DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL, USA, 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

Thursday, October 30, 1997

Russian Federation

Politics

Duma Looks at Presidential Term Limits

· The Russian State Duma on Wednesday asked the Constitutional Court to decide whether Boris YELTSIN is legally entitled to run for a third term as President in the 2000 election, reported RFE/RL. Article 81 of the Russian constitution states that the president cannot serve for more than two consecutive terms. Some presidential aides, however, argue YELTSIN could run for another term, since he was first elected under another constitution. YELTSIN so far has given mixed signals regarding his intentions for the 2000 election.

Yeltsin to Visit China

· Russian President Boris Yeltsin will visit China for the fifth time on November 9-11 to hammer out a bilateral border demarcation agreement and boost flagging Sino-Russia trade. During his trip, Yeltsin is expected to lobby Beijing for a greater Russian role of China's developing nuclear power industry, seek increased sales of high-tech arms to China's modernizing military, and to seek greater cooperation in agricultural trade and natural resource exploitation with Chinese industry.

Russia-Kazakh Military-Technical Cooperation

· Russian Defense Minister Igor Sergeyev today completed his visit to Kazakhstan with the signing of documents on military and military-technical cooperation, reported Itar-Tass. The agreements cover joint planning of operational activities and training of Russian and Kazakh armed forces personnel.

sergeyev and his Kazakh counterpart Mukhtar Altynbayev also signed agreements on compensation by Russia for leasing testing sites in Kazakhstan and on the procedures and conditions for storing

and moving highly toxic missile fuel and other compounds from the Sary Shagan test site.

French Premier Jospin Visits Moscow

· French Prime Minister Lionel Jospin today arrived in Moscow on a three-day official visit focusing on boosting bilateral cooperation, reported Itar-Tass. During his visit, JOSPIN will join Russian Premier Viktor Chernomyrdin to co-chair a meeting of the Russian-French intergovernmental commission on economic and technical cooperation and then sign a package of agreements.

Special attention will be given to doubling two-way trade in the next few years and expanding partnerships in the aircraft industry, space research, nuclear power engineering, agriculture and health care, said a French official.

According to forecasts, trade between Russia and France will increase to $3.2 billion in 1997 up from $2.86 billion in 1996.

Economy

Ruble = 5,885/$1.00 (NY rate)

Ruble = 5,887/$1.00 (CB rate)

Ruble = 5,870|5,904/$1.00 (buy|sell rates)

Stroyev Promises Less Taxes

· Russian Federation Council chairman Yegor Stroyev told Itar-Tass today that one of the key goals for Moscow is the removal of exorbitant taxes imposed on foreign

Today's News Highlights

Russia

Roper Delays Gazprom Deal

BP Buys Sidanko Stake

Armada Gold Progress

European Republics

US Foreign Aid Bill Update

South Caucasus & Central Asia

Ukraine/Georgian Force Planned

Swiss Co. In Georgia Mining

Uzbek GDP Rising

Amoco President to AIOC

Politics-Economics-Business

Page

Thursday

October 30, 1997

Intercon's Daily

businessmen in Russia. "Even our own Russian capital flees Russia because of tax problems. The Japanese tell us: bring your capital back to Russia, and Japanese investors are sure to follow," Stroyev is quoted as saying.

Stroyev is in Tokyo leading a parliamentary delegation holding talks with Japanese legislators.

Armada Progress in Gold Project

· Canadian based Armada Gold Corp. announced Wednesday in a company press release that a feasibility study, conducted by Kvaerner Metals Davy Ltd., concluded that the first phase of the Taseevskoe portion of Armada's Baley Gold Project in southeastern Russia is capable of producing an average of 220,000 ounces of gold a year for an initial period of 10 years. Kvaerner, estimates that the cash operating cost will average $166 an ounce.

Production in the first year is estimated to be 267,000 ounces and in the second 324,000 ounces. The operating cost would be $140 an ounce in the first year and $120 an ounce in the second year.

Armada Gold, through its Russian-subsidiary, Balgold Limited, holds an 85 percent interest in the Baley Gold Project, in the Chita region of Siberia. Armada concluded a tax protocol with the Chita region administration and is finalizing appropriate contracts with Russian banks and authorities to permit its gold production to be marketed in Russia and abroad.

Business

Roper Delays Delivery to Gazprom

· US Roper Industries Inc. announced on Wednesday that it has postponed a $12 million fourth quarter shipment to Russian gas monopoly Gazprom anticipated to be covered under a US Export-Import Bank guaranteed financing, said a company press release. Roper said that while finalization of the documentation for this secured financing is approaching completion, US congressional criticism of Ex-Im financial support for Gazprom and Ex-Im's response warranted caution.

Certain Congressional leaders asked Ex-Im to reconsider its financial support for Gazprom last week, after discovering that the Russian company had signed onto a $2 billion deal to develop a major gas deposit

in Iran. The CLINTON administration has also threatened to impose sanctions against Gazprom for doing business with Iran.

Russia has responded angrily to US efforts to stop the Iranian gas deal. Fuel and Oil Minister Boris NEMTSOV told reporters on Wednesday that Moscow "rejects all attempts to influence Russia's Gazprom" and will protect that organization, said RFE/RL Newsline.

