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Johnson's Russia List


August 28, 1999   
This Date's Issues: 3467 3468  

Johnson's Russia List
28 August 1999

[Note from David Johnson:
1. AP: Russian Banks Bleed the Economy.
2. Itar-Tass: Russia Movements in Flurry of Congresses Over Weekend.
3. Moscow Times: Brian Whitmore, Stepashin Gives Yabloko New Image.
4. Wall Street Journal Europe: Mike McFaul, Russia's Political Forces 

5. Times Literary Supplement (UK):Abraham Brumberg reviews Peter 
Kenez's A History of the Soviet Union from the Beginning to the End.

6. RFE/RL: Paul Goble, An Explosion That Changed The World.
7. AFP: Money-laundering scheme has US probing other possible hiding 

8. AFP: Russia's military recovers some luster in Dagestan conflict.
9. Reuters: Russia money scandal unlikely to alter U.S. policy.
10. Itar-Tass: Russian PROSECUTOR'S Office Sidelines Mabetex 

11. Itar-Tass: Govt Endorses Measures to Prepare Election to Duma.]


Russian Banks Bleed the Economy
August 27, 1999

MOSCOW (AP) - In Russia's murky financial world, one thing is certain:
billions of dollars pour out of the country every year illegally, much of
it looted by the Russian mob and big businesses, and almost no one is ever

The capital flight has greatly undermined Russia's muddled attempt to build
a market economy, yet President Boris Yeltsin's government has been unable,
or unwilling, to halt the illicit outflow of capital that shows no signs of

The latest in a series of scandals is potentially one of the most explosive
- investigators believe that the Russian mob may have laundered billions of
dollars in accounts at the Bank of New York. 

So far, no one has been charged. But the Bank of New York on Friday fired
Lucy Edwards, an executive it had suspended amid the allegations. The bank
did not explain its decision, but Dow Jones Newswires reported that the
bank suspected her of misconduct and falsifying records. 

How bad is money laundering and capital flight in Russia? 

No one knows for sure, but a reasonable estimate is that $10 billion leaves
the country illegally each year, said Alexei Ulukayev, an economist at the
Institute for the Economy in Transition. 

``Unfortunately, not only criminals but ordinary businessmen are also
involved in capital flight from Russia,'' said Ulukayev. ``If it was only
the mafia it would be a smaller problem. You can fight the mafia with
police methods. But when it's an ordinary businessman then police methods
are not sufficient.'' 

In post-Soviet Russia, crime and corruption are endemic, involving
government, big businesses and organized crime groups with the lines
between them often blurred. A series of corruption scandals and allegations
in recent years have tainted Yeltsin's government and entourage. 

Wealthy Russians, whether their money was earned legally or not, have
established a pattern of moving their money outside Russia, a place where
your bank can go belly-up at any time. 

The Russian mob, which is believed responsible for much of the capital
flight, sends money abroad to hide its illicit profits. Genuine businessmen
face the uncomfortable choice of paying extremely high taxes or sending the
money on a trip to Europe where the tax man won't find it. 

Even Russia's Central Bank, which sets the rules for moving money in and
out of the country, plays fast and loose. 

The Central Bank sent billions of dollars to a secret bank account on
Britain's Channel Islands over a period of several years. Its explanation
was hardly inspiring - it wanted to hide the money from foreign creditors
that might try to seize Russian assets. 

The Central Bank said the original capital was returned, but it hasn't said
where the profits from the investments went. 

When Russia's Central Bank defends the practice of clandestine bank
accounts in foreign countries, wealthy Russians wonder why they should
behave any differently. 

``We know there is money missing from the government coffers, but no one
seems to care,'' said Nikolai Gonchar, an independent member of parliament,
who has been pushing for a more detailed investigation of the Central Bank. 

``For four-and-a-half months I've been urging the prosecutor general to
investigate, but he has been doing his best not to open a criminal case,''
Gonchar said. 

The Russian government has not been accused of any wrongdoing in the Bank
of New York scandal. But Gonchar says his review of Central Bank documents
has led him to believe that government has mishandled large sums of money
on multiple occasions, including loans given to Russia by the International
Monetary Fund. 

Private banks mushroomed in Russia after the collapse of the Soviet
government in 1991, but they've done little to win the trust of ordinary

Many people simply don't have banking accounts, personal checks are unheard
of, and in rural areas, bank tellers sometimes tally up transactions on an

In Moscow, the biggest banks can send money zipping around the globe, but
they are largely unregulated and have been quite accommodating to people
who don't want to answer questions about where their money came from. 

This jerry-built system crumbled in August 1998, when Russia was hit by the
world crisis in developing markets. Many banks eventually closed and
depositors lost their money. 

Not surprisingly, well-heeled Russians are partial to bank accounts in
Geneva, London and New York. In many cases, sending the funds abroad is
illegal in some way, if only because the money is not being declared and no
Russian taxes are being paid on it. 

Russian law enforcement agencies, widely seen as corrupt and incompetent,
have almost no experience in combating sophisticated money-laundering
schemes that can send money whizzing across continents with a few
keystrokes on a computer. 

In the Bank of New York case, investigators believe that more than $4
billion through a single account with some 10,000 transactions during a
six-month period, according to U.S. newspaper reports. The reports have
said a total of $10 billion or more may be involved. 


