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1. Reuters: Russia's Putin turns on U.S. over war in Iraq.
6. Reuters: Gorbachev says US attack big mistake, unjustified.
7. Interfax: Alexy II denounces beginning of war in Iraq.
8. Vremya Novostei: ARBATOV: UNITED STATES WILL ASK RUSSIA, EUROPE, AND THE UN FOR HELP. How war in Iraq will affect relations between Russia and the United States.
9. Nezavisimaya Gazeta: Anatoly Kostiukov, A HANGOVER AT SOMEONE ELSE'S BANQUET. Debate on post-war developments.
10. Financial Times (UK): Stephen Fidler, Soft stance on Russia keeps options open for the US.
11. Moscow Tribune: Stanislav Menshikov, ILLEGAL AND DANGEROUS WAR. An end to UN and international law?
12. Luba Schwartzman: TV1 Review.
13. RFE/RL: Michael Lelyveld, Experts Say Moscow Is Powerless To Influence Oil Prices.
14. Profil: Dmitry Orlov, RUSSIAN ECONOMY AND IRAQI WAR. The consequences of the Iraqi war for Russian economy are contradictory but not hopeless.
15. The Electronic Telegraph (UK): Simon English, IMF admits its policies seldom work.
16. Izvestia: Elena Korop, THE WEAK LINK. Economic Development Ministry's plan for 2004-06 is flawed.
17. Argumenty i Fakty: Tatiana Netreba and Lyudmila Pivovarova, WHOSE MONEY POLITICAL PARTIES USE. An update on the financial standing of political parties.
18. gazeta.ru: Prosecutors assume control of Chechen referendum.
19. Moscow News: Sanobar Shermatova, New Battle for Grozny Looming. Who's who in Chechen politics in the run-up to the republic's presidential
20. Russia Business List: RBC, Russian capital seeks new offshore havens.
21. The Guardian (UK): Nick Paton Walsh, Developers menace Pasternak village.
22. Reuters: War on Iraq may fuel Russian inflation-Deputy Econmin.


Russia's Putin turns on U.S. over war in Iraq
By Ron Popeski

MOSCOW, March 20 (Reuters) - Russian President Vladimir Putin, in some of
the harshest words by a world leader so far over the U.S. attack on Iraq on
Thursday, said the war was unjustified and must end quickly.

Russia had joined France, Germany and China in demanding that United
Nations arms inspectors continue their search for banned weapons in Iraq
before the countries would back any hostilities.

"This military action is unjustified...there has been no answer to the main
question which is: are there weapons of mass destruction in Iraq and, if
so, which ones," a grim-faced Putin told Russia's top ministers in the

"Military action...is a big political error,"he said in
nationally-televised remarks, adding it flouted world opinion and
international law.

Iraq has denied having weapons of mass destruction.

The tone of Putin's speech was closer to the more critical rhetoric that
marked the Kremlin's view of U.S. policy before the September 11, 2001
attacks on the United States which prompted the two to join hands in the
global war on terror.

Putin's comments were notable for their absence of diplomatic niceties
towards U.S. President George W. Bush whom he has routinely described as a
friend, or any words of sympathy for the Washington case against Iraq.

The Russian leader, desperately looking for a way to boost the sagging
Russian economy, has been dragging his country into the arms of the West,
and the United States in particular.

But the crisis over Iraq, with which Russia has long had close economic
ties, appears to have tested the new-found warmth between Moscow and its
former Cold War foe.

"Iraq has presented no danger, neither for neighbouring countries nor for
any region in the world," Putin declared, in a flat contradiction of
Washington's view.

In fact, he said, there had been signs that Iraq had begun to cooperate far
more with the U.N. arms inspectors.

He underscored Moscow's concern that by going ahead with the war without
U.N. backing, the United States was undermining the world body and, in the
process, one of the few international institutions in which Russia still
has a powerful voice.

"Of no less concern is the threat of a collapse of the international
security system," he said.

If the world submitted to the right of might no country would be safe,
Putin said. "It is for these reasons that Russia insists on an end as
quickly as possible to military action."

One of his senior economic officials said that the U.S.-led war could fuel
inflation and give an unwanted lift to the rouble, which would hurt
Russia's attempts to export more.

Deputy Economy Minister Arkady Dvorkovich told reporters that continued
high oil prices this year could push inflation one percentage point above
the government's 10-12 percent target.



MOSCOW, March 20, 2003. /from a RIA Novosti correspondent/. - Russian
President Vladimir Putin called the war on Iraq "a political blunder"
adding that Russia "was seeking to stop military action as soon as
possible." On Thursday speaking at a Kremlin meeting the Russian Head of
State said that "Russia intends to follow the line of diplomacy on the
Iraqi issue and sought to resolve the problem within the UN Security
Council." "War can be justified neither by allegedly accusing Iraq of
harboring international terrorism /we do not have and have never had such
information/ nor by attempting to change the Iraqi regime, which violates
international law and can be decided upon only by the residents of that or
another state," Putin said.

"Finally, military strikes on Iraq cannot be regarded as a means of
answering the major question of the international community, that is
whether or not Iraq possesses weapons of mass destruction. And if it does,
than what and when must be done to disarm Iraq," the President said.

According to him, Iraq "posed no threat." There have already been reports
of casualties and destruction, the Russian President said.

Among those attending the meeting were Head of the Kremlin Administration
Alexander Voloshin, Prime Minister Mikhail Kasyanov, Minister of Defence
Sergei Ivanov, Minister of Foreign Affairs Igor Ivanov, Head of the Federal
Security Service Nikolai Patrushev, Foreign Intelligence Agency Director
Sergei Lebedev, Chief of the General Staff Anatoly Kvashnin, Head of the
Federal Frontier Service Vladimir Pronichev, Head of the General Staff's
Main Intelligence Agency Valentin Korabelnikov.

The meeting focused on the situation in Iraq in view of the US
intervention, the President said. One of the issues addressed at the
meeting was the ensuring of security in Russia as well as assessing the
possible impact of the Iraqi war on the Russian economy.



MOSCOW, March 20, 2003. /from RIA Novosti correspondent Natalya Gorbunova/.
- The war on Iraq might threaten the whole region with a wide-scale
humanitarian and environmental disaster, Russian President Vladimir Putin

On Thursday, speaking at a Kremlin meeting, the Russian President noted
that the "international security system might collapse as well, and it
causes concerns." "If we let international law be replaced by clublaw, when
the strongest is always right, almighty and has an unlimited choice of
means to achieve his goals, one of the cornerstones of international law,
sovereignty, will be put in question then," the President said.

According to him, if this happens, "no one, no country will feel safe and
the present-day hotbed of instability will spread and cause negative
consequences in other regions of the world." That is why Russia seeks to
stop the military action as soon as possible, the President emphasized.

"We are still convinced that the main role in settling international
crises, including the one around Iraq, must belong to the UN Security
Council," the President said.



MOSCOW, March 20, 2003. /From RIA Novosti corr./--The harm done to
Russia-US relations in connection with their contradictions about Iraq will
soon pass, believes US Ambassador in Moscow Alexander Vershbow.

Appearing on Russia's Pervy Kanal TV channel on Thursday, he said
Washington "regretted" the fact that Russia and the USA failed to reach a
consensus on the Iraqi problem. He insisted nevertheless that the US took
military action "in strict accordance with resolutions of the United
Nations Security Council" and that there was "no doubt about the
legitimacy" of Washington's steps.

Vershbow admitted that Russia-US relations had lately been "somewhat tense"
because of their contradictions about Iraq, but insisted that if the Iraqi
issue had been out to the vote in the Security Council and Russia had voted
against military force, it would have been "even worse" for Russia-US
relations from Washington's point of view.

According to his words, the statements made by the two countries'
presidents raised his hopes: both leaders said they wanted bilateral
relations to stay the same. In his opinion, this fact shows that Moscow and
Washington have common interests in the 21st century and that despite
certain differences, they have "just a few issues between them where their
interests clash." "So we're going to work more intensively to build such a
level of relations that we wanted to build in the past few years," he



MOSCOW, March 20, 2003. /from a RIA Novosti correspondent/. The United
States does not rule out a possibility of using military force also against
other "rogue states" possessing weapons of mass destruction.

Thursday morning speaking live on the Russian ORT TV channel US Ambassador
to Moscow Alexander Vershbow said when answering the question whether the
United States begin a military operation against North Korea following the
Iraqi war that the United States does not rule out any actions.

