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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, August 29, 1997

Russian Federation


More Details on Top Defense Changes

· The presidential decree issued on Thursday that reshuffled Deputy Defense Minister Andrei Kokoshin and Defense Council secretary Yuri Baturin also created a new defense-related body. The State Military Inspectorate, which is part of the presidential administration, will coordinate government defense policy and will oversee the implementation of decisions and decrees related to it.

The decree, in addition to naming KOKOSHIN secretary of the Defense Council in BATURIN's place, appoints him head of the new Inspectorate. However, it also relieved him of the Deputy Defense Minister post.

Russia-China Sign Major Arms Deal

· China has signed a contract with Russian arms export agency Rosvooruzheniye to purchase some $100 million worth of armaments, reported Thursday's Financial Times. The contract was signed by General LIU Huanquing, a member of China's powerful Politburo standing committee, who arrived Sunday for a 10-day visit to Russia.

LIU met with Russian Prime Minister Viktor CHERNOMYRDIN on Wednesday to discuss military cooperation, including deliveries of spare parts for Russian military aircraft already purchased by the Chinese and the transfer of Russian license that would allow China to build the Sukhoi Su-27 fighter jet, said FT. The Chinese official is also slated to tour military factories across the country, including visits to Yekaterinburg, Novosibirsk, and Khabarovsk.

Russia Denies Carrying Out Nuclear Test

· Russian Nuclear Energy Minister Viktor

Mikhailov today vehemently denied that Russia has carried out an underground nuclear test on the island of Novaya Zemlya, saying that a tremor registered in northern Russia was simply a minor earthquake, reported the Associated Press (AP). Seismologists detected a 3.5 magnitude tremor in the Arctic Kara Sea 12 days ago, just east of Novaya Zemlya, the former Soviet nuclear testing site.

US State Department and Pentagon officials said Thursday that initial indications suggested an underground explosion was touched off in the area and asked Moscow for an explanation. Norway and Finland have made similar requests.

"An ordinary earthquake took place in the Kara Sea 100 kilometers away from Novaya Zemlya, whose magnitude was one to two points. This is a seismic area, and everybody knows it, the Nuclear Energy Minister is quoted as saying. MIKHAILOV insisted that the testing site at Novaya Zemlya had been shut down and that Russia is strictly observing the Comprehensive Nuclear Test Ban Treaty.

Belyayev Quits Our Home is Russia Faction

· Sergei Belyayev today announced his resignation as deputy chairman of the pro-government party Our Home is Russia and as leader of the party's faction in the State Duma, warning of "dangerous trends appearing in the movement," reported Dow Jones. Speaking at a Duma news conference, he said he disagrees with the course of the party.

Today's News Highlights


Russia-Chechen Pipeline Deal

Russia-Turkey Gas Pipeline

Gazprom Plans Intl Tender

Rockwell, Aeroflot Testing Center

South Caucasus & Central Asia

Karabakh Pres. Election

Netanyahu in Azerbaijan

Azeri Oil Development Deal

German Min. in Central Asia

Kazakhs Cancel Gold JV




August 29, 1997

Intercon's Daily

Ruble = 5,826/$1.00 (NY rate)

Ruble = 5,830/$1.00 (CB rate)

Ruble = 5,820|5,840/$1.00 (buy|sell rates)

Television company (VGTRK), will be broadcast nationwide, except in St. Petersburg and the Leningrad Oblast.

During his weekly radio address today, President Boris YELTSIN said that "by creating the new TV channel, we are paying our debt to Russian culture."


Russia-Chechnya Pipeline Accord

· Russian Security Council secretary Ivan Rybkin told the Mayak radio station today that an agreement with Chechnya on transporting Azeri Caspian Sea oil through Russia will be signed in Moscow on September 1. The agreement, to be signed by the Russian Fuel and Energy Minister and Chechnya's southern oil company YUNKO, will allow repairs on the Baku-Grozny-Novorossiisk oil pipeline to be completed in time for the oil to flow in late September.

Both sides have already initialed the text of the agreement, Deputy Fuel and Energy Minister Sergei KIRIYENKO told Russian television RTR on Thursday, after two days of negotiations in Grozny.

Russia's Sidanko Buys Iraqi Oil

· Russia's Sidanko oil company on Thursday announced it has reached agreement on the purchase of 1.8 million barrels of oil from Iraq, under the UN oil-for-food program, reported United Press International (UPI). Company officials said the oil will be shipped from the port of Mina Al-Baqr in southern Iraq in September. The deal is value at $28 million.

