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

Monday, November 25, 1996

Russian Federation

Politics

Russia-Chechnya Agreement Signed

· Over the weekend, Russia and Chechnya made more progress toward peace. The two sides signed an agreement governing their relations until new parliamentary elections are held in Chechnya on January 27, and Russia agreed to pull its remaining troops out of the separatist republic. Russian Prime Minister Viktor Chernomyrdin and Chechen rebel premier Aslan Maskhadov on Saturday signed an agreement regulating economic relations between Russia and Chechnya, aimed at promoting peace in the region during the period of political and economic reconstruction. The temporary agreement pledges Russian help in rebuilding Chechnya and obligates the Chechen leadership to protect oil pipelines and refineries from attacks and theft.

In a policy reversal, Russian President Boris YELTSIN signed a decree ordering the withdrawal of the last two Russian military units (101st Interior Ministry brigade and 205th Defense Ministry motorized infantry brigade) from Chechnya before the planned elections. A concrete date for the pullout was not given. The decree aims to lessen anti-Russian sentiment in the region, demilitarize Chechnya, and pave the way for regional presidential and parliamentary elections. Previously, Russian officials contended that it was necessary to retain troops in the republic indefinitely to combat crime.

Duma Threatens Impeachment over Chechnya

· Opposition legislators in the Russian State Duma have denounced the newly-signed Chechen-Russian agreement and the presidential decree on a Russian pullout from Chechnya as violations of the Russian constitution and threatened to impeach the president. Communist Duma chairman Gennady

Seleznyev told reporters today that an urgent parliament meeting has been called for Friday which will consider whether to begin impeachment proceedings and hold a vote of no confidence in the government. SELEZNYEV said that Chechen rebels should have been disarmed before Russian troops left Chechnya and charged that the withdrawal will lead to an "unconstitutional breakup of Russia." The parliament seems to feel that the military withdrawal is tantamount to the abandonment of the republic and tacit acceptance of its desire for independence.

Despite his angry words for the president, SELEZNYEV is unlikely to go forward with his impeachment attempt. The long, difficult impeachment process is stacked in the president's favor and it is unlikely that the Duma has a constitutional leg to stand on. Russian television reported today that the constitutional court has already determined that the agreement and decree do not violate the constitution. According to Intercon sources, SELEZNYEV held a meeting today with Security Council chairman Ivan RYBKIN and complained that without Russian troops in Chechnya the mafia will flourish, taking over control of the republic and threatening the Russian economy. RYBKIN reportedly replied that even without the Chechens, organized crime already controls 50 percent of the Russian economy.

Communist Leads in Kurgan

· In Sunday's gubernatorial elections in Kurgan Oblast, incumbent Anatoly Sobolev fared badly, receiving just over 13 percent of the vote. The other two

Today's News Highlights

Russia

Chernomyrdin in France/Poland

US - No Supercomputers

Nuclear Reactors for Iran

Scientific-Atlanta & Technocom

Tax Police Target Chem. Co.

Transcaucasia & Central Asia

Disputed Elections in Abkhazia

Disputed Elections in Karabakh

Pepsico Expansion in CIS

Cable TV in Almaty

Politics-Economics-Business

Page

Monday

November 25, 1996

Intercon's Daily

competitors, Communist-backed local parliamentary speaker Oleg Bogomolov (who got 41 percent) and businessman Anatoly Koltashev (with 32 percent), will face each other in a runoff election, scheduled for December 8.

Chernomyrdin to France and Poland

· Russian Prime Minister Viktor Chernomyrdin began a four-day trip to France today to participate in the second session of the Russo-French bilateral commission on economic, scientific, and technical cooperation (Chernomyrdin-Juppe Commission). Trade turnover between Russia and France for the first nine months of this year totaled to $2.1 billion, an increase of 12 percent from the same period of 1995, reported Itar-Tass. Russian exports to France grew eight percent to $1.16 billion, and imports increased by 19 percent to $940 million.

French investments in the Russian economy total about $280 million. According to the Russian Trade Ministry, there are currently some 600 Russo-French joint ventures with fixed assets of over $500 million. These joint ventures are mostly engaged in providing commercial, consulting, information, or other services to Russian and foreign firms.

Chernomyrdin will leave France on Thursday for Poland, where he will attend, together with his Polish counterpart Wlodzimierz Cimoszewicz, a ceremony on the outskirts of Poznan to put into operation the Polish section of a new gas pipeline network running from Russia to Western Europe.

Economy

Ruble = 5,496/$1.00 (NY rate)

Ruble = 5,497/$1.00 (CB rate)

Ruble = 5,492|5,502/$1.00 (buy|sell rates)

New USAID Moscow Chief on 1997 Program

· The US Agency for International Development (USAID) will continue to finance projects in Russia in the field of privatization, healthcare, and cooperation with non-governmental and public organizations in 1997, said newly-appointed head of the USAID mission in Moscow Janet Ballantyne, according to Itar-Tass. Ballantyne said a total of $4 billion was disbursed to the countries in Eastern Europe and the CIS from 1992 through 1995. Unfortunately, allocations for these purposes have dwindled to no

more than 10-15 percent of the resources assigned in the federal budget to the USAID for projects in Eastern Europe and the CIS. Currently, the annual volume of resources provided to the USAID amounts to 0.5 percent of the US annual budget.

