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Johnson's Russia List


September 17, 1999   
This Date's Issues: 3505 3506  

Johnson's Russia List
17 September 1999

[Note from David Johnson:
1. Business Week: Margaret Coker, How Terrorism Could Boost Yeltsin's 

2. Izvestia: Vladimir Korsunsky, Battle Between Household Managers And 
Intelligence Men. (re Luzhkov and Primakov)

3. Itar-Tass: Russians To Attend US Hearings on Bank of New York.

5. Rome's La Repubblica: Interview with former Moscow Prosecutor Yuriy 
Skuratov, 'Russiagate: These Are the Guilty Parties; the Kremlin Will Not 
Stop Me'.

6. Moscow Times: Natalya Shulyakovskaya, Pressure on Skuratov Heats Up.
7. AFP: IMF official dismisses accusations of Russian ex-prosecutor.
8. PBS Newshour with Jim Lehrer: MOSCOW'S MONEY PROBLEMS. Special 
correspondent Simon Marks reports extensively from Moscow on Russia's 
money laundering crisis.]


Business Week
September 27, 1999
[for personal use only]
Russia: How Terrorism Could Boost Yeltsin's Rivals
By Margaret Coker in Moscow 

Moscow residents watched wide-eyed as rescuers pulled the bodies of 
pajama-clad children from the rubble of an eight-story building on the 
city's outskirts. At 5 a.m. on Sept. 13, a bomb destroyed the building, 
leaving at least 118 people dead. It was the third explosion in the city in 
two weeks. While no one has claimed responsibility, Russian security agencies 
blame Islamic rebels from the Caucasus region.
Apart from terrifying Moscovites, the attacks are raising the pressure on 
Russia's leaders to sky-high levels just as they are gearing up for crucial 
parliamentary elections on Dec. 19. Presidential elections are scheduled to 
follow in July, 2000. Rumors are swirling that President Boris N. Yeltsin 
will use the terrorism as an excuse for calling a state of emergency and 
canceling the elections. Moscow Mayor Yuri Luzhkov called for police searches 
of up to 3 million people daily. And Prime Minister Vladimir Putin closed all 
roads leading from Chechnya into Russia.
TAKE THE BLAME. If the violence continues, almost anything could happen.
for now, most analysts expect the elections to go ahead. Of all the political 
contenders, Luzhkov and his ally, former Prime Minister Yevgeny M. Primakov, 
may be in the best position to gain a boost from the disorder. Even though 
Luzhkov is mayor, he doesn't have authority over most of Moscow's security 
forces, which answer to the federal government. Federal forces, not the 
city's 70,000-strong police force, are in charge of the counter-terrorist 
operation. Luzhkov can let Putin take the blame for not preventing the 
Primakov, meanwhile, is out of office and can't do anything directly to 
track down terrorists. But he can bolster his already strong reputation as a 
crime fighter by criticizing the government. ``For Primakov and Luzhkov it's 
perfect. Primakov is a law-and-order man and not connected to the Yeltsin 
Administration. And Luzhkov represents stability,'' says Vyacheslav Nikonov, 
director of Fond Politika, a Moscow think tank. Both are contenders for the 
Up to now, Luzhkov and Primakov haven't missed a step. On Sept. 8, Luzhkov 
announced he was rescheduling the Moscow mayoral election from July, 
2000--the same time as the next presidential election--to Dec. 19. That 
ensures Luzhkov a political role, no matter what he decides to do about the 
presidential elections. In 1996, Luzhkov won the mayoral race with more than 
90% of the vote, and he could very easily be re-elected.
Luzhkov's decision to rejigger the election closely followed the creation 
of his alliance with Primakov on Aug. 28. Their Fatherland-All Russia bloc 
quickly became the country's most popular political party. Polls show it is 
likely to win 25% of the seats in the parliamentary elections, snatching 
control from the Communists. Primakov is the front-runner for the 
presidential race, according to polls, with Luzhkov third after Communist 
Party leader Gennady A. Zyuganov. Putin, Yeltsin's preferred successor, 
trails way behind.
Luzhkov may work behind the scenes to quell Moscow's violence. The Mayor 
has close ties with Moscow's Chechen business elite, and the city has 
partnered with some of them in high-profile commercial deals. He successfully 
used this relationship to end a short spate of bombings in the mid-1990s 
during the Chechen war. If Luzhkov's lobbying is effective again, he will 
boost his reputation as a can-do mayor even further. But the longer the 
violence continues, the greater the chances Yeltsin may be forced to declare 
a state of emergency and even cancel the elections. That goes against his 
political instincts. But these days in Russia the terrorists seem to hold the 


September 16, 1999
Battle Between Household Managers And Intelligence Men 
By Vladimir Korsunsky 

