30 October 2003, Volume 4, Number 43
YUKOS CASEFSB ARRESTS YUKOS HEAD... Federal Security Service (FSB) officers in Novosibirsk on 25 October pulled Yukos head Mikhail Khodorkovskii off his charter plane, which had stopped for refueling en route to Irkutsk, and arrested him, Russian media reported. Khodorkovskii was then brought back to Moscow, where he was questioned by prosecutors prior to the official filing of charges against him. He is accused of seven counts, including large-scale corporate tax evasion and large-scale embezzlement, according to a press release from the Prosecutor-General's Office. Prosecutors stated that the arrest was necessary because Khodorkovskii ignored a summons to appear on 24 October. However, his lawyers said they informed prosecutors that Khodorkovskii was on a business trip. Also on 25 October, a Moscow court ordered that Khodorkovskii, who is reportedly Russia's richest person, be remanded in custody for two months.
FELLOW BUSINESSMEN UNANIMOUS IN THEIR DISAPPROVAL... The Russian Union of Industrialists and Entrepreneurs (RSPP), Business Russia, the Association For Entrepreneurial Organizations of Russia, and the All-Russia Organization of Small and Medium-Sized Businesses have issued statements condemning Khodorkovskii's arrest, "Izvestiya" and Interfax reported on 25 and 26 October, respectively. After an emergency meeting of the RSPP board, RSPP member and Unified Energy Systems (EES) head Anatolii Chubais told reporters the board believes that the business community's confidence in the law-enforcement system has been eroded and that "only a clear and unambiguous statement by Russian President [Vladimir] Putin can stop these extremely dangerous developments." Sergei Borisov, president of the All-Russia Organization of Small and Medium-Sized Businesses, commented that business "cannot accept such actions on the part of the authorities."
...AS ALL EYES ARE ON PUTIN. Both gazeta.ru and "Kommersant-Daily" on 27 October compared Khodorkovskii's arrest with actions once taken by Aleksandr Korzhakov, former security chief for Russian President Boris Yeltsin. According to gazeta.ru, Korzhakov tried to scare his political opponents in 1996, namely Yeltsin's then-presidential-campaign manager Chubais. The upshot of that event was that Yeltsin dismissed Korzhakov and his comrade-in-arms, FSB Director Mikhail Barsukov, and First Deputy Prime Minister Oleg Soskovets, "Kommersant-Daily" noted. Yeltsin made a choice in favor of Russia's "democratic future," according to the daily, while "today the choice before Putin is the same -- strengthen democratic institutions or the KGBization of Russia's system of power." Mark Urnov, president of the Ekspertiza foundation, told "Kommersant-Daily" that the arrest embodies "the culmination of the struggle among the Kremlin clans." "Business has already expressed its lack of faith in the security structures," Urnov said. "And the intelligentsia and the mass media will likely react the same way. The likelihood of a compromise has been reduced." The president, according to Urnov, will have the last word.
BUT PUTIN DECLINES TO DISCUSS YUKOS AFFAIR. Speaking at a cabinet meeting on 27 October, President Vladimir Putin ruled out holding any meetings to discuss the 25 October arrest of Yukos head Mikhail Khodorkovskii, Russian media reported. Several business groups, including the Russian Union of Industrialists and Entrepreneurs (RSPP), have requested such a meeting (see "RFE/RL Newsline," 27 October 2003). "Everyone must be equal in the eyes of the law, regardless of the billions of dollars in someone's personal or corporate bank account," Putin said. He noted that only the courts can authorize an arrest, and the court in this case "must have had sufficient reason for doing so." He concluded by saying, "I want to ask you to stop all the speculations and hysteria, and I specifically request that the government not be drawn into the debate."
EU SPEAKS WITH TWO VOICES ABOUT YUKOS HEAD'S ARREST... European Union External Relations Commissioner Chris Patten said on 28 October that Russia must apply the rule of law in relation to the Yukos oil company if it wants closer trade links with the EU, Reuters reported. "The rule of law for a company is ultimately the same as the rule of law for individuals," he said. "So it shouldn't surprise anybody that this case, the details of which none of us know as much about as presumably the Russian authorities...has caused a good deal of concern." Patten said he would be "extremely surprised" if the Yukos case were not discussed when EU leaders meet with President Putin in Rome on 6 November. Italian Foreign Minister Franco Frattini, who met with Foreign Minister Igor Ivanov in Moscow on 28 October, said the 25 October arrest of Yukos head Khodorkovskii will not negatively affect relations between Russia and the EU, RBK reported. Frattini said he would not comment on the case against Khodorkovskii, but that the situation surrounding Yukos did not figure in his talks with Ivanov.
