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

Tuesday, July 22, 1997

Sergeyev added that if he does not succeed in immediately pushing through reforms, he will resign. "I am fully determined to take advantage of this moment. …If I fail, I shall have to go."

Briton Killed in Moscow Apartment Fire

· The body of a British businessman was found in his burning apartment building in Moscow on Sunday, reported PA News today. Alex MCINTOSH, 47, had been working in Moscow since October for British construction company Oscar Faber.

"At this stage, we have not been given any indication from them that there were suspicious circumstances," PA News quoted a Foreign Office spokeswoman as saying. However, Interfax cited Moscow officials as saying that the fire was set deliberately. No further details were available.

Two Shot at Moscow Film Festival

· A former Russian nightclub owner and his bodyguard were gunned down Monday night outside a movie theater hosting the 20th International Moscow Film Festival, reported Interfax. Police are searching for two suspects who used a Kalashnikov rifle equipped with a silencer. Contract killings in Russia are rarely solved.

Shots Fired at Dubinin's Home

· Gunshots were fired early this morning at the Moscow apartment of Russian Central Bank chairman Sergei DUBININ, but no one was home and no injuries were reported,

Russian Federation

Politics

Yeltsin to Cut 500 Generals

· Russian President Boris Yeltsin said Monday that he is ordering the armed forces to cut more than 500 generals from their ranks, reported United Press International (UPI). Yeltsin said the current number of 2,865 generals is too high and there should be a ceiling of 2,300.

Following a meeting with Defense Minister Igor Sergeyev in Samara, Yeltsin said that the government's plan for military reform will go forward despite criticism. Last week, Yeltsin signed several decrees which will reduce the number of servicemen, decentralize command structures, and merge some military units.

State Duma Defense Committee chairman Lev ROKHLIN and former Security Council secretary Aleksandr LEBED have harshly criticized the proposed reform measures in the press. "We will brush aside the Rokhlinites with their unconstructive actions. We do not need such help," YELTSIN is quoted by Reuters as saying.

The president instructed SERGEYEV to launch a public relations campaign to explain the reforms. "People need to know the true content of the reforms, and politicians need to know, so that they can make the right judgments about the first reform measures and steps," Interfax cited him as saying.

In an interview in today's Izvestia, Sergeyev admitted that the government's military reform plan is opposed by many high-ranking Defense Ministry officials and other top brass. Therefore, the minister said he will rely on supporters in his entourage and middle-ranking army officers to carry out his plans.

Today's News Highlights

Russia

US DOE Pena in Russia

Anti-Dumping Rulings - Russia

Qualcomm Gets Russia License

European Republics

Ukraine GDP Down

Gazprom Cuts Gas to Belarus

South Caucasus & Central Asia

Armenia-US Eximbank Accord

AIOC Deals w/Turkmen Threat

Kazkommertzbank Issues ADRs

Politics-Economics-Business

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Tuesday

July 22, 1997

Intercon's Daily

said Dow Jones, citing a central bank spokesman. DUBININ's apartment is in a building that houses several senior government officials and is located near the main government building.

Interfax quoted a police official as saying that DUBININ called the police after finding a ricochet mark on his window and bullet lodged in the frame. In March 1996, unidentified gunmen fired at DUBININ's home, after which he had bullet-proof glass installed at his apartment.

Comment: Last year's attack on the Central Bank chairman's home was called a warning by one bank official. This new assault likely carries a similar message. Over the last few weeks, DUBININ has stepped on some powerful toes by publicly accusing a former Deputy Finance Minister—Andrei VAVILOV—and three leading commercial banks—MFK bank, Uneximbank, and Unikombank—of mishandling government funds.

It appears that DUBININ has laid bare an internal political and economic struggle. This impression is underscored by the fact that, despite their seriousness, the charges were quickly denied and the scandal was swept under the rug.

Economy

Ruble = 5,787.5/$1.00 (NY rate)

Ruble = 5,791/$1.00 (CB rate)

Ruble = 5,783|5,799/$1.00 (buy|sell rates)

US DOE Secretary Pena in Russia

· US Energy Secretary Federico Pena met with Russian Atomic Energy Minister Viktor Mikhailov in Moscow Monday to discuss bilateral nuclear energy cooperation. The talks focused on the implementation of the agreement on processing highly-enriched uranium, and on the removal of restrictions on trade with the US in uranium products, according to Itar-Tass. Mikhailov and Pena also agreed to continue joint activities in creating new types of nuclear reactors based on fast neutrons.

