DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 908,

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, March 31, 1998

Sergey STEPASHIN as Interior Minister and Igor SERGEYEV as Defense Minister. The President announced that a decree had already been signed to this affect. Presidential spokesman Sergei YASTRZHEMBSKY quickly added that YELTSIN has not signed decrees because he cannot formally appoint the new cabinet of ministers until the Russian State Duma has confirmed Sergei KIRIYENKO as Prime Minister. YASTRZHEMBSKY tried to cover for the President by saying that the president called PRIMAKOV and ZADORNOV "ministers" because he, "already saw them as such." This isn't the first time spokesmen have covered for YELTSIN's mistakes. During last week's triplet with France and Germany, YELTSIN mistook a photo session for a press conference and began his statement. He had to be corrected and helped during the entire session. These actions call into question the state of the Russian President and the unclear lines of succession. Article 92 of the constitution stipulates that the Prime Minister becomes acting President if the incumbent President resigns, is incapacitated for heath reasons, or is removed from office. The article does not provide any further line of succession. Duma legislation committee chairman Anatoli LUKYANOV said that an acting Prime Minister who had not been confirmed by the Duma would not be eligible to become acting President, RFE/RL Newsline reported.

Nizhny Novgorod's Election May Be Annulled

·Russian government's senior spokesman Igor SHAB-DURASULOV said at a news briefing today that

Russian Federation

Politics

Duma Tries To Delay Kiriyenko's Approval

· The Russian State Duma today approved and put on the agenda of the Duma a draft resolution urging President Boris YELTSIN that the government's account on the implementation of the last year's budget be heard by the Duma instead of debating on the nomination of Sergei KIRIYENKO for Prime Minister. The draft resolution urges YELTSIN to meet with parliamentary delegates to keep counsel with them on a new government. The resolution urges the President to withdraw his nomination of KIRIYENKO for prime minister. The resolution was written by communist, agrarian and People's Power factions. Nikolai KHARITONOV of the hardline Agrarian faction said at a briefing that the resolution would discussed before the Duma on April 1. All factions except for Liberal Democrats led by Vladimir ZHIRINOVSKY allegedly endorsed the draft resolution which edited before the Wednesday debate. The resolution says, "The demands of the president of immediate approval of the cabinet which he is selecting have an ultimatum character and do not fit into constructive interaction of branches of the state authority." The Duma is going to call on the Federation Council to endorse the resolution. Communist party leader Gennady ZYUGANOV said that legislators are required to consider KIRIYENKO's candidacy within a week but they do not have to vote on it Friday. "We can consider it as long as we think necessary." The government is likely to fight the opposition's efforts to draw out the confirmation process.

Spokesman Backtracks For Yeltsin

· Russian President Boris YELTSIN today re-appointed Yevgeny PRIMAKOV as Russia's foreign minister, Mikhail ZADORNOV as finance minister,

Today's News Highlights

Russia

Tatneft Sold on NYSE

Ericsson Wins Russian Contract

European Republics

Communists Lead Elections

South Caucasus & Central Asia

Georgian Poice Kill Esebua

Kocharyan For Armen. Presid.

Rus-Kazakh To Sign Power Deal

Tajik Opposition Releases 23

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the results of Nizhny Novgorod's mayoral elections can be annulled. "Results of elections in Nizhny Novgorod so far have not been approved and probably they will be revised for a number of reasons," he said. Returns in the elections suggest that businessman Andrei KLIMENTYEV won 34 percent of the vote on Sunday against 32 percent for his rival city administration head Vladimir GORIN. KLIMENTYEV has been convicted for improper use of hard currency and embezzlement of $2 million. He is also still under investigation for another crime. Russian Central Election Commission Chairman Alexander VESHNYAKOV said that it was too early to speak of valid elections. He said pre-election propaganda extended into the election day with violations, which included, "attempts to distribute goods," particularly alcohol as bribes for a vote in KLIMENTYEV's favor. These allegations are being investigated. VESHNYAKOV said, "The difference in votes is very small, about 13,000 [between KLIMENTYEV and GORIN]." Most analysts predicted that GORIN would win the post. Russian President Boris YELTSIN and acting Interior Minister Sergey STEPASHIN expressed concern that a criminal could be elected as mayor. Former First Deputy Prime Minister Boris NEMTSOV also was disappointed in the elections. He backed the third place winner Dmitri BEDNYAKOV. In 1997, NEMTSOV filed a slander suit against KLIMENTYEV.

