DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 908,

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, September 13, 1996

hearing on the situation in Chechnya, accusing the Council of interfering in Russian internal affairs, reported Interfax. The Council has also invited Security Council secretary Aleksandr LEBED and Chechen rebel military commander Aslan MASKHADOV to address the hearing. Lukin has reportedly urged Lebed not to attend. The Russian Foreign Ministry called the Council's decision to invite only Chechen rebel representatives and no one from the Moscow-backed Chechen government as "unacceptable," said Interfax. Pro-Moscow Chechen government head Doku Zavgayev charged the Council of slapping the "Chechen people's face" by inviting Maskhadov, "a traitor and slaughterer."

The president of the Council of Europe's parliamentary assembly, Leni Fischer, on Thursday affirmed the assembly's right to examine human rights issues in all member states, including Russia, reported United Press International (UPI). Fischer said the invitations, including Lebed's, were issued after a Council of Europe delegation visit to Moscow in late August. At the time, Lebed agreed to participate in such a hearing, while LUKIN, the chairman of the 18-member Russian delegation to the Council assembly, had not opposed the idea, she said.

Russian Parliamentarians in Washington

· A group of Russian legislators, led by State Duma Defense Committee chairman Lev Rokhlin, arrived in Washington today, at the invitation of the US Information Agency (USIA), said Itar-Tass.

Russian Federation

Politics

Kokh Appointed Privatization Minister

· Russian Prime Minister Viktor CHERNOMYRDIN has appointed Alfred Kokh as chairman of the State Property Committee (Goskomimuchestvo), putting him in charge of the country's privatization program. The 35-year-old KOKH was already serving as First Deputy Chairman of the Committee, and was acting Chairman between August 1995 and January 1996. Former chairman, Aleksandr KAZAKOV, stepped down in July to become the first deputy head of the presidential administration. The appointment will not be welcomed by the Russian parliament. Some deputies have strongly criticized KOKH for his role in the controversial shares-for-loans privatization program and several times called for his removal or prosecution for abuse of power.

Lebed Vs. Justice Min. over Chechnya

· Russian Justice Minister Valentin Kovalyov said on Wednesday that the agreements signed on August 31 between Russian Security Council secretary Aleksandr LEBED and Chechen rebel military commander Aslan MASKHADOV were merely a "political declaration" and were not legally binding, reported Interfax. Lebed responded by describing the Ministry's assessment of the Chechnya accord as "unwise." Prior to his appointment to Justice Minister in January 1995, KOVALYOV was a Communist State Duma deputy who gained favor with the YELTSIN administration through his unconditional support of the Russian intervention in Chechnya.

Russian Parliament Rejects CE Invite

· Russian State Duma speaker Gennady Seleznev and chairman of the Duma Foreign Affairs Committee Vladimir Lukin have rejected an invitation to Strasbourg from the Council of Europe to attend a

Today's News Highlights

Russia

Pravda Goes to Court

Ericsson in Cellular Deal

European Republics

Coastal Corp. in Tallinn

Business Center in Ventspils

Lebed Goes to Minsk

AvtoZAZ & GM Seek JV

Transcaucasia & Central Asia

World Bank $ for Pipeline Study

Israel Co. in Kazakh Refinery

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September 13, 1996

Intercon's Daily

Ruble = 5,379/$1.00 (NY rate)

Ruble = 5,370/$1.00 (CB rate)

Ruble = 5,350|5,390/$1.00 (buy|sell rates)

new publication misleads the readership by using a similar name and masthead. Pravda's former editor-in-chief Aleksandr Ilyin initiated the court case.

Business

Ericsson in Cellular Network Deal

· Swedish telecommunications firm LM Ericsson Telefon has been awarded a contract by MTT (Multiregional Transit Telecom), one of Russia's largest telecommunications companies, to supply 10 electronic mobile telephone exchanges (EMXs) for MTT's analog cellular network, reported Newsbytes on Thursday. The 10 EMXs will be deployed across Russia for use on the country's NMT 450 (megahertz) cellular networks. Ericsson has previously supplied 22 EMXs to MTT for its networks, said Newsbytes. This latest contract will allow MTT to create a Russian Federal Cellular (RFC) network which is expected to eventually cover all of Russia.

Ericsson and MTT Officials signed a framework agreement for the supply of the EMXs last week in Moscow and, according to MTT officials, the Russian Ministry of Communications supports the creation of the RFC network, said Newsbytes. Plans call for MTT to now coordinate with the various cellular telephone companies in Russia's regions over the installation of the new EMXs, and to work towards linking the various regional networks into a giant seamless analog cellular network spanning most of Russia. MTT will oversee the interconnection of the cellular networks with the existing hard-wired telecommunications structure of Russia, said officials. Plans also call for the some 60,000 subscribers of the NMT 450 cellular networks to have pan-Russian roaming in place within the next year.

