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Security Watch: August 5, 2003


5 August 2003, Volume 4, Number 31
FOREIGN POLICY
PYONGYANG AGREES TO INCLUDE RUSSIA IN MULTILATERAL TALKS ON NUCLEAR CRISIS. North Korea has agreed to Russia's participation in multilateral talks to resolve the crisis over Pyongyang's nuclear-weapons program, Russian media reported on 1 August, citing the Russian Foreign Ministry. North Korean Ambassador to Russia Pak Ui Chun met on 31 July in Moscow with Deputy Foreign Minister Yurii Fedotov, newsru.com reported. "The Russian side emphasized the necessity of regulating existing problems politically through negotiations predicated upon the non-nuclear status of the Korean Peninsula and the security of the countries located there," the Foreign Ministry's statement declared. In Washington, White House spokesman Scott McClellan hailed the initiative. "We welcome the multilateral approach," he said, according to AP. "It's important that we continue to move forward and that North Korea once and for all ends its nuclear-weapons program." Foreign Minister Igor Ivanov said on 31 July that the crisis "is one of the most serious threats to regional security," newsru.com reported.

WOULD RUSSIA LAUNCH A PREEMPTIVE STRIKE AGAINST NORTH KOREA? On 30 July, "Izvestiya" speculated that "Russia's best response" to the unfolding crisis in North Korea could be to launch a preemptive strike against that country's nuclear facilities. The daily argued that if North Korea launched a nuclear strike against Seoul, radiation could easily spread within hours through Primorskii and Khabarovsk krais. The paper also reported that regional officials are holding meetings in Khabarovsk on civil defense and a possible emergency situation. The paper quoted a Vladivostok-based meteorologist as saying that radiation from Seoul could reach Vladivostok within two-three hours. An unidentified source within the Pacific Fleet told the paper that the cruiser "Varyag" is capable of carrying out a preemptive surgical strike, saying, "As soon as North Korea begins preparations to launch a rocket, we will know about it." As for the preemptive strike, the fleet source told the newspaper, "It would be better if the Americans did it themselves." Defense Ministry official Major General Vladimir Dvorkin noted that North Korea has not even tested a nuclear weapon and so it is premature to consider Pyongyang a nuclear threat. "Therefore, I completely exclude the possibility of Russia carrying out a preemptive strike," Dvorkin was quoted as saying. "But it cannot be ruled out that the United States will do so."

PUTIN, BERLUSCONI DISCUSS RUSSIA'S INTEGRATION WITH EUROPE. President Vladimir Putin met in the Kremlin on 29 July with Italian Prime Minister Silvio Berlusconi, whose country currently holds the rotating EU Presidency, Russian and international media reported. The talks reportedly covered a broad range of bilateral and Russia-EU issues, concentrating particularly on ways of successfully launching the Russia-EU Partnership Council, which was agreed to at a Russia-EU summit in St. Petersburg in May. Speaking to journalists following the talks, Berlusconi said the specific question of a timetable for Russia's accession to the EU was not discussed, but that he personally supports Russia's eventual membership of the union, as well as those of Turkey and Israel. He advocated the intensification of Russian-EU relations in all spheres and praised Putin's "pragmatic and workable approach," ITAR-TASS reported. Berlusconi also held out hope that Putin will meet with Pope John Paul II when he visits Rome in November. The latest talks were the fourth meeting between the two men in the last six months, "Nezavisimaya gazeta" reported.

BERLUSCONI SAYS RUSSIA SHOULD JOIN WTO THIS YEAR. Italian Prime Minister Berlusconi told reporters in Moscow on 29 July that Russia could join the World Trade Organization (WTO) by the end of this year, ITAR-TASS reported. "We are confident that accession must take place and shall do all in our power for it to happen before the end of the year," Berlusconi said. In an interview with "Kommersant-Daily" on 26 July, U.S. Undersecretary of State for Economic, Business, and Agricultural Affairs Alan Larson was less committal. "The United States supports Russia," Larson said. "Significant progress has been made recently in Russian reforms and, the main thing, the direction of reform meets the demands of the WTO. However, additional steps are necessary in reforming the telecommunications, aviation-construction, and financial-services sectors, and in protecting intellectual-property rights."

