September 14, 1999   
This Date's Issues: 3497 • 3498 • 3499

Johnson's Russia List
#3498
14 September 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Russian media say blasts fuel hatred of Chechens.
2. Itar-Tass: Muscovites Believe Army Should Restore Order in Dagestan.
3. Moscow Times: Leonid Bershidsky, Terrorism's Xenophobic Blame Game.
4. Reuters: West aids Russia for global stability - Wolfensohn.
5. RFE/RL: Paul Goble, Giving Yalta A New Meaning.
6. Los Angeles Times: Maura Reynolds, In Unlikely Surroundings, a Russian 
Scandal Is Born. Inquiry: Sleepy shop in Swiss town purportedly played key 
role in alleged influence-buying scheme involving Yeltsin. 
7. PRIVET ROSSIYA: RUSSIAN POLITICAL MILL.
8. New York Times letters: Russia, Not I.M.F., Squandered Money.
9. STRATFOR.COM: Who Gains From the Moscow Apartment Bombings?
10. Ray Thomas: RE: 3496-Dolan.
11. Bloomberg: Russian Officials Aid Money Laundering Probe in US.]

*******

#1
Russian media say blasts fuel hatred of Chechens

MOSCOW, Sept 14 (Reuters) - Russian newspapers on Tuesday enthusiastically
endorsed the view of officials that warlords from breakaway Chechnya had
masterminded bomb blasts in Moscow which have killed more than 200 people. 

But some papers also expressed concern that public anger over the blasts
could fuel an irrational hatred of everyone from the country's volatile
North Caucasus region. 

At least 109 people died on Monday when a powerful explosion destroyed an
eight-storey block of flats in southern Moscow. A similar blast last
Thursday claimed 94 lives. 

No one has claimed responsibility for the blasts. Chechen warlord Shamil
Basayev, battling Russian troops in the North Caucasus republic of
Dagestan, has denied any involvement. 

``If Chechnya was far from us before, now it is as close as it can be,''
wrote Vechernyaya Moskva, referring to Russia's ill-fated operation to
quell Chechnya's independence bid in 1994-96, in which tens of thousands of
people died. 

``Those who are losing the battle in the North Caucasus are fighting
peaceful people now,'' it added, referring to setbacks suffered by the
Chechen-led Islamic rebels in Dagestan. 

Noviye Izvestia said the strong anti-Chechen views expressed by ordinary
Muscovites could help push the authorities into taking a much tougher line
towards Chechnya. 

``Disappointment and fear are giving way to hatred,'' it said. ``The slogan
'One Chechen village for each Moscow building' is gaining popularity,'' the
paper said. 

The newspaper Tribuna also commented on the chauvinist mood developing in
Moscow after the blasts, which it said recalled the carefully orchestrated
anti-Chechen campaign launched by Soviet dictator Josef Stalin, who
expelled the Chechens from their land in 1943 because of their alleged
collaboration with Nazi invaders. They returned to Chechnya only in the
1950s. 

``Josef Vissarionovich (Stalin) would have felt huge satisfaction
yesterday,'' it said. ``He was respectfully remembered in kitchen
conversations. 

``Not only old people who miss their moustachioed prophet, but also young
progressive people speculated nostalgically that Stalin's way was the only
way to keep this multi-ethnic country calm,'' Tribuna said. 

President Boris Yeltsin said in a televised address to the nation on Monday
that those responsible for the Moscow blasts should not be judged by their
nationality or religion. 
Authorities in Moscow and St Petersburg have introduced tough security
measures, but say they will not discriminate against any ethnic group in
their bid to head off new attacks. 

But the liberal daily Sevodnya said ethnic tension could flare into
violence if the blasts continued. ``One risk is a campaign to expel people
originating from the North Caucasus or exposing them to physical threats,''
it said. 

``The other (danger) is a massive anti-government movement with attacks on
state offices over their inability to combat the terrorist threat,'' the
paper said. 

Some newspapers said the origins of the Moscow blasts should be sought in
the cruelty of the Chechen war, which devastated the mountainous region and
fuelled anti-Russian feelings there. 
Since withdrawing its forces from Chechnya, Russia has done little to help
the region's beleaguered president, the relatively moderate Aslan
Maskhadov, who wields little power over warlords like Basayev. 

``It is stupid to think that after purging Chechnya with fire and drowning
it in blood four years ago (in the war) we could avoid the consequences
once we decided to run away,'' Noviye Izvestia wrote. 

*******

#2
Muscovites Believe Army Should Restore Order in Dagestan.

MOSCOW, September 13 (Itar-Tass) - Sociologists from an independent public 
opinion group (Mneniye) have carried out a survey among 1020 Muscovites on 
events in Dagestan. About 53.8 percent of the respondents said the army 
should be used to restore order in Dagestan. Nineteen percent did not share 
that opinion and 27.2 percent hesitated to give any specific reply. 

The state of emergency is Northern Caucasus was welcomed by 37.2 percent 
while 26.9 percent rejected the idea. 

Only 5.3 percent of respondents said they would support the state of 
emergency in Russia. The prevailing part (68.8 percent) spoke against the 
move and 25.9 did not give any answer. 