...WHILE U.S. STATE DEPARTMENT EXPRESSES CONCERN... Asked on 28 October about Yukos head Khodorkovskii's arrest, U.S. State Department spokesman Richard Boucher said that while the U.S. government is "not in a position to comment on the specific legal aspects of the case...recent events do raise questions as to whether the law is being applied selectively." The events surrounding Yukos, he said, "raise doubts on the part of companies doing business in Russia and among potential investors." Boucher said the State Department is following the Khodorkovskii case closely and is "concerned at the escalation and confrontation with Yukos," the Department's website (http://www.state.gov) reported.
...AND RUSSIAN COMMENTATORS PREDICT A MILD WESTERN RESPONSE. Several Russian commentators predicted that the West's reaction to Khodorkovskii's arrest -- specifically that of the United States -- will be muted. National Strategy Council General Director Stanislav Belkovskii said that while Khodorkovskii had hoped Russian business and the U.S. "Republican elite" would support him, neither group is likely to do so in any significant way, izvestia.ru reported on 27 October. "For the United States, the stability of [President] Putin's regime is more important," Belkovskii said. The National Strategy Council published a report in May warning of a possible "oligarchic coup," although Belkovskii subsequently denied any connection between the report's appearance and the moves against Yukos (see "RFE/RL Newsline," 30 July 2003). Igor Bunin of the Center for Political Technologies predicted that neither the West nor Russian business nor Russian "liberals" are likely to protest forcefully against Khodorkovskii's arrest, "Vedomosti" reported on 27 October. Statements from the West have thus far been "very mild," Bunin said, noting that it is preoccupied with Iraq.
REPUTED IDEOLOGUE OF ANTI-OLIGARCH CAMPAIGN SAYS YUKOS CASE MARKS END OF THE YELTSIN ERA... National Strategy Council Director Stanislav Belkovskii told RosBalt on 28 October that he believes that by siding with law enforcement officials in the Yukos dispute, President Putin has brought the era of former President Boris Yeltsin to an end. The National Strategy Council in May published a report warning of a possible "oligarchic coup" in Russia (see "RFE/RL Newsline," 27 May 2003) that many analysts viewed as the opening volley in a new anti-oligarch campaign. In July, however, Belkovskii denied any connection between his report and the Yukos cases (see "RFE/RL Newsline," 30 July 2003). Belkovskii called upon Putin to follow this new policy to the end and to rid his administration of holdovers from the Yeltsin era.
...SAYS THAT WEST, RUSSIA WILL BACK PUTIN IN DISPUTE... Commenting on Yukos head Mikhail Khodorkovskii's 25 October arrest in the same RosBalt interview on 28 October, Belkovskii said Khodorkovskii made a grave miscalculation if he believed that the West would support him against President Putin. The West, he said, values stability in Russia above all else, and therefore will support Putin. He added that Khodorkovskii cannot count on much support within Russia either, since oligarchic capital has not legitimized itself at home. "People do not understand where all this wealth comes from, how the oligarchs got it, and why it should have such a major impact on Russian politics," he said.
...AND COMMENTS ON YUKOS'S FUTURE. In the same RosBalt interview, Belkovskii said that the arrests of some senior Yukos managers will not have a major impact on the company's capitalization over the long term. He commented that it is not the actions of the authorities that could harm Yukos, but rather the public-relations campaign launched by Khodorkovskii's supporters. Belkovskii also speculated that President Putin would like to delay as long as possible the sale of a Yukos stake to a Western company, although he said Putin would eventually approve such a deal, including possibly the sale abroad of a majority stake in the company. Yukos has reportedly been in talks recently with U.S. oil majors ExxonMobil and ChevronTexaco. Belkovskii said the question of which of these companies could get the stake remains open, but the Kremlin believes ChevronTexaco has closer ties with the current Republican U.S. administration, while ExxonMobil is more closely associated with the Democratic Party, and a final decision will be based on this understanding. He concluded that there is no danger that Yukos will be nationalized or broken up.
