August 11, 1999    
This Date's Issues: 3432 • 3433 • 3434

Johnson's Russia List
#3434
11 August 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Washington Times: Paul Saunders, Musical Prime Ministers.
2. RFE/RL: Paul Goble, Nationalism And Islam, Islam And Nationalism.
3. Los Angeles Times: Yosef Abramowitz and Gideon Aronoff, Putin Could Be 
Spymaster or Reformer. Russia: There are indications that the new prime
minister 
could rise above his KGB past to be a man of principle. 
4. Investor's Business Daily: Brian Mitchell and David Sanders, Russia's
Phony 
Market Economy. Foreign Aid Helps Keep Corrupt System Afloat.
5. Ira Straus: What the US ought to be saying about Dagestan.
6. the eXile: Matt Taibbi, press review re the NYT FIMACO piece.] 

*******

#1
The Washington Times
11 August 1999
[for personal use only]
Musical Prime Ministers
By Paul J. Saunders (Nixon Center)

Russian President Boris Yeltsins decision to dismiss Sergei Stepashin - his
fourth prime minister in less than eighteen months - is yet another
demonstration of the glaring flaws in both his personality and his regime.
In view of his frequent urges to dismiss them, is virtually
incomprehensible how Mr. Yeltsin could continue to believe that any of his
prime ministers might be taken seriously, let alone elected his successor,
as he has proposed in the case of his new nominee, Vladimir Putin. 

Stepashin and his immediate predecessor, Yevgeny Primakov, were both been
dismissed at times when their popularity was high (especially by Russian
standards) and increasing. Stepashin had a 45% approval rating; Primakovs
was 68%. Moreover, Russias economy, while still in terrible shape, has been
improving slowly but surely all year and, aside from the political
excitement surrounding the upcoming parliamentary and presidential
elections and Moscows normal rumor mill, the country has been relatively
calm. 

Internationally, Moscow finally received long-sought credits from the IMF
under Stepashin and appears to be able to avoid default on its sovereign
debt. And despite resentment of NATO and especially American behavior
during the Kosovo crisis, most Russians feel better about the situation in
Yugoslavia after the surprise seizure of the Pristina airport by Russian
paratroops and the subsequent expansion of Moscows role in KFOR, the
Alliances peacekeeping force. 

So why did Yeltsin fire Stepashin after less than three months on the job?
He gave no official reason, but there are several contributing factors:


* "The Family," Yeltsins unofficial inner circle, was never been united
behind Stepashin, despite his loyalty to the President. Notorious banker
Boris Berezovsky and oil magnate Roman Abramovich reportedly preferred
Nikolai Aksyonenko, who was made First Deputy Prime Minister in Stepashins
government and was quick to seek a visible and independent role. Also,
Stepashin was seen as an ally of Berezovskys nemesis Anatoly Chubais, now
head of Russias electricity monopoly.

* Despite the fact that Russia has been relatively calm, the country (and
Yeltsin) face sufficient challenges that it is not difficult to
generate a case against almost any particular figure in government. In
fact, recent reports in the Russian media blamed both a recent alliance
between two key political groups opposed to Yeltsin Moscow Mayor Yuri
Luzhkovs "Fatherland" and the "All Russia" alliance of regional leaders
and the spread of separatist violence from Chechnya to Dagestan on
Stepashins "excessive flexibility."

* More fundamentally, Yeltsin cannot tolerate prime ministers or other
officials acting independently or having too high a profile. Both Viktor
Chernomyrdin and Yevgeny Primakov were clearly sacked in part for this
reason; Chernomyrdin had just returned from a summit with Vice President Al
Gore in which he looked increasingly "presidential," while Primakov was
becoming too popular and seemed to comfortable with opposition leaders.
Before being dismissed, Stepashin was gaining public support, was described
as having a "desire not to quarrel" with the opposition, and had just
returned from successful meetings with Gore and President Clinton.

This last point is the most important and, in combination with the role of
"the Family," may be the most difficult to overcome. As his tenure in
office comes closer to an end, Mr. Yeltsin is increasingly interested in
guaranteeing that his successor as President will not only be sympathetic
to him but also protect him, and his family, from harassment,
investigation, or even prosecution. As a result, he is driven to seek an
unswervingly loyal prime minister to groom for higher office. 

However, because President Yeltsin is so deeply unpopular his approval
rating is at most seven percent no prime minister can hope to succeed him
without establishing some distance from Yeltsin and moving closer to the
political center (not to mention without being given enough power to be
effective and build a record of accomplishment, which is a related
problem). In a somewhat similar situation in the United States, Vice
President Gore has sought to distinguish himself from President Clinton
(who is much more popular than Mr. Yeltsin), with the support and
understanding of his superior. Despite being a brilliant political
tactician, Yeltsin has been unable to follow a similar course, perhaps
because he simply does not understand his own incredibly weak political
position. It is easy to imagine how a combination of mental deterioration,
self-deception, and reliance on information filtered through his inner
circle could lead to such a miscalculation. 

