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Johnson's Russia List


September 20, 2000    
This Date's Issues: 4526  4527   4528

Johnson's Russia List
20 September 2000

[Note from David Johnson:
1. Reuters: Cox report to Congress blasts US policy on Russia.
2. AP: Gorbachev Opens Exhibit About Wife.
3. AP: Russian Journalist Trial Date Set. (Babitsky)
4. RFE/RL: Sophie Lambroschini, New Twist To Gazprom-Gusinsky Battle
5. Paul Kindlon: Western press coverage on Russia in the 90s.
6. Moscow Times: Yulia Latynina, Heavyweights Still Waging 

7. Bloomberg: World Bank Says Donors Share Blame for Eastern Europe 

8. Reuters: Ex-KGB seen as menace to Russian human rights.
9. Deputies Could Be Exposed As Insiders.
10. The National Interest: Tainted Transactions: An Exchange.
(Jeffrey Sachs and Janine Wedel)

11. The National Interest: Zbigniew Brzezinski, Living With Russia.]


Cox report to Congress blasts US policy on Russia
By Christopher Wilson

WASHINGTON, Sept 19 (Reuters) - In a report Democrats derided as an attempt 
to embarrass presidential nominee Al Gore, a Congressional task force on 
Tuesday blasted the Clinton administration's Russia policies, saying they had 
discredited America and contributed to Russia's 1998 economic crisis. 

The report by a 12-member panel of Republican lawmakers, led by 
Representative Christopher Cox of California, sharply criticised President 
Bill Clinton for effectively delegating U.S. Russia policy in 1992 to a 
``troika'' of high-ranking officials that included Gore, Strobe Talbott, who 
is now Deputy Secretary of State, and Lawrence Summers, now Treasury 

The result, according to the report, was a U.S. policy on Russia tied too 
closely with former Russian President Boris Yeltsin that strengthened the 
Russian central government instead of creating the building blocks of a new 

The ``troika'' dealt almost exclusively with a cadre of Russians close to 
Yeltsin, gave Russia bad economic advice, ignored the crippling impact of 
corruption and brushed aside intelligence reports that ``clashed with the 
administration's policy views or political interests,'' the report said. 

``United States policy could have engaged broadly with Russia at any time 
during the past eight years. It could have emphasised the development of the 
necessary building blocks of free enterprise instead of massive, effectively 
unconditional IMF lending to Russia's central government. And it could have 
stopped enabling Russian corruption.'' 

Clinton's relationship with Yeltsin and his administration's exclusive 
dealings with a cadre close to the Russian president largely ignored 
engagement with Russia's legislature, opposition and regional parties, the 
report said. 

This policy, together with Yeltsin's propensity to rule by decree, 
``virtually guaranteed that the legal reforms needed to establish a genuinely 
free enterprise system would not be enacted in the Duma or in the regional 

The report, which will be presented to House Speaker Dennis Hastert on 
Wednesday, was commissioned by Hastert in March to scrutinise U.S. Russia 
policies after a rash of corruption scandals and reports that billions of 
dollars in Russian funds had been laundered through the Bank of New York. 

The Republican-led Congress suspected possible misuse of Western loans to 
Russia and was infuriated by intelligence reports of Russian weapons 
technology sales to Iran last year. 

Cox, who also headed a bipartisan commission of inquiry into Chinese 
espionage is one of Congress' leading authorities on Russia. He studied 
Russian in college has wide contacts in the Russian government and private 


The report was harshly critical of Gore who, headed a joint commission with 
former Russian Prime Minister Viktor Chernomyrdin to foster economic and 
technical cooperation. 

``Clinton's abdication to Gore of authority over the most important foreign 
policy opportunity for America since World War II ... had fateful 
consequences,'' the report said. ``The Gore-Chernomyrdin Commission 
contributed to a deliberately uninformed U.S. policy toward Russia. It 
refused to acknowledge failure and...celebrated failure as if it were 

Congressional Democrats, who were excluded from the Russia Advisory Group 
(RAG), said the report's release at the height of the presidential election 
campaign was a clear attempt to embarrass Gore. ``The truth is that the RAG 
report is merely an election year gimmick,'' a group of Democrats led by 
Representative Sam Gejdenson of Connecticut and David Obey of Wisconsin said 
in a letter to Hastert. 

The White House, which has not yet seen the report, dismissed it as a 
partisan study and questioned the timing of its release so close to election 

``We have worked very diligently over the last eight years to engage the 
Russians to try to promote democracy and to make the world a safer place,'' 
said White House spokesman Joe Lockhart. ``We have parts of the world now, 
parts of the former Soviet Union, that no longer have nuclear weapons because 
of the work that has been done.'' 

Cox told Reuters that the end of the Yeltsin era and the election of Russian 
President Vladimir Putin had made it vital that America reassess its overall 
policy on Russia. 

``Perceived American responsibility for what has happened has strengthened 
those in Russian elites who would pursue anti-American foreign policy,'' he 
said. ``The assessment of what went so terribly wrong and how we can turn 
things around are important, no matter who is president.'' 


Gorbachev Opens Exhibit About Wife
September 19, 2000

MOSCOW (AP) - With tears in his eyes, former Soviet leader Mikhail Gorbachev 
on Tuesday opened a museum exhibit about his wife, Raisa, calling her a 
willful and intelligent companion who struggled for women's rights. 

Shortly before touring the exhibit, which opened just before the anniversary 
of Raisa Gorbachev's death from leukemia last year, Gorbachev said he 
appreciated the sympathy he received during his wife's illness, despite 
Russia's turmoil and the suspicion with which she was regarded by many 

``I understand how hard it is for people now, and in this situation people 
found the strength, the moral strength, to pay so much attention to Raisa, 
and I'm thankful for that,'' he said tearfully. 

