October 25, 2000    
This Date's Issues: 4599 • 4600  • 

Johnson's Russia List
#4600
25 October 2000
davidjohnson@erols.com


[Note from David Johnson:
DJ: 4600: This means that this is the 5th year of JRL and
this issue is the 600th in 2000. Is there a compelling reason
to think that this is too much? I'm open-minded on the subject.
1. RIA: Security Council views role of Russian language in the world 
as strategically important.
2. New York Times: Sabrina Tavernise, Making Russia Investor-Friendly.
3. Vedomosti: Anatoly Khodorovsky, GREF CONCERNED OVER CAPITAL 
"EXPORTS"
4. St. Petersburg Times: Galina Stolyarova, Starovoitova Honored by 
New Monument.
5. Izvestia: Svetlana Babayeva, REGIONAL ELECTIONS: WITHOUT IDEOLOGY 
OR THE KREMLIN.
6. BBC Monitoring: Local election row seen as "Kremlin's lesson for 
unpopular governors" 
7. Moscow Times: Yulia Latynina, Central Bank: Just a Tool For 
Stealing.
8. Paul Kriloff: Re: 4595-McMahon/Pay Up.
9. Los Angeles Times: Mayerbek Nunayev and Maura Reynolds,
Chechens Falling Prey to Russian Soldiers of Fortune. Caucasus: 
The tables have turned in the separatist republic, where kidnapping 
has long been big business. 
10. AP: Concerns Raised in Gore-Russia Deal.
11. AFP: Russian lawmaker says Kursk sank after collision with 
British sub.
12. Interfax: Former Russian Premier Primakov claims US barred 
Russia from Mideast peace talks.
13. Wall Street Journal: Steve Liesman and Carla Anne Robbings,
Forum Financial Sues Harvard And Two Ex-Advisers for Fraud.] 


******


#1
Security Council views role of Russian language in the world as
strategically important 
Russian news agency RIA 


Moscow, 25th October: The spread of the Russian language abroad is a major
plank in Russia's international policy, Oleg Chernov, deputy secretary of
the Russian Security Council deputy secretary, said on Tuesday 24th October
after a meeting of the Council for the Russian Language which reports to
the Russian government. 


The Security Council press service told RIA that Chernov told the meeting
that the issue of preserving and strengthening the Russian language's
positions in the world is one related to Russia's strategic interests. The
issue is important to promoting effective activity by Russia in the
economic, scientific, technical, cultural and diplomatic spheres. It
provides a contact that actively helps millions of Russian citizens living
abroad. And it provides support for historical links with other countries
and boosts our country's prestige, Chernov said. 


The meeting particularly concentrated on the situation of the Russian
language in countries which formerly were part of the Soviet Union. "We
cannot but be alarmed by a situation where the Russian language is excluded
from the curricula of foreign educational institutions, where the number of
foreign citizens learning Russian is sharply declining and Russian language
departments and faculties in foreign countries are practically receiving no
help from Russia, as far as teaching methods and material and technical
resources are concerned", Chernov said. 


He added that the "attempts in several CIS and Baltic states to displace
the Russian language from the system of education, cultural activity and
media are particularly alarming". This considerably "infringes upon the
rights of the Russian and Russian-speaking population in those countries
and hampers the integration processes", he said. 


The participants in the meeting expressed their concern over a possible
change in the status of the special federal programme called "The Russian
Language" and plans to move it down to departmental level, the press
service said. The rector of the state institute of the Russian language,
Vitaliy Kostomarov, chaired the meeting. 


******


#2
New York Times
October 25, 2000
[for personal use only]
Making Russia Investor-Friendly
By SABRINA TAVERNISE
MOSCOW, Oct. 24. After a decade of stumbling through false starts and 
failures, Russia seems to be making progress in its hoped- for transition to 
a market economy. Now a 36-year-old colleague of President Vladimir V. Putin 
is getting his turn to steer.


German O. Gref, Mr. Putin's economic development minister since the new 
administration was elected in March, is under orders to cut taxes, simplify 
the bureaucracy, and revamp courts and monopolies in hopes of sustaining 
growth and restoring the faith of skeptical investors.


Mr. Gref confronts a vast challenge. But he has gained a good deal of respect 
for aggressively pushing a reform plan that he and a team of Russian policy 
makers designed. This contrasts with previous programs — written by Western 
lenders like the International Monetary Fund to release billions of dollars 
in loans for financial or budget targets that often went unachieved.


In an interview, Mr. Gref said that Mr. Putin, who remains popular in Russia, 
is the force behind the economic program and has given him wide authority to 
carry it out. And though much of the program requires Parliament's approval, 
Mr. Gref expressed confidence that he would succeed.


"The only real medicine for the lack of investor confidence is real action," 
said Mr. Gref, a Russian of German descent, who also heads the Center for 
Strategic Research, a Moscow-based institute that put together the program of 
economic change. "If, through our actions, we can show that we're not just 
talkers but also implementers of what we say, really protect investors 
rights, then everyone's relations to our country will change."


Many investors fear that these plans will languish and that their property 
will be as vulnerable to political whim as it has always been. That deep 
skepticism was reinforced last month at an investor conference here, when 
participants fired questions at senior government officials about a series of 
corporate property abuses, a shareholder dilution in the country's leading 
metals company, and the temporary revocation of previously awarded 
frequencies to mobile phone companies.


In another indication of investor disaffection, direct foreign investment in 
the first half of this year fell 22 percent from the corresponding period 
last year, despite a rise in overall investment, government figures show.


Previous programs for structural change under Mr. Putin's predecessor, Boris 
N. Yeltsin, stalled by the mid-90's after public support waned and many big 
businesses fell into the hands of a few wealthy Russian entrepreneurs — 
people who became known as the oligarchs because of their power and political 
influence. State ownership was smashed, but little was erected in its place, 
giving the country a wild capitalism with few rules. The economy became 
addicted to borrowing on a huge scale, culminating in a currency collapse and 
a default in the summer of 1998.


