February 2, 2000    
This Date's Issues: 4083  4084

Johnson's Russia List
#4083
2 February 2000
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: Prospect Of Putin Presidency Begins To Worry Business.
2. Christian Science Monitor: Fred Weir, Russia takes Grozny, but the war isn't over. Russia's picture of pushing out rebels may bump Putin's falling popularity levels.
3. Stephen Shenfield: Re election fraud/DJ/4082.
4. Gordon M. Hahn: Election Falisfication.
5. Komsomolskaya Pravda: Igor Chernyak, PUTIN'S MEN: WHO'S WHO?
6. Moscow Tribune: Stanislav Menshikov, LIMITS-TO-GROWTH TALK IS POLITICALLY BIASED. Real Dangers and Mythical Threats Compared.
7. Novaya Gazeta: Boris Kagarlitsky, We Don’t Talk To Terrorists. But We Help Them? A version of apartment explosions in Russia.(re origins of war in Chechnya)]

********

#1
Prospect Of Putin Presidency Begins To Worry Business

MOSCOW, Feb 1, 2000 -- (Agence France Presse) One month after being propelled 
to the Kremlin, Vladimir Putin's huge initial popularity is beginning to fade 
as support from business and the West ebbs, but the acting president is still 
the favorite to win the March 26 presidential elections.

Only 36 percent of Russian business leaders said they would vote for Putin, 
down from 49 percent two weeks ago, according to a poll published Monday by 
business daily Vedomosti.

However, 83 percent of those polled predicted a Putin win in the election.

The results followed findings released on Thursday by the VTSIOM polling 
institute, showing that 49 percent of Russians surveyed supported Putin, down 
from 55 percent one week ago.

Putin enjoyed huge popularity when he was handed the reins of power by Boris 
Yeltsin on December 31, but the downturn in Putin's popularity has been 
blamed by some on the difficulties Russian forces have faced in their 
military offensive in the breakaway republic of Chechnya.

But despite his wavering fortunes, the polls still leave him with enough 
support to at least win in a run-off.

Western politicians and business leaders have begun to express uncertainty 
about the policies Putin would enact if elected as president.

Other than vague references to a "liberal economy," the former KGB spy has 
done little to spell out his thinking on economic policy.

American financier George Soros called on Sunday for the International 
Monetary Fund (IMF) to pull out of Russia, saying "political developments are 
moving in the wrong direction". He said that the West no longer had any 
significant influence on developments in Russia.

The Russian financial community considers Putin's election a sure thing, but 
is unsure about the economic policy he will put in place.

"Many investors are taking a wait-and-see approach to the Russian market 
because of the huge uncertainty surrounding the acting president," said an 
analyst at Renaissance Capital, an investment firm.

Russia's first deputy prime minister, Vladimir Kasyanov, addressed these 
worries on Sunday, speaking from the World Economic Forum in Davos, 
Switzerland, where he told Russian television station NTV he had faced many 
questions regarding "the unpredictability of Russian policy."

The Russian political world also foresees an inevitable Putin election. 
Grigory Yavlinsky, the main liberal opposition figure in recent years, 
announced that he would carry on with his campaign for president only in 
order to ensure fair elections in Russia, and to prevent them from becoming a 
mere rubber stamp for Putin.

Yevgeny Primakov, a former prime minister who only six months ago held a huge 
lead in the polls, still refuses to officially declare his candidacy, 
according to Stanislav Govorukin, a deputy from Primakov's party.

Everything is happening as if the votes were already counted, said Alexander 
Kabakov, a journalist at the daily business newspaper Kommersant, "and the 
politicians are much more worried about dividing up ministerial posts than 
economic reform programs. No one is really interested in those." ((c) 2000 
Agence France 

********

#2
Christian Science Monitor
2 February 2000
[for personal use only]
Russia takes Grozny, but the war isn't over
Russia's picture of pushing out rebels may bump Putin's falling popularity 
levels. 
By Fred Weir, Special to The Christian Science Monitor

Russian forces appear poised to seize Chechnya's capital city after 
inflicting severe losses on its rebel defenders. But few political analysts 
in Moscow believe that planting the Russian flag over Grozny's ruins will 
bring an end to the war. 

"The taking of Grozny has been expected for some time, and it is the signal 
for the beginning of a full-scale guerrilla war," says independent military 
analyst Pavel Felgenhauer. "The Chechens are leaving Grozny because it has 
served its purpose for them as a useful battlefield for inflicting casualties 
on the Russians. Now they will head for the mountains to regroup and plan a 
new offensive." 

Though the Russians will claim victory, the battle of Grozny exacted a very 
high price from them. Even by their own account, the Russian military has 
lost hundreds of men in the savage street-by-street fighting over the past 
month. 

Some 2,000 Chechen fighters had been holding Grozny's heavily fortified city 
center against a fierce Russian infantry assault. That latest bombardment on 
Grozny, which began Christmas day, was backed up by almost constant air and 
artillery support. 

Reports from Chechnya and official Russian military sources agree that the 
rebels began pulling out of the doomed city on Jan. 31, while Russian troops 
reported advancing through the city center. 

"The withdrawal was carried out in an orderly fashion," Chechen government 
spokesman Movladi Udugov said. "There is not a single fighter left in 
Grozny." 

