Johnson's Russia List
#6142
19 March 2002
davidjohnson@erols.com
A CDI Project

[Note from David Johnson:
1. Moscow Times: Nabi Abdullaev, Novaya Gazeta Fined $1.5 Million for Libel.
2. Newsweek International: Carla Power, The Shackles of Freedom. The end of 
communism was supposed to make life better for women. Has it? 
3. AP: Top Lawmaker Urges Russia on Weapons.
4. gazeta.ru: Cold War Breaks Out In Lenin’s Hometown.
5. Moscow Times editorial: Don't Expect Quick Fix of Bank Sector.
6. Financial Times (UK) editorial: Viktor loses.
7. UPI: Putin urges bill to boost pay in army.
8. AFP: Russia to stand by pledge to Japan over disputed Kuril islands.
9. pravda.ru: Alexander Alexeyev, RUSSIA'S ECONOMY: TIMID PEEK AHEAD.
10. NBC's MEET THE PRESS: An Interview with Russian Defense Minister Sergei 
Ivanov.]

*******

#1
Moscow Times
March 19, 2002
Novaya Gazeta Fined $1.5 Million for Libel
By Nabi Abdullaev 
Staff Writer 

Novaya Gazeta, known for its criticism of the Chechen conflict and its
investigations into state corruption, is staring bankruptcy in the face
after being slapped with a record $1.5 million judgment in two libel cases.

Novaya Gazeta journalists and free press advocates say the newspaper is the
target of a government-backed campaign to muzzle independent media.

Novaya Gazeta lost the two libel cases in Moscow's Basmanny municipal court
in late February. Judge Yelena Ptanskaya ordered the newspaper on Feb. 22
to pay about $1 million for a report alleging that the Krasnodar region's
top judge was living well beyond his means. Six days later she ordered the
newspaper to pay $500,000 to Mezhprombank for a story alleging that the
bank was involved in the Bank of New York money-laundering scandal.

"They [the fines] are equal to our yearly turnover, and we will not be able
to pay even if we sell all of our property," said Sergei Sokolov, the
newspaper's deputy editor. 

In a story published in January, Novaya Gazeta reported that Krasnodar
judge Alexander Chernov owns a $50,000 watch, drives luxury cars, frequents
expensive resorts and is building a $1 million mansion in Sochi -- all on a
monthly salary of $300.

Chernov filed a defamation suit in the Basmanny district, where the
newspaper is located, for 300 million rubles. He asked that the money go to
the state budget.

In a telephone interview, Chernov said the newspaper had fabricated the
story and that only one allegation was true -- the fact that he wears
expensive suits. "I run an important office and I must wear decent
clothes," he said. "But that does not mean that anybody is entitled to dig
into my dirty laundry."

Novaya Gazeta's lawyer Yaroslav Kozheurov said the newspaper has good
reason to be disliked by judicial authorities: The day before the Feb. 22
trial, it ran a highly critical story about the head of the Moscow city
court. 

"Solidarity among the judges could be the reason for the harsh verdict," he
said. 

Chernov acknowledged that solidarity could have played a role.

"I have nothing against this kind of corporate solidarity," he said.
"Perhaps this is the first time in Russia when a judge has imagined herself
in my place."

Chernov denied having any personal contacts with Ptanskaya and said he had
not attended the trial.

Ptanskaya refused to comment Monday.

Mezhprombank spokesman Sergei Samoshin said that the court had just cause
to fine the paper, calling the story that was published in November 2001
filth.

"I am a former journalist but I have never seen such a bad article,"
Samoshin said. "The newspaper now says it cannot afford to pay such fine,
but it could afford to publish such filth." 

Samoshin denied that the bank had filed the lawsuit on behalf of former
Mezhprombank CEO Sergei Pugachyov, often a target of the paper's criticism. 

Pugachyov, who is widely thought to be a confidant of President Vladimir
Putin, left the bank in December to take the Tuva seat in the Federation
Council.

Ruslan Gorevoi of the Glasnost Defense Foundation said the two verdicts
looked like a concerted campaign against Novaya Gazeta supported by the
authorities.

"Formally, it looks like the state has nothing to do with the cases, but
when we summarize reports about the prosecution of certain Russian
newspapers, it becomes clear that courts are fulfilling official orders to
eliminate the independent press," he said.

"After the punishment of the two independent TV stations [NTV and TV6],
somebody in the Kremlin has been left with idle hands," said Anvar Amirov
of the Panorama think tank. 

"Novaya Gazeta is now the most radical in Russia in its criticism of the
war in Chechnya," he added.

Leonid Olshansky, a renowned civil lawyer, said the size of the judgments
suggested that there was more at stake than just a libel suit.

"There are no means to define moral damages, so its size depends upon a
court's judgment," Olshansky said. 

"The verdict of the Basmanny court means probably that they don't like the
newspaper."

One of the largest libel judgments announced to date took place in 1999,
when Moscow Mayor Yury Luzhkov won 50,000 rubles ($1,700) from ORT
television and 100,000 rubles ($3,400) from its former anchorman, Sergei
Dorenko.

Novaya Gazeta has appealed to the Moscow city court but fears the lower
court's rulings will be upheld.

"After our story about the head of the court, it may want to get revenge,"
Sokolov said.

Kozheurov, the paper's lawyer, said the only appeals that can be made after
the city court is to its presidium or to Moscow prosecutors, who could
order a new trial.

*******

#2
Newsweek International
March 18, 2002
The Shackles of Freedom 
The end of communism was supposed to make life better for women. Has it? 
By Carla Power
 
