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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, April 24, 1998

KHARITONOV, who said he voted for the Duma not be to be dissolved added, "We should not act like the first-graders who took their schoolbags and went home because of their resentment against the teacher. It is stupid; we should make decisions at a state level. The conflict will be growing, but we should handle it. We should not come into a frontal clash." However, some analyst wonder at what cost has YELTSIN won the battle for his Prime Minister nominee. Enemies in the Duma, forced to approve KIRIYENKO, most likely will not be keen on approving crucial legislation, such as the new tax code and START II Treaty, without Presidential concessions. Others speculated that KIRIYENKO's approval strengthens the President's resolve to push reforms. MFK Renaissance analyst Roland NASH predicted on Thursday, "If you see a split in the Communist Party voting tomorrow, that could lead to a split in it overall," the Financial Times reported. It appears that the Communist deputies did defy its party's line in order to KIRIYENKO to be approved. It is not clear whether this split will continue. KIRIYENKO must submit a Cabinet for Presidential approval by Tuesday and begin his work to improve the nation's economy and social problems.

Duma Endorses Land Code

· The Russian State Duma on Wednesday endorsed the revised Land Code that had earlier been turned down by President Boris YELTSIN in a vote of 265 to 3 with 2 abstentions. Although deputies passed the Code mentioning that, "the

Russian Federation


Kiriyenko Approved, Presidential Victory?

· In a showdown today between the Communist Party and Russian President Boris YELTSIN, the Russian State Duma approved Sergei KIRIYENKO as Prime Minister, which ended a month long political standoff and avoided dissolution of the Duma. The third vote to confirm the Presidential nominee was conducted through a secret ballot, where deputies were able to break ranks and cross party lines. KIRIYENKO surpassed the needed 226 votes, by winning 251 votes to 25. Polling commissioner Igor BRATISHCHEV announced that 315 deputies had taken voting cards, but only 276 voted out of possible 450 deputies. Grigory YAVLINSKY's Yabloko faction did not participate in the secret ballot as a sign of their united opposition to KIRIYENKO. The Duma approved KIRIYENKO, after rejecting him twice earlier this month, on April 10 and 17th. On March 23, YELTSIN dismissed the entire cabinet, including then Prime Minister Viktor CHERNOMYRDIN, and named KIRIYENKO, Fuel and Energy Minister in the outgoing cabinet, as acting Prime Minister. If KIRIYENKO had been rejected a third time, YELTSIN according to the Russian Constitution would have dissolved the Duma, called elections, appointed a Prime Minister, and ruled by decree. The Communists in the Duma described the 35-year-old KIRIYENKO as too young and inexperienced to solve Russia's massive social and economic problems. Russian President Boris YELTSIN insisted that KIRIYENKO, also a former banker, was the right man for the job and will be able to improve the country's economy.

Many deputies including Nikolai KHARITONOV, leader of the Agrarian group, in order to save their jobs voted reluctantly in favor of KIRIYENKO.

Today's News Highlights


Digitcom Open Moscow Office

European Republics

Baltic Conference Opens

Estonian Bank Mergers

Gazprom Invests in Lith. Gas

South Caucasus & Central Asia

Russia Invests In Georgian Mine

Turkmen-US Presidents Meet

Kazakh-Sino Relations Strong

Tajik Receives $50M WB Loan




April 24, 1998

Intercon's Daily

President's proposals have been taken into consideration," the Duma, however, did not alter the draft resolution on the passage of the Land Code. The Presidential representative in the Duma Alexander KOTENKOV said that YELTSIN's main concern is that the turnover of farmlands had not been taken into account in reworking the Code. "This version of the Land Code keeps the ban on the turnover of farmlands in force," KOTENKOV said. The President insists on allowing to sell and buy land plots, with the exception of agricultural land. He added if the Code is passed, "with this wording, the President may return it to the house without considering it."


Ruble = 6,130/$1.00 (NY rate)

Ruble = 6,131/$1.00 (CB rate)

Ruble = 6,113|6,149/$1.00 (buy|sell rates)

Nov Dec Jan Feb Mar Apr

Russia Floats 500 Billion Lira Eurobond

· The Russian government issued a five year 500 billion lira ($280 million) Eurobond with annual interest rate at 9 percent on Tuesday. Russian Deputy Finance Minister Mikhail KASYANOV said the Eurobonds will be sold at 98.71 percent of their face value. Finance Ministry officials failed to comment on the reduction of volume from 750 billion lira to 500 billion lira. Russia's previous foreign loan, denominated in Deutsche Marks, was issued on March 24, 1998 for a seven year period. The value of the issue was then 1.25 billion Marks ($688 million).

