July 13th, 2000    
This Date's Issues: 4399 • 4400  • 4401

Johnson's Russia List
#4401
13 July 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Washington Post: Jim Hoagland, A Shadow on Putin's Hopes.
2. Reuters: Rift in top brass of Russian military goes public.
3. Itar-Tass: RUSSIA UNIONS CALL FOR CHANGES IN GOVERNMENT'S 
SOCIOECONOMIC PROGRAMME.
4. Reuters: Russia's Media-Most head says fears for his life.
5. Heinrich Vogel: World Bank statistics on Russia's GDP.
6. Nezavisimaya Gazeta: Marina Volkova, VLADIMIR PUTIN DISTANCING 
HIMSELF FROM RUSSIA'S OLIGARCHS.
7. Transitions Online magazine: Sophia Kornienko, Who's Pulling 
Russia's Strings?
8. Vremya MN: Valery YELIZAROV, DEATH RATE RECORD HIGH IN RUSSIA.
9. The Independent (UK) editorial: A VISION FOR RUSSIA THAT IS 
BOTH REASSURING AND ALARMING.
10. Financial Times (UK): Oil pipeline 'threatens sturgeon': 
Moscow plays environmental card over US-backed plans for Caspian,
report Charles Clover and David Stern.
11. BBC MONITORING: RUSSIAN TAX POLICE PROCEEDINGS AGAINST LUKOIL 
"PURELY POLITICAL" - NEWSPAPER. (Izvestia)]

********

#1
Washington Post
July 13, 2000
[for personal use only]
A Shadow on Putin's Hopes
By Jim Hoagland

Russia's reconquest of Chechnya is being capsized by guerrilla attacks that 
now claim several hundred Russian soldiers killed or wounded a week. A bloody 
stalemate similar to the one that humiliated Moscow in 1996 is suddenly a 
plausible outcome to this campaign as well. 

The worsening Chechen conflict casts a large shadow over President Vladimir 
Putin's hopes to garner political laurels and economic help from the world's 
most affluent industrial democracies at his first Group of Eight summit in 
Okinawa later this month.

The Russian leader plans to deliver an impassioned plea for solidarity 
against terrorism and Islamic extremism in Chechnya. But Western responses 
will range from tepid to chilly. The coldest shoulder will come from France's 
President Jacques Chirac, who has let Moscow know that he will not have time 
for bilateral talks with Putin while in Japan.

Scheduling will be blamed. But the increasing diplomatic frostiness between 
Paris and Moscow makes Chirac's snub seem deliberate. The snub is also a sign 
of total failure for Putin's strategy to isolate France--Russia's most 
outspoken critic on Chechnya--and force Chirac to moderate his position.

Putin has never responded specifically to a formal French invitation tendered 
last year to visit Paris. Instead he has traveled to most other important 
European capitals in a sequence intended to "reward" those who have been most 
lenient on his actions in Chechnya.

President Clinton will take the middle ground at the July 21-23 Okinawa 
summit, aides say. He will meet with Putin privately and avoid conflict in 
public. But a new coolness that has crept into Washington-Moscow relations 
will be evident.

Clinton will reiterate private warnings to Putin that military assaults alone 
are unlikely to subdue Russia's rebellious province. Clinton has pointed to 
America's own failure in Vietnam in past conversations with Putin but has not 
had an impact.

"The death grip in Chechnya continues for both sides," Sandy Berger, the 
president's national security adviser, said disconsolately in an interview on 
U.S.-Russian relations.

Describing Russian domestic support for Putin's Chechnya policies as 
"fierce"--in part because of the "terrorism, abductions and kidnappings" 
employed by the guerrillas--Berger then asked: "But is it fierce enough to 
withstand the internal bleeding that is going on? That is not clear."

Berger's comments indirectly suggest that the Clinton team will be much more 
restrained on Russia than it was at the Cologne G-8 meeting last summer. In a 
political fiasco, Clinton and his summit colleagues hailed President Boris 
Yeltsin and Prime Minister Sergei Stepashin as commanding Russia's future, 
only to see both of them resign by year's end.

"It is in our interest to maintain the engagement with Mr. Putin's 
government, but in a clear-eyed way," Berger told me.

"Their record has been mixed. They put forward quite an economic program . . 
. but there are other troubling elements," such as Chechnya and media 
freedom, Berger said, adding: "It is unclear where Putin's center of gravity 
is and where his compass is pointed. I'm not sure he knows what he means when 
he says he wants to modernize Russia."

Berger has dealt with Putin, who was for a time Yeltsin's top security 
adviser, more extensively than any other U.S. official. Behind Berger's words 
seems to lie a sense of a Russian leader whose years as a KGB officer are at 
war with his more recent existence as an official in democratically elected 
municipal and national governments.

Depersonalizing the Kremlin-White House relationship is welcome, even late in 
the day for the Clinton team. The trick for Clinton at Okinawa and beyond 
will be to deny Putin real economic aid while dangling future help if and 
when Putin commits clearly to peace and democratic rule throughout Russia.

Putin will come to Japan hoping for a G-8 statement he can use to bolster 
Russia's three-pronged case for a renunciation of Soviet era debt, a 
rescheduling of Russia's own more recent loans and a new International 
Monetary Fund agreement now under negotiation.

Timing is everything: There is a strong case for writing off most Soviet-era 
debt. But it should not be offered or even promised while Putin's intentions 
are so unclear. And any new IMF agreement has to continue the present pattern 
of making sure Moscow pays more back to the fund than it gets in new loans 
annually.

Early "victories" in the war in Chechnya brought Putin to full power. But the 
needle, to borrow Berger's apt metaphor, has begun to point in the direction 
of eventual failure for Putin's Chechnya policies. His G-8 partners need to 
make it clear to Putin that the road out of the swamp does not pass through 
Okinawa.