It looks like the Fatherland-All Russia election bloc is creating an image 
of a shadow President of Russia for ex-Prime Minister Yevgeny Primakov, 
writes IZVESTIA. The tone of Primakov's speech after the second terrorist 
explosion in Moscow sounded as if he already was President. He proposed that 
Interior Minister Vladimir Rushailo, whom President Yeltsin had put at the 
head of the anti-terrorist headquarters, instruct policemen in Moscow 
districts, clear the special [security] services of "anti-popular elements" 
and report daily to the population about progress in the investigation of the 
terrorist acts. Like Yeltsin before him, he called upon the nation to "rally 
round the authorities and act together with them." 
Creating an image of a parallel president is a very dangerous political 
game, but Primakov's team has to take the risk, because it has become a 
matter of political survival for it. 
The struggle within Fatherland-All Russia today is for the place of the
leader in the bloc. The winner will be the bloc's presidential candidate. 
This struggle has begun even though Moscow Mayor Yury Luzhkov, who heads the 
Fatherland movement, which is a component of the Fatherland-All Russia bloc, 
had promised "not to run for President of Russia, if Primakov joined the 
presidential election race." 
Luzhkov's election President of Russia, the paper says, opens up unlimited 
opportunities for Moscow businessmen and officials. Therefore they would like 
to use Primakov with his high rating among the public as a locomotive which 
will carry Luzhkov to the Kremlin. At best they are prepared to give Primakov 
a role of a chief ideologue in their future victories. 
Primakov, the paper recalls, warned his present allies that he had taken
decision to head the bloc "very seriously." His refusal to join any of the 
political parties or movements making up the bloc testifies to his 
unwillingness to lose the status of an national politician. And the creation 
of an image of a shadow President is part the same strategy. Asked how he and 
Luzhkov will share the presidential post, Primakov replied: "We shall agree 
on that." Nobody seems to doubt that, the paper says in conclusion. 
Another paper, MOSKOVSKY KOMSOMOLETS [09/16/99, pp. 1, 2], writes that the 
status of Fatherland is to be changed at its next congress, and this public 
organization will become a political party with a rigid hierarchic structure. 
This will be done to separate Primakov and Luzhkov. After the elections to 
the State Duma, Fatherland is going to withdraw from the bloc, create its own 
powerful parliamentary faction and prepare its own candidate for the 2000 
presidential elections. The paper does not rule out that the candidate will 
be Yury Luzhkov. 
Meanwhile, Fatherland is going to become a "party of power." After its 
victory at the parliamentary elections, Fatherland-All Russia intends to 
start forming a new government comprizing only its members, said Andrei 
Isayev, member of the coordinating council of the bloc. 


Russians To Attend US Hearings on Bank of New York 

WASHINGTON, September 16 (Itar-Tass) - Organisers 
of the US Congress' hearings on the Bank of New York said they would give 
the floor to Russia's representatives. 

A delegation of Russian investigators is visiting Washington these 
days for a scrutiny of evidence of the US' probe into the Bank of New 
York whose accounst are implicated in money-laundering deals of Russian 
organised crime groups. 

The organisers thus far refuse to give names of Russians to be invited 
to the hearings. 

We want a broad range of opinions to be represented at the hearings, 
including of Russian officials, one of staffers of Congress member John 
Leach, an Iowa Republican chairman of the House of Representatives' banks 
and financial services committee, said in an interview with Itar-Tass. 
Leach is a main initiator of the hearings. 

The speaker of Russia's State Duma lower house of parliament, Gennady 
Seleznyov, said in a statement that Russian memebrs of parliament were 
ready to attend te congressional hearings. 

Asked to comment this, the staffer said it was not ruled out that Leach 
would want to hear the opinion of Russian law-makers, but his committee 
so far was not ready to give any specific names. 

Seleznyov said "(Duma) deputies already have addressed a corresponding 
to the American Congress, but have not got an answer". 

The committee staffer said Leach did not know of the inqury. He said he 
would informally inform Leach on it. 

The hearings are scheduled to be held at the banks and financial 
services committee on September 21-23. 

The hearings on the Bank of New York will be also held at the Senate's 
foreign affairs committee and presided by influential Senator Jessy Helms. 


Office of the Spokesman
September 16, 1999


MODERATOR: We have a few minutes for questions. The Secretary has
agreed to take some. I will ask everybody to use the microphones that
are in the center aisle and please identify yourselves when you speak.
And I will try to alternate between the audience and the press. I ask
everybody to be as precise as we can.

Q: I applaud your sense that this is not necessarily a linear process.
Just about everyone I have talked to in Moscow is convinced the next
government is going to be either somewhat more or a lot more
(inaudible) in the (inaudible) of the economy. And I was wondering if
we have begun to think about what our response to this would be and
whether it will affect what our assistance program would do and, in
particular, whether we might try to target assistance even more
directly at a lower level, say, for the education and medical systems.

ALBRIGHT: First of all, I think that as I've stated in my remarks, I
truly do believe that we have taken the right approach in terms of the
targeting of our assistance. I think there is a great misunderstanding
about our assistance -- which is primarily, as I said, for threat
reduction and the nuclear proliferation and then going as much as
possible to the grassroots.

I believe that we need to stick with that process and that the more
that we can do in terms of encouraging grassroots democracy, the
better. Also, one of the interesting debates that's going on now in
terms of Russian institutions is the role of the governors and
decentralization generally, and the question of the relationship
between the executive and the Duma. I think generally it is in our
best interest to keep supporting whatever we can to pluralize
democracy, and that would be our approach.

Q: About the cloud of corruption, do you have any estimate of how much
Western assistance in the form of loan, what percentage -- a rough
estimate even -- is being ripped off by the corrupters? And is the
central government involved? Is the executive branch at all involved
in this corruption?

ALBRIGHT: As you know, what is going on now is an in-depth
investigation of the whole business and we support that fully. It's
very difficult for me to answer any questions specifically on this
because we are in the process of really having the fullest possible
investigation in order to try to get all the answers here. We are
obviously more than concerned -- in fact, outraged -- if some of these
allegations are true.

