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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Wednesday, April 15, 1998

ZAKHARCHENKO said the state intends to cut the scholarship fund by a third, charge for the use of gym-halls, libraries and laboratories, and cut enrollment by 15 percent. Over 300 students of the Tula state university on Tuesday picketed the building of regional administration. Leader of the students' union Dmitry MALAKHOV said financing from the federal budget is irregular, with delays in payment of wages for university lecturers and allowances to students. With the introduction of paid education, a reduction of the scholarship fund and the number of professors, and cuts to budget spending, higher education will become inaccessible for the majority of youth.

Duma Decides To Hold Open Vote On Kiriyenko

· The Russian State Duma today debate the procedure of the second vote on Sergei KIRIYENKO as Prime Minister. The Duma agreed to an open vote, instead of the secret vote mandated by the previous rules. However, first deputy Duma speaker Vladimir RYZHKOV said legislators will vote again on Friday whether the confirmation ballot should be secret or open. The Communist Party backed today's decision hoping that an open vote would tighten party discipline. The Communist party has publicly pledged to vote down President Boris YELTSIN's nominee. YELTSIN has offered more concessions to the Duma if they approve KIRIYENKO. YELTSIN announced that he had instructed Pavel BORODIN, who heads the Presidential administration to take care of the needs of Duma deputies if they, "show a constructive approach," to Friday's vote.

Russian Federation


Students Protest For Education Turns Violent

· Russian students clashed with police in the Ural Mountains city of Yekaterinburg when a protest over the late payment of student stipends turned violent. Russia's NTV television network says 3,000 students threw snowballs and bottles to provoke police who were guarding a government building. Police charged the students, wielding clubs and shields. It is estimated that 24 students and police were injured. Russian Acting Premier Sergei KIRIYENKO described the beating of students in Yekaterinburg as, "an inadmissible fact," and already asked for an account of the event from Interior Minister Sergei STEPASHIN with in 24 hours. The Russian State Duma has charged the education, security, and for family and youth affairs committees with the task of investigating the dispersal of a student demonstration in Yekaterinburg as well.

Thousands of students in other cities, including Moscow, St. Petersburg, and Tula also protested education reforms which do not benefit the students. In Moscow KIRIYENKO met with Chairman of the Board of the Russian Association of the trade union organizations of students Oleg DENISOV and other participants. DENISOV said, "Reforms in the education system are needed but not at the expense of students and faculty members." Reforms include measures to increase the cost of hostel accommodations or dormitories, reduction in student grants, and introduce a tuition fee for the use of technical and instructional facilities in institutions of higher learning. In St. Petersburg's central Dvortsovaya square, students demanded that the government observe their rights to an education and preserve scholarships for diligent students. The trades union leader of the Maritime Technical University, Andrei

Today's News Highlights


Chechen VP Survives Assassin.

Rosneft Price Tag Remains

European Republics

IMF Pulls Out of Belarus

Lith. Arms Smugglers on Trial

South Caucasus & Central Asia

Rus-Georgian Border Chiefs

Black Sea States Sign Accord

Kazakh-Vietnam Increase Trade

Turkmen Presid Meets OCSE




April 15, 1998

Intercon's Daily

Duma Security Committee Chair ILYUSHIN told Izvestiya that YELTSIN's comment on BORODIN is an attempt to bride deputies. He charged that foreign funds were being used to win the approval of the acting Prime Minister. KIRIYENKO also attempted to win deputies' votes by pledging that if confirmed he would regularly meet with speakers of both parliamentary houses on all major decisions concerning industrial, social, and budgetary policy.

Chechen VP Escapes Assassination Attempt

· Russia's Itar-Tass reports that Chechnya's Vice President Vakha ARSANOV narrowly escaped an assassination attempt after roadside explosives missed his jeep. Apparently a remote-control bomb, planted in a pile of garbage on the side of the road, was misplaced. The explosion shattered windows in nearby houses and missed ARSANOV's jeep when it drove by. No one was injured in the explosion. Chechnya's Deputy Security Minister Shamsudin UVAISAYEV has dismissed earlier reports that an unidentified person had fired a grenade launcher at the jeep. ARSANOV was elected vice president in January 1997, six months after Chechnya won de facto independence from Russia in a peace agreement. He has been accused of involvement in the hostage-taking of five Russian journalists.


Ruble = 6,121/$1.00 (NY rate)

Ruble = 6,127/$1.00 (CB rate)

Ruble = 6,109|6,145/$1.00 (buy|sell rates)

Russian Stock Market Attractive To The West?

