Versiya, January 27, 2003, pp. 16-17

The word in Chechnya’s government circles is that one of the deputy heads of the administration bought his position for $200,000. And now he is recouping that money – having been placed in charge of a small factory producing a valuable food item. The corruption here centers on the point that this factory was reconstructed using federal funding as part of a targetted program; and now the rewards of this are being covertly gathered by one particular official.


Versiya, January 27, 2003, pp. 16-17

Rumor has it that Andrei Belianinov could soon lose his job as chief executive of Rosoboroneksport (Russian Arms Exports). Local rumor-mongers have already named his replacement: Yuri Demchenko, presently deputy director of the Foreign Intelligence Service (FIS). It is said that during his years in intelligence, Demchenko has acquired a substantial knowledge of how Rosoboroneksport operates. However, according to another theory also making the rounds of the defense sector, Demchenko could face some competition for the job from his direct superior, Sergei Lebedev. “Kommersant-Dengi” magazine reports that some sweeping changes await the FIS: not only the current director might lose his job, but also a number of his senior staff. It is said that just before New Year, the FIS headquarters received a memorandum from the personnel department of the presidential administration, including a list of 20 names of generals who are in line for dismissal.


Versiya, January 27, 2003, pp. 16-17

Rumor has it that in late December a report landed on President Putin’s desk, signed by three security ministers: Defense Minister Sergei Ivanov, Interior Minister Boris Gryzlov, and FSB Director Nikolai Patrushev. The president received evidence about some dubious activities of Akhmad Kadyrov and his staff; this was accompanied by a request to dismiss Chechnya’s head of administration as soon as possible, before the referendum on a constitution for Chechnya.

On hearing of this, Kadyrov flew to Moscow immediately; however, the president did not receive him.

The word is that the scandal concerns the appointment of Eli Isaev as finance minister of Chechnya, as well as the conflict between Kadyrov and Mikhail Babich, prime minister of Chechnya.

Experts predict that if the Kremlin supports Kadyrov, Eli Isaev will remain finance minister, while Kadyrov will gain virtually unrestricted power in the lead-up to the referendum and elections. Babich would have to resign in order to save face, or accept his subordinate role.

If the Kremlin decides that Kadyrov has exceeded his authority, this will be the first sign of his impending dismissal.

For the time being, Babich has the tactical advantage; however, he recently lost one of his most influential supporters when General Troshev was dismissed. It is said that Babich owed his appointment to Troshev.


Versiya, January 27, 2003, pp. 16-17

Igor Trunov, the attorney representing victims of the Moscow hostage-taking who are seeking compensation, is becoming a controversial figure. Rumor has it that attempts are being made to put pressure on Trunov, in the time-honored manner: by digging up some dirt on him. It is said that the presidential administration – which could also be sued for damages, along with the Moscow city government – is taking an interest in the attorney’s qualifications. The “Moskovskii Komsomolets” newspaper reports that presidential administration staff are checking his academic background. Igor Trunov graduated from a university in Krasnodar, and gained his doctorate in March 2001, writing a thesis on “Current issues in protecting civil rights during criminal trials”.


Profil, January 27, 2003, pp. 58-64

The Central Bank and the Finance Ministry have decided to find out who really owns Russia’s crediting organizations.

Actually, no one really knows the rules of the game here, nor the potential winners or losers. The state’s chief slogan, purpose, and goal in its latest initiatives to reform the banking sector is as follows: to increase transparency, and thus to raise public confidence in banks.

Let’s look at the state’s most recent move, announced by Finance Minister Alexei Kudrin immediately before New Year: the intention of the Finance Ministry and the Central Bank to reveal the real owners of Russia’s banks – which, if one believes their official registration details, are currently owned by all kinds of organizations with vague names like “Cyprus Limited”. This revelation is meant to be achieved by amending the laws on banks and banking activities, and on the Central Bank of Russia. Unless the amendments get bogged down in the Duma (and since the government seems so determined, the chances of avoiding delays are high), by the end of this year banks may well be compelled to publish the names of their real owners.

According to the law as it stands, Russian banks are obliged to provide the Central Bank with certain details about all shareholders who own stakes of over 5% (see table for list of nominal owners of Russia’s ten largest banks as at December 1, 2002). If the shareholder is a company, details about its owners must also be provided. In other words, the Central Bank now has information about so-called “first tier” and “second tier” shareholders.

The new initiative, however, consists of compelling banks to reveal every last link in the chain of ownership. This, according to the Central Bank and the Finance Ministry, will lead to the names of the real owners. These should not include any companies registered in offshore zones; the plan is to make this illegal.

The authorities plan to collect shareholder data on a quarterly basis. Banks will also be obliged to publish this information quarterly in the open media.

According to Pavel Mamai, an analyst with Renaissance-Kapital, obtaining this information from the big banks will not be difficult.