The small exhibit emphasized how Gorbachev's wife broke the mold in Soviet 
society, where leaders' wives had stuck to the background, and public 
elegance was considered an extravagance. 

She adopted Western fashion and played a prominent role next to her husband, 
even though many Soviet citizens disliked her for it. On display were 
pictures of her with Nancy Reagan, both in fur coats, and next to her husband 
consoling survivors from a devastating 1988 earthquake in Armenia. 

``You could say that only with the arrival of (Raisa Gorbachev) was the idea 
of a first lady created in the Soviet Union,'' said Tamara Shumnaya, director 
of the Museum of Contemporary Russian History, which is holding the exhibit. 

The exhibit featured a few pictures from Raisa Gorbachev's early life and 
highlighted the work she did as first lady, when she helped establish a 
cultural fund and raised money for sick children. 

There were also curious pieces, like a giant music box the size of a suitcase 
given to her during a visit to Japan, and portraits of her and her husband 
painted on two dried leaves - a gift from India. 

The elegance and style that brought her the suspicion of many in her country 
won Raisa Gorbachev admiration in the West, and she helped bring a human face 
to the people living on the other side of the Iron Curtain. 

``She was a breakthrough for our society,'' said First Deputy Minister of 
Culture Natalya Dementyeva. ``We were the Evil Empire, and she brought that 
image down.'' 

At home, resentment toward Gorbachev's wife waned once she was hospitalized 
in Germany last July. The exhibit displayed a few of the letters that poured 
in from Russians around the country, as well as get-well cards from children 
in Germany. 

``After she died, people understood her contribution to history,'' said Nina 
Fetisova, a museum visitor. ``It is unfortunate it didn't happen during her 


Russian Journalist Trial Date Set
September 19, 2000

MOSCOW (AP) - Russian authorities have set a trial date for a correspondent 
for U.S.-funded Radio Liberty, whose arrest in January helped draw 
international attention to Russia's treatment of civilian prisoners in 

Andrei Babitsky said Tuesday that he had been told the trial would be held 
Oct. 2 in the town of Makhachkala in the southern Russian region of Dagestan, 
adjacent to Chechnya. 

Russia's Interior Ministry accused Babitsky of knowingly using false 
documents. If convicted, he faces up to two years in a labor camp. He denies 
the charge. 

His attorney and the judge in the case agreed on the trial date, but it could 
change, Babitsky said. 

Babitsky was detained in January by Russian agents in the breakaway republic 
of Chechnya for not having proper accreditation after he reported on the war 
from the rebel side, angering the Russian military. 

Babitsky was held for two weeks in a detention center in Chechnya, where he 
said he saw prisoners tortured by Russian police. He then disappeared for 
weeks, causing co-workers to say they feared the military had killed him. 

He resurfaced in Russian custody in February and was eventually released on 
condition that he not leave Moscow. A travel ban was later lifted. 


Russia: New Twist To Gazprom-Gusinsky Battle
By Sophie Lambroschini

Vladimir Gusinsky's Media-MOST group, which includes Russia's main private TV 
channel and other media often critical of the Kremlin, has again come under 
pressure from the government. Yesterday, the natural gas giant Gazprom -- 
partly owned by the government -- said that Gusinsky was trying to hide 
assets that he had agreed to turn over to a Gazprom subsidiary to settle 
Media-MOST debts to the company. Gusinsky, in turn, accused authorities of 
extortion. RFE/RL's Moscow correspondent Sophie Lambroschini reports.

Moscow, 19 September 2000 (RFE/RL ) -- The ongoing conflict between business 
tycoon Vladimir Gusinsky, head of the private media holding Media-MOST, and 
Russian authorities has taken a new twist. 

Gazprom, the partly government-owned giant gas monopoly, accused Gusinsky 
yesterday of breaking an agreement over the sale of his media empire. With 
that, Gusinsky accused Russian authorities of Mafia-style extortion methods 
and said he would not honor a July 20 sale contract with Gazprom. 

Gusinsky explained that he would not fulfill the part of the agreement over 
the sale of his stock holdings. It was invalid, he said, because it had been 
extorted from him "at gunpoint." He said that he has a video recording of the 
signing to confirm this. 

The agreement was signed two months ago when Gusinsky was still under fraud 
charges, for which he spent several days in jail. The charges were 
subsequently dropped. 

Gazprom accuses Media-MOST of not complying with the July 20 agreement and of 
hiding assets off-shore in order not to comply with its obligations. 
According to the agreement, Gazprom and Gusinsky agreed to the sale of 
Media-MOST for $300 million, plus the writing-off of a debt of $473 million 
in bank loans to Media-MOST that had been guaranteed by Gazprom. But 
according to Media-MOST, a secret appendix to the agreement -- aired on its 
television channel NTV yesterday -- spells out what the channel and other 
media allege to be "blackmail." 

The Russian daily "Sevodnya" -- also owned by Media-MOST-- today published 
the alleged secret appendix, known as protocol "number six." The paper 
charged it was signed by Alfred Kokh, Gazprom's media branch head, and by 
Information Minister Mikhail Lesin. 

According to the published text, if the stock transfer agreement is broken, 
the parties are "freed of their obligation" to guarantee Gusinsky safety and 
the defense of his rights and freedoms. The text also implies that Gusinsky 
took upon himself the obligation not to "discredit" state institutions. 

Gazprom's Kokh admitted today at a news conference that he and Information 
Minister Lesin had indeed signed protocol number six. But he denied that 
Gusinsky had signed it under pressure. 

"Concerning the sixth protocol -- yes, I did sign it. We considered that 
under the conditions of last July, it was necessary to receive precise and 
clear promises from the parties that the agreement was being signed without 
any pressure." 