Most respondents (66.3 percent) are convinced that Russia has a right to 
deliver strikes against rebel units inside Chechnya. The idea was opposed by 
13.9 percent and 19.8 percent did not respond. 

All the respondents unanimously ruled out a possibility that nuclear weapons 
can be used to fight the Chechen militants. Such radical measure was favoured 
by only 2.9 percent. The rest did not comment it in any way. 

*******

#3
Moscow Times
September 14, 1999 
FIFTH COLUMN: Terrorism's Xenophobic Blame Game 
By Leonid Bershidsky 

Following the explosions in Moscow, which have already taken a heavy toll, an 
explosion of xenophobia may soon claim its own victims. 

If you have a dark complexion, be careful and always carry a passport. If you 
have a black beard, shave it off or stay off the streets. It does not matter 
whether you are Azeri, Bulgarian, Chechen, Italian, Georgian, Armenian or 
Turkish. There are people out there who have always hated the likes of you 
and who may now have the authorities' silent permission to vent their hatred. 

After all, it was Moscow Mayor Yury Luzhkov who recently said that Chechnya 
should be sealed off so that no Chechen can ever set foot in Moscow. 

If you are from the south, it is you the cops suspect of blowing up those 
buildings. Viktor Ilyukhin, the Communist chief of the State Duma's security 
committee, said Monday that the authorities had "loosened control and now 
more than a million people of Caucasian nationality live in Moscow." He 
meant, of course, all those dark-skinned people from several countries and 
half a dozen southern Russian regions. 

If they'd followed Ilyukin's logic years ago, Josef Stalin would never have 
made it past the Moscow patrols. But this is hardly a strong enough argument 
for setting up a new police state. There is a stronger - political -argument. 
The southerners have lived side by side with us for decades, and they have 
always been considered more foreign than "white" foreigners. In other words, 
many Russian women will think twice before dating a Chechen or a Georgian, 
but not a Pole or a Brit. In a farmer's market, some people will buy from 
"white" vendors from Belarus, but not from dark-skinned Dagestanis, though 
the latter are technically Russian. It affects Arabs and Turks as well as 
people from southern post-Soviet states, but not Europeans or Americans. In a 
nutshell, this is a racism much stronger than the new coolness between 
Russians and Americans. During the war in Kosovo, you could hear Americans 
talk about how they felt less safe here. And NATO certainly was not bombing 
Russians. Now, terrorists are bombing Russians, in a bombing campaign that 
comes fast on the heels of Russia's own bombing campaign in the Caucasus. It 
is a connection that seems obvious enough to most people. Now, Caucasian 
nationals are in more danger in Moscow than Western expats could ever 
imagine. Only Africans and some American blacks - like the American marine 
who was beaten up by neo-Nazis here a couple of years ago - know what it is 
like.When a Lebanese citizen suffered severe burns in the Manezh shopping 
mall explosion, he was automatically suspected of smuggling in the explosives 
that made the bomb. TV stations broadcast that suspicion without any 
corroboration. Viewers, for their part, are used to hearing about all these 
dark-skinned people committing crimes. 

The terrorists, no matter what color their skin, feel safe, though. How else 
could they smuggle sacks of dynamite into residential buildings? Even if the 
police start checking the identity of every man with black stubble, the guys 
with the bombs will hire someone of Slavic appearance to do the dirty work. 

The bettter argument for locking down the city, then, is that hatred and 
impotence go hand in hand. When mixed, they work better for political 
campaigns than just impotence alone. 

Leonid Bershidsky is the editor of Vedomosti. 

*******

#4
West aids Russia for global stability - Wolfensohn

COPENHAGEN (Reuters) - The West supports Russia, despite the corruption 
there, because of the former Soviet state's economic and military stature on 
the world stage, World Bank President James Wolfensohn said Monday. 

``The reason we need to help is that the whole of the former Soviet Union 
represents not only an economic threat or economic opportunity, but 
politically it does have a somewhat different weight than some other 
countries because of its defense and offensive capabilities,'' Wolfensohn 
told a news conference. 

``I don't doubt that there has been corrupt practice ... but the overall 
question of global stability is also an issue,'' he said on the last day of a 
two-day visit to Denmark. 

``When you get to the issue of corruption, the important thing is to take the 
opportunity and try and clean the house when you uncover it,'' he said. 

Authorities in the United States and Britain are examining the alleged 
laundering of billions of dollars of Russian funds through the Bank of New 
York Co. The bank has denied any wrongdoing and is cooperating with 
investigations. 

Russian President Boris Yeltsin told President Clinton last week that reports 
linking him to a corruption scandal through payments made by a Swiss firm 
were untrue. 

Wolfensohn said he thought some scandal reports were exaggerated and linked 
to mudslinging campaigns ahead of Russia's parliamentary elections in 
December. 

``Everybody is accusing everybody else,'' he said, but he did not single out 
any one of the scandals, which continue to grab headlines, and which Clinton 
warned Sunday could ``eat the heart out of Russian society.'' 

``I don't think that anyone could really be surprised that there has been 
some corruption in Russia. I regard it, frankly, as rather positive that all 
this is coming out now,'' Wolfensohn said. 

``If you go back a few years or even a few months, getting public examination 
of these things was not in the cards,'' he said. 

Analysts say corruption has historically accompanied large economic shifts 
throughout the world, and Wolfensohn agreed. 

