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Johnson's Russia List


September 20, 1999   
This Date's Issues: 3510 3511 3512

Johnson's Russia List
20 September 1999

[Note from David Johnson:
1. AP: Russian Crusaders Try To Fight Graft.
2. Christian Science Monitor: Michael McFaul, Russia's revolution is 
not over. The 'who lost Russia' debate misses what a majority of the 'lost' 
are doing.

3. Itar-Tass: Yabloko Leader Urges all Measures to Ensure Security.

4. Itar-Tass: GORBACHEV'S Wife Remains in Critical Condition.
5. Itar-Tass: Start-2 Important for Russia, USA--Gromov.
6. Financial Times (UK): John Thornhill, Top 'oligarch' plays down bank 
scandal. (Mikhail Khodorkovsky)

7. Peter D. Ekman: Bolshoi Good News.
8. Jerry F. Hough: Re: 3507-Taibbi and Ames/Wall Street Journal and Russia.
9. Washington Post: Masha Lipman, Russia: Near a Crackdown.
10. Anne Williamson, Russia's X mysteries.]


Russian Crusaders Try To Fight Graft
September 19, 1999

MOSCOW (AP) - How do you fight corruption in a country where even the 
smallest thing - vaccinating a child or parking a car - can mean paying a 

Russians may complain ceaselessly about corruption, but almost no one does 
anything about the graft that hatched under the czars, flourished under 
communism and mushroomed after the 1991 Soviet collapse. 

Now a handful of crusaders who have been waging a lonely and largely 
ineffectual campaign against corruption hope their cause will be furthered by 
growing international concern over the situation in Russia. 

Foreign investors have been complaining about corruption for years, citing it 
as a key obstacle to investment. But world interest has been muted until 

Among the cases that have caught world attention are a reported U.S. 
investigation into alleged money laundering by Russians through the Bank of 
New York and allegations that President Boris Yeltsin and his family received 
bribes from a Swiss company for lucrative Kremlin construction contracts. 

``Are (Russian officials) ashamed of themselves? They should be,'' said 
Konstantin Borovoi, a businessman and politically unaffiliated member of 
parliament. ``If they are ashamed on the world stage, things might change.'' 

Most Russians are skeptical the outside pressure will make a difference 
because corruption benefits so many people. The number of bureaucrats has 
even multiplied since Soviet times, meaning more wheels must be greased to 
clinch any deal. 

Corruption is almost never exposed or punished in Russia, and few expect 
Russian investigators to put much effort into the latest probes, despite the 
worldwide interest. 

Russian prosecutors have been halfhearted in responding to the Bank of New 
York money laundering allegations. Most officials have dismissed reports of 
wrongdoing as an anti-Russian plot. 

``You can steal a loaf of bread and sit in jail. Or you can steal millions of 
dollars of government money and sit in your nice summer home without 
worries,'' said Yuri Boldyrev, who served as Yeltsin's first anti-corruption 
czar - and was fired as soon as he pointed fingers at some Yeltsin allies. 

Former finance minister Boris Fyodorov, a brash former investment banker, has 
been one of the few officials to challenge the kingpins of Russian 
corruption. As tax chief last year, he took tough action against tax dodgers, 
including some politically connected tycoons and industries thought to be 

Boldyrev has also been outspoken. As deputy head of the parliament's Audit 
Chamber, he has investigated and published corruption charges against some of 
Russia's largest companies, including natural gas giant Gazprom and 
electricity monopoly Unified Energy Systems. 

Speaking out has its dangers. 

Borovoi says he was beaten for unmasking the lawlessness of Russian politics. 

Galina Starovoitova, a liberal lawmaker who was considered one of Russia's 
most principled politicians and regularly rebuked her colleagues for 
corruption, was shot to death last year in an apparent contract hit that some 
observers linked to her ``clean-hands'' campaigning. 

Some religious leaders are also trying to tackle graft, which they blame on 
the spiritual vacuum left by decades of communism. 

``There is no sense of shame, or responsibility,'' said Gleb Andreyev, a 
Russian Orthodox priest at a Moscow parish. 

Perhaps most disheartening for the anti-graf crusaders is when their efforts 
make no difference. 

The Russian public has largely shrugged off the reports linking Yeltsin's 
entourage to Swiss bank accounts, and voters often support allegedly corrupt 
politicians if their politics or campaign promises are appealing enough. 

Corruption ``is becoming more socially acceptable,'' Fyodorov said. 

For some people, graft is a matter of survival in a country where many public 
workers don't get paid because the government is broke. 

Among the daily examples: Traffic cops take bribes from motorists. Teachers 
give students good grades or sell places in top schools and universities. 
Doctors in state-run hospitals demand payment for supposedly free care before 
treating patients. 

In post-Soviet Russia, some of the most successfully corrupt have turned out 
to be the ``young reformers'' who studied capitalism at American and European 
universities and came home to apply their knowledge. They used government 
connections to buy valuable companies for a pittance in rigged privatization 
auctions, and reaped huge sums playing undeveloped securities markets - all 
in the name of market reform. 

``The corrupt people of the '90s have made more money in a few years than 
their communist predecessors did in decades,'' Borovoi said. 


Christian Science Monitor
20 September 1999
[for personal use only]
Russia's revolution is not over
The 'who lost Russia' debate misses what a majority of the 'lost' are doing 
By Michael McFaul
Michael McFaul is a senior associate at the Carnegie Endowment for 
International Peace. 