Kokh also said the agreement was a purely financial deal. He suggested that 
Gazprom wants to buy Media-MOST not as a way of suppressing private 
television but because it's a good investment. 

The accusations of blackmail are consistent with earlier suspicions that 
Gusinsky had been released from jail on June 17 in exchange for the sale of 
his Media-MOST stock. After all charges against him were dropped five weeks 
later -- and one week after the agreement was signed -- Gusinsky immediately 
left Russia and kept an unusually low profile. He remained silent, while for 
weeks before his press group had repeatedly accused the Kremlin of pressure 
to silence their critical reports. One of the alleged methods of applying 
pressure was the use of Russian Media-MOST's debt to Gazprom. 

Many politicians from different shades of the spectrum today expressed shock 
over the latest revelations. The liberal Yabloko State Duma faction said it 
would request an investigation into the affair. Communist party boss Gennady 
Zyuganov spoke of what he called his "disgust" with the state's methods of 
"forcibly extracting money" from private firms. 

The NTV public council, an advisory body headed by former Soviet President 
Mikhail Gorbachev, also said it was shocked by the alleged methods applied by 
the authorities to strike a deal over the sale of Media-MOST. Gorbachev 
called the agreement "glaring evidence [of] state blackmail," and requested a 
meeting with Russian President Vladimir Putin to discuss the matter. 

"Does President Putin know about all this? We have to help the president to 
work in the spirit of the mandate he got from the people and not according to 
the contracts of some groups. And I think this is our common responsibility." 

Some media expressed fear that the Gazprom-Gusinsky agreement was fresh proof 
of Russian authorities' determination to crack down on free media. The daily 
"Izvestia" -- a paper that is not controlled by Gusinsky -- said that the 
alleged blackmail could mean one of two things: "Either the Russian 
Constitution was banned and we were not informed about it, or it contains a 
special secret protocol where basic rights and freedoms are implemented only 
after signing a special agreement [such as Gusinsky's with Gazprom]." 


Date: Tue, 19 Sep 2000
From: "Paul Kindlon" <>
Subject: Western press coverage on Russia in the 90s

When Stephen Cohen recently criticized Western reporting on Russia in the
90s, there were a few responses that focused on whether or not reporters
analyzed events here correctly. It seems to me this reaction misses the
point and the real story. Journalists did not simply err; they misreported
on purpose.

When I began working as a journalist for Open Radio (Moscow) in 1992, the
Russian governmental structure had an executive branch, legislative branch
and judicial branch. 

The president was a former communist who had powered his way to the top
after having been the head of the communist party clique out in
Sverdlovsk, Siberia some years back.

While many, including journalists, were touting the shock therapy scheme
of Yegor Gaidar and Jeffrey Sachs, some were uncovering shocking truths
about the government's chief executive. The effect was far from therapeutic. 

In order to form an intelligent opinion on Boris Yeltsin, I had to know who
this man really was. My research led me to one inescapable conclusion:
Boris Nikolaevich was no democrat. He was, in fact, the opposite. Many
Russian journalists knew this, but to the Western press in 1992 Yeltsin was
the Great Liberator.

Why ? Because he stood on a tank in 1991 for a photo-op?

Didn t they know that Yelstin became the big boss of the Sverdlovsk
Communist Party structure through rough and tough power plays? Didn t they
know that Boris Nikolaevich presided over a fiefdom riddled with
corruption? That the Sverdlovsk Mafia during that time was considered the
most powerful criminal group in all of the Soviet Union? And that the Mafia
in Soviet times could only flourish with acceptance from above?

Now this provincial Boss with a highly questionable past was the most
powerful man in all of Russia. What incredible path would this country
take, I wondered, under such leadership? 

What should have been an eye-opening experience for Western journalists
(and politicians) occurred seven years ago. Yeltsin had predicted a very
hot autumn for 1993. It was more of a threat than a prediction, but few in
the West took note. The Parliament which had been an irritant to the
provincial tyrant because it only passed around 80 % of the bills he
wanted, was cast as the enemy. Yeltsin wanted carte blanche and would not
tolerate opposition. But what did these irritants in the Parliament want?
Well, for one, they insisted that the narod (the masses) be given a social
safety net during the turbulent reform period. Gaidar and Yeltsin saw this
insistence as communist opposition and the American press in particular

The Parliament at the time was composed of a number of factions: some
nationalists, some communists, the democrats and those favoring a mix of
socialist and capitalist policies.

One thing was certain: there was no clear majority in the White House where
the parliament met at that time.

Despite this fact, when the great liberator decided to go head-on with the
parliament, Western wire reports churned out stories about the
communist-dominated parliament. Overly simplistic reports presented the main
contenders as FORMER COMMUNIST Ruslan Khasbulatov ( speaker of Parliament)
versus President Boris Yeltsin. All it took was that label attached to
Yelstin s main opponent to make it obvious who was the good guy and who was
the bad guy. The odd omission of the label former communist which should
also have been attached to Boris Yeltsin I found more than curious. It was,
of course, deliberate and deceptive. 

When Yeltsin dissolved both the legislative and judicial branches that
autumn with his now famous ukaz or decree, good friend Bill was not
opposed. It didn't matter that the Parliament had been duly elected. The
communist threat had to be destroyed.

Supporters of Parliament gathered behind the White House to demonstrate
their solidarity with those who defied Yeltsin's decree and were holed up
inside. Those parliamentarians who left early or who
were persuaded to give up the fight were offered generous material rewards.
Unfortunately for Yeltsin, some of the People's Deputies* had principles
and couldn't be bought. These people were among the defiant ones, all soon
labelled collectively as hardliners by the Western media. 

Another deliberate and deceptive label from the practitioners of objective

Meanwhile, my Russian bosses at Open Radio allowed me and my colleagues (an
American, an Australian and a Brit) to openly report the truth about what
was happening. 

