Thank you very much Mr Chairman, thank you very much, ladies and gentlemen. It is a great pleasure for me once again to speak to you. First of all I want to explain the angle that I plan to take: the Liberal party in Russia, the Yabloko party, is a party which has taken part three times since 1993 in the elections. We were winners in the elections in 1993,again in 1995. We also took part in the Presidential elections. About 10 million people voted for us in the Presidential elections. The ideas that I want to share with you now represent the ideas and sentiments held by the people, by a lot of people in Russia.

During the Presidential elections, we had a chance to present our ideas. The main slogan of the Presidential elections was a very short word: "Freedom". That was the slogan of our Presidential elections. People gave us a vote, a positive vote in all 98,000 polling stations in Russia. There is not one

polling station in Russia which gave us zero. Somewhere we had 2 percent, sometimes we had 45 percent. In one of the largest cities of Russia, St.

Petersburg, we got through to the second round.

I was a candidate in the second round in St. Petersburg and also in 10 cities around Russia. I am going to speak to you from that standpoint. I am going to express some thoughts about developments in Russia and the main

problems here:

First of all, I want to say that the presentation by Alexander Rahr at the beginning of our seminar on developments in Russia was very interesting.

However, generally speaking, I disagree with the opinions expressed here. The main question for me is why, why is such a vision so widespread as presented in our seminar? This is why I think it is extremely valuable that this position was expressed in such a sophisticated and helpful manner. It may be the main stimulating motive for this discussion: it certainly is for me. I would start with this question for example: if everything we have

heard is correct about a reformist government, the government of young reformers, the positive signs emanating from the President, the new positive attitude to the former Soviet Union Republics, the democratic processes in Russia, the 3-year time limit for positive developments, then "Why was there any need for NATO expansion?" And the answer - which is well understood in our respective societies - is that Russian internal problems were the main reasons for NATO’s expansion. We think that NATO expansion happened because we had a war that lasted some 2 years, which killed 100,000 people in Russia; that NATO expansion happened because our military collapsed; that NATO expansion happened because our economic reforms failed; that NATO expansion happened because we have an unpredictable government, an unpredictable President and so many criminals surrounding the President. These are the main reasons why we think that the western leaders took this dramatic decision. But the important problem for us is that this was never openly discussed. The western leaders always came to

Russia saying: "Mr Yeltsin, what are you doing here?" Mr Yeltsin replies

that he is implementing reforms. "What kind of reforms?" "Radical ones."

"Oh, congratulations, Mr Yeltsin." Kisses, hugs, handshakes and that is all. But when it comes to a serious problem like security and NATO expansion,

things changed because this is something which touches the vital interests of the people. What it means is that we feel, and we understand, that most western leaders and the majority of the western political elite believe that Russia is a second-hand democracy.

This is a widespread feeling. People think that Russia is a special sort of country, an Euro-Asian country with a troubled history, that the people

there don't understand democracy, they don't understand this or that, and so on and so on, and so forth. All of these arguments make the west feel that this is the kind of country which quite simply has to be kept in order. Because they believe that progress in creating a real democracy in Russia is extremely problematic. That is why they do not say all these things openly, and also why people in the west always have such a picture of Russia. We witnessed this picture in 1992, 1993, 1994, and 1995. Sometimes, when I read the western press and listen to the western experts, I feel that they are saying things which contrast absolutely with actual developments in my country. This is simply a different story about a different country.

Why is this so? First of all, because the general thinking in the west is that, as we understand that democracy in Russia is differs somewhat from

democracy in western Europe, it cannot be the same as the democracy we have here. This is also attributable to deep and widespread political investments in Russia, in the Russian transformation process. A lot of western leaders have stakes in Russia’s political success. They have political stakes in

Russian success and Russia’s transformation. A lot of talk, a lot of promises, a lot of speeches about Russian transformation

That's why they prefer to use Russia as a positive example of this process. And they try to eliminate any reservations or criticisms about developments Russia, for example. This includes a lot of societies and funds and many, many people who are investing their political knowledge in developments in Russia. This creates a special sort of picture. I am not just talking about financial investments, which are very active in Russia right now - and that is the third reason why very often we only obtain such a very special view of events in Russia.

