July 25, 1999   
This Date's Issues: 3405 • 3406 • 

Johnson's Russia List
#3406
25 July 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Inter Press Service: Russia: Culture Short of Funds, Not Customers.
2. Interfax: Zyuganov Doubts Likelihood of Duma Disbandment.
3. Interfax: Zyuganov: Leftists To Run for Duma 'in One Column' 
4. NTV: Protesters Implicate Voloshin in Car Plant Fraud.
5. US News and World Report: Christian Caryl, Getting a really cold
shoulder in Kosovo. Why Albanians hate Russian peacekeepers.
6. Gordon Hahn: on Money, Press & Politics in Russia.
7. Washington Post: Interview with Prime Minister Stepashin.
8. New York Times: Raymond Bonner, Russian Gangsters Exploit Capitalism to 
Increase Profits.] 

*******

#1
Russia: Culture Short of Funds, Not Customers
Inter Press Service
24-JUL-99

MOSCOW, (Jul. 23) IPS - In a country of shortages, there is an abundance of 
readers at the Russian State Library -- the largest in Europe -- a fact that 
has failed to cheer its underpaid and overworked librarians. 

These days, when most Russians are struggling to make ends meet, some find 
escape in literature and the arts, traditionally affordable and high quality, 
but whose institutions' financial situation is no exception to the general 
rule. 

"The job here -- by shifts -- is pretty exhausting," said Marina, a young 
worker at the library, formerly called Lenin Library or "Leninka." "But the 
salary is absolutely inadequate -- with 600 rubles ($25) in your pocket you 
simply can't live in Moscow." 

The country's vast network of libraries seems to have been entirely forgotten 
by the government, and the problem is so evident that even the culture 
minister agrees. 

"Of course, it's a shame that employees at cultural institutions are getting 
wages well below the level of subsistence," Vladimir Yegorov, Russian 
Minister of Culture, told IPS. He now faces a daunting task, as cultural life 
has suffered from the calamities that followed the collapse of the Soviet 
Union in 1991. 

Yegorov is no stranger to Russian libraries -- before his appointment to the 
cabinet last year, he served as the director of the Russian State Library. 
"Even with all my degrees and honorific titles, the director's salary was 
just 1,800 rubles ($75)," he recalls. 

"Generally speaking, I'd say that the funding needed to sustain Russian 
cultural activities is 20-30 times higher than the current $100 million a 
year," the minister said. 

Facing an acute shortage of funds, many institutions have to rely on foreign 
aid. 

These days a European Union-funded project is helping the Leninka to 
computerize its catalogue and vast collection. The EU's TACIS program has 
provided some $1.1 million to get the project off the ground, but it is 
expected to cost far more. 

Russia's world famous Bolshoi Theater -- which houses probably the world's 
finest ballet and opera companies and schools -- is another example of savage 
market laws at work. Harboring little optimism about government funding, its 
management is struggling to increase income from international performances 
and projects. 

UNESCO, the United Nations Educational, Scientific and Cultural Organization, 
has launched an international campaign to raise the $350 million needed to 
rescue the dilapidated 142-year-old Bolshoi Theater in downtown Moscow. 

"The Bolshoi has a worldwide recognition, and we are keen to sustain that 
reputation," Vladimir Vasiliyev, Bolshoi's artistic director, told IPS. "One 
of the goals is to extend our audience even more widely, which can be made 
possible through substantial technological renovation -- in fact it is a 
matter of survival, " he said. 

"There is no doubt that the Bolshoi needs more space to deal with its 
expanded production schedule, which now includes some 30 performances a month 
compared with only ten a century ago," he argued. 

But not only libraries and performing arts suffer in crisis-hit Russia -- 
most Russian museums are routinely underfunded and unable to cover even the 
most basic expenses such as staff wages and pensions. 

For instance, Moscow's renowned Tretyakov Gallery, which houses one of the 
finest collections of Russian art, recently was threatened by a shutdown 
because it failed to pay its security guards's salaries. 

Home to a great collection of medieval icons and leading Russian 
masterpieces, the Tretyakov reopened in 1995 after a decade-long renovation. 
The main building's 62 halls and a nearby annex are packed with more than 
100,000 works of art ranging from centuries-old icons and sculptures to 
20th-century paintings. 

But a reduction of government subsidies has left it short of money while, 
like many Russian museums and galleries, it is facing growing problems. 
Recently, it was even threatened by a humiliating electricity blackout over 
unpaid bills. 

Experts have warned that many valuable art works may be damaged because 
museums cannot afford restoration, or cannot even maintain proper temperature 
and humidity conditions in their halls. State subsidies are just a fraction 
of what is needed, and even those are not always delivered on time. 

Nonetheless, Yegorov now sees some light at the end of the tunnel. He said 
that since the beginning of 1999, the federal government is improving its 
record in honoring obligations to cultural institutions. "In March, the 
federal disbursement was just 120 million rubles, while in May the figure 
rose to 220 million," he said. 

But these figures are still widely seen as inadequate, and leading artists 
and authors have been vocal in their criticism of Pres. Boris Yeltsin's 
cultural policies. 

Two years ago, Yeltsin approved a plan to launch a state-owned Russian 
cultural television channel, named "Kultura," to counterbalance a foreign 
cultural invasion. 

