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

Monday, March 9, 1998

decisively in order to prevent leaks of any materials and technologies related to weapons of mass destruction both through official and private channels."

Chechnya's Air Defense Prepared for Attacks

· Chechnya's Air Defense is prepared to open fire without warning to hit targets violating Chechnya's air space. State Border and Customs Service of the Chechen Republic of Ichkeria told Itar-Tass reporters today that this statement was made public following an incident when Russian jets appeared over the territory of Chechnya. According to Chechen border guards, around 11:00 a.m. today two Russian jets crossed into the territory of Chechnya flying at low altitudes above the military town of Khanakala and then retreated in the direction of North Ossetia. Border guard officials said that a similar incident occurred on Sunday when two Russian jets flying at a low altitude crossed into Chechnya when a motorcade of the Chechen president was moving along the Rostov-Baku highway. In both incidents the jets crossed into Chechnya's air space from the territory of Daghestan and disappeared in the direction of the Ossetian border, the border guard officials said. According to a statement of the Chechen Foreign Ministry since 1998, there were 148 air attacks, 23 alleged robberies on villagers by Russian forces and 7 violations of air space by Russian fighter planes. The Chechen Foreign Ministry expressed deep concern with regards to these recent actions, because they can lead to destabilization in the North Caucasus region. The Chechen officials call for an ending of provo

Russian Federation

Politics

Russia Reiterates No Nuclear Tech. Transfer

· Russian Prime Minister Viktor CHERNOMYRDIN declared today, before leaving for Washington, DC where he will attend the tenth session of the Gore-Chernomyrdin Commission, that Moscow had not transferred missile or nuclear technologies either to Iran or any other country in violation of the existing international regime. "As regards nuclear technologies we shall never violate anything. We have not and will not transfer anything [nuclear missiles] to Iran or other countries....We shall not violate our obligations," CHERNOMYRDIN reaffirmed. The US has offered Russia a chance to expand its launches of foreign satellites in exchange for a crackdown on its sales of missile technology to Iran. The offer is potentially worth hundreds of millions of dollars to Russian companies and their western partners. The issue is expected to be discussed with US Vice President Al GORE this week in Washington, DC.

On Saturday, Government spokesman Igor SHABDURASULOV said that proliferation of weapons of mass destruction and means of their deliveries, including missile technologies, do not conform to Russia's national interests. The spokesman added that, "certain forces seeking to distort the essence of contacts between Russia and Iran and thus worsen Rus-US relations...Russia sticks strictly to the non-proliferation policy and has repeatedly stated its stance. Moreover, it has been constantly improving its mechanisms of control." At the beginning of 1998, the Russian government passed a resolution drastically toughening the regime for export of double technologies, the spokesman said. Strict observance of the national and international non-proliferation regime is among top priorities of the Russian secret services which have been instructed to, "act

Today's News Highlights

Russia

Lobby For Russian Exports

Gazprom-Ukraine Resolve Debt

European Republics

Lith. Renominates Prime Minister

Iran-Belarus Strengthen Relation

South Caucasus & Central Asia

Arm Depot Found in Azerbaijan

Opposition Members Beaten

Turkmen to Launch Stock Market

IFC Loans $7M to Azeri Plant

Politics-Economics-Business

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Monday

March 9, 1998

Intercon's Daily

cation and murder of the civilian population by Russian military forces because this constitutes a real threat to stability in the Caucasus.

Maskhadov Survives Car Accident

· Chechnya's security agency has confirmed that President Aslan MASKHADOV is safe after Sunday's car crash injuring seven. A spokesperson at the Ministry of Shariat Security said the crash occurred not near of Gudermes, Chechnya, when MASKHADOV's motorcade was moving along the highway connecting Rostov-on-Don and Baku. Chechnya's law-enforcement agencies claimed referring to the preliminary investigation that the collision was "purely accidental" and resulted from a civilian driver's failure to cope with the steering-wheel. According to officials, one of the escort cars carrying MASKHADOV's bodyguards smashed into a Zhiguli that was moving along the same strip of the road towards the motorcade. Only those who were in the escort car were injured. The President continued his travel in a reserve Mercedes to Baku. MASKHADOV told Azerbaijan President Geidar ALIYEV that, former Soviet republics in the region should create a "common Caucasus home." He said, "Attempts to eliminate center of tension with prompting from the outside cannot succeed. It is the people in the Caucasus region themselves which must come to agreements and settle them." His comments appear to be directed against Russian involvement in Chechnya, and echo allegations from other former soviet republics in the region, notably Georgia, that Moscow interferes in their affairs. After meeting with ALIYEV, MASKHADOV will leave for Britain, as he refused to fly out of Moscow. In Britain, MASKHADOV will meet with ex-premier Margaret THATCHER and British businessmen. He plans to discuss problems facing Chechnya.