GOVERNMENT INSIDER SAYS YUKOS AFFAIR WILL HARM ECONOMY... Mikhail Delyagin, director of the Institute of Globalization and, until recently, economic adviser to Prime Minister Mikhail Kasyanov, told reporters in Moscow on 28 October that he believes Western investors will steer clear of the Russian economy as a result of the Yukos investigations, RosBalt reported. "The reaction of international and Russian business to the arrest of Mikhail Khodorkovskii indicates that they view the efforts against Yukos not as a step to bring order but as a shift away from 'managed democracy' -- which is acceptable for business circles -- toward uncontrolled lawlessness," Delyagin said. The new climate could lead to the cancellation of some major economic projects, including the proposed Angarsk-Datsin oil pipeline, which has been heavily lobbied for by Yukos. He added, though, that the Russian business community will not attempt to exert pressure on the Putin administration, as the Kremlin has already shown what can happen to those who dare to do so. "The state can no longer curtail the appetite of the state security bureaucracy which, according to the Prosecutor-General's Office's own statistics, has opened 3,000 privatization-related cases this year," Delyagin said. "During his 2000 presidential campaign, Putin promised a 'dictatorship of law,' but now he seems to be demonstrating something that looks more like a dictatorship of mediocrity."
...AS POLITICIANS, BUSINESSMEN CONTINUE TO DISCUSS THE SITUATION... Speaking on Ekho Moskvy on 29 October, EU foreign- and security-policy chief Javier Solana said that Europe "has no position on the Yukos affair, as it is an entirely internal matter for Russia." "The only comment I can allow myself is that one should be careful about its impact on the economic and financial situation," Solana said. Former Prime Minister Yevgenii Primakov, who is president of the Russian Chamber of Commerce and Industry, said that he will not intervene in the Yukos case and that he would like to "watch this show to the end." He added that Yukos head Khodorkovskii could pay back more to the community than he has to date. Former Finance Minister Boris Fedorov said that he does not see Khodorkovskii's arrest as a threat to Russian democracy, polit.ru reported on 29 October. "In the past we have already seen the state assault other oligarchs and we have seen one businessperson assault another, and nothing happened to democracy," Fedorov said.
...AND FELLOW OLIGARCH HOLDS HIS TONGUE. Chukotka Autonomous Okrug Governor Roman Abramovich, who is one of the richest people in Russia and who is regarded as a member of the so-called Yeltsin-era "Family," declined to comment on Khodorkovskii's arrest. "I prefer not to think about it," Abramovich told NTV on 29 October.
COMBATTING TERRORISMMOSCOW MARKS FIRST ANNIVERSARY OF THEATER HOSTAGE DRAMA... Speaking at a ceremony to open a new Russian air base in the Kyrgyz town of Kant on 23 October, President Vladimir Putin noted that it is was one year ago that a group of Chechen fighters took more than 900 people hostage at a Moscow theater (see "RFE/RL Newsline," 24, 25, and 26 October 2002), Russian media reported. Putin used the occasion to call upon the international community to redouble its efforts to combat terrorism. During the October 2002 hostage crisis, 129 hostages died during a special-forces operation to liberate the theater, most of them dying from the effects of a sleeping gas used by the rescuers. Putin called the tragedy a "deep wound that has continued to bleed for a long time." In Moscow, the city administration and civic organizations organized commemorations, including the unveiling of a monument with the names of the hostages who died.
...AS POLL SHOWS RUSSIANS FEAR SIMILAR TERRORIST INCIDENTS... The ROMIR polling agency has released a poll of 1,600 adults that found that 91 percent of respondents believe a similar terrorist incident could happen again, lenta.ru reported on 22 October. According to the same poll, 63 percent of respondents approved of the government's actions during the crisis, while 32 percent did not. However, 37 percent said that the sleeping gas is to blame for the deaths of the hostages, while 26 percent blame the hostage takers, 20 percent blame the "inadequate medical assistance," and 10 percent blamed other causes.
