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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, March 4, 1997

Russian Federation


Yeltsin Says Chernomyrdin to Stay

· Top Russian presidential spokesman Sergei YASTRZHEMBSKY told reporters today that President Boris Yeltsin and Prime Minister Viktor CHERNOMYRDIN had discussed government personnel changes and the president had approved the premier's recommendations. He did not offer details on the proposed changes, but said they would be announced at a government meeting, following YELTSIN's address to parliament on Thursday.

Update on Cash Theft at Heathrow

· The US Embassy in Moscow on Monday denied reports that the $2.5 million in cash stolen recently at London's Heathrow airport was US government aid to Russia. An Embassy statement said that the US Agency for International Development (USAID) "has no direct government-to-government cash payments" in Russia, instead using letters of credit or electronic transfers to contractors and non-governmental organizations (NGOs), which implement its programs.

Iraqi/German Officials to Moscow

· Iraqi Deputy Prime Minister Tarek Aziz arrives in Moscow today for talks with Russian Foreign Minister Yevgeny Primakov on the UN-imposed trade and economic sanctions and bilateral matters. He will also discuss implementation of several joint oil production contracts, planned to begin after UN sanctions against Iraq are lifted, with First Deputy Fuel and Energy Minister Anatoly Shatalov.

German Economics Minister Gunter Rexrodt begins a two-day visit to Russia today. He will discuss ways to deepen and expand bilateral relations with Kremlin officials as well as inaugurate a German industrial and trade center in Moscow.


Ruble = 5,692/$1.00 (NY rate)

Ruble = 5,686/$1.00 (CB rate)

Ruble = 5,677|5,695/$1.00 (buy|sell rates)

Focus on Crime and Corruption

· During a televised meeting with Russian Prosecutor-General Yuri SKURATOV today, President Boris YELTSIN said he was dissatisfied with the work of the Prosecutor's Office, warning SKURATOV that public anger over the failure to solve high-profile contract murders was growing.

"Behind the overall figures, which I am well acquainted with, are hidden some prominent which the whole of society is seething about," Interfax cited the president as saying. On Sunday, Russians marked the two-year anniversary of the slaying of popular television personality Vladislav LISTYEV.

Senior representatives of the Prosecutor General's Office, the Interior MInistry, the Federal Security Service (FSB), and a number of other agencies held a conference on the prevention of crime, corruption, terrorism, and drug trafficking today in Moscow. The meeting was led by Security Council first deputy secretary Mikhail Mityukov. Each law enforcement agency was asked to offer concrete proposals to increase the efficiency of the country's law enforcement system, reported Itar-Tass. Participants complained about a lack of legislative basis for fighting crime.

Today's News Highlights


Oil Company Privatizations

Ford to Expand in Russia

PLD Moves to the US

European Republics

Belarus Changes View on NATO

Demonstration in Belarus

South Caucasus & Central Asia

Kazakh Oil Min. Abolished

DTR/API Dairy Venture

Kazakh Mins. Fired in Scandal




March 4, 1997

Intercon's Daily

Protest Strike Plans Gain Momentum

· Two more Russian trade unions, representing more than three million workers, have announced that they will join a one-day protest strike on March 27, called by Russia's Federation of Independent Trade Unions. Viktor Mokhnachev, the chairman of the Union of Automobile Transport Workers and Road Economy, told Prime-Tass on Monday that its nearly one million members will join the protest to demand some 1.5 trillion rubles in wage arrears.

In addition, Mikhail TARASENKO, president of Russia's Mining and Metallurgical Trade Union, said that some enterprises in the sector will join the strike, reported Interfax last week. The Union has two million members.

Salary arrears to non-ferrous metals and gold-producing workers had risen to 2.05 trillion rubles by the end of February, from less than one trillion rubles in March 1996, he said. Arrears to ferrous metal-producing enterprises stood at 1.53 trillion rubles at the end of last month.

Shares of Two Oil Cos. for Sale

· Russia's Federal Property Fund said Monday that it will sell 14.99 percent of oil trading company Nafta-Moskva at a commercial tender on April 9, reported Reuters. The 124,401 share stake has a starting price of 71 billion rubles, and the winner of the tender must invest $6 million in the company over three years.

The winner will make the $6 million investment through an oil export agreement with Nafta-Moskva. Under this agreement, the winner must agree to export at least 12 million tons of oil over three years, at a rate of at least four million tons a year, paying Nafta-Moskva a commission of $0.50 per ton.

