December 14, 2000   

This Date's Issues:   4687 • 4688

Johnson's Russia List
#4688
14 December 2000
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Ron Popeski, Putin spy pardon extends coincidental hand to Bush.
2. Reuters: Spanish prosecutor favours Gusinsky extradition.
3. Interfax: Fears voiced over US missile defence after Bush victory. (Sergei Karaganov)
4. Financial Times (UK) editorial: Putin power.
5. BBC Monitoring: The slave in us lives on, anti-Stalinist academic tells Russian television. (Interview with Aleksandr Yakovlev)
6. Moscow Times: Igor Semenenko, Book Is Closed on Probe of Mabetex.
7. BBC Monitoring: Swiss to have final say on Mabetex corruption case, says Russia's ex-prosecutor. (Interview with Yuriy Skuratov)
8. Vremya Novostei: Glev Cherkasov, UNANSWERED QUESTION. (re Putin)
9. The Times (UK): Roger Boyes, Berlin plays power game for a stake in Russia.
10. Bloomberg: World Bank's Carter on Russian Economy, Poland.] 

*******

#1
Putin spy pardon extends coincidental hand to Bush
By Ron Popeski
 
MOSCOW, Dec 14 (Reuters) - Russian politicians said on Thursday the election
of George W. Bush could promote better ties and the Kremlin extended a
coincidental but symbolic hand to the U.S. president-elect by pardoning
convicted spy Edmond Pope.

As U.S. Vice President Al Gore conceded defeat in the November 7 poll and
Bush urged Americans to put the legal disputes behind them, some political
experts in Moscow suggested a Republican administration would not be to
Russia's disadvantage.

The Kremlin has not yet officially commented on the confirmation of Bush's
victory, but President Vladimir Putin referred directly to maintaining good
relations with the U.S. when he pardoned Pope, a businessman convicted and
sentenced to 20 years in prison on charges of trying to obtain secrets on a
high-speed torpedo.

Putin, on a visit to Cuba, issued a decree on Thursday granting the pardon on
grounds of Pope's ill health "and based on the high level of relations
between the Russian Federation and the United States of America."

Pope's detention and conviction had been an irritant to relations, with
Washington saying the businessman had done nothing wrong and urging Putin to
secure his release. Putin had rejected the U.S. appeals pending the outcome
of the trial.

Putin's decree was issued just hours after he was legally able to do so and,
coincidentally, within hours of Bush emerging as the winner of the disputed
election.

Some Russian officials said it would be easier for Moscow to deal with a
Republican administration not subject to second-guessing from a hostile
right-wing Congress.

"Our relations will become more clear now. The Democrats left much shrouded
in fog. Sometimes Russia was a friend, sometimes it represented a threat,"
Gennady Seleznyov, Communist speaker of the State Duma lower house of
parliament, told reporters.

"Under the Republicans, this won't happen. We know which aspects of foreign
policy suit them and which ones don't."

Boris Gryzlov, parliamentary leader of the pro-Putin Unity party, which sent
a delegation to the Republicans' convention, hailed Bush's victory as the
start of a new era of pragmatism.

"We believe it highly symbolic that (the 20th century) ends with the coming
to power in the United States and Russia of realists representing a new
generation of politicians," he said in a written statement.

"This allows us to look forward with optimism to both our bilateral relations
and other developments in the world."

U.S.-RUSSIAN TIES CHILLIER IN RECENT YEARS

For much of the 1990s, ties between Moscow and Washington were dominated by
cheery summits between presidents Bill Clinton and Boris Yeltsin.

But disagreements over arms control, NATO enlargement, Kosovo, Iraq and
Russia's military campaign in Chechnya have made relations frostier in the
past two years.

Bush has pledged a tougher line on arms control, threatening to withdraw from
the 1972 Anti-Ballistic Missile Treaty if Russia does not agree to amend it
to allow the United States to deploy an anti-missile shield.

Sergei Rogov, Director of Russia's USA and Canada institute, said the
Republicans would adopt tougher stands, but this would not necessarily be to
Moscow's detriment.

"I think it is possible to do business with a Republican administration.
Unlike the Democrats they can deliver. A lot depends on their -- and our --
ability to compromise."

Vladimir Lukin, a former ambassador to Washington and now a member of the
Duma, said Russia would have to take account of a more rational, or cynical,
approach.

"We have experts who know all about Republicans," he told ORT television. "We
have to make use of them."

Ultra-nationalist Vladimir Zhirinovsky, who often backs Kremlin policy
despite flamboyant public statements, predicted confrontation would be
undiminished with the new administration.

"Nothing will change, not a single centimetre, not an iota. We are rivals,
enemies," he said.

"We are getting ready for a war of mutual destruction. This will go on for 10
years."

*******

#2
Spanish prosecutor favours Gusinsky extradition
 
MADRID, Dec 14 (Reuters) - The chief prosecutor of Spain's High Court said he
saw nothing that would prevent the extradition of Russian media magnate
Vladimir Gusinsky to his home country, a Spanish newspaper reported on
Thursday.

"The position of the prosecutors is clear...He was sent to jail yesterday
(Tuesday) because he is wanted for fraud involving a substantial amount," the
prosecutor, Eduardo Fungairino, was quoted as saying in the daily El Pais.

"It's a question of a common crime and Russia is a democratic country that
has signed the European convention on extradition," he added.

The Spanish High Court is not due to give its opinion on the case until early
next year. A ruling in favour of extradition would have to be backed by an
official High Court report and approved by the Spanish government.

Gusinsky was arrested in his luxury villa in southern Spain in the early
hours of Tuesday in response to a Russian request to extradite him to face
fraud charges involving some $250 million.

