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Corruption Watch: November 7, 2003

7 November 2003, Volume 3, Number 39
As a series of bombings hit targets in Baghdad on 27 October in what has come to be known as the Ramadan Offensive in Iraq, "Jane's Intelligence Digest" on 31 October reported that the largest Islamic militant group in Algeria, the Salafist Group for Call and Combat (GSPC) declared itself in support of Al-Qaeda. In a statement released by the new, apparently ultra-hard-line leadership, which took over control of the group on 22 October it states: "We strongly and fully support Osama bin Laden's jihad against the heretic America and as well we support our brothers in Afghanistan, the Philippines, and Chechnya."

If the "Jane's Intelligence Digest" report is true, (the author of the report states that it was not immediately possible to verify the authenticity of the GSPC statement) it would mean that a large number of combat-ready cadres might become available to Al-Qaeda for actions around the world, including in Iraq where there have been reports of "outsiders" joining in the fighting against coalition forces. "The New York Times" reported on 28 October that U.S. officials estimate that there are "between 1,000 and 3,000" foreign fighters in Iraq.

One report in the British "Independent" daily on 31 October said that a prime suspect wanted by the coalition forces for orchestrating the attacks in Baghdad, according to a source in the Pentagon, is Izzat Ibrahim al-Douri, a former aide to deposed Iraqi President Saddam Hussein who "is working with Al-Qaeda to coordinate attacks in Iraq." This report, however, was rejected by "one well-informed Iraqi who said: 'I don't believe that a nonentity like that is orchestrating all this turmoil.'"

After the 27 October attacks in Baghdad, U.S. Brigadier General Mark Hertling, deputy commander of the 1st Armored Division, was quoted in "The New York Times" on 28 October as saying that the blasts were the work of "foreign fighters." His view of the situation on the ground contradicted an earlier statement by Brigadier General Martin E. Dempsey, the division commander who had said that he saw "no evidence of an infusion of foreign fighters in Baghdad." Yet another view was expressed by Major General Raymond Odierno, commander of the U.S. Army's 4th Infantry Division was said that "A very, very small percentage of foreign fighters" were responsible for attacks on American forces.

Such a dramatic difference of opinion by top U.S. field commanders indicates an intelligence failure of some proportions. "The New York Times" writes on 28 October that according to several officers, the U.S. side is "relying too much on sophisticated intelligence-gathering devices, and not enough on human intelligence." RK

Swiss authorities have said that newly adopted anti-money laundering laws were working since Switzerland became a founding member of the Paris-based Financial Action Task Force (FATF). However, authorities there plan to increase the number of investigations by up to 40 percent this year as compared with 2002, the British "Financial Times" reported on 31 October.

Banking regulators announced on 30 October that they had instituted better client identification measures and planned to extend reporting from mainstream banks and financial institutions "to additional sectors, including gaming, real estate, and precious stones and metals." RK

Without any formal explanation, Ukrainian Prosecutor-General Svyatoslav Piskun was fired by President Leonid Kuchma on 29 October. The terse announcement appeared on the website of the president ( at the end of the workday. Two days later, Kuchma sent parliament a letter indicating that his choice for the new prosecutor-general was Gennadiy Vasylyev, the first deputy speaker of parliament.

A day before Piskun was fired, a press conference was held to repudiate a statement by Deputy Prosecutor-General Viktor Shokin that a group of "turncoat" Interior Ministry (MVD) and Security Service of Ukraine (SBU) officers had been uncovered. The newly appointed head of the SBU, Ihor Smeshko, and the new head of the MVD, Mykola Bilokin, both spoke critically of the work of the Prosecutor-General's Office as they announced that no such "turncoats" existed.

On 29 October, Olha Kolinko, the head of a presidential anticorruption watchdog committee, accused Piskun of a variety of wrongdoings -- from misuse of government funds to inefficiency in the battle against corruption. According to on 30 October, it was Kolinko who urged the president to relieve Piskun.