What is the result of such an approach? I would say that the negative result of such an approach - and here I want to refer to the extremely interesting presentation by Mr Yakovlev - is embodied by the difficulties arising from a loss of faith or trust - which the Russians feel – in the West’s statements about their country Russia. In 1991, there was unlimited trust in the western political system, western culture and ideas.

Now things have changed. This change is due to the gap between developments in the country and its presentation by Western leaders. For example, Mr Yakovlev was asked a very good question: What he would do if he were Mr Clinton? I am not prepared right now to say everything that Mr Clinton should do in his life - maybe his wife will tell him – but I am prepared to say one thing about my country, something which we expect Mr Clinton to say when he comes to Russia:

“Men and women, ladies and gentlemen, we understand what is going on here. We Americans know what employment means, we Americans know what an economic

crisis is, we understand what extremely high inflation means, we understand only too well what corruption means, and criminality; we understand all these problems. We understand all the problems with the old Soviet monopolies, with the oil, gas barons and so on. We faced these difficulties. It was a very hard and tough job for us too . And now we understand the

problems you are facing and we are with you. We are ready to help you and we know what kind of advice we can give to you." And so on. Such a speech would make our people feel and understand the American people, which would mean much more than a general clapping of hands and saying what great, radical reforms, congratulations! To a government which enjoys absolutely no confidence in the country. You would not be able to find a single person on the street who would say that he has confidence in the government as a whole, in its policies, its future economic success, or whatever.

When we were talking just now about such extremely important topics as a

pro-western government, which is what we have just now, I would like to explain my view here: I mean here that a pro-western government is a pro-Russian government, and that life in Russia would be much better, and we would achieve more positive results, if we were to take the western model as the basic model for our economy. By the way, adoption of the western model as a basic model for our political system would also be the best way for progress and the direction of the Russian people and the Russian government. This would be the main sign. And major co-operation with the west would mean that the people should have real confidence in relations with the west and have a positive attitude to developments in the west and co-operate in political and economic areas. In my opinion these are the main trends in establishing the real, positive relations between Russia and the west.

Now, I am going to mention a few economic problems that we are experiencing at the moment, in a bid to explain the problems faced by our government and the problem with the government as a whole. To be precise, I would describe the main problem of economic transformation in Russia as follows: for many different reasons, - including historical ones - the policies of our government are resulting in economic reforms which are creating in Russia an oligarchic, semi-criminal type of economic system. Maybe some of them say – for instance this is something that Anatoli Chubais says privately sometimes - that this is a kind of southern Asian model with big corporations and big monopolistic groups - which some people think would work in Russia. Sometimes to generalise, I say that this is a robber-capitalism system. If you were to look at our economic system just now, you would see all the signs and features of a robber-capitalism system. What are the main characteristics of this system? First of all, I would like to say that the starting point of this system, its roots, is the economic system of the Soviet Union. This system has certainly remained in place with regards many, many basic things such as monopolies, industrial structures and the overall structure of the Russian economy.

What are the main directions advocated by our reformist' government and cited as the main advantages? Privatisation: if we had privatisation, wide-spread voucher privatisation as was brought about by Mr Chubais. Now the following must be clear to anyone who has even a minor understanding of economics: this was privatisation, where there were no bankruptcies. Can you imagine such a kind of privatisation? It just involved a change of titles. Privatisation took place with out any change of management. The main plants with 200,000 workers, 100,000 workers, have the same management now as they had under the Soviet system. No bankruptcy, no change of management - and as a consequence, no investments. This is absolutely evident. Secondly "advantage" number two: we limited inflation. Well, this is true but please don't forget, millions of the people were simply not paid. This was underlined in the previous speech: for one to two years people were not paid, not because they are not paid by their businesses - they have no businesses. They are the military and should be paid by the government. This involves the police, the judiciary, the medical system, the security system. Such methods of curbing inflation, do not involve that many tricks. No money equals no inflation. No inflation equals no population. So it is a direct way of saying no population, no inflation – this is the formula, and it is easy. If 60 percent of enterprises are not paying taxes, you have no inflation, simply because they are not paying the workers. And the government has a 70 trillion debt, about 12 billion, and the debt is simply: the pensions and salaries. This is an extremely difficult situation. It means we have unemployment which the government does not want to recognise. I am in favour of keeping inflation very low but in this case, it is necessary to openly say we have about 20 percent unemployment - every fifth person - and there is no single programme in the government to combat such unemployment. Monopolies like Gazprom producing weapons, the

monopolies on electricity, railway companies and the such, still exist. This is the standing point: the reason why I was saying that the communists and then

