August 30, 1999   
This Date's Issues: 3471 •3472 • 

Johnson's Russia List
#3471
30 August 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Newsweek: Michael Hirsh, The Gangster State. The Clinton administration 
hoped Yeltsin and his reformers would be able to lead Russia toward 
democracy. Instead, what Russia got was kleptocracy. 
2. The Times (UK): Russian mafia boss mocks FBI 'ravings' 
3. AP: Russia Limits Moves to Moscow.
4. Itar-Tass: Right-Wing Electoral Bloc Approves Lists of Candidates.
5. The Guardian (UK): Jonathan Steele, Russian centre-left leads race 
after 80-year break.
6. AP: Scientist: Planet Hurt by Cold War.
7. The Times (UK): Michael Binyon, Alarm in West as Russia is swept by '
drug-resistant TB.
8. The Electronic Telegraph (UK): Alice Lagnado, Closed city keeps 
secret of glorious atomic past. (Arzamas-16)
9. Reuters: Sakhalin aims to be Asia's gas supplier.
10. St. Petersburg Times: Fyodor Gavrilov, Capitol's Glitz Brings 
St. Pete Political Blitz.]

******

#1
Newsweek
September 6, 1999 
[for personal use only]
The Gangster State
The Clinton administration hoped Yeltsin and his reformers would be able to 
lead Russia toward democracy. Instead, what Russia got was kleptocracy. 
By Michael Hirsh 

It began as a spore of suspicion — a tip that British investigators picked up 
in some boxes of corporate documents last summer. That led them to Canada, 
and then, along with the FBI, to several accounts at a respectable, midsize 
New York bank. Nothing very startling — until authorities realized that 
billions and billions of dollars were getting "laundered" through the Bank of 
New York accounts, apparently shunted through a maze of companies traced to 
Russia. Today the case has become a scandal that threatens to unravel the 
whole threadbare structure of relations between Russia and the West. 

The facts of the case, first reported by The New York Times on Aug. 19, 
remain murky. A senior FBI official familiar with the investigation cautioned 
it is still at an early stage, and along with other officials he expressed 
concern the story may have been prematurely overblown by some media. "All we 
know is that lots of money was going in and out of these accounts. Whether 
it's nefarious or not we really don't know," the FBI official said. 
"Basically we don't know if this is legitimate money or illegitimate." 

Investigators say at least $4.2 billion and as much as $10 bil- lion may have 
been laundered — funneled through legitimate accounts so it appears clean — 
from as early as October 1997 to March of this year. This was done through 
Bank of New York accounts largely in the name of Benex Worldwide Ltd., a firm 
that authorities say is controlled by Semyon Mogilevich, allegedly a vicious 
mafioso known as the "brainy don." The accounts flowed through a department 
managed by Natasha Kagalovsky, a bank executive who has since been suspended. 
Her husband is Konstantin Kagalovsky, an admired economic reformer who was, 
as recently as 1995, Russia's chief delegate to the International Monetary 
Fund. Neither she nor her husband has been charged with any wrongdoing. 

Playing the Blame Game 

Some of Russia's most prominent names have been mentioned in connection with 
the money-laundering scandal. Who did what isn't at all clear. Investigators 
are still trying to unravel the connections. All of the people mentioned deny 
wrongdoing, and none has been charged. 

Tatyana Dyachenko Did Yeltsin's daughter launder money through a mobster and 
share $1 million in Swiss 'pocket money'? 

The Kagalovskys Was Russian-born Natasha, a top Bank of New York executive, 
in cahoots with oilman-husband Konstantin? 

Yuri Luzhkov Moscow's mayor wants to be president, but has he been playing 
footsie with money-launderers in the mob? 

Boris Berezovsky If Yeltsin's circle wanted to launder money, rivals ask, 
wouldn't they turn to his favorite tycoon? 

The biggest mystery is where all these billions came from. It's too much 
cash, most investigators agreed, to have flowed only from "traditional" 
Russian mob pursuits like prostitution, drugs or even arms sales. More 
likely, authorities believe, the money was looted from IMF loans (The IMF has 
asked for a new audit of Russian central-bank transactions, NEWSWEEK has 
learned) or represents revenues from state assets like oil or aluminum. It 
might even be legitimate capital fleeing Russia. Whatever the source of the 
money, it probably originated with some of Russia's leading political and 
business figures, many of them engaged in what seems to be an unholy alliance 
with Mogilevich. 

How do two men like Mogilevich and Kagalovsky — seemingly from opposite poles 
of Russian society — get linked to the same scandal? Investigators say it's 
the main problem in Russia today. Virtually no one, from the nation's 
business elite to Presi- dent Boris Yeltsin to his major political opponents 
in next year's presidential election, seems untainted any longer by 
corruption. Here the connection may amount only to innuendo. But if it turns 
out that massive laundering is involved, "this [case] is a dagger aimed at 
the heart of the Russian elite we have built up in the post-communist era," 
says a U.S. official with knowledge of the investigation. 

