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Russia: Battle Escalates Between Kremlin, Prosecutor

Moscow, 24 March 1999 (RFE/RL) -- When Russia's Federation Council last week rebuffed Kremlin attempts to oust Prosecutor General Yuri Skuratov, it also opened a flood of accusations that could engulf the country's leadership in a new struggle for power.

Officials from the General Prosecutor's office yesterday searched Kremlin offices and seized documents as part of a potentially explosive inquiry into alleged corruption in the administration and the entourage of President Boris Yeltsin.

The powerful head of the Kremlin's administrative department, Pavel Borodin, confirmed that prosecutors had questioned officials in his department. Borodin manages the Kremlin's multibillion-dollar empire of state buildings, country residences, aircraft, hotels and other properties.

Borodin said an inquiry into whether a Swiss company, Mabetex, had bribed Kremlin officials to ensure lucrative contracts to renovate top government buildings had been under way since last week.

Borodin denied any wrongdoing by Kremlin administration officials and said the prosecutor's office did not initiate criminal proceedings against him. Similar denials came from the chairman of Mabetex, Behgjet Pacolli. He flew to Moscow from Switzerland this week and, as prosecutors were searching the Kremlin offices in Staraya Ploshad (Old Square) yesterday, he vehemently denied at a packed press conference any allegation of corruption and bribery.

"Should I tell you now that I bribed somebody? I did not do this and nor did my company. [I don't know whether] this is an exception [to widespread Russian corruption standards] or a rule, but it's true.

Meanwhile, Swiss Attorney General Carla del Ponte, who on January 22 had personally overseen the search of Mabetex's Swiss headquarters, arrived yesterday in Moscow. Del Ponte was met personally by Skuratov. The full agenda of their talks has not been made public. However, Skuratov's office said it would focus on Mabetex's activities.

Yesterday's events came as the dangerous confrontation between Yeltsin and Skuratov and his supporters continued to intensify. Skuratov never enjoyed a brilliant reputation as crime and corruption fighter. He is considered close to some of the communist and ultranationalist leaders that are among Yeltsin's main foes.

The Kremlin failed last week in its attempt to oust Skuratov. The usually loyal Federation Council overwhelmingly voted to keep him in his job, after he said that various forces close to the Kremlin and the government had attempted to blackmail him into resigning, because of inquiries into corruption cases he had initiated.

Skuratov is himself entangled in a sex scandal, but at the week-end he responded to the airing of an embarrassing videotape showing a person resembling him in bed with two women by vowing to stay on and root out high-level corruption.

Yeltsin sacked the head of his administration last week, seemingly over his handling of the Skuratov affair and appointed a little-known official, Aleksandr Voloshin, as new chief of staff.

Skuratov's charges of corruption in the Kremlin could profit Yeltsin's communist foes, as well as possible presidential candidates such as Prime Minister Yevgeny Primakov and Moscow Mayor Yuri Luzhkov.

Luzhkov said at the weekend that Russia "is witnessing the beginning of a catastrophe."

Concerned Kremlin officials say privately that the Kremlin may lack the resources to fight back.

Borodin said the motivation behind the prosecutor's inquiry focusing on Mabetex is "purely political."

Borodin also alleged that the prosecutors' investigation could have been initiated by the company's competitors, among which he seemed to list construction structures controlled by the Moscow city government.

During the last six years, Mabetex renovated Yeltsin's Kremlin office, parliamentary headquarters and other top government buildings in Moscow and elsewhere in Russia under contracts worth hundreds of millions of dollars.

Mabetex also participated in other Russian projects, as well as in top ventures in Kazakhstan and other CIS countries. It is reportedly one of the companies awarded contracts for the reconstruction of the Chechen capital, Grozny. Russian budget funds targeted to that project have reportedly disappeared.

Pacolli claimed the Mabetex was awarded all its contracts in Russia in "honest tenders." He also argued that he was the victim of Russia's internal political conflicts, and said his company had worked in Moscow since the Soviet era. However, it appeared clear during the press conference that Mabetex started obtaining lucrative contracts after he got acquainted with Borodin.

Yeltsin has not been directly implicated in Skuratov's inquiries, but officials around him and his family could be investigated.

Some Russian media have speculated -- without providing evidence -- that Yeltsin's daughter and image advisor Tatyana Dyachenko was among those who benefited from the alleged corruption.

The reports have claimed that Mabetex, among other things, paid for a luxurious residence Dyachenko is allegedly building outside Moscow. Pacolli denied all the allegations. In what seemed as a continuation of Skuratov's moves, communist deputy Viktor Ilyukhin, one of Skuratov's main supporters, claimed yesterday that Dyachenko was linked to an Australian company that received $235 million after Russia received a loan from the International Monetary Fund (IMF) last summer. Ilyukhin did not provide any evidence for his allegations, but linked them to a recent statement by U.S. Treasury Secretary Robert Rubin, who said the IMF's last loan tranche, released immediately before the August financial meltdown, could have been "siphoned off."

One of the charges recently leveled by Skuratov was that the Central Bank mismanaged Russia's reserves, allowing an obscure offshore fund, FIMACO, to handle them, including moneys coming from IMF loans released up to last year.

Former Central Bank chairman Sergei Dubinin, one of the officials Skuratov seemed to intend targeting with his accusations, told NTV Russian commercial television this week that IMF loans released after 1997 could not have ended up in FIMACO's accounts. He said the Central Bank had ceased to use the offshore fund that year.

A Moscow daily funded by financial structures close to the Central Bank, "Vremya-MN," reported yesterday that IMF officials last Friday met first Deputy prosecutor General Yuri Chaika. The daily said IMF representative Gerard Belanger asked Chaika whether prosecutors had evidence proving the accusations of misuse of the IMF's last tranche and whether a criminal investigation is under way. A positive answer would have been a huge blow to difficult negotiations between Russia and the IMF on the refinancing of the country's outstanding $4.8 billion debt to the fund.

According to Dubinin, as well as to "Vremya," Chaika replied that there are no accusations, no criminals have been caught and no criminal cases are under way.

Chaika was quoted in the report as telling the daily that officials in the prosecutor's office during the meeting asked the IMF official "to avoid dramatizing the situation in Russia."

The IMF Moscow mission did not reply to a request made by RFE/RL to confirm or deny the report.

Somebody in Russia's prosecutor's office clearly seems to be misleading people, but the on-going political fight makes it nearly impossible to find out whether it is Skuratov or Chaika.

What is clear is that many Russian politicians involved in this latest power feud seem to have little consideration for its overall possible consequences.

In Dubinin's words, "with our own hands we are destroying the image of our country and we are even not able to understand this." He added "There are rules of the game. People worried just about their careers sacrifice the country's respect abroad. To the West, we look like a bunch of savages ready to eat each other up."

For the confused Russian public, struggling to make ends meet, the impression is probably pretty much the same.