August 5, 2000    
This Date's Issues: 4439  4440   

Johnson's Russia List
#4440
5 August 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Itar-Tass: Putin Heeds Security Advice; No Doubles, No 
Astrologers.
2. Washington Post editorial: Was Russia Lost? 
3. New York Times letter: John Simmons, Putin and Privatization.
4. Rossiyskaya Gazeta: Vladimir Kucherenko, The Powerful Always 
Blame the Powerless. (Efficacy of 'Draconian' Power Cutoffs 
Questioned)
5. Financial Times (UK): Sounding the retreat from Russia's rule 
of wealth: Macchiavelli could teach little to Russia's 'entrepreneurs'. 
Now, many fortunes later, Vladimir Putin is starting to call them to 
account. John Lloyd reports.
6. The Times (UK): Giles Whittell, Berezovsky ready to take on 
the Kremlin.
7. BBC MONITORING: NTV, RUSSIAN PRESIDENTIAL OFFICIAL SLAMS BIG 
BUSINESS ATTEMPTS TO FORM OPPOSITION.
8. Theodore Karasik: Why Kokoshin May Be The Next Defense 
Minister.
9. Boston Globe: Brian Whitmore, Importing the legal loophole 
to tax-challenged Russia.
10. The Globe and Mail (Canada): Geoffrey York, Russian poachers 
rip roe from salmon. Organized gangs flown in by helicopter to 
pristine Kamchatka peninsula for illegal harvesting of fish, brown 
bears.
11. Gordon Hahn: re Goble's Comment on Putin's State of Union 
Address.
12. Vremya MN: Yevgeniya PISMENNAYA, FOREIGNERS DECLARE THEIR 
LOVE FOR RUSSIAN MARKET AGAIN.]


*******


#1
Putin Heeds Security Advice; No Doubles, No Astrologers 


Moscow, August 3 (Itar-Tass) -- Russian President 
Vladimir Putin "heeds recommendations" provided by the Federal Security 
Guards Service (FSO) and even "basically follows them," Service chief 
Yevgeny Murov told Itar-Tass. 
Murov has been responsible for the personal security of the head of 
state and "approximately thirty" other specially protected Russian 
leaders, including the president's seven plenipotentiary representatives 
in the federal districts, since May 15. 
"The president is free to decide independently what to do. It is 
one thing what I advise and quite a different thing what he decides. He 
makes efforts to lend an ear to our opinion, but sometimes there are 
exceptions," said General Murov, 55, who has direct access to the 
president at all times. 
Yevgeny Murov does not conceal that the FSO has to adjust to the 
swift pace of Vladimir Putin's work. But, according to him, the Service 
does so without any assistance from the president's doubles or 
astrologists, for the presence of whom the press repeatedly rebuked the 
former leadership of the Kremlin security service. 
"There have never been astrologers on the FSO staff. And even if 
there were magicians (in the Kremlin), they were rather a tribute to 
image-making. As for me, I now have to make personnel decisions and 
restructure the Service to fulfill new tasks. If we manage to 
accomplish our tasks in a normal fashion - each in his own capacity - we 
need no astrologers." 
"When directly upon appointment in May, I called together all the 
leaders of the Federal Security Guard Service, I warned them: our work 
now will differ considerably from what we did in the past. The pace 
which we now set for our officers must be up to the energy of the 
president and his team. And it means that we must be even more energetic." 
With Putin's advent to the Kremlin, Murov said, "restructuring began" 
in the Federal Security Guard Service. Without divulging details the 
general said, "we do not touch the numerical strength of the Service and 
its technical equipment will change, taking into account the achievements 
of Russian science and technology." 
Yevgeny Murov thinks it right that the president's personal security 
service (SBP) headed by Viktor Zolotov is now part of the Federal 
Security Guard Service. (It existed as a separate entity from 1993 to 
1996 and became part of the FSO in the second half of 1996). 
"What is the point of having two services doing identical work. 
After all, the tasks are the same. It is simply that the presidential 
personal security guard service protects the president alone and the FSO 
as a whole provides bodyguards to all the protected personages," he 
explains. "The SBP was incorporated into the FSO because it is 
necessary to do one's assigned job, not engage in astrology." 
Yevgeny Murov has been with different security services since 1971 
and he has known Vladimir Putin for almost a quarter of a century. 
Their careers began simultaneously in St. Petersburg, but Putin later 
embarked on the intelligence service path, while Murov opted for 
counterintelligence, where he specialised in economic security problems. 
Later, he also joined the intelligence service and worked in Southeast Asia. 
According to Murov, as a security service veteran, he was familiar 
with the FSO job on the whole, although now he has "to go deeper into new 
nuances." 


******


#2
Washington Post
August 5, 2000
Editorial
Was Russia Lost?


IN THE year or so following Russia's financial crash of August 1998, the only 
compensation for the country's desperate economic state was that democracy 
showed no sign of faltering. These days the opposite is true. Russia's ex-KGB 
president, Vladimir Putin, is moving to rein in elected regional officials 
and limit press freedom. But on the economic front, there is better news. The 
gross national product grew by 3.2 percent last year and is now growing at an 
annual rate of about 8 percent. 


This news raises a question about the quality of Western economic advice to 
Russia. In the lead up to devaluation, economists from the Treasury and the 
International Monetary Fund predicted that it would bring all manner of 
disasters--roaring inflation, capital flight, budget chaos and a return to 
Soviet-era economic policies. When the ruble crashed, these advisers were 
duly faced with furious questions about who lost Russia. Now that Russia's 
economy is sailing along, a different question may be posed: Why did the 
economists resist devaluation in the first place?