Russia's State Property Committee said last week that a plan to privatize state oil holding company Rosneft has been approved, reported Interfax. Under the plan, 51 percent of Rosneft would remain in government hands, two percent will be given to the company's employees, and the remainder would be offered through tenders and auctions.

Rosneft produced 13.1 million tons of crude oil in 1996, up from output of 12.8 million tons in 1995.


Ford Introduces Taurus in Russia

· Detroit-based Ford Motor Co. announced on Monday that it will begin offering the Taurus sedan this week in Moscow, St. Petersburg, and other Russia cities, reported United Press International (UPI). Russian versions of the car are being built at a Ford assembly plant in Chicago and will go on sale in Russia beginning Thursday.

"We expect it to sell well and be a strong competitor in the `executive class'" in Russia, Ford spokesman John Tome is quoted as saying. The Taurus will challenge European-made cars including the Saab, Mercedes-Benz, and BMW.

Last year, Ford sold 3,500 vehicles in Russia—triple the number sold the year before. The company expected sales to increase substantially with the introduction of the Taurus into the Russian marketplace. The Taurus joins Ford's North American-made Windstar minivan and the Ford Explorer sport-utility vehicle in Russia. The company also sells European-made Escort cars, Transit vans, and Mondeo cars in Russia.

The Russian Taurus will be equipped with special lighting, modified bumpers, and an engine that runs on leaded gasoline. It will be sold by 30 dealers across the country.

PLD Moves to US from Canada

· PLD Telekom Inc., provider of local, long distance, and international telecommunications services in Russia and Kazakhstan, announced on Monday that it has changed its corporate domicile from Canada to the US, said a PLD press release. Shareholders approved the move on February 27.

Among other reasons for the move, PLD no longer has operations in Canada, while the majority of its investor base, as well as its principal sources of financing, are in the US.

The company also announced that it will open a new PLD representative office in St. Petersburg.PLD provides services through three main businesses: Peterstar in St. Petersburg; Techncom/Teleport in Moscow; and BECET International in Kazakhstan.

When you need to know it as it happens




March 4, 1997

Intercon's Daily


n Japan received 50 tons of palladium from Russia in 1994 and approximately 64 tons in 1995. According to Japanese statistics, 50-70 percent of the Japanese industry's needs for palladium and platinum have been met by Russian deliveries in the recent years.

n Over the past three decades, Russian gas monopoly Gazprom has increased exports to Europe by almost 100 times and is now operating in 17 countries. The current gas pipeline network enables the company to export 125 billion cubic meters of gas annually to Western Europe. The gas supplies are mainly provided under long-term agreements or contracts. Gazprom's current European market share is 31 percent.

n Russian President Boris Yeltsin last week signed an amended federal law on the Central Bank under which the Bank is to deduct 50 percent of its annual balance profit to the federal budget. Profits were about three trillion rubles in 1995 and 11.5 trillion rubles in 1996. Deductions to the national budget were 97.8 and 24.9 percent, respectively.

n US Federal Express recently lowered its tariffs for parcels from Russia to destinations worldwide in response to increased competition in the courier business, particularly from Australia's TNT. The TNT Express Worldwide joint venture in Russia opened a state-of-the-art customs clearance warehouse in Moscow last month.

n Germany's Siemens opened a service center in Barnaul, the capital of southern Altai Krai, as part of a supply agreement with the local government. Siemens will supply a variety of medical installations for local hospitals and clinics over the next year, with the first deliveries due in March.

n In a rare interview with Ekho Moskvy radio on Saturday, Russia's first lady Naina Yeltsin admitted that she was nostalgic for the former Soviet Union and hoped all the republics would develop closer cooperation. "I do not rail against the past. Like everybody I feel nostalgia for the Soviet Union as for a large family when we were all together."

European Republics

Ukraine Foreign Min to Canada/US

· Ukrainian Foreign Minister Gennady Udovenko arrives in Canada today for an official visit aimed at promoting bilateral cooperation. After Canada, he will travel to Washington, where he has a meeting with US Secretary of State Madeleine Albright on March 7.

Lukashenko Wants US Out of Europe

· Belarus President Aleksandr LUKASHENKO suggested today that NATO conclude a separate treaty with Belarus and that a new European security order should exclude the US. "We are observing with interest developments in the dialogue between NATO and Russia, but Belarus' national interest also should be taken into account," he told a group of Minsk policemen, according to Reuters. "I propose direct talks with NATO's leadership to sign a bilateral treaty between NATO and Belarus in the future."