But the channel -- packed with old Soviet movies and art documentaries -- 
looks badly underfunded as well, and seems unlikely to compete with the 
private commercial channels that show Hollywood blockbusters. 

Some of the country's cultural institutions are earning enough to cover a 
sizable part of their actual needs, argues Yegorov. Leninka, for instance, is 
now earning out up to one-third of its budget, he said. 

"But we shouldn't have any illusions," he admitted. "The culture as a whole 
can never sustain itself economically, and needs funding -- government or 
private. Thus, the fate of Russian culture depends 
on the country's ability to reverse the current economic downturn." 

*******

#2
Zyuganov Doubts Likelihood of Duma Disbandment 

MOSCOW. July 22 (Interfax) -- Russian Communist 
Party leader Gennady Zyuganov doubts that the State Duma will be 
disbanded in the next few months, but "attempts to do so are not ruled 
out," he said at a press conference at Interfax's main office on 
Thursday. "In any case, they [the initiators of disbandment] will not do 
without elections and will not be able to control the situation should 
chaos begin. In elections we shall win an additional 15%- 20% of the 
votes," he said. He said that if something extraordinary happens, say if 
a sudden decision to bury Lenin's body is made, "a program of emergency 
measures will be implemented without delay." He said that the authorities 
"are looking for a pretext to ban the Communist Party. But they have 
failed to find any pretexts even after six checks," he said. "The 
Ministry of Justice has given us an official document which says that 
there are no serious violations in our work," said Zyuganov. "If Yeltsin 
and his guards have found any violations, let them appeal to a court. But 
no decree can forbid me to respect the working people, and the ideals of 
humanism and international friendship," he said. He said that he thinks 
that President Yeltsin's inability to run the state is obvious. "He is 
not fit for this work, primarily in the intellectual sense," said 
Zyuganov. In his opinion, Yeltsin's team "does not see any successor to 
replace Yeltsin. "For them salvation is in a military decision. But they 
are too weak for this. No one will defend them if they decide to entangle 
the country in one more bloody conflict, similar to the one that broke 
out in October 1993," said Zyuganov. "They do not and will not have any 
successor for the current president," he said. 

*******

#3
Zyuganov: Leftists To Run for Duma 'in One Column' 

MOSCOW. July 22 (Interfax) -- Russian Communist 
Party leader Gennady Zyuganov said at a press conference at Interfax's 
main office on Thursday that "we shall run for parliament in one powerful 
column - the Communists, the Popular Rule, the Agrarians and the 
Patriots." "Our list will be very representative and our program 
convincing and trustworthy," he said. He said that everyone will be able 
to see soon how a single column of center-left forces will be created. He 
said he thinks that "the center-left and people's patriotic forces will 
constitute a majority in the future Duma." In most of the Russian 
regions, supporters of the People's Patriotic Union will muster more than 
half of the votes, he said. He noted, however, that "much will depend on 
whether the most influential political forces will be able to hold a 
constructive dialogue and come to an agreement on a qualitatively new 
economic, social and international policy." "We are holding intensive 
talks with everyone and think that very much will depend on direct 
consultations with Yevgeny Primakov, Yuri Luzhkov and other statesmen and 
regional leaders," he said. Regarding talks with ex-prime minister 
Primakov and Moscow Mayor Luzhkov, he said that "regular consultations 
are held and efforts coordinated to save the country from chaos and those 
who provoke it." "We know them personally, and we have warned them that 
if the situation gets out of control they will bear personal 
responsibility as the organizers of all this," said Zyuganov. Zyuganov 
said that the Communist Party is prepared for the election campaign and 
for publishing its basic documents. He said an initial draft of the 
election program has been prepared and will be finalized by experts 
during the next two weeks. According to Zyuganov, at the end of June the 
Communist Party published its economic strategy and has already received 
"original ideas from manufacturer and entrepreneurs, including 
foreigners." "Two more drafts have been worked out - a short and an 
adapted one - for the broad promotion of our economic strategy," said 
Zyuganov. 

*******

#4
Protesters Implicate Voloshin in Car Plant Fraud 

NTV
22 July 1999
[for personal use only]

