DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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

WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, May 16, 1997

Russian Federation

Politics

Yeltsin Denounces Corruption Again

· Russian President Boris Yeltsin today gave a national radio address and promised a crackdown on official corruption. He announced the signing of a decree requiring government officials to regularly disclose information on their incomes and property and that of their families.

He pledged that he will start the process by declaring his own income and property. "Voters have the right to know about the incomes and property of all top state officials," he said.

"The public does not need calls, angry newspaper leaders, and a search for `whipping boys.' We need specific measures, and we shall start exactly with them. The decree will be followed by other measures. My task is to put an end to the situation when a state post serves as a source of enrichment."

YELTSIN said the new measures will help root out for dismissal those officials who collect bribes and take advantage of their position. "I address government officials: we launch this drive not for window-dressing. If you cannot give a reasonable account of your property and fill out a declaration, resign voluntarily."

Today's anti-corruption speech differs from the president's several previous anti-corruption speeches because it was accompanied by a legal document outlining specific, concrete measures to combat official corruption. YELTSIN signed a decree mandating that government officials must file yearly income and property disclosures.

The six-page decree lists which government positions must declare income and outlines procedures

for doing so. Under the decree, income and property must be declared by the president, members of both houses of parliament, government ministers, executive branch officials, and all regional officials, including governors and mayors. The income and property declaration must be filed annually, by April 1, with the local tax service.

The declaration will be also submitted at application or appointment for federal public service and official posts. Applicants and appointees named this year must declare their income and property within two months of the decree's publication. The decree stipulates that the declaration is confidential information, but it can be published in the media when ordered by the president. Yeltsin gave the government one month to draft a law to enact the decree.

Federation Council Approves Govt. Law

· The Russian Federation Council on Wednesday voted 140-14, with 16 abstentions, to approve a federal constitutional law on the government, said Thursday's RFE/RL Newsline. The law, passed last month by the State Duma, would force the whole government to step down if the prime minister resigned or was dismissed. Federal constitutional laws must be passed by a two-thirds majority in the Duma and a three-quarters majority in the Council.

The law would also require government ministers to submit yearly income and property declarations. The Council rejected an earlier version of the measure in December. A presidential de

Today's News Highlights

Russia

NATO OKs Accord with Russia

Rodionov Goes to Tokyo

Far East Coal Miners Protest

Petersburg Terminal Planned

RUX in New Russia Gold Deal

South Caucasus & Central Asia

Armenian Gold Co. Sale

WorldCom Expands to Baku

CPC Final Agreement Signed

Turkey on Gas Pipeline

Politics-Economics-Business

Page

Friday

May 16, 1997

Intercon's Daily

Ruble = 5,761.5/$1.00 (NY rate)

Ruble = 5,771/$1.00 (CB rate)

Ruble = 5,750|5,792/$1.00 (buy|sell rates)

Rodionov is scheduled to meet today with Japanese Foreign Minister Yukihiko Ikeda and hold talks on Saturday with Fumio Kyuma, the head of Japan's National Defense Agency (NDA).

Economy

Far East Coal Miners Protest

· About 300 coal miners in Russia's far eastern Primorsky Krai today held a protest demonstration outside the regional government building, demanding that Governor Yevgeny NAZDRATENKO answer questions about the region's energy crisis and payment of their back wages, reported Dow Jones. Many of the miners blame the governor for the region's energy problems and some protesters called for his resignation.

About 30 miners were allowed in the building to meet with Deputy Governor Konstantin TOLSTOSHEIN, who promised that the administration was seeking ways to pay salary arrears. The region's miners are owed a total to 238 billion rubles. Regional leaders are reportedly hoping for a federal bailout.

The energy crisis in the regional capital, Vladivostok, has been eased over the past two days as a result of an emergency shipment of fuel, but the shipment is reportedly only enough to last the city for five days.

Itar-Tass reported that the coal miners are threatening to block the operation of the Vladivostok airport, the Moscow-Vladivostok trunk railway, and the main highways in the territory, if they are not paid their wages for the last six months and if authorities do not meet demands on the development of the coal industry in the territory.

AIDS Activists on Russia's HIV Problem

· Representatives of Russian organizations combating AIDS estimated that 4,242 people in Russia are infected with HIV and every day about 10 people contract the HIV virus which causes AIDS, reported Itar-Tass. At a press conference ahead of AIDS Victims Day on May 18, the activists said preventive measures and comprehensive information for the population are the only ways to stop the epidemic.

