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Johnson's Russia List


September 16, 1999   
This Date's Issues: 3502 3503  3504

Johnson's Russia List
16 September 1999

[Note from David Johnson:
1. Moscow Times editorial: Insider Deals Blight IMF's Russia Loans.
2. Jamestown Foundation Monitor: PUTIN TO DUMA: KHASAVYURT AGREEMENTS 

4. Ellis L. Rolett: more on medical aid problems.
5. John Danzer: Re Aron's Letter To Washington Post.
6. Matthew Rendall: The West's investment.
7. Anatol Lieven: Re: 3500-Interview with Rebel Leader Basayev.
8. Ashok Bardhan: Re: JRL-3498-Bershidsky.
9. Newsday: Ken Fireman, GOP Raps Policies on Russia / Gore's role
as corruption charges emerge.

10. The Russia Journal: Ekaterina Larina and Michael Heath, Politburo alum 
reflects on '89. (Alexander Yakovlev).

11. RFE/RL: Paul Goble, Many Shades Of Gray. (re money-laundering).
12. Izvestia: Alexei Tarasov, General Lebed Wants To Play Up Authority's 

13. Itar-Tass: Prominent Figures View Latest Terrorism.
14. Itar-Tass: Soviet Intelligence Veteran Comments on UK Spy Scandal.
15. IMF: Fact Sheet: International Monetary Fund Lending to Russia.
16. Reuters: Russia Shrugs Off Forecasts Of Millennium Chaos.] 


Moscow Times
September 16, 1999 
EDITORIAL: Insider Deals Blight IMF's Russia Loans 

When the International Monetary Fund organized a $22.6 billion bailout 
package for Russia in July 1998, the money was meant to rescue Russia by 
propping up the ruble and restoring confidence in the country's battered 

As suspended Prosecutor General Yury Skuratov revealed in an interview 
published in Wednesday's issue of The Moscow Times, what the IMF's money 
mostly did instead was to "rescue" a handful of Russian insider banks, 
without ever reaching Russia itself. 

The Central Bank's reported justification for these back-room deals was that 
it protected the currency markets and therefore the ruble by keeping down the 
volume of currency trades on Russian exchanges. 

This claim flies in the face of economic logic - the way to defend a currency 
is by intervening on the open market, thereby influencing general 
expectations regarding exchange rates. It also flouts IMF strictures that a 
truly convertible currency should have only one exchange rate, and no more. 

As the PricewaterhouseCoopers report into the use of last year's bailout 
shows, the dollars were sold to the favored banks at a cheaper average rate 
than that used for the foreign exchange markets inside of Russia. 

The report claims that "no material exceptions" were found in these cases. 
However, until a more detailed investigation into these transactions is 
carried out, it is fair to assume that the insider banks had one exchange 
rate when swapping rubles for dollars while everybody else had another. 

And it appears that those insiders had a very good idea that it was time to 
get out of the doomed Russian treasury bill market. 

So, the IMF loan didn't bail out Russia, it bailed out a handful of GKO 

If the Fund wishes to retain any shred of credibility, it needs to admit that 
the Russian authorities have consistently acted in a murky and corrupt manner 
- not just once. 

It also needs to go beyond merely quarantining fresh loans to Russia, or even 
suspending them. The only way it can save itself and the Russian people from 
further harm is to insist on root and branch reform of the Russian Central 

The top management at the bank must be cleared out. A proper, independent 
investigation into the bank's activities must be performed - one that has the 
authority to effectively subpoena documents and witnesses and place the 
latter under oath. 

Of course, only President Boris Yeltsin has the power to make such an inquiry 
happen, and he may well look askance at yet another corruption probe. 

If he declines, then the IMF should suspend Russia's membership in the Fund 
until such time as the country has a Central Bank worthy of the name. 


Jamestown Foundation Monitor
15 September 1999

Putin addressed a special session of the State Duma yesterday concerning
the situation in the North Caucasus. In a programmatic speech, he
essentially put forward a new Kremlin policy in regard to Chechnya, based
on the premise that the Khasavyurt agreements ending the 1994-1996 Chechen
War had not been realized, and thus that Moscow has to stop being guided by
these agreements in dealing with Djohar. Putin called for the creation of a
strict quarantine zone around Chechnya and for tough economic sanctions
against the breakaway republic (NTV, RTR, ORT, September 14).

This plan has already been partly implemented: All railway lines and
highways connecting Chechnya with the outside world are under strict
control by Russian troops. The Khasavyurt and Kizlyar crossing points
between Chechnya and Dagestan have been shut for two weeks (Nezavisimaya
gazeta, September 14).

It would seem that if the Kremlin manages to implement Putin's program, it
will mean the complete death of the Chechen state. Economically, Chechnya
is completely dependent on Russia: even its electricity continues to come
from Russia, even though Djohar pays nothing for it. There are practically
no jobs to be had in the republic, and virtually all of Chechnya's
work-capable population makes a living outside the republic, either in
criminal businesses, such as hostage-taking and robbery, or in legal
private businesses. Besides Russia, Chechnya borders only Georgia, but the
so-called "road of life" connecting the two regions, to which Djohar gave
great significance, is not functioning, given that Tbilisi fears attacks by
Chechen fighters and wants to avoid problems with Moscow.

