October 1, 2001

This Date's Issues:   5469 • 5470

Johnson's Russia List
#5469
1 October 2001
davidjohnson@erols.com

[Note from David Johnson:
1. AFP: Shevardnadze offers to mediate in Chechnya, but will it matter?
2. AFP: Pain resurfaces too as Kursk salvage reaches climax.
3. Christian Science Monitor: Fred Weir, Bitter lessons from the past. As war on terrorism gathers momentum, Russia cautions against entering 'quagmire' of Afghanistan.
4. BBC Monitoring: Russian liberal politician denies rift with president over Chechnya. (Nemtsov)
5. Moscow Times: Valeria Korchagina, The Economics Of War.
6. Financial Times (UK): Judy Dempsey, Nato soft pedals on Russian arms treaty breach. (CFE)
7. Christian Science Monitor: Scott Peterson, A new world focus on Central Asian states. The US-led war on terrorism holds new opportunity, and risks, for a remote region.
8. The Observer (UK): Kevin O'Flynn, Russians say 'nyet' to meat and vodka.
9. The Sunday Telegraph (UK): Craig Nelson, Russia's black market trades in degree places.]

*******

#1
Shevardnadze offers to mediate in Chechnya, but will it matter?

MOSCOW, Sept 30 (AFP) -
Nearly two years since Russia began an "anti-terrorist" campaign in
Chechnya, a glimmer of hope emerged Sunday when Georgian President Eduard
Shevardnadze said he was prepared to mediate in peace talks.

The Georgian leader "is prepared to be a mediator in reaching a settlement
to Chechnya's problems, and to make whatever contribution he can on
condition that he has the consent not only of the Chechens but also that of
Russia," his spokesman Khakha Imadze told AFP.

It was highly unlikely that Russia will accept the offer, since the Kremlin
has always regarded the conflict in Chechnya -- in which rebels are
fighting for independence from Moscow -- as an internal affair.

Relations between Russia and Georgia have also deteriorated since the armed
intervention in Chechnya began in October 1999. Moscow has accused the
former Soviet republic of harboring Chechen rebels on its territory, which
borders Chechnya.

The offer from the former Soviet foreign minister came in response to an
appeal for mediation by the rebel side, after Russian President Vladimir
Putin last Monday called on the rebels to surrender their arms with 72 hours.

Putin's comments, presented as an ultimatum, appeared to mark a possible
breakthrough.

But many observers said the conditions made it impossible for the rebels to
accept them and that the president was really engaged in a propaganda ploy
ahead of a fresh military campaign.

A top Kremlin spokesman stressed Friday that Putin had not issued any
"ultimatum" to the rebels and had intended merely to display his
willingness to put an end to the war.

Analysts said Putin was anxious to get the international community to
recognize the connection between the Chechen rebels and Saudi militant
Osama bin Laden, the chief suspect behind the September 11 attacks in the
United States.

"Putin's offer aims to obtain carte blanche to fight (in Chechnya) without
worrying about international opinion," Russian political scientist
Alexander Golts told AFP.

A senior aide to Chechen rebel president Aslan Maskhadov, Akhmad Zakayev,
said Friday he had held initial talks with Putin's special envoy in
southern Russia, Viktor Kazantsev, on ways to end the two-year war in
Chechnya.

"We discussed technical questions about future negotiations concerning the
end of military activity in Chechnya," he said, noting that this was "the
first contact between the Chechen and Russian sides, there having been no
such contacts previously."

Shevardnadze's intervention, in response to a call Saturday by Zakayev,
comes with Russia scarcely more advanced in its efforts to stamp out

Chechen separatism than it was on October 1, 1999 when it invaded its
troublesome southern republic.

Moscow announced with some fanfare early this year that the situation in
Chechnya, where around 85,000 Russian troops are stationed, was now
"normalised" and that it now proposed to scale down its military presence,
handing the enforcement role over to interior ministry troops.

The troop withdrawals soon petered out however, and Russian officials have
continued to talk tough on the Chechnya issue, invariably denouncing
"terrorist actions" and ruling out any prospect of talks with Maskhadov.

With rebel actions taking more and more Russian lives, public opinion has
become increasingly weary with the war and sceptical of a successful
military outcome, by contrast with the enthusiasm with which it greeted the
initial intervention.

According to official figures more than 3,000 Russian soldiers have been
killed over the past two years, but a Soldiers' Mothers committee estimates
that up to 10,000 troops may have died.

Russia has faced international condemnation for the frequently brutal
treatment of civilian populations by its forces in the breakaway republic.

*******

#2
Pain resurfaces too as Kursk salvage reaches climax

VIDYAYEVO, Russia, Oct 1 (AFP) -
As the days count down to the moment when the wreck of the Kursk submarine
remounts to the surface of the Barents Sea, the pain felt by the families
of the doomed crew members grows ever keener.

At the Kursk's base of Vidyayevo, a short drive from the city of Murmansk
on Russia's northern Kola peninsula, time has not yet healed the wounds
suffered by the families and friends of the 118 men who went down with the
submarine on August 12 last year, after two explosions ripped through its
front section.

Later this week, if weather permits, giant hydraulic cranes will lift the
20,000-tonne wreck from the seabed where it has lain for nearly 14 months.

"They say that time helps you to forget, but that hasn't been the case for
me," said Natalya Kasyanova, who had been due to marry Sergei Loginov and
whose daughter Vlada was born three months after his death at sea.

"My heart refuses to accept that Sergei is no longer around. For me, he's
still on his mission somewhere. At least raising the Kursk will bring it
home to me that he really is dead," she said.

At the same time, she is dreading the possibility of seeing the submarine
again.

"I don't think I could bear seeing the Kursk. All that twisted metal will
remind us of the way our husbands died. It will all be too much for me,"
she said bitterly.

Several dozen families of the drowned seamen have said they oppose the
operation to recover the men's bodies, due to be completed some time in the
next few days.

Twelve bodies were pulled out of the wreck last November in a separate
underwater operation.

Though the pain wrought by last year's events has inevitably been revived
as the salvage operation nears completion, reactions have varied.

"I think I would like to see the Kursk once last time, to see that
submarine that my husband loved so much and that he was so proud of," said
Galina Belogun, widow of captain Viktor Belogun.

