September 22, 2000    
This Date's Issues: 4532• 4533 • 

Johnson's Russia List
#4533
22 September 2000
davidjohnson@erols.com


[Note from David Johnson:
1. Novaya gazeta: Boris Kagarlitsky, Why the West Woke Up?
It Was Awakened by Putin's Setbacks.
2. Theodore Karasik: Stepashin's Audit Chamber and Police Capitalism.
3. Financial Times (UK): Putin prepares to retreat from reform.
The Russian president is likely to accede to demands for increased 
military spending after the Kursk disaster, says Andrew Jack.
4. Nezavisimaya Gazeta: Sergei Markov, WHY THE TIME IS RIGHT FOR 
TALKING WITH MASKHADOV.
5. From Edward Lucas
6. The Economist (UK): Russia’s investment climate.
7. Washington Times: Arnold Beichman, Furtive ways with democracy 
in Russia?
8. New York Times: Boris Berezovsky, Putin Reins In Russia, at a 
Price.
9. Reuters: Russian business needs the net to stop corruption.
10. Moscow Times: Peter Ekman, Government Must Show It Is 
Trustworthy.
11. Wall Street Journal: Team Russia. (Re Cox report)]


******


#1
September 21, 2000
Novaya gazeta
Boris Kagarlitsky
Why the West Woke Up?
It Was Awakened by Putin's Setbacks
[translation for personal use only]


The news that the March presidential elections in Russia had been falsified
were spread by independent media and opposition virtually by the end of the
election day. There were grounds for suspicion in everything: in the voters'
lists, as well as in official reports of the Central Electoral Committee
which claimed that hordes of voters had rushed to the ballot boxes literally
in the last seconds before the polling stations were closed. The Communist
party, being the only party in Russia able to ensure at least some control
over vote counting, revealed hundreds of monstrous violations. Yabloko
provided evidence about some regions where thousands of "dead souls"
materialized overnight out of the blue.


Striking as it was, but in the West all these pronouncements, half of which
would have been enough to question electoral results somewhere in Peru, fell
on deaf ears. And even though all of the victims' complaints were presented
in English on the pages of The Moscow Times already in March, they were
seemingly ignored. Which was surprising, because foreign correspondents and
diplomats living in our capital usually borrow a large part of their
information about Russian life from this newspaper.


The Organization for Security and Cooperation in Europe which had organized
the international monitoring of this vote showed no reaction to news about
fraud. This was not much different, though, from lack of reaction on the
part of Western institutions to similar news from Georgia, and before that
from Albania. As for the international observers themselves, many of them
later complained that in their reports they had pointed to numerous evidence
of scandalous violations, but not one of their exposures was reflected in
the OSCE final documents. One may surmise that the OSCE press-release was
prepared in advance, without relation to whatever was happening on the
ground and to observers' reports. Which, again, would not be unprecedented -
in Albania, it had been quite similar.


And now, on September 9, about half a year after the elections, The Moscow
Times journalists have again assembled evidence, organized it and published
in a special expressively titled appendix, Fraud Special. In principle, most
of these facts had been already known. The CPRF local branches, having
collected a huge amount of evidence, are trying, in vain, to file suits, but
for some reason the courts keep rejecting their appeals. And the party top
brass in Moscow is equally persistent in denying political support to their
own grass-roots.


The CPRF leadership's low profile in this case is not at all surprising.
They don't want to fall out with the authorities, even if the latter have
robbed them. Yes, they did - big deal! - but at least they did not leave
them naked, let alone kill them. That communist leaders are letting their
rank and file down, while the latter are doing their job honestly and in
good faith, is, again, no news at all.


But what about the West?


It is worth noting that this time The Moscow Times publication did send
waves. It got attention. The Deutsche Welle even noted that Western
politicians should feel ashamed. And the crux of the matter is not in the
amount of evidence. Indeed, the newspaper's staff did an enormous job
collecting materials from a variety of regions. But the general picture had
been clear even without this.


THE PUBLICATION SENT WAVES BECAUSE IT APPEARED IN THE WAKE OF THE KURSK
CATASTROPHY. And after the Ostankino fire. These days, both the media and
the public in the West see Russia through different lenses than half a year
ago. The key is that representatives of Western elites have started
pondering WHETHER THEIR BET ON PUTIN WAS WELL CALCULATED.


The problem, again, is not the squeezing of the media, not the bombing of
Chechnya, not nationalistic pronouncements of Russian officials. Doubts
about the Russian president's democratic credentials are not a serious
stuff. The history is full of examples of most repulsive authoritarian
regimes endorsed by Western democracies. Against this background, Putin and
his entourage are not that bad at all. After all, unlike Indonesia's
Suharto, they haven't yet sent to death a million of their citizens. Unlike
Peru's Fujimori, he hasn't dispersed a legitimately elected parliament. And
unlike Yeltsin, he hasn't used tanks to shell the streets of the capital.
And electoral falsification by regional bosses acting without direct and
open instructions from the Kremlin is far less of a crime than bombing
civilians in Chechnya.


Meanwhile, in spite of some ritual pronouncements about human rights,
Western political class is outstandingly tolerant in this regard. Although
Milosevic was declared criminal and persona non grata in most Western
capitals, Putin is their welcome guest, even though his actions in Chechnya
are not that different. The same refers to Turkish leaders, whose armed
forces are involved in a systematic extermination and intimidation of the
Kurds. But the nationalism of Turkish or Latin American generals was never
an obstacle to treating them as best defenders of "the free world".