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The delegation includes Duma Veterans Affairs Committee chairman Valentin Varennikov and deputy Albert Makashov, both of whom hold the rank of general. The former helped lead the 1991 coup against Soviet President GORBACHEV, while the latter was involved in the October 1993 Duma rebellion against YELTSIN. The delegation will meet with US Defense Secretary William Perry, NATO Commander-In-Chief for the North Atlantic General John Sheehan, US Congressmen, and others.

Economy

Pravda Goes to Court

· A Moscow arbitration court has ruled that the forced suspension of the newspaper Pravda, the former mouthpiece of the Soviet Communist Party, by the board of the Pravda International company, is invalid, reported Itar-Tass. The court found that the Greek owners of Pravda had infringed on the rights of subscribers, the editorial staff, and the founders by shutting down the paper in July. The court proposed that the Russian Prosecutor-General's Office investigate whether the suspension had obstructed the work of journalists.

Pravda International, owned by Theodoros and Christos Giannikos had been publishing Pravda since 1992. They ceased publication after the editorial board had refused to make personnel and editorial changes to try to make the paper profitable. The brothers then began a new publication called Pravda 5 with a new editorial staff. The court said that the

European Republics

Coastal Corp. Opens Tallinn Terminal

· Houston-based Coastal Corp. announced on Thursday that Coastal Baltica Holding, a company jointly owned by a Coastal subsidiary and Swedish-Dutch company Baltica Finance N.V., had begun operations at its Tallinn terminal and new port facilities on the Baltic Sea, said a company press release. "This new terminal operation will benefit the energy future of Estonia with the import and export of almost 2.5 million metric tons of petroleum products annually," said Coastal CEO David Arledge.

When you need to know it as it happens

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Friday

September 13, 1996

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The Coastal Baltica joint venture recently completed its refurbishment of the Tallinn terminal and construction of a new 4.6-mile pipeline connecting the terminal with the deepwater Port of Muuga. The opening of the Tallinn terminal will allow the marketing of petroleum products, primarily from Russia and the former Soviet republics, to markets in Europe, North and South America, and the Caribbean.

The Tallinn terminal is operated by E.O.S. Ltd., an Estonian subsidiary of Coastal Baltica Holding. E.O.S. Ltd. is in the process of finalizing its purchase of the owner of the terminal, AS Termoil, and its parent company, AS Esoil, the state-owned Estonian petroleum company offered for sale in July by the Estonian Privatization Agency. Other subsidiaries of AS Esoil included in the acquisition are AS EK, which owns and operates 38 retail gasoline stations and a wholesale lubricant and fuels marketing operation; AS Tartu Terminaal, which owns and operates a terminal handling gasoline, diesel fuel, and fuel oil in southern Estonia; and Parnu Terminaal, which owns and operates a fuel oil and gasoline terminal on Estonia's southwestern coast.

Business Center Opens in Ventspils

· A new business center, that includes a large conference hall equipped with audio equipment for simultaneous translation, three meeting halls, a communications office, and a bank office, opened this week in the Latvian Baltic Sea port of Ventspils, reported Itar-Tass. Ventspils transships a greater volume of cargo than the Baltic ports of St. Petersburg, Tallinn, Kaliningrad, and Klaipeda. Last year, 29.6 million tons of cargoes—mainly oil, metals, ammonia, fertilizers, grain, and timber—were transported through Ventspils.

Lebed Goes to Minsk

· Russian Security Council chief Aleksandr Lebed arrived in Minsk today for talks on the withdrawal of the remaining SS-25 nuclear missiles inherited by Belarus from the Soviet arsenal. LEBED and his Belarussian counterpart Viktor Sheiman will discuss the pullout of Russian missile units. He is also expected to meet with Belarus President Aleksandr Lukashenko.

All nuclear weapons in Belarus were supposed to be transferred to Russia by the end of 1996. However,

the pullout was delayed earlier this year at the initiative of Lukashenko, who threatened to redeploy the missiles, if NATO expands into Eastern Europe. Seven missile regiments have already been withdrawn from Belarus, but two remain.

World Bank/EU Loans for Ukraine

· The World Bank has decided to extend a $470 million loan to Ukraine to develop its agricultural industry, reported Xinhua, citing Ukraine's UNIAN news agency. World Bank officials visiting Ukraine have told Kiev that if it does not prohibit or limit the export of agricultural products, the World Bank will provide the credit. Of the total, $300 million will be used for reforming Ukraine's agricultural structure, and $170 million will be used to guarantee agricultural exports. The World Bank will reportedly call a special meeting on October 24-25 to discuss the situation of Ukraine's agricultural reforms.

