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Johnson's Russia List
7 August 1999
[Note from David Johnson:
1. AFP: IMF Denies Reports Of Misappropriations Of Funds.
2. Itar-Tass: Nothing Boded Trouble, Gorbachev Says.
3. Itar-Tass: New Satirical Publication To Appear in September.
4. Itar-Tass: STEPASHIN'S Interview with Vechernyaya Kazan.
5. AFP: Price Waterhouse reports on Russia's management of IMF funds.
6. St. Petersburg Times: Fyodor Gavrilov, Are Black and White and Red
7. Business Week: Margaret Coker, Gas Pains in Russia's Heartland.
With oil exports way up, gasoline is getting scarce.
8. Moscow Times: Brian Whitmore, Primakov, Everyone's Heartthrob.
9. RFE/RL: Paul Goble, Ethnic Conflicts: Explanations, Exploitations.
10. Rossiyskaya Gazeta: Experts View North Caucasus Situation.
(Kulikov, Pain, Shakhrai).]
IMF Denies Reports Of Misappropriations Of Funds
WASHINGTON, Aug 6, 1999 -- (Agence France Presse) The IMF Thursday attacked a
report in the French newspaper Le Monde alleging that money it loaned to
Russia was finding its way into the hands of mafia gangs.
"We take strong exception to the Le Monde editorial and we considerate it
irresponsible," the IMF said in a letter to the newspaper, read to AFP by
spokesman William Murray.
"The editorial concludes wrongly that the funds from the international
community to Russia were being diverted through FIMACO to enrich oligarchs
and that was done with full knowledge of world leaders, including our
managing director, (Michel Camdessus)," it continued.
Le Monde claimed that an audit by the international company PriceWaterhouse
Coopers showed that "one of this planet's world powers and an influential
member of the UN Security Council is diverting money like a common thief
through offshore companies used as tax havens."
Le Monde added that though world powers may not sanction such a practice,
most were well aware of it.
"The IMF for a long time has known about the practice of diverting public
funds in Russia but it nonetheless decided to continue giving loans to the
country," the article said.
But in the letter the IMF insisted that the PriceWaterhouse report "contains
no such allegation and the Le Monde editorial relies on Moscow rumors that
have been propagated."
"The decision to release new financing to Russia reflected the judgement of
the IMF 182 member nations in light of the economic policies that Russia will
be implementing," the letter said.
The IMF had been aware that some of the reserves from the Russian central
bank were held in European subsidiaries, but conceded it had not been
informed of FIMACO activities (an off-shore management company) until this
"The Fund's executive board has concluded that the FIMACO episode constituted
fundamental lack of cooperation on the part of Russian authorities and was a
serious violation of Russia's obligations to the IMF."
And the institution had conveyed its disapproval, the letter said, according
The IMF in July approved a 17-month $4.5-billion line of credit for Russia
aimed at averting a devastating default by Moscow on its external debt.
Nothing Boded Trouble, Gorbachev Says.
MUENSTER, August 6 (Itar-Tass) - Mikhail Gorbachev, the first Soviet
president, said leukemia diagnosed in his wife was totally unexpected by him.
Raisa Gorbachev, who was found to have leukemia, or blood malignancy, is in
the Muenster University clinic in North Rhine-Westphalia state, Germany.
Gorbachev is with her. "In May, we were still in Australia. Even after such a
long flight, Raisa felt well, and nothing boded the present turn of events.
We had many plans for the summer," he said in an interview with Itar-Tas on
A tired and downcast-looking Gorbachev said he stayed at the bedside of his
wife "since the early morning to half past ten of the evening".
Raisa Gorbachev's condition is described as "serious". "Raisa Maksimovna was
hospitalised last Sunday. Today is the seventh day of intensive therapy. Then
a break will be made, more consultations conducted. I'm very upset, and I
will stay near the wife as much time as is needed," he said.
He said his wife's condition had improved as compared with the last weekend.
Gorbachev said he was very grateful to all who had expressed support to him
and wished a possibly rapid recovery to his wife.
"Help in the treatment and hospitalisation was given by the Germany embassy
in Moscow. The decision was made within hours," Gorbachev said, adding that
"every day we get huge stacks of letters, faxes, telegrams with the
expression of sympathy".
Gorbachev's daughter Irina and granddaughters Ksenya and Nastya have come to
Muenster to be with him in his dark days.
"This week has turned our whole life over," Irina said. "Our family much
trusts the doctors of the university clinic," Gorbachev added.
He said the decision to treat Raisa Gorbachev in Muenster was made by leaders
of Moscow's Hematology Centre jointly with American and German physicians.
The treatment could be carried out in Russia, but medical experts say
Germany's clinics have the best equipment.
