DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 908,

WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, September 4, 1997

Russian Federation

Politics

Duma to Condemn Chechnya Executions

· The Russian State Duma and President Boris YELTSIN today condemned Wednesday's public execution of two people in Grozny, reported Russian television RTR. A Chechen man and a woman were sentenced to death on charges of murder by the Sharia court and publicly shot by a firing squad in Grozny's main square. The court read death sentences to two other people involved in the murder, including a pregnant woman whose execution the court said was delayed until after she delivers.

Chechen President Aslan MASKHADOV has ordered public executions in an attempt to combat rampant crime in the region, said Reuters. Under his order, the bodies of the executed will be displayed with signs describing their crimes for a short time before burial.

The Duma speaker called the execution "a barbaric, medieval act," and insisted that Chechnya follow Russian law, rather than Islamic law. The Duma will vote to make an official statement condemning the executions on Friday.

Russia-Chechnya Agree on Oil Tariff

· Russia and Chechnya have agreed on a compromise plan for paying oil tariffs for the transport of Azeri Caspian Sea oil through Russia, via Chechnya, reported Interfax. Originally, Russia had offered $0.43 per ton of oil transported against Chechnya's request for $4.27 per ton, a demand which later dropped to $2.20 per ton.

During talks in Dagomys today, Russian Security Council Ivan RYBKIN offered a deal whereby the Russian government would pay Chechnya $0.43 a

ton and Russian pipeline company Transneft would pay in additional funds to bring the amount up to $2.20 per ton. The Chechen leadership has reportedly accepted the deal.

Duma Passes Radio,TV Protection Law

· The Russian State Duma on Wednesday passed on the first reading a draft law on television and radio, which mandates measures to regulate Russian television and radio producers and introduces licensing restrictions on Western investors, reported Itar-Tass. The law regulates sponsor and charity activities on television and radio and bans preference to political parties or business groups and employers.

If passed, the law will forbid broadcasters from making substantial changes in their programs without preliminary notice. It also imposes controls on broadcasting companies, aimed at protection of human rights and freedoms.

Economy

Ruble = 5,835/$1.00 (NY rate)

Ruble = 5,837/$1.00 (CB rate)

Ruble = 5,832|5,842/$1.00 (buy|sell rates)

IMF Releases Another Tranche

· The International Monetary Fund (IMF) board of directors on Wednesday approved the release of a $675 million tranche of a three-year loan to Russia. The IMF noted positive developments regarding budget revenues during the first six

Today's News Highlights

Russia

MMM Fund Ruled Bankrupt

Russia-Iran Eco. Cooperation

Russian Fin. Info. Service Open

Ford Negotiating in Regions

Mitsui, Ricoh Plan Venture

Conserver Eyes Sakhalin Hotel

South Caucasus & Central Asia

Shevy Cancels Moscow Trip

Tranport Corridor Agreement

Uzbekistan Plans Smelter Tender

Politics-Economics-Business

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Thursday

September 4, 1997

Intercon's Daily

months of the year as well as continued low inflation and a stable ruble, but pointed out that wage, pension, and tax arrears are still a major problem.

MMM Investment Fund Declared Bankrupt

· A Moscow arbitration court on Tuesday declared the notorious pyramid scheme, MMM investment fund, insolvent and called for its liquidation, reported Interfax. Investors in MMM brought the lawsuit to try to recover their lost money. However Izvestia pointed out today that the ruling on MMM's insolvency will only help fund owner Sergei Mavrodi, while tens of thousands of deceived Russian investors will likely never recover their savings.

Investors lost some 10 trillion rubles ($1.7 billion) when MMM collapsed in August 1994.

Russian, Iran Plan Economic Commission

· The deputy foreign ministers of Iran and Russia have developed a program to exchange political and economic delegations and a joint economic commission is expected to be set up soon, reported Compass news on Wednesday. The Islamic Republic News Agency (IRNA) said that the program was drawn up during a meeting in Iran between Russian Deputy Foreign Minister Viktor PosOvalyuk and Iranian Deputy Foreign Minister Morteza Sarmadi.

"Greater understanding and increased political will among the countries bordering the Caspian Sea will be an important factor toward solving the current problems in the region," Sarmadi was quoted by IRNA as saying.

Fatal Traffic Accidents Skyrocketing in Russia

· The head of the Russia's State Automobile Inspection bureau (GAI) Vladimir Fyodorov said on Wednesday that more 12,000 Russians have been killed in traffic accidents so far this year, reported Xinhua. Traffic violations have doubled since 1992 and among the injured were 13,000 teenagers, he said, mainly attributing the increase in traffic mishaps to speeding.

