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Corruption Watch: January 10, 2002


10 January 2002, Volume 2, Number 1
SPOTLIGHT
ARMING ROGUE STATES
Illegal sales of armaments and munitions to rogue regimes and terrorist groups, along with indirect sales to terrorist organizations through fake end-user certificates, have been a problem for former Soviet and Warsaw Pact states.

The countries identified as being most involved in such sales are Ukraine and Belarus from among former Soviet states, and Slovakia and the Czech Republic from within the former Warsaw Pact. And despite numerous inquiries by the United Nations Security Council and special investigative commissions formed by the UN, the trade seems to continue.

In Ukraine, the Prosecutor-General's Office recently opened an investigation of charges against Ukrainian citizens who might have been involved in such activities.

Recent revelations, published in "The Washington Post," that senior Belarusian officials sold huge amounts of weapons to rogue regimes has so far failed to elicit a response from Minsk. The same holds true for Moldova and some Central Asian countries, such as Turkmenistan, suspected of having sold arms to the Taliban in the past.

In a confidential letter that perhaps sheds some light on the illegal arms trade, the head of the Ukrainian Security Service (SBU), Yevhen Marchuk discussed the problem of arms sales with the president of Ukraine at the time, Leonid Kravchuk. It is revealing in that the SBU head apparently did not know where the arms were destined. As it turned out, these weapons were bound for the bloody conflict in Croatia, which subject to a UN-enforced arms embargo. Eventually, some of these same weapons were resold to the Irish Republican Army and Basque separatists from ETA by Croatian arms dealers. Today, most of those responsible for the sales, including a former Ukrainian citizen, are awaiting trial in a prison in Turino, Italy.

Dated 12 February 1993, the following letter addressed to President Kravchuk has never been published in its entirety. It reads as follows:


Esteemed Leonid Makarovych,

The Security Service of Ukraine has in its possession information regarding violations of existing legislation and established procedures for the organization and execution of sales of armaments, military technology, and munitions. Unfortunately, in isolated cases these sales were concluded on the basis of unfounded references to your directives.

As I have informed you, the Security Service, on orders from the Ukrainian Prosecutor-General's Office, is conducting an investigation around the circumstances of armament sales by the Defense Ministry to the Panamanian company "Global Technologies Inc."

During the investigation it was found that numerous violations of existing legislation took place by individual officials of the Ukrainian Armed Forces who overstepped their official functions. We have received absolutely reliable information that officers in the Ministry of Defense were given bribes in U.S. dollars for their role in exporting armaments. A legal opinion of this will be provided by the Prosecutor-General's Office of Ukraine.

I want to inform you of the actions and statements made by individual officials of the Ministry of Defense which can implicate you personally as well as discredit Ukrainian state policy. Furthermore, if a criminal case were to be started, their statements can serve as a basis to have you questioned as a witness during a trial. They concern two instructions given by you in response to the inquiries of the foreign company as to military-technical cooperation which were related to you personally by the president of the company, Mr. L. Streshinsky.

The first such inquiry was examined by you on 2 October 1992. In it, Streshinsky requested that he be given the opportunity to acquire in Ukraine a large amount of armaments and ammunition. Your instructions were the following: "To Morozov K.P. [Editor's note: the minister of defense] and Antonov V.I. [Editor's note: the minister of machine construction, i.e. weapons] Please review this and, if it is favorable, decide."

As is shown by available documentary materials and explanations by officials from the Ministry of Defense and the Ministry of Machine Construction of Ukraine, your instructions were interpreted as an order to act since the word "decide" was used. Without any evidence about the possible benefits of this [word illegible] to you on making the decision, orders were immediately issued to provide the foreign company with special products [Editor's note: "spezvyrobiv," or armaments and ammunition] which began with the phrase: "According to the decision made by the President of Ukraine�" Thus Minister Antonov V.I. granted permission to export special products without the prior review of this matter by a meeting of the State Experts-Technical Commission and in violation of a resolution of the Cabinet of Ministers of Ukraine No. 153 of 25 March 1992. Using as justification your instructions [Editor's note: to Morozov and Antonov] a shipment was prepared for delivery overseas. This shipment consisted of 6 million rounds of ammunition, 12 thousand artillery shells, 300 machine guns, and other arms which were not included in the contract or agreement and exceeded the limits specified on the end-user certificate. They were all delivered to the port of "Oktyabersk" without any export documentation and loaded onto containers of the foreign company. The value of this shipment was $4 million.

