Fellow pen-l'rs, Here is the latest from Fred Weir in Moscow. His article is followed by John Thornhill's article from the Financial Times, on the Russian firms resorting to hiring Western PR 'specialists' in hopes of attracting the fleeing investors Regards, Greg. ***** #1 Date: Thu, 13 Aug 1998 [for personal use only] For the Hindustan Times From: Fred Weir in Moscow Moscow (HT Aug 13) -- As Russia's economy continued to crash Thursday, the opposition-led parliament dealt the government a potentially fatal political blow by refusing to hold an emergency session on the crisis. "Russia is on the verge of financial collapse, and we are now facing sharp political struggle and possible change of government," says Andrei Piontkowsky, director of the independent Centre for Strategic Studies. Last week parliamentary Speaker Gennady Seleznyov agreed with a request from Prime Minister Sergei Kiriyenko on holding an urgent Duma session next Monday to consider 17 draft laws to slash spending, raise taxes and stabilize state finances. But Duma deputies, in an angry mood, decided this week not to convene the meeting. Mr. Seleznyov's deputy, Mikhail Yuriev, told journalists that the request for an emergency session was illegal because it was made by the Prime Minister. "The Duma can cold an extraordinary session only in three instances: at the request of the President, the Duma speaker or one-fifth of the deputies," he said. "It is quite possible that the Prime Minister did not understand that. In any case, there will be no extraordinary meeting." However, he added, the session might go ahead if President Boris Yeltsin, who is currently vacationing in Russia's lake district, submits a personal request. Despite sealing a $22-billion bailout package from Western lending agencies last month, Russia's financial markets have continued a disastrous months-long plunge. The Moscow stock exchange, which was the world's best performing in 1997, has lost over 70 per cent of its value since March and is still dropping. Interest rates on state bonds have climbed from about 20 per cent in March to over 120 per cent this week. Analysts say there may be no choice but to devalue the battered rouble, a move that would lead to rapid price increases in Russia's import-dependent consumer economy and could push tens of millions into abject poverty. Particularly dangerous, rouble devaluation would shatter the tenuous prosperity of Russia's new middle-class -- mainly based in Moscow -- who are the mainstay of the Yeltsin regime's support. "The only achievement from six years of reform that the government could point to was a stable rouble and low inflation rate," says Mr. Piontkowski. "Now that is in ruins, and devaluation of the rouble looks imminent." The Duma's refusal to get behind the government's harsh austerity program may make little economic difference since President Yeltsin can implement many of the measures by decree, but it will explode confidence in the political system at a time when social unrest is already rising precipitously. Wildcat strikes are multiplying across Russia's vast hinterland, where millions of workers have gone without wages for months due to the economic crisis. Coal miners have been blockading railroad tracks in several regions, and trade unions are promising a general strike this autumn over the huge buildup of wage arrears. Ironically, parliamentarians say the government has not paid their salaries for months either, and therefore the refusal to meet in emergency session may also be viewed as a justifiable work stoppage. Communist leader Gennady Zyuganov, whose party controls almost half the seats in parliament, said the government owes the Duma 126-million roubles ($20-million). "Why hasn't the government transferred the money to us if it wants the Duma to convene?" Mr. Zyuganov said. ***** #2 Financial Times (UK) 12 August 1998 [for personal use only] MOSCOW: Brokers take on western PR By John Thornhill in Moscow A group of Moscow-based stockbrokers is hiring a western public relations company to improve Russia's image among foreign investors and help reverse the savage falls in the country's financial markets over the past year. The stockbroking firms, which have seen daily turnover on Russia's rudimentary stock market reduced to just ?6m, are desperate to entice foreign investors back into Russia - and salvage their own businesses. "There is a feeling that Russia generally gets a bad rap, and we are looking at ways of correcting that," said a member of the group. The 15 firms, which are forming a non-profit industry association called the Financial Council of Russia, have selected Burson-Marsteller to head the public relations campaign. Burson-Marsteller, which has confirmed its involvement in the project, is one of the biggest public relations companies in the world and has wide experience of working for foreign clients. Discussions are at an early stage but it is envisaged the council will act as a clearing house for information about Russia's financial markets and liaise with the government about how it can communicate its economic message more effectively. The council is also looking to recruit a prominent spokesman who would devise a communications strategy with Burson-Marsteller for "selling" Russia to foreign investors. Charlie Ryan, chief executive of United Financial Group, one of the council members, said the firms had met several times over the past two months to discuss ways of encouraging the development of Russia's financial markets. "All of us have been so competitive with each other that we have not been very good at co-operating. "But there is now a sense that we need an industry association which can represent our views and correct some of the misconceptions out there," he said. The financial council, which includes leading local brokers such as Troika Dialog and MFK Renaissance, as well as international investment banks such as Credit Suisse First Boston, also intends to lobby the government to improve the corporate governance environment within Russia. Abuses of minority shareholder rights have deterred many foreign fund managers from venturing into the Russian market, which has plunged more than two-thirds this year. The Russian government is encouraging the stockbrokers' initiative, although it has not given it any direct support. -- Gregory Schwartz Dept. of Political Science York University 4700 Keele St. Toronto, Ontario M3J 1P3 Canada Tel: (416) 736-5265 Fax: (416) 736-5686 Web: http://www.yorku.ca/dept/polisci