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Johnson's Russia List


July 15, 1999    
This Date's Issues: 3394  


Johnson's Russia List
15 July 1999

[Note from David Johnson:
1. Moscow Times: Melissa Akin and Natalya Shulyakovskaya, Swiss Tie Kremlin 
to Money-Laundering. 

2. Journal of Commnerce: John Helmer, RUSSIAN STEEL LEARNS AN AMERICAN

3. Andrei Liakhov: RE: 3393-Ekman/Joint Ventures.
5. Interfax: 'Primakov Factor' Gaining Momentum.
6. New book: Mikhail A. Alexseev, ed. Center-Periphery Conflict in
Post-Soviet Russia: A Federation Imperiled (New York: St. Martin's Press, 1999).

7. AP: Israel: Jews Leaving Russia.
8. Bloomberg: Russian Foreign Investment Law First Step to Improving

9. Moscow Times: Matt Bivens, Stepashin Surprised To Be Yeltsin's Pick.
10. Obshchaya Gazeta: Yelena Tokareva, Nizhniy Novgorod Wunderkind Launched 
His Career Bilking Old People: Pension Fund Money Used To Promote Sergey 

11. Moskovskiy Komsomolets: Moscow Political Rumors Cited.]


Moscow Times
July 15, 1999 
Swiss Tie Kremlin to Money-Laundering 
By Melissa Akin and Natalya Shulyakovskaya
Staff Writers

Prosecutors in Geneva, Switzerland, said Wednesday that they have opened a 
criminal money-laundering investigation into top Kremlin official Pavel 
Borodin, Borodin's wife and 22 others, many of them purportedly highly placed 
Russian state officials. 

The prosecutors said the investigation, opened by the Geneva General 
Prosecutor Bernard Bertossa, would link Russian officials to money-laundering 
in Swiss banks. No charges have yet been filed, but Bertossa's staff is 
checking into whether the 24 people had Geneva bank accounts and how they 
used them, said investigating magistrate Daniel Deveau. 

"We have reason to suspect it was bribe money being laundered," Deveau said 
in a telephone interview from Geneva on Wednesday evening. 

Deveau refused to name the other 22 Russians under investigation. "I don't 
know what relation they had to Borodin," he said. 

Asked if any of the accused had the last name of either Yeltsin or Dyachenko 
- the married name of Tatyana, Yeltsin's daughter and image adviser - Deveau 
said no. 

"Not yet," he added. 

Asked whether entrepreneur and itinerant federal official Boris Berezovsky, a 
powerful Kremlin insider who has been targeted by Swiss prosecutors in the 
past, figured in the investigation, Deveau again said no. 

Deveau said he had no plans to question or seek the extradition of any 
Russian officials. 

He also stressed that the investigation so far is very preliminary. He said 
more would be clear next week. 

News of the Geneva prosecutor's investigation was apparently broken by a 
Swiss newspaper on Wednesday. It was by afternoon picked up by The Associated 
Press. Citing a Swiss judge involved in the case who spoke on condition of 
anonymity, AP reported out of Geneva that last week Swiss banks had been 
asked to freeze any assets belonging to either Borodin or the other 23 
officials under investigation. 

By Wednesday night, few Russian media outlets had reported the story. NTV, 
which has a history of brave journalism, covered the investigation in its 7 
p.m. broadcast. Otherwise, not even wire services like Interfax and Itar-Tass 
reported the official allegations of money-laundering that reach - for the 
first time - into the Kremlin itself 

So many Swiss-Russian joint investigations of corruption have been underway 
in recent months that it is difficult to keep track of them all, and Swiss 
Attorney General Carla del Ponte has even come under fire in Switzerland for 
getting too involved in "Russian politics." 

Del Ponte and Russian prosecutors - most notably former Prosecutor General 
Yury Skuratov, but apparently also his various successors - have repeatedly 
called on each other's help, most notably in an investigation of the 
Swiss-based construction firm Mabetex. 

Mabetex is run by an expatriate Kosovar Albanian, Bahgjet Pacolli, and has 
won lucrative construction projects across the former Soviet Union - from 
renovating the Kremlin under Borodin's careful supervision to rebuilding both 
the TsUM department store and the international air terminal in Kazakhstan's 
new capital of Astana. 

The company is so well-connected that in April, when the Russian newspaper 
Segodnya reported that a Russian company had won a bid to refurbish Moscow's 
Bolshoi Theater, it did so under the headline "Mabetex Loses for a Change." 

In March, Russian prosecutors entered the Kremlin to seize documents from 
Borodin's office related to Mabetex's renovation work. Prosecutors said those 
lucrative contracts had been won in return for bribes to Kremlin officials. 

In April, Borodin's apartment was searched, according to a report at the time 
in Komsomolskaya Pravda. The newspaper reported that the search turned up 
documentation of about $100 million in various wire transfers to personal 
accounts in Switzerland, Liechtenstein and the Bahamas. Komsomolskaya Pravda 
also reported that the accounts in question were jointly in the name of 
Borodin's daughter and the Mabetex president. 

Borodin later denied those allegations 

Earlier this month, del Ponte's office raided several companies in Lausanne, 
Switzerland, suspected of laundering money from Russia. Del Ponte's spokesman 
Dominique Reymond said the raids had been carried out at the request of 
Russian prosecutors. 

This week, Russian tax police raided the Moscow offices of a private security 
firm called Sokol-UNS, and among the documents confiscated were Mabetex seals 
and letterhead. 

