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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Wednesday, September 17, 1997

the Communist Party, the Spiritual Heritage movement, the Russian Organization of Afghan War Veterans, the Agrarian Party, the Popular Alliance, the Russian National Union, and others.

Sestanovich Confirmed to NIS Post

· The US Senate on Tuesday confirmed Stephen Sestanovich to be ambassador-at-large for the former Soviet republics, as well as special adviser to the Secretary of State for the New Independent States (NIS), reported the Associated Press (AP). Sestanovich's nomination raised some controversy because as a political analyst at the Carnegie Endowment for International Peace he expressed doubts about the Administration policy of expanding NATO. At Senate confirmation hearings, however, Sestanovich said that while he had been a skeptic of NATO enlargement, he was now convinced that the Administration policy was correct.


Ruble = 5,851/$1.00 (NY rate)

Ruble = 5,849.5/$1.00 (CB rate)

Ruble = 5,841|5,858/$1.00 (buy|sell rates)

Russia Becomes Member of Paris Club

· Russia became a full-fledged member of the Paris Club of creditor nations today, a move that will give it significantly improved leverage to collect debts from various governments. A document on Russian membership was signed in Paris by Russian First

Russian Federation


Yeltsin Removes Two Presidential Aides

· Russian President Boris YELTSIN has dismissed two of his aides, said the presidential press service today. Political advisor Georgy Satarov will return to work at the Center of Applied Political Research, from which he came to the presidential administration. Lev Sukhanov was said to be retiring.

The reason for the dismissals is not clear. SUKHANOV is a longtime YELTSIN aide who was close to former Presidential Security Guards head Aleksandr KORZHAKOV. In contrast to YELTSIN, SUKHANOV received favorable mention in KORZHAKOV's recently-published memoirs.

Yeltsin's Wife Named to Culture Channel Board

· Mikhail SHVYDKOI, head of the new state television channel Kultura, announced on Tuesday that Russian First Lady Naina Yeltsin has agreed to co-chair the board of trustees of Kultura, reported today's edition of The Independent (UK). The channel, created by a presidential decree last month, will replace St. Petersburg's Channel 5.

In related news, Communist Party leader Gennady ZYUGANOV described the creation of the culture channel as suspicious and criticized SHVYDKOI in a recent interview with Sovetskaya Rossiya. He also charged that "there is not a single [ethnic] Russian face on national television's five channels."

Opposition to Challenge Moscow Elections

· The Russian leftist opposition has formed an election bloc, called My Moscow, to participate in the December elections to the Moscow City Duma and "challenge radical reformers," reported Itar-Tass. The bloc is composed of Moscow organizations of

Today's News Highlights


National Depository Decree

Aviation Sector Restructuring

Fruit, Vegetable Harvests Good

Satellite Tender Announced

Canada Oil JV Exports

South Caucasus & Central Asia

Georgia Passes Adoption Law

Investment Fund for Armenia

DCR Report on Kazakhstan

Sumitomo in Kyrgyzstan




September 17, 1997

Intercon's Daily

Deputy Prime Minister Anatoly Chubais and Paris Club chairman Christian Noyer.

The Paris Club said in a statement that Russian membership "opens the way for a significant amount of claims that were previously dealt with on a bilateral basis" to now be resolved within the formal structure of the Paris Club.

CHUBAIS estimated that the volume of current payments to Russia from debtor countries will triple as a result of Paris Club membership.

Russia will now concentrate on gaining entry to the London Club of commercial banks.

Decree on National Depository Signed

· Russian President Boris Yeltsin has signed a decree on creating a national depository system, which is aimed at safeguarding the rights of investors and shareholders on the stock market, reported Reuters. The system will include a central depository and a fund for analyzing securities market data, as well as depositories licensed by the Federal Commission for the Securities Market. These depositories would be required to observe professional standards adopted under the new system.

The decree also ordered all government agencies and organizations currently holding shares in privatized companies on behalf of the government to transfer and re-register the stakes with a depository by January 1, 1998.

Fruit and Vegetable Harvest Sufficient

· The Russian Agriculture Ministry said today that the country will produce enough fruit and vegetables to meet domestic demand for the coming winter, reported Itar-Tass. Farmers have grown a bumper crop of vegetables, fruit, root crops, and potatoes, as a result of changes in fruit- and vegetable-growing, said the ministry.

