CDI Russia Weekly-#212 28 June 2002 Edited by David Johnson Center for Defense Information 1779 Massachusetts Ave. NW Washington DC 20036 phone: 202-797-5277; fax: 202-462-4559 djohnson@cdi.org The CDI Russia Weekly is an e-mail newsletter that carries news and analysis on all aspects of today's Russia, including political, economic, social, military, and foreign policy issues. With support from the Carnegie Corporation of New York and the MacArthur Foundation, CDI Russia Weekly is a project of the Washington-based Center for Defense Information (CDI), a nonprofit research and education organization. CDI Russia Weekly web page (with archive): http://www.cdi.org/russia/ Visit CDI's web site: http://www.cdi.org Contents: 1. BBC: Russia's scientists demand a living. 2. UPI: G8 OKs scrapping Russia's nuke stockpiles. 3. AFP: G8 rewards Russia for anti-terror role with full G8 membership. 4. BBC: Stephen Dalziel, Analysis: Russia's place in G8. 5. The Globe and Mail (Canada): Mark MacKinnon, For Russians, press freedom more theory than fact. Putin's brand of democracy is different than the rest of the G8. 6. Rossiiskaya Gazeta: RUSSIA MAY BECOME A LEADING ASIAN COUNTRY.(interview with CDI's Nikolai Zlobin) 7. Moscow Times: Pavel Felgenhauer, Bill Is a Potemkin Reform. (re alternative service) 8. strana.ru: Ira Straus, A Strategy for Russia's Next Steps in the G-8. (Russia should) make itself a leader in building up the G-8, as a way of enhancing its role in the world. 9. Novye Izvestia: Said Bitsoyev, SECURITY MINISTERS DISSATISFIED WITH THE PRESIDENT. Generals dislike the initiatives of their supreme commander-in-chief. The military will not tolerate any criticism of its actions in Chechnya. 10. Novaya Gazeta: Boris Kagarlitsky, CHEKISTS IN THE MARKET. Consequences of the dominance of the secret services in Russia. 11. Komsomolskaya Pravda: RUSSIAN NAVY RECEIVES THE WORLD'S BIGGEST SUBMARINE. 12. Nezavisimaya Gazeta: GLOBALISATION AND RELATIONS BETWEEN THE WEST AND THIRD COUNTRIES. (interview with Vladimir INOZEMTSEV) 13. The Russia Journal: Andrei Piontkovsky, History lesson for newest nuclear rivals. 14. Time Europe: Yuri Zarakhovich, Fighting Spirits. The Russian state reverts to the bad old days in a battle to control the country's vodka distributors. ******* #1 BBC 27 June 2002, Russia's scientists demand a living Hundreds of Russian scientists have protested in Moscow against chronic underfunding for their sector. About 800 protesters rallied outside government buildings, many of them coming from a 100-km (62-mile) protest march in support of a living wage. The academics and research workers, not normally known for their militancy, say chronic underfunding bodes ill for Russia's economic development. The BBC's Russian affairs analyst, Stephen Dalziel, says there are also real fears that impoverished Russian scientists may be wooed abroad by rogue nations seeking to develop weapons of mass destruction. Brain drain Viktor Kalinushkin, chairman of the Russian Academy of Sciences' trade unions, says that between 500,000 and 800,000 Russian scientists made long-term missions abroad in the past 10 years. "Hardly any of them have come back," he told a news conference. Talented young physicists, biologists, chemists and computer programmers are seeking more lucrative placements in Western states. "When they work abroad they can get more than 100,000 dollars a year," said Fedor Brovko, trade union leader at the Pushchino Biochemistry Institute. "The difference is just too great. Young people are studying with us purely so that they can go and work abroad." Pittance for science Many of the demonstrators had marched from the scientific research town of Pushchino outside Moscow. Postgraduate researchers and students at the rally said their paltry student grants did not even cover their accommodation costs. "I want to work in the science sector," said 21-year-old Pavel Medvedev. "But to do so I either have to take some sort of work on the side or sponge off my parents, and I don't want to do that." President Vladimir Putin has acknowledged the sector's funding crisis. In March, he said that support for science was "downright inefficient" and called for a "new economic foundation" for the sector. He accused science of being "poorly adapted for the market economy". The BBC's correspondent notes that scientists have had particular cause to rue the passing of the USSR. Once holding prestigious jobs, with salaries, accommodation and perks to match, many senior research scientists now have to survive on less than $50 a month. Whilst many of the scientists do go to the USA and other Western states, the worry is that others are ending up in countries such as Iran and Iraq. ******* #2 G8 OKs scrapping Russia's nuke stockpiles By Kathy A. Gambrell UPI White House Reporter CALGARY, Alberta, June 27 (UPI) -- G8 leaders Thursday approved a plan to spend $20 billion to scrap Russia's plutonium stockpile over the next decade. "This is an effort to bring to bear more resources -- an estimated $20 billion over 10 years from the G7 countries and Russia to deal with the destruction of weapons of mass destruction," U.S. national security adviser Condoleezza Rice said. "Given the terror threat that is (cited) by those who worry about the legacy of these weapons of mass destruction, we think it's a very important initiative and we're delighted to get it done." President Bush and Russian President Vladimir Putin discussed the issue during a bilateral meeting earlier Thursday. The West fears that terrorists may get their hands on the stockpiles. The so-called 10-10-10 agreement gives Russia $10 billion of American funds plus another $10 billion from the other six members of the G7 over a period of 10 years. Foreign policy analysts said the 10-10-10 agreement was an old issue and it remained to be seen whether this year's discussions represent a fresh infusion of commitment and funds. Bush met with Putin in Moscow a little more than a month ago to sign off on a pact sanctioning a bilateral reduction in nuclear weapons, effectively supplanting the three-decade-old Anti-Ballistic Missile Treaty. During talks Thursday, Bush and Putin also discussed the WorldCom Inc. scandal and its impact on world markets. "I'm concerned about the fact that there are some corporate leaders who have not upheld their responsibility," Bush said. "If you are a responsible citizen, and you run a corporation in America, you must fully disclose all assets and liabilities, and you must treat your shareholders and employees with respect." Putin said the world was watching the U.S. economy. "During the general discussion there at the G8 meeting, the president paid attention to this issue," Putin said. "And for me and my other colleagues, it was very important to listen to the president's opinion, because under the circumstances of the globalized community and world, a lot depends on the state of the U.S. economy these days." The two leaders sat side-by-side in the Delta Lodge Hotel where they appeared comfortable with each other, with the Russian head of state calling his U.S. counterpart by his first name. They sat in wing-backed chairs that nearly touched. "I'd like to emphasize that the president and I are having very good personal relations, and our colleagues in our capitals also note that interaction between our countries is becoming very efficient, not only from the viewpoint of bilateral relations and solving bilateral issues, but also as regards the resolution of major international problems," Putin said. Bush also said he was "very pleased" with the response he received from European leaders on the Middle East, calling the feedback "very positive." European leaders appeared uncomfortable about Bush's plan for Palestinian statehood and his call for Palestinian leader Yasser Arafat's ouster. ******* #3 G8 rewards Russia for anti-terror role with full G8 membership AFP June 27, 2002 Russia was rewarded with the lure of full membership in the Group of Eight and the right to host a 2006 summit despite the puny size of its economy, a move seen as payback for President Vladimir Putin's unprecedented support for the US-led war on terror. Canada, host of this year's G8 summit that opened Wednesday in the Rocky Mountain resort of Kananaskis, immediately hailed the "historic