In reality, however, Moscow's economic blockade of Chechnya is only
worsening the situation in the North Caucasus and in Russia as a whole. If
Russia is incapable of preventing Chechens from finding legal work on its
territory, it is doubtful that it can prevent guerrillas from penetrating
its territory.

Moscow has been trying for a long time now to isolate the mutinous region.
Immediately after the Khasavyurt agreements were signed, Interior Ministry
troops set up posts along the Chechen border with the goal of preventing
fighters from penetrating Russian territory. But the borders in fact
remained porous. In April of this year, then Interior Minister Sergei
Stepashin announced a tough blockade against Chechnya and that any Chechen
fighters penetrating Russia would be destroyed on the spot. This and other
such declarations, however, remained empty. If Putin's new plan is
realized, it will bring not only radical Islamic fighters onto Russian
territory, but also peaceful civilians hoping to avoid the prospect of



MOSCOW. Sept 15 (Interfax) - Chairman of the Federation Council
Yegor Stroyev is confident that a state of emergency won't be imposed in
None of the upper house's committee leaders would agree to it,
Stroyev told journalists Wednesday.
The emergency rule is beneficial to the destructive forces which
can "throw the country into a bloody mess of vandalism," he said. It can
hinder Russia's democracy along with the parliamentary and presidential
election, he said.
The Federation Council will debate the situation in Dagestan at its
emergency session on Friday. Prime Minister Vladimir Putin and law
enforcement chiefs will attend the meeting. "We want to listen to them
and find out what steps are being taken and will be taken to effectively
combat bandit formations in Dagestan and terrorism throughout the
country," he said.


Date: Wed, 15 Sep 1999
From: Ellis.L.Rolett@Dartmouth.EDU (Ellis L. Rolett) 
Subject: Re: A Prescription for Tragedy, JRL 3496 #6

The article written by Robyn Dixon and reprinted from the Los Angeles
Times (JRL 3496 #6) on the burning of medical aid in Ulyanovsk (formerly
Simbirsk, Lenin's childhood home) struck a responsive chord. I had a related
experience in 1994, but with a happier outcome, perhaps because it preceded
alleged toughening of Russian Customs regulations in 1996, perhaps because of
the intervention of a U.S. Senator.

Under the auspices of the Vermont-Karelia Sister State Program, I
arranged for a donation of pharmaceuticals, medical supplies and medical
appliances valued at $340,000 to the City Hospital in Petrozavodsk, Karelia. 
The donation had been approved by the hospital's head doctor and cleared in
advance with the Karelian Ministry of Foreign Affairs. It was specifically
targeted for the treatment of patients with heart and lung disorders. The
donor was Direct Relief International in Santa Barbara, California. Half of
the donation was shipped by air from Los Angeles to St. Petersburg on 18 May
1994, the other half by truck from Bremen, Germany. The shipping agent,
International Logistics, combined the two shipments in St. Petersburg and
delivered them to the City Hospital in Petrozavodsk, Karelia on 31 May 1994. 
The donation was unpacked and inventoried by hospital personnel in the
of local customs agents. Despite the prior agreements, the shipment was
impounded by Customs pending "approval from Moscow" for its release. 
("Approval" more than likely meant payment of a bribe, something we were not
willing or able to do.)

After it became apparent that the shipment would not be released,
Senator Patrick Leahy of Vermont was asked for help. Senator Leahy's staff
worked for the release of the shipment through a variety of channels including
the Office of the Coordinator for U.S. Assistance of the Department of State
and the Russian Embassy in Washington. On 19 Aug 1994, Senator Leahy
a letter to the Minister of Health of the Russian Federation detailing the
problem and the importance of the shipment. It was not until Senator Leahy
brought up the matter in person on a visit to Moscow in the fall that things
began to happen. The consignment was released on 29 Oct 1994, five months
after its arrival in Petrozavodsk. Approximately 10% of the pharmaceuticals
were destroyed because the "use by" date was about to expire, but fortunately
the major portion of the donation reached hospital patients in need of


Date: Wed, 15 Sep 1999 
From: (John Danzer)
Subject: Aron's Letter To Washington Post/JRL 3501

I enjoyed Leon Arons humorous letter to the Washington Post. It
was funny how he used the devastation of Russia as a good return on
Western investment. Humor is built on reframing a situation so it
reverses what we would anticipate with our common sense. Aron
suggests looking at Western investment in a historical context. 
But history isn't the important thing with investments. No one
invests in the past. We invest in the future. The Russian future
is terrifying.

It was also funny how he described the break down of law and order
as a "free and open society". How free is a doctor who makes $40 per
month or a teacher who makes $12 per month? I suppose they are
"free" to speak their mind. But when you are hungry your mind is
on food. And what good is freedom of speech when no one listens. 

The part that really had me rolling is the way Aron justifies
Yeltsin's blasting the parliament building. After all duly elected
representatives are supposed to vacate their offices in single file
with their hands above their heads when the president carries out
a coup.

I'm rethinking Aron's letter. Maybe he wasn't really trying to be
funny. He was serious. That's not funny that's weird.

