April 26, 2001 

This Date's Issues:   5223 • 5224 • 5225

Johnson's Russia List
#5223
26 April 2001
davidjohnson@erols.com

[Note from David Johnson:
1. Reuters: Bush must back Putin, says U.S. business in Russia.
2. Moscow Times: Alla Startseva, AmCham Pushes Bush On New Russia Policy.
3. strana.ru: Poll shows increase in Communist electorate.
4. AP: Poll shows Putin's popularity slips a bit, remains sky high.
5. Itar-Tass: Over 13,000 kilometres of Russian border still in question.
6. strana.ru: What do they want to reform? (railways)
7. Ben Slay: RE: Inflation and the ruble/Yorke-5215.
8. BBC Monitoring: Russian TV presenter becomes NTV news editor-in-chief. (Mitkova)
9. RIA: Russia: Internet to reach about 15 per cent of population by 2006.
10. Financial Times (UK): Robert Cottrell, Russia to restructure army.
11. RFE/RL: Sophie Lambroschini, Judiciary Reform Meets With Resistance -- Part 1.
12. RFE/RL: Sophie Lambroschini, Judges, Plaintiffs, Defendants Face Arbitration Court Problems -- Part 2.
13. The Times (UK): Giles Whittell, Ukraine's leaders fight to keep democracy alive.
14. Rossiyskaya Gazeta: Andrey Grozin, Americans Have Their Own Penchant for Ukrainian Dumplings. (US Involvement Seen Behind Political Crisis in Ukraine, 'Cassette Scandal')
15. Victor Kalashnikov: Russia's media/re 5219-Menshikov/Kalashnikov.]

*******

#1
Bush must back Putin, says U.S. business in Russia
By Daniel Mclaughlin

MOSCOW, April 25 (Reuters) - American businessmen urged U.S. President George
W. Bush on Wednesday to support Moscow's economic reform efforts and not to
follow a foreign policy that mixes business with security.

A tit-for-tat expulsion of diplomats and a row over U.S. missile defence
shield plans have sullied relations between Washington and Moscow since Bush
took power in January, and he has been in no hurry to meet Russian President
Vladimir Putin.

But the American Chamber of Commerce in Russia said Bush must keep foreign
policy and commerce distinct and should publicly back Putin's plans to
liberalise the economy, reform an arcane tax code and sweep clean a murky
banking sector.

"The main thrust is to urge the new administration to support Russia's effort
to restructure the economy," Chamber President Andrew Somers told reporters,
referring to a set of policy recommendations the chamber has submitted to
Bush.

The report advised Bush to avoid mixing business and security issues, to
enter into high-level dialogue on trade with Moscow, to let Russia follow its
own, promising reform path and to support its drive to join the World Trade
Organisation.

The recommendations call for "cabinet-level" U.S. backing for commercial
investors and for emphasis on business rather than security as the basis for
healthy bilateral relations.

"Commercial relations should properly be viewed as the ties that bind our two
countries over the long term, providing stability in the relationship as we
work through consistent differences in the foreign policy arena," the report
said.

As well as the diplomatic expulsions for alleged spying and the spat over
Bush's missile defence plans, Bush has put Russia's nose out of joint by
criticising Moscow's rights record in Chechnya and business links with "rogue
state" Iran.

U.S. CHAMBER OPTIMISTIC ON BUSH STANCE

But Somers said that after meeting with senior officials in Washington this
month he was optimistic Bush's team would not damage commercial ties with
Russia.

"The response was quite friendly. They said Russia is basically not the enemy
and that a strong Russian economy was in the interests of the U.S and a weak
one was not," he said.

He added that the White House's declaration of a "less engaged" line on
Russia would not mean abandoning Moscow.

"It means Russia has to solve its own problems, not that the U.S is ready to
withdraw completely," Somers said, speaking on behalf of a chamber which
represents some 450 firms in Russia.

Russia's lower house of parliament ratified on Wednesday an international
convention on fighting money laundering, a move which Somers said could only
help Russia's business climate.

James Balaschak, a partner at accountants Deloitte and Touche in Moscow, said
Putin's drive for transparency was also vital to attracting investment and
fuel growth, but Russia would take several years to reach international
accounting standards.

"Russia is moving in the right direction, and market mechanisms are in place
to make transparency a condition for receiving capital... lenders just won't
lend without it."

*******

#2
Moscow Times
April 26, 2001
AmCham Pushes Bush On New Russia Policy
By Alla Startseva
Staff Writer

The president of the American Chamber of Commerce in Russia is fiercely
lobbying the Bush administration as it hammers out its policy for dealing
with the Kremlin.

Andrew Somers told reporters Wednesday that he met senior U.S. officials in
Washington earlier this month to brief them on policy recommendations
formulated jointly by AmCham members and the U.S.-Russia Business Council.

"I met with senior people from the Cabinet: energy, trade, the Security
Council and so on," Somers said, adding that he would be returning to the
U.S. capital in two weeks for more meetings.

The two organization's policy recommendations, published in a 32-page
booklet titled "Commercial Engagement With Russia," include veiled
criticism of the previous administration's "laissez-faire approach to
Russia's transformation" and "over-reliance on economic sanctions" as a
foreign policy tool.

"This report is aimed to urge the Bush administration to adopt a policy of
serious high-level engagement with the Russian government," Somers said.

"While Europe is increasingly seen to be taking the lead on the West's
integrating Russia agenda, both security and commercial concerns require
that we not sit on the sidelines," the report said.

American firms have had to cede market share to their European competitors
in part because of less vigorous government trade-finance programs, it said.

The two business lobbies also called high-level support from the Bush
administration crucial to "the success of the dialogue initiated by
America's private sector with the Russian government entities charged with
structural transformation."

They also called on President George W. Bush to help facilitate Russia's
entry into the World Trade Organization and praised the economic program
adopted last year by the Russian government, which displayed a sense of
"hardheaded realism."

Problems abound, however, in nearly every sector of the economy, with
progress being made in some areas faster than others.

Intellectual property rights violations, for example, "remain epidemic;"
the Russian accounting system is "particularly unsuited" for the market
economy; the banking sector remains fragile, with little public confidence
either in banks or the ruble; and currency control laws have damaged the
Russian business community, the groups wrote.

