable and the pendulum
will swing towards the manufacturers of consumer goods. The current
oligarchs will never dominate these businesses."
In the short term successful groups are not necessarily a bad thing as they
are mobilising the capital and investing in a wide range of industries. For
the meantime the Kremlin is unconcerned with the economic power these
companies are collecting. But in the long run too few companies controlling
too much of the production can cause problems. Big groups tend to make poor
investment decisions. After a period of fast growth typically these mistakes
end in crises before the cycle repeats itself.
Mature economies are already flexible enough to smooth out the worst of
boom-bust cycle. Over the last forty years the American economy has reached
an equilibrium where the average growth of 3% has fluctuated between -2% and
6% and the average investment as a proportion of output has been 19%,
fluctuating in a relatively narrow band of 16% to 21%. These numbers draw a
tight cycle of relative stability. (see diag)
Russia's experience has been much more volatile and draws a wide circle of
good times - bad times. According to Evgeny Gavrilenko, chief economist at
Troika Dialog, Russia is once again at the start of a 40-year cycle (see
diag).
Comparing Russia to the American experience and the picture is very
different. In the last two decades of the Soviet Union's life investments
doubled as a share of GDP while growth faltered. Gorbachev's political
reforms were designed to stave off the collapse of a crumbling system, but
didn't go far enough to prevent the eventual fall.
Partial liberalisation at the end of 1980s saw some of the worst decisions
undone, but growth continued to slow and the economy went into complete
meltdown following the coup attempt in 1991 and Gorbachev's ouster.
The 1998 financial crisis brought Russia's economy back to the start of the
forty-year cycle and growth and investment rates are now similar to those of
1961.
If Russia follows same pattern as Asian - which display the same volatility
- then although Russia is about enjoy as much as a decade of strong growth
it will end in another collapse unless the domination of the big companies
can be diluted through creation of other business. Boone argues that it
doesn't matter if one or more of the big groups go belly up.
"So what if a big group borrows too much and then collapses? This is what
the free market is all about," says Boone. "What is driving growth now is
the big groups all want to grow and integrate with the world economy. What
is missing is the grass roots pressure from below; small- and medium-sized
enterprises putting pressure on regional government to make market-friendly
reforms. It will happen as there has never been a better time to invest."
Finland has already been through the reforms that Russia now faces. Like
Russia, Finland invested heavily in the 1980s to develop capital-intensive
industries focused on exports to the Soviet Union. The collapse of the
Soviet Union plunged the Finnish economy into crisis and lead to the
devaluation of the Finnish markka. From the crisis emerged a strong
financial system and led to Finland putting in some of the highest growth
rates in Europe. New sectors, like telecoms, have replaced the old
capital-intensive ones and the economy has seems to have started a new
tighter cyclical pattern similar to that of America's.
Gavrilenko believes that the government needs to play a more active role in
promoting new business to dilute the big eight industrial groups' role in
the economy and should not be content to let the big eight drive growth.
"Russia is at a fork in the road," says Gavrilenko. "If it can put a strong
banking sector in place that can allocate resources efficiently, lower the
barriers to new business and stimulate competition then the country can look
forward to high rates of growth. If not then another economic crisis is
inevitable."
*******
#17
Russian mafia extends tentacles across the globe
AFP
Henry Meyer | Moscow
From cocaine smuggling for Colombian drug cartels to criminal betting
syndicates in Asia, Russian mobsters have extended their tentacles across
the far corners of the globe, backed up by formidable resources at home.
The scandal surrounding Alimzhan Tokhtakhounov, the alleged Russian crime
boss accused of fixing results at the Salt Lake City Olympics with French
and Russian judges, has shone a spotlight on the international reach of
Russia's mafia.
A Western law enforcement official who is investigating Russian organised
crime says no criminal structure in the world has wielded such political
influence and wealth as in Russia, giving it the muscle to expand
activities ambitiously.
"You talk about Al Capone who had the Mayor of Cicero, Illnois in his
pocket and other political connections. But he was the biggest we ever had.
He never took over General Motors, he never took over US Steel, He was
never in Congress," he told AFP, speaking on condition of anonymity.
"Some of these guys are billionaires, they control natural resources such
as aluminium and oil," the official added. In Soviet times, crime bosses,
known as "vory v zakone" (thieves-in-law), made fortunes from
black-marketeering but kept a low profile for fear of being thrown into
gulag camps.
