(Extensions of Remarks - October 16, 1998)

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[Extensions of Remarks]
[Pages E2228-E2229]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                        Friday, October 16, 1998

  Mr. CRANE. Mr. Speaker, thanks to White House scandals and an 
impeachment inquiry preoccupying the attention of Americans, the poor 
performance of this administration on the affairs of state has been 
overshadowed. This incompetence has proven costly--in terms of human 
life in Bosnia and in terms of financial capital in places like Russia.
  While the Clinton Administration and their allies at the 
International Monetary Fund, the IMF, would have you believe that 
Russia is merely experiencing the growing pains of a new market 
economy, nothing could be further from the truth. Instead, Russia has 
become a country run by thieves who respect none of the fundamental 
principles necessary for the establishment of a market economy. So 
money being poured into Russia by the IMF, courtesy of American 
taxpayers, is being heisted by criminals who buy, for example, chic 
real estate in France and a gambling casino in American Samoa.
  To get the real story on Russia, I commend to the attention of my 
colleagues an article by Arnaud de Borchgrave from the September 28, 
1998 edition of the Washington Times, entitled ``Subsidizing the 
Kleptocracy.'' Mr. de Borchgrave points out that, contrary to the 
Clinton Administration and the IMF, Russia is not an emerging market 
economy and we deserve to know where all that foreign aid and IMF money 
is going.

                      Subsidizing the Kleptocracy

       The handwriting has been on the Kremlin's walls for the 
     past seven years. The late great reporter Claire Sterling's 
     best seller ``Thieves World,'' published in 1994, documented 
     the emergency of a criminally controlled Russian state--from 
     top to bottom. But the U.S. national security establishment's 
     Russian experts--Pied Pippered by Vice President Al Gore and 
     Deputy Defense Secretary Strobe Talbott--not only walked by 
     the wall looking the other way, but derided as ``loose 
     cannons'' those who read the handwriting and took it 
       Four years ago, President Boris Yeltsin, in what sounded 
     like a cry of despair, said Russia had become the world's 
     ``biggest mafia state . . . the superpower of crime.'' He 
     felt overwhelmed by the lethal mix of oligarchs, former 
     intelligence and security officers, organized crime gangs, 
     and corrupt Soviet-era bureaucrats who had hijacked Russia's 
     transition from a communist command economy. Mr. Yeltsin has 
     launched seven major crackdowns against organized crime in 
     seven years--all to no avail. And a year ago, he told the 
     upper house of parliament that ``criminals have entered the 
     political arena and are dictating our laws with the help of 
     corrupt officials.''

[[Page E2229]]

