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

Johnson's Russia List
#4527
20 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. AFP: Russian minister admits blunder over deal with media 
magnate. (Lesin)
2. Itar-Tass: Russia Achieved Political Stability-Kasyanov. 
3. AFP: Foreign sub collision most likely cause of Kursk disaster: 
admiral.
4. RFE/RL: Sophie Lambroschini, New Study Sees NATO, EU Threat.
5. Washington Post editorial: Strangling Russia's Media.
6. Edward Lucas: BBC Monitoring.
7. Nigel Gould-Davies: Re: 4523/Moscow Times.
8. Interfax: GOVERNMENTAL COMMITTEE CONSIDERING THREE SCENARIOS 
FOR KURSK DISASTER.
9. Reuters: EBRD to mobilise private funding for Russia.
10. Financial Times (UK): Arkady Ostrovsky, Russian oil sell-off 
raises Dollars 1.08bn. (Onako)
11. Wall Street Journal: Paul Hofheinz, Poverty Jumped in Former 
East Bloc As Reforms Took Hold, Study Finds.
12. Speaker's Advisory Group on Russia (SAGR) report on web.
13. Washington Times: David Sands, House GOP report says Gore's 
policies hurt U.S.-Russian ties.
14. Gore2000: Cox Report Evidently Biased.
15. RFE/RL: Andrew Tully, Is Berezovsky Interested In The Presidency?
16. Victor Yasmann: Re 4523-:Donnelly/cuts in military.
17. The Times (UK): Giles Whittell, Russian Church accused of illegal 
rackets.
18. Vremya Novostei: Timofei Bordachev, VERY EXTERNAL POLICY.]
******


#1
Russian minister admits blunder over deal with media magnate


MOSCOW, Sept 20 (AFP) - 
Russian Press Minister Mikhail Lesin admitted Wednesday he had blundered by
signing a deal to drop fraud charges against anti-Kremlin media mogul
Vladimir Gusinsky if he sold his Media-MOST empire.


But the minister said he would not resign unless told to and denied that
the government had used blackmail to force Gusinsky to yield his
controlling stake in Russia's only independent media group.


"I broke the regulations in a certain manner. A minister should not put his
signature to such a document," he told a hastily-arranged news conference.


"It is not a coincidence that the judicial process against Gusinsky was
halted after this accord," the minister added.


Lesin insisted that he had not been acting as a government minister when he
signed off on the controversial annex to the Media-MOST sale, which stated
the case against Gusinsky would be dropped if he sold the media group to
gas monopoly Gazprom, whose main shareholder is the state.


He also distanced himself from an interview in a Moscow newspaper Wednesday
in which he appeared to suggest the Kremlin had given its blessing to his
actions.


Lesin said, however, he had informed his boss of the deal -- Prime Minister
Mikhail Kasyanov -- once it had been signed.


Gusinsky, whose national NTV channel has angered the Kremlin with its
critical reports on the 11-month-old war in Chechnya, said he was forced to
sign a sale contract to avoid imprisonment on trumped up fraud charges.


But Lesin denied the accusation.


"It was drawn up entirely at the initiative of Media-MOST and Gusinsky in
particular," Lesin said in an interview published Wednesday with the
Kommersant business daily.


Charges against Gusinsky, briefly jailed in June, were dropped on July 27,
a week after the Lesin signed the controversial protocol to the sale of the
debt-ridden Media-MOST group to its main creditor, Gazprom.


The media magnate, who left immediately for Spain and has not returned, now
faces criminal proceedings after Gazprom accused him of illegally
transferring the group's assets offshore.


Russian deputy prosecutor-general Vasily Kolmogorov said Wednesday in an
interview with the Rossyskaya Gazeta daily that the authorities were
launching an international probe into the matter.


"A decision has been taken to launch an inquiry and to institute criminal
proceedings. We will ask Britain and other countries to verify the
lawfulness of the transfer of Media-MOST assets," he said.


Alfred Kokh, head of Gazprom's media subsidiary, vowed court action to
force Media-MOST to honour the sale agreement and did not rule out seizing
the newspaper-to-television group's assets.


"If there was such a ruling that these assets are rightfully ours because
of our debts, why not? We will then restructure the company and sell it" to
Western investors, he told Izvestia daily.


Gazprom says it is owed 473 million dollars by Media-MOST. The sale
contract now repudiated by Gusinsky involved a 300 million dollar cash
payment and debt cancellation.


The burgeoning row comes amid heightened fears for media independence in
Russia following Putin's approval last week of an "information security
doctrine" bolstering state control of broadcasters.


NTV is Russia's only nationwide television channel in private hands.


Fellow media mogul Boris Berezovsky claims that the Kremlin threatened to
jail him unless he gave up his 49 percent state in ORT, Russia's
most-watched television station.


Observers say Gazprom's new-found debt collecting zeal coincides with
intense Kremlin pressure on the gas monopoly, 38 percent of whose shares
are state owned.


******


#2
Russia Achieved Political Stability-Kasyanov. 


LONDON, September 19 (Itar-Tass) - The Russian political situation changed 
radically during the past nine months: "we achieved political stability," 
Russian Prime Minister Mikhail Kasyanov said on Tuesday, addressing the 
Confederation of British Industry. 


He explained that the stabilization had become the result of the elections to 
the State Duma and the election of a new Russian president. He stressed that 
"people's confidence in the president and the authorities in general is 
steadily growing." 


"This period of stability enables us to implement real transformations, real 
reforms," he continued. When the new government was formed last May, it was 
facing two main tasks: the first one was to put through the parliament a 
package of draft laws, aimed at consolidating power, "in order to ensure the 
observance of laws on the whole of the Russian territory." The second task 
included economic transformations and the reform of the tax system, Kasyanov 
continued. He stressed that "the targets, that we set for ourselves, have 
been reached by 100 per cent." "We have a new tax code, which shows the 
investors that the authorities are working to create a more predictable and 
stable tax system," he said. 


