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Security Watch: June 4, 2001

4 June 2001, Volume 2, Number 22
PUTIN CULT CONTINUES TO GROW. Moscow's streets at the end of May featured a new Kremlin-produced poster showing President Vladimir Putin flanked by movie star Sergei Bodrov, who plays the main character in a popular but very anti-American movie, "Brother," and Maya Plesetskaya, the famous ballerina, Moscow radio reported on 30 May. The poster's caption reads "He's Your President, Brother and Pride."

EURASIANISM EXPLAINED TO MILITARY. In an article published in "Krasnaya zvezda" on 29 May, Aleksandr Dugin, who heads the pro-Kremlin Eurasia group, said that President Putin's creation of a Eurasian Economic Community shows that Eurasianism is on its way to becoming the common ideology of the entire political leadership of the country. He used the opportunity to stress that Eurasianism is based on the idea that Russia is a separate and self-contained civilization which cannot be understood or even described in Western terms. The second postulate of the ideology is that Eurasia is a single entity under the wing of the Russian nation. And the third is that Eurasia stands irreconcilably in opposition to the Atlanticist world.

WHERE COMMUNISTS DON'T FRIGHTEN RUSSIAN MILLIONAIRES. "Izvestiya" reported on 29 May that the victory of the Communist Party on the Greek sector of Cyprus did not spark any panic among the numerous Russian millionaire investors on the island. That is because they have invested large sums there and know that they are not threatened by expropriation in the near future -- especially since Greek Cypriot President Glafikov Claridis remains attached to liberalism and has more powers than do the legislators elected on 27 May.

UNITY CREATING ITS OWN ARMED UNITS. The pro-Putin Unity party is forming special armed units called Legions, reported on 27 May. The units are trained at a paratrooper center near Moscow and are paid by private companies, the website reported.

COMMUNIST PARTY SETS UP PR AGENCY. The Communist Party of the Russian Federation (KPRF) has founded its public relation agency that will be run under the aegis of Gennadii Semigin, one of the leaders of People Patriotic Union of Russia, allied with KPRF, "Moskovskii komsomolets" reported on 28 May. The Communist image-makers will not only spin off their political candidates but also will sell their services on the market.

ALEKSII II SIGNS COOPERATION PROTOCOL WITH LUKOIL. Russian Orthodox Patriarch Aleksii II signed an agreement with LUKoil and said it marks "a new stage in the development of our cooperation," Interfax reported on 30 May. Aleksii said that the oil company has supported many church projects and helped to restore "that which was destroyed in earlier years."

PUTIN MET ARAFAT, PHONED SHARON. President Putin on 29 May received Palestinian leader Yasser Arafat in Moscow and spoke by telephone with Israeli Prime Minister Ariel Sharon, Russian and Western agencies reported. Arafat told Putin that he wants Moscow to take a more active role in seeking a Middle East peace. Putin responded that Moscow fears that the situation there is "nearly out of control" and would welcome a regional summit but wants to discuss the idea with the U.S. before moving forward. Meanwhile, Yevgenii Primakov met with Syrian President Bashar Assad on the first stop of the Fatherland-All Russia leader's tour of the region, ITAR-TASS reported. Primakov handed Assad a letter from Putin outlining Russian thinking on regional questions. Moscow officials announced that senior Russian diplomats will visit the Middle East next week.

RUSSIAN WITHDRAWAL FROM TRANSDNIESTER MAY NOT BE NECESSARY. Despite an OSCE pledge to finance the withdrawal of Russian forces from the Transdniester region of Moldova, "Nezavisimaya gazeta" on 30 May pointed out that such a withdrawal, required by the Istanbul Agreement of 1999, may not be necessary if Moldova joins the Russia-Belarus Union. In that event, the paper said, the troops can be shifted from Transdniester to elsewhere in Moldova.

NEW UKRAINIAN PREMIER HAS CLOSE TIES TO PUTIN. Moscow newspapers have pointed out that Anatoliy Kinakh, the new prime minister in Ukraine, spent his formative years in Leningrad as "a member of Putin's team," in the words of "Izvestiya" on 30 May. Kinakh graduated from a Leningrad shipbuilding institute and worked in the city.

PUTIN INAGUARATES EURASIAN ECONOMIC COMMUNITY. Putin, together with the presidents of Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan, announced the formation of a Eurasian Economic Community, Russian wire services reported on 1 June. Kazakhstan President Nursultan Nazarbaev will serve as the first president. But power will reflect the different contributions of the members: Russia will get 40 percent of the voting power, Belarus and Kazakhstan 20 percent each, and the others 10 percent.

MOSCOW SEEKS GREATER RETURNS FROM SAKHA DIAMOND SALES. ALROSA diamond trading company Vice President Aleksandr Matveev told RIA-Novosti on 28 May that the Russian government plans to increase its share in the capital of that firm from 37 to 40 percent in order to increase its earnings from Russian diamond sales. The Sakha Republic government currently owns 40 percent of the firm, with the rest of the shares in the hands of the company's employees. But a recent Kremlin audit found that there had been violations of the law during the initial privatization of the firm in 1992 and now seeks to regain a government share in the company and its earnings.

