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

Friday, February 20, 1998

again. NEMTSOV said YELTSIN's re-election for another four years in office, "will not be the worst option...At least, we will know what to expect." He added that the President is in better health than a year ago. "A sick Yeltsin is far more safe than a very healthy ZYUGANOV and LEBED. And even than LUZHKOV." As Intercon pointed out in Thursday's Daily, LUZHKOV is proned to strange imperial comments, which threaten relations with Russia's independent neighbors. NEMTSOV also expresses a concern echoed in the west, that the next president will be "elected" by appointment and endorsement of huge financial and media groups. He branded the situation where Russia's big financial groups can influence public opinion through mass media under their control as "dangerous." "Why run for presidency? He who is appointed will become president. It is vitally important to have a tsar. Russia is too big and not democratic enough to act differently."

Duma Ratifies Human Rights Convention

·The Russian State Duma today in a vote 294 to 11 with two abstentions ratified the European Convention on Human Rights, Reuters reported. Russia signed the convention when it joined the Council of Europe in February 1996. Duma Foreign Affairs Committee Chairman Vladimir LUKIN of Yabloko told the Duma that ratifying the convention, "is an important step on the road to providing real protection for human rights in Russia." The convention obliges the participating states to guarantee fundamental human rights and freedoms to every person under

Russian Federation

Politics

Duma Discusses Budget Amendments

· The Russian State Duma in a vote 187 in favor, 80 against, and one abstention rejected the fourth reading of the 1998 budget; 226 votes were needed for the budget to be approved. Speaker Gennady SELEZNYOV said the Duma will re-consider the draft budget on March 4th. This is the first time in Russia's history that the country will be without a budget in March. Votes in favor of the budget came from the Communists faction and the Russian Regions group but these were not enough to pass the budget. First deputy Finance Minister Vladimir PETROV, who represented the government at the session, refrained from making any statements after the voting results were announced. The lawmakers turned down a government-proposed amendment providing for reducing revenues and expenditures by 27.9 billion roubles. The house also rejected a proposal by the Duma's budgetary committee to change article 102 which allows the government, in case of decreased tax returns and in order to overcome the aftermath of the crisis on financial markets, to execute proportional reduction of expenditures and to channel the money (up to 18 billion roubles) to service Russia's state domestic debt. Analysts believe that some law makers rejected the budget because it is unconstitutional to make late changes to the draft. The budget will still needs approval of the Federation Council and President Boris YELTSIN, which law makers estimate will take three weeks.

Nemtsov Not to Run For President in 2000

· Russia's first vice premier Boris NEMTSOV said on Thursday he will not run for Russian presidency in the 2000 elections. He did not excluded the possibility that President Boris YELTSIN could be re-elected, despite YELTSIN's statement he will not run

Today's News Highlights

Russia

Anti-Dumping Commisssion

LUKoil-Turkey Oil Project

European Republics

Ukraine-Russia Visit

Latvia Sends Volunteers to Gulf

South Caucasus & Central Asia

Georgian Negotiations Fruitless

S&P Rate Kazakh Currency

Turkmen Leader Reduces Power

Politics-Economics-Business

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February 20, 1998

Intercon's Daily

their jurisdiction. The accord will also allow Russian citizens to file appeals with the European Court, the rulings of which would be binding. The European Court has received more than 800 complaints from Russians over the last two years. First Deputy Speaker RYZHKOV said, "Russia is becoming a member of the Council of Europe in her own right."

Economy

Ruble = 6,059/$1.00 (NY rate)

Ruble = 6,062/$1.00 (CB rate)

Ruble = 6,036|6,088/$1.00 (buy|sell rates)

Sep Oct Nov Dec Jan Feb

Anti-Dumping Commission To Be Created

· First Deputy Prime Minister Boris NEMTSOV told members of the State Anti-Monopoly Committee today that a presidential decree is being prepared to set up an anti-dumping commission in Russia. "Russia hasn't conducted a single anti-dumping investigation aimed against foreign companies, while discriminatory measures against Russian manufacturers are being taken all over the world," NEMTSOV said. He stated that in the US, Latin America, Europe, and Asian countries at least 58 discriminatory rulings against Russian companies have been decided. The vice premier said those countries were introducing anti-dumping duties to make Russian exports unprofitable, above all the export of steel, textile and fertilizers. NEMTSOV cited estimates that Russia losses $1 billion to $1.7 billion annually due to anti-dumping duties.

