DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, September 15, 1997

CHUBAIS following a tip off about a plot to assassinate him, reported Russian television RTR. The threat on the Deputy Premier's life may have come from the head of a large oil and gas conglomerate which owes huge debts to the federal government, said RTR.

Two New Duma Deputies Elected

· Popular Russian folk singer Iosif Kobzon was elected to the State Duma from the Aginsky-Buryat autonomous district in a Sunday by-election. He easily won a field of six candidates with 86 percent of the vote to take a seat vacated by Bayir Zhamsuyev, resigned from his deputy post in February after being elected governor of the district. KOBZON is reputed to have ties to the mafia for which he was denied an entry visa to the US in 1995.

Also on Sunday, Communist Party candidate Ivan Meshcherin bested 15 other contenders to win a Duma seat from Stavropol Krai with 43 percent of the vote. The seat became vacant in the spring after the death of Communist deputy Nikolai Manzhosov.

Maskhadov Honors Budyennovsk Rebels

· In a move certain to anger Moscow, Chechen President Aslan MASKHADOV on Saturday gave "Hero of the Nation" awards to Chechen rebels who carried out a raid on the Russian town of Budyennovsk in June 1995. "I want to sing the praises of the act of heroism performed by Shamil BASAYEV's battalion," he is quoted by Reuters as saying.

Russian Federation

Politics

Yeltsin Meets with Top Bankers

· Russian President Boris Yeltsin met with the heads of six major financial groups today to call a truce between the government and Russia's top businessmen over privatization policy. The president met for nearly two hours in the Kremlin with Vladimir Gusinsky of Media-Most, Aleksandr Smolensky of SBS-Agro, Mikhail FreIdman of the Alfa bank, Vladimir Potanin of Oneximbank, Vladimir Vinogradov of Inkombank, and Mikhail Khodorkovsky of the Rosprom Group.

Following the talks, YELTSIN announced that the businessmen had endorsed Moscow's privatization program and had agreed to halt their "war" against the government, especially with First Deputy Prime Ministers Boris NEMTSOV and Anatoly CHUBAIS, reported Interfax.

YELTSIN called the meeting after Saturday's Nezavisimaya Gazeta launched a front-page attack on Chubais. The article accused CHUBAIS of trying to gain total control over Russia, calling him "authoritarian and unscrupulous." Comparing his mentality to that of Vladimir LENIN, the paper said that CHUBAIS had created an oligarchy with the help of Oneximbank, Izvestia, Komsomolskaya Pravda, the new Russian Telegraph daily, and the All-Russian State Radio and Television Company (VGRTK).

It also accused CHUBAIS of planning to remove his "competitor," Security Council deputy secretary Boris BEREZOVSKY, who controls Russian Public Television (ORT), as well as Nezavisimaya Gazeta.

Meanwhile, the Federal Security Service (FSB) said on Sunday that it has stepped up security around

Today's News Highlights

Russia

New Northern Oil Route Planned

Yavlinsky on Tax Code

Nizhnevartovsk Oil Co Confusion

Russian Govt Probes Bosch

Quintiles to Open Moscow Office

Moskvich to Begin Exporting

South Caucasus & Central Asia

Georgia-Russia Alcohol Row

Mobil Opens Station in Almaty

Turkmen Road Tender Planned

Politics-Economics-Business

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Monday

September 15, 1997

Intercon's Daily

A total of 115 guerrillas received medals for their part in taking some 1,000 people hostage at a hospital in Budyennovsk. Over 100 civilians were killed in the six days of fighting that followed the raid. The hostages were eventually released after Moscow promised to hold peace talks with Grozny. "This raid changed the course of the war," said MASKHADOV.

Economy

Ruble = 5,846/$1.00 (NY rate)

Ruble = 5,847/$1.00 (CB rate)

Ruble = 5,840|5,854/$1.00 (buy|sell rates)

New Northern Route to Go Forward

· Russian First Deputy Prime Minister Boris Nemtsov told reporters today that Moscow has decided to transport Azeri Caspian Sea oil to Novorossiisk using a pipeline that does not pass through Chechnya. The government will begin to discuss the financing of the project this week, he said.

The pipeline route around Chechnya is clearly viewed as the best possibility for Russia to be chosen as a strategic route for Azeri oil production. Moscow wants the Azeri government and the Azerbaijan International Operating Co. (AIOC) to pick a northern route through Russia for long-term output rather than a southern route through Turkey. By bypassing Chechnya, NEMTSOV can present the Russian route as safe, stable, and relatively cheap.

