[Congressional Record (Bound Edition), Volume 150 (2004), Part 12]
[House]
[Pages 16107-16114]
[From the U.S. Government Publishing Office, www.gpo.gov]




                     LACK OF RULE OF LAW IN RUSSIA

  The SPEAKER pro tempore. Pursuant to the order of the House of 
January 20, 2004, the gentleman from California (Mr. Lantos) is 
recognized during morning hour debates for 5 minutes.


                             General Leave

  Mr. LANTOS. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
on the topic of my 5-minute speech, and that I may include extraneous 
material on the same.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from California?
  There was no objection.
  Mr. LANTOS. Mr. Speaker, I rise today to call the attention of my 
colleagues to my serious concern with the lack of the rule of law in 
Russia.
  Fifteen years ago, all of us watched with great excitement and great 
optimism as the Communist system came to a resounding close while the 
Russian people and the government went through an historic 
transformation. We saw President Boris Yeltsin stand up against tanks 
in the streets of Moscow, and we watched as Russia moved to embrace 
Democratic change.

[[Page 16108]]

  Mr. Speaker, unfortunately, in the last few years, we have watched as 
the government of Mr. Putin has slowly but surely pulled back from 
Democratic change. Freedom of the press has increasingly declined, 
particularly in the realm of television. Elections have been less open 
and less Democratic. The rule of law has been proscribed by government 
regulation. Increasingly, government control has restricted the 
freedoms that had just begun to blossom in post-Soviet Russia.
  Mr. Speaker, the most recent, and in many ways the most dramatic, 
example of this decline of the rule of law in Russia has been the 
Russian government's political prosecution and persecution of Mikhail 
Khodorkovsky, the former chairman of Yuko Oil, one of Russia's largest 
companies, and the one that had gone the farthest in moving towards 
transparent western market-oriented business practices. It was the 
Russian company which had made the greatest progress in corporate 
transparency. The company was on the verge of an unprecedented business 
deal with Western oil companies.
  The Russian prosecutors, clearly at the demand of the political 
leadership, initiated a political prosecution of Mr. Khodorkovsky. He 
was arrested last summer by a mob of armed security forces as his plane 
landed at a Siberian airfield. Since that time, he has been held in a 
Russian jail. He has been limited in his contact with his own 
attorneys, he is not permitted to communicate with the outside world, 
and he appears in court in a steel cage.
  This treatment of an individual who at this point has a tax dispute 
with the Putin regime violates all principles of due process and the 
rule of law.
  Mr. Speaker, I am calling attention today of our colleagues in the 
Congress to this decline of civil and human rights in Russia. Together 
with my distinguished colleague, the gentleman from California (Mr. 
Cox), we have established the Russia Democracy Caucus to work for the 
development of the rule of law and the consolidation of civil and human 
rights in Russia.
  Mr. Speaker, a number of my colleagues will be submitting their 
statements joining me in deploring the rollback of freedom and civil 
rights in Russia during recent years.
  Mr. Speaker, last month, on a visit to Moscow, I met with Ambassador 
Alexander Vershbow and other embassy officials to get an update on the 
political situation in that country. I also met with legal experts and 
human rights groups who provided a grim account of the recurring 
threats to individual and political freedoms that regrettably harkens 
back to the old Soviet days.
  Respect for human rights is the cornerstone of a civilized society. 
Even the Russian constitution recognizes this fact, as provided in 
Article 2:

       The individual and the individual's rights and freedoms 
     represent the highest value. It is the duty of the state to 
     recognize, respect, and protect the rights and freedoms of 
     the individual and the citizen.

  Our own commitment to human rights as it relates to Russia and other 
former Communist countries is manifest in the Helsinki Final Act in 
1975, in which we effectively utilized the so-called ``Basket Three'' 
of that document to publicly hold the Soviet Union accountable for its 
violations of human rights and civil liberties.
  For a brief moment, during President Yeltsin's presidency, we thought 
indeed there would be freedom and liberty in Russia. It was during this 
time, the G-8 member nations allowed Russia to participate as an ad-hoc 
member, so long as it adhered to the principles of Constitutional 
democracy, rule of law and human rights. My colleague Chris Cox and 
Senator Joe Biden have spoken out recently about whether Russia, under 
President Vladimir Putin, deserves a place at the G-8 table and indeed 
if that country should host the next session in 2006.
  I would also remind my colleagues that Resolution H. Con. Res. 336, 
which enumerates these shortfalls and recommends that Russia be denied 
participation in G-8 sessions until it demonstrates its worthiness as a 
Democratic state, recently passed the House International Relations 
Committee. A similar measure is cosponsored by Senators McCain and 
Lieberman.
  Mr. Speaker, our own State Department has documented what we have 
learned from a variety of sources concerning the deteriorating 
situation as it relates to rule of law, freedom of expression, and 
human rights in Russia. Over the past year, reports from human rights 
groups, NGOs, the European Union, legal scholars, and wide spread media 
reporting of conditions in Russia bear out what our own government has 
reported. On Secretary of State's last trip to Russia, he made it a 
point to voice his concerns directly to President Putin and publicly 
expressed them through the limited media outlets that exist in Moscow.
  There is much that concerns me about Russia today. In view of the 
time limitation I cannot address all of them, but I would like to 
mention a few that I believe deserve urgent attention.
  First is the case against Mr. Mikhail Khodorkovsky, chairman of YUKOS 
Oil Company. This week Mr. Khodorkovsky goes to trail in a court that 
is hardly known for its integrity or independence. Virtually all of the 
legal entities and courts outside Russia have ruled against the Russian 
government, generally finding the cases lack in legal merit and being 
political in nature. Little wonder Mr. Khodorkovsky is already a 
condemned man. Hardly anyone inside or outside Russia seriously 
believes he will receive a fair and just trial.
  Since his arbitrary arrest last fall by masked gunmen and detention, 
Mr. Khodorkovsky has been subjected to numerous violations of his due 
process rights. The Kremlin has directed the case against him for 
purposes that are widely seen as political, not criminal. Indeed the 
case is being held in the notoriously corrupt Basmanny Court, which is 
controlled by Kremlin and Russia security forces. His corporate and 
lawyers' offices, foundations, daughter's school have been repeatedly 
searched without warrant or warning.
  The relentless attacks on the YUKOS Company and efforts to cripple 
the once prominent and Western-oriented company raises questions about 
the true motives by the authorities involved. It is one thing to bring 
a case against Mr. Khodorkovsky and other officers in the company, 
depending on the charges brought against them. But clearly the Kremlin 
has other motives as well, not the least of which is to bring about a 
stake takeover or ownership of the once thriving private company.
  Mr. Speaker, I draw the attention of my colleagues to Senate Res. 
258, which expresses concern about the circumstances surrounding Mr. 
Khodorkovsky's case, and which has passed the full Senate.
  My second concern has to do with state ownership and control of the 
media in Russia. Under President Boris Yeltsin, privately owned and 
independently operated media began to take root and for the first time 
citizens of that country could read and view objectively reported news 
and even criticism of government officials, even the president himself.
  The vanguard of this new era was Mr. Vladimir Gusinky, an 
entrepreneur who had the genius of a William Randolph Hearst and the 
resources to build a media empire worthy of any in the West. However, 
Boris Yeltsin's successor had no tolerance and certainly not the 
temperament to allow any criticism of him or his politics.
  The result, as we have seen in subsequent events, was predictable. An 
angry Vladimir Putin, utilizing extralegal means, forced a shutdown of 
Mr. Gusinsky's media outlets, save one--the prominent and popular NTV 
television station, which was taken over by the state-owned Gazprom and 
has been under Kremlin influence ever since. Just a few weeks ago, the 
one newscaster on NTV who dared to lightly criticize government 
officials was sacked on orders from intelligence agencies inside the 
Kremlin. Mr. Leonid Parfyonov, a popular host of a Sunday-night 
political news program and one of the most independent voices in 
Russia, apparently crossed over the line on the Kremlin-directed 
censorship.
  I was personally well acquainted with Mr. Gusinsky, who today 
operates a media conglomerate in Israel. Not only did he lose his media 
businesses in Russia, but he suffered personal hardship and 
humiliation. President Putin ordered raids by masked gunmen on his 
business headquarters and the arrest and detention in Moscow's infamous 
Butyrskaya prison, and eventually forced him into exile. Since then 
Russian authorities have sought his extradition by way of requests to 
Interpol, and the courts of Spain and Greece. In every single case, the 
requests were denied for lacking in legal merit and being political in 
nature.
  Finally, I would like to address the issue of expropriation of 
property. There is little secret that many of Russia's crown jewels, 
its natural resources, were acquired by individuals during the 
privatization that occurred in the early 1990s. Whatever the 
circumstances and the controversial amounts that were paid for these 
acquisitions, they were conducted within the laws that existed at the 
time. Yet there are recurring threats, some outright as in the case of 
YUKOS and others implied, that the government may renationalize these 
assets.