"The next stage is connected with structural transformations, aimed at 
creating a competitive atmoisphere, with the reforming of our natural 
monopolies, with the creation of a commodity market, to which all would have 
equal access ... Practical experience shows that a period of stability is 
usually does not last longer than two years. This is why the authorities 
should take effective measures within this period for reforming the national 
economy," the Prime Minister said. 


******


#3
Foreign sub collision most likely cause of Kursk disaster: admiral


MOSCOW, Sept 20 (AFP) - 
A collision with a foreign submarine mostly likely caused the Kursk nuclear 
submarine to sink, the commander of Russia's Northern Fleet said in a 
newspaper interview Wednesday.


"I believe that a collision with a foreign submarine is the most logical of 
all the versions" for the disaster, Admiral Vyacheslav Popov told the 
official Rossyskaya Gazeta daily.


"The collision could have deformed the advance unit of the torpedo system and 
precipitated a torpedo explosion or another accident in the bow section," he 
said.


That could have caused the submarine "to crash to the seabed, after which the 
second, main explosion of a weapons system occurred," said Popov.


The design of the Kursk, the most modern submarine in the Russian fleet, made 
it vulnerable to collisions as its main weapons systems were located outside 
the pressurised bulkhead, Popov said.


The Kursk was lost with all 118 crew on board in the August 12 catastrophe.


President Vladimir Putin subsequently came under sharp public criticism for 
failing to promptly take charge of the ill-fated rescue effort for the vessel.


A government commission into the disaster is currently evaluating three main 
theories: that the Kursk struck a World War II era mine, suffered a torpedo 
misfire or struck a foreign submarine, probably belonging to a NATO member.


A Russian lawmaker involved in a separate parliamentary probe last week said 
the Russian nuclear cruiser "Peter The Great" had probably sunk the Kursk 
with a torpedo in a friendly fire incident during August wargames.


That theory first emerged in the German newspaper Berliner Zeitung ,which 
quoted an internal report by the Russian domestic intelligence agency, FSB.


Russian officials have hotly denied the claim saying live ammunition was not 
used in naval exercises.


Britain and the United States have firmly denied their vessels, monitoring 
the August exercises in the Barents Sea during which the Kursk sank, were 
involved in any collision with Russian warships.


"There is also the question why three foreign submarines -- two American and 
one British -- were in the area of our naval exercises at the time," Popov 
told the paper.


A refusal by US Defence Secretary William Cohen to allow Russian officials to 
inspect the US submarines Toledo and Memphis, has only fuelled Moscow's 
suspicions. The British submarine Splendid was also in the zone.


******


#4
Russia: New Study Sees NATO, EU Threat
By Sophie Lambroschini


Several Russian analysts this week issued a new study on Russia's relations 
with Europe. It discusses, among other questions, how Moscow should deal with 
NATO's changing role and the European Union's planned expansion to the East. 
RFE/RL Moscow correspondent Sophie Lambroschini talked with some of the 
contributors. 


Moscow, 15 Sept 2000 (RFE/RL) -- The challenge to Russia posed by changing 
Western European multilateral organizations is the major issue addressed by 
eight young Russian political scientists in a new study published by the 
Carnegie Fund that was presented in Moscow this week. 


NATO's expansion to the East -- which has already brought it three Central 
European members -- is treated at length in the study, whose title is "Russia 
and European Security Institutions Entering the 21st Century."


The analysis also warns of the effects of the European Union's planned 
further expansion, which could take in as many as 10 Central and East 
European nations, including the three Baltic states.


Dmitry Glinsky-Vasiliev, a researcher with the Russian Institute for 
International Economic relations, acknowledges that NATO expansion today is 
seen as a threat by Russian foreign policymakers.


He says they fear not only the effects of NATO having made Poland, Hungary, 
and the Czech Republic members, but also the alliance's Partnership for Peace 
program that is active in the former Soviet states. He says many Russian 
politicians believe granting NATO membership to Latvia, Estonia and Lithuania 
would be a special menace to Russia. Glinsky-Vasiliev himself thinks the 
Baltic states joining NATO soon is unlikely because a number of the 
alliance's members are wary of taking them in. He says he thinks granting the 
three nations membership would not be a positive step. But he also feels it 
would not pose any strictly military threat at Russia's borders. 


For Glinsky-Vasiliev, the key is not the extension of NATO's membership, but 
what he perceives as its changing international role, especially after last 
year's NATO bombing of Yugoslavia to curb ethnic cleansing in Kosovo. That's 
where he sees the danger:


"Expansion in the number of NATO members is, after all, a regional problem, a 
problem first and foremost between Russia and the West. But in a larger 
context, the other expansion -- the expansion of NATO's mission -- poses a 
global security threat."


Ekaterina Stepanova, a research associate with the Carnegie Moscow center, 
agrees with Glinsky-Vasiliev's logic. She says increasing NATO's membership 
is much less threatening than expanding its mission from beyond its 
traditional defensive role.


Stepanova says Russia's security interests are affected by NATO's expanding 
role, particularly its influence on Russia's western neighbors, such as 
Ukraine and the newly independent states of the south Caucasus. She says if 
Ukraine, for example, were to have a crisis, Russia and NATO and would both 
be involved.


"Ukraine is a classic case. To be perfectly blunt, what Russia is worried 
about is not the landing of paratroopers around St. Petersburg. What Russia 
is concerned about is -- for example -- the destabilization of the situation 
in Ukraine. Now, there's Kuchma, but what would happen if he was suddenly not 
there anymore? If the situation in Ukraine is destabilized, and the conflict 
internationalized, then Russia and NATO will be pulled into it."


The study also pays special attention to the European Union's coming 
expansion eastward. Its authors say the critical questions posed by EU 
enlargement are often overlooked because Russia still perceives its threats 
as largely military and not economic. 


According to Igor Leshukov, research director at St. Petersburg's Center for 
Integration research institute, the EU poses challenges to both Russia's 
economic and security interests. But, he says, Russia's efforts to cooperate 
with the EU -- in working groups and other ways -- leave hope for what he 
calls a "realistic" approach to EU expansion.