********

#2
Rift in top brass of Russian military goes public
By Peter Graff

MOSCOW, July 13 (Reuters) - A top level row over Russia's nuclear rocket 
forces spilled into the open on Thursday when a leading newspaper accused the 
chief of the general staff of trying to mount a ``coup'' against Defence 
Minister Igor Sergeyev. 

At a closed meeting of generals on Wednesday, Chief of Staff Anatoly Kvashnin 
called for the strategic nuclear rocket forces to be eliminated as a separate 
branch of the military, freeing up resources for conventional forces. 

The call amounted to a direct challenge to Sergeyev, a former commander of 
the rocket forces who backs their continued independence. 

``Eventually, one of the two will have to go,'' Alexander Golts, defence 
analyst for Itogi weekly magazine, told Reuters. ``The row has already 
reached the point where it clearly harms the functioning of the Defence 
Ministry's leadership.'' 

The rocket forces' commanders moved quickly to fight their corner on 
Thursday, sending Kvashnin an unprecedented letter calling on him to rethink 
his plans. 

``A sharp cut in the strike formations of the rocket forces can have negative 
political, military-technical and socio-economic consequences for Russia and 
its international authority,'' the letter, quoted by Interfax news agency, 
said. 

A spokesman for the rocket forces confirmed the text. 

HOT TOPIC 

The clash between Kvashnin and Sergeyev became a hot topic for Russia's 
press. 

``For the first time in the history of the Russian army, an acting chief of 
the general staff has spoken out against the defence minister,'' wrote the 
respected daily Kommersant. 

The event ``can only be described as an attempted coup in Russia's 
military,'' it wrote. 

The generals did not vote to act on Kvashnin's proposals at their meeting on 
Wednesday, leaving Sergeyev and the missile commanders an opportunity to 
lobby President Vladimir Putin, who has so far remained silent on the issue. 

Sergeyev should have access to the president's ear on Friday at a military 
show in the Ural Mountains. 

Kommersant said Kvashnin must have been confident he had the backing of the 
Kremlin or he would not have spoken out. But Golts said the issue was far 
from decided and the advantage could lie with Sergeyev. 

``For a reason that is completely incomprehensible to me, (the Kvashnin camp) 
thought they would win,'' he said. ``They have lost so far, but not 
conclusively. The infighting will go on.'' 

The row could also have consequences in international affairs. If the clout 
of the nuclear rocket forces is reduced, Russia could argue for more 
energetic cuts in warheads during arms control talks with the United States. 

Moscow is already proposing cuts in both sides' arsenals to 1,500 warheads 
each, down from 3,500 under the 1993 START-2 arms deal which Russia's 
parliament ratified this year. 

Russia's security doctrine calls for an important role for its nuclear 
deterrent, but commanders of conventional forces have long grumbled that a 
Cold War-era strategic arsenal diverts resources away from basic needs. 


********

#3
RUSSIA UNIONS CALL FOR CHANGES IN GOVERNMENT'S SOCIOECONOMIC PROGRAMME
ITAR-TASS 

Moscow, 12th July: The Federation of Independent Trade Unions of Russia
(FITUR) insists on changes to the country's social and economic programmes
until 2010, its leader, Mikhail Shmakov, said today. 

The programme spells "the state's pullout from economy and social life, its
refusal to be responsible for the provision of basic public functions in
the social sphere to employees", top FITUR officials said at a session of
the executive committee. 

Participants in the session decided to draw a FITUR resolution on the issue
and work out a detailed analytical document on what might come out of the
implementation of the government's programme. 

An all-Russia union gathering will discuss this document in September or
October. 

********

#4
Russia's Media-Most head says fears for his life

MADRID, July 13 (Reuters) - The head of independent Russian media group 
Media-Most, at the centre of a dispute over freedom of the press, told a 
Spanish newspaper on Thursday that he feared his life may be in danger. 

Vladimir Gusinsky, who was detained briefly last month, also said in his 
interview with the Madrid daily El Mundo that Russia was moving towards 
becoming a police state. 

Media-Most, Russia's only independent national media network whose outlets 
have often been critical of the Kremlin, has been the target of a series of 
official investigations on suspicions ranging from breach of privacy to 
embezzlement. 

Asked if he feared for his life, Gusinsky said: ``If I say no, I'd be lying. 
If I say yes, you will publish it although I'd ask you not to do so, and that 
will not encourage the people who work at Media-Most to carry on.'' 

Gusinsky says the allegations against his empire have been masterminded by 
Kremlin officials. Prosecutors have denied any political motives and the 
Kremlin has said it is not involved. 

``In Russia, there used to be a police regime. It disappeared temporarily and 
now it is being rebuilt. It hasn't been completed yet but it is being 
restored very quickly,'' Gusinsky said. 

He said he thought Russian President Vladimir Putin had a personal grievance 
against him. 

Legal action against Media-Most has stirred public fear that the Kremlin 
might be trying to silence its critics, prompting a group of prominent Russia 
businessmen to throw their weight behind Gusinsky and raising concerns 
abroad. 

Earlier this week, officials from the prosecutors office searched 
Media-Most's offices in a new probe which the group said was linked to an 
investigation into its ties with state-controlled natural gas monopoly 
Gazprom. 

Gazprom guaranteed a multi-million-dollar loan to Media-Most by a foreign 
bank and recently reimbursed the bank. 