On 14 December 1992, the State Expert-Technical Commission unanimously refused to grant Global Technologies Inc. permission for exporting a second shipment of armaments. However, on 18 January 1993, Streshinsky with the support of the head of your personal bodyguard service Lieutenant Colonel Palyvoda V.I. informed you of his company's request to immediately issue an export license and fulfill the contract. In the request he stated, without any basis, that the contract had been cleared by the Security Service (SBU-RK) and the Ministry of Defense. I want to inform you that neither I, nor Morozov K.P. had gotten any requests of this nature from anyone. We knew that if the contract were to be fulfilled it would lead to losses for the state and tried to increase the sales price by at least $1 million.

After your instructions "Antonov V.I. please decide without [word illegible]. Both Morozov K.P. and Marchuk Y.K. support. What is the question?" and your telephone conversation with him, export permission was granted and the special products were again prepared for delivery, again without the approval by the Expert-Technical Commission. The contract with Global Technologies Inc. was filled without increasing the sales price and it included only those items which were agreed upon earlier. Items not agreed upon or not included in the end-user certificate were not allowed. They are to be returned to stockpiles or sold abroad under different contracts and for higher prices.

Therefore, officials from the Ministry of Defense of Ukraine, justifying their actions by citing your instructions, sold abroad arms and armaments considerably below world prices. By fulfilling this contract, the state lost a significant sum of hard currency. As a matter of fact, in his explanation, Streshinsky himself acknowledged that he is purchasing armaments from Ukraine at the lowest possible prices. He confirmed that he gave bribes to those who assisted him in making the deal. These went to officials in the Defense Ministry who at first demanded $385,000 but agreed to $200,000.

I want to inform you, esteemed Leonid Makarovych [Kravchuk] that throughout the world a president is shielded from making decisions in regard to commercial deals with foreign companies, even more so when it comes to the sale of defense technology, armaments, and ammunition. Without a complete study of the nature of such questions by competent state organs, there can be severe consequences. Your instructions in response to proposals from Global Technologies, while being only recommendations in essence, were understood to be instructions and "indulgences" toward law-enforcement agencies in case they were to begin looking into the legality of their actions. You have already confiscated five copies of the first letter from the company with your instructions which certain officers from the Ministry of Defense kept not only in their offices, but at home as well in case they were to be called upon to explain the circumstances of the export of arms and ammunition.

Informing you of the above, I find it reasonable to ask you to retrieve both letters from Global Technologies Inc. with your instructions as such, which can compromise you personally as well as Ukrainian state policy. It is also possible that this information can find its way into the mass media.


Sincerely yours,

Ye. Marchuk,

Head of the Service

[Editor's P.S.: A year after this letter was written, on 8 March 1994, the transport ship, "Yadran Express" was seized in the waters between Italy and Albania by NATO authorities. It was loaded with contraband weaponry from Ukraine and Belarus bound for Croatia. The boat and its cargo are being held as material evidence in the trial in Turino.]

RUSSIA
BUSINESSMAN LINKED TO PRESIDENTIAL OFFICE IS CHARGED WITH BRIBING FSB CHIEF.
The Russian Prosecutor-General's Office has brought a charge of bribery against General Director Vyacheslav Aminov of Prominvest financial group, Interfax reported on 29 December. Aminov was taken into custody last week in late December, the agency said. Aminov has been released from custody on his own recognizance and is not allowed to leave Moscow.

