September 01, 2000    
This Date's Issues: 4486 4487

Johnson's Russia List
#4487
1 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Interfax: RUSSIA'S GDP TO TOTAL 10.5 TRILLION RUBLES IN 2003.
2. The Economist (UK): Russia’s infrastructure. Crumble, bumble.
3. Interfax: RUSSIAN-U.S. STRATEGIC STABILITY GROUP TO MEET IN NEW YORK IN EARLY SEPTEMBER.
4. The Times (UK): Anatole Kaletsky, Can Putin Save Russia From Meltdown?
5. Jamestown Foundation Monitor: WILL YELTSIN HAVE A JOB ON STATE COUNCIL?
6. THE JAMESTOWN FOUNDATION PRISM: Elena Dikun, THE KREMLIN CHANGES THE OLIGARCHS' DIAPERS...FOR WHICH THEY THANK THE PRESIDENT.
7. Sevodnya: Interview with Nikolai VOLKOV, former investigator at the General Prosecution Office.
8. Security Dialogue: Sven Gunnar Simonsen, PUTIN'S LEADERSHIP STYLE: ETHNOCENTRIC PATRIOTISM.]


*******


#1
RUSSIA'S GDP TO TOTAL 10.5 TRILLION RUBLES IN 2003


MOSCOW. Sept 1 (Interfax) - Russia's GDP is expected to amount to
10.5 trillion rubles in 2003, says an appendix to the draft 2001 budget
that has been sent to the State Duma.
GDP will total 7.75 trillion rubles in 2001 and 9.1 trillion rubles
in 2002, the document said.
Industrial output will be worth 8.2 trillion rubles in 2003
compared to 5.75 trillion rubles in 2001 and 6.94 trillion rubles in
2002.
Investments from all sources in 2003 are to add up to 2.1 trillion
rubles in 2003 compared to 1.3 trillion rubles in 2001 and 1.65 trillion
rubles in 2002.
Direct foreign investments are expected to total $7 billion in 2003
compared to $6 billion in 2001 and $6.5 billion in 2002.
Turnover of retail trade will amount to 3.56 trillion rubles in
2003 compared to 2.67 trillion rubles in 2001 and 3.11 trillion rubles
in 2002.
Paid services will be worth a total of 1.29 trillion rubles in 2003
compared to 810 billion rubles in 2001 and 1.03 trillion rubles in 2002.
The population is expected to drop to 143.1 million in 2003 from
144.5 million in 2001 and 143.8 million in 2002. Employment in the
economy is expected to rise to 63.7 million in 2003 from 63 million in
2001 and 63.3 million in 2002.
The economically active population is expected to increase to 72.4
million from 72.3 million in 2001 and 2002 while unemployment will rise
to 3.2% in 2002 from 2.4% in 2001 and 2.8% in 2002.


********


#2
The Economist (UK)
September 2-8, 2000
[for personal use only]
Russia’s infrastructure
Crumble, bumble 
MOSCOW 

NEON road signs, neatly trimmed verges, pothole-free asphalt—the
Rublevo-Uspenskoe Shossee, known as the Rublevka, to the north-west of
Moscow, is by far the best country road in all Russia. It was along this
route that Russia’s rulers whizzed in their limousines on August 27th to
inspect a spectacular fire at the country’s tallest building, the Moscow
television tower. 


The contrast between the two bits of infrastructure is telling. The
Rublevka, which leads to the most exclusive residential district in Russia,
is absurdly splendid and maintained to comically high standards. Armies of
workers make sure that not a flake of snow sullies its surface in winter.
Traffic regulations are pedantically enforced for ordinary drivers—who are
barred from using it altogether on Friday afternoons, so that the nobs can
get home quickly. 


The Ostankino TV tower, built in 1967, was the opposite: shabby and badly
run. Its managers plastered it with lucrative extra antennae, but did not
bother to update its fire-safety systems, which proved dismally inadequate.
It is also much more typical of the state of Russian infrastructure. The
country invests very little compared with other emerging economies,
including post-communist ones (see chart). As a result, it is falling
behind, and apart. 


The biggest looming crisis is in the energy industry, the single most
important bit of the Russian economy. The industrial collapse that followed
the end of communism has disguised the impending shortfall in generating
capacity. Vladimir Ushakov of Alstom, which sells power stations, reckons
that Russia needs to invest $7 billion a year for the next 15 years to
repair and replace increasingly clapped-out power stations. Last year it
managed just $1 billion. 


The oil and gas industry faces a similar crunch. Old reserves are being
depleted and Russia cannot afford to develop new fields on its own (the
typical cost of bringing a new field onstream is $8 billion-10 billion).
But that could change if investment conditions were better. The Petroleum
Advisory Group, a lobbying outfit, reckons that Russia could attract $60
billion in new oil and gas investment over the next decade if
production-sharing agreements, which give foreign energy companies special
legal protection, were properly implemented. 


In telephony—vital for any Russian ambitions to compete in e-business—the
position is equally dismal. Tom Adshead, of Troika Dialog, a Moscow
investment bank, estimates that Russia needs to spend $6.5 billion to end
the current 6.5m-long waiting list for telephones, plus $9 billion to make
the existing old-fashioned lines digital, and a further $6.5 billion on
modernising the long-distance system. Currently it spends less than $500m a
year. 


It is hard to see where the money will come from. Tariffs for using
utilities and the infrastructure are extremely low: local calls are usually
free, gas prices artificially cheap and wholesale electricity costs about a
tenth of the average European level. The central government budget—around
$30 billion—cannot plug the gap; neither, in current conditions, can
foreign loans. 


