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Johnson's Russia List


June 14, 2000    
This Date's Issues: 4366  4367

Johnson's Russia List
14 June 2000

[Note from David Johnson:
1. Moscow Times: Simon Saradzhyan, Prosecutors Arrest NTV Boss Gusinsky.
2. Moscow Times: Andrei Zolotov Jr. and Garfield Reynolds,
Media Man's Dance With Authority.
3. Reuters: Russian media baron detained amid outcry.
4. AFP: Putin tires of being Gusinsky's TV puppet.
5. Reuters: Russian politicians comments on Gusinsky detention.
6. Roman Solchanyk: Russia's independence/4364 Heinlein.
7. Moscow Tribune: Stanislav Menshikov, DOESN'T CHUBAIS DESERVE A VOTE OF NO CONFIDENCE? A Flagrant Case of Mistreating Investors.
9. James Beale: Re: 4363-Gertz/Russian Nuclear Book.
10. Andrei Stepanov, Putin`s PM Applies Putin`s Policy.                                                 (re argument between Kasyanov and Gerashchenko)
12. Interfax: U.S. congressman calls monitoring money transfers to Russia. (Weldon)


Moscow Times
June 14, 2000 
Prosecutors Arrest NTV Boss Gusinsky 
By Simon Saradzhyan
Staff Writer

NTV founder Vladimir Gusinsky was arrested Tuesday and sent to Butyrskaya 
Prison, in what his supporters say is an effort to gag the nation's largest 
independent media voice. 

Gusinsky's arrest follows a year of nasty relations between the Kremlin and 
NTV, marked by far-from-loyal news coverage of the president and his men. 

The Prosecutor General's Office accused Gusinsky of having swindled the state 
out of at least $10 million. But it did not formally charge him. 

Gusinsky heads the Media-MOST holding company, whose offices were raided by 
masked agents last month. Russian journalists united to produce a special 
edition of the newspaper Obshchaya Gazeta to protest that May 11 raid as an 
attack on free speech. 

Media-MOST spokesman Dmitry Ostalsky said Gusinsky's arrest was more of that 

"The action of May 11 appeared insufficient to certain people," Ostalsky 
said. "What we feared so much has happened. The authorities have switched to 
direct repressions against the leaders of independent media." 

Gusinsky voluntarily showed up at the Prosecutor General's Office at 5 p.m. 
to be questioned on how he stores ammunition for a pistol he received as an 
award from the government several years ago, Ostalsky said in a telephone 
interview. He went without his lawyer. 

Two hours later, an investigator walked out of the room where Gusinsky was 
being interrogated to tell his aides he had been arrested, NTV reported. 

"It is a frightening sign, which speaks either of the president's weakness or 
of his capacity to violate the law despite his own statements to the 
contrary," Ostalsky said. 

President Vladimir Putin, who left Moscow on Tuesday for a weeklong foreign 
trip, told reporters in Madrid that he was not aware of Gusinsky's arrest. 

"For me it is a dubious present," Putin was quoted by Interfax as saying. "I 
hope the prosecutor's office has enough cause for this step. I don't know the 
details. I will learn all the circumstances tonight and I will have my own 

A duty officer at the prosecutor's office confirmed that Gusinsky, who had 
returned to Moscow on Monday from a trip abroad, had been arrested. 

The officer, speaking by telephone, said Gusinsky was being held in 
Butyrskaya Prison and within the next 10 days would be charged with having 
committed "gross fraud." 

The press service of the prosecutor's office released a statement saying 
Gusinsky is suspected of having defrauded the state of at least $10 million 
with the help of managers of St. Petersburg-based Russkoye Video company. 

Unlike Putin, the government said it was "aware" of Gusinsky's arrest, but 
was not planning to intervene, a spokesman said, Itar-Tass reported. 

"The law is equal for everyone. þ We have no separate rules or laws for the 
owners of mass media or one of the leaders of the World Jewish Congress," the 
spokesman was quoted as saying. 

Gusinsky, who holds Israeli citizenship, is head of the Russian Jewish 
Congress and a vice president of the World Jewish Congress. His Media-MOST 
holding includes not only NTV, the country's only privately owned television 
channel, but the Segodnya daily newspaper, Itogi magazine and Ekho Moskvy 
radio station. 

Ekho Moskvy editor Alexei Venediktov went on the air Tuesday evening to 
defend Gusinsky. He said the arrest was the Kremlin's reaction to U.S. 
President Bill Clinton's appearance on the station June 4. APN, a Russian 
politics web site, said the same thing, citing a Kremlin source. 

Boris Berezovsky, Gusinsky's arch-rival and the country's most powerful 
business tycoon, said he disapproved of the arrest. 

"In the last few years, there hasn't been a single entrepreneur who has not 
broken the law somewhere," Berezovsky said in an interview with Vedomosti 
newspaper. "Naturally the law enforcement agencies have a chance to settle 
accounts with anyone. My attitude toward this is extremely negative, but it 
is clear to everyone why this happened to Gusinsky. 

"He became the victim of the machine that he set in motion himself. We have 
known for a long time that the MOST group has tried to pressure its 
competitors using law enforcement agencies. This, of course, does not mean 
that others did not do this, but MOST was the leader. 