New Satirical Publication To Appear in September
MOSCOW, August 5 (Itar-Tass) -- A new political
satire publication named "Prav? Da!" (after the communist PRAVDA) will
appear in September.
At Thursday's presentation of the new newspaper, one of its founders
Sergei Yushenkov said that "Prav? Da!" (right? yes!) will be of an
anti-communist nature and propagate liberal values. However, this
"propaganda" will be expressed in such a way so that the readers
"laughing, part with their past."
One of the leaders of the Right Cause coalition Irina Khakamada
complained of the humour-deficient current political life. Both Yushenkov
and Khakamada openly said that the Right Cause has to do with the
newspaper, but "Prav? Da!" is not its press organ. All other democratic
movements are welcome to join us, they said.
STEPASHIN'S Interview with Vechernyaya Kazan
MOSCOW, August 6 (Itar-Tass) - Prime Minister Sergei Stepashin in an
interview with the newspaper Vechernyaya Kazan on Thursday has called on
Russian voters to think what a future they want for their children.
Stepashin on Friday started a three-day working tour of Volga regions. He
will trip from Samara down the Volga to Tatarstan's capital Kazan with a
stop-off in Ulyanovsk.
Stepashin was asked by a correspondent why he did not want to run in the
presidential elections in 2000.
Stepashin said that the elections were not called thus far and, besides, "a
large scope of responsibilities is placed on me, which determines my role in
big politics in the nearest time".
Asked who should rule the country, Stepashin said the voter is to decide.
"Only let him take into account that he is to elect the president not for the
unloved mother-in-law but for himself," Stepashin added.
"Casting the ballot, each should also think what a future he wants for his
children," he said.
As for financial relations of the federal centre with regions, Stepashin said
the government had come to agreement with regions, including with Tatarstan,
on separation of tax revenues, but some problems remain unsolved.
He said he did not find normal the situation where taxes come from regions to
Moscow in a full volume and then "by drops return back, placing the
federation entities on a hungry ration".
The government should make major decisions in a close contact with regions,
"The effective fulfillment of decisions and documents passed at the level of
the Russian government is largely and often fully depends on their support by
entities of the Russian Federation," he said.
"For this reason I am of the opinion that without close cooperation with
regions, the government should not approve and adopt concepts and programmes
of the socio-economic development and decisions on the most important state
problems," he said.
Touching on objectives of regional associations, Stepashin said they "should
become a fulcrum in business relations between the centre and territories".
The closer are contacts between federal and regional authorities, "the more
rapidly we shall find answers and agreed solutions to the acutest questions
that are now standing before Russia".
Stepashin said "one should think not only about creating more effective
mechanisms for cooperation of regional associations with federal bodies of
authority, with the entities of the Russian Federation, but also between the
associations themselves that would help solve these questions". Stepashin
said the "import of foods from abroad suppresses our national agriculture
that for centuries glorified our country, drives us into shackling external
dependence and, as a consequence, undermines the economic security of
Russia". That said, "the government should protect and support domestic
producers and the domestic market. This is especially important in the sphere
of food production, where the pressure in imported foods is felt most
acutely", Stepashin said.
Price Waterhouse reports on Russia's management of IMF funds
WASHINGTON, Aug 6 (AFP) - Russia's central bank managed a substantial part of
its assets -- including funds lent by the IMF -- in a complex and speculative
way described in a report by Price Waterhouse released Friday.
The technical, 19-page audit commissioned by the Central Bank of Russia (CBR)
and made public at the request of the International Monetary Fund appears on
the IMF's Internet website.
Without drawing conclusions or making recommendations, the report describes
transactions between the central bank and its Paris-based subsidiary
Eurobank, and in turn between Eurobank and a Jersey-based off-shore
subsidiary that it controls, the Financial Management Company Limited
The document describes how Eurobank in 1990 capitalized its debt through
FIMACO, a common practice among French banks at the time.
Between 1994 and 1996, through Eurobank and FIMACO, the CBR had made hundreds
of millions of dollars in short-term loans to Russian banks, guaranteed by
the Russian government, including 70 million dollars worth that have
defaulted and are still on Eurobank's books.
In 1995-1996, FIMACO and Eurobank moved at least 1.3 billion dollars into
Russia's short-term government bonds, or GKOs, according to figures gathered
by Price Waterhouse.
In 1996, the CBR began investing in short-term financial instruments
including interbank deposits and US Treasurys, according to the report.
Regarding transactions conducted in 1992 with IMF funds, the authors of the
Price Waterhouse report note:
"We do not know whether the IMF imposed any jurisdictional restrictions, or
whether MinFin (Russia's Finance Ministry) made any representations to the
IMF about how any such funds were to utilized. We note, however, that the
investment criteria in MinFin's investment plan differ from those adopted by
In August, 1992, the report says, the IMF disbursed 977 million dollars in
two tranches on Russia's behalf: 832 million dollars to the Federal Reserve
Bank of New York, and 267 million Deutsche marks to Deutsche Bank.