********

#5
Date: Thu, 13 Jul 2000 
From: Heinrich Vogel <Vogel.heinrich@gmx.net>
Subject: World Bank statistics on Russia's GDP

Dear David,
the recent revision of the World Bank's calculation of Russia's GDP
measured in Purchasing Power Parity (an upgrade by some 50 percent) went
unnoticed
so far in the community. It's political implications, however, are very
far-reaching: The combination of Russia's new wealth with applications for
debt
forgiveness abroad and total neglect of issues of distribution at home
invites a discussion. I do hope the enclosed summary of a first evaluation by
the Bundesinstitut will meet with some interest.
Heinrich Vogel 

Heinrich Vogel Köln, 27.06.2000
BIOst
Lindenbornstrasse 22
D-50823 KÖLN
research@biost.de


Annotation: Russia's GDP - a riddle inside am enigma wrapped in mystery

A recent statistical earthslide went unnoticed so far in economic and
political discussions: The World Bank in its edition 2000 of "World
Development Indicators" revised the calculations of GDP at purchasing power
parity of over 140 countries. With a GDP (calculated by Pur-chasing Power
Parity) now estimated at $948 bn Russia was moved up from rank 13 (in the
1999 edition) to rank 10 of the leading economic powers of the world (among
the CIS coun-tries, Ukraine and Georgia also got a promotion):

PPP-GDP 1998 (bn US-$ and percentage change)
World "old" "new" % CIS "old" "new %
USA 7944 8002 1 Ukraine 111 161 45
China 4067 3846 -5 Uzbekistan 71 49 -31
Japan 2887 2940 2 Kazakhstan 55 68 24
Germany 1772 1819 3 Belarus 50 65 30
India 1510 2035 35 Azerbaijan 15 17 13
France 1309 1246 -5 Georgia 11 18 64
UK 1220 1201 -2 Kyrgyz Rep. 11 11 2
Italy 1176 1185 1 Turkmenistan 10 12 26
Brazil 1085 1098 1 Armenia 9 8 -12
Mexico 847 738 -13 Tajikistan 7 6 -2
Canada 760 715 -6 Moldova 7 8 29
Spain 642 638 -1 East Europe "old" "new" %
Russia 605 948 57 Poland 264 295 12
Indonesia 586 540 -8 Czech Rep. 108 127 18
Korea 579 625 8 Romania 90 127 41
Hungary 73 104 42
Slovakia 43 52 23
Bulgaria 33 40 20
Slovenia 23 28 23
Kroatia 23 30 32
Lithuania 16 24 49
Latvia 10 14 44
Estonia 8 11 46

Accordingly, Russia's 1998 per capita GDP rose from $4,200 to 6,500. For a
detailed analysis see: Roland Götz, "Russlands wirtschaftlicher Rückstand
geringer als angenommen", BIOst, Aktuelle Analyse Nr. 30/2000
(http://www.biost.de).

Once noted, the political consequences may be considerable: 
What about credit standing, forgiveness or restructuring of debts, and
domestic arguments on issues which had been shelved with the declaration of
general poverty, e.g. public versus pri-vate sector, tax and defense
burden, health, education, or income distribution? Is Russia "a rich
country with poor people" (Putin in his "Letter to the Voters" even
proclaimed a per cap-ita GDP of only $3,500)? If it is more rich than
assumed so far, how can the challenge of (re-gional, sectoral and personal)
distribution issues be contained? In my view, the World Bank's upgrade of
PPP-GDP will be increasing, not easing the pressure.

Comments are welcome.

*******

#6
Nezavisimaya Gazeta
July 13, 2000
[translation from RIA Novosti for personal use only]
VLADIMIR PUTIN DISTANCING HIMSELF FROM RUSSIA'S OLIGARCHS
By Marina VOLKOVA

Vladimir Putin used to say that specific rules of the game 
involving the government and this country's oligarchs, which 
had evolved over the last few years, were going to change. As a 
matter of fact, Putin made this statement while he was still an 
acting president. Putin used to stipulate equal business 
opportunities, as well as the crackdown on Chechen terrorism, 
in the course of his own election campaign.
Incidentally, the former was seen as one of the most clear-cut 
campaign issues.
The oligarchs' equi-distant status with regard to this 
country's corridors of power was proclaimed, rather meekly at 
first, by Putin upon his arrival at the Kremlin. However, the 
oligarchs preferred to keep silent on this score.
On July 12 Putin formulated even tougher rules of the game 
during his interview to ORT and some Western mass-media bodies, 
also explaining the gist of the Russian saying "To Catch Fish 
in Murky Waters." According to Putin, some people, who have 
already caught a lot of "fish," would like to preserve this 
situation for a lengthy historic period. "Still I don't think 
this suits the people of Russia and our foreign partners," 
Putin went on to say. In other words, the President apparently 
dislikes the so-called zero option suggesting that Russia's 
powers-that-be and oligarchs forget all about their old-time 
sins on a reciprocal basis. By the way, some of the 
presidential administration's officials kept suggesting that 
such a provision be formalized in line with the law. Putin also 
noted during the same interview that there could be no 
effective state without a stable and efficient judicial and 
legal system. Mikhail Kasyanov also made a similar statement, 
noting that the oligarchs had lost their immunity.
Frankly speaking, the Russian "legal" system, which is 
trying to act already at this stage, has instituted criminal 
proceedings virtually against all so-called oligarchs, as well 
as those businessmen, who believe that their capitals enable 
them to become oligarchs. Each oligarch would also be expected 
to repay specific sums, e.g. overdue taxes, to "sleep calmly" 
afterwards (as the well-known commercial says).
Meanwhile Russia's oligarchs, who are in no hurry to 
assess the President's role, don't want to explain their 
silence either. Quite possibly, they are waiting for a 
round-table discussion that would also involve Putin. By the 
way, Boris Nemtsov is ready to organize such a round-table 
discussion and, in his words, got the approval of this idea by 
the head of state. How can such restrained behavior on the part 
of the oligarchs be explained? Maybe, the oligarchs, who hope 
to strike a deal with Russian leaders, don't want to declare 
war on the Kremlin posthaste. According to Nezavisimaya 
Gazeta's sources, bilateral negotiations involving this 
country's oligarchs have taken place the other day. 
Nonetheless, experts don't think that the Russian business 
elite will team up against Putin. However, one should keep in 
mind that a select few people control more than 50 percent of 
the entire Russian economy. Well, this seems to be a rather 
serious argument for influencing the overall political and 
economic situation.

