September 9, 2000    
This Date's Issues: 4500  4501  

Johnson's Russia List
#4501
9 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Moscow Times: Yevgenia Borisova, Vicious Circle Fraud.
2. Financial Times (UK): Andrew Jack, Moscow puts its hopes of 
regaining its past Olympic triumphs on ice: Russia is focusing 
on its ice hockey stars of the future in a bid to revitalise its 
reputation for sporting prowess.
3. Stanislav Menshikov: THE OUTLOOK FOR THE ECONOMY LOOKS GOOD.
But Black Clouds Persist and Could Stop Growth.
4. Newsday: Dimitri K. Simes and Paul J. Saunders, U.S. Needs 
a Tougher View of Putin.
5. CNN Larry King Live: Russian President Vladimir Putin Discusses 
Domestic and Foreign Affairs. (Complete transcript)] 


****** 


#1
Moscow Times
September 9, 2000 
Vicious Circle Fraud 
By Yevgenia Borisova 


Alexander Saly, the Communist Duma deputy who leads the Duma's investigations 
into election fraud, is full of plans. But just as soon as he nears the close 
of one investigation, there is another election, and another series of fraud 
allegations to tackle. 


So Saly talks with excited indignation about fraud in Dagestan, in Tatarstan, 
in Saratov, in Bashkortostan. But ask the results of his labors and his face 
falls. 


"I am dealing with all this for the fifth year. It all sucks up one's energy, 
it is very nerve-racking. The authorities are absolutely not interested in 
finding the truth, and they create obstacles and pressure witnesses," Saly 
said sadly in an interview. 


"It is hard. But someone has to deal with it." 


It is a thankless task, and for some a dangerous one. 


Consider Dagestan: The Communist Party has found so much evidence of blatant 
fraud there that it has succeeded in pushing the Central Elections Commission 
to appeal to the Prosecutor General's Office for an audit. That was about 
four months ago, yet so far there are no known results. 


Yet curiously, the Communists say they are holding back from filing lawsuits 
or criminal charges in Dagestan over the fraud they have documented. 


"Dagestan is a very complicated region. Our witnesses may lose their jobs and 
even receive threats to their lives. We must think whether we should expose 
people to such danger," said Vitaly Konstantinov, a legal adviser of the 
Communist Party. 


In fact, despite all the fraud documented, not even the Communist Party has 
sought a re-vote. Apparently, there is no point in doing so. "No one filed a 
suit to the Supreme Court about the cancellation of the presidential 
elections results _ such a suit is impossible to win," said Konstantinov in 
an interview in his Moscow office. "We could sit in courts for 20 years and 
get nowhere." 


Konstantinov speaks of election fraud with a lawyer's caution, and seems 
pained when asked about Communist leader Gennady Zyuganov's 
loud-yet-undocumented claim of 7 million votes stolen from him by Vladimir 
Putin. 


Both he and his colleague Saly explain their work in terms of improving 
future elections _ even as both shrug and say they expect the worst from 
them. 


Saly, for example, wants his Duma commission to push new legislation stating 
clear penalties for election fraud. He argues that large-scale, organized 
elections fraud ought to be classified by the Criminal Code as an effort to 
overthrow the government _ as a coup. 


Konstantinov agreed, and in turn, talked more about documenting the 
widespread abuses of state power, "which was at its peak in these elections." 
He guesstimates that Putin could chalk up a full 10 percent of his vote to 
the bullying of governors _ a commonly offered, yet unprovable, piece of 
speculation often met when talking about election fraud. 


But Konstantinov also worries about the paradox that it is precisely in 
regions where "abuse of administrative resources" was most flagrant _ 
Dagestan, Tatarstan, Bashkortostan, Kabardino-Balkariya, Kaliningrad, 
Mordovia and Saratov _ were local administrations are most unchecked in their 
power. Witnesses in court cases in these regions could face threats to their 
employment, "and even their lives," he said. 


Sometimes he wonders: Why bother? 


"I am sure our complaints and lawsuits will result in nothing. The 
authorities are the authorities. Our target is to attract public attention, 
punish fraud-makers and to make sure they have a lesson for the next time," 
Konstantinov said. 


"But," he added, "I am certain that next time, exactly the same will happen." 


*******


#2
Financial Times (UK)
9 September 2000
Moscow puts its hopes of regaining its past Olympic triumphs on ice: Russia
is focusing on its ice hockey stars of the future in a bid to revitalise
its reputation for sporting prowess.
By Andrew Jack


At the Spartak Olympic reserve sports school in northern Moscow, 450 of
Russia's future ice hockey players are being trained for at least eight
hours a week - starting when they are just four years old. 


"Sometimes they can't walk when they arrive, but they can already skate,"
jokes Naum Reznikov, the headmaster. "In Soviet times, they started at nine
or 10. Now we can't afford to take them at that age. It's already too late." 


As Russia's team left for the Olympic games in Sydney this week, Mr
Reznikov's enthusiasm seems to mirror the official optimism that the worst
has passed following the difficult times for sport that was triggered by
the collapse of the Soviet Union a decade ago. 


With 16 special schools in Moscow alone - 10 of which opened in the past
two years - and many more in the Urals and Siberia, ice hockey at least
seems to defy the general image of Russian infrastructure in decline. But
even Mr Reznikov says that if there has been an increase in the number of
players, the quality has declined. 