But I think that the most important thing here now is to get to the
bottom of this and to sort out what has happened and to allow the
investigation -- in fact, make sure -- that the investigation goes
into the depths of the whole problem.

Q: I really enjoyed your talk and I think that you laid out all the
points very well. One of the issues that I'm curious about is this
whole business of reducing tensions in the region. I work in the oil
industry; obviously there is a lot of problems in Russia and Dagestan
and Azerbaijan, Georgia, and let's go down the list.

But just recently the House has again sanctioned Russian companies for
dealing with Iran and the U.S. issued a travel warning for Iran two
days ago, I think. Can you express your views on do you think this is
increasing tensions in the region and what do you think should be done
about Iran?

ALBRIGHT: Let me say that we are obviously concerned about the spread
of various technologies to do either with nuclear weapons or weapons
of mass destruction generally. We consider that the greatest threat to
our societies at this stage is the threat of the proliferation of
weapons of mass destruction. We have been concerned, and as I
mentioned in my remarks again, about transfers that take place and the
sanctions that have been -- there is a desire here to stop this kind
of a transfer. We've had discussions with Russian authorities about
this. We do consider that there is -- we have said in terms of talking
about our own relationships with Iran that our relationships cannot
change if they do not stop trying to acquire weapons of mass
destruction, support terrorism, or not support the Middle East peace

So while we have been noting carefully some of the changes in Iran,
those three points are very important in terms of our own policy and
our concern about the fact that there has not been a turning away from
those three.

Q: Underlying or preceding the question of proliferation of mass
destruction is a fundamental puzzle about the behavior of the United
States in respect to nuclear weapons. Why haven't we gone ahead with
START II and funding for START III? The fact is we have far more than
we need and the Russians have, of course, far more than that. And I
sometimes point out to my students that we should even -- that we
should proceed with reduction, that we should even offer to buy Soviet
nuclear weapons because the pro-rated cost of buying them would be
cheaper than the cost of having deterred them in the past. And that
would also help them in financial ways.

ALBRIGHT: It is my belief that the Clinton Administration has a very
good record on pushing for arms control and we have been pushing for a
ratification of START II and the Duma has -- because, as we know, it's
a very conservative body -- has managed to find various excuses for
not ratifying START II. But every time that I meet with my
counterparts we discuss the importance of the ratification.

And I must say that both Mr. Primakov when he was foreign minister and
Foreign Minister Ivanov have said that they are determined to pursue
the ratification of START II. In Cologne, President Clinton and
President Yeltsin agreed to hold parallel discussions over START III
and the ABM, and based on agreements made previously at Helsinki on a
reduction to the levels of 2,000 to 2,500 strategic warheads. I think
we are involved in those discussions as we speak.

So we believe that it's important to keep this process moving. And as
for your buying up, to a great extent, that is what this threat
reduction initiative of the President's is -- to really be able to not
buy up the weapons but to try to do everything we can to employ the
scientists, to try to do what we can to deactivate. We have helped
through the Nunn-Lugar program a great deal to try to deactivate
warheads. So we have worked on this very hard and I do think that we
have been proactive in this and will continue to do so.

But it takes two to tango here and what I am very interested in is
that the executive branch of the Russian Government, at least the
people I deal with, want very much to move forward on the ratification
of START II and moving forward on START III.

Q: Madame Secretary, thank you for your comprehensive tour d'horizon
on Russia. To follow up with Iran, the dialogue between the United
States and Russia on Russian proliferation to Iran, both in ballistic
missiles and civilian nuclear reactors, is ongoing since 1995. There
was a personal promise as far as I understand by President Yeltsin to
President Clinton to stop further operation. It did not happen.

What was the reaction of Prime Minister Putin and how do you think we
should react if we do not see the cessation of this dangerous process?
What should we communicate to the Russians in terms of (inaudible)?

ALBRIGHT: Let me say this: This is a subject that has been part of the
discussion whenever President Clinton and President Yeltsin have met,
when Vice President Gore has met with his various counterparts, when I
have met with mine. And there have been other channels that have been
developed in order to deal with this problem specifically.

I think that there has been some progress but not enough on this
subject and we will continue to raise it. When we met -- President
Clinton met with Prime Minister Putin just now in Auckland, again we
talked about the problem of the threats posed by the transfer of
technology and we expect that the Russians will cooperate. I think
that this is one of the essential marks of cooperation in our
relationship and we will continue to hold them accountable and expect
them to take the measures necessary to stop this.

MODERATOR: Do we have any more press questions? 

Q: Mrs. Secretary, this week a few Russian officials accused
Azerbaijan and Georgia of supplying arms to the (inaudible) in
Dagestan. The officials of the two respective countries denied that
this is true. Many in that region are concerned that Russia may use
this war in Dagestan as a pretext to destabilize Azerbaijan and
Georgia, and jeopardize the whole stability and the pipeline,
US-backed pipeline from Baku to Turkey to (inaudible).

Are you talking to Russians about the situation, the Caucasus and the
Caspian region in the light of this developments --

ALBRIGHT: First of all, let me say that, again, when I met with
Foreign Minister Ivanov in Auckland we talked generally about the
Caucasus and the issues to do with maintaining territorial integrity
of Armenia, Azerbaijan and Georgia. We talked about the problem that
they see in terms of terrorist activity in Dagestan and Chechnya and
there was not -- in my discussions with the Foreign Minister -- there
was no linkage of the two.

