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Johnson's Russia List


October 22, 2000   

This Date's Issues:   4593  4594


Johnson's Russia List
22 October 2000

[Note from David Johnson:
DJ: An early Sunday request: It would be helpful if you could pass on to me the name and email address of someone who you think would benefit from receiving JRL. This could be your good deed to help improve understanding of Russia.

1. AP: Report: Putin Co-Authors Judo Book.
2. Reuters: Russian court bars governor from regional election. (Rutskoi)
3. BBC Monitoring: Russian regional governors increasingly willing to defy Kremlin - paper.
4. The Russia Journal: Andrei Piontkovsky, When ‘moons and planets freeze.’ Boris Berezovsky’s ruthless doppelganger lurks in a new Russian novel — a frightening portrait that suggests a Pinochet-styled democracy may be in Russia’s future
5. The Russia Journal: Yuri Sigov, Foreign news vacuum dangerous for Russia. Cuts in staff mean little information from abroad.
7. Moscow Times/Vedomosti: Olga Promptova, Consumer Spending Nearing '97 Levels.
8. Financial Times (UK): There could be lots in store for Russian shoppers: As country's consumer spending starts to rise retailers are moving in, writes Arkady Ostrovsky.
9. Pacific News Service: Lucy Komisar, While Washington Denies Any Problem, Swiss Probe "Missing" $4.8 Billion Loan To Russia.
10. The Economist (UK): Ukraine: Plenty of plots, not much reform.


Report: Putin Co-Authors Judo Book
October 21, 2000

MOSCOW (AP) - While Boris Yeltsin was writing a memoir of his last days as 
Russian president, his successor Vladimir Putin was apparently working on a 
book of his own: a judo manual. 

A new book on judo techniques has been released in the northern city of 
Arkhangelsk, citing Putin - a black belt in the sport - as one of its three 
authors, Russia's private NTV television reported Saturday. 

``Judo: History, Theory, Practice'' outlines techniques in the sport, 
including moves Putin used during a visit to a Japanese stadium at a summit 
last month, NTV said. 

``When I am on a judo mat, I feel at home,'' Putin said at the time. The trim 
president rumbled with Japanese athletes, then faced a 10-year-old girl who 
tossed him to the mat. 

The presidential press service could not be reached for comment on the book 
Saturday night. 

Earlier this month, Yeltsin released his latest book of memoirs, called 
``Presidential Marathon'' in Russia and ``Midnight Diaries'' in the United 
States and Europe. 


Russian court bars governor from regional election

MOSCOW, Oct 21 (Reuters) - A court in Russia's southwestern Kursk region on 
Saturday barred incumbent governor Alexander Rutskoi, a former vice president 
who led a revolt against Boris Yeltsin in 1993, from standing for reelection 
on Sunday. 

NTV television showed a judge reading the verdict excluding Rutskoi from 
Sunday's poll following a complaint by two other candidates, Viktor Surzhikov 
and Sergei Maltsev. 

Rutskoi, contacted by telephone from Moscow, told Reuters the court's ruling 
was the result of a conspiracy against him. 

"The whole of the Kursk region is up in arms. I have many supporters," he 
said, adding that the election could be disrupted. "Just imagine, people will 
show up to vote and see my name scored out. What do you think will happen?" 

Asked about the basis for the court's ruling, he said: "Police supposedly 
found a car registered to me, a 1994 Volga sedan, which they alleged I did 
not include in my declaration as a candidate," he said, adding that he no 
longer owned the car. 

Rutskoi also said that he had been accused of using the benefits of his 
position as governor to help his campaign. 

He said the court ruling had been deliberately delayed until the last moment 
to give him no time to appeal to the Supreme Court. 

"The police ringed off the court building, the television centre and the 
radio building during the day, that was before the court's decision. That 
confirms there was a conspiracy," he said. 

Rutskoi was elected vice president with Yeltsin in June 1991, but eventually 
fell out with his boss and ended up as one of the former Kremlin leader's 
most bitter opponents. 

He and other hardline opposition members barricaded themselves in the White 
House parliament building in 1993, but Yeltsin forced them to surrender by 
sending in tanks. 

Rutskoi was arrested but later amnestied in 1994. 


BBC Monitoring
Russian regional governors increasingly willing to defy Kremlin - paper 
Text of report by Russian newspaper 'Kommersant' on 18th October 

Regional leaders, who initially yielded to the president's intense pressure 
over the reform of the system of state power, are gradually getting back to 
their old selves again. At yesterday's [17th October] session of the Greater 
Urals association, governors, instead of discussing economic problems, 
rounded on the Kremlin with sharp criticism. 

Yesterday [Bashkortostan] President [Murtaza] Rakhimov gave shelter to the 
Greater Urals association in his republic. The holding of the association's 
session in Ufa looks symbolic. Following Bashkortostan's inclusion in the 
Volga Federal District, the republic should logically have moved to the 
Greater Volga association. But Mr Rakhimov has decided to remain in Greater 
Urals "irrespective of administrative division". The president of 
Bashkortostan described the districts themselves as "a superfluous and 
inefficient bureaucratic structure that is producing an unprecedented army of 

It was to criticizing the reform of state power being carried out by the 
Kremlin that Messrs [Governor of Sverdlovsk Region Eduard] Rossel and 
Rakhimov devoted their joint press conference. Having complained of financial 
problems (the new tax code cut the regions' share of the budget and deprived 
them of the road funds), they set upon the president's plenipotentiary 
representatives. Mr Rakhimov said that he had been in touch with the 
president's Volga District representative, Sergey Kiriyenko, only once, and 
that was by telephone. And Mr Rossel is indignant that Urals plenipotentiary 
representative Petr Latyshev indulges in an impermissible "flexing of 
muscles", changing the leaders of regional federal structures without the 
agreement of the regional governor: In Yekaterinburg the head of the customs 
administration was recently fired, and the replacement of the prosecutor is 
being prepared. Moreover, experienced leaders, as he puts it, are being 
replaced with people who "are still wet behind the ears in leadership terms". 