More than 4.7 million speeding violations were reported in the first half of this year, he said. Driving under the influence of alcohol is another cause for the increase in accidents. This year, 830,000 people have been found driving drunk, he said.

Traffic violations were pervasive even among GAI employees, he said. As many as 2,200 staff members have been punished for traffic violations, and among them 377 have been dismissed and 55 are facing criminal charges.

Russia-Indonesia Arms Deal Sealed

· Indonesia and Russia have reached an agreement over Jakarta's planned purchase of 12 Sukhoi SU-30K fighters and eight MI-17-1V helicopters from Russia, worth about $500 million, reported Kyodo news. An Indonesian government minister announced today that Russia has agreed to a 100 percent barter arrangement, accepting 40 Indonesian commodities, including rubber, coffee, palm oil, and textile products in exchange for the aircraft.

Business

New Russian Financial Info. Service Opens

· Boston-based Technical Data, a division of Thomson Financial Services, has launched its first local-language financial market analysis service, called Inside Russia, said a company press release issued today. Delivered via the Dow Jones network, Inside Russia covers the GKO and Russian equity markets with real-time commentary, trading recommendations and strategies. The service is geared to the professional in the Russian investment/trading community and any institutional participant who needs detailed information on the Russian markets.

"With the growth of the Russian infrastructure and financial community, there is a dearth of information for locals on the local markets," Scot Knight, vice president and general manager of Technical Data for Europe, is quoted in the release as saying. "We saw this as an opportunity at the grassroots level and therefore hired local market experts to produce a combined Russian and English language service for insight into the Russian market place."

Inside Russia is delivered in Cyrillic and packaged with the Dow Jones Russian service. It covers the GKO market with commentary on market activity, price and yield studies, technical analysis, trading recommendations and quantitative analysis. Equities coverage includes a focus on key benchmark stocks on the Russian Trading System, with intraday price updates, time/sales analysis and short-term

When you need to know it as it happens

Politics-Economics-Business

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Thursday

September 4, 1997

Intercon's Daily

technicals. In addition to the market sections, the service also includes economic, political and media comments and tracking of central bank activity. Inside Russia is produced primarily from Technical Data's new Moscow office, with additional analysts contributing from London and Boston.

Russia-Taiwan Air Links Planned

· Russia and Taiwan today announced that direct air services will open between the two countries in March, reported Kyodo new agency. Taiwan's leading carrier China Airlines (CAL) and private Russian airline Transaero plan to operate two direct flights each between Taipei and Moscow.

Beginning in April, the number of flights will be increased to three for each of the two airlines. The direct air services formally took effect Wednesday following the signing of a memorandum on the opening of direct flights in Moscow in March. CAL has already established an office in Moscow.

Unions Oppose P&G Investment in Russia

· The Russian Federation of the Independent Trade Unions (FITUR) has said that it is concerned that US Procter & Gamble's (P&G) has acquired one of Russia's largest pharmaceutical companies, Novomoskovskbytkhim, with the intention of destroying its competitive edge, rather than to develop production at the plant, reported Itar-Tass on Monday. A FITUR spokesman told Itar-Tass that, following P&G's acquisition, the firm began to "thwart" production and layoff workers.

By the end of 1997, P&G intends to slash production at the enterprise by two-thirds, which will entail mass dismissals, he said. The spokesman described P&G's actions as "an intervention on the Russian market" and added that FITUR will back the trade union of the Novomoskovskbytkhim company.

Ford Negotiating with Russian Regions

· The governments of two Russian regions said on Wednesday that they were in talks with US Ford Motor Co. on local production of Ford automobiles, reported Reuters. Officials in the northwestern Leningrad Oblast and the central Republic of Udmurtia, in which is located the Izhevsk car factory, both said that negotiations were ongoing with Ford, but no agreements had yet been signed.

Ford opened an assembly facility with an annual capacity of 6,300 units in Belarus at the end of July.

Mitsui, Ricoh Plan Russian Venture

· Japan's Mitsui & Co. and Ricoh Co. have said that they will establish a venture in Moscow to strengthen sales and technical support of office supplies, such as copy machines in the Commonwealth of Independent States and the Baltics, reported Reuters today. The 50-50 venture, to be called Mitsui-Ricoh CIS, is expected to be capitalized at $800,000.

The company will be organized next month, with operations scheduled to begin in November. The company will aim for sales of six billion yen some three years after it begins operations and a 20 percent market share in the region.

