DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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Daily intelligence briefing on the former Soviet Union

Friday, November 7, 1997

Russian Federation

Politics

Communists March for Bolsheviks' Anniversary

· Russian TV [channel 1] reported up to 100,000 while Russian police only estimated that 35,000 communists demonstrated in Kaluzhskaya (former October) Square in Moscow carrying red flags glorifying the 80th anniversary of the Bolshevik Revolution today. Leaders from the Russian Communist Party and People's Patriotic Union of Russia marched along with Gennady ZYUGANOV and his growing supporters. ZYUGANOV told reporters before the march that "the 1917 Great October Revolution is our history." Viktor ANPILOV led members of the Labor Russia Party in a rival march. Communists in Vladistock, St. Petersburg, and in various former Soviet republics like the Ukraine and Belarus also demonstrated in the streets. Small counter demonstrations also occurred in Moscow.

Russian President Boris YELTSIN addressed the nation on Russian TV. He said the holiday, is a "memorable benchmark in the destiny of my country ... I see now, above all, a historic lesson in it." He renamed Revolution Day to be preserved as Accord and Reconciliation Day. YELTSIN said that the Russian people are obliged to remember, understand, and forgive those who, "committed a fateful historical mistake and who put the Utopian idea above human life." He called for again for reconciliation. "We can not only be locked in conflict but also can come to agreement. We can, at long last, do away with division of Russians by `ours' and `theirs'. Not only quarrel and accuse but also look for compromises and meet one another halfway."

YELTSIN announced the construction of a civil war monument uniting the Red and White Guards representing faith and illusions, the courage and sufferings

of people, "... who turned to be by the opposite sides of barricades, as fate willed it."

Moscow Duma Revokes Deputies Immunity

· ·The Moscow City Duma on Wednesday unanimously approved amendments to the law on legislative immunity. Deputies will no longer be protected from criminal prosecution. Moscow Duma Deputy Chairman Valerii GALCHENKO said the amendments are aimed at heading off attempts by "criminal structures" to place their people in the legislature during the coming elections in December, reported RFE/RL Newsline. With elections upcoming in Moscow, the question remains is this directed at LUZKHOV and his entourage?

APEC to Choose Russia as Member

· APEC is likely to choose Russia as a member at its upcoming informal summit talks to be held in Canada, a Japanese government source told Kyodo Newsline. Russia may attend as an official member at the forum's annual meeting next year, if procedures are concluded smoothly. Entry to the forum is expected to be mutually beneficial; accelerating Russia's integration to the world economy further, and the forum gaining a wider political and geographical scope. Japan changed its stance following Prime Minister HASHIMOTO's meeting with President YELTSIN .

Economy

Russian Investors Buy Short-term T-Bills

· Russian and foreign investors on Thursday led a move toward the short-term issuing of ruble-denominate Treasury bills,

Today's News Highlights

Russia

Ex-Im Bank Opens in Tatarstan

Eastern Oil Co. Sells Stakes

SAP AG Opens in Moscow

European Republics

Baltic Assembly Meets

South Caucasus & Central Asia

Uzbekistan Privatizes

Abkhazia Factions Disagree

Kazakh-China Oil Project

Politics-Economics-Business

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Friday

November 7, 1997

Intercon's Daily

Ruble = 5,892/$1.00 (NY rate)

Ruble = 5,892/$1.00 (CB rate)

Ruble = 5,887|5,907/$1.00 (buy|sell rates)

venture between YelAZ and General Motors. Washington, D.C. based ATA Motors Co., a key player in obtaining the loan, represents GM distributors in Russia and the CIS.

Business

Eastern Oil Company Stakes for Sale

· The Federal Stock Corporation on the Thursday stopped accepting applications for bidding for a stake in the Eastern Oil Company (VNK), reported Itar-Tass. The stake is 50 per cent of authorized capital minus one share to be sold off on a special money auction. Up for sale are 752.2 million shares with a par value of two rubles. The starting price is set at 6,000 rubles.

Results of the bidding will be summed on November 24. The Eastern Oil Company had an output of 11.2 million tonnes oil in 1996. Of this, 5.8 million tonnes was refined and 3.7 million tonnes exported. VNK owns 38 percent of authorized capital of oil companies Tomskneft, Achinsky NPZ, Tomsknefteprodukt, Khakassnefteprodukt and Novosibirsknefteprodukt, and 20 percent of the Tomsk Petrochemical Plant.

Gazprom-Shell Interested in Rosneft's Stakes

· Russian gas monopoly Gazprom and Royal Dutch Shell group plan to join forces to bid for Rosneft, the last large Russian oil company to be privatized, reported Financial Times. The government plans to sell off its stake in Rosneft at the beginning of the next month. The bidding battle is expected to be intense, particularly following Russian President Boris YELTSIN's decree permitting foreign investors to own 100 percent of Russian oil companies.

Shell and Gazprom have been planning to sign an agreement in the near future. By joining forces with Gazprom, Shell would be gaining a powerful partner is the bid battle for Rosneft. Rosneft is estimated to be valued by Salomon Brothers at $1.4 billion. Alexander PUTILOV advisor to Rosneft's Chairman, said senior executives from the three companies discussed the plan. Many Russian and foreign companies expressed an interest in the bidding, including Oneximbank, owner of Sidanco. Boris BEREZOVSKY, who was ousted from the government this week, is also said to have an interest in joining the Gazprom-Shell joint venture.