He says the Russian enclave of Kaliningrad will pose a special problem. If 
the EU expands to the Baltics, the Kaliningrad region will be wholly within 
the Union. He adds that Moscow, the Baltic States, Poland and the EU should 
start working out a special status for Kaliningrad because that will prove 
very difficult. 


"Integration will not be possible if Russia keeps full sovereignty over 
Kaliningrad. A concrete dialogue about the Kaliningrad issue between Russia 
and its EU partners is necessary. There's a mutual interest in this because 
the expansion of the European Union to Poland and the Baltic region without a 
resolution of the problem of Kaliningrad's status is not possible. 
Kaliningrad would then remain an abscess that hampers normal development."


The contributors stress that the crucial importance for the West is not to 
give Russia the impression that European processes are taking place without 
it. The coordinator of the project, Dmitry Trenin, says Russia has no choice 
but to adjust to the changes that Europe is going through. 


Trenin calls Russia's expressed aspirations to be a great Asian power a "myth 
aimed at scaring Europe from time to time." He says Russia will never be a 
"big brother" to India, Iraq, let alone China. He says Russia is part of 
Europe by 


******


#5
Washington Post
September 20, 2000
Editorial
Strangling Russia's Media

RUSSIAN PRESIDENT Vladimir Putin, who proclaimed his devotion to a free press 
during a recent visit to the United States, in fact seems determined to 
destroy Russia's independent media, the growth of which constituted one of 
the important successes of the post-Soviet era. His latest target is NTV, 
Russia's only independent television network. He is attacking it with a 
veneer of legality, but the underlying tactics of threats, imprisonments and 
political prosecution are not subtle. 


Some clues to Mr. Putin's thinking are available in a new "information 
security" doctrine. The document is vague--and contradictory. It includes 
allusions both to the "constitutional rights" of individuals to obtain and 
use information, and to the state's need to "defend national interests in the 
information sector as defined by checks and balances safeguarding the 
interests of the individual, of society and of the state." It also hints of 
threats to Russia's national interests that might be posed by foreign 
journalists. What it doesn't include is any hint that independent media are a 
critical part of a strong democracy.


That may be because Mr. Putin does not appreciate the role that independent 
media have played in post-Soviet Russia. In Chechnya, his forces abducted a 
Radio Liberty reporter, Andrei Babitsky, whom Mr. Putin had singled out for 
criticism because of Mr. Babitsky's tough reporting on the war. He has 
pressed Boris Berezovsky to unload his 49 percent stake in the ORT television 
network so that the state, which owns the other 51 percent, can more freely 
exercise control. ORT's political commentator, Sergei Dorenko, was recently 
fired from his position, which he had used to aim acid commentary at Mr. 
Putin's handling of the Kursk submarine disaster. The sudden firing 
apparently came at the Kremlin's direct insistence. Now the Kremlin, which 
jailed NTV owner Vladimir Gusinsky for three days several months ago, is 
intensifying its campaign to force him to sell his firm to Kremlin-controlled 
interests.


Mr. Putin has chosen his enemies astutely. Mr. Gusinsky and Mr. Berezovsky, 
leading members of Russia's widely despised business elite, have little 
popular support. Nor can either claim an unblemished history of fair-minded 
publishing: Both used their media assets to promote Mr. Yeltsin's candidacy 
in 1996, and ORT and its Mr. Dorenko in fact helped Mr. Putin by viciously 
attacking his opponents a year ago.


But if Russia's media barons are imperfect tribunes of free expression, an 
important principle is at stake. Mr. Putin has already pushed through 
legislation eliminating the power of Russia's regional governors; he has 
co-opted the Duma, which was never constitutionally strong to begin with. An 
independent press is one of the few remaining institutions capable of holding 
the Russian government accountable for its actions. None has been more dogged 
than Mr. Gusinsky's TV network, radio station, newspaper and weekly magazine 
Itogi, which he publishes in partnership with The Washington Post Co.'s 
Newsweek.


Mr. Putin would have us believe that Mr. Gusinsky's independence is 
threatened by a run-of-the-mill financial dispute, and there's no question 
that his company is in debt to the Kremlin-controlled Gazprom. But there's 
nothing run-of-the-mill about imprisoning one side in the dispute, forcing 
him to come to terms while under threat of further prosecution and then--as 
happened yesterday--turning prosecutors loose to enforce the tainted deal 
rather than leaving the dispute to civil courts to resolve. If Mr. Putin 
succeeds in taming the media, he will have undone a fair piece of the good 
work of the Yeltsin era.


******


#6
Date: Tue, 19 Sep 2000
From: Edward Lucas <edwardlucas@economist.com> 
Subject: BBC Monitoring


I think there may be a misunderstanding in the recent criticism of the
BBC Monitoring report of the fuel supply situation in Novosibirsk. I can
well believe that the Kommersant article about the fuel shortage was
totally fictitious or wildly exaggerated, but the BBC Monitoring Service
isn't to blame for not having checked it, because that isn't their job.
Unlike the BBC news desks (which are an entirely separate bit of the
organisation), Monitoring, like the American FBIS, is just a commercial
service which translates and distributes vast swathes of media reporting
in the countries it covers--the average daily bulletin on the FSU is
about 300kb. It would require a staff of thousands to check all the
information it contains. Even if that was practical, it would make the
service prohibitively expensive (it's already a juicy $2000 a year). So
blame Kommersant for the hype, but not the BBC: that would be rather
like holding David personally accountable for everything that goes out
on the JRL.


Edward Lucas
Moscow correspondent
The Economist


******


#7
Date: Wed, 20 Sep 2000 
From: Nigel Gould-Davies <nigel.gdavies@hertford.oxford.ac.uk>
Subject: Re: 4523/Moscow Times


The recent Moscow Times report on Gusinsky's repudiation of his July 20
deal with Gazprom on the sale of Media-Most refers to the text of the
agreement available at www.geocities.com/abramson4/. It is an extraordinary
document, above all prilozhenie 6 which lists the necessary conditions for
the implementation of the agreement. In short, a commercial organisation
(albeit one intimately linked to state structures) is contracting with a
private individual to arrange the dropping of a criminal investigation and
to guarantee the observance of basic freedoms (of domicile, movement, and
travel), in exchange for the acquisition of a media empire. 


