September 10, 1999   
This Date's Issues: 3491 • 3492  • 

Johnson's Russia List
#3492
10 September 1999
davidjohnson@erols.co

[Note from David Johnson:
1. Bloomberg: Talbott on Money Laundering, Missile Treaty.
2. Reuters: Text of Russian PM's TV address on Moscow blast.
3. Itar-Tass: No State of Emergency in Russia, Opinion.
4. AFP: Security beefed up at Russian nuclear power stations.
5. Reuters: Yeltsin seeks cooperation with West on crime.
6. Business Week editorial: Banks Should Come Clean on Laundering.
7. The Russia Journal editorial: Not just Russian linen.
8. STRATFOR.COM: Checkmate Nears for Yeltsin.
9. Moscow Times: Steve Geiger, Who Does Oil Better? 
10. Boston Globe: Dave Montgomery, Islamic outsiders may aid Dagestan 
revolt.
11. Reuters: Russians rebuilding ``Eighth Wonder of World''. 
(Amber Chamber)
12. Washington Post: Nora Boustany, Lone Russian Wears a White Hat.
(Russia's new ambassador, Yuri Ushakov)
13. The Times (UK): Ian Brodie, Mafia may control Russian arms firm.
14. Los Angeles Times: Richard Paddock, Russian Intrigue Continues as 
Prosecutor's Homes Searched.] 

******

#1
Talbott on Money Laundering, Missile Treaty: Comment

Moscow, Sept. 10 (Bloomberg) -- U.S. Deputy Secretary of State Strobe
Talbott completed talks in Moscow yesterday on the 1972 Anti-Ballistic
Missile Treaty. 

His visit came as U.S. investigators are studying allegations of Russian
money laundering through U.S. banks, including the Bank of New York Co. 

The following are Talbott's comments in an interview with Russian daily
Vedomosti: 

``My visit was not connected with the'' money laundering allegations,
Talbott said. ``U.S. Attorney General Janet Reno will come to Moscow in
October, around the thirteenth, to discuss crime at a G-8 meeting. 

``I don't see anything in Russia's political situation that scares me.
It's your process. We shouldn't interfere. We should conduct all important
business with any president which you choose. Since they met in Vancouver
in the spring of 1993, President (Bill) Clinton and President (Boris)
Yeltsin did many important things together. Clinton's term is ending not
much later than Yeltsin's term. There were times with U.S.-Russian
relations were tense in the past years. The crisis in the Balkans is one of
the reasons for worsening relations between the U.S. and Russia. We came
out of those tests perhaps more strong. Now we have other problems. I'm
holding talks here in Moscow on the very important issues of strategic
nuclear relations between the U.S. and Russia. 

``Corruption and crime also concern us. Because if we don't control this
process, then Russia's economy and the legitimacy of Russia's system of
government is put in doubt. One of the striking things we have heard from
many Russian leaders is that they say they see the problem and are
determined to solve it. We are prepared through Janet Reno to work with
them to solve the problem. 

``Strategic weapons control is in the interests of both the U.S. and
Russia. Our many years of work of reducing nuclear weapons is one of the
most important issues of this administration and will also likely be as
important for the next president, whoever it may be. We ratified START-2
and we hope the Russian parliament will do the same. By the way, we respect
the process in your parliament and we expect Duma deputies will ratify the
START-2 Treaty only when they understand that its necessary for both our
countries. We are anxiously waiting for the ratification of START-2 to
begin talks on START-3 which will include further and greater cuts in
nuclear weapons. 

``We don't want to break the Anti Ballistic Missile Treaty. That agreement
is a foundation for ensuring international security. But the agreement went
into effect in 1972, that's 27 years ago. The world has changed a lot since
then. In its original form, it was meant to regulate strategic nuclear
relations between the U.S. and USSR. But the Soviet Union no longer exists.
Russia exists and it has its own defense interests. There are other new
factors, such as the proliferation of the technology for produce ballistic
missiles in governments which could threaten both the U.S. and Russia. The
issue which our leaders will address in coming months is whether
maintaining the importance of the agreement can be combined with the new
reality of proliferation. I think, as well as President Clinton, Secretary
of State (Madeleine) Albright and Defense Secretary (William) Cohen, the
answer to that question is yes.'' 

******

#2
Text of Russian PM's TV address on Moscow blast

MOSCOW, Sept 10 (Reuters) - Russian Prime Minister Vladimir Putin said on
Friday criminal negligence or a terrorist bomb destroyed a Moscow building
killing at least 74 people. 

The blast followed a similar explosion last week which ripped through an
elegant shopping mall in central Moscow, killing one person and injuring
dozens. 

The blasts have coincided with fierce fighting between Russian troops and
separatist guerrillas in the southern republic of Dagestan. 

Following is the text of his rare television address (translated by Reuters): 

``We have just finished a meeting with the heads of the power ministries
and the mayor of the capital. We discussed the situation in Moscow after
the explosion in Manezh square and on Guryanov Street. We also discussed,
of course, the explosion in (Dagestan's) Buinaksk. 

``The death of people is always a tragedy, no matter what the cause of
death was. I have spoken with the president, on Monday a day of mourning
will be declared in Russia. 

