STATEMENT OF KONSTANTIN BOROVOI, DEPUTY, RUSSIAN STATE DUMA,
CHAIRMAN, ECONOMIC FREEDOM PARTY
[The following testimony was presented with the assistance
of an interpreter.]
Mr. Borovoi. Thank you, Mr. Chairman, for giving me an
opportunity to speak to you.
It is actually one of the problems and one of the issues I
work on in Moscow, the problem of criminalization of political
power and the economy, and it is actually the main motive of my
statements in Moscow, my press conferences and legislative
requests that I make.
I would like to touch on a few issues that I think are
important for me to make a point of here. Corruption in Russia
is a part of a more complex problem, the problem of loss of
direction of democratization in our country. What we call
uncontrollable growth and expansion of corruption is more
characteristic of what we had in 1995 and 1996. Today, we have
a new phase of growth of corruption, where corruption now is an
integral part of the government. At the same time, this current
status of corruption is very convenient for the current rulers
of Russia, and they are very happy with it.
Today's corruption and criminalization of power structures
in government in Russia is influencing not only its domestic
and economic policy but also its international foreign policy.
The testimony of this process is the current events in the
Caucasus and Chechnya, as well as the position of animosity
toward NATO, toward the United States, and as well as a number
of other initiatives taken on the international arena and also
the support for the different rogue regimes in different parts
of the world.
In 1991, good conditions were created for the forms of
democratic Russia, but not all the government and economic
structures were abolished, and it was clear for us already in
1992 when we met with the American policymakers and explained
to them these negative trends and dangers in Russia. Actually,
at a place not far from here at the State Department I was
attempting to convince the officials there that there is a
danger of uncontrollable development of corruption in Russia,
as well as serious threat to development of democratic
principles. But they actually accepted a concept of self-
propelled, independent process of democratization of Russia,
and this process created a paradoxical situation in Russia and
a paradoxical situation in the relations between Russia and the
United States.
As a matter of fact, American taxpayers are financing
projects that are implemented in Cuba, Iraq, Iran, and in
Belgrade; and, as a matter of fact, right now Russia is not a
friendly country toward the United States.
As a matter of fact, the American taxpayers' money is now
spent on organizing of anti-American, anti-NATO propagandist
campaigns. As a result of this anti-American propaganda
campaign led by the Russian government, almost 85 percent of
the Russian population was willing to support sending Russian
volunteers and weapons systems, even advanced anti-aircraft
missile systems, to Milosevic.
Unfortunately, humanitarian and even food product
assistance for Russia is also a matter of increased corruption
in Russia, and I think that the following steps are necessary
in order to stop the development of this dangerous situation:
First of all, we need to say good-bye to the illusions
about democratic development of Russia. Right now the only
direction of development I see in Russia is the development
toward forming of a small evil empire, adversarial to the rest
of the democratic world; and I think in order to understand the
process we need to have good professional expertise.
Unfortunately, here in the United States I frequently
encounter very naive views on the situation and process that is
happening in Russia. I think that all the programs of support,
including the financial support and cooperation progresses,
should be halted or stopped, and there should be a coordination
between this type of assistance and the political process.
Otherwise, the United States can find itself in the situation
as it evolved when it will closely resemble what was happening
in the events preceding to the tragedy at Pearl Harbor.
Also, I think it is important not to lose the hold of the
pulse of Russia. I think it is necessary to keep and expand the
forms of work that promote further democratization of Russia.
Thank you.
Sources: https://www.govinfo.gov/content/pkg/CHRG-106hhrg62963/html/CHRG-106hhrg62963.htm
Who would like to comment on the Duma's ability to conduct
oversight on government affairs? Deputy Borovoi?
Mr. Borovoi. I absolutely agree with the statement of the
gentleman that corruption is an integral element in the work of
the Russian parliament. Actually, I had one press conference on
the illegal way of lobbying in the Russian parliament, and the
theme of this press conference was the state Duma as a private
joint stock company. The issues of corruption were raised at
the sessions of the joint Duma-Congress commission; and,
unfortunately, the majority of the Russian members of the
parliament took the formal position that these allegations have
nothing to do with reality. It is just the allegation and
pretext for some accusation.
