DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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

WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, November 14, 1996

pears to be a departure from the Soviet-style coercive diplomacy which has continued toward the near abroad since the Soviet collapse.

Lebed Weighing Invitations to the US

· Former Russian Security Council secretary and presidential candidate Aleksandr LEBED will make his first trip to the US next week, reported RFE/RL on Wednesday. The New York-based Council on Foreign Relations is sponsoring LEBED, who will make a speech on Monday. The Washington, DC-based Nixon Center for Peace and Freedom also invited LEBED to speak, but he has not yet accepted. A State Department spokesman told RFE/RL that US officials would hold talks with LEBED, if requested.

Rutskoi Brushes Off the Communists

· After being elected governor of Kursk Oblast with the help of the Communists, former Russian Vice President Aleksandr RUTSKOI has rejected his former colleagues, reported today's Moskovsky Komsomolets. In an interview with NTV television, Rutskoi stated that he will be, in the near future, quitting as one of the chairmen of the leftist coalition People's Patriotic Union of Russia and as the leader of the Derzhava (Great Power) movement.

RUTSKOI snubbed the communists by meeting with presidential chief-of-staff Anatoly CHUBAIS. The meeting took place on RUTSKOI's initiative, a source told the paper. "Rutskoi was trying to persuade Chubais to leave Kursk alone and not to

Russian Federation

Politics

Galkin to Get Out of Jail?

· Intercon sources report that the charges will be dropped today against Vladimir GALKIN, the ex-KGB officer who was arrested at JFK on October 29 on espionage charges dating back to 1990. He is expected to be released from custody.

Berezovsky Busily Traveling the CIS

· In what is apparently a frantic diplomatic effort, newly-appointed Russian Security Council deputy secretary Boris Berezovsky has spent the week traveling back and forth between various CIS countries. On Wednesday afternoon, he held talks with Kazakh President Nursultan Nazarbayev in Almaty, and later in the day he left for Tbilisi, where he met with Georgian President Eduard Shevardnadze behind closed doors.

The Georgia trip was his second visit to that country in a short period. During the first trip last week, SHEVARDNADZE quickly cleared his calendar and met with BEREZOVSKY for three hours. On the Sunday following the trip, SHEVARDNADZE received representatives of Russian companies LogoVAZ, Aeroflot, ORT television station, and Most Bank, reported Tuesday's Kommersant-Daily.

BEREZOVSKY arrived in Baku today and held a four-hour meeting with Azeri President Geidar ALIYEV. He then flew to Yerevan to meet with Armenian President Levon Ter-Petrosyan.

BEREZOVSKY and his high-level interlocutors have been tight-lipped about their talks. The Russian's mission must be important for all his haste and for the careful attention he has recieved from CIS leaders. This businesslike approach is refreshing as it ap

Today's News Highlights

Russia

Dubinin Speaks in Paris

Tax Revenues Up

Motorala Tech. for Russia Co.

GE in Moscow

European Republics

New Belarus Econ. Minister

Belarus Minister Resigns

Transcaucasia & Central Asia

US Official/Exec. in Baku

Rosneft Joins CPC

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November 14, 1996

Intercon's Daily

prevent him from conducting reforms," it said. For his part, Rutskoi "promised to extirpate vestiges of communism" in Kursk, said MK. For example, he recently tried to ban the Revolution Day march.

Fears that the election of RUTSKOI, YELTSIN's arch-rival, to a governor's post would spell major trouble for the federal administration appear to be unfounded. On the contrary, RUTSKOI has offered to cooperate with the center, and has broken with his former communist buddies.

Economy

Ruble = 5,484/$1.00 (NY rate)

Ruble = 5,481/$1.00 (CB rate)

Ruble = 5,476|5,486/$1.00 (buy|sell rates)

Dubinin on Prospects for IMF Tranche

· Russian Central Bank chairman Sergei Dubinin said Wednesday that he was "convinced" that the International Monetary Fund (IMF) would find Russia eligible to receive the next tranche of the $10.2 billion loan, reported Futures World News. Addressing the French Banking Association in Paris, he said he hopes the November assessment will succeed.

On economic prospects, he predicted that the Russian gross domestic product (GDP) would shrink by about five percent this year, but would be stable with zero growth in 1997. He said inflation, which has come down from 125 percent in 1995, should average 22 to 24 percent this year and come down to between 10 and 12 percent in 1997. This would bring average monthly inflation to 1.7 percent in 1996 and to less than one percent a month in 1997.