The funds were then transferred to Eurobank, less a commission, as per normal
procedure, according to the report. Eurobank used some of the money,
designated "Tranche A" funds, as assets to finance FIMACO investments in
short-term, high-yield interbank loans.
St. Petersburg Times
August 6, 1999
NOTES OF AN IDLER
Are Black and White and Red All Over?
By Fyodor Gavrilov
IT'S good to be a political columnist! You get to say whatever you like, and
get paid for it to boot. But sometimes even a peaceful Petersburg onlooker
like myself can have his internal balance upset by this country's seemingly
endless political intrigues.
Right now I, like many people, am worried by several things: the reckless
media war; the actions of the unappealing Kremlin chief of staff, Alexander
Voloshin; the strange patchwork of political blocs and - last but definitely
not least - the tragic changes in staff at Kommersant-Daily, Russia's best
Putting immediate annoyance aside, however, one can see that the events
currently unfolding are about much more than just election-season
maneuverings. They paint a picture of Russia's possible political future as
The elections of 1995-96 may have marked the last time the Russian electorate
was forced to make the difficult choice between white and red, or more
precisely, white and black. The Communists, it seems, have once and for all
stepped back from the proscenium into the corps de ballet.
But regardless of which political leader eventually comes to power, he will
have no space to maneuver. The IMF credits necessary for survival, the feeble
but still breathing privatization process, and the lazy but stable addiction
of our people to democratic procedures - these things won't leave leaders of
any color a way out, short of committing political suicide, like initiating a
world war. But with no suicide on the political horizon, it's clear that the
social experiment started at the beginning of the 20th century has been
completed. Our new political color is gray, with all of its innumerable
And so, the political history of Russia in the 21st century will begin on a
clean page. What will it be like? To my mind, our life in the beginning of
the new century will be much the same as now (a developing market, the slow
growth of consumption, etc.). In sum, I see our new choices in the following
way. First, there is the option of continuing the "Yeltsinism" of the '90s, a
relatively flexible political system with its own special kind of chaos - a
rational chaos that provides for the preservation of what we consider
freedom, in particular the freedom of the press.
Such an option will mean constant scandals, countless government hirings and
firings, thievery, strikes, new oligarchs, a dissatisfied generation and
Russia's gradual growth into a country built on the western model. But
there's a different option as well: Absolute order, strictly maintained.
Public punishment of those guilty of corruption, a stable ruble and healthy
investment climate, clean streets and ... variations on the theme of
Order in Russia always means the curtailing of freedom, proof of which can be
seen today. Pressure inflicted on Luzhkov-friendly NTV will keep the Moscow
mayor from winning the rightist electorate from the still-undetermined
Kremlin candidate. The independent, influential and unprofitable Kommersant
is in even greater danger, because its leanings are too undefined. Yeltsin's
Kremlin doesn't want the free press to ruin its election plans, and free from
immediate repercussions for its actions, is involuntarily illustrating for us
both options for the future, including the Chinese variation. What will we
choose? It's a hellishly complicated question.
August 16, 1999
[for personal use only]
Gas Pains in Russia's Heartland (int'l edition)
With oil exports way up, gasoline is getting scarce
By Margaret Coker in Moscow
After months of haggling, Russia won approval for a $4.5 billion bailout loan
from the International Monetary Fund on July 28. But the Russian government
is getting an even bigger bailout--one it didn't have to beg for--from global
oil markets. Oil prices have almost doubled so far this year, giving a
much-needed boost to the world's third-largest producer. Russia's exports are
surging <A HREF="aol://4344:109.B3642203.824574.618361003">(chart)</A>, and
so are its tax revenues. On Aug. 1, the cash-strapped government said that it
had collected $1.3 billion in taxes in July, 41% from the oil sector, the
largest monthly take this year. Instead of a budget deficit, the Russian
government now projects a surplus of 10% of gross domestic product.
But the black-gold bonanza has triggered a domestic gasoline crisis.
Thanks to a rush by oil companies to cash in on exports, many Russian cars
are running on empty. Motorists from the Pacific port of Vladivostok to the
Black Sea resort of Sochi report shortages reminiscent of the Soviet era.
Farmers from Krasnodar in the south to Karelia in the north warn they don't
have fuel to bring in the harvest. In Moscow, where fuel is available, prices
rose 12% to 25 cents a liter in the last two weeks of July, and are expected
to rise 30% in August.
