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Johnson's Russia List


September 11, 1999   
This Date's Issues: 3493    

Johnson's Russia List
11 September 1999

[Note from David Johnson:
1. The Straits Times (Singapore): John Helmer, MOSCOW REPORTS NO YELLOW 

2. The Guardian (UK): Jonathan Steele, US bid to alter arms treaty alarms 
Russia's military.

4. Moscow Times: Lebed Denies Report.
5. Mickey Berdy: Lebed and Memory.
6. AFP: U.S. Intelligence Projects Dramatic Decline In Russia Strategic 

7. Jerry F. Hough: Re: 3488-Hough Responds.
8. The Electronic Telegraph (UK): Marcus Warren, Ex-ambassador to Moscow 
named in smear campaign.

9. St. Petersburg Times: Fyodor Gavrilov, In Dagestan, It's Déjà Vu All 
Over Again.

10. World Socialist Web Site: Patrick Richter, What lies behind the
scandals in the Kremlin?

11. Financial Times: Charles Clover, UKRAINE: Kiev fights the shackles of 

12. New York Times: James Leach, The New Russian Menace.]


Date: Fri, 10 Sep 1999 
From: (John Helmer) 

>From The Straits Times (Singapore) September 12
>From John Helmer in Moscow

The movement of Chinese into Russia has fallen sharply since
the August 1998 financial crash in Russia, according to a Moscow 
researcher, who claims Russian fears of a Chinese settler "invasion"
in Russia's fareastern territories are "either a myth, pure and simple,
or misinformation".

"The principal dangers to Russia today," says Galina Vitkovskaya, in
a report released this week, "stem not from Chinese immigration per se, but 
from the failure to prepare adequately for a civilized reception of 
migrants, due to flawed Russian migration policy."

Entitled "Does Chinese Migration endanger Russian security?", 
Vitkovskaya's report was prepared at the Moscow office of the Carnegie
Endowment, a Washington-based research foundation.

It is the first attempt by a Moscow-based academic institution to challenge
the widespread Russian belief that the Chinese population in Russia is 
growing rapidly, threatening to outnumber Russians in the eastern
Siberian regions bordering China herself.

Senior Kremlin officials, as well as leading politicians in the Russian
parliament, have been complaining for years about the threat to
Russia's security which they believe uncontrolled Chinese immigration

The Russian media have also reported the activities of Chinese spies 
attempting to buy or steal sensitive Russian military technologies;
and Chinese shuttle traders selling allegedly inferior goods, and pocketing
the hard currency proceeds without paying tax.

Popular estimates of Chinese numbers in Russia range as high as 5 million.

According to Vitkovskaya, who analyzed Russian government data and interviewed
both Russian officials and Chinese migrants, the size of the Chinese
population in Russia is much less than the general belief. She estimates
the total living in Russia as "in the hundreds of thousands", but less
than 1 million.

She is critical of higher numbers, because they were based on projections
from peak 1998 arrival statistics, which registered 500,000 arrivals for the 
year. These numbers "double-counted shuttle traders, who entered and
re-entered Russia several times per year."

The fourfold collapse of the rouble in August 1998 caused an abrupt increase
in the price of imports, and the Chinese cross-border trade fell in
response. This meant, according to Vitkovskaya, that the number of
Chinese visitors to Russia fell from 9,000 in August 1998 to less
than 3,000 last December.

Chinese migrants, which includes those arriving to work or study, or
receive short-term business visas, reached a peak of 74,000 in 1998,
but fell dramatically this year. In the first five months, Russian
statistics indicate migration of this type at 24,000. This is a 22%

Responding to public reports that Chinese tourists over-stay their time
in Russia, the Carnegie Centre report indicates that in the Maritime
Region (Primorsky Krai), bordering China, less than 0.5% of Chinese
failed to leave on time. Federal government figures show there

has been a steady improvement nationwide, with 64% of Chinese tourists
departing on time in 1994 rising to 99.2% in the first half of this year.

In Primorsky Krai, according to local officials, just 37 Chinese citizens
hold legal residency.

"There is no evidence," the report concludes, "for the widespread view
regarding the emergence of stable Chinese communities in the [Russian]

The largest Chinese community in Russia, according to Vitkovskaya, is
in Moscow. She estimates this at about 25,000, with travellers and traders
adding another 15,000. She acknowledges that since the last Soviet Union
census of 1989, when the Chinese population in Russia numbered 11,000,
there has been rapid growth. She claims, however, that this growth 
responded to economic opportunities in consumer goods trade. As this trade
has declined, so too have Chinese movements across the border.

Vitkovskaya reports there are serious health hazards associated with
Chinese migration to Russia. Quoting an official of the Primorsky Krai
health inspectorate, Vitkovskaya says that cholera has been identified
as having been introduced by Chinese or Russians returning from China.
In 1998, the flea known to carry bubonic plague was found in
Vladivostok, where Chinese migrants were living.

"This potential danger," the report declares, "can be prevented
by observing well-known precautions." More threatening to Russian
public health, the report claims, is sub-standard food smuggled from
China without passing veterinary and sanitary inspections.

Vikovskaya is critical of proposals from Russian administrators and
politicians who call for tougher restrictions and mass deportations.
"Restrictive measures are ineffectual," she says, "and merely breed

"What Russia and China need are not transitory decisions, but a sensible
economic and migration strategy -- a strategy of sustained partnership."