I don't think that cooperation with the Russian parliament
can be an effective or efficient tool in fighting corruption in
Russia.
Chairman Gilman. [presiding.] Mr. Sherman?
Mr. Sherman. Thank you, Mr. Chairman.
One preliminary comment, and Mr. Bereuter's comment brought
this up. I am disturbed that it is difficult for this Committee
to get testimony in executive session from CIA agents and
former CIA agents, and that while we are concerned about the
transparency and honesty of the Russian government here in
these hearings we should never spare effort to assure the
honesty of the U.S. Government. Perhaps whatever we could do to
get clear and honest executive session testimony from former
CIA agents would be a step in that direction.
Deputy Borovoi, it is indeed shocking to hear your
comments. I wouldn't be shocked if any of these other gentlemen
said them, but you are an official of the Russian government
and even the Chairman of a party. How many seats in the Duma
does your party have, and do you think that your comments
reflect the views of a few other parties in the Duma as well?
Mr. Borovoi. My party has two seats in the Duma. Fifty
percent of the state Duma members are communists. For you to
better understand the balance of forces in the state Duma, I
can give you the results of the vote on the resolution of
support, political and military support, of President Milosevic
that was taken in the Russian Duma--372 votes in favor, against
1.
Mr. Sherman. I understand. I don't know if the vote for
Milosevic just reflects misplaced nationalism or whether it
reflects corruption. I do know here in the United States we
will get criticism for voting for aid for Russia or, frankly,
for any foreign aid. I am convinced that at least half of what
we send to Russia is wasted, and I am convinced that it is the
most important thing we could possibly do with our dollars, to
send aid to Russia, if even half of those dollars are used
effectively, because I think the peace of the world depends
upon many things which are easy to predict, and one thing which
we cannot predict, and that is the future of Russia.
Corruption is not unknown here in the United States, and we
have adopted a number of laws, techniques, and procedures to
try to control corruption. These are costly both in terms of
dollars and in terms of flexibility. I wonder if the Deputy and
perhaps some others could comment on whether Russia has
studied, or even implemented American or Western European laws
in the following areas: competitive bidding on outside
contracts; independent audits of government agencies; civil
service protection for the vast majority of government
employees; a public documents act to require that any citizen
can obtain a copy of public documents for only the copying
charge; and, finally, an independent judiciary.
I realize that changing the law does not necessarily change
culture, but it can be helpful, and I wonder whether there has
been adequate attention in those areas.
I would like to hear from the Deputy first.
Mr. Borovoi. Unfortunately, the entire theme of the fight
against corruption is a political theme. I have a very simple
example.
Mr. Stepashin was Prime Minister of Russia around 3 months
ago, and now he is the head of the anticorruption commission.
He talks of things during his Prime Minister activity, a lot of
things that cannot be in Russian government now, any form of
corruption. He is maybe the most active fighter against
corruption. It is nonsense. Sometimes some vehicles, some
discussions about corruption in Russia can be used for the
purpose of corruption. I spoke before that it is an element, a
structural element--corruption is a structural element of
Russian power. It is maybe the most dangerous thing we faced
since the beginning of democratization in Russia.
I have a lot of experience, European experience. We have
some laws adopted now, but they are on the subject of political
fighting against communists and democrats.
Mr. Henderson. A comment. I would say that all the laws
that you mentioned are extremely important. In fact, I tried to
highlight some of them in my written testimony.
In response to your question, only one of these laws to my
knowledge exists and it exists by decree, not through
legislation which, of course, is a large part of the problem in
Russia. Many of the laws are issued by decree, and they are
never implemented.
That really leads to my last and most important point. All
of these laws are under consideration. I know that, for
example, a Russian Freedom of Information Act law has been
under debate for many years. There still seems to be no hope of
passing it, according to people I know involved with it.
So the short answer really is that even if all of these
laws were passed, none of them would be implemented in today's
environment. There is no political will to implement any of
these kinds of laws. I think that is a serious problem.
