idbits, April 1998.

The Moody's international agency has reduced Russia's long-term foreign currency debt rating from Ba2 to Ba3 and the debt rating of Russian banks from Ba2 to B1. The year 1998 is likely to be hard on Russia financially. The ratings of Eurobonds issued by Russia, Komi Republic, Krasnoyarsk territory, Moscow city, Nizhny Novgorod, Samara and Sverdlovsk regions, Tatarstan and also Tatneft, Lukoil, Alrosa and MGTS companies have been downgraded to Ba3. Moody's also reduced the ratings of five Russian banks, Avtobank, Menatep, the National Reserve Bank, Uneximbank and Vneshtorgbank, in foreign currency debt from Ba3 to B1.

Moody's rating agency has decided to downgrade Russia's sovereign credit rating led to a sharp decline in Russian stock prices.

Russia's mortality rate rose in the early 1990s at a pace rarely seen outside war zones. Death rates soared nearly 33% between 1990 and 1994. A JAMA editorial calls it "an unprecedented pace of deterioration in a country not at war." More than 75% of the drop was caused by the deaths of people 25 to 64.

6,000 died on the job in 1996 in accidents resulting from slackened safety rules.

The use of alcohol among Russians has risen to 13 liters (nearly 12 quarts) per person per year - well above the 8-liter (7-quart) danger limit established by the World Health Organization.

From 1990 to 1994, the life expectancy of Russian men declined to 57.7 years from 63.8 years, 15 years less than American men's life expectancy of 72.4 years.

The number of bankruptcies among Russian companies is approximately doubling each year. This was revealed at a news conference in RIA Novosti Wednesday by Georgy Tal, chairman of the federal service for bankruptcies and financial rehabilitation of businesses.

Head of the Military, Sergeyev said the situation is "critical" and that servicemen are deserting the army, harassing local civilians and killing each other in the barracks. Officers and soldiers are committing suicide; commissioned officers committed 18,000 felonies in 1997; and in the Severo-Kavkazsky, Uralsky and Zabaikalsky military districts, the number of felonies doubled in 1997. Many commanders are losing control of their units.

Only 16 of the 156 moth-balled submarines have been properly dismantled. The rest are rusting away in Arctic and Far Eastern harbors, with the nuclear plants intact, posing a threat to the environment.

Marc Pasotti, expert representative of the U.N.'s Centre for International Crime Prevention in Vienna, told a conference in Hungary that more and more heroin from Asia is passing through Russia instead of the Balkans on its way to the rest of Europe. Increasingly powerful crime groups in Russia take advantage of the largely cash economy of Eastern Europe and the absence of anti-money laundering laws in many of these countries. By Russian estimates, mafia groups were growing in power, controlling some 40,000 Russian business and industrial enterprises, 40 percent of private businesses, 50 percent of Russian banks and 60 percent of state-owned companies. Some experts say that two-thirds of the (Russian) economy is under the sway of crime syndicates, Olga Prokofievka, head of the Russian central bank's banking and audit licensing department, acknowledged Russia had no law against money laundering.

Moscow Mayor, Yuri Luzhkov, has refused to comply with the ruling of Russia's highest court to scrap the controversial "propiska" system of residence permits that governed where a person could live, and in Soviet times. it was the purview of the Communist Party to tell people where to work and reside. It continues to be. Dissident writers were banished to the provinces as punishment. Russia's 1993 constitution sought to end the practice. It declared that all Russians "shall have the right to freedom of movement and to choose their place of stay and their residence." A federal law was adopted codifying the same principle. However, Luzhkov has preserved the system in Moscow, changing the name and the method, calling it "registration" and demanding a high fee -- often several thousand dollars. Luzhkov doesn't seem to consider himself bound by the rulings of the highest court in the country, clarifying how little actual the rule of law, separation of powers, and democracy there really is in Russia. The rest of the world pretends.

Number of suicides in Russia, and rate per 100,000 population:

           1990 -- 39,200, 26.4.
           1991 -- 39,400, 26.5.
           1992 -- 46,100, 31.0.
           1993 -- 56,100, 38.1.
           1994 -- 61,900, 42.1.
           1995 -- 61,000, 41.4.
           1996 -- 57,800, 39.4.
           1997 -- 54,900, 37.5.
 

