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Newsline - July 17, 1997


The first meeting of the Russia-NATO Joint Council, scheduled to convene at the ambassadorial level in Brussels on 17 July, has been postponed, an RFE/RL correspondent in the Belgian capital reported. The council was created under the Founding Act signed by Russia and NATO in May. According to AFP, the joint council is to have three top officials: NATO Secretary-General Javier Solana, a Russian official, and a rotating member from one of the NATO countries. However, NATO officials reportedly want Solana to preside over all the council meetings, while Russian officials advocate that the chairmanship rotate among the three top members. An unnamed NATO official told RFE/RL that the meeting is likely to take place within the next few days. The first ministerial-level meeting of the Joint Council is scheduled for September in New York.


First Deputy Prime Minister Boris Nemtsov, who is also fuel and energy minister, says the government will pay 123 billion rubles ($21 million) in wage arrears to workers at nuclear power plants this month, ITAR-TASS reported on 17 July. He also said all back wages would be paid by the end of the year. Nemtsov made the promises while meeting with protesters who picketed government headquarters. Hundreds of protesters arrived in Moscow on 16 July following a two-week march begun by workers at a plant in Desnogorsk (Smolensk Oblast), some 360 kilometers from Moscow. Demanding adequate financing to pay wages and ensure the safety and security of nuclear power stations, the protesters marched in shifts and were joined along the way by workers from several other nuclear plants. Nemtsov promised to make the safety of nuclear facilities a "top priority goal" for the government.


Following discussions on 16 July with Prime Minister Chernomyrdin, President Boris Yeltsin signed several decrees on downsizing and streamlining the armed forces, Interfax reported. The total strength of the armed forces is to be cut by 500,000 to 1.2 million. The ground troops command is to be abolished; the strategic missile forces, space defense force, and anti-aircraft missile units are to be combined; and the air defense forces are to be merged with the air force, according to ITAR-TASS. The budget of the Defense Ministry's central apparatus will be cut by almost half to no more than 1 percent of the defense budget. It is unclear how these measures relate to proposals for restructuring the military that Defense Minister Igor Sergeev and Defense Council Secretary Yurii Baturin are supposed to submit to Yeltsin by 25 July.


At least seven people were killed and 50 injured when a three-story barracks collapsed at a military school in Tomsk, Russian news agencies reported on 17 July. Some 150 people were in the building when it collapsed, and three or four are still trapped under the rubble. According to ITAR-TASS, the building was a two-story seminary before 1917. A third level was built during the 1950s.


Russian military officials have expressed satisfaction with this year's spring draft, claiming more than 214,000 people responded. "Rossiiskie Vesti" on 16 July reported that the ranks of Russian armed forces' non-commissioned officers and enlisted men are currently 85 percent staffed, which the newspaper said was a "record for the last five years." But "Nezavisimaya Gazeta" the same day pointed out that one-third of the conscripts arrived at induction centers underweight and that a small number of draftees have criminal records or substance-abuse problems. Draft-dodging remains a problem, with more than 31,000 conscripts not responding to the call. Some observers say it will be impossible to have an all-volunteer army by 2000 because contract soldiers earn more than three times the amount conscripts are paid.


Yeltsin announced on 16 July that tougher measures will be taken to improve tax collection from enterprises, Russian media reported. Appearing on NTV, Yeltsin said the directors of some 50 large enterprises must be summoned to cabinet meetings and told that they must pay their back taxes. If they fail to do so, he said, either they will be made to resign or their enterprises will be forced into bankruptcy. In a recent radio address, Yeltsin blamed incompetent enterprise directors for many of Russia's economic problems (see "RFE/RL Newsline," 11 July 1997).


The "Mir" space station suffered another problem on 17 July, Russian media reported. Early in the morning , a power loss was caused by malfunction in the station's orientation system. The station's solar panels were unable to position themselves toward the sun and temperatures fell inside the space station. All non-essential systems have been shut down, and Reuters reports the crew is now working in darkness. There are also conflicting reports as to whether U.S. astronaut Michael Foale has been given permission by NASA to take the place of ailing "Mir" commander Vasilii Tsibliev in repair work scheduled to start on 24 July. Russian media on 16 July had reported Foale would replace Tsibliev.


