Robert Amsterdam

Thanks to Russia's new, flexible definition of "extremist" activity, criminal charges can be brought against anyone who offends the "national dignity" or commits "public slander of a state official." The latest victim: Yabloko's Andrei Piontkovsky, whose critical books on the Putin administration have now been deemed extremist. According to a report in today's Wall Street Journal, the prosecutor from Krasnodar is threatening to close down the Yabloko office for distributing these books (most bookstores refuse to sell the books out of fear), and Piontkovsky is expecting to be charged with extremism once he returns to Russia in July.

The sovereign democratic revolution will not be televised

Not everyone remembers that the extremism law was originally modified out of a legitimate concern for the enormous problem of hate crimes in Russia, to be used protect the public from those who spread racist propaganda and incite violence. Many nations face the same difficult legal challenge of creating hate crimes legislation while maintaining equality before the law.

However, not much time was wasted before the new legislation was exploited for political convenience, confirming the worst fears of freedom of expression advocates. For example, the ultra-nationalist opposition Rodina Party, which was well known for spreading deeply offensive racist material and inciting hatred, was brought under the new extremism law and was banned from participation in last year's Moscow City elections - a move which RFE/RL called "a dress rehearsal for the 2007 parliamentary elections." Did Russia go too far in banning a party, albeit a racist one, from participation? Freedom of expression NGO Article 19 issued a statement saying "Although the broadcast [of Rodina] was certainly offensive, the total exclusion of this party from the normal political processes was a disproportionate."

By applying the extremism law to Piontkovsky and Yabloko, it appears the procuracy has officially dropped all pretenses of safeguarding against ultra-nationalism (in fact, one would be hard pressed to argue that the Kremlin doesn't encourage Nashism), and is now openly using this thin legal precedent as a tool of repression. This abuse of law is strongly reminiscent of the instrumental tactics perfected by the procuracy during the Yukos affair, and similar to the fraudulent methodology of regulatory attacks used to steal from foreign investors. It is now clearly evident that the Kremlin has become addicted to counterfeit legalism.

Below is an interesting comment from the analysts at Breakingviews, who ask if Gazprom is really capable of handling the operational and financial challenges of their ill-gotten new energy assets. In related news, Gazprom's board just approved an 11% cut in capital expenditure, right at a moment in which money is so badly needed for reinvestment in gas production. This news does little to inspire confidence in the "reliable supplier" campaign, and must make steam blow out of Claude Mandil's ears. Why would Gazprom cut the capex on the brink of a supply crisis? Perhaps the siloviki on the board are looking to pocket the maximum before any possible instability comes with the next elections - then again, state-run industries filled with rent-seekers are not exactly known as bastions of efficiency and long-term planning.

From Breakingviews:

Russia Energy Egotism Pushes Gazprom to a New Power Grab

Russia's Vladimir Putin recently said energy egotism was "a road to nowhere." If so, it looks like state-owned Gazprom is well on its way. The $210 billion Russian gas monopoly has pretty much gained control over Russia's vast gas resources, with the exception of BP's Kovykta, a gas field with reserves twice the size of Norway's. Most expect Gazprom to take that over too.

Can Gazprom really handle it all? There are two risks: operational and financial. Take Shtokman, a field in a storm-tossed sea dotted with icebergs, 550 kilometers off the coast of Russia. Gazprom plans to develop this project alone, snubbing the foreigners that were lining up to join. Its other flagship project is in the Yamal Peninsula, which means "end of the world" in the native population's tongue. There is a high risk that budget or timetable could slip on either of these projects or on both. Meanwhile, Gazprom's current production is flat.

Then there is the question of whether it can pay for the growth. The gas giant increased its capital-expenditure plan to $60 billion between 2007 and 2009, some 70% more than analysts were expecting. Analysts expect Gazprom to make only about $10 billion in free cash flow this year, before taking into account acquisitions. But Gazprom has already spent $10 billion on a 50% stake in Sakhalin and a stake in a Belarus pipeline. It is also spending billions on building new pipelines. Worse, Gazprom is regularly accused of being wasteful and inefficient in its spending.

But the gas monopoly's profligacy is, to some extent, self-serving. For years, it has been negotiating for the Russian government to push cheaper domestic prices closer to the export price. Any savings would strengthen the case against raising prices. The plan seems to be working. Once parity is achieved, Gazprom should have a greater incentive to be more efficient. New projects should also begin to fill its coffers.

And so what if Russia's egotism means these projects take a few more years to develop? Mr. Putin is playing a long-term game of controlling Russia's energy resources. A delay in the Kovykta field must bother China, the intended market, much more than Russia. If the oil price stays high, there's no reason for Russia's energy ego to deflate anytime soon.

Russian President Vladimir Putin gives a press conference at Sennigen's Castle, during an official visit to Luxembourg (AFP)

From the IHT:

But something more fundamental has changed in Putin's Russia, which the Europeans have yet to grasp. Putin does not like the European Union.

"If the EU agrees on anything, it is values such as human rights and democracy. The present leadership in Russia strongly disagrees with these values," said Oksana Antonenko, a Russian analyst at International Institute for Strategic Studies in London. "The EU cannot deal with this. It has a complex about Russia. It hankers after a Russia that will embrace its values. For Putin, this means hectoring and lecturing. The EU has no strategy over how to deal with this new Russia."
....
There are other reasons why Putin increasingly dislikes the EU. The EU is trying to develop a Neighborhood Policy for countries including Ukraine and Moldova. Although it is short on incentives for persuading these countries to pursue radical political and economic changes, Russia nevertheless resents the policy.

The Kremlin has made it clear to Germany, which has initiated a new EU policy toward Central Asia, to stop meddling in a region Moscow regards as its legitimate sphere of influence. Gernot Erler, state secretary at the German Foreign Ministry and a Russian specialist, recently said Berlin had tried to explain to Putin that such an initiative posed no threat to Russia. Even so, it is what the EU represents that worries the Kremlin. "The issue is values," said Gienek Smolar, director of the Center for International Affairs in Warsaw. "Putin does not like the spread of the EU's value system, regardless of its minimal impact so far on improving human rights in Central Asia."

Columbia Visiting Scholar Vasili Rukhadze has done a fascinating blog post on Russia's geopolitical ambitions in Central Asia, concentrating not on the threat to Western interests as so many think tanks have done, but rather focusing on the deleterious impact that Russia's influence has on these nations' sovereignty and prospects for democracy. Rukhadze concludes:

Today Russia represents the single biggest threat to the national sovereignty and security of post-Soviet states. Moscow’s goal is not a mere dominance in the region. Russian strategic planners and policy makers have made it amply clear that the Kremlin wants to bring the whole former Soviet landmass under the Russian dominated “Eurasian Union”. Moscow’s new KGB run regime has political will, determination and aggressiveness to do just that. As long as America continues to be bogged down in Iraq and Afghanistan and Europe shows timidity in confronting new Russian neo-imperialism, the Kremlin will find it less and less difficult to achieve its goals. Undoubtedly, there are very hard days ahead of those former Soviet countries which really care for their freedom and future.

My friend and colleague Karinna Moskalenko, one of Russia's greatest human rights lawyers, is featured in an extensive Washington Post article today, detailing her efforts to fend off the politically motivated campaign to disbar her and prevent her from practicing law in Russia. Observant readers will recall that this blog was the very first outlet to break the news about the disbarment proceedings opened against Moskalenko (coverage from mass media shortly followed), and serve as a platform to chronicle all actions taken by Russian government to punish and harass lawyers for simply doing their job.

This crass and transparently biased attempt smear Moskalenko's reputation and destroy her career is just the latest in a long established pattern of harassment of lawyers and anyone else to have been even remotely involved with Khodorkovsky or Yukos. The fact that the Russian government has chosen to attack everyone within reach of this case, even PriceWaterhouse Coopers, is a firm demonstration that they know that what they are doing is illegal, and the only way to cover themselves for breaking the law is to scare everyone away.

