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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Wednesday, November 20, 1996

Russian Federation


Yeltsin Takes Post-Op TV Stroll

· Russian Television (RTV) today showed footage of President Boris YELTSIN taking a walk outside the Central Clinic Hospital with his wife and granddaughter in his first TV appearance since undergoing a quintuple heart bypass on November 5. Chief Kremlin surgeon Sergei MIRONOV announced today that YELTSIN's stitches had been removed and he could be released from the hospital by the end of the week. "I am ready for battle," YELTSIN is quoted by Interfax as saying.

Israel Clears Up Berezovsky Citizenship

· Israel's Ambassador to Russia Aliza Shenhar officially announced today that Russian Security Council deputy secretary Boris Berezovsky does not have Israeli citizenship, reported Itar-Tass. Reports that BEREZOVSKY had dual Russian-Israeli citizenship recently caused a huge uproar in light of his high-level security position.

Berezovsky did not directly deny he held Israeli citizenship, but recently said he had asked Israeli authorities to strip him of it and he was no longer an Israeli citizen. Shenhar did not explain whether Berezovsky was stripped of citizenship at his own request or whether it had never been granted.

Dep. Minister Fired for Tax Evasion

· Russian Prime Minister Viktor CHERNOMYRDIN said on Tuesday that he will dismiss Vadim KISIN, deputy minister for CIS relations, for tax evasion, reported Reuters. "Tomorrow he will be relived of the post he occupies for concealing income and non-payment of taxes," said the premier following a meeting of the temporary extraordinary tax commission. CHERNOMYRDIN was quoted as say

ing that undeclared income and hidden wealth were "a real black hole" for funds that should go to the government budget.

G-8 Transport Anti-Terrorism Meeting

· US Secretary of Transportation Federico Pena announced today that security officials representing the Group of Seven industrialized nations and Russia will meet next spring in Washington to improve ground transportation anti-terrorism activities, said a DOT press release. "More than ever, transportation systems are being singled out as targets of terrorism," said the Secretary, stressing the need for improved international consultations on this problem. In 1995, approximately 20 percent of the more than 2,000 identified terrorist acts worldwide were aimed at transportation systems.

The meeting will focus on improving the prevention, investigation, and response to terrorism and enhanced communication among governments. Participants will discuss "an international network for exchanging information and technology to strengthen the global battle to prevent terrorist attacks on land transportation systems," said PENA.

The agreement to hold the conference came at the conclusion of a two-day meeting of land transportation officials from the Group of Seven and Russia in Washington. The participants shared information on land transportation security and ways to reduce the threat of terrorism on transportation systems.

Today's News Highlights


MICEX Goes to Europe

Natural Gas Mtg in London

EBRD Invests in Kuban Bank

European Republics

Luka. Shuns Russian Mediation

Fountain Oil in Ukraine JV

Bentley Software for Latvia

Transcaucasia & Central Asia

Deere Equipment to Kazakhstan

Kazakh-Uzbek Energy Deal




November 20, 1996

Intercon's Daily


Ruble = 5,489/$1.00 (NY rate)

Ruble = 5,491/$1.00 (CB rate)

Ruble = 5,486|5,496/$1.00 (buy|sell rates)

MICEX Goes to Europe

· The Moscow Interbank Currency Exchange (MICEX) today announced plans to install its terminals in Paris and Luxembourg next month to provide foreign companies with the opportunity to deal securities on the Russian market, reported Itar-Tass. MICEX President Aleksandr Zakharov also told an international conference in Moscow that other plans to plug into the international financial network include joint projects with the Budapest Currency Exchange and the Chicago Oil Exchange. However, the first priority is networking Russian exchanges throughout the country. Over 1,000 remote terminals are to be installed in 1997 to allow transactions with over 50 financial instruments, said Zakharov.

Oil Exports Up in Jan.-Sept.

· Russian crude oil exports in the first nine months of 1995 totaled 94.5 million tons with a value of $11.5 billion, reported Itar-Tass Express weekly, citing Trade Ministry figures. Oil exports accounted for 18 percent of all export revenues during the January-September period, and exceeded exports during the same period in 1995 by 3.9 percent. The average price for a ton of oil was $121.3. The bulk of oil shipments (77 million tons) went to countries outside of the CIS. Oil exports to the CIS declined by nine percent during this period. The average price of a ton of oil delivered to CIS countries was 40 percent below the price of oil exported to the West.

Gazprom Featured at London Conference

· Over 200 representatives of Western companies, international financial institutions, and Russian parliament and government members discussed the prospects for a unified energy system for Europe at a conference, called Natural Gas Trade and Investment Opportunities in Russia, which ended in London on Tuesday.