Moscow and Tokyo continue to disagree over the cause of the 2 January accident in the Sea of Japan, in which the Russian tanker "Nakhodka" sank spilling oil onto the Japanese coast, according to Interfax. Russia says the sinking was caused by a collision with a submerged object, while Japan says an aging and possibly corroded section of the ship fell off during a heavy storm. The findings of the joint investigating committee will determine whether the owner of the tanker receives insurance money. Meanwhile, the Russian rescue ship "Topaz" has been impounded in the port of Pusan, South Korea. The ship was returning to Vladivostok from the Persian Gulf where it took part in towing exercises. It had docked at Pusan port to replenish food and fuel supplies when South Korean officials decided to impound the vessel for reasons not yet known.


The 20 largest Russian banks control 57.8 percent of the total assets in the banking system, Central Bank Chairman Sergei Dubinin told journalists on 15 July. The 220 largest banks control 86.5 percent of total assets. Currently there are 1,881 registered Russian banks, down from some 2,500 at the end of 1995. About half of Russian banks currently have assets of less than 1 million ECU, Dubinin said, noting that the combined assets of those banks totals just 1.7 percent of all assets in the Russian banking system. He added that after 1 January 1999, all banks with less than 1 million ECU in assets would be liquidated or reorganized--for instance, into affiliates of larger banks.


Communist State Duma deputy Gennadii Khodyrev announced on 16 July that he will contest the result of the 13 July gubernatorial election in Nizhnii Novgorod Oblast, RFE/RL's correspondent in Nizhnii Novgorod reported. According to the official results, Ivan Sklyarov outpolled Khodyrev by 52 percent to 42 percent. However, Khodyrev told journalists that when he and his staff saw documents on the voting, "our hair stood on end." Among other things, he claimed that some 60,000 voters--a suspiciously large number--cast ballots before election day and that almost all of those were for Sklyarov. In addition, Khodyrev questioned official tallies showing that 43,000 votes were cast during the final hour polls were open on 13 July. Khodyrev also confirmed he will sue First Deputy Prime Minister Nemtsov for remarks he made while campaigning on Sklyarov's behalf, ITAR-TASS reported.


The organizing committee of the Russian-Belarusian movement Popular Unity, which advocates the full integration of Russia and Belarus, held its first meeting in Moscow on 15 July, "Nezavisimaya gazeta" and "Kommersant-Daily" reported. State Duma deputy Nikolai Gonchar was unanimously elected chairman of the movement. Representatives of Boris Fedorov's Forward, Russia! party and Aleksandr Lebed's Russian People's Republican Party, among other groups, have also joined Popular Unity. Other outspoken Russian advocates of integration with Belarus, including Moscow Mayor Yurii Luzhkov and Communist Party leader Gennadii Zyuganov, are as yet not involved, although Communist representatives joined the movement's organizing committee. Popular Unity seeks to hold a referendum in both countries that would ask voters one question: "Do you support the unification of the Republic of Belarus and the Russian Federation into a single union (federative) state?"


Representatives from countries and organizations that are guarantors of the Tajik peace process met for the first time in Dushanbe on 16 July, according to RFE/RL correspondents there. They reviewed the first meeting of the Tajik Reconciliation Commission, which had taken place in Moscow earlier this month. They also agreed to meet every Tuesday or more often if necessary. The group is made up of the Russian and Kyrgyz ambassadors to Tajikistan; representatives from Pakistan, Afghanistan, and Iran; and the heads of the OSCE mission in Tajikistan. Absent were representatives from the Organization of the Islamic Conference, Kazakhstan, Turkmenistan, and Uzbekistan who for "technical reasons" were unable to attend. Uzbekistan did not sign the April Tehran protocol, nor did it send an official to the 27 June signing of the Tajik National Peace Accord in Moscow.


The prices for bread and transportation have risen by some 40 percent, according to Interfax on 15 July. At the beginning of July, wages, pensions, and student grants were all raised. The official minimum monthly wage is now 750 som ($12) and the minimum monthly pension 1,400 som ($22).


Failure to meet grain quotas has led to more dismissals in Turkmenistan, according to RFE/RL corespondents in Ashgabat. A presidential decree was issued on 16 July replacing the leaders of Mary Province, which fulfilled only 50 percent of the 1997 grain plan. Earlier this month, many officials from Akhal Province were sacked for failing to meet grain demands. Akhal and Mary produce the bulk of Turkmenistan's grain.