Supporters of Parliament were being beaten up, reporters who tried to get
close to the scene were roughed up and cameras broken. Freedom of Assembly
was not allowed. 

All of this was broadcast on a modest AM station in the capital of Russia.
We were drowned out, however, by the mighty voices of Reuters , AP and
various other righteous crusaders willing to skew the truth in order to
help crush the communist- dominated Parliament.

What happened in the early days of October 1993 are known. What is obvious
now was obvious back then. Any chance for the development of a truly
democratic Russia died seven years ago and was buried with a helping hand
from the most trusted news sources who now throw dirt on its grave.

One newspaper - the ill-fated We/íÙ - which was a joint venture between
Isvestia and Hearst, boldly told the truth about what really happened in
October of 1993 and how hundreds of bodies were taken from the location of
the White House and secretly cremated. There were no identification tags.
The estimated figure was 500. Western reports in the majors put the death
toll from the battle for the White House at 50. Just a mistake in translation?

I ran into the newspaper's American editor, Peter Khlebnikov, months after
the events as they were known, and asked him if he still stuck by that
incredible story. He answered in the affirmative without hesitation.

There were a few others, I should mention, among the Western press corps
who tried to be objective during that very hot autumn and who saw through
the deception. Some of them are still around. 

The ugly truth, however, as Matt Taibbi of the Exile has so skillfully
proven time and again, is that certain journalists clearly are not honest
in their reporting. Many have agendas.

Let the reader beware.

* I exclude, among others, the opportunist Alexander Rutskoi.

Paul Kindlon
Moscow Linguistic University


Moscow Times
September 20, 2000 
INSIDE RUSSIA: Heavyweights Still Waging Centralization 
By Yulia Latynina 

In July, the general director of the Smolensk vodka factory Bacchus received 
a phone call at home. The call came from Moscow, from the company 
Rosspirtprom. The people in Moscow were worried about the director f was he 
all right? "Yes," he answered, "what's up?" 

"You know, we got a call and were told that you had been killed." 

"That's ridiculous! I'll be there [in Moscow] tomorrow." 

But the director did not in fact make it to his destination. He was killed on 
his way to Moscow. 

Who killed the director? Supporters of one version of the crime ask this 
question: Might his future killers actually have called him as a warning? 

The directive on the formation of Rosspirtprom was signed by President 
Vladimir Putin on May 6. According to the directive, Rosspirtprom was to 
receive all government shares in factories that produce alcohol, liqueurs and 
vodka. And, if that were to happen, Rosspirtprom would be a monopoly equal 
to, say, Gazprom. 

But Rosspirtprom is not just another state enterprise. It is a cornerstone of 
Putin's centralization policy. But in order to effect this centralization, 
the governors must be stripped of their control over state budget cash flows 
f and no fewer than half of those are generated by vodka sales. Furthermore, 
this industry brings together an indivisible combination of governors, police 
f and thugs. 

The question of what sort of control Rosspirtprom might wield over regional 
alcohol producers is essentially a question of what Putin can do with the 
nation's governors. But here's the paradox: To date, Rosspirtprom hasn't been 
able to do anything. 

As soon as the directive on the creation of Rosspirtprom was signed, the 
regions began bankrupting factories that produced alcoholic beverages, 
thereby taking them out of commission as state property. Factories in Penza, 
Veliky Ustyug, Voronezh, Smolensk f to date, 12 large factories have eluded 
the government. Question: How did they manage? Simple: Rosspirtprom still 
doesn't actually exist. It hasn't lodged its charter yet. 

The charter should have been lodged first with the Agriculture Ministry and 
then with the Tax Ministry. The former sets quotas on alcohol production; the 
latter issues licenses for vodka production. Neither ministry wants some 
other entity to horn in on this cash cow. 

These days, many people are saying that the nation is being threatened with 
authoritarianism f and with good reason, if you look at the president's 
directives. But where is this frightening authoritarianism? Look at 
Rosspirtprom, which employs a group of security types from St. Petersburg; 
for five months, they haven't been able to lodge their charter. Even a really 
tough group can't wage war simultaneously with the governors, the Tax 
Ministry, the Agriculture Ministry, the police and petty thugs. 

It's clear that dealing with a horde this big is harder than throwing a media 
magnate in Butyrskaya Prison. Putin's actual successes with centralization 
are minimal to date. 

Unfortunately, the gangrenous process in this country has gone so far that 
everything has rotted, including the most basic surgical instruments used to 
operate on the patient f including the guillotine, frequently used as the 
main scalpel. 

Yulia Latynina is the creator and host of "The Ruble Zone" on NTV television. 


World Bank Says Donors Share Blame for Eastern Europe Poverty

Prague, Sept. 19 (Bloomberg)
-- The World Bank acknowledged it should have done more to prevent an 
explosion of poverty in Eastern Europe during the transition to capitalism 
and called for a crackdown on corruption to help close the gap between rich 
and poor. 

``The issue of poverty was not given sufficient attention by donors, by our 
own institution'' said Ana Revenga, the bank's lead economist for Eastern 
Europe and central Asia. ``We thought it would be temporary, we thought the 
countries would soon be on their way to growth.'' 

The number of poor people, or those living below a $2.15 per day poverty 
line, in Eastern Europe and Central Asia rose to 21 percent in 1998 from 2 
percent in 1988, the bank said in a new report. 

With economic growth rates this year in such countries as Russia and Hungary 
at or near decade highs, corruption is a main cause of inequality in the 
region, hindering distribution of wealth, reform and economic stability, the 
bank said in the report, ``Making Transition Work for Everyone.'' 

``Politicians captured by special interests have little incentive to advocate 
policies in the interest of all in society,'' the report said. 

Without those policies, economic growth will continue to make the rich 
richer, while creating a class that has less access to education, health care 
and employment, the bank said. 

