DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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

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Daily intelligence briefing on the former Soviet Union

Wednesday, November 12, 1997

Russian Federation

Politics

Chubais Scandal Aired on Channel 1

· Russian channel 1, owned by the government and partially by Boris BEREZOVSKY, Russian tycoon and leader of a large FiG, reported for almost half its evening newscast that First Deputy Prime Minister Anatoly CHUBAIS has been accused by Russian journalist Alexander MINKIN of money laundering, taking bribes, and providing bribes to various political partners including State Property Minister Maxim BOIKO. The bribe is described as an advance for a book on Russian Privatization, which Chubais has never written or published. MINKIN declared he will follow up next week with an article in Novaya Gazeta on the specifics of the alleged money laundering. MINKIN has a reputation for his investigative exposes of corruption. He previously exposed former Defense Minister GRACHEV's mercedes as an illicit gift and GIDAR's dacha as an improper privatization. The journalist has demanded that Prosecutor General Yuri SKURATOV investigate CHUBAIS' actions.

The political struggle in Russia is intensifying as BEREZOVSKY wields his power to ruin his political enemies. The fact that Russian TV can be accessed world wide will surely add doubts to CHUBAIS' character internationally.

Luzhkov and Mongolian Leader Meet

· Moscow Mayor Yuri LUZHKOV met with Chairman of People's Great Hural of Mongolia Radnasumbereliyn GONCHIDORJ to compare administrative operations in their cities. Moscow and the Mongolian capital Ulan Bator are sister- cities. Luzhkov told the chairman of the Mongolian parliament about his rights and duties as mayor, his relationship with the city Duma, stating that the Mayor and the city council work on principles of compromise rather than confrontation. LUZHKOV continues to develop his image as a man with interna

tional connections and savvy, positioning himself for a presidential run.

Military Reform Continues

· Top commanders and officials of the Russian armed forces began meeting in Moscow on Tuesday to sum up the results of army reform and training in 1997 and specify the tasks for 1998. Defense Minister Igor SERGEYEV said, "It took us five years to understand that a reform of the armed forces is part of the national military reform and an objective necessity...A possible escalation of local armed conflicts and enhanced positions of Islamic extremism in Transcaucasia and the Central Asia pose threats to Russian security." They will also discuss, "information provision of the military reform and creation of a unified information system of the Russian armed forces," spokesman for the Defense Minister Anatoly SHATALOV told Itar-Tass.

Military reform and army cuts will leave another 60,000 servicemen homeless to bring their total number to 450,000. Head of the State Construction Committee Yefim BASIN said the government is working out a five-year federal program called "State Housing Certificates" designed to provide housing to more than 380,000 military families by 2003 by subsidizing up to 80 percent of construction and 20 percent to be paid by servicemen or through a bank credit. Subsidies will be provided in the form of housing or cash to those who have served 10 years and who have no housing.

Russia's interior troops are planned

Today's News Highlights

Russia

Central Bank Satellite Launched

EBRD Opens Office in St. Pete

Arms Exporting Possibilities

European Republics

Pensions and Wages in Ukraine

Lithuanian Pres. Candidate

South Caucasus & Central Asia

Georgia Abolishes Death Penalty

Uzbekistan Defines Identity

Politics-Economics-Business

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Wednesday

November 12, 1997

Intercon's Daily

to be reduced further. Colonel-General Leonty SHEVTSOV for interior troops said on Monday that his troops have been reduced from 440,000 in January 1992 to 257,000 in 1997. Next year, they will be cut by another 37,000 troops to 220,000 by 1999. "Interior troops handle the entire range of tasks of ensuring public order in close cooperation with local interior departments," he said.

Economy

Ruble = 5,899/$1.00 (NY rate)

Ruble = 5,900/$1.00 (CB rate)

Ruble = 5,892|5,909/$1.00 (buy|sell rates)

Russia Launches Central Bank Satellite

· The Central Bank of Russia will launch the Kupon satellite today, which is the first space vehicle for global accounting for Russia, reported Itar-Tass. It will be placed in orbit by the heavy carrier rocket Proton, which will be launched off the Baikonur space-launch complex. The satellite, weighing 2.5 tons, will promote communication between fixed subscribers. The Central Bank sees the satellite as the beginning of its own global accounting and information system.

Bumper Crops to Feed Russia

· Russian Minister of Agriculture and Food Supplies Viktor KHLYSTUN announced that, "Russia has harvested over 95 million tons of grain by this day. The state will procure 86 million tons of grain." The minister noted that Russia garnered in twice as much cereals and maize as last year. Farmers topped the projected goal of 80 million tons of grain for this year. The procured quantity is enough to meet food needs as well as industrial requirements, to replenish seed stocks and procure fodder.

EBRD to Open Office in St. Petersburg

· The European Bank for Reconstruction and Development (EBRD) will open an office in St.Petersburg next week, the Mayor Vladimir YAKOVLEV. The decision of the EBRD to open its office was prompted by the expanding scale of operations by this international finance organization in St. Petersburg and the North-Western region.