Jun Jul Aug Sep Oct Nov

reported Reuters. Yields for some T-bills maturing by the end of the year, favored by investors eager to flee the market, fell a few percentage points. However, bills maturing in six months to a year yields rose close to one percent. Foreigners hold one third of the domestic government securities market, but because many local accounts do not actively trade, they control closer to half of the secondary market. Because of the lack of laws, the Central Bank has taken measures to punish the flight of foreign capital by pushing down the dollar yield on T-bills guaranteed to bank-influenced forward contracts from nine percent to five percent. Head of Research at Moscow investment bank Renaissance Capital commented on the move, "investors essentially gave notice that money is coming out in one month. The government has another three weeks."

US Ex-Im bank to Open in Tatarstan

· First Deputy Prime Minister Ravil MURATOV and Ex-Im Bank Executive Committee Chairman James HARMAN signed a memorandum on the opening of a Regional Development Bank in Tatarstan, reported RFE/RL Newsline. The Tatar government will have a 50 percent stake while the remaining 50 percent will be shared between US Ex-Im Bank and the private sector. Ex-Im Bank will grant Tatarstan a $270 million loan to finance the production at YelAZ plant of Chevrolet Blazer automobiles as a part of a joint

When you need to know it as it happens

Politics-Economics-Business

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Friday

November 7, 1997

Intercon's Daily

SAP AG Opens Development Center in Moscow

· German software company SAP AG opened a development center in Moscow and branch offices in St. Petersburg and Kazakhstan, reported Reuters. SAP CIS General Manager Marco BURKHARDT said "Russia offers great potential in qualified and well trained, software developers. We want to use this in the further development of SAP software." SAP's software allows companies, such as Mars Inc., Reebok International Ltd., and Ukraine National Bank, to coordinate manufacturing, purchasing, inventory, accounting, finance and personal operations. SAP predicts sales in Russia and the former Soviet Union to reach over 30 million DM this year.

directly linked to this highly volatile political situation. The Georgian Interior Ministry plans to prevent refugees from converging on Tbilisi.

Uzbek to Privatize 15+ Large Companies

· Uzbekistan announced Thursday that more than 15 large scale companies will be privatized and stakes will be offered to foreign investors, reported Reuters. Foreign Deputy Minister of Finance Abdulla ABDUKADIROV told a conference that a 40 percent sale of stakes in Alamlyk, whose assets are estimated at $1 billion, and other precious metals will lead the privatization drive. Other industries being privatized include bakery, metallurgy, electrical engineering, building materials, agricultural engineering, mechanical engineering, aerospace, and communications. "Our main aims will be to offer shares to foreign investors," ABDUKADIROV said. The tender process is expected to begin by the end of this year. South Korea's Daewoo Corp., US Gerald Metal SA, Switzerland's Glencore AG and Sweden's Svedala International AB have expressed interest in the sales.

$28M EBRD Loan to Uzbekistan

· The European Bank for Reconstruction and Development (EBRD), said Thursday it is lending $27.8 million to Uzbekistan for power generation, reported United Press International. The loan will accelerate the development of a competitive and efficient power sector as well as support Uzbekistan's move towards a market economy. EBRD President Jacques de LAROSIERE said, "The 15-year financing facility will improve efficiency through the use of new technology and will accelerate the policy reform of promoting the development of a commercially managed power sector." Uzbekistan will use the funds to introduce state-of-the-art technology in two turbine units south of Tashkent.

Kazakhstan-China Oil Development

· Kazakhstan chose China National Petroleum Corporation (CNPC) over Amoco, Unocal, and Texaco to develop its third largest oil field. China promised to spend billions of dollars investing in pipelines linking the oil fields with China, reported Xinhua.

European Republics

Baltic Assembly Discuss Integration

· A two-day session of the Baltic Assembly will open in Vilnius on Friday, reported Itar-Tass. They will discuss the cooperation of the Baltic states to integrate into the European Union and NATO, as well as concerns regarding relations with Russia. The forum is to approve a number of resolutions to protect the Baltic states' territory from low-quality and out of date products, to combat corruption, to struggle against drug trafficking, to protect children's rights, etc.

South Caucasus & Central Asia

Abkhazia Factions Disagree on Tactics

· Boris KAKUBAVA, leader of the Abkhazeti faction in the Georgian parliament told Interfax that representatives of the Georgian refugees in Abkhazia will demand the dismissal of Georgian President Eduard SHEVARDNADZE at their congress meeting next week, reported RFE/RL Newsline. He accused SHEVARDNADZE of "pursing a pro-Russia policy" and the Abkhaz parliament in exile of ignoring the interests of the Georgian displaced people. Chairman of parliament in exile Tamaz NADAREISHVILI said its deputies would not attend the meeting and that the actions of the congress is intended to destabilize the internal political situation in Georgia. The failure of Russian peacekeepers to up hold the UN-CIS mandate is

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

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