August 3, 2001

This Date's Issues:   5379 • 5380

Johnson's Russia List
#5380
3 August 2001
davidjohnson@cdi.org

[Notes from David Johnson:
1. Moscow Times: Andrew Kuchins, Russia, China and What's Really on the Table.
2. Itar-Tass: Russia escapes "black list" of financial violators.
3. AP: Russians Release American Student.
4. Interfax: Russia rejects US conditions on links with third countries.
5. The Economist (UK): Russia's coming winter. The authorities were ill-prepared for last winter. There's worse to come.
6. Chicago Tribune: Colin McMahon, A palace fit for Russia's president. Home to be turned into state museum, residence for Putin.
7. Moscow Times: Alla Startseva, Tariffs Frozen; UES Issues Alert.
8. Itar-Tass: Opinion poll shows Russians want South Kuril islands as their territory.
9. Reuters: Caspian carve-up to drag on amid tensions.
10. Caspian Studies Program working paper, Russia Refocuses its Policies in the Southern Caucasus by Pavel Baev.
11. Financial Times (UK): Andrew Jack, Battle to protect Russian lake from boom in hot baths: The increasing popularity of Lake Baikal brings along with it the threat of pollution.
12. Business Week: Fixing Russian Schools.
13. RIA Novosti-Moscow Diary: Olga Sobolevskaya, REFORM OF RUSSIA'S EDUCATIONAL SYSTEM.
14. Kommersant-Vlast: WE'VE BEEN HERE FOR TWO YEARS. The results of the two-year counter-terrorist operation in Chechnya.
15. Wall Street Journal: Jeanne Whalen, Potanin Reaps Big Gain on Sidanko Sale. Despite Firm's Rickety Financial Health.
16. Reuters: Moscow braces for end of Kim's Siberian odyssey.]

*******

#1
Moscow Times
August 3, 2001
Russia, China and What's Really on the Table
By Andrew Kuchins
Andrew C. Kuchins directs the Russian and Eurasian Program at the Carnegie
Endowment for International Peace in Washington. He contributed this
comment to The Moscow Times.

What a two-week period would-be geopoliticians have had. It began with the
Bush administration's announcement of plans for testing of ballistic
missile systems that will likely "bump up" against the ABM Treaty, followed
by the successful test of the missile defense kill vehicle. Then Chinese
President Jiang Zemin arrived in Moscow to sign a new Chinese-Russian
Friendship Treaty. Finally in Genoa U.S. President George W. Bush had
another opportunity to confer with European allies as well as his new
soulmate President Vladimir Putin. The head of Sir Halford MacKinder, the
godfather of geopolitics and originator of the term "Eurasian heartland,"
must be spinning in his grave.

Many observers have been quick to resurrect the notion of triangular
politics that was popularized by Henry Kissinger during the Nixon
administration's efforts to combine detente with the Soviet Union with the
historic opening to China. But with the demise of the Cold War coupled with
an increasingly interdependent world, the explanatory power of triangular
politics does not get us very far in understanding what is really going on
between Moscow and Beijing. Washington's worst-case scenario artists
delight in pointing to anti-American rhetoric and transfers of Russian
weapons and technologies to China to conjure up the anti-hegemonic alliance
in-waiting that will bring down Pax Americana. The fact is that both China
and Russia are too heavily invested or want to be too heavily invested in
benefiting from Pax Americana to really want to bring the forces of
globalization down.

Russia cannot have a prosperous future without deep integration in the
world economy. And an impoverished and consequently unstable Russia will
not be an attractive partner for anybody in the long run, be it the
European Union, China, Japan, India, or even Iran. Mikhail Gorbachev
understood this, and so set forth with perestroika and new thinking in
foreign policy. Boris Yeltsin understood this, and so accelerated reform
efforts. Putin understands this and will continue to hew to a primarily
Western orientation, especially toward Europe, but he needs to be
constantly reminded that contemporary European powers respect human rights.

While the Chinese and the Russians oppose some aspects of U.S. policy, most
notably missile defense, they share a number of common interests that have
little or nothing to do with opposing the United States. The first is to
maintain a peaceful border and ensure that Central Asia not be overwhelmed
by separatist forces, terrorism, and drug trafficking. These factors have
motivated China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan, and Uzbekistan
to form the Shanghai Cooperation Organization. The development of energy
resources in Siberia, the Far East and the Caspian Basin will help address
China's growing energy needs. Balancing Russia's growing labor demand with
China's burgeoning labor force will require the two countries to carefully
manage bilateral migration policies.

MacKinder was right to point to the importance of the Eurasian heartland.
But today, it is not traditional, competitive geopolitics resurrected in a
rebalanced U.S.-China-Russia triangular format that should be our guiding
paradigm. Rather it is the geoeconomics of this pivotal region that
urgently demands cooperative action not only in Beijing and Moscow, but in
Washington, Tokyo, European capitals and elsewhere. The Bush
administration's relaxed and supportive response to the treaty signing in
Moscow was on target, and now we need to develop a strategy that will help
ensure that the collaborative spirit of geoeconomics will indeed triumph
over geopolitical anachronisms in Eurasia.

*******

#2
Russia escapes "black list" of financial violators
ITAR-TASS

Paris, 3 August: Russia was not included into the "black list" of
countries, which may face tough international financial control measures
before the end of the year, according to Nikolas Pray, a high-ranking
representative of the Organization of Economic Cooperation and Development
(OECD).

He told ITAR-TASS today that the final list of countries violating
international financial norms and standards is to be published in November.

"Russia is not on the list. The OECD is satisfied with the reforms in the
banking and tax systems of Russia and with the measures taken by its
leadership to fight illegal incomes", he said.

*******

#3
Russians Release American Student
August 3, 2001
By JIM HEINTZ

ROSSOSH, Russia (AP) - American Fulbright scholar John Tobin was released
from a Russian prison Friday after serving half of a one-year drug sentence
and winning parole, ending a high-profile case that had strained
U.S.-Russia relations.

Tobin, carrying his belongings in a shopping bag, was escorted by two U.S.
Embassy representatives as he left the prison in the southern Russian town
of Rossosh. He was freed shortly after a 15-judge panel approved a parole
board's recommendation for his release.

Tobin did not speak to reporters gathered at the prison. He was to travel
to the regional capital of Voronezh before going to Moscow.

Tobin became eligible for parole Thursday, the halfway point of his
sentence, and the parole board unanimously recommended release, satisfied
by his behavior at the prison.