On Wednesday, Reymond refused to comment on whether the Geneva prosecutor's 
investigation was linked to del Ponte's investigation into Mabetex. 

Del Ponte's office has also helped Russian prosecutors investigate the 
Swiss-based company Andava, which until outed earlier this year handled the 
hard currency revenues of state-owned Aeroflot - a company whose general 
director, Valery Okulov, is one of President Yeltsin's sons-in-law. 

Arch-tycoon Berezovsky was charged in connection with allegations that Andava 
was an embezzling operation he had set up. But the case seems to have lost 
momentum with the sackings of both former Prime Minister Yevgeny Primakov, a 
Berezovsky enemy, and Skuratov. 

Skuratov was fired by the Kremlin, and when he continued to make noise a 
videotape showing him cavorting with two prostitutes found its way onto RTR 
national television. Skuratov has said the video was a blackmail effort aimed 
at stopping his investigations into Kremlin corruption. 

Yeltsin, vacationing in the Tver-region resort of Rus, did not comment 
Wednesday. Borodin's staff, reached by telephone on Wednesday evening, said 
Borodin, too, was on vacation and was not available for comment. Borodin's 
spokeswoman, Galina Khavrayeva, was also unavailable. 

Viktor Savchenko, one of Borodin's deputes in charge of maintenance, said he 
had seen Borodin in the office on Tuesday and Wednesday, but that Borodin was 
indeed on a planned vacation and by Wednesday evening was probably at his 
dacha outside Moscow. 

No one in Borodin's office had heard the news from Switzerland, Savchenko 

"I saw [Borodin] today and he mentioned nothing," he said. 

Asked if he was worried at all about his own Swiss bank account, Savchenko 
replied playfully: "I don't think I need to. I had nothing to do with 
Mabetex. And I sleep well, too." 

Staff reporter Yulia Solovyova also contributed to this report.*** 


Date: Wed, 14 Jul 1999 
From: (John Helmer)

Moscow. In the very short history of post-communist Russian trade,
the agreement on steel, which was signed with the United States Department
of Commerce at midnight Monday [July 12], was unique.
It was the first time the Russian government has negotiated according to 
the American principle -- never agree to anything, unless you are sure your 
domestic constituents will support the deal.
Russian steelmakers acknowledge this. But they claim the U.S. 
was pursuing an objective that was typical of communist trade policy --
never allow the free operation of market supply and demand, if you can 
order and restrict the volume and price of steel entering the market.
It took a marathon eight months of negotiations for the two sides
to agree; and only then at the very last minute, after Vice President
Al Gore told Russian Prime Minister Sergei Stepashin the U.S. would
accept several compromises the Russians said were make-or-break.
One of these was a provision that obliged Russia's steelmills to
provide Washington with the evidence to convict themselves in self-
initiating dumping investigations.
The Russian steel industry is the largest industrial employer in the 
Russian economy, commanding votes that will be vital in December's Russian 
parliamentary elections. Never before has it been so influential in an 
international trade bargain. And never before have constituency politics, of 
the traditional American brand, forced the Kremlin to calculate the tradeoffs
between signing and not signing a trade limits deal.
That decision, a Russian official claims, was made after the government
polled the industry. 70% of the steelmills, the official says now, were
in favor of the agreement; 30% wanted to reject it. That poll could
could be termed the first democratic trade deal ever struck between Russia
and the U.S. 
This also puts the Russian government in the awkward position of explaining
to the local steel industry and to the voters what the payoff is.
Statements from Washington have emphasized the drastic 50% to
80% reductions in Russian steel imports, compared to 1998, that have been 
incorporated into the new agreement. According to Secretary William Daley,
they "will reverse the unprecedented surges in low-priced steel
imports...and prevent this type of surging in other steel product areas
in the future."
The Russian government has quietly accepted the U.S. determination
to regulate the steel trade, so that "surging" won't happen again. The
new agreement, according to its Russian signatories, establishes Russian
access to the U.S. market, but only on the basis of 1997 levels. Indeed, the
1999 quota for all categories of Russian steel imports has been
fixed at 1,627,000 metric tons, almost equal to the import total for
1997 of 1,678,000 tons.
Russia's biggest steelmakers, who produce relatively high-value hot-rolled
sheet, agreed to an even longer delay in shipments than U.S.
negotiators were proposing, in order to enlarge the quota of low-value
steel slab, which they can sell instead of sheet.
Russia's producers of wire, rod and bar products have been the most
reluctant to go along with the deal. They believe the U.S. was
trying to close the market for a dozen types of steel which Russia wasn't
dumping, and on grounds U.S. trade law would not allow, even in an American 
presidential campaign year. These Russian steelmakers are the most
vociferous in condemning the Commerce Department for introducing 
"communist type" trade and market controls, and the Russian Trade
Ministry for going along.
Each of these mills has been handed a quota for exports of its products
to the U.S. for the next five years. In most cases, this is equal to
their 1997 export level, with little possibility of growth. These are the
Russian steelmakers who argued against signing the trade deal. They
believed they would be better off if the Kremlin had insisted
on free trade.