Whatever the reason, if Mr. Yeltsin cannot overcome his resentment of
popular prime ministers, it is difficult to see how "his" candidate for the
presidency whether it is Vladimir Putin or (who knows?) a successor can
win a remotely free election. As the average tenure of the three previous
prime ministers is under six months, we should find out relatively soon
whether the Russian president is up to the task. 

Under the circumstances, the Clinton Administration was correct to announce
that it is unconcerned by Mr. Stepashins dismissal and is prepared to work
with his successor. More broadly, we can only hope that the dispensability
of Russias prime ministers will encourage the administration to consider
the fact that Mr. Yeltsin will soon be out of office as well and to spend
significantly more time getting to know the responsible members of the
Russian opposition. Unless Boris Yeltsins personality changes overnight,
they arent likely to remain the opposition for long. 

*******

#2
Russia: Analysis From Washington -- Nationalism And Islam, Islam And
Nationalism
By Paul Goble

Washington, 11 August 1999 (RFE/RL) -- The new round of fighting in
Dagestan between the Russian Federation and separatist groups there
highlights the complicated and largely misunderstood interrelationships
between nationalism and Islam.

Most Russian and Western coverage of the events in Dagestan has suggested
that the separatist rebels in that region are Chechen nationalists seeking
to expand their political base, Islamic fundamentalists interested in
establishing a theocratic state, or some combination of the two.

Each of these characterizations captures part of the story, but all of them
are problematic. On the one hand, such descriptions frequently reflect the
policy goals of their authors, many of whom have discovered that Russians
and the international community are more likely to support attacks on Islam
than on ethnic nationalism.

And on the other, these descriptions, even when apparently based on careful
research, seldom fully reflect either the complexities of the ethnic and
religious mosaic of the North Caucasus or the various strategies different
groups there have used to advance their interests.

The North Caucasus in general and Dagestan in particular are among the most
ethnically complicated regions on earth. Most of the indigenous
nationalities -- and there are more than 30 in Dagestan alone -- are
historically Islamic, and their national identities and thus national
aspirations are affected by that fact.

But this Islamic component in their makeup has not always been the defining
one either in their culture or in their political aspirations. In general,
and of course there are exceptions, the larger communities in this region
have pursued ethno-national agendas, turning to Islam only as part of a
search for allies.

That has been the story of the Chechens -- who number almost a million
people -- in the past decade. The Chechen national movement originated as a
largely secular one demanding national rights for the Chechens. Frequent
suggestions to the contrary, it turned to Islam only when its nationalist
agenda appeared to have been stymied by Russian opposition.

And that pattern has been followed by most of the other larger groups in
the region at various points in the past.

The numerically smaller groups there, however, have adopted a very
different strategy. Because they are so small -- many number in the
hundreds or even less -- they have turned to Islam almost immediately as
the only overarching identity that could give them the chance to define
themselves and to achieve their goals.

That has been the strategy that the peoples of Dagestan have adopted in the
past and now appear to be using again. And it explains why the Dagestani
movement today appears so much more Islamic than did Chechen activism in 1991.

But the events in Dagestan and Chechnya today call attention to yet a third
pattern, one that also has a long history. Moreover, this pattern helps to
explain why some Russian officials, including now ousted Prime Minister
Sergei Stepashin, have been suggesting that Moscow could "lose" more of the
North Caucasus unless it acts vigorously now.

This third pattern is a linking up of the nationalism of the larger ethnic
communities like the Chechens with the Islamism of smaller ethnic
communities in Dagestan. That mix, which powered anti-Russian movements
there for much of the past 200 years, frequently posed a bigger challenge
to Moscow than either ethnicity or Islam. 

During Moscow's 1994-96 campaign against Chechnya, many analysts in both
Moscow and the West warned that Russian actions were driving the
nationalist Chechens into the arms of the Islamic groups and that the
Russian Federation might find it easier to deal with an independent
nationalist Chechnya than a ethno-Islamic challenge across the entire region.

Such predictions now appear to be coming true in the hitherto isolated
villages of highland Dagestan. And that development represents a
potentially far greater challenge than the one posed by the Chechens
earlier in this decade. 

******

#3
Los Angeles Times
August 11, 1999 
[for personal use only]
Putin Could Be Spymaster or Reformer 
Russia: There are indications that the new prime minister could rise above
his KGB past to be a man of principle. 
By YOSEF ABRAMOWITZ, GIDEON ARONOFF
Yosef Abramowitz Is President of the Union of Councils for Soviet Jews and
Publisher of Fsumonitor.com, the Union's Web Site. Gideon Aronoff Is Deputy
Director of the Ucsj

By firing Prime Minster Sergei V. Stepashin and his government, President
Boris Yeltsin has, for the fourth time in 17 months, thrown Russia and
Russia observers into chaos. 

This move comes at a time when reform has stalled and ethnic conflict is
brewing in the Russian north Caucasus. With his decision to designate
Vladimir V. Putin as his choice for prime minister, as well as his
successor for the July 2000 presidential election, Yeltsin has given
Russians a new figure on whom to pin their hopes and fears. 

At first glance, Putin's elevation is a choice that is not likely to sit
well with advocates of democratic reform. He is the current chief of the
Federal Security Service (FSB), and a 15-year veteran of the FSB's
predecessor organization, the KGB. 

