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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, September 24, 1996

Russian Federation


Korzhakov-Lebed Allied for Power Struggle?

· As more news of the precarious state of President Boris YELTSIN's health is disclosed, the Kremlin power struggle intensifies and it now appears that alliances have already been made for the battle. The latest speculation centers around a possible alliance between a seemingly unlikely duo—Security Council secretary Aleksandr LEBED and former Presidential Security Guards chief Aleksandr KORZHAKOV. Several articles in the Russian press have suggested the possibility of such an alliance, seeing it as a logical force to counter a rival team, made up of Prime Minister Viktor CHERNOMYRDIN and presidential chief-of-staff Anatoly CHUBAIS.

Another possible indication is KORZHAKOV's prediction that LEBED will be the next Russian president, made in an interview with Komsomolskaya Pravda, published today. KORZHAKOV, who was ousted from the Kremlin in June, recently announced that he will re-enter politics by running in a special election to fill LEBED's empty State Duma seat from the Tula Oblast.

The two men seem to need each other to further their political careers. Their relationship began with KORZHAKOV's negotiations with LEBED, on behalf of YELTSIN, prior to the second round of presidential elections. LEBED is popular and holds a top post, but is a novice at working in the Kremlin. KORZHAKOV once held major influence in the Kremlin and has the experience and inside knowledge that LEBED lacks. "I really know a lot about them, about their behind-the-scenes lives," he told Komsomolskaya Pravda about his political opponents, including CHUBAIS. "I am waiting for the appropriate time (to release this information)."

Meanwhile, other reports suggest that the Communists plan to line up behind CHERNOMYRDIN, if new presidential elections are held. An article in Monday's Journal of Commerce cited unidentified sources that said the Communists are discussing an alliance with CHERNOMYRDIN to present a strong challenge to LEBED. The article also stated that CHUBAIS is at "war" with CHERNOMYRDIN and has allied himself with First Deputy Prime Minister Vladimir POTANIN against him. In conclusion, however, the article's sources believe that Russia's bankers, oilmen, and directors of military-industrial enterprises are engaged in a ruthless struggle for their own survival and plan to use CHERNOMYRDIN, CHUBAIS, and LEBED as their "political hatchetmen."

Lebed Warns US/German Firms on NATO

· Russian Security Council secretary Aleksandr LEBED warned in an interview published today that US and German economic interests in Russia will be harmed if the West goes ahead with NATO eastward expansion. "Let there be no mistake. German and American industrial interests in Russia will suffer directly as a result of enlargement plans. Enlargement looks like capricious triumphalism on the part of the West, particularly the US," he told London's Daily Telegraph, reported the Associated Press.

LEBED accused US President Bill CLINTON of catering to voters during an election year and putting domestic politics ahead of international relations. "As we all know, we are in the middle of an American presi

Today's News Highlights


Communist Wins Amur Election

Primakov/Christopher Agree

Russia-Italy Gas Pipeline

Caterpillar in Khabarovsk

European Republics

UK Shops Bombed in Lithuania

Transcaucasia & Central Asia

Georgian Trade Turnover Up

Uzbek Telecom Min. Killed

Japanese Seek Kazakh Oil




September 24, 1996

Intercon's Daily

Tuesday Tidbit

received the endorsement of the Russian Communist Party.

LYASHKO, the former mayor of the regional capital Blagoveshchensk, was appointed by President Boris YELTSIN in June 1996, becoming Amur's fifth governor in five years. The previous governor Vladimir DYACHENKO was removed in May for misuse of budgetary funds and his wage arrears.

Amur Oblast, with a population of 1.04 million, is located 8,000 km east of Moscow and borders on China. The region is known for supporting Communists, having voted for Gennady ZYUGANOV over Boris YELTSIN by 41.85 percent to 26.6 percent in the first round of presidential elections and 53.07 to 40.67 percent in the second round, said OMRI.

Gubernatorial elections will be held on Sunday, September 29, in Leningrad and Rostov Oblasts, and local parliamentary elections in Tula Oblast.

Primakov/Christopher Reach Partial Accord

· Russian Foreign Minister Yevgeny Primakov and US Secretary of State Warren Christopher announced on Monday in New York that the US and Russia have approved the first phase of a new agreement on anti-missile systems. "This important progress ensures we can effectively defend against theater ballistic missiles while ensuring the integrity of the Anti-Ballistic Missile (ABM) Treaty," Christopher is quoted by United Press International (UPI) as saying. "We reached a milestone."

State Department Undersecretary Lynn Davis said the agreement clarifies the legality of a new type of anti-missile systems, being developed by the US Defense Department, designed to destroy incoming missiles at great ranges. Christopher said talks will begin next month on the second part of the agreement, dealing with higher-velocity systems.

PRIMAKOV said the accord would have a "significant, positive effect" on the debate in the Russian State Duma on ratifying the second phase of the Strategic Arms Reduction Treaty (START II), according to UPI. The US Congress has already ratified START II.