Zhirinovsky - let's take the communists first - are currently the main friends of the government: quite simply the situation is clear to them all: while the monopolies, the largest in the world, remain in place, the communists will always have an opportunity to be in power, as they can change everything in the country using five or six officers – because these things are at the core of the Russian economy.

Private property is another major issue. Here once again I agree with Mr Yakovlev. I want to stress that private property rights have still not been implemented in Russia. Voucher privatisation was in fact collectivisation of Russian industrial enterprises and not a private property issue. Competition is simply not part of the Russian economic system - but as you know, the theory of a market economy is that an effective market economy can only come from 2, and not one, from 2 basic

starting points: private property and competition. In Russia, there is no competition: there is no competition in social life, there is no competition in economic life, and the government and Yeltsin himself are trying to abolish competition even in political life. This is the situation we have. So, in the current situation the government collects just half the taxes. This is why the budget collapsed. In April, the budget completely collapsed for the simple reason that the government could not collect taxes - they can only collect 50 percent of the taxes. This is the situation with our government. Here I want to explain that these are the same old policies. The only new person in the government is Boris Nemtsov, but he has only been

there for three months. Basically it is the same government as before, implementing the same policies which bring us back to the same old familiar situation in general.

The other problem - which I think is problem number one or two maybe- I

don't know which, is corruption. According to some German experts who made a study about the level of corruption last year in 1996, and drew up a list of corrupt economies and corrupt countries, some 57 countries are implicated.

The least corrupt country is number one, the most corrupt country is number 54. Number 54 is Nigeria. In this study Russia is ranked 47. Bolivia is 36, Columbia is 44. Russia is 47. Corruption is such a disease that it changes all kinds of political or economic initiatives. I think that corruption was one of the main reasons for the Chechen war by the way. And there is no visible sign to date that we are really doing anything to fight corruption. The main advantage of the new government is that they are at least talking about fighting corruption. They are speaking about it now, whereas half a year ago, they weren't even doing that. Now they are saying such things - for example, Yeltsin said to our country that there are 2 people who do not take bribes: himself and Mr Nemtsov. This was his statement, and it was very amusing! But this is all that has been said so far. This represents a mere start to talk about corruption, but it is not a real fight against it.

Now, what does all this mean? It means that we are creating a repressive

economic system. It is an economic system for a small group of people who are barons in the energy sector and some other sectors, which represent the clans and five to seven very strong monopolistic groups. What are the results of this economic policy? This led in 1996 to a decline in investment of 18 percent. A Decline in GDP of 6 percent. A decline in industrial production of 8 percent, etc. These are the results of such a policy. The other result of this policy is the

current collapse of the budget and the inability of the government to collect taxes. The last point here is: what are the main worries? Certainly all those people are very close to me personally; they are my friends and we are very close. I am very close to my friend, but not maybe so close to Mr Chubais - but what is the problem with this new government? From my point of view - and I can prove it - the problem is that the new government has no programme which would be effective in overcoming these difficulties. That means that the crisis is a very serious one. Here I want to refer to something that Ludwig Erhard said about such situations: he said that you cannot improve an economy or overcome a crisis if you have two situations: firstly a government which does not know what to do; and secondly if you have a lot of criminals in the government. From my point of view, this sums up 100 percent the situation we have in Russia right now. This is the main problem. There is a lot of talk about different steps that the government should take and programmes to follow, but they are not following them.