If you see this Leon, don't quit your day job. Timothy Leary found
out the hard way that Professors don't make good comedians.


Date: Wed, 15 Sep 1999 
From: Matthew Rendall <> 
Subject: The West's investment

Leaving aside the accuracy of Leon Aron's description of
contemporary Russia (Washington Post/JRL 3501), it should be noted that
much of the progress he cites--the lifting of censorship, political
pluralization and the end of the Cold War--was made under Gorbachev. It
was in 1991-92 that Russia was "the least menacing to its neighbors in the
world; [and] the friendliest toward the West and the United States," not
1999. The West's blind trust in Yeltsin & Co. now seems headed for a crash.


Date: Wed, 15 Sep 1999 
From: Anatol Lieven <> 
Subject: Re: 3500-Interview with Rebel Leader Basayev

My heartiest congratulations to Petra Prochazkova (Johnson's List,
September 15th) for her interview with Basayev - a scoop which shows
tremendous courage and commitment on her part. I just wanted however to
follow up one sentence, where Basayev said that "the latest blast in Moscow
is not our work, but that of the Daghestanis" - implying I suppose the
Daghestani islamists. Have there been any other such statements from the
Chechen side? It may just be a careless slip on Basayev's part, but if true
it surely nails responsibility for the bombs more firmly than anything else
that has appeared.


Date: Wed, 15 Sep 1999
From: Ashok Bardhan <bardhan@haas.Berkeley.EDU>
Subject: Re: JRL-3498-Bershidsky

Bershidsky's piece- the "Xenophobic Blame Game" going on in Moscow and the
attitudes of the Russians toward the "dark-complexioned"..."black-bearded"
southerners from the Caucasus, as well as other reports over
the years on the same issue, help uncover one of the more delicious
ironies of our times. It seems that Johann Blumenbach, the 18th c. German
naturalist, who was responsible for naming the white race "Caucasian", did
so at least partly, because he is reported to have thought that the region
of the Caucasus mountains produced "..a most beautiful race of men", and
that they were, so to speak, the ideal of the white race. These same
people - the "chorniye", or blacks of Russia!

Before one comes down too heavily on the Russians for their racism one
should remember that they are extraordinarily accomodating and accepting
of ethnic non-Russians who embrace their culture and
language..witness the adulation of Bulat Okudzhava(Georgian) and Yuli Kim
(Korean origin), the balladeers, or the respect for Irina Khakamada (part
Japanese), Russia's leading woman politician. As a Russian visitor to the
Berkeley campus once said, if Pushkin had been born in the US, he would
today be known as a "great African-American poet, whereas in our country
he is one of us - a Russian".


15 September 1999
[for personal use only]
GOP Raps Policies on Russia / Gore's role questioned as corruption
charges emerge
BY Ken Fireman <>