RUSSIA WILL NOT INSIST UPON NEW UN RESOLUTION ON IRAQ... President Putin told journalists in Moscow on 29 July that Moscow "does not insist upon a new UN resolution on Iraq," although it continues to believe that one would be desirable, ITAR-TASS reported. "We are all interested in a settlement being achieved as soon as possible," he said. "Russia is prepared to make its contribution to this process and to take part in the restoration of [Iraq's] economy." Putin called for the "enhancement of the United Nations' role" in stabilizing Iraq. Meanwhile, the Foreign Ministry on 29 July issued a statement saying the U.S.-led occupation of Iraq "does not influence the existence of Iraq as a state. Formally, its diplomatic relations with Russia continue."

...AS GOVERNMENT NEWSPAPER CASTS DOUBT ON REPORTS OF ROBBERY AT IRAQ'S MOSCOW EMBASSY. The government daily "Rossiiskaya gazeta" on 30 July published a long report calling into question whether the Iraqi Embassy in Moscow was actually robbed on 29 July. According to the earlier reports, three unknown people broke into the embassy at around 2 a.m. local time and forced a guard to open a safe containing more than $3 million in cash. "Rossiiskaya gazeta" notes that the Russian police officer guarding the embassy did not notice anything unusual and wonders why embassy staffers did not notify the police until around 6 a.m. that day. The paper also says no explanation has been offered as to how the security guard was able to open the safe. The paper quoted an unidentified Moscow police officer as speculating that the robbery might have been staged, as no outsider could have expected that such a large sum of cash would be kept in the embassy, which has been virtually inactive since former Ambassador Abbas Halaf and his senior staff were recalled to Baghdad for consultations in June, newsru.com reported.

RUSSIA, TURKEY REACH AGREEMENT ON BLUE STREAM. During talks on 30 July, Turkish government officials and a visiting Gazprom delegation succeeded in resolving "almost all disputed issues" relating to Turkish imports of Russian gas via the Blue Stream pipeline, ITAR-TASS reported on 31 July, quoting a Gazprom press release. Turkey suspended gas imports via Blue Stream in March 2003, just months after shipments via the Blue Stream pipeline got under way. In June, Russia filed suit in the International Court of Arbitration in an attempt to coerce Ankara to comply with its formal commitment to pay for 800 million cubic meters of gas in 2003, regardless of whether it takes delivery. Gazprom said on 31 July it might withdraw that suit if it reaches a mutually acceptable settlement with Turkey during further talks in Ankara next week. Meanwhile, gas supplies to Turkey via Blue Stream are to resume on 1 August.

PUTIN TO FINALIZE FIGHTER DEAL WITH MALAYSIA. President Putin began a state visit to Malaysia on 4 August during which he is expected to discuss bilateral military and high-technology cooperation, Russian media reported. "A number of contracts are taking shape, and not only those concerning military technologies [and] combat planes," Putin told the Malaysian daily "New Straits Times" on the eve of his departure from Moscow. "We seek to take the first steps in the sphere of helicopter technologies, too." Putin is expected to finalize a $900 million deal to sell 18 Su-30 MKM multipurpose fighter jets to Kuala Lumpur that was signed in May during a visit to Malaysia by Defense Minister Ivanov (see "RFE/RL Newsline," 20 May 2003). That contract makes Malaysia the third-largest customer for Russian military goods after China and India, ITAR-TASS reported. Putin also told the "New Straits Times" that he will be discussing a proposal to send a Malaysian astronaut into space. "Nezavisimaya gazeta" noted that Putin's trip to Malaysia was originally scheduled for the beginning of July, but was postponed following a terrorist bombing at a Moscow rock concert on 5 July. Putin on 3 August met with Ivanov, Federal Security Service (FSB) Director Nikolai Patrushev, and Prosecutor-General Vladimir Ustinov, at which it was decided not to postpone the trip again in the wake of the 1 August Mozdok bombing.