Pointing to the history of the United States, he said: ``It took a long while 
for the mechanisms of the state to come into play. That is what you're seeing 
in Russia today.'' 

The new Russia was still less than 10 years old. ``That's not a long time to 
develop a state,'' he noted. 

``So I don't think we should be too critical of ourselves in trying to help 
the Russians get a stable state,'' he said. 

``Trying to ensure that the Russian state moves forward in a manner that is 
balanced is probably of great interest (for other countries),'' he added. 

The World Bank is doing its best to monitor how the funds it has poured into 
Russia are being used, he said. 

``We have tried it in all our programs with independent audits and with 
direction of our funding to make sure that our particular money is not 
stolen. Hopefully, that will prove to be the case,'' Wolfensohn said. 

******

#5
East/West: Analysis From Washington--Giving Yalta A New Meaning
By Paul Goble

Washington, 13 September 1999 (RFE/RL) -- Yalta, the place where Moscow and 
the West divided Eastern Europe in 1945, is now the symbol of the new and 
independent role the countries between Russia and Germany and between the 
Baltic and Black Seas hope to play in the future.

On Friday and Saturday, 14 presidents and other senior officials from these 
and adjoining countries met there to promote cooperation among themselves, to 
denounce the emergence of any new dividing lines in Europe, and to demand 
that no decisions about them be taken without them.

This, the third international conference in a series launched in Vilnius in 
1997, represented the latest and most dramatic effort by these countries to 
repudiate the great power politics that dominated thinking at the Yalta 
conference in 1945.

At that first Yalta conference, Soviet leader Joseph Stalin, U.S. President 
Franklin Roosevelt and British Prime Minister Winston Churchill effectively 
created new spheres of influence in Europe without consulting any of the 
nations thus affected.

>From that decision, one that has many precedents in European and world 
history, many once independent and proud peoples were consigned to Soviet 
rule for nearly half a century. And none of those affected has ever forgotten 
or forgiven either that meeting or its results.

Now and largely as a result of the efforts of these nations themselves, they 
are once again in a position to be the active subjects of history rather than 
its mere objects. 

And thus virtually all of the leaders there echoed in one way or the other 
the words of Ukrainian Foreign Minister Boris Tarasyuk who said that " 
Yalta-99 has done away with the spirit of Yalta-45." 

But that celebratory spirit was undercut not only by the tight security 
arrangements surrounding the meeting but also by expressions of genuine 
concern about whether the goals of Yalta II, as some of the leaders described 
it, were likely to be achieved anytime soon.

Ukrainian President Leonid Kuchma, the host of this year's meeting, pointedly 
appealed to the European Union not to create a new "paper curtain" of travel 
restrictions in place to the now-collapsed "Iron Curtain" of the Cold War.

Such restrictions on the "free movement of law-abiding citizens of states 
aspiring for European integration," Kuchma suggested, could effectively 
divide the continent in ways that would make it difficult, if not impossible 
for states once submerged in the Soviet empire to recover. 

Then, Estonian President Lennart Meri called attention to one of the problems 
that many of the other leaders only alluded to. While the countries of this 
region are now the subjects of history, he said, "none of us are simply 
subjects."

As a result, the Baltic leader continued, his country and its neighbors 
"remain its objects as well, driven hither and yon by larger forces and 
larger states." Because of that, Meri said, the countries of this region 
cannot take anything for granted but must work together to defend their 
interests. 

And finally, in words that confirmed both the fears and the appeals of Meri 
and the others, the Russian representative at the Yalta meeting used the 
occasion to oppose the expansion of a Western institution that many of the 
countries in this region hope to join.

Speaking on Friday, Russian First Deputy Prime Minister Viktor Khristenko 
argued that "NATO's further expansion, including the Baltic states would lead 
to the creation of new division lines and would in no case assist in the 
consolidation of security."

Khristenko's appeal in itself reflects the continuing view of many in Moscow 
that it and no one else should play the dominant role in this region, a role 
that Stalin believed the West had ratified at the first Yalta conference.

But at the same time, Khristenko made these comments in a city that is now 
part of an independent Ukraine and that his audience consisted of leaders of 
countries who have either gained or regained their independence from Moscow.

And that fact demonstrates more clearly than anything else just how much the 
world has changed since 1945 and how significant Yalta II in fact was, both 
as a symbol of those changes and as an expression of hope for the future. 

******

#6
Los Angeles Times
September 13, 1999 
[for personal use only]
In Unlikely Surroundings, a Russian Scandal Is Born 
Inquiry: Sleepy shop in Swiss town purportedly played key role in alleged 
influence-buying scheme involving Yeltsin. 
By MAURA REYNOLDS