No, Putin's problem is not in his authoritarian proclivities. THE PROBLEM IS
IN HIS RECENT SETBACKS. Among representatives of Western political class,
there is a growing sense that this Russian gamble may end up badly. And then
they would be held accountable before public opinion in their own country.
All the more so because Russian troubles in a globalized world may soon
spill over into other countries.


The reading of Western publications on Russia over this spring brought to
mind the famous judgement by Winnie the Pooh: these are the wrong bees, they
make the wrong honey. In the eyes of Western observers, Russia happened to
be just such a country populated by wrong bees. These Russians have a wrong
democracy, and their market economy is also not what it should be (that is,
like in Southern California).


On the other hand, just as Winnie the Pooh, these authors were ready to
renounce all attempts to "fix" the wrong bees. Let them be as they are.
Especially since everybody is happy with the current state of affairs. In
its present condition, Russia can neither scare nor attract anybody. So
everybody is just fine (except for most of Russia's population, of course,
but who cares).


But if the bees are wrong, why should their hive and its master be any
different? As for the wrong honhey, unlike Winnie the Pooh, Western leaders
have no reservations at all about Russian oil and gas. Striking as it may
be, the bees supply their products to the world market without biting anyone
on their own. Because they have got a strong master.


After the mess of the last few months, the mood is changing. What if on a
sunny day the bees get out of control? A successful authoritarian regime in
our country would satisfy a large part of Western politicians, although they
are not comfortable saying this in open. BUT THE FAILURE OF AN AUTHORITARIAN
EXPERIMENT WILL NOT MAKE ANYBODY HAPPY. What is impossible to conceal from
public opinion in our country will be even less possible to hide from
Western population. And it is particularly upsetting to be punished for
someone else's lies and failures. Thus, the deeper the Kremlin bogs down in
its problems, the greater interest in the fate of the Russian democracy will
be displayed in the West.


******


#2
From: "Dr. Theodore Karasik" <tkarasik@mindspring.com>
Subject: Stepashin's Audit Chamber and Police Capitalism 
Date: Thu, 21 Sep 2000 


Stepashin's Audit Chamber and Police Capitalism 


Recent JRLs (i.e. #4528, #4531) have focused on Sergei Stepashin's
activities as Audit Chamber chairman. Stepashins newest incarnation is
extremely important to understand as he is pursing "violators" of Russias
experiment with capitalism under Yeltsin. With Putins full support, the
Audit Chambers rising status in 2000 is an example of Russias emerging
"police capitalism." Police capitalism illustrates the emergence of the
FSBs (security police) ability to regulate and monitor the Russian
economic environment. Clearly, Stepashin, with Putins 7 okrug strategy in
mind, is helping Putin to establish new vehicles and organizational tools
to exert influence and to break the logjam in center-periphery relations. 


It is important to point out that Putin and Stepashin met in St. Petersburg
following the Soviet collapse when the two built a mutual trust of one
another. Putin reflected on Stepashin in his "First Person" autobiography.
For Putin, Stepashin was linked to the internal police rather than to the
security services. Stepashin said to Putin: "If you trust me, then trust
me. What we can publicize, we will [referring to lists of KGB agents and
declassifying files]. But what will be harmful to the state, we wont
publicize." According to Putin, the security police then trusted Stepashin
because he was putting state before democracy. This idea of "state before
democracy" is important when looking at Stepashins many positions during
the Yeltsin era whether involving Chechnya or as PM. Although he never
really says it, the idea of "State before democracy" is a constant theme
repeated by Putin in numerous documents and speeches since late 1999. 


The Audit Chamber will be playing an important role in the new regional
make-up. In June 2000, Putin and Stepashin agreed to create audit chambers
in the 7 okrugs. By September 2000, Stepashin wanted to make clear the
intent of the Audit Chambers federal organization: "The president has made
an amendment concerning the competence of branches of the Audit Chamber.
But in no way will they be substituting the current regional auditing
authorities. Our branches are federal control." When implemented, the
regional audit chambers will join the judiciary and the tax police who are
planning to supervise the 7 okrugs. Personnel serving in these structures
will be there with the FSBs blessing, who, in almost all 7 districts, run
the personnel departments. 


As stated above, FSB involvement will help guide the Audit Chambers
progress in their investigations. In July 2000, Stepashin and Patrushev,
the head of the FSB, signed 15 articles outlining how the two bodies would
work in tandem to inform each other of "criminal attempts on state funds
and federal property." The FSB, according to Stepashin, had identified
"18-20 targets" for investigation. Some have come to light such as UES
during 1992-1998, Gazprom, Rosvooruzheniye, and Promexport. Regions have
also been targeted, including Rutskois Kursk Oblast. 


The Audit Chamber investigations also focus on Russian ministries. On 25
August, Stepashin, following a meeting with Putin, announced that an
investigation into financing the war in Chechnya would be the Audit
Chambers next topic. This would fit nicely with the ongoing corruption
investigations in the Russian MOD where Russian air force and MOD finance
officials have already been ousted and arrested for embezzlement. The press
is also under scrutiny. In early September 2000, State Duma Deputy Leonid
Maevesky, who revealed the existence of secret media funding in the 2001
budget, announced that Stephasins Audit Chamber would soon begin to audit
VGTRK, the state radio and television company.. All of this activity is
closely tied to the new information doctrine, a critical component in
police capitalism. 