Aminov is charged with bribing a public official (an offense under Art. 291 of the Russian Criminal Code), police sources told Interfax. The businessman is suspected of giving a $50,000 bribe to the director of the Federal Security Service (FSB), Nikolai Patrushev. Aminov's office, apartment, and summer house were searched the day before his detention, and compromising videocassettes were confiscated, according to press reports.

Prosecutor-General Vladimir Ustinov confirmed Aminov's detention and said that criminal proceedings against have been initiated. However, Ustinov declined to give any details and promised to supply complete information at the end of investigation.

Aminov is a public adviser to head of the presidential administration, Aleksandr Voloshin, according to media sources.

TAX POLICE BATTLE CORRUPTION IN THE RANKS.
Speaking at a press conference on 4 January, the head of the Moscow Tax Police Department, Viktor Vasiliev, said the Federal Tax Police will concentrate on fighting corruption within its ranks in 2002, RBK News Agency reported on 8 January. Vasiliev said eight tax policemen faced criminal proceedings in 2001, adding that figures were similar in 2000. He added that three employees of the Moscow Tax Police were convicted of abuse of power or bribery-related crimes in 2001, versus two in 2000.

Vasiliev said the security and anticorruption service within the Moscow Tax Police had been enlarged and transformed into a special department to deal with crimes within tax-police ranks. He added that senior officials within the organization had been replaced because their performance did not meet with requirements. He stressed that the special department focused on crime prevention. As a result of the department's work, more than 20 tax policemen were dismissed in 2001, according to Vasiliev.

At the same time, Russian tax police will step up their efforts to fight economic crimes, Vasiliev pledged. He said the Tax Police will be better-armed to combat economic crimes in 2002, noting that a new Russian Criminal Procedure Code will come into force on July 1 that expands the powers of tax police.

Vasiliev said his organization supported stricter punishment for tax-related crimes. He cited offenses that require the creation and use of complicated schemes of tax avoidance and significantly affect the state budget, in particular, and repeated tax-related crimes. Vasiliev said these proposals were being considered by the relevant State Duma committee and expressed hope that they would be approved by lawmakers this year.

Vasiliev is convinced that the new Criminal Procedure Code will enhance citizens' guarantees of civil rights and freedoms, since criminal proceedings over tax crimes will be launched only in consultation with the Prosecutor-General's Office. Moreover, he said, many actions -- including searches and detentions -- will require a court ruling.

Tax authorities at the press conference said the number of tax-related crimes had risen in 2001. But they stressed that the nature of such crimes was at a new and higher level. Representatives of the Moscow Tax Police said that last year authorities concentrated on preventing tax crimes across regions and the increasingly sophisticated schemes of tax criminals.

TERRORISM
JUND AL-ISLAM MEMBERS JOINING ISLAMIC GROUP.
The Sulaymaniyah newspaper "Hawlati" of 31 December noted that a number of members, cadres, and armed men from the now-outlawed Jund al-Islam have joined the Islamic Group, or KIG, in Kurdistan. A source told "Hawlati" that seven "Arab armed men along with their families" have joined and said more are more to follow. This is the most peaceful alternative to the recent fighting between the Jund and the Patriotic Union of Kurdistan (PUK). In another article in the same issue, "Hawlati" reported that 25 houses have been ransacked and burglarized over the past month. Among the houses and offices ransacked are two telephone and fax companies, as well as the home of a member of the PUK's organizing committee in the area (in the Sharazur region of Sulaymaniyah). In the Hurmal region of the same province, one of the arrested men has been identified as a Jund al-Islam member. ("RFE/RL Iraq Report," vol. 5, number 1, 11 January 2002)

KAZAKH CITIZENS REPORTEDLY FOUGHT FOR AL-QAEDA.
Kazakh nationals fought on the side of international terrorists in Afghanistan, FBI investigators reportedly stated after they questioned captured fighters in Afghanistan's Sheberghan (Jowzjan Province, northern Afghanistan) camp, Kazakh television reported on 4 January.

