Fwd: Russia

Macdonald Stainsby mstainsby at SPAMhotmail.com
Thu Sep 2 03:00:13 MDT 1999

>Repeal of Investment Exit Tax Demonstrates Mahathir's Economic Insight
>Sudan Oil Flows Into Tanks
>Russian Security Service Restructured in Run-Up to Duma Elections
>Global Intelligence Update
>September 2, 1999
>The Russian Bank Scandal: A Purge Against Yeltsin's Allies
>An avalanche of allegations and investigations is rapidly burying
>the allies and officials of the Yeltsin administration.  The timing
>and evidence suggests this is far more than just Luzhkov versus
>Yeltsin in pre-election scandal-mongering.  This is a full-scale
>assault on Yeltsin's ruling political and economic cabal by
>elements of Russia's security apparatus, which could quickly lead
>to Yeltsin's replacement by Prime Minister Vladimir Putin.  If the
>purge gets out of hand, will Putin and his backers fall victim to a
>still more reactionary force?
>Russian President Boris Yeltsin's administration and his allies are
>besieged by allegations and investigations.  The most recent, which
>broke on the front page of the New York Times August 19, involved
>allegations that Yeltsin administration officials were involved in
>laundering billions of dollars from criminal activities and
>possibly from IMF loans through the Bank of New York and the
>Republic National Bank.  The IMF has denied that its funds have
>been laundered through U.S. banks.
>Concurrent with this are ongoing investigations into allegations
>that close Yeltsin ally Boris Berezovsky diverted funds from the
>state airline Aeroflot to a private Swiss bank account and that
>Yeltsin, his family members and his administration accepted bribes
>from the Swiss construction firm awarded the contract to renovate
>the Kremlin.  All these scandals come hot on the heels of confirmed
>reports that the Russian central bank diverted IMF loans through an
>offshore shell company, using them to speculate on the global
>currency markets.
>Some of these scandals have been simmering for months and date back
>to events that occurred years ago.  And yes, the Yeltsin cabal was
>a kleptocracy just waiting for an indictment.
>But we do not believe that these scandals are coming to a boil
>almost simultaneously out of mere coincidence or bad timing.  This
>is not, as some in the Russian press have alleged, a fictional tale
>generated in the U.S. by opponents of Vice President Al Gore - a
>key figure in U.S. policy toward Russia - in an attempt to
>embarrass him prior to the U.S. presidential elections.  This is
>not, as Berezovsky has asserted, a simple pre-Duma election plot
>dreamed up by Yeltsin's political foe, Moscow Mayor Yuri Luzhkov.
>That said, we believe that Luzhkov's new ally, former Prime
>Minister Yevgeny Primakov, is playing a role in it, although not
>the lead role.
>According to Russian and U.S. intelligence sources and analysts
>cited by UPI, the Bank of New York money laundering allegations
>were leaked to Western law enforcement officials by disgruntled
>elements in the Russian security services, eager to embarrass and
>undermine Yeltsin.  Analysts cited by UPI pointed to Primakov, who
>headed the Foreign Intelligence Service (SVR), as the successor to
>the KGB's foreign operations directorates before he was promoted to
>foreign minister and then prime minister.  The analysts insist that
>current Prime Minister Vladimir Putin is helpless to stifle the
>dissent within the security apparatus, despite the fact that he was
>previously head of the Federal Security Service (FSB), the
>successor to most of the KGB's domestic operations directorates and
>a career KGB officer.
>We disagree.  We see a continuity between Primakov and Putin, with
>Putin far more likely to be playing the lead role in manipulating
>this crisis.  If Primakov was in a position to reveal the full
>scope of the economic crimes of the Yeltsin administration and its
>supporting cast of oligarchs, why wait for months after he was
>forced to step down to set the plan in motion?  In fact, Primakov
>launched an attack on corruption in the Yeltsin cabal, particularly
>against Berezovsky, but was thwarted.
>The chronology speaks for itself.  Primakov took office as prime
>minister on September 11, 1998.  Five months later, in February,
>news emerged of the investigation by Prosecutor General Yuri
>Skuratov of the Russian central bank's misdirection of IMF funds
>through the Jersey Island holding company FIMACO.  By late March of
>this year, Skuratov had launched an investigation into illegal
>deals between Russian officials and Yeltsin's family and the Swiss
>construction company Mabetex.  On April 2, Yeltsin attempted to
>sack Skuratov, though the Duma declared the move unconstitutional.
>Days later, arrest warrants were issued for Berezovsky and Aeroflot
>director Nikolai Glushkov, as well as for another oligarch,
>Alexander Smolensky.  Berezovsky was ousted as executive secretary
>of the Commonwealth of Independent States (CIS).  The arrest
>warrant against Berezovsky was the straw that broke the camel's
>back and Yeltsin struck back.  By May 12, the arrest warrant had
>been lifted and Primakov was sacked, replaced by Sergei Stepashin.
>During Stepashin's short tenure as prime minister, the scandals
>were effectively smothered, as the Kremlin sought one more infusion
>of cash from the IMF.  It got it by selling out Slobodan Milosevic
>to NATO.  The ousting of Primakov, the abandonment of Yugoslavia
>and the failure of the Kremlin to take steps to prevent a guerrilla
>uprising apparently brewing in the northern Caucasus was too much