``Disaster always unites. I have no doubt that the federal organs of power,
the organs of power in the capital and also in other regions of the Russian
Federation will do all they can to ensure discipline, order, to guarantee
the maximum safety of our citizens. 

``Experts will draw conclusions on what has caused the blast, whether it
was negligent, criminal manipulation with an explosive or it was a
terrorist act. If it was a terrorist attack then we are facing a cunning,
impudent, treacherous, bloodthirsty opponent. 

``In the course of history, there have been many attempts to force Russia
to kneel down and be intimidated, but it never worked. I am confident
nobody will succeed this time either.'' 

******

#3
No State of Emergency in Russia, Opinion.

MOSCOW, September 10 (Itar-Tass) - Chairman of the Federation Council upper
house of Russian parliament committee for constitutional legislation and
legal affairs, Sergei Sobyanin believes there is no chance of the state of
emergency being introduced over the latest tragic events in Russia, even
though a number of politicians and the media continue talking about it. 

Asked by Tass whether combat operations in Dagestan and explosions in
Moscow and in other places may become the pretext for clamping down the
state of emergency and calling off elections in Russia to the State Duma
lower house of parliament, Sobyanin said that the Russian president and
government, without infringing laws, have enough power and opportunities
for more decisive protection of peaceful population in Dagestan against
band formations and for ensuring law and order and security in the capital. 

The senator believes that the elections to the Duma should be held within
the timeframe stipulated by law. He believes that calling off the elections
would amount to the violation of citizens' constitutional rights and would
damage the country's prestige. "This is not to be permitted," Sobyanin said. 

Regarding the situation in Karachayevo-Cherkessia, he believes it is
"complicated but not hopeless". In order to prevent the emergence of a new
trouble area in the Northern Caucasus, the federal authorities should
participate more vigorously in the settlement and easing of tension in the
republic, Sobyanin believes. All the actions taken there to establish peace
and tranquility must be based on law. 

He said the federal authorities should conduct the negotiating process
between the opposing sides on the basis of the Constitution and
preservation of Russia's integrity. He called on "politicians competing for
power in the republic to come to realise that common human values -- peace,
worthy life, and tranquility of everyone -- matter more than 
their personal ambitions". 

*******

#4
Security beefed up at Russian nuclear power stations

MOSCOW, Sept 10 (AFP) - Security at Russian nuclear power stations has been
heightened due to the growing threat of terrorism, the deputy minister of
the atomic energy ministry, Yevgeny Fyodorov, said Friday.
"The protection and defense of the perimeter of nuclear installations has
been strengthened," said Fyodorov in an interview to Echo Moscow radio. 

Prime Minister Vladimir Putin earlier approved a plan to bolster security
across the country and notably in Moscow during a meeting with security
chief Nikolai Patrushev.

A blast demolished an apartment block in the southeast of Moscow Thursday,
killing 82 in the worst explosion in the Russian capital. 

******

#5
Yeltsin seeks cooperation with West on crime

MOSCOW, Sept 10 (Reuters) - President Boris Yeltsin, stung by media
allegations of corruption in his circle, wants Russia to step up
cooperation with Western countries on fighting organised crime, the Kremlin
said on Friday. 

Yeltsin has ordered Prime Minister Vladimir Putin and other senior
ministers to look into why Russia has still not signed European conventions
``of an anti-criminal nature'' or joined an international commission
fighting money laundering, it said. 

``The president...has expressed dissatisfaction with the (present) state of
affairs,'' said a Kremlin press statement. 

Yeltsin has also ordered his representatives in the two houses of
parliament to give top priority to securing Russia's ratification of
European conventions on cooperation in the fight against crime. 

The move comes amid growing Kremlin unease about allegations made in a
number of Western newspapers about corruption in the higher echelons of the
Russian state. 

The Kremlin has denied a report in Italy's Corriere della Sera newspaper
that Swiss firm Mabetex paid $1 million into a Budapest bank for Yeltsin
and paid credit card bills for the Russian leader and his two daughters. 

Russian officials have also denied allegations by several U.S. newspapers
that Russian businessmen and senior officials may have laundered billions
of dollars, including loans from the International Monetary Fund, through
the Bank of New York. 

U.S. and British prosecutors have launched an investigation. The IMF is
examining the claims but says it has no evidence that its money went
astray. The Bank of New York is cooperating with the prosecutors' probe and
is not accused of any wrongdoing. 

On Wednesday Yeltsin told U.S. President Bill Clinton in a telephone
conversation that the allegations made against him, his family and
administration were untrue. 

Yeltsin repeated the view of many Russian officials that politics was
driving the scandals. Both Russia and the United States face presidential
elections next year and Russia also elects a new parliament this December. 

Russia will send a team of senior law enforcement officers to Washington on
September 13 to confer with the FBI and other U.S. authorities on the
money-laundering probe. 

Yeltsin also told Clinton he had refused to sign a bill passed by
parliament on money laundering because it contradicted the Russian
constitution. He said he was ready to sign a revised bill dealing with the
issue. 

The financial scandals are expected to be on the agenda when Clinton meets
Putin at an Asia-Pacific economic summit this weekend in New Zealand.