I did want to go back to one of the initial questions
asked--in response to the question as to is there any evidence
of the U.S. Government failing to correct problems and
procedures that might lead to corruption. I think that might be
the way I would ask the question. I would point to the HLID
scandal as an example of a situation where I know that there
was collusion within the U.S. Government not to properly
oversee the way that very sensitive, important program was
being implemented.
I talked to virtually everyone involved with that program
during the time I was at AID because I was floored that there
was very little government oversight, and I was finally told
that that was intentional by people who know. And that, of
course, is what led to the GAO investigation as requested by
this Committee.
As far as the parliament is concerned, I am glad that issue
was raised because the current Russian constitution, at least
as seen by many analysts who have been studying this, Russian
politics and the development of the law for many years, is
fatally flawed. It gives the presidency too much power. The
1993 constitution really decapitated the role of parliament,
and it is now not able to serve an effective monitoring
function within the Russian government.
For more on this subject there are several new books that
have just come out, one by Eugene Huskey at the University of
Virginia, and another by Robert Charlotte at Union College.
They are long-time Russia watchers, real legal scholars. One
has been following developments in the presidency and the
parliament for many years, and I would encourage anyone to read
them who is interested in this subject.
Chairman Gilman. Thank you, Mr. Sherman.
Dr. Cooksey.
DD. Cooksey. Thank you, Mr. Chairman.
Mr. Palmer, I would like to direct these questions at you.
I had a friend that had done some work over there some
years ago, and had gone back and forth, and it was something
for the Russian people, not a business deal, just trying to
help them out. But he reached the point that he said he was
told that he would not be safe because he was not giving a
portion of the goods that he was giving to these people,
donated goods, to the Mafia people or whatever the underworld
people were called.
How safe are Americans over there today in Moscow and St.
Petersburg, or in the outlying areas like Ekaterinburg, for
example?
Mr. Palmer. If we leave the Caucasus areas out of the
obvious danger areas, and we talk about the major cities,
largely, Americans are rather safe.
I recently did a study for a U.S. corporation on how much
risk was involved in trying to collect debts from Russian firms
even with direct organized crime ownership, which you would
think would be one of the most dangerous things you could
become involved in. What we found was that there really had not
been a recorded case, at the time of the report, that any
American had been killed or even injured because he tried to
exercise his legal rights.
So far this year, there were, I think, four Americans who
died. One was a T-shirt salesman. The only businessman was a
used car salesman. I am saying it is not like any executives or
anything of this because of their work.
The one case that everyone will point to is the case of
Paul Tatum, who owned the Radisson Hotel and had the dispute
with the city of Moscow, Mayor Luzhkov's office, one of the
front runners for the next president. You can argue that he
brought some of the difficulties on himself because he tried to
imitate some of the business techniques of organized crime. So
it was danger to himself.
I suspect that there is normal street crime that you would
have in a city like New York. Other than that, I have not seen
any more serious risks to Americans.
Mr. Cooksey. Good. That answers my question.
For several years there have been some allegations that
some of the top people in the Russian military have been
involved in some of the massive corruption and theft of the
government funds, including Yeltsin's First Minister of Defense
Grachev. There are also reports that a young reporter that was
killed in October 1994--1998 was also linked to this type of
corruption.
Do you have any views about these allegations that you can
share with us in an open session? I mean, do you think that, in
fact, people in the military are involved in this corruption
and the killings?
Mr. Palmer. Graham Turbeville, who works at the National
Defense College, wrote an excellent 50-page paper detailing the
corruption in the military. It is widespread.
I cannot speak to the case of the journalist who was
killed. There have been other journalists who were killed by
nonmilitary. I would say that probably the stories are true.
What we do know, and I can tell you I know for a fact, is
that almost every Russian soldier has to give a percentage of
his salary to his commanding officer. It works its way up. They
rarely ever get the rations they are supposed to. They
frequently sell off weapons. I watched as the Russian army was
pulling out of the former Soviet Union and they would come up
and offer you AK-47s, grenades, and even anti-aircraft missiles
offered to me after I retired. What I am saying is it is a very
common thing.
