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Security Watch: June 24, 2003

24 June 2003, Volume 4, Number 25
PUTIN GIVES OVERVIEW OF RUSSIAN FOREIGN POLICY... In a 21 June interview with the BBC on the eve of a four-day state visit to Great Britain that began on 24 June, President Vladimir Putin said that he has information that unspecified European companies have supplied Iran with "technology of dual use, to say the least." Therefore, Putin said, Moscow will resist efforts to use "the nuclear theme to squeeze Russian companies out of the Iranian market." Putin also said Russia will expand its relations with NATO, but continues to view the UN Security Council as the main institution for resolving international conflicts. Commenting on the Israeli-Palestinian conflict, Putin did not exclude the possibility of deploying Russian personnel as part of an international security force in the region. Putin added that Moscow views Palestinian Authority President Yasser Arafat as a viable political figure who could participate in any peace efforts.

...AND EMPHASIZES PERSONAL RELATIONS WITH BRITISH PRIME MINISTER. During the same BBC interview, President Putin said that his friendly personal relations with British Prime Minister Tony Blair made it easier to overcome differences between Moscow and Washington during the recent Iraq crisis. Putin said that before agreeing to support a new U.S.-British UN Security Council resolution on Iraq (see "RFE/RL Newsline," 22 May 2003), he discussed it in detail with Blair. This development helped to defuse the crisis. Putin said that his relationship with Blair is "frank and open" and that the two men are able to communicate directly without relying on the advice of diplomats and aides. Nonetheless, he said, policy differences remain between Russia and the United States and Great Britain over Iraq and Moscow "will defend [its] interests in the region." Partnership means taking into account the interests of other countries, but not serving them, Putin concluded.

PUTIN SAYS IRAN WILL COMPLY WITH IAEA REQUIREMENTS... In a major Moscow press conference with more than 700 journalists on 20 June, President Vladimir Putin said that he has been assured in recent days by Iranian President Mohammad Khatami that Tehran has no plans to develop nuclear weapons, Russian and Western media reported. Putin said that, according to information available to him, Iran has agreed to sign the International Atomic Energy Agency's (IAEA) additional protocol to expand international inspections of Iran's nuclear program. Putin said that Russia's position on Iran's nuclear program is much closer to that of the United States than many seem to think. Both Washington and Moscow, Putin said, expect all countries to comply with international nonproliferation regimes, especially countries like Iran that have signed the Nuclear Non-Proliferation Treaty. Moscow categorically insists that Iran comply with all IAEA regulations and has noted that the latest IAEA session found no violations on Tehran's part, Putin said.

...AS MOSCOW PUTS POSITIVE SPIN ON IAEA STATEMENT. Russian Atomic Energy Ministry spokesman Nikolai Shingarev said on 19 June that the major provisions of the IAEA statement coincide with the Russian position, ITAR-TASS reported. "This statement opens the way to closer cooperation between Iran and the IAEA and gives hopes that Iran will sign the Additional Protocol," Shingarev said, adding that the IAEA's position and Iran's desire for greater transparency in its nuclear program open the way for even greater cooperation between Tehran and Moscow in nuclear engineering. Russian Deputy Foreign Minister Yurii Fedotov said the IAEA statement will not negatively affect Iran-Russia relations, according to ITAR-TASS.

MOSCOW REJECTS TALK OF NORTH KOREA SANCTIONS. Speaking to journalists in Phnom Penh, Cambodia, on 18 June, Foreign Minister Igor Ivanov said Russia does not favor increasing military and economic pressure on North Korea because of its refusal to dismantle its nuclear-weapons program, RTR and "Izvestiya" reported. Ivanov is participating in a session of the Association of Southeast Asian Nations (ASEAN). "For us, the prospect of North Korea gaining nuclear status and any attempt to resolve the problem of its nuclear program by force are equally unacceptable," Ivanov said. Moscow is urging continued negotiations about this issue in both bilateral and multilateral formats involving North Korea, South Korea, the United States, China, and Japan. Ivanov said he discussed the issue with U.S. Secretary of State Colin Powell, who is also attending the ASEAN session, and with North Korea's ASEAN representative. Deputy Foreign Minister Yurii Fedotov said that Russia categorically opposes the imposition of economic sanctions against Pyongyang, "which is already in a very miserable economic situation."

