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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, June 23, 1997

KOVALYOV, who is also a member of the Russian Security Council, was named Justice Minister in January 1995. The scandalous videotape was made in September 1995.

Russian Mafia Smuggling Arms to PKK?

· A Russian organized crime group has been systematically smuggling weapons to Kurdish terrorists in Turkey through eastern Europe and the former Soviet Union, reported today's Washington Times, citing a classified US intelligence report. The Kurdistan Workers' Party (PKK) has been receiving weapons for about a year through Kapikule, on Turkey's western border with Bulgaria, and Sarp, an eastern border checkpoint located in Georgia. The report did not specify the number of weapons shipments that were made or the types of weapons, but Washington Times sources suggest that the Russian group is supplying the PKK with small arms, shoulder-fired anti-aircraft missiles, and rocket propelled grenades.

The report underscores the international threat posed by the porous borders of former Soviet republics. The flow of nuclear materials, weapons, drugs, and commodities through these countries has been growing dangerously since the breakup of the USSR.

The situation in Sarp is a prime example of the consequences of one country's undeveloped border service. Russian border guards troops are currently controlling the Georgian border with Turkey near Batumi and, according to the intelligence document, are allow

Russian Federation


Chernomyrdin in NY for Eco Summit

· Russian Prime Minister Viktor Chernomyrdin arrived in New York on Sunday to attend the UN General Assembly's special session on ecology and sustainable development, which will review global environmental changes five years after the 1992 Rio Earth Summit.

Justice Min. Caught in Sauna Scandal

· Russian Justice Minister Valentin Kovalyov has reportedly been suspended from his post in the wake of a sex and corruption scandal. The newspaper Sovershenno Sekretno early last week published a grainy photograph allegedly showing KOVALYOV cavorting with nude women in a sauna frequented by the notorious Moscow crime group, the Solntsevo gang.

According to Saturday's issue of Kommersant Daily, government investigators have also obtained a videotape featuring a naked Kovalyov with prostitutes in one of the nightclubs. The secret videotape was discovered in a police raid on the safe of Moscow banker Arkady Angelevich, who was arrested on suspicion of embezzlement. Angelevich reportedly told investigators that he had given bribes to Kovalyov.

Kovalyov, who was visiting Sweden when the photograph was published, was immediately recalled to Moscow. He denied any wrongdoing, but not his presence at the bathhouse. "The minister believes that the publication violated his right to privacy," Interfax quoted a Justice Ministry source as saying. "If we allow hidden cameras to pursue us everywhere we will have to say good-bye to hopes of building a law-based society in this country."

Today's News Highlights


Mayors Conference in Moscow

Duma Bill Restricts Religion

Soros Money for Tuberculosis

Svyazinvest Auction Date Set

Gazprom Exec. Injured by Bomb

South Caucasus & Central Asia

Shevardnadze to Meet Clinton

Armenia Buys Telecom Equip.

New Karabakh Peace Proposal

Turkmen Gas Payment Dispute




June 23, 1997

Intercon's Daily

aimed at strengthening border controls in former Soviet republics. However, the Senate appropriations subcommittee on aid to the NIS last week dramatically increased US assistance to Georgia, which could be used to support border control.

Duma Bill Restricts "Untraditional" Religions

· The Russian State Duma today overwhelmingly passed a law that declares Orthodox Christianity is "an integral part of the Russian historical, spiritual, and cultural heritage," but restricts the actions of many smaller religious groups. Deputies voted 300-8 to approve the bill on its third reading.

The bill also supports the right of Russians to practice Islam, Buddhism, Judaism, and other unspecified "religions traditionally existing in the Russian Federation," but it imposes restrictions on the spread of newer, foreign-based religious groups. A religious organization is required to operate in Russia for at least 15 years before it can gain property rights and groups are required to register with the government before the end of 1999.

Duma deputy Gleb YAKUNIN, a defrocked Orthodox priest, has denounced the bill, saying it will re-impose Soviet-era controls over religion, according to the Associated Press (AP). "Instead of the Communist ideology, they are now trying to establish a ruling clerical ideology, which would lead to discrimination against dissent," he said. YAKUNIN said that the bill's ban on proselytizing contradicted the principle of freedom of religious choice.

Russian Orthodox Patriarch Aleksei, who has often railed against the negative influence of cults and small religious sects on Russian society, was a strong proponent of the bill. Last week, the patriarch said the bill will help halt the division of Russians along religious lines. Also last week, Aleksei canceled a scheduled meeting with the Pope in Vienna.