President Rakhimov at this point stated determinedly that "this trick won't 
work" in Bashkortostan. He stated that he would "cut off the telephones" from 
all leaders of federal departments and not allow them over the threshold if 
they had been appointed without the agreement of the popularly elected 
president of Bashkortostan. Mr Rossel warmly supported him, describing the 
torrents of accusations of violating federal legislation levelled at regional 
leaders as "drivel". 

In the opinion of the leaders of Greater Urals, the autonomy of the regions 
is written into the Russian constitution and is the guarantee of economic 
recovery. Until relations with the centre "settle down", leaders of Ural 
regions in which by-elections have already been held (Sverdlovsk, 
Bashkortostan, and Udmurtia) have decided to set up an alternative television 
broadcasting service, contrary to a recent presidential decree, according to 
which the right of agreeing the leaders of regional subdepartments of the 
All-Russia State Television and Radio Broadcasting Company was transferred 
from the governors to the plenipotentiary representatives. In this way 
regional leaders intend to oppose the "lack of objectivity of the federal 
mass media", which accuse the governors of all Russia's misfortunes. At first 
the joint TV channel will broadcast to three regions, but Messrs Rossel and 
Rakhimov expect others governors to join their battle with the Kremlin. 

The regional leaders' demarche is no accident. Whereas initially many 
governors expected that, following tradition, the Kremlin would succeed in 
realizing far from all its plans, it is now becoming clear that they can 
expect no mercy. Nor are their hopes for the State Council being borne out. 
The new organ has simply been given no real powers: the most serious question 
that the president has entrusted to the governors to discuss is the problem 
of the tune and words for the state anthem. On the other hand, the date is 
drawing nigh when Moscow will be able to remove governors if decrees and 
directives signed by them do not conform to federal legislation: that will 
become possible from March 2001. 

Therefore, it is not surprising that regional leaders have started to become 
nervous. The Federation Council will examine on 25th October the question of 
sending a query to the Constitutional Court to ascertain whether the 
provision for the removal of governors conforms to the Fundamental Law. It is 
obvious that Messrs Rossel and Rakhimov have decided to show their colleagues 
by example that it is necessary not to fear the Kremlin, and to fight for 
their flouted rights to the last. 


The Russia Journal
October 21, 2000
SEASON OF DISCONTENT: When ‘moons and planets freeze’
Boris Berezovsky’s ruthless doppelganger lurks in a new Russian novel — a
frightening portrait that suggests a Pinochet-styled democracy may be in
Russia’s future. 
By Andrei Piontkovsky 

Sometimes life comes up with strange bedfellows. Nationalist Alexander
Prokhanov, that indefatigable foe of Russian robber capitalism, and liberal
Westernizer Anatoly Chubais, the godfather of that same capitalism, both
share tender and loving feelings toward President Vladimir Putin. Each has
already written more than one loyal essay on the subject "My Putin."

Prokhanov’s Putin is a "patriot, raised in the depths of a Jewish regime,"
while Chubais’ Putin is an "absolutely modern man, a Westernizer called
upon to see through liberal reforms in Russia."

It’s hard to suspect these political antagonists of being naive or simply
ill informed. An excerpt from Prokhanov’s recently published new novel
"Zmei v Nebesakh" (Snakes in the Skies) leaves no doubt that the author
knows full well what kind of people thought up and carried out the
"successor" project, or "Manhattan project" as Gleb Pavlovsky, that modern
day Azef, smugly likes to call it.

"Parusinsky [Boris Berezovsky’s prototype in Prokhanov’s novel] really did
feel proud. The successor, who the people were certain to elect, had been
initially chosen by him, Parusinsky. Among the mass of banal politicians it
was he who had stood out with that cold expression in his silent and pale
eyes. Those eyes, if you looked hard into them, let glimpse such
ruthlessness, a flame of such cold intensity that it froze the moons and
planets he turned his gaze upon, and in the middle of summer clothed the
red Kremlin in a thick coat of frost." (Sovietskaya Rossia, Oct. 5. 2000)

Parusinsky-Berezovsky, it seems, realizes that, as so often happens in
history, he is in line to be swallowed by his own project. But the
"ruthlessness" and "flame of such cold intensity" in those "silent and pale
eyes" continues to lure toward it clouds of political moths, both large and

Dozens of these politicians exalt the trendy ideas of controlled, managed
and patronized democracy, enlightened authoritarianism, strengthening the
vertical of power and fighting the "anti-state media." 

Why are we seeing on such a mass scale this ideological laying of the
ground to usher in a regime based on personal power and no difference of
opinion? Why are we seeing dozens of generals becoming governors,
overseers, special representatives? Where is the opponent whom such a
massive ideological and police-repressive apparatus is being created to crush?

