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Daily intelligence briefing on the former Soviet Union

Wednesday, November 25, 1997

"...lack of energy, intelligence, or something else," at the Foreign Trade Ministry, YELTSIN said. He urged the Russian regions to broaden foreign economic ties and use their potential to the full.


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Russia Receives EBRD $99 Million Loan

· The European Bank for Reconstruction and Development said on Wednesday that it approved a $99.9 million loan to the Russia for a geothermal power project in the Kamchatka Peninsula. The loan will be on-lent to Geoterm, a Russian company specializing in the design and operation of geothermal power production facilities, to finance a 40-megawatt geothermal power station, the first "renewable" energy project launched in the Russian Federation. The project will significantly increase local energy production in the remote peninsula, which is unconnected to the Russian power grid. Regional governor of Kamchatka Vladimir BIRUIKOV said, "This is a high priority project for the Kamchatka region. To concentrate on our most profitable industries, fishing, food-processing, ship-building and tourism, we must reduce energy costs and maintain our greatest asset, a unique environment. The EBRD and development of the Mutnovsky geothermal field will propel us along that path," United International Press reported. To date the EBRD has invested more than

Russian Federation


APEC Grants Russia membership

· The Asian Pacific Economic Cooperation (APEC) met on Tuesday in Vancouver to discuss domestic economic policies, international monitoring of financial institutions, the environment, and extending its membership. APEC unanimously agreed to admit Russia, Peru, and Vietnam to the group. Many opposed Russia's membership, but the strong argument in support by US, Japan, and China was convincing. The group's membership, now 21, will not grow in the next ten years. Australian Prime Minister John HOWARD once opposed to Russia's membership said, "The argument that was put in favor of Russian entry by one or two leaders was, I thought, a persuasive argument. It has a connection with the Pacific and I think, Russia, as President CLINTON pointed out during the discussion, has done more privatizing than most of the other former Soviet bloc countries. President YELTSIN ought to be given a helping hand and given encouragement and offered the embrace of people who hold the same views as he is endeavoring to espouse in the face of great difficulty in his own country." He further added that he did not think Russia's membership would fundamentally change APEC's Asia-Pacific focus.

Yeltsin Encourages More Foreign Trade

· Russian President Boris YELTSIN on Monday urged Foreign Trade Minister Mikhail FRADKOV to step up its efforts and improve its work, reported Reuters. YELTSIN said that a solid basis for developing foreign trade has been set as a result of long-term efforts, involving numerous meetings and talks with Japan, China, Canada, Finland and other countries. The president noted that significant steps must be taken to broaden economic ties with these countries. The poor foreign trade record could be a result of a

Today's News Highlights


$99 Million EBRD Loan

Lenergo Looking for Buyer

European Republics

ACI Expands to Ukraine

South Caucasus & Central Asia

Russia-Georgian Border Tense

Tajikistan Gets $56 Million in Aid




November 25, 1997

Intercon's Daily

$2.5 billion in the power and energy sector throughout eastern and central Europe and the former Soviet Union. More than $3 billion has been invested in other sectors in the Russian Federation such as manufacturing, food production and financial services.


Lenergo Looking for a Buyer

· Russia's giant utility Lenergo is seeking a buyer for government shares. 17 percent of the company retained by the government is set to go on sale November 28, expecting to bring in $120 million to the government. The sale will result in full privatization, freeing the company to make reforms necessary to bring it up to western standards for market-based utilities. Lenergo's financial director Oleg V. ZAITSEV is looking forward to the new management style of a private company. "It's going to be a different approach, looking at the bottom line and shareholder value," reported the Journal of Commerce. Unfortunately, Lenergo like many other Russian utilities faces an upward battle. It will have to overcome the Soviet legacy of subsidized electricity rates and steam heat sales without profits, while simultaneously conquering the payment crisis brought on economic restructuring. The company owes Gazprom $360 million for the fuel that produces 76 percent of the utility's energy, however, Lenergo owed $566.8 million by customers in back payments for heat and power.

Lenergo is one of 73 utilities and is the major steam producer and distributor in Northwest Russia. It serves 6.5 million people in a heavily industrialized region which includes St. Petersburg. Shareholders include Russia's United Energy Systems holding company, the Russian Federal Property Fund, and other individual and institutional investors. So, far German utility Prussen is the only foreign investor.

Russian Helicopters Delivered to Columbia

· Several Russian military helicopters Mi-17 have been airlifted to Colombia by the Russian company

Rosvooruzheniye and the Kazan Helicopter Plant complying with a contract signed by the two countries earlier this year. The four helicopters have been delivered on the eve of Foreign Minister Yevgeny PRIMAKOV's visit to Colombia. Apart from other directions of bilateral relations, prospects for the development of contacts in the military-technical field will be discussed at a meeting between President of Colom

bia Ernesto SAMPER and Russian Foreign Minister Yevgeny PRIMAKOV.