Gusinsky's media have been fiercely critical of the Kremlin and he told the
Madrid court he was a victim of political persecution and that his alleged
debts had been paid, a court source said.

"Gusinsky's lawyer is free to allege this is a political affair, but we
should not take those allegations into account," Fungairino was quoted as
saying.

Interpol, the international police organisation, said it had asked for
clarification from its Moscow bureau that the warrant for Gusinsky's
detention was not based on political grounds.

Gusinsky, one of Russia's mega-rich, created independent media outlets in
Russia and championed press and democratic freedom during the chaos of the
country's post-Communist years. His villa in Sotogrande in Spain is one of
several foreign residences.

Russia now has 40 days to send Spain documentation to back its extradition
request. That then needs to be translated and checked by the High Court
before the request goes to ministers for approval.

Only then will the court investigation begin and, once finished, its opinion
will be returned to ministers for a final decision, against which Gusinsky
cannot appeal.

Court sources note the extradition to Britain of "road rage" murder suspect
Kenneth Noye last year took nine months from the time he was arrested.

*******

#3
Russia: Fears voiced over US missile defence after Bush victory
Interfax

Moscow, 14 December: Sergey Karaganov, the head of the Russian Council for
Foreign and Defence Policies and deputy director of the Russian Academy of
Sciences' Institute of European Studies, is predicting that Washington will
tighten its position on the deployment of a national missile defence system
following the victory of Republican George Bush Jr in the presidential
elections.

He told Interfax that after control is established over the legislative and
executive authority, "the Republicans will start pouring large amounts of
money into the development of a missile defence system, meaning, in actual
fact, the accomplishment of a new technological breakthrough, not the
creation of any shield".

Moreover, the Republican administration may turn a deaf ear to Russia's call
to begin negotiations on the future START-III treaty, Karaganov said.

******

#4
Financial Times (UK)
14 December 2000
Editorial
Putin power

Vladimir Putin's commitment to investor-friendly reforms is about to be put
to the test. In the next few weeks, the Russian president must decide the
future of UES, the electricity utility, and settle a row between Anatoly
Chubais, the UES chairman, and a shareholder group.

Mr Putin's advisers are expected to publish tomorrow far-reaching proposals
for creating fair regulatory conditions in the electricity industry. If the
president backs them, he will send a powerful signal to foreign investors to
take another look at Russia. But it will take more than a few well chosen
words to win investors' confidence. Mr Putin must be ready to implement the
programme and to defend it against vested interests.

There is little dispute that UES, which is 53 per cent state-owned, requires
big investments to modernise its decrepit plant and that most of this capital
can come only from outside the company, mainly from foreign investors. Mr
Chubais's plan is to keep the transmission network largely in the hands of
UES and to spin off 10-15 regional generating companies to private investors.
Minority shareholders led by Boris Fyodorov want to ensure that before the
break-up starts, proper controls are in place to stop Mr Chubais selling
assets cheaply to his friends. Mr Fyodorov is also pressing for a fair and
transparent regulatory regime. To ensure that Mr Chubais sticks to the rules,
he wants UES to reverse a decision to raise from 50 per cent to 75 per cent
the minimum votes needed to remove the chairman.

Tomorrow's Kremlin paper will almost certainly echo Mr Fyodorov's demands for
fairness and transparency. But Russia has not been short of perfectly formed
plans for better laws. What has been missing is the will of powerful people -
including those in the Kremlin - to respect the laws that already exist.

Insiders - such as government officials, enterprise owners and managers -
have repeatedly disregarded the interests of outsiders, including minority
shareholders. Boris Yeltsin ruled by playing insiders off against each other.
Mr Putin has so far concentrated on recovering some of the power lost to
Yeltsin-era insiders. Now he must show that he is willing to keep within the
law and to enforce it fairly on others. Arbitrary attacks on political
enemies such as media magnate Vladimir Gusinsky, who was arrested this week,
are not the way forward. A fair regime for the electricity industry is.

Without firm action, Mr Putin will not persuade foreign investors that he is
serious about protecting their interests. Without such assurances they will
put their money elsewhere and UES will continue to rot.

******

#5
BBC Monitoring
The slave in us lives on, anti-Stalinist academic tells Russian television
Source: Russia TV, Moscow, in Russian 1730 gmt 13 Dec 00

The figure of 20m put forward as the total number of victims of the Soviet
system is a provisional one and the real tally was higher, according to the
chairman of the Commission for the Rehabilitation of the Victims of Political
Repressions, Academician Aleksandr Yakovlev. Interviewed on Russia TV's
"Details" programme, Yakovlev said his latest book, "Maelstrom of Memory",
sought to explore why Russia had a habit of destroying its reformers and was
in thrall to a destructive determinism. Condemning the decision to bring back
the Soviet-era national anthem, which, he said, "glorified the period of mass
crimes", and asserting that it was time to give Lenin a Christian burial,
Yakovlev diagnosed Russia's problems thus: "the slave in us... is only
gradually crawling out". The following is the text of the interview,
conducted by Tatyana Aldoshina and broadcast on 13 December. The subheadings
have been added editorially:

[Presenter Tatyana Aldoshina] Good evening. This is "Details". Twenty million
people were subjected to repressions in the years of Soviet power. This
figure is being confidently asserted today by Academician Aleksandr Yakovlev,
chairman of the Commission for the Rehabilitation of the Victims of Political
Repressions. Good evening, Aleksandr Nikolayevich.

[Yakovlev] Good evening.

[Aldoshina] My first question. There is perhaps no-one in this country who
knows better than you about the nature of the repressive apparatus and has a
better understanding of how many victims of political repressions there were
during our history. How was this figure of 20m arrived at?