The oligarchs? They’re doing fine, so long as they’re close to the regime
or have sworn their loyalty to it. The millions of ordinary people who lost
out in the reforms? They are disillusioned, apathetic, and have resigned
themselves to a miserable existence. The intellectuals, who don’t hide
their aesthetic repulsion toward the new regime and its leaders? There are
only a few of them left, and they can be easily frightened or sent into

Kremlin intimate oligarch Pyotr Aven persistently recommends that Russia
adopt the Pinochet model, but who is he planning to have shot at Luzhniki
stadium or wiped out in the Kremlin toilets? Maybe himself and Mikhail

The Kremlin Website provides answers to these questions. This is
where the court spin doctors discuss among themselves the idea that by
December, they must "have finished building the administrative vertical and
cleansing the information field." 

Then, with the new year, it will be possible to move on to the highly
unpopular measures contained in German Gref’s program (abolition of
subsidies for housing, education and medicine, mass bankruptcy of
loss-making companies) without fear of exploding social unrest. If social
protest doesn’t make it to the TV screens, it won’t happen at all.

For the umpteenth time over the last three century, the Russian authorities
are trying to accomplish a great leap forward, at the expense of their
impoverished population, whipping the people toward a radiant future. The
Kremlin PR people and new strong-state advocates from Prokhanov to Chubais
have thought everything through. The only thing is, the little nag with its
ribs sticking out, beaten into obedience, might not make it this time.

(Andrei Piontkovsky is director of the Center of Strategic Research.)


The Russia Journal
October 21, 2000
Foreign news vacuum dangerous for Russia
Cuts in staff mean little information from abroad
By YURY SIGOV / Washington bureau chief for Noviye Izvestia

WASHINGTON – When the media became independent after the collapse of the
Soviet Union, attention increasingly focused on domestic news, gradually
pushing out international news. 

Explanations for this have varied. Some have said the average Russian is
more interested in knowing how much bread costs in their local shop than in
learning about how London’s unemployed live. Others say the international
information blackout is simply a result of the financial squeeze most
Russian media have felt since losing access to the state coffers.

The former Soviet Union had more than 2,000 correspondents abroad, all
writing regularly for papers, sending in TV reports and writing books about
their time in countries that remained enigmatic and unseen places for most
Soviet citizens. Even if an ideological element was always present, this
activity at least went some way toward giving Soviet citizens an idea of
what was going on beyond the Iron Curtain.

It’s not that the number of Russian journalists abroad has dropped today,
but their work often has little to do with objective coverage of foreign
events. The state still manages to dredge up a bit of money for the
ITAR-TASS agency’s network abroad, but its correspondents seldom have the
money to actually travel anywhere in the country or region they’re in. 

As for the other main state agency, APN, it is busy these days mostly with
just guarding the property it inherited from the Soviet Union. Sending a
correspondent abroad is too expensive. 

Many Russian media outlets resort to using people they don’t pay, and
therefore they can’t make any demands on them regarding international news
coverage. This means that a huge variety of occasional contributors write
for the Russian media today – people on training programs abroad, former
and current businesspeople, former correspondents for Pravda who for
whatever reason stayed abroad and send in the odd article.

The Internet has also had an impact, and with its spread, many media
outlets have closed their international departments. The reasoning seems to
be that the wire agencies will provide coverage of all the news and that
the average Russian reader doesn’t need any more. As a result, most Russian
media outlets get their international news from the same two or three
foreign wire services.

Only a few of the national papers still find the money to send their
correspondents abroad to cover official visits, though beyond official
ceremonies, the reader doesn’t get much of an impression. 

Statistics show that during the Soviet period, only 0.01 percent of the
population traveled abroad. Today, with a smaller population, 2 percent of
Russians travel abroad. But I can’t recall a single instance when some New
Russian or well-informed tourist published an interesting article about
this or that country. Even if they were to start writing, it’s doubtful
they would get published. And there’s no finding books about other
countries of the sort that our foreign correspondents used to write.

Most of today’s journalists writing about international affairs are either
young people who haven’t yet been anywhere or seen much, or yesterday’s top
reporters who no longer go anywhere and spend their time reliving the past.
The result is an information vacuum when it comes to interesting and
objective information.

As a consequence, the average Russian has little real idea of what is going
on in the world. True, there are lengthy articles written right here in
Moscow, commenting on what is going on halfway across the world, but their
objective information value is questionable.

And we wonder why it is that our citizens are surprised when the French
criticize Russia’s policy in Chechnya or put a lien on a Russian sailing
ship, as in the case of the Sedov. And we wonder why Russia supported
Slobodan Milosevic to the bitter end in Yugoslavia. 

Surveys show that the average Russian is, in fact, ever more interested in
news from abroad. And the information vacuum, even if partially filled by
bits and pieces from abroad, is actually very dangerous. The kind of news
available and how it is presented forms public opinion on international
events and on Russia’s own foreign policy.


October 19, 2000
[translation from RIA Novosti for personal use only]
The popularity of Vladimir Putin remains rather high, as 
proved by the weekly polls. How does the president manage to 
keep the sympathy of the people so long? Sociologist Svetlana 
KLIMOVA, scientific consultant of the Public Opinion 
Foundation, tells Izvestia's Yelena YAKOVLEVA about the 
"mechanism" of Putin's popularity.

Question: How do you measure the president's popularity?
Answer: The Public Opinion foundation has revolutionised 
opinion polls, which now speak in the voice of the people. It 
weekly asks open questions about the policy of the president, 
collects the people's requests to him, and their opinion of his 
words and deeds.
In the past, when ratings rose and fell, sociologists and 
political scientists interpreted these fluctuations on the 
basis of their own understanding of the people's motives. Now 
we can hear the people's explanations of their motives. And you 
know, it turned out that the opinions and evaluations of the 
capital's intelligentsia frequently clash with the opinion of 
common people. 