Karinna is going through an extremely unpleasant and frighteningly lawless process right now, and she deserves our support and tireless advocacy to let the procuracy know that such tactics of intimidation will not and shall not be tolerated. If there is anything positive to be drawn from this baseless disbarment campaign, it is that now the world now knows and understands beyond the shadow of a doubt that the charges against Mikhail Khodorkovsky are politically motivated, based not on merit but the vengeful inclinations of an autocracy. There is simply no other reason that so many lawyers, myself included, should be threatened, harassed, intimidated, deported, and jailed.

From the Washington Post:

"I am the champion of unsuccessful cases -- at least in Russia," Moskalenko said in an interview at the offices of the International Protection Center, the legal defense organization she founded 12 years ago. "Hopeless people are my clients."

Now, Moskalenko fears she will become a hopeless case herself.

The Russian Prosecutor General's Office, her constant adversary, is seeking to have her disbarred -- on the remarkable grounds that she has failed to adequately represent one of its prime targets, Khodorkovsky. It has succeeded in getting the Ministry of Justice to back its claim before the Moscow Bar Association. A hearing is scheduled for next month.

Moskalenko, 53, is known as a formidable legal foe of the Russian state, invariably losing in the country's courts but winning numerous cases at the European Court in Strasbourg, where her clients include the families of tortured, disappeared or murdered Chechens.

Khodorkovsky's attorneys have long been subject to official harassment, including arrests, searches of their persons and offices, and seizure of defense materials. His international attorneys have faced expulsion, and his domestic ones disbarment proceedings. But the case against Moskalenko takes the campaign to new levels, analysts here say.
...
"I didn't want to take this case," Moskalenko said. Khodorkovsky "is a rich man and I had many doubts because, at first, this didn't look like a human rights case. But after they started to attack one of our colleagues, a young attorney, I changed my mind."

The bar association rejected the prosecutors' motion against Artyukhova, but the authorities appealed to the courts and the case dragged on for nearly two years before Artyukhova, exhausted, voluntarily stopped practicing law. Since then, the Russian authorities have unsuccessfully tried to have 12 of Khodorkovsky's lawyers disbarred.

"This is psychological pressure to knock us off our mode of working," said Yuri Schmidt, one of Khodorkovsky's senior lawyers who beat back an attempt to disbar him in 2005. "Every time they file a complaint it requires a lot of time to defend."

Schmidt noted that he was disbarred once, in Soviet days when he criticized a local party committee. "I was saved by perestroika," he said, referring to the reforms and new openness under Soviet leader Mikhail Gorbachev.

In all cases until now, the bar association, where lawyers form a majority of any panel reviewing a disbarment case, has refused to support the government's attempts to disbar Khodorkovsky's lawyers. But Schmidt fears there is a hidden agenda to the repeated filings .

"At some point I believe the Ministry of Justice will argue that they've filed so many complaints and the bar keeps defending these lawyers, so the law needs to be amended to punish lawyers," he said. Any amendment, he said, would likely replace the majority of working lawyers on review boards with a majority of government appointees.

In Schmidt's case, the ministry abandoned its effort to disbar him when it lost at the bar, but Moskalenko fears that in her case, as with Artyukhova's, prosecutors will appeal to the courts, where they rarely lose. "If the issue goes to the court, I will be disbarred," Moskalenko said. "I have no doubt."

Complete article here.

The White Paper is now available in Japanese. Download here, or click the title of the document.

ロシア連邦における国家権力濫用に関する白書
ミハイル・ホドルコフスキーに対する政治的動機に基づく起訴

エグゼクティブ･サマリー【要旨】

2003年春、プーチン政権は、活気のある市民社会とエネルギー部門における市場原理に基づく競争を支持するミハイル・ホドルコフスキー氏の政治的見解及び活動がクレムリンのイデオロギーおよび政治目的と相容れないと判断。クレムリンはホドルコフスキー氏をシベリア･チタ州の刑務所に投獄するため、同氏を逮捕、裁判、捏造された容疑に対する過度の刑罰を科した。また、ホドルコフスキー氏が社長を務めるロシアの石油会社大手ユコス社の資産を国家管理下に差し押さえるため、捏造された法外な課税査定を用いた。

さらにプーチン政権は、正当性、ロシア法における合法性、犯罪行為に対する処罰のいずれにも全く当てはまらない以下の政治的目的のためにホドルコフスキー氏を新たに告発した:

＊ 現行のロシア法と慣行に従えば、ホドルコフスキー氏は2007年10月に釈放されるはずであるが、氏を釈放しないようにするため。

＊ ロシアの政治的将来を形成する、また現行のロシアの国家路線に反する積極的な役割を果たす機会をホドルコフスキー氏に与えないようにするため。

＊ ホドルコフスキー氏に対する過去の国家活動を正当化するため。

＊ 330億ドルに上るユコス社の残余資産に対して、ロシアの国有企業が実施しようとしている一連の詐欺まがいの取得を正当化するため。

＊ ホドルコフスキー氏が海外に保有していると思われる残余資産を没収しようとする行為を、氏がマネーロンダリングを行ったという理由により正当化するため。

2003年に逮捕されるまで、ホドルコフスキー氏は国民による政治参加を通じた民主主義国家の実現への支持を表明し、民主化要求活動を支援してきた。プーチン政権が同氏に対する政治的弾圧を加えはじめていることが表面化する中でさえ、ホドルコフスキー氏は民主化要求のための戦う姿勢を貫き、自らの政治姿勢を変えなかった。

ホドルコフスキー氏は、ロシア社会が民主主義国家に進歩すること、また市場原理に基づく経済体制の実現を望んできた。またロシア石油会社大手の社長として、国家が独占してきた産業を民間企業に開放することによりロシア経済の世界経済への統合を唱え、民間投資による新しい石油パイプラインの建設、中国と米国へのエネルギー輸出の促進、市場の自由化による産業分野の国家独占の排除、西側流の標準的なコーポレートガバナンスの採用、国際的石油企業による投資拡大オフショアを通じた生産の増大といった構想を打ち出してきた。また、ホドルコフスキー氏は経済復興の過程で生み出された国家腐敗の蔓延を一掃の必要性についても公の場で表明してきた。同氏のこれらの政治的見解はクレムリンの政策と衝突する結果となり、ホドロフスキー氏に対する政治的弾圧につながった。このホドルコフスキー氏への政治的弾圧は、ロシアが民主主義ではなく権威主義へ、自由化ではなく独裁化へ、正義ではなく単に腐敗を法的虚構によって覆い隠そうとする方向へ向かっていることを表面化している出来事である。
ホドルコフスキー氏に対する新たな告発は、不当な制度のもとですら誤審であるとしかいいようがない。そのような法制度を掌握している人々が物質的にも個人的にも同氏の有罪判決を望む環境において、ホドルコフスキー氏が公正な裁判を受けられる保証は全くといってない。

ホドルコフスキー氏の逮捕、ユコス社の解体及び国有化をそれぞれ別案件として捉えるのではなく、「垂直統合権力」を通して競合する政敵および分権化の根絶といったプーチン大統領の下での「管理された民主制」という政治目的を達成させようとする極めて重要な出来事として捉える必要がある。この政治的方針を実現するためクレムリンは以下の措置をとった:

＊ シラヴィキと呼ばれる旧KGB、検察、警察等の省庁関係者に権力を集中させ、ロシア経済を市場ベースで改革しようという動きを排除。

＊ ロシアにおける民主主義、人権、法の支配の後退。

＊ 国内および国外投資家が有するエネルギー資産を継続的に接収するために法制度を手段として利用。

＊ エネルギー資産を操作して近隣諸国および欧州に対してロシアの国家権力を行使すると同時に、主な競合国に対してエネルギー外交の影響力をさらに行使するために核および軍事技術を無差別に輸出することによる国際安全保障の不安定化。

