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Edited by David Johnson
| ISSUE #16 | September 25, 1998 |
The CDI Russia Weekly is an e-mail newsletter that carries news and
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#1 For more articles from The Moscow Times, check out their website at www.moscowtimes.ru Moscow Times September 24, 1998 DEFENSE DOSSIER: The Arms Bazaar Beckons By Pavel Felgenhauer Pavel Felgenhauer is defense and national security affairs editor of Segodnya. Special to The Moscow Times
As the Russian economic crisis goes from bad to worse, the country also becomes increasingly isolated internationally. Western governments and the International Monetary Fund are not inclined to shoulder any more financial bailouts. On the contrary, there is a growing desire to write Russia off and to build a fire wall around the wreckage to contain any possible harm to free markets and democracies outside. Of course Russia is still a nuclear superpower with hundreds of intercontinental ballistic missiles, thousands of nuclear warheads and tons of loose nuclear materials left over from the Cold War. But if Russia remains potentially dangerous, there is still no comparison with the old Soviet Union that had hundreds of divisions and thousands of tanks poised to march into Western Europe. The West successfully contained the mighty Soviet Union, so many believe that Russia cannot possibly be a more serious problem. The Russian army is weak, undisciplined and unprepared for battle. Several thousand Chechen irregulars defeated it in 1996 and since then the state of the Russian military has deteriorated further. Russia has nuclear-tipped ICBMs, but in what way could it use them? A nuclear holocaust would only destroy everyone and not solve anything. Prime Minister Yevgeny Primakov may be a former spy master, but he is also a reasonable person, not a crazy Third World dictator in a fancy military uniform. Primakov will hardly threaten to use nuclear weapons against any Western country that may freeze Russian bank accounts or seize Russian property, ships and passenger planes if Russia defaults on all of its sovereign debt. President Boris Yeltsin may be turning senile, but that does not mean he can start a nuclear war. Yeltsin's real power has been so much diminished recently that the Russian uniformed military will most likely disobey any direct order from the Kremlin to go into battle, let alone a sudden nuclear attack directive. However, today Russia is facing a problem the Soviet Union never had to face. In the coming 15 months more than $20 billion of Russian sovereign debt will fall due. There is no way in which Russia can possibly repay it. Only massive Western financial aid, a new rescheduling program or a write-off of almost all Soviet-time debt can possibly help avert a sovereign default and an ensuing economic blockade at a time when millions of Russians will be struggling to survive the coming winter. A desperate situation may call for desperate remedies. If the West resorts to a policy of containment and isolation, Moscow could turn to its old friends in the Middle East who also happen to be Primakov's old buddies. Russia could cancel the 1995 memorandum that effectively stopped the signing of new arms contracts with Iran. Russia could begin totally unrestricted sales of the most advanced weapons to the Middle East. This would bring in much-needed money and create jobs in Russia's depressed defense industry. Of course Iran, Iraq, Syria, Libya and other anti-Western, or "rogue," Third World countries do not have the money needed to feed Russia or even make all of its defense industry happy. But this is not really important. Russia may barter, lease or lend out weapons. The main point is to provide anti-Western militant regimes with capabilities to mount a successful military attack at U.S. forces and those of its allies in the Gulf and maybe also in the Mediterranean. For decades Russian defense designers have been developing weapons specifically tailored to challenge U.S. warplanes and aircraft carriers out at sea. If the Iranians and the Iraqis are able to obtain advanced cruise and ballistic missiles, the U.S. command of the seas and air in the Middle East will be in question. A terrible war of anti-imperialist liberation could be caused by Russian military technology proliferation in the Middle East. The most fertile oil fields in the world may go up in flames, supertanker navigation in the Gulf may cease and the Strait of Hormuz may be closed. The price of crude oil would then quadruple and Russia would be one of the main benefactors of such a crisis together with Norway. If there is a war in the Gulf, the West would be forced to pay Russia more money for its gas and oil than it today grudges as emergency aid. NATO forces could be fighting unpopular overseas wars instead of expanding to the East, while Russians would be counting their money.