The other thing I should tell you is that you will notice
that Spetsnaz, the Russian special forces, which are involved
in more assassination and sabotage than the type of our special
forces are involved in, are reported very reliably to have
started training Russian organized crime hit men about 3 years
ago as a way to make extra money, and they are now one of the
leading employers of ex-Spetsnaz people. That is why when they
kill people they don't blow up city blocks, they are more
likely to get the right guy. That is a leading indicator that,
indeed, the military is corrupt.
Mr. Cooksey. There is a Russian analyst named Glakena who
reported that 13 percent of all the vouchers issued under the
U.S.-financed privatization program in Russia ended up in the
possession of one American firm. Do you know anything about
this allegation, and do you believe that such accumulation of
vouchers could have indeed been carried out by one American
firm? Do you know who the firm is?
Mr. Palmer. I have read the same articles. I am familiar
with the background on the firm. I do not have direct knowledge
of it. I do know that a Russian government study said that a
minimum of 85 percent of all the privatization shares came into
the possession of organized crime. Whether they would deal with
an American firm, I would say that is not even a serious
question. Of course they would. The American firm would not
necessarily have to know, in a legal sense, that they were
dealing with organized crime, but that is the only way that you
could control such a large amount of vouchers.
Mr. Cooksey. Mr. Satter from Johns Hopkins, it is reported
that a Russian tycoon, Vladimir Pontanin, sold an oil company
called Sidanko for $2 million in 1996, and later sold 10
percent to BP for $570 million. It has also been reported that
the Russian automobile company Vaz was sold at voucher
privatization auction for an estimated $45 million even though
Fiat had offered $2 billion for it in 1991. Do you feel that
some of these industries have indeed been sold for less than
what they are really valued at?
Mr. Satter. Unquestionably. The examples that you cite are
two among many of the way in which the most valuable
enterprises in Russia were practically given away, and they
were given away through a variety of means. One of them was the
voucher privatization that we just talked about.
When I was living in Moscow in late 1992 and early 1993,
voucher privatization was at its height. At every metro station
and at many bus stops, there were people with signs reading,
``I will buy a voucher.'' These persons bought vouchers for a
few U.S. dollars or for a bottle of vodka from alcoholics and
other persons who didn't know what the vouchers potentially
meant. Then the vouchers were used to purchase enterprises at
fire sale prices.
Another reason why this was possible was because once the
voucher privatization had ended and money privatization began,
the auctions at which enterprises were sold were rigged. The
victor in the auction was determined in advance. In some cases
there never was an auction. It took place only on paper. In
situations where an auction was held, if someone was brave
enough to bid against the pre-determined winner, he was putting
his life in danger. This is the reason for those low prices.
Mr. Cooksey. I will give you my opinion. I assume there is
someone here from the Russian Embassy. You can send this
message back from the Fifth Congressional District in
Louisiana. I was in the military 30 years and a month ago. We
have people in my district and districts across the United
States that are paying taxes. I still have confidence in the
goodness of a lot of the Russian people, but we do not want to
pay taxes to this government, to our government, our own
government and then have it given to the Russian people and
squandered or taken by outright theft.
Yesterday, in a hearing on this same subject, we were
advised that approximately $200 billion has been spirited out
of Russia in the last several years. I am sure some of that was
American taxpayer dollars and, if we had that, we could have
balanced the budget and been home 2 weeks ago. That is a
concern that I have no matter what my district is.
My concern about this Administration, if there is anyone
here from the State Department, is that at times you get the
feeling that there is--well, to their credit, I think some
people in the State Department are stronger than the people
over in their boss's office--but they just want to try to make
everybody feel good. If they go have a meeting and drink a
little vodka, we will give them everything and throw in the
kitchen sink. But still, that is American taxpayers' dollars,
and we just don't want to continue doing that. That is my
personal opinion.
Mr. Satter. I just want to make one observation. The
Russians are very smart people and do not need to be taught by
the United States how to invent the wheel. The problem with the
truthful revelations about corruption in Russia is that they
may turn public opinion against any aid for Russia, and Russia
right now is in a desperate situation.
While I was completing a book that I wrote about the fall
of the Soviet Union, I did a little bit of work for Reader's
Digest. One of the articles I had to write was about kids who
die in Russia because they don't get timely heart surgery. They
have defects that are easily correctable over here. The reason
these children are not operated on is that, although there are
talented surgeons in Russia, Russian hospitals don't have the
necessary equipment.
