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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, June 20, 1997

This week the Daily Report on Russia will

present guest articles from the embassies of the

Newly Independent States (NIS) in the US .

our common roots and our common history. Without having this sense of uniqueness as a region, nothing else I propose will make any sense. My first proposal is simple: let us create a project for our scholars and experts in which they will systematically uncover and illuminate those things that unite us and give us a sense of shared purpose. Let them write our regional history¾warts and all¾in all its complexity, richness and beauty. Let's ask them to put new strength into the historical platform on which we now stand and on which our future must be built. Perhaps an American university would coordinate such an effort.

Second, we cannot change our geography. When Soviet borders and troops stood between us and the rest of the world we had fewer choices concerning who our friends were and with whom we could trade. I am certain that none of us believe that this was a preferable state of affairs. Let us be frank on this issue. We have three large neighbors. It will be necessary for us to have close and correct relations with Turkey, Russia and Iran. In fact, there is reason to hope that Georgia, Armenia and Azerbaijan can find not only accommodation with each of these powers but also can prosper with them. These relationships can form into strong and friendly attachments. But let it also be clear what will damage us all in the long run. If any of us attempts to exploit a relationship with one of our powerful neighbors as a way of gaining advantage over another South Caucasian state, its gains would be only temporary, the product of foolish politics.

Third, let us agree that speaking with one voice on many pressing strategic issues is preferable to speaking with many voices. Today we tend to speak about Georgia's problems, Azerbaijan's problems, and Armenia's problems. But this is changing. Wednesday, the US Senate Appropriations Subcommittee for the first time earmarked funds for Georgia on par with that of Armenia. An exception



Today's contribution is from the Embassy of the

Republic of Georgia in Washington:

South Caucasus Cooperation and Development

When we first began discussing the need for greater cooperation among the three South Caucasus states more than three years ago, the war in Nagorno-Karabakh was raging and Abhkazia was a painful sore for Georgians. Other smaller but no less destabilizing regional or ethnic problems impeded our efforts to build a strong national economy and create an effective national government. The relations among our three states and with Russia, which can be both a good partner and an antagonist, were mixed and uncertain. No common threads of regional security policy were visible, and no common vision of how we should best organize ourselves to deal with the uncertainties of these new relationships in the region were apparent. Even our foreign relations and diplomacy were divided more than unified. In some cases, we chose to amplify our local squabbles in the legislatures of foreign capitols. Three years ago there existed little regional cooperation. Today problems remain but so do the opportunities

We do not have to agree on everything, but we should agree on some things. First, we must agree that we are a distinct region and being part of that region entails both risks and opportunities. In the past, this sense of regional cohesiveness and purpose was strong. Scholars traced our shared links and associations, and institutions existed to study




June 20, 1997

Intercon's Daily

was also proposed for Section 907 of the Freedom Support act which allows American funding for "Democracy and Government Program Assistance" to Azerbaijan. I can only hope that my Armenian colleagues, who do enjoy a strong and vital Diaspora community in the US and Europe, note well these developments. The signs of a backlash are already evident, which is all the more reason to explore and develop concepts that underline Armenia's strategic importance as part of its region. Any foreign policy built strictly on the backs of a Diaspora community will ultimately fail.

What kind of concepts can we discuss? Where might there be resonance for a message that the independent states of the South Caucasus deliver in unison? I can think of several.

First, we should emphasize the great importance of the stable status of South Caucasus for maintaining positive relations between and among our larger neighbors. We are all aware of the ongoing political and social adjustments—of which are greater in some places than others—among our larger neighbors. A strong and politically stable South Caucasus helps our neighbors to concentrate on their own domestic issues.

Second, let us advance the idea that the north-south linkages that once defined the Caucasus and Central Asia as separate regional issues are rapidly giving way to east-west linkages that presage the emergence of a Eurasian belt stretching from the Chinese border to the Black Sea. These countries will increasingly share a wide range of strategic interests. Trade will drive this notion of the Eurasian Corridor. These new interests will be symbolized by and embodied in the planned east-west Eurasian transport corridor that will eventually link Central Asia to Europe via the South Caucasus. It will rehabilitate and expand highways, railroads, airports and ports from Tashkent to Batumi; link the states of this new Silk Road with each other and the outer world via the most modern and sophisticated communications and information technologies; and establish policies and plans to train personnel to make it all work in concert.