    When Natasha M.’s circle of friends met at the University of Kiev back
in the 1980s, they were full of hope for the post- perestroika era. Over
late-night sessions in local cafes, they discussed their dreams of
glamorous travel, successful careers and the freedom to run their own
lives. But for many of them, the dozen years since communism’s fall have
been rough ones. Luda—who, like the rest of the group, doesn’t want her
last name used—went abroad and married an Italian man 15 years her senior,
only to find out he wanted an unpaid nursemaid, not a wife. Irina married
“a new Ukrainian,” who drove a Mercedes and outfitted her in Dior, but
forbade her from working or seeing her old friends. Lena and Julia started
“shuttle-trading,” traveling to Turkey with empty suitcases that they would
fill with cheap goods to sell back home. While abroad, they sold their
bodies to earn money, too. Daria, 33, who holds a Ph.D. in physics and
cybernetics, has been working as a property valuer, where the pay is low
and the prospects few. Now she’s desperately looking for a husband so she
can get a home of her own. “You can’t call me a woman,” she says. “I still
live with my parents. I’ve got no husband, no children. What kind of woman
is that?” 
     NATASHA HERSELF HAS fared better. As head of a French-owned
consultancy firm in Kiev, she has her own apartment and travels abroad. But
when she visits her hometown of Kaniv, she is pitied as a single, childless
woman, rather than admired for her success. She longs to return to London
or America, where she studied social policy, to escape the pressures of
economic instability and traditionalism. “I still have hope,” she says.
“But I don’t see any hope in the eyes of the women of my generation. I call
them ‘The Sufferers’.”  
      This isn’t how it was meant to be. The fall of the Berlin wall was
supposed to bring political freedom, Western fashions, private-sector jobs
and a new spirit of entrepreneurship to millions of Eastern and Central
European women. And to some degree, it has. But as Natasha’s circle shows,
it has also brought unexpected hardships, troubling paradoxes and plenty of
disappointment. When communism died, so did the liturgy of gender equality.
Today, the East European trends of domestic patriarchy and religious
conservatism threaten women’s freedom. Some women even wonder if they were
better off under the old system. “Things are much worse [since communism’s
collapse],” says 45-year-old Tamara Boiko, who trained as an engineer but
now earns $137 a month—still a relatively good salary—painting metal doors
as part of a Moscow city-maintenance crew. “There is more work and less
money.”
     Last Friday, on International Women’s Day, Russia’s women were feted
with flowers, toasts and a day of vacation. Sadly, such recognition comes
but once a year. Squeezed on one side by economic uncertainties and on the
other by growing cultural and religious traditionalism, East European women
are bearing the brunt of the region’s transition to capitalism. Throughout
the 1990s they lost jobs, benefits, quotas in government and status. State
funding for child care and support for the old and sick have dwindled,
leaving women to care for kids and aging parents. Fiercer competition from
the free market has increased stress over balancing work and home life. A
1998 survey found that between paid work and unpaid household duties,
Eastern European women averaged 70 hours of work a week—about 15 hours more
than women in Western Europe. (During the Soviet era, they averaged only
two hours more.)
      The brave new economies that have sprung up from Kiev to Kyrgyzstan
have favored the quick, the corrupt and, overwhelmingly, the male. Studies
show that women have been far slower than men to move from public-sector
jobs to the better-paying private sector. Across the region’s 27 countries,
women have lost considerably more paid work than men since 1989; of the 12
million Russians who lost their jobs between 1991 and 1999, 8 million of
them were women. Unemployment and spiraling costs have forced women to take
menial jobs or work in the sex industry to support their families.
Trafficking in Eastern European women—a crime that didn’t exist a decade
ago—is rampant, involving an estimated half-million women and millions of
dollars. At the same time, women are subject to increasingly strict
statutes on reproductive rights and fewer guarantees of child care or child
support in the case of divorce. Says Hungarian law professor and activist
Krisztina Morvai: “Feminism is still a swear word here.”
      Post-Soviet women remain skeptical of the goal of total equality. In
part, that’s because many East European women associate feminism with
Western women, who they believe have lost their femininity. But gender
equality is also unpopular because it’s still tightly tied in many women’s
minds with Soviet-style communism—which, despite the benefits it conferred,
still dictated equality from above. Under the Soviet state, many women
believed they were left with little choice but to work outside the home.
     These days, East European politicians are much more concerned with
economic growth than women’s equality. After the Soviet Union fell in 1991,
factories began to close and many institutions encouraged women to give up
their jobs so that men might keep theirs. Women who had trained as nuclear
scientists, mathematicians or factory heads found themselves applying to be
secretaries, translators or hostesses. One Moscow firm in the early ’90s
advertised openly for secretaries who “enjoy sex.” In Ukraine, ads for
office workers specified they were looking for “young, single women under 24.”
      Overwhelmingly, women are returning to “traditional” women’s jobs,
many of them in the lower levels of the public sector. A 1999 UNICEF report
found that in many ex-Soviet states, women make up 75 percent of employees
in education, health care and social services. And raising children is
still seen as women’s primary work. Ewa Zimna-Ziolkowska, a Polish mother
of two, is unemployed—and resigned to not finding a job. Under the Soviets,
she worked as an electrician. “At that time, we were treated as human
beings,” she says. “Now we are perceived as being stupid. Women like me may
as well get the doctor to give them a fatal injection once they hit 40.
We’ve fulfilled our one useful purpose in life—having children—and are no
longer any use to society.”
      Not all women mourn the demise of communism. Indeed, many have
eagerly embraced the trappings of capitalism. At the plush Planeta Fitness
gym in Moscow, the spinning-class instructor spurs exertions by calling the
last few minutes of the workout “the peak of communism.” “It’s to encourage
the girls to keep pumping, to say, ‘Don’t worry, it will be over soon’,”
says Lena Borodina, 25, who takes the class and insists she lives “very
well.” She holds a law degree, but says she hasn’t “found myself yet.” She
doesn’t need to; a rich businessman supports her. She drives a BMW Z3 and a
Range Rover, travels to Europe and has developed a fondness for Dolce &
Gabbana clothing—a radical departure from Soviet life for this daughter of
a miner and a teacher. Says Borodina: “My mother is happy for me.”
      Borodina and her fellow ladies of leisure are a new breed born of
post-Soviet wealth and resurgent traditional values. Across the Baltics,
many women are searching for that time-tested meal ticket: a wealthy man,
whether he’s a local “biznesmen,” or a Western entrepreneur. Marriage
agencies have mushroomed since independence, attracting eligible Western
bachelors by promoting Slavic women’s beauty and devotion to family. Each
woman, in turn, learns enough English to ask how much money her prospective
husband earns, and how many houses and swimming pools he has.
      But for many women, marriage isn’t the salvation they expect it to
be. According to a 2000 report from the International Helsinki Federation
for Human Rights, domestic violence is rampant across the region, from
Moldova to Uzbekistan (sidebar). In the mid-’90s, a Russian presidential
aide estimated that about 14,000 Russian women are killed each year as a
result of domestic conflicts. Domestic crimes are rarely reported, largely
because battered women lack legal protection, shelters and the full support
of the authorities. Few women or men even see violence against partners as
a problem. In 1998, when Hungarian activist and lawyer Morvai published
“Terror in the Family,” a study of domestic violence in Hungary, “nobody
actually had identified this as a problem,” she says. The post-perestroika
notion of the house as a private sphere has also made domestic violence
harder to police. “During communism, police would arrest the man if the
wife complained about domestic violence,” notes Morvai. “Now the whole
family is the private sphere—and police can’t interfere.”
      Feminist equality has also suffered from the religious renaissance
sweeping the region. The growing power of the Roman Catholic Church has
changed attitudes and laws. Until recently, Slovenian single women could
get treated for problems conceiving babies, but a new law mandates that
such treatment be reserved only for married or long-term cohabiting
couples. When Lesley Abdela, a British consultant on democratization and
gender, met with a Ukrainian bishop a couple of years ago, she asked him
when the Eastern Orthodox Church would start ordaining women as priests.
“Never,” he promptly responded. “How can women ever be priests when they
bleed every month?”   
       Many governments in the region have enacted stricter limits on
reproductive rights. In Poland, women can’t get abortions unless they have
medical problems or have been raped, or the fetus shows signs of
disabilities. But even women who are eligible discover that many doctors
are reluctant to carry out abortions. “The law turned out to be much more
restrictive than on paper,” notes Wanda Nowicka, executive director of the
Warsaw-based Federation for Women and Family Planning. Alicja, a married
mother of three, had a genetic condition impairing her eyesight, so when
she got pregnant again she assumed it would be relatively simple to get a
legal abortion, since her child could inherit the condition. Instead, she
was shunted between doctors who refused to certify her. Afterward, the same
doctors offered her an illegal abortion for $1,000—entirely beyond her
family’s means. In the end, she had the child, with the result that “my
health has seriously deteriorated and doctors say I will be blind within
months.” The Polish government lists the number of official abortions in
1999 as 151, a figure Nowicka hotly disputes, saying it was more like the
pre-communist 200,000.
      Slowly, the issue of women’s rights is gaining clout. Eagerness to
join the European Union has prompted some countries to examine their
equality laws. A new Polish labor code tackles gender inequality, placing
the burden of proof in discrimination claims on employers, not employees.
Polish women can now split the statutory six-month maternity leave with
their partners. A new Czech labor code, designed to meet EU standards,
outlaws sexual harassment and discrimination. Firms will no longer be able
to advertise for “young, attractive female secretaries.”
      Perhaps the greatest hope lies in the political sphere. In Estonia,
female parliamentarians canvassed to get more women on ballots in 1999—and,
as a result, succeeded in getting more women elected. In Lithuania, female
members of parliament have fleshed out the Law on Equal Opportunities, and
have supported women’s claims of discrimination. Since 1999, Latvia has had
a female president, Vaira Vike-Freiberga. Last week the European Commission
delegation to the Czech Republic called on Czechs to increase the number of
women in politics; in most EU countries, women make up about a quarter of
the government, compared with 13 percent in the Czech Republic. That is
beginning to change: last June Hana Marvanova, a 38-year-old lawyer and
single mother, was elected as leader of the right-wing Freedom Union Party.
Many hope her charismatic leadership will boost her party’s pro-Europe
fortunes. Some predict she could even be the Czech Republic’s first female
prime minister. Says Jiri Pehe, political analyst and director of New York
University’s Prague campus: “Marvanova’s election is a breakthrough in
Czech politics and the start of a new era for women.” It had better be. For
women left out of the new economies, the last new era—which began a mere 12
years ago—was a tough one. But if the political changes trickle down, the
women Natasha calls “the sufferers” may teach their daughters not to
suffer—but to prosper.