Rising world prices are the main cause of the shortages. As the price of
Russian oil sold on world markets jumped from $9 per barrel last December to
$19 in August, oil companies have found it more lucrative to export than to
supply the domestic market. Agricultural consumers of low-end oil products
such as diesel fuel often don't pay for supplies, and slackened seasonal
demand this winter from cash-paying motorists kept prices for high-octane gas
low. No surprise, then, that Russian crude exports have risen to an average
of 3 million barrels per day, the highest level since the mid-1980s,
according to Moscow brokerage Brunswick Warburg.
Russian oil companies are increasing exports of fuel oil as well as crude.
Fuel-oil prices in Europe rose to $100 a ton, from $40 per ton, during the
first quarter, so Russian oil companies redirected refining away from
gasoline for local consumption to fuel oil for export.
CONTROLS FLOUTED. Government policies are exacerbating the shortages. In
April, Moscow demanded that oil companies pay all of their taxes in cash,
rather than in credits that could be swapped for oil. That has increased tax
revenues, but pinched Russia's 30,000 gas retailers. These businesses used to
secure gas through barter transactions from oil producers or refineries. The
cash received from motorists rarely went back to the gas stations. It was
usually diverted to other businesses owned by the companies, or squandered on
luxuries. Now, gas retailers don't have the cash to buy oil.
Many gas stations are being forced to shut their doors. Russian media
report that up to 80% of the stations in Krasnodar have closed, while prices
for high-octane gasoline have jumped threefold across southern Russia, to 15
rubles per liter, or 60 cents, in the last month.
Government efforts to keep prices down have failed thus far. In June,
Moscow asked oil companies to respect informal price controls. That plan was
widely flouted. Moreover, as gas retailers are squeezed out, Russia's ten
major oil producers, which now own about 10% of retail stations, will be able
to grab market share. In the last year, Tyumen Oil Co. has doubled its retail
outlets to 540 stations. Oil executives say it will take an additional 20%
rise in retail prices to turn refining back toward domestic consumers.
All this puts Prime Minister Sergei V. Stepashin in the hot seat. With
parliamentary elections scheduled for December, he wants to avoid dramatic
price hikes. On Aug. 2, he called a meeting with the country's oil barons to
defuse what he termed an inflationary ``time bomb.'' His proposal: require
each company to deliver a set amount of diesel fuel and gasoline to domestic
consumers before it is allowed to use the government-controlled export
pipelines. Oil executives publicly have agreed to the plan, but privately say
they won't abide by it. ``It's very easy to get a customs official to allow
exports through,'' says one oil company president. And very hard for Russian
consumers to get a fair shake.
August 7, 1999
Primakov, Everyone's Heartthrob
By Brian Whitmore
Just what is it about Yevgeny Primakov?
The former spymaster f who emerged as a compromise prime minister amid the
political turmoil of August 1998, only to be dumped eight months later by
President Boris Yeltsin in May f has suddenly become the hottest commodity in
And with good reason. Public opinion polls released this week not only rank
Primakov, who turns 70 in October, as Russia's most popular and trusted
politician, they also show that he could single-handedly alter December's
elections to the State Duma.
Both Gennady Zyuganov's Communist Party and Moscow Mayor Yury Luzhkov's
Fatherland movement have courted Primakov. Both know that having Primakov on
their ticket in the December Duma elections is like money in the bank.
If Primakov stays on the sidelines, then a nationwide poll of 1,600 adults by
the All-Russian Center for Public Opinion Research, or VTsIOM, indicates the
Communist Party will dominate the Duma elections with 34 percent of the vote.
Luzhkov's Fatherland would come in a distant second with 16 percent,
according to the VTsIOM poll f which was conducted in late July, prior to the
building of a coalition between Fatherland and All Russia, a bloc of regional
The picture changes dramatically if Primakov decides to join Fatherland. Then
Luzhkov's party leapfrogs past the Communists into first place with 28
percent, and the Communists fall to second place with 27 percent.
If, on the other hand, Primakov were to join the Communists, Fatherland
sinks. The polls show it getting just 12 percent of the vote. The Communists,
correspondingly, soar, taking a startling 40 percent of the vote.
Moreover, with Primakov in the race in any form, other parties across the
political spectrum f from Grigory Yavlinsky's Yabloko to Anatoly Chubais'
Right Cause to Vladimir Zhirinovsky's Liberal Democrats f lose votes.
Another VTsIOM poll showed that Primakov is far and away Russia's most
trusted politician, with a 26 percent rating. Primakov's closest competitor
for the trust of Russian voters is Luzhkov, with 17 percent.
So who will Primakov ally with? At least for now, he is keeping his own
counsel. Earlier this week, he said he had not decided whether he plans to
run for the Duma. At the same time, he expressed a "very positive" view of
the All Russia-Fatherland union and is expected by many to join Luzhkov &
"Primakov is not some sheep who moves where the grass is greener," said
Georgy Boos, Fatherland's campaign manager and the former tax minister in the
Primakov Cabinet, at a press conference Friday. "He is a serious political
figure who does his own thinking."
