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Strategies & Market Trends : Investment in Russia and Eastern Europe -- Ignore unavailable to you. Want to Upgrade?

To: Real Man who wrote (1110)	11/7/2000 12:47:07 AM
From: CIMA	Respond to of 1301

Putin's Power Base Deepening, Widening Summary Ahead of Russia's gubernatorial elections, incumbent governors have been banned from running, accused of corruption and brought in for questioning. The Kremlin is finding excuses to remove governors of questionable loyalty and replacing them with men loyal to President Vladimir Putin. In this way, Moscow will gain a stronghold over key regions, and Putin will control federal administrative bodies such as the Federation Council and the newly formed State Council. Analysis With upcoming gubernatorial elections in 32 of Russia's 89 regions, Moscow has targeted certain incumbent governors for replacement by men loyal to President Vladimir Putin. By replacing governors who have questionable alliances, Putin will indirectly secure control over some of Russia's most economically and politically lucrative regions. Furthermore, Putin will directly control the overall administration of the country. In the first days of August, several military and security officers announced they would run for governor of various regions in upcoming November and December elections. Some Russian newspapers claimed to have been provided with leaked documents outlining Putin's support for these officers and listing the incumbent governors to be replaced: Alexander Rutskoi, Aleksander Nazarov, Leonid Gorbenko, Ivan Shabanov, Pyotr Sumin, Eduard Rossel, Yuli Goryachev and Vyacheslav Lyubimov. The Kremlin has denied any involvement in the gubernatorial elections. Yet government agencies have targeted at least three of the listed governors, and one incumbent has already been banned from participating in the elections. __________________________________________________________________ Would you like to subscribe to our new services for just $49.95 each year? stratfor.com _____________________________________________________________ The 89 regional governors also make up the Federation Council, the upper house of Russia's parliament. By January 2002, the governors will not sit on the Federation Council but will have the option to join the newly created State Council, chaired by Putin. If Putin's allies replace his enemies in the gubernatorial elections, he will effectively control Russia's administration and economy. In his press to impose order and regain control over the regions, Putin is using a democratic forum to consolidate his power. While some regional governors have openly supported Putin and his initiatives, others have histories or philosophies threatening to his ability to rein in regional authorities. Governors who do not support Putin have been subject to tax raids, corruption scandals and court injunctions in the weeks preceding the gubernatorial elections. The targeted governors preside over some of the more important regions in Russia. For example, Alexander Rutskoi was incumbent governor of the Kursk region. Kursk sits on one of the world's largest iron-ore deposits, has eight oil and gas pipelines running through it and produces one-sixth of Russia's total electrical power. Rutskoi was banned from running in the Oct. 22 elections on a technicality failing to register his car. Rutskoi has a history of disloyalty and a reputation for acting independently of the Kremlin. As vice president, he staged an attempted coup against President Boris Yeltsin in 1993. He is also friendly with Boris Berezovsky, a Russian oligarch and a Putin enemy. Since Rutskoi was banned from participating in the elections, Maj. Gen. Viktor Surzhikov and Alexander Mikhailov participated in the Nov. 5 run-off to be the governor of Kursk. Surzhikov is an officer of the Federal Security Service (FSB), successor to the KGB, while Mikhailov is a local Communist Party leader who is reportedly loyal to Putin. Mikhailov won the election though Putin, a former KGB officer, faced a win-win situation in Kursk. ________________________________________________________ Promote global intelligence. Forward this newsletter to your friends and colleagues. ________________________________________________________ The Kursk region was the first of several areas targeted in the upcoming elections. FSB and military officers who are loyal to Putin and accustomed to taking orders are running against the more independent incumbents of economically important regions like Voronezh and the Urals regions. Putin allies also seek to gain control of regions of strategic rather than economic importance. Kaliningrad is a geographically independent region of Russia, west of the Baltics, and secures Russia's presence in Europe. The Kremlin has blamed Leonid Gorbenko, Kaliningrad's incumbent governor, for the region's economic decline and has accused him of corruption. His opponent, Adm. Vladimir Yegorov, is the Baltic Fleet commander and supported by Putin. If Putin's allies gain control of these regions, then Putin will indirectly control regional policy. By securing gubernatorial allies, however, Putin also gains direct control over a potentially powerful federal administrative body, the State Council. The new Federation Council would consist of regional envoys appointed by the governors. In its present form, the State Council is supposed to function only as an advisory body to the Kremlin. The Federation Council, however, can vote to change the constitution to transfer functional power over to the State Council. Several targeted incumbent governors have been opposed not only to the transfer of powers, but also to the creation of the State Council entirely. If Putin can assemble his allies into the Federation Council, he may be able to change the constitution to give the State Council real power. Putin, as chairman of the State Council, would have direct control over the council's proposed powers to review laws and the federal budget. Putin would also control the governors who appoint the representatives to the new Federation Council. At that point, Putin would consolidate his power over two federal bodies and economically or strategically important regions. _______________________________________________ SUBSCRIBE to our new service. Just go to stratfor.com _______________________________________________ (c) 2000 Stratfor, Inc. _______________________________________________ SUBSCRIBE to the free, daily Global Intelligence Update. Click on stratfor.com UNSUBSCRIBE by clicking on stratfor.com _______________________________________________ Stratfor.com 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet: stratfor.com Email: info@stratfor.com