A rebel Web site (www.kavkaz.org), run by loyalists of Chechen field 
commander Shamil Basayev, also reported the pull out Feb. 1. It said that two 
Chechen generals, Aslambek Ismailov and Khunkarpasha Israpilov, were killed 
in the final stage of the city's defense. Grozny's rebel mayor, Lecha 
Dudayev, died in combat over the weekend, it said. 

Other sources said Mr. Basayev himself was seriously wounded when the car he 
was riding in struck a land mine in the outskirts of Grozny. 

But there was no sign that any of the estimated 15,000 to 40,000 civilians 
trapped in Grozny had been able to flee. 

State TV showed footage of the Russian tricolor flying over Minutka Square, 
the fiercely contested gateway to central Grozny. 

"There is a great psychological breakthrough," the Kremlin's new press 
spokesman, Sergei Yastrzhemsky, told a press conference Feb. 1. He said there 
was still intense fighting in the city, but that some rebels had tried to 
escape over the previous day and had been driven into mine fields and bottled 
up by federal forces. 

"We expect further attempts by those who are on the small patch of Grozny 
still controlled by the militants to break out every day and night," he 
added. 

Russia has many reasons to put the best face on a Grozny victory. Foreign 
ministers of several Western nations were in Moscow for a Middle East peace 
conference Feb. 1. 

Western criticism 

And in those meetings, Secretary of State Madeleine Albright repeated the US 
position that the campaign was excessively brutal and warned Russia it risked 
international isolation. 

But Acting President Vladimir Putin countered international criticisms. "It 
is unacceptable to cancel such basic principles of international law as 
national sovereignty and territorial integrity under the slogan of so-called 
'humanitarian intervention,' " Putin told the delegates. 

He did not mention Chechnya by name, but he was clearly referring to the 
West's strong criticism of Russia's military campaign against Muslim fighters 
in the breakaway republic. Moscow accuses the fighters of terrorism and other 
crimes, and says the West should not interfere in Russian internal affairs. 

Putin and popularity 

Mr. Putin, who faces elections on March 26, has seen his popularity tumble 
for the first time since he was appointed prime minister last August. 
According to the VTSIOM agency, his public approval rating fell from 56 
percent to 49 percent last week, largely due to bad news from the Chechnya 
war front. The appearance of victory may get his momentum going again. 

And in private meetings with his Western counterparts, Russian Foreign 
Minister Igor Ivanov has responded to criticism about the mounting civilian 
toll in Chechnya with assurances that the war is "winding down." The fall of 
Grozny may help cement this impression. 

But even Russian analysts who support the war effort doubt the taking of 
Grozny will have much military impact. "It's a small victory, and it will 
improve the morale of our troops while dispiriting the bandits," says 
Vladimir Kuzar, an infantry specialist with Krasnaya Zvezda, the official 
Russian military newspaper. "But obviously the Chechens will not stop 
fighting because of this. Now we must move our army into the foothills and 
mountains in the south, and confront them there. This is going to be a long 
war." 

Other analysts warn the events of the previous 1994 to 1996 Chechnya war are 
repeating themselves. In that conflict Russian forces took Grozny after a 
similar long and bloody assault. But they never managed to fully control the 
city, and the rebels swooped down from the hills to snatch it back from them 
in a lightning August 1996 offensive. 

"Our generals don't seem to learn that taking territory in a guerrilla war is 
meaningless," Mr. Felgenhauer says. 

"The point is to destroy the enemy's strength and will to resist. The taking 
of Grozny has contributed little to that goal," Felgenhauer adds. 

********

#3
Date: Tue, 01 Feb 2000 
From: Stephen Shenfield <Stephen_Shenfield@Brown.edu> 
Subject: Re: election fraud/DJ/4082

One way of assessing the plausibility of such large-scale electoral
fraud -- presumably effected through the state communications
agency FAPSI, which aggregated the results -- is to compare the
extent to which the official results and the claimed actual results
diverge from the trend of the pre-election polls. I don't have the
time to do this at the moment, but perhaps someone else will.

>From what I recall of the polls, fraud would help to explain some
puzzling divergencies. For instance, the polls repeatedly gave
Zhirinovsky 3--4% and all the observers were assuming he wouldn't
pass the 5% barrier. How could he have picked up that extra
support at the last minute? Similarly, very few observers expected
Union of Right-Wing Forces to pass the barrier. And didn't the polls
predict Yabloko doing much better than it officially did?

I hope that someone will make a thorough study of relative
plausibilities based on the poll data.

p.s.

1. The Italian journalist Giuletto Chiesa, in his book "Proshchai
Rossiya!" (Farewell, Russia!), which unfortunately has
been published in Italian and Russian but never in English, gives detailed
evidence of similar fraud in the compilation of results for the 1995
presidential election. It seems that there is a well-established
methodology in this field.

2. It should be pointed out that regional authorities also carry
out electoral fraud, using different methods, so central fraud and
regional fraud to some extent compensate for each other.