With Eve Conant in Moscow, Katka Krosnar in Prague and Warsaw and Lily Hyde
in Kiev 

******

#3
Top Lawmaker Urges Russia on Weapons
March 18, 2002
By VLADIMIR ISACHENKOV
  
MOSCOW (AP) - A senior lawmaker called Monday for Russia to upgrade its
nuclear weapons capability in response to the U.S. missile defense program,
despite a recent improvement in ties. 

``If you build up the shield, we will build up the sword,'' Ret. Gen.
Andrei Nikolayev, the head of the parliament's defense affairs committee,
said, according to the Interfax-Military News Agency. 

After years of protests against U.S. missile defense plans, Russian
President Vladimir Putin reacted calmly to the U.S. decision late last year
to withdraw from the 1972 Anti-Ballistic Missile Treaty, saying it was a
mistake but not a threat to Russia. The treaty barred the kind of missile
defense Washington wants to build. 

But top Russian military officials and diplomats have continued to express
concern that the U.S. missile shield, conceived to fend off threats from
such nations as Iran, Iraq and North Korea, might erode the deterrence
value of Russian nuclear forces. 

Nikolayev said Russia must respond to the U.S. missile ``umbrella'' by
``increasing the threat'' and developing weapons ``capable of penetrating
their missile defense.'' 

Unlike Nikolayev and other lawmakers, Russian government officials have
sought to play down differences and negotiate an arms reduction deal with
the United States by the time President Bush visits Russia in May. 

Bush has promised to slash the U.S. arsenal to 1,700 to 2,200 strategic
nuclear warheads, while Putin has said Russia could go even lower to 1,500
warheads from the current 6,000 that the countries are each permitted under
the START I treaty. 

The pledge reflected the general warming of U.S.-Russian ties, strengthened
by Putin's support for the U.S.-led war in Afghanistan. 

But negotiations have been rocky because of Moscow's strong objection to
the Pentagon's decision to stockpile decommisioned nuclear weapons rather
than destroy them. 

Signs of a breakthrough emerged Sunday, when Russian Defense Minister
Sergei Ivanov wrapped up talks in Washington by saying that Moscow wouldn't
mind if the United States stores some of the decommissioned weapons. He
added that the details were ``negotiable.'' 

U.S. Ambassador to Russia Alexander Vershbow voiced hope Monday that any
remaining differences would be ironed out before May's summit, Interfax
reported. 

******

#4
gazeta.ru
March 18, 2002
Cold War Breaks Out In Lenin’s Hometown
By Andrei Korvin 

A real war between the city officials and the local energy supplier has
broken out in Ulyanovsk, known as the birthplace of Vladimir Lenin.
Regional energy company Ulyanovskenergo has cut off heat and energy supply
after the communal utilities failed to repay over 300 million rubles of
debts. More than 100 thousand people in the largest district of the city
were left without heating and hot water for almost a week. At first the
local residents described the conflict between the energy company and the
Ulyanovsk’s mayor office as the “cold war”, but now the parties have passed
to the offensive.

At the behest of the Ulyanovsk city mayor – the FSB Colonel Pavel Romanenko
on Saturday local police and personnel of the city directorate for
emergency situations denied energy workers access to their equipment in
order to prevent further cutoffs. Being unable to repay the huge debt,
Ulyanovsk mayor ordered to tear off the seals and to restore hot water
supply. 

The energy company Ulyanovskenrego declared this action illegal. In
response to that the mayor said in televised comments on the NTV channel:
“It's true, we have no legal grounds for stopping the energy company from
cutting off hot water supply and using force against the energy provider.
But we proceeded from the assumption that the city residents should not be
held hostages of any financial and economic relations”. 

The mayor’s “armed forces” blocked the entrances to the energy equipment
facilities. Their task is to secure the safe access to the equipment for
workers of the housing sector, who restore the heat and energy supply to
the houses. Following the cutoffs the temperature in Ulyanovsk apartments
fell below 5 degrees Centigrade. 

The mayor’s office made the first attempt to restore energy supply on
Friday evening last week. The attempt failed. After workers of the communal
sector opened the valves, the Ulyanovskenergo officials immediately cut off
the supply again. It was then that the mayor ordered to restore energy
supply by force. Henceforth, all side-valves are guarded by armed policemen. 

Formally, the mayor’s office justified its move by the decision of the city
directorate for emergencies situations, which is headed by the same Pavel
Romanenko. The directorate had authorized the use of force against
Ulyanovskenergo citing the regional meteorologists’ frost forecast. 

At the same time Pavel Romanenko sent a letter to the President Vladimir
Putin, the presidential envoy to the Volga district Sergei Kiriyenko, the
national power grid UES’ chief Anatoly Chubais, Prime Minister Mikhail
Kasyanov and to the Prosecutor General Vladimir Ustinov, whereby he asked
the federal authorities to render assistance to the cash-strapped freezing
city, and warned that otherwise the mayor’s office “will be compelled to
take extreme measures to defend the interests of the city residents”. 

The management of Ulyanovskenergo, too, plans to address the
above-mentioned persons with a request for help. Ulyanovsk energy workers
consider the actions of the mayor’s office not only illegal but also
endangering the safety of residents. 

According to the company’s chief engineer Alexander Simanovsky, as a result
of the armed seizure of the energy supply equipment unskilled persons have
been granted access to the sophisticated equipment. Any wrong move may lead
to tragedy, Simanovsky charged. The wrong turn of the valve may lead to
explosion of radiators in apartments. 

