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Security Watch: June 25, 2002

25 June 2002, Volume 3, Number 23
PUTIN SAYS ECONOMY IS FIRST PRIORITY... Speaking at a major press conference involving 700 journalists from across the country on 24 June, President Vladimir Putin said that his administration's highest priority is the development of the economy and improving the standard of living for average Russians, Russian and Western news agencies reported. Putin also stressed the need to boost the country's national security and improve its image around the world. He added that Russia's foreign policy must reflect the possibilities of its economy. He said that in order to achieve his goals, he needs the consolidation of society and its support so that Russia can join the World Trade Organization (WTO) and fully enter into the globalized world economy. He said that he is seeking support across the political spectrum and does not intend to marginalize either the left, right, or the center.

...AS DUGIN OFFERS HIS EXPLANATION OF PUTIN'S COURSE. The current warming of Putin with U.S., NATO, and Europe, as well as his promulgation of liberal economic policies is being dictated by the political calculation that now is the best time to get "good grades" with the West, said the controversial geopolitician and the leader of the "Eurasia" movement, Aleksandr Dugin, to "Versiya" No. 21. Dugin goes on to say that Putin is now in the center of a timeline between two electoral cycles and his liberal and pro-Atlantic line has reached its peak, and that once elections draw closer, Putin's policies will take on a more "national-patriotic" and "Eurasianist" tilt. For Putin it is vitally important to preserve his freedom to maneuver by having loyal supporters both in the Atlantic and Eurasian camps, and the tactic he has selected provides exactly this result, Dugin opined. Dugin does not conceal the fact that he and his party back all the international alliances made by Putin during his rule -- except the one with the United States. As far as the U.S. is concerned, Dugin said, his party supports only conservative Republicans who back isolationism for Washington.

DUMA ADOPTS TOUGH RESOLUTION ON KALININGRAD. The State Duma on 19 June overwhelmingly approved a hard-line, non-binding resolution on the Kaliningrad Oblast issue, "Izvestiya" and other Russian news agencies reported. The resolution, which garnered 401 votes, demands that the European Union provide a visa-free transit corridor between the enclave and the rest of Russia after neighboring Lithuania and Poland enter the organization. It accuses the EU of "disrespecting Russia's national sovereignty" and "violating the norms of international law." The resolution backs President Vladimir Putin's tough stance on the issue. After the vote, Deputy Foreign Minister Yevgenii Gusarov told the newspaper that Russia will continue insisting on visa-free transit not only for Kaliningrad residents but for all Russian citizens. Kaliningrad Oblast Governor Vladimir Yegorov was quoted as saying that the EU proposal for simplified visas for Russians is unacceptable and that Kaliningrad residents alone would require 5,000 such visas per day. "Izvestiya" commented, however, that by offering blanket support for Putin's position, the Duma has placed Russia in a no-win situation, since it seems clear that the EU will not back down from its position on the matter.

...BUT EU REMAINS UNIMPRESSED. Leaders at the European Union summit on immigration policy in Seville rejected Russian proposals to provide visa-free transit corridors between Kaliningrad Oblast and the rest of Russia, Russian and Western news agencies reported on 22 June. The summit's final documents instead offer residents of the Kaliningrad enclave the right to multiple-entry Schengen visas at the lowest possible rate following the accession of Lithuania and Poland to the organization. The summit directed the European Commission to flesh out the details of this visa procedure before September. The pro-Kremlin website editorialized that Russia will sabotage EU efforts to establish border control around the enclave. "If they want to, let them build up barbed wire and checkpoints around Kaliningrad at their own expense. We certainly aren't going to do this. Let's see how they manage," the website wrote on 19 June.

MARGELOV SAYS PACE IS BIASED IN MIDDLE EAST. Deputy Mikhail Margelov, the chairman of the Duma Foreign Relations Committee who recently headed a fact-finding delegation of the Parliamentary Assembly of Council of Europe (PACE) to Israel, said PACE has a clear bias toward the Palestinian side, "Izvestiya" reported on 16 June. Margelov said the PACE report on the conflict issued in April contains a biased evaluation and that both sides are responsible for the bloodshed in the region. Margelov said he will correct the PACE analysis in a new report that he is currently preparing for submission. However, he sharply criticized Israel's policies toward Palestinian civilians and its mistrust of international organizations.

