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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, June 6, 1996

Russian Federation


Dudayev's Widow Backs Yeltsin

· Alla DUDAYEVA, widow of Chechen rebel leader Dzhokhar Dudayev, announced on Wednesday her support for the recent Chechnya peace initiatives forwarded by President Boris Yeltsin at the constituent congress of the Russia Women's Socio-Political movement. "Strange though it may seem, I will begin by backing our president—Boris Yeltsin," she told the congress, according to Itar-Tass. "Only by defending him, we shall be able to uphold our freedom. The role of the Russian president in the Chechen war is comparable to that of the lion from the fable about a lion and jackals," she added. The fable says that a lion is always followed by jackals, who say they love him, but are always the first to betray him when he is trapped. Dudayeva believes that the war in Chechnya was a "trap" set for Yeltsin, said Itar-Tass. She said that DUDAYEV has wanted to end the war peacefully and blamed YELTSIN's entourage for blocking contacts between the president and her late husband. "Four times DUDAYEV tried to contact YELTSIN and they [YELTSIN's entourage] would not allow this. That is how Boris Nikolayevich was misled. He thought Dzhokhar did not want these talks," she is quoted by Reuters as saying.

Council Approves Law on Presidency

· Russia's Federation Council approved on Wednesday a draft law "On the Taking of Office by the Newly Elected President of the Russian Federation," adopted by the State Duma in May, reported today's Nezavisimaya Gazeta. The law outlines procedures for the transfer of power of the top position in the Russian state, based on the results of the June 16 presidential elections. The draft law now goes to President Boris Yeltsin for his signature.


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World Bank Health Loan to Russia

· The World Bank on Tuesday approved a $270 million loan for a $305 million project to improve health care services in Russia, said a Bank press release. The project will provide for purchases of medical equipment and related consumables by more than 1,200 primary and secondary care facilities throughout Russia. It will also finance consultant services for survey design of, and computer hardware and software for, a national system for the tracking of health expenditures. This type of system is considered essential both to administering a national health system, and to effectively monitoring budget execution by national and regional authorities. The Russian government will finance the remaining 11 percent of the project cost ($35 million).

US Ex-Im Bank Loan for Oil Refining Equipment

· The US Export-Import Bank announced on Tuesday that it finalized agreements allowing disbursements to begin to finance the purchases of $60 million worth of equipment and services from Houston-based Stone and Webster Co. by Russia's Yaroslavlnefte-orgsintez oil refinery, said an Ex-Im Bank press release. This is the fourth transaction

Today's News Highlights


IMF Tranche for Russia

Inkombank Gets Credit

Yugo-Russia Gas Pipeline

European Republics

Belarus Blamed for Balloon

Transcaucasia & Central Asia

Exxon and SOCAR Sign MOU

Kazakh Foil Metal Smuggling

Uzbek Plans Uranium Tender

Turkmen Anthem Contest




June 6, 1996

Intercon's Daily

approved under Ex-Im Bank's Oil and Gas Framework Agreement (OGFA). In September 1995, Ex-Im Bank began support for the $75.6 million sale deliveries of equipment and services by Colorado's Bateman Engineering for a gas compressor station at the Tomskneft oilfield. In addition, the Bank has financed exports of drilling and compressor equipment from Boca Raton's Ramoil Management Co. ($293.4 million) and Houston's International Tool and Supply Co. ($41.1 million) to Nizhnevartovsk-neftegaz and Chernogorneft.

IMF Tranche for Russia

· The International Monetary Fund on Wednesday approved the disbursement to Russia of $330 million, part of a $10.1 billion loan deal, adopted in March. The payment was based on Russia's continued adherence to a tough economic reform plan and will be the last before the June 16 elections.

Inkombank Receives Foreign Credit

· In Dusseldorf Monday, Inkombank President Vladimir Vinogradov signed an agreement on a syndicated credit with representatives of the 10 European financial institutions which comprise the Consortium of Western Banks, reported Itar-Tass. The credit will be used for financing short-term commercial transactions and for making investments in various projects. The London West Merchant Bank, a subsidiary of Germany's Westdeutsche Landesbank, is the principal manager of the project. Its co-organizer is the Luxembourg branch of the Dresdner Bank AG. The Chemical Investment Bank will be the credit agent. "This agreement is a convincing example of confidence crediting without any deposit for a period of one year," Vinogradov told Itar-Tass. "The credit was granted very promptly, in spite of the political vacillations in Russia. We shall get the money already within the next three days," he added. The investment projects to be financed from the credit include an oil refinery in the Mari-El Republic, the Raskat plant in Samara, and a cellular communication system in one of Russia's regions.