Economic Collapse 

Poverty also soared because the region's economies collapsed after the fall 
of communism, jobs vanished, pension benefits dried up and spending on 
education and health imploded, the bank added. 

``These countries have been fairly lousy at managing their safety nets to 
protect their populations,'' said Revenga, one of the report's lead authors. 

Low government expenditures on health, education and other social priorities 
``really threaten the long-term growth and poverty reduction prospects,'' she 

The bank, which has made about $35 billion in loans to Eastern Europe since 
the end of the Soviet era, traced the growth of corruption in the region in a 
separate report, ``Anticorruption Transition,'' which it also released today. 

``Corruption in the region is developing new dimensions, reaching new 
heights, and posing new challenges'' that report said. ``It is the poor who 
bear the heaviest brunt of corruption'' because public services suffer. 

Most Corrupt 

Azerbaijan, Ukraine, Moldova and the Kyrgyz Republic ranked as the most 
corrupt former Soviet countries in the bank's report. It blamed some of the 
corruption on a lack of independent regulation of companies recently sold to 
private owners and on insufficient competition. 

In Russia, about 20 percent of the population lives in absolute poverty, the 
bank said. In the U.S. in 1998, the official poverty rate was 12.7 percent, 
the bank said. 

The typical poor person in Eastern Europe probably is between 15 and 64 years 
of age and lives in a rural area where only the head of the household is 
employed, the bank said. 

``It appears an underclass is forming,'' the bank said. ``Safety nets are 
needed to help people cope. Divorce rates have increased. . . while marriage 
and birth rates have declined sharply throughout the region.'' 

Health problems also are on the increase, the bank said. In Russia, alcohol 
consumption has risen, as have cases of tuberculosis and sexually transmitted 
diseases, such as AIDS, the bank said. In Ukraine, 1 percent of the adult 
population is infected with the HIV virus, the bank said. 

Education probably will suffer as children from poorer families are more 
likely to drop out of school, the bank said. 

Widespread reforms of the region's health-care, social security and education 
systems are needed, the bank said. Still, reforms cost money and many of the 
region's governments don't have enough cash to pay social security benefits, 
the bank said. 

While countries such as Russia need to improve their tax collection system, 
job creation is another factor in ending poverty and sustaining economic 
growth, the bank said. 

``What matters ultimately (is that) growth generates jobs and that real wages 
rise,'' the bank said. 


Ex-KGB seen as menace to Russian human rights
By Deborah Zabarenko

WASHINGTON, Sept 19 (Reuters) - Former KGB and ex-Soviet military members are 
gathering openly, waiting for the chance to crush Russia's struggling human 
rights movement, a regional Russian activist told a Capitol Hill briefing on 

``It looks like over the cities of Russia, someone has started to play a 
magic flute and the old veterans of the movement, the KGB, the military, 
their eyes light up,'' said Viktor Lozinsky, a human rights activist in the 
city of Ryazan, about 124 miles (200 km) outside Moscow. 

``It's not that they look so threatening; it's that they look so happy,'' 
Lozinsky said through a translator. 

``It's like, we've come, we're back, and there's not going to be any more 
problems. And now they come out on the streets, they meet one another on the 
streets (as if to say), no problem right now, maybe in about a year, though, 
we'll destroy the human rights movement,'' he added. 

He said the Internet played a role for humans rights, but that it was 
vulnerable to tampering by members of the Special Services and that few 
people in the provinces could even afford computers. This made newspapers and 
leaflets key sources of information, he said. 

The human rights picture is worse in the provinces than in Moscow, Lozinsky 
and other activists said. 

``The rapid de-centralization of power in Russia over the past decade has 
resulted in a system of near feudal despotism, in which provincial officials 
routinely violate their citizens' human rights with near impunity,'' Michal 
Naftalin, national director of the Union of Councils for Soviet Jews, said at 
the briefing before the Congressional Helsinki Commission. 

A report by the International Helsinki Federation for Human Rights covering 
events in Russia in 1999, which was available at the briefing, expressed 
anxiety over the future of human rights under Russian President Vladimir 

Noting a ``change in many people's political priorities during the last 
year,'' the report noted, ``this change has not been favourable for the cause 
of furthering human rights and civil liberties.'' 

There was systematic needling of ecological, human rights and religious 
non-governmental organisations (NGOs), which were required to re-register 
last year, according to Ludmilla Alexeeva, president of the International 
Helsinki Federation. 

The most petty errors or deviations from bureaucratic rules were used as 
justification to deny re-registrations, and human rights NGOs were advised to 
leave the term ``human rights'' out of their titles and charters, Alexeeva 

The one bright spot was the establishment of a network of grassroots groups, 
Alexeeva said. 

``This apt network of NGOs is a new phenomenon for Russia. Its emergence 
testifies to the fact that the formation of civil society is indeed taking 
place in contemporary Russia, and it is our only hope,'' Alexeeva said. 

The report also found that: 

-- Russian courts cracked down on those who tried to exercise their 
constitutional right to alternative military service, jailing one pacifist 
for six months; 

-- Proposals for judicial reform stalled and several judges known for their 
strict adherence to the constitution were banished from the judicial corps; 

-- There were clear signs of xenophobia and nationalism, against Chechens and 
others, including Jews, with ``unfortunate passivity'' from the authorities. 


September 19, 2000
Deputies Could Be Exposed As Insiders
The State Duma’s deputies have elaborated a draft bill on insider
information containing a precise definition of the term. If the law is
passed, those found guilty of speculating on the stock exchange using
insider information could lead to five years in jail. 
The draft bill on insider information was elaborated by a working group of
Duma deputies from two of the lower house’s committees; the State Duma’s
property committee and the committee for credit institutions and financial

As defined in the draft, insider information is any confidential data
concerning a company and its shares which could influence securities market
prices. A potential insider is any person who has such information owing to
the position he or she holds in this or that company. 

