Johnson's Russia List
30 April 2003
A CDI Project

  1. Center for Defense Information: Bruce Blair, Hair-Trigger Missiles Risk 
Catastrophic Terrorism.
  2. Interfax: Gap widens between rich and poor in Russia.
  5. Reuters: Putin opposes U.S., Britain on Iraq sanctions.
  6. Kelley Beaucar Vlahos, Analysts Urge Mending of
  7. Kasyanov's days are numbered. (interview with Gleb Pavlovsky)
  8. Rossiyskaya Gazeta: Russian YeES Company Allegedly Abuses Mine Lease For 
Chubays Election Slush Fund.
  9. Moscow Times: Yulia Latynina, Gryzlov Gets Busy in the Far East.
  10. Testimony of AmCham President Andrew Somers to the US Senate
Committee on
Foreign Relations on U.S. Energy Security: Russia and the Caspian.
  11. Vremya MN: Duma Member Contests Westerners' Negative Assessment of
Banking System.
  12. RFE/RL meeting in Washington with Marshall Goldman on Putin and the 
Oligarchs -- What are the Implications for Russia.
  13. Robert Chandler: book presentation in London on Andrey Platonov.
  14. Financial Times (UK): Rafael Behr, Russia: Flagship project and
(re UES) 
  15. Russia To Borrow Billions of Dollars Abroad. Russian
is more benevolent now towards writing off the Iraqi debt.
  16. Marina Adamovitch: Continent/Kontinent, #115, 2003. Quarterly Review.
  17. Wall Street Journal book review: Stephen Sestanovich, Chain of Misery.
(re Gulag)
  18. Ibragim Alibekov and Sergei Blagov, NEW SECURITY 


Hair-Trigger Missiles Risk Catastrophic Terrorism
By Dr. Bruce G. Blair
Center for Defense Information
April 29, 2003 

While the efforts of the U.S. government to assist Russia in preventing the
theft of nuclear materials from storage sites and research institutes have
been inadequate, the opportunities for nuclear terrorism presented by U.S.
and Russian nuclear weapons on hair-trigger alert represent an even greater
peril that receives even less attention and effort. In an era of potential
nuclear terrorism, the theft of a nuclear weapon from a storage site could
spell an eventual disaster for an American city, but the seizure of a
strategic missile or group of missiles ready for immediate firing could be
apocalyptic for entire nations. 

Our two governments have not yet overcome the mutual suspicion that is
severely impeding their cooperation in preventing nuclear materials theft.
They had better leap this hurdle soon, because even greater cooperation is
necessary to protect their populations against the multitude of potential
terrorist threats to launch-ready nuclear forces. 

The distrust stems partially from disputes such as the Iraq war, but it
persists in large part because the United States and Russia remain in each
other's nuclear cross-hairs. War planners in both countries remain, believe
it or not, preoccupied with preparing to fight a large-scale nuclear war
with each other on short notice. Both sides keep thousands of weapons aimed
at each other and poised for immediate launch. U.S. spy planes still
routinely lurk off the Russian border looking for holes in the air defense
network through which U.S. heavy bombers and cruise missiles could fly to
drop nuclear bombs on Russia in wartime. Russian missile submarines still
find themselves trailed by U.S. submarines as soon as they leave port on
patrol. Two massive leadership posts inside mountains in the Urals built to
withstand a U.S. nuclear strike are just coming online. Russia is equipping
the one at Kozvinsky Mountain with an underground antenna for radioing a
launch order to a "dead hand" communications rocket designed to ensure
quasi-automatic Russian missile retaliation in the event of a U.S. strike
that decapitates the nuclear chain of command. 

It behooves the former enemies to kick these old habits and stand down
their obsolete confrontation. Nuclear terrorism is the real enemy, and
fostering cooperation in tackling it requires that both countries move away
from their nuclear confrontation. Taking U.S. and Russian missiles off of
hair-trigger alert, moreover, would itself automatically reduce if not
remove many of the biggest terrorist threats — which stem largely stem from
the extremely high launch-readiness of strategic missiles. Both U.S. and
Russian intercontinental ballistic missiles remain fueled, targeted, and
waiting for a couple of computer signals to fire. They fly the instant they
receive these signals, which can be sent with a few keystrokes on a launch

What kind of terrorist threats? The most obvious is the loss of physical
control over such missiles. If scores of armed Chechen rebels could slip
into the heart of Moscow and hold a packed theater hostage for days, could
terrorists infiltrate missile fields in rural Russia, seize control over a
nuclear-armed mobile rocket roaming the countryside, and launch it at
Europe or America? It's an open question that warrants candid bilateral
discussion of the prospects of terrorists capturing rockets and
circumventing the safeguards designed to foil their illicit firing. 

Another specter concerns terrorists spoofing radar or satellite sensors, or
cyber-terrorists hacking into early warning networks. Could sophisticated
terrorists generate false indications of an enemy attack that results in a
mistaken launch of nuclear rockets in 'retaliation?' False alarms have been
frequent enough on both sides under the best of conditions. False warning
poses an acute danger as long as Russian and U.S. nuclear commanders are
allowed, as they still are today, only several pressure-packed minutes to
determine whether an enemy attack is underway and decide whether to
retaliate. Russia's deteriorating early warning network coupled to
terrorist plotting against it only heightens the risks. 

Russia is not the only crucible of risk. The early warning and control
problems plaguing Pakistan, India, and other nuclear proliferators are even
more acute. As these nations move toward hair-trigger stances for their
nuclear missiles, the terrorist threat to them will grow in parallel. 

In addition, U.S. nuclear control is also far from fool-proof. For example,
a Pentagon investigation of nuclear safeguards conducted several years ago
made a startling discovery — terrorist hackers might be able to gain
back-door electronic access to the U.S. naval communications network, seize
control electronically over radio towers such as the one in Cutler, Maine,
and illicitly transmit a launch order to U.S. Trident ballistic missile
submarines armed with 200 nuclear warheads apiece. This exposure was deemed
so serious that Trident launch crews had to be given elaborate new
instructions for confirming the validity of any launch order they receive.
They would now reject a firing order that previously would have been
immediately carried out. 

If Russian and U.S. experts could instill trust in each other, then they
could identify the real deficiencies in the system of early warning and
control over nuclear forces on high combat alert. They could also allay
unwarranted fears. The value of trust was illustrated two years ago when
Russian scientists at the renowned Kurchatov Institute alerted their
American counterparts in the Department of Energy to software flaws they
feared had compromised the U.S. computer system used to keep track of the
U.S. inventory of nuclear materials. 

The stakes today are too high to let old habits of mind and obsolete
practices of nuclear confrontation stand in the way of protecting ourselves
against the biggest threat faced by both the United States and Russia.
Washington and Moscow need to stop playing Cold War-like games and confront
nuclear terrorism instead. Both need ironclad safeguards against the
terrorist exploitation of their hair-trigger arsenals. They should each
stand down, and work together not only to protect their own arsenals but
also to keep other nations off of high alert, before it's too late. 


Gap widens between rich and poor in Russia

MOSCOW. April 29 (Interfax) - The gap between the rich and the poor in Russia 
is widening. 
   According to figures released on Tuesday by Goskomstat, Russia's state-run 
statistics committee, 10% of high-income Russians shared 29.6% of the total 
cash revenues during the first quarter of 2003, against 29.3% in the first 
quarter of 2002. 
   A total of 10% of low-income families shared only 2% of the population's 
cash revenues in January-March 2003 (2.1% in the first quarter of 2002). 
   The population's combined cash income comprised 1.86 trillion rubles in 
the first quarter of 2003 (1.40 trillion in the first quarter of 2002). Cash 
incomes totaled 1.88 trillion (1.44 trillion). 
   As many as 20% of high-income Russian families accounted for 46.2% of all 
cash income in the first quarter of 2003 against 45.9% in the first quarter 
of 2002. At the same time, 20% of the low-income populace shared 5.5% of all 
cash income in January-March 2003 (5.6% in January- March 2002). 
   Some 0.6% of Russia's entire population had incomes less than 500 rubles a 
month in the first quarter of 2003 (1.5% in January-March 2002). Another 1.8% 
of Russians have incomes from 500 to 750 rubles; 9% (14.1%) - from 1,000 to 
1,500 rubles; 10.6% (13.9%) - from 1,500 to 2,000 rubles; 19.9% (21.7%) - 
from 2,000 to 3,000 rubles; 15.3% (13.9%) - from 3,000 to 4,000 rubles; and 
39.7% (25.2%) made over 4,000 rubles a month. 
   Pay in Russia averaged 4,841 rubles in the first quarter of 2003 and 5,124 
rubles in March. 



MOSCOW, APRIL 29 (RIA Novosti's Natalia Gorbunova) - A Cold War revival is 
ruled out, reassured Russia's President Vladimir Putin as he was addressing a 
news conference to sum up negotiations with Tony Blair, Great Britain's Prime 

The Cold War came out of antagonisms between two systems based on mutually 
confronted ideologies. Now, the situation is quite different, and a return to 
the Cold War is impossible, pointed out Mr. Putin. 

Whatever Russia is doing, and intends to do, has not whatever confrontation 
in view. On the contrary, Russia desires partnership, he said emphatically. 