Using TV to teach people how to become criminals
There were twice as many homicides in Moscow in 1997 as in New York. Newspapers relay lurid accounts of murders, kidnappings and businessmen blown up in their Mercedeses. Television is awash in tabloid-style "reality based" police dramas. The fascination with crime has even seeped into game shows: In the popular "Interception," contestants pretend to be car thieves and try to outrun police patrol cars in a "stolen" vehicle provided by the producers. Winners keep the car.

Russians see the government as an entity that imposes obligations on the population.

Russia is the world's fourth largest tobacco market and about two-thirds of its adults smoke between 220 billion and 260 billion cigarettes a year.

On March 16th More than 500 veterans of Latvia's Nazi Waffen-SS legion paraded through the capital Riga on Monday, prompting a protest by Russia. The veterans, who were marking their unit's 55th anniversary, say they were patriots fighting alongside Nazi leader Adolf Hitler's troops in World War Two to stop another invasion by Soviet forces.

Historians and Nazi hunters say that while membership of the legion did not necessarily amount to guilt for war crimes, some units that were added to it near the end of the war had committed atrocities. The Latvian government allowed the two-day reunion to go ahead but decided not to send an official representative. Even so, armed forces commander Juris Dalbinsh attended the parade. Riga authorities also banned a demonstration against the reunion. "This was an astonishing and disgusting scene for Europe...on the eve of the 21st century," Yastrzhembsky said.

Construction of 380 buildings, in Bishkek, Kyrgyzstan which began before 1991, have not been completed yet. Total cost of them is 37,000 million som (about $1.8 billion dollars). 143 of them are situated in the capital, Bishkek, and their cost is about 4,000 million som.

Description of Import Export and Market Companies

The Kyrgyz Parliament describes those who conduct international trade other than the manufacturers as "engaging in huckstering only".

President Askar Akayev received in Bishkek in March Kasia Murakawa, an official from the European Bank for Reconstruction and Development. Strategic cooperation between EBRD and Kyrgyzstan was discussed. It was announced after the meeting that the EBRD has given Kyrgyzstan 493.5-million-dollar loans in recent years. Also, an additional $57-million package of help is under consideration now. The EBRD is 10% owned by the United States which finances it from tax-payer revenues.

Jangoroz Kanimetov, chairman of the parliamentary committee of Kyrgyzstan on social affairs, announced in Bishkek in March some figures on poverty in the country. According to him, people, receiving less than 442 som (about $26) in a month should be considered poor in Kyrgyzstan and people, who receive less than 221 som monthly - "very poor". Kanimetov announces that 41.4% of city dwellers and 74.9% of rural residents are poor in Kyrgyzstan now. 7.2% of city dwellers and 23.3% of rural residents are very poor. Also, real income of Kyrgyz citizens decreased by 83.6% in 1992-1996. Average monthly salary is about 600 som in Kyrgyzstan now. Then benefits of democracy seem obscure when the elite has stolen the country from it inhabitants. More than $500 billion dollars has been removed from the former Soviet Union and placed in Western bank accounts in the past 6 years.

The new Socialism

One Russian worker in four no longer paid regularly. More than 20 million people in Russia are not receiving their wages on time with many owed between six and twelve months' pay. By Autumn 1997 the state and the employers owed some 10 billion US dollars in unpaid wages.

Wage debts in the Russian Federation started rising again this year, by early March 1998 hitting the previous figure of 54,000 billion "old" rubles. They will undoubtedly continue to rise given the recent ruling by the Constitutional Court that means taxes must be paid before wages. As a result of this ruling, tax bodies now take everything for taxes, leaving no funds for wages.

