DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, April 24, 1997

Russian Federation

Politics

Five-Nation Border Agreement Signed

· In Moscow today, the presidents of Russia, China, Kazakhstan, Kyrgyzstan, and Tajikistan signed an agreement governing troops and equipment along the former Sino-Soviet border, heralding the document as a breakthrough for regional security. The agreement which came after seven years of negotiations, will create a zone of stability along the more than 7,000-km border, said President Boris YELTSIN.

The details of the treaty have not been officially published. But Interfax cited Russian government experts as saying that the accord would set limits on land forces, short-range aviation, and anti-aircraft defenses deployed in any 100-km wide strip along the border. The treaty also sets special limits for border troops, but does not affect strategic missile forces, long-range aviation, and navy deployed along the strip. The treaty also includes a system of mutual inspections to make the 100-km strip transparent.

The Russian Foreign Ministry presented the agreement as a model for NATO and the East European countries seeking membership in the alliance. "This is a good example of how countries should tackle acute and delicate issues in the sphere of national security, by strengthening confidence in the military sphere and by cutting weapons rather than by building up troops and expanding military blocs," said a Ministry statement, cited by Itar-Tass.

Yeltsin Goes Back on Holiday

· Russian President Boris Yeltsin will return to the Black Sea resort of Sochi this afternoon to continue his vacation, after the final meeting with Chinese President Jiang Zemin, said presidential spokesman Sergei Yastrzhembsky.

Yeltsin is expected to stay in Sochi until May 4, when he will return to Moscow to meet with Spanish King Juan Carlos. Yeltsin is also planning to meet with UN Secretary General Kofi Annan in May.

Nemtsov Named Fuel and Energy Minister

· Russian President Boris Yeltsin today named his First Deputy Prime Minister Boris Nemtsov as the country's new Fuel and Energy Minister, said the presidential press service. The appointment is apparently aimed at facilitating NEMTSOV's efforts to restructure the country's natural gas and electricity monopolies. Former Fuel and Energy Minister Pyotr Rodionov, who had held the post since August 1996, resigned earlier this month and took a position in the private sector.

The appointment came just hours after YELTSIN told the nation that the placement of young people in government posts was important for the future of the country. In a regular radio address this morning, YELTSIN announced that he wanted the younger generation to "take a more active part in the management of the country."

"The fighting spirit of the young, their zeal and boldness make up the reserve for the continuation of the reform, which we have not used so far."

The president appealed to Prime Minister Viktor Chernomyrdin, the presidential chief-of-staff, and regional and local officials to "be more bold in promoting the young." He ad

Today's News Highlights

Russia

Regional Political Changes

IMF GDP/Inflation Chart

Explosion at Railway Station

Govt. Prepares 1998 Budget

Russia Eyes Big Tax Debtors

Update on Izvestia Battle

European Republics

World Bank Loan for Moldova

South Caucasus & Central Asia

Kyrgyz-Azeri Accords Signed

Politics-Economics-Business

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Thursday

April 24, 1997

Intercon's Daily

monished the premier for being afraid to bring young people into the leadership, reassuring him that, "They are not trying to get into your shoes."

Regional Political Changes

· Irkutsk Oblast Governor Yuri Nozhikov on Monday sent a letter to the regional legislature announcing his intention to resign and asking it to call new elections, reported Kommersant-Daily. His motives for stepping down are: "The government's economic line strikes a blow at the donor regions, Irkutsk Oblast being one of them. Under these circumstances we shall have next elections 11 months from now. Unfortunately, the election campaign has already begun and it destabilizes the political situation in the oblast. It is only possible to end the nonpayment crisis provided there is unity of all branches of power and public organizations."

Last week, NOZHIKOV sent his own economic proposals to Prime Minister Viktor CHERNOMYRDIN, as well as the chairman of both houses of parliament and the leaders of other regions in Siberia, said RFE/RL Newsline. Among other things, NOZHIKOV called for lowering energy and transportation tariffs, paying government debts, granting tax breaks to enterprises to boost production, and adopting a policy of "reasonable protectionism," according to Delovoi Mir.