Alexander Simanovsky is certain that the energy workers will not stand by
idly. Nor will they resort to any extreme measures. They will not even
close the thermoelectric power plant – the move that could easily rob the
whole city of heat. The company management is set to turn to the police and
the prosecutor’s office without delay.

******

#5
Moscow Times
March 19, 2002 
Editorial
Don't Expect Quick Fix of Bank Sector
 
The resignation of Central Bank chief Viktor Gerashchenko marks the
departure of one of the few larger-than-life characters remaining in
Russian politics and a man who has played a -- if not the -- dominant role
in the banking sector for the best of part of the past decade.

In the deluge of commentary since Friday, one of the chief indictments
against Gerashchenko has been that he was the main obstacle to reform of
the banking sector. The arrival of the president's candidate Sergei
Ignatyev at Neglinnaya -- it is suggested -- will give the green light to
reform.

While reformist zeal has never been one of Gerashchenko's strong points,
this view seems somewhat simplistic.

The government's attempt to produce a blueprint for banking sector reform
in the second half of last year ended in farce. After months of wrangling,
involving the Central Bank, government ministries, the State Duma and the
Russian Union of Industrialists and Entrepreneurs, the government adopted a
plan that barely differed from the Central Bank's initial proposals.

One might conclude from this that Gerashchenko single-handedly scuppered
the reformist urges of the government. However, a more likely explanation
is that there was no consensus in the government on the issue or simply
that there was no clear idea regarding what needed to be done to reform the
sector. Under this scenario, Gerashchenko serves as a convenient whipping
boy for the government.

So, will parachuting Ignatyev in from the Finance Ministry to the Central
Bank provide the necessary impetus for major reforms, just as Putin's
appointment of Alexei Miller to Gazprom was seen as paving the way for
serious changes at Gazprom?

It would seem a little optimistic. The problems of the banking sector are
inseparable from the broader problems besetting the economy. Bank lending
to the real economy will remain minute, while the legal system is weak and
the legal recourse for creditors to recover loans remains limited. 

It would require Herculean might to make a dent here. Ignatyev would do
better to focus his energies on putting the Central Bank's house in order. 

He'll certainly have his work cut out. The Central Bank has a swollen
bureaucracy; its approach to banking regulation can only be described as a
Soviet-style triumph of form over substance; transparency is not a strong
point; and its role as both regulator and major market player provides
serious potential for conflict of interests. Add to that the need to
insulate the Central Bank from undue influence from big business, and
Ignatyev will have more than enough to be getting on with.

********

#6
Financial Times (UK)
March 19, 2002
Editorial
Viktor loses

Vladimir Putin, Russia's president, has sent a signal that he is at last
serious about financial sector reforms. The decision to remove Viktor
Gerashchenko, the conservative central bank governor, will not by itself
open the floodgates to modernisation. But it shows the Kremlin is willing
to give reform a chance. 

Sergei Ignatiev, Mr Gerashchenko's successor, inherits an economy that is
growing fast, fuelled by energy exports. The rouble and currency reserves
are strong. Mr Ignatiev has a good opportunity to accelerate financial
sector reforms, especially in banking. The Russian economy has managed
extraordinarily well without proper banking since the 1998 crisis shattered
public faith in banking, leaving the state-controlled Sberbank dominant.
But the country cannot develop a modern economy without a broad-based
banking system. 

Mr Ignatiev's priority should be to strengthen privately owned banks by
raising minimum capital requirements and forcing a cull among the existing
1,300 institutions. The survivors should create a deposit insurance scheme,
probably with some degree of state backing. 

Bank ownership should be clearly separated from the ownership of other
forms of business. Among the worst features of the 1998 crisis was bank
owners raiding deposits to finance losses in other investments. Mr Ignatiev
must try to stop history repeating itself. Russia's business oligarchs must
choose whether to follow JP Morgan or Andrew Carnegie. They cannot be both. 

Next, Mr Ignatiev must reduce Sberbank's dominance. This cannot be rushed,
as it runs the only national financial network. But Sberbank's 80 per cent
share of retail deposits stifles competition. The Kremlin should prepare
for some form of break-up and the privatisation of the central bank's 63
per cent stake. 

Foreign investors can play a valuable role by bringing expertise.
Foreign-owned banks could also help Mr Ignatiev dilute oligarch capital in
banking. 

None of this will transform Russian banking overnight. Russians will
continue to keep a big share of their savings under mattresses until they
have much greater faith in business, public administration, tax officials
and the rule of law. But banking reform is a necessary part of the whole
picture. 

The international community can play a modest role by encouraging Moscow to
liberalise financial services during its negotiations to join the World
Trade Organisation. Mr Ignatiev may occasionally find the WTO application a
useful stick with which to beat domestic critics. But this is principally a
challenge that Russians themselves must meet. 
 
******** 

#7
Putin urges bill to boost pay in army 

MOSCOW, March 18 (UPI) -- Russian President Vladimir Putin addressed his
government Monday urging passage no later than May 1 of a new law to boost
military salaries by at least 1.5 times current levels, the
state-controlled ORT television network reported.

Putin recommended that Russia's bicameral parliament adopt the bill passed
Friday in the second reading.

After passing both chambers of the parliament, the bill will be enacted by
a presidential decree.

The bill -- dubbed by the Russian media as the "benefits cancellation bill"
-- seeks to scrap numerous social benefits enjoyed by the military staff
and raise instead meager salaries in a sweeping army reform.

According to Putin, the new bill should result in a "significant increase
of the military personnel's income despite cancellation of a number of
ineffective benefits."

The president criticized the existing system of payment saying it was
"inherited from the Soviet system and has been continuously failing over
the last decade."

"The state told the military staff: 'Yes, you are low paid, but you have
the benefits. As a rule, the benefits rarely reached the officers' pockets
and when they did, it was a paltry amount," said Putin.

The president blamed the authorities of failing to allocate appropriate
funds, as well as of spending them on other needs.

Until now, Russia's military staff was entitled -- among others -- to
benefits allowing them to pay only half the cost of housing and utilities,
as well as to get substantial income tax deductions.

Not all benefits will be kicked out, though -- pensioned officers, the
families of servicemen who died or were killed in combat will retain some
of the existing benefits. 

If passed in accordance with Putin's recommendation, the new law would
raise the staff's salaries as early as July 1, 2002, by 1.5 times current
levels.

Another increase is scheduled for Jan. 1, 2003 when the salaries would go
up twofold.

Accordingly, the salary of the first deputy defense minister in the rank of
an army general will be raised in July from current 9,306 rubles ($300) to
13,198 rubles ($426), Moscow's Gazeta daily reported in a survey Monday.

Respectively, a lieutenant serving as a platoon commander and currently
earning 2,369 rubles ($76) will get a raise amounting to 4,288 rubles
($138), the paper said.

In his Monday address, Putin stressed the necessity to especially boost the
salaries of junior- and medium-rank officers.

The officers' earnings will be indexed with the civil servants' salaries,
said the president.

The draft of the new law also foresees a 70 percent salary bonus (instead
of the current 50 percent) to the personnel serving under "specially
difficult and tense" circumstances.

