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Daily intelligence briefing on the former Soviet Union

Friday, October 31, 1997

on Thursday that Russia has completed the integration of its rocket, military space, and anti-missile defense forces, reported Xinhua. Integration is aimed at creating a more efficient organization and is expected to annually reduce expenses by 60 billion rubles ($10.3 million).

The integration is part of a larger military reform plan presented by Russian Defense Minister Igor Sergeyev. Under the plan, Russia's future armed forces will comprise the air defense forces, general forces and space rocket forces. The future air defense forces consist of the present air force and air defense forces, while general forces consist of the army and the navy. The new strategic rocket forces and some elements of the air force and the air defense forces will be combined to form the space rocket forces.

Yeltsin, Jospin Together on Iranian Gas Project

· Russian President Boris YELTSIN and French Prime Minister Lionel JOSPIN on Thursday agreed that a project to develop a major natural gas deposit in Iran complies with both the letter and the spirit of the international law, reported Interfax.

Russian presidential spokesman Sergei YastrZHEMBSKY said the two leaders rejected US attempts to impose sanctions on Russian gas monopoly Gazprom and French oil company Total, for involvement in the deal.

Jail Terms for Illegal Power Cut-offs

· The Russian State Duma on Wednesday unanimously approved a

Russian Federation


Duma Ratifies Chemical Weapons Treaty

· The Russian State Duma today voted 288-75, with two abstentions, to ratify the 1993 Chemical Weapons Convention which bans the development, production, and use of chemical weapons. President Boris YELTSIN submitted the Chemical Weapons Treaty to the Duma on Wednesday. The opposition dominated Duma's agreement to the treaty is a political win for YELTSIN and will improve relations between Russia and the international community particularly the US.

Prior to the Duma's vote, presidential aide KOTENKOV pointed out to legislators that if Russia failed to ratify the convention by November 1, it would put itself to disadvantage. All decisions would be made by other participating countries "without taking Russia's interests into account," Kotenkov is quoted by Itar-Tass as saying. If the law had not been approved, Russia would neither be represented in the Organization for the Prohibition of Chemical Weapons (OPCW) governing bodies, nor take part in the drafting of the organization's budget.

The Russian government also promised the Duma that the 1998 budget will allocate 500 million new rubles ($85 million) to destroy chemical stockpiles.

During the debate , Duma Defense Committee chairman Vladimir Volkov pointed out that the world community must consider the Russian economy. Meaning, Russia needs financial and material assistance to carry out the provisions in the treaty.

Russia Completes Military Reform Step

· Vladimir Yakovlev, general commander of the newly integrated strategic rocket forces, announced

Today's News Highlights


Duma Rejects KGB Bill

Ruble Rates

Oct. Inflation Figures

Transneft Opens Tender

European Republics

Onex President Shot in Kiev

Eastbrokers Int'l Inc. in Ukraine

South Caucasus & Central Asia

Foreign Investors, Azer. Market

Shell Invests in Kazakh Fields




October 31, 1997

Intercon's Daily

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

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

Ruble = 5,872|5,902/$1.00 (buy|sell rates)

opposed the bill saying it was untimely and inopportune under current circumstances.


October Inflation 0.2 percent

· The State Statistics Committee said today that the monthly inflation rate for October hit 0.2 percent. In August, consumer prices decreased by 0.1 percent and in September, by 0.3 percent.

The prices for services grew by 1.2 percent and for commodities by 0.9 percent, while the prices for food products went down by 0.5 percent. During January-October, the total rise in the consumer prices amounted to 9.3 percent.

Government to Use Only Cash

· Russian's First Deputy Finance Minister Aleksei KUDRIN said on Thursday that the government decided that all transactions between the state and enterprises will be made on a cash basis only, beginning January 1, 1998, reported today's Journal of Commerce. Previously, the government allowed enterprises to pay their debts to the state by writing off the relevant sum of the debt owed by the state to the enterprises on an in-kind basis.


Gazprom to Open Tender on Pipeline

· Russian gas monopoly Gazprom will open an international tender on a project to lay a gas pipeline on the Black Sea floor to Turkey and build a compressor station, reported Interfax. US General Electric, Italy's Fiabem, and Dutch Allseas are reportedly interested in the tender on the project. Results on the tender will be announced early in 1998.Construction on the $1.5 billion pipeline and the $200-300 million compressor station is set to begin in 1998 and be

Jun Jul Aug Sep Oct

law which would introduce jail terms for "illegal" power cut-offs to non-paying customers, reported the Financial Times. This law says those responsible for illegally cutting off customers could face jail sentences of up to five years, however, the law does not define what it means by illegal.