COMMUNIST LEADER TELLS U.S. AMBASSADOR THAT KPRF OPPOSES U.S.-RUSSIA STRATEGIC ACCORD... Communist Party of the Russian Federation (KPRF) leader Gennadii Zyuganov said during a 20 June meeting with U.S. Ambassador to Russia Alexander Vershbow that the Strategic Offensive Reductions Treaty signed in May by U.S. President George W. Bush and President Vladimir Putin represents a threat to Russia's national security, and other Russian news agencies reported. "This treaty codifies a plan for Russia's unilateral disarmament," Zyuganov said. He added, however, that he believes reductions in Russia's strategic forces are necessary, but the cuts should not bring arsenals below the level needed to defend the country.

BILL ON EXTREMISM CONTINUES ITS RAPID PROGRESS TOWARD PASSAGE... Despite being introduced only at the beginning of June, the government-sponsored bill on combating extremism passed its second reading on 20 June, Russian news agencies reported. The vote was 272 in favor, with 126 against and two abstentions. According to "Izvestiya," discussion of the bill occupied almost half the session, as sharp words were exchanged regarding the definition of extremism and the possibility that the law could be interpreted by the Prosecutor-General's Office and the Justice Ministry in such a way as to be a weapon against "internal enemies." However, Legislation Committee Chairman Pavel Krasheninnikov (Union of Rightist Forces) argued that more than 100 amendments were considered, and the new version contains a more clear-cut definition of extremism and better-formulated norms governing the suspension of the organizations considered extremist, ITAR-TASS reported.

...WHILE PROSECUTOR-GENERAL DOWNPLAYS THE MOVE... Prosecutor-General Vladimir Ustinov told a group of heads of foreign diplomatic missions in Russia on 20 June that although the passage of the anti-extremism law is "a good thing," there are nonetheless more important issues, and RosBalt reported. "Members of extremist groups will read this law, and it might prevent them from committing extremist acts," Ustinov said.

...AND CRIMES AGAINST FOREIGNERS IN GENERAL. Ustinov also told the diplomats that the incidents of extremist violence in recent weeks in Russia were not directed "intentionally" against foreigners, RosBalt reported on 20 June. Last year, about 3 million crimes were committed in Russia, of which 1,500 were directed against foreign citizens, Ustinov said. He did not mention that the number of foreigners in Russia is far smaller than the number of Russians. RosBalt also quoted the head of the Interior Ministry department in charge of tracking down fugitives, Viktor Papsuev, as saying that there have been "hardly any" cases in Moscow of racial or religious crimes committed against African citizens.

DEPUTY PROPOSES ALLOWING CONSCRIPTS TO BUY THEIR WAY OUT LEGALLY. Duma Deputy Vladimir Semenov (Union of Rightist Forces) has introduced a bill that would allow draftees to avoid compulsory military service by making a set payment to the state treasury, RIA-Novosti reported on 18 June. Semenov was quoted as saying that the bill is intended to reduce opportunities for corruption at military induction centers, where presently conscripts often pay bribes in order to be released from service. Semenov even claims that he calculated the fee -- which would be $3,000 in Moscow and $1,500 in the regions -- based on his estimate of the amounts of typical bribes. Meanwhile, the Duma on 19 June was scheduled to consider the second reading of a bill on alternative civilian service.

PUTIN CALLS FOR REPATRIATION OF CAPITAL... Speaking to a congress of the Russian Chamber of Commerce and Industry, the national umbrella business association headed by former Prime Minister Yevgenii Primakov (see "RFE/RL Newsline," 19 June 2002), President Putin noted that too much Russian capital is working for Western economies and "Western economies that possess resources of Russian origin are not interested in them being removed," RIA-Novosti and other Russian news services reported on 19 June. He called on business and the government to create favorable conditions for repatriating Russian capital. "The government should not grab everyone by the arm and ask where this money came from, since the government itself failed to establish normal conditions for investment [in Russia]," Putin said. Aleksei Volin, Putin's deputy chief of staff, added that the government is considering an amnesty for capital that left the country because of political and economic instability, reported on 19 June. "If only $100 billion of the estimated $300 billion that left Russia is repatriated, state budget revenues will be increased by 18.5 percent on account of income tax alone," Volin said.

