October
3, 2000
This Date's Issues: 4554
4555
Johnson's Russia List
#4555
3 October 2000
davidjohnson@erols.com
[Note from David Johnson:
1. AFP: Rich harvest not enough to save struggling Russian
agriculture.
2. Itar-Tass: PRO-KREMLIN WEB SITE SAYS MILOSEVIC DOOMED,
RUSSIA TO BENEFIT FROM DITCHING HIM.
3. Moscow Times: Lucy Komisar, Money Trail. (re Bank of
New York and money laundering)
4. Ben Aris: Media Most.
5. Transitions Online: Brian Whitmore, Might Makes Right.
(re fighting corruption)
6. THE JAMESTOWN FOUNDATION PRISM: Andrei Kolganov,
RUSSIA: CONSOLIDATION OF THE NATIONAL CONSCIOUSNESS?]
******
#1
Rich harvest not enough to save struggling Russian agriculture
SHESTAKOVO, Russia, Oct 3 (AFP) -
This year's harvest in Russia at least was bountiful and the silos are full
of grain, but the nation's agriculture is in terrible shape and there is no
light at the end of the tunnel.
But some 100 kilometres (60 miles) northwest of Moscow, Shestakovo, an
agricultural cooperative, is a rare success story -- is a profitable farm.
Shestakovo contains a whole village and employs 320 people to work on its
3,600 hectares (8,892 acres) of land on which 2,700 cattle graze.
Anna Kostina, who is in charge of 400 cows, says Shestakovo is an exception
rather than the rule. "Many farms don't make it," she said.
Kostina says the cooperative is well managed and she has no reason to
complain -- she regularly receives her monthly wage of 1,500 rubles (54
dollars, 50 euros) and she is paid additionally in kind with three kilos of
free meat a month, a discount on milk, and fodder to feed a cow and a sheep
she is raising on a small patch of land.
After the devastating financial crash of 1998, Russia's agricultural sector
slowly got back to its feet.
"Demand turned around significantly, prices went up again. For many farms,
large as well as small, the situation improved in 1999," said the director of
Shestakovo, Vassily Shuliyepov, whose office is decorated not only with a
Russian flag, a religious icon and a portrait of Lenin, but also with a
picture of a black-and-white cow.
"But the positive effect of the devaluation has been practically reduced to
zero," he continued. "The prices of main agricultural products have gone down
again, while industrial prices have soared."
Due in part to good weather, this year's grain harvest is expected to be
satisfying, having surpassed 65 million tonnes, already well above the 48
million tonnes harvested over the whole of 1998.
But it is not enough. To relaunch production, more than 90 million tonnes are
needed each year, a figure that was easily achieved some six years ago.
To make matters worse, the number of Russia's livestock dropped has dropped
by half in only a decade.
And the decline continues. The production of meat and dairy products has
plunged as the combined number of cows, sheep and pigs dropped by two percent
between January and August.
"Milk is cheaper than water nowadays. And foreign countries dumping their
meat here only discourages potential farmers," Shuliyepov said.
"This is our best harvest in years. But our profit will be nine million
rubles (320,000 dollars) less than last year," he added.
Shuliyepov, 50, and also an agricultural engineer and deputy in Russia's
state Duma, the lower house of parliament, said the current financial crisis
ruined the prospect of a resurgence, which he says can only be achieved with
state intervention.
Huge price differences are not the only problem. Debts, expensive credit,
disorderly distribution channels and ageing machinery have brought Russia's
agriculture to the brink of disaster.
"The cost of a Russian-made combine harvester amounts to half of our annual
grain harvest. More than 70 percent of the machinery is obsolete, but not a
single farm has enough money to replace its machines," he said.
******
#2
PRO-KREMLIN WEB SITE SAYS MILOSEVIC DOOMED,
RUSSIA TO BENEFIT FROM DITCHING HIM
ITAR-TASS
Moscow, 3rd October: A recently launched pro-Kremlin web site has said
Yugoslav President Slobodan Milosevic was doomed and Moscow was likely to
join the West in defending democracy in Serbia.
"The current regime in Belgrade has been dealt a stunning blow from which it
will hardly be able to make a comeback. Therefore, the fall of Slobodan
Milosevic is only a matter of time," said a "viewpoint from Russia" comment
of the Strana.ru national information service which sharply contrasted with
official reaction. It quoted unidentified sources in Belgrade as saying that
the Yugoslav leader had already lost the backing of the power structures and
that their chiefs were "now busy thinking of their own survival rather than
of prolonging the agony of the outgoing regime".
"Russia's support could tip the scales in Serbia in favour of the opposition
and convince Milosevic not to try clinging on to the authority slipping out
of his hands, but rather to take up a more useful matter such as looking for
a place for future emigration", the comment said.
The straightforward comment in support of Yugoslav opposition leader Vojislav
Kostunica radically differed from the official reaction of the Foreign
Ministry which refused to take sides. It said on Monday [2nd October] that
the run-off election was envisaged by the Yugoslav constitution and called on
the conflicting parties to abide by law. It also refused to get involved in
the first round vote recount, saying it was an internal Yugoslav affair.
In contrast, the pro-Kremlin site, which said it was providing "unbiased
information" also for decision makers, stressed that the political crisis in
Yugoslavia has given Russia "an unexpected chance... [ellipsis as received]
to regain its lost positions in the Balkans and, at the same time, to
consolidate its relations with the West by acting together with Europe and
America to defend democracy in Serbia".
*****
#3
Moscow Times
October 3, 2000
Money Trail
By Lucy Komisar
REUTERS
Lucy Komisar, an American reporter, spent several months in Moscow this
summer doing research on the offshore system on a grant from the U.S.