"I'm the wife of a submariner and I want to see my husband brought back to
dry land," she said firmly.

Her son Artyom joined up this summer for a marine engineering school with
the avowed intention of becoming a submariner like his father.

"I was obliged to accept his choice, as I accepted Viktor's choice, but I
will always be so afraid for him," she said.

For Raisa Povar, a teacher in one of Vidyayevo's two infant schools who
lost seven of her former charges in the disaster, "the wreck of the Kursk
was a blow that has changed something in every one of us."

In her view, "we should leave the Kursk where it is. The seamen died at
sea, and they should stay there. That's how it has always been."

The past year "has been difficult for all of us," said Captain Vyacheslav
Gradov, deputy head of the Vidyayevo garrison, itself named after a
submarine captain, Fyodor Vidyayev, who went down with his vessel during
World War II.

The great majority of the families who lost loved ones in the Kursk
disaster have taken up the government offer to move to other regions of
Russia.

Cold weather has already battened down on the town's dismal apartment
buildings, huddled amid the majesty -- and harshness -- of Russia's Arctic
coastline.

But the heating is usually slow to work, and the supply of hot water is a
hit and miss affair.

"Almost nothing has changed here over the past year," said Irina, wife of a
Northern Fleet submariner.

"They have just repainted the outside of some of the buildings. What good
is that? My husband earns just 5,000 rubles (170 dollars) a month. How are
we expected to get by on that, with two children to bring up?" she
complained.

******

#3
Christian Science Monitor
1 October 2001
Bitter lessons from the past
As war on terrorism gathers momentum, Russia cautions against entering
'quagmire' of Afghanistan.
By Fred Weir
Special to The Christian Science Monitor

MOSCOW - If the United States is preparing to assault Afghanistan to
retaliate against the alleged organizers of the New York and Washington
terror attacks, Russian experts have one piece of advice: Don't go in on
the ground.

"Afghanistan is a quagmire that is easy to enter and very hard to leave,"
says Irina Zvegelskaya, an Islamic expert and vice president of the
independent Center for Strategic and Political Studies in Moscow. "If the
US commits itself to changing things there, or propping up a particular
government, it will be the beginning of a long, painful and very costly
story - just like it was for us."

Recent history explains Russia's reluctance to commit any military forces
to the US-led campaign to destroy alleged terrorist bases and, some
observers speculate, remove the militant Islamic Taliban militia from power
in Afghanistan. Experts say the Soviet Union hastened its own collapse by
waging a futile war in the remote and rugged Central Asian state in the 1980s.

"Russian leaders are allergic to taking any direct military action there,
mainly because of those memories," says Oleg Pleshov, a regional expert
with the Institute of Oriental Studies in Moscow, who served as a political
adviser in Afghanistan in the mid-80s.

Russia, however, has offered Washington support in the war on terrorism,
pledging to provide weapons to the Afghan opposition, open Russian air
space for humanitarian missions, and share intelligence with the US.

Yesterday, a White House spokesman reiterated President Bush's statements
that the anti-terror campaign is "not about nation-building." But White
House Chief of Staff Andrew Card also told Fox News in an interview: "If
they [the Taliban] are going to be associated with these terrorist acts,
they should not be in power."

Afghanistan has long been known as the "graveyard of empires." The British
twice tried, and failed, to subdue its ferocious mountain tribes in the
19th century. On both occasions the British began their operations by
installing a friendly government in the Afghan capital of Kabul, but were
subsequently compelled to back up their clients with increasing levels of
direct military support. Disasters followed. Of a 16,000-strong British
army that retreated from Kabul in 1842, only one man made it back to India
alive.

The USSR also opened its 1979 invasion of Afghanistan with a coup d'état.
In a swift KGB commando operation, the Kremlin replaced an extreme and
unpredictable Marxist leader, Hafizullah Amin, with the pliable and
pro-Soviet Babrak Karmal. Mr. Amin's erratic behavior and antireligious
crackdown had provoked a popular revolt. About 100,000 Soviet troops
entered the country - from the same Central Asian bases the US may now use
- to "ensure order."

Things went well, at first. "We were met with flowers and cheers from the
population," says General Makhmut Garayev, president of the Russian Academy
of Military Sciences, a top Soviet military adviser to the pro-Moscow
Afghan government during the war.

Soviet leaders initially vowed that their forces were in Afghanistan only
as a temporary "stabilizing factor" and would do no fighting. Any military
operations were to be handled by the well-equipped 50,000-member pro-Soviet
Afghan armed forces. "Within a few days, the Afghans were asking for our
help," says Gen. Garayev. "Bandits started attacking Soviet troops, killing
our men, and destroying our equipment. We had to retaliate."

In the counterinsurgency war that followed, 14,000 Soviet troops and about
1 million Afghans perished. Soviet forces battled elusive guerrillas across
scorching deserts, through the rabbit warren of caves and ravines that
define the foothills of the Hindu Kush, and in the thin air and bitter cold
of the snow-covered high mountains.

"There are many different terrains in Afghanistan, and they are all
hostile," says Sergei Merkulov, a Russian ethnic expert who served as a
Pashtun interpreter with the Soviet Army.

A much bigger issue was Afghanistan's social and ethnic complexity.
Pashtuns, who comprise about two-fifths of the country's (current)
estimated 25 million people, are the dominant group. But there are dozens
of others, many of whom have never submitted to the rule of any central
government.

"If you gain the support of one group, you incur the enmity of another,"
says Ms. Zvegelskaya. "The one thing that stirs them all up is a foreign
invader."

Gen. Garayev insists Afghanistan could have been pacified, but only if the
USSR had committed more troops: "We would have needed about 30 divisions
(half a million men) to cope with the situation."

He also charges that US support for the mujahideen rebels - which added up
to almost $10 billion in training, supplies, and sophisticated weapons
during the decade of war - aggravated the conflict and educated future
terrorists, such as Osama bin Laden in the lessons of modern warfare.

Reformist Soviet leader Mikhail Gorbachev withdrew Soviet forces in 1989,
and later cited the strains and costs of the Afghan war as among reasons
for the USSR's subsequent collapse.

