ANALYSIS: Russian Ambassador to Ukraine Chernomyrdin, and corruption (04/28/02)

ANALYSIS

Russian Ambassador to Ukraine Chernomyrdin, and corruption

by Roman Kupchinsky
RFE/RL Crime and Corruption Watch

In 1995 the co-chairman of the Gore-Chernomyrdin Commission, U.S. Vice-President Al Gore, was given a report prepared by the Central Intelligence Agency (CIA) which claimed that Mr. Chernomyrdin, the vice-president's partner within the commission, was a highly corrupt official in the Yeltsin government. The report claimed that Mr. Chernomyrdin, as head of the Russian gas monopoly Gazprom, had stolen billions of dollars. The then vice-president allegedly scribbled "bull -" in the margin of the report and had it sent back.

When this sequence of events was exposed in The New York Times on November 23, 1998, Vice-President Gore denied having done anything of the kind. Writing in The Washington Post on July 27, 2000, Leon Fuerth, Mr. Gore's national security adviser, stated: "There have been a lot of charges and innuendo [about Mr. Chernomyrdin] but there has been no proof, no smoking gun, and certainly no indictment in a Russian court."

However, CIA officials have described the intelligence information on Mr. Chernomyrdin as "more detailed and conclusive than allegations of bribery and insider dealing that have been made in the Russian media and elsewhere," according to The New York Times of November 23, 1998.

On August 20, 1995, Peter Reddaway, a well-known and respected scholar and specialist on Russia and the former Soviet Union, published an op-ed article in The Washington Post titled, "Better Than Whitewater: Scandal Dogs Russia's Rising Star." Mr. Reddaway presented the following arguments and purported facts to state his case:

"Mr. Chernomyrdin is 'the chief mafioso of the country,' according to the former presidential security council secretary Yuriy Skokov. Mr. Skokov told the weekly Obschaya Gazeta that Mr. Chernomyrdin had become a billionaire from the privatization of Gazprom.

"How Gazprom was privatized is still a mystery, according to Former Minister Boris Fedorov. While Gazprom's market value was estimated to be $120 billion, the best estimates of its wealth begin at $250 billion and go as high as $700 billion.

"Anders Aslund, the noted economist, has estimated that Mr. Chernomyrdin's maneuvers led Gazprom to make vast profits without paying taxes. According to Mr. Aslund, if Gazprom were taxed, it would have had to contribute up to $30 billion in tax revenues. This sum would solve the debilitating problem of the budget deficit at a stroke and remove the rationale for foreign aid."

The criminal aspect of Mr. Chernomyrdin's activities was supplied by the Swiss criminal justice system. Swiss magistrate Laurent Kasper-Ansermet, while investigating the Mabetex scandal around former Kremlin property manager Pavel Borodin, accused of taking kickbacks of $22 million for the renovation of the Kremlin, found that Mr. Chernomyrdin had transferred into his Swiss accounts tens of millions of dollars. The transfers were made by Mercata Trading, a firm linked to Mabetex, the company that paid the kickbacks to Mr. Borodin. Mr. Kasper-Ansermet ordered the account documents in banks in Geneva and Ticino seized and any further deposits blocked. The Swiss court found Mr. Borodin guilty of money laundering on March 6 and fined Mr. Borodin $175,000. The fine was subtracted from the $3 million bail paid by the Russian government. It should be noted that Russian law-enforcement agencies did not participate in the investigation of Mr. Borodin.

The investigation, according to Swiss authorities, has gone nowhere.

During the U.S. presidential campaign of 2000, George W. Bush, then the Republican candidate, stated that Mr. Chernomyrdin had stolen some $1.2 billion in International Monetary Fund (IMF) resources given to Russia. Mr. Chernomyrdin was predictably outraged and threatened to sue; but, for undisclosed reasons, the issue never came before a court. Mr. Chernomyrdin let the Bush remark slide and soon afterwards was appointed Russia's ambassador to Ukraine. This transfer removed Mr. Chernomyrdin from the Russian domestic scene to an important posting abroad - the most important posting in the eyes of the new Russian president.

The Bush campaign stood by the Texas governor's statements, saying Mr. Chernomyrdin, a former head of the natural gas monopoly Gazprom, "made a fortune in personal profits" in the Russian oil and gas business while a member of the Cabinet.

It was no secret to the FBI and Russian businessmen that Mr. Chernomyrdin, as head of Gazprom, had extensive dealings with Pavlo Lazarenko when Lazarenko was running Unified Energy Systems of Ukraine. The former Ukrainian prime minister, now in prison in California awaiting trial on charges of money laundering in the United States, is reputed to have made enormous amounts of money on crooked deals with Gazprom at that time.

Vladimir Putin's presidential pardon, promising non-prosecution for illegal activities or corruption and granted to former Russian President Boris Yeltsin when he retired, was seemingly extended to Mr. Chernomyrdin.

Mr. Chernomyrdin, while not pardoned by Putin, had his talents put to good use. He was given a post which suited him and Russia best - Russian ambassador to Kyiv. It seemed the perfect place for Mr. Chernomyrdin: He was among friends. Mr. Chernomyrdin, as head of Gazprom, had numerous dealings with Pavlo Lazarenko; the discredited former head of Naftogaz Ukraina, Ihor Bakai; and other high-ranking Ukrainian energy traders and officials.

One of the first moves that Mr. Chernomyrdin made as ambassador to Ukraine was to purchase the summer villa, located near the Dnipro River, of the former head of the Central Committee of the Communist Party of Ukraine, Volodymyr Shcherbytsky. He bought the villa from Bakai, whose former state gas trading monopoly worked with Mr. Chernomyrdin when he was head of Gazprom. Mr. Bakai had been accused of embezzling millions of dollars from Gazprom and its partner-subsidiary, Itera, but was pumping big money into the election campaign of Leonid Kuchma - presumably to buy freedom from prosecution. Bohdan Mysko, an American businessman who owned the villa before Mr. Bakai and spent hundreds of thousands of dollars to have the residence renovated, said he was forced to sell it under pressure to Mr. Bakai for "peanuts."

During March 31 parliamentary elections in Ukraine, Ambassador Chernomyrdin spoke out loudly and clearly in favor of the pro-Kuchma bloc of candidates. But it was never made clear if these were his own views or those of President Putin. At one point prior to the elections, Mr. Chernomyrdin added a note of merriment by accusing Yulia Tymoshenko, the leader of a large anti-Kuchma bloc, of corruption. He also made it clear that the Russian government was supporting those candidates which, in his words "were friends of Russia."

The issue of Mr. Chernomyrdin's guilt has not been resolved. The former Russian prime minister, the joint chairman of the Gore-Chernomyrdin commission, and presently the Russian ambassador to Ukraine - who was once quoted as saying that "Gazprom is our common home" - remains accused of being "the biggest mafioso in Russia."

Will he ever be brought to trial in Russia? Or perhaps in San Francisco?

Roman Kupchinsky is the editor of RFE/RL Crime, Corruption and Terrorism Watch.

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