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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, March 7, 1997

Primakov to US, Yeltsin to Germany

· Russian Foreign Minister Yevgeny Primakov will visit Washington on March 15-17 to prepare for the US-Russian presidential summit, scheduled for March 19-20 in Helsinki, reported Interfax. He will meet with US Secretary of State Madeleine Albright and President Bill Clinton, according to the Russian Foreign Ministry's press service.

Russian President Boris Yeltsin will visit Germany in the second half of April, presidential spokesman Sergei Yastrzhembsky told Itar-Tass today. During the visit, Yeltsin is expected to meet with Chancellor Helmut Kohl and receive an award in Baden-Baden from the German media as its 1996 Man of the Year.

Monday is a Holiday

· Monday has been declared a day off in Russia because International Women's Day, which falls on March 8, is a federal holiday.


Norilsk to Join Planned Strike Action

· The strike committee at Norilsk Nikel metals group main plant said today that the plant's employees plan to participate in the nationwide protest action over wage arrears, planned by Russian trade unions for March 27, reported Reuters. The committee said that some 50,000 plant workers will hold a one-hour warning strike on March 27 and begin a more se

Russian Federation


Yeltsin/Lukashenko Discuss Integration

· The presidents of Russia and Belarus signed a joint statement today saying that, "Life impels us more insistently and effectively to proceed along the road of further integration." Presidents Boris Yeltsin and Aleksandr Lukashenko pledged to strengthen the legal basis of the Community that was established between the two countries in April 1996.

Today's statement called for enlarging the powers of the Supreme Council and Executive Committee of the Community of Russia and Belarus, for standardizing the laws of the two countries, as well as for forming integrated transport, power, and communications systems, pursuing a common monetary, credit, and budgetary policy with the prospect of establishing a monetary union, and other steps towards integration.

After his meeting with YELTSIN, LUKASHENKO had talks with Prime Minister Viktor CHERNOMYRDIN whom he told that the West had offered him $10 million to reject the idea of merging with Russia last year, reported Russian television RTV. LUKASHENKO said he told the West that friendship with Russia is not something to be bargained away.

Federation Council Passes Aviation Code

· Russia's Federation Council (upper house of parliament) on Wednesday approved the Aviation Code and a federal draft law on state support for the domestic aviation industry, reported Itar-Tass. The draft law was approved despite objections from the presidential representative in the Federation Council, Anatoly Sliva, who said that some of the recommendations made by President Boris YELTSIN were not included in the bill.

Today's News Highlights


Norilsk Workers to Strike

CCM to Sue Novolipetsk

Corning in Russia Deal

C&W, US West Merge in Russia

Intl Investment Banks to Moscow

European Republics

Canada in Ukraine Oil Deals

South Caucasus & Central Asia

US Co. Wins Azeri Contract

Turkmen Oil Law Signed




March 7, 1997

Intercon's Daily

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

Ruble = 5,695/$1.00 (CB rate)

Ruble = 5,685|5,705/$1.00 (buy|sell rates)

Thursday filed a lawsuit in Russia to enforce its legal right to proportional representation on NLMK's board of directors, reported Business Wire. The suit was filed with an arbitration court in Lipetsk, the city where NLMK's plant is located. The court is expected to announce its decision within two months.

"As a significant minority shareholder, we are committed to obtaining proportional representation on NLMK's board of directors so that we can have a voice in overseeing the development of the company," CCM Chairman Thomas Gaffney is quoted as saying. "Unfortunately, the company's continued violation of our clear shareholder rights under Russian law gives us no alternative but to institute legal action," he said. Our lawyers gave NLMK ample notice that we would take legal action if our director slate was not accepted, and the company's failure to respond left us no other course of action."

This is the latest step in the effort by CCM and other shareholders, who together own in excess of 40 percent of NLMK's shares, to obtain representation on the company's board. Under Russian law, minority shareholders with at least two percent of the outstanding shares are entitled to nominate candidates for the board of directors.

CCM has been advised that other shareholders, including the Sputnik Fund, a major Russian investment fund, have also initiated lawsuits against NLMK's management to force the company to accept their director slates. A separate suit has been filed to declare last year's annual shareholders' meeting invalid because of NLMK's violation of minority shareholder rights.