With hindsight, Western advisers did exaggerate devaluation's bad 
consequences. Inflation spiked up after the devaluation as imports grew 
suddenly more expensive, but prices are now rising at a less than disastrous 
19 percent a year. Capital is indeed fleeing the country, but more slowly 
than it did before devaluation. The budget has actually grown healthier, 
though admittedly for the bad reason that Russia stopped servicing its debt 
when it devalued. As to economic policy, the Putin government has announced a 
pro-market reform program. Meanwhile devaluation has allowed Russian industry 
to compete with newly expensive foreign imports, so factories that had all 
but closed down are now bustling.


All of this will delight congressional critics of the IMF and the 
administration. And yet the critics should beware: Even though Russia's 
economy is doing much better, devaluation was probably bad for it and 
certainly is no miracle remedy for other emerging economies. Devaluation 
brought a jump in import prices that cut the real incomes of ordinary 
Russians and caused widespread hardship. The simultaneous debt default drove 
a large number of banks under and has damaged Russia's ability to borrow. The 
recent economic expansion is only partly a tribute to the industrial boost 
caused by devaluation. It is also the result of rising oil prices, and must 
in any case be weighed against the collapse that came immediately after the 
devaluation.


At any given time, a country can boost industrial competitiveness by slashing 
the real wages of its workers, which is what devaluation amounts to. This 
makes sense where wages are too high compared with other countries with 
similar levels of productivity. But where wages are already competitive, as 
was the case in Russia, devaluation is not usually a good road to 
development. Over time, wages are likely to be inflated back up to their 
pre-devaluation levels, so the gains in competitiveness will be eroded. 
Meanwhile, the inflation will undermine economic confidence, discouraging 
savings and investment.


Rather than go for the short-term boost of devaluation, therefore, it is 
nearly always better to strengthen the economy by other methods. Both before 
the devaluation and recently, Western advisers have been urging Russia to 
improve its tax collection, restructure its energy sector and undertake other 
hard reforms. This advice was a sound alternative to devaluation two years 
ago. It remains a sound way to reinforce the recent upbeat economic news from 
Russia.


******


#3
New York Times
August 5, 2000
Letter
Putin and Privatization

To the Editor: 
In "Putin, Exerting His Authority, Meets With Russia's Tycoons" (news 
article, July 29), you report that the oligarchs had won President Vladimir 
V. Putin's "assurance that their purchases of state property during the 
post-Soviet privatizations would not be overturned." 


Does this mean that Mr. Putin will try to stop the work of the courts? In the 
last four years, the regional courts have tried 3,000 cases of illegal 
privatization, and decided in more than 1,000 of them that the property was 
illegally privatized. 


Mr. Putin cannot both uphold the rule of law and grant amnesty to those who 
took part in illegal privatization, which has contributed to the failure of 
thousands of companies and the poverty of millions of people. Such an act 
would shake the faith of his constituents and risk destabilizing the country. 


JOHN SIMMONS 
Chicago, July 29, 2000 
The writer is a consultant on Russian privatization. 


******


#4
Efficacy of 'Draconian' Power Cutoffs Questioned 


Rossiyskaya Gazeta
August 3, 2000
[translation from personal use only]
Article by Vladimir Kucherenko: "The Powerful Always Blame the 
Powerless" 


So, mass electricity cutoffs of defaulting 
consumers have become a reality throughout the country. There have 
already been human casualties: A baby has died in a Maritime Kray 
maternity hospital. 
But will these draconian measures solve the problem? After all, the 
problem is clearly more than just nonpayments. The situation is 
scandalous. As reported in our previous issue, mass cutoffs await 
Dagestan and Mordvinia, and major defaulters will be cut off in Saratov 
and Penza Oblasts. Maritime Kray, where cutoffs have been compounded by 
the typhoon which caused flooding in coal pits, is best not mentioned. 
The normal operation of the railroads has already been disrupted. There 
is frenzy in the Kuban Region, where everyone -- both those who pay and 
those who do not -- is being cut off indiscriminately. There have even 
been mass cutoffs of children's vacation camps in Anapa, and food is 
rotting in their refrigerators. In short, you cannot make an omelet 
without breaking eggs. 
But will this Gaydar-style "shock therapy" resolve the problem of 
electricity payments? Unfortunately, this is extremely doubtful. 
Because nonpayments are not a single problem but a multitude of problems 
knitted together into a single knot. 
First of all, citizens who pay should be distinguished from those who 
do not. However, you and I often pay our money not directly to the YeES 
Rossii [Unified Energy System of Russia] Russian Joint-Stock Company or 
its subsidiary energy joint-stock companies but to municipal electricity 
grids, intermediary resellers of electricity. They are not part of the 
energy systems. We may pay everything in full, but this money does not 
reach the energy systems. And we are cut off. What is to be done? 
Far from everyone can afford to take them to court. 
Local authorities are extremely reluctant to surrender control of 
distributor substations to energy joint-stock companies, because this is 
a source of cash with which many problems can be resolved. So there is 
a need for a federal law on a standard procedure whereby every ruble 
received as payment for electricity is split according to fixed 
proportions. A certain percentage would go to the municipal electricity 
grids, and a certain percentage to the energy joint-stock companies. 
Money received would be split up automatically by the banks. And the 
municipal leadership would be liable for breaches of the procedure. 
Unless this is done, totally innocent people will be cut off. 
Another situation is as follows: A distributor substation supplies 
electricity both to people who pay and to those who do not. (In a 
variation of this situation, a substation that supplies a debtor plant 
also supplies apartment blocks and hospitals.) If you cut off the 
debtors, those consumers who pay also suffer. Again, there is no law 
whatsoever about this. 
These are only some of the "awkward problems." The nonpayments 
themselves are the product of the anarchy and impunity of leaders at all 
levels and of the lack of economic control in the 1990's, the 
privatization "onslaught," and the many years during which the 
authorities did nothing to establish payment discipline at state level. 
They are also the product of narrow-minded "liberal" stubbornness in 
believing that the market will sort everything out. 
Will it be possible to find a quick solution to this Augean stables 
of a problem, which has been around for years? After all, consumers who 
conscientiously pay their bills are now becoming hostages in the energy 
sector's campaign against nonpayments. 