Expert Opinion

Russian tax inspectors continue to check the records of 
various big-league corporations, what with the 
Prosecutor-General's Office instituting criminal proceedings 
afterwards in some cases. In this connection, Nezavisimaya 
Gazeta's correspondent has asked the following two questions to 
Russia's leading political-science experts: 
1. Has Putin launched an offensive against the oligarchs?
2. What principles does the government use for instituting 
criminal proceedings against specific oligarchs?

Vyacheslav NIKONOV, Politics Fund: 
1. Yes, I believe, Putin has started attacking the 
oligarchs today. Evidently, the logic of Putin's actions is as 
follows. He wants to remove those particular forces, which can 
be perceived as a theoretical threat to projected reforms, from 
the political scene, or to make them less influential.
Their list includes the oligarchs, as well. Ideally speaking, 
the goal of the state's de-privatization, which is now being 
discussed rather actively, must be achieved. It's an open 
secret that over the last few years quite a few state functions 
were privatized by influential vested interests, which, in 
turn, boast quite a few representatives inside the Russian 
bureaucratic machinery. However, the press is still inclined to 
think that the present-day campaign is rather selective.
2. One gets the impression that the oligarchs were 
sub-divided into the good guys and the bad guys, into more 
loyal and less loyal persons. The current attack is still 
selective. By all looks, those specific oligarchs, who oppose 
Russia's powers-that-be, as well as those oligarchs, who 
control sizeable mass-media resources, are currently being 
targeted. I personally believe that there exist two criterions, 
e.g. loyalty and political resources, above all the mass-media 
potential. However, additional criteria would make it possible 
to attack additional oligarchs, too.

Andrei FEDOROV, Political Research Fund: 
1. I don't think so. Putin has now started bolstering his 
personal power. Meanwhile the oligarchs don't seem to be the 
most important aspect of them all. In my opinion, the crackdown 
on this country's oligarchs merely constitutes a supporting 
attack.
2. As I see it, specific principles for choosing such 
oligarchs are fairly simple. Politically influential oligarchs 
are being targeted, in the first place. Those particular 
oligarchs, who are still being overlooked by the authorities, 
will inevitably find themselves in the limelight pretty soon.
As I see it, the following machinery will be used for rounding 
up all oligarchs. At first, the authorities will crack down on 
politically influential oligarchs, subsequently attacking all 
those business-like persons, who prefer not to stick their head 
out.

Vladimir Rimsky, Indem Fund: 
1. I think that it would be incorrect to use the word 
"offensive" here. As I see it, our cash-strapped federal budget 
needs money now. As a result, they are trying to scoop up 
additional revenues, no matter what. Naturally enough, some 
political tasks are also being tackled. All this constitutes an 
attempt to redistribute monies. A large-scale frontal attack is 
currently being conducted. The decision to crack down on 
tax-evaders can also be explained rather easily.
Russia's tax agencies had expected such tax-evaders to 
voluntarily transfer all overdue payments for quite a while.
The relevant deadline has already expired; consequently, our 
tax inspectors now have every right to collect such monies in 
line with the law. Still the authorities have opted for a 
rather interesting method here. To cut a long story short, 
every major Russian corporation and all local oligarchs depend 
on their territorial tax inspectorates a great deal. This can 
be explained by the fact that our legislation enables tax 
inspectors to make various decisions in the given field. In 
other words, they can collect as many taxes, as they want, or 
just few taxes. And in both cases their actions will be deemed 
quite legal. For example, LUKoil was named the best Russian 
tax-payer only six months ago, and now tax inspectors are 
accusing the company of hoarding some tax proceeds.
2. Those responsible for conducting this campaign should 
be asked about such principles. As I have already said, the 
situation's political aspects should not be overlooked. A 
political selection is now taking place. Quite possibly, any 
particular system might also be lacking. Our authorities are 
quite aware of the fact that there are oligarchs who are not 
going to pay any money whatsoever, regardless of the extent of 
official pressure. I'm talking about all those tycoons, who can 
exert pressure on Russian tax agencies, or those responsible 
for making the appropriate decisions.
Unfortunately, the state keeps working selectively. The 
oligarchic structures boast connections at local tax agencies, 
this country's Interior Ministry, etc. Consequently, they are 
able to either torpedo unfavorable verdicts, or to make 
decisions more profitable. Russian authorities won't deal with 
those, who are sufficiently powerful in this context. Such is 
my hypothesis. However, I certainly know nothing about specific 
lists.

Gleb Pavlovsky, Effective Policy Fund: 
1. No, I don't think so. In my opinion, Putin has been 
distancing himself from the oligarchs and teaching them the 
appropriate rules of the game for quite a while now. I believe 
that the very same line is currently being pursued. However, 
local bureaucrats have now started displaying greater 
initiative than before.
2. I don't think, there are any principles here. This is 
largely seen as a spontaneous, albeit somewhat disturbing, 
process, because the President tends to influence the entire 
bureaucratic decision-making process to a considerable extent.
Our bureaucrats have their own vision of the president's words 
and actions and sometimes interpret them in a specific way. To 
my mind, Putin should control this process in some sense.
Current developments imply that various initiatives have now 
coincided in time and at different levels. In my opinion, the 
oligarchs constitute a rather small and unique group, which 
lacks any principled political importance at this stage.
Therefore one can't say that the government has now started 
cracking down on the oligarchs. A campaign stipulating new 
rules of interaction between businessmen, law-enforcement 
agencies and the corridors of power has now been launched. I 
think that everyone should abide by such rules, which, in turn, 
should be known to all and sundry. But the trouble is that no 
one knows such rules well enough.