Authorities are fairly convinced that Mogilevich is a kind of lodestone 
drawing in a vast network of official Russian corruption. One U.S. official 
familiar with the probe says Mogilevich and other principals in the case have 
corporate links with both of Russia's main power centers: Boris Berezovsky, 
the industrialist and media baron who is Yeltsin's main financier; and 
Systema, a group of companies supporting Yeltsin's main political rival, 
Moscow Mayor Yuri Luzhkov. Indeed, by last weekend both the Yeltsin and 
Luzhkov camps were hurling charges of corruption at each other based on the 
case. U.S. intelligence sources tell NEWSWEEK that the CIA, which has long 
watched Mogilevich, believes he also had business interactions with other 
members of the political elite, especially former prime minister Viktor 
Chernomyrdin and former economic czar Anatoly Chubais (both of whom deny 
wrongdoing). Russia's political and business elite sought out Mogilevich, 
officials say, because of his money-laundering savvy. Mogilevich has also 
denied criminal activity, and the FBI official cautioned that, contrary to 
some reports, there is as yet no direct criminal evidence linking the Bank of 
New York case to President Yeltsin or his powerful daughter, Tatyana, or to 
so-called oligarchs like Berezovsky (who like Luzhkov has also said he is 
guilty of nothing criminal). 

Whatever the details, the case is really about the unmaking of a myth. 
Throughout the 1990s the Clinton administration has unstintingly promoted the 
idea that in Russia, liberal democracy was slowly replacing communism. That 
may still happen, but for now Russia seems mired in a transition stage that 
no one anticipated: the gangster state. "We probably have been deluding 
ourselves that reform has taken hold," says Brent Scowcroft, 
national-security adviser to President Bush. Many investigators and Russia 
experts now say that the so-called Russian mafia is so tied in with the 
Russian state that the two are no longer distinguishable. 

Ironically, it may be Al Gore who pays for the sins of the Russian elite. 
Last week GOP presidential candidates criticized the vice president, the 
leading Democratic contender, for his deep involvement in the Clinton 
administration's Russia policy. Some Clinton critics suggested that key 
Russia policymakers in Washington — especially Deputy Secretary of State 
Strobe Talbott and Secretary of the Treasury Larry Summers — basically 
facilitated the fleecing of Russia by looking the other way at corruption. 

But the Clinton administration is not admitting defeat, yet. "Calm down, 
world," Talbott said in an interview with NEWSWEEK. "We have been aware from 
the beginning that crime and corruption are a huge problem in Russia and a 
huge obstacle to Russian reform." Talbott insisted: "Russian reform is not 
over." But "it's going to take decades [and] the problem will only get worse 
if you isolate Russia." Others note that some reform, like the banishment of 
central planning, has taken hold. 

In the end, the Bank of New York case may rank as one of the great swindles 
of the 20th century — or it may just be another case of vast capital flight 
from the wreckage of the Russian economy. The bank, which also denies 
wrongdoing, on Friday fired another Russian-born executive, Lucy Edwards, 
reportedly for gross negligence and falsification of bank records, among 
other reasons. But the real mystery was Kagalovsky and her husband, 
Konstantin. After leaving his IMF post he plunged into Russia's financial 
world, working as VP at Menatep Bank. The now bankrupt Menatep was known to 
have been deeply connected to the Russian central bank — the recipient of IMF 
money — through its purchase of Russian treasuries. Through their New York 
attorney, Stanley Arkin, the couple said they "have never been involved in 
money laundering in any way, shape or form." The point was well taken: is it 
even possible to "launder" from a country where the theft of state assets is 
not against the law? That's one of many questions that investigators may 
spend years pondering. 

With Owen Matthews in Moscow, William Underhill in London, Daniel Klaidman in 
Jerusalem and Gregory Vistica in Washington 

*******

#2
The Times (UK) 
August 30 1999
[for personal use only]
Russian mafia boss mocks FBI 'ravings' 
BY DAVID LISTER, ALICE LAGNADO AND JAMES BONE 

THE secretive Russian mafia boss at the heart of a massive money-laudering 
investigation broke his silence over the weekend to claim that he was the 
victim of "delirious ravings" by the FBI. 

Semyon Yukovich Mogilevich, who has been linked to an inquiry said to involve 
up to $15 billion (£9.4 billion) of laundered money, protested his innocence 
to a Moscow newspaper. In an interview with Moskovsky Komsomolets, he mocked 
accusations that he had laundered money: "Once I accidentally washed five 
dollars I'd left in a shirt pocket. I must say they looked a lot cleaner and 
brighter after that. And the exchange bureau happily changed them for me. 

"If I could earn - I stress earn, not steal - just a third of that money, I 
could say that I had been lucky in life. Alas, I have only been able to read 
about this kind of money." 

In a direct swipe at the FBI, which is leading an inquiry focusing on the 
Bank of New York and allegations that it was used as a conduit to ship 
illegal Russian money out of the country, Mr Mogilevich said: "All the 
accusations about 'laundering' money, drug trafficking, prostitution and 
contract killings are the fruit of delirious ravings on the part of the FBI 
as they try to get more funds from the US Congress for their fight against 
the 'Russian mafia'." 

Mr Mogilevich, known as "The Brainy Don", is alleged to be the head of 
Solnetsevo, Russia's largest organised crime group. He is based in Hungary, 
but is thought to have gone to Moscow in recent weeks. He says that he is a 
legitimate businessman. 

The Russian mafia is said to have all but taken over most of Russia's 
commercial banks earlier this decade and has actively sought to channel money 
out of the country after the collapse of communism and the privatisation of 
large areas of Russian industry. Mr Mogilevich referred to the accusations 
that up to $15 billion had been transferred out of Russia as "clownery". 

He said: "There just cannot be this kind of money in Russia. In better times, 
our oil companies - Lukoil, Sibneft and the others - would extract about 150 
million tonnes of oil. If you sold all of it - and this is Russia's main 
source of hard currency - without returning one cent, that would hardly bring 
you $15 billion. Where's the rest?" 