At the same time, the US top diplomat stressed that military action was a
means of last resort. The United States is not trying to create a pattern
of dealing with threatening regimes, he pointed out.

Speaking of North Korea, the Ambassador expressed hope that the United
States, together with Russia and other countries would enhance
international cooperation and resolve the Korean crisis through diplomacy
without the use of force.


Gorbachev says US attack big mistake, unjustified

OTSU, Japan, March 20 (Reuters) - Former Soviet leader Mikhail Gorbachev,
who gave tacit approval for the 1991 Gulf War, said on Thursday the U.S.
attack on Iraq was a major mistake that would do huge damage to
international relations and security.

Gorbachev, who was president of the Soviet Union when the first Gulf War
broke out in January 1991, told reporters at an international water
conference in Japan that it seemed the United States was trying to make the
world its own province.

"I believe not only that this war is unjustified, it is a major political
mistake," Gorbachev said.

"It will do tremendous damage to international relations and to world
security," he said.

"It is an attempt to teach a lesson to all other states and shows that the
U.S. administration is trying to make the world its own province."

Gorbachev tried to act as a middleman to prevent the Gulf War in 1991 but
the Soviet Union did not use its right of veto within the United Nations
Security Council to oppose the war.

This time Russia strongly opposed U.S. plans to attack Iraq.

Its opposition, along with that of France, contributed to the decision
earlier this week by the United States, Britain and Spain to drop the idea
of a second U.N. resolution authorising the use of force to disarm Iraq.

Gorbachev, in Japan to attend the World Water Forum in the city of Otsu,
some 365 km (227 miles) west of Tokyo, said the reasons given for the war
were an illusion.

"It certainly has nothing to do with real leadership in international
affairs to which the United States is making a claim," he said.

"Now that war has broken out I think we are facing a totally new situation
where our worst fears are being realised. We need to act with a cool head,
we need cool analysis.

"Let us act to minimise the loss of life and the destructive consequences
to international relations," he said.

Gorbachev, who resigned as president of the Soviet Union on December 25,
1991, currently heads Green Cross, a non-governmental organisation. He is
taking part in a series of discussions on "Water and Peace."


Alexy II denounces beginning of war in Iraq

MOSCOW. March 20 (Interfax) - Alexy II, the Patriarch of Moscow and all
Russia, has denounced the U.S. led campaign against Iraq and urged Iraq's
neighbors to accept refugees.
   "Give them shelter and keep them warm with the kindness of your hearts,"
Patriarch Alexy II said in a statement issued in connection with the start
of the war in Iraq. Interfax obtained the statement on Thursday.
   "The Russian Orthodox Church again calls on the governments of the
anti-Iraqi coalition to stop the bloodshed. Do your best to prevent the
spread of military operations. Resume negotiations for peace. Spare
thousands of innocent people," the statement runs.
   "I call on everyone who can help to do their best to put an end to the
war as soon as possible. I pray the Lord will bring peace to the Middle
East. May the Lord give us the wisdom to settle the Iraq crisis."


Vremya Novostei
March 20, 2003
How war in Iraq will affect relations between Russia and the United States
Author: Katerina Labetskaya
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

Alexei Arbatov: It's too late to change anything now. We should
have understood last autumn that Saddam Hussein's regime would not
survive, and started looking for other solutions to the problem of
weapons of mass destruction and replacing regime. Without a war. We
should have suggested an alternative: say, inspections with
international contingents protecting and accompanying the inspectors.
Question: What shall Russia do if the war began?
Alexei Arbatov: Wait. If the Americans do a quick job (and that
is almost a certainty), some serious problems will arise in and around
Iraq. Most probably, the Americans will ask Russia, Europe, and the UN
for help. If, on the other hand, the Americans take over without
undermining moderate Islamic regions or inciting a war of terrorism
worldwide, if they prevent a clash in Iraq itself among the Kurds,
Iraqis, and Turks, we will have to admit: "Yes, you did it. Let us
proceed with our cooperation now..." And go on with the Strategic
Offensive Reductions Treaty, with trade, etc. Provided the Americans
agree. After all, they expected better from Russia, given that we
depend on them and are vulnerable. Even our budget cuts down some
items without American financial assistance (dismantlement of weapons
of mass destruction and nuclear submarines).
Question: But the Duma postponed ratification of the Strategic
Offensive Reductions Treaty because of Iraq.
Alexei Arbatov: I do not consider the document a treaty. This is
a gentleman's agreement lacking what is expected of a treaty -
definition of the subject, rules of calculation, oversight mechanisms
and inspections, procedures of dismantling, or a schedule. The
document states that each signatory should possess 1,700 to 2,000
warheads; but not a word is said on how they should be counted. So it
would be possible not to cut anything until the deadline, December 31,
Question: Do you mean that the postponement doesn't have anything
to do with the Iraqi crisis?
Alexei Arbatov: The connection is purely symbolic. This document
is not so valuable because of the effect it has on the strategic
situation. It is valuable as a symbol of warm Russian-American
relations. Russia wanted a new treaty with the United States; the
United States did not want anything. After September 11, 2001, Russia
supported the United States in Afghanistan and in other matters, and
Washington made this concession and signed the treaty. In fact, the
Americans were reluctant to call it a treaty or forward it for
ratification. Russia persuaded them, appealing to feelings of
friendship and counter-terrorism solidarity. The Americans signed it
with certain reservations and the document became a symbol of our new
relationship. Some forces in the Duma decided to take advantage of
that, placing ratification on the March 21 agenda in order to
subsequently remove it from the agenda in an emphatic manner. However,
other factions, including our Yabloko faction, prevented the issue
from being included on the agenda in the first place.
Question: Do you think the ratification will be a lengthy
Alexei Arbatov: It took the Duma seven years to ratify START II.
History may repeat itself. There is, however, an interesting detail:
the Strategic Offensive Reductions Treaty doesn't impose any
limitations on us. Financial difficulties will suffice to reduce our
strategic nuclear arsenals to a level below the specified one.
American strategic arsenals may remain at their present level of about
6,000 warheads - they do not have any financial problems, after all.
The joke is that it is a treaty on reduction of American nuclear
arsenals, and we deliberately postpone it because of Iraq -
essentially enabling the Americans not to cut their nuclear arsenals.
The United States has ratified the treaty, but it will not come into
effect. A decade from now, the United States will have five nuclear
warheads for each one that Russia has, without spending a single cent.
Question: Do you mean that we need the ratification?
Alexei Arbatov: Speaking as a specialist in strategic arms
limitations, this document - which cannot be called a treaty - is an
insult to my intelligence. As a politician, however, I think it is
necessary to ratify it when the time is ripe. We may disagree with the
United States on Iraq, but that is not something worth spoiling
bilateral relations over. Iraq is just a narrow sector of our
relationship. It would be even more stupid to tear up a treaty that
imposes certain obligations on the Americans, but not on us. It would
have been logical perhaps to postpone ratification had we expected to
build up our nuclear arsenals to 6,000 warheads a decade from now. But
we do not expect to do so, right?
Question: What lessons might other countries, such as North
Korea, learn from the Iraq situation?
Alexei Arbatov: Everyone's attention is glued to Iraq now, and
the chances of influencing North Korea have diminished to some extent.
As for Pyongyang, it now has a reason to produce its own weapons of
mass destruction and ballistic missiles - in order not to become the
next target. Pyongyang already has missiles, and may come up with
long-range ones. It may even have nuclear weapons. There are rumors
that it may have a warhead or two. All this puts the whole problem in
an entirely different light. Pyongyang knows that should it obtain
these weapons, Washington will start talking to it in a different
tone. I still remember the Americans' mumbled response to the
statement of North Korean leaders to the effect that they possessed
nuclear weapons. The Americans said that they preferred a political
solution to the problem and that military force was the last resort
Question: The Iraqi crisis is leading observers to speak about a
collapse of the international security framework.
Alexei Arbatov: That's an exaggeration. This is not the first war
to be started despite the UN Security Council. The problem is serious
indeed, but the Iraqi crisis plainly shows the importance of the UN.
The United States threatened to topple Saddam Hussein's regime by
force in September. Remember what battles were fought in the UN
Security Council? Seeing the futility of their efforts, the Americans
have opted to use their military might only now. All the same, their
efforts indicate that the UN Security Council wields considerable
influence. The American unilateral action will not benefit the UN or
its Security Council, of course, but I do not doubt that in the near
future Washington will once again raise the issue of UN involvement.
We should be pragmatic. We may even find ourselves forced to
participate in the war - whether we agree with it or not - because of
our political or economic interests.