Finally, the creation of a board of experts gives Stepashin a key body for
discussing and reviewing possible prosecution of parties guilty of gutting
Russias economy in the 1980s and 1990s. The board "is made up of 64 persons
who are prominent and experienced economists, lawyers, specialists in the
budgetary process, and representatives of the judiciary and the
law-enforcement authorities." They include Sergey Glazyev, Aleksandr
Zhukov, Mikhail Prusak and Aleksandr Shokhin. Such a body seeks to bury
the influence of "The Family" once and for all. The 64 members also plan a
probe into the gold and diamond sell-offs that date back to the Soviet and
Yeltsin eras. 


Indeed, police capitalism signals that Putin is serious about his program
and it is much, much too early to discount the impact of the FSB rise and
the effectiveness of the 7 okrugs. 


Dr. Theodore Karasik, Visiting Professor, School of International
Relations, University of Southern California; Editor, Russia and Eurasia
Armed Forces Review Annual; Resident Consultant, RAND 


******


#3
Financial Times (UK)
22 September 2000
Putin prepares to retreat from reform
The Russian president is likely to accede to demands for increased military
spending after the Kursk disaster, says Andrew Jack 
Five weeks after the sinking of the Kursk submarine, there are growing
signs that Vladimir Putin is backing away from radical reform of Russia's
armed forces. 


Tackling the country's costly and inefficient military is one of the most
difficult challenges facing the president in his efforts to modernise
Russia. To succeed he must take on a secretive, unwieldy and unaccountable
structure still focused on the past. 


In spite of the loss of one of the Navy's best-equipped nuclear submarines,
most of the military hierarchy resists the need to rethink the armed
forces' role or funding. Admiral Eduard Baltin, retired head of the Black
Sea fleet to which the Kursk belonged, instead complains of "15 years of
neglect, (that turned) the navy from a very powerful structure which
ensured peace and stability into something weakened by under-financing". 


Admiral Baltin is dismissive of the need for tougher management or the
adoption of a more modest role for the navy, limited to policing Russia's
coastlines. "Let's not turn our needs into a bookkeeping issue," he says.
"We always have, and always will, operate in the open oceans." 


Analysts believe such views will take at least a decade to change, when a
new generation of officers begins to replace their Soviet-trained seniors
at the top of the armed forces. 


Even today "there is no liberal or economic education in the military
academies, and even history is based mainly on lies and prejudices with an
illogical anti-American hatred," says Vitaly Schlikov, a former defence
adviser to Boris Yeltsin. The armed forces remain "an entity closed from
society", impervious to new ideas from outside. 


Western actions since the collapse of Communism have hardened the
reactionary outlook. "The enlargement of Nato in the 1990s was one of the
biggest historical mistakes of the west," argues Andrei Kokoshin, former
head of the Russian Security Council and a member of parliament. "It was
seen as unfair by nearly every Russian. And it was reinforced by Kosovo." 


Debate is raging within the armed forces over the split of military
resources between long-range nuclear weapons and reinforcement of
conventional forces that could help Russia deal with the more pressing
conflicts on its southern border - divisions accentuated by the tragedy of
the Kursk. 


"Russian military structures are absolutely inadequate for the security
needs of our country today," says Alexander Golts, defence editor of Itogi,
a weekly magazine. "The submarine was designed and built for one purpose:
to attack US aircraft carriers. What do we need it for now?" 


But to some extent this debate misses the point. Procurement remains only a
small part total defence expenditure: more than half of the total budget
goes on wages and support costs of the former Red Army. 


While precise figures are difficult to obtain, Russia is estimated to have
about 1.2m people in uniform under the Ministry of Defence, and another 1m
civilian employees. There are also several hundred thousand interior
ministry troops, border guards and others, bringing the total to up to 3m.
Against such figures, last month's announcement by Marshall Igor Sergeyev,
the defence minister, of a cut of 350,000 appears modest. 


Just as problematic as numbers is the military structure. It is top-heavy,
starting with hundreds of generals who benefit, like other officers, from
tax-free incomes and state-provided housing. Conscripts account for about
500,000 soldiers, of whom the majority are not used for combat duty, but
unrelated tasks such as bringing in the harvest, carrying out manual jobs
for the hierarchy and even, in some cases, sold virtually into indentured
labour. 


"We should have done like the Germans after the second world war,
rebuilding from scratch," says Mr Schlikov. "Even if you spent 10 times as
much money as now, it would still be the same Soviet army as it was." 


The result has been tremendous waste. Army generals prefer elaborate
show-exercises, shown regularly on Russian television, to mundane
day-to-day training. There has also been widespread corruption, including a
recent case opened by a military prosecutor concerning Dollars 450m in
missing funds. 


Even some Russian parliamentarians who have access to confidential details
of military expenditure complain that they lack sufficient data to make
accurate judgments. 


Immediately after the Kursk's sinking, there were signs that Mr Putin would
address these issues. He promised that "our armed forces must be compact,
but modern and well-paid", and appeared to be reluctant to respond too
generously to demands for increased military spending in next year's budget. 


More recently, however, there have been signs that the Kremlin will accept
demands by the Duma for a substantial increase in military spending. 


There are still no detailed plans on military reform in documents, despite
a 400-page 10-year plan developed by German Gref, the economics minister.
And Mr Putin has so far held back from any radical gestures, approving only
gradualist reforms at a meeting of the Security Council in August, and
shielding the hierarchy from swift repercussions after the Kursk. 