``I'm absolutely elated,'' said Alyce Van Etten, Tobin's mother, who lives
in Monticello, N.Y. ``I look forward to hearing his voice as soon as
possible.''

The 24-year-old from Connecticut was arrested in January amid strained
U.S.-Russian relations, which were exacerbated by Federal Security Service
claims that Tobin was a spy in training. No espionage charges were filed
and Tobin said he was framed on the drug charges because he refused to work
for Russian intelligence.

He was convicted in April of obtaining, possessing and distributing
marijuana and sentenced to 37 months in prison. A higher court overturned
the distribution conviction and reduced the sentence to one year.

U.S. Rep. John H. Maloney, who represents Tobin's district in Congress,
said he and Tobin's family are concerned that something may happen to Tobin
before he leaves Russia. ``We're on guard for that.''

Maloney said Tobin's release ``is wonderful news, but everyone is still
holding their breath. Our goal is to get Jack back to the United States,
back to Ridgefield, Connecticut, back to his family.''

Tobin was expected to return to the United States by next Tuesday or
Wednesday, he said.

Maloney and other members of Congress from Connecticut had pressed for
Tobin's release, sending letters to Russian officials and asking President
Bush to address it in meetings with President Vladimir Putin.

``We have to get rid of this headache for the (prison) administration,''
Judge Boris Gladko, of the Rossosh City Court, said Thursday.

Warden Nikolai Kravchenko had welcomed signs that Tobin could soon be out
of his jurisdiction, saying, ``I'm probably more interested than anybody in
his speedy return home.''

The warden portrayed Tobin as model prisoner who spent his time playing
sports, chess, and the guitar. Tobin ``came to be more understanding of our
Russia, of our soul,'' Kravchenko said.

The prison where he was held is a collection of shabby two- and three-story
Soviet-era buildings, surrounded by a white brick wall topped with barbed
wire on outskirts of town. While journalists waited outside Friday, a
horse-drawn wagon delivering bread went into the facility.

Kravchenko boasted about the state of his prison, saying U.S. Embassy
officials even ``expressed their gratitude'' to him for ensuring Tobin was
held in decent conditions. Most Russian prisons are poorly equipped and
disease-ridden.

Last December, Edmund Pope, a U.S. businessman convicted of spying and
sentenced to 20 years in a Russian prison, was quickly pardoned by Putin as
a humanitarian gesture.

*******

#4
Russia rejects US conditions on links with third countries
Interfax

Moscow, 3 August: Attempts to link the Russian-US relations with Russia's
relations with third countries are unacceptable, Russian diplomatic sources
told Interfax on Friday [3 August].

According to reports from Washington, the US president's National Security
Adviser Condoleezza Rice has said that the United States is prepared to
work out a new framework of strategic partnership with Moscow which would
include joint military exercises and Russia's access to US missile
technology on the condition that Russia ceases cooperation in the
technological and military spheres with Iran and North Korea.

This option is unacceptable, the Russian Foreign Ministry thinks.

Russia will not embrace this kind of exchange, the sources said. It "is
developing relations with Iran and North Korea not for the purpose of doing
harm to the United States," they said.

"These are neighbouring countries which are important to us and which we
have our own interests in, but this bears no relation to the United
States," the sources said.

"US officials often make statements amounting to wishful thinking and
create distorted pictures," the sources said. "This line is pursued
conscientiously and designed to rise suspicion between Russia and other
countries," they said.

"We cannot and will not fall for this bait," the sources said.

"Following her visit to Moscow, Ms Rice has been talking about something
like a breakthrough in the missile defence issue," they said.

"What sort of a breakthrough there could be when the Americans have not yet
given a coherent explanation as to what kind of system they wanted and from
whom it was meant to protect them," the sources said.

*******

#5
The Economist (UK)
August 4-10, 2001
Russia's coming winter
Icy calm
The authorities were ill-prepared for last winter. There's worse to come

RUSSIA'S capital is still sweltering in the summer heat, but the
looming difficulties of keeping the country heated this winter are
already sending a chill through top officials' hearts. Last winter
was the worst for decades in the east of the country. Fuel stockpiles
were too low. Rickety equipment conked out. So hundreds of thousands
of people endured days, even weeks, in temperatures well below zero.
President Vladimir Putin was furious, and instructed his government
to sort things out in time for next winter. Some hope.

The most vigorous activity visible in officialdom is energetic buck-
passing. Officials at local heating plants say fuel deliveries are
far behind schedule. The energy companies say that rail freight
charges for coal are too high, and that they are not paid properly
for deliveries. Local authorities say they simply cannot afford to
pay for heat. The government berates dishonesty and incompetence, but
so far seems to have little idea about what to do.

The statistics are dire. Prospects for much of Russia east of the
Urals look even worse than last year. The ill-run Maritime region, in
the far east, was the worst hit last year. There, the federal
government has taken direct charge. But Dalenergo, the main power
company, says it has only 40% of the needed coal reserves. The local
authority says it lacks 1.3 billion roubles ($45m) to get ready for
the winter, and blames Moscow for not providing it.

Across Russia, the main electricity generator, United Energy Systems,
says its consumers owe it more than 100 billion roubles. A large
chunk is due from the central government. Dealing with non-payers is
politically explosive. In the far-northern town of Archangel the
local power company wanted to cut off Sevmash, a deadbeat local
engineering company. Then it realised that the firm was involved in
raising the sunken Kursk nuclear submarine, a project close to the
Kremlin's heart.

Some of the current panic is for propaganda purposes. On past form,
quite a lot of fuel usually does get delivered at the last moment, or
soon afterwards. But that does not solve the underlying problems. Too
many people live in unserviceable places. Heating systems are simply
worn out, and payments too low to pay for proper upkeep, let alone
replacement. Design dates from the days when energy was virtually
free, so huge amounts are simply wasted. Pipes are badly insulated.
Most Soviet-era radiators lack any controls; if a room gets too hot,
you open a window.

There are long-term solutions around. Chukotka, the country's most
distant and impoverished region, is thinking of wind power. Another
idea, much liked by economic reformers in Moscow, is to move over to
a decentralised system of small gas boilers, rather than pumping heat
from giant plants. But any of that would require some competent
administration and political will on the ground. It is easier just to
blame someone else. Where will that blame stick? Another fiasco-
filled winter would be bad news for Mr Putin. Last time he could
still blame the old regime. Now he has 12 months' less excuse.