This highlights the real obstacle to saving Russia’s infrastructure:
politics and mentality, rather than finance. One, admittedly very
difficult, question is how to charge market prices for energy to those who
can afford them, while protecting the really poor from freezing in winter.
Another concerns planning for long-term results, rather than short-term
survival and prestige. After a recent visit to the glitzy headquarters of
Itera, a mysterious Russian company that handles most gas exports, one
western oilman remarked that “our own boardroom seems like a barn in
comparison”. 


Changing all this requires a huge and almost unimaginable shift in the way
Russian managers and officials think. Yet without it, not only the energy
industry, but also domestic aviation, railways, public buildings and other
legacies of the Soviet Union’s industrialisation will decay with increasing
speed, putting the bits of Russian industry that are trying to modernise at
even more of a competitive disadvantage than the one that they face already. 


*******


#3
RUSSIAN-U.S. STRATEGIC STABILITY GROUP TO MEET IN NEW YORK IN EARLY
SEPTEMBER


MOSCOW. Sept 1 (Interfax) - The Russian-U.S. strategic stability
group is expected to convene in New York at the beginning of September,
Interfax has learned.
Sources said the session will be held on the eve of a meeting
between Russian President Vladimir Putin and U.S. President Bill Clinton
that will take place at the Millenium Summit.
In the strategic stability group, Russia will be represented by
Deputy Foreign Minister Georgy Mamedov, and the U.S., by U.S. Deputy
Secretary of State Strobe Talbot.
At the meeting, "a whole complex of strategic stability issues will
be discussed, including already available and new initiatives in the
sphere of bilateral and multi-lateral cooperation to strengthen
international security, to continue the reduction of arms, and to
improve missile-nuclear non-proliferation regimes," the sources said.
It is possible that North Korea's initiative to curtail its missile
program in exchange for international assistance in launching North
Korean satellites will be addressed as well.
The sources laid special emphasis on the fact that the upcoming
Russian-U.S. consultations "will be based on agreements to step up
dialogue on strategic stability issues" that were reached in the course
of the last meetings between the Russian and U.S. presidents in Moscow
and at the Okinawa summit.
The sources recalled that in their joint statement on cooperation
in the field of strategic stability, which was adopted at the Okinawa
summit, the leaders of both countries stressed their "adherence to the
search for new ways of cooperation to limit the proliferation of
missiles and missile technologies" and said they were starting a more
intensive discussion of issues relating to the promptest possible
enforcement of the START II Treaty and the further reduction of
strategic forces under the future START III Treaty, as well as ABM
issues.
Moscow and Washington have said they are ready to resume and expand
cooperation in the sphere of theater ABM, as well as to consider the
possibility of involving other states in it.
Russian-U.S. consultations on strategic stability issues have been
held regularly since February 1999. However, so far the parties have not
been able to reach an agreement on the destiny of the ABM Treaty.
Washington wants amendments, which will allow the deployment of a
limited national ABM system, to be made to the Treaty. Moscow opposes
reconsideration of the ABM Treaty and believes that the implementation
of the U.S. plans will destroy the entire system of strategic stability
in the world and will initiate a new arms race.
Russia's position on the ABM Treaty "remains unchanged," diplomatic
sources have told Interfax.


*******


#4
The Times (UK)
August 31, 2000
[for personal use only]
Can Putin Save Russia From Meltdown?
By Anatole Kaletsky


Upper Volta with rockets. This phrase must surely have passed through
Vladimir Putin's mind in the past few days, as he watched his political
reputation first buried at sea alongside the Kursk submarine and then
cremated with the Ostankino television tower in Moscow.


In the waning days of the Soviet Union, "Upper Volta with rockets" was the
nickname applied by contemptuous journalists and diplomats in Moscow to a
country that had sunk into political and economic irrelevance, but which
still boasted about being a global superpower.


To most Western observers this was a ludicrous pretension. Were it not for
Moscow's military capabilities, Russia would have been recognised for what
it was: a basket-case society, hardly evolved beyond the Middle Ages,
governed by a vicious but incompetent kleptocracy and not much more
significant for human history than a typical African failed state. That, at
least, was the conventional view among Western cognoscenti by the time that
Mikhail Gorbachev came to power.


When I first visited Russia, after 30 years of absence, in the late 1980s,
I was appalled by this derision of my native country. Did these sneering
cynics not recognise the contribution that Russia had made to Western
literature, music and science? Had they forgotten how Russia saved the
world, almost single-handedly, from Hitler? Did they not understand that
the Russian people, despite their physical and intellectual privations,
were better educated and more cultured than the populations of almost all
Western countries?


So convinced was I that conventional wisdom was wrong about Russia's
post-Communist potential that, ten years ago, I made one of the biggest
misjudgments of my journalistic career. In a series of articles written in
1990, during a stint in Moscow for the Financial Times, I predicted that
the Soviet Union would recover quickly once Mr Gorbachev began to implement
his plans for post-Communist reconstruction.


My reasons for making this ludicrous prediction - and it sounded almost as
silly ten years ago as it does today - were not, I think, entirely naive.
Indeed, they may shed some light on the choices that President Putin will
have to make in the months ahead if he really wants to restore Russia's
standing in the world, its people's hopes for the future and his own
diminished reputation.


I believed, and still believe, that Mr Gorbachev (and now Mr Putin) could
refute the cynics who described Russia as "Upper Volta with rockets". All
they had to do was make a very simple decision: give up the rockets.