{Presenter] Investors who were cheated by the 
all-Russia car alliance [AVVA] company gathered today practically in the 
centre of Moscow demanding that their money be returned. The protesters 
announced the setting up of a party of cheated investors, since AVVA is 
not the only company to have made use of the investors' trust. Today they 
are demanding not only money but that the guilty be brought to account. 
Arkadiy Mamontov has the report: 
[Begin recording] [Correspondent] At the entrance to the Logovaz building 
used for receptions on Novokuznetskaya Street today there were many 
police and guards in civilian clothing. The cheated investors in AVVA 
held a protest meeting. The company was set up in 1993 and promised to 
build a plant producing Russian cars using the Russian money. The people 
who bought shares were promised great dividends and several million 
dollars were collected this way. Six years on the Russian-made car has 
not appeared and the cheated investors have come to the Logovaz building 
to demand their money back. Logovaz knew they were coming. You can see 
here how one of the guards is signalling to a certain man to film 
everything going on in front of the office building. Clearly, this 
evening the Logovaz security men will study the video. 
This is the first time the investors have held their protest at the 
Logovaz building, the former headquarters of AVVA. 
[Protester, using a loudspeaker] Abramovich [Boris Abramovich Berezovskiy], 
come 
out and speak to the people! Let's discuss how you ripped off the people. 
You must have some conscience. No? Or have you locked yourself away in 
your castle, you bastard. 
[Crowd chants] Abramovich! Voloshin! [Aleksandr Voloshin, head of Yeltsin's 
administration] Thieves and conmen! 
[Correspondent] It is not by accident that the protesters are calling out
the 
name of the Russian president's head of administration: In the mid-nineties 
Aleksandr Voloshin carried out a transaction worth about $5.5 million in 
the name of and under instruction from AVVA. He sold part of the shares 
in AVVA to investors in Chara Bank, but a bit later Chara Bank became 
bankrupt, like AVVA and the investors' money disappeared. 
[Protester, using loudspeaker] The adverts said that if you invest money in 
AVVA 
you are supporting the real sector of the economy, that a car plant will 
be built using this money, that there is a massive difference between a 
financial pyramid and AVVA. 
[Correspondent] A few minutes after the start of the meeting, a black 
Mercedes left 
the mansion. The security men said Boris Berezovskiy had left his 
residence. The protesters continued with their slogans. 
Everyone had a story to tell. Oleg gave AVVA about $2,000. He has still not 
seen this money. He no longer trusts Boris Berezovskiy. 
[Oleg] Of course I do not trust him, he is a wide boy. It is just a shame 
that (words indistinct). 
[Correspondent] The protesters are accusing the former heads of the AVVA 
company of all the worst sins, and suspecting new ones. 
[Female protester] He [Berezovskiy] has bought everything. There remains 
only parliamentary immunity then that's it. [passage omitted: ritual 
stamping on blow-up car similar to the one which was to be produced in 
Russia] [end recording] 
[Presenter, with next report] We learned today, straight after watching the 
report in our previous bulletin, that the head of the presidential 
administration, Aleksandr Voloshin, whom the cheated investors have 
demanded be brought to criminal account, as you have just seen, has given 
the tax police the urgent order to find any way of instigating criminal 
proceedings against the head of Media Most, Vladimir Gusinskiy [owner of 
NTV].

*******

#5
Date: Sun, 25 Jul 1999 
From: Christian Caryl <CCaryl@compuserve.com>
Subject: Russians in Kosovo

US News and World Report
World Report 8/2/99
Getting a really cold shoulder in Kosovo 
Why Albanians hate Russian peacekeepers 
BY CHRISTIAN CARYL 

MALISEVO, KOSOVO–A few years ago, Vitaly Popov thought he had had it with
the Russian Army and got out. Things were tough financially. "For a while
we were just about managing to make ends meet," he says. Then came last
year's financial crisis in Russia, so when he heard that his old
paratrooper unit was looking for a few good men to serve in a new
peacekeeping force in Kosovo–with salaries in American dollars–Popov
decided to re-up. Now, on a searing day in July, the 25-year-old soldier is
pulling sentry duty at a checkpoint outside the Pristina airport. A small
convoy of armored personnel carriers passes through, en route to somewhere.
Next comes a trio of electricians, here to repair the airport generator
destroyed during NATO bombing. Last but not least are some Serbs. They're
being threatened by the Albanians in their hometown and want the Russians
to help. An officer is called to the gate. He'll see what he can do, he
says. The day grinds on. 

In some ways, the presence of Russian peacekeepers here is just a subplot
in the Kosovo rebuilding story. But there is one thing that distinguishes
the thousand or so Russians from their counterparts in the NATO-led Kosovo
peacekeeping force, known as KFOR: the antipathy they arouse among the
Kosovar Albanians victimized by Slobodan Milosevic's ethnic cleansing
campaign. 

Catcalls. Nowhere is the hatred more evident than in western Kosovo, a
stronghold of the Kosovo Liberation Army where the Serbs committed some of
their worst atrocities. In Orahovac, the announcement that Russians would
be stationed in the area triggered weeks of protests. Residents presented
U.S. Gen. Wesley Clark with a petition containing 20,000 signatures
protesting the Russians' arrival. When the first Russian troops showed up,
they were greeted with catcalls and angry gestures. Weeks later, a Russian
drive through the town of Malisevo still drew angry whistles. "They scream
at us," says Ilya Kolchin, a 20-year-old private. "We don't understand. We
don't know exactly what they're saying." 

Albanians give two reasons for the way they feel about the Russians. Every
Kosovar, it seems, has heard lurid tales of Russian-speaking mercenaries
who participated in Serbian atrocities during the war. (Such accounts are
hard to verify; NATO is investigating the allegations.) There's also the
matter of Moscow's consistent support for the Serbian cause. Now Russians
are manning checkpoints right alongside NATO troops. 

What comes next makes many Albanians antsy. In predominantly Albanian
Malisevo, German troops patrol alongside Russians. The Germans are popular,
but even they worry about what will happen when they hand over the patrol
duties to the Russians later this month. In Ostrazub, a village just a few
miles down the road, 34 people were massacred by Serbs on March 31.
Villagers can't believe they may soon be left alone with the Russians. "If
that's the case, then we might have just as well have remained refugees,"
says Jakup Morina, 44. Other villagers say they consider moving away. Says
KFOR spokesman Louis Garneau: "The challenge is for the Russians to
demonstrate that they can be evenhanded. Let's give them a chance and see
if they can do it." 