******


#5
Financial Times (UK)
5 August 2000
[for personal use only]
Sounding the retreat from Russia's rule of wealth: Macchiavelli could teach
little to Russia's 'entrepreneurs'. Now, many fortunes later, Vladimir
Putin is starting to call them to account. John Lloyd reports


One simple truth came to take the place of the degraded tenets of communism
as, a decade ago, the Soviet Union crumbled: private property brings
freedom in its wake. 


This was the credo of the young reformers whose ideas dominated the first
post-Soviet government of Russia. It was printed and broadcast by media
whose most influential mouthpieces were liberal. 


It was a point of principle for the first Russian president. Boris Yeltsin
was never more lyrical and convincing in his rhetoric than when describing
the material wealth of the west, which could be Russia's if it reformed. 


The young reformers - Yegor Gaidar, Anatoly Chubais, Boris Nemtsov and
others - believed in it, at the beginning, in purity of heart, and often in
the poverty of their existence. They were part of the Soviet
intelligentsia: they earned little, lived in overcrowded little flats,
schemed and scrimped to go abroad. 


They were nearly all economists who had supplemented their Soviet education
with semi-clandestine reading of the foreign free-market classics. When
they came to government, they reached out for help to the international
financial institutions, and especially to the International Monetary Fund,
which had prime responsibility for Russian economic reform. 


Political reform was often seen as an adjunct to economic reform. "The
west," says Alex Pravda, a Russian specialist at St Antony's College,
Oxford, "tended to think that if the economy became private in post-
communist countries, then everything else would fall into place." The
Russian leadership proclaimed the same coincidence of values. 


It was thus quite natural - indeed, it was the desired outcome - that the
"heroes" of the capitalist revanche should be business leaders. These were
the men who became known as "the oligarchs", a name which emerged in the
mid-1990s when it became evident that their political power had become so
great as to be justified. 


Their names became the most famed in Russia and became known abroad -
better known, as a class and as individuals, than any but the most
prominent of business people, such as Bill Gates of Microsoft or Gianni
Agnelli of Fiat. 


Indeed, they took on, and welcomed, the reputations of a much older
commercial class - that of American businessmen at the turn of the 20th
century - Morgan, Rockefeller, Carnegie. 


These were too determined to get rich, too possessed of the spirit of the
age, too untrammelled by weak or corrupt central or local authorities to
pay attention to the victims in their wake. 


The Russian equivalents are certainly in the same mould. They include Boris
Berezovsky, who built up a car dealership into a diverse and complex finan
cial-cum-media-cum-industrial-cum-energy corporation, no part of which he
ever admitted to owning. 


Roman Abramovich, his protege , surpassed the master by building up Sibneft
into one of the country's oil majors, then - in the past six months - put
together an aluminium company which virtually monopolises Russia's output. 


And Vladimir Potanin, banker and oilman and the monopolist producer of
nickel from the bleak Arctic (former convict) settlement of Norilsk.
Mikhail Khodorkovsky, like Potanin a youthful success in communist times,
who early on saw the possibility of turning Soviet savings into capitalist
profit and who came to hold one of the biggest finance and energy groups in
the state. Mikhail Friedman and Peter Aven of the Alpha Group, who now have
Russia's biggest privately owned bank and are - late but powerfully -
driving into the oil business. 


There's Vagit Alekperov, a former oil manager and deputy oil minister, who
fashioned Lukoil into the first Russian oil company with a serious
financial structure. 


And last, Vladimir Gusinsky, failed theatre director turned successful
media and property baron, whose Media Most group has been the most powerful
and consistent critic of state power in the past decade. 


These are the men whose wealth ruled. These are the ones who have survived
- often precariously and with heavy losses - the east Asian crisis, which
sparked off a financial collapse in Russia in August 1998. These are the
men who started with little or nothing but an abundance of wits and nerve.
"In Russia," says Sergei Karaganov, head of the Russian Council for Foreign
Relations, "the tactic is to push everything to its limits before backing
down, if you have to." These men are past masters of the tactic. 


They made alliances and deals with the Soviet barons who controlled
property (when the Communist party no longer did) - alliances which saw
Berezovsky use the Avtovaz trading network to buy cheap and sell dear into
a market hungry first for Soviet, then for foreign, cars; which saw
Gusinsky link up with Yuri Luzhkov, mayor of Moscow, to create a property
market so controlled that one of the poorer cities of Europe had some of
the highest property prices in the world; saw the former street trader
Friedman turn to the former trade minister Aven to take over huge slices of
the formerly tightly controlled import-export sector. 


They made money - while the country's wealth declined - from arbitrage,
inflation hedging, oil trading, buying at state and selling at market
prices. They saw, more quickly and more clearly than anyone else, that if
the new state's ideals were derived from Adam Smith, its economy was from
one of the darker visions of Dante and its power structure to be understood
best by a Macchiavelli. 


They generally stayed close - in the cases of Berezovsky and Abramovich,
very very close - to Yeltsin and his court; indeed, the latter two were an
important part of that court. Only Gusinsky dared to strike out against
Yeltsin through his media and his alliance with Luzhkov, who used Moscow as
an implicit and latterly explicit centre of rival power to the Kremlin. 


