In this issue:

Leading Russian Economist Announces Candidacy for Kraznoyarsk Governor

Putin Calls for Repatriation of Flight Capital

Economic Protests Occur In Russia, As Worries About Them Rise

Russian Wages Plummet 60% During 1990s

Uzbekistan Leaves GUUAM, Looks to Shanghai Cooperation Organization

From the Vol.1,No.14 issue of Electronic Intelligence Weekly
Russia and Eastern Europe News Digest

Leading Russian Economist Announces Candidacy for Kraznoyarsk Governor

Sergei Glazyev, the former chairman of the State Duma's (Parliament's) Economic Commission, has announced his candidacy for Governor of the Krasnoyarsk region, declaring, "I am ready for battle." The announcement marks a turning-point in his political career, and, probably also, significant shifts in Russia's internal political situation as a whole. In a strategic assessment published a month ago in the newspaper Zavtra, in reaction to the yearly State of the Federation address by President Vladimir Putin, Glazyev called for a reorientation of "national-patriotic forces" away from narrow focus on the center in Moscow, toward building up their in-depth political and economic base in the Russian regions. This reorientation, the noted economist said, was necessary due to what appeared to be the unbroken grip of the "oligarchs" on national decision-making. As long as their control persisted, no positive changes in economic policy could be expected from the Putin Administration.

Earlier this year, Glazyev was removed from his position as chairman of the Economic Policy Commission of the Duma, which had last year invited Lyndon LaRouche as the keynote speaker at a hearing on the global financial crisis.

The governorship of Krasnoyarsk, considered the richest of all Russian regions in terms of accessible natural resources, was left vacant by the sudden death of Gen. Aleksandr Lebed—with whom Glazyev had once worked very closely—in a helicopter crash on April 28. The election of Lebed's successor is scheduled for Sept. 8.

"The decision to become a candidate ... was not easy for me," said Glazyev. "My competitors are strong figures, well-known in the Krasnoyarsk region. But the problems of the region are not unknown to me. I have been there often ... and have many friends there." Although Glazyev is not a Krasnoyarsk native, he asserted: "In the last analysis, what is important is not where you were born, but what you are ready and capable of doing.... Right now the wealth of the Krasnoyarsk region is neither benefitting the population, nor Russia as a whole, but is enriching criminal structures.... This is absurd: The richest region of Russia has the lowest rate of growth of average income.

"I don't exclude that active counterattacks will be launched against me personally, and against my supporters," Glazyev continued. "But I am ready to fight. I have a concrete plan of action, to bring the region out of the crisis, and there is a program to restore economic stability to the region. I don't promise mountains of gold, but I will do all in my power, to ensure a life in dignity for the citizens, and to make sure that the economy works in the interest of the region."

Putin Calls for Repatriation of Flight Capital

Russian President Vladimir Putin has called on Russian businesses that channelled earnings abroad, most of it illegally, to bring the funds home. Aleksei Violin, his deputy chief of staff, said June 19 that the Russian government is drafting an amnesty law, allowing Russian citizens to declare, repatriate, and pay taxes on (at Russia's vaunted 13% flat income-tax rate) the funds they hold offshore, without facing prosecution. They would be allowed to leave 75% of their money abroad in its offshore havens. Addressing the Russian Chamber of Commerce and Industry, Putin motivated the proposal by saying, "It would be much more sensible for the business community, together with the government, to think about creating favorable conditions for investing Russian resources, including those placed in the West, in the Russian economy."

Although a partial flight-capital amnesty has figured in many proposals for generating investment within Russia, Putin's latest statement has to be seen in the context of the current hype about how (bankrupt) foreign speculators, with their Russian criminal partners, should seize this moment to make money by looting Russia—since they can't do so elsewhere. On June 13, Economics Ministry official A. Ulyukayev (one of the original Yegor Gaidar liberal reform team) announced that Russia has now shifted from net capital flight—of approximately $20 billion annually—to net capital inflow.