Mr Mogilevich has been linked to the widening scandal through a network of 
companies all going under the name of Benex, which held an account at the 
Bank of New York. 

His relationship with the Bank of New York has focused on the role of Peter 
Berlin, a director of a British company called Benex Worldwide and an officer 
of Benex International, a American company based in New Jersey. 

Mr Berlin is the husband of Lucy Edwards, who was dismissed from the Bank of 
New York's London office on Friday. Ms Edwards was spotted last week in the 
lobby of a stylish Moscow hotel. 

It was also reported at the weekend that Natasha Gurfinkel Kagalovsky, who 
works in the bank's New York office and has been sent on paid leave, has now 
turned up in London. 

In a new claim, a senior Russian businessman linked to the inquiries said 
that Moscow officials moved considerable sums of cash abroad just before the 
devaluation of the rouble last year. 

Mikhail Khodorkovksy, the former chairman of Menatap, a Russian bank that is 
one of several under investigation, told The New York Times that Russian 
officials began selling government securities because they had inside 
knowledge of the devaluation of the rouble. He said they transferred the 
money abroad through a "front company" and then into the Bank of New York. 

Anyone who sold government securities before the Russian financial collapse 
and devaluation of the rouble last August would have gained immensely from 
knowing that the currency was about to be devalued. 

The investigation is also said to have touched on whether some of the money 
moved through the Bank of New York may have been diverted from aid given to 
Russia by the International Monetary Fund. The claims have led to renewed 
calls for tighter controls on IMF loans to help to prop up Russia's faltering 
economy. 

In the US, the claims have also caused embarrassment to Al Gore, the 
Vice-President, and are threatening seriously to hurt his ambitions to become 
President Clinton's successor in the White House. 

Mr Gore has repeatedly put the case for fresh funds to Russia to help the 
tottering state in its transition from former communist state to capitalist 
democracy. 

*******

#3
Russia Limits Moves to Moscow
August 29, 1999
By NICK WADHAMS

MOSCOW (AP) - Artist Boris Prudnikov was living in a tiny southern village in 
1991, when he decided he had to move to Moscow, the country's mecca for art - 
as well as business, politics and just about every other field.

The Soviet Union had just collapsed, and laws restricting people's movements 
were easing, so he figured he could chance moving to the big city.

But Moscow's strict registration rules remained in effect, making him an 
illegal resident and forcing him to pay frequent bribes to avoid arrest and 
possibly deportation back home.

``Registration is a violation of all my human rights,'' says Prudnikov, who 
finally managed to register in 1997. ``If you look suspicious, the police 
will stop you. And if you're not registered, finding a job is virtually 
impossible.''

In a country wracked by a decade of economic depression, Moscow is the one 
place where Russians from the provinces can hope to break a cycle of dead-end 
jobs, unpaid salaries and shortages of basic goods. It is a magnet for people 
from every corner of the former Soviet Union, but moving here remains an 
extremely tricky business.

Under the city's powerful mayor, Yuri Luzhkov, Moscow still enforces 
registration rules that violate the spirit, if not the letter, of Russia's 
constitution, which gives citizens the right to travel freely and live where 
they choose.

Police actively try to stem the flow of fortune seekers and demand bribes 
from those without proper documents. They are particularly vigilant when 
encountering people from the Caucasus region of southern Russia, whose darker 
complexions make them easily identifiable.

Estimates on the number of unregistered people living in Moscow range from 
300,000 to 1.5 million - no one knows for sure. Most are Russian citizens who 
should be entitled to live in the capital, along with the 8.7 million 
registered residents.

``The whole system exists to keep basically anyone out of the city, anyone 
who isn't wanted,'' says Diederik Lohman, director of the Moscow branch of 
Human Rights Watch. ``There's a group of privileged people who can come to 
Moscow and live here fairly easily. For all the rest it's very difficult.''

Prudnikov, the artist, says it cost him $9,000 to get registered - $5,000 to 
a landlord who agreed to formally rent him an apartment and $4,000 in bribes 
to police and bureaucrats.

During the Soviet era, a strict internal passport system tied people to their 
hometowns and made moving to another city extremely difficult.

The Constitutional Court ruled in 1996 that Moscow's registration rules were 
illegal, but the revised law still discourages legal migration to the capital.

Today, registration requires proof of residence, permission from the owner of 
the living space and an 8 ruble (30 cent) fee.

But Russians trying to move to Moscow say the process isn't that easy. They 
say police ignore the law, demand bribes and often refuse registration based 
on ethnicity.

``In principle, the problem should be solved,'' says Tatyana Dolbena, a 
migration lawyer in Moscow. ``But in reality, Russians and citizens of the 
former Soviet Union are often refused registration arbitrarily.''

Police insist the registration system is needed to keep Moscow from being 
overwhelmed. It already has twice as many people as any other Russian city.

Police also say they need to keep track of migrants, who, according to the 
Interior Ministry, committed about one-third of all crimes in the capital in 
1998.

``It's no secret that (so many) crimes committed in Moscow are committed by 
migratory people,'' says Alexander Barabanchikov, deputy head of Moscow's 
passport control. ``Therefore, registration is essential.''

Many average Russians who are fed up with the high crime rate agree.

But critics say the system is outdated and discriminates against citizens who 
are not ethnic Russians.

Police still arbitrarily check internal passports, which Russian citizens are 
supposed to carry at all times. They frequently stop people based on ethnic 
appearance, believing minorities are less likely to be registered.

Prudnikov says that before he registered, he was periodically taken to a 
police station and had to pay bribes to ensure he wasn't sent back to his 
village of Taganurk in southern Russia.

