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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, June 11, 1996

Russian Federation


Zyuganov Defends Stalin

· In an interview with the Hungarian newspaper Magyar Hirlap on Monday, Russian Communist Party leader and presidential contender Gennady Zyuganov theorized that, if Soviet leader Josef Stalin had lived for another 5-6 years, the Soviet Union would have remained unconquerable for centuries, reported Itar-Tass. Commenting on the number of people killed in prison camps under Stalin, Zyuganov said "there are perhaps more people who are laboring in the slave yoke today," and in much worse conditions, than in Stalin's days. He blamed innocent victims of that time not on Stalin, but on "such alien elements as [Soviet secret police chief Genrikh] Yagoda, [railways minister Moisei] Kaganovich, [army chief ideologist Lev] Mekhlis and [STALIN's chief executioner Lavrenti] Beria." ZYUGANOV told the paper that he regretted that Stalin was replaced by "weak-handed followers" whose policies led to "the thaw" after Nikita Khrushchev's speech at the 20th CPSU congress. Yuri Andropov tried to fix things, but he did not live long, while the "comedian [Mikhail] Gorbachev, who sold away the country," is not even worth mentioning, he said. Zyuganov's views on STALIN and on the downfall of the Soviet Union and Communism were outlined in his 1995 book, I Believe in Russia.

Gaidar Says Second Round Inevitable

· Russia's Democratic Choice party head Yegor GAIDAR has issued a statement on the upcoming presidential elections, in response to President YELTSIN assertion on Sunday that he expected to win in the first round of voting. "I do not share Boris Nikolayevich's [Yeltsin's] optimism—although he is a better campaigner than anyone else in this

country—a second round is inevitable and reaching it will be Zyuganov and Yeltsin," Gaidar is quoted in today's Nezavisimaya Gazeta. He believes that the optimistic reports of the central mass media are somewhat premature as the preferences of people in so-called "small towns," where the monopoly of pro-Communist local press on information almost completely overwhelms propaganda successes scored by national Russian TV channels, like ORT, are yet unclear, said NG.


Ruble = 5,064/$1.00 (NY rate)

Ruble = 5,051/$1.00 (CB rate)

Ruble = 5,032|5,070/$1.00 (CB buy|sell rates)

Nuclear Smuggler Caught

· A. Plakhov, a Russian nuclear scientist who used to work in a closed town near Krasnoyarsk, has been arrested for attempting to smuggle to Britain about one kilogram of materials suitable for manufacturing a nuclear explosive device, reported this week's Moskovskiye Novosti, citing the Federal Security Service (FSB). The investigation is still underway, but it apparently is the first time that Russia has admitted to a case of fissionable nuclear materials being smuggled out of the country. Russian officials announced that the arrested scientist, who was charged with spying for Great Britain, worked for a federal agency and had access to political and defense information of strategic importance, said MN.

Today's News Highlights


1997 Economic Forecasts

Satellite JV Planned w/France

European Republics

Ukrainian Govt Changes

Flour Joins Chernobyl Group

Transcaucasia & Central Asia

Azeri-Turkey Military Deal

Karabakh Oil Consortium Set

Uzbek Airlines Expands

Updates: Chechnya; Tajikistan




June 11, 1996

Intercon's Daily

Russia's Proposed 1997 Budget Optimistic

· Russian presidential economic advisor Alek-sandr Livshits on Monday outlined the main goals of the country's proposed 1997 budget, which is being submitted for parliamentary approval, reported Itar-Tass. Livshits said the government is faced with three interrelated tasks: the state's unconditional, full, and timely fulfillment of its financial obligations, full-scale financing of social programs, and the creation of the conditions for the growth of investment and stimulation of business. The budget forecasts that the average monthly rate of inflation will be 0.8 percent in 1997 and that the federal budget deficit will be equivalent to three percent of the gross domestic product (GDP). Livshits believes that improving tax legislation is the most important task for increasing revenues for the federal budget, and stressed that active tax reform will begin in 1997.

PEEC Releases Economic Report

· The Pacific Economic Cooperation Council (PECC) released a report today, Pacific Economic Outlook 1996-1997, forecasting real growth in the Russian economy and a rise in investment over the next two years. Industrial investment is expect to increase by 2-4 percent, with the oil and gas sectors, ferrous and non-ferrous metallurgy, chemical production, wood processing, and telecommunications primarily contributing to the growth. In addition, a rise in domestic investment in the second half of 1996 will increase the demand for new industrial technologies and stimulate economic growth in 1997, said the PECC. The total accumulated value of foreign direct investment in Russia is estimated at $6.7 billion, with 1994 levels reaching $1 billion and 1995—over $2 billion. The PECC forecast average monthly inflation in 1996 at 1.9 percent, the same as the Russian government forecast. Annual inflation in 1997 is expected to be 20-25 percent.