Looking at the Russian economy in the late 1980s, it seemed obvious that
the country was producing more than enough to sustain the living standards
of its population. In those days, the Soviet Union claimed not only to be a
military giant but also an industrial colossus - an economy which, for all
its clumsiness, still produced twice as much oil, steel, cement, aluminium
and rubber than the United States.


Naturally, I realised that much of Russia's production was substandard and
most of it was lost in the inefficiencies of the central planning system.
But in principle, the country's main economic problem was not one of
production but of distribution, pricing and exchange. The creation of
private markets could quickly begin to improve these distributional
problems, even without the need for largescale investment in new factories,
which would inevitably take money and time.


The fastest and most promising ways of redirecting resources to the Russian
population seemed obvious ten years ago. By redirecting spending from the
Army and the military-industrial establishment into social security
benefits and pensions, the Government could have sustained the living
standards of the Russian people during the post-Communist transition - and
could still do so today. Redirecting defence resources to the civilian
budget would be the most logical move for Mr Putin as he assesses his
reaction to the past few weeks' events.


After the Kursk fiasco, Russians would probably react with enthusiasm to
any moves to reduce defence spending and to cut the size of the Army, since
these would spare the lives of the millions of young conscripts forced into
virtual slavery in the bloated, abused and demoralised Armed Forces.


The real motivations for preserving the gigantic military-industrial
complex have had very little to do with fears of foreign attack or the need
to maintain an effective Army. This has been clear in the Russian Army's
inability to subdue tiny Chechnya, a conflict whose horror and
destructiveness is still being hidden from the Russian people, as is
powerfully shown in a Channel 4 documentary to be broadcast on Monday,
Babitsky's War.


Much more important to successive Russian leaders than the dictates of
geopolitics or the needs of national defence have been three other
considerations: anxiety about military unemployment, the personal interests
of military leaders, and fears about the creation of a complete collapse of
national morale.


Russia's leaders have also feared that largescale defence cuts would
produce massive unemployment as bases and armament factories were closed
down. Indeed, the limited demilitarisation under Presidents Gorbachev and
Yeltsin is widely blamed for a great deal of the economic disruption in
post-Communist Russia. The closure of military research facilities has been
blamed, for example, for the almost total collapse of scientific research
in Russia. Yet it would have been quite possible - and economically
rational - for the Russian Government to maintain much of its spending on
scientific projects, while cutting back more sharply on the production of
armaments and the employment of military personnel.


It would also have been far more rational economically, as well as socially
fairer, if the Russian Government had redirected much of the money required
for the payment of soldiers' wages and spent it on unemployment benefits
and pensions for the population at large.


The interests of military officers and defence-related officials have
exerted even more pressure on Russian policy than the fears of military
unemployment. Generals have always enjoyed immense powers and privileges in
Russia.


Such interest-group politics has dominated the histories of many
militarised societies from Argentina to Nigeria to China. But the histories
of these societies also suggest how the personal interests of the Russian
military could have been finessed - and still could be if Mr Putin puts his
mind to this issue in the years ahead.


In China, the People's Liberation Army has become the country's biggest
industrial employer, the biggest exporter and the biggest manufacturer of
consumer goods, as well as a powerful force behind the creation of a
reasonably effective, albeit distorted and corrupt, market economy. Many
PLA generals and their relatives have become prosperous industrial
magnates. The same is true to a lesser extent in Indonesia and numerous
other militarised developing countries.


Military involvement in the civilian economy is certainly not an ideal or
even a desirable solution to Russia's economic and social problems. It has
bred corruption, sustained oligarchies and distorted markets in China,
Indonesia and many other developing countries. But Russia is already an
economy controlled by oligarchs, most of whom acquired their wealth and
power by illegitimate means. Would matters be any worse if the Russian
oligarchy included some more generals, alongside the former gangsters,
party apparatchiks and professors who managed to grab the country's
oilfields, factories and resources in the past decade?


But what about the impact of demilitarisation on national morale? Deep
down, Russia's leaders have agreed with the Western cynics. If your country
is "Upper Volta with rockets" and you take away the rockets, what do you
have left? But Russia is not Upper Volta. It is a richly endowed, highly
educated, technologically sophisticated country with huge potential for
rapid economic advancement. Take away the rockets and Russia could forget
about Upper Volta and get on with becoming an advanced European economy.


*******


#5
Jamestown Foundation Monitor
September 1, 2000


WILL YELTSIN HAVE A JOB ON STATE COUNCIL? Putin's imminent signing of the 
decree creating the State Council yielded an intriguing report today in a 
leading newspaper. Moskovsky komsomolets (M-K) reported that the 
president's meeting August 30 with his predecessor, Boris Yeltsin, at the 
ex-president's residence at Gorky-9 outside Moscow, was devoted in part to 
the issue of the State Council. Specifically, M-K claimed that Putin 
offered Yeltsin the position of first secretary on the new body, and that 
the post of second secretary would be offered to Yegor Stroev, governor of 
the Oryel region and Federation Council speaker. The Kremlin apparently 
decided on these appointments as a way to raise the State Council's status 
and assuage those governors unhappy that the body will have only a 
consultative role. It was reported that Yeltsin had taken a "time out" to 
mull over Putin's offer (Moskovsky komsomolets, September 1).


It is not clear what the positions of first secretary and second secretary 
of the State Council would entail. Some media reported this week that Putin 
had already offered the post of "secretary" of the State Council to former 
Prime Minister Yevgeny Primakov (see the Monitor, August 31).