Despite all this, Somers is bullish on Russia, saying the difference
between the new administration and Bill Clinton's is "There is no romance."

"Bush is the first president with an MBA," he said.

*******

#3
strana.ru
April 25, 2001
Poll shows increase in Communist electorate

If parliamentary elections were held next Sunday, Gennady Zyuganov's
Communist party would win 39% of the vote, the biggest share of the
electorate.

Interfax learned this from the All-Russia Public Opinion Center Wednesday.
The poll had brought together only people who were going to vote in future
elections and who had made their choice of political parties and blocs.

A similar survey in February revealed that 35% of respondents were ready to
vote for the Communists.

According to the latest poll, the Fatherland and Unity association would get
22% of the vote.

Grigory Yavlisnky's Yabloko can count on the support of 10% of the
population.

Union of Right Forces led by Boris Nemtsov and Irina Khakamada and Vladimir
Zhirinovsky's Liberal Democrats would gain seven percent each.

Alevtina Fedulova's Women of Russia have the support of six percent.

Two percent would be ready to vote for Nikolai Kharitonov's Agrarians.

Several other parties can count on one percent of the vote or less, and five
percent of the Russians would vote against all candidates.

*******

#4
Poll shows Putin's popularity slips a bit, remains sky high
By DAVID McHUGH
April 25, 2001

MOSCOW (AP) -- President Vladimir Putin's approval rating slipped slightly in
the past month, but remains sky high despite concerns about press freedom and
continuing casualties in the war in Chechnya, according to a poll released
Wednesday.

Seventy percent of those questioned in the poll, taken April 20-23, approved
of the job Putin was doing, while 24 percent disapproved. That was down from
75 percent approval the month before, but Yuri Levada, head of the respected
VTsIOM polling agency, said that the drop was not especially significant. The
poll had an error margin of plus or minus 3.8 percent.

Levada said the March figures were slightly pushed up by the March 26
anniversary of Putin's election, which got several days of prominent press
coverage including newspaper articles reviewing Putin's record. February's
approval rating was 69 percent.

Putin's trust rating experienced a similar small drop, with respondents who
mentioned him as one of their trusted figures falling from 47 percent to 39
percent during the same period. Communist Party head Gennady Zyuganov came in
second, with 20 percent mentioning him.

Zyuganov on Wednesday accused Putin of plunging the nation deeper into
poverty in the interests of the West, his harshest attack on Putin since his
election more than a year ago.

Since losing their dominant position in the lower house in December 1999
parliamentary elections, the Communists have supported most government bills
and avoided criticizing Putin.

Breaking the armistice with the Kremlin, Zyuganov harshly criticized Putin's
recent state-of-the-nation address at a meeting with a delegation of Chinese
Communists on Wednesday.

"If it's implemented, the situation of 90 percent of the population will
worsen further," Zyuganov told the Chinese, according to a statement from his
office.

Zyuganov accused Putin of betraying his earlier pledges of a stronger state
and a broader social safety net and addressing his state-of-the-nation speech
"more to Americans and pro-Western liberals than to the Russian people."

There was no immediate comment from the Kremlin.

Putin scored highly in the poll despite concern expressed by foreign
governments and press advocates over the takeover of NTV, the country's only
nationwide nongovernment TV channel, by a state-connected gas company. Many
of the station's journalists said it was a Kremlin-backed move to muzzle
independent reporting.

But many Russians view the takeover as a purely political dispute between the
station's former owner, exiled tycoon Vladimir Gusinsky, and his enemies in
the government.

Russian troops take daily casualties in rebel Chechnya, but the war remains
popular as many Russians appear to agree with the government's definition of
Chechen rebels as terrorists and bandits.

*******

#5
Over 13,000 kilometres of Russian border still in question
ITAR-TASS

Moscow, 25 April: More than 13,000 km of Russia's border are still not
regulated by agreements or other legal documents, a high-ranking official
said.

Fifteen governmental commissions on border delimitation and demarcation are
working on his now, Lt-Gen Aleksandr Manilov, head of the international
department of the Federal Border Guard Service, told journalists on Wednesday
[25 April].

He said the total length of the Russian border is 61,000 km.

Questionable stretches exist mainly on the border with Kazakhstan, Ukraine,
Azerbaijan and Georgia. The demarcation of the border with Lithuania has been
finished, and an appropriate agreement has been signed, he said.

Similar agreements are being prepared with Latvia and Estonia.

"Russia has fully finished the delimitation and demarcation of the border
with China. This work took 20 years," Manilov said.

********

#6
strana.ru
April 25, 2001
What do they want to reform?

After the session of the State Council, the Collegium of the Russian Railways
Ministry is to meet on April 27 to examine a plan of action for reorganizing
the railway system.

Earlier, on April 12, the government already gave its approval to the program
for reforming the railway system. Now the program has to be tabled before May
1 for the government's final endorsement.

The program consists of three main stages of reformation and a preparatory
stage. During the preparatory stage in the course of 2001, specialists are to
draft a series of bills to ensure the reform, after which the bills are to be
endorsed by the State Duma.

What is the Russian railway system? It occupies a leading place in the world
transportation system and predominates in the country's overall
transportation network. By their overall length, Russia's railroads rank
second after the United States; by volume of delivered freight - they are in
third place after the USA and China; by the number of passengers carried -
third place after China and Japan.

The length of track in use is 86,200 kilometers. Out of this number, over
36,300 kilometers are double-track and multi-track; 62,200 kilometers have
automatic blocking systems and centralized traffic control. Over 40,000
kilometers are electrified. More than 1,300,000 people work in the railway
system.

In the country's overall transportation system, railroads account for 80.3%
of the freight deliveries and 44% of the passengers carried. Commuter trains
and regional railroads play an especially important role.

Stabilization of the social-economic situation in the country, containment
and even lowering of railway tariffs have had positive impact on spurring
industrial production. This, in turn, has triggered a growth in freight
turnover. Reasonable railway fares have stimulated the number of passengers
carried.

Compared to 1998, the freight turnover in 1999 grew 17%, and in 2000 another
14%. Passenger turnover in 2000 increased 18.4% as compared to the preceding
year.