Is there a name for this phenomenon? "Corporatism" was coined in Western 
Europe to describe the use by the state of "peak associations" (employers'
federations and trade unions) to bind their members to collective
bargaining agreements for purposes of macroeconomic management. This is
something else: the state's subcontraction to a corporate entity of the
bargaining power of discretionary coercion, in order to gain control over
a troublesome independent voice. Are there precedents for such an
arrangement in other countries?


******


#8
GOVERNMENTAL COMMITTEE CONSIDERING THREE SCENARIOS FOR KURSK DISASTER


MOSCOW. Sept 19 (Interfax) - The governmental probe into the causes
of the 'Kursk' disaster is now considering three main versions, Deputy
Russian Prime Minister Ilya Klebanov told the press on Tuesday after a
meeting with President Vladimir Putin.
Around twenty versions of what caused the submarine's sinking had
originally been looked at, Klebanov noted. "Now, there are three
versions: collision with an underwater object, collision with a World
War II-era mine, and a small initial explosion in the first
compartment."
Klebanov said that a powerful explosion equivalent to 3-5 tonnes of
TNT had ripped through the doomed sub 104 seconds after the initial
cause of the catastrophe, and said that most of the crew were killed
during the first minutes of the event.
In his opinion, he said, "all three versions are indirectly
confirmed." The deputy prime minister said that experiments aimed at
clarifying the situation the Kursk's sinking are currently being
conducted.
Klebanov said he hopes that the research vessel 'Academician
Keldysh', which will arrive on the scene of the accident sometime after
September 20, will help to clarify the causes of the catastrophe.
Klebanov noted that, in spite of the cancellation of the contract
with the Keldysh, foreign partners have refused compensation. "The
research vessel will return to the area of the sinking of the Titanic
upon completion of its work in the Barents Sea and the contract will be
restored," the Russian deputy prime minister said.
Speaking with the press, Russian Security Council Secretary Sergei
Ivanov said that the U.S. had given Russia technical information
specifying geographical coordinates for the explosions registered on the
submarine, as well as their temporal parameters. The U.S. also
registered an explosion equivalent to 5 tonnes of TNT, he noted. "The
U.S. did not provide any materials concerning the causes of the
explosions," however.
Ivanov told the assembled press that the Russian authorities had
turned to the U.S. twice. "The first letter was from navy commander
Vladimir Kuroyedov, and in response to this letter the U.S. side
provided the corresponding information I just mentioned. The second
request [a request to allow Russian representatives to examine the two
U.S. submarines that were in the Barents Sea at the time the Kursk sank]
was from Defense Minister Igor Sergeyev. The answer was in the
negative," Ivanov said.
Also speaking with the press, Kuroyedov emphasized that "for the
time being, submarines of the Kursk's type will not be used."


******


#9
INTERVIEW-EBRD to mobilise private funding for Russia
By David Chance

LONDON, Sept 19 (Reuters) - The European Bank for Reconstruction and 
Development is seeking to restore long term finance for Russian companies 
which have been cut off since the 1998 debt default and believes its 
involvement can be a catalyst for reform, Deputy Vice President David Hexter 
said on Tuesday. 


"There is not a problem for short term money, private banks can probably go 
one or two years, but beyond two years there is very little source of finance 
for Russian companies," Hexter said in an interview ahead of talks with 
Russian Prime Minister Mikhail Kasyanov. 


The EBRD is close to agreeing terms with oil company LUKoil <LKOH.RTS> for a 
$150 million medium term loan and more controversially, is considering a $150 
million loan with an additional $100 million syndicated to banks for natural 
gas giant Gazprom <GAZP.MO>. 


Speaking as the EBRD board puts the final touches to its Russia strategy and 
Kasyanov visits London, including a lunch at the bank on Wednesday, Hexter 
said the EBRD was well placed to exert influence with its loans to push 
Russian companies to greater openness. 


"What we are trying to do is to use our finance to move companies forward in 
terms of in accounting and improved corporate governance," Hexter said. 


He declined to comment on the specifics of the loan negotiations with 
Gazprom, a company which analysts say has scant regard for the interests of 
investors and which is involved in a feud with Media Most, Russia's only 
independent media company. 


Controversially, Gazprom may also be engaged in the purchase of a Hungarian 
chemicals company via an offshore Irish company. 


EBRD INFLUENCE ON GAZPROM, LUKOIL KEY, ANALYSTS SAY 


Analysts said the role of the EBRD would be key to opening both Gazprom and 
LUKoil, which could lead to greater openness in Russian companies as a whole. 


"International financial institutions such as the EBRD have the perfect 
opportunity to enforce higher standards of corporate governance on these two 
major Russian companies in return for giving their managements the seal of 
approval which a loan from the EBRD brings," said Stephen O'Sullivan, head of 
research at United Financial Group. 


Hexter at the EBRD agrees. 


"The leverage is the money," Hexter said. 


"The carrot is that they can start thinking about us for their very 
significant medium term capital expenditure requirements," he added. 


For foreign banks who want to get involved with Russia loans, the presence of 
the EBRD provides comfort. 


"The EBRD has preferred creditor status and the fact that Russia did not 
default on repayments during the 1998 default means that for banks who would 
quite like Russia exposure, there is an element of risk which is taken away," 
Hexter said. 


If the LUKoil and Gazprom deals are approved, they together will total $400 
million, including the portion which is syndicated to banks, a figure which 
is larger than all of the loans made in 1999 by the EBRD to Russia. 


There is also the possibility of a $170 million loan and $50 million equity 
investment in a joint venture between General Motors <<A HREF="aol://4785:GM">
GM.N</A>> of the U.S. and Russian carmaker AvtoVAZ <AVAZ.RTS>. 