WAR ON TERROR
SUICIDE BOMBER KILLS 50 IN NORTH OSSETIA... A lone suicide bomber detonated a truckload of more than 1 ton of explosives in front of a Russian military hospital in Mozdok in the evening of 1 August, destroying the building and killing at least 50 people, including hospital workers, and injuring more than 100, Russian and international media reported. Defense Minister Sergei Ivanov inspected the wreckage of the building on 2 August and suspended the hospital director, an ethnic Armenian, for his alleged failure to take adequate security precautions.

...AND CHECHENS ARE BLAMED. President Putin sent condolences to the families of those killed in the Mozdok bombing, which he characterized as "further confirmation of the inhumanity and cruelty of the bandits who seek to destabilize the situation in the North Caucasus," Interfax reported on 2 August. Putin added that such "evil deeds" will not derail the process of seeking a political settlement of the conflict in Chechnya. Russian Deputy Prosecutor-General Sergei Fridinskii told Interfax late on 3 August that two suspects who sold the truck used in the bombing have been detained. Also on 3 August, Interfax quoted an unidentified source close to the North Ossetian Interior Ministry as saying that radical Chechen field commander Shamil Basaev is believed to have masterminded the attack. Basaev claimed responsibility for the car bombing of the Chechen government building in Grozny in December and two further suicide bombings in Chechnya in May. He has not claimed responsibility for the Mozdok attack. In Moscow, Chechen President Aslan Maskhadov's official envoy to the Russian Federation, Salambek Maigov, denounced the attack and disclaimed responsibility for it, according to "The Washington Post" on 3 August. Maskhadov has issued strict orders to his fighters not to target civilians or to launch any offensives outside Chechnya (see "RFE/RL Newsline," 18 June 2003).

MOSCOW ON ALERT FOLLOWING MOZDOK BOMBING. Law enforcement officials in Moscow moved the city on 2 August to a heightened security regime following the hospital bombing in Mozdok, Interfax reported. The head of public relations for the Interior Ministry's Moscow directorate, Kirill Mazurin, said special controls will be imposed at children's and medical facilities, places where crowds gather, and at objects of special religious significance. The special security alert will last until at least 7 August, he added. Ekho Moskvy reported on 1 August that, according to Moscow police officials, Red Square has been closed to tourists and pedestrian traffic since 11 July for special repairs -- not because of threats of terrorist attacks, as some foreign media have reported.

POLICE RECOVER STOLEN SHOULDER-LAUNCHED MISSILES NEAR ST. PETERSBURG. Security agents in Leningrad Oblast have arrested a man who allegedly stole 10 shoulder-launched Strela surface-to-air missiles from a naval warehouse outside of St. Petersburg (see "RFE/RL Newsline," 16 July 2003), "Rossiiskaya gazeta" reported on 1 August. The 10 missiles were recovered during the operation, strana.ru and polit.ru reported on 1 August. The suspect was identified as a former naval officer who had been assigned to the base from which the missiles were stolen. He reportedly attempted unsuccessfully to sell the weapons. Investigators are still looking into the case and anticipate that more arrests will be made, "Rossiiskaya gazeta" reported.