In other sports, the reservations are more considerable. Ludmila Fedoriva,
an Olympic trainer and former athlete, says: "If Russia can't maintain its
factories, what can you say about its sports? There has been no
refurbishment or support for sports facilities and equipment." 


The independence of Russia's former satellite states in 1991 diluted the
number of prize-winners that the combined USSR could previously claim. But
it also sharply reduced the training facilities available to each
individual country. 


Pavel Razhkov, a former wrestling champion who now heads the state sports
committee, says that in the past, "we never thought about the problem of
finance. Sportsmen went to different training camps, and no one worried
about where to get money or visas." 


The worst period, he argues, was the early 1990s. The former state sports
committee was liquidated, and government money dried up. The National
Sportsmen's Fund created by individuals close to former President Boris
Yeltsin was granted tax exemptions on the sale of liquor and cigarettes,
and was supposed to bridge the gap. But Mr Razhkov says that no proceeds
were ever handed over to sports. 


Since the mid-1990s, the state began to contribute again financially, along
with regional and local authorities - and even some commercial sponsorship.
Just over a year ago, all federal funding was centralised in Mr Razhkov's
committee. That cut out commissions to middlemen, which he says had
consumed a third of all money. 


He stresses a new-found enthusiasm for sport in Russia, starting with
President Vladimir Putin's support for Russia's Olympic efforts. He is
lobbying for corporate sponsorship for sports to become tax deductible, and
new contracts that would finance the best sportsmen in exchange for
commitments that they remain in the country. 


For the infrastructure-heavy sports, however, considerable problems remain.
Much skating training for Russians takes place in neighbouring countries,
for example, and its most recent national speed-skating championships were
held in Germany because of a lack of adequate domestic facilities. 


Emigration - for political or commercial reasons alike - has also depleted
the ranks of Russia's top sports stars, who themselves could have become
coaches for future generations. Mr Reznikov says that 150 Russian ice
hockey players now play for the North American National Hockey League, for
example. 


Victor Krushchov, a sports journalist with the newspaper Vremiya Novostei,
argues that the real problem is less the departure of trainers than of
Russia's future generations. "Foreign agencies are agreeing sports
contracts with parents in exchange for citizenship. It is turning us into a
third world country." 


He also suggests that state sports funding has been concentrated on
preparing this year's Olympic team, at the expense of everything else.
"There are already concerns that there is not enough money for the Salt
Lake winter games, schools are not being funded and infrastructure is
declining," he says. 


As for those who stay within Russia, economic pressures have added sharply
to the difficulties of practising sports at top levels. Even the lowest
grade of ice hockey boots costs Dollars 350 a pair, for example. 


In a country with an average monthly wage of Dollars 82, that hardly leaves
much room for the Soviet dream of mixing egalitarianism with competitive
success. 


*******


#3
Date: Fri, 08 Sep 2000 
From: "stanislav menshikov" <menschivok@globalxs.nl> 
Subject: THE OUTLOOK FOR THE ECONOMY LOOKS GOOD


"MOSCOW TRIBUNE", 8 September 2000
THE OUTLOOK FOR THE ECONOMY LOOKS GOOD
But Black Clouds Persist and Could Stop Growth
By Stanislav Menshikov


After another stormy August, it is soothing to hear that the outlook for
the economy is pretty good. Inflation (as expected) came down to 1 per cent
last month and is expected to keep low thanks to a better than usual
harvest. Price increases so far this year are right on track as projected
in the 2000 budget which means that by late December inflation will be only
18 per cent compared to last December. In recent years, only 1997 was
better (11 per cent). This is a healthy comeback from the shock of August
1998 and a considerable achievement in view of the fast increase in money
supply and substantial price hikes for energy and transportation ­ all
natural monopolies or oligopolies. Lower inflation is translated into
higher real growth of real output. GDP is expected this year to grow by 5.5
per cent, which is a record for the 90s, and industrial production by 7 per
cent or more, another record. 


Nothing came out of the inflationary panic which struck the Kremlin in
early summer. More importantly, there are no signs of losses in competitive
power by domestic producers which was widely expected due to a stable and
even slightly revalued rouble. At some point in the future the rouble will
have to yield to downward pressures, but the fall of the exchange rate from
28 to 30 roubles per dollar projected in the 2001 budget is minimal. The
government sounds optimistic but there are serious doubts that it can keep
consumer price inflation next year down to the projected 12 per cent. And
does it really want to do so? There is ample evidence that, in fact, it
would tacitly welcome more inflation.


First, there is an in-built pro-inflationary force in the state
bureaucracy. It is easier for the government to fulfil budget projections
when prices rise faster. It is also easier to satisfy demands from the
Duma for increased budgetary appropriations because higher prices lead to
higher nominal revenues.


Second, the pressure from the natural monopolies for steep price hikes is
on the rise, and it is no secret that Messrs. Chubais, Viakhirev and
Aksenenko are influential men who usually have their way in the corridors
of power. Their concerns are now finding sympathy at the very top. The
other day, Mr. Putin expressed his shock by the fact that world natural gas
prices are nearly seven times higher than at home and promised to "work on
the problem". There is only one way that problem can be solved and that is
by raising domestic prices for gas. Which automatically leads to more
inflation across the board. 


Besides the danger of more inflation the other dark cloud is inadequate
capital investment. While domestic resources for investment are quite
adequate, Russian businesses spend a large part of their gross profits
abroad rather than inside the country. Unstable political conditions and
uncertain economic prospects are cited as reasons for this "investor
shyness". But with the current rise in presidential power, a tame
parliament and a growing economy this explanation lacks persuasiveness. 


