September 15, 1999   
This Date's Issues: 3500 • 3501 • 

Johnson's Russia List
#3501
15 September 1999
davidjohnson@erols.com

[Note from David Johnson:
1. Washington Post letter from Leon Aron: A Terrific Return on Investment 
in Russia.
2. Reuters: Be Vigilant, Stick Together, Paper Tells Russians.
3. Los Angeles Times editorial: Russia Mustn't Overreact.
4. The Times (UK) editorial: AFTER THE BOMB. Moscow's blame game must not 
lead to the abuse of power.
5. Itar-Tass: Lebed Says His Party Will Not Run for Duma.
6. St. Petersburg Times editorial: A Perspective On Our First 500 Papers.
7. Moscow Times: Natalya Shulyakovskaya, Skuratov: IMF Billions Sold on 
the Sly.
8. NTV: Poll Shows Fatherland-All Russia Bloc Leading Party.
9. NTV: Primakov Leads in Presidential Race.
10. Reuters: US House panel sets dates for Russia money hearing. (Banking
Committee).
11. Itar-Tass: US Senate to Hold Hearings on Russia Corruption.
(Foreign Relations Committee).
12. Congressman Dick Armey statement: Clinton-Gore Russia Policy 
"Greatest U.S. Foreign Policy Failure Since Vietnam" 
13. NEWS FROM THE House International Relations Committee Benjamin 
A. Gilman, Chairman: CITING THE ADMINISTRATION'S "WILLING DISREGARD 
FOR HIGH-LEVEL CORRUPTION" IN RUSSIA, GILMAN ANNOUNCES HEARINGS ON 
CLINTON/GORE POLICY.
14. The Russia Journal: Otto Latsis, Capital flight: truth, fiction.
15. Bloomberg: Panel Calls on IMF to Disclose All Reviews of World 
Economies.
16. Financial Times (UK): MONEY LAUNDERING: NY laws may apply.
17. Baltimore Sun: Will Englund, Cynicism, anxiety grip Moscow after 
bombings of apartments. Police sweep capital as terrorism suspicion 
shifts to politicians.]

******

#1
Washington Post
September 15, 1999
Letter from Leon Aron
A Terrific Return on Investment in Russia

In his article "Pumping Up the Problem" [Outlook, Aug. 15], Robert Kaiser
states that "in the context of Russian politics, the West's investment in
Yeltsin seems -- for now at least -- counterproductive." How about in the
context of Russian history?

Today we see the freest and most open Russian state and society in history;
the least militarized in history; the least menacing to its neighbors in
the world; the friendliest toward the West and the United States; and,
after 1,000 years of authoritarianism, totalitarianism and patrimonialism,
a Russia radically decentralized yet whole; a Russia with diverse and
dispersed centers of power; a Russia where courts rule against the Kremlin,
the army and the secret police; where the press is free from government
censorship; political opposition (no matter how radical) is free to
campaign and publish; and where free and competitive elections have become
a norm, as has private property. One wishes all the West's "investments"
were even remotely as "productive"!

One also wishes that Robert Kaiser -- an astute, serious and long-term
student of Russian affairs -- did not resort to the cliche of Mr. Yeltsin's
"using his army to shell the parliament." When, on the morning of Oct. 4,
1993, 12 tank shells (nine duds and three explosive charges) were fired at
the parliament building, it had been taken over by and become the
headquarters of the armed leftist militants and black-shirted antisemitic
thugs of Aleksandr Barkashov's Russian National Unity, Viktor Anpilov's
Working Moscow, and Stanislav Terekhov's Union of Officers, who a few hours
before used grenade launchers against the national television center and
rampaged through Moscow killing scores of civilians. Not one of the 1,041
members of the parliament (the Congress of People's Deputies) was killed,
injured or arrested, and scores (including radical Communists) ran for the
Duma two months later and were elected.

LEON ARON
Washington
The writer, a resident scholar at the American Enterprise Institute, is the
author of a biography of Boris Yeltsin. 

*******

#2
Be Vigilant, Stick Together, Paper Tells Russians

MOSCOW, Sept 15 (Reuters) - A popular Russian newspaper offered its own
checklist on Wednesday on how to keep residences safe for Russians shocked
and scared by two blasts which killed more than 200 people in Moscow. 

The weekly Argumenty i Fakty published brief instructions on how to try to
deter new explosions similar to the ones which destroyed two apartment
blocks in residential areas on September 9 and 13. 

Moscow authorities have taken unprecedented security measures to try to
calm people who have rarely, if ever, had to confront such a bombing
campaign. But they have acknowledged their efforts could not succeed
without cooperation from the residents and guests of the 10-million-strong
capital. 

Here is what the paper advises residents of apartment blocks, the main type
of accommodation in the sprawling city: 

- Form vigilante teams, ideally headed by neighbours who have some military
experience. 

- The teams should identify all people who own or rent apartments in the
building. 

- They should thoroughly examine cellars and attics for suspicious objects,
which if found should not be touched before police arrive. 

"A bomb can be disguised as a beer can, cigarette pack, toy, bottle, tube,
milk carton, parcel, box, trunk or barrel," the paper said. "A stretched
string, wire or plastic tape as well as traces of fresh renovation should
trigger your suspicion." 

- Make police or local authorities check shops and warehouses if they are
situated in your building as well as their registration documents. 

- Examine cars parked near your residence, especially those which seem
abandoned. 

- If possible, set up a round-the-clock duty rota. 

"It all looks like emergency situation, but we should take care of
ourselves," Argumenty i Fakty concluded. 