Piskun had been in office for just over one year. During his confirmation hearings, he promised to solve the murder of opposition journalist Heorhiy Gongadze within six months, but did not keep this promise. Lately, he seemed to be making progress on the case when it was announced that Oleksiy Pukach, the former head of the intelligence unit of the MVD, had been arrested on charges of involvement in the Gongadze case.

Piskun's most visible actions as prosecutor-general were his repeated attempts to jail one of the leaders of the opposition, Yulia Tymoshenko, on charges of defrauding the government of millions of dollars when she headed Unified Energy Systems of Ukraine during the time when Pavlo Lazarenko was prime minister. Tymoshenko was questioned by U.S. prosecutors in Kyiv in conjunction with the Lazarenko case.

Piskun also traveled to the United States a number of times while in office. During these trips he unsuccessfully tried to convince the FBI to give him the original recording made by Mykola Melnychenko in the president's office and tried to convince lawmakers that he was on the verge of solving the Gongadze murder. During one private meeting with a person close to the case, he stated that his hands were tied in this investigation by his superiors.

Reacting to the news of Piskun's firing, the head of the parliament's Committee on the Freedom of the Press, Mykola Tomenko, proposed that Piskun be asked to testify in parliament about what he was able to discover about the murder of Gongadze. RK

As the presidential elections in Ukraine, scheduled for next year draw closer, a number of incidents have occurred that indicate that the use of dirty tactics has already begun. Viktor Yushchenko, the leader of the Our Ukraine opposition bloc, announced in late October that he had received a number of death threats and that some 40 members of his bloc have been notified of investigations against them by the Prosecutor-General's Office. In response to this, President Kuchma announced that he had ordered the Security Service of Ukraine to provide bodyguards for Yushchenko.

On 30 October, Our Ukraine was scheduled to hold a regional conference in Donetsk, but at the last minute, the hall which had been rented for this purpose was cancelled by the city administration. When Yushchenko arrived in Donetsk with his party, a large number of demonstrators from local pro-Russian organizations were at the airport protesting his arrival. As members of Our Ukraine tried to enter the conference hall, they were blocked by hundreds of demonstrators while televised footage showed police standing by without interfering.

The following day another Our Ukraine rally was to have been held in the western Ukrainian city of Lviv. Here too, the oblast governor, an appointee of the president, announced that the hall was no longer available. The rally, attended by several thousand people, was held on the street outside the hall.

On 31 October, the "Ukrayinska Pravda" website ( published an alleged "secret" letter of instruction circulated by the presidential administration and signed by a high-ranking member of the administration, Yuriy Zahorodnii, ordering local governors to do what it takes to prevent Our Ukraine from organizing meetings and rallies in their regions. RK


By Taras Kuzio

In the Commonwealth of Independent States (CIS), leaders are afraid of being out of power. The reason is their high-level involvement in corruption during the "economic reform" of the 1990s. Being out of power means revenge by the newly elected opposition, a re-division of accumulated assets or, worse still, the application of anticorruption legislation. In both Russia and Ukraine, the authorities and the opposition have attempted, without much success, to assuage fears that privatization conducted in the 1990s will not be re-opened for corrupt dealings.

There is a close link between the deterioration of democratization in the CIS, the creation of hybrid regimes by elites who have "captured" the state, and corruption. Of the 12 CIS states, only two countries are exceptions to this link: Belarus and Moldova, led by neo-Soviet and communist leaders.

Belarus is led by President Alyaksandr Lukashenka and is, according to the Transparency International corruption watchdog, the least corrupt state in the CIS in 53rd place out of 133 countries (where 1st is the least corrupt). Why? Because Lukashenka has not allowed "economic reform" to take place and therefore no group of oligarchs have arisen who could then undertake "state capture."

Lukashenka's hint that when his term in office expires in 2006 he will contemplate running for a third term (which would require constitutional changes) has more to do with his authoritarian streak than a fear of being out of power because of corruption.

Moldova is the only country where communists have been re-elected to power. The Moldovan communists remain the countries' most popular force despite Moldova being Europe's poorest country. Yet these leaders are seemingly not corrupt and are not backed by oligarchs who simply do not exist in Moldova. One reason Moldova's communists do not fear being out of power is because there is no evidence of corruption within their ranks. Fear of being out of power by corrupt CIS leaders tends to breed authoritarianism.

