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

Thursday, May 8, 1997

almost 98 percent ready and it would be best if the accord were signed in Paris on May 27. The president said he hopes that accord would be finalized during talks between Russian Foreign Minister Yevgeny Primakov and NATO Secretary-General Javier Solana, scheduled for May 13 in Moscow.

Notorious Mafia Attorney Shot Dead

· A mafia-connected attorney with a checkered past was gunned down outside his Moscow office at midday on Wednesday and died a few hours later in a hospital operating room. The 43-year-old Anatoly Lobanov was attacked by two men with TT pistols on Novoslobodskaya Street as he was leaving his office, reported Itar-Tass. The men fired nine shots, then dropped their weapons and fled.

A police spokesman told Itar-Tass today that the attack was an obvious contract murder which underscored Lobanov's well-known links with organized crime. Lobanov reportedly once served as lawyer for a leader of the Balashikha mob, Sergei Frolov nicknamed Flor, who was killed in late 1993. He also worked for two gangsters, the Sokolov brothers, one of whom was killed in a turf hit.

Lobanov twice ran in elections to the State Duma, failing to outline his work history for the voters. He also served on the police force, but was expelled after being implicated as a accomplice in the murder of a Moscow shop manager.

Lobanov also forged documents to enter the law institute

Russian Federation

Politics

Russia Adopts New National Security Concept

· The Russian Security Council, at a meeting chaired by President Boris YELTSIN on Wednesday, adopted a new national security concept which takes into account domestic as well as foreign threats to the country. "We want Russia to become a truly great and at the same time a democratic power," YELTSIN told the Council.

According to today's Kommersant-Daily, the concept has four parts: Russia in the World Community; Russia's National Interests and Goals and Tasks of their Realization; Threats to Russia's National Security; and Guaranteeing Russia's National Security.

One of the key provisions of the concept is that the main threat to Russia's security lies in its internal political, economic, social, and intellectual spheres, which are mostly of a non-military character, said the newspaper. The document says that a priority task for ensuring national security is strengthening social stability through economic growth and broad-based public agreement on ways to revive the state.

It also says that the current period of development of international relations opens up for Russia fresh opportunities to ensure its security, but it simultaneously entails a number of threats attributed to Russia's position in the world and the difficulties it is experiencing in trying to conduct reforms. The concept also stresses the desire of a number of foreign states "to weaken Russia's positions in the political, economic, and military fields."

Yeltsin Says NATO Accord Near

· Russian President Boris Yeltsin said today that the text of a draft NATO-Russian agreement is

Today's News Highlights

Russia

Resolution on Gold Sales

IFC Loan for Troika-Dialog

Shareholder Wins Rights Suit

Spar in Russia Satellite Deal

Telephone Network Expanding

South Caucasus & Central Asia

Aliyev Supports Turkish Option

Shevardnadze Criticizes Russia

US Co. in Kazakh Oil Deal

Rafsanjani to Central Asia

Politics-Economics-Business

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Thursday

May 8, 1997

Intercon's Daily

where he received his law degree, said Itar-Tass. He then set up a law firm which only defended court cases on organized crime.

In addition, the police spokesman told Itar-Tass that Lobanov's name figured in the criminal case against "godfather" Nazar, whose ring is believed responsible for a bomb attack which killed Federal Security Service (FSB) officer Mikhail Chekanov. Moscow Criminal Investigation Department officer Igor Chernov-Yagodin was killed in a raid on Nazar's crime group. Nazar died of natural causes in the detention center.

Economy

Ruble = 5,757/$1.00 (NY rate)

Ruble = 5,769/$1.00 (CB rate)

Ruble = 5,748|5,790/$1.00 (buy|sell rates)

Resolution on Individual Gold Sales Approved

· A Russian government commission, headed by First Deputy Prime Minister Anatoly CHUBAIS, on Wednesday approved a resolution on direct gold sales to individuals, a key step in the effort to liberalize Russia's gold market, reported Interfax. Viktor TARAKANOVSKY, chairman of the Gold Prospectors' Union, told the news agency that the resolution would be passed to the government for signing in seven days.

The commission also reportedly approved a resolution on the necessity of "significantly simplifying the procedure for exporting precious metals from Russia." According to TARAKANOVSKY, however, a document "On precious metals trading" was sent back for further work as it conflicted with a clause in Russia's Criminal Code giving five years imprisonment for precious metals sales which exclude the government. Interfax cited an unnamed sources as saying that the draft resolution would allow gold producers to sell gold freely if the government failed to pay for it within 30 days.