Pledging to continue Russia's rigorous monetary policy, DUBININ said that interest rates should come down in order to attract foreign investments, citing the lack of foreign investment as one of the major problems facing the Russian economy. The government has reduced the volume of Treasury bills in order to bring down interest rates, he said.

Exchange Rate to 6,200 by 1997

· The ruble/dollar exchange rate is expected to continue rising up through the end of 1997 to close at 6,200 rubles to $1.00, Itar-Tass quoted Central Bank deputy chairman Sergei Aleksashenko as saying. The Central Bank will announce the prin

ciples for regulating the ruble exchange rate in 1997 in 10-11 days, he said. The Bank believes that the existing flexible fixed currency exchange rate can be maintained in the future. The annual growth in the nominal exchange rate of the dollar was set at about nine percent and its absolute value by the end of 1997 is estimated to be 6,200 rubles to the dollar.

However, the Central Bank of Russia believes it is necessary to correct inclination parameters of the dollar corridor every three months within the assigned annual parameters of the currency exchange rate. Proposals addressed by the Central Bank to the government contain alternative variants of regulating the currency exchange rate, for instance, the establishment of a fixed currency exchange rate or combining elements of the fixed exchange rate and its planned downward value.

Tax Revenues Up, More Debtors Targeted

· The Russian government's crackdown on large tax evaders seems to be working and will encompass even more delinquent companies. Federal Bankruptcy Agency chief Pyotr MOSTOVOI announced Wednesday that the government had collected more than 100 percent of tax revenues in October, said today's Financial Times. In September, less than half of planned taxes were collected.

MOSTOVOI named another 16 companies that were being threatened with bankruptcy proceedings unless they pay off tax arrears, including some mining and metallurgy firms. He also said that audits on another nine major tax debtors have been completed: AO Norilskgazrpom gas producer, Tebukneft oil company, Atvodizel deisel company, Karelsky Okatysh mining operation, Krasnyy Oktyabr (a metallurgical enterprise), Severkuzbassugol coal mines, the Berezovskaya GRES-1 power station, Vakhrushevrazrezugol, and the Korshunovsky smelter, reported today's Nezavisimaya Gazeta. The aggregate debt of these companies to the state budget exceeds one trillion rubles, he said. The directors of these enterprises must submit to the government formal evidence showing that they have repaid their debts or that they plan to soon.

Business

Russia Co. to Produce Motorola Technology

· Motorola's Messaging Systems Products Group

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(MSPG) announced on Wednesday that Moscow-based EcoSoft GTCO has licensed the company's FLEX™ high-speed paging technology to develop infrastructure equipment, said a company press release. EcoSoft joins over 50 manufacturers who have licensed FLEX technology. "We are interested in developing FLEX technology-based software and hardware solutions for Russian and CIS markets by building inexpensive paging terminals," stated Dr. Mikhail Bogdanov, EcoSoft GTCO chairman.

By licensing the FLEX technology, EcoSoft aims to strengthen its position in the competitive wireless personal messaging arena. "In developing a FLEX technology-based infrastructure network, our subscribers are assured that their pagers will perform in an efficient and reliable way," said Bogdanov. EcoSoft has developed the only FLEX protocol product software in Russian and plans to develop software in other European languages.

Motorola's FLEX family of paging protocols, including FLEX, ReFLEX™ and InFLEXion™, optimizes the inherent benefits of paging to create a complete wireless operating environment. The FLEX protocol has been adopted by more than 70 percent of the world's largest paging markets.

EcoSoft GTCO is a private company, incorporated in Moscow in September 1993 by entrepreneur Dr. Mikhail Bogdanov. EcoSoft is effectively the successor to Scientific Initiative Company, one of the leading software companies in the former Soviet Union between 1988_92. The company develops hardware and software solutions for paging systems. EcoSoft is a leading paging system integrator in CIS countries.

Acer Wins Employment Service Order

· The Russian unit of Taiwan's Acer computer company has won a highly competitive tender to supply multimedia PCs to regional offices of the Russian Federal Employment Service, reported the Economist Intelligence Unit (EIU) on Wednesday. Acer beat out several major rivals such as the US Dell Computer and Hewlett Packard, Britain's ICL, and Germany's Siemens to land the contract, the value of which was not disclosed.

