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

Monday, November 24, 1997

expanding its energy investments in Vietnam. On Tuesday, CHERNOMYRDIN will visit a joint Russian-Vietnamese venture Vietsovpetro in the south Vietnamese city of Vungtau, where he will attend a meeting of the venture's personnel, dedicated to the production of 50 millionth ton of oil on Vietnamese continental shelf. Arms sales will be discussed as Russia still supplies the bulk of Vietnam's military hardware and has hundreds of military personnel stationed in Cam Ranh Bay. Experts say the withdrawal of Russian forces may be linked to an agreement on the debt repayment.

Seleznev Calls for Coalition Government

· Russian State Duma speaker Gennadii SELEZNEV has called for a coalition government that would take into consideration the communist's dominance in the lower house, reported Interfax. "It is time to speak frankly to the president about the creation of a government based on popular confidence," SELEZNEV said. He called for a constitutional amendment allowing the government to be formed on the basis of either the majority party in the Duma or a coalition formed by the deputies.

Russo-Israeli Cooperation Increased

· The Russian and Israeli commission on trade, economic, scientific and technical cooperation signed a protocol on broadening and stepping up of ties in various areas between the two nations. Israeli Minister of Industry and Trade Natan SHARANSKY and Russian Minister of Science and Technology

Russian Federation

Politics

Russia-Vietnam Cooperation

· Russian cabinet head Viktor CHERNOMYRDIN arrived in Vietnam and met today with his Vietnamese counterpart Phan Van KHAI. The two leaders signed documents covering a declaration on joint development of trade, economic, scientific and technical cooperation and an agreement on cooperation in tourism and veterinary. CHERNOMYRDIN also discussed the massive debt which Hanoi owes to Russia. "I have had exchanges with the Vietnamese prime minister on the debt repayment, and we have assigned specialists in the finance ministries of Russia and Vietnam to prepare concrete proposals so that we will solve it," CHERNOMYRDIN said.

"The matter of debt is one of the most complicated of Russo-Vietnamese relations, and the main difficulty consists of recounting foreign currency equivalent rubles into US dollars and determining the total sum," Russian Ambassador to Vietnam Viktor IVANOV said. The conversion of the debt into hard currency has stalled negotiations. The total hard currency debts stands at about $7 billion, trade debt so far this year is around $1.8 billion and foreign exchange reserves are at $2 billion, reported the Financial Times. Andrei KOSTIN, president of Vnesheconombank, responsible for servicing Russia's foreign debt, said Russia is willing to discount the Vietnamese debt by 70 percent.

Regarding trade relations between Vietnam and Russia, IVANOV said that the sides are not satisfied with the existing volume of commercial relations. "It is necessary to revise the old mechanisms and look for new ways of economic cooperation attracting not only state enterprises but also the private sector." The two leaders will discuss Russia's interest in

Today's News Highlights

Russia

Eastern Oil Co.Tender Canceled

Motorolla in Moscow

Volvo JV in Russia

European Republics

Rival Marches in Minsk

South Caucasus & Central Asia

VPChechnya in Tbilisi

Kazakh Floats 5 "Blue Chips"

50 Cos. Auctioned in Turkmen.

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November 24, 1997

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Vladimir FORTOV were productive on all items to be discussed connected with trade, health services and cooperation in outer space. The commission's next meeting is planned to be held in Moscow in six months. The sides expressed the interest to increase economic relations between them. The volume of Israeli export to Russia for the first nine months of 1997 was about $190 million, while the Russian export to Israel was valued at only $80 million. These indexes were, respectively, $344 million and $93 million in 1996.

Economy

Ruble = 5,910/$1.00 (NY rate)

Ruble = 5,912/$1.00 (CB rate)

Ruble = 5,905|5,919/$1.00 (buy|sell rates)

Stock Market Stability Determined in 7- 10 days

· Russia is watching the world markets closely and Central Bank chairman Sergei DUBININ predicts, "the next seven-ten days will determine the situation on the world stock market." DUBININ said that foreign investment totaling $5 billion has been pulled out of Russia's bond market. He was optimistic that as the world markets stabilize, the pressure on Russia will also ease. DUBININ said the Central Bank and the government will be able to stabilize the situation to prevent sharp fluctuations in the value of the ruble, reported Reuters. DUBININ admitted they had underestimated the depth and the duration of the crisis on the world stock market, which had effected the Russian market of corporate stock. The crisis duration also took foreign specialists unawares. It appeared to be graver than they thought, he said.

Liquidation of Rossiiskaya Metalurgical

· President Boris YELTSIN has ordered the liquidation of the closed joint stock company Rossiiskaya Metallurgiya. The decision aims to further reform Russia's metallurgical industry. Rossiiskaya Metallurgiya is fully owned by the government. The President also ordered the government to determine the procedure for financing investment conversion programs within a month.