WASHINGTON BUREAU Washington - As fears of terrorism,
official corruption and alleged money laundering undermine Russia's
precarious stability, U.S. policy toward Moscow has turned into a
volatile political issue that could damage Vice President Al Gore's
prospects for the White House.
Republicans, sensing an advantage, are training fire on the Clinton
administration's policy of support for President Boris Yeltsin. They
accuse the administration of continuing to funnel aid to Russia despite
mounting evidence of corruption and economic mismanagement.
The issue has particular resonance because of the central role Gore
played on Russia. Along with then-Russian Prime Minister Viktor
Chernomyrdin, Gore co-chaired for five years a commission that became
Washington's main operational link to Moscow.
Gore, the front-runner for the Democratic presidential nomination,
once liked to cite his Russia experience as a prime qualification for
the White House.
But with Russia now engulfed in economic and political turmoil, that
experience looks more like a liability - especially since his former
partner, Chernomyrdin, has become a symbol of alleged corruption in
Moscow's ruling circles.
Gore's vulnerability is magnified by the political calendar. Both
countries are entering an election cycle that could fundamentally alter
their political balance. Russia will elect a new parliament in December,
just before the U.S.
presidential primaries begin, and a new president next year, only
five months before U.S. national elections.
Administration officials strongly defend their record. They say it
unquestionably has served U.S. interests to support Yeltsin against his
Communist and nationalist adversaries and to work with him on issues
ranging from arms control to nuclear proliferation to economic reform.
They deny that they were unaware of or uninterested in reports of
official corruption in Moscow.
"We've had some progress; we've had some problems," said White House
Chief of Staff John Podesta. "And we're aware of the allegations of
corruption. We've tried to deal with them at every level." But the
administration has been on the defensive since it was revealed last
month that federal investigators were probing the apparently illicit
transfer of at least $4.2 billion out of Russia through the Bank of New
The inquiry into this alleged money laundering, along with a
separate Swiss probe of alleged payoffs to Yeltsin and his familiy in
return for lucrative contracts, launched Russian corruption out of the
foreign-policy journals and landed it in the midst of the presidential
Republican presidential candidates rushed to the attack, their line
of assault typified by former Red Cross President Elizabeth Dole's
remark that Gore "has failed in his only major foreign policy effort."
House Banking Committee Chairman Jim Leach (R-Iowa) announced hearings.
Even Gore's lone Democratic rival, former Sen. Bill Bradley (D-N.J.),
joined the chorus of critics.
Since then, damage control has been at the top of the agenda in both
Treasury Secretary Lawrence Summers threatened to withdraw U.S.
support for new international lending to Moscow unless previous loans
are accounted for and "adequate safeguards" are installed to prevent
Yeltsin telephoned President Bill Clinton to pledge cooperation with
investigators even while denying the allegations and dismissing them as
political inventions. Clinton raised the issue during a meeting with
Prime Minister Vladimir Putin on Monday.
Aides say Clinton and Gore did not learn of the Bank of New York
probe until it became public knowledge last month. They confirm that
State and Treasury Department officials became aware of the
investigation months earlier, but say the information was not passed
along to the White House because the probe did not then involve the
Russian government.
Gore aides insist he has heeded reports of corruption in Russia that
did cross his desk. "The vice president reads the intelligence," said
one Gore aide, who spoke on condition of anonymity. "He takes it
seriously. And he takes it into account when dealing with foreign
That version of events was at least partially supported by
one former administration official who has since become a strong critic
of its intelligence policies: former CIA Director James Woolsey.
During his tenure in the first two years of the Clinton
administration, Woolsey said in an interview, intelligence agencies
produced a number of reports about the then-nascent problem of organized
crime in Russia. "I saw no lack of attention or lack of interest in the
National Security Council or the White House or the vice president or
the president about this issue," he said.
But Republicans and other critics say the Bank of New York affair is
emblematic of a much larger failure. They accuse the administration of
continuing to support Yeltsin despite mounting evidence that his regime
was stubbornly pursuing policies that impoverished most Russians while
enriching a small circle of oligarchs.
The result, they argue, is the worst of all possible worlds: a
Russia that is economically destitute, politically volatile and
increasingly mistrustful of Westerners. If the coming elections bring to
power a government hostile to Western interests, they say, the
administration will have only itself to blame.
"They always had this naive notion that if you just threw money at
people who called themselves reformers, the thing would take care of
itself," says GOP presidential candidate Steve Forbes. "They were just
giving money to people at the top and hoping for the best." 
There is at
least some basis to criticize the administration's handling of Russia,
according to Wayne Merry, a former diplomat in Moscow. Merry, who served
as the U.S. Embassy's chief political officer from 1991 to 1994, said
American policymakers pressed their Russian counterparts to pursue
orthodox free-market policies without any understanding of whether they
were suitable for Russia's circumstances.
Merry said that as administration officials became progressively
more invested in Yeltsin's government, they became progressively less
interested in hearing bad news. And he said the Gore-Chernomyrdin
commission, initially a good idea, evolved into a self-perpetuating
bureaucracy designed mainly to advance Gore's political interests by
burnishing his foreign policy credentials.
But Merry cautions that Republicans who hope to gain political
advantage from Russia may find themselves wielding a double-edged sword.
Most of the flaws in the administration's Russia policy, he says, had
their origins in the previous administration - which happens to have
been led by the father of the current Republican front-runner, Texas
Gov. George W. Bush.
"This was fundamentally an American attitude," Merry said. "It
transcended administrations. Much of this mentality was nonpartisan."


The Russia Journal
September 13-19, 1999
Politburo alum reflects on '89
By Ekaterina Larina and Michael Heath

Ten years ago, Alexander Yakovlev watched from Moscow as the Iron Curtain
cracked and, within a few months, completely collapsed. 

On Sept. 10, 1989, Hungary announced it would open its borders to East German
"tourists" and anyone else who wanted to cross. The "tourists" were in fact
East Germans stuck in transit in Hungary as they attempted to take
advantage of
its porous border with the West and flee to freedom.

Hungary had stopped aggressively guarding its western border earlier in the
year. But on Sept. 10, it officially announced it would no longer prevent any
communist bloc citizens from crossing to the free West. This set off a chain
reaction of revolutions - some violent, some peaceful - in neighboring
communist countries, culminating in the collapse of the Soviet empire.

Yakovlev, then a member of the Soviet Politburo, recalled those heady weeks
months in late 1989, but argues that earlier events actually were of more

"It's a pity nobody recalls that earlier that year [Soviet leader Mikhail]
Gorbachev spoke at a meeting in East Berlin [celebrating 40 years of the
Democratic Republic]. There, he said that each nation had a right to
self-determination and that the Soviet Union and Communist Party would not

"[Erich] Honecker [GDR leader from 1971 to 1989], who was in power then, was
very irritated by Gorbachev's comments. So that was the real bombshell, but it
has been forgotten," he said.

Yakovlev was the most liberal member of the Soviet Politburo and was very
to Gorbachev in the early years of Perestroika. 

Today, despite having retired from active politics, he takes pride in the fact
that he is still No. 2 on the execution lists of radical left-wing groups for
his perceived role in the collapse of the Soviet Union. The only person ahead
of him is President Boris Yeltsin himself.

Yakovlev recalled that after Hungary announced its decision in 1989, the last
GDR leader, Egon Krenz, came to Moscow to vent his spleen at the Politburo for
its passive acceptance of the outcome.