But I think that what is -- they know that we consider the -- as I
said, the territorial integrity of those countries as important to us
and I have in the past been in touch with the presidents of all three
of those countries. I think that while there clearly is a concern --
and there was another explosion today in Russia -- about terrorist
activities, I think it is very important to investigate those
activities and for us to understand that there is a common bond that
we have in dealing with terrorism but to be very careful in terms of
linkages made.

Q: Madame Secretary, to follow up on START, why not -- as some have
suggested -- follow the lead of Bush and Gorbachev and unilaterally
and jointly go down to 1,000 or 1,500 deployed nuclear warheads, and
why not de-alert all of our ICBMs, especially in view of the looming
Y2K problem at the end of the year? Yes, there is a Y2K strategic
commission with Russia, but why not take those two measures
unilaterally and mutually reduce and de-alert because it would - these
would be tremendous steps toward nonproliferation?

ALBRIGHT: Let me just say that as I've said, as we begin the
discussions on START III the desire is, in fact, to work to lower
numbers. But I am not going to get involved in the details of those
negotiations. Obviously, I think we both feel the importance of
lowering threats and supporting what we have believed to be central to
our arms control regimes, which is the ABM treaty, but I don't at this
stage want to get into the details of our negotiating strategy.

MODERATOR: We have time just for one more. I think you better use the

Q: Thank you for your very interesting statement. Two weeks ago, the
President of Moldova, Petru Lucinschi, visited Russia in unofficial
visit. He had very good meetings with Mr. Yeltsin, Mr. Putin. They
agreed about withdrawal of Russian troops from (inaudible) region.

Is intended United States to assist Russian and Moldova to resolve
this problem?

ALBRIGHT: Well, we have for a long time believed that it was important
to withdraw. When I was in Moldova myself when I was still UN
Ambassador I got into a little debate with General Lebed over this and
it is -- and I have raised the issue now in my bilateral discussions
and I think that we clearly believe that it's appropriate to have them

MODERATOR: Madame Secretary, you have shown all of us once again that
your reputation for clarity and candor and openness is very
well-earned. On behalf of everybody who braved Hurricane Floyd this
morning, thank you very much.

ALBRIGHT: Yes, goodness. To the brave people who are here. Thank you
very much.


Former Russiagate Skuratov Prosecutor Interviewed 

Rome's La Repubblica
15 September 1999
[translation for personal use only]
Interview with former Moscow Prosecutor Yuriy Skuratov by Alberto 
Stabile in Moscow; date not given: "'Russiagate: These Are the Guilty 
Parties; the Kremlin Will Not Stop Me'" -- first paragraph is La 
Repubblica introduction 