In part, he is held back by the fact that he rose to power on the back of
the military, notably through the campaign to suppress secessionist groups
in Chechnya. Several generals are now beginning to taste a new sense of
power, publicly criticising the state and creating the basis for a
political platform. 


Earlier talk of radical military restructuring was greeted with concern by
Russia's regional governors, who would have to fund housing for the large
number of officers placed into early retirement by any wide-ranging
shake-up. Mr Putin is likely to face a rough ride in the autumn in
parliament, with the Communist and Fatherland factions alike demanding
sharp rises in defence expenditure. 


"I doubt if Mr Putin is ready for the crucial decisions," Mr Golts says.
"He is still living in the world of myth, that Russia is a great military
power. Meanwhile, we have armed forces that are more and more dangerous,
not for an enemy but for our own people." 


******


#4
Nezavisimaya Gazeta
September 22, 2000
[translation from RIA Novosti for personal use only]
WHY THE TIME IS RIGHT FOR TALKING WITH MASKHADOV
By Sergei MARKOV, Director of the Institute of Political 
Studies, Associate Professor at the Philosophy Department of 
Moscow State University

There are several reasons for which talks should be held 
with Maskhadov today. First, Moscow should demonstrate to the 
international public the will for a political settlement of the 
problem. The Russian elite should understand that the methods 
of restoring constitutional order in Chechnya are not quite the 
internal affair of Russia, because this concerns human lives.
Moscow should justify itself in front of the international 
community, and there is nothing shameful in that, as these are 
the realities of the modern world. Second, talks with Maskhadov 
should be held to demonstrate to the people of Chechnya that 
Moscow is trying to minimise losses among peaceful civilians.
Talks should become the main method of ensuring Moscow's 
victory in the information war waged against the Wahhabis, for 
winning a moral victory, and gaining the support of the Chechen 
population and international public opinion. 
The talks were not launched earlier, for good reason. The 
Russian troops won a military victory, but paid a very high 
price for it: thousands of dead and wounded civilians and 
Russian servicemen, the destruction of the economic 
infrastructure, a serious deterioration of Russia's image in 
the world, and the growing diplomatic isolation of Russia as a 
result of all this. 
Talks with Maskhadov should have been held before the 
beginning of hostilities. Such talks would be a criminal 
mistake during the hostilities. But now that the active phase 
of the hostilities is over and the republic is moving from war 
to peace, talks with Maskhadov should be put on the agenda 
again. They should symbolise the end of war and the transition 
to peace. A major step towards such talks could be an amnesty 
granted to Maskhadov and him alone. 
The main task today is to ensure a political settlement of 
the conflict by creating civilian authorities in Chechnya, and 
to do this we must ensure political isolation of the 
terrorists. If Maskhadov deserts the terrorists, it will be a 
shattering political victory of Russia in the North Caucasus. 
But if Maskhadov refuses to collaborate with the Russian 
authorities despite everything, it will be his choice. A choice 
that would push him into non-existence, claiming thousands of 
Chechen lives in the process. 
It is very difficult for Maskhadov to recognise Russian 
authority in Chechnya, for he regards himself to be the legally 
elected president. Consequently, talks with Maskhadov should be 
held on the condition of his de-legitimisation in the eyes of 
the Chechen population and the international community. This is 
Maskhadov's tragedy, for he really tried to create an 
independent civilised Chechnya. Independent Chechnya has been 
de-legitimised nearly completely, and the final stroke should 
be to strip its illegally elected president of legitimacy. 
The only way out for Maskhadov today would be to admit his 
political mistakes, recognise the sovereignty of Russia over 
Chechnya, and take part in the restoration of peaceful life in 
the republic. This would give Maskhadov a chance to take part 
in the political life of the future free, Russian Chechnya. He 
should be given this chance for getting out of the dead-end. 
And this would be a proper transition from Russia's military 
victory in Chechnya to a political victory that would seal the 
results of the military victory.


******


#5
From: "edward lucas" <esl@economist.com>
Date: Fri, 22 Sep 2000
Subject: From Edward Lucas


First of all, I was thrilled that Christian Caryl has reported the
ecological drama in our village for Newsweek 


My rant on Russian imperialism got held again, despite more worries in
Ukraine, Georgia and Moldova. Just because Soviet tanks are not going to
pour through the Fulda gap in the foreseeable future does not mean that the
imperialist itch has gone away . So just one piece this week (see below)
which is unusual because it reports some good news as well as bad. 


I have been stricken by both 'flu and Economist television this week, so
only rather brief personal thoughts for now (maybe more later). It is
wonderful watching the Hurrah Chorus trying to explain why property
confiscation (Vimpelcom) and fraud (Norilsk) are not that bad really. 


I'd be very interested to hear from the pinstripes who expensively
shepherded Vimpelcom's ADR programme exactly how their due diligence on
the frequencies failed to spot the dodginess (getting it for free from the
military) that is now emerging.


I thought Zhenya Albats was spot on in her article about pretence in the
Moscow Times this week. This government is a mixture of superficially good
intentions, incompetence and nastiness. The incompetence is very much to
the fore at the moment: they simply can't push the things through that they
want. It can't carry on like this,


I bleat. Something must happen. (I have been thinking this about Russia
for twenty years. And usually life goes on pretty much as before). But just
because the Russian state can't do everything it wants, when it 
wants, doesn't mean that it can't do some nasty things to some people. A
drunk on crutches still seems pretty intimidating if you are in a 
wheel chair.