On Friday, the State Duma passed in the third reading a draft law on the principles of the state policy on military and technical cooperation with foreign states, reported Itar-Tass. The law declares the key goals of Russian military and technical cooperation with foreign states to be the consolidation of Russia's military and political positions in various regions of the world and increasing Russian exports of conventional armaments and materiel.

This Week's Happenings

¨ Russian First Deputy Prime Minister Boris Nemtsov will be in China from June 22_28 to prepare for a visit of Prime Minister Viktor Chernomyrdin. Nemtsov is heading the Russian side of the intergovernmental commission on trade, economic, and scientific cooperation.

¨ Chernomyrdin's visit to China is due to take place on June 26_28. He will hold talks with Chinese Premier Li Peng and Chairman Jiang Zemin. Ten documents on different aspects of economic cooperation between the two countries are expected to be signed during the visit.

¨ The leaders of Russia, Belarus, Kazakhstan, and Kyrgyzstan are scheduled to meet on June 26.

¨ Russian State Duma speaker Gennady SeleznyOv will visit the Irkutsk region from June 27_28. SELEZNYOV will attend a regional seminar of parliamentary chairmen from 26 Siberian and Far Eastern regions.

¨ Tajik President Emomali Rakhmonov and opposition leader Said Abdullo Nuri will meet in Moscow on June 27 to sign an agreement on peace and national accord, formally ending the civil war in Tajikistan.

¨ Russian diamond producer Almazy Rossii-Sakha will hold a meeting of shareholders on June 28. The meeting, to be held in Mirny on the northeastern Siberian Republic of Sakha, was called by the company's supervisory board. The board has recommended paying shareholders a dividend of 199,000 rubles per share in 1996.

¨ On June 28, Russian gas monopoly Gazprom will hold its annual general meeting for shareholders.

ing arms smuggling that is destabilizing the region. Clearly, the Russian mafia is using the weak border regime to its advantage.

It is imperative that the US provide funding and technical assistance to the newly independent states to create effective border guard services. An op_ed by Jessica STERN in today's Washington Post notes that the US Senate Armed Services Committee is seeking to reduce funding for US programs

When you need to know it as it happens




June 23, 1997

Intercon's Daily

The two draft laws must still be approved by the Federation Council and signed by the president.


Ruble = 5,760.5/$1.00 (NY rate)

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

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

Mayor's Conference Held in Moscow

· Mayors from 29 of the world's biggest cities attended a conference in Moscow, June 18-19, to exchange views on various problems facing megalopolises. The conference approved the charter of the organization and admitted four new members—Athens, Warsaw, Santiago, and Lisbon.

During the conference, Moscow Mayor Yuri Luzhkov signed a cooperation agreement with the mayor of Bangkok, Thailand. Earlier this month, LUZHKOV visited Baku, where he signed cooperation accords with Azeri leaders.

$5 Billion Needed for Chemical Arms Disposal

· Russia needs $5 billion to destroy its huge stockpile of chemical weapons, reported Interfax today, citing Colonel-General Stanislav Petrov, commander of Russia's chemical and biological defense troops. The general said that Russia could not rely completely on foreign funds to finance the destruction of chemical weapons, but he also noted that the Russian budget only covered one percent of the cost of the destruction program.

The US and Germany have already given millions of dollars to help Russia dispose of its some 40,000 tons of chemical weapons.

Russia Launches Campaign Against AIDS

· On Thursday, the Russian government launched a new campaign against the spread of AIDS. With the help of the French aid agency, Medicins sans Frontieres, Moscow became the sight of a television and billboard campaign against the spread of the disease. The advertising campaign, using the slogan "Safe Sex, My Choice," is aimed at young people and may be brought to other Russian cities, reports RFE/RL Newsline.

Government officials recognize that preventative measures are their best available tool against the

spread of the disease. Money to buy drugs to treat patients is not available. Therefore, billboards, posters, newspapers, and television and radio ads are all being employed by the Russian health care system to prevent the spread of HIV.

Officially, Russia has recorded only 4,400 HIV cases and just 259 full-fledged AIDS cases, said Aleksandr GOLIUSOV, head of the Ministry of Health's AIDS prevention department, quotes the AP. GOLIUSOV went on to say that actual figures are only a fraction of actual cases.

The spread of AIDS through Russia is primarily through drug users and secondarily through prostitution. Since the breakup of the Soviet Union, Central Asian borders are now open for the free flow of drugs to the rest of the world. The level of prostitution has also dramatically increased since the breakup.