In a related action, CCM's financial advisers, Salomon Brothers, on Thursday "submitted complaints on behalf of CCM to the head of Russia's Federal Securities Commission and the office of policies on attracting portfolio investment to Russia," Jim Dannis, Managing Director of Salomon and head of the firm's Russian business is quoted as saying. "Will the Russian Government and the Russian legal system protect the rights of leading global investors when they invest in a major Russian company? Many investors thought this kind of conduct was a thing of the past. Investors will be paying close attention to the outcome of this case."

Oct Nov Dec Jan Feb Mar

rious strike action on April 2. Worries about a strike at Norilsk have already disrupted international metals markets, driving up prices, and this announcement will likely make metals traders even more jittery.

The Russian State Duma today issued a statement of support for the nationwide protest action called by several Russian trade unions for March 27, reported Itar-Tass. The statement calls for keeping the protests "in total conformity with the Constitution and laws of the Russian Federation."

The statement also says the government's systematic failure to meet its pledges to repay wages and pensions gives Russian citizens the legitimate right to resort to lawful forms of social protest.

Rosneft Buys Iraqi Oil

· Russian state oil holding company Rosneft has signed a contract to buy 7.4 million barrels (one million tons) of Iraqi oil under the oil-for-food deal, reported Interfax. The oil will be received in April and will be in addition to 2.96 million barrels purchased previously. Rosneft's new contract brings Russian firms' total Iraqi oil entitlement to 32.6 million barrels over the six-month period from December 1996.

CCM Suing Novolipetsk Over Shares

· Britain's Cambridge Capital Management Ltd. (CCM), the international investment fund with a 17.2 percent stake in the Novolipetsk Metallurgical Combine (NLMK), Russia's largest steel producer, on

When you need to know it as it happens




March 7, 1997

Intercon's Daily


Corning In Russian Cable Deal

· US Corning Inc. on Thursday announced an investment in an equity venture with Samara Cable Company, the largest telecommunications cable maker in Russia, said a Corning press release. The new entity, Samara Optical Cable Company, Ltd., to be located in Samara, Russia, will be jointly owned by Corning and Samara Cable Company. The financial terms of the deal were not disclosed.

Samara Optical Cable Company will manufacture optical fiber cables for telecommunication applications, to be sold primarily in Russia. Samara Optical Cable will use Corning optical fiber. The optical fiber market in Russia is expected to grow rapidly over the next few years, said the release.

Samara Cable Company is one of Russia's largest manufacturers and suppliers of cables and conductors. Besides telecommunication cables for local and long distance networks, the company manufactures cables for aerial transmission, power cables, television cables, and a large variety of conductors. Corning Inc., based in Corning, New York, is the world's largest manufacturer of optical fiber.

Cable & Wireless/US West Merge in Russia

· British telecommunication group Cable & Wireless and US West, the US regional operator, are planning to merge their operations in Russia to challenge the country's telecommunication giants, reported the Financial Times today. The deal would create an integrated Western-owned operator to counter the dominant long-distance carrier Rostelekom and the major state-owned grouping of local operators Svyazinvest, it said.

In November 1996, the Russian government announced plans to merge its 51 percent stake in Rostelekom with Svyazinvest, which would effectively re-create a telephone monopoly in Russia.

The two Western companies are discussing a merger of PLD Telekom, a Russian long-distance operator owned 32 percent by Cable & Wireless, and Russian Telecommunications Development Corp. (RTDC), a wireless operator owned 66.5 percent by US West, according to FT.

Russian Space Module to Wisconsin

· An agreement in principle has been reached by Tommy Bartlett, Inc. to acquire a Russian Mir space station core module and relocate it to Wisconsin Dells, Wisc., said a Tommy Bartlett press release on Thursday. The deal was announced by Tom Diehl, president of Tommy Bartlett, Inc. and former US astronaut Norman Thagard, the first American to travel with Russian cosmonauts and live on Mir.

Financial details of the transaction were not disclosed, and the Russian entity involved in the deal was not identified. The Mir space station module along with a cosmonaut suit and a replica of Sputnik 1 will become the core of a new permanent interactive educational exhibit at Tommy Bartlett's Robot World & Exploratory in Wisconsin Dells.

The Mir to be acquired by Tommy Bartlett, Inc. is one of three existing core modules; one is currently in orbit around the earth and another is in storage in a Russian warehouse. The third module will be moved from a museum in Moscow to Wisconsin this spring.