decision" to give Russia a permanent place on the top table of world economies. "In 2006, we have agreed that Russia will assume the presidency and host our annual summit," the Canadian government said in a statement. "The world is changing. Russia has demonstrated its potential to play a full and meaningful role in addressing the global problems that we all face." Putin hailed the G8's awarding of the 2006 summit to Russia as a "good sign," adding: "Russia's role is growing, and what is most important is the quality of our relations with the leading industrial countries is changing." A senior Japanese official said the 2006 summit decision "means Russia will be a full G8 member," though it was unclear exactly when Russia would assume full membership. Until now, Russia has been allowed into the political discussions of the G8 but excluded from financial meetings of the Group of Seven powers -- Britain, Canada, France, Germany, Italy, Japan and the United States. But in a clear sign that G7 leaders were eager to reward Putin's unprecedented pro-Western realignment of Russia's foreign policy, the Kremlin was admitted to a session devoted to financial issues. From 2006, Russia will also participate in meetings of G8 finance ministers, German Chancellor Gerhard Schroeder's adviser, Alfred Tacke, said. Canada said the decision reflected what it called the "remarkable and democratic transformation that has occurred in Russia in recent years and in particular under the leadership of President Putin." The decision to award Russia full membership in the elite club of the world's leading industrialised nations owes more to Moscow's strategic partnership with the West than to any obvious economic credentials. Russia's economy will have to grow by at least eight percent annually for 15 years even to catch up with Portugal, one of the poorest European Union nations, according to official government figures. The country's economic growth registered at five percent last year after a record rise of 8.3 percent in 2000 on the back of high oil prices on world markets, although growth forecasts have been lowered for this year. However, Putin's top economic adviser Andrei Illarionov said before the summit that having out-performed recent global growth figures, Russia would be viewed as an equal partner in Kananaskis. The promise of G8 membership is the latest sign the West is keen to help Putin stave off domestic critics who argue that Moscow capitulated to the US-led coalition without extracting a discernible reward. The United States announced earlier this month that Russia had successfully completed the transition to a market economy, considering the statement a sign the global financial community was ready to welcome it into the World Trade Organisation. Putin hailed the US decision as a "very important sign directed towards the international community," and argued it also showed "the Russian economy is prepared to take part fully in the world economy." The Russian leader defended his pro-Western stance before a skeptical nation at a marathon news conference in Moscow on the eve of the G8 summit, saying partnership with Washington and Europe would decide Russia's economic fate. And G7 leaders gave a further signal that Russia could expect financial rewards for its policy change in the wake of September 11 by drafting a joint plan to safeguard Russian stocks of excess military plutonium. The plan could see the United States commit 10 billion dollars to the scheme over 10 years, a figure to be matched by 10 billion dollars from the other six G7 states as part of a concerted effort to fight proliferation of nuclear, biological and chemical weapons. G8 leaders are expected to make a "significant" announcement on action to cut down those levels, a spokesman for British Prime Minister Tony Blair said. Dismantling Russia's stocks of military plutonium, viewed as particularly susceptible to theft in the corruption-tainted post-Soviet era, has become a main focus of international efforts to halt proliferation. ******* #4 BBC 27 June 2002 Analysis: Russia's place in G8 By Stephen Dalziel BBC Russian affairs analyst The decision by the G8 to hold its summit in Russia in four years' time is being heralded in Moscow as an indication that Russia is now a fully-fledged member of the world economic community. But the fact that the G8 is also preparing to give Russia $20 billion to help dispose of its weapons of mass destruction suggests that the country still relies more on aid than do the other members. However you twist the figures, technically Russia is not one of the world's top eight developed economies - which is what the term "G8" is supposed to mean. It does not even come in the top ten. But, geographically, Russia is the biggest country in the world. And its legacy from when it was a part of the Soviet Union means that it still has a huge nuclear arsenal. From G7 to G8 These factors have meant that Russia has gradually been growing closer to what used to be called the G7 ever since the then Soviet President, Mikhail Gorbachev, made the first overtures to the organisation in the late 1980s. G7 became G7 plus one, then G8. But the crash of the rouble in August 1998 saw a swift return to G7. The recovery made by the Russian economy since then, though, has seen a growing acceptance by the G7 to bring Russia into the fold. And in the past year, politics has played a huge part. The readiness with which the Kremlin signed up to the international war against terrorism has led to an expectation of some sort of payback from the West. Huge boost In recent weeks, both the European Union and the United States have granted Russia the recognition that its economy can now be deemed "a market economy". That neatly paved the way for Russia to be considered a full member of the G8, sidestepping the technicality of the Russian economy not being the world's eighth largest. Granting Moscow the right to host the summit in 2006 is a huge boost. But giving the Kremlin $20bn over the next 10 years to deal with its weapons of mass destruction underlines that economically Russia still owes much to the West. ******* #5 The Globe and Mail (Canada) June 27, 2002 For Russians, press freedom more theory than fact Putin's brand of democracy is different than the rest of the G8 By MARK MACKINNON With a report from Associated Press MOSCOW -- It was a chilly evening in March when Natalya Skryl, a reporter for the daily newspaper in the southern city of Taganrog, set out for the local prosecutor's office. Known as a crusading journalist bent on pushing the limits of Russia's access-to-information laws, the 30-year-old reporter had made a few enemies with her dogged efforts. On March 7, she stayed a little later than usual at the prosecutor's office, focused on a project her editors say consumed her: digging up information on a share dispute involving the city's pipemaking factory. She was also curious about the planned construction of a methanol terminal along the same stretch of coast on the Azov Sea. Her colleagues at Nashe Vremya (Our Time) say she was investigating allegations about bribery involving one or both projects. After finishing her work, she decided to walk home, as she often did. She was set upon by thugs wielding iron bars, and died after a blow to the head. Her gold jewellery wasn't taken, her purse was left full of money. Media watchdogs immediately classified Ms. Skryl as a "victim of her professional activities" -- a euphemism for journalists assassinated by those they work to expose. Russian President Vladimir Putin arrived yesterday in Kananaskis, Alta., to take a seat alongside the leaders of the world's major democracies at the G8 summit. But Russian-style democracy is one where freedom of the press is a theory rather than a principle. Activists charge that journalism has become Russia's most dangerous profession. Ms. Skryl was one of eight reporters killed since January, and among 36 killed in the past 2½ years. Another four are missing. In many cases, reporters were killed or they vanished while investigating government corruption or links between big business and members of Russia's powerful organized crime groups. "Because so many journalists have been killed in Russia recently as a result of their work, we ask . . . that a serious and