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Focus on...
 THE FORMER SOVIET EMPIRE
BACK IN THE XUSSR
Part One



Last year we looked at the former USSR arguing that it was being set up
 as an investment opportunity for the west with 'stability' being 
engineered by oppressive regimes led by ex-communists. Eight months on
 has the west turned its back on this region as the press seemed to be
 saying it might after the election 'triumph' of the Liberal Democrats?...


 When we last focused on the Ex-USSR at the turn of the year the press 
in this country was full of stories of emergent fascism, Russian
military involvement in the former Yugoslavia and indeed nuclear war was 
being touted as back on the cards. We said this was a smokescreen to cover
 up for the non-democratic activities of 'our man in Moscow' Mr Yeltsin
  and we said that the truth of the matter would out in the investment
 strategies of the west. So what has been happening in the aftermath of
 the election so decried over here?

 Richard Layard writing earlier this year in the Financial Times 

demonstrates that it is now safe to talk down the panic started by the 
west when he says that Russian politics, 'is probably more stable now 
than at any time since the reform began. The government is a broad
 national coalition in which most of the key industries are headed 
by reformers. Few westerners seem to realise this'. Not surprising 
given the over the top hype given to Mr Zhirinovsky's mediocre election
 performance. What has happened to those Liberal Democrats who were 
going to blow the reform programme off course as papers like the FT
 were proclaiming last December?
 Indeed it is very much business as usual in the Ex-USSR. Mr Yeltsin 
continues with his high handed approach dismissive of all except his 
new found G7 friends and the IMF. The latter now have virtual control 
over the budget with Yeltsin the man up front laying down the orders.
 In May he announced the scrapping of quotas and licences for oil and 
gas exports and a three year tax holiday to foreign investors in the 
manufacturing sector. At the same time he 'instructed' the government
 to submit to parliament by mid September legislation lowering companies

 taxes by between 10 and 20%. Finally he decreed a three year exemption 
from profit tax for all manufacturing ventures with more than 30%
 foreign ownership.
 The rationale for all this rush of economic activity is of course 
justified in the name of 'development' or 'convergence' - the need to
 stake out one's place in the Old American Disorder. Who pays the bill 
for this rejection of the notion of a self sustaining economy for one 
of the world's areas the richest in resources? Is all this foreign capital
 paying dividends? Acording to the FT the former Soviet block is 
suffering from a crisis 'more serious and crushing than any developed 
country has had to withstand since the second world war' They continue
 to talk of 'reeling' and 'plunging' economies. Our man Boris solemny
 concured in May saying that the  economy was on the brink of collapse.
 But we don't have to listen to Boris. The figures speak for themselves.
 All the major indicators are currently in a pretty doleful state. There
 have been record slumps in industrial production (down 25% on last year).
 GNP has gone down to about a third of the level it was at when the wall
 came down back in historic times. Unemployment is set to hit 7% (having
 started from a 0% base rate). Over the same period inflation has nearly 
doubled (rising by some 400%).

 Such figures of course are just the shorthand for the human trajedy
 taking place. Staple foods such as bread and 'luxuries' like meat are
 well beyond the pockets of those who are unimportant to the new world 
order. Reports of pensioners pawning their teeth in order to eat, people
 selling their clothes (or themselves) on the street. It was all too
 predictable. Five years ago there was nothing in the shops but you
 had the money now the shops are full and you can't afford it. In one 
anecdotal tale on BBC Radio 4 (11/11/94) a Russian spoke of how under
 the Soviets he knew he would have to save 20 years in order to get a
 car - now he knows he will have to wait a lifetime.


A EUROPEAN PERIPHERY

 The former USSR is fast on the way to becoming a new cheap manufacturing
 hinterland for western capital in the form of multinationals and the
 western banking system. Soon they will own the commanding heights of the
 economy. Indeed the process is well under way.
 To take a couple of examples. The UKs biggest multinational (after 
the Anglo-Dutch TNC Unilever) BAT industries announced, also in May,
 that it is to invest £133 million in Uzbekistans tobacco industry.
 This, according to Ulrich Hertez, BAT's tobacco managing director,
 will improve BATs export prospects to republics in Central Asia and
 elsewhere in the Ex USSR. The investment makes it a monopoly supplier
 - so much for competition - and will be added to lucrative deals 
already secured in the Ukraine and Hungary with Moscow and Southern 
Russia next in line. Uzbekistan is a favourite for investment with the
 stability brought by its president  Islam 'We are prepared to set
 straight the brains of hundreds' Karimov who is widely suspected of
 having arranged the car bombing of his main political opponent a few
 years ago. No political parties here - but you'll look far to find a
 businessman put off by such minor details.
 As for foreign investment coming in from the west's banking
 institutions stage two of the privatisation programme began on July 1st
 when westerners were invited in to buy up some of the pickings. 
 The world's biggest gas company GASPROM is to offer 10% of its shares
 to foreign investors. Likewise LUKOIL the largest oil company in the
 country is to offer 25%. NORILSK NIKEL the world's biggest nickel
 producer is seeking an undisclosed level of investment from abroad as
 is UNITED ENERGY SYSTEMS again the world's biggest.

 This turmoil and the fact that industrial production is down 25% on
 last year and unemployment - as we have seen - is set to hit 7% leads
 Andrei Illarionov - the deputy head of the Economic Reform Centre in
 Moscow to claim that Russia may be on route to becoming 'normal' in the
 sense of a developing country, dependant on the west for investment,
 'Russia is now likely entering the so called Romanian or Latin American
 way - with periods of high inflation and attempts at financial
 stabilisation following each other'. Clearly a Pinochet or a Chiauchesku 
will be required to keep the lid on the kettle.


OPPRESSION TO CONTINUE

 But of course we've already got one. Indeed in a short article in 
June The Guardian informs us that the speakers of both Russian 
parliaments have backed a proposal to suspend the parliamentary and
 presidential elections that were due to take place in 1996. This will
 allow Mr Yeltsin to stay at the helm until the turn of the century. 
'The almost casual way in which the issue was mentioned belies the 
desperate efforts of all concerned to batten down the hatches against a
 wave of social unrest capable of unseating them.', the report continues
 pointing out also that the date passed with no comment in the media the
 first sign of 'a growing consensus between parliament and president 
that it was in neither's interests to stick to the terms of the new
 constitution'.
 In our last FOCUS.. we said that as anarchists we were alarmed by the
 rise of the right but asked, 'How will Boris and the west react, not 
just in the immediate aftermath, but in the medium and long term?' Now
 we have our answer: they're all in bed together. 



 3rd June 1994
 FT 30/9/94
 Le Monde Diplomatique November 1994
 22 June 94