Upcoming Events

Russian Far East Business Forum

September 25, 1997

Grand Hyatt Hotel, Washington, DC

Sponsored by: US Department of Commerce- BISNIS and The Kennan Institute

for Advanced Russian Studies

Info: Joseph Dresden

Tel: 202-287-3400; Fax: 202-287-3772

e-mail: jdresen@sivm.si.edu*

How to Master the Art of Doing Business in Russia

September 29_30, 1997

Park Lane Hotel, New York City

Organized by: Insight Information Inc.

Conference Chairmen:

Jeffrey A. Burt, Arnold & Porter

John I. Huhs, LeBoeuf, Lamb, Green & MacRae

Speakers include:

Patricia A. Moore, General Counsel,

Caspian Pipeline Consortium (Moscow)

Ambassador Richard L. Morningstar,

Special Advisor to the President and Secretary of State on Assistance to the New Independent States

Info: Insight Information

Tel: 416-777-2020 or 1-888-777-1707

Fax: 416-777-1292

When you need to know it as it happens

Politics-Economics-Business

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Thursday

September 4, 1997

Intercon's Daily

Conserver Considers Sakhalin Hotel Venture

· US chemicals company Conserver Corp. has made a tentative move into the Russian hotel industry, reported the Economist Intelligence Unit (EIU). The company announced recently that it had paid $500,000 for the right to participate in a proposed hotel and casino development on Sakhalin Island in the Russian Far East. Sakhalin is located less than 30 minutes from Japan and is the site of several major foreign oil projects.

Luzhkov Orders Plans Telephone Consortium

· Moscow Mayor Yury Luzhkov has signed an order calling for telecommunications firms with links to Moscow to form a new consortium, Mostelekom, reported the EIU on Wednesday. The new company will be charged with the task of coordinating telecommunications infrastructure growth in the capital.

Georgia and Bulgaria have appealed to international investors to help fund the project, which already receives financial support from the US and the European Union.

The plans call for expanded ferry services between Italy and Albania, a new ferry line between Bourgas and Georgia's Black Sea port of Poti, and new highway links across the countries.

Uzbek Copper/Zinc Tender

· Uzbekistan will open a tender for a 40 percent stake in the Almalyk copper/zinc smelter this month, reported Reuters. No specific date has been chosen yet to tender the stake, worth an estimated $400 million. The tender for the plant, located 60 km from Tashkent, will be open for six months.

The smelter has the capacity to produce 100,000 tons per year of copper cathodes and around 90,000 tons per year of zinc, along with lead, molybdenum, gold, and silver. According to Uzbek officials, the plant produced 100,000 tons of copper, 12.9 tons of gold, and 49.5 tons of silver in 1996.

Several major foreign companies have already expressed an interest in the tender including South Korea's Daewoo Group, US-owned Gerald Metals SA, Switzerland's Glencore AG, a German consortium of Thyssen Handelsunion AG and Siemens AG, Indonesia's Bakrie Group, Japan's Mitsui & Co., and several Russian companies.

Uzbekistan Opens Embassy in Israel

· Uzbekistan on Wednesday opened an embassy in Israel, reported Itar-Tass. Diplomatic relations between the two nations were established in 1992, Tashkent opened a consular office in Tel Aviv. Rustam Isayev, formerly Uzbekistan's Consul in Israel, was appointed charge d'affaires ad interim. At the opening ceremony, ISAYEV noted that Jews have lived in Uzbekistan for hundreds of years and that Uzbekistan provided refuge to some 200,000 Jews during World War II.

South Caucasus & Central Asia

Shevardnadze Cancels Moscow Visit

· Georgian President Eduard SHEVARDNADZE today canceled a planned trip to Moscow to attend the 850th anniversary festivities because of a customs dispute on the Russian-Georgian border. Russian border guards have denied entry to a convoy of trucks carrying alcohol, which were approved by Georgian customs. The Russian side has accused Georgia of trying to cover up smuggling operations, while Georgian customs charges that Russia is trying to discredit it.

Progress on Euro-Asian Corridor

· Following two days of talks in Bulgaria's Black Sea port of Bourgas, transport officials from nine countries on Tuesday signed a document outlining their common interests in, and details on the implementation of, the Euro-Asian transport corridor, said RFE/RL Newsline. The signatories are Albania, Azerbaijan, Bulgaria, Georgia, Kazakhstan, Macedonia, Turkey, Turkmenistan, and Uzbekistan. The corridor will connect Europe and Central Asia via the Black and the Caspian Seas by ferries and a railroad.

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

Svetlana Korobov, Contributing Editor

Politics-Economics-Business

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