In the remainder of the 10 CIS states, the link between democratization and corruption is more evident. All five Central Asian states have undertaken referendums to prolong their presidents' terms in office: Turkmenistan (1999 for life), Kazakhstan (2000), Uzbekistan (2002), Kyrgyzstan, and Tajikistan (2003). In Belarus (2001) and Armenia (2003) presidential elections were not held in a free and fair manner.

In Russia (2000) and Azerbaijan (2003) presidential elections were organized successions from prime minister to president. In Azerbaijan, the succession of father to son (Heidar to Ilham Aliyev) was the first dynastic succession in the CIS, making the country more akin to North Korea or Syria.

In Russia, President Vladimir Putin was Boris Yeltsin's chosen successor in the first of such organized successions in the CIS. Putin granted Yeltsin immunity from prosecution in return for him staying out of politics. The deal has held.

Such a deal could be a model for other CIS states, such as Ukraine. But, what is needed for such a deal to remain stable is a degree of trust on both sides. Putin's background in the KGB and its successor, the Federal Security Service (FSB), probably facilitated this. A second factor was the degree of "crimes" that Yeltsin was accused of (and thereby required immunity for).

In Ukraine, two of the three leading candidates (reformer Viktor Yushchenko and communist Petro Symonenko) are not from security-service backgrounds and are distrusted by Kuchma. A second complicating factor is the far larger degree of revelations about illegal activities that Kuchma is accused of involvement in. For example, despite periodically replacing the prosecutor-general, no progress can be expected in a resolution of the murder of opposition journalist Heorhiy Gongadze in fall 2000 until after Kuchma leaves office in November 2004.

In Russia, an understanding in 2000 between Putin and representatives of big business allowed the oligarchs to maintain their wealth in return for staying out of politics. Businessmen Boris Berezovskii and Vladimir Gusinskii were forced to flee abroad in late 2000 (following a precedent set by Ukrainian Prime Minister Pavlo Lazarenko the year before). Berezovskii funded from exile the Liberal Russia party, NGOs, and media outlets. The oil concern Yukos funded Yabloko and the Union of Rightist Forces. Neither of these three reformist parties poses a serious challenge to Putin.

The dramatic arrest of Yukos CEO Mikhail Khodorkovskii in fall 2003, only three months before parliamentary elections, has shown the instability of any deal between a new president and established oligarchs. Whereas it is in the interests of an outgoing president to go silently into "retirement" in return for immunity, the oligarchs are younger, dynamic, and self-confident, and therefore more unwilling to stay aloof from daily politics.

The attack on Yukos therefore has little to do with combating corruption, but with selective law enforcement, which is also used in other CIS states against political opponents. Putin is not launching a drive against the oligarchs. If this were the case, another highly wealthy oligarch, Roman Abramovich, governor of the Chukotka Autonomous Okrug and new owner of London's Chelsea soccer club, would also be imprisoned.

The link between corruption and democratization in the CIS was not an issue in the 1994 Ukrainian or 1995 Georgian presidential elections because privatization had not yet begun and the oligarchs were not yet the presidents' power base. In 1994, outgoing Ukrainian President Leonid Kravchuk had no need to seek immunity from prosecution (which he still does not possess and has never sought). Immunity has only become an issue for the 2004 and 2005 Ukrainian and Georgian elections because Kuchma and Georgian President Eduard Shevardnadze are both ending their second terms in office after a decade of corruption, privatization, and being allied to oligarchs.

The last two CIS states that are still to hold presidential elections are Ukraine and Georgia. The executive did not permit free and fair parliamentary elections in March 2002 in Ukraine and in November 2003 in Georgia. This would lead us to be pessimistic about the possibilities of them holding free and fair presidential elections in Ukraine and Georgia in 2004 and 2005 respectively because the stakes are too high for themselves and their oligarchic allies.

Dr. Taras Kuzio is a resident fellow at the Center for Russian and East European Studies, University of Toronto.