*******

#6
Chicago Tribune
August 3, 2001
A palace fit for Russia's president
Home to be turned into state museum, residence for Putin
By Colin McMahon
Tribune foreign correspondent

STRELNA, Russia -- President Vladimir Putin's fans and underlings look on
him as a kind of Russian savior. Now they want to give him a palace fit for
a king.

Just outside St. Petersburg, minutes from the sweeping summer estate of
Peter the Great, Konstantinovsky Palace is to be restored as a presidential
residence and state museum.

Work on the 18th Century palace is expected to cost more than $150 million.
But that is just the start. Officials envision a whole tourism and
convention complex on the site, with the president's home away from Moscow
at its heart.

All that could cost $1 billion, officials said.

The Kremlin is leaning on businesses to donate heavily toward the project.
High-powered regional and federal officials lead the fundraising team. But
in the end, some money will have to come from federal coffers.

Popularity high

So far no one seems to object. Putin's popularity remains high, his grip on
power unchallenged. A recent series of meetings with President Bush and
other heads of state has reinforced Putin's image as a smart, capable and
modern world leader.

Kremlin officials deny the project is a tribute to Putin. Kremlin property
manager Vladimir Kozhin even brushes away the fact that Putin will live
there when in St. Petersburg.

"The Konstantinovsky Palace--as I've said many times, and I'm even tired of
explaining--will not be a presidential residence but a facility for major
international events," Kozhin said.

Nevertheless, plans call for Putin to use the western part of the palace
and all the basements as a home, the Russian daily Kommersant reported. He
also wants a fine restaurant and a wine cellar installed, the paper said.

Officials acknowledged last month that the restoration will cost at least
10 times their initial estimate of a year ago. But they defend the project
as a good-government issue, a tourist draw, a way to inject investment into
the St. Petersburg region's economy.

"Look at the West, which we often try to copy today," said Boris Petrov of
the Konstantinovsky Palace restoration committee. "Parliament is in
Strasbourg. NATO is in Belgium. UNESCO is in Paris. The political,
governmental, local and international institutes are everywhere."

Putin's hometown

St. Petersburg also happens to be Putin's hometown. He has used the city to
welcome and entertain foreign dignitaries. He has stacked his
administration with officials from St. Petersburg, Kozhin among them.

Some Petersburg residents even suggest, more hopefully than realistically,
that Putin is considering restoring St. Petersburg as the nation's capital.

In any event, St. Petersburg will have to wait for any Putin housewarming.

From a distance--the only way to view Konstantinovsky Palace because the
government recently sealed off the grounds--the baroque building looks
weathered but workable. The grass and weeds choking the 300 acres of
grounds seem manageable. A glimpse of the Gulf of Finland beyond the palace
hints at a marvelous view and a good reason the czar's son Konstantin made
the place his summer home.

The structure, however, must be rebuilt, officials said. Inside, the palace
shows the effects of time, neglect and vandalism.

During the 1990s things got so bad that, even as Putin was beginning his
remarkable political career as an unremarkable deputy mayor in St.
Petersburg, squatters were taking over the palace.

Now one expert suggests that the damage is so great that Putin will be gone
from the Kremlin by the time the place is livable.

Behind schedule

Already, officials are behind schedule. They want to finish the palace
before St. Petersburg starts its tricentennial celebrations in 2003. But
hopes to start work "when the snow melts" this spring were optimistic.

Money is the matter. The palace account has received a mysterious $15
million donation, Kommersant said, perhaps from "some businessman who owes
the government quite a bit." But the rest of the money could prove hard to
come by. And because no federal funds were budgeted for the palace this
year, the government cannot use state funds until 2002.

Kozhin insists that the Kremlin will not pressure anyone to donate. But
business leaders will look for something more concrete than Kremlin
goodwill in exchange for their donations.

Participation perks

"If the government really wants to interest businesses ... then it has to
show us some real pluses to come from participating," an adviser to a
powerful business group told the newspaper Vedomosti. "To be frank, we need
this about as much as a goat needs an accordion."

Putin should not be too upset about the delays. As popular as he may be,
Putin is still no match for Peter the Great, who could not get the same
palace done on time either.

Czar Peter I ordered design on the palace started in 1710, commissioning
several architects, including the Italian master Bartolomeo Rastrelli. But
when Peter died in 1725, construction was still plodding along.

*******

#7
Moscow Times
August 3, 2001
Tariffs Frozen; UES Issues Alert
By Alla Startseva
Staff Writer

Tariffs on natural monopolies won't rise again this year unless "emergency
situations" develop, Economic Development and Trade Minister German Gref
said Thursday.

"Until the end of 2001, the tariffs of natural monopolies may be changed
only in emergency situations, when a serious imbalance has occurred," Gref
was quoted by Interfax as saying.

Tariff increases for the so-called natural monopolies — Unified Energy
Systems, Gazprom and the Railways Ministry — accounted for 38 percent of
consumer price inflation, one of Russia's most difficult economic problems,
Gref said Wednesday.

The ban comes just five days before the Cabinet is scheduled to hold an
extraordinary session to discuss preparations for winter before it breaks
for the rest of the summer.

Insuring heat and electricity throughout the winter is a daunting task for
UES and an annual political time bomb for regional leaders. The governor of
the Primorye region in the Far East, for example, was forced to resign
after thousands of people went days without either last winter.

UES said bill arrears and artificially low tariffs left local energos
without enough money to buy enough fuel.

UES deputy board chairman Mikhail Abyzov told a news conference Thursday
the utility had started borrowing from banks to stockpile fuel for winter,
but it couldn't provide loan guarantees sufficient to borrow the sums it
needs.

He said UES had already borrowed 1.5 billion rubles ($51.46 million) from
four banks, including state savings bank Sberbank, but was having trouble
getting the additional 5 billion rubles it needs.

"The government will have to solve a number of problems, including
introducing levers that will help to stop price rises in related
industries," Abyzov said. "If the government fails to do this, it will
aggravate an already critical situation."

If tariffs aren't raised, the "problem" energos, or local utilities, in the
Far East will be 5 billion rubles short of what they need to purchase
enough fuel to provide full services through the end of the year, he said.