Yet even Gusinsky joined in to fund Yeltsin's re-election campaign in 1996
- a common enterprise from which they derived huge rewards, obtaining the
best energy and other assets of the state at laughably cheap prices in the
second round of privatisation. 


In the Russia of the 1990s - under a president who grumbled and cursed and
occasionally allowed his heavies to frighten the mercurial and critical
Gusinsky, but who never fundamentally disturbed the oligarchs' fabulous
gains - they pushed their acquisitive talents to the limit. "Yeltsin," says
Aven of Alpha Group, "was convinced that Russian business had to have time
to grow without the interference of the state. In that sense, we were not
to be touched." 


This is true, but only partly. The other side of the equation that
democratic reform in Russia was seen as an adjunct of economic
privatisation was that the new economic order was heavily politicised. The
oligarchs were so called because they had real power, state power. They
wrote laws. They appointed ministers, often entire cabinets, and made sure
that their interests were served. 


They corrupted the new governing, legislative and bureaucratic class of
Russia, in the centre, in the regions and abroad. They made sure that
foreigners did not get into Russia in any important way - for had there
been open bidding for the assets, then their lack of serious capital and
inability to borrow would have put them at a disadvantage. 


Only Potanin made a serious deal with a big western corporation, BP-Amoco -
and that is still mired in a bitter, two-year-long dispute which is always
on the verge of being settled. 


Most of all, however, they destroyed the philosophical - and, in the end,
practical - base of the new Russian polity. 


The explicit assumption was that capitalism was necessary for democracy:
but oligarchic capitalism has not - with exceptions - done much for
democracy's good name. Indeed, at least in part because of what they did
and because they were proposed by the most active reformers as being the
exemplars of the new capitalist-democratic order, they have done the most
to question the link between a free market and free politics. 


So when Vladimir Putin, president since March, began to move against the
oligarchs earlier this summer, he found that while he unleashed a storm in
the west his ratings went up in Russia. 


His moves were clumsy; the judiciary and law enforcement agencies were more
motivated, apparently, by revenge than by a desire for justice. Potanin was
accused, without explanation, of paying too little for Norilsk Nickel.
Alekperov's Lukoil was accused of evading taxes - again, with no details.
The hardest blow came against the most public critic. Vladimir Gusinsky was
put in jail for four days because of alleged tax evasion and non-payment of
debt, only to be released when Putin returned from a foreign trip. 


Yet what looked maladroit and oppressive abroad reads differently in
Russia. The oligarchs were scared: the more frank, openly so. They asked
for, and got, a round table with Putin when the latter returned from the
recent Group of Eight meeting in Okinawa. 


The result was a statement of good intent on both sides, with the oligarchs
signalling a retreat from politics and the new president a more careful
approach to enforcing the law. On the ground, Gusinsky has been released
from immediate threat and allowed to leave the country (he had been
confined, after release from prison, to Moscow); and his media, especially
his NTV channel - the most efficient in the country - has suddenly dropped
its critical tone. But this is only the beginning. 


The oligarchs discovered that they were democrats late in life. They
appealed for support from a society which, while it has formal democratic
institutions, has not learned to be civil. Indeed, even the parallel with
the American turn-of-century magnates flatters most of them, for the former
built vast industries, oil fields and communication networks. The latter
have, to date, largely cannibalised what Soviet power had, however
inefficiently and damagingly, itself constructed. 


So when Gusinsky and Berezovsky, the two most public fighters in the
oligarchs' own defence, appealed to the people to recognise that democracy
must protect minorities and that wealth must be created by the few before
it benefits the many, they got a vast, hollow horse laugh from Vladivostok
to Brest. 


I talked, when in Russia, to Gleb Pavlovsky, who has emerged as one of
Putin's closest advisers - a cross, it seems, between a court philosopher
and a speech writer. 


A former dissident, Pavlovsky is now hated by those who have always
suspected Putin for his secret police background and see in his treatment
of Gusinsky ample confirmation of their scepticism. Pavlovsky is unfazed by
this. He says liberals, at home and abroad, see an enemy in what is, in
fact, a friend. 


"Putin," he says, "is the leader of the masses who were disenfranchised
after 1993 (when President Yeltsin crushed the parliament and wrote a
constitution which gave the presidency huge powers) and who have reappeared
since. He must keep control of them - for they could go out of control. 


"The oligarchs behaved stupidly - pushing each other at the edge of a
cliff. They had become untouchable - but they are so no longer: that is the
meaning of what Putin did. 


"Worse could happen - much worse. If Putin does not make the people believe
in the possibilities of order in a civil society again, then someone else
will make order in an uncivilised way." 


August is the month when Russian political life closes down, though it has
also been - in 1991, 1993 and 1998 - a time when either the political
system collapsed (in 1991), the tensions in the system approached boiling
point (in 1993), or the economic system collapsed (1998). 


Putin - and his allies, the secret services, now very much strengthened -
is unlikely to face a coup soon. But if he is not to rely on the rule of
wealth, on what rule is he to rely? The autumn, and the resumption of
Russian politics, will tell us if the oligarchs really have retreated - and
who is coming out of the shadows in their place. 


*******


#6
The Times (UK)
August 5, 2000
[for personal use only]
Berezovsky ready to take on the Kremlin 
FROM GILES WHITTELL IN MOSCOW
BORIS BEREZOVSKY, whose media holdings helped Vladimir Putin to sweep to 
power in Russia five months ago, said yesterday that he was ready to turn 
them against the Kremlin and form a new political party to counter Mr Putin's 
drift towards authoritarianism. 