timely inquiry is made into whether his death was linked to articles he published," Robert Menard, secretary-general of Reporters Without Borders, wrote in an open letter to Russia's prosecutor-general. Last December, Sergei Kalinovsky, senior editor of the Smolensk edition of the outspoken Moskovsky Komsomolets daily, disappeared. Although he was also the host of a popular TV program about crime in the region, "nobody in law enforcement did anything to find him," said Ruslan Gorevoi, a media activist with the Glasnost Defence Foundation. Instead, the Smolensk prosecutor offered many versions of what might have happened to Mr. Kalinovsky, ranging from being the victim of Armenian gangs to having arranged his own disappearance for publicity reasons. In April, his body was found beside a lake after snow melted. "It's really very dangerous to work as a journalist in Russia especially if you're covering organized crime or dare to criticize the authorities," Mr. Gorevoi said. "And when something happens to one, nothing is done to find what happened. It gives the impression that assassins are not really wanted [by the police]." Mr. Gorevoi sees something more sinister at play than poor police work. He, like many observers outside Russia, sees a connection between the physical attacks on journalists and a wider state pressure on the news media -- pressure that has replaced the outright censorship of the Soviet era. Four days after Mr. Putin was inaugurated, for example, armed troopers in ski masks raided the offices of Russia's largest private media company, Media Most, whose newspapers and TV networks were outspoken critics of Mr. Putin during the 2000 election campaign. The company is now controlled by Gazprom, a state-owned oil company. Next it was TV6, an independent and muckraking television station booted off the air last year after it ran a series of stories questioning Russia's war in Chechnya. It was allowed to return to the airwaves only after accepting Kremlin-appointed overseers at the top of its management structure. But risks to journalists, and journalistic freedom, predate the Putin administration. Yesterday, a Moscow court acquitted six men for lack of evidence in the 1994 killing of Dmitry Kholodov, a 27-year-old reporter who was investigating military corruption. His death sparked nationwide condemnation and rattled reporters across the country. Mr. Kholodov was probing allegations of corruption in the army's intelligence service in October, 1994, when an anonymous caller told him he could find evidence in a briefcase at a train station. When he opened the case in his office at Moskovsky Komsomolets, it exploded, killing him and wounding a colleague. Prosecutors and Mr. Kholodov's parents said they would appeal the acquittal of the five former paratroopers and one businessman, which came after a 19-month trial and testimony from 300 witnesses. ******* #6 Rossiiskaya Gazeta No. 114 June 2002 [translation from RIA Novosti for personal use only] RUSSIA MAY BECOME A LEADING ASIAN COUNTRY Following below is an interview with Nikolai ZLOBIN, who supervises Russian and Asian programs at the US Center for Defense Information. Question: The conference for interaction and confidence- building measures in Asia (CICA) has ended in Alma-Ata not so long ago. The Shanghai cooperation organization's summit has also proved successful. Russia's relations with Israel have become more active. Add to this Moscow's efforts to mediate the Indo- Pakistani conflict. Does this mean that Russia would like to represent Asian interests during the present-day G8 summit in Canada? Answer: The G8, which is an elite club of rich countries, is now suffering from well-nigh the same problems, as other international entities do. As I see it, the G8 concept itself partly loses sense because regional problems now top the agenda. I'm talking about Asia, whose problems can't be solved by the former G7. That's why it's pretty hard to overestimate Russia's role in this respect. Russia's presence at the Canadian summit can bring this forum in conformity with present-day global realities. On the one hand, the G8 would like to utilize Russia's regional potential. On the other hand, Asia is greatly interested in expanding its influence within the G8 framework. Mind you, Asia simply lacks any other leverage, except Russia, for influencing the situation today. Question: Can you confirm the fact that the United States is ready to represent Russia's interests in other regions of the world in exchange for a similar Russian service in Asia? Answer: Naturally enough, the regional-parity concept for Asia, which implies that Russia will be instrumental in ensuring Western interests there, enables Moscow to demand that its allies defend Russian interests in those specific regions where Russia has minimal or even zero direct influence. Washington is ready to provide sufficiently wide-ranging verbal guarantees, while discussing this issue nowadays. Still Moscow itself should formulate its clear-cut demands. It would be naive to think that Washington is going to draft a concept of its relations with Russia at this stage. Moscow should set forth a clear-cut concept of its strategic interests in those particular regions, which are not traditionally influenced by it, or which have been lost to Russia over the years. This concept should then be offered to the White House for discussion. Question: Japan and China are also vying for the leading role in Asia. What are Russia's chances to claim the role of US President's permanent representative in the Asia "federal district"? Answer: Russia can now become the main Asian country with US assistance; such chances are higher than those of any other regional country. Japan, which is now suffering from a long-term economic and demographic crisis, lacks the required resources and military potential. Nor does Tokyo have sufficient political influence and authority over vast continental Asian territories. Japan can't become part and parcel of military structures; nor can it join the European Union. Incidentally, the same can be said about China. Should Russia lose to China in the struggle for Asian leadership, then Washington would perceive this as the most unfavorable scenario. However, China still faces the Taiwan problem; consequently, its foreign-political orientation will remain sufficiently purposeful and somewhat predictable. The Chinese economy now lags considerably behind Russia's economy. In addition, Washington considers the Chinese economy as potentially less attractive because China lacks fuel-and-energy resources. Summing up, Russia can become a leading regional country some 25 years from now. (Transcript by Nikolai KHORUNZHY.) ******* #7 Moscow Times June 27, 2002 Bill Is a Potemkin Reform By Pavel Felgenhauer Last week the State Duma passed in its second -- and most important -- reading a draft law to allow alternative community service as an option to the draft. Now it is almost certain that it will sail through parliament, be signed into law by President Vladimir Putin and come into force as of January 2004, and then conscientious objectors will legally be able to dodge military service. But will they? The new law makes community service highly unattractive: A conscientious objector may have to serve up to 3 1/2 years somewhere in a far-off region of Russia that he will have no say in choosing, assigned a job that may not be to his liking (the assignment could be to do noncombat duties inside military units where a conscientious objector might face severe hazing). Also, a conscientious objector is obliged by the law to officially notify the military authorities at least half a year before he turns 18 of his intention to choose the community service alternative. The military authorities will then have the right to decide whether to allow the applicant to do community service or not, depending on whether they think the draftee's pacifist convictions are real. It's clear that there will be no genuine community service alternative in this country under the new rules. The Defense Ministry will gather the statements of conscientious objectors and then decide how many applications to grant. Today the ministry calls up some 400,000 draftees per year (30 percent of all young men that turn 18 each year). From 