I have got to write a zingy city guide for the new e-cities feature on the
www.economist.com website. As I almost never go to any restaurant other
than the Scandinavia, and never stay in hotels, and loathe 
nightclubs, this is quite a challenge. I'd be very grateful for any
suggestions from people who read this about:


--which if any of the overpriced, sterile, pretentious "western" 
hotels-Marriott, Kempinski, etc-is better than the others
--what are cheaper alternatives (preferably not hooker- and
cockroach-infested ones)
--good business lunch places especially on the south side of the river
--good places for quiet dinners (ie privacy, no music) 
--civilised nightlife (sounds as likely as an open-air skating rink
in Dubai to me, but perhaps it exists)


To subscribe to this weekly mailing, send an e-mail to 
edwardlucas-subscribe@egroups.com


*****


#6
The Economist (UK)
September 23-29, 2000
Russia’s investment climate
Oil change 
MOSCOW 

IT SHOULD be unremarkable: a state-owned company is sold to the highest
bidder, with no visible foul play. In Russia it is sensational. On
September 12th, the government sold Onako, a regional oil firm, for $1.1
billion—more than double the starting price. Even better, the winner was
not the politically best-connected bidder, but a somewhat cleaner rival. 


Cheerleaders for Russia trumpet this as the best privatisation in the
country’s history. Three full cheers look excessive, though: foreigners
were not allowed to bid, and some of the local contenders are linked by a
murky web of alliances. But, barring surprises, two positive points are
clear enough: a Russian company is prepared to invest a large chunk of
money at home, and the state has actually sold an asset, rather than giving
it to cronies. 


What excites foreigners even more, though, is rapid progress in talks about
production-sharing agreements (PSAs). These provide a special legal
framework for outside investors in mining, oil, gas and other industries
requiring big, long-term investments. A combination of xenophobia,
protectionism and politicking held up a workable PSA law in Russia for
years. In the past month, the kopeck seems to have dropped, at least with
President Vladimir Putin, who turned up to a PSA conference and strongly
backed the idea. Since then, obstacles have been tumbling. “The message has
gone right through the bureaucracy,” says Glenn Waller, a negotiator for
foreign oil firms. 


Sorting out PSAs to western companies’ satisfaction would bring tens of
billions of dollars of investment in oil and gas. But the symbolic value is
even greater: a big chunk of the Russian economy becomes governed by
western-style commercial law. Disputes would be settled not in Russian
courts, but by arbitrators in Stockholm. 


Whether Russia is ready for what amounts to foreign colonisation of large
parts of its most attractive industries is another matter. There are still
questions about whether even Mr Putin’s support is enough to make PSAs
work. The customs and tax offices, ministries and other agencies—“state
mafias” as they are sometimes termed—will not stop sucking investors’ blood
just like that. If they are blocked one way, they are all too capable of
finding another one, or six. 


Another big question is how to get the oil out. The only successful western
energy investments in Russia so far have been those that do not depend on
Russia’s overloaded, decrepit and corrupt pipeline system. A PSA will give
a western company export rights: whether Russian companies will let western
oil displace theirs is another matter. 


Thomas Wälde, a specialist in energy law at Dundee University in Scotland,
believes that western oil companies risk being over-eager in Russia,
despite, he estimates, at least $10 billion in costs and losses in the past
decade. The waiver of sovereign immunity under PSAs, for example, is an
illusion, he argues: foreigners have already had plenty of opportunities to
sue the Russian government in recent years, but always back away from legal
action for fear of reprisals. 


The legal wobbliness of the Russian business environment is still painfully
apparent in other industries. Firstly, Norilsk Nickel, a mining company
popular with foreign investors, admitted this week that it had already
embarked on a murky share-swap that dilutes outsiders’ shareholdings. “It
stinks,” says James Fenkner, an investment banker who only days earlier had
lured a pinstriped planeload off to Russia’s far north to inspect Norilsk’s
charms. 


Secondly, Russia’s two big mobile-phone companies, MTS and Vimpelcom, are
still waiting to hear whether the state will indeed confiscate some of
their frequencies for the benefit of a new entrant. Last week, the
government took the frequencies away, then promptly suspended its decision;
now officials are questioning whether Vimpelcom won all its frequencies
legally in the first place. 


Thirdly, Russia’s biggest company, Gazprom, has renewed its
government-backed attempt to take over Media-Most, which owns the country’s
only nationwide independent television station. Media-Most’s owner,
Vladimir Gusinsky, had agreed to sell his shares in exchange for being let
out of prison. Now, safely abroad, he argues that duress invalidated the
deal. Gazprom says it will sell the group on to a western investor. Please
form an orderly queue. 


******


#7
Washington Times
September 22, 2000
Furtive ways with democracy in Russia?
By Arnold Beichman
Arnold Beichman, a research fellow at the Hoover Institution, is a columnist 
for The Washington Times.