POLITICAL ECONOMY
PROSECUTORS ATTACK PRIME MINISTER OVER YUKOS COMMENTS. Prosecutor-General's Office spokeswoman Natalya Vishnyakova told reporters in Moscow on 28 July that recent comments by Prime Minister Mikhail Kasyanov concerning the Yukos investigations were "to say the least, incorrect," gazeta.ru and other Russian media reported on 29 July. The comments "could be taken as an attempt to influence the courts," Vishnyakova was quoted as saying. "Every branch of government should mind its own business." Kasyanov said on 24 July that the investigation "does not enhance the country's image and is negatively influencing the mood of investors" (see "RFE/RL Newsline," 25 July 2003). Meanwhile, the Antimonopoly Ministry on 28 July announced that it will postpone for two weeks considering the application to merge oil giants Yukos and Sibneft, strana.ru reported. Previously, industry analysts had said that the ministry would not have any problems with the merger, which would create a company that would control about 29 percent of Russia's oil production, the website commented.

PAPER REPORTS THAT PROSECUTORS HAVE THE PRIME MINISTER IN THEIR SIGHTS... The Prosecutor-General's Office and the FSB on 30 July began investigating Trast Investment Bank, which belongs to Menatep, "Kommersant-Daily" and other Russian media reported on 31 July. According to the daily, investigators are not interested primarily in Trast itself, but in its clients, and the focus of their inquiries has been the state-owned Russian Development Bank (RosBR). RosBR President Tatyana Ryskina is considered "a creature of [Prime Minister] Kasyanov," "Kommersant-Daily" wrote. Kasyanov himself until recently was chairman of the RosBR oversight board. "It is possible that by analyzing the bank's records, prosecutors hope to get to the personal foreign accounts of the prime minister himself and his closest associates," the paper commented.

...AS YUKOS-CONNECTED BANKER DENIES PRIME MINISTER WAS TARGET OF RAID. Trast Investment Bank President Ilya Yurov on 31 July denied media reports that during a search of Trast on 30 July prosecutors sought information about a state-owned bank that is reportedly close to Prime Minister Kasyanov, "The Moscow Times" reported on 1 August. "This is absolute rubbish," Yurov said, pointing to an article on the topic in "Kommersant-Daily." "Only 15 percent of that article was true." Yurov said investigators seized files relating to 15 Trast clients, but that the RosBR was not among them. He said he believes the seizures are related to the tax-evasion charges filed recently against Menatep board Chairman Lebedev. Prosecutor-General's Office spokeswoman Vishnyakova refused either to confirm or deny the "Kommersant-Daily" story, "The Moscow Times" reported. RosBR was created in 2000 at the initiative of Kasyanov as a state-owned vehicle to channel state credits to industry. Current RosBR President Ryskina until 2000 was the president of Trast and Investment Bank, which later changed its name to Trast Investment Bank. Prior to that, she worked at a number of Menatep-connected companies, "The Moscow Times" reported. "Kommersant-Daily" is owned by self-exiled former oligarch Boris Berezovskii.

OLIGARCHS OFFER GOVERNMENT AN OLIVE BRANCH... Russian Union of Entrepreneurs and Industrialists (RSPP) President Arkadii Volskii said on 30 July that Russia's leading businesspeople are prepared to do more to help the government to combat widespread poverty, strana.ru, "Kommersant-Daily," and other Russian media reported on 31 July. "I'll tell you honestly," Volskii told journalists following an RSPP meeting, "among the major businesspeople there is an atmosphere of bewilderment. It isn't even just the Yukos matter, but the fact that in the country an atmosphere of hatred toward big business...is being artificially created." Volskii said that in 2000, business leaders agreed with President Putin that they would pay taxes and help the country overcome its economic crisis and, in exchange, the government would not revisit or revise the privatizations of the 1990s, strana.ru reported. Volskii said he is arranging a meeting with Putin at which he will propose a series of initiatives by business to assist the government in fighting poverty. He said the RSPP might even be prepared to endorse tax increases for certain sectors of the economy. Volskii also repeated his previous statements that "de-privatization" would be "an enormous mistake" and that the Yukos affair is doing tremendous harm to Russia's international business reputation, "Nezavisimaya gazeta" reported on 31 July.