Reforms to Agricult-Indust. Combine

· The Russian economic reform committee ratified on Saturday a guideline for reform of agricultural and industrial combine to simplify tax-collecting institutions, reshuffle bankrupt farms and protect domestic

agricultural market with tariffs. Chaired by First Deputy Prime Minister CHUBAIS, the committee meeting agreed to implement a unitary land tax to replace the traditional land tax, business property tax, real estate tax, profit tax, transportation tax and water resources tax.

The meeting also decided that the term for the agricultural businesses to repay their debts and interest would be changed. Furthermore, local governments would sign agreements with farm producers on allocating agricultural subsidies in accordance with crop harvests and ratio of livestock products, local media reported. This guideline will serve as the basis on which to draft the three-year reforming program of the federation on agricultural and industrial combine.

Eastern Oil Co. Tender Canceled

· The Russian government canceled a major privatization action for 34 percent stake in Eastern Oil Company today because of insufficient interest. Under Russian law the action requires at least two bids to be legal. The government had hoped to raise at least 4.5 trillion rubles ($761 million) from the tender of the Eastern Oil sale to help meet budget revenue targets. This cancellation, following the cancellation of Tyumen Oil Company's tender on Thursday, is further evidence of the difficulties in Russia's domestic banking. Russian banks are still in turmoil over drained resources because of the equity and government security markets. Shares in six Russian oil companies were due to be sold by the end of this year as part of the final phase to complete the privatization of the oil sector.

Business

Chuvashia Oil tender for all Russia

· On Friday, an all-Russia tender was announced in Chuvash Republic on the Volga for the right to use mineral resources with a view to prospecting for and production of oil and gas on an area of more than 1,000 kilometers called "MarPosad block." Russian Minister of Natural Resources Viktor ORLOV said that, after considerable surveys by leading experts, the area of the Volga is promising for oil and gas.

Volvo JV in Russia?

· Deputy Prime Minister Vladimir BULGAK told Swedish-based Volvo top executive that Russia has

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an interest in setting up a joint venture to assemble buses and cars. Volvo's executive vice president Lennart JANSSON said his company was seeking to expand its production activity to Russia, specifically to make buses in Moscow. With this in view, the Volvo executive vice president suggested drawing up and signing a memorandum of understanding between Volvo and Russia's Transportation Ministry during Russian President Boris YELTSIN's visit to Sweden, which is scheduled for December 2-4.

Motorola's Assembled in Moscow

· Motorola has revealed that the first satellite and telemetry hardware started to roll off the production lines of the Izhevsky Radio Factory (IRF) in Moscow. More than 900 charging devices have been produced by IRF and shipped to Motorola for global sale, and production. The new deal is not the first time the two firms have worked together. Three years ago, in 1994, IRF and the Land Mobile Products Sector division of Motorola agreed to cooperate in the field of development and production of the modern equipment of two way radio communication services. The current linkup is developing service, sales, and production. The production rolling off the IRF facility lines this month is the third and final stage in the linkup. Plans call for as many as 20,000 charging devices to manufactured at IRF's Russian facilities.

Russo-Chinese Pipeline Accord Signed

· Russia and China signed on Saturday an agreement on the construction and operation of a 12 kilometer pipeline to export oil products to China. The document is signed under the Agreement dated November 10, 1997, between the Russian and Chinese government on principles for cooperation between the regional administrations. The pipeline will constitute a makeshift sectional collapsible system consisting of five lines of a field pipeline with a throughput of up to 2,000 tons daily and will be used for the export of liquid cargoes, including petroleum products. Experts estimate the revenue from the project will be $1 per ton of pumped oil.

Union of Youth supported LUKASHENKO by carrying banners and portraits congratulating him on this vote. 5,000 anti LUKASHENKO marchers denounced the vote and carrier banners calling the president a dictator and that he should step down, reported Reuters. No incidence of violence were reported. The vote passed by a large majority allowed LUKASHENKO to rewrite the constitution in his favor, increasing his hold on state institutions, packing the parliament with his supporters, and extending his presidential term. Belarus is one of the few European states denied membership to the Council of Europe, a watchdog body set up to defend human rights and democracy. The Council has criticized LUKASHENKO and his policies, as hundreds of people have been detained and some beaten for expressing opposition to the government.

South Caucasus & Central Asia

VP Chechnya in Tbilisi

· Vice-Premier Ahmed ZAKAYEV of the Chechen Republic arrived in Tbilisi today for an unofficial visit with Mamuka ARESHIDZE and members of the Georgian government to discuss matters concerning economic relationships between Chechnya and Georgia. ZAKAYEV intends to discuss the question of expediting the construction of the Grozny-Tbilisi highway, more than a half of which has been built. The arisen financial difficulties prevent the construction from being finalized, ARESHIDZE said. It is not yet known whether ZAKAYEV will be received by Georgian President Eduard SHEVARDNADZE.