Privatization List Submitted to Duma

· First Deputy State Property Minister Alexander BRAVERMAN on Thursday said that the list of

Russia's ten largest companies to be privatized, signed by Prime Minister Viktor CHERNOMYRDIN on Wednesday, will be submitted to the State Duma in March. The list includes telecommunications giant Svyazinvest, oil companies Rosneft, Tyumen Oil Company, Norsi-oil, the Eastern Oil Company VNK, Slavneft and Sibur, the Novosibirsk Electrode Plant, as well as the Moscow regional Elekotrosvyaz Company. BRAVERMAN said that the list is expected, "to make investors certain that privatization will go on in conformity with the legislation...We are turning from mass privatisation to privatisation according to priority projects." The Ministry estimates this year's income from privatisation at 8.1 billion rubles, dividends at 1 billion and income from the management of state property at 360 million rubles, Prime-Tass reported. BRAVERMAN said 400 enterprises of the defence sector have prepared all the required documents and requested to be included in the list of state enterprises to undergo privatization.

Business

Westinghouse Awarded Nuclear Contract

· Pennsylvania based Westinghouse Electric Company has been awarded three contracts to provide instrumentation and control (I&C) upgrades to nuclear power stations in Sosbovy Bor, near St. Petersburg. Under the terms of the contracts, Westinghouse's Nuclear Projects Division will provide a leak detection system, series of hydrogens monitoring systems, and an advanced computer upgrade package. General Manager of the Nuclear Projects Division Michael COMISKEY said, "Since 1992, we have won more than 15 contracts for more than 35 I&C projects at nuclear power plants in Russia, Ukraine, the Czech Republic, and Lithuania. The knowledge base we have gained and the strong customer relationships we have developed during that period will enable us to continue to assist in the ongoing process that will make nuclear plants in this region as safe and efficient as possible." Westinghouse provides a wide range of advanced products, services, and technologies to nuclear-related industries throughout the world.

LUKoil-Turkey Discusss Baku-Ceyhan Project

· LUKoil President Vagit ALEKPEROV met with Turkish Energy Minister Cumhur ERSUMER in Moscow on Thursday to discussed LUKoil's possible participation in the planned Baku-Ceyhan pipe

When you need to know it as it happens

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line for exporting Caspian oil, the export of Russian oil via Turkey, and refining LUKoil crude in Turkey. Turkish Foreign Minister Ismail CEM proposed last month that Russia be compensated if the main export pipeline for Caspian oil bypassed its territory, reported RFE\RL Newsline. Meanwhile, the chief Russian engineer planning the construction of the underwater gas pipeline across the Black Sea from Russia to Turkey announced that work on that project will get under way by year's end.

to satisfy Ukraine's demands. This decision may help solve other issues with Russia. KUCHMA said, "There is no politics here, these are purely economic issues. Besides, any country wants to have alternative energy sources," Itar-Tass reported.

Latvia Sends Volunteers Troops to The Gulf

· The Latvian Parliament in a vote of 65 to five with two abstentions on Thursday endorsed the participation of its forces in the possible international operation against Iraq. President Guntis ULMANIS told the parliamentary session that Latvia could count on assistance only if it was ready to take part in common efforts and contribute to international security. Defence Minister Talavs JUNDZIS has consulted with US experts. Only volunteers will be sent to the Gulf, he said. A limited number of troops will be dispatched, including a planeload of field engineers, chemists, and physicians. He did not rule out that a mine sweeper would be sent as well.

South Caucasus & Central Asia

Georgian Negotiations Fruitless

· Negotiations continued through the night between Georgian Security officials, Parliament leaders, and the kidnappers of four UN military observers and six civilians in Zugdidi. During negotiations officials agreed to remove armed vehicles intially placed around the house, although the area remains surrounded. The deputies offered themselves in exchange for the hostages, but kidnappers refused. Deputies confirmed that the hostages are unharmed. The kidnappers, armed with assault rifles, machine guns, and grenade launchers, are demanding the release of seven men arrested in connection with the failed assassination of Georgian President Eduard SHEVARDNADZE, the release of all Georgian political prisoners, and the withdrawal from Georgia of all Russian troops stationed there. They have threatened to kill their hostages if those demands are not met. The kidnappers are supporters of the late President Zviad GAMSAKHURDIA claiming to represent Georgia's "legal government."