Russia Movements in Flurry of Congresses Over Weekend.

MOSCOW, August 27 (Itar-Tass) - The coming weekend abounds in pre-election 
conferences and congresses that are held to meet registration requirements. 

To be officially registered, movements and groups are to hold bloc-founding 
congresses, and newly forged blocs are to hold theirs to approve policy 
documents and lists of candidates for the State Duma, or parliament's lower 

For some of groups, the congresses are political events. Thus the Agrarian 
Party of Russia, or APR, meets on Friday to decide whether to merge with 
Fatherland-All Russian electoral bloc or with For Viktory movement that is in 
the fold of the Russian Communist Party. The congress could result in the 
APR's split. 

Yabloko opens its two-day congress on Friday to outline the frame and terms 
of its newly made alliance, with former Prime Minister Sergei Stepashin. 

Stepashin's joining the Yabloko movement of Grigory Yavlinsky promises 
serious changes in Yabloko's pre-election plans, given that Stepashin will be 
made one of the top threesome on the electoral list and will bring with him, 
as he promised, some "interesting people" to Yabloko. This is bound to hurt 
interests of some of Yabloko members. 

Fatherland-All Russian bloc hold it merger conference on Saturday, at which 
it will thrash out the electoral list and approve the common platform. 

The conference is unlikely to bring any surprises, as the list and the slates 
had been discussed at congresses of the two movements and at a meeting of the 
bloc's board. 

The conference is to decide on admission of the Agrarian Party of Russia. 

Right and center right groups are also to meet over the weekend to observe 
the registration formalities. 

Our Home Is Russia, the Union of Right Forces, Russia's Democratic Choice, 
the Voice of Russia and the New Force also hold their conferences on 

Our Home's leader Viktor Chernomyrdin is expected to name three candidates to 
top the electoral list. 

The Union of Right Forces, earlier declared that it top troika of candidates 
were former Prime Minister Sergei Kiriyenko, former First Deputy Prime 
Minister Boris Nemtsov and former cabinet minister Irina Khakamada. They are 
to be approved at the congress to be held at Moscow's President Hotel on 

Of groups with real chances to get into the State Duma, only Communists will 
not hold their congress this week. 

The congress is scheduled for September 4. The Communist-allied For Victory 
movement will confer on a later date. The Liberal Democratic Party of 
Vladimir Zhirinovsky and the Movement for Support of the Army, led by Viktor 
Ilyukhin, hold their congresses on September 11. 

Therefore, the line-up of political forces will be certain by the middle of 


Moscow Times
August 28, 1999 
Stepashin Gives Yabloko New Image 
By Brian Whitmore
Staff Writer 

Side by side with his new ally Sergei Stepashin, a combative Grigory
Yavlinsky unveiled the new look Yabloko on Friday, saying his party was
ready to lead Russia into the next century. 

At Friday's party congress, Yabloko officials also officially confirmed
what the media have been reporting all week: that Stepashin would occupy
the second spot in the party's national slate of candidates in December's
parliamentary elections. In the third slot will be Vladimir Lukin, chairman
of the State Duma's international affairs committee. 

"We must take the risky and necessary step of appealing to a wider
electorate, and this is the idea behind our union with Sergei Stepashin,"
Yavlinsky said. "Our time has come. Yabloko is ready for power." 

Stepashin agreed, saying that with him on board, it was time for Yabloko
"to move from words and criticism to action." 

"We are ready to assume responsibility for the country," Stepashin said. 

Stepashin, who unexpectedly announced Tuesday that he was joining forces
with Yabloko, assured the party congress that he was planning to stay with
them for the long haul. The media was ripe with speculation that Stepashin
would abandon Yabloko prior to the elections. According to Russia's
election law, if one of the top three candidates on a party's slate of
candidates drops out, that party is disqualified. 

"This union is real, and it is for the long term," Stepashin said. 

Lukin also took a stab at one of Yabloko's rivals, Fatherland-All Russia,
a movement headed by Moscow Mayor Yury Luzhkov and former Prime Minister
Yevgeny Primakov. 

"We have no false candidates," said Lukin. "Everybody on our list intends
to work in parliament." 

Luzhkov has said that he has no intention of taking a seat in the Duma
should he win one. 

The name Yabloko, which means "apple," is derived from the first initials
of its three founders, Yavlinsky, Yury Boldyrev, deputy chairman of the
State Audit Chamber, and Lukin. Boldyrev left the party in 1995. Russian
media have playfully suggested that given the alliance with Stepashin, the
party should change its name to Yasli, which means child care center. 

"I am glad they are calling us Yasli," said Lukin, concluding his speech
to the congress. "This is appropriate because we can care for Russia as it
enters the next century." 

The presence of Mikhail Zadornov, Russia's representative to international
lending institutions, raised eyebrows at the congress. Zadornov left
Yabloko in 1997 to take a post in the federal government. Several members
of Yabloko, speaking on condition of anonymity, said that Zadornov was
considering resigning his Kremlin post and rejoining the party. 