There are three major attributes which characterize most Third World 
countries. (1) They keep afloat only by 
selling their raw materials, if any, overseas.
(2) Their governing elites live high on the hog, while their people are 
poor and hungry.
(3) Elections, if any, are usually fraudulent.
Russia, which since the Kursk submarine disaster is being called by some 
critics as "Upper Volta with rockets," fits this pattern to a T. According to 
David Satter, a longtime observer of that tragic land, almost 40 percent of 
the people now are living in poverty, its GDP since 1992 has been halved and 
it lives by selling oil, gas and precious metals so it can import consumer 
goods.
As for its elections, of course there weren't any in Russia in a 
thousand years of czardom and Bolshevism. Since the breakup of the Soviet 
empire in 1990 six national elections have been held — three for president 
and three for the national legislature, the Duma.
It is the last presidential election on March 26 that the Moscow Times, 
a sturdily independent English language daily, has just described as corrupt. 
The paper is owned by a Dutch company and some Russian corporations. Last 
week it published a documented expose of election frauds. Spread over eight 
pages, the expose was based on firsthand reports by staff members, headed by 
Evgenia Borisova, who investigated 12 regions all over the country. Over a 
six-month period, they interviewed voters and officials in a position to know 
what happened during and after the presidential election.
The Moscow Times expose cited rewriting of returns in Dagestan which, it 
says, gave Mr. Putin 551,000 extra votes; stuffing of ballot-boxes in 
Tatarstan, free vodka to Putin voters, rewriting election results in 
Bashkortostan where Mr. Putin's communist opponent, Gennady Zyuganov, was 
ahead. Other fraudulent practices included listing children as adults, 
listing people twice or adding names at random. In some cases, the Moscow 
Times revealed, "corrupt election officials have added fictional floors to 
apartment buildings, and filled the resulting fictional apartments with 
fictional voters who, as one, cast their ballots for Putin." Not even Tammany 
Hall was that inventive.
Vladimir Putin, the ex-KGB agent and the choice of Boris Yeltsin, the 
outgoing president, won the March 26 election by a narrow margin of 52.94 
percent or 2.2 million votes. The most startling statistic to emerge out of 
the Moscow Times investigation is that in the three months between the Dec. 
19, 1999, Duma elections and the March 26 presidential elections, the 
official number of registered voters grew by an astonishing 1.3 million 
voters and, adds the Moscow Times, "There is no good explanation as to why." 
The report continues:
"The inescapable conclusion is that Putin would not have won outright on 
March 26 without cheating. At the same time. . . . the conventional wisdom of 
the time was correct: Putin was far and away the most popular candidate for 
president in the spring and summer of 2000. Had he won less than 50 percent 
of the March 26 vote he most likely would have faced — and easily
defeated — 
communist leader Zyuganov in a runoff."
What is troubling about the elections was that under Russian law, 
foreign organizations are given broad powers to observe voting day procedures 
and where possible to prevent frauds. But observers cannot be everywhere, 
especially when there are 95,000 polling stations. The Organization for 
Security and Cooperation in Europe (OSCE) had a team of 400 observers at the 
presidential elections, only about 40 of whom had any knowledge of Russia or 
the language itself. The OSCE post-election report conceded there were 
manifold irregularities but these would not have altered the final outcome.
The Moscow Times candidly said, "Not one person of those interviewed 
over the six months since the election could offer compelling evidence that 
fraud was part of a national conspiracy organized on direct orders from 
anyone in the Kremlin." However, there is "abundant evidence" that in some of 
Russia's 89 regions "orders to falsify the vote came down directly and 
formally from the governors' offices," the majority of whom had publicly 
embraced Mr. Putin's Unity Party.
The London Times said the expose of "vote-buying, ballot-stuffing, and 
brazen doctoring of figures" was convincing enough as to cast doubt on Mr. 
Putin's "legitimacy" as Russia's president.
Stanford Professor Larry Diamond has coined the phrase 
"pseudo-democracy" for countries like Azerbaijan run by an old KGB 
functionary, Gaidar Aliyev. His second category is the "electoral democracy" 
like Russia under Mr. Yeltsin. Mr. Putin's Russia is a back-sliding 
pseudo-democracy and if the last presidential election is any guide for the 
future, it is en route to becoming an authoritarian regime.
(The original Moscow Times articles can be found at the Website 
www.themoscowtimes.com.)

*******


#8
New York Times
September 22, 2000
Putin Reins In Russia, at a Price
By BORIS A. BEREZOVSKY
Boris A. Berezovsky, who held several positions in the Yeltsin government, 
resigned from the Russian parliament in July. 


If asked to describe myself, I say, rightly, that I am a businessman who 
turned to politics, an entrepreneur, a communications executive. But in 
Russia and in the West, I have been called an oligarch, someone who wielded 
unknown power in the Yeltsin years and who does not believe in democracy. 
This was an unfair portrayal, but I never felt seriously compelled to refute 
it until recently. 


The current situation in Russia has made it necessary for me to tell the 
world of concerns I have for the future of democracy there. Actions against 
me and against my main rival in the media business, Vladimir A. Gusinsky, are 
only the most visible signs of authoritarian retrenchment. 


I had hoped that Mr. Putin would preserve the fundamental accomplishment of 
the Yeltsin era — the national commitment to democracy — while correcting 
some of the mistakes from that time. But his performance in the year he has 
been in power — he was elected in March but has been running the country 
since August 1999, when Boris Yeltsin named him as his successor — has
been a 
disheartening disappointment. Not only did Mr. Putin not start solving these 
pressing problems, but he initiated the dismantling of some revolutionary 
achievements of the Yeltsin era.


He has formally (so far only formally) destroyed the basis of democratic 
federation by replacing elected representatives in the upper chamber of the 
Russian parliament with appointees. Moreover, he abrogated for himself the 
power to dismiss regional governors elected by the people. In doing so, the 
new president concentrated all the country's political power in his hands. 