RUSSIA, INDIA BOOST COOPERATION. Foreign Minister Ivanov met in New Delhi on 16 June with Indian Foreign Minister Yashwant Sinha to discuss foreign-policy coordination and expanding bilateral military-technical cooperation, RIA-Novosti reported. Ivanov also met with Indian Prime Minister Atal Bihari Vajpayee and Defense Minister George Fernandes. He undertook preparations for a Russian-Indian summit to be held in Moscow later this year. Ivanov also briefly met with Indian President Abdul Kalam, a physicist by training who is considered the creator of his country's nuclear program, "Vremya novostei" reported on 16 June. Meanwhile, Indian Chief of the General Staff General Nimral Chandra Vij is touring military factories in Moscow, St. Petersburg, and Tula, the daily reported. He discussed both the possibility of new weapons purchases and prospects for the joint development of military projects, particularly a Russian proposal to cooperate on building a fifth-generation fighter jet.

RUSSIA, U.S. TO HOLD JOINT MISSILE-DEFENSE EXERCISES. First Deputy Chief of the General Staff Colonel General Yurii Baluevskii told journalists on 17 June that Moscow and Washington have agreed to conduct a joint missile-defense exercise on Russian territory next year, reported. Baluevskii added that the exercise will test the compatibility of the two countries' antiaircraft and antimissile defenses and their command and control systems. Defense Minister Sergei Ivanov told President Vladimir Putin that the United States and Canada have accepted a Russian proposal to participate in joint exercises with the Pacific Fleet in August. In addition, Moscow has invited Scandinavian countries, the Baltic states, and Poland to take part in exercises with the Russian Northern and Baltic fleets in the Baltic Sea at the end of this month.

RUSSIA WORLD'S LEADING ARMS EXPORTER... Russia in 2002 surpassed the United States and became the world's leading weapons dealer, selling arms abroad worth $5.9 billion, according to an annual study by the Stockholm International Peace Research Institute (SIPRI), Russian and Western media reported on 17 and 18 June. The SIPRI figure for Russia is higher than the $4.8 billion figure officially released by Russia's state arms export agency Rosoboroneksport, with the discrepancy accounted for by differing methods for calculating the total, "Kommersant-Daily" reported on 18 June. China and India are the biggest customers for Russian military hardware and are also the world's largest arms importers. According to the report, the United States led the world in military spending with a total of $336 billion, followed by Japan with $49 billion and the United Kingdom with $36 billion. The United States accounts for 43 percent of global military spending, according to the SIPRI report.

...AS COMMENTATOR QUESTIONS WISDOM OF SELLING WEAPONS TO CHINA. Although most Western countries do not sell advanced weapons systems to China, Russia offers Beijing some of its most modern military equipment despite potential threats to its own security, TV-Tsentr political commentator Stanislav Kucher stated on 18 June. Many analysts believe that Russia could someday be threatened by these weapons, as China is the only country likely to pose a real military threat to Russia in the foreseeable future, Kucher said. He noted that while Russia is selling state-of-the-art weaponry to China and Malaysia, it cannot find funding to purchase advanced equipment for its own military. In the last year, the Russian Army has purchased only two new airplanes and just 600 new Kalashnikov automatic rifles, Kucher asserted.