[[Page 16109]]

  This poses several disturbing questions. One, of course, is the 
overall affect on direct foreign investment in the country. At the 
moment, Russia's economy is performing well only because of the sizable 
revenue that is pouring in from the exportation of energy, primarily 
oil and gas. Foreign investment and Western business cooperation, which 
is necessary if Russia is to truly develop its industrial and exporting 
sectors, will be jeopardized if the Kremlin-directed assaults on these 
enterprises is allowed to continue.
  Other questions concern the Russian government's official position 
with regard to these privatized businesses, most of which are in the 
resource-based sectors. At the moment, the government policy is, if 
anything, arbitrary and unpredictable, if not outright threatening to 
the privatized companies involved. At best, President Putin has sent 
conflicting messages by making reassuring statements, on the one hand, 
while authorizing contrary actions on the other.
  A case in point is the SPI Group, which acquired production and 
distribution rights to Russia's most famous vodka trademarks (including 
Stolichnaya). In 1997, a group of investors, headed by Mr. Yuri 
Shefler, bought the rights to 43 Russian vodka brands from the original 
investors who acquired the production and trademark rights during the 
privatization of this and other resource-based sectors. They assumed a 
$50 million debt and promptly invested another $20 million, and today 
it is a well managed and successful business.
  SPI Group has registered the trademarks for its vodka brands in more 
than 150 countries. It has a 10 year distribution deal with Allied 
Domecq in the United States and equally well established distributors 
throughout Europe. Yet the Russian authorities, principally Rospatent 
and the Ministry of Agriculture, have aggressively challenged the SPI 
Groups rights inside Russia and elsewhere, and while court rulings have 
been mixed in Russia they have been uniformly in favor, of the SPI 
Group outside the country. Among the more prominent cases, ruling in 
favor of the SPI Group, occurred in Germany, a Rotterdam decision 
affecting the Benelux countries, France, and more recently in 
Kazakhstan.
  Mr. Speaker, what I have recounted here is limited simply because 
there is no time to go on further. But it underscores the disturbing 
trends in Russia today.
  I have always counted myself as a friend of Russia and have expressed 
on many occasions my gratitude for the huge sacrifices made by the 
people of the country to halt the march of Nazism in Europe. It greatly 
saddens me, therefore, to witness the unraveling of democratic freedoms 
in that country today. The Russia democracy Caucus, cochaired by 
Christopher Cox and myself, is fully committed to helping guide Russia 
through this period so that it can be counted among the truly great 
democracies of the world.
  Mr. Speaker, in conclusion to this discussion of concerns about the 
rule of law and related problems, there is an urgent humanitarian issue 
that I want to bring to your attention. That is the grave medical 
condition of Mr. Platon Lebedev, a prominent businessman who, along 
with his partner, Mr. Mikhail Khodorovosky, is in detention under 
rather inhuman conditions in Moscow. The gravity of Mr. Lebedev's 
deteriorating health and the absolute neglect of his condition by the 
Russian authorities demands international outrage and it underscores 
why I, along with many of our colleagues, have asked for this time on 
the floor today.
  Last week, a dozen of the leading human rights activists in Russia 
representing major human rights groups issued a statement critical of 
the treatment by Russian authorities of Platon Lebedev, the head of 
Group Menatep, the parent company of YUKOS Oil.
  Mr. Lebedev has been detained and jailed for nearly a year and has 
not been allowed to have an independent medical examination or 
treatment, despite the fact that credible Russian and foreign experts 
have confirmed that he has severe and life-threatening ailments. In 
fact Mr. Lebedev was originally taken into custody from a hospital bed 
and in December 2003 had to have an ambulance take him from a court 
hearing.
  Russian human rights activists point out that the denial of 
appropriate medical attention violates several articles of Russian law 
that indicate that detainees may receive medical treatment at medical 
establishments should this be required by the detainees condition. It 
is clear that Russia is not only violating universal human rights and 
the rule of law but their own laws.
  Let me read a quote from the recent statement:

       It is out conviction that in order to protect the sacred 
     human rights--the right to live and the right to a fair 
     trial--the court must change the custodial restraint for 
     Platon Lebedev to a format that does not involve prison 
     detention so that an independent medical examination and 
     full-fledged treatment can be provided immediately.

  Mr. Speaker, the treatment of Platon Lebedev is clear evidence that 
the Russian legal system is broken.
  Mr. Speaker, I am submitting for the Record a series of articles and 
extraneous material on the lack of the rule of law in Russia. These 
articles are from the Washington Post, the Wall Street Journal, and the 
International Herald Tribune.

