DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 908,

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, April 28, 1997

Russian Federation

Politics

Yeltsin Approval Rating Up

· Recent opinion polls in Russia suggest that President Boris YELTSIN's recent reshuffling of the government has helped improve his popularity. A poll, conducted this month by the All-Russian Public Opinion Research Center, found that 24 percent of respondents approved on YELTSIN's actions up from 20 percent in February, reported Dow Jones.

The poll also showed that 15 percent of respondents feel that the new government works better than the old, nine percent think that the situation has worsened, 22 percent were undecided, and the majority—54 percent—said they saw no difference.

The positive responses seem to mainly come from the addition of Boris NEMTSOV to the government. Some 61 percent of those polled approve of NEMTSOV. At the same time, Anatoly CHUBAIS approval rating increased from 12 percent in February to 15 percent this month, while approval for Prime Minister Viktor CHERNOMYRDIN fell to 26 percent from a previous 36 percent.

New Presidential Dept. and its Chief

· Russian President Boris Yeltsin has appointed Anton Danilov-Danilyan, 30, as chief of the recently re-established economics department of the presidential administration. Deputy presidential administration chief Aleksandr Livshits told Prime-Tass on Saturday that the department's main responsibility is "to fully provide for the activity of the Russian president in the field of the economic policy."

Hardline Former Presidential Aide Dies

· Nikolai Yegorov, a former Russian Nationalities Minister known for his unswerving support of the

Russian intervention in Chechnya, died in Moscow Friday at the age of 45, apparently from complications related to diabetes. YEGOROV held several top positions in the government, presidential administration, and a regional administration in southern Russia, but recently had lost any political position.

YEGOROV's most recent official position was Krasnodar Krai governor, which he lost in a December 1996 election. He was appointed to the governorship in July 1996 by President Boris YELTSIN, after being relieved of his duties as presidential chief of staff.

YEGOROV was Nationalities Minister from May 1994 to June 1995 and was given the rank of Deputy Prime Minister in December 1994, as well as being the presidential envoy to Chechnya. He was dismissed from the government in the aftermath of the May 1995 Chechen raid on Budyennovsk.

YEGOROV, who enjoyed the support of then-Presidential Security Guards chief Aleksandr KORZHAKOV, became Yeltsin's aide for regional and ethnic policy and was named presidential chief of staff in January 1996. In July 1996, he was replaced by Anatoly CHUBAIS and sent to become governor of Krasnodar Krai, a position he held from December to May 1992.

The Parliament Takes a Recess

· The deputies of the Russia State Duma will go on a two-week vacation, beginning today. The lower house will resume its work on May 14.

Today's News Highlights

Russia

G-7 on Russia Eco. Progress

Chubais & G-7 Officials

Russia-Turkey Gas Accord

Russia JV Rolls Out Plane

Russia-Japan Telecom JV

European Republics

Two-Week Holiday for Ukraine

G-7 Statement on Ukraine

South Caucasus & Central Asia

AIOC Contract Announced

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Intercon's Daily

Economy

Ruble = 5,737/$1.00 (NY rate)

Ruble = 5,760/$1.00 (CB rate)

Ruble = 5,740|5,760/$1.00 (buy|sell rates)

G-7 on Russian Economic Progress

· The finance ministers and central bank governors of the Group of Seven industrialized nations met in Washington for more than five hours on Sunday, including holding discussions with Russian government officials, to review recent developments in the world economy and financial markets.

The G-7 released a statement late Sunday, which said that, "Russia is at a critical juncture in its economic transformation process." The statement also said that the world's five wealthiest countries believe that the "rapid improvement of the revenue situation under the Russian authorities' 1997 economic program will be of crucial importance for further reform progress. In addition, deepened structural reform to improve the environment for private investment was seen as critical for propelling Russia onto a path of sustained growth."

Chubais Meets with G-7 Officials

· Following a meeting with G-7 finance ministers and central bank governors in Washington Sunday, Russian First Deputy Prime Minister/Finance Minister Anatoly Chubais told reporters that the G-7 officials were receptive to the prospect of "speeding up the process" of Russia's membership in the Paris Club group of creditor nations, reported Futures World News (FWN). The tentative timetable for Russia's Paris Club entry is the "end of 1997," said CHUBAIS, and G-7 members "will instruct their staffs" to move along the negotiations that must precede the accession.

Chubais also said he is hopeful that Russia will have satisfied all the criteria to become a member of the World Trade Organization (WTO) by the end of this year.