National Research Council.
When news broke in August 1999 that somewhere from $7 billion to $15 billion
had been spirited out of Russia through the Bank of New York, in what looked
to U.S. investigators to be money laundering, American bankers professed
shock. A month after those revelations, Bank of New York CEO Thomas Renyi
told the U.S. House Banking Committee "how dismayed I have been by the
suggestions in the press that the Bank of New York has been involved in, or
been used as a vehicle for, money laundering or other illicit activities."
Renyi's dismay aside, this was hardly the first time a New York bank had been
soiled by money believed stolen by Russian criminals. U.S. immigration agent
Thomas O'Connell described one scam in detail. Connell headed a U.S.
inter-agency federal investigation of money laundering and other
international crimes. The FBI, the IRS, the Customs Department and
O'Connell's agency, the Immigration and Naturalization Service, had monitored
two Russians with unusual banking habits. In 1993 and 1994, the pair used
Chemical and Chase f now merged f Citibank, and the Bank of New York to
launder almost $2 million embezzled from St. Petersburg Channel 5 television.
And there was more. During that investigation, U.S. authorities discovered
roughly a thousand bank accounts they suspected of being used by other
Russian criminals.
"Most [of the accounts] were out of the Chemical Bank in Dag Hammarskjold
Plaza in New York City," said O'Connell. "The first four or five bank
statements I saw had hundreds of thousands of dollars going through them. The
money would be wired in from Russia and then go out [offshore] to the Cayman
Islands or the Isle of Man or Switzerland in two or three days. There's at
least a thousand of them, and in each one, there's money being wired into the
U.S. f hundreds of thousands of dollars." O'Connell said the money moving
through all the accounts investigators examined ran into the "hundreds of
millions."
O'Connell said dozens of the owners of the targeted accounts were linked to
Russian organized crime. He said one customer was Vyacheslav Kirillovich
Ivankov, at the time the most powerful Russian organized crime leader in the
United States. Ivankov was convicted of extortion in Brooklyn in 1996 and
sentenced to 10 years in federal prison at Raybrook, New York.
The bank accounts were discovered because investigators were tapping the fax
machine of a Russian immigrant, Alexander Yegmenov, who'd caught the
attention of law enforcement authorities almost the moment he set foot in the
country.
Yegmenov arrived in the United States more than 10 years ago when he was in
his early 30s. O'Connell arrested him in 1990 as an "overstay," when he was
living at a fraternity house at Rensselaer Polytechnic Institute in Troy, New
York. Seeking to block deportation, in 1990 Yegmenov filed a political asylum
application. He claimed he had been an economist in the dissident
organization Sintez and had been detained in a psychiatric facility for a
month. Actually, Russian authorities had convicted him in 1984 on weapons and
unlawful sale of goods charges and he had served three years, the court
records said. That wasn't known by U.S. Immigration then, and Yegmenov got
asylum.
Paper Companies
A good capitalist, Yegmenov went into the corporate services business,
setting up shell companies f paper corporations used to evade taxes or
disguise transactions. He established New York companies through his All
American Corporate Service Inc., in Albany, and filed for Delaware
corporations with help from Delaware Business Incorporators in Wilmington.
"He would create a company in New York and subsidiaries outside the U.S.,
typically in the Caribbean," said New York State police Captain David McNulty
of the Bureau of Criminal Investigations, who helped collect evidence.
"Sometimes, he was creating a couple of hundred corporations a week all over
the country. People came to him and said, 'I need four companies outside the
U.S. that the IRS can't get access to.'"
To incorporate U.S. "subsidiaries," Yegmenov would dummy up supporting
documents to show that companies existed in Russia.
"I have 16 boxes and filing cabinets of his papers," O'Connell said. "I have
two boxes full of Russian stamps and seals he made for every Russian entity,
from federal police agencies to universities to hospitals. They bought a
modem for the stamping company and were modeming them images of the stamps
they wanted.
"We seized a Russian typewriter," he added. "They use thin paper and bind it
with white string. He had all that stuff." The grand jury indictment called
Yegmenov "a master forger."
He promised fast service. "He was buying people at the New York State
Department of State drinks and dinner to expedite the incorporation process,"
O'Connell said. "At one time, he had a box of blank New York State
certificates of incorporation that an employee at the Department of State
gave him. They had a watermark and seal." Two state clerks were disciplined
in the wake of that discovery, he said.
Too Many Visas
Yet Yegmenov was sloppy. Some clients wanted to use the companies to back up
requests for business visas, claiming the American subsidiaries of their
companies needed them to work here. The INS got suspicious about the large
number of applications Yegmenov was filing. Investigators discovered that he
had printed business cards for many of the companies at the same two
addresses: 1 Columbia Place and 283 State Street in Albany.
They tapped his fax machines f and learned he had set up thousands of shell
companies. They found 4,000 in New York, a thousand in Delaware, a few
hundred in Pennsylvania, Massachusetts, Ohio and other states, plus a couple
dozen in havens such as the Isle of Man and the Cayman Islands.
The faxes led authorities to a Yegmenov client named Mikhail Syroejine and
the $2 million embezzlement case.
Scamming St. Pete TV
Syroejine was 28 in 1993 and had just been appointed deputy director of St.
Petersburg's GTRK Channel 5. He was responsible for company purchases.
Prosecutors charged that Yegmenov helped Syroejine set up TV & Radio of St.
Petersburg Inc., which was registered in August 1993 in Albany in the name of
Syroejine's wife, Anna Potyomkina. Syroejine was the secretary. Channel 5
director Bella Kurkova and her deputy, Viktor Pravdyuk, were listed as
shareholders. Kurkova was a close ally of then-St. Petersburg Mayor Anatoly
Sobchak f the man who brought Vladimir Putin into politics as his deputy
mayor.