Now, with the economy growing again, Mr. Gref said, the new reform task lies 
in building an institutional infrastructure for business, like an effective 
court system and laws governing the behavior of companies and protecting 
property rights.


Changes in two of Russia's monopolies — the national power grid operator 
Unified Energy Systems and the railroads — will begin this autumn, Mr. Gref 
said, while the government will wait to deal with Gazprom until the second 
half of next year. With Gazprom, a giant that supplies Western Europe with 
more than 20 percent of its natural gas, the government intends to break out 
its transport functions and allow all companies equal access to the pipeline 
that Gazprom now dominates, Mr. Gref said.


Critics of the gas monopoly, among them foreign investors, have said that the 
long-entrenched management is taking assets out of the company through 
subsidiaries, and Mr. Gref hinted that the government is also concerned about 
this.


"We now are watching closely all the companies that are connected to Gazprom 
and the movement of assets," he said. "I can't say there's been a massive 
moving of assets, but we are getting signals and we are following these 
carefully."


Changes in the courts is another of the government's priorities. Many 
businesses have little in the way of fair legal recourse in settling 
disputes, partly because powerful regional politicians easily influence 
judges. Regional governors give federal judges in their areas perks like 
housing, cars and monetary bonuses.


The government's 2001 budget for the first time allots housing funds for 
judges, who will also be given a modest wage increase, Mr. Gref said. 
Officials are also working on a computerized database that can retrieve all 
court decisions and help guard against abuses. Judges will no longer be 
appointed for life, as now, he said.


So far, all the proposals for court reform remain on paper. Mr. Putin has yet 
to approve a broad plan, which will include a package of legislation for 
passage by the Russian Parliament.


"We have to break the financial connection between judges and regional 
authorities," Mr. Gref said.


Another important change, to take effect on Jan. 1, reduces and simplifies 
Russia's complex import tariffs. The bewildering array of tariffs — seven 
categories for every item — encouraged bribes and hampered efficient 
business. The seven categories have been thinned to four and the average 
import tariff rate has been reduced to 20 percent from 30 percent.


Beyond that, government bureaucracy is to be trimmed, and a commission led by 
Mr. Gref and Finance Minister Aleksei L. Kudrin has been formed to recommend 
to Mr. Putin what needs cutting. Despite the vast official ranks, Mr. Gref 
said, there is still a shortage of professionals to help draw up reforms. 


"Many bureaucrats, for the most part the old ones, are doing what they are 
used to — check and give fines," he said. "We need to bring in government 
influence in places and cut it out altogether in others."


*******


#3
Vedomosti
October 25, 2000
[translation from RIA Novosti for personal use only]
GREF CONCERNED OVER CAPITAL "EXPORTS"
By Anatoly KHODOROVSKY

The Russian Federation's Economic Development and Trade 
Minister Gherman Gref said October 24 that Russia had lost more 
capitals throughout 2000 on the 1999 period, what with 
capital-flight volumes reaching 1998 levels. (This country 
experienced an economic-and-financial melt-down in August 1998 
-- Ed.) Continued capital "exports" constitute a negative 
Russian economic factor, also highlighting its unhealthy state, 
Gref noted. However, quite a few economists disagree with him. 
In their opinion, present-day capital exports are a normal 
phenomenon.

We believe that this amounts to a global Russian corporate 
strategy, Leonid Grigoryev, who heads the Economic Survey 
Bureau, noted. Our companies want to assert themselves all over 
the world. This is neither good, nor bad; but, most 
importantly, such a situation won't be rectified in conditions 
of a different investment climate, Grigoryev stressed.
In real life, though, Russian economic leaders, e.g.
raw-materials exporters, tend to leave ever less export 
earnings elsewhere. (See Table 1 -- Ed.) Economists perceive 
this relative indicator as very important, while discussing the 
capital-flight issue.

Table 1
Commodity Exports and Capital Flight 
(in billions of dollars)
------------------------------------------------------------
Period Commodity- Estimated Capital-Flight Volumes
export
volumes Trade Unpaid Net Grand Correlation
(Central- credits foreign- errors total between
Bank and currency and capital-
statistics) advance earnings omissions flight
payments volumes
and
commodity
exports,
in percent
------------------------------------------------------------
1996 90.6 9.4 9.7 9.8 28.9 31.9
1997 89.0 6.8 11.5 8.9 27.2 30.6 
1998 74.8 6.8 8.6 9.5 24.9 33.3
1999 74.7 5.8 5.4 7.1 18.3 24.5
------------------------------------------------------------
January-
June
2000
period 49.0 1.1 2.1 4.5 7.7 15.5 
------------------------------------------------------------
Source: Economic Survey Bureau, Russian Federation's 
Central Bank. 