Goskomstat has just published details about investment by Russian private
enterprises abroad. Less than 3 per cent of that money this year is spent
for direct investment into foreign enterprises or real estate and acquiring
foreign securities. A lion's share, namely 86 per cent -- $6.6 billion in
the first half of 2000 -- went into foreign bank accounts. Now, bank
deposits in Western countries today yield somewhere between 3 and 5 per
cent per annum. Russian entrepreneurs operating abroad insist that they
would never work even at the usual local profit rate of 20 per cent, they
need at least a 100 per cent, better 300. It beats me to understand why $13
billion (on an annual basis) earned inside Russia should be invested so
overcautiously and unproductively abroad. After all, rouble profits can be
easily converted into dollars and stored at home at a better interest rate
and serve as an anti-inflation hedge here, not far away. Scared of a
communist comeback or of being expropriated by Mr. Putin? Hardly. 


Whatever the explanation, the fact is that the equivalent of 360 billion
roubles is practically wasted abroad. This is about a half of all domestic
expenditure for new construction and equipment in Russia or 5.6 per cent of
its GDP. Unless this money is redirected to productive domestic use, the
economy will never have a solid basis for sustainable growth.


One could argue that roubles do not buy foreign technology believed to be 
superior than Russian-made. But there are no administrative barriers to
more imports. In fact, this year's estimate of the trade surplus is
approaching $65 billion. With that influx of dollars an increase in buying
foreign machinery and technology from should not be a problem.


There are other clouds in the Russian economic horizon. But inflation and
lagging investment are more than enough to stop economic growth, if not
this year or next, then soon after.


*******


#4
Newsday
September 8, 2000
U.S. Needs a Tougher View of Putin
by Dimitri K. Simes and Paul J. Saunders
(Dimitri Simes is President of The Nixon Center. Paul J. Saunders is the
Center's Director.) 


Vladamir Putin's speech at the UN-sponsored Millennium Summit shows how
misguided the Clinton administration was in its self-serving portrayal
of the new Russian leader as a "leading reformer" after his appointment
as acting president and his subsequent election. 


Putin opened his five minutes on the world stage Wednesday by praising
the United Nations for guaranteeing "freedom from the arbitrariness of
hegemony and diktat," a thinly veiled attack on American global
leadership. 


He then promoted the ABM treaty as the "foundation" of disarmament,
proposed a Moscow conference on preventing the militarization of space
and implicitly defended Russia's brutal conduct in Chechnya in a call
for international cooperation against terrorism. Finally, Putin
questioned the universality of the principles of democracy and freedom
by asserting countries' rights to "national self-expression" and
"independence" (from whom we can guess). 


The Clinton administration's Manichean division of Russia's political
leaders into so-called "reformers" and "reactionaries" ignores both the
authoritarian, corrupt and self-serving tendencies of many of the
so-called "reformers" and the defense of democracy and the rule of law
by some "reactionaries" who, being outside the establishment, had few
other means to protect themselves. No less important, it has given scant
attention to the increasingly assertive foreign policy views of many
"reformers." Putin's remarkable reception at the G-7 Summit on Okinawa
demonstrates that confusion about Russian developments is not limited to
the United States. 


The most that could be said of Putin when he came to power was that he
had given his anointed "reformer" masters-St. Petersburg Mayor Anatoly
Sobchak and former President Boris Yeltsin-the same loyalty he doubtless
offered the KGB. 


Putin's book-length interview, "In the First Person," suggested not that
he was a born-again democrat but rather that he was a dedicated servant
of the state willing to do what was necessary to protect his superiors. 


Attacks on Putin's inadequate reaction to the tragic sinking of the
Russian submarine Kursk, which predict a return to Soviet-style
dictatorship are on the other extreme. 


Critics have generally ignored the fact that any nation would have very
serious security concerns if its newest and most technologically
advanced submarine experienced similar problems-particularly if, as may
apparently be the case, it was testing a new torpedo. The Russian
president can and should be criticized for failing to understand
democratic politics and not returning to Moscow (or, better, flying to
Murmansk) at the beginning of the crisis. Yet, he deserves credit for
eventually deciding to ask for foreign help and for his difficult
meeting with the lost sailors' families. 


Although much commentary suggests otherwise, Putin remains quite popular
after the Kursk crisis, in part because of improvements in the Russian
economy. 


One respected poll put Putin's public support at 65 percent-a level many
presidents would envy. Whatever some in the West may hope, this is a
direct result of the fact that Russians want a no-nonsense leader, that
a KGB background is a plus, and that in the best Russian tradition many
see a powerful czar as the only way to protect the weak from the strong.


The facts of life in Russia call into question the utility of the newly
fashionable prescription of shifting American engagement from the
Russian government to Russian society. This idea ignores not only that
Russian society actually wants a strong state, but also that the regime
has considerably greater influence over its society than Americans
do-particularly if American influence is seen at variance with the
Kremlin's interests. 


More fundamentally, it is yet another call for U.S. management of
Russia's evolution, which Americans have only a limited ability to
affect. 