以上のことからも明らかなように、現在行われているホドルコフスキー氏に対する政治的迫害、ユコス社の国有化、プーチン政権下における「管理された民主制」という政治目的の達成は、国際社会にとって大きな意味を成している。それは、全ての民主主義国家の国家安全保障、エネルギー安全保障、政治的安定を脅かすものである。

ホドルコフスキー氏を起訴した人々は、現代史における最大の窃盗ともいえるユコス社の奪取を見渡してきた。彼らは世界のエネルギー市場を不安定化させ、エネルギー最大手企業数社をゆすり、政界実力者たちを取り込み、彼らの行動は概ね共謀と沈黙をもって迎えられた。彼らはロシアを財産権が政治的に左右され、ジャーナリストや改革者に対する契約殺人が横行する国家に変貌させたのであり、こうした慣行は、最近、明らかに表面化してきている。この白書は、一人の人間が権力に対し勇敢に立ち向かったホドルコフスキー氏の運命を取り上げる 。

On 15 May 2007, the Erich Maria Remarque Peace Prize organizational committee in the northern German city of Osnabrück officially announced that it was awarding its 2007 prize to the highly regarded British historian Tony Judt, and a special prize to the Russian journalist Grigory Pasko, who as many of you know is a frequent guest contributer to this blog. Grigory has provided this blog with numerous exclusive feature reports, interviews, and photos from Russia, and I am extremely proud that his achievements have now been recognized by a wider audience.

Photo of Grigory Pasko by Gaby Waldeck

The Peace Prize is named after one of Osnabrück’s most famous native sons, Erich Maria Remarque (1898-1970), the author of the powerful anti-war novel “All Quiet on the Western Front”. Remarque’s strong anti-militarist views did not sit well with the Nazis, who banned his works in 1933. He lived in exile in Switzerland from 1931 onwards, but was forced to flee from this ostensibly neutral country to the United States in 1939. He returned to Switzerland in 1948 and spent the rest of his life there, in voluntary exile from his homeland.

The biennial Erich Maria Remarque Peace Prize itself was instituted in 1991 by the city of Osnabrück, and is awarded “for literature and journalistic or scientific work dealing with subjects of peace in a specific country or on an international level and for exemplary commitment to peace, humanity, and freedom of man against oppression.” Previous laureates have included such writers as Yuri Andrukhovich of Ukraine, Svetlana Alexievich from Belarus, and Russia’s Lev Kopelev.

Here’s what the organizers had to say about Grigory and his work:

“The reason to award … Grigory Pasko was his prison diary ‘The Red Zone’, a literary masterpiece of great linguistic power and intensity, which, however, is at the same time a document of powerlessness and lack of access to rights and justice of the individual towards the Russian state power and the secret service that has never stopped trying to suppress the freedom of opinion. Furthermore, this prize appreciates Pasko’s great commitment to the protection of the environment, civil and human rights.”

When I recently spoke with Grigory, he informed me that he had already received an official invitation to the September 21 awards ceremony from the Bürgermeister of Osnabrück, Boris Pistorius.

Last year, the publishing house Wallstein Verlag in Göttingen published German translations of two of Grigory’s prison memoirs, “Pryanik” and “The Red Zone” (under the titles “Honigkuchen” and “Die Rote Zone”, respectively). Grigory is the author of six books, a member of the Russian Union of Writers and the Russian PEN-club, and has won many awards his writing. However, given Grigory's sometimes "contentious relationship" with the authorities - "contentious" in that he had the bravery to speak up when he found out that the Russian Navy was dumping nuclear waste into the Pacific Ocean - most self-censoring Russian publishers have shied away from Grigory's writings, so very few people inside Russia have had the opportunity to read his work.

For those of you who don’t know his story, Grigory Pasko was a journalist with the official newspaper of the Russian Navy’s Pacific Fleet when he was arrested by the organs of the FSB in 1997 and charged with "espionage for Japanese journalists." Yes, that’s right, that is exactly the wording of the indictment, not that he had been spying for a foreign government, but rather for journalists. After spending two years in jail, he was acquitted of this charge, but convicted of “exceeding official authority” – even though the court itself was unable to clearly formulate in its verdict what specifically this “exceeding” consisted of.

Grigory Pasko appealed this verdict, and was granted a retrial. This second trial already took place under Russia’s new president, former KGB agent Vladimir Putin. There were a total of ten charges in the indictment. Pasko was found guilty of one half of one of the charges, but as far as the court was concerned, that still made him a “Japanese spy”, and he was sentenced in 2001 to four years in a strict regime colony. Vladimir Putin publicly suggested to Pasko that he submit a formal petition for a pardon to the president himself, but Pasko categorically refused Putin’s clemency.

In 2003, Grigory was granted a conditional early release on parole from the colony. His application to the European Court of Human Rights for redress against his illegal prosecution by the FSB has been sitting in Strasbourg for five years already, awaiting its turn to be heard.

To say the least, the Pasko case shows that Russia is still learning what it is like to have whistleblowers in a free society.

Grigory Pasko has lived through the nightmare of being trapped in the Russian gulag, yet continues to have the strength of will and a firm belief in doing what is right. I am proud to know this courageous man, and I know our readers will join me in congratulating him for being awarded the Erich Maria Remarque Peace Prize.

Today a Bloomberg analyst published an extensive article on Gazprom, highlighting the company's flat production, its inability to promote its own shareholders' interests, dependence on Central Asian gas, and nearly everything else going on with the company. The reporter also reminds us of the Royal Dutch Shell - Sakhalin heist, and how the Kremlin was actually able to steal from Shell and while at the same time making them say "thank you." It is truly incredible what some firms will do to maintain proximity to power.

Gazprom May Thwart Putin Drive for Russian Energy Dominance

By Lucian Kim

June 4 (Bloomberg) -- Four corporate heavyweights are arrayed before Russian President Vladimir Putin in his Kremlin office. Sitting across a white oval table from Putin are Shoei Utsuda and Yorihiko Kojima, chief executive officers of Japan's largest trading companies, Mitsui & Co. and Mitsubishi Corp.; Jeroen van der Veer, head of Royal Dutch Shell Plc, Europe's biggest oil producer; and Putin's old friend, OAO Gazprom CEO Alexei Miller. The purpose of the Dec. 21, 2006, confab: to seal a deal made earlier that day in which Gazprom, the giant state-run gas company, will take control of Sakhalin-2, a $22 billion oil and gas project on Sakhalin Island in the Russian Far East.

Van der Veer and the Japanese executives make a show of endorsing Gazprom's participation in Sakhalin-2, until now the biggest totally foreign-owned energy venture in Russia. "Thank you very much for your support on this historic day,'' van der Veer says to Putin in remarks captured on camera and posted on the Kremlin's Web site. "Gazprom is very welcome as a partner in our project.''

Gazprom, with Putin standing behind it, is reasserting Kremlin control over an energy industry that has become critical to Russia's prosperity and global prestige. "Gazprom is emerging as the most important Russian enterprise, both as a driver of economic growth and international influence,'' says Chris Weafer, chief strategist at Alfa Bank in Moscow.

Yet Gazprom's demonstration of its political clout in December obscures an enterprise that some investors say is flawed by a lack of transparency, flat production, money-losing domestic sales and an increasingly competitive market for the gas it depends on from Central Asia.

Output Down

Last year, Gazprom, of which the government owns just over 50 percent, pumped 556 billion cubic meters (19.6 trillion cubic feet) of gas, slightly less than it produced 10 years before.