                [From the Washington Post, July 13, 2004]

                        Same Old Ruthless Russia

                         (By Michael R. Caputo)

        American journalist Paul Klebnikov was shot to death 
     outside my office building on Friday. At least it used to be 
     my office. I worked with Klebnikov, Forbes magazine's 
     maverick correspondent, several times in the past 10 years, 
     sometimes in Moscow, sometimes in New York. Our paths crossed 
     often through one of Russia's wildest decades.
        Eight years after we first met as he covered Boris 
     Yeltsin's 1996 presidential election, his murder brings 
     clarity: Nothing has changed. Brutal criminals still run amok 
     in Russia, operating with impunity and no fear of 
     prosecution.
        Klebnikov had high hopes for Russia and was determined to 
     urge democracy along. He grew up in the United Sates, cradled 
     in the close-knot Russian American community; his Russian 
     skills were perfect and his devotion to the culture ran deep. 
     He blossomed in journalism just as the communist bloc 
     crumbled, and his unique understanding of ``the story'' in 
     the region propelled his career.
        As we toured the Russian countryside eight years ago, he 
     talked to peasants waiting in line to vote and grilled me 
     with questions, too. Had I run across billionaire Boris 
     Berezovsky in my work with the Yeltsin administration? I 
     hadn't. Klebnikov had recently been scratching the surface of 
     Berezovsky's brazen get-rich-quick schemes. He was convinced 
     there was much more to the oligarch. He was in town to 
     investigate him as well as to cover the elections.
        Berezovsky was one of several super-wealthy men who had 
     back doors to Yeltsin's Kremlin. His popularity waxed and 
     waned, but as he amassed wealth he gained unparalleled power. 
     Experienced expatriates in Russia shared an essential rule: 
     Don't cross these brutal billionaires, ever, or you're likely 
     to go home in a box.
       Klebnikov knew this well. In Russia the mafia kills every 
     day. He knew Paul Tatum, the Oklahoma entrepreneur who ran 
     afoul of Moscow's mafia and was shot dead just a few hundred 
     yards from a hotel he had founded and had fought against 
     Mayor Yuri Luzhkov to control. After Tatum's murder. Hizzoner 
     promised swift justice. We're still waiting.
        Tatum had led a loud life in Moscow. Klebnikov told me he 
     knew Tatum's battle with city ``authorities'' was never a 
     sound strategy for survival. The Tatum murder shook him, but 
     he was determined to go forward with what grew into a series 
     of articles exposing Russian corruption. After all, he was a 
     reporter, not a businessman.
        As a journalist, Klebnikov was the real deal. He was based 
     in New York through the 1990s but had more contacts in Moscow 
     than most reporters on the ground full time.
       During his frequent trips to the region he accomplished 
     more meetings before lunch than many of us could pull off in 
     a week.
       Klebnikov listened as intently to the griping of a 
     pensioner as he did to the drone of politicians. He was quick 
     to the point, wasted no time, and drove to the center of his 
     story like a tank. Some thought he was bold, others thought 
     him brash, but everyone was reading.
       ``Godfather of the Kremlin,'' his December 1996 Forbes 
     cover story on Berezovsky, threw new light on the doings of 
     Russia's oligarchs. The story grew into Klebnikov's first 
     book, with the same title, published in 2001. The exiled 
     industrialist took the magazine to court in London, and 
     eventually Forbes recanted accusations of violence. Those of 
     us who lived in Moscow during Berezovsky's heyday still 
     believe.
       His follow-up stories on Russian industrialists were always 
     fair and thorough, but he didn't make many friends in the 
     country. Soon after Vladimir Putin stepped into the 
     presidency, Klebnikov and I met in New York. I told him he 
     needed to watch his back with so much change afoot. He 
     shrugged and said he was uniquely positioned to get to the 
     heart of corruption in Russia. ``Who else is going to do 
     it?'' he asked. I had no answer.
       When Forbes announced Klebnikov would lead its new Russian 
     publications and relocate to Moscow, I immediately feared for 
     his safety. A few months later he was dead. I think about 
     him, sprawled bleeding on the sidewalk, coughing his final 
     words to a reporter colleague who found him dying.
       Russia hasn't changed in the past decade and at this 
     trajectory it won't be truly civilized for generations. Those 
     who killed Klebnikov are killing today, plan to kill 
     tomorrow, and know they'll roam free to kill for years to 
     come. Hellbent on getting rich,

[[Page 16110]]

     they have no boundaries. Raised in a communist world devoid 
     of morals, they have no soul.
       There is no valid reason why a nation so tolerant--even 
     complicit--in organized crime should stand on par with world 
     leaders in groups such as the World Trade Organization. Putin 
     must stand as the guarantor of media freedom. And the Bush 
     administration must demand results in this murder 
     investigation and require the assassins and their bosses be 
     detected, arrested, tried and punished to the fullest extent 
     of the law.
       Or will it let Paul Klebnikov, like Paul Tatum, be just 
     another footnote in Russia's disingenuous flirtation with 
     world-class rule of law? We're waiting.
                                  ____


             [From the Wall Street Journal, July 12, 2004]

                             Lawless Russia

       The murder of Forbes Russia Editor-in-Chief Paul Klebnikov 
     on a Moscow street Friday night was the most dramatic display 
     yet of the lawlessness that has Russia in its grip. 
     Prosecutor General Vladimir Ustinov says he has taken 
     ``personal control'' of the case, a suggestion that the 
     Russian state is finally conscious of its bad image in the 
     world. But under its present leadership, the state is itself 
     an important part of the problem.
       The 41-year-old Mr. Klebnikov was a brilliant journalist 
     and student of Russian history. He had written for our pages 
     several times, most recently last November when he argued 
     that the arrest of Russia's richest businessman, Mikhail 
     Khodokovsky, was a blow against the ``kleptocracy'' that had 
     enriched itself with state assets under Boris Yeltsin's 
     privatization program.
       He knew a lot about the subject, having written a 
     controversial 2000 book, ``Godfather of the Kremlin,'' about 
     one of the leading Russian oligarchs, Boris Berezovsky, In 
     the May issue of Forbes Russia, Mr. Kelbnikov broke the news 
     that Moscow has more dollar billionaires than New York City.
       The magazine, licensed by Forbes of the U.S. and published 
     by the German Axel Springer organization, published the names 
     of Russia's 100 richest business leaders, giving them the 
     sort of attention many don't welcome. Mr. Klebnikov was not 
     afraid to make powerful enemies in the interest of honest 
     journalism.
       In a recent book, ``Darkness at Dawn,'' David Satter, a 
     former Journal Moscow correspondent, wrote that Russia has 
     been taken over by a criminal elite in which gangsters, 
     business and corrupt officials work together. The result is a 
     climate of fear and public cynicism. The collapse of 
     communism, with its history of state-sponsored violence, left 
     a moral vacuum that persists in a different form. Some of the 
     modern thugs got their training with the Soviet secret 
     police.
       The Committee to Protect Journalists, which records attacks 
     on journalists throughout the world, cites Russia as a 
     special problem. Attempts to shut up the press have been made 
     by the Federal Security Bureau, formerly the KGB. Russian 
     President Vladimir Putin, who has systematically seized 
     control of Russian TV, retains some of the habits he 
     developed when he himself was a KGB functionary.
       Yet Mr. Putin is welcomed to international parleys, such as 
     G-8 meetings, as if he were the leader of a normal country. 
     The murder of Paul Klebnikov demonstrates that Russia is not 
     a normal country. Perhaps it's time for the leaders of free 
     democracies to ask Mr. Putin whether the rule of law exists 
     in Russia.
                                  ____


                [From the Washington Post, July 7, 2004]