Nezavisimaya Gazeta
March 20, 2003
Debate on post-war developments
Author: Anatoly Kostiukov
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

A day before zero hour for President Bush's ultimatum, a
representative meeting of political experts in Moscow's Alexander
House was considering what to do after the war. That is, what Russia
should do after the American flag is raised over Baghdad. Predictions
about post-war existence differed depending on the forecasters' vision
of the impending war on Iraq - fast and victorious for the US, or long
and not decisive. Although no one tried to dispute Gleb Pavlovsky's
thesis that the worst-case scenario for the US was not the best for
Russia, predictions based on the expectation of an easy American
victory were not numerous and not too attractive from the point of
view of advantages Russia might extract from that victory. Thus,
Politics Foundation president Vyacheslav Nikonov believes that Russian
diplomacy has "exhausted all its resources to protect a regime that
will soon not exist," so it is unlikely to be allowed to share the
fruit of others' victory.
A somewhat more optimistic vision of the post-war future comes
from Strategic Studies and Analysis Institute president Alexander
Konovalov and Political Studies Institute chief Sergey Markov.
Konovalov proceeds from the fact that Iraq is a country which is very
complex from the ethnic, religious, and other points of view; it will
be very difficult for the United States to stabilize such a country,
so the victors may need Russia's help here. Russia has quite a solid
trust resource in the eyes of the Iraqis. Markov believes that Russia
has a chance to show its potential in creating new and strengthening
old institutions of international security.
Russia's plans of action in case of a drawn-out war were
distinguished through their great variety and greater attractiveness.
Foreign and Defense Polity Council president Sergey Karaganov
recommends the Russian power getting ready for "peacemaking" in Iraq.
He is convinced that Americans will not be able to take hold of that
country, and less so to keep control of the situation in the entire
Middle East, so the fire they will ignite will have to be extinguished
by forces of an international peacemaking coalition, in which Russia
might play a leading role. In the process of peacemaking, this country
is capable of protecting its economic interests in that region as
well, Karaganov believes.
This point of view turned out to be very popular: "America should
be allowed to break its own neck," and, while it indulges in this
self-mutilation, Russia should solve its own problems that are more
urgent for it. For example, restore "greater Russia," create "a new
Entente" (Russia-France-Germany), and so on.
Vladimir Zhirinovsky said: "We should behave worse than the
Americans." He used the word "worse" to mean "more insolent." This
meant large-scale supplies of arms to the Middle East, the
establishment of pro-Russian regimes in the South Caucasus and Central
Asia, economic strangulation of the Baltic states, and restoring the
status of a superpower to Russia. "Sure enough, we are sorry for
Iraq," admitted Zhirinovsky, "but the war on Iraq is Russia's hour of
triumph." However, at the end of his speech he reassured those
present: there is no one among Russia's leaders who would be capable
of using this historic opportunity.
(Translated by P. Pikhnovsky)


Financial Times (UK)
March 20, 2003
Soft stance on Russia keeps options open for the US
By Stephen Fidler

Washington rounded on Paris with ferocity after the failure of efforts to
secure a United Nations resolution to back the use of force in Iraq. Yet
Russian condemnation of US-led military action has been almost as strong,
and continued yesterday at the UN. So why has Washington gone easy on Moscow?

At one level the answer is simple. "It was the French who stuck their necks
out. They clearly went out of their way to lead the opposition. The
Russians had no such role," says a senior US official.

Unlike the French, Russian officials did not travel the world drumming up
opposition to the US. And the US remains convinced that without the cover
provided by Paris, Moscow would not have vetoed the resolution.

Russia has opposed military action in part because it was unpopular among
Russians. But it also felt its interests would be complicated by an
invasion, not least because it feared the repercussions among Russian
Muslims, particularly in Chechnya.

Something deeper was going on too, says Wayne Merry, a former US diplomat
in Moscow: a preoccupation with the implications of a more aggressive
American foreign policy.

"There was a misperception. People in Washington thought the issue was Iraq
but for most governments, including Russia, the issue was the US," he said.

Those concerns could have been overcome. That they were not was because of
weak US diplomacy and the sense in Moscow that Mr Putin has not got more
out of his much criticised tilt towards Washington than the dubious
pleasure of a trip to the Bush ranch in Texas.

Dimitri Simes, president of the Nixon Center, a rightwing think-tank, says
Moscow hoped that the US would treat it in a similar way to the UK, by
giving it, for example, a role in drafting a second resolution on Iraq.

Beyond that, he says, France courted Russia far more assiduously than did
the US. There were daily telephone calls between the two foreign ministers
and regular conversations between presidents Chirac and Putin.

The Russians have also felt Mr Bush's warm rhetoric towards Mr Putin during
the past two years has not yielded much tangible benefit. The two leaders
get on well - but the relationship has developed no depth. The
Jackson-Vanik amendment threatening Russia with US sanctions for not
allowing free emigration, though regularly waived, has not been repealed as

Among other things, Moscow has also felt ill-served in trade disputes about
poultry and steel.

Mr Simes says the Russians offered to fly Mr Putin to Washington, where he
might have disagreed with aspects of US policy but have firmly placed the
onus on Saddam Hussein to resolve the crisis.

That did not happen - but neither did any senior US official visit Moscow.
Instead, Igor Ivanov, foreign minister, stood on a podium in Paris with his
French and German opposite numbers - a chance to demonstrate how Russia's
place in the world really has changed - and agreed with their anti-war stance.

Yet Mr Merry, now with the American Foreign Policy Council, draws a strong
and favourable contrast between Mr Putin's handling of this dispute and the
way Boris Yeltsin dealt with the Kosovo crisis in 1999.

The Yeltsin approach - which culminated in an infamous race between Russian
and Nato troops to the airfield at Pristina - still hankered after
superpower status, but Mr Putin's, he argues, is more realistic.

In Saturday's Washington Post, Mr Ivanov argued that US policy on Iraq was
a mistake. But he also said this: "We have irreversibly abandoned the cold
war formula: the worse things are for the US, the better for us."

Repairing some of the crockery broken in the fight at the UN makes a lot of
sense for Washington too, says Mr Simes. Even the world's only superpower
will find it tough to manage its foreign policy interests against the
permanent and combined antagonism of Russia, China, France and Germany.


Moscow Tribune
March 21, 2003
An end to UN and international law?
By Stanislav Menshikov

There is little doubt that George W. Bush's decision to start war against
Iraq is illegal under existing international law. The latter permits war in
two cases only: (1) as a means of self-defence against outright aggression,
and (2) by decision of the UN Security Council when an imminent threat of
aggression is acknowledged by that body and all diplomatic means of
preventing war have been exhausted. International law, as it stands today,
does not permit unilateral pre-emptive wars under whatever pretext.

The US president has referred to reasons why he feels Iraq is a threat to US
security. First, Saddam Hussein is in possession of weapons of mass
destruction (WMD), which he is prohibited to have by UN decisions and which
he is hiding from the world community. Second, he is helping international
terrorists, including al-Quaeda, to operate, including from his own

None of these allegations have been corroborated, so far. The
Iraqiterrorist connection has been discounted even by the Bush obedient
CIA. The WMD issue has been under careful scrutiny by qualified UN
inspectors. They have definitely refuted the alleged possession by Iraq of
nuclear weapons and were still working on biological and chemical weapons
when the Bush ultimatum put an end to their efforts. The US claims that it
will now occupy Iraq by military force and find the WMD that Saddam is
allegedly hiding.

It is not clear why the US army should be more effective than UN inspectors.
That is unless the WMD will be planted and there is no independent authority
to confirm that they were there in the first place. If, however, Iraq uses
them in self-defence then, of course, Bush would prove his point. But then
the high cost in terms of American lives would raise the issue of the
president's irresponsibility in going to war rather then taking the safer
way suggested by the UN majority. Would he take that risk? We doubt it. More
likely, his order to start war was made exactly because he was sure that no
WMD would be encountered.

But this is not just another case of a superpower bullying a small country.
It is also an act of disregard for the United Nations. It is clear that the
current US administration does not want to observe the democratic rules
under which the UN works and refuses to abide by the decisions of the world
majority. As one author put it, the American Gulliver feels uncomfortable in
a realm of Lilliputians.

Bush said on the Azores that the UN will have to be reformed. Others are
more explicit. They demand that the UN functions be reduced to humanitarian
operations. Voting rules in the UN Security Council should be foregone as an
"historical hangover" and "increasingly archaic" because they are being used
against the US.