Satellite JV Planned with France

· French satellite firms Aerospatiale and Arianespace have announced plans to set up a satellite-launching joint venture with the Russian Space Agency and the Samara space center, builders of the Soyuz spacecraft, reported the European Intelligence Unit (EIU) this week. The French partners will own 50 percent of the venture, provisionally named Starsem. Soyuz boosters have launched over 2,000 medium-sized satellites, and on average offers prices that are only one-fifth of Western equivalents, such as the Europe's Ariane program.

New Russian Debt Fund Planned

· London-based Regent Fund Management Ltd. and Australia and New Zealand Banking Group (ANZ) are attempting to raise between $100 million and $200 million for a Dublin-listed split capital fund to invest in Russian debt securities, reported Reuters today. "With local yields over 150 percent and exchange rate depreciation projected at around 20 percent a year this could provide investors with windfall profits," ANZ's Julian GREEN is quoted by Reuters as saying. The Regent Russian Debt Fund will be managed by Regent and advised by ANZ. Regent and ANZ estimate the daily turnover of the Russian government securities is $75 billion. Regent already manages three Russian equity funds, the Red, White, and Blue Tiger funds.

Update on Gazprom NTV Buy

· Russian gas monopoly Gazprom has purchased a 30 percent stake in the NTV independent television network from Vladimir GUSINSKY's Most financial group, reported today's Financial Times. Most, which owned 77 percent of NTV before the sale, will retain a controlling interest in the TV network. The other 23 percent of NTV is owned by the network's employees. NTV officials insisted the sale to Gazprom is aimed at gaining investment funds for the launch of five new satellite channels and the gas giant will not affect the editorial content of the network. NTV president Igor MALASHENKO joined President Boris YELTSIN's re-election campaign team in March and the station has shown a more pro-government slant in the run-up to the presidential elections than it did in the months before the parliamentary elections.

When you need to know it as it happens




June 11, 1996

Intercon's Daily

European Republics

Belarussian Move Against Media

· The Belarussian government on Friday ordered the closure of the independent newspapers Birzhi i Banki (business) and Beresteisky Krai (mildly nationalist), reported the Associated Press (AP). Birzhi i Banki is currently printed in neighboring Lithuania, as it was banned from using state publishing facilities last year. It has received five warnings from the Belarus government, the latest after running a story on President Aleksandr LUKASHENKO's personal security service on May 6. The government has set a July 1 deadline for media organizations to renew their registrations—a move seen as a way for LUKASHENKO to close down organizations that he finds disagreeable.

Meanwhile, two Belarus opposition activists recently freed from prison after a hunger strike have been warned about interviews they conducted after their release, reported AP. Officials have told them that another public appearance could land them back in a prison cell.

Ukrainian Government Changes Expected

· Five or six new ministers will be appointed to the Ukrainian government this week, a well-informed source in the Ukrainian presidential administration told Itar-Tass today. The only specifics offered by the source was that Justice Minister Sergei Golovaty had submitted his resignation to the president. Golovaty is quitting because of a dispute with Prosecutor General Grigory Vorsinov over the inclusion of an article about the prosecutor's control over law enforcement agencies under the new constitution. The Minister believes this would contradict the norms of the Council of Europe, he said. The Prosecutor General argued that the Council of Europe does not object to general prosecutors' control. Vorsinov was backed by the Ukrainian parliament which approved the draft constitution during the first reading last week, including the disputed provision.

Flour Joins Chernobyl Team

· France's SGN Reseau Eurisys has invited Fluor Daniel, Inc. to be the US partner on an international team from the Group of Seven (G-7) major industrialized nations which will offer coordination and

management remediation services for the Chernobyl nuclear disaster cleanup, according to a Flour press release. In addition to SGN and Flour, it includes Britain's AEA Technology, Canada's Canatom, Inc., Germany's Energie Werk Nord (EWN), and Japan's JCG Corporation and Mitsui & Co. The team has extensive nuclear experience in mining; milling; nuclear reactor design, construction, and maintenance; and decontamination and decommissioning of nuclear plants, including both solid and liquid waste treatment and disposal. "We now bring a truly comprehensive and coordinated management team which is capable, in full partnership with Ukrainian authorities and the Chernobyl operators, of managing and coordinating this critically important restoration program," said M. Xavier GORGE of SGN, according to the press release.

Meanwhile, Ukraine and the G-7 are at odds over funding for the proposed closure of Chernobyl by the year 2000. Ukrainian Minister for Environmental Protection and Nuclear Security Yuri Kostenko told reporters late last week that Ukraine may reconsider the timetable for shutting down the Chernobyl plant because of delays by the G-7 in providing $3 billion, promised for the construction of new generators at two other nuclear power plants.