...WHILE ECONOMY MINISTER, PRESIDENTIAL ECONOMIC ADVISER FINALLY FIND SOMETHING TO AGREE ON. In an interview with "Kommersant-Daily" on 31 July, Economic Development and Trade Minister German Gref restated his opposition to reversing the results of previous privatizations. "There will be no campaign to revise the results of privatization in Russia. Such a campaign would be suicidal for the government," Gref said. Saratov Oblast Governor Dmitrii Ayatskov told Interfax on 30 July that "revising the results of privatization would return Russia to a totalitarian system." Ayatskov nevertheless advocated adopting a law under which major businesses would have to pay 50 percent of their profits into a fund "for redistribution." "If the laws enabled them to become superrich people in a short time, then why shouldn't they turn over their capital for the benefit of their country?" Ayatskov said. "Nezavisimaya gazeta" on 31 July quoted presidential economic adviser Andrei Illarionov as saying, "Revising the results of privatization in today's situation would lead the country to civil war."

BUSINESS SPOKESMAN CONCERNED ABOUT ONGOING 'DE-PRIVATIZATION' IN THE REGIONS. RSPP President Volskii also told journalists that he is worried about creeping "de-privatization" in the regions, "Nezavisimaya gazeta" reported on 31 July. "In the regions, massive de-privatization has begun," Volskii said. "Today in the courts there are 41,000 bankruptcy cases, and I am completely confident in saying that half of them have been ordered."

PRESIDENT MAKES AMBIGUOUS STATEMENTS ON YUKOS AFFAIR. President Putin on 29 July sent more mixed signals concerning the Yukos investigations, Russian and Western media reported. RTR television showed Putin telling a senior Interior Ministry official to "take tough and consistent actions exclusively within the framework of the law, but [you should] not forget the legal rights and interest of citizens." He added that such work should be conducted "systematically, but not turned into a kind of campaign." As in his previous comments, Putin avoided directly mentioning Yukos or its head, oligarch Mikhail Khodorkovskii. According to "Nezavisimaya gazeta" on 21 July, presidential chief of staff Aleksandr Voloshin told a Kremlin meeting on 18 July that he had advised Putin to make a public statement that would send a signal to both sides to wind down the dispute (see "RFE/RL Newsline," 22 July 2003).

U.S. OIL MAJOR LOOKING TO BUY PIECE OF TROUBLED YUKOS? Britain's "Sunday Times" reported on 3 August that U.S. oil giant ChevronTexaco is in talks to purchase a 25 percent stake in embattled Russian oil major Yukos, Russian media reported on 4 August. An unidentified source within ChevronTexaco told the newspaper that his company is offering about $6.4 billion for the stake and that the talks were undertaken because "Yukos's plan to merge with Sibneft...was looking shaky." "Vremya novostei" on 4 August reported that Yukos refused to comment on the "Sunday Times" report. Meanwhile, the Prosecutor-General's Office announced on 3 August that it has opened an eighth investigation into Yukos, this one centering on the firm's nearly 20 percent stake in Yeniseineftegaz, which holds the license to develop Western Siberia's Vankor oil fields.

EUROPE GIVES THE GO-AHEAD TO BP-TNK MERGER. The European Commission has approved a $6.15 billion merger plan concluded in February between British Petroleum, Alfa Group, and Access/Renova (see "RFE/RL Newsline" 12 February 2003), RIA-Novosti and pravda.ru reported on 29 July, citing the European Commission's Moscow office. The new holding will combine the companies' energy-sector assets in Russia and Ukraine -- including, most notably, the Tyumen Oil Company (TNK). The new company will control oil reserves estimated at 5 billion barrels and will have a daily production capacity of 1 million barrels, making it the world's eighth-largest producer, lenta.ru reported on 29 July. The deal is yet to be approved by the Antimonopoly Ministry or the Ukrainian government.