Ex-Deputy Prime Minister Boris Nemtsov, a leading member of the Right
Cause movement, who attended the congress as a guest, presented Yavlinsky
with a T-shirt bearing the phrase Ty Prav, or "you are right." Right Cause
f Pravoye Delo in Russian f and Yabloko are expected to battle for Russia's
liberal voters in December's Duma elections. Nemtsov concluded his brief
remarks by saying to Yavlinsky: "We will meet in the Duma." 


Date: Fri, 27 Aug 1999 
From: "Mike McFaul" <> 
Subject: Russia's Political Forces Realign 

Wall Street Journal Europe
August 26, 1999
[for personal use only]
International Commentary
Russia's Political Forces Realign
By Michael McFaul, a senior associate at the Carnegie Endowment for
International Peace in Washington, and professor of political science at
Stanford University in California. He is the author of "Russia's 1996
Presidential Election: The End of Polarized Politics" (Hoover Institution
Press, 1997).

The formation last week of a new electoral bloc, Fatherland-All-Russia, might
be the most important development in Russian politics since the 1996
presidential elections. Bringing together two of Russia's most powerful
politicians -- former Prime Minister Yevgeny Primakov and Moscow Mayor
Yuri Luzhkov -- and dozens of regional leaders, the new, left-of-center
has the potential to dominate the post-Yeltsin era. Tuesday's announcement
of a
center-right alliance that includes former Prime Minister Sergei Kiriyenko,
former privatization czar Anatoly Chubais and former minister Boris Nemtsov
was a belated response to the Luzhkov-Primakov challenge.

Despite the emergence of a center-right force (which may yet collapse), many
Western observers are worried about the way Russia's political landscape is
shaping up, and with some justification. Mr. Luzhkov has championed a brand
of state-dominated capitalism that fosters corruption and discourages
competition. When he was prime minister, Mr. Primakov floated the horrendous
idea that the governors of Russia's regional governments should be
appointed by
Moscow rather than elected by the people. Messrs. Luzhkov and Primakov
both have foreign policy views that are threatening to Russia's neighbors
and run
contrary to Western interests. There are even concerns that if
Fatherland-All-Russia were to win by wide enough margins in upcoming
parliamentary and presidential elections, it might try to reinstate
one-party rule in

Silver Lining

Nonetheless, there may be a silver lining in these clouds. The Luzkov-Primakov
alliance signals the emergence of centrist politics in Russia, officially
ending the
days when the nation's politicians were strictly segregated into Communist or
anti-Communist camps. This in itself won't bring about an economic rebirth;
next president and parliament are likely to remain hostile to the reforms that
Russia desperately needs. But by relegating Russia's Communists to the
wilderness, the realignment of Russian politics might increase the chances for
reform over the long term. And in at least one realm -- constitutional reform,
which is in fact a prerequisite for economic reform -- action might come
than later.

In the battle between Communist and anti-Communist forces, the Communists
typically worked to preserve the Soviet Union, while most anti-Communist
politicians supported the dissolution of the Soviet empire. Communists
aimed to
preserve the command economy; anti-Communists wanted to create a market
economy. Not only did these divides produce a lot of stalemate, but they
precluded the emergence of alternative political voices. Centrist parties
horribly in the 1993 and 1995 parliamentary elections, while the Communist
Gennady Zyuganov and the anti-Communist Boris Yeltsin dominated the 1996
presidential election.

Since that election, however, the traditional lines dividing Russia's elites
and its
society have begun to fade. Although the majority of Russian citizens still
the collapse of the Soviet Union, there is no longer a serious political
force in
Russia that believes it can rebuild the empire. Nor do serious political
and parties believe that it is possible to roll back market forces. While
are still unsure about what sort of market economy is best for Russia, few
support a return to Communism.

This change in attitude has opened doors for parties not directly affiliated
either the Communist or anti-Communist camps. It is hoped that alternatives to
Fatherland-All-Russia will take advantage of this opening as well. In
the right-of-center reformers need to bury their personal differences and
Russian voters with a liberal alternative to the new statist, left-of-center
formed by Messrs. Primakov and Luzhkov. But the very fact that there is a
space for new parties is certainly a positive development. Rather than
whether to preserve empires or return to Communism, politicians might finally
begin talking about how to make Russia's market economy work.

Even more important, the emergence of centrist parties suggests that
constitutional change in Russia is now possible. For the past decade,
Boris Yeltsin, for obvious reasons, has fiercely resisted constitutional
that would weaken his power and establish a more typical parliamentary system
with a strong prime minister. Important parliamentary groups, such as the
neo-nationalist Liberal Democratic Party of Russia have also emphasized the
importance of preserving a strong presidency. The coalition of a strong Mr.
Yeltsin and these parliamentary groups has kept the current constitution

But the formation of Fatherland-All-Russia shows that there is now room for
parties that are prepared to fight the status quo. Indeed, the negotiations
between Messrs. Primakov and Luzhkov reportedly involved a mutual
commitment to try to amend the constitution to increase the power and
autonomy of the prime minister and decrease the power of the president. If
these constitutional changes take place, Mr. Primakov would run as the
coalition's presidential candidate and Mr. Luzhkov would agree to serve as
prime minister.