Under Putin's watch, the FSB has persecuted former navy Capt. Alexander
Nikitin, an environmental researcher whose writing, based on openly
available sources, documented nuclear contamination by the Russian northern
fleet. Nikitin was charged with treason in 1996 for his actions, and his
trial in 1998 ended without a verdict. Last month, a new trial was ordered,
which he appealed to the European Court of Human Rights in Strasbourg. Also
last month, the FSB opened a new investigation of Prof. Vladimir Soyfer for
his work studying the extent and effects of radiation leakage from the
accidental sinking of a nuclear submarine off Russia's Pacific coast. These
attacks on environmental researchers and scientists directly threaten the
health of Russia and its neighbors, and violate Russian constitutional
provisions guaranteeing the public's right to information on environmental
dangers. 

Also, reminiscent of Soviet campaigns to control expression and information
technology, the FSB has recently taken steps to coerce Russian Internet
service providers into submitting all Internet traffic to FSB censorship.
Here again, Putin's agency is a leading threat to freedom and democracy in
Russia. 

As in previous changes in Russia's government, however, Russians, Western
governments and advocates for human rights, democracy and pluralism search
this new leader's biography for any reasons for optimism. In Putin's case,
his service in the early to mid-1990s with St. Petersburg's reform-minded
mayor, Anatoly A. Sobchak, provides a glimmer of hope. With Putin's
assistance, Sobchak ensured that St. Petersburg--Russia's second
city--would stay committed to reform and out of the control of the
Communists. 

Also positive, in the eyes of anyone concerned about anti-Semitism, fascism
and extremism, were Putin's remarks in a December 1998 Izvestia interview,
in which he declared, "If society does not react sharply and unambiguously
to manifestations of extremism, the danger of a repeat of the situation in
Germany in 1933-45 will arise." At a time when anti-Semitic terrorist
incidents are becoming all too common in downtown Moscow, a prime minister
who understands the dangers that extremism holds for Russia's minorities,
and even the nation's democracy, is a positive sign. 

While the world will have to wait and see what kind of prime minister Putin
turns out to be, the preeminence of principle over personality has never
been more important. Governments, international financial institutions and
nongovernmental organizations should, instead of focusing exclusively on
Putin's biography, present a set of principled actions as a litmus test for
his commitment to lead Russia toward a democratic future. These actions
should include the following: 
* The Russian government must commit itself to an aggressive battle against
anti-Semitic terrorists and other extremist forces throughout the country,
making it clear that hate will not be part of a new Russian politics. 
* The discriminatory Russian law on religion must be reformed, consistent
with the Russian Constitution and international human rights agreements. 
* The false espionage cases against Nikitin and Soyfer, signs of dangerous
repressive tendencies in Russia, must be ended. 
* The criminal justice system--including pretrial detention and prison
conditions--remains essentially as it was during the Soviet period and is
in need of significant reform to promote respect for the rule of law and
protect public health. 

The world is faced with two very different visions of the man chosen to
lead Russia into the 21st century--a spymaster out to squelch free
expression or a valiant combatant for democracy and reform. When faced with
the principled challenge outlined above, the key question is, "Will the
real Vladimir V. Putin please stand up." 

*******

#4
Investor's Business Daily
11 August 1999
[for personal use only]
Russia's Phony Market Economy
Foreign Aid Helps Keep Corrupt System Afloat
By Brian Mitchell and David Sanders

Peter Grinenko knew how to play the game. He was in business in 
Russia before the fall of the Soviet Union.

Before that, he was a cop in New York City and an investigator for the 
FBI, specializing in crimes by Russian nationals.

In 1996, Grinenko met Paul Tatum at the luxury hotel Tatum had built in 
Moscow. He told Tatum, ''I suggest you leave because you're not playing the 
game right. They're going to hurt you.''

Months later, Tatum was dead -machine- gunned outside a subway stop near 
his hotel, the suspected victim of a dispute with a Russian partner.

Tatum was a fearless, flamboyant businessman from Oklahoma. He once 
called Russia ''an entrepreneur's heaven.''

That dream died with him, as the West was forced to face the problem of 
widespread corruption in many ex-communist states in Eastern Europe.

Many Westerners expected that when the Soviet system fell apart in 
Russia, a democratic capitalist system would fall neatly into place - with a 
little funding from Russia's new Western friends. That didn't happen, and 
some analysts say the funding has actually hurt.

Billions of dollars in loans have propped up an unproductive socialist 
monetary system in Russia. To date, it has gotten $16.5 billion from the 
International Monetary Fund. Millions have been spent to show ex- communists 
how to be good democrats and capitalists.

The results have been a handful of fabulously rich Russians amid 
widespread misery and rampant corruption. Unemployment has reached 14%.

The dollar value of the ruble has sunk to 4 cents. It would be worth 
1,000 times less if the Russian government hadn't issued a new ruble last 
year worth 1,000 old rubles.

''Many Russians think that we deliberately set out to destroy their 
economy,'' said Janine Wedel, research fellow in Eastern European studies and 
professor of anthropology at George Washington University.

''The reforms have left many Russians worse off than before the breakup 
of the Soviet Union, and many blame the Western aid and advice,'' Wedel said.