>for a faction in the security and defense apparatus.  What they saw
>was Russia spinning out of control.  Moreover, the financial
>scandals had not gone away.  Price Waterhouse confirmed the details
>of the FIMACO scandal and the Swiss opened an investigation of the
>Mabetex allegations.  The final insult may have been when Islamic
>guerrillas finally did invade Dagestan and Stepashin, sent to the
>area to evaluate the situation, declared his aversion to risking
>the lives of Russian troops or civilians.
>Whether by his own volition or not, Yeltsin sacked Stepashin and
>appointed Putin, not only his prime minister but also his chosen
>successor, on August 9.  Even before his confirmation in office,
>Putin deployed a massive contingent of Russia's elite forces to
>attack the guerrillas in Dagestan and ordered an increase in pay
>for soldiers in Dagestan and for members of the FSB.  Putin revived
>Primakov's aggressive foreign policies toward Belarus and other CIS
>countries, which had stagnated under Stepashin.
>Two days after Putin's appointment was approved by the Duma, Swiss
>officials froze what were reportedly Berezovsky's bank accounts.
>The next day, the New York Times broke the Bank of New York money-
>laundering story.  On August 28, again perhaps not altogether
>voluntarily, Yeltsin signed a decree merging the FSB department
>responsible for protecting the constitution - and the
>constitutionality of the upcoming elections - with the counter-
>terrorism department.  The FSB spokesman who announced the decision
>cited the "close responsibilities" of the two departments, though
>he did not explain why election monitors need to coordinate closely
>with the FSB's armed commando units.
>Now Yeltsin is drowning in scandal, and Putin, according to
>analysts, is unable to save him from this Primakov-directed deluge.
>More likely, Putin is pushing Yeltsin under.  First of all, Putin
>was Primakov's ally, even presenting him with a gift of a hunting
>rifle as condolence when he was sacked.  Primakov headed the SVR,
>while Putin headed the FSB.  In the FSB, Putin had the files on
>Kremlin officials and earlier he even worked under Anatoly Chubais,
>under investigation in the Mabetex and Bank of New York scandals,
>and Pavel Borodin, under investigation in the Mabetex scandal.
>Yet somehow, Putin has not been implicated in the scandals.  As
>business manager and then head of the main oversight office in the
>Kremlin, Putin knew where much of the money was going even before
>he took over the FSB.  Primakov reportedly did not even have an
>office in the Kremlin during his tenure as prime minister.
>Currently, Putin has the levers of power in the Kremlin,
>theoretically allowing him to block investigations, while Primakov
>is working from the outside.  So while Primakov was ousted for
>launching a purge, Putin may be far more successful.
>As we wrote on August 23, a silent coup has occurred in the Kremlin
>[ http://www.stratfor.com/SERVICES/GIU/082399.ASP ].  Now the purge
>is under way.  Those reportedly under investigation in the Bank of
>New York case include: Yeltsin's daughter and close advisor Tatyana
>Dyachenko; former Deputy Prime Minister Anatoly Chubais; former
>Deputy Prime Minister Oleg Soskovets; former Finance Minister and
>now G-8 Relations Advisor Alexander Livshits; oligarch and former
>Finance Minister Vladimir Potanin; oligarch Mikhail Khodorkovsky;
>and reputed Russian mob boss Semyon Mogilevich, who reportedly had
>business relations with senior Russian officials, including Chubais
>and Viktor Chernomyrdin.  Also under investigation are 33 Russian
>companies that do business with the Bank of New York, including
>Khodorkovsky's Yukos oil company, Avtovaz and Sibneft, both
>connected to Berezovsky, and Lukoil, headed by oligarch Vagit
>Alekperov.  Berezovsky is joined by Yeltsin's son-in-law under
>investigation in the Aeroflot scandal.  And the Mabetex scandal
>drags in Yeltsin himself, his two daughters and Borodin.
>Great swaths of Yeltsin's family, administration and the oligarchs
>who supported him, are poised for conviction for economic crimes.
>They are even feeding on one another, with Berezovsky taking on
>oligarchs Vladimir Gusinsky and Rhem Viakhirev, and Khodorkovsky
>beginning to turn against the administration.  The swirling scandal
>not only holds the possibility of gutting the kleptocracy and
>ousting Yeltsin, leaving Putin as president before next year's
>elections, but also plays into a strong domestic anti-American and
>anti-Western sentiment.
>As has occurred throughout history, responsibility for Russia's
>calamities are once again laid at the feet of the Westernizers and
>their conspiratorial Western allies.  It now emerges that Western
>money served only to enrich and empower a small cabal in the
>Kremlin before cycling back to Western banks.  In exchange, the
>Yeltsin cabal sacrificed Russian international prestige and
>Yeltsin's tenure, and that of his self-serving supporters, is
>nearly at an end.  The question is, is Putin the end or the
>interim?  Is he Lenin or Kerensky?  Putin and his backers do not
>represent the farthest possible reaction of Russian politics.  They
>understand the need for continued economic and political engagement
>with the West, albeit under significantly less self-debasing terms.
>If the purge now under way gets out of hand, Putin and his backers
>could fall victim to a still more reactionary force.  If Putin
>turns out to be Kerensky, who will be Lenin?

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