That would put the EBRD well on track towards its target of lending 1.0 
billion euros ($854.7 million) a year to Russia, up from just 220 million 
euros in 1999, the year after the default.


*****


#10
Financial Times (UK)
20 September 2000
Russian oil sell-off raises Dollars 1.08bn
By Arkady Ostrovsky


The Russian government raised Dollars 1.08bn yesterday in the test case
privatisation auction of an oil company, which analysts say may lead to
revaluation of the country's oil sector and pave the way for further sales
of state assets. 


Tyumen Oil Company (TNK), one of the country's most aggressive oil groups,
bid 2.5 times the Dollars 425m starting price for an 85 per cent stake in
Onako, a small integrated oil company in the south-east of Russia. 


This is the second largest privatisation in Russian history, in terms of
the money received by the government, after the sale of Svyazinvest, a
telecommunications group. 


Analysts said the sale of Onako was a rare example of what they called a
"fair" privatisation, after a decade of transfers of state assets to a
group of politically connected business tycoons at knock-down prices. 


"This is the first time in Russian history that the state got a full and
fair price for an oil company," said James Henderson, head of research at
Renaissance Capital, a Moscow-based brokerage. 


At a price of Dollars 1.08bn, the government received Dollars 159 for every
tonne of oil produced by the company, compared with Dollars 29 a barrel in
the privatisation of Lukoil, the country's largest oil company, according
to Steven Dashevsky, an oil analyst at Aton Capital, a Russian brokerage. 


Observers said the successful sale of Onako signalled a new phase in
Russia's privatisation and would pave the way for the sale of Rosneft and
Slavneft, the last two large oil companies to be privatised. 


The sale of Rosneft flopped in 1998, partly due to the country's financial
crisis. "It is clear that these companies are not going to be priced at
bargain level," said Stephen O'Sullivan, head of research at United
Financial Group. 


The emergence of TNK as a winner came as a surprise to most observers.
"Everyone expected the best-connected companies to win. The fact that they
did not shows Putin's commitment to distance himself from the oligarchs,"
one observer said. 


The losers in the auction are Sibneft, an oil company controlled by Roman
Abramovich, a business tycoon closely linked to the Kremlin, and Yukos, one
of Russia's largest companies, controlled by another oligarch, Mikhail
Khodorkovsky. 


TNK bid for Onako through an obscure affiliated company, Yevrotek, with no
obvious links to TNK. However, TNK later admitted that Yevrotek was a fully
affiliated company. 


Onako is a small, integrated oil company which produces 8m tonnes a year.
At Dollars 3.29 a share, however, its assets are valued higher than those
of Lukoil. 


*******


#11
Wall Street Journal
September 20, 2000 
[for personal use only]
Poverty Jumped in Former East Bloc As Reforms Took Hold, Study Finds
By PAUL HOFHEINZ (paul.hofheinz@wsj.com)
Staff Reporter of THE WALL STREET JOURNAL


PRAGUE -- Far from disappearing, poverty in the former Soviet Union and
Central Europe has risen tenfold in the decade since reforms began, the
World Bank said in a report released on Tuesday. Now, one in five people in
the former Eastern bloc lives in destitution, according to the report.


[http://wbln0018.worldbank.org/eca/eca.nsf/General/40F8E9D019CE2E5C852569580
0636022?OpenDocument]


The report, which is called "Making Transition Work for Everyone: Poverty
and Inequality in Europe and Central Asia," says the poverty found in the
former Soviet bloc is unlike most of the destitution elsewhere in the
world. For starters, poverty in Eastern Europe was virtually nonexistent 10
years ago. In 1988, the World Bank says, the poverty level was only 2% of
the population. Today, the figure is nearly 20%.


In addition, it says, the economic dislocations brought on by Communism's
collapse fell on a highly literate, well-educated population -- a status
among whom the deeply impoverished are seldom found. "Many of the people
who are poor today did not expect to be poor," says Johannes Linn, the
World Bank's vice president for Europe and Central Asia. "This came as a
shock to them."


See the full text of the report on poverty on the World Bank's Web site.
The report also says that income inequality is increasing, and approaching
the levels usually experienced in Latin American countries.


The report cites several reasons for the region's drastic fall in living
standards. Most notable, it says, is the dramatic decline in economic
output brought on by the collapse of the old economic system. In the former
Soviet Union, for example, most economies have shrunk by around 50% in the
10 years of reform. In response, most governments simply don't have the
resources to pay for basic social services any more.


The report says corruption has taken a toll, as well. Many doctors
routinely require patients to pay them cash directly, because the state
(which still owns most hospitals) pays low salaries to the doctors and
nurses. As a result, medical care is becoming less and less adequate for
many who cannot afford to pay for it, the report says.


The poorest country, according to the report, is Turkmenistan, where 80% of
the population lives below the poverty line. Because of its size, Russia
has the most poor people; 60% of the region's poor are found in Russia, the
report says.


For the report, the World Bank set the poverty level at $2 (2.34 euros) a
day -- a dollar a day more than the level the bank uses in other countries
-- because of the region's extreme weather conditions. It says the harsh
climate means additional heating costs in the winter.


The World Bank says one way to fight the rising poverty would be for local
governments to take more measures to spur economic growth. But, it says,
even economic growth must be supervised by strong government and private
institutions capable of insuring that wealth isn't simply stolen or
misplaced. "It is important that all people participate in the growth," Mr.
Linn says.


The report also found that countries that had pursued reforms the most
consistently often had the least amount of poverty. "Countries further on
the reform path have lower inequality," says Ana Revenga, an economist at
the World Bank and one of the report's authors. "The results [of reform]
have a lot to do with how the reform is carried out."


*******


#12
From: Dave Merkel <cdmerkel@erols.com>
Subject: Speaker's Advisory Group on Russia
Date: Tue, 19 Sep 2000 


The report of the Speaker's Advisory Group on Russia (SAGR) will be
available on the web at www.house.gov/republican-policy/ on September 20,
2000 after 10:00 a.m.