He finally decided to go through the registration process when police, acting 
on a tip, confronted him at his apartment.

Even now, police often stop him several times a day for document checks, 
presumably because of his dark skin.

For those who can't afford the price of even temporary registration - some 
firms charge $100 - living in Moscow can be a game of paying bribes, telling 
lies and keeping a low profile.

Yevgeny Petrenko, a native of the remote, northeastern region of Chukotka, 
has been in Moscow for more than a year. He hasn't gotten a job, isn't 
registered and lives with his girlfriend.

He's afraid to register because he worries authorities will discover he 
hasn't performed his obligatory military service.

But Petrenko insists he'll never return to the economically strapped Far 
East. Instead, he pays the occasional bribe and takes precautions such as 
attempting a Moscow accent and not carrying his passport so he can lie to 
police if stopped.

``There's no possibility of going home. Back there, it's death,'' he says.

*****

#4
Right-Wing Electoral Bloc Approves Lists of Candidates.

MOSCOW, August 29 (Itar-Tass) - Participants in the founding conference of a 
Union of Right-Wing Forces (SPS) electoral bloc, which took place at 
President-Hotel here on Sunday, approved, in a secret ballot by 54 votes to 
five, a Federal list of the bloc's candidates who will run for the State Duma 
lower house of the Russian parliament at the forthcoming elections in 
December. 

The central part of the bloc's Federal list includes the following 
representatives of the bloc: Sergei Kiriyenko (New Force), Boris Nemtsov 
(Young Russia), Irina Hakamada (Common Cause),Pavel Krasheninnikov (New 
Force), Professor Boris Nadezhdin, a lawyer (New Force), Gasan Mirzov, 
presidentof the Russian Guild of Lawyers (Voice of Russia), human rights 
campaigner Sergei Kovalyov, a member of the State Duma (Democratic Choice of 
Russia), General Eduard Vorobyov, a member of the State Duma (Democratic 
Choice of Russia), and Konstantin Remchukov,k adviser to the president of the 
Siberian Aluminium group (Voice of Russia). 

The delegates to the conference confirmed the name of the electoral bloc, and 
formed its political and coordinating councils, and an election headquarters. 

Anatoly Chubais (Democratic Choice of Russia) was elected to chair the SPS 
electoral headquarters while Konstantin Titov, leader of the Voice of Russia, 
was elected to head the SPS political council. 

******

#5
The Guardian (UK)
30 August 1999
[for personal use only]
Russian centre-left leads race after 80-year break 
By Jonathan Steele in Moscow

Russia's former prime minister Yevgeny Primakov and the mayor of Moscow, Yuri 
Luzhkov, joined forces on Saturday at the launch of a powerful new alliance 
which is favourite to win Russia's parliamentary elections in December. The 
two men called for privatised companies to be taken back from owners who have 
ruined them. 

The Fatherland-All Russia alliance is the nearest to a centre-left movement 
that Russia has legally had since the Mensheviks were pushed aside in the 
wake of the revolution more than eighty years ago. 

"We don't want to go back to the command system which went bankrupt, nor do 
we want to nationalise everything, but we do want to use the levers of the 
state to regulate the economy in the interests of growth, honest business, 
and the welfare of tax-payers," Mr Primakov said. 

Mr Luzhkov stated that "the country needs a course correction. We cannot 
solve its problems only according to the prescriptions of the IMF, which 
regards Russia as a test-bed for its experiments." 

Their group brings together two movements, Fatherland and All Russia, and has 
the support of several powerful regional governors. On the eve of its 
congress on Saturday, it won a major boost when delegates from the Agrarian 
Party decided by a large majority to join forces with it. 

The Agrarians, who normally take about 8% of the national vote, used to be 
allied with the Communist Party. Mikhail Lapshin, the Agrarians' leader, made 
it clear he was tired of the Communists' unwillingness to treat them as a 
genuine partner. "In four years the Communists have not supported a single 
one of our candidates in the governorship races, although they have twice 
supported people from Vladimir Zhirinovsky's party," he said. Mr Zhirinovksy 
is a maverick nationalist who sometimes sides with the Communists - but more 
often with President Boris Yeltsin. 

With several other movements also holding congresses this weekend, the 
kaleidoscope of Russian politics, at least through the prism of the 
manifestos, is beginning to shake down into something like a Western 
left-right spectrum for the first time since Communism fell. This enlivens 
the debate, even if in practice the real issues for any party are how to curb 
the power of the financial oligarchs, weed out massive corruption at every 
level of power, and revive economic growth and social justice. 

The right wing is filled by several small movements, led by the so-called 
"young reformers" who pursued Western monetarist policies during their 
various spells in government. These men, Anatoly Chubais, Yegor Gaidar, and 
Sergei Kiriyenko have found it hard to unite, and they may fall below the 5% 
barrier needed to get into parliament. 

On the centre-right are two groups. One is Our Home is Russia, led by Viktor 
Chernomyrdin, another former prime minister, who is chairman of the gas 
monopoly Gazprom. 

The second is Yabloko, led by Grigory Yavlinsky. It scored a coup last week 
when it was joined by Sergei Stepashin, the rightwing prime minister 
unexpectedly sacked by Mr Yeltsin earlier this month. 

Mr Primakov did not use the term "centre-left" on Saturday, preferring to 
describe the new alliance as one made of gosudarstvenniki or "advocates of a 
strong state". 