· Following over due economic reforms in Russia, the Russian stock market will be attractive to western investors. The Managing Director of the Lexington Troika Dialogue Russia Fund, which is regarded as one of the leading US profit-makers on the Russian market, confirmed this and thinks that the economic environment in Russia has already become much more favorable with inflation low and a 2 percent growth of its gross domestic product (GDP) expected this year. Political stability is seen as one of the most important conditions for western business activities in Russia. Most western investors would welcome Sergei KIRIYENKO's confirmation as Russian Prime Minister as they see him as a reformer backed by President Boris YELTSIN. Other key problems needing solution in Russia are associated with tax reform

and the non-payment problem. American experts believe that the solution of these problems would enable Russia to cut taxes and increase revenues.

Tax Agreement With Foreign Nations

· Russian acting prime minister Sergei KIRIYENKO signed a government decree endorsing the draft basic agreement between Russia and foreign countries on cooperation and exchange of information on the observance of tax laws. Under the draft agreement Russia will be developing cooperation with foreign countries in the following areas: joint effort to avert, spot, and cut short violations of the tax legislation, supply of information on the observance of tax laws by taxpayers, exchange of information on the national tax systems, specific features and amendments to the tax legislation. The parties agreed to exchange information on the observance of tax legislation, supply information on the registration of taxpayers, the opening of accounts by taxpayers in state and commercial banks, taxpayers' incomes received in the territory of a given country, the paid sums of tax and other information related to tax.

Industrial Output Rises in First Quarter

· The State Statistics Committee released today official data showing that Russia's industrial output increased by 1.3 percent on a 12 month basis in the first quarter of 1998, reaching $401 billion. Growth in January on a 12 month basis was 1.5 percent, while growth in February was 1.4 percent and in March 1.2 percent. Of the 15 industries watched by the Statistics Committee, nine reported growth over the first three months of 1998, while six saw a fall in industrial output. Growth was the highest in the printing, medical and non-ferrous metal industries, where the output rose by 16.9 percent, 12.6 percent and 12.3 percent, respectively. Output decline was the greatest in the building materials industry falling by 8 percent. Russian industrial output rose 1.9 percent last year.


Fleming Opens Broker House in Moscow

· Britain's bank Flemings has opened a large broker's house in Moscow with the expectation that the Russian stock market will grow. A company spokesman said Flemings expects a major expansion of securities operations in the Russian market. Flemings cooperates with the Russian company

When you need to know it as it happens




April 15, 1998

Intercon's Daily

UCB Capital, whose range of oil, gas and metal deals is fifth largest in the Russian stock market. Fleming paid $10 million for a 60 percent controlling stake in UBC Capital, making it the first Western broker to have expanded its operations in Russia after the Asian crisis. Flemings has been in the Russian stock market since 1992. Its new brokerage will also deal with Ukraine's securities market.

Rosneft's High Price Tag To Remain

· Russia's Acting First Deputy Premier Boris NEMTSOV said Tuesday the price of $2.5 billion for a 75 percent stake in the oil company Rosneft would not be revised adding that the government does not plan to make any concessions. The price of Rosneft's package of shares is $2.1 billion plus an investment program worth $400 million, which totals $2.5 billion. Since the announcement of the value of Rosneft's property, many of the potential bidder have dropped out of the tender, claiming the price is too high. Moscow Mayor Yuri LUZHKOV said the city will not participate in the privatization of Rosneft since the company owes Moscow 100 billion old rubles. LUZHKOV also expressed that a 50 percent stake should remain with the State. LUKoil President Vagit ALEKPEROV complained that the price of the block of shares offered for a tender should take into consideration the interests of participants in the tender and give them an opportunity to compete. LUKoil vice president Leonid FEDUN believes the real price of the block of 75 percent plus one share of Rosneft company is $1.6 billion. Gazprom Rem VYAKHIREV has also complained at the high price tag for a failing oil company. He did not rule out Gazprom's participation in the tender. The Yuksi oil company withdrew from the auction after its head Mikhail KHODOROVSKY stated that the offered package was overpriced by $800 million. The financial group Unexim-MFK, another potential bidder, has refrained from commenting on the tender.

set up the Minsk office in 1992, has only disbursed $70 million of the $500 million credits it originally pledge to Belarus. The IMF stopped cooperating with the Belarus because of the government's unwillingness to carry out necessary reforms, specifically establishing the independence of the National bank and accelerating privatization.

Lithuanian Arms Dealers Caught in Miami

· Attorneys for Alexander DARICHEV and Aleksandr PORGEBEZSKIJ, two Lithuanian men accused of trying to sell illegal arms to undercover agents, began testimony in a Miami federal court, United Press International reported. The two men are charged with conspiring to smuggle 40 Russian designed Strela and Igla missiles which can be fired from a car traveling at 20 mph or by a foot soldier. Both men maintain they wanted to do business legally and did not want to be responsible for the shipment of the weapons into the United States but the agents insisted. The undercover agents, a Miami Beach police officer and a US Customs agent, began the sting operation with the arms dealers in 1995 when they posed as operatives for a Colombian drug cartel. The two agents said they wanted the weapons to shoot down US aircraft patrols working drug surveillance. Attorneys for DARICHEV and PORGEBEZSKIJ claim the agents were under great pressure to produce results from the two-year investigation and pressured the Lithuanian's to ship the missiles to Puerto Rico which the agents called and independent country.