Afghanistan dissolved into anarchy and civil war, until the Taliban militia
emerged victorious in 1996. Among the Taliban's front-line troops were
thousands of Islamic "volunteers" from around the world - including Mr. bin
Laden - who Russian experts say have since imposed a global terrorist
agenda on what had formerly been a local Islamic fundamentalist movement.

Only the Northern Alliance, a shaky ethnic coalition controlling about 10
per cent of the country, still fights Taliban rule.

Russian experts say that if the US is determined to engineer change in
Afghanistan, it should make sure the United Nations is involved, and not
commit American troops. "If the US acts unilaterally, it will look like a
war on Islam, and all Afghans will unite behind the Taliban," warns General
Garayev. He says that the Northern Alliance could do the fighting against
the Taliban on the ground, but cautions that the coalition represents only
a few ethnic minorities, while the Taliban is based among the dominant
Pashtuns.

"Maybe with the US Air Force behind it, the Northern Alliance could win,"
says Ms. Zvegelskaya. "But I doubt they could form a viable government.
Basically, Afghanistan remains an insoluble problem."

• Material from Reuters was used in this report.

*******

#4
BBC Monitoring
Russian liberal politician denies rift with president over Chechnya
Source: TV6, Moscow, in Russian 0620 gmt 30 Sep 01

Boris Nemtsov, the leader of the Union of Right Forces, a Russian liberal
political party, has denied he has major disagreements with President Putin
over the situation in Chechnya and said the main thing is that the
political process in Chechnya has got under way. Nemtsov said Putin's main
problem was his "sacred belief that only St Petersburg have good people",
referring to Putin's nearest circle, and that Putin did not trust people.
The following is excerpt from the interview to "Breakfast with Solovyev"
programme broadcast by Russian TV6 on 30 September:

[Presenter Vladimir Solovyev] ...One cannot not mention the beginning of
consultations and contacts, in other words the beginning of the political
settlement of the Chechen problem. One must say that the first man, who was
insistently demanding, proposing and visiting Chechnya frequently with his
proposals, was [leader of the Union of Right Forces party] Boris Yefimovich
Nemtsov, who was told off rather than praised from the very top for that.

[Putin, archive footage] If anyone among the State Duma deputies, including
Boris Yefimovich Nemtsov, is capable of ensuring the implementation of
these conditions in the foreseeable future, let's say within a month, let
them do it. But if they can't do that, they should stop messing around in
the country's political arena and hand over their mandates of State Duma
deputies.

[Presenter] As one knows, at the beginning of last week a meeting took
place between the leaders of the Federal Assembly and Russian President
Vladimir Vladimirovich Putin. According to eye-witnesses, Boris Yefimovich
Nemtsov was the only person with whom Putin did not shake hands. Let's have
breakfast with him.

[recorded interview followed]

[Presenter] ...According to eye-witnesses, Putin did not shake hands with
you. He shook hands with everyone else but he bore a grudge against you.

[Nemtsov] It is total nonsense.

[Presenter] You mean that was not the case?

[Nemtsov] No, he greeted everyone.

[Presenter] Had you spoken to him before or was it the first meeting after
him telling you off?

[Nemtsov] No, we had not met but I believe that emotionally - you know, the
president and leaders of parties are human and sometimes they can lose
temper or show emotions in public. What can one do? They are only human...

Essentially the political process got under way in Chechnya. Some argue
talks are under way, others say it is an ultimatum. But it is obvious that
it is a political process. It is clear that it is not an obtuse military
decision, or mopping-up operations or carpet bombing. It is clear that
there are no taboos, including to speak to [Chechen separatist leader
Aslan] Maskhadov's entourage. It is exactly what we were talking about. So,
the main thing is the result, not the skirmishes...

[Nemtsov] Incidentally, I am ready to assist in every possible way to the
political process in Chechnya. I believe that [presidential envoy in the
Southern Federal District and formerly commander of the military operation
in Chechnya Viktor] Kazantsev is unlikely to solve all the tasks which the
president set him in Chechnya. Moreover, there are two major reasons why he
can't do that. Firstly, he was fighting there and, honestly, it is not the
best way to begin talks with a man who was fighting against you and firing
at you. Secondly, it seems to me that Kazantsev needs intellectual help.

[Presenter] It is a polite way of putting it.

But what you personally attracts to Chechnya? Everyone knows that it is a
sore point for the president.

[Nemtsov] Vladimir, it is not a question of it being a sore point for the
president, the thing is that more than 3,100 soldiers have been killed in
the second Chechen war alone. I don't know the exact figure because it
changes every day. Nine thousand lads among the army men and the Interior
Ministry representatives alone were crippled. There are 400,000 wretched
refugees who are living in appalling conditions not only in Ingushetia,
where their camps stretch as far as the eye can see, but I also saw all
that in Stavropol Territory and Kuban region. Besides, tens of thousands of
civilians were killed - no-one knows exactly how many...

[Presenter] How well does [chairman of the Unified Energy Systems of Russia
company and a member of the Union of Right Forces Anatoliy] Chubays know
about your movements and your ideas and desires? How often do you discuss
with him things like, for example, the plan of your visit to Chechnya?

[Nemtsov] We don't discuss at all my political plans. We have different
tasks. His task is to upgrade the energy system of Russia. And my task is
to create the most powerful democratic party in the country. We agreed with
him - I am probably saying this for the first time in public - we agreed
that - [changes tack] Of course, we tell each other about progress in the
loading of fuel oil and coal for the Far East, yes, I know about that as
many others do and he knows about what is happening in the political life
of the right-wingers, but we have no mutual penetration - each should mind
their own business. And I think it is correct, it is normal...

[Nemtsov] The main thing is that on the whole the situation is developing,
in my view, in a favourable direction for Russia strategically. In my view,
we are on the right track, or we are getting on the right track, not
without problems, of course. If only you could hear all the hysterical
remarks from the nationalists and the Communists that we should be together
with the Taleban or God knows who else. Thank God, the president did not
listen to these political outsiders and took the right decision.

[Presenter] Boris Yefimovich, ...it is known that relations between you and
the first Russian president were very emotional and that you were promised
the throne. After the throne was given to someone else, don't you think
that that someone else feels jealous? Could there be an internal conflict
in Putin's treatment of you?