A split international community cannot cope with terrorism, mass destruction 
weapons proliferation, and other burning problems, warned the President. 

When a reporter on the audience asked him whether postwar Iraqi settlement 
was possible without the United Nations involved, Mr. Putin said: "That's 
quite possible - after all, the war started without an UN sanction." However, 
he does not think Iraq can come to a lasting and effective settlement unless 
the UN contributes to it. Iraqi settlement bypassing the UN will not "help to 
consolidate global forces against existing threats. The British Premier and I 
met today to prevent the developments from taking that turn," remarked 
Vladimir Putin. 



MOSCOW, APRIL 29 (RIA NOVOSTI) - Now that the direct armed action in Iraq is 
over, some questions remain outstanding, said Russian President Vladimir 

"Where is Saddam? Where are mass destruction weapon arsenals, if any? 
Perhaps, Saddam, hiding somewhere in a secret bunker with all these mass 
destruction weapons around him, prepares to explode all of them and to 
endanger thousands of human lives? Answers should be found. These might prove 
non-existent threats but we should investigate into them and offer some 
solution," Vladimir Putin said after meeting in his Novo-Ogarevo residence 
with British Premier Tony Blair. 

We have to concentrate today on efforts to settle as quickly as possible the 
country's humanitarian problems and to resolve de jure and de facto the 
question of mass destruction weapons in Iraq, said Vladimir Putin. 

In order to accomplish the former task, it is necessary especially now, when 
Iraq is living through a period of anarchy, to ensure the performance of the 
Oil for Food programme under UN supervision, said Putin. In his opinion, this 
programme should be broadened with the use of available mechanisms under the 
control of the world community. 

As to weapons of mass destruction, possibilities and variants are wide to 
enable the inspectors to act even in the post-war conditions, said the 

If anything is discovered, one should not show empty buckets on TV," said 
Putin. In his opinion, UN inspectors, perhaps under the protection of UN 
guards, can be instantly called to the scene of storage. 

The president suggested pondering over various solutions by benefiting from 
the way it was in Afghanistan. 

Putin also underlined that Russia had declared more than once its readiness 
to serve UN inspectors in Iraq. 

But anyway, the basic task is to take such decisions which will consider the 
legitimate interests of the Iraqi people and will be based on unconditional 
respect for Iraq's sovereignty and territorial integrity, said Putin. 


Putin opposes U.S., Britain on Iraq sanctions
April 29, 2003
By Mike Peacock

NOVO-OGORYOVO, Russia (Reuters) - Russian President Vladimir Putin, setting
himself at odds with Washington, said Tuesday that U.N. sanctions against
Iraq should not be lifted until the existence of illegal weapons had been
cleared up.

Speaking after talks with British Prime Minister Tony Blair, the U.S. main
ally in the war on Iraq, Putin focused on the issue of weapons of mass
destruction, the original justification for the U.S.-led invasion of the
Arab country.

"So far we have no answers and as long as we have no answers we cannot feel
safe. We need to have a legal basis to put an end to this," the Kremlin
leader told a news conference, adding that the United Nations was the only
body competent to do this.

"Sanctions were imposed on Iraq on the basis of suspicions that it held
weapons of mass destruction. Sanctions can only be removed if there is no
suspicion and it is only the Security Council that can remove these
sanctions because it imposed them in the first place," he said.

Since toppling Saddam Hussein in a three-week military offensive, U.S. and
British forces have failed to turn up any caches of chemical or biological

Putin's view represented a slap in the face for Blair who went into the
talks, held at a presidential estate west of Moscow, hoping to convince
Putin to agree to an early removal of U.N. sanctions.

Clearly annoyed, Blair told reporters that Russia could be setting the
scene for another bruising confrontation with the United States over Iraq.

"The question is, can we find a way forward together for the future...or
whether we are going to have the stand-off we have had for the past few
months," Blair said before flying back to London after three hours of talks
with Putin.


Blair's one-day trip had been aimed at paving the way for a gradual healing
of wounds after months of disagreement between the United States and
Britain on one hand, and Russia, France and Germany on the other over the
Iraq war.

Putin, together with the leaders of France and Germany, had opposed
military action against Iraq, arguing that intensified arms inspections
could determine whether Iraq held weapons of mass destruction or not.

With the war over and major powers beginning to jostle over Iraq's
reconstruction, Putin -- like the leaders of France and Germany -- wants to
restore good relations with the United States and Britain.

The U.S. has called for an immediate end to the sanctions imposed on Iraq
over its 1990 invasion of Kuwait.

But Russia, fearing that the United Nations could lose leverage over Iraq's
future, has said it backs only a temporary suspension of the sanctions to
ease the plight of Iraqis.

Putin, replying with irritation to a journalist's questions, went so far as
to question whether Iraq had ever held weapons of mass destruction as the
United States alleged.

"Where is Saddam? Where are those arsenals? Did they even exist? What is
happening with them?

"Perhaps Saddam is hiding somewhere in a secret bunker and plans to explode
all this stuff at the last minute and put hundreds of lives under threat,"
he said.

Putin also called for the U.N. humanitarian oil-for-food program, at the
core of the sanctions, to be extended.

"Today when there is a power vacuum in Iraq we must ensure that the
oil-for-food program is implemented under most strict control by the United
Nations," he told reporters.

Iraq has not sold crude under the program since shortly before the war
because there is no legal authority in Baghdad.

Though a solid backer of the invasion launched without U.N. approval, Blair
differs from U.S. President George W. Bush in wanting to make the world
body the focus of Iraq's reconstruction.

Blair urged Putin to press ahead with developing a strategic partnership
with Washington. "The alternative in the end is in no one's interests. This
strategic partnership is the only alternative to a world that would break
up into different poles, acting as rivals to one another.

"That's a real danger for our world," he said.

April 30, 2003
Analysts Urge Mending of U.S.-Russian Relations  
By Kelley Beaucar Vlahos
WASHINGTON — As both a "deeply devout American patriot," and a "best friend
of the Russians," Rep. Curt Weldon has no problem blaming both sides for
the current diplomatic freeze between the two nations during and since the
war in Iraq.

But the Pennsylvania Republican, who for the last 20 years has worked to
strengthen U.S.-Russian relations, expressed hope Tuesday that the two
nations will be able patch things up for a more positive alliance in the

"I say there is blame on both sides," he told an audience Tuesday at the
annual World Russian Forum in Washington, D.C.

Weldon said he is deeply concerned by reports that Russia passed to Iraq
details of secret pre-war conversations between prime ministers Tony Blair
of Britain and Silvio Berlusconi of Italy and that Russian companies sold
military equipment to Iraq.

However, walking away from Russia would be a big mistake.

"That would be absolutely, totally, the wrong decision to make," he said.

As a veto-wielding member of the United Nations Security Council, Russia
angered the Bush administration when it joined Germany and France in
refusing to support the U.S.-led coalition in toppling the Iraqi regime.

The intransigence by the United States' would-be allies led the "coalition
of the willing" to go ahead with Operation Iraqi Freedom in March without
U.N. backing.

But unlike the frosty fallout aimed at Germany and France, U.S. officials
appear open to repairing the damage with Russia and returning to the upbeat
relations the two nations had been pursuing before the Iraq war.

National Security Adviser Condoleezza Rice traveled to Moscow to meet with
President Vladimir Putin in April, and President Bush is expected to be on
hand for the St. Petersburg 300th anniversary celebration in late May.

"A very true test will be the president’s visit in May," said Celeste
Wallender, senior fellow at the Center for Strategic and International

Wallender said she does not believe the rift between the two countries is
irreparable, but that future relations will depend on how much Russia will
call for more U.N. involvement in managing postwar Iraq and assert its
prewar oil contracts in the war-torn country.

Rep. Chris Cannon, R-Utah, who also spoke before Tuesday's forum sponsored
by the Washington, D.C.-based Russia House, said the two countries’
differences over Iraq were "irrelevant," and would not mar future
diplomatic efforts.

"America is certainly not going to hold grudges against Russia," he told
the very pro-Russia audience. "I don’t think we will have large problems."

But foreign policy experts warn that U.S. treatment of Russia, along with
serious strategic and political miscalculations on Putin’s part, led to the
rift in the first place and need to be examined carefully.

"I think we were on the right track before the Iraq war," said Heritage
Foundation analyst Ariel Cohen, noting that both countries were working
together to fight the common adversary of terrorism following the Sept. 11

However, Russian refusal to get on board with the war in Iraq was
"unfriendly and not a performance of an ally by any stretch of the

Cohen said Putin was "ill-served by his foreign ministry," which is filled
with Soviet old guards who gave him poor advice and bad information about
U.S. military capability.

If Putin were ill informed, the Russian public was even more in the dark
about U.S. intentions, Cohen said, and that fueled already-existing
anti-American sentiment in the region.

That anti-Americanism put Putin — up for re-election next year — under a
lot of pressure, said Arkady Murachev, a visiting fellow with the Robert
Krieble Institute of Freedom and Democracy in Washington.

But the biggest mistake Putin made, said both Cohen and Weldon, was
breaking U.N. sanctions by selling equipment to the Iraqis and in effect
spying for them.

