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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, January 24, 1997

Russian Federation


Yeltsin Return Date Uncertain

· Chief Russian presidential spokesman Sergei YASTRZHEMBSKY said today that although President Boris YELTSIN has a "burning desire" to return to work, he has still not fully recovered from pneumonia. He offered no details of the current state of the president's health, nor did he predict how long it would be before YELTSIN returned to the Kremlin full-time. The president made a surprise showing at his Kremlin office on Wednesday, two days after being released from the hospital, but then returned to his dacha outside Moscow to the disappointment of some political observers.

Also today, YELTSIN, at the suggestion of four CIS presidents, decided to postpone indefinitely the Moscow summit of CIS heads of state, scheduled for the end of this month. The CIS summit delay is an indication that YELTSIN may have a good deal more recuperating to do and will contribute further to rumors of his deteriorating fitness.

Former Amb. Pickering on Yeltsin Health

· Former US Ambassador to Russia Thomas PICKERING expressed concern over the possible effects of Russian President Boris YELTSIN's continuing poor health on the political situation in Russia, according to Voice of America (VOA). Speaking at the Women's National Democratic Club in Washington on Thursday, PICKERING described YELTSIN's health as tenuous and suggested that the president's inability to carry out his duties will have a negative affect on US-Russian relations.

PICKERING predicted that if new presidential elections are held in Russia, retired general Aleksandr LEBED would be one of the strongest contenders,

but he voiced reservations about him. "General LEBED is a man who is, in my view, still progressing on his own political journey, someone who has not yet finalized or fixed his thoughts in many key areas, including the critically important question of economics," PICKERING is quoted by VOA as saying.


Parliament Passes 1997 Draft Budget

· The Russian State Duma today voted 245-90, with 17 abstentions, to approve the 1997 draft federal budget on its fourth and final reading. The passage of the budget is a major victory for Viktor CHERNOMYRDIN's government. The budget still must be approved by the Federation Council (upper house of parliament), but members have indicated that they will endorse it, despite disagreements over some of its provisions.

The Duma this week debated whether YELTSIN is healthy enough to govern the country, but postponed a vote on the matter. Early today, Communist legislators discussed trying to scuttle passage of the 1997 draft budget during its fourth reading today in an effort to force YELTSIN to step down, but eventually decided against it.

Russians Forge New $100 Bill

· St. Petersburg police have arrested three men trying to pass off forgeries of the new $100 bill, introduced by the US treasury in March 1996 and touted as virtually impossible to

Today's News Highlights


Russia-De Beers Deal?

Trump to Invest in Moscow?

UNECE Report on Investment

Gazprom Receives Huge Loan

European Republics

New Moldovan Cabinet

Lukashenko Fires Top Aide

Litho. FinMin Offers Resignation

Marathon Out of Ukraine

Updates Chechnya




January 24, 1997

Intercon's Daily

Ruble = 5,613/$1.00 (NY rate)

Ruble = 5,618/$1.00 (CB rate)

Ruble = 5,613|5,623/$1.00 (buy|sell rates)


Trump to Invest in Moscow Hotels

· US hotel magnate Donald TRUMP is seeking investment opportunities in Russia and is near agreement on a plan to restore the Hotel Moskva in central Moscow, reported the Associated Press (AP). Moscow's first deputy major Vladimir RESIN told Interfax on Thursday that an agreement with TRUMP's representatives on the Moskva is "practically reached." TRUMP reportedly said he could restore the dilapidated hotel in 18 months.

RESIN, who is in charge of housing and construction for the city government, said that TRUMP is also eyeing the Rossiya Hotel, but this Soviet-era monstrosity seems a less likely candidate for an overhaul. TRUMP visited Moscow in November 1996 and reportedly got a lavish reception. He currently owns and develops properties in New York and casinos in New Jersey, but has no overseas holdings or development projects.

Incidentally, TRUMP himself met with Russian presidential hopeful Aleksandr LEBED at Trump Tower in New York on Wednesday and discussed TRUMP's desire to build "something major" in Moscow, said Thursday's New York Times. Following the meeting, TRUMP said he had accepted an invitation to visit Russia from LEBED, describing him as "terrific."

UNECE Report on Investment & Energy Eff.

· The Geneva-based UN Economic Commission for Europe (UNECE) has published new guidelines for investors to help improve energy efficiency in Russia. Russian experts estimate that up to 40 percent of current national energy use is wasted, reported Xinhua on Wednesday, citing a UNECE press release. "To fight against this waste, important new legislation has been passed in the Russian Federation to enhance energy efficiency," it said.

