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 5, 1997

YELTSIN's generous gift to the Russian people on the eve of the 80th anniversary of the Bolshevik revolution." However, Chechen Vice President ARSONOV sees BEREZOVSKY's removal as a loss to the Chechen people, reported Russian TV. BEREZOVSKY was held in high esteem by Chechens for his business, economic common sense which tended to moderate a purely narrow politcal viewpoint.

Rus-Belarus Union Adopts Legislation

· The Russian-Belarussian Union completed its deliberations Tuesday in Kaliningrad, reported Itar-Tass. The Legislators adopted three bills: on the status of deputy of the Union's Parliamentary Assembly, financial-industrial groups (FIGs) and on social insurance from accomidents in production. The bills will be debated later by both countries' parliaments.

Australian Minister in Moscow

· Russian Foreign Minister Yevgeny PRIMAKOV will meet with Australian counterpart Alexander DOWNER to discuss plans for trade, investment cooperation and ways to expand direct ties between the business circles of the two countries today, reported Itar-Tass.

The question of Russia's participation in regional organizations, including Asia-Pacific Economic Cooperation, are planned to be discussed. "We attach great significance to the visit primarily because we value high political contacts with Australia," Russian Deputy Foreign Minister Girgory KARASIN said.

Russian Federation

Politics

Berezovsky Removed From Security Council

· Russian President Boris YELTSIN signed a decree today to relieve Boris BEREZOVSKY of his duties as deputy secretary if Russia's Security Council in connection with his transfer to another job. "It was First Deputy Prime Ministers Anatoly CHUBAIS and Boris NEMSTOV who convinced President Boris YELTSIN of the necessity of removing Boris BEREZOVSKY from his post as deputy Secretary of the Security Council...," a Kremlin spokesman told Reuters. NEMSTOV in a Russian Television interview stated BEREZOVSKY's removal was due to conflicts of interest with his business deals and government position.

BEREZOVSKY, a business tycoon (media, automobiles, and banking) ranked by Forbes as one of the richest men in the world, backed YELTSIN's campaign. With his influence and power, controversy has followed BEREZOVSKY for some time. Critics questioned why a man with no experience in government or security affairs was appointed to such a senior position a year ago. While in the government BEREZOVSKY feuded with business rivals and made enemies in YELTSIN's administration. BEREZOVSKY was also dissatisfied in his inability to influence security decisions. In a statement to Interfax, he said, "I can guarantee there is no talk about me being appointed to any [other] government job." BEREZOVSKY has stated he would like to pursue a political career. Whatever he chooses, this clears the way for BEREZOVSKY to follow his own business interests (Rosneft privatization) unfettered.

Russian Communist Party leader Ganady ZYUGANOV, expressed satisfaction with the dismissal of Boris BEREZOVSKY stating, "This is President

Today's News Highlights

Russia

Unstable Market Plauges Russia

Rus. Made Aircraft in Europe

Energy Restrictions Lifted

European Republics

LHS Telecom in Ukraine

Ukraine Halts Prizatization

Belarus-Turkey Miltary Coop.

South Caucasus & Central Asia

US Buys MiGs from Moldova

Azeri-Us Dialog Continues

Politics-Economics-Business

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Wednesday

November 5, 1997

Intercon's Daily

According to experts, the Russian-Australian goods turnover is about $10 million, including $8 million of Russian exports.

Fed. Coun. Votes Chemical Weapon Convention

· The Russian Federation Council today approved the international Chemical Weapons Convention with 123 votes and no one voted against or abstained as it opened its 25th session, reported Itar-Tass. During the session the Council will discuss 30 agenda items, including several amendments to laws coming from the Duma covering the code of criminal procedure, civil and family codes, and payment for land laws.

Russian Nukes Secure

· US Strategic Command Chief General Eugene HABIGER concluded after a visit to Moscow, that Russian army storage and security of nuclear weapons are efficient and reliable, reported Itar-Tass. HABIGER is the first American to see Russia's nuclear weapons storage facility. He was impressed by a three-hour talk with Russian Missile Strategic Forces Commander Col-Gen. Vladimir YAKOVLEV and by all he was shown. At a Pentagon Conference HABIGER stated that the only drawback in guarding the missile sites was a shortage of electronic measures. The Russians do not yet employ video-monitoring systems as most US bases.

Economy

Ruble = 5,889/$1.00 (NY rate)

Ruble = 5,890/$1.00 (CB rate)

Ruble = 5,876|5,904/$1.00 (buy|sell rates)

Unstable Market Conditions

· J.P. Morgan, citing the recent meltdown in Hong Kong Stock Exchange, said its Emerging Market Bond Index Plus dropped 11.52 percent in October, reducing its year-to-date gain to 4.30 percent, reported United Press International. The brokerage firm said all countries posted losses during the month. Russia was Octobers worst performer, posting a decline of 7.73 percent as unstable global market conditions prompted investor concerns about Russia's ability to finance its fiscal deficit by rolling over short-term maturities. "Things are not as good as they seem," Dan RAPOPORT, a trader for Centre Invets a Russian brokerage firm told The Wall Street Journal.

Leading brokerage firms, such as Russia's largest Renaissance Capital, have stopped trading with all but the most credit worthy as they fear buyers may default on purchases.