Mikhail Korchemkin, who heads Malvern, Pennsylvania-based consulting firm East European Gas Analysis, blames Gazprom's marriage with the Kremlin for its underperformance. ``It's mismanaged but knows where it's going,'' Korchemkin says. "It's a cash cow for the state. Does anybody care about the midterm strategy? I don't think anybody thinks they'll be there so long.''

The Kremlin meeting cementing the takeover of Sakhalin-2 shows why Gazprom is a poorly managed company, says Kim Iskyan, co-head of research at investment firm UralSib Financial Corp. in Moscow.

"What business does the president of a country have being there?'' he asks. "It's absurd he was even involved. At Gazprom, the interests of management are aligned with the government, not the shareholders, as in other global companies. It's run like a private fiefdom, like a branch of the Kremlin.''

Full article here.

OK, so this is a dramatic escalation of rhetoric: Vladimir Putin has announced to a small group of journalists before the G-8 meetings this weekend that in retaliation for U.S. missile defense sites, Russia would aim its missiles at European cities. Have we really arrived to this point?

The Wall Street Journal has some interesting excerpts from the interview:

Excerpts from an interview Russian President Putin gave a small group of G-8 journalists on June 1, 2007. * * *

On U.S. Missile-defense plans in Europe:

I am against any kind of arms race. We studied the experience of the Soviet Union and we won't be dragged into any arms race, but will respond. Not in an identical fashion but with means that are no less effective. It's called an asymmetric response. The U.S. is building an enormous expensive missile defense system that will cost tens of billions of dollars. We won't get dragged into this race.

We will build a much cheaper but quite efficient system… and that way we'll retain the balance. Regardless of the fact that we have found this response, we are not increasing our military spending relative to GDP. It was 2.7% and that's how it will stay. We plan to keep it at that level in the next 5-10 years.

Q: Are we returning to the time when Russian nuclear missiles were targeted on Europe?

A: Of course we are returning to those times. It's obvious that if part of the strategic nuclear potential of the U.S. is located in Europe, which in the opinion of our military experts represents a threat, we will take the corresponding steps in response. Of course we will have to get new targets in Europe. Which weapons will be used to destroy those targets that in the opinion of our military specialists pose a threat to the Russian Federation -- ballistic missiles, cruise missile or it could be completely new systems -- that's a technical matter…

We often hear talk of European solidarity. What solidarity? Two countries have taken a decision to host the missile defense system, the Czech Republic and Poland. We are told that it's for the defense of Europe. Has anyone asked Europe? Was there some kind of general European decision or even a decision in NATO, even for appearance's sake? No. They didn't want to ask anyone. At the beginning we even suggested that we work together on this but immediately got rebuffed. And then later, when they saw our position in the world and in Europe on this and the circumstances changed, they said they wanted to talk.

Do you know what they wanted by way of cooperation? Our American partners wanted us to provide our missiles for target practice. Brilliant! We have received no substantive proposals about serious cooperation from them and we know that we won't receive any because this system is being created as a part of the American nuclear potential and of course it's absurd to talk of allowing Russian into the holiest of holies. There's nothing to talk about. We need to be serious about this. If we saw some signs that our opinions were being taken into account, that they were thinking about our security and about the balance of forces and it wouldn't threaten us, then we would work together. But I think that is highly unlikely…

And as regards the missile defense system, it is not an anti-missile system just by itself. When created it will start operating automatically as part of the United States' nuclear capability. It will be an integral element of the nuclear capability of the U.S.A. It's the first time in history that elements of the nuclear capability of the United States of America appear on the European continent. That simply changes the whole configuration of international security.

How is it being explained? That it is necessary to defend oneself against Iranian missiles. And there are no such missiles. Iran does not have missiles with a range of 5-8 thousand kilometers. You are being told that the antimissile system is for defense. But it's a defense against something which does not exist. It would be funny if it was not so sad.

We are not satisfied with the explanations we hear. We see no grounds for deploying the missile defense system in Europe. Our military experts believe that this system will of course affect… Russia. And naturally we will have to react to it.

What are we trying to achieve? Firstly, we want to be heard. We want our stance to be clear. We don't exclude the possibility that our American partners could revise their decision. We don't impose anything on anybody but we are relying on common sense. And I think that everybody possesses common sense. If it does not happen, we will divest ourselves of the responsibility for any retaliatory steps, because it is not us who are initiators of the new arms race which is pending in Europe.

We were not the instigators of withdrawal from the ABM treaty. But when we were discussing this subject with our American counterparts, what did we tell them? We told them that we do not have such resources and that we don't wish to create such a system. But you and I at a professional level understand that a situation when one side has a missile defense system and the other side does not creates the illusion of safety and increases the possibility of a nuclear conflict. I am speaking strictly theoretically, it does not have any personal dimension.

The strategic balance in the world is being upset. In order to restore this balance without creating our own missile defense system, we will have to create a system to overpower this new system. That is what we are doing now. We are used to hearing from our partners that there is nothing to fear of because "We are not enemies," "We won't be working against a friend." And we remind them, that we have been warning you, that we will respond in such a situation. We are doing what we said we would do…

I would not like there to be an illusion, that we have fallen out of love with someone. But sometimes personally I wonder why all this is being done. Why are our American partners so persistently trying to breathe life into plans to deploy a missile defense system when it is obviously not needed for defense against Iranian missiles let alone North-Korean missiles. Do they even know where North Korea is situated? Or what those missiles' range would need to be like for them to reach Europe? It's clear that it is not against them, it is clear that it is not against us, because it's obvious for everybody that Russia does not intend to attack anybody. So what is the purpose then? Maybe it is being done specifically in order to make us take retaliatory steps and in order to prevent any further rapprochement between Russia and Europe. If it is like that -- and I'm not saying I think it is, this is just one of several theories -- but if it is like this, it is one more mistake because we won't improve the international security situation or promote international peace in this way.

On Russian domestic politics:

Q: Do you consider yourself a "dyed-in-the-wool democrat," as Gerhardt Schroeder once called you?

A: Of course I am. I am an absolutely pure democrat. The real tragedy is that I am the only one. Elsewhere in the world there just aren't any others. Let's look at what is happening in North America -- nothing but horror. Torture, homeless people, Guantanamo and the detention of people without trial. Let's look at what is happening in Europe. Look at how they deal with demonstrators. The use of tear gas in one capital or another, the murder of demonstrators in the street. Then look at the post-Soviet space. Ukraine, all our hopes were on the guys in Ukraine, but now they are drifting towards tyranny and a complete breach of the constitution.

Since Mahatma Gandhi died, there's just no one left to talk to.

Q: Are the harsh police crackdowns on opposition marches in Russia backfiring and creating more support for Kremlin critics?

A: Look at how the police in Europe work -- with truncheons, tear gas and electric stun guns. In Germany, 70 people have died after being subjected to electric stun guns. Rubber bullets…

Everyone needs to know that you have to live according to the law. Permission to hold such demonstrations is the prerogative of the local authorities. Without a doubt, people who want to express their opinion have that right and the government is obliged to ensure that anyone who wants to express an opinion has the right whether these people agree with the government's politics or not.

But in exercising that right they should not bother other citizens, they should not disrupt transport, they should not prevent people getting to work or create dangerous situations for the health or lives of other citizens. But when people deliberately provoke law enforcement organs and deliberately gather in places where they are clearly disrupting normal everyday life or the city's organism, then the authorities have to take corresponding steps and bring order. Thank God we haven't yet seen any extreme methods that are used in west European countries. Everyone who wants to hold a demonstration has the right to do so, but in locations stipulated by the authorities.

Q: Are there circumstances under which Russia would extradite Andrei Lugovoi to the U.K., where prosecutors charge him with the murder of Alexander Litvinenko?