Gohar Ayub Khan was Turkmenistan from15-16 July to meet with President Saparmurat Niyazov, according to ITAR-TASS and Interfax. The two leaders discussed the situation in Afghanistan and agreed that continued U.S.-Russian dialogue was essential for securing peace in Afghanistan. They also discussed the proposed gas pipeline from Turkmenistan to Pakistan, saying they hope the project would be realized soon. Niyazov said his country could supply southern and southwestern Asia with "energy supplies for many years to come." Khan also sought Niyazov's help in mediating Pakistani disputes with India.


Khan arrived in Baku on 16 July for a two-day official visit, ITAR-TASS and Turan reported. In a meeting with his Azerbaijani counterpart, Hasan Hasanov, and with President Heidar Aliev, Khan said his country will support Azerbaijan's position in the Karabakh conflict both at bilateral meetings and in international forums. Possible areas for expanding cooperation were discussed, including the training of Azerbaijani students and military personnel in Pakistan. Khan proposed that part of Azerbaijan's Caspian oil could be exported by the planned pipeline from Turkmenistan via Afghanistan to Pakistan.


The World Trade Organization granted Azerbaijan observer status on 16 July and will begin negotiations on granting it full membership, Western agencies reported. This process is likely to last two or three years. Also on 16 July, state economic adviser Vahid Ahundov told journalists in Baku that Azerbaijan's GDP grew by 5.2 percent during the first six months of 1997 and foreign investment by 45 percent, compared with the same period last year, according to Interfax. In 1996, Azerbaijan registered GDP growth of 1.6 percent after five consecutive years of decline.


The International Development Association (IDA) has approved a $20.9 million loan to Georgia to help decentralize government functions, according to an RFE/RL correspondent. Most of the loan will be used to improve roads, drainage, lighting, water supplies, clinics, schools, and to build revenue-generating facilities such as markets and transport facilities. The remainder will be used to speed up the decentralization process and help local governments to program, finance, and manage facilities and deliver public services.


Director-General of the International Atomic Energy Agency Hans Blix, during his official visit to Tbilisi from 15-16 July, was scheduled to meet with President Eduard Shevardnadze and parliamentary speaker Zurab Zhvania, according to ITAR-TASS. The main topic of discussion was the Georgian nuclear reactor at Mtskheta. Zhvania expressed concern over the danger to Georgia in the event of an accident at Armenia's Medzamor nuclear power plant, "Rezonansi" reported on 16 July, as cited by the Caucasian Institute for Peace, Democracy, and Development. The Medzamor plant shut down in 1989 and reopened in 1995. It is shortly to be closed for routine maintenance. Blix is scheduled to arrive in Yerevan on 17 July.


The parliament on 16 July confirmed Valery Pustovoitenko as prime minister, Ukrainian media reported. A leading member of the People's Democratic Party, the 50-year-old Pustovoitenko was nominated by President Leonid Kuchma and was head of Kuchma's election team in the presidential campaign in 1994. He is regarded as one of the president's closest associates. From 1991-1993, Pustovoitenko chaired the Dnepropetrovsk city council and executive council. He has said that he will continue the policy of radical economic reforms. Kuchma told reporters that the parliament will be more involved in the formation of the new government than was the case in the past. But he declined to say what changes he intended to make in the cabinet.


For the second time in just over a month, the parliament on 16 July rejected a presidential proposal to restore tax and tariff breaks for foreign investors . The tax breaks were abolished this spring at the request of the government. They applied to investors whose ventures were registered before 1995. President Kuchma has urged the parliament to restore the benefits for companies involved in production. After rejecting the tax breaks, the parliament asked the government to provide more detailed information showing how tax breaks would help production. Ukraine has received only $1.5 billion in direct foreign investment since 1991. The U.S. telecommunications giant Motorola announced in April it was leaving Ukraine because of red tape and obstacles to foreign investment.


Tallinn and Riga on 16 July firmly declined Russia's offer to provide the Baltic States with security guarantees, BNS and ETA reported. The offer was made the previous day in Moscow by Foreign Ministry spokesman Gennadii Tarasov, who commented that Russia has a "constructive alternative" to the Baltics' possible entry to NATO; namely, security guarantees. Estonian Premier Mart Siimann responded by saying his country "sees international security guarantees in unification with European structures, including NATO." He added that the best guarantee Russia could offer would be its "transformation into a democratic country with a well-developed economy that we could trust." Latvian President Guntis Ulmanis commented that "under no conditions, even on the level of a discussion, will we speak about Russian guarantees." Although there has been no official reaction from Vilnius, similar proposals have in the past been rejected by Lithuania, according to RFE/RL's Lithuanian service.