At the same time, Yegmenov established several other shell corporations to
use in the scheme. And Syroejine opened an account for TV & Radio of St.
Petersburg at Chase Manhattan Bank in Manhasset, New York, with a $200
deposit.
Then, Syroejine arranged to purchase new Sony television equipment from the
phony TV & Radio of St. Petersburg. Channel 5 paid $2 million into the
account of the shell company between December 1993 and February 1994.
St. Petersburg television officials said Syroejine had persuaded them that
the cheapest way to buy the Sony equipment was via a three-way contract
between GTRK, VN Express f one of theNew York shell companies f and Jojan
Consultants Ltd., a company registered in Dublin, Ireland. The Irish capital
offers corporate secrecy, hiding owners' names from government investigators
and courts.
As it often does in these cases, some of the money ended up fueling the U.S.
economy. In April 1993, Syroejine had gotten a non-immigrant visa from the
U.S. Consulate in Vienna, and in March 1994 he disappeared from St.
Petersburg and showed up in America to micromanage the scam. On March 18,
1994, half a million dollars was wired from a Liechtenstein account to a New
York Citibank account Syroejine controlled, and between March and May, checks
drawn on Citibank paid for a $20,000 Rolex watch, a 1994 Jeep Grand Cherokee
and a Chris-Craft 380 Continental pleasure boat.
Covering the Tracks
Money launderers move cash through multiple accounts to obfuscate paper
trails. Between August 1993 and May 1994, Syroejine opened accounts at Chase,
Chemical, Citibank and the Bank of New York, and shifted hundreds of
thousands of dollars between them until he sent nearly $2 million out of the
country. Some $430,000 went to Barclay's Bank in Limassol, Cyprus. Another
$400,000 was sent to an account called Mand Stifftung, opened in the name of
Valeri Martioukhine at Verwaltung Und Privatbank in Vaduz, Liechtenstein.
That bank was mentioned in a report by the German intelligence service last
year as a prominent money launderer. More than a million dollars went to
Jojan Consultants at Lloyd's Bank in Britain.
By May 1994, close to delivery time for the illusory Sony television
equipment, VN Express had replaced the now defunct TV & Radio of St.
Petersburg as the supplier and taken over its $600,000 banked assets.
Syroejine sent a fax from VN Express stating that because of the "provocative
behavior" of one of Channel 5's representatives, VN Express refused to deal
with it anymore. Channel 5 never got more of an explanation or the equipment,
nor could it get in touch with VN Express or Syroejine.
Meanwhile, U.S investigators learned through Interpol of Yegmenov's 1984
Russian convictions and jail term. The U.S. Justice Department's Office of
International Affairs passed the information to the Russians, and in 1995,
Russian prosecutors began looking into the disappearance of the $2 million
from Channel 5.
Sting Operation
On Nov. 13, 1995, the FBI arrested Yegmenov in Brooklyn. Agents also seized
Syroejine at his Santa Monica California condominium. The two men were
indicted in November 1995 for money laundering. Yegmenov was also charged
with visa fraud. The U.S. calculated the total theft of the Channel 5 case at
$1,949,460.66. Authorities interviewed for this article declined to say
whether any money was recovered.
O'Connell had the INS run a computer search to pull all the visa applications
Yegmenov had filed. It found about a thousand. "They were for the Brighton
Beach crowd," he said. "Ninety-eight percent of the companies were out of
Brooklyn." He referred, of course, to a prominent center for Russian
immigrants.
Then U.S. agents used the applications to lead them to the bank accounts of
the phony companies.
"Each company that petitions for an alien has a file, a lot of supporting
documents," O'Connell said. "I had at one time a thousand of those files,
each for different companies, all sent to our service center in St. Albans,
Vermont. We had the center start asking the petitioners for additional
documents, including bank statements. Most were out of the Chemical Bank in
Dag Hammarskjold Plaza in New York City. Some were from the Bank of New York,
a couple from Citibank."
He said the Russian mafia was using many of the bank accounts to bring in
large sums by pretending they were paying for contracts in the United States.
O'Connell suspects hundreds of millions of tainted dollars have passed
through the New York banks into offshore havens. Once sent there, money is
generally impossible to locate or recover because those jurisdictions won't
open bank records to law enforcers.
Lost in the Paperwork
When investigators sought to locate other shell companies Yegmenov had
incorporated, they were stymied by U.S. state corporation department
practices. There was no way to run a computer search to locate corporations
by filer. New York State Police agents had to search by hand the papers of
every corporation filed with the state over a period of time and pull folders
with recognizable names such as Yegmenov or someone from his office. Sensing
the surveillance, he had started using other petitioners' names. Limited to
tagging files that bore names they knew, investigators still discovered
roughly 4,000 New York state shell companies Yegmenov set up.
But investigators could get banking information only from corporations
sponsoring people to get visas, not from those set up just to launder money.
"The only reason we know about the bank accounts is because of the supporting
documents," O'Connell said. "If Alex incorporated 3,000 companies that didn't
apply for visas, where do you start looking? Do you search every bank to see
if it has accounts from those corporations? It's an impossible task."
Yegmenov pleaded guilty in 1995 to money laundering and visa fraud. He served
about a year in prison or in INS detention, and was deported. In Russia, he
was jailed for a year on the St. Petersburg television station charge, then
released.
Prosecutors in Moscow opened a case against Syroejine in January 1995 and in
May handed the case to the Interior Ministry in Moscow. A source said that in
the United States, Syroejine had been freed on bond, but from Jan. 18, 1996,
most U.S. court records in his case were sealed, including any indicating its
disposition. That suggests he got his freedom in a deal to provide
information to U.S. authorities.
