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> WSWS : News & Analysis : Europe : Russia & the CIS
>
> What lies behind the corruption scandals in the Kremlin?
>
> By Patrick Richter
> 10 September 1999
>
> Back to screen version
>
> For over a week, accusations of corruption against President Boris Yeltsin and
> his "family" have been mounting. They were unleashed by the almost simultaneous
> publication of three articles, which for the first time linked Yeltsin
> personally to a series of scandals in Russia.
>
> First, the Italian newspaper Corriere della Sera reported that investigations
> had been launched into the granting of credit cards to Yeltsin's family. During
> a probe of the Swiss company Mabetex, records were found relating to credit
> cards issued to Boris Yeltsin and his daughters, Tatyana Dyachenko and Yelena
> Okulova.
>
> Mabetex, which received $335 million worth of contracts for the restoration of
> the Kremlin and other government buildings, had transferred millions of dollars
> to the private account of Pavel Borodin at a Budapest bank. Borodin is the
> director of the department for real estate and services in the Kremlin, and is
> considered to be number two after Yeltsin, who is believed to have received a
> million dollars in compensation. On the Mabetex balance sheet, the amounts
> appeared as "local special expenditures". Under Swiss law, commissions paid to a
> foreign official are not subject to taxation, but the name and account number of
> the recipient must be shown.
>
> Second, Yeltsin's name surfaced in a series of articles in Switzerland about the
> seizure of Boris Berezovski's bank accounts. Berezovski, operating in league
> with one of Yeltsin's sons-in-law, is accused of having defrauded the Russian
> airline Aeroflot of $250 million.
>
> Third, the New York Times has published reports on nine bank accounts with the
> Bank of New York, through which up to $10 billion was laundered for the Russian
> Mafia, with Yeltsin's knowledge. Other reports put the total amount of laundered
> money at $15 billion. Even IMF funds were alleged to have flowed into the
> pockets of the Russian Mafia. According to USA Today, in addition to 12 former
> or current Russian cabinet members, Yeltsin and his daughter Dyachenko were
> involved.
>
> On September 3, Corriere della Sera published a report listing 24 names and
> addresses of Russians at the heart of the Mabetex scandal. Among them were Pavel
> Borodin and family, Anatoli Kruglov, the government official responsible for the
> lucrative area of customs, and Oleg Soskovez, vice-premier responsible for
> building, energy and health until his dismissal in 1996.
>
> Newspapers and press agencies are falling over themselves with new and detailed
> articles regarding the close links between Russian politics, business and the
> Mafia. Reports are being published describing in detail the obscene wealth of
> the new "jet-set Russians", whose Byzantine profligacy is on display at every
> exclusive international health resort.
>
> An article by Rudolph Chimelli, headlined "The Last Superpower", appeared in the
> S�ddeutsche Zeitung August 28. Chimelli describes how the "new Russians"�as
> Russia's nouveaux riches are called�indulge themselves on the French Riviera.
> One of them, Gennadi, orders the most expensive champagne and Beluga caviar at
> the beach. But he lacks the �famous little ball of 24-carat gold, which, because
> of its high specific gravity, sinks when placed in fresh caviar, but stays on
> the resinous surface if the product is old."
>
> Chimelli writes that by the end of May, holiday mansions with monthly rents
> between 400,000 and 1.5 million francs (US$64,600-$242,350) are already
> completely booked. A hotel employee is quoted as saying, �Russians and Americans
> fought for the most expensive mansions on the C�te d'Azur. In the end the
> Russians won, because they are not frightened to overpay, and they rent for four
> months."
>
> The waiter at one of the haute cuisine restaurants �recalls a meal at which the
> diners ordered 23 bottles of Ch�teau Margaux 1971, at that time costing 8,000
> francs (US$1,300) each�. In the �H�tel de Paris in Monte Carlo and in the H�tel
> du Cap in Antibes, the reserves of rare Ch�teau Petrus 1985 and precious Roman�e
> Conti 1983 have dwindled�even at a price of almost $3,250 a bottle".
>
> Although these descriptions throw light on Russian politics since the collapse
> of the Soviet Union in 1991, they contain nothing surprising. In the recent
> past, especially since the financial crisis of August 1998, detailed reports
> have appeared on the extent of corruption and money laundering in Russia. Anyone
> who has followed the developments in Russia even marginally, or, like the
> Russian population, has experienced events firsthand, knows that this is only
> the tip of the iceberg.
>
> After the collapse of the Soviet Union, the IMF, the World Bank and the majority
> of Western governments pursued a policy in Russia which, with the aid of
> billions in foreign currency, flushed a whole layer of the most corrupt and
> criminal elements to the surface.
>
> The influential German weekly Die Zeit rightly asks in its recent edition: �Why
> is it that no one now wants to suspect what everyone already knew?"
>
> A typical proponent of the �economic science� supporting �liberal� policies is
> Harvard professor Andrei Schleifer, who is known for his close co-operation with
> the American advisor to Moscow and fellow Harvard professor Jeffrey Sachs. The
> latter was in Moscow at the beginning of the 1990s and directed the �reform�
> policies.
>
> In an OECD study Schleifer explains their strategy as follows: �Encourage and
> give legal blessing to some stakeholders to expropriate others, thus reducing
> the number of stakeholders with overlapping stakes" ( The Economics and Politics
> of Transition to an Open Market Economy: Russia, Andrei Schleifer and Daniel
> Treisman, OECD, 1998, p. 18). In plain English: put more power in the hands of
> one section of crooks so they can knock off the others and make it an easy game
> for us!