Yabloko Proposes Amnesty for Grey Ventures

· Russia's Yabloko party leader Grigory Yavlinsky suggested on Friday that a new Tax Code could include a provision that would offer an amnesty for the declaration of "shadow" funds, reported Itar-Tass. Yabloko has presented a proposal to legalize "shadow" capital through a 15 percent tax on declared property and income, he said. Such an amnesty was previously endorsed by President Boris YELTSIN.

According to Yavlinsky, the draft Tax Code to be discussed by the State Duma in November aims to secure economic growth by lessening the tax burden, as well as to "bring the shadow economy out to the light." When the tax is paid, shadow dealers will be granted documents legalizing their businesses.

This Week's Happenings

¨ Russian Foreign Minister Yevgeny Primakov on September 15 will hold talks with visiting Oman Foreign Minister Yousef al-Alawi bin Abdullah.

¨ Italian Prime Minister Roman Prodi will leave on September 15 to pay official visits to Kazakhstan and Uzbekistan.

¨ Georgian President Eduard Shevardnadze begins a three-day official visit to Greece on September 15. He is scheduled to meet his Greek counterpart Costis Stephanopoulos and sign a friendship and cooperation agreement. He will also receive the Onassis International Foundation's award for international understanding and social achievement.

¨ The Central Asia Peacekeeping Battalion `97 military exercise takes place September 15_21 in Kazakhstan and Uzbekistan. As many as 1,500 soldiers from Kazakhstan, Uzbekistan, and Kyrgyzstan and the North Atlantic Treaty Organization (NATO), including 500 US soldiers, will participate in the exercise.

¨ Russian diamond producer Almazy Rossii-Sakha and South Africa's De Beers will hold talks in Moscow on September 16_18. The De Beers delegation includes Deputy Chairman Nicholas Oppenheimer, Central Selling Organization director Harry Rafe and Executive Director Michael Farmilow who is in charge of the Russia department of the corporation.

¨ The annual CIS transportation coordinating conference takes place in Yerevan on September 18_19. The conference will discuss cooperation in the transport sphere until the year 2000 and work out plans for integration and legal provisions for joining international conventions and agreements, as well as steps to upgrade transport safety and security. Georgia and Armenia will attend, but Azerbaijan will not take part. Armenian representatives reportedly plan to raise the question of Azerbaijan's blockade of Armenia and the blockade of the Abkhazia-Georgia railway.

When you need to know it as it happens

Politics-Economics-Business

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Monday

September 15, 1997

Intercon's Daily

At a later stage, it will be possible to raise the issue of amnestying Russian capital resting in foreign banks, said YAVLINSKY. He estimates that "shadow" businesses account for 40 percent of the Russian economy.

Russian Government Probes Bosch

· Russia's Anti-Monopoly Committee plans to review the activities of Germany's Bosch in Russia to determine whether Bosch controls the Russian market for the production of spark plugs, reported Itar-Tass. Committee chairwoman Natalia Fonaryova told a press conference on Friday that the reason for the probe is the purchase by Bosch of the controlling interest in a Saratov-based company that produces automobile spark plugs.

Fonaryova declined to say when the investigation will begin or what measures will be used against Bosch if it is found to control the market.

Business

Confusion over Siberian Oil Co. Continues

· A struggle for control over western Siberia's Nizhnevartovskneftegaz oil company continued on Sunday when two rival shareholders' groups held simultaneous meetings in Moscow, reported Interfax. One meeting was chaired by the company's director-general Viktor PALI and the other was led by representatives of the Tyumen Oil Company, Nizhnevartovskneftegaz's biggest shareholder. Each group claims to be legitimate.

The Tyumen-led meeting voted decided to remove Pali as director-general and turned over control of to itself. The Tyumen Oil Company will assume the functions of the director-general and the board of directors of the company, according to Prime-Tass. The meeting also decided to pay out intermediate dividends on Nizhnevartovskneftegaz preferred shares of 100 rubles per share.

The meeting commission responsible for verifying shareholders ballots said a total of 1,049 shareholders representing 50.17 percent of the companies charter capital participate in the meeting.

The rival meeting, headed by PALI, had a similar agenda. The commission responsible for verifying voting ballots said the participants represented 50.21

percent of Nizhnevartovskneftegaz's charter capital. Meeting attendees voted against the dismissal of PALI and against handing control over the Tyumen Oil. The meeting noted that the company made no profit either last year or in the first half of this year, so decided not to pay dividends on preferred shares.

An arbitration court is reportedly expected to rule on the legitimacy of each meeting and their results.

