From Volume 4, Issue Number 40 of EIR Online, Published Oct. 4, 2005
Russia and the CIS News Digest

Russians Hear LaRouche on Systemic Crisis

Lyndon LaRouche's Sept. 21 "Hyperinflationary Patterns: Inflation Runs Wild!" release was posted in Russian Sept. 30, on the website of the Ukraine-based Institute for Independent Strategic Studies ( The posting includes the conical shock-front illustration, a link to EIR's English-language site, and an announcement of LaRouche's upcoming Oct. 12 webcast.

Russian audiences are eager to hear what LaRouche has to say on the systemic crisis and its solutions, as is evidenced also by two other recent publications:

*The September issue of Valyutny Spekulyant ("Currency Dealer") monthly carried an article called "Waiting for the Global Tsunami." It presented highlights of several EIR articles on the hedge-fund crisis, published in May-August 2005.

* The Russian online almanac Vostok ("East"—the name of Yuri Gagarin's spacecraft on man's first flight into outer space) includes in its July-August issue a package of material, taken from the LaRouche movement's Russian-language site. The components are: 1) LaRouche's April 2004 speech at Moscow State University, "Russia's Great Mission in Asian Development" (EIR, April 30, 2004); 2) LaRouche's presentation at the Moscow Academy of Finance and Law, also dating from April 2004, and titled in Vostok with this extract, "On the threshhold of the greatest financial crash in modern history: will we find the courage, and the leaders, to force governments to adopt the measures required to solve the problem?"; 3) the complete translation of LaRouche's Dec. 3, 2004 interview with Rodnaya Gazeta, titled "The Dollar Is Crashing Because the USA Is Bankrupt!"; 4) a March 1998 article from Ekonomicheskaya Gazeta, in which Prof. Taras Muranivsky presented excerpts from LaRouche's "Russia's Science: A Strategic Assessment" (EIR, Aug. 8, 1997) under the headline "An Alternative to Monetarism." Included with both of the April 2004 speeches are the ensuing Q&A sessions with Russian youth.

Gazprom Acquires Sibneft

The acquisition of Roman Abramovich's Sibneft oil company by Gazprom, the state-dominated Russian natural-gas monopoly, has been finalized, Gazprom announced on Sept. 28. Gazprom will buy Sibneft for $13.01 billion in cash, giving Chukotka Region Governor Abramovich a $9 billion-plus profit on his investment in Sibneft, which he picked up during the "loans for shares" swindle in the 1990s. With Sibneft and the state-owned oil company Rosneft's acquisition of Yuganskneftegaz, formerly the main production unit of Yukos Oil, the Russian government now controls 28% of national crude output.

Gazprom financed its purchase with a $12 billion loan from a consortium of Western banks, including Citigroup, Goldman Sachs, Credit Suisse First Boston, and Morgan Stanley. The Financial Times of London, in a Sept. 27 article titled "Russian loans prove flavor of the season," noted that a different foreign banking consortium had just extended $7.5 billion to Rosneft to finance the acquisition of Yuganskneftegaz. Even before these two energy-sector mega-deals, Western commercial bank lending to Russia had reached $16 billion this year, as against $11 in all of 2004. These loans are commercial credits, not direct takeovers, but they show the banks' interest in obtaining more leverage for potential control of Russian raw materials.

Russia Asserts Leadership on Nuclear-Fuel Issues

Russia would join the USA in creating a nuclear-fuel bank for nations that relinquish their right to enrich uranium. Alexandr Rumyantsev, head of the Russian Federal Nuclear Agency, said in Vienna Sept. 28, that Russia supported the U.S. initiative. He said it should be "incorporated in international agreements," and that the International Atomic Energy Agency (IAEA) should oversee it. U.S. Energy Secretary Samuel Bodman had announced Sept. 26 that the United States was ready to convert highly enriched uranium into low-enriched uranium, and offer it to countries that give up their own enrichment programs.

Before the Vienna talks, Rumyantsev stated in Moscow on Sept. 22, that Russia intends to refuse some U.S. financial aid for securing Russian nuclear fuel depots. He said the assistance had been helpful in maintaining inventory and safety controls, RIA Novosti reported, but now Russian nuclear materials are safely stored and Russia can handle their protection without an outside role.