Disappeared
U.S. Embassy sources in Moscow said Yegmenov was arrested last year illegally
attempting to cross the border to Belarus. They also said local authorities
want Syroejine back, but that he is still in the United States and is seeking
immigration status. The Federal Security Service, the Prosecutor General's
Office and Interior Ministry offices in Moscow and St. Petersburg all
declined to answer questions on what happened to Yegmenov or the money, what
efforts were being made to get Syroejine back and whether the information
revealed here was considered when authorities decided not to prosecute
Kurkova and her confederates.
A Bank of New York spokesperson also declined to comment. Officials at
Citibank and the now-merged Chase and Chemical banks promised to look into
the matter. Follow-up queries brought the reply that they were "still
looking."
The U.S. Justice Department and the attorneys who handled the case declined
to provide information on grounds that aspects of it are still being
investigated. There are thousands of Yegmenov companies suspected of being
used for illegal purposes.
"I get calls all the time on the companies he opened," O'Connell said. "It
created a lot of awareness in the U.S. State Department. Every once in a
while, I'll get a call from the Office of International Affairs. The legate
to Moscow or St. Petersburg has one of Yegmenov's companies on his desk and
what should he do about that. I tell them, 'Don't give the guy the visa.'" He
added, "I'm sure somebody by now has taken Yegmenov's place."
Hiding the Money
Lax U.S. federal and state regulations make it easy for criminals to hide
their connections to shell companies and bank accounts.
Banks routinely establish accounts for phony companies without exercising
effective due diligence to check out their customers. Law enforcement agents
are hamstrung by state corporation recording procedures that make it hard to
ferret out bogus companies set up by crooks. Neither New York nor Delaware,
for example, demands that owners and officers be listed on incorporation
filings. Company directors are supposed to be listed on the annualDelaware
franchise tax filing, but lawyers often name themselves or leave a blank.
A clerk at the New York State Division of Corporations said a requirement for
biannual filings signed by the chairman of the board was not enforced,
because the legislature hadn't passed an implementing law. A Delaware
corporation division clerk said when papers come through with directors not
listed, the lack of data is ignored.
Immigration agent O'Connell and Anthony Russo, the IRS agent on the Alexander
Yegmenov investigation, agreed that company owners and officers should be
named in incorporation papers and that state incorporation computers should
be configured to facilitate searches of owners, officers and filers. Then,
Russo said, "If we had an allegation against a suspect, we could go there
right away and see that he formed 5,000 corporations," instead of having to
hunt for them by hand.
*******
#4
Date: Tue, 03 Oct 2000
Subject: Media Most
From: "Ben Aris" <benaris@online.ru>
Confiscating Media Most Monday, October 2, 2000
Dear David,
I would like to respond comments made by Peter D. Ekman (JRL#4549) and
Garfield Renyolds (JRL#4548) on Media Most. I went to see them yesterday and
I donıt think the mechanics of this debt Media Most owes Gazprom has been
understood properly.
To summarise their comments: Ekman says Media Most is bust as a business and
so the Gazprom has the right to take it over by dint of the money MM owes
it. Garfield argues that it is Russiaıs only real unbiased media and the
Kremlinıs attempts to close it down will stifle the freedom of press and so
be bad for democracy. As one of the few media prepared to oppose and
criticise the Kremlin, MM has been one of the few checks on the current
administration.
They are both right, but they are not talking about the same thing. There
are two important facets to the media business, which the Kremlin is
deliberately confusing to cover its arse.
1) On the one hand at the level of the journalists media is about
objective reporting on what is happening and criticising injustices or
exposing the abuse of power. In short: the role of the fourth estate. The
fourth estate must be separate from the state and the crux of the Media Most
story is the state seems to interfering above and beyond imposing the normal
regulations and liable laws.
2) On the other hand at the level of the owners it is a business that
must make a profit if it is to be independent of the state. In theory
objective reporting and informed opinion and criticism will sell well and so
will make a profit. The Media Mostıs problem is the company owes a lot of
money that it canıt pay and so therefore should be bankrupted.
Both these points of view are correct. Which to choose?
Media Most was in full expansion mode when the ı98 crisis hit and got caught
with its financial trousers down. They had just launched a $150m satellite
to provide the NTV Plus satellite channel. If Russia had continued to grow
this business alone would have been a money-spinner, but the timing was
terrible. In the midst of the crisis everyone slashed budgets to the bone
and revenues fell by up to 80%, leaving the company broke.
The company has been recovering since then, but they were unable to pay back
their debts and Media Most says that it is still not quite breaking even
(although NTV is showing a small profit).
In this sense Ekman is right: Media Most (the company) owes Gazprom (another
company) money that it canıt pay. Normally in this situation Gazprom would
bankrupt MM to get its "investment" back.
But when you put it in these terms it starts to sound odd. Investment into
media in the mid90s for profit? And when did anyone get anything back from
bankrupting a Russian company? Or even when did anyone in Russia ever
bankrupt a Russian company for purely commercial reasons?
In fact Media Most didnıt borrow the money from Gazprom Media at all, but
Credit Suisse First Boston. Gazprom was the guarantor on a loan. Secondly
the widely quoted size of the debt was not $473m but $211m. There are
actually two loans from CSFB, both with Gazprom guarantees. But the second
one for about $262m doesnıt come due until next summer so MM isnıt yet in
default on that one.
The first loan of $211m came due in March and MM didnıt have the money. MM
says that it came to an agreement with Gazprom, which already owes 14% of
NTV. The deal was Gazprom would pay off the CSFB loan and in return receive
a blocking stake in NTV (ie another 11% plus one share of stock).