During the meeting, the two signed a joint statement saying that "the research institute of instruments in Lytkarino is now part of Russian-American cooperation on counting, control, and physical protection of nuclear materials," said Itar-Tass.

Pena also met with First Deputy Prime Minister/Fuel and Energy Minister Boris Nemtsov on Monday

to discuss investment possibilities in Russia's fuel and energy sector, particularly in power engineering. The two also touched on prospects for the development of nuclear power engineering and the taxation of joint ventures in Russia.

The two officials told reporters after the meeting that Moscow will host a summit of energy ministers from the G_7 plus Russia in March or April 1998, ahead of the summit of the eight, scheduled for May 15_17 in Birmingham, England. The summit will address global energy issues and investment in the Russian energy complex.

Russia Says 14 Nuke Safety Projects Done

· The Russian nuclear concern Rosenergoatom has completed 14 international projects worth $9 million to guarantee safety at Russian nuclear power stations in the first half of 1997, reported Interfax on Thursday. The concern expects to use a total of $50-55 million in foreign investments for nuclear safety projects this year.

Rosenergoatom vice president Anatoly Kirichenko told Interfax that the biggest grant decided on between January-June was $44 million from the US. Kirichenko said that a total of 25 nuclear safety projects are to be carried out in Russia this year with Western funding.

Last year, Rosenergoatom carried out $54 million worth of nuclear safety projects, with Western companies delivering equipment worth $44 million and technologies worth $10 million.

Under bilateral agreements signed this year, France decided to allocate $24.5 million for Russian nuclear safety, to be spent over 2-3 years, said Kirichenko. In addition, several million dollars will be invested in the Russian energy industry over five years through agreements with Germany. The US is taking part in 46 Russian nuclear safety projects worth $98 million and decided this year to invest in 10 new ones worth $11 million.

Russian Beset with Anti-Dumping Rulings

· Russia is among the top 10 countries facing anti-dumping claims, with the US and the European Union (EU) leading in the number of anti-dumping

When you need to know it as it happens

Politics-Economics-Business

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Tuesday

July 22, 1997

Intercon's Daily

investigations, reported the Moscow Times recently. Russia hopes that it will have a better chance of countering anti-dumping allegations once it is admitted to the World Trade Organization (WTO), which has a dispute settlement body.

The paper gave the following list of products and duties against Russian exports imposed by the EU: ammonium nitrate—198 percent; calcium metal—270 percent; ferro-silico manganese—248 percent; ferro-silicon—302 percent; ferrochrome—246 percent; electrical steel sheets—42 percent; isobutanol—87 percent; pig iron—182 percent; potassium chloride—308 percent; silicon carbide—94 percent; unwrought magnesium—174 percent; urea—49 percent; seamless pipes and tubes—33 percent; and unwrought unalloyed zinc—5 percent.

The US has the following anti-dumping duties against Russian products: urea—68 percent; ferro-silicon—104 percent; ferrovanadium—4 percent; and carbon steel plate—61 percent.

In addition to the US and EU, some 11 countries have launched anti-dumping investigations or have imposed duties against Russia products including Canada, Mexico, Argentina, Brazil, Turkey, South Africa, India, Indonesia, South Korea, and Taiwan.

Nakhodka Airport Opens for Business

· The first passenger plane touched down today at the new airport of Russia's Far Eastern free economic zone Nakhodka, reported Itar-Tass. The Nakhodka airport was build on the site of a former military airport. About 100 school children from the Far Eastern city of Komsomolsk-on-Amur have arrived in Nakhodka on a TU-154 plane to spend their summer holidays at camps in the Primorsky Krai.

The new airport will mainly serve for transshipping cargoes arriving from the countries of the Asian-Pacific region to different places of destination in the Far East. The Nakhodka airport will only receive passenger planes on an as needed basis.

Business

QUALCOMM Gets Russia OK for CDMA

· US Qualcomm has announced that its code division multiple access (CDMA) cellular systems have been approved for use in Russia, reported

Newsbytes on Monday. "The certification clears the way for us to move forward immediately with commercial deployment of CDMA systems in the Moscow Region, Rostov, and Chelyabinsk, where Qualcomm has already won contracts to deploy CDMA wireless local loop systems," Ronald Uhlig, Qualcomm's regional vice president for the CIS and the Baltic states, is quoted as saying.

The Russian State Committee for Telecommunications and Information has said that the approval was granted after extensive testing on Qualcomm's CDMA wireless local loop (WLL) network in Chelyabinsk. The approval will allow Qualcomm's cellular systems to compete with European majors, such as Sweden's Ericsson and Finland's Nokia.

