Politics and Economics A Russian Physicist Reports to American Students

To Miss Jacobs' Social Studies Class, Creede HS, in Colorado

Hello! I am happy to answer your questions. I think the questions you asked are really important to understand what is happening here. In fact, it is possible to open a separate conference to discuss them. But I'll try to be brief.

Russia now and actually always was an "experimental lab" of History. First, Lenin started his cruel experimenting on the living people, now Gaidar et al are continuing. But what can be done else now, if no one ever experienced anything like this? Getting into capitalism from socialism. In the years of socialism we had a joke: What is the difference between capitalism and socialism? - Capitalism is sucking SOCIALly, socialism -CAPITALly. Our experiment in building socialism sapped the capital of our society. As the result of this capital decay our society and economy are still unhealthy. And of course life is tough for the majority of the population.

In fact, the former "communist" regime should have been gone in 1985 when Gorbachov came to power. But he managed to stabilize it by selling the Gold Resources of the State. Official figures are: from the 70-s untill 1985 there was 2000 tons of gold in the State Gold Fund; by 1991 there was only 100 tons of gold left. This is about the what the state owned in 1913. You can see why he managed to maintain somehow the level of life during his 5 years of power and why he failed further. Brezhnev survived due to the "oil dollars", Gorbachov - due to the gold of the state.

Of course after these 74 years of god knows what (it cannot be called communism) people got tired of it and when it failed the majority were excited. People were lacking normal democratic freedoms: of mass media, of free elections, of demonstrations etc. But now you will be able to find all sorts of newspapers starting from "The Hawk of Zhirinovskii" and "Pravda" and finishing with "He and She", "Sex in Your Family", etc. I should explain: Zhirinovskii is the leader of the right extreme party, close to fascism. He fortunately does not have much support, but the party is allowed to have the newspaper until and unless there is overt (open) fascist propaganda in it.

During a historically very short time (couple of last years) people have gotten very much used to the freedoms they have acheived and now already do not pay much attention to having them. But, if anyone would dare to try to terminate what we have now... I am afraid, people would not love that. Yes, sometimes in the overcrowded metro trains I can hear some angry remarks (by the way, mainly from the people of the middle age and by appearance not very well educated):

"What for do I need this freedom of mass media if my wage is low???" Yes, not so many people are now coming to the political meetings and demonstrations. But that's because people are busy! They have many things to do now and just do not have time to spend in the streets rioting for/against something. But again, I am sure that if one day we will get up in the morning and find out about the new coup, the situation will be much worse than a year age, many more people will come out to defend what they achieved. Looks like I'm getting too long and boring already. I'll stop for now. I definitely understand that the picture I gave is simplified and strongly depends on what class of the society you are considering. Bye for now. Masha.

Dear Andrew, Travis and Adam! Your question about the workers wages is quite hard to give brief answer also. That's because the wages are strongly dependent on the industry, social position, geographical area and many other factors. Let me show my statement on few examples.

For instance, in Tyumen', the very rich with oil area the workers are paid 40-50 thousands a month, teachers were on the edge of rioting because of low wages: 15 thousands... In comparison: in Moscow teachers are making 4-6 thousands. The official statistical data for the government paid workers - 6000 monthly. But now when many people shifted to the private sector of the economy, many are making a lot more. For example in the private kiosks in the streets of Moscow people get about a thousand daily... Scientists make 2000 - 3000 .

Now - about prices. First of all, they are changing almost weekly. I will give you the figures what I've seen myself, but that does not mean that when you'll be reading this letter they will remain the same. All prices are in rubles. 1 liter of milk today was 14 rubles. Regular Russian made fridge last week was about 30 -60 thousands. Imported fridge is more than 100 thousands Same with TVs: Russian I have not seen for more than a week and I do not know what price will be when they'll appear. Imported TVs more than 100000 . Pair of athletic shoes: Nike - 15 000, ROOS'(high) - 5-7 thousands, Reebocks - 9- 12 thousands (It all depends on the place where you see them , exactly like in the U.S.) A 3 person baidarka (canoe)three weeks ago was 15000 a 2 person I have not seen since summer. But in making the calculations take into account apartment rent payments, oil for the car (if you have one), transportation expenses if you use public transportation, such necessities as clothes for growing children in the family etc.