2004 it simply plans to allow several hundred young men a year to do community service, and so it can say that the constitutional right to choose is being realized. It is obvious that the alternative community service law is being passed largely to improve Russia's image abroad -- as additional proof of our serious intention to join the community of democratic nations. Russia already has a free media that is in fact not free at all; a private banking system that is no more than a cover for money-laundering activities; a stock exchange that does not reflect the real economy; free elections, the results of which are pre-determined by the Kremlin, and so on. Potemkin reforms, Potemkin civil rights and Potemkin democracy were often used during Soviet times to fool foreigners. And often the West knowingly took these Potemkin decorations at face value, and today they will surely do the same. If Putin continues to maintain his present pro-Western foreign policy no one in the West will seriously scrutinize his domestic record. The new bill on community service is ample proof that no serious military reforms will happen anytime soon, but then that's an internal Russian problem, is it not? Generals plan to keep a large conscript army and to continue the draft indefinitely. Of course, Putin has announced that the draft should end somewhere after 2010. But to make this happen, the military needs to undergo serious structural reforms. The defense budget is today some $10 billion and will hardly exceed $20 billion in the next 10 to 20 years. With such a spending bill, Russia can maintain a more or less well-fed, well-armed and disciplined conventional armed force of no more than half a million men, taking into account the fact that we should also keep a significant nuclear deterrent. Today Russia's military has more than 2 million servicemen in active service and also some 700,000 civilian support personnel. The per capita militarization of Russia today is in fact higher than that of the Soviet Union in the 1980s. Russia inherited some 80 percent of the Soviet military machine and kept most of it, while inheriting only 50 percent of the Soviet Union's resources, population and natural wealth. Over the past decade, the military machine has degraded as a result of inadequate financing, aging equipment, bad food and living conditions, a steady decline in discipline, morale and the professional standards of its commanding officers. The Russian military is the main supplier of munitions and military equipment to Chechen separatists. It was announced this week that terrorists purchased the MON-90 antipersonnel mine that killed and wounded hundreds on May 9, in Kaspiisk, Dagestan, from a Russian military unit. Desertions, killings and the hazing of conscripts in Russian units have clearly been on the rise recently. A total breakdown of the military machine is becoming a genuine possibility, while the authorities seem to believe that the forced drafting of unwilling young men is the best cure. Pavel Felgenhauer is an independent defense analyst. ******** #8 strana.ru June 27, 2002 A Strategy for Russia's Next Steps in the G-8 (Russia should) make itself a leader in building up the G-8, as a way of enhancing its role in the world By Ira Strauss The G-8 is the only important Western grouping that Russia is as yet a member of. The OECD accepts the goal of eventual Russian membership, but no one knows when it will happen. NATO is ambivalent on the goal of Russian membership. The EU is negative, for reasons that are unfortunately realistic. That leaves the G-8 for now, with OECD and perhaps NATO in prospect. Building up the G-8 is, meanwhile, the way that is immediately available for increasing Russia's role in the world. How can the G-8 be further built up? There have been a number of proposals in the West, but there has not been the energy to carry them through. The initiative has been lacking, partly because the Western countries have other institutions for playing their role in the world. Russia has the interest to supply the missing energy for strengthening the G-8. Some of the possibilities are: * institutionalizing the G-8 - giving it a secretariat, letting it develop a substructure of committees and civil staff * enhancing the informal dialogue of G-8 leaders and their capacity for initiative, by meeting more frequently. Since this seems impractical in person, frequent videoconferences among the leaders could serve the purpose. * increasing the G-8's role in global regulation, by adding major items to its agenda, by turning to it more frequently for working out joint plans, and by turning to it for joint responses to crises. Frequent meeting by videoconference would make this feasible. * strengthening G-8 links with other institutions of global regulation, so that it can play more effectively its informal role as a "steering" agency. If G-8 has a bigger staff, it can assign personnel to maintain links with other institutions, such as the UN Security Council, NATO, OECD, IMF, and WTO. These institutions in turn can assign the personnel for liaison with G-8. * establishing a G-8 agenda item on integrating Russia into the rest of the Western institutions and global economic institutions -- OECD, NATO, etc. Make this a continuing G-8 agenda item, supported by a staff and perhaps a subcommittee. G-8 would thus offer Russia a venue for holding a dialogue as a full, equal partner on Russia's goal of further integration with the West. It would be a much more dignified posture than the role of supplicant, which has hitherto been the basis for Russia's dialogue with OECD and NATO; and because Russia, unlike small Central European countries, cannot accept the role of supplicant very easily, the dialogue has not gone far. Using the G-8 for this dialogue would provide a way out of the logjam. In particular, Russia has not been able to get a serious dialogue with NATO on joining NATO, as would have been logical after 1991, and this gap has created a vicious circle in all of Russia's other relations with NATO. G-8 can provide political impetus from the top level to move integration forward, cutting through bureaucratic habits that have obstructed progress for the last decade. NATO and OECD bureaucrats often focus on demands that all new members must satisfy every unimportant item of the NATO and OECD acquis, and special interest-based demands often come up as well. This is the natural business of entrenched bureaucracies, which cannot be expected to act on a basis of political vision, even when some of their personnel have the necessary vision; it is on the level of political leaders that the secondary interests can be put in perspective and the greater national interests given their due attention. In pursuing a strategy of building up the G-8, Russia can put itself forward as a leader in building Western unity. This would work wonders for building trust. It would enable Russia to overcome the image of a potential spoiler. Tremendous damage has been done to Russian diplomatic interests by the distrust that it faces, particularly the fear that exists in the West that Russia's role, once it is inside Western institutions, will be to drive a wedge between Western countries and weaken their institutions. By putting itself forward as a proponent of those Western institutions of which it is itself a part, starting with the G-8, Russia can transform its image from negative to positive. This will do more for getting Russia an equal status in NATO than any number of logical arguments with NATO people. Russia can become a chief defender of G-8 and Euro-Atlantic integration against the "anti-globalization" protesters. It can frankly state what Western leaders, in their deference to political correctness, fear to say: that these are nihilistic anti-Western protests. It will help if Russia understands the distinction between Euro-Atlantic institutions and globalization. The West does promote globalization, but West-West institutions are NOT the institutions of globalization; rather they are regional integration, and they have aspects of positive joint regulation as well as deregulation. Thus, they provide a balance to globalization, which is mostly global deregulation, and a protection against its excesses or pace. Globalization itself is inevitable