The movement's platform, outlining "One Hundred Laws for Russia", has a 
recognisable social-democratic content with its calls for a national minimum 
wage and the indexation of pensions. But it recognises how much the old 
system of free education and health care has collapsed. 

The platform calls for a major reduction of the president's power and a 
transfer of authority to a government reflecting the majority in the Duma, 
the lower house of parliament. It wants the constitution changed so that the 
president ceases to be the country's chief executive. 

An independent committee of doctors should be set up to decide when the 
president is unfit to go on serving. "A sick person is not always the best 
judge of his own health," the manifesto gingerly says. 

Many Russians are worried that Mr Yeltsin will never give up power for fear 
of seeing himself and his family prosecuted for corruption. The 
Fatherland-All Russia manifesto calls for a new law to guarantee the 
president's status after he leaves office. 

Mr Stepashin, Yabloko's new member, made the same point this weekend. "We 
must put an end to the tragic tradition of persecuting an outgoing head of 
state," he said. Threats would only trigger a "tough retaliation" from Mr 
Yeltsin, he added. 

******

#6
Scientist: Planet Hurt by Cold War
August 29, 1999

MOSCOW (AP) - On the 50th anniversary of the first Soviet atomic test, a 
prominent Russian scientist said Sunday that the arms race had left behind 
massive environmental damage that would take generations to repair. 

Soviet researchers carried out their first experimental blast on Aug. 29, 
1949, near the Semipalatinsk testing ground in what is now part of northern 
Kazakstan. 

The Cold War arms race ``has created environmental problems with which future 
generations will have to contend,'' said Alexei Yablokov, a member of the 
Russian Academy of Sciences and a former adviser to President Boris Yeltsin, 
now one of the country's leading anti-nuclear campaigners. 

``If the enormous human and material resources burnt in the furnace of the 
nuclear arms race had been spent on the solution of global problems,'' many 
of them could have been solved, Yablokov told the Interfax news agency. 

Soviet citizens living near the Semipalatinsk testing ground were exposed to 
dozens of above-ground tests, and these people and their descendants have 
suffered from extremely high rates of cancer, birth defects and other serious 
illnesses. Ecologists say there are several inhabited areas of Semipalatinsk 
that contain radiation levels unsafe for humans. 

Several churches held services in Semipalatinsk on Sunday to remember the 
people who died because of the testing. 

The Soviet Union, which dissolved in 1991, mounted its crash program to 
develop nuclear weapons after the United States used atomic bombs against 
Japan at the end of World War II in 1945. 

President Boris Yeltsin on Thursday praised the Soviet nuclear program, 
saying it had helped preserve world peace. 

``Half a century ago the selfless work of scientists, engineers, workers and 
military men created a strong foundation for Russia's nuclear shield,'' 
Yeltsin said in a message to the builders of the first Soviet weapon. 

``That was an event of historic significance, which played an extremely 
important role in maintaining durable peace on the planet,'' the message 
added. 

Nuclear weapons remain an important part of Russia's defenses, although many 
missiles are old and unsafe. 

The United States and Russia have both been reducing their arsenals in recent 
years, and each country now has about 6,000 strategic nuclear weapons. 

The START II arms control treaty, signed by both countries but ratified only 
by the United States, calls for the countries to cut their nuclear arsenals 
further to 3,000 to 3,500 warheads each. 

******

#7
The Times (UK)
August 30 1999 
[for personal use only]
Alarm in West as Russia is swept by drug-resistant TB
FROM MICHAEL BINYON IN MOSCOW

A DISEASE that once cut a swath through Europe's brightest and best is again 
laying waste to Russia. Tuberculosis, virtually eliminated a generation ago, 
has now infected at least half a million people, and threatens to spread from 
villages, prisons and ramshackle hospitals to the rest of the country. 

What is terrifying Western health officials is that a new form of the 
disease, resistant to modern drugs, is increasingly taking hold in Russia. 
Inadequate and primitive attempts to deal with the near-epidemic have merely 
boosted the prevalence of multi-drug-resistant (MDR) tuberculosis, especially 
in the fetid and overcrowded prisons. Within a decade, medical experts say, 
Russia could have two million almost incurable TB patients. 

The disease, principally incubated among the huge prison population of more 
than a million, is rapidly being spread by the release of 300,000 prisoners a 
year. Of these, about 10,000 are carrying MDR TB and each person passes on 
the disease to at least 20 others, health officials estimate. Sooner or 
later, Western health officials believe, TB will cross Russia's borders, 
putting all of Western Europe at risk. 

In June, Russia's partners in the Group of Eight decided the threat was 
serious enough to make it a priority for Western aid. Disease control experts 
have begun pilot programmes to look at new ways of identifying and isolating 
TB. Health officials have been seconded to Western embassies and 
non-governmental organisations have sent missions to Siberia to help to 
tackle the crisis in large, isolated cities that have neither the money nor 
expertise to control the TB outbreak. 

Britain is playing a leading role in these efforts. 

But there are formidable obstacles. The main one is bureacrats' reluctance to 
recognise the extent of the crisis. Since the collapse of the Soviet Union, 
health spending has plummeted to only half the sum in 1991 and the incidence 
of TB has more than doubled from 34 cases per 100,000 people to 78 per 
100,000. 

But officials refuse to abandon inefficient Soviet-era practices of general 
disinfectant and preventive measures for the cheaper and more specifically 
targeted anti-TB programmes now used by the World Health Organisation.Pride 
is preventing a change from public health edicts suitable for developed 
countries to those that would put Russia on a par with India and Africa. The 
other problem is the shortage of money and drugs. The TB bacillus must be 
tackled by a combination of three drugs; if only one is available, it 
survives and quickly becomes resistant. 