Question: How did the president's popularity change?
Answer: In June, soon after his inauguration, Putin's 
popularity somewhat diminished, as the people expected him to 
immediately resolve quite a few problems, such as raise their 
living standards, ensure the growth of production, liquidate 
unemployment and restore order in state management. By 
mid-July, his rating went up again, as the people saw that the 
president was working as they expected him to work. Putin's 
decisions related to governors were highly popular. By the way, 
one of the dominant motives in the people's requests was "to 
cut short the omnipotence of local princelings." This is why 
they welcomed the reform of the Federation Council. He is 
"bringing Russia together," the people said. 

Question: And they probably liked his foreign visits?
Answer: The visit to Okinawa was an immediate success: "he 
came and convinced everyone of his view." The public also 
approved the results of Putin's visit to India. 
His ratings fell off by August 19-20, after the sinking of 
the Kursk. But the fall was not significant. The supporters of 
Putin denounced his behaviour in the first days after the 
tragedy, but this did not stop them from supporting him. 
The dominant justification of Putin's actions in the focus 
groups, which we polled to learn their attitude to Putin's 
actions during the tragedy and the rescue operation, was as 
follows: "Tell me now, who can work normally with the boss 
hovering over?" 
The opponents accused Putin of "inactivity," of refusing 
to accept foreign assistance immediately. A week later, when 
Putin went to Severomorsk, the number of those who approved of 
his actions grew considerably. Today Russians praise his 
"he is fulfilling the promise to salvage the bodies of the 
seamen" and "helping the seamen's families." So, a short-term 
forecast is that Putin's rating will not fall. And the 
long-term forecast is that it will remain high and stable. 

Question: What is the basis of such forecasts?
Answer: Not clairvoyance or "space rays." My work with the 
data on the electoral support of Putin prompted conclusions on 
its component parts. 
It consists of three basic elements. First, it depends on 
the evaluation of the situation in which the country and each 
citizen live. Second comes the evaluation of Putin as statesman.
And the third element is the people's acceptance of Putin as 
"one of them," a "close" and "understandable" man, which 
amounts to the people's identification with him. 

Question: Can something send Putin's rating crashing?
Answer: I have great apprehensions concerning that part of 
Gref's programme, which concerns relations between the employer 
and personnel and says that the bulk of labour relations will 
be regulated by collective agreements between them. 
The employer is always more powerful than the employee, as 
he has the resources of power, capital and connections at his 
disposal. All and any injustices in that sphere will be 
invariably blamed on Putin. 

Question: How long will Putin's rating remain high, if 
these problems are resolved or do not arise at all?
Answer: Until the end of his term.


Moscow Times
October 21, 2000 
Consumer Spending Nearing '97 Levels 
By Olga Promptova

Consumers are spending at such a rapid clip that the State Statistics 
Committee retailers' confidence index has finally reached pre-crisis levels, 
according to committee data. 

Over the first eight months of this year, consumers spent 1.7 billion rubles 
($61 million) on goods and services, up 30 percent from the same period last 
year, the committee said Thursday. 

The number of people buying durable goods over the summer was more than the 
same pre-crisis period in 1998, it said. 

And the proportion of wages spent on goods and services increased from 6 
percent to 81 percent from June to August, it said. 

"[This] is a very positive tendency," said Marina Sabelnikova, a deputy head 
at the statistics committee. "It means that after buying foodstuffs the 
consumer is able to allow him or herself a little something extra, a product 
for long-term use. 

"This tendency was observed in 1997," she added. "[But] after the crisis the 
market share of food stuffs, which had just started to fall, increased 

The figures suggest that retailers have fully recovered from the crisis and 
have good reason to feel optimistic about the future, Sabelnikova said. 

Alexander Demidov, general director at the GFK marketing agency, said his 
data shows that demand fell about 40 percent after the August 1998 crisis and 
now stands at 90 percent to 95 percent of 1997 levels. 

"There is a steady rise in demand," he said. "It has yet to reach 1997 
levels, but it is growing across all indicators." 

"There are positive changes f the data from our surveys also support this," 
said Marina Krasilnikova, head of the department for living standards at the 
All-Russia Center for Public Opinion. 

Despite the good news, analysts aren't overexcited: The rosy figures from the 
summer months have only been posted once before, in 1997. Overall, the 
economic picture over the past decade has been gloomy and experts fear the 
country will inevitably revert back to the doldrums. 

While consumer confidence is growing, about half of them still consider their 
financial affairs to be in bad or very bad state, according to the All-Russia 
Center for Public Opinion. 

"We should not exaggerate these changes," said Krasilnikova. 

"Only a limited segment of the population is buying durable products." 


Financial Times (UK)
October 21, 2000
There could be lots in store for Russian shoppers: As country's consumer
spending starts to rise retailers are moving in, writes Arkady Ostrovsky: 

Many foreign investors have had bad experiences in Russia but Walter
Demetz, a manager of Metro, was robbed even before he began. 

Mr Demetz, who has long experience of working in Eastern Europe, came to
Moscow to announce the leading German retailer's plan to open its first
cash-and-carry store in Russia. 

But while he was presenting his plans to journalists, and talking about the
improving business climate in Russia, his mobile phone was stolen. 

Refusing to be phased by the incident, Mr Demetz says his experience is not
going to deter the company from investing in a vast and fragmented Russian

Metro is planning to invest DM200m (Euros 102m, Dollars 88m) over the next
three years. 

