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Security Watch: August 28, 2000

28 August 2000, Volume 1, Number 6
PUTIN BLAMES DISASTER ON THOSE WHO 'DESTROYED THE STATE.' In the wake of the "Kursk" tragedy, Russian President Vladimir Putin told Moscow's RTR television on 23 August that "it would be the most incorrect step" for him to accept the resignations submitted by Defense Ministry officials. Among those who have turned in resignations to him are Defense Minister Igor Sergeev, Russian fleet commander Vladimir Kuroyedov, and Northern Fleet Commander Vyacheslav Popov. Instead of focusing their anger against the military, Putin said, they should be upset at "those who for years destroyed army, navy, and the state." Putin also implicitly attacked Boris Berezovsky and the other businessmen, who with much fanfare have established a fund for the families of the sailors who perished. "It would be better if they sold their villas in France and Spain, which are registered under fake names," Putin said.

WHAT MOSCOW KNEW AND WHEN IT KNEW IT. Deputy Prime Minister Ilya Klebanov, the head of the government commission looking into the "Kursk" accident, said on 22 August that the Russian government had known that there were no survivors from the very beginning of the crisis on 14 August. But he added that the authorities had gone ahead with the search efforts anyway. Klebanov's statement is only the latest indication of the Russian government's often confused and contradictory response to the tragedy. Meanwhile, other Russian officials changed their story lines as well. After leading the claims that the Kursk had sunk after colliding with an underwater object, "possibly a foreign submarine," Defense Minister Igor Sergeev on 24 August told NTR that this is only "one possible version" and that more analysis needs to be done.

MOSCOW PAPER HIGHLIGHTS KURSK'S FOREIGN POLICY IMPLICATIONS. The loss of the "Kursk," "Nezavisimaya gazeta" wrote on 22 August, casts doubt on President Vladimir Putin's entire foreign policy approach. The Russian president had made the Northern Fleet into a key force in negotiations on strategic arms reductions and on projecting Russian naval power into the Mediterranean. Now, the paper suggested, Putin will have to recalculate his possibilities in both areas. And the paper added that Putin's uncertain behavior during the crisis would only raise additional questions about his rule and Moscow's capabilities.

SEAMEN'S RELATIVES TO SUE THE STATE. Veronika Marchenko, the head of the Mothers' Rights Human Rights Organization, told RFE/RL on 23 August that her group will help "Kursk" crew family members sue the Russian Defense Ministry and government. She said the suit would be filed after the bodies were recovered. She also said that her group has asked President Vladimir Putin to put off the fall military draft until those responsible for the "Kursk" tragedy are identified and punished.

FORMER USSR MILITARY PROSECUTOR COMMITS SUICIDE. Aleksandr Katusev, the chief military prosecutor of the Soviet Union under Mikhail Gorbachev, has committed suicide at his home in Krasnodarskii Krai, "Izvestiya" reported on 23 August. Katusev began his career as the military prosecutor of the Northern Fleet, where he was in charge of investigations of incidents with nuclear submarines. He later served as chief investigator in the so called "cotton" case in Uzbekistan. Katusev gained fame from his investigation of Stalin's massacre of Polish officers at Katyn. The paper said that it could not exclude the possibility that Katusev had been emotionally destroyed by the "Kursk" tragedy.

TAX POLICE INVENTORY GUSINSKY'S ASSETS. The Moscow Tax Police and court collectors have searched the premises and inventoried the property and assets of Vladimir Gusinsky's MOST bank, Russian agencies reported on 23 August. They did so on the basis of a court order concerning MOST's 200 million ruble ($7.143 million) indebtedness to several financial institutions. According to "Kommersant Daily" on 24 August, the state-run Vneshtorg bank is currently conducting talks with MOST about placing the banks' assets under Vneshtorg's control. Vladimir Putin's aide Gleb Pavlovsky said earlier that public intimidation of an oligarch is the best means of raising the rating of the Russian president.

MONEY-LAUNDERING INVESTIGATOR FORCED TO RESIGN. The senior investigator of the Office of the Prosecutor-General, Nikolai Volkov, who investigated several so-called Swiss cases, told Russian newspapers on 21 August that he had been forced to resign. In July, after meeting with Swiss prosecutors, Volkov said that he would recommend reopening the investigation of the possible misuse of IMF loans by Russian officials. Before his forced resignation, Volkov had also been responsible for probing alleged money-laundering of Aeroflot funds through Swiss companies belonging to Boris Berezovsky. In order to finish his work, Volkov told "Vedomosti" on 23 August that he was prepared to work "without salary" but his superiors refused to allow that. Meanwhile, an FSB representative told the same paper that Volkov may have in his possession "very valuable information" and therefore "must comply with the confidentiality agreement he had signed." Volkov first came to public attention when he probed the diversion of hundreds of millions of dollars by the pro-Moscow administration in Chechnya.

YELTSIN SAID TO HAVE LEGALIZED CORRUPTION. Philip Turover, a Swiss citizen who is a major witness in the Mabetex affair, told "Segodnya" on 23 August that former Russian President Boris Yeltsin had issued a classified edict in 1993 allowing for the creation of special secret funds for the budgets of selected political parties. The edict, Turover said, state and private enterprises, as well as major exporters and financial institutions to transfer funds into special bank accounts controlled by narrow circle of individuals selected by the Kremlin. In this way, what many now call "the Family" was born." Turover argued that the dismissal of investigator Nikolai Volkov (see above) shows that Vladimir Putin has no power over this group. Turover, who was born in Russia, has worked in Moscow as representative of Banko del Gottordo and the other big Swiss banks. In that capacity, Turover established excellent contacts with the key members of Yeltsin' administration.