In the American sector, newly arrived Russian peacekeepers triggered two
days of demonstrations in the middle of July when they drove through a town
with the local Serbian police official, the Serbian flag flying jauntily.
U.S. forces responded by setting up joint patrols designed to drive home
the point that the Russians are part of KFOR too. Soldiers of the 9th PsyOp
battalion link up their humvees with Russian BTR armored personnel carriers
and tour villages handing out brochures printed in Serbian and Albanian
with the slogan "Give a thumbs up to peace." 

In the end, of course, it will be up to the Russians whether they succeed,
and there are some reasons for optimism. Like Popov, many members of the
Russian Military Contingent here have prior peacekeeping experience. Most
are members of the elite paratroopers with a pronounced esprit de corps.
When they get together with their American counterparts, it's soldiering,
not politics, that they talk about. Tough-looking Alexei, in a flak jacket,
cradling his Kalashnikov, is a fan of Saving Private Ryan–the only film
about the U.S. experience in World War II he has ever seen. "That
Spielberg's a genius. He made a brilliant film about the horrors of war." 

If encounters like that are any indication, KFOR's multinational troops may
yet find the common ground they'll need to succeed in Kosovo. 

*******

#6
Date: Sat, 24 Jul 1999 
From: Gordon Hahn <hahn@hoover.stanford.edu>
Subject: G. Hahn on Money, Press & Politics in Russia

Several recent devlopments deserve attention, it seems to me, because they
underscore the overlap between money, press, and politics in Russia; all
revolving around the vast corruption that now pervades Russia state and
society. The following hypotheses inform the suspicions aired further below:
(1) Almost every political 'gruppirivka' in Russia - Yeltsinites, Luzhkov
government, NDR, former Nizhegorodians, Gaidar & Chubais, agrarain lobby,
KPRF and its factions, and the LDPR are deeply involved in corrupt
practices. Since almost each group is involved in corruption, each is
susceptible to such charges and so each tries to dig up evidence and find
press outlets to make charges.
(2) Numerous journalists are forced to publish 'zakaznye' articles
wittingly or unwittingly (for payment or by being handed hot 'kompromat')
gotten by financial backers of their newspapers to attack an opponent.
(3) the effect of kompromat is pervasive in Russian politics forcing
political appointments, changed political strategies, and the like.
(4) In some cases, kompromat is not necessary and direct payments to
political opponents can have the proper effect. This is more likely if the
buyer has access to state coffers. Then the press is not necessary.
LIKELY CASE EXAMPLES:
(A) Russian media reports on Swiss prosecutors' criminal money-laundering
investigation into RF Presidential Administration chief Pavel Borodin, his
wife and 22 other purportedly highly placed Russian state officials opened
up in March. Russian prosecutors reportedly also got involved, entering the
Kremlin to seize documents from Borodin's office related to the Mabetex
firm's renovation work; contracts apparently won in return for bribes to
Kremlin officials. In April, Komsomolskaya reported Pravda Borodin's
apartment was searched and found documentation on $100 million in various
wire transfers to personal accounts in Switzerland, Liechtenstein and the
Bahamas. Komsomolskaya Pravda also reported that the accounts were in the
name of Borodin's daughter and the Mabetex president. Dangerous stuff. It
would require a strong backer to dare publish this. Indeed, there was one.
Or two. Chernomyrdin and Vyakhirev. It would be wrong to buy Vyakhirev's
claims that GazProm is out of politics, or the rumors about the
estrangement between 'Che' & 'Vya'. GazProm has a good stake in
Komsomolskaya pravda. Shortly after the article's publication, Chernomyrdin
began meeting with Yeltsin, then became envoy on debt negotiations. Then
Chernomyrdin was returned to the corridors of state power by Yeltsin, being
appointed special envoy to Belgrade during the NATO bombing campaign, now
as a board member once more at GazProm. No coincidence I suspect.
(B) On 8 July, Prime Minister Sergei Stepashin announced that the Central
Bank would be giving a loan worth 2.5 billion rubles ($103.3 million) to
SBS-Agro Bank on condition that 1 billion rubles would be used as favorable
loans for agriculture. In return, the SBS-Agro was to hand over 75 percent
of its stock to the government. At the conference devoted to discussing
problems facing the agro-industrial sector, Stepashin said he would like to
see a "powerful agrarian faction" in the next State Duma. The same day, the
Agrarian Party 'decided' to go it alone in the upcoming Duma elections.
Apparently, the Kremlin had prevented the APR and KPRF from running
together in the Duma elections by offering direct state assistance to the
agricultural sector, even if the money was difficult to find as other
Stepashin remarks at the conference suggested. 
(C) Another example. Obshchaya gazeta (1-7 July 1999) recently published
an expose' on former Russian premier Sergei Kirienko's oligarchic
relationship to the state and how his Garantiya Bank and Norsi Oil firms in
Nizhnii Novgorod profitted from ties to the Russian State Pension Fund and
then Nizhnii mayor Boris Nemtsov, who paved Kirienko's road to the
premiership. The article outlines detailed information, some apparently
received from the Shchyotnaya palata, on Kirienko's pension fund, and
promissory-note and "pension oil" schemes in Nizhegorod. The article
sarcastically denigrates Kirienko's criticism of corruption in Luzhkov's
Moscow city goverment. Kirienko is decribed as "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..." The article goes on to
describe how Kirienko's Nizhniy Novgorod social bank 'Garantiya' created a
method for extracting pension payments from enterprises and deistributing
pension payments in full and on time. The Shchyotnaya palata's report on
investigation into the "social banks" created by Yeltsin under the Pension
Fund is used. It found, for example, that surplus pension funds were used
to invest by Garantiya and other social banks, but dividends were never
paid back to the Pension fund. Thus, its loss, according to the article,
over three years of investment in the authorized capital of Kiriyenko's
bank was more than 23 billion old rubles. The money provided "material
incentives for bank employees, social development of the collective, etc.",
according to the article. Almost R6 billion was spent on this in 1995, more
in '96. Promissory-note schemes involved extracting pension dues from
enterprises that delay payments to the Pension Fund. Garantiya Bank would
pay their debts over the course of a year, issue the Fund a promissory note
for R10 million with one-year term of repayment, receive debtor
enterprises' accounts to Garantiya bank for servicing, and assume three
months later their pension indebtedness. As three quarters remained until
the promissory note becomes due, Guarantiya could use the money obtained as
it saw fit. Kiriyenko's bank, it is reported, made up to $10 million a
month through this scheme. Under the "pension oil" scheme debtor
enterprises paid their pension fund debts to the bank not in money, but in
oil. Garantiya bank obtained the oil cheap, then resold it through
intermediary firms at market price.
This article was very likely inspired by materials provided from the
Moscow city government, whose interests the article served, as the last
paragraph makes clear:
"Now apparently we can understand why he was so distraught when he saw
Muscovites had so many social privileges compared with Nizhegorodians. The
record shows the capitol clearly lacked a good "social" bank. Garantiya
commercial bank needs only to open up a branch here, and Moscow's spoiled
pensioners would immediately begin to understand what life is like for
people in the rest of Russia." 
The Shchyotnaya palata likely leaked documents to someone in the Moscow
city government. The KPRF, which dominates the Duma, to which the SP is
subordiated, and former Yabloko leader Yurii Boldyrev, the SP's deputy
chairman both have an interest in doing in Kirienko, as does Luzhkov.
It's going to be a very interesting campaign season. 
Gordon M. Hahn
Hoover Inst.
Stanford U.