Twenty million victims an understatement

[Yakovlev] The figure is a provisional one. I think the actual number was
higher. A week ago we submitted a proposal to the president for the
establishment of an interdepartmental group for counting the victims of
political repressions. In conversation with me, he agreed with such an
approach, and a draft decree on this score is on his desk. I think he will
sign it.

But how did we arrive at this figure? It is made up of the number of people
executed by shooting, sentenced or arrested under Article 58 [of the former
criminal code, dealing with counter-revolutionary crimes]. Between 1923 and
1953, 42m people were sentenced - not all of them on political grounds, of
course, but I am just giving you an idea of the scale. Five and a half
million families were driven from their homes. Multiply that figure by four
on average - to include the children, the families, the elderly. It won't
appear to be a small number, will it?

Take the deported ethnic groups driven from their homes and homeland. They
also numbered millions. It was more than 3.5m people.

[Aldoshina] The repressed peoples.

[Yakovlev] Yes, the repressed peoples - deported to different places.
Usually, 40-60 per cent of them died on the journey, particularly the
children. And when you examine the figures, the number serving sentences in
camps, ordinary prisons and internal prisons and doing hard labour must be
included. There was a special Politburo decision establishing hard labour,
and it did exist. Then take the prisoners of war returning from Germany, from
German camps to Soviet camps. Few survived. They were mainly made to do the
hardest work. I haven't mentioned the thousands and thousands of people from
various parties. The repressions began after 1917.

Indifference to the deaths of millions

[Aldoshina] How did the whole thing begin? I understand you have been working
with documents and documentary evidence. How was this situation - the start
of the repressions - marked in society? Are there some symbols of this?

[Yakovlev] As far as the Soviet period is concerned, I think the very
beginning can be traced back to the civil war. There was a policy decision of
the party to turn the imperialist war into a civil war, and so it began. Up
to 13m people were killed in it on the two sides. And 2m left for abroad as
emigres. Consider the figures. Should they be counted among the repressed or
not?

You see, I think there is a very profound reason for all this in our
psychological make-up. It all derives from the deep and distant past: we have
always been fighting. Not a year or decade pass without it. We call [17th
century Russian tsar] Aleksey Mikhaylovich the "Most Gentle" as there were no
wars under him. The rest of the time we have been fighting all the time. We
have got accustomed to it, to the human deaths. We can be upset at the death
of an individual, whether a relative or not, but for some reason we are not
upset at the millions.

[Aldoshina] We are also fighting now.

[Yakovlev] We are fighting now, and we continue to fight. And I don't know
when we are going to stop. It places a certain stamp on people's psychology.
People become merciless, uncaring and indifferent. Indifference, as
(?Brudyashchenskiy) said, engenders treachery and murder.

Russia "racked by disorder"

[Aldoshina] Yes. Is the book you have written based on documentary material
or is it more of a book of memoirs? How do you see it yourself?

[Yakovlev] You know, it is something between a meditation and a set of
memoirs.

[Aldoshina] It has a difficult name.

[Yakovlev] Yes, "Maelstrom of Memory". The book describes what came up from
this maelstrom. It starts with the period of [Petr] Stolypin [Russian prime
minister, initiator of economic reforms, assassinated 1911]. The purpose of
the book, at least as far as I imagined it, is to reply or attempt to reply
to the question of why Russia continues to be racked by disorder: fundamental
disorder, as Stolypin put it. That is how he phrased it. He was the person
who came up with the concept of perestroika. It was not we who coined it.

Reformers destroyed

[Aldoshina] Did you reach an answer?

[Yakovlev] No. The more I delved into the documents and thought about it, the
more I came to an impasse when I tried to explain why it was all happening.
The more I wrote and the more I counted, the less I understood what was the
root of it all. Whenever we embark on reforms, the reformers are either
murdered or cursed. But those who murder and destroy, who are a long way from
creating something, are invariably hero-worshipped. Once again, it all comes
unstuck because of this perpetual habit of mind that was formed neither today
nor yesterday.

[Aldoshina] It seems people are right when they say that Russia is a country
whose purpose is to be a lesson to the whole of mankind?

[Yakovlev] Yes, to check mistakes and to see what can and what can't be done!
What depresses me is this fatalistic sense of determinism. Admittedly, for
the sake of salvation one can believe in divine providence, but I don't think
it brings any kind of salvation!

Anthem glorifies mass crimes

[Aldoshina] If there is an explanation, why has it been decided that society
is inclined towards adopting the national anthem with the old Soviet-period
tune - really beautiful but very symbolic music.

[Yakovlev] I see it as a historic misunderstanding. I wouldn't like to put it
more strongly. I have already spoken strongly. I am a little insulted as a
citizen of Russia. Surely we can come up with an anthem for the new Russia?
Why are we taking someone else's anthem, the anthem of another country? Why
do we regard this anthem as belonging exclusively to us Russians, and not the
Uzbeks, the Georgians, the Ukrainians. After all, we all sang it together.
Secondly, the words are rather vile. They reflect the era of mass terror, and
with this anthem we glorified the period of mass crimes, if you like. And
instead of repentance, we are beginning to bring back this anthem, which,
symbolically speaking, as a symbol, also bears its share of responsibility to
history and to the people. I just can't understand it.

Bury Lenin if the earth will have him

[Aldoshina] Proposals are now coming from the democratic camp. They say: if
that is how things are, then the problem of the other symbol - the mausoleum
- needs to be dealt with, and Lenin's remains must finally be consigned to
the ground. What do you think on that score?

[Yakovlev] I expressed my view a long time ago. I believe that if we don't
want to continue to be pagans, but insist on being Christians - and it is so
- we must simply behave like Christians, and just bury him. That is, of
course, if the earth will have him!

[Aldoshina] There is another proposal. The Union of Right Forces today
proposed that a memorial to the victims of the 20th century should be put up
on the site of the mausoleum.