In its guidelines, the UNECE described the new policy measures and the financing methods created in the Russian legislation in order to provide assistance in preparing loan projects in the country. The guidelines provide foreign investors with important new information on recently developed financing mechanisms, investment guarantees, government decisions, and laws and regulations governing en

Sept Oct Nov Dec Jan

counterfeit, reported Reuters. The men, arrested on January 6 outside of St. Petersburg's main department store, were carrying 14 false $100 bills and another $6,000 worth was found after a search of one of the detained men's homes. Two of the men had criminal records, one was arrested for murder and the other for illegal foreign currency operations.

"Experts are now trying to establish how and where these bills were made because their quality was very high and practically all levels of defenses were reproduced on the fake bills," Marina KOZLOVA, a spokeswoman for the St. Petersburg police anti-organized crime division told Reuters. According to a spokesperson from the Interior Ministry's economic crimes division in Moscow, this is the first arrest for forged new $100 bills.

However, Lithuanian police said on Thursday that they had arrested two people with counterfeit new $100 bills, reported Interfax.

Russia-De Beers Deal Expected Soon

· Russian Deputy Finance Minister German KUZNETSOV said Thursday that a presidential decree and other documents on a long-awaited trade deal between Russia and South African diamond company De Beers were ready for signing, reported Interfax. He did not, however, indicate a likely signing date. De Beers ceased buying Russian diamonds on January 1 for lack of a new agreement.

When you need to know it as it happens




January 24, 1997

Intercon's Daily

ergy efficiency investments in Russia. "The guidelines should reduce costs for investors by providing information needed for the due diligence of investment projects together with two worked examples of how new financing mechanisms would be applied in the Russian market," said the UNECE.

By the end of 1996, two World Bank loan projects for energy efficiency investments had been approved. The World Bank's Russian Energy Efficiency Project provides $120 million for 10 cities, six of which are energy efficiency demonstration zones of the UNECE Energy Efficiency 2000 Project. The second loan is the Enterprise Housing Divestiture Project aimed at improving the energy efficiency in housing and municipal buildings for $300 million in six cities, one of which is a demonstration zone.

Gazprom Gets Loan for Yamal Pipeline

· Russian gas monopoly Gazprom has been approved for a $2.5 billion syndicated loan from Germany's Dresdner Bank Group that will help finance a $24 billion pipeline from western Siberia's Yamal Peninsula gas fields to western Europe, reported today's Financial Times. The new loan will help pay for the construction of a 4,200 km pipeline from Yamal to Frankfurt/Oder on the Polish-German border, which is expected to begin phased production in 1998.

Gazprom also made progress this week on another pipeline deal. The Russian company signed an agreement with Finland's Neste Oy to set up a joint venture to implement a north European pipeline project, said Reuters, citing a Neste statement. Planning and research for the project will begin this year and the project is expected to be implemented in 2005, it said.

In related news, Gazprom has become the first Russian company ever to be ranked on the Financial Times' annual list of the top 500 companies in the world. Gazprom appeared in the 421st place of the FT Global 500, which rates companies by market capitalization, published in today's edition. Gazprom was estimated to have a market capitalization of $7.93 billion.

In addition, six Russian companies were placed in the first 10 slots of the Financial Times' list of the top

50 eastern European companies by market capitalization. Gazprom was first, followed by oil giant Lukoil and electric utility Unified Energy Systems (UES) as numbers two and three, while Mosenergo took fifth place, Surgutneftegaz seventh place, and ninth place went to telecommunications giant Rostelekom with a market capitalization of $3.037 billion. The Times cautioned, however, that it is difficult to determine the true worth of huge, largely state-owned Russian companies.

European Republics

New Moldovan Cabinet Being Formed

· The Moldovan parliament this week discussed the composition of a new Cabinet for the country and newly-appointed Prime Minister Ion Chubuk will soon submit the list of government members for approval. The new premier is expected to reduce the number of personnel and departments in the government during the change-over.

According to Itar-Tass sources, the new cabinet will comprise almost one third of ministers from the former government of Andrei Sangheli including Foreign Minister Mikhail Popov, Finance Minister Valery Kitsan, Transport Minister Vasily Iovv, and Communications Minister Ion Kasyan. Also, former deputy prime minister Ion Gutsu and deputy finance minister Valentina Badrazhan will be invited to fill the deputy prime minister positions and former deputy foreign minister Aurelian Danile will become Minister of Culture.