The lowering of production costs and improved freight delivery efficiency
have resulted in better performance indices of the entire industry. Compared
to 1998, the average payload of a freight train increased 2.5% in 1999, and
another 2.2% in 2000; the daily average production capacities of locomotives
increased 2.9% and 2.6% respectively, and for freight cars - 5.7% and 3%
respectively.

*******

#7
Date: Wed, 25 Apr 2001
From: Ben Slay <bslay@planecon.com>
Subject: RE: Inflation and the ruble/Yorke-5215

Dear Professor Yorke,

Let me offer some thoughts on your recent JRL submission on inflation and the
exchange rate in Russia.

There are two different problems here: definitions and policy.

DEFINITIONS: It's important to distinguish between real and nominal
depreciation and appreciation.

In nominal terms (i.e., what you see in the newspaper), the ruble has been
depreciating against the dollar (i.e., more rubles per dollar) pretty much
non-stop ever since August 1998. (There have been some months of nominal
appreciation since then, but these have been exceptions.)

In real terms -- adjusting the nominal exchange rate movements to account for
changes in inflation -- the ruble has been appreciating ever since January
1999. This is because the monthly depreciations in the exchange rate have
been smaller than the monthly inflation rates.

It is movements in the real exchange rate that affect the competitiveness of
Russian exports (everything else equal, real appreciation makes Russian
exports
more expensive) and boost Russian imports (everything else equal, real
appreciation makes Russian imports cheaper). To be more precise, one should
look at real effective exchange rates, which show trends in inflation in
Russia's main trading partners, as well as inflation trends in Russia. But
since most of Russia's trade is with non-CIS countries with very low inflation
rates, movements in the real and real effective exchange rates are pretty
similar.

The real (effective) appreciation has resulted from Russia's current account
surpluses. Every quarter Russia exports some $10-12 billion more than it
imports. A lot of this surplus turns around and leaves as capital flight/debt
repayment, etc., but much stays in the country as well. This is apparent in
the fact that ther CBR's foreign exchange reserves keep growing: they are
currently at $30-31 billion, compared to $12 billion in late 1998/early
1999.

If the ruble were allowed to float freely, this huge increase in the
supply of
foreign exchange would sharply reduce the price of foreign exchange. This is
another way of saying that the number of rubles required to buy a dollar would
fall sharply -- i.e., the ruble would appreciate sharply in real terms. But
the government and CBR think (some times, at least) that they don't want this
sharp nominal appreciation to happen. So, the CBR buys up a lot of these
dollar inflows, with new rubles. When it does this, the ruble-denominated
money supply grows rapidly, causing inflation. So even if the exchange rate
doesn't appreciate in nominal terms, it does in real terms.

Now we come to the policy issues. The basic problem is that the government
and CBR are torn between conflicting policy objectives. These include: (1)
maintaining a stable exchange rate (preventing short-term variation); and (2)
supporting domestic industry by keeping exports competitive and imports
expensive (by preventing, as much as possible, the ruble's real
appreciation).
The CBR tries to steer a middle course between these two objectives by causing
the ruble to depreciate in a gradual, controller manner. In doing this it
pays
particularly close attention to psychologically important exchange rate
yardsticks (like $1 = 29.00 rubles, $1 = 30 rubles, etc.) When the nominal
exchange rate fluctuates a lot, especially in a downward direction, the CBR
worries about shooting past these yardsticks and creating more short-term
variation. From this perspective, the CBR either bought too few rubles or
sold
too many dollars during the recent nominal depreciation. But the ruble
continues to appreciate in real terms, and this is what matters for Russia's
economic growth.

I don't think inflation is the main threat to Russia's economic growth now.
The ruble's real appreciation is the more serious threat, and this will happen
regardless of the whether inflation is high (with a relatively constant
nominal
exchange rate) or low (with an appreciating nominal exchange rate). In many
respects, a lower oil price that reduces the current account surplus and
reduces the pressure for real effective appreciation is exactly what Russia
needs right not.

Hope this helps.
Regards,
Ben
Dr. Ben Slay
Senior Economist, PlanEcon Inc.
1111 Fourteenth Street, NW, Suite 801
Washington, DC 20005-5603
Telephone (202) 898-0471
Facsimile (202) 898-0445
www.planecon.com

*******

#8
BBC Monitoring
Russian TV presenter becomes NTV news editor-in-chief
Text of report by Radio Russia on 25 April

Tatyana Mitkova has been elected editor-in-chief of the NTV television
company's news service at a meeting of the journalistic workforce. At the
press service of NTV it was reported that the director general of NTV, Boris
Jordan, will recommend that the board of directors approve Mitkova's
appointment to that post.

It is expected that the sitting of the board of directors will take place on
26 April.

Vladimir Kulistikov, who earlier occupied the post of editor-in-chief of the
news service, has been appointed first deputy director general of the NTV
television company.

*******

#9
Russia: Internet to reach about 15 per cent of population by 2006
RIA

Moscow, 24 April: By the year 2006 in Russia, approximately 15 per cent of
the population will be Internet users. This was the prognosis on Thursday
from leading representative of the department of information Ivan Kurnosov,
who was speaking at the international conference "Russia on the path towards
a new economy: Business and the Internet".

As reported by the RIA correspondent, in the opinion of Kurnosov, "this will
create a critical mass of users, allowing for the implementation of
e-commerce projects with the appropriate economic effects."

Kurnosov thinks that the Ministry of Economic Development, together with the
Ministry of Communications, is working on a federal targeted programme aimed
at developing e-commerce in Russia in the period up to 2006. The programme
will be submitted to the government in the near future, Kurnosov said...

*******

#10
Financial Times (UK)
26 April 2001
Russia to restructure army
By Robert Cottrell in Moscow

Russia's new defence minister, Sergei Ivanov, has told the army to prepare
for sweeping reforms that will include cuts in troop numbers, a restructuring
of missile forces, a rationalisation of weaponry, and tighter budgetary
controls.

Writing in Wednesday's Krasnaya Zvezda, the army newspaper, Mr Ivanov gave
the most comprehensive account yet of the military reform plans already
announced in broad outline by President Vladimir Putin.