NOZHIKOV was appointed governor of Irkutsk by President Boris YELTSIN in 1991 and then elected to the position in March 1994 with 70 percent of the vote. If Nozhikov steps down, new gubernatorial elections will be held in three months, rather than early next year as previously scheduled. Kommersant-Daily believes that NOZHIKOV plans to run in the next election and his resignation is aimed at shortening the campaign from 11 to three months.

In southern Russia's Stavropol Krai, Communist candidate Vasily KHMYROV won an election for a vacant State Duma seat on Sunday, said RFE/RL. KHMYROV, a deputy chairman of a livestock farming enterprise, won about 35 percent of the vote in the largely rural district, compared to only 13 percent captured by his nearest competitor. He will fill the seat of Aleksandr CHERNOGOROV, also a Communist, who was elected governor of the region in November 1996.

Explosion at Southern Railway Station

· Three people died and about 20 were wounded on Wednesday when an explosion ripped through a railway station in the southern Russian town of Armavir. The explosion occurred at about 7:00 p.m. local time in the waiting room of the railway terminal. As a result, railway traffic was halted until about 11:30 p.m. Armavir, located in Krasnodar Krai, is about 200 miles from Chechnya and the railway line runs to the Chechen capital, Grozny.

No one has claimed responsibility for the blast, but Chechen terrorists are considered the most likely perpetrators. Chechen officials, however, have denied that "Chechen resistance forces" have any involvement in the incident, according to RIA Novosti.

Economy

Ruble = 5,746.5/$1.00 (NY rate)

Ruble = 5,758/$1.00 (CB rate)

Ruble = 5,743|5,773/$1.00 (buy|sell rates)

Government Prepares 1998 Budget

· The Russian government is considering targets of a 3-5 percent increase in gross domestic product (GDP) and an eight percent annual inflation rate for

When you need to know it as it happens

Politics-Economics-Business

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RUSSIA SHORT TAKES

n Nuclear Energy Minister Viktor Mikhailov said that Russia has an agreement and a contract with the US for 20 years, under which Russia is obliged to recycle 500 tons of weapons-grade uranium. In actuality, only six tons were recycled in 1995 and 12 tons during 1996. This year, 18 tons will be recycled, but it will reach the 30-ton level by 1999.

n Moscow's Health Service Committee reported that 57 people froze to death in the capital between December 1 and February 28. These deaths are down significantly from last year because of fewer extremely cold days. Most of the deaths were blamed on drunkenness. Another 1,066 people were hospitalized with frostbite during the period.

n The Russian Economics Ministry last week ordered a 37.5 percent increase in the minimum price of domestically-produced vodka, effective immediately. A spokesman said the price hike will not affect imported brands.

n About 500 underground studios in Moscow are engaged in large-scale video piracy. Each has at least 100 video recorders operating constantly. Piracy is also lucrative for legal video recording studios. Studios, having licenses for 150 films, sometimes offer price lists with over 600 film titles.

n In March 1997, strikes were staged at 4,413 enterprises in Russia, compared with only 154 strikes during the same period last year. The number of participants involved in protests totaled 309,000 against 15,300 people reported last year.

n As many as 3,000 private cars were stolen in Moscow last year, according to a local police official, who said that the number of thefts was an average figure that had remained unchanged for years. He also said police found just 300 cars out of 570 stolen over the past three months. Many stolen cars are resold in Chechnya or Belarus.

n Russia's Vneshtorgbank has become a member of the Washington-based International Institute of Finance, which has over 245 members from 40 countries. The Institute hopes to make Russia's leading commercial banks its members. Tokobank became a member in 1996.

the 1998 budget, First Deputy Finance Minister Vladimir Petrov told Prime-Tass on Tuesday. Russia's 1997 budget plans for GDP growth of one percent growth in (GDP) and a 12 percent annual inflation rate, he said.

According to the State Statistics Committee, Russia's GDP increased by 0.2 percent in the first quarter of this year, compared with the same period last year, while consumer prices have risen by six percent since the beginning of this year.

Much of the 1998 budget is ready and the government is planning to discuss its provision in the first ten days of May, Petrov said. The 1998 budget sections regarding housing, utility services, social and pension reform, and funding military reform have already been worked out, but the problems of inter-budgetary relations with the regions remain. This issue will be discussed by a meeting of members of the Siberian Agreement association in Novosibirsk on May 12, he said.