Executives at Unified Energy Systems, the national electricity monopoly, dismissed the vote as a "populist measure" and said it would have no direct effect because it targeted only illegal power cuts.

The law still must be endorsed by the Federation Council and Boris Yeltsin, the president to be put into effect.

Duma Rejects KGB Reformation Bill

· The Russian State Duma Thursday rejected the first reading of a bill on security agencies in a vote of 148-129 with 11 abstentions, reported Itar-Tass. All major Duma factions opposed the bill which was supported only by the Liberal Democratic Party faction which submitted it.

The bill called for the merging of the Federal Security Service (FSB), the Foreign Intelligence Service (SVR) and the Federal Agency for Governmental Communications and Information (FAPSI) into a single ministry of state security. In other words, the LDP was attempting to recreate the Soviet-era KGB.

Duma Security Committee chairman Viktor Ilyukhin

When you need to know it as it happens




October 31, 1997

Intercon's Daily

completed in 1999. Russian-Dutch joint venture Petergas is taking part in designing the project.

Russia has agreed to deliver three billion cubic meters of gas to the Turkish port of Samsun by 2000.

Transneft to Open Tender on Pipeline

· Russia's pipeline monopoly Transneft is drawing up documents for a tender to build an oil pipeline bypassing Chechnya, which is expected to be held by the end of the year, reported Bridge News. Under the terms of the tender, the contractor will build a 312-km pipeline and three pumping stations.

The pipeline is the brainchild of Fuel and Energy Minister Boris NEMSTOV. He has authorized Transneft sell bonds to pay for the pipeline construction.

of this year, said a company press release. The company hopes to engage in the trading and brokerage of shares, and to participate in the privatization process, which will continue throughout next year.

"We are anticipating the next growth market in Central and Eastern Europe to be in Ukraine. We expect that Ukraine will start to generate additional interest from our international clients early next year and we want to be in a position to service their needs," said Easterbrokers Vice Chairman Martin SUMICHRAST.

South Caucasus & Central Asia

Azer. Eases Restrictions on Foreign Investors

· The government of Azerbaijan is easing restrictions on entry of foreign investors to the Azeri market, reported Economist Intelligence Unit (EIU). Under a presidential decree, residents are permitted to participate in the privatization of 19 cotton gins, and non-residents may purchase options worth 2,000 Manat (about $0.50). By the end of July, ten foreign companies were permitted to purchase 10 million options.

The Azeri market is becoming more attractive to foreign investors, who participate primarily in the oil sector. In 1997, some 72 percent of foreign capital will be likely invested in the oil sector. The government hopes to expand investment beyond the sector.

According to the Economy Ministry, total foreign investment is expected to reach $1.2 billion in 1997 and $1.48 billion in 1998. FDI in these years is projected at $1.1 billion and $1.35 billion, respectively.

Shell Acquires 60 pct in Kazakh Field

· Royal Dutch/Shell has acquired a 60 percent interest from Germany's Veba Oel Kasachstan GmbH in the production sharing agreement for the Temir block oilfield in Western Kazakhstan leaving 40 percent in the hands of Veba Oel, reported UPI. Shell has created a new company called Temir Petroleum Development BV, which will start work by drilling two appraisal and two exploration wells.

European Republics

Onex Bank President Shot Dead in Kiev

· Yakov Rogozin, co-founder of Onex Bank, one of Ukraine's top 25 commercial banks, was shot dead in Kiev Thursday near a company office building in an apparent contract killing, reported Reuters. The bank was set up by several oil companies and Ukraine's biggest oil refinery, Kremenchuk. Local media reported in recent months that ROGOZIN was involved in a row over ownership of Onex Bank.

Onex is closely linked to the Oneximbank, one of Russia's largest banks. The Ukrainian bank gained notoriety last summer when it fell short by $3.5 million. The blame was put on chairman of the board Boris Kushniruk who spent two months in a remand prison and was released on his own recognizance.

Last year, another top Ukrainian Onex executive was shot in a similar fashion near his office.

Eastbrokers Int'l Inc. to Open in Kiev

· Rockville, Maryland-based Eastbrokers International Inc. announced today its intention to open a full service brokerage operation in Kiev by the end

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

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When you need to know it as it happens