In his previous job as a top Kremlin aide, Mr Ivanov oversaw drafting of the
blueprint for reforming Russia's sprawling, ill-trained and underfunded
military. His appointment to the defence ministry last month is seen as a
sign of Mr Putin's determination to push those plans through and to end
bickering among generals about where the cuts should fall.

Mr Ivanov confirmed on Wednedsday his intention to cut troop numbers by
365,000 over the coming three years. He did not specify the army's current
strength, but this is usually estimated at about 1.2m. He claimed the cuts
could be made in ways that would leave undiminished the army's command and
control, combat readiness and combat capability.

He also promised higher pay for the army's professional soldiers - those
serving under contract, as opposed to conscripts - but only in the long term.

The cash income of these servicemen would rise by 60-100 per cent over the
coming ten years, he said.

He confirmed plans to restructure the army's strategic missile forces, which
include Russia's ground-based nuclear missiles. The so-called space forces,
responsible for satellites and missile defence, are to be taken out of the
strategic missile forces and constituted as a separate unit. This will
reverse a controversial merging of those same forces in 1997.

Mr Ivanov announced plans for what he called a single technological policy
for weaponry. The aim will be to unify and standardise the number of types
and kinds and categories of weapons and military technology, he said.
Analysts say the proliferation of weapons factories in Soviet times has left
the Russian army with a motley arsenal including, for example, 26 different
types of anti-aircraft weapons and 20 types of communications control
systems.

There will also be a rationalisation of logistics, said Mr Ivanov. Services
such as warehousing, transport and healthcare, for both the army and the
paramilitary forces answering to the interior ministry, would be integrated
under a single command in each military district.

A smaller and more efficient army would be able to spend more on weaponry,
said Mr Ivanov. At present 70 per cent of the military budget went on
soldiers' pay and other current spending, he said, leaving only 30 per cent
for weapons. The ratio would shift to 60-40 in 2006 and 50-50 by 2011, he
said.

*******

#11
Russia: Judiciary Reform Meets With Resistance -- Part 1
By Sophie Lambroschini

One of Vladimir Putin's key promises during last year's presidential campaign
was a thorough reform of the Russian's judicial system. Now, five months
after a special presidential commission was instructed to work out a reform
program, several bills are expected to be presented to the Duma as soon as
early next month. But attempts at partial reform over the past months have
revealed underlying resistance. In part one of a two-part series on Russia's
judiciary, RFE/RL Moscow correspondent Sophie Lambroschini looks at the
reform plans and the problems they face.

Moscow, 24 April 2001 (RFE/RL) -- The failings and alleged widespread
corruption of the Russian court system are such that they've become material
for everyday jokes. Here's one of the latest, inspired by warring NTV channel
shareholders Vladimir Gusinsky and Alfred Kokh, who have instituted numerous
court proceedings against one another.

Gusinsky and Kokh went to court, the joke goes. The first gave the judge $1
million, the second gave $1.5 million. The judge said, "let's be impartial
and fair," and gave Kokh back $500,000.

But Russia's judiciary system is in fact no joke. A thorough reform of the
country's courts was a key promise in Vladimir Putin's electoral campaign
last year. On his electoral website, Putin said that prosecutors should stop
"privatizing their powers" -- a hint at rampant corruption -- and end the use
of law-enforcement forces to serve political or business needs.

Raids by prosecutors' personnel or by other armed and masked men using a
prosecutor's warrant have become a common method of intimidation used to take
over a company. Courts are suspected of being used to legalize such takeovers.

A first judicial reform was drafted in 1991 by a group of liberal independent
experts and its principles were adopted soon after by the Supreme Soviet.
That reform was backed not only by human rights organizations, but also by
politicians, judges, and businessmen. They all recognized the need for an
overhaul of a system largely inherited from the Soviet Union and overrun by
corruption. But the reform was never actually implemented.

In his address to parliament three weeks ago (3 April), Russian President
Vladimir Putin compared the court system to Russia's shadow economy. He said
that Russia's "shadow justice" could compromise both business confidence and
the state's reputation. "A key question for the authorities is the trust of
its citizens in them," Putin said, noting that the degree of this trust is
directly determined by how well the state protects its citizens from what he
described as "arbitrariness, racketeers, bandits, and bribe-takers."

Putin called Russia's judiciary a "political problem" because, he said, it
violates "the rights and interests of our citizens." Reform, he added, was
"badly needed."

"The country's judicial system is lagging behind real life and is not very
helpful in carrying out economic transformations. Not only for entrepreneurs,
but also for many people who are seeking to restore their rights in law, the
courts have not been quick, fair, and impartial."

Four months ago, a special commission headed by deputy head of the
presidential administration Dmitry Kozak was put in charge of drafting a
reform of the courts. The commission is expected to present the brunt of its
work to the State Duma by the beginning of next month (May).

On the website strana.ru, which generally supports the Kremlin, Kozak was
quoted a few days ago as telling judges at a special meeting held last week
near Moscow that part of the planned reform concerns them directly. Aimed at
fighting corruption and overwork, the reform would both raise judges'
salaries and increase their numbers. From an equivalent of about $200 a month
today, judges' salaries would reach $1,000 in 2006, the programmed end of the
reform.

In addition, Kozak said, measures would be taken to lessen the grip of local
authorities over judges -- and thereby their ability to pressure the court in
favor of one or another party. Under the draft reform, judges will be
appointed without the approval of regional parliaments and will not receive
their apartments from local authorities.

The projected judicial reform will also seek to rein in the present
freewheeling status of judges. It would introduce an age limit for judges and
widen the existing special judges' council deciding on appointments and
suspensions to include legal experts who are not part of the judicial system.
The hope is to increase judges accountability while weakening their overall
influence.

In addition to the planned major judicial reform, several other projected
bills or drafts already presented to the Duma are expected to correct what
are seen as remnants of the Soviet repressive system.

Several laws are expected to overhaul and in effect replace a criminal
procedural code adopted in the 1960s.

A bill setting a 12-month limit to detention during pretrial investigation
was adopted by the Duma several months ago, but was rejected by the upper
house (Federation Council) earlier this year. Another bill, which conforms to
Russia's 1993 constitution, would introduce court sanctions for detentions of
more than 48 hours as well as for unauthorized searches. According to the
existing criminal code, the Prosecutor-General's Office can order such
detention and searches, which only afterwards can be challenged in court.