[Nemtsov] To be honest with you, this is the first time in my life I've
heard such a question. I don't envy Putin. He cannot do what he wants - one
can see this in his eyes. He wants to say something but he is afraid not
because he is a coward but because the responsibility which he has is
incomparably higher than the responsibility of free people. He is
absolutely not free and, hence, he is unhappy. I don't think there are any
problems at the subconscious level. I see it differently. I think your
original theory is correct. Putin has a number of very sore topics. The
problem of Chechnya is the most painful for him. And it is correct that it
is the most serious problem for him since his political career began in
Chechnya and his political future depends on how the whole situation in
Chechnya will end. Naturally, he is rather jealous of those who have their
own plan for a peace settlement in Chechnya, those who are trying to do
something there. Incidentally, I must say that I don't have a desire to
score points in Chechnya. It is much easier to break your neck than to
score points there.

Secondly, I think that Chechnya is such a serious problem that it should be
resolved jointly. At the same time, if someone, say Putin, wants to win
laurels there, I am happy about that - he began the war there, let him end
it and enjoy the dividends, if there are any...

[Nemtsov] The Union of Right Forces unites free and independent
people...Yes, they don't account for 50 per cent but they are reliable
people who joined us at a rather difficult moment which means they will
stay with us and our ranks will grow. As a classic said, better less but
best.

The arrival of new people in the Union of Right Forces - many
representatives of small and medium-size businesses are joining us now,
many young people are joining us, as well as people who want to engage in
politics at regional and local levels. Fresh blood is coming in the Union
of Right Forces.

[Presenter] Does that mean that classical conformists such as
representatives of big business - since their interests always directly
depend on the interests of the authorities - are gradually leaving the
Union of Right Forces?

[Nemtsov] ...They never were members of the Union of Right Forces. They are
cautious, you are right. But they want to live in a free country. They
don't want to be in barracks. For them freedom is an opportunity to make
money and to spend money. They secretly - and many openly - support us,
hoping that Russia will be a European country. They have a very pragmatic
approach in this respect. At the same time they are not members of the
party's leading body and they are not members of our party and at any
moment they can say: you know, in principle, we are ready to join Unity.
Incidentally, I understand them - they are the biggest employers in the
country with hundreds of thousands of employees behind them, they have to
pay them wages and pay taxes. Already half of the Russian economy depends
on what they do.

[Presenter] Are they trying to influence your political views or decisions
you take?

[Nemtsov] There are agreements to the effect that they cannot impose their
political view at all.

[Presenter] During the time in office of the first president, everyone kept
saying that the Family was ruling everything and that the president was not
independent. Now everyone is talking about the nearest circle from St
Petersburg, which deals with all the problems of the country, and that, in
actual fact, everything is decided there, at the small political bureau.

[Nemtsov] It is Putin's sacred belief that only St Petersburg has good
people. It is his profound mistake. I don't know how to explain to him that
there are talented people in Moscow, Nizhniy Novgorod, Khabarovsk or
Novosibirsk. But this is a tragedy. It is a tragedy that in his life,
including his work in special services, Putin met only several hundred
colleagues. It is not enough for moving the country forward. Of course, one
can appoint the caretaker who was sweeping your courtyard minister in
charge of housing maintenance and municipal services, no problem. But I am
afraid the country will freeze after that. In my view, Putin's main tragedy
is that he doesn't trust people...

*******

#5
Moscow Times
October 1, 2001
The Economics Of War
By Valeria Korchagina
Staff Write
As major global economies struggle to ward off recession following the
terrorist attacks in the United States, Russia is shaping up to show the
world that it will not only emerge unscathed but perhaps come out on top.
Valeria Korchagina reports.

As global stock markets were reeling, airlines were laying off hundreds of
thousands of employees and consumers were staying away from stores in
droves, Prime Minister Mikhail Kasyanov made a prediction that no other
leader in a leading industrial power would dare utter.

He upgraded Russia's economic forecast. Kasyanov said Sept. 20 that the
economy would grow this year by 5.5 percent, a figure slightly higher than
previous government forecasts.

President Vladimir Putin backed up that optimism late last week at a
conference in Dresden aimed at winning over German investors.

"We know there is currently a big fall in the world economy. We hope it
won't lead to serious consequences, but Russia's economy is still growing,"
Putin said without a trace of pride in his voice.

The mood in Moscow is drastically different from elsewhere in the world. In
Asia, Europe and across the Atlantic in North America, stock brokers have
long written off scrumptious year-end bonuses, and investors are hoping
that once the seesawing markets stabilize there will be enough money left
for retirement. Economists have been hastily revising their colorful graphs
to account for depressed economic expectations.

But those same market watchers say Kasyanov and Putin could well be on the
mark. Russia, thanks to its insulation from other global economies, has a
good chance of outperforming not only other emerging markets this year, but
also showing relatively healthier growth than economic heavyweights such as
the United States, Britain, Germany and Japan.

However, the key to this growth could well hang on two factors -- global
oil prices and Russian diplomacy, economists say.

And even if oil prices hit barrel bottom, diplomacy could pull Russia
through. Russia, which is steadily warming up to the United States' call to
fight terrorism, could be on track toward cutting a deal with the West in
which it trades its war support for a restructuring or write-off of its
staggering foreign debt, accelerated entry into the World Trade
Organization or even, perhaps, membership in NATO.

A Pattern of Growth

The optimistic economic expectations voiced by the government this month
are hardly surprising. Russia's economy has been showing improved
year-on-year growth every year since the devastating 1998 financial crisis.
Last year, gross domestic product growth topped a stunning 8 percent, the
highest growth ever in post-Soviet history.

The 5.5 percent GDP growth planned for this year is 1.5 percent above
initial forecasts made in January. Furthermore, Russia is expecting to see
4 percent growth in 2002.

Putin and his economic-minded government have been working around the clock
to keep that locomotive of growth roaring at full steam. The Kremlin pushed
legislation through the State Duma last year that simplified a
mind-boggling web of often-contradictory tax legislation which suffocated
investment. He also slashed income tax to 13 percent, the lowest in Europe.

The government this year has continued to keep up a frantic pace of reform
aimed at improving the investment climate, drawing up crucial land, labor
and judicial laws. Just last week the Cabinet began taking steps to tame
the banking sector.

