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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, April 16, 1998

committee recommends that the house pass the government's version as the most elaborated and appropriate for the current economic situation in the country, which will be introduced by Deputy Finance Minister Mikhail MOTORIN. The discussion is to result in a "soft" rating vote on all the versions of the tax code. The top two versions receiving the most votes will be taken as a basis for further discussion. The Duma will put those versions to a "tough" vote which will determine the document to be put to the vote in first reading. When answering Duma members' questions on April 10th, acting Prime Minister Sergei KIRIYENKO warned that, "If the 1999 budget is formed within the framework of the old taxation system, we'll lose a year and a half more. It is inadmissible." He challenged both houses of parliament to endorse a new tax code no later than September.

Duma Supports Students' Demands

· The Russian State Duma expressed unequivocal support for students in the city of Yekaterinburg, who protested Tuesday over the late payment of student stipends. In a statement approved today, the Duma denounced the crude violence used against a peaceful student demonstration. Duma deputies invited Interior Minister Sergei STEPASHIN to their meeting and demanded the that the head of the regional police department of the Sverdlovsk Region should be relieved of his duties until the investigation is completed. The Duma decided to urge the Russian President to use his powers to protect constitutional rights of students

Russian Federation


Yeltsin Reprimands Berezovsky Privately

· Russian President Boris YELTSIN privately reprimanded Russian business tycoon and self-appointed Presidential advisor Boris BEREZOVSKY behind closed doors at an awards ceremony in the Kremlin on Monday in a move which further separates YELTSIN from crony capitalism and divides the government from business. Infuriated by BEREZOVSKY's claims that he advised the President to dismiss Viktor CHERNOMYRDIN and the entire government and by BEREZOVSKY's meddling in the formation of the new government behind the scenes, YELTSIN threatened to, "drive him out of the country." BEREZOVSKY appears to have launched a campaign against acting Prime Minister Sergei KIRIYENKO and the President through his newspaper Nazaisimaya Gazeta. The newspaper reported that, "The economy and finances of the country are paralyzed because of the lack of a cabinet of ministers," which diminishes the hopes of economic recovery. BEREZOVSKY prefers to have deputy prime minister on Commonwealth of Independent States (CIS) Affairs and former parliamentary speaker Ivan RYBKIN installed as Prime Minister. He and RYBKIN developed a close relationship while serving on the Security Council. Although BEREZOVSKY's only link to power is his relationship with YELTSIN, the fact that the President expressed his disapproval privately, reveals that BEREZOVSKY's influence is still a factor within the Kremlin and in YELTSIN's personal life.

Duma Considers New Tax Code

· The Russian State Duma will meet today to discuss a draft tax code in first reading. Nine alternative versions of the long-awaited document are to be introduced by their authors. The Duma's budget

Today's News Highlights


Tax Breaks For Foreign Auto Co

European Republics

Belarus To Revise Currency Law

AvtoZAZ-Daewoo JV Registered

Latvia To Change Citizenship

South Caucasus & Central Asia

Georgian Foreign Min. In China

Belgium To Invest In Kazakhstan

US-Uzbek JV Gold Out Rises

Turkey-Uzebk Sign Agreements




April 16, 1998

Intercon's Daily

to free education and to punish those guilty of violence against them. In the opinion of Duma members, "the use of violence against peaceful demonstrations of young people will lead not to the triumph of fear, as its organizers hoped, but to a sharp growth in political tension in the country."

Russia- Bulgaria To Discuss Gas Deal

· Russia and Bulgaria have agreed to meet on April 21st in Sofia to begin the final round of bilateral talks on deliveries of Russian gas to Bulgaria and its transit to third countries, specifically to set conditions of two long-term contracts. Press service head of the Gazexport Olga AFANASYEVA announced the meeting's date following the closing of bilateral negotiations in Moscow on Wednesday. She noted that successful completion of negotiations will enable Moscow and Sofia to sign contracts by the end of April. According to preliminary data, the signing ceremony will be attended by head of the Gazprom company Rem VYAKHIREV. Russian gas deliveries will be brought to 18.7 billion cubic meters by the year 2010. In 1998, the sides already signed contracts on the delivery of Russian gas to Bulgaria to the amount of 3.1 billion cubic meters. Apart from this, additional volumes will be delivered to pay for the transit of Russian gas across the Bulgarian territory. Gazprom intends to deliver another 1.5 billion cubic meters to the Bulgarian market through the joint Russian-Bulgarian joint stock company Topenergy. The volume of transit of Russian gas across the Bulgarian territory will total 9.5 billion cubic meters this year.