From: "Andrei Liakhov" <>
Subject: RE: 3393-Ekman/Joint Ventures
Date: Wed, 14 Jul 1999 

Re: Peter De Ekman:
The list of the successful JVs inter alia include:
1. Saint Springs (mineral water producer - on sale in every Moscow kiosk);
2. Gulfstream-Tupolev (supersonic business jet - 10 orders so far);
3. Sun Brewery (beer production all over Russia);
4. Kato Aviation (refurbishing of TU204 and Il96 to international standards
and leasing of these jets);
5. Chernogorka (oil extraction);
6. Sakhaklin 1 and Sakhalin 2 (oil extraction);
7. OAO Perm Motors (with Pratt Whitney);
8. Compass (with Microsoft, software design);
9. Pokrovsky Rudnik (gold extraction);
10. Star Mining (gold extraction); etc., etc., etc.....

I can make that list probably a mile long. To avoid Slavianskaya hotel sad
saga - my advice is check whom you are dealing with first - it's so simple
and remember not all that glitters is gold. And.......... before even
thinking of going into Russia re-read O'Henry, particularly Kings and


RFE/RL NEWSLINE Vol. 3, No. 135, Part I, 14 July 1999

an interview with "Komsomolskaya pravda" on 14 July, former
Prime Minister Yevgenii Primakov declined to clear up the
mystery surrounding his future political plans. Asked whether
he will run in the State Duma elections, Primakov said "it
depends a lot on circumstances" and "the most important
condition is whether there is a real base created for the
unification of [politically] sound centrist forces." Primakov
did speak out in favor of the proposed union between Vsya
Rossiya (All Russia) and Otechestvo (Fatherland), calling it
a "very good idea." Primakov also expressed his support for
amending the Russian Constitution to create the post of vice
president and to require the next president to cede "part" of
his authority to the government. JAC

"Izvestiya" reported on 14 July that at their 12 July
meeting, leaders of Pravoe Delo (Right Cause), Novaya Sila
(New Force), and Golos Rossii (Voice of Russia) "seemed to
agree" to create a single ideological and economic platform
but did not even discuss the creation of a uniform election
list. The leadership of Our Home Is Russia (NDR) still has to
decide whether it will join the potential right-center
formation. According to the newspaper, it is rumored that "a
number of governors who are members of [NDR] and Golos Rossii
say that they will never be on a list with [Pravoe Delo
members] Boris Nemtsov and Boris Fedorov." One governor who
is a member of both NDR and Golos Rossii is Tyumen Oblast
head Leonid Roketskii. Saratov Oblast Governor Dmitrii
Ayatskov, who has flirted with the idea of joining a number
of different groups, is so far formally only a member of NDR.


Interfax: 'Primakov Factor' Gaining Momentum 

MOSCOW. July 12 (Interfax) - The Primakov factor 
seems to be gaining momentum as the parliamentary elections in Russia 
draw nearer. Several influential political forces during the past few 
days have expressed the willingness to see former prime minister Yevgeny 
Primakov join their ranks. The Fatherland movement of Moscow mayor Yuri 
Luzhkov made the first invitation. On Saturday, Luzhkov said that he 
would not just want to see Primakov as his ally but become Primakov's 
ally himself. On Sunday, a source in the Fatherland leadership told 
Interfax that the movement's political council is prepared to invite 
Primakov to top Fatherland's federal ballot in the December elections. 

After meeting with Primakov over the weekend, Luzhkov said, "It is the 
dream of any political organization that such a respected and influential 
statesman as Primakov join or head it." Luzhkov's purpose is clear: 
Primakov remains the most popular Russian politician going, and by 
winning him over the movement hopes to succeed in the Duma elections. Now 
two months before the beginning of the election campaign, Fatherland has 
plenty of organizational problems, especially in the provinces, and such 
a strong figure as Primakov is necessary to strengthen it. 

Many analysts 
consider a Primakov-Luzhkov duo invincible in the present political 
environment. The Agrarian Party has also begun to court Primakov. Its 
leader Mikhail Lapshin has said that the top farmer on the Primakov 
Cabinet, Gennady Kulik, is also conducting talks with the former premier 
about topping the party ballot. And as "the Primakov-Kulik course of 
supporting domestic farm producers, advancing the Russian agro-industrial 
complex was interrupted like a song" with the dismissal of the Primakov 
Cabinet, Lapshin evidently thinks that it will be best for Primakov to 
finish his song with the Agrarian Party. Communists are cautious in their 
evaluations of Primakov's political future. On the one hand, they say 
Primakov will never agree to head Fatherland, on the other they say they 
are not conducting any talks with him because they believe, as a 
communist leader, Valentin Kuptsov, said, "The initiative in this matter 
should come from Primakov himself." 

In the two months after his 
dismissal, Primakov has not publicly said with what political group he 
will run in the elections or whether he will run at all. The only phrase 
that can be squeezed out of his aides is that "Yevgeny Maksimovich is 
considering the proposals he has received." Primakov has deserved the 
reputation of a great mute, and the Russian political elite is 
impatiently waiting for the moment when he begins speaking. The political 
future of many figures, including Luzhkov, depends on what he says. If it 
is true that Luzhkov and his current entourage are ready to offer 
Primakov the top position on the Fatherland ballot in the Duma elections, 
could it be the first sign that under certain circumstances Luzhkov would 
be ready to support the former premier in the 2000 presidential race? 


Date: Wed, 14 Jul 1999 
From: "Dr. Mikhail A. Alexseev" <>
Subject: New book: Center-Periphery Conflict in Post-Soviet
Russia: A Federation Imperiled 

Dear David,

I was wondering if it would be appropriate/possible for you to post an
announcement about the publication of my new edited volume on
center-periphery relations in Russia. If so, I'd appreciate it if you
include the following information in the posting:

Mikhail A. Alexseev, ed. Center-Periphery Conflict in Post-Soviet
Russia: A Federation Imperiled (New York: St. Martin's Press, 1999).