After weeks of reports that the Kremlin is trying to tighten its grip on the 
media, Mr Berezovsky said that he was determined to keep control of the giant 
ORT network and was ready for confrontation with the Government, even at 
personal risk. "I've felt great pressure from the police and prosecutors 
before and I am prepared for it again," he said. 


In an interview with The Times, the tycoon, whose ruthless methods helped to 
define Russian politics in the decade after communism, set out a vision of 
how he hopes to stay a powerbroker in the Putin era. He shrugged off talk of 
a large embezzlement investigation involving two of his companies and 
disclosed that, despite his differences with Mr Putin, the two men still have 
regular private talks. 


Mr Berezovsky stole the Moscow limelight last month by resigning from the 
Duma in protest at Mr Putin's plans to sack regional governors who break 
federal laws. Yesterday he outlined promises he has since made to create a 
"constructive opposition", without which, he said, Mr Putin's drive to 
improve the Russian economy is doomed. 


He said the first of four steps towards a new opposition party would be a 
"declaration of position", setting out his policy differences with Mr Putin 
over Chechnya, big business and regional reform. Step two would involve 
gathering feedback to create a popular platform. The third step would be a 
"public political organisation", which he said would be transformed into a 
full-blown party if successful. 


Critics noted that in ten years few plans for modern opposition parties have 
moved very far in Russia and that Mr Berezovsky may simply be seeking a new 
power-base. 


"In the Yeltsin years, he was a mediator par excellence in a fragmented 
world," Andrei Ryabov, of the Moscow Carnegie Institute, said, "but Mr Putin 
has made it clear he wants power without fragmentation." 


Speaking in the courtyard of the lavishly restored, 19th-century vodka 
magnate's mansion, from which he runs his oil, aluminium and media empire, Mr 
Berezovsky said the turning point in his relations with the Kremlin came six 
weeks ago, when the regional governors and Vladimir Gusinsky's Media Most 
empire felt the first challenges to the independence they had enjoyed in the 
Yeltsin years. 


"After the presidential election everyone realised the communists no longer 
had power," he said. "I decided I didn't want to fight any more. I was 
tired." He said he approached Aleksandr Voloshin, the Kremlin Chief of Staff, 
and offered to relinquish control of ORT, in which he has a 49 per cent 
stake. No deal was reached because Mr Berezovsky "realised that Putin 
continues to make mistakes and it's not the time to be quiet. 


"When I thought that ORT would be used to promote liberal development, I said 
take it. Now I see that Putin thinks you can have a liberal economy with an 
authoritarian political system and I think that's wrong." 


ORT has left Mr Berezovsky with £100 million in debts and Swiss prosecutors 
have reopened an investigation into up to £480 million of Aeroflot's hard 
currency earnings allegedly funnelled into Swiss companies linked to him. 


Asked if he felt Mr Putin had been grateful for ORT's backing over the past 
year, he replied: "Grateful? That implies emotion, and emotion has no place 
in political life." 


******


#7
BBC MONITORING
RUSSIAN PRESIDENTIAL OFFICIAL SLAMS BIG BUSINESS ATTEMPTS TO FORM OPPOSITION
Source: NTV International, Moscow in Russian 1800 gmt 4 Aug 00 


[Presenter] A highly-placed Kremlin official, the first deputy head of the
presidential administration, Dmitriy Medvedev has today come up with fresh
political accusations against the Media-Most [group owned by media tycoon
Vladimir Gusinskiy], NTV and their owners. Replying to a question put by a
correspondent of the `Vechernyya Moskva' newspaper as to whether there was
a conflict with Gusinskiy and if so, whether this conflict was now over,
Dmitriy Medvedev says: the thing is that some representatives of big
business see in a fairly odd way their role in Russia's social development
- they see that their role in this development is to build an opposition to
the authorities that is based within the system. This is a
counterproductive method. Attempts by whoever to interfere in the
prerogatives of the state must be stopped within a framework defined by the
constitution and the laws. 


Question: NTV often accuses the current team in power of trying to return
to the times of totalitarianism and total control by the special forces. Do
you find this offensive? 


Answer: People making such statements can still remember very well the
Soviet times when the slightest displeasure by the authorities, when just
one word by those adhering to power, was sufficient to ensure that a
journalist should never again appear on a screen or in a newspaper. Today
we are, and never will be, anywhere near to anything such as this.
Nevertheless, fears are being whipped up, words are distorted and facts are
being juggled about. This results in the creation of the corresponding
image of the authorities, said Dmitriy Medvedev... 


******


#8
From: "Dr. Theodore Karasik" <tkarasik@mindspring.com>
Subject: Why Kokoshin May Be The Next Defense Minister
Date: Fri, 4 Aug 2000 


Andrei Kokoshin has a very good chance of becoming Russia's first civilian
defense minister. Kokoshin seems to be right in tune w/ TMD issue plus need
for SMT reform. Kokoshin states in Izvestiia 27 July 2000 "Russia can and
must play an active, and sometimes leading, role in preventing such wars
and armed conflicts. Like the USA, Russia is a nuclear superpower,
although its nuclear might will soon begin to plummet for logical
reasons." Perhaps Putin will make Kokoshin defense minister in order to
guide the pending SMT reorganization. Putin and Kokoshin also seem to
share similar points of view on N. Korea and TMD in East Asia. Finally,
Kokoshin seems to endorse portions of Kvashnin's views on emerging local
conflicts; except that Kokoshin emphasizes the RMA in precision weapons
and information warfare, meaning that Kvashnin may be out of a job too
(perhaps this is where Russian Security Council Deputy Secretary Col. Gen.
Aleksei Moskovskii comes in?). Kokoshin's rhetoric is reaching new levels
that cater to the tenets of Putin's national security concept.