But the small banks are a different matter. They are frequently backed by regional state officials, who are not actually permitted to engage in business activities. Thus, they will make every possible effort to preserve secrecy.

It seems likely that the battle for transparency in the Russian banking sector will not be an easy one.

Since the start of 2002, loans extended to private citizens by Russian banks have totalled around $3 billion, which represents a 20% increase over the total at the start of the year.

But this is an insufficient basis for predictions of success. Despite some obvious progress in making credit more available to citizens, borrowing is still not widespread in Russia. Everyone knows the reasons: a lack of any credit history system in Russia, and a shortage of qualified banking personnel. To all appearances, these problems will remain acture in 2003 as well.


Profil, January 27, 2003, p. 6

In a recent poll, the Public Opinion Foundation (FOM) asked: which is prevalent in Russian society today – cohesiveness or division? Most respondents – 76% – said there was more disagreement and division; only 8% chose cohesiveness.

The next question was: do you think Russian society can become more cohesive than it is now? And 58% of respondents said this is possible; but 20% did not believe there is any chance of social consensus happening. And 22% of respondents were uncertain.

Rosbiznesconsulting has done a poll on what people think of the performance of public servants: 79% of respondents consider that public servants are not doing their jobs properly, while 20% assess their performance as satisfactory.


Itogi, January 28, 2003, pp. 14-17

The State Council met at the Kremlin last week to discuss international affairs. In his comments after the meeting, Foreign Minister Igor Ivanov said that in order to implement foreign policy successfully, Russia’s diplomats need to be very keenly aware of the nation’s domestic needs. He expaned on the interplay between foreign and domestic policy in this exclusive interview.

Question: There is much talk of Russia’s foreign policy being pragmatic and aimed at securing the nation’s economic interests. Here’s a topical question: how do Russia’s diplomats intend to protect the interests of Russian companies in Iraq, for example?

Igor Ivanov: The example of Iraq is a very good demonstration of how Russia’s economic interests can and ought to be protected. In Iraq we have to do this under extremely difficult circumstances, given that Iraq has had UN sanctions against it for over a decade. Nevertheless, as a result of our efforts – primarily at the political and diplomatic levels – we are managing to maintain a confident lead for Russian companies in operations with Iraqi oil as well as supplying goods within the framework of the UN humanitarian program. Over the past year, our contracts for supplying humanitarian goods to Iraq have totalled over $1 billion. And a rising proportion of these contracts involves long-term projects in electrical energy, construction, transport, and irrigation. Russian oil companies have secured a number of promising deposits.

The sanctions can’t last forever. Therefore, on the one hand we ought to continue working through the UN mechanism in the interests of unravelling the “knot of Iraq” as a whole, including getting sanctions lifted. On the other hand, we do of course take the interests of Russian companies into account during this process, laying favorable political and legal foundations for their future operation in Iraq.


Rossiiskie Vesti, January 29, 2003, p. 3

The December truck-bomb explosions that damaged the government offices in Grozny, Chechnya attracted the attention of others besides readers of crime reports.

Specialists have pointed out some peculiar aspects in this terrorist attack. For example, the main force of the blast hit that part of the government building which housed financial accounts. As a result, all accounts relating to the “reconstruction” of Chechnya were destroyed.

It is also worth noting that not a single senior government official was injured in the attack; none of them were in Grozny at the time.

And it may well be asked how two trucks packed with explosives, which subsequently blew up outside the government building, managed to pass unhindered through the three rings of intensive security around that building.

At any rate, now the leaders of Chechnya – which is fighting a war and “reconstructing” at the same time – have a pretext for yet another tearful appeal to the Finance Ministry for further reconstruction funding – for the government building itself, this time.

Knowing how kind-hearted our Finance Ministry is, we may confidently assume that the request will be granted.


Itogi, January 28, 2003, p. 11

There are statistics about everything: the number of coats produced in Russia (2.355 million in 2002, incidentally), the number of audio CDs (32.2 million), the number of PCs assembled (175,000), and the number of eggs (36.2 billion). Those who keep track of statistics today know what will become of the nation, their business, and their own wallet tomorrow.

“Itogi” is launching a new project, in cooperation with the State Statistics Committee: we intend to be the first to bring the latest Russian statistics to our readers. Our first installment in this series concerns results for 2002, announced by the State Statistics Committee last week.

As at December 1, 2002 Russia had a population of 143.2 million, and around 50% of these people were active in the economy. So national wealth is really being created by only half the nation – less the unemployed, 7.1% of those classified as “economically active”. But the GDP is growing, if slowly. Industrial growth (jobs, services) was 3.7% last year, and construction grew by 2.7%. Oil extraction is on the rise, and so are living standards.

Russia’s living standards serve as a kind of benchmark for the CIS. Migration to Russia continues. The only CIS nation with which Russia has a “negative migration balance” is Belarus. People are even migrating here from the United States (420 migrants in 2002), and – surprise! – from Israel (1,558 people in 2002).