*******


#13
Washington Times
20 September 2000
House GOP report says Gore's policies hurt U.S.-Russian ties 
By David Sands


The Clinton administration's close identification with a few corrupt 
Kremlin officials has badly tarnished America's reputation in Russia and set 
back U.S.-Russian relations by at least a decade, a new congressional report 
says. Related Articles
The 209-page report, to be released today by a dozen senior Republican 
House members, takes direct aim at Vice President Al Gore's stewardship of 
policy on Russia over the past eight years, and it has already drawn 
prerelease fire from Mr. Gore and congressional Democrats unhappy with its 
conclusions.
"After tens of billions of dollars and eight years of mismanagement by 
the Clinton administration, the U.S.-Russian relationship is in tatters, 
characterized by deep and growing hostility and divergent perceptions of 
international realities and intentions," according to the report, titled 
"Russia's Road to Corruption."
The report criticizes the administration's record on a variety of 
fronts, including aid in building a market economy in Russia, weapons 
proliferation, efforts to fight Russian corruption, and the focus on 
President Boris Yeltsin and a few favored aides while ignoring Russia's 
parliament and other regional and private power centers.
The survey notes that Russia's relations with China have improved 
sharply, with the two talking openly of warmer ties to frustrate U.S. foreign 
policy goals.
"To find a foreign policy failure of comparable scope and significance, 
it would be necessary to imagine that after eight years of American effort 
and billions of dollars of Marshall Plan aid, public opinion in Western 
Europe had become solidly anti-American, and Western European governments 
were vigorously collaborating in a 'strategic partnership' directed against 
the United States," the report says.
House Speaker J. Dennis Hastert commissioned the study in March. House 
GOP Policy Committee Chairman Christopher Cox, California Republican, chaired 
the group, which included the chairman of the House Banking and Financial 
Services, International Relations, Intelligence and Appropriations committees.
Democrats criticized both the report and its timing, coming out just 
weeks before the presidential election.
"This is a partisan report not worth the taxpayer-provided paper it's wri
tten on," said Douglas Hattaway, a spokesman for Mr. Gore yesterday.
"While they play politics with foreign policy, Al Gore has put the 
national interest ahead of politics to help Russia reduce its nuclear arsenal 
and move toward a free-market democracy," Mr. Hattaway said.
"This is a political hatchet job. It's outrageous," said Rep. Sam 
Gejdenson, Connecticut Democrat and the ranking minority member of the 
International Relations Committee.
Mr. Gejdenson was one of five senior Democratic House lawmakers who 
wrote a letter Monday to Mr. Hastert, Illinois Republican, complaining about 
the report, although they had not seen the text.
A copy of the report was obtained yesterday by The Washington Times.
"This document should come out under the letterhead of the Republican 
National Committee," added Rep. Ellen O. Tauscher, California Democrat. "It's 
only meant to inflame the electorate 48 days before the election."
Mr. Gore has been closely identified with the administration's Russia 
policy since being appointed by Mr. Clinton to head a joint commission with 
former Russian Prime Minister Viktor Chernomyrdin overseeing a number of 
bilateral issues, including energy and space exploration.
Mr. Cox, in an interview with reporters and editors of The Washington 
Times, said the report was not intended as a partisan attack.
"The next president is going to face tremendous challenges and 
tremendous opportunities in our relationship with Russia," he said. "It's 
important to understand how we got to where we are and not repeat the 
mistakes of the past."
To Mr. Cox, the last eight years represent a series of squandered 
opportunities that have left Russia poorer, U.S. influence weaker and the 
average Russian far more cynical about U.S. intentions.
The report cites the State Department's own surveys tracking a sharp 
decline in favorable opinion among Russians toward the United States during 
the 1990s, from 70 percent favorable in 1993 when Mr. Clinton took office to 
just 37 percent in February.
Mr. Cox said an "insular troika" of advisers — Mr. Gore, Deputy 
Secretary of State Strobe Talbott and Deputy Treasury Secretary (now 
Secretary) Lawrence H. Summers — largely set U.S. diplomatic and economic 
policy toward Russia.
Their unflagging support for Mr. Yeltsin and close association with 
corruption-tainted aides such as Prime Minister Viktor Chernomyrdin and 
privatization chief Anatoly Chubais backfired badly as Mr. Yeltsin's 
popularity flagged and the economy staggered in the ruble crisis of August 
1998, according to the Republican report.
Because of their rhetorical and financial support of figures like Mr. 
Chernomyrdin and Mr. Chubais, the report argues, the administration became 
associated with their policy failures and with the scandals involving money 
laundering and theft of state assets that plagued the Yeltsin years.
The administration has cited a number of successes in its foreign policy 
with Russia, including progress in decommissioning Russia's huge nuclear stock
pile and Russia's efforts to broker an end to the conflict with Yugoslavia 
over Kosovo last year.
While the House report castigates U.S. economic policy toward Russia, a 
new International Monetary Fund survey forecasts over 7 percent economic 
growth for Russia in 2000, the country's best performance in years.
The House Republican report says the incoming administration will have a 
chance to repair Russian relations, but must broaden its contacts beyond a 
small Kremlin circle, must promote private sector solutions to Russia's woes, 
and more aggressively combat official Russian corruption.


*******


#14
Gore2000: Cox Report Evidently Biased

NASHVILLE, Sept. 18 /U.S. Newswire/ -- The following was released today by 
Gore/Lieberman 2000: 


Noting that foreign affairs and national security were once taboo topics for 
partisan potshots, TIME magazine today reported that the soon-to-be-released 
Republican Cox Report on U.S.-Russian relations is evidently biased and 
partisan. TIME also reported that the report's author, Christopher Cox 
(R-CA), readily admitted that the report was partisan. 