and mostly benign, but needs the Western and other regional integration processes as balances. As a moderate voice, representing the relatively conservative eastern wing of Europe in its spirit while being liberalizing in its contemporary policies, Russia has a chance to help restore balance in Western discourse on globalization, integration, and political-economic regulation. Russia's fundamental interest is in the success of G-8 and, actually, of all Western institutions, since they are a basis of world stability and global regulation. This is something that Russia has understood clearly since September 11, although as far back as the Brezhnev and Gorbachev eras it began to correct its analysis and accept this reality. To be sure, where Russia is not a member of an institution, particularly in a military alliance such as NATO, Russia cannot give much support to that institution -- it can support it only to the extent that it becomes a member; otherwise it risks that the institution might too often be used for policies that it dislikes. In the G-8, the condition of membership has been met. Russia can give it full support and work without reservation for strengthening its role. Here Russia can remind itself, without risk of embarrassment, about its interest in a "common European home" -- including the "greater Europe" of which G-8 is one of the embodiments, not just the little Europe of the EU - as one of the foundations of global order and an ultimate global "common human home". This was a language which Russia rightly used during the period of the phasing out of Communism, but which itself faded out of use for want of validation in practice. Today, in the G-8, Russia's analysis of its interest in the institutions of regulation has finally been validated. Russia's interest in global regulation and stability is one of its vital interests; it is among the countries most at risk from terrorism, regional conflicts, and weapons of mass destruction. The G-8 and other Western-based institutions are the joint planning ground for the struggle against terrorism, for the regulation of regional conflicts, and for opposing the proliferation of weapons of mass destruction and delivery systems. Objectively, Russia needs for them to be successful, as well as for itself to be included in them. It need only imagine the chaotic consequences if any of the major West-West institutions were to disappear, in order to realize how much it is in its own fundamental interest for them to remain strong and grow even stronger. If Russia had begun to be brought into the West-West institutions after 1989, and rapidly brought in after 1991, it would have joined with great enthusiasm, which would have been appropriate to its own true interest in the success of these institutions. It could have emerged as a leader in the revitalization of the West-West institutions. Today Russia still has, objectively, the opportunity to play this role, but it is necessary for it to remind itself of this and make an effort to revive its enthusiasm, in a more mature and professional form. If it does this, it will be able to use its new level of acceptance into the G-8 to regain for itself a leadership role befitting to its importance in world geopolitics. ******* #9 Novye Izvestia June 27, 2002 SECURITY MINISTERS DISSATISFIED WITH THE PRESIDENT Generals dislike the initiatives of their supreme commander-in-chief The military will not tolerate any criticism of its actions in Chechnya Author: Said Bitsoyev [from WPS Monitoring Agency, www.wps.ru/e_index.html] CLEARLY IRRITATED, SECURITY MINISTERS IMMEDIATELY CHALLENGE ANY AND ALL PROPOSALS FOR A PEACEFUL RESOLUTION TO THE PROBLEM OF CHECHNYA. EVEN PRESIDENT PUTIN'S PROPOSALS ARE NO EXCEPTION. THE GENERALS FEEL FREE TO DISAGREE WITH THEIR OWN SUPREME COMMANDER-IN-CHIEF. The public hadn't even had time to digest President Putin's peace proposals for Chechnya when the military took offense and raised an outcry. United Federal Group commander Vladimir Moltenskoy was the first to voice his displeasure. Moltenskoy described the practice of cleanup operations as effective, and advocated continuing it - less than two hours after the president spoke of the need to put an end to cleanup operations. "We are ready to restrict our actions to passport regime checks in the settlements where the locals back up the federal center and power structures. Operations will be stiff, however, when our troops come under fire or when terrorist acts are organized," Moltenskoy said. The president called formation of local internal affairs directorates, each including a fighting unit, a major condition necessary for resolution of the conflict in Chechnya. "Chechnya should be defended by Chechens themselves," Putin announced. The following evening, however, a popular TV channel ran an update on the state of affairs in Chechnya: mysterious officers of secret services in black masks telling the audience horrible things, as follows: Wahhabi militarnts have infiltrated the local law enforcement agencies. In some internal affairs district directorates they account for up to half of personnel. As soon as Aslan Maskhadov gives the order, they will rise up against the federal forces... What the TV channel meant was that Chechens were not to be trusted. Unless we want to mount another military campaign several years from now, of course. Defense Minister Sergei Ivanov became Putin's foremost opponent. Ivanov, with his cultured voice and inevitable smile, went on television to tell the nation that a guerrilla takeover of Grozny had been prevented. According to the minister, special forces killed three separatists carrying bags of documents. This is what amazed the public. After all, this was the first time guerrillas in Chechnya had used this unusual method of delivering Maskhadov's orders to his subordinates. The prevented capture of Grozny is, however, the most striking part of Ivanov's revelations. The city is located in the center of Chechnya, right on the flatlands which the federal forces have controlled since 1999. There are numerous units, armored vehicles, and thousands of troops in Grozny itself and around it. What kind of force would be needed to overcome the lot of them, and defend some areas of the city for days on end? And if Chechen separatists can actually field such forces, then what has the United Federal Group been doing in Chechnya all these years? And what are generals' assurances on gradual stabilization and destruction of the major enemy forces worth? Clearly irritated, security ministers immediately challenge any and all proposals for a peaceful resolution to the problem of Chechnya. Even President Putin's proposals are no exception. The generals feel free to disagree with their own supreme commander-in- chief. ******* #10 Novaya Gazeta No. 43 June 2002 CHEKISTS IN THE MARKET Consequences of the dominance of the secret services in Russia Author: Boris Kagarlitsky [from WPS Monitoring Agency, www.wps.ru/e_index.html] SECRET SERVICES PEOPLE ARE A PRIVILEGED CASTE IN PUTIN'S RUSSIA. THEY ARE PROMOTED INTO THE HIGHEST LEVELS OF GOVERNMENT; THEY CONTROL MILITARY OPERATIONS AND MANAGE TELEVISION NETWORKS; THEY ENJOY LEADING POSITIONS IN BUSINESS. TECHNICALLY, THEIR POSITION NOW IS EVEN BETTER THAN IT WAS IN THE SOVIET UNION. Online journalist Anatoly Baranov describes the contemporary secret services in Russia as "Beria Lite". Indeed, the chekists are like cigarette companies - on the one hand, they promote their products, but on the other, they can't avoid knowing that these products are harmful. That is why their advertising explains that new cigarette brands are as pleasant as the old ones, but less harmful. The chekists also take pride in their past, while being slightly ashamed of it. The chekists are a privileged caste in Vladimir Putin's Russia. They are promoted into the highest levels of government; they control military operations and manage television networks; they enjoy leading positions in business. Technically, their position in Putin's Russia is even better than it was in the Soviet Union. Secret services were controlled by the party then. They do not have any controllers nowadays. No matter how much liberals may complain, the regime of secret services in the early 21st century is not reminiscent of the all-out terror