"Of course, what happened to Gusinsky also has to do with NTV's stance. You 
cannot take money from the authorities and slam them at the same time," 
Berezovsky said. 

Boris Nemtsov, leader of the Union of Right Forces faction in the State Duma, 
called Gusinsky's arrest "yet another act of intimidation against his 
company, Media-MOST," Interfax reported. Nemtsov called on prosecutors to 
release Gusinsky pending a trial. 

Media-MOST spokesman Ostalsky said that by putting Gusinsky into Butyrskaya 
Prison, which is notorious for its dreadful conditions, the authorities made 
clear that the arrest is "an act of revenge, a desire to intimidate the 
leadership of Media-MOST." 

The arrest won the approval of some political figures. 

Vladimir Zhirinovsky, leader of the Liberal Democratic Party of Russia, said 
Gusinsky's arrest "is just the beginning" and more arrests would follow. 

"It will now be the turn of oligarchs, former ministers, former deputies and 
governors," Zhirinovsky said. 

The deputy leader of the pro-government Unity Party's faction in the Duma, 
Frants Klintsevich, said prosecutors must have obtained solid evidence 
against Gusinsky. Klintsevich warned that the media backlash to the arrest in 
Russia and abroad would be "twice as big" as that created by the raid on 
Media-MOST's offices. 


Moscow Times
June 14, 2000 
Media Man's Dance With Authority 
By Andrei Zolotov Jr. and Garfield Reynolds
Staff Writers

The system that Vladimir Gusinsky helped create has turned against him. 

Gusinsky, now 47, emerged in the early 1990s as one of many rising 
entrepreneurs in the heady early days of the country's switch to capitalism. 

Capitalizing on close ties to the Moscow government under Mayor Yury Luzhkov 
f who parked much of the city's accounts in Gusinsky's MOST Bank f the 
theater-director-turned-businessman built his fortune in banking and real 
estate development. 

Gusinsky then used his financial empire as a base for the creation of the 
nation's leading private media empire. 

In 1993, he launched Segodnya newspaper and then co-founded NTV independent 

Despite only broadcasting 6 p.m. through midnight f the channel had to share 
its frequency with the state university station f NTV emerged as Russia's 
most professional television news outlet. 

In December 1994, Gusinsky's offices were raided by troops from the 
presidential security service, who beat MOST Bank's security guards and 
forced them and other bank personnel to lie face down in the snow. 

Alexander Korzhakov, who was then head of the presidential security service, 
had done nothing to conceal his dislike of Gusinsky. In one newspaper 
interview, he talked of his love of "hunting geese" f widely taken as a 
reference to Gusinsky, whose name derives from the Russian word for goose. 

Korzhakov later wrote in his memoirs that Gusinsky's business rival Boris 
Berezovsky had asked him to arrange the murder of Gusinsky. 

Gusinsky left Russia for London soon after the raid and did not return for 
several months. He later said that he had feared for his life at the time. 

Despite the pressure on their boss f or perhaps because of it f NTV 
distinguished itself with the strongest coverage of the first Chechen war, in 
1994 and early 1995. While state media offered heavily slanted reports from 
Russian military headquarters, NTV reporters roamed far afield, evenfiling 
reports from the Chechen side. 

NTV's coverage further enraged Ko rzhakov and other Kremlin officials. At one 
stage the Kremlin barred NTV from presidential press conferences. 

Gusinsky's fortunes changed when he joined Berezovsky and other "oligarchs" 
in backing Boris Yeltsin's re-election bid in 1996. One of Gusinsky's close 
associates who headed NTV at the time, Igor Malashenko, became the Kremlin's 
public relations strategist, and the channel started to beam similarly 
positive reporting of Yeltsin's campaign as the Kremlin-controlled ORT and 

After Yeltsin was re-elected, Gusinsky received his rewards. In November 1996 
NTV received a license to broadcast all day on Channel 4. Later, the 
government allowed NTV to set up its own satellite network, NTV-Plus, and 
state-owned Vneshekonombank provided guarantees for millions of dollars in 

In late 1997, Media-MOST had no difficulties obtaining a second broadcasting 
license for its newly founded THT network. 

Perhaps most importantly, President Boris Yeltsin signed a decree allowing 
NTV to pay the same low rates for use of the state-owned national 
transmission network as those paid by state television channels ORT and RTR. 

At a press conference earlier this month, Gusinsky said he regretted his 
participation in building up the system of "oligarch" rule under Yeltsin. 

"Unfortunately, I was part of the team that in 1996 gave birth to this 
system," Gusinsky said on June 1. "Believe me, today I have to a large extent 
reassessed this process. If I could step into the same river twice, we would 
have behaved the same during the 1996 elections as we behaved in 1999 and 
2000. But unfortunately, time flows only one way." 

Gusinsky has said that the Kremlin again approached him last year asking for 
his media empire's help during the 1999 State Duma vote and this year's 
presidential polls. 

The Media-MOST tycoon said that Kremlin Chief of Staff Alexander Voloshin f 
credited with helping Berezovsky mastermind the meteoric rise of President 
Vladimir Putin and the pro-Kremlin Unity Party f jokingly offered him $100 
million not to be "in the way" during elections. Gusinsky said his refusal 
was seen by the Kremlin as a declaration of war. 