Chubais is leading a Russian delegation to the annual meetings of the International Monetary Fund (IMF) and World Bank this week in Washington. He also met with US Undersecretary of State Strobe Talbott over the weekend.

Russia-Turkey Gas Accord Signed

· Turkish state pipeline company Botas and Russian gas monopoly Gazprom today signed a $13.5 billion contract on deliveries of Russian gas to Turkey, reported Itar-Tass. Shipments under the 25-year contract will begin this year, Botas director-general Mustafa Murathan said at the signing ceremony in Istanbul.

Gazprom director Rem Vyakhirev said the deal would build up Russia's gas exports to Turkey from the current annual six billion cubic meters to 30 billion by 2010. The project initially earmarked annual deliveries of 14 billion cubic meters of gas via the western gas pipeline which runs across Ukraine, Romania, and Bulgaria, and of 16 billion cubic meters through a new pipeline crossing Georgia.

However, Gazprom also offered as an option the laying of a 440-kilometer underwater gas pipeline to link Russia's Black Sea port of Izobilnoye with the Turkish port of Samsun. The gas would then go through a 400-kilometer ground extension of the pipeline to Ankara.

Turkish Energy and Natural Resources Minister Recai Kutan said after the signing ceremony that Turkey's demand for the Russian gas is forecast at 27 billion cubic meters by 2000, increasing to 60 billion by 2010.

Business

Russia JV Rolls Out First Plane

· At a ceremony in Voronezh attended by Russian Prime Minister Viktor CHERNOMYRDIN, the Ilyushin Design Bureau on Saturday unveiled the first plane built as part of a joint venture with US companies, reported Reuters. The $70-million, wide-body IL_96T cargo plane includes an engine made by Pratt & Whitney, as well as avionics and components from other US firms. "Cooperation with Western planemakers may be the shortest way to get Russian aircraft on the international market," CHERNOMYRDIN told reporters at the ceremony.

The chief designer at Ilyushin, Genrikh NOVOZHILOV, said that the plane will now undergo test flights and its buyer—Russian Aeroflot International Airlines—will receive it in September. Aeroflot

When you need to know it as it happens

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April 28, 1997

Intercon's Daily

has ordered 20 planes, both the IL_96T cargo model and the IL_96M passenger model, for delivery by 2001 in a $1.5 billion deal backed by the US Export-Import Bank.

"We hope the IL_96M/T will be certified in Russia and in the United States," Marshall ROBINSON, general manager of Russian airframe programs at Pratt & Whitney told Reuters, adding that the planes have good potential to be marketed outside Russia.

Russian-Japanese Telecom Venture

· St. Petersburg Telephone Network and Japan's NEC, Mitsui, and Sumitomo companies have formed a joint venture to manufacture digital telephone switching equipment, reported Interfax. The venture, called NEC Neva Switching Systems, has charter capital of $6 million and is 65 percent owned by the three Japanese partners.

St. Petersburg Telephone Network is represented in the venture by Telekominvest, a holding company which has transferred 10 percent of its shares in trust to Telekom of Moscow.

The joint venture will utilize an unfinished factory in Petersburg, which was originally meant to produce luxury bathroom fixtures. The Okhta company began construction of the plant in 1991, but couldn't raise the money for equipment. It eventually sold the 12,500-square meter, four-floor administrative building and several manufacturing shops to St. Petersburg Telephone.

The six-year NEC program plans the transfer of Japanese technology in five phases with the venture finally involved in the full-scale production of telephone exchanges. It expects to eventually produce enough exchanges to provide one million lines a year, with many of the lines to be purchased by St. Petersburg Telephone at a 10 percent discount.

The mandated two weeks off came as a surprise to some who have noted the Ukraine is barely working as it is. The director of the country's tax authority, Mikhail AZAROV, estimated that the holiday will cost Ukraine's ailing economy about 350 million hryvnia ($191 million), said the Financial Times.

G-7 Statement on Ukraine

· The finance ministers and central bank governors of the Group of Seven industrialized countries on Sunday released a statement on economic development in Ukraine. It reads as follows: "We are increasingly concerned that the Ukrainian government has been unable to implement its ambitious reform agenda... Designed to boost investment and bring the shadow economy above ground, we consider these measures to be Ukraine's best chance to achieve positive, sustainable economic growth. We urge the government to engage fully and quickly to implement this package while this window of opportunity remains open and before further delays make the reform task more difficult."

