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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, June 24, 1996

Russian Federation


Lebed's Choices for Defense Minister

· Newly-appointed Russian Security Council Secretary Aleksandr Lebed told Moskovsky Komsomolets on Saturday that he favors Colonel-General Igor Rodionov, chief of the General Staff Academy, for the position of Defense Minister. RODIONOV drew up Lebed's electoral documents on military policy and military reform. Lebed also favors General Vyacheslav Tikhomirov, his former subordinate in the 14th Army, who is currently commander of the Joint Group of Federal Forces in Chechnya, for the position. RODIONOV's candidacy is not likely to sit well with other former Soviet republics, particularly Georgia. As Commander of the Transcaucasian Military District in 1989, RODIONOV was blamed for ordering the violent breakup of a peaceful demonstration in Tblisi, during which several people were killed. RODIONOV was removed from his post and demoted by then-Soviet President Mikhail GORBACHEV.

Despite a statement, cited by Itar-Tass, made by Lebed last week that he "does not plan any dismissals or reductions in the apparatus of the Security Council." Intercon sources indicate that he has been pressuring some Security Council staffers to resign. LEBED reportedly asked some officials, to write up resignation notices. However, they refused, suggesting that he could give reasons and fire them, if he was dissatisfied with their performance. United Press International (UPI) reported Saturday that he would ask President Boris Yeltsin for "broad additional authority" in his post as Russian Security Council secretary.

Zyuganov Seeks to Build Coalition

· Communist presidential contender Gennady

Zyuganov told reporters today that he has proposed to various political forces in Russia that, whoever wins the presidential election, a Council of National Coalition be set up to form a coalition government. The Council would include representatives from the government, chairmen of the two houses of the parliament, heads of State Duma factions and groups, leaders of the main parties, movements, and public organizations. The new government would likely be comprised of one-third communists, one-third representatives of other political forces in the State Duma, and one-third members of the current government. Communist candidates for Cabinet posts include deputy State Duma speakers Sergei Baburin and Svetlana Goryacheva, lawmaker Stanislav Govorukhin, actor Nikolai Gubenko, economist Sergei Glazyev. "I am ready to offer many regional leaders to join the government, including Moscow Mayor Yuri Luzhkov, Bashkortostan President Murtaza Rakhimov, and some other politicians and state leaders," Zyuganov stated, according to Itar-Tass. Zyuganov added that the policy, composition, and distribution of ministerial posts in the government should correspond to the balance of political forces in the country, as represented in the State Duma. Of course, as the Duma is largely made up of Communists, this would mean that they would dominate the government. ZYUGANOV's motives for proposing a coalition government, rather than focusing on campaigning to win the presidency in the runoff, are uncer

Today's News Highlights


Yabloko Conditions Support

Duma on Gold Sector

Gulfstream Gets Rus. Certificate

European Republics

Lithuania OKs EU Accord

FDI in Ukraine

Transcaucasia & Central Asia

World Bank Loan for Kazakhs

Uzbek Agreement with EU

World Wide/IBE in Kazakhstan




June 24, 1996

Intercon's Daily

tain. This coalition proposal could be aimed at convincing voters that he is more moderate than some suspect.

In the meantime, Saturday's Moskovsky Komsomolets printed an unconfirmed, but still disturbing, report on the Communist Party's possible activities following the first round of elections. The paper's sources say that leaflets are being printed in several Russian cities which say that ZYUGANOV really won the presidency in the first round, but YELTSIN's team rigged the results and calls on Russian citizens to hold a nationwide strike.

Yabloko Gives Conditional Support to Yeltsin

· The reformist Yabloko party and its leader Grigory Yavlinsky decided over the weekend not to support President Boris YELTSIN's candidacy for re-election, unless he meets certain conditions. At a Yabloko Congress in the town of Golitsyno party members were unanimous in their desire to prevent the election of Gennady ZYUGANOV and they agreed that to vote against both candidates would indirectly support the Communist. At the same time, YAVLINSKY urged his supporters to turn out at the polls, but would not specifically endorse YELTSIN until he addressed several questions including specifics on ending the war in Chechnya, amendments to the government's social and economic programs, and who the replacements for the recently-dismissed security chiefs would be. Yavlinsky came in fourth in the first round of presidential elections, receiving some seven percent of the vote.