"We took his outburst quietly," Yakovlev, 75, said. "The signals from Moscow
had already been given [to the Eastern Bloc nations]."

Yakovlev said that many years before Gorbachev accession, there had been
members of the Politburo who had wanted to withdraw from Eastern Europe. "This
question arose sporadically throughout the post war period," he said.

"And despite my dislike for Russia's Soviet rulers, those who are to blame for
maintaining the Eastern Empire were the government elites in the satellite

"Indeed, there were cases when we tried to persuade them to weaken ties with
the U.S.S.R., but they would have none of it."

Yakovlev says the collapse of the Eastern European empire began on the very
first day of its formation because it was an artificial union.

He says the tragedy for Russia today is that it is remembered in Eastern
not as the liberator of 1945 (Yakovlev himself was seriously wounded in the
war). But as the oppressors of 1956, 1968 and 1980 in Budapest, Prague and

"It should have been that we, the liberators, freed Eastern Europe and then
left them as free nations. These sorts of actions [by victors] are never lost
from a nation's psyche.

"It is significant that the Bulgarians don't really remember our liberating
role in 1945, but remain sincerely grateful for Russia's help in freeing them
from the Turks last century. This was the tragedy of what we did," he said.


Russia: Analysis From Washington: Many Shades Of Gray
By Paul Goble

Washington, 15 September 1999 (RFE/RL) -- An apparently arcane aspect of 
money -- its fungibility -- makes it less likely that many money-laundering 
charges against Russians will ever be definitively proved and more likely 
that the scandal will cast a larger shadow over both Moscow and the West.

The fungibility of money means that when cash from two or more sources are 
put together in a single account, be it that of a bank or of a government 
agency, no one can definitively say which particular unit of money comes from 
which particular source.

Thus, if money from a criminal enterprise is pooled in one account together 
with money that is entirely legitimate and only part of it is then 
transferred to yet another account, it is very difficult if not impossible to 
be certain whether the latter contains legitimate or illegitimate funds. 

That is what ever more financial experts are suggesting may be the case with 
the current money laundering scandal involving Russian money passing through 
the Bank of New York.

Some of the funds sent through the accounts of that bank were undoubtedly 
from illegal sources, but others may have been entirely legitimate, at least 
within the loose definition of that term in the current Russian financial 

As a result, investigators are discovering that they may face impossible 
obstacles, not least of which is the lack of adequate record-keeping in 
Russian governmental and financial institutions, in sorting out just how much 
money fell into one category or another. 

And because of these difficulties, the investigation is likely to face three 
other obstacles as well.

First, many officials in Moscow and the West already are highlighting this 
difficulty both to defend their past policies and to challenge critics to 
indicate how they would have behaved differently. 

Second, many Russian businessmen and their partners will be able to testify 
that their operations were legitimate or at least entirely defensible in 
American law and that any violations they may have made were of the complex 
and often contradictory Russian legal code. 

And third and perhaps especially important, many Western bankers who have 
benefited from the deposit of such funds which they appear to have accepted 
in good faith are likely to demand standards of proof that no one will be 
able to meet. 
But these difficulties in proving specific allegations seem likely to make 
the current scandal in Moscow more serious rather than less, precisely 
because ever more people in both Russia and Western countries appear unlikely 
to begin to make some critical distinctions.

For most of the past eight years, both Russians and their Western partners 
tended to downplay charges of corruption, arguing that such illegal 
activities were both marginal and a price worth paying for the transformation 
of the Russian economic system.

But now, ever more critics -- Russian as well as Western -- are denouncing 
what some have called the Russian kleptocracy -- a system based on the 
corrupt theft of state property -- and appear prepared to tar most if not all 
of Russian economic activity as criminal at its core.

In Russia, such attitudes are helping to generate support for those parties, 
including the Communists, who are deeply suspicious of capitalism in general 
and private ownership in particular, and others, who have become convinced 
that the Yeltsin regime is totally corrupt.

And in the West, such attitudes are providing ammunition not only for those 
who have criticized the West's approach to Russia, its reliance on 
international financial institutions rather than government-to-government 
aid, but also for those who believe the West should not help Russia at all. 

In this way, the search for the clarity of black and white in the current 
situation is likely to leave Russia in a still darker gray, a shade all the 
closer to black because so many people have worked so long and hard to deny 
that the situation had been gray all along. 


September 15, 1999
General Lebed Wants To Play Up Authority's Impotence 
By Alexei Tarasov 