PUTIN LOYALIST REPLACES VYAKHIREV AT GAZPROM. The Gazprom board of directors on 30 May accepted the resignation of its chairman, Rem Vyakhirev, and appointed Aleksei Miller in his place, Russian and Western news services reported. Miller, 38, is close to President Vladimir Putin. He worked under Putin's supervision in the St. Petersburg Mayor's Office and in 1999-2000 he served as head of the Baltic Pipeline System project. At the time of his appointment, he was deputy energy minister in charge of developing national energy security policy. Miller's first act was to meet with the Russian president. Putin told him that Gazprom plays a central role in the Russian economy and hence the Russian state, and Miller pledged to "re-enforce" the role of the state in the gas giant. He added that his first priority is the promotion of "strategic pipelines." Reaction to Miller's appointment, which itself was a surprise to many, was generally positive among Russian politicians and analysts and on the Moscow stock market, where shares in Gazprom rose, Russian and Western agencies reported.

PUTIN REASSURES BUSINESS LEADERS. Prior to his departure for the Minsk CIS summit, President Vladimir Putin met on 31 May with leading Russian businessmen and said that he wants to reduce tax burdens on business and plans to liberalize current regulations, albeit "slowly and cautiously." Putin noted that preventing capital flight requires greater liberalization of the country's economic system rather than the imposition of new controls. The business leaders who participated said they hope that such meetings will become regular events.

TAX CHIEF SAYS CAPITAL FLIGHT NOW $1.5 BILLION A MONTH. Mikhail Fradkov, the director of the Federal Tax Police (FSNP), said that Russia is losing approximately $1.5 billion in capital flight each month, "Nezavisimaya gazeta" reported on 31 May. He said that most of it is another form of money laundering. Moreover, he said, some 1.5 million businesses do not keep adequate financial records that would allow the authorities to trace the funds.

KASYANOV SEEKS DELAY IN RATIFICATION OF INVESTMENT ACCORDS... Prime Minister Mikhail Kasyanov has asked the Duma to suspend ratification of agreements on investment protection that Moscow has signed with a number of foreign countries, "Vedomosti" reported on 31 May. He said that some of the provisions stand in the way of Russia's application to join the World Trade Organization and others call for protection of foreign investments that Moscow is not in a position to guarantee.

...AND OUTLINES ECONOMIC STRATEGY THROUGH 2004. Prime Minister Mikhail Kasyanov on 30 May presented his midterm economic strategy to take Russia through 2004, RIA-Novosti reported. That strategy calls for the simultaneous reform of the military and defense sectors; banking and taxation; energy and transport; communal services; and the pension system. Kasyanov said that the reforms must proceed regardless of fluctuations in the price of oil. In addition, the Russian government plans to promote the north-south and east-west transport corridors Putin has long advocated. The Trade and Economic Development Ministry said that it expects Russia's GDP to grow by 15-18 percent during this period but that it believes the country's positive trade balance will fall from $61 billion in 2000 to $37-42 billion in 2004, Interfax reported.

SPECIAL PRESIDENTIAL GUARD UNIT FORMED. Interior Minister Boris Gryzlov has issued a directive transforming several elite units of internal troops into a special presidential guard, "Versiya," No. 21, reported. Gryzlov has stepped up his campaign against corruption within the ministry, appointing Konstantin Romodanovskii, a former KGB general, as head of internal security, "Moskovskii komsomolets" reported on 29 May.

SECURITY MINISTRIES COMBINE SUPPORT SERVICES. Vladimir Isakov, the deputy defense minister in charge of support services, said that the Russian government has decided to merge the supply functions of his agency with similar bodies in the Interior Ministry, the federal communications agency FAPSI, the Federal Border Guard Services, and other security entities, RIA-Novosti reported on 30 May. The idea, being pushed by Deputy Defense Minister Lyubov Kudelina, who came to that post from the Finance Ministry, is clearly intended to save money by eliminating duplication, but in addition it will bring many of the security agencies closer together, possibly setting the stage for their integration in the future.

JAPANESE JOURNALIST DETAINED ON SUSPICION OF SPYING. The Yuzhno-Sakhalinsk branch of the FSB detained at the airport there Ando Takasi, an NHK journalist, and confiscated his videotape, the RBK agency reported on 30 May. The FSB said that he had been photographing a secret military installation, but Takasi replied that he had not done so, at least not intentionally. The Russian Foreign Ministry reportedly has asked that Takasi be deported to Japan and barred from ever re-entering Russia.

IS THE FSB TRYING TO RESTRICT ACADEMIC CONTACTS? Human rights activist Sergei Kovalev said on Ekho Moskvy on 31 May that the Academy of Sciences, operating on the orders of the FSB, had directed its institutes to monitor all foreign contacts of their scholars and also require their employees to report such contacts to the authorities. But the following day, Russian government officials denied that such an order had been given.