The "who lost Russia" debate reveals more about US electoral politics than it 
does about Russian realities. Russia is midstream in a social revolution. In 
only a few short years, the borders of the state, the nature of the economic 
system, and the organization of the polity have undergone fundamental, 
simultaneous change. Our current focus on Russian corruption obscures our 
understanding of this triple transition. 

To be sure, Russians have endured an economic depression of unprecedented 
length and depth. Likewise, crime and corruption have flourished in 
post-Communist Russia. We should have a real debate about the causes of these 
negative developments in our search for solutions. Yet, corruption and 
economic hardship aren't the only outcomes of the transition. 

Russian reformers achieved their greatest success when they destroyed the 
Soviet empire and the Communist dictatorship that held it in place. This is 
taken for granted today, but 10 years ago, the fate of the USSR was 
uncertain. Remarkably, only seven years since the Soviet collapse, no major 
political force in Russia today advocates re-creating the Soviet empire 
through military means. 

This outcome seems so permanent now that it gets virtually no mention in the 
"who lost Russia" debate. 

A second achievement of Russia's transition also rarely mentioned in the 
Western press is democracy. Analysts frequently declare that market democracy 
in Russia has failed, and their discussion focuses almost exclusively on 
economic setbacks. 

Russia's transition to democracy has been protracted, violent, and 
incomplete. Its political system still lacks many features of a liberal 
democracy. Superpresidentialism, a poorly organized civil society, an 
ineffective state, a slowly developing commitment to the rule of law, and a 
weakly institutionalized party system are serious flaws in the new democratic 
polity. But the political system does meet the standard definition of an 
electoral democracy - a system in which competitive elections are the only 
legitimate means of assuming political power. 

In the December 1993 national referendum, Rus-sian citizens ratified a new 
Constitution. Though this vote was probably falsified, all major political 
actors in Russia nonetheless recognized the results, believing that some 
rules were better than no rules at all. 

Since 1993, all major political actors have continued to abide by the new 
Constitution. Likewise, all political individuals and organizations of 
consequence participated in the 1993 and 1995 parliamentary elections, the 
1996 presidential election, and dozens of regional elections that have 
occurred since 1996. Shortly after the presidential vote, Communist leaders 
complained - with just cause - that President Boris Yeltsin had violated 
campaign-spending limits. But neither Communist Party candidate Gennady 
Zyuganov nor anyone else officially protested or rejected the results. 

Elections largely have been competitive and consequential - two-thirds of 
Duma deputies elected in 1993 did not win reelection or compete for 
reelection in 1995, and nearly half the regional chiefs lost reelection bids. 
US incumbents are much more likely to win reelection than are Russian 

As Americans debate who lost Russia, the "lost" Russians are debating whom to 
elect to Parliament in December and to the presidency in July. The list of 
potential candidates has narrowed since the last electoral cycle in Russia (a 
positive development), but it remains uncertain who'll win either election. 
Such uncertainty is the hallmark of competitive and meaningful elections. 

How free and fair elections will be in 1999 and 2000 will vary across 
regions. In some, local authorities influence both the voting and vote 

Moreover, the Russian press still discusses the possibility that Mr. Yeltsin 
and his allies - in an act of desperation to hold onto power - might try to 
cancel or postpone the presidential vote, although this seems increasingly 
unlikely and almost certain to fail if attempted. The very discussion of such 
scenarios is a sign Russian elections still can't be taken for granted. 

To date, however, the rhetorical attention devoted to the collapse of Russian 
democracy has outpaced the real threats to the current system. 

There is little positive news to report on the third leg of Russia's triple 
transition. Market reform in Russia has been less successful than most 
suspected. Yet it's striking that no major political actor today, including 
even the Communist Party, advocates a return to Communism. The consensus 
among political leaders amid the nation's economic hardship has been a search 
for new ways to make markets work, not to abandon them. 

Russia is plagued by corruption, crime, economic hardship, and a new wave of 
terrorism. We should welcome the new attention to these issues and do what we 
can to assist Russia in fighting these evils. But the singular focus on this 
set of problems should not crowd out the much more complex story that is the 
ongoing and unfinished revolution in Russia today. 

The next time you read a story about another corrupt Kremlin official, 
remember that Duma Deputy Svetlana Orlova also lives in Russia. As a 
candidate for governor in the far eastern Maritime Territory, she is running 
on an anticorruption platform to oust the incumbent. The next time you read 
about another Russian gangster, remember that Duma Deputy Viktor Sheinis also 
lives in Russia. Rather than believing Russia is doomed to dictatorship, he 
is busy drafting constitutional amendments to limit presidential powers. 

Though you'd never know from reading the Western press, there are literally 
tens of thousands of other unknown people like Ms. Orlova and Mr. Sheinis 
still fighting to make it a better place to live. If they still do not 
believe that Russia is lost, then why should we? 


Yabloko Leader Urges all Measures to Ensure Security.

MOSCOW, September 19 (Itar-Tass) - The developments around Chechnya and the 
terrorist war announced to Russia were the topics highlighted by leader of 
the Yabloko movement Grigory Yavlinsky at the movement's 7th congress in the 
Otradnoye rest house, the Moscow region, on Sunday. 

"It's time for the authorities to wake up from lethargy and to do everything 
possible to ensure the security of Russian citizens," he said. In the words 
of Yavlinsky, the moves must be well-considered and efficient, not impulsive. 

"We must get ready for a grave and lengthy confrontation," Yavlinsky noted. 
Primarily, it is necessary to give a serious support to the Russian Armed 
Forces and the Russian Premier must carry a personal responsibility for the 
provision of the military, he said. 