At the same time, the Central Bank has maintained a tight monetary policy
that has kept the ruble stable.

These changes have helped convince foreign investors that Russia is worthy
of their attention and, perhaps even more importantly, given Russian
businessmen a good reason to bring hundreds of millions of dollars back home.

The Best Laid Plans ...

But despite all the effort Putin and the government put into building a
robust economy, the one thing they probably did not count on was a possible
U.S.-mounted war in Russia's backyard.

U.S. President George W. Bush has named Osama bin Laden, the exiled Saudi
millionaire believed to be hiding in Afghanistan, as the No. 1 suspect for
the terrorist attacks. And even as Putin extolled the virtues of Russia's
economy to German investors last Wednesday, Bush was building up U.S.
forces in the Middle East in anticipation of an assault on Afghanistan.

The initial fallout of the potential war was seen in Moscow within hours of
the Sept. 11 terrorist attacks. On the street, the value of the U.S. dollar
plummeted from the official rate of about 29.3 rubles to as low as 15 as
currency exchange operators hoped to cash in on jitters about a looming
U.S. crisis. However, the Central Bank rate ended up holding steady and
exchange rates on the street quickly returned to official levels.

Central Bank head Viktor Gerashchenko breathed confidence into the country
by expressing unconcern that a considerable portion of the bank's reserves
were in dollars.

Longer term prospects for the stability of the dollar are unclear. Central
banks around the world -- including Russia's Central Bank --worked with the
U.S. Federal Reserve after the attacks to keep the dollar stable. In a
country like Russia, where billions of dollars in personal savings are kept
under mattresses, the strength of the dollar remains of paramount importance.

In the days that followed the attacks, trade thinned out on the Russian
stock market as investors waited to see what would happen when the New York
Stock Exchange reopened. After opening Sept. 17, the Dow plunged and the
benchmark RTS index in Moscow quickly followed suit. Although it is still
down, the RTS has since shown more stability than other major indices.

Significantly, the Russian stock market, while seen as a good bet compared
to other emerging markets, has never been a major factor in influencing the
health of the Russian economy. Thus, any ups and downs would do little to
shake up the economy.

"Most economic growth is currently due to local factors, and we believe
that Russia has enormous potential for internally driven growth, rebuilding
infrastructure, industry, distribution and the entire economic apparatus,"
said Eric Kraus, chief strategist with NIKoil investment bank.

The Petrodollar Economy

The attacks only managed to shoot a first shockwave through Russia when
global oil prices plummeted 13 percent last Monday. Oil tried to clawed
back its losses throughout the week but to little avail.

Kasyanov dourly noted that Russia saw the value of its Urals blend drop in
one month by almost $10 a barrel. The government estimates that the federal
budget loses $1 billion for every $1 drop in the price of oil.

As such, there was little the country could do but sit up and take notice.

"Despite positive [economic] trends [this year], there are a series of
uncertainties that the government must take into account," Kasyanov told a
government meeting last Tuesday.

Despite Kasyanov's remarks, the meeting went on to approve a draft 2002
budget that set the average oil price at $23 per barrel. The State Duma,
while expressing jitters about the price level, passed the budget at a
first hearing Friday.

Kasyanov and the Duma have good reason to be worried. Russia's economic
growth is linked almost entirely to oil prices. The country has enjoyed a
sweeping ride over past two years because of high oil prices. They have
enabled the government not only to meet foreign debt obligations, but also
provide extra funding for activities such as the war in Chechnya and
building up Central Bank reserves.

A Worst-Case Scenario

If worst came to worst, oil prices could fall to unexpected and prolonged
lows as the world economy sinks into a deep recession. Russia would be
unlikely to have enough revenues to meet its debt obligations -- which come
to $19 billion in 2003 -- and would find it difficult if not impossible to
borrow more in order to keep up payments.

To ease its Soviet-era debt repayments, the government this month said it
intends to issue $2 billion worth of Eurobonds. Even if the float goes
ahead as planned, with volatility in oil prices and uncertainty over how
long and deep a global recession might be, there is a risk that Russia
won't be able to find enough buyers for the debt.

The government will most likely refrain from issuing Eurobonds if the price
of oil falls below $16 a barrel, said Troika Dialog equity strategist James
Fenkner. Although Russia is currently in good shape politically and
economically, there is still strong residual doubt over the country's
credibility rooted in the 1998 crisis.

"The problem is that the investors have so much doubt following the August
1998 crisis that it is impossible to see major investors coming back to
Russia yet in any meaningful way," Fenkner said. "Russia is better than
other countries, but it's still not so attractive. The risk factor is still
quite high."

The negative aftermath of 1998 would become particularly acute if Russia is
hit by the world economic turmoil in the near future, Fenkner said.

"Russia no longer has the benefit of the doubt," he said. "It lost the
benefit of the doubt on Aug. 17, 1998. And, unfortunately, although the
later achievements are very good, no one is going to care about them over
the next couple of months."

Even if oil prices collapse, Russia should be able to get by in the short
term, said Keith Rowden, senior energy partner at PricewaterhouseCoopers
Russia.

"The government is building credibility in the world markets by publicly
focusing on debt repayment and maintaining a surplus in the federal budget
despite the significant temptation to spend money on needed domestic
issues, such as salaries for government workers and infrastructure costs,"
Rowden said.

Russia's dependence on oil could prove to be a blessing of sorts in disguise.

When the Organization of the Petroleum Exporting Countries hastily met late
last week to discuss falling oil prices, nonmember Russia found itself with
an invitation to join.

Russia is not thought to have any interest in teaming up with the cartel,
but the invitation from Saudi Oil Minister Ali al-Naimi in itself is a sign
that Moscow is being considered a force -- albeit small -- to be reckoned
with on the world oil stage, analysts said.

Russia produces about 6.5 million barrels of oil per day, and exports,
nearly 3 million bpd -- an amount equal to about 12 percent of all OPEC's
daily output on the market.

Other Economic Movers

A saying has it that war is the grease that gets an economy going. Despite
the rations and blackouts, the United States certainly saw its economy come
out of the doldrums of the Great Depression during World War II as
factories worked overtime pumping out weapons, planes and other military
hardware.