...AND CHECHEN FIELD COMMANDERS FORMALLY CHARGED IN THE CASE. Shamil Basaev, Khasan Zakaev, and Gerikhan Dudaev have been charged in absentia with organizing the October 2002 hostage taking at a theater in Moscow, and international warrants have been issued for their arrest, Interfax on 22 October quoted the Moscow City Prosecutor's Office as saying. Basaev claimed responsibility for the hostage taking shortly after it ended (see "RFE/RL Newsline," 1 November 2002). Colonel General Valerii Baranov, first deputy commander-in-chief of the Interior Ministry Troops in Chechnya, told Interfax on 25 September that Basaev is believed to be hiding in southern Chechnya.
FOREIGN POLICYPUTIN ORDERS TEMPORARY HALT TO CONTROVERSIAL DAM PROJECT... Presidential spokesman Aleksei Gromov announced on 23 October that President Putin and Ukrainian President Leonid Kuchma have spoken by telephone and have agreed that the two countries' prime ministers will meet on 24 October to discuss the conflict over a controversial dam being built by Russia in the Kerch Strait (see "RFE/RL Newsline," 3, 14, and 21 October 2003 and "End Note," 16 October 2003), Russian media reported. Putin will ask the administration of Krasnodar Krai to halt construction of the dam until the dispute with Kyiv is resolved. Foreign Minister Igor Ivanov said on 22 October that the project is dictated "exclusively by economic and ecological considerations and has nothing to do with Ukrainian-Russian talks about border delimitation in the Azov Sea," RTR reported.
...AS PARLIAMENTARIAN SAYS DISPUTE WILL BE RESOLVED. Duma Deputy Dmitrii Rogozin, chairman of the Foreign Affairs Committee, said the conflict over the dam is "the result of Ukraine's ambitions to join NATO," RTR and NTV reported on 22 October. Ukraine claims that the Tuzla islet is its territory and that it is threatened by the dam. "In fact, there is no Tuzla islet at all," Rogozin said. "It is merely the above-water part of a seabed sand spit that reaches far out into the Kerch Strait." He added that if Russia and Ukraine are unable to agree on the status of the Azov Sea, it could acquire the status of international waters and other countries, including NATO countries, could gain the unrestricted use of it. "I am sure that President Putin has levers to deal with this problem," Rogozin said. "I am sure he can just call Leonid Kuchma and say a few words. President Kuchma understands Russian better than Ukrainian," Rogozin said.
RUSSIAN, UKRAINIAN PREMIERS DISCUSS TUZLA... Prime Minister Mikhail Kasyanov and Ukrainian Prime Minister Viktor Yanukovych met on 24 October to discuss the ongoing dispute over the Tuzla islet, Russian and international media reported (see "RFE/RL Newsline," 23 October 2003). Russia agreed to suspend construction of a dam from the Russian mainland to the islet, which is located in the Kerch Strait connecting the Black and Azov seas, while the Ukrainian side agreed to withdraw its border guards from the island. The two sides will try to resolve the disputed status of the Azov Sea and the Kerch Strait within the next three months. Tensions, however, quickly reemerged, with Russian media accusing the Ukrainian side of reneging on the 24 October agreement. "Ukrainian border guards, who were supposed to leave the Tuzla spit immediately, have not gone anywhere and, it would appear, have no intention of leaving," ORT reported on 25 October. The next day, ITAR-TASS reported that the Ukrainian government has appropriated $1 million to improve "amenities" at its border post on Tuzla.
...BELARUSIAN PRESIDENT SLAMS RUSSIAN OFFICIALS. Belarusian President Alyaksandr Lukashenka on 24 October accused Russian presidential administration chief Aleksandr Voloshin and presidential foreign-affairs adviser Sergei Prikhodko of provoking "nonobjective" media coverage of the 14 October meeting in Moscow of the Higher State Council of the Russia-Belarus Union, RosBalt reported. Following that meeting, Russian media quoted an unidentified presidential-administration source as saying the two countries had failed to agree on introducing the Russian ruble as the union's common currency because Lukashenka is primarily concerned with his own political role within the future union. Since no such role for Lukashenka is envisioned, the source said, the situation has reached a "stalemate" (see "RFE/RL Newsline," 15 October 2003). Lukashenka claimed that Prikhodko was the anonymous source and that Voloshin was the leak's "director." He accused them of trying to thwart Russia's merger with Belarus. Russia's leadership, Lukashenka added, fears sharing its powers with the union structures, newsru.com reported on 26 October. The Foreign Ministry, meanwhile, summoned Belarus's ambassador to Russia, Vladimir Grigoryev, on 25 October to protest Lukashenka's "unfriendly" comments, Interfax reported.
