Russian generals stole millions of petrodollars in Chechnya

MOSCOW - A cable from the U.S. Embassy in Moscow to the State Department in Washington, one of the recent WikiLeaks documents, details how Russian generals stole millions of petrodollars and laundered the money during the Russian occupation of Chechnya.

The cable is dated May 30, 2006. Information in the cable, dating to the early 1990s, had been made public in at least one book before WikiLeaks published the State Department cable.

The cable says that the lack of central control by Moscow over the military, as well as officers' greed, may have been a prime cause of the first Chechnya War.

Immediately after the collapse of the Soviet Union, energy prices in the part of Eastern Europe known as the "ruble zone" were only three percent of world market prices.

Russian government officials and their partners bought oil at ruble prices, diverted it abroad and sold it on the world market.

The military joined in this arbitrage. Pavel Grachev, then defense minister, reportedly diverted oil to Western Group of Forces commander Matvei Burlakov, who sold it in Germany.

Chechnya, according to the cabled analysis, was a major entrepot for laundering oil for this arbitrage. It appears to have been used both by the military (including Grachev) and the Khasbulatov-Rutskoy axis in the Duma. At the time, Dzhokhar Dudayev, the Chechen president, had declared independence, but remained part of the Russian elite.

Chechnya's independence, oilfields, refineries and pipelines made Chechnya perfect for laundering oil. Pipelines to Chechnya were functioning, allowing oil - but not auditors - to transit to Chechnyan refineries.

In the early 1990s, millions of tons of Russian oil entered Chechnya and were magically transformed into “Chechen" oil to be sold on the world market at world prices.

Some of the proceeds went to buy weaponry for Chechnya, most of it sold by the Russian military to the Chechens, and another lucrative trade developed.

Dudayev took much of his cut of the proceeds in weapons. The Groznyy Bazaar was notorious in the early 1990s for the quantity and variety of arms for sale, including heavy weaponry.