********

#4
Date: Tue, 01 Feb 2000 
From: "Gordon M. Hahn" <hahn@hoover.stanford.edu>
Subject: Election Falisfication

My first reaction to the election results to a colleague at Hoover, Sergei
Kudelia, was that the results were falisfied. I based my suspicion on the
fact that all the polls and experts leading up to the election showed
results similar to the "actual results" relayed to you. The results of
surveys published on, I believe, the Friday night before the Sunday
election wildly deviated from the official results while they corresponded
to exit polls shown early on a web sit that subsequently went off line on
election night. While all this does not convince me that the elections were
falsified, it warrants suspicion and examination, as you say. There is
little discussion of it here, and I was frankly surprised that those
parties that did poorly than expected never raised the issue of
falsification -- Yabloko and OVR. I suspect that it there was falsification
it was organized at the regional level to make it more difficult to catch,
and was done so through ballot stuffing by the military, mobilization of
families of bureaucrats and enterprise workers controlled in less
democratic regions (particularly in the national autonomies -- indeed OVR
benefitted from this in Bashkortostan, Tatarstan and elsewhere, so
Yedinstvo just did it better having more regional support likely organized
through the presidential administration), and through the mobile ballots,
not through the centralized computer system.

Gordon Hahn
Hoover Institution
Stanford University 

********

#5
Komsomolskaya Pravda
January 26, 2000
[translation from RIA Novosti for personal use only] 
PUTIN'S MEN: WHO'S WHO?
By Igor CHERNYAK

New people are coming to the high offices.
Yeltsin's men are vacating them for new appointees 
who will work with the current occupant of the Kremlin for 
three months and four years--if they are lucky, that is.

To quote Dmitry Kozak, one of the closest men to Vladimir 
Putin these days, the acting president proceeds from two 
criteria when forming his team: professionalism and lengthy 
personal knowledge of the man in action. 
"There may be a little inclination to St. Petersburg, but 
people coming from that city to join his team are relatively 
few, in terms of percent," Kozak says. 
How many is 'few'? And who are Putin's men who may have to 
decide this country's future pretty soon?

Alexei KUDRIN, first deputy finance minister. In case of 
Putin's election to the presidency, he is a candidate to the 
first deputy premiership or an even higher post. Has been 
maintaining good relations with Putin since working together in 
St. Petersburg's town hall where they launched quite a few 
projects in the city's economy. Have moved to Moscow together.
While leaving the post of the chief of Main Control Department, 
Kudrin has been lobbying for the appointment to the post of a 
compatriot of his, a rank and-file 'deputy' at that time, Pavel 
Borodin.

Dmitry KOZAK, 41, chief of the Russian government's staff. 
A graduate of Leningrad University's law school. An assistant 
to the Leningrad prosecutor for four years, went to work for 
the legal department of the city's executive committee, later 
to be transformed into the town hall. Following Anatoly 
Sobchak's electoral defeat in 1996, resigned together with 
Putin only to return to the post in Vladimir Yakovlev's new 
government. But his relations with the new mayor soon spoiled 
and Kozak resigned from his office to start a private legal 
consultancy. 
He was one of the first whom Putin called on the phone 
after having been appointed to the premiership. Putin asked the 
private counsellor to come and work for the good of the 
country. Kozak says he took the call as army subscription. His 
reply was curt, military-style: "Will serve until the election, 
no matter what." Kozak stresses he is not after being in power. 
If Putin offers him the job of the Kremlin chief of staff, 
Kozak promises to "try to refuse."

Igor SECHIN, a deputy to the Kremlin chief of staff. A 
linguist, he has worked as a military translator in a number of 
countries. Inseparable from his boss since 1991 when he 
appointed Sechin the chief of his staff. For five years, 
Sechin has been sitting in Putin's reception room in the Smolny 
Palace, the seat of the St. Petersburg government, and 
coordinating the work of his referents and assistants. When 
Putin moved to Moscow to become a deputy to Borodin, the loyal 
Sechin was invited to come along. 
After the chief was appointed the premier, Sechin headed 
his secretariat only to shortly become a deputy to the chief of 
the government's staff. As soon as Putin was appointed the 
acting president, he summoned Sechin to the Kremlin, to stand 
at the head of his secretariat. 

Viktor CHERKESOV, first deputy director of the Federal 
Security Service, or FSB. One of the few people whom Putin 
trusts--although those who know Putin well joke that his main 
principle is to trust no-one. The two studied together in 
Leningrad University's law school, both went to work for the 
FSB St. Petersburg department. Was transferred to Moscow in 
1998 thanks to Putin. 
After Putin left Lubyanka, a popular name for FSB, 
Cherkesov was seen as a candidate for the director's office but 
yielded, for a number of reasons, to Patrushev, relations with 
whom remain uneasy to this day. If Putin makes it to the 
presidency, Cherkesov's start will rise even higher: he is seen 
as a candidate for the top slot in one of the "power 
structures." Colleagues describe him as a tough and rather 
ambitious man.
Democrats accuse him of crackdowns on dissidents, but the 
charge has never been proven. On the eve of the 2000 
presidential election, was dispatched from FSB to the Centre of 
Strategic Studies, which today effectively works for Putin as a 
presidential contender.

Leonid REIMAN, Russia's communications minister. Knows 
Putin since the early 1990s. Although seen as Stepashin's man, 
he accompanies Putin on all his trips round the country. 
Government bureaucrats say he has a better knowledge of state 
affairs than some vice-premiers. May be appointed a 
vice-premier or first vice-premier.

Nikolai PATRUSHEV, 49, FSB Director. Has worked for the 
KGB Leningrad Region Department since 1974. In 1992-94, was 
both the security minister of Karjala and the chief of the 
local KGB department. Later was transferred to Lubyanka. 
When Putin left the post of the chief of the Main Control 
Department in 1998, he recommended Patrushev to take the place.
After Putin became the FSB Director, he returned Patrushev 
there, making him first a deputy and then the first deputy 
director.
Patrushev was his chief's backup when Putin was absent from the 
FSB. When leaving Lubyanka, Putin insisted that Patrushev 
become his successor. Little wonder that he is openly referred 
to as Putin's man. 