Meanwhile, Russian State Duma Defense Committee chairman Lev Rokhlin told a European security

Sometimes a

picture is worth a thousand words.

The Moscow Criminal Police were taken

by surprise recently by an Itar-Tass photograph

of Chechen rebel leader Zelimkhan YANDARBIYEV's

car, said a recent issue of Itar-Tass Express Weekly. Checking the license number from the picture of the Mercedes-400, officials discovered that it had been reported stolen in Moscow on July 12 and was the subject of a Russia-wide search. YANDARBIYEV had been scheduled to travel to Moscow Monday, but delayed

his trip, reportedly to better prepare for a meeting

with Russian Premier CHERNOMYRDIN.

It is not known whether he

had planned to drive.

dential campaign. CLINTON demonstrates, cynically, that the Polish vote in Chicago is worth more to him than the relationship with Russia for the next 20 years."

He charged Germany with having imperialistic ambitions over eastern Europe. "The German Defense Ministry, clearly determined to expand Germany's sphere of influence to the East, has driven the expansion policy. With the enlargement of NATO and of the European Union, the whole of central and eastern Europe will come under German economic and political domination," he told the Daily Telegraph. "Is this the work of the new generation of post-unification policymakers, building a Fourth Reich?"

LEBED's remarks came as NATO Defense Ministers prepare to meet in Norway Wednesday to discuss the expansion plans. The Russian secretary is scheduled to travel to NATO headquarters in Brussels on October 7-8 to hold talks on the issue. It will be LEBED's first trip abroad.

Communist Wins Election in Amur Oblast

· Leftist candidate Anatoly BELONOGOV has won Sunday's gubernatorial election in the far eastern Amur Oblast with 41.77 percent of the vote, according to preliminary returns, cited by RIA Novosti. BELONOGOV, the former chairman of the oblast parliament, defeated incumbent governor Yuri LYASHKO, who ran a close second with 41.69 percent of the vote. Another Communist candidate, former Federation Council member Pavel SHTEIN, also participated in the race, but BELONOGOV had

When you need to know it as it happens




September 24, 1996

Intercon's Daily

seminar in London Monday that the Russian parliament is "unlikely" to ratify the Strategic Arms Reduction Treaty (START-II), reported Itar-Tass. In the face of NATO's planned expansion and deployment of nuclear arms to Russia's east, the implementation of START-II provisions would be a "betrayal of Russia's national interests" and a "serious unilateral concession to the West," he said.


Ruble = 5,392/$1.00 (NY rate)

Ruble = 5,391/$1.00 (CB rate)

Ruble = 5,371|5,411/$1.00 (buy|sell rates)

Russia to Italy Gas Pipeline Planned

· Italian energy group Edison and Russian gas monopoly Gazprom today announced plans to go forward with a project to build a natural gas pipeline from Russia to Italy, reported Reuters. A joint statement said that their joint venture, Volta, had completed a feasibility study on importing and distributing natural gas to Italy, and that both sides were interested in pursuing the project. The project calls for the completion of a 1,600-km pipeline, some 600 km of which has already been built, between Russia and Italy. The pipeline would carry to Italy some 10 billion cubic meters (bcm) of Russian gas annually, accounting for nearly one-fifth of Italy's annual consumption of 55 bcm, said Reuters. The feasibility study estimates that Italian yearly gas demand could increase to 85 bcm by 2005. Under the original plan, the pipeline would be operational in 1999.

Russia to License Scrap Metal

· The Russian government's Current Issues Commission, chaired by First Deputy Prime Minister Aleksei BOLSHAKOV, ordered the ministries of industry and trade to draw up a system of licensing for the collection, procurement, and processing of scrap metal and ferrous and non-ferrous metallurgical waste, reported Interfax. The Commission rejected a proposal by the Industry Ministry to impose quotas on exports of scrap metal and metal waste. Deputy Industry Minister Serafim AFONIN had proposed limiting all scrap metal exports to two million tons a year to ensure greater supplies for domestic metals firms. Russian steel mills are currently operating 20-25 percent of capacity. The Industry Ministry estimated Russia's annual losses from duty-free exporting of scrap and waste non-ferrous metals at 5.2

trillion rubles. Russia scrap metal prices are reportedly 50 percent lower than world prices.

Interfax cited Russian State Customs Committee figures showing that scrap copper exports from Russia totaled 54,000 tons in the first half of this year, a 70 percent increase over total exports in 1995.

Russian Mutual Funds In October

· The first two Russian mutual funds have received management licenses and will be ready to begin operations in October, said Russian Federal Securities Commission Chairman Dmitri VASILIEV in New York, reported Monday's Journal of Commerce. Another eight mutual funds have received licenses but will not open until later. VASILIEV's Commission is responsible for capital market regulation and the creation of a capital infrastructure in Russia. The commission has set up regulations for the creation of two kinds of funds: "open"—which are required to hold liquid assets and whose unit holders would be able to redeem their shares at any time—and "interval"—which can hold some less liquid assets, and will run on a periodic redemption schedule.