RUSSIAN MILITARY DEPLORES GEORGIAN, UKRAINIAN STANCE ON PORTABLE ANTIAIRCRAFT MISSILES. Colonel General Baluevskii said on 17 June that he cannot comprehend the reason for the refusals by Georgia and Ukraine to sign an agreement proposed by Russia to other CIS member states to impose stricter controls on the sale of Igla and Strela shoulder-launched antiaircraft missiles, Interfax reported. He noted that Azerbaijan and Moldova, which likewise declined at a meeting of senior CIS defense officials earlier this month to endorse such a multilateral ban, have subsequently hinted that they are prepared to sign bilateral agreements with Russia on strengthening control over the sale of such weapons. According to a Georgian Foreign Ministry statement of 16 June, Tbilisi was ready to sign such a ban if it had been amended to include an inventory of such weapons currently deployed at Russian military bases in Georgia (see "RFE/RL Newsline," 11 and 17 June 2003).

DEFENSE MINISTER OUTLINES MILITARY'S STRATEGY ON BASES ABROAD... Sergei Ivanov on 18 June told journalists in Moscow that Russia will continue its policy of withdrawing from costly military bases far from Russia in favor of boosting its presence at bases located in CIS countries near Russia's borders, and other Russian media reported. "We have plans to establish new military bases abroad, including an air base at Kant in Kyrgyzstan," Ivanov said. He also mentioned the 201st Motorized Infantry Division, which is deployed in Tajikistan and which should acquire the status of a military base by the end of the year, reported. He added that the Defense Ministry will increase its presence in space by launching 35 new military reconnaissance satellites this year. Russia currently has about 100 satellites in orbit, many of which are dual military and civilian use. Ivanov's statement seems designed to counter the negative impression of the military resulting from Russia's withdrawal from its bases in Lourdes, Cuba, and Cam Ranh Bay, Vietnam; the withdrawal of Russian peacekeepers from the Balkans; and the impending evacuation of Russian bases in Georgia, commented.

...AS AUDIT CHAMBER ALLEGES MASSIVE EMBEZZLEMENT IN THE MILITARY. The number of army generals continues to increase even as the amount of military funding decreases due to corruption, "Argumenty i fakty," No. 25, commented. On the eve of the 12 June national holiday, 90 officers were given new general-level ranks, including ground forces commander Colonel General Nikolai Kormiltsev and military-intelligence (GRU) head Army General Valentin Korabelnikov. Meanwhile, Audit Chamber investigator Aleksandr Piskunov announced that the chamber has submitted to the Prosecutor-General's Office documentation on the alleged embezzlement of 2.4 billion rubles ($77.5 million) that was allocated from the federal budget to "enhance the conditions of the armed forces," the weekly reported. The Audit Chamber's evidence reportedly establishes that conditions in military continue to deteriorate and procurements continue to be made at inflated prices. In addition, the Prosecutor-General's Office has opened criminal-fraud cases involving the embezzlement of money obtained for commercial space launches from the Baikonur, Plesetsk, and Svobodnyi cosmodromes, "Argumenty i fakty" reported.

SECURITY AGENCIES REPORT FOILING MAJOR TERRORIST ACT IN ST. PETERSBURG. Federal Security Service (FSB) spokesman Arkadii Murashov has confirmed Western media reports that a group of terrorists based in Chechnya attempted to carry out major terrorist acts in St. Petersburg during the 30 May-1 June summits involving leaders from Russia, the CIS, the European Union, and the United States, "Argumenty i fakty," No. 25, reported. Murashov alleged that a group with links to international terrorism networks sent a column of an unspecified number of trucks loaded with explosives to St. Petersburg, but that the FSB intercepted the trucks near the city and arrested all the people in them. Murashov did not say how many people were arrested, where the arrests took place, the amount of explosives involved, or what buildings in St. Petersburg were targeted. Meanwhile, Moscow city Prosecutor Mikhail Avdyukhov told "Rossiiskaya gazeta" on 20 June that radical Chechen field commander Shamil Basaev last year planned four major terrorist acts in Moscow, including seizing the State Duma building. Among them was the 19 October 2002 car-bomb explosion near a McDonald's restaurant in which one man was killed (see "RFE/RL Newsline," 21 October 2002). Avdyukhov said this information was obtained during the investigation of the 23-26 October 2002 hostage-taking incident at a Moscow theater that left more than 120 hostages and 40 Chechen hostage takers dead (see "RFE/RL Newsline," 26 October 2002).