of the 1930s. Attempts are made to intimidate, but the effect falls rather flat. People do disappear, but only in Chechnya. Newspapers are shut down, but not all of them. Criticizing the regime is not entirely safe, but not impossible. The trouble and problems Beria Lite may cause you now cannot be compared with what their predecessors could do six decades ago. In short, some softening is undeniable. Some communists and liberals thought that the rise of Beria's successors would mean a return to the past. Their naivete is staggering. No matter how important state security structures may be, or what influence they may wield, they themselves do not determine the nature of the regime. They protect and defend the existing system. The economic power of corporations needs protection as much as the privileges of the party bureaucracy did. Guaranteeing oligarchs the ability to manage their capital as they think best means keeping everyone else under control. Two years of chekist administration have been tranquil, but the elections are coming and the regime feels insecure. The political situation is under control, with chekists in all key positions. The economy is on the brink of collapse, but nothing too horrible has happened yet. In other words, there is no reason for panic. All the same, the Kremlin is launching a cleanup operation against the opposition, lashing out in all directions. The liberal Obschaya Gazeta newspaper is no longer circulating. Communists in the Duma have been driven from their leadership positions. Oppositionist regional leaders are given the message that they had better become moderate or face the consequences. Everything is being done peacefully, with courts available to back up the required decisions. There are problems with independence of courts, of course, but the harassment is fairly liberal on the whole. The objective is quite clear. No one threatens freedom of speech as such. This freedom is to be under control and within reasonable limits. Let there be oppositionist newspapers. No one is so naive nowadays as to fight the samizdat anymore. A newspaper with a print run of 5,000 copies may criticize the regime every day, but the major national newspapers should be "respectable". The same goes for the opposition. The regime is not aiming to do away with the Communist Party for ideological reasons. The Communist Party should be destroyed because it still takes up too much space in the existing political system. As soon as the party crumbles under the onslaught of the determined Kremlin with its special operations, it will be left alone. The same will happen to the Novaya Gazeta newspaper. We will probably survive the attack currently underway, and the regime probably knows it. The question is what will happen afterwards. The newspaper had better learn its lesson and behave itself; then it won't be bothered anymore. It seems that the Kremlin wants the cleanup operation over by winter. When all the special measures are taken, Russia will have a multiparty system and free media. But all parties and newspapers will be controlled. None will have to be banned or shut down. At worst, some publications will get new editors and shareholders. Hungarian historian Tadasch Kraus wrote that the Soviet Union had to be hypocritical, because it justified itself using humanity's highest ideals. The current Russian regime does not promise the people power or property. Whether or not "Beria Lite" achieves its strategic goals remains to be seen. The special services cannot formulate the tasks and priorities to be performed and serve the ruling elite. They cannot solve economic and social problems either. This is beyond them. We can urge the government to formulate "more ambitious plans" or "speed up economic growth" all we like, but the only result will be impossible optimistic promises with false figures to support them. The regime is only displaying its impotence by responding to social and political problems with special services measures. Two years of the war in Chechnya have led to a new generation of separatist resistance ringleaders arising, even more dangerous than their predecessors, according to the Russian military. Most probably, the political cleanup operation of 2002 will end in something similar. ******* #11 Komsomolskaya Pravda No. 112 June 2002 [translation from RIA Novosti for personal use only] RUSSIAN NAVY RECEIVES THE WORLD'S BIGGEST SUBMARINE By Igor CHERNYAK An Mk 941-U SSBN (Strategic Submarine Ballistic Nuclear) was launched at the Sevmash ship-yard June 26. This hard-hitting Akula (Shark)-class submarine is the biggest in the world; moreover, no other submarine displaces as much water as she does. It was named Dmitry Donskoi. The Akula SSBN carries 20 MIRVed ICBMs (Inter-Continental Ballistic Missiles); each missile has 10 nuclear warheads and a 10,000-km range. (MIRV stands for Multiple Independent Re-Entry Vehicles -- Ed.) The Akula can hit 200 large ground targets over an area of 7,000 sq. km. with one salvo. It should be mentioned in this connection that Moscow's area totals 1,000 sq. km. To cut a long story short, this formidable submarine can position herself in the White Sea near Arkhangelsk, subsequently destroying 10 sprawling megalopolises as big as New York in no time at all. She can also wipe out a small European country or 50 percent of Afghanistan. The Akula packs a more devastating punch than 10 Topol (Poplar) ICBM regiments do. Russian Defense Minister Sergei Ivanov flew over to Sevmash to attend the launching ceremony. This calls for a celebration because Russia hasn't launched a single SSBN in its entire modern history, Ivanov noted. It took more than four hours to launch the submarine to the sounds of the Russian state anthem. A bottle of champagne was smashed against her hull in line with a long-standing tradition. Newspaper correspondents were also allowed to attend the ceremony; frankly speaking, this is an unprecedented event in Sevmash's history. The Akula submarine, which even has a steam-bath and a swimming pool, boasts a virtually unlimited endurance, which depends on her food supplies alone. Moreover, she can launch her ICBMs from a depth of 50 meters. For comparison, US SSBNs can fire missiles from a depth of just 25 meters. Sergei Ivanov will now visit Novaya Zemlya, analyzing prospects for the construction of nuclear-waste compounds there. All in all, $70 million are needed to build such facilities; their first stage would be commissioned some 2-3 years from now, if the Russian Government finds the money. The Novaya Zemlya nuclear testing site hasn't detonated any nuclear devices since 1990. Still Russian military say that Moscow's hands have been untied after the latest US decision to abrogate the ABM (Anti-Ballistic Missile) Treaty. Nonetheless, Ivanov said the other day that Russia won't resume nuclear tests on Novaya Zemlya. Mk 941-U Akula SSBN Main specifications Length .......................... 172 meters Beam ............................ 22.8 meters Underwater displacement .................... 50,000 tons Underwater speed ................ Over 30 knots Weaponry: 20 ICBM-s replete with 10 nuclear warheads each Two torpedo tubes (one 533-mm torpedo tube and one 650-mm torpedo tube) 36 torpedoes ICBM range ...................... Up to 10,000 km Maximum diving depth .................... 500 meters Operational diving depth .................... 380 meters Endurance ....................... 120 days Crew ............................ 