A: Are there conditions that would allow us to extradite Lugovoi? Yes there are. For that we would have to change the constitution. For that we would need grounds. According to the information I have received from the general prosecutor, the British side has so far not presented us with such information. There is a request to extradite Mr. Lugovoi but no material explaining on what grounds we should do this. We have our own investigation into the death of Litvinenko in Great Britain. If our law enforcement organs collect enough information to put someone on trial over this -- whoever it may be -- we'll do it. And I'm counting on us getting effective help from our British colleagues…

Of course I've got really mixed feelings about this request. If the people who sent us this request didn't know that under the Russian constitution we're not allowed to extradite Russian citizens, then of course that puts a question mark over their competence. Law-enforcement officials of that level should have known this. If they didn't, then instead of working in law enforcement they should work in a different area, such as in parliament or for a newspaper…

If they knew that the constitution prevents us from extraditing anyone, why did they send this request? It means it was some kind of political act. If that's the case, it's bad. Whichever way you look at it, it's just pathetic. Stupidity. There's nothing positive in what has been done.

On Shell and BP investments in Russian energy:

[Shell's contract on Sakhalin] was a colonial agreement. It had nothing in common with the interests of the Russian Federation. I regret that at the start of the 1990s, Russian officials allowed themselves to sign up to this, something they should in fact have been jailed for. According to this agreement, we allowed others to exploit our natural resources for an extended period but got nothing in return -- almost nothing.

But if our partners had fulfilled the terms of this agreement as they should have done, of course we wouldn't have had the chance to correct it. But they are guilty themselves in so far as they breached ecological legislation. That's been recognized and confirmed by objective data. Our partners don't even deny that.

When ecological problems were uncovered and the possibility of fines arose, the entry of Gazprom saved the project. Gazprom didn't simply enter the project under pressure from us. They paid out huge funds to be able to join the project. Eight billion dollars. It was a market price. As far as I understand, our partners were mostly satisfied with the outcome.

On BP's Kovykta project:

In every country there are certain rules for working with mineral wealth. Those rules exist in Russia, too. If someone thinks that in Russia those rules don't need to be observed, they are mistaken. We're not just talking about BP or foreign partners here; there are Russian economic partners and residents involved in this, too. They took on this project and responsibility for exploiting these resources, but unfortunately didn't fulfill the conditions of the license. They still haven't started production. Last year, according to the license, they were supposed to start extraction and take out a certain quantity of gas, but unfortunately they didn't do this.

There are a mass of complications associated with this, such as getting access to the pipeline network, but they knew that when they obtained the license. They knew about these problems and about the possible limitations. I won't even mention how this license was obtained in the first place. There are about three trillion cubic meters of gas there, almost as much as Canada's entire reserves, so you can understand the importance of this for the country. If they're not doing anything to develop it, how long should we put up with this?

Clearly the Ministry of Natural Resources has raised the question about the withdrawal of this license, although for now talks are going on. I don't know how they will finish. I don't know what decision the ministry will take and the shareholders of the company. In BP's case its reserves are growing in large part thanks to Russia… and 25% of its revenues are from Russia. We welcome their participation in the Russian economy and will continue to help and support the company… but only in the framework of current legislation.

Masha Lipman in today's Washington Post on Russia's new middle class and the reasons for their lack of interest in politics:

As the Kremlin has steadily expanded and tightened control over the public realm -- stripping other institutions of authority and restricting people's political rights -- the "burgeoning middle class" has shown as little yearning for political participation as has the vast majority of the rest of the population. As with the majority overall, those in the middle-income group have accepted the paternalism of Vladimir Putin's government and remained apolitical and apathetic. They have not taken action to reclaim the territory encroached upon by the Kremlin. ....

Radical depoliticization is not the only feature that distinguishes the Russian middle class from its Western counterparts. Russia's is not a broad-based economy. Revenue from commodities exports is greater than tax revenue from small or medium-size businesses. The government does not depend greatly on taxpayers, and taxpayers do not expect, let alone demand, accountability from the government. ...
...
Russia's middle class may suffer from the absence of the rule of law but is unlikely to demand it. Abiding by the law is hardly regarded as a virtue. Corruption and extralegal arrangements are seen as facts of life, and the rare attempts by civic activists' to change things seem naive. Government bureaucrats habitually convert the authority of their offices into steady incomes.

Complete article.

Last week I blogged about the news of an investigation by Austrian prosecutors into an alleged money laundering operation between the Vienna-based Raiffeisen Zentralbank (RZB) and Diskont Bank in Russia, an entity which had its license revoked by the Central Banker Andrei Kozlov, who was murdered just two weeks later. So far, the Austrian prosecutors are saying that they have not received the full cooperation of the Russian authorities, and that there are indications that the Kozlov murder could have involved official corruption. Raiffeisen says that the money laundering allegations are baseless, and that this news broke as an part of a "targeted attack" on RZB during Vladimir Putin's visit to Austria. This is not the first time RZB's enthusiasm for all things Russia has landed it in the hot seat - the bank is also involved in a probe by the US Justice Department for its questionable role in managing (as a trustee) half of a Swiss-based joint-venture with Gazprom called RosUkrEnergo, which corruption watchdogs say is just a fraudulent shell company created to siphon rents from the Turkmen-Ukraine gas trade.

Below is an exclusive translation of the article that started the whole RZB-Diskont affair, published in the Russian magazine New Times on May 21 (Issue 15, page 6). Tomorrow we will post a translation of the second article which appeared the following week.

Officials are taking money away to the West

On 23 May president of Russia Vladimir Putin will arrive with an official visit in Austria. A surprise may await him there: according to the data of The New Times, Interpol is investigating, while the Austrian police is ready to open a criminal case, in which, as they assert, key figures of his administration are involved.

By Natalia Morar

In this same time in Moscow the Russian Procuracy-General is going to adopt a decision on the closing or writing off as “insignificant” of criminal case No. 248089, initiated by the MVD of the RF based on the fact of the removal beyond the border of the money of big Russian officials on the eve of the presidential elections of the year 2008. The reckoning in the “insignificant” case is in the billions of dollars. Figuring in it among others are five banks from the top ten largest banks of Russia and the Austrian «Raiffeisen». There are already victims in this case, too: investigators assume that a victim became deputy head of the Central Bank of Russia Andrey Kozlov, killed on 13 September 2006.

— The case of «DISKONT» —

As The New Times’s sources in the MVD have reported, having agreed to provide information exclusively on conditions of anonymity, what is being spoken of is criminal case No. 248089, initiated 8 September 2006 on the basis of the results of a check of the Department of economic security of the MVD of Russia “in relation to unestablished persons form the number of employees of MBK «DISKONT» (OOO)1 with respect to indicators of the crimes prescribed by Art. 173 and item «а» of part 3 of Art. 174 of the CC RF [Criminal Code of the Russian Federation—Trans.]. What is being spoken of in the Articles is about the creation of dummy firms without the intent to implement entrepreneurial activities (Art. 174) and the laundering of monetary funds or other property acquired by other persons in a criminal way (Art. 174). According to the data of the MVD, uncovered in the process of the examination was a unitary scheme for taking out the money of officials, close to the oil companies controlled by the Kremlin and lieutenant-general Alexander Bortnikov, deputy director of the FSB and head of the Department of economic security of the FSB. Bortnikov is known for his close relations with deputy head of the administration of the president Igor Sechin and Vladimir Putin’s assistant Viktor Ivanov (The New Times wrote about this in detail in No. 1 of 12 February 2007 within the framework of a probe into the case of the killing of Alexander Litvinenko). As the sources of The New Times declare, Bortnikov supposedly oversaw the outflow of the money of various commercial structures engaged in the sale of electronics in Russia.