The Guardian (UK)
11 September 1999
[for personal use only]
US bid to alter arms treaty alarms Russia's military 
Jonathan Steele in Moscow

As the US stepped up its attempts to get President Boris Yeltsin to agree to 
amendments to its anti-ballistic missile agreement with Moscow, the Russian 
military this week has been sending clear signs it considers the move 

While Strobe Talbott, the US deputy secretary of state, left Moscow on 
Thursday declaring he was "satisfied" with disarmament talks, it is clear 
that there is now a greater threat of nuclear escalation than at any time 
since the cold war ended a decade ago. 

The US wants Moscow to accept an American exemption from part of the 
anti-ballistic missile (ABM) treaty of 1972, and to that end the Clinton 
administration has begun to pile pressure on Mr Yeltsin's beleaguered regime. 

Mr Clinton's hour-long phone call with Mr Yeltsin on Wednesday was part of 
the plan, saying in effect "We will support you in spite of the 
money-laundering scandal, if you give us what we want on ABM". 

Next week, William Cohen, the US defence secretary, visits the Russian 
capital in the hope of brow-beating the Russian military. Further pressure 
will be applied when Mr Clinton meets Vladimir Putin, the Russian prime 
minister, at an Asia-Pacific summit next week. 

But the Russian military, along with politicians from a variety of parties, 
are not falling for the American blandishments, although there are fears that 
Mr Yeltsin may. "With the present weakness of the regime, there is a danger 
of unjustified concessions," Sergei Karaganov, director of the Council for 
Defence and Foreign Policy Studies, said. 

Colonel-General Vladimir Yakovlev, the commander of Russia's strategic rocket 
forces, was quoted in Thursday's newspaper Izvestiya as saying that if the 
Americans abandoned the ABM treaty "Russia has worked out asymmetric 
measures, including the option of giving the intercontinental Topol-M 
missiles independently targetable warheads". These warheads were expressly 
forbidden by the Start-2 treaty. It has never been ratified by the Russian 

Timed to coincide with General Yakovlev's warning was an interview in another 
Russian paper with Yuri Solomonov, the head of the rocket team which is 
making the Topol-M. 

"We have a number of technical options for breaking through the prospective 
American ABM system," he said. "These include making the missile manoeuvrable 
during the active part of its flight." 

Beyond mere words, the air force literally fired a shot across Mr Talbott's 
bows. Four days before he reached Moscow, it launched the latest Topol-M 
model, hitting its target in the Russian Far East "with a high degree of 
accuracy", General Yakovlev said. 

Mr Talbott, as had other American officials before him, was trying to 
convince Moscow that its aim in "modifying" the ABM treaty was to build a 
national missile defence only against "rogue' states such as North Korea, 
Iran or Iraq. The US says the system is not intended to be sophisticated 
enough to be able to shoot Russian missiles down. 

One proposal is to move the main battle-management radar system from North 
Dakota to Alaska. The ABM treaty forbids such radars from being sited on the 
edge of either signatory. 

Pavel Podvig, Russia's top civilian expert on ABM systems, said this week 
that the Russian military feared the new system "could be the basis for a 
more robust missile defence scheme later". "The US could link this 
Alaska-based radar with just a few interceptor rockets for use against North 
Korea, but then quickly add hundreds of interceptors." 

It takes five to 10 years to build a large phased-array radar installation, 
allowing time for the other side to build better missiles to counteract it, 
Mr Podvig explained. "If the US scheme goes ahead as though it is just a 
regional defence, then Russia loses the lead-time." 

The Russian military was not, however, seriously worried that its missiles 
would lose their deterrent power, Mr Podvig said, since no ABM system could 
ever give the US a guarantee of hitting Russia without having to worry about 
successful retaliation. "The worry is partly finanical. It will force Russia 
to keep upgrading its missile systems. 

"It is also conceptual. The ABM treaty helps to bring about a reduction in 
offensive weapons. As the Clinton administration used to say, it is the 
cornerstone of nuclear arms reduction." 



MOSCOW. Sept 10 (Interfax) - A public figure close to Mikhail
Gorbachev said on Friday that the former Soviet president still took an
interest in politics but did not plan to run for any political post.
"Mikhail Sergeyevich [Gorbachev] is taking deeply to heart the
events in Dagestan, and also in Karachayevo-Cherkesia, which is right
near Stavropol territory, where he comes from," Viktor Mironenko,
executive director of an international organization called Youth for
World Culture and Democracy, told a news conference in Moscow.
Dagestan and Karachayevo-Cherkesia are regions in Russia's North
Caucasus. In Dagestan, troops and police are fighting Muslim militants.
Karachayevo-Cherkesia is being torn by a conflict over the results of an
election for local governor.
Mironenko several days ago visited Muenster, Germany, where
Gorbachev's wife, Raisa Gorbacheva, has been taking hospital treatment
for leukemia since mid-August.
He said Gorbachev had no plans to run for any political post but
would be making efforts to complete reforms he launched between 1985 and
Mironenko confirmed reports that Gorbacheva was feeling somewhat
better after a slight deterioration early on Sunday.
"Doctors say a hope has emerged and that it will be possible to
continue treatment," he said. I gathered from Mikhail Sergeyevich's mood
that there was a dynamic for improvement."


Moscow Times
September 11, 1999 
IN BRIEF: Lebed Denies Report 

MOSCOW -- Alexander Lebed denied media reports that he would run for 
president in 2000, saying Friday that he hadn't made up his mind yet. 