#2 Date: Wed, 23 Sep 1998 From: weir@rex.iasnet.ru (Fred Weir) Subject: Middle class problems
MOSCOW (CP) -- Stanislav Grishiuk thought a middle class job was the wave of the future; now he fears it was a one-way ticket to the ash bin of history. ``I can't believe how quickly everything has fallen apart,'' says the dark, burly 40 year old, who was a financial manager for SBS-Agro, Russia's largest retail bank, until he was abruptly laid off in September. Like hundreds of thousands of relatively young, well-educated, urban Russians, Grishiuk kept his hopes alive during the economic turbulence that followed the collapse of the USSR. In 1996 he landed the job with SBS-Agro, thinking he could make a permanent place for himself in Russia's emerging financial services sector. ``I was building a real life. I bought my first car, took my family on our first ever vacation abroad. Everything was going fine,'' he says. But in August the bubble burst. The Russian government, on the verge of bankruptcy, devalued the rouble and defaulted on its foreign and domestic debts. In the resulting panic Russia's biggest banks failed, vapourizing the savings of millions and paralyzing commerce throughout the country. Grishiuk suddenly lost his dream. So did thousands of others, and analysts believe the carnage has only begun. ``The emergence of a middle class was a very new thing in this country, but it was a major factor in the political stability we have enjoyed in recent years,'' says Olga Krishtanovskaya, an expert on social change at the Institute of Sociology in Moscow. Krishtanovskaya says that by early this year as many as 10 per cent of Russians could be classified as middle class, which she defines as professionals, skilled workers or private entrepreneurs earning at least $800 (US) per month. The average income in Russia is currently less than the equivalent of $200 per month. But in just a few weeks Russia's middle class has become an endangered species. ``It's hard to take in what has happened. It's like a natural disaster,'' says Valery Oskin, deputy head of the 'Contact' employment agency, which caters primarily to professionals. ``Suddenly we are flooded with highly-qualified people, all frantically seeking work. But available jobs have dried up.'' Oskin says that such signal middle class professions as financial services, advertising, journalism, real estate and the leisure business have turned upside down in recent weeks. ``More and more people are hitting the streets every day, and there is no hope of finding them new jobs in these fields,'' he says. Another grim sign of the times is that many foreign-owned firms, which brought Western expertise and standards to Russia, are drastically cutting back or closing altogether. ``We've just slashed all salaries by 20 per cent, and soon we may have to start cutting staff,'' says Don Storey, who manages SVO Travel, a Russian-Canadian joint venture. Storey says few Russians are travelling anymore, though SVO still has a core business with foreign residents of Moscow. But even here the indications are ominous, he says. ``We've experienced a surge in the past month of foreigners buying open-ended plane tickets out of here. Some people openly call these 'evacuation tickets', a kind of insurance in case they have to leave in a hurry,'' he says. ``Everybody thinks things will only get worse.'' The political implications are dire if Russia loses its fledgling middle class to disillusionment and poverty, experts say. ``We are talking about acute anger, disappointment and bitterness among the most educated and capable sections of society,'' says Leonid Vardomsky, an analyst at the Institute of Economic Research. ``This is a very volatile brew. These people were the mainstay of the democratic capitalist experiment in Russia, and if they turn against it now it will probably not survive.''
#3 Date: Wed, 23 Sep 199 From: Geoffrey York (york@glas.apc.org) Subject: Kaliningrad SEPT.23,1998 By Geoffrey York The Globe and Mail (Canada) Kaliningrad, Russia
For the 120 children in Kaliningrad's tuberculosis hospital, only two kinds of food are guaranteed: milk and bread. Suppliers have stopped bringing meat, cheese and eggs to the hospital. In the chaos of Russia's economic crisis, they can't even afford a vehicle to transport their food. The hospital staff are donating vegetables from their own gardens to feed the sick children. But every week, the meals get smaller. "At the beginning of the crisis, we reduced the portions of meat," said Dr. Inna Nazharenko, deputy chief doctor of the hospital. "Now we don't have anything. Dairy products have disappeared, and meat is unavailable. There's no protein in the meals - it's a major disaster. We can't plan the next meal. Whatever we can find, we give to our patients." Kaliningrad, a strategically important Russian enclave on the Baltic Sea, is one of the hardest-hit regions in Russia's economic crisis. Surrounded by Poland and Lithuania, separated by 600 kilometres from the rest of Russia, this western outpost is dependent on imports for 80 per cent of its food. And when the ruble collapsed last month, the flow of imports ended. This territory of one million people is now a zone of empty store shelves, food shortages and soaring inflation. It has become one of the first Russian regions to accept emergency food and medicine from the West since the crisis began. A truckload of 15 tonnes of sugar from Germany is expected to arrive in Kaliningrad this week. Lithuania sent $375,000 (Cdn.) worth of medicine to the region last week. "We must think first about survival," said Alexei Ignatiev, a Kaliningrad development official who is leading the appeal for humanitarian aid. Mr. Ignatiev estimates that Kaliningrad will need 100 tonnes of food aid every month. Hospitals are rapidly running out of supplies, and prisons have only a few days worth of food left, he said. "It's very difficult for people to survive - especially pensioners, the disabled, and other vulnerable groups. The main problem is that prices are going up every day and most importers have gone bankrupt. With the high exchange rate and the collapse of the banking system, it's impossible to do business with foreign companies now," Mr. Ignatiev said. Western countries have always kept a close eye on Kaliningrad because of its military importance as a Russian enclave in the heart of central Europe. The region was heavily militarized in the Cold War, and it remains a key Russian naval