If we had only had the wit at the beginning of this process
to orient our aid toward genuine humanitarian needs in Russia
and not toward teaching the Russians how to be capitalists--a
process which enriched our own consultants and led us to
cooperate with a lot of people who spoke English very well and
made a good impression on us but turned out to be totally
corrupt--we could have done some good there.
In the reaction now to what we did do and what, of course,
the Russians did for themselves--I mean, after all they are
adults--we may turn against the idea of helping Russians in any
way, even in those situations where we can help and where our
help is badly needed.
Mr. Cooksey. There is no question that we could reach that
point, and I think that is unfortunate. I am a surgeon, and
there are some similar talented, bright people in Russia, good
physicians, good surgeons.
Anyway, it gets back to the same problem that is a problem
the world over. Sometimes you don't always have the best and
the brightest in government. There are a lot of bright, capable
people, particularly the Chairman and myself. I am being
facetious. He is, for sure. But then you get people that just
don't do the right thing, and it is a problem. It is a problem
in Russia, and I hope that they can evolve to an era where they
will have more integrity and do the right thing for their
people instead of for themselves.
Mr. Palmer. Briefly, but it supports some of your earlier
comments, the Russian Ministry of Interior did a study and, as
of the end of 1998, from 1991 to today they estimated that
total theft out of Russia had been over $300 billion, and
Interpol agreed with those figures. That may be a low figure.
Chairman Gilman. Is that with a ``B,'' billion?
Mr. Palmer. That is with a B, billion, sir.
Mr. Cooksey. So that is $100 billion more than we were told
yesterday.
Mr. Palmer. Those are Russian Ministry of Interior figures,
and Interpol supported them. Other estimates run higher.
The argument is made, well, there were not that many
dollars in Russia. I would make two comments. This also
includes Russian resources that go out at low prices for high
profit on the outside. And, second, I would remind you that,
through 1996, we had weekly planes going to Russia, 747 cargo
aircraft carrying $100 dollar bills. At one time, Russia had
more U.S. $100 bills in circulation than the United States.
Mr. Cooksey. I have heard that. Is that a correct
statement?
Mr. Palmer. That is correct, and one could assume that
those dollars didn't stay in Russia. That is the loss....
Source: https://www.govinfo.gov/content/pkg/CHRG-106hhrg62963/html/CHRG-106hhrg62963.htm
... Mr. Cooksey. One question for Mr. Borovoi. It has been
alleged that Russia's Chief Prosecutor, Yuri Skurotov, that the
Yeltsin administration had tried to remove from that position,
that the government recently brought the investigation in
connection between the Kremlin and the Mabetex Construction
Company in Switzerland. Is this true? This was in the paper
about 60 days ago. I remember seeing it, that there was an
allegation that there was a connection between perhaps
Yeltsin's entourage and the Mabetex Construction Company that
had paid some of his credit card bills. Is that true? Have you
heard about that? Are you familiar with that?
Mr. Borovoi. I am familiar with this situation. I have no
doubt that Pavel Borodin profited from construction and
restoration work contracts in Moscow.
But I would like to go back to the problem that I have
pointed out about the competent professional expertise about
the situation in Moscow.
The resignation of the chief prosecutor--general prosecutor
happened when Mr. Primakov was Prime Minister in Russia. As a
matter of fact, that event was the result of a fight between
the entourage of Mr. Primakov, which we call the KGB group,
with the entourage of Mr. Yeltsin. The process is much more
complicated or complex than it is seen from here.
Dr. Cooksey. Thank you.
Chairman Gilman. Thank you, Dr. Cooksey.
I would like to address this question to all of our
panelists. We all recognize that there is an extensive amount
of corruption in Russia, but what do you recommend now? How
should our policy toward Russia change or be revised in order
to address this worsening situation? And let me start with Mr.
Palmer.
Mr. Palmer. Thank you, sir.
It seems to me the first thing we have to do is
depersonalize the foreign policy. There are some quarters in
this town that believe that our relationship with Russia
depends on good contacts between a few officials on both sides.