The length of an officer's service in the military will also play an
important role in terms of finances as a current 40 percent bonus scale
will be increased to 70 percent.

Putin's address urged Prime Minister Mikhail Kasyanov's immediate reaction
as he ordered the Finance Ministry to seek funds in Russia's budget to
accommodate the predicted raise.

Russian Deputy Defense Minister Lyubov Kudelina told RIA Novosti news
agency that the planned increase would be only the "first step on the
government's way to boost the military personnel's incomes further."

Kudelina also denied media reports that said retired officers would have
their pensions decreased as a result of upcoming legal changes.

"The procedure of calculation of military pensions remains the same and
won't be changed," said Kudelina, announcing that the Defense Ministry
would publish in the media in coming weeks detailed information explaining
the novelties in the accounting system.

The Russian government's effort to raise the salaries of its military staff
is one in a number of steps that should help Russia boost the image of the
army and reach the goal set by Putin to create a "more modern, well trained
and equipped, mobile military."

The military reform also foresees staff cutbacks by 2005 that would reduce
the current number of troops by 350,000.

A long-term program to discontinue recruiting conscripts and staff the
military with professional soldiers and officers serving under contracts is
part of the reform, too. 

******

#8
Russia to stand by pledge to Japan over disputed Kuril islands
AFP
March 19, 2002  
 
Russia pledged to stand by a Soviet-era agreement with Tokyo over four 
disputed islands off northern Japan despite a resolution by deputies urging 
President Vladimir Putin to reaffirm Russian sovereignty over them. 

Foreign ministry spokesman Alexander Yakovenko said that as the successor 
state to the Soviet Union, Russia would "fulfil all the international legal 
obligations" assumed by Moscow in 1956 when it signed with Tokyo a statement 
ending World War II hostilities. 

The statement included a clause in which Moscow pledged to hand over two of 
four southern Kuril islands seized by Soviet troops at the end of the war, 
Shikotan and Habomai, once a formal peace treaty was concluded.

The fate of the other two islands, Kunashiri and Etorofu, was to be 
determined later. 

With Japan refusing to formalise a peace treaty until the dispute over the 
Kurils is settled, no progress towards achieving such an agreement has been 
made since then.

The Kurils issue has continued to bedevil Russo-Japanese relations, acting as 
a brake on badly needed Japanese investment in the Russian economy, notably 
in the Far Eastern region. 

There has been growing speculation in Russia that the government is engaged 
in behind-the-scenes negotiations to return two of the islands while 
continuing talks about the other two in line with a proposal by Tokyo last 
month that the sides should adopt a "two-plus-two" approach.

Russian Foreign Minister Igor Ivanov sought to dampen the rumours last week, 
denying that Moscow was negotiating a handover in exchange for having its 
foreign debts cleared, but Tokyo was adamant that Russia had not turned down 
its two-track proposal.

With new opinion polls showing Russian public broadly opposed to handing the 
islands back, the State Duma lower house approved a proposal Monday 
recommending Putin to abandon efforts to secure a peace treaty with Japan so 
as to sidestep Tokyo's demands.

The deputies urged Putin to seek instead a "cooperation and good neighbours 
treaty, bearing in mind that Russia and Japan made peace in 1956 and there is 
no need for an additional peace treaty," the Interfax news agency reported. 

"Territorial concessions by Russia are unacceptable and the treaty should 
only confirm the existing border between Russia and Japan which has gained 
international recognition," according to the text drafted by the chairmen of 
the Duma foreign affairs and security committees Dmitry Rogozin and Alexander 
Gurov. 

Rogozin told deputies the islands were important "in protecting Russia's 
security interests" and said the 1956 pledge had been an "obvious mistake." 

Gurov said the Russian authorities should be tougher in "strengthening 
Russia's sovereignty over the south Kuril islands."

Deputy Economic Development and Trade Minister Muhamed Tsikanov told deputies 
that a bill setting up a Kuril islands free economic zone was to be approved 
later this year.

*******

#9
pravda.ru
March 18, 2002
RUSSIA'S ECONOMY: TIMID PEEK AHEAD
Alexander Alexeyev, Rosbalt News Agency 

The wave of euphoria from oil super-profits and the intoxication of brotherly 
hugs and kisses with the U.S. rolled on and subsided. Now we need to have a 
good look at what we are left with and what we can expect in the future. In 
other words, we need to see what if any chances we have of surviving in this 
cruel world. However terrible terrorists may be, if indeed they exist, it is 
hard to make us, sane people, believe that from now on everything rides on 
whether or not Bin Laden is apprehended. The economy of the U.S. seems to be 
gradually awakening after its post-September 11 stupor, Afghanistan quiet and 
obedient like a baby lamb, etc. However hard some people try to convince us 
of the opposite, our lives and well-being still depend on our own ability to 
make a living. In other words, be it under the old man Karl Marx or now, we 
depend on the state of our economy and we are nowhere near being able to 
dismiss it. 

Despite the optimistic vertigo Russia's and Western mass media are suffering, 
there are no unequivocal forecasts as to what our economy is in for. Normally 
prognostication is done through modelling something that develops. Yet a 
number of incidental factors may frustrate any and all efforts to have a peek 
into the future. The economic policies of our government are too chaotic to 
become a firm foundation for a sound estimate of the long-term prospects of 
our development. So what's left to us is rather establishing facts than 
making forecasts. 

In most cases, the optimism of estimations concerning Russian economy has 
been confined to the following: 
1) On the whole, ours has become quite a market economy; 
2) While for now its growth is slowing down, the way things were in 2000 and 
2001 allows hoping that stability is possible in principle, unless an 
insufficiently conscientious terrorist with explosives in his boots causes 
another confusion. 

Yet market economy is not necessarily a synonym of effective economy. The 
eternal oppositionist Grigory Yavlinsky noted quite to the point that there 
might be no successful market economy where politics doesn't go hand-in-hand 
with protecting human rights and where there is no society of true citizens, 
as we call it. Yet such society is no more than an ideal to aspire to. In the 
meantime, economic growth that for a while looked unstoppable suddenly turned 
into a small stagnation. So today we have much more uncertainty than just six 
months ago. 

Among other positive developments, Western analysts note the growth of the 
effectiveness of Russia's companies. Low investment activity looks quite 
adequate if we just look back to the unfortunate August of 1998, while the 
recent tax reform, the heightened budget discipline, and a number of new 
important laws illustrate there being at least a common tendency toward 
fighting chaos. Some foreign-made forecasts as to the development of Russia's 
economy seem even more optimistic than of our government. All seems good, yet 
only until we notice that the current situation is just a replay of 
1994-1995. Of course, everyone remembers where we ended then. 

In fact, the economic policies of the years 2000 and 2001 were mostly 
'drifting with the waves'. Such is, for instance, the opinion of Mikhail 
Delyagin, the Director of the Institute for the Problems of Globalisation, 
who considers our success in those years just a positive echo of the 
devaluation of our national currency in 1998 and the risen oil prices. Now 
those positive effects have run out. The substitution of our domestic 
products for imports is slowing down. According to the forecasts made by the 
Vedi analytical laboratory, by 2005, foreign trade balance should be just 
half of that in the year 2000. 