*******

#3
Los Angeles Times
September 15, 1999 
Editorial
Russia Mustn't Overreact 

Moscow has become a city of fear. Three terrorist explosions in the last
two weeks, one in a shopping mall, two others in apartment buildings, have
taken more than 260 lives. Authorities blame separatists from Chechnya, the
largely Muslim territory in the Caucasus whose independence movement in
1994 drew Russian troops into a disastrous and inconclusive 20-month war.
More recently Russia has had to deal with a rebellion in Dagestan, which is
being aided by neighboring Chechnya. The government has offered little
evidence to back its allegation of responsibility for the bombings, though
among a populace long hostile to Chechens and other Caucasian peoples the
claim is readily accepted. 
The bombings have diverted attention from Russia's high-level
financial scandals, some of them touching President Boris N. Yeltsin and
his family. They have also raised concerns that Yeltsin could use the
threat to domestic security to proclaim a state of emergency. That would
permit him to order postponement of December's parliamentary elections and
possibly even next summer's presidential balloting. In countries that have
only fragile links with democracy, states of emergency have a way of
remaining in force long after the emergencies have passed. Prime Minister
Vladimir V. Putin is right to oppose a state of emergency. 
The threat of domestic terrorism always puts the rule of law at some
risk. The challenge for Russia is to meet this crisis without recourse to
regressive measures. Timetables for the scheduled elections should not be
changed, first because postponement isn't warranted, second because Russia
urgently needs a parliament more effective than the one it has now and a
new president with a broader base of popular support. The terrorism danger
can be overcome without sacrificing the gains Russia has made toward
representative rule. 

******

#4
The Times (UK)
15 September 1999
[for personal use only]
Editorial
AFTER THE BOMB 
Moscow's blame game must not lead to the abuse of power 

Moscow's ten million residents, going in fear of the mystery terrorists
whose bombs have reduced two city apartment blocks to dust in the past
week, deserve the world's heartfelt sympathy. Sympathy is also due to the
Russian administration, lumbered with an extra crisis. It comes on top of
several other onerous tasks for Moscow: alleviating international suspicion
about the role of President Yeltsin's entourage in money-laundering scams;
a scandal over past KGB activity in the West; finally, working out how to
boost single-digit poll ratings in time to stand a chance of winning two
votes before next June and hanging on to power under a new leader. 

Popular panic has been the direct effect of the murderous bomb attacks. A
tense blame game has been its indirect effect. Russian officials suspect
the bombings are connected to a conflict between Moscow forces and
dark-skinned ethnic separatists from the south. They believe the
perpetrators are militant Muslims from Chechnya or Dagestan, retaliating
against recent Russian bombing of these territories. Officials point to a
recent threat by one southern militant, an Arab warlord and Muslim radical
known only as Khattab, to bring that conflict to Russia's heartland. 

But the separatists' figurehead, the Chechen warlord Shamil Basayev, denies
that either he or Khattab was involved; despite many similar threats during
Russia's war with Chechnya, Chechens did not attack civilian targets in the
north. Chechens and Dagestanis, for their part, suggest that the explosions
reflect purely Russian political tension, as a leadership fingered for
fraud abroad and heartily disliked at home foments a sense of national
crisis and scapegoats a "external enemy" on whom to refocus popular rage.
They, along with Russian communists and nationalists, believe Mr Yeltsin's
supporters want to use this crisis to suspend normal government and delay
the elections they fear losing. 

So far, there is little proof for either set of panic-driven allegations,
just as there is little proof yet of the Moscow media's recurring suspicion
that Osama Bin Laden, the high-profile terrorist suspected of masterminding
the bombing of US embassies in Africa last year, may have thrown in his lot
with the decidedly small-scale struggle for independence of non-Arab
Muslims from Russia's remote south. Moscow's pleas for foreign co-operation
to pin down any foreign involvement in the bombing should be heeded;
however, Moscow should be quicker to take up offers of help such as one
from Britain, ignored for several days, for technical and intelligence
assistance in protecting Russian cities against terrorism. 

It is clearly vital for the Russian administration to protect its citizens.
Given the suspicions now being aired, however, it must also be seen to be
above suspicion of manipulating this tragedy for its own ends. An existing
anti-terrorism law already provides for the creation of a counter-terrorism
command, more security checks, and curbs on some civil liberties; patrols
of Moscow's 30,000 apartment blocks are being organised. Although
parliament plans a further law on full emergency rule, that should not be
needed; nor should Moscow police fall prey to the traditional temptation to
arrest every dark-skinned man in the capital. A survey this week shows that
fewer than 6 per cent of Muscovites want a draconian state of emergency.
Russia's leaders must heed their wishes and refrain from going too far. 

*******

#5
Lebed Says His Party Will Not Run for Duma.

KRASNOYARSK, September 15 (Itar-Tass) - Krasnoyarsk governor Alexander
Lebed, who chairs the People's Republican party of Russia and the "Honour
and Matherland" movement, said on Wednesday that both organisations will
not participate in the parliamentary elections to the State Duma in December. 

Lebed, who is widely believed to be a presidential hopeful, told a press
conference that "it was a shame" to run in such polls. 

"One and the same people, of who everyone is sick and tired and who for ten
years know what is to be done, but do not disclose it, will run in the
elections. It is a shame to participate in such polls", he said. 

Lebed also said he would skip the meeting of the Federation Council on
Friday. The upper house is to discuss the war with Islamic extremists in
Dagestan and the situation in the country in general in connection with the
recent terrorist acts. 

"There is nothing to do there", Lebed said. He explained that "as the law
on the introduction of a state of emergency does not exist, there is
nothing to introduce". 