Of course, this alliance might crumble quickly, especially if the Moscow mayor
opts to run for president himself (though again this week he rejected that
possibility). Moreover, the window for constitutional reform is small: It must
take place before the presidential vote next summer since, after the vote, the
new president is unlikely to support any dilution of presidential power.
But the
deal at least suggests that the impetus for constitutional reform exists.
And by
uniting forces at a moment when Mr. Yeltsin looks extremely weak, the party
may succeed in garnering the support from regional executives and parliaments
that is necessary for any amendment process to succeed.

Changing the Constitution

Like all well-written constitutions, Russia's has a complex and difficult
amendment process. The most likely amendment procedure, though other
mechanisms are available, requires a two-thirds majority from both the upper
and lower houses of parliament, and then ratification by two-thirds of
regional governments. This difficult process means that Russian politicians
have to unite and demonstrate real political leadership to succeed in changing
the constitution. Such cooperation in the name of national goals rather than
individual self-interest is a rare occurrence in Russia today. At the same
the degree of consensus on this issue has never been greater than now.

Constitutional revision along these lines should be a boost to Russia's
fortunes as well. Research comparing parliamentary and presidential systems
has demonstrated that parliamentary systems are more stable, less corrupt,
prone to coups d'etat and better at sustaining economic reform programs.
Western leaders are right to worry that a Primakov-Luzhkov alliance might not
bode well for the immediate future of market and economic reforms in Russia.

But at the same time, we must stop viewing Russian politics through the old,
bipolar lens. If the formation of Fatherland-All-Russia marks the beginning
of a
trend that will bring more centrists into Russia's political fold, it
should be
welcomed. And if Messrs. Primakov and Luzhkov -- or their challengers on the
center-right -- can create an impetus for constitutional change, Russia will
be the
better for their efforts.


Date: Fri, 27 Aug 1999 
From: abraham brumberg <> 
Subject: Review of A History of the Soviet Union from the Beginning 
to the End

Times Literary Supplement (UK)
Aug 29 l999
A Past Encapsulated
by Abraham Brumberg
Abraham Brumberg was for many years the Editor of the journal Problems of
Communism. He writes frequently on Russian and East European problems.

Peter Kenez
A History of the Soviet Union from the Beginning to the End
316 pp. Cambridge University Press
ISBN 0-521-3426-2 (hb)--ISBN 0-521-31198-5 (pb)

Does the world really need yet another history of the Soviet Union?
Cambridge University Press obviously thinks so, and so does Prof. Peter
Kenez of the University of California in Santa Cruz, author of the new
history boasting a title few historians since Edward Gibbon could have
ever hoped to match. 
And indeed why not another history? The business of producing
usable text books on the USSR did not begin in earnest until about the
mid-l940s, with the emergence of what came to be known as Sovietology, and
its slightly suspect scion, Kremlinology. (The latter was the spawn of the
Leninist maxim kto kovo?--who whom-- which probed the presumably
perennial power struggle within the Communist hierarchy in order to
determine what policy shifts would result from the victory of one contender
over another--a process that yielded, at best, mixed results. 
In Germany the study of the Soviet Union had sturdier credentials, 
Osteuropa Studien had thrived since the l920s, though by l933-34 it became
suffused, of course, by Nazi truisms. But even in the United States after
the birth of Sovietology college students were still fed on books such as
the dotty Political Power in the USSR, l9l7-l947, by Julian Towster, a man
who refused to consider that some of the laws passed in the Soviet Union
had no bearing on reality. Another de rigeur text was Isaac Deutcher's
Stalin, a superb and wily apologia for the man who, in the author's words,
"brought Russia, kicking and screaming, into the 20th century" (for which,
though holding our noses, we should admire him). The other books 
were also steeped in a parti pris spirit of one kind or another, some of
them authored by aging Mensheviks with their own axes to grind. It was
difficult to expect at that time that authors writing on the Soviet Union
be free of strong biases. In the event, it was up to the student and to
the odd teacher of Russian history--not many of them around in those days--
to decide which of the authors they assigned in their courses were least
In the fifties and sixties, the golden age of Russian--or
Soviet--studies in the United Sates and in Great Britain, histories were
still relatively scarce, most of the scholars exploring discrete aspects
of the Soviet polity, economic system, and culture, occasionally producing 
works that were esoteric and of little use to anyone except the
Why then, to repeat, not another history, especially now that the
Soviet Union is no more? For the general reader, as well as for the
students still writing papers in the surviving "area studies" departments
of American and British universities, a new textbook should be a godsend.. 
Few historians are as well qualified to write such a volume as
Professor Kenez. A solid and contientious scholar, author of several books
on the early l920s and on the Soviet cinema, 
Kenez's work has always inspired confidence and the new book is no
exception.. It is lucid, amply documented, well organized, and
occasionally brightened by flashes of quiet humor (thus on the "all-male
members of [Stalin's] company who were often forced to dance with each
other--something for which they had no greater talent then they did for
Above all, the book is thumpingly sensible. The evolution of
Soviet foreign and domestic ;policy is laid out without a whiff of apologia
or of far-fetched "anti-Communist" theories which have littered the
whole field of Russian studies. .Robespierre was not responsible for
Lenin any more than von Trietschke led directly to Hitler. Lenin was a
ruthless man who craved power and, for all brilliance as a political
strategist, an unreconstructed utopian--but not a monster. Stalin was a
monster--but also a man who truly believed he was doing his best for the
country and for the cause of "socialism", however he interpreted this
term... The "darling of the party," Nicholas Bukharin, was moved by noble
impulses--but also joined Stalin in the latter's Machiavellian intrigues
against fellow Bolsheviks. . The Communists came to power believing in
social justice and world revolution: they gave them up, one after the
other, soon thereeafter (ditto for "world conques"--if indeed the notion
had ever enjoyed any currency). The Ukrainian man-induced famine in the
l930s caused the deaths of millions -but Stalin (pace some historians) did
not hate the Ukrainians any more than he hated any other national group 
(with the exception of the Jews: a special case). The East European
"people's democracies" were not created in order to strengthen Stalin's
fiat in these countries, but to prevent them from becoming a military and
political threat to Moscow. The grim consequences of this policy were
another matter. 
All of this--and more-- is spelled out by Kenez in vivid, 
pragmatic and compelling terms. He even dispenses--bless him--with
excessive footnotes. And while sticking to the facts, he is not loath to
give reign to his feelings when discussing, say, the horrors of Stalinism
or the fatuous and corrupt atmosphere of the Brezhnev interregnum,. His
"Afterthoughts" are similarly sober. He reminds those who were astonished
by the sudden collapse of the Soviet system that the Soviet Union had long
ceased to be a monolithic state, and that "the reforming urge was constant
from the time of the revolution." The Soviet Union wasn't felled by the
threatening increase of America's military might but because it became the
victim of its own contradictions. Its "flexibilitry existed within very
definitely drawn limits [which] had not changed over time and became a
brake for furtrher social and above all economic development." He takes a
leaf from the Marxist ouevre: "As a technology changed and as society was
transformed, the superstructure--that is, the form of state and its
ideology--became a hindrance to furtrher development."
One single caveat: :Professor Kenez, like so many historians of the
Soviet Union, is wedded to political and economic analysis, though he also
comments frequently on cultural matterst. (In fact some of his
illustrations from Soviet films, which he knows so well, are both
entertaining and insightful.). Yet he leaves out, unfortunatley, one major
ingredient--namely, the parlous state of the country's social
infrastructure. You cannot be a large industrialized strate, much less a
super power, you cannot aspire to achieve any genuine progress if your
population is in physical and intellectual decline, your public health is a
shambles, your rivers and air polluted, your rate of deaths over births
standing at ten to one, your men and women dying of alcoholism and heart
failure at a rate remarkably higher than in any other country in the
world, your lakes drying out and your corrupt bourgeoisie sedndcing its
illegally procured profits to Swiss banks while more than half of the
population languishes below subssistence level.. Had Professor Kenez
incorporated some observations on this subject in his final chapter, his
book would be even better than it is----and it is excellent.