*******

#6
Business Week
September 20, 1999
Editorial
Banks Should Come Clean on Laundering

The Russian money-laundering story is a scandal in more ways than one. It is 
a failure of federal law, government regulation, and bank self-discipline. 
The advent of high-speed electronic wire transfer systems that move trillions 
of dollars every day make the policing of money laundering more difficult, 
but not impossible. Banks shouldn't hide behind technology to excuse illegal 
behavior.
The truth is that commercial banks find the business of moving money 
around the world for high-net-worth individuals extremely profitable. They've 
been in it for decades. Some banks even have a history of working with U.S. 
intelligence agencies to move money quietly. Countries with poor economic 
policies often experience capital flight, and banks have been there to 
facilitate the transfer. In the process, legal and illegal monies often get 
commingled, which appears to be the case with Russia. Back in the '70s and 
'80s, hundreds of billions of dollars left Latin America for the U.S. and 
Europe through commercial banks. They know how to do it.
They therefore know how to stop it. Certainly federal law needs updating. 
Money laundering laws cover only six foreign crimes and need to be broadened. 
Regulators have to better monitor the flow of electronic funds through wire 
systems as well. But banks bear the major responsibility. Bank of New York 
clearly courted Russian capital fight by employing people connected to that 
country's new political and financial elite. When a torrent of tens of 
billions began pouring out of Moscow, BONY should have surmised that a 
portion of that flow might be illegal. The bank should have called in the 
feds. Instead, it appears that a competitor in the business of moving money 
for the world's rich, Republic National Bank of New York, blew the whistle.
Money laundering is a gray area of global banking. But bankers have been 
operating in these shadows for a long time. They should know right from wrong.

*******

#7
The Russia Journal
www.russiajournalcom
September 6-12, 1999
Editorial
Not just Russian linen

The Western media, banking institutions, international monetary organizations 
and even the U.S. Congress are in a storm over Russian corruption and 
money-laundering allegations.

As details of more transactions involving capital flight and money laundering 
through transfer pricing, asset stripping and offshore invoicing come under 
public scrutiny, the world is questioning the whole issue of Russia's reform 
and the West's support over the past 10 years.

Russian corruption and capital flight, as everyone knows, is nothing new.

The breakup of the Soviet Union in 1991 also broke down barriers around local 
Party bosses and their appointed directors of Russian oil, metal and gas 
companies as well as "speculators"-turned-businessmen. These characters used 
each other to the hilt to fill their own coffers - but not without the help 
of willing international companies and banks.

But one should also remember that trillions of dollars in Swiss banks did not 
get there from the export of milk and cheese alone. The Bahamas and Cayman 
Islands, which house banks and finance companies hiding billions from 
national taxes, are not Russian protectorates. And closer to home, Cyprus was 
a favorite spot for the English, German and Lebanese rich before Russians 
even knew it existed. That much-tainted island was home to more than a dozen 
Lebanese/Arab offshore banks before the first Russian bankers set foot there.

U.S. banks were being fined even as late as the 1980s for failing to report 
billions of dollars of transactions in violation of regulations devised to 
curb money laundering by home-grown organized criminal groups. Reports emerge 
almost monthly - even now - of Wall Street's penetration by Italian mob 
syndicates.

Russians may have invented many things, but money laundering was not one of 
them, although they did prove to be quick learners.

By 1995, Russian organized crime was not just in the business of protecting 
and extorting, but running massive export, import and distribution 
operations. Next to the state and its organs, which were thoroughly corrupt, 
only organized gangs had the connections and manpower to recruit and run 
trading operations from various locations. Highly specialized Western 
merchants moved millions of tons of goods out of Russia into international 
markets. There was hardly an international trader in metals, chemicals, oil, 
precious metals and a hoard of other raw materials who did not buy from this 
new class of Russian traders, paying into offshore accounts, which their 
employees set up for their Russian clients as well as themselves.

And hardly a single bank refused a Russian customer, whether corporate or 
individual, on the grounds that the money might not have been clean. The same 
banks' analysts now scream loudly about $60 billion to $130 billion having 
been laundered from Russia. They would do well to add a footnote - it wasn't 
taken out in socks and panties. Western banks helped wash Russian money 
abroad and they have been as much beneficiaries of the loot as Russian 
officials and mobsters.

Money laundering and the siphoning-off of Russia's assets should serve as an 
indictment of the international financial and banking system. The fight 
against Russian corruption, if taken off political agendas, must extend 
deeply into the acts of some very respected people in some very respected 
institutions - and on both sides of the Atlantic.

But no one believes the Russian state has the will or the power to fight 
corruption. The system cannot fight corruption because the system itself is 
corrupt. The system cannot fight the Mafia because the Mafia is the system. 

If and when there is a will to do something, the government would do well to 
legitimize money siphoned abroad, giving a tax amnesty to all those who have 
profited from any enterprise in the last decade unless that enterprise 
happens to be a criminal one. 

As for the Western banks, they are doing what they do best: pumping money 
around the globe and making profits in the process. To fire a few employees 
of one bank will not change anything. When Western central banks and 
governments become serious about not helping corrupt leaders of foreign lands 
wash their money, they can do it in no time and without much fuss.

******

#8
STRATFOR.COM
Global Intelligence Update
September 10, 1999

Checkmate Nears for Yeltsin

Summary: 

Russian President Boris Yeltsin has now been directly
implicated in one of several corruption scandals currently
engulfing the Kremlin. Despite rumors, Yeltsin is unlikely to
resign from office over the scandals, retaining presidential
immunity. This immunity will soon evaporate, however, with
presidential elections scheduled for next May, leaving him three
choices - flee the country, choose a sympathetic successor, or
declare a state of emergency, canceling the elections. The latter
would provide the ultimate justification - in Russia and abroad -
for his removal and the purge of his allies.