BP to Buy Sidanko Stake from Oneximbank

· Russian financial group Oneximbank is in the final stages of negotiations to sell a minority stake in Siberian oil company Sidanko to British Petroleum, reported Dow Jones today. "The talks are close to conclusion and the investor will be British Petroleum," Oneximbank spokesman Sergei CHERNITSYN is quoted as saying. The sale is expected to be complete by the end of the year.

No financial details were disclosed nor would Oneximbank reveal the size of the stake to change hands. According to Itar-Tass citing a source in London's business community, however, British Petroleum will buy a 10 percent stake in Sidanko.

Kazan Telecom to Issue ADRs

· Russian telecommunications company Kazanskaya GTS, based in the Republic of Tatarstan, plans to issue American Depository Receipts (ADR) and will hold a presentation in London in November, reported Reuters today. Moscow investment bank Troika-Dialog and Tatarstan-based IK Elemte are acting as Kazanskaya GTS's financial consultants.

The Bank of New York will act as depository for the level-one ADR program. Price Waterhouse has been appointed as the company's auditors.

European Republics

US Foreign Aid Bill for NIS Decided

· The Foreign Operations conference of Appropriations Committees agreed on Wednesday that the Newly Independent States (NIS) of the former Soviet Union will receive $770 million in US foreign aid next year, $130 million below the President's request.

Of the total, $250 million was reserved for the Southern Caucasus region, which includes Azerbaijan, Armenia, and Georgia. Of this $250 million, $92.5

When you need to know it as it happens

Politics-Economics-Business

Page

Thursday

October 30, 1997

Intercon's Daily

million will go to Georgia, which the conference recognized as "a key country providing regional leadership for conflict resolution and economic reform." Training and infrastructure support for customs and border control by Georgian officials was named as a high priority for the use of these funds.

Armenia, which will receive $87.5 million, was recognized as "a country in the center of a volatile region that cannot prosper without renewed trade and communications with its sometimes hostile neighbors.

Azerbaijan is barred from receiving US aid under the Section 907 of the Freedom Support Act.

The Southern Caucasus aid also includes $12.5 million in aid has been designated to provide assistance for victims of the Nagorno-Karabakh conflict and $5 million for victims of the conflict in Abkhazia.

Another $52.5 million will be made available as the US share of international efforts to restore peace in Nagorno-Karabakh and Abkhazia, but these funds cannot be released until settlements to the conflicts have been reached. If no settlements have been reached by May, these funds can be used elsewhere in the NIS, as decided by the Secretary of State.

Of the total sum allocated to the NIS, Ukraine will receive $225 million and Russia will receive between $110 million and $160 million. Another $135-185 million will be divided among the remaining former Soviet republics.

South Caucasus & Central Asia

Glencore in Georgia Mining Deal

· Georgia successfully begun to attract investors to its mineral assets. Swiss company Glencore has won five-year rights to the copper and barium deposits of the Madneuli mining complex by promising to invest a minimum of $10 million within the next three years, reported Economist Intelligence Unit (EIU).

Amoco President Becomes AIOC COO

· Amoco Canada Petroleum Company Ltd.

announced on Tuesday that Bob Erickson, current Chairman and President is relocating to Baku, reported Canada NewsWire. He will hold the position of Chief Operating Officer with Azerbaijan International Operating Co. (AIOC), a 12-company consortium led by Amoco Corp. and British Petroleum.

In his new role, Mr. Erickson will assume direct operational management of AIOC as they move into the next phase of full field development. The AIOC consortium is involved in one of the world's largest oil projects—the development of three major fields in the Azeri sector of the Caspian Sea, which have an estimated four billion barrels of recoverable reserves.

Georgia- Ukraine Military Cooperation

· Ukrainian Defense Minister Alexander KUZMUK and his Georgian counterpart Vardiko NADIBAIDZE today in Tblisi agreed to create a joint battalion to protect the transit corridor along which Caspian oil will flow to Western Europe. The force will be formed in 1998 and train at a military base near Odessa, reported Reuters. Last year, the first Azeri Caspain OIl was transported across Georgia by rail and pipeline and then on to Ukraine by tanker.

"We have worked out the structure of this battalion which will be used to guard the Euro-Asian transport corridor," KUZMUK is quoted by Reuters as saying.

The military cooperation between Ukraine and Georgia was further strengthened by Ukrainian president KUCHMA's agreement to purchase an unspecified number of Su-25 fighter jets produced at an aviation plant in Tblisi, reported RFE\RL.

Uzbek GDP Rises

· Uzbekistan's gross domestic product (GDP) in the first nine months of 1997 increased 4.9 percent, compared with the same period of last year, reported Interfax. Industrial production rose by 6.3 percent and agricultural output increased by 12.7 percent. Trade turnover grew 10.3 percent. The budget deficit did not exceed the set limits and was 3 percent of GDP, according to a government spokesman.

Paul M. Joyal, President, Editor in Chief Clifton F. von Kann, Publisher Jennifer M. Rhodes, Principal 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

available for non-profit institutions.

Daily Report on Russia is for the exclusive use of the subscriber only. Reproduction and/or distribution is not permitted without the expressed written consent of Intercon. Daily Report on Russia Ó copyright 1997, Intercon International, USA Inc.

When you need to know it as it happens

Politics-Economics-Business

Page