Introduction: Challenges to the Russian Federation
Mikhail A. Alexseev

Chapter 1: Ideology, Interests, and Identity: Comparing the
Soviet and Russian Secession Crises
Stephen E. Hanson

Chapter 2: The Dynamics of Secession in the Russian Federation:
Why Chechnya?
Gail W. Lapidus

Chapter 3: Political Stability and Ethnic Parity: Why Is
There Peace in Dagestan?
Robert Bruce Ware and Enver Kisriev

Chapter 4: Dilemmas of Federalism in Siberia
Marjorie Mandelstam Balzer

Chapter 5: Fortress Russia or Gateway to Europe? The
Pskov Connection
Mikhail A. Alexseev and Vladimir Vagin

Chapter 6: A Mirage of the "Amur California:" Regional Identity
and Economic Incentives for Political Separatism
in Primorskiy Kray
Mikhail A. Alexseev and Tamara Troyakova

Conclusion: Asymmetric Russia: Promises and Dangers
Mikhail A. Alexseev
Select Bibliography
Notes on Contributors

Brief description:

Why did the Soviet Union break up, whereas the Russian Federation has so
far held together in the face of ostensibly similar secession crises? To
what extent is regional separatism a product of economic incentives or
local ethnic identity? Drawing on insights from political science,
sociology, and anthropology, Center-Periphery Conflict in Post-Soviet
Russia asks why political elites in some regions in post-Soviet Russia
have shown more of a proclivity for separatism from Moscow than others.
The case studies have been contributed by an interdisciplinary group of
scholars based in the United States and in Russia's regions. The authors
of the case studies were asked to address how regional elites in their
respective regions perceived and publicly framed ethnopolitical
(regional) identity and economic incentives for strategy vis--vis
Moscow. Focusing on Chechnya, Dagestan, Sakha, Buryatia, Tyva, Pskov,
and Primorye, this volume explores political programs articulated by top
officials in the regions, local separatist or anti-separatist movements,
and disputes between Moscow and the regions over natural resources and
external trade. 

For more information please contact the volume editor, Mikhail Alexseev: (828-262-6350).
Mikhail Alexseev, is assistant professor of political science at the
Appalachian State University (UNC member institution).


Israel: Jews Leaving Russia
July 14, 1999

JERUSALEM (AP) - The exodus of Jews from Russia has increased dramatically 
and could bring the largest number of Russian Jews to Israel this year since 
the early 1990s, Israeli immigration officials said Wednesday.

In the first six months of 1999, 12,188 Russian Jews came to Israel, an 
increase of 129 percent from the same period last year, said the Jewish 
Agency, a quasi-governmental body dealing with immigration.

``A dramatic turn of events has taken place in Russia,'' said Jewish Agency 
chairman Sallai Meridor.

``If the trend continues, the number of Russian Jews might reach 30,000, the 
largest immigration figure since 1992,'' Meridor added, noting that only 
about 14,000 Russian Jews settled in Israel in 1998.

Russian Jews are pushed to emigrate by concerns about their homeland's weak 
economy, political fears and anti-Semitism, officials said.

Immigration to Israel from the entire former Soviet Union, including Russia, 
also was up and could total about 60,000 people this year, compared to 47,000 
in 1998.

Some 800,000 former Soviet Jews have moved to Israel since 1989, when Soviet 
leader Mikhail Gorbachev adopted more liberal emigration policies.

The exodus brought some 185,000 people to Israel in 1990 and 148,000 in 1991, 
the year of the Soviet Union's collapse, but the number had declined steadily 
ever since.

Jewish Agency officials said they had expected a certain increase in Jewish 
immigrants following last year's economic crisis in Russia, home to an 
estimated 600,000 Jews and their family members.

Meridor declined to directly link the increase to a recent wave of 
anti-Semitic attacks in Russia, such as the May blasts at Moscow's main 
Choral Synagogue and another synagogue in the capital and anti-Jewish 
outbursts by some Russian lawmakers. A Jewish activist was stabbed Tuesday at 
the Choral Synagogue.

However, surveys among recent arrivals from Russia found anti-Semitism 
ranking the third reason for emigration, after concern for the future of 
children and the ``desire to live among our people,'' agency officials said.

Psychological reasons also are playing a role, Meridor noted.

``Although it's hard to pinpoint, there seems to be a general feeling of the 
loss of hope,'' Meridor said. ``People were awaiting better times... but 
perhaps they have reached a point when their patience expires.''


Russian Foreign Investment Law First Step to Improving Climate

Moscow, July 14 
-- Russia's new law on foreign investment, intended to protect 
investors' rights, and guarantees that tax obligations won't suddenly change, 
is a first step to increasing direct foreign investment, analysts said. 

The law, which comes into force today, defines the rights of foreign 
investors, freezes tax rates for investment projects for seven years and 
prohibits changes to tax or customs laws which hurt investors' profits by 
regions or the federal government. 

Russia, which lags much smaller countries in Eastern Europe in attracting 
foreign investment, still must do more to reassure investors before 
investment increases significantly, analysts said. Developing the country's 
legal system is just as important as passing laws on foreign investors' 

``It's a building block but nothing more than that,'' said Margot Jacobs at 
United Financial Group in Moscow. ``A lot of risks have to do with courts 
upholding fair business principles. What's written in the law can be great, 
but if courts take too long to defend you, it's less useful.'' 

