Stratfor on Putin/Yelstin/Primakov

Michael Pollak mpollak at panix.com
Thu Sep 2 05:16:42 PDT 1999


STRATFOR.COM Global Intelligence Update September 2, 1999

The Russian Bank Scandal: A Purge Against Yeltsin's Allies

Summary:

An avalanche of allegations and investigations is rapidly burying the allies and officials of the Yeltsin administration. The timing and evidence suggests this is far more than just Luzhkov versus Yeltsin in pre-election scandal-mongering. This is a full-scale assault on Yeltsin's ruling political and economic cabal by elements of Russia's security apparatus, which could quickly lead to Yeltsin's replacement by Prime Minister Vladimir Putin. If the purge gets out of hand, will Putin and his backers fall victim to a still more reactionary force?

Analysis:

Russian President Boris Yeltsin's administration and his allies are besieged by allegations and investigations. The most recent, which broke on the front page of the New York Times August 19, involved allegations that Yeltsin administration officials were involved in laundering billions of dollars from criminal activities and possibly from IMF loans through the Bank of New York and the Republic National Bank. The IMF has denied that its funds have been laundered through U.S. banks.

Concurrent with this are ongoing investigations into allegations that close Yeltsin ally Boris Berezovsky diverted funds from the state airline Aeroflot to a private Swiss bank account and that Yeltsin, his family members and his administration accepted bribes from the Swiss construction firm awarded the contract to renovate the Kremlin. All these scandals come hot on the heels of confirmed reports that the Russian central bank diverted IMF loans through an offshore shell company, using them to speculate on the global currency markets.

Some of these scandals have been simmering for months and date back to events that occurred years ago. And yes, the Yeltsin cabal was a kleptocracy just waiting for an indictment.

But we do not believe that these scandals are coming to a boil almost simultaneously out of mere coincidence or bad timing. This is not, as some in the Russian press have alleged, a fictional tale generated in the U.S. by opponents of Vice President Al Gore - a key figure in U.S. policy toward Russia - in an attempt to embarrass him prior to the U.S. presidential elections. This is not, as Berezovsky has asserted, a simple pre-Duma election plot dreamed up by Yeltsin's political foe, Moscow Mayor Yuri Luzhkov. That said, we believe that Luzhkov's new ally, former Prime Minister Yevgeny Primakov, is playing a role in it, although not the lead role.

According to Russian and U.S. intelligence sources and analysts cited by UPI, the Bank of New York money laundering allegations were leaked to Western law enforcement officials by disgruntled elements in the Russian security services, eager to embarrass and undermine Yeltsin. Analysts cited by UPI pointed to Primakov, who headed the Foreign Intelligence Service (SVR), as the successor to the KGB's foreign operations directorates before he was promoted to foreign minister and then prime minister. The analysts insist that current Prime Minister Vladimir Putin is helpless to stifle the dissent within the security apparatus, despite the fact that he was previously head of the Federal Security Service (FSB), the successor to most of the KGB's domestic operations directorates and a career KGB officer.

We disagree. We see a continuity between Primakov and Putin, with Putin far more likely to be playing the lead role in manipulating this crisis. If Primakov was in a position to reveal the full scope of the economic crimes of the Yeltsin administration and its supporting cast of oligarchs, why wait for months after he was forced to step down to set the plan in motion? In fact, Primakov launched an attack on corruption in the Yeltsin cabal, particularly against Berezovsky, but was thwarted.

The chronology speaks for itself. Primakov took office as prime minister on September 11, 1998. Five months later, in February, news emerged of the investigation by Prosecutor General Yuri Skuratov of the Russian central bank's misdirection of IMF funds through the Jersey Island holding company FIMACO. By late March of this year, Skuratov had launched an investigation into illegal deals between Russian officials and Yeltsin's family and the Swiss construction company Mabetex. On April 2, Yeltsin attempted to sack Skuratov, though the Duma declared the move unconstitutional. Days later, arrest warrants were issued for Berezovsky and Aeroflot director Nikolai Glushkov, as well as for another oligarch, Alexander Smolensky. Berezovsky was ousted as executive secretary of the Commonwealth of Independent States (CIS). The arrest warrant against Berezovsky was the straw that broke the camel's back and Yeltsin struck back. By May 12, the arrest warrant had been lifted and Primakov was sacked, replaced by Sergei Stepashin.

During Stepashin's short tenure as prime minister, the scandals were effectively smothered, as the Kremlin sought one more infusion of cash from the IMF. It got it by selling out Slobodan Milosevic to NATO. The ousting of Primakov, the abandonment of Yugoslavia and the failure of the Kremlin to take steps to prevent a guerrilla uprising apparently brewing in the northern Caucasus was too much for a faction in the security and defense apparatus. What they saw was Russia spinning out of control. Moreover, the financial scandals had not gone away. Price Waterhouse confirmed the details of the FIMACO scandal and the Swiss opened an investigation of the Mabetex allegations. The final insult may have been when Islamic guerrillas finally did invade Dagestan and Stepashin, sent to the area to evaluate the situation, declared his aversion to risking the lives of Russian troops or civilians.