US Rejects Supercomputer Sale to Russia

· The US government has rejected a request by two US companies to sell supercomputers to research institutes of the Russian Nuclear Energy Ministry, reported today's Journal of Commerce. Export licenses for high-speed computers made by IBM and Hewlett-Packard faced heavy opposition from the US Congress and the General Accounting Office (GAO), but were denied by the CLINTON Administration after Russian Nuclear Energy Minister Viktor MIKHAILOV admitted they could be used to simulate nuclear weapons tests.

Russia Sends Nuclear Reactors to Iran

· Iran announced on Saturday that Russia has delivered nuclear reactors to Iran for a nuclear power plant in the southern port city of Bushehr, reported Xinhua from Tehran. "There are no problems with Russia regarding the Bushehr nuclear power plant and the project will be completed on time. Everything is going according to schedule," Iranian Foreign Minister Ali Akbar Velayati told reporters. The first unit of the Bushehr nuclear plant, a joint project between Iran and Russia, is expected to be completed by the year 2000.

Business

Scientific-Atlanta to Invest $14 Million

· Scientific-Atlanta, Inc. announced today a $14 million contract to provide Skylinx™ and IDR satellite telephony equipment and accompanying earth stations to Technocom, a Moscow-based supplier of international satellite services, said a company press release. The new contract follows the $12 million Phase 1 agreement to bring telecommunications infrastructure to Russia, signed between the two companies in 1995.

Technocom, majority-owned by PLD Telekom Inc. of Moscow, has procured the new satellite network systems for its service operator in Russia, Teleport-TP. Teleport-TP in partnership with the regional Elektrosvyaz (PTT) organizations, will be providing high capacity intercity telecommunications trunks

When you need to know it as it happens

Politics-Economics-Business

Page

Monday

November 25, 1996

Intercon's Daily

between Russia's major cities using IDR (intermediate data rate) technology. Thin route traffic between smaller cities will be supported in a full mesh configuration using SCPC/DAMA (Single Channel Per Carrier/Demand Assigned Multiple Access) technology. Voice, data, and facsimile services will be provided. Teleport-TP will also provide access to its Internet gateway in Moscow to other Russian cities via high-speed data satellite circuits. Technocom will contract with the individual Elektrosvyazs to install satellite earth stations to provide these services over the INTELSAT 704 satellite.

"Our partnership with the Electrosvyazs for providing intercity long distance trunking will complement Rostelekom's digital national public network on traffic routes where digital service is not currently available. This additional capability will enhance the Russian nationwide telecommunications network," said Teleport-TP CEO Dr. Boris Antoniuk.

Technocom's business plan currently calls for 11 new 7_meter earth stations, each supporting 3-5 IDR inter city satellite trunks/carriers and 30 SCPC/DAMA channels per site. In addition to the new equipment for these sites, Scientific-Atlanta will provide Skylinx SCPC/DAMA and IDR equipment to upgrade seven Phase 1 sites and an existing earth station in Kazan to match this new configuration. This expansion will result in 19 newly equipped regional gateways/transmit earth stations in the largest cities of Russia. A major expansion of the Scientific-Atlanta 18_meter hub earth station in Moscow will also be implemented.

Installation and program management services will be provided by Scientific-Atlanta in the first quarter of 1997, with sites becoming operational through the second quarter. Phase 2 cities for the new 7_meter earth stations for Technocom include Yakutsk, Yekaterinburg, St. Petersburg, Sochi, Nizhny Novgorod, Astrakhan, and Kazan. Teleport-TP supplies dedicated network services to private businesses and government organizations throughout Russia. These services commenced as part of the first phase of the satellite network implementation in 1996.

Lukoil Refinery Modernization Project

· US and Russian companies celebrated the completion of a joint project to modernize the Lukoil refinery in Perm on Thursday. Carl Bartoli, presi

dent and CEO of Foster Wheeler USA Corp. (FWUSA), and Vagit Alekperov, president of Russian oil conglomerate Lukoil, attended dedication ceremonies for the upgraded refinery, said a Foster Wheeler press release. FWUSA received a contract in 1993 for basic engineering incorporating Foster Wheeler's proprietary SYDEC(SM) Delayed Coking Technology for the upgrading of the Perm delayed coker unit. The new coker, developed by FWUSA, the Perm refinery, and other US suppliers, is expected to serve as a model for a new generation of delayed coking units in Russia. The new coker has been in operation since September 28 of this year.

As a result of its initial performance, FWUSA was later awarded two additional contracts by the Perm refinery in 1994 and 1995 for the supply of state-of-the-art equipment for the coking unit.