Never fear. More aid is on the way.

Both House and Senate have passed bills to provide another $1.3 billion 
in aid to Eastern Europe and the former Soviet Union. The Clinton 
administration has asked for millions more, citing national security concerns.

''Russia still has thousands of nuclear weapons and tons of weapons 
materials that are tempting illicit weapons traffickers,'' State Department 
assistance coordinator William Taylor told Congress in June.

''Tens of thousand of former Soviet weapons scientists, unpaid and 
underemployed, are targets of opportunity for rogue states,'' Taylor said.

The hope is that democratic and economic progress will keep Russian 
nuclear know-how at home and prevent the return of communism. But has U.S. 
aid helped democratic and economic progress?

No, critics say.

''Anytime we put money directly in the hands of the Russian government, 
it goes into a big black hole,'' said Rep. Dana Rohrabacher, R-Calif., a 
frequent critic of foreign aid.

Foreign aid comes in several forms: loans and loan guarantees, grants to 
official and nonofficial groups and ''technical assistance,'' which means 
funding for Western experts to advise and assist Eastern counterparts.

Critics say all forms have suffered from two faults:

1. They rely too much on government policy and programs to solve deeply 
rooted cultural problems.

2. They tend to overlook the corruption of people and systems, which 
often keep aid money from doing what it's supposed to do.

Soon after the Cold War ended in the early 1990s, Western aid agencies 
sent teams of experts on grand tours of Eastern European capitals. The teams 
rarely stayed more than a few days.

In Poland, they were scoffed at as ''the Marriott Brigade'' for their 
habit of staying at Warsaw's best hotels.

''Many were ill-prepared,'' Wedel said. ''They didn't really know much 
about the countries they were visiting, and often didn't really think it was 
important to know very much.''

Few experts could tell the difference between real reformers and 
ex-apparatchiks posing as reformers. The experts tended to trust those who 
dressed like Westerners and knew the right buzz words like ''democracy,'' 
''free enterprise'' and ''market reform.''

''The local people are not stupid. They quickly figured out what they 
needed to say and do to get the money,'' said Wedel, the author of 
''Collision and Collusion: The Strange Case of Western Aid to Eastern 
Europe.''

In Russia, the experts' early favorites belonged to a tight circle of 
St. Petersburg ex-apparatchiks, whose leading light was Anatoly Chubais. The 
''Chubais clan,'' as it was known in Russia, soon came to control some $4 
billion in Western aid, Wedel says.

Chubais became the leading figure in Russian President Boris Yeltsin's 
scandal-ridden privatization program.

Last year, as Yeltsin's special envoy to international lending 
institutions, Chubais engineered a new, $22.6 billion bailout of Russia by 
the IMF. He later told a Russian newspaper the IMF had been ''conned.''

George Selgin, professor of monetary economics at the University of 
Georgia, says Western aid has produced a ''Potemkin capitalism'' - a phony 
form of free markets - in Russia. In the new socialist system, supposedly 
private companies are protected from losses by massive government subsidies.

The West keeps the system afloat with periodic loans. The loans are used 
to prop up the value of the ruble, which is then used to redistribute 
Russia's wealth. Taxes are collected in rubles, and subsidies are paid in 
rubles.

''The ruble is the money of socialism,'' Selgin said. ''When the ruble 
dies, so will the last remnants of socialism, because the ruble is the 
instrument of socialist reallocation.''

The West won't let the ruble die for fear of the upheaval that would 
cause. So it gives aid to prop up Russia's political system, even as Russia's 
economic system fails.

''We find ourselves acting like drug dealers who are supporting a very 
bad set of habits by continually injecting funds without insisting on 
change,'' Selgin said.

The Russian economy is again shrinking - by 5.7% last year and 8.5% 
this year, according to the IMF. Foreign investment is in retreat, driven out 
by continuing political instability and pervasive corruption.

''There really still is very much an embedded culture of corruption,'' 
said Lucinda Low of Transparency International USA. ''The attitudes are 
evident. You see them in employees. You see them in partners. You see the 
attitudes in government officials.''

In Washington last month, Russian Prime Minister Sergei Stepashin - 
fired Monday by Yeltsin - belittled allegations of corruption in Russia. 
''This information gets into your mass media from our mass media, so take it 
with a grain of salt,'' he said.

But a survey of business leaders by Transparency International ranks 
Russia 76th out of 85 countries in perceptions of corruption. No. 1, or least 
corrupt, is Denmark. The U.S. ranks 17th.

Some aid programs to Russia add to the problem, handing out money 
without adequate accountability.

In 1997, the U.S. Agency for International Development canceled $17.4 
million in aid intended for Harvard University's Institute for International 
Development, amid allegations of improper business dealings by project 
administrators. A grand jury investigation is ongoing.

From 1992 to 1997, HIID dispensed $40.4 million in aid to Russia. It 
also advised the U.S. Agency for International Development to give $300 
million in additional aid. HIID was an early supporter of Chubais.

To combat corruption abroad, the Clinton administration is pushing 
enforcement of the Antibribery Convention ratified last year by the Senate.

Others doubt the treaty will make much difference. The culture in the 
former Soviet bloc has to change first.