[Yakovlev] I think it would be sensible.

[Aldoshina] You have met the president. Do you get the feeling that he might
support this idea?

[Yakovlev] It is difficult for me to say. We did not broach this matter. At
the same time, when we were talking of the repressions, the creation of the
commission, the count of victims and the publication of documentary
literature, he actively backed all these proposals, and said it must be done.

[Aldoshina] Another question. Do you accept the idea that the old symbols can
be some kind of cementing link between the generations, because it is well
known that what is described as the Gulag was often Komsomol construction
sites, and there were all kinds of people there, including people who
enthusiastically responded to the slogans of the party, and believed in it
all? It is their past. And so the old symbols are their past and we young
people should respect that?

[Yakovlev] For me, a symbol of that time is the fine lyrical songs young
people sang. Those are symbols! There can be a continuity of generations on
that basis because they were based on enthusiasm, love, faith in mankind and
hope for a beautiful future.

Society based on chimerae

[Aldoshina] Why is it a paradox of that time that two incompatible things
were linked: human illusions and such uncommon brutality?

[Yakovlev] You see, when the social order is built on the basis of chimerae,
fantasies, pressure from above and the issuing of commands that deny all
human freedom, nothing good can come of it. You see, it is a very serious and
dangerous delusion when people come to think that the longer the stick and
the louder the voice, the better things will go. We have become used to fear.
We say that we fear nothing now. In practice, we are willing to fear, just as
we are willing to deceive ourselves, in [national poet Aleksandr] Pushkin's
phrase. And that is the trouble with us: the slave in us lives on, it has not
left us yet, it is only gradually crawling out.

[Aldoshina] Aren't you afraid of a relapse into the past?

[Yakovlev] I'm afraid it could happen, but I do not fear it!

[Aldoshina] Many thanks!

******

#6
Moscow Times
December 14, 2000
Book Is Closed on Probe of Mabetex
By Igor Semenenko
Staff Writer

Twenty-six months after the case was opened, prosecutors Wednesday
announced they have dropped the so-called Mabetex investigation into the
doings of Boris Yeltsin, his daughters and the former president's Kremlin
property chief Pavel Borodin.

"The prosecutor's office has issued a special regulation declining to open
a criminal case against Boris Yeltsin and his family members," said Ruslan
Tamayev, deputy head of the Prosecutor General's Office's department of
particularly important cases.

Tamayev told a news conference Wednesday that the Mabetex case was being
dropped because no evidence had ever turned up of a crime being committed,
despite numerous communications from Swiss prosecutors.

The result has been to send nearly 19,000 pages of evidence into top secret
archives, and to bring to a close a sordid storyline of lucrative Kremlin
renovations for kickbacks.

Tamayev said that the last report his office got from Swiss prosecutors was
received in late November. "They said they had nothing more to tell us," he
said.

Officials in Switzerland refused to comment Wednesday on the closing of the
Mabetex case. Their Moscow colleagues said they would send an official
notice to Switzerland about the matter in the next few days.

Earlier this year, Swiss magistrates indicted five people in the affair and
issued an arrest warrant for alleged money laundering against Borodin, who
has repeatedly insisted that he is innocent. In September, Swiss
prosecutors voiced doubt that their colleagues in Russia were pursuing this
and other cases as strenuously as they could.

Tamayev also criticized the handling of the Mabetex investigation in Russia.

The case was opened more than two years ago by then-Prosecutor General Yury
Skuratov. Tamayev, who took over the Mabetex case in October 1999 after
Skuratov had been forced out, complained of obscure-seeming procedural
violations by Skuratov in filing the original Mabetex paperwork.

"[The Skuratov team] even did not file a formula No. 1 with the Main
Information Center [upon opening the Mabetex case]!" exclaimed Tamayev.

Skuratov countered with a mirror-image accusation that Tamayev's decision
to close the case was political.

"Unfortunately, criminal prosecution is driven by political
considerations," Skuratov said in an interview to NTV television Wednesday
night. "Prosecutors who take a course of action do not realize that they
may fall victims of their own decisions when the political winds change."

Tamayev said the investigation into Mabetex - the Swiss construction
company that has carried out renovations of the Kremlin, the White House
and Yeltsin's private residence - was officially closed on Dec. 8.

The case was first opened after Skuratov received a letter in November 1998
from one Felipe Turover, a Soviet ?migr? who worked for a Swiss bank as a
debt collector in Russia and was a key witness in the Swiss investigation
into alleged bribery of Kremlin officials. Turover alleged in that letter
that construction contracts between Mabetex and Borodin's Kremlin property
department had been padded by 30 percent to 40 percent, with the extra
money going as bribes to Yeltsin and his entourage.

Since then, Russian prosecutors, citing the laws on state secrets, have
classified all information about the prices in those contracts. Those
documents now go, along with 122 tomes of about 155 pages each, into the
state archives.

The Prosecutor General's Office says that after the Turover letter,
investigators looked into whether Borodin or any of the Yeltsins kept money
in suspect foreign accounts, but failed to to arrive at a definitive
conclusion.

They did find traces of a joint bank account open in the names of Mabetex
head Behgjet Pacolli, Borodin and Borodin's daughter Yekaterina Seletskaya.
But Tamayev said Wednesday that there was no evidence that Borodin or
Seletskaya had ever signed orders for money transfers.

He also said it was not possible to judge the authenticity of the
signatures of Borodin and his daughter on those accounts, because Swiss
prosecutors - who have worked parallel to the Russians investigating
Mabetex - would only provide photocopies of banking documents.

"We could not identify the signatures [definitively] because we did not get
access to the originals [kept in a bank]," said Tamayev.