"The discussion of how bad it is will go without me", he added. nec

*******

#6
St. Petersburg Times
September 14, 1999
EDITORIAL
A Perspective On Our First 500 Papers

IN many ways, St. Petersburg has become a completely different city since 
this paper was first published over six years ago. Streets are better paved, 
buildings look smarter and the number of businesses, cafes and clubs has 
risen exponentially.

Instead of a mayor, we now have a governor, who is kept in check not by a 
City Soviet, but a Legislative Assembly. A city constitution has been adopted 
to limit the governor's powers and make him more accountable to local 
lawmakers and - ideally - the average voter.

Although much has changed, a brief look back at our previous centenary 
editions shows, strikingly, how much hasn't. In issue 100, for example, the 
"hot" stories were the capture of the "last rebels in Chechnya;" a resolution 
in the debate with Germany over World War II trophy art; and the "urgent 
need" to solve prison overcrowding. Well, Chechen rebels are still shooting 
aircraft out of the sky, trophy art is still a contentious issue, and local 
prisons often keep 15 inmates in cells built for six. 

Issues 200 and 300 both carried front-page stories about former navy Capt. 
Alexander Nikitin. In issue 200, Nikitin had yet to be officially charged 
with treason for co-authoring a report condemning the navy's handling of its 
nuclear waste, but by then he had already been held by the FSB for seven 
months. In issue 300, Nikitin had just been charged with treason for the 
fifth time. Today, Nikitin has just been charged for the ninth time and is 
currently awaiting the date of his new trial.

In issue 400, we reported that making St. Petersburg an autonomous republic 
of Russia was a contentious debate among candidates campaigning for the 
Legislative Assembly - the same contentious debate we published on the 
front-page of our very first issue.

Since Tuesday, May 11, 1993, this newspaper, like this city and this country, 
has been constantly adapting to the rough and tumble reality of post-Soviet 
society. But one thing has remained constant: our philosophy of publishing no 
hidden advertising - just factual, independent and informative reporting.

As simple as this concept sounds, it is a rarity in Russia, which might 
explain why past and present Times' staffers have contributed so much of what 
is read by the English-speaking world about events in Russia. Former Times' 
editors and journalists have gone on to have their stories and opinions 
printed in virtually every major English-language newspaper in the world, 
including The Wall Street Journal, The New York Times, The Sunday Times, Los 
Angeles Times, The Guardian and The Boston Globe, to name a few.

So in this, our 500th issue, we feel it timely to reaffirm the basic 
commitments that have allowed us to make it this far and, hopefully, will 
sustain us into the future: to present the news as accurately as possible, to 
admit our mistakes when we get it wrong and, above all, never to give up in 
our search for the truth.

*******

#7
Moscow Times
September 15, 1999 
Skuratov: IMF Billions Sold on the Sly 
By Natalya Shulyakovskaya
Staff Writer

Almost $4 billion of last year's IMF bailout never entered Russia but was 
instead sold by the Central Bank directly to Russian insider banks, Russia's 
suspended prosecutor general said. 

The dollars from the International Monetary Fund loan were sold directly to 
those banks, bypassing the Russian currency markets - using correspondent 
accounts that the Russian institutions held at the Bank of New York, 
Prosecutor General Yury Skuratov said in an interview Monday at his dacha in 
the Arkhangelsoye goverment complex. 

"I cannot understand why only $471 million went to support the ruble, and the 
rest - without even landing in Russia - was sold to commercial banks." 

Last July, the IMF put together a $22.6 billion bailout package aimed at 
restoring confidence in the Russian economy. 

Skuratov's revelations make it clearer than ever that most of that money 
instead went to bail out a handful of well-connected banks as they fled 
Russia's ill-fated market for ruble-denominated short-term treasury bills, 
known as GKOs. 

In a memo that Skuratov prepared for President Boris Yeltsin but was never 
able to submit to him, he detailed where much of the IMF's $4.8 billion first 
installment - sent to Russia on July 23, 1998 - went during the hectic 25 
days that were left before Moscow's financial armageddon. 

"An analysis of the Central Bank's use of the account where the IMF 
stabilization loan was deposited showed that $4.4 billion was sold from that 
account between July 23, 1998 and Aug. 17, 1998. Of that money, $3.9 billion 
was sold directly to Russian and foreign banks, bypassing the trading session 
at the Moscow Interbank Currency Exchange. And only $471 million went to 
support the ruble exchange rate on MICEX. Another $100 million went for 
intervention on other [currency] exchanges." 

That $3.9 billion was used by 18 large banks to convert their GKOs into 
dollars just days before Russia defaulted on the short-term bonds - which had 
been paying yields as high as 200 percent, he said. 

And it seems it was shipped out of Russia with the help of the Bank of New 
York. "These operations between the correspondent accounts of the Central 
Bank and these banks were done with the involvement of the Bank of New York," 
Skuratov said. 

The bailout cash in fact never even made it to Russia, Skuratov said. 

Ironically, the Central Bank's sales to the Russian banks bear some 
similarity to current IMF measures aimed at ensuring that fresh loans to 
Russia do not go astray. The latest IMF credits to Russia are channeled 
through a special account in the United States before being used to meet 
Russian obligations to the Fund, without ever entering Russia. 

The money went from the IMF to the Central Bank's U.S. account and then to 
Russian banks' Bank of New York accounts, with the Russian banks paying for 
dollars by depositing rubles with the Central Bank. 

The money was sold through special arrangements that the Central Bank had 
already struck with major banks operating on the Russian market, under which 
they could purchase hard currency directly from the Central Bank. 

"We got an explanation that the deal was justified because it was lifting the 
pressure from the ruble by satisfying the banks' dollar needs even before 
they turned to the exchange," Skuratov said. 