Sergei IVANOV, secretary of the Security Council. A coeval 
and compatriot of Putin. Their roads have crossed on more than 
one occasion; both studied in Leningrad University (Putin in 
the law school, and Ivanov, in the school of linguistics), and 
in the same class of the KGB Institute of the Red Banner, and 
served in the intelligence together. 
Ivanov has been working for the KGB since 1976. At 
overseas posts, worked in Sweden and Kenya. When Putin was 
appointed the FSB Director, he summoned his fellow-student 
without delay: in August 1998, deputy chief of a department in 
the intelligence Ivanov was made a deputy director of the FSB. 
Having been appointed the PM, Putin convinced Yeltsin to 
make Ivanov the Security Council's secretary instead of himself.
Ivanov has an office in the Kremlin where only Andrei Kokoshin 
and Putin himself of all SC secretaries has been allowed to 
work.
His colleagues say that he has not been affected by the 
star sickness: in private talks, Ivanov is said to possess a 
stable temper and keen intellect. He is also said to remember 
his old friends and comrades; he has been maintaining contacts 
with many of them for 20-25 years, no matter what their current 
posting is and how 'useful' they can be to him personally.

Yuri SHEVCHENKO, minister of health. Has known Putin well 
for a long time. Shevchenko has been the one to help Sobchak 
flee to Paris, having diagnosed a heart stroke. Shevchenko 
would say later that he had made the correct diagnosis. A 
potential vice-premier for social issues. 

Dmitry MEDVEDEV, 34, a deputy to the chief of the Kremlin 
staff. A graduate of Leningrad University's school of law. 
Moved to Moscow at Putin's request. Putin is expected to name 
him the head of his election staff--contrary to expectations of 
those who saw either Anatoly Chubais or Boris Berezovsky at the 
post. 

Vladimir KOZHIN, 40, chief of the president's business 
management department. Graduated from the Leningrad Electric 
Mechanics Institute in 1982, worked in the Petrogradsky 
District Committee of the Young Communist League (Komsomol) for 
four years, then as an engineer at St. Petersburg's R&D 
association Azimut, and was head of the Soviet-Polish JV Azimut 
International. General director of the Association of Joint 
Ventures of St. Petersburg in 1993, when he first met Putin. 
In 1994, Kozhin headed the Northwestern regional centre of 
the Russian Federal Service of Currency and Export Control 
(VEK), while Putin monitors currency flows in the capacity of a 
vice-governor. The two worked side by side for two years. One 
of the first personnel decisions of Putin the premier was to 
transfer Kozhin from St. Petersburg to Moscow to head Russia's 
VEK in September 1999. 
Kozhin is not known to be a secret service man, but 
knowledgeable people say that the VEK is effectively controlled 
by the secret services and employs only officers. 

German GREF, first deputy minister of state property 
management and head of the Centre of Strategic Studies 
established by Putin. Moved from St. Petersburg to Moscow in 
1998. One of the more promising managerial staffs in the St.
Petersburg team. He has been entrusted with the task to devise 
a strategy of the country's development for the next 10 years. 

Viktor IVANOV, 40, a deputy chief of the Kremlin staff.
Former chief of the economic security department at the FSB St.
Petersburg Department. After Putin was appointed the FSB 
Director, he invited Ivanov to Moscow to place him in charge of 
the FSB internal investigations and later to make him a deputy 
to the FSB Director. 
A deputy to the Kremlin's chief of staff Alexander 
Voloshin, Ivanov replaced another Cheka man, Makarov, who was 
said to be a proxy of Boris Berezovsky. In charge of personnel 
matters, he held the fates of hundreds of ranking officials in 
the upper echelons of power in his hands. They say that Putin 
pays close attention to the man in charge of the personnel 
department in the Kremlin: "Personnel matters are pivotal." 
Yuri ZAOSTROVSKY, 44, a deputy to the FSB Director, a 
Muscovite. Son of an intelligence officer, he worked for the 
counter-intelligence. After the August '91 abortive putshch, 
quit the secret service to become a private businessman and a 
deputy to the president of the Board of Tveruniversalbank. 
Returned to civil service at the request of Putin when the 
acting president was the chief of the Main Control Department.
When Putin came to Lubyanka, Zaostrovsky was appointed the 
chief of the FSB economic security department. 

Alexander ABRAMOV, a deputy chief of the Kremlin staff. A 
former vice-president of Alfa-Bank. A leader of the rather 
strong 'Alfa-Bank group' which competes with the St. Petersburg 
team for influence on the acting president.

Colonel Putin's Reserves
Nikolai Bobrovsky, a deputy to the chief of the premier's 
secretariat. Studied with Putin in the KGB's Institute of the 
Red Banner.

Taimuraz Bolloyev, general director of the giant Baltika 
beer brewery, whose rapid economic growth is said to have been 
assisted by Putin. Both go in for wrestling. 

Sergei Golov, deputy head of the foreign relations section 
of the president's business management department. Served with 
Putin in the FSB.

Valery Golubev, chief of the St. Petersburg mayor's 
department of tourism. A former KGB man, served together with 
Putin, who later invited him to come work for Smolny. 