Strikes, hunger strikes, demonstrations and civil disobedience are mounted throughout Russia. 1998 saw a new desperate tactic as workers at some localities took management officials hostage. On March 4, 1998 a top regional health official was taken hostage by workers in Irkutsk, Siberia, and only let free after documents confirming the transfer of back wages to their employer were presented. In February the director of a fish factory in Kamenka township in Primorye, Maritime Territory was "taken hostage" by 60 factory workers who locked him in his own office and refused to release him until the repayment of half a year wage arrears took place. Employees of an instrument-making plant at Kovrov in Vladimir Region, locked managers in their offices because they had not received any wages since June last year. Chief engineer Aleksandr Nikitin was later released "on parole", and sent off to look for money at the municipal administration.

The Russian "strong" ruble which is exchanged at a rate 1 new ruble = 1 thousand old rubles since January 1-st 1998, already suffers from creeping inflation. Before the new rubles were printed the rate of exchange of the old ruble never was higher than 6000 rubles = $ 1 . On April,6th is was 6129 = $1 In early April 1998 one dollar became equal to 6.129 new rubles, that is 6147 old rubles . The ruble will loose catastrophically in its value by the end of 1998 leaving world wide traders to deal in Japanese "just-in-time" methods of 'holding" rubles.

Russia". stock market is down more,than 25 percent and foreign portfolio investment has ceased. Russian banks' credit rates rocketed from 25 to 50%. Russian stock market" is sooner a virtual phenomenon, than a real thing. It is being manipulated by some American speculators and few professional brokers in Russia. Evidently they are accomplices of a much bigger global financial plot, which has nothing to do with the very notion of free market and free trade. Ruining Russian commodities market they ruin the ruble and vice versa. If their scheme works we shall have the same exchange rate of $1 = 5900 or 6000 rubles. But in new rubles!

The leading Russian oil-companies are either getting out of existing deals with their Western partners or are trying to renegotiate them, sensing more profit to come from the oil market, especially from crude. That is why several important Western oil-investment projects are frozen and are to be stalled for indefinite period.

Here are some, the most important.Amoco Corp. is involved in Priobskoye oil project in Western Siberia with estimated reserves of 4,7 billion barrels. Investment is 100 million USD so far with 57 billion USD projected. Northern Territories project / Nenets national autonomy/ is attacked by Conoco / a unit of Du Pont Co/ eager to develop its 500 million barrel potential . Investment - about 95 mln USD so far with projected 1,5 billion USD. Timan Pechora project / North-Western Siberia/ attracted Texaco Corp, Amoco, Exxon ans Norsk Hydro, who spent already millions of dollars , hoping to profit from its 2,4 billion barrel potential. 50 billion USD investment is envisaged. Mobil, Exxon and Texaco went to Sakhalin to explore its oil reserves at estimated 150 million USD cost. All these projects are stalled due to joint resistance of local authorities and Russian oil companies, who are turning to strong protectionism now.

The strongest Russian banks, such as ONEXIMBANK and MENATEP BANK are taking hold of oil fields. In Russian Parliament only Communists stood before against foreign investments into the energy sector. Now they found an ally - their former arch-enemy multi-billionaire Berezovsky, who is quickly becoming Russian oil-magnate N 1. He uses his governmental position of a Deputy Chief of the Russian Security Council to strengthen his own gains and his protectionist policy in energy sector.

The Russian government authorized for the first -time since NEP (1922-1924) a selling of gold ingots to Russian citizens and even to "foreigners". Up to one kilo of gold can be bought. The price is lower, than that of London gold market - about $ 300.00 fix.

The IMF in 1996 , the first year of its loan to Russia, targeted the budget deficit at 4% and settled for 8.2%. In 1997 the government collected $29 of its targeted $56 billion in revenue and the IMF settled for that. In the last quarter of 1997 Moscow met targeted revenues and budget deficits when IMF allowed it to consider "projected collections" as "collected" another way of saying there are no conditions to giving $10 billion to Russia. For 1998 the IMF has abandoned revenue collections and told Russia to collect slightly more than its poor performance last year. Many worry that IMF medicine may exacerbate rather than relieve economic problems. Still no one admits that corruption creates a bottomless pit and the only growing economy is that of bank deposits in foreign banks by Russian officials. A new form of international "transfer payments" has been created from American tax payers to Russian officials.