On Thursday, Lebed, governor of the Krasnoyarsk region, appeared to declare 
his intention to run, saying that Russia needed a military man at the helm. 

"In Russia, it is not only possible, but necessary. Nobody will believe in us 
without a general [in power]," he said. 

He said Friday that his comments Thursday had been misunderstood. "I will 
only run if they need me," he said. 


Date: Fri, 10 Sep 1999
From: "Mickey Berdy" <> 
Subject: Lebed and Memory

Hi, David. Two quick notes:
1. The three pieces posted yesterday on Lebed left out the other main news
story about him - how his appointment of director to a local factory was
rejected by the workers, how they chased his representative off the factory
grounds, and how Lebed had to have extra OMON guards to accompany him to the
factory for discussions. He has not been an unmitigated success as governor
does not enjoy such great popularity; his chances for the presidency are far
less rosy than readers of JRL might be led to believe.
2. In Oleg Petrov's piece on "what went wrong with Russia," he states that
"many actions were taken by the Yeltsin governments (often with a donor
support) to break the spine of the State: demoralize it and undermine the
fiscal revenue: The West simply failed to appreciate the importance of the
strong, efficient, competent and altruist State during transition to a
market democracy."

What "State" in 1991 in the Soviet Union is Mr. Petrov referring to? In the
Soviet Union in 1991 the state was ALREADY bankrupt, demoralized, and
broken. It had used up all the gold and hard currency reserves and applied
to the IMF for assistance (which it was granted, by the way). It was
corrupt, inefficient, a bad economic manager, and powerless in many parts of
the county. Perhaps a "strong, altruistic, efficient and competent" state
IS essential to successful transition to a market economy, but that state
did not exist in 1991.


U.S. Intelligence Projects Dramatic Decline In Russia Strategic Arsenal

WASHINGTON, Sep 10, 1999 -- (Agence France Presse) Russia will maintain a 
formidable strategic nuclear arsenal beyond 2015, but the force's size will 
fall well below arms control limits because of budget shortfalls, a US 
intelligence estimate released Thursday concludes.

The estimate said Russia currently has about 1,000 strategic ballistic 
missiles with 4,500 warheads, already well below the 6,000 warheads allowed 
under the START I treaty with the United States.

The START II agreement, which Russia has signed but not ratified, would 
require it to reduce the number of warheads to 3,000 to 3,500 by 2007.

Russia's strategic force "will remain formidable through and beyond 2015," an 
unclassified summary of the National Intelligence Estimate said.

"But the size of this force will decrease dramatically -- well below arms 
control limits -- primarily because of budget constraints," the report said.

"Russia will maintain as many strategic missiles and associated nuclear 
warheads as it believes it can afford, but well short of START I or II 


Date: Fri, 10 Sep 1999
From: "Jerry F. Hough" <>
Subject: Re: 3488-Hough Responds

As can be imagined, I received a number of comments on my last 
comment. Gretchen Wilson Brevnov replied that she, her husband, and 
their two children are living in London, not in her home state of Kentucky. 
She protests that she and her husband are quite innocent of any corruption.

Let me make myself absolutely clear. I obviously do not know 
whether there was any corruption as we define the term involved with the 
Brevnovs in Nizhnii, United Electric, or the IFC project. As I hope 
that a series of comments have made clear that I do not care. The kind of
American press focus on crime and corruption represented in David Hoffmann's
most recent and earlier articles seems to me to be extraordinarily

I really think that the line between corruption and profits is 
quite unclear in early capitalism, and, as I have indicated many times, I 
think that the US Robber Barons and the government officials they dealt with
played a very useful role in US history. What disturbs me about 
Brevnov is United Electric and earlier the "private" banks in Nizhnii. 
United Electric is essentially a state company--or really a patrimony of 
Yeltsin--that supplies electricity free to regions and enterprises as a form
of patronage to control them and the Federation Council. It is the sort of
institution that makes a joke of talk about a normal market economy or any 
autonomy or independent power of the regions.

All rulers have their mechanisms of rule, but what really disturbs me
is that United Electric is 49 percent privatized. Surely people like Brevnov
acquired a substantial packet of shares one way or another. They
received dividends. Many of them sold their shares to Westerners, who likely
did very badly with their purchase. The insiders who were selling 
presumably did not think they themselves were holding the Russian 
equivalent of Microsoft and did not sell them to Westerners out of 
generosity alone. Indeed, the circulation of personnel in Russia clearly is
designed to assure that insiders flow through the kind of jobs where 
they get "stock options" and the like. Presumably a lot of the 
proceeds are now abroad. It may all be legal. 

But the utter scandal is precisely that it may all be legal. That 
is the point that all the fictional melodrama like Hoffmann's keeps 
hiding. It is cover for the character of American and Russian policy. 
United Electric is a state firm. There is no excuse that it is not 100 
nationalizedif that is the case. There is no excuse that there is private
profit to be made with a state firm or with a bank whose sole purpose is 
providing state subsidies to enterprises, regions, etc. and that is 
bankrupt from the first, even as it sells paper and forward contract 
insurance to Westerners. 