Israel's Simon Wiesenthal Center has urged the Lithuanian government to arrest and bring to trial Kazys Gimzauskas, a retired machinist accused of helping Nazis kill Jews during World War II, BNS reported on 16 July. The 89-year-old Gimzauskas was stripped of his U.S. citizenship last year for his alleged wartime activities. The Israeli Nazi-hunting organization sent a letter to President Algirdas Brazauskas calling on the Lithuanian authorities to "move against Gimzauskas following a indefinitely suspend legal proceedings on medical grounds against his superior, Aleksandras Lileikis" (see "RFE/RL Newsline," 16 July 1997). Gimzauskas and Lileikis both served during World War II in the Lithuanian Security Police, which was subordinated to the Nazis.


Aleksander Kwasniewski signed the country's first post-communist constitution on 16 July. Speaking after the ceremony, which was broadcast live on television, Kwasniewski said the signing marked the end of an eight-year period of provisional laws. He said the new constitution ensured a "modern state, guaranteeing all basic rights and freedoms." The document, which was approved in a popular referendum in May, commits Poland to a democratic system based on the rule of law and guarantees personal freedoms and private ownership. It will become valid in three months. The Polish Constitutional Court on 15 July ruled that the referendum on the basic law was valid, despite low turnout.


Polish Prime Minister Wlodzimierz Cimoszewicz told journalists in Warsaw on 16 July that the EU's assessment of Poland's progress towards meeting the requirements for membership was even more positive than Poland had expected. He welcomed the news that the EU considers Poland to be among the six forerunners for membership in the next few years. Czech Prime Minister Vaclav Klaus told journalists in Prague he is glad about the developments and was prepared for intensive preparations for the start of negotiations.


The Polish parliament convened a special session on 16 July to pass an emergency aid program. The government is seeking authority to double the limit on borrowing from the central bank to 5 billion zloty ($1.5 billion) and to borrow $300 million from the World Bank. Each family whose house was affected by flooding will receive 2,000 zloty ($606) in immediate aid. The floods have killed 43 people in Poland and damaged 40 towns and 600 villages. Meanwhile, in the Czech Republic, where 37 people died in the floods and five are reported missing, the government on 16 July decided that people who lost their homes in recent floods will each receive some 150,000 koruna ($4,400) in immediate aid and preferential loans, Prime Minister Vaclav Klaus told journalists. He said those who lost their homes and are planning to build new ones will be eligible for a low-interest loan of at most 850,000 koruna. The loan will be due in 20 years with a three-year grace period.


The European Commission on 16 July criticized the Slovak government for its lack of democratic reforms, saying the country's current political problems make it ineligible for EU membership negotiations Hans van der Broek, the EU external relations commissioner, told the European Parliament in Strasbourg that "although the quality of democracy could be improved in most countries" seeking to join the EU, "only in Slovakia are political problems sufficiently severe to rule out in themselves negotiations." Van der Broek said Slovakia could soon meet criteria for membership negotiations on economic grounds but that it lacks stability of political institutions.


Parliamentary Foreign Committee chairman Dusan Slobodnik on 16 July told journalists that the decision by the European Commission to exclude Slovakia from the first wave of EU expansion talks is "not definitive" and that the "final verdict will only be announced in Luxembourg in December." Jan Luptak, deputy parliamentary chairman and head of the far-left junior coalition partner, the Slovak Workers' Party, rejected what he called "EU and NATO dictates." Opposition Christian Democratic Movement chairman Jan Carnogursky said on 16 July that "it is the fault of Premier Vladimir Meciar's government that Slovakia finds itself internationally isolated" and that Slovakia could enter the EU only if there were a change of government. The Democratic Party on 16 July called on Meciar's cabinet "to resign and leave political life forever due to the absolute bankruptcy of its policies and the serious damage it has inflicted on Slovak citizens."


A spokesman for the Finance Ministry announced on 16 July that the government has decided to introduce import tariffs on consumer goods and food, Slovak radio reported. The tariffs will initially amount to 7 percent of the goods' value and will decrease to 5 percent on 1 January 1998 and to 3 percent on 1 July 1998. They will be abolished on 31 December 1998.