The newspaper Segodnya today featured an even more intriguing article 
concerning Putin's meeting with Yeltsin at Gorky-9 this week. The paper, 
citing "informed sources," wrote that Yeltsin retains a "strong influence" 
on the Kremlin, because one of the conditions attached to the transfer of 
presidential power to Putin at the end of last year was that he would not 
change the country's "power ministers" (meaning the ministers of defense 
and interior, the Federal Security Service head, among others) for two 
years without the agreement of Boris Yeltsin and the Kremlin "Family." 
According to Segodnya, two key "Family" members--Yeltsin daughter Tatyana 
Dyachenko and Valentin Yumashev, the former Kremlin administration chief 
and Yeltsin ghost-writer--remain "linked with the Kremlin." The paper said 
that this condition attached to Putin's accession explains the alleged 
incident last May, when the "Family" reportedly forced Putin to drop his 
choice for prosecutor general, Dmitri Kozak, in favor of Vladimir Ustinov 
(see the Monitor, May 18). Segodnya also attributed Putin's failure to 
punish Defense Minister Igor Sergeev and Armed Forces Chief of Staff 
Anatoly Kvashnin for their public battle over military doctrine and 
bureaucratic turf, or to accept Sergeev's resignation after the Kursk 
submarine disaster, to the conditions attached to Putin's accession. Citing 
unnamed Defense Ministry sources, Segodnya wrote that Sergeev's dismissal 
was strongly opposed by "Gorky-9"--that is, by Yeltsin and the "Family" 
(Segodnya, September 1).


The Segodnya report, even if true only in part, would certainly call into 
question the view--widely held by both Putin supporters and opponents--that 
he is now an independent figure who has decisively broken his ties with the 
"Family," or that he is well on his way to becoming such a figure. What is 
difficult to understand--again, if the story is completely or even just 
partially true--is why a person who enjoys the nearly authoritarian powers 
conferred upon him by the Russian constitution, the support of 65 percent 
or more of the public and a reputation for being a strong and decisive 
leader, would continue to adhere to humiliating conditions imposed by 
people who no longer have state power, not to mention public support.


*******


#6
THE JAMESTOWN FOUNDATION PRISM
AUGUST 2000 Volume VI, Issue 8 Part 1


THE KREMLIN CHANGES THE OLIGARCHS' DIAPERS...FOR WHICH THEY THANK THE
PRESIDENT
By Elena Dikun


As the political season came to an end, Vladimir Putin hosted a meeting 
with the oligarchs. The official version suggested that the get-together in 
the Kremlin was a hugely important political event. Yet the impact of this 
meeting has been minimal; a more likely explanation is that the gathering 
was held just for form's sake.


THE OFFENSIVE


The whole of July was marked by an all-out attack on the oligarchs by the 
Kremlin. Following the broadside directed at Media Most President Vladimir 
Gusinsky, next in line was Vladimir Potanin, head of Interros. On July 10 
he received a letter from Deputy Prosecutor General Yuri Biryukov informing 
him that in 1995 Oneximbank had underpaid for a 38 percent share in Norilsk 
Nickel by 140 million dollars. The prosecutor general's office proposed 
that this debt should be "reimbursed forthwith," so that "no legal action 
would be taken" against Potanin in the future. On the following day, 11 
July, Lukoil president Vagit Alekperov was the target. The federal tax 
police announced the institution of criminal charges against the management 
of Lukoil for evading tax on some 500 million dollars.


On 12 July a criminal case involving large-scale tax evasion was brought 
against the bosses of AvtoVaz. And finally, on 13 July, the Audit Chamber 
sent a letter to the prosecutor's office outlining its reservations about 
how the privatization of Unified Energy Systems (UES) had been handled. The 
authorities were doing this to demonstrate how serious they were about 
putting the oligarchs in their place. However, after this show of force 
they decided to do something to pacify the extremely alarmed businessmen.


NEMTSOV'S PROPOSAL


The man behind the meeting between the president and the oligarchs was 
Union of Right-Wing Forces leader Boris Nemtsov. The great missionary idea 
he was propounding was to draw a line under the period of initial 
accumulation of capital, and, as a first step, to decriminalize relations 
between business and the authorities.


In Nemtsov's opinion, the authorities should take the initiative in purging 
themselves of the sins of "primitive capitalism," because whichever way you 
look at it their sins are the greater. After all, it is the 
bureaucrats--not the businessman--who are responsible for the health of the 
state and for the rules of play which operate in the country. It is no 
coincidence that in the agreement drafted by Nemtsov "On the principles of 
relations between the state and entrepreneurs," which he proposed should be 
signed by the presidential administration, the government and the 
oligarchs, the main responsibilities are assumed by the executive. Nemtsov 
submitted a draft of this document to Alexander Voloshin a year ago, but 
after reading it Voloshin put it in his long-term pending tray. Last month 
the leader of the Right finally managed to deliver a copy to the president.


The substance of the responsibilities that the author thinks both sides 
should assume may be summed up as follows: All applications from 
entrepreneurs for state credits, licenses or benefits should be reviewed by 
the authorities openly and publicly, purely on the basis of and in 
accordance with current legislation. In the final analysis this will help 
eliminate illegal lobbying, and will put an end to the shady relationship 
between the state and business.


Clearly, Boris Nemtsov's prescription for a way out of the current 
situation was based on his own experiences. He was one of the main 
protagonists in the first oligarch war which broke out in the summer of 
1997. That time the oligarchs defeated the young reformers, not because 
they were stronger in number but because the judges turned out to be no 
better and no purer than the accused. By airing a file containing 
transcripts of the telephone conversations of government officials, the 
oligarchs demonstrated to the public that the people judging them were no 
angels themselves. Nemtsov, who fell in that battle, therefore believes 
that there is only one way to have done with the accursed past: The doctors 
and the patients must be cured together, at the same time and in the same 
place.