Gusinsky's recent time of troubles openly began last June when 
state-controlled Vneshekonombank called in a $42 million loan. 

Not long after, the holding's longtime partner and shareholder, Gazprom f in 
which the state holds 38.4 percent f demanded Gusinsky's firm repay a $211 
million loan that the gas giant had first guaranteed and then taken over from 
CS First Boston. 

The move coincided with a statement from Gazprom boss Rem Vyakhirev 
criticizing NTV's reporting on Chechnya, which, though it vacillated, was at 
times aggressively critical. 

"As the head of Gazprom and as a citizen, I do not consider the position of 
NTV leadership on the Chechnya problem entirely correct," Vyakhirev said in 
an interview he gave to Interfax soon after a meeting with Putin. 
"Highlighting some negative aspects of [federal forces'] struggle against 
bandits is simply inappropriate," he added. 

But while its news coverage has regularly irritated those in power, it also 
seems that Media-MOST's most egregious sin in the eyes of many Kremlin 
officials has been the sharp satire of NTV's popular political puppet show, 


NTV director Yevgeny Kiselyov last month said that the channel had received a 
"shopping list" from a Kremlin official of measures it could take if it 
wanted authorities to make life easier for Media-MOST. Top of that list was a 
request to stop using the Putin puppet on the show, Kiselyov said. 

While some might have expected matters to quiet down once Putin was firmly in 
power, they haven't. 

Just four days after his inauguration, masked tax police, accompanied by 
federal prosecutors and Federal Security Service officers, raided several 
Media-MOST offices in Moscow. 

Investigators said they had discovered evidence that Media-MOST security 
officials had been engaged in eavesdropping on prominent political and 

Media-MOST officials have denied any wrongdoing. A Moscow district court 
ruled two weeks ago that the raids were illegally carried out. 

One figure who had forecast tough times for Media-MOST was tycoon and 
arch-rival Berezovsky. 

On the eve of the presidential election, he told Vedomosti that Media-MOST 
had major financial difficulties and that its "ownership structure" was 
likely to change. 

Berezovsky recently called Gusinsky's media empire part of the 
"nonconstructive opposition" to the Kremlin. 


Russian media baron detained amid outcry
By Peter Graff

MOSCOW, June 13 (Reuters) - Russian authorities detained the owner of the 
country's main independent television station on Tuesday in what allies and 
even some foes called a political assault on the media that dared to 
criticise the Kremlin. 

A spokesman for the prosecutor's office said businessman Vladimir Gusinsky 
was being held for questioning and that the authorities had 10 days to charge 
him formally. Russian news agencies said he had been detained on embezzlement 

President Vladimir Putin, in Spain on a European tour, said the detention 
came as a surprise but he would look into it. Questions about his commitment 
to free speech could haunt the ex-KGB spy in talks with Spanish and German 
officials this week. 

"I hope the security forces, the prosecutor's office, have sufficient grounds 
to take such an action and it has been done according to the law," Putin told 
reporters in Madrid. 

"If it was the prosecutor-general's office, that is an independent body and 
it took the decision." 

But a chorus of liberal politicians, Gusinsky allies and even some of his 
fiercest foes said they saw the arrest as a political act ordered at a high 

Alexei Venediktov, head of Gusinsky's Ekho Moskvy radio station, took to the 
airwaves to call the detention a "loutish, brazen, openly illegal act on the 
part of the authorities." 

Boris Nemtsov, head of the liberal Union of Right-Wing Forces party told a 
talk show on Gusinsky's NTV television that the arrest "seriously discredits 

Even Boris Berezovsky, a businessman known for his rancorous public clashes 
with Gusinsky, was quoted by Interfax news agency as condemning the 
detention. Sergei Dorenko, a commentator on a rival station who routinely 
attacks Gusinsky, told Ekho Moskvy the detention was "political repression." 


Gusinsky's media, especially his groundbreaking NTV television which often 
criticised the Kremlin, have been at the heart of Western leaders concerns 
over Russian free speech. 

In Washington, White House spokesman Joe Lockhart repeated concerns President 
Bill Clinton raised at a summit in Moscow earlier this month. 

"We haven't had a chance to look at the specifics of this (Gusinsky's 
detention) but we do have a concern about press freedom in Russia and that 
concern was expressed directly in President Putin's meeting with President 

"We are going to want to take a look at this and understand the details, but 
we are quite concerned about some of the steps that have been taken against 
the free media." 

Gusinsky's Media-Most company was searched in May by heavily armed and masked 
tax police in a raid the company said was intended to silence its media 

That raid sparked anger and concern among journalists and supporters of free 
speech, which many see as still being fragile nine years after the end of 
Soviet rule. Prosecutors said at the time it was a legitimate criminal 

During the summit, Clinton appeared on Gusinsky's Ekho Moskvy radio in what 
was widely seen as a show of solidarity. 


Sergei Parkhomenko, editor of the Gusinsky-owned Itogi weekly magazine, told 
Reuters Gusinsky was being held in Moscow's 18th century Butyrsky jail, not 
the more modern Lefortovo prison where high-ranking detainees are usually 

"It is the ugliest jail in Moscow, where only criminals are held," he said. 
"They won't let us see him until tomorrow. They arrested him late in the day 
intentionally so they could tell us they are closed and keep him out of 
contact overnight." 