Moscow -- Yuriy Skuratov has a magnificent, 
state-owned dacha at his disposal, with guards at the gates, well-kept 
lawns, a greenhouse, and splendid woodlands taking on autumnal tones of 
ocher and purple. But this is the only remaining clue to the power that 
the Prosecutor General used to wield, because Skuratov has been living in 
a sort of limbo, suspended from his post and subject to searches, 
interrogation, and shadowing, since he decided to investigate the 
corruption that had spread right into the corridors of the Kremlin. He 
received us affably on the threshhold of the modestly furnished dacha, 
wearing a grey sweater, track suit pants, and slippers. Despite his 
naturally cheerful disposition, Skuratov looked the very image of 
[Stabile] Who wants to silence you, Mr. Prosecutor? Name a name. 
[Skuratov] First of all, the people implicated in the Mabetex [Lugano-based 
company accused of bribing Kremlin to win tenders] investigation. I will 
not name names, because they have not yet been charged. And then the 
figures involved in the Andava and Aeroflot investigations; Mr. Dubinin 
(the former governor of the central bank -- La Repubblica editor's note) 
and Mr. Chubays (former prime minister and leader of the young reformers 
-- La Repubblica editor's note). Phone calls between Berezovskiy (the 
financier suspected of diverting the Aeroflot profits to his own 
companies -- La Repubblica editor's note) and Dubinin have also been 
intercepted, in which the pair showed that they knew I would be asked to 
resign three days before it happened. 
[Stabile] It is common knowledge that the Mabetex investigation also covers 
Kremlin treasurer [Pavel] Borodin and the President's daughters. Why do 
you not want to name them now? 
[Skuratov] As I said, they have not been formally charged. The same applies 
everyine involved in the investigation. I am not a reporter; I still 
regard myself as prosecutor general of the Russian Federation, and I have 
to act within the law. 
[Stabile] Can you tell us when and why you began investigating? 
[Skuratov] The start of the investigation dates back to the first visit to 
Russia made by Ms. Carla Del Ponte (Swiss Prosecutor General -- La 
Repubblica editor's note), in May 1998. Toward the end of her visit, she 
took me aside and told me: "We have information on corruption among 
members of the presidential entourage." Then, with a conspiratorial wink, 
she asked me: "Do you want to look into it?" I answered that everyone was 
equal before the law and that I would look into it. The first papers 
arrived in September. I realized at once that it was a very serious 
matter. The papers were the fruit of an international investigation. 
(Mabetex owner -- La Repubblica editor's note) Mr. Pacolli's activities 
had aroused the interest of the German police, the Swiss police, and the 
Italian Finance Police. 
[Stabile] How did you react when you first saw evidence in black and white 
that the Kremlin was implicated in corruption? 
[Skuratov] My heart missed a beat when I opened the first sheaf, then I 
a colleague, and we shut ourselves up in the room and started thinking 
how we could continue the investigation. 
[Stabile] But why on earth did you not discuss it with the President? There 
would have been nothing wrong in going to Yeltsin and saying: "I have 
discovered something amiss in the handling of tenders, and I would like 
to look further into it." 
[Skuratov] I would have liked to discuss it with Yeltsin, but I failed to
an appointment. We used to have regular meetings up until the fall of 
1998, then they became very rare and, in the end, we had none. 
[Stabile] No one in high office was informed? 
[Skuratov] I discussed it with then Prime Minister Yevgeniy Maximovich 
Primakov. I told him the prosecutor's Office had come across material 
giving grounds for a very serious investigation. 
[Stabile] And what did Primakov have to say to that? 
[Skuratov] To go ahead in accordance with the law. 
[Stabile] He gave you a green light. 
[Skuratov] Let us say that at least he knew about the investigation. 
[Stabile] It is incredible that the Prosecutor should be unable to talk to 
President about a case that directly concerned him. 
[Skuratov] I imagine the people working against me were already paving the 
for my resignation, so they took advantage of any pretext to cancel my 
[Stabile] Not to put too fine a point on it, you suspect that Yeltsin had 
heard about your investigation from other sources? 
[Skuratov] I do not rule it out; what other explanation could there be for 
wanting my resignation? I do not rule out his knowing, because my phone 
conversations with Ms. del Ponte will have been bugged. The first leak 
must have occurred on 22 January, when Ms. Del Ponte had to show Pacolli 
my request for inquiries abroad so that she could go ahead with her 
search at Mabetex. He sent the document to Moscow at once. The head of 
the presidential administration, Bordyuzha, summoned me on 1 February and 
asked me to resign. 
[Stabile] After showing you the video [of Skuratov in compromising
with prostitutes]? 
[Skuratov] Quite. 
[Stabile] And what was your reply? 
[Skuratov] At our second meeting, the day after, I told him that he was
manipulated, like a weapon in criminal hands, but that made no impression 
on him. 
[Stabile] Did you expect a pornographic video to emerge against you? 
[Skuratov] I was expecting something. It was obvious they were getting
goad me. My relations with the President were icy by then. For the first 
time, after three and a half years of working together, he did not send 
me new year greetings; but I was not expecting that cassette. 
[Stabile] You are married with two grown-up children, a son and a daughter. 
How have they reacted? 
[Skuratov] My family has believed me. It has been brave. They obviously 
to provoke a quarrel between my wife and me, but they have failed. 
[Stabile] No one in your family saw the video when it was put out on 
[Skuratov] No, because it was the middle of the night. 
[Stabile] Are you or are you not the man filmed in the company of two 
prostitutes, Prosecutor Skuratov? 
[Skuratov] You surprise me. There is no more talk of that here. You are the 
first foreign journalist who has asked me. I am sick of answering. 
[Stabile] Let us get back to Mabetex. You say you heard about corruption at 
the Kremlin from Ms. Del Ponte, but the Swiss Prosecutor's Office says it 
acted at the request of the Russian Prosecutor's Office. Which is true? 
[Skuratov] The first reports of offences came from the Swiss Prosecutor's 
Office, and we made a preliminary check here. While we were checking them 
out, we discovered a number of facts that confirmed that abuses were 
being committed. In particular, we established that Pacolli once tried to 
bring in a large sum in hard currency without declaring it on a trip to 
Russia by personal jet. He was apprehended by the police, a report was 
drawn up, and his papers were confiscated. Then the Kremlin Commissary 
put a phone call through to the police station, and the matter was hushed 
up. Pacolli was released, but the story stayed on file. Then we gathered 
statements from Turover and collected further evidence. 
[Stabile] Who is Turover? 
[Skuratov] Ms. Del Ponte introduced him to me as a witness, and we
him. He is a former Banca del Gottardo employee. 
[Stabile] Is it true that he was free to come and go to and from your
and regularly used your telephone? 
[Skuratov] When Turover's role in the Mabetex investigation was realized, a 
campaign to discredit him began, to the effect that he was an adviser of 
mine, that he had free access to the prosecutor's office, and that he 
lived rent-free. I am not acquainted with his private life, but I can say 
that he did not act as my adviser and that he came into the Prosecutor's 
Office only with a regulation pass. 
[Stabile] You have said that the evidence against Yeltsin and his daughters 
has to be checked out. Why was the check not carried out before? 
[Skuratov] Because, as I have already said, the more detailed reports did
arrive from the Swiss Prosecutor's Office until March. I then gave 
instructions for a number of checks to be carried out, but I do not know 
the outcome, as I was taken off the investigation. I can judge from what 
my colleague Chyuglazov (the prosecutor who has stated that 98 percent of 
what the papers have printed is true -- La Repubblica editor's note) has 
said that the reports were reliable. 
[Stabile] Judging also from the fact that Chyuglazov has been taken off the 
[Skuratov] Sure, from the fact that the case has been taken out of his
as well. 
[Stabile] Are you in a position to reconstruct the network of corruption? 
[Skuratov] I can imagine it. 
[Stabile] Do you believe that Mabetex alone paid $10 million in kickbacks? 
[Skuratov] It is the sum calculated by Ms. Del Ponte. It seems to be a 
realistic estimate, although it has to be proved. 
[Stabile] Did International Monetary Fund aid fall into the net as well? 
[Skuratov] I would not know about the latest installments of aid, but I
a fair amount about the money lent to Russia prior to the August 1998 
crisis. I can say there was no direct embezzlement, but there was a 
transaction whose meaning is not entirely clear to me. Most of the 
currency was not used on the interbank market to support the ruble rate, 
but was sold to Russian and foreign commercial banks. Formally, it was a 
legitimate operation, but it remains to be clarified why the money failed 
to arrive at that time of crisis. 
[Stabile] What sum was involved? 
[Skuratov] Only $500 million were negotiated on the interbank exchange. The 
loan amounted to $4.8 billion. 
[Stabile] You were subjected to a search recently and to interrogation 
yesterday. You said on television that the police arrived as soon as you 
named Yeltsin's daughters. Have you received threats? 
[Skuratov] No, not threats, but the most effective tool is clearly the 
criminal proceedings opened against me at the Kremlin that night. 
[Stabile] Are you afraid? 
[Skuratov] No. Risk is part of my chosen profession. 
[Stabile] You have threatened to talk if the Mabetex investigation is
up. Why do you not say what you know now? 
[Skuratov] Revelations are not my creed. However, they might accuse me one 
of opening the Mabetex investigation for political ends, in which case I 
will be forced to defend myself, and to speak out more openly. 