It was an amicable agreement. MM has been thinking about floating stock for
years. They were just about to make an initial public offering on Nasdaq in
the US in 1998 when the Russian economy collapsed. They had resurrected
plans this spring and took the company on a road show in the US in March to
begin the process of drumming up investor interest abroad.
But they had no intention to float until about 2002. They didnıt need to as
the company was growing and they had already agreed with Gazprom how to
handle the $211m debt to both sidesı satisfaction.
Indeed MM was so confident of their growth potential that they turned down
several foreign investorsı offers to buy MMıs debt to Gazprom in order to
get a foot in the door. They wanted to wait as selling the company now, they
would sell at rock bottom prices.
MM insists that relations with Gazprom until March had been cordial and it
had regarded Gazprom as a partner.
Following Putinıs inauguration in May all that changed and the Kremlin
became more aggressive. According to MM in May the Kremlin stepped in and
stopped Gazprom/MM debt-for-shares deal.
A mounting series of raids on MM, culminating in Gusı incaseration, would
scare off any potential investors, effectively making it impossible for MM
to raise fresh cash from abroad. Even at this late stage the Kremlin has
covered its bases and impounded MMıs shares, so even if a white knight could
be found to cover the debt, they physically couldnıt buy the stock.
Under Yeltsin Gazprom was much more autonomous and its relations with MM
were company to company. But that has changed this year. At the Gazprom AGM
on June the Kremlin installed Dmitry Medvedev -- a key member of President
Putinıs election campaign team and deputy head of the Presidential
Administration -- as Chairman of Gazprom. About a week later Gus was
arrested. Coincidence?
Gazprom is being subsumed into the Kremlin apparatus and the Kremlin has
lent on management. For the Kremlin the most embarrassing aspect of the
documents released to the press by Gus was the fact it was Press Minister
Mikhail Lesin that offered to buy the company from Gusinsky, not Alfred
Kokh, the head of Gazprom Media. This makes a mockery of the "itıs a fight
between two companies" Kremlin line.
This fact alone is a rather obvious smoking-gun and I donıt think anyone
disagrees that it was the Kremlin, not Gazprom, that wanted to see MM in
difficulties. PM Mikhail Kasyanov has threatened to sack Lesin for his role
in the scandal, but donıt expect to see it happen anytime soon.
The deal that Gus signed with Lesin "practically at gunpoint" is compete
nonsense. No government can promise: "if you give us your company we will
not send you to jail, and by the way here is $300m sweetener." It is an
agreement that puts Gus above the law and no government can promise that.
The Kremlinıs strategy is very clever. It is deliberately confusing the
issues here. By arguing the "itıs a fight between two companies" line it
stands aloof as a state must from a fight involving the media. Moreover, it
relies on the law and the letter of the law is clearly on the
Kremlinıs/Gazpromıs side.
But given the Kremlinıs blatant interference in the workings of the progress
of this deal it steps over the line. It is attacking the company at the
level of the owners to stop something it doesnıt like that is happening at
the level of the journalists. At the end of the day the Kremlin couldnıt
give a hoot about who runs MM as long as they tone down their message.
It has manipulated the business mechanism by quashing the Gazprom/MM deal
and in doing so suppressed the freedom of the press. And this is without
mentioning throwing Gus into jail on trumped up charges.
Unfortunately because of its debt Gus will probably lose control as the
business rules have to be followed: if he doesnıt have the money and canıt
raise it then he is bust. Gus has not been cheated he did owe the money
and Gazprom doesnıt have to agree to the deal to swap debt for shares in NTV
-- but outmanoeuvred.
Some encouragement can be taken from the fact that the Kremlin is using the
law to do its dirty work. Dmitri Ostalsky, chief press officer of Media
Most, summed it up to me wryly with: "at least we have made some progress
since 1917 when they just shot you and confiscated your property. Now they
donıt shoot you and even offer you some money when they are confiscating
your property."
*******
#5
Transitions Online
October 2, 2000
www.tol.cz
Might Makes Right
by Brian Whitmore
Brian Whitmore worked as a journalist in St. Petersburg and
Moscow from 1996 to 2000, and is now based in Prague.
In contemporary Russia, corruption allegations are dragged out for a number
of reasons, and none of them have anything to do with fighting corruption.
Earlier this year in Russia, machine gun-toting riot police in camouflage
and ski masks stormed Guta Bank, one of Moscow's largest. Under the
pretense of investigating the bank's finances, the police smashed down a
door, seized documents, and scared the wits out of the bank's employees.
Part of President Vladimir Putin's campaign to stamp out corruption and
establish a "dictatorship of law" in Russia?
Not quite. Law, at least by common definition of the word, has very little
to do with it.
Instead, the story unfolded like this: The Moscow regional government owed
Guta Bank about $40 million in overdue debts. Prior to the raid, the bank
had seized about $4.2 million in government assets that were held in its
accounts. Afterwards, it had second thoughts. It was basically a commercial
conflict, the type that in most countries would be resolved in court of
law. But the incident served to illustrate that in Russia, the rule of law
is far less important than a much older principle: Might makes right.
The country has recently witnessed a virtual epidemic of similar armed
takeovers at aluminum smelters, paper mills, mining complexes,
pharmaceutical plants, vodka distilleries and once even at an ice
cream factory. In such contemporary Russian commercial disputes, the
Kalashnikov trumps the courtroom and the Kalashnikovs are usually in
the hands of police officers acting in the interests of private companies.
Rather than keeping public order, law enforcement bodies in Russia are most
often used as blunt weapons, intervening in business feuds on the sides of
those with sufficient political contacts. The term gosudarstvenaya
krisha, or "state cover," is tossed around by businesses to indicate
that they have the protection of the police, prosecutors, or security
services. And strange things have happened to people without "state cover"
who think they own property.