The jail's director, Gennady Lisenkov, told RIA news agency Gusinsky had 
introduced himself to the other inmates there and was getting on well. "They 
watch NTV in every room," he said. 

RIA quoted the prosecutor's office as saying Gusinsky had been arrested under 
a criminal statute that covers large-scale embezzlement. It said he was 
accused of illegally acquiring state property worth at least $100 million. 

A spokesman for Media-Most, Dmitry Ostalsky, denied the reported allegations. 

Gusinsky's holdings include the NTV television station, Ekho Moskvy radio, 
the Sevodnya daily newspaper and the Itogi weekly magazine. NTV is the only 
national television station not controlled by the state. 


Putin tires of being Gusinsky's TV puppet

MOSCOW, June 13 (AFP) - 
Russian President Vladimir Putin called in vain for the makers of a popular 
satirical puppet show to pull his effigy out of the show, said 
programme-makers on NTV television.

Now Vladimir Gusinsky, the man who owns the station, is behind bars.

Gusinsky, whose Media-MOST group owns NTV, was arrested Tuesday on a 
10-million-dollar theft charge.

The authorities had promised they would be left alone if they pulled Putin's 
puppet from the show, Yevgeny Kiselyov, anchorman of the private NTV 
station's heavyweight news analysis programme, said last month.

So Kukly ("The Puppets") dropped Putin's effigy in the May 28 edition of the 
show -- but managed to run an even more derisive show making references to 
Putin's KGB background and likening his off-stage presence to that of God.

It was not altogether clear if Kisleyvo's announcement was tongue-in-cheek or 
not. But Putin was thought to have been irked by being constantly lampooned 
in the programme.

The show came soon after a heavy-handed raid by tax police that is believed 
to have been sanctioned by the presidential administration. Critics warned 
that it could herald a media crackdown by Putin, a former KGB spy.

Scores of heavily armed officers in masks and hoods raided the headquarters 
of Media-MOST on May 11. Some estimates said that up to 500 police were 
involved in raids on a number of companies in the group.

In any case, Putin's puppet was back on air in June, taking the flak 
alongside a puppet of US President Bill Clinton, who was visiting Russia at 
the time.

Kukly makes it its business to make fools of the rich and powerful in its 
popular weekly show. But as well as winning a wide audience, it has earned 
itself some powerful political enemies.

Five years ago, its portrayal of the then president Boris Yeltsin as a 
drunken tramp sparked a criminal investigation, although it was later dropped.

Gusinsky's media interests include radio Echo Moscow, daily newspaper 
Sevodnya, several other publications -- and the national television station 
NTV, which interrupted its evening newscast Tuesday to announce his arrest.

NTV has been critical of Russia's crackdown in Chechnya, masterminded by 
Putin, and Sevodnya has documented corruption involving the Federal Security 
Service (ex-KGB) which the new Kremlin master used to head.


FACTBOX-Russian politicians comments on Gusinsky detention

MOSCOW, June 13 (Reuters) - Russian politicians reacted with surprise to news 
that media magnate Vladimir Gusinsky had been detained on Tuesday but several 
cautioned against interpreting it as a political move. 

Gusinsky, who owns Russia's only independent national television station 
among other business interests, was being held without charge for 

Following is a summary of reactions by the main politicians from the State 
Duma lower house of parliament. 

Former Prime Minister Viktor Chernomyrdin said it was hard to understand what 
had happened but nobody should jump to conclusions, Interfax news agency 

Gennady Zyuganov, leader of the Communist Party which holds most seats in the 
Duma, told RIA news agency that it was an unexpected move and he would ask 
prosecutors for clarification. 

Alexander Gurov, chairman of the Duma Security Committee and member of the 
pro-Kremlin Unity Party, was quoted by RIA as warning against interpreting it 
as a political move. Another Unity member, Boris Gryzlov, said the 
authorities must have had a good reason to act as they did. 

Gennady Raikov, leader of the left-leaning People's Deputies fraction told 
RIA news agency he did not see anything unusual in the detention. Russian 
Regions fraction leader Oleg Morozov said he saw no political subtext. 

Irina Khakamada, of the pro-market Union of Right Wing Forces (SPS), was 
quoted by Interfax as saying the detention was a serious mistake and set a 
precedent for holding famous people without charge. 

Boris Berezovsky, a Duma deputy and one of Gusinsky's main business rivals, 
was quoted by Interfax as saying he reacted sharply negatively to the 

``There's no doubt that anyone who was involved in business in the last 10 
years has directly or indirectly broken Russian laws, mostly because of their 
imperfect state and because they've changed a lot in this short time,'' he 

Vladimir Zhirinovsky, the flamboyant and often outspoken leader of the 
nationalist LDPR Party told Interfax this was the first of a long list of 
detentions for which 130,000 prison cells had been freed up. 

``It is only the beginning and oligarchs (businessmen), former ministers, 
former deputies and governors will be next,'' he said, adding that people 
should ``submit to, obey and work with the Kremlin.'' 


Subject: Russia's independence/4364 Heinlein.
Date: Mon, 12 Jun 2000 18:47:22 -0700
From: Roman Solchanyk <>

It's always good to hear from VOA.

But VOA, like all of us, is not infallible. In June 1990, the RSFSR
declared its sovereignty; all of the other republics followed suit.