Whether by his own volition or not, Yeltsin sacked Stepashin and appointed Putin, not only his prime minister but also his chosen successor, on August 9. Even before his confirmation in office, Putin deployed a massive contingent of Russia's elite forces to attack the guerrillas in Dagestan and ordered an increase in pay for soldiers in Dagestan and for members of the FSB. Putin revived Primakov's aggressive foreign policies toward Belarus and other CIS countries, which had stagnated under Stepashin.

Two days after Putin's appointment was approved by the Duma, Swiss officials froze what were reportedly Berezovsky's bank accounts. The next day, the New York Times broke the Bank of New York money- laundering story. On August 28, again perhaps not altogether voluntarily, Yeltsin signed a decree merging the FSB department responsible for protecting the constitution - and the constitutionality of the upcoming elections - with the counter- terrorism department. The FSB spokesman who announced the decision cited the "close responsibilities" of the two departments, though he did not explain why election monitors need to coordinate closely with the FSB's armed commando units.

Now Yeltsin is drowning in scandal, and Putin, according to analysts, is unable to save him from this Primakov-directed deluge. More likely, Putin is pushing Yeltsin under. First of all, Putin was Primakov's ally, even presenting him with a gift of a hunting rifle as condolence when he was sacked. Primakov headed the SVR, while Putin headed the FSB. In the FSB, Putin had the files on Kremlin officials and earlier he even worked under Anatoly Chubais, under investigation in the Mabetex and Bank of New York scandals, and Pavel Borodin, under investigation in the Mabetex scandal.

Yet somehow, Putin has not been implicated in the scandals. As business manager and then head of the main oversight office in the Kremlin, Putin knew where much of the money was going even before he took over the FSB. Primakov reportedly did not even have an office in the Kremlin during his tenure as prime minister. Currently, Putin has the levers of power in the Kremlin, theoretically allowing him to block investigations, while Primakov is working from the outside. So while Primakov was ousted for launching a purge, Putin may be far more successful.

As we wrote on August 23, a silent coup has occurred in the Kremlin [ http://www.stratfor.com/SERVICES/GIU/082399.ASP ]. Now the purge is under way. Those reportedly under investigation in the Bank of New York case include: Yeltsin's daughter and close advisor Tatyana Dyachenko; former Deputy Prime Minister Anatoly Chubais; former Deputy Prime Minister Oleg Soskovets; former Finance Minister and now G-8 Relations Advisor Alexander Livshits; oligarch and former Finance Minister Vladimir Potanin; oligarch Mikhail Khodorkovsky; and reputed Russian mob boss Semyon Mogilevich, who reportedly had business relations with senior Russian officials, including Chubais and Viktor Chernomyrdin. Also under investigation are 33 Russian companies that do business with the Bank of New York, including Khodorkovsky's Yukos oil company, Avtovaz and Sibneft, both connected to Berezovsky, and Lukoil, headed by oligarch Vagit Alekperov. Berezovsky is joined by Yeltsin's son-in-law under investigation in the Aeroflot scandal. And the Mabetex scandal drags in Yeltsin himself, his two daughters and Borodin.

Great swaths of Yeltsin's family, administration and the oligarchs who supported him, are poised for conviction for economic crimes. They are even feeding on one another, with Berezovsky taking on oligarchs Vladimir Gusinsky and Rhem Viakhirev, and Khodorkovsky beginning to turn against the administration. The swirling scandal not only holds the possibility of gutting the kleptocracy and ousting Yeltsin, leaving Putin as president before next year's elections, but also plays into a strong domestic anti-American and anti-Western sentiment.

As has occurred throughout history, responsibility for Russia's calamities are once again laid at the feet of the Westernizers and their conspiratorial Western allies. It now emerges that Western money served only to enrich and empower a small cabal in the Kremlin before cycling back to Western banks. In exchange, the Yeltsin cabal sacrificed Russian international prestige and interests.

Yeltsin's tenure, and that of his self-serving supporters, is nearly at an end. The question is, is Putin the end or the interim? Is he Lenin or Kerensky? Putin and his backers do not represent the farthest possible reaction of Russian politics. They understand the need for continued economic and political engagement with the West, albeit under significantly less self-debasing terms. If the purge now under way gets out of hand, Putin and his backers could fall victim to a still more reactionary force. If Putin turns out to be Kerensky, who will be Lenin?

__________________________________________________

SUBSCRIBE to FREE, DAILY GLOBAL INTELLIGENCE UPDATES (GIU) http://www.stratfor.com/services/giu/subscribe.asp

or send your name, organization, position, mailing address, phone number, and e-mail address to alert at stratfor.com

UNSUBSCRIBE FROM THE GLOBAL INTELLIGENCE UPDATES (GIU) http://www.stratfor.com/services/giu/subscribe.asp ___________________________________________________

STRATFOR.COM 504 Lavaca, Suite 1100 Austin, TX 78701 Phone: 512-583-5000 Fax: 512-583-5025 Internet: http://www.stratfor.com/ Email: info at stratfor.com ___________________________________________________

(c) 1999, Stratfor, Inc.



More information about the lbo-talk mailing list