While Putin denied knowledge of these diplomatic transgressions, there was
clearly a "wink and nod go-ahead provided by Russian leadership," Cohen said.

Weldon said he personally wrote to Putin and members of the Russian
Parliament to tell them they were making a "fundamental mistake" in
opposing the war in Iraq.

Weldon, who insists he is not "an apologist" for the Russians, said that
despite Russia's failings, U.S. policy toward it has been long on talk and
short on action over the past decade.

Among the actions leaving Russia feeling the cold shoulder were the U.S.
withdrawal from the Anti-Ballistic Missile Treaty in 2001, the expansion of
NATO to include many former Warsaw Pact nations and the refusal to lift the
1974 Jackson-Vanik trade restrictions.

"What did we give Putin? We didn’t give him much. And what were the Russian
people seeing from us? In my opinion, not much," said Weldon. "I’m not
saying this forgives their lack of cooperation [in Iraq]. But we’re not
doing enough to engage Russia."

And though the United States has plenty to do in the way of repairing
relations, Russia too has to decide where it stands.

"A lot of things can be done together, but you can’t sit on two chairs at
the same time," said Cohen. "You can’t be a friend and an adversary at the
same time."

April 29, 2003
Kasyanov's days are numbered
By Maria Tsvetkova  

On the one hand, it is lucky for the prime minister that namely Yabloko,
and not say, United Russia has said it will initiate a vote of no
confidence in his cabinet. On the other hand, Mikhail Kasyanov’s position
is so unstable that even a blow dealt by Yabloko could prove decisive,
believes the chairman of the Effective Policy Foundation Gleb Pavlovsky. He
granted the following interview to Gazeta.Ru. 

Gleb Olegovich, what is behind Yabloko’s initiative to seek the resignation
of the cabinet, in addition to mere electioneering? 

Behind it stands the obvious weakness of the Mikhail Kasyanov government. A
weak government is prey for anyone during an election campaign. And since
one of the main catchphrases for the election campaign in Russia nowadays
is the creation of a new, stronger executive power, Yabloko is merely
taking advantage, dealing a blow before others do it. 

I think Yabloko is seeking to forestall, most likely, the Communists, or
maybe, somebody else. The point is that this government was built to
accomplish different tasks in a different era. Quite often it is forgotten
that Kasyanov’s mandate is that issued in 2000, and it has virtually
expired. Putin has, for the most part, fulfilled it, and that is why
Kasyanov, you know, is now the sort of a man without credentials. 

Not to mention the fact that the parties represented in the government –
first and foremost, United Russia and SPS (the Union of Rightist Forces) –
have engaged in a bitter fight between themselves since United Russia
claimed full control over the government. 
But the starting point is the political weakness of the government, which
is unable to ensure anything for anyone: neither strength, nor security,
nor freedom. That is why, generally, everyone is dissatisfied with it.
Kasyanov feeds the nation valerian drops and has turned maneuvering into
philosophy, especially in the aftermath of Iraq, which has seriously
altered the security criteria. There is a general impression that no one is
safe and this government is a government of defeat. 

Incidentally, the Communists dote upon such governments, since it is
pushing society to the left. Yabloko’s move also puts United Russia in a
rather difficult position, since, apparently, they feel no great sympathy
for the government either. 

''The Bears'' [United Russia] had clearly planned to take a bite of the
government, but kept on saving it for the main course, so to say, in the
autumn. And as for the government, Yavlinsky’s initiative is more
convenient because it is more likely to survive it than if it was initiated
by someone else, someone more dangerous. 

In other words, the initiative will remain Yabloko’s and United Russia is
unlikely to support it? 

It seems so. And possibly Yabloko realized that it would be so, and did not
have much hope for its initiative succeeding. But at the same time, there
are strong political fluctuations at the moment and it cannot be ruled out
that they will gain more from the general discontent with the government
than they initially intended. 

I see no political foothold for the government. It is hanging by a thread,
quite literally. In the Duma, save for the vacillating United Russia, it
has practically no support: some of the centrists call for its immediate
resignation; others say to wait a little. That is why I do not rule out
that Yavlinsky’s initiative may spur on the process. 

It is rumoured that Yavlinsky discussed his initiative with the
presidential administration. Are those rumours based on any kind of truth? 

And who isn’t holding consultations with the Kremlin nowadays? Practically
all the Duma factions without exception consult the Kremlin, even
Zyuganov’s men [the Communists]. There is scarcely anything special about
that. This does not mean that the idea originated in the administration,
and I don’t think it did. It is just that the presidential administration
is a strong political agent merely by the virtue of the political resource
of President [Putin], rather than its executive possibilities. That is why
everyone seeks its advice, and Yabloko is no exception. 

But can the Kremlin somehow take advantage of the Duma’s pressure on the

And why, in fact, would the Kremlin need Yabloko for that? I think Putin
has a much shorter route – the centrists. Paradoxically, the government’s
strength lies namely in its extreme weakness. 

The government is so obviously not seeking any political support – as if it
can do without it – that one cannot help suspecting a certain strategy in
its behaviour. Look, the government seems to be saying that you can crush
me with a fly swat if the president lets you. And everyone starts thinking:
and what about the president? They are rather afraid of the president,
since he is, after all, the indisputable supporter. And the government
takes advantage of that situation. You can see the government growing
weaker, yet it still feels quite comfortable. 

That depraved strategy leads to the population’s disenchantment with the
executive authorities and becomes the object of the left’s propaganda. But
since they all are afraid of stirring things up, the government lives off
that fear of change. 

Paradoxically, the longer the serious changes in power reform are
postponed, the better the government feels, because when changes begin fear
starts to grow. This is a peculiarity of the Russian mentality – what if
things take a turn for the worse… 

And when will that discontent become critical for the government? 

Whatever happens, it is hard to imagine that the government will survive
the forthcoming parliamentary campaign. There is not long left to wait. But
during the election campaign, which, in itself is a moderate crisis, the
government will be the object of incessant attacks, some of which may prove
unexpectedly successful, that is what I mean. 

It may well happen that Kasyanov’s fortress will be left without anyone to
defend it. Then even the president will be unable to help Kasyanov, because
he cannot save him from the Duma. That is why Yavlinsky’s initiative is not
entirely hollow, as well as having an electioneering tinge. 

The two most likely outcomes of the election are either United Russia wins,
or the Communists do, the rest is just nuances. No matter which of those
scenarios materializes the government will go, that much is clear. I think
that the day following the vote it will be on the butcher’s table. I
reiterate, regardless of who wins the elections, it is impossible to
imagine that the government will endure.  
Last Saturday Yabloko leader Grigory Yavlinsky said his party would call
for a vote of no confidence in Mikhail Kasyanov’s cabinet, saying it was
responsible for derailing vital economic reforms, pursuing antisocial
policies and protecting large monopolies and oligarchic clans. Earlier this
year, the Communist Party tried and failed to put a vote of no confidence
on the agenda of a lower house dominated largely by pro-Kremlin centrists.


Russian YeES Company Allegedly Abuses Mine Lease For Chubays Election Slush

Rossiyskaya Gazeta
23 April 2003
Report by Roman Nikitin of Pravda.Ru: "Fight Over RAO YeES Rossii 
Assets In Coal Mine" 

    As has become known from a source close to 
Russian Joint Stock Company [RAO] YeES Rossii, a real struggle is 
beginning to develop around the company's non-profile assets.   YeES 
Rossii's consultant, Alfa Bank, is raising the issue of selling the 
company's non-profile assets in the hope, probably, of doing well from 
such sales. 
    Meanwhile the interests of the company's management are directly 
contradictory.   So why not sell off what is doing so badly and can be 
used for your own interests? 
    The source says that one such example is the Severnyy [Northern] Coal 
Mine situated on Kazakhstani territory.   It is a neighbor of the very 
large Bogatyr [Hero] Coal Mine that was famous in the Soviet union.   The 
Severnyy Mine belongs at present to YeES Rossii and it is an object of 
constant attention from a whole range of industrial groups. Currently it 
is being worked by the Access Group. 
    It turns out that the coal mine, which was obtained by YeES Rossii as 
payment for Kazakhstan's electricity debts, has been transferred at the 
present time on an indefinite lease time-wise to a company representing 
the interests of Access for a completely laughable rent that amounts to a 
little more than $1 million.   This rent does not even cover fully the 
expenses incurred by RAO YeES Rossii when it pays its taxes as owner of 
the mine. 
    According to information from the source mentioned above, the monthly 
income which the company with the lease on the mine really receives and 
which YeES itself could receive, stands at a minimum of $6.8 million, 
that is, five or six times higher than the rent.   In addition, at the 
cheapest estimate, if such an asset, which is quite difficult for the 
company to manage for certain understandable reasons, were to be sold, 
the company could gain up to $60 million, which, generally speaking, is 
probably enough to cover the replacement of out-of-date equipment in some 
small heat and electricity power station.   Also the lease agreement, 
which is subject to Kazakhstani Law, was drawn up in such a way that it 
cannot be annulled and this is further evidence of company abuse. It is 
hard to credit that the difference between the rental fee and the real 
earnings which the company (YeES) could receive is not falling into 
somebody's pocket or into Chubays's infamous election slush fund.   Here 
we are talking about just one comparatively small asset, but what if we 
imagine what is going on on the scale of RAO YeES as a whole?   Most 
probably even if there is a sale, the managers will not lose out, given 
all that technical equipment - you reduce the sale price and sell an 
asset on the quiet, and then you share out the difference between the 
real price and the true value as suits your soul and pocket. 
    It is obvious that Access Group is trying to acquire through this 
sale a mine, which yields up to 12 million tonnes of high-quality 
energy-producing coal a year, for a price comparable with rental fees. 