Meciar, speaking on Slovak Television on 16 July, criticized the way in which U.S. Ambassador to Slovakia Ralph Johnson explained Slovakia's failure to be in the first wave of NATO expansion talks (see "RFE/RL Newsline," 15 and 16 July 1997). "Dialogue cannot have a form where the ambassador of one state interferes with the political affairs of another country without dialogue with its government," Meciar said. He also noted he had warned U.S. Secretary of State Madeleine Albright at the NATO summit in Madrid that she was receiving false information on Slovak developments from Ambassador Johnson. According to Meciar, "Slovakia has so far lost nothing by not having been invited to join NATO in the first expansion wave in Madrid." In his view, the Madrid summit communique indicates Slovakia was merely given a "two-year postponement."


Premier Gyula Horn, addressing a meeting of Foreign Ministry staff in Budapest on 16 July, said the EU should accept Hungary as a full member in 2000, following two years of accession negotiations. EU officials had said earlier that the process of enlargement could last until 2002, but Horn voiced the opinion that accession should be decided by reviewing each country's performance. "Hungary's achievements are truly outstanding," he commented.


The 7,000 foreign troops who began arriving in Albania in April started to return home on 16 July. Some 390 Romanian soldiers left Gjirokaster for the port of Durres, and some Italian contingents will also depart shortly. Many leading Albanian politicians and Franz Vranitzky, the OSCE's chief envoy to Albania, want the force to stay on, however. They argue that it has provided a basic degree of security and stability that could break down without the foreigners' presence.


A meeting of the leadership of the Democratic Party decided in Tirana on 14 July that Secretary-General Genc Pollo will act as interim party leader. He replaces Tritan Shehu, who resigned in the wake of the party's crushing defeat in the 29 June elections. News agencies report there is opposition to making President Sali Berisha party chief, since many Democratic Party members blame him for the defeat. Some leaders prefer Eduard Selami, whom Berisha purged from the party in 1995 and who then left for the U.S.. Some members of the Central Election Commission have meanwhile called on Berisha either to resign the presidency--as he said he would do if the DP lost the elections--or give up his claim to the parliamentary seat he won in the 29 June vote. They argue that he cannot legally hold both offices at the same time.


Federal Yugoslav parliament speaker Dragan Tomic said in Belgrade on 16 July that he will cease to be acting federal president on 23 July. On that day, Slobodan Milosevic is expected to assume the federal presidency and resign that of Serbia, an RFE/RL correspondent reported from the Serbian capital. But opposition leaders on 16 July lodged an appeal with the courts against Milosevic's election by the parliament the previous day. The complaint alleges that under the law, the vote should not have taken place before 23 July. Observers charge that Milosevic sought to get the election out of the way quickly before the Montenegrin parliament held a scheduled meeting on 22 July. Milosevic's backers have been losing ground in Montenegro's governing party recently (see "RFE/RL Newsline," 16 July 1997).


President Momir Bulatovic held a meeting with his closest supporters near Podgorica on 16 July to launch a petition drive for his reelection to the presidency. His recent ouster as president of the governing Democratic Socialist Party (DPS) has cast his political future in doubt. Meanwhile in Podgorica, the members of the DPS Steering Committee that ousted Bulatovic reconstituted themselves under the name of Coordinating Committee, an RFE/RL correspondent reported from the Montenegrin capital.


Western officials said in Banja Luka on 17 July that four hand grenades were tossed into a British base during the night. British troops detained several suspects, but the extent of damage or injuries is unclear. This is the latest in a series of attacks against Western personnel in the Republika Srpska following NATO's recent direct intervention against indicted war criminals (see "RFE/RL Newsline," 16 July 1997). SFOR spokesmen said in Sarajevo on 16 July that they have no evidence that the incidents against Western personnel are related, but media in the former Yugoslavia suggest they are part of a Serbian campaign to discourage further arrests of war criminals. Meanwhile in Pale, Momcilo Krajisnik, the Serbian member of the Bosnian joint presidency, urged Serbs not to act against foreign personnel.