*******

#7
From: tracyj@tol.cz (Jen Tracy)
Subject: Sophia Kornienko/Who's Pulling Russia's Strings?
Date: Thu, 13 Jul 2000 

Dear David, we posted this on Monday, hope you'll be able to use it. Best,
Jen Tracy

>From Transitions Online magazine (www.tol.cz)
Who's Pulling Russia's Strings?
To many Russia-watchers, it seems that as two powerful clans battle it out,
no one is in control -- yet.
by Sophia Kornienko
Sophia Kornienko is TOL's stringer in St. Petersburg.

Russia, some say, has finally found itself in the fraternal arms of a
president determined to restore law and order at any cost. And those
supporters have some fairly strong evidence to back them up. The war in
Chechnya is a good starting point, followed by Vladimir Putin's recent
reforms designed to thwart the ambitious corruption of regional governors.
When media mogul Vladimir Gusinsky was arrested in mid-June, many took this
as a sign that the new government isn't going to take any criticism
lightly. In many respects, Putin seems a specimen of resolute strength: He
walks and talks with the same effectiveness that he throws down judo
opponents.

But this isn't the judo mat anymore, and through the cracks in Russia's
political glasshouse there are theories emerging that Putin isn't really in
control. Those theories can also offer up plenty of recent evidence. "As a
source of power, Putin does not even exist," says Boris Kargarlitsky, the
leading expert at Moscow's Comparative Political Science Institute.
"[Putin] is only there because someone has to fill the post."

Putin claimed ignorance when he learned of Gusinsky's arrest during a trip
to Spain. According to the president's press service, when Putin tried to
call the prosecutor general to get to the bottom of things, he couldn't get
through. Eyes were fixed on presidential administration head Alexander
Voloshin as having inspired the arrest. Voloshin has long remained an
influential member of tycoon and Kremlin-insider Boris Berezovsky's clan
and the "Family," the Kremlin's Moscow circle created by Yeltsin's kin and
closest trustees&#151;mostly Russia's richest magnates. "Putin is a member
of the Family," says Yevgeny Volk, an analyst with the Heritage Foundation
in Moscow.

Upon his return to Moscow, Putin found himself ordering Voloshin to share
more power with his deputies, providing more young administrators with
so-called "access to the body"&#151;a privilege to advise to the president
directly. Yet, as the Kremlin accommodates new inhabitants, analysts say it
may simply mean the clans are expanding. According to independent analyst
Gleb Pavlovsky, "Yeltsin's successor is a product of careful meticulous
selection, providing not only his loyalty but also a degree of dependency."

QUESTIONABLE POWER

The president's strength was first questioned in May this year when St.
Petersburg Governor Vladimir Yakovlev, a man Putin openly dislikes, was
given the green light by the Kremlin and re-elected as governor. The daily
independent analytical website, Polit.ru, at the time interpreted that as
Putin's first concession to Voloshin and Berezovsky. In June, after signing
a decree naming well-known and widely respected independent lawyer Dmitry
Kozak -- a friend and fellow alumnus of the St. Petersburg government -- to
the post of prosecutor general, Putin suddenly changed his mind and
appointed Vladimir Ustinov, an old military figurehead loyal to Yeltsin.
When Gusinsky was arrested on orders from the Prosecutor General's Office
later the same month, Putin had just embarked on his first European tour
and was visibly frustrated before his Western counterparts when he
announced that he knew nothing about the arrest and could not get in touch
with Ustinov.

Enter the gray cardinal. It was Voloshin, according to sources at the
Kremlin, who had long been advising Putin to do something about the
critical coverage of the Chechen campaign on the NTV independent television
channel, a widely watched and highly popular Media-MOST outlet. One of
Russia's wealthiest oligarchs, who also ran Yeltsin's administration from
early 1999, "Voloshin is probably the most powerful figure in today's
Russia," Kagarlitsky says. Partners in multiple joint projects over the
last decade, Voloshin and Berezovsky have gained control over a vast share
of formerly state-owned monopolies. While Berezovsky has been called "The
Family's purse" by Kremlin insiders, Voloshin has been nicknamed "the purse
of The Family's purse."

Some say that Voloshin has Putin in check. Kargarlitsky, for one, is
convinced that Voloshin is powerful enough to put any decree on hold.
Former President of the Soviet Union Mikhail Gorbachev hinted at the same
in an interview with Media-MOST's Segodnya daily newspaper, though he did
not mention Voloshin in particular. "I think the old forces are holding
Putin on a short leash. I feel sorry for the president," Gorbachev said.
Union of Right Forces (SPS) leader Boris Nemtsov has openly called for
Voloshin's removal. Some analysts doubt though, that Putin could get rid of
his watchful guardian, even if he wanted to.

At 44 years of age, Voloshin is now head of the board of directors at the
United Energy System (UES) giant. He's come a long way. In 1986, after
finishing courses in foreign trade, he was hired by a research center at
the Soviet Foreign Trade Ministry, and at the beginning of the 1990s,
started earning some extra money on the side by providing inexpensive
market consulting to various companies. It was then that Berezovsky first
sought his advice regarding car export. In little time, Voloshin became
Berezovsky's personal broker -- or so the story goes. His trump card was
always his talent to apply his state-granted access to the latest
commercial information to his own private ventures. There was no time to
waste at the onset of Russia's privatization scheme in 1993, when all
citizens were given vouchers that entitled them to be "rightful co-owners"
of the state's property. Every citizen, including minors, could choose to
invest or to sell their shares, which were then hardly worth a meal at
McDonald's.

Berezovsky saw to it that Voloshin's career would skyrocket. In 1993,
Voloshin's voucher investment funds&#151;Olympus, Prestige, and
Elite&#151;were established to purchase vouchers from people at low prices
and later use them to buy whole sectors of the post-Soviet economy. When
Russian financial pyramids began to collapse in 1994, Voloshin's other
voucher mediating venture, Esta-Corp, fooled a Moscow bank into making a
$5.5 million purchase of Berezovsky's AVVA automobile alliance stocks,
which in reality were worth almost nothing at the time. But Voloshin's
biggest break came in 1996, when he was appointed president of the
Financial Funding Corporation (FFC, part of the State Federal Property
Fund) and was charged with supervising state property auctions.