The European Union (EU) and Ukraine signed an agreement in Kiev Thursday on extending some 540 million ECU (about $700 million) in technical aid between 1996-1999, reported Xinhua. The deal was signed by Hans van den Broek, the EU Commissioner in charge of relations with the former Soviet Union, and Roman Shpek, the head of Ukraine's Agency for Reconstruction and Development. The TACIS aid will assist Ukraine with its institutional reform and economic development.

The EU would also give Ukraine another 37.5 million ECU (about $46.5 million), including 22 million ECU to close the Chernobyl nuclear power plant, before the end of 1996 for the development of its energy sector, van den Broek added.

Ukraine to Open Missions in South America

· The Ukrainian parliament voted Thursday to open diplomatic missions in several countries of Central and South America, such as Uruguay, Venezuela, Peru, Bolivia, and Colombia, reported Itar-Tass. Deputy Foreign Minister Vladimir Khandogy told the deputies that Ukraine regards these countries as Ukraine's important political and economic partners. On Thursday, the parliament ratified a friendship and cooperation treaty between Ukraine and Brazil.

Ukraine AvtoZAZ/GM Sign Deal

· US General Motors Corp. and Ukraine's largest

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automaker AvtoZAZ agreed on Thursday to conduct a $500,000 feasibility study on forming a joint venture, reported Reuters. "We have to see if we can agree on products that can be manufactured in Ukraine, and evaluate with regard to the facilities that AvtoZAZ has today and how they can be jointly utilized," said Louis SANDE, GM's overseas vice president, at the signing ceremony.

State-owned AvtoZAZ, located in the eastern industrial city of Zaporozhiya, has been seeking foreign investment since the start of the year. The study would look into joint car and light truck manufacture. AvtoZAZ manufactures the popular Tavria automobile, producing roughly 70,000 vehicles in 1995. The study, funded in part by the US government, would be completed by the end of the year, said SANDE. South Korea's Daewoo Group has also reportedly expressed interest in cooperation projects with the Ukrainian automaker.

Transcaucasia and Central Asia

World Bank Loan for Pipeline Study

· The World Bank agreed on Thursday to lend Turkey $5 million to help finance studies on the feasibility and environmental impact of pipelines to export oil from Azerbaijan, reported Reuters. The proposed export route for Azeri Caspian Sea oil is from Baku through Georgia to Turkey's Mediterranean Sea port of Ceyhan. The $5.25 million studies will evaluate the best route for a pipeline to ship up to 45 million tons of Azeri oil a year and recommend "a realistic, commercial structure" for building and operating the pipeline, said the World Bank. The Bank said that the private sector, led by Turkish state pipeline company BOTAS, would finance the construction of the pipeline.

Kyrgyz Officials Fired for Corruption

· Kyrgyzstan President Askar Akayev has signed a decree dismissing six top officials for financial misconduct, the first act under a new anti-corruption campaign in Kyrgyzstan, reported Itar-Tass, citing

the Kyrgyz presidential spokesman. Those dismissed are the governors of the Issyk-Kul and Talass regions, Zhumagul Saadanbekov and Beishenbek Bolotbekov, chief of the Kyrgyz State Customs department Anatoly Lemeshenko, and three regional officials.

Addressing a session of the Kyrgyz Security Council on Thursday, AKAYEV expressed concern over the sweeping corruption within the country's power structures. "The shadow economy which has increased to make up 13 percent of the level of the gross national product poses a serious threat to the progress of domestic reforms and economic security of Kyrgyzstan," Itar-Tass cited him as saying.

IDA Loans for Tajikistan, Uzbekistan

· The Executive Board of the World Bank on Thursday approved financing for projects in Tajikistan and Uzbekistan, reported Xinhua. Tajikistan will be offered a $34.8 million for agricultural recovery and social protection projects. The fund will support macroeconomic reforms and the government's efforts to design and implement agricultural and farm reforms by providing non-inflationary budget resources to ease liquidity constraints.

Uzbekistan will receive a $3.7 million loan for a pilot water supply project. The two credits will be channeled through the International Development Association (IDA), the World Bank's concessionary lending arm for developing countries.

Israel Co. Invests in Kazakh Refinery

· Israel's Metal Technologies company plans to establish a $70 million oil refinery in Kazakhstan, reported United Press International (UPI), citing Ha'aretz. The Israeli firm will also manage the refinery, which is expected to begin operations at the end of 1997. The refinery will be built near the city of Aksai at an oilfield that is owned by British Gas, Italy's Agip, and the Kazakhstan state gas company. The Israeli company has received foreign trade insurance from Canadian, Czech, and Israeli backers.

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

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