The IMF continues to either believe or pretend that Russia without rule of law has a reform process and is strongly committed to it. It has made two $800 million loans for "pension reform" and down-sizing of the coal industry, ignoring that concurrently those in power continue to "export" ten times that amount every two months. The IMF pay lip service to "cost recovery reforms" of the utility industry when there is no GDP or per capita income to support the payment of bills for such services.

Last year Russia's budget revenue declined to 10% of GDP There are 250 enterprises that each owe more than $17 million - for a total of $4 billion, equivalent to 1% of GDP.

The Big 7 controlling half of The Russian Economy

1. Alfa Group - Mikhail Fridman - Pyotr Aven (formet Minister of FER)

2. Inkombank - Vladimir Vinogradov -

3. LogaVaz - Boris Berezovsky former deputy secretary RF Security Council) matematician, Started a car dealership in 1989.

4. Rosprom Group 9Menatep) Mikhail Khodorkovsky - student of chemistry - Komsomol deputy secretary - made in money in computer trading - bank incorporated in 1991. Made his money in currency speculation.

5. Most Group - Vladimir Gusinsky - former theatre director- sold office supplies in the 1980's organized the bank in 1989 and became the bank for the city of Moscow.

6. ONEXIMBANK - Vladimir Potanin ( for a while Russia's first deputy prime minister) Now the most powerful bank in Russia as the paying agent for and depository of the Russian government. He started the firm with $10,000 an it now has $38 billion in assets (10% of Russia's GDP).

7. SBS - Agro (formerly Stolichny) Alexandr Smolensky. Acquired Agroprombank in 1996 with 1500 branches.

THE QUESTION

THE ANSWER

On 5 March, the Russian government reached agreement on its 1998 privatization program (theft of the nation from its owners the Russian people with the proceeds paid the to State). The program includes tens of enterprises to be privatized, including the Rosneft oil company, the Svyazinvest telecommunications group, Domodedovo airlines, Kama pulp and paper mills and the engine-maker Russky Diesel. This year's budget assumes that theft should raise about RUB 8 billion (USD 1.3 billion) for the state ( the Russian in power). 1997 privatization sales brought nearly RUB 19 billion (USD 3.2 billion) into the state coffers (from which it has disappeared).

Question: if the State is spending this money for the welfare of the Russian people, how then can a few citizens wind up owning all the property after the privatization is completed and all the money has been spent. Where did the buyers get the money to buy? In 1989 all Russians had no money.

Land for sale. Russia's first auction of land took place 5 March in the town of Balakovo in the Saratov region. The most expensive plot, located in downtown Balakovo, went for RUB 160,000 (USD 26,000). The farm land was definitely cheaper; for example, 20 hectares of grain field cost just RUB 500 (USD 80). In total, the auction generated sales of RUB 468,000 (USD 77,000).

According to Russian central bank deputy chairman Alexander Turbanov, even though the clean-up campaign of recent years has involved the withdrawal of hundreds of banking licenses, measures to liquidate or administer failed banks have proceeded either very slowly or not at all.

Ukraine is supposed to pay Russia's Gazprom USD 750 million by the first of October 1998. The sum includes all of Ukraine's debts to Gazprom except the interest for belated payment. Gazprom CEO Rem Vyakhirev said earlier that Ukraine owed a total of USD 1.2 billion. According to Pustovoytenko, the proposal by which Ukraine would pay some of its debts by turning over some of its pipelines, pumping stations and storage facilities to Gazprom had been dropped for the time being. The agreement is expected to be signed soon.

The Bank of Russia lowered the refinancing rate from 36% to 30%, effective 16 March.

Russia State ownership in Russian banks law went into effect on 10 March. Russia's central bank is mandated to retain stakes with voting rights amounting to 50 per cent plus one vote in Sberbank (presently the central bank holds a 55% stake), Vneshtorgbank (97%), and three foreign banks: Moscow Narodny Bank of London (89%), Eurobank of Paris (78%), Ost-West Handelsbank of Frankfurt (51%).

†hispank Estonia's largest bank at the end of February. At the end of February, †hispank (Union Bank) declared total assets of over EEK 10 billion (USD 690 million). The next largest bank was Hoiupank (Savings Bank) with total assets of EEK 9.5 billion (USD 660 million). Hansapank was third with EEK 9.4 billion (USD 650 million).