Frankly speaking, there exists no officially accepted 
model for assessing the scale of Russian capital flight. Most 
economists and analysts base their detailed calculations on 
three balance-of-payments items, e.g. trade credits and advance 
payments, unpaid foreign-currency earnings, as well as "net 
errors and omissions." Therefore one gets the impression that 
minimal capital "exports" were registered last year.
Russia lost more money throughout the 2000 period than 
before; however, paradoxically enough, specific capital-export 
methods highlight the Russian economy's healthy state. Most 
countries, which had defaulted on their payments, usually 
export capital in the form of debt payments. Meanwhile Russian 
capital-export volumes exceed such debt payments by an 
impressive 100 percent, Grigoryev noted.
Russian companies simply find more attractive investment 
projects elsewhere, rather than on Russian territory.
Consequently, the afore-said "net errors and omissions" tend to 
increase.
Administrative methods are unable to cope with this 
process. More stringent foreign-currency control was introduced 
only recently; and here's how it has affected official 
statistics. Russian customs officers have presented the FSB and 
the police with 102 criminal files dealing with the illicit 
"exportation" of foreign-currency assets worth 584.2 million 
roubles over the January-June 2000 period. It ought to be 
mentioned for comparison's sake that 89 cases involving 809.3 
million roubles were examined last year. These statistics are a 
far cry from real-life capital-export volumes. Capitals will be 
channelled into various essential areas, failing to obey the 
orders of politicians or national legislation, says Valery 
Draganov in charge of the Russian State Duma's sub-committee 
for customs and tariffs regulation.
By the way, Draganov used to head the State Customs Committee 
some time ago.
One should not forget the fact that all capitals being 
exported from Russia because of that unfavorable tax climate 
alone will subsequently return in the form of foreign 
investment, provided that the concerned businessmen want to 
channel such capitals into the Russian economy. For instance, 
the volume of accumulated Cypriot investment (on Russian 
territory) exceeded the $3-billion mark early this year. Such 
investment closely tallies with British and French investment 
volumes; but, as distinct from the afore-said investment, 
direct Cypriot investment accounts for 80 percent of the grand 
total. Meanwhile the Cypriot balance of payments implies that 
direct national corporate foreign investment doesn't exceed a 
meager $15 million per year. Therefore one has every reason to 
say that God's ways are many, and that Russian money travels 
far and wide.

******


#4
St. Petersburg Times
October 24, 2000
Starovoitova Honored by New Monument 
By Galina Stolyarova
STAFF WRITER


State Duma deputy Galina Starovoitova, who was gunned down two years ago by 
unknown assassins, was honored with a monument unveiled at her grave in 
Nikolskoye cemetery last Saturday.


The unveiling ceremony drew hundreds of supporters of the former Du ma 
deputy, who was one of Russia's most visible and outspoken female 
politicians. American ambassador in Mos cow James Collins and Sergei Stan 
kevich, former aide to President Boris Yelt sin, attended the ceremony.


The granite monument - designed by St. Petersburg artist Anatoly Bel kin - 
juxtaposes a Russian flag, a fragment of a city street, and a piece of 
lattice work in the style found on the Griboye dov Canal, where Starovoitova 
lived.


"When making this monument we met with so much compassion. The artisans 
refused even to talk about money," said Olga Starovoitova, the late Duma 
deputy's sister.


"Though these may sound like minor details, they show the people's attitude, 
and this is what's important."


"The more time that passes since the tragic death of my mother, the deeper 
and more sensible the loss gets," said Sta rovoitova's son Platon. "She paid 
with her life for the people's right to live, think and act freely. She 
didn't just give me life, she gave me its sense and meaning."


He said the flag on the monument was a very apt symbolic touch. "Everyone who 
comes here will sense what she lived and sacrificed her life for," he said.


Starovoitova was murdered in the stairwell of her building on Nov. 20, 1998. 
Her aide, Ruslan Linkov, who was with her at the time, suffered head injuries 
but survived.


Her murder remains unsolved, and though few at the monument's unveiling spoke 
about this fact out loud, there was a palpable mood of anger and bitterness 
over the authorities' complete failure to make any progress in the 
investigation.


As at Starovoitiva's funeral, many people spoke out about the unification of 
democratic parties that Starovoitova had worked for in the Duma. The parties 
remain fragmented.


Declaring Galina Starovoitova the conscience of Russian democracy, Stankevich 
said, "Even though God knows what is happening under the slogans of Russian 
democracy, we all have Galina as a standard to verify our feelings and steps. 
And we have this place to come and think about what we do in our lives."


"For me, Galina Starovoitova is an example of a true people's deputy, taking 
other's sorrows as her own," said Yabloko Duma Deputy Alexander Shishlov.


"She was a lighthouse showing the way. ... I see my duty as a deputy to serve 
the unification of democrats, of those to whom liberty and human life are the 
most precious values."


******


#5
Izvestia
October 25, 2000
[translation from RIA Novosti for personal use only]
REGIONAL ELECTIONS: WITHOUT IDEOLOGY OR THE KREMLIN
By Svetlana BABAYEVA

Many analysts think that the regional elite has already 
lost, and this is the main result of the busy political year 
that began in the summer of 1998. 