As a potential conflict looms in Central Asia, Russia has the potential to
see a rebirth of sorts in the defense industry. While a Russia that wants
the West to see it as an ally would not be able to sell arms to Mideast
countries like Iran and Iraq, there could be a clamoring for additional
defense goods from former Soviet republics in the region such as
Kazakhstan, Tajikistan, and Uzbekistan. Furthermore, longtime customer
India -- which is seeing rival Pakistan getting Western concessions for its
assistance in bargaining for bin Laden -- may decide its wants to bolster
its forces. Pakistan, which was just allowed last week to once again buy
arms on the world market, has expressed interest in shopping for hardware
at an upcoming arms bazaar in Turkey.

Even before the attacks in the United States, arms sales -- like Russia's
economy -- were expected to grow rapidly this year. The government says
Russia will sell up to $4 billion in arms in 2001, more money than the
industry has earned since 1991.

Deputy Prime Minister Ilya Klebanov, who oversees the defense sector, said
earlier this year that the country will be selling $6 billion worth of arms
annually in the near future.

Theoretically, an increase in arms sales could be tied to a need for an
increase in metals production and, perhaps, an increase in jobs.

While the entire scenario is purely hypothetical, the fact remains that a
boost in one Russian industry could bode well for the economy as a whole.

One other factor that could tip the balance for the economy is gas.
Revenues from the export of natural gas account for a fourth of the
country's GDP. However, with the price of gas stable and its shipment from
Russia practically bypassing the Central Asia region (except for imports
from Turkmenistan), gas is not seen by analysts as a wild card at this point.

Cutting a Deal

What could turn out to be the wild card in the stack is how Russia deals
diplomatically with the West in the war on terrorism.

After initially saying little about Russia's stance, Putin last week backed
the U.S. initiative to fight terror and offered Washington anti-terrorist
support that included providing Russian airspace for relief missions,
participating in search and rescue operations and arming the anti-Taliban
opposition.

Almost immediately, Russia began to bear the first fruits of its decision.
The United States and Western Europe toned down -- for the first time --
their criticism of Moscow for its ongoing campaign in Chechnya. Bush said
he believed there were rebels in Chechnya funded by international terrorist
groups -- echoing statements made by Moscow for years.

Speculation is already swirling that the terrorism war will allow Russia to
fulfill a 50-year-old dream of becoming a member of NATO. Putin is to visit
Brussels, Belgium, early this week to meet for talks with NATO members on
terrorism. Some reports have said he will become the first Russian leader
to visit NATO's headquarters there.

Putin mentioned Russia's interest in joining NATO when he met Bush for the
first time in Slovenia in June. He said a request to Washington to discuss
the issue had been rebuffed late last year. He also said the Soviet Union
had made such a request in the 1950s.

Whether NATO membership will be used as a bargaining chip remains to be
seen. But Russian politicians are already looking for an economically
rewarding payoff for Moscow's support of America's fight against terrorism
-- a debt deal.

"Pakistan had its debts quickly forgiven. Such a window of opportunity for
Russia has also opened," Boris Nemtsov, leader of the Union of Right
Forces, said at parliamentary hearings Friday.

After Pakistan offered its support to the U.S. campaign, international
lenders quickly agreed to drop sanctions and rescheduled hundreds of
millions dollars in maturing debt.

At the start of the year, the government tried to convince its creditors in
the Paris Club to rollover or revamp 2001 payments, claiming the country
lacked the money to make good on its obligations.

When the club balked, the government was forced to rewrite the federal
budget to take the debt into account. Since then, the government has
repeatedly dropped hints about getting some debt relief while faithfully
paying off its dues.

"Russia is the only post-communist country that is still paying 100 percent
of its communist debt, and not only for itself but for the other 14 former
Soviet republics," said Vyacheslav Nikonov, head of the Politika think tank.

Russia also has its eye on one other goal -- winning entry into the WTO.
Putin has named WTO entry as a top priority and has ordered bundles of
legislation passed that would make Russia's laws conform with that of WTO
member states.

Seven years of negotiations with those member states appeared to have made
little progress.

However, U.S. Trade Representative Robert Zoellick met with Russian
officials in Moscow over the weekend to discuss the bid and emerged saying
Russia could be in the final stage for WTO ascension by early 2002.

Previously, WTO members had said Russia had little chance of joining before
2003-04.

While Zoellick conceded that Russia had a lot of work to do before it
obtained membership, he said, "Serious progress has recently been achieved
by Russia in reforming its economy and developing its social sphere."

He added that he had spoken with EU officials about speeding up the WTO bid.

*******

#6
Financial Times (UK)
1 October 2001
Nato soft pedals on Russian arms treaty breach
By Judy Dempsey, Diplomatic Correspondent, in Brussels

Russia is breaking the treaty on Conventional Armed Forces in Europe (CFE)
but Nato and European Union officials are reluctant to raise the issue with
President Vladimir Putin when he arrives in Brussels on Monday.

With the US administration anxious to keep Russia on board its global
coalition against terrorism, several European diplomats said Washington
would not push Mr Putin to comply with a treaty aimed at reducing the
levels of conventional weapons in 30 countries, ranging from Canada and
Europe to the new republics of the former Soviet Union.

"Such pressure would be politically inconvenient," said one European
diplomat. "Trying to push Russian compliance is not a priority for the
Americans, even though many of us believe Moscow will exploit the fight
against terrorism to its own advantage."

Indeed, diplomats warn that if Washington and the Europeans do not press
Russia to comply, it could have far-reaching consequences for the northern
Caucasus, the region at the heart of the CFE dispute between Russia and Nato.

The independence of Georgia, to the south, and Moldova, to the west, could
be undermined, especially as Georgia depends on Russia for its gas
supplies. Turkey, a key Nato ally with close ties to the region, is also
concerned. Without compliance with CFE, Turkey sees Russia entrenching
itself in a region where it could control vital gas and electricity
supplies to Ankara.

The 1999 CFE treaty (often called CFE2) is an adaptation of the original
1990 CFE1 treaty that established ceilings of conventional weapons for
Warsaw Pact and Nato military blocs.