Russia: Analysis From Washington -- An Explosion That Changed The World
By Paul Goble

Washington, 27 August 1999 (RFE/RL) - The testing of the first Soviet atomic 
bomb 50 years ago this Sunday catapulted the USSR into superpower status and 
defined both the nature of the Cold War and the limits of international 
conflicts ever since.

On August 29, 1949, Soviet scientists exploded their country's first nuclear 
device not far from the city of Semipalatinsk in the Central Asian republic 
of Kazakhstan. And while the bomb itself was relatively small, the fallout 
from its testing continues to affect not only the immediate region but the 
world as a whole.

This Sunday, residents from the area near the testing range as well as 
scientists and anti-nuclear activists will meet in Semipalatinsk to remember 
the more than 1.6 million people whose health was undermined by Soviet 
nuclear testing over the next 40 years.

But as significant as those consequences were on a human level and as great a 
claim as they have on the conscience of the world, the three geopolitical 
consequences of the August 1949 test are far greater.

First, the Semipalatinsk test broke the American nuclear monopoly, and as a 
result, the USSR became the second superpower. Even though Moscow could not 
compete with the West in any other way, its possession of the most 
frightening weapon of all time meant that no one could ignore its demands.
In the short run, that development meant that the West could no longer 
dictate to the Soviet Union as it had concerning Moscow's World War II-era 
occupation of northern Iran. In the longer term, it placed enormous burdens 
on both countries and exacerbated suspicions on both sides because of the 
role espionage played in the Soviet breakthrough. 

Even today it means that the Russian Federation, as the Soviet Union's 
successor state, can claim a seat in the highest councils even where it is 
economically or politically unqualified in every other way. And that in turn 
has made Moscow ever more reliant on its nuclear arsenal precisely because 
these weapons are a symbol of power. 

Second, the test 50 years ago defined the limits of the Cold War. The 
enormous destructive power of nuclear weapons as demonstrated by the American 
attacks on the Japanese cities of Hiroshima and Nagasaki made each side more 
cautious in its dealings with the other.

On the one hand, this often meant that one or the other side was prepared to 
go to the brink in the expectation that the other side would blink. And on 
the other, it meant that officials in both Moscow and Washington began to 
learn what the limits were and began to define their relationship in terms of 
developing a nuclear control regime.

That was the basis for most East-West contacts during the Cold War, and those 
contacts in turn helped bring that frightening competition to an end. Indeed, 
one of the most difficult challenges for those involved in such talks has 
been the demise of the Soviet state, a demise that left them in some cases 
without an obvious interlocutor. 