Evidence of other Yeltsin-entourage bank accounts, which were written about
in numerous media publications, was never uncovered, Tamayev said.

Investigators in their digging did turn up evidence showing that Yeltsin
had paid 55,000 Swiss francs (about $23,000) using a Eurocard credit card
issued in his name, but the expenses were covered by a money transfer from
Yeltsin's official account in Mezhprombank.

The decision to drop the case was made despite a continuing Swiss
prosecutors' probe into the activities of a Mabetex affiliate, Mercata
Trading and Engineering SA.

Russian prosecutors said they saw the Mabetex and Mercata investigations as
separate, and Tamayev said Russian prosecutors would respond to any Swiss
inquiry or request for help in investigating Mercata.

"It's as if I do not see anything beyond a particular case," said Tamayev.
"I investigate only one case at a time, and that's the case of Mabetex, not
Mercata."

Tamayev refused to provide any details Wednesday about other investigations
being carried out by his department - those into Boris Berezovsky's
dealings with Aeroflot, and those behind Vladimir Gusinsky's arrest in Spain.

"We are not some sort of a private company," Tamayev said. "We should take
care of the national interests."

If that sounded defensive, it was perhaps not surprising, given that some
politics-watchers reacted to Wednesday's closing of the case as more chess
and intrigue than police work.

Yevgeny Volk, head of the Heritage Foundation's Moscow offices, speculated
that the Mabetex case was zipped shut on the eve of President Vladimir
Putin's trip to Cuba so that Putin would not have to worry about domestic
loose ends while in the Americas.

In the past, many of Putin's trips abroad developed against the backdrop of
a domestic political scandal.

*******

#7
BBC Monitoring
Swiss to have final say on Mabetex corruption case, says Russia's
ex-prosecutor
Source: NTV International, Moscow, in Russian 1643 gmt 13 Dec 00

The Russian prosecutor's office has closed the investigation into a case of
alleged corruption involving close associates of the former president, Boris
Yeltsin. The case centres around allegations that Swiss companies paid bribes
for contracts to renovate the Kremlin and other presidential properties. The
former Russian prosecutor-general, Yuriy Skuratov, who initiated the
investigation, says the decision to drop the case was taken at the highest
level and this decision was more political than legal. However, he says, the
decision is not binding on the Swiss authorities, whose chief concern is the
fact that criminal money was laundered through the Swiss financial system. If
they continue their investigation, convictions - in absentia if need be -
could result. The following is an excerpt from the interview, broadcast live
by Russian NTV International television on 13 December. Subheads have been
inserted editorially.

["Hero of the Day" presenter Andrey Norkin, live] Hello, you are watching
"Hero of the Day". The so-called Mabetex case was, for a long time, a kind of
symbol of the drive against corruption in Russia. I deliberately use the past
tense because the Office of the Prosecutor-General has closed this case for
lack of corpus delicti. Today I have with me in the studio the person who
initiated this case, the former prosecutor-general of the Russian Federation,
Yuriy Skuratov. Hello, Yuriy Ilyich.

[Skuratov] Good evening.

[Norkin] So, today an investigator from the Office of the Prosecutor-General,
Ruslan Tamayev, announced that the Mabetex case was being closed, saying the
case was instituted on your direct instructions, to all intents and purposes
without any substantial justification for starting it.

Solid grounds for initiating Mabetex proceedings

[Skuratov] Well, I cannot agree with that, since the Mabetex case, when it
was instituted, was based on serious evidence - not only [Felipe] Turover's
testimony which Tamayev refers to, but - first and foremost - the detailed
reports by the Swiss prosecutor-general's office. The evidence also includes
a very extensive report from the Swiss police and, for instance, material we
obtained as a result of inquiries made at the national bureau of Interpol by
the Russian Ministry of Internal Affairs, as well as much other evidence. All
this, taken together, was in my view sufficient justification and grounds for
instituting criminal proceedings. I am convinced even now - in spite of the
decision that has been taken - that the case was instituted lawfully and
justifiably and the case had real prospects. It was not a political or
orchestrated case. It was the result of fairly lengthy and painstaking work.

[Norkin] It is somewhat strange that about two months ago - correct me if I'm
wrong - an aide to the Russian prosecutor-general, [Vladimir] Kolesnikov I
think, said the investigation had been stepped up as a result of evidence
which had been supplied by the Swiss side. In other words, quite recently.
So, why are they now using the phrase "lack of corpus delicti". Was there
really no proof in this evidence?

[Skuratov] Well, that is the conclusion of the investigator. It could be
overruled at the supervisory level, although I doubt this will happen. In
principle, the supervisory level -

[Norkin] In other words, a higher authority might disagree with this decision
and reopen the case?

Decision to drop case taken at highest level

[Skuratov] Well, that is rather hypothetical because the decision has
obviously been taken at the highest level. Formally, the ruling says the
investigation has not revealed the elements of a crime in the actions of
those people connected with the Mabetex firm, with the contractors for the
reconstruction of the Kremlin. But - and I repeat, this is my position, I am
not a judge of course, I have not been involved with the investigation into
this case for a long time. But the evidence with which I am familiar
convinces me that this decision is more political than legal.

[Norkin] What will the Swiss do now? Will they also have to terminate this
investigation now?

[Skuratov] The Swiss investigation is not inextricably linked with -

[Norkin] How could it be? They have even issued a warrant for the arrest of
[former head of the Administrative Office in the Russian Presidential
Administration Pavel] Borodin.