On June 15, Itar-TASS reported from Halifax, Canada that "halting of the exodus of capital from Russia was the main positive news" when Finance Minister Aleksei Kudrin met his Group of Eight counterparts, adding that "Kudrin stressed the importance of this news for the development of the Russian economy and its integration into the world economy." Also in early June, the notoriously politicized international rating agencies in unison upgraded Russia's credit rating, or issued improved forecasts on the Russian economy.

Quick to welcome Putin's announcement was Anatoli Chubais, another key figure in the ransacking of Russia through privatization and asset-stripping during the 1990s. Currently the head of United Energy Systems, the national electricity company, Chubais said that for too long the attitude towards illegal capital flows had been "ban and interdict." Now there would be a "more professional" approach to offshore accounts. On June 21, Mikhail Khodorkovsky's Yukos oil company became the first big Russian company to publicize its ownership structure, which consists of nested offshore holding companies, based in Gibraltar and the Isle of Man. Formally, the action by Yukos was done in preparation for a new type of international share issue, but Russian media were quick to call it a sign that "our offshore capital is ready to come home." Khodorkovsky himself is campaigning for the dubious scheme to boost Russia to the status of world's top oil supplier (see EIW #13, INDEPTH article, "What Did 'Energy Dialogue' at Bush-Putin Summit Mean?").

Economic Protests Occur In Russia, As Worries About Them Rise

"Recent cases of social unrest point to a dangerous trend in the way the public is responding to stagnating incomes and rising inequality," Prof. Stanislav Menshikov wrote in his June 14 column for The Moscow Tribune, analyzing the nervous sparring amoung the Russian government and President Putin's staff over what rates of economic growth to attempt to achieve. He suggested that hesitation to proceed with the drastic cuts in federal budget spending, advocated by Presidential adviser Andrei Illarionov, is due to some degree of realization that "Rocking the budget boat too much is dangerous and could easily destabilize the economic and financial balance."

During May and June there have been street protests over wage arrears (in the Far East) and utilities price hikes (in the interior cities of Voronezh and Ulyanovsk). On June 18, protester Valeri Sitnov was killed when hit by a truck while trying to blockade the Ulyanovsk-Penza highway, as part of a group protesting the local power company's cut-off of electricity to the town of Staroye Timoshenko. Another person injured in the protest action could not be hospitalized, because power had also been cut to the local hospital.

Concluding his June 14 speech on the 2003 budget, made before the Federation Council, Prime Minister Mikhail Kasyanov named his top priority: "...to secure the rate of growth, without which we will not be able to keep the situation under control, or, rather"—quickly adjusting his formulation—"to improve it."

Russian Wages Plummet 60% During 1990s

Academician Dmitri Lvov published an article in Versty magazine, No. 59, June 2002, "An Impartial View of the Russian Economy," which noted that during the 1990s, Russian wages and other labor remuneration fell by an astonishing 60%. He identified this as one of the most important problems to be solved if Russia is to reverse its economic catastrophe. He also identified this as a holdover problem from the Soviet era, but a problem that has deepened in the post-Soviet period. "We live in poverty," he wrote, "because we have an inadmissibly low level of labor remuneration, not because we work poorly. Not a single civilized country has such a low level of pay by the hour.... Over the 1990s, effective wages have declined by 60%."

Uzbekistan Leaves GUUAM, Looks to Shanghai Cooperation Organization

Uzbek Foreign Minister Abdulaziz Komilov announced June 14 that his nation was withdrawing from the GUUAM group, made up of Georgia, Ukraine, Azerbaijan, and Moldova, which was set up as a security alliance of these former Soviet states. Komilov said that at this time, "The economic dimension of the international organization is the most important for us," referring to Uzbekistan's relations with both the United States and Russia.

In terms of its security, analysts referred to by UPI, state that Tashkent's decision was linked to the recent meeting of the Shanghai Cooperation Organization, to which Uzbekistan belongs, which is establishing a legal basis for security cooperation among its members.

All rights reserved © 2002 EIRNS