Yavlinsky calls for submitting a bill on the legal status of the army units 
and the law-enforcement bodies in the Northern Caucasus to the State Duma in 
the near future. Another insistent need is to close the administrative border 
with Chechnya and to build defensive lines there, the Yabloko leader said. 

In his words, a special attention shall be given to prevent soldiers drafted 
less than a year ago from taking part in combat operations. Their use in 
hostilities results in unjustified losses and has a negative effect on the 
moral-political unity of the country, Yavlinsky said. The unity of Russian 
citizens and the Armed Forces "is the number one question," he added. 

The authorities must not yield to the enemy, which is trying to instigate a 
clash between peoples, Yavlinsky remarked. "The authorities must not allow 
persecution on the ethnic reason, they must prevent religious discord and a 
war against any people of the Northern Caucasus. The bandits and those who 
guide them must answer for all they have done," he said. 


GORBACHEV'S Wife Remains in Critical Condition.

BERLIN, September 19 (Itar-Tass) - The wife of Soviet ex- president Mikhail 
Gorbachev, Raisa, remains in critical condition, a staffer of the Muenster 
clinic where Raisa Gorbachev stays to cure leukemia, told Itar-Tass on 

On September 12 Raisa Gorbachev was taken to the clinic's intensive care unit 
with a blood vessel shock, he said. Professor Thomas Buechner, 67, the doctor 
of the ex-president's wife, thinks there is still hope despite any positive 
changes in the condition of Raisa Gorbachev. At the same time, any 
transplantation of the donor's marrow is now out of the question. 

Raisa Gorbachev is unconscious and using the artificial lung ventilation 
system. Mikhail Gorbachev sticks to his wife's bed. Their daughter Irina is 
the only other visitor admitted to the room of Raisa Gorbachev. 


Start-2 Important for Russia, USA--Gromov 

WASHINGTON, September 19 (Itar-Tass) - The START-2 is strategically important 
for Russia and the United States, Chairman of the State Duma's Sub-Committee 
on Arms Control and International Security Boris Gromov told the Washington 
Times newspaper. The interview is published in the newspaper's Sunday issue. 

"The START-2 ratification will have a good foreign political effect for 
Russia and will not run counter the country's defense interests," the general 
said. In his opinion, the delay in the START-2 ratification by the State Duma 
is caused by the socio- economic problems of Russia and difficulties with the 
financing of the START-2 implementation. "Our countries shall strengthen the 
spirit of partnership and mutual understanding," he noted. 

Asked to comment on the U.S. striving to change the ABM Treaty of 1972, 
Gromov reaffirmed that Russia did not accept such moves. "If the ABM Treaty 
is changed, the future of the global nuclear disarmament will be unclear at 
best, or unpredictable and very dangerous at worst," he said. The changes 
will ruin the Treaty and entail the revision of the START-1 and the START-2. 

Asked whether he was satisfied by the Russian-U.S. political and military 
cooperation in the period of the Balkan crisis, Gromov answered negative and 
said "there was no such cooperation at all." 

"Russia and the United States moved autonomously, although in the parallel 
political directions," he said. "The NATO bombing of Yugoslavia, which lasted 
for three months, was a blunder of the North Atlantic Alliance. The military 
solution of such problems is unpromising and leads into a deadend." In his 
opinion, the NATO military operation against Yugoslavia "seriously 
complicated the American-Russian cooperation in the military sphere." 


Financial Times (UK)
20 September 1999
[for personal use only] 
RUSSIA: Top 'oligarch' plays down bank scandal 
By John Thornhill in Moscow

One of Russia's business "oligarchs" invited to testify to the US Congress
this week on an alleged money laundering scandal has insisted reports that
$10bn (£6.2bn) was laundered through accounts in the Bank of New York
exaggerated the sums involved and their criminal origins.

Mikhail Khodorkovsky, head of the Rosprom industrial group, which includes
the Yukos oil company and Menatep bank, said in an interview with the
Financial Times he had established that $6.3bn of Russian money passed
through the Bank of New York accounts over the past 3½ years.

He said he had derived this information from un-specified Russian sources,
who had been able to confirm it overseas.

US newspapers have reported that a total of $10bn or $15bn might have
passed through the Bank of New York accounts since the beginning of 1998.

Interpol, the international crime fighting agency, last week described the
case as the biggest money laundering scandal it had seen.

Mr Khodorkovsky, who has been invited by the US Congress to testify before
a committee investigating the money laundering allegations, said the money
transfers were so large that they must have come from many different sources.

"I was very surprised by this enormous sum. But I do not think that all
this sum concerns money laundering, or even capital flight," Mr
Khodorkovsky said.

"I think there is an element of criminal money. But the bulk of the money
reflects attempts by Russian importers of consumer goods to avoid taxes,"
he said.

Mr Khodorkovsky said Russian importers typically would understate the value
of their imported consumer goods to avoid paying taxes and make up the
remaining payment for the products by means of surreptitious money
transfers via Benex, the company at the centre of the money laundering

Several foreign consumer goods companies operating in Russia had also used
this scheme, he claimed.

The Russian businessman said he was prepared to co-operate with the US
Congress's inquiry, which starts tomorrow, but first wanted a more detailed
list of questions.

Mr Khodorkovsky was one of the group of powerful "oligarchs" who benefited
from the controversial loans-for-shares privatisations in 1995 and then
helped finance Boris Yeltsin's presidential re-election campaign the
following year.