A majority of those with HIV in Russia were infected through intravenous drug use, they said. HIV infection is widespread in the Kaliningrad and Nizhny

Dec Jan Feb Mar Apr May

cree detailing how government officials should make financial disclosures was signed today.

NATO States Approve Accord with Russia

· NATO's 16 member-states today unanimously approved an accord with Russia, negotiated by NATO Secretary-General Javier SOLANA and Russian Foreign Minister Yevgeny PRIMAKOV this week, reported the Associated Press (AP). The accord, formally known as the "Founding Act on Mutual Relations, Cooperation, and Security between NATO and the Russian Federation," outlines areas of cooperation between Russian and an expanded NATO and is meant to assuage Russian concerns in light of the addition of former Warsaw Pact members to the Atlantic Alliance.

The approval clears the way for Russian President Boris YELTSIN to sign the agreement on May 27 in Paris with the leaders of NATO states.

Rodionov Makes Historic Trip to Tokyo

· Russian Defense Minister Igor Rodionov arrived in Tokyo today for a three-day official visit, which is the first visit by a Russian defense minister to Japan, reported Itar-Tass. In recent years, the two Pacific neighbors have taken steps to improve relations by increasing dialogue and contacts.

Rodionov is accompanied by Admiral Vladimir Kuroyedov, Commander of the Pacific Fleet, and by top officials at the Defense Ministry and Russia's Armed Forces General Staff.

When you need to know it as it happens

Politics-Economics-Business

Page

Friday

May 16, 1997

Intercon's Daily

Novgorod regions and the Krasnodar Krai, according to the activists.

Business

Foreign Cos. to Build Petersburg Center

· Swedish construction group Skanska announced on Thursday that its Finnish subsidiary Skanska Oy and its 50-50 British partner Taylor Woodrow won a $251 million order to build a commercial center in St. Petersburg, reported today's Financial Times. "The new 150,000 square meter transportation and financial center is the first step towards the establishment of a new express railway service linking St. Petersburg with Moscow," FT quoted Skanska as saying. The project includes construction of a terminal, a new three-star hotel, offices, residences, and parking facilities.

Skanska won the order from Russia's High Speed Railway Company. Financial support is expected from Britain's Export Credit Guarantee Department.

Roper Wins Another Gazprom Order

· Bogart, Ga.-based Roper Industries, Inc. announced on Thursday that it has received a $10 million order for equipment from Russian gas monopoly Gazprom, to be funded by a letter of credit, said a company press release. The new contract will allow Gazprom to continue its gas pipeline upgrade program while the financing for a $151 million contract, subject to US Export-Import Bank financing guarantees, is being finalized. Roper's backlog to Gazprom as of May 15th was $15.2 million, the majority of which is expected to be shipped in the current fiscal year, it said.

RUX in New Russian Gold Deal

· Canada's RUX Resources Inc. on Wednesday announced that it has signed a Letter of Intent with Ural Gold Platinum Company (UGPC) and Gold of Northern Urals (GNU), both closed-stock Russian companies, with respect to RUX acquiring a 49 percent interest in GNU, reported BusinessWire. GNU holds the exploration and mining licenses for the Vorontsovsk gold deposit, located about 400 km north of Yekaterinburg in the Sverdlovsk Oblast.

Vorontsovsk is located in a well-known mining district near the cities of Krasnoturinsk, Serov, and Karpinsk. These cities offer a solid infrastructure

which includes an experienced workforce, good access to rail transportation and electric power, and year-round road access to the mine site.

Pursuant to the Letter of Intent, RUX will pay UGPC $200,000 for a 12-month period of exclusivity during which RUX shall have the right to receive and examine all information pertaining to Vorontsovsk. During this period, RUX will work with UGPC and GNU to: (i) examine the social effects connected with the development of Vorontsovsk; (ii) complete the final geological reports for the project; and (iii) prepare a scoping study.

Upon the expiration of the period of exclusivity, RUX shall have the right to acquire a 49 percent interest in GNU for a series of payments that will be based on the progress of the project review. The terms for such purchase will be specified in a General Agreement which is currently under negotiation.

RUX explores for, develops, and mines gold and other precious metals in Russia and Uzbekistan. RUX is a majority-owned subsidiary of William Resources Inc.

South Caucasus & Central Asia

First Dynasty Buys Armenia Gold Co.