Skuratov was unable to say at what rate the dollars had been sold. However, 
the PricewaterhouseCoopers report into the Central Bank's use of the July 
bailout shows that banks were able to buy dollars from the Central Bank at an 
average rate of 6.33 rubles to the dollarduring July and August 1998, while 
the average MICEX rate for the same period was 6.97. 

"There was a list of 18 banks, nearly 20. All of our major banks were on that 
list. SBS-Agro was listed, as was Uneximbank," Skuratov said. He said he 
could not reveal the entire list. 

The Bank of New York is now the subject of a probe into whether or not some 
$4.2 billion to $10 billion that moved through its accounts between October 
1998 and May 1999 included ill-gotten gains being "washed clean" by Russian 
mobsters. 

Investigators' suspicions regarding money coming from Russia were reportedly 
fueled by a surge in capital flight from that country to the United States in 
the wake of last year's crash, according to a report in The New York Times 
last month. 

The Bank of New York has denied any impropriety regarding its business 
dealings with Russia. The bank, one of America's oldest and largest, had 
built a dominant position in servicing Russian customers wanting to do 
business in or through the United States. 

Skuratov opened an investigation last September into the Central Bank's role 
in the August financial crash. That investigation was one of several that 
have ground to a halt since the Kremlin succeeded in effectively ousting the 
prosecutor general earlier this year. 

He first submitted his resignation Feb. 1, after a meeting with then-head of 
the presidential administration Nikolai Bordyuzha, Skuratov said. Bordyuzha 
pressured him at that meeting to resign because of the investigations into 
Swiss-based contractor Mabetex, he added. 

Mabetex has since become the center of allegations that top Kremlin figures - 
including Yeltsin, his two daughters, and the head of the president's 
business administration, Pavel Borodin - accepted bribes from the firm in 
return for lucrative contracts to aid in the renovations of the Kremlin 
palaces. 

When he first began investigating Mabetex, Skuratov kept the probe secret. 
Only he and one other investigator at the Prosecutor General's Office knew 
about the probe. He declined to identify that investigator. 

The first person that he informed outside of his own office was Yevgeny 
Primakov. Skuratov went to Primakov after he was appointed prime minister 
last fall. Soon after he was confirmed by the State Duma, the lower house of 
parliament, Primakov had declared a tough stand on corruption. 

Skuratov, who had sent a letter to Swiss prosecutors asking for assistance 
into the Mabetex investigation, said the Kremlin began harassing him after 
receiving a copy of the letter, which had been used as the basis of the Swiss 
search of Mabetex offices in January. 

Regarding the investigation into the IMF money, one major question left 
unanswered was whether or not the flood of cash he had traced as far as New 
York had been the result of insider trading on GKOs, Skuratov said. 

"Some of those individuals who got rid of their GKOs right before the August 
financial crisis turned their GKOs into hard currency and funneled it to the 
Bank of New York," he said. 

Earlier this month, Skuratov said that former First Deputy Prime Minister 
Anatoly Chubais was among 780 former and current officials under 
investigation on suspicion of insider trading in GKOs. 

Chubais has denied ever using inside knowledge to trade GKOs. Furthermore, he 
has said that he only ever traded in the debt instruments when he was a 
private citizen and that he in fact lost money on his GKO holdings. 

*******

#8
Poll Shows Fatherland-All Russia Bloc Leading Party 

NTV
September 12, 1999
[translation for personal use only]

An opinion poll conducted by the Public Opinion 
Foundation this week on the State Duma elections to be held on 19th 
December, has indicated that the parties headed by the leading 
politicians, aiming at the presidential post, would receive the majority 
of the votes. 

The Fatherland-All Russia election bloc, headed by former Prime Minister 
Yevgeniy Primakov, Moscow mayor Yuriy Luzhkov and St Petersburg governor 
Vladimir Yakovlev, was well ahead of its rivals, supported by 23 per cent 
of those polled. Russian Communist party headed by Gennadiy Zyuganov 
followed with 20 per cent. Yabloko, whose federal election list includes 
former Prime Minister Sergey Stepashin as No 2 after Grigoriy Yavlinskiy, 
received 12 per cent of the votes. 

Among other federal parties and election blocs, only the Liberal 
Democratic Party of Russia managed to receive 5 per cent. The rest, 
including the People's Republican Party of Krasnoyarsk governor Aleksandr 
Lebed, the Union of Right Forces of former Prime Minister Sergey 
Kiriyenko, Our Home is Russia of ex-premier Viktor Chernomyrdin, were 
below the 5 per cent barrier. 

It is worth noting that according to the results of the same poll 
conducted among Muscovites, only three all-Russian parties have crossed 
the 5 per cent barrier. Fatherland-All Russia leads again with 26 per 
cent, followed by Yabloko with 16 per cent. However, the Communist party 
position in Moscow happened to be much weaker than at Russiawide level: 
Zyuganov was supported only by 8 per cent of those polled. 

The results of the poll, representing 56 towns and villages of 29 
Russian regions, were broadcast by Russian NTV "Itogi" programme at 1700 
gmt on 12th September. The poll was carried out on 4th-5th September 
1999. The number of pollsters was not indicated. 

The Moscow poll was carried out on 6th September among 1,000 
respondents. 

******

#9
Russian Poll: Primakov Leads in Presidential Race 

NTV
September 12, 1999
[translation for personal use only]

An opinion poll conducted by the Public Opinion 
Foundation this week on the presidential elections to be held next year 
has indicated that former Prime Minister Yevgeniy Primakov leads with 19 
per cent of votes, followed by Communist party leader [Gennadiy] Zyuganov 
with 17 per cent. 