"This is a partisan report not worth the taxpayer-provided paper it's written 
on," said Gore/Lieberman national spokesman Douglas Hattaway. "While they 
play politics with foreign policy, Al Gore has put the national interest 
ahead of politics to help Russia reduce its nuclear arsenal and move toward a 
free-market democracy." 


GOP PLAYING POLITICS WITH FOREIGN AFFAIRS, NATIONAL SECURITY 


"It used to be that foreign affairs and national security were taboo topics 
for partisan potshots. Not this year; instead of stopping at the water's 
edge, politics in Washington is plunging off the deep end. This Wednesday, 
the House Republican leadership's Policy Committee will produce a 209-page 
report pillorying the Clinton administration for its handling of Russia. The 
main target? Al Gore..." (TIME.com, 9/19/00) 


REPORT CALLED PARTISAN HATCHET JOB, EVEN MODERATE REPUBLICANS KEPT AT ARMS 
LENGTH 


"Rep. Samuel Gejdenson, top Democrat on the House International Relations 
committee, fumes that the Republican-only exercise 'is a completely partisan 
hatchet job.' And even moderate Republicans from the International Relations 
Gommittee say they were kept at arm's length because the report's authors, 
under the leadership of California representative Christopher Cox, "get 
nervous when you try to inject some truth into the proceedings." (TIME.com, 
9/19/00) 


COX HIMSELF ADMITS REPORT IS PARTISAN 


"Cox shrugs off charges the report is partisan - 'Of course it is!' he crows. 
But reports like this one are more likely to damage their authors' 
reputations than the electoral chances of their intended targets." (TIME.com, 
9/19/00) 


REPORT CALLED BIASED, VITUPERATIVE, & CONTAINING CONTRADICTIONS 


"The document suffers from incomplete source materials presented with evident 
bias. It blames the administration for souring U.S.-Russian relations by 
pursuing NATO expansion and National Missile Defense, both of which 
Republicans support even more fervently than Democrats. It repeatedly 
mentions Russia's objections to unilateral U.S. action but then criticizes 
the administration for pursuing consensus-building with Moscow and others. 
Those contradictions, combined with breathless, vituperative language, 
obscure valid points, like the administration's studious disregard for 
Russian atrocities in Chechnya and its failure to achieve any new arms 
control agreements with the Russians over eight years." (TIME.com, 9/19/00) 


Contact: Douglas Hattaway or Chris Lehane, 615-340-3251, both of 
Gore/Lieberman 2000; Web site: http://www.algore.com 


******


#15
Russia: Is Berezovsky Interested In The Presidency?
By Andrew F. Tully


Boris Berezovsky, the Russian "oligarch," says he is in the U.S. only to 
build support for an opposition movement in his homeland. But his apparently 
coy answer to a question about Russia's presidency indicates a greater 
ambition. RFE/RL senior correspondent Andrew F. Tully reports. 


Washington, 19 September 2000 (RFE/RL) -- Russian Industrialist Boris 
Berezovsky was in Washington on Monday to win support for what he calls a 
"constructive opposition" movement in his country.


Berezovsky, once a strong supporter of Putin, said at a news conference that, 
during his trip to the U.S., he will be meeting with journalists at leading 
American newspapers, with policy experts at think-tanks, and with Russian 
expatriates.


At one point, a reporter noted that his visit comes as the American 
presidential race is gaining momentum. In that context, the reporter asked, 
does Berezovsky harbor any ambitions for the Russian presidency?


The Russian businessman smiled and responded with the skill of the most 
seasoned politician.


"And as for my direct answer to your question, no, I am not planning to take 
part in the presidential election. ... In Russia. [Laughter]."


Berezovsky faces legal trouble in his country. Among other things, Moscow 
prosecutors are investigating whether he stole large sums of money from 
Aeroflot, the Russian airline. Berezovsky says he is being singled out 
because of his 49 percent share in ORT, the Russian television network that 
at times is critical of Putin's policies. The other 51 percent is owned by 
the government, and Berezovsky says Putin is putting pressure on him to 
relinquish his ORT shares to the Kremlin.


The Russian businessman emphasized that his goal in assembling an opposition 
movement is not necessarily to find a way to defeat Putin, but to offer 
alternatives to Putin's proposals when they are deemed necessary.


He noted that during Boris Yeltsin's presidency, the predominant opposition 
was communist. This movement simply objected to anything Yeltsin proposed, 
regardless of its merits. Berezovsky said this was not constructive and, 
ultimately, fruitless.


The industrialist said he is hoping to build the opposition from among 
Russia's political and intellectual elite. He noted that Putin enjoys the 
support of Russia's military and security services, as well as the people at 
large.


"The major support that Putin has in Russia -- and it's more than 50 percent 
of the population who really support him -- those people support him 
primarily because of the inertia of their thinking."


One reporter challenged Berezovsky on this statement, asking him if he did 
not have a low opinion of the Russian people. Berezovsky responded that for a 
thousand years, most Russians have had a slave mentality -- fostered by the 
strict rule of czars and, later, the Communist Party.


He said the young people of Russia are beginning to break out of that 
mentality. But for most Russians, he said, intellectual inertia is a way of 
life.


To a Western observer, such a comment would be seen as political suicide for 
a man who is at least considering the possibility of running for office. But 
some analysts stress that Russians approach politics far differently than 
Westerners do.


Helmut Sonnenfeldt -- a foreign policy analyst at the Brookings Institute, a 
Washington think-tank -- says that, first, it is unlikely that what 
Berezovsky says in Washington will be reported in detail throughout Russia.


Second, Sonnenfeldt told RFE/RL that the average Russian knows he is not a 
member of the Moscow-St. Petersburg elite, and is not uncomfortable with 
being reminded of that.


"In don't think that a condescending term like that or a self-aggrandizing 
term like that is going to do him any damage in the population at large to 
the extent they care."


But Sonnenfeldt is not so certain that Berezovsky is seriously running for 
president, if only because of the legal and business problems he faces. In 
fact, Sonnenfeldt says, he believes that it is unlikely that Russia's elite 
would even want to join an opposition group organized by the industrialist, 
much less support him for president.