Vladimir Yakovlev, chairman of the St. Petersburg mayor's 
culture committee. Close to Putin. The governor's name-sake. 

Sergei Chemezov, head of Promexport, worked with Putin for 
the FSB.

Sergei Alexeyev, director of St. Petersburg's largest 
exhibition hall Lenexpo.

Igor Spassky, Academician, director of a defense R&D 
institute in St. Petersburg.

Nikolai Khrameshkin, director of the production 
association Leningrad-Impex.

Vladimir Shamakhov, chief of the Northwestern department 
of the State Customs Committee. An old acquaintance of Putin. 
During the latest visit to St. Petersburg, Putin had a long 
talk with Shamakhov, which was seen by many as a bad sign for 
the current State Customs Committee chief Vanin.

...Many of them are virtual unknowns, but then few people 
in Russia heard of Colonel Putin only a few short years ago. 
It is a fact that the number of St. Petersburg men, former 
secret service officers whom the acting president knows 'in 
action', has been snowballing. 
The question is what it will lead to.

********

#6
Date: Tue, 01 Feb 2000 
From: "stanislav menshikov" <menschivok@globalxs.nl>
Subject: LIMITS-TO-GROWTH TALK IS POLITICALLY BIASED

Moscow Tribune
February 1, 2000
LIMITS-TO-GROWTH TALK IS POLITICALLY BIASED
Real Dangers and Mythical Threats Compared
By Stanislav Menshikov

New official data on economic results for 1999 confirm the optimistic
forecast made in this column in early December. Real GDP was up 3.2 per
cent and industrial production expanded by a whopping 8.1 per cent. Some
sceptics claim that the government is painting too rosy a picture. But
credible international agencies like Standard & Poor's seem to largely
agree with the official figures. Even top bananas at the IMF - normally
short on compliments when it concerns Russia - admit that recovery is real.

The big question is how long will the upturn last. Unfortunately, the
discussion on this point is getting politically motivated and less
professional. A drive is under way to spoil Putin's economic record in the
upcoming presidential campaign. This can be observed in the revival of the
old fashioned limits-to-growth talk reminiscent (at least in method) of the
Club of Rome. That club (prominent 30 years ago, predicted a general
catastrophe of the world economy by the end of century. But the century
ended without major economic disturbances. The Club of Rome method was to
sum up all factors working against growth, ignore factors working for
growth, and produce a fast-baked doomsday scenario ready for sale. Such
scenarios tend to break down pretty soon and are safely forgotten. 

However, there are also serious arguments worth considering. One is that
growth in Russia cannot be sustained because structural reforms are
lagging. This reminds me of old Communist times when our economists would
stress capitalist recessions in the West and insist on "structural crises"
and "uneven development" when western economies were booming. Now the same
method is used vis-à-vis capitalist Russia. Sure enough, any economy at
all times has structural problems. But solving them can be a positive
factor contributing to growth, not necessarily the other way around.

Another argument is that, lacking new capital investment, Russia will
exhaust its spare capacity that resulted from the long depression of the
90s. As everyone agrees, there can be no long-term growth without new
investment. But it is also true that the capacity utilisation ratio in
Russian industry is still way below normal which means that the capital
investment problem, though serious, is not an immediate barrier to growth.
At the latest count, that ratio (as calculated by the Russian Economic
Barometer is around 70 per cent of "usual level". compared with 60 per cent
a year ago. Strong recovery in 1999 was possible because some of the 40 per
cent of spare capacity was put to work. Even if growth continues at the
same rate, another two years of uninterrupted expansion are possible
without major new investment. Under conditions of moderate growth (which is
more likely) spare capacity would last much longer.

But investment is not simply a structural problem. When producers see their
output rising and demand exceeding supply, they tend to add new equipment
and plant even though institutional problems are not resolved. Today order
book levels in the industry (according to the Barometer) are at least 10
per cent ahead of capacity utilisation ratios. It is a simple economic rule
that such a gap inevitably leads to rising real investment. In the second
half of 1999, real expenditure for new plant and equipment was 4.1 per cent
higher than in the first half. No significant structural improvement
occurred between those two periods, and yet investment grew because demand
and output were up. The same will increasingly happen if demand continues
to grow.

And chances are that it will. Last week the government announced that
defence procurement of hardware and R&D this year will increase by 62
billion roubles. If this programme goes through (and there is no reason why
it should not), then, according to calculations, total demand in the
economy will increase by 97 billion. The additional increment is due to
higher consumer expenditure and capital investment created by rising
revenues in the industries involved. The aggregate wage bill alone would
rise by an additional 31 billion. In real terms, this would add on an
annual basis 0.8 percent to growth in GDP, 1.2 per cent to industrial
production, 6.2 per cent to the depressed machine-building industry (where
spare capacity is way above average). Due to higher profits and incomes in
general, additional defence expenditure would be largely financed by
increased tax collection. Less than 2 per cent would be added to money
supply by the end of the year and only 1,3 per cent to consumer prices. In
other words, low-inflation sustained growth is quite possible in 2000 and
beyond.

These calculations go a long way in refuting parrot-speak about structural
reforms, limits to growth, money printing and new inflation. Sure,
reforms are necessary, particularly in banking, government finance, incomes
policy, legal protection of contracts and property rights. But it is also
true that maintaining growth by promoting demand creates a better
atmosphere for implementing structural reforms.