The government also proposes to generalize trials by jury, which now are only
used in a handful of Russia's 89 regions. In most cases today, a panel of one
judge and two assistant judges decides on alleged criminal acts.

Using such procedures, more than 92 percent of those accused are found
guilty, and the courts have been criticized for clinging to the Soviet-era
logic that the state is never wrong. Human rights experts, judges, and
lawyers have proposed jury trials as an antidote to the high conviction
rates. According to Moscow judge Sergey Pashin, jury trials acquit 20 percent
of those accused.

However, the first overtures at judicial reform have already backfired,
reflecting deep-ingrained resistance to some of the proposed changes.

Two projected bills reducing the powers of the Prosecutor-General's Office
have failed to be adopted, allegedly because of pressure from law-enforcement
organs.

Early this year [January], the Duma passed a bill that stripped prosecutors
of the right to deliver detention orders, harmonizing legislation with the
1993 constitution that clearly states a person can be jailed only on a court
order. But just days after the bill was adopted, Putin withdrew it -- with
the official reason given that it was too expensive to implement.

According to liberal deputies who had pushed for the reform, high
law-enforcement officials such as Prosecutor-General Vladimir Ustinov and
Federal Security Service chief Nikolai Patrushev pressured the Kremlin to
withdraw the bill.

The Federation Council rejected another bill limiting pretrial detention to a
year instead of 18 months after an official protest by the
Prosecutor-General's Office.

Law-enforcement organs, especially the Prosecutor-General's Office, warn that
such a reform would let hundreds of criminals out in the streets and make it
more difficult to catch terrorists.

At a news conference last week [Friday], Deputy Prosecutor-General Badir
Kekhlerov urged that prosecutors' rights be left untouched:

"When the courts take up the defense of citizens, then of course the
prosecutor's office will give up some of its powers. But I would like to say
that when we speak about obeying some kind of standards, obeying the norms
set by the constitution -- [when we] refer to the West, we constantly forget
that our people don't get paid in time, that our people's mentality is
different, that our perception of justice is different, that the respect of
the law is not the same. Why shouldn't we demand that these standards should
first be attained and only then introduce the rest [that is, the judicial
reform]?"

Kekhlerov, who is a member of the presidential reform commission, suggested
that the Prosecutor-General's Office should wait until Russia improves its
living standards and grows more respectful of the law before it renounces
some of its many powers. He also said that the Prosecutor-General's Office is
society's last resort to protest against corrupted judges.

Another obstacle to extensive judicial reform will be purely financial.
Simply raising salaries a bit and giving old courtrooms a new coat of paint
would cost well over $300 million. But that sum will not cover the cost of
training more specialized judges and other needed changes. Overall, the
judicial reform is expected to cost about $1.5 billion (some 42 billion
rubles).

Lawyer Larissa Move tells RFE/RL that she has a hard time believing in the
upcoming judicial reform because it so blatantly contrasts with existing
law-enforcement practices.

"I have the feeling that all that is happening now is very reminiscent of
Soviet-style justice -- and I mean far from its better sides. At least,
that's how it work in practice, that's what we are confronted with every day."

Some judges also complain about the reform. At a meeting last week, judges
attacked the authors of the draft reform, accusing them of trying to dilute
judicial independence by widening the existing college of judges responsible
for appointing and, especially, for suspending judges.

If reform commission head Kozak has his way, the colleges hearing charges
against sitting judges would be reduced to just three judges -- but expanded
to include legal experts recruited outside the court system.

Reformists argue that this measure would reduce the protection of incompetent
or corrupt judges. But critics reply that judges' independence would be
called into question by more outside pressure put on judges who already feel
enough political heat.

(Part 2 will examine Russia's arbitration courts, which are called upon to
resolve million-dollar disputes but without the legal or material instruments
to do so.)

********

#12
Russia: Judges, Plaintiffs, Defendants Face Arbitration Court Problems --
Part 2
By Sophie Lambroschini

During last year's presidential campaign, Vladimir Putin pledged to carry out
a thorough reform of Russia's judicial system. Now, five months after a
special presidential commission was instructed to work out a reform program,
several bills are expected to be presented to the Duma as soon as early next
month. In part one of a two-part series on Russia's judiciary RFE/RL Moscow
correspondent Sophie Lambroschini looked at reform plans and the resistance
they face. In this second part, she focuses on the country's arbitration
courts, examining the special problems faced by judges, plaintiffs, and
defendants, and the solutions reforms could offer.

Moscow, 25 April 2001 (RFE/RL) -- Arbitration courts are called upon to hear
some of Russia most important cases -- at least in terms of money.

Set up eight years ago to settle conflicts between companies and the state,
or between one company and another, the arbitration courts are regularly
pulled into privatization battles or takeovers worth millions of dollars.
They are now key players in the process of property distribution in Russia.
But at the same time, they display all the failings of Russia's ordinary
courts, and that scares away potential investors.

Analysts say that arbitration judges, who formerly specialized in Soviet
economic conflicts, are considered more efficient than the broad-ranging
general judges who hear criminal, administrative, and civil cases. But, the
analysts add, the arbitration judges suffer from the same failings that
undermine trust in Russia's overall judiciary.

Oleg Fyodorov serves as an adviser to two non-governmental organizations that
seek to protect the rights of Russian stock investors -- the National
Association of Securities Market Participants and the Investors' Rights
Association. He has followed several arbitration court cases that involved
Russian or foreign investors in conflict either with the state or major
Russian companies. He says that, in his experience, the courts are biased in
favor of wealthier, more influential parties.

"The most important problem is probably that the court is called
'arbitration' but is not an arbitrator at all. [If] two parties of very
different size are facing each other in court -- for instance, one very
influential, very rich, and the other having only the law behind him -- then
almost no case is known of the court taking the side of the lesser-known
side."

According to Fyodorov, the lack of trust in Russian courts is one major
reason why many Russian companies try to file their arbitration suits abroad.