Most recently, he has taken steps to subordinate the mass media and and has 
begun using law enforcement agencies to put pressure on both independent 
businesses and political opponents. He demanded that I transfer my media 
holdings in the ORT television network to the state after ORT broadcast 
interviews with angry relatives of the crew on the doomed Kursk submarine. In 
June, Mr. Gusinsky was arrested, briefly jailed and, under pressure, he 
signed a deal transferring his media holdings to the state-owned Gazprom, the 
giant oil company. After that, he left the country. He is now repudiating the 
deal. 


Mr. Putin continues to insist on a military solution to the ethnic conflict 
in Chechnya, a path leading nowhere. The fear of the authorities' unchecked 
power has begun to find its way back into the everyday lives of ordinary 
Russians.


By and large, Mr. Putin is gradually heading toward authoritarian rule. For 
ages, the supreme leader of Russia — be it a czar, general secretary or 
president — wielded practically unlimited power. Thus, the personal
attitudes 
and decisions of Vladimir Putin will have incomparably graver consequences 
for Russians that those, say, of President Clinton for Americans. 


Right now, the president remains popular with ordinary Russians, and some say 
the people are not ready for democracy. But as we saw in the popular reaction 
to the submarine disaster, they have gained independence from the 
bureaucratic state. 


This potential for civil society should be more than adequate not only to 
preclude a return to the past, but to ensure further progress of democratic 
reforms. The West must let President Putin know that this course is the only 
acceptable one.


******


#9
INTERVIEW-Russian business needs the net to stop corruption
By Peter Henderson

MOSCOW, Sept 22 (Reuters) - Business leaders aiming to stamp out corruption 
will drag Russia into the information age, adopting e-commerce and all the 
trappings, the head of Russia's largest computer and technology services firm 
said on Friday. 


Businesses will use the Internet to become more transparent, reaping a reward 
from investors for their openness, the head of Information Business Systems, 
IBS, said in an interview. 


IBS group, the $250 million leader of Russia's roughly $1.4 billion 
information technology market, aims to lead Internet newbies by the hand and 
plans its own public offering next year, head Anatoly Karachinsky said. 


The reasons for Russia to boot up start with corruption. 


"There is a model of stealing money from companies and taking it offshore, 
which is a much easier way to make money than to earn it honestly," 
Karachinsky said. 


But bribes are small change. "People are discovering that is more profitable 
to have a high capitalisation than to steal a bit of money today," he added. 
"The prize in the West for those who work honestly is larger capitalisation." 


FUTURE OF ECONOMY? 


Thus Russia's infamous grey sector of unrecorded deals, bribes and tax 
avoidance, a major part of the economy, is becoming a problem for some who 
built it, as well as the government and more honest competitors. 


Computerisation and the Internet leave deal trails, uncovering bribes and 
foul play, Karachinsky says. "It is effectively a way to get out from under 
the control of independent company bureaucrats." 


"It is crucial for Russia's existence," he adds. 


However, Russians don't get the net -- literally. There are only a million or 
two users in the nation of 150 million, with consumers, relatively 
impoverished and inexperienced, bound to lag business in the move online, 
Karachinsky said. 


Businesses will fight for the few legendary Russian computer experts, he 
says, eyeing a public offering to attract people more than fixed assets. That 
approach addresses what many analysts say is Russia's main deficiency: the 
lack of experienced managers, who understand how a business works. 


IBS group plans to place some 20-30 percent of stock on the U.S. NASDAQ 
market, next year, though details may be changed after an investment bank is 
hired this month. 


More than half its revenues come from selling computers, software and 
equipment, but IBS's strategic direction is on services, like consulting and 
contract programming. It already writes computer code for Western firms like 
IBM and Boeing. 


"We do not sell products -- that is a different type of business approach. We 
are more like EDS or Andersen Consulting," he said. 


That means that IBS will not produce a piece of software for a broad market 
but can use experience on other ventures. 


Its software form the guts of a U.S. firm, NewspaperDirect, 
www.newspaperdirect.com, aimed at allowing travelers to download their 
hometown morning paper, and the would-be Ticketmaster of Russia, Parter.ru, 
which is in the planning stage. 


******


#10
Moscow Times
September 22, 2000 
TWO KOPEKS' WORTH: Government Must Show It Is Trustworthy 
By Peter Ekman 


Two landmarks have been passed in recent days that show this nation can 
govern itself honestly, but two other unresolved situations raise serious 
doubts about the government's honesty. They are simple matters of trust: Can 
the government keep its promises? 


The privatization auction for the Onako oil company fulfilled the 
government's promise of a fair auction, with the result determined not by 
government connections but by who submitted the highest bid. The results are 
more than just an extra half-billion dollars for the budget over the 
auction's starting price. Further privatizations will bring in even more 
money as bidders are not scared away by rumors of fixed auctions. Other 
investors will be encouraged to make new investments, knowing that the 
government keeps its word. 


The victory of environmentalist Alexander Nikitin over trumped-up espionage 
and treason charges pursued by the FSB and the Prosecutor General's Office is 
a victory for society. The Constitution promises fair trials, an independent 
court system and no double jeopardy. The Presidium of the Supreme Court kept 
those promises by refusing to allow the FSB to reopen Nikitin's case after 
his acquittal by a lower court and a previous confirmation of the acquittal 
by the Supreme Court. Nikitin thus became the first Russian in history to be 
cleared of charges of treason. All Russians can now have more trust that the 
Constitution's promises will be kept. 