Inflation For April Predicted To Be

· According to a forecast of the State Statistics Committee, inflation in April will average 0.4 percent.

An official statistical report released on Wednesday said that consumer prices in the first 20 days of April grew by 0.3 percent. The weekly price increase rate was 0.1 percent. The average daily price growth rate in April fell to 0.014 percent compared to 0.021 percent in March when inflation was 0.6 percent.


Digitcom Opens Moscow Office

· Digitcom Corp. simultaneously announced Thursday the opening of offices in Moscow and the company's move to new headquarters in Santa Monica. Digitcom's new presence in Moscow represents the significant commitment the company has made to provide the Russia with Internet-enhanced long distance telecommunications services. The office will support Digitcom's continuing relationships with telecom partners that are using the company's Internet voice compression and international long distance technology in Russia's various regions. TLA/DLD Corp., Digitcom's wholly-owned subsidiary is led by Tatiana KOSYRKINA. Digitcom is a leader in Internet voice communications technology and is deploying its Internet-based telephony products using the company's IntraVoice gateway and voice compression technology, working with regional and national telephone companies in Europe and on the Pacific Rim to establish international long distance networks.

Warner Brothers Help Reconstruct Theaters

· Movie and entertainment company Warner Brothers will take part in the restructuring of movie theaters in Moscow. This understanding was reached today between Moscow Mayor Yuri LUZHKOV and Warner Brothers' executives. The Russian capital has around 100 outdated movie theaters. Warner Brothers plans to build 10 modern multi-complexes, cinemas with several auditoriums, outfitted with latest stereo equipment. LUZHKOV backed the initiative and proposed 20 sites in the capital for the construction of such cinemas.

New Fighter Jet To Boost Arms Exports

· Russia's arms exporter Rosvooruzheniye on Wednesday said a new fighter jet, MiG- 29SMT, will boost the export potential of Russian warplanes. The updated jet completed test flights at a military aerodrome outside Moscow. Rosvooruzheniye's general manager Yevgeny ANANYEV said, "The MiG-

When you need to know it as it happens




April 24, 1998

Intercon's Daily

29SMT boasts all that is new in the field of fighter construction." ANANYEV dismissed rumors about a controversy allegedly marring relations between Rosvooruzheniye and Russian defense industries exporting arms. He said "certain discrepancies" over the place of arms exporters in the trade infrastructure had been overcome. In his words, Rosvooruzheniye defines the general marketing strategy and ensures the state monopoly over arms exports, preventing economic, political or military damage individual exporters might inflict by their advances to the external market. ANANYEV said the defense industries help Rosvooruzheniye to hold an aggressive position on the market.

management Aadu OJA said that, "Although they have said they will continue consultations, we regard both banks as single entities from now on." The merger would have created a financial institution worth $1.4 billion. Reuters reports that doubts overshadowed the merger as the local media reported Hoiupank was not happy with a proposed 63/37 split in Hansa's favor.

Gazprom May Invest In Lithuanian Gas

· Lithuanian Economics Minister Vincas BABILIUS today said that next week he will hold talks with Russia's Gazprom to discuss investment in Lithuanian Gas. The 90 percent state-owned company with share capital of 372 million litas, is in negotiations with several investors for a 66 million litas share issue equal to 5 percent of the utility. BABILIUS said, "It some 15 or 16 percent of [Lithuanian Gas] shares were sold to Gazprom, and the money was directed to develop and modernize the pipeline, that would be a mutually beneficial deal." Lithuanian Gas has already completed talks with Gaz de France, Lithuanian-Russian venture Stella Vitae, and a consortium of Germany's Ruhrgas and Preussen Elektra.

South Caucasus & Central Asia

Russia Invests in Chiatura Manganese Mine

· The Association of Industry, a Yekaterinburg-based joint-stock company, has paid $1 million for a 75 percent stake in the Chiatura manganese mine. Once one of the country's major industrial enterprises, the mine has been idle for the past two years. Meeting with Georgian President Eduard SHEVARDNADZE on Wednesday, Association of Industry President Aleksandr VYATKIN said his company will pay off the mine's estimated $60 million debt, fund reconstruction of the Chiatura municipal infrastructure, and create some 2,500 new jobs, RFE/RL Newsline reported.