Moscow Times
April 30, 2003
Gryzlov Gets Busy in the Far East
By Yulia Latynina   

The murder of State Duma Deputy Sergei Yushenkov seems to have roused Russian 
law enforcement from its slumber. In less than two weeks, a number of 
high-profile murder cases have suddenly been solved.

First, Interior Minister Boris Gryzlov, during a trip to the Far East last 
week, announced that police had cracked one of the biggest contract killings 
in recent memory -- the May 2002 murder of Major General Vitaly Gamov of the 
Federal Border Service. The contract was put out by none other than Vasily 
Naumov, also known as Vasya Yakut, an organized crime boss specializing in 
the lucrative black-market fishing business.

Naumov had more than his fair share of problems with the border guards, 
especially with the agents employed by his competitors. Things got so bad 
that a portion of Naumov's fishing fleet bolted for Korea. Naumov tried to 
board one of the runaway boats, the Tulun, as it stood at anchor in the South 
Korean port of Pusan. The Tulun's captain radioed authorities that he was 
under attack by terrorists, and South Korean forces came to his rescue. The 
conflict between rival criminal organizations developed into an international 

After that, Naumov boarded two more boats by force and perfected a new method 
of scallop fishing. His high-speed cutters sailed from Korean ports to the 
Sea of Okhotsk and robbed the local "Flying Dutchmen" -- fishing boats that 
are unregistered but nonetheless ply Russian waters with impunity. The 
poachers, however, decided to protest: In early April they whacked Naumov.

Shortly thereafter, Gryzlov announced that the Gamov case had been solved.

Next the interior minister declared the murder of Magadan Governor Valentin 
Tsvetkov solved. The governor was killed in the battle for Pacific Ocean 
fishing quotas, he said.

Tsvetkov had an insatiable appetite for business. He was known as the 
bureaucrat who totally monopolized commerce in the Magadan region. A wide 
variety of sources have told me that Tsvetkov openly extorted shares in 
companies that were often registered in his wife's name or that of his 
adviser, Viktoria Tikhachyova. The fish story is well known by now. In recent 
years, the lion's share of Magadan's fishing quotas went to Magadanrybflot, a 
company belonging to Tikhachyova. Following Tsvetkov's murder, the allocation 
of quotas was brought into compliance with established norms. 

Tsvetkov was also drawn to gold. He literally brought the region's most 
successful gold producer, Omolonsk Gold Ore Co., to its knees. He demanded 
that the company repay a $40 million loan, but refused to sanction the sale 
of a stake in the company to foreign investors who were prepared to pay off 
the loan. Then the governor was gunned down in Moscow. The foreign investors 
acquired their stake in the company and paid off the loan.

Tsvetkov was also not indifferent to coal and fuel oil. It's said that he 
blatantly demanded half of the shares in fuel oil contractor Nord Oil. One of 
the company's owners recorded the conversation and put the cassette in the 
right hands. Nothing happened to the governor, however, and Nord Oil was 
denied access to regional port facilities. Following Tsvetkov's death, Nord 
Oil is back in business.

This pattern was repeated in every sector of the regional economy. Any 
businessman in Magadan could have ordered the hit on Tsvetkov.

It's heartening, of course, that as soon as Gryzlov returned from the Far 
East, he solved two of the region's most high-profile murders. The news must 
have come as a blessing to the police. One thing still rankles, however. 
Deputy Prosecutor General Vladimir Kolesnikov refused to identify the person 
who put out the contract on Tsvetkov, saying only that "we have taken someone 
into custody." But the person in police custody is -- wait for it -- none 
other than Tikhachyova, whom Tsvetkov tried to make the nominal queen of 
business in Magadan.

Tikhachyova is obviously not a model citizen, but she is the only person in 
Magadan with no motive whatsoever to rub out the governor. On the other hand, 
every businessman in Magadan had plenty of motives to have her framed.

Yulia Latynina is host of "Yest Mneniye" on TVS.

Testimony of AmCham President Andrew Somers to the United States Committee
on Foreign Relations 
Subcommittee on International Economic Policy, Export and Trade Promotion
Hearing on U.S. Energy Security: Russia and the Caspian
Testimony of Mr. Andrew B. Somers
American Chamber of Commerce in Russia
April 30, 2003

Senator Hagel, on behalf of the 700 member companies of the American
Chamber of Commerce in Russia operating in the Russian market, I would like
to express our appreciation for this opportunity to testify on U.S. Energy
Security: Russia and the Caspian.

A brief word about the American Chamber, known in Russia by the acronym
“AmCham”. We are an independent, self-funded business advocacy organization
with offices in Moscow and St. Petersburg. Our mission is to promote trade
and investment between the U.S. and Russia in order to maximize sustainable
penetration of the Russian market by our member firms. To achieve this
objective we are engaged in an on-going, and we believe, effective dialogue
with all relevant organs and levels of the Russian government and the most
influential representatives of the Russian private sector. We benefit
greatly from the new U.S.-Russia strategic relationship which has emerged
under the leadership of President Bush. In this regard I should acknowledge
in particular the vital support of AmCham by U.S. Commerce Secretary Donald
Evans and the U.S. Ambassador to the Russian Federation Alexander Vershbow.

It is in the interests of American business for Russia to continue its
re-emergence as a major oil producer and to gain a significant share of the
U.S. oil import market. As the U.S. Department of Commerce held last June
after an extensive public inquiry, Russia has succeeded in making the
difficult transition to a market economy. Moreover, this fundamental change
in the character of the Russian economy has occurred within a new
democracy, an historic transformation in itself. American business prospers
best in democratic market economies. By allowing such an important sector
of the Russian economy to contribute with other oil-producing nations to
meeting U.S. energy needs, the U.S. would help to globalize the Russian
economy and stabilize these positive developments.

For the U.S. to make such a commitment requires, of course, a judgment that
Russian oil is a viable option for diversifying foreign-sourced energy
supply to the U.S. In our view 3 factors should be considered when making
this determination:

1) Transportation infrastructure.
2) Production and reserves.
3) The investment climate.

1. Transportation Infrastructure:

a) Current export constraints.

It is an incontrovertible fact acknowledged by all parties operating in the
Russian oil sector that Russian oil is export constrained. Current
production far exceeds both local demand and the capacity of the Russian
state oil transport system, Transneft. As a result local oil prices are
depressed and the volume of crude available at export points is
significantly compromised. An additional negative effect is the decline in
profitability of small independent oil companies who must sell at low
prices and lack the refinery facilities common to the majors for the
production and sale of secondary oil products at a reasonable markup. With
Duma elections ahead in the fall and the Presidential elections looming in
the spring of 2004 it is perhaps not surprising that no vigorous steps have
been taken to relieve the pipeline clog and risk an increase in domestic
oil prices. However, for Russia to be a viable import option, substantial
improvement of the current oil transport infrastructure is imperative.

b) Future export constraint relief.

Two important features of the current Russian oil environment suggest that
relief for Russia’s export constant problem could be on the way in the
relative near term. I have in mind the existing Caspian Pipeline and the
proposed Murmansk Pipeline project.

(i) Caspian Pipeline. Russia has already taken a significant step toward
the enhancement of its oil export capability. A 24 % majority shareholder
in the Caspian Pipeline Consortium (“CPC”), in which U.S.-owned Chevron
Caspian Pipeline holds the largest private sector stake of 15 % and Mobil
Caspian Pipeline owns 7.5%, Russia can use the pipeline to quickly increase
its oil exports. Operational since late 2002, the initial stage of the
Caspian Pipeline delivery system involves shipment from the Tengiz oil
field in Kazakhstan on the north-east shore of the Caspian through almost
1000 miles of Russian territory to the Black Sea port of Novorossisk. If
the Russian state oil transport system Transneft builds a 40-mile trunk
line connecting its network to the Caspian Pipeline at the Russian city of
Kropotkin, where CPC has already constructed the necessary pumping
facilities, Russia’s export capacity on the Caspian Pipeline could be
increased by 150,000 barrels of oil per day in 6 months and by 300,000
barrels of oil per day within 2 years. As yet Transneft has given no
indication it plans to build this trunk line.