He said both Menatep and Yukos had had negligible dealings with Benex.

The western press had linked Menatep and Yukos with the money laundering
scandal on the basis of purely coincidental evidence, he said.

Natasha Gurfinkel Kagalovsky, a senior executive at Bank of New York
responsible for Russia, was married to Konstantin Kagalovsky, Russia's
former representative to the IMF, who later held top level jobs at both
Menatep Bank and Yukos.

Yukos, Russia's second biggest oil company, is still locked in a bitter
struggle with its minority share-holders, who claim the parent company is
systematically stripping value out of its daughter companies through
disadvantageous transfer pricing, opaque asset sales, and dilutive share

The Federal Securities Commission, the stock market regulator, is
continuing to investigate the share-holders' complaints. It has also passed
on evidence to the interior ministry and tax police suggesting that Yukos
violated several tax laws and court orders.


From: "Peter D. Ekman" <>
Subject: Bolshoi Good News
Date: Mon, 20 Sep 1999

Bolshoi and Small Miracles
On Sept. 1 I wrote in JRL about the ticket scam that 
apparently has always plagued the Bolshoi Theater. Ordinary
people simply couldn't buy tickets to the Bolshoi, except through
scalpers who took about 95% of the revenue.
Even in such trying times, miracles happen in Moscow.
Last Wednesday I bought two tickets directly from the Bolshoi
box-office (next to the Okhotny Riad metro station). There were only
3 or 4 people in the line which moved quickly. The cashier was polite 
and sold me 2 good tickets for La Traviata (2nd balcony center). 
I was so nervous actually buying tickets direct from the Bolshoi that
I forgot that I had guests coming over on Saturday. The next day I 
returned and was politely told that more tickets for Saturday would
only be available on Friday. On Friday I returned and quickly bought
2 good tickets (10th row center Parterre). Total cost for 4 tickets
820 rubles (about $32), which went straight to the Bolshoi. 
Prices are clearly posted for tickets and they run from about 80
to 400 rubles
The show was pretty good, and the Big Old Lady has spruced
up her act. The top half of the curtain even has a double-headed eagle
and "Russia" on it - though the bottom half still has the hammer and sickle
and "CCCP."
There are still scalpers hanging around charging twice or more the
posted prices. But guards keep them away from the box-office. I couldn't
get too much information from the scalpers but the new system seems to 
have started at the beginning of Sept. and they consider the new prices to
be too expensive (!!!)
The Metropol Hotel still has its ticket office- now hard wired into
the Bolshoi's box-office and printing up their own tickets (similar to the
way Ticketmaster operates in the US). They couldn't sell me tickets for
Saturday but said 1 Parterre ticket would cost about $50. I'd guess
that the Bolshoi is sharing in the extra revenue. The price discrimination
is amazing however ($16 vs. $50) for the same tickets being sold about
50 meters apart.
Perhaps I should apologize for writing my earlier nasty piece right 
when the Bolshoi was switching over to the improved system of selling
tickets. I'll wait awhile to see whether they follow through. I will risk
small generalization however: progress does happen in Russia - slowly,
and one step at a time- but it does happen.


Date: Sun, 19 Sep 1999 
From: "Jerry F. Hough" <>
Subject: Re: 3507-Taibbi and Ames/Wall Street Journal and Russia

Matt Taibbi and Mark Ames are right that the Wall Street Journal 
coverage in 1996 and 1997 was the worst. But they see only the 
correspondents, not the editorial pressures. I still quote Serge 
Schmemenn's article in the Times in March 1985 that correctly predicted that 
Gorbachev would have a transformation as great as Stalin's. His 
coverage then became very cautious. When I criticized him personally, 
he said that his editor in chief did not agree and that editors decide. 
Even today, that editor, now a columnist, is known for his virulent 
anti-China columns. Liesman's articles had real defects, but they were 
not nearly as bad as the headlines given them in the Journal, 
usually on the front page. That is an editorial decision. The op-ed 
pieces were uniformly even worse.

But the Journal really deserved the Pulitzer for its three 
articles in late September 1998. Liesman did something no one else 
did. He went back to the old success stories--e.g., Bakaleynik, the 
director of the Vladimir Tractor, who said he had left the plant and had 
gone into oil trading because peasants had no money for tractors. If 
only others would report that instead of still saying the problem is 
Russian businessmen and agricultural subsidies instead of exploitation of 
the countryside! 

The article that everyone should reread is the one published the 
next day (September 24), written by the Journal's Washington 
correspondents. Nothing I have ever written on these pages was so 
critical of Rubin, Summers, and Fischer. It lay out the 
relationship: Summers "installed" Fischer in IMF and talked with him 
daily. Fischer today says the West could not have influenced Russia . 
Then he was naive and bitter and said a big IMF loan in August 1998 would 
have saved everything, but he publicly blamed the electoral pressures on 
Chancellor Kohl as being the cause of the disaster. The correspondents 
called Russia "A Vietnam for Washington's `best and brightest' economic 
minds." Only editors can decide if such a line goes on the front page 
high in an article, but the editors emphasized the point by printing a 
quote from Halberstam's The Best and the Brightest in the head of the 
article. The Journal editors were claiming, rightly or wrongly, that they 
had trusted Rubin and Summers and that those two had misled the Journal.

There is another great article of the time that absolutely must be 
reread by anyone interested in the corruption story. The New York 
Times, October 18, 1998, p. 1. It deals with the question of how the 
banks got misled and bought into GKOs. 