SWISS INVESTIGATE SIBNEFT AS WELL. Swiss investigators are probing the possible involvement of Sibneft, which belongs to Roman Abramovich, in the diversion of IMF loan funds, "Le Temps" reported on 23 August. Magistrate Loran Kasper-Ansermet, who is leading the investigation (see "RFE/RL Security Watch," 21 August 2000), said that portions of one of the tranches of 1998 IMF loan appear to have been transferred into the accounts of Runicom, the Swiss affiliate of Sibneft. Runicom already has been under investigation in connection with its non-payment of a $58 million loan to the European Bank for Reconstruction and Development. Sibneft CEO Yevgenii Schwidler, however, told "Segodnya" on 24 August that his company has nothing to do with IMF money.

NEW DETAILS ON KASYANOV'S ROLE WITH IMF LOAN. Oleg Lurie, an investigative journalist, wrote in the 21 August "Novaya gazeta" that then Finance Minister and current Premier Mikhail Kasyanov had in July 1998 directed that IMF funds be put in the foreign accounts of SBS-Argo, Inkombank, Menatep, Sobin-bank, as well as other Moscow banks. Kasyanov then sought to have these banks transfer a corresponding amount of money in rubles to stabilize the national currency. But the banks involved provided the treasury not with rubles but with GKO bonds that soon became worthless. After doing so, these banks in many cases declared themselves bankrupt even as they wired assets to their offshore affiliates.

BULGARIA EXPELS FIVE RUSSIAN 'BIZNESMENY.' The Bulgarian Ministry of Interior Affairs has expelled five Russian citizens because of their ties to "international criminal organizations," the BTA news agency reported on 19 August. The list of those expelled is headed by Michael Chorny, co-owner of the Bulgarian cellular operator Mobitel as well as the Russian companies, Yukos, Roseximbank and Neftinvestbank. Because most of those involved have double or triple citizenship, it is unclear as to where they will be deported.

CIA DIRECTOR'S VISIT NOT LINKED TO "KURSK" TRAGEDY. Despite suggestions in the Moscow press to the contrary, the Moscow visit of George Tenet, director of the U.S. Central Intelligence Agency, was long planned and not a response to the "Kursk" tragedy, "Izvestiya" reported on 19 August. Tenet met with SVR officials to discuss expanding cooperation in the fight against international terrorism and drug trafficking.

FBI HELPS RUSSIA INVESTIGATE MOSCOW EXPLOSION. The U.S. Federal Bureau of Investigation is providing assistance to Russian law enforcement agencies investigating the 8 August explosion at the Moscow subway station, "Vremya MN" reported on 19 August. The bureau took this step on the basis of an agreement with Interior Minister Vladimir Rushailo and because three of the wounded were in fact naturalized American citizens.

MOSCOW COURT REFUSES BAIL TO AMERICAN. The Lefotovo district court has ruled against any pre-trial release of retired U.S. Navy officer Edmund Pope, Interfax reported on 24 August. Pope, an American businessman who lived in Moscow, was charged with espionage on his arrest in April. The FSB asserts that Pope sought to obtain information about a new missile system. The Russian authorities have also refused to allow an American doctor to examine Pope, who reportedly suffers from cancer. An FSB spokesman told "Izvestiya" on 10 August that his organization knew about a U.S. State Department protest concerning Russian treatment of Pope. But, he added, "our medical experts find no pathology in Pope's condition."


By Victor Yasmann

A Russian Communications Ministry directive issued on 25 July demanding that all state and private operators of telephone, cellular, and paging communications as well as Internet service providers open their lines to monitoring by the Federal Security Service (FSB) has sparked remarkably little controversy in Russia.

According to the directive, the operators of wiring and non-wiring communication companies must design and install monitoring and eavesdropping equipment configured for their networks. These firms must also obtain FSB approval of the system, known by its Russian abbreviation of SORM. Further, the operators must reveal to the agency all access keys to their networks and the operators must integrate the SORM into their networks, get certification of the equipment from the agency. and train the FSB officers working with the equipment.

The document places particular stress on the principle that all information on SORM must be kept secret and the FSB should use SORM without the knowledge of the network clients.

When the SORM project first surfaced in 1998, it caused a public uproar in Russia. But now, as it has been put into practice, its provisions have sparked little or no controversy.

"Segodnya" on 22 and 23 August explained this lack of reaction by the division between providers and users. Most Russian telecommunication providers are inclined to accept SORM regulations as regrettable but inevitable. Some even argue that the new regulation does little more than codify existing practice. And they claim that the new edict can bring together numerous legal norms or loopholes that give the secret services access to public telecommunications. The only objection these providers have is that they must bear the cost of installing the expensive monitoring equipment.

Users, on the other hand, view this directive as a violation of the country's constitution. And many of them argue that it points the way to further restrictions on freedom of information and the mass media. But their voices have not yet found a spokesman in the central media or political system.