LUGANO, Switzerland--In this city of breathtaking Alpine peaks, medieval 
charm and world-class fashion, the little Fenini Shop is notable for being, 
well, uninspiring. 
The family-owned clothing store, tucked into a mini-mall near a highway 
offramp, sells a ho-hum selection of Levis and casual sweaters. Neighbors say 
they've rarely seen a customer in the place, and some snicker that the 
shopkeeper spends most of her time drinking Campari in the bar on the corner. 
It is, to say the least, not the kind of establishment one would expect 
to find at the center of an international scandal. But this unassuming shop 
is the purported linchpin of an alleged scheme to buy influence with one of 
the world's most powerful men--Russian President Boris N. Yeltsin--by 
providing credit cards to him and his two daughters. 
The credit card scheme is perhaps the most sensational of a stream of 
allegations over the last several weeks accusing top Kremlin officials of 
corruption and money laundering. Yeltsin is accused of at least tolerating, 
perhaps even encouraging, the unscrupulous activities of his aides. 
Although it is not yet clear where the scandal will end, it is clear 
where it began: in 1990, in this venerable, Italian-speaking spa town, when 
the Fenini Shop's owner, Franco Fenini, met a young Soviet emigre named 
Felipe Turover. 
Fenini was a 39-year-old banker, an official with the Lugano-based Banca 
del Gottardo, which was looking to build up business in the collapsing Soviet 
Union. Turover, who had left the Soviet Union about seven years earlier, was 
about 25, savvy, energetic, spoke five languages and had connections in 
Moscow. 
Fenini, now 48, says the two men became close friends despite their age 
gap. They took a trip to Mexico together in 1990 and over the next five years 
built up a lucrative debt collection business in Moscow. 
Turover ran the Moscow end, tracking down assets in Russia and claiming 
them on behalf of customers of the bank. Fenini handled relations with the 
bank's customers in Switzerland. 
According to Fenini, the two men had a private pact, which broke the 
bank's rules, under which they split the commissions from the reclaimed 
debts. Fenini says Turover decided in 1995 that he could continue the 
business on his own, disclosed the pact to the bank, and got Fenini fired. "I 
relied on him," Fenini told The Times. "Perhaps I was naive." 
Turover tells a different story. He says that they were never friends 
and that Fenini was blackmailing him for those five years, demanding and 
receiving a total of $3 million in return for not revealing Turover's income 
to Spanish tax authorities. Turover, a Spanish citizen, was avoiding taxes by 
declaring his tax residence as Russia. 
And this is where, according to Turover, the Yeltsin credit cards come 
in. In 1995, in an effort to force him to pay more and keep quiet, Turover 
says, Fenini showed him three credit cards: an American Express card in the 
name of Boris Yeltsin and two Eurocards in the names of Yeltsin's two 
daughters, Tatyana Dyachenko and Yelena Okulov. 
"He wanted to show me how high he is connected," Turover said in an 
interview. 
Turover says Fenini also showed him some bill summaries indicating that 
purchases had been made on the cards, though he says he doesn't recall how 
much or where. 
"I can't tell you the guy spent very much," Turover said, referring to 
Yeltsin. 
According to Turover, the bills run up on those accounts were mailed to 
the Fenini Shop and paid out of accounts belonging to a Lugano-based 
construction firm, Mabetex, or its officers. Mabetex has been the recipient 
of several contracts to refurbish Kremlin properties. Fenini handled 
Mabetex's accounts at the bank and went to work for Mabetex after he was 
fired. 
For his part, Fenini refuses to discuss the credit cards, answering 
every query with a curt "No comment." 
"All I can tell you is that the shop has never been used as a cover for 
bribery," Fenini said. 
Turover and Fenini are now suing each other in Swiss courts. Turover 
accuses Fenini of extortion and forgery. Fenini accuses Turover of making a 
false accusation. 