In handling these two situations by the rules, the government showed the 
world that its word can be trusted in certain instances. Full trust in the 
government's word is all that is needed to turn around the economic situation 
and make Russia prosperous. 


But full trust is a long way off. The government has also broken two key 
promises recently. When the Communications Ministry informed Vimpelcom and 
MTS that they could no longer use 52 cell-phone frequencies, the ministry was 
not just breaking a promise, but also stealing private property. It was 
telling investors loud and clear, "Don't invest in Russia." Fortunately, most 
of the damage can be repaired by returning the frequencies immediately. 


A much more damaging breach of trust is shown by Press Minister Mikhail 
Lesin's signature on the infamous Appendix 6 of the sales agreement for 
Media-MOST between Vladimir Gusinsky and Gazprom, guaranteeing that Gusinsky 
will not be prosecuted by the government if the sale of Media-MOST is 
completed. By signing this guarantee to a private contract, Lesin has in 
effect said that justice can be bought and sold and that the prosecutor's 
office can be used to blackmail businessmen. 


To retain the public's trust, Lesin should be fired for exceeding his 
authority. Lesin has countered the accusations against him by claiming that 
he signed the protocol at Gusinsky's request and as a private citizen, not as 
a government minister. If this is true, he should be fired for incompetence 
as well. 


When Gusinsky was arrested in June, President Vladimir Putin was questioned 
by reporters in Spain about the arrest. Putin responded that the prosecutor's 
office had acted independently, that it was above political influence, but 
that, if anybody had abused his powers, he would be punished. 


Lesin must be fired. It's a simple matter of trust f can Putin keep a 
promise? 


Peter Ekman is a financial educator based in Moscow. He welcomes e-mail at 
pdek@co.ru. 


******


#11
Wall Street Journal
September 22, 2000 
Review & Outlook
Team Russia


"Russia's Road to Corruption" is the blunt name of a report put out this week 
by a House Republican study group. Yes, it's a "partisan" analysis of Russian 
policy during the Clinton presidency, but last time we looked this is what a 
loyal opposition is supposed to do. As an added bonus, it's an awfully 
interesting read (full text available at policy.house.gov/russia).
Russian coach 
The 209-page report, assembled under the direction of Rep. Chris Cox of 
California, asserts that "Russia today is more corrupt, more lawless, less 
democratic, poorer, and more unstable than it was in 1992." Of course, the 
Clinton administration doesn't bear primary responsibility for Russia's many 
ills. The blame for that goes to 72 years of communism. When that vile system 
finally collapsed, it left Russia bereft of any institutions with which to 
build a modern, law-governed society. Personal trust, so vital to a market 
economy, had been shredded by the evil presence of the KGB.


But the Clinton government can be faulted for assuming that merely schmoozing 
with Russian leaders and funneling huge sums of money to them would help 
Russia recover. The congressional report details this history of backing the 
wrong Russian pols, seeing no evil and insufficiently monitoring the uses of 
Western money. These policies aggravated and entrenched the worst tendencies 
in post-Communist Russia while wasting the precious goodwill America had with 
the Russian people in the period just after they overthrew communism.


When President Clinton came to office, he delegated policy toward Russia to 
Vice President Gore, the State Department's Strobe Talbott and Lawrence 
Summers at Treasury. The Gore-Talbott-Summers policy struck special 
relationships with a few members of the new Russian elite; it didn't go out 
of the way to demand accountability, or, for that matter, offer any of its 
own. Mega-loans and mega-summits followed. Long on self-certitude, Mr. 
Clinton's Russia team deflected all criticism or facts that suggested that 
the policy wasn't working.


"The Clinton administration's enormous political stake in its Russian 
partners gave it an overwhelming incentive to ignore and suppress evidence of 
wrongdoing and failure by officials, including Viktor Chernomyrdin and 
Anatoly Chubais, who had come to personify the administration's Russia 
policy," the report notes. There is ample evidence to support this conclusion.


By the end of 1995, the IMF had lent Russia $10 billion. But the money wasn't 
flowing fast enough for Vice President Gore, who complained in 1994 that the 
IMF and World Bank were "slow to recognize some of the hardships that are 
caused by some of the conditions that have been overly insisted upon in the 
past." In March 1994, IMF Managing Director Michel Camdessus complained that 
Russia had not provided the IMF the basic information needed to make a 
decision on a loan. But the pressure was on from Washington to look past 
those details.


Whether enthusiastically or not, the IMF and the administration eventually 
landed on the same page. A new loan of $10.2 billion was agreed in March 
1996, the second largest loan made to any borrower by the IMF. It's no secret 
that those cash infusions, and the bigger ones to follow, failed. Far from 
squeezing out cronyism, the loans promoted it.


Whenever pressed about rampant corruption, Mr. Gore and those who worked with 
him dismissed it as endemic and said it was always "on the agenda" at the 
Gore-Chernomyrdin meetings.


Russia's problems are primarily the responsibility of Russians. But the U.S. 
didn't have to encourage or reward bad tendencies. A different kind of 
administration might have used its moral authority to demand responsible 
behavior from Russian officials and the use of Western aid money to promote 
genuine reforms that would aid the Russian masses, who have seen little or 
none of the billions sent to Moscow.


Instead of respect, the United States earned a great deal of contempt from 
the Russians themselves. It's a little late in the day to search for 
remedies, but the House has performed a service by making an issue of the 
Clinton-Gore mistakes.
******