Ruble = 6,109/$1.00 (NY rate)

Ruble = 6,128/$1.00 (CB rate)

Ruble =6,110|6,146/$1.00 (buy|sell rates)

Palladium Price Teeters On Russian Politics

· Palladium reached another all time high record of $351.50 a troy ounce, before falling due to rumors that Russia may soon begin exporting the metal for the first time this year. Before the news that acting Prime Minister Sergei KIRIYENKO had signed a government order defining the export quotas for platinum and palladium on Wednesday, many believed Russia was doomed to repeat last years delay of six months because of bureaucratic bungling. KIRIYENKO commented that, "all necessary decisions," had been made to allow exports to begin, but

he did not comment on the timing or volume of the exports. Confusion and controversy still surround the exports. Russia's sole platinum and palladium exporter, Almazjuvelirexport's director Sergei GORNY dimly said, "I do not exclude the possibility of bureaucratic delays. One London Trader pointed out that although KIRIYENKO had agreed to exports, "he can't sign anything until he is Prime Minister so the price could spike again if another vote [to confirm] goes against him," the Financial Times reported.

Inflation Prediction for April

· The State Statistics Committee announced today that Russia's inflation rate in April is predicted to reach 0.4 percent. The Committee's report said consumer prices in the first 13 days of April had grown 0.2 percent, which included a 0.1 percent growth in the period from April 6 to April 13. Daily price growth fell to 0.012 percent from 0.021 percent in March when the inflation ran at 0.6 percent.


Tax Breaks Offered to Foreign Auto Investors

· The Russian government today approved a program to attract foreign investments in the domestic auto industry. Under the program, foreign companies are allowed to import parts, equipment, and finished vehicles duty-free for a limited period, provided they invest a total of $250 million in Russia over five years. A minimum investment of $25 million is required. Investors would sign agreements with the government giving the company tariff exemptions for up to five years, if they pledge to integrate local parts into their product by up to 50 percent during that period. Import duties on foreign made cars has made them out of reach of an average Russian's income. At a cabinet meeting, officials reported that Russia's domestic auto industry is 10 to 12 years behind its foreign competitors and need 10 to 12 billion rubles in investment per year. Acting Prime Minister Sergei KIRIYENKO ordered the new plan to include measures to limit auto imports from former Soviet Republics, where huge tax breaks reduce production costs.

Russian President Boris YELTSIN has signed a law limiting imports which are deemed to harm the Russian economy. The law stated that imports are considered harmful if their, "amount or their conditions inflict damage on any sector of the Russian economy," The Journal of Commerce reported. The

When you need to know it as it happens




April 16, 1998

Intercon's Daily

law establishes a special federal body to monitor foreign trade and investigate violations.

Slavneft, Surgutneft, LUKoil and Yukos arrived in Minsk on today to meet the country's leader Alexander LUKASHENKO. During the meeting, the oil bosses and the Belarus President plan to discuss prospects for cooperation between Belarus and Russian oil companies and issues related to the payments for oil product supplies to Belarus. Belkhimnefteprom oil company president Ivan BAMBIZA thanked the Russian partners for meeting their commitments in oil product supplies to Belarus. Speaking of the proposed meeting, BAMBIZA said it should sum up the results of last year's cooperation.

Latvia Considers Citizenship Amendments

· The Latvian Parliament is considering amending the Latvian Citizenship law, under which a third of Latvia's population, 700,000 mostly ethnic Russians, are stateless. Although some changes are expected to be made next week, the requirement of command of the Latvian language will remain. Many Russians resent the requirement since Latvian isn't related to Russian, it is full of unfamiliar words and has difficult consonant sounds. According to the Latvian Development Agency, 95 percent of the working population knows Russian but only 80 percent can communicate in Latvian. Local observers say the language requirement is likely to stay because it is a uniting force and a key part of their identity. Proposed amendments stipulate that children born in Latvia since independence on August 21, 1991 may claim citizenship at the age of 16 and after passing an exam on Latvian language. The ruling factions agree that people older than 65 need not take the written exam to prove their knowledge of the Latvian language. But with the openings for people of various age brackets under the law they will still have to wait for the new century to receive citizenship. The Saimnieks Democratic Party insisted on eliminating these ratios, but other parties disagree. The reduction in the number of noncitizens and the change of the attitude towards ethnic minorities is one of the main conditions for Latvia's admission to the European Union.

Russian Foreign Ministry spokesman Valery NESTERUSHKIN said today that possible changes were undoubtedly a, "step in the right direction." He expressed that the government would like the amendments realized, despite infighting in the Latvian parliament. The diplomat believes that before speak

European Republics

Belarus To Loosen Currency Rules

· Head of the Central Bank of Belarus Pyotr PROKOPOVYCH on Wednesday said that Belarus plans to relax laws which demand citizens declare deposits of convertible currencies. He said that a draft decree to this affect is ready to be presented to President Alexander LUKASHENKO. PROKOPOVYCH explained that, "The draft decree removes all requirements to declare sources of money held in banks. Full confidentiality of all deposits will be guaranteed." Citizens that deposit convertible currency will be able to withdraw it and have it returned in that same currency. The Economics Ministry estimates that Belarus citizens have about $2 billion in savings, but only 5 percent of that is held in bank accounts. Belarus also plans to remove the requirement that citizens declare the sources of money used to buy apartments or build homes.

