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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, August 4, 1997

Russian Federation


Korzhakov Memoir Excerpt Published

· An excerpt from the memoirs of former Russian presidential bodyguard Aleksandr Korzhakov, published in the Sunday Times of London, said that Russian President Boris YELTSIN failed to meet with Irish Prime Minister Albert Reynolds at Shannon Airport in September 1994 because he was ill. Rumors surrounding the embarrassing diplomatic incident had YELTSIN too drunk to hold the meeting.

The excerpt described in dramatic detail how Yeltsin collapsed in the night as he got up to go to the plane's toilet, about three hours before the scheduled meeting in Ireland. Korzhakov said he was woken by Yeltsin's wife Naina and dragged YELTSIN over to his bed. KORZHAKOV suggested that he had suffered a heart attack or a mild stroke.

The president was treated by doctors on board. Although too weak to stand without support, YELTSIN insisted on trying to attend the meeting with REYNOLDS and had to be physically restrained by his aides. First Deputy Premier Oleg SOSKOVETS was sent out to met the Irish leader in his stead.

"You have disgraced me in front of the whole world by doing this," KORZHAKOV cited YELTSIN as saying to him. "You're the one who nearly disgraced Russia and yourself," the bodyguard retorted.

Korzhakov was YELTSIN's friend, bodyguard, and adviser for 11 years. He was dismissed as chief of the Presidential Bodyguards in June 1996, and has since become YELTSIN's adversary.

The memoir, titled Boris YELTSIN: From Dawn to Sunset, is to be published in Russia this week. The

excerpt published on Sunday also included a description of YELTSIN's dissolution of the Russian parliament in 1993. KORZHAKOV described how he and Federal Security Service (FSB) chief BARSUKOV, also fired in June 1996, essentially propped YELTSIN up and saved the day during the parliament's revolt and seizure of the White House in October 1993.

The book excerpt also gave accounts of YELTSIN's disastrous trip to Germany in August 1994 and how then Deputy Prime Minister Anatoly CHUBAIS and businessman Boris BEREZOVSKY hatched the idea of initiating YELTSIN's daughter Tatyana DYACHENKO as his advisor so that, through her, they could better control him.

Railway and FAPSI Troops Cut

· Russian President Boris Yeltsin on Friday signed decrees on the reform of troops subordinated to the Railways Ministry and the Federal Agency for Government Communications and Information (FAPSI), reported Itar-Tass. The decrees call for a significant reduction in both agencies' troops in line with cuts in other branches of the armed forces.

Duma Speaker Accused of Corruption

· The chairman of the Russian State Duma anti-corruption committee Vladimir Semago (Communist) told a press conference on Friday he believed that suspicions that several Duma deputies, including the body's chairman, were engaged in corrupt practices,

Today's News Highlights


Nemtsov Accused of Bribetaking

Redenomination of the Ruble

Air Crash Deaths Double

Tech. Innovation Ctr. Opens

Conn. Welcome Gazprom

Unikombank Official Missing

South Caucasus & Central Asia

Shevy Warns on Sanctions

Aliyev-Clinton Accords

Azeri-US Oil Agreements




August 4, 1997

Intercon's Daily

reported Interfax. For example, a number of Russian commercial banks have extended deputies interest free loans.

Semago also charged that Duma chairman Gennady Seleznyev exceeded his authority when he allowed himself numerous trips around the country and abroad without any sanction from the parliament and spent huge amounts of money. SEMAGO did not offer any documents as proof of corruption.

Seleznyev reacted angrily to SEMAGO's statements on Saturday, calling them "clearly provocative and aimed at stirring up a scandal inside the house," he is quoted by Interfax as saying. "In Semago's revelations, every word is libel. Were he not a deputy, he would have to answer for his lies before the court."

Seleznyev said Semago's empty accusations had convinced him of the need to set up a watchdog commission for deputies' ethics. "I am sure that such a commission will be set up in September," he said.

Nemtsov Accused of Taking Bribes

· Nizhny Novgorod businessman Andrei Klimentyev and Liberal Democratic Party (LDP) head Vladimir ZHIRINOVSKY have publicly accused former Nizhny Novgorod governor Boris NEMTSOV, who is currently First Deputy Prime Minister, of taking numerous bribes while serving as governor.

On Friday, Klimentyev told reporters that Nemtsov took several large bribes while in office as Nizhny Novgorod Oblast governor. Klimentyev also accused NEMTSOV of initiating fabricated criminal proceedings against him, said RIA Novosti. The businessman was convicted in 1994 of embezzling some $2 million from a $30 million credit meant for the construction of six vessels at the Navashinsky shipyard in Nizhny Novgorod.