Kazakh mercenaries who were detained by Operation Enduring Freedom forces were reportedly members of the Al-Qaeda organization. U.S. investigators have information that some were middle-ranking commanders. The reports did not give the exact number of Kazakh citizens who were suspected members of Al-Qaeda.

The Kazakh Foreign Ministry meanwhile said it knew nothing about such activities. The head of the analysis department there said that no information had arrived via diplomatic channels about Kazakh citizens fighting in Afghanistan.

END NOTE
UKRAINE'S DECADE-LONG ILLEGAL TRADE IN ARMS

By Taras Kuzio

Recent accusations in the Western, Ukrainian, and Russian media that Ukraine has long been involved in illegal arms exports should not be of surprise to researchers, governments, and intelligence agencies who have long written about and monitored such activities. Evidence is allegedly to be found on the "Kuchmagate" tapes in the possession of former presidential guard Mykola Melnychenko, who has been seeking political asylum in the U.S. since April 2001.

Organized crime and corrupt state officials do not respect state borders in the postcommunist world. In May of last year, an Ilyushin-76 cargo aircraft was intercepted at the Bulgarian port of Burgas with $250,000 worth of arms. The guns were Czech-made, the air company was Ukrainian, the destination was Eritrea, and the end user was stipulated as Georgia.

Ukraine was in a relatively unique position in that as a front-line (first echelon) Soviet republic it possessed and inherited the best quality and large volumes of military equipment. Much of this was superfluous to Ukraine's security needs after 1992, and so it is not surprising that much of it found its way abroad, often illicitly.

A Ukrainian parliamentary commission found that Ukraine's 1992 military stocks were worth $89 billion and that, in the course of the next six years, some $32 billion of that was stolen, with much of it re-sold abroad. The investigation was headed by a parliamentary deputy and the former deputy defense minister, Lieutenant General Oleksandr Ihnatenko, who was court-martialed and stripped of his rank. Ihnatenko leaked some of his findings to Serhiy Odarych, who heads the Kyiv think tank Ukrainian Perspectives. Odarych was accosted and shot in the leg in July 1998 and says he was warned to stop publicizing those findings. As Odarch recalls, "The police said I shot myself to grab attention."

That the export of large volumes of arms could not be undertaken without state officials, the Security Service of Ukraine (SBU), and other bodies either being complicity involved or, at the very least turning a blind eye, is obvious. After all, taking a tank or a batch of Kalashkinovs out of Ukraine requires access to either an air- or seaport. Up to 80 percent of this Ukrainian trade was undertaken through the shadow economy, which has remained at approximately half of GDP throughout the post-Soviet era.

In the last decade, there have been many reports of Ukrainian arms surfacing in countless places around the world. During the Bosnian arms embargo, Ukrainian arms turned up on both the Muslim and Croat sides (as did former Soviet weapons from the then-Russian bases in the GDR despite Russia's support for Serbia), including 20 C-300 anti-missile batteries. Ukraine's arms also ended up in many other "hot spots" around the world, including: Sri Lanka in its battle against Tamil separatists (a military-transport aircraft and Mi-17 military-transport helicopters); Southern Yemen in its secessionist drive (MiG-29s, artillery, and anti-aircraft guns); Peru in its border conflict with Ecuador (light weapons and missile launchers); Angola in support of the MPLA government; and in the civil wars in Sierra Leone, Liberia, and Rwanda.

Official arms exports, such as tanks, have gone to Pakistan since 1996. Recent reports that Ukraine supplied weapons to the Taliban in Afghanistan could have come via Pakistan, its patron. (See "RFE/RL Crime, Corruption, and Terrorism Watch," Vol. 1, No. 8, 20 December 2001). Meanwhile, Iran has received MiG-29 fighters, tanks, and anti-ship missiles.