Dangers, barriers and speed limits exist on any road one travels,
particularly on a road undergoing repair. But refusing to drive until
repairs are over gets one nowhere. Drive carefully, but drive. Do not block
the road.

*******

#7
Novaya Gazeta
January 24, 2000
We Don’t Talk To Terrorists. But We Help Them?
A version of apartment explosions in Russia
By Boris Kagarlitsky
[translation by Olga Kryazheva, research intern,
Center for Defense Information, Washington DC]

Instead of a Foreword

Life requires political fiction. Here is a story of this kind, where all the
events and names are false, and life is not. For some reason everything in the
story corresponds with real life. Surprisingly, only the worst presentiments
come true.

Anyway, here is the story. And don’t take it as some instruction for action.
Take it as something to think about, who we are and what we are. We are used
to living by our instincts, by basic instincts.

Division of Humanitarian Problems

I never was a fan of mystery. I hate to solve puzzles. But everything that
has been happening in our country for the past few months reminds me of a
regular mystery plot. It does not matter whether you wanted or not, you have
to think. From the brief information in the newspapers, from reservations and
omissions, a certain picture can be put together. Strange questions about
Moscow explosions, leakage of information from the special forces, the
contradictions in official information, all of the above form certain
questions. 

We figured out much, but not everything. It is clear that the war in Chechnya
began as agreed; it is clear that commanders on Chechen fields were abandoned;
nobody agreed on war with bloody bombings. Generally speaking, it is clear
that
apartment explosions in Moscow would not have happened if somebody in the
Russian political elite did not want them. 

But there is more. Pieces of information were leaking through the Versiya
newspaper, Novaya Gazeta, London’s Independent newspaper, magazine Profile,
and
the Internet. One by one pieces of puzzle were put together. But there were a
few details that were lacking. They began to clear in January, when
Zhirinovsky
and Chubais finally broke up. And at the same time, some of the participants
started to tell their version of events. 

Meeting at the Azure Seashore

Back in summer in the Versiya newspaper there was an article about the meeting
of Voloshin with Basayev in France. This did not happen in Paris, as some of
the newspapers reported later, but on the villa of Adnan Khashoggi, Arabic
millionaire, on the Mediterranean. This villa was under the supervision of
the
French intelligence services, which noticed some unusual actions there.
Russiagate had begun and French intelligence organized the leakage of
information. When this information appeared in the newspapers, Khashoggi
stated
that he was being groundlessly accused and he was not even on the villa during
the negotiations. But the main participants of the negotiations remained
silent. 

Anton Surikov, the former member of army special forces (if there are former
members among them), who earlier had supervised brothers Basayev in Abkhazia,
met Voloshin in France. During Primakov’s time, Surikov worked in the staff of
RF government. Despite this fact, he developed regular work relations with
Voloshin’s people. When some of the foreign reporters tried to ask Surikov
about the meeting on the Azure seashore, Surikov ironically noted that he had
never been abroad, especially in France. This seemed strange because a few
months prior the country could see him in Washington, DC in the company of
Maslukov and Camdessus. Also, he visited France at least twice: first time in
December of 1994, and second in summer of 1999. He left on June 23 on the
Aeroflot flight to go to Paris, and came back from Nice on July 21, a month
later.

At that time the contacts of the resigned government official Surikov with the
head of the president’s administration did not matter. What mattered was his
experience of working with brothers Basayev, not only with Shamil, but also
with his brother Shirvani. By the time Surikov got to Abkhazia Shamil has
already had some experience of working with Main Investigative Services
(GRU). 
Shirvani was just starting to work there. Old connections still existed, and
the trust remained, despite all the complications of Chechen conflict.
That is
why when people from Kremlin needed somebody they could trust they easily
found such an individual.

The head of the president’s administration had a very urgent business he
had to
discuss with the head of Chechen forces. The villa was completely secured from
bugs. The security was so thorough, that people in the surroundings started to
have problems with their cellular phones. But the members of the meeting did
not know about one of the details in the security system. It blocked the
hearing on the outside, but it provided the perfect hearing from the inside. 

Voloshin was concerned about the situation in Russia and succession of power
problem. Luzhkov seemed to be a threat, and his alliance with Primakov was
already a decided matter. They had to be stopped, and there was only one
way to
stop them. The political situation and rules of the game had to be completely
changed. In order to do this the conflict with external enemy was needed. 
Basayev was also interested in power in Chechnya, not Russia. With the
regular
development of events the influence of the legal president Maskhadov was
growing. A small war or crisis could change it. In this matter, the final
word belonged to the field commanders, such as Basayev. But the war had to
remain small, otherwise Chechnya would need something like a real and big
army,
and Maskhadov would be in charge of it. In other words, a small war, a border
conflict, a big performance with a firework or a hide-and-seek game was
needed, and why not? They generally agreed on the plan. 

It starts with a small conflict in Botlikhsky region. Then Basayev, taking
over
the Novolaksky region, attacks Khasavyurt with the support of the
Karamakhinsky
“beardmen.” Robing Khasavyurt, Basayev’s squadron attacks Kirzyatsk
Hydroelectric Station, organizes a small sabotage there, and heads to Mozdok
afterwards. Then Russian Army has to start the military activity, and by
fights
dislodge Basayev’s squadron from Russia, and enter Chechnya. All this is
supposed to take long time, so the country can follow the military reports
about liberating of the territory (a propagandist plot, which was later
used in
Chechnya.) During that time the Prime Minister will be replaced in Moscow and
the power will be given to General Lebed. He will be an acting president by
December. By the end of this campaign the Army will heroically occupy
Nadrechny
region, get over Sunzhensky Range, and stop. If needed, the troops will take
over Gudermes as agreed with brothers Yamadayev by spring. 