Foreign investment in Russia has been growing, but is still meager compared 
with other countries in Eastern Europe, particularly on a per capita basis. 
Russia, a country of about 150 million, has had about $11 billion in foreign 
direct investment since the end of Communism. Hungary, with a population of 
10 million -- about the size of Moscow -- has seen about $20 billion in 
investment since 1990 and expects as much as $2 billion this year. Poland, 
with about 40 million people, has had about $30 billion in investment since 

Oil Investment 

Some foreign investors with money in Russian oil production projects already 
have set tax regimes, through so-called production sharing agreements. 
Companies must win parliamentary approval for their production site to be 
included in the government's list of agreements. 

Foreign investors have long cited Russia's imperfect legal system as a 
barrier to increasing investment. Foreign lenders such as the World Bank have 
said Russia must improve its record for protecting investors' and 
shareholders rights to ensure future lending programs. 

Mikhail Zadornov, Russia's chief negotiator with international lenders, said 
yesterday the World Bank wanted to see the foreign investment law put into 
effect before releasing new loans. 

The law defines foreign investment projects, details investors' rights and 
tax regimes. The law defines foreign investment as a project with at least 1 
billion rubles ($41 million) of total foreign investment or when a foreign 
investor has at least 100 million rubles in the charter capital of a company. 

The law doesn't apply to foreign investors with stakes in Russia banks, or 
portfolio investors. 


Moscow Times
July 15, 1999 
Stepashin Surprised To Be Yeltsin's Pick 
By Matt Bivens
Staff Writer

Sergei Stepashin was completely surprised when President Boris Yeltsin 
appointed him prime minister in May, because he had assumed the top job was 
already going to someone else, according to an interview with Stepashin 
published in this week's Argumenty i Fakti newspaper. 

"It's no secret - the candidacy of another minister for the post of prime 
minister was being seriously considered. Therefore, the final decision of 
Boris Nikolayevich [Yeltsin] concerning me was absolutely unexpected," 
Stepashin was quoted as saying. 

"I learned about it that morning, when I was invited to see the president. I 
did not even have time to prepare for anything." 

Stepashin did not say who that "other minister" was. But he is almost 
certainly referring to Nikolai Aksyonenko, who was the railways minister in 
the Cabinet of Prime Minister Yevgeny Primakov. 

In the days before Primakov was fired May 12, Russian media were speculating 
that both Railways Minister Aksyonenko and Interior Minister Stepashin were 
in the running to replace him. The conventional wisdom is that Stepashin was 
the candidate of a camp led by Kremlin insider and privatization architect 
Anatoly Chubais, now head of the national power company Unified Energy 
Systems, while Aksyonenko's patron was the oil and media tycoon Boris 

If that is so, then Yeltsin carefully balanced the power of both the Chubais 
and Berezovsky camps. While Stepashin won Yeltsin's favor, the president 
appointed Aksyonenko as his No. 2 in the Cabinet. Yeltsin also rejected 
Stepashin's efforts to sideline Aksyonenko and appoint his own No. 2 man. 

Aksyonenko has been dramatically assertive - most notably in the weeks 
immediately following his appointment, when he first flew down to Sochi on 
the Black Sea to barge in on a meeting between Yeltsin and Stepashin, and 
then days later announcing that his understanding with Yeltsin was that "my 
supervision will extend to all areas of [the Stepashin Cabinet's] work." 

In his interview with Argumenty i Fakti, Stepashin is careful to praise 
Yeltsin. While he talks extensively about the December 1999 parliamentary 
elections, Stepashin turns aside a question about whether he and Yeltsin have 
ever discussed the June 2000 presidential elections." I don't think it's 
tactful to even talk today about on this topic: We have a sitting president!" 
Stepashin says. 

Asked whether he has personal political ambitions beyond being prime minister 
- a veiled way of asking whether Stepashin wants to be president - Stepashin 
replies that all depends on how the State Duma elections turn out. 

"For me [these elections] are a test. All the more so since the president has 
asked me to work on them," he said. 

Stepashin also complained about press reports hinting at dubious financial 
activities on the part of his wife, Tamara, a banker. 

"My Tamara had never before read such things about herself. She is a 
professional financier, moreover a 'red financier' - she's been in banking 
since 1974. That's her job. 

"When we moved to Moscow, she built up from nothing the branch of a Moscow 
bank, one that was not touched by last year's [ruble devaluation] crisis. ... 
And now, they are starting to write this nonsense about her: that she 
privatized some sort of oil companies, other things,'" he said. "They've 
started advising her: Maybe you should quit [the bank]. 

"But I tell her, 'You're not going anywhere. Why should you quit? ... Why 
should I bother doing anything [in government] if you're going to be ashamed 
of such a normal profession as being a banker?" 

Stepashin also denied reports that he had approved another 2.5 billion-ruble 
($100 million) tranche of a 7.5 billion-ruble loan package from the Central 
Bank to the ailing bank SBS-Agro. 

"Of course that's nonsense," he said. "We still can't get 700 million rubles 
out of them for our agriculture. I ordered [Agriculture Minister Vladimir] 
Shcherbak and [Central Bank chief Viktor] Gerashchenko to get that money out 
of [SBS-Agro]. Then in surprise, I read the opposite." 