The current regional elections have four specific features:
they have been cleansed of ideological influence, have Putin's 
name on the banner, are acquiring elements of "oligarchic 
conflicts," and will not seriously change the political face of 
Russia. 
After Vladimir Putin implemented a part of his political 
plans, the attractiveness of the post of governor has plummeted.
Several institutional difficulties have been created for the 
governors. The first was the creation of federal districts, 
with the president's envoys ruling them. Second, regional 
leaders are being consistently deprived of the possibility to 
influence the appointment of federal officials. The centre has 
gradually assumed control of the appointment of the heads of 
regional militia and radio and television companies. Changes in 
budgetary relations and the tax initiatives of the centre 
concentrated greater financial resources at the federal level, 
so that the donor regions lost a substantial part of their 
revenues. From the economic viewpoint, the weakening of strong 
regions was a disputable but quite effective measure for 
centralising power. 
Another difficulty concerns changes in the principles of 
forming the Federation Council. Putin is removing the "boyars" 
from Moscow: changes in their status deprived them of a place 
where they could "shake their beards and clamp their staffs." 
On the other hand, the final outlook of a new Federation 
Council is not clear yet. And lastly, Putin has got a chance to 
remove governors. 
Is this the final defeat of the governors? Or can they 
take revenge? Most experts say the regional bosses cannot 
create large problems for the centre in the next six months. 
They will be busy trying to preserve their "political bodies" 
and hence would not be able to plan coordinated counterstrikes 
at the centre.
"The transition period and the time of forming the elite 
is ending," says Mikhail Afanasyev, head of the analytical 
department of the Niccolo M centre. "A traditional, meaning 
more centralised, order is developing in Russia. In this 
situation, it is important to preserve the institutional 
democratic possibilities. I mean elections above all. It is 
highly important that Putin has preserved the mechanism of 
electing governors, although he could have abandoned it. 
However, it is not clear yet if the manoeuvres of the centre 
would decentralise power in the regions."
Nearly six months have passed since the appointment of 
presidential envoys in the federal districts, but even the 
Kremlin cannot yet sum up the results of their operation. The 
most frequent commentaries are: "They [the envoys] are all very 
different," "They have only started working" [what have they 
been doing for the past five months then?], and "They will soon 
harmonise legislations, and then we'll see." The envoys 
themselves say they have only managed to synchronise their 
actions. They don't say what actions they mean. 
The absence of ideological influence is generally 
recognised as a distinctive feature of the ongoing regional 
elections. There is no competition, like in the 1990s, when we 
counted scores: 1:0 in favour of communists, 2:0 in favour of 
the president. It has become usual for the communists and the 
Kremlin to support the same candidate. At the same time, the 
retreat of ideology was complemented by the growing struggle 
within the elites, the parties of power and oligarchic teams. 
And this is another distinctive feature of the elections. 
Quite a few candidates represent big regional (and most 
frequently transregional) business [Sberbank and such 
monopolies as the Ministry of Railways and Gazprom] or are 
supported by it.
At least this is true of the Volgograd and Ulyanovsk regions.
This is why these elections are described as "the oligarchic 
conflict."
Nearly all serious candidates have their own ways into 
high offices, such as contacts with Unity, a large company 
(like in the Chita and Voronezh regions), the Putin 
administration, or personal contacts with Putin, which are 
presented as the direct support of the president. The 
president's statement about the "equidistance" of candidates 
cooled off the active lobbying of candidates, but did not 
preclude a situation where the opinion of one deputy chief of 
the administration on the best candidate differs from the 
opinion of another deputy chief. And both candidates rest 
assured of the Kremlin's support. 
The centre has occupied a comfortable position in many 
cases, meaning that it supports a clear favourite. One does not 
want to stir a conflict without good reason, the Kremlin 
administration explains. It has not made public its position in 
Mari El and the Komi-Permyak autonomous area. And there are 
only a few regions where the Kremlin is adamantly against the 
current governors. That black list of six governors includes 
the Kursk, Kaliningrad, Bryansk, Voronezh, Kostroma and Ryazan 
regions, as well as (to a degree) the Koryak autonomous area. 
But even this black list is not homogeneous. Here is 
Moscow's attitude to the Bryansk, Voronezh, Kostroma and Ryazan 
regions: "It would be undesirable if the acting governors were 
re-elected there, but the pro-communist population there could 
vote for them and hence it would not be suitable to sever all 
relations." The legality of elections will be strictly 
monitored in these regions. 
Only two regions provoke strong negative feelings in the 
Kremlin: the Kursk and the Kaliningrad ones. As a Kremlin 
expert said, the Kremlin "is shaking" with hatred, and it has 
already led to the removal of Governor Rutskoi from the race in 
the Kursk Region. However, this will most probably be an 
exception, rather than a rule. 

******


#6
BBC Monitoring
Russia: Local election row seen as "Kremlin's lesson for unpopular governors" 
Source: 'Segodnya', Moscow, in Russian 24 Oct 00 


"By making an example of [Kursk Region governor Aleksandr] Rutskoy, the
Kremlin has provided a lesson for other governors not to its liking,
demonstrating who is the boss," Secretary of the Communist Party of the
Russian Federation [CPRF] Central Committee Aleksandr Kravets said in an
interview with `Segodnya'. To all appearances, the lesson was intended not
only for governors, but for the entire political elite. The authorities
have shown that any past services to them will not be taken into account.
Aleksandr Rutskoy was one of the first to play an active role in the
formation of the Unity bloc. But he only had to utter a few words of
criticism about federal reform, and retribution was not long in coming -
especially as Rutskoy does not have such control of his Region as, say,
[Tatar President Mintemir] Shaymiyev or [Federation Council Speaker Yegor]
Stroyev. Hence the coalition between the court, the internal affairs
administration, and the electoral commission against the governor... 


The Central Electoral Commission (CEC) certainly will not help him: [the
CEC chairman] Aleksandr Veshnyakov also recalled a school theme, saying
that "the events in Kursk must be a lesson for all candidates for elected
office". The governor is appealing to the Supreme Court, although it is
unlikely that the judges will decide to issue a direct challenge to the
Kremlin. The former vice president also has no real chance of contesting
the presumed violations in the course of voting. The Central Electoral
Commission has not noted any violations, and the deputy head of Rutskoy's
campaign team, Anatoliy Khakhalev, complained in a conversation with your
Segodnya correspondent that their representatives were not allowed into the
polling stations, as their candidate had been dropped from the election. 


However, the Kremlin team is playing into the hands of the Communists by
kicking its former supporters out of office. It will hardly be able to
close the gap between the pro-Kremlin candidate Viktor Surzhikov (on 21.5
per cent) and the first secretary of the CPRF regional committee, Aleksandr
Mikhaylov, (whose percentage of the vote is almost double - nearly 40 per
cent). The Communists are not regarded as enemies by Putin's Kremlin, so it
will be possible to reach a rapid agreement with Mikhaylov. But if there is
something the latter does not understand, his politically aware comrade
[head of the Communist Party of the Russian Federation, Gennadiy] Zyuganov
will explain to him how a Communist governor should behave so as not to
leave his party vulnerable... 


*****


#7
Moscow Times
October 25, 2000 
INSIDE RUSSIA: Central Bank: Just a Tool For Stealing 
By Yulia Latynina 


This week State Duma deputies planned to start discussing President Vladimir 
Putin's changes to the law on the Central Bank. 