The Grozny storm was not planned. The comedy could be over in spring. The
parties had not decided how to conclude this story, but they did not really
care about it: “ We’ll think of something, when power is ours.”

Months after maneuvers, marches, and contramarches, attacks and special
operations, both sides will announce themselves as the winners. Russians
triumphantly get rid of Chechens on their territory, and Chechens will not let
the enemy in the middle of Chechnya, and they will sign a declaration of
peace. Basayev will be rewarded for his merits. First, attacks on Khasavyurt
and Mozdok will bring him some good results. Second, he could be rewarded by
Saudis (if needed, the Jordanian Khattab, who closely cooperates with Saudi
Special Forces, will help) for fighting the enemy. 

The parties had departed pleased with each other. Everything looked
spectacular. But they have not thought of just one detail, which happened
to be
fatal. Along with Voloshin other people participated in implementing of the
plan in Russia. It is not a secret that Berezovsky favors Voloshin.
Unfortunately, Boris Abramovich could not operate alone in this operation. In
order for political and military mechanism to work he had to include other
players in the game, such as Roman Abramovich, Anatoly Chubais, and mainly
General Anatoly Kvashnin, the Chief of General Staff. All of them had a common
interest with Berezovsky: to keep Luzhkov and Primakov away from power. But
they also had their own interests. And so, being part of the plan, they
started their own game.

We thought that conflict between Chubais and Berezovsky started in December,
after they could not divide fruits of the victory on the parliamentary
elections. That was not the case, the fight began long before. Chubais was
not
satisfied with Berezovsky’s choice of successor. General Lebed was too close
to the Moscow oligarch. Chubais was looking for another individual, more
dependent, and more familiar, for example, Vladimir Putin. Putin was also
forceful, but from a different team; he did not have his own political and
administrative staff, therefore was very dependent on Chubais’ team. 

In order to take leadership in his hands, Chubais had to break the original
scenario and replace it with his own. At this point Kvashnin’s and Chubais’
interests met. For the Chief of General Staff the small war was good, but the
big war was even better. He could use real military tactic, all kinds of
troops, and conduct grand scale battles. 

The Voloshin plan was being destroyed. But the participants did not know about
it. 

The War is On the Way. Let It Go!

So, on one hand we have brothers Basayev, Voloshin, and Berezovsky, and on the
other Chubais, Kvashnin, and Abramovich, who had joined them. GRU is
somewhere
in between. In August everything was going according to the plan. The
regiment of internal forces, which secured the border with Chechnya, was
withdrawn from Dagestan, as local people demanded so. Frontier guards had
left. Chechens easily crossed the border. Having disturbed Botlikhsky
region,
Basayev moved to Novolaksky, where he met some obstacles. Not only the roads
to Khasavurt were closed by troops, but Karamakhi was blocked also. This was
not a part of the plan. Basayev was mad. Anton Surikov had to go to Dagestan
to resolve the problem. Despite that war was everywhere, the meeting went
relatively quite. Basayev calmed down, but he did not know the whole truth at
the time. 

General Kvashnin fights very good when he knows enemy plans. The operation in
Dagestan went excellent, but he did not manage to stretch the war. At this
point of time new events that were not agreed on started to happen. 

Kvashnin and Chubais had an advantage of not being bound by personal
agreements
with brothers Basayev. They had not known them as long as Berezovsky, they
did
not participate in the same operations with them, as Kvashnin did, and did not
shake hands with them, as Voloshin did. Kvashnin and Chubais were in business
with them, but they were not bound by any obligation. 

Chubais changed the plan. Stepashin was fired, but instead of Lebed Putin was
appointed on the post of Prime Minister. This turn of events was unexpected
for Berezovsky and Lebed. In the middle of crisis, Lebed flew from
Krasnoyarsk
and stayed in Moscow for few days waiting for an appointment. Unfortunately,
while Berezovsky and Lebed tried to resolve the current situation, Chubais,
Abramovich, and Kvashnin had already picked a different successor for Yeltsin.

The new Prime Minister needed a new war, his own war. Unlike Lebed he did not
have a reputation, and he wanted to create it in no time. Along with
instability on the borders he needed a new terrible threat, which could unite
the country around the new leader. Terrorism seemed to fit.

During the January battles in Grozny Independent, the London newspaper,
published an article, which Western readers found sensational. GRU officer
Alexy Galtin was trapped by Chechens and testified that GRU was involved to
the
explosions of apartments in Moscow. GRU officials stated immediately that
these
accusations were “provocation, nonsense, garbage.” To tell the truth, GRU did
not argue the fact either of Alexy Galtin’s existence or his entrapment by
Chechens. This seemed strange. Nobody asked how Chechens trapped and
identifies the GRU officer. After all, he was not the commander of Army
Special Forces.

Apparently, it was easy for brothers Basayev to find the GRU officer. They
have
been having serious problems with their management colleagues. Shamil had
already been accused in the apartment explosions. But he fiercely denied the
accusation and was absolutely right. Shamil was not involved in this
terrorist action. However, Basayev helped. But it was a different Basayev.