Analysis:

Amid a storm of scandals engulfing his administration, Russian
President Boris Yeltsin has long been suspected of being personally
involved in illegal activity. His presumably biased Russian
political foes have accused Yeltsin of wrongdoing, leaving rumors
to float freely in international circles. But now, according to the
September 8 edition of the Washington Post, Swiss investigators
have directly linked Yeltsin to one of the burgeoning number of
Russian corruption scandals - to the tune of $1 million. The Post
cited law enforcement authorities investigating the Mabetex scandal
as alleging the Swiss construction firm provided credit cards for
Yeltsin and his two daughters, backed up by $1 million deposited in
a Hungarian bank account. Yeltsin himself reportedly denied the
allegations during a September 8 telephone conversation with U.S.
President Bill Clinton.

For the time being, the alleged bribe is less important than the
fact that Yeltsin has been unambiguously linked to the scandal.
Already most of the group of close Yeltsin advisors, senior
administration members and supporters collectively known as the
"Family" are under investigation for alleged involvement in one or
more of the major scandals now facing the Kremlin 
[ http://www.stratfor.com/SERVICES/GIU/090299.ASP ]. These include
allegedly laundering billions of dollars - some possibly from IMF
loans - through New York banks, using IMF funds for international
currency market speculations, skimming profits from the state
airline Aeroflot, and accepting bribes from Mabetex.

The Russian officials, their family members and friends under
investigation now number nearly 800. Moreover, investigators are
reportedly uncovering links between the scandals, effectively
painting the whole Yeltsin administration as one boundless
kleptocracy. With Yeltsin himself under investigation, the question
immediately rises, will he remain in office for the duration of his
term and if so, what then?

Yeltsin has a few options - none of them good. He is unlikely to
step down before the end of his term. Under the Russian
constitution Yeltsin is immune from prosecution as long as he
remains in office. In addition, retaining the presidency keeps
levers at his disposal with which he can interfere in the
investigations. He has already apparently used those levers,
attempting to dismiss Prosecutor General Yuri Skuratov and
"reassigning" investigator Georgy Chuglazov just before he was to
travel to Switzerland to review evidence in the Mabetex case. The
Duma could attempt to impeach Yeltsin, but the Duma's previous
failed attempt took 10 months from initial discussion to final
vote. With Duma elections slated for December and presidential
elections scheduled for next May, there is little time for formal
proceedings.

Assuming Yeltsin has no desire or intention to submit himself for
prosecution, he has three options before next year's presidential
election. He can flee the country - a risk with no guarantees,
considering the Russian security services. The security apparatus
is apparently fueling these scandals and would no doubt be watching
for such a move.

Alternately, he could attempt to affect the election of a
sympathetic successor who might theoretically protect him once his
immunity ends. Yeltsin's ability to pick his successor, however,
has been eroded by Russia's dismal economic situation and the
snowballing scandals. Public support from Yeltsin is generally
considered to be a political kiss of death.

Moreover, he will be tempted to try to cast the blame on others in
order to shake off the scandals and regain the ability to influence
the vote in his favor. He will most likely point to the Family
itself. Kremlin property manager Pavel Borodin is a leading suspect
in the Mabetex scandal, and thus a possible target for redirected
recrimination. Presidential Chief of Staff Alexander Voloshin is
another potential scapegoat, with rumors already floating in Russia
that he is due to lose his job.

The problem with this strategy is the possibility of Family members
striking back, especially if they feel taking the blame is more
than a mere formality. When oligarch Mikhail Khodorkovsky began to
take heat for the Bank of New York money laundering allegations, he
quickly suggested that the money transfers could have been an
attempt by Russian leaders to save their personal fortunes in
advance of economic collapse. This allegation fed a new
investigation of some 780 Russian officials - including Anatoly
Chubais - for possible illegal insider trading of government
securities.

Unable to flee or to ensure his security through a loyal successor,
Yeltsin is left only with "extra-constitutional" measures with
which to attempt to save himself. His political foes have already
warned that Yeltsin could attempt to use the conflict in Dagestan
or bombings in Moscow as justification for declaring a state of
emergency and indefinitely postponing the December Duma and/or the
May presidential elections.

This may be just what those in the security apparatus have in mind.
Rather than take extra-constitutional steps of their own against
Yeltsin, they may simply let him bring himself and his allies down.
In the short term, Yeltsin and the Family are consumed with the
allegations, unable to do much beyond look to their own survival.
This hands control of domestic issues to those in the
administration outside Yeltsin's inner circle and untainted by the
scandals, notably Prime Minister Vladimir Putin, Defense Minister
Igor Sergeyev and Interior Minister Vladimir Rushailo.

Additionally, Yeltsin's foes can only benefit by letting the Family
publicly feed on itself. Not only are the scandals fully
discrediting Yeltsin and the Family, but also Yeltsin's allies in
the West, who for their own reasons are downplaying the
allegations. The West is being accused of contributing to and
benefiting from the Yeltsin regime's corruption, while
simultaneously abandoning him and attempting to demean Russia by
spreading allegations of corruption.