163 men ****** #12 Nezavisimaya Gazeta No. 120 June 2002 [translation from RIA Novosti for personal use only] GLOBALISATION AND RELATIONS BETWEEN THE WEST AND THIRD COUNTRIES Analyst's remarks Yevgeny VERLIN Globalisation, the relations between the West and third countries, Russia's prospects in the global context are some of the most widely discussed topics in the mass media today, especially after the September 11 events. For specialists who study these issues, everything is not as clear as for journalists and on-duty analysts. Vladimir INOZEMTSEV, Doctor of Sciences (Economics) and director of the Centre for Post-Industrial Society Studies was interviewed by NG to share his opinion on the above processes. Question: You have been developing for over ten years now the theory of post-economic society in your books and articles. With each new work this concept becomes ever more profound and specified but at the same time your optimism related to the possibility of a conflict-free settlement of contradictions accumulating in contemporary world fades away. Why? Answer: The era of the industrial society in the first half of the 20th century, when economic goals and materialistic motivation dominated Western society, has been succeeded by the post-industrial era. It has brought with it the quick growth of well-being and the decrease of the role of material motivation. Today individuals are more seeking to achieve the inner goals of their development rather than to increase their material wealth. But such a significant social revolution cannot but generate new inter-class contradictions. It destroys the former unity of society, making people's goals incomparable. It undermines the unity of civilisation and sharply increases the gap between the rich and the poor. All this is fraught with extremely grave consequences. Question: But what threat can the replacement of economic goals by the individual's desire for self-realisation pose in this respect? Answer: The answer is very simple. In the course of centuries any society had been united not so much by the consent of people about things, which they like. "A worker seeks to get as much as possible while a capitalist wants to give as less as possible. This unique formula devised by Adam Smith is a guarantee of the stability of societies based on the resultant of opposite but actually similar forces. Similar relations also developed globally: European countries were interested in the riches of colonies (and then in the riches of independent countries of the South) and spared no efforts for their annexation and subsequently for a long political bargaining with them. But as soon as unheard-of riches begin to be concentrated in the hands of those who produce knowledge and frequently do not even aspire for mere enrichment while the Western world discovers that it is more independent from the need for material and mineral resources than ever before, the sustainable balance becomes upset. The workers' demands on the increase of their pay no longer have former grounds since the creation of a new software and its copying do not require personnel that is needed for the creation and production of, say, a new car model. Likewise, the value of mineral resources that are actually the only wealth of Third World countries is largely levelled off. Meanwhile, the personnel of the traditional sectors continues to constitute a majority even in developed countries while Third World residents a larger part of the world population. They cannot agree with their redundancy. This generates a new conflict. Question: Is it possible then to refer you to anti- globalists whose influence grows? What positive features do you see in this movement? Answer: Modern anti-globalists believe that what is generally understood as globalisation is dangerous and they are right. However, they are right only about that. Their opinion is that globalisation is not only dangerous but also harmful, which is erroneous because an objective process cannot be either bad or good. Anti-globalists proceed from the fact that today there are in the world a lot of pressing problems: inequality, poverty, senseless violence. However, to my mind, they illegitimately confuse inequality and injustice. Standing for the introduction of special taxes on developed countries, the proceeds from which should be committed to the fund for the development of the Third World, and seeking to impose restrictions on the economic progress of developed countries, they are not aware of the fact that its modern successes have been generated by the efforts of the West and its citizens rather than by the exploitation of the Third World. No one today compels representatives of peripheral countries to buy software at high prices and sell their natural resources at low prices. Simply, such is the price of access to the world economic infrastructure created by the West and this price has to be paid since the stay outside this infrastructure (this applies to Afghanistan, Zimbabwe and North Korea) turns out to be much more expensive. That is why, you need to pay attention to the fact that the anti-globalist movement emerges in developed countries rather than in the Third World where investment and humanitarian aid are perceived almost like an unexpected pleasant thing. Anti-globalists' programmes are not only utopian but reactionary since any demand of equality not based on justice is reactionary. Question: It is possible to find enough examples of the successful development of formerly backward countries in the last several decades. The countries of South-East Asia, China testify to the fact that the position of peripheral societies is not so hopeless. What are the prospects of catch-up development in the 21st century, to your mind? Answer: The examples you speak about are the examples of accelerated development. The Asian economies have, indeed, made a considerable breakthrough. Based on cheap labour force, imported capital and technologies, and also western demand (which is, incidentally, not so vitally acute) for their products. The rate of economic growth never exceeded from 1973 to 1997 the rate of the growth of direct investments in any of these countries. As before, the overwhelming number of Asian goods is produced on the basis of US and European technologies. In this case, what we see is an example of quite reasonable and positive cooperation of the centre and the periphery rather than an attempt by Asian countries to catch up with and outpace the USA and Europe. Today it is possible to catch up with Western countries only when the latter wish so, and this wish may appear only if catch-up states do not only seek but are also really ready to become loyal members of the western community. Question: What is the place of Russia in the emerging world of the 21st century, in your opinion? Answer: To my mind, in the 21st century Russia must acquire what it was deprived of in the 20th century: the status of a normal civilised country that does not sacrifice its people for the sake of absurd experiments and does not subject its international reputation to situational projects of the ruling elite. That is why Russia has to cover a long way to join the community of developed nations with time. However, this is possible, if some conditions are met. This involves refusal from confrontation with the Western world. This means the maximum attraction of foreign capital and technologies to the sectors oriented to the production of finished consumer goods sold on the domestic market, the emphasis on rasing the living standards and the educational level of the population, the maximum development of the domestic market and the refusal from state support for inefficient industries. Finally, it is of decisive nature to build a civil society and individualistic consciousness which implies the expansion of scientific, cultural and educational exchange with Western countries. ******* #13 The Russia Journal June 21-27, 2002 History lesson for newest nuclear rivals By ANDREI PIONTKOVSKY During the 1960 U.S. presidential election campaign, John F. Kennedy tried to get the better of his opponent, then-Vice President Richard Nixon, by actively promoting the idea that there was a "missile gap" between the United States and the Soviet Union, in favor of the latter. No one knows now whether the future president was sincerely misled by the Soviet successes in space, or whether he was deliberately misleading voters. But, in October 1962, when the Cuban missile crisis broke out, Kennedy had pretty accurate information about his opponent, thanks to super spy Oleg Penkovsky. And there was no question of any nuclear missile gap – the United States still had a considerable advantage in this area. The problem was in using this advantage. The United States could defeat its ideological and geopolitical rival by wiping out its military and industrial potential, but the cost would be the destruction of New York and Washington. This was the choice Kennedy faced, and the question was whether he was willing to achieve victory at such a price. This wasn’t just an academic question, either, considering that