But there was the laughter that punctuated Berezovsky's denial of an interest 
in Russia's presidency. And that was more convincing than the words of any 
analyst.


******


#16
Date: Tue, 19 Sep 2000
From: Victor Yasmann <yasmann@erols.com>
Subject: Re 4523-:Donnelly/cuts in military


I am sharing opinion of Michael Donnelly about proposed cuts in Russian
armed forces (JL-4523). I also paid attention on at least two aspects of
the planned reduction. First, its strong PR-element:
the announcement was clearly timed to support President Vladimir Putin's
positive image-making during his staying at UN Millennium Session in
New-York. Second, it is lack of any reaction inside of Russia, including
military itself and its staunch supporters like Gennady Zyuganov or
Vladimir Zhirinovsky. No surprise, no questions, no protests. (See our
issue of RFE/RL Security Watch No.9 at www. rferl.org/securitywatch


Victor J. Yasmann <yasmann@erols.com>
Senior Fellow.
American Foreign Policy Council,
Washington, DC


******


#17
The Times (UK)
20 September 2000
Russian Church accused of illegal rackets 
FROM GILES WHITTELL IN MOSCOW
THE Russian Orthodox Church is mired in illegal or dubious business schemes 
ranging from money-laundering to selling candles at extortionate mark-ups, 
according to a report that was condemned by the Church yesterday as the work 
of atheists. 


The fast-expanding communion had financed its growth through exploitation of 
parishioners, systematic tax evasion and international trading in oil, 
diamonds, cigarettes and alcohol, says a Moscow institute set up to study 
Russia's shadow economy. 


The Church, which says its money-making activities are vital to maintain its 
independence from the state, had entered the bottled mineral water business 
with what was now one of the country's best-known brand names. It had charged 
increasing amounts for holy ceremonies and burial plots, and priced offertory 
candles at up to 40 times their wholesale value, the study said. 


A church spokesman yesterday attacked the authors of the report - one of 
whom, Mikhail Edelstein, is the son of an Orthodox priest - as "the heirs of 
military aetheism" of the Soviet era. "There are forces in this country that 
disapprove of the Church's new independence and its role in society," Viktor 
Malukhin, of the Moscow Patriarchate, said. "It's a great shame that Soviet 
prejudices live on in some academic circles." 


Mr Malukhin denied that the Church was involved in money-laundering but did 
not address the report's more detailed claims. These include bribe-taking by 
senior clerics in return for sought-after jobs; the failure of larger 
churches to declare profits of up to £150,000 a year from the sale of icons, 
candles and grave sites; and criminals' use of the Church's tax-free status 
on sales of gold ornaments. 


One myth destroyed by the Moscow study is that of tight control from the top. 
Geraldine Fagan, of Britain's Keston Institute, which monitors religious 
freedom in the former Soviet Union, said: "The impression is one of complete 
and utter chaos." 


The Church has never been forced to answer similar past claims or to publish 
open accounts, even though Russian law requires them. President Putin is 
unlikely to press for action, not least because he and Patriarch Aleksi II 
share a KGB past. The Patriarch's codename as a Soviet-era informer was Agent 
Drozdov. 


****** 


#18
Vremya Novostei
September 20, 2000
[translation from RIA Novosti for personal use only]
VERY EXTERNAL POLICY
By Timofei BORDACHEV, senior researcher, 
Institute of Europe, Russian Academy of Sciences 


The new Russian leader set the pace in clearing up the 
debris he inherited from the spontaneous foreign policy of his 
predecessors even before he was elected president. The style of 
dealing with the West, based on confrontation and scandals, was 
rather easily and quickly liquidated by the establishment of a 
network of personal contacts and the shelving of the more 
questionable projects, such as the idea of nascent 
multipolarity.
It seemed that the impressive foreign policy dynamics of the 
new leader only needed to be complemented with draft 
agreements, and the Russian foreign policy would stop marking 
time. The idea was that this would send Russia up to a level of 
a more or less balanced dialogue on questions of vital 
significance to it. 
However, little has changed in the Russian foreign policy.
Worse still, despite regular and mostly successful foreign 
visits of President Putin, one is coming to think that the 
Russian foreign policy is skidding and that no solution has 
been found to any of our practical problems. This is all the 
more painful, as the foreign policy statements and initiatives 
of the president are virtually ideal, with few exceptions, such 
as the idea of the Russo-European ABM system. But they are not 
followed by practical results. 
The energetic and outwardly rather open model of Putin's 
behaviour on the international scene is creating a 
fundamentally new format of Russia's foreign policy. It is 
apparently centered on the renunciation of excessive ambitions 
in favour of resolving practical problems. Indeed, Russia's 
humility, even if it takes the form of verbal statements, is a 
sign of progress in the sphere of forming an objective view of 
one's place in the world.
On the other hand, hardly anything is done to become 
established in this place. It appears that the Russian leaders 
understand what the country should do on the international 
scene, but do not know how this could be done. Instead of 
practical actions, we see the continuation of the old 
declarative policy. 
It should be admitted that the Russian Foreign Ministry in 
its current form is not adequate to the new style of the 
Russian foreign policy as outlined by the country's top 
political leadership. The result of this inadequacy will be 
rather sad for Russia. In the absence of practical actions, the 
volcanic energy of the head of the Russian state will 
inevitably start idling, producing only the glossy pictures of 
parties and handshakes. And we will again fail to provide an 
adequate answer to major foreign policy challenges, such as 
relations with NATO, Moscow's stand on the Balkans settlement, 
Russia's prospects in the CIS (in particular its relations with 
Ukraine), the level of dialogue with the EU, and many other 
problems. 
It is true that Russia's place in the world eventually 
depends on the domestic political and economic situation. And 
yet, the current foreign policy problems and challenges will 
not wait until the full stabilisation of Russia. If the central 
authorities continue to limit themselves to empty declarations, 
the regions, gas monopolists and generals will start untying 
these knots. 

*******