Tax Police Seize Chemical Co. Assets

· Russian tax police have seized property from the Nitron chemical plant in Samara for non-payment of taxes. The company owes 56 billion rubles, half to the federal and half to the regional budget, a local Federal Tax Police official told Itar-Tass. The plant makes fiber, chemical threads, and a number of chemical compounds used by various industries, including the defense sector. The seized property includes sports and health centers, two workshops, which were shut down in the 1950s and the 1970s, and several buildings that are not used by the plant. The plant's vehicles were mortgaged earlier to pay off Nitron debts to a private company.

Total current tax arrears of Volga Oblast enterprises are one trillion rubles, said the official. Measures against the debtors have resulted in payment of 542 billion rubles, and another 20 billion rubles were confiscated. Nitron has become the 528th enterprise, whose property was seized.

EBRD Studies Novobirsk Airport Renovation

· The European Bank for Reconstruction and Development's (EBRD) operation committee is examining a $27 million project to modernize Novosibirsk's Tolmachevo airport, reported RIA Novosti today. The EBRD is considering extending a $20 million credit to help bring the airport in line with international standards. The project is expected to begin in April 1997. Project funding will depend on Russian government guarantees for loans.

When you need to know it as it happens

Politics-Economics-Business

Page

Monday

November 25, 1996

Intercon's Daily

Transcaucasia and Central Asia

Abkhazia Holds Disputed Elections

· Georgia's separatist republic of Abkhazia went ahead with elections for its 35-member parliament on Saturday, disregarding international opposition, as well as protests in Georgia and violence along its border. About 80 percent of Abkhazia's electorate of 219,000 voted in the weekend poll, according to preliminary results, cited by Abkhazpress.

The UN and European Union do not recognize Abkhazia and called on authorities to cancel the elections. The Russian Foreign Ministry issued a statement condemning them. "This action by the Abkhaz side violates general norms, human rights, and basic freedoms and completely ignores international opinion," Interfax cited the Ministry as saying.

Georgia argues that elections should not be held until an agreement with Georgia on Abkhazia's political status is reached and the 250,000 Georgian refugees are allowed to return to Abkhazia. Georgian President Eduard Shevardnadze organized a referendum, also held on Saturday, among ethnic Georgian refugees from Abkhazia to determine whether they support the Abkhazian leaders' decision to hold parliamentary elections. The Georgian government has called the elections illegal because refugees are not allowed to participate. "This [vote] is an attempt to grant legitimacy to the results of ethnic cleansing," SHEVARDNAZE told Russian Public Television (ORT).

A total of 182,000 refugees from Abkhazia, are living in Tblisi, Kutaisi, Zugdidi, Batumi, and other Georgian cities, while another 28,000 live in Russia, and some 50,000 are in other former Soviet republics and Turkey. ORT reported today that 99 percent of the refugees from Abkhazia rejected the results of Sunday's parliamentary elections.

Azeris Protest Karabakh Pres. Election

· Thousands of Azeris protested in Baku as the

separatist republic of Nagorno-Karabakh re-elected Robert KocharYan by an overwhelming margin on Sunday. Azerbaijan does not recognize the sovereignty of Karabakh, an ethnic Armenian enclave within Azerbaijan. A civil war between the two sides was halted in 1994 with a cease-fire agreement, but a political settlement has proved elusive.

Some Azeri protesters argue that refugees displaced from Karabakh during the conflict were not able to vote, according to Itar-Tass. The refugees amount to one third of the former Karabakh population. Other protesters view the elections in Karabakh as an illegal action aimed at cementing the Armenian occupation of 20 percent of Azeri territory during the war, and illegitimately presenting itself as an independent political entity.

Pepsi to Open Six Bottling Plants

· Pepsi International Bottlers announced Friday it plans to set up six new bottling plants over the next two years in Almaty, Kazakhstan, and the Russian cities of Yekaterinburg, Vladivostok, Novosibirsk, Nizhny Novgorod, and Samara, reported Dow Jones. The plants are expected to create 5,500 new jobs. Earlier this year, Pepsi International announced plans to invest $350 million in Kazakhstan and Russia over the next five years. Pepsi International is a joint venture between US companies Pepsico and New York-based Leucadia National Corp.

Cable TV in Almaty

· US-Kazakh joint venture Alma TV has announced the launch of the first cable TV station in Almaty, reported OMRI, citing Thursday's Kazakhstanskaya Pravda. About 2,000 cable television sets with more than 30 channels will be installed during the first trial. Alma TV was established in 1994 by US International Telcell and a Kazakh partner. The company offers satellite TV retranslating service in Almaty. A first attempt to introduce a cable system in Almaty in 1992 failed due to low market demand, said OMRI.

Daily Report on Russia & the FSU will not be published on Thursday and Friday, November 28_29, for Thanksgiving.

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

available for non-profit institutions.

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.

When you need to know it as it happens

Politics-Economics-Business

Page