base. Russian nationalists have threatened to deploy nuclear weapons in Kaliningrad if the North Atlantic Treaty Organization expands eastward into the former Soviet Baltic states. The Russian economic crisis, however, has inflicted serious damage on the 25,000 military personnel in Kaliningrad. Even before the crisis, conscript sailors were earning less than $8 a month. After the ruble's collapse, the value of their salaries has been cut in half. And their wages have not been paid since May. "We will lose a lot of money if our salaries are not adjusted to the new rate," said Captain Oleg Shanko, a spokesman for the Russian Baltic Fleet. "Officers are trying to finds jobs as watchmen or taxi drivers. But the price of gasoline has gone up so much that they can't afford to work as drivers now." The meltdown of Russia's currency is compounded by Kaliningrad's decision to support local industries by restoring customs duties on most food imports. As a result of this double blow, most prices have doubled or tripled since July. In many food stores, European imports have been replaced by poor-quality local products. "Even the price of local products is going up every day," said Nina, the manager of a food store in Kaliningrad. "I'm the director of the shop, but I can't even afford to shop here any more." Foreign humanitarian aid might be a logical response, but many Kaliningrad residents are resentful of Western aid. "It hurts us as Russians," said Nikolai Khromov, the retired deputy commander of the Baltic Fleet. "It hurts my patriotic feelings. We always thought Russia was a great country and could sustain itself. But we must understand the situation in the regions. It's not the time for us to show our pride." At the tuberculosis hospital, meanwhile, doctors are pleading for help from private businesses and from the parents of their patients. Heavy debts have forced the hospital to cut back on medicine for treating the children. And the food shortage is expected to delay their recovery from their illnesses. "We can cope with the medicine shortage, but not the food shortage," Dr. Nazharenko said. "Patients are staying longer, and their health is deteriorating. If it keeps on like this, patients will be staying here for 12 months -- twice as long as normal. The lack of proper nutrition is affecting their immune system. They won't recover fully."
#4 Russia Today http://www.russiatoday.com Sept. 22, 1998 This Is Getting Personal By Rod Pounsett
Russians seem to be having a tough time being Russian these days. My mailbag tells me there is a lot of mental pain, self-denigration and sensitivity laced in with the hardship most of them are experiencing at the moment. But a lot of my correspondents are also hitting back at what they see as predominantly negative analysis and self-righteous gloating by the Western media. One guy in particular, who is well-educated and has spent a lot of time in the West working with organizations such as the United Nations, was quick to admit: "I blame nobody for our failures but us, the Russians." He detailed what he saw as the multitude of failings by dishonest and arrogant politicians and chastised his fellow countrymen and women for allowing them to get away with it. "Our arrogance and inability to listen and learn are proverbial, especially when it comes to top managers, stylish reformers included," he wrote. But he also sounded off about too many "bad news only" reports in the Western media. He seemed anxious we should also acknowledge that most Russians, despite their present hardships, are still trying to fall in love, have affairs on the side, run their homes, care for their families, grow vegetables on their plots of land, shoot films, write books, have parties and generally go about their ordinary lives like anybody else in the world. I personally have not read anything from even the most ardent critics suggesting Russians are a bunch of freaks. In fact, it is because we know that, apart from a few obvious cultural differences and unfortunate programming under past regimes, they are people just like us. And that is why some of us are getting angry about what is happening to them. I also admit, however, that having family and lots of close friends in Russia presents me with particular problems. The ubiquitous domestic fallout of the Russia crisis causes me to be on constant guard against allowing elements of subjectivity and emotiveness to creep into commentary. Digesting and interpreting current events can get very personal at times. Suggesting Russians have got to learn to be more responsible and honest, to live within their means, get accustomed to working harder and not leaning so much on the state is not easy when you know you are also addressing people you love. Friends who a few months ago I was congratulating on winning top jobs in the private sector or senior posts within the reform-minded government are now victims of the crisis and struggling to make ends meet. My wife's family is suffering similarly if not worse because, for various reasons, they were detached from the good times in the private sector and has had no chance to build up nest eggs. Fortunately, the black-and-white nature of the unfolding picture and opinion about the actions of the authorities so far in Moscow have made the task of remaining objective that much easier. Friends and family concerns aside, I and lots of commentators like me remain justifiably concerned about Russia's immediate future. Prime Minister Yevgeny Primakov, whatever his declared good intentions, is orchestrating an economic nightmare and I am still unable to buy the promises he has made to the international community about no U-turns. Maybe there is too much shuffling of unfinished plans on his desk to hear the rumbling of the printing presses down the road churning out billions of rubles as useful as monopoly money. Or maybe he is putting too much faith in the psychological techniques he learned as spymaster, believing he can maintain the temporary pacifying mind control cast over the Russian population by his appointment. Despite a blanket "no comment" order he placed on ministers and officials, he denies there is any attempt at media censorship. Let him be warned, however, that if this is another lie he can kiss goodbye international support for his regime. The Russian people, including my friends and family, deserve and need the truth -- even if it is all bad news. Rod Pounsett writes a weekly column for Russia Today.