Collectively, UES subsidiaries as of Aug. 1 had 12 percent more fuel
stockpiled than was targeted. But the critical regions, like those in the
Far East, are far behind. Vladivostok's Dalenergo — supplier to the
surrounding Primorye region — has just 61 percent of the coal it was
supposed to have by Aug. 1. Chelyabenergo has just 72.6 percent,
Kirovenergo has 72.8 percent, Arkhenergo 76.9 percent and Amurenergo 77
percent.

Other regions are doing even worse: Vladimenergo met just 33.5 percent of
its target, Kamchatskenergo 38.6 percent, Kostromenergo 35.3 percent and
Penzaenergo 42.3 percent.

Abyzov called for higher tariffs, saying the main obstacle was that the
"problem" energos were receiving just enough money to cover operating
expenses and not enough to buy fuel reserves.

Apart from funding, the major problem in the critical regions is
infrastructure. He said just 10 percent to 30 percent of the housing
complexes in these areas have reliable piping and electrical systems.

The Vladivostok City Duma on Thursday called the city's preparation for
winter "catastrophic," Interfax reported.

More than 600 kilometers of heating pipes and 95 percent of the area's
schools and hospitals are in urgent need of repair, Vladivostok's mayor's
office said.

Gosstroi, the state construction committee in charge of housing, refused to
comment, saying everyone was too busy preparing for Tuesday's extraordinary
Cabinet meeting.

Prime Minister Mikhail Kasyanov was quoted by Reuters as saying that the
government was working on measures to make sure the economy stays healthy,
including the formation of a single body to set tariffs for heat, gas,
electricity and water, which are currently decided by a range of bodies.

*******

#8
Opinion poll shows Russians want South Kuril islands as their territory
ITAR-TASS

Tokyo, 3 August: The majority of Russian respondents polled by the Russian
Public Opinion Fund at the request of the Japanese Foreign Ministry believe
that the South Kuril islands claimed by Japan should be part of Russia.

The poll showed that 82 per cent of the Russian respondents were aware of
the territorial dispute between Russia and Japan. Forty-eight per cent of
the respondents said that the disputable islands should remain under
Russia's jurisdiction. Forty-three per cent believe that the problem should
be settled by mutual consent.

Only three per cent of the respondents said that Russia should hand over
the islands because it was a stumbling block preventing the two countries
from signing a peace treaty.

The biggest number of opponents to the Kurils' being placed under the
Japanese jurisdiction (61 per cent) live in the Far East. In Sakhalin
Region, the number of the opponents exceeds 70 per cent.

*******

#9
ANALYSIS-Caspian carve-up to drag on amid tensions
By Patrick Lannin

MOSCOW, Aug 3 (Reuters) - Tensions are rising over the division of the
Caspian Sea and its potential for billions of dollars of oil wealth. Experts
say the row may drag on for years.

All sides fear the Caspian could one day become a new zone of instability,
replicating the many wars which flamed on the territory of the former Soviet
Union.

Lengthy talks are likely to involve Iran's neighbours around the Caspian
shores -- Russia, Kazakhstan, Turkmenistan and Azerbaijan -- offering it
commercial sweeteners and oil deals to agree with their view of how the
waters should be divided.

However, Iran has so far been firm that a Soviet-Iranian treaty on
partitioning the waters remains valid.

Daniel Dzurek, head of International Boundary Consultants in Washington,
which advises companies and governments on territorial disputes, was not
confident of a fast solution.

"Sometimes it is relatively quick, but usually they (disputes) go on for
decades," said Dzurek.

The latest bout of tension was sparked last week when Iranian gunboats drove
off two vessels from Azerbaijan being used by British Petroleum <BP.L> to
explore waters also claimed by Iran.

Turkmenistan then chipped in, criticising Azerbaijan for illegally developing
fields it claims too.

Russian President Vladimir Putin said on Thursday that any use of force was
unacceptable, although Azeri President Haydar Aliyev had earlier insisted the
dispute would not worsen ties.

However, the Azeri government is also coming under internal pressure to keep
exploring in disputed areas after a string of poor drilling results in other
zones.

"They (the Azeris) have not had the drilling success they were anticipating
and obviously hoped for. I think there is a need in Azerbaijan for someone
somewhere to discover some oil," said Julian Lee, senior energy analyst at
London-based thinktank the Centre for Global Energy Studies.

"Everything that restricts that exploration activity is detrimental to that,"
he said.

OUTSIDER IRAN?

Kazakh, Russian and Azeri leaders meeting this week at an informal summit in
the southern Russian town of Sochi presented a united front on how the sea
should be divided up.

Analysts say that unison means Iran is rapidly becoming the odd man out in
the dispute, with its insistence that the Caspian is a lake and should be
divided up in equal fifths.

The other states have backed the idea the Caspian is indeed a sea and that
another way of dividing the water should be used. This would give Iran less
than a fifth of the waters and of its oil riches, something Tehran has so far
vociferously rejected.

Turkmenistan's position has so far not been made clear, although analysts see
it as being closer to the Russian, Kazakh and Azeri position than to Iran.
Turkmenistan has also backed the idea of a Caspian summit in October in its
capital Ashgabat.

The waters are further muddied by the fact that the United States is also
trying to assert its influence in the Caspian.

Dzurek said the issue could go to the International Court of Justice,
although this needed prior agreement from all. The states would also have to
agree a judgement would be binding.

But he saw it more likely that the states would try to thrash out some kind
of deal among themselves by offering Iran commercial deals to compensate it.

"If the countries had political will what they will probably do is allow the
Iranians to participate commercially through the exploration of oil or they
will route a pipeline through Iran," Dzurek said. "In other words, Iran would
get commercial benefits to compensate for its reduction in potential offshore
oil."

TENSIONS CAST CLOUD

Lee agreed: "It will that kind of horse trading type of solution rather than
anything on firm legal principles."

Whatever the solution, the new tensions have cast a cloud over the Caspian as
never before, particularly in the south, where the disputed
Azeri-Turkmen-Iranian zones are.

In the north, Russia and Kazakhstan are cracking on as before by developing
their fields. This month should also see the first Kazakh oil from a new
pipeline from the Caspian be loaded on a ship at Russia's Novorossiisk Black
Sea port.

But future plans for getting the oil out of the region to markets in the West
and Asia could be stalled.

"Having these debates about who owns the assets and disputes between the
countries does not help when it comes to the cross-border transport of oil,"
said James Henderson, an analyst at Moscow's Renaissance finance house.