The good news is that both the Russian government and its subjects are
currently in a pragmatic mood and have little interest in a Stalinist
political system or a global ideological crusade. Despite Putin's
rhetoric at the UN, they understand that Russia needs the West-and the
United States in particular-more than the United States needs Russia.
But much more is needed for a successful relationship with Russia.
Rather than try to engineer the details of Russia's transition, the
United States must: Maintain sufficient economic and military power to
act unilaterally when necessary if it is unable to reach agreements with
Moscow on vital interests, including protecting the American people
through national missile defense; avoid the destructive impulse to see
everything in Russia in black and white; be realistic about the
character of Russian society and politics; respect Russia's
perspectives, so long as they do not contradict key American interests
or values; establish international priorities rather than attempting to
advance a laundry list of commendable but contradictory objectives (by
recognizing, for example, that humiliating Russia in Kosovo and rapidly
expanding NATO into the Baltic States could hinder productive
discussions on non-proliferation, terrorism and other essential issues);
and be patient. 


Americans must recognize Russia is in the midst of a painful historical
transformation that even most Russians are challenged to understand.
America is fortunate it has the strength to manage this ambiguity. Let's
hope it will have the wisdom as well.


*******


#5
CNN
Larry King Live
Russian President Vladimir Putin Discusses Domestic and Foreign Affairs
Aired September 8, 2000 - 9:00 p.m. ET 
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY
BE UPDATED.


LARRY KING, HOST: Good evening, and welcome to this special edition of
LARRY KING LIVE. It's our honor to have as our special guest for the full
hour here in New York at the Millennium Summit at the United Nations --
we're at our studios -- Vladimir Putin.


Vladimir Putin is, of course, president of Russia. There's lots of things
to talk about tonight. We thank him for coming, and welcome to the United
States.


What about this job so far, if anything, has surprised you?


PRES. VLADIMIR PUTIN, RUSSIA (through translator): I'd say I was much
surprised since prior to my presidency for a while, I fulfilled the duties
of the head of the Russian government. And in that capacity, I had to deal
very frequently with the functions of the president himself. So nothing was
exceptionally new. But the volume of my job has certainly increased.


KING: Are you enjoying it?


PUTIN (through translator): Partially, yes.


KING: Let's get to the part that may not have been enjoyable. What can --
what happened? You tell me. What happened with the submarine?


PUTIN (through translator): It sunk.


KING: But why? What caused it? What happened? What do we know?


PUTIN (through translator): Unfortunately, today we cannot tell you much
about the reasons of this tragedy. However, it's clear that the result of
this tragedy, we can talk about of certain explosions. But we don't know
what triggered those explosions.


All the rest, you know. There was a large hole in the pressure hull around
one and a half meters to two meters, and now we know for sure that in
result of that powerful blast for 75 or 80 percent of the crew died within
90 seconds since the submarine was at so-called periscope depth at the
moment, which implies that all the crew were at battalion stations in the
first two or three water-tight compartments. And they were destroyed within
90 seconds after the blast. What happened next, you all know.
Unfortunately, the rescue operation, which was deployed immediately -- I'd
like to emphasize the point immediately. They did (inaudible) with success
since the rescue submarines, which were specifically designated for the
purpose failed to dock with so-called docking pad, where this submersible
is supposed to sit on top of the submarine. They were broken.


The other means of salvation operation had to do with the lifting
(inaudible), which was also destroyed, having been found in the area of the
blast. Therefore, these are the conditions we are aware of at this point in
time and which did not help.


KING: Mr. President, it has been said all over the world, why didn't you
ask for the help of other countries right away?


PUTIN (through translator): This is not a difficult question. I can recall
the chronology of events those tragic days. On the 12th of July 23, p.m.,
the communication was broken, and immediately the search started.


And the usual procedure is seven days for a risky operation, but it was
detected within four and a half hours. It was not clear what was going on
at the time. But the navy had the necessary rescue operation means, which
were provided for by the engineers and the designers of such type of
submarine. Together with the submarine, they designed these rescue
operations tools, and they were at the possession of the navy.


And the sailors were thinking about using those means and did so at the
time when it became apparent that something was going wrong, something
failed. Later on, it turned out that the area of that docking pad was
broken, making it difficult for the rescue submarines to dock.


On the 15th of July, for the first time, an official proposal was tabled
concerning foreign assistance. It was proposed by the military attache of
the United Kingdom. It was immediately accepted. But that's not really the
matter here.


What matters here, immediately after accepting the proposals requiring
risky operation, people needed six days to open the hatch. And if we now
count those days and nights, even had our sailors on their own incentive
addressed them earlier, 13th, 14th, 15th, 17th would have already passed --
at least five days.


There would have been no chance anyway.


KING: In retrospect, Mr. President, is there anything you would have done
differently knowing what you know now?


PUTIN (through translator): No. The only thing which could have been
changed in my conduct as head of state, it could be possible to halt my
working meetings, to suspend them at the place of my vacation in
(inaudible). I could go back to Moscow, to the capital. But again, it would
have been a PR activity, since in any city of the country or all over the
world, I'm always linked to the military. 


I have communications means that I can discuss any problems on the table.
Therefore, from the point of view of PR that could look better. Maybe yes,
it would look better. But what matters here subsequently became clear that
this situation was used for certain attacks to Russia, the pose of the
presidency, which is in itself bad and dangerous for this stage.


Therefore, perhaps it was necessary to do it differently here, though there
were some suggestions and recommendations made to do something different.
To go to the ground, to go down on this rescue submarine to the submarine
itself, and perhaps you are smiling yourself, and that's right...


KING: I don't think security would have let you do that.