According to Vladimir Tarachev, the author of the draft bill, one of the
main reasons for elaborating the draft were the “numerous rumours”
regarding the shares of various major companies. 

The deputies were especially concerned with the news reports alleging that
some ‘insiders’ managed to grow rich due to a leap in share prices of
Vladimir Potanin’s Norilsk Nickel at the time when Moscow prosecutor’s
office was trying to contest the legality of the company’s privatization.
The authors of the draft suspect that similar tricks were used on the
occasions when RAO UES share prices sharply rose. 

However, they remain allegations. Unlike most countries Russia still has no
adequate legal mechanism that can safeguard its national securities market
against insiders. 

The State Duma deputy Tatachev says corresponding clauses should have been
stipulated in the Law on the Securities Market. However, that law does not
even provide a definition of the term “insider”. Tarachev asserts that the
Law on Securities Market currently in force contains the term “official
information”, but the clauses pertaining to that term are weak, thus

If the new draft bill is passed by the State Duma, approved by the
Federation Council (upper house), signed by the president and the necessary
amendments introduced into the Crime Code, the courts of justice will be
empowered to sentence those found guilty of using insider information to up
to 5-year imprisonment. 

If a person commits such a crime for the first time, he will get away with
it by paying a fine equivalent to half of his annual income (naturally
one’s official income, i.e. that declared for tax purposes). 

The draft bill has been elaborated on the basis of international practice
and foreign legislation, chiefly on the basis of German legislation on
securities trade. The draft contains a precise list of liabilities of the
would-be insiders and their “affiliated persons”. 

According to the draft bill, ‘insiders’ will be obliged to report to the
Federal Commission for the Securities Market within a period of five days
after entering into a transaction involving the securities of a company
about which the parties in the transaction posses inside information. 

The draft law stipulates for the Federal Commission becoming the chief
watchdog of the securities market, endowed with the right to conduct a
thorough probe into any transaction concluded on the securities market,
should there be any suspicion of insider information being involved. 

The Commission will also be entitled to challenge deals, not only with
information collected by the commission itself, but also with reports
provided by third parties. 

It is somewhat ironic that some deputies still do not know whether
according to the new bill, they themselves are potential insiders. Vladimir
Tarachev admits that in theory it is possible for the Russian securities
market is still largely influenced by political events. Nevertheless,
according to the data at Tarachev’s disposal, no deputy has yet been
exposed for speculating on the stock exchange. 

In any case the draft will be forwarded to all the potential insiders for
consideration and is expected to get its first reading in the State Duma
within a month. 

Anton Baranov 


The National Interest
No. 60 
Summer 2000
Extracts from
Tainted Transactions: An Exchange

A letter exchange in response to Janine Wedel's "Tainted Transactions:
Harvard, Russia and the Chubais Clan" (Spring 2000). Participants: Jeffrey
Sachs, Anders Aslund, Marek Dabrowski, Peter Reddaway, Igor Aristov, Wayne
Merry, Michael Hudson, David Ellerman, Steven Rosefielde and Janine Wedel. 

Jeffrey D. Sachs, director of the Center for International Development,
Harvard University:

Janine Wedel, for the umpteenth time, repeats her phony diatribes against
me ("Tainted Transactions: Harvard, the Chubais Clan and Russia’s Ruin",
Spring 2000). Please permit me to correct the record.

Despite Dr. Wedel’s weird insinuations that I had no advisory role with the
Russian government, I was an official adviser to that government, but only
for two years and two months, from December 1991 to January 1994. I worked
closely with Anders Aslund during this period. President Yeltsin officially
designated us as advisers during a meeting with us on December 13, 1991,
and we received offices in the Council of Ministers during 1992 and in the
Ministry of Finance during 1993. During the period until the end of 1992,
Aslund and I mainly advised acting Prime Minister Yegor Gaidar, and in 1993
we led a unit within the Russian Finance Ministry advising Deputy Prime
Minister Boris Fedorov. (The most bizarre and entertaining fiction is Dr.
Wedel’s additional suggestion that I somehow secretly worked with the IMF
during 1992.)

During this entire period, there were notoriously heated divisions within
the Russian government, and between the Russian government on one side and
the Duma and Central Bank on the other. The reformers, led by Gaidar and
Fedorov, did what they could to pursue needed reforms, but very often they
were blocked. Unlike my experience in many other countries, such as Poland,
little of what I recommended was actually enacted. It wasn’t pleasant being
blamed for high inflation and other ills that resulted from the very
opposite of the advice that Aslund and I were giving (such as when the
Central Bank ran a disastrous hyperinflationary monetary policy in 1992 and
1993), but it was still worth the effort of supporting the brave reformers
fighting an uphill battle. Aslund and I publicly resigned in January 1994,
days after Gaidar and Fedorov left the government. We were concerned about
the takeover of the government by the "industrial lobby", with a
foreshadowing of the mega-corruption that was to follow, especially in the
disgraceful state giveaways of the lucrative natural resource enterprises,
mainly during 1994­96. I was also particularly distressed by the lack of
appropriate Western advice and assistance, a point that I made repeatedly
in writings and speeches at that time and afterward.

Somehow in this maelstrom some people came to assume (or at least claimed
to assume) that whatever happened was what I had recommended, even though I
was publicly and privately critical of the lawlessness and lack of reform
progress. For a few people this has continued despite the fact that I have
not advised the Russian government for six years or even been to Russia for
five years. Wedel writes in just this nonsensical vein. For many years I
have publicly and repeatedly denounced the scandals of privatization such
as the "shares for loans" deals, and published articles and books
describing and criticizing the lawlessness and corruption in Russia
(including The Rule of Law and Economic Reform in Russia, 1997).