Gore-Chernomyrdin Meeting Set

· The Russian-US intergovernmental commission, led by Prime Minister Viktor Chernomyrdin and Vice-President Al Gore will hold its next session in Moscow on July 14-16, Chernomyrdin told journalists on Saturday. The Prime Minister spoke by telephone with Gore on Friday evening to decide the final date of the session and its agenda. He said the commission will focus mainly on such issues as trade restrictions and market access.


Ruble = 5,073/$1.00 (NY rate)

Ruble = 5,068/$1.00 (CB rate)

Ruble = 5,049|5,087/$1.00 (buy|sell rates)

Russia May Impose Food Import Quotas

· Russian Trade Minister Oleg Davydov has not ruled out the possibility of imposing quotas on some types of imported foodstuffs, reported Segodnya on Saturday. However, "this step will be taken only after a careful analysis of the market situation," said DAVYDOV. The Minister explained "that the main task of the government is to meet the population's demand for staple food and rule out lines for all times," according to Segodnya.

Duma on Crisis in Gold Sector

· The Russian State Duma on Friday issued an appeal to Prime Minister Viktor Chernomyrdin in an attempt to draw his attention to the crisis situation in the nation's gold-producing industry, reported Itar-Tass. The situation has been getting increasingly worse in recent years, with production slumping and mines shutting down, said the appeal. The Duma attributed the situation mainly to high taxes, the increasing costs of production, and an almost complete state monopoly on the purchase of precious extracted metals, without providing any guarantees on full and timely payment. The appeal contends that the government has not complied with its responsibilities concerning the gold-producing industry and urged it to adopt and implement a program for the development of the industry until year 2000. The Duma called on Chernomyrdin to take effective measures to improve the situation.

Meanwhile, the acting head of the Russian State Committee on Precious Metals and Stones Yuri Kotlyar said earlier this month that Russia's gold reserves reached 386 tons, reported Finansoviye Izvestia (1996, No. 63). In 1992, Russian gold reserves were 290 tons. Kotlyar forecast that 1996 gold production will reach 120 tons.


Gulfstream Certified for CIS

· Savannah, GE-based Gulfstream announced today that its Gulfstream III, Gulfstream IV, and Gulfstream IV-SP large cabin business aircraft have become the first aircraft to be approved by the Russian and US governments under the new joint CIS certification rules for Transport Category Aircraft (AP25), said a company press release. The certification from the Aviation Register of International Avia

When you need to know it as it happens




June 24, 1996

Intercon's Daily

tion Committee (IAC) will usher in a new era in the development of long-range business travel throughout Russia and the CIS, it said. The certification was marked by a ceremonial flight of a Gulfstream IV-SP business jet from London to Moscow today and a news conference at Moscow's Sheremetyevo airport. "This is a significant achievement for Gulfstream, the Aviation Register of the IAC, and the US Federation Aviation Administration that will allow us to make available new and pre-owned Gulfstream aircraft in CIS countries. We feel that the CIS is an extremely important market for long-range, large cabin business aircraft," said Gulfstream's Executive Vice-President for international Sales Gene RAINVILLE.

Norilsk Inspects Plant

· Russian metals giant Norilsk Nikel has begun a "comprehensive financial inspection" of the group's Severonikel subsidiary, reported Interfax. A commission will analyze the subsidiary's credit policy and pricing, and draw up a financial plan for the rest of this year. The commission will also look at cooperative raw materials supplies between Norilsk subsidiaries, production, efficiency and the use of equipment; and try to identify ways of bringing down the costs at Severonikel. The inspection commission includes officials from Norilsk's core plant, from Norilsk subsidiaries Krasnoyarsk and Pechenganikel, and Russian auditors Rosekspertiza.

more than a month resisted the Nazi onslaught. Belarus President Aleksandr Lukashenko met with Yeltsin in Brest, where the Nazis launched Operation Barbarossa in 1941, opening up a second front and breaking a secret pact with Stalin.

Foreign Investment in Ukraine

· The Ukrainian Statistics Ministry has estimated that total foreign direct investment (FDI) in Ukraine reached $990.4 million by the end of March, reported Finansoviye Izvestia (1996, No. 58). Non-residents invested $137 million in the Ukrainian economy from January-March 1996, including $38 million (27.8 percent) from the CIS and Baltic states, and $99 million from other countries.