After a period of abstention, Alexander Lebed is back in big politics, 
writes IZVESTIA. Various scenarios of Boris Yeltsin's voluntary resignation 
have appeared recently, with Lebed featuring there as acting Prime Minister 
till a new President is elected. Some say that even a relevant presidential 
decree is ready and is expected to be signed any time. 
General Lebed recently said that he was ready to take Russia out of the 
Caucasian mess it had found itself in because of actions by some "unwise men" 
in Moscow. "There is no other man who can do the job," he said. Right after 
that statement, Chechnya President Aslan Maskhadov wrote Lebed a letter 
inviting him for a meeting in order to prevent a large-scale Caucasian war. 
The latest developments in the Caucasus strangely coincided with the 
appearance of scenarios for destabilizing the situation in Russia, the paper 
notes. Liberal Democratic Party leader Vladimir Zhirinovsky even called for 
an arrest of General Lebed and financier Boris Berezovsky to prevent new 
The Kremlin is annoyed by the maverick general, who has shown by his own 
example that big sponsors' (including mafia's) money can bring politicians to 
power and that once in power these politicians may ruthlessly get rid of 
those whom they owe. 
Lebed realizes that without the West's approval no one can come to power in 
Russia. This is why he takes care to stay in the spotlight, time and again 
making loud statements, such as this one: "The world fears our revolt. Many 
are ready to pay [to prevent it], but they do not know against what 
programs." In America, the paper says, some Congressmen, who see Lebed as a 
future Russian President, hope to use him as a scarecrow in their designs to 
move NATO further to east. 
The current situation in Russia is such that the image of "brutal general" 
who will be a strict but just "father of the nation" may play into his hand. 
Lebed and those who stand behind him may use to their ends the ever expanding 
"protest electorate," now sick and tired of the impotence of the current 
regime, the paper concludes. 


Prominent Figures View Latest Terrorism 

MOSCOW, September 14 (Itar-Tass) -- The bandits 
which organised the monstrous explosions in Moscow "must be found and 
eliminated," said Valery Kokov, deputy chairman of the upper house of 
Russian parliament and president of the Republic of Kabardino-Balkaria. 
Kokov did not think it necessary to introduce the state of emergency in 
the country over the developments in the Northern Caucasus and the latest 
tragic events in the Russian capital. "The state of emergency is not a 
panacea," he stressed. Kokov said Russian legislation had enough strength 
to settle the situation in the North Caucasus region and step up the 
struggle against terrorism. 

He also spoke in favour of "certainty" with regard to the status of the 
Chechen republic as a component part of the Russian Federation. 
"Certainty in relations is better than protracted vagueness," he noted. 
"What is needed in the present situation is dialogue between the 
leadership of Russia and the lawful, legitimate leader of Chechnya," 
Kokov said. He stressed that the Khasavyurt accords "no matter what one 
may think of them, laid down the possibility of a return to the question 
about the status." 

In Kazan, President of Tatarstan Mintimer Shaymiyev told a conference 
on Monday that "there is no justification of terrorism, whatever its 
source, and it must be punished severely. Shaymiyev declared that "the 
industrial enterprises, communications, life-support installations, 
market places, railway stations, entertainment centres and other places 
where masses of people concentrate must be put under special control." 
"The population now needs strong power more than ever before, it needs a 
government that pursues a policy attractive to the people and that 
ensures the people's security." But the events in Moscow must nor 
unsettle peace and accord in the Republic of Tatarstan, he said. "We must 
not allow discrimination by nationality." 

President Shaymiyev has set up Tatarstan's Security Council to ensure that 
human rights and freedoms and the republic's sovereignty are duly 
protected by the constitutional power, and that the Constitution and laws 
are abided by. The Security Council will be headed by President Shaymiyev 
himself. His deputies will be Prime Minister Rustam Minnikhanov and State 
Council Chairman Farid Mukhametshin. Former leader of the republic's 
state security committee Vener Salimov will act as Security Council 

In St. Petersburg, Governor Vladimir Yakovlev declared that "the 
reaction of the state to the acts of terror that have taken place must be 
merciless." In his televised address to the residents of Russia's second 
largest city Yakovlev expressed confidence that "the state has enough 
strength to restore order without announcing the state of emergency, 
about which people have begun to speak." According to Yakovlev, "the 
introduction of the state of emergency would mean an end to our advance 
towards the future, it would throw us back to the bleakest times, which 
some hot heads fail to understand." Moreover, the state of emergency 
"would not signify an unconditional triumph over terrorism," Yakovlev 

The governor called on the citizens of St. Petersburg to be vigilant and 
expressed deep condolences to the kith and kin of the people who had died 
in the acts of terror in Moscow and Buinaksk. 

Speaking for the Russian intellectuals, prominent film director and public 
figure Nikita Mikhalkov declared that "absolutely all efforts must be 
made to punish those who commit evil deeds and acts of terror in Moscow. 
Huge efforts and resources must be committed to achieve this goal." 

Mikhalkov said in an exclusive interview with Itar-Tass that "no one will be 
permitted to talk to Russia from the positions of strength." In his view, 
the acts of terror in the Russian capital were results "of a national 
tragedy because we must be aware not so much of the effects as of the 
painful causes. The causes of this ailment are contained in the total 
lack of faith in God, or - to specify this thought - in the lack of 
culture. And, of course, in the lack of understanding of what the war in 
the Caucasus, beginning with the notorious Chechen operation, is all 
about. The most horrendous thing is that absolutely innocent people die. 
And the emerging sense of terror and despondency brings about an 
unpredictable reaction." 

"I think that if the political power does not want to be irrevocably 
discredited, it must make up its mind about what it must do," Mikhalkov 
said. "I mean what road and what destination to choose and with whom to 
embark on this road." Such a decision would engender "respect for power 
and the power itself must treat the people with respect. Without it we 
shall have to swallow the worst in Russia - uncertainty and experiments 
with structures of power and powerful ideas, which neither grasp nor feel 
how the country is breathing," Mikhalkov said.