Putin Attacked for 'Left Turn'; Glazyev Says Not So

Since his Sept. 5 announcement of sharply increased 2006 budget spending on social sectors such as education and health care, Russian President Vladimir Putin has been under fire from monetarist fanatics for making a "left turn" in economic policy. His own adviser, flat-tax author and radical free-marketeer Andrei Illarionov gave an interview to the government paper Rossiyskaya Gazeta Sept. 23, in which he attacked Putin for moving "in the direction of state capitalism, interventionism, and populism." Citing the consolidation of state control in the energy and some other sectors of industry, as well as the willingness to increase government spending on social programs, Illarionov lamented "a turn not only in economic policy, but also in the national economic discussion and prevailing economic thinking."

In its annual Public Information Notice on Russia, issued Sept. 21, the International Monetary Fund likewise complained that "...with ample oil revenues, complacency has set in and key structural reforms have come to a virtual halt." The IMF (to which Russia no longer owes anything) demanded that "fiscal policy not be loosened further." Meanwhile Finance Minister Alexei Kudrin, in Washington for G-8 meetings, upheld the orthodox monetarist side of Russian policy, pledging that none of the Stabilization Fund (from high oil export revenues) will be spent on "any projects"—though he didn't mention the newly created, now separate Investment Fund—and that Russia will repay another $10 billion of its Paris Club debt to Western governments, ahead of schedule, during 2006.

The financier-oriented paper Kommersant-daily has attacked the Russian government for moving in the direction of economist Sergei Glazyev's views, by its dubbing the 2006 budget a "Development Budget" and by the increase in social spending. Glazyev, however, doesn't think so. In an interview with Zavtra weekly of Sept. 21, Glazyev said, "There is no social 'left turn,' by those in power. This is just an imitation; all you have to do is look at next year's budget figures." Speaking to a local election rally of his "For a Worthy Life" movement and the Rodina bloc, in the defense-industry city of Izhevsk on Sept. 24, Glazyev said, "If you look at the budget breakdown, you'll see that it's the budget of a late-19th-Century bureaucratic police state," with 42% of federal spending going to defense, police agencies and the bureaucratic apparatus, while only 21%, or 3.5% of GDP, goes for social spending. Only 3% of state-sector workers will be affected by Putin's much-advertised wage hikes, Glazyev said, while "800 billion rubles [$28 billion] is simply taken out of the economy, put into the Stabilization Fund and invested in American government bonds. Thus we are paying taxes and producing goods with our labor, but the taxpayers' money is going to finance the U.S. budget deficit."

Russian Cabinet Meets on Child Health Disaster

On Sept. 29, the Russian government discussed issues of health care for Russian children, in the framework of President Vladimir Putin's announced commitment to boost spending on critical social needs. In advance of the session, the Russian Ministry of Health and Social Development issued a report, according to which the number of children (up to age-17) in Russia has fallen by 7 million during the past decade, to the level of 30 million. The Ministry of Health pointed to the health of parents as a grave problem, noting that, due to poor health of the mothers, only 32% of births in Russia last year were without complications. Illness among newborns has risen by 32% in 10 years, while teenagers fall ill at a rate 64% higher than a decade ago.

During the cabinet debate on how to allocate the spending increases, prominent pediatrician Leonid Roshal said that Putin's proposed pay increases for doctors and nurses were merely a drop in the bucket, while hundreds of clinics lack the resources to provide basic care. Health Minister Mikhail Zurabov, who is responsible for making government spending produce results, could be heard on national television shouting, that only 10-15% of young women in Russia are healthy, and that the whole situation around health care is like the socialist period, when, "we proclaim one thing at party conferences," but what happens is quite different.

Ukraine's New Premier Visits Russia

Newly confirmed Prime Minister Yuri Yekhanurov made his first foreign trip since taking office, with a Sept. 30 visit to Russia. After meeting with Russian Prime Minister Mikhail Fradkov, Yekhanurov said that Ukraine and Russia have "similar views on the development of relations between Russia and Ukraine." One of the issues on the Yekhanurov's agenda was certain to be Russia's energy deliveries to Ukraine, which has received Russian natural gas at discount rates. Russia is preparing to triple the price as of Jan. 1, 2006. Representatives of the Russian natural gas company Gazprom and Ukraine's Naftohaz were to be involved in the Moscow talks,

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