Stepashin, however, told a Cabinet meeting last week - in remarks that were 
televised - that SBS-Agro would indeed be getting the 2.5 billion-ruble 


Kiriyenko Pension Fund Roots Examined 

Obshchaya Gazeta 
1-7 July 1999
[translation for personal use only]
Article by Yelena Tokareva: "Nizhniy Novgorod Wunderkind Launched His 
Career Bilking Old People: Pension Fund Money Used To Promote Sergey 

Sergey Kiriyenko is taking on a new image. From a rather 
boring technocrat mired down in economic nonsense, he seems to have 
emerged from the pupal state into a bombastic gentleman espousing 
eternal moral values--a castigator of political vice, teacher of 
morals, living standard of virtue. He is not all that good at it 
yet, but Sergey Vladilenovich is a diligent worker. He delivered 
quite a decent performance in the role of chairman of the 

The press has fussed over the precocious premier, as parents 
would fuss over the youngest child in a country family where all the 
children up to this point have been monsters, but this one--Praise 
the Lord--turns out to be bright and handsome. Many people to date 
have expressed regret that a decent man's reputation has been put in 

But before all this, we had the image of a wunderkind from the 
provinces, a financial genius who performed an unprecedented 
economic miracle in Nizhniy Novgorod. In essence, Kiriyenko's 
present transformation into a moralist is justified--in the eyes of 
his admirers--by virtue of the memory of that other Kiriyenko. It 
is conjectured that THAT man has the right to deliver a moral 

Then again, myths are amazingly easily developed and amazingly 
long endure. 

Origins of the Master 

Kiriyenko owes Boris Nemtsov for his fame as an outstanding 
financial expert. It was Nemtsov's doing that Moscow found out 
about the Nizhniy Novgorod social bank Garantiya, which invented a 
marvelous method for extracting pension payments from enterprises. 
Thanks to this, the old people of Nizhniy Novgorod began receiving 
pension payments in full and on time. 

Nemtsov was in fashion at this time. His word was taken as 
truth. Mistakenly so. Kiriyenko's "pension miracle" was nothing 
more than the usual "majestic cranberry" that grew thick and bushy 
on the soil of Russian reforms. It would not be difficult to 
identify this distinctive plant--it is simply that inquisitive 
botanists were nowhere around. 

Let us begin with a simple query. Was Sergey Kiriyenko the 
first banker to have thought up an operation with pension funds? 
Absolutely not. Nizhniy Novgorod's Garantiya was registered in the 
fall of 1993, when there were already several such ("social") banks 
in the country. All of them--they soon numbered around 50--were 
instituted by regional branches of the Russian Federation Pension 
Fund (600 million rubles [R] of pension money was deposited in the 
authorized capital of Garantiya; the share was then increased to 
R19.883 billion). This is a sure sign that the implantation of 
banks of the Kiriyenko variety was coordinated from a unified 
center, and the laurels of authorship in no way belong to the 
individual who garnered the secular glory. 

The next question is a memory check. When Kiriyenko learned 
how to dislodge pension dues from enterprises, was the Pension Fund 
experiencing financial problems? Anyone whose memory is still 
intact will recall that there were no delays in the payment of old- 
age pension benefits during those years. Moreover, the Pension Fund 
had accumulated a surplus, through which the Supreme Soviet 
regularly strove to increase pension benefits--while the government 
heroically resisted this effort insofar as high pensions supposedly 
spur on inflation, thereby threatening to smother our entire 
monetaristic policy. This discussion continued over many months. 

It ended in March 1993 when the president withdrew the Pension Fund 
from subordination to the Supreme Soviet and placed it under control 
of the government. Soon afterwards the Pension Fund started to 
become impoverished, and the task of repayment of the pension debt 
turned into one of the most important political tasks facing the 
supreme authority. 

Last year the "social banks" were inspected by the Russian 
Federation Comptroller's Office. The results of this dismal 
inspection point to sedition. All these banks were instituted for 
no purpose other than to "suck out" money from the extremely rich 
Pension Fund. It was ascertained with respect to Garantiya, for 
example, that the profitable bank never once paid dividends to its 
main shareholder, the oblast Pension Fund. The auditors calculated 
that lost advantage to the Pension Fund over three years of 
investment in the authorized capital of Kiriyenko's bank exceeded 23 
billion old rubles. In other words--pure losses. A fairly 
appreciable portion of the "lost advantage" went to provide material 
incentives for bank employees, social development of the collective, 
etc. Almost R6 billion was spent on this in 1995. The following 
year, organization of a good life for Kiriyenko's Komsomol friends 
was even more expensive. 

The relationship between Garantiya bank and the oblast Pension 
Fund entailed some intriguing episodes. On 29 November 1995, for 
example, the Pension Fund transferred R24 billion to the bank's 
reserve fund. One month later, it drew large-scale credits from 
this very same bank at 115 percent annual interest, paying R26 
billion for use of the money. Why the fund would have to borrow its 
own money and then pay interest to boot--is not the issue. That is 
the simplest and most brazen way to pump money from a nonbudget fund 
to the family budgets of participants in a financial game. 

A bank, even a commercial bank, is not the private purse of 
its managers, of course. But it is not a very complicated technical 
task to remove this inconvenience. As chairman of the board of the 
bank, for example, Kiriyenko concluded a contract for information- 
processing services with two firms--the Aval insurance company, 
owned by his and Nemtsov's friend, Aleksey Likhachev, and the joint- 
stock company AMK Concern, owned and managed by Kiriyenko himself 
since back in the Komsomol days. For 17 pages of text paraphrasing 
newspaper articles, these fellows paid themselves R14,935,549,050 
old rubles from Garantiya money, which was immediately transferred 
to subsidiary structures. Even the old manuscripts over which poor 
Yakubovskiy so painstakingly labored are not worth that much. 