(ii) Murmansk Pipeline Project. Due to Transneft’s failure over the past
several years to add capacity to Russia’s oil transport infrastructure,
substantial private investment is needed. Several Russian oil majors
recently proposed the construction of a pipeline from Western Siberia to
the northern city of Murmansk, a deep-water, ice-free port. Private Russian
capital would cover the cost of this several billion dollar investment,
which would include renovation of the port. Proponents of the project see
it as the gateway to the U.S. market, estimating that the cost of transport
to the American east coast would be comparable with that from the Middle
East. Initially the Russian government balked at the concept of private
ownership of the pipeline but more recently indications of a compromise
solution have emerged. Some Western analysts estimate that Murmank export
capacity could reach one million barrels of oil per day. Given the
commitment and resources of the Russian majors and the lack of a
governmental plan for substantially increasing infrastructure, the Murmansk
Pipeline project may well be the long term solution to export constraint.

2. Production and Reserves:

Russia’s primary source of oil production is Western Siberia, with a volume
of 7.4 million barrels of oil per day, of which about 1/3 is exported by
pipeline, and another 1/3 exported as fuel oil by rail, a very costly
method of transportation. Western estimates see this level of output from
Western Siberia continuing for the next several years and then declining.
For this reason a number of Western experts urge that Russia start
developing major new reserves on both the Eastern and Arctic Continental
Shelf and Eastern Siberia. Several such projects with foreign investment
are already underway off the coast of Russia’s Sakhalin Island. The
Sakhalin projects are beneficiaries of so-called Production Sharing
Agreements (“PSAs”). PSAs are intended to provide investors in long-term
projects, remote from infrastructure, with a certain degree of
predictability concerning taxes and fees over the 20-30 year period
required to make the project fully operational. PSA legislation to cover
some projects but exclude others is now pending in the Duma and probably
will pass into law this spring.

Some Russian private sector sources are more optimistic about Russia’s
reserves and see little need for PSAs. Yukos, now the world’s fourth
largest oil company recently asserted that reserves are sufficient to
assure the extraction of oil in Russia over the next 30 years at levels of
9-10 million barrels per day, with an export capacity of 6-7 million
barrels per day. A strong proponent of the Murmansk project to resolve the
export constraint problem discussed above, Yukos claims that Russia can
supply 15 % of U.S. oil imports with an estimated range of 1-2 million
barrels of oil per day.

A word on the Russian Caspian: estimates put Russian Caspian recoverable
oil at about 3 billion barrels, or less than one 10th of the resource base
of Kazakhstan. The geology of the Russian Caspian is very different from
the Kazakhstan Caspian. The Russian Caspian eventually may provide
400,000-500,000 barrels per day, a not insignificant volume.

3. The Investment Climate:

There can be little doubt that the investment climate in Russia has
significantly improved during the Putin years. Political stability, fiscal
discipline, 3 successive years of constant GDP growth, including a stunning
6.4% GDP growth for the first quarter of 2003 testify to Russia’s emergence
as a strong investment candidate. American companies operating in the
Russian marketplace are experiencing strong annual growth in revenues,
market share and profit margins, with the Russian operations of some U.S.
global companies outperforming all other units worldwide. In the energy
sector the enormous potential for fruitful cooperation between the two
countries is reflected by the creation of the government-to-government
U.S.-Russia Energy Dialogue, which had its first summit in Houston October
2002 and has scheduled the second summit for St. Petersburg in September.
Of equal significance is the private sector Russian American Commercial
Energy Dialogue. Comprised of 5 working groups of American and Russian
energy company executives, the Commercial Energy Dialogue will identify
barriers to trade and investment and make concrete recommendations to both
governments to facilitate commerce in the energy sector.


Duma Member Contests Westerners' Negative Assessment of Russian Banking

Vremya MN
24 April 2003
Unattributed article with commentary by State Duma member Vladir 
Tarachev: "Run-Down Russian Banks" 

    The German economic newspaper Handelsblat 
published a damaging assessment of the domestic banking sector.   The 
main excerpts are published below.   Bank reform is not moving forward.   
The experts are regarding this more and more as an obstacle to the 
rebirth of the former great power. 
    On the whole, Western experts are united in their assessments of the 
Russian banking system.   The risks for lending institutions are as great 
today as during the catastrophic Autumn of 1998, the Standard & Poor's 
(S&P) agency believes.   At that time, numerous banks went bankrupt, 
credit servicing was suspended, and the ruble depreciated by 75 percent.  
 True, the Russian banking sector restored its financial base since then. 
  However, as before the crisis, 50 to 75 percent of the credits are 
considered "potentially problematic," the S&P's recently published report 
    Credits granted to financial-industrial groups by banks related to 
the financial-industrial groups remain risky to the highest degree.   To 
this one must add the "dominance" of Sberbank [the Savings Bank], which 
is more than 50-percent owned by the Central Bank, as well as "lax 
banking oversight," the report goes on to state. 
    The Brookings Institution, one of the research institutions in the 
USA, even comes to the debatable conclusion that the Russian banking 
sector is "the first virtual economy in the world."   This opinion is 
essentially shared by Richard Spikerman from the supervisory board of the 
Russian MDM Bank:   "About 15 banks may be considered as such; all the 
others are trash." 
    So one should not be surprised that the S&P places the Russian 
banking system on the same level with Argentina, China, and Turkey, that 
is, countries with enormous financial problems.   "Russia has too many 
banks and extremely little foreign investments in the banking system," 
such is the Fitch Rating Agency's opinion. 
    According to the specialized magazine The Banker, in Russia the 35 
banks with a foreign interest comprise only 8.8 percent of the banking 
sector, while this indicator approximates 66 percent in Poland and even 
97 percent in Estonia. 
    For Peter Kelly, the director of the CIS area in Hypo-Vereinsbank and 
a member of the supervisory board in Mezhdunarodnyy Moskovskiy Bank 
[International Moscow Bank], many bank owners are themselves guilty of a 
crisis of confidence.   "At the time of the default of 1998, the majority 
saved their own industrial empires and cut off their own hands."   But 
even today the majority of Russian banks are, Kelly believes, 
"quasi-financial divisions of the concerns standing behind them."   Or 
they are new institutions that skimmed off their predecessors' assets for 
themselves before the latter were declared bankrupt.   Others perform 
transactions in favor of their own owners.   They use information for 
control over their own clients and thereby for the buildup of the 
financial industrial group's power. 

   [Commentary by Vladimir Tarachev: "Cleansing of Filth"] 
    The newspaper Vremya MN asked our permanent expert, the deputy 
chairman of the State Duma's Committee for Lending Institutions and 
Financial Markets, Vladimir Tarachev, to comment on the publication. 
    On the whole, an accurate assessment was given, although one may 
agree with far from all the assertions.   Indeed, the government is doing 
nothing significant in the sphere of bank reform.   But let's not forget 
something else:   Western lending institutions are Russian banks' 
potential competitors and accumulated considerable experience in the 
struggle, including PR experience.   We already had The Bank of New 
York's scandalous example of 1998, when what didn't they accuse the 
Russian side of, but not a single document attesting to the laundering of 
10 billion dollars was presented during the court hearings. 
    Substantively, the assertion about "banking trash" may in particular 
be disputed here.   Yes, we ourselves admit that our competitiveness in 
the international arena is not great.   Sberbank, BTB [the Bank of 
Foreign Trade], and other banks with a state interest correspond in 
capital indicators to Western scales.   But if we approach our lending 
institutions with Russian standards, the overwhelming majority of them 
are quite competitive in the conditions of the domestic financial market. 
  The introduction of a law on insurance contributions will enable the 
Central Bank to soundly "ruffle" the banking system, and possibly 300 to 
400 out of a total of 1,300 banks will lose licenses.   But the majority 
will survive; their services are truly in demand by the Russian economy.  
 Besides, in the largest Russian banks the percentage of the Western 
interest comes close to 40 percent and more.   Does it turn out that part 
of the Western "subs" is also considered "trash?" 
    Examples of foreign capital's interest in the banking systems of 
Poland and Estonia are cited.   And the low level of such an interest in 
Russia is given as a big minus.   The thesis is a dubious one.   At one 
time, foreign banks' interest among us was limited to 12 percent, and 
this level could in no way be above this figure.   The Bank of Russia and 
the government deliberately conducted a policy to limit such access with 
the goal of maintaining control over the processes occurring in the 
banking system.   The scenario of Estonia, Poland or Hungary is in no way 
suitable for Russia, when a policy of preferences for foreign capital is 
conducted for the sake of the fastest possible development of the banking 
market.   The key decisions concerning the abovementioned countries' 
financial market are made outside them in foreign corporations' 
headquarters.   And besides the financial sector, whole segments of the 
real sector wind up under others' control:   Banks serve as a platform 
for intervention.   The total loss of control over the financial sector's 
development, for Russia this is a serious threat to national security.   
Yes, the portion of foreign investments should be increased, but not at 
the expense of the loss of national control over key sectors of the 
    The assessment of the problematic nature of credits granted to the 
real sector, whose volume rose sharply by 40 percent last year, also 
arouses objections.   The portion of problem loans also rose somewhat, 
but according to the Central Bank's assessments it is a question of not 
more than 4 to 6 percent, but in no way 50 to 75 percent.   This is 
direct evidence of an attempt to tarnish all Russian business. 
    In the Western business community's eyes the Russian economy 
continues to be considered half-criminal, gray, and non-transparent.   
One may fully or partially agree with this, but one thing is certain:   
There should exist a program of government measures that would enable us 
to overcome this negative stereotype within the next three to four years. 
  This should be done primarily for the good of our economy, since there 
are more than enough problems in the financial sector. 
    One negative trend clearly manifested itself in recent times: a sharp 
increase of operations involving the cashing in of dollars from citizens' 
bank accounts.   According to the Central Bank's data, non-residents 
perform the majority of such operations, on the order of 65 percent.   
The volume of "cashing in" rose by 60 percent during the years 2001 and 
2002, and again by half according to the results for the first quarter of 
2003 in comparison with last year's same period.   An almost 2.5-fold 
increase is observed; meanwhile the average amount of operations 
involving the withdrawal of foreign exchange from accounts rose to a 
million dollars in certain banks.   This means that the shadow economy, 
comprising 25 percent according to the State Statistics Committee's 
estimates and 40 percent according to independent economists' data, 
consists in servicing a part of the banking system.   This is where a 
cleanup of finances is needed, the separation of the "sheep" from the 
"wolves."   The Central Bank possesses information on banks in which a 
considerable part of the operations is built on servicing gray, semilegal 
business.   But there are no levers of influence.   A million or more 
dollars may be absolutely legally withdrawn from accounts.   Legislation 
must give oversight authorities an opportunity to interrupt shady 
financial structures' activity within the shortest possible time periods. 
    Operations involving cashing in utilize an intermediary link, 
non-residents:   They withdraw money, then disappear, and no one is the 
wiser.   Therefore, in the initial phase I'm proposing to legislatively 
reinforce a ban on the withdrawal of large sums through plastic cards.   
This draft law is being reviewed right now in a working group of the 
State Duma's Banking Committee.   It will give the Central Bank the right 
to impose such limitations.   But the need to pose the issue more broadly 
arose after recent consultations with the Bank of Russia.   To not only 
impose limitations for non-residents with respect to the cashing of 
foreign-exchange funds but to also activate a mechanism of the 
self-cleansing of the banking system.   That is, to give banks the right 
(after a proper analysis of clients' credit history and other data) to 
refuse to conclude agreements to open a bank account for them.   And 
more:   If a client abuses a bank's trust, performs suspicious operations 
indicating the possibility of the laundering or legalization of "dirty" 
money, a bank should receive the right to obligatorily close such an 
account within two weeks.   Its owner must inform the bank of the new 
account's particulars within a specified time period for a transfer of 
non-cash funds.   Clearly a respectable bank will not take on such a 
    Thus, the considerable part of Russian banks that is truly fighting 
for financial operations' cleanliness is interested in cleansing the 
domestic banking system of "filth" and increasing its authority in the 