PUTIN ANNULS REQUIREMENT TO REPORT TRANSACTIONS ABOVE $10,000. President Putin has signed a decree canceling a 1994 executive order requiring banks to report to the tax authorities all individual transactions exceeding $10,000, utro.ru and RTR reported on 31 July. The website noted that the 1994 order was very unevenly observed and that the law on banking and banking secrets obligated banks only to reveal such information to courts and prosecutors. The Tax Code does not include any mention of the 1994 order. As a result of Putin's latest order, banks are now required only to report private transactions worth more than 600,000 rubles ($19,800) to the Financial Monitoring Committee, as required by the 2001 law on money laundering.

MILITARY
PUTIN VISITS LEADING NUCLEAR-RESEARCH FACILITY. President Putin visited on 31 July the top-secret nuclear-weapons laboratory Arzamas-16, where he told scientists that Russia will always be a great nuclear power, RIA-Novosti and other Russian media reported. Atomic Energy Minister Aleksandr Rumyantsev conducted a tour of the facility, showing Putin its supercomputers and other technology. Rumyantsev said that although Russia has not conducted any nuclear-weapons tests since 1990, its arsenal remains at a high state of military readiness. Putin emphasized the potential civilian applications of the facility's research. "Today the scientific discoveries of this institute -- based on modern military technologies -- are used in many branches of industry and they are capable of successfully competing on international markets," Putin said, according to Regnum on 1 August. "Therefore, it is essential to apply the techniques of your center as widely as possible to the production of civilian goods, to use the most modern nuclear technologies for peaceful purposes."

PRESIDENT URGES FASTER MILITARY-SUPPLY REFORM. Speaking to a session of the government on 28 July, President Putin urged the Defense Ministry to move more rapidly to create a unified military-supply system, "Vremya novostei" reported on 29 July. The so-called Interdepartmental Unified Supply System (MUSTO) was adopted by the government in February 2002, but implementation has only just begun. The new system will involve combined governmental tenders for standardized equipment to supply all defense, security, and law enforcement agencies. Such tenders will be coordinated by the Defense Ministry. As a first step, representatives and monitors of the Interior Ministry, the Emergency Situations Ministry, and other agencies will be removed from military-industrial enterprises where they duplicate the functions of Defense Ministry representatives, the daily reported. According to the paper, the Interior Ministry, the Emergency Situations Ministry, and the General Staff have been delaying the implementation of the reform. At the 28 July cabinet meeting, Putin said he has ordered Chief of the General Staff General Anatolii Kvashnin to accelerate implementation of MUSTO. "Vremya novostei" on 29 July published a long interview with Deputy Economic Development and Trade Minister Colonel General Vladislav Putilin, who oversees the military-industrial complex, detailing plans for the long-term reform of the military-supply system.

CRIME AND PUNISHMENT
MOSCOW CITY PROSECUTOR STEPS DOWN AMID SCANDAL IN HIS OFFICE. Prosecutor-General Ustinov on 31 July accepted the resignation of Moscow City Prosecutor Mikhail Avdyukov, Interfax and other Russian media reported. Avdyukov has been named an adviser to Ustinov and will begin working in his office on 4 August, a spokeswoman for the Prosecutor-General's Office was quoted as saying. Also on 31 July, representatives of the Moscow Prosecutor's Office met with representatives of the Prosecutor-General's Office to discuss the results of an audit of the Moscow office that found legal violations and incompetence. According to the spokeswoman for the Prosecutor-General's Office, the audit found "massive" violations of the law, particularly concerning the registration of crime reports. "I can say that a definite system of the mass concealing of crimes was developed," the spokeswoman said, according to newsru.com on 31 July. The report also alleges that city prosecutors have done a poor job of overseeing the work of the Moscow police, "Izvestiya" reported on 31 July. Gazeta.ru reported that Avdyukov was asked to step down quietly in the spring, but refused to do so.

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