Lagging behind are Moscow mayor [Yuriy] Luzhkov with 9 per cent, Yabloko 
leader Grigoriy Yavlinskiy with 8 per cent, former Prime Minister Sergey 
Stepashin, now in alliance with Yavlinskiy, with 7 per cent of those polled. 
In the third group of potential contenders for the Kremlin are the 
leader of the Liberal Democratic Party [of Russia], Vladimir 
Zhirinovskiy, with 6 per cent, Krasnoyarsk governor Aleksandr Lebed with 
4 per cent, and acting Prime Minister Vladimir Putin with 2 per cent of 
the pollsters. 

In the second theoretical poll pollsters pitted current politicians 
against former Russian leaders. Former Communist party general 
secretaries Leonid Brezhnev and Yuriy Andropov topped the poll with 12 
per cent each, followed by Primakov with 10 per cent. Joseph Stalin and 
Zyuganov tied up with 7 per cent, followed by Luzhkov with 6 per cent and 
Yavlinskiy with 5 per cent. Emperor Nikolay II and Stepashin tied up with 
4 per cent. Vladimir Lenin came bottom with three per cent of the votes. 

The results of the poll, representing 56 towns and villages of 29 
Russian regions, were broadcast by Russian NTV "Itogi" programme at 1700 
gmt on 12th September. The poll was carried out on 4th-5th September 
1999. The number of pollsters was not indicated. 

******

#10
US House panel sets dates for Russia money hearing

WASHINGTON, Sept 14 (Reuters) - The House of Representatives Banking 
Committee said Tuesday its promised hearings on allegations that Russian 
mobsters laundered billions of dollars through the U.S. financial system 
would start with two sessions on Sept. 21-22. 

Committee Chairman James Leach, an Iowa Republican, said he was interested in 
putting the facts on the public record in a fair manner, with a view to 
assisting Russia's transition to a democracy. 

``My principle concern isn't 'Who Lost Russia?,' but what can be done to save 
Russian democracy,'' Leach said in a statement. A witness list would be 
issued later, he said. 

U.S. investigators are probing whether Russian organised-crime figures may 
have transferred as much as $10 billion in ill-gotten gains through accounts 
at Bank of New York (BK.N). 

There have been allegations that international aid advanced to Russia through 
the International Monetary Fund was also laundered, though the IMF has said 
it has no evidence of this. 

*******

#11
US Senate to Hold Hearings on Russia Corruption.

WASHINGTON, September 14 (Itar-Tass) - The US Senate will hold hearings on 
corruption in Russia on September 23. 

The hearings will in particular address international loans to Moscow in the 
light of the scandal over the Bank of New York whose operations are probed 
for money laundering deals by Russian organised crime groups, a high-ranking 
official of the apparatus of the Senate's foreign affairs committee told 
Itar-Tass on Monday. 

The official, who preferred anonymity, said the hearings were motioned by 
foreign affairs committee chairman Jessy Helms, an influential North Carolina 
Republican. He is expected to preside at the hearings. 

The hearings will not focus on the Bbank of New York case alone. They will be 
broader, the source said. 

He said the hearings will look at the "situation with corruption in Russia" 
and at policies of Washington and Moscow toward corruption. 

The hearings "will be called to determine ways of continuing the assistance 
to Russia's reform and developing its democratic system, the committee 
official said. 

We are not going to put anybody before the choice of giving or denying 
support to Russia at the hearings. 

What is at issue is how the US could give the assistance, how to avert misuse 
of it and discreditation of the very process of democratisation, he said. 

He said American law-makers want to be sure that the US' aid is not stolen 
and that Russian officials take more efforts to improve the well-being of 
people, he said. 

*******

#12
>From US Congressman Dick Armey
Clinton-Gore Russia Policy 
"Greatest U.S. Foreign Policy Failure Since Vietnam" 
September 14, 1999

House Majority Leader Dick Armey delivered the following statement today at a 
Capitol Hill press conference where he announced five specific steps that 
Congress will be taking in the coming days to begin to address the failure of 
the Clinton-Gore Administration's policy towards Russia:

We're gratified by today's overwhelming vote for the Iran Nonproliferation 
Act. By acting today we've helped deter Russian organizations from aiding 
Iran's ballistic missile program. 

This action is just the first of many congressional steps required to address 
the failure of the Administration's Russia policy. 

You may recall that last year, Congress decided not to enact a similar bill 
over the President's veto because the Administration asked for more time to 
let the President's policy work. 

But it's clear there is nothing left of that policy to save. 

The unparalleled financial graft in Russia—much of it apparently involving 
money from US taxpayers—marks the effective end of the Clinton-Gore 
Administration's approach to Russian reform. 

The disastrous results speak for themselves. The stated purpose of the 
Clinton-Gore policy was to help Russia become a peaceful and productive free 
market democracy. Instead, Russia has become a looted and bankrupt zone of 
nuclearized anarchy. 

This is a tragedy beyond words. It is a tragedy first for the Russian people, 
who have endured immense suffering in this century and now must endure more. 
It is a tragedy for the United States and all law abiding nations. After 
prevailing in a decades long Cold War, we'll likely continue to face a 
Russian security threat for another generation or more. 

The Clinton Administration's Russia policy is the greatest U.S. foreign 
policy failure since Vietnam. 

We need to find out what went wrong and where we go from here. It is time for 
Congress to ask, Who lost Russia? 

For this reason, we'd like to call you attention to the following: 

First, we intend to see the Iran Nonproliferation Act become law – even if we 
have to override the President's veto. If this Administration is unwilling to 
stop the flow of arms technology out of the former Soviet Union, Congress 
will require it to do so. 