       Russia began its post-communist history as a kleptocracy, 
     which has consolidated its power ever since, but still the 
     Clinton administration's apologists and their IMF 
     counterparts, all frequent travelers to Moscow where they 
     chose to believe three sets of phony government books, 
     insisted that Russia's looters were the latter-day equivalent 
     of America's 19th century ``robber barons.'' A crucial 
     difference was overlooked. The J.P. Morgans, Goulds, 
     Vanderbilts and Villards made their fortunes by building 
     railroads and new industries and creating jobs. They also 
     reinvested their profits in the future of America, such as 
     Thomas Edison's quest for electric light. By contrast, 
     Russia's oligarchs and their corrupt allies in government 
     took over state-owned industries at giveaway prices, bled 
     them white by stripping their assets, and then stashed their 
     loot in tax havens abroad. The IMF's Inspector Javert took a 
     page out of Clouseau's notebook and failed to notice that 
     privatization was camouflage for piracy.
       Garry Gasparov, the world chess champion, wrote in the Wall 
     Street Journal on Sept. 1 that ``the mentality of Al Capone 
     runs rampant among the highest circles in Russia today; Lucky 
     Luciano's clones are filling vacancies at state and municipal 
       Yet what Western creditors were doing, in effect, was to 
     subsidize the plunder. So it is hardly surprising that 
     Russians who have not been paid in months are venting their 
     anger at the U.S. administration and the International 
     Monetary Fund. Anatoly Chubais, a tacit ally of the criminal 
     class in reformer's clothing, has now conceded that Russia's 
     negotiators had pulled thick wool over the not-too-
     inquisitive eyes of IMF's Russian ``experts.''
       Russians know their government is now the world's most 
     corrupt, forging ahead of Nigeria and Indonesia in those 
     sleazy sweepstakes, but they blame the United States and IMF 
     for not blowing the whistle on the scandal of the century. It 
     was a gigantic Ponzi racket. What was funneled into Russia by 
     the United States, Germany and international institutions was 
     siphoned out through global money laundering schemes. 
     ``Liability'' was not in a Russian banker's lexicon. All 
     Western credits were treated as free money to be moved around 
     as the oligarchs saw fit. For a two-year study for the Center 
     for Strategic and International Studies on ``Russian 
     Organized Crime,'' this journalist discovered the same 
     spending pattern from Buenos Aires to Berlin, from Hamburg to 
     Hong Kong, and from Tunisia to Thailand, and including 
     London, Paris, Rome, New York and Los Angeles. Choice 
     properties in the $5 million to $15 million range were 
     purchased by Russia's oligarchs and their executives, and 
     assorted crooks, the world over, even a gambling casino in 
     American Samoa, always paid cash--in $100 bills carried in 
     large suitcases.
       The record for private property is still held by Boris 
     Berezovsky, who parlayed a car dealership into a $3 billion 
     empire in five years and served as Mr. Yeltsin's deputy 
     national security adviser. He bought the Chateau de la 
     Garoupe and an adjoining property, and 50 well-manicured 
     acres at Cap d'Antibes, France's most expensive real estate, 
     for $70 million.
       For several years, Russians were laundering about $1 
     billion a month through Cyprus (where some 4,000 Russian 
     shell companies hang their shingles) and another $1 billion 
     through Israel. Before he was ousted last March as Interior 
     Minister, Gen. Anatoly Kulikov estimated that some $200 
     billion had been spirited abroad since the implosion of the 
     Soviet Union--perhaps not coincidentally the same amount of 
     foreign debt Russia may default on in the next few years. 
     When Gen. Kulikov visited Washington last June, he said he 
     now believed the amount was at least $300 billion in six 
       It was the age of greed run amok. But apologists in the 
     United States, from left to right, continued to insist the 
     hemorrhaging was no more than a nosebleed--at most $50 
     billion--and that it was a healthy manifestation of the 
     growing pains of democracy and market economics. That 
     powerful Russian opposition voices called what was happening 
     a parody of democracy and an economic kleptocracy didn't seem 
     to faze them. Even after Grigory Yavlinsky wrote in July 1997 
     that the longer ``the path which Russia is traveling is 
     concealed, the higher the price will be for everyone,'' the 
     conspiracy of silence continued in Washington. Russia's 
     oligarchs had hired top-flight legal talent in Washington and 
     New York soon established themselves as the opposite numbers 
     of America's captains of industry. With a straight face, one 
     shady Russian tycoon told a foreign policy group. ``There is 
     much more crime in America than in Russia.''
       Hearing after congressional hearing was held on Russian 
     organized crime, only to be ignored by top U.S. policy-
     makers. The CIA was even discouraged by the White House from 
     reporting on Russia's covert financial shenanigans around the 
     world. And until recently, George Soros, the international 
     financier who once broke the Bank of England, taking home a 
     cool $1 billion, sided with the apologists. Now Mr. Soros 
     says, belatedly, the Russia situation is ``cataclysmic'' and 
     that ``we should have done more to prevent the crisis.'' This 
     was the same Mr. Soros who concealed the truth about the 
     great Russian robbery throughout the 1990s and even assured 
     us that democracy was flourishing.
       Vice President Al Gore went out of his way not to embarrass 
     his good friend Viktor Chernomyrdin, the godfather of the 
     oligarchs who was finally ousted as prime minister last March 
     after five years in office--only to be resuscitated by his 
     friend Mr. Berezovsky and foisted on Mr. Yeltsin for a few 
     days before the Duma sent him packing again. Messrs. 
     Yeltsin and Chernomyrdin convinced Messrs. Clinton, Gore 
     and Talbott and anyone else they spoke to that American 
     aid and IMF loans had to continue because Russia still 
     possessed 24,000 nuclear weapons and warheads and hundreds 
     of tons of weapons-grade nuclear materials that could all 
     become vulnerable to theft if Russia were cut adrift. But 
     they were just as vulnerable while Western assistance was 
     being ripped off and scores of millions were pushed below 
     the poverty line.
       It was this kind of nuclear blackmail that prodded the 
     apologists to silence FBI Director Louis Freeh. He had 
     testified before Congress in 1996 and 97, explaining that 
     from one year to the next Russia's organized crime syndicates 
     had increased the number of countries where they had 
     established relations with criminal counterparts from 29 to 
       When CSIS' report on Russian Organized Crime was released a 
     year ago, Mr. Freeh was quick to endorse it. But as he left 
     for Moscow a month later, senior U.S. officials persuaded Mr. 
     Freeh to backtrack and at a joint news conference with Mr. 
     Kulikov he said his congressional testimony had been 
       The CSIS report found that ``Russian organized crime had 
     extended its tentacles throughout Russia's economy,'' which 
     confers an aura of legitimacy to myriad illicit activities, 
     including the manipulation of Russia's banking system and 
     financial markets.'' It concluded that ``if the forces of 
     organized crime are not stymied Russia will complete its 
     devolution into a criminal-syndicalist state. The U.S. would 
     then be faced with an agonizing reappraisal of its diplomatic 
     and commercial relations with Russia.''
       The reappraisal is now at hand. In the debate about ``Who 
     lost Russia,'' congressional hearings should focus on the big 
     coverup. And as a condition for further aid, why shouldn't 
     Congress insist on a full accounting of every dollar of U.S. 
     aid and IMF bailouts?