WHAT THE KREMLIN WANTED


Initially, the Kremlin was categorically opposed to the idea of the 
president sitting down with the oligarchs at the same "round table." They 
were worried that it would be interpreted in a particular way--that the 
authorities had given some slack and gone back on their word. Then they 
began some targeted leaking: They didn't understand what the businessmen 
could possibly want from the head of state, given that they themselves were 
to blame for the all the outrages; the businessmen were busy collecting 
compromising material on each other, "shopping" their rivals to the 
prosecutor general's office or the interior ministry--in other words they 
were involving the authorities in their dirty tricks and then complaining 
about it. After this the Kremlin tried to pooh-pooh Nemtsov's efforts at 
conciliation, saying that the president had been planning a meeting like 
this for some time and that Nemtsov was trying to worm his way into someone 
else's project. Eventually the president's administration came up with a 
new formulation: The main aim of the event was to "change the frightened 
oligarchs' diapers, wipe their sweaty hands and stop their knees knocking." 
And at the same time to hint that if they didn't understand polite 
treatment then they would only have themselves to blame: In the words of a 
senior Kremlin official, "spiked enemas" may have to be brought into play.


The list of round table participants was known to have been drawn up by the 
president's deputy chief of staff Vladislav Surkov. The Kremlin says that 
Vladimir Putin did not personally add any names to the list or cross any 
out. However, the names of three of the best known oligarchs were removed 
from the version proposed by Boris Nemtsov: Gusinsky, Boris Berezovsky and 
Roman Abramovich. The first two were charged with being "overly 
politicized," while the third was removed without explanation. His 
detractors say that Abramovich--who continues to enjoys a special position 
in the Kremlin--is simply so successful in resolving his problems on a 
one-to-one basis with the heads of the presidential administration that he 
has no other questions that need discussing at the round table.


WHAT WAS NEW FROM THE HOST?


The president delighted the oligarchs by saying that he was not planning to 
pursue a policy of reviewing the results of privatization and the 
redistribution of property--although this does not mean that no 
privatization deals will be disputed in court. If the inquiry committees 
were to find concrete violations they would pursue them. In addition to 
this Vladimir Putin announced that the policy of keeping the oligarchs 
equidistant from power will be continued. However, the president has said 
all of this before, and on more than one occasion, literally from his first 
day in office as the "successor."


But on the other hand, it was immediately indicated to the oligarchs what 
their place in history was. "You created this state yourselves," said the 
president instructively. Not "we," but "you." In other words it was these 
capitalists who gave state officials the idea of taking bribes, corrupted 
the tax inspectors, customs officials and policemen and got the law 
enforcement authorities working for them. It transpired that the 
authorities did not see themselves as having any sin, and were not planning 
to purge themselves together with the frightened capitalists.


WHAT DID THE GUESTS BRING TO THE TABLE?


Frankly speaking, the businessmen were not expecting anything different. 
They came more to listen than to say anything themselves. Amusingly, when 
Gazprom chief Rem Viakhirev was asked by the president to say a few words, 
he was clearly very reluctant to say anything at all--particularly for the 
whole wide world to hear. Basically Viakhirev conveyed the general mood of 
the meeting. As a result there was nobody to support Nemtsov's project, and 
he had to stand up for it himself. Nemtsov reminded the president that the 
authorities did not have the moral right to "regiment" the businessmen; 
first they had to get rid of corrupt officials and departmental bosses who 
had compromised themselves. It was necessary to learn together how to live 
honestly.


There was some timid support for Nemtsov from the president of the board of 
Impexbank Oleg Kisilev and the director of Vimpelkom Dmitry Zimin. But on 
the whole the oligarchs did not show any impatience to get on with 
overhauling past experience and refashioning their relationship with the 
authorities into a public, open arrangement. It was more important for the 
visitors to hear that they were not all going to be put behind bars, and 
just to say thank you for that. As one Kremlin official who had been 
present put it, the businessmen "did not complain, but said thank you for 
their present and for their future." Basically both sides agreed to carry 
on with business as usual. If they had really wanted to bring their 
relations out of the shade and into the light, they would have given 
maximum exposure to the gathering in the Kremlin. By definition, events 
like this cannot be closed: On the contrary, they require the presence of 
journalists, party observers and representatives of voluntary 
organizations. But the host was geared up to carry out some educational 
work, and the guests were willing to submit to anything, so they locked 
themselves away from everybody.


It should not be forgotten that in 1997 President Yeltsin held two similar 
meetings with the oligarchs. In content and style they basically differed 
very little from this one. Then as now, there were some stock phrases about 
how it was necessary to get on better and that business and the authorities 
were not enemies. Upon which they shook hands and left. However, Putin's 
meeting with the oligarchs soon had a practical result--all the criminal 
cases that had been opened were closed again without explanation.


NEMTSOV'S SUMMING-UP


For well-known reasons Boris Nemtsov is quite cautious in his assessment of 
the meeting between the president and the businessmen, because it might not 
have taken place at all. So Nemtsov is happy to make do with small returns. 
In a conversation with the Obshchaya Gazeta correspondent he noted that 
"we're certainly no worse off after this meeting--after all, there was a 
threat that it might not go ahead at all. Everyone let off steam at the 
round table, and that alone is a positive result." Given that "letting off 
steam" and "changing diapers" amount to pretty much one and the same thing, 
it may be concluded that the event followed the Kremlin's script rather 
than Boris Nemtsov's.


Elena Dikun is a political columnist for Obshchaya gazeta.