#5 Russia: Analysis From Washington -- Can Russian Diplomacy Hold Russia Together? By Paul Goble
Washington, 23 September 1998 (RFE/RL) -- In one of his last speeches as foreign minister, Russia's new Prime Minister Yevgeny Primakov argued that Russian diplomacy's major tasks include the maintenance of that country's territorial integrity. In acknowledging the extent of the difficulties Russia now faces, Primakov joins a growing number of Russian political figures who have suggested that the future of their country in its current borders may be in doubt. But Primakov's remarks, published in the latest issue of the Russian foreign relations journal "International Affairs," represent something more than that. They provide three important clues to the approach Primakov appears likely to adopt as he puts together his government. First, in sharp contrast to most other Russians similarly worried about the integrity of their country, Primakov suggests that an active diplomacy may be just as important as domestic policy in helping to hold the Russian Federation together. Specifically, he suggests that Moscow can take the lead in putting together a new international coalition against the principle of national self- determination "up to separation." Primakov suggests that Russia should first of all draw on the support of other states facing separatist challenges. Because of their own difficulties, such countries will be especially interested in limiting the applicability of national self-determination in Russia as well. And then the Russian leader suggests that Moscow should seek the backing of Western countries who may not face ethnic challenges themselves but who are worried about the possibility that acts of self-determination might lead to expanded refugee flows. Second, Primakov suggests that Russia's territorial integrity and stability will be promoted by an intensification of ties among the former Soviet republics that now form the Commonwealth of Independent States. He argues that "no European stability and security are possible if they are absent from the post-Soviet space." And in this way, he implicitly suggests that Western countries must support CIS integration, something many of them have expressed doubts about, if they are want Russian stability, something all of them back. And third, Primakov repeats Moscow's opposition to any new dividing lines in Europe, including ones that he says would be created by the expansion of NATO. On the one hand, his remarks on this point offer little that is new. But on the other, his linkage of Moscow's opposition to NATO expansion with the notion that Russia will find it "hard, if not impossible" to pursue democratic change "without an active foreign policy" adds a potentially persuasive element in Moscow's case against the Western alliance. Indeed, by implying that NATO expansion could have an impact on Russia's borders and not just on Russia's political direction as many other Moscow leaders have asserted, Primakov is likely to gain support on this point from Western leaders who may not fear a change in government in Moscow but would fear the consequences of a Russian in dissolution. When Primakov made these remarks, he was responsible for foreign policy and consequently he was naturally inclined to highlight the role of foreign policy activities. And now that he is prime minister, he has a broader role and possibly a different one. But Primakov has displayed a remarkable consistency in approach over his career, even as it has taken him in many apparently different directions. And consequently, these indications of how he may seek to enlist international support against the disintegration of his country are likely to guide him in the future. To the extent they do, Primakov may have a powerful new lever to block the dissolution of his country. But if he attempts to rely on that lever alone, he is likely to find, as did Soviet President Mikhail Gorbachev seven years ago, that Western support for the territorial integrity of his country may prove less significant than he believes.