This represents a reversal from LUKASHENKO's previous stance toward NATO. LUKASHENKO last year stated that Belarus was not only opposed to NATO expansion, but to its very existence. He threatened to redeploy troops along the Polish border as well as the country's Soviet-era nuclear missiles, if NATO expanded into eastern Europe.

"We and only we, as members of the European family, can and must establish order in our own home without the participation of leaders from across the ocean," Reuters quoted him as saying today. On Friday, the US State Department accused Belarus of failing to uphold democracy and human rights and announced it was halting all US aid to the country.

Large Belarus Opposition Demonstration

· Some 5,000 Belarussians protested the pro-Russian policies of President Aleksandr LUKASHENKO in Minsk on Sunday. The demonstration, originally planned to mark the 930th anniversary of the founding of Minsk, turned into a protest against integration with Russia. Demonstrators, led by the opposition Belarussian Popular Front, reacted to a statement that Russian President Boris Yeltsin and Lukashenko have agreed in principle to hold simultaneous referendums in the two countries on accelerating integration. Interfax cited sources close

When you need to know it as it happens




March 4, 1997

Intercon's Daily

to YELTSIN on Saturday saying that the Russian president would bring up the referendum in his address to parliament on Thursday.

South Caucasus & Central Asia

Kazakh Oil Min. Restructured

· Kazakh President Nursultan NAZARBAYEV signed a decree setting up a national oil and gas company, Kazakh Oil, to replace the country Oil and Gas Ministry, reported Reuters today. Kazakh Oil will hold a 40-50 percent stake in all joint ventures and all companies which are developing Kazakh oil reserves under Western management. It would be the operator of and the state's agent in the deals. Former Oil and Gas Minister Nurlan BALGIMBAYEV will head the new company.

DTR/API to Expands Kazakh Dairy Venture

· US Developed Technology Resource, Inc. (DTR) and Agribusiness Partners International, L.P. (API) announced on Monday the formation of FoodMaster International LLC for the purpose of pursuing dairy opportunities in the former Soviet Union, said company press releases. Under the founding agreement, DTR will contribute its dairy operations in Kazakhstan and its opportunities in Moldova and API has agreed to fund up to $6 million over the next two years to expand the business.

DTR will manage the day-to-day affairs of FoodMaster and its subsidiaries under a separate management agreement. API will own 60 percent of FoodMaster and DTR 40 percent, with DTR having the ability to earn a greater economic interest by reaching defined performance targets.

DTR started its first dairy operation in Kazakhstan in June 1995 with the intention of expanding into other markets in the former Soviet Union. In July 1996, DTR obtained the right to purchase its dairy partner in Kazakhstan and this year, it received a grant from the US Agency for International Development (USAID) to expand to Moldova.

DTR is a publicly-held company focused on building business opportunities in the former Soviet Union. It maintains offices in Minnesota and Almaty.

API is a $100 million fund managed by Agribusiness Management, LCC, a wholly-owned subsidiary of America First Companies. America First is headquartered in Omaha, Nebraska, and maintains an office for this Fund in Moscow.

"We believe that this is an excellent time to get into the dairy business in the FSU. Currently there are no companies offering domestic high-quality, brand name dairy products in the regions where FoodMaster will operate. The industry is in need of capital, technology, and Western management techniques which FoodMaster can provide," said API president Robert PEYTON.

Kazakh Education/Culture Mins in Scandal

· Kazakh President Nursultan Nazarbayev on Monday fired Education Minister Murat Zhurinov and Culture Minister Talgat Mamashev for abuse of power for personal gain in connection with deciding on lists of students to study abroad, reported Xinhua, citing the Kazakhstan Telegraph Agency. Nazarbayev criticized Zhurinov and Mamashev for their failure to promote the country's culture and education while in office. Moreover, the men lowered the quality of the students sent overseas and wasted the country's education funds by exchanging favors for the opportunity to study abroad.

Economic Assessment of Eastern Europe

and the Former Soviet Republics

March 5-6, 1997

Kensington Thistle Hotel, London, UK

Sponsored by: PlanEcon and DRI/McGraw Hill

Meeting will look at investment climate

in EE/FSU including banking, energy,

and automotive industry analyses.

Info: Mazher Ahmad, Tel: 202-898-0471

E-Mail: Mahmad@planecon.com

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

Svetlana Korobov, Contributing Editor

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