Basayev II

Shamil Basayev is not only a GRU staff member with a tremendous work
experience, but also a Chechen politician, capable of playing his own
political
games. His brother, Shirvani, is different. In GRU opinion, he is easily
influenced. When the original plan was failing, the decisions were being made
as an urgent matter. Shirvani was not well informed, and there was no time to
check with his brother on every small detail. 

The terrorists to execute explosions in Moscow were picked from the Shirvani
Basayev staff. Nobody asked Shamil, and Shirvani did not know he was used. It
is clear that the terrorist would never explode anything in Moscow on their
own. They did not even have a clearly formulated task: everybody was
responsible for their own part of the deal, but they did not know what was
going on. Clearly, it is hard to hold a difficult operation like this without
effective cover. It was a task for people from GRU system, to which brothers
Basayev belonged.

The most mysterious question about Moscow explosions is “How did brothers
Basayev bring explosives to Moscow?” Nobody could give a convincing answer. 
But nobody brought the explosives to Moscow. Special forces had their own
supplies, which were used in this operation. Both explosions occurred in the
southern part of the city, and that was not an accident. The city is divided
into sectors. The group from one sector was used in that part of the town.
Next
time, when somebody needs to explode something, we will hear the thunder in
another part of the city. The group that was used as a cover apparently is not
the last and only one. 

This catastrophe took our attention from some other problems for some time. 
Chubais and Kvashin could have celebrated the victory. Everything looked like
a good detective story. It was a zero-sum game. On one hand, all the goals
were reached, on the other, all suspicions led to Berezovsky and his people,
who had already been seen with Chechen fighters. Berezovsky had to make
excuses, but nobody believed him. Shamil Basayev protested, but people had
already labeled him as a devil and a murderer of sleeping babies. Shirvani
had
to keep silence. And during this time Chubais and Kvashnin could quietly play
their game. They were not involved into an open conflict with Berezovsky.
They
continued to have a common interest in fighting against Luzhkov and
Primakov. Therefore they had to support each other. 

Surprisingly, after the Moscow explosions Russian officials immediately blamed
Basayev and Khattab, and nobody even mentioned Shirvani. Nobody had brought
his name up or requested his extradition. As for Berezovsky, all close to him
reporters started to support their boss immediately, proving that Boris
Abramovich was not a murderer, no matter what we thought of him. Press
hostile
to Berezovsky insisted that Berezovsky was a murderer. Evidently, such
polemics pleased Chubais greatly. No, Boris Abramovich had not request
explosions in the apartments. He had requested a war…

Blood For Blood

So, the field had opened for Kvashnin and supporting generals. By the way,
there are many generals in the Army, but not all of them are as close to the
Chief of General Staff, as General Shamanov, the new Hero of Russia. Big war
brings big awards. Marshal Sergeyev and his strategic rockets are nothing in
comparison to infantry regiments. 

It feels so wonderful to fight, when there is no enemy! According to the
previous agreements, the Chechen troops were pulling out of the northern
regions. Shamil Basayev realized that the previous agreement had failed, but
he was still able to act according to the old scenario. More so, this
preliminary plan of withdrawal corresponds with strategic plans of Chechen
Chief of Staff Maskhadov. 

Moscow explosions turned out to be a catastrophe for Basayev. The national
hero turned out not only into a mercenary, but also into a person who can be
easily fooled. More importantly, his chances for political leadership dropped
down to zero. At this point the war was not possible without Maskhadov. 
Chechens remembered that campaign, which ended with thousands of dead peaceful
citizens, bloody bombings, and distractions of the whole towns, started
with an
awkward Dagestan mission, which brought hardly any benefit. 

Shamil Basayev starts a real war. But what had happened in the minds of the
generals? How could Kvashnin sincerely believe in his own victory knowing its
real reason? Or maybe it was not possible to stop the war machine, and the
Chechen campaign promised some big conquests. They probably decided that if
they could fool Chechens, they should be able to destroy them. 

This did not work out. The war has been dragging on for several months, and is
nowhere near the end. More so, the chances to renew the negotiations and for
“honorable peace,” convenient for both sides, are minimal. The popularity of
Putin, who was brought to power as an acting president, is decreasing, as the
situation on fronts promises nothing. At the same time the confrontation
between Chubais and Berezovsky turns from secret to public.

Both Chechen fighters and GRU staff appeared to be involved in an affair they
did not plan. Both felt deeply insulted. This brought all kinds of rumors
into
the mass media. Agents don’t trust their bosses; soldiers don’t trust their
generals. Power structures, involved into a secret struggle for power, are
losing an ability to execute their main function: to protect state interests. 

Time of Conspiracy

The story of the Dagestan provocation reminds one of the classic mysteries
with
a bad ending. The analysis of a political process leads one to the covert
affairs studies, which generally do not relate to politics. It is always
tempting to explain the current history events with the help of “a conspiracy
theory.” Unfortunately, conspiracy is a part of our political life, a
result of
the closed power system, built by our political elite. Conspiracy also results
in crisis. History is full of conspiracies, but most of them fail. Most
importantly, they usually lead to completely different unplanned results.
Our
political elite can not rule by regular means, but they don’t want to give up
power. Therefore, they create conspiracies, one worse than another.
Behind-the-curtain intrigues end in bloodshed. In reality, while some create
conspiracies, others pay for them with their blood. 

*******

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