Tallinn gets investment-grade rating. Moody's has assigned a rating of Baa1 to the City of Tallinn's upcoming Eurobond issue. This is the first time that the debt of a local Estonian government has been rated. Tallinn's rating is the same as the Estonian state.

Yeltsin dismisses his entire cabinet. On Monday (23 Mar), President Yeltsin dismissed the entire government of Viktor Chernomyrdin.

Former energy minister Sergei Kiriyenko, 35, was named acting prime minister. Previously he has been head of the Nizhny-Novgorod Garantiya Bank and chairman of Russia's third largest oil refinery company, NORSIoil.

Russian government plans to dismiss 200,000 state workers. The job cuts include 68,000 teachers and 22,000 medical staff, are part of a plan to sack 10-15% of employees on the federal government payroll.

Effective January 1999 the Russian central bank will require all commercial banks in Russia to meet a new minimum own capital requirement of at least ECU 1 million. Hundreds of small banks could go under as a result of the requirement.

Belarus central bank bans "foreigners" to trade in Belarus rubles. The value of the Belarus ruble continued in free fall the following day. According to Russia's central bank, the prohibition had been intended to affect Russians, who are the main forex traders in Belarus. At the same time, Russian enterprises operating in Belarus have switched over to Belarus rubles. The Bank of Russia has ceased to quote an official exchange rate for the Belarus ruble and has encouraged all Russian citizens to stop their trading in Belarus rubles.

Russia-Belarus relations have also stumbled in recent months as Russia has begun to demand payment for gas deliveries in cash. Belarus has responded by threatening to cut off Russia's gas deliveries passing through its territory on the way to Western Europe.

President Alexander Lukashenko ordered all enterprises to roll back their prices to 1 March levels. The intended effect was to prevent further price rises that are the result of the collapsing external value of the Belarus ruble. On 25 March the central bank froze non-resident bank accounts in Belarus rubles. That's democracy at work for you.

MOSCOW (RFE/RL) - Newspaper Accuses Kirienko of Shady Financial Deals
http://www.rol.org/library/top-stories/nis032698a.htm

PETROPAVLOVSK-KAMCHATSKIY (Eastview) - Regional Political Leader Implicated in Murder Attempt
http://www.rol.org/library/top-stories/nis031798i.htm

MOSCOW (RFE/RL) - Prosecutors Charge Former Privatization Officials
http://www.rol.org/library/top-stories/nis032698b.htm

MOSCOW (Paul Goble) - Regions and Russian Reform
http://www.rol.org/library/top-stories/nis032698d.htm

MOSCOW (Eastview) - Corruption Allegations Against Russian Prosecutors
http://www.rol.org/library/top-stories/nis032398g.htm

MOSCOW (Eastview) - Moscow Prison Guards Allegedly Serving as Drug Couriers for Inmates
http://www.rol.org/library/top-stories/nis032198b.htm

TBILISI (RFE/RL) - Newspaper Claims Arab Connection in Shevardnadze Assassination Attempt
http://www.rol.org/library/top-stories/nis032698c.htm

TIRANA (RFE/RL) - Albanian President Declares War on Corruption
http://www.rol.org/library/top-stories/cj032698b.htm

For detailed information and related links go to http://www.rol.org

Kubanychbek Jumaliev was appointed new Kyrgyz Prime Minister on 25 March. by President Askar Akayev.

Aral Sea

O. Ye. Semenov, KazNIIMOSK: The amount of aerosols falling on one square kilometer in the district of Takhnatash, Karakalpakstan reaches 79 metric tons per year, and in the Aralsk district of Kazakstan it reaches 40 metric tons per year. Along the actual shores of the Aral Sea, 100 tons are deposited on the eastern side, and 50 on the north. Near Uyala in the southeast, measurements of 145 tons per year have been recorded! And this is in addition the background level of deposit of about 45 tons per year. The concentration of salts in aerosols in general is 5% south of the Aral Sea but reaches 40% in the worst areas, near the Amudarya Delta. Particles .0001 mm in size are transported 600km.

<- To Tidbits March 1998