Namibia-Russian Relations

· Russia and Namibia signed an agreement today on cooperation between diamond production sectors in the framework of a visit to Russia by Namibian President Sam NUJOMA. Presidential spokesman Sergei YASTRZHEMBSKY said that the issue is, "diversification of Namibian connections in the diamond sector. In order to stand firm on the ground it is not enough to be orientated to one partner only. Many people are aware of strong positions maintained by the De Beers company in the south of Africa and in this connection Namibia is interested in diversification of cooperation in this sector." Namibian President Sam NUJOMA expressed gratitude to Russian President Boris YELTSIN for support given to Namibia in the process of its liberation. YELTSIN noted that he had been looking forward to the meeting with the Namibian President since there are many questions which they will discuss together. Russian State Duma Speaker Gennady SELEZNYOV

also held meetings with President NUJOMA to discuss the level of interparliamentary relations between the two countries.

Economy

Ruble = 6,106/$1.00 (NY rate)

Ruble = 6,108/$1.00 (CB rate)

Ruble = 6,089|6,127/$1.00 (buy|sell rates)

Tatneft Launched on NYSE

· Tatneft became the first Russian oil company to be traded on the New York Stock Exchange as American Depository Receipts, or ADRs when it was launched on Monday. The ADRs are freely circulating receipts for foreign shares deposited at US banks. They are ubiquitous in the world and make a convenient mode of international trade in stocks. There are five ADRs to one Tatneft share to enhance the liquidity. This rate is based on the high price of the company's shares, over $200. ADRs starting price reached and remained at $24 dollars until the close of Monday. The NYSE has issued ADRs of over 25 Russian companies over the recent years. Tatneft, Rostelekom, and Vympelkom, a major provider of cellular communications services on the Russian market are the only companies which are registered for trading. Tatneft is Russia's fourth-largest oil producer with a charted oil store of 855 million tons.

Kiriyenko-Dubinin Discuss Economy

· Acting Russian Prime Minister Sergei KIRIYENKO met with Chairman of the Central Bank of Russia Sergei DUBININ to discuss the present situation in Russia's financial markets, as well as a joint statement of the Russian government and the Central Bank on economic policy for the current year, government spokesman Igor SHABDURASULOV said. The drafting of a report on priority steps of the new Russian government, which KIRIYENKO is going to deliver in the Russian State Duma on April 3rd, was also discussed. KIRIYENKO continued consultations in the Duma with Peoples' Power group of deputies, the Communist Party, and members of the Agrarian group.

Business

Gazprom To Bid in Rosneft Sale, Criticizes Price

· Russia's gas giant Gazprom's financial adviser

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Andrei VAVILOV told a news conference on Monday that Gazprom may sidestep restrictions on participation in the Rosneft contest. Earlier reports said that Gazprom would be unable to participate in the Rosneft contest, because more than 25 percent of its shares were owned by the state and it had a debt to the federal budget. VAVILOV said there are, "legal methods that allow [those] restrictions to be circumvented." Gazprom is a member of a consortium with LUKoil and Royal Dutch Shell to jointly bid for Rosneft. VAVILOV said the contest had been seriously effected by falling oil and gas prices, but the situation was now changing for the better. VAVILOV said he hoped that the Rosneft contest would be successful and not trigger conflicts similar to those of previous tenders for stakes in major Russian enterprises.

Head of Russia's gas producer Gazprom Rem VYAKHIREV said today the announced price of $2.1 billion for the 75 percent plus one stake in the oil company Rosneft is much too high. The Yuksi oil company withdrew from the auction after its head Mikhail KHODOROVSKY stated that the offered package was overpriced by $800 million. With Yuski withdrawal from the auction and criticism over the price of Rosneft's stakes, Russian acting first deputy premier Boris NEMTSOV urged representatives of Russian and world petroleum business for active participation in privatizing Rosneft Russian petroleum company. Privatization in the fuel and energy complex should be based on the principles of openness, equal accessibility to participants and public monitoring, NEMTSOV said. It is precisely on these principles that a tender for the sale of the package of Rosneft shares should be held.

Ericsson Wins Rostelekom Contract

· Swedish telecommunications company LM Ericsson announced that it has won the tender to create an open multimedia network across Russia for Russian international long distance provider Rostelekom. The initial phase of the deal is worth $11.5 million, according to Ericsson's Moscow office. Regional governments will be the first to benefit from the new technology. Rostelekom's chief executive officer Oleg BELOV said the multimedia connection will be set up in 78 region in this year alone, Reuters reported. Rostelekom in February began listing American Depository receipts on the New

York Stock Exchange, allowing freer overseas trade of its shares.