Least of all is there any excuse that the West pushed the Russians 
in this direction--indeed, required this kind of fraud and false 
bookkeeping even when papers like Izvestiia kept reporting it. The West
insisted on false privatization because that was an indicator of success. 
Despite denials, the loan-for-shares deal came out at the same time as 
the decision on the huge 1995 IMF loan and was a response to IMF pressure 
to sell state assets and strengthen the balance sheets of the banks. The
nature of the program was absolutely clear from Financial Times in 
April 1995 and no one in the IMF or US government protested. One might
think that the IMF forced privatization in order to enrich Western investors,
but instead it did it so to fleece Western investors. Presumably that was
not the intention, but it always was a high risk and investors were reassured 
rather than warned of the extremely high risk. Russia after all was a
normal market economy. Indeed, by 1996-1997 when the investors were 
really drawn in, there was no risk at all. It was clear the pyramid had 
to collapse.

I don't blame Russian insiders from following rational self-interest
the way that the neoliberal model correctly says they should. Crime and 
corruption is in self-interest if that is what the incentives suggest. That
is the theme of my new book--Russian behavior proved that Russians were normal
economic men and behaved as the neoliberal model said they should. But the
West is supposed to advise the creation of incentives that lead rational
actors in a direction that is in the societal, public good. That includes
continued nationalization of the electricity, oil, and gas companies if they
are not really private. That means trying to find out how the system 
really works, and trying to correct errors. The US tax code is a set of 
institutions and incentives that we monitor continually to make sure 
that it not being gamed with loopholes. But instead of trying to fix 
the loopholes in Russia, Treasury and IMF tried to hide them and pretend 
that nothing was happening. They still are.

The corruption that concerns me is that in the United States where we 
are supposed to have legal restraints on the way Americans enrich themselves. 
A lot of deserved attention has been given to Harvard's role in the
privatization. However, I have always understood that the big accounting 
firms got the big A.I.D privatization contracts. As a matter of principle, 
I have never invested in Russia nor never sold its shares short, but I do
follow Russian stocks. Tatneft (Tatarstan Oil) interests me because I have 
done so many surveys in Tatarstan and have talked about it with 
Russians. Kommersant Daily in January 1998 laid it all out. The 
company was bankrupt, it had to "barter" its oil below cost and then was 
not paid, it could not pay its workers for months, and its foreign debts 
were huge. AFTER THIS, Tatneft was listed on the New York Stock 
Exchange on April 1st, with Price Waterhouse audit and seal of 
approval. The stock opened at 23, was at 10 on June 1, and 2 on 
September 1. Then when Central Bank was accused of keeping reserves 
abroad, who gets the job to audit it? Price, Waterhouse. It is not 
hard to see where Russians get their ideas about the nature of capitalism. 
But given the nature of our society, I don't understand why there are not 
more law suits from those who were taken, more investigations by critics of 
A.I.D. like the Wall Street Journal, the Washington Times, and Jesse Helms.

This is really important. People say that the West was not 
responsible. Balderdash. Yeltsin was a construction engineer who 
worked for 20 years in construction administration in the 
industrial center of Sverdlovsk. He had built his life building it up. In
the fall of 1992, all domestic political forces supported an industrial 
policy except a handful of neoliberal economists. Had they not had been 
supported with Western money, they would have fallen. Had the West 
insisted on an industrial policy, had it made continued nationalization 
of the export energies a precondition of aid (and that was where the 
budget could have received revenue), had it tolerated overt subsidies 
rather than insisted on covert ones, that is what would have happened. 
One can argue what was a wise policy in late 1992--although I think that 
question is now answered--but the policy that was followed was 95 percent 
the result of Western conditionality. When United Energy is 49 
percent "private," when the West never says anything about investment, 
when it never complains about a system of loans that destroy property 
rights of insider-owners (as the West wanted it to do), it is pious 
nonsense to say that Russians were "corrupt" when they rationally 
followed the incentives that the West put in place. 


The Electronic Telegraph (UK)
11 September 1999
[for personal use only] 
Ex-ambassador to Moscow named in smear campaign
By Marcus Warren in Moscow

A FORMER ambassador to Moscow and foreign policy adviser to John Major 
yesterday became the latest pillar of the British establishment to become the 
target of a grotesque and false Russian smear campaign.

Sir Rodric Braithwaite, now a senior adviser to Deutsche Morgan Grenfell, 
joins King's College, London, and the publishing firm Brassey's in being 
dragged into the scandal, a case study in the black arts of Moscow politics. 
For good measure, the name of an influential ex-CIA analyst critical of 
Washington's recent policy towards Russia, Fritz Ermarth, is also the target 
of fantastic allegations and conspiracy theories.

Two Moscow newspapers with diametrically opposed political allegiances have 
now "exposed" the existence of an explosive book of claims about Kremlin 
misconduct and Western banks' alleged collusion in Russian financial 
scandals. Kommersant, usually regarded as Russia's top people's paper, 
yesterday claimed that the book's whole print-run had been bought by Merrill 
Lynch, the investment bank, to protect the secrets of its alleged wrong-doing.

Merrill Lynch refused to comment on the story, but the book's alleged 
publisher and the two men identified as its likely authors, Sir Rodric and Mr 
Ermarth, were quick to rubbish the claims. Sir Rodric said: "You must be 
joking!" Mr Ermarth said: "Everything purporting to be fact in that article 
is false."

Caroline Bolton, publisher of Brassey's UK, said: "These allegations are 
totally untrue. We are very concerned about our reputation and anything that 
could jeopardise it." The claims are so fantastic as to be hardly worth 
comment but for the fact that similar allegations surfaced in another Moscow 
paper earlier this week, including the identity of a mysterious figure linked 
to both publications.