Maskhadov in Azerbaijan / Delayed Return

· Chechen leader Aslan Maskhadov on Saturday stayed in Azerbaijan's capital Baku on the way home from Turkey to meet with Azeri President Geidar ALIYEV. The unplanned visit took place mostly behind closed doors. However, it was reported that MASKHADOV told ALIYEV that the goals of his visits to the United States and Turkey had been achieved. In the words of MASKHADOV, he managed to tell the truth about the Chechen situation primarily during his visit to the United States. "It was my main goal to tell the truth about Chechnya and, I think, I managed to do that," MASKHADOV said.

Sources of both sides have not officially made public the content of the conversation but one can suppose they focused on development of economic relations. Chechnya counts on assistance of Azerbaijan spe

European Republics

Marches in Minsk Mark Presid. Powers Anniv.

· Rival marches filled the streets as pro and anti-LUKASHENKO supporters expressed their views on the vote last year that handed the president new powers. 2,500 members of the Belarussian Patriotic

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cialists in restoration of the oil industry and a number of energy facilities in Grozny.

MASKHADOV's date of return to Grozny is still unknown. This kind of uncertainty, according to foreign and Russian analysts, is giving rise to the thought that president MASKHADOV's holiday abroad is dragging on not because of his own free will. Staying in power vice-president Vakha ARSANOV, Shamil BASAYEV, and Zelimkhan YANDERBIYEV, Salman RADUYEV and Movladi UDUGOV are striving to delay MASKHADOV's "holiday" and putting off his date of returning home. Experts believe these people, some of whom have received power from lawfully elected president MASKHADOV, might attempt to discredit him in the eyes of the Chechen people and the Russian and world community.

Kazakh to Float Five "Blue-chip" Companies

· The Kazakhstan government announced it would float state shares in five potential "blue chip" companies on the Kazakhstan Stock Exchange, but it suspended planned sales in eight companies. The government, "will hold negotiations with investment banks on the primary placement of state shares in AO Zhezkazgantsvetment, Mangistaumunaigaz, Kazakhtelekom, Aktobemunaigaz and Ust-Kamenogorsk Titanovo-Magnievy Kombinat," said the Kazakhstan prime minister's statement. Most of these companies are worth multi-billion dollars. The statement gave no date for when state-held stakes might be floated on the Kazakhstan Stock Exchange. The exchange, officially launched on September 19, trades every Tuesday and Friday.

Turkmenistan-Iranian Relations

· Turkmen Deputy Prime Minister and Foreign Minister Boris SHIKHMURATOV and Iranian Foreign Minister Kamal KHARRAZI met in Tehran on Saturday discussing bilateral cooperation, particularly on gas and oil export. Iran has announced its readiness to be a bridge for the relatively landlocked Central Asian republics to reach the outside world and has signed several documents with those coun

tries to help them export oil and gas. Last month, Iranian Foreign Minister KHARRAZI announced that Iran and Turkmenistan will form an international oil consortium for oil and gas exploration in the Caspian Sea. He said that the two countries' relationship is based on long-term bilateral relations, adding that Iran can serve as the most efficient route for transfer of oil from the Commonwealth of Independent States to the world markets.

Turkmenistan Signs with EBRD

· Turkmen President Saparmurat NIYAZOV commissioned the Cabinet to sign guarantee agreements with the European Bank for Reconstruction and Development for two loans totaling $80 million. The first credit of $30 million, to be signed by the Turkmen sea steamship line, will be given to finance the reconstruction of a sea port in Turkmenbashi on the Caspian Sea. The second credit totaling $50 million is to reconstruct the Ashkhabad-Mary highway. This time the agreement will be signed by the state concern of Turkmenavtoyellary on the part of the Turkmen government. The EBRD and the Vnesheconombank of Turkmenistan will hold international tenders for the projects.

Turkmenistan to Auction 50 State Owned Cos.

· A total of 50 state owned companies will be auctioned in Turkmenistan from January to March 1998, announced President Saparmurat NIYAZOV on Friday. Half of the listed companies accounts for the textile industry. The others include companies, now under the ministries of energy and industry, construction materials, melioration and water facilities, and the association of food and fruit industries. President NIYAZOV hopes that these auctions will accelerate the rate of privatization. By the year 2000, 350 state-owned companies will be privatized.

Daily Report on Russia & FSU will not be published on November 27-28, 1997, in observance of the Thanksgiving Holiday.

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

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