In a recent profile published in the daily newspaper Novaya Gazeta, Igor
Lurye wrote that "Alexander Voloshin helped Boris Berezovsky and [tycoon]
Roman Abramovich to illegally acquire 85 percent of Sibneft oil company,
thus causing a large loss to the federal budget. "On behalf of the FFC, the
state lost $55 million in just three years, Lurye wrote. Sibneft (Siberian
Oil Company) remains in the Family's coffers today. The largest producer of
gasoline in Russia, this company retails gasoline through its own chain of
gas stations across western and central Siberia, owning 38 percent of a
major refinery in Omsk. According to Hoover's Online Business Network, the
company, "which emerged out of the Russian-style privatization movement of
1995, has proved reserves of 4.1 billion barrels of oil and produces
342,000 barrels of oil per day, a third of which is exported." The Family's
Abramovich controls approximately 40 percent share of Sibneft. "The
economic resources of the country are being concentrated and consolidated
in the Family's hands, and they have Alexander Voloshin as their powerful
tool," Nemtsov said in a 13 June interview on NTV television.

BATTLE OF THE CLANS

After an urgent closed meeting with Putin on 20 June, Voloshin signed a new
order of duty distribution among his staff. Yet, according to Volk, the
rearrangement of who does what was purely decorative and more likely
implemented to expand Dmitry Medvedev's privileges, rather than limit
Voloshin's. Of all Voloshin's deputies, Medvedev, former chief of Putin's
electoral headquarters, is to now become "an alternative center of power,"
Gusinsky's Segodnya writes. Medvedev, who once worked as an adviser to then
Deputy Mayor Putin in St. Petersburg, belongs to the so-called "Petersburg
clan," which is viewed as the Family's rival. This clan has its people
scattered across Russia's many branches of power, including the government
and the security service, as well as the oligarchy and Putin's
administration. Among the group's best-known representatives is a former
Kremlin chief administrator, the "father of privatization" and UES Chairman
Anatoly Chubais. Finance Minister Alexei Kudrin is also a part of this
group. Among the powerful presidential staff, aside from Medvedev, the
Petersburg team includes other deputies to Voloshin -- Igor Sekhin,
Alexander Abramov, and Dmitry Kozak, the appointee to the post of
prosecutor general. Yet, as many analysts suggest, only Medvedev, who was
also elected head of the board of directors of the gas monopoly Gazprom on
30 June, is being groomed to succeed Voloshin as chief administrator.

Meanwhile, of the multicolored Petersburg clan, it is his former KGB
colleagues with whom Putin seems to feel most comfortable. In an early
April interview with ABC News, the Russian president said it is simple
trust that gives him reason to rely on people like Nikolai Patrushev, the
head of the FSB, and Sergei Ivanov, Putin's university classmate and a
former co-worker at the KGB, now heading the newly formed Security Council.
This powerful body, which some say Putin designed specifically for Ivanov,
includes the president's regional representatives and security service
officers, and aims to outweigh the oligarchy, which works closely with the
regional governors.

After Yeltsin destroyed the dreaded KGB at the beginning of his rule in
1991, it was replaced by two successor agencies, the SVR (Russia's CIA),
and the FSB, which focus on fighting domestic crime, terrorism, and foreign
counterintelligence. Today, the SVR, the FSB, and the Security Council form
a large and strong security service bloc, competing for power with the
members of the Family. While the Family is definitely the one in control
financially, the security service group possibly plays a more powerful role
when it comes to more forceful forms of influence, says Volk.

Nevertheless, according to former KGB officer Konstantin Preobrazhensky,
one level down from the FSB's and the Security Council's high-standing
officials, the security service today suffers a shortage of quality agents.
As a 41-year-old surveillance expert told Newsweek, his salary "increased
nearly tenfold" when he left the agency for a large Moscow bank in the
mid-1990s. There are only two classes of people left at the FSB, he said.
"One, the most dedicated public servants. And two, those intelligence
agents who maybe aren't so intelligent."

It is unethical to follow KGB tactics in official state politics, claims
Preobrazhensky. The provocative tactics lately so carefully pursued by the
Russian side&#151;for example, when Putin promised to bomb Afghanistan or
suggested a joint missile defense shield with the United States -- come
directly from KGB textbooks, he says.

"We used to have the so-called 'A-Service' (Active Misinformation Service)
which practiced deliberately misleading announcements and later observed
the public reaction," Preobrazhensky said. "This and other typical KGB
moves are being heavily abused in Russia today on the levels of top
strategic decision-making."

The recent arrest of Media-MOST's Gusinsky, and his release three days
later, is one instance that could have been viewed as the arm not knowing
what the hand is doing. According to Volk, the arrest was made in
cooperation between the Prosecutor's Office and the FSB, but not
necessarily the president. The fight for power between the clans is heating
up and the arrests were one of its consequences, according to Kagarlitsky.
And the fight should be a good one, as most analysts agree that the
influence of the security service is on the rise. Where Putin fits in,
however, is still unclear. On one hand, he trusts his former security
service colleagues. On the other hand, if Voloshin is ordering the
Prosecutor's Office to make arrests in conjunction with the FSB, the two
clans begin to clash.

What it comes down to is that the struggle among groups of influence
constitutes the main component of current Russian politics. The country's
political events are triggered chaotically by several powerful clans, each
acting exclusively in favor of its own interests, concludes Kagarlitsky.
That may mean that Russia is in fact ruled by no one.