*******

#7
Washington Post
25 July 1999
[for personal use only]
Q&A
'Partners . . . Should Respect Each Other'

This week, Russian Prime Minister Sergei Stepashin will meet here with Vice 
President Gore and President Clinton, both of whom are eager to patch up 
differences with Russia that emerged during the Kosovo war. Although 
Stepashin is expecting the approval of a new $4.5 billion loan from the 
International Monetary Fund and is expecting to receive a warm welcome at the 
Clinton White House, rumors circulate in Moscow that he will not last. 
Stepashin, 47, who became prime minister in mid-May, admits he's aware of the 
rumors, but no one--except perhaps Stepashin's patron, the politically 
capricious Boris Yeltsin--can predict the Kremlin's next move.

On the eve of his first trip to Washington, Stepashin sat in the Russian 
"White House" and spoke expansively about his intent to repair the 
U.S.-Russia relationship during an interview with Newsweek contributing 
editor and Washington Post columnist Lally Weymouth. Excerpts follow:

What do you hope to achieve in your meeting with Vice President Gore?

I had a number of telephone conversations at a difficult time with the vice 
president during the Kosovo settlement. I had the impression that the vice 
president and I understood each other, although we were speaking through 
interpreters.

There are two tasks I hope to accomplish during the visit. The first is to 
get to know Gore. I believe good personal contact can be helpful in solving 
difficult questions. Second, we're going to discuss economic matters such as 
[Russian rocket] launches [of U.S. satellites] and steel quotas. Then we will 
discuss the reconstruction of Kosovo and Yugoslavia. I would [also] like to 
find out what the vice president thinks about the ABM and START II [arms 
control] treaties.

How much damage has Kosovo done to the U.S.-Russia relationship?

No doubt, serious damage has been done. However, I believe that our 
relationship is stable and can't be shattered even by the war in Yugoslavia. 
We should draw lessons from Yugoslavia: If we are partners, and we are 
serious partners, we should respect each others' positions and strive for 
compromise before military action begins. . . . At the moment, we are at an 
impasse. We are very concerned with NATO enlargement and expansion.

The administration has linked an increase in the number of Russian launches 
of U.S. satellites to a cutback in supplies of missile and nuclear technology 
from Russia to Iran. Has Russia stopped supplying Iran?

Nobody has proved that it is Russia who supplies missile technologies to 
Iran. . . .

Obviously, the United States has sanctioned companies here, so the United 
States [must] believe Russian entities continue to proliferate weapons of 
mass destruction.

The more restrictions that are placed on Russia, the more difficulties there 
are for investments to come to Russian markets, the more our companies--in 
order to survive--will seek any outlet to market their goods, even using 
shady deals.