GE Energy Saving Lights Installed

· US General Electric (GE) and the Moscow city government have successfully completed a joint

project to modernize public lighting in Moscow. GE has supplied 6,900 energy-saving lamps to light 375 streets in the central district, reported RIA Novosti. The equipment could save up to 40 percent of the power previously used to light the area, and will not need any servicing for two to three years. The $1.3 million project was financed through a US Agency for International Development (USAID) program designed to provide Russia with energy-saving and environmental protection equipment and materials.

European Republics

New Economics Minister for Belarus

· Belarus President Aleksandr LUKASHENKO on Tuesday signed a decree appointing deputy economics minister Vladimir SHIMOV as head of the ministry, reported Reuters. Former Economics Minister Georgi BADEI quit in July after being accused of ruining the economy, despite his disagreements on the policy course being pursued. One government official commented that LUKASHENKO's administration had "repeatedly ignored the minister's proposals to speed up reforms."

"SHIMOV is reputed to be a very highly qualified professional and more market-oriented and aware of market needs than some. ... SHIMOV's appointment will certainly not do any harm, but it remains to be seen how forceful he can be in pushing any reforms through," said one Western analyst. Belarus has enacted few economic reforms since gaining independence. SHIMOV worked in close contact with the World Bank on an economic program for Belarus which LUKASHENKO rejected and replaced with his own conservative version.

Belarus Minister Resigns in Protest

· Belarussian Deputy Foreign Minister Andrei Sannikov resigned today, citing dissatisfaction

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with President Aleksandr Lukashenko's policies, reported United Press International (UPI). SANNIKOV, who oversaw Western relations and disarmament issues, resigned one day after Lukashenko threatened to suspend the transfer of nuclear weapons to Russia, if NATO proceeds with plans to expand into Eastern Europe.

$20 Mln Credit for Latvian Mobile

· Finland's Merita Bank said on Monday that it has arranged a $20 million loan to Latvian Mobile Telephone Ltd. from Merita, the Finnish Government Guarantee Fund, Nordiska Investeringsbanken (NIB), and the Investment bank of Latvia, reported Reuters. A Merita official said the five-year credit is "probably the largest ever single credit" to Latvia. The borrower is 49 percent-owned by Telecom Finland and Sweden's Telia. The majority is owned by Latvian state firms.

Transcaucasia and Central Asia

US Official/Oil Execs. in Baku

· US Special Ambassador to the Newly Independent States (NIS) James Collins met Wednesday with top Azeri officials and US oil executives in Baku to discuss the development of Caspian Sea oil resources. He reiterated Washington's support for the current division of the Caspian and expressed concern over Russian-proposed changes in the sea's legal status that could limit the participation of foreign oil companies, said United Press International (UPI).

During his meeting with COLLINS, President Geidar Aliyev said he expects three contracts on Caspian shelf development, signed with world's major oil

companies, to bring some $15 billion worth of investment to Azerbaijan, reported Itar-Tass. A new international consortium, led by US Amoco and Unocal, to develop the Dan Ulduzu and Ashrafi sites in the Caspian, will add to the existing three before 1997, according to the president.

Collins arrived in Yerevan from Baku today, and will travel to Tblisi on Friday

Georgia Producing Yak Aircraft

· The Tbilisi aircraft plant has begun manufacturing Yak-58 aircraft, reported the Economist Intelligence Unit (EIU) last week. The 6-seat model was developed by Russia's Yakovlev design bureau together with Georgian designers.

The aircraft will be priced at $200,000 to $230,000. In addition to the Yak-58 passenger aircraft, the plant can manufacture its cargo, ambulance, and patrol models. The plant's capacity is 200-250 units a year.

Rosneft Joins Caspian Pipeline Group

· Russian state-owned oil company Rosneft has signed a joint venture deal with Royal/Dutch Shell Group's exploration unit to invest in the Caspian Pipeline Consortium (CPC), reported today's Wall Street Journal (WSJ). The CPC plans to build a 930-mile oil export pipeline from Kazakhstan's Tengiz oilfields to the Russian Black Sea port of Novorossiisk by the year 2000. US Chevron and Mobil are developing the Tengiz fields.

The Consortium is 50-percent owned by the governments of Oman, Russia, and Kazakhstan, while the other 50 percent is owned by US, Russian, Italian, Kazakh, and British oil companies.

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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