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Daily intelligence briefing on the former Soviet Union

Monday, November 3, 1997

Russian Federation


IMF Expected to Withhold

· The IMF has suspend its $700 million disbursement of the $10 billion loan to Russia until early 1998 because of the Kremlin's poor finances, reported The Wall Street Journal. First Deputy Prime Minister Anatoly CHUBAIS announced on Friday that the government's deteriorating finances are the cause of the IMF recommendation not to disburse the quarterly installment. The Russian economy has stopped its five year decline with a growing GDP, but plunging tax collections of 46 percent of the budget target has raised various doubts in Russia's fiscal responsibility. "Despite recent tax collections, overall revenue performance of the federal budget remains insufficient," the IMF and Russian Finance Ministry jointly stated.

Chubais Closes His Most Bank Account

· Specifying "personal reasons," First Deputy Prime Minster CHUBAIS closed his personal Most Bank account, reported Russian news agencies on Friday. CHUBAIS and founder of Most Bank and Media-Most Vladimir GUSINSKY until recently were on good terms. CHUBAIS' withdrawal of accounts may be because of criticism covered in Media-Most of his and NEMTSOV's economic policies.

Small Business Comm. Names New Head

· Russian President Boris Yeltsin on Friday appointed Irina Khakamada as head of the State Committee on Support and Development of Small Businesses, reported RFE/RL Newsline. Her priorities are to lessen obstacles facing small businesses including tax burden, pressure to pay criminal groups for protection, and high start up costs. She hopes to attract more media interest in small business. KHAKAMADA gave up her Deputy seat in the State Duma to take up this cabinet level post.


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

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

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

Increased Economic Cooperation with Japan

· President Boris Yeltsin and Prime Minister Ryutaro Hashimoto approved several initiatives to increase Russo-Japanese trade relations and joint projects in energy, transportation, and business management training, reported RFE/RL Newsline. Japanese direct investment in Russia to date totals $227 million, Interfax reported. HASHIMOTO expressed support for Russia's membership in the Asian-Pacific Economic Cooperation forum. Hashimoto's Spokesman Nobuaki TANAKA told Itar-Tass Sunday that Tokyo was accepting Moscow's proposal to insure commercial deals with Russia against the guarantees of private Russian banks and to lower the insurance rates for commercial transactions with Russia. Russian Vice-Premier Boris Nemtsov stated that such an initiative is the first of its kind in a long time.

US Companies to Be Top Investors in 1998

· US companies will be the largest investors in Russia in 1998 as the economy finally reaches comfortable levels. The European Bank of Reconstruction and Development predicts that US firms will account for a third of the $10 billion FDI in Russia, according to The Journal of Commerce. The expected $10 billion is double what the $5.8 billion foreign companies spent in 1989 and

Today's News Highlights


Northeast Asian Pipeline Plan

The Bank America to Open

European Republics

Lithuania Rejects Rus. Security

Ukraine Limits Fuel Prices

South Caucasus & Central Asia

Sheverdnaze On CIS

UN Sect. Gen. on Abkazia

Elchibey Returns to Baku

Turkmen-Iran Pipeline




November 3, 1997

Intercon's Daily

1996. US investment targets consumer products geared to the domestic market. "The United States is particularly strong in exploiting the potential (of Russia)," said EBRD senior economist Hans Peter LANKES. He further stated that in 20 years it is possible that many of the `tiger' economies will be investing in the region. The EBRD stated that countries in the region have the potential for high growth—5 to 7 percent annually.


Northeast Asia Plans a Pipeline

· The countries of Northeast Asia revealed, at the World Petroleum Congress (WPC) conference in Beijing, a plan for a network of trans-national pipelines linking Russia with Mongolia, China, South Korea and Japan, reported Kyodo. Experts have estimated reserves in the region at 56 trillion cubic meters, of which 57 percent is in Russia's East Siberia and 19 percent in its Far East region. Gas exports from the two regions could hit 49 billion cubic meters by 2010, said Russian Energy Research Institute.

Zhang Chengwu, representative of China National Petroleum Corp. (CNPC) in Moscow, outlined plans for one pipeline to link the natural gas fields in Russia's Irkutsk with Rizhao of eastern China's Shandong Province, with the other pipeline, running from western Siberia to China's Shanghai via the Xinjiang Uygur Region. The cost of the 3,500 kilometer pipeline is estimated at $8-10 billion. The pipeline is expected to be completed as early as 2005.

Bank of America to Open in Russia

· The Bank of America's Managing Director Jim Jardine stated on Friday that it applied to the Central Bank for a banking transactions license in Russia and for affiliate bank registration, reported Itar-Tass. The Bank of America has already held a business presence in Russia for some time. One of its first major projects in Russia will be the organization of a $77 million syndicated loan offer for Alfa-bank.

October prices, reported Xinhua. The fuel price rose more than 30 percent in October alone.

Ukraine to Reduce Armed Forces

· Ukrainian President Leonid Kuchma on Saturday instructed the National Security Council and other "power agencies" to prepare for cuts, reported Itar-Tass. KUCHMA said the armed forces will be subject to cuts without infringing upon the country's defense capacity. The reasons for this reduction are overlapping troops (the national guard and the internal troops) and budgetary financing.