BRUSSELS URGES MOSCOW TO EMBRACE STATUS OF NEW EU MEMBER STATES. The European Commission has warned that relations between Moscow and Brussels could deteriorate if Russia does not automatically apply its partnership and cooperation agreement with the EU to new member states, RFE/RL reported on 29 October. European Commission foreign press secretary Diego Ojega said the EU's position will be explained at an EU-Russia meeting in Moscow ahead of the EU-Russia summit in Rome on 6 November. Russia wants to discuss the issue, fearing its foreign trade could suffer in the wake of EU enlargement. It has also been complaining of alleged human rights violations against Russian speakers in Latvia and Estonia. Eight postcommunist countries are expected to join the EU in mid-2004: the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia, and Slovenia.
RUSSIA PRAISES IRAN'S PLEDGE TO COOPERATE WITH IAEA. Deputy Foreign Minister Sergei Kislyak told his Iranian counterpart, Gholamali Khoshru, on 25 October that Russia welcomes Iran's readiness to cooperate with the International Atomic Energy Agency (IAEA), ITAR-TASS reported. During a meeting between the two officials in Moscow, Kislyak expressed satisfaction at Tehran's intention to sign the IAEA's additional protocol, to provide the agency with complete information about its nuclear programs and to suspend work on the enriching uranium. On 19 October, President Putin said Russia is ready to implement stricter controls over the transfer of Russian nuclear technology to Iran, but wants to avoid pushing Iran's leadership "to extreme decisions." He also charged that while there are Western sanctions against Russian companies engaged in nuclear cooperation with Iran, there are no sanctions against Western companies doing the same thing (see "RFE/RL Newsline," 21 October 2003).
SECRET SERVICESONE INTELLIGENCE OFFICER SENTENCED... The Moscow Military District Court on 21 October handed down to retired Federal Agency of Government Information and Communications (FAPSI) Colonel Boris Galchuk a three-year suspended sentence after convicting him of revealing state secrets, RIA-Novosti and "Nezavisimaya gazeta" reported on 21 and 23 October, respectively. The court ruled that in 2001-03, while he was working at FAPSI -- which has since been absorbed into the FSB -- Galchuk gave secret government documents analyzing the sociopolitical situation in the regions against the background of some election campaigns to a Moscow-based public-relations firm. The court said that revealing the information might have jeopardized Russia's national security, but gave Galchuk a relatively mild sentence in view of his 35 years of exemplary service and his lack of previous transgressions.
...AND ANOTHER ARRESTED... Interior Ministry agents on 22 October arrested former FSB Lieutenant Colonel Mikhail Trepashkin on suspicion of illegal possession of a handgun, newsru.com reported. Trepashkin's wife, Tatyana, told the website that the police planted the weapon in order to fabricate a case against her husband, who has a long history of conflict with the authorities.
...AFTER YEARS OF DISPUTES WITH AUTHORITIES. In 2002, Trepashkin -- who retired from the FSB seven years ago and who is now a lawyer -- represented former FSB Lieutenant Colonel Aleksandr Litvinenko. Litvinenko is a close associate of former oligarch Boris Berezovskii and now has political asylum in Great Britain. Trepashkin also worked with a public commission organized by Duma Deputy and human rights activist Sergei Kovalev to look into the 1999 apartment-building bombings in Moscow and other Russian cities. As a result of this work, Trepashkin was charged by military prosecutors of divulging state secrets and other crimes. A case against him was filed on 15 September 2003, but no hearings were held pending a procedural appeal by Trepashkin to the Supreme Court. That appeal was granted on 16 October, and the case was transferred to a new court. Analysts think the weapons case is likely an attempt by the authorities to ensure that Trepashkin serves some time in prison.