Goldman Sachs, Merrill Lynch in Moscow

· Two major international investment banks—Goldman Sachs and Merrill Lynch—have announced plans to open offices in Moscow, reported Itar-Tass today. Goldman Sachs was one of the first Western banks to open an office in Moscow, but withdrew from the Russian market in 1994. Merrill Lynch has vast experience in transactions with Russian securities.

Key Operating and Investment Issues in Ukraine

March 18-19, 1997

Marriott Hotel, Vienna, Austria

Information: Angela Flaes,

The Economist Conferences

Tel: (43 1) 712 41 61-32; Fax: (43 1) 714 67 69

Russia/NIS Investment, Commercial, and

Political Outlook `97

April 16, 1997

Marriott Marquis Hotel, New York City

Organized by: The Russian-American

Chamber of Commerce™

Info: 303-745-0757; Fax: 303-745-0776;

E-mail: russia@rmi.net

When you need to know it as it happens




March 7, 1997

Intercon's Daily

European Republics

Odyssey to Buy into Ukraine Oilfield

· Canada's Odyssey Petroleum Corp. said today that it is has entered into an option agreement with Canada's Trident (88) Exploration Ltd. which allows Odyssey to acquire a 60 percent interest in a proposed joint venture to develop the Dolina oil field in western Ukraine, said a company press release. Trident (88) has signed a protocol of intent with Ukraine's Ukrnafta and Odyssey has agreed to advance funds to Trident (88) in order to provide it with sufficient working capital to complete negotiations toward forming a joint venture with Ukrnafta during the next 60-90 days, with respect to the further exploration and development of the Dolina field.

Epic Progress on Ukraine Oil Dev.

· Canada's Epic Energy Inc. announced on Thursday that the equipment needed to undertake its aggressive field development and exploration drilling programs on Ukraine's Crimean Peninsula is en route to its destination, said a company press release. Epic has acquired and refurbished three western drilling and completion rigs with a supply of spare parts for on-site maintenance in Ukraine. Accompanying the rigs are vehicles, tubulars, pumping equipment and other oilfield and office equipment necessary to upgrade the company's Ukraine program. The shipment has departed Houston, Texas with an expected arrival at the port of Kerch, Crimea by mid-March.

The approval and permitting process for drilling the planned wells in 1997 is virtually complete. The company's Ukraine subsidiary, KrymTexasNafta, has requested confirmation from Kiev authorities regarding its tax and customs exemptions, and said it expects a formal response imminently.

Epic and Ukrainian partner Krymgeologia have a production-sharing agreement to explore and develop resources within the 11,000-sq.-mile area of Crimea where oil and gas has been discovered.

South Caucasus & Central Asia

US Co. Wins Contract in Azerbaijan

· AzeriAmerican joint venture Caspian Geophysical has won a $7-8 million contract to carry out seismic exploration of the Shahdeniz oil and gas field in the Azeri section of the Caspian Sea, reported Interfax. The contract was awarded by the managing board of the consortium developing the field, which is led by British Petroleum and Norway's Statoil. Exploration is expected to get underway in May.

Intercon reported in September 1996 that Caspian Geophysical won a tender for a contract to survey the Karabakh oilfield in the Azeri section of the Caspian Sea from an international consortium.

New Turkmen Oil Law Signed

· Turkmen President Saparmurat Niyazov has signed a Law on Hydrocarbon Resources aimed at ensuring rational and effective uses of hydrocarbon resources and the conservation of natural resources of Turkmenistan, reported Itar-Tass today. The law was passed by the Turkmen parliament on December 30, 1996. The law regulates relations that arise in the process of oil production operations on the territory of Turkmenistan, including off-shore deposits, the issuance of licenses, the conclusion and execution of contracts, and it regulates the rights and duties of state enterprises, as well as companies and organizations. The law recognizes production-sharing treaties as the basic form of cooperation in oil production operations in Turkmenistan.

Bids in for Uzbek Mining Tender

· Britain's RTZ and Canada's Mazarin Mining Corp. Inc. have entered bids in a tender for the right to explore and develop gold and non-ferrous metal deposits in seven areas of Uzbekistan, reported Interfax. According to the Uzbek State Committee for Geology and Mineral Resources, 17 companies expressed interest in the tender, but only the two had made final bids by the closing date of March 1. The results will be announced at the end of the month.

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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When you need to know it as it happens