What has emerged is a picture of a duplicitous West and its
thieving cronies in the Kremlin. Yeltsin is unable to protect
himself constitutionally past the presidential elections next May.
His few interim options are self destructive, further discrediting
the Family and his Western allies. All that remains, short of
fleeing in the night or surrendering to prosecution, is to cancel
the elections. This attempt to circumvent the constitution would
provide the final justification - in Russia and abroad - for
whatever steps are subsequently taken to remove Yeltsin from
office. Checkmate.

*******

#9
Moscow Times
September 9, 1999 
Who Does Oil Better? 
By Steve L. Geiger 
Steve L. Geiger is a nine-year veteran of the Russian oil industry and a
consultant to Anglo Petroleum & Mining, a U.K.-based energy advisory group.
He contributed this comment to The Moscow Times.

On Thursday the creditors of Sidanko subsidiary Chernogorneft will decide
the fate of the restructuring plan advanced by Sidanko and its shareholder
BP Amoco. Meanwhile, rival Tyumen Oil Company, or TNK, - whose board
chairman, Leonid Roketsky, is also the Tyumen Region's acting governor - is
vigorously pursuing a bid to block the settlement by buying the
subsidiary's debt. 

According to TNK, this is because it can manage the oil asset better than
BP-led Sidanko, so everyone will benefit. As TNK President Simon Kukes in a
recent interview stated: "Western managers cannot manage Russian [oil]
enterprises." While such a statement itself is curious coming from a person
with more than 85 percent of his own career spent as a Western manager in
Western companies, it does raise two fundamental questions: Who can better
run Chernogorneft, and is that really even the issue? 

To answer the first, one needs to examine why Sidanko and its subsidiaries
are bankrupt. Was it because BP (pre-Amoco), with only a minority 10
percent, non-decision making share, drove the company to disaster? Or
rather because the Russian Uneximbank-controlled Interros group, with its
controlling interest, and subsidiary management (again Russian), took on
large debts at a time of declining cash flows? There is no doubt that it
was the latter. 

Yes, BP was naive in assuming that a 10 percent shareholding plus a few
powerless Western managers - who were actually observers - could turn the
tide at Sidanko. Yes, BP could have done more to find Russia-experienced
managers rather than simply relying on its own staff. And yes, BP now
painfully realizes that without actual control any shareholding in a
Russian company is worthless. 

The real issue here was lack of control - not nationality of management,
as TNK's Kukes believes. And BP Amoco's restructuring plan, as approved by
Sidanko creditors on July 16, provided not only for paying down debts and
injecting new capital, but for BP Amoco to assume actual operational
control and financial responsibility. 

Can TNK run Chernogorneft better? Put another way: Can a three-year-old
company of limited resources really outperform BP-Amoco and its
century-long track record of successfully managing operations in more than
100 countries - just because TNK is owned and managed by locals? The
argument is weak and evidence exists to the contrary. 

Take, for example, Chevron's Tengizchevroil joint venture. Located in
isolated northwest Kazakhstan and lacking major export pipeline routes,
this Western-controlled company has nevertheless succeeded over the past
six years in increasing crude output from 1.1 million tons per year to more
than 10 million tons per year, a whopping 900 percent increase. Equally
important to note is that even six years on, most key management positions
are still held by expatriates. This suggests that when Western oil majors
gain real control, they can be far better equipped to improve mismanaged
assets than local oil groups. 

But this brings us to our second question. Who can run Chernogorneft
better is not the real issue here. The reality is that this just seems to
be another attempted asset-grab, Russian-style. 

The real issue is the damage that will be done to the domestic oil
industry and the nation itself if BP-Amoco is unable to defend its
interests in Russia. Make no mistake: This is a litmus test for Western
investment in Russia. If one of the world's most powerful and influential
companies, despite intervention by the prime minister of Britain and the
president of the United States, can be abused and stripped of its
investments here, then Russia is off-limits for all reasonable investors.
The ensuing damage to the Russian economy, budget and work force will far,
far outstrip any potential gain from TNK's allegedly superior management. 

A final issue is whether the U.S. Eximbank and the U.S. taxpayer should be
facilitating TNK's attempt to wrest Chernogorneft away. TNK requires
massive investment just to preserve its own production facilities. By
providing guarantees of $200 million for TNK's Ryazan refinery upgrade and
$300 million for TNK's Samotlor oil field, U.S. Eximbank is effectively
financing TNK's hostile bid for Chernogorneft. 

Additionally, TNK is piling up debt at an alarming rate and risks default
at the next downturn of oil prices. Is this really the kind of activity
that the U.S. Eximbank wants to support - particularly given the tens of
thousands of American jobs that will be lost if Russia becomes a long-term
pariah for foreign investment? Remember that by some estimates the August
1998 crisis cost 20,000 American jobs in Moscow alone. 

This is why the outcome of Chernogorneft matters. Will it be Russian
business-as-usual? Or can some small modicum of legitimate business rights
be successfully defended and a positive precedent set for Western
investment in Russia? That the Russian government is too weak to ensure a
legitimate outcome is already a tragedy; that American governmental
agencies and U.S. taxpayer dollars are facilitating this is simply
inexcusable. 