*******


#7
August 24, 2000
Sevodnya
Interview with Nikolai VOLKOV, former investigator at the General
Prosecution Office
by Andrei Kamakin
[translation for personal use only]


Nikolai Volkov expected to complete the investigation of one of the
pisodes
of the Aeroflot case within two to three months. But at the end of last
week he was fired from the General Prosecution Office.


Q: When did you first feel that you were going to be removed?
A: After my return from Switzerland. I made a report on the results of my
trip, explained my vision of the subsequent investigation and told about
new
directions and new individuals that had emerged in the case. I asked for
some additional personnel to my three-people group in order to intensify
the investigation, to interrogate some individuals and set up face-to-face
encounters between some of the people in the case. While being in
Switzerland, I felt that the initiative was in our hands, judging upon
nervous actions by Andava and Forus representatives that were creating
obstacles to our attempts to obtain the necessary documents.


But our top officials had a different opinion: they favored first to have
an inspection by the control department of the Ministry of Finance. "You
always have these airy plans," they said, "don't rush."


Finally, in response to my request for additional personnel, they appointed
a general, a senior investigator. This is the same as putting two bears in
one lair. I have my vision of the investigation, and he has his own. This
was not going to speed up the investigation, quite to the contrary. Have
you seen a general who would be a subordinate under an ordinary investigator?


Q: You had been accused of not avoiding contacts with the media.


A: I did not seek publicity. We needed to keep the case afloat while we were
waiting for documents from Switzerland. We spent more than a year trying to
obtain them. Last year, having not received them, we had to lift our
charges
against Boris Berezovsky. It was up to the chief officials to deny the
extension of the investigation period which would mean closing the case
completely. But the information appearing in the media did not allow them
to do it. I am confident that there was nothing reprehensible in my conntacts
with the media. After all, taxpayers need to know what the investigator is
being doing. We've already been fed up with those secrets. The sub tragedy
is one example. One can do just anything he likes under the pretext of
secrecy. I had been taught that the investigator is an independent official
and it is up to him to decide how best to handle his case. But these days
unmanageable investigators are not in favor.


Q: How close did you come to the end of the investigation?


A: Speaking about the case as a whole, the end was not close. It would have
required more than a year. But we have done virtually all our job on one
important episode. To put it briefly, its essence was that Aeroflot was
given its own money as a credit, with huge interest and commision fees
demanded for servicing its account in Andava. For Aeroflot, this single
operation led to a loss of $30 mln. We could have been able to charge
specific individuals already by October or November.


Q: How was your last encounter with Boris Berezovsky?


A: Let me say that after communicating with this gentleman I first got the
feeling that the initiative was in our hands. May God help the new
investigator to achieve more success than myself and to finish the case.
But
he will have to study 60 volumes and to establish working relations with
the
group that I had assembled. On my part, I will be glad to help even from
beyond the walls of the Prosecution Office.


Of course, it is a pity to leave the case as such. But I cannot work with a
boss who does not trust me. However, even if I would have stayed, he would
have been able to take the case away from me, just by issuing an order.


However, the case is already high-profile. Sooner or later, the prosecution
will have to report to the public about the results of its work.


Q: Were there any attempts to pressure you before your latest trip to
Switzerland?


A: No, there were no problems. There were some incidents related to petty
skirmishes in the newspapers, but this didn't touch upon the conduct of the
investigation.


Q: I heard that some of the latest documents in the Aeroflot case are
considered to be very powerful.


A: They contain important evidence. When I see that Aeroflot borrows money
at huge interest rates to lease a Boeing, while Aeroflot's account at
Andava
has funds sufficient for several transactions of this scale, and that the
chief of a government company is simultaneously the owner of the company
from which the money is borrowed, this raises questions. And when we have
multiple incidents like that, this leads to certain conclusions. In a
foreign country, one would have been already charged long ago for
conducting such transactions.


Q: It is quite strange that you were let loose for so long.


A: This was because no one believed that we would be able to obtain the
documents. This is why they let us act on our own.


Q: You were censored for your pronouncements about the alleged plundering
of the IMF tranche.


A: Of course I was. My Swiss colleagues gave me a huge file of publications
about the journey of these funds, with names of the banks and account
numbers. When I was asked at the press conference, how Russia would react
to
all this, I said that I was going to report to my superiors, and let them
decide whether to open the case. Meanwhile, my superiors were told that I
said too much.


Q: What became the pretext for your firing?


A: On August 14, I was phoned by Mr.Florian, adjunct to the Swiss federal
prosecution office. He offered to bring another installment of documents on
his own. We negotiated the dates of his trip. I coordinated the logistics,
I made an arrangement with Aeroflot and FSB to organize his pickup. The only
thing that was required was an official invitation to apply for his visa.
Our top officials were on vacation, so I prepared the two papers required
on
behalf of the Acting General Prosecutor Mr.Biryukov and appended them to my
report that was delivered to him. Four days later, I got another call from
Switzerland inquiring about the invitation. I responded saying that the
original invitation had not yet been signed, but that I have its unsigned
translation and could send it by fax to speed up things. And they would
soon
receive the original, or at least so I thought. I send them the translation
by fax. But since the original invitation never arrived, I believe that my
fax was bounced from our embassy in Switzerland back to the Prosecution
Office.


On Friday, I was summoned by Biryukov and asked why I had sent the fax. I
said I believed that the original had already been signed. I was told that
I had exceeded my authority. "Why do you make decisions on our behalf? May
be,
we have a different opinion?" Formally speaking, he was right. I told him I
was ready to accept any punishment. Biryukov said: "I don't trust you. You
poke your nose into questions that are not in your competence, and you
speak out everywhere. I suggest you quit on your own." I agreed.


