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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

Tuesday, May 20, 1997

Russia and NATO on May 27. In a clear effort to appease communist and nationalist legislators who oppose the agreement, YELTSIN promised that he would review ties with NATO, if the alliance ignored Russian views. "If NATO begins to take decisions without taking account of Russia's opinion, Russia will review its relations with the alliance," he is quoted by Reuters as saying. The president does not need parliamentary approval for the agreement.

Intelligence News Tidbits

· In a sign that the Russian intelligence service has not changed much from its Soviet era counterpart, the Foreign Intelligence Service (SVR) officially hosted a book party for the memoirs of Viktor GRUSHKO, the former KGB First Deputy Chief who helped lead the 1991 coup attempt against Mikhail GORBACHEV, according to Intercon sources.

A high-ranking Russian defense industry official charged with spying for British intelligence will go on trial soon in Moscow, reported Thursday's Moskovsky Komsomolets. Vadim SINTSOV was allegedly recruited by the British in London, when he was on a tour of duty as head of the trade directorate for the Spetsmash company in the early 1990s.

According to the newspaper's information, British intelligence took advantage of compromising information against SINTSOV—it had documentation that he received 30 million rubles in bribes during 1991_94, primarily for "help" in choosing go-between firms to

Russian Federation

Politics

Russia Presents New Economic Reform Plan

· Russian President Boris Yeltsin met on Monday with Prime Minister Viktor Chernomyrdin, First Deputy Prime Ministers Anatoly Chubais and Boris Nemtsov, and Deputy Prime Minister for social issues Oleg Sysuyev to discuss the government's new short-term economic reform program. YELTSIN supported the program and ordered the government to carry it out immediately. "This is not a declaration, not just statistics, but rather a business document which addresses every problem facing each Russian and the country as a whole," Interfax quoted YELTSIN as saying.

Following the meeting, Chernomyrdin unveiled the seven-point plan aimed at stepping up economic reform and helping build social stability. The program includes measures to: (1) repay delayed wages; (2) reform the welfare system to ensure that money goes only to the truly needy; (3) rejuvenate state industry and the agricultural sector by providing low-interest loans; (4) give local governments greater autonomy and a larger share of taxes collected in their regions; (5) combat corruption by tightening control over bureaucrats; (6) cut the government budget and staff; and (7) make government work more transparent to the public by providing honest and open explanations of reform programs.

CHERNOMYRDIN called the measures "tough but necessary for all citizens or Russia."

Yeltsin Reassures Communists on NATO Deal

· Russian President Boris Yeltsin on Monday briefed the chairmen of both houses of parliament, and the leaders of major parliamentary factions on the partnership agreement to be signed between

Today's News Highlights

Russia

Sakhalin Miners Strike

Russian Satellite Crash

Marathon Buys Oil Platform

LMZ to Issue More Shares

South Caucasus & Central Asia

Georgian-Greek Telecom Deal

Azeri-Moscow Cooperation

Turkey in AIOC Phone Deal

IFC Invests in Kazakh Registrar

Tajik Peace Accord Signed

Politics-Economics-Business

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Tuesday

May 20, 1997

Intercon's Daily

export weapons—to get him to pass on secrets. The British had 20 secret meetings with SINTSOV between recruiting him and his arrests, it said. In exchange for $15,000, SINTSOV allegedly gave the British a large amount of top secret information, including the specifications and performance of the latest Russian weaponry.

Another suspected Russian spy was sentenced to 12 years in prison recently for helping the CIA. Moisei FINKEL, a former staffer of the Naval Scientific Research Institute in St. Petersburg was reportedly recruited by the CIA and offered asylum in America in exchange for information. He turned himself in to the Russian authorities, but apparently did not receive special treatment for his honesty.

General Kobets Fired and Decommissioned

· Russian President Boris Yeltsin has issued a decree relieving General Konstantin Kobets of his position as deputy defense ministers and chief military inspector and discharging him from the military in connection with corruption charges brought against him by the military prosecutor's office, reported Itar-Tass.

Russian Scholar on Nationalism

· George Mirsky, a visiting professor at Princeton University, held a discussion, entitled "Russian Nationalism, Eurasian Theories, and Ethnic Problems in the Post-Soviet States," on Monday at the Washington-based Kennan Institute for Advanced Russian Studies. MIRSKY has recently published a new book, Ruins of the Empire, on the current state of Russian nationalism.