Russian gas monopoly Gazprom board member Aleksandr SEMENIAKO hailed the company's October sale of 1.15 percent of its equity to foreign investors as a success, reported Dow Jones. The offer was 4.5 times oversubscribed with half the

applications from the US and half from Europe, he said. SEMENIAKO also said that Gazprom had made the right decision to "ring fence" domestic and foreign equities, with stock in the hands of foreigners protected from political and tax risks. On Tuesday afternoon, SEMENIAKO and other Gazprom officials were expected to meet executives from the London Stock Exchange (LSE), said Dow Jones. Gazprom is the first Russian company to be listed on the LSE.

Gazprom head of finance Mikhail DOKUCHAEV told the meeting that Gazprom is owed some 50 trillion rubles (about $10 billion) by its creditors. However, he also called 1996 a "watershed year" for Gazprom as domestic debts have stabilized and payments owed by former Soviet republics, particularly Ukraine, Belarus and Moldova, have fallen considerably.

EBRD to Invest in Krasnodar Bank

· The European Bank for Reconstruction and Development (EBRD) decided to invest $2.5 million in the Kuban Investment Bank, reported Itar-Tass, citing an EBRD spokesman. The Kuban Investment Bank (KIB) is based in Krasnodar, the capital of southern Russia's Krasnodar Krai. The EBRD official told Itar-Tass that the Cyprus bank has a major stake in the KIB. The Kuban bank is expected to grow into a financial center to handle foreign investment in the territory's economy.

European Republics

Lukashenko Shuns Russian Mediation

· Russian attempts to mediate in the political conflict in Belarus failed today when President Aleksandr LUKASHENKO rejected an invitation for talks in the Russian city of Smolensk. Russian President Boris Yeltsin spoke by telephone today with Lukashenko, who insists on holding a referendum to increase his powers on Sunday, and with Belarus parliamentary speaker Semyon Sharetsky, who has begun impeachment proceedings against the president. Sharetsky agreed to attend talks in Smolensk along with Russian Prime Minister Viktor CHERNOMYRDIN and the speakers of both houses of parliament. But LUKASHENKO aides said that the president had a very busy schedule and would not travel to Russia.

SHARETSKY has said he will stop the impeachment proceedings, if LUKASHENKO cancels the referen

When you need to know it as it happens




November 20, 1996

Intercon's Daily

dum, but the president is standing firm. On Tuesday, he told a rally of his supporters in the city of Borisov that, "The people gave me power, and I will not surrender it to adventurists."

Today in Minsk, both opponents and supporters of LUKASHENKO rallied in the town square, according to Russian Public Television (ORT).

Belarus Prime Minister Mikhail Chigir and Labor Minister Alexander Sosnov offered to resign on Monday to protest the president's standoff with the parliament. Lukashenko accepted the resignations and appointed First Deputy Prime Minister Sergei Ling as acting Prime Minister. Speaking on local television, Lukashenko said he was "surprised and outraged" by Chigir's resignation. "This is not the first treachery [I have seen] but time will be our arbiter," he noted. Today's Kommersant-Daily said it received unverified information that Ling had declined to perform the duties of premier and also tendered his resignation. The paper said it could not confirm this information because the government phones in Minsk are dead.

The US Department of State issued a statement on Monday saying that it is clear that LUKASHENKO has exceeded his authority in restricting the opposition. France, Germany, Britain, and Italy have lodged protests through their ambassadors in Minsk over what they believe is an illegal referendum.

German legislator Karsten VOIGT, who heads the North Atlantic assembly of parliamentarians, has called LUKASHENKO's behavior illegal, undemocratic, and sometimes crazy, according to Voice of America. International financial institutions already suspended assistance to the ailing Belarus economy, and LUKASHENKO's authoritarian actions are causing the further isolation of the country.

In the face of growing opposition, LUKASHENKO is single-mindedly moving forward with his autocratic ambitions. The protests of the opposition, as well as several Belarussian institutions, the loss of support of CHIGIR and SOSNOV, the apparent, if unstated, disapproval of Russia, and the open criticism of US and western European governments have left him undeterred. Despite all the resistance to his plans, LUKASHENKO remains popular among the elderly

and people in the countryside and the referendum is expected to pass. His strict control over the media and information flows in the country has helped ensure its success.

Fountain Oil JV with Ukranafta

· Houston-based Fountain Oil announced on Monday that it has formed a joint venture with Ukrainian state oil company Ukranafta for the further development of the Stinavsky oil field in western Ukraine, said a Fountain press release. The US company will have a 45 percent stake in the venture, with Ukranafta holding 55 percent. Independent reservoir engineers have estimated remaining proven reserves at 14 million barrels.