Dr. Wedel deliberately and systematically mixes personal references to me,
the Harvard Institute for International Development (HIID) and other
Western advisers, so that she can rope me into her phony conspiracy
theories. The HIID projects she refers to were directed by Professor Andrei
Shleifer at Harvard, and I had no role in those projects. She seemingly
can’t understand that I had a completely separate project, and that I
resigned from advising the Russian government as of January 1994. One and
one half years later, I became director of HIID in July 1995, and Professor
Shleifer’s project was one of sixty or so ongoing HIID projects around the
world. During the period in which I directed HIID (1995­99), I stayed
completely away from any personal involvement in any Russian advisory work,
consistent with my public resignation in 1994. Moreover, when dubious
practices in Professor Shleifer’s project came to the attention of the U.S.
Agency for International Development (USAID) and myself in the spring of
1997, USAID and I worked together to close the project immediately. 

Dr. Wedel writes darkly that "it is unclear who paid Sachs and his team."
As I have explained repeatedly to her, and to anyone else that had the
slightest interest, I received my academic salary for my work in Russia,
with my leave time from Harvard University covered mainly by the United
Nations University in Helsinki in early 1992, and thereafter by the
advisory project supported by the Ford Foundation and the Swedish
government during 1992­93. USAID supported a small amount of my summer
academic salary, probably a total of a month or two. Of course, I never
invested a penny in Russia, or in any other country in which I have served
as an economic adviser. Nor did I engage in any consulting services for
private businesses or investors involved with the Russian economy. 

Dr. Wedel also accuses me of somehow improperly promoting myself to the
Russians as a person "facilitating access to Western money." As any mildly
interested observer of the Russian reforms would know from my writings and
speeches, I strongly believed and publicly argued in 1992 that the West
should provide large-scale assistance to Russia to support the early days
of market reforms and stabilization, something the West manifestly declined
to do. There was nothing sinister, surreptitious or secretive about any of
this: I simply believed (and continue to believe) that timely Western help
in 1992 and 1993 could have played an important role in helping real
reforms and democratization to take hold, but of course it did not come.
The Russian reformers and I knew that the chances for the needed
large-scale support were not high, but we felt the effort was worth making

Wedel’s twisting of facts and outright misrepresentations go on and on.
What I find hard to understand is how The National Interest could publish
this nonsense without even doing an iota of fact-checking.

. . .

Wedel replies:

Jeffrey Sachs’ and Anders Aslund’s letters contain a series of unsupported
counter-assertions. Both deal in significant part with issues that are not
addressed in, or material to, my National Interest article. The article
presents the theory of transactorship, a mode of organizing relations among
nations. Both Sachs and Aslund are stunningly silent on this central issue:
neither attempt to refute either the theory or the critical body of facts
supporting it. The principal point of the article is that a group of
self-interested actors and advocates from both the United States and
Russia, supported by Western aid and promoted by high U.S. officials to
whom they were closely linked, managed to co-opt U.S.-Russian economic
relations and helped to bring about the fiasco that followed. It is not at
all "contradictory" to conclude that Western economic advisers in Russia
were both "influential" and "ineffective." The Harvard-Chubais transactors,
including Sachs and Aslund, were most influential precisely in recommending
and implementing policies that turned out to be highly counterproductive.
The outcomes of their activities ran directly counter to the stated aims of
the U.S. aid program in Russia. 

Sachs seems not to understand that the issue is the multiple and
conflicting roles that the transactors assumed (with ambiguous loyalties,
ambitions and income sources), not the specific official title they held at
any given time. Sachs restates that he advised Yegor Gaidar, which I do not
dispute, and does not deny his other roles: his transfer of loyalty from
Gaidar to Gaidar’s nemesis, Ruslan Khasbulatov, who was seen in the West as
a retrograde communist; and his offer of access to Western aid to
Khasbulatov, while urging, in his role as an American economist, that vast
amounts of such aid be sent to Russia. Sachs seems to deny that he was in
correspondence with the IMF while at the same time advising Gaidar.
However, one memorandum that I have in my possession was written by Sachs
and David Lipton (who became a Treasury undersecretary), dated May 11,
1992, and directed to key Russian decisionmakers at the IMF. It shows that
Sachs and Lipton were privy to internal discussion within the Fund and were
proffering advice within that context without any mention of their role
advising the Russian side. 

Aslund and Sachs portray me as a conspiracy theorist "going after leading
advocates of radical market reform." On the contrary, I have been trying,
as an anthropologist, to understand the roles being played by key actors
involved in the aid process and in guiding economic transition. If those
studies have resulted in uncovering unseemly activities, that is a
consequence of what the actors have done, not of any analytical bias. I
have no personal antagonism toward any of the key figures involved, nor did
I approach the analysis with any ideological agenda. 

As a researcher, I have pieced together the story based on hundreds of
documents, U.S. General Accounting Office (GAO) reports and interviews. I
have been studying Eastern Europe as the centerpiece of my professional
work for more than twenty years. As an anthropologist, I am especially
aware that people I interview don’t always tell the truth--and not only
Eastern Europeans. I always cross check critical information and confirm
key points with multiple sources....


The National Interest
No. 61 
Fall 2000
Extracts from Living With Russia 
by Zbigniew Brzezinski

. . . In considering Western policy toward Russia, we would do well to
reflect briefly on the collapse of the Ottoman Empire and the subsequent
emergence of the Turkish national state. That experience is more pertinent
to Russia’s dilemmas than either Germany’s and Japan’s after 1945, or Great
Britain’s and France’s after they ceased to be empires.