#6 Christian Science Monitor SEPTEMBER 24, 1998 Editorial Russia's Solution
As Russia gropes for solutions to its economic crisis, the outlook remains as murky as ever. President Boris Yeltsin has named Yevgeny Primakov as prime minister. The former foreign minister and spymaster is trying to cobble together a center-left coalition. He's named two centrists, a Communist, and an Agrarian Party member as deputy prime ministers. He's appointed a former Soviet central banker, Viktor Gerashchenko, chairman of the central bank. Such a government will have a tough time agreeing on a plan to get Russia's economy moving again. The appointments are not encouraging. For example, Mr. Gerashchenko's previous reign as central banker under Yeltsin was marked by hyperinflation as the bank flooded the country with currency. Now he returns, and his answer to the government's inability to pay workers at state enterprises? To print more money. The new government appears headed towards renationalization of some companies and increased state control of the economy. Such voodoo economics will bring only inflation, shortages, and a bigger black market. What got Russia into this mess is not too much economic reform, but too little. The politicians have never been willing to make the tough decisions necessary to allow the market to function. Indeed, the Communists, Agrarians, and others who control the lower house of parliament have fought reform every step of the way. It's important to remember how thin is the veneer of modernization that overlays Russia's essentially third-world economy. The country still suffers from a lack of business law - no way to legally enforce contracts, insufficient property protections, inadequate antifraud controls. Agriculture is fundamental to any economy. Marxists have never understood that, and successive Soviet governments did little to build rural infrastructure. That legacy remains: Many farms have no access to paved roads. Grain elevators are frequently hundreds of miles away. Produce rots in fields for want of railroad cars to transport it. Rural residents still cannot buy land to farm - and Primakov has just put a leading opponent of land reform in charge of agriculture. Speaking last week at the White House, Czech President Vaclav Havel noted that solving Eastern Europe's economic problems will be a matter of years; solving Russia's will be a matter of decades. Since the fall of communism, Eastern Europeans have careened back and forth between free-market and socialistic governments. Barring total collapse and civil unrest, Russia may well follow the same cycle. The challenge for Russia's friends in the West will be to remain patiently engaged, gently but firmly encouraging Russia to stick with reform and democracy. Economic reality will assert itself eventually. Better times will come when enough Russians understand that the old, statist ways will never work and that reform is the solution, not the problem.
#7 St. Petersburg Times September 22, 1998 1917 All Over Again? Russians Talking Revolution By John Varoli STAFF WRITER
It was a time of great political, economic, and social upheaval. Food supplies to the capital declined drastically. Strikes paralyzed the economy. The political leadership of the country was ineffective, unable to rule, and totally discredited in the eyes of its people. Crime and lawlessness spiraled out of control. By the end of October the Bolsheviks had seized power. It is just such similarities between the autumns of 1917 and 1998 that have politicians, commentators, and journalists talking about the strong possibility of a new Russian revolution. Yet others draw parallels between current-day Russia and Germany's Weimar Republic, and believe that the threat of fascist rise to power in Russia is a strong possibility. The Russian and international press have been running dramatic headlines threatening that "Russia teeters on the edge." The specter of upheaval has become a common weapon, with even more moderate officials using it for political gain. "Different politicians are playing different games," to promote their own agenda, Dmitry Trenin, of the Carnegie Institute in Moscow, recently told Reuters. And the upcoming National Day of Protest, planned for Oct. 7, when nearly 25 million workers are expected to take to the streets, has only reinforced those who are predicting the apocalypse. According to the Public Opinion Fund, while only 17 percent of Russians said they would take part in protests of some form in September 1997, this figure has nearly doubled to 27 percent today. On Monday, St. Petersburg had its own dress rehearsal for Oct. 7, when about 400 communists and far-right activists held a demonstration in front of the city's Legislative Assembly on St. Isaac's Square, calling for an end to the Yeltsin government and for a new constitution that would support the interests of the working class. But despite the superficial similarities between the breakdown of order and authority in 1917 and 1998, there still are substantial differences. The most obvious one is the fact that in 1917 millions had already died, and tens of millions more displaced, in an imperialist war that the country was losing. Second, in 1917, a revolutionary movement had already existed in Russia for the preceding 50 years, with a number of well-organized revolutionary groups, staffed by young and fanatic followers, who had the will and desire to change the existing social and political order. Third, demographics - perhaps the most important ingredient in the makings of any major upheaval - were in the revolutionaries' favor in the years leading up to 1917. Between 1897 and 1913, according to "Russia in 1913, A Statistics Reference Book," the Russian population grew from 129 million to 178 million, a whopping increase of 39 percent in just 16 years, making it one of the fastest-growing nations on the planet at that time. As Russia was being populated with more and more young people who were not able to find the economic opportunity to meet their basic needs, they became more receptive to the revolutionaries' promises of a better and more just future. Today, Russia is not at war. It lacks a potent revolutionary movement, and its people are actually in a post-revolutionary phase - tired and exhausted by decades of social and political experiment. Also, the demographics are against any upheaval. Since 1991, the Russian population has been shrinking by about 150,000 a year, and now stands at 147 million. "There will certainly be no return to communism or violent revolution," said Viktor Voronkov, a sociologist and director of the Center for