Too Much Money 

According to Andrei Illarionov, the President's economic advisor, a new round 
of the devaluation of rouble may help the situation. Mr. Illarionov believes 
the fall of oil prices is beneficial because it cuts the inflow of dollars to 
Russia. This should result in the growth of exports and bring imports down, 
which, in turn, should naturally boost Total Internal Product. Yet is 
everything that simple? 

The situation is rather paradoxical. On the one hand, we do not need too much 
money and rejoice the crash of our oil-related hopes. On the other hand, we 
exert ourselves trying to bring in investments. As many analysts believe, the 
reasons lie not in that dollars and dollars are different. The reason is 
rather in the inability of our economy to assimilate the money we get. This 
is why eliminating structural barriers must become the government's first 
priority objective. In order to break the magic circle of being dependent on 
exports, we need profound institutional reforms. 

The Perspectives of Middle Class 

Russia's internal market has an enormous potential. Those who hope to 
overcome the raw-stock orientation of our economy, which should bring real as 
opposed to incidental stability, are many. An important role in this is 
ascribed to the middle class and that is believed to be the cornerstone of 
our future prosperity. Why don't we, for starters, try and understand what 
are those we call 'middle class'. According to the estimates published in the 
Expert magazine, our hypothetical 'middle class' is now right where its 
American counterparts were in mid-60s. Yet the growth of its material 
well-being is limited by the excessive share of imports, the low rating of 
our national currency and our underdeveloped financial credit system. The 
continuing low productivity of the majority of Russia's companies and the 
deterioration of main productive assets curb our ability to curb the growth 
of imports. 

True and Imaginary Problems 

To reverse the situation we need responsible policies. According to the 
Expert magazine, V. Fadyeev believes that our government should worry about 
real rather than imaginary problems. The excessive strengthening of rouble or 
joining the World Trade Organisation (WTO), which has lately been chewed on 
so much, are among the least problems. No one says Russia should not 
integrate into the world economic institutions. The question is how fast and 
at what price? Can the benefits prove far smaller than the losses? We are 
aspiring to becoming equal partners there, yet the recent joining of the WTO 
by China shows that in truth not all its members enjoy equal rights. In any 
case, joining the WTO threatens us with an inflow of goods, which means the 
reduction of investments. What could be worse than that? Besides, joining the 
WTO will create additional problems with our integration into the European 
Union (EU) or any other such regional entity, and that may be far more 
important for us than the doubtful benefits of joining the WTO. 

To many analysts the graduate adaptation of European institutions to Russia's 
realities seems to be the most rational strategy for our country. Prof. V. 
Mau, the head of the Working Centre for Economic Reforms, believes Russia 
could most naturally opt for joining the WTO. There are various economic, 
social, and cultural reasons. This is not the same as joining the European 
Union. The criteria Russia is oriented to are already rather tough. Following 
them, a partnership between Russia and the EU could take on rather developed 
forms in strategic perspective. 

The Problem of 2003 

The so-called problem of the year 2003 has long since become a bugaboo 
pessimists use to scare us with. It is the problem of foreign debt. Russia is 
required to pay a total of $17 milliard next year. The amount is by all means 
impressive, especially if compared with our budget. Strictly speaking, the 
problem is not limited to 2003. We will have to come up with annual payments 
of between $12 milliard to $19 milliard over the period from 2003 through 
2008. And this is a serious challenge that may upset the illusory stability. 
Yet lately many have been saying the problem is not all that terrible. 

Speaking on Wednesday at the Ministry of Finance, Mikhail Kasyanov, the Prime 
Minister of Russia, even suggested there was no such problem at all. Of 
course, a sceptical thinker won't just take this at face value. Yet 
authoritative Russian and foreign analysts join the consensus as to the 
forecasts made by the Centre of Development and the Expert magazine, all 
saying Russia's economy can handle 'the problem of 2003' rather easily. 
Well, let us live and see. And there is not much time left before we see it 
all. Everything is going to unfold right before our eyes. In any case, the 
government should concentrate of the partial conversion of foreign debt into 
domestic debt, which is not easy. 

Not Enough Money - as Usual 

The outflow of capital from Russia is traditionally named among the most 
serious problems hampering the sky-high growth of our economy and the unheard 
of prospering of our country. However, this situation is gradually improving. 
Even better, some experts predict the inflow of capital to Russia to an 
annual total of $5 milliard to $7 milliard as soon as around 2003. Everything 
stops at the measures necessary to maintain investment activity, some of them 
not just or even not as much financial as legislative, managerial, 
law-enforcement-related, etc. 

Those Insidious Imports 

High oil prices are similar to drugs in that you taste them once and you will 
want more and more. Yet despite their short-term beneficial effect, high oil 
prices may prove destructive as goes Russia's economy. This is why numerous 
are those who see the unfavourable situation with oil prices as a chance to 
do some structural reforming. According to Mikhail Delyagin, oil prices may 
keep fluctuating about the critical level till at least 2005. Just as a 
long-time junky, Russia cannot live without her oil-dollar needle. Well, most 
analysts believe the price of oil will not go below the fatal $10 or $12 per 
one barrel. More likely than not, the prices will keep at or above $18 per 
barrel. And that is the figure that assures we have no problems with our 
budget, that is, if one agrees with what Pyotr Aven, the President of 
Alfa-bank, said in his interview to Gazata.ru. 

Whatever. We must gradually do away with our orientation toward exporting raw 
stocks. According to the forecasts made by Sergei Glaziev, the Chairman of 
the State Duma's Committee on Economic Policies and Entrepreneurship and a 
correspondent member of the Russian Academy of Sciences, if we continue to be 
exports-dependent, our annual economic growth may drop to 1% or 1.5% by the 
year 2010. And what little left of the growth will be mostly contributed to 
by raw-stock industries while the growth of industrial production may find 
itself in the red. 

'New' Russian Economy 

Everybody says the economic situation can be corrected only if we keep 
developing our scientific and productive potentials. Of course, this is a 
worthy objective, except how can we do it while there is not enough 
investment activity, the outflow of capital from Russia continuing and the 
debt growing? There are lots of people saying that in a few years our 
outdated equipment may begin failing avalanche-like. Some economists say the 
decade of reforming has, in effect, de-modernised the country. Some expect 
our complete infrastructure to fall apart over the time from 2004 through 
2005. This will immediately affect the production of energy and gas industry, 
which are the most vulnerable to equipment failures. 

Some analysts believe the development of economy has a choice of two 
directions. The first of these is modern hi-tech requiring lots of 
intellectual resources and less labour. Then there is agriculture, and we 
have plenty of natural resources to develop it. What we keep forgetting is 
the level of consumption. In the meantime, most family budgets are spent 
entirely on food. This is why we must ease tax burden on agricultural 
producers and those who process their products. Protective customs barriers 
would not hurt anyone either. 

By the way, if we join the World Trade Organisation it may hurt our 
agriculture before anything else. And this is exactly the area where we are 
least likely to get any concessions from the WTO. In the meantime, according 
to Mr. Korolyov, a deputy director of the Institute of World Economy and 
Foreign Relations, agriculture is the very industry that may provide the 
so-called 'growth points', where investments are the easiest to obtain and 
which uses lots of the products of other industries. 