Swiss investigating disappearance of 770m dollars from oil sales

[Skuratov] The investigation is not inextricably linked in the sense that
procedural decisions taken by the Russian prosecutor's office are not binding
on the Swiss. I am convinced that the Swiss side will continue the
investigation. After all, they are not just investigating the activities of
the Mabetex firm. There are about six additional areas of investigation which
stemmed from Mabetex, which were prompted by Mabetex. These are the
activities of the Mercata Trading firm, questions connected with the
refitting of the presidential airliner, questions connected with the use of
the [IMF] tranche, questions connected with the use of the oil quota. There
is a firm called International Economic Cooperation [also known as MES, by
its Russian initials]. The government issued an oil quota so that the money
raised from the sale of the oil could be spent on renovating the Kremlin. But
this money - 770m dollars - disappeared and there is still no trace of it.
The Swiss are investigating all these areas. I am convinced that the work
will be continued.

In principle, unlike our legislation, the Swiss legal system envisages the
possibility of conviction in absentia, in other words a conviction even when
the defendants, the accused do not turn up for the hearing of a judicial
case. I do not rule out the possibility that the Swiss may, in spite of
everything, take this case to its conclusion.

[Norkin] They convict in absentia.

[Skuratov] This is a very important point. Why? Because, if such a verdict is
returned, this person will not be able to show himself anywhere because he
will be -

[Norkin] You mean in Switzerland or -

Russian decision a setback to Swiss investigation

[Skuratov] No, not only Switzerland. They will issue an international warrant
for him. But returning to your question about how this decision by the
Russian prosecutor's office will affect the position of the Swiss, I have to
say that, in principle, it will have a negative impact. Why? Because the
Swiss are prosecuting these people not because they have broken Russian laws,
but because they laundered money - which they obtained by criminal means -
through Switzerland's financial system. In order to prove that this money was
obtained by criminal means, evidence from the Russian side was also needed,
because the criminal nature of this money was defined by crimes and actions
committed on Russian territory.

[Norkin] Well, obviously, the Swiss are not altruists who are worried about
deception by officials in Russia. Here their own interests are affected.

[Skuratov] Unquestionably...

[Norkin] ... From about June onwards rumours began to spread, especially via
the Internet, that the case was about to be closed, that it would not survive
for much longer. Did there come a time when you yourself also realized that
the case would be closed, that it would not be completed?

Three key investigators taken off case

[Skuratov] Well, to be frank, Andrey, the fate of this case was, as far as I
am concerned, preordained when three personnel matters were decided - the
dismissal of Prosecutor-General Skuratov, the dismissal of the deputy
prosecutor-general responsible for the investigation, Mr [Mikhail] Katyshev,
and, above all, the replacement of Georgiy Timofeyevich Chuglazov, the deputy
head of the Directorate of Investigations, by another investigator. Chuglazov
conducted the investigation in a splendid way. He is a man of principle, a
meticulous and highly trained professional. There was nobody with the same
degree of professional training as Chuglazov, when I was prosecutor-general
at least. When the investigator who a) knows the case well, and b) has
established excellent contact with the Swiss side, is replaced by another
investigator - even though Chuglazov himself was on the face of it promoted -
everything becomes clear. So, for me, today's - or yesterday's - decision by
the Office of the Prosecutor-General was no surprise. In general, I knew that
this was merely a question of time...

*******

#8
Vremya Novostei
December 14, 2000
[translation from RIA Novosti for personal use only]
UNANSWERED QUESTION
By Gleb CHERKASOV
    
     It has been almost a year since Russian President Vladimir
Putin won his first and so far most important political victory.
At the State Duma election almost a fourth of Russians cast
their votes for the Yedinstvo [Unity] bloc that Putin supported
"as a citizen." This achievement de-facto confirmed [former]
Prime Minister Putin's bid for succeeding First Russian
President Boris Yeltsin. It was then that a question of Mr.
Putin's identity became acute. This question has still remained
unanswered especially after the president insisted on a
synthetic solution to the state attributes issue. It was not
Glinka's or Aleksandrov's tunes that triggered the scandal. The
coalition members that back Putin in one way or another asked
themselves for the first time who was in the same boat with
them. The president asked them not to rock this boat.
     In late 1999 Putin's followers were an odd mix of staunch
advocates of a great power, no less staunch liberals,
supporters of stability and preservation of Yeltsin's rules of
the game as well as those who wanted changes. During his first
year on the presidential post Putin retained most of these
supporters and acquired the new ones. The secret of Putin's
success is that everybody can find things they like in the
president's words or actions.
     The hard-liners are likely to approve of the operation in
Chechnya, a regular arrival of masked people carrying automatic
machine guns in oligarchs' offices and Putin's periodic
statements about resurrecting the great power. Liberals should
like the tax reform and German Gref's program. Those who favor
the previous regime are probably encouraged by the fact that
the people whom Yeltsin brought in have remained in the
country's leadership. Moreover, the new leaders have not taken
abrupt actions in relation to businesses. Advocates of
"throwing Yeltsinism off the boat of the present" liked the
simultaneous declaration of "equal distancing of oligarchs from
the power" and the appearance of politicians with a military
bearing or with a KGB officer's heartfelt gaze in the power
structures.
     Putin's supporters adhering to absolutely different
positions might for some time "ignore" their rivals or reassure
themselves that "a union with rivals" is temporary and
short-lived. The same happened to Yeltsin who was supported by
both democrats and "Great Russia" advocates in the early
nineties. However, this situation cannot continue eternally.
Russia is faced by serious problems that must be resolved
sooner or later. Probably the state symbols belonging to the
epochs of the Tsar, the Provisional Government and the USSR can
be packaged together and the State Duma can be made to adopt
them. This method cannot be applied either to the military or
the administrative reform. Putin will let down part of his
supporters at some point for the sake of unpopular actions.
     The president might find a way out in a modern conversion
of mass support into strengthening the personal power and a
vertical permitting him to take unpopular steps. Some of his
supporters will be lost in the process. The federative reform
is in effect a vivid example of moving in the direction of
strengthening the personal power. The president tightened his
control over provinces by placing seven representatives in the
federative districts. At some point Putin's plenipotentiary
representatives will have to resolve more important tasks and
they will need wider powers. They will fail to cope otherwise.
That's what happened to Konstantin Pulikovsky during the
Primorye (the Maritime Territory) energy crisis. Deputy Prime
Minister Ilya Klebanov was sent there first and Emergencies
Minister Sergei Shoigu followed him.
     A reform of the party system and the announcement of the
new rules of the game also strengthened the federal, primarily
presidential, power. However, it's not enough to create
conditions for the "party of power" to win serious positions in
the Duma. People are needed who are able to secure benefits of
this resource. The Yedinstvo party project has not been
successful so far. For instance, the local Yedinstovo divisions
oppose the presidential representatives in some regions.
     Personnel have remained the key problem. Mr. Putin will
partially solve it if he determines priorities of his
presidency.
Then the people suitable for the tasks will be drawn. At that
point the question of who Putin really is will cease being
acute and become urgent.
    