Unlike Germany and Japan, Russia was neither occupied and subjected to
political “re-education” by the Cold War’s victors, nor treated to
large-scale social reconstruction under their direct supervision. For most
Russians, the outcome was more ambiguous and confusing. Most at first did
not feel defeated; many later felt deceived; few were receptive to Western

Like the Russian Empire, the Ottoman Empire was territorially contiguous.
Both Ottoman and Russian imperial elites drew many members from the subject
nationalities. The boundaries of what was specifically Russian or Turkish
territory were not very precise. In both cases, the empire was not a remote
reality overseas but a seamless extension of the homeland itself. Hence,
the sudden loss of empire was both more searing and directly disruptive.

In contrast to the efficiently repressive Soviet Russia, however, the long,
slow decline of the Ottoman Empire spawned a significant minority of
dissident intellectuals and young officers determined to model Turkey on
the West European nation-states. The Young Turks, first organized in the
late nineteenth century, gained increasing political influence, especially
in the wake of the military defeats suffered by the Ottoman rulers. Some of
them at first sought to re-create a modernized version of the old empire.
But the defeat suffered in World War I prompted the next generation of
reformist leaders, notably Kemal Pasha (who later became known as Atatürk),
to embrace the concept of a modernized, post-imperial state, patterned on
the European nation-states. In short order, the Swiss civil code, the
Italian penal code and the German commercial code were adopted, and—very
important to note—irredentist claims, derived from the imperial past, were
explicitly renounced.

Three timely conclusions can be drawn from the emergence of the modern
national Turkish state: first, Turkey would not be contending today for
membership of the European Union were it not for the fact that Atatürk and
his bold reformers represented a critical mass capable of effecting a
psychological break with the past; second, this effort would not have
endured if the West had continued to spurn Turkey; and, third, the process
of historical self-redefinition is necessarily a prolonged one, to be
measured in decades, not years, and is likely to be punctuated by periodic

These conclusions contain important lessons for Russia. Although Putin
displays a picture of Peter the Great in his office, his reliance on a KGB
entourage and his professed admiration for his KGB predecessor, Yuri
Andropov, indicate that Putin is no Russian Atatürk. His geopolitical
mindset reflects the thinking of the last Soviet generation and not of the
first post-Soviet generation. Nonetheless, a new outlook is being nurtured
beneath the existing political surface in the much more open conditions of
post-Soviet Russia. And if only for actuarial reasons, the next generation
of Russian leaders is unlikely to be the product either of the KGB or of
the apparat.

That generation will come of age at a time when Russia’s past imperial and
global status will have become a distant memory rather than an entitlement.
This inevitably will create a different global outlook. The next generation
of leaders is much more likely to include graduates of Western universities
and businessmen with genuine international (but not criminal) exposure,
sharing a more widespread desire for Russia not only to be like the West
but to be a part of the West. Not least, the Russian public will
increasingly demand that its overall lifestyle begin to match at least that
of Central Europe, and that Russians not be deprived of free access to the
enlarging Europe next door. In short, a critical mass supportive of a
genuine break with the past is taking shape.

To encourage that process, Western aid to Russia should be continued. But
such assistance should not be directed to the central government. Russia is
wealthy enough to be able to address its basic problems through its own
resources, and Western aid has the tendency to perpetuate the worst
inclinations in the current elite. Also, since financial aid is fungible,
its diversion to military programs and operations (such as those in
Chechnya) is a likelihood. Instead, Western aid should concentrate on
helping Russia’s nascent NGOs, which promote the emergence of a new,
younger and more open-minded political elite—an elite that understands its
own interest in a society based on the rule of law.

The United States should also expand its ongoing visitor programs for
younger Russian political and economic aspirants. In 1999 the Library of
Congress initiated a program to bring to the United States some 2,000
younger Russian local officials for visits designed to acquaint them with
the complexities of American democracy. This initiative deserves to be
enlarged tenfold, and it should be complemented by a similar program for
the newly independent states. After World War II, tens of thousands of
young Germans and Japanese were made familiar with American democracy, with
an immensely beneficial impact. Younger Russians, especially from outside
Moscow and St. Petersburg, should have the same opportunity.

However, the reorientation of Russia’s outlook will be delayed if Russia’s
current political leadership gains the impression that its priorities can
be successfully pursued, especially in the space of the former Soviet
Union. That such illusions and nostalgia tend to be self-perpetuating makes
it all the more important that Western policy both engage Russia and drive
home the need for a basic redefinition of Russia’s role in Eurasia. To
facilitate Russia’s historical transformation, Western support for the
consolidation of the new states—especially Ukraine, Georgia, Azerbaijan and
Uzbekistan—must be sustained.

Admittedly, the necessary strategic balance will not be easy to strike. In
fact, some Russian sources have claimed that Clinton administration
officials at times have encouraged Russian efforts to regain a dominant
position in the former Soviet space. Even the internationally condemned
Russian assault on Chechnya did not produce a single noticeable U.S.
response, on the grounds that it would be contrary to the policy of
“engagement.” It may unfortunately be the case that, during the latter
phases of the Clinton administration, the one-sided U.S. emphasis on the
West engaging Russia—but not on Russia engaging the West—could delay by
some years the day when Russia comes fully to terms with its current
historical condition.

To hasten rather than delay that moment, the transatlantic community must
patiently keep the grand option of an ever widening and deepening
association open to Russia, while persistently re-inforcing an environment
that discourages any Russian efforts to turn back the geopolitical clock.
Only then may the next generation of Russian leaders—no longer the products
of the Soviet era and more likely to represent a new critical political
mass—draw the sole realistic conclusion to the dangers posed by their
country’s internal malaise and external vulnerability: namely, that in
order to recover Russia must opt for the West. What is more, Russia must do
so unambiguously and unconditionally as a post-imperial state. Russia’s
imperial baggage cannot be dragged into Europe. Russia cannot be at once
imperial and European. . . .


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