From: (
Sent: Tuesday, April 29, 2003
Subject: Putin and the Oligarchs -- What are the Implications for Russia

Radio Free Europe / Radio Liberty
1201 Connecticut Ave NW, Washington, DC  20036
Radio Free Europe/Radio Liberty
invites you to a briefing by
Marshall Goldman
Kathryn W. Davis Professor of Soviet Economics, Wellesley College
Associate Director, Davis Center for Russian Studies at Harvard University

Putin and the Oligarchs:
What are the Implications for Russia

Thursday, May 1, 2003
in Conference Room A (4th Floor) at
Radio Free Europe/Radio Liberty
1201 Connecticut Ave NW
[entrance on Rhode Island Ave NW, next to St. Matthew's Cathedral]

In the early 1990's, a small group of Russians emerged from the collapse 
of the Soviet Union claiming ownership of some of the most valuable 
petroleum, natural gas and metal deposits in the world. By 1997, five of 
those individuals were among the world's richest billionaires. These 
self-styled oligarchs were accused of using guile, intimidation, and 
occasionally violence to reap these rewards.  Noted specialist on the 
Russian economy Marshall Goldman will examine the structure of the Russian 
economy today, consider why it collapsed in 1998 and why the oligarchs 
remain a force in Russia, in spite of Putin's election promise to push 
them out of politics.

Marshall Goldman is the Kathryn W. Davis Professor of Soviet Economics at 
Wellesley College and the Associate Director of the Davis Center for 
Russian Studies at Harvard University.  He earned a B.S. in economics from 
the Wharton School of the University of Pennsylvania (1952), and an M.A. 
and Ph.D. in economics from Harvard University, as well as an honorary 
Doctor of Laws degree from the University of Massachusetts, Amherst, 1985. 
 He has also been elected to the American Academy of Arts and Sciences. 
Dr. Goldman has written several books Soviet and Russian economic issues, 
most recently The Piratization of Russia: Russian Reform Goes Awry
(Routledge, 2003).  Dr. Goldman publishes widely in Foreign Affairs,
Atlantic Monthly, Boston Globe, Harvard Business Review, New York Times,
Washington Post, and Los Angeles Times.  He is a frequent guest on CNN and
"Good Morning America" and has 
appeared on "NewsHour", "Crossfire", "Face the Nation", "The Today Show", 
"Nightline", and NPR.

Please RSVP by Wednesday, April 30, 2003 by email to
, by telephone to Melody Jones at 
(202) 457-6949, or by fax to (202) 457-6992.


Date: Tue, 29 Apr 2003 
Subject: book presentation: Andrey Platonov 
From: Robert Chandler 

Andrey Platonov¹s 'Soul', newly published by Harvill (ISBN: 1-843-43038-X),
is one of the great works of C20 Russian Literature.  Robert Chandler, one
of its co-translators, will discuss and read from this extraordinary novel,
set in Central Asia and embodying insights not only from Freud and Marx, but
also from Sufism and Zoroastrianism.  An unexpurgated Russian text of Soul,
written in 1935, was first published only in 1999.

1) at LRB BOOKSHOP, 14 BURY PLACE, LONDON WC1.  7th May, 6.30 for 7.0 p.m..
Tickets: £3, can be reserved through Nicky Spice --  --
and must be claimed by 6.45.

2) at PUSHKIN CLUB, 46 LADBROKE GROVE, W11.  3rd June, 7.15 for 7.30 p.m.
Tickets: £3 at the door.
This evening will include discussion of translation problems.

³Into the courtyard of the Moscow Institute of Economics walked a young man
who was not a Russian, Nazar Chagataev.  He looked around in surprise and
came back to himself from the long time that had passed.  He had crossed
this yard again and again over the years; it was in these buildings that his
youth had gone by, but he felt no regret.  He had climbed up high now, onto
the mountain of his mind, and from there he had a clearer view of the whole
of this summer world, now warmed by an evening sun that had had its day.²
                            (from the first page of Soul)

Enquiries: 020-7603-3862.   OR:


Financial Times (UK)
April 29, 2003
Russia: Flagship project and minefield 
By Rafael Behr
It could be the sale of the century: 30 big thermal generating plants and 72 
smaller generation and distribution facilities, plus miscellaneous assets, 
consolidated and packaged into competing private companies.

Throw in partnership with the Russian state, powerful vested interests among 
the country's industrial oligarchs and a commitment to keep the lights on in 
the remotest regions of Eurasia and you have Unified Energy Systems (UES), 
flagship reform project and political minefield.

Plans to restructure UES, the first Russian energy monopoly to be broken up, 
have been in the pipeline for years, but were finally approved by parliament 
earlier this year.

It is a controversial business. Millions of ordinary Russians depend on UES 
assets to keep warm during the winter. A smaller number of more powerful 
Russians depend on UES assets to fire their industrial empires (or consume 
the combustible natural resources they control).

The latter group has bought into the company ahead of the planned reform. 
Basic Element, the country's largest aluminium company, holds an estimated 2 
per cent and MDM, a financial group with interests in Russian coal, has about 
8 per cent.

The state has a 52 per cent stake, which it will keep after the reform. The 
national transmission grid, nuclear facilities, big hydro-electric plants and 
the handful of overseas assets are not for private hands.

The government also customised the original restructuring plan to limit the 
rate at which consumer prices can rise and to prevent any single shareholder 
controlling more than 40 per cent of regional power markets.

The changes were a political necessity. Privatisation has a bad name in 
Russia. The mass sales of the 1990s concentrated much of the nation's wealth 
in the hands of an elite, which is mistrusted by many Russians. Anatoly 
Chubais, the architect of the process, is reviled for letting it all happen.

Mr Chubais is UES chief executive and author of the electricity reform plan. 
Members of parliament, facing re-election in December, were disinclined to 
give Mr Chubais' blueprint the nod un-amended.

But some kind of reform is urgent. UES, which controls 100 gigawatts of power 
and employs about 680,000 people, badly needs investment. Its generating 
assets are on average 30 years old. Some facilities date from before the 
Bolshevik revolution.

The Soviet system of heavy industrial and private subsidies left a culture of 
non-payment and inefficiency. Delinquent customers owe UES $440m from the 
first quarter of this year. The total debt is about $3bn.

Mr Chubais, meanwhile, wants to bring in more than $55bn in investment over 
the next 10 years. He sees wholesale liberalisation as the only source of 
capital, without which the service will start to fail Russian consumers, 
which, since it means blackouts and heating stoppages, is a political issue.

"To the question 'who is responsible for the fact that people froze this 
winter?' every fourth person answered 'UES'," Mr Chubais told an audience of 
Russian energy officials and businessmen. "You and I know it's not so, we can 
prove it. Nonetheless, that is the widely held opinion."