Russian-Turkey Gas Pipeline Deal Signed

· Russian gas monopoly Gazprom and the Turkish government today in Ankara signed an agreement to build an undersea pipeline to carry natural gas to Turkey, reported Reuters. Under the agreement, Turkey will receive eight billion cubic meters (bcm) of gas annually until the year 2000 and 16 bcm annually from the year 2003. The pipeline will run under the Black Sea connecting Izobilnoye in southern Russia to the Turkish port of Samsun.

The pipeline is part of a landmark $13.5 billion, 25-year agreement signed between Gazprom and Turkey in April. The pipeline is expected to cost a total of about $3.3 billion.

Apr May Jun Jul Aug

"Today, this movement is beginning to serve a concrete corporation of people and interests which are determined only by power, and not by public interests," he was quoted as saying. Belyayev also accused the faction of failing to meet electoral promises and becoming a Soviet-style party.

Russian Prime Minister Viktor CHERNOMYRDIN founded Our Home is Russia in 1995 to present a pro-government alternative to the Communists and to unite reform-minded groups. However, the party gained a disappointing 63 seats in the 1995 parliamentary elections, compared with the Communists 139 seats. The party has generally failed to act as a uniting force among reform leaders or to attract significant popular support.

CHERNOMYRDIN told Itar-Tass today that he is ready to accept BELYAYEV's resignation, noting that the faction leader "was not a success with that work." The relationship between CHERNOMYRDIN and BELYAYEV has apparently been going sour for some time, as seen in CHERNOMYRDIN's criticism of the faction leader at an Our Home board meeting in late June. The premier will be responsible for nominating a new head for the parliamentary faction.

Culture Channel Head Named

· A presidential decree issued on Thursday named Deputy Culture Minister Mikhail Shvydkoi as chief editor of the new state television channel Kultura. The channel, which will be run by the Russian State

When you need to know it as it happens




August 29, 1997

Intercon's Daily

Gazprom Plans Int'l Tender for Equipment

· Russian gas monopoly Gazprom has announced a $225 million tender on purchases of equipment and services for reconstruction of the gas distribution system, reported Interfax. The tender operator, the Center for the Preparation and Implementation of Investment Projects, said the purchases will be financed by a loan from the European Bank for Reconstruction and Development (EBRD).

The first part of the tender offering contains 13 lots, including mobile compressor stations, mobile environmental and research laboratories, and hydro-vacuum units for treatment of various materials.

The tender documentation for potential bidders will be available from September 2-24 and bids will be accepted during November 10-20. The tender is open to bidders from all countries.


Aeroflot, Rockwell Plan Test Center

· US Rockwell Collins and Aeroflot Russian International Airlines plan to open up a joint avionics test center at Moscow's Sheremetyevo Airport before the end of the year, reported Newsbytes on Thursday. The two sides have been working since 1994 to establish an avionics testing facility to be operated by Collins, staffed by Aeroflot technicians, and equipped with Collins test equipment.

Rockwell Avionics & Communications has provided test equipment to be used in testing avionics flown on a wide range of Russian and Western aircraft.

The start-up will be initiated by installation of a TVI-900 automated test station now en route to the new facility. The station will be operated by Aeroflot technicians who recently completed five weeks of training in the US.

These technicians, according to the company, have been trained to evaluate and repair LCD vertical speed indicator avionics integrated in the Collins Traffic Alert and Collision Avoidance System (TCAS) flown on many Aeroflot aircraft.

GSE Receives Russia, Ukraine Contracts

· Columbia, Maryland-based GSE Systems, Inc., announced on Thursday that its GSE Power Sys

tems subsidiary has been awarded $6 million worth of contracts to build and upgrade simulators in Russia and Ukraine, said a company press release. Pacific Northwest National Laboratories (PNNL) has awarded GSE the contract under the US Department of Energy's international nuclear safety program which is aimed at improving the safety of Russian-designed reactors.

Under one of the contracts, GSE will provide the simulation technology and manage various local Ukrainian companies in building a fill-scope simulator for Unit 3 of the Rivne Nuclear Power Plant in western Ukraine. The other contract involves the development and delivery of a display-based analytical simulator for the Balakovo Plant in Russia.

"Upon completion of the PNNL contract for Rivne, GSE will have build simulators for each of the five civilian reactor sites in Ukraine," a GSE Power Systems official is quoted in the release as saying.