A Washington-based author writes: "The White House is now convinced that the
current, post-World War II system of international relations is no longer
able to deal with new problems: The US is beginning to build a new
international system, which will revolve around the security of America and
her allies: To weigh the legitimacy of the American military operation in
Iraq on the scales of contemporary international law, including the UN
Charter is meaningless".

However, it is a well-known principle that laws continue to remain in force
until they have been changed. The same holds for international laws and the
UN Charter. If the US wishes to reform the UN, it should try to do so from
inside and according to its procedures. If it feels that the organisation is
no longer relevant for its purposes, it should leave the UN, as it left the
League of Nations after World War I. But as long as the US remains a member,
it should abide by its rules.

Vladimir Putin expressed the feelings of many Russians when he told George
W. Bush he was "making a mistake". There are two major reasons for that.
First, the US may still be in need of a universal world organisation that
sets by common agreement the rules of civilised behaviour of all nations. No
organisation that is built exclusively around America can serve the same
purpose. Without a global parliament built on democratic principles, the
world would disintegrate into a lawless conglomerate of nations guided
exclusively by brutal military force, as it used to be before World War II.

Second, as many in the world fear, the Iraqi war will set the precedent that
no country can be guaranteed from US interference if it disagrees with
Washington. The war in Iraq is widely seen as just one in a sequence of
pre-emptive strikes against "undesirable" nations. This will create general
insecurity and lead more countries to acquire real, not imaginary WMD for
self-defence. Once again, the world would become a very dangerous place to
live in, always on the brink of a most disastrous new World War. And no
country, including the US, will be safe in such a world.


TV1 Review
Compiled by Luba Schwartzman (luba_sch@hotmail.com)
Research Analyst, Center for Defense Information, Moscow office

Wednesday, March 19, 2003
- About 200 supporters of the Communist Party and the Liberal-
Democratic Party gathered in front of the US Embassy in Moscow
to protest the war against Iraq.
- The Moscow Directorate of the Ministry of Interior Affairs
announced that security will be heightened at the missions of
countries supporting the war against Iraq: US, Great Britain, Spain,
Kuwait and Turkey.
- The Russian Emergencies Ministry will help Iraqi refugees in
case of war.
- The Russian Consulate in Iraq will continue to function; 25
employees are in place.
- Deputies from the Communist Liberal-Democratic and Agrarian
factions left the State Duma building in protest of the decision not
to discuss the Iraqi problem.
- Russian President Vladimir Putin met with Chairman of the State
Customs Committee Mikhail Vanin to discuss progress on the new
customs code.
- The Ministry for Taxes and Collections of the Russian Federation
has discovered schemes used by companies registered in Baikanur
to conceal $15 billion in taxes.
- President Putin met with Prime Minister Mikhail Kasyanov to
discuss the need to increase the financial reserve and raise the
effectiveness of tax and customs collection.
- The Day of the Submariner is celebrated at the Pacific Military
Naval College.
- The season of spring flooding begins. Emergency Ministry
rescue services are now on 24-hour alert.
- President Putin met with Defense Ministry officials to discuss the
federal program for the transition to contractual service.
- Foreign Minister Igor Ivanov declared that, in case of war in Iraq,
Russia will do everything possible to renew political processes.
- Three days remain until the referendum on the Chechen
- Deputies of the former Parliament of the Chechen Republic of
Ichkeria, elected in 1997, asked President Putin to proclaim an
amnesty for all members of rebel formations.
- Deputy General Prosecutor for the Southern Federal District
Sergei Fridinskii declared that Shamil Basaev organized the
December bombing of the Chechen State House.
- Storm winds, exceeding 30 meters a second, are raging on the
Barents Sea.
- Pension Fund Chairman Mikhail Zubarov declared that additional
funds will be provided for medical care for poor pension
- Up to 50,000 people are expected to attend a concert by Paul
McCartney on Red Square.


Russia: Experts Say Moscow Is Powerless To Influence Oil Prices
By Michael Lelyveld

Despite a meeting with Saudi Arabia, Russia can do little to pump up oil
production or stabilize the world energy market during a war with Iraq,
experts say. The country has already reached its export limit, and Moscow now
seems more worried about what Saudi Arabia will do to prevent a sudden price
drop after the war ends.

Boston, 19 March 20003 (RFE/RL) -- A meeting between top Saudi Arabian and
Russian energy officials has shown how little Moscow can do to keep oil
prices in check during the Iraq crisis, analysts say.

Last week, Saudi Petroleum Minister Ali bin Ibrahim al-Naimi flew to Moscow
to meet with Russian Energy Minister Igor Yusufov, where they reached an
agreement on stabilizing oil prices, according to Russian and Saudi news

Al-Naimi's three-day visit may have given the market some assurance that the
world's two biggest oil producers are cooperating to prevent a price spike on
the eve of war with Iraq.

But experts say that only Saudi Arabia has the ability keep prices from
soaring out of control, while Russia appears stuck with the same limits on
pipelines and ports that have kept its industry in a straitjacket for months.

The situation may bring an abrupt end to Russia's claims over the past year
that it has the power to offset actions by the Organization for Petroleum
Exporting Countries and provide alternate supplies to the West. The Russian
government has promoted the country's oil-producing capacity in proposing
energy partnerships both with Europe and the United States.

But Robert Ebel, director of the energy and national security program at the
Center for Strategic and International Studies in Washington, said, "In terms
of Russia, they're producing flat out, and they have some infrastructure

Ebel pointed to the restrictions of Russian pipeline capacity and the
continuing feud between independent oil producers and the Russian state
pipeline monopoly Transneft as limiting factors.

In what could be a classic case of bad timing, Russia's second-largest oil
company Yukos said this week that it would cut production by 12 percent
because of pipeline problems, the Moscow-based investment bank Troika Dialog
reported. Transneft lowered its intake of Russian crude by 9 percent starting
on 7 March, according to the brokerage.

Speaking of the Russian oil companies, Ebel said, "They've been somewhat
successful in using river and rail to get around the pipeline problems, but
there's a limit to that."

Ebel also noted that Saudi Arabia has already been pumping more than 9
million barrels of oil per day for a sustained period to offset low output in
Venezuela and slim U.S. inventories. While the country can push to more than
10 million barrels per day, Ebel said there is concern about how long it can
do so.

In the worst case, the image of the world's two top oil producers having so
little power to raise output may be reason for worry.

Ebel said, "It doesn't give you that warm, fuzzy feeling, does it?" But in
the early part of the week, world oil prices appeared to be headed down, not
up, even as war with Iraq loomed.

One reason is a report that Saudi Arabia, unlike Russia, has been quietly
saving up oil for a rainy day. "The New York Times" reported this week that
the country has set aside 50 million barrels of oil that could cover the loss
of Iraqi exports for about a month.

Fareed Mohamedi, chief economist of PFC Energy, a Washington-based consulting
firm, said that Iraqi exports have already stopped, but the world market has
previously "priced in" the stoppage because Iraqi production has been
undependable for some time.

The extra Saudi oil is on top of the 600 million barrels in the U.S.
Strategic Petroleum Reserve, as well as other stockpiles in most
industrialized countries.

Mohamedi said of the new Saudi pool, "That's just sending a signal to the
market, don't worry about any potential stoppages." Mohamedi believes the
Saudi-Russian meeting was more likely about the risk of low oil prices rather
than high ones. Both countries are concerned that the market may already be
oversupplied and that prices could drop too far once the crisis subsides.

Mohamedi said, "I think the Russians may have worried that it is going down
too fast." Russian officials fear that prices could plunge quickly below
their target price of $25 per barrel, blowing a hole in the government's
budget. The consultations with Saudi Arabia are likely to have focused on
what to do after, rather than during, the war.

While gasoline prices in Western countries have climbed, crude-oil prices in
the early part of the week fell from the high $30 range to the low $30 range
on confidence that the U.S.-led coalition would end the uncertainty and win
the war. The approach of spring in the Northern Hemisphere also ushers in the
traditional drop in second-quarter oil consumption, easing price pressure.

Despite those factors, experts warn that prices could still go either way. In
recent weeks, warnings of an oversupply have been balanced by a "war premium"
of $5 to $6 per barrel, which could now be melting away.

Mohamedi said, "If the war goes really well, then the war premium
disappears." But it could also rise suddenly in case of damage to oil fields
outside Iraq.