Moscow Times
September 17, 1999 
Pressure on Skuratov Heats Up 
By Natalya Shulyakovskaya
Staff Writer

Russia's suspended Prosecutor General Yury Skuratov had his weekend plans put 
on hold Thursday when his scheduled trip to Switzerland was unexpectedly 

Skuratov, who was to meet with Carla del Ponte - until Wednesday the leading 
prosecutor in the Swiss investigation into Russian corruption - had a May 
trip to Switzerland for a corruption conference similarly scrapped when 
Russian authorities canceled his newly issued passport. But this time around, 
he said it was the Swiss visa that seemed to be the problem. 

"The embassy is not rushing to give it to me, although I did ask them to give 
it to me expediently," Skuratov said. He said del Ponte, who has moved on to 
become the chief prosecutor for the international war crimes tribunal for the 
former Yugoslavia, had sent his invitation. 

Heidi Grau, press secretary for the Swiss Embassy in Moscow, refused to say 
if the embassy had received an invitation for Skuratov. "We don't comment on 
visa matters," she said. 

Meanwhile, investigators from the Prosecutor General's Office conducted a 
search of the office of their suspended boss on Tuesday. 

The search was the second time in a week that property belonging to the 
suspended prosecutor has been searched by investigators formerly under his 
command. Last Thursday, his dacha and city apartment were searched, as was 
the apartment of his wife's parents. 

Skuratov, who has been under investigation since being removed from his post 
April 2 amid a scandal involving his probe into allegations of Kremlin 
corruption, said the tactics were meant to "scare" him. He rushed to dispel 
any talk of his trying to go abroad to escape his recent political pressures. 

"I have no reason to flee and such a thought has never surfaced in my head. 
They're all dreaming of it, but I will never make them such a gift," he said. 


IMF official dismisses accusations of Russian ex-prosecutor

WASHINGTON, Sept 16 (AFP) - A senior International Monetary Fund official on 
Thursday dismissed as "nothing new" accusations by a former Russian 
prosecutor that IMF money for Russia had been misused by Moscow's central 

"We believe there is nothing new," the official said, referring to 
accusations by ousted chief prosecutor Yury Skuratov.

Skuratov told the English language daily The Moscow Times that 3.9 billion 
dollars from an IMF bailout last year were sold directly by Russia's Central 
Bank to a small group of insider banks.

The money was part of a 22 billion dollar lifeline to Russia put together by 
the IMF in July 1998 in a bid to save the under pressure ruble from collapse.

However, the Russian government was forced to abandon the currency a month 
later on August 17, and simultaneously announced a default on 250 billion 
rubles (then worth 40 billion dollars) of domestic debt, known as GKOs.

The crash crippled Russia's financial system which has still to recover from 
the crisis.

According to Skuratov, a list of 18 politically well-connected banks profited 
from the bulk of the first 4.8 billion dollar tranche of the IMF rescue 

"An analysis of the Central Bank's use of the account where the IMF 
stabilisation loan was deposited showed that 4.4 billion dollars were sold 
from that account between July 23, 1998 and August 17, 1998," Skuratov told 
the paper.

"Of that money, 3.9 billion dollars were sold directly to Russian and foreign 
banks, bypassing the trading session at the Moscow Interbank Currency 
Exchange (MICEX)," he said.

The 3.9 billion dollars were used by the insider banks to convert their GKOs 
into dollars only a few days before the August crash, the Moscow Times said, 
citing Skuratov.

The IMF official, who asked not to be named, said however that "in 1998 and 
before, the central bank of Russia had been intervening on the exchange 
markets, which is legal and done in other places."

But he said the Fund, currently considering the release of a 640 
million-dollar loan installment for Moscow, was awaiting reports on how the 
central bank manages its reserves.

"It's in the interest of the bank to totally clarify this. Then we'll be 
ready to go."

A previous report from the US auditing firm PriceWaterhouse disclosed that 
Moscow had relied on an off-shore subsidiary known as FIMACO to manage part 
of its foreign currency portfolio.

As a result, according to the IMF, the Fund did not get an accurate picture 
of the country's reserve position.

But IMF officials insist there is no hard evidence to support allegations 
that any of its loans to Russia have been misappropriated. 