Transcaucasia and Central Asia

Azeri-Turkish Military Accord

· Turkish Chief of Staff Ismail Hakki Karadayi and visiting Azeri Defense Minister Sefer Aliyev signed a military agreement in Ankara on Monday, reported Xinhua, citing Anatolia news agency. The agreement calls for technical, scientific, and educational cooperation between the military establishments of the two countries. Under the agreement, the two states will also cooperate in the social, medical, and cultural aspects of the military. Aliyev the agreement would create a strong foundation for the further development of the Azeri army. Meeting with his Azeri counterpart earlier in the day, Turkish Defense Minister Oltan Sungurlu said that Turkey wanted to see peace and stability in the Caucasus and Azerbaijan. "We have repeatedly told Russia that we are not pleased with the developments in Chechnya. However, we don't ever want to damage our good relations with Russia either," Sungurlu is quoted as saying. The closer

When you need to know it as it happens




June 11, 1996

Intercon's Daily

military relations between Turkey and Azerbaijan comes on the heels of a dispute between the US and Turkey over Armenia. Last week, the US House of Representatives approved two amendments to its fiscal 1997 foreign assistance bill that would restrict or ban US military and economic aid to Turkey, reported United Press International (UPI). One amendment blocks aid until Turkey lifts its four-year-old land blockade on goods shipped to Armenia, imposed during the Karabakh conflict in support of Azerbaijan. The other reduces the size of a grant to Turkey until it "acknowledges" the official Turkish role in mass killings of Armenians during World War I, said UPI. The Turkish government reacted angrily to the House moves.

Karabakh Oil Consortium Set

· The Caspian International Petroleum Company (CIPCO) has been incorporated as the joint operating company for oil and gas exploration, development, and production sharing for the Karabakh deposit in the Azeri sector of the Caspian Sea, said a Pennzoil press release, issued on Monday. The contractor parties to the Karabakh production sharing agreement are Pennzoil Caspian Development Corp. (30 percent), Russia's Lukoil (12.5 percent), Italy's Agip Azerbaijan (five percent), LukAgip, N.V. (45 percent); and a commercial affiliate of the Azerbaijan state oil company SOCAR (7.5 percent). James A. Tilley of Pennzoil Co., Houston, has been named president of CIPCO. Other officers are Andrea Chiura, of Agip, senior vice president for operations; and Pavel Kaufman, of Lukoil, senior vice president for finance and human resources. The Karabakh structure is located 12 miles north of the

Azeri-Chirag-deepwater Gunashli oil and gas unit being developed by another international consortium, Azerbaijan International Operating Company. That consortium also includes Lukoil and Pennzoil as members. The Karabakh structure lies approximately 50 miles offshore Azerbaijan in a water depth of about 600 feet. Tom Hamilton, president

of Pennzoil Exploration and Production Co., said the potential reserves of the Karabakh structure are in excess of one billion barrels of oil.

Uzbek Airlines Expands Service

· The state carrier Uzbekistan Airlines and Romania's Tarom will begin flights between Bucharest and Beijing, via Tashkent, on June 15, reported Interfax. The new air route was agreed upon during a visit of Uzbek President Islam KARIMOV to Romania. Uzbekistan Airlines already flies to more than 20 countries and Tashkent is a regular stop-over for flights between Europe and Asia.


Chechnya: On Monday, Russian and Chechen rebel negotiators agreed to postpone the June 16 Chechen parliamentary elections until after the complete withdrawal of Russian troops from Chechnya, scheduled to be complete by the end of August. Both sides compromised to reach the accord. In addition, they agreed to set up a working group to oversee the release of prisoners held by both sides. Lists of detainees were due to be exchanged today and their release is to follow immediately. Russian officials have said rebels hold some 600 servicemen and civilians, while Chechen spokesmen say the Russians have seized about 2,500 people during the conflict. The talks have not yet addressed the critical issue of Chechnya's future political status.

However, the deal may have been put in jeopardy today as a result of new violence. A convoy carrying Chechen rebel delegates and international mediators to Chechnya from Ingushetia following the peace talks was hit by two blasts and six people were hurt.

Tajikistan: Reviewing the situation in Tajikistan in the last three months, UN Secretary-General Boutros Boutros-Ghali said Monday that the situation there was "at its worst and most volatile" since the end of the 1992 civil war, according to a VOA report. However, he noted that a new special representative and head of mission in Dushanbe had begun his activities and recommended to the Security Council that the mandate of the 94-member UN military observer mission in Tajikistan, scheduled to end on June 15, be extended for another six months.

Paul M. Joyal, President, Editor in Chief Clifton F. von Kann, Publisher Ellen Shapiro, Principal Editor

Alycia S. Draper, Rebecca Martin, Contributing Editors

Daily Report on Russia is published Monday-Friday (excluding holidays), by Intercon International, USA. Subscription price for Washington, D.C. Metro area: $895.00 per year. A discount is

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Daily Report on Russia is for the exclusive use of the subscriber only. Reproduction and/or distribution is not permitted without the expressed written consent of Intercon. Daily Report on Russia Ó copyright 1996, Intercon International, USA.

When you need to know it as it happens