*******

#10
From: sdijfk@harvard.edu
Subject: Caspian Studies Program working paper, "Russia Refocuses its
Policies in the Southern Caucasus" by Pavel Baev
Date: Thu, 2 Aug 2001

http://ksgnotes1.harvard.edu/BCSIA/Library.nsf/pubs/PavelBaev

Dear Colleagues,

I am pleased to present to you a research paper by Dr. Pavel K. Baev
entitled "Russia Refocuses its Policies in the Southern Caucasus," as part
of the Caspian Studies Program's Working Paper Series. Dr. Baev is a Senior
Researcher at the International Peace Research Institute, Oslo (PRIO), and
the Editor of Security Dialogue.

Previous Caspian Studies Program publications this year have addressed
the question of Russian policy in the Caucasus and greater Caspian region
since Putin's ascendancy to the presidency. These preceding works have
argued that Russia's policy toward the Caspian region is becoming more
centralized and assertive. Baev agrees that the Kremlin has raised the
profile of its activity and increased the coordination of its activities in
the Caucasus. However, at the same time he finds that Russia's policy
toward the region reflects "no clear and realistic aims" and that the
"Russian leadership has no strategy for the Southern Caucasus and pays far
too little attention to the potentially grave problems there." Baev writes
that lack of Russian strategy toward the Caspian region is compounded by
the fact that Putin's inner circle contains few advisors who are well
versed in the Caspian region.

Baev argues that Russia's calculations in the Caucasus region have
changed substantially due to the fact that Moscow views Turkey primarily as
a "valuable partner," rather than a threat. If Baev's view on Russia's
perception of Turkey is correct, this shift would indicate a significant
change in Russia's policy toward the region. Some claim that Russia has
recently begun to promote resolution of the Nagorno-Karabagh conflict; and
a shift in Moscow's perceptions of Turkey, if it has taken place, could
explain some of the background of the supposed Russian changed stance on
the conflict. The question of Russian-Turkish relations would be a good
subject for future research on the region.

In this working paper, Baev also claims that the results of the second
Chechen War have forced Russia to review its interests in the wider
Caucasus region. Moreover, he explains that Moscow now appears "ready to
settle the legal issues related to the division of the Caspian waters and
the seabed, rather than using legal obstacles as brakes."

We hope you will find this working paper useful as well as future
publications in this series and others by the Caspian Studies Program at
Harvard University.

To download Pavel Baev's paper, go to
http://ksgnotes1.harvard.edu/BCSIA/Library.nsf/pubs/PavelBaev

Brenda Shaffer, Ph.D.
Research Director
Caspian Studies Program
Harvard University

******

#11
Financial Times (UK)
3 August 2001
Battle to protect Russian lake from boom in hot baths:
The increasing popularity of Lake Baikal brings along with it the threat of pollution
By ANDREW JACK

An environmental group dedicated to protecting Lake Baikal, the world's
largest and deepest freshwater lake, is launching a battle against one of
Russia's most sacred rituals: the banya or steam bath.

The group, Baikal Ecological Wave, has turned its attention to a boom in
the construction of steam baths on the shores of the lake, fuelled by the
region's rapidly developing tourist trade. Traditionally, banya users
plunge from the hot steam cabins into the cold waters of the lake, covered
in body oils, and sometimes soap and shampoo, a practice that has added to
the environmental pressures on the lake.

In an effort to combat unlicensed lakeside building and other environmental
threats, the group has now won funding from the United Nations for joint
inspection patrols with local officials who claim they cannot afford to
enforce local regulations.

Apart from the illegal banyas, the joint teams will examine the damage
caused by more than 300 boats licensed to operate on the lake, while trying
to clamp down on poaching and other uncontrolled tourist development.

Jenny Sutton, an Englishwoman who has lived in Irkutsk since the 1970s and
a founder of Baikal Wave, said: "Tourism centres are mushrooming, but the
government environmental inspectors say they only have enough money to pay
their salaries and not even to travel to the lake."

The state regulatory system was dealt a further blow last year when
President Vladimir Putin merged the State Environmental Committee with the
Ministry of Natural Resources.

Ms Sutton said the move had had the effect of annulling the past authority
of non-profit organisations such as hers from issuing citizens' warrants
against polluters.

By accompanying the environmental inspectors, and funding travel costs, her
volunteers will be able to maintain and increase their role with support
from the state.

The organisation's inspectors will also help scrutinise the development of
the Kovytka gas field to the north-west of the lake, in which Russian and
foreign energy groups, including BP, are involved.

Baikal Ecological Wave has long battled for the closure of a paper
cellulose factory that pollutes the lake from the southern end, but it has
also diversi-fied its activities to a range of other environmental matters.

It recently took on the local bureaucracy by launching a pioneering hotline
that local people can call free of charge to warn of the illegal burning of
rubbish.

******

#12
Business Week
August 13, 2001
Fixing Russian Schools

Without a fresh infusion of funds, Russia's tattered educational system
threatens to collapse, warns a top-level working group directed by
President Vladimir V. Putin to produce a rescue plan. It will take some $18
billion just to bring the basement-level salaries of school teachers up to
the $100-per-month average wage of all Russian workers. Dealing with other
problems, such as rundown schools and shortages of resources, could take
billions more.

One idea to raise money: sell university slots to overseas students to
bring in as much as $3 billion annually. The most promising target is
China. The number of Chinese students attending Russian universities is
expected to increase from the current level of 10,000 to 100,000 within the
next three years. Putin himself is expected to decide soon whether to levy
new taxes to provide additional support for Russian education.

Edited by Rose Brady

*******

#13
RIA Novosti - Moscow Diary
August 2, 2001
REFORM OF RUSSIA'S EDUCATIONAL SYSTEM
Olga SOBOLEVSKAYA, RIA Novosti

For many decades, Russia was known as a country providing
the best free public education in the world. The country's
radical economic re-orientation in the early nineties proved a
heavy blow for many state-financed spheres, and the educational
system was no exception. Today, it is obvious that the latter
may become a full-fledged part of Russia's life only after it
has adapted itself to the new situation.

The reform contemplated by the Russian education ministry
is meant to perfect secondary and higher education. Perfection,
however, concerns the organisational component rather than the
"contents" of education.

The reform suggests stretching out the secondary school
program, which normally took schoolchildren 10-11 years to
complete, into a universally accepted 12-year one. This step
will help relieve the packed school program along with its
heavy time-table by reapportioning the number of school periods
on this or that subject and, what is equally important, to
simplify the 4-year primary school program, which, according to
some specialists, is a bit too complicated for young children.