Now, if you look in any economics textbook you'll read that the classic 
definition of a central bank is a financial institution whose main function 
is the issuance of a national currency. However, historically central banks 
have never been created for this noble purpose. 


The Bank of England is a classic example. Created in 1694, it was granted the 
right to issue bank-notes. In exchange, the bank promised to use those notes 
to finance the state budget deficit. Over the next two years, the bank 
printed pounds 760,000 sterling against its reserves of pounds 36,000. 
Naturally, the currency rapidly lost its value and the government had to 
allow the bank to refuse to exchange the currency for gold. This measure was 
a boon to the Bank of England and its shareholders, which included about half 
of the Cabinet of ministers. 


Since then, central banks have become much more civilized. Except in Russia. 


Our Central Bank bears a strong resemblance to the early Bank of England. 
Although it is not a private bank, it does own a whole network of private 
banks - the so-called Sovzagranbanks, created in Soviet times to launder 
Party money abroad. One of these banks had a subsidiary called Fimaco, 
through which the Bank's reserves were diverted into the state securities 
market. 


In spring 1998, the Central Bank and the now-defunct Tokobank got into a 
dispute. The cause was a Sovzagranbank called Ost-West Handelsbank. Part of 
its shares belonged to Tokobank and the Central Bank didn't like this. So, 
when Tokobank got into trouble and ran to the Central Bank for a 
stabilization loan, it was denied. Tokobank was told it would get the credit 
only if it put upthe Ost-West Handelsbank shares as collateral. 


Having no choice, Tokobank put up the shares. Toward the end of April, 
Tokobank received the loan. On May 4, Tokobank was put under temporary 
administration, but the bank did not collapse. 


But Tokobank owed about $150 million to its foreign creditors. They were 
upset that the Central Bank, instead of putting the bank back on its feet, 
was simply holding it down. They sent a letter to major Western banks telling 
them not to extend any more credits to Russian banks. Since Russian banks at 
that time survived simply because of Western loans, as soon as the flow was 
stopped, the August 1998 ruble crisis occurred. 


Of course, the August crisis had many objective causes, and Tokobank had many 
objective problems. But when deciding to use Tokobank in order to advance 
their own interests, the directors of the Central Bank should have at least 
paused to think about the larger consequences. 


So, what about Putin's amendments? They represent a fundamental change in the 
status of the bank: It will be converted into a federal institution and all 
the banks controlled by the Central Bank will be brought under the 
jurisdiction of the Property Ministry. 


That is, if the changes are adopted, the bank will no longer be able to be 
misused by its directors. Only the federal government will be able to do 
that. 


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


******


#8
Date: Tue, 24 Oct 2000
From: "Paul Kriloff" <pkriloff@fraec.org> 
Subject: Re: 4595-McMahon/Pay Up


I wanted to point out a couple of factual errors in Colin McMahon's Chicago
Tribune editorial. It's a fairly insignifcant piece, but since McMahon
claims to be teaching readers about the realities of doing business in
Russia, I felt it deserved comment. Foreigners like McMahon have no right to
blame their problems on Russian corruption or Russia's legal system if they
haven't made an effort to understand or follow Russian law.


According to McMahon, the Tribune imported its car in summer 1997 under the
temporary import regime that McMahon correctly points out was intended to
encourage foreign investment by allowing representative offices of foreign
companies to import goods duty-free for up to two years. After two years,
the temporary import regime required that the foreign company pay the duties
on the goods imported or re-export them. There was nothing unclear about the
law, and a lot of foreign companies understood it and followed it. The
Tribune eidently only encountered problems in 2000, a full year after the
law would have required that it pay duties on the car or re-export it.
According to McMahon's editorial, the Tribune did neither. It's neither
bureaucratic nor corrupt at that point for Russian customs to insist on
enforcing the law.


McMahon states that you have to have a bank account to wire transfer money
in Russia. In fact, you don't. Individuals, who, unlike legal entities, are
not required by law to maintain bank accounts, do periodically have need to
wire transfer money to companies who don't have "registered cash
apparatuses." In situations like this, an individual can take his or her
money to Sberbank and have the bank transfer it for a fee. You don't have to
bribe a customs officer as McMahon implies at the end of his editorial.


Of course, none of McMahon's readers in the States know any of this. All
they see is another open and shut case of corruption and overwhelming
bureaucracy in Russia. There are, of course, many places where Russian law
is confusing or inconsistent, but using that as a blanket excuse not to
learn the rules that do exist is a cop-out.


*****


#9
Los Angeles Times
October 25, 2000 
Chechens Falling Prey to Russian Soldiers of Fortune 
Caucasus: The tables have turned in the separatist republic, where 
kidnapping has long been big business. 
By MAYERBEK NUNAYEV, MAURA REYNOLDS, Special to The Times