''For 70 years you had enforced atheism on the people, and all the basis 
for personal morality and thus honesty and integrity was forcefully extracted 
from that society,'' Rohrabacher said.

''When that happens, it takes a while to re-establish that moral basis 
for the success of any society,'' he said.

Peter Grinenko says corruption drove him out of the cigarette business 
in Russia and Latvia.

''If you're under the impression that these people are our friends, 
forget about it. We're there to be used,'' said Grinenko, now a partner in 
the Staysafe Security Corp.

His advice to American investors: ''Stay home and play the stock 
market.'' 

*******

#5
From: IRASTRAUS@aol.com (Ira Straus)
Date: Wed, 11 Aug 1999
Subject: What the US ought to be saying about Dagestan

The U.S. government is rightly saying very little about the change in prime 
minister in Russia, but it is wrong in having nothing to say about Dagestan. 
The U.S. is already getting blamed all across Russia for surreptitiously 
encouraging the break-up in Russia. Silence only feeds the suspicion.

Here, in substance, is what the U.S. ought to be saying:

"The United States supports the territorial integrity of the Russian 
Federation in Dagestan and the Caucasus. It does this out of regard for the 
welfare of the Russian Federation and the liberties of its citizens, and 
because it considers it to be in its own national interest for Russia to be 
stable, moderate, and strong. We are on Russia's side.

"The United States condemns the repeated acts of violence, terrorism, 
kidnapping, and now insurrection committed by armed groups operating against 
the Russian Federation in the Caucasus. It deplores the attempts by local 
groups in the Caucasus at imposing Islamic law on Russian Federation citizens 
whose civil liberties are lawfully guaranteed by the Russian Federation. It 
deplores the failure of the government of Chechnya to gain control over the 
armed groups operating on its territory and using that territory as a base 
for attacking surrounding areas, and calls on that government to fulfill its 
responsibilities in this regard. It deplores any support being given from 
abroad to illegal armed groups in the Caucasus, and calls upon nearby 
countries to ensure that no such support is being given from their territory.

"Our bottom line position on Dagestan is that we support the goals of the 
Russian and Dagestani officials who are trying to restore and maintain order. 
We approach this question with humility, recognizing our limits; we do not 
say that force ought to be used, nor that it ought not: this is outside of 
our authority, it is the exclusive responsibility of Russia and Dagestan, and 
we intend to be cautious about second-guessing their decisions. Mistakes will 
inevitably be made no matter what policy is pursued. 

"We would be willing to consult with Russia on whether there is any 
assistance that we could appropriately render in this matter."

While we wait for Mr. Clinton or the U.S. Embassy in Moscow to issue such a 
statement, let's go over the reasons why they should do so:

1. The crisis in Dagestan provides an opportunity for the U.S. to begin to 
overcome the belief that America is trying to break Russia into pieces. That 
belief is extremely dangerous for America, and in the last few years it has 
been spreading like wildfire in Russia. 

2. America already deserves more credit than it is getting from the Russian 
people for the support it gave to the territorial integrity of the Russian 
Federation in the case of Chechnya. Now it can take a confirming action that 
would finally secure it that credit.

3. Russians nowadays suspect that America did not really care about Russia's 
integrity in the case of Checnya. But at least the U.S. has avoided the 
terrible blame that it would have drawn upon itself if it had failed to 
support Russia's territorial integrity in Chechnya. The present case provides 
an opportunity to prove that our support for Russian unity is genuine.

4. The wrong lessons are being drawn from Chechnya. 

Dagestan is being simplistically compared to Chechnya, but the situation in 
Dagestan today is very different from that in Chechnya in 1993. The war in 
Chechnya was one of the Federal government against the local government; it 
was a war against an entrenched secessionist regime. In the skirmishes in 
Dagestan, the Federal and local governments are on the same side; on the 
other side are armed bands, some of them with a base in Chechnya. In 
Chechnya, the Dudayev regime had some secular legitimacy, and the Islamist 
forces, while sometimes unnerving, did not seem so predominant; in Dagestan, 
the main rebellious armed groups are Islamist extremists, who would oppress 
the moderate and secular majorities within the local Islamic population as 
well as the ethnic Russian population in the region.

Some purist democrats in Russia, it is true, blame us for not having stopped 
the Russian state from taking military action in Chechnya. On this issue, 
they reason like the Reds and Browns -- blaming America first, treating 
America as a kind of omnipotent God, capable of imposing any policy it wishes 
on Russia. At the same time, their argument attributes to America an 
unlimited right of interference in this ultra-sensitive domestic Russian 
matter. Never mind that this would have been the very kind of arrogance and 
careless intrusiveness that is the butt of most of the criticism of the 
American role in Russia. 

The purist democrat criticism of American policy on Chechnya is fortunately 
only a sectarian matter. It does not sink very deep into the Russian body 
politic -- even if it does sink in deeper in America, where it is shared by 
both Russophobes and Yeltsinophobes.

What would have really brought down on America a deep and mass-scale hatred 
in Russia -- as some of my more moderate democratic friends in Moscow have 
pointed out to me -- would have been if we had interfered the very way that 
some of the radical democrats had wanted, in the name of stopping the Russian 
campaign in Chechnya. 