Maybe so. But what makes this bland Leonid Brezhnev-look-alike such a
The weekly newspaper Moskovskiye Novosti recently wrote that the ex-prime
minister's "true strength and potential are not in programs or in his
political manifesto," but in his image f something the paper called "the
According to analysts, "the Primakov phenomenon" is a hodgepodge of positive
associations. Primakov is a seen as a patriot, but not an aggressive
nationalist; he is not associated in the public mind with the rampant
corruption and cronyism that have plagued post-Soviet governments; and his
modest personal style breaks sharply with the perceived arrogance of the
"young reformers" who dominated Yeltsin's other Cabinets.
Perhaps most important, Primakov is widely seen as the only prime minister
who left Russia in better shape than he found it.
Primakov became prime minister after Yeltsin fired the youthful Sergei
Kiriyenko in response to last August's debt default and ruble devaluation.
His selection was backed by Yavlinsky of Yabloko, among others, on the
premise that then-Foreign Minister Primakov was a compromise candidate
without any ambition to replace Yeltsin in 2000.
In office, Primakov's tried to be a consensus builder. He won praise for
steering Russia out of the financial meltdown without major catastrophe. His
cautious style, and his support for some state regulation of the economy,
struck a chord with Russians weary from a decade of wrenching social and
"Primakov came in with a government that was boring f and this was good,"
said Boris Kagarlitsky, a researcher at the Russian Academy of Sciences'
Institute of Comparative Political Studies.
"After everything that has happened in this country, as soon as a government
promises that something exciting will happen, people are certain that life
will again become worse. From the moment he took office, Primakov gave the
impression that he was just trying to do his job."
According to Kagarlitsky, some of Primakov's appeal is also accounted for by
"Many people, even some of those who have prospered, are nostalgic for Soviet
times, without wanting to really go back to those days," said Kagarlitsky.
"In this sense, people respond positively to Primakov because he reminds them
of what they liked about the Soviet Union, although he is not seen as
Caucasus/Russia: Analysis From Washington--Ethnic Conflicts: Explanations,
By Paul Goble
Washington, 6 August 1999 (RFE/RL) -- The deteriorating situation in the
North Caucasus reflects a "fight for interests" between the Russian
Federation, on the one hand, and the United States and Western Europe, on the
other, according to a senior Russian official.
Speaking at a Moscow press conference on Monday, Russian Nationalities
Minister Vyacheslav Mikhailov said that outside powers were promoting
interethnic conflicts there to consolidate their influence in the
Transcaucasus and extend it northward at Russia's expense.
Without providing any evidence for his assertions, Mikhailov suggested that
the efforts of outside powers had created an explosive situation in which
Moscow now faced the existential question: "Will Russia stay as a single
state and a great power?"
Such dramatic language -- and it has been echoed by several others in Moscow
and the North Caucasus itself this week -- has led some Russian observers to
speculate that President Boris Yeltsin may be planning a new campaign against
Chechnya in order to declare a state of emergency, postpone elections and
remain in office.
But while such predictions may prove to be true, there are compelling reasons
to think they may in fact be overblown. Polls suggest that most Russians have
no stomach for renewed hostilities there. Russian assistance to the North
Caucasus is rising.
Moreover, many other senior Russian officials - including Prime Minister
Sergei Stepashin, who was involved in Moscow's earlier campaign against
Chechnya - have stressed that Moscow has no intention of taking that step.
Indeed, Stepashin said on Wednesday that "one should not joke" when dealing
with the North Caucasus.
Why then did Mikhailov make this statement now? There are at least three
reasons. First, polls suggest that tough rhetoric against Chechnya and the
other North Caucasian republics remains very popular among Russians, even if
tough action is something most of them clearly oppose.
Second, lashing out against the West in general and the United States in
particular on this issue offers an occasion for Moscow to reassert not only
its claims to primacy on the post-Soviet space but also its continuing
nervousness about Western involvement there.
And third, claims that ethnic conflicts are being orchestrated by foreign
powers not only serve to deprive these groups of the legitimacy they seek but
also put pressure on them to settle on Moscow's terms and warn the West
against supporting these groups.
In approximately two weeks, Russian President Boris Yeltsin is scheduled to
meet with Chechen President Aslan Maskhadov to discuss the future of
relations between Moscow and Grozny.
Given their timing, Mikhailov's remarks appear intended to provide Yeltsin
with a justification for taking a harder line against Grozny than he has in
the past, to force Grozny to agree, and to warn the West against attempting
to lobby for a more balanced outcome.
Such a reading of Mikhailov's comments seems particularly compelling
precisely because other Russian officials, such as Stepashin, have adopted a
more conciliatory line. Yeltsin will thus be in a position to offer Maskhadov
carrots as well as sticks.