Now I have come to the main issue of my presentation: this is the problem of democracy, and the opportunities for democracy. First of all as a starting point, I would like to say that robber-capitalism is not equal to democracy. It is necessary to perceive the differences between these two concepts: an open society, European values and human rights are not the same as robber capitalism. They are two quite different things. That is why it is so difficult to understand in Russia right now who the reformers are. The Russian political system from this point of view is split into two parts: the people who think that the kind of capitalism they are creating is the same as the western model, that is an open society or that they would create an open society sooner or later; and the other democrats who think that we have to start to doing this right now, that we have no chance of creating a real democratic country, and that we are going along the path of criminalisation, the direction of an oligarchical, monopolistic state. First of all, I would like to point out that there is no way back: there is no threat that Russia will become a communist country again. I do not see any scope whatsoever for that. Russia will never become the communist country it was in previous times. This is impossible. With this threat out of the way, we overcome one problem but face new ones, which from my point of view are no less of a problem than communism was. Certainly as a result of this economic situation, we have a very strong nationalistic autocracy which has representatives in the Russian political elite, among Russian politicians and leaders, people who are always ready to be leaders of such nationalistic movements, which can be very strong. Secondly, another threat to our democracy is criminal dictatorship, the dictatorship of criminal elements. And the third threat is the attempt to create some kind of Russian Pinochet. That's the person our young reformers like very much as an example. They cannot even imagine what Pinochet would mean in Russia, or what the differences are between that event and developments in Russia.

All these three issues are a real threat to Russian democracy, but they are not the threats to robber-capitalism which we have in the country. That is why this situation in general is rather dangerous.

Now I want to use this opportunity to express that the main political freedoms that Russian people have, which they were given during the Gorbachev era with the firm help of Mr Yakovlev at that time. Since 1991, we have changed a lot of things, but there are no additional political developments in this general direction. So the main task for us is to make sure that we do not lose the freedoms which we gained some six or seven years ago. That is the situation which we are in. How do these threats emerge? This can happen as a result of the criminalisation of our economy and the failures in economic policy. We have an extremely autocratic constitution, which provides President with unlimited power and rights. This creates two situations: first of all, it creates such situations as the Chechen war and secondly, it creates an extreme weakness of power -because with such great responsibilities, the President cannot use them in the right way. Consequently people in the shadows, surrounding him, take this power and make considerable use of it. This creates the criminal environment. The key issue is that we have no civil society as of present. That is what I

want to stress: we were making reforms all this time in the economy, many things were done but I can safely say that there were no real steps or moves made to create civil society whatsoever.

When I think about Russian reforms, I think that creating a new life in Russia is a process of reforms and looks something like a bicycle: economic reform, political reform. Economic changes, civil society changes; and the most important elements for my country are the middle-classes, small businesses, medium-sized businesses, access to the resources and the property of dozens of millions of people - that is what is not happening, as we start creating capitalism in Russia. This is very dangerous. That is why the government has no social base. As long as they do not have this base, they will always have to make deals with the communists and nationalists - and they are paying a lot to the communists and nationalists. So what you see in Russia just now is a historical process: how the government has for instance to literally pay the communists and nationalists to adopt laws, in order to find some support in parliament. In this way, the government is

developing such forces that will finally put a curb to any reforms, once these parties come to power.

So what are the main directions? The main directions are certainly anti-criminal policies, changes in economic policies, liberal changes to the tax system, regulations, competition, real property rights - civil society issues which the government is absolutely giving no attention: nor are the President or the Prime Minister. Division of power, federation, these are the main things that must be addressed but are not on the agenda of the current government, nor on the agenda of our President. What are the consequences? Here I want to say that it is a well-known, even a banal idea that stems from a Romanticism of relations between Russia and the United

States, and so on and so forth. And I think that our vital interests coincide right now, even more than before, much more even. I will try to

prove this now: As a result of these issues Russia makes threats which are even more dangerous than in the past. First, owing to the values of economic reforms and an oligarchic government (not a public but oligarchic one), which is extremely greedy, we are losing control of many nuclear key issues.