Group Offers Different Inflation Figures

· Russia's Center for Prices and Economic Analysis has been tracking consumer goods and services price levels since the beginning of last year and has calculated monthly inflation figures that are higher than those released by Russia's State Statistics

Committee (Goskomstat), reported A&G news service. The methods developed by the Center are based on the UN Statistics Committee recommendations used in inflation index calculations in developed Western countries.


Yugo-Russia Gas Pipeline Plan

· Russia and Yugoslavia have set up a joint stock company to build a $240 million natural gas pipeline from Bulgaria to Serbia, reported Reuters today, citing Belgrade papers. JugoRosGas was founded on Wednesday by Russia's Gazprom and Yugoslavia's Progres, Progres Gas Trading, NIS Oil Industry of Serbia, and Beobanka. The first stage of the project, construction of the 172-km Dimitrovgrad-Nis-Pojate section, is expected to cost about $105 million. Russian gas supplies to Serbia currently flow through a pipeline across Hungary. Yugoslavia imported 397 tons of natural gas in the first four months of the year.

Japan May Join Asian Gas Project

· Officials at Japan's Agency of Natural Resources and Energy are holding talks with the Chinese and Russian governments on the possibility of forming an association to develop a natural gas field in Irkutsk, Siberia, reported United Press International (UPI). The Kovyktinskoye gas field holds an estimated 400-600 million tons of liquefied natural gas equivalent, the largest known deposit of natural gas in Asia. Russia and China agreed to jointly develop the gas field when Russian President Boris Yeltsin visited Beijing in April. However, the project may require as much as 1 trillion yen ($9.26 billion) in investment over a development period of 10_20 years. The

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June 6, 1996

Intercon's Daily

Chinese and Russian governments are expected to decide on whether to accept Japan as a third venture partner before the end of the year. Natural gas produced at the field would be piped to Chinese cities through pipelines laid from Russia to Beijing and Shangdong Province via Mongolia.

Nestle in Ice Cream Venture

· Switzerland's Nestle SA said today that its Russian subsidiary Nestle Food AO and Moscow-based Zhukovsky Khladokombinat are setting up a joint venture, called Nestle Ice Cream Zhukovsky LLC, to produce and market ice cream in Russia. The initial investment is $20 million. The JV will produce both traditional Russian and Western-style ice cream. Russia's ice cream market is estimated at $1 billion.

Democracy and Human Rights in Belarus issued an appeal to the American public and business community documenting LUKASHENKO's "growing oppressive regime." It asked these groups, particularly investors, to speak up in defense of those arrested, prosecuted, and banned by the LUKASHENKO government.

During the latest anti-LUKASHENKO demonstration on Thursday, Belarus police arrested 84 protesters, and eight people, including two policemen, were taken to the hospital. Intercon reported May 30 that 3,000 people had marched through Minsk to demand that the government release seven Ukrainians being held and drop proceedings against two nationalist leaders for their part in an anti-government protest on April 26. Both of these protests turned violent when riot police attempted to break up the crowds.

In a related event, on Wednesday Russian First Deputy Foreign Minister Boris Pastukhov circulated a letter to the State Duma in Moscow recommending that the body not support a debate on Belarussian "human rights violations" at the Council of Europe, reported Itar-Tass. Opposition forces in Belarus, it said, hope that the Council will implicitly "punish" the Belarussian leadership for its movement toward Russia, along with its alleged human rights violations.

Transcaucasia and Central Asia

Exxon-SOCAR Sign MOU

· US Exxon Corp. announced today that its affiliate, Exxon Azerbaijan Ltd., has signed a memorandum of understanding (MOU) with the Azerbaijan state oil company (SOCAR) granting Exxon exclusive rights to negotiate the terms of exploration, development, and production-sharing agreements covering two oilfields in the Azeri sector of the Caspian Sea, said a company press release. The exploration blocks covered by the MOU are located between 50 and 75 miles sough of Baku near the large, undrilled Shakh-Deniz structure and the Bulla Deniz gas condensate field. The exploration blocks, which cover about 200,000 acres, were selected by Exxon Azerbaijan after completing joint technical studies with SOCAR. Drilling will be required to confirm the presence of an hydrocarbons. Exxon Azerbaijan and SOCAR hope to agree on the main principles of the contract in six

European Republics

Belarus Blamed for Balloon Downing

· The International Civil Aviation Organization has issued a report blaming Belarus for the downing of a hot air balloon last September, which killed its two American pilots, reported Wednesday's OMRI, citing AFP. The balloon, which was participating in an international competition that started in Switzerland, wandered across the Belarussian border from Poland and was shot down by Belarussian air defense forces. At the time, Belarus officials claimed that the balloon occupants failed to identify themselves after repeated requests. However, an international investigation commission determined that the Belarussian military failed to identify the balloon correctly and then did not take appropriate steps in attempting to communicate with the balloon's pilots, said OMRI. Belarus authorities expressed regret over the incident, but refused to apologize to the US.