FAR EAST SPY CASE TO RESUME. A Primorskii Krai court is expected to continue hearings on 1 July on the espionage case against local Professor Vladimir Shchurov (see "RFE/RL Newsline," 3 July 2002), and other Russian media reported on 18 June. Shchurov is accused of divulging state secrets and of illegally transferring sensitive technological information to China. In August 1999, Shchurov's laboratory at the Pacific Ocean Oceanographic Institute was searched by agents of the Federal Security Service (FSB) after a device that was produced there was discovered by customs officials. According to the charges filed by prosecutors, Shchurov allegedly attempted to smuggle the device -- which could be used to detect extremely quiet Russian submarines -- to China.

ESTATES FOR THE OLIGARCHS? The oligarchs stand to benefit most from the idea of privatizing Russian cultural and historic sites that was discussed on 16 June at a meeting of the State Council in St. Petersburg (see "RFE/RL Newsline," 17 June 2003), reported on 16 June. According to the report, Putin met with leading Russian oil businessmen on the eve of the State Council session (see "RFE/RL Newsline," 16 June 2003) and noted positively the financial support provided by private businessmen for the renovation of the Konstantin Palace. Putin urged his audience to participate in similar projects. However, he acknowledged that the issue of property ownership is crucial. At present, Russian law prevents the privatization of historical and culturally significant objects that are protected by the federal government. However, the law is less rigid with regard to objects protected by local and regional governments. noted that pharmaceutical tycoon Vladimir Bryntsalov was able to privatize the historic Nikolskoe-Uryupino estate outside Moscow by lobbying to have its status downgraded from federal to local protection. If the proposal discussed in St. Petersburg is adopted, the Bryntsalov model will likely be repeated many times over, the website commented.

U.S. AGENCY APPROVES NORILSK NICKEL PURCHASE OF STILLWATER MINING. The U.S. Federal Trade Commission on 17 June approved a deal under which Norilsk Nickel, the world's leading trader of platinum-group metals, will purchase 51 percent of the Stillwater Mining Company, the largest U.S. producer of palladium, RTR and other Russian media reported. Norilsk Nickel is controlled by oligarch Vladimir Potanin and the Interros group. Under the deal, Norilsk will pay $100 million and 877,000 ounces of palladium worth $160 million for control of Stillwater. The purchase is the first move of this type and makes Norilsk Nickel a "supermonopolist in its field," RTR commented. In addition, the company will now have direct access to major U.S. automakers including General Motors and the Ford Motor Company, which are major palladium purchasers.

PRIME MINISTER PUSHES GOVERNMENT'S ECONOMIC ACHIEVEMENTS. Ignoring the Duma's no-confidence debate, Prime Minister Mikhail Kasyanov addressed an international economic forum in St. Petersburg on 18 June and lauded his government's economic achievements, Prime-TASS and RosBalt reported. He said that economic growth this year should reach 5 percent, with the natural-resources sector continuing to set the pace of growth. However, Kasyanov said that other sectors of the economy are also catching up and that the growth rate of industrial production for the first five months of this year reached 10 percent. He acknowledged that few Russian companies are ready to face direct international competition and that Russia needs more large and very large corporations, as well as efficient small businesses. Kasyanov said his government is preparing for Russian accession to the World Trade Organization by implementing economic reforms and eliminating economic distortions that remain from the Soviet era.

DUMA TO CONSIDER CREATING CREDIT-MONITORING AGENCY. The State Duma's Committee on Credit Organizations and Financial Markets has submitted to the Duma a bill on the creation of a national agency to monitor the credit histories of Russian citizens and companies, the Duma's press service ( reported on 18 June. Under the bill, the agency would be part of the Central Bank and would compile credit-history documentation. The documents would be protected by laws governing financial privacy, and physical access to the credit records of individuals by agency employees would be banned.