Newshour with Jim Lehrer 
September 15, 1999

Special correspondent Simon Marks reports extensively from Moscow on Russia's 
money laundering crisis.

SIMON MARKS: They are three separate corruption scandals that have rocked the 
Kremlin to its foundations, threaten to engulf President Boris Yeltsin and 
derail U.S.-Russian relations. All three are complex, detailed, and dominated 
by allegations that are not yet proven facts; with their dizzying array of 
influential characters, they have created a firestorm. Each scandal centers 
on money, and each scandal involves alleged dubious business dealings with a 
wide range of countries worldwide. 

Scandal number one involves the Bank of New York. It hit the headlines a 
month ago -- at its heart, questions about up to $15 billion that reportedly 
passed through as many as nine accounts with the bank. The accounts were 
overseen by two Russians, both vice presidents with the bank, one in New 
York, the other in London. The London employee, Lucy Edwards, who was born 
Ludmila Pritska, has been fired by the bank and remains behind the closed 
doors of her apartment in Britain. 

SIMON MARKS: We're wondering whether you'd be happy to talk to us about your 
suspension from the Bank of New York. 

LUCY EDWARDS: I have no comment at this time. 

SIMON MARKS: Is there any chance we could film you on the doorstep? 

LUCY EDWARDS: You can talk to my lawyer. 

SIMON MARKS: The Bank of New York, which has been cooperating with federal 
investigators, reportedly opened up to nine accounts related to a company 
called BENEX. BENEX, based in Britain, has only one director and shareholder, 
a Russian named Peter Berlin. Berlin is married to Lucy Edwards, the bank's 
fired London employee. And at the bank, she helped oversee her husband's 
accounts. Investigators say the company is also allegedly tied to notorious 
Ukrainian mobster, Semian Mogilevich. Mogilevich denies any connection to 
prostitution rings, drug sales, and other criminal businesses. But underworld 
activities he allegedly controls throughout the former Soviet Bloc are 
believed by investigators to be responsible for at least some of the money 
passing through the BENEX accounts.

JIM MOODY, Former FBI Deputy Assistant Director: The FBI, I personally, 
identified Mogilevich as the head of a Eurasian organized crime group 
operating in the United States as far back as May of 1996. 

SIMON MARKS: Jim Moody, recently retired, is the deputy assistant director of 
the FBI's organized crime program. He was the first U.S. official to identify 
Mogilevich as a leading member of the East European Mafia.

JIM MOODY: He and his people conduct the traditional type of organized crime 
activities of extortions and drug trafficking, but he's also into arms 
trafficking, frauds and a lot of the extortions they do I hear are very 
brutal. You're talking about a smart, vicious organized crime group, and he's 
supposedly a smart and vicious individual.

SIMON MARKS: And certainly Lucy Edwards, the fired bank employee, knows how 
criminals often launder their money through banks overseas. In June, she 
addressed this conference in Latvia. Her subject: Money laundering. The 
NewsHour declined to pay the conference organizers the $10,000 asking price 
for an audio tape of her speech. But even if Mogilevich did have the 
assistance of bank employees, investigators believe the money he allegedly 
laundered was only a small portion of the money passing through the Bank of 
New York. $15 billion is more than 40 percent of the Russian government's 
entire annual budget, so investigators have been focusing on the other 
players in scandal number one: Natasha Kagalovsky, a bank vice president, who 
supervised the BENEX accounts, and her husband Konstantin. He is no stranger 
to the United States. He was once Russia's envoy to the International 
Monetary Fund, an economic reformer who now says U.S. investigators are using 
him as a scapegoat in the burgeoning Bank of New York inquiry.

KONSTANTIN KAGALOVSY, Former Russian Envoy to IMF: (speaking through 
interpreter) My wife is being accused of being married to a Russian 
businessman, and that's what all these speculations are based on. 

SIMON MARKS: Not so, say those investigating the bank of New York. They are 
based instead on concerns that some of the money allegedly laundered through 
the BENEX accounts could have emanated from here, the headquarters of the IMF 
in Washington, where Mr. Kagalovsky used to work. An internal IMF 
investigation is underway to determine whether IMF aid to Russia was 
diverted. The Russians insist it wasn't. Even if the money didn't come 
directly from the IMF, there are other possible sources: The Russian banks 
that spectacularly collapsed during the past year. They include a bank called 
Menatep, which once operated from this cavernous building in Moscow. 
Menatep's failure was not an ordinary business bankruptcy. It closed after 
allegedly funneling much of its reserves overseas. Investigators believe it 
was taking the personal fortunes of Russia's powerful business leaders to 
havens safe from a free-falling ruble. Among Menatep's executives at the time 
- Konstantin Kagalovsy, who became the bank's first deputy chairman after 
leaving the IMF.

FRITZ ERMARTH, Former CIA Officer: The native Russian players in the Bank of 
New York story, Ms. Kagalovsky and Ms. Edwards, look like they've been asked 
to take the fall, when we all know they were not freelancing. 

SIMON MARKS: Fritz Ermath was a senior officer with the CIA, Until his 
requirement last year. Earlier this year in the an argument in the magazine 
National Interest, he accused U.S. policymakers of consistently ignoring the 
threat to Russia posed by top level corruption. 

