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- Russian Roulette - 1/20 -


(c) 2002, 2003 Copyright Lidija Rangelovska.

Russian Roulette

Russia's Economy

In Putin's Era

1st EDITION

Sam Vaknin, Ph.D.

Editing and Design:

Lidija Rangelovska

Lidija Rangelovska

A Narcissus Publications Imprint, Skopje 2003

First published by United Press International - UPI

Not for Sale! Non-commercial edition.

(c) 2002, 2003 Copyright Lidija Rangelovska.

All rights reserved. This book, or any part thereof, may not be used or reproduced in any manner without written permission from:

Lidija Rangelovska - write to:

palma@unet.com.mk or to

vaknin@link.com.mk

Visit the Author Archive of Dr. Sam Vaknin in "Central Europe Review":

http://www.ce-review.org/authorarchives/vaknin_archive/vaknin_main.html

Visit my United Press International (UPI) Article Archive

ISBN: 9989-929-31-9

http://samvak.tripod.com/guide.html

http://samvak.tripod.com/briefs.html

http://economics.cjb.net

http://samvak.tripod.com/after.html

Created by: LIDIJA RANGELOVSKA

REPUBLIC OF MACEDONIA

C O N T E N T S

I. The Security Apparatus

II. The Energy Sector

III. Financial Services

IV. The Russian Devolution - The Regions

V. Agriculture

VI. Russia as a Creditor

VII. Russia's Space Industry

VIII. Russia's Vodka Wars

IX. Let My People Go

X. Fimaco Wouldn't Die

XI. The Chechen Theatre Ticket

XII. Russia's Israeli Oil Bond

XIII. Russia's Idled Spies

XIV. Russia's Middle Class

XV. Russia in 2003

XVI. Russia Straddles the Euro-Atlantic Divide

XVII. Russia's Stealth Diplomacy

XVIII. Russia's Second Empire

XIX. The Author

XX. About "After the Rain"

The Security Apparatus

Shabtai Kalmanovich vanished from London in late 1980's. He resurfaced in Israel to face trial for espionage. He was convicted and spent years in an Israeli jail before being repatriated to Russia. He was described by his captors as a mastermind, in charge of an African KGB station.

In the early 1970's he even served as advisor (on Russian immigration) to Israel's Iron Lady, Golda Meir. He then moved to do flourishing business in Africa, in Botswana and then in Sierra Leone, where his company, LIAT, owned the only bus operator in Freetown. He traded diamonds, globetrotted flamboyantly with an entourage of dozens of African chieftains and their mistresses, and fraternized with the corrupt elite, President Momoh included. In 1986-7 he even collaborated with IPE, a London based outfit, rumored to have been owned by former members of the Mossad and other paragons of the Israeli defense establishment (including virtually all the Israelis implicated in the ill-fated Iran-Contras affair).

Being a KGB officer was always a lucrative and liberating proposition. Access to Western goods, travel to exotic destinations, making new (and influential) friends, mastering foreign languages, and doing some business on the side (often with one's official "enemies" and unsupervised slush funds) - were all standard perks even in the 1970's and 1980's. Thus, when communism was replaced by criminal anarchy, KGB personnel (as well as mobsters) were the best suited to act as entrepreneurs in the new environment.

They were well traveled, well connected, well capitalized, polyglot, possessed of management skills, disciplined, armed to the teeth, and ruthless. Far from being sidetracked, the security services rode the gravy train. But never more so than now.

January 2002. Putin's dour gaze pierces from every wall in every office. His obese ministers often discover a sudden sycophantic propensity for skiing (a favorite pastime of the athletic President). The praise heaped on him by the servile media (Putin made sure that no other kind of media survives) comes uncomfortably close to a Central Asian personality cult. Yet, Putin is not in control of the machinery that brought him to the pinnacle of power, under-qualified as he was. This penumbral apparatus revolves around two pivots: the increasingly fractured and warlord controlled military and, ever more importantly, the KGB's successors, mainly the FSB.

A. The Military

Two weeks ago, Russia announced yet another plan to reform its bloated, inefficient, impoverished, demoralized and corrupt military. Close to 200,000 troops are to go immediately and the same number in the next 3 years. The draft is to be abolished and the army professionalized. At its current size (officially, 1.2 million servicemen), the armed forces are severely under-funded. Cases of hunger are not uncommon. Ill (and late) paid soldiers sometimes beg for cigarettes, or food.

Conscripts, in what resembles slave labour, are "rented out" by their commanders to economic enterprises (especially in the provinces).

A host of such "trading" companies owned by bureaucrats in the Ministry of Defense was shut down last June by the incoming Minister of Defense (Sergei Ivanov), a close pal of Putin. But if restructuring is to proceed apace, the successful absorption of former soldiers in the economy (requiring pensions, housing, start up capital, employment) - if necessary with the help of foreign capital - is bound to become a priority sooner or later.

But this may be too late and too little - the much truncated and disorientated armed forces have been "privatized" and commandeered for personal gain by regional bosses in cahoots with the command structure and with organized crime. Ex-soldiers feature prominently in extortion, protection, and other anti-private sector rackets.

The war in Chechnya is another long standing pecuniary bonanza - and a vested interest of many generals. Senior Russian Interior Ministry field commanders trade (often in partnership with Chechen "rebels") in stolen petroleum products, food, and munitions.

Putin is trying to reverse these pernicious trends by enlisting the (rank and file) army (one of his natural constituencies) in his battles against secessionist Chechens, influential oligarchs, venal governors, and bureaucrats beyond redemption.

As well as the army, the defense industry - with its 2 million employees - is also being brutally disabused of its centralist-nationalistic ideals.

Orders placed with Russia's defense manufacturers by the destitute Russian armed forces are down to a trickle. Though the procurement budget was increased by 50% last year, to c. $2.2 billion (or 4% of the USA's) and further increased this year to 79 billion rubles ($2.7 billion) - whatever money is available goes towards R&D, arms modernization, and maintaining the inflated nuclear arsenal and the personal gear of front line soldiers in the interminable Chechen war. The Russian daily "Kommersant" quotes Former Armed Forces weapons chief, General Anatoly Sitnov, as claiming that $16 billion should be allocated for arms purchases if all the existing needs are to be satisfied.


Russian Roulette - 1/20

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