It is hoping to open its first store by the end of next year and expand its
network to six stores by the end of 2005. 

Metro is not the only foreign group attracted to the lucrative Russian

As the Russian economy starts to recover - it boasted growth of 7.5 per
cent in the first six months of this year - consumer spending is starting
to rise. 

So, undeterred by stories of corruption and crime, Tengelmann Group,
another German retailer, has said it is looking for investment
opportunities in Russia. 

The German Spar group is also looking to open its stores in the country.
Turkish and Chinese retailers are already operating in Russia. 

The Russian retail industry has also attracted some of the country's
largest oil companies, including Yukos and Sibneft, which have plans to
invest in retailing. 

Vladimir Malyshkov, the head of trade and consumer goods with the Moscow
government, says these companies are attracted by quick returns. 

Potential benefits of investing in food retailing are not to be

It is one of the largest sectors of the Russian economy, employing 4 per
cent of the Russian workforce and accounting for 45 per cent of household
spending, according to a study by McKinsey. 

Until a few years ago, a traditional Russian over-the-counter food store
was a sorry sight. 

Buying a piece of cheese or meat was an ordeal that involved standing in
three different queues. The first queue was at the counter where the cheese
would be weighed; the second at the cashier's little window to pay for it;
and finally back at the counter again, to swap a cashier's receipt for a
piece of cheese. Today, many Russian stores are no different from the
typical self-service western supermarket. 

However, the share of the supermarkets in the retail sector is still under
1 per cent in Russia compared with 13 per cent in Poland, 36 per cent in
Brazil and 71 per cent in the US. 

Perekrestok is the largest single operator in the Russian food retailing
market. It is owned by Alfa Group and already has 20 stores in Moscow. 

It is planning to open another five by the end of the year. 

Alexander Kasyanenko, head of Perekrestok, estimates that his share in the
Moscow food retailing market does not exceed 1.5 per cent. 

His company increased sales from Dollars 95m last year to Dollars 140m this
year, making a net profit of about Dollars 3m. Perekrestok is also the only
chain that has a distribution centre. 

Investors remain concerned about the continued high level of criminal
activity affecting the retail industry. 

But Mr Kasyanenko, who trained for 12 years as a karate fighter and was
formerly responsible for security at Menatep Bank, says the high level of
criminal activity is the least of his problems. 

"We have opened our second store in Solntsevo (one of Moscow's most
criminalised areas) and we had visitors almost straight away. But we were
well prepared and managed to explain to them fairly quickly who is who," he

However, the biggest threat for Mr Kasyanenko as well as for other
operators is not the mafia but Russia's open-air wholesale markets that
comprise hundreds of little kiosks and pavilions and make up a large part
of Russia's grey economy. 

These markets, which account for 40-50 per cent of all retail trade, have
low overheads and can afford to sell products 30-40 per cent cheaper than

McKinsey says open-air wholesale markets, which often do not pay taxes and
sell counterfeit goods, remain one of the main barriers to the growth of
supermarkets chains in Russia. 

For Mr Kasyanenko, this is one problem his karate degree will not help him


From: "Lucy Komisar" <>
Subject: While Washington Denies Any Problem, Swiss Probe Missing $4.8
Date: Sat, 21 Oct 2000 

Pacific News Service
While Washington Denies Any Problem, Swiss Probe "Missing" $4.8 Billion
Loan To Russia
By Lucy Komisar 
Date: 10-16-00 

Washington denies any problem, as does the International Monetary Fund. But
Russians who should know are sure that a $4.8 billion loan never reached
its destination. They have been joined recently by Swiss prosecutors who
are equally skeptical. PNS contributor Lucy Komisar is a freelance
journalist who, sponsored by PNS, spent three months in Russia on a U.S.
National Research Council grant to investigate the impact of offshore bank
and corporate secrecy. 

What really happened to the $4.8 billion? 

In his second debate with Al Gore, George W. Bush claimed that some of the
$4.8 billion loaned to Russia by the International Monetary Fund in August
1998 to prop up the ruble had ended up in the pockets of former
Russian prime minister Viktor Chernomyrdin. 

Denials came quickly from Chernomyrdin, the IMF, and the Gore campaign --
some citing an August 1999 report by the accounting firm Price Waterhouse
Coopers saying the loan had been accounted for with no evidence of
theft. The IMF insists the Central Bank used the money as intended. 

In Russia, such defenses are widely discounted. As Kim Iskyan, a
vice-president of Renaissance Capital brokerage in Moscow, says, "The
problem with Price Waterhouse Coopers is it looks at just what the Central
Bank gives it. It's the problem with all the accountants. Companies
keep two sets of books." 

The $4.8 billion was supposed to avert a financial collapse brought on by
widespread stripping of Russian assets, capital flight, and looting of
international loans and investments. It was purportedly given to allow
major Russian banks to buy rubles and stabilize the currency. 

But according to Viktor Ilyukhin, chairman of the security committee of the
Duma, Russia's legislature, the money "was robbed." 

"The IMF money was sent from the Bank of New York via Russia to the
Frankfurt Ost-West Hendelsbank, an affiliate of the Central Bank," he said
in June. 

Copies of money transfers provided by an employee of the German bank
implicate Yeltsin's daughter Tatyana Dyachenko, Yeltsin advisor Anatoly
Chubais (who now runs the national electric company), Boris Berezovsky
(deputy secretary of the National Security Council in the Yeltsin
administration), and former prime minister Viktor Chenomyrdin. 