FRITZ ERMARTH: Some portion of the $300 billion to $5 billion of wealth that 
have been sucked out of Russia in the last ten years has come through various 
pipes, Cyprus, Switzerland, Bahamas, into New York, Bank of New York among 
other places. And how much actual money laundering; that is, disguising 
through various transactions, has been going on, rather than simply moving 
and depositing, I have no way of knowing. But this should emphasize the point 
that it's not just laundering but capital flight where the origin of the 
capital is not really honest and fair. 

SIMON MARKS: Not really honest and fair, but not necessarily illegal either. 
The billions of dollars exiting Russia would, under American law, only be 
leaving illegally if they could be tied to specific illegal acts. And 
analysts say the rule of law in Russia is so lax that it may never be 
possible to tie specific dollars to specific crimes. 

JIM MOODY: Proving that this money was generated dirty is going to be very, 
very difficult. 

SIMON MARKS: So at the end of the day, this could be smoke without fire this 
could be activity that's obviously highly suspicious, highly dubious, but 
might be completely legal? 

JIM MOODY: Based upon Russian law, that's correct. Now, the reason why is 
because Russian criminal law is woefully inadequate. 

SIMON MARKS: The Bank of New York investigation will likely take many months, 
and without the full cooperation of the Russians few U.S. observers believe 
it will ever be possible to untangle completely the trail of money, I.M.F. Or 
otherwise, that that passed through the BENEX accounts. Without a complete 
investigation it may never be known who in Moscow authorized the flight of 
capital. At the moment, no Kremlin officials are implicated in the Bank of 
New York scandal. The same cannot be said about scandal number two. Call it 
the credit card scandal. Boris Yeltsin is proud of the renovations to the 
Kremlin that have been carried out during his rule. He's shown them to a 
stream of visiting foreign leaders in the course of the past few months. But 
those renovations may have come at an incalculable price. The second scandal 
dominating Russia centers on claims that, in exchange for the renovation 
contract, a Swiss construction company gave a $1 million bribe to the 
president, members of his family and his senior advisors. Swiss prosecutors 
say they have evidence showing that the company, MABATEX, deposited money 
into an account controlled by the Kremlin's chief property manager, Pavel 
Borodin. It's claimed that credit cards issued to Boris Yeltsin, his 
daughter, Tatiana Jachencko, and Mr. Borodin were paid off using that money. 
Last week, in an interview with the NewsHour in his Kremlin office, Mr. 
Borodin, who has compared the inquiries to the Spanish Inquisition, went to 
great lengths to proclaim his innocence. 

PAVEL BORODIN, Kremlin Chief Property Manager: (speaking through interpreter) 
Modern banking technology allows anyone to issue credit cards in any name. 
Issuing credit cards is one thing. Using them is something else. These are my 
credit cards. Look, you can see them. This one is from Russia's Spare Bank, 
this one is from S.B.S. Agro Bank. These are the credit cards which I 
actually use. I can provide you with the receipts. With these cards, I take 
money from my personal accounts and I pay for business functions and 
meetings. Everything is transparent, everything is clear. It is not my 
interest to hide anything.

SIMON MARKS: And as for the allegations against President Yeltsin...

PAVEL BORODIN: (speaking through interpreter) I am sure the Yeltsin 
investigation will soon fall apart. I assure you that Yeltsin is on the 
state's payroll. He's got no idea what a credit card is all about. 

SIMON MARKS: But Swiss prosecutors, according to newspaper reports in Italy, 
have pointed the finger firmly at Boris Yeltsin and his daughter Tatiana, 
seen here on the left, one of his key aides, she and her sister are suspected 
of using MABATEX's-backed credit cards during business trips to Europe. Uri 
Skuratov has his way has been blocked ever since Boris Yeltsin ordered his 
dismissal after the public release of a compromising videotape allegedly 
showing Mr. Skuratov in the company of two prostitutes. Just last week, Mr. 
Skuratov's home was searched again by security agents shortly after he told 
the NewsHour that 90 percent of the reports linking the Yeltsin family to the 
scandal are accurate. 

YURI SKURATOV, Prosecutor General: (speaking through interpreter) As far as 
the Yeltsin family is concerned, I am pretty sure that Boris Yeltsin is a 
decent man, an honest man. And what happened was a bitter mistake made by 
people who are organizing presidential travel overseas and dealing with 
financial matters. Most likely, he didn't even know about the whole business 
to do with credit cards, but when we talk about his daughters, it is a more 
complicated matter. It would be interesting to find out how with a modest 
member of the presidential administration, Tatiana Jachencko, with a salary 
of 5,000 to 6,000 rubles, could spend $10,000 without asking herself where 
this money came from. 

SIMON MARKS: And Tatiana Jachencko is not the only Yeltsin family member 
tarnished by scandal. Valery Okulov is married to Yeltsin's other daughter, 
Yalena. He runs the state airline Aeroflot, subject of scandal number three. 
Prosecutors in Russia and Switzerland are investigating whether profits from 
Aeroflot was held in was stolen while Mr. Okulov was in command. He denies 
all the allegations, but says the welter of charges has brought anguish to 
his father-in-law, the president. 

VALERY OKULOV, Yeltsin Son-in-Law: (speaking through interpreter) We are 
feeling terrible, obviously, it hurts. It's hard to get through. I have no 
doubt that there will be answers to these absolutely fictional allegations. 

SIMON MARKS: From the Bank of New York to the Kremlin's renovations, to the 
Aeroflot investigation, the whiff of scandal now touches a wide range of 
business and political leaders in Russia, allegations and denials cloud the 
political atmosphere. 


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