Lithuania Rejects Russian Proposal on Security

· The Lithuanian Foreign Ministry on Thursday rejected a proposal on security made by Russian President Boris Yeltsin to the three Baltic nations and said it preferred to continue its pleas for entrance into NATO, reported Reuters. "The idea is "no" to security guarantees or a regional pact, but "yes" to expansion of economic, social and other relations with Russia," Vygaudas ushackas head of the political department of Foreign Ministry. Latvia and Estonia are still reviewing Yeltsin's offer.

South Caucasus & Central Asia

Shevardnadze on CIS Importance

· Georgian President Eduard SHEVARDNADZE today disagreed with Georgia's politicians who say that the Commonwealth of Independent States is useless and Georgia should quit it. "The CIS does create a geopolitical space for broad collaboration and cooperation of the countries that comprise it ... [if] this potential is not realized, the CIS will not have any future," reported Itar-Tass.

The President further went on to address the importance of strategic alliances between nations in the CIS to help attain its potential. "Leonid Kuchma and I have officially laid down the readiness of Ukraine to take a direct part in this peacekeeping operation [in Abkhazia] in the declaration of the presidents of the two states signed in Tblisi on October 28."

He noted Russia's importance in the CIS, but criticized Moscow's unfairness in a dispute involving the transfer of military planes and ships from Georgia to Russia as the Soviet Union was collapsing. "We criticize it with good intentions and wishes since we want to have an unbiased and fair partner. We want the country, on

European Republics

Ukraine Limits Rising Fuel Prices

· The Ukrainian government Friday announced limits on the rising prices of gasoline and diesel. The Ukraine decided to halt soaring gasoline prices limiting prices to no higher than 15 percent above

When you need to know it as it happens




November 3, 1997

Intercon's Daily

which much depends, not to act unfairly within the space which is called the new commonwealth," stated SHEVARDNADZE on Saturday. The military hardware and property withdrawn from Georgia in early 1990s is estimated at $5 billion.

UN Secretary Gen. on Abkhazia

· UN Secretary General Kofi ANNAN on Saturday warned that the withdrawal of CIS peacekeepers and UN observers from the border between Abkhazia and Georgia could result in the resumption of conflict, reported RFE/RL Newsline. Foreign Minister Irakli MENAGARISHVILI implied on Friday that Georgia may reject further Russian mediation in the region, instead favoring the continuation of peacetalks. Russian First Deputy Foreign Minister PASTUKHOV stated that Russian forces will be withdrawn unless there is further progress in political settlement.

Elchibey Returns to Baku

· Former Azeri President Albufaz ELCHIBEY returned to Baku Thursday after four years in exile to form a new political party. He added the he has not yet decided whether or not to run in the 1998 presidential elections or to support an alternative opposition candidate such as Musavat Party chairman Isa GAMBAR. ELCHIBEY, a nationalist, was the first elected president of independent Azerbaijan and was ousted in 1993 in a military coup.

Armenian Pres. Argues His View on Karabakh

· Armenian President Levon Ter-Petrosyan accepted on Saturday the Organization on Security and Cooperation in Europe Minsk Group's initiative on gradual settlement of the Nagorno-Karabakh problem to resume the negotiating process, reported RFE/RL Newsline. He called for the resumption of talks with Azerbaijan, which were put on hold in November 1996. This decision was met by thousands demonstrating in the streets in opposition, calling the statement the beginning of a surrender.

Armenian Foreign Minister Alexander Arzumanyan said the country will sign any document if Nagorno- Karabakh signs it.

Hungarian President in Kazakhstan

· Hungarian President Arpad Goncz arrived in Almaty on Sunday to meet with Kazakh President Nursultan Nazarbayev to discuss effective ways to exchange investments and promote commercial and economic cooperation. While Hungary is interested in Kazakh petroleum, Kazakhstan wants capital investments or some new interesting proposals for large-scale joint ventures, reported Itar-Tass. NAZARBAYEV stated today that they will be shipping 900 million cubic meters of gas to Hungary to pay off Soviet debts from the 1980s. He said the gas may be delivered to Hungarian consumers via Russian pipelines, but did not say when, reported Reuters.

Cooperation Among Caspian Sea States

· Iranian Foreign Minister Kamal Kharrazi and Kazakh counterpart Edrisov signed a protocol expressing the need for cooperation among the Caspian Sea littoral states to determine the legal status of the sea, reported Xinhua. The Caspian Sea issue has emerged after some Caspian states signed agreements with foreign countries to explore oil reserves in the world's biggest inland sea.

Iran feels that none of the five littoral countries has the right to take unilateral measures to explore the resources of the sea. Edrisov said that the Caspian Sea belongs to Iran, Kazakhstan, Russia, Turkmenistan and Azerbaijan, and all issues concerning it should be settled unanimously.

Turkmenistan-Iran Pipeline

· An agreement for the new gas pipeline Korpedzhe-Kurtkui to deliver Turkmen gas to Iran in the first two weeks of December was reached during the talks between the Turkmen Ministry for Oil and Gas industry and Mineral Resources and the Iranian Oil Ministry on Saturday, reported Itar-Tass. The volume of the pipeline-delivered gas exported will reach four billion cubic meters in 1998, which is the main source of national wealth in Turkmenistan. During the talks, the sides expressed a common interest in laying an oil pipeline from the Kazakh and Turkmen oil fields to the Persian Gulf area.

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