Independent Sociological Research in St. Petersburg. "The most angry elements in society are those that are the weakest and the most marginal, such as the elderly. Most Russians are already used to such deprivations, and they know how to survive under harsh conditions and can adapt." Also, experience has shown that the number of people who say they are ready to join protests is much greater than the number of those who actually join demonstrations. Only 8 percent of Russians say they have ever taken part in a protest or strike, according to the Public Opinion Fund. "Even those opposition leaders with popular support, such as Zyuganov, will not lead any uprising or violence," said Vladimir Rymsky, head of the sociology department at the INDEM foundation in Moscow. "Zyuganov will only lead a peaceful demonstration because he understands that any violence would sweep him away with the regime." Speaking Monday at the demonstration on St. Isaac's Square, Yury Terentiyev, head of the radical Russian Communist Worker's Party and a deputy in the Legislative Assembly, said, "we will only work toward our goals within the framework of the [Russian] Constitution, and we will not use violent methods." Still, history has an interesting way of befuddling any well-educated prognosis, and the possibility of violence can never be ruled out. "If a political force does appear which can unite and spur the discontented segments of the population to action, then the possibility of violence will increase greatly," added Rimsky. "Russian history shows that each great rebellion occurred not when the people's lives were at their worst but at the time when there appeared a leader who promised them a better life." But many citizens of St. Petersburg, both those who can be characterized as liberal and those who support the Communists, tend to believe that a return to communism or violence is most unlikely. "Unfortunately, there is no way back to socialism, and our people are too patient and persevering to rise up to change their situation," said one old woman shopping for food on Sennaya Ploshchad with her 400-ruble pension. "Before we had social protection, and now look at what we have." "Even if the Communists should come to power, they could not act as communists because the people now have a different mentality and different values, not to mention the fact that the world is a much different place with the communications revolution," said Luba, a specialist who works with imports. At least for the near future, life in Russia may be troubled but likely to remain relatively free of violent uprising. "I do not think we will see any violence on Oct. 7," said Rimsky. "Most likely there will only be a meeting with radical slogans and then everyone will go home."
#8 The Nation October 5, 1998 Russian Students: Optimism Has Turned to Anger By by Renfrey Clarke and Boris Kagarlitsky Renfrey Clarke has reported from Moscow for Australia’s Green Left Weekly for the past eight years. Boris Kagarlitsky is a Russian political writer and an adviser to the Duma’s Committee on Labor Relations.
Just what role Russian students will play in their country’s current crisis is unclear, but they may yet be a force to be reckoned with. Until quite recently, students were widely regarded as a politically tranquil, even passive layer of the population. Their passion, according to powerful segments of the Russian and Western media, was not to change society but to seize well- paid openings in the new sectors of the “capitalist” economy. Consequently, the outbursts of student rage that shook city after city around the country in April staggered government officials and left pundits grasping for explanations. The students’ demand—the payment of long-delayed stipends—was not the reason for the demonstrations’ impact. Rather, the protesters on the TV screens subverted an image Yeltsin and his supporters had painstakingly cultivated for themselves since the beginning of the nineties: that of the political wave of the future. Who really represents the future, if not young people? If they rebelled against the authorities, the revolt was that of the future against the past. The reputation of young people in Russia as “pro-market” and “pro-reform” has always concealed a host of contradictions. Opinion surveys have consistently shown young people to be more optimistic than their elders about the processes unfolding in post-Soviet Russia. But this optimism must be seen within the context of a general, devastating loss of faith in the new system over the past few years. If young Russians have been relatively more forgiving of the Yeltsin administration than older ones, it should be borne in mind that Yeltsin’s overall approval rating has fallen in recent months to as little as 4 percent. The perception that young people remain apolitical is broadly correct. Few students vote in elections. Understandably, most are concerned above all with finding enough money to allow them to eat and continue their studies. But if they do not as a rule hold formed political views, that does not mean they support the authorities or are indifferent to their own interests. In recent times the readiness of students to mobilize has increased dramatically. Reporting the findings of a sociological survey, the newspaper Komsomolskaya Pravda noted in July: “The awakening of students is…[an] alarming signal. Some three years ago only 22.5 percent of students were prepared to participate in protest actions. Now those who would take to the streets without a moment’s hesitation make up almost half.” Independent Union of Miners leader Aleksandr Sergeyev says: “As soon as we took more radical positions, young people started coming around us. Very often they’ve been students. I have to confess that we don’t even know what to do with them. We’re not ready for this.” The Soviet system of higher education was oriented toward meeting the needs of a developed industrial society, but in present-day Russia, with its more primitive economy and ravaged industries, such a mass of educated people has become superfluous. For millions of young people, these developments have put an end to any chance of a successful career. The people affected most include those who were studying during the transition period, when there were still places in the universities and colleges but no jobs for graduates. Says Igor Malyarov, general secretary of Komsomol, the onetime Communist Party youth wing that is now a leftist but independent group, “In 1991 the bulk of young people weren’t on our side. They’d found it dull under the Soviet system, and they wanted changes. The market and private enterprise really did open up new opportunities for them. Now everything is totally different. For most young people there are no prospects, and there won’t be any.