And third, the Soviet test a half-century ago this weekend -- by highlighting 
both the importance of nuclear weapons and relative ease of producing them -- 
encouraged other countries around the world to think about "going nuclear." 
Few of them have succeeded, but the possibility that they could had an 
unexpected impact on Soviet-American relations: It gave the two sides a 
vested interest in limiting the spread of nuclear weapons.

Neither Moscow nor Washington wanted to see its own status diminished by such 
a development, and consequently the two rapidly came to recognize that they 
in fact had a set of shared values within their overarching competition. 

That led to efforts on both sides to limit the proliferation of nuclear 
weapons, efforts which also contributed to overcoming some of the early 
suspiciousness which the Semipalatinsk test itself set off.

Those joint efforts have been remarkably effective, and where they have 
broken down -- as in the recent testing of nuclear devices by India and 
Pakistan -- both the impulse to limit the spread of nuclear weapons and the 
shared commitment to preventing their use has had the effect of restricting 
the likelihood that these weapons will in fact be used.

When the Soviet Union exploded its device in 1949, no one saw all these 
political possibilities, both good and bad. Now, they are more obvious. But 
the enormous destructive power of nuclear weapons remains unchanged. And on 
this anniversary, coping with that fact remains unchanged as well. 


Money-laundering scheme has US probing other possible hiding places

WASHINGTON, Aug 27 (AFP) - Scandalized by what could be the biggest-ever 
money laundering scam using US accounts, investigators here are probing a 
multitude of avenues that Russia's mobsters and political elite may have used 
to slip cash overseas.

US President Bill Clinton's administration is also on the defensive against 
attacks that it has been too free with funds for Russian and less than 
vigilant with respect to where they are going.

"This has the potential to be the largest money-laundering scheme in history 
and this 10-15 billion dollars now is the tip of the iceberg," said a source 
close to planned congressional hearings into the scandal.

The House Banking Committee aide said on condition of anonymity that the sums 
examined in the hearings next month could run as high 15 billion dollars and 
that the investigation could unearth a number of similar operations.

"It is possible that considerably more money has been thieved from the 
Russian government by the Russian mobsters," he said.

Investigators believe as much as 15 billion dollars -- including some IMF 
loans -- was diverted through New York bank accounts by Russian organized 
crime and members of Russia's political and business elite.

Some 4.2 billion dollars were funneled through accounts at the Bank of New 
York from last October to March, investigators said.

The initial New York Times story last week spawned more alarming reports that 
aid from the International Monetary Fund was funneled into the accounts and 
that President Boris Yeltsin and his family may have been involved.

The Kremlin has vehemently denied both charges and the officials have 
suggested they may be motivated by the December 19 parliamentary elections 
and the presidential vote next summer.

But IMF spokesman Bill Murray said while the organization had no independent 
confirmation that its funds were involved, it was "highly concerned" about 
the claims and "will vigorously explore the issue."

And Representative Banking Committee Chairman Jim Leach warned Thursday that 
the charges may hold up the next allocation of Russia's badly-needed IMF loan.

"Clearly the loan payment shouldn't go out if it's going to be handled the 
way the past has been handled," the representative told MSNBC television. 

Russia expects to receive the next 640-million-dollar installment of a 
4.5-billion-dollar IMF loan package at the end of September. 

Capital flight has been a significant problem in Russia as the wealthy, 
particularly those with ill-gotten booty, seek to circumvent the country's 
strict currency controls.

Money laundering operations have multiplied in the 1990s as a way to hide 
illegal profits in overseas bank accounts. 

A source connected to the US investigation acknowledged that the practice is 
so widespread and the sums so "mindboggling" that it will be difficult to 
root out everyone involved.

And USA Today reported Friday that the probe will expand to other areas of 
foreign aid.

A senior US official told the paper that tens of millions of dollars have 
gone missing from an account opened by the Russian government to deposit 
profits from the sales of US grain in Russia. 

The United States donates grain to Russia and provides long-term loans to 
purchase grain, which is sold at market prices. The profits were meant to be 
placed in the special account.

The paper also reported that at least 12 current and former Russian officials 
are being investigated, including Tatyana Dyachenko, Yeltsin's daughter and 
close confidante, as well as other advisers to the president.

The scandal is also threatening fallout in the US political arena.

Vice President Al Gore, Clinton's handpicked successor for the 2000 
Democratic presidential nomination, is being targeted by his Republican 
rivals for his role as chairman of the US-Russian bilateral commission.

Representative Leach, who will preside over the Banking Committee hearings 
set for September 21-22, is likely to pursue that avenue.

"We have an administration that's been very supportive of the Yeltsin 
administration and we need to rethink our policy toward Russia based on 
what's uncovered in this probe," said the congressional source. 


Russia's military recovers some luster in Dagestan conflict

MOSCOW, Aug 27 (AFP) - The Russian military made an honorable showing in 
Dagestan, managing to avoid a Chechen quagmire and confounding critics who at 
the outset predicted a protracted guerrilla war in the northern Caucasus.

The victory over Moslem rebels in the southern republic will provide a 
badly-needed boost to the military, once revered as a mighty fighting machine 
but nowadays wracked by a shortage of funds and loss of prestige. 

During a brief visit to Dagestan Friday, Prime Minister Vladimir Putin 
congratulated the local police and army chiefs, saying they had done 
"excellent work" and that the operation to wipe out the Islamists "was 
carried out within the agreed timeframe."