Belarussian Political Situation Heats Up

· Recent protest demonstrations in Belarus are drawing attention to, and increasing criticism of, the policies of Belarussian President Aleksandr LUKASHENKO. Parliamentarian Mechislav GRIB, speaking of a Thursday protest, told the parliament on Friday that, "Nowadays, ordinary people are beaten and detained in broad daylight," according to Reuters. On Tuesday, parliamentary speaker Semeon SHARETSKY accused the president of being more totalitarian than the leaders of the former Soviet Union. Also on Tuesday, the Coalition in Defense of

When you need to know it as it happens




June 6, 1996

Intercon's Daily

months and finalize negotiations within a year. Exxon also holds a five percent stake in the AIOC.

Azeri-British Trade Committee Meets

· Azeri President Geidar Aliyev told the first meeting of the Azeri-British Trade and Industrial Consultative Council in Baku Wednesday that he wanted to modify existing tax restrictions and involve foreign companies in the country's privatization program, reported United Press International (UPI), citing Interfax. For its part, the British government said it will provide the necessary guarantees for British companies that wish to take part in projects in Azerbaijan, including those in the oil and gas sector.

Kazakhs Foil Rare Metals Smuggling

· Kazakh law enforcement authorities have arrested two Kazakh businessmen in the city of Ust-Kamenogorsk for attempting to sell 89 kilograms of tantalum to a Lithuanian citizen, reported Itar-Tass on Wednesday. Tantalum, a rare metallic element, is used mainly in defense and airspace industries. Experts estimated the cost of the metal at 1.5 million tenge (about $99 million), and was probably destined for somewhere other than Lithuania. The metal likely came from the Ulbinsk metallurgic plant, which specializes in nuclear fuel and rare metals, in Ust-Kamenogorsk, but by whom and when it was stolen has not been established. Thefts at Ulbinsk, a former secret defense enterprise, have reached a disastrous level. After the break up of the Soviet Union, the company lost most of its customers and suffered from lengthy wage payment delays, which led some workers to try to illegally sell rare metals. Kazakh police have retrieved about 1.5 tons of stolen rare metals, including radioactive ones, in the past eight months alone. However, the company is attempting to reverse its fortunes by, together with 16 Kazakh and Russian enterprises, setting up an international financial and industrial group called Titan.

Uzbekistan to Hold Tender for Uranium Mining

· An international tender is expected to be held in mid-June to purchase foreign drilling equipment

that is the most appropriate for the development of Uzbek uranium deposits, reported Wednesday's Nezavisimaya Gazeta. The most efficient and reliable drilling rigs will be tested for two months in Uzbekistan to determine the best. The company chosen by competitive tender will win the right to ship from 25 to 30 drilling rigs, worth $30 million, to Uzbekistan. During the last 40 years of Soviet rule, the bulk of uranium for the Soviet military-industrial complex, as well as for nuclear power stations, came from the Uzbek uranium mining industry, noted NG. According to International Atomic Energy Agency (IAEA) data, Uzbekistan's uranium resources stand at 230,000 tons, said the report. During the last 40 years, more than 440 uranium deposits, including Central Asia's largest—the Uchkuduk deposit—have been discovered. However, a third of the deposits are now depleted and, in Soviet times, some of them were turned into nuclear waste dumps. Nonetheless, as of the beginning of 1996, Uzbekistan rates third in the world for uranium sales and fifth for uranium mining. In 1992, the US State Department imposed rigid quotas on imports of Uzbek uranium, severely restricting sales, although a small fraction of mined and enriched uranium was sold to Ukraine under an intergovernmental agreement. Early this year, Uzbekistan's Navoi Mining and Metallurgical Combine (NGMK) made its first attempt to find buyers outside the US and signed a lucrative contract for the supply of 500 tons of Uzbek uranium with a delegation of South Korean businessmen in Tashkent, said NG. Following the deal, the Uzbek government drafted a program for modernizing NGMK before the year 2030, which calls for investments of $100 million.

Turkmenistan Offers $10,000 for Anthem

· Turkmen President Saparmurat NIYAZOV has signed a decree offering $10,000 to the composer of a new national anthem for the country, reported Reuters. New anthems, which should reflect Turkmen independence, neutrality, and historical traditions, will be heard by NIYAZOV and 13 other judges, and the winner will be announced on October 1.

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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