But there is another article that is even more 
important to read: Richard Medley's "Europe's Next Big Idea" in the 
current issue of Foreign Affairs. Your average reader may look at the 
issue for Aslund's piece on Russia. Aslund repeats his long-time line 
that the trouble with Russian capitalism is that it has capitalists and 
that these capitalists have opposed and destroyed capitalism. He uses 
terms like businessmen and nomenklatura, but the insider-owners WERE and 
ARE the capitalist class. Aslund, like many others, combines an extreme 
right-wing view of the virtues of capitalism with an extreme Marxist 
view that capitalists are worthless parasites with whom pro-capitalist
"reformers" should not form coalitions or political parties. It is a 
remarkable line. Perhaps I am not as critical of Liesman and the Journal
because we should forgive prodigal sons who give their mea culpas and then
write articles that try to correct the misinformation they have published. 
Those who have promoted a policy that has killed millions of Russians and
promoted Islamic war in the Caucasus in the name of promoting peace and
democracy and who are incapable of mea culpas or taking responsibility--or 
even of rethinking or even of remaining silent--belong in a special circle 
of Hell in my opinion.

The reader should not, however, throw the Foreign Affairs issue 
into the trash halfway through Anders' article. Richard Medley's 
article is the must reading. He begins with the absolutely shocking 
assumption that capitalists try to maximize profit and that even today 
they deal with government in order to do this. This happens, he even 
implausibly claims, in the United States, which must be as corrupt and 
inefficient as Russia. Medley then multiplies his error by suggesting 
that Western European capitalists follow the American capitalists' path. 

The basic theme of the article is that Western Europe soon will 
and should form a united military with far higher expenditures on 
research, development, and procurement. I think that he is certainly 
right on the "will." Now that Western Europe has a single currency, it 
surely will have a single military. That will make it a state by any 
definition, and it will remain a democracy only by creating strong 
European political institutions. That will soon come.

But Medley also says, and, I think, also totally correctly 
that this would be economically highly beneficial for Europe. He ends 
the article, "A unified European military would not only change 
world politics, it would also change European economies, with benefits 
that we cannot yet fully imagine. After all, although Al Gore may not 
have invented the Internet, the Pentagon did." He says the US spends 40 
percent of its defense budget on procurement and research, and this is 
the American industrial policy. $30 billion goes to advanced research and
technology compared with less than $10 billion in Western Europe, although the
US and EU have identical $8 trillion economies. That is why we are in the 
lead in computers, airplanes, internet, etc. 

One can certainly argue that there are more intelligent ways to
conduct an industrial policy, but the notion that other countries--especially 
those like Russia without strong financial institutions--should not have 
one is either ideologically naive or, in fact, a policy of keeping 
inflation low in the US by keeping Russia dumping raw materials at low cost.
There is no excuse for Russia to follow the advice.

But, in conclusion, we need to give thought to Medley's central thesis 
about the unification of Western Europe. It is ludicrous that 
Western Europe is moving to economic integration while the former 
Soviet Union is not supposed to have it. Clearly we are on the eve of 
very major political changes in Russia. Almost surely whoever comes to 
power will begin moving toward some kind of reconstitution of a stronger 
confederation or a federation among the former Soviet republics, probably 
excluding the Baltic countries. The minute Russia has an industrial 
policy with tariffs, countries like Ukraine will be begging for entry and 
the Baltics will be seeking special arrangements. Ukraine had 
"sovereignty" and UN membership under Stalin. Clearly it will have no 
less in the future. But we should be giving thought on how best to 
visualizing and to promoting the kind of sovereignty that a France or 
Germany has and will have within the new West European state. It may 
have been necessary to end Orthodox rule of Catholics and Protestants 
to end the schism between the two, but Secretary of State Baker remains 
right that in a world in which the super-powers will, like China and 
India, have a billion people, we need a healthy, economically sound 
community of a billion people from Vladivostok to Vancouver, and we need 
to think how to achieve it.


Washington Post
19 September 1999
[for personal use only]
Russia: Near a Crackdown
By Masha Lipman
The writer is deputy editor of Itogi magazine. 

MOSCOW—A series of explosions in apartment buildings here kills nearly 300 
people and leaves Muscovites in shock. Everyone calls for tough measures. 
Although the available evidence is far from conclusive, no one seems to have 
any doubt about who is responsible: Chechens. A popular evening TV show asks 
viewers who should be "kicked out of Moscow" -- just Chechens, everybody who 
comes from the Caucasus or all bandits? "All those from the Caucasus" wins 
overwhelmingly. Callers to another program suggest that terrorists be killed 
"in their mothers' wombs" and that "Stalin's methods" be brought back to deal 
with them. Politicians seek to surpass one another in their mercilessness and 

Moscow Mayor Yuri Luzhkov, a likely candidate for president in 2000, orders 
that all "guests" of Moscow be put under stiff police control. The mayor's 
tone leaves no doubt he means all those from the Caucasus. Each guest, the 
mayor announces, must renew his residence registration and provide an 
explanation of what he's doing in the capital.

The leader of the democratic opposition party, Yabloko's Grigory Yavlinsky, 
says Russia must present an ultimatum to the Chechen rulers: Turn in the 
terrorists or we'll level your republic to the ground. Prime Minister 
Vladimir Putin, in addressing the Communist-dominated Duma, says it's time to 
revise the 1996 peace agreement with Chechnya, since the Chechens have taken 
advantage of some of its provisions to further their separatist aspirations. 
The legislators think that's a fine idea.