Russian ultranationalist Zhirinovsky on Friday echoed Klimentyev's allegations of bribe-taking against Nemtsov, as well as accusing the first deputy prime minister to plotting an assassination attempt against him, reported Itar-Tass.

NEMTSOV's spokesman Andrei PERSHIN on Friday called KLIMENTYEV's charges "absurd and false," reported RIA Novosti. Addressing

ZHIRINOVSKY's charges of a murder plot, PERSHIN said that the investigation of this case "is not a subject for a lawyer, but for a psychiatrist."

PERSHIN said that Friday's allegations were part of a concerted propaganda campaign by NEMTSOV's political opponents aimed at destroying public trust in him. PERSHIN said he has information that the attempt to discredit NEMTSOV will continue and connected it to the failure of the communists and nationalists candidate to win the Nizhny Novgorod governorship in June's runoff election.

NEMTSOV's lawyer Vitaly Khavkin said on Saturday that he has initiated a lawsuit against KLIMENTYEV for slander, reported Itar-Tass.


Ruble = 5,800/$1.00 (NY rate)

Ruble = 5,801/$1.00 (CB rate)

Ruble = 5,808|5,794/$1.00 (buy|sell rates)

Russia to Cut Three Zeros of the Ruble

· Russian President Boris YELTSIN today announced the redenomination of the ruble, beginning from January 1, 1998. Under the monetary reform, one new ruble will be worth an old 1,000 ruble note. YELTSIN said that the redenomination will make transactions easier and he promised that the government would avoid "stress and upheaval" in the introduction of the new banknotes.

The last ruble denomination was undertaken in 1992. At that time, Russians were given only three days to exchange their old rubles for new, which caused many Russians, particularly pensioners, to lose their savings.

YELTSIN said that the new coins and banknotes would begin circulating on January 1, 1998, but both new and old notes will be valid until January 1, 1999. The old notes will be taken out of circulation in 1999, but it will still be possible to exchange them for new notes at Central Bank branches until the end of 2002.

The president said the change was made possible because the government is now in control of money in circulation and of inflation. Annual inflation in 1996 was about 22 percent and the government predicts that inflation this year will total about 14 percent.

When you need to know it as it happens




August 4, 1997

Intercon's Daily

Beginning from January 1, 1998, the Central Bank will release into circulation new banknotes with the face value of 5, 10, 50, 100, and 500 rubles and new coins of 1, 5, 10, 50 kopecks, 1, 2, and 5 rubles.

Deaths From Air Crashes Double in H1

· In the first half of this year, 66 people died in air crashes in Russia, compared with 35 people who were killed in four air crashes in the same period of 1996, reported Xinhua, citing the Russian Federal Aviation Service. The majority of air accidents occurred in Russia's southern and central regions.

Federal Aviation Service experts said human error still accounted for the majority of air accidents, or 79 percent, while malfunctions in aircraft equipment accounted for 17 percent of air accidents.

Russia Tech. Innovation Center Opens

· Russian Deputy Prime Minister Vladimir Bulgak today presided at the opening of a technological innovation center, New Technologies, in Moscow, reported Itar-Tass, citing a statement from the Russian government's culture and information department. Similar centers are to be set up in St. Petersburg, Novosibirsk, Yekaterinburg, Kazan, and other cities under Russia's innovation programs.

The Moscow center is located in a building provided by the research center of the Russian Electrotechnical Institute. It will house small companies handling research-intensive technologies. The companies' core businesses are market research, sales of technological products, computer information technology services, clothing design, air conditioning, and electrotechnical products.


Conn. Co. Welcomes Gazprom Officials

· CTG Resources Inc., the holding company of Connecticut Natural Gas Corp. and its unregulated subsidiary The Energy Network, hosted a group of Russian executives on July 30 for a tour of CTG's fuel cell at its corporate headquarters in Hartford, said a company press release. The Russians, all employees of Russian gas monopoly Gazprom are in the US to visit the ONSI factory in South Windsor.

ONSI in the only manufacturer of commercial fuel cells in the world. Fuel cells use clean burning natural

gas to produce electricity and heat with no noise or harmful exhaust to pollute the environment. Gazprom has purchased one fuel cell for installation on its pipeline network serving Western Europe. The company is evaluating the purchase of additional fuel cells in the future.

Unikombank Official Missing

· Some officials of Russian commercial bank Unikombank said on Friday said they were concerned about deputy chairman of the board Andrei Gloriozov, reported Prime-Tass. Gloriozov, his assistant, and his car and driver have been missing since July 30.

Gloriozov managed a majority of Unikombank's financial issues. In mid July, the Russian Central Bank recommended the dismissal three Unikombank officials—chairwoman Nina Galanicheva, her first deputy Andrei Gloriozov, and her deputy Sergei Pashvykin.