"Even our own entrepreneurs don't go to a Russian court when they need an
arbitrator. If, let's say, a big oil company wants to open proceedings, say,
against an aluminum company, then they'll try to hold the trial somewhere in
Great Britain or in the United States. So when they really want the court to
have some influence, they don't even trust our highest jurisdictions, neither
the Supreme Court nor the supreme arbitration court. And they all try to get
under foreign jurisdiction when need to have [stock] shares frozen -- because
here [in Russia] of course, the rules of the game are completely different."

Fyodorov explains that while bribe-taking does exist, pressure on judges is
usually exercised in a more indirect and subtle way. He says that often it's
not money but administrative pressure that will sway the judge.

For instance, says Fyodorov, one of Russian investors' biggest grievances is
that it's almost impossible to win a case against the Moscow city government.
He says that's not because the city government is paying each and every judge
a bribe. Rather, according to Fyodorov, the real reason is that the city
government regularly pays judges significant bonuses to supplement their very
low salaries.

This financial dependence exists in most of Russia's regions, with judges not
only beholden to local government for their apartments but sometimes also for
basic utilities like electricity.

Russia's projected judicial reform, drafted by presidential aide Dmitry
Kozak, seeks to address this problem by raising judicial salaries in an
effort to detach judges from their dependence on local authorities.

Also, according to supreme arbitration court head Veniamin Yakovlev, the
number of arbitration judges should be increased to address their courts'
increasing workload. In an interview earlier this year in the daily
"Vedomosti," Yakovlev said the arbitration courts' workload had increased in
recent years ("since the late 1990s") by 15 percent.

But some important failings of the arbitration courts are not expected to be
eliminated any time soon.

One major problem is that arbitration courts have become the instruments of
redistributing property under Russia's imperfect bankruptcy laws. Yakovlev
says that bankruptcy suits can be filed automatically if there's a proven
debt of more than $1,400 and that courts have to start proceedings almost
immediately. This, he says, leads to many cases of illegal property
redistribution. He cites one instance where a court suspended bankruptcy
proceedings just in time against the Klinsky brewery -- an enterprise that by
all accounts was doing well.

But, Yakovlev says, for arbitration courts to minimize such misuse of the
law, judges need to increase their qualifications in an ever-changing
economic and legal environment. He urges that arbitration judges, and courts,
seek to specialize in specific areas.

Non-governmental adviser Fyodorov is also concerned with judges' lack of
understanding of complicated shareholders' rights legislation. He says their
ignorance leads them, in his phrase, to "do things the old-fashioned way" --
that is, hear each side for half an hour, recess for an hour, and emerge with
a decision.

Xavier Barre is the head of a European Union TACIS aid program that is
providing instruction over two years to some 700 arbitration court judges. He
calls Russia's training of "two weeks every two years" insufficient.

But Barre stresses that judicial reform will not make any significant
progress in Russia until it tackles a very touchy subject -- the state's
accountability for its own mistakes.

"There's a lack of legal fundamentals. There's no [notion] of administrative
fault, of state accountability, the way we understand it in French or in
other Western law. And when there is no fault, it is impossible or at least
difficult to convict."

According to the supreme arbitration court, administrative disputes account
for 46 percent of all cases. Many involve taxation and customs duties. Court
head Yakovlev says that plaintiffs who claim they have overpaid taxes win in
as many as half of the cases.

The EU's Barre says that claims against tax authorities are indeed an
encouraging step forward -- but an exception to the rule. He points out that
that there is no law on the state's responsibility in economic relations. As
a result, he says, companies are helpless against routine administrative
harassment that can paralyze them.

"In a [Russian] company's life, what is often subject to abuse are
inspections. Inspections [come] from different administrations -- firemen,
security officials, hygiene, municipal, ecological, sanitary. Where we [at
TACIS] work in Krasnodar, there are cases of companies that get such 'visits'
more than 400 times a year, twice a day from civil servants."

Kozak's planned judiciary reform is attempting at least to lessen the grip of
the Prosecutor-General's Office in purely business conflicts. Kozak says the
projected arbitration procedure code adopted in a first reading by the Duma
earlier this month would strip the Prosecutor-General of his right to protest
an arbitration court decision if the adversaries are private companies
settling a bilateral business conflict.

But the Prosecutor-General's Office opposes any reduction in its authority.
Badir Kekhlerov, deputy prosecutor-general, says his office is the last
barrier against court corruption

"Today we are being banned from protesting to the supreme arbitration court.
We're talking about few cases -- 100, 200 a year. But in those cases [when we
intervene] all the courts have sold out [to moneyed parties], and we come to
the conclusion that the state's interests are being violated and that it is
necessary to go all the way to the highest jurisdiction."

However far the projected judicial reform may go, Oleg Fyodorov points out
that the system will work efficiently only under a new generation of judges,
appointed and formed under a more democratic and more honest system. Of the
present judges, educated under Soviet rule, he says: "They have the old
system in their blood. and you can't overcome that with reforms or with
money."

*******

#13
The Times (UK)
APRIL 26 2001
Ukraine's leaders fight to keep democracy alive
FROM GILES WHITTELL IN KIEV

UKRAINE’S leaders held emergency talks yesterday aimed at averting a
parliamentary coup that could topple the country’s most successful
government in ten years.

Viktor Yushchenko, the Prime Minister, cut short a trip to Greece and flew
back to Kiev after hinting that he may offer Cabinet seats to Communists
and other rivals rather than capitulate to them and risk a political and
economic meltdown in the heart of Eastern Europe.

Nothing less than “the stability of the State and the democratic path that
Ukraine has chosen” were at stake, Mr Yushchenko said before flying home to
fight for his political life and for reforms that have put him at odds with
a business elite still clinging to the power and wealth it inherited from
the Soviet Union.

Large crowds of Yushchenko supporters were expected on the streets of the
capital today after Tuesday’s announcement of a vote of no confidence in
his Government. It was unclear last night if they would be hailing him as a
martyr or a leader, however, as negotiations continued in an attempt to
defuse a crisis that has exasperated Western governments.

There was speculation that Mr Yushchenko, whose austerity measures have
brought hopes of an end to Ukraine’s economic slump, could be forced from
office and replaced by an unknown as the price for leaving the rest of his
Cabinet intact.