Turkmen-US President Meet In White House

· Turkmenistan President Saparmurat Niyazov and US President Bill CLINTON held talks in the White House Thursday on oil and gas transport, regional security and democratic reforms, specifically human rights guarantees. The Presidents signed an agreement on the feasibility study of a trans-Caspian pipeline following their talks. The US Trade and Development Agency granted $750,000 for the study which will evaluate the construction of a new

European Republics

Baltic Conference Begins In Lithuania

· A one-day international conference on cooperation among the Baltic states opened today in the Lithuanian parliament building. The conference, titled Baltic States: Cooperation and Search for New Perspectives, is sponsored by the Baltic Assembly. Taking part in the conference are lawmakers, diplomats, scholars, and defense officers from Lithuania, Latvia and Estonia. They will deliver reports on how to develop cooperation among the Baltic states in the political, economic, military and law spheres as these former Soviet republics integrate into NATO and the European Union. Relations between these states and Russia will also be discussed. Lithuanian President Valdas ADAMKUS addressed the participants saying it was necessary, "to relax the atmosphere of suspicion" with respect to the adoption of Lithuania, Latvia and Estonia to Atlantic and European organizations. ADAMKUS called upon Baltic politicians to view, "any success of one Baltic state as a victory of all the three Baltic states."

Estonian Bank Merger

· Estonia's largest bank the Union Bank and the nation's fourth largest the Bank of Tallinn signed a formal merger agreement on Wednesday. The merger creates the largest financial institution in the Baltic States. It will have assets totaling nearly 16 billion kroons ($1.06 billion). The Union Bank will have a 80.3 percent stake in the new institution and the Bank of Tallinn 19.7 percent.

Meanwhile, Hansapank and Hoiupank Banks have postponed merger talks. Head of Hansa Investment

When you need to know it as it happens




April 24, 1998

Intercon's Daily

East-West pipeline to transport gas across Turkmenistan under the Caspian Sea, through Azerbaijan and Georgia and into Turkey. The pipeline construction under the Caspian Sea is estimated to cost approximately $2.8 billion. American officials clearly maintain that the purpose of the project "for obvious reasons" is to avoid transporting Turkmen gas across the territory of Iran. Vice President Al GORE stated that the pipeline will give Turkmen more export opportunities, diversify the world energy resources, and contribute to the security, prosperity, and independence of the countries of Central Asia and the Caucasian region. The US has been seeking to urge political reforms, while trying to direct Turkmenistan's development towards the West and away form Iran. NIYAZOV gave no hints on the final pipeline route, but said it would, "require unprecedented regional co-operation, contribute to creation of a great number of jobs and become a powerful catalyst to rational ending of conflicts, such as the intra-Afghan conflict," according to the Financial Times. The two countries also signed several other documents for cooperation in energy, science and technology, agriculture, and security relations. "Given Turkmenistan's significant position in the region, and given its historical associations with the government of Russia, we have a keen interest in the role that they play with respect to regional economic security," White House spokesman MCCURRY said.

On the eve of the White House talks, NIYAZOV released six dissidents held nearly three years for protesting his regime. State Department officials said the release left only one member of the Ashgabat 8, arrested in a July 1995 anti-government protest, in prison. NIYAZOV insists that there are no opposition parties in Turkmenistan. NIYAZOV also signed an agreement for a technical exploration study with Exxon Corp., a production-sharing deal with Mobil Corp. and Monument oil, and an oilfield service contract with Halliburton Co.

Turkmen-Ex-Im Bank Sign Agreement

· Turkmenistan's President Saparmurat NIYAZOV

Wednesday signed an agreement to facilitate the expansion of the Ex-Im Bank programs to help finance export of American goods and services to Turkmenistan. The Ex-Im Bank can provide short-and medium-term support under its insurance, loan and guarantee programs, if the loans are back by repayment guarantees from the Turkmen government. In the agreement, however, the two sides pledged to continue efforts to enable Ex-Im Bank to support exports to private-sector entities without a guarantee from the Turkmen government. US exports are interested in developing the east-west routes in the Eurasian transport corridor. To date, the Ex-Im Bank has financed $424 million in transactions for US exports in Turkmenistan. In May, Ex-Im Bank Chairman James HARMON will visit Turkmenistan and other countries in Asia.

Nazarbayev Praises China's Cooperation

· Kazakh President NAZARBAYEV Wednesday in Akmola expressed Kazakhstan hopes to broaden cooperation with China on trade, energy and communications and bring the robust bilateral ties into the 21st century to Chinese Vice Foreign Minister ZHANG Deguang. He said valued his friendship with Chinese President JIANG Zemin and spoke highly of the efforts Chinese leaders have made in developing the good-neighborly relations. NAZARBAYEV said regular contact between their leaders is important in pushing forward the bilateral ties. He proposed a summer summit with Kazakhstan, China, Russia, Kyrgyzstan and