Japanese Hotel to be Built in Moscow

· The Japanese firm Itochu Shiozi plans to build a 34 story complex, which will include a hotel, an apartment house and a business center in Moscow. The contract will be signed with the Moscow government for the lease of a plot of land, situated four kilometers away from the Kremlin, for a period of 49 years, a representative of the firm announced in Tokyo. The new housing and hotel complex will become a component part of a trade and financial district, which is now being designed by the city administration. Construction will begin in the summer of 1998, and the overall cost of the work is estimated now at 25 billion yen.

European Republics

ACI Expands to Ukraine and Russia

· Applied Communications, Inc. (ACI), based in Omaha, announced last Thursday that it will continue expansion of its customer base in Europe and Russia. ACI is a subsidiary of Transaction Systems Architects, Inc. with software that facilitates electronic payments and commerce by providing consumers and companies access to their money. The company's products are used to process transactions involving credit cards, debit cards, smart cards, home banking services, checks, wire transfers and automated clearing and settlement. Among the financial institutions choosing ACI software solutions are United Payment Systems of Ukraine, Ltd. (UPSU) in the Ukraine and SGS-AGRO (formerly known as Stolichny Bank of Savings) in Russia.

UPSU is an independent processing company that will initially provide card processing services for pensioners to pay their utility bills electronically. UPSU will use BASE24-pos and GENcard to meet the challenges presented by Ukraine's transition from cash-based to an electronic-cash society. Vladimir A. DUBOVENKO general manager of UPSU said, "To ensure smooth transition from cash to cards, our customers will require reliable, flexible processing and BASE24 meets the need. We expect growth in volume and in types of services our customers want and chose BASE24 because it offers us the flexibility to integrate additional functionality and value-added services to meet customer demand."

When you need to know it as it happens




November 25, 1997

Intercon's Daily

SBS-AGRO, the second largest retail bank in Russia, licensed BASE24-atm and BASE24-pos to support its network of 350 ATMs and 3,000 POS devices. Vladimir A. LEVTCHENKO, chairman of the board of SBS-AGRO said, "We needed a new system that was state-of-the-art and able to handle a large number of transactions reliably and efficiently."

Ukraine Shifts to Cash Privatization

· Acting Head of the Ukrainian State Property Fund Volodymir LANOVYI said that Kiev will sell for cash, rather than vouchers to privatize major industrial firms. LANOVYI said the new approach will bring in billions of dollars to the cash-starved government.

South Caucasus & Central Asia

Russia Moves Border Further into Georgia

· The Georgian Parliamentary Committee on Defense and Security has accused heads of the Russian federal border guard service with two unilateral acts of issuing instructions not coordinated with Georgian authorities to move the Verkhi Lars borderline between Georgia and Russia. Georgian committee members regard these acts as "piracy" and warned that "Georgia might take adequate measures to defend its sovereignty with dignity." Last week the Russian border guard check point moved 700 meters forward into Georgian territory. The presence of the Russian border guards in Georgia has been controversial for sometime. There have been reports that Russian guards on the Turkish border have allowed arm shipments to Kurdish Separtists in Turkey. Other controversies include interference of cargo in transit at the Port of Poti, allowing Chechen fighters to cross into Abkazia during the war, and the illegal detention and seizure of a Ukrainian vessel in the Black Sea by Russians, in which the Ukrainian crew was flown to Moscow for interrogation. This will certainly fuel the debate over Russian border guards, especially since the US foreign aid bill to Georgia places high priority funding on Georgian border guard training and infrastructure. This issue is critical to Georgia and strikes at its very independence and sovereignty. These

incidence underline the growing criticism found in many of the former Soviet states that Russia refuses to respect these new nations, which is fueling sentiments to dissolve the CIS.

Uzbek-US Digging for Gold?

· Uzbekistan's government and US Gold Discovery company are negotiating a possible agreement on exploratory work on Dzhetymtau gold field. Dzhetymtau gold field is estimated to hold reserves if 400 tons of gold and 350,000 tons of tungsten ores. The field is one of seven Uzbek gold areas put up last year for tenders of rights to explore and develop them.

Uzbekistan Receives US Ex-Im Bank Loan

· Uzbekistan officials announced on Tuesday that the country had received a $50 million line of credit from Citibank, largely backed by the US Export-Import Bank for the processing of fruit and vegetables. The loan backed up to $47 million by the Ex-Im Bank, is for a project with New Jersey based Texuna USA, a subsidiary of Hong Kong Trading Company.

Tajikistan Gets $56 Million in Aid

· Representatives from over 60 countries, 18 UN agencies and 30 international government and non-government organizations participated in a conference of donor countries to give international aid to Tajikistan in Vienna on Monday. The forum decided to render $56 million in financial assistance to peace processes in Tajikistan. The funds will be used for demobilizing the army, preparing multi-party elections to the parliament, the resettlement of refugees and displaced persons, and general economic reforms. These steps will help to achieve quicker reconciliation and stabilization in the republic as well as to draw foreign investments.

The Swiss government said it will help Tajikistan pay its admission fee to the Asian Development Bank. An agreement to this effect was signed by Tajik Finance Minister Anvarsho MUZAFFAROV and the Swiss government in Vienna. A Tajik presidential spokesman said that the funds will be provided in the form of grants to a total amount of $3.7 million.

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