...AND PRIMAKOV SECONDS CALL FOR CAPITAL-FLIGHT AMNESTY... Addressing the same audience, Primakov urged the government to find "some form of amnesty for capital that fled the country," RIA-Novosti and other Russian news agencies reported on 19 June. Primakov argued that much of this money was exported for perfectly legitimate reasons. He stressed that Russia must continue to allow the free movement of capital into and out of the country while simultaneously creating incentives to encourage Russian business to repatriate their capital. Arkadii Volskii, head of the Russian Union of Industrialists and Entrepreneurs (RSPP), told the audience the state should restore the practice of Western concessions -- a New Economic Policy-era practice of granting special privileges to Western investors for a certain period of time -- in order to improve the negative balance of foreign investment and repatriate Russian capital.

...AS PRESIDENT MEETS WITH MYSTERY BANKER. Following his speech to the Chamber of Commerce and Industry, President Putin met for two hours with Sergei Pugachev, a senator representing Tuva in the Federation Council and the former president of Mezhprombank, "Izvestiya" reported. The discussions reportedly centered on concrete ideas for repatriating Russian capital. However, the newspaper speculated that Putin also asked Pugachev, who is reputed to be the informal leader of the presidential "Petersburg clan," about a 18 June article in "Le Monde" alleging that Pugachev -- and possibly other unnamed members of the presidential entourage -- is involved in money laundering in France and Monaco. "Izvestiya" also quoted a source close to Pugachev as saying, "Discussing a newspaper publication is not on the presidential level." Pugachev is one of the least-known figures in Putin's inner circle, the newspaper wrote. He is known as a major sponsor of the Russian Orthodox Church and is reputed to have considerable influence over the president.

PUTIN CALLS FOR DELAY OF LAND SALES TO FOREIGNERS. Speaking in Moscow at a congress of the Russian Chamber of Commerce on 19 June, President Putin called for the indefinite suspension of the sale of farmland to foreign citizens, reported the same day. Putin noted that the issue is currently on the agenda of the Duma, where it has provoked controversy. He added that many governors and legislators have informed him of their opposition to the measure. The president said that he understands their concerns and that the issue demands an "extremely gradual and cautious approach." He noted as well that, given the present economic situation in the agriculture sector, there is relatively little foreign interest in buying Russian farmland anyway. He said the government's position on the issue could be revised at a later date once the market for agricultural land is more developed.

PREMIER LAYS OUT VISION FOR SUSTAINED ECONOMIC GROWTH... Prime Minister Mikhail Kasyanov said that, for the first time in 30 years, Russia is entering a period of sustainable economic growth and now it must improve its competitiveness in international markets, RIA-Novosti and other Russian news agencies reported. Kasyanov added that Russia should enhance the "quality of its economy." The country "does not efficiently use its intellectual potential and remains an intellectual donor of the whole world," Kasyanov said. He also noted that his government should do much more to remove bureaucratic barriers to private business activity and to reduce the large state involvement in the economy.

...AS OLIGARCHS ATTACK PREMIER FOR UNREALISTIC ECONOMIC FORECASTS... Russian Aluminum head Oleg Deripaska, Interros head Vladimir Potanin, Yukos chief Mikhail Khodorkovskii, and other major business figures harshly criticized Prime Minister Kasyanov's government for its "utopian" prognosis of economic growth for 2003, recently made public by Economic Development and Trade Minister German Gref, "Vedomosti" and other Russian media reported on 18 June. Talking with Kasyanov at an 18 June meeting of the Entrepreneurship Council, the oligarchs said Gref's prognosis is inflated because it is based on budgetary guidelines instead of the real situation in the economy. None of the indicators for the 15 basic economic sectors that Gref presented coincide with the assessments of businessmen actually working in those sectors, Deripaska said. The same may be said for the inflation prognosis, which Gref predicted at from 12 to 14 percent for this year, but which in reality will be not less than 16 percent, Deripaska claimed.

...AND YUKOS TESTS U.S. OIL MARKET. Meanwhile, Yukos's Khodorkovskii told journalists on 18 June that his company will begin exporting oil to the United States on a trial basis early next month, reported. Khodorkovskii said a tanker is already en route carrying 200,000 tons of oil. He declined to name the buyer, saying that the deal has not yet been sealed. He added that the U.S. market will be difficult to crack, but Yukos believes that by using supertankers it will be able to sufficiently reduce transportation costs to make its products competitive (see "RFE/RL Newsline," 3 May 2002).