Promissory Notes Based on Oil 

Not all the schemes put into practice by young banker 
Kiriyenko were so simple and straightforward. The legends spread by 
word of mouth strongly exaggerate his ingenuity, however. We have 
the extensively advertised scheme of extracting pension dues from 
nonpaying enterprises, there being enterprises that persistently 
delay payments to the Pension Fund. And there is the Garantiya 
social bank, which sets about paying their debts. Not right away, 
however. Over the course of a year. The only thing the bank does 
immediately is issue the Pension Fund a promissory note for R10 
million with a one-year term of repayment. 

Following this, debtor enterprises straightaway transfer their 
accounts to Garantiya bank for servicing. Some three months later 
Kiriyenko assumes their pension indebtedness. Another three 
quarters remain until the promissory note becomes due, so the bank 
can manipulate the money obtained as it sees fit. Of course, this 
money is urgently needed by the Pension Fund. After all, you do not 
use promissory notes to settle accounts with pensioners. But here 
the Pension Fund really lucks out. A certain firm--Horns and 
Hoofs--is prepared here and now to buy up the Kiriyenko promissory 
note with "real money." But--at half the value. The Pension Fund 
loses R5 million, of course, but it gets the money today, not a year 
from now. 

When the one-year term expires, Horns and Hoofs (many of these 
were opened in the city) presents Kiriyenko the promissory note. He 
then pays the full 10 million, and everybody is happy. And we mean 
everybody--not only the directors at Horns and Hoofs who, at first 
glance, seems to have gotten the 5 million differential lost in the 
transaction. This is entirely understandable, insofar as such 
manipulation is possible only under one set of circumstances--when 
the Pension Fund directorship, the bank management, the directors of 
Horns and Hoofs, and possibly the directors of debtor enterprises 
all comprise a single syndicate, each taking a piece of the pie-- 
with some of the booty, in all likelihood, going to the provincial 
leadership. How much to whom--is not known, but Kiriyenko's bank, 
according to certain calculations, made up to $10 million a month in 
promissory-note schemes. 

Yet another scheme well known in the Kiriyenko biography has 
acquired the name "pension oil." This is not fundamentally 
different from the promissory note scheme. The only difference lies 
in the fact that debtor enterprises pay their pension fund debts to 
the bank not in money, but in oil (Garantiya bank's zone of services 
encompassed oil-bearing regions). The bank obtains the oil dirt 
cheap, then resells it through various intermediary firms at the 
real price. Once again we need not be surprised that the oil people 
themselves are unable to profitably sell their oil. While the 
former Komsomol obkom secretary, who had not even seen a drilling 
rig or pipeline up to this time, handles the matter without undue 
strain. It is not a problem of selling, but rather of finding a 
handsome way of assimilating the proceeds gained. 

It is a standard problem. The solution is also standard. 

Taking lessons from scientology, the "young technocrat" introduced 
nothing new to our fraudulent domestic practices. The same schemes 
of privatization of financial flows have long been in use in the 
coal industry, the railroads, the metals industry... Some skilled 
craftsmen made incomparably more in this scheme than the legendary 
Nizhniy Novgorodan, though their glory does not travel beyond the 
close quarters of police headquarters and provincial haunts. 

There is perhaps just one feature that imparts a very specific 
aroma to Mr. Kiriyenko's business: He made his fortune on old 
people's pension benefits. We might say that he ripped off the 
grave. It is one thing to take a piece of the pie from your work 
associate, to constantly manipulate a "free lunch," or to open up an 
underground vodka distillery, but to fleece old people--is a most 
grievous sin. Everyone is thinking: Look at this smart, decent 
young man. How could he go after the pennies of old people? What 
could be worse? 

Now it seems we can understand why he was so upset when he saw 
that Muscovites had so many social privileges as compared with 
Nizhniy Novgorodans. The record shows that the capital clearly 
lacked a good "social" bank. The Garantiya commercial bank need 
only open up a branch here, and spoiled Moscow pensioners would 
immediately come to understand what life is like for people in the 
rest of Russia. 


Moscow Political Rumors Cited
Moskovskiy Komsomolets
12 July 1999
[translation for personal use only]
"Rumors Rated" feature by Mariya Fedorina and Mariya Markina 

If Yeltsin Is Sticking Close to the Kremlin, Expect Surprises. Kremlin 

Midsummer is the most stagnant time; politicians are on vacation, building up 
their strength for August putsches and defaults. Only the top politician 
has almost made a point of not going anywhere, has made so much of a 
point of this that everyone immediately began to fret: Why has he not 
gone off to his Shuyskaya Chupa [residence]? Specialist Kremlinologists 
(and who in our country today is not a Kremlinologist?) have various 
answers: Some believe that Yeltsin is readying another surprise. Indeed 
-- all the branches of power are on leave, and this is his last (!) 
presidential leave so it would be a pity not to take advantage of it by 
disbanding, reinterring [vynesti], again canceling, or rescheduling -- 
there is plenty that one man in the Kremlin can do and another such 
opportunity will not present itself again. 

According to other information, it is all about the successor -- it is 
that not even any of the leading members of the [Presidential] Staff can 
go on leave until they have decided who is going to enter the elections 
from the Kremlin and how. In this connection people have again begun to 
speak of the possible dismissal of Stepashin, especially as the 
president's recent words-- "Sergey Vadimovich [Stepashin] will rest 
later" -- sounded ambiguous. The removal from the summer airwaves of the 
"Goodnight, Kids!" program and the puppet protagonist of our prime 
minister seemed a sinister omen against this backdrop.... 