I think that has to be broadened. I think we have to deal with
all aspects of the Russian political scene. That certainly
includes the Duma. That means we cannot focus on only one group
or one party. Everyone talks about this. I have seen no change
in that.
Second, we cannot support one group blindly. Imagine from
the American point of view if the Russians sent us 30 election
experts to help run the 2000 elections and sent us several
million dollars to help organize them. I don't think that we
would take that well, no matter which candidate won, and that
is precisely what we did with Russia. We sent experts. We sent
money. I don't think we can do that. I think we have to stand
back a little farther from that. We cannot take sides quite so
often.
The next thing I think we have to do is make every bit of
the not only aid, but loan money, a quid pro quo. That means,
yes, we will support investments in Russia after you have come
up with a bilateral U.S.-Russian investment treaty. This is a
normal thing between states. If we are going to encourage
investment, let's protect our investors. I think that is not
only prudent, I think it is responsible.
I think that we should have audits. If we look at the food
aid that has just gone to Russia, that food aid was meant to
disappear. Marcy Kaptur argued constantly for more controls on
that. They didn't happen. ...
..... Mr. Borovoi.
Mr. Borovoi. First of all, it seems dangerous to me, the
trend of stepping back from involvement in the political
process in Russia or being bystanders and just observing what
is going on. If this point of view was prevalent in 1948, then
70 percent of German parliament would consist of Nazis. I think
that the major highlights of democratization of Russia are
programs targeted for development of education and
democratization. I think that the $600 million that was spent
on the procurement of food products would much better be spent
on purchasing mass media and providing programs for education
and enlightenment of the Russian population on economics and
democracy, free market economy.
Chairman Gilman. Thank you.
Mr. Campbell.
Mr. Campbell. Thank you, Mr. Chairman.
I would like a member of our staff to give this to Mr.
Henderson if you could, kindly. I am telling you what this is.
At yesterday's hearings on the same subject, Dr. Michael
Waller, Vice President of the American Foreign Policy Council
testified. He put into the record this e-mail--and I am going
to read to you what he said about it--you were in the e-mail,
but I am going to take a second and explain it.
The suggestion is that the principal contractor for USAID
for the rule of law project, ARD-Checchi--and I am quoting from
Mr. Waller's testimony--tried to suppress a noted expert in
Russian crime and corruption from voicing concerns about the
USAID-sponsored privatization program. That expert, Professor
Louise Shelley of the American University, and a colleague of
Dr. Waller's at Demokratizatsiya journal, had early evidence
that organized criminal elements had exploited the U.S.-backed
privatization program.....
... Mr. Campbell. Thank you.
I have one last question for Deputy Borovoi. I would like
to ask what the prospects are for the Economic Freedom Party
and other members of the Duma who believe, as you do, in the
upcoming elections?
Mr. Borovoi. Unfortunately, Russian politics today is
dominated by nationalistic and isolationist forces. In the
current composition of the Duma there are about 50 percent of
these forces. I think that after the next election there will
be about 80 percent of them. This is the result of a very
powerful, mighty antiwestern campaign that was modeled after
Soviet-style propaganda campaigns trying to picture western
community as an enemy. The examples of these campaigns, there
was a campaign of support for Iraq and a campaign of support of
Milosevic and a campaign against NATO expansion. So, if this
trend is going to continue, I don't think there are any
prospects of any democratically inclined parties in Russia.
Chairman Gilman. I think we have overstayed the patience of
our experts. We want to thank our witnesses for their
participation in the hearing today. I am certain that your
thoughts and your comments will assist the Members of our
Committee as we seek to better understand developments in
Russia today and as we make recommendations for the direction
of U.S. policy toward that important country in the future.
This hearing of the Committee on International Relations is
now adjourned.
[Whereupon, at 12:25 p.m., the Committee was adjourned.] ...
05/22/2015 |Konstantin Borovoy: I Believe This War Can Only Be Ended in Moscow
Source: https://www.govinfo.gov/content/pkg/CHRG-106hhrg62963/html/CHRG-106hhrg62963.htm
05/22/2015 |
KONSTANTIN BOROVOI – Congressional Hearings. General. International Relations. Thursday, October 7, 1999
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