*******

#8
Vremya MN
July 11, 2000
[translation from RIA Novosti for personal use only]
DEATH RATE RECORD HIGH IN RUSSIA
By Valery YELIZAROV, Head of the Centre of Demographic Studies of 
Moscow State University

The figures are alarming. The death rate exceeded the 
birth rate in Russia eight years ago. The population has been 
dwindling ever since and there is no hope that this slide will 
stop in the near future. 
There are roughly 145.3 million people in Russia, a 
dramatic fall from 148.7 million in 1992. The population 
withers away by an average of 0.3-0.8 million a year. Last year 
Russia moved down from the sixth to the seventh place on the 
list of the world's most populous countries, ceding its sixth 
place to Pakistan. Our forecasts show that there will be 
roughly 140 million in Russia in 2001. 
The birth rate is going down, too. A total of 1.216 
million babies were born last year, the lowest figure in 
Russia's modern demographic history. This figure looks 
especially alarming against the background of the statistical 
growth of the death rate. The life expectancy dropped from 69.9 
to 67 years (61.3 years for men). 
And yet the government does not pay enough attention to 
demographic problems, which can be explained as its 
unwillingness to highlight the dramatic situation in the 
country. 
The number of divorces has been growing. In 1997-98, there 
were only two or three regions where more divorces than 
weddings were registered, but the current figure is 15 regions. 
And this concerns not just Chukotka and Magadan, where the 
situation is dramatic because people are leaving these regions, 
but also Central Russia. 
It does not matter if we had perestroika or not, if our 
president were Yeltsin, Zyuganov or Zhirinovsky, the country 
was doomed to a dramatic fall in the birth rate in the early 
1990s, because the marriageable age group (20-25) was quickly 
declining in number. We could have probably found a way to 
change the situation in other, more tranquil times, but what we 
have now is the demographic price of the reforms. Our social 
policy could not cope with the plummeting living standards. 
The highest figures today are the dwindling number of 
weddings and firstborns: nearly 30% in either case. The number 
of second and third children has dropped by 60%. The thing is 
that 35-year-old people refused to have children until they 
raised their living standards to a substantial level. They 
might account for the compensation growth in the birth rate 
now, but it would be overoptimistic to count on this. I think 
it would be more realistically to expect 1.2-1.5 million births 
and 2 million deaths a year. This decline in the number of 
population can be offset only by immigration, which compensated 
some 60-80% of natural losses in the mid-1990s, some 40% in 
1997-98, but no more than 20% now. And the outlook is not 
bright, because few people are eager to immigrate to Russia.
At the same time, quite a few are emigrating. Some 30,000 
have emigrated to Germany and 15,000 to Israel and the USA each.
We are facing a predetermined demographic future, but we should 
not overlook the dynamics in the most interesting segments of 
population, such as the dynamics of the average annual number 
of 7-year-olds. The number of first-graders dwindled by one 
million in the past six years. Shockingly, it amounts to some 
35,000-40,000 classes. 

********

#9
The Independent (UK)
13 July 2000
Editorial
A VISION FOR RUSSIA THAT IS BOTH REASSURING AND ALARMING

VLADIMIR PUTIN begins to make sense. The recent statements of his
government's economic and foreign policy, a wide-ranging television
interview this week, and his attacks on the powerful regional governors and
the oligarchs who control much of the country's wealth, have fleshed out
his vision for Russia. His goals are a strong central state, a modern
economy and good relations with the West - provided, of course, the West
keeps out of Russia's internal affairs, notably Chechnya. It is a vision
both reassuring and deeply alarming. 

If Mr Putin has indeed declared war on the oligarchs, most people would
say, "and about time too". Russia will remain backward and chaotic until it
acquires an institutional framework trusted by all its citizens - in other
words, a fair tax system, a legal system before which everyone is equal,
and a stable business environment in which disputes are settled under
contract law, not by contract killings. 

In their absence, the business moguls and the corporate gangster culture
that underpins them have flourished, frightening off foreign investment and
contributing little to the wellbeing of ordinary people. The sooner the
oligarchs, too, are made accountable, the sooner Russia will acquire the
civil society and liberal, wealth-creating economy to which Mr Putin
aspires. So far, so good. But Russian history suggests some disquieting
parallels. Ivan the Terrible's destruction of the boyars, Peter the Great's
crushing of the rebel Streltsy, Stalin's systematic elimination of his
every rival - and now Putin against the clique of individuals who have
virtually cornered the national economy. 

The methods, naturally, have changed. The tsars and the communists
preferred mass executions and show trials; today it is tax inspectors and
the financial police who have been sent in against the country's biggest
car-maker, against the head of the group that runs the only independent
television company, and against a mogul who controls one of Russia's
largest metals concerns. The pattern, however, is similar. 

Mr Putin's instinct is to brook little dissent. The assault against
Vladimir Gusinsky, whose TV channel refuses to fawn to the Kremlin, smells
of an assault on free speech. The president insists that his goal is
democracy, but this would be more convincing had he not surrounded himself
with cronies from his old KGB days. Once again, we face the eternal Russian
question: is the price of progress an erosion of freedom? In Mr Putin's
case the jury is still out. But the increasingly likely answer is yes. 

*******

#10
Financial Times (UK)
13 July 2000
[for personal use only]
Oil pipeline 'threatens sturgeon': Moscow plays environmental card over
US-backed plans for Caspian, report Charles Clover and David Stern

US-backed plans to build a network of oil and gas pipelines under the
Caspian Sea are running into Russian environmental objections following
announcements of a big oil discovery by Kazakhstan this month. 

A Russian diplomatic mission has been making the rounds of Caspian states -
last week Kazakhstan, this week Azerbaijan - to push home the message that
the pipelines will not go ahead without a complicated series of
environmental accords designed to protect the Caspian's fragile ecology,
home to dwindling supplies of sturgeon that are essential in caviar
production. 

