SKOPJE, Macedonia, Jan. 22 (UPI) -- Shabtai Kalmanovich vanished from London in the late 1980s. He resurfaced in Israel to face trial for espionage. He was convicted and spent years in an Israeli prison before being repatriated to Russia. His captors described him as a mastermind, in charge of an African KGB station.
In the early 1970s, Kalmanovich even served as advisor to Israel's iron lady, Golda Meir, on Russian immigration. 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 Joseph Momoh included. In 1986-87, he even collaborated with IPE, a London-based outfit, which former members of the Mossad and other paragons of the Israeli defense establishment were rumored to have owned, 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 1970s and 1980s.
Thus, when communism was replaced by criminal anarchy, former 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. President Vladimir 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, the only type he allows to survive, 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. In today's piece I discuss the economics of the military's apparatus; Wednesday I will discuss that of the FSB.
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 labor, are "rented out" by their commanders to economic enterprises, especially in the provinces. The incoming minister of defense and a close pal of Putin, Sergei Ivanov, shut down a host of such "trading" companies owned by bureaucrats in the Ministry of Defense last June. 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 in stolen petroleum products, food, and munitions, often in partnership with Chechen "rebels."
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. The procurement budget was increased by 50 percent last year, to 4 percent of the U.S. budget, about $2.2 billion, and further increased this year to $2.7 billion. Whatever money is available, however, goes towards research and development, 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 quoted Former Armed Forces weapons chief, Gen. Anatoly Sitnov, as claiming $16 billion should be allocated for arms purchases if all the existing needs are to be satisfied.
Having lost their major domestic client (defense constituted 75 percent of Russian industrial production at one time) -- exports of Russian arms have soared to more than $4.4 billion annually, not including "sensitive" materiel. Old markets in the likes of Iran, Iraq, Syria, Algeria, Eritrea, Ethiopia, China, India, and Libya have revived. Decision makers in Latin America and East Asia, including Malaysia and Vietnam, are being avidly courted. Bribes change hands, offshore accounts are open and shut, and export proceeds mysteriously evaporate. Many a Russian is wealthier due to this export cornucopia.
The reputation of Russia's weapons manufacturers is dismal; there are no spare parts, after sales service, maintenance, or quality control. But Russian weapons, often Cold War surplus, come cheap and the list of Russian firms and institutions blacklisted by the United States for selling weapons from handguns to missile equipped destroyers to "rogue states" grows by the day. Less than one quarter of 2,500 defense-related firms are subject to Russian Federal supervision. Gradually, Russia's most advanced weaponry is being made available through these outfits.
Close to 4,000 R&D programs and defense conversion projects, many financed by the West, have failed abysmally to transform Russia's "military-industrial complex." Following a much-derided "privatization" in which the state lost control over hundreds of defense firms to assorted autochthonous tycoons and foreign manufacturers -- the enterprises are still being abused and looted by politicians on all levels, including the regional and provincial ones. The Russian Federation, for instance, has controlling stakes in only seven of about 250 privatized air defense contractors. Manufacturing and R&D co-operation with Ukraine and other former Soviet republics is on the ascendant, often flying in the face of official policies and national security.
Despite the surge in exports, overproduction of unwanted goods leads to persistent accumulation of inventory. Even so, capacity utilization is said to be 25 percent in many factories. Lack of maintenance renders many plant facilities obsolete and non-competitive. The Russian government's new emphasis on R&D is wise -- Russia must replenish its catalog with hi-tech gadgets if it wishes to continue to export to prime clients. Still, the Russian Duma's prescription of a return to state ownership, central planning, and subsidies, if implemented, is likely to prove to be the coup de grace rather than a graceful coup.