But with the chaos surrounding the collapse of the Soviet Union, organised
crime flourished with the weak state powerless to resist, seizing control
of the fragile banking sector and collaborating with the Soviet
nomenklatura (bureaucrats) to pillage state assets.
According to interior ministry figures in the late 1990s, the Russian mafia
controlled 40% of private business and 60% of state-owned companies.
In 1989 the Russian mobsters also began to move across to Europe, America
and Israel, using as a stepping stone the Russian emigre communities in New
York's Brighton Beach district, in Israel and European capitals.
Israel has been a favourite target, with billions of dollars believed to
have been laundered there by Russian criminals, many of whom claim to be
Jewish to get an Israeli passport.
Unlike the Colombian cartels or the Italian Mafia, Russian crime groups are
not centralised hierarchical structures but instead work in small groups,
with hundreds of gangs around the world that have thousands of members.
Their strength, according to Russian mafia expert Mark Galeotti, lies in
their willingness to strike up temporary alliances with just about anyone
else.
"No one else cooperates like them, they make deals with everyone. You have
even seen Russian mafia cooperating in supporting al-Qaida in getting
weapons to Chechen rebels fighting Russians," he said.
"These are internationalists, absolutely amoral criminal gangs," added
Galeotti, Director of the Organised Russian and Eurasian Crime Research
Unit at Britain's Keele University and a writer on the Russian mafia for
Jane's Intelligence Review.
Uninterested in taking over territory, Russian gangsters usually try to
work with existing criminal structures. In the United States, Russian
mobsters for example paid protection money to the Italian mafia when they
got involved in fuel tax scams, said the Western investigator.
US law enforcement agencies got extremely worried when the Russians struck
a partnership with the Colombian drugs cartels at the end of the 1990s,
arranging cocaine shipments to Europe and providing weapons to Latin
American mafias.
In an act of extraordinary daring, one Russian gang in 1997 tried to sell a
Soviet-era submarine to the Colombians to help them smuggle cocaine into
the United States.
Russian groups, operating out of Miami, New York and Puerto Rico, also
opened bank accounts and front companies across the Caribbean to launder
hundreds of millions of dollars in drug sales and other criminal activities.
The Russian crime groups' other advantage is that they are extremely
flexible about their area of activities, although their strength lies in
drugs, weapons and raw commodities.
Recently they have been arranging for foreign toxic waste to be dumped in
Russia, according to Galeotti.
Often, Russian criminals simply are paid to provide transport for other
people's goods.
Drugs from Afghanistan, the world's main supplier of heroin, are shipped
through Russia for sale in Western European markets and Russians are
involved in human trafficking of Asian refugees who come through Russia
into Europe.
But in the Far East, they have tried ambitiously to get involved in
criminalised gambling syndicates. They tried and were rebuffed in Macau but
were more successful in the Philippines and Indonesia.
"They have no problem in thinking on a big scale. They will move to
whatever is profitable," commented Galeotti.
*******
#18
Russia cannot make more concessions in WTO talks
MOSCOW. Aug 16 (Interfax) - For practical purposes, Russia has reached its
limit of concessions in talks on joining the World Trade Organization,
Deputy Economic Development Minister Maxim Medvedkov told the Gazeta
newspaper in an interview published on Friday.
"We have informed our negotiating partners," he said.
"The talks cover access to the goods and services markets, conditions
for agriculture and systemic issues. When I said we cannot make more
concessions, I meant the goods and services market. Our position is that
Russia should join the WTO on standard conditions," Medvedkov said.
Russia cannot equalize domestic and foreign trade fuel prices, Medvedkov
said. "This is not a standard requirement. We cannot commit ourselves to
this," he said.
Nor can Russia sign an agreement under which it should give up
supporting its aircraft building industry and open its market to foreign
manufacturers without any restrictions, Medvedkov said.
These are probably all the demands that Russia cannot accept but there
are also 30 to 40 issues concerning, for example, the registration of
enterprises and foreign trade licensing. These issues should be resolved in
a legally sound way, he said.
*******
#19
Russia's military spending to soar by nearly 50% in 2003
MOSCOW. Aug 16 (Interfax) - Russian Defense Ministry spending will
skyrocket 45.9% in 2003.
"In absolute figures, that makes 77 billion rubles with 47 billion
assigned for social spending: 27 billion on increasing military pensions
and 20 billion for increasing the allowances of regular officers," a
spokesman for the ministry financial department told Interfax on Thursday.
He said that the proportions perfectly demonstrate the priorities
defined by the military leadership.
********
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