The criminal case was initiated with respect to a concrete episode. Thus, during the course of only one day, 29 August 2006, money in a sum of around 1.595 bln rubles, or $60 mln, was transferred all at once from the accounts of 27 banks of the city of Moscow to the bank «DISKONT».2 The money went to the address of two firms — a certain OOO «Solange» and OOO «Saturn-M», supposedly created by unestablished persons from the number of employees of the bank «DISKONT» itself and registered to dummy persons. During the course of the 29 August working day the money received on the accounts of these firms was transferred to the accounts of three foreign companies: «Ennerdale investments limited», «Ideco engineering limited» and «Fontana invest inc. Limited». The companies were registered on Cyprus and the British Virgin islands, while the accounts were located in the Austrian Raiffeisen Zentralbank Oesterreich AG. The monetary operations with the Austrian bank for that day were not reflected in the internal accounting of the bank «DISKONT», while the turnover for the day was shown as zero. On 30 August 2006, «DISKONT» gave the Austrian «Raiffeisen» an instruction to transfer money from the enumerated companies to the accounts of 12 foreign banks. Already on the next day, 31 August, the Central bank revoked from«DISKONT» the banking license as of 1 September 2006. The reason for this became the failure by the bank to observe federal laws regulating banking activities, and the repeated violation during the course of one year of the demands prescribed by the 115th federal law «On counteracting the legalization (laundering) of incomes received in a criminal way, and the financing of terrorism». In all over the period of two summer months – from 30 June to 28 August 2006 – money in an overall sum in excess of 41 bln rubles, or more than $1.5 bln, was transferred to the three named foreign companies from the accounts of OOO «Solange» and OOO «Saturn-M» through «DISKONT». The money was transferred to the so-called OOOs from various Russian banks, and already from the three foreign companies at the instruction of the bank «DISKONT» it was transferred by the Austrian «Raiffeisen» to various foreign banks.

— The “Diskont” scheme —

The scheme for the mass taking out of money beyond the border, as they assert at the MVD, worked in the following manner. The main nodal elements were two banks – the Russian Moscow Commercial Bank «DISKONT» and the Austrian Raiffeisen Zentralbank Oesterreich AG. From more than 50 banks of Russia, money, as a rule, was transferred first to the accounts of 17 Russian firms, registered to dummy persons. Many of them were supposedly created with the assistance of the banking structures themselves. In the list of the banks clients of which implemented transfers of large sums to the accounts of these 17 firms are Gazprombank, Alfa-Bank, the International Bank of Development, Vneshtorgbank Ekaterinburg, Vneshtorgbank Belgorod, Vneshtorgbank Retail services, RAKB «Moskva», Sberbank of Russia (city of Moscow), Impexbank, Master-Bank, Nefteprombank, Transkapitalbank, the International Industrial Bank, Stroyprombank, Sotsinvestbank, bank «Senator», Rusbank, Lesprombank, Investsberbank, Sobinbank, the Moscow Credit Bank, Russlavbank, Runa-Bank, Grand Invest Bank and others. Sources close to the FSB have reported to The New Times that “a real hunt is going on for this list of banks, for each name of a bank, in order that it would disappear from the list, they are offering $150 thousand each, so you count for yourselves – the value of the list exceeds $15 mln.” The money received by the 17 firms was later transferred to the accounts of dummy Russian commercial companies, the so-called OOOs, founded by the bank «DISKONT» (among which are OOO «Solange» and OOO «Saturn-M»), and already from them – to the accounts of the three foreign offshores on Cyprus and the British Virgin islands. Standing out separately in this scheme, in the words of that same source, was a Russian “daughter” of a large European bank: “The bank did not make use of the services of the 17 dummy firms, but used its own. From them the money was redirected through «DISKONT» to the three foreign offshores, and from them already through the Austrian «Raiffeisen» – to other foreign banks.” As they assert at the MVD, the given scheme was in operation for about a year and a half. “The mass outflow of money of officials beyond the border began already in the years 2001—2002 concurrently with the sharp increase in prices for oil,” reports the source. “But this had never before borne such a centralized character, usually the money was taken away by various groupings individually. Mixed up in the scheme tied around the bank «DISKONT» and the Austrian «Raiffeisen», however, were practically all the big banking structures and roughly one and the same circle of officials.”

— Golden guest-workers —

Besides the moving out of money beyond the border through the bank «DISKONT», the conversion of large sums into cash within Russia was [also] implemented in a centralized manner. Participating in this were certain banks from the list mentioned. The scheme worked extremely smoothly, while used in it, as a rule, were guest-workers from countries of the CIS, as well as non-residents from the countries of the Baltic. “As a rule, the guest-worker was driven to one of the banks (from a list of more than 50 banks — The New Times) where a money transfer to a physical person had previously been implemented to his name at the instruction of the bank «DISKONT». Sums from several tens of thousands to a million and a half dollars could be withdrawn by the guest-worker at one time. They could cash up to several tens of millions of dollars in one work day in various banks using such a scheme. After this the money was taken away, while the guest-worker received his kopeks.” Thus, in only one of the banks figuring in the list, over a short period of time transfers were implemented to physical persons — non-residents and sums of 1.36 mln, 257 thsd., 566 thsd., 420 thsd. and 824 thsd. dollars turned into cash. According to the data of sources, one could accuse the banks of violation of the 115th federal law «On counteracting the legalization (laundering) of incomes received in a criminal way, and the financing of terrorism». According to article 7 of this law, a bank is obligated to submit all information about operations exceeding a sum of 600 thsd. Rubles (around $23 thsd. — The New Times) to the Federal Service for Financial Monitoring not later than the work day following the day of the fulfillment of an operation. As a source declares, information about all transfers from the bank «DISKONT» for concrete physical persons to other Russian banks was submitted backdated with a large time lag. According to the data of the MVD, Russian banks participating in the transfer of money beyond the border, and in the cashing of funds through the bank «DISKONT», supposedly received “up to 10% of the overall sum” for each operation executed.

— First victims —

As has become known to The New Times, already in March 2006 in the department of the Central bank of Russia responsible for bank licensing and until September 2006 headed by deputy chair Alexey Kozlov, an analytical document had been prepared on the possible laundering of funds through foreign banks by a whole series of Russian commercial organizations, as well as physical persons. The information voiced in the report was taken for examination by the Department of economic security of the MVD. Already in July of 2006, Andrey Kozlov was speaking in narrow circles about three foreign companies through which the main flow of “laundry” goes beyond the border. Towards the end of August, the overall scheme of the flow of money through the bank «DISKONT» and the three foreign offshores with accounts in the Austrian «Raiffeisen» had been established, and on 31 August the deputy chair of the CB personally insisted on the revocation of the license from the bank «DISKONT». 8 days later based on the results of the examination of the Department of economic security of the MVD and with the direct assistance of Kozlov criminal case No. 248089 was initiated in relation to unestablished persons form the number of employees of the bank «DISKONT». In another 5 days, on 13 September 2006, an attempt was committed on the deputy chair of the Central bank, when he was coming out of a sports complex on the street Oleny Val in Moscow. His driver died from wounds received on the spot, while Kozlov himself died the next morning in the hospital.

— The procuracy “gets down to business” —

The criminal case initiated based on the fact of the killing of Andrey Kozlov was transferred to the administration for probing particularly important cases of the Procuracy-General of the RF. Soon representatives of the agency officially declared that the investigation does not have any doubts that “the killing of the deputy head of the Centrobank is associated with his professional activities”. Already in October of 2006, it was announced about the apprehension of the executors of the killing – three citizens of Ukraine, who had come to Moscow from Luhansk. A bit later, in November, the intermediaries in the organization of the attempt were apprehended. At the beginning of December 2006, procurator-general Yuri Chaika declared at a press conference in Moscow: “It can be spoken about how the criminal case has been solved”. A month later, on 11 January 2007, the main suspect in the organization of the killing was apprehended in Moscow – the banker Alexey Frenkel. However, The New Times’s interlocutors in the MVD, the State Duma and in the banking community are convinced that “Frenkel has nothing to do with the killing; he was apprehended for one and only one reason — he knew the scheme of the laundering of the ‘black’ money in sufficient detail, as in general did many in the banking sector, but in so doing he was not distinguished by particular reticence.” From sources of The New Times close to the Procuracy-General, it became known that the bank «DISKONT» did not figure in the case about the killing of Andrey Kozlov at any one of the stages. No declarations about a possible connection between criminal case No. 248089 initiated on 8 September under the immediate assistance of the deputy chair of the Centrobank and the DES of the MVD and the killing committed five days later after the initiation of the case were voiced.