KHUTI-KHUTOR, Russia--Salman Batashev was in a pasture tending his herd 
when the Russian soldiers came, tied a black scarf over his eyes and took him 
away. 
They didn't say much, the 31-year-old recalls. They didn't even ask if 
he supported the Chechen rebels. Instead, they asked how many cattle his 
family owned, what kind of house they had, how well they lived. They drove 
him around for half an hour, then took off the blindfold and threw him into a 
deep earthen pit. 
Four men were there already. 
"The servicemen were counting us as if we were sheep, estimating how 
much they could earn for us," Batashev says, speaking softly, the fear 
returning as he recounts his ordeal. "We knew we were being kept there for 
ransom." 
In the second half of the 1990s, between Russia's first and second wars 
in the separatist republic, Chechnya's warlords became notorious for running 
cruel and lucrative kidnapping rings, using the proceeds to arm and enrich 
themselves. 
But in recent months, the tables have turned. According to victims and 
officials, many of the Russian units that have reoccupied the rebel republic 
are running their own kind of abduction business, illegally detaining Chechen 
men and freeing them for ransom. 
For many Russian servicemen, a tour in the war zone is a moneymaking 
proposition, both by official and unofficial means. Officially, they get 
combat pay of about $30 a day--a significant improvement over an average 
military salary of $50 a month. But for many, that's not enough, and 
unofficially they increase their earnings by taking bribes to let travelers 
through checkpoints, or to release detained suspects. 
Aslambek Aslakhanov, a retired police general recently elected to serve 
as the rebel republic's deputy in the lower house of Russia's parliament, 
says the practice is widespread, although some Russian units are more deeply 
involved than others in the reverse kidnapping industry. 
"With or without a reason, they conduct sweeps, take people away, maim 
them, and then as a rule their relatives have to buy them back," Aslakhanov 
says. "Do you understand? They have to ransom their cripples." 
Batashev was lucky. He wasn't beaten or injured. On Sept. 25, 10 days 
after he was abducted, the soldiers pulled him out of the pit, took him back 
to his pasture and let him go. When he got back to this mountain village, his 
family told him they had paid a middleman $700 for his release--more than the 
amount many Russians earn in a year. 
When Russian troops reentered Chechnya a year ago, they vowed to wipe 
out the rebels and restore law and order. But many Chechens and observers say 
the Russian troops have just replaced one form of lawlessness with another. 
"Despite the end of large-scale hostilities, repression of the civilian 
population has not come to an end," says Pavel Krasheninnikov, a former 
justice minister who heads an ad hoc parliamentary commission on Chechnya. 
"Laws and human rights are being violated by servicemen all the time." 


Thousands Just Disappear 
In many respects, those who are ransomed are the lucky ones. Thousands 
of Chechen men have simply disappeared since the beginning of the war. 
"One ought to understand that most of them are no longer alive," 
Aslakhanov says. "They were deliberately rubbed out a long time ago." 
For Russian servicemen, illegal detentions not only boost their earnings 
but help keep the civilian population cowed. 
Victims say the size of the ransom that the soldiers demand depends in 
part on the location of the Russian unit. In Chechnya's northern flatlands, 
where there are more servicemen and more civilian oversight, ransoms can be 
as low as $20. But in the highlands, where the battle against the rebels 
still rages and civilian authorities dare not venture, ransoms can easily top 
$1,000. 
That's how much it took to free 28-year-old Rustam Khalimov, who says he 
was detained Sept. 24 with a friend at a roadblock outside the mountain 
village of Tangi-Chu. Servicemen at the checkpoint accused him of violating 
curfew, even though it was only 7 p.m. Curfew begins at 9 p.m. 
After being held overnight at the checkpoint, the two handcuffed men 
were blindfolded and driven away on an armored personnel carrier. Khalimov 
was thrown into a narrow, barren pit--about 10 feet deep and only 4 feet 
across. 
Once a day, a soldier would be lowered in to remove Khalimov's 
handcuffs, give him food and wait as he ate. When Khalimov asked why he was 
being held, the servicemen replied only that they were trying to determine if 
he was a rebel fighter. 
Sixteen days later, he was blindfolded again and dropped off in the 
middle of Tangi-Chu. When he arrived home, his joyful family said they had 
paid $1,000 for his release. His friend was held in the same conditions and 
ransomed for the same price. 
"No one beat us. No one asked us any unnecessary questions," he says. 
"As we understood it, their main goal was to make money on us. And that's 
exactly what they did." 
Some units demand the ransom in weapons, not cash. Relatives are told to 
bring the soldiers anywhere from one to 15 assault rifles to pay for their 
family member's freedom. The family members are forced to buy weapons 
illegally from black-market traders--who are in cahoots with the military. 
The soldiers even tell the relatives which traders they should go to. 
"It is the weapons traders who pay them cash," Khalimov explains. "This 
is the weird circulation scheme they use now. But there is a good reason 
behind it: When they accept guns as payment, it makes them look clean, as if 
all they are doing is confiscating illegal weapons." 
And it also allows the servicemen to boost their performance records, 
reporting a greater number of illegal weapons confiscated from the local 
population. Such reports are distributed in Moscow on a daily basis. 
In some cases, Russian servicemen genuinely suspect their detainees of 
working for the rebels. But in many other cases, they are open about the fact 
that the detentions are for money. 
Artur Gakayev, 17, was hanging out with seven friends in the village of 
Gikalo when a group of soldiers drove up in a large truck and rounded up the 
young men. As they drove past the village school, Gakayev asked the soldiers 
if he could get off and let his mother, a teacher, know he had been detained. 
"As soon as they heard that my mother was a teacher and my father had 
died, they gave me a kick in the butt and threw me out of the truck," he 
says. "They were saying that a teacher will not be able to pay anything for 
me since teachers aren't paid even their meager salaries." 
The youths with wealthier parents spent three or four days locked in a 
basement, he says. Their families paid around $175 for their release. 
Ramzan Batyyev, deputy director of the Russian government's human rights 
reporting center in the Chechen town of Znamenskoye, says women who come to 
the center bring stories of unofficial and illegal detentions. 
"There is some unverified information that some people are unofficially 
detained by Russian servicemen without any sanctions from their superiors and 
are unofficially held in custody," he says. "But since this information has 
never been officially confirmed or verified, we are not in a position to 
comment on it. . . . 
"But in this general mess in the Chechen republic today, it is also 
impossible to rule out that such cases have never happened," he adds. 


