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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, January 10, 1997

Yabloko party leader Grigory YAVLINSKY wished YELTSIN a speedy recovery but contended that the president was incapable of ruling the country. "During the seven months following the presidential elections, the president has done nothing to solve the pressing problems. This is what the country's problem is, rather than YELTSIN's health. His time has passed," he is quoted in today's Financial Times as saying.

"Our president is physically unable to work. Politically, he has outlived himself too," former Soviet President Mikhail GORBACHEV told Associated Press Television from his dacha outside Moscow. "We just don't have a president." He said that YELTSIN reminded him of Soviet leader Leonid BREZHNEV in the late 1970s when the Kremlin hid his ailments from the world. "They walk the same way, there is the same difficulty in speaking, the same pretense of working two or three hours a day when actually not real work is done," said GORBACHEV. "I took part in just this kind of sham when I was a Politburo member under BREZHNEV. Such were the rules of the game."

Izvestia columnist Stepan KISELYOV portrayed YELTSIN as unable to lead, despite having recovered from heart surgery. "What is going on? As I see it, the president's return after his long heart illness provided no leadership in the Kremlin."

Moskovsky Komsomolets ran a front-page article today that began: "They fooled us with

Russian Federation


Update on Presidential Health

· Russian President Boris YELTSIN's condition is improving, but there has been no "breakthrough," said the presidential press service today. He is breathing easier and his temperature is normal but it is too early to say when he will leave the hospital, said the brief Kremlin statement. Russian and American doctors who have treated Yeltsin say he should be back at work in 2-3 weeks. Interfax reported today that the CIS summit, scheduled to take place in Moscow on January 17, has been postponed until January 30-31.

Lebed Ready for New Presidential Poll

· Russia's most ambitious politician Aleksandr Lebed told Interfax today that he is preparing for the next presidential elections and plans to "take power [in Russia] by civilized methods." LEBED won some 15 percent of the vote in the first round of presidential elections in June 1996. Last month, he announced the formation of a new political organization, called the Russian People's Republican Party (RPRP), to support his political comeback, particularly his next presidential bid. The new party will meet for the first time in March.

"The whole system I am building now is aimed at winning the next presidential election. I am ready to win the election," Interfax quoted him as saying. Hours after President Boris Yeltsin was hospitalized on Wednesday, Lebed described him as "a sick old person" and called for him to step down.

Meanwhile, more voices have been added to the din questioning YELTSIN's fitness for office and repeating the assertion that no one has been at the helm of the Russian state for some time now.

Today's News Highlights


Chechen Pres. Race Messy

More Energy Subsidies Needed

Aluminum Output in 1996

New Wireless Tech. for Russia

Court Rejects Moskvich Case

European Republics

WB on Ukraine Govt. Corruption

Transcaucasia & Central Asia

More on Murdered American

British Equipment for Uzbek Mill




January 10, 1997

Intercon's Daily

Ruble = 5,590/$1.00 (CB rate)

Ruble = 5,581|5,599/$1.00 (buy|sell rates)

Candidate Shamil Basayev made accusations against several of his rivals this week. At a meeting with his supporters, Basayev accused former deputy prime minister Movladi Udugov and Kutayev, in his capacity as Maskhadov supporter, of being "preachers of Wahhabism and leaders of this movement in Chechnya," said Itar-Tass. Chechnya's mainstream religious movement is Sufism, but extensive attempts to spread Wahhabism, Saudi Arabia's official ideology, have been made in the republic in recent years. In a recent TV interview, BASAYEV said Udugov abused alcohol.

Basayev also charged Yandarbiyev with attempts "to involve former speaker of the Russian Supreme Soviet Ruslan Khasbulatov [an ethnic Chechen] in the political processes in the republic."


More Energy Subsidies Needed for Winter

· A Russian Cabinet meeting on Thursday, chaired by First Deputy Prime Minister Aleksei Bolshakov, decided that the country's energy industry requires an additional two trillion rubles ($358 million) to ensure steady energy supplies this winter, reported Russian television (RTV). The Finance Ministry and Fuel and Energy Ministry were given five days to draft a government decree on extra allocations to the energy sector.

BOLSHAKOV also told the meeting that the nonpayments problem that currently cripples the energy industries and other economic sectors will mean reduced production at nuclear energy plants. Deputy Fuel and Energy Minister Lev RYABOV said the nuclear energy industry needs up to 270 billion rubles to solve its most urgent problems, including the payment of wage arrears. The government's debt to the nuclear sector totals 2.3 trillion rubles, while the sector owes 1.2 trillion to the federal budget. To ensure that nuclear energy workers are paid, Bolshakov said that the government will impose state control over the construction and operation of new nuclear power plants.