One change is that potatoes are now grown not only by large agricultural producers, but also by individual farmers and millions of families who are cultivating small plots of land in addition to their kitchen gardens. Small landholders now produce over 60 percent of commercial potatoes. Moreover, small farmers are producing high quality crops using more environmentally sound fertilizers than large farms.

Owners of gardens near big industrial centers widely used foreign technology for growing vegetables and root crops this year and had better yields than in the past, noted the Ministry.

However, farmers needed help again this year to bring in the harvest. The Moscow city government sent 12,000 servicemen to help vegetable farmers in the countryside with harvesting. Moscow also decided to purchase high-grade fruit and vegetables at prices higher than market. It has already stockpiled over 20,000 tons of this produce.

Aviation Sector Restructuring Planned

· The Russian government has decided to restructure the country's ailing aviation sector to better meet both military and civilian needs. Under a special reorganization program, the aviation industry will be change to have only half of the existing 300 enterprises through mergers or shutdowns, reported Xinhua, citing Finansoviye Izvestia.

After the restructuring, the industry will have only four giants—MiG, Sukhoi, Tupolev, and Ilyushin—as its backbone to produce entire planes, and 10-15 companies as its second tier, supplying instruments, engines, and auxiliary products and parts.

In the future, the Russian government plans to provide only minimal financial support for the development of new aircraft, and by early 1999 there will be no wholly state-owned aviation enterprises. However, the government plans to retain a controlling stake in these companies.

Russia will need an estimated 6,500 new civilian planes before the year 2015. Imported aircraft would cost the country an estimated $99 billion, while domestically-made planes

would run only $53 billion.

Forecaster Negative on Russian GDP

· Andrei Illarionov, director of Moscow's independent Institute of Economic Analysis, has estimated that Russia's gross domestic product (GDP) will total $947 billion by 2010 (1.5 percent of total world GDP), dropping to 15th place among the world's economies, reported Prime-Tass. He noted that in 1950 the USSR was the world's third nation in terms of GDP, on the basis of purchasing power parity, and in 1970 it was number four in the world.

When you need to know it as it happens




September 17, 1997

Intercon's Daily

According to the Institute's forecast, Russia's GDP in 1997 will total $585 billion, placing the country 14th in the world. However, in terms of GDP per capita, Russia will rank 102nd out of the world's 209 countries this year. By an economic yardstick, Russia has left the world's top 10 nations, apparently never to return, said ILLARIONOV.

Metal Theives Cut Telephone Lines

· An inter-regional communications system in central Russia partially collapsed this week, when 74 meters of mainline telephone cable running between Lipetsk and Voronezh was stolen. This is "an unprecedented case related to the thefts of non-ferrous metals, which have assumed an alarming scope across Russia," a Voronezh official told Itar-Tass, adding that "the criminals had adequate equipment because it is impossible to pull out a three-centimeter-thick lead-braided cable, which is [that] long, by hand through a manhole."

In a separate incident last week in western Voronezh region, five kilometers of wire was stolen from an operating power transmission line.

Thieves can melt down the stolen cables, wire, and transformer parts and easily sell it in one of the regions over 100 shops that buy non-ferrous metals.


Communications Satellite Tender Opens

· The Russian Space Agency (RSA) today announced the opening of bidding to produce communications satellites to join Russian satellites deployed in geostationary orbit, reported Itar-Tass. Companies can apply for a preliminary qualifying contest until September 26 and for bidding until December 10. The tender was commissioned in a presidential anti-corruption decree signed in April.

Manufacture projects must be supplemented by guarantees of investors in the projects. Only Russian space companies are eligible to bid, but under the terms of the tender they are allowed to invite foreign partners or investors to cooperation.

Bidders are expected to produce 3-7 communications satellites in 1997-2000 to add to Russia's orbital network, which currently needs at least three new satellites.

Canada Oil JV Complete Export Sale

· Canada's Black Sea Energy Ltd. announced on Tuesday that the company's Tura Petroleum joint venture in Russia's western Siberia has completed its first major export sale of crude oil, totaling 193,000 barrels, said a company press release. The sale represents the Tura project's entire production from its Kalchinskoye field for the month of August.

