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Western Press Review: Finance--From Privatization To Pyramids

  • Ron Synovitz



Prague, 14 February 1997 (RFE/RL) -- From privatization to corruption and pyramid schemes, Western newspapers today are commenting on financial issues that effect the transition process in Eastern Europe and the former Soviet republics.

FINANCIAL TIMES: Russia's "black economy" accounts for 40 percent of economic activity

Covering a Prague conference on money laundering, Vincent Boland reports stark accounts of how Russia's organized crime networks are draining the country of hard currency. Boland says an estimated $60 billion has been moved out of Russia to overseas accounts in the past five years. He quotes experts who say that the money drain is continuing at a rate of $12 billion a year. He also notes a Swiss law enforcement estimate that at least $10 billion of Russian Mafia funds are now deposited in Swiss bank accounts.

The basis of Boland's report is a speech given at the conference yesterday by Sergei Shibaev, a former partner at the accountancy firm of Coopers & Lybrand in Moscow. Shibaev, according to Boland, said that financial institutions in Switzerland and Cyprus are the favored destinations for Russian mafia money. He also said Chechnya is a leading center for laundering funds obtained in Russia through criminal activities. But Shibaev noted as well that much of the money being sent out of Russia is not from criminal activities. Rather, he said, it is "legitimate money" that is being sheltered from soaring crime, political instability and the high taxes that have led to widespread tax evasion in Russia.

Shibaev concluded that it is impossible to determine how much of Russia's total flight capital was "clean." But he estimated that the "black economy" accounts for about 40 percent of all Russian economic activity.

FINANCIAL TIMES: Bulgaria's omens for success in obtaining economic support are good

An editorial on the paper's leader page says that news from crime-ridden Bulgaria "has been bad for so long that it is a relief to welcome the formation of a new caretaker government." The newspaper finds that the caretaker prime minister, Stefan Sofianski, has proven himself as "one of the most capable opposition leaders" in his work as the mayor of Sofia.

The editorial goes on to say that economic salvation for Bulgaria now depends on the ability of Sofianski and President Petar Stoyanov to "ensure that emotions are kept under control" through the parliamentary elections scheduled in two months time. The newspaper writes: "This should be an opportunity for all parties to concentrate on telling voters how they intend to deal with the country's deep economic crisis." It says that Bulgarians shouldn't launch "divisive witch-hunts and calls for revenge" against the former Communists who are widely blamed for the corrupt schemes that have drained the country's assets.

The paper concludes that Bulgaria's "omens for success" in obtaining economic support from the International Monetary Fund "are now reasonably good." It says: "All parties now accept that the key to staving off default is the establishment of a currency board, which effectively takes monetary management out of the hands of the government."

WALL STREET JOURNAL EUROPE: A Ukrainian metal plant holds a monopoly on the metals industry

A column by Matthew Brzezinski in today's edition closely examines the proposed privatization of Ukraine's profitable Mykolayiv Alumina plant. Brzezinski says that "old-style virtual monopolies (left over from Soviet times) now offer private owners lucrative strangleholds on captive markets." He quotes Ukrainian privatization agency chairman Yuriy Yekhanurov as saying that the Mykolayiv plant now holds a monopoly in the metals industry and "is among the most profitable enterprises undergoing privatization."

Brzezinski says this explains why it has taken Kyiv so long to sell off the plant. "No one appeared to be in any great hurry to unload the moneymaker." He says this has only frustrated potential foreign investors like London-based Trans-World Metals and South Korea's Daewoo, who reportedly are interested in buying Mykolayiv shares. Brzezinski notes that, like so many recent privatization deals in Eastern Europe and the former Soviet republics, Mykolayiv's senior managers have been fighting to try to retain a controlling stake. Brzezinski says: "With its plot twists, back-room maneuvering and intrigue, the privatization process has all the makings of a soap opera" (i.e., a popular melodramatic television program like "Dallas").

SUDDEUTSCHE ZEITUNG: The West should refuse financial aid to Serbia's Milosevic

An editorial in yesterday's edition says the West should refuse to send financial aid to Serbian President Slobodan Milosevic's regime until Belgrade implements real democratic reforms. The paper says the potential for police controls in Serbia should be reduced, restrictions on free media should be removed and "all the prerequisites for free elections" should be put in place.

The editorial says that Milosevic now needs financial support like he needs "air to breathe." It says Milosevic is afraid of an explosive social situation much more than he is concerned about opposition demands for democracy. The paper says that when Serbia's rural population finally finds that they have nothing to eat, they will join protests calling for Milosevic's resignation. It concludes that "the problem of Milosevic will be solved by itself" when basic democratic principals are introduced. Until then, it says, there is no chance for an easing of tensions in Serbia.

FINANCIAL TIMES: Milosevic may use privatization funds to keep his grip on power

An opinion column by Guy Dinmore in today's edition points out that Milosevic may use funds from proposed privatizations to prevent a social crisis and keep his grip on power. Dinmore notes that Serbia finally appears to be making plans to privatize parts of its huge and inefficient state sector. He writes: "Privatization has become one of the issues in the weeks of pro-democracy rallies in Belgrade...Leaders of the opposition Zajedno (Together) coalition back privatization but accuse the regime of selling state assets" cheaply to stave off bankruptcy.

Dinmore quotes independent economists who say that Serbia cannot expect a serious inflow of capital this year, so it must sell off state enterprises to pay wages and pensions, and to support Belgrade's army of more than 100,000 police officers. Dinmore says Serbia's telecommunications sector and the state oil company Nis are likely to be the first things sold off. He says foreign firms reportedly interested in deals with Belgrade include the Italian telecommunications firm Stet, along with Texaco Oil of the United States and the British branch of Shell Oil.

FRANKFURTER ALLGEMEINE ZEITUNG: Only two percent of international aid was dispersed to Bosnian Serbs

Referring to financial troubles elsewhere in the former Yugoslavia, a report in today's edition notes that only two percent of international aid targeted for Bosnian Serbs was dispersed last year. The paper says this is primarily because the Bosnian Serb leadership refused to participate in crucial international aid conferences last year.

LONDON INDEPENDENT: Albania is a center for drug smuggling and other crimes

The paper today carries a report by Andrew Gumbel that depicts Albania as "a center for drug-smuggling, Yugo-embargo busting and money-laundering." Gumbel says that "frustrated intelligence sources" who call Albania a "gangster state" have shown him "detailed evidence of collusion by members of Tirana's Democratic Party" in an extraordinary range of crimes."Gumbel says those allegedly involved include ministers in the present government.

Gumbel writes: "Classified documents have circulated in Western capitals for the last two years citing evidence" of the ruling Democratic Party's involvement in "drugs trafficking, illegal arms trading and large-scale sanctions-busing via oil sales to Serbia and Montenegro" during the war in Bosnia. He says that the European Union in particular has turned a "blind eye" in its policy of almost unconditional support for President Sali Berisha's government. But, Gumbel argues, violent protests following the collapse of shady pyramid funds have shattered the belief that Berisha could provide stability in his corner of the Balkans. Gumbel concludes that "the West must ask itself why it did not see the debacle coming."

LONDON TIMES: Albanian smuggling rings are pleased by a police pullout

A report by Richard Owen from Albania's Adriatic port of Vlore in today's edition says that mafia-controlled smuggling rings in the city are "overjoyed" by a police pullout from Vlore, where violent clashes have continued for days. Owens says smugglers of illegal immigrants, cigarettes and drugs have taken back more than 100 speedboats that had been confiscated by police. He says the smugglers are plying their trade again.
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