Russian Agriculture in 1997: US View

· For the US, the changes in Russia's agricultural imports over the last few years have meant about a 35 percent drop in the value of agricultural exports to

Aug Sep Oct Nov Dec Jan

Boris Nikolaevich [YELTSIN]." It enumerates a series of unfulfilled promises that the Kremlin made about the president's return to work at the Kremlin and finally asks: "Who is leading us?"

Few observers seem to believe, however, that YELTSIN will agree to step down anytime soon or that the current actual leaders of the country—essentially Prime Minister CHERNOMYRDIN and presidential chief-of-staff CHUBAIS, have any plans to relinquish power and call new elections. It is conceivable that YELTSIN will continue to limp along as head of state, working or not, for months or even years. The current prospects for Russia are not positive: a vast, chaotic country continuing to exist without strong cohesive leadership for an indefinite period or attempting to initiate the first major leadership turnover of the independent Russian state.

Rancor Among Chechen Pres. Candidates

· The 16 Chechen presidential candidates have begun verbally attacking each other ahead of presidential elections on January 27. Incumbent Chechen President Zelimkhan YANDARBIYEV dismissed the region's acting prime minister Ruslan KUTAYEV for too actively supporting Aslan MASKHADOV in his bid for the presidency, reported Interfax and Itar-Tass. MASKHADOV formally resigned from the government in order to campaign, as required by law. Itar-Tass quoted a spokesman for KUTAYEV's Chechen National Independence Party as saying that the party's members had quit their government posts in protest of their leader's dismissal.

When you need to know it as it happens




January 10, 1997

Intercon's Daily

Russia from an estimated $2 billion total in 1991, said the Futures World News (FWN) on Thursday. Moreover, the makeup of US exports has shifted from predominantly grain and soy products, which comprised over 90 percent of total agricultural sales in 1991, to mainly livestock products, which in 1996 accounted for over 75 percent of the total.

Russia is the world's largest importer of poultry meat, and poultry accounted for about 45 percent of the country's meat imports in 1996 by volume, with the US capturing a large share. Russia's pork imports have quadrupled since 1992, making it the world's second-largest importer in 1996, after Japan, and the likely number-three market for US pork exports. Russia's beef imports have increased by nearly 25 percent since 1992, placing it third in 1996 global imports, but only around the number-ten market for US beef exports.

The next agriculture-related meeting between US and Russian officials will take place February 6-8 as part of the Gore-Chernomyrdin Commission in Washington. Russian Deputy Prime Minister in charge of agriculture Aleksandr Zaveryukha will be attending. A US visit by Russian Agriculture Minister Viktor Khlystun was postponed in December, apparently because of budget meetings in the Russian parliament. It has not yet been rescheduled.

Govt. Unemployment Service Underfunded

· If Russian industry begins active restructuring in 1997, the number of officially registered unemployed may reach four million, Deputy Labor Minister Marina Moskvina told Itar-Tass on Thursday. Moskvina said restructuring will lead to dramatic cuts in the workforce. If it happens, however, the Federal Employment Service will be unable to pursue a large-scale policy of curbing unemployment because of poor funding, she said.

The Service currently receives only 20 percent of its budget allocation. This is insufficient to cover the cost of unemployment benefits, not to mention expenses for re-training courses, creating new jobs, and saving existing ones. According to MOSKVINA, federal agencies should overhaul their approach to employment policy. The current emphasis on payment of unemployment benefits without additional assistance is "a road to nowhere," she said. She

suggests that the Federal Employment Service help finance, on a competitive basis, projects to create jobs in depressed Russian regions and launch retraining courses for the unemployed, including young and disabled people.

Russian Aluminum Production in 1996

· Russian output of primary aluminum in 1996 was 2.87 million tons, reported Reuters, citing figures released today by the Alyuminiy producers' group. Galina STELMAKOVA, the group's deputy director for development and investments, said the figure was final and replaced an earlier group estimate putting output at 2.79 million tons. She said the group had not completed compiling statistics on exports.