If we had actively opposed Russia on Chechnya, today we would inevitably get 
blamed by most Russians for having inspired the break-away of Chechnya. There 
would be a broad belief that we are engaged in an active campaign to break up 
Russia, not just quietly waiting for it to happen. There would be a frenzy of 
fear over our every political, economic and military connection in the 
Caucasus. There would be a presumption that we are actively using our every 
instrument and link there for the sake of breaking up Russia.

Our position on Chechnya was careful and basically correct, even if it was 
criticized the same way everything we do gets criticized. We recognized out 
limits. We stated that we supported the continuation of Russian Federation 
sovereignty on the territory; that we preferred a peaceful resolution of the 
matter and were against any senseless brutality in response to it; and that 
we approached this matter with humility, having as we do neither authority 
nor responsibility to second-guess the Russian government on its decisions 
for or against militarily methods. 

There was some loose talk in the mass media about how the Russian military 
campaign was one of ethnic cleansing or even genocide. However, this was a 
decidedly two-sided war, unlike the one in Bosnia; the Chechen forces were 
well-armed and well-trained. Mr. Clinton recalled that there had been a lot 
of brutality in our own civil war to preserve the American Union, and drew 
the conclusion that we had to be cautious about criticizing Russia. Clinton's 
statement was accurate and tactful. It doesn't deserve the frequent 
ritualistic attacks that it has received -- it is always said with an 
incredulous gasp that Clinton had equated Lincoln with Yeltsin. Lincoln, by 
the way, has also been subjected to a lot of second-guessing by historians 
who view the civil war as unnecessary. He is treated as a saint only because 
we Americans have a habit of putting aside the contemporary criticisms and 
revering most of our historical leaders, rather than going on vilifying them 
as the Russians are prone to do.

In the Chechen war, the U.S., despite Mr. Clinton's motif of humility, did 
criticize the brutality of some of the bombing. Also, the U.S. encouraged 
Russia to seek a negotiated solution. It applauded the settlement reached by 
Lebed, which gave de facto independence to Chechnya. What the Chechens have 
done with their independence since then does not make a pretty picture; it 
ought to give pause to those who had argued that the Russians were the whole 
problem in Chechnya. Fortunately the U.S. never put the kind of strong 
pressure on Russia that could have made it seem that America was responsible 
for forcing Russia into this settlement -- otherwise we would be taking the 
blame now for all of its faults.

5. In effect, what we said on Chechnya was: 'It is your responsibility to 
decide what to do, but we are on your side.' 

It is a good thing that we said that we were on Russia's side! We ought to 
say it more often, and more openly. We shouldn't feel embarrassed about 
saying it; we should feel proud to say it.

Perhaps one reason why Mr. Clinton is criticized so much on Chechnya is that 
lots of people, after decades of Cold War, feel as if it would be a sell-out 
to be on Russia's side in any conflict. They are wrong. We ought to seize on 
every legitimate opportunity to be on Russia's side. Anything else would be a 
sell-out of our prospect for having Russia as a friend and ally. 

6. Nowadays, unfortunately, lots of Russians feel that we deferred to their 
sovereignty in Chechnya only because we didn't yet realize how weak Russia 
was. The belief may be irrational, but it is widespread. Ever since NATO 
began bombing Yugoslavia over Kosovo, it has been popular in Russia to say 
that, next time around, the US or NATO will intervene against Russia in the 
Caucasus. 

The "next time around" is now right in front of us, in Dagestan. This is why 
Dagestan provides an opportunity for America. It is an opportunity to dispel 
the rumors and beliefs that we are Russia's enemy. It is an occasion when we 
can demonstrate again, convincingly this time, that we really are on Russia's 
side

A single well-worded statement on this subject will be worth a thousand aid 
programs. 

Our representatives in Moscow ought to speak in this vein -- even if some of 
them will have to put aside some deep-seated anti-central-power prejudices in 
order to do this. Meanwhile, a strong short statement ought to be coming from 
President Clinton.

Ira Straus

*******

#6
Date: Wed, 11 Aug 1999 
Subject: new eXile press review
From: "Matt Taibbi" <exile.taibbi@matrix.ru>

Here is the new eXile press review, re: the NYT FIMACO piece.

the eXile
Timed Exposure
Press Review
by Matt Taibbi

I got a letter a few weeks ago, all in lower-case:

Hey!
the new york times finally wrote a massive article about fimaco, i'm
pretty sure their first ever. they skedded publication of this article
for at least a week, but kept eliminating it from the sked. the DAY
AFTER the imf money is approved, they publish it. what's up with that??

Well, shit...I don't know. You're right, it looks bad-- the NYT article,
"Secrecy at Russian Bank Raises Eyebrows", really was published on July 30,
or exactly one day after the latest $4.5 billion IMF bailout package was
announced. 

That's what you'd normally call bad timing. It's a little bit like
releasing your big-budget action movie a day after the new Star Wars comes
out. You're dooming yourself at the box office in advance. More to the
point, it's a little like waiting until after the election to run a photo
of a candidate in bed with a pair of altar boys. 