********

#10
Boston Globe
9 September 1999
[for personal use only]
Islamic outsiders may aid Dagestan revolt 
By Dave Montgomery, Knight Ridder

MOSCOW - The war unfolding in the province of Dagestan is being waged by a 
well-trained international Islamic force of more than 10,000 that has been 
planning the insurgency for more than a year, apparently with the support of 
the fugitive Saudi millionaire Osama bin Laden, according to military and 
antiterrorism experts.

A top antiterrorism adviser to the US Congress said the insurrection is 
supported by Islamic militants in several countries, including Afghanistan, 
Pakistan and Sudan, and appears to be heavily financed by bin Laden, whom the 
United States has accused of orchestrating the US Embassy bombings in Kenya 
and Tanzania last year.

''They're thinking about starting the whole Caucasus aflame,'' said Yossef 
Bodansky, director of the Task Force on Terrorism and Unconventional Warfare 
for the US House of Representatives, who said his information is based on 
what he termed reliable confidential sources. ''It's a nasty bunch.''

Said Sergei Arutyunov, one of Moscow's leading scholars on the North Caucasus 
region, ''Bin Laden aspires to the world domination of Islam. These people 
are now pulling the strings to what is happening in the Caucasus.''

The insurrection began Aug. 7 as Islamic guerrillas crossed into Dagestan 
from neighboring Chechnya, seizing several villages. Russian forces claimed 
to have the invaders on the run after two weeks, but the conflict erupted 
again over the weekend. Hundreds of insurgents poured back into Dagestan and 
a car bomb devastated an apartment complex, killing more than 60.

The insurgents' stated goal is to carve an independent Islamic state out of 
Chechnya and Dagestan, on the western side of the Caspian Sea. A number of 
experts say the war is part of a broader crusade to destabilize the oil-rich 
Caspian region.

Far from being a ragtag group, Bodansky said, the insurgents are a 
multinational force of more than 10,000 disciplined and well-armed fighters 
who began training months ago at secret bases in Chechnya and Islamic 
countries that include Pakistan, Sudan and Afghanistan.

Many are veterans of the 1994-96 conflict in Chechnya. The principal field 
commanders are Shamil Basayev, who led the victorious rebel forces in that 
war, and Khattab, a Jordanian of Chechen descent who is a leader of the 
militant Wahhabi movement. Bodansky asserted that hundreds of subcommanders 
are also knowledgeable about terror tactics, bomb making and the use of 
biological weapons.

Bodansky said the force includes fighters from Pakistan, Egypt, Afghanistan 
and other Islamic countries, many of them members of the Mujahideen who 
battled Soviet forces in Afghanistan from 1979 to 1989.

Russia, which will soon reinforce its 15,000 troops in the troubled North 
Caucasus region, thus finds itself mired in a crisis that many analysts said 
could be even worse than its disastrous war in Chechnya, which cost Russia 
tens of thousands of lives.

''It seems they have a war right now that seems unwinnable, and it's going to 
drag on for months and years,'' said a Russian military analyst, Pavel 
Felgengauer.

Bodansky, who is a recognized specialist on bin Laden, described the Saudi as 
''a spiritual leader'' behind the insurrection. He said bin Laden had been 
involved in planning discussions that began in spring 1998 and involved 
militant Islamic movements in at least three other countries.

Other participants, Bodansky said, included Basayev and his forces in 
Russia's breakaway republic of Chechnya, high-ranking officers in Pakistani 
intelligence and Husan Turabi, leader of Sudan's National Islamic Front.

Afraid of arrest if he left Afghanistan, bin Laden, an heir to a Saudi 
construction fortune, communicated through secret emissaries to arrange 
financing, training and arms shipments, Bodansky said.

Ben Venzke, a senior consultant with Pinkerton Global Intelligence Services 
in Arlington, Va., said the fugitive millionaire has been ''actively 
soliciting funds'' through a clandestine e-mail network to finance the 
insurgents in Dagestan.

Bin Laden also made a weeklong visit to a training camp in Chechnya shortly 
before the rebels crossed into Dagestan, Venzke said. The camp trains up to 
100 fighters at a time, he said.

Arutyunov said the international fundamentalist groups began targeting 
Dagestan because economic instability has increased resentment toward Moscow.

Arutyunov said the rebels ''are very well armed'' with antitank weapons, 
Stinger missiles, heavy mortars and armored cars.

After training outside Russia, Islamic fighters were often smuggled into 
Chechnya through Azerbaijan, Bodansky said.

He said two new clusters of training facilities have just opened in southern 
Chechnya that ''are extremely worrisome.''

*******

#11
Russians rebuilding ``Eighth Wonder of World''
By Gareth Jones

TSARSKOYE SYELO, Russia, Sept 10 (Reuters) - Russia's Amber Chamber was
known as the Eighth Wonder of the World until the Nazis carted it off to
Germany during World War Two. 

More than half a century later, the famed gleaming panels of ``northern
gold'' are still missing but Russian craftsmen are rushing to rebuild the
room in all its original Baroque splendour, with a little help from the old
enemy. 

Russia's cash-strapped Culture Ministry has just signed a funding deal
worth $3.5 million with Germany's Ruhrgas AG to help speed up and complete
the reconstruction of the chamber. 