Transcaucasia and Central Asia

Kazakh Irrigation Loan Announced

· The World Bank on Friday approved a $80 million loan for a $118 million project to improve the irrigation and drainage systems in Kazakhstan, said a World Bank press release. The project will rehabilitate key irrigation and drainage infrastructure, assist the Kazakh Ministry of Agriculture in working with various stakeholders to plan and implement irrigation investments, improve the government's environmental and monitoring capacity, and support a pilot program for farmer training and information on improved farm and water management practices. The primary benefits of the project will be generated by increased agricultural production through: increased efficiency in water use through improved water delivery and irrigation practices; reversing the declines in yields from water logging and salinity build-up through improved drainage; expanding cultivated area through reclamation of some abandoned areas; and higher agricultural productivity from farmers honing water management skills, adopting improved cultivating practices, and switching to higher-value and improved varieties of crops. The remainder of the project cost will be financed by the Kazakh government. The Kazakh Ministry of Agriculture will have overall responsibility for implementing the loan, while the Project Implementation Unit in the Ministry will provide day-to-day management of the project.

Uzbekistan-EU Sign Accord

· The European Union (EU) and Uzbekistan on Friday signed an agreement on partnership and

European Republics

Lithuanian Parliament OKs EU

· The Lithuanian parliament has voted 112-1, with five abstentions, to ratify an agreement on the country's associate membership in the European Union (EU), reported Interfax. Lithuania signed the agreement on associate membership in June 1995.

FSU Marks Nazi Invasion Anniversary

· People across the former Soviet republics on Saturday marked the 55th anniversary of Nazi Germany's invasion of the Soviet Union and paid tribute to the millions of soldiers who died in defense of the country during World War II. Russian President Boris Yeltsin declared this year that June 22 should be honored annually as a Day of Remembrance and Mourning to mark the anniversary of the start of the Nazi invasion in 1941. He flew to Brest, a city in western Belarus on the border with Poland, once the Soviet Union's western border, which for

When you need to know it as it happens




June 24, 1996

Intercon's Daily

cooperation at a summit meeting of the European Council in Florence, reported Itar-Tass. Uzbek President Islam Karimov expressed the hope that the agreement will help maintain economic and political stability in Europe and Asia. Uzbekistan is the eighth former Soviet republic to sign such an agreement with the EU after Russia, Ukraine, Belarus, Kazakhstan, and the three Baltic states.

Addressing a group of Italian businessmen in Florence, Karimov said his country wished to start more joint ventures with Italy and offered a five-year tax exemption to foreign companies with investments in his country, reported Xinhua. Italy has only 19 joint ventures with Uzbekistan, next to 200 with the US and 170 with Germany, said Karimov. However, he said foreign investment had exceeded $1 billion in his country since the breakup of the USSR.

Kazakh/World Wide Minerals Agreement

· Canada's World Wide Minerals announced that it has received exclusive rights to negotiate a management and development agreement for, and an option to acquire a 90 percent equity stake in, a major uranium, gold, diamond, and phosphate mining and processing operation in north central Kazakhstan, reported Dow Jones. The project is currently owned and operated by state-owned Tselinny Gorno-Khimicheskii Kombinat. Assets of the company include several underground uranium mines, a two-million-ton per year processing plant, a 2.7-million-ton phosphate deposit, a gold refinery, an industrial diamond deposit, and a 180-megawatt coal-fired power station. World Wide has formed a consortium with Dundee Bancorp, Inc. and its Kazakh partner Tsesna Corp., as well as KATEP, the state uranium producer and marketer. World Wide said it has until July 17 to negotiate pacts to manage Tselinny and the

complex, to conduct due diligence, to develop a plan to restructure Tselinny, and to arrange interim working capital financing for the project.

IBE Wins Kazakh Tender

· US IBE Trade Corp. won a tender for management control of the state's 51 percent stake in seven Kazakh phosphorous enterprises, which process ore for export, mainly to Russia, reported Reuters. Spokesman for the State Property Committee Kanat MUKUSHEV announced today that the arrangement will last for 10 years, with IBE having first option to buy the stake outright. IBE pledged to invest $92 million in the plant by 2002. The US company beat out Newgate International, Inc. and a private Iranian firm in the tender. Intercon reported June 5 that Kazakhstan canceled a similar deal with Czech Inekon group, saying Inekon has not found the funds to repay wage arrears owed to enterprise workers.

Central Asia Presidents at Swiss Mtg

· A three-day international economic meeting in Crans-Montana, Switzerland, which ended on Sunday, was attended by heads of state, prime ministers, businessmen, and political scientists, including the presidents of Kazakhstan and Kyrgyzstan--Nursultan Nazarbayev and Askar Akayev. The two leaders, who were awarded 1996 Crans-Montana Prizes for their contribution to economic growth, democracy, and regional stability, described for meeting attendees their countries' progress.

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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