Ukraine's involvement in this trade has also been assisted by the Transdniester region, which has long been an economic black hole through which all types of contraband moves, from cigarettes to oil, gas, and weapons. The main seaport the Transdniester uses is Odesa. In 1996, the Moldovans issued eight customs seals to the region and, by September of this year, the new Moldovan government found that the Transdniester had made an additional 348 illegal customs seals. Re-elected Transdniestrian President Igor Smirnov's son heads the region's State Customs Committee. Moldovan President Vladimir Voronin recently complained that the Transdniester was a hotbed of smuggling, which is taking place with Ukraine's assistance. "We in Moldova have understood that Smirnov is a bandit. It is not clear who he is for Ukraine," Voronin added.

A major transit point for illicitly exported weapons from the Transdniester are Ukrainian ports in the Odesa region. The Transdniestrians have their own people in Illichevsk and Odesa who fabricate documents for goods shipped via Ukrainian ports allegedly coming from Moldova. The Ukrainian side has therefore refused to agree to Moldovan requests for joint customs posts, preferring to maintain Ukrainian border control with the Transdniester that allows an uncontrolled flow of such contraband. Last month, Ukrainian President Leonid Kuchma reiterated his opposition to joint checkpoints on the Transdniester-Ukrainian border because it would be tantamount to an economic blockade of the separatist enclave.

Most of these illicitly exported goods are weapons, the mainstay of the Transdniester economy. In the Soviet era, the region's military-industrial complex only produced military components. Currently, they have closed production cycles for small arms, a full range of different types of mortars, 43 Grad multiple-missile launchers, and grenade launchers.

A picture of Ukraine's illicit trade in arms can be now gleaned from millionaire gunrunner Leonid Minin, who was arrested in Italy in August 2000. Minin is a native of Odesa and emigrated to Israel in the 1970s before going into business after the collapse of the former USSR re-exporting oil from Russia. He is an associate of Alexander Angert (alias "The Angel"), a notorious Odesa godfather.

In Minin's Milan hotel room, Italian police officers found $150,000 in cash and half a million dollars in African diamonds. There was also a cache of 1,500 documents detailing his dealings in oil, timber, gems, and guns. Two weeks before his arrest, Minin chartered an Antonov-124 transport aircraft in Moscow; had it flown to Kyiv, where it was loaded with 113 tons of small arms AK-47's and 330 grenade launchers, sniper rifles, night-vision equipment), and ammunition; and then flown to Abidjan, capital of the Ivory Coast. Sixteen months earlier, another Antonov aircraft delivered 68 tons of small arms and ammunition to Liberia and Sierra Leone. The Ukrainian government protested that the end-user certificate was for Burkino Faso (which does not use former Soviet military equipment).

Recent accusations have been made by Labor Ukraine (TU) party leader Andriy Derkach of illegal arms exports in the first half of the 1990s, when Yevhen Marchuk, former chairman of the SBU and current secretary of the National Security and Defense Council, was chairman of the Security Service of Ukraine (SBU). In his defense, Marchuk claims that as head of the SBU he stopped the illegal trade in arms that some officers in the Ministry of Defense with Dmytro Strashynsky, whose license was revoked, had been undertaking [see Marchuk's letter to Kravchul included in this issue]. Strashynsky is also being held in an Italian prison.

On 4 January, the Prosecutor-General's Office launched an inquiry into the allegations. Strashynsky is accused of forging end-user certificates for Nigeria, Egypt, Sudan, Morocco, Ecuador, and Guinea -- which provides a glimpse into the global reach of these exports. The TU-controlled TV station Era alleges that documents it has received from Italy show that Marchuk persuaded Kravchuk to sell weapons to Strashynsky, that the Prohres company that had contracts with him was under the SBU's "protection," and that Marchuk supervised Strashynsky's activities in Ukraine. Both Kravchuk and Marchuk have denied these allegations as an attempt to damage their reputations on the eve of parliamentary elections in Ukraine.

Ukraine has a bad record in the illicit trading of weapons to conflict zones and other countries in the last decade. Not surprisingly, Ukraine's media has either been too scared or has lacked the information to write about this covert trade, and the Ihnatenko commission was the only Ukrainian attempt to probe its illicit trade in arms.

Taras Kuzio is a research associate at the Centre for Russian & East European Studies, University of Toronto.

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