— “Don’t talk, Frenkel” —

It was already understood about how Frenkel is not going to stay silent after his apprehension, when it became known about how already in December 2006 we was intending to openly appear in the mass information media with accusations of corruption addressed at the leadership of the Central bank and a critique of its policy with respect to the revocation of licenses. Finding their way to Russian newspapers were the so-called three letters of Frenkel, in which the scheme for turning large sums into cash by various banks and moving “gray” funds out beyond the border through offshores is described in detail. As Alexey Frenkel’s lawyer Igor Trunov declared, he does not remember that his client had ever mentioned the bank «DISKONT» in his talks. Alexey Mamontov, president of the Moscow International Currency Association, who passed on the first letter of the apprehended banker to the mass information media, added in confirmation of the words of the lawyer: “This bank did not figure in the letters of Frenkel. Furtermore, I have never heard anything at all about «DISKONT».” Igor Trunov notes: “The published letters are but a part of a large text written much earlier. It was never published in its entirety. What would end up in the mass information media was decided at the discretion of several persons, the names of whom I can not name, and little has remained of the initial text. As concerns the names of the banks a huge quantity of them figured there.” Whether or not the scheme voiced by the banker has anything whatsoever in common with the «DISKONT» scheme is not know so far, however in both cases what is being spoken about is a large number of Russian banks.

— Why Raiffeisen? —

Raiffeisen Zentralbank Oesterreich AG, apparently, was selected not by chance. As sources in the MVD have reported, this is associated first and foremost with the fact that the main flow of money for the construction of the North-European gas pipeline (NEGP) along the bed of the Baltic sea from Russia (Vyborg) to Germany (Greifswald) is going through the Austrian «Raiffeisen». “Under the cover of this money, the money of a whole series of high Russian officials and commercial structures controlled by the Department of economic security of the FSB is being taken out”, noted the source. Construction of the NEGP began in December 2005 and according to pans will continue until the year 2010. The main operator of the project became the company Nord Stream, 51% of the shares in which belong to «Gazprom» and 24.5% each to the German companies BASF AG and E.ON AG. President of the Institute of national strategy Stanislav Belkovsky in an interview with The New Times asserts that the money for the construction of the North-European gas pipeline are coming “among others through the Austrian «Raiffeisen» as well. “According to my data, this bank belongs to our fellow citizens for a really long time – mister Kovalchuk and the companies, they have already bought out part of the shares of the bank. It is precisely with this that such close and warm relations are associated”, continued Belkovsky.

The volume of the sums going for the construction of the gas pipeline is assessed, as general director of «Gazprom export» Alexander Medvedev officially declared in April 2006, at $10.5 bln. It is curious, however, that the initially voiced sum of the construction was around $5 bln. “To explain with economic reasons why the cost of the project has literally in four months increased more than two times is impossible”, asserts president of the Institute of energy policy Vladimir Milov. “One kilometer of gas pipe in the world costs from $600 thsd. to $1.5 mln, while during the construction of the NEGP already now the cost of one kilometer is running up to $2.5 mln.” Does this mean that $1 mln from each kilometer of pipe is going for kickbacks?

— Soon the case will kick the bucket —

As has become known to The New Times from sources in the Procuracy-General, in the next few days the question of “writing off the case (about the bank «DISKONT» — The New Times) as insignificant” and its transfer for consideration “to one of the territorial subdivisions of the GUVD of Moscow or the Moscow procuracy” is supposed to be examined within the walls of the agency. The task is to put a lid on the case once and for all. Concurrently with this, as lawyer of the banker Alexey Frenkel Igor Trunov declared, thoroughly unexpectedly on 17 May in the Procuracy-General they reported to him that the investigation with respect to the case of his client has been completed and would be handed over to the court during the course of the next week. All attempts by the lawyer to declare a petition on the conducting of a supplementary expert assessment were met with refusal.

— Mop-ups ahead —

According to information had by The New Times, a series of loud dismissals of a series of Russian officials of various levels who were accessories in corruption affairs is supposed to take place in the most immediate future. As sources in the MVD reported, “under the cover of corruption mop-ups, dismissals of people engaged in the case with respect to «DISKONT» from the very beginning may begin at the agency. The aim – to reduce to a minimum the circle of persons knowing about the schemes for taking money out through the indicated bank. Thus, according to our information, one of the heads of the criminal investigation unit of the Department of economic security of the MVD may be dismissed in the nearest future.

— Greetings from Austria —

As they reported to The New Times in the press service of the president of Russia, on 23 and 24 May Vladimir Putin will call on Austria with an official visit. The Russian president may be asked questions about the so-called case about «DISKONT». According to information had by the magazine, the Austrian police has already become interested in the involvement of Raiffeisen Zentralbank Oesterreich AG in the story with the Russian bank. Did the president of Russia know about the mass removal of the funds of high officials through the Russian «DISKONT» and the Austrian «Raiffeisen»? — about this we, most likely, will found out very soon indeed.

Here's one of those stories you haven't been reading about in the news - especially as there has been practically no English-language coverage. Over the past week, and especially this weekend, there have been numerous brawls (involving hundreds), clashes and attacks between Caucasians and Ethnic Russians in the Southern city of Stavropol. One Chechen was killed last week, and this weekend, two Russian university students were senselessly murdered outside their school, an event which has greatly exacerbated tensions and provoked widespread grief and outrage. Some Slavic groups have called for a city-wide curfew in response to the violence, and are condemning the performance of the territorial migration office - perhaps foreshadowing a future policy toward Chechen immigrants in the area.

Ethnic violence constitutes one of modern Russia's greatest challenges to overcome, and it is unfortunate that the administration largely prefers to hide these kinds of problems and not allow them to be discussed or debated in the "controlled marketplace of ideas." This inability to engage the inconvenient issues which directly impact Russia's national identity is a critical flaw of the sovereign democracy model - one that could eventually become unsustainable.

The mother Nadezhda and father Viktor stand in front of their house with a portrait of their son Dmitry Blakhin in Russia's southern city of Stavropol, June 4, 2007. Two students Blakhin and Viktor Chadin were killed in Stavropol on June 3 near their institute, Interfax news agency reported. REUTERS/Eduard Korniyenko (RUSSIA)

Friends carry the coffin with the body of Dmitry Blakhin in Russia's southern city of Stavropol, June 4, 2007. REUTERS/Eduard Korniyenko (RUSSIA)

A candle is lit in front of the portrait of Dmitry Blakhin at his room in a house in Russia's southern city of Stavropol, June 4, 2007. REUTERS/Eduard Korniyenko (RUSSIA)

Kommersant summary via IHT:

INTERETHNIC TENSIONS HIGH AFTER MURDERS: The murder of two ethnic Russian university students on late Saturday or early Sunday in Stavropol could be the latest escalation in a conflict between Russians and residents from the Caucasus, the newspaper wrote. A large brawl on May 24 left one Chechen student dead. Officially, the two students were victims of a robbery, though police have been put on heightened alert. Officials have warned that funeral services for the two could spark interethnic riots like those in the northern city of Kondopoga last fall, which forced residents from the Caucasus, mostly Chechens, to flee.