Ilyukhin claims to have copies of the paper trails showing $235 million
went to the Bank of Sydney, was changed to pounds sterling and went to
Great Britain with the help of Dyachenko. 

"Another part, $1.7 billion, went to the Swiss Bank of Lausanne. Our
information is that Chubais and Berezovsky were involved," Ilyukhin
claimed, with a major part of that going to the Bank of New York. "In
this, Chernomyrdin was involved." 

Official Russian sources give "contradictory information," said Ilyukhin.
"The Central Bank told us this money was used to buy securities. The
Finance Ministry said that part went to the salaries of Russian
government employees and part for other purposes." 

Prosecutor Yuri Skuratov, who angered the Yeltsin government by repeatedly
digging into scandals, confirmed that he had been given copies of requests
to transfer money between companies with bank accounts in Germany
and Australia. He ordered the documents checked in 1999, but never saw the
investigators' report because he was fired a month after he started the

This July, a Swiss magistrate, Laurent Kasper-Ansermet, reopened the issue
saying he wanted to investigate a report that as much as $4.8 billion in
IMF funds had been transferred to a Swiss bank account. 

Kasper-Ansermet ordered the account documents in banks in Geneva and Ticino
seized and any further deposits blocked. He, too, noted that the Price
Waterhouse Coopers audit did not show how the credit had been used,
telling reporters that Russian prosecutors and U.S. authorities were
ignoring his requests for cooperation. 

Nikolai Volkov, an investigator for the Russian prosecutor's office,
arranged for a Swiss official to bring the papers to Moscow. He was fired.

A week later, Swiss officials announced that, in connection with this
investigation, prosecutors seized papers from the headquarters of Runicom,
which handles trades for the Russian oil company, Sibneft. Sibneft, bought
at auction by Berezovsky, is controlled by his erstwhile partner,
Roman Abramovich, known as "the banker" of the Yeltsin family. 

The Swiss built their wealth on a banking system that promises secrecy.
Ironically, American pressure persuaded them to allow penetration of
secrecy in cases involving illicit funds. 

Washington, the IMF, and Moscow (which has to repay the $4.8 billion loan)
should be eager to recover any money that was diverted. But political
interests apparently make them very reluctant to follow the money


The Economist (UK)
October 19-25, 2000
Plenty of plots, not much reform 

Recent events in Ukraine paint an ever-bleaker picture of the country

A FAILED coup, outrage over a missing journalist, growing western 
worries, a sacked foreign minister and a rushed energy deal with 
Russia: that Ukraine's politics is a-bubble this autumn is not in 
doubt. What is cooking so unsavourily is much less clear.

The first oddity is that Ukraine's security service, the SBU, claimed 
last month to have foiled a coup. This supposedly consisted of a 
planned attack on the Chernobyl nuclear power station and other key 
installations, followed by a seizure of power and the restoration of 
Communist rule. But the alleged plotters were a small bunch of retired 
officers, with no proper plan. There is no evidence that they had any 
weapons. Their organisation was well-known, not clandestine. And the 

maps that supposedly showed the places they were planning to seize 
seem to have been guides for mushroom-hunting. It all seemed 
implausibly amateurish.

The SBU plays a powerful role in Ukrainian politics: its boss, Leonid 
Derkach, heads one of the big clans at the court of the country's 
president, Leonid Kuchma. Mr Derkach's son, Andrei, is a prominent 
official-turned-businessman whose wide-ranging interests are certainly 
not harmed by his excellent connections (the president is his 
godfather). He has his eye on the presidency, and compares himself to 
Russia's Vladimir Putin. But if the scotching of the coup was staged, 
or hyped up, by the SBU to improve the image of its leaders, as some 
in Kiev suspect, then it has backfired: most Ukrainians find the whole 
story ridiculous. 

The second mystery, the disappearance on September 16th of a 
polemical journalist called Georgi Gongadze, has also had unexpected 
political fallout. Mr Gongadze worked on an Internet website 
specialising in abusive criticism of Ukraine's powerful tycoons. Only 
days before his disappearance, the site had published a long dossier 
on one of the biggest of the lot, Oleksandr Volkov, alleging that he 
was tied to organised crime. Mr Volkov vehemently denies all 

The authorities' ostentatious efforts to investigate the case seem 
incompetent, unimaginative and heavy-handed-repeatedly interrogating 
Mr Gongadze's colleagues, for example, and suggesting, rather 
implausibly, that he might have run away simply to escape his debts. 
Ukrainian journalists have shown unusual backbone in staging protests, 
while western human-rights groups worry that the disappearance chimes 
with the Ukrainian authorities' generally unsympathetic attitude to 
the media.

The explanation for the disappearance most favoured by cynics is that 
Mr Gongadze had trodden unwisely hard on some powerful toes. Others 
believe this is too simple. Many now suspect that the culprit could be 
someone who wants to embarrass the interior minister, Yuri Kravchenko, 
over the police bumbling on the case. Mr Kravchenko is linked to the 
most powerful of Ukraine's political clans, headed by Volodymyr 
Litvin, who runs the presidential administration.