Russian primary aluminum output will increase by 1.5-2 percent in 1997 over last year's level, said STELMAKOVA. Aluminum production in 1995 totaled 2.7 million tons, compared to output of 2.65 million tons in 1994. Aluminum exports were 2.2 million tons in 1995, on par with 1994's level, and were forecast to fall in 1996 as domestic consumption rose. However, Alyuminiy data from December 1996 put Russia's 1996 primary aluminum exports at 2.37 million tons.

Total primary aluminum output in the Commonwealth of Independent States (CIS) in 1996 was 3.16 million tons, including 198,300 tons in Tajikistan and 89,900 tons in Ukraine.


LMDS Tech. Gets Go-Ahead in Russia

· Russia's Ministry of Communications last week invited CellularVision of Russia, a licensee of US CellularVision Technology & Telecommunications (CT&T), to begin offering telephone service via its Local Multipoint Distribution Service (LMDS) wireless technology, said a press release on Thursday CellularVision has been awarded an exclusive, 10-year renewable federal license to begin providing television service, data transmission, and local, long distance, and international telephone service throughout Russia. The Russian government awarded CellularVision a large block of frequency spectrum (2GHz) over which to deliver its service.

With the LMDS technology, broadband signals travel through the air from Earth-based transmitters di

When you need to know it as it happens




January 10, 1997

Intercon's Daily

rectly to flat six-inch-square antennas located on the building or inside the window of a home or business. The delivery system has the ability to handle two-way analog or digital signals for the voice, video, or data simultaneously. The wireless nature of LMDS is significant in a nation like Russia which has insufficient telecommunications infrastructure, with only 17 out of every 100 people having telephone service.

CT&T, the creator of the original LMDS technology, functions as a business cooperative with licensees around the world sharing bulk buying power and using from the company's technology.

Court Rejects Moskvich Bankruptcy

· The Moscow City Arbitration Court on Wednesday rejected the suit of the Federal Bankruptcy Agency to declare bankrupt the Moskvich car company, reported RIA Novosti. Moskvich was one of the first companies threatened with bankruptcy proceedings in October as part of a federal government crackdown on companies with large tax debts. The government alleges that Moskvich (formerly called AZLK) paid less than 10 percent of the taxes it owed in 1996. The court yesterday refused the request of the government to postpone the hearing, instead dismissing the case. Bankruptcy officials have said they will appeal the decision.

Acting plant director Ruben ASATRYAN said a petition asking that the enterprise be rehabilitated rather than declared bankrupt was signed by over 7,000 of the automaker's 14,000 employees and presented to the court. He said that the rehabilitation "will make it possible to start repaying the plant's debt of 2.4 trillion rubles ($430 million) even in half a year's time and to repay it completely in a year-and-a-half."

He added that the plant will pay off a 74 billion ruble ($13.3 million) wage debt by the end of the year. Moskvich stopped production lines early last year, but ASATRYAN said that the main conveyer will be in operation again on January 22.

European Republics

World Bank Cites Ukrainian Corruption

· World Bank director James WOLFENSOHN sent a letter to Ukrainian President Leonid KUCHMA at the beginning of the year criticizing corruption within the Ukrainian government, reported Thursday's OMRI, citing a Wednesday Ukrainian radio report. On the same day, Prime Minister Viktor PYNZENYK noted that international criticism of the problem of Ukrainian government corruption has begun because of increased foreign investment in the country. He said budgetary laws, currently under review, would limit the opportunities for corruption.

Transcaucasia and Central Asia

More on American Killed in Kazakhstan

· Christopher Gehring, the US citizen found dead Thursday in his Almaty apartment, worked for the California-based non-profit media company Internews, and had lived in Kazakhstan for a year and a half, said United Press International (UPI). Kazakh police believe the murder may have occurred because GEHRING interrupted burglars in his apartment, reported Itar-Tass. They say that a PC and other items were missing from the apartment and it had been ransacked.

British Equipment Export to Uzbekistan

· Britain's Export Credits Guarantee Department (ECGD) today announced it had issued its first guarantee for a British export to Uzbekistan since including the market in its coverage in May 1994, reported M2 Communications. The guarantee will support an contract won by Crosrol Ltd. of Halifax to supply, install, and commission replacement machinery for a spinning mill owned by the Tashkent Textile Combinat (TTC), one of the largest mills in the former Soviet Union. Crosrol's equipment should enable TTC to improve the quality of its yarn to international standards, not only for export but also to help reduce Uzbekistan's dependence on imported yarn.

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 1997, Intercon International, USA.

When you need to know it as it happens