A NEW TWIST TO OLD CORRUPTION
The most successful privatization that has taken place in Russia over the
past decade has been the informal privatization of Russia's law enforcement
bodies. Nowhere is this more evident than in the country's so-called
"battle" with corruption a battle that has been going on for the
better part of the last 10 years.
In Soviet times, when an official was charged with corruption, it was often
said the real reason he got arrested was that on ukral ne po
dolzhnoste which roughly translates as "he stole out of proportion
to his official position." In other words, low-level officials can steal a
little, mid-level officials a little more, and top-level officials as much
as they please. Don't go over your limit, and you will be just fine.
To a large degree, this principle still holds true in post-Soviet Russia,
but with a few twists.
In March 1992, then-President Boris Yeltsin said he was launching "a full,
head-on assault on crime, bribery, and corruption." Then, in February 1993,
he announced that "corruption in the organs of state power is literally
corroding the state from top to bottom." Yet weeks later, Yeltsin fired
corruption fighter Yury Boldyrev from his job as the Kremlin's Inspector
General. Boldyrev's crime? Investigating then-Defense Minister Pavel
Grachev for corruption.
Yeltsin was gearing up for a battle with Russia's parliament a battle
that would reach its bloody conclusion in October 1993 and he badly
needed Grachev and the military on his side. By Yeltsin's re-election in
1996, Grachev had become a liability, and was unceremoniously sacked.
Boldyrev clearly didn't understand his role as the Kremlin's Inspector
General. He was not supposed to be an anti-corruption watchdog, applying
equal principles to all officials. Instead, he was supposed to be more like
a hitman picking his targets carefully.
Today, corruption allegations are dragged out for a
number of reasons, and none of them have anything to do with fighting
corruption. In some cases, they are a means to rein in or intimidate
opponents of the state. This summer's detention of media magnate Vladimir
Gusinsky, whose NTV television station had relentlessly attacked Putin, was
a case in point. In other cases, corruption scandals are initiated by
financial clans using friendly (privatized) police and prosecutors against
their foes. The message here is simple: If you are loyal, steal as much as
you like. If you aren't, then watch it!
EVERYONE IS VULNERABLE
Given the blurred lines between the public and private sectors in Russia,
and pervasiveness of official corruption, just about everybody is
vulnerable. The low salaries of public officials, many say, almost make
some form of corruption inevitable some say even necessary.
Sergei, a friend in St. Petersburg, once told me how his brother was fired
from the city's traffic police for not taking enough bribes. Beat cops,
Sergei explained, were supposed to shake down people on the streets and
kick some of the money upstairs to their superiors like an alternative
system of salaries. By being an honest cop, so the logic goes, Sergei's
brother was depriving his superiors of an "honest" wage.
Furthermore, friends doing business in Russia have told me that quarterly
meetings with tax officials are simply occasions to agree on the size of a
bribe necessary to avoid an audit.
"In the past few years, there isn't a single businessman who has not broken
the law somewhere," media and oil magnate Boris Berezovsky said recently.
"Naturally the law enforcement bodies have a chance to settle accounts with
anybody."
Berezovsky, one of the top power brokers in Yeltsin's Kremlin, should know.
For nearly two years he has been battling allegations that he had embezzled
millions of dollars in funds from the state airline Aeroflot and laundered
them through Swiss bank accounts. Those charges surfaced in the fall of
1998 when Berezovsky's mortal enemy, Yevgeny Primakov, was Russia's prime
minister. The allegations miraculously disappeared last year when Primakov
was fired. They remained buried when Berezovsky used his media and wealth
to help elect Putin president. They surfaced again a few months ago, right
around the time when Berezovsky began feuding with the new president.
But Berezovsky is also a master at manipulating law enforcement bodies to
serve his own ends. Many observers in Russia say that he has "privatized"
large chunks of the country's law enforcement authorities. Interior
Minister Vladimir Rushailo, for example, is widely believed to be a close
Berezovsky ally.
Berezovsky also uses the television stations and newspapers at his disposal
to air corruption allegations against his enemies. The so called "Writers'
Union Scandal" is a case in point. In the fall of 1997, then-Deputy Prime
Minister Anatoly Chubais and other top government officials were accused of
taking bribes in the form of book royalties from a publisher tied to the
powerful Russian bank Uneximbank. The scandal took place in the midst of
bitter clan warfare pitting Berezovsky against Chubais and his team of
"young economic reformers." When the scandal broke, Chubais had just
overseen the controversial privatization of telecommunications giant
Svyazinvest. Berezovsky wanted the company badly, but instead, the
Chubais-connected Uneximbank won the tender that many alleged was fixed.
The Writers' Union scandal first broke in media controlled by Berezovsky,
and Chubais and his allies were soon on the defensive, and many lost their
jobs.
In February of this year another attack was launched against Chubais and
his United Energy Systems (UES) energy monopoly. And most recently, a nasty
September tax "inspection" into UES continued the anti-Chubais blitzkreig.
Many observers have speculated the tax audits are attempts to oust Chubais
as CEO of that company, and have little to do with tax evasion. Some have
even speculated more to the point, that Berezovsky, his friends in the
presidential administration, and fellow tycoon Roman Abramovich would very
much like to see Chubais out of UES. They have already pulled off a
near-total takeover of the aluminum industry, and UES would be the
clincher. But public perception right now says that Berezovsky is on the
outs with the Kremlin. In the end, only when the winners of Russia's most
lucrative assets are announced, will it be clear who is "corrupt," and who
is in the good graces of the elite circle. Corruption, in this sense, is
defined not by criminal activities, rather by standing within the
presidential administration.