A 12-year school program suggests that children start
attending school at 6 instead of 7, with the bulk of compulsory
subjects falling on the period between the 5th and 10th grades
and the most complicated and specific branches of physics,
chemistry and biology emerging as far as in the 11th and 12th
grades.

The two senior grades will specialize in either
humanitarian or technical sciences and focus mostly on subjects
that pupils intend to study at a higher educational
establishment. As a matter of fact, this practice has already
been adopted by a relatively small number of schools. The idea
behind this particular innovation is to allow university
entrants to skip the paid preliminary courses provided by the
higher educational establishment of their choice by offering
them an opportunity to gain all the necessary knowledge at
school. School-leavers' high standard of knowledge will be
equally compulsory for all regions of the country.

Obviously, the reform is going to bring secondary and
higher school closer together. By 2004, the education ministry
is planning to officially introduce a system of uniform state
exams and simultaneously cancel the existing system of double
exams by merging school-leaving exams and entrance exams at a
higher educational establishment.

According to specialists, the system of uniform
examinations offers university entrants from the province a
clear advantage of not having to spend money and effort on
trips to a city-based institute. Instead, they will simply mail
examination results to the institute of their choice. What's
even more important, the new system is meant to equalize
metropolitan and provincial youth's chances to join a higher
educational establishment -- so far, too many gifted young
people from the province have been unable (on financial
reasons) to afford a trip to the capital for the sake of
entrance exams.

According to the new rules, school-leavers' knowledge will
be evaluated not by schoolteachers or lecturers at the
institute they choose but by an independent commission with the
help of a special computer program. The latter is meant to
ensure transparency and impartiality of the evaluation process.

Besides, school-leavers will get a chance to mail
examination results to several different institutes at a time.
"Let the best educational establishments choose the best
school-leavers and let the rest have the rest," says Education
Minister Vladimir Filippov.

This year, a few of the country's regions introduced
uniform exams as an experiment. The experiment will continue
into 2002 and 2003 before the new educational concept is ready
to be introduced universally.

The general supposition is that the new educational system
will brace up the country's higher educational establishments,
which will have to introduce innovations and new specialities
unless they want to lose popularity with school-leavers.
"Knowledge must always find a practical use," concludes
Vladimir Filippov, meaning both secondary and higher education.

******

#14
Kommersant-Vlast
No. 30
August 2001
WE'VE BEEN HERE FOR TWO YEARS
The results of the two-year counter-terrorist operation in Chechnya
Author: Olga Allenova, Dmitry Kamyshev, Pyotr Netreba, Sergei Strokan
[from WPS Monitoring Agency, www.wps.ru/e_index.html]
RUSSIA HAS CARRIED OUT ITS MILITARY OBJECTIVES IN CHECHNYA AND
PREVENTED EXTERNAL INTERFERENCE IN THE CONFLICT. PROPER FUNCTIONING OF THE GOVERNMENT STRUCTURES IN CHECHNYA HAS NOT YET BEEN RESTORED, WHILE HUMANITARIAN AND ECONOMIC PROBLEMS REMAIN ACUTE. BUT EVEN THIS MAY BE CONSIDERED A SUCCESS.

ARMED CLASHES BETWEEN LAW ENFORCEMENT AGENCIES AND LOCAL WAHHABIS BEGAN IN THE AREAS OF DAGESTAN BORDERING CHECHNYA ON AUGUST 2, 1999. FIVE DAYS LATER, CHECHEN GUERRILLAS LAUNCHED THEIR INCURSION INTO DAGESTAN. MOSCOW RESPONDED WITH A COUNTER-TERRORIST OPERATION WHICH IT NEVER EXPECTED TO LAST MORE THAN A COUPLE OF MONTHS. TWO YEARS HAVE PASSED. THE OPERATION IS STILL UNDERWAY, WITH SENIOR OFFICERS AND STATE OFFICIALS EVERY NOW AND THEN POSTPONING THE DATE OF ITS TERMINATION.

Critics of the regime are quite certain that the Wahhabi revival
in Dagestan and the subsequent incursion by Basayev's and Khattab's
gangs were organized - or at least instigated - by Moscow, with only
one purpose in mind. The Kremlin needed military successes to boost
the approval rating of Prime Minister Vladimir Putin, virtually
unknown to the general public until then, and thus ensure his rise to
the presidency. We are not going to consider this theory. Not just
because it seems impossible - past experience shows that even more
improbable events do happen in Russia. If Putin's election was the
only objective of the counter-terrorist operation, then the goal was
accomplished on March 26, 2000. But changes in Chechnya did not end
with the announcement of the official outcome of Russia's presidential
election. So it is logical to try to analyze exactly what Moscow has
accomplished in Chechnya over the last two years.

MILITARY RESULTS

The major military objective of the campaign has practically been
achieved. Almost all of Chechnya - save for the most distant and
mountainous areas - is under the control of the federal troops. The
remaining splinter groups of resistance are incapable of large-scale
hostilities.

Once the major guerrilla forces in Chechnya had been destroyed,
the situation reverted to textbook guerrilla warfare. They lay mines
along roads, organize explosions in garrisons of the federal forces,
and assassinate servicemen and officials. The new phase of the
counter-terrorist operation in Chechnya began in January 2001, when
responsibility for the operation was handed over to a headquarters
under FSB director Nikolai Patrushev.

Actually, the prospects of this phase don't look good. Experience
of civilized countries with similar problems (Britain or Spain) shows
that even superbly-equipped secret services cannot handle terrorists.
Minor successes like killing ringleaders have only a limited effect on
the situation in general.
Political results

De jure, the task of establishment of a new state power hierarchy
in Chechnya appears to have been accomplished. Chechnya has an
officially appointed leader, there are mayors in most districts and
villages, police forces are operating, and the court system is being
restored. Only a parliament and a general election are lacking for
Chechnya to resemble a truly democratic republic.

Essentially, however, what has been formed is not a state power
hierarchy. To varying degrees, tiny Chechnya is run and managed by
four federal officials (Deputy Prime Minister Viktor Khristenko of the
Cabinet's special commission, Minister Vladimir Yelagin, presidential
envoy Viktor Kazantsev, and Senior Federal Inspector Bislan
Gantamirov), two leaders in Chechnya (Kremlin-appointed Akhmed Kadyrov
and Prime Minister Stanislav Ilyasov), and a whole team of
representatives of various security structures.