MILITARYMOSCOW TO BUILD NEW AIR-RAID SHELTERS. The Moscow city government has approved a new municipal civil-defense program, including the renovation of existing air-raid shelters and the construction of new ones, gtz.ru reported on 29 October. "Despite the diminishing of the threat of full-scale aggression against Russia, a potential military threat remains," said Aleksandr Yeliseev, head of the municipal civil-defense and emergency-situations department. Moscow currently has 7,000 air-raid shelters, which is not enough to protect the entire city population, Yeliseev noted. He said the city's new civil-defense program will cost 1.98 billion rubles ($600 million), half of which will come from the federal budget.
DEFENSE MINISTER AMBIVALENT ABOUT THE UNITED STATES... "Moskovskii komsomolets" on 27 October published an extensive interview with Defense Minister Sergei Ivanov. In the undated interview, which Ivanov gave to correspondent Yuliya Kalinina aboard his plane, Ivanov discussed, among other things, relations with the United States, Russia's new military doctrine, and Iraqi reconstruction. Asked about relations with the United States, Ivanov said Russians are not "completely clear about this" just as "the Americans are not clear what the Russians are to them." He said that while the two countries are not enemies, they are "not allies either, that is for sure." Still, the U.S. attitude toward Russia is "is entirely different from what it was during the Cold War," he said, citing the example of Chechnya, about which the "American authorities have now agreed with us." On the issue of Iraqi reconstruction, Ivanov said that if the United States wants to "share power" with the United Nations, then Russia's "political participation is possible." Any participation of Russia's military in postwar Iraq, however, is "is 100 percent ruled out," Ivanov said.
...AND AMBIGUOUS ABOUT NUCLEAR FIRST STRIKES. In her interview with Defense Minister Ivanov, "Moskovskii komsomolets" reporter Kalinina referred to the assurances he gave to various Western interlocutors that the policy on preemptive military strikes in Russia's new military doctrine does not mean the possible first use of nuclear weapons (see "RFE/RL Newsline," 10 October 2003). Why shouldn't Russia declare "the right to a first nuclear strike?" she asked. Ivanov answered: "What we say is one thing. That sounds cynical, but everything that we plan does not necessarily have to be made public. We believe that from the foreign-policy viewpoint, it is better to say that. But what we actually do is an entirely different matter. If we are talking about nuclear weapons, they are the chief component of our security." Asked by Kalinina what he was listening to through his headphones, Ivanov told the journalist it was Pink Floyd's "Wish You Were Here" and indicated that he is a big fan of the British rock group.
POLITICAL ECONOMYRUSSIAN COMPANIES COULD INVEST $4 BILLION IN IRAQ. Deputy Prime Minister Yurii Fedotov told an international donors conference in Madrid that Russian companies might invest up to $4 billion in Iraq's economy, ITAR-TASS reported on 24 October. Russian investors, he said, are ready to do more if contracts signed under the oil-for-food program that are due to expire on 21 November are renewed. Iraqi reconstruction will be successful if security and honest rules are guaranteed for companies working in Iraq and if economic aid is transparent and stable, Fedotov said. On 17 October, President Putin called the UN resolution on Iraq passed unanimously the previous day a step in the right direction, but said it did not expand the UN's role in Iraq sufficiently to warrant Russia providing either peacekeepers or funds to help the country rebuild, Interfax reported.
PUTIN URGES TRANSPORT-SECTOR PRIVATIZATION. Addressing a State Council session devoted to a national transport strategy, President Putin on 29 October said that "an efficient and reliable transportation system will secure the territorial and economic integrity of the country," Russian media reported. However, he noted that 10 percent of the population has no access to the network of roads and highways and there are many regions in Siberia and the Far East where expensive air transport is the only reliable means of movement. He called for reducing the state's control over the transportation infrastructure in order to attract private investment and initiative to develop it. The State Council the same day approved nearly 20 ambitious transportation projects, including completing construction of the transnational Moscow-Vladivostok highway, the world's longest, next year. The council also approved the expansion of the 10,000-kilometer Trans-Siberian Railroad, as well as the modernization of several airports. Although Putin advocated rapid privatization in the transport sector, the national transport strategy does not envisage the privatization of the country's oil and natural-gas pipelines, which will remain under state control (see "RFE/RL Newsline," 10 October 2003).