Kaliningrad, a sea port located between Poland and Lithuania, is the site of half Russia's HIV cases.

Soros Donates Money for Tuberculosis

· US financier and philanthropist George Soros told reporters in Moscow Friday that he will give $3 million to create a Russian center for infectious disease diagnostics, his financing of a medical program in the country, reported Itar-Tass. The new center will be created by Moscow's Sechenov medical academy and the Russian Health Ministry's tuberculosis research institute in collaboration with the New York Health Institute.

Tuberculosis and intrahospital infections have spread at an alarming rate in Russia over the past few years. Soros said he hopes that other organizations and Russian businessmen will make further contributions toward combating the problem.


Svyazinvest Auction Set for July 25

· The Russian government will auction off a 25 percent stake in telecommunications holding company Svyazinvest on July 25, the press service of the Russian Federal Property Fund told Prime-Tass today. The Fund began collecting $400 million deposits from bidders today and will accept them until July 21. The starting price for the stake has been set up at $1.18 billion.

When you need to know it as it happens




June 23, 1997

Intercon's Daily

Svyazinvest, which was formed in August 1995 with authorized capital of 7.7 trillion rubles, has controlling interest in 85 regional telephone companies nationwide. Its authorized capital grew to 19.5 trillion rubles after it absorbed the state's interest in the Rostelekom, Central Telegraph, Yekaterinburg City Telephone Network, and Giprosvyaz companies.

Senior Gazprom Exec. Injured by Bomb

· A senior executive of Russian gas monopoly Gazprom suffered a severed leg when a bomb exploded under his car on Saturday, reported the Financial Times. The attack is believed to be connected to Vladimir ZAVGORODNY's position as deputy director of Gazprom's gas export subsidiary.

ratist region of Nagorno-Karabakh as part of Azerbaijan, reported Reuters. In return for this recognition, Azerbaijan will reportedly have to grant Nagorno-Karabakh a very high degree of autonomy.

The interest of Western leaders in the nearly decade-long Karabakh conflict has grown along with the discovery of huge oil deposits in the Caspian Sea. During the last few months, the three countries—the co-chairs of the OSCE Minsk Group mediating the conflict—have drastically stepped up diplomacy in the area.

Turkmenistan Drops US Firm from Gas Market

· At a meeting in Ashgabat on Thursday, the board of Turkmen state gas company Turkmenrosgaz decided to break its contract with the US company Itera, which exports Turkmen gas to Western markets, reported Itar-Tass, citing a source in the Turkmen Ministry of Oil, Gas and Mineral Resources. The co-founders of Turkmenrosgaz are Turkmen state gas trading firm Turkmenneftegaz, Russian gas monopoly Gazprom and the US-registered Itera.

Board members noted that Itera still owes Turkmenistan $200 million for 1996 gas deliveries. Itera's 1997 debt totals another $257 million, of which $120 million is owed in cash and the rest in goods.

Turkmen co-founders, represented by Deputy Prime Minister Batyr Sardzhayev, also complained that Gazprom is $70 million in arrears for deliveries of Turkmen gas to Russian regions. Turkmenistan accused Gazprom of making these deliveries without arrangements with the three-party venture, said the report. Turkmenistan gave notice to Gazprom about its decision to take over gas sales.

The board of Turkmenrosgaz warned that the company's status of the joint venture would be altered, unless the Russian and US partners settled the claims by August 1. The Turkmen energy ministry said it had made draft contracts for gas sales with several foreign companies.

South Caucasus & Central Asia

Georgia's Shevardnadze to US in July

· Intercon sources report that Georgian President Eduard SHEVARDNADZE will meet with his US counterpart Bill CLINTON in Washington on July 18.

Armenia Buys S. Korea Telecom Equipment

· Armenia's Ministry of Communication and South Korea's LG Information and Communication Ltd. have signed a memorandum of understanding on the export of $25 million worth of telephone equipment to Armenia, reported United Press International (UPI) today. The deal, signed on Monday in Seoul, includes switches, switching stations, and other telephone system equipment.

LG spokesman Chang Ho-joon told UPI that the South Korean government will provide $25 million to Armenia to support the deal.

Some 15.6 percent of the 3.7 million Armenian population currently have telephones, he said.

G-8 Declaration on Karabakh Conflict

· As part of a new peace initiative in the Caucasus, the presidents of Russia, the US, and France have issued a joint statement at the G-8 Summit on Saturday calling on Armenia to recognized the sepa

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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When you need to know it as it happens