That would give Ukraine its ninth Prime Minister in ten years and throw the
popular Mr Yushchenko, whom the Communists have tried to smear as a
“Western puppet” and whose American-born wife they have accused of spying
for the CIA, into the political wilderness. It would also leave him well
placed to rally Ukraine’s fractious opposition for elections next year.

Wary of such a challenge, President Kuchma gave a last-minute show of
support for Mr Yushchenko, joining the talks alongside him even though
until yesterday he had seemed ready to sacrifice his top official to shore
up his own crumbling power base.

Whether Mr Kuchma can keep Mr Yushchenko as an appointee rather than a
rival is open to doubt. The President has been marginalised by a macabre
murder scandal in which he is alleged to have ordered the killing of Georgi
Gongadze, a journalist, last year.

Ultimately the fate of the Government will depend on a broader power
struggle. Forceful factions are pulling it towards Russia and the “Slavic”
way of doing business - a fashionable euphemism for endemic corruption -
while Ukraine’s people, especially in the west of the country, yearn to be
accepted as a part of Europe.

Yesterday Mr Yushchenko insisted that Ukraine was committed to the European
path. “For every realistic, thoughtful person, Ukraine’s economic course
has no alternative,” he told Moscow’s Nezavisimaya Gazeta, beating the drum
for policies that brought the country a 7 per cent growth rate last year
after a decade of recession.

Mr Yushchenko has vowed not to let his Government be “privatised” by
businessmen opposed to his reforms, but if he wants to stay in office he
may be left no choice.

Compromises being discussed last night were thought to include a deal in
which he would offer ministerial posts to a handful of Communists and
centrists who could, in turn, shackle the Ukrainian economy to Russia’s.

At the heart of Mr Yushchenko’s dilemma is how Ukraine pays for its gas.
Short of currency but dependent on Russia for energy, he reached a deal
with Moscow in December that would keep Russian gas flowing to Ukraine in
return for Kiev’s waiving of transit fees on the huge volumes of gas that
Russia exports via Ukraine to Western Europe. That deal - a resumption of
Soviet-style bartering - met with approval from Ukraine’s industrial
tycoons and from the Kremlin, but not from the IMF. Yesterday sources close
to the IMF said that greater transparency in Ukraine’s gas payments was a
key criterion still to be met before the release of a delayed $190 million
(£132 million) loan.

Mr Yushchenko and anyone who succeeds him are likely to be as torn between
Ukraine’s two conflicting ways of doing business as they will be between
its eastern and western neighbours. “That’s the problem and I don’t see it
going away soon,” one Western diplomat said.

*******

#14
US Involvement Seen Behind Political Crisis in Ukraine, 'Cassette Scandal'
Rossiyskaya Gazeta
20 April 2001
[translation for personal use only]
Article by Andrey Grozin from the Institute of CIS Countries:
"Americans Have Their Own Penchant for Ukrainian Dumplings"

Many people have already noticed that the political
crisis in Ukraine has for some reason attracted most attention from U.S.
political scientists and state officials. Every once in a while, they
give Ukrainian authorities recommendations, which the legal terminology
defines, by the way, as interference in internal affairs of a sovereign
state.

Even the U.S. State Department issued a declaration on the "undemocratic
attitude of the authorities toward the opposition." The Americans
ostentatiously refused to provide financial assistance to the "stray
Ukraine." Financier George Soros even decided to explain in the
Financial Times what is what to the most slow-witted people in the
Ukrainians halls of power.

So, Mr. Soros advised the West to condemn actions by Ukrainian President
Kuchma even more strongly and Leonid Kuchma himself to delegate his
powers to Prime Minister Viktor Yushchenko. But Soros proposed Kuchma
"resigning temporarily" until all the circumstances of the "cassette
scandal," which has lasted since last fall, were established.

By the way, well-informed sources in Kiev speculate that the scandal in
some way involves the same U.S. financial circles that recommend Kuchma
to resign. For example, reports have appeared in the Ukrainian press
that George Soros funds the operation of the International Press
Institute in Vienna, which... examined the controversial audiocassettes
at the request of the Ukrainian opposition. By the way, the examination
cost $3 million but the opposition never specified who paid for it.
It is also unclear who helped security guard Major Mykola Melnychenko,
who allegedly recorded the Ukrainian president's conversations, flee
abroad without proper documents and, by the way, [to a country located]
in the zone of Schengen accords.

Some Kiev analysts believe that it is not at all a coincidence that
Melnychenko obtained a Czech visa and the Ukrainian section of Radio
Liberty, which is financed by the U.S. Government and whose leadership is
based in Prague, is able to stay in contact with the fugitive major and
broadcast his "exposing declarations" about the Ukrainian president.

But the real slap in the face to "Ukrainian independence" is the fact
that the United States granted political asylum to Melnychenko.
Official Kiev was forced to declare that "when making this decision, the
U.S. side could not help but know that the Ukrainian General Prosecutor's
Office has instigated a criminal case against Melnychenko on charges of
illegal eavesdropping and disclosure of a state secret -- the crimes that
are severely prosecuted in the United States."

Based on all this, the analysts conclude that some in the United States
cannot wait to railroad the incumbent Ukrainian president into
resignation and "appoint" in his place present Prime Minister Yushchenko,
with whom the West is openly sympathetic. In fact, it is the Western
circles, as many Ukrainian political scientists believe, that placed
Yushchenko in the position of prime minister. Leonid Kuchma was exposed
to corresponding pressure. Otherwise, the West threatened to refuse to
reschedule Ukraine's foreign debts, which could have even reduced the
country to bankruptcy.

Sure enough, once Viktor Yushchenko was appointed prime minister, the
"debt problem" was resolved in a matter of one month. Very high-level
officials from the U.S. administration extended their support to the
prime minister in rescheduling the debts, while the deferment itself was
credited by those eager for changes on the [Ukrainian] political Olympus
as one of Yushchenko's "heroic deeds." However, financial analysts view
the whole situation ironically because the huge foreign debts were
accumulated in just several years with the participation of Viktor
Yushchenko himself, who earlier headed the National Bank. In that
position, the analysts contend, Mr. Yushchenko sanctioned the OVGZ
[internal state loan bonds] pyramids, whereby the bonds were bought from
the state with foreign loans and then repaid (at 60-80 percent per
annum!) with money from the state treasury.