The Eurasian Corridor will overlap and interact with the emerging Greater Black Sea Region, which will center on the developing commercial and political

relationships between Turkey, Ukraine and the South Caucasian states, but it may also include overlapping relationships that include Iran and Bulgaria.

The Eurasian Corridor's center is the south Caucasus. Georgia, Azerbaijan and Armenia are presented with a historical opportunity of immense proportions. If we are clever and if we approach the opportunity for trade, for the transport of goods and energy, for the creation of new political relationships that will flow from the economies of the Corridor with a common vision and a common sense of sharing in its benefits, our societies will benefit at levels unlike anything we could have imagined only a few years ago. Moreover, the Eurasian Corridor will be a strategic reality. When we speak in unison as principal participants in the Corridor's operation and success, people will listen, and the "they-are-just-another-little-country" syndrome will evaporate.

But this is also what we also stand to lose. Disunity, disagreements, disharmony will compromise our position and our opportunities. And like the current politics over the routing of energy pipelines, our disunity can risk that the reality of the Eurasian Corridor will be routed around us.

As the last three years have shown, we cannot dissolve our differences or overcome our reluctance to work together all at once. So let us find areas where progress can be immediate and lasting. There is much to be done on regional legal reform, customs procedures and developing transport infrastructures. All South Caucasian states should share in the region's natural wealth, especially energy. Let us therefore find specific areas where our understanding of our regional responsibilities can be advanced.

I would prefer to begin with a vision of what the South Caucasus is and can be and we should immediately begin to explore this together. But short of this, we should begin to solve the problems of regional cooperation one by one. Georgia's continued economic revitalization, marked in 1996 with its economic growth of 10 percent, and low inflation of only 1.5 percent are a clear indication that we have turned the corner from the difficulties of the past through the leadership of Edwuard Shevardnadze. We expect these rates to continue and even improve in 1997. Even though these figures are the highest within the former Soviet Union, they are even more remarkable

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when considered from the standpoint of Georgia only four years ago. Georgia, then racked by civil war has emerged the stronger and is now able to contribute to this effort concretely. Georgia is building a pro-foreign investment climate, on the foundations of its new constitution, laws and freely elected legislature and government. We are ready to work with all regional parties and those larger states which seek the mutual benefits of prosperity and independence. At some point, the solutions to these problems will suggest a vision. This vision is in fact emerging as I am writing. It is found in the economic seeds of the Eurasian corridor. The United States will no doubt play an important role in this process. And when this occurs it will be an important day for our people, our neighbors and the world.

The Ambassador

Tedo JAPARIDZE has served as the Ambassador of the Republic Georgia to the United States since 1994. From 1992-1994, JAPARIDZE served as the National Security Advisor to President SHEVARDNADZE. Prior to that, he held several positions at the Ministry of Foreign Affairs, including Deputy Foreign Minister and First Deputy Foreign Minister. JAPARIDZE received his doctoral degree from the Institute of the USA and Canadian Studies in Moscow. Previously, he taught at the Tblisi State University in the Department of International Relations and International Law.

Today's News


CLINTON Meets Russian President

• US President Bill CLINTON will meet Russian President Boris YELTSIN today in Denver. The two presidents agreed to meet several hours prior to the official opening to discuss Russia's integration to the global economy, NATO expansion, European security issues, and arms control, reported Reuters. This will be the third meeting between them this year.

CLINTON has arranged for YELTSIN to conduct the opening talk of the three-day gathering at a working dinner tonight. The discussion tonight will focus on Bosnia and what the leaders can do to "advance the

nonmilitary parts of the peace process" in the former Yugoslav region, according to Dan Tarullo, a White House official.

While the two leaders have enjoyed some success lately in improving relations, several other issues have shown little progress. Russia's membership in international institutions such as the World Trade Organization, while supported by CLINTON, has not seen much movement. On his side, Yeltsin will have difficulty showing progress with the status of the START 2 agreement. The Russian parliament is not expected to ratify the 1990 nuclear reduction accord any time soon.