Bizarrely, they tie in with Moscow's claims that the accusations of massive 
Russian money-laundering on Wall Street are a Western plot. They also say a 
lot about the sorry state of the Russian media. With elections three months 
away and open war being fought between rival clans over claims and 
counter-claims of corruption in high places, many titles have given up all 
pretence of objectivity.

A weekly printed matching allegations earlier this week with the twist that 
the alleged book, supposedly jointly published by King's College and 
Brassey's, also accused President Yeltsin's powerful daughter, Tatanya, of 
using cocaine and heroin. An academic paper entitled Crime in Russia: the 
International Implications was published by King's College in 1995, but has 
nothing to do with the alleged book of the same title supposedly now doing 
the rounds of the City of London and Wall Street.

The author of the 1995 book was Anton Surikov, an authority on strategic 
nuclear issues, but lately a figure of notoriety on the Moscow circuit. Mr 
Surikov, press secretary to the number two in the Russian government until 
May, denies any connection with the two articles, written by unknown 
journalists under pseudonyms.


St. Petersburg Times
September 10, 1999
In Dagestan, It's Déjà Vu All Over Again
By Fyodor Gavrilov

SUMMER in the European part of Russia shows no sign of coming to an end: the 
weather's just magnificent. What's more, Russia isn't doing as badly as some 
people like to think: someone's out there making money in the dead of night, 
someone's gathering the harvest from their dacha garden, someone's on the 
town making the difficult choice between Ukrainian and Jewish cuisine, 
someone's planning to take a holiday down south in Sochi...

For me the great weather last weekend was spoiled by my fears for 25 OMON 
soldiers (the military division of the police force which operates in every 
major city in Russia), who were surrounded by enemy forces and trapped in the 
sport hall of a House of Culture (I can just see it in all its grey concrete 
wretchedness) in a village in Dagestan. It seems unfair - while we're doing 
quite well for ourselves here, 25 police officers have to defend themselves 
from the merciless modzhakheds of Shamil Basaev.

According to Interfax, the Russian army's losses in Dagestan since fighting 
began (i.e. since Aug. 2) amount to 149 dead and 522 wounded, with around 20 
people reported "missing without a trace" (which in all likelihood means that 
they were killed and left on the battlefield).

Offical statistics from the Ministry of Internal Affairs, however, report 66 
killed and 249 wounded, with 17 police officers missing without a trace. Note 
that these figures don't include the killed and wounded soldiers from the 
Ministry of Internal Affairs in Dagestan, or from the republic's emergency 
volunteer corps - at best they are a very approximate estimate: the generals 
at Russian army headquarters have refused to comment on this matter, as they 
consider that the information is a state secret.

The Omon officers were somehow able to break out of the encirclement - some 
of them were killed in the process. The only consolation here is that these 
OMON officers went to war of their own free will; they chose to make their 
living from a profession in which situations like this could, theoretically, 

But the same is emphatically not true for those Russian teenagers who are 
enlisted in the army - no one asked them if they wanted to serve or not. On 
the contrary, they were hunted down by the police and dragged to the nearest 
recruitment office. The present situation in the Caucasus is bound to claim 
many victims, and most of them will come from the ranks of these new recruits.

Evidently, the Russian military has learned something over the last few 
years; the war in Chechnya and, in particular, NATO's Yugoslavia campaign 
have served as lessons of a sort, and it seems that they really are trying to 
be more humane to their soldiers. All the same, the policy of the Moscow 
generals is something of a surprise - new recruits who have just received 
their first combat experience in the war in Dagestan have been sent back to 
where they came from, and as far as I understand will soon be demobilized.

What are the generals trying to achieve by swapping their soldiers around? 
Justice is, in a sense, done, but combat experience that is acquired at the 
expense of dozens of lives is wasted; another batch of inexperienced soldiers 
joins the fray, and major losses become inevitable once more.

In 1996 presidential candidate Boris Yeltsin promised voters a professional 
army for Russia, and no doubt this won him plenty of votes. It wasn't to be: 
the generals' platform proved to be stronger and now the idea of a 
professional army isn't even mentioned. We can, however, expect to hear this 
promise again from more than one presidential candidate.

It really is sad: all of this has happened before. No one who went to a 
Soviet school will forget the official interpretation of the events which 
took place 55 years ago: on June 22, 1941, the "unstoppable enemy, armed to 
the teeth" and "with forces far ounumbering our own" (of course) 
"treacherously" invaded the Soviet Union.

Alas, there's not much different between this Stalinist rhetoric and the 
rhetoric that we are hearing now. As long as Russia lacks a professional 
army, the feeling of déjà vu is here to stay.


World Socialist Web Site
What lies behind the corruption scandals in the Kremlin?
By Patrick Richter
10 September 1999

For over a week, accusations of corruption against President Boris Yeltsin 
and his "family" have been mounting. They were unleashed by the almost 
simultaneous publication of three articles, which for the first time linked 
Yeltsin personally to a series of scandals in Russia.

First, the Italian newspaper Corriere della Sera reported that investigations 
had been launched into the granting of credit cards to Yeltsin's family. 
During a probe of the Swiss company Mabetex, records were found relating to 
credit cards issued to Boris Yeltsin and his daughters, Tatyana Dyachenko and 
Yelena Okulova.

Mabetex, which received $335 million worth of contracts for the restoration 
of the Kremlin and other government buildings, had transferred millions of 
dollars to the private account of Pavel Borodin at a Budapest bank. Borodin 
is the director of the department for real estate and services in the 
Kremlin, and is considered to be number two after Yeltsin, who is believed to 
have received a million dollars in compensation. On the Mabetex balance 
sheet, the amounts appeared as "local special expenditures". Under Swiss law, 
commissions paid to a foreign official are not subject to taxation, but the 
name and account number of the recipient must be shown.