Exposes are like any object-- they have both potential and kinetic energy.
You can raise the potential impact of a dropped rock by carrying it up the
stairs; the potential impact of an expose rises and falls according to the
timing of its release. Part of any editor's job is to time the release of
his expose appropriately. This is often a political decision on his part.
If, for instance, he thinks that the expose is going to have a
disproportionate and inappropriate effect on its subject if it is released
at a certain time, he might hold it until its release will have the
desired, i.e. lesser impact. For instance, if one of his reporters turns up
a photo of a gubernatorial candidate shopping in the bondage section of a
local adult video store, a judicious editor might sit on it until after the
polls, or even indefinitely, if he thinks a man's taste in porn has no
business being an issue in a serious election.

That being said, judiciousness could not possibly have been a factor in any
decision to hold an expose on FIMACO. There can't be any argument that
taxpayers should have to wait until their money has already been given away
as aid to learn that their last "loan" was used by a bunch of fat Russian
bankers as front money for an insider-trading scheme. The story of the
Russian Central Bank's use of the Jersey Island-based Financial Management
Company, or FIMACO, is a genuine scandal worthy of the loudest and most
alarmist expose possible. In a world where money matters as much as it does
in ours, FIMACO is a fire in a crowded theater. You don't wait to sound the
alarm bell. You do it immediately, and at the top of your voice. 

The New York Times did neither. Its FIMACO report by Celestine Bohlen was
not only late, it read like an astonishingly clumsy whitewash job. One
comes away from reading the report thinking that nothing more serious than
the breaking of a few internal bank rules took place-- and not the
shameless maruading of international aid money for personal profit, which
is what FIMACO almost certainly was all about. 

Bohlen's first mistake comes in paragraph three of her piece, which is the
first mention of violations linked to FIMACO:

"That Jersey company, known as Fimaco, has for months been the center of
a controversy that has tantalized the bank's many critics, inside and
outside of Russia. Although recent investigations by Russian prosecutors
and international auditors have found no criminal violations in the
central bank's dealings with Fimaco, many experts say the operations
definitely skirted the edge of normal central bank rules and ethics and
effectively deceived the I.M.F."

Bohlen here leaves out three key facts. 1) The prosecutor who made FIMACO
public, Yuri Skuratov, was quickly stripped of influence soon after he
outed the scheme, leaving the criminal investigation in the hands of
pro-Yeltsin loyalists 2) The "international auditors" who looked into
FIMACO, PricewaterhouseCoopers, are employed by the suspect, the Central
Bank, and 3) While no criminal violations have so far been found, they are
widely suspected to have taken place by most rational observers. 

Regarding this last point, I called one of the sources Bohlen quoted in her
piece, Central Bank critic Duma deputy Nikolai Gonchar. When asked about
suspected criminal violations in the FIMACO matter, a spokeswoman for his
office said the following:

"No, they haven't found any criminal violations. But we feel they certainly
would have, if they had been looking."

Chief among the suspected criminal violations tied to FIMACO would be
violations of the insider-trading laws (the Central Bank is barred from
manipulating the price of its own debt instruments for profit), and
embezzlement of the still-unaccounted-for massive profits from the invested
monies.

To recap the story in brief, the Russian Central Bank in 1991 opened
FIMACO, a small investment company in the Channel islands-- an area
well-known for its money-laudering-friendly banking laws-- and began to
secretly funnel Russia's reserves into its accounts. Eventually, much of
the money in FIMACO was secretly re-routed back into Russia after it had
been used to purchase short-term Russian treasury notes, or GKOs. The
profits from those transactions have yet to be accounted for. Billions of
dollars went into FIMACO, and GKOs during much of this period offered
returns of up to 200 percent. One can imagine just exactly how much money
might be missing. 

It's too bad the New York Times doesn't miss it. Although she gave Gonchar
a decent amount of space to wonder aloud where the missing money might be,
Bohlen goes to fantastic lengths to avoid the suggestion that the money
might simply have been-- God forbid!-- stolen. To read Bohlen's piece, one
would guess that embezzlement is the kind of thing which just doesn't
happen in Russia. What follows is a verbatim list of Bohlen's educated
guesses as to where the money might be:

1) "Some suspect that the real purpose of this operation in 1996 was to
generate money for the Russian Government, then caught in a web of
election year promises given by President Boris N. Yeltsin. To general
relief in the West, Yeltsin won a second term."

Note the language here. No phrases like "funds from FIMACO may have been
used to illegally fund Boris Yeltsin's 1996 election campaign, which has
already been reported as having exceeded legal spending limits." In
Bohlen's version, FIMACO money might have been used to do the good deed of
simply helping an overenthusiastic Yeltsin keep an excessively
multitudinous list of campaign promises. And why include the phrase "to
general relief in the West, Yeltsin won a second term"? It's hard to
interpret that phrase as meaning anything other than, "If it turns out that
this is how they used the money, then it's no big deal because the end
justifies the means-- after all, we wanted Yeltsin to win."