The trade relationship between the United States and Russia is uneasy. Russia 
wants to sell more steel in the U.S. market, and America wants more access to 
Russian markets for aircraft. What solution do you see, and when is Russia 
going to join the WTO [World Trade Organization]?

We shall join the WTO. The only problem is the date of our entry. I've 
mentioned already the problem of steel exports. I should not hide [the fact] 
that U.S. restrictions dealt a serious blow to our steel market. I would like 
to note that Vice President [Gore] has supported me. But I understand that 
the president and vice president must take Congress and the steel lobby into 
account now that elections are coming up. I also want to raise the issue of 
the aerospace industry--I am going to Seattle to visit Boeing and will 
discuss cooperation.

Rumors are swirling that you won't last long as prime minister. Is there any 
truth to the reports? Do you plan to be a presidential candidate? Who is 
seeking to undermine you?

If I give you an open and frank answer, I would be sacked immediately. A 
joke. Of course, there are such rumors, and in a situation of political 
instability with elections coming up, such rumors are inevitable. I don't pay 
much attention because I have been in politics for 10 years and have learned 
to ignore such rumors. What is most important is how one's colleagues and 
family feel. . . .

As for the presidential election, there are many candidates for the job, but 
the balance of forces will be clear after the elections to the parliament in 
December. At that time, we shall probably know who the president will 
support. If you want to ask who I will vote for, I will not cite a name but I 
will cite two criteria: First, it must be a person who will not lead us 
backward and second, I would not want this person to be of pension age.

Will you be a candidate yourself?

It is too early to say now.

Would you rule out being a candidate for the presidency?

I'm 47 years old and I have no plans to retire.

Did the military or the president order the Russian troops to march into the 
airport at Pristina [Kosovo] without NATO's knowledge? The foreign minister 
said he was unaware of the action. Were you?

I believe the episode can be explained by a lack of coordination between our 
military and NATO.

It's reported that General [Anatoly] Kvashnin [chief of the Russian general 
staff] was in charge that night.

Kvashnin is a very disciplined general and would never make a decision like 
that himself.

Without the president or yourself ordering it?

I am the prime minister, not commander of the armed forces. Of course, the 
president is the commander in chief.

President Yeltsin has spoken openly about banning the Communist Party. What 
do you think of the idea?

I would take a different approach to this question. It's not a matter of 
banning or not banning the Communist Party. It is a question of any big 
political party like the Communists complying with the constitution. [They 
must not] talk about toppling the government or fan ethnic tensions by their 
electoral rhetoric. This is a serious concern for us. There are other ways to 
influence political parties--through the Ministry of Justice, the 
prosecutor's office and the courts. All these levers will be actively used.

I understand that the IMF board will soon grant Russia the loan it has been 
seeking. Will you be able to meet the general conditions the IMF has laid 
down for Russia?

Mostly, the loan we are getting from the IMF will be used to repay our debt 
to the organization [the IMF]. On the other hand, the World Bank will provide 
additional loans for the reconstruction of the coal industry and for other 
programs.

Only one year after [last August's] default, we've already gotten real 
results in industry and agriculture, despite the drought. [We've made 
progress] in restructuring the banking system and in containing inflation. I 
am fully convinced that between now and the end of next year, Russia will not 
see any major economic and financial shocks because of the work of my 
government. Our primary task for the long-term is developing a free and 
attractive investment climate.

What about the ongoing war in Chechnya? Are you trying to contain the war 
from spilling over into Dagestan? Do you see a threat to Russia?

We are trying to stop the strife from going not only to Dagestan, but also to 
the Stavropol region. We are working every day on this.

The most important thing is to improve economic conditions there. There are 
many Chechens without work or shelter. We should make sure that gangsters do 
not use the idea of independence as a cover for their crimes.

The problem of Chechnya's constitutional status [it is part of the Russian 
federation, though effectively independent] is complicated. We are now 
preparing a meeting between Chechen President Aslan Maskhadov and President 
Yeltsin. I am personally engaged in this.

You know I fought in Chechnya. . . . NATO partially repeated our bitter 
experience when they conducted airstrikes against Yugoslavia and Kosovo. I 
believe it is an unproductive idea to defend human rights with weapons.

People say that corruption and organized crime are huge problems in this 
country. What can you do about it?

I won't deny that there is a problem with corruption and organized crime in 
Russia. However, it is exaggerated by the media and the politicians. The most 
important problem is economic crime. A special department has been set up in 
the Interior Ministry to fight money laundering. And we have very good 
relations with the American law enforcement agencies including the FBI and 
[FBI Director] Louis Freeh. We cooperate on drug smuggling and organized 
crime.

In conclusion, I would like to convey my deep condolences to the Kennedy 
family. Russians are very nostalgic about the Kennedys. And we are very sorry 
that such a good young man died so senselessly. 

******

#8
New York Times
July 24, 1999
[for personal use only]
Russian Gangsters Exploit Capitalism to Increase Profits
By RAYMOND BONNER

WASHINGTON -- A few years ago, British intelligence and law enforcement 
agencies began investigating the money-laundering activities of Russian 
organized crime in Britain. At the center of their concerns was Semyon 
Yukovich Mogilevich, a man described by British authorities in one classified 
report as "one of the world's top criminals, who has a personal wealth of 
$100 million." 