South Caucasus & Central Asia

Karabakh Pres. Election on September 1

· Azerbaijan's separatist region of Nagorno-Karabakh will hold an unsanctioned presidential election on September 1 to fill the position left vacant when former President Robert KOCHARYAN became Prime Minister of Armenia in April. Azerbaijan has called the election "illegal," and Russia has also denounced it. Armenia supports the poll.

As of August 21, three candidates were registered to compete for the president's seat, said Itar-Tass. Karabakh parliamentary deputy Boris ARUSHANYAN will vie for the post against parliamentary chairman Artur TOVMASYAN and Karabakh foreign minister Arkady GUKASYAN. Karabakh's independence from Azerbaijan and its own statehood are the main tenets of the platforms of all three candidates.

Israel's Netanyahu to Azerbaijan

· Israeli Prime Minister Benyamin Netanyahu today paid a brief visit to Baku, following a tour of Far East Asia. After a some 4-hour meeting with President Geidar Aliyev, Netanyahu told reporters that they discussed cooperation in the energy sector, including the possibility of future deliveries of Azeri oil to Israel. Aliyev said that his country is interested in technologies being developed in Israel.

When you need to know it as it happens




August 29, 1997

Intercon's Daily

New Azeri Oil Development Deal

· The Azeri state oil company SOCAR has prepared a production-sharing deal with US Union Texas Petroleum and Canada's Commonwealth Oil & Gas Company Ltd. to develop a 603-hectare onshore oil field in Azerbaijan, reported Interfax. The Shemakha-Gobustan field, west of Baku, includes some partially-explored and some unexplored areas.

The field was mothballed in the early 1980s because of its distance from any industrial facilities and the great depth at which its oil and gas reserves lie. The last exploration well drilled there was in 1979. However, the field is believed to contain significant amounts of gas, which is needed for domestic consumption. Commonwealth Oil & Gas has already done preliminary exploratory work at the deposit.

The deal would be Azerbaijan's second production-sharing agreement to develop an onshore deposit. The other deal, with US United BMB Oil Group, covers the western part of the Absheron peninsula.

Output at Azerbaijan's onshore oil fields is forecast to reach 1.55 million tons of oil this year, representing 17.2 percent of the country's total expected output.

German Minister Tours Central Asia

· German Economics Minister Gunter Rexrodt, accompanied by a 40-strong delegation of German businessmen, visited Turkmenistan, Uzbekistan, Kyrgyzstan, and Kazakhstan this week to strengthen economic and business ties. Germany's annual trade with the region totals about DM2 billion (about $1.1 billion), with the lion's share of that trade (DM920 million) conducted with Uzbekistan.

German oil companies RWE DEA AG and Erdoel-Erdgas Gommern GmbH (EEG) announced on Monday that they will participate in a joint venture for the development of the Akshabulak oil field in southeast Kazakhstan, reported Reuters. RWE DEA officials said that a consortium of German banks would offer a credit of $106.7 million to support the venture.

Total investment for developing the Akshabulak deposit is planned a DM600 million.

The Akshabulak joint venture will include RWE DEA (with a 25 percent stake), EEG (17.5 percent), the International Finance Corp. (7.5 percent), and Canada's Hurricane Kumkol Munai (50 percent).

Initial production is scheduled for mid-1998 at an annual volume of 300,000 metric tons (MT). Recoverable reserves are estimated at 15 million MT.

Turkmen President Saparmurat NIYAZOV on Thursday urged German companies to take part in a recently announced tender to develop oil and gas deposits in the Turkmen sector of the Caspian Sea, reported Dow Jones. NIYAZOV, who is currently in Germany, told businessmen in Cologne that German involvement in Turkmen oil and gas projects would help keep Germany supplied with fuel for decades to come. He specifically invited German firms to sign a contract for the use of natural resources from the Kara-Bogaz-Gol Gulf, near the Turkmen Caspian Sea coast, for a period of 40-50 years.

Kazakhs Cancel Canada Gold Venture

· Kazakhstan has dissolved a Kazakh-Canadian gold mining venture, accusing the company of failing to increase production at some mines formerly run by the government, reported Dow Jones. Gold Pool, a joint venture between Canada's Central Asian Goldfields and Kazakh BSB Corp., took control over the Aksu, Bestube, and Jolimbet mines last year from the state mining company. It was expected to invest up to $70 million in the mines.

The government said Gold Pool had not fulfilled its pledges and that gold output had declined in 1996 and the first half of 1997. It said tax and wage arrears remained a problem at the mines. The government said Gold Pool offered to settle the debts if it was given a controlling interest in the three mines.

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