Russians may or may not believe that their national leaders have the will and 
skill to combat terrorism. After decades of absolute dependence on the Soviet 
government for their social welfare, employment, ideology, cultural needs and 
artistic tastes, the Russians have found themselves all but abandoned by 
rulers who leave them free to speak their minds and vote for parties of their 
choice but will not pay their wages, defend them against crime or provide 
simple justice in court. For the most part, they have learned surprisingly 
well to take care of their everyday lives without any help from government.

Russians furiously condemn the government for not taking care of them and 
curse those in power for enriching themselves at people's expense, but 
they've learned to do without state support. If instead of salaries they are 
"paid" in car tires, vodka or towels, they master the barter economy and opt 
for direct commodity trading. If the government fails to provide a reliable 
banking system, they convert their money into dollars and stuff it under 
their mattresses.

But no amount of personal endurance, patience, resourcefulness or general 
optimism can protect the Russian people against terrorism. There is no 
"hustling strategy" that will work against a truck bomb. The impoverished 
majority and the few new rich are equally vulnerable to these blasts.

And the sad thing is they have nobody to turn to but the national leaders who 
have already failed them. After the horrible explosions of recent days, 
people here seem willing to forget the inefficiency and corruption of the 
government and entrust the leadership with any use of force, be it against 
"guests of Moscow" or the Chechen republic.

They respond eagerly to calls for vigilance. A journalist friend who happens 
to have dark hair and a mustache told me he makes sure he's wearing a white 
shirt and tie these days -- formal dress is supposed to send a message to the 
police that he's not one of "those from the Caucasus" (in fact, he's Jewish).

If the city police want to kick out of Moscow "all those from the Caucasus," 
the public approves. People prefer not to remember that these are the same 
police who are universally regarded as sellouts, more often than not on some 
criminal's payroll, cops they would never rely on for protection.

If the prime minister wants to crack down on Chechnya, he'll have nationwide 
approval. The public seems to have forgotten that this same prime minister 
said in August that the current war in Dagestan would last two weeks. And 
those who embrace the idea of undoing the 1996 peace agreement seem willing 
to forget that the agreement was the only way to put an end to Russia's 
disgrace and humiliation in the 18-month Chechen campaign.

It would be good if the horror of terrorist attacks could do the seemingly 
impossible -- that is, make the Russian government act responsibly and 
effectively. And maybe the benefit of the doubt now being granted the 
government by the Russian people is justified. But it's more likely that a 
crackdown on Chechnya and "those from the Caucasus" will only result in many 
more lost lives, major destabilization and the instigating of the most brutal 
racist acts, while jeopardizing one of the precious few achievements we in 
Russia have a right to be proud of: our democratic freedoms.


Date: Fri, 17 Sep 1999 
From: "Anne Williamson" <> 
Subject: Just Another Campaign Contributor
FRIDAY SEPTEMBER 17 1999          
Russia's X mysteries 
By Anne Williamson
Anne Williamson has written for the Wall Street Journal, The New York Times,
Spy magazine, Film Comment and Premiere. An expert on Soviet-Russian affairs,
she is currently working on a book, "Contagion: How America Betrayed Russia." 
© 1999 

With each passing day of the Bank of New York-Russian money scandal, the
of suspect Russian companies whose names end in "-ex" expands: Mabetex, Benex,
Forex, Ostex, Torfinex and Dimalex. Once again, Papa Bear "-Ex," Nordex, and
its founder Grigori Loutchansky are in the news. 

Fingered in the spring of 1997 as one more dubious foreign contributor to
Clinton's re-election campaign, Loutchansky -- sounding like the frustrated
Rodney Dangerfield of alleged Russian nuke smugglers -- had a scatological
mouthful to say. "A big American game of big bulls---!" he bellowed over the
telephone line from corporate headquarters in Vienna, "It's those bloody
gangsters in the CIA!" 

Look, from Loutchansky's point of view, aspiring to Friend-of-Bill status
turned into a real nightmare. Think about it. One day you're having your mug
snapped alongside Bill Clinton's in the White House and you're carrying
messages from POTUS to POU (President of Ukraine) and the next your good name
is being drug through the mud and your once-proud firm's reputation is
besmirched. Other campaign donors got OPIC and Ex-Im Bank support, a night in
the Lincoln bedroom, or a ride on Air Force One. 

But you? All you got were your hot deals in Kazakhstan with Canada's Placer
Dome, U.S. Steel and Mobil Oil trashed, visa refusals from the U.S., Canada,
Great Britain, and Hong Kong, your phone calls monitored by NSA, a clutch of
unflattering newspaper stories and a letter of inquiry from a congressional
investigatory committee. Talk about slings and arrows. 

"Americans consider us to be second rate people!" Loutchansky fumed. 

I first stumbled on Nordex years ago in Baku when it was still a provincial
Soviet capital, utterly bereft of Texas oilmen. It was there that I confronted
a man whom I was sure was my KGB tail, but who protested, saying he was a
simple biznesman who'd "left the service." But why? 

