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Strategies & Market Trends : Investment in Russia and Eastern Europe

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To: Paul Berliner who wrote (1060)9/14/1999 12:35:00 AM
From: CIMA   of 1301
 
Who Gains From the Moscow Apartment Bombings?

Summary:

The explosions in Moscow during the past week are among the most
deadly in Russia's recent past. The Russian administration blames
the Chechens, but we will not attempt the impossible task of
assigning blame. Rather, we will discuss who could benefit from the
bombings. We can find no evidence that Chechen rebels - or the
Russian mafiya, another suspect group - would benefit from bombing
Moscow apartment buildings. Only political forces in Moscow would
seem to benefit.

Analysis:

Explosions in two apartment buildings in Moscow have claimed over
200 lives in the past five days. No group has claimed
responsibility and the police have made no definitive statements
indicating they have specific suspects under investigation. While
there is not enough information to assign blame for these bombings,
we can eliminate some of the suspects and discuss who could gain -
namely, political forces in Moscow.

The target and death toll from the recent spate of bombings in
Russia are inconsistent with previous acts of political or criminal
retribution dating from 1996. Bomb attacks in Russia are forms of
political protest, gang warfare and ultra-nationalism. Hence, the
target is defined for each case, inhibiting collateral damage.
Strictly political bombings occurred in Moscow immediately before
and after the 1996 presidential elections, killing four and
injuring dozens in separate incidents. The highest toll on lives
lost in the republics until the recent attack was in North Ossetia
in 1998, with 53 dead and 100 wounded. The current casualty count
for the first bombing on September 9 is 92, higher than any single
bomb attack in Russia since World War II.

Russian leaders, including Moscow Mayor Yuri Luzkhov, have chosen
the Chechens as the preferred scapegoat. Interior Minister Vladimir
Rushailo, who was appointed head of the investigation into the
bombings, has also announced that his prime suspects are the
Chechens. Although Prime Minister Vladimir Putin's September 13
statement that the bombing was "a clear terrorist act" did not
specifically name the Chechens, proof that they were responsible
would legitimize further force in Chechnya. He said if a link is
found between the bombings in Moscow and the fighting in Dagestan,
the "federal government will consider itself within its rights to
use all resources at its disposal to rebuff the aggression."

Russians may be willing to believe that Chechens are attacking in
Moscow as well as the Caucasus, but it is highly unlikely. In his
statement of denial, rebel leader Shamil Basayev said, "We had
nothing to do with the explosion in Moscow. We never kill
civilians. This is not our style."

Based on the group's activities in Dagestan, Basayev is correct.
Generally, Chechen forces have targeted military and police forces.
The bombing early this month of Russian military housing in
Buinaksk killed 64 people, including members of military families.
The target, though, was clearly a military installation.

Chechen militants also have not attacked regions outside the ones
they intend to claim - Dagestan and Chechnya. And finally, since
the Islamic rebels have a spokesman and a press center through
which to publicize their fight, we would expect them to claim their
actions; they have not. These reasons lead us to believe that the
Islamic militants led by Basayev are not the perpetrators of the
Moscow bombs.

Organized crime is another potential but improbable suspect.
Russian organized crime is motivated by profit and expansion. The
mafiya is not known to commit mass murders, especially through such
overt actions as bombs large enough to demolish entire apartment
buildings. According to an FBI report, the Russian mafiya prefers
economic crimes such as fraud, extortion, theft, drug trafficking
and contract killing. The apartment building bombs were not tightly
controlled to target one or a few specific targets. Reports of
typical mafiya activities do not suggest that these explosions were
coordinated by the Russian organized crime element. Large-scale
bombings against civilian targets simply do not fit into the
Russian mafiya's modus operandi.

Having eliminated both the mafiya and Chechens as likely suspects,
it is now interesting to question who else could gain from the
bombings. With President Boris Yeltsin in his last year in office
and parliamentary elections due this December, the political
situation in Russia is tense and agitated. The war in the Caucasus
adds to the situation, and a Chechen bombing crusade could give
Russia license to execute a full force campaign against Chechnya.

The Moscow bombings could also push the Duma to declare a state of
emergency in the outlying regions. Preliminary debate on how to
enforce such a condition is scheduled for September 14. Until
recently, most of the nation was strongly against this type of
action.

Speaker of the Federation Council, the upper house of parliament,
Yegor Stroyev, firmly opposed emergency measures due to the
situation in Dagestan. However, after the second Moscow apartment
block bombing, he said there was "a need to consolidate the legal
base for combating the rampage of terrorism and crime." Speaker of
the lower house, the State Duma, Gennadiy Seleznev, said September
13 that the Duma would begin its September 14 meeting by discussing
a draft law on regulating a state of emergency in some regions.

A state of emergency would interfere with December parliamentary
elections. This could benefit Yeltsin, who would like to see the
elections postponed until he can ensure a loyal successor.
Yeltsin's opponents, such as former Prime Minister Yevgeny
Primakov, have long feared that Yeltsin would call a state of
emergency for political gain. The recent bombings could give him
the excuse to do this legitimately.
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