His money came from "large-scale extortion, prostitution, arms dealing and 
drug trafficking," and it was laundered through a London bank with the help 
of a lawyer there, the report said. 

The British shut down that operation in 1995, prompting Mogilevich to begin 
laundering his illicit profits into a new venture: an American company listed 
on the Canadian stock exchange that sold its stock to investors throughout 
North America. 

Current and former American officials say Mogilevich is the harbinger of a 
disturbing new trend: the Russian mobster masquerading as crack capitalist. 

It is also a new twist in how international criminals turn their illegally 
obtained cash into legitimate assets. 

Historically, drug barons and those who amass mountains of cash have 
laundered their money through private companies, which are subject to less 
stringent reporting requirements. 

But in the bull market of the 1990's, authorities say, public companies offer 
criminals the chance to make even more money by artificially pumping up the 
stock price and bilking investors. 

Mogilevich's move into the North American equity markets began with a company 
he set up in suburban Philadelphia called YBM Magnex. 

Its primary business was the manufacture of industrial magnets at a factory 
in Hungary and later at a factory the company bought in Kentucky. YBM 
attracted a blue-ribbon board, its books were audited by two prominent 
American accounting firms, it issued glossy annual reports and it had its own 
Web site. 

All of this turned out to be sophisticated cover for what was also a vast 
money-laundering operation, American intelligence and law enforcement 
officials say. They add that it is far from a unique case and that Russian 
organized crime, which has acquired devastating power in much of Eastern 
Europe and the former Soviet Union in the last decade, has made inroads in 
America's highly regulated financial markets. 

"This is the first public demonstration of the manipulation and infiltration 
of world financial markets by Russian organized crime," said a senior 
Administration official whose responsibilities include following Russian 
organized crime groups. 

Last month, in a negotiated agreement, YBM pleaded guilty to securities fraud 
in the Federal District Court in Philadelphia. The criminal investigation is 
continuing, and officials said it is focusing on the role that Mogilevich and 
two associates played in setting up and running the company. 

Like a handful of other Russian crime figures, Mogilevich is barred from 
entering the United States. But he has Israeli citizenship, as do several 
other prominent Russians involved in crime, American diplomats and 
intelligence officials said. 

While American officials believe they have shut down Mogilevich, or at least 
curtailed his activities -- "in a box," as a senior intelligence official put 
it -- they fear that there are similar schemes waiting to be exposed. 

"This is just one case, but there are others like it throughout the world," 
said Jim E. Moody, a retired F.B.I. agent who headed the organized crime 
section for many years and was one of the first agents to begin working with 
the Russian police after the collapse of the Soviet Union. 

In the three years between the British action and the American authorities' 
penetration of YBM's corporate facade, the company had raised $114 million 
(Canadian) on Canada's capital markets. Helped by glowing claims about sales 
and profits, YBM's stock soared, and Mogilevich and some of his associates 
sold their shares for millions of dollars in profits. 

The shares were traded in Canada, attracting some American investors, while 
the company awaited approval for listing on the Nasdaq exchange in the United 
States. 

"They cloaked themselves in an air of legitimacy that was beyond belief," 
said a former F.B.I. official whose job included watching Mogilevich. 

The company had sales but it also exaggerated them. It had customers, but it 
also maintained fictitious customer lists. 

It paid suppliers, but some were companies controlled by associates of 
Mogilevich. Some YBM officers and directors were complicit with Mogilevich, 
but others thought they were engaged in a legitimate business, investigators 
say. 

With the investigation continuing, and a investors' class-action suit pending 
-- as yet with no reply from the defendants -- there is a general reluctance 
to discuss what attracted anybody to YBM. 

"It would be lunacy for me to say anything," said one former company 
official. 

Lawyers for the plaintiffs in the class action said they would not permit 
their clients to talk about their investments because they feared retaliation 
by Mogilevich. 

A public portrait of Mogilevich's criminal empire first appeared in May 1998 
in The Village Voice in an article by Robert Friedman, who had access to 
classified F.B.I. and Israeli intelligence reports. After the article 
appeared, Mogilevich put out a contract on Friedman's life, a threat that was 
picked up during a telephone intercept by the Central Intelligence Agency, 
law enforcement and intelligence officials said. 

Mogilevich started as a small-time thief and counterfeiter in the 1970's, 
officials say, then made millions in the 1980's from Jews leaving the Soviet 
Union. He took their art, jewelry and other valuables, promising to sell them 
and send the money. He kept most of the proceeds, officials say. 

Not long after the Berlin wall came down and the Soviet Union collapsed, 
making travel easier, Mogilevich set up operations in Budapest, where he ran 
a prostitution ring out of a topless bar called the Black and White Club, 
European and American officials say. 

Mogilevich, who is believed to spend most of his time these days in Budapest 
and Moscow, could not be located. But a small Hungarian newspaper reported 
last month that it had interviewed him (the newspaper did not say where or 
how) and that he had denied any criminal activity. 

"I consider myself a law-respecting citizen who works in earnest and pays 
taxes regularly," Mogilevich told the newspaper, Napi Magyarorszag. 