It is not clear yet what role in those speculative operations was played
by the international financial organizations, which closely cooperated
with the National Bank. But one thing is clear: The Western financial
circles have displayed unconcealed sympathy toward Viktor Yushchenko
specifically since those financial pyramids were launched, and today
those circles are even attempting to make him president. Notably, the
more active Ukrainian-Russian relations, the stronger pressure on Kuchma.
For example, the aforementioned article by Soros in the Financial Times
was published immediately after the recent meeting by the Ukrainian and
Russian presidents in Dnipropetrovsk. Therefore, many politicians
believe that the Western interference in the situation in Ukraine is not
accidental.

This is how well-known political scientist Valeriy Matviyenko commented
for the Ukrainian Den newspaper on several recent statements made by the
West on Leonid Kuchma's actions: "It is generally known that U.S.
politicians use human rights as a tool when the interests of big capital
are at issue in a particular region. We see this kind of situation in
Ukraine today. After all, nobody mentioned human rights before the
conversation between the Ukrainian and Russian presidents 'against the
missile backdrop.'"

The West is so much worried by the Ukrainian problem that Western
officials, politicians, and statesmen even gathered in early April in
Washington at a an extraordinarily large-scale forum entitled "The
EU-U.S.-Canada: Policy Toward Ukraine." Yevhen Marchuk, secretary of
the Ukrainian National Security and Defense Council, who attended the
forum, pointed out: "In my speech, I had to reveal the essence of what
is called now the improvement of relations with Russia, because this
tendency raises some concern in the West."

In this light, you should agree, everything looks quite plausible, even
if the speculation circulating in Kiev that certain Western structures
are involved in the organization of the "cassette scandal" and political
crisis in Ukraine is practically impossible to prove. In any case, many
Ukrainian politicians stress that certain skillful engineers direct the
Ukrainian protest actions, while unknown circles generously finance all
the events staged under the slogan: "Resignation for Kuchma, Yushchenko
for President." The West has probably every reason to consider
Yushchenko a future "dependable president." This is why a joke that is
circulating in Kiev now and presenting Ukraine as "the 51st U.S. state"
does not sound as funny and silly as it may seem.

*******

#15
Date: Wed, 25 Apr 2001
From: Victor Kalashnikov <machinegun@online.ru>
Subject: Russia's media/re 5219-Menshikov/Kalashnikov

I'm thankful to Mr. Menshikov for his remarks. I believe, JRL-readers
have followed this exchange with interest. My initial idea was to
pinpoint differences in perceiving the same problems from various
stands. The most recent events and publications, including those
placed by the JRL, have provided even more stuff into the debate.
So everyone is free to make his own judgement based on a broader
set of facts and opinions.

I only have not said - contrary to Mr. Menshikov's suggestion - that
Mr. Jordan was a FSB agent. How should I know? My question was
completely different. Moreover, why so much fuss about the FSB?
It's a legal institution, not a Medeline cartel. Many people work for
the FSB or cooperate with it. Both our president and Yevgeny
Kiselyov did. Even some foreigners still do, reportedly. I see no point
in focusing on the FSB-connections as such.

The actual concern was that the only independent media-structure in
Russia has been destroyed for political reasons. Everyone is
welcome to guess, whether the services had taken Mr.Jordan - one
of the central figures of that operation - into their accounts, and
whether Mr.Jordan was ignorant of this background after years of
closest contacts to local officials.

Mr. Menshikov also asked for more details and more proof. Maybe
the following story, fresh at hand, would just fit in. My wife made an
extensive interview with Murtaza Rakhimov, the president of
Bashkortostan, for 'Nezavisimaja gazeta' a couple of weeks ago. He
was quite open with regard to the Kremlin's politics and to the
seizure of the NTV. Upon returning to Moscow, she sent the text of
the interview to Rakhimov's Ufa office for authorisation. What she
got back was cut by half in size, Soviet-kind recital, a totally
different thing. 'Operative information department' chief called from
Ufa and demanded to make serious cuts: 'Otherwise you will inflict
damage to the Republic, and its relationships with Moscow, and
cause problems for you as well'. As my wife managed to contact
Rakhimov again, he himself gave his 'go ahead' for the initial version
and added, with a sort of confusion in his voice, that not all of his
subordinates were equally good.

That version first appeared in the 'Nezavisimaya's upcoming issue
on the Internet on 24 April late in the evening - for one hour only,
and then was removed again.

The printed edition now contains several politically relevant changes
concerning, for example, Rakhimov's view on the newly formed
State Council.

That's the way it works. I think researchers will increasingly face the
problem of authenticity of some published texts.

But the problem may become even more extensive, as the
information minister Lesin is proceeding with talks on Russia's
image-building in the West with an American PR-company. So I
agree with Ira Straus who said recently that the JRL may under
circumstances assume the mission of the solely refuge for the free -
and genuine - thought on Russia.

Finally, a few words about the NTV. As expected, its popularity rating
has dropped, approximately by half since the end of March. This
implies that a substantial part of the audience (critically minded
intellectuals) would turn to some other sources of information.
Nobody knows to which sources, and what processes in the mass
conscience it may cause.

Moreover, the Kremlin team has partially lost its sense of that
important group. The TV-ratings which are conducted permanently
in a very smart way, have since long served as an important
indicator for the state minds, also among the real and would-be
opposition. Furthermore, the NTV has provided some tools for
influence - just within that section of the audience. These politically
crucial facilities have been severely undermined through the recent
events.

Add the fact that TV6 - the 'youth' channel - has seriously altered its
profile as well, thus inevitably loosing parts of its basic audience.

Intelligenzia and the youth are impelled to search for new sources of
public information. In a politicised country as Russia, just prior to
serious economic turbulence, all this may bring Putin before
unexpected challenges.

It reminds me the last period of the USSR's existence. The Kremlin
was then severely suffering from the lack of understanding of the
political situation - to a large degree just due to the absence of the
nation-wide opposition media. It looks those austere lessons were in
vain.

*******

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