Russia Eyes Big Tax Debtors

· Russian privatization minister Alfred KOKH told Interfax today that the government will review plans to restructure the tax debts of 15 major tax debtors into government-held equity at the end of May. The plans include such major companies as Yuganskneftegaz, Nizhnevartovskneftegaz, Kondpetroleum, Noyabrskneftegaz, the main unit of metals producer Norilsk Nikel, and subsidiaries of gas monopoly Gazprom.

Update on Battle over Izvestia Control

· The row between the editor of Moscow-based daily Izvestia and Russia's oil giant Lukoil over control of the paper seems to be cooling, reported Itar-Tass. Izvestia editor Igor Golembiovsky and Lukoil vice president Leonid Fedun agreed on Wednesday to impose a "moratorium" on further action and refrain from public accusations against each other.

The two men agreed to keep silent on the issue until May 12 and, beginning on Monday, they both decided to take two weeks' leave until the moratorium expires. they had agreed over the period of the moratorium. The problems concerning the paper will be discussed by working groups during this period.

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Business

Rostelekom Borrows to Buy Equipment

· Russian telecommunications firm Rostelekom has received a $100 million syndicated loan from Merrill Lynch to purchase fiber-optic cable and a digital switch for a project to link Moscow and Minsk, reported M2 Communications today. The money will also be used to replace the radio-relay link joining Novosibirsk in southwestern Siberia and Khabarovsk in the Far East. The loan was not guaranteed by the Russian government.

The state has offered the 22.8 percent stake twice before, but found no takers. A Property Ministry official told Reuters that the price of the stake could not be lowered because it was set in a presidential decree. No date for the auction was given.

Ford Turns Out First Car in Belarus

· US Ford Motor Co.'s joint venture in Belarus, called Ford-Union, has begun assembly of its first trial Ford Transit and expects to begin mass production in June, reported Interfax. Ford-Union said it plans to produce 5,000 vehicles in its first year of operations.

Initially, the vehicles will be made from foreign components, but Ford-Union has plans to open a local facility to make and paint the car bodies.

Ford owns 51 percent of the venture, the Belarus State Property Ministry holds 26 percent, and Lada-OMS, a Ford dealer in Belarus owns the remaining 23 percent. The venture was formed in May 1996 and is based at a plant near Minsk.

South Caucasus & Central Asia

Kyrgyzstan's Akayev in Azerbaijan

· Azerbaijan and Kyrgyzstan signed a friendship and cooperation treaty and 11 other agreements in Baku on Wednesday, reported Xinhua. Azeri President Geidar Aliyev and his Kyrgyz counterpart Askar Akayev said that the documents create the legal framework for developing bilateral relations. The trip to Baku completes AKAYEV's effort to forge closer relations with the Caucasus states.

IDB Loan to Turkmenistan

· The Turkmen Foreign Economic Bank has signed a credit agreement with the Islamic Development Bank to build an oil tanker, reported Itar-Tass. The 5,000-ton displacement tanker will cost not more than $11 million, according to an executive order issued by Turkmen President Saparmurat Niyazov on Wednesday. The credit will be paid off with the profits from the operation of the tanker.

European Republics

World Bank Loan for Moldova

· The World Bank on Tuesday approved a $16.8 million loan to Moldova to help finance a General Education Project in support of the government's education reform efforts, said a World Bank press release. The project is designed to enhance the quality of primary and lower-secondary education (grades 1-9) through improved curricula, new textbooks, teacher training, and the introduction of a modern system of learning assessment.

"By improving the quality of education, the project will also contribute to an improved human capital base and thus benefit the labor market and the country's economy," said Monika HUPPI, World Bank Task Manager.

Belarus to Tender Stake in Timber Co.

· The Belarus State Property Ministry plans to sell 22.8 percent of the shares in Fandok, one of the country's biggest timber processing companies, reported Reuters today. The state is trying to sell off 699,428 shares for a total of 93.72 million Belarussian rubles (about $2,640).

Fandok's authorized capital is 411 million Belarussian rubles, divided into 2.94 million shares. The face value of a share is 140,000 rubles. The state owns a 76 percent stake in the company, and employees and individuals own the remaining shares.

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

Svetlana Korobov, Contributing Editor

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