'All They Wanted Was Money' 
Sultan Akhmadov, a 21-year-old from the town of Argun who was detained 
along with two friends, spent three days in a quarry outside the capital, 
Grozny. 
"Our hands were tied behind our backs with steel wire," he recalls. "Our 
captors gave us food. On the third day, one of us managed to work his hands 
free and helped us do the same, and then the three of us simply walked into 
Grozny. 
"All they wanted was money," he concludes. "Nothing else. If there had 
been a different reason, we would have been kept where normal prisoners are 
kept--at a pretrial detention center, at the commandant's office, or a 
prison. They kept us in a quarry deliberately so no one would learn about 
us." 
Chechens accuse Russian officials of deliberately ignoring the practice. 
Islam Dakuyev, an 18-year-old from Grozny's suburbs, says he was even held on 
the grounds of a military base. He was released only after his mother paid 
about $220 in ransom. 
Dakuyev says the worst thing is that there is no defense, and nowhere to 
appeal for help. And anyone who resists paying ransom risks sending a family 
member to a quick and anonymous death. 
"There were absolutely no guarantees that the man would keep his 
promise," Dakuyev says. "But my parents had no other choice. They were afraid 
something really bad could happen to me." 
Special correspondent Nunayev reported from Khuti-Khutor, Tangi-Chu and 
other Chechen towns, and Times staff writer Reynolds reported from Moscow. 
Alexei V. Kuznetsov of The Times' Moscow Bureau contributed to this report. 


******


#10
Concerns Raised in Gore-Russia Deal
October 25, 2000
By BARRY SCHWEID

WASHINGTON (AP) - Backed by a statement of concern from four former 
Republican secretaries of state and other officials, Senate Republicans are 
airing allegations that Vice President Al Gore in 1995 secretly acquiesced to 
Russian arms sales to Iran. 


Coming just two weeks before the Nov. 7 election, the Gore presidential 
campaign labeled the issue political and said a Senate hearing Wednesday 
would only rehash actions that were well known five years ago and done in the 
interest of U.S. security. 


But Sen. Sam Brownback, R-Kan., co-chair of the hearing with Sen. Gordon H. 
Smith, R-Ore., said, ``U.S. national security is at stake.'' 


Two of the 11 officials signing the statement of concern served in Democratic 
administrations. 


Brownback, in a statement, said Secretary of State Madeleine Albright had 
admitted in a secret letter to Russian Foreign Minister Igor Ivanov that Gore 
promised Russia the United States would not enforce a 1992 law designed to 
curb the spread of dangerous technology. Gore had been a co-sponsor of the 
law when he was in the Senate. 


``The administration must come clean and share with Congress the content of 
those secret agreements,'' Brownback said. 


On Tuesday, 11 former high-level officials issued a statement saying Gore and 
then-Russian Prime Minister Viktor Chernomyrdin agreed in 1995 that the 
United States would acquiesce to the sale by Russia to Iran of ``highly 
threatening military equipment such as modern submarines, fighter planes and 
wake-homing torpedoes.'' The statement said Gore did not inform Congress 
fully about the deal. 


``We are deeply disturbed by the agreement,'' the officials said. 


``The president's most important job is safeguarding our nation's security 
and our ability to protect our interests, our citizens, our allies and 
friends,'' the statement said. 


Gore spokesman Jim Kennedy said the agreement with Russia prevented new arms 
sales to Iran, thereby helping to safeguard U.S. security. 


The agreement was publicly announced and Congress was briefed at the time, 
Kennedy said in a statement. ``No member of Congress and none of these former 
officials complained about it then or in the years since,'' he said. 


``Their inaccurate complaints about it, only now, 14 days before the 
election, speaks for itself,'' Kennedy said. 


The four former secretaries of state who joined in the statement were George 
P. Shultz, Henry A. Kissinger, James A. Baker III and Lawrence Eagleburger. 
Four former secretaries of defense - Frank C. Carlucci, Donald H. Rumsfeld, 
James R. Schlesinger and Caspar W. Weinberger - along with former CIA 
director R. James Woolsey and former national security advisers Zbigniew 
Brzezinski and Brent Scowcroft joined with them. 


All worked in Republican administrations except Brzezinski and Woolsey. 
Brzezinski has been critical of the Clinton administration's foreign policy 
in the past. Schlesinger served in both Republican and Democratic 
administrations. 


The New York Times reported earlier this month that Gore had promised the 
United States would not interfere with Moscow's fulfillment of existing sales 
contracts for conventional arms to Iran on condition such sales would 
conclude by the end of 1999. 


The report said Washington agreed not to penalize Moscow under the 1992 law, 
which prohibited arms sales to countries the United States viewed as 
exporters of terrorism. 


The Washington Times then reported that Chernomyrdin had urged Gore in a 
classified ``Dear Al'' letter on Dec. 9, 1995, to keep Russian nuclear 
cooperation with Iran confidential and said it was ``not to be conveyed to 
third parties, including the U.S. Congress.'' 


******


#11
Russian lawmaker says Kursk sank after collision with British sub


MOSCOW, Oct 25 (AFP) - 
A senior Russian lawmaker Wednesday said that the Kursk nuclear submarine 
sank after colliding with a British submarine, retracting his earlier 
suggestion that a friendly-fire blunder was to blame.


Sergei Zhekov, a member of a parliamentary probe into the August 12 
catastrophe, told Interfax he had obtained new facts from Russian naval 
chiefs and the constructors of the Kursk that backed up his latest theory.


First, the rescue buoys found after the accident were white and green, 
colours Zhekov claimed were those of Britain's Royal Navy.


British warships in fact fly the White Ensign, a red cross on a white 
background with the Union Jack in the upper quadrant alongside the flagpole.


Secondly, according to the lawmaker, in the days following the tragedy the 
British navy carried out its first large-scale emergency and rescue exercises 
for the past 10 years.


And finally, he said that two submarines were withdrawn from service by the 
British navy in the space of one week.


Zhekov, speaker of the regional assembly in Russia's far eastern Primoriye 
region, said that fragments of the British submarine should logically be 
lying near the site of the wreck in the Barents Sea.