GAZPROM ATTEMPT TO TAKE OVER BASHKORTOSTAN'S OIL ASSETS STOPPED. Gazprom CEO Aleksei Miller and Bashkortostan's president, Murtaza Rakhimov, on 17 June nearly signed an agreement in Moscow under which Gazprom would take in trust the management of the shares of Salavatnefteorgsintez, the republic's largest petrochemical company, RosBalt reported on 18 June. However, the signing was stopped at the last minute when it was decided that Rakhimov does not have the authority to conclude such a deal. Salavatnefteorgsintez has a capitalization of more than $500 million and is wholly owned by the government of Bashkortostan, TV-Tsentr reported on 17 June. In addition, Gazprom under the deal would have taken in trust management of the energy and chemical companies Kauchuk, Kaustik, and Gaz-servis, which also belong to Bashkortostan. Under the agreement, Gazprom would have had the option of acquiring these companies. In exchange, Gazprom would have supplied natural gas and technical assistance for the maintenance of its gas-distribution infrastructure for the next five years. The republic reportedly owes the gas giant $500 million. State Duma Deputy Aleksei Mitrofanov, a leading member of the ultranationalist Liberal Democratic Party of Russia, called on Moscow to take control of economic assets in regions where "the leaders have not been replaced for decades," TV-Tsentr reported. Mitrofanov specifically mentioned Bashkortostan, Tatarstan, and the city of Moscow.

PUTIN SAYS 'NO' TO QUOTAS ON WESTERN FILMS. At a State Council session on 16 June, Mosfilm studio Director Karen Shakhnazarov urged the government to increase support for domestic cinema production and to restrict the showing of Western films, against which the underfunded Russian film industry cannot compete, RTR reported. He told the gathering that a Moscow taxi driver recently told him that he dislikes Russian movies and prefers U.S.-made films. "I told him that I prefer Chinese drivers, who are better, cheaper, and don't drink," Shakhnazarov quipped. Putin, however, said he sympathizes with the taxi driver and noted that only very rich countries can allow themselves the luxury of imposing import quotas. For other countries, reduced competition leads not to the development of domestic industries, but to economic stagnation and degradation, Putin said. The president also expressed concern about intellectual-property rights and noted the huge share of counterfeit multimedia products on the Russian market. "The government should take active measures to protect copyrights," Putin said.

PRESIDENT, GOVERNMENT CALL FOR PRIVATIZATION OF SOME CULTURAL SITES. During a State Council session in St. Petersburg on 16 June devoted to cultural policy, Culture Minister Mikhail Shvydkoi acknowledged that there is an acute shortage of funding for culture and the arts, Russian media reported. Shvydkoi said that the free market has caused more harm to culture than communist-era ideological censorship ever did. He added that about 50 percent of the country's cultural projects are currently being funded from private sources and argued that this practice should be extended to the preservation of historical and cultural sites currently controlled by the state. "We should get beyond the current impasse between the federal center and the regions [regarding jurisdiction over cultural sites] and allow their privatization," Shvydkoi said, according to on 16 June. Moscow Mayor Yurii Luzhkov reportedly endorsed the proposal, as did President Putin, who said he supports the idea of privatizing cultural objects "whenever possible." He said that the state cannot allocate funding for culture based on a fixed percentage of the gross domestic product as it has in the past, because it has already taken on a number of social-payment obligations that it cannot meet.

RUSSIAN CAPITAL NAMED MOST EXPENSIVE, MOST DANGEROUS CITY IN EUROPE. Moscow was named the most expensive city in Europe and the second-most expensive in the world after Tokyo in a study conducted by Mercer Human Resource Consulting, reported on 16 June. Geneva came in second and London placed third among European cities. The study was based on 200 indicators, including the cost of real estate, transportation, food, and clothing. According to another Mercer study in March, Moscow was named the most dangerous capital in Europe, also reported. In that study, Moscow was found to be an even more dangerous place than Harare, Zimbabwe, despite that country's ongoing civil unrest.