The question got me a shot of vodka and the guy's story at a corner table in a
tiny bar in a dreary hotel next to the Caspian Sea. His last assignment while
"in the service," he said, was accompanying shipments of Soviet gold bars to
Austria and something in the course of those operations that I couldn't quite
grasp had led to the career change, but he did say I ought to remember the

Naturally, I forgot all about Nordex until years later in Moscow when I
read in
a William Safire column that "it's remarkable how the name Nordex causes
intelligence faces to turn to stone." For laughs, I looked Nordex up in the
Moscow Business Telephone Guide, an entrepreneurial asset of the new age
regnant in the capital, and to my surprise found the listing with seven
telephone numbers. This was serious blat ("pull"), very serious blat, since
nobody, but nobody, had seven published telephone numbers in Moscow in 1995. 

After a day's long marathon of dialing, a cheerful voice answered,
Innostrannykh Del." This was unbelievable! The Foreign Ministry? I stated my

"Oh, how lucky you are! I was just passing and almost didn't pick up the phone
and not only that, but I know everything about Nordex. You say you're
American?" a certain Aleksandr Konstantinovich queried. 

I was stunned. It's a journalist's dream to hear anything so normal, so
friendly from Russian officialdom; it was impossible not to be suspicious.
Konstantinovich suggested that I call two days hence mid-morning, saying we'd
schedule a meeting for that day. And then with the breezy suddenness of an
Englishman's "Cheerio," he was gone. 

Naturally, Konstantinovich blew me off, and days more of dialing only got me
frazzled. Then, by chance, I stumbled on paydirt again while leafing through a
1993 issue of VIP, the vanity organ of the commercialized nomenklatura.
a boastful interview with Vladimir Shcherbakov, the last first deputy prime
minister of the Soviet Union and today president of the International
Foundation for Privatization and Private Investment (FPI), I learned that
charter was legitimized by Gorbachev's signature and approved by 13 heads of
what were still constituent republics on Sept. 14, 1991 -- a time when the ink
on Boris Yeltsin's decree banning the Communist Party was barely dry -- and
the foreign partner amongst the three founders was an Austrian firm, Nordex

In the interview, the nimble-footed Shcherbakov reported excellent relations
with the new regime of "eager young reformers" -- Yeltsin, Gaidar and Chubais,
all hail-fellows-well-met -- along with similarly sympathetic connections
to the
EBRD, the IMF and the U.N. Industrial Development Organization. Shcherbakov
bragged about FPI's "new approach to the problem of the property of the
Army Groups in Eastern Germany that comes down to its joint exploitation by
Russian and German businesses," a mind-boggling admission considering that a
year after the interview was published, the Russian scandal was Bonn's claim
that Soviet weaponry sales to rogue regimes originating in the Western Army
Group had amounted to a $4 billion criminal take. 

A week later, I stumbled again, right into the company of a former employee of
FPI, who spoke through clenched teeth while saying, "I don't and didn't like
this business. It's not an honest one, I decided I didn't want to be

But exactly why? 

"It's not a well-known organization, but it's one of the most wealthy and most
powerful organizations in Russia. Their main business is acting as a sort of
professional legal business for companies in the regions. They go knock on the
government's door and get some money for the companies, or subsidies, or tax
breaks. Then they take their commission. I can't say it publicly, I can't
my position with documents, but I know they were privatizing companies, the
very best companies, before we had a privatization program." 

And what about Nordex? 

He clammed up at that, "I won't say one word about Nordex and you shouldn't
even pronounce the name." 

When I tracked down an acquaintance with military intelligence who'd been
helpful in fleshing out a "Jewish mafia" scheme to swindle the government over
a pulp and paper mill on the Volga, he too showed a sudden concern for his
visitor at the mention of Nordex. "Anechka," he murmured softly, "I want to
help you, and I am doing so now in telling you, and I am underlining these
words, not to ask anybody any more questions about Nordex." I've lived long
enough that when guys twice my size preface a warning with the equivalent of
"dear Anniekins" and I was in a country where overly nosy journalists
explode -- literally -- I pay attention. I put Nordex to bed in a manila file

Imagine then my surprise to discover that no one had shown similar concern for
our own fair-haired boy in the White House, that Grigori Loutchansky, in the
company of one Sam Domb, a New York real estate businessman and DNC Trustee
good for $160,000 worth of support in 1993-94, was so close to Bill Clinton as
to be photographed. Intentionally. Not only that, but he gets a letter
him for his support and a second dinner invite for January 1995. Out came the
manila file folder. 

I called up a high Russian government muckety-muck, who when I told him the
news, mumbled, "Oh, that's bad." He described Loutchansky as "sort of an
and confirmed what my man in Baku had told me, "It's definitely not a simple
story because his business was a KGB cover-up operation in the very beginning,
a kind of firm in the West which developed underground and after the original
objective disappeared, he used it for making money. He had very peculiar
connections in Russia, very peculiar connections, but it cost a few figures in
the government. It's not simple anyway." 

Not according to the Time Magazine reporters who took up Loutchansky's
offer to
examine his books in July 1996. Time's report detailed deals involving PM
Viktor Chernomyrdin, Moscow Mayor Yury Lyuzhkov and former Soviet Minister of
Metallurgy and hometown Yeltsin crony Oleg Soskovets, scud missiles, nuclear
smuggling and multimillion dollar transfers through a network of Swiss bank
accounts and dummy companies set up in tax havens like the Isle of Man and
Liechtenstein. Loutchansky told Time that the very fact he was framed by Boris
Pugo, former head of the Latvian KGB, and served a two-year prison term for
embezzlement, was proof he never worked for the KGB. 