FSB'S UGRYUMOV DIES FROM HEART ATTACK IN CHECHNYA. German Ugryumov, the deputy director of the FSB responsible for combating terrorism, died from a heart attack while he was in Chechnya, Russian news agencies reported. A vice admiral, he controlled the FSB's Alpha Task Force and other elite units.

DUMA COMMITTEES APPROVE DRAFT ANTITERRORISM LAW. The Duma Security, Legislation, and State Construction committees have approved antiterrorism legislation submitted by the government, Interfax reported on 31 May. The bill would increase the time persons suspected of terrorism could be held without charges being brought and expands the kinds of information that could be used to bring charges of terrorism against individuals and groups.

COUNTER-COMPUTER CRIME ACCORDS. The countries of the Eurasian Economic Community have agreed to work together to combat computer crime, ITAR-TASS reported on 31 May.

PARDONS SHOULD BE 'EXCEPTIONS.' The Justice Ministry has issued a directive to prison officials calling on them to reduce appeals for pardons to a minimum, "Izvestiya" reported on 29 May. Pardons should be the "exceptions" rather than the rule, the directive said. The number of those pardoned must not exceed 0.6 percent, according to the new rules. But very few pardons have been handed out since Putin took office, and 3,500 current applicants are unlikely to get the pardons they might have obtained earlier.

GRYZLOV PROMISES MAJOR OVERHAUL OF INTERIOR MINISTRY. Interior Minister Boris Gryzlov said in an interview published in "Izvestiya" on 30 May that his ministry is not working effectively and must be reformed. But at the same time, he warned against hasty steps that might make things worse. Gryzlov said he has discussed the matter with Putin and that he will in the next seven to 10 days issue orders on the restructuring of the ministry. Those reforms, he said, will eliminate duplication, reflect functional responsibilities, and clearly define the authority of agencies at different levels in the federation.

RADIO MAYAK PLANS TO CHALLENGE EKHO MOSKVY. The managers of Radio Mayak announced that they plan to try to attract the audience Ekho Moskvy now has by going to a 24-hour format in cities where Ekho Moskvy is popular, RIA-Novosti reported on 28 May.

RUSHAILOV ACCUSED OF CORRUPTION. In an article published in "Novaya gazeta" on 28 May, Yuri Shchekochkin, who is a member of the Duma Corruption Committee, said that his group has collected a large number of documents concerning corruption in the Interior Ministry when it was headed by current Security Council secretary Vladimir Rushailov. Shchekochkin said that the ministry had tried to cover up the corruption and that one of Rushailov's aides, General Aleksandr Orlov, had recently left the country, taking a lot of "dirty secrets" with him. The Duma committee has handed the materials it has to President Putin, Shchekochkin said.

FORMER DEPUTY FINANCE MINISTER INDICTED. The Main Military Prosecutor on 31 May indicted former Deputy Finance Minister Andrei Vavilov for gross embezzlement of state funds, "Rossiiskaya gazeta" reported on 31 May. Vavilov is charged with having illegally transferred funds from the defense budget to the Ukrainian Energy Systems company then headed by Fatherland Party leader Yuliya Tymoshenko. The prosecutors said that some of these funds, which totaled $450 million, were diverted into the private accounts of Vavilov and Tymoshenko.

MINISTRY OF DEFENSE MISUSED $50 MILLION. The Russian Audit Chamber announced after its probe of the federal defense budget that the Ministry of Defense misused in 2000 about 1.5 billion rubles ($50 million), reported Interfax on 28 May. The biggest misappropriation of the funds was discovered within administration dealing with international military technical cooperation as well as at Leningrad navy base.

CRIMINAL CASE LAUNCHED AGAINST SIBNEFT. The Prosecutor-General re-activated the criminal case on tax evasion against the top management of one of the biggest Russian oil companies, Sibneft, reported "Kommersant" on 25 May. According to sources familiar with the case, Sibneft falsely reported about oil supply to Kyrgyzstan that made the company eligible for the tax exemption; in reality, however, the oil never left Russia. Magnate Roman Abramovich currently controls the company.

MOSCOW PRESSURES POLAND TO BUY RUSSIAN MILITARY GOODS. Andrei Nikolaev, the chairman of the Duma Defense Committee, visited Warsaw to pressure Poland to purchase Russian military equipment, RIA-Novosti reported on 31 May. He said that Poland was interested in purchasing updated equipment for its MiG-29 planes and T-72 tanks.

COMMANDER OF SPACE TROOPS DESCRIBES HIS FORCES. General Anatoly Perminov, the commander of Russia's Space Forces, said in an interview published in "Kommersant" on 31 May that Russia is working to beef up its presence in space. He noted that his forces will control the launch centers at Baikonur, Plesetsk, and Svobodnyi, the main control center at Krasnoznamensk, and the special rocket space defense forces consisting of three divisions.

MOSCOW CONFIDENT IRAN WILL BUY SATELLITE. A Russian company that makes communications satellites has submitted a bid to Tehran, which is looking to buy one or more, Interfax reported on 30 May. The company's spokesman said that he is confident that the Iranian government will accept the Russian offer.