But even if this strategy does not yield the results that Moscow hopes for
and even if there is no evidence of outside involvement in the North
Caucasus, Mikhailov's words have the effect of calling attention to an
important aspect of ethnic conflicts.
Repeated references to "ancient ethnic animosities" notwithstanding, ethnic
conflicts, like all other struggles, have a beginning, a middle and an end.
Indeed, as the late American ethnosociologist Myron Wiener pointed out, few
of them last longer than a single generation. And as he demonstrated, most of
those that last longer share a common feature: both sides enjoy outside
Implicitly understanding that fact, Moscow clearly hopes to win in the North
Caucasus by frightening off any outsider who might support the North
Caucasians and to do so by suggesting that North Caucasians already enjoy
precisely that kind of backing.
Experts View North Caucasus Situation
3 August 1999
[translation for personal use only]
Commentary by Anatoliy Kulikov, ex-Vice-Premier of the Government of
Russia and Minister of Internal Affairs; Emil Pain, director of the
Center for Ethnopolitical and Regional Studies and professor of MGU
[Moscow State Unitersity], and Sergey Shakhray, juris
No modern-day state, even the most stable, is ensured against
regional crises, including those which take place under national and
It would seem that, learning by the mistakes of others, we could
if not entirely avoid our own, then at least not step repeatedly on the
same rake. Alas, Chechnya and Kosovo are sad testimony to the extremely
low learning curve of the world community from textbooks, many of whose
pages have been written in blood.
What could and could not have been prevented in the Chechen
conflict? What is happening today in the North Caucasus? How to untie
this knot? What must be done today?
These questions are answered by people whose names are widely
known and closely associated with the Chechen conflict: Anatoliy
Kulikov--in the recent past a Vice-Premier of Government of Russia and
Minister of Internal Affairs; Emil Pain--director of the Center for
Ethnopolitical and Regional Studies and professor at MGU, and Sergey
Shakhray--jurist and politician.
[A. Kulikov] The philosopher Ivan Ilyin said: "A smart politician
knows how to stop a war, but a wise politician knows how not to allow
it." And so, it is specifically wisdom which the federal leadership
lacked in the Chechen crisis. Beginning with 1991, the miscalculations
by the leaders led to other miscalculations. Let us take even the Law
on Rehabilitation of Repressed Peoples, which made it possible to rather
loosely interpret the concept of territories. Or the famous statement
of Boris Nikolayevich Yeltsin: "Take as much sovereignty as you can
swallow." I purposely cited specifically these examples, in order to
show that it is both the legislative and the executive branches of power
which are responsible for the Chechen tragedy. It is unfair to place
the blame solely on the President.
In 1994, he appealed to the State Duma with the question: Whether
or not to agree to negotiations with Dudayev? As far as I know, this
intention by the head of state did not receive the support of the
parliament. This historic fact is hushed up, and no one disclosed it in
the course of the impeachment effort--and that is a shame.
[S. Shakhray] I participated in the North Caucasus events from
November of '92, when I was appointed head of the interim administration
in the zone of the Osetino-Ingush conflict, through May of '94, when
Yegorov became Minister on Affairs of Nationalities. I can say with
full responsibility: If I had remained head of Minnats [Ministry on
Affairs of Nationalities], there would have been no Chechen war. I knew
at that time, and I am convinced even now, that the conflict situation
in the Caucasus could be resolved only through a peace agreement.
On 11 November 1992, I arrived in the zone of armed conflict.
Ruslan Aushev and I were dispersing the troops and looking for Russians,
Osetins and Ingush who were missing. We confiscated piles of weapons
from the unlawful formations (without a single loss to our side!)...
And all the while, we were conducting negotiations. In the course of
these endless negotiations, the idea of a treaty with the Chechen
authorities on delineation of powers and authorities was
On 14 January 1993, Ramazan Abdulatipov and I signed a protocol in
Grozny on preparation of such a treaty. But the political process was
disrupted. Thank God the idea did not perish, and a year later it was
realized in the treaty with Tatarstan.
Who disrupted the negotiation process, and how? No one will give
a definite answer to this question. For example, I would like to know
precisely what former Minister of Defense Grachev and Dudayev talked
about prior to the introduction of federal troops...
[A. Kulikov] Yes, they met face to face prior to the start of the
combat actions. People close to Dudayev affirm to this day that the
latter gave his consent to Grachev for the "Tatar variant." Whether
this is true or not--we do not know. If this was so, then why did
Grachev not tell either the President or any of the members of the
Security Council about it? That too we do not know. In the course of
the combat actions by the federal troops, there were at least two times
when the situation was favorable for negotiations, but these
opportunities were not utilized by the Russian authorities.