Fountain has paid $500,000 in cash plus 30,000 of its shares, with another $500,000 and 175,000 shares of stock due upon signing the joint venture agreement. Another 375,000 shares will be turned over when the project reaches production level targets. The Stinavsky oil field currently produces approximately 280 barrels of oil per day.

Bentley Software for Latvian Land Reform

· US Bentley Systems, Inc., announced on Tuesday that the Latvian State Land Service (SLS) has chosen and is using its MicroStation GeoGraphics™ in the country's program to privatize over 65,000 square kilometers of land, said a company press release. The recent land reform legislation inundated the government with over 460,000 claims for restitution of ownership, compensation, and land purchases.

MicroStation GeoGraphics provides a solution to manage this new infrastructure and process these claims. Specifically, the Latvian SLS will use 28 seats of MicroStation GeoGraphics to chart property valuation and taxation, and to create digital soil and sea coast maps. The unique geoengineering capability of MicroStation GeoGraphics will allow the Latvian SLS to establish a streamlined workflow of data collection, storage, and analysis. Image data including Soviet-era maps and aerial photographs will be prepared with MicroStation Descartes™ imaging application.

The Latvian SLS is now converting old paper maps from early in the century through the Soviet era into

When you need to know it as it happens




November 20, 1996

Intercon's Daily

usable digital files, a task also performed on MicroStation. As the country is among the first in Eastern Europe to build such a geoengineering infrastructure, the work could serve as a land privatization model for neighboring governments.

MikroKods, a Bentley value-added reseller, is training the Latvian SLS in the use of MicroStation and MicroStation GeoGraphics. The Latvian SLS now holds over 50 licenses for MicroStation software. Bentley Systems, Inc. is a worldwide leader in engineering software and user services.

Lithuanian Government Steps Down

· Lithuanian Prime Minister Mindaugas Stan-kevicius tendered the resignation of his government to President Algirdas Brazauskas on Tuesday. The government was formed by the Democratic Labor Party, which lost its majority in parliament in the recent elections. The president accepted the resignation, but asked the Cabinet to continue working until a new Lithuanian government is formed.

The two right-wing parties that won the elections signed an agreement today to form a coalition government, reported Reuters. The Homeland Union, led by former president Vytautas LANDSBERGIS, and the Christian Democratic Party will form a government after a new prime minister is approved by parliament in the next 15 says. The premier nominee is widely expected to be Gediminas Vagnorius, of Homeland Union. Vagnorius was prime minister of Lithuania in 1991-1992.

Transcaucasia and Central Asia

Deere Sells Equipment to Kazakhstan

· US Deere & Co. on Tuesday announced the completion of a $114 million agricultural equipment sale to Kazakhstan, said a company press release. The deal includes the sale of 630 combine harvesters, 100 cotton pickers, plus related equipment to the country for delivery during 1997. The sale is the company's second largest agricultural equipment

transaction, following the sale earlier this year of 1,049 combines to Ukraine. The combines for Kazakhstan will be produced at the John Deere Harvester Works in East Moline, IL., while the cotton pickers will be built at the John Deere Des Moines Works in Ankeny, Iowa. Deere & Co. is the world's leading producer of agricultural equipment.

According to Bernard L. Hardiek, president of Deere's Worldwide Agricultural Equipment division, "We are very pleased that Kazakhstan has selected John Deere as the supplier for this very significant equipment order. We know that this state-of-the-art machinery will give Kazakhstani farmers the efficiency, performance and productivity that our customers throughout the world have come to expect and receive from John Deere."

The US Export-Import Bank is providing loan guarantees to Kazakhstan to support the transaction. Loan co-arrangers include Deutsche Morgan Grenfell Inc., New York; ABN AMRO North America, Inc., Chicago; and ABN AMRO Bank Kazakhstan. Lenders include Deutsche Bank AG, New York; ABN AMRO Bank N.V., Chicago; ABN AMRO Bank Kazakhstan; Credit Suisse, New York; and Canadian Imperial Bank of Commerce, Chicago.

Kazakh-Uzbek Energy Deal

· Kazakhstan signed an agreement on Tuesday with Uzbekistan on a debt payment for fuel and gas supplies, reported the Kazakh Telegraph Agency. In the agreement, signed by Kazakh Deputy Prime Minister Dyusenbai Duisenov and Uzbek government officials in Tashkent, the two sides settled on the deadline and form of payment of Kazakh debts. The two sides also agreed upon the further supply of gas by Uzbekistan. This comes as severe gas shortages caused by Uzbekistan's cut in natural gas supply had drawn growing complaints against the government of Kazakhstan. Uzbekistan cut off the supply when Kazakh debts for past supplies reached $676 million. In some regions in Kazakhstan, the gas supply has been cut for several months.

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