Given such an environment, it is not surprising that the many so-called
anti-corruption campaigns in Russia have come to nothing. "Corruption is
out of control in Russia because society itself is out of control," Leonid
Kesselman, a prominent St. Petersburg-based sociologist, once said. And
there are no indications that Russia under Putin will be any different than
Russia under Yeltsin.
*****
#6
THE JAMESTOWN FOUNDATION PRISM
A MONTHLY ON THE POST-SOVIET STATES
SEPTEMBER 2000 Volume VI, Issue 9 Part 2
RUSSIA: CONSOLIDATION OF THE NATIONAL CONSCIOUSNESS?
By A.I. Kolganov
Andrei Kolganov is a doctor of economics and a senior research fellow at
Moscow State University.
(This article makes use of materials from the RNISiNP analytical paper
"Russians on the fate of Russia in the 20th century and on their hopes for
the new century," presented by the Friedrich Ebert Foundation.)
The consciousness of the members of Russian society is still riven by
contradictions. Consensus on the fundamental questions, answers to which
will determine the future development of the country, is an extremely long
way away. Although some tendencies can be observed in Russia which suggest
a consolidation of the public consciousness at least on certain issues, it
mainly touches on abstract value judgments only.
On the one hand, this state of affairs does not offer a basis for a broad
coalition of social forces around any particular positive program for
reform or modernization. On the other, the commonality of value judgments
and the significant level of agreement on the assessment of individual
periods in history and concrete historical events, create a potential
platform in society for consensus or compromise on future actions. But has
the time for forming such a consensus in Russia arrived?
To answer this question, we need to establish exactly where the views of
most Russians coincide and where they diverge.
COMMON ASSESSMENTS OF THE PAST
Irrespective of any particular age, social or professional group, over 50
percent of Russians have a positive attitude to such historical
developments as the reforms of the early 20th century, the new economic
policy of the 1920s, the period of industrialization and the Khrushchev
thaw. Negative attitudes predominate in almost all groups with regard to
the Brezhnev stagnation, the collectivization of agriculture and
Gorbachev's perestroika.
It should be noted that these assessments have changed somewhat from
results given in 1995. At that time the period of stagnation enjoyed a
generally positive appraisal and few people gave a positive assessment of
the reforms of the early 20th century. The change was brought about both by
the influence of official propaganda, which for ten years has presented the
early 20th century in an exclusively positive light (simultaneously
extolling the virtues of Nicholas II), and by an independent reappraisal of
the historical role of the Brezhnev period as the time when the crisis
conditions which burst to the surface in the late 1980s began to develop.
Assessments of such events as the 1917 October revolution and the
modern-day market reforms continue to divide society approximately down the
middle.
VARYING CONCLUSIONS FROM THE PAST
As concerns the lessons which Russians have taken from their past, there is
not even a semblance of consensus here. Only a few statements attracted
between 30 percent and 40 percent of votes. These included: Russia should
think for itself and follow its own path, rather than copy the experience
of other countries (39 percent); reforms in society should begin with the
economy, not with the political system and democracy (39.8 percent); Russia
can only become a developed country when all the conditions are provided
for those who want to work and earn money; those who do not want to do this
should remain poor (34.6 percent).
It should be noted that a rather insignificant number of those surveyed
support such statements as "the West is Russia's eternal enemy; it is the
West which counteracts its prosperity" (13.2 percent). However, at the same
time just 4.2 percent of respondents agreed that "the western model of
development is effective, and should be followed strictly." Only 21.1
percent of those surveyed think that "socialism is much more suitable for
Russia than capitalism." But even fewer believe that "despite its
individual achievements, Soviet power brought the country to a dead end"
(13.5 percent).
All this shows that the Russian people lack priorities and values which
unite them; most Russians have not yet firmly decided what they should do
and where they should pin their hopes for the future.
AREAS OF DISAPPOINTMENT
This uncertainty in the mood of Russian society is in many ways determined
by a negative assessment of most of the events which took place in the
country between 1985 and 2000. A number of these events used to be
supported by the majority of the population, and now are given a negative
assessment by a similar majority. People are disappointed by their own
actions, they have lost the illusions they once shared. For example, events
based on a direct expression of the will of the people are now assessed
negatively: The adoption of the 1993 constitution (51.1 percent negative)
and Yeltsin's victory in the 1996 presidential elections (66.5 percent).
Negative assessments were also given to other important political steps
taken by the Yeltsin administration: The Belovezh agreement and the
collapse of the USSR (80 percent); radical market reforms (53.5 percent);
the dissolution of the Supreme Soviet of the Russian Federation in 1993
(51.6 percent); the privatization of state property (77.5 percent); the
first Chechen war of 1994-96 (53.1 percent).
Overall positive assessments were accorded to such events as Yeltsin's
early retirement (87.8 percent positive), the appointment of Putin as
acting president (66.7 percent) and the antiterrorist operation in Chechnya
in 1999-2000 (69.2 percent).
It is notable that the only clearly positive assessments are mainly linked
to the end of the Yeltsin era and the hopes which arose in connection with
this.
But what do Russians hope for? What do they want?
CRISIS IN THE MASS CONSCIOUSNESS WITH REGARD TO THE REFORMS
A 1995 survey already revealed a negative trend with regard to the
assessment of a number of issues related to market reforms. However, only
on one of these issues did the negative assessment exceed 40 percent. By
2000 the situation has changed.
While in 1995 just 38.6 percent demanded that the results of privatization
should be reviewed and the leading position of the state sector should be
restored, the corresponding figure is now 70 percent. In 1995 64 percent of
Russians wanted to extend price controls. Now 72.9 percent support this
demand. In 1995, just 37.6 percent of Russians thought it necessary to
restore elements of state planning. This has now risen to 70.1 percent in
2000. In 1995 only 37 percent wanted the free sale and purchase of land to
be prohibited; in 2000--54.3 percent.