By the following year, all of the republics--except the RSFSR--had declared
their independence. Why Yeltsin's Russia did not formally "separate" from
the USSR is a no brainer for those of us who spent their time following and
analyzing nationality issues in the Soviet Union. Admittedly, this was
largely a thankless endeavor. There were much more important things to
study--e.g., May Day slogans, who was standing next to whom on top of the
Kremlin wall, workers' issues, women, invalids, etc. These were the "real"
issues. Who would have thought that there was a "Russian question" in the
USSR? Nagorno-Karabakh? Abkhazia? Transdniester? Ferghana Valley? Etc.

Alas, a sad commentary on Soviet studies in the 1970s and 1980s, which in
the year 2000 takes the form of Madame Albright's quip about Putin and

What was that thing about the Habsburgs? Something along the lines of
"Nothing learned and nothing forgotten."


Date: Tue, 13 Jun 2000 
From: "stanislav menshikov" <> 

"MOSCOW TRIBUNE", 14 June, 2000
A Flagrant Case of Mistreating Investors
By Stanislav Menshikov

Anatoly Chubais has long been considered, especially in the West a
brilliant business manager and principal architect of a market economy in
Russia. Yet, on careful analysis his record raises doubts as to whether
that image is indeed correct.

It is by now well established that massive privatisation pushed by Chubais
in the early 90s has created an economic structure which, far from
resembling the model of modern market capitalism as it is known in the
developed industrial world, has become the foundation of a system better
known by the nickname of "robber baron capitalism". Many if not most

private companies created under that project have fallen prey to managerial
groups that are incompetent to perform their proper functions in a
responsible way. They have also indulged in asset stripping and other forms
of illegal self enrichment that has led over the years to hundreds of
billions of capital transferred from Russia abroad and bleeding the economy
of investment resources. Particularly destructive was the infamous
shares-for-loans scheme that helped create the dominance of oligarchs in
the economy and effectively destroyed free competition without which a
market economy cannot normally operate. Much of the long crisis and
stagnation, as well as widespread corruption in Russia in the 90s is due to
that counter-productive and inefficient structure.

In later years, as one of the leaders of the government Chubais pursued an
economic policy that helped prolong stagnation by maintaining an
excessively stringent fiscal regime which led to inadequate aggregate
demand and thus stifled possibilities of economic recovery. At the same
time, it gave rise to the internal government short-term debt pyramid that
finally, under Kiriyenko, exploded in the destructive financial crisis of
August 1998.

Moved to the leadership of RAO UES, the Russian electric power monopoly,
Mr. Chubais did precious little in saving that industry from its most
notable maladies -- the plague of non-payments and continuous
underinvestment. For many months accusations that he was in fact using his
position for self promotion as a newly born oligarch went unheeded. Through
his high connections in the Yeltsin regime Chubais was shielded from
criticism and continued to rule the company with little or no interference
from the federal government which holds more than 50 per cent of its voting

In recent years, Chubais was instrumental in selling a third of the
company's shares to foreign, mainly US investors who were lured by absurdly
low stock prices and his alleged closeness to highly placed western
financial leaders. The confidence that he enjoyed at the time in these
circles helped him create de facto independence from government control.
More recently, that confidence has come to an end when foreign investors
discovered that he was engaged in a major restructuring of the company
without consulting its owners and asking for their views. On that basis a
group of minority investors is now initiating action to oust Mr. Chubais
from his position of the company's chief executive.

Normally, our sympathies would be on the side of a Russian businessman
supposedly guided by the national interest. Unfortunately we have to admit
that the foreign investors have a good case. Mr. Chubais's new idea is that
by breaking the company in two parts and privatising its electric power
stations he can restore the industry to stability and expansion is very
doubtful, to say the least. As confirmed by the government's Securities and
Exchange Commission, the situation in the stock markets is such that shares
of the producing plants will be inevitably sold at discount prices, i.e. to
the detriment of the controlling stockholder. For the same reason total

market capitalisation of RAO UES has fallen sharply in recent weeks - thus
reducing the value of shares owned by foreign investors. Contrary to
assertions from Mr. Chubais that his reform is the only possible way of
attracting foreign investment and saving the industry, quite the opposite
seems to be in stock.

New evidence just published in the Russian press indicates that Mr. Chubais
has also been using his position as creditor of industrial electric power
consumers as a lever to bankrupt and take over aluminium and other
important industries and in the process create a multi-industry empire of
his own. Equally disturbing is the fact that this has been done under the
pretext of inadequate gas supplies due to allegedly inappropriate business
policies of Mr. Viakhirev, Gazprom's chief executive. The result of this
conflict is widespread cutting off electric power supply across the country
to industrial and public sector consumers including universities, schools,
medical institutions and the like. One immediate result has been a drop in
industrial production which threatens to sabotage Mr. Putin's spectacular
economic recovery.

On all these counts it is fairly certain that Mr. Chubais's performance
requires, as a minimum, a close impartial investigation by a special
committee of all interested RAO UES stockholders, government and foreign.
It is clear that by ignoring a basic principle of capitalist
enterpreneurship -- maximisation of shareholders' equity -- Mr. Chubais
deserves their temporary, if not permanent vote of no confidence.