Second, Yeltsin's name surfaced in a series of articles in Switzerland about 
the seizure of Boris Berezovski's bank accounts. Berezovski, operating in 
league with one of Yeltsin's sons-in-law, is accused of having defrauded the 
Russian airline Aeroflot of $250 million.

Third, the New York Times has published reports on nine bank accounts with 
the Bank of New York, through which up to $10 billion was laundered for the 
Russian Mafia, with Yeltsin's knowledge. Other reports put the total amount 
of laundered money at $15 billion. Even IMF funds were alleged to have flowed 
into the pockets of the Russian Mafia. According to USA Today, in addition to 
12 former or current Russian cabinet members, Yeltsin and his daughter 
Dyachenko were involved.

On September 3, Corriere della Sera published a report listing 24 names and 
addresses of Russians at the heart of the Mabetex scandal. Among them were 
Pavel Borodin and family, Anatoli Kruglov, the government official 
responsible for the lucrative area of customs, and Oleg Soskovez, 
vice-premier responsible for building, energy and health until his dismissal 
in 1996.

Newspapers and press agencies are falling over themselves with new and 
detailed articles regarding the close links between Russian politics, 
business and the Mafia. Reports are being published describing in detail the 
obscene wealth of the new "jet-set Russians", whose Byzantine profligacy is 
on display at every exclusive international health resort.

An article by Rudolph Chimelli, headlined "The Last Superpower", appeared in 
the Süddeutsche Zeitung August 28. Chimelli describes how the "new 
Russians"—as Russia's nouveaux riches are called—indulge themselves on the 
French Riviera. One of them, Gennadi, orders the most expensive champagne and 
Beluga caviar at the beach. But he lacks the “famous little ball of 24-carat 
gold, which, because of its high specific gravity, sinks when placed in fresh 
caviar, but stays on the resinous surface if the product is old."

Chimelli writes that by the end of May, holiday mansions with monthly rents 
between 400,000 and 1.5 million francs (US$64,600-$242,350) are already 
completely booked. A hotel employee is quoted as saying, “Russians and 
Americans fought for the most expensive mansions on the Côte d'Azur. In the 
end the Russians won, because they are not frightened to overpay, and they 
rent for four months."

The waiter at one of the haute cuisine restaurants “recalls a meal at which 
the diners ordered 23 bottles of Château Margaux 1971, at that time costing 
8,000 francs (US$1,300) each”. In the “Hôtel de Paris in Monte Carlo and in 
the Hôtel du Cap in Antibes, the reserves of rare Château Petrus 1985 and 
precious Romanée Conti 1983 have dwindled—even at a price of almost $3,250 a 

Although these descriptions throw light on Russian politics since the 
collapse of the Soviet Union in 1991, they contain nothing surprising. In the 
recent past, especially since the financial crisis of August 1998, detailed 
reports have appeared on the extent of corruption and money laundering in 
Russia. Anyone who has followed the developments in Russia even marginally, 
or, like the Russian population, has experienced events firsthand, knows that 
this is only the tip of the iceberg.

After the collapse of the Soviet Union, the IMF, the World Bank and the 
majority of Western governments pursued a policy in Russia which, with the 
aid of billions in foreign currency, flushed a whole layer of the most 
corrupt and criminal elements to the surface.

The influential German weekly Die Zeit rightly asks in its recent edition: 
“Why is it that no one now wants to suspect what everyone already knew?"

A typical proponent of the “economic science” supporting “liberal” policies 
is Harvard professor Andrei Schleifer, who is known for his close 
co-operation with the American advisor to Moscow and fellow Harvard professor 
Jeffrey Sachs. The latter was in Moscow at the beginning of the 1990s and 
directed the “reform” policies.

In an OECD study Schleifer explains their strategy as follows: “Encourage and 
give legal blessing to some stakeholders to expropriate others, thus reducing 
the number of stakeholders with overlapping stakes" ( The Economics and 
Politics of Transition to an Open Market Economy: Russia, Andrei Schleifer 
and Daniel Treisman, OECD, 1998, p. 18). In plain English: put more power in 
the hands of one section of crooks so they can knock off the others and make 
it an easy game for us!

In connection with the coming US presidential elections, extreme right-wing 
sections of the American ruling class, who see no sense in continuing the 
Russian policy of President Bill Clinton and Vice President Al Gore, are 
intensifying their attacks. As is widely known, US business interests aided 
the corrupt practices of the Yeltsin family and secured Yeltsin's victory in 
the 1996 Russian presidential elections with substantial financial and 
personnel support. Al Gore maintained the closest connections to the Russian 
prime minister through the so-called Gore-Chernomyrdin commission, in order 
to promote American interests.

Against the backdrop of the corruption revelations, a leader of the 
Republicans in the American Congress, Dick Armey, demanded an immediate halt 
to payments and an examination of all cash transfers to and from Russia. The 
representatives of the IMF and US government protested, claiming there was no 
proof that IMF funds were involved in the money laundering scandal and 
insisting that payments to Russia continue with September's tranche of $640 

The right-wing attacks are directed not only against the American government, 
but also against international institutions. Signs of this political 
orientation had already emerged in the Kosovo War, in which NATO, under the 
guidance of the US, operated without a UN mandate and demonstratively snubbed 
Russia. The Russian government succeeded in saving face at home and abroad 
only with European assistance. While the US carried out one affront after 
another, German Minister of Foreign Affairs Joschka Fischer remained in close 
contact with the Russian leadership via Moscow's envoy to Yugoslavia, Viktor 

Along with the growing pressure against Clinton and Vice President Gore, who 
is the leading Democratic Party candidate in the upcoming presidential 
elections, the danger increases that Russia will receive no more foreign 
money, and thus be deprived of one of its most important pillars.