"The opposing side understands this and is making repeated efforts to enter 
this region to 'erase its footsteps'," he added.


Last month Zhekov sparked an uproar when he asserted that the ill-fated 
nuclear submarine had been hit by a misfired missile from a Russian warship 
engaged in wargames with the Kursk.


His about-turn came a day after Russia's top navy commander Admiral Vladimir 
Kuroyedov said he was "80 percent certain" that the Kursk sank following a 
collision with another submarine.


Russia has said two US and one British submarines were in the Barents Sea 
area when the Kursk sank on August 12 following two onboard explosions.


London has categorically denied that any British vessel was anywhere near the 
scene, while the United States also insists that its submarines, which 
monitored the explosions aboard the Kursk, were not involved.


Western experts have suggested an onboard fire in the munitions room set off 
armaments stored on the Kursk, causing two explosions, the second of which is 
estimated to have been equivalent to five tonnes of TNT.


The navy dismissed the report and a government commission has yet to publish 
the official report into Russia's worst maritime disaster since the collapse 
of the Soviet Union.


*******


#12
Former Russian Premier Primakov claims US barred Russia from Mideast peace
talks 
Interfax 


Bishkek, 24th October: Former Russian Prime Minister Yevgeniy Primakov has
indirectly slammed US presidential candidate George Bush Jr. for making
accusations against former Russian leaders. 


Such accusations jeopardize Russian-US relations, the leader of the
parliamentary group of the Fatherland-All Russia party, Primakov, told US
reporters in Bishkek, Kyrgyzstan. 


Normal relations with the United States are a foreign policy priority for
Russia, he said. However, Russian-US relations are not a "one-way" street
and so their future largely depends on the United States, he said. 


Lately, problems have been arising between the two nations, Primakov said. 


One of them is the US refusal to consider a START III treaty other than in
a package with a revision of the Anti-Ballistic Missile Defence (ABM) treaty. 


"Russia is categorically against [altering] the ABM treaty, which forms a
solid basis for the reduction of strategic armaments," the former prime
minister said. 


He also accused the United States of barring Russia from mediation in peace
talks. 


"Such monopolization of mediation, in particular in the Middle East, has
already shown that this is a path to nowhere and that without Russia
conflicts cannot be settled," he said. 


"We support the United States in its desire to settle conflicts, but we
believe that ignoring Russian efforts of course sows mistrust between the
two countries," he said. 


*****


#13
Wall Street Journal
October 25, 2000 
[for personal use only] 
Forum Financial Sues Harvard And Two Ex-Advisers for Fraud
By STEVE LIESMAN and CARLA ANNE ROBBINS 
Staff Reporters of THE WALL STREET JOURNAL


In the second lawsuit in recent weeks related to a high-profile U.S. 
foreign-aid program in Russia, Forum Financial Group sued Harvard University 
and two former Harvard advisers, alleging that the two men defrauded the 
company.


The lawsuit, filed in federal district court in Maine, is linked to a 
three-year investigation by the U.S. government into allegations that Harvard 
economics professor Andre Shleifer and former Harvard legal expert Jonathan 
Hay used their positions managing the U.S. aid program in Russia for personal 
gain. Forum, a large mutual-fund-service company, alleges that the two men 
defrauded it of a business to help Russia build capital markets.


In September, the Justice Department filed suit against Harvard, the two 
advisers and their wives seeking $120 million in damages. It alleged that Mr. 
Hay and Mr. Shleifer defrauded the government, abused public resources and 
engaged in conflicts of interests while managing the government's flagship 
foreign-aid program in Russia. The government suit is still pending.


The Forum suit alleges the men sought to gain influence over Russian 
officials by using U.S. aid money to provide the "officials and/or their 
families and friends with cash, no-show jobs, exorbitant and unjustified 
compensation and benefits."


The money was "frequently deposited into foreign bank accounts to evade the 
imposition of Russian taxes." That allegation hasn't been raised previously 
by the Justice Department nor the U.S. Agency for International Development.


All the defendants have denied the allegations in the Justice Department 
suit. David Zornow, an attorney for Mr. Hay, called the Forum suit 
"frivolous." He said that everything his client did "was known to and 
approved by Russian government officials." An attorney for Mr. Shleifer said 
a draft of the suit was reviewed by defendants months ago, and found to be 
"totally without merit."


Harvard Vice President and General Counsel Anne Taylor said she hadn't yet 
seen the complaint. "But we are aware of the nature of the claims, which we 
think are absolutely baseless," she said. "The university had no contractual 
relationship with Forum Financial. As we understand it their contract was 
with the Russian government. It's also our understanding that at the 
termination of that contract the company signed a comprehensive release 
relinquishing any claims it might have against anybody related to that 
contract."


Forum, based in Portland, Maine, said it was hired in March 1996 to create a 
depository that would handle the share registration, fund-pricing and 
accounting operations of Russia's first mutual fund. But Forum says that as 
early as May of that year, Mr. Shleifer and Mr. Hay were planning to take 
control of the depository and were secretly marketing it to potential 
American investors for $1.2 million.


Eventually, Forum says it was forced to sell the depository for $400,000 to 
Julia Zagachin, an associate of Mr. Hay. But Forum and the Justice Department 
allege that Mr. Hay was among the investors who actually bought the 
depository.


In its suit, Forum charges Mr. Hay with fraudulent and negligent 
misrepresentation and Mr. Shleifer with aiding and abetting fraudulent and 
negligent misrepresentation. It charges Harvard with negligence, saying the 
university is liable because Mr. Hay and Mr. Shleifer were agents of the 
university. Forum also is seeking punitive damages from all three.


Write to Steve Liesman at steve.liesman@wsj.com and Carla Anne Robbins at 
carla.robbins@wsj.com
******