Also, the license extends to include Qualcomm's CDMA One (IS-95) systems, which offer fixed access wireless systems for regions where landline circuit deployment is unsuitable.

According to Qualcomm, its Intelligent Base Station Controllers (IBSC), Base station Transceiver Subsystems (BTS), QCP-800 portable phones and QCT-1000 fixed wireless telephones can now be legally used in commercial wireless local loop (WLL) applications throughout Russia.

The certificate is valid for three years and is renewable after that, pending an annual inspection of the certified equipment by the Russian State Committee for Telecoms and Information.

European Republics

Gazprom Reduces Deliveries to Belarus

· Russian gas monopoly Gazprom on Monday reduced natural gas deliveries to Belarus by 50 percent because of the country's escalating debt, reported Interfax. Gazprom warned Belarus gas company Beltransgaz last week that supplies would be cut unless the company paid off some of its debt for past deliveries. On Saturday, daily gas deliveries to Belarus were cut by 25 percent.

Gazprom officials says Beltransgaz owes it $203 million, while the Belarus company claims that it only owes $123 million. A Belarussian government delegation arrived in Moscow today to negotiate a debt repayment plan.

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When you need to know it as it happens

Tuesday

July 22, 1997

Intercon's Daily

Today, Gazprom reduced deliveries to Ukraine by about 20 percent over that country's unpaid bills.

Ukraine's Economy Still Contracting

· Ukraine's Statistics Ministry said last week that the country's gross domestic product (GDP) declined by 7.5 percent in the first six months of 1997, compared with the same period last year, reported Xinhua on Monday. The decrease was worst in agriculture, transport, and communications. In addition, investment fell 11 percent, mainly in manufacturing, compared with the first half of 1996.

Kuchma Replaces Ukraine General Prosecutor

· Ukrainian President Leonid KUCHMA signed a decree today dismissing General Prosecutor Grigory VORSINOV, saying he was of retirement age, reported Reuters. VORSINOV was seen as an ally of former Prime Minister Pavlo LAZARENKO who quit earlier this month, apparently under pressure.

Another decree named Oleg LITVAK as acting General Prosecutor. LITVAK, previously KUCHMA's top legal advisor, has been heading the National Bureau of Investigation, a newly-created body charged with combating corruption and organized crime.

South Caucasus & Central Asia

Armenia Signs PIA Accord with US Eximbank

· Armenia has signed a Project Incentive Agreement with the US Export-Import Bank that will make possible the financing of US exports to Armenia, reported RFE/RL. The PIA provides a framework for financing US sales to Armenia, where repayment is based on export revenues from the project, rather than a sovereign guarantee of the debt by the host country government.

The agreement was signed in Washington between Armenian Economy Minister Armen DARBINIAN and Eximbank head James HARMON, who said it will help build a solid trade relationship between the two countries and facilitate financing for exports.

Cen. Asian Railway Transport Accord

· The directors general of the railway companies of Iran, Turkey, Pakistan, Turkmenistan, Kazakhstan, Azerbaijan, Uzbekistan, and Tajikistan have signed an agreement on railway transportation cooperation, reported Compass news on Monday. The agreement, signed in Istanbul, covers exchange and supply of cargo wagons and containers, fixing hiring charges of railway equipment, and cooperation in stabilizing service charges of rail transportation.

Turkish railways Director General Tekin Cenar said that the Turkish railway link to Central Asian countries, established through a link with the Mashhad-Sarakhs-Tajan railway, is the most important link between Turkey and the region.

Kazkommertsbank Issues ADRs

· Kazakhstan's largest private bank Kazkommertsbank has become the first Kazakh company to issue American Depositary Receipts (ADRs), equivalent to 28 percent of its equity, reported today's Financial Times. The issue, which was several times oversubscribed, is an important step in Kazakhstan's efforts to integrate with global capital markets, it said.

Last January, Kazkommertsbank, founded in 1991, became the first Kazakh bank to obtain an international credit rating and it recently received a $20 million syndicated loan arranged by Bankers Trust.

AIOC Not Worried About Turkmen Threats

· Azerbaijan International Operating Co. (AIOC) president Terry Adams told reporters on Friday that he is certain that the three Caspian Sea oilfields being developed by his company are in Azerbaijan's sector, reported Itar-Tass. Adams dismissed claims by the government of Turkmenistan that two of the fields—Azeri and Chirag—are in the Turkmen sector. The Azeri government and the AIOC have sent an official letter to Ashgabat pointed out Turkmenistan's mistake and they hope that the matter will not have to go to court, said Adams.

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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