Stanislav Menshikov
Visit my homepages at:
Also visit ECAAR-Russia web site at



Moscow, 13th June: Real steps to attract new investment to the country's 
power engineering sector are possible no earlier than spring - summer of next 

This was reported to journalists by Anatoliy Chubays, the leader of the 
Unified Energy System of Russia joint-stock company [Russian power grid 
operator], who was received in the Kremlin on Tuesday [13th June] by the 
Russian Federation's president, Vladimir Putin. 

"A detailed and thorough conversation took place about the situation in the 
power engineering sector as a whole and about long-term tasks in the 
development of this sphere," Chubays reported. He stressed that they touched 
on the question of attracting resources and introducing new technology, so 
that "in 5-6 years we do not end up in a situation where we are no better off 
than before". 

Answering a question about price increases for energy, the chairman of the 
board of the Unified Energy System of Russia stressed that "the 
liberalization of the energy market, as world experience shows, leads in the 
end to a drop in prices". But "fundamental transformations are requiered" for 
this to take place, Chubays explained. A programme that has been worked out 
has already been submitted to the council of directors of the Unified Energy 
System of Russia. It will be discussed with the greatest number of interested 


According to Chubays, this is essential so that all possible additions and 
amendments are taken into account at this stage of drawing up the programme. 

It is worth noting that the meeting between Chubays and the Russian 
Federation's president has been taking place in two stages. It began in the 
morning, but the problems that were touched upon turned out to be so 
important that Putin and Chubays decided to continue the conversation after 
the Russian president has met the US defence secretary, William Cohen. 

Later on Tuesday President Putin will be leaving on an official visit to 


From: "James Beale" <>
Subject: Re: 4363-Gertz/Russian Nuclear Book
Date: Mon, 12 Jun 2000 

Hi David,

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selling this book.

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June 13, 2000
Putin`s PM Applies Putin`s Policy
By Andrei Stepanov

The outcome of the argument between Kasyanov and Gerashchenko is of 
fundamental importance for Russians. The matter concerns the safety of 
citizens’ savings deposited in U.S. dollars. However, the outcome of 
conflict is even more important for Russian state: the independence of the 
Central Bank as an emission and credit policy regulator is at stake. 

The Central Bank’s Chairman Viktor Gerashchenko pursues the policy that 
the population income in the dollar equivalent should stay stable or grow. 
Consequently, that would stimulate the demand for domestic products and 
create necessary prerequisites for macroeconomic stability and further 
economic growth. According to Viktor Gerashchenko, the Central Bank’s goal is 
to provide macroeconomic stability, improvement of living standards and to 
build up hard currency reserves. 

As a chief governmental official, Mikhail Kasyanov pursues an absolutely 
different goal: to carry out the budget plan, to pay external debts. And 
achieving this goal is a lot more important for him than economic growth and 
social protection of the population. 

Therefore, Mikhail Kasyanov wants the Central Bank to issue rubles in order 
to buy dollars on the market, and these purchased dollars should be used for 

paying off foreign debts, and the newly emitted rubles would fill the 
treasury. Then the government would be able to meet all its primary 
engagements: it would pay off debts and implement the budget plan, and ­ 
besides ­ would make life a bit easier for domestic exports tycoons. 

As for the inflation and the dollar-ruble exchange rate, Kasyanov seems not 
to care less. Should something go wrong, the government might always excuse 
itself by pointing at the situation at the international raw materials 
markets, or react by firing some unwanted official (for example, 

A heated dispute between the government and Gerashchenko concerns the 
independence of the Central Bank. The Central Bank, or Bank of Russia, is the 
sole money emission centre and credit policy regulator in the country. There 
are few examples in the world of a central bank being directly subordinate to 
the government, and the countries where such a situation exists, are marked 
by totalitarian regimes and poorly developed market economy. 

Kasyanov and his government closely watch the steps that are being taken by 
the new Russian president Vladimir Putin who aims at gaining control over all 
branches of power, and attempt to act the same way. The first step the 
government took was adopting the 2001 budget plan and launching the tax 
reform aimed at bringing all cash flow under the government’s jurisdiction. 
As the first step proved itself successful, now the government plans to gain 
control over the Central Bank, its foreign currency reserves, money producing 
facilities and shares of Russian banks abroad. 

One might only guess, what the third step of the government would be: on the 
one hand, the centralization of cash flow is beneficial for the budget, but 
on the other hand, it provides new opportunities for corruption and gives new 
economic levers of management over all economic entities. 

Will Viktor Gerashchenko be able to oppose Kasyanov’s government? This is the 
question that only Vladimir Putin can answer. For no matter how tough it gets 
for Gerashchenko, his fate is in the hands of the State Duma. The new Duma’s 
deputies might vote for Gerashchenko’s dismissal only if the new president 
insists on that, because there are no formal complaints about how he is doing 
his job. 