             Russian Government Begins Seizing Yukos Assets

                 (By Peter Baker and Susan B. Glasser)

       Moscow, July 7.--The Russian government moved Wednesday to 
     begin seizing assets of Yukos Oil Co. in the culmination of a 
     politically charged tax battle that could either bankrupt or 
     break up the country's largest oil producer.
       Court marshals accompanied by special police forces raided 
     the company's registry office in Moscow at the end of the 
     business day to search for ownership documents for various 
     Yukos properties. The marshals were enforcing last week's 
     court judgment giving Yukos a Wednesday deadline to pay a 
     $3.4 billion back tax bill.
       Yukos said this week that it had no more than $1.4 billion 
     in cash and could not pay the full charge in time without an 
     installment plan. Yukos reportedly offered to turn over some 
     or all of the controlling stake owned by the company's 
     imprisoned chief shareholder, Mikhail Khodorkovsky, and his 
     partners, but all attempts at negotiations appeared to have 
     failed so far.
       ``The debtor was given a five-day deadline for voluntary 
     execution, after which the court bailiffs service of the city 
     of Moscow began to enforce the court decision,'' the Russian 
     Justice Ministry said in a statement carried by the Interfax 
     news service after the raid began.
       The ministry statement immediately threatened a new 
     criminal investigation and obstruction charges against 
     officials at Yukos' registry for allegedly trying to avoid 
     cooperating with the marshals who arrived at their building.
       Authorities can seize the company's assets and either keep 
     them to satisfy the tax debt or sell them off. But it is 
     possible they were not able to find the right documents at 
     the office of the registry, a firm called Reyester-M. Yukos 
     said registry documents of its subsidiaries in Siberia and 
     along the Volga River were transferred last week after the 
     court ruling, apparently to those regions.
       The confrontation stems from a year-long power struggle 
     between Khodorkovsky and President Vladimir Putin. 
     Khodorkovsky is a brash former communist youth league leader 
     who bought Yukos at bargain-basement price during the 
     privatization auctions of state property during the 1990s. He 
     built the company into a major international player and 
     himself into Russia's richest man.
       But he angered some in the Kremlin with his outspoken 
     political activities and soon found himself and his company 
     under legal threat. Khodorkovsky was arrested at gunpoint 
     last October and remains in prison awaiting trial on fraud 
     and tax evasion charges, while the federal tax service has 
     hit Yukos with two tax bills from 2000 and 2001 adding up to 
     nearly $7 billion. The country's chief prosecutor said 
     Tuesday that more bills from 2002 and 2003 were still to 
     come.
       The situation endangers a company that pumps more oil than 
     Libya and accounts for one-fifth of foreign petroleum sales 
     by Russia, the world's second-largest oil exporter. The 
     latest figures published by brokerage houses Monday showed 
     that Yukos produces 1.7 million barrels a day, surpassing its 
     own records and every other Russian oil company.
       Bruce Misamore, the company's chief financial officer, said 
     Tuesday that production had not been disrupted yet and that 
     the company has prepaid transport and other fees to keep 
     shipping oil until at least the third week in July. The bank 
     accounts frozen so far have just $20 million in them, he 
     said. Misamore met Tuesday with representatives of Western 
     banks that declared Yukos in default on a $1 billion loan and 
     they have not demanded payment yet.
       Misamore said the government abruptly halted secret 
     settlement discussions last week and has not been willing to 
     compromise. ``We're just trying to make our best efforts to 
     reach a resolution to the situation,'' Misamore told a 
     conference call with investors. ``But first they've got to 
     talk to us.''
       The Financial Times reported that Yukos sent a fresh 
     proposal to the government Tuesday, offering some or all of 
     Khodorkovsky's shares in exchange for a three-year payment 
     plan. Prime Minister Mikhail Fradkov's office denied 
     receiving any written proposal, and a Yukos spokesman said it 
     sent no letter, however, he would not say whether the idea 
     was floated in some other form.
       Prosecutor General Vladimir Ustinov, who imprisoned 
     Khodorkovsky, expressed little sympathy for what he 
     sarcastically called ``poor Yukos'' and doused hopes for a 
     deal. ``This is like a snowball,'' he said on Echo Moskvy 
     radio Tuesday. ``This case has a beginning, but it's very 
     difficult to see its end.''
       He asserted that the company should have no trouble paying 
     the tax bills even though the government obtained a court 
     order freezing its assets. ``The profits that Yukos made 
     could easily pay the company's debts,'' he said.
       The case drew international criticism this week for the 
     politicization of Russian business and courts. ``The so-
     called `Yukos case' reflects these problems,'' the Paris-
     based Organization for Economic Cooperation and Development, 
     said in its annual report on Russia, released Wednesday. 
     ``Whether the charges against the company and its core 
     shareholders are true or not, it is clearly a case of highly 
     selective law enforcement.''
       A senior U.S. diplomat said Tuesday that the case is 
     ``raising fundamental questions in the minds of many 
     investors.'' There are ``increasing signs that destruction of 
     the company is the intended endpoint,'' he said. ``At a 
     minimum,'' he added, it's ``an extraordinary game of 
     brinkmanship'' akin to a game of chicken with two cars racing 
     toward a cliff and ``they're getting very close.''
       In his analysis, the diplomat said, it appears likely that 
     a ``sizable percentage of the company's assets [will] move 
     into the hands of the state.''
                                  ____


                [From the Herald Tribune, June 15, 2004]

                            Russia on Trial

       The Russian government's fraud and tax evasion case against 
     two billionaires, Mikhail Khodorkovsky and Platon Lebedev, 
     opens Wednesday in a Moscow court. The trial has already 
     attracted enormous attention; the extraordinary fortunes of 
     the two defendants, and the parallel struggle for survival of 
     the oil company that made them rich, Yukos, has turned this 
     case into a microcosm of the struggles that are shaping the 
     new Russia. Much depends on the outcome, not least how 
     investors will look at Russia in the future. In effect, it is 
     Russia and the rule of law that go on trial.
       Khodorkovsky, to be sure, is not the model, philanthropic 
     businessman his supporters make of him. Like all the other 
     so-called oligarchs, he made his billions in the dirty 
     plunder of Russia's riches in the chaotic aftermath of the 
     Soviet Union's disintegration. But neither is President 
     Vladimir

[[Page 16111]]