The third spicy ingredient recently sprinkled into Ukraine's 
political soup is the contents of a letter signed by the American and 
Canadian ambassadors, as well as the local representatives of the 
World Bank and the European Bank for Reconstruction and Development, 
expressing worries about the stalled reform of public spending in 
Ukraine's regions. The government, headed by its reformist prime 
minister, Viktor Yushchenko, wants to replace the previous system of 
block grants with one based on a formula whereby each region's 
allocation from the centre would be determined by clearly laid out 
criteria-demography, income levels, and so on. Lenders such as the 
World Bank, which is offering up to $200m in extra loans if the reform 
goes through, are keen on the idea. But the plan is strongly opposed 
by powerful local interests, who thrive on bad administration and 

What is odd is that the letter, sent privately, was leaked by the 
presidential administration, with a hefty spin: what were foreigners 
doing, interfering in Ukraine's domestic affairs? Behind this seem to 
lie the chilly relations between the president and the prime minister. 
Mr Yushchenko is popular among western politicians and bankers with an 
interest in the country, and has made some creditable advances in 
economic reform-for example, in getting a new tax code through 
parliament, and in beginning to unravel the messy mixture of subsidy 
and debt in Ukraine's energy sector.

In theory, Mr Kuchma should be delighted by this: the new government 
is doing things he has been demanding for years. However, it seems 
that he had not realised, or not expected, that his own pals would 
also be hurt by any serious attempt to clean up. In the year that Mr 
Yushchenko has been in power, barely a word of praise has come from 
the president's office, but instead much sniping.

Although the government has done well, this is not yet enough to get 
Ukraine out of the pickle created during the largely wasted 1990s. The 
public finances are wobbly: the currency, the hryvna, is slipping, and 
the central bank's defence of it has caused its reserves to fall below 
the psychologically important threshold of $1 billion. This week Mr 
Kuchma struck a deal with Russia's president, Vladimir Putin, that 
will provide Ukraine with energy this winter. In return, Russian 
companies will be allowed to buy stakes in Ukraine's gas pipelines. 

All of this makes the fourth piece of the puzzle, the sacking earlier 
this month of the pro-western foreign minister, Borys Tarasyuk, 
particularly worrying. Although Mr Tarasyuk managed to win few friends 
abroad with his charmless personal style, Mr Kuchma has said bluntly 
that the new foreign minister's priority must be to placate Russia. 
Other pro-western figures in important posts, including the head of 
military intelligence, have also been moved. Ukraine's flawed 
democracy and half-hearted independence could both be in jeopardy. 


October 20, 2000
[translation from RIA Novosti for personal use only]
1st rank state counsellors

People in both Russia and the rest of the world have 
lately been asking the question: "What are you, Mr. Vladimir 
Putin?" They have been asking the question before Putin's 
election, and many are still asking the question, although the 
simplest answer to it is "Putin is the president of Russia." On 
the whole, one can easily appreciate people's desire to have a 
better understanding of the political stance and moral credo of 
the only recently modest "power minister" who unexpectedly 
became, at 47, the political leader of a great, albeit 
impoverished, power. 
As we see it, now that Putin has made dozens, if not 
hundreds, of speeches in Moscow and Okinawa, in Belarus and 
North Korea, in the Far East and Britain, in China and Germany, 
in India and Kazakhstan, the question is no longer abstract for 
those who really pondered Putin's pronouncements. 
But there is another, no less topical question, closely 
connected to the former question, that hides the invisible part 
of the Russian "iceberg" on top of which we see the new 
"What will Russia and the rest of the world think of Putin now 
that he has come to the pinnacle of power?" This is the 
question we want to address.
Many people say that Putin has taken on the momentous task 
of leading Russia away from the fatal line beyond which lies 
the irreversible process of Russia turning into a second-rate 
country when it comes to the basic economic and social indices. 
He has 8-10 years (doing it sooner is impossible) to build a 
basis for stable and dynamic development aimed to close the 
ever growing gap between Russia and the leading countries of 
the world that are surging ahead. 
The initial three or four years, i.e. his first term in 
office, are instrumental. If they are wasted, the country would 
finally degrade politically, economically, socially and - even 
worse - morally. Russia would lose the will to make an historic 
The first question one is apt to ask in this connection is:
Does Putin appreciate his mission? In other words: Is he ready?
Does he have a more or less wholesome ideology of overcoming 
the crisis Russia is living through? If yes, what is the gist 
of it?
Does he have the realistic capacity of forming a team of his 
And what will its lineup be - on the personnel and ideological 
These questions are anything but simple. Still, president 
Putin's initial practical performance opens the door to an 
attempt - not indisputable, of course - to depict the basic 
objectives and chart the main directions of his domestic and 
foreign policies. 
Certain steps have been made in the past ten years towards 
democracy, freedom of speech and individual freedoms; there 
have been other important transformations. At the same time, 
Russia has lagged behind economically and socially; its GDP has 
been halved. It has pursued no sensible foreign policy. 
The majority of people have a negative view of the Yeltsin 