… The protests now aren’t aimed against Communists, but against the authorities and the ‘new Russians.’” Young people who had little experience of life under the Soviet system and who are trying to succeed under the new conditions are finding that no one needs their knowledge or their desire to work. In these circumstances, an increasing number of students are turning to left organizations and ideas. The largest and most active left-wing political youth group is the Komsomol, which by the spring of this year claimed a membership of 20,000, most of them students and young teachers. One of the most impressive initiatives to have made an impact in left-wing student circles is the Youth University of Modern Socialism, organized by a group around Moscow State University professor Aleksandr Buzgalin. Offering radical courses in a variety of disciplines, Buzgalin’s university has enjoyed considerable popularity. “Liberal professors are boring,” a student of this institution said. “They don’t have anything new to say. The Marxists are more interesting.” But neofascism also has its appeal, although to date its strongest supporters have been working-class youth rather than students. The ultra-right-wing Russian National Unity has an estimated membership of at least 60,000, decked out in black uniforms with “Slavic” stylized-swastika emblems. So far, the student and youth movement in Russia has had nothing like the scope of Students for a Democratic Society in the United States, not to speak of the recent eruption of youth outrage in Indonesia. But in Russia, as the saying goes, people spend a long time harnessing their horses. The question for the autumn, as Russia’s economic and political crisis unfolds, is where the student movement is headed, and how the journey will proceed.
#9 Jamestown Foundation Monitor September 24, 1998
TWO TEAMS DRAFT ECONOMIC PROPOSALS: THE ACADEMICIANS... Russian Prime Minister Yevgeny Primakov has promised to announce the main outlines of his government's new economic policy on either September 29 or October 2 (Itar-Tass, September 22). At least two teams of economists are busy drawing up proposals. The first team includes a number of senior economists who are members of the Russian Academy of Sciences and were advisers to Mikhail Gorbachev in the late 1980s. Their leader, academician Dmitri Lvov, said yesterday that he is working with fellow economists Leonid Abalkin and Nikolai Petrakov under the leadership of First Deputy Prime Minister Yuri Maslyukov. Russia, he declared, should not rely on "portfolio investment" but should instead draw on its own internal resources--an odd and unclear depiction of the alternatives (Russian agencies, September 23). However vague these words, it can be inferred from earlier statements he has made that Lvov favors taxing natural-resource producers and using the proceeds to revitalize Russian manufacturing. He believes that foreign inward investment should be restricted and domestic producers protected by import controls. Lvov, who heads the Academy of Sciences' economics department, is a distinguished member of the old Soviet school of mathematical economists and long a critic of the "young reformers" in successive Russian governments. He argues that, if Russia were to insulate itself more from the outside world, it could restore its manufacturing capacity, much of which was, during the Soviet period, in the military industrial sphere (for example, the aerospace industry). He and his teammates have difficulty acknowledging that what the USSR used to produce was not up to international standards and could not compete on world markets. Much of it was in essence a deficit rather than an asset and therefore unsustainable--in the absence of dramatic efficiency gains--over the long term. Lvov and the other academicians on his team were good critics of what was wrong with the Soviet system. Most of them, however, have not proved emotionally able either to accept the full logic of market reform or to acknowledge that many Soviet-era enterprises have no future in an open, competitive economy. Many Western and reformist Russian analysts believe that the cause for the debacle of Russia's latest reforms was the government's failure to follow through on early measures and establish hard budget constraints for enterprises, thereby forcing a radical restructuring of production. The academicians, by contrast, are alarmed, first, by how much restructuring has already taken place and, second, by how much output and employment in the formerly most prestigious parts of Russia's economy have already declined. Hardly any enterprises have yet been bankrupted. Western critics point to enterprises which are still operating inefficiently, with high payments arrears and use of barter and money surrogates. What the academicians see is those same enterprises producing far less than before and employing far fewer people. Westerners say the logic should be continued until unreformable enterprises close down. The Russian academicians say the enterprises should be resuscitated and prevented from closing down. Both groups are looking at the same situation, and each sees what a mess it is. But they disagree diametrically about how to resolve the situation....AND THE REFORMERS... The second team is headed by Deputy Premier Aleksandr Shokhin, who announced yesterday that the government will shortly submit to parliament proposals for "revolutionary changes to the tax system." These will include introduction of a uniform income tax rate, a reduction in value-added tax and modification of the profit tax (Russian agencies, September 24). The first two items were mooted by the acting government of Viktor Chernomyrdin in recent weeks. They were associated with then First Deputy Premier Boris Fedorov, who favors a flat rate of 20 percent income tax reminiscent of the scheme put forward by American millionaire publisher and former presidential candidate Malcolm Forbes, Jr. The third item is so vague that it is unclear what it means. Shokhin and Maslyukov are already known to disagree on the question of printing money to cover the budget deficit, with Maslyukov much more favorably disposed toward the idea than Shokhin. The incompatibility between the two approaches may help to explain why Yevgeny Primakov is having such difficulty putting together a new government. Another explanation is a general reluctance to join a government which, in many people's opinion, is unlikely to last long.