"Although Russian domestic oil prices have been rising toward world levels in recent years, export sales will contribute significantly to our revenues and profits," said Black Sea Energy President Clint Hussin said. "Our export sales are also demonstrating that we have the marketing capability to work within the established system and capitalize on our developmental and production activities."

The company's Kalchinskoye oil wells are now producing at the rate of 7,100 barrels a day, an increase of 48 percent over the production levels that were being achieved when the joint venture began operating on April 1, said HUSSIN.

The Tura venture, which is 50 percent owned by Calgary-based Black Sea Energy, sold 116,800 barrels through the Russian Black Sea port of Novorossiisk at a net price of $16.06 a barrel. The sale of the remaining inventory of 76,200 barrels was contracted through Rosneftegaz export in early September and will be priced when it is delivered through the port of Odessa.

Tura is one of two projects in Russia currently being operated by Black Sea Energy, which is focused on the initiation, incorporation, rehabilitation, exploration, and development of oil properties in Russia.

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October 22, 1997

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Tel: 303-745-0757; Fax: 303-745-0776

E-mail: russia@rmi.net

When you need to know it as it happens




September 17, 1997

Intercon's Daily

South Caucasus & Central Asia

Georgia Passes Adoption Law

· The Georgian parliament today passed a law on adoption procedures on its second reading, according to Intercon sources. The new version of the law includes a section on the adoption of Georgian children by foreigners, which says that if no Georgian citizens adopts a child within four months after coming up for adoption, foreigners will be allowed to adopt the child with no restrictions.

The third and final vote on the adoption law will take place within two weeks.

Georgian President Eduard SHEVARDNADZE suspended foreign adoptions in December 1996, following complaints within Georgia last year of fraud and corruption surrounding foreign adoptions, causing problems with pending adoptions by American couples and straining USGeorgian relations.

However, SHEVARDNADZE set up a special presidential commission on foreign adoptions to operate until legislation could be passed. Reportedly, four Georgian babies are in the final process of being released to waiting US parents.

New Investment Fund Launched for Armenia

· US Tracinda Corp. and the Lincy Foundation have established a $100 million entrepreneurial enterprise lending fund for Armenia with the help of former Senator Bob Dole, reported Business Wire. An international bank will distribute the funds.

"This assistance will create countless opportunities for business and economic development. We...know firsthand the spirit and determination of the people who will use these tools to help build a brighter future for the country," Dole is quoted as saying.

Jim Aljian, chairman of the Lincy Foundation, said that Dole was selected for this project because of his longstanding commitment to the Armenian people.

Duff & Phelps on Kazakhstan

· The Republic of Kazakhstan's solid political environment and strong growth support a stable outlook for the sovereign, said Duff & Phelps Credit Rating Co. (DCR) in a new Credit Analysis Report.

"Under President Nursultan NazarbaYev's strong leadership, Kazakhstan's economy has stabilized after a period of high fiscal deficits and hyperinflation following the dissolution of the Soviet Union," said Jaime Sanz, a DCR vice president and author of the report. "Nazarbayev has also accelerated structural reforms, including price and trade liberalization, privatization, and bank restructuring."

DCR expects 1997 year-end inflation to be about 17 percent, down from 2,200 percent in 1993. In addition, government deficits averaged 2.6 percent in 1995-96, which is about one-third the average for the previous five years.

The country also has a comparably low and favorably structured debt burden, with total public sector debt estimated at 15 percent of GDP in 1997 and public sector external debt at a modest 45 percent of export receipts, said the report. However, it said that Kazakhstan still suffers from a deficient tax system, which will probably only collect about 11 percent of GDP in 1997. "The country has also seen limited progress in the area of enterprise restructuring, and asset quality problems in the banking system persist," said Sanz.

Currently, DCR rates the country's foreign currency obligations `BB' (Double-B) and its local currency obligations `BB+' (Double-B-Plus). Its short-term obligations are rated `D-4' (D-Four).

Sumitomo to Build Refinery in Kyrgyzstan

· Japan's Sumitomo Corp. has signed agreements on building an oil refinery in Bishkek and on extending long term loans to the Kyrgyz government, reported RFE/RL. Kyrgyz President Askar AKAYEV met with Sumitomo representatives on Tuesday.

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