[S. Shakhray] The reason for the non-resolution of the Chechen
conflict in fact lies in Moscow. If we put emotions aside, we
immediately see the absence of a clear and coordinated appraisal of the
situation at all stages of the conflict. And the inevitable consequence
of this is the ineffective methods of its resolution. In essence, the
patient was constantly being treated for the wrong illness, and with the
wrong medications. They tried to resolve by political methods that
which could be resolved only by administrative methods; To use force on
that which should have been regulated by purely economic effect. They
tried to use public opinion to create that which should be established
[A. Kulikov] I have no doubt that Sergey Mikhaylovich could have
achieved much if he had had sufficient powers and authorities. Perhaps
he could even have convinced Dudayev and stopped the tragic development
of events. But does this mean that the criminal fire which had engulfed
all of Chechnya by that time would have been extinguished? We must
recall: In a republic with population of less than a million people,
there were over 2,000 murders in 1993 alone! We had at our disposal
operative data about terrible crimes in Chechnya. MVD [Ministry of
Internal Affairs] associates made a 9-hour tape recording of interviews
with refugees from Chechnya, which would make your hair stand on end...
But nevertheless, the war should have been prevented. And it could have
[E. Pain] But not at that moment. Yes, there was a period when
one prosecutor and several militiamen could have solved the problem.
When Dudayev's group had just emerged, and was supported by a handful of
people. When the parliament had not yet been taken over. But this
period was missed. Why--that is another question.
[S. Shakhray] Let us turn to the essence of the conflict. What
lies at its basis? A vital component of the events in the Chechen
Republic, which is often overlooked, is the tragic fate of the Chechens.
In the last century there was the fierce half-century Caucasus War, with
huge human losses and the subsequent exodus to Turkey and the Near East.
In this century, there was the mass deportation to Northern Kazakhstan
in 1944. All this could not help but leave painful scars on the
historical memory of the people. It could not help but give rise to
deep-seated mistrust of the central authorities. The opportunity to
heal the wounds was presented by the return of the Chechens to their
homeland in 1957, but the half-measure decisions of the central
authorities left the legacy of a bomb with time-delay fuse.
And it exploded. It exploded when the Union authorities, in the
struggle against the new Russian leadership, began playing the card of
autonomy, and tried to equate its status with that of the Union
republics. The first democrat, as Ruslan Khasbulatov called himself,
tried to seize the initiative. He personally went to Chechnya and
achieved removal of the "partocrat" Zavgayev. And who won? Not the
Union and not the Russian leadership, not the democrats and not the
partocrats, and certainly not the people. The winner was the
entrepreneurial structure of "Dudayev and company," which under the
slogan of national self-determination and independence built a criminal
economic mechanism on the territory of Chechnya, which turned the wealth
of the republic, the savings of its citizens, the federal property and
the monies of the federal budget into the personal income of the
"concessionaires." This was a strong financial pump, with the aid of
which a transit of contraband, arms and drugs flowed into Russia and
throughout the entire world. A strata of people was formed which
serviced this mechanism, which received its share from its operation,
and which was therefore ready to take up arms to defend its criminal
enterprise. In essence, the criminal leaders played on such qualities
of the Chechens as love of freedom, honor and trueness to traditions,
and used the people in their own cynical game. That is, the nature of
this conflict is not ethnic, but criminal-economic.
[E. Pain] I am in absolute agreement with this definition, and it
is specifically for this reason that I say: The negotiations with the
Dudayev followers were doomed to zero result. I am generally opposed to
mythologizing negotiations. I have serious doubts about the fact that
the negotiations could have prevented the war. Why? Why because
Dudayev needed a foreign enemy to consolidate society around himself,
and there was no positive basis for this. And it is specifically for
this reason, and not for any other, that all the attempts to solve the
problem by means of negotiation were disrupted by the Chechen side. It
is obvious that if, under the conditions of conflict, one of the parties
expected to get more without the negotiations than with the aid of the
negotiations, then it would not go to the negotiations. And then the
conflict cannot be resolved without a compulsory armistice.
[A. Kulikov] Today we have in fact returned to the same situation
which we had prior to the introduction of the troops. There is still a
huge number of weapons on the territory of Chechnya, uncontrollable
armed formations, the existence of regulated drug transit routes and
approbated schemes for financial machinations (of the "Chechen aviso"
type), a real threat of the spread of terrorism far beyond the
boundaries of the republic, as well as the dangerous development of the
sanitary-epidemiological situation. All this dictates the need for
application of decisive measures in regard to the "Chechen
It is already clear: Aslan Maskhadov controls the lesser part of
Chechnya, and he cannot bring about order through his own fforts. When
I, as Minister of Internal Affairs and Vice-Premier of the Government of
the RF, offered to help him with investigative and operative workers, I
warned him: "Aslan Aliyevich, after the withdrawal of federal troops,
you will have a fight amongst yourselves." He replied: "I am very
hopeful that this will not happen." It happened. As soon as the
"foreign enemy" left, they began dividing up the pie. I was
categorically opposed to withdrawal of the entire contingent. We should
have left at least two military units. After all, the Americans are in
Cuba, our forces are in Central Asia and the Transcaucasus...