Mohamedi said sabotage of the Iraqi fields would be a long-term concern, but
the loss of supply in the short term has already been factored in. Damage to
fields in Kuwait or Iran could add $10 to oil prices, he said. Destruction of
the Saudi fields would be the worst case, driving prices over $60 per barrel.
And Mohamedi said that if that happens, the eventual exhaustion of strategic
petroleum reserves would be the market's "doomsday scenario."


No. 11
March 2003
[translation from RIA Novosti for personal use only]
The consequences of the Iraqi war for Russian economy are
contradictory but not hopeless
Dmitry ORLOV, deputy director general of the Centre of
Political Technologies, chief editor of Politkom.ru

Russia chose its model of involvement in the Iraqi crisis
when it said that it would use its right of veto during the
voting on the Anglo-American-Spanish resolution. It appears
that Russian interests were not sufficiently taken into account
during negotiations. But now we will get nothing at all.
Moreover, we will have to pay for our choice based on
principle. How? US Ambassador Alexander Vershbow spoke about
the curtailment of bilateral cooperation in energy, security
and struggle against terrorism. The potential consequences of
the Iraqi war for Russian economy are much more contradictory.
We cannot expect to get contracts for the restoration of
the Iraqi oil infrastructure because USAID has long distributed
the roles of the main players on that market (in particular,
Halliburton, a company with which Vice-President Cheney is
closely associated). The new Iraqi government loyal to the USA
would hardly confirm contracts on the control of the production
of 25 billion barrels, which Saddam Hussein promised to Russian
companies. On the other hand, the lifting of embargo may
encourage the repayment of Iraq's 8-billion-dollar debt to
Russia, which was halted in the early 1990s.
On the other hand, it is not the Iraqi debts but global
oil prices that are important for Russia. Though the war has
begun, oil prices will not plummet. On the contrary, they are
expected to grow and experts differ only on the ceiling (40-65
dollars per barrel) and duration (six weeks to 12 months) of
the rise. These parameters depend on a variety of conditions,
such as the duration of the military operation, the level of
involvement of adjacent countries in it, and the amount and
effectiveness of the occupation regime. Other important factors
are the position of Saudi Arabia, OPEC and Russia, which may
increase their oil production to make up for the daily shortage
of 4 million barrels of oil, which were produced in Iraq and
After that, oil prices will stabilise. But at what level?
According to the unofficial information of the Russian Foreign
Ministry, the USA has guaranteed Russia that long-term oil
prices would equal 20 dollars (and not 18 dollars as pessimists
predicted). This is why Vice-Premier and Finance Minister
Alexei Kudrin has reasons to say about the readiness of the
Russian fiscal system for a period of instability on the oil
Russia, with its growing markets and investments and
rising national currency, stands out among the other countries.
The other day the IMF downgraded its global GDP forecast for
2003 from 3.7% to 3.3% and warned that the Iraqi war may have
serious economic consequences. The IMF expects not only a rise
in oil prices but also a fall in consumer and investment demand
and instability on financial markets.
This contrast between the Russian and global economies can
grow, as the Iraqi war may ruin Russian economy or give it a


The Electronic Telegraph (UK)
March 20, 2003
IMF admits its policies seldom work
By Simon English in New York 

The International Monetary Fund, the Washington-based bank set up to police
the financial globe and assist the Third World, yesterday made the
startling admission that the policies it has been pursuing for the last 60
years do not often work.

In a paper that will be seized on by IMF critics across the political
spectrum, leading officials reveal they can find little evidence of their
own success.

Countries that follow IMF suggestions often suffer a "collapse in growth
rates and significant financial crises", with open currency markets merely
serving to "amplify the effects of various shocks".

Kenneth Rogoff, the IMF chief economist who is one of the report's authors,
called the findings "sobering".

A recent study by the United Nations reported that the 47 poorest countries
in the world - the biggest recipients of loans from the IMF and the World
Bank - are poorer now than they were when the IMF was founded in 1944.

The IMF has been on the back foot since former World Bank chief economist
Joseph Stiglitz, a Nobel prize winner, started publicly attacking the
organisation two years ago. Detractors claim that last year's $30 billion
bail-out of Brazil was the final chance for its lending policy to succeed.

Loans in the last few years to Thailand, Indonesia, Korea, Russia and
Argentina are widely regarded as having little positive effect. Activists
in Bolivia last month blamed an IMF inspired tax increase for rioting that
led to at least 20 deaths.

At the start of the 1990s, market reformers proclaimed a "decade of hope"
as free trade grew and poor nations opened up to investment from abroad.

The report says that "financial integration" has often led to an "increased
vulnerability to crises" because foreign speculators pull out as soon as
trouble emerges.

A spokesman said the report should not been seen as an admission that the
IMF itself had failed, but admitted it was considering an overhaul of its

He said: "There hasn't been overwhelming evidence for the benefits of
globalisation. We are not the only perpetrators of this - we are not ground
zero for globalisation. This is an economic analysis; it is not institution


March 20, 2003
Economic Development Ministry's plan for 2004-06 is flawed
Author: Elena Korop
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

The prime minister is extremely dissatisfied with the performace
of the Cabinet's economic bloc. Last week, Mikhail Kasianov
reprimanded Deputy Prime Minister Alexei Kudrin - publicly, and in a
sharp manner unlike Kasianov's usual style - for obstructing taxation
reforms. Now it is the turn of Economic Development and Trade Minister
Herman Gref. The Cabinet staff has found flaws in plans for the
development of the economy in 2004-06, submitted by the Economic
Development Ministry. Cabinet staff sources say that unless this
document is revised within a day, Kasianov will strike it from the
agenda of today's Cabinet meeting.
Last Thursday, Kasianov refused to hear a report on taxation
reform plans, stopping Deputy Finance Minister Sergei Shatalov as he
rose to speak. And the battles over taxation between the prime
minister and the Finance Ministry did not end there. The Finance
Ministry, the Economic Development Ministry, and the Taxes and Duties
Ministry received a written directive from Kasianov yesterday,
instructing them to "ensure full compliance with the government
resolution of February 6". That resolution instructed the ministries
to present their evaluations of how tax cuts would affect the economy,
and proposals for stimulating investment, by February 15. However, the
Cabinet has still not received a response.
The Economic Development Ministry recently gave the prime
minister its evaluation of how reducing VAT and the common social tax
would affect the economic condition of enterprises. Kasianov sent a
copy of this document to the Finance Minister, "as a prompt", together
with his latest directive. He also attached a memorandum from the
Enterprise Council relating to VAT reforms: this proposes that all
companies should have special bank accounts for collecting VAT. Having
special bank accounts set aside for VAT would rule out the risk that
VAT payments would disappear along with companies that go out of
business, and would make the VAT refund process much simpler.
According to the Enterprise Council, it would be possible for the
state to collect between two and four times as much revenue from VAT
as it does now, making it a painless process to reduce VAT rates from
20% to 12%.
While the Finance Ministry familiarizes itself with the work that
has been done for it, the prime minister has set about re-educating
the senior officials of another leading economic ministry. An economic
development scenario for 2004-06 is scheduled to be discussed at
tomorrow's Cabinet meeting. However, Cabinet staff sources do not rule
out that the person who delivers this report - Deputy Economic
Development Minister Ivan Materov - "could meet the same fate as
Sergei Shatalov".
The Economic Development Ministry usually presents several
options for economic development. It used to have two basic scenarios:
optimistic (high oil prices) and pessimistic (low oil prices). But
this time, the ministry has taken domestic factors into account and
come up with nine alternative scenarios - each of which entail some
unpleasant outcomes for the economy.
The first scenario (moderate) is based on "external and domestic
conditions being relatively stable, but still somewhat less favorable
than at present". In short, it is based on oil prices being around
$18.50 a barrel. It does not indicate any outlook for GDP growth.
The second scenario is based on oil prices being around $22-23 a
barrel. Then the average GDP growth rate would be 5%, and revenues in
the natural resources sector would increase; but the influx of foreign
currency would lead to a stronger ruble, which would make Russian
producers less able to compete.
The crisis scenario involves oil prices falling to $13.50 a
barrel, leading to a deep, sustained decline in the economy. However,
falling real incomes and ruble devaluation would benefit domestic
producers and facilitate an upswing in industry similar to that
recorded after the financial crisis of 1998.
For the first two scenarios, Economic Development Ministry has
included subsections A and B. The A option assumes that prices for the
services of natural monopolies are not deregulated. In other words,
the ministry does not rule out the possibility that over the next two
years the government will be unable to complete reforms to the
electricity and natural gas sectors. The B option is called "radical",
and assumes that the government will carry out these parts of its mid-
term program and achieve economic growth of over 5% per annum.
However, the rising tariffs of the natural monopolies would lead to a
crisis in the metals sector, petrochemicals, and a number of other
sectors of industry.
The government is especially outraged by the proposed subsections
of the crisis scenario: these assume that due to some "events of a
political nature", the Cabinet will give up on trying to implement its
mid-term economic program (actually, this program was written by the
Economic Development Ministry). This would lead to a sharp drop in
investment, as well as capital flight, shrinking of the tax base, and
extra borrowing abroad. However, devaluation of the ruble would still
benefit domestic producers. Even under the second subsection of the
crisis scenario (with oil prices at $22-23 a barrel), GDP growth might
fall to 2.5-3.5%; but producers would be adversely affected by an
influx of foreign currency.
In its conclusions about the materials submitted by the Economic
Development Ministry, the Cabinet staff points out the need to provide
some justification for each scenario, the lack of a key forecast, and
the fact that it is completely unacceptable to assume the government
would refuse to implement the program it has adopted. Mikhail Kasianov
has instructed the Economic Development Ministry to work with the
Central Bank to produce detailed forecasts for changes in economic
indicators in 2004-06, by March 19; Kasianov's implication was that
the document cannot be discussed by the Cabinet in its present form.
Yesterday evening, Ivan Materov reported that the GDP growth forecast
for 2003 is being revised from 4.3% to 4.6%, since oil prices have
turned out to be higher than what was assumed in the Economic
Development Ministry's optimistic scenario.
(Translated by P. Pikhnovsky)