Soviet Intelligence Veteran Comments on UK Spy Scandal 

MOSCOW, September 14 (Itar-Tass) -- A high-ranking 
Soviet-time intelligence officer on Tuesday [14 September] commented here 
on a juicy spy scandal which had erupted not long ago around former head 
of one of the former KGB department's archive Vassily Mitrokhin, and 
Melita Norwood who was reported to have spied for the Soviet Union for 
more than 40 years. 

In an exclusive interview given to Tass, the officer expressed hope 
that "one more time, Britain will show good sense, and will not turn 
bygones into problems of the current inter- state relations not to 
aggravate them." 

He further pointed out that in connection with the developments in 
Daghestan, "it is extremely important now that efforts of all secret 
services be pooled to avert the terrorist attacks." 

Speaking about Mitrokhin, the intelligence veteran said "it was all about a 
mere file clerk who used to work at one of the KGB archives." The veteran 
stressed the fact that "Mitrokhin was given clearance to work with the 
archives only, with no access whatever to the current work." Besides, he 
added, the man had got his discharge as early as in 1982. 

According to the source, the intelligence had known for a long time about 
Mitrokhin's plans to publish a book. However, a decision was taken to 
make no comments. Specialists are "looking forward" to the publication as 
they know it only too well at the intelligence agency what kind of 
clearance Mitrokhin had been given, what he could know, and what might 
appear on the pages of the book. 

"They can now credit Mitrokhin with God knows what kind of deeds," the 
officer said, adding that "it will be most interesting in this respect to 
learn what the British intelligence service knows about us, the more so 
as Christopher Andrew, a Cambridge academic known for his links with the 
intelligence officers and access to secret information has co- authored 
the book." 

The officer noted that Great Britain had developed a special liking for 
espionage horrors, and not a single year had recently passed without a 
new spy scandal having erupted. 

According to the source, 87-year-old Melita Norwood had just fallen victim to 
another mostly invented spy story. The courageous woman did not deny 
anything, insisting on that she had been governed in the 30-70ies by her 
convictions. In the years of the WWII, the Soviet Union and Great Britain 
were allies and were pooling efforts to fight against common enemy. As 
regards the post-war years, Norwood had been quoted to have sought 
nuclear parity for the Soviet Union. "Now she is being charged with those 
noble in their essence aspirations, which have saved the world from a 
thermonuclear disaster. 

"The Russian intelligence service will neither officially deny nor 
confirm the fact of her involvement, but as a veteran, I can say that 
people like Norwood should only evoke if not gratitude then understanding 
and respect in all sober-minded people, as she was governed by political 
motives, the ideas of parity and justice, and not by mercenary interests 
as was the case with Mitrokhin who was selling the archive secrets sheet 
by sheet... ," the intelligence officer said. 

He added that anyway the position of the Russian intelligence service 
remained invariable, and "no spy scandals should prevent or impede the 
development of the regular bilateral relations." In conclusion he said 
that it had already happened many times that from molehill-to-mountain 
espionage campaigns had impeded the progress in the development of the 
inter-state relations, and "afterwards, great efforts had to be made to 
straighten things out."


15 September 1999 

Fact Sheet: International Monetary Fund Lending to Russia 
(No evidence of IMF loan money diversion) (820)

The International Monetary Fund (IMF) on September 14 released a fact
sheet outlining its history of loans to Russia and refuting reports
that IMF loan money was included in funds recently alleged to have
been illegally diverted from that nation.

The fact sheet was posted on the IMF web site.

The fact sheet said that neither the IMF nor U.S. authorities
including Treasury Secretary Lawrence Summers have found any evidence
that IMF funds were misappropriated, although the U.S. Treasury
Department continues its investigations of several commercial banking

Under terms of a 17-month loan agreement concluded July 28 between the
IMF and Russia, all IMF money disbursed to Russia will be held in an
account at the IMF. This account will be used only for Russia's debt
service to the Fund, the fact sheet said.

However, the fact sheet concluded that it is not possible to determine
whether capital funds being transferred abroad from Russia come from a
particular source, including IMF loan monies.

Following is the text of the fact sheet:

(begin text)


"That there has been capital flight on this scale (from Russia) does
not surprise us, but there is no proven link between this money and
the loans released by the IMF." -- Michel Camdessus; Managing
Director, IMF; France-Soir; September 1, 1999.

-- The International Monetary Fund takes very seriously the recent
allegations in the press that funds advanced to Russia may have been
diverted from their intended purpose and included in the flows of
capital that left the country illegally. The IMF has no evidence of
such diversion. The U.S. authorities -- including Treasury Secretary
Lawrence Summers -- have also stated that no evidence has been found
that IMF funds were misappropriated, although their investigations of
Bank of New York and other commercial banking operations continue.