Good luck in your estimations! If I can be of any help further, please, write back. Masha.

What Russians Can and Can't Own

Fromthe Moscow Times, October 20 1992

Moscow Law: What Can Russians Own Here and There?

"In the past there was no prohibition against an individual having a bank account abroad or having property outside Russia. For whatever reasons Russian law has now plugged these loopholes. Several regulations from late 1991 and early 1992 permit citizens to maintain bank accounts abroad only as long as they reside abroad and require them to transfer all funds in such accounts to a Russian bank upon returning home.

Similarly a short paragraph in another regulation prohibits citizens from owning property or shares outside of Russia. The Russian government has also adopted Soviet rules forbidding individuals from receiving payment in foreign currency.

It is legal for a Russian citizen to have a foreign currency bank account and even to convert rubles into foreign currency in certain circumstances, but such rights are largely symbolic without the right to earn foreign currency. Land and other property laws also fail to provide Russians with clear secure opportunities for saving.

Land ownership other than dachas and kitchen gardens is limited to farmers who may themselves loose their land if they use it incorrectly. Apartments may be owned but the state remains the largest landlord and is not always willing to sell apartments to their occupants. It also by no means certain what obligations will come with such ownership.

Privatization offers people with sufficient means the chance to purchase enterprises or shares in them but the privatization law requires an individual purchaser to present his tax returns to prove the legitimacy o f the funds that he wishes to use for the purchase.

Employees of such privatized enterprises enjoy preferences in purchasing shares in them and are also entitled to receive part of the proceeds from their privatization. Russian law also does permit people to start their own businesses, although these businesses may also not have bank accounts or property abroad without permission.

Symbolically Russian law has abandoned the requirement of soviet law that every one must work. Unemployment is no longer a sign of dissidence. It is the sign of the times."

Invest Rubles: Receive Dollar Dividends!

In the newly "capitalist" Russia wherever you turn, you are greeted with invitations to invest your money in new stock companies. On the fiber optic conference cruise someone has distributed a prospectus for a Transiberian Communication Line Stock Company. Talking of a 1997 completion date, this appears to be an investment effort to raise funds for the line planned by Min Sviaz and Intertelecom. A translation of the first page follows.

Transiberian Communication Line Stock Company.

The TSL is one of the best possibilities for investing your money in industry. You invest rubles and receive hard currency. It is possible to use the territory of Russia to build a communications bridge to Europe. The CoCom embargo against high technology, especially in fiber optics makes it impossible for foreign technology to compete in this effort opening the way for indigenous technology instead.

We plan to cooperate with Min Sviaz and some other leaders in the communications industry in the privatization of the necessary key industries. A permit to create on the territory of the CIS (Russia and the Ukraine) is the basis for a new stage of development of national communication networks centered in the most important economic regions.

The present technology of digital signal development guarantees the quality necessary for entrance into world networks. Using fiber optics allows high traffic through put and by this the profitability of this line.

Main parameters are:

Total length 14,300 km

Quantity of parallel channels are 4 to 6 in each direction.

Data speed 140 to 565 megabits per sec allowing from 1920 to 7680 telephone channels.

Total capacity about 30,000 channels

Plans are to go from 7680 to 15000 and 30,000 channels

Russian communication needs would fill half the channels.

Israeli Company Sells in Russia Router that it Claims Outclasses the Cisco AGS+

On September 9, 1992 Yaron Polak, Director of Marketing and Sales, RAD Network Devices Ltd., Altidim Technological Park, Bldg 1, Tel Aviv 61131, Israel Telephone 972-3 645-8555, send a fax to Iurii Znamenskii in Moscow.

The fax reads:

Dear Dr. Znamenskii,

We are delighted to inform you that Open Gate has been released. After three months of intensive testing in large networks and in a number of successful Beta sites throughout the world, RND feels confident that OpenGate is ready for general release. This means that we will now be shipping OpenGate without restrictions.

The Market is ready for OpenGate. We all appreciate the tremendous new opportunity OpenGate gives us for generating new business. RND has prepared a host of marketing material to help you promote OpenGate. This includes a Coulor Brochure, Datasheets, a Sales Guide and a detailed System Description. By now you should have received copies. Based on our experience, the System description provides an excellent "first impression" on customers, so be sure to order these and use them in your sales effort.