Mr Chubais is under no illusion about his popularity. His personal website 
has space for jokes at his expense. But the concern is that public mistrust 
is shared by would-be investors.

UES managers have clashed with minority shareholders, foreign portfolio 
investors among them, and Mr Chubais has seen off attempts to unseat him.

In the run-up to the reform bill's passage through parliament, minority 
shareholders again raised concerns that their interests were not adequately 
addressed and that measures to improve corporate governance had stalled.

UES shares, once the engine of Russia's relatively small exchanges, tumbled 
through the latter part of 2002, raising concerns that liberalisation would 
amount to a fire sale for the benefit of well-connected oligarchs.

Mr Chubais has lamented the lack of interest among strategic foreign 
investors and taken steps to reassure shareholders.

Meanwhile political sensitivities - exacerbated by the upcoming elections - 
mean key details of the process have been fudged.

"It's not clear what the rules are at this stage. Noone knows what the price 
of electricity will be, or what the price of gas will be," says Fyodor 
Tregubenko, power analyst at Brunswick UBS Warburg, an investment bank.

Also, under the amended law, the restructuring has no fixed timetable. 
Wholesale liberalisation is unlikely to get under way until 2006-7. 
Meanwhile, industrial interests and political lobbies will continue trying to 
mould the process to suit their needs, which is off-putting for would be 
strategic investors.

"I don't think there will be any interest at this stage by foreign 
investors," says Mr Tregubenko. "The game is largely influenced by Russian 

April 29, 2003
Russia To Borrow Billions of Dollars Abroad 
Russian government is more benevolent now towards writing off the Iraqi debt 

The Russian government tries its best to adjust its skills and abilities to 
the constantly changing world conjuncture. Ministerial departments compete 
with each other, changing and modifying one plan after another several times 
in a month. Yet, the result always remains unchanged - the money shortage. 

At today's session, the government approved the layout of the perspective 
financial plan for the period of 2003-2005. The document was prepared by the 
Russian Finance Ministry, under Finance Minister Aleksey Kudrin's personal 
control. To all appearances, the new document is not going to result in any 
considerable progress, there is no economic ambition either. As Aleksey 
Kudrin stated, the level of income that had been achieved so far was not 
going to either drop or grow. The oil price on the world market will not cost 
more than $20 per barrel, and the government will have to borrow not less 
than six billion dollars on the foreign market in the coming couple of years. 
This money will be used to refinance Russia's foreign debt. There is only one 
positive thing about it: it was promised that Russia would not raise any 
loans from the World Bank and the IMF. 

According to the layout, Russia will most likely try to do without eurobonds, 
the placement of which was previously promised to take place this year. One 
may thank Uncle Sam for rattling the saber and waging a small victorious war 
in Iraq. High stable prices on oil allowed to set up a small financial 
reserve. Yet, it deems that it won't be enough anyway. That is why, according 
to the financial plan that was approved for three years today, the Russian 
government decided to borrow some money on the international market. Next 
year, it is planned to borrow 2,2 billion dollars and in a year - four 
billion dollars. This is what the governmental plan stipulates. Last year, 
the government tried to convince the country that everything was fine with 
finances, that no one was going to raise any loans. However, foreign 
financial experts had a different point of view on the situation, although 
their opinion was not echoed in the Russian media. Furthermore, governmental 
officials were cunning in their manipulations with budgetary revenues, peak 
foreign debt payments and privatization program. 

Today, Aleksey Kudrin assured that the government would take the maximum of 
its efforts to balance the clearing of the Russian debt to international 
financial institutions. There is money to pay the debt: the government plans 
to pay 41-43 billion rubles to foreign creditors (the money was obtained from 
the property privatization), as well as the funds, which were obtained from 
precious metals and stones sales - some 20 billion rubles. Thus, Russia will 
pay its own money for the debt. 

However, in addition to the foreign debt, the government has the burden of 
other financial commitment. For some reason, the budget of the current year 
did not take that expenditure into its account. Apparently, this gap will be 
filled with the money that is going to be borrowed on the international 
financial market. The government needs to add some more money for security 
and defense. Of course, the budget of the next year stipulates for 100 
billion rubles for defense (the government is to discuss the draft budget 
2004 on June 5th). Yet, the blitzkrieg of the USA and Great Britain in Iraq 
scared both senior ministerial officials and a lot of politicians. One shall 
assume that the Russian defense spending will be increased before the budget 
of the next year is approved. 

Furthermore, Finance Minister Aleksey Kudrin said that education, science and 
healthcare were also a great priority. This means that the spending on these 
fields is to be increased too, although Mr. Kudrin previously promised to cut 
it. In connection with all of the things mentioned above, one may not doubt 
that there will be money found for security and defense. The situation is not 
that clear when it comes to teachers, professors and doctors. 

The Iraqi debt to Russia is obviously not going to be a part of the Russian 
income. Despite previous harsh statements regarding the issue of the Iraqi 
debt, Aleksey Kudrin shows more benevolence about the rescheduling of the 
Iraqi debt, within the scope of the Paris Club, of course. Russia has already 
had the experience of writing off huge debts of developing countries in the 
Paris Club. Well, this is a noble thing to do - to write off debts of poor 
countries and to pay own debts and to borrow funds from abroad. 
Kira Poznakhirko

Date: Tue, 29 Apr 2003 10:31:39 -0400
From: Marina Adamovitch 
Subject: Continent/Kontinent, #115, 2003. Quarterly Review

In #115 Continent published: 
"The main events of Russian Orthodox Church (ROC)'s life in the media,
December-January 2003". Here one can find the information about VII World
Russian Sobor (Congress) "The Faith and Labor: spiritual and cultural
traditions and economic future of Russia"; the review of the articles from
Russian newspapers about the ROC -Vatican relationship; the press' review
about the controversy surrounding the attempts to introduce a new school
textbook on religious education. 
The editorial article "The Case of Fr. Paul Adelgeym" analyzes the reasons
for the persecution of the orthodox priest Fr. Paul Adelgeym, the author of
a book "The Church's Dogma in the Canon and Practice" (Pskov, 2002). His
book lights up the main problems of the modern church, its destiny, the
relationship between different groups of believers, the role of the
hierarchy in the modern church. 
In the section "Russia and the World at the Turn of the Century", Ilya
Smirnov dedicates his article "Trotsky's Prophecy" to the analysis of the
state government system of modern Russia.  The author of the article
writes: "If corruption is the basis of the government system, it is no
longer corruption in the traditional (Western) sense, it is a different
social phenomenon".  Smirnov analyzes this phenomenon of "corruption as a
governmental basis".  According to the author, this phenomenon cannot be
looked at from the criminal law angle.  The socio-economic nature of
Russian ruling class is such that the so-called "corruption" is not a
criminal/punishable deviation, but rather a normal mechanism that ensures
the re-distribution of income between the representatives of the ruling
class.  There is currently no name for the ruling class in modern Russia.
The author of the article suggests "nomenklatura's oligarchy".  After this
Smirnov discusses the prospects of national "paracapitalism" and the role
of V. Putin in the development of Russia.  In the author's opinion, the
popularity of the president among the people is linked to the fact that
Putin "re-evaluated the results of reforms" that were performed by
"nomenklatura's oligarchy" in the most sensitive, Caucasus areas.  However
the author doubts that Putin has enough power to seriously reform the
socio-economic foundations of the developed regime.  And the modern
intelligentsia that doesn't belong to a 'political' class cannot change
anything in the modern social situation.  It had a chance that was given by
Gorbachev in 1987, but it has missed that chance.
The highlight of the issue is the article dedicated to "The Apparitions of
The Blessed Virgin Mary at Medjugorje". Since 1981, in a small village
named Medjugorje in Bosnia-Herzegovina, The Blessed Virgin Mary has been
appearing and giving messages to the world. Millions of people of all
faiths, from all over the world, have visited Medjugorje and have left
spiritually strengthened and renewed. Our Lady (Gospa) continues to give
messages to six young people from the village of Medjugorje. These six
young people ("visionaries") have had apparitions of the Blessed Virgin
Mary since June 24, 1981. In addition to these messages, Our Lady is to
give each of the six visionaries a total of ten "secrets" or happenings
that will occur on earth in the near future. Some of the secrets pertain to
the whole world while others concern the visionaries themselves or their
local village. 
Continent published the extracts from the books and Internet articles about
The Apparitions of The Blessed Virgin Mary, some of Her Messages and an
editorial analysis of The Prodigy.
As always, Continent gives a digest of Russian periodicals (last quarter of
2002) on the subjects of philosophy, history and literature.

Subscribe to Continent - a literary, political and religious quarterly that
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Wall Street Journal
April 29, 2003
Chain of Misery
Mr. Sestanovich is a senior fellow at the Council on Foreign Relations and a 
professor of international diplomacy at Columbia University.

In 1958, Alexander Solzhenitsyn began collecting material on the Soviet 
labor-camp system. When he finally published "The Gulag Archipelago" 15 years 
later, in three big volumes, he made no claim to have written the last word 
on the subject. His effort, he wrote, had produced only "a peephole into the 
Archipelago, not a view from the tower."