Ex-Partners Queried by Investigators 
Meanwhile, the Kremlin accusations have taken on a life of their own. 
Both men have been questioned by Swiss investigators, who are cooperating 
with the Russians to investigate whether Mabetex, through Fenini, tried to 
bribe Yeltsin or other Kremlin officials. 
So far, despite all the scrutiny of the case, no one has leaked to the 
public documents such as receipts with Yeltsin's signature. And there is no 
clear indication that Yeltsin knew about the cards or, even if he did, that 
he thought of them as anything other than a novelty or courtesy gift. 
Russian prosecutors say that even if they reconstructed a paper trail 
linking Yeltsin purchases to Mabetex, it wouldn't be possible to prove 
corruption unless it could be demonstrated that Yeltsin or his daughters knew 
Mabetex was paying the bills and that that was improper. 
"They may not have known where the money was coming from, who was 
financing their purchases," said suspended Russian Prosecutor General Yuri I. 
Skuratov, who oversaw the case until he was forced from office last spring. 
"They need to explain what they knew when they spent this money." 
That is something neither Yeltsin nor his daughters have done. The 
Kremlin press service has issued several statements denying that the Yeltsin 
family has bank accounts abroad, but there has been no official denial that 
the family has or has used foreign-issued credit cards. 
Meanwhile, the allegations have focused ever more attention on Mabetex, 
headquartered in a posh, checkerboard-patterned pink marble building a few 
blocks from Lugano's lakefront. 
According to public records in Lugano, Mabetex was founded in 1990 by a 
bankrupt local contractor. The company's flamboyant current director, Behgjet 
Pacolli, appears in public records as an officer of the company only in 1993. 
That was the same year that Pavel P. Borodin became manager of the Kremlin's 
property department, which administers a vast network of government 
buildings, country homes, resorts and other facilities. 
Borodin and Pacolli knew each other from Borodin's earlier tenure as 
mayor of the Siberian city of Yakutsk, where Pacolli helped build a city 
hospital. The relationship continued after Borodin moved to the Kremlin, with 
Mabetex gaining six contracts to provide furniture and other materials for 
various renovations, including four presidential residences. 
Borodin calls Mabetex a minor contractor for the Kremlin that has earned 
a total of $300 million over the past six years. He also denies reports that 
he serves as unofficial "treasurer" for the Yeltsin family. 
"Yes, I have renovated the Kremlin, the [government headquarters], the 
country residences," Borodin said. "But I never gave Yeltsin a ruble or a 
dollar." 
Swiss prosecutors have long kept an eye on Pacolli and Mabetex. As early 
as 1992, Pacolli was investigated for suspected money laundering, but the 
case was eventually dropped for lack of evidence, according to Luca 
Marcellini, a former prosecutor in the canton that includes Lugano. 
In recent years, the high volume of transactions on Mabetex bank 
accounts attracted attention from Swiss authorities as possible money 
laundering. But they were unable to open a new probe without indications that 
the money was of criminal origin. 
"First, you must have a crime," explained Dominique Reymond, spokesman 
for the Swiss attorney general's office. "Otherwise, you cannot have money 
laundering." 
The Swiss got the go-ahead after April 1998, when Russia and Switzerland 
concluded an agreement to tighten cooperation. Swiss Atty. Gen. Carla del 
Ponte went to Moscow to sign the pact and mentioned to Skuratov, her 
counterpart, that he might start looking into Mabetex. 
Skuratov says he did and, in October 1998, he sent Del Ponte's office an 
official request for assistance. Shortly thereafter, Del Ponte interrogated 
Turover, and on Jan. 22 she conducted a raid of Mabetex offices. 
During the raid, some press reports say, investigators seized the 
Yeltsin credit cards from a safe in Fenini's office--an assertion that Swiss 
prosecutors refuse to discuss but make a point of not denying. Fenini was 
detained by authorities at the same time and wound up spending 50 days in 
jail before being released pending trial on Turover's charges. 
Skuratov had also sent the Swiss a list of about two dozen names of 
Russians somehow linked to Mabetex, asking if they had Swiss bank accounts 
and whether there was suspicious activity on the accounts. On that list were 
Borodin and many of his associates and family members. 
Daniel Devaud, the Geneva magistrate leading the money-laundering 
investigation, said in an interview that a few names have since been dropped 
from Skuratov's list but that more have been added, including those of some 
offshore firms linked to the people on the list. He said many of the accounts 
have levels of activity that suggest money laundering. 
"There are flows of money on the accounts of individuals and offshore 
firms that are sufficiently large, considering the position of these persons, 
to keep the investigation going," Devaud said. 

Russian Denies Any Swiss Accounts Are His 
In Moscow, Borodin vigorously denies any wrongdoing. He has said that if 
there are Swiss bank accounts in his name, they were opened without his 
knowledge. 
But according to current Swiss regulations, that would be all but 
impossible. To open an account, a bank must have a copy of the account 
owner's passport. The Italian newspaper Corriere della Sera has published 
photocopies of Borodin's passport along with a form, apparently carrying his 
signature, that opened an account at the Banca del Gottardo in his name. His 
daughter and Pacolli are listed on the form as having power of attorney over 
the account. 
It is not known whether the Banca del Gottardo would have permitted 
Pacolli to use a power of attorney to open an account on Borodin's behalf; 
both Pacolli and officials from the Banca del Gottardo declined to be 
interviewed. 
New allegations seem to surface nearly every day. Last week, Corriere 
della Sera reported that Italian authorities are investigating the mysterious 
death of a Russian who is alleged to have carried cash--about $200,000 every 
other week--from Mabetex in Switzerland to an Italian subcontractor. That 
Italian furniture company is alleged to have channeled the money to bank 
accounts in Britain, Ireland and Canada. 
As the speculation spins ever more widely, prosecutors in Switzerland 
and Russia urge calm. They insist that only a thorough investigation on both 
sides can determine if there was any criminal wrongdoing in any country, 
whether bribery, money laundering or tax evasion. 
But in Russia, among Yeltsin's critics, there is concern that a thorough 
investigation is not in the works. In fact, they accuse prosecutors of 
deliberately delaying the probe and point out that the chief investigator was 
taken off the case days before he was to go to Switzerland to help depose 
witnesses. 
Reymond of the Swiss attorney general's office acknowledges that 
disarray in Russia has posed problems but insists that the various 
investigations are still on track. 
"Justice will be done sooner or later," he said. "In Switzerland, we 
have time." 

Times special correspondent Gabriella Broggi in Lugano contributed to 
this report. 