PUTIN (through translator): In such situation, I would not ask questions
from security. Security serve me, not me serving them.


But not because of security, I wouldn't do that. But at the ground, you
know, each second counts. Minutes, days, it's all important. Professionals
should do their job, and politicos should not be engaged in scoring points
here because of the tragedy.


As regard to the security, I participated in the trainings. I was at the
submarines. I spent a night with sailors at the bottom of the ocean.
Therefore, it has nothing to do with security. I am commander-in-chief, and
it's my duty to be together with the military.


KING: We will take a break and come right back with the president of
Russia, Vladimir Putin, right after this.


(COMMERCIAL BREAK)


KING: We're back with President Putin of Russia. We thank him very much for
this hour that he's given us tonight here on LARRY KING LIVE.


In concluding on the submarine, will we some day know fully what happened,
do you think?


PUTIN (through translator): We'll do our best. We'll seek to do it. It's
important not only because of the need to understand what really happened
to our sailors, but also to avert such tragedies in the future.


This has not been the first incident of this kind in Russia. This was the
fourth nuclear engine submarine which perished. We are aware of similar
tragedies are known to the United States. They lost their two submarines.


We are aware for sure, for fact, about two incidents of the kind. In one of
those cases, it was possible -- in no case, it was possible to come to the
root of the tragedy, and we hope this time it will be different. We'll do
whatever it takes to recover the bodies and to raise the submarine and to
figure it out. KING: Does it give you concern, this incident, about the
entire military machine of your country?


PUTIN (through translator): It sure does.


It raises questions as to we need to look into the status of our armed
forces. Like I said, it was not the first incident of a kind. Such
incidents happened both in the Soviet Union and the United States.


Now as regards the reasons as to why it happened, coming back to that
issue, I might say that since 1967, we have a whole set, a whole number of
19 collisions of our submarines with other underwater objects. Therefore,
nothing extraordinary has happened in that regard.


The question is, however, like I said, to analyze it thoroughly is an
imperative. And maybe jointly, with our partners, to work out a more
efficient rule of conduct at the high seas like we have been able to do
with our joint scientific and research policies in the outer space. That's
also a hostile environment we've been able to deal with jointly.


KING: Did you discuss that with President Clinton, the possibility of
jointly looking at submarines and underwater activities?


PUTIN (through translator): We sure did. Usually, me and President Clinton
discuss a broad range of issues, and I'm very thankful to him that he
responded quickly to this tragedy, expressed his condolences, proposed his
assistance in our very first conversation on the phone, which testifies to
the fact that this issue will be on our constant agenda in future.


KING: Concerning that, you know Vice President Gore, do you not?


PUTIN (through translator): I have met him only once, and it was in passing
when he visited in St. Petersburg a few years ago. So it was a very quick
contact.


KING: Do you have a great interest in the American presidential race?


PUTIN (through translator): Naturally. First and foremost, I take interest
of what's going on in my own country, but the United States is one of the
major partners we have, one of the most important partners. And therefore,
we are very much interested in what's going to happen with respect to the
next presidency in this country.


KING: Do you favor any of the candidates?


PUTIN (through translator): I think the American people should express
their preferences, and we'll accept their choice.


KING: Would you like to meet with both candidates? PUTIN (through
translator): I'm ready to do so but wouldn't like to interfere in this very
acute pre-election campaign. One needs to exercise caution. We don't want
to cause any detriment or tension in our interstate relations.


We are ready to work with all candidates, especially so that in both
candidates' programs a position vis-a-vis Russia has been laid out which is
quite satisfactory to us.


KING: All right. If you like the positions of both Governor Bush and Vice
President Gore as it relates to Russia?


PUTIN (through translator): Basically, what we've seen in their
pre-election documents gives us a sense of optimism. We would like to see
to it that positive which has been accumulated over the years of President
Clinton's presidency, he would be able to give the torch to his continuer
(ph) in the same direction, whoever it might be.


KING: We'll be right back with the president of Russia -- President
Vladimir Putin. Don't go away.


(COMMERCIAL BREAK)


KING: We're with President Putin. A lot talk today in the United States, I
believe you talked to President Clinton about it. About this businessman,
Edmund Pope. He is in a Russian President on espionage charges, there's a
lot of movement here to try to get him to come back. There are stories that
you want to make a trade. What's the story on Mr. Pope?


PUTIN (through translator): Indeed our security services believes that he
was involved in illegal activities, an investigation has been carried out
but -- and according to the criminal code, he has been provided with all
the necessary documentation to get acquainted with. Currently he is reading
those documents. 


President Clinton has expressed his concern with respect to the situation
with American citizens. We are not hiding anything. I have talked about it
to my American colleagues in detail. But, in our country, like elsewhere
the legal process should be finalized and then, depending on the situation
and certainly in the spirit of good relationships between our two
countries, we'll see we can do.


And we'll take account of the relevant decision to be taken by the court.
Ultimately, it's only the court who, in a democratic state, could decide
whether the man is to be blamed or not.


KING: There are reports that he is quite ill though. Will that play a part
in any of the decision making you might make? 


PUTIN (through translator): If it comes to the situation when it's up to me
to make the decision, then naturally this will be taken into consideration.
Generally, I really don't think, even if the court confirms that Mr. Pope
has causes some substantial harm by his activities, I don't really think
that intelligence can be that harmful, I mean intelligence of one country
can be that harmful to the other country. But these are the rules of the
game and this is the procedure, which has to be complied with.