Second, we strongly believe that the Administration should instruct the IMF 
to provide no further aid to Russia until the nonpartisan IMF commission now 
meeting issues its report. Fundamental changes in the IMF may be required 
before assistance to Russia can resume. We need to allow time for this 
reappraisal. 

Third, we look forward to a comprehensive set of hearings by Chairman Leach 
in the Banking Committee. Beginning next week, these will explore in detail 
the loss of American aid in Russia. The American taxpayers sent billions to 
Russia—and all of it may well have been lost or stolen. We need an 
accounting. 

Fourth, I am today asking Chairman Saxton of the Joint Economic Committee to 
analyze the IMF's new plan to sell part of its gold reserves. Given the 
manifest irresponsibility with which the IMF handled its loan programs to 
Russia, we need to ask if the IMF deserves even greater resources through 
gold sale proceeds. 

Finally, the International Relations Committee will be holding a series of 
hearings on overall U.S. policy towards Russia, and specifically the 
Gore/Chernomyrdin Bi-national Commission. 

******

#13
NEWS FROM THE House International Relations Committee
Benjamin A. Gilman, Chairman 

DATE: September 14, 1999
FOR RELEASE: Immediate
Contact: Lester Munson, Communications Director (202)225-5021

CITING THE ADMINISTRATION'S "WILLING DISREGARD FOR HIGH-LEVEL CORRUPTION" IN 
RUSSIA, GILMAN ANNOUNCES HEARINGS ON CLINTON/GORE POLICY 

WASHINGTON (September 14) - In conjunction with House Leadership, U.S. Rep. 
Benjamin A. Gilman (20th-NY), Chairman of the House International Relations 
Committee, announced today that his committee would hold a series of hearings 
on U.S. policy toward Russia. His full statement follows: 

"I share the leadership's serious concern over the state of US-Russian 
relations. 
"As Chairman of the International Relations Committee, I have publicly stated 
my concern about Russian foreign policy and developments within Russia, 
particularly the extensive corruption apparently not just abetted by the 
Yeltsin government, but engaged in by some of its highest officials. 

"Today the House is considering my bill to place sanctions on Russian 
enterprises that are proliferating dangerous missile technology to Iran - and 
to cut US funding of Russia's participation in the International Space 
Station if the Russian Space Agency is found to be part of that 
proliferation. 

"Remarkably, that proliferation is but one of the many problems we face with 
the current government in Russia. 
"The Yeltsin government provides not just technology for weapons of mass 
destruction to Iran, but arms and technology to China as well, and may have 
attempted to provide dangerous military technology to Saddam Hussein in Iraq. 
It also supports the outright dictatorship of Alexander Lukashenko in 
Belarus. 

"The Yeltsin government sent troops into Kosovo to occupy a key airport in an 
obvious obstruction of the deployment of NATO peacekeeping forces - while 
claiming it didn't know who issued the orders. 

"Russia continues its espionage against the United States and recently sent 
nuclear-capable bombers to test our defenses -- while accepting US aid to 
help it meet its START-I Treaty obligations. 

"Russia has sought to throttle its newly-independent neighbors by fomenting 
ethnic conflict and manipulating their energy pipelines. Its 1995-96 war in 
the region of Chechnya was replete with the deaths of thousands of innocent 
civilians, both Russian and Chechen. 

"It now looks as if Russia is on the verge of a new war in the region of 
Dagestan, and the stories of internal corruption and money-laundering 
alleging involvement of the highest officials of the Yeltsin government have 
become too numerous to keep track of. 

"We have allocated almost $6 billion in aid to Russia over the past eight 
years, provided over $20 billion in loans from international financial 
institutions, arranged for generous re-schedulings of its government debt, 
paid the Russian Space Agency to participate in the Space Station project, 
and encouraged US trade and investment in Russia. 

"The President and Vice President, early in their Administration, made it 
their objective to each meet twice yearly with their Russian counterparts - 
the Vice President even set up a special commission for that purpose. 

"But that generosity has apparently gone hand in hand with a willing 
disregard for the high-level corruption within the Yeltsin government -- and 
the alleged squashing of internal dissent to the Administration's Russia 
policy within the State Department as far back as 1993. 

"The question I want answered is this: Why did the President claim that 
Russia was a "success story" for his foreign policy in his 1996 re-election 
campaign when today, less than three years later, people are asking ‘who lost 
Russia?' 

"I intend to convene comprehensive hearings of our Committee on International 
Relations to address this and many other questions regarding the 
Administration's Russia policy in response to this call from the Republican 
congressional leadership." 

******

#14
The Russia Journal
www.russiajournal.com
September 13-19, 1999
Capital flight: truth, fiction
By Otto Latsis

People steal in Russia. They've been at it for hundreds of years, a fact 
widely reflected in literature. Of all that has come out of the Bank of New 
York money laundering scandal, that is the only fact Russians accept without 
question.

To simplify statements made by the media and some U.S. politicians, the 
scandal boils down to the following: Semyon Mogilevich, a little-known 
swindler, stole money amounting to five times Russia's annual budget, and for 
some reason transferred it all to the Bank of New York - which employs the 
wife of a former Russian representative to the International Monetary Fund 
(which now should stop lending to Russia).

The exaggerations and clear absurdity surrounding the allegations point to 
behind-the-scenes political interests - not so much American as Russian.

That much is agreed upon in Russia, as is the fact that the scandal is 
damaging for the country. But laughing at the absurdity of it all won't make 
the problem go away.

And the problem is not Mogilevich, but capital flight from Russia.

What, then, is actually happening here?

The $4 billion transferred through the Bank of New York in a short space of 
time, one of the scandal's few proven facts, may or may not be of criminal 
origin. But wherever it comes from, it proves that capital flight exists. 
That is not news: estimates put capital flight from Russia at $1.5 billion a 
month, or around $18 billion each year. 