New Belarus Embassy in Beijing

· Belarus President Aleksandr Lukashenko attended the opening ceremony of his country's new embassy in Beijing today, reported Xinhua. LUKASHENKO is on an eight-day tour of Asia and has already visited South Korea and Vietnam.

Upcoming Events

Attracting Investments & Issuing Securities

April 28-29, 1997

Vladivostok, Russia

Organized by: Portinvest Brokerage

and Investment Consulting

Info: Tel (7-4232) 28-39-88

Fax (7-4232) 22-23-64

Investment in the Nizhny Novgorod Region:

New Opportunities

May 12-14, 1997

Nizhny Novgorod, Russia

Spponsored by the:

Nizhny Novgorod Regional Administration

Tel: 7 (8312) 391-242, 391-867

Fax: 7 (8312) 391-988, 390-450

European Republics

Two-Week Holiday for Ukraine

· The Ukrainian government has decided that the country should have a two-week vacation. The first part of the holiday, which commences today and runs until May 5, will celebrate May Day and Orthodox Easter. Week two runs May 8_12 and commemorates the end of World War II and Victory Day.

When you need to know it as it happens

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Monday

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Another Anti-Govt. Rally in Belarus

· Some 30,000 people demonstrated in Minsk Saturday to mark the 11th anniversary of the Chernobyl nuclear disaster, which affected Belarus worse than any other country. The demonstration quickly turned into an anti-government rally with people calling for President LUKASHENKO's ouster. Unlike previously rallies, however, no violence or arrests were reported on Saturday.

South Caucasus & Central Asia

OSCE Suspends Monitoring of Karabakh

· Organization for Security and Cooperation in Europe (OSCE) chairman Niels Helveg PETERSEN said on Thursday that the organization has suspended its cease-fire monitoring operations in the Karabakh region on the Azeri-Armenian border because it is too dangerous, reported RFE/RL. The decision was prompted by an April 15 incident in which the car transporting an OSCE monitor was fired on near the Azeri town of Horadiz, as well as another shooting incident in November 1996.

Armenian President Levon Ter-Petrosyan and Azeri President Geidar Aliyev met in Turkey today in a bid to resolve the dispute over Nagorno-Karabakh, but reportedly failed to make any progress, said Itar-Tass. The meeting was organized by Turkish President Suleiman Demirel who offered to act as a mediator.

A Black Sea regional business conference opened in Istanbul today with the presidents of Armenia, Azerbaijan, Georgia, Moldova, Romania, and Ukraine in attendance. The participants in the conference will discuss issues of economic development and how to attract investment to the Black Sea economic cooperation group countries.

AIOC Contract Announced

· Dominion Bridge Corp. on Friday announced that McConnell Dowell Middle East LLC has been awarded a contract valued at $26 million by the

Azerbaijan International Operating Co. (AIOC) and the Georgian Pipeline Co. to lay 39km of 530mm new pipeline in Georgia from the border of Azerbaijan to Tblisi where it will tie into an existing 530mm line, and the rehabilitation of this new line to the Black Sea, said a Dominion press release.

Work on the project will begin immediately and is scheduled to be completed early in 1998.

In January of this year, McConnell Dowell successfully completed a similar project in Azerbaijan for the AIOC. Both projects were part of an overall project to transport Azeri Caspian Sea oil to Russia via Northern and Western routes.

Dominion Bridge Corp., a Delaware corporation, is an international engineering infrastructure company, employing advanced materials technology with operations and projects in North America, Europe, and the Asia-Pacific region.

Kazakh Population Declining

· The population of Kazakhstan has fallen by seven percent over the last five years as a result of emigration, reported Itar-Tass, citing the national statistics agency. More than one million people left the country to take up permanent residence elsewhere since Kazakhstan gained independence. Currently, the country has 16.4 million residents.

At the same time, approximately 65,000-70,000 people have taken up permanent residence in Kazakhstan over the last five years.

Kazakh Foreign Exchange Reserves Falling

· Kazakh central bank chairman Alievich DZHANDOSOV said over the weekend that the country's foreign exchange reserves fell by 3.6 billion tenge ($47.5 million), or 3.6 percent, to 98.4 billion tenge ($1.3 billion) over the first four months of the year, reported Xinhua. The chairman attributed the decline to the devaluation of gold on the world market, which has caused a loss of two billion tenge to Kazakhstan's foreign exchange reserves.

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.

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