European Republics

Communist Lead Election Preliminary Results

· Ukrainian Central Electoral Commission released preliminary results of the parliamentary election showing the communist party ahead and eight political parties overcoming the four percent hurdle needed to be elected to the parliament. The Ukrainian Communist Party is leading with 26 percent of the vote. Ukraine's Popular Rukh is the runner-up with 11 percent. Socialist parties received 8 percent, Green Party 7 percent, Gromada 6 percent, People's Democratic Party 5 percent, Social Democrats 5 percent, and Progressive Socialist Party with 4 percent. None of the remaining 23 parties and blocks have crossed the four percent barrier. The election for 450 seat parliament is figured half on a party list system and half on single member constituencies. Independent candidates with no party affiliation won more than 114 seats of the 225 single mandate constituencies. The Central Election Commission said that official results will be released on Friday.

Following the announcement of preliminary results Communist Party leader Pyotr SIMONENKO said, "The people have shown that we must cast off this ruinous course...We are against presidency in Ukraine." Asked whether a new parliament may initiate the impeachment proceedings against the President, SIMONENKO said the present government is carrying out an anti-popular policy and therefore it is necessary not only to raise the question of impeachment, but also assess the government's policy in order to fight crime. He accused President Leonid KUCHMA of, "bringing Ukraine to the brink of economic collapse." SIMONENKO called for, "equal relations with the West," and financial structures such as the International Monetary Fund, which the Communist Party says aims to make a "marionette" of Ukraine.

South Caucasus & Central Asia

Georgian Police Kill Esebua

· The Georgian Police today said they have shot Gocha ESEBUA the leader of the opposition group that took four UN military observers hostage in February. ESEBUA escaped on February 25 after a

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six day siege ended peacefully. He was tracked down to a house in Zugdidi. A spokesman described that, "The house was surrounded by special forces and they asked him to surrender. The criminals opened fire using grenade launchers. As a result of the fire exchange, Gocha was wounded and died later." Eight other men were detained. ESEBUA was a supported of the ousted former President Zviad GAMSAKHURDIA.

Kocharyan Leads Armenian Presid.Elections

· After counting almost 50 percent of the ballots, Prime Minister Robert KOCHARYAN is already ahead of his rival in the second round of the Armenian Presidential elections, which was held on Monday. The Armenian Central Electoral Committee reports that 62 percent of the electorate cast their ballots for KOCHARYAN, while 38 percent voted for Karen DEMIRCHYAN. Deputy chairman of the Central Electoral Commission Ruben MANUKYAN said it is too early to speak of the results as vote-counting is still in progress. During the first round of the elections, which was held on March 16, KOCHARYAN received 38.76 percent of the votes and former leader of the Communist Party of Armenia DEMIRCHYAN 30.67 percent. Neither National Democrats, nor Communists voiced support for either run-off candidates on the eve of the election. This means that the electorate of the main forces of the opposition had no clear-cut directions and voted according to their own discretion. DEMIRCHYAN's supports claim that KOCHARYAN's supports stuffed ballot boxes. The Organization for Security and Cooperation in Europe have not reported any cases of large scale voting fraud. The West is watching this election closely due to past flawed elections and because more fraud might call into question Western aid to Armenia. If elected President, KOCHARYAN plans to revise the Armenian constitution to re-distribute powers of the president, the government and the parliament. "I do not think the president should have the right to dissolve the national assembly," he said. KOCHARYAN said that among top priority economic challenges is the need to increase

budget revenues by collecting more tax and customs payments. "Armenia will be the most developed country in the Transcaucasia and Azerbaijani oil will not prevent from achieving this goal," he said. KOCHARYAN pledged to form a political council of heads of Armenian leading political parties to discuss key aspects of the domestic and foreign policy. He thinks that close cooperation between political forces is necessary to overcome the crisis.

Russian-Kazakhstan Sign Atomic Power Deal

· Russia and Kazakhstan are expected to sign a new agreement on cooperation in the atomic industry, a Russian atomic ministry official said on Monday. The agreement will provide for the construction of an atomic power plant in Kazakhstan. According to the project, the station will be equipped with three improved light-water VVER-640 reactors. The first one is expected to be operational in 2005, the second one in 2007, and the third one in 2009, the source said. The plant will be located north of Almaty. Kazakhstan has been operating only one nuclear reactor near the city of Akatau. But the service life of the BN- 350 unit expires in 2003. Kazakhstan signed an agreement with the US in November, 1997 to help with its withdrawal from operation.

Tajik Opposition Releases 23 Soldiers

· Armed opposition groups released another 23 government troops in the Kofirnikhon district of Tajikistan on Monday night, Itar-Tass reported. Escorted by UN military observers and members of National Reconciliation Commission, they were taken from the Ramitskoye gorge located northeast of Dushanbe, presidential adviser Mizrob KABIROV said. Government troops who have blocked 12 opposition fighters in the Kofirnikhon area over the last 24 hours provided a corridor for the hostages. An estimated 20 government soldiers remain with the opposition group. Talks between the government and the opposition are still in progress. KABIROV said the government is now considering the opposition's demands that the Defense Ministry withdraw its forces from the area.

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

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