Putin knows Kokoshin from their service in Yeltsin's presidential
apparatus. In May 1997, Putin, as chief of the Presidential Staff Main
Control Administration, announced a plan where he would be forming special
teams (FSB, MVD, and FinMin) that would inspect specified territories,
districts and perhaps individual military units. Putin said that "The
Defense Ministry is not going to reform itself." This conclusion,
according to Putin, was confirmed "in a classified inspection" that "would
never be made public." This plan sounds like a proto-type for the 7
federal okrugs and should have involved Kokoshin in some capacity. For
Putin, though, the experience exposed the future Russian president to the
ongoing problems in the military, particularly corruption, bribe-taking,
etc. Such an investigation by Putin may have been used to identify future
reliable military cadres, including Kokoshin, who became head of the
presidential military inspectorate and head of the defense council three
months later in August 1997. (Important to note that Moskovskii worked
here with Kokoshin, particularily after Kokoshin's March 1998 appointment
to the Security Council that absorbed the Military Inspectorate). Later,
in the summer of 1998, Putin, just prior to his appointment as FSB chief,
briefed Kokoshin and the Russian Security Council on the situation in the
Caucasus. Clearly, both are not strangers to each other. 


Dr. Theodore Karasik Resident Consultant, RAND Editor, Russia and Eurasia
Armed Forces Annual 


*******


#9
Boston Globe
August 5, 2000
[for personal use only] 
Importing the legal loophole to tax-challenged Russia 
By Brian Whitmore, Globe Correspondent


ST. PETERSBURG - The two Russian tax inspectors, armed with bad attitudes and 
an aging book titled ''Tax Instructions,'' glared menacingly across the dimly 
lit courtroom.


Facing them, fresh out of the University of Colorado and equipped with laptop 
computers and a database of Russian tax law, was James Beatty.


For Beatty, who was helping his Russian partners defend a client fined for 
tax evasion, it was his first experience before a Russian judge.


They won the case, and Beatty, now 30 and a six-year veteran of Russia's 
turbulent business world, has never looked back.


Beatty is considered to be among the top tax consultants in St. Petersburg, 
Russia's second-largest city, the go-to guy when it is time to do your books. 
His is one of the most challenging jobs in Russia: helping foreign businesses 
navigate a notoriously corrupt and complicated tax system.


Among his 50 or so clients have been such corporate giants as Shell Oil, 
Caterpillar Inc., and the household goods company SC Johnson & Son Inc.


In a country where tax evasion is a national pastime, Beatty not only helps 
companies pay their punishingly high taxes without going broke, he helps them 
to do so without breaking the law. And if they have to, Beatty and his legal 
staff are prepared to defend clients in court.


He recalls his first court case, against the poorly equipped tax officials, 
with an easy smile.


''It was a real shock to me,'' Beatty said. ''They were not really up on the 
law, and their argument was basically, `We are the tax inspectors - and we 
are right,' sometimes yelling this.''


When it comes to Russian tax law, Beatty's clients say, he is as good as any 
Big Five US accounting firm.


''Jim is without a doubt the most informed tax expert among expatriates 
working in St. Petersburg,'' said one client, Douglas Boyce, director of the 
Lomonosov Porcelain Factory. ''He just knows the material so well.''


A native of South Haven, Mich., Beatty arrived in Russia in 1994, right after 
earning a degree in accounting and international business. He interned with a 
St. Petersburg-based audit firm called ALCO, one of the first in Russia. He 
studied Russian and quickly mastered the country's complex tax code.


Those were the early, optimistic days of Russian capitalism. Scores of small 
Western businesses were setting up shop in St. Petersburg, hoping to cash in 
on what was then seen as one of the world's most promising emerging markets. 
With his growing knowledge of Russia's tax system, Beatty spotted a business 
opportunity.


''I saw that there were a lot of small foreign businesses that needed help 
with their Russian taxes,'' he said. ''There was a niche in the market, and I 
saw an opportunity to gain experience, help the development of business in 
Russia and, of course, make money.''


He approached ALCO's director, Dmitry Mikhailov, with a business proposition: 
Why not form a partnership, with Beatty bringing in foreign clients? Beatty 
then founded a tax-consulting firm called Emerging Markets Group, or EMG, 
which works with ALCO.


Russia is littered with failed joint ventures between Western and local 
partners, but the EMG-ALCO partnership has prospered.


''One of the keys to my success in Russia has been the partnership with Dima 
and ALCO,'' Beatty said. ''We completely trust each other.''


Beatty said that, contrary to Russia's ''Wild Wild East'' reputation, it is 
possible to do business honestly - if you are smart enough.


As an example, he offered one of his methods for helping clients to 
circumvent Russia's payroll taxes.


Prior to recent changes, Russia's income-tax system punished employers for 
paying ''high'' salaries. A company paying a worker $1,000 a month, for 
example, was liable for a payroll tax of about 40 percent. In addition the 
employee had to pay 30 percent.


One way around the dilemma, Beatty said, was to exploit a provision in the 
Russian tax code - intended for self-employed individuals, such as hot dog 
vendors - and register a company's entire payroll as so-called ''private 
entrepreneurs.''


In place of income taxes, registered private entrepreneurs pay a one-time 
annual fee of about $500. And since the private entrepreneurs are technically 
''consultants'' and not employees, companies using them are exempt from 
payroll taxes. Companies can also deduct wages paid to consultants as 
business expenses.


Changes in Russian tax law that go into effect next year establish a flat 13 
percent income tax and significantly reduce the payroll tax. Beatty applauded 
the changes, and added that he would continue working to help businesses make 
money in Russia - honestly.


''You don't need to break the law,'' he said. ''You just need to find the 
loopholes.''