After the collapse of the Warsaw Pact and Nato expansion, ceilings were
modified to apply to individual countries. The weapons categories -
armoured personnel carriers (APCs), tanks and artillery pieces - remained
the same. The new treaty, diplomats say, takes better account of Russia's
security interests, especially along its southern borders. However, neither
Congress nor the Duma has yet ratified it. This means that, technically
speaking, the CFE1 treaty is still valid. Even so, diplomats said Russia
had frequently breached those ceilings.

Moscow is now also violating the CFE2 treaty, they note. Under its terms,
Russia undertook to withdraw its remaining forces from Georgia and Moldova.
By last July, the deadline set for disbanding its military base of Gudauta,
northern Georgia, Moscow was still entrenched.

Russia claims it needs the base as a "rest and recreation" facility for
monitors from the Organisation for Security and Co-operation in Europe.
"But we know, and the Russians know we know, that they are staying in
Gudauta to prevent supplies reaching the rebels in Chechnya," said a
western diplomat.

Russia also said it would destroy or withdraw the 40,000 tons of ammunition
it keeps in the trans-Dnestr region in Moldova, home to a Russian ethnic
minority. One phase was recently completed. Despite repeated offers of
western financial assistance, diplomats said Russia had refused to complete
the final two phases.

There is also substantial non-compliance along the northern Caucasus.
Russia tried hard in 1999 to have this flank treated as an exclusion zone
with no weapons limitations. It insisted it needed flexibility to deal with
the Chechnya rebellion.

Nato members refused such a zone. "However, we bent over backwards to
accommodate Russia," said a European military attache. The size of the
flank zone was reduced and Russia's APC allowance was increased from 1,380
to 2,140. Nevertheless, said western defence experts, Russia had exceeded
that allowance by 500 APCs and tanks by 300. It has also refused to allow
inspections into Chechnya, claiming travelling there is too dangerous. "The
bottom line", said a senior defence official, "is that Russia is in breach
of CFE." More important, Moscow may well use its non-compliance as one
condition of remaining in any US-led coalition.

*******

#7
Christian Science Monitor
1 October 2001
A new world focus on Central Asian states
The US-led war on terrorism holds new opportunity, and risks, for a remote
region.
By Scott Peterson
Staff writer of The Christian Science Monitor

FAIZABAD, AFGHANISTAN - Afghan rebels increasingly portray themselves as
indispensible to America's declared war against terrorism, and those living
in their territory have the message down pat.
"I saw Osama bin Laden on TV, and he's a bad person and very naughty," says
Shamsoleh, an Afghan English student. "If I find bin Laden, I will cut off
his head."

Not a surprising view, in this valley hamlet surrounded by bleak stone ridges.

The United Nations-recognized government of Afghan President Burhanuddin
Rabbani "rules" from this picturesque town, but only over about 10 percent
of the country.

His Northern Alliance - a coalition of fractious rebel groups - is fighting
Taliban control over the rest of Afghanistan.

With the US threatening to attack the Taliban to press for the handover of
Mr. bin Laden, its most notorious guest, Northern Alliance officials have
firm ideas about what must be done.

"The US should consult us. If they don't, the results of this operation
will be bad," says Col. Saleh Registani, Northern Alliance military attache
to Moscow. "We are inside Afghanistan, and ready to help," he says, adding
that "missile and air attacks are not enough. We need to collaborate."

But while a new US presence may prove a boon for some in Central Asia,
analysts warn that any US misstep risks boosting instability in a region
already renowned for poverty, Islamic militancy, and drug- and gun-running.

Another caveat: the US military focus on Afghanistan - and possible use of
former Soviet bases in Uzbekistan and Tajikistan - also cuts to the heart
of Russia's sphere of influence.

"It remains to be seen how much Russia will willingly allow this to
happen," says John Schoeberlein, head of the Forum for Central Asian
Studies at Harvard University in Cambridge, Mass. "I predict a major
confrontation will develop between Russia and the Central Asian states, if
they decide to go with the US."

Russian President Vladimir Putin says he is committed to the US-led
antiterrorism coalition, and already Washington has expressed a newfound
understanding of Russia's hardline tactics - including extensive human
rights violations - against separatist rebels in Chechnya.

Russia also says it will boost its longstanding military and cash support
for the Northern Alliance.

American officials are already in contact with the group, though its own
three years in power in the early 1990s were marred by corruption and
misrule, which helped fuel the spread of the Taliban.

President Putin yesterday spoke by telephone with the president of
Uzbekistan, Islam Karimov. The chief staging post for the 1979 Soviet
invasion of Afghanistan, Uzbekistan is likely to be the focus of any US
military presence. It has also been one of the former Soviet states most
eager to snub its nose at its former masters in Moscow.

According to a Kremlin statement, the two leaders discussed "the situation
taking shape in Afghanistan and around it, as well as practical issues of
mutual action by both countries in the war on international terrorism."

The fiercely secular, authoritarian regime in Tashkent has been conducting
its own crackdown on Muslims, shutting down mosques and arresting more than
5,000 people at one point for infractions as slight as growing a beard or
wearing a religious hat.

One result was the birth several years ago of the Islamic Movement of
Uzbekistan, or IMU, which works out of Tajikistan and has attacked targets
Kyrgyzstan and Uzbekistan.

Despite Uzbekistan's poor human rights record, the US has already begun to
warm up its rhetoric, paving the way for future help against Afghanistan.
President Bush explicitly mentioned the IMU when he outlined his war
against terrorism to a joint session of Congress. IMU assets were among
those frozen on Mr. Bush's terrorism list.

'Of all the Central Asia countries, it is Uzbekistan that will face the
most serious problems participating in the antiterrorist war," says Aziz
Niyazi, director of the Institute for Central Asia Development at the
Russian Academy of Sciences.

"The state already does not control a lot of Uzbek territories. Instead
there are illegal radical military groups that keep them under their
control. The radicals' positions are reinforced by serious economic and
social mistakes, made by Uzbek leaders," he says.

The likely results are also unclear for Tajikistan, torn by a series of
brutal civil wars since 1991 independence from the Soviet Union have
claimed at least 25,000 lives. A fragile 1997 peace deal brought Islamic
rebels into the government, though the regime ever since has been unable to
prevent Tajikistan from being the major transit route for heroin from
Afghanistan into Europe. This despite the 10,000 to 20,000 Russian troops
that patrol the Afghan-Tajik border. Their presence vastly complicates any
possible US military deployment.