Kennedy’s entourage included military officials ready to seek just such a victory. But Kennedy wasn’t ready, and his refusal gave rise to the doctrine of mutually assured destruction, which really did became the cornerstone of strategic stability throughout the decades of the Cold War. This threat of mutual destruction not only prevented a nuclear war between the two superpowers, it also prevented a conventional war, though there were more than enough pretexts over the years for such a war to begin. This showed the dual nature of nuclear weapons. The consequences of their use are so horrific that their very existence can prevent a military conflict from breaking out. For the U.S. and Soviet leaders, the shared experience of going through the Cuban missile crisis and teetering on the brink of nuclear war was a moment of truth, after which war of any kind between the two countries became impossible. Now, 40 years after Kennedy and Soviet leader Nikita Khrushchev went toe-to-toe, the leaders of the two adolescent nuclear states of India and Pakistan are going through a similar coming-of-age rite. Though not identical, the crisis between the South Asian neighbors is reminiscent of the Soviet-U.S. tete-a-tete of the early ’60s. There is an acute geopolitical – and, to some extent, religious – conflict over the disputed territory of Kashmir. Both sides are nuclear-armed. With both nuclear and conventional supremacy, India has the obvious edge at all levels of possible conflict escalation. Some Indian military and political figures are fed up with the conflict over Kashmir and are tempted to sort it out once and for all by launching a rapid military attack using conventional weapons. It’s not clear, though, what they would do with this "victory," which would give New Delhi control of a sizable territory with a Muslim-majority population that is hostile to its presence. Worse still, an Indian triumph in Kashmir would put Pakistan’s president, Gen. Pervez Musharraf, in a desperate and hopeless quandary. Faced with the defeat of his army, Musharraf would be obliged to use nuclear weapons. If he didn’t, he would be simply swept aside by Islamic radicals, for whom a nuclear bomb dropped on Delhi is no different from the explosives strapped to the torsos of young fanatics who blow themselves up in markets and on buses in Israel. Indian Prime Minister Atal Bihari Vajpayee now has a clear choice. A large-scale conventional war will inevitably lead to nuclear escalation. This would destroy Pakistan as a state but provide a solution to Kashmir – only at the cost of millions of Indian lives. Are India’s leaders ready to pay such a price? Vajpayee undoubtedly will make the same choice as Kennedy did 40 years ago. Let us hope that India and Pakistan will emerge from this crisis wiser and enriched by their experience, as their superpower predecessors did. The Soviet Union and the United States continued their fierce geopolitical rivalry for almost 30 years after the Cuban missile crisis, but never again did they come to the brink of war with each other. The Kashmir conflict will also smolder on, but, having gone through the current crisis and seen into the abyss, India and Pakistan won’t come to the edge again. The writer is director of the Center for Strategic Research. ******* #14 Time Europe July 1, 2002 Fighting Spirits The Russian state reverts to the bad old days in a battle to control the country's vodka distributors BY YURI ZARAKHOVICH/MOSCOW The Kremlin has cause to celebrate: last month the United States recognized Russia as a market economy, not long after the European Union made a similar acknowledgment. Those decisions boosted Russia's drive to join the World Trade Organization and attract sorely needed foreign capital. But while Russia may toast itself with champagne, the U.S. and the E.U. may have to forgo toasting with Stolichnaya, the highly successful brand of Russian vodka. The Russian state is attempting to nationalize Sojuzplodimport (SPI), the private company that holds exclusive export rights to the world's most popular vodka brand and sends abroad 25 million liters of the spirit a year. Back in 1991, the state privatized Sojuzplodoimport, the monopolist Soviet vodka exporter. Then, in 1997, SPI was independently launched as a competing vodka exporter. The new firm had nothing in common with the old Soviet company, but wanted its new name to sound familiar to foreign markets. So SPI executives dropped the third "o" from Sojuzplodoimport's name and bought that firm's rights to Stolichnaya and 42 other vodka trademarks for $300,000. Now, state officials claim that SPI paid too little for rights that have a real value of $400 million. "They are worth that kind of money now that we've developed bleak Soviet trademarks into real market brands," contends SPI spokesman Sergei Boguslavski. "We assumed $10 million in debt and invested another $50 million to accomplish that." In five years, SPI has grown into a major business, selling Russian vodka to some 150 countries and bringing an annual $100 million in revenue to the Russian treasury. But in May 2000, masked police stormed The Russian state reverts to the bad old days in a battle to control the country's vodka distributors the SPI headquarters in downtown Moscow and forced staff members to lie on the floor while they ransacked offices, confiscating documents and computers. "These storm troopers openly said they were assigned to destabilize our business rather than find any proof of our guilt," says Alexei Oliynik, CEO of SPI. In October 2000, Russian Prosecutor General Vladimir Ustinov wrote to Premier Mikhail Kasyanov, requesting that, "in accordance with the instructions of the President of the Russian Federation," SPI brands be turned over to the state. "In this case, the state may restore its rights independently without a court decision," read the letter. Accordingly, the cabinet issued a decree "to restore and protect the exclusive rights of the Russian Federation" to vodka brands, and punish "those guilty of harming the interests of the Russian Federation." A year later, the Russian court of arbitrage ruled that Sojuzplodoimport was wrongly privatized in 1991. So the state nationalized 17 vodka brands, including Stolichnaya. spi has doggedly pursued the case in the courts since then, obtaining several favorable decisions. But, says Oliynik, "the Prosecutor General's Office overturns them all." In February, Russian customs officers impounded $10 million worth of SPI vodka earmarked for export to the U.S. SPI responded by exporting from its distillery in Latvia. Now, government officials are asking Western distributors to boycott spi, claiming that the disputed vodka brands now belong to the state. Meanwhile, the General Prosecutor's Prosecutor's Office is pressing criminal charges against SPI top executives. "As a citizen, I'd like Russia to be recognized as having a market economy," Oliynik says. "As a businessman, I don't yet see that we have one. The state interferes too heavily." During President Bush's visit to Russia in May, Eugene Lawson, president of the U.S.-Russia Business Council, protested to both Bush and Putin about what he said was a violation of ownership rights in the SPI case. Neither leader reacted publicly. Around the same time, 18 Republican Congressmen wrote to Robert Zoellick, the U.S. Trade Representative, decrying Russia's attempts to renationalize the vodka industry and invoking "significant doubts on Russia's ability to become a reliable member of the international economic community." The Congressional protest referred to other Russian governmental attempts to interfere in the market. One example of such meddling is the case of Sawyer Research Products of Cleveland, Ohio. After Sawyer in 1994 invested $8.2 million in a quartz glass plant in the Vladimirski region in central Russia, regional authorities helped its Russian partners grab the assets by having a local court overturn the lease in February 2001. There is evidence of at least five similar takeovers of American businesses in Russia, in some cases with threats and use of violence. Though Western governments may grant Russia its coveted status as a market economy, the Stoli experience raises doubts about whether private Western businesses will want to invest there. *******