     Putin the champion of civic virtue he would have us see. If 
     tax evasion were the real issue, every oligarch, and most 
     every Russian, would be in the dock. And even if Putin needed 
     to pillory a couple of oligarchs to set an example, there are 
     far more unsavory examples to go after. Khodorkovsky at least 
     turned Yukos into a globally admired, relatively transparent 
     business.
       To all appearances, Putin is leaning on the judiciary to 
     settle scores with tycoons who dared show an interest in 
     politics. In this regard, Khodorkovsky, who has contributed 
     generously to reform-minded parties, is only Putin's latest 
     target, following in the footsteps of Boris Berezovsky and 
     Vladimir Gusinsky, two Russian tycoons now residing in exile.
       Equally ominous, in pushing Yukos to the brink in a 
     parallel tax-avoidance case, Moscow has raised fears that it 
     is trying to bring Russia's natural resources back under 
     direct state control. Last Friday, the government was able to 
     remove a judge from the case who seemed open-minded in 
     considering an appeal by Yukos.
       We do not argue that all oligarchs should go scot-free. No 
     state can tolerate enterprises operating above the law. But 
     at play here is a different danger, of a state capriciously 
     and selectively applying laws to suit its political 
     interests.
       Russia's judiciary faces an unenviable challenge in 
     tempering excess prosecutorial zeal, without endorsing 
     blanket immunity for past misdeeds. In the end, the critical 
     question is not whether the court finds the two men guilty or 
     not, but whether it succeeds in demonstrating that it has 
     delivered justice. Russia's courts have shown themselves 
     sadly subservient to the government so far. Most Russians 
     expect that they will continue down this familiar road, 
     rubber-stamping the government's charges until Khodorkovsky 
     and Lebedev are found guilty.
       For the sake of Russian democracy, the judiciary needs to 
     declare its independence. Courts in such high-profile cases 
     can do so in the way they handle the objections and arguments 
     of the defense, in the way they rule on the crude methods of 
     the investigators and in the way they separate the political 
     demands of the Kremlin from the legal facts of the case. 
     Given Russia's past, few things could be more corrosive to 
     democracy than a show trial.
       The Russian government's fraud and tax evasion case against 
     two billionaires, Mikhail Khodorkovsky and Platon Lebedev, 
     opens Wednesday in a Moscow court. The trail has already 
     attracted enormous attention; the extraordinary fortunes of 
     the two defendants, and the parallel struggle for survival of 
     the oil company that made them rich, Yukos, has turned this 
     case into a microcosm of the struggles that are shaping the 
     new Russia. Much depends on the outcome, not least how 
     investors will look at Russia in the future. In effect, it is 
     Russia and the rule of law that go on trial.
       Khodorkovsky, to be sure, is not the model, philanthropic 
     businessman his supporters make of him. Like all the other 
     so-called oligarchs, he made his billions in the dirty 
     plunder of Russia's riches in the chaotic aftermath of the 
     Soviet Union's disintegration. But neither is President 
     Vladimir Putin the champion of civic virtue he would have us 
     see. If tax evasion were the real issue, every oligarch, and 
     most every Russian, would be in the dock. An even if Putin 
     needed to pillory a couple of oligarchs to set an example, 
     there are far more unsavory examples to go after. 
     Khodorkovsky at least turned Yukos into a globally admired, 
     relatively transparent business.
       To all appearances, Putin is leaning on the judiciary to 
     settle scores with tycoons who dared show an interest in 
     politics. In this regard, Khodorkovsky, who has contributed 
     generously to reform-minded parties, is only Putin's latest 
     target, following in the footsteps of Boris Berezovsky and 
     Vladimir Gusinsky, two Russian tycoons now residing in exile.
       Equally ominous, in pushing Yukos to the brink in a 
     parallel tax-avoidance case, Moscow has raised fears that it 
     is trying to bring Russia's natural resources back under 
     direct state control. Last Friday, the government was able to 
     remove a judge from the case who seemed open-minded in 
     considering an appeal by Yukos.
       We do not argue that all oligarchs should go scot-free. No 
     state can tolerate enterprises operating above the law. But 
     at play here is a different danger, of a state capriciously 
     and selectively applying laws to suit its political 
     interests.
       Russia's judiciary faces an unenviable challenge in 
     tempering excess prosecutorial zeal, without endorsing 
     blanket immunity for past misdeeds. In the end, the critical 
     question is not whether the court finds the two men guilty or 
     not, but whether it succeeds in demonstrating that it has 
     delivered justice. Russia's courts have shown themselves 
     sadly subservient to the government so far. Most Russians 
     expect that they will continue down this familiar road, 
     rubber-stamping the government's charges until Khodorkovsky 
     and Lebedev are found guilty.
       For the sake of Russian democracy, the judiciary needs to 
     declare its independence. Courts in such high-profile cases 
     can do so in the way they handle the objections and arguments 
     of the defense, in the way they rule on the crude methods of 
     the investigators and in the way they separate the political 
     demands of the Kremlin from the legal facts of the case. 
     Given Russia's past, few things could be more corrosive to 
     democracy than a show trial. The Russian government's fraud 
     and tax evasion case against two billionaires, Mikhail 
     Khodorkovsky and Platon Lebedev, opens Wednesday in a Moscow 
     court. The trial has already attracted enormous attention; 
     the extraordinary fortunes of the two defendants, and the 
     parallel struggle for survival of the oil company that made 
     them rich, Yukos, has turned this case into a microcosm of 
     the struggles that are shaping the new Russia. Much depends 
     on the outcome, not least how investors will look at Russia 
     in the future. In effect, it is Russia and the rule of law 
     that go on trial.
       Khodorkovsky, to be sure, is not the model, philanthropic 
     businessman his supporters make of him. Like all the other 
     so-called oligarchs, he made his billions in the dirty 
     plunder of Russia's riches in the chaotic aftermath of the 
     Soviet Union's disintegration. But neither is President 
     Vladimir Putin the champion of civic virtue he would have us 
     see. If tax evasion were the real issue, every oligarch, and 
     most every Russian, would be in the dock. And even if Putin 
     needed to pillory a couple of oligarchs to set an example, 
     there are far more unsavory examples to go after. 
     Khordorkovsky at least turned Yukos into a globally admired, 
     relatively transparent business.
       To all appearances, Putin is leaning on the judiciary to 
     settle scores with tycoons who dared show an interest in 
     politics. In this regard, Khodorkovsky, who has contributed 
     generously to reform-minded parties, is only Putin's latest 
     target, following in the footsteps of Boris Berezovsky and 
     Vladimir Gusinsky, two Russian tycoons now residing in exile.
       Equally ominous, in pushing Yukos to the brink in a 
     parallel tax-avoidance case, Moscow has raised fears that it 
     is trying to bring Russia's natural resources back under 
     direct state control. Last Friday, the government was able to 
     remove a judge from the case who seemed open-minded in 
     considering an appeal by Yukos.
       We do not argue that all oligarchs should go scot-free. No 
     state can tolerate enterprises operating above the law. But 
     at play here is a different danger, of a state capriciously 
     and selectively applying laws to suit its political 
     interests.