Most European think tanks agree that under no conditions can there be a 
destabilisation of Eastern Europe, as this could endanger the expansion of 
Western Europe's sphere of interest in this region. In its last edition, Der 
Spiegel magazine quoted an advisor to the German chancellor, who said, “The 
worst thing that could happen for us is chaos in Russia."

For this reason, hope is increasingly coming to rest on the nationalist 
Luzhkov -Primakov alliance in the coming Duma elections. The above mentioned 
Zeit article summed up this widespread mood as follows: “The Americans are 
said to reproach him [Primakov] for 'stubbornly holding on to great power 
politics'. Better a conservative great power than a lawless cartel."

An end to IMF credits would dramatically exacerbate Russia's agony, and the 
lucrative posts of the Russian Camarilla would be directly threatened. This 
explains the outer unity of the Russian establishment: Chernomyrdin, Chubais, 
Luzhkov and even the “liberal” Yabloko leader Grigory Yavlinsky , regarded as 
an “intellectual” opponent, all condemn the criticisms from abroad. In a 
remarkable assertion, Yavlinsky remarked that the “hysterical imputations 
that Russia is a kleptocracy are just as far from reality as the euphoric 
praise for Russia's restorationist course a few years ago” ( Süddeutsche 
Zeitung, September 4).

>From the outset, Moscow Mayor Yuri Luzhkov guaranteed Yeltsin's “personal 
security for the period after his presidency”. The reason for this is simple: 
if Yeltsin goes under, the others involved in the network of “business, 
politics and the Mafia” could be pulled into the abyss along with him.

Thus, as Luzhkov explained to the press on September 2, the investigation of 
ex-general public prosecutor Yuri Skuratov has purely domestic significance, 
because “I doubt that ... amounts in the billions were defrauded from 
international accounts by the Russian Mafia”.

In the spring, Skuratov was twice dismissed by Yeltsin because he wanted to 
let the president swing for the Mabetex affair. Now this two-faced man has 
risen to become one the main leaders of the campaign against Yeltsin. He has 
not denied “proofs", which are certainly not lacking in the present conflict, 
indicating he obtained funds from Felipe Turover. Turover is a former 
associate of the Swiss Gotthard Bank, and it was his “revelations” that got 
the Mabetex affair rolling again.

Meanwhile, in this game of power politics, nobody talks about the real 
interests of the Russian population. In the midst of the flood of media 
articles about the corruption scandals, information regarding social 
conditions in the country is difficult to come by. What is available, 
however, speaks volumes. In the eastern region of Sakhalin a cholera epidemic 
has broken out. By the year 2016, the Russian population will decrease by a 
further 8 million. This is based upon a current projection of the Russian 
Office of Statistics, according to which each 100 Russian women would have to 
bring 215 children into the world for the population level to remain stable. 
At present, however, this ratio has dropped to 124 children per 100 woman. 
Over the past seven years Russia's population has declined by 2 million.

Another recent article comes from the Socio-Economic Research Institute of 
the Academy of Sciences, which has revised upwards the figures on poverty in 
Russia published by the National Statistical Committee in November of last 
year. According to the Socio-Economic Research Institute, some 60 million 
Russians live below the poverty line, instead of the previous estimate of 42 
million. This is 40 percent of the population. The average wage has dropped 
to US$33 per month.

Against this background, it would hardly have been surprising had the August 
31 bomb attack on Moscow's finest shopping arcade, which injured 41 people, 
turned out to have been the act of desperate young people. This temple of 
consumption was completed in 1997 on the occasion of Moscow's 850th 
anniversary, at a cost of $300 million.

Even if the “uncovering” of corruption scandals does not offer a solution to 
the Russian population in their struggle for existence, it does at least 
expose to a world-wide public the methods employed in Russia by Western 
policy makers and financial interests in Russia, upon which the upper layers 
of post-Soviet society are based.


Financial Times
September 11, 1999
[for personal use only]
UKRAINE: Kiev fights the shackles of history 
Charles Clover on Ukrainian fears that a new iron curtain has fallen over 

The ghosts of Joseph Stalin, Franklin Roosevelt and Winston Churchill were 
haunting the white marble Livadia palace in Yalta, on Ukraine's Black Sea 
coast, yesterday as 12 European presidents gathered. They were there, 
according to Ukraine's President Leonid Kuchma, "in order not to repeat a 
historical mistake".

The symbolism of the 1945 Yalta accord, in which the Big Three divided Europe 
into postwar eastern and western spheres, is particularly heavy for Ukraine.

The prospect of expansion of Nato and the European Union to Ukraine's western 
borders has left the country wondering whether a "new iron curtain" has 
fallen over Europe.

Mr Kuchma said the aim of the summit, attended by leaders from Baltic and 
Black Sea states, was to wipe out the dividing lines that for almost half a 
century kept countries in the region "outside the natural context of the 
evolution of European civilisation".