NORDEX IS FOCUS OF INTERNATIONAL INVESTIGATION OF RUSSIAN MAFIA. Operation Web, an international law enforcement investigation into Russian organized-crime groups involved in money laundering (see "RFE/RL Newsline," 11 June 2002), is focusing its efforts on the activities of magnate Grigorii Luchanskii and his company, Nordex, "Izvestiya" reported on 16 June. Luchanskii, who resides in Austria, attracted the attention of international law enforcement agencies in the 1990s because of his massive and controversial deals involving the export from Russia of oil, copper, strategic metals, and weapons. Although Luchanskii has been dubbed by the media as "the biggest uncaught criminal," Operation Web has been studying a potential Achilles heel -- his close contacts with the controversial U.S. businessman Mark Rich, who lives in Switzerland. Rich was wanted by U.S. authorities for 17 years on suspicion of illegal oil trading and massive tax evasion until he was pardoned in 2000 by then-U.S. President Bill Clinton.

...AS FSB ARRESTS KRASNOYARSK KRAI DEPUTY GOVERNOR FOR BRIBE TAKING. Krai Deputy Governor Valerii Suladze was caught in his office accepting a $250,000 bribe in an apparent Federal Security Service (FSB) sting operation on 14 June, "Izvestiya" reported on 16 June. Analysts have begun speculating that Suladze's arrest will harm Aleksandr Uss's chances in the 8 September election. Suladze was responsible for construction projects in the vast krai and has often drawn criticism from the media and the krai legislature for his questionable distribution of construction contracts among a select group of companies. According to the newspaper, Suladze has been under FSB scrutiny for some time, although authorities did not confirm that the arrest was the result of a sting operation.

BUSINESSMAN'S BROTHER INVOLVED IN ATTEMPTED ASSASSINATION OF MOSCOW DEPUTY MAYOR... One of the gunmen who fired at the car of Moscow Deputy Mayor Iosif Ordzhonikidze on 19 June (see "RFE/RL Newsline," 20 June 2002) and who was himself shot dead by Ordzhonikidze's bodyguards has been identified as Salavat Dzhabrailov, brother of controversial businessman Umar Dzhabrailov, Russian news agencies reported on 21 June. Police reported that identification papers were found on Salavat Dzhabrailov's body at the scene of the incident, which Ordzhonikidze escaped unharmed. Umar Dzhabrailov, who ran for president of Russia in 2000 and who reputedly has close ties to Moscow Mayor Yurii Luzhkov, came to public attention in the mid-1990s during a dispute over ownership of the Radisson-Slavyanskaya Hotel. Dzhabrailov's partner in that project, American businessman Paul Tatum, was murdered near the hotel on 3 November 1996.

...BUT BUSINESSMAN SAYS ASSASSINATION ATTEMPT WAS STAGED. Umar Dzhabrailov told "Kommersant-Daily" on 22 June that his brother, who was in charge of security for Dzhabrailov's companies, was lured into a trap by Ordzhonikidze and his entourage, who staged an assassination attempt against Ordzhonikidze in order to cover up their murder of Salavat Dzhabrailov. Umar Dzhabrailov told the paper that it would be nonsensical to send a man with identification papers to try to kill a man in an armored car with a pistol. However, investigators told the paper that there is no reason that the would-be assassins would know that Ordzhonikidze was traveling in an armored car. They added, however, that they have no evidence to indicate that Umar Dzhabrailov was involved in the incident.

MEDIA MINISTER PREDICTS HIS MINISTRY'S DEMISE. Speaking to a conference devoted to the mass media on 19 June (see "RFE/RL Newsline," 18 and 19 June 2002), Media Minister Mikhail Lesin predicted that his ministry will be abolished within two or three years, having fulfilled its mission, Russian and Western news agencies reported. Lesin said that the state will continue to play a role in the national mass-media market, but claimed that that role will be minimal. He stressed, though, that there will be no "panic selling of state mass-media outlets." Lesin described the state's current policy of providing direct federal subsidies to more than 2,000 newspapers as "senseless," and predicted that after the Media Ministry is abolished, the state will continue to control "one information agency, one television channel, one radio company, and one national newspaper." In addition, state interests will continue to be protected through licensing, registration, and other media legislation, Lesin said. He also noted that the country's small advertising market is the major obstacle to developing the sector, but did not offer any suggestions for enlarging it.