The decision followed an audit of Unikombank, which the Central Bank said was obstructed by certain bank officials. Last month, Central Bank chairman Sergei Dubinin accused Unikombank of involvement in the mishandling of some $500 million in federal budget funds.

South Caucasus & Central Asia

Shevy Warns Russia on Sanctions

· Georgian President Eduard SHEVARDNADZE today warned that any attempt by Moscow to ease economic sanctions against Abkhazia would be unacceptable to Tblisi, reported Reuters. "The sanctions have the aim of exerting peaceful pressure on the separatist regime. A unilateral lifting of sanctions by Russia will immediately result in a loss of authority of the CIS and will seriously complicate Georgian-Russian relations," he said on national radio.

Russian envoy to Abkhazia Gennady ILYICHEV told Interfax on Friday that Russia might lift economic sanctions placed against Abkhazia. Russia has maintained a partial sea blockade, as well as restricting movement through Abkhazia's only land border with Russia, since 1995. Shevardnadze noted that the question of lifting the sanctions can only be decided by a summit of CIS leaders.

When you need to know it as it happens




August 4, 1997

Intercon's Daily

SHEVARDNADZE said that if Moscow lifts the sanctions, Tblisi would take "adequate measures," according to Reuters. Georgian presidential national affairs advisor Levan ALEKSIDZE told Interfax that the measures could include a closure of Russia's three military bases in Georgia.

Aliyev-Clinton Sign Two Accords

· During a meeting on Friday, US President Bill Clinton and his Azeri counterpart Geidar Aliyev signed a joint statement on US-Azerbaijani relations and a US-Azerbaijani Bilateral Investment Treaty, said a White House press release. The Investment Treaty is aimed at creating a better basis for trade and investment, helping promote an open business climate in Azerbaijan, and further strengthening economic ties.

Four Major US-Azeri Oil Deals Signed

· Azerbaijan's state oil company SOCAR and four major US oil corporations on Friday signed agreements on oil exploration, development, and production in the Azeri sector of the Caspian Sea. Chevron, Exxon, Mobil, and Amoco are expected to invest billions of dollars to participate in the exploitation of the country's massive, untapped oil reserves.

Chevron Overseas Petroleum and SOCAR signed an agreement to explore Azerbaijan's Absheron offshore block, a deep-water geologic structure in the southern Caspian Sea, said a Chevron press release. Under terms of the agreement, Chevron will serve as operator in exploring the Absheron structure. Absheron, formerly known as the Tagiyev Block, covers an area of about 400 square kms. Chevron will hold a 30 percent interest in the Absheron block. Chevron will conduct a 3-D seismic program to augment data collected in the earlier surveys. Exploratory drilling is expected to begin in late 1999.

Exxon Exploration and Production Azerbaijan Ltd. and SOCAR signed an agreement that defines exploration, development and production sharing terms for the Nakhichevan prospective structure in

the Caspian Sea, said an Exxon press release. The Nakhichevan prospective structure, formerly referred to as D-3, is an exploration block located about 100 kms south of Baku.

Under the agreement, both SOCAR and Exxon will retain a 50 percent interest, and Exxon will serve as operator. Exxon said it hopes to conclude negotiations on the deeper water exploration block, D-9/D-38, later this year.

Mobil Exploration & Producing Azerbaijan Inc. and SOCAR signed a production sharing agreement (PSA) for the Oguz offshore block in the Azerbaijan sector of the Caspian Sea, said a Mobil press release. Under the terms of the PSA, Mobil will be the operator with a 50 percent working interest in the block. SOCAR will hold the remaining interest. The PSA calls for exploration drilling to be completed on the block over the next three years. Mobil is also negotiating with SOCAR on obtaining rights to other projects in Azerbaijan.

Mobil opened a venture office in Baku in 1995 to enhance its evaluation of Azerbaijan's offshore opportunities. Working with SOCAR and other partners, it participated in a group seismic shoot covering the entire offshore Azerbaijan area, acquiring more than 16,000 kms of seismic data. The processing and interpretation of this data led Mobil to identify Oguz as an attractive exploration opportunity.

Amoco Caspian Sea Petroleum and SOCAR signed an agreement for broad cooperation in a range of activities in the upstream and downstream sectors of the petroleum industry, said an Amoco press release Further negotiations will focus on commercial terms under which the two companies will jointly explore and develop the Inam prospect in the South Caspian Sea. In addition, Amoco and SOCAR will form joint working groups to define further cooperation in the exploration, development and production of hydrocarbon resources; transportation, export, and trading of crude; marketing of petroleum products; etc.

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