Economy

Ruble = 6,081/$1.00 (NY rate)

Ruble = 6,081/$1.00 (CB rate)

Ruble = 6,057|6,105/$1.00 (buy|sell rates)

Lobby For Russian Goods to US Markets

· Russian Prime Minister Viktor CHERNOMYRDIN Sunday called for lifting all barriers for Russian goods to the US markets. A lifting of trade restrictions on Russian exports would help stimulate Russia's depressed manufacturing sector. The US imposes

high tariffs and quotas on a range of Russian goods. CHERNOMYRDIN said, "It is difficult for Russian goods to break through" into the American market sometimes due to tactless and artificial trade barriers. He noted that Russia and the US should cooperate on equal terms so that this could be profitable for both sides. The Prime Minister said Russia and the US have developed an efficient mechanism of coordinating work in trade, economic, scientific and technical spheres. However, he continued, "the potentials of Russia and the US do not meet the present level of our trade and economic relations. We wait for more active participation of American investors in the Russian economy." Since 1993, the volume of trade between Russia and the US rose by 50 percent, totaling $7 billion. CHERNOMYRDIN's comments are a past of an aggressive campaign to win favorable treatment for Russia's exports and follow a clash with the European Union over trade policies. The Russian Prime Minister will participate in the tenth session of the intergovernment meetings on Tuesday and Wednesday in Washington and will hold bilateral meetings with US President Bill CLINTON and Vice President Al GORE.

1997 Budget Deficit Reaches 3.2 Percent of GDP

· The State Statistics Committee on Thursday said Russia's 1997 federal budget has been implemented with a deficit of 85 unredenominated rubles. This places the budget deficit at 3.2 percent of gross domestic product, which is within the law on the federal budget limit of 3.5 percent. However, the proportion of the budget deficit in total spending reached 21.1 percent, the law-set limit being 18.01 percent. A 61.8 percent portion of the 1997 budget deficit was cleared by exterior borrowing and 38.2 percent by internal financing. The internal financing of the 1996, budget deficit made 55.2 percent. Russia's foreign trade in January of 1998 made $10.2 billion, or 61.1 billion redenominated rubles in current prices, down 2.3 percent from January 1997. The Committee reported that January exports declined 13.9 percent against January 1996 figures, to $5,7 billion. Imports grew 17.7 percent in January of 1998, to $4.5 billion.

Business

Gazprom-Ukraine Resolve Gas Debt

· Russian gas giant Gazprom president Rem VYAKHIREV and Ukrainian Prime Minister Valery

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PUSTOVOITENKO agreed during talks Thursday and Friday that Ukraine's natural gas debt to Russia, approximately $1.2 billion including penalties, will be repaid on an agreed upon time-table. Russian Prime Minister Viktor CHERNOMYRDIN helped to negotiate the time table. A protocol was signed in the talks, under which Ukraine's users of gas imports from Russia will undertake to pay their dues. One of them, state-run Ukrgazprom, owes Russia over $300 million which is to be paid off on the time-table by October 1. Ukraine's Intergaz and EES Ukrainy Corporation, and Gosneftegazprom are to submit to Gazprom in the second quarter their time-table of clearing their debt of $400 millions. Ukraine agreed to repay a $20 million debt of Ukrzarubezhneftegaz and a $40 million debt of Sigma Center.

Attempt On District Leader Fails

· Unidentified criminals on Sunday launched an attempt to kill the head of the largest district in the Kamchatka region Alexander POLOZOV, but he survived in a blast, receiving several wounds and a broken shin. Regional police have determined that unidentified people rang the door bell of POLOZOV's apartment in the morning after which the man opened the door and a powerful explosion, equivalent to 200 grams of TNT, threw him three meters back from the entrance. The type of the explosive device has not been established. POLOZOV heads the administration of the Yelizovsky district administration. The police said this was the first-ever attempt against an official of such level in the region. The local branch of the Federal Security Service (FSB), the local interior ministry and the regional prosecutor's office are participating in the investigation.

of parliament mandates belong to the coalition of the Conservatives and the Christian Democrats. It is also known that the Cabinet will be reshuffled. ADAMKUS and VAGNORIUS have agreed to reduce the cabinet positions from 17 to 12. ADAMKUS has pledged to streamline Lithuania's post Soviet-bureaucracy to prepare it for membership to the European Union.

Iran-Belarus Strengthen Relations

· Belarus President Alexander LUKASHENKO met with Iranian President Mohammad KHATAMI and Islamic republic religious leader Ayatollah Ali KHAMENEI in Tehran on Saturday. The two leaders agreed to increase economic and political relations. KHATAMI hopes that trade between the two nations will increase five times its current rate. "Broad relations between Iran and Belarus is no detriment to any other country and the two countries' relations based on mutual respect can help peace and stability in the region," KHATAMI was quoted by Iran News. His statement clearly responds to the US fear that Iran is acquiring nuclear technology from former Soviet republics. The Washington Times just last month quoted an unnamed CIA source as saying that Belarus was close to a deal with Iran to sell military equipment and spare parts for a tank-repair facility. Belarus denied the reports and stated that no military cooperation deals were discussed during the visit. LUKASHENKO is to meet with Syrian President Hafez ASSAD in Damascus today.

