Security Watch: September 4, 2000

PUTIN HIKES SEEKS TO RAISE MILITARY AND LAW ENFORCEMENT MORALE... In the wake of the Kursk disaster, Russian President Vladimir Putin took several steps to shore up his standing with hard-liners in the military and security agencies. On 25 August, he posthumously presented the Kursk crew with the highest state orders and directed a 20 percent increase in salaries for members of the armed forces and law enforcement agencies. In a separate decree, he also increased salaries and pensions of specialists working on the use and dismantling of nuclear weapons. And, on the following day, he restored the tsarist era's highest military decoration, the Saint George Cross. Its statute, as approved by Putin, says that the cross is to be granted to officers who have "completely defeated a foreign enemy."

...BUT NOT INCREASE THE MILITARY BUDGET. Deputy Prime Minister Ilya Klebanov said that Putin was not inclined to increase the defense budget at present even though many Russian political figures have called for precisely that. But he added that the military might get more money through non-budgetary means. (For a discussion of this upcoming struggle, see in End Note below).

PROCURACY, PUTIN DISAGREE ON KURSK DISASTER. By stating that the criminal investigation of the Kursk disaster is based on Article 263 of the Criminal Code, the office of the Russian Prosecutor-General falls in line with the scenario that the disaster was caused by a collision with a foreign submarine, "Kommersant-Daily" reported on 26 August. But Moscow media reported that President Vladimir Putin has already conceded privately that the Russian submarine sank as a result of an internal explosion. In the transcript of his meeting with families of the Kursk crewmen, which was published by "Kommersant-Vlast" on 29 August, Putin said that "the hull of the Kursk was so demolished by two powerful explosions that no salvage vehicle can make effective contact with it."

RUSSIAN NAVY CRITICIZES U.S. INVESTIGATION. A Russian navy spokesman told Interfax on 30 August that the Pentagon's conclusion that a torpedo onboard the Kursk had caused the explosion had been put out to show "how unreliable the Russian navy now is." The spokesman added that the U.S. explanation is intended to "reduce the competitiveness of Russian arms on the world's weapons market." He noted that Moscow is not making use of American hydro-acoustic data because it has its own. Meanwhile, Deputy Prime Minister Ilya Klebanov, who heads the investigative commission, told ORT television on 30 August that the first stage of the recovery operation will seek to lift the bodies of the dead crewmen and only in the second stage will the Russian navy attempt to lift the submarine itself. He noted that the Norwegians will help with part of this operation but that only Russian divers will be allowed to work on and in the hull of the Kursk.

KURSK TRAGEDY MAY AFFECT POPE CASE. According to an article in "Izvestiya" on 25 August, the Kursk disaster may adversely affect the case of the accused spy. It may have been behind the decision by a Russian court not to release Pope on bail, the paper said. And his case supposedly links him with Moscow Professor Anatolii Babkin, who is a specialist on torpedo equipment that may have been involved in the Kursk explosions.

MOSCOW'S DENUNCIATION OF BISHKEK AGREEMENT MAY BACKFIRE. The Russian government's decision to withdraw from the CIS-wide visa-free regime, as announced by Foreign Minister Igor Ivanov on 30 August, could backfire, several Russian media outlets suggested. On the one hand, it may make it far more difficult for Russia to find the cheap labor its own declining population now needs to man many factories around the country. And on the other, this move may prompt other CIS countries to take a harsher attitude toward ethnic Russians living on their territories.

DID UZBEKISTAN ASK FOR RUSSIA'S ASSISTANCE? Russian Foreign Minister Igor Ivanov said that Moscow was actively considering an Uzbek request for assistance to combat Muslim extremist forces in Central Asia. But Uzbek Foreign Minister Abdulaziz Kamilov told Pravda.ru the same day that his country had never made such a request and described Ivanov's claim as "wishful thinking." Kamilov's version of events was confirmed by Colonel-General Leontii Ivanov, the head of the Russian Defense Ministry's Interregional Cooperation Directorate. Not only has Uzbekistan not asked for assistance, he said, but his ministry does not see any need for it and is not considering providing it.

CHINA SENDING MILITARY AID TO TASHKENT. Uzbek President Islam Karimov announced on 29 August that China is providing Uzbekistan with military equipment, Interfax reported. Karimov said that China had agreed to do so during Uzbek Defense Minister Yurii Akzamov's visit to Beijing on 27 August. So far the assistance has been limited to a few hundred sniper rifles and other anti-terrorist equipment, but Karimov noted that the important thing is that it shows that China is on Uzbekistan's side.

INDIA CONFIRMS PLANS TO PURCHASE 300 RUSSIAN TANKS. The Indian ambassador in Russia, Sutinder Kumar Lamba, has confirmed his country plans to buy 300 Russian advanced T-90 tanks and several dozen personnel carriers, "Vremya novostei" reported on 28 August. The newspaper said the Indian purchase, the largest tank deal since the demise of the Soviet Union, will be signed off on during President Vladimir Putin's visit to New Delhi in October.

VYAKHIREV WANTS TO CIRCUMVENT UKRAINE. Gazprom head Rem Vyakhirev has called for the creation of a consortium of the four largest European energy companies to build a pipeline through Belarus, Poland, and Slovakia, "Izvestiya" reported on 30 August. In making this proposal, Vyakhirev said that "the goal of his life is to build a pipeline circumventing Ukraine," a country which he said has been "stealing Russian gas."

