In this issue:

Russian Prosecutor: Central Bank Should Answer To The Government

Primakov: Economic Policy Can Be Changed

Georgian Crisis Escalates, as Election Results Announced

Russian Foreign Ministry Officials Slam U.S. Excesses

Putin Meets King Of Jordan

From Volume 2, Issue Number 47 of Electronic Intelligence Weekly, Published Nov. 25, 2003
Russia and Central Asia News Digest

Russian Prosecutor: Central Bank Should Answer To The Government

A hint of what some of the Russian siloviki (men from the uniformed agencies), directly involved in the prosecution of Yukos Oil ex-CEO Mikhail Khodorkovsky and others, have in mind as necessary changes in Russian economic practice, was given in a Nov. 13 Pravda.ru commentary by Dmitri Chirkin. He reported that Deputy Prosecutor General Vladimir Kolesnikov took the occasion of a Nov. 12 conference on combatting pirated goods, to suggest some far-going economic policy changes. In particular, Kolesnikov offered his view that "the Central Bank should become a state agency, subordinate to the government or the President of the country, and the interest rate on loans should be zero.... What profit are we receiving in the Central Bank? The Central Bank ought to be supplying the circulatory system of the economy with money."

As Chirkin points out, Kolesnikov's remarks imply radical changes, insofar as the 1993 Russian Constitution and the Law on the Central Bank enshrined the principle of a legally distinct central banking institution, independent of the Federal government—i.e., the Venetian/Anglo-Dutch model of an independent central banking system, imported into Russia in the 1990s.

The previous day, during a round-table discussion at the State Duma, Kolesnikov also spoke about "corruption in the upper echelons," as Russia's gravest problem: "that corruption in the elite institutions of power, which involves the largest-scale thievery of state assets, simultaneously inflicts the greatest moral damage, by creating a negative image of the state authorities." He said he was talking about people "who look really nice—all smooth, with ties on." Kolesnikov, notes Chirkin, is a blunt speaker, but does not speak out often or without a purpose. He was the first to announce some of the criminal cases against Boris Berezovsky, and he warned of Khodorkovsky's impending arrest, a few days before it occurred.

Primakov: Economic Policy Can Be Changed

An interview with former Russian Prime Minister Yevgeni Primakov on Radio Ekho Moskvy, Nov. 4, was widely reported because of his assessment of the ouster of Yeltsin "Family" member Alexander Voloshin from the Kremlin staff, as a good development. The full transcript, made by Federal News Service, reveals several other strategic evaluations by Primakov, including his assessment of the potential for shifts in Russian institutional and economic policies:

"I have closely watched comments regarding the anti-Khodorkovsky operation, ... and all these comments were devoted mostly to who was against whom up there at the top, whether these were the tricks of Leningrad FSB people against Leningrad lawyers, or whether these were the tricks of both Leningrad FSB people and lawyers against the Family.

"I'd like to step aside from this scheme. Let's look at the background. There are 40 million people in the country who live in poverty, who live below the lowest subsistence level determined by the government. There are no jobs in small towns and settlements. People drink alcohol not because it's some national trait—that is nonsense—but because they don't have a job.

"Amidst all this, a small group of people has concentrated huge resources, and these resources have been going back and forth between Russia and other countries, and are not invested here in the manufacturing industry or other sectors, in science and technical progress....

"Several days ago I read the latest issue of Forbes magazine.... It listed the 100 richest people in China. Most of these people work with high technologies.... Others represent the automobile industry and construction. But in Russia it's only oil or gas. But why? Apparently these people have huge funds that they have acquired, not because of excellent management, but because they use resources that were given by God to all the people. And they pocket these funds. Twenty seven percent—I have found this figure in the press—of their revenues turn into net profit in the oil sector, and 12-14% in manufacturing.

"Now, this group of people, not all of them, of course—personally I think very highly of [Lukoil head] Alekperov, and as a rule he does not do such things—so, this group of people uses various schemes to evade taxes. I have recently made a trip to the North, and everybody told me openly that most oil companies create subsidiaries. These subsidiaries are fully owned by these companies but are registered either in special territorial zones where taxes are low, or in off-shore zones abroad. Then products are sold to these enterprises at an artificially low price and these enterprises do not pay taxes to our budget at all....

"And look at the moral climate. We can't get rid of it. And the climate is as follows. I am the president of a fund that helps homeless people. This fund is a non-profit organization. We exist only on contributions from businessmen in the form of charitable support, and we extend this charitable support to children's homes, not in the form of money, but in the form of clothes, kitchen equipment, etc. All this is done under strict control of the contributors. They have a right to scrutinize everything we do, down to the last kopek. But the fund can raise a million dollars a year at best. At the same time, everybody knows that $230 million are spent on a foreign soccer team [the purchase of Britain's Chelsea team, by Roman Abramovich]. So, what moral context can you talk about in this situation?...