And what shall we do about the development of science and technologies? The 
world's experience shows that today there is no effective and stable 
development of economy without innovation. Yet in Russia there are 
practically no policies directed at innovation. In the meantime, to use the 
favourable situation of the recent years to direct our development that way 
would be the most rational. We should also try and develop such effective 
trends as electronic commerce where there already have been some positive 
movement. What stands in the way of innovation is the insufficient number of 
computers, the lack of psychological adaptation on the part of 
administrators, the lack of venture capital, excessive semi-legal activities 
and the overall poor condition of Russia's industries. 

And when will our economy leave the shadows? The problem of bringing Russia's 
economy, a considerable part of which is still 'shady', out to the light of 
legality is very urgent. Practically all Russia's business is either illegal 
or semi-legal to some or other extent, administrations corrupted. The problem 
can hardly be alleviated by half-measures like lowering taxes and customs 
duties. There are too many Russian companies the legalisation of whose 
operations would render them totally and catastrophically unprofitable under 
the existing conditions. 

Getting out of the shadows is a problem of conventions. Economy can only be 
legalised all at once. Otherwise the shady companies will have great and 
unfair advantages. The government's hands are completely tied as goes the 
gradual legalisation of Russia's business. Obviously, such legalisation could 
not possibly be supported by any legal acts. In other words, victory over 
shady economy is so far away, it can hardly be seen. 

Plainly, there are more questions than answers where the future of Russia's 
economy is concerned. We have been somewhat lucky yet the ineffectiveness of 
regulations still remains. Our future hangs on whether development remains 
incidental or becomes regulated - over the following years. The economic 
well-being of any country is reflected not only in the standards of living of 
her citizens but also in her international status. And missiles cannot 
support that. Rockets rust and become no good. Whatever one's weapons, there 
is always a better weapon someplace. And it belongs to someone else. We still 
have enough potential to spoil everything for the world without profiting 
from it in the least. Yet such potential comes and goes and once it is gone, 
who do you think will respect us? 

*******

#10
MEET THE PRESS
NBC TV
MARCH 17, 2002
An Interview with Russian Defense Minister Sergei Ivanov

MR. RUSSERT: But first, overnight violence around the world. In Islamabad,
Pakistan, a grenade hurled into a church service, killing five, including
two American worshipers.

In Israel, north of Tel Aviv, a Palestinian gunman shot dead by Israeli
police after he had opened fire, killing at least one Israeli, wounding
several more.

And American Mid East peace envoy Anthony Zinni, trying to broker a
cease-fire, meeting with both Israeli Prime Minister Ariel Sharon and
Palestinian leader Yasser Arafat.

And Vice President Dick Cheney continues his Mideast trip, trying to
convince reluctant Arab leaders it may be necessary to remove Iraq's Saddam
Hussein from power by military means.

The world, indeed, still a very dangerous place, but relations have
improved dramatically over time with our former primary enemy, Russia.
Earlier in the week, I visited the Russian embassy and sat down with their
minister of Defense, who had just met with his American counterpart, Donald
Rumsfeld, at the Pentagon, and with President George W. Bush at the White
House.

(Begin videotaped segment.)

Sergei Ivanov, welcome to "Meet the Press."

As you know, as the world knows, last week the Nuclear Posture Review was
leaked to the media from the Pentagon, and I'd like to read you one
paragraph from that.

"Russia's nuclear forces and programs, nevertheless, remain a concern.
Russia faces many strategic problems around its periphery, and its future
course cannot be charted with certainty. U.S. planning must take this into
account. In the event that U.S. relations with Russia significantly worsen
in the future, the U.S. may need to revise its nuclear force levels and
posture."

And what we learned is that, in fact, the United States would like to
reduce the number of nuclear weapons, but warehouse them, put them on a
shelf, in case circumstances change, in case our relationship with Russia
changes. Is that prudent thinking on behalf of the United States?

MIN. IVANOV: Well, good afternoon, Tim, and thanks for the invitation. I
have to admit that, of course, part of that which says that Russia has lots
of problems on its periphery is true. Unfortunately, our neighbors are much
more numerous than the Americans one -- than American ones. You have only
two, Canada and Mexico. I always envied you in that sense. We have dozens
of them, and not all of them are really quite all predictable.

As for reducing nuclear capability as such, particularly strategic nuclear
capability, it's a proper move. Both presidents have already agreed about
that, and both Russian and American side are trying to devise a formula how
to do it most effectively on the principle of equal security, transparency,
and legally binding documents.

MR. RUSSERT: But you have said if you put them on a shelf, they would not
be, quote, "real reductions."

MIN. IVANOV: In that sense, yes, because the majority of the people in the
world, I am convinced about that, think that reduction really means
elimination. Elimination.

Part of nuclear weapons should be eliminated because they simply get
outdated, and may become dangerous for the owner of those warheads or
missiles to that end. But part of it may be stored. I don't argue that
principle, you know, out of hand, but the devil is in the details -- how
much, how long, and how quickly it might go back to operational and, well,
jeopardize strategic stability.

MR. RUSSERT: But that is negotiable.

MIN. IVANOV: That's negotiable, yes.

MR. RUSSERT: The CIA each year issues an annual report to Congress on the
safety and security of Russian nuclear facilities. The most recent report
says, "Weapons-grade and weapons-usable nuclear materials have been stolen
from some Russian institutes. We assess that undetected smuggling has
occurred, although we do not know the magnitude of such thefts.
Nevertheless, we are concerned about the total amount of material that
could have been diverted over the last 10 years."

Is that accurate?

MIN. IVANOV: No. Here I can answer quite definitely. Concerning
weapons-grade material, there is not a single case that any Russian
weapons-grade material have been stolen, sold, or something like that.
There were cases of isotopes, I think you call them isotopes, from the
civilian energy sector, which some fools thought that it might be presented
as a nuclear material and try to sell it, but that has nothing to do with
defense. And I can assure you really point blank that Russian weapons
system plutonium is under a very strict government control.

MR. RUSSERT: Safe and secure?

MIN. IVANOV: Safe and secure, absolutely.

MR. RUSSERT: Let me turn to the war on terrorism in Afghanistan. Are you
impressed thus far with the United States success in Afghanistan?

MIN. IVANOV: That depends on what you measure as success. If you measure it
as removing big groups of bandit groups or terrorist groups, which are
combined in thousands sometimes or march in the roads, well, in a
paramilitary way, then, of course, United States have achieved definite
progress. The big groups are dispersed already.

But if you analyze it -- and we have a history of knowing what Afghanistan
is, and from the very start, we told that people, not the American
military, because they shared our realistic view from the very start, but
the general public, they shouldn't be very over-optimistic. It will take
years to dismantle the roots of al Qaeda and Taliban -- 

MR. RUSSERT: Years?

MIN. IVANOV: Years, definitely. Not months.

MR. RUSSERT: Russia lost 15,000 soldiers in Afghanistan; 35,000 more were
injured. Why did Russia meet with such an awful outcome, when apparently
the United States has done it with relatively fewer casualties?

MIN. IVANOV: It was not Russia. It was Soviet Union. That's a big change.
And why the Soviet Union did that? Because the Soviet Union at the time was
trying to impose military power on every square mile of Afghanistan. As far
as I know, no foreign country which takes part in this operation in
Afghanistan now has such an aim.