To: Real Man who wrote (1110)	11/17/2000 2:17:06 AM
From: CIMA	Respond to of 1301

The High Price of Russia's Military Improvement Plan Summary President Vladimir Putin has taken critical steps toward enhancing Russia's military capabilities over the next five years. His recently approved plan calls for severe reductions in service people and civilians, with successive annual increases in defense spending. The coming year will likely bring large-scale strikes as military and civilian personnel demand justice and adequate social benefits. Analysis After months of wrangling, the Russian government has settled on a five-year plan to cut 600,000 service people and civilian staff from the military's 3.1 million-member payroll. The cuts, agreed to last week by Russia's Security Council and President Vladimir Putin, are expected to bring closure to debate on the issue. But among military personnel, the cutbacks which come as Moscow finally gives uniform pay raises to the armed services will likely incite strikes by personnel expecting to be discharged or laid off. The five-year plan for Russia's armed forces could change in both its scope and its schedule. But staff layoffs scheduled for the next year will provoke an aggressive response from government employees and their families. Russia plans to allocate nearly 20 percent of its federal budget to defense in the coming year. Putin's objective is to boost this amount annually. But this measure alone will not solve the problems of Russia's military. Russian soldiers are notorious for being underpaid and frequently forced to serve without pay. Moreover, food and housing is considered inadequate for a modern army, and equipment and training has been lacking for years. Russia has moved slowly to plan cutbacks. Generals have resisted the cuts, and civilian leaders hoped maintaining the military trappings of a superpower might preserve Moscow's diplomatic clout. But the strain of maintaining these troop levels merely advertised weakness. Putin demands an end to this approach. __________________________________________________________________ Subscribe now for just $49.95 per year! stratfor.com _____________________________________________________________ Putin's solution to the military's shortcomings is to increase the cost per soldier, affording each individual better training, resources and services. Money saved from cuts combined with budget increases will let Moscow multiply its spending per soldier over the next decade. The plan is to optimize Russia's combat capabilities and readiness, which are dismal at present. Cutbacks in the five-year plan will come mostly from the ranks of support and administrative personnel. A scheduled reduction of 365,000 by 2005 is under way for the Ministry of Defense. According to this plan, about 5,000 airborne troops will be discharged in 2001. Putin indicated Nov. 9 that the Interior Ministry will lose 33,000 employees while the Federal Border Service, Federal Security Service, Federal Railroad Services and other agencies will lose about 235,000 workers over the next five years. The losers in this scheme will be those left to rely on social protection benefits, which have decreased in the last year. Housing and pensions for retired personnel do not appear to be a priority in the new budget. Though Putin approved a 10 percent increase in pensions beginning Nov. 1, service people were hit by a new flat tax earlier in the year and lost their transportation and utility privileges. The increase in pensions does not absorb these costs. Moreover, federal housing, offered to armed service pensioners, will not accommodate the proportion of retired in need. The impact on housing will be protracted, but as many as 240,000 officers and 380 generals will be eligible for federal housing over the next five years. Current shortages in state housing certificates do not portend to meet demand. ________________________________________________________ Yes, I'd like to subscribe for just $49.95 per year! stratfor.com ________________________________________________________ This year, the federal government was able to present only 50 percent of certificates allotted for 2000. Less than one out of four applicants actually received an apartment. This trend is likely to worsen as cuts in armed forces proceed into the next year. The cutbacks will be especially painful for those laid off when on the precipice of better times. The new budget allows a 20 percent pay raise for armed service personnel by October, and the boost could go as high as 40 percent. Pay within the armed services now ranges from $14 to $800 per month, which in most cases is below poverty level. Higher salaries apply only to combat soldiers, and military paychecks in Russia are often delayed for months. Moreover, Russia's armed service personnel are paid less than half of what employees in other parts of government earn. Raises, accorded by promotion, are also much smaller for those in the armed services than for federal employees. Russia's military downsizing will deprive workers of wage hikes at a time when the pay could finally begin to meet cost-of-living needs. Worse yet, laid-off service people and civilian staff will have a very thin social safety net to fall back on. The combination of boosting wages for remaining personnel and executing substantial layoffs and discharges will incite strikes among employees across Russia's armed services. Active duty personnel will insist on better social protections in anticipation of cutbacks. _______________________________________________ SUBSCRIBE to our new service. Just go to stratfor.com _______________________________________________ (c) 2000 Stratfor, Inc. _______________________________________________ SUBSCRIBE to the free, daily Global Intelligence Update. Click on stratfor.com UNSUBSCRIBE by clicking on stratfor.com _______________________________________________ Stratfor.com 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet: stratfor.com Email: info@stratfor.com