epoch, although he did win a landslide victory over the 
Communists ten years ago. 
Since many of the popular expectations had not 
materialized, a majority of Russians were rejecting radical 
reforms of whatever hue in the late 1990s. People are simply 
tired. This is the circumstance that has enabled the first 
Russian president, who was speedily and quietly, with no 
fanfares or laurels, leaving the political Olympus, and his 
immediate entourage to bring to the post of the head of state a 
figure that had not been involved in scandals and information 
wars of the latter half of the nineties on the one hand, and 
would guarantee the interests of Yeltsin and his lieutenants, 
on the other hand. Strangely as it might have seemed to many, 
their choice was Vladimir Putin. 
Putin's appearance in the Russian political arena, his 
breathtaking ascension to the pinnacle of power, his 
unquestionable authority and acceptance in the eyes of the 
masses, were the main surprise in Russia's political life in 
the latter half of 1999. The surprise was made even more 
surprising because Putin entered the political arena as the 
'successor' to the man who had been deeply distrusted by the 
majority of the population long before he had officially 
Our explanation of Putin's speedy political career ever 
since he had moved from St. Petersburg to Moscow would not seem 
too original to people well versed in politics. We think that 
those who believe that Putin had been "thought up" by PR 
geniuses - albeit their contribution is indisputable - are 
Putin's success is explained primarily by his personal and 
professional properties and the decisions that he made on his 
own, while taking on full responsibility and not running into 
opposition on the part of Yeltsin, who was aging but was still 
the head of state. 
Of course, the second Chechen war was of help, for it had 
been triggered by Basyaev and Khattab in Dagestan. The contrast 
between the young energetic Putin and the fast deteriorating 
Yeltsin also helped. As distinct from Yeltsin, Putin proved he 
can address not only papers but acute, burning issues - both 
military and purely civilian, the type of the disgraceful late 
payment of pensions - and thus cut a man of action. Last but 
not least, the beneficial economic situation, largely based on 
the high international oil prices, was a great help.
Still, a degree of mystery about Putin lingers. All 
analogies are known to be lame. Somebody may think it 
eccentric, but we tend to draw a parallel between Putin and 
Mikhail Sholokhov. Some people still negate the latter the 
right of being the author of the book Quiet Flows the Don, 
saying that he could not possibly have the wisdom and literary 
knack when the novel was penned, rather than referring to 
formalities, e.g. the absence of manuscripts. 
Of course, there is every reason to marvel at the fast 
political growth of Putin since he entered big-time politics in 
Moscow in the mid-1990s. He was noticed and enlisted and as if 
"led" along the corridors of power in a mere 5-6 years. It is a 

law, rater than a fortuity, of the period of radical, 
revolutionary transformations that fast political ascension, 
impossible in the "regular" times, becomes a reality. 
The first few months of Putin's activities at the pinnacle 
of power - August 1999 through May 2000 - are conspicuous. It 
was then that sociologists devised the notion of the "Putin 
phenomenon" to denote an unprecedentedly fast growth of his 
rating, popularity and influence. To remind: Putin's 
appointment to the premiership had evoked no special interest 
and generated no serious commentaries in and outside Russia. 
But here is the dynamics of the new PM's rating: 2% in 
August, 15% in September, 25% in October, 40% in late November, 
and a staggering 50% in December on the eve of the Duma 
elections. Putin received 53% of the votes in the subsequent 
presidential election. 
Evidently, this is not only due to the firmness that Putin 
displayed in Chechnya and in the solution of some social 
problems, but also thanks to the fact that he keenly 
appreciated the sentiments and expectations of the masses. That 
was the time before the presidential election when Putin formed 
and publicly formulated an ideology revolving on strong power, 
law and order, security, socially oriented and dynamically 
developing economy, and consistently upheld national interests 
in the international arena. 
What specifically has Putin done after becoming the 
president? One can discern the following trends today:
- strengthening the Russian statehood, which is largely 
understood by Putin as reinforcing the institute of the 
presidency. He uses the Constitution that is said to have been 
tailored to fit Yeltsin, to build a new configuration of power 
oriented to the establishment of a certain 
authoritarian-democratic regime, a kind of a Russian Gaullism;
- conducting liberal reforms in the economy, including 
smaller state expenditures and a restructuring of the economy, 
aimed to overcome the current raw-materials inclination;
- conducting a liberal reform of the social sphere aiming 
to do away with the paternalism of the state by way of shifting 
the burden of social expenditures onto the population's 
shoulders -stretched in time, but fast nevertheless; and - 
actively upholding Russia's national interests in the 
international arena. He is trying to avoid the worsening of 
relations with the leading countries of the world, while 
attempting to return to Russia the position - at least 
partially - of a great power by way of developing ties with 
China, the Central Asian states and the "rogue states" the type 
of North Korea, Iran and Cuba.
The above trends serve to explain Putin's certain 
confrontation with the governors and oligarchs, certain strain 
in relations with some media, Putin's vision of human rights 
and freedoms, his current policy on Chechnya...
The "Putin team" is central to the regime now in the 
This is a vague component. There is no reason to speak of an 
established, pure-Putin team; the groups represented in the 
Kremlin have very differing aspirations. It looks as if he 

would have a single team in the spring of 2001 when he launches 
the practical effort to implement the new government strategy.
In short, there would have been no Putin if there had been 
no conditions for his coming by the time he had entered the 
political arena. We disagree with those who contend that Putin 
is but a talented pragmatic. He is forming his own philosophy 
and ideology - albeit slowly and painfully. 
Contrary to his own declarations, Putin in practice does 
not act too liberally. As time goes by, he is increasingly 
cutting the figure of an etatist, patriot and fan of Russia's 
great-power status. This latter quality is especially evident 
in foreign policy. This is why he is so ardently "loved" by 
such radical anti-Yeltsininsts as, say, Prokhanov and Chikin 
(but we do not think this "love" will last), and opposed in 
certain specific situations by such people as Nemtsov. 
Human rights and freedoms do not seem to be the supreme 
and absolute value - let alone "value in itself" - for Putin. 
They do not contradict his mentality for as long as they do not 
contradict the state interests - as Putin understands them.
Putin's liberalism is limited to the economy and the social 
sphere - at this stage. Unless the reforms start producing what 
is expected of them, Putin would not think twice before he 
steers towards stringer state regulation...
Such is our feeble attempt to answer the question: What 
are you, Mr. Vladimir Putin?


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