*******

#7
From
HELLO RUSSIA
"PRIVET ROSSIYA"
FREE RUSSIAN WEEKLY NEWSLETTER # 47
September 13, 1999

RUSSIAN POLITICAL MILL
(Tykhookeanskaya Zvezda, Yuri Strugov, September 8, 1999)
The election campaign in America is similar to carnival show with fancy
suits, drums, flag waving, distribution of free beer, TV shows, and witty
and cheerful candidates. Look at the people and their faces! They are happy.
They are happy to participate in this national American fiesta because any
results don't threaten them. On the contrary, they can expect only a better
life. From one candidate they may get reforming of already good health care
system, which will become even better. From another candidate they can
expect improvement of education system, which also is good, but will become
better...
And take a look at our elections. Angry persons and faces! Angry gestures!
Great poses! A lot of threats. And words, what are the words! It is even
impossible to say, that they are speaking, they roar up the words: "A Gang
of Eltsin - to the Court!". It is good enough, that they don't request to
kill him on the spot. We go to elections not as a fiesta, but rather as to
the Crack of Dooms.
The West chooses up the best ones from the good ones. They have stable
well-established economic and political life. Only moderate candidates
really apply for being an authority. The lovers of revolution for a long
time are pushed out of political life.
In Russia we choose from the extremes. We never knew anything different in
our political life. But the choice from extremes can not bring peace to the
society. It inevitably produces a struggle, which absorbs all our energies.
We have no time for economies and arrangement of better life.
We say that Eltsin according to the acting Constitution has an autocratic
authority. Really, there are some similarities. However, there is also a

difference, because an Emperor is a Master, who always wants transfer to his
children a comfortable and peaceful country. This idea leads up all his
actions and determines a selection of his environment.
The history will give the right evaluation of the President Eltsin. Today I
think that with all necessity and inevitability of changing of Soviet system
and creation of other state, his regime actually was a contingency. There
could be created another worse or better system and leader, but they could
not change our life. The reason is that our leader is not a Masters looking
into the future. He acts extremely spontaneously and in the same way selects
his team. He has no other support in society.
Such authority, basically, can not be responsible and honest. And only a
naive person can believe, that is possible to achieve something only by
change of people. And if the country is not a monarchy, than there should
come to power not the persons, but only political forces, which create a
leader and support his course. A party and its leader can not allow
themselves, what can allow a single hero. Party cares about its future
image, because it plans to win elections tomorrow, and also the day after
tomorrow.
But we don't have real parties. There is not already a Communist party not
to speak about all others. The present Communist party has some party
attributes, but actually it is only a group of people, who temporarily
united leading by insult and thirst of revenge.
LDPR also has some attributes of party, but it was established by marginals
for marginals.
We can mention "Yabloko" as a party of western type, but for our Russian
reality it is too sophisticated and obscure.
That's all. And the people are silent. For centuries they've got used to
wait for benefits from the leaders, and now are waiting from them the bread
and better life. They are tired of waiting - and cuss the leaders.
Our national mentality has entrusted to create the parties so necessary for
Russia to the nomenclature. It has become the historical mission of Russian
nomenclature to create parties for people. And nomenclature gives us created
by sheer laboratory synthesis "Our Home Russia". We called them "Our
Home -Gasprom"
Now "Fatherland", than "Whole Russia ", and also super block from simple
blocks "Fatherland" - " All Russia ". Of cause, it is possible to look
ironically at those "block builders". But what should do a voter, who wants
a new and sane Duma, and therefore does not want to vote for Communists?
All we have received a good lesson from the previous choices. Truly say, our
Russian voter doesn't knows what he really wants, but he precisely knows,
what does not want. And the nomenclature also understands and uses it to
gain a popular support.

*******

#8
New York Times
September 13, 1999
Letters
Russia, Not I.M.F., Squandered Money

To the Editor: 
It is unfair for Jeffrey D. Sachs (Op-Ed, Sept. 8) to blame the
International Monetary Fund for Russia's economic travails. After all, it
was Western leaders and economists who urged the Russians to install a
market economy without making sure the institutional framework that such
an economy requires was in place. 
The partial dismantling of Russia's central planning and the political
apparatus that supported it led to an interregnum in which neither central
planning nor the market was effectively functioning. This discredited the
market, thus encouraging resistance to further change. From this
miscalculation emerged the dog-eat-dog, gangster-dominated brand of
capitalism that rules in Russia today. 
PATRICK M. BOARMAN
San Diego, Sept. 8, 1999 

To the Editor: 
Re "Calling the I.M.F. to Account" (Op-Ed, Sept. 8): One way to deal with
the problem of corruption in Russia would be to empower the people most
hurt by the gross mismanagement of the country's medium and larger
companies -- the employees, customers and suppliers -- to throw out the
corrupt general directors of these firms. 
Less than a year after the 1992 privatization law was passed, President
Boris N. Yeltsin signed a decree limiting employee stockholders to
holding no more than 33 percent of seats on a company's board and allowing
the general director to fill the remaining seats. Yet today, in more than
70 percent of the companies, the employees still own the majority of the
shares. 
Even against these odds, in the past six months, stakeholders at two
plants have used their position as majority stockholders to overthrow the
general directors of their companies. With greater power on boards, others
would find it easier to do the same. 
JOHN SIMMONS
Chicago, Sept. 10, 1999 
The writer is a consultant on Russian privatization. 

To the Editor: 
Bribes from Swiss business people to Russian Government officials have
been cast in recent reports (news articles, Sept. 6 and 9) as another
instance of "Russian corruption." Why not a Swiss scandal, a Swiss crime
or Swiss corruption? Despite cultural and historical differences between
East and West and the conventional casting of the Swiss as a law-abiding
people and Russia as a criminal and corrupt country, it appears that
Western and Eastern Europeans are both capable of corruption. 
We should welcome the fact that corrupt officials may be exposed. We
must also be careful not to promote stereotypes. 
MICHAEL McFAUL
Washington, Sept. 9, 1999 
The writer is a senior associate at the Carnegie Endowment for
International Peace. 