Mirsky pointed out that there is a difference between ethnic identity and national identity in Russia. While ethnic consciousness originates in language and territoriality, national conscience is a more complex idea, which involves the mentality, beliefs, and ethics of the Russian people. According to Mirsky, Russian national consciousness is divided into Slavic (Christian) and Turkish (Muslim) origins and lacks unity as a "nation." Thus, Russia is not a "nation" as the word is understood in the West, nor has it emerged as a cohesive society.

Mirsky argues that, contrary to popular belief, Slavs are closer to their Muslim neighbors in the

East, than to their Western neighbors. Poles have always been a part of the Western world, which is alien to the Russians. There was an artificial attempt to replace the so-called identity consciousness with nationalism during the Bolshevik regime. The authorities, for example, encouraged each republic to have its own National Science Institute and other national organizations. However, the superiority of the Russian republic was always presented as an unquestionable fact. Russia was the big brother to all other republics.

Mirsky also noted the dual feeling of Russians towards the West. On one hand, they realize the superiority of the economic status and the higher living standards. On the other hand, Russians have always believed that their culture, literature, art, and military are far more advanced than that of the West.

Today, Russian ideals are changing and a new idea of Euro-Asian identity and a "single ethnic community" is forming, said MIRSKY. This could eventually change the mentality of the Russian people and help them to enter the global arena. At the same time, there is a growing notion of the need to "restore the Russian Empire." The concept could alienate Russia from the former republics and create a future conflict with Ukraine. Mirsky sees conflict as inevitable because Ukraine was founded on the territory of Kievan Rus, the base of historical Russia, and would necessarily be a part of a revived Empire.

Currently, the younger generation in Russia is business-oriented and the country is progressing towards globalization. However, for Russians globalizing means, essentially, Americanizing because of the strong influence of the American media and culture. This is viewed as a negative aspect of globalization by some Russians and the decline of Russian culture and identity is a feared result.

Economy

Ruble = 5,754.5/$1.00 (NY rate)

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

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

Sakhalin Miners, Medics, Teachers Strike

· Some 500 coal miners from the city of Makarov on Russia's far eastern Sakhalin Island today blocked

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	Tuesday		May 20, 1997
	Intercon's Daily
	traffic on a key railroad, demanding payment of back wages, reported Dow Jones. The two- hour protest action was joined by medics and teachers. Wage arrears to Sakhalin miners total 11 billion rubles. Last week, miners in the Far East's Primorsky Krai held a protest demonstration over wage arrears in front of the Vladivostok government building and threatened to block operations at the local airport, railway, and highways if their demands were not met. Frustrated and desperate Russian workers and pensioners seem increasingly to be turning to protest actions that disrupt major transport routes, rather than simply relying on work stoppages to press their cases. Russian Booster/Satellite Crash · A Russian rocket carrying a Kosmos military satellite today crashed to earth only 48 seconds after launch. The crash resulted when the engine of a Ukrainian-made Zenit_2 booster rocket shut off during the first stage of the launch. The rocket was launched from the Baikonur cosmodrome in Kazakhstan and fell into a deserted section of the steppe. Two other Kosmos satellites were successfully launched earlier this month. Business Marathon Buys Platform for Sakhalin · South Korea's Daewoo Heavy Industries Co. Ltd. today signed a $90 million contract to build an offshore oil platform near the Russian far eastern Sakhalin Island for US Marathon Oil Co., reported United Press International (UPI). Daewoo will deliver the facility by August 1998. Marathon plans to use the platform to extract 90,000 barrels of crude oil and two million cubic meters of natural gas per day at the Piltun-Astokhskoe oil field near Sakhalin. The US company is the leader of a consortium of five foreign companies which is developing oil off of Sakhalin. Leningrad Metal Co. Plans Share Dilution · The shareholders of Russian engineering firm Leningradsky Metallichesky Zavod have authorized the issue of an additional 125 million shares without consulting several of the companies foreign shareholders, reported today's Wall Street Journal.	LMZ currently has 12.5 million shares outstanding. Minority shareholders such as Germany's Siemens and Austria's Creditanstalt Bankverein AG said they hadn't been informed of the proposal for the potential major dilution of their stakes, according to the report. A Creditanstalt objection was reportedly ignored. LMZ produces turbines for power plants. Its biggest customer, Energomashinostroitelnaya, holds a controlling interest in the company.
		South Caucasus & Central Asia Georgian-Greek Telecom Deal · Greece's Hellenic Telecommunications Organization (OTE) and construction company Hellax have signed a $14 million contract with the Georgian government to build and operate fiber optic networks in Georgia, reported Greek news agency ANA on Monday. The fiber optic cable system will run from the Black Sea port of Poti to Tblisi, where it will branch off to Azerbaijan and Armenia. The project will be fully financed by OTE under a 10-year loan. Hellax has been awarded a contract to carry out building work for the project. The project is one of the largest investments in Georgia's telecommunications sector. Azerbaijan-Moscow Cooperation Agreement · Azerbaijan and Moscow initialed an agreement in Baku on direct cooperation in trade as well as the economic, scientific, and technological, and cultural spheres on Friday, reported Itar-Tass. This framework document will be signed during Moscow Mayor Yuri Luzhkov's visit to Baku in mid-June, Moscow deputy mayor Ernest Bakirov said at a meeting with Azeri President Geidar Aliyev. Five bilateral cooperation agreements are to be signed simultaneously with the framework accord. "We also propose to Azerbaijan cooperation in the machine-building field, in particular, in completing spare parts for cars manufactured by the ZiL and the AZLK motorcar factories, as well as in the creation of wholesale markets of food products in Moscow," Bakirov is quoted as saying. During two days of talks in Baku, the sides also agreed to establish joint ventures, mixed joint-stock