Russia May Limit Trade with Latvia

· Russia may limit trade with Latvia in response to the rough treatment given to Russian pensioners living in Latvia. Foreign policy advisors to Russian President Boris YELTSIN have recommended that he take steps to limit economic relations with Latvia. The dispute with Latvia began Tuesday when Latvian police brutally used batons to disperse a protest of Russian pensioners over poor living conditions. No serious injuries were reported, but the incident has sparked tensions between the two nations. Russians living in Latvia accuse the government of discriminating against the sizable Russian minority. Latvia, which economically relies on Russian energy supplies and resale of Russian resources, should be, "more loyal with regard to Russia's interest," the presidential spokesman said. The Russian State Duma postponed an official visit of its delegation to Latvia, in response.

European Republics

Lith. President Renominates Prime Minister

· New Lithuanian President Valdas ADAMKUS renominated Prime Minister Gediminas VAGNORIUS to remain as the Prime Minister. Under the Lithuanian constitution, the Prime Minister must hand back his powers to a new President and wait to be renominated as Premier. Then the Parliament must vote to accept him back. The candidate will be discussed on March 10, the first day of the parliament's spring session. The parliaments approval is expected to be only a formality as VAGNORIUS is the head of the Conservative Party Board. The majority

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South Caucasus & Central Asia

More Zviadistas Voluntarily Surrender

· More members of unlawful armed detachments of Zviadistas have voluntarily surrendered to Georgian officials in Zugdidi District. 43 automatic rifles, three grenade launchers, grenades and other weapons have been confiscated along with their surrender. Chief of the criminal police department of the Georgian Interior Ministry Zurab CHKHAIDZE stated that about 30 people, who had been on the wanted list in recent years for the commission of various offenses and crimes, were apprehended. Police exempted those, who turned themselves in, from preliminary detention. Such exemptions are possible due to the peaceful resolution of the issue concerning the release of the UN officers, who had been held hostage in Dzhikhashkari village last month, CHKHAIDZE pointed out.

Arm Depot Disclosed in Western Azerbaijan

· An unidentified source at a special department under the Azeri president revealed that a arms depot has been disclosed in west Azerbaijan not far from the border with Georgia. The depot yielded grenade throwers, machine guns, Kalashnikov submachine guns with ammunition, trinitrotoluene blocks and portable radio sets, the AzerTaj information agency reported on Saturday. According to the source, the armaments and ammunition had been buried in the ear-border area two years ago by a special police unit, headed by now-in-custody Elchin AMIRASLANOV. He is being held in connection with the attempted stage coup against President Geidar ALIYEV. According to AzerTaj, the rebels had to bury the armaments as they tried to escape to Georgia.

Three Opposition Members Beaten in Armenia

· Three prominent opposition members were beaten during Sunday's election rally for their presidential candidate Vazgen MANUKYAN in southern Armenia. Central Electoral Commission member Vova AKHVERDYAN said lawmaker Arshak SADOYAN, commission member Filaret BERIKYAN and chair

man of the opposition party National State Samvel SHAGINYAN were in a brawl that was fueled by unidentified people during the rally. BERIKYAN is in intensive care after an operation on his shoulder. The other two are also hospitalized, a spokesman for Armenia's National Democratic Union (NDS) said. SADOYAN and BERIKYAN are members of the union which is led by MANUKYAN, a former premier and presidential candidate. There was no comment from law-enforcement agencies.

Turkmenistan Prepares to Launch Stock Market

· Turkmenistan is preparing to launch a stock market after an official bank body asked the Central Bank to draw up a regulatory base within two months. Laws regarding a stock exchange, joint stock companies, and the securities market have already been passed. The Central Banks said it was time to launch an exchange, since the annual inflation has been reduced to 21.5 percent. The Turkmen currency, manat, has been stable at 4,165 per dollar and the refinancing rate steady at 35 percent for nine months. The Central Bank hopes a market will boost the issue and distribution of treasury bills.

IFC Loans $7M to Azeri Bottling Plant

· International Finance Corporation (IFC) on Wednesday announced in a press release that it has signed an agreement to lend $7 million to Baku Coca-Cola Bottlers (BCCB), the largest bottler in Azerbaijan. The financing is to be used in a $21.2 million expansion to increase the company's range of products to include bottled water and soft drinks. Azerbaijan's urban and rural water suppliers are unsatisfactory. The project will be meet the country's demand for clean bottled water and soft drinks. This project represents IFC's second investment in the company. The first investment in September 1997, consisted of a loan of $3.5 million and an equity investment of $2.3 million. IFC's projects are the first major foreign direct investments outside the country's oil sector and are creating 250 jobs. BCCB is a joint venture between Turkey's Efes Investments and Azeri company Ilchin Ltd.

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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