"I was in the gulag in Russia! I was an activist fighting against Communism,"
he hollered, when I asked him about the incident with Pugo, "I was accused of
Zionism, an ideology said to be against the USSR, at a time when Pugo was the
first secretary of the Komsomol. He didn't recommend me for CPSU membership
personally, but administratively. I needed his signature for a position with
the Central Committee of the Latvian Party, which found summer work for
students. The embezzlement charge was all nonsense, it was a simple barter

I didn't get a chance to ask how one could both be an activist against
Communism and an employee of the Latvian Central Committee when we were off to
the races again, "All these charges are 1000 percent not true! The CIA was
bugging my telephones without the Austrian government's permission; they are
working in the interests of big Western monopolists with credits to the
government. You, the West will be responsible for Communist revanchism. That
stuff in Time magazine about a report from German intelligence, they have no
file on me and they were unable to introduce evidence about me in the court
case I just won today, and that so-called report from the KGB, it's nothing
bulls--- for sale, a digest of different articles and some imagination. That
s--- about me shipping scud missiles to the Middle East, my family lives in
Israel, why would I do something like that?" demands Loutchansky, who did
possess an Israeli passport. 

The missiles were on a Nordex plane that was leased and besides, Loutchansky
said, it was the USSR that sold a factory for scud production to Iran in 1991,
not Nordex. 

It all began so promisingly, lamented Loutchansky when in the late 1980s he
appointed the Western representative of Soviet collective farm Adazhi, "which
was one of the best, most modern farms. We were shipping fertilizer, raw
materials and steel." Hey! That is one heck of a collective farm that not only
ships steel but racks up annual profits of $2 billion; "OK, so we expanded." 

"I've been to Kansas, to visit Fairmont, an agro firm," he continued,
plaintively. Funny, how credible a connection to Kansas makes a man sound. His
voice trailed off weakly, like maybe he was thinking he wasn't going to get to
go to nice places like Kansas any more, it was all coming apart so quickly. 

Sure he knew Shcherbakov, "a clever man," and he helped him to start his
business, but Nordex withdrew in 1994, and as far as the Western Forces Group,
Loutchansky says, he "withdrew voluntarily" when he saw "they would be trying
to get their piece." Why wouldn't he know Soskovets, the former Soviet
of Metallurgy, when Nordex is selling steel? Why wouldn't he know
the former Soviet Minister of Energy, when Nordex is selling oil? He knew
Lyuzhkov knew back when the Moscow mayor had real power as the head of the
fruit and vegetable mafia (Agripol), but they had no business together. As far
as Sam Domb goes, he met him in Israel and they were thinking of restoring a
Manhattan hotel for Russian tourists, "I was introduced to Mr. Clinton as a
successful Russian businessman, who was not asking for money, but wanting to
invest his own into American real estate. 

"Mr. Clinton remarked that he'd just come from Congress and that he was
about Ukraine getting nuclear material from missiles to Russia and I said, 'I
supply oil to the Ukraine and know President Kravchuk,' and that's when Mr.
Clinton asked me to tell Kravchuk the United States wanted to help. Nothing
more! As far as Sam Domb goes, I haven't seen him for three or four years." 

Only Christopher Ruddy, then with the Western Journalism Center, managed to
flush out Sam Domb. Domb told Ruddy he didn't have any idea who Loutchansky
before having met him at the dinner, but was then stumped to explain why he
photographed with Loutchansky and Clinton. But Domb didn't need $160,000 from
Loutchansky for his DNC contribution since, besides being a heavy supporter of
Likuud, he's a multimillionaire. So why then was Loutchansky anxious enough
his second DNC invitation, $25,000 a head, to race to the American Embassy in
Tel Aviv to attach a copy of it to his visa application? 

"He was probably being extra-cautious. We know of no violation of U.S. laws,
but maybe Loutchansky knew differently," said the CIA man I engaged on the

"We know Nordex had three objectives: the first, a business, the second, a
front for the KGB and the third, crime. So what did he want?
Respectability. He is fighting very hard." 

That was true. Loutchansky offered anyone a look at his books, he had his
attorney, Thomas Spencer, offer his appearance before Congress, but Hannes
Reichmann of Wirtschafts Woche, an Austrian business magazine, laughed at
Loutchansky's boast of winning a court case against him, "Loutchansky didn't
win any court case. The judge asked for more evidence, which my lawyers and I
have decided to provide. I already published a facsimile of an excerpt from
German intelligence's report on Nordex. Now, he's shutting down his
business in
Vienna, and his partners are fighting with him." 

What about those numbers at the Foreign Ministry? 

"A fluke, probably," the CIA man shrugged, "They might have just gotten so
screwed up in their own arrangements, the phone was ringing in Nordex's office
and they forgot that was a line meant for the Foreign Ministry supposedly.
Sometimes lower level people are just stupid." 

Sometimes higher level folks are too. 

Only now, with many billions down the Kremlin's rathole, are the West's
lamestream media and spendthrift legislators interested in learning what
happened. Only now do fleeced taxpayers learn that the men to whom their
resources were sent for the purpose of building a new Russia were in league
from day one with the exhausted Soviet nomenklatura in a scheme to loot
wealth and park it in the West. 

Nordex vacated its offices in Vienna some time ago, but not before a
congressional investigator and a security guard flew to Vienna to meet with
Loutchansky. According to the investigator, an unrepentant Loutchansky
shrugged, "Yeah, so OK, I was trying to bribe the president of the United
States. So what? In my country, it's normal." 

Indeed. So what? After all, one man's freshly-laundered bribe is another man's
million dollar mortgage guarantee on a pricey, post-presidential New York
suburban Westchester County homestead. 

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