Maybe you are aware of the suicide last autumn of the director of the Federal Thermal Nuclear Centre of Russia. He wrote a note, which was later stolen by the KGB, where he said that he could no longer guarantee security, that he had received no financing for three years. And this is a Centre which has been producing thermal nuclear weapons since 1958 ! It is a special city which is not on the map: 50,000 people work there, etc.. He

continued in the letter that he had paid only 50 dollars to the people who were working there over the past 6 months. He could not continue like this any more. If you think something has changed there today, you are mistaken. This is a real threat: if all this were to go out of control, we would be treated to some very nice entertainment, and that means for all of us.

Secondly, last year 160,000 guns were stolen from the arms depots of the

Russian military, - can you imagine !? So I want to underline and stress

that these are the pre-conditions for international terrorism - not just

military threats, but also for international terrorism. Thirdly, concerning ecological problems, when I read in our newspapers that the staff at the St Petersburg's nuclear power-station have not been paid for 6 months and have gone on strike, I think about all these people suffering from starvation who are regulating the nuclear power-stations and this gives me a very bad feeling. And this actually happened just several months ago! These three

things are much more important than the possible military threat that NATO expansion may mean. What is needed is a new kind of co-operation, and new forms of mutual understanding, as current developments in Russia, from this point of view, create interests which I personally think are closer to Europe than even before. That is why I think such co-operation is so important - these issues must be given priority.

Now, I want to say a few words about the Council of Europe: as far as I can understand, the main values of the Council of Europe, where I am privileged to be making this presentation, are pluralistic democracy, rule of law and human rights. I would like to say that these are not yet the basic values for Russia. That is why I had so many reservations when Russia became a member - I want my country to be a member, I want this very much, but I want Russia to be an equal member. Not simply equal on a formal basis, but equal from the point of view that these values should really be the basic starting-points for domestic policy in Russia. And this is not the case. Such discussions have not even started yet. I think that the Council of Europe cannot remain uninvolved in so far as Russia is a member. This is not simply an internal affair for Russia.

It is not just an issue that Russia is not meeting the main conditions of admission to the Council of Europe - you are aware of the many conditions that Russia has to meet. It also reflects the attitude of the Russian people, and I mean the country as a whole, to the Council of Europe - to

Europe - an attitude which is still held in high esteem. And respect is very high: so every word which reaches the people in Russia is respected. This is why every step made here towards Russia is important for Russians. I do not believe - because I simply know from my own political experience: I campaign all over the country; every month, two or three times I go around the country and am able to speak to the people everywhere in the country - I

know that respect is very high and that interest is very keen. That is why if every decision which is taken concerning Russia were to reach the Russian people, which is not always the case, then this would be treated with high respect.

That is why I am discussing here everything, including the Belorussian issue, an question about direction that Russia should take – for example, you have the chance to elect a vice-chairman from Russia. I think that two different figures would be proposed: one of them would be Mr Kovalev and the other person would be maybe Mr Dzasokhov, who was presented by Mr Zhirinovsky, who was one of the driving forces behind political integration with Belorussia. So a great deal depends upon your decision as that has an impact on the people.

Finally let me answer the question: "what does Russia need?" Always when I make a speech abroad, I am asked: how can the west help? What can be done? My answer is that Russia needs honest, open, moral, political and intellectual support for Russian reforms. We do not need money, we have enough already, I am afraid to say more than even you. Because you have our money in Swiss banks - 22 billion dollars

leaked from the country last year - 22 billion abroad. We don't need money. We need open and honest, moral and political and intellectual support. You must never give us advice which you would not accept for yourselves. Do not treat us as a second-hand democracy. We want to have the criteria you have in your own countries: that would be the best thing for us. Never suggest that we elect a President that you would not elect for yourselves - I am sorry but that is what you are doing. For example, when such a strange person as Mr Lebed appears on the scene and so on and so on - I was in Germany for example when a great fuss was made about Mr Lebed and I was questioned by many people - I get on well with Mr Lebed, but I asked the people: "Are you ready to elect Mr Lebed as your chancellor?" They said no ! So I said why are you asking us to elect him as our President? Never give us advice which you would not accept yourselves because we have a different

history, as we are one civilisation. The next century should be the century of civilisations and not of single countries.

Thank you very much.

This report was originally published in September 1997 by the Liberal, Democrat and Reformers' Group of the Parliamentary Assembly of the Council of Europe.