In all, 66 Russian and Dagestani troops as well as police died in less than 
three weeks of fighting, according to an official toll.

Moscow also claimed to have killed more than 1,000 of the Islamists from 
Chechnya who seized several villages of southwest Dagestan on August 7 as 
part of a drive to set up an Islamic state in the northern Caucasus.

At the outset, the Russian press unanimously predicted that the conflict 
would be long and bloody in Dagestan, a mountainous republic that borders 
Chechnya, where Russia fought a devastating war in 1994-1996.

The Russians have learnt important lessons from the Chechen war, says Paul 
Beaver, a military expert with the British defense journal Jane's.

"They have learned that instead of using your conscript soldiers, you have to 
use your professional soldiers," he said. "They have learned that you must be 
highly mobile and highly flexible."

Before sending in ground troops, the Russians carried out bombing raids, 
which grew in intensity as the campaign progressed.

The village of Tando, where the rebels made their last stand against Russian 
forces before announcing a retreat on August 23, was reduced to rubble as a 
result of marathon bombings.

"They have also learned to use a lot of air power," Beaver said, noting that 
the use of SU-25 fighter planes helped in the campaign. "They are using these 
aircraft in a much more effective manner than ever before."

Moscow sent its best troops from the airborne divisions, interior ministry 
special forces and secret services units to Dagestan to flush out the rebels, 
many of them the same fighters who inflicted a stinging defeat on the 
Russians in the Chechen war.

Deploying experienced soldiers to conflict areas reflects Russia's desire to 
develop a smaller, professional army.

In Dagestan however, the situation on the ground differed from that in 
Chechnya, where the local population supported the rebels in their battle 
against the Russian "occupiers."

"In Chechnya, the Russian army was not only very incompetent, they were 
fighting fairly united people," says Charles Dick, head of the Conflict 
Studies Research Centre at Sandhurst, England.

Thousands of Dagestani volunteers joined Russian forces to battle the Moslem 
rebels, believed to be followers of the hardline Islamic Wahhabi sect.

Most of Dagestan's two million inhabitants are moderate Sunni Moslems.

"It's one thing when the Chechens united in Chechnya to defend their 
territory against a Russian aggressor," says Dick. 

"It's another thing when the Chechens go into territory they claim."

But the war in Chechnya was not the only conflict in the back of the Russian 
generals' minds when they set out to fight the rebels in the Dagestani 

"The conflict in Yugoslavia influenced our generals as did the US raids on 
Iraq," said Yury Gladkevich, an expert with the AVN military news agency.

In both those countries, the United States and their western allies relied 
mostly on air power to wage a campaign, mindful that a ground war in hostile 
terrain could result in heavy casualties.

"It's a very small victory," says Dick, but he added that it will be used to 
provide a morale boost to the army in the same way that the US invasion of 
Panama in 1989 was made out to be a military success after Vietnam. 


Russia money scandal unlikely to alter U.S. policy
By David Storey 

WASHINGTON, Aug 27 (Reuters) - Revelations of Russian money laundering at a 
New York bank are reverberating in the heated world of preelection Washington 
but are unlikely to have a major impact on U.S. policy toward Russia, 
analysts said. 

Allegations of misconduct at the Bank of New York,
which fired a senior executive on Friday, hit 
close to home. But no one in Washington was surprised by suggestions of 
corruption in Moscow. 

"It's the Russian government. It's plagued with corruption. We know that," a 
White House official said. 

The Clinton administration had virtually choked off big donations, especially 
after last summer's Russian financial collapse, but its political engagement 
with the defeated former superpower is likely to remain in place. 

President Bill Clinton has made it a pillar of his foreign policy to back 
President Boris Yeltsin in the hope of edging the failed communist state 
toward democracy, reforming the centralized economy and defusing its nuclear 

The policy has been maintained despite strains, including Russia's threats in 
the face of the NATO bombing of Yugoslavia, disputes over Russian nuclear 
help to Iran and Yeltsin's unpredictability. 

David Leavy, spokesman for Clinton's National Security Council, said the 
multi-pronged investigation of the New York bank scandal would not alter 
U.S.-Russia relations, however much Clinton's opponents might seize on the 

"I think there is a strong bipartisan agreement that the Russian transition 
to a free-market democracy is in the interests of the American people," he 
told reporters with Clinton during his vacation in Massachusetts. 

But the issue was sure to be seized on by opponents of Vice President Al 
Gore, front-runner for the Democratic nomination for next year's presidential 
election and a prominent manager of Russia policy. 

"He will be asked why the U.S. side was not more critical when they knew that 
a great deal of corruption was present at all levels of government right up 
to the top and western money was going astray," said Russia expert Keith 

"It will make them very cautious in any further dealings and any further 
commitments to the Russian side and let's hope they become more critical," 
Bush, of the Center for Strategic and International Studies, said. 

Several Republican-led congressional committees are expected to hold hearings 
on the issue starting next month, raising the prospect of political fall-out. 

Gore has led the U.S. side at a joint commission that meets about twice a 
year to handle issues from cooperation in space to arms reduction, from 
investment to international crime. 