Please copy this fax to all relevant people in your organization. RND's technical support contact in your organization will receive by airmail a full technical OpenGate release package. RND is here to provide you with any assistance you may need!

RND is ready, the market is ready. Let's go out there and sell.

Best Regards, Yaron Polak

Iurii also gave me a 13 page technical comparison of the OpenGate Router (which uses the Intel 80960 RISC processor) with the Cisco AGS+. If the comparison is accurate, this Israeli company is producing routing technology equal to or better than the best American technology. Furthermore RND also advertises a complete line of routers ranging in price performance from very inexpensive entry level boxes at the bottom to the OpenGate at the top.

In view of some uncertainty about whether Cisco's entry level 64kbs router is still under CoCom control or not -- while it is clear that every router more powerful is still controlled -- it seems that we have here another example of the way in which CoCom is handing the Russian market to foreign suppliers.

Sovintel Gets 6.5 million EBRD Loan

by Geoff Winestock, Moscow Times -Tuesday October 20, 1992

The disrepair of the Russian phone system is the only security that the joint venture Sovintel had to put up for a landmark $6.5 million loan it signed on Monday with the European Bank of Reconstruction and Development. The telecommunications firm became the first Russian legal entity to receive what amounts to a regular bank loan from an international financial institution, according to Ron Freeman, the EBRD's merchant banking vice president.

The EBRD, as well as the Export Import Bank of the United States and the German Hermes export insurance agency have previously only underwritten projects on he security of a government or commercial bank guarantee. The EBRD 5-year loan, however was made without recourse to either the Russian government or Sovintel's US partner.

Freeman said: "With the structure of this loan the EBRD confirms its willingness to finance commercial enterprises in Russia without government or other guarantees." Sovintel, owned by the Russian Ministry of Communications and a US partnership of GTE Spacenet and the San Francisco Moscow Teleport will use the funds to extend its international telephone and data network, with a move to cities outside Moscow as the next big step.

Tony Kuczura, Sovintel's acting director, said that the fact that the EBRD had made a normal bank loan to Sovintel showed that the company was emerging as a normal business unit without the need for cash or other guarantees from its parent organization.

Kuczura says that western firms will need an alternative phone system for many years to come. The problems with the Soviet phone system are so great, including lead cables and electro- mechanical switching dating back to the 1950s, that it would take ten years to reach acceptable standards for business use. Sovintel employs 60 Russian staff, mainly trained in the United States. Its network now links about 100 western businesses to the outside world.

SomeTechnical Details on Relcom TCP/IP Hardware and Software

"Now we offer a few technical details on currently used software and hardware. Lack of appropriate routers forced us to develop our own solutions. First of all we developed CSLIP software which is capable to use several physical links for one network interface. Such software allows us to achieve acceptable bandwidth (for example ~6KB/sec FTP for ASCII files) in the absence of medium and high speed links, and provide good backup in case if one of the links fails. We plan to develop in the nearest future the same software for PPP protocol.

Routing software currently used is "routed" but it has become unacceptable due to significant growth of RIP traffic over the links. All major routers (Moscow backbone routers first) will be upgraded to use "gated" software (the latest "gated-alpha" and "gated-3.0" when it will be released). Using "gated" will allow to use BGP-3 between major border routers, highly reducing routing traffic. Using BGP-3 will also allow simple routing between xSU AS and Amsterdam Cisco. Future plans based on utilizing gated software includes switching to OSPF as IGRP. Until that time networks will still speak RIP to backbone routers.

Router's built-in software for "firewall-alike" functionality, IP accounting and priority queues is also under development and will be installed soon. Router's hardware currently consists of 386/33 (486/50 planned), 8/16 channel DigiBoards and Ethernet card(s). We also plan to install appropriate 64K interface." [This is a continuation Relcom report quoted on page 18.)

Contacts for EUnet/RELCOM & RelTeam Ltd.:

• Nickolay Saukh - nms@ussr.EU.net
• Valery Bardin - fox@ussr.EU.net
• Oleg Tabarovsky - olg@ussr.EU.net