KING: Do we gather from that, that should you find Mr. Pope did do some
things you might want to exchange him for Mr. Ames who's in a prison here
for selling spies to you, so we put an end to spying?


PUTIN (through translator): I wouldn't like to trade these things, this is
not my job to bargain. But I think that experts will decide on what needs
to be done. Of course, we can do all options which could alleviate the
tension here. 


KING: Is -- you were a spy -- I mean, you wanted to be a spy, you were up
in the KGB, is spying among friendly nations still warranted?


PUTIN (through translator): Intelligence is not running around in the
drainage, underground cellars of Moscow or New York. This is an information
gathering work. Therefore, intelligence people are very close by their
duties to the stuff in mass media.


The same purpose to gather information, to synthesize it and to present it
for the consumption of the decision makers, who could use that information
while deciding on things. If the government is active in foreign policies,
then such a tool can be efficient. If it's well organized and workable,
therefore intelligence could be a good support in deciding and settling
international problems.


KING: Did you enjoy your career at the KGB? 


PUTIN (through translator): Well, you know, it was an interesting job. It
allowed largely to increase my vision, to get certain skills, skills of
dealing with people, with information, which was referred to earlier. It
taught me to choose what is the priority and what is less important. That
was useful in this regard.


KING: We'll be right back with President Putin on this edition of LARRY
KING LIVE. Don't go away.


(COMMERCIAL BREAK)


KING: We're back with President Putin.


I know that you are trying to stop the United States from getting in to
more anti-missile defense systems and the like. Why should it matter to
you, if another country builds a system that's just defensive? As long as
one country doesn't attack another country, what's the difference if we had
80 billion defense systems? Why care?


PUTIN (through translator): Were you prepared to listen to my monologue.


KING: As long as it's not 20 minutes, yes. Why should you care about a
defense system?


PUTIN (through translator): Well, when our countries agreed on limitations
of ABM systems, that was not an accident. When we deploy on our own
territories ABM systems, we put together certain facilities which are hard
to penetrate for the strikes from outside. If we cover the entire territory
by such systems, or try to do so, then according to our experts today, this
is a mission impossible. 


But let's imagine it would be possible. That could create on one side an
impression -- an illusion -- they could without being punished in
international affairs whenever they like deal a blow, decide on attack.
That would disrupt the balance of strategical interests and forces which in
my opinion is extremely dangerous.


When discussing with our American colleagues on this matter, I've always
been tempted to remind them of the beginning of the arms race -- nuclear
arms race. I always recall the fact that initially nuclear arms emerged --
were created -- in the United States. And subsequently, some scientists who
invented those arms, in part at least, the secret concerning the A-bomb, on
their own will transferred those secrets to the Soviet Union.


Why did they do that? I always ask my American colleagues: "Can you invent
something of the kind?" 


No, we cannot come up with anything like this.


Neither can I, but your scientists could do that. They were smarter than
you and I. But voluntarily they transferred those secrets to the Soviet
Union because they wanted to restore the balance. And thanks to that
balance the humankind has survived without major conflicts, large-scale
wars, for about since 1945.


If we disrupt that balance, then we'll put the whole world to this real
great danger, which doesn't serve the interests either of Russia or other
countries.


In my impression, that's the most important thing, and why we seek to
retain that balance; why we object to the deployment of the national ABM
system is because of that.


KING: Do you think the United States might go ahead with it? 


PUTIN (through translator): This is a choice to be made by the United
States itself. We've been pursuing a dialogue on this matter. We have
different approaches. To a certain extent, we agree, coming closer and we
hope we'll be able to find a mutually acceptable solution. 


The most acceptable solution, in my opinion, would be to preserve the
balance of interests as we know it today and jointly to try and avert all
these dangers, which can surface later on versus all of our countries. That
would be a step in the right direction.


KING: We'll be right back with President Putin. We're only half-way
through. Don't go away.


(COMMERCIAL BREAK)


KING: We're back with President Putin of Russia. We'll discuss some other
aspects of his life. He is the head of his country. He's been elected -- I
guess just a little over 100 days now, am I right? A little over 100 days.


Freedom of the press. Lots of the talk in the United States about worries
over this in Russia. We have a jailing of Vladimir Gusinsky, Boris -- I
want to pronounce this right -- Berezovsky, is the media mogul who has been
asked to transfer his own holdings to the state. Are you looking to stop
opposition? 


PUTIN (through translator): Opposition? On who's side? On the side of those
who are interested in retaining the situation, which is, I believe very
dangerous and detrimental to Russia today. This is about legalism (ph)
towards the fulfillment of the existing legislation. 


Wherever I go, I try to meet with the business community. In the U.K., I've
just visited Tokyo. Whenever, the first question asked by the business
community, it's one and the only question, they ask and I agree, said the
most important question, whether there will be time in Russia, they ask,
when law will be abided by? 


Letting alone the fact that laws should be measurable to the demands of
economy and democratic society, but the government should provide for their
execution. 


Now, the cases you have mentioned, have nothing to do with the freedom of
press. In the first case, we're talking about so-called Most Holdings. And
the owner of 70 percent, to the best of my knowledge is, incidentally, Mr.
Gusinsky. But this holding has been in red, with credits and debts, and has
not returned, according to creditors, those one billion -- 30 -- 300 U.S.
dollars billion worth of debt, they don't recognize this whole sum. They
say they're in debt to the tune of $800 million, but that's a lot of money,
again. 