Analysts said the commission had lost credibility along with the Russian 
government, which has seen five different prime ministers in 17 months and 
has increasingly failed to implement promises made at the meetings. 

There are fears that a strong Republican assault on Gore over Russia policy, 
centering on corruption, would make it impossible to have a sensible 
political discussion over how to deal with Moscow in the run-up to the 
November 2000 election. 

"It taints the whole Russia issue to the extent it prevents any of the 
candidates from including in their foreign policy program a constructive, 
engaged policy toward Russia," said Clifford Gaddy, a Russia expert at the 
Brookings Institution. 

He added: "They would be countered with the response: 'But do you want to 
pour money down this black hole, do you want to keep dealing with these 
crooks and criminals'." 

The money laundering allegations were sure to give ammunition to those who 
have argued for years that giving money to Moscow, bilaterally or through the 
International Monetary Fund, actually damages rather than helps Russia. 

"There is no kind of infrastructure there that you can put funds into and 
ensure they will go to productive use," said Brent Scowcroft, former 
President George Bush's National Security adviser. 

William Odom, a former head of the National Security Agency and a veteran 
Russia analyst, commented: "We have a remarkable capacity for pouring money 
down ratholes even after we realize they are ratholes." 

But Gaddy said the engagement should be pursued. "As far as concrete foreign 
policy terms is concerned, we still have to deal with Russia on arms control 
and we will," he said. 

The United States is seriously investing new money in that area, and Clinton 
has directed a two-thirds increase for programs to reduce Russia's nuclear 
threat over the next five years, taking the figure to $4.5 billion. 


Russian PROSECUTOR'S Office Sidelines Mabetex Investigator.

MOSCOW, August 27 (Itar-Tass) - The Russian Prosecutor-General's Office on 
Friday replaced an investigator in charge of the criminal case on Mabetex 
construction company. 

The case was instituted at the start of this yeat on suspicion of abuses of 
high officials in concluding contracts for Kremlin restoration work with 
Mabetex, a Lausanne-based Swiss fitout company. 

The deputy chief of the department for investigation of special importance 
cases by his order relieved Georgy Chuglazov from the Mabetex case, a 
spokesman at the Prosecutor-General's office told Itar-Tass. 

The same order sidelined from investigations two other deputy chiefs of the 
department for investigation of special importance cases, Gennady Teterkin 
and Vladimir Lyseiko. 

The spokesman said the replacements were made because amendments to the Law 
on the Prosecutor's Office had come into force that "clearly differentiate 
responsibilities in accordance to the table of the personnel". 

Under the amended law, Deputy Prosecutor-Generals Mikhail Katyshev and 
Vladimir Ustinov were dismissed from their posts in April. 

Lyseiko was in charge of several criminal cases in Saint Petersburg, 
including on its former mayor Anatoly Sobchak, and Teterkin investigated a 
case on abuse of office by officials of the Interior Ministry and of the 
prosecutor's office in the Rostov region. 


Govt Endorses Measures to Prepare Election to Duma.

MOSCOW, August 27 (Itar-Tass) - Russian Prime Minister Vladimir Putin signed 
the resolution "On the assistance to electoral commissions in preparing and 
holding election to the State Duma of the Federal Assembly of the Russian 

The resolution referred to Itar-Tass by the Government Information 
Directorate points out ministries and agencies which, under election law, are 
obliged to supply information for compiling voters lists, ensure the setting 
up of polling stations, the forming of district electoral commissions and 
organise the supply of protocols on the result of the voting to appropriate 
territorial electoral commissions. They should also take measures to ensure 
that citizens who are on active service and those living in territories where 
army units are stationed be able to exercise their right to vote. 

The Interior Ministry, jointly with other law enforcement bodies, has been 
instructed to ensure free-of-charge public order and security during the 
preparation for and holding of elections to the Duma. Law enforcement bodies 
are to supply on electoral commissions demand the information about 
candidates' criminal record, also about their having been convicted under 
criminal laws of a foreign state for actions regarded as a crime under the 
Criminal Code of the Russian Federation, and whether their cases have been 

The Interior Ministry and the Federal Security Service should take measures 
under the established procedure to put a stop to unlawful canvassing 
practices. They should also immediately inform electoral commissions of 
establish facts of unlawful canvassing practices and of measures taken 
against such practices in accordance with Russian laws. 

The Russian government's resolution outlines measures to ensure the normal 
functioning of the state automated "Elections" system, as well as prompt 
delivery of documents of electoral commissions. 

The Russian Ministry for the Press, Television and Radio Broadcasting and the 
Media was instructed, specifically, to supervise the allotting by the media 
of free time on the air and space in publications to electoral commissions, 
to candidates and registered candidates, election associations and blocs. It 
is also to ensure the publication of decisions of electoral commission, 
results of voting and of elections. 

The resolution stipulated the procedure of assistance to electoral 
commissions in the exercise of their powers to monitor the observance of the 
procedure of financing election campaigns of candidates, registered 
candidates, elections associations and blocs. 

At the request of election companies, the Justice Ministry is obliged to 
supply information about legal persons making voluntary contributions to 
election funds and registered in territorial bodies and judicial 

The Tax Ministry, jointly with the State Committee for the Land Policy, is 
charged with verifying at electoral commissions requests the information 
about the candidates sources of income and property. 



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