However, recent searches in the Ministry of Economy show that in case it is 
necessary the new government and the oligarchs behind it may always dig up 
something against disagreeable officials. Thus, the dollar exchange rate in 
Russia will most likely depend on diplomatic talents of Viktor Gerashchenko, 
who should find common language with the new president in order to keep his 


Jamestown Foundation Monitor
June 13, 2000

Service and tax police have reportedly searched the Moscow offices of 
Sokol-YuNS, a private security firm. What gives the raid significance is 
the fact that Sokol-YuNS provided security for Behgjet Pacolli, head of the 
Swiss engineering-construction firm Mabetex, which is under investigation 
in both Russia and Switzerland for allegedly paying kickbacks to top 

Russian officials in return for lucrative contracts to restore Russian 
government buildings. Sokol-YuNS also guarded property belonging to Mabetex 
both in Russia and abroad, including in Germany and Austria. The private 
security firm apparently took full advantage of its relationship with 
Mabetex. According to a report yesterday, law enforcement officials 
carrying out the raid on Sokol-YuNS discovered Mabetex documents and rubber 
stamps in the safe of Yuri Stenin, Sokol-YuNS' director (ORT, June 12).

These raids on Sokol-YuNS were not the first: Last August, Russian media 
reported a raid on the firm's offices in connection with alleged tax 
evasion, during which investigators found original documents recording more 
than US$8 million worth of payments, some of which had been signed by Pavel 
Borodin, who then headed the Kremlin's property management department. It 
was not clear from press reports at the time to whom these payments were 
made, or for what purpose. During that raid, investigators also reportedly 
found stamps from the Interior Ministry and Moscow police department, 
equipment for intercepting pager messages, documents with details of the 
personal lives of top politicians and government officials--Deputy Prime 
Minister Viktor Khristenko was specifically named--and 500 audio- and 
videocassettes of surreptitiously recorded conversations (Kommersant, 
August, 5, 1999).

Earlier this year, the Swiss authorities issued a warrant for Borodin's 
arrest in connection with alleged bribery and money laundering. Shortly 
after Boris Yeltsin stepped down as president last December 31, his 
successor, Vladimir Putin, removed Borodin as head of the Kremlin's 
property department and recommended that he be named state secretary of the 
Russia-Belarus Union, the post which Borodin now occupies. Putin has 
identified Borodin as the man responsible for bringing him from the St. 
Petersburg city administration to the Kremlin. After moving to Moscow, 
Putin served as Borodin's deputy.

While the reason for the authorities' renewed interest in Sokol-YuNS is not 
clear, the reports of this latest raid on the private security firm 
coincided with a report in Newsweek that the Swiss authorities will soon 
file formal complaints against fourteen people involved in the Mabetex 
affair, including Tatyana Dyachenko and Yelena Okolona, Yeltsin's two 
daughters. Back in 1993, they allegedly made purchases worth hundreds of 
thousands of dollars using credit cards provided by Mabetex. The Kremlin 
has denied the allegations (Newsweek, June 19; see also the Monitor, 
September 9, October 15, 19, November 19, 1999 and January 11, March 30). 
Last week, the Italian newspaper Corriere della Sera quoted a letter from 
Geneva investigating magistrate Daniel Devaud alleging that Mabetex had 
paid US$4 million in bribes to Russian officials, most of it to Borodin, 
and that another Swiss company, Mercata Trading and Engineering, had paid 
US$60 million in bribes, at least US$25 million of which went to Borodin. 
Earlier this month, Devaud reportedly informed Mabetex chief Pacolli that 
he would be charged with money laundering and membership in a criminal 

organization. Both Pacolli and Borodin have denied all charges and 
allegations connected with the case. Swiss prosecutors have complained that 
they have not received cooperation from their Russian counterparts in 
investigating Mabetex and other high-level corruption cases (Moscow Times, 
June 1, 9).


U.S. congressman calls monitoring money transfers to Russia

MOSCOW. June 13 (Interfax) - US congressman Curt Weldon who
specializes in relations with Russia has suggested at a press conference
in Moscow the setting up of a bilateral parliamentary commission for
monitoring money transferred to Russia from the West.
Speaking Tuesday at the Interfax central office he said the
commission should include US congressmen and deputies of Russia's State
Duma and Federation Council.
He explained the measure was necessitated by "insufferable actions
committed both by Americans and Russians who purloin the money intended
as aid for Russia's citizens."
"Billions upon billions of dollars aimed at helping Russia ended up
deposited in Swiss bank accounts or invested in real estate," he said.
Weldon stressed that the commission "was not to find out what the
money was spent for, but only to monitor its progress." He expressed
hope that the Duma would agree to set up such a body.
Talking of the recent Russia-US summit he expressed disappointment
with "its tone and content." He explained that many people in the US had
perceived the meeting as the kind that might have been held during the
cold war years. They would have preferred the summit to tackle a wider
range of questions on relations between the US and Russia and their
development in the XXI century under two new presidents, he said.
At the same time he welcomed the statement by Russia's President
Vladimir Putin who said that Russia is ready to join the U.S. in
devising anti-ballistic missile systems.
Weldon, as one of the authors of the ABM treaty signed by the then
US president, assured Russia's people that nobody in America is thinking
of creating an anti-missile defense due to fear of Russia. Russia is our
friend, he said, we really want to work together.
Introducing himself at the beginning of the press conference,
Weldon, a Republican, said he was Russia's best friend in Congress, but
sometimes its most scathing critic.


Source: NTV, Moscow, in Russian 0600 gmt 13 Jun 00 

[Presenter] Russian President [Vladimir Putin] begins an official visit to 
Spain today. Vadim Glusker reports from Madrid. 