******

#9
The Times (UK)
DECEMBER 13 2000
Berlin plays power game for a stake in Russia
ROGER BOYES IN GERMANY
 
GERMANY is forging an extraordinary economic deal with Russia that will, if
it succeeds, change the balance of power in the east of Europe. Details
were being discussed yesterday in Berlin by Werner Müller, the German
Economics Minister, and his Russian counterpart, German Gref.

The idea is simple: a large chunk of Russia's huge £14 billion debt to
Germany will be converted into equity stakes in Russian companies. Germany,
in other words, could soon become a major shareholder in Russian industry
and come to enjoy quite unprecedented influence over the country's economic
policy.

Whether this is a desirable aim is a matter of debate, but it marks a
strategic repositioning. While US foreign policy is on automatic pilot and
the European Union exhausts itself with pocket-sized reform, Germany is
developing a radically new approach to dealing with Moscow that will deepen
an already extensive mutual dependency.

Something has been in the wind since June when President Putin met Gerhard
Schröder, the German Chancellor. An informal meeting is being prepared for
early next month by Michael Steiner, the Chancellor's foreign policy guru.
The Russian Prime Minister and various Cabinet ministers have been thick on
the ground all autumn and Berlin is never a mere pit-stop. For example,
Igor Ivanov, the Foreign Minister, spent four days last month in the German
capital. In this light, spin-doctor claims that Tony Blair is Mr Putin's
best friend in Europe seem slightly exaggerated.

When Germany sidestepped the trade embargo against Moscow in the 1980s, the
Reagan White House was suspicious. Germans were selling pipes to the Soviet
Union, enabling the Russians to exploit and export oil and gas revenues,
and deepening German dependence on that energy, at a time when Russian
soldiers were patrolling Warsaw's streets.

The US President may not have been a genius but he understood the
importance of consistency, the principle of reward and punishment, in
dealing with Russia. German policy towards Moscow has swivelled over the
centuries, either seeking a cushion between Berlin and Russia, or to
civilise, or at least profit from, the feckless Slav. Poland was the
cushion, Europe's punchbag. Now Poland is in Nato, and on the cusp of the
European Union, Germany is returning to the modernisation mission pursued
under the reigns of the German-educated Peter the Great and the German-born
Catherine the Great.

A Moscow exhibition has been demonstrating how Germany shaped the
reformoriented Russia: the motor vehicle sold by Gottlieb Daimler, the
floating cranes of Mannesmann, the German founded chocolate and coffee
factory today known as Red October.

Could Lenin have electrified the country without Siemens? German loans kept
Russia from outright bankruptcy until the First World War. The stock
exchanges of Moscow and St Petersburg were built up on German capital and
Russian company law was based, then as now, on German legislation.

It seems appropriate then that the Germans are enthusiastic to do business
with that most German of modern Russian leaders, Vladimir Putin. It is part
of the historic compact that trades Russia's mineral resources for German
technical expertise. Since all sane politicians in Europe want to see a
stable, open Russia, logic appears overwhelmingly in favour of the
initiative.

Yet the deal is fraught with risk. Expectations of what Berlin, and German
companies, can do for Moscow are pitched too high.

Disappointment with the West is a powerfully disruptive force in Russian
politics. That Russia supplies well over 30 per cent of Germany's gas needs
is not alarming: no one is suggesting nowadays that Berlin can be
blackmailed. Russia, however, is not above using gas as a political weapon
against smaller countries. One option being consideredis to give Germany a
bigger share - Ruhrgas has 4 per cent - in Gazprom, Russia's gas exporter.
Though edging towards privatisation, Gazprom is, in effect, an instrument
of foreign policy. Some German companies are anxious to buy into Russian
high-tech or telecommunications concerns. That makes some sense. But
cautious businessmen are urging that Russia first give rock-solid
guarantees for investors and overhaul its tax laws. That would be a true
test of the seriousness of the deal taking shape in Berlin and Moscow.
 
******

#10
World Bank's Carter on Russian Economy, Poland: Comment
 
Moscow, Dec. 14 (Bloomberg)
-- Michael Carter, the World Bank's country director for Russia, made
the following comments on his views of the country. On Jan. 1, Carter starts
work as the bank's director for Poland and the Baltics. Carter spoke in an
interview.

On how his views on Russia have changed:

``First of all I came here realizing the Russian economy, the Russian
situation is an extremely complicated one. And that hasn't changed at all in
the last five and a half years.

``The second thing is that I think that in many ways a lot has changed in the
last five years. Whatever the indicators say, I believe that Russia is in
fact substantially better off today than it was five years ago. I think that
that is reflected, for example, in the political situation. When I first came
there were major fears of a complete reversal back to a centrally planned
system. I don't think that that is what most people consider to be a major
risk today.