Many TB patients are put on courses of a single drug - with devastating 
effects. Their TB is not cured but develops into the MDR strain. All local 
officials can do for these patients is to isolate them and leave them to die. 

Worse still, conditions in prisons are so grim that prisoners are now trading 
their sputum, paying infected inmates to spit on them so that they will be 
moved to the more comfortable TB wards. 

"Maybe it would be better if we did not try to intervene at all," one British 
health official said despairingly. The Duma, alarmed by the figures, passed a 
Bill in April guaranteeing free medicine, separate housing and sanitary 
treament for TB patients. It also included clauses making treatment 
compulsory, so that courts can round up drunks, addicts and the homeless to 
enforce compliance. But there is no money to back up these proposals. 
Promises of medicine and better housing may, perversely, persuade many of the 
desperately poor to seek to become infected so as to better their lot. 
Western Europeans are watching the spread of the disease with alarm. "If TB 
is not tackled at international level now, it will become the major epidemic 
of the 21st century," said Dr Hans Kluge, regional TB coordinator of Médecins 
Sans Frontières. 

******

#8
The Electronic Telegraph (UK)
29 August 1999
[for personal use only]
Closed city keeps secret of glorious atomic past
By Alice Lagnado in Arzamas-16, Russia

THE architects of the Soviet atomic arsenal will spend this weekend, the 
50th anniversary of their first atomic test, contemplating their descent from 

fame and glory to a sorry, poverty-stricken existence.
The men who conducted the first Soviet atomic test on 29 August 1949 lived in 
luxury compared with the rest of the Soviet Union. Arzamas-16 is the jewel in 
the crown of Russia's 12 closed nuclear cities, and the place where Andrei 
Sakharov, the dissident physicist, developed the first hydrogen bomb in 1953. 
The hand-picked scientists working in the Institute of Experimental Physics 
within the 200km closed zone were hailed as heroes of the Soviet Union, seen 
as the great hope in the race for nuclear supremacy. They had the best food, 
the highest pay and the biggest apartments the Kremlin could give. 

That generation of top scientists now scrapes by on tiny pensions of as 
little as £10 a month. Their children have left Arzamas-16, or Sarov as it is 
now known, for better prospects in Moscow's sprawling suburbs 250 miles to 
the west. The few who remain feel utterly forgotten by the country that once 
adored them.

The plight of Mikhail Kvasov, 82, who took part in the development and 
testing of the Soviet Union's first atomic bomb, typifies that of the aged 
scientists who remain at the camp. His children are grown up and already 
retired themselves. He ekes out a living on a pension of 600 roubles (£15) a 
month. "I live on my rather symbolic pension. I feel that I am not needed by 
anyone," he said bitterly.

Mikhail Mokshennikov, 65, the head of the Institute's Testing Department, 
also took part in the first experiment. "I was a student and it was all new, 
secret and we didn't really understand what was going on," he said. "It was 
interesting work, but we got used to it and considered it normal." He would 
like to retire, but could not survive on his pension. "We don't like to 
complain, but we live like everyone else in Russia - with many difficulties. 
I have to work, because my pension is only 450 roubles (£10) a month and if I 
work I get 1,500 roubles (£37)," he said.

Another veteran of the first test, Grigory Tsirkov, 77, recalled it with 
enthusiasm. "The explosion was beautiful. It is the best memory of my life, 
and that was the best period of my life," he said. Mr Tsirkov was less 
forthcoming about his present situation, although he made it clear that he 
felt unhappy and unappreciated.

Arzamas-16 is a city of 85,000 near the Volga city of Nizhny Novgorod. For 
security reasons it is still not on Russian maps, and remains ringed by 
barbed wire fences. It enjoys a low crime rate - a rarity in modern Russia - 
because of the heavy security. The men who built Arzamas-16 were Soviet 
citizens who had been used as forced labour in Germany during the second 
world war. They had learnt how to build military test sites and factories, 
and when they were repatriated they were used to construct closed cities.

Sakharov described Arzamas-16 as a "symbiosis between an extremely modern 
scientific research institute, experimental factories, test sites and a large 
prison camp." 

As a young man Mr Kvasov watched the first Soviet atomic explosion standing 
about 20 miles away from it in Semipalatinsk, the nuclear testing site in 
Kazakhstan. In an interview with The Telegraph Mr Kvasov said: "It was the 
most wonderful experience. I felt cheerful and full of hope. The explosion 
was very bright - we had to wear dark glasses. We could not hear anything; 
after some time a blast wave came back to us and shook us, so that we 
couldn't go to sleep.

"We had laboured day and night, through the weekends, for this and we were 
seeing a result from our work, so naturally we were very happy. It wasn't 
frightening. Why should it have been? You may want me to say the bomb is 
something murderous, that it is anti-people, but that did not play a part; it 
did not even occur to us." 

Out of work there was little time to relax - and no female company. "There 
were no women in the explosion zone apart from one typist, and she was about 
55."

Vladimir Rogachev, the deputy director of the Institute, said that scientists 
were staying on despite the pay of £100 or less a month, he said: "People 
feel duty-bound to stay here and not to go abroad. And we are attracting 
young scientists without difficulty." He denied that representatives of rogue 
regimes had approached his scientists. He said: "We do not agree with Western 
theories that we have contacts with these countries."

His task is now to redirect scientific staff to new jobs not connected with 
nuclear science. The Institute eventually aims to send half of its 18,000 
staff to work in the energy sector, computing and ecological monitoring.