[Correspondent] Spain is among the few European countries that have never 
been tough on Russia because of the Chechen campaign. 

[Omitted: Putin's schedule, general remarks] 

It is not ruled out that Fatherland-All Russia leader [and former foreign 
minister and prime minister] Yevgeniy Primakov will come to Madrid with Putin 
as a member of the Russian delegation. The official explanation is that he 
will represent the State Duma. However, people from Putin's entourage are 

making hints that this is not the only reason. So far Primakov's tense 
relations with the Kremlin have been common knowledge. It is very interesting 
that another Fatherland-All Russia leader, [Moscow mayor] Yuriy Luzhkov, 
accompanied Putin during his recent visit to Italy. In that case the strong 
friendship between the Russian and Italian capitals was the formal pretext 
for Luzhkov's presence. 

[0852-1122; video shows street views of Madrid] 


Text of report by Russia TV on 13th June 

[Presenter] Alongside government members State Duma deputies Fatherland-All 
Russia faction leader Yevgeniy Primakov and head of the international affairs 
committee Dmitriy Rogozin will accompany Vladimir Putin in his visits to 
Italy and Germany. Today the guest of our programme is Dmitriy Rogozin. Good 
morning, Dmitriy Olegovich, and thank you for joining us. 

[Rogozin] Good morning. 

[Q] The previous report by our correspondent from Spain showed interviews 
with ordinary Spaniards who are saying that Putin is opening Russia up to 
Europe again with the help of this visit. Do you think that our relations 
with Western Europe will change? 

[A] Russian diplomacy has a good manoeuvre for action now. Russia has come up 
with a serious initiative - I mean the proposal to set up a European 
antiballistic missile system. True, today Europe as well as Russia are facing 
a new threat, a threat of local conflicts, interethnic clashes and religious 
fanaticism. There is no answer to these questions yet, either in Kosovo or in 
Chechnya. We should be looking for answers together. This is why the 
development of Russia's relations with European countries is acquiring a 
special significance these days in terms of a search for strategic security 
and stability in view of new threats. 

[Q] Now to an internal Russian event: the appointment of Akhmad Kadyrov as 
head of the Chechen administration. Can it change the Council of Europe's 
attitude to the Chechen problem? Will the long-awaited understanding with 
Chechen parliamentarians ever come? 

[A] I will tell you what I know. Last week I received a letter from Lord 
Russel-Johnston, the chairman of the Parliamentary Assembly of the Council of 
Europe [PACE] in which he is asking for new information on the progress in 
the Chechen issue settlement. We have prepared a new memorandum, it will be 
sent to Paris and Strasbourg, and to Rome for the session of the PACE 
political commission. Now the mufti has already appointed [as administration 
head] and I am sure that this piece of news will receive a most favourable 
response not only in PACE, but in all other international organizations. It 
is essential to allow most authoritative representatives of the Chechen 
nation to settle the Chechen crisis. I believe that this decision of the 
Russian president is brilliant. 

[Q] Putin is expected in North Korea and China soon. What should we expect 
from these visits and what are the priorities in Russian foreign policy: 
Europe, Asia or America? Or the task is to create a steady balance? [A] 

Russia is not only a European country. We have a long borderline with China. 
China has reacted to the US ABM initiative in a most tough way because the 
second phase of the ABM defence system overlaps the Chinese nuclear potential 
completely. This will cause definite and very firm decisions in China itself, 
most likely in terms of increasing its own nuclear potential. 

As for the trip to North Korea, it will show how serious the threat of North 
Korea' s possible attack on the USA or any other country is, as described by 
the USA. To be honest, Russia does not like the concept of rogue states. It 
is a very incorrect expression. This is why I believe that the Russian 
president's visit to North Korea and China will be a ceratin breakthrough. 

[Q] Besides, Putin will be the first Russian leader to go to North Korea. 

[A] Exactly. I think that after his trip Vladimir Vladimirovich [Putin] will 
have a worthy answer before the Okinawa summit as to how advanced North 
Korean nuclear missile programmes really are and how irrational Pyongyang' 
behaviour is. I think that the reverse is true. I believe that the Russian 
president will manage to convince the countries of Asia and the Pacific, he 
will manage to convince the USA that the threat of so called rogue states are 
completely made up. However, I would not like to look ahead of the trip. I 
believe that the president's trip will speak for itself. 

[Q] Dmitiry Olegovich, thank you very much for your interview. 


RFE/RL NEWSLINE Vol. 4, No. 114, Part I, 13 June 2000

nationalist Tatarstan Public Center (TPC) held protest
meetings in Kazan and Chally on the Day of the Adoption of
the Declaration of State Sovereignty of the Russian
Federation on 12 June, RFE/RL's Kazan bureau reported. At the
rally in Chally, some 500 people gathered to protest
President Putin's recent creation of seven federal
administrative districts and the prospect of Moscow's
abrogating its power-sharing agreement with Tatarstan. TPC
representatives also burned a map depicting the seven zones,
claiming that Putin's move was inspired by an idea proposed
by Liberal Democratic Party of Russia leader Vladimir
Zhirinovskii. RIA-Novosti reported that a similar rally and
map-burning ceremony took place in Naberezhnye Chelny. Some
100 people attended that meeting according to police figures
(see also "RFE/RL Russian Federation Report," 14 June 2000).


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