A note here on the New York Times in general. Part of the paper's style is
its obliqueness; even when it is airing a truly savage expose, it refers to
its subjects using the prim and proper titles "Mr." or Mrs.", and as a
complement to its annoying small print and colorless headlines, it
generally prefers that its text be read against a background of mental
quiet, without either a laugh track or any symphonic verbal fanfare. In
other words, if the New York Post writes "Rough Sex Killed Jenny!", the
Times is likely to counter with a paragraph-long quote from a forensic
pathologist which concludes, minus any follow-up commentary, "...it is not
inconceivable that the victim hoped to attain further satisfaction through
asphyxiation." 

What I'm trying to say is that it is entirely possible that Bohlen's
passage here about the possibility that FIMACO helped fund Yeltsin's
campaign might actually have been the Times's typically oblique way of of
suggesting that the West improperly turned, and continues to turn, a blind
eye to a rigged election. If that's the case, it's a pretty pathetic
passage. Give me the Post any day, if this is the way the "world's greatest
newspaper" is going to make its best case against corruption. 

Bohlen goes on to speculate further:

2) "Others have guessed that like any elaborate plumbing system, this one
was bound -- maybe even designed -- to leak, in the form of commissions,
risk margins and other profits collected along the way."

Again, if this is the way Bohlen is going to suggest that Central Bank
officials stole their money, that's pretty fucking sad. "Commissions"?
"Risk margins"? "Other profits"? What fucking commissions and risk margins
and other profits? If you can't bring yourself to make a specific
accusation of theft, that doesn't mean you should offer a series of
unspecific exculpatory arguments in its place. The Times's lawyers may have
decreed the former-- but it's Bohlen and her editors alone who chose to
stick in the latter, and its inexcusable. Furthermore, what does Bohlen
mean when she writes "like any elaborate plumbing system, this one was
bound...to leak"? Does that mean that if $5 billion disappears from the
U.S. Federal Reserve Bank, we should all just shrug and say, "It was bound
to happen"? 

Bohlen goes on:

3) "There may have been other reasons, such as avoiding taxes or simply a
chance to test unorthodox financing mechanisms required by Russia's
shallow and fragile debt market."

Jesus, I'm just wincing reading this. "A chance to test" unorthodox
financing systems? Bohlen lives here-- she must have a pretty good idea
that when Russian bureaucrats start shuffling around billions of dollars
into secret offshore accounts, they're probably not just testing the
piping, so to speak. And how can anyone say that unorthodox financing
systems are "required"? Is Bohlen suggesting that the Central Bank HAD NO
CHOICE but to lie to the IMF and improperly route billions of dollars into
secret offshore investment funds? That's as ridiculous, more ridiculous
even, than the claims many Western reporters made for years that
loans-for-shares was excusable because, in the fight against socialism,
there was "no alternative" to giving away billion-dollar industries to a
handful of mobsters. 

Bohlen's first three excuses were entertaining, but the fourth is the real
kicker:

4) "The central bank of Russia was more creative than others," said a
Russian banker familiar with the central bank's operations. "There were
a lot of young people working there, with very good brains." In those
years, he said, the central bank's main goal was not to generate profit
for itself, but to control a shaky G.K.O. market, and bring down the
dizzying rise in yields.

Okay, let me get this straight. An excess of creativity was responsible for
FIMACO? What is this, the financial version of the Physical Graffiti album?
Beyond that, Bohlen wants us to believe that this whole thing happened
because a bunch of bespectacled whiz-kids (I was amazed that they weren't
described as "Harvard-trained" young people) got carried away with some
adolescent fund-raising ideas? GIVE ME A FUCKING BREAK! It's shocking that
the Times underestimates our intelligence to this degree. Bohlen here
continues to ignore the fact that all that money is still missing. If all
that those young whippersnapper bankers were trying to do was bring down
yields, then where's the rest of that money? 

This last passage by Bohlen is truly pathetic. The Central Bank's own
excuse for FIMACO was that it was "testing" the mechanism for foreign
investment, and that itself was incredibly lame on its face. But Bohlen
here has one-upped even those bankers. She has offered up a lamer excuse
than the one offered by the guilty themselves-- that the bank was simply
too smart for its own good. Sergei Dubinin and Viktor Geraschenko are
extraordinarily shameless people and have proven as much in public many
times over the years, but even they have more shame than to offer an
argument like this as a defense for FIMACO. They won't do it, and yet,
they're the ones who have something to gain from doing it. Which begs the
question-- why is the Times doing it? Why is the most influential news
outlet in the world publishing an article that all but openly wishes the
FIMACO scandal away?

Well...I've got some theories on that score, but in the interest of not
being too publicly paranoid, I won't get into them. Incidentally, I called
Bohlen and asked her both why her piece was held up and, if she was upset
that it was late-- and she answered that, in fact, it wasn't late, and she
wasn't upset. "You're barking up the wrong tree here," she said. 

Am I? What tree am I barking up? Jesus Christ. Start doing your job, and
I'll stop barking up your fucking tree. 

*******
-------
David Johnson
home phone: 301-588-3861
work phone: 202-332-0600 ext. 107
email: davidjohnson@erols.com
fax: 1-202-478-1701 (Jfax; comes direct to email) 
home address:
9039 Sligo Creek Parkway #1606
Silver Spring MD 20901
USA

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