AvtoZAZ-Daewoo JV Formally Registered

· Ukraine's AvtoZAZ chairman Alexander SOTNYKOV announced that AvtoZAZ and South Korean Daewoo Corporation have formally registered their joint venture to produce cars. Daewoo has pledged to invest $1.3 billion over the next seven years in the project to produce Ukrainian and South Korean model cars at the AvtoZAZ plant in Zaporizhya. In turn, the Ukrainian parliament promised special privileges including, abolishing import taxes on space parts, and 10 year break on profits and tax-free land status to any vehicle manufacture willing to work in Ukraine. The European Union was angered by these actions along with a ban on imports of foreign made vehicles more than five years old and a $5,000 minimum custom duty on used vehicle imports. The joint venture's $300 million authorized capital was formed from equal investments by the two companies. US General Motors (GM) may invest up to $120 million in the AvtoZAZ-Daewoo venture to produce 60,000 Opel cars. The Joint venture plans to produce 80,000 modernized Ukrainian Tavria cars, 150,000 of Daewoo's models, and 25,000 GM cars.

Lukashenko Meets Russia's Oil Tycoons

· The heads of Russia's major oil companies,

When you need to know it as it happens




April 16, 1998

Intercon's Daily

ing about real significance of the amendments, specialists in humanitarian issues should analyze how really it will change the situation.

South Caucasus & Central Asia

Georgian Foreign Minister in China

· Georgian Foreign Minister Irakly MENAGARICHVILI and his Chinese counterpart TANG Jiaxuan met in Beijing to discuss the development of the bilateral relations between the two countries. TANG said that China and Georgia have similar if not identical views on all key international issues. TANG praised the Georgian government's adherence to "One China" policy and for its steadfastness in refusing to establish official contacts with Taiwan authorities. The Chinese government fully respects Georgia's independence, sovereignty and territorial integrity, according to TANG. MENAGARICHVILI said the Georgian government plans to open an embassy in China as part of an effort to expand cooperation between the two countries. After the meeting, the two nations exchanged ratification documents covering counsellor treaties. MENAGARICHVILI also met with Prime Minister ZHU Rongji.

Belgium To Invest $1 Billion in Kazakhstan

· Kazakh President Nursultan NAZARBAYEV and Belgian Prime Minister Jean-Luc DEHAENE after formal meetings in Almaty on Wednesday agreed that there was a bright future for the two countries to develop bilateral cooperation and cooperate in the international arena. NAZARBAYEV said that Belgium was one of his country's key European cooperation partners and that Kazakhstan hopes to strengthen its ties with the North Atlantic Treaty Organization (NATO) and Europe. Since the establishment of the diplomatic ties between Kazakhstan and Belgium in August 1992, the two countries have seen frequent exchanges of high-level visits and the development of bilateral economic cooperation. The trade volume between the two countries totaled $38.6 million in 1996 and increased to $53.4 million

in 1997. Belgium has set up 22 joint ventures and four solely-owned enterprises in Kazakhstan. DEHAENE said that his nation intends to bring its investments in Kazakhstan to $1 billion in the next five years. The construction of a gas processing plant in Aktyubinsk is the most ambitious project to be carried out by the two countries in the future. Its cost has been estimated at $400 million. Belgium will also finance the construction of a plant to make lead-zinc batteries and a facility to process gold-containing waste from the mining and ore-dressing industry. DEHAENE stressed the importance of guarantees for Belgian capital in Kazakhstan. He called on the parliament to pass relevant laws.

US-Uzbekistan JV Increased Gold Output

· A joint venture between US Newmont Mining Corp., Uzbekistan government, and Uzbek Navoiy Mettalurgical Plant (NGMK) produced 13.4 tons of gold in 1997, compared to 10.2 tons in 1996. Zarafshan-Newmont, the first gold joint venture in Uzbekistan, enriches gold from NGMK's ore slug. The Muruntau deposit is the world' largest deposit in terms of output. NGMK produces about 90 percent of Uzbek gold. It's output is a state secret, but the government estimates Uzbekistan's gold reserves total 5,000 tons, Reuters reported.

Turkey-Uzbekistan To Sign Four Agreements

· Turkish Prime Minister Mesut YILMAZ arrived in Uzbekistan on Sunday for a three day official visit accompanied by a large business delegation. More than 30 Turkish companies and over 200 Uzbek-Turkish ventures are operating in Uzbekistan. Trade between the two states totaled about $400 million in 1997. Uzbekistan and Turkey have over 40 accords on trade and cooperation in health, transport, communications, sport and travel fields and in fighting terrorism and drug-trafficking. YILMAZ and Uzbekistan President Islam KARIMOV on Monday signed three governmental agreements on bilateral cooperation in economy and trade. YILMAZ also met with parliament speaker Erkin KHALILOV.

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

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When you need to know it as it happens