US-Russian Firm Places Aircraft Engine Order

· The Russian-US company Yakovlev Aircraft is planning to place an order for a large number of light civil and special aircraft, made in the Russian republic of Tatarstan, reported Saturday's Nezavisimaya Gazeta. The order will be filled by the Gorbunov Aviation and Production Association in Kazan. Company Vice President Bronislav Iskhakov told Nezavisimaya Gazeta that the basic model in question is a multi-mission universal supersonic jet, Pegas, equipped with a state-of-the-art Russian engine RD-33. According to Western estimates, current demand for Pegas-type aircraft is more than 1,000 machines, he said. Iskhakov also said that the US side will finance the project.

Caterpillar to Open Store

· US Caterpillar has opened Amur Machinery & Services Co., a retail store, in the Russian far eastern port city of Khabarovsk, reported Dow Jones on Monday. The company said the area is an important market because of its opportunities in forestry, mining, oil, gas, and construction. Caterpillar opened an office in Khabarovsk in 1994.

When you need to know it as it happens




September 24, 1996

Intercon's Daily

European Republics

UK Optician Shops Bombed in Lithuania

· Three British-owned Vision Express optician shops in Lithuania were wracked by explosions over the weekend, apparently for not paying protection money to the Lithuanian mafia, reported Reuters, citing the Interior Ministry. The bomb attacks took place nearly simultaneously at about 1:00am Sunday in Vilnius, Kaunas, and Panevezhys. The shops suffered different amounts of damage, but no one was hurt. "The preliminary findings are the `security' was proposed to these shops and they refused," an interior ministry spokesman told Reuters.

Ukraine Sugar Exports Seen Down

· Ukrainian sugar exports are expected to decrease to 1.6 million metric tons (MMT) raw value in 1996/97, said a report from the US agricultural attaché in Kiev, cited by Futures World News (FWN). According to Ukrainian officials, Ukraine produced 3.7 MMT of raw value beet sugar in 1995/96. Domestic sales comprised 1.7 million tons raw value, and 2.0 million tons were exported. Exports to Russia totaled 1.7 million tons. However, exports to Russia are expected to fall in 1996/97 due to Russian plans to introduce a 10 percent value-added tax (VAT) on sugar and other goods imported from Ukraine. Russia is also reportedly discussing plans to impose an annual quota of 1.03 million tons for the Ukrainian sugar imports. Ukraine has estimated its 1996/97 sugar beet crop at 3.37 million tons raw value. Ukrainian sugar authorities are actively seeking access to the Central Asia and Middle East markets.

Ukraine to Liberalize Exchange

· In a move aimed at boosting foreign trade, Ukraine's central bank on Monday said it plans to liberalize the rules governing foreign currency exchange, making the hryvnia freely convertible during business transactions, National Bank chairman Viktor YUSHCHENKO is quoted by Reuters as saying. One change would remove limits on the ability of non-residents with accounts at Ukrainian banks to con

vert hryvnia into another currency to pay for goods and services. Under the changes, interest would be paid on foreign-held accounts, and rules would be clarified on non-residents' purchase of foreign currency on the Ukraine Interbank Currency Exchange.

Transcaucasia and Central Asia

Georgian Trade Turnover Up Sharply

· Georgia's trade turnover for the first six months of 1996 totaled $433.1 million, an 83.5 percent increase over the same period last year, reported the Georgian News Agency, citing the Socio-Economic Information Department. In addition, Georgia now trades with some 70 foreign countries, up from about 50 trading partners last year.

Uzbek Communications Minister Murdered

· Uzbekistan's acting Communications Minister Vladimir Kravchenko was stabbed to death early today by unidentified assailants who broke into his home in Tashkent. The masked assailants stabbed Kravchenko six times in the head as his 11-year-old son watched through a crack in the door, police in Tashkent told Itar-Tass. The attackers later entered the boy's room but did not harm the child as he hid under his covers. They ransacked the apartment, but did not take anything. Kravchenko was a first deputy communications minister and had been acting minister for the past two months.

JNOC in Kazakh Prospecting Deal

· The Japan National Oil Corporation (JNOC) on Monday signed a deal allowing it to explore oil reserves in the Kazakh sections of the Aral and Caspian Seas, reported Reuters. JNOC plans to invest $50.5 million over an unspecified period of time, including $40 million for exploration and test drilling in the Aral Sea. JNOC President Kunio Komatsu said that the company hopes to eventually take part in a tender to develop the resources they will explore. Kazakhstan said in June that a survey of its Caspian Sea shelf had revealed reserves estimated at 10 billion tons of crude oil.

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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When you need to know it as it happens