There is also a return flow. Recent reports say that more money is coming 
back to Russia from Cyprus, for example, than is going out. But on the whole, 
more goes out than comes in.

The simplest form of capital flight is to just not receive payment in Russia 
for export goods - oil, metals, and so on. In some cases, these operations 
are completely legal. In others, money is not so much laundered: it becomes 
dirty. 

Legal money becomes illegal if it is hidden abroad to evade taxation. But 
Russians have mixed feelings about this kind of "crime," as they know that 
Russian tax legislation makes it impossible for any firm to operate entirely 
within the law.

A larger and more criminal source of capital flight involves imports. 
Importers state a deliberately low price on their customs declarations. Money 
is thus "saved" and then transferred to an offshore account, from which 
suppliers take their cut. This scheme involves not just Russian firms, but 
also their foreign suppliers.

Of course, some of the money leaving Russia is indeed traditional "laundry" - 
revenues from drug trafficking and other criminal activities. But most 
capital flight from Russia is about keeping money safe, and in many ways, it 
is perhaps the best option.

Political uncertainty is the main cause of capital flight. Just think back 
over what intelligent but conservative former Premier Yevgeny Primakov said 
during his eight months as prime minister. He began with suggestions that 
people may no longer be able to freely buy and sell foreign currency. He 
never went ahead with them, but whoever was able to stashed his currency in a 
safe place and isn't likely to bring it back any time soon.

Then Primakov revived the Soviet-era term, "economic crimes," and asked that 
room be made in prisons for "economic criminals" - entrepreneurs, in other 
words. 

Then there was his talk of setting up a fund to protect investors from 
political risk in Russia, an idea that betrayed Primakov's misunderstanding 
of the issue. Some countries have set up such funds, but to protect their 
businesspeople from political risk in other countries. No government has ever 
suggested protecting investors from itself.

And all this comes from the man who could well become Russia's next 
president. Until the presidential elections are over and Primakov makes clear 
his real plans in the event that he wins, capital is not going to start 
flowing back into Russia. 

Until then, maybe it is better for money on the run to remain in foreign 
banks that show such alacrity in diddling their clients, as is the case in 
Russia. The money will be safer abroad, and when the time is ripe, it will 
return to Russia as foreign investment. After all, where else is it to go?

*******

#15
Panel Calls on IMF to Disclose All Reviews of World Economies

Washington, Sept. 14 (Bloomberg) -- The 
International Monetary Fund should release all its annual reviews of national 
economies, a move that would give investors and lenders a better idea of what 
risks they are facing, an advisory committee said. 

The IMF publicly releases the reviews, called ``article IV consultations,'' 
only at the request of the country being reviewed. The fund has made public 
the results of 80 percent of the reviews completed so far this year. 

``This is self-selection,'' said John Crow, the former governor of Canada's 
central bank and the chairman of the IMF- appointed committee that evaluated 
how the lender watches over the world's economies. ``We propose that they all 
be published.'' 

The committee released a report today as pressure builds on the IMF to become 
more vigilant over both its lending and over countries potentially facing 
economic trouble. U.S. investigators are probing allegations that some IMF 
loans to Russia were caught up in a money-laundering scheme through U.S. 
banks, prompting U.S. House Republicans today to call for a halt to IMF 
lending to Russia. 

The IMF says it has found no evidence its money was diverted. 

The committee also found that Thailand, Brazil, South Korea and the Czech 
Republic largely ignored the IMF's advice before they tumbled into economic 
crises in recent years. 

``It was not that clear to us that the authorities paid that much attention 
to the IMF's advice,'' Crow said. ``Domestic politics overrode the fund's 
advice, I would say, in every case.'' 

IMF Debate 

The IMF's executive board is debating whether to release results from all 
economic reviews, which sum up a nation's economic performance and evaluate 
the soundness of monetary and fiscal policies, said Thomas Bernes, the IMF 
executive director for Canada, who was in charge of selecting the committee's 
members. 

The IMF does a better job with its broader reviews of the world's economic 
health, such as its World Economic Outlook, to be released next week, than it 
does with individual country reports, Crow said. 

One IMF official said change won't happen overnight. 

``There is a lot of ground we need to make up,'' said Leslie Lipschitz, 
deputy director of the IMF policy development and review department. 
``Movement on things like this is necessarily slow. With 182 member 
countries, it takes a while to get everybody on board with any initiative.'' 

*******

#16
Financial Times (UK)
15 September 1999
[for personal use only]
MONEY LAUNDERING: NY laws may apply 
By Thomas Catan in New York and Jimmy Burns in London

US prosecutors investigating individuals alleged to have laundered up to 
$10bn in Russian funds through the Bank of New York may bring any charges 
under New York State laws against "enterprise corruption", rather than under 
US money laundering laws.

According to US investigators, such a move reflects the difficulty 
prosecutors face in establishing the criminal origins of the funds. It also 
reflects the increasing complexity and sophistication of financial crime.

To prove money laundering, prosecutors must show the funds came from a 
specific list of 176 US crimes. But when it comes to crimes committed on 
foreign soil, only a small handful apply.

Evading foreign taxes or diverting foreign aid - both cited in news reports 
as possible sources of the funds - would not be grounds for conviction under 
the federal money laundering laws.

Enterprise corruption is a New York state version of the federal 
Racketeering-Influenced & Corrupt Organisations Act and targets anyone who 
intentionally "participates in the affairs of an enterprise by participating 
in a pattern of criminal activity". The law is used fairly regularly by the 
Manhattan District Attorney's office against financial institutions based in 
the city.