Argumenty i Fakty
No. 12
March 2003
An update on the financial standing of political parties
Author: Tatiana Netreba, Lyudmila Pivovarova
[from WPS Monitoring Agency, www.wps.ru/e_index.html]

Needless to say, United Russia will have the fattest wallet.
Virtually all financial groups in Moscow and in the regions are
contributing to its campaign coffers. In late 2002, party
functionaries advised the business sector in no uncertain terms to
find $500 million for the election campaign; and companies muttered
that the demands were too much. At present, United Russia's campaign
budget amounts to about $1.2 million already, according to unofficial
sources. There are rumors that even some state monopolies and
enterprises of the military-industrial complex are investing in United
Billboards and posters in Russian cities also testify to United
Russia's financial prosperity. The party is swelling its ranks by
admitting athletes and actors - another indication that everything is
going well. However, PR consultants say no election campaign can be
that expensive. It follows that most of the sums raised will be spent
Anatoly Chubais is universally viewed as the ideologue and major
sponsor of the Union of Right Forces. Hence the impression that the
party relies on money from Russian Joint Energy Systems for survival.
This is a delusion. Chubais cannot quietly spend shareholders' money
these days. Sources in the Union of Right Forces itself maintain that
the party gets financial assistance from almost all the oligarchs,
save for Oleg Deripaska and Roman Abramovich. According to our
sources, there must be at least six such oligarchs. Union of Right
Forces leader Boris Nemtsov says that no sponsor's contribution is
permitted to exceed 10%. Understandably enough, no one has a
controlling interest in sponsorship.
Yabloko was pressed for funds before its leader Grigori Yavlinsky
started visiting the Kremlin regularly. The Kremlin found a new
sponsor for the party. According to rumor, this is the YUKOS oil
company. Judging by how active Yabloko and its functionaries are these
days, their financial standing has greatly improved. Some Duma members
whisper, however, that money is donated to Yabloko by its German
friends from the Friedrich Nauman trust and the Ebert trust. If this
is so, it is unlawful.
When the Union of Right Forces and Yabloko were discussing an
electoral coalition, oligarchs played the part of mediators. Acting on
Nemtsov's request, his party investors Vladimir Potanin (Interros),
Mikhail Fridman (Alpha-Group), and Mikhail Khodorkovsky (YUKOS) tried
to persuade Yavlinsky to join the alliance with the Union of Right
Forces. They failed.
There are rumors that when Boris Berezovsky proclaimed his
readiness to sponsor the CPRF (according to our sources, he even
established a line of credit for the Communist Party), the Kremlin
administration persuaded Khodorkovsky and Potanin to "buy" the party
from him. YUKOS and Interros drafted a five-year program of
investment. What information is available at this point indicates that
up to $70 million is to be invested in the Communist Party. The first
installment of $10 million has allegedly been paid out already.
Both companies rely on their security structures in keeping an
eye on how the Communist Party spends the funds. YUKOS and Interros
will actively promote their own candidates onto the party list and
into its campaign team. There are even the rumors that a YUKOS
executive will become chairman of the Executive Committee of the
People's Patriotic Union soon.
Representatives of Liberal Russia claim that Berezovsky promised
them $100 million for the election, while all he actually financed
were the party congresses at which he himself was present via a
videolink. When Berezovsky's negotiations with the communists became
public knowledge, Liberal Russia turned its back on its former
benefactor. These days, it is forced to rely on contributions from
small and medium-sized businesses.
Needless to say, the LDPR is the most mysterious political party.
It is widely thought that it was first established by the Soviet KGB,
and now has criminal underworld sponsors. Vladimir Zhirinovsky
complained, however, that "this is the wrong time to accept money from
the underworld..." In any case, the LDPR is quite all right from the
financial point of view.
In short, the parliamentary elections will be an auction as much
as a contest of policy platforms. Some sell their lobbying capacities;
others buy them.


Marc 20, 2003
Prosecutors assume control of Chechen referendum
By Yelena Shishkounova

In less than three days the residents of Russia's war-torn southern
province of Chechnya will go to the polls to vote on a new republican
constitution. Chechnya's clergy, as well as members of Chechnya's
separatist parliament have already pledged to support the referendum.

Akhmad Kadyrov, the region's pro-Moscow leader said on Wednesday evening
that the republic is ready for the vote and all the necessary security
measures have been taken to prevent possible terror attacks. Polling
stations are being guarded around-the-clock while access to administrative
buildings has been restricted.

Kadyrov also called on the residents of the republic ''to discard personal
grievances and ambitions'' and to come to the polling stations on Sunday
and fulfill their civic duty. The Chechen official stressed that the
referendum on the draft Chechen constitution was the first step to peace
and the revival and prosperity of the republic. ''The fate of the republic
and its population and economic and spiritual development depend on the
right choice of the multi-ethnic people of Chechnya,'' Kadyrov said.

''We have all become convinced that Vladimir Vladimirovich Putin is set to
achieve peace and calm in our long-suffering land soon, and we have to
justify the president's trust,'' he stressed. At the same time, the head of
the republic did not rule out possible provocation and terrorist acts
during the referendum. ''In this connection, I have issued instructions for
the heads of district administrations, ministries and departments to be
vigilant and to do everything possible in order to conduct the referendum
with dignity,'' Kadyrov clarified. ''All the necessary measures are being
taken to make sure that everything passes off strictly within the framework
of the law, and we will not allow any violations or falsifications to take

Preventing possible attacks that might disrupt the vote has become the top
priority of both the local and the federal authorities. At a session
dedicated to ensuring security at polling stations chaired by the
presidential envoy to the Southern Federal District, Deputy Prosecutor
General Sergei Fridinsky reported that joint work groups comprised of
representatives of various power-wielding agencies have been set up in
Chechnya to observe the ''rule of law during voting''. According to
Fridinsky, those groups will work at all polling stations throughout the

Furthermore, Fridinsky reported that the staff of the Prosecutor General's
Office has begun working in Chechnya, their task being to render practical
assistance to the organization of the referendum and to deal with any
violations detected during preparations for the vote.

Participants of the session admitted that in spite of the tough security
measures they could not rule out terror attacks and attempts to disrupt the
referendum. The authorities, quite reasonably, assume that the rebels, too,
have become more active in the run-up to the voting. And after two polling
stations were destroyed in rebel attacks in Shali last Sunday those
apprehensions increased. All polling stations have been placed under
round-the-clock surveillance. In Grozny access to the government compound
has been restricted, all administrative buildings and hospitals are heavily
guarded, and all vehicles entering the city are thoroughly searched at

The federal centre is pinning great hopes on the referendum. In the past
weeks top Kremlin officials have visited the republic as a part of a
full-scale campaign aimed to encourage Chechen residents to take part in
determining the future of their native land. In the run up to Sunday's
decisive vote the head of the Central Election Commission, Alexander
Veshnaykov, the head of the presidential administration, Alexander
Voloshin, and his deputy Vladislav Surkov have all visited the republic.
All those officials promised the Chechens that should the results of the
referendum turn out to be positive, the republic would be offered broad
autonomy. On Sunday Vladimir Putin addressed the Chechen people on TV and
called on them to make the ''right choice''.