"The US presence is going to increase substantially," says a Western
diplomat in the capital, Dushanbe. "America will bring money, and if it is
well-managed, it's a unique chance for Tajikistan.

"The question is: Are the authorities in a position to harness it for the
better, or will it aggravate the situation?"

Tajikistan is one of the poorest of the former Soviet Central Asian states,
with a per capital income of about $290 - less than $1 a day.

The risk of divisive instability is also real, and depends on American
actions. "There will be a certain split in the society of these countries,
between the state authorities, supporting the American action, and their
peoples, who are not at all so eager to do it," says Mr. Niyazi. "This is a
direct way to the instability and mass disorder."

Meanwhile, back in Afghanistan, despite the Sept. 9 assassination of
Northern Alliance military chief Ahmad Shah Masood - known as the "Lion of
Panjshir" for his exploits fighting Soviet occupation here in the 1980s -
there is a rekindled hope among rebel ranks that their sliver of turf,
which they say adds up to one quarter of the country, is soon to expand
with US help.

"We are the most optimistic we have been in five years," Colonel Registani
says. "It's a good opportunity for us."

But while the Northern Alliance groups may be rubbing their hands in glee
that the US appears to have taken up their cause against the Taliban, some
warn that the result could be unprecendented instability.

"If people see suffering because of this, it will be seen as an action
taken on behalf of dubious and often dictatorial leaders, in alliance with
the West," says Schoeberlein. "It could create a great impulse to
extremism, and create an anti-West, anti-American view that has so far been
absent in Central Asia."

******

#8
The Observer (UK)
30 September 2001
Russians say 'nyet' to meat and vodka
Kevin O'Flynn in Moscow

They were suppressed for 70 years and the name of their philosophy was
forbidden. Yet all they wanted was the right to be vegetarians. Now, more
than a century after the first Russian vegetarian society was founded, the
meat-free life is flourishing again.
At the forefront of the trend is Dzhangannat, a restaurant and 'Centre of
Healthy Eating', which, not content with a ban on meat, has also forbidden
alcohol and smoking. In a country where half the people smoke and cheap drink
is available 24 hours a day, a restaurant aimed at the health-conscious
seemed to be commercial suicide. But now there are plans to expand.

'Opponents said the restaurant business [in Moscow] is not possible without
meat or vodka,' said manager Igor Byutner. 'There's a lot of curiosity among
the average Russian.'

The country has a long history of being anti-meat. Before the Revolution
there were vegetarian societies all over the country. They were partly
influenced by the West, where such societies were in vogue at the time, but
the real father of Russian vegetarianism was Leo Tolstoy, who converted in
1885. 'The more compassionate we are to all animals, the better it is for our
soul,' wrote the author of War and Peace .

The Bolsheviks considered vegetarianism too close to the fastings of the
Church and an imperialist trait. 'Vegetarians didn't say they were
vegetarians,' said Nikolai Kalanov, director of The Vegetarian magazine and
president of the Eurasian Vegetarian Society. 'In Soviet times, being
vegetarian was like being a homosexual.'

*******

#9
The Sunday Telegraph (UK)
30 September 2001
Russia's black market trades in degree places
By Craig Nelson in Moscow

RUSSIA'S decaying schools system has spawned a £1.4 billion-a-year black
market in obtaining university entrances - in addition to a sophisticated
educational underworld for cheating in examinations.

In the rapidly transforming Russian economy, a university degree is one of
the few sure routes to obtaining a job with a reasonable wage.

Vladimir Filippov, the education minister, said last week that admissions
policies at Russian universities and institutes increasingly favoured the
well-to-do over the poor, and students from Moscow, whose parents can afford
to pay black market prices to get their children into higher education, over
their counterparts in rural Russia.

The case of Irina Yermolenko, a 46-year-old mother of two high school
students who lives in Moscow on a modest income, demonstrates how corrupt the
university entrance system has become.

When she tried to get her 17-year-old daughter Natasha into the Russian State
University for the Humanities she was told by a distinguished professor there
that he could arrange it for £3,500.

Soon afterwards, on the strength of a notice posted on a school wall, Mrs
Yermolenko, an executive assistant, met a man calling himself Volodya outside
a Moscow metro stop.

From a large sports bag Volodya produced the means to ensure her 16-year-old
son Sasha's admission to the computer science department at Moscow State
University - a tiny microphone, a pager and a set of miniature earphones.

Volodya explained that for £1,400 the devices would link Sasha to three
post-graduate students outside the room where he would be sitting the
department's entrance examination. He simply had to whisper the questions
into the microphone and listen to the answers.

Students with sufficiently high marks can obtain one of the highly prized
government-subsidised places in the department. An alternative route, offered
by Volodya for another £700, is to use certificates stating that Sasha was
deaf, which under Russian rules would also ensure his free enrolment.

Unfortunately for both Natasha and Sasha, the professor's invitation and
Volodya's solutions were beyond Mrs Yermolenko's financial reach. Much of the
corruption in Russian universities stems from the lack of a standardised,
national entrance exam. Each university and institute administers its own
admission tests.

They also sponsor preparatory classes, however, and private tutorials taught
by the same professors and lecturers who write, administer and often grade
the tests - an influential position that they often exploit.

School officials and faculties make no secret of the fact that without the
extra courses that they offer, students will not pass the examinations.Mrs
Yermolenko said: "There's no choice, really. You have to do what they say is
best.

"It's clear you are paying for access. You find a tutor with connections to
the exam board or who can put in a good word in your child's chosen
department."

In Russia, where the average monthly income is below £70, it can cost up to
£2,000 in tutors' fees to prepare a child for university. Thrice-weekly
preparatory classes with 10-15 other students cost £70 a month and more.

Proposals that there should be a national university entrance examination
have been strongly opposed by university officials and faculty groups.

Gregory Kantorovic, the vice president of the Higher School of Economics in
Moscow, argues that the lucrative prep-course system is driven not just by
the desperation of parents and their children, but from the university
teachers too. At £50 a month their salaries are what Mr Kantorovic describes
as "disgustingly small".

******

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