All their spheres of responsibility overlap, which makes all
kinds of conflicts inevitable.

Apart from personal conflicts, there are broader controversies in
Chechnya as well. This concerns relations between the military and
civilian authorities. At present, the former are gaining the upper
hand. Without their consent, civilian officials cannot even get to
their own offices without the fear of being detained or ambushed at
some checkpoint. Actually, these military successes do not apply to
the guerrillas. Unlike the pro-Moscow Chechens, most separatist
fighters have never had any problems at checkpoints. They move about
Chechnya freely. So it's hardly surprising that it is becoming more
and more difficult to find candidates for local government officials.
After all, they are constantly being harassed by the federal forces
and assassinated by the guerrillas.

SOCIAL RESULTS

The federal government does have something to show for its
battles with terrorists and efforts to restore the government
structures in Chechnya. Unfortunately, the same can't be said for the
social sphere. Officially registered refugees number almost 400,000
(230,000 of them in various camps throughout Chechnya itself).
Moreover, this figure does not include the former residents of
Chechnya who now live with their friends and relatives in other
Russian regions.

The problem of refugees damages Russia's image in the eyes of the
international community. These days, the West is not as critical of
Russia and its policy in Chechnya as it used to be, and the matter of
refugees is only rarely raised at the international level.

The problem of refugees generates even more serious difficulties
for the federal government. Firstly, the tent camps (along with the
villages and towns wrecked in the course of mass search operations)
supply the Chechen resistance with fresh recruits. Secondly, Moscow's
inability or unwillingness to deal with the problem prevents
restoration of the Chechens' trust and confidence in the federal
government structures, a task the Kremlin views as one of the
priorities in the current phase of the counter-terrorist operation.
Thirdly, Kremlin-appointed leaders of Chechnya are blamed for this
situation. They cannot handle the problem all on their own - and it is
impossible to explain to the average Chechen how Kadyrov is better
than Maskhadov, when Kadyrov cannot help his own people.

Actually, solving the problem of refugees within the framework of
the present counter-terrorist operation is unlikely to be possible.
Refugees are not going to return to their villages while the federal
troops - using aviation, artillery, and armored vehicles - continue
their operations against guerrillas and while the search operations
continue. At the same time, the federal troops cannot put an end to
the search operations, because this is the only way they know to fight
guerrillas.

Economic results

No one knows how much Chechnya is costing the federal budget.
Unofficial reports indicate that restoration of Chechnya after the
first war cost the federal government $2.5 billion. The facilities
restored there no longer exist, if they ever existed at all.

These days, the cost of the military operation is a deep dark
secret. Prime Minister Mikhail Kasianov said earlier this year that
the counter-terrorist operation was costing Moscow 2.5 billion rubles
a month. This means that maintenance of the troops, military hardware,
and munitions supplies for Chechnya have already cost 90 billion
rubles.

Post-war restoration in Chechnya began in 2000. Deputy Prime
Minister Nikolai Koshman, who was the government's representative for
Chechnya, asked for 10 billion rubles a year for restoration of only
part of Chechnya. But 7.5 billion rubles was allocated for all of
Chechnya. The federal budget came up with only 3 billion rubles of
this, with the rest being provided by natural monopolies like Russian
Joint Energy Systems, the Railroads Ministry, and Gazprom. The
government never found out exactly what had been restored in Chechnya
with this money. Koshman was dismissed, and Yelagin was put in charge
in December 2000.

Ilyasov became prime minister of Chechnya this spring. Yelagin
and Ilyasov prepared a post-war restoration plan together, a program
which would cost 40 billion rubles. Kasianov agreed to 14 billion
rubles for Chechnya in 2001, one-third of the sum to come from the
federal budget and the rest to be provided by additional revenues of
the budget, private investors, and natural monopolies.

Yelagin accepted the decision and began creating the
infrastructure of post-war restorers. He began by completing formation
of the Chechen government; he established a directorate for
restoration and construction, and set up the Chechen Union of
Entrepreneurs and Employers in July.

No active post-war restoration is taking place in Chechnya at
this point. All this is scheduled for 2002. Needless to say, it will
require new funding.
International results

The very first footage of Grozny under fire in December 1994
established the negative attitude of the West and the international
community toward any attempts to solve the problem of Chechnya by
force. When Putin made it clear that nothing was going to stop him
from taking the war through to its logical conclusion, the West
started threatening Moscow with sanctions. In spring 2000 the
Parliamentary Assembly of the Council of Europe deprived Russia of its
voting rights. The Russian delegation left Strasbourg.

When these and similar arguments and countermeasures were
exhausted, with little if anything to show for it, respected
international institutions like the Council of Europe and OSCE made a
sharp turn. Russia's rights within the Council of Europe were restored
in January 2001. The PACE upper echelons knew that putting Moscow
under too much pressure was a dangerous strategy. If it took offense,
the former superpower might have responded too violently and come up
with drastic and unpredictable moves. The West did not want that.
Moreover, Western public opinion is somewhat tired of Chechnya and
does not respond to the latest reports from the restive region the way
it did at first.

The G-8 summit in Genoa made it absolutely clear that Russia's
policy and actions in Chechnya would no longer have any serious impact
on the Kremlin's relations with the West. On the eve of the summit
Maskhadov appealed to world leaders to discuss the issue of Chechnya
at their meeting. The Western leaders chose to ignore the appeal.
Unlike the officials, the Western media remains skeptical about
Russia's actions in Chechnya.
Sum total

All this means that Russia has carried out its military
objectives in Chechnya more or less successfully, and prevented
external interference in the Chechen conflict. All the same, proper
functioning of the government structures in Chechnya has not yet been
restored, while humanitarian and economic problems remain acute.
Moreover, it is not very realistic to expect they will be solved in
the foreseeable future.

But even this result may be considered a success. Russia has not
been fighting isolated gangs of terrorists. It has been facing a well-
armed and well-trained army, backed up by the populace. There are no
easy victories in such conflicts.

******

#15
Wall Street Journal
August 3, 2001
[for personal use only]
Potanin Reaps Big Gain on Sidanko Sale
Despite Firm's Rickety Financial Health
By JEANNE WHALEN
Staff Reporter of THE WALL STREET JOURNAL

MOSCOW -- One of Russia's first oil tycoons, Vladimir Potanin, got out of
the business Thursday, selling the last piece of his company for a total
take of $1.1 billion (1.25 billion euros). That's not a bad return
considering he paid the state about $150 million for the business in the
mid-1990s and watched it slide into bankruptcy.