-- Under the 17-month, $4.5 billion program approved on July 28, all
IMF money disbursed to Russia will be held in an account at the IMF.
This account will be used only for Russia's debt service to the Fund.
Over the period of the program, Russia's payments to the IMF of
interest and principal on previous arrangements will exceed new

-- The IMF has insisted on the preparation and publication of
investigations by the accounting firm Price Waterhouse Coopers (PwC),
into allegations of mishandling of the July 1998 Fund disbursement,
into relations between the Central Bank of Russia (CBR) and one of its
offshore subsidiaries (FIMACO), and into statistical reporting to the
IMF by the CBR. The investigations found no evidence to support the
allegations concerning misappropriation of funds. However, the report
on FIMACO uncovered past incidents of misreporting by the CBR to the
Fund of the true position of Russia's international reserves and other
monetary aggregates. The reports of the PwC investigations have been
made available on the IMF web site.

-- The IMF routinely reviews Russia's compliance with the terms of the
program. The recent IMF mission to Russia was intended to determine
whether the Russian authorities are meeting their commitments in the
area of economic policy, including tax collection and the accumulation
of foreign reserves. The Executive Board of the IMF, which represents
its 182 member countries, would consider suspending disbursements if
Russia is not meeting its commitments.

-- Russia's transition to an open, market-oriented system is proving
to be more difficult and slower than anticipated. But both Russia and
the international community will be better served if the IMF remains
engaged and provides assistance under strict conditions. Russia has
made progress in the past year by implementing cautious fiscal and
monetary policies, and the economy has responded with renewed growth
and low inflation.

-- The large capital outflows from Russia have fundamentally been due
to the large uncertainty and risk that investors associate with
keeping money in Russia. This uncertainty reflects a number of
factors, among them macroeconomic instability, weak enforcement of
property rights, an arbitrary and confiscatory tax system, and
inadequate supervision and regulation of the banking system.
Facilitating tax evasion may also be an important reason for capital
flight. Fund-supported programs contain measures to address, over
time, the economic problems that lead to capital flight.

-- Capital transferred abroad from Russia may represent such legal
activities as exports, or illegal sources. But it is impossible to
determine whether specific capital flows from Russia -- legal or
illegal -- come from a particular inflow, such as IMF loans or export
earnings. To put the scale of IMF lending to Russia into perspective,
Russia's exports of goods and services averaged about $80 billion a
year in recent years, which is over 25 times the average annual
disbursement from the IMF since 1992.


Russia Shrugs Off Forecasts Of Millennium Chaos

MOSCOW, Sep 15, 1999 -- (Reuters) Russian officials shrugged off suggestions 
on Wednesday that the Y2K computer bug could plunge the vast country into a 
darker, colder winter than usual, saying their hard work to stop a computer 
meltdown should pay off.

Russian officials played down a U.S. State Department report which said Y2K 
disruptions were "likely to occur in the key sectors of electrical power, 
heat, telecommunications, transportation and financial and emergency 

They said computers which support nuclear power plants, Russia's vast 
telecommunications network and energy supplies were being checked, sometimes 
changed and worked on to prevent the computer glitch hitting key sectors.

"In Russia, organizations of the highest level are working on this problem... 
Every region has its own internal plan to prepare for the problem," said 
Adrian Makeshin, deputy head of the parliamentary committee for 

Makeshin said he believed regional leaders would comply with a government 
order to take measures by mid-October to prevent a computer crash.

Some challenged other countries, many of which have criticized Moscow for its 
slow response in waking up to the threat of the millennium bug, to state with 
confidence that they would not face problems when the clock strikes midnight.

"As I understand it, no one can guarantee, not one country can guarantee that 
they will be successful in avoiding this problem, not even us," Makeshin said 
by telephone.

He added that the Y2K glitch was less of a problem for Russia as the country 
had fewer computers.


Company officials were confident Russians across 11 time zones would have 
light and heat when the clock ticks to midnight in the depth of winter - 
traditionally very cold in Russia.

Russia's national power utility UES has said it was increasingly confident 
that Russians would not be without light.

Yuri Bespalko, spokesman for Russia's Atomic Energy Ministry, said he did not 
envisage any problems with the millennium computer bug, which may scramble 
systems that have not been programmed to recognize the date change to 2000.

"We think that there will be no failures across Russia, we think our specific 
computer systems are pretty safe, they are good quality systems most of which 
are from the West," he said.

"Work is going well, there do not seem to be any major problems for the 
Atomic Energy Ministry."

Even the central bank was upbeat about the continued work of Russia's banking 
system, which was shattered in a crippling financial crisis last year.

"An analysis of the information...shows that in the banking system there has 
been certain progress in undertaking the measures to prevent the year 2000 
problem," the bank said on its website. It said 80 percent of the credit 
organizations had taken "necessary measures".

Steps have also been taken to stop Moscow's military launching missiles 
against the United States.

U.S. Defense Secretary William Cohen and Russian Defense Minister Igor 
Sergeyev signed a landmark agreement for officers of both countries to staff 
a "Y2K" joint missile launch warning center in the United States as the new 
year dawns.

"The greatest Y2K danger comes not from the threat of an accidental launch, 
but from the threat of Y2K glitches being misinterpreted by personnel on 
either side of the Atlantic," said Senator Robert Bennett, a Utah Republican.



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