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15 July 1999
[Note from David Johnson:
1. Moscow Times: Melissa Akin and Natalya Shulyakovskaya, Swiss Tie Kremlin
2. Journal of Commnerce: John Helmer, RUSSIAN STEEL LEARNS AN AMERICAN
OR IS IT A COMMUNIST ONE?
3. Andrei Liakhov: RE: 3393-Ekman/Joint Ventures.
4. RFE/RL NEWSLINE: PRIMAKOV FAVORS REGIONAL BLOC ALLIANCE WITH OTECHESTVO
...AS EFFORT TO FORM COMPETING BLOC FOUNDERS.
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.]
July 15, 1999
Swiss Tie Kremlin to Money-Laundering
By Melissa Akin and Natalya Shulyakovskaya
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
"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
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
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
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: email@example.com (John Helmer)
Subject: RUSSIAN STEEL LEARNS AN AMERICAN LESSON, OR IS IT A COMMUNIST ONE?
BY JOHN HELMER
JOURNAL OF COMMERCE, coming
RUSSIAN STEEL LEARNS AN AMERICAN LESSON, OR IS IT A COMMUNIST ONE?
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" <firstname.lastname@example.org>
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
PRIMAKOV FAVORS REGIONAL BLOC ALLIANCE WITH OTECHESTVO... In
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
...AS EFFORT TO FORM COMPETING BLOC FOUNDERS. Meanwhile,
"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.
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" <email@example.com>
Subject: New book: Center-Periphery Conflict in Post-Soviet
Russia: A Federation Imperiled
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:
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
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
Notes on Contributors
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-à-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
For more information please contact the volume editor, Mikhail Alexseev:
Mikhail Alexseev, is assistant professor of political science at the
Appalachian State University (UNC member institution).
Israel: Jews Leaving Russia
July 14, 1999
By SERGEI SHARGORODSKY
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
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
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
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
July 15, 1999
Stepashin Surprised To Be Yeltsin's Pick
By Matt Bivens
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!"
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
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
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
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
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
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
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
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."