*******

#9
STRATFOR.COM
Global Intelligence Update
September 14, 1999

Who Gains From the Moscow Apartment Bombings?

Summary:

The explosions in Moscow during the past week are among the most
deadly in Russia's recent past. The Russian administration blames
the Chechens, but we will not attempt the impossible task of
assigning blame. Rather, we will discuss who could benefit from the
bombings. We can find no evidence that Chechen rebels - or the
Russian mafiya, another suspect group - would benefit from bombing
Moscow apartment buildings. Only political forces in Moscow would
seem to benefit.

Analysis:

Explosions in two apartment buildings in Moscow have claimed over
200 lives in the past five days. No group has claimed
responsibility and the police have made no definitive statements
indicating they have specific suspects under investigation. While
there is not enough information to assign blame for these bombings,
we can eliminate some of the suspects and discuss who could gain -
namely, political forces in Moscow.

The target and death toll from the recent spate of bombings in
Russia are inconsistent with previous acts of political or criminal
retribution dating from 1996. Bomb attacks in Russia are forms of
political protest, gang warfare and ultra-nationalism. Hence, the
target is defined for each case, inhibiting collateral damage.
Strictly political bombings occurred in Moscow immediately before
and after the 1996 presidential elections, killing four and
injuring dozens in separate incidents. The highest toll on lives
lost in the republics until the recent attack was in North Ossetia
in 1998, with 53 dead and 100 wounded. The current casualty count
for the first bombing on September 9 is 92, higher than any single
bomb attack in Russia since World War II.

Russian leaders, including Moscow Mayor Yuri Luzkhov, have chosen
the Chechens as the preferred scapegoat. Interior Minister Vladimir
Rushailo, who was appointed head of the investigation into the
bombings, has also announced that his prime suspects are the
Chechens. Although Prime Minister Vladimir Putin's September 13
statement that the bombing was "a clear terrorist act" did not
specifically name the Chechens, proof that they were responsible
would legitimize further force in Chechnya. He said if a link is
found between the bombings in Moscow and the fighting in Dagestan,
the "federal government will consider itself within its rights to
use all resources at its disposal to rebuff the aggression."

Russians may be willing to believe that Chechens are attacking in
Moscow as well as the Caucasus, but it is highly unlikely. In his
statement of denial, rebel leader Shamil Basayev said, "We had
nothing to do with the explosion in Moscow. We never kill
civilians. This is not our style."

Based on the group's activities in Dagestan, Basayev is correct.
Generally, Chechen forces have targeted military and police forces.
The bombing early this month of Russian military housing in
Buinaksk killed 64 people, including members of military families.
The target, though, was clearly a military installation.

Chechen militants also have not attacked regions outside the ones
they intend to claim - Dagestan and Chechnya. And finally, since
the Islamic rebels have a spokesman and a press center through
which to publicize their fight, we would expect them to claim their
actions; they have not. These reasons lead us to believe that the
Islamic militants led by Basayev are not the perpetrators of the
Moscow bombs.

Organized crime is another potential but improbable suspect.
Russian organized crime is motivated by profit and expansion. The
mafiya is not known to commit mass murders, especially through such
overt actions as bombs large enough to demolish entire apartment
buildings. According to an FBI report, the Russian mafiya prefers
economic crimes such as fraud, extortion, theft, drug trafficking
and contract killing. The apartment building bombs were not tightly
controlled to target one or a few specific targets. Reports of
typical mafiya activities do not suggest that these explosions were
coordinated by the Russian organized crime element. Large-scale
bombings against civilian targets simply do not fit into the
Russian mafiya's modus operandi.

Having eliminated both the mafiya and Chechens as likely suspects,
it is now interesting to question who else could gain from the
bombings. With President Boris Yeltsin in his last year in office
and parliamentary elections due this December, the political
situation in Russia is tense and agitated. The war in the Caucasus
adds to the situation, and a Chechen bombing crusade could give
Russia license to execute a full force campaign against Chechnya.

The Moscow bombings could also push the Duma to declare a state of
emergency in the outlying regions. Preliminary debate on how to
enforce such a condition is scheduled for September 14. Until
recently, most of the nation was strongly against this type of
action.

Speaker of the Federation Council, the upper house of parliament,
Yegor Stroyev, firmly opposed emergency measures due to the
situation in Dagestan. However, after the second Moscow apartment
block bombing, he said there was "a need to consolidate the legal
base for combating the rampage of terrorism and crime." Speaker of
the lower house, the State Duma, Gennadiy Seleznev, said September
13 that the Duma would begin its September 14 meeting by discussing
a draft law on regulating a state of emergency in some regions.

A state of emergency would interfere with December parliamentary
elections. This could benefit Yeltsin, who would like to see the
elections postponed until he can ensure a loyal successor.
Yeltsin's opponents, such as former Prime Minister Yevgeny
Primakov, have long feared that Yeltsin would call a state of
emergency for political gain. The recent bombings could give him
the excuse to do this legitimately.