By contrast, no US financial institution has been tried under the federal 
money laundering laws this decade, according to Charles Intriago, publisher 
of the Miami-based newsletter, Money Laundering Alert.

The case against Citibank - which is under investigation for allegedly 
laundering $90m for the brother of Mexico's former president, Carlos Salinas 
- has languished for nearly four years. Despite a report by Congress' audit 
arm, which said bank officials "facilitated a money-managing system that 
disguised the origin, destination, and beneficial owner of the funds 
involved", it seems prosecutors are unable to show the money stemmed directly 
from a relevant crime.

In the Bank of New York case, investigators are also struggling to find a 
response to the increasing complexity of financial crime, which often blurs 
boundaries between legitimate business, crime and government enterprise. 
"This doesn't fit the neat paradigm we grew up with," said Frank Cillufo, an 
expert on Russian organised crime at the CSIS think tank in Washington DC.

"You almost need to look at [Russian organised crime] from a business 
perspective. In the US we've seen them engaged in crimes that are more 
sophisticated, such as gas excise tax scams, health care fraud, penny stock 
manipulation, all in cahoots with other criminal organisations," he said.

Yesterday, the Manhattan District Attorney's office would neither confirm nor 
deny that it was considering bringing charges of enterprise corruption 
against anyone in connection with the Bank of New York case.

******

#17
Baltimore Sun
15 September 1999
[for personal use only]
Cynicism, anxiety grip Moscow after bombings of apartments
Police sweep capital as terrorism suspicion shifts to politicians
By Will Englund 
Sun Foreign Staff 

MOSCOW -- A deep sense of suspicion settled over this city yesterday as
Russians tried to grasp what could be behind the apartment-house bombings
that have killed hundreds and thrown the whole country into a state of
anxiety.

Police searched traffic coming into Moscow and said they had checked nearly
all the city's 30,000 residential buildings. Ordinary Muscovites made
hundreds -- perhaps thousands -- of calls to a police hot line to report
suspicious people and packages.

Some of the country's leaders have blamed an international conspiracy of
Islamic extremists. But in the dark mood that has afflicted Russia, an even
darker suspicion gained some currency: that the Kremlin itself, or its
allies, might have had a hand in the bombings.

The Moscow prosecutor's office announced that "several" people connected to
the bombings on Thursday and Monday had been detained, but provided no
details.

Russian police said yesterday that they had prevented a third blast by
seizing as much as 2 tons of explosives in another apartment building,
according to wire reports.

The explosives and a 70-yard fuse were discovered in a 12-story residential
building with 260 apartments in southeastern Moscow, police said.

A highly publicized security crackdown in Moscow meant 12-hour shifts and
canceled leaves for the city's 70,000 police officers, who searched traffic
coming into the capital and rounded up hundreds of people from the Caucasus
who were found without proper papers. Busloads of police swept through the
city's markets late in the day.

The harassment of Caucasians is typical here, but the scale of yesterday's
actions was nearly unprecedented. The police may be bolstered by army
patrols along the city's streets, which will either reassure people or,
more likely, remind them of their anxieties.

But in the absence of much information about the bombings, and in the murky
context of Russia's on-again, off-again war in Dagestan against Islamic
rebels, the terrorist acts in Moscow have been put to use by politicians in
whatever way they can.

Prime Minister Vladimir V. Putin went to the Duma yesterday and talked
about the seriousness of the bombings and the war in Dagestan. "I think it
is, in fact, a struggle for the integrity of the Russian Federation," he said.

Russia's enemies, he declared, were "bandits, marauders, aggressors, who
have no home, no kin, no nationality, no religion," and he warned against
"hasty and wholesale accusations and repressions, especially detentions or
arrests on ethnic grounds."

This was a slap at Moscow Mayor Yuri Luzhkov, who ordered the police
sweeps. The city's police have never been tender toward Caucasians. Takhir
Mamedov, an Azerbaijani guard at the Butyrsky farmers' market, described
shakedowns and punishment cells as a regular fact of life. But even while
harassing men and women on the street, city authorities have rarely tried
to interfere with the livelihood of Chechens and others who control the
markets.

Money from the markets, according to some reports, flows into various city
projects, but some also has gone to support the rebels in Chechnya and
Dagestan. In light of this, Luzhkov's show of force by the police resembles
Russia's conduct in Dagestan: All for appearance, with little substance.

Luzhkov is leading an anti-Kremlin coalition in the upcoming elections, and
publications friendly to him have battered away at the administration of
President Boris N. Yeltsin. The newspaper Moskovsky Komsomolets published
yesterday what it said were transcripts of intercepted phone calls that
appeared to show Yeltsin's friend, the tycoon Boris A. Berezovsky,
discussing plans for the rebel uprising in Dagestan with Chechen leaders
last summer.

The magazine Profil suggested that the Kremlin had been in on the planning
for the Dagestan revolt and in league with Islamic terrorists who carried
out the first of the apartment house bombings. The rationale, Profil said,
was to throw Russian politics off balance, with an eye toward canceling
parliamentary elections in December, and to boost the standing of Putin,
the new prime minister, by showing that he could handle a crisis.

Some Communist politicians have said they suspect the same thing, and their
leader, Gennady Zyuganov, accused the Yeltsin administration yesterday of
planning to use the bombings as the pretext for a state of emergency. Putin
specifically denied that in the Duma later in the day.

It is a measure of the cynicism in Russia today that people could believe
their leaders were accessories to a terrorist campaign in the heart of
Moscow -- as many apparently do, judging from casual conversations with
ordinary Muscovites. Even some of Luzkhov's antagonists in the markets
agree. "It's all politics, it's not terrorism," said Mamedov. "Anyone could
have done this for the right amount of money."

******