The Kremlin gave to understand that it is ready to recognize the special
political status of Chechnya and to make certain concessions. Putin stated
that the power sharing agreement between the republic and the federal
centre is necessary, although such practice, in line with the Kremlin's
reformist designs, should, in the long run, be abandoned.

Yet another incentive for the Chechen people is a possible amnesty for
members of illegal armed formations and rebels not involved in grave
crimes. At his meeting with the Chechen clergy earlier this week Putin
stated that after the referendum, should its results be positive, the
Kremlin is ready to consider an amnesty.

Admittedly, as Gazeta.Ru wrote yesterday, a source in the Kremlin
administration has in effect poured cold water on Putin's promises, saying
that ''the amnesty cannot be carried out on an ethnic or republican
level''. In other words, should the amnesty be declared, it ought to be
offered nationwide, and apply not only to Chechen rebels.

On Wednesday the presidential aide Sergei Yastrzhembsky was commissioned to
make up for that setback. At a joint conference held together with members
of Chechnya's separatist parliament he said (noting, however, that it was
his personal point of view), that ''announcing a broad amnesty could bring
a calming note and contribute to the stabilization of the Chechen republic''.

On the same day it transpired that representatives of the so-called
moderate Chechen opposition -- members of the parliament of Ichkeria,
elected under Aslan Maskhadov's government -- have sent a message to
President Vladimir Putin expressing their support for the constitutional
referendum in the republic.

The group of former Chechen members of parliament met with the Security
Council chief Vladimir Rushailo and Yastrzhembsky. The Chechen delegation
included Khasan Atiyev, Isa Kemirov, Baudi Tsomayev and Malik Saydullayev.

At a news conference after the meeting Rushailo told journalists: ''There
is a common opinion that the referendum gives the opportunity of finding a
political settlement in Chechnya, and the moderate opposition's members are
well aware of this. A lot of people wanted this meeting to take place,
including members of illegal armed groups.''

Meanwhile, Yastrzhembsky said, ''This address by well-known people in
Chechnya, who are members of the moderate opposition, will have a positive
impact on those who have not made their minds up.''

At the same time, Yastrzhembsky emphasized that Moscow's position regarding
possible negotiations with Chechnya's elected president Aslan Maskhadov
remains unchanged. ''It is absolutely clear that no changes [in the
government's stance on talks with Maskhadov] should be expected. This
position is firm,'' the presidential aide said.


Moscow News
March 19-25, 2003
New Battle for Grozny Looming
Who's who in Chechen politics in the run-up to the republic's presidential
By Sanobar Shermatova

The presidential race in Chechnya is well under way: Consider the almost
daily appearance of old and new faces on the political scene, hastening to
assert themselves. The number, and lineup, of players suggest that the
struggle is going to be fierce. Obviously, the weight of a particular
aspirant is predicated not so much on his human qualities as on the amount of
financial and administrative resources available to him. Who's who in this
largely behind-the-scenes contest among the nomenklatura? Who will end up in
control of administrative and financial levers in a republic that is going to
get substantial funds for a rebuilding program?

Zavgaev, Koshman, Et Al.

Doku Zavgaev is rightly seen as the progenitor of the Chechen nomenklatura.
He was the first Chechen to become head of the republic: Before Zavgaev, this
post had been held exclusively by ethnic Russians. The republic's Chechen
population in its time was fairly enthusiastic about his appointment. An
experienced administrator, Zavgaev set out to create his own executive team,
seeing this as his first priority. People who know Zavgaev say that he was
unrivaled in the art of nomenklatura intrigue. Thanks to these qualities, he
managed to do the impossible: After his flight from Chechnya in 1991, when he
stepped down in favor of Gen. Djokhar Dudaev, he returned to power in
1995,when federal troops began to consolidate their positions in Chechnya.
His political comeback looked rather mysterious, given that the Yeltsin
entourage had written Zavgaev off as a no-no after the head of the republic
supported the coup attempt staged by the Coomunist State Committee for the
State of Emergency, in 1991.

They say it was Viktor Chernomyrdin, RF head of government at the time, who
interceded on behalf of the disgraced Doku Zavgaev. Yet the Zavgaev team
proved unlucky a second time: It broke up in August 1996, when militants
entered Grozny. The third revival of the Chechen nomenklatura came in 1999,
when it was picked up by Nikolai Koshman.

Koshman, who was appointed head of the republic government, leaned on the
remnants of the Zavgaev team, in particular "inheriting" Badruddin and Musa
Djamalkhanov (the former becoming his deputy), Amin Osmaev, and Abdullah
Bugaev. At the same time he enjoyed a good personal rapport with the Chechen
business elite in Moscow - say, banker Abubakar Arsamakov (Moscow Industrial
Bank, Stailbank, Universalbank, and Promenergobank) and businessman Malik
Saidullaev (Milana concern, Russkoye Loto; rumor has it that Koshman's wife
is an employee at the Saidullaev foundation).

As a result, Koshman formed a full-fledged team. In addition to Zavgaev's old
nomenklatura, it is said to include Stanislav Ilyasov, RF minister for
Chechnya; Vladimir Zorin, the nationalities minister; Anatoly Popov, the
republic's prime minister; and Oleg Zhidkov, the mayor of Grozny. His recent
appointment as chairman of the State Committee for Construction gives Koshman
additional leverage in Chechen politics.

For all of its apparat success stories, the Koshman team has to put up with a
newcomer in the nomenklatura game: Akhmad Kadyrov.

How It's Done

Finding himself at the helm in 2000, Kadyrov soon realized who was who in
Chechnya's informal hierarchy. According to Chechen sources, he had a private
meeting with Doku Zavgaev, now the Russian ambassador to Tanzania, at his
Moscow apartment on Kutuzovsky Prospekt. Kadyrov purportedly asked Zavgaev
for support in the upcoming presidential election in Chechnya, promising in
exchange to secure for his brother, Akhmad (Ali) Zavgaev, the position as
Chechen representative in the Federation Council. It should be noted that
Doku Zavgaev was anxious to get his brothers out of the warring Chechnya.
Apparently a deal was cut: Akhmad Zavgaev was appointed to the Federation

Kadyrov is definitely supported by President Putin, but he is clearly not
accepted in the Moscow corridors of power as one of their own. Neither does
he enjoy a very good relationship with security services whose heads
periodically submit to the president compromising material on the head of the
Chechen administration.

Unlike the "pro" Koshman's, Kadyrov's personnel policy is rather erratic.
Soon after his appointment he placed his bet on the Benoi teyp (clan) to
which he belongs himself. But even within the teyp, contingent on the
situation, he is constantly reshuffling personnel. Thus he dismissed his
representative in Moscow, Shamil Beno: According to Kadyrov, Beno proved to
be no good on "economic" issues. Beno was replaced by a cooperative Adlan
Magomadov. Brothers Adlan and Lema Magomadov were closely associated with
both Malik Saidullaev and Nikolai Koshman. But people who ought to know say
that Adlan Magomadov's appointment as representative in Moscow came with
assistance from Nazir Khapsirokov, who was involved in the case of the
disgraced Prosecutor General Skuratov.

According to Chechen sources, Khapsirokov became friends with Lema Magomadov
when both were doing their conscription service in the Soviet Army. Forced to
quit a logistics position at the Prosecutor General's Office under a cloud,
Khapsirokov eventually landed a job as advisor in the Kremlin administration,
establishing contact with Akhmad Kadyrov. It was apparently with his
assistance that Lema Magomadov was appointed chief of the republic's Motor
Vehicle Inspection Administration.

With the existing lineup of forces Akhmad Kadyrov clearly does not have much
chance to consolidate his position in Chechnya. So the presidential race in
the republic will be extremely tough. A target of several assassination
attempts in Chechnya, in Moscow Karydov is coming under scathing attack: At a
recent "roundtable", banker Abubakar Arsamakov assailed Kadyrov associates as
"an anti-people clan that has usurped power." Arsamakov also said that
"untainted people" should come to power in Chechnya. They say that Khusein
Djabrailov, brother of businessman Umar Djabrailov, owner of the Rossia
hotel, decided to run for president.

There is also an exotic scenario abroad that sees Doku Zavgaev quitting his
diplomatic post and joining the presidential race. This would be an
unexpected finale: After 10 years of wars and coups, the wheel in Chechnya
will have come full circle.