However, our lives have long since ceased to depend on his [Yeltsin's] 
reshuffles and he himself is scarcely seriously hoping to change anything 
in society in his remaining period in office, so his reluctance to go 
away is perfectly explicable: His presidential term is shrinking visibly, 
and the less of it is left, the closer he wants to be to power, in other 
words, to the Kremlin. The End of the World Is Nigh. Popular Rumors [subhead] 
Apocalyptic forecasts have become an extremely fashionable genre lately. 

Everybody is making them, and often they even give specific dates. For 
instance, 15 July. Many people feel that something bad is going to happen 
that day: Either a new banking crisis, or another ruble devaluation, or 
the Earth will tilt on its axis. A bad day, in general. People in the 
West are more restrained in their forecasts, but they also believe that 
the end of the world is nigh for Russia. All because of the notorious Y2K 
problem. Russia is not the world's most computerized country, but it is 
experiencing the full range of problems with malfunctioning equipment of 
various kinds. All because, according to The Guardian, testing all 
computer communications would have cost one-seventh of the total Russian 
federal budget. Naturally, we cannot afford this. So in January, 
according to rumors across the ocean, we can expect malfunctions on all 
telephone and telegraph lines, in February it will be the turn of 
interruptions to s upplies of electricity and hot water, and then there 
will be problems in the health care sphere. So here we go. The situation 
will more or less return to normal in March. 

If you recall, a little while ago the Americans had a burning desire to 
help us with the Y2K problem. Especially in the military sphere -- 
concerning the possible spontaneous launch of ballistic missiles. And 
agreement had almost been received. But then Yugoslavia began. The 
Defense Ministry decided that the Americans might help, but they would 
spy for all they were worth. In short, the ministry refused. So it is odd 
that the Western mass media are devoting more time to our power outages. 
By then there may be nobody to be bothered by this. 

New Campaign Techniques Being Tested Out in Moscow. Election Rumors

Another mayoral candidate with the promising name of Dvornikov [Janitor] 
emerged this week and made quite a splash. Not only did this gentleman 
not appear at his own press conference devoted to his nomination, he also 
contrived to accuse the current Moscow authorities of every mortal sin: 
from incorrect privatization to NATO's rampage and the drought in the 
Moscow region. The new candidate recorded all these accusations on a 
videocassette which was shown to astonished journalists, while 
Dvornikov's advisers explained that the candidate had been forced to take 
refuge abroad from possible repressions at the hands of you know who. 

However, there are rumors that the new candidate will continue his 
virtual election campaign: He himself will not put in an appearance in 
Moscow, but a well-known actor will be instructed to present his views; 
according to another version, it will not be a performer but the leader 
of a rock group, and he will not be speaking but mostly singing. In 
general, his team will play the 
role of candidate -- speaking, singing, dancing, denouncing, and telling 
jokes -- while the candidate himself shelters from repression since he 
apparently has a sober idea of his own oratorical and other abilities. In 
short, at last Muscovites have Zhirinovskiys and Bryntsalovs of their 
own, and there is only one consolation here: The next six months will not 
be boring. 

Rumor Laboratory 

No one bats an eyelid any longer at imagemaking based on scandal. 

There are plenty of examples of this, especially in our country. But even 
in the West this is apparently an extremely popular route into big-league 
politics. It is said that Hillary Clinton, who has at last decided to run 
for the Senate, will base her election campaign mainly on the sex scandal 
surrounding her husband, presenting herself as the innocent victim. 
Hardened transatlantic PR specialists have probably calculated that she 
will be able to carve out the necessary number of votes this way. 

There have long been rumors that Tatyana Dyachenko is about to emerge onto 
the big-league political scene at long last. It is said that with every 
passing year she finds it harder to hide behind her father's back. And 
with the approach of the elections this is downright unbearable. There 
has even been speculation that she may be the new successor. But that is 
more from the realm of fantasy. It is more probable that Tatyana 
Borisovna will try to find her own niche in politics. She most likely 
will not succeed in becoming a senator like Hillary, but running for the 
Duma, representing the new party or power, for instance.... In general, 
modern campaign techniques borrowed from the West and tested out under 
Russian conditions are capable of performing miracles, and the last 
presidential campaign was confirmation of that. There is plenty of 
material that can be used to cobble together a worthy image. Filial love, 
devotion to the family, and experience of work in power structures. 

We asked people with firsthand knowledge of political battles to 
comment on Mrs. Dyachenko's chances. 
Vladimir Nikitin (State Duma deputy, People's Power group): 
"It is of course impossible to rule out the appearance of Tatyana 
Dyachenko as an independent figure on our country's political scene. But 
I think there are two important points here. First, in this case the 
family's secrets will definitely be revealed and we will learn a lot 
about Western accounts and the real estate of the presidential house. 
And, second, from the viewpoint of campaign techniques, it would be 
better for Tatyana to appear as Luzhkov's political granddaughter than to 
emerge from the shadow of her own father." 

Vladimir Lysenko (State Duma deputy, Russian Regions group): 
"Of course, modern imagemaking techniques have achieved a very high 
level, but even in this case our people will hardly vote for Tatyana 
Dyachenko. The very fact that she belongs to the Yeltsin family counts 
against the president's daughter. Especially as we know what sort of a 
role she has played as Yeltsin's image consultant and in the backstage 
games in the Kremlin." 


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