Eight years after the end of the cold war, Europe remains deeply suspicious 
of the former Soviet countries, including Ukraine, whose economic collapse 
has made them a huge potential source of immigrants. The inability of the 
former Soviet republics to reform their economies has also stalled most 
attempts at economic integration.

The EU, for example, has been insisting that prospective members adopt a visa 
regime against non-EU countries. This would mean that Poland and Hungary, 
which border Ukraine, would have to require visas from Ukrainians before the 
two countries could attain full EU membership. Slovakia and Romania, other 
countries on the slow track for EU membership, are also under pressure to 
take this step.

And it took EU governments four years to ratify a simple partnership and 
co-operation agreement (PCA) with Ukraine. The agreement, a precursor to a 
possible free trade deal, was signed in 1994 but only implemented four years 

An article about the summit in the Kiev newspaper Dyen offered an 
unfavourable comparison of the situation today with that of 1945. "Following 
the second world war the Soviet Union was feared because of its power. But 
after the collapse of the 'world socialist system' we are feared because of 
our poverty. . . The Ukraine of today cannot avoid a new division of Europe. 
It already stands on the sidelines of the European processes, thanks to its 
internal situation, created by itself."

Aside from Brussels, a number of other European institutions have seen 
increasingly strained relations with Ukraine. The Council of Europe has 
warned Kiev that its approval of capital punishment threatens its membership 
of the body. In May the Organisation of Security and Co-operation in Europe 
(OSCE) warned that backsliding on press freedoms would not be tolerated.

And few Ukrainians believe that Nato's so-called open-door policy for new 
applicants will be open for them any time soon.

While many pro-westerners in Ukraine blame their government for failing to 
take their country Europewards, government officials often claim they are 
victims of an historical decision to exclude them from Europe, and say this 
decision could have huge consequences for Ukraine's fragile identity.

For 350 years Ukraine was part of the Russian empire and then the USSR, and 
Russian nationalist sentiment, especially in the eastern and southern parts 
of the country, is still a factor in Ukraine's politics.

Boris Tarasyuk, Ukraine's foreign minister, commenting on the delay in the 
ratification of Ukraine's PCA, said in 1998: "It might lead to the conclusion 
that we don't belong in Europe, that we belong to Eurasian space, or to 
somebody's sphere of influence."

His remarks have proved prescient. Ukraine's presidential elections, to be 
held on October 31, are rapidly turning into a referendum on the country's 
continued existence; many candidates favour Ukraine joining a union with 
Slavic neighbours Russia and Belarus.

Mr Kuchma, meanwhile, is campaigning on the basis of being the only candidate 
who could lead Ukraine westward. That is ironic to some observers, as Mr 
Kuchma was elected in 1994 as the Russophile candidate, running against the 
westward-looking incumbent Leonid Kravchuk.


New York Times
September 10, 1999
[for personal use only]
The New Russian Menace
James A. Leach, a Republican Representative from Iowa, is chairman of the 
House Banking Committee, which will hold hearings this month on international 
financial corruption. 

WASHINGTON -- Recent allegations that American and European banks have 
facilitated money laundering for Russian organized-crime figures underscore 
how intractable a problem corruption in Russia is and how vulnerable Western 
institutions are to the lure of servicing the world's most virulent 

Russia is hardly the first country to be victimized by a culture of 
corruption. The plundering of the Philippines under Marcos, the looting of 
Zaire by Mobutu and Indonesia's crony capitalism during the last years of 
Suharto stand as parallels. What sets Russia apart is the pervasiveness of 
politically tolerated corruption in a country of such size and geopolitical 

The Russian Government estimates that criminal syndicates control 40 percent 
of the economy and perhaps half of the country's banking assets, though 
others put the figures higher. In any country where political stability is 
questionable and legal protections of property are unreliable, those who come 
to control wealth, legally or otherwise, can be expected to invest abroad. In 
Russia, theft exceeds investment, resulting in negative economic growth and a 
disillusioned society. 

The question is how the West should respond. Americans have both a vested and 
a humanitarian interest in helping the Russian transition to democracy. But 
there's no credible way to suggest to taxpayers that they should support 
assistance to a government that allows insiders to recycle aid from the West 
in the form of laundered bank deposits, personal investments in the stock 
market or Pebble Beach real estate. 

American policy in this circumstance should be directed to helping the 
Russian people, not its rulers. 

The struggle of the last half century was to defeat Communism; the challenge 
in the years ahead will be to constrain corruption. The second struggle may 
well prove more difficult, because avarice is a more fundamental aspect of 
human nature than the Communist precept that people are subject to historical 
determinist forces beyond the individual's control. 

We should begin by enforcing our laws, issuing indictments if necessary. Such 
actions might prompt Russian prosecutors to do the same, calling Russia's new 
class of thieving oligarchs to account for domestic crimes more serious than 
international banking violations. We should also emphasize retrieving stolen 
assets for the Russian people rather than giving new aid, except perhaps food 

For the Russians' part, instead of propelling the flight of capital through a 
banking system that principally serves as a platform for money laundering, 
they should establish community-oriented banks and press for the opening of 
branches of well-regulated Western banks in which people can trust that their 
savings will be turned into loans for local enterprises. No nation, after 
all, can prosper if it lacks institutions where people can safely put their 
money and seek secure loans. 

Most of all, we have an obligation to insure that the corrosive impact of 
foreign corruption is blocked from our shores. America may be as challenged 
today by the threat of a deterioration of values -- galloping corruption -- 
as it was yesterday by Marxist ideology. 



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