Georgian Interior Ministry and Defence Ministry units have been put on the alert. Adviser to the Georgian President on International Law Levan ALEKSIDZE stated today that, "an operation to release the hostages in the Zugdidi district of Geor

European Republics

Ukrainian- Russian Trade relations

· Russian Prime Minister Viktor CHERNOMYRDIN, Ukrainian President KUCHMA, and Prime Minister Valery PUSTOVOITENKO met today in Kiev to discussed bilateral interests and look into the course of implementation of earlier agreements. CHERNOMYRDIN said, "Ukraine is among top priorities for Russia. We believe our Ukrainian partners have the same attitude towards Russia." He called for the establishment of the most favoured nation treatment in relations between the two countries. Since the economies of the two countries supplement each other and have direct economic ties, they can cooperate most effectively in machine-building and in defence branches, the premier said. "There are all conditions for the establishment of joint productions lines, joint companies." CHERNOMYRDIN also called on non-state enterprises to manufacture high-quality products. "They must manufacture such products that will be in demand both in our countries and abroad...If they cannot do it, we do not need such companies." The two Prime Ministers also initialed an program of economic cooperation between Russia and Ukraine through the year 2007, which Presidents YELTSIN and KUCHMA are to sign during the visit on February 26-27. At the end of the session, the sides are expected to sign intergovernmental agreements on cooperation in the sphere of information, including the setting up of a direct presidential line, education, and an agreement on the guarantees of the rights of migrants, CHERNOMYRDIN said.

CHERNOMYRDIN also announced that Moscow, "will allow as much gas to transit [through Russia] as Ukraine wants to buy from Turkmenistan." According to KUCHMA, Ukraine needs additional 10-15 billion cubic meters of gas, since Russian is unable

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gia should be over within the next 24 hours." He noted that the UN was authorized to resort to its military units to free the hostages, but has been refraining from use the force. UN Secretary-General Kofi ANNAN and the UN Security Council condemned the abduction and demanded the unconditional and immediate release of the hostages. The UN Security Council termed the incident an attempt to undermine Georgia's international image and deter international organizations from their ongoing efforts to mediate a solution to the Abkhazian conflict.

US Gains Support for East-West Pipeline

· US Undersecretary of State Stuart EIZENSTAT said Thursday that the US push for an east-west transport corridor, specifically the planned Baku-Ceyhan pipeline which avoids Iran, gained interest from European countries. He and Undersecretary Tom Pickering have been lobbying for support from several European nations. Although some exports care calling for flexibility in Iran given the new moderate President Mohammed KHATAMI, the US remains clear in its support for the Baku-Ceyhan pipeline over any route through Iran. "We feel very strongly there should be no pipelines across Iran," EIZENSTAT said. Such projects, "potentially give Iran a chokehold over energy development in the Caspian going west...increase its political and economic influence [and are] contrary to the interests of the West and the United States."

EIZENSTAT has met with Royal/Dutch Shell and Amoco executives to expolore the feasiblity of alternative routes to Iranian pipelines. "This is not an American game, a great oil rush [in the Caucuses]. We want to have European companies participating in this east-west corridor," EIZENSTAT said. Comment: European support for alternatives to Iranian pipeline routes, would assist the US position to enhance stability within the Caspian basin as former Soviet republics continue to develop independently, thereby reducing their dependence on other large, powerful neighbors. However, European support

concerning American effort to isolate Iran has been elusive at best. It is doubtful that the Europeans will fully support American initiatives to exclude Iran.

S&P Rates Kazakhstan's Currency

· Standard & Poor's (S&P) Wednesday affirmed its double B minus long-term foreign currency and double B plus long-term local currency sovereign credit ratings for Kazakhstan. S&P's also affirmed the rating of single B for short-term foreign and local currency sovereign credit ratings. S&P based its rating on several economic factors, including poor tax administration, the quality of governance and political institutions, lack of export expansion. S&P was pleased with the government's continued strong commitment to orthodox economic management, structural reforms, and financial stabilization.

Turkmen Leader Plans To Limit His Powers

· Turkmen President Saparmurat NIYAZOV on Monday said he plans to amend the constitution in hopes of creating a more democratic society by reducing his powers. "We will increase the role of the parliament and limit the powers of the president a little, so that the executive power is controlled by the parliament." The President plans to discuss the amendment in a governmental meeting in May. NIYAZOV, an unlikely advocate of reforms, has become the center of a personality cult complete with large portraits and statues planned for the capital city. NIYAZOV acts as President, Prime Minister, and commander-in-chief of the armed forces. NIYAZOV will meet with US President Bill CLINTON and Energy Secretary Federico PENA on April 22-23. Agreements on economic, educational and cultural cooperation are to be signed during the visit along with several contracts with Mobil, Amoco, Unocal, and Exxon to explore and develop the Caspian shelf. To mark Turkmen's National Flag Day on Thursday, NIYAZOV signed several decrees, including a call to citizen to report violations of their rights by law enforcement agencies to the government, changing the name of the militia to police, and an increase in state employee wages and pensions.

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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