It was, of course, false modesty. Mr. Solzhenitsyn had made an obscure 
bureaucratic acronym -- gulag is short for Main Camps Administration -- into 
a metaphor for the entire Soviet regime. And he had made himself, with Andrei 
Sakharov, that regime's greatest critic and judge.

Yet what Mr. Solzhenitsyn had written was not exactly a history of the Gulag 
, and he said he "would not be so bold as to try" to write one. How could he? 
He didn't know the end of the story, official documents were not available 
and few memoirs had yet made it past the censors. Other books, and other 
writers, would have to finish the job.

What Mr. Solzhenitsyn hoped for, Anne Applebaum has now done. "Gulag : A 
History" (Doubleday, 677 pages, $35) achieves the "view from the tower" that 
he was denied. Helped on by all that the collapse of Soviet communism makes 
possible -- a vast memoir literature, access to official archives, the 
support of Russian scholars and human-rights organizations, and the chance to 
interview survivors and tramp the hallowed ground of forgotten camps -- Ms. 
Applebaum has written an affecting book that enables us at last to see the 
Gulag whole.

A labor-camp system in which coercion and "rationality" went together.
She presents two different histories at once -- the rise-and-fall story of 
the camps as a Soviet institution and the story of what happened to the 
prisoners in them. For most readers, the second of these will have the 
greater emotional impact. Ms. Applebaum portrays every phase of what befell 
the Gulag's inmates in unflinching detail. Although her table of contents -- 
with separate chapters devoted to "Arrest," "Prison," "Transport, Arrival, 
Selection" and so on -- may hint at a dry tale, "Gulag " is in fact 
relentlessly wet. It does not sensationalize, but its appalling story is 
choked in blood, mud, ice, feces, filth, pus and tears.

Ms. Applebaum grants that the Soviet camp system was not created, as the Nazi 
death camps were, for mass extermination. Yet no imaginable brutality or 
brutishness, no violation of human dignity, seems missing here. Millions of 
people, over decades, passed through a system in which they were fed barely 
enough to live; treated like beasts of burden; given little or no protection 
against climate, disease or sadistic guards; and left to die in large numbers.

For what? Anyone tackling the enormity of the Gulag comes up against this 
question, and Ms. Applebaum canvasses the explanations, from the ambitions of 
Lenin and Stalin to the boredom of camp guards ("fourth-class people, the 
very dregs," one of their commanding officers called them). Many readers are 
likely to be surprised by how much attention she pays to the economic logic 
behind the camp system, but she does so for good reason. As an institution 
the Gulag reflected the Bolshevik drive to remake the human personality by 
remaking the world of work: hence the term "corrective labor." To achieve 
this aim, Soviet leaders were ready to enforce their own ideas, however 
bizarre, of what constituted a "rational use" of the manpower at their 

Coercion and "rationality" went together: hence the euphemistic term "command 
economy." Did Moscow want to tap the natural resources of the Russian far 
north? The Gulag could help. As the commander of one of the largest northern 
mining camps explained: "If we had sent civilians [instead of prisoners], we 
would first have had to build houses for them to live in."

The idea that the camps could be thought economically rational infuriated Mr. 
Solzhenitsyn, and he fulminated against it at length. But his rebuttal was 
heavy on principle, light on proof. Ms. Applebaum, by contrast, gives us an 
inside sense of how Kremlin views changed over time. Shutting down the Gulag 
eventually became the rallying cry of Bolshevik budget-cutters, but no one 
had the courage to tell Stalin himself that this instrument of repression had 
become too expensive. It was the head of the secret police, Lavrenti Beria, 
of all people, who first emerged, upon Stalin's death, as the champion of 
prudent financial management.

Mr. Solzhenitsyn wrote "The Gulag Archipelago" to destroy the Soviet regime. 
He had to make reading it an overwhelming experience, and he succeeded. 
Despite his current reputation as moralist scourge and traditionalist bore, 
Mr. Solzhenitsyn was a polemical genius. Given his material, it was not hard 
to shock, anger or sicken readers. But he could also charm and persuade them, 
and make them laugh out loud. Whatever you thought before, once you had read 
his book you couldn't think about the Soviet regime in quite the same way 

Anne Applebaum writes to keep that regime alive -- in memory. Compared with 
its predecessor, "Gulag : A History" is a mere book, not an experience. But 
it is a valuable and necessary book, the kind that Mr. Solzhenitsyn hoped for 
and that he, 30 years ago, did much to make possible.


April 29, 2003
Ibragim Alibekov and Sergei Blagov
Editor’s Note: Ibragim Alibekov is the pseudonym for a Kazakhstani
journalist. Sergei Blagov is a Moscow-based specialist in CIS political

Russia and five other CIS countries have formalized a security alliance
that potentially could help boost Moscow’s strategic presence in Central
Asia. At the same time, efforts to promote greater economic cohesion among
CIS states continue to struggle to gain traction. 

At an April 28 summit, Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan and
Tajikistan formally created the Collective Security Treaty Organization
(CSTO), which will attempt to provide a more efficient response to
strategic problems confronting member states, specifically terrorism and
narcotics trafficking.

The CSTO is an outgrowth of the 1992 Collective Security Treaty, which
sought to promote greater strategic cooperation among the signatories. The
organization has now committed to creating permanent institutions
responsible for budget management and strategic military planning, with
Russian officers likely to dominate the newly created CSTO staff. The bulk
of the organization’s attention and resources will be initially
concentrated in Central Asia, with a rapid deployment force to be stationed
at a Russian military facility at Kant, Kyrgyzstan. [For additional
information see the Eurasia Insight archive]. 

Since the September 11 terrorist attacks, the United States has established
a strategic presence in the region, with bases in Kyrgyzstan and
Uzbekistan. Some Russian policy makers believe the CSTO has the potential
to help Moscow reestablish its high strategic profile in what traditionally
has been its sphere of influence. [For additional information see the
Eurasia Insight archive]. According to a report in the Russian daily
Nezavisimaya Gazeta, some CSTO summit participants pressed Kyrgyz officials
to curtail basing rights given to US forces at Manas. 

Russian President Vladimir Putin downplayed the notion that Russia seeks to
utilize the CSTO to reduce US influence in the region, saying that the
organization would strive to contain the flow of drugs coming out of
Afghanistan, and counter the threat posed by radical Islamic organizations
in Central Asia. [For background see the Eurasia Insight archives]. Putin
stressed in a television interview that elements of the Taliban and al
Qaeda are regrouping and posing a fresh threat to regional security. [For
background see the Eurasia Insight archive].

At the same time, leaders of participating states acknowledge that the CSTO
remains an organization mostly on paper. They also tacitly admit that,
given past experience with CIS integration initiatives, full implementation
of the CSTO’s strategic plans is far from assured.

Tajik President Imomali Rahmonov, who hosted the CSTO summit in Dushanbe,
asserted that a "solid foundation for further efficient work" has been
established for the organization. "The main stress [of the meeting] was
placed on the need for strict implementation of decisions adopted with the
organization," Rahmonov told Tajik television April 28.

Some political analysts believe the impetus for the formal creation of the
CSTO is concern over the US tendency under the Bush administration to take
a unilateralist approach on strategic issues, as recently underscored by
the American military’s successful campaign to topple Iraqi dictator Saddam

Other observers believe that with Central Asian security conditions
becoming more complex, countries in the region are eager to hedge their
bets by expanding cooperation with all regional powers, including China,
Russia and the United States. Kazakhstan in particular is eager to pursue a
"multi-vector" policy, Maulen Ashimbaev, the director of Kazakh Institute
for Strategic Studies, said in an interview with the Express-K newspaper.
Over time, Central Asian analysts expect existing US-Russian competition to
give way to greater cooperation in addressing regional security threats.

In the days prior to the CSTO summit, two economic-oriented meetings failed
to make much headway in promoting integration efforts. Officials attending
an April 25 CIS summit in Moscow examined various economic and political
topics. Russian Prime Minister Mikhail Kasyanov indicated that Russia
"favors any initiatives to promote integration and to guarantee more
effective work." Among the main topics of discussion was a plan by Russia,
Belarus, Kazakhstan and Ukraine to forge a core group within the CIS. [For
background see the Eurasia Insight archive]. Some political observers say
that formation of such a core group could render the larger CIS redundant. 

At the CIS gathering, other member states expressed interest in possibly
joining the so-called core group. And Kasyanov sought to reassure that the
establishment of a "common economic space" would not leave behind those CIS
states currently on the outside. Kasyanov reiterated that expert groups aim
to complete a framework agreement for core group operations by September. 

On April 27, members of the Eurasian Economic Community (EEC) – Russia,
Belarus, Kazakhstan, Kyrgyzstan and Tajikistan – met in Dushanbe.
Discussions touched on a variety of strategic subjects, including the entry
of member states into the World Trade Organization and the possibility of
forming an EEC customs union, without delving much into specifics. Perhaps
the most prominent action taken by EEC participants was a decision to grant
Armenia observer status. The EEC also expressed intent to pool resources to
complete a hydro-electric power station in southern Tajikistan. 


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