Quintiles Opens Moscow Office

· US Quintiles Transnational Corp. today announced the opening of an office in Moscow to manage ongoing clinical trials in Russia, said a company press release. Quintiles currently has 10 staff members in Russia, nine in Moscow and one in St. Petersburg. "The opening of this office is tangible evidence of the strong relationships we've developed over the years with Russian regulatory authorities, leading Russian medical centers, and medical opinion leaders," Quintiles chairman and CEO Dennis GILLINGS, Ph.D, is quoted as saying at the dedication ceremony in Moscow.

Quintiles Transnational Corp., based in Research Triangle Park, NC, provides full service contract research, sales, and marketing to the worldwide pharmaceutical, biotechnology, and medical device industries, and provides healthcare policy consulting and health information management services to the healthcare industry.

Moskvich to Begin Exporting

· Russian automaker Moskvich (formerly called AZLK) is planning to start selling its cars on the European market in 1998, company general director Ruben Asatryan told Prime-Tass on Saturday. Asatryan said that this will be possible because improved quality of cars and price cuts.

Asatryan said Moskvich has overcome its recent crisis and managed to increase output to 3,300 cars in August from 2,500 cars in July. It has set a production target of over 5,000 cars in December. The company's new Aleko model, which will be equipped with Renault engines, will account for 80 percent of production.

He said that the total output for 1997 is expected to reach 30,000 cars, while next year Moskvich plans to produce 8,000 cars per month.

When you need to know it as it happens

Politics-Economics-Business

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Intercon's Daily

Moskvich has regained strength after being forced to halt production lines early last year as a result of financial difficulties and almost being declared bankrupt early this year. Production at Moskvich fell to 2,929 units last year from 40,600 units in 1995.

Moscow-based firm has benefited from the energetic assistance of Moscow Mayor Yuri LUZHKOV.

Almaty on Saturday, reported Xinhua. Addressing an opening ceremony of the stations, Kazakh President Nursultan Nazarbayev said the event has proved that Kazakhstan had made considerable achievements in its efforts to maintain a stable economy and utilize foreign investment.

Mobil began oil exploitation in Kazakhstan in 1993. It holds a 25 percent stake in the Tengiz oilfield on the eastern shore of the Caspian Sea and a stake in northern Kazakhstan's Tulpar exploration project.

Turkmenistan Plans Infrastructure Tender

· The government of Turkmenistan is planning to announce an international tender for a road rehabilitation project, to be funded by the European Bank for Reconstruction and Development (EBRD), according to US Embassy in Ashgabat on Tuesday. The infrastructure improvements are being carried out in conjunction with the project to create a Euro-Asian Transport Corridor to link Europe with Central Asia.

The tender will cover the restoration of the Tedjen-Mary highway, which is to be financed with a ECU 59 million loan (about $74 million) from the EBRD. The highway is the main road connecting Uzbekistan and other countries to the East with the Caspian Sea. It serves most domestic and international cargo traffic, but is not capable of handling an increase in the volume of traffic.

A feasibility study of 142 km of the Tedjen-Mary highway, conducted by the Turkmen Ministry of Highways (Turkmenautoyollary) and a German company, found that 110 km were in need of repair. In addition to this priority project, the Turkmen government hopes to rebuild another 300 km of main roads in the country.

The tender documentation is expected to be finished in November 1997, but Turkmenautoyollary is already collecting applications for the tender and proposals from interested parties. The winner is to be announced in February 1998.

South Caucasus & Central Asia

Georgian-Russian Alcohol Row

· A disagreement between Moscow and Tblisi over the entry into Russia of a convoy of trucks carrying alcohol reached a new level over the weekend. On Saturday, Georgian President Eduard Shevardnadze chaired a closed-door meeting of the Georgian Security Council on the situation of the alcohol trucks blocked by Russia, reported Itar-Tass. The Council decided that no international standards or accords were violated by Georgian customs when it released the trucks to cross the border.

On Sunday, in response to Russia's refusal to admit the trucks, Georgia began to block the passage of Russian border guards returning to duty in Georgia, reported Itar-Tass. Specifically, a group of ten border guards and seven civilian truck drivers, led by Major Yevgeny Andreyev, were taken off a train on Georgian territory and arrested while returning from Armenia to Batumi.

However, they were released following a protest by Colonel Vladimir Manych, chief of staff of the Russian border guard force in Georgia.

Azerbaijan, Armenia Cooperate on Crime

· During a meeting of CIS Interior Ministers last week, the representatives of Armenia and Azerbaijan discussed joint efforts to combat crime along their mutual border, said RFE/RL Newsline.

Mobil Launches Gas Stations in Kazakhstan

· US Mobil Oil Corp. opened two gas stations in

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

Svetlana Korobov, Contributing Editor

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