So they are disputing, primarily, between the creditors and the owners,
concerning the activities of the holding of that transfer company. 


And in the second case, again, there are no problems concerning the freedom
of expression, since Mr. Berezovsky and the structures under his control,
and they control around 49 percent of the leading first program TV company,
ORT (ph), 51 percent was owned by the government, today it's in the hands
of the government. 


Therefore, it has nothing to do with the freedom of expression, because of
the fact that the owner of 51 percent, the government, by the charter, has
already any right to define the policies of that company, completely. So,
regarding the staffing and the policies there, 49 percent by the charter
could in no way affect the policies of the company.


And the owners of those 49 percent could claim only profits, but there is
none, since, you know, they work with loss. And we do not demand them
transfer those 49 percent in the hands of the government. 


KING: A business question: But you're not out to stop a newspaper or a
television station from saying, "We don't like President Putin, we think
this should change." You don't want to see that? 


PUTIN (through translator): No problem, whatsoever. 


No, no, you have mentioned the Most holdings owned Mr. Gusinsky. They've
been criticizing us all along. And we don't have any objections in our
government. And they've been so critical to such an extent, like now it
happens in the United States, I think. 


The other thing, I think the duty of the government in this area is to
guarantee to all the competitors on the market, fair share, fair equal
taxation, technical conditions, and other rules of fairness. We have been
doing so. There is no difference in our approach towards the private mass
media and government press mass media, the same taxation policy is being
used. The approaches taken by administrations are the same. 


Therefore, I believe that when they are talking about the need to protect
the freedom of expression, that's only a pretext to be able to cover their
own commercial interests in some quarters. 


KING: Now, let us discuss Chechnya. Is this solvable? Will the troops stay?
I know that you had great support when you started. The Russian people are
now having their questions. What's the situation today? 


PUTIN (through translator): Today the situation is fundamentally different.
If I may, I will probably give you a history of the situation, how it
started, all those most recent events. 


KING: Let me get a break first so we could do this, OK?


We'll take a break and then get the Chechen story. There's lots more to
talk about as well with President Putin on this edition of LARRY KING LIVE.
We'll come right back.


(COMMERCIAL BREAK)


KING: We're back with President Putin.


Chechnya?


PUTIN (through translator): I will allow myself to remind you of the very
start of those most recent events last year. Since 1996, Russia completely
and fully fled Chechnya. Russia did not recognize the euro (ph)
independence of Chechnya, but de facto they got full state independence. 


All the structures of governance of Russia were dismantled -- police, the
military, procurators offices, courts -- all the offices of administration
were destroyed and the president was elected who by law did not comply with
the procedures of the Russian Federation. 


What happened afterwards? You all know. They didn't get any independence
and de facto the territory was occupied by foreign mercenaries and
religious fundamentalist, fanaticists from Afghanistan and other circles in
the Arab East. This is a fact of life. They started firing squads working
on the thoroughfares, beheading people, mass capture, hostage taking in the
adjacent territories of the Russian Federation and inside Chechnya. Over
this period they took hostage of over 200,000 people. That was a market of
slave driving in the contemporary world in Chechnya. 


And Russia, finding itself in a similar situation like America found itself
in the wake of the Vietnam War, did not respond to it at the time, and
naturally that promoted, in a way, those international terrorists who swept
-- who had their cradle now in this area, their nest was set up there, and
it resulted in the direct attack on Afghanistan, on Dagestan last year,
armed-land direct attack, coupled with destruction of a shelter, property
and death of people. And Russia had to react to protect its people and its
territory.


KING: And is still reacting.


PUTIN (through translator): No, the quality of this reaction has changed.
When our armed forces entered Chechnya, our armed forces were met with a
surprising good reception by the local populace. Over the years of Chechnya
regime, we probably didn't pay attention to certain new phenomena. Turned
out the foreign mercenaries who captured, in fact, certain spheres of
authority in the territory of Chechnya, they didn't have unified
governance, it was broken, with certain chieftains, those military
commanders governing certain segments of society. 


So it turned out that they also threw from outside into Chechnya a new
ideological platform, religious platform for conception in Chechnya, coming
from Middle East, and they tried to impose on the local population the
Sunni trend of Islam. And our people in the Caucasus are mainly Shi'ites,
therefore that caused a certain revolt on the part of the population there
with respect to those mercenaries, and that caused tension between the two. 


So whence the federal forces stopped resistance of the organized troops
there, subsequently increasingly actively, the political process was
started with the local population, and today there are no large-scale
military operations in progress, none.


KING: No more suicide bombings? No? Do the Russian people support you?


PUTIN (through translator): Yes, absolutely so, they do support me. But
this phase is over, like I said, and now we've started to look for a
political solution and, at the time of the Chechnya, now the former clergy,
mufti, the clergy head was put -- it started after 1996 first and the other
thing, just two or three days ago, as the whole territory of Chechnya we
held elections for the deputy of Chechnya to the parliament of Russia both
the results and the figure of the population surprised me, over 69 percent
of local population actively participated in this election campaign and
elected their deputy to the Russian parliament.


KING: We'll be right back with President Putin. Don't go away.


(COMMERCIAL BREAK)


KING: We hear stories, terrible stories about the Russian economy, half of
the people are living below poverty level, lots of corruption, businesses,
Mafia. What's the health of the nation? What's the stability of the country?