Zbigniew makes a good point:

"I think there must have been peals of delirious laughter echoing around the ornate chambers of the Kremlin when the invitation to go to Kennebunkport arrived," said Zbigniew Brzezinski, who was national security adviser to President Jimmy Carter. "Putin has been spitting at the United States for the last year, and what is the reaction? An invitation to a family gathering."

From Stratfor:

Head of Russia's Panorama think tank, Vladmir Pribvlovsky, said June 1 that law enforcement officials searched his apartment and seized computers with the manuscripts of two books he was writing about Russian President Vladmir Putin, Russian media reported June 4. Pribvlovsky was told the seizures were part of an investigation into the unsolved murder of Col. Gen. Anatoly Trofimov, a former head of the Federal Security Services who was shot and killed in 2005. Pribvlovsky said he suspected officials wanted to see what was to be published about Putin.

Departing the land of democracy, arriving to Heiligendamm

Some collected opinions on the G-8 Summit in Germany, which looks like it is going to descend into a veritable fiasco.

WSJ: The G-8's Cognitive Dissonance

The original G-7 countries are straining to divine the motivations behind Moscow's recently ratcheted-up nationalist bluster. Maybe Mr. Putin wants to shore up the Kremlin's hold on Russia less than a year before hand-picking his successor. Or maybe he wants to intimidate the outside world into staying out of what he deems to be Russia's internal affairs. Or perhaps he wants to split the Europeans and carve out space for Russia in the old Soviet sphere of influence. Or...

FT: Russia has lost all sense of proportion over missile defence

After what it sees as the humiliations of the 1990s, and ahead of an electoral season, Russia is in no mood to accept what it sees as a US foothold in Poland and the Czech Republic. Mr Putin’s lieutenants have brushed aside US offers to co-operate on missile defence. Instead Russia threatens to pull out of two landmark arms control treaties and has made ever more belligerent noises towards the west.

Such a course of action is not just out of proportion and wrong; it is also counterproductive. Although Germany’s Social Democrats have criticised the US for its role in the dispute, the German electorate is showing signs of turning against Mr Putin’s bullying behaviour. And while public opinion in Poland and the Czech Republic is against the missile defence bases, largely because of fears provoked by Russia’s threats, the two countries are likely to become more, not less, anti-Russian in feeling.

Chicago Sun Times: Bush has chance to set wise policy on Russia

This threat is an amazing blend of chutzpah and boomerang. First the chutzpah: Putin is denouncing a system intended to defend Europe against nuclear missiles from Iran when he has been helping Iran to develop such a capability by assisting its nuclearization program.

Second the boomerang: Putin's direct threat to aim missiles at Europeans would now justify their building a defense against Russian missiles even though that was no part of their original purpose. He is almost challenging the West to unite around an anti-Soviet policy.

Bush should take up his challenge. It gives him one last chance to save his own presidency by fashioning a stable long-term Western response to Russian state aggressiveness that will outlast him as the strategy of "containment" outlasted Truman. But it will work only if it has benefits for Russia too -- even if those benefits are not immediate.

Guardian: Encircled and Humiliated

This is not to deny that Russia poses a potential threat to Europe, notably in terms of energy supplies, or that its political culture is prone to an arbitrary and authoritarian mentality. But Russia is not about to change, and we must find a modus vivendi that respects what it is and recognises its legitimate interests. The danger with the US attitude, and any new cold war spirit in Europe, is that it will drive Russia into a corner. The consequences are already apparent. As soon as Russia has felt a little stronger, largely as a result of rising oil and gas prices, it has been more assertive. But in global terms it remains weak and fundamentally incapable of aspiring again to superpower status. Mikhail Gorbachev was surely right when he pointed the finger of blame for the present mess at Washington.

In our continuing coverage of the probe into the Austrian bank Raiffeisen's alleged ties to money laundering and possible trail leading back to the assassination of Andrei Kozlov, below we are posting an exclusive English translation of the second investigative piece from the Russian magazine The New Times, which kicked off the whole RZB scandal. Yesterday we posted the translation of the first New Times investigative piece, which followed my first post on this case.

Translated from The New Times - Issue No. 16 of 28 May 2007, p. 12

Sensational details have appeared in the case about the laundering of large sums by Russian officials through the bank «DISKONT» and the Austrian «Raiffeisen»

By Natalia Morar

— From the story of «DISKONT» —

In the last issue (No. 15 of 21 May), The New Times described in detail the scheme for taking money out to the West by big Russian officials, close to the oil companies controlled by the Kremlin and lieutenant-general Alexander Bortnikov, deputy director of the FSB and head of the department of economic security of the FSB of Russia. More than 50 Russian banks were involved in the scheme. Five of them are in the top ten banks of Russia. The money from these banks with the use of 17 fictional firms was transferred to accounts of dummy Russian commercial companies, founded by the bank «DISKONT». Next, «DISKONT» transferred the money to three foreign offshores, registered on the British Virgin Islands and on Cyprus, with accounts in Raiffeisen Zentralbank Oesterreich AG, and already from these offshores, that very same «Raiffeisen» transferred the money to the accounts of various European banks. On 8 September 2006, based on the act of a mass removal of money beyond the border, the MVD of Russia initiated criminal case No. 248089. A week earlier the deputy chairman of the Centrobank of Russia, Andrey Kozlov, had revoked the license from the bank «DISKONT». Five days later the banker was killed.

— Speak, «Raiffeisen» —

The Austrian «Raiffeisen» reacted to the article in The New Times without delay. An official representative of the bank, Gregor Bitschnau, declared that “information about the participation of the Austrian Raiffeisen Zentralbank Oesterreich in schemes with respect to the laudering of monetary funds out of Russia, disseminated by a series of mass information media, is absurd.” However, Mr. Bitschnau admitted that in the year 2006, the bank had found itself involved in a series of doubtful operations. “We conduct business with a respected bank in Russia. This bank received money and transferred it to us. Being a provider of services with respect to the transfer of funds, we forwarded this money to other international banks”, reported Bitschnau, not specifying about which specific bank he was speaking.

“In August of the year 2006 we received a warning about how the transactions, perhaps, are doubtful. We promptly reported about this to the corresponding authorities in Russia and Austria.”

In the Austrian «Raiffeisen» they likewise told The New Times about the existence of three Latvian offshore companies, which in actuality were mixed up in the doubtful transfers from Russia. “As soon as it became known to us about this, we immediately submitted all the information to the competent Austrian organs”, they noted in so doing in the Austrian bank.

— According to the data of the MVD of Austria —

However, that which the Austrian «Raiffeisen» calls “absurd”, in the MVD of Austria they are regarding as a cause for the most serious criminal investigation. Materials of an annual report on the struggle with the laundering of monetary assets, prepared by the Ministry of internal affairs of Austria based on the results of the work of the Administration of financial intelligence of Austria in the year 2006, have turned out to be at the disposal of The New Times (the report was presented at the end of April 2007). From the part of the report devoted to Russia it follows that a series of suspicious monetary operations was conducted between a certain Austrian bank and a Russian bank (names are not indicated) in 2006. The New Times cites excerpts from the report without changes.

“In the year 2006, one Austrian bank received information from the president of one Russian bank (by telephone) that large volumes of monetary funds (the result of operations with respect to currency exchange) were credited to the correspondent account of one Russian bank (they are speaking, most likely, of the bank «DISKONT» — The New Times), opened in this Austrian bank.

“As was reported by telephone, the given monetary funds were the result of an operation with respect to the laundering of money, in connection with which an inquiry was sent about their blocking.

“With the help of one of the employees of the Russian Centrobank (perhaps they have in mind former deputy chair of the CB of Russia Andrey Kozlov — The New Times), it became known to the Austrian bank that this Russian bank had already been formally accused of not paying taxes and laundering money and it had been prohibited by the Centrobank of the RF to carrying out any further payments whatsoever. Likewise the Russian Centrobank asked the Austrian bank to return all assets fro