Andrei Urnov, head of the Caspian Sea working group in Russia's foreign
ministry, says seismic activity in the Caspian puts pipelines at risk of
rupturing; the Caspian is a closed aquatic environment, so an oil spill
would have drastic effects. 

Earlier this month, the Russia Committee on Fishing Industry published
figures showing a dramatic decline in the Caspian's sturgeon population. 

At about the same time Kazakh President Nursultan Nazarbayev announced that
the size of an oil field discovered in Kazakhstan's section of the Caspian
this year was roughly 50bn barrels, though western company sources
cautioned that it was too early to make any estimates. 

Transporting this oil to market has been the subject of a decade-long chess
game of "pipeline politics" between the US and Russia. 

US officials privately say that Russia's environmental stance is just an
excuse to try to thwart the undersea pipelines, part of an attempt to make
sure the pipelines travel through Russian territory. The pipelines would be
an important lever of control over central Asia, which has historically
been dominated by Russia. 

Mr Urnov said of these suspicions: "Everybody is entitled to his own
opinion." 

The US would like to ensure that any future pipelines transporting central
Asia's oil and gas avoid both Russia and Iran, and therefore backs plans to
build a network of oil and gas pipelines from Turkmenistan and Kazakhstan
under the Caspian sea to Baku, Azerbaijan and on through the Caucasus to
Ceyhan, on Turkey's Mediterranean coast. 

The undersea pipeline is critical to this project, for without it oil
specialists say that the Baku-Ceyhan link stands less of a chance of being
built, as there is so far not enough oil in Azerbaijan to justify it. 

However, the Russians are not entirely without blame for the ecological
situation, according to Baku-based experts. Environmentalists believe
sturgeon populations are dropping because of overfishing and poaching on
the Caspian's main tributaries - the Volga, Kura and Ural rivers. 

The issue of pollution in the sea is also not clear-cut. Most pollution is
localised, affecting individual ecosystems and not the sea as a whole. 

Soviet-era factories along the coastline and rivers, and oil tanker
traffic, pose the greatest threats, according to environmentalists. 

"The point is there are greater risks in the sea already than the
pipelines," said one western environmental expert in Baku. "The world oil
industry has some pretty strict guidelines and any pipelines across the
floor of the sea would be closely controlled. Any new pipeline would pose
an environmental issue, but it is not raising the environmental risks
inordinately." 

Russia has taken other steps recently in an apparent effort to entice oil
companies to stick to Russian pipeline routes. 

This month, Transneft, Russia's oil pipeline monopoly, announced plans to
lower tariffs on the oil pipeline that connects Baku to the Russian port of
Novorossysk from Dollars 15.67 per ton of oil to Dollars 8-Dollars 10, an
attempt to make the route more attractive than the prospective Baku-Ceyhan
route. Moscow also says it can raise the capacity of Baku-Novorossysk and
other pipelines to accommodate oil from the Caspian. 

*******

#11
BBC MONITORING
RUSSIAN TAX POLICE PROCEEDINGS AGAINST LUKOIL "PURELY POLITICAL" - NEWSPAPER
Source: 'Izvestiya', Moscow, in Russian 12 Jul 00 

The announcement on 11th July by Russia's Federal Tax Police Service that
criminal action was being taken against the LUKoil oil company over the
"large-scale concealment of income from the tax authorities" is difficult
to square with the Taxes and Levies Ministry announcement on the same day
that, as of 1st July, LUKoil owes no tax to the budget at all, according to
an article in the Russian newspaper 'Izvestiya'. This contradiction leads
to the conclusion that the prosecution "is purely political", it added. The
following is the text of the article, published on 12th July: 

Yesterday the Federal Tax Police Service [FTPS] information department
announced that criminal action was being taken against the LUKoil oil
company over the large-scale concealment of income from the tax authorities. 

The announcement caused the company's share price to fall dramatically.
Despite LUKoil's efforts to prop up its own price, it failed to stop the
collapse altogether. The blow to its market value - was it an accident or
not? - came on the eve of the placing of American Depositary Receipts
(ADRs) to the value of 4.5 per cent of LUKoil's shares. The idea was that
earnings from the placing would be of the order of 500m dollars and the
money would go to the state treasury. The company intends to sue the FTPS
information and public relations administration and claim damages. 

The oil company management is accused of hiding several hundred million
dollars from the tax people in 1998-99. The story is rather vague at the
moment. In the first place, it has not been announced who the LUKoil
individuals mentioned in the official FTPS information administration
document are. But, according to Reuters, they are probably company head
Vagit Alekperov and LUKoil chief accountant Lyubov Khoba. 

Meanwhile, according to the company's vice-president, Leonid Fedun, as yet
there are no "official documents on proceedings against the company's
president, Vagit Alekperov, or any other top company official." 

Second, the FTPS has not yet established the exact amount of damage to the
budget. The only thing the police are firmly insisting on is that LUKoil
was allegedly able to conceal the income as a result of bogus oil product
export transactions. `Izvestiya' was told by LUKoil that this is totally
inconceivable. Moreover, the latest comprehensive check on LUKoil's
financial and economic activities, carried out by Russian tax agencies,
found no violations connected with exports of oil products and refund of
value-added tax. In fact, the budget owes LUKoil R2.2bn in value-added tax
refunds for exports of oil products. 

LUKoil was named an "Honourable Taxpayer" at the end of 1999. The company's
taxes are still in order - the Taxes and Levies Ministry yesterday
announced that, as of 1st July 2000, LUKoil owes no tax to the budget at
all. What has happened literally in the last few days to change the view of
the company and its tax discipline so radically? 

Usually in cases where the tax police have performed such a U-turn, it is
absolutely pointless seeking an explanation in the business sphere, because
the explanation is purely political, as a rule. Moreover, Russian
experience suggests that there is no "clean" legal way out of the political
problems that have been increasingly besetting major, significant Russian
companies of late, while certain people, as a result of the complex
investigations, always get a very concrete dividend. 

********