PUTIN (through translator): Oh, Larry, this is small surprise to me, our
country has been coming through a dramatic tectonic change, unprecedented
internationally. Such experience does not exist elsewhere. 


Transfer from the totalitarian regime and the arm-chair economy to
democracy, to the marketplace methods of economy control one needs to
define the place of the state, what laws we needed to see to it that these
laws are abided by, which had not been possible to do to the full extent. 


Let's also not forget about the so-called "ideological heritage." People
were always taught about the Communist paradise, Communist -- people
beliefs were decayed that was their life. And this has also been our past,
resulting in an ideological vacuum, which affected the status of the state.


But, as of late, what you have seen in our country gives us promise that
the future is looking good, and we'll cope with it, a solid foundation has
already been laid in the market relations and the basis of the democratic
society has been set up.


KING: You are optimistic.


PUTIN (through translator): I certainly am.


KING: In other word, big problems resulted from that drastic switch from
one kind of government to another kind of government. This was to be expected?


PUTIN (through translator): Nobody expected there would be this change and
couldn't imagine what will be entailed here. But I would think that, right
now, we can confidently state to the fact that the country is able to deal
with it.


KING: Mr. President, I like to touch some other bases, we have a few
minutes remaining. You are a Judo expert -- know more about you personally,
do you know Judo?


PUTIN (through translator): While I am fond of that sport, I have been
involved in martial arts since my childhood, but I am not an expert, I am
an amateur.


KING: But you were on your team, weren't you? You performed martial arts,
you were on your school squad?


PUTIN (through translator): Oh, yes I did. I mean, in St. Petersburg,
Leningrad, as a kid, I was involved, I was member of the city team, and I
got a black belt in the all-national competition and I was master of
sports... KING: Do you practice? 


PUTIN (through translator): ... at the time.


KING: Do you still work out?


PUTIN (through translator): Unfortunately, I don't have enough time to do
it very frequently, but when I have time and space I take pleasure in doing
it, yes.


KING: We'll be back with our remaining moments with President Putin of
Russia right after this.


(COMMERCIAL BREAK)


KING: A couple of other quick things. Are American businesses hesitant to
invest in Russia because of corruption?


PUTIN (through translator): Well, I think they have reason to be hesitant
here. In order to invest money, one needs to be confident that his
investment will be productive, it will pay back, it will give profit easy
enough to firmly confident, then the better refrain from investing money.


But it seems to me that those people are right who don't waste time
waiting. We have developed a network of contacts with the U.S. community,
and many American businesses are doing business successfully in Russia,
many companies are already there. A lot needs to be done, if we are to make
our cooperation with business partners more effective and our country
become more attractive. We understand that and will work on it.


We have adopted new laws, citation code, which we failed to do earlier.
This is another result of essential consolidation of the society. Our
parliament has become more solid, and it's to possible pass-through those
laws which are necessary for effective work, effective investment. 


We have introduced a unified 13-percent tax for all physical entities,
which is not known all over the world as a system. Now we are working on
liberalization, fighting with corruption in the customs services and
serious move ahead, I'm sure it will happen in this area as well.


I believe that the question which you have posed is very urgent. We
understand the problems. We understand what needs to be done to make our
country to become more attractive and we will follow through.


KING: How is the health of President Yeltsin?


PUTIN (through translator): I met him quite recently one week ago before my
visit to Tokyo. I must say that today he looks even better than when he did
being a president. This probably has to do that he does have that much work
to do, he has more time to relax, to do his own thing. KING: There is much
talk about Vladimir Putin and religious faith. I'm told that you wear a
cross. Is that true? Are you religious? What are your feelings in this area?


PUTIN (through translator): I prefer -- I would prefer not to develop on
that subject in detail. I think such things are sacred for everybody.
Everybody's belief is not to be shown off, it's inside a man's heart. As
regards to wearing cross, earlier I never had it -- once my mother gave it
to me and when I visited Israel. I was there two times. First on an
official invitation of the minister of foreign affairs of that country. The
second time, I liked the country, and I traveled there with my family as a
tourist.


So my mother gave it to me to have a blessing there at the Tomb of Lord. I
did so and now it's with me always. 


Incidentally enough, there was a story about this cross and since then I
have always decided to have it on my body, now in the Dacha close to St.
Petersburg, there was fire on the Dacha, it happened because of the fact
that something went wrong with sauna.


Prior entering sauna, I took off the cross before entering the sauna, and
then with my friend we jumped out naked, since it was so unexpected. And I
cherish that cross very much, it was my mother's cross, and the fire was
really in earnest at the time. So I was thinking about whether perhaps it
could get even remnants of it, it was an aluminum-made cross, a very simple
thing.


I was surprised completely when one of the workers, just muddling through
those ashes of the remnants, found that cross intact. And the house fell,
that was a surprise, a revelation, and therefore I always now keep it with me.


KING: Do you believe there is a higher power?


PUTIN (through translator): I believe in human beings. I believe in his
good intentions. I believe in the fact that all of us have come to this
would to do good. And if we do so, and if we do so together, then success
is awaiting for us. And both with regards to our relations as people to
people, or inter-state relations. And most important, we will achieve the
ultimate goal, comfort in our own heart.


KING: Thank you Mr. President.


PUTIN (through translator): Thank you.


KING: Vladimir Putin, president of Russia, thanks for joining us. 


We'll see you on another edition of LARRY KING LIVE tomorrow night. For all
of us here in New York and our CNN crews around the world, including in
Moscow, good night.


******