· Canada's First Dynasty Mines Ltd. announced on Thursday that it has entered into a definitive agreement to acquire up to 100 percent of Global Gold Armenia Ltd. from its current parent, Global Gold Corp., said a company press release. The agreement gives First Dynasty immediate management control of Global Armenia and its projects.

Global Armenia is a partner in a joint venture with agencies of the Armenian government to construct a $412 million plant at Ararat to recover gold from mine tailings and to conduct feasibility studies on the redevelopment of the Zod and Meghradzor mines in Armenia. It said estimated resources at the three projects total 6.3 million ounces of gold.

Under the terms of the definitive agreement, First Dynasty said it has committed to invest sufficient funds to permit Global Gold Armenia to meet its ongoing joint venture obligations, and will thereby earn an incremental equity interest in Global Gold Armenia. It will earn a 25 percent interest after

When you need to know it as it happens

Politics-Economics-Business

Page

Friday

May 16, 1997

Intercon's Daily

investing $6.4 million; 51 percent after investing $10 million; and 80 percent after $25.4 million.

WorldCom Expands Service to Baku

· WorldCom is expanding its satellite-based digital communication services between London and the CIS to account for growing demand, said M2 Communications on Wednesday. A new dedicated satellite link has been commissioned for delivery on the London-Baku corridor in the third quarter.

WorldCom currently delivers high-capacity services into the CIS using a gateway class earth station near London to address multiple sites in Russia, Kazakhstan, Turkmenistan, Kyrgyzstan, and other countries. A second satellite earth station is currently under construction at the London uplink site which will be brought on line in August this year. This station will provide a dedicated high-capacity link between London and Baku, with capability for additional digital links between London and cities in Central Europe, the Caucasus, Central Asia, and the Mediterranean.

The service will be particularly useful to the large oil and gas corporations in Baku—virtually all of which currently use WorldCom—in addition to the growing number of legal and logistic companies, said the report. WorldCom also offers access to the Internet via WorldCom's UUNET Technologies' services.

WorldCom's designated partner in Azerbaijan is Teleradio. This company, which installs and maintains the digital links, has worked successfully with WorldCom for a number of years. It will also be responsible for the key support services in Baku. The somewhat limited city wide cable infrastructure is overcome through provision of local microwave links, installed and maintained by Teleradio.

WorldCom is a global business telecommunications company, operating in more than 50 countries. WorldCom subsidiary, UUNET Technologies, Inc., is the world's largest provider of Internet services.

CPC Final Agreement Signed

· The members of Caspian Pipeline Consortium (CPC) today in Moscow signed a "final agreement" on a deal to build a 1,500 km oil pipeline from Kazakhstan to Russia. The agreement completes the restructuring of the consortium allowing full project financing and construction to proceed.

The $2 billion construction project is scheduled for completion by the end of 1999. The pipeline, to stretch from the Tengiz oilfield in Kazakhstan to a new terminal at Russia's Black Sea port of Novorossiisk, will eventually have a capacity of 67 million tons of oil a year.

The owners of the CPC and their equity interests are as follows: US Chevron Corp. which is developing the Tengiz field (15 percent); LUKarco, a joint venture between Russia's Lukoil and US Arco (12.5 percent); Rosneft-Shell, a partnership between Russia's Rosneft and Royal/Dutch Shell (7.5 percent); US Mobil, which is also involved in the Tengiz project (7.5 percent), Italy's Agip (two percent); British Gas (two percent), Amoco/Munaigaz (1.75 percent); Oryx Energy (1.75 percent); and the governments of Russia (24 percent), Kazakhstan (19 percent), and Oman (seven percent).

Turkey Prepares Gas Pipeline Consortium

· The government of Turkey is in discussions with Italian Eni's Snamprogetti, Gas de France, and Royal/Dutch Shell about establishing a consortium to build a pipeline to transport Turkmen gas to world markets, reported Reuters. "Three companies said they were interested to set up a consortium to build a 3,200 km pipeline to carry 28-30 billion cubic meters of Turkmen gas to Europe via Iran and Turkey. The cost of the project is $1.6 billion," it cited Turkish Energy Minister Recai KUTAN as saying.

KUTAN said that many technical details related to the project must still be worked out including the terminus point of the pipeline in Europe, the exact route of the pipeline, and the financing for the project.

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

available for non-profit institutions.

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

Politics-Economics-Business

Page