Beatty, who has turned down offers from top accounting firms, declined to say 
how much money his business makes. Down the road, he plans to pursue a 
master's degree in business administration, but in the short run he is 
content to develop his company. ''My main ambition at this point is to keep 
growing my business,'' he said.


*******


#10
The Globe and Mail (Canada)
August 4, 2000
Russian poachers rip roe from salmon
Organized gangs flown in by helicopter to pristine
Kamchatka peninsula for illegal harvesting of fish, brown bears
GEOFFREY YORK
Kurilskoye Lake, Russia


The windswept waters of Kurilskoye Lake are the site of an astonishing annual 
phenomenon: Asia's biggest salmon spawning run, where 1.7 million salmon 
fight their way up rivers and creeks, attracting the attention of hundreds of 
giant brown bears and rare sea eagles as they pass.


However, this phenomenon is now attracting a more ruthless predator: 
organized criminal gangs of knife-wielding poachers, flown in by helicopter 
and capable of devastating an entire river with just two weeks of illegal 
slaughter.


This summer's spawning season in Russia's Far East has barely begun, and 
already the poachers are brazenly harvesting their prey. Scattered around 
creeks are hundreds of dead salmon, their bodies slit open, their roe ripped 
out.


"Not even 24 hours after the salmon run began, the poachers were already 
here," said William Leacock, a researcher from the Wildlife Conservation 
Society, a New York-based environmental group that is trying to protect the 
area from poachers.


On the first day of the spawning season that began on July 21 he saw hundreds 
of discarded salmon corpses near the creeks around Kurilskoye Lake, on the 
southern tip of Russia's remote Kamchatka peninsula. He fears much worse may 
be yet occur. In previous summers, he said, he has seen tens of thousands of 
salmon killed for their eggs.


"It could reach a threshold where the population breaks," Mr. Leacock said.


Poaching is one of the fastest growing threats to the ecological wonderland 
of Kamchatka, a lush peninsula of wild rivers, forests, erupting volcanoes, 
hot springs, rare birds, dozens of endangered species and even a spectacular 
valley of geysers. A third of the world's Pacific salmon population spawns in 
its pristine rivers.


It is one of the world's greatest unspoiled wildernesses -- but its survival 
could be in peril.


Illegal fishing and poaching is believed to cost Kamchatka as much as 
$7-billion a year in lost revenue. As many as 100 fishing companies can be 
licensed on a single river.


Organized gangs harvest the salmon illegally for their red caviar, a delicacy 
that sells for $22 a kilogram in Russian shops. Other animals, too, are 
slaughtered by poachers in massive numbers.


Hundreds of Kamchatka's huge brown bears -- the same species as the North 
American grizzly, -- are killed by poachers every year to satisfy the 
bear-organ market in Asia, where Chinese and Koreans pay thousands of dollars 
for the animals' gall bladders, for medicinal use.


According to some estimates, the bear population in Kamchatka has dropped by 
50 per cent since the 1960s, the result of excessive hunting and poaching.


Nobody knows how many bears still roam the Kamchatka wilderness (estimates 
range from 6,000 to 25,000), but poachers are killing as many as 2,000 
annually. More than 300 bears will also be killed legally this year by trophy 
hunters, including wealthy Americans and Canadians who pay as much as $13,000 
for the privilege of bagging a bear. As many as 1,000 bears will be shot 
legally by local hunters.


"There's been a dramatic decline in the size and age of the bears killed," 
Mr. Leacock said. "If it continues, the population is going to be decimated."


Kamchatka is such a spectacular and unique region that five of its nature 
reserves have been designated as a UNESCO World Heritage site. Yet an 
impoverished Russian government lacks the staff to protect it.


Only two federal park wardens, each armed with a shotgun, guard the salmon 
wealth of Kurilskoye Lake. They live in an isolated compound behind an 
electrified fence designed to keep out the bears.


A new project to help Kamchatka's nature reserves is being launched by the 
United Nations Development Program, which hopes to raise as much as 
$15-million for a plan to strengthen the management of four protected areas, 
including the South Kamchatka nature reserve, where Kurilskoye Lake is 
located.


The Canadian International Development Agency has spent $100,000 on studies 
to support the UNDP project, and several Canadians are at the forefront of 
the planning.


"Kamchatka is an amazingly untouched place, but there are so many threats to 
it," said Paul Grigoriev, an Ottawa-based consultant to the UNDP project.


Because of the post-Soviet economic collapse, poaching is often seen as an 
acceptable means of economic survival. Even local government officials are 
sympathetic to small-scale efforts.


"We can't reproach people for poaching," said Kamchatka's deputy governor, 
Sergei Timoshenko. "The economic situation here is very difficult. People 
have to poach to support their families."


Large-scale organized poaching, though, is a different story. By blocking 
rivers with nets, poachers can strip an entire year's salmon run, weakening 
the diversity of the salmon and reducing their long-term capacity for 
survival.


"It's a rich resource, but it's under unprecedented pressure now," said 
Jeffrey Griffin, a UNDP consultant. "The poachers are a real threat to some 
salmon runs. They're taking away the salmon's ability to reproduce."


Gangs of poachers sometimes hire a Russian aboriginal person as a frontman, 
allowing the exploitation of salmon quotas that are supposed to go to 
aboriginal people.


The illegal poaching brigades have taken on the atmosphere of fear that comes 
with reputations of power and ruthlessness.


"Poaching is a very big business," said Olga Chernyagina, a leading 
environmental activist in Kamchatka. "It's easy for them to take a helicopter 
and fly it to any river. Few people know the details because it's a criminal 
business. I'm afraid even to talk about it."