IFC Assistance for Securities Market

· The International Finance Corporation (IFC), an arm of the World Bank, on Wednesday worked out the final details of a $12 million deal with Russia's Dialog-Bank and Troika-Dialog for the development of securities operations on the Russian market,

Dialog-Bank President Pyotr Derbi told Itar-Tass. "The funds provided for in the agreement is a kind of lubrication for the already operating mechanism. One may hope that the establishment of the fundamental institutions of the stock market in Russia will be completed this year to enable the market to operate reliably and professionally," said Derbi.

Business

Steel Shareholder Wins Rights Suit

· A Lipetsk Arbitration Court has ruled in favor of Renaissance Capital, a minority shareholder at Russian steelmaker Novolipetsk Metals Combine (NMLK), who was seeking board representation, reported Reuters, citing a Renaissance statement. The court ordered the steelmaker's board of directors to include nominees from fellow shareholder Bank MFK on a list of candidates to the board, it said.

"Lawyer Larisa RYABCHENKO, who represents the interests of MFK and Renaissance Capital, considers this decision has breached the armor of systematic violations of shareholders' rights at NMLK," Reuters quoted the statement as saying.

MFK, which is linked to major commercial bank Oneksimbank, owns 15 percent of NLMK. Other minority shareholders include US investment fund Cambridge Capital Management (with 17.2 percent) and the Sputnik Fund (nine percent), an investment arm of Renaissance Capital.

The statement said the further hearings were expected on May 14 and 21 on suits launched by Sputnik Fund and Cambridge, which are also seeking representation on the NLMK board.

Canadian Co. Announces Russia Contract

· Canada's Spar Aerospace Ltd. announced on Wednesday that it has won a $9.5 million contract to supply Russia's Informcosmos with four high power Ku-Band repeater panels for the GALS-R16 satellite, said a Spar press release. Under the terms of this contract, Spar Space Systems will design and build the amplification module for the GALS-R16 repeater, which will rely on Spar's expertise in high power payload systems and the use of heritage equipment. Spar will also cooperate with Informcosmos for the integration of the repeater.

When you need to know it as it happens

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Scheduled for launch at the end of 1998, GALS-R16 is a new generation of Russian-built satellite that will provide telecommunications services over Russia and the former Soviet Union.

Informcosmos is a Russian designer and manufacturer of satellite communications systems. It is currently developing a new generation of fixed communications and Direct Broadcast by Satellite satellites (Express and GALS-R16) to replace the existing Gorizont satellites, as well as a mobile satellite system (Marafon) to provide reliable communications with mobile vehicles and remote terminals.

Spar is a Canadian advanced technology company with businesses in the space, communications, aviation and defense, and software industries.

Russian Telephone Network Expanding

· The number of public telephone subscriber lines in Russia increased by one percent, or 227,000, in the first quarter of 1997 to reach 23.3 million as of April 1, reported Interfax, citing the State Statistics Committee (Goskomstat). During the same period, the number of household subscriber lines rose by 1.4 percent. The household increase was the result of the installation of six long-distance digital switches which provide 17,000 new channels in the cities of Gorno-Altaisk, Novokuznetsk, Rostov, Lipetsk, Ulyanovsk, and Cheboksary.

Goskomstat noted, however, that eight of Russia's 12 Express, Gorizont, and Ekran-M communications satellites have passed their service life and are due to be replaced.

During the quarter, 11 new mobile telecommunications base stations were put into operation in Moscow and another in Rostov. Also a paging network in St. Petersburg was expanded to provide roaming in Finland.

The number of cellular and paging subscribers rose four percent (10,000), and three percent (6,000), respectively, over the quarter to a total of 233,000 and 216,000, respectively, as of April 1.

Goskomstat estimated the total value of telecommunications services provided in the quarter, including by new commercial outfits, at 11.8 trillion rubles up from 8.1 trillion rubles in the same period last year.

Russian Communications Ministry enterprises, including those that have been turned into joint stock companies, provided 9.9 trillion rubles worth of telecommunications services during the quarter, including 3.6 trillion rubles to households.

South Caucasus & Central Asia

Aliyev Backs Pipeline Through Turkey

· During a recent visit to Turkey, Azeri President Geidar Aliyev said that Baku supports the Turkish option for transporting Caspian Sea oil extracted by the Azerbaijan International Operating Company (AIOC) over the Russian one. The question of the route "had been decided in favor of Turkey," Interfax quoted him as saying. However, Reuters cited an AIOC spokesperson as saying the company had not yet made a recommendation to Baku on the route. AIOC refused to comment on ALIYEV's statement.

ALIYEV was expressing his support for a Turkish pipeline route that runs from Baku to the Mediterranean Sea terminal of Ceyhan, via Georgia. Turkey has lobbyied hard for approval of the route and seems to have finally convinced ALIYEV of its merits.