U.S. and French officials in their respective capitals have denied press reports that France is opposed to apprehending war criminals (see "RFE/RL Newsline," 16 July 1997). In Zagreb, the weekly "Globus" suggested that NATO may be planning to catch Croatian war criminals soon. Many individuals linked to atrocities against Muslims and Serbs are living openly in Herzegovina, and some have moved to Croatia. In Vienna, the daily "Die Presse" reported from Banja Luka that many Serbs would like to see war criminals arrested but are afraid to say so publicly. The newspaper quoted a Bosnian Serb professor as saying that Croats and Muslims should be arrested as well as Serbs to counter the Serbian view that the Hague-based tribunal is anti-Serb.


In Zenica, a court on 16 July sentenced two French citizens to 20 years in prison for murder in connection with a robbery attempt. The two were former Islamic fighters in the Bosnian army. In Mostar, representatives of Muslim, Croatian, and Serbian refugees met for the first time. They will meet again soon to discuss a joint proposal for the return of refugees to their homes now under the control of another nationality or to provide for compensation for lost homes and property.


Unknown persons, including one in a police uniform, robbed passengers on two tourist busses from Germany on 13 July outside Obilic near Pristina. The robbers' haul totaled $90,000 in cash and $40,000 in gold. Local ethnic Albanian journalists said the incident marked the 11th time this year that busses bringing Kosovars home on visits from Western Europe had been subjected to armed shakedowns. Ethnic Albanians in previous years have reported shakedowns by Serbian police at airports as well as on busses.


Emil Constantinescu said at a press conference in Tokyo on 15 July that Romania finds itself now in a situation similar to that of Japan in the 1950s. The successes of the Japanese economy, he said, were not due to any "outstanding natural resources" but to its "outstanding human resources." Like Japan at that time, Romania has highly-educated human resources and good managers, he said. Also on 15 July, Constantinescu was received by Emperor Akihito. He travelled the next day to Kyoto and Osaka on a prviate trip to meet with businessmen there. On 17 July, he begins a three-day visit to Indonesia.


Victor Ciorbea said at a Bucharest press conference on 16 July that his government has fulfilled all the conditions stipulated in the memorandum signed with the IMF in April. A delegation from the fund recently arrived in Bucharest to begin assessing Romania's economic performance since the signing of the memorandum. The fund's chief negotiator for Romania, Poul Thompsen, will arrive on 22 July. Ciorbea said the "macrostabilization of the economy" has become "reality" and that the budget's deficit and the inflation rate are within the limits agreed on with the IMF. He added that the volume of foreign-currency reserves exceeds the provisions of the agreement, RFE/RL's Romanian service reported. Ciorbea also commented that the "de-Sovietization" of the intelligence services and the Foreign Ministry must be completed.


A Swiss diplomat has been detained by the police in Bern on suspicion of spying for the Romanian intelligence service, Romanian media reported on 17 July, citing foreign agencies. The diplomat was arrested on 1 July and has admitted his guilt. He is accused of passing on confidential political and economic information between 1991 and 1997 in exchange for cash and other "material rewards."


The parliament on 16 July ratified the European Charter of Local Self-Government. The move follows criticism of its failure to do so in a recent report by the Council of Europe. Moldova had signed the charter in May 1996 but failed to ratify it until now owing to the opposition of parliamentary deputies who had reservations about some of its articles. Moldova must now amend legislation on local administration and local elections, Infotag reported. In other news, the Socialist Unity-Edinstvo faction has added its voice to those criticizing the inauguration of a private Slavic university (see "RFE/RL Newsline," 15 July 1997). It called for the opening of a state-financed Slavic university.


Mate Granic on 16 July met with Bulgarian President Petar Stoyanov and Premier Ivan Kostov, an RFE/RL Sofia correspondent reported. Following their meeting, Kostov said they had discussed the creation of a free trade zone and ways to share experience over help from international finance institutions. The previous day, Granic held talks with his counterpart, Nadezhda Mihailova. and with premier Ivan Kostov. He is the highest Croatian official to visit Bulgaria since Croatia declared its independence. In other news, Foreign Minister Mihailova told a press conference in Sofia on 16 July that the government has the necessary public support to implement reforms. She added that "we are optimistic that we shall soon overcome our economic problems and...reform delays which impeded our way into the European Union," Reuters reported.