Moldovan Ambassador to Belgium Tudor Botnaru was reportedly chosen to head the secret services. Botnaru was dismissed from the post of Moldovan KGB chairman in August 1991 by former president Mircea Snegur for failing to organize a resistance to the Moscow coup plotters.

In addition, Moldovan communist party leader Vladimir Voronin will become deputy prime minister in charge of the Interior Ministry. He was dismissed from that post in 1990 for suppressing riots of nationalists in Kishinev. The Defense Ministry will be for the first time headed by a civilian, Moldovan Ambassador to Russia, historian Valery Passat.

The new cabinet will include for the first time a ministry for relations with the Commonwealth of

When you need to know it as it happens




January 24, 1997

Intercon's Daily

Independent States (CIS). It will be headed by former deputy prime minister Valentin Kunev. Another former deputy prime minister Valery Bulgar was offered the post of agriculture minister.

Lukashenko Removes His Top Aide

· Belarus President Aleksandr LUKASHENKO signed a decree this week dismissing Vladimir Zametalin, the deputy head of the presidential administration, and transferred him to the post of head of the state press committee, reported Reuters.

ZAMETALIN was a close aide to LUKASHENKO who was instrumental in getting him elected in 1994 and promoting his policy of rapid integration with Russia and the passage of a controversial constitutional referendum last November.

Litho. Finance Min. Offers Resignation

· Lithuanian Finance Minister Rolandas MATILIAUSKAS on Saturday offered to resign over allegations that he wrongfully received a loan from a commercial bank which later went bankrupt. The minister handed a resignation letter to Prime Minister Gediminas VAGNORIUS, saying he wanted to "end political speculation" and avoid damage to the Lithuanian state, reported Reuters. The premier will consider the offer and then hand it to President Algirdas BRAZAUSKAS.

Marathon Pulls Out of Ukraine

· US oil company Marathon announced yesterday that it will pull out of Ukraine after a year of preliminary work on the possibility of exploring for natural gas in the country, reported today's Financial Times. Company spokesman Bill RYDER told Reuters that after a year's work there were still too many unanswered questions about issues such as licensing, gas marketing, security of investment, and tax and legal stability. The company had reportedly been considering investments of up to $200 million in two fields in the Poltava region in conjunction with state oil company UkrNafta and PotalvaNaftaGaz. Despite last year's preliminary agreement with these compa

nies, Marathon could not get a joint-production licensing agreement in place. "They're having problems getting enabling laws to get things to work," Reuters quoted RYDER as saying.


Chechnya: Chechen president Zelimkhan YANDARBIYEV on Thursday renamed the capital of the republic after its late president Dzhokhar DUDAYEV. Grozny will now be known as Dzhokhar-Ghala, which means City of Dzhokhar. The renaming announcement, which was made at a ceremony in the middle of Grozny to mark DUDAYEV being given the posthumous title of Generalissimo by the Chechen parliament earlier this week, was unexpected. The move was apparently an attempt by YANDARBIYEV to gain support in Monday's presidential elections.

Out of a field of 16 candidates, former Chechen rebel chief commander Aslan MASKHADOV is seen as the front-runner, but rebel field commander Shamil BASAYEV, top rebel propagandist Movladi UDUGOV, and YANDARBIYEV are also considered to be contenders. Russian officials likely favor MASKHADOV, who negotiated the cease-fire with former Security Council secretary Aleksandr LEBED that ended the war and is considered reasonably cooperative. The worst possible scenario for Moscow would be the election of BASAYEV, who led the June 1995 raid on the city of Budyennovsk in Stavropol Krai and is adamantly opposed to reconciliation with Russia. If no one candidate receives over 50 percent of the vote on Monday, a runoff will be held in February.

Some 75 election monitors from the Organization for Security and Cooperation in Europe (OSCE) arrived in Moscow today en route to Chechnya to observe the elections. In addition, Chechen Interior Minister Kazbek MAKHASHEV told RIA Novosti today that more than 250 journalists had already arrived in Chechnya to cover Monday's parliamentary and presidential elections. Security in the republic has been stepped up considerably.

Paul M. Joyal, President, Editor in Chief Clifton F. von Kann, Publisher Ellen Shapiro, Managing Editor

Rebecca Martin, Charles Lawrence, 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