[S. Shakhray] After the withdrawal of federal troops, Dudayev's
"economic order" was practically fully restored on the territory of
Ichkeriya, characterized by the absence of state mechanisms of
financial, customs and tax control, the presence of open borders with
other subjects of the RF and with foreign states (the border with
Georgia is 70 kilometers long), and the absence of truly operational law
Since it is juridically believed that there is the same economic
order on the territory of the Chechen Republic as there is in Ryazan or
Yaroslav Oblasts, any individuals and legal entities of the RF have the
opportunity to freely enter into economic relations with any economic
subjects of the Chechen Republic, and vice versa: They may conclude
agreements, obtain credits, and supply products--including of a military
nature. Often the products which have been brought here and the
financial means which have ended up on the territory of the republic are
sent outside the boundaries of Russia, by-passing tax, customs or any
control whatsoever. The unlawful "economic order" which in fact
operates on the territory of Chechnya inflicts huge losses upon the
federal budget, brings no benefit to the economy of the republic itself,
and directly violates the lawful interests of all citizens of the
[A. Kulikov] Juridically, everything is characterized precisely,
but this description does not contain anything that the federal
authorities and all those agencies and personalities on which the
adoption of immediate measures depends do not know: The discussion here
is about registration of entry onto the territory of the republic and
exit from Chechnya by all individuals; Regulation of import and export
of all types of cargo; Introduction of a mechanism of strict control
over banking and financial activity in the republic (all operations
performed only through the special institution of the Bank of Russia).
Of course, such measures of control and regulation must have a
legislative basis: After all, they significantly limit the rights of
citizens and economic subjects.
[S. Shakhray] The main thing is the utilization of exclusively
administrative methods for regulating the excesses which in fact largely
have an economic nature, and are most often politically expensive,
economically ineffective, and practically unfulfillable in full volume.
As a result, unilateral administrative measures, even those which on the
whole are correct and approved by the majority of the population, will
not achieve the desired goal.
Another approach is possible and necessary: When measures of
administrative control are not a goal in themselves, but merely
supplemental and temporary attributes of a specific economic regimen for
the Chechen Republic. Its primary element should be a free economic
[E. Pain] A sort of "sanitary economic cordon?"
[S. Shakhray] Just the opposite! The "shadow economic order"
which has operated on the territory of the republic since 1991, when
placed within strict limits, will lose its criminal nature in a short
time. Economic operations will be placed under federal tax and customs
control. Favorable economic conditions will be ensured for restoring
the republic's destroyed economy. In the absence of "surplus" funds in
the federal budget, the latter circumstance is the determining
The status of a special economic zone for the Chechen Republic,
introduced by federal law and based on Russian legislation, means the
full retention (or more precisely, restoration) of the jurisdiction of
the Russian Federation, and suppresses the intentions of a number of
foreign states to announce their recognition of the Chechen Republic as
an independent state.
Creation of an administrative free economic zone would ensure
increased effectiveness of work on normalizing the situation in Chechnya
and control over effective and purposeful application of the financial
means. And most importantly--it would make it possible to solve the
republic's pressing economic problems, regardless of the rates of
formation of a truly viable Chechen coalition government.
[A. Kulikov] However, along with these prudent measures of
economic and financial control, in my opinion, there must invariably
also be administrative measures, operating along two contours: Federal
law--along the administrative borders of the Chechen Republic, and
statutes of the executive authorities of Stavropol Kray, Astrakhan
Oblast, North Osetiya-Alaniya and Kabardino-Balkariya--along their
administrative boundaries with the Ingush Republic, the Republic of
Dagestan and the Chechen Republic...
[S. Shakhray] Thus, the discussion centers around restoration of
the unified economic space of Russia. In this case, the federal
authorities demonstrate the latitude and flexibility of policy.
Granting the republic the broadest possible economic independence, the
federal center has the right to expect adequate reciprocal steps in
political regulation of the crisis.
[A. Kulikov] Not all is lost. The matter, as they say, lacks
only one small thing: What is needed is political will. And this is the
product which is in shortest supply in the federal center. If we turn
to lessons, I would place the following one in first place. It is the
duty of politicians and military men who make decisions to do everything
possible so as not to allow war. But if the decision to use force has
been adopted, then it is necessary to plan most thoroughly, to prepare
the entire operation, foreseeing and appraising its possible