Housed in the Yekaterinsky Palace outside Russia's former imperial capital
of St Petersburg, the room is meant to be completed by 2003, the 300th
anniversary of the city's founding. 

``The Amber Room is one of the great monuments of world culture and also a
symbol of the huge cultural losses suffered by Russia during World War
Two,'' Culture Minister Vladimir Yegorov told reporters before this week's
signing ceremony. 

``This agreement (with Ruhrgas) is a pioneering project for German and
Russian relations,'' Yegorov said. 

AMBER CHAMBER MIRRORS COMPLEX RUSSO-GERMAN RELATIONSHIP 

The chamber, which covers 100 square metres (1,080 square feet) and was
inlaid with six tonnes of exquisitely crafted amber and Italian mosaics,
closely mirrors the tumultuous history of relations between Russia and
Germany. 

Built by German craftsmen, the original Amber Chamber was sent as a gift to
Russian Tsar Peter the Great from Prussia's King Frederick William I in 1716. 

Peter's daughter, Tsarina Elizabeth, later had the room assembled in her
newly built palace in the village of Tsarskoye Syelo, 24 km (15 miles)
south of St Petersburg, where it remained until the German army invaded
Russia in 1941. 

The Russians managed to rescue many of the precious furnishings from the
room, including amber jewellery boxes and tables, but the Nazis seized the
panels and shipped them off in 27 crates to the German city of Koenigsberg
in East Prussia. 

The Amber Chamber was last seen in 1945, shortly before advancing Soviet
troops took Koenigsberg and renamed it Kaliningrad. It remains a Russian
city to this day. 

Both Russians and Germans have spent decades searching for the chamber.
Some experts believe it was destroyed by bombs in 1945 but many more think
its panels were hidden, perhaps in a mine or underground bunker. 

Two years ago, German police found a mosaic belonging to the Amber Chamber
but nothing more has since come to light. 

RESTITUTION OF LOOTED TREASURES STILL A THORNY ISSUE 

If the panels were ever found, they might well reignite simmering tensions
between Moscow and Berlin over the restitution of a large number of looted
artefacts. 

The Amber Chamber tops Russia's list of treasures missing because of the
Nazi occupation but Germany is equally keen to retrieve valuable items
seized by Soviet troops in 1945. 

These include French Impressionist paintings, drawings by Rembrandt, a rare
Gutenberg Bible and gold artefacts believed to be from the ancient site of
Troy. 

Germany was dismayed by a recent ruling by Russia's Constitutional Court
upholding Moscow's right to hold on to treasures taken from Nazi Germany.
The same ruling acknowledged the right of Allied governments and victims of
Nazism, such as Jewish collectors, to reclaim their property. 

President Boris Yeltsin has criticised the Constitutional Court's ruling,
saying it would complicate Russia's own efforts to retrieve thousands of
artefacts still held abroad. 

But the Russians have long despaired of ever finding, let alone
repatriating, the Amber Chamber panels. 

RUHRGAS CASH GIVES BIG BOOST TO RECONSTRUCTION EFFORT 

As long ago as 1979, the then Soviet government took the decision to
rebuild the chamber at Tsarkoye Syelo with the help of photographs of the
original taken before the German invasion. 

Over the past 20 years the Russian craftsmen have been able to reconstruct
about 40 percent of the chamber using amber mined from the Yantarny
district near the Baltic Sea. 

But the project has been dogged by financial difficulties since the fall of
the Soviet Union in 1991 and so the Ruhrgas sponsorship has come as a
godsend. 

``We need another four tonnes of amber to complete the room. The money from
Ruhrgas puts us back on track to present the new Amber Room as a gift to St
Petersburg in 2003,'' said Boris Igalov, who heads the team of 30 restorers. 

The money will help buy the amber and pay workers' wages. 

Yeltsin has signed a decree exempting Ruhrgas's donation from onerous taxes
and customs duties. 

The donation is one of the biggest by a private company in Russian history
and partly reflects Ruhrgas's own close links with the country, where it
owns a stake in Russia's natural gas monopoly Gazprom. 

Ruhrgas's Chief Executive Friedrich Spaeth dismissed a reporter's
suggestion that the donation had anything to do with German guilt for the
devastation wrought by the Nazis in World War Two, when an estimated 28
million Soviet citizens perished. 

``With this donation we want to look to the future, not back to the past,''
he said. 

``After all, the Amber Room is a wonderful symbol of a time when friendship
between Russia and Germany was an example to the world,'' he said,
referring to the era of Peter the Great. 

Spaeth also shrugged off a suggestion that money allocated to the project
might be siphoned off by corrupt bureaucrats. The signing of the Amber
Chamber deal coincides with claims that Russian officials and businessmen
were involved in a suspected international money-laundering scam worth
billions of dollars. 

``You need have no worry about misuse of funds. This is a matter not even
worth discussing,'' said Spaeth. 

******

#12
Washington Post
10 September 1999
[for personal use only]
Lone Russian Wears a White Hat
By Nora Boustany

In the history of the Wild West, the good guys wore white hats and the bad
ones wore black. Hazardous journeys requiring guts and nerves of steel were
part of the white hats' franchise. This week fate dictated that as Russia's
new ambassador, Yuri Ushakov, was stepping out to meet Washington society
at a barbecue bash, an investigation was heightening into allegations of
Russian money laundering and kickbacks by a Swiss firm involving President
Boris Yeltsin. At least Ushakov got some white toppers as a howdy gift.