  Mr. CHANDLER. Mr. Speaker, last March, I had the opportunity to meet 
with human rights groups, legal experts, media representatives, and 
others concerning the situation on the ground in Russia. I learned 
firsthand that Russia is enduring a difficult transition to what 
hopefully will become a modern, fully democratic nation. While there 
have been many positive developments in Russian society over the past 
decade, particularly with regard to the freedoms that average Russian 
citizens now enjoy, there are disturbing signs that Russia under 
President Vladimir Putin may be slipping back to its old authoritarian 
ways.
  My primary concern is with the rule of law. Prior to coming to 
Congress, I served for eight years as the Attorney General of Kentucky. 
I understand that there are inherent principles in any constitutional 
democracy, chief among them the rule of law. Recent events have called 
into question Russia's unequivocal commitment to a transparent judicial 
system, defendants' rights, and the presumption of innocence within the 
Russian legal system.
  As we speak, there is a major trial taking place in Moscow. It 
concerns the controversial arrest and detention of prominent Russian 
businessman Mikhail Khodorkovsky. The case of Mr. Khodorkovsky has 
raised concerns from legal experts, human rights groups, and the media 
that his trial may have more to do with his opposition to President 
Putin's policies rather than the crimes for which he is accused.
  The most disturbing element of Mr. Khodorkovsky's trial is that it 
may signify a reassertion of state influence over Russia's private 
sector economy. Such a move by the Russian government, I fear, would 
raise questions about the state of property rights in Russia, 
discourage foreign investment, and slow progress towards Russia's full 
integration into the global economy.
  Mr. Speaker, the U.S. must continue to deliver the message that 
adherence to the rule of law and support for political and economic 
freedom is essential to developing successful free-market economies and 
prosperity. As I mentioned earlier, Russia is truly at a crossroads in 
its history. I urge my colleagues to work with me to convince Russia to 
choose the path of transparency, adherence to the rule of law, and a 
commitment to the security of private investment.
  Mr. SMITH of New Jersey. Mr. Speaker, I thank the distinguished 
gentleman from California for requesting this time to discuss rule of 
law in Russia. Not only is this an issue of great importance to the 
citizens of Russia but

[[Page 16112]]

U.S.-Russia relations are affected by the regard given to this critical 
component of democratic and civil society.
  I have the privilege of serving as chairman of the Commission on 
Security and Cooperation in Europe, commonly known as the ``Helsinki 
Commission,'' an independent agency of the United States Government 
charged with monitoring and encouraging compliance with the Helsinki 
Final Act of 1975 and subsequent documents of the Organization on 
Security and Cooperation in Europe. The fate of rule of law in Russia, 
an OSCE member, will determine to a great degree the future of the 
Russian state and its role in the world community.
  With the collapse of the Soviet Union in 1991, Russia moved from an 
authoritarian police state under communist rule to a sovereign nation 
with democratically elected leadership and many of the civil liberties 
that we in this country take for granted. We were encouraged by those 
positive and historic steps. On paper at least, there have been 
significant reforms designed to bring the Russian political and legal 
system into conformity with the accepted norms and practices of the 
United Nations, the OSCE, the Council of Europe, etc.
  In recent years, though, the Putin government has undermined these 
reforms. In its Nations in Transit 2004 report, Freedom House sums it 
up: ``Russia is backsliding in key areas of democratic governance and 
rule of law.''
  Two months ago, on May 20th, the Hensinki Commission held hearings on 
the issue of human rights in President Putin's Russia. One of our 
distinguished witnesses, Mr. Gary Kasparov, chairman of the Free Choice 
2008 Committee in Russia and world-famous chess champion, spoke with 
passion about restrictions on freedom of speech in the electronic 
media, a process that we see continuing today.
  In the area of rule of law per se, we are also seeing some disturbing 
moves against individuals who have apparently offended the powers-that-
be in the Kremlin or the intelligence apparat.
  The first case is that of industrialist Mikhail Khodorkovsky, former 
head of the Yukos Oil Company. Mr. Khodorkovsky's arrest on charges of 
fraud and tax evasion has received a lot of publicity. I don't claim to 
know whether Khodorkovsky is guilty or innocent, but this appears to be 
very much a case of selective justice. His real crime seems to have 
been, as David Satter wrote in the Wall Street Journal last week, that 
he ``had demonstrated independence, and, by financing opposition 
political parties, had contributed to political pluralism.''
  Will Khodorkovsky get a fair trial? Let me jut quote from a report by 
the Organisation for Economic Cooperation and Development: ``The courts 
are often subservient to the executive, while the security services, 
the prosecutors and the police remain highly politicized . . . the so-
called `Yukos case' reflects these problems.'' As if to confirm the 
OECD assessment, officials at the Matrosskaya Tishina prison 
confiscated documents from one of his lawyers after she met with her 
client.
  Another case is that of Dr. Igor Sutyagin, a Russian scientist who 
was sentenced to 15 years of labor camp for espionage, i.e., passing 
military secrets to British intelligence agents. Sutyagin never denied 
that he had worked with foreign scholars or that he shared previously 
published material with them. Indeed, Federal Security Service (FSB) 
agents never found evidence of any classified documents in his 
possession, and he had neither security clearance nor access to 
classified material. However, the FSB and the court came to the 
conclusion that Sutyagin's research was so accurate that he must have 
used classified documents to draw his conclusions. Think of it: one may 
be imprisoned for espionage for being too competent an analyst in 
military-security issues.
  Deputy Assistant Secretary Steven Pifer of the State Department has 
testified before the Commission that ``most observers agree that 
[Sutyagin] had no access to classified information and consider the 
severe sentence an effort to discourage information-sharing by Russians 
with professional colleagues from other countries.''
  The final case I would mention in this brief presentation is that of 
Mikhail Trepashkin, an attorney and former FSB officer who was arrested 
on October 24, 2003, a week before he was scheduled to represent 
relatives of a victim who perished in an apartment explosion at a trial 
in Moscow. At the trial, Trepashkin was expected to present the 
findings of his investigation which implicated the FSB in the 1999 
apartment bombing in Moscow and the aborted attempted bombing of 
Ryazan.
  A week before the trial opened, the police just happened to pull 
Trepashkin over on the highway, and just happened to find a revolver in 
his car. Trepashkin claims the gun was planted, a venerable KGB tactic. 
Three weeks later, he was put on trial and sentenced to four years 
labor camp for allegedly divulging state secrets to a foreign 
journalist.
  I don't know all the details of this case, but it has the whiff of 
the proverbial mackeral by moonlight. It is very possible that 
Trepashkin was arrested in order to prevent him from releasing 
potentially damaging information regarding the activities of the FSB.
  These are just few examples of the challenges to rule of law and 
human rights that Russia is now experiencing under President Putin. Let 
us hope that he will soon realize that the way to a genuinely stable 
and prosperous society is paved with rule off law and civil society, 
not the high price of crude oil.
  Mr. DOGGETT. Mr. Speaker, the Khodorkovsky/Lebedev trial resumed on 
Monday last week before a three judge panel in Moscow. Since the last 
hearing three weeks ago, the physical appearance of the court was much 
improved: the courtroom had been air conditioned and the halls outside 
had been refurbished and painted.
  Appearances are important, but substance is critical.
  Respect for the rule of law in Russia is essential for the same 
reason it is essential in every democratic society--citizens, the 
press, and the business community must have confidence that the legal 
system affords them protection of their rights and that everyone is 
treated equally under that law.
  In Russia there is a pattern of troubling signs that the rule of law 
and a free press are threatened. I know a number of my House colleagues 
share these concerns. Members of the Congressional Human Rights Caucus, 
the Helsinki Commission, and the Russia Democracy Caucus are just some 
of those who have expressed their misgivings.
  One high profile example of concern is the seizure of the assets of 
Russia's largest oil company, YUKOS, and the trial of two of YUKOS's 
largest stockholders, Mikhail Khodorkovsky and Platon Lebedev.
  Many Russian and Western observers view the Russian Government 
seizure of the assets of YUKOS as a result of political motivations.
  Here are just a few recent statements on these events:
  On July 7, the Washington Post quoted a senior level U.S. diplomat as 
saying ``there are increasing signs that destruction of the company is 
the intended endpoint,'' and that it appears likely that a ``sizeable 
percentage of the company's assets will move into the hands of the 
state.''
  On July 7, the Organization for Economic Cooperation and Development 
(OECD) called the YUKOS affair ``a case of highly selective law 
enforcement'' and a case that reveals how ``the courts are often 
subservient to the executive, while the security services, prosecutors 
and police remain highly politicized.''
  What is now occurring in Russia has significant human, political, and 
economic consequences. Justice, freedom, and human rights are all 
directly tied to the rule of law, open and accountable government, and 
a free press, which are increasingly absent in Russia.
  There are several disturbing trends that demonstrate problems with 
the rule of law in Russia.
  The general prosecutor and courts cannot be merely an extension of 
the political will and agenda of the Kremlin. In his visit to Moscow 
earlier this year, Secretary of State Colin Powell was unambiguous in 
his concern over the rule of law in Russia, saying ``Russia's 
democratic system seems not yet to have found the essential balance 
among the executive, legislative and judicial branches of government. 
Political power is not yet fully tethered to the law.''
  Furthermore, the selective and arbitrary use of judiciary power by 
the Kremlin undermines the rule of law.
  Mikhail Khodorkovsky, as many observers have noted, shows how a 
businessman has been singled out for prosecution because his political 
activities are not appreciated.
  Journalist German Galkin was thrown into jail and prosecuted for 
revealing the corrupt behavior of local government officials. His 
appeal was denied and he was only freed under the weight of 
international pressure.
  Aleksandr Nikitin is a former submarine officer and nuclear safety 
inspector who was pursued relentlessly through the courts by the 
Russian security service in retaliation for his outspokenness about 
radioactive contamination by the Russian military. These rulings bear 
out what prominent legal experts have been saying about the flawed 
legal system in Russia.
  More recent events in Russia threaten a free press, an essential 
element of any strong democracy.
  We do not know who murdered Paul Klebnikov, the editor in chief of 
Forbes Russia,