Japanese claims to the Kuril islands will also be a subject of discussion. When asked for help by Tokyo to settle the issue, CLINTON stated it will have to be resolved. Japanese Prime Minister Ryutaro Hashimoto stated that he will also seek support from other leaders of at the summit. Russian Presidential spokesman Sergei Yastrzhembskii said "if this issue is addressed, it will have to be in the framework of joint steps undertaken to develop natural resources."

Georgia-Abkhazia: Minor Progress

• The talks on the status of the controversial Abkhazia region ended today with little progress. Georgian Deputy Foreign Minister Giga BURDULI said that the discussion between Abkhaz leader, Vladislav ARDZINBA, and Georgia Foreign Minister, Irakly MENAGARISHVILI, progressed slowly. After working on a wide-ranged political agreement, ARDZINBA told Interfax that "Abkhazia has made a maximum of compromises...it is completely up to the Georgian side" to finalize the issue.

Abkhazia, in its struggle for independence, has suffered politically and economically. It has not been recognized as a separate state by other nations and has been blockaded by both Russia and Georgia in their attempts to end the conflict. Russia, serving as a peacekeeper, has sent 2,500 Russian soldiers to a buffer zone between the two sides. Georgia has demanded that the peacekeepers leave after July 31 unless they patrol and help resettle the 150,000 Georgian refugees still remaining on the territory of Abkhazia. However, while Russia agreed to the demand, Abkhazia remains opposed to this condi

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tion. It is feared that if the peacekeeper retreat, the fighting, which killed more than 10,000 in 1992-93, would reignite.

Protests Called in Moldova

• Moldovan trade unions are calling for rallies on July 3rd to protest the government's decision to raise the old age pension limit and the prices of fuel and electricity writes Itar-Tass. Moldovan officials have stated that the changes are necessary to save the economy from disaster. Moldovan Prime Minister, Ion CHUBUK, argued that energy and heat production are below production costs and can no longer be tolerated. Criticism of these actions have come from both the left and right. Opposition parties are considering a collection of signatures to sack the existing Cabinet.


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

Ruble = 5,783/$1.00 (CB rate)

Ruble = 5,761|5,805/$1.00 (buy|sell rates)

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The Duma's approval is a major victory for President YELTSIN and his drive to restore financial order to the government and to improve Russia's investment climate. The tax code will simplify existing regulations, broaden the tax base and allow the government to improve budget plans for 1998.


Russian Harvest Improves Slightly

• This year's harvest in Russia will be some 70 million tons according to Alexander YUKISH, president of the Russian Grain Union, reports the Financial Times. This amount is only a slight improvement over 1995-1996 when 69.3 tons were harvested. YUKISH went on to state in his interview with the Financial Times, that Russia would import approximately four million tons in the current agricultural year to July to meet Russia's needs.

Red Tape Delays Metal Exports

• The world's platinum metals market continues to be effected by Russian bureaucracy according to a Reuters report today. With nearly two-thirds of the world's palladium and approximately 20 percent of platinum deliveries, these delays have a had significant impact on world market prices. Just this month, palladium prices soared to a 17-year high and platinum prices rose to a 7-year high.

Most international traders attribute the delay to in-fighting between state agencies. Russian agencies responsible for metals exports have undergone a considerable change in the last year. As a result of this reshuffle, Russian agencies can't seem to coordinate a clear policy on metals exports.

Just last week, Almazjuvelirexport, the state precious metals trading agency, did announce that platinum exports would be set at 22 million tons. This was an unprecedented move designed to calm international traders. However, since then, it has not stated when deliveries would commence. This lack of communication has flustered traders and given rise to speculation about Russian reserves.

Russian Tax Code Support by Duma

• Fearing for their livelihood, the Russian parliament, dropped earlier threats and conditionally approved a new tax code at its first reading, reports the Financial Times. It is widely believed that Parliament acted fearing YELTSIN would dissolve them if they did not approve the tax code.

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

Svetlana Korobov, Contributing Editor

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