In an attempt to rally morale at the nuclear cities, Russian President 
Yeltsin last week spoke out. He said: "By their selfless labours half a 
century ago, our scientists, engineers, workers and military personnel laid a 
powerful basis for Russia's nuclear shield. In the most difficult conditions, 
in the shortest time, they succeeded in resolving a complex scientific and 
technical task - unlocking atomic energy."

Mr Yeltsin's sabre-rattling was echoed by Lev Ryabov, the First Deputy Atomic 
Energy Minister. Moscow must "keep its powder dry", he said, to counter 
America's bid to restart the "Star Wars" programme.

*******

#9
Sakhalin aims to be Asia's gas supplier
By Dmitry Zhdannikov

YUZHNO-SAKHALINSK, Russia, Aug 30 (Reuters) - The governor of Russia's remote 
Sakhalin island has a dream of building the country's first gas liquefaction 
plant, conquering the nearby gas markets of Asia and solving a permanent 
local energy shortage. 

But supporters of the project have yet to overcome a series of major 
obstacles, especially persuading foreign investors to join forces in 
developing six different oil and gas projects now being worked separately on 
the island. 

``With the construction of this plant Russia will move to an absolutely new 
level of technical development. It will give us the chance to sell 
competitive product to Japan, South Korea and China,'' governor Igor 
Farkhutdinov told journalists. 

FROM ONSHORE TO OFFSHORE 

Sakhalin was Russia's first oil producing region, with onshore output dating 
back to 1920. But as onshore reserves started to run dry, the island began 
exploring its offshore shelf and by 1970 had already attracted some funds 
from Japan. 

The first offshore fields were discovered between 1977 and 1979, but western 
and Japanese companies were reluctant to start work in the environmentally 
difficult region under legislation in force in what was then the Soviet 
Union. 

Galina Pavlova, head of the Sakhalin shelf development department, says the 
island's offshore fields are probably the hardest in the world to develop 
because of extreme ice hazards. 

``The ice lasts for six months of the year. But it is not stable, it drifts 
at up to three metres per second. Work is also complicated by regular 
earthquakes,'' she said. 

Western firms finally decided to start exploration in these harsh conditions 
in 1994, 20 years after the discovery of offshore oil and two years before 
Russia adopted laws on production sharing to provide guarantees to investors. 

Five years on, many of the giants of international oil, including Exxon, 
Mobil, Texaco, Royal Dutch/Shell and BP Amoco, have signed production sharing 
agreements with Russia and Sakhalin promising billions of dollars of 
investment. 

Encouraged by this, local authorities have decided to make Sakhalin a hub 
from which to expand into Asian markets. 

A liquefied natural gas (LNG) plant with a capacity of 10 million tonnes a 
year and oil and gas export terminals in southern Sakhalin are only some of 
the ambitious plans for the future. 

An LNG plant would not just be attractive because of export revenues it could 
bring to the Sakhalin budget. 

The local administration says the plant should be built in southern Sakhalin 
even though all gas fields are in the north. 

Gas from the fields would then be shipped by pipeline almost 1,000 km (620 
miles) across the island, to the port of Prigorodnoye some 60 km (37 miles) 
from the capital, Yuzhno-Sakhalinsk. 

This would allow Sakhalin to resolve a longstanding energy crisis by 
providing gas to almost 30 towns and industrial centres along the way which 
now use coal and fuel oil. 

It would also allow the island, which has to battle every year with Moscow 
over fuel deliveries, like many remote regions, to become more independent 
from the federal budget. 

The coming winter is already scaring local authorities, who fear protests 
from unpaid miners and electricity workers. 

THE GIANTS WAIT FOR NEW RUSSIAN PRESIDENT 

But of the six energy projects only one, Sakhalin II, which includes Royal 
Dutch/Shell, US Marathon and Japanese Mitsui and Mitsubishi, is now 
producing. 

It has already invested some $750 million in building Russia's first offshore 
platform and a storage tanker with capacity of one million barrels. 

The other international giants, which have waited for years for Russia to 
adopt production sharing agreements, are now waiting for the country's 
presidential election in the summer of 2000. 

``We want to see how the investment climate, which has never been very 
attractive in Russia, changes. We want real political stability and new 
protective laws before taking a decision to invest billions of dollars,'' 
said a Western oil company source. 

Farkhutdinov also admits that the current political and fiscal regimes do not 
encourage foreign companies and are delaying the creation of joint 
infrastructure for the LNG plant and oil and gas pipelines, in which reserves 
from at least three production projects must be involved if they are to be 
viable. 

He said Exxon, which operates the Sakhalin I project and has already invested 
some $350 million in exploration, has become more careful after last August's 
financial crisis and has cut substantially the investments planned for 1999. 

``We understand that investors are waiting for the results of parliamentary, 
presidential and gubernatorial elections. But on the other hand we cannot 
wait for ever. The foreign companies will simply have to join forces and act 
in accordance with our strategy,'' said Pavlova. 

The governor also urges participants in Sakhalin II to find potential buyers 
for their production right away, without waiting for progress at other 
projects. 

``We want Sakhalin II to start marketing gas immediately and to sign its 
first supply contracts by the end of the year,'' said Farkhutdinov, who 
expects the first cargo loadings in 2004-2005. 

But Sakhalin II, the pioneer of Sakhalin offshore development, does not seem 
likely to act on his proposals. 