Privatization Results and Plans

· State Property Minister Maxim BOIKO announced Tuesday that privatization brought more than 12

trillion rubles ($2 billion) to the federal budget during the first 10 months of 1997, reported RFE/RL Newsline. The state hopes to acquire another 10 trillion rubles from privatization before the end of this year, to make up for low tax collections. BOIKO announced the following companies and their stakes to be privatized: Lenenergo Utility 16 percent stake; LUKoil 0.96 percent stake; Tyumen Oil Company 48 percent stake; Slavneft 19.68 percent stake; and Eastern Oil Company 34 percent stake. However, BOIKO apparantly negated the YELTSIN decree allowing the 100 percent ownership. BIOKO interpreted the decree to only apply to Russian governmental shares in Russian oil companies, thereby limiting the decree to merely two companies Salvneft and LUKoil.

Business

Oil Terminal West of St. Petersburg

· The construction of a new oil terminal will be launched in Primorsk, west of St.Petersburg, on Thursday with expected completion by the year 2010. The oil terminal will transport crude oil, oil products, gas and liquid cargoes with a total capacity of 45 million tons year. The cost of the project is estimated at $3.5 billion. The new terminal will be part of the unified Baltic oil pipeline system which will run from Harjaga in the Komi republic to the coast of the Gulf of Finland. Russian Transport Minister Nikolai TSAKH said Russia loses 600 million dollars annually, transporting its cargoes through foreign sea ports of the Baltic sea. Apart from payments for the use of foreign sea ports, Russia has to make additional expenditures of around $1.3 billion a year on the lease of foreign ships for the transportation of cargoes, the minister said.

Exporting Arms on the Rise

· Minister for Foreign Economic Relations and Trade Mikhail FRADKOV said the number of Russian arms exporters will gradually rise thanks to producers of weapons and materiel, capable of conducting independent export operations. Promexport and Rossiiskiye Tekhnologii will now compete on the world market with Rosvooruzhenie, the company which held the concentration of foreign trade of military and technical equipment from Russia. This is a departure from the monopolistic policy previously managed by General KORZHAKOV, YELTSIN's former bodyguard chief, which should boost sales and reduce the risk of corruption. FRADKOV believes Russian has not yet tapped into the demand for weapons

When you need to know it as it happens

Politics-Economics-Business

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Wednesday

November 12, 1997

Intercon's Daily

and won the interest of the world markets for Russian military goods and services.

The growth of export, achieved in 1995-1996, is an indisputable accomplishment of organizations and factories participating in military-technical cooperation, FRADKOV continued. In 1995, the growth amounted to 65 percent and in 1996 to 18 percent, while the volume of deliveries rose to $3.6 billion, reported Itar-Tass. Russia second to the US in exports of weapons to the world. However, Russia takes the second place position only in the volume of sold weapons, but not in real funds earned from their sales. Some of Russia's arms supplies were made to pay credits and Russian debts to several countries.

spect to Russia. "In respect of Russia, for example, it will remain unchanged and if changes do occur, these will be for the better," he said. LANDSBERGIS also said that when elected he will be a "non- conflicting and cooperative president, active and laborious." As previously reported by Intercon, LANDSBERGIS ranks among three major candidates having the best chances to win the race. The other two contenders are Arturas PAULAUSKAS, ex- prosecutor general of the republic, and Valdas ADAMKUS, an American environmentalist of the Lithuanian origin. The elections are scheduled for December 21, 1997.

South Caucasus & Central Asia

Georgia Abolished Death Penalty

· Georgian parliament on Tuesday passed a draft law proposed by President SHEVARDNADZE abolishing capital punishment. Georgia is the second former soviet nation to abolish the death penalty after Moldova, reported Reuters.

Uzbekistan Identity With Russia and World

· Uzbekistan President Islam KARIMOV said that he wants to have good relations with the US and world community but, "it is by no means directed against Russia," reported Xinhua. KARIMOV emphasized his country's interest in Russia. "Uzbeks cannot be torn away from the Russian people, Russian culture, Russian civilization, Russian history," he said. Uzbekistan wants to continue good economic relations with Russia but only as, "with a civilized country which has hard currency." He stressed that he did not want to get a Russian-made Yenisey harvester in exchange for cotton grown in Uzbekistan as he needs dollars to buy what the people really need.

When asked about development of state patterns, the President said, "Uzbekistan follows the Uzbek pattern," that is "to restore everything great in the ancient culture of our ancestors, combine the great legacy with the achievements of world civilization and use enormous natural and intellectual resources."

European Republics

Pensions and Wages in Ukraine

· President Leonid KUCHMA rejected an attempt by the leftist-dominated parliament to raise the minimum pension, thus producing a deadlock on pension and wage reform, reported Xinhua. KUCHMA said the decision of the parliament to raise the minimum pension to 70.9 gryvnas (about $38) a month would bankrupt the country. The President also vetoed a law to raise the minimum wage from 15 gryvnas ($8) to 73.7 gryvnas (about $39) a month after January 1, 1998, which the parliament passed on October 15. He said the parliament failed to state the source of funds for the increases since Ukraine's economy had shown no sign of recovery.

Observers claim left-wing lawmakers tried to please voters by passing these two laws as the parliamentary elections approached. The legislation hopes to gain support from voters and force the president into a very difficult situation.

Lithuanian Pres. Candidate on Foreign Policy

· Vytautas LANDSBERGIS, candidate for Lithuanian presidency and currently speaker of the Lithuanian parliament, said that if he is elected president he will not change the country's foreign policy with re

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

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