Business

Yeltsin Removes Energy Restrictions

· Russian President Boris YELTSIN on Tuesday signed a decree lifting restriction on the energy sector, reported Reuters. The decree will allow foreign investors to own 100 percent stakes in Russian oil companies; before this decree foreign investors' stakes in oil companies was limited to 15 percent. The decision follows Russia reaching a turning point against its steep declines in crude oil production. INTERCON comment: This decree reflects more the government's lack of readily available cash as seen with increasing arrears in payments to government workers.

Chief Ministry of State and Property Maxim BOIKO said in an agency press release, that the lifting of the restriction will attract strategic investors to Russia from abroad. Foreign investors will be most attracted to large oil companies, whose State-owned packages of shares are to be sold before the end of the year, such as Eastern Oil Company, Tyumen Oil Company, Rosneft, and LUKoil. Foreign oil companies plan around $70 billion in investment in Russian oil projects if the government passes the necessary legislation. The Duma is likely to protest YELTSIN's decree, as it generally does not like the prospect of major foreign ownership in domestic oil companies.

Russian-made Aircraft Approved for Europe

· The Interstate Aviation Committee (IAC) which oversees civil aviation in most Former Soviet Union nations approved today Western avionics system that will allow Russian-made aircraft to fly in Europe after a change in rules in 1999, reported Reuters. "This is the first certificate from IAC for western avionics systems,"said CIS marketing director Ark KHOMYACHENKO. The new avionic designs to improve communication were approved by US Rowell Collins and Gables Engineering firms.

European Republics

Belarus-Turkey Military Cooperation

· Turkey's Chief of General Staff Ismail Hakki KARADAYI and Belarus' Defense Minister Aleksandr

When you need to know it as it happens

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Wednesday

November 5, 1997

Intercon's Daily

Petrovich CHUMAKOV Tuesday signed a military agreement on cooperation in the fields of training, defense industry, and the development of technology and science, reported Xinhua.

LHS Group Telecom Launch in Ukraine

· Ukrainian Mobile Communications (UMC) and Atlanta, Ga. based LHS Group Tuesday announced the launch of the first Global System Mobile (GSM) 900 network in Ukraine, said an LHS press release. LHS was selected by UMC to provide the billing and customer support system for the network. UMC's General Director Martin DIRKS said, "LHS was instrumental in launching our GSM network in Ukraine. The successful implementation stems not only from a dedicated team of employees, but also from network investments such as the LHS Business Support and Control System (BSCS)."

GSM is one of the most popular digital cellular telecommunications standards in the world and has been adopted by network operators in approximately 200 countries. It has more than 40 million worldwide subscribers. "The introduction of GSM is a momentous occasion for Ukraine. Ukraine is entering the European and worldwide telecommunications systems network. This is very important in the economic reform process and the integration of Ukraine into Europe," added DIRKS.

South Caucasus & Central Asia

US Buys MiG's sought by Iran

· The US bought 21 MiG-29C fighter jets form Moldova to keep them from being sold to Iran, reported Reuters. Defense Secretary William COHEN said at a press conference on Tuesday that the planes, which are able to carry nuclear weapons have been moved to the Wright-Patterson Air Force base, Ohio over the past several weeks. "This was the first time the US had acquired any of this Russian Aircraft," COHEN said in a press release from LUGAR's office. The US will re-assemble the MiGs and test them for capability, but the main reason for the purchase was to keep the

aircraft away from countries such as Iran. The deal with Moldova was made under the Cooperative Threat Reduction program (CTR) developed in 1993 by Senators NUNN and LUGAR aimed against the spread of mass destruction weapons, technologies, and materials. COHEN praised both the CTR program and the government of Moldova for its cooperation. "This is a joint effort by both governments to ensue that these dual-use military weapons do not fall into the hands of countries that might use them against us or our friends or allies," stressed COHEN.

Ukrainain Parliament Stops Privatization

· The Ukrainain Parliament on Tuesday passed a resolution suspending privatization and demanding the President Leonid KUCHMA appoint a new privatization chief, reported Interfax. The legal impact of this decision is unclear. It is another indication how Ukrainian legistlators include many opponents of reform, which KUCHMA has repeatedly warned.

Azeri-US Dialog Continues

· An Azerbaijani-US dialogue, which was started Washington three months ago, continued in Baku on Tuesday, reported Itar-Tass. Special adviser to the US Secretary of State for the New Independent States Stephen SESTANOVICH came to Azerbaijan with US representatives interested in development of cooperation with Azerbaijan. He said that Azerbaijan is progressing in more quickly than other regional countries. U.S. Energy Secretary Federico PENA will come to the country next week to celebrate the early oil extraction on the Chirag field. The contract for this extraction involves five American companies.

World Bank Assesses Belarus

·· A World Bank official said on Tuesday Belarussia was plagued with corruption to a lesser extent than Russia because of tighter discipline in the society. However, Washington-based director of the World Bank's operations in Belarussia and Ukraine Paul SIEGELBAUM, found little progress in market reforms in the country, especially in privatization, currency regulation and liberalization of prices. Until this occurs, lending will not resume.

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

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