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companies, industrial and financial groups, and considered a mechanism for a free flow of goods and investments in both directions, said Itar-Tass.

A passenger train traveled between Baku and Moscow on Sunday evening for the first time in three years. It will arrive in Moscow in two days. The agreement on resuming communications and transport ties between the capitals of Azerbaijan and Russia, which was cut short because of the conflict in Chechnya, was achieved after lengthy talks between government delegations of the two countries. Earlier, the Russian side lifted restrictions on railway freight traffic with Azerbaijan, imposed for the same reason in December 1994.

Turkey Wins Phone Contract from AIOC

· Turkey's Alcatel Teletas Telekomunikasyon Endustri ve Ticaret has won contracts, valued at $2.2 million, from the Azerbaijan International Operating Company (AIOC) oil consortium to manufacture, supply, and install 34Mbit/s radio link systems and to the modernize the Gence telephone network in Azerbaijan, reported M2 Communications.

IFC Invests in Kazakh Share Registry

· The International Finance Corp. (IFC) today signed an investment agreement with Dutch bank ABN Amro NV and Global Kazkommerts Securities to create ABN Amro Registrars, the first share registry company in Kazakhstan, said an IFC press release. ABN Amro Registrars will provide independent share registration and transfer services that meet international standards.

ABN Amro Registrars is expected to eliminate some of the uncertainties that shareholders face in recording ownership rights, thereby facilitating the inflow of foreign portfolio investment as well as the development of the local retail market.

"The Kazakh government has requested IFC assistance in developing their equity market and attracting portfolio investment," IFC regional representa

tive Michael ESSEX is quoted as saying. "The establishment of an independent, reliable registry service is IFC's first response to that request."

ABN Amro Registrars will be 51 percent owned by ABN Amro NV, which will provide management, 29 percent by Global Kazkommerts Securities, one of the leading investment banks in the country, and 20 percent by the IFC. It will have a capital base of $100,000. The company will be headquartered in Almaty and will use the same offices as ABN Amro Bank Kazakhstan, a financial institution in which IFC was a founding shareholder.

Tajik President, Opposition Sign Accord

· Tajik President Emomali Rakhmonov and United Tajik Opposition leader Said Abdullo Nuri on Sunday signed in Bishkek a draft political accord and several agreements, which represent significant progress toward the achievement of peace in Tajikistan. A final end to the bitter civil war that has ravaged the country almost since it achieved independence in 1991 will allow Tajikistan to begin rebuilding its economy and improving the lives of its people.

The two leaders agreed to a general amnesty, continued prisoner exchanges, and a plan to turn over 25 percent of seats in the Central Election Commission to opposition representatives. In addition, RAKHMONOV agreed to lift the ban on opposition activities after their armed forces are disarmed and redesignated. Disagreements on those issues blocked the peace negotiations last April.

The Bishkek Memorandum said the peace talks have paved the way for the constructive development of the political situation in Tajikistan. After the talks, Rakhmonov said that a breakthrough has emerged in the process of national reconciliation. A commission for national reconciliation will begin operations right after the signing of the general accord on peace and national accord in Tajikistan.

Daily Report on Russia & the FSU will not be published on

Monday, May 26, 1997, in observance of Memorial Day.

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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