Russia's federal fishing regulators are almost powerless to combat the 
poaching. They have only two helicopters to watch Kamchatka's 14,000 rivers, 
and officials say they need a major increase in the number of fishing 
wardens. With salaries of only $50 or $60 a month, many wardens are unable to 
resist the temptation of bribes.


"It's hard to fight the poachers," said Vladimir Rezvanov, director of the 
federal fish-protection department in Kamchatka. "They have a well-organized 
system. They come in by helicopter, strip out the caviar and throw away the 
fish. Sometimes we feel helpless and discouraged when we see we can't improve 
the situation."


The Russian government has admitted the penalties imposed on poachers are too 
lax. The basic fine for an individual is 83 rubles, less than $5 an 
infraction. There can also be a "damage recovery" fine, but this too tends to 
be small unless the poacher is caught red-handed.


In the first half of this year, 972 fishing infractions were recorded in 
Kamchatka, but only about $6,300 worth of fines were collected.


Likewise, the maximum fine for killing a snow sheep is about $150, even 
though a ram's head can fetch up to $10,000 on the black market. "Clearly, 
such legislation does not inhibit poaching, but rather inadvertently condones 
it," a Canadian UNDP consultant concluded.


*******


#11
Date: Fri, 04 Aug 2000 
From: Gordon Hahn <hahn@hoover.stanford.edu>
Subject: Hahn on Goble's Comment on Putin's State of Union Address


I detect continued anti-Russian bias in RFERL's reporting on Russia and 
the CIS region. An example comes from Paul Goble's recent "Russia: Analysis 
>From Washington -- When Words Count" of 2 August reproduced in JRL 4435 
Posting #11) of August 3.
He writes: "An analysis published in Moscow of Russian President Vladimir 
Putin's state of the nation address suggests but does not necessarily prove 
(Can you say: CYA = Cover Your A--? - GH) that he is significantly less 
committed to democracy, human rights and integration with the West than was 
his
predecessor Boris Yeltsin." His "conclusion flows from a content analysis 
of their respective
state-of-the-nation speeches in 2000 and 1995. Prepared by the Russian 
newspaper 'Moskovskiy komsomolets' and published in 'The Moscow Times' last 
week, this study found that the greatest difference between Putin and his 
predecessor was precisely on questions involving the formation of a civil 
society and integration with Europe." Citing the noted Moscow-based 
journalistic outlets, Goble is happy to report that "Putin did not mention 
democracy or human rights at all and used the term reform only twice, a 
sharp departure from Yeltsin's record. In 1995, then-President Yeltsin 
mentioned democracy 11 times, reforms 13 times, and his commitment to human 
rights three times."
In fact, if Mr. Goble picked up the text of Putin's 8 July State of the 
Union address to the Federal Assembly he would have found that Putin 
mentions 'democracy' and 'democratic' (demokraticheskaya politicheskaya 
systema, demokraticheskoe obshchecstvo, demokraticheskoe gosudarstvo) 8 
times all together. He mentions civil society 4 times. He mentions 
"freedom" as often.
In a recent article reproduced in JRL as well Yevgeniya Albats also 
complains that Putin did not mention the courts in his address. In fact, he 
did so twice and called their role an "axiom" for developing an effective 
state and united economic space.
Mr. Goble was right about one thing: "words do count, and by failing to" 
acknowledge "Putin's references to democracy and human rights in his 
speech," Goble has sent a signal as well.


*******


#12
Vremya MN
August 3, 2000
[translation from RIA Novosti for personal use only] 
FOREIGNERS DECLARE THEIR LOVE FOR RUSSIAN MARKET AGAIN
By Yevgeniya PISMENNAYA

The West comes to believe in our economic growth. 
As it is known, a long-expected boom has been witnessed on 
the Russian stock market in the past few days. Foreign 
investors have finally begun to buy the shares of the largest 
Russian companies. The RTS index rose by 5 per cent at once 
during the first working days of the week. What has influenced 
the attitude of Western business to Russia? For the past two 
years the West has used to say nothing good or nothing at all 
about the Russian economy. Even this year, when more or less 
steady economic growth began to be registered in Russia, 
potential foreign investors treated it as a dead cat bounce 
(when the price of fallen shares rises a little, which reflects 
a temporary fluctuation rather than a growth). Today, however, 
the tone of assessments has changed radically.
Foreign investors have begun to speak exclusively well about 
our economic situation. 
The declarations of love for Russia have begun to appear 
ever more frequently in foreign business publications. 
Business newspapers now give a lot of optimistic forecasts 
about the development of our economy, which serves as a 
guideline for foreign companies to act more aggressively or at 
least with enhanced interest. 
International financial organisations are also changing 
the tone of assessment in relation to our country. In 
particular, the IMF, after analysing the materials of the 
fund's latest mission in Russia, does not conceal its pleasant 
surprise. As director of the external relations department of 
the IMF Thomas Dawson said, the successful development of the 
Russian economy this year has not only produced a big 
impression but has also become a surprise. 
Of course, there is nothing bad in existence of generally 
benevolent sentiments. It seems that the too long period of 
aggression is drawing to a close. In the near perspective, such 
an atmosphere can help Russia significantly in its negotiations 
with the Paris club of creditors on its debts to that 
organisation. And in the future Russia can expect foreign 
companies with a high level of corporate management to begin 
coming to Russia. So far, however, this has not happened 
despite all the love for our country. According to the 
observations of the State Statistics Committee, the growth of 
investments in the real sector of the economy in the first half 
of the year was ensured solely through Russian capital.
Besides, it is well-known that there is just one step from love 
to hatred; that is why, it is premature to devise impressive 
plans with reliance on foreign capital. 

*******