Q: So this was only a matter of one signature.


A: Apparently it is considered undesirable to receive any documents from
Switzerland. I was not given explanations, and I don't know whether the
invitation was eventually sent out.


********


#8
From: Sven Gunnar Simonsen <Sven_g@PRIO.NO>
Subject: PUTIN'S LEADERSHIP STYLE: ETHNOCENTRIC PATRIOTISM
Date: Thu, 31 Aug 2000 


Dear David,
I'm enclosing the text of a commentary article of mine which I hope will be
of some interest to the JRL readers. The article is forthcoming in the
September issue of Security Dialogue.
Yours sincerely,
Sven Gunnar Simonsen
Researcher, International Peace Research Institute, Oslo (PRIO)



PUTIN'S LEADERSHIP STYLE: ETHNOCENTRIC PATRIOTISM
By Sven Gunnar Simonsen


Russian President Vladimir Putin's authoritarian style is well documented.
There is, however, another dimension to his leadership that may signify
greater danger of political protest. Media have paid some attention to
Putin's lack of sensitivity to issues of ethnicity, while the ethnic aspects
of his administrative initiatives have hardly been pointed out at all. There
is not enough ground for solid academic conclusions, but we have seen
several signs that clearly testify to Putin's Russian ethnocentrism.


Russia's population is both homogeneous and extremely diverse. At the most
recent census (in 1989) state authorities recognized 128 'nationalities'
(ethnic groups), and the 1993 Constitution explicitly describes the country
as 'multi-ethnic'. At the same time, ethnic Russians (defined by so-called
'passport nationality') make up some 82% of the population. 


For all his faults, Boris Yeltsin was a leader who saw the challenge of
Russia's ethnic diversity ñ after all, he had been a key driving force as
the Soviet Union broke up along republic borders. Following the Soviet
pattern, among the 15 new-born states it was only the Russian Federation
that did not have a pronounced ethnic identity. Yeltsin would always ensure
he referred to citizenship, and not ethnicity, when addressing his people.
He avoided the term russkiy (ethnic Russian) and used the adjective
rossiyskiy (encompassing all citizens). And he took up the use of the
inclusive term rossiyanin (citizen of Russia), which was rarely heard
earlier.


Yeltsin could not completely get around the fact that ethnic Russians, after
all, are predominant in Russia's population. That is evident above all from
his making the fate of ethnic Russians in the 'near abroad' a major foreign
policy issue. On balance, still, his successor appears to get along with
much less caution in this regard. We can see this from his war in Chechnya,
regionalñadministrative initiatives, reflections on a Russian 'national
idea', and from an overt Russocentrism in his public statements.


Chechnya and Islam


In the first statement after the September 1999 bomb attacks in Moscow and
other cities, President Yeltsin made certain not to associate the
perpetrators with any particular ethnic group: 'This enemy does not have a
conscience, shows no sorrow and is without honor. It has no face,
nationality or belief. Let me stress ñ no nationality, no belief.'1 In other
words, the guilty were obviously Chechens, but that would not be held
against the Chechen people as a whole. However, nuances like this
disappeared quickly as the second Chechen war escalated, and Putin in no way
exerted himself to prevent this. 'Chechens' became synonymous with
'terrorists', 'bandits' and Islamic 'fundamentalists'. The warfare has
turned half of Chechnya's population into refugees, but the military, the
Kremlin, and Putin personally maintain that only 'terrorists' are targeted.
There is little evidence that the war in Chechnya generates much
anti-Kremlin reaction among Russia's Muslims, but the continuing fighting is
a strain on the Muslim republics' relations with Moscow. This could become
more evident as the Kremlin begins to implement regional policies that aim
explicitly at reducing the sovereignty of Russia's republics.


Targeting the Regions


Administratively, the world's largest state is divided into 89 federal
units, or subjects, of many different levels of formal and real autonomy.
The highest degree of autonomy is enjoyed by the 21 republics, which each
have their own basic law, elected president, and legislative assembly. The
republics are all ethnically defined: Tatarstan as the homeland of the
Tatars, Kalmykia of the Kalmyks, and Chechnya of the Chechens. This does not
mean that the titular population is dominant in the republic ñ actually, in
a dozen of the republics ethnic Russians are in the majority ñ but it does
mean that ethnic awareness among the titular population is strong. Local
nationalistic policies in recent years have made it even stronger.


Under Yeltsin, regional leaders had strengthened their powers to the point
that many units today appear as fiefdoms whose rulers are less interested in
democracy than in their personal enrichment. That has been tolerated by the
Kremlin, where such motives are also not alien. Most regions are ruled in
ways that clearly contradict federal laws ñ and most also have legislation
that does the same. Since 1996 governors and presidents have enjoyed new
legitimacy, as they are elected locally rather than appointed by Moscow. 


Under Putin, the times of tolerance for regional liberties seem to be over.
In a series of initiatives he has signaled an intention to dramatically
change the current status quo: the regions have been ordered to bring their
laws into line with federal laws; Putin has threatened to dismiss elected
leaders who fail to comply with this order; he has introduced draft
legislation that denies the regional leaders seats in the parliament's upper
chamber, the Federation Council, and removes their parliamentary immunity.
The State Duma has approved this legislation and broadly supported another
Putin initiative: the introduction of seven large administrative districts
covering all federal subjects. The authority of the heads of these districts
(five of whom are generals) is questionable, but Putin has strengthened
their status by making them full members of Russia's Security Council. 