The other possible route to the Russian Black Sea port of Novorossiisk via Chechnya has fallen from favor as a result of continued instability in Chechnya and Azerbaijan's apparent desire to reduce its dependence on Russia. An article in Tuesday's Kommersant-Daily implies that part of Turkey's successful lobbying effort was based within Russia. It tells those who stand to lose money if the pipeline bypasses Russia to look for "Ankara agents" in Moscow "among those who are systematically preventing the signing of the Russian-Chechen treaty."

Shevardnadze Criticizes Russia

· Georgian President Eduard SHEVARDNADZE this week expressed anger at Moscow on two major issues, indicating Tblisi's frustration over the fact that Russia seems to be continuing to put its perceived geopolitical interests in the Caucasus ahead of its bilateral relationships.

SHEVARDNADZE reacted strongly to the publication in the Tblisi newspaper Novoye Pokoleniye of an interview with Igor Giorgadze, a former Georgian security service chief. GIORGADZE has been hiding out in Russia since he allegedly masterminded an

When you need to know it as it happens

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unsuccessful attempt on SHEVARDNADZE's life in 1995, reported Wednesday's Kommersant-Daily. The Georgian president pointed out that although it is well known that GIORGADZE is in Moscow, Russian authorities have made no attempt to detain him, despite repeated requests from the Georgian Prosecutor's Office. "I do not understand why Russia puts the interests of one terrorist above the interests of Russian-Georgian relations," he is quoted by Kommersant-Daily as saying.

Shevardnadze considers Russia's refusal to extradite Giorgadze to Georgia as being in the same category as the failure to honor its obligations to extend the security zone controlled by its peacekeeping forces in Abkhazia. During a March summit of CIS heads of state, Russia agreed to widen the security zone farther into Abkhazia to help guarantee refugee return efforts.

Shevardnadze reminded CIS Interparliamentary Assembly general secretary Mikhail Krotov, during his recent visit to Tblisi, that Russia has not followed through on this promise. "Nothing has been done to implement the decisions of the CIS summit," he is quoted by Kommersant-Daily as saying. Russia's position, in Shevardnadze's opinion, calls into question the usefulness of the CIS. If "the Commonwealth shows helplessness in implementing its own decisions, we should probably think about the expediency of the existence of such a Commonwealth."

He warned that should the decision adopted by the CIS March summit not be fulfilled, Tblisi is ready to demand the withdrawal of Russian peacekeepers from Abkhazia when their mandate expires on July 31. A source at the Georgian Foreign Ministry told the newspaper that expert groups have already begun working on proposals to involve the US and Turkey in the negotiations between Tblisi and Sukhumi.

It seems that Russia's attempts to maintain its influence in the Caucasus are backfiring. SHEVARDNADZE couldn't help but notice that Russia finally

extradited former Azeri Prime Minister Suret HUSEINOV, who is accused of leading a coup attempt in 1994, to Azerbaijan in March. Moscow didn't bother with HUSEINOV, despite repeated extradition requests, until it wanted to please Baku. Azerbaijan needed to be appeased after disclosures that Russia had secretly sent large shipments of weapons to Armenia. These kind of selective actions are frustrating Caucasian leaders who see Russian diplomacy as unreliable, a political game.

US Co. in Oman-Kazakh Oil Deal

· US Union Texas Petroleum Holdings Inc. announced on Wednesday that it has signed agreements to form a joint venture with Oman Oil Company Ltd. to explore for, develop, and produce oil and gas in the Kazakh sector of the Caspian Sea and onshore Kazakhstan, reported United Press International (UPI). Union Texas will serve as operator of the new venture and will own a 75 percent interest. Oman Oil, a state-owned project development company, will retain a 25 percent interest. The terms of the agreements were not disclosed.

Union Texas said the venture will explore two onshore blocks in the Atyrau region of northwestern Kazakhstan. The venture has budgeted about $11 million for seismic and other exploration activities during 1997.

The offshore block selections are expected to take place during 1997's third quarter. The government of Kazakhstan is then anticipated to offer the remaining offshore acreage via an international bid tender, it said. Union Texas has opened an office in Almaty.

Iran's President to Tajikistan, Turkmenistan

· Iranian President Akbar Hashemi Rafsanjani on Friday will begin a trip to Tajikistan and Turkmenistan to promote bilateral relations, reported Xinhua. Rafsanjani will hold talks with his Tajik and Turkmen counterparts, as well as attend the summit meeting of the Economic Cooperation Organization (ECO) in Ashgabat.

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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