GOVERNMENT PROMISES TO STREAMLINE DEFENSE INDUSTRY. Government plans to reform the defense sector envisaged a 25 percent reduction in the number of enterprises in the military industrial complex, Deputy Prime Minister Ilya Klebanov said on 2 September. The government plans to close obsolete enterprises and integrate more advanced defense research centers and factories into the conglomerates that can compete on the world arms market, stressed Klebanov. The model for such reform will be aircraft and avionics concern Sukhoi, whose reorganization will be completed by the end of the year.

CHECHNYA RECONSTRUCTION FUNDS BEING PLUNDERED. Most of the funds the Russian government has allotted for rebuilding the Chechen economy are being and will be diverted to other and presumably criminal uses, "Rossiiskaya gazeta" reported on 28 August. This is happening, the paper cites Aleksei Novoseltsev, who heads the MVD's economic crimes directorate, as saying, because the local population is not aware that the money is available. He said his office has already opened 61 cases of stolen Chechen funds.

ATOMIC ENERGY MINISTRY WANTS TO PRIVATIZE ITSELF. The Ministry of Atomic Energy has prepared plans for transforming itself into a state shareholding company modeled on UES, SMI.ru reported on 29 August. The new company, Atomprom, is to include even those nuclear power elements not under the ministry's jurisdiction. Such privatization could open the door to more problems with nuclear security and proliferation.

U.S., RUSSIA SEEK ARREST OF MAVRODI. Along with Interpol, both U.S. and Russian officials are seeking the arrest of Sergei Mavrodi, who in the early 1990s masterminded the largest pyramid scheme in post-communist Russia, RIA-Novosti reported on 25 August. Mavrodi and his cousin, Oksana Pavlyuchenko, recently created yet another pyramid scheme via the Internet on the basis of their Dominican Republic-registered Stockgeneration company. According to the August 2000 issue of "Wired," Mavrodi promised 275,000 investors up to 215 percent in annual interest but has not returned their investments. On 9 July, the U.S. Securities and Exchange Commission brought suit against Stockgeneration for organizing a "classical financial pyramid." That court has now frozen all of the company's assets in the United States. The Russian government has had a warrant out for Mavrodi since 1998.

FSB, MILITARY FORMING A POLITICAL PARTY. Veterans of the FSB, Defense Ministry, and law enforcement agencies have set up a special organizing committee for a new "law and order" political party, Vesti.ru reported on 29 August. Among those involved in this venture are the former Commander-in-Chief of the MVD Internal Troops, Colonel-General Anatolii Shkirko, and the former chief of the General Staff, Army General Mikhail Moiseev, who now serves as an adviser to the present chief of the General Staff, Anatolii Kvashnin. Earlier efforts of military and security people to create their own political party failed because of Kremlin opposition, but now the Kremlin itself has indicated that it wants this party to succeed, Vesti.ru said.

FSB SHIELDS ORGANIZED CRIME. Five retired foreign intelligence colonels have sent a letter to the FSB exposing an international criminal group which they say has caused hundreds of millions of dollars in damage to the Russian economy, "Novaya gazeta" reported on 21 August. The letter says that the officers uncovered this criminal activity by a group led by U.S. citizen Iakov Tilipman and two Russian MVD officers. But what prompted their letter, the colonels say, is that they had turned without success to the FSB's Department "M," which is charged with investigating such crimes. The paper noted that on 15 August, in what appears to have been a vendetta action, the MVD searched the offices of a company where the colonels who had exposed Tilipman's activity were working. Among those who participated in the raid were two of the MVD officers who had "worked" for Tilipman.

AN EASY WAY TO CATCH A SPY. "Komsomolskaya pravda" reported on 29 August that the awarding of the Order of Lenin to KGB Colonel Nikolai Cherkashin may have led to the unmasking of Aldridge Ames as a Soviet spy. When Cherkashin appeared in public with his award, the paper said, American intelligence agencies decided to check Cherkashin's activities once again to determine what he might have done to merit this order. When they did, they refocussed their attention on Ames.

FIGHT OVER MILITARY BUDGET LIKELY

By Victor Yasmann

In the wake of the Kursk disaster, proposals to increase defense spending could unbalance the Russian government's 2001 budget, which was given to the Duma on 27 August. The draft budget calls for funding the military to the tune of 206 billion rubles ($6.9 billion), or 2.66 percent of GDP, a relatively small sum given Russia's pretensions in the defense sphere but a serious budget for the Russian economy and an increase from 140 billion, or 2.39 percent, of GDP this year.

Most Moscow observers now expect the parliament to call for an even larger expansion, possibly to 3.5 percent of GDP. One of the reasons for their conclusion is the statement of Fatherland-All Russian leader Yevgeny Primakov's statement that his faction will not accept anything less than 3 percent of GDP for defense. His campaign for more money for the military will certainly be supported by the communists and probably by Vladimir Zhirinovsky's faction as well.

Until recently, reformers in the government led by Aleksei Kudrin, the deputy prime minister for financial matters, have managed to blunt such efforts, drawing on the implicit support of President Vladimir Putin. But with the Kursk disaster, Kudrin has had to back down, promising to allow extra revenues to the military and defense industries. He is likely to have to back down more, as public demands resulting from Kursk led to a shift not only in the Duma but quite possibly in Putin's position as well. But if there is a significant change in the military budget, that will have political fallout as well.