[[Page 16113]]

who was writing the truth about Russia's dark underside, but the 
government must insist on a thorough, open, and full investigation of 
his killers. As one observer noted in the New York Times, ``Twenty 
journalists have now been assassinated in Russia for their work; 14 
since Mr. Putin became president. Not one of the murders has been 
solved.''
  A crackdown of media freedom has resulted in all major TV networks 
under state control. The last independent TV station disappeared last 
summer. TV is the number one way Russians get their news.
  If Russia continues down this path, she will never fully become the 
peaceful and democratic nation that the Russian people and the 
international community desire. It is essential that Russia undertake a 
sincere effort to reform its judicial system and establish the highest 
degree of credibility for the rule of law and free press, which are 
essential for a prosperous and peaceful Russia.
  Mr. WOLF. Mr. Speaker, as co-chair of the Congressional Human Rights 
Caucus I continue to be concerned that Russia has significant problems 
in honoring the universal human rights standards that are widely 
accepted in many parts of the world. Russia aspires to be a leading 
force on the world economic and political scene, but it is failing to 
respect some of the fundamental and universal principles of the rule of 
law, human rights and freedom of speech and expression.
  I am concerned about freedom of expression in Russia, given the fact 
that the Russian government's commitment to independent and free media, 
freedom of assembly, and religious freedom appear to be wavering. In 
fact, Russia's last major non-state television station was eliminated 
in 2003 as a result of government pressure. This is a disturbing trend 
which is in stark contrast to the value placed on freedom of speech by 
other democracies around the world.
  Earlier this year the State Department released its annual Country 
Reports on Human Rights Practices, which included documentation of many 
abuses. Serious violations of basic human rights in Chechnya were 
highlighted including unlawful killings, abuse of civilians and Chechen 
fighters and politically motivated disappearances. The report also 
mentioned that the December 7, 2003, Duma elections failed to meet 
international standards. Factors undermining party competition included 
criminal charges and threats of arrest or actual arrest against major 
financial supporters of opposition parties and the seizure of party 
materials from opposition parties.
  I remain concerned that Russia is named in the State Department's 
annual report on trafficking in persons as a tier two country and this 
year was placed on the tier two ``special watch list.'' Trafficking in 
persons is an evil that must be directly confronted and ended. 
Countries that fall under the special watch list have high numbers of 
trafficking victims and fail to provide evidence of increasing efforts 
to combat severe forms of trafficking from the previous year. Russia is 
named as the largest source country in Europe for trafficking and is a 
significantly large transit country. It is my hope that the Russian 
government will acknowledge the extent of its trafficking problem and 
play a more active role in ending trafficking in the region.
  I also am concerned that Russia still does not fully accept or 
encourage religious freedom. The 2004 annual report on religious 
freedom by the United States Commission on International Religious 
Freedom states about Russia:
  ``A federal law on religious organizations enacted in 1997 contains 
provisions that have prevented some religious groups from registering 
and thus practicing freely. Regional governments have often passed 
ordinances that result in discrimination against minority religious 
groups, and acts of violence against members of religious minorities 
are widespread.
  ``In the past few years, however, trends have emerged that have 
raised serious questions about Russia's commitment to democratic reform 
and protection of religious freedom. Russian authorities have denied 
registration efforts of certain religious communities, based on the 
allegedly insufficient time they have existed, despite a February 2002 
Russian Constitutional Court decision that found that an active 
religious organization registered before the 1997 law could not be 
deprived of its legal status for failing to re-register. The government 
has meddled in the internal affairs of religious communities, including 
the Jewish and orthodox Old Believer communities.''
  The U.S. Congress must speak out about human rights abuses around the 
world. It is my hope that Russia will begin to encourage religious 
freedom, crack down on trafficking in persons and comply with 
international standards on human rights.
  I would like to submit for the Record an article from The Wall Street 
Journal, highlighting the concern for the lack of rule of law in 
Russia.