Of course, rumors may not materialize, but there is little doubt that
Zavgaev's cadres, rallying around Nikolai Koshman, will strengthen their
position in the power structure. Whoever comes to power - Kadyrov or one of
his opponents among the Moscow Chechens - will have to reckon with Doku
Zavgaev's people who are holding key posts.


From: Ben Aris <benaris@online.ru>
Subject: [RusBizList] RBL542 -- Mar 20
Reply-To: RusBizList@yahoogroups.com

Russia Business List
Thursday, March 20, 2003

4. Russian capital seeks new offshore havens

A statement by Igor Kostikov, the chairman of the Federal Securities
Commission of the Russian Federation, that the Central Bank of Cyprus and
Russia"s Securities Commission were "exchanging information", unnerved
Russian businessmen. Indeed, if Russian authorities get access to
information about the real owners of Cyprus-based offshore companies, one of
the most popular offshore havens in Russia may lose its main advantage,
confidentiality, and Russian capital will have to look for another place of
residence. Businessmen also fear that the Securities Commission might hand
over the information received from the Cypriot authorities to the Russian
Anti-Monopoly Ministry. This would be fraught with serious problems for many
companies, from huge fines to criminal prosecution. However, experts say
that the latest attempt by Russian authorities to repatriate capital is
unlikely to have any significant effect.

Cyprus is the third largest exporter of capital to Russia and one of few
offshore countries to have an agreement on avoiding double taxation with
Russia. Also, the geographic location of the island is most convenient -
just three hours by plane from Moscow. However, Cyprus, which plans to join
the European Union, has to shed his "offshore" reputation and bring its
legislation into line with European laws. According to experts, Cyprus will
now lose its position as a popular offshore center. "Most probably, Cyprus
will lose most of its attractiveness. I think there will be no offshore
companies in Cyprus," Yuri Borisenko, a partner of the Vegas Lex law firm,
told RBC Daily.

Indeed, there is a possibility that the Federal Securities Commission will
hand over information about beneficial owners of Cyprus-based Russian
companies to the Anti-Monopoly Ministry. The authorities have already
prepared amendments to the Russian Criminal Code, strengthening punishment
for illegal use of investments, violating book-entry regulations, and
manipulating and preventing state control. With such a legal base and access
to information about the real owners of offshore companies, the
Anti-Monopoly Ministry can fine or send to prison dozens of businessmen. But
experts say such fears are unjustified. "As soon as it becomes clear that
Cyprus will release information, most legal entities will close their
offshore subsidiaries and will register their relatives and business
partners as owners," Mr. Borisenko said.

Most analysts do not believe that Russian authorities will achieve real
mechanisms for capital repatriation. "Even if Cyprus is closed, there will
remain other offshore centers," they say. "So, capital will move to the
jurisdictions that did not follow Cyprus" model and that do not have the
institute of beneficiaries at all," said Andrei Tereshchenko, the head of
the legal department of Tax Consulting UK's Moscow office. "There are
countries whose laws allow issuing bearer shares. In that case, information
about their owners is not registered anywhere. First of all, these are
Belize, Dominica and the Seychelles Islands," he added.

According to experts, "classic" offshore centers, especially in western
Europe and the United States, remain attractive for Russian entrepreneurs.
"In terms of trade operations, European companies remain very attractive,
particularly Hungary, which has an agreement on avoiding double taxation
with Russia. In addition, the corporate profit tax is currently at 3 percent
in Hungary. But Hungarian authorities have stopped registering new
companies, as the country prepares to join the European Union in 2006, and
it will have to bring its tax legislation into line with European laws.
However, those companies that were registered before January 1, 2003, may
continue working there until 2006. In terms of investment operations,
Denmark, Great Britain and Finland are most attractive," Mr. Tereshchenko
said. But even if European offshore zones suffer the same fate as Cyprus in
the future, Russian capital will still have enough "retreat" routes. "Such
established offshore centers as the Virgin Islands and the Cayman Islands
will remain. These zones enjoy a good reputation even in the United States,
where they are not regarded as just money-laundering areas. There also
remain "classic" offshore centers in the United States and Great Britain,
but there"s no talk of information protection there," Mr. Borisenko said.

As for Russian offshore areas, analysts say they have no future. "Russian
offshore centers are not popular among serious businessmen now. At least, I
have not seen a single company that would seriously consider the possibility
of moving its capital to Russian offshore zones. And this is quite
understandable, as tax regimes there are not very attractive, and it is
impossible to ensure the necessary confidentiality," Anastasia Verechkina of
the BKG company told RBC Daily. According to Mr. Borisenko, large Russian
companies used Russian offshore zones actively some time ago. "However,
after multiple lawsuits were filed over tax avoidance, for example, in
Kalmykia, and companies had to pay large sums to the state, I think the fate
of Russian offshore centers is set," Mr. Borisenko said.


The Guardian (UK)
March 20, 2003
Developers menace Pasternak village
Nick Paton Walsh in Moscow

One of Russian literature's most famous houses, where the writer Boris
Pasternak lived and composed his best work, including Dr Zhivago, will soon
be "ruined" by the construction of an estate of holiday homes opposite it,
according to his relatives. Pasternak's relatives, who have turned the
cottage in the village of Peredilinko, around three miles from Moscow, into
a museum are furious. Natalya Pasternak, the widow of one of the writer's
sons and director of the museum, said: "There is a very beautiful view from
the first floor of the cottage of the field, the Syetun river bank, and
then a small hill with a cemetery where Mr Pasternak is buried.

"When groups of children come to the museum, I always show them this view,
which inspired Mr Pasternak, and I always read them the famous line [from
his poetry]: 'I have made all the world cry from the beauty of my land'.

"But what can I show the children in a year or two? The big red brick
houses and roofs of the Russian nouveau riche houses? This would reduce
anyone to tears."

Stalin built a settlement of country cottages in Peredelkino where writers
like Pasternak, Kornye Chukovsky and Fyodor Pavlenko were given free homes
for life. Pasternak spent the second world war there, living off the
potatoes in his garden.

But today the highly-prized land belongs to a local state farm. Local
people say the farm's two previous directors resisted the developers and
both died in mysterious circumstances. The third decided to sell two years

Boris Pasternak, the writer's grandson, said: "This is a tragedy for those
who are interested in the world of Boris Pasternak ... Similar things are
happening everywhere in Russia - it is a sign of our times. The fields
around Lev Tolstoy's manor house are also being developed. But we, the
family, have decided not to fight - we expect that public opinion will step


War on Iraq may fuel Russian inflation-Deputy Econmin
By Darya Korsunskaya

MOSCOW, March 20 (Reuters) - The United States-led war on Iraq may fuel
Russia inflation or propel the rouble even higher against the world's
leading currencies, said Deputy Economy Minister Arkady Dvorkovich on

"Continued high oil prices throughout the year might lead either to
additional inflationary pressure and acceleration of inflation by one
percentage point (above a 10-12 percent forecast) or faster appreciation of
the rouble," he said.

He also said a swift conclusion to the war could lead to oil prices
tumbling to $20 per barrel by the end of the year.

"We expect a fast completion of the operation in Iraq and by the end of the
first half (of 2003) prices for crude may stay at a level of $28-30 per
barrel and by the end of the second half they will fall to about $20 a
barrel," he told reporters.

A surge in oil prices ahead of the United States-led military strike
against Iraq has fuelled Russia currency reserves, now at record levels,
and steadily strengthened the rouble.

But Russia's main Urals export blend of crude eased to $25.6 per barrel on
Thursday, down from a peak earlier in the month of $33.54 per barrel, after
the start of hostilities.

Russia's spending plans in the 2003 budget are based on the assumption that
crude oil prices will average $18.5 per barrel. It has based revenue
projections in the budget on a $21.5 average oil price this year.

The Finance Ministry has said it would not consider tapping international
debt markets so long as the oil price stayed above $20 a barrel.

The central bank last month shifted away from trying to contain the
rouble's rise and is now gearing monetary policy more towards keeping
inflation in check. Inflation last year fell to 15.1 percent, ahead of a 14
percent official target.

Earlier on Thursday the central bank announced gold and foreign currency
reserves rose to an all-time high of $54.7 billion as of March 14.

The rouble firmed in early trade on Thursday to a weighted average for
today settlement of 31.3840 against the dollar from 31.3976 in Wednesday's
trading session.

The central bank has said it wants to keep real appreciation of the rouble
to less than six percent in 2003 against a combined euro and dollar
currency basket.

Local manufacturers are concerned that the rouble's strength against the
dollar is undermining their competitiveness.