To: Real Man who wrote (1110)	12/28/2000 5:00:32 PM
From: CIMA	Respond to of 1301

Russia's Bid for WTO Accession SUMMARY Russia's chief WTO negotiator revealed Dec. 19 that Russia would present new proposals to the WTO in February 2001 in a bid to accelerate its negotiations for accession. Membership in the organization, whose 140 members account for nine-tenths of global trade, would open up more trading and investment opportunities for Russia. But Moscow's chances of membership are negligible due to internal economic problems and external political factors. ANALYSIS Russia has sought to join the World Trade Organization since 1993. Membership in the WTO, whose 140 members account for nine-tenths of global trade, would open up new trading and investment opportunities for Moscow. Maxim Medvedkov, Russia's chief negotiator, revealed Dec. 19 that he would present new proposals in February 2001 in a bid to accelerate accession negotiations. Although the details remain undisclosed, the proposals probably differ little from those offered over the past seven years, and Moscow's chances of membership are likely to remain as negligible as ever. Joining the WTO enjoys broad political support in Moscow. But realizing the economic rigor required for membership is only now dawning in the Kremlin. Over the past two months, Moscow's accession target has slipped from early 2001 to mid 2002. Medvedkov has even acknowledged that the process could take years, although he insists the fault lies with other states, not in Russia's lack of qualifications. In all probability, Medvedkov is correct: the process will take years. But the principal obstacles lie within Russia. Its economic problems and negotiating stance will delay membership or, more likely, keep Russia out altogether. In negotiations, Russia's position officially consists of exchanging opinions on what Russia should do. ********* TO READ THE REST OF THIS ARTICLE CLICK HERE:********* stratfor.com ___________________________________________________________________ <<<<<<<<<<<<<< SUBSCRIBE TO BECOME A MEMBER TODAY!>>>>>>>>>>>>>>> Stratfor.com introduces new, expanded analysis for readers seeking more insight on the entire range of global affairs. Our new site features more intelligence on more subjects, easier navigation and expanded coverage. What New Members Say About Stratfor.com: "I was happy to pay the new subscription charge for continued access to your material given the high quality...In fact, I've quoted you several times in a report recently published by (my consulting firm)." D.A. "I teach geography and international relations at the college level. Your site is one of the most excellent resources for students and teachers alike. My compliments on the site." J.B. "I subscribe to numerous publications including the Economist, the National Interest and Foreign Affairs, and yet not one provides cogent analysis of today's events as well as you do." M.U. stratfor.com <<<<<<<<<<<<<< SUBSCRIBE TO BECOME A MEMBER TODAY!>>>>>>>>>>>>>>> =================================================================== SIGN-UP: Get the free, daily Global Intelligence Update: stratfor.com You can stop receiving the GIU by clicking on: stratfor.com CONTACTS AND CUSTOMER SERVICES: STRATFOR.com 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Internet: stratfor.com Email: info@stratfor.com ADVERTISE For information on advertising in the GIU or any section of the Stratfor.com website, please email us at advertising@stratfor.com ==================================================== (c) 2000 Stratfor, Inc.