******

#10
Date: Mon, 13 Sep 1999 
From: "Ray Thomas" <R.Thomas@open.ac.uk> 
Subject: RE: 3496-Dolan

Tidying up my old papers I came across my Post Office Savings Bank account
book that showed a balance in January 1966 of One Pound, Nine shillings, and
Eleven pence - when I last used the account.

I telephoned the call centre of Post Office Counters - the privatised(?)
company now running the public face of the Post Office. They gave me the
number of National Savings in Glasgow. National Savings confirmed that my
account was still 'active' and that if I sent the book to them they would
update to decimal currency and credit interest. Post Office Counters would
give me a special prepaid envelope for the return. 

There was some feeling of pride in the British banking system that
demonstrated such ability to take care of its small savers! 

The point of this story is that it exposes the utopianism of the Chicago
School evident in Edwin Dolan's summary. The rule of law did not protect my
money. It was protected by governments that appreciated that people need
money as a store of value. There was trust on both sides.

That trust was not strong in Russia in the early 1990s and by 1998 had
vanished. Edwin Dolan provides his own answer to the question of 'Who lost
Russia?'. It is easy to preach the rule of law, but the law is only obeyed
if there is some degree of trust. A banking system for the rich and
powerful as well as the poor and powerless requires trust.

It is ironic that Edwin Dolan recommends us to read the monetarist Friedman.
Friedman makes money the centrepiece of the economy. The ideas of the
Chicago school failed to create money supply in Russia. Instead there is a
demonetised economy. 

Nevertheless I would support Dolan's suggestion as far as the early chapter
of Friedman's book 'Free to Choose' on the development of the Federal
Reserve System, where Friedman explains how banks *make* money. That
description should give an idea to any serious student of Russia what that
country is lacking. 

Friedman writes about 'one of the most misleading words in the English
language - the word 'deposit' .. If you deposit currency in a bank it is
tempting to suppose that the bank takes your greenbacks and deposits them
in a bank vault . . It does nothing of the kind. If it did, where would
the bank get income to pay its expenses, let alone pay interest on deposits?
The bank may take a few of the greenbacks and put them in a vault .. the
rest it lends to someone else, charging the borrower interest ... for every
$100 of deposits, all the banks together have only a few dollars of cash in
their vaults'. We have a 'fractional reserve banking system'. The system
works very well, so long as everyone is confident that he can always get
cash for his deposits ...'

Friedman here was writing about the early years of the century before the
Federal Reserve System was created in 1913. But the lessons of that period
and that of the banking crisis of the 1930s and that of the importance of
the FRSB system seem lost on the Chicago School, and the other advisers of
the credulous Russians. Has anyone been giving advice and help to Russia
as to how they should create a banking system from nothing? Something the
rest of the western world has taken for granted for more than a century.

*******

#11
Russian Officials Aid Money Laundering Probe in US

Washington, Sept. 14 (Bloomberg) -- Russian investigators are meeting with
U.S. officials in Washington this week to aid an investigation into
allegations Russians laundered money through Bank of New York Co., and
other banks. 

The Russians will discuss the case with the U.S. Justice and State
departments as well as with the Federal Bureau of Investigation, Russian
and U.S. officials said. 

``We must bring clarity to the case,'' Viktor Ivanov, deputy director of
Russia's Federal Securities Service, said on Russian television NTV. ``We
have some information to share to create an objective picture of the
issues.'' 

U.S. authorities are looking into allegations of Russian money laundering
of billions of dollars through U.S. and international banks, including the
Bank of New York, the 16th- largest U.S. bank. The investigation has also
prompted U.S. and German officials to call for increased scrutiny into
corruption in Russia's government and into how Russia spent loans given by
the International Monetary Fund. 

``There are certain areas where we may have some expertise that the
Russians may want to avail themselves of,'' U.S. State Department spokesman
James Rubin said. ``What we would expect to do is talk to those officials .
. . about what kind of forensic and other support we could provide on an
urgent basis. 

No Evidence 

The IMF says it's found no evidence any of its loans were caught up in the
alleged money-laundering operation of billions of dollars. 

A report last month by PricewaterhouseCoopers, commissioned by the Russian
central bank at the IMF's request, showed the country misreported its
foreign reserves to cover up its inability to meet targets laid out in an
IMF agreement. 

PricewaterhouseCoopers is carrying out the next phase of that audit now. 

The IMF, which is expected to decide next month whether to release the
second $640 million payment of a $4.5 billion loan for Russia, has come
under criticism for lending more than $20 billion to the country over the
past decade without insisting on a crack down on government corruption. 

``It's known everything all along, the problem is it chose to ignore what
it knew about corruption,'' said Fritz Ermarth, a former Central
Intelligence Agency official who specializes in Russian affairs. ``What it
has done is legitimize asset stripping, plundering and capital flight.'' 

U.S. President Bill Clinton this week urged Russian Prime Minister Vladimir
Putin to combat graft and take concrete steps to revive the economy, which
can be supported by international lenders. 

The Bank of New York already has fired two employees as the investigation
into money laundering widened. 

The bank was one of the first to do business with Russian banks and
companies after the collapse of the Soviet Union in 1991, helping them
attract foreign investment by selling American depositary receipts, or
shares that trade in the U.S. 

******