``Many parts of the population of course have suffered greatly during the
transition -- not the result of the transition as such but the legacy of the
economic decline and degradation of the previous 20 years. But increasingly
there are people who are benefiting substantially. In some sectors there are
the beginnings of not just a market economy but of a competitive market
economy and it's really the competition that's extremely important. That's
what really will create the benefits for everybody of a market economy -- by
forcing investment, innovation.

``For example in the food processing sector -- in beer and soft drinks. In
other sectors -- basically the heavy industry sectors it's still not
happening. That's the optimistic view, which I think is justified.

``On the other hand I think it's also true that there's an awful lot left to
do in terms of economic reform. In particular it comes back to this issue of
competition -- creating conditions of competition throughout the economy is
really very important.

``And a key ingredient of that is to strengthen the environment for
enterprises. Much enterprise transformation has happened, but even more
remains to be done. There has not been enough of a hard budget constraint,
not enough of an environment where enterprises that aren't successful
disappear. Not enough of an environment in which new enterprises can quickly
be established and flourish.

``I think that leads me to one general observation which is that one thing
that's changed my perception is an appreciation for the fact that this
transformation process is not a quick fix. It's a difficult, long-term
process. In a short span of time the changes have been impressive; but the
scale of transformation demanded is unprecedented in history -- moving from a
centrally planned economy when many enterprises were established without any
regard to economic costs. . .to a market driven economy. . .I think that
looking ahead it's going to be a process with setbacks as well as progress,
but it's inevitably going to happen.

On whether the West misguidedly imposed its own values on how the
transformation should go:

``It is evidently true that any country's economic process has to be rooted
in its own values and systems. And that those values and systems in Russia
itself are in transition. There has been a tendency at times in the West to
see things in simple terms -- sometimes in terms of standards that Western
countries don't apply to themselves. That really comes back to what I said
earlier -- it's going to be a messy process with setbacks as well as
progress.''

On disappointments in Russia:

``One would have hoped that reform would have gone quicker, but it's
difficult for me to say whether in fact that slight sense of disappointment
is because it ought to have gone faster or that expectations were not
realistic.

``The great dilemma is that when you look at how far things have come, how
complex and difficult the problems are, one is impressed. But when one looks
at what remains to be done, one wishes it would go faster. But it involves
great shifts and balancing interests.''

On breaking up Russia's monopolies:

``When talking about competition, you have to think carefully about the kinds
of benefits you're expected to get. If you look at both electricity and gas,
you have an additional complicating factor -- that at least a part of what
they do is a natural monopoly. Nevertheless, there is scope for strengthening
competition in both electricity and gas and that's been very much recognized
by the government.

``The basic idea which is being discussed is to restructure (national power
monopoly RAO Unified Energy Systems) into transmission and generation and
distribution groups, which could then gradually be separated off. My view is
that's very much the way to go, but that it needs to be done progressively,
and that it would be a mistake to rush into divestiture.

``In the electricity sector probably the main benefits from competition would
be through competitive generation, which would lead to generation from least
cost sources. This would yield major savings. You could probably get quite a
lot of that through a system of internal competition at UES which I think
ought to be developed before you start splitting things off.

``In the gas industry -- There is real potential for developing competition
on production. Clearly gas transmission would always need to be regulated.
That would mean splitting off some production activity.''

On reasons for concern about divestiture:

``Of course to some extent there is a question for all shareholders of
getting as good a value as possible from sales. But there's another concern,
that the sales not take place in a way that would impede competition. The
government has an interest and a responsibility -- there's a sensible
sequence. You need to strengthen policies and second you need to strengthen
regulations. Without strong regulation you will have problems.

``Then you need to go forward with some internal reorganization, including
getting proper information. And then you've created the basis for possible
divestiture, which should be a commercial decision.''

On President Vladimir Putin and his economic policies:

``It's dangerous to rush to a snap assessment. We're looking at a process
that will take a long time. Only later will it be clear where things stand
and what has really been done. But I what I would say there's one thing I
believe is very positive -- a year ago was the end of a long period of time
throughout the transition when transition was taking place and policy reform
was taking place without any clear blueprint as to what its full intentions
were.

``That has changed of course completely through the elaboration and adoption
of the government's economic program. And the very existence of a clear
economic program is actually of very major importance to reform. There are
two other ingredients which are of course important.

``Basically its direction strikes us as very much of a good direction for
Russia and a direction that will help create the basis for sustained growth
in Russia. The second element of course is implementation -- for that I think
it's too early to judge. They've adopted a program and a very good program:
forceful implementation -- that's the real challenge.

``The stability of government compared with the earlier period is very
helpful for any effort to reform. I also agree the initial steps for the
enactment of legislation were also a very positive sign. The idea of the
realization of the relationship between the federal government and the
regions also is very important.

``But I think there's another dimension to all of this -- the economic
situation in the past year has of course improved enormously. Where I would
be a little cautious is that that itself creates important policy challenges
for the government.

``Managing greater prosperity creates its own issues. In particular it's
really important that, if the oil price is sustained at present levels, they
look at ways to control the real appreciation of the ruble -- because that's
clearly a very important element in the environment for Russian enterprises
-- while also controlling the risk of a significant emergence of inflation.
This is a real dilemma for the government. In my own view it does suggest
there should be some tightening of the fiscal position to deal with this
problem. To create a basis for handling difficult times if the oil price
comes down.''

On Poland:

``My general impression is that Poland is a country that's done
extraordinarily well with reform. The main issue on the agenda is (European
Union) accession. We'll be dealing with a number of key structural
problems.''

*******

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