>
> In connection with the coming US presidential elections, extreme right-wing
> sections of the American ruling class, who see no sense in continuing the
> Russian policy of President Bill Clinton and Vice President Al Gore, are
> intensifying their attacks. As is widely known, US business interests aided the
> corrupt practices of the Yeltsin family and secured Yeltsin's victory in the
> 1996 Russian presidential elections with substantial financial and personnel
> support. Al Gore maintained the closest connections to the Russian prime
> minister through the so-called Gore-Chernomyrdin commission, in order to promote
> American interests.
>
> Against the backdrop of the corruption revelations, a leader of the Republicans
> in the American Congress, Dick Armey, demanded an immediate halt to payments and
> an examination of all cash transfers to and from Russia. The representatives of
> the IMF and US government protested, claiming there was no proof that IMF funds
> were involved in the money laundering scandal and insisting that payments to
> Russia continue with September's tranche of $640 million.
>
> The right-wing attacks are directed not only against the American government,
> but also against international institutions. Signs of this political orientation
> had already emerged in the Kosovo War, in which NATO, under the guidance of the
> US, operated without a UN mandate and demonstratively snubbed Russia. The
> Russian government succeeded in saving face at home and abroad only with
> European assistance. While the US carried out one affront after another, German
> Minister of Foreign Affairs Joschka Fischer remained in close contact with the
> Russian leadership via Moscow's envoy to Yugoslavia, Viktor Chernomyrdin.
>
> Along with the growing pressure against Clinton and Vice President Gore, who is
> the leading Democratic Party candidate in the upcoming presidential elections,
> the danger increases that Russia will receive no more foreign money, and thus be
> deprived of one of its most important pillars.
>
> Most European think tanks agree that under no conditions can there be a
> destabilisation of Eastern Europe, as this could endanger the expansion of
> Western Europe's sphere of interest in this region. In its last edition, Der
> Spiegel magazine quoted an advisor to the German chancellor, who said, �The
> worst thing that could happen for us is chaos in Russia."
>
> For this reason, hope is increasingly coming to rest on the nationalist Luzhkov
> -Primakov alliance in the coming Duma elections. The above mentioned Zeit
> article summed up this widespread mood as follows: �The Americans are said to
> reproach him [Primakov] for 'stubbornly holding on to great power politics'.
> Better a conservative great power than a lawless cartel."
>
> An end to IMF credits would dramatically exacerbate Russia's agony, and the
> lucrative posts of the Russian Camarilla would be directly threatened. This
> explains the outer unity of the Russian establishment: Chernomyrdin, Chubais,
> Luzhkov and even the �liberal� Yabloko leader Grigory Yavlinsky , regarded as an
> �intellectual� opponent, all condemn the criticisms from abroad. In a remarkable
> assertion, Yavlinsky remarked that the �hysterical imputations that Russia is a
> kleptocracy are just as far from reality as the euphoric praise for Russia's
> restorationist course a few years ago� ( S�ddeutsche Zeitung, September 4).
>
> From the outset, Moscow Mayor Yuri Luzhkov guaranteed Yeltsin's �personal
> security for the period after his presidency�. The reason for this is simple: if
> Yeltsin goes under, the others involved in the network of �business, politics
> and the Mafia� could be pulled into the abyss along with him.
>
> Thus, as Luzhkov explained to the press on September 2, the investigation of
> ex-general public prosecutor Yuri Skuratov has purely domestic significance,
> because �I doubt that ... amounts in the billions were defrauded from
> international accounts by the Russian Mafia�.
>
> In the spring, Skuratov was twice dismissed by Yeltsin because he wanted to let
> the president swing for the Mabetex affair. Now this two-faced man has risen to
> become one the main leaders of the campaign against Yeltsin. He has not denied
> �proofs", which are certainly not lacking in the present conflict, indicating he
> obtained funds from Felipe Turover. Turover is a former associate of the Swiss
> Gotthard Bank, and it was his �revelations� that got the Mabetex affair rolling
> again.
>
> Meanwhile, in this game of power politics, nobody talks about the real interests
> of the Russian population. In the midst of the flood of media articles about the
> corruption scandals, information regarding social conditions in the country is
> difficult to come by. What is available, however, speaks volumes. In the eastern
> region of Sakhalin a cholera epidemic has broken out. By the year 2016, the
> Russian population will decrease by a further 8 million. This is based upon a
> current projection of the Russian Office of Statistics, according to which each
> 100 Russian women would have to bring 215 children into the world for the
> population level to remain stable. At present, however, this ratio has dropped
> to 124 children per 100 woman. Over the past seven years Russia's population has
> declined by 2 million.
>
> Another recent article comes from the Socio-Economic Research Institute of the
> Academy of Sciences, which has revised upwards the figures on poverty in Russia
> published by the National Statistical Committee in November of last year.
> According to the Socio-Economic Research Institute, some 60 million Russians
> live below the poverty line, instead of the previous estimate of 42 million.
> This is 40 percent of the population. The average wage has dropped to US$33 per
> month.
>
> Against this background, it would hardly have been surprising had the August 31
> bomb attack on Moscow's finest shopping arcade, which injured 41 people, turned
> out to have been the act of desperate young people. This temple of consumption
> was completed in 1997 on the occasion of Moscow's 850th anniversary, at a cost
> of $300 million.
>
> Even if the �uncovering� of corruption scandals does not offer a solution to the
> Russian population in their struggle for existence, it does at least expose to a
> world-wide public the methods employed in Russia by Western policy makers and
> financial interests in Russia, upon which the upper layers of post-Soviet
> society are based.
>
>
>
>
>
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>
> Copyright 1998-99
> World Socialist Web Site
> All rights reserved
>
>
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