Mr. Potanin is the first of Russia's early capitalists to sell out of a big
enterprise acquired during the privatization of state industries. The tidy
profit he earned underscores what the Russian state lost when it originally
sold its oil and metals assets to a group of insiders. It also shows how
political and economic stability have boosted the perceived value of
Russian assets since then.

Mr. Potanin's holding company, Interros, said it would sell a 44% stake in
oil producer OAO Sidanko in order to end a two-year feud with a group of
rival businessmen. His rivals, owners of Tyumen Oil Co., will pay $650
million for the shares, according to people familiar with the deal. In
1997, BP PLC paid Interros $484 million for 10% of Sidanko.

The settlement is good news for BP, whose investment was gutted when Tyumen
took over Sidanko's biggest oil fields in 1999. Tyumen's main shareholders,
Alfa Group and Renova, will return the oil fields to Sidanko and buy out
Mr. Potanin, the parties said at a news conference.

"BP welcomes the deal ... it is positive news for foreign investment in
Russia," said Peter Henshaw, BP's director of external affairs in Russia.
With the settlement, Alfa and Renova now control Russia's third-biggest oil
group.

But the man with the most to celebrate is Mr. Potanin, who has cashed out
far ahead of what he invested to buy Sidanko. In 1995, as founder and chief
of Uneximbank, Mr. Potanin lobbied the Kremlin to adopt a
"loans-for-shares" system by which banks would grant the state loans and
take industrial stakes as collateral.

He got control of 51% of Sidanko in a loans-for-shares deal, later buying
the stock for $130 million in an auction run by Uneximbank that most
analysts said was rigged. Uneximbank and Mr. Potanin have defended the
auction as open and fair. The state sold Mr. Potanin's holding company,
Interros, another 34% of Sidanko for $20 million. On top of what he paid
the state, the deals required Mr. Potanin to invest $220 million in
Sidanko. Although Interros says the investments were made, many oil
analysts said it is difficult to confirm the spending.

Mr. Potanin declined to comment Thursday. His deputy said at the news
conference that Interros is happy with the "good financial results" of the
deal.

Russia's privatization sales were supposed to put state industry in the
hands of talented managers capable of turning the companies around, but
Sidanko racked up debts during Mr. Potanin's tenure and fell into
bankruptcy in 1998. The bankruptcy left Sidanko vulnerable to attack, and
in 1999, Tyumen wrested away its biggest oil fields.

Stephen O'Sullivan, an oil analyst with United Financial Group in Moscow,
thinks a "combination of fear and greed" made Mr. Potanin and some of
Russia's other oligarchs treat their businesses as piggy banks instead of
investment opportunities.

"They never really thought they were long-term owners, either because they
thought someone would buy it off them, or that someone would come and take
it away," he said.

Tyumen's shareholders have drawn sharp criticism for their aggressive
takeover of Sidanko's oil fields. BP and analysts accused them of
manipulating the courts. But the Tyumen owners are generally seen as savvy
managers dedicated to raising the value of their holdings. Alfa and Renova
bought 40% of Tyumen from the state in 1997 for $650 million, a price
analysts said was fair.

Under Thursday's deal, BP will continue to own 10% of Sidanko but will lead
its management team. Mikhail Fridman, chief of Alfa, said he hoped BP would
play a key role in developing the company.

BP, Interros and Tyumen will continue to jointly own the giant Kovykta gas
field in Siberia, which is still under exploration. The partners hope to
export the gas to China.

******

#16
Moscow braces for end of Kim's Siberian odyssey
By Daniel Mclaughlin

MOSCOW, Aug 3 (Reuters) - Moscow woke to a bomb scare and warnings of
transport misery for tens of thousands of residents on Friday, as North
Korean leader Kim Jong-il's nine-day train ride across Russia chugged towards
its Kremlin stop.

The 21-carriage armoured train of Pyongyang's Dear Leader has left closed
roads, shuttered stations and fuming residents in its hefty wake, as it
rolled 9,000 km (5,600 miles) and eight time zones across Siberia from
Stalinist North Korea.

Curious media have been kept well back from Kim on his voyage across Russia,
the only country he is known to have visited except China, and have strained
for a glimpse of the diminutive 59-year old in trademark tunic and dark
glasses.

And now Moscow, where Kim is due to meet President Vladimir Putin and visit
Russian space bases this weekend, is falling under the Dear Leader's spell.

Moscow police said they received a bomb threat on Friday morning at
Yaroslavsky train station, the starting point and terminus for the
Trans-Siberian express and Kim's scheduled point of arrival at about 10 p.m.
(1800 GMT).

Police deemed the threat a hoax after searching the station with sniffer
dogs, leaving scores of workers to continue touching up the station's
paintwork before the big arrival.

Radio and television stations warned Muscovites they would face travel chaos
on Friday evening, a time when local "elektrichka" trains are always packed
in summer with people heading for their dachas, country homes outside the
city.

Vedomosti newspaper posted an announcement on its front page that local
trains would be delayed or cancelled from 7 p.m. for almost four hours,
repeating a pattern of severe disruption which has followed Kim across
Siberia.

"GROTESQUE ENTOURAGE"

Russian television has shown residents of Siberian cities complaining about
the heavy handed nature of Kim's security demands, which have forced the
closure of busy stations for hours around the slow procession of Kim's train
through town.

But Vladimir Lukin, the deputy speaker of Russia's lower house of parliament,
urged Russians not to judge Kim by the trappings and idiosyncrasies of his
entourage.

"The outward reality is that of a train with darkened windows, a grotesque
entourage and so on," Lukin told Ekho Moskvy radio.

"But behind that there are people on the train who fully understand what
situation they are in, what's going on in the world and they will enter into
discussions based on that understanding."

Lukin said Kim would sign a decree on strategic cooperation with Russia and
discuss Asian-Pacific stability, in light of the United States' plan to
create a missile shield to neutralise the threat from what it calls "rogue
states," North Korea included.

Starved of access to the reclusive Kim, Russian media swarmed over
photographs published in a tabloid newspaper on Thursday which appeared to
show a spray of bullet holes in the side of one of his armoured train
carriages.

But a North Korean official firmly denied the report, which cited an expert
saying the marks resembled bullet holes from an AK-47 rifle. The official
said no photographer could have got close enough to take pictures if any such
incident had occurred.

******

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