The parliament on 16 July amended the law regulating the activities of insurance companies to put foreign companies on an equal footing with local ones, an RFE/RL Sofia correspondent reported. The amendment also bars insurance companies from engaging in other commercial activities, such as providing security services. Private insurance companies mushroomed after the collapse of communism and are widely believed to serve as cover for organized crime and money laundering. The amended law reflects the hope to attract foreign insurance companies and break the monopoly of local firms on the insurance market.

Patrimonialism in Post-Soviet Russia

by Donald N. Jensen

"Much of what we [in the West] took for granted in our free market system and assumed to be human nature was not nature at all but culture," Federal Reserve Board Chairman Alan Greenspan said at the Woodrow Wilson Award dinner in New York in June. Dismantling a centrally planned economy such as the one that existed in the former Soviet Union, he added, does not automatically establish a free market. In fact, one aspect of Russia's culture--what scholars such as Richard Pipes and Max Weber have called patrimonialism--has ensured that its post-Soviet political and economic transformation would be especially difficult.

According to Pipes's definition, the sovereign of a patrimonial state views himself as both the ruler of the country and its proprietor. Political authority is seen as an extension of the rights of property ownership, with both land and people at the sovereign's disposal. Citizens are assigned duties but have no rights. By contrast, "the existence of private property as a realm over which public authority normally exercises no jurisdiction is the thing that distinguishes Western political experience from all the rest," Pipes argues.

In pre-1917 Russia, the tsar "owned" the nation, its vast resources, and its citizens. The state concentrated in its hands the most profitable branches of commerce and industry and gave favored parts of the nobility economic privileges in exchange for their support. The civil service practiced a byproduct of patrimonialism whereby responsibility for administering lands and collecting taxes was handed over to civil servants, who, in exchange, were allowed to keep a portion of what they collected. This practice fostered corruption, which became part and parcel of public administration. Although some aspects of patrimonialism weakened or disappeared in late tsarist Russia, the consequences for the growth of democracy in Russia were severe: a small middle class, weak state institutions, and underdeveloped rule of law.

Soviet communism was an especially virulent form of patrimonialism. Although Marxism denied the existence of private property, in practice the state and party "owned" virtually everything--publishing houses, sanatoria, public buildings, and businesses--as well as controlling state revenues. In reality, citizens' rights that existed on paper were for the state to give or take away.

Today Russia has to overcome not only the burden of its Soviet past -- too often conceived of only in macroeconomic terms -- but also a patrimonial inheritance of much longer standing, which is retarding the development of a law-based state. Privatization, the infamous loans-for-shares transactions, and the state's reliance on nominally private "authorized" banks to handle large amounts of its money are just three examples of patrimonialism's continued vitality.

In addition to its tendency to weaken democratic development, patrimonialism fosters a close relationship between business and politics. The government holds large chunks of stock in key industries. State efforts to regulate entrepreneurial activities are half-hearted. Patrimonialism means that political authority often depends on leaders' business contacts and leads to the dominance of clan politics, whereby politicians, businessmen, media entrepreneurs, and security forces use the political process to vie for control over the economy. Patrimonialism is also reflected in the increasing identity of Russian foreign policy with the economic interests of specific clans and lobbies. This trend was most clearly demonstrated by the appointment of tycoon Boris Berezovskii, who has extensive holdings in the oil and gas industries, to oversee implementation of the Chechnya settlement as deputy secretary of the Security Council.

With the government playing such a patrimonial role in property relations, crime is all-pervasive. There is traditional "organized crime," including drug trafficking, racketeering, and prostitution. White-collar crime, such as bribery, embezzlement, and the extortion of protection money, is also widespread, reflecting the weakness of the state. Official corruption, which President Boris Yeltsin's government sometimes sponsors in the name of economic reform and revenue raising, exists in the form of insider trading, preferential treatment in the granting of licenses, and the banking of state funds in favored financial institutions. Moreover, the government routinely uses corruption charges in the struggle for political power.

On a more positive note, there is unprecedented popular acceptance of civil liberties and elections as a way to legitimize political authority. Society is steadily being demilitarized and economy integrated into the international community. However, Russia's patrimonial heritage has ensured that corruption and lawlessness are not a just a passing phase but a systemic problem that is unlikely to go away anytime soon. "Corruption is an old problem of ours," Yeltsin said in a recent radio address. "Corruption is like weeds. No matter how hard you try to get rid of them, they keep reappearing." The fight against corruption is likely to be a long struggle.

The author is associate director of RFE/RL's Broadcasting Division.