``We have informed local authorities that we are not ready to invest in 
construction of the LNG plant and pipelines without the participation of 
other projects,'' said David Loran, Sakhalin II's regional manager. 

Victor Beghini, president of US Marathon, operator of the project, is more 
optimistic. 

``It is still theoretically possible to construct this plant by 2004-2005, as 
was proposed by the regional administration. But it seems premature to 
discuss concrete figures while other Sakhalin players don't have concrete 
plans,'' he told Reuters. 

THE SHADOW OF COMPETITORS 

The implementation of Sakhalin's ambitious projects is also complicated by 
other Russian plans to conquer the lucrative markets of East Asia, extending 
far beyond Sakhalin's aims. 

Russian gas giant Gazprom, the biggest gas producer in the world, two years 
ago came up with a plan to build a pipeline from its Siberian fields to China 
and on to Korea and Japan. 

According to Gazprom chief Rem Vyakhirev, the Chinese market could become the 
most attractive in the world, while European gas consumption remains stable 
or even declines. 

BP Amoco, which shares with the Russian company Sidanko the licence to 
operate a giant gas field near the border with China, is also eyeing the same 
market. 

The most difficult task for these big players now is to find some $15 billion 
to finance the projects and develop a gas market in China, which cannot yet 
consume large volumes of gas. 

``According to our sources, China and Japan will not develop a gas network 
soon but will consume liquefied gas,'' said Farkhutdinov, who still believes 
that the Sakhalin projects are ahead of their competitors. 

********

#10
St. Petersburg Times
August 27, 1999
NOTES OF AN IDLER
Capitol's Glitz Brings St. Pete Political Blitz
By Fyodor Gavrilov

THE last 10 days have been exhausting even for a die-hard political voyeur 
like myself. 

The political scene in Petersburg, normally quiet (except for the occasional 
burst of Kalashnikov gunfire), was suddenly blinded by the glitziest stars 
Moscow has to offer. Among them were the ex-premiers Chernomyrdin and 
Stepashin, former vice-premier Nemtsov, and the indefatigable leader of the 
democratic anti-Kremlin opposition: Yavlinsky. 

This exclusively male collective which, let's be honest, everyone is sick to 
death of, was livened up by Russia's only woman politician in the public 
arena, Irina Khakamada.

Events took place at a speed as yet unheard of in this city, and at least two 
of them were sensations: The block "Pravoe Delo," led by Anatoly Chubais, 
collapsed, only to turn into the "Soyuz Pravykh Sil" (Right Wing Union). At 
the same time, pacifist Yavlinsky joined forces with the mastermind of the 
Chechen War: General Sergei Stepashin.

Every one of these blocs deserves to be described in detail, but for now I'll 
just provide a few close-ups.

At present, four main political columns are on the march toward parliament. 
First, we have the movement Fatherland-All Russia, with the ambitions of 
Yevgeny Primakov and Yury Luzhkov driving the publicity engine, along with 
our own governor, Vladimir Yakovlev. To the left of Fatherland are the 
Communists and nationalists with their bloc, For Victory. (Which three 
leaders will take command is still uncertain, but we can expect one of them 
to be Gennady Zyuganov.) To the right of Fatherland is Yabloko, now with 
ex-premier Stepashin on board. Last is the liberal Right Wing Union. Recently 
the governor of Samara, Konstantin Titov, and his Voice of Russia joined the 
movement, and the talented but unpredictable economist Boris Fyodorov was 
replaced by the no-less-talented Sergei Kiriyenko as one of its three leaders.

In addition to these four blocs, there are a number of murky political 
figures who don't fit anywhere. First is "liberal democrat" Vladimir 
Zhirinovsky, whose popularity (in his role as the most theatrical of the 
anti-Communists) has been rising recently, notably in circles which not so 
long ago couldn't stand the sight of him. 

The phantom Our Home Is Russia of Viktor Chernomyrdin and his parliamentary 
warrior Vladimir Ryzhkov (a name to watch for, he has a future) will at best 
be a homeless shelter for a few governors who for some reason didn't join 
Luzhkov. Then there are the outsiders - a mishmash of a few ultra-left and 
ultra-right groups that didn't join Zyuganov's For Victory and will never 
unite.

As far as Fatherland-All Russia is concerned, their movement looks very 
stable when compared to the continual splitting-up and re-grouping of their 
competitors. According to various opinion polls, they command up to 40 
percent of the votes in St. Petersburg (Communists are at 18 percent, Yabloko 
15 percent and Right-Wing Union five percent). Note that all three leaders of 
this movement have announced that they have no intention of working in the 
Duma, and will only take fellow-thinkers with them - people totally unknown 
to the wider public. In other words, we have no way of knowing who is really 
behind this party of regional barons. For this reason, Yakovlev is an 
interesting figure. In 1996, he won the Petersburg elections as the protégé 
of Moscow politicians, among them Luzhkov, but unlike his patron he is a 
being without color or taste. A professional builder, Yakovlev has certainly 
built plenty of roads in his town, and everyone who owns a car loves him. But 
in the non-material sphere he has destroyed a fair amount too. In Russia, 
they call these sort of people "Centrists," for some reason.

Evidently, people have almost made up their minds as to how they feel about 
Duma elections in December, and we can now make a highly accurate prediction. 
I don't mean the number of votes each party will get. I mean something more: 
Economic market values will undoubtedly win three-to-one.

Individual freedom (as the West understands it) is set to lose by the same 
score. It's the fight to maintain this freedom that provides us with the real 
historical intrigue.

Fyodor Gavrilov is the editor of Kariera-Kapital.

******