>Simple solution was on system level
>
>1. Open Regional and Language Options in Control Panel.
>2. On the Advanced tab, under Language for non-Unicode programs, click the language version of non-Unicode programs that will be used.
>
>Winrar after reboot started to show file names properly and files after unarchiving are shown properly in Windows Explorer . It resulted in side effects, e.g. Skype interface suddenly became russian ( after switching to english in menu back to normal ). If no more serious side effects I may leave it as is, otherwise will roll back. Funnily enough I was unable to read cyrillic in readme.txt and etc in notepad for many years, had to open Word and switch to 1251 page. Now it also works. I 'll give a try to conversion and also still would be interested in programmatic solution , if anyone encountered and solved a similar problem

Notepad accepts utf-8 since many versions ago. Funny that Word wouldn't :).