PUTIN PROPOSES REFORM OF MASS-MEDIA MARKET... Speaking in the Kremlin at a national conference devoted to reform of the mass media, President Putin said that without "economically independent mass media, it is impossible to guarantee the constitutional rights [of citizens] to receive reliable information," RIA-Novosti reported on 18 June. Putin also said that in the past the state has carried out a mistaken policy of selective customs and tax privileges to the mass media "that ruined big segments of this sector of the economy." Putin also called for order in advertising to make it maximally transparent and free of bureaucratic barriers. At present, Putin noted, the advertising market is totally monopolized and, as a result, many mass-media outlets -- especially in the regions -- are dependent on outside subsidies, including state subsidies.

...AS NORWEGIANS PICK UP STAKE IN 'KOMSOMOLSKAYA PRAVDA.' Vladimir Sungorkin, editor of Russia's most popular daily newspaper, "Komsomolskaya pravda," announced on 17 June that the Norwegian media company A-pressen will purchase a 25 percent-plus-one-share stake in the paper, Russian news agencies reported. According to "The Moscow Times," A-pressen paid about $5 million. Sungorkin stated that the paper took the step not because of financial difficulties, but in order to secure access to the global market. Prof-Media, the holding that manages "Komsomolskaya pravda" and the other media holdings of Vladimir Potanin's Interros, hopes eventually to be able to list its shares on international stock exchanges. Sungorkin also said that A-pressen is in final negotiations to purchase a similar stake in "Sovetskii sport," another Interros paper. A-pressen has been active in Russia since 1997 and owns newspaper-printing plants in Nizhnii Novgorod and Yekaterinburg, with another under construction in Novosibirsk.

GOVERNMENT INCREASES ELECTRONIC OPENNESS. The Russian government announced the launch of a new version of its official electronic portal (, which is part of the state project Electronic Russia, ORT and reported on 17 June. Unlike the old website, the new one emphasizes interactive communication between officials and the public, allowing citizens to send letters, complaints, and suggestions concerning the government's functioning. In connection with the revamped website, the Department of Government Information announced that it is discontinuing most of its paper publications and press releases.

STATE COUNCIL MOVES TO GIVE YOUNG PEOPLE 'PURPOSE'... At a 17 June meeting in the Kremlin, the youth-policy group of the State Council decided to reinstate a number of collectivist traditions that hark back to the Soviet-era Komosomol youth organization, "Kommersant-Daily" reported. Among the practices to be reinstated are youth construction brigades and mass rallies. Speaking at the meeting, Taimyr Autonomous Okrug Governor Aleksandr Khloponin said that youth today is characterized by a lack of purpose, while in Soviet times, "there were magnificent subbotniks [public-service labor performed on Saturdays] and travel to collective farms to gather in the potato harvest." "Let us restore this collectivism in order to consolidate [young people]," Khloponin said. Deputy Economic Development and Trade Minister Andrei Sharonov, who was formerly a secretary of the Komosomol, endorsed the proposals and encouraged the group, which is under the patronage of President Putin, to advance more "ambitious suggestions."

ZYUGANOV SAYS THERE HAS BEEN NO SPLIT IN HIS PARTY. Answering a question about the KPRF's recent expulsion of Duma Speaker Gennadii Seleznev and ranking parliamentarians Nikolai Gubenko and Svetlana Goryacheva (see "RFE/RL Newsline," 5 June 2002), the leader of the KPRF, Gennadii Zyuganov, said, "There has been no schism in the KPRF. Just three people have left its ranks, and 18,000 new party 'fighters' have joined," reported Russian news agencies on 20 June He also remarked that Seleznev has no chance to create a social-democratic-type party. "Social-democratic parties are a European phenomenon. There is no room for such a party in Russia, just as there is none in the United States or most Asian countries," Zyuganov said.

FISHERIES HEAD CALLS FOR BAN ON FOREIGN FISHING IN RUSSIA'S TERRITORIAL WATERS. Speaking at the State Naval College in St. Petersburg on 20 June, State Fisheries Committee head Yevgenii Nazdratenko said that his agency will seek to ban fishing by foreign operators in Russia's territorial waters beginning in 2004, RosBalt and reported. He added that fishing rights will only be granted to foreign companies that pledge to invest in Russia's fish-processing industry and other fisheries infrastructure.