MR. RUSSERT: Osama bin Laden. At a news conference Wednesday in Washington,
you said that you had absolute proof that Osama bin Laden trained many of
the terrorists that are now operating in Chechnya, a province of Russia. Do
you have any idea where Osama bin Laden is?

MIN. IVANOV: I have no idea.

MR. RUSSERT: What's your hunch?

MIN. IVANOV: My hunch that he is -- hunch, it's just a hunch, no
background, no information sustaining that hunch -- is that he is either
inside or somewhere close to Afghanistan.

MR. RUSSERT: Still alive?

MIN. IVANOV: Probably, but -- 

MR. RUSSERT: Do you think he will be captured?

MIN. IVANOV: I believe sooner or later, maybe even years, but still he will
be captured, because I am convinced he should be captured, as well as many
other terrorists, which we also mentioned have been trained in Afghanistan
before and now in hiding either in Chechnya or Pankisi Gorge in Georgia.

MR. RUSSERT: Numerous senior officials in Washington have credited Russia
with sharing significant intelligence information with our government to
take on terrorists. In fact, there are coordinating officers, officials,
Russians, in Tampa near the U.S. Central Command. Are those Russian
intelligence officers down there working with us?

MIN. IVANOV: They do. They are.

MR. RUSSERT: And cooperating?

MIN. IVANOV: And there are a lot of American intelligence officers in
Moscow who routinely, on a daily basis, attend the appropriate Russian
services and get information.

MR. RUSSERT: As a former KGB official, how does that make you feel?

MIN. IVANOV: Well, of course, psychologically, it might be difficult to
adjust. May I remind you we discussed this with Donald Rumsfeld that in the
old times, we were looking for long-term agreements on arms reductions and
we both thought that the only enemy is on the opposite side of the table,
but, as you said, we both changed our minds. It's the same with intelligence.

MR. RUSSERT: But we're still spying on each other, as well.

MIN. IVANOV: We do, but as far as I know, America spies not only on its
former enemies, but also long-time allies.

MR. RUSSERT: And Russia also?

MIN. IVANOV: I wouldn't comment on that. (Laughter.)

MR. RUSSERT: Let me turn to Iraq. In "The Christian Science Monitor," there
was this headline: "Russia rethinks its long-time support for Iraq." And it
goes on to say that Iraq owes Russia $8 billion in arrears of money they
owed the former Soviet Union.

MIN. IVANOV: Yes.

MR. RUSSERT: And probably another $12 billion in oil export money, for a
total of $20 billion, and that there's a growing calculation in Russia that
they may be better off having Iraq without Saddam Hussein. Is that accurate?

MIN. IVANOV: The figures which you have just pronounced, they're accurate,
the figures. But speaking about Saddam, I'm afraid you are slightly wrong.
We don't calculate in that sense. We calculate that there is -- there might
be a problem in Iraq with weapons of mass destruction. That's why we
support strongly the idea that the huge team of international monitors
should go to Iraq, should go there, investigate whatever they wish, finally
have a clear answer, yes or no.

MR. RUSSERT: Unfettered access?

MIN. IVANOV: Yes, and complete access, complete access of course. After
that, yes or no. If no, the sanctions should be lifted.

MR. RUSSERT: If yes, he is developing weapons of mass destruction -- 

MIN. IVANOV: Yes.

MR. RUSSERT: -- what happens?

MIN. IVANOV: Then we'll have to meet again and decide what sort of pressure
should be applied on the government of that country, but that's
hypothetical. We have to first know, yes or no, whether weapons of mass
destruction exist or not.

As for the idea or some allegations that there are international terrorists
who are hiding in Iraq or Iraq has been implicated in sponsoring terrorism,
I'm afraid that's wrong. That's wrong information. Terrorists have
unfortunately other areas where they hide.

MR. RUSSERT: The Czechoslovakian government said that they, in fact, had
confirmed a meeting with Mohammed Atta, one of the hijackers, and Iraqi
intelligence officials in Prague.

MIN. IVANOV: Well, as far as I know, Mohammed Atta has spent many years in
Germany, and nobody accuses Germany as being -- (laughter) -- a sponsor of
terrorism.

MR. RUSSERT: Would the world be better off without Saddam Hussein?

MIN. IVANOV: I wouldn't comment on that because it shouldn't -- the problem
is not with Saddam Hussein. The problem is with weapons of mass
destruction. We have to finalize and get the final answer, yes or no, as
I've already mentioned.

MR. RUSSERT: If the United States decided that it was necessary to change
the regime in Iraq, would, in fact, Russia support such military operations?

MIN. IVANOV: So far we haven't been informed by the United States that
they've made a decision to change. I hope that if such -- if and when such
a decision will be taken, we will be informed.

MR. RUSSERT: Iran. Why does Russia continue to assist Iran in the
development of nuclear weapons?

MIN. IVANOV: That's a myth, a myth supported for many years by Israel. I
discussed our -- well, generally proliferation problems and our ties with
Iran extensively in your National Security Council and minister of Defense.
Russia never supported Iran with nuclear or missile technologies. The only
project Russia takes part in Iran is nuclear power plant in Busheher, which
is under the auspices of International Atomic Energy.

MR. RUSSERT: Are you afraid of a nuclear-armed Iran?

MIN. IVANOV: (Sighs.) Well, afraid is a word which is a bit, um, how do you
put it? -- theoretical -- or -- it's a matter of feeling. I would say that
I am afraid with proliferation as such not only in Iran, proliferation in
countries whose elements or leaders doesn't care much about the
international laws, rules, and even morals.

MR. RUSSERT: What should be done in the Middle East? How do you analyze the
situation? Should the United States be more active in the peace process?

MIN. IVANOV: Well, I would advise United States policy on that to be more
or less active, but the Russian attitude is that the circle of violence has
reached, I think, the level when something should be done. Some pressure, I
think, should be put on both sides to stop, well, the acts of terror
against Israelis and, by the way, lots of casualties are Russian-speaking
Israelis.

On the other hand, Israel should stop this indiscriminative policy of
killing women and civilians. I think United States, Russia, the European
Union, and neighboring Arab states -- Saudi Arabia, Egypt, Jordan,
basically -- should try and offer some emergency plans at least to stop the
violence of the present level, because I am realistic enough not to expect
that the violence will disappear completely in a short period of time -- in
months, even, or a year. But it should be stopped at the present level.

MR. RUSSERT: You met with President Bush. What were your impressions of him?

MIN. IVANOV: He is a visionary man, if I may say so, and he understands
that the times of Cold War is definitely over and that both leaders should
be bold and imaginative enough to try and maybe overpower the bureaucracy
of both countries, which sometimes has some vested interests.

MR. RUSSERT: He said your president was trustworthy.

MIN. IVANOV: Yes.

MR. RUSSERT: Do you believe President Bush is trustworthy?

MIN. IVANOV: Yes, I do.

MR. RUSSERT: Before you go, "Meet the Press" is 54 years old. One of the
first guests was Senator Joe McCarthy on this program, who used to lean in
and say, "Are you now or have you ever been a member of the Communist
Party?" I've always wanted to ask that.

MIN. IVANOV: I have been. (Laughter.)

(End videotaped segment.)

MR. RUSSERT: How the world has changed.

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