             [From the Wall Street Journal, July 12, 2004]

                             Lawless Russia

       The murder of Forbes Russian Editor-in-Chief Paul Klebnikov 
     on a Moscow street Friday night was the most dramatic display 
     yet of the lawlessness that has Russia in its grip. 
     Prosecutor General Vladimir Ustinov says he has taken 
     ``personal control'' of the case, a suggestion that the 
     Russian state is finally conscious of its bad image in the 
     world. But under its present leadership, the state is itself 
     an important part of the problem.
       The 41-year-old Mr. Klebnikov was a brilliant journalist 
     and student of Russian history. He had written for our pages 
     several times, most recently last November when he argued 
     that the arrest of Russia's richest businessman, Mikhail 
     Khodorkovsky, was a blow against the ``kleptocracy'' that had 
     enriched itself with state assets under Boris Yeltsin's 
     privatization program.
       He knew a lot about the subject, having written a 
     controversial 2000 book, ``Godfather of the Kremlin,'' about 
     one of the leading Russian oligarchs, Boris Berezovsky. In 
     the May issue of Forbes Russia, Mr. Klebnikov broke the news 
     that Moscow has more dollar billionaires than New York City.
       The magazine, licensed by Forbes of the U.S. and published 
     by the German Axel Springer organization, published the names 
     of Russia's 100 richest business leaders, giving them the 
     sort of attention many don't welcome. Mr. Klebnikov was not 
     afraid to make powerful enemies in the interest of honest 
     journalism.
       In a recent book, ``Darkness at Dawn,'' David Satter, a 
     former Journal Moscow correspondent, wrote that Russia has 
     been taken over by a criminal elite in which gangsters, 
     businesses and corrupt officials work together. The result is 
     a climate of fear and public cynicism. The collapse of 
     communism, with its history of state-sponsored violence, left 
     a moral vacuum that persists in a different form. Some of the 
     modern thugs got their training with the Soviet secret 
     police.
       The Committee to Protect Journalists, which records attacks 
     on journalists throughout the world, cites Russia as a 
     special problem. Attempts to shut up the press have been made 
     by the Federal Security Bureau, formerly the KGB. Russian 
     President Vladimir Putin, who has systematically seized 
     control of Russian TV, retains some of the habits he 
     developed when he himself was a KGB functionary.
       Yet Mr. Putin is welcomed to international parleys, such as 
     G-8 meetings, as if he were the leader of a normal country. 
     The murder of Paul Klebnikov demonstrates that Russia is not 
     a normal country. Perhaps it's time for the leaders of free 
     democracies to ask Mr. Putin whether the rule of law exists 
     in Russia.

  Mr. INSLEE. Mr. Speaker, I would like to share with my colleagues 
information that raises serious concerns about the development of a 
free-market system in Russia. Many of my constituents who develop 
products such as software and biological drugs rely on the enforcement 
of strong intellectual property rights laws and copyright protection, 
and therefore have an interest in ensuring that countries such as 
Russia maintain fair and enforceable laws in this regard. For this 
reason, there is cause for concern regarding the Russian government 
placing significant pressure on SPI, the company that produces the 
Stolichnaya beverage, in an effort to reclaim the intellectual property 
rights of its brands. Stolichnaya, nicknamed Stoli to many Americans, 
is one of many brands of production the Russian government is 
attempting to reclaim from SPI in the wake of the privatization of 
other beverage companies in the 1990's.
  I am concerned about the implications of such actions on 
international global property rights, Russia's potential WTO and G-8 
membership, and the direction of Russian Democracy and rule of law. 
This case is emblematic of a general situation and is part of a pattern 
of disrespect for the rule of law that has unnerved foreign investors 
who are concerned about long-term economic, legal and political 
stability of Russia. If we are to hope to crack down on the copyright 
infringements on software produced in the Puget Sound, I believe that 
proper enforcement of this issue is an important step.
  I would like to offer my colleagues some background on SPI and its 
issues.
  SPI is a Dutch-based company that owns the trademark rights to a 
large number of beverage brands including Russia's most famous brands, 
Stolichnaya and Moscovskaya as well as Russkaya and Limonnaya. It is my 
understanding that the SPI Group acquired the rights for these 
trademarks by means of buying out the minority shareholders of a 
Russian company, which owned the above-mentioned trademarks worldwide 
and was privatized between 1990-1992. It also assumed a $50 million 
debt that was inherited by the previous owner from its state-owned 
predecessor. SPI

[[Page 16114]]

has since invested another $100 million to develop into a successful 
international competitor.
  The SPI Group has registered the trademarks for the 43 brands in more 
than 150 countries. It has a 10-year distribution deal with Allied 
Domecq in the U.S. as well as a distribution deal with First Drinks in 
the UK and Bacardi in Greece. Last year, SPI recorded sales of $680 
million. This success, however, has merely brought the company to the 
forefront of the debate over who owns these trademarks.
  It is also my understanding that from 2000 onwards, certain entities 
within the Russian State have started various actions against SPI to 
obtain its trademark registrations.
  In late 2001, in a case brought by the Russian State Trademark 
Organization, the Russian courts ruled that the original privatization 
of the company that owned the brand before SPI was invalid (on a 
technicality) and returned the rights for 17 brands controlled (now) by 
the SPI Group to the Russian Ministry of Agriculture.
  Since then, SPI, while producing the product in Russia, has been 
forced to move its bottling plant to Riga in Latvia, after the Russian 
authorities seized and blocked its exports from the Russian port of 
Kaliningrad. Various heated legal battles have been fought in a number 
of Russian and foreign courts as SPI continues to sell Stolichnaya 
internationally. In Russia, a company resurrected by the Government 
markets its own Stolichnaya brand after confiscating back the trademark 
there.
  On 4 March 2002, the Leninsk-Kuznetskiy City Court seemingly resolved 
the dispute by ruling that the Ministry of Agriculture had illegally 
registered 17 trademarks belonging to SPI, including the Stolichnaya 
trademark, and ordered that SPI be reinstated as the registered 
trademark owner.
  However, Russian authorities ignored the Leninsk-Kuznetskiy City 
Court's ruling and employed intimidation and police-state tactics to 
grab the company's assets and trademark rights for its own purposes. 
Some examples of these tactics include:
  The Government's Federal Security Service, in a letter dated March 5, 
2002, ordering Kaliningrad Customs to prohibit bulk export of 
Stolichnaya produced by SPI in Kaliningrad.
  The confiscation of more than 150,000 cases of SPI products seized in 
Kaliningrad along with related packaging material.
  The filing of criminal charges levied against Audrey Skurikhin, 
president of SPI Spirits-Russia, and its Kaliningrad facility.
  As a result of these events, it is my understanding that the Ministry 
of Agriculture currently produces these products in Russia with 
virtually identical labeling and uses libel and intimidation to force 
distributors and customers to stop doing business with SPI. In 
addition, the Russian Patent Agency gave the rights for the re-
nationalized trademarks to the newly incorporated company of the 
Russian Ministry for Agriculture.
  International courts have ruled in favor of SPI. Court rulings in 
October 2002 in Hamburg, Germany and May 2003 in Rotterdam, 
Netherlands, rejected the lawsuits brought against SPI, substantiating 
SPI's claims.
  Mr. Speaker, in conclusion, the SPI case is about something larger 
and more fundamental for Russia and its relationship with the United 
States and other nations of the world--adherence to the rule of law and 
political, social and economic freedom. SPI is an example of the need 
to uphold the rule of law and ensure a better business environment for 
Russian business. A stable and democratic Russia, based on a rule of 
law, is critical to U.S. interests; not only for U.S. firms interested 
in doing business there, but also for the overall, long-term U.S.-
Russia relationship. Many of my constituents depend on adherence to the 
rule of law and copyright protections to ensure that their products, 
particularly software and biotechnology, are not stolen. We should not 
let this SPI case set precedence or be a harbinger for software and 
other U.S. industries.

                          ____________________