#10 Moscow Times September 22, 1998 THE ANALYST: Only a Friendly State Can Make a 'New Deal' Work By Gary Peach Special to The Moscow Times
Even after 200 years, the debate hasn't changed much. The arguments are the same, the names different. Alexander Radishchev, the father of Russian liberalism, wrote in 1774 of the primacy of the individual over the group, of the transcendence of human rights over the power of the monarchy. Nikolai Karamzin, writing contemporaneously with Radishchev, adhered to the belief that a gregarious autocracy would best preserve traditional Russian values and defend the motherland from dangers of a "revolutionary Europe." Karamzin, despite his wide travels, never shed the conservatism typical of Russia's gentry. Although Radishchev and Karamzin, both children of the Enlightenment, were concerned more with natural rights and societal structure than economics, the essence of their philosophic dispute has significant economic implication: To what extent should government participate in a nation's economic life. While the Old World was shaking apart with revolution, in the New World Thomas Jefferson spoke out against the idea of an active, interventionist state. In a phrase that all living Russians would appreciate, he wrote, "Were we directed from [government] when to sow and when to reap, we should soon want bread." His sworn enemies, Alexander Hamilton and John Adams, spent their lives fighting for the creation of an affirmative government. Adams said: "The great object of the institution of civil government is the improvement of the condition of those who are parties to the social compact." The choice of statism or liberalism has never gone away; rather, following then paralyzing economic events in Russia over the past five weeks, it has found new vigor and urgency. Only now, instead of Radishchev and Karamzin, the debate belongs to such laissez-faire economists as Gaidar and Illarionov, and their opponents from the Communist Party, Zyuganov and Maslyukov. The latter two, swept up on a wave of giddiness after the financial crash, are boldly announcing the death of market reforms in Russia, the irreversible demise of the decade's economic transformation. The solution, they are claiming, lies in the restoration of a powerful, active, centralized government -- a government that will plan, regulate and rid Russia of all its inclement phenomena (insolvency, unemployment, crime). The leftists' apparent resurrection has them thinking big. They have already identified a historic parallel to inspire hope in their new cause: F.D. Roosevelt's New Deal. This massive interventionist program, which not only brought the United States out of depression but brought it victory against Germany and Japan, changed forever the concept of an active government in the minds of a majority Americans. Zyuganov and his cohorts are now calling for a similar rescue program here, certain that a "Novoye Delo" is the nation's panacea. Delusions were never so grand as this. As Adams' words above imply, the idea of an affirmative government presumes a benign government; a system of governing that will work tirelessly for the benefit of its people. This is why a "New Deal for Russia" is impossible. In Russia, the concept of government automatically excludes the concept of benevolence. The history of Russian government is one of incredible evil: slavery, forced conscription, extreme civil repression, wars of aggression. Peter the Great built his city in the north on the bones of thousands of his subjects. When the Soviet Union "organized" industrialization and collectivization, countless died. In Russia, an affirmative government is one that causes suffering and pain. There would be more benevolence in a colony of cannibals. Commentators both here and in the West have earned their bread over the past weeks by claiming that economic reforms in Russia resulted in utter disaster. They have consistently penned scathing judgments of Yeltsin, Chubais and the oligarchs, and why all these individuals share the blame for the country's tremendous difficulties. Most observers have been a bit too quick to write a death certificate for the liberal market model in Russia. There are two simple reasons why economic reforms -- knocked down, but not out-- have finished way short of their mark after seven years. Write it down in the textbooks. The government 1) failed to bankrupt worthless enterprises; and 2) neglected to support small businesses. It's as easy as that. Almost all the country's ills originate in this tandem: insurmountable non-payments, fiscal incompetence, unemployment, abuses of shareholders' rights, narrow tax base, low foreign direct investment per capita and a dispirited populace. Now many politicians yearn for an active government. The only "affirmative solution" to Russia's eternal economic morass is to unlock its human potential. A liberal-democratic society is capable of this, and leaders should start by realizing that what is good for the entrepreneur is good for the state. For too long in Russia the thinking has been the converse. Government should stop defeating its own purpose of improving its people's lot, and let people work. It can do this by getting bureaucrats, tax men, and the mafia off people's backs.
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