What is striking about Putin's administrative initiatives is that they have
no provisions for accommodating the ethnic minorities' claim to special
privileges within their own territories. Should he pursue his policies to
the point where the 89 subjects are effectively subordinated to the seven
'general-governors' (or even dissolved), institutions securing ethnically
defined federalism would all but disappear. A more immediate threat to the
republics comes from the fact that they have dared to step the furthest from
the federal legislation, claiming that their legislation has precedence.


In the beginning most regional leaders were reluctant to challenge Putin
head-on and kept a low profile. By early summer the first voices criticizing
Putin's regional policies were heard from the leaders of Ingushetia,
Khakassia, Bashkortostan ñ and Moscow. And in midsummer the regional leaders
made the first attempt to draw the line, blocking Putin's initiative on
changing the composition of the Federation Council. More open confrontation
between the center and the regional leaders seems to be on the cards, and
republican leaders, having much to lose, may opt to play the ethnic card.
That has proven to be a powerful tool of mobilization, but ethnically based
protests are hard to control. According to media reports, Tatar nationalists
have burnt the new federation map at their rallies, and that might be just
the innocent beginning.


A New 'National Idea'


In July 1996 President Yeltsin declared that Russia was in need of a
'national idea' that would unify the population. He gave his aides one year
to produce such an idea, but nothing much came out of the process. Not,
anyway, until Vladimir Putin arrived on the scene and strongly reiterated
the need for a 'national idea': 'Large-scale changes have taken place in an
ideological vacuum. One ideology was lost and nothing new was suggested to
replace it'; 'Patriotism in the most positive sense of this word' must be
the backbone of a new ideology, he said.2 In a programmatic article which he
posted on the government's website on the eve of Yeltsin's resignation,
Putin identified the 'traditional values' of Russians: patriotism,
gosudarstvennichestvo ('state-ness', a concept with connotations of both
centralization and authoritarian rule) and social solidarity. Patriotism he
defined as 'a feeling of pride in one's country, its history and
accomplishments [and] the striving to make one's country better, richer,
stronger and happier'.3


Since becoming president, Putin has several times referred to the national
idea, which should answer the country's need for spirituality and moral
guidelines, and has linked this directly to religion ñ albeit not
specifically to Orthodoxy. What perhaps was just a pose for Yeltsin in his
last years in power has for Putin become an explicit wish to associate
himself with the Orthodox Church. He claims to have been secretly baptized
as a child and to wear a crucifix that his mother gave to him. His friends
have told journalists that Putin has become an increasingly religious man
after he rescued his two daughters from a burning house in 1997. If Putin is
an Orthodox believer, that in itself does not of course make him any less,
or any more, suitable as a Russian president. What we nevertheless should
look out for are signs that Putin might add such spiritual substance to his
'national idea' that could alienate citizens belonging to other confessions.


Who Won the War?


While it may be argued that the above amounts only to circumstantial
evidence of a Russian ethnocentrism on Putin's part, his phrasing in several
statements clearly indicates that the new president is not very sensitive to
issues of ethnicity. We can look at the question of Putin's choice of words
in two important statements, where every word must have been carefully
weighed before it was uttered by the president.


One month before the presidential election, several newspapers ran an 'Open
letter letter by Vladimir Putin to the Russian voters', and in fact he never
came any closer to an electoral programme. The last paragraph summarized his
platform with a message about building 'a worthy life' ñ the kind of life
most citizens believe in and would like to live: 'How I, too, see our life,
being [an ethnic] Russian' [buduchi russkim chelovekom].4


In one of his Victory Day speeches, commemorating the victory over Nazi
Germany, Putin focused on the achievements of the Slavic peoples, and in
particular on the ethnic Russians: 'The people's pride and Russian [russkiy]
patriotism are immortal. And therefore no force can win over Russian arms
[russkoe oruzhie], or break the army.'5 A lone voice to criticize Putin for
this phrasing was that of journalist Yevgeniya Albats. Her Jewish father had
volunteered to fight in that war and came out of it as an invalid. Hurt by
Putin's words, Albats wrote: 'In a way, Putin simply repeated the 1945
speech of Josef Stalin, who proclaimed the victory in the war as a victory
of ethnic Russians.'6


Perhaps comparing Putin to (the ethnically Georgian) Russian nationalist
Josef Stalin is unfair; perhaps it is more reasonable to draw a parallel
with Mikhail Gorbachev, who was ignorant of ethnicity to the point where he
would travel to Kiev and express his pleasure at traveling in Russia. The
evidence is thus far too thin to conclude that Putin is calculatedly playing
a Russian nationalist card. On the other hand, we may conclude that his
ethnocentrism is not merely attributable to political inexperience. It is
here to stay, and its presence is ominous. Not least when it is paired with
an unbending authoritarianism.
Sven Gunnar Simonsen
Researcher, International Peace Research Institute, Oslo (PRIO)


NOTES AND REFERENCES
1 Reuters, 13 September 1999.
2 Interfax, 3 November 1999. FBIS-SOV-1999-1103.
3 V. V. Putin, 'Rossiya na rubezhe tysyachetletiy' [Russia on the
Threshold 
of the Millennium], available at
www.government.gov.ru/government/minister/article-vvp1.html.
4 V. V. Putin, 'Otkrytoe pismo Vladimira Putina k rossiyskim
izbiratelyam', available at http://www.putin2000.ru.
5 This speech can be found at http:// president.kremlin.ru/
events/32.html.
6 Yevgenia Albats, 'Putin Forgets Who Was Patriotic in War',
St. Petersburg Times, 9 May 2000.


*******

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