Finally, in 2000 67.1 percent of those questioned wanted controls on
business activities to be strengthened. Those who support this demand are
typically employees of privatized companies.
The only thing which does not elicit mass disapproval is the free sale and
purchase of currency (19.1 percent against in 1995; 29.1 percent against in
2000). Does this mean that Russians are now firmly opposed to any type of
market reform, or is this just a negative reaction to the very poor results
of the market reforms carried out by the Yeltsin administration?
CONTRADICTORY ASSESSMENTS OF BASIC VALUES
When Russians were invited to assess which concepts provoked a positive
reaction and which provoked a negative reaction, it emerged that the
Russian consciousness is split. Positive assessments were given to such
concepts as "work" (95.7 percent) and "collectivism." That combination of
basic values raises the legitimate question: where do the Russians really
want to go?
THE MORAL CRISIS AND NEW HOPES
In order to answer this question, we need to bear in mind that the Russian
consciousness is experiencing a deep moral crisis. The vast majority of
Russians agree that in the last 10-15 years there has been a weakening of
such qualities as patriotism (72.9 percent), spirituality [dushevnost'] (81
percent), selflessness (82.9 percent), sincerity (84 percent), respect for
women (77.6 percent), benevolence (85.7 percent), honesty (81.6 percent),
respect for one's elders (86 percent). At the same time, there has been a
strengthening of qualities such as aggression (91.1 percent), cynicism
(83.9 percent), suggestibility (57 percent).
However, it is not just the perception of the "external" moral situation
that has changed, but also people's own moral criteria. Russians are
prepared to justify many acts which would have certainly been subject to
condemnation under the old moral standards. Russians accept or tolerate
such behavior as bribery (32.6 percent), unscrupulousness in business (42
percent), prostitution (42.8 percent), tax evasion (51.3 percent), draft
dodging (62 percent), resisting the police (66 percent), traveling on
public transport without a ticket (83.1 percent).
There are major differences in the level of tolerance between young and
old, and between cities and the countryside. City-dwellers and young people
have much more flexible moral principles than older people and those who
live in the country.
At the same time, a comparison of the attitude of Russians and Germans to
positive moral values shows that Russians demonstrate a stronger attachment
to such values (for example, 96 percent of Russians rate conscience as a
positive quality, compared with just 78 percent of Germans; work--96
percent and 82 percent respectively; law and order 93 percent and 88
percent; solidarity 92 percent and 80 percent, compassion 92 percent and 51
percent).
Russians still set very high moral standards. Situations where they are
forced to witness a decline in these standards, or, worse, have to violate
them themselves, provoke an internal protest. So how do Russians want to
extract themselves from this crisis?
NEW POLITICAL ATTITUDES
The disappointments of the last fifteen years have established an
authoritarian political attitude in Russians' minds. Dividing respondents
according to political preferences, it is revealed that in every political
group, including liberal marketeers, there are fewer supporters of
political freedoms than there are advocates of the "firm hand". In most
political groups, more than 80 percent of respondents support the idea of
the firm hand. This unanimity, however, certainly does not mean that
Russians are prepared to part with their political freedoms. Just as in
1995, limiting these freedoms arouses protest.
At the same time, there has also been a growth in the number of people
prepared to justify the use of force, in a number of examples, to resolve a
crisis. The percentage of those prepared to tolerate the use of military
force in conflicts which threaten Russia's integrity has increased from
25.6 percent in 1995 to 45.2 percent in 2000. Support for confiscating the
ill-gotten gains of "new Russians" has risen from 45.2 percent to 62.6
percent. However, the banning of political organizations and newspapers
that oppose the current authorities is supported by just 12.3 percent of
the public (10.6 percent in 1995); suspending parliament by 17.2 percent
(18.1 percent); canceling all elections for the next few years by 19.6
percent (12.4 percent). Over the same period, the number of people who
support a ban on strikes and other mass demonstrations has noticeably
fallen from 18 percent to 12.2 percent.
To summarize the results of the survey: Although generally speaking there
remains an adherence to democratic values and market freedoms, most
Russians lean towards the idea of a strong authority capable of reviving
Russia as a great power (this goal secured most support among
respondents--42.4 percent), using state intervention in the economy to
correct the results of market reforms with a view to achieving greater
social justice, and limiting the profits of private capital.
It is this sociopolitical tendency that determined Vladimir Putin's victory
in the presidential elections. Voters saw in him a man capable of
strengthening law and order, gearing the economy towards the needs of the
ordinary people, and defending Russia's national interests, while at the
same time preserving democratic forms of government and the positive
results of the market reforms.
There is no need to demonstrate that Putin's ability to meet these demands
is in fact very doubtful, and on certain issues totally illusory. The
initially effective war against the Chechen guerrillas, which began with
Putin's ascendancy to power, eclipsed in voters' minds many other acts of
Putin's which went against the mood of the electorate.
However, it is now clear that Putin has a very selective understanding of
law and order, that he is even more inclined towards compromise with the
West than Yeltsin was, and that his economic policy thus far is geared
towards radical liberal ideas. This means that the voters will not see the
expected rebirth of Russia from Putin, and he will not even manage to
maintain the temporary period of economic growth.
The question is, how long will it be before Russia's voters admit to
themselves that they have once again become the victims of unfounded hopes?
These hopes may in fact linger on for a very long time, if--as with
Yeltsin's reelection in 1996--the electorate is not offered a convincing,
attractive political alternative.
******
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