"I think it would now be correct to conduct some round-table discussion and, naturally, this should be done on a legal basis, and it would be good to talk with the large entrepreneurs working, say, in the petroleum sector, not in the spirit of 'you give us back everything, and on and on.' No expropriation. And the question should not even be raised in this way. But there should be a serious conversation held with them. It is 27% and it is 14%. This is the lag that exists and it is not due to management, it is due to the national wealth, due to the raw materials which are supposed to belong to the whole people. There are mechanisms whereby all this can be taken away."

Georgian Crisis Escalates, as Election Results Announced

The official announcement of Nov. 2 Parliamentary election returns in Georgia, made Nov. 20, confirmed President Eduard Shevardnadze's For A New Georgia Party and Aslan Abashidze's regionally based Revival movement, as the top vote-getters. The U.S. State Department promptly declared the results invalid due to vote fraud, based on their conflicting with exit polls conducted by NGOs. Michael Saakashvili's National Movement and Nino Burjanadze's bloc resumed mass protest meetings in Tbilisi on Nov. 20-21, having suspended them a week earlier. On Nov. 22, as Shevardnadze attempted to open Parliament, Saakashvili and his supporters crashed into the chamber and seized the microphone, announcing that a "velvet revolution" had arrived. As of the evening of Nov. 22, Shevardnadze has gone to his residence and declared a 30-day state of emergency, threatening to use the Army to restore order unless the Parliament endorses his declaration within 48 hours.

Fear is high in Georgia, however, that events will develop in the direction of a bloody civil war. Rumors are rife about the possibility of the Ajaria district's secession under Abashidze's leadership, and the attachment of other districts to Armenia and Azerbaijan.

The other two leading electoral blocs—out of the six that cleared the 7% barrier to enter Parliament—are Nodar Natelashvili's Labor Party, which has endorsed the official results, and the New Right. Georgi Topadze's Industry Will Save Georgia bloc narrowly missed crossing the threshold to enter Parliament.

Abashidze's Revival has been holding large demonstrations against the opposition rallies. The widow of overthrown President Zviad Gamsakhurdia addressed a rally of her own supporters early in the week of Nov. 17, as well. She said that she remained an opponent of the Shevardnadze regime, but now Georgia is in danger from the extremism of Saakashvili, who aims to destroy Georgia. There were reports from southern Georgia, of clashes between supporters of Shevardnadze and of Saakashvili. Saakashvili et al. are calling for non-payment of taxes, boycott of government institutions, boycott of public transport, and schools.

At the Gamsakhurdia movement rally, pro-government MP Guram Sharadze, a well-known academic, said that George Soros, the American Embassy, and U.S. Ambassador Richard Miles personally, along with NGOs financed from the West, were instigating support for Saakashvili.

Sharadze's remarks are typical of the great attention being paid in Georgia to the role of the U.S. in the latest crisis. Besides Ambassador Miles' constant conferring with the opposition leaders, State Department official Lynn Pascoe also arrived in Tbilisi and met with opposition leaders, as well as Shevardnadze.

At a briefing Nov. 17, Shevardnadze himself brought up the Soros Fund again. He noted that George Soros said he would spend a billion dollars against Bush. Shevardnadze said that if Soros spends that kind of money against Georgia, he'll destroy the country. Earlier, it became known that Soros financed the anti-government agitation of TV Rustavi-2, to the tune of $18 million.

Russian Foreign Ministry Officials Slam U.S. Excesses

At a conference honoring 70 years of U.S.-Soviet diplomatic ties, Russian Foreign Minister Igor Ivanov on Nov. 18 said that today Russia remains "far from content with every aspect of U.S. foreign policy," despite the apparent easing of Cold War tensions. Ivanov said, "Russia is concerned about Washington's excessive tendency to use force in resolving international questions, its preference for unilateral actions to the detriment of international unity." The invasion of Iraq, in particular, has been "a serious upset." "We considered, and still consider, the war in Iraq a mistake. The latest events confirmed our view.... Irrespective of its economic or military power, a country cannot advance its interests, ignoring the collective will of the international community."

The next day, Interfax reported strong criticism by Deputy Foreign Minister Yuri Fedotov, of the Nov. 15 agreement signed between U.S. Coalition Provisional Authority head L. Paul Bremer and the Iraqi Governing Council, which Fedotov pointed out had been negotiated in secret, and had little chance of proving durable. He said that a timetable for the transfer of power in Iraq has to take into account the view of the UN Security Council and of Iraq's neighbors.

Putin Meets King Of Jordan

On Nov. 19, Russian President Putin received King Abdullah II of Jordan. According to Russian TV, their talks focussed on the Road Map for Mideast peace, to which Abdullah said there is no alternative. Bilateral trade and military-technical cooperation was also on the agenda. Putin thanked King Abdullah for Jordan's support of Russia's efforts to establish a permanent tie with the Organization of Islamic Conference.

Russian press reports that Sheikh Mohammad bin Sayid, chief of the general staff of the armed forces of the United Arab Emirates, was in Moscow at the same time.

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