Decked out with checkered red-and-white tablecloths, candles and bandannas,
the back yard of Esther Coopersmith, Washington's resident ambassador of
good causes and greeter of the great, offered a soothing setting for the
Russian envoy and his wife Svetlana. They not only sampled traditional
baked beans, brisket, spareribs, chicken, and corn on the cob; they also
were presented with snappy white cowboy hats.

Ushakov was overcome with emotion as he thanked his hostess for her
friendly gesture, "especially in this very difficult time, specifically
this so-called Russiagate.

"I would like to tell you about Russians. Not all of them are criminals,
not all of them are thugs and bandits. At least we are not here, perhaps.
Thank you for your warmth; we feel it." 

Ushakov said one of the gift hats was going to visiting 3-year-old grandson
Misha for his birthday, a day he and grandpa will remember.

Asked to comment later on how the turmoil at home was affecting him just
seven months into his tour of duty here, the ambassador said: "I think we
have to calm down. We have a lot of other things to talk about." That's
more like it.

******

#13
The Times (UK)
September 10 1999 
[for personal use only]
Mafia may control Russian arms firm 
FROM IAN BRODIE IN WASHINGTON

SUSPECTED links between the Russian mafia and the company that builds
Sukhoi jet fighters are being pursued by officials investigating money
laundering at the Bank of New York, according to a report yesterday. 
Sukhoi sets a world standard in aircraft performance and has sold billions
of dollars worth of its Su27 family of fighters to international air
forces. The company accounts for almost half Russia's arms export revenues. 

There have already been suggestions in the Moscow press that Sukhoi is one
of the sources of hard currency that the "cabal" around President Yeltsin
would like to control, although the Russian leader denied to President
Clinton on Wednesday that he or his family were involved in any
moneylaundering or corruption. 

But American intelligence officials have been questioning those involved
with the Bank of New York about the failure of two Russian banks that
between them owned 39 per cent of Sukhoi, according to the New York Post.
It added that the officials are worried that Sukhoi could be under the
control of Russian organised crime bosses. 

"If the manufacturer of arguably the world's deadliest military aircraft is
controlled by Russian organised crime, it makes the world a little more
dangerous place to live," one source said. 

The two banks, Inkombank and Unexim, were said to own 25 and 14 per cent of
Sukhoi respectively. Both banks ran into financial difficulties amid
allegations that underworld figures had looted accounts and used others to
launder money. The licences of both banks were withdrawn by the Russian
Central Bank three months ago. 

The Sukhoi shares were reportedly never found. Those belonging to Inkombank
were said to have been transferred to a subsidiary in Cyprus and then to
three off-shore firms which remained under the control of former officers
of the bank. What happened to Unexim Bank's Sukhoi shares is not known. 

Officials from Russia's Federal Security Service, the Interior Ministry and
the Tax Police are expected in America on Monday to meet their US
counterparts investigating the Bank of New York scandal. 

******

#14
Los Angeles Times
September 10, 1999 
[for personal use only]
Russian Intrigue Continues as Prosecutor's Homes Searched 
By RICHARD C. PADDOCK, Times Staff Writer

MOSCOW--Residences of suspended Prosecutor General Yuri I. Skuratov were
searched Thursday by investigators from his own office who apparently were
seeking documents connected to an ongoing probe of alleged Kremlin
corruption. 
Skuratov, who has been outspoken in recent days about widespread graft
in Russia, said investigators searched his Moscow apartment, his main
residence outside the city and his mother-in-law's apartment in what he
maintained was an attempt to silence him. 
"The search was clearly an act of intimidation," he said by telephone.
"Today's incident goes to show that the Kremlin is still ready to go to any
lengths and commit any violations of the law in order to intimidate me and
hush me up." 
Officially, the investigators were seeking evidence in a case against
the prosecutor general. 
Skuratov was suspended by President Boris N. Yeltsin in April after a
man closely resembling the prosecutor general was shown on state-run
television in bed with two women--neither his wife. 
Skuratov, who has gone to court to keep his job, alleges that
Yeltsin's inner circle wants to force him out because his investigation of
alleged Kremlin kickbacks was hitting too close to the mark. 
In recent days, the suspended prosecutor has given numerous
interviews, including one to The Times in which he said his office was
investigating whether 780 current and former officials abused their
positions by trading in high-yield government securities. 
On Tuesday, he told NTV television that a Swiss businessman--whose
company, Mabetex, received $300 million in contracts to renovate Kremlin
properties--paid the bills for credit cards issued in the names of Yeltsin
and his two daughters. Skuratov said in the interview that investigators
need to determine whether Yeltsin was aware of the credit cards. 
Skuratov maintained that Thursday's searches were not legal because a
judge has ruled that an extension of the probe into his activities violates
Russian law. 
Skuratov said it was apparent from the way the investigators conducted
the search that they were actually looking for documents related to
Mabetex. "They wanted to know for sure what I've got on them," he said. 
In the end, after a search that lasted seven hours, the investigators
took suits, family photos, videotapes and what Skuratov called irrelevant
documents. 

Alexei V. Kuznetsov of The Times' Moscow Bureau contributed to this report. 

******