South Caucasus & Central Asia

Rus- Georgian Border Guard Chiefs Meet

· Chief of the Georgian border service department Valeri CHKHEIDZE Tuesday met with his Russian counterpart Nikolai BORDYUZHA, who is touring deployment places of the Caucasian Border District. The meeting was held behind closed doors in Stavropol. BORDYUZHA noted before the meeting that the sides would discuss difficulties which have developed with the implementation by the Georgian side of contractual obligations of material supplies to the Russian military border group "Georgia." The two will also discuss the transportation of alcoholic spirits across the Russian border, which became an every-day reality at the Verkhny Lars and Nizhny Saramag check points.

European Republics

IMF Closes Office In Minsk

· Head of the International Monetary Fund (IMF) representation in Minsk Richard HAAS has been called back to Washington, there by closing the Minsk office, RFE/RL Newsline reported. Following his departure, an IMF representative in Lithuania will assume responsibility for Belarus. The IMF, which

When you need to know it as it happens




April 15, 1998

Intercon's Daily

Colonel-General BORDYUZHA noted that an enlarged meeting of the Federal Border Service (FPS) leadership with the participation of high-ranking officials of the Russian President's staff, the Russian Security Council, several federal ministries and departments and the State Customs Committee will be held in Stavropol today. The agenda of the meeting includes drafting of measures to improve cooperation between all power-wielding structures to ensure stability in border areas, tougher struggle against smuggling, border transgressors and violators of border regime.

Black Sea States Sign Emergency Accord

· Black Sea Economic Cooperation (BSEC) member countries on Wednesday signed an agreement on coordination when rendering emergency aid and overcoming emergency situations of natural and industrial character. The signing ceremony was attended by representatives from eight out of 11 BSEC countries, including heads of departments and divisions on civil defense and emergencies from Armenia, Bulgaria, Georgia, Greece, Moldova, Romania, Ukraine and Russia. The document describes ways of cooperation between the Black Sea region countries when rendering emergency aid and overcoming emergencies of natural and industrial character. Under the agreement, customs and border barriers by civil defense teams and rescue groups will by cut considerably. The agreement contains a provision to establish a joint working group, responsible for implementing principles recorded in the agreement.

Kazakh-Vietnam To Increase Trade

· Vietnam's Deputy Trade Minister HO Huan Nghiem and Kazakhstan's Deputy Minister for Energy, Industry and Trade Murtazaev Murat ARZAEVICH at a meeting in Hanoi Tuesday signed an agreement to cooperate in trade, food processing, industrial construction and housing. Under the agreement, Vietnam and Kazakhstan will map out projects to explore and transport Kazakh gas, which

will be open to international bidding. Meanwhile, the two sides have decided to cooperate in developing traditional medicine and in the exchange of teachers, post graduates and those students studying science and technology.

Turkmen President Meets OSCE Chairman

· Turkmenistan President Sapamurat NIYAZOV and Chairman of the Organization for Security and Cooperation in Europe (OSCE), Polish Foreign Minister Bronislaw GEREMEK on Tuesday met to discuss ways to accelerate the democratic and peacemaking processes in the Central Asian region. GEREMEK is on a tour of Central Asian nations. GEREMEK stated that the tasks of this organization now are directed at forming both the European and global systems of security. he noted the importance for the OSCE of determining a specific role of neutral Turkmenistan whose geopolitical situation may add to the republic a new quality in the formation of a future architecture of European security. During a visit to Turkmenistan, the OSCE chairman met with Turkmen parliamentarians and visited the Institute of democracy and rights of Turkmenistan.

Meanwhile, NIYAZOV signed on Tuesday an enactment on the turning of state enterprises into joint-stock companies and associations. The document proposes the privatization of state enterprises as property complexes, along with their isolated production and non-production structural subdivisions; block parcels of shares of joint-stock companies belonging to the state; uncompleted objects of construction, as well as separate kinds of property of state enterprises in the event of their liquidation. The evaluation of the cost of state enterprises and their sale have been entrusted to the Ministry of Economics and Finance, and the State Agency for foreign investments subordinated directly to President NIYAZOV. New owners will have the right to buy also buildings of objects subject to privatization. After state registration, a privatized enterprise will go out of an administrative subordination to a branch body of state management.

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

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