Though raised in a Communist society, Mogilevich, now 53, quickly adapted the 
ways of fast business dealing. In putting together YBM, he used offshore 
locales where secrecy prevails over disclosure, sophisticated financial 
transactions and wire transfers to move money quickly and beyond the prying 
eyes of regulators. 

The following account of how Mogilevich and his associates penetrated North 
American capital markets is pieced together from the information and plea 
agreement in the criminal case in Philadelphia; the complaint in the 
class-action suit, which the investors filed in the Federal District Court in 
Philadelphia; an audit of YBM's books in December 1998 by a Philadelphia 
accounting firm, Miller Coffey Tate, which the company hired when Canadian 
securities regulators raised questions; and YBM's annual reports, public 
statements and filings with regulatory agencies in Canada. 

In the beginning there was a company, Arigon, which Mogilevich set up in the 
Channel Islands in 1991. This was his original conduit for laundering money, 
the British report said. 

One of his partners at Arigon was his mistress, who was the mother of a son 
by him and the wife of the London lawyer who was reportedly in league with 
Mogilevich, according to the report. (Readers of John Le Carré's latest 
novel, "Single & Single," will find similarities between various elements and 
characters and Mogilevich's escapades.) 

Eventually, through a series of complex transactions and takeovers, Arigon 
acquired control of YBM Magnex. To finance YBM's first public offering, in 
Canada, Mogilevich sent $2.4 million from Arigon's bank accounts in the 
Channel Islands. 

YBM was headed by one of Mogilevich's trusted associates, Jacob Bogatin. 
Bogatin, who has a doctorate in powder metallurgy from Volgograd State 
University, came to the United States in the 1980's and eventually became a 
citizen. From 1996 to 1998, he was president and chief executive of YBM. 

Bogatin's lawyer in Philadelphia, Eric Sitarchuk, declined to comment about 
his client, who law enforcement officials said is one of the subjects of the 
continuing investigation by the United States Attorney in Philadelphia. 

The company's glowing claims propelled YBM's stock from a few cents at the 
time of the first offering in 1994 to $5 (Canadian) in early 1996, to more 
than $20 two years later. 

In its 1996 annual report, for example, the company boasted of "record sales 
and earnings," with sales up 79 percent over the previous year. It also 
claimed that revenues from buying and selling crude oil increased from $13.6 
million (Canadian) to $20.4 million. 

YBM's books were audited for 1996 by Parente, Randolph, Orlando, Carey & 
Associates in Philadelphia. The firm reported that the financial statements 
"present fairly in all material respects" the company's financial position. 

In the summer of 1997, when YBM was preparing for another public offering, 
Ontario securities regulators asked Deloitte & Touche to conduct a "high 
risk" audit. In the securities world, this means that the authorities were 
suspicious and wanted the accounting firm to apply extra scrutiny and 
diligence. 

Deloitte & Touche gave YBM a clean bill of health. 

One Canadian analyst who issued a "buy" recommendation noted that the company 
had emerged from the Deloitte audit "with flying colors." And in November 
1997 YBM completed a public offering of 3.2 million shares, at $16.50 
(Canadian) each, bringing in a total of nearly $53 million. 

Both accounting firms are defendants in the class-action lawsuit by investors 
in YBM. 

Parente, Randolph did not respond to several phone calls asking for comment. 

A spokeswoman for Deloitte & Touche, Ellen Ringel, said that the company had 
carried out the audit "in accordance with applicable professional standards" 
and that it would "vigorously defend" itself against the suits. She added 
that in June 1998, the company resigned as YBM's auditors after it became 
concerned about "questionable transactions." 

But the auditors had already missed a few things. 

"Money Laundering and Unusual Transactions" is the heading on a 14-page 
section of a 50-page report by Miller, Tate, the accounting firm that YBM 
turned to hoping once again to get a clean bill of health after Canadian 
officials raised question. At the center of these transactions was a company 
called United Trade, which was incorporated in the Cayman Islands and was run 
by Igor Fisherman, who was also the chief operating officer of YBM. 

Fisherman, who has a master's degree in mathematics from Ufa State University 
in Russia, immigrated to the United States in the late 1980's and later 
became an American citizen. He is also a subject of the ongoing 
investigation, officials said. Fisherman's lawyer, Peter Vaira, declined to 
comment. 

On one occasion, $3.2 million was transferred from a bank in Lithuania to a 
United Trade account in Hungary. It was then quickly transferred to Chemical 
Bank in Buffalo for the benefit of six ostensibly different companies. At the 
same time, United Trade sent money to Chemical Bank for a Buffalo lawyer, 
Paul F. Fallon. 

These transactions have "several of the indicia of money laundering," Miller, 
Tate said in its report, noting, for example, that the companies involved in 
the transactions, those in Lithuania, Hungary and the United States, all had 
the same address -- that of Fallon's office in Buffalo. 

Fallon denied in a telephone interview that he had engaged in any improper 
activity. He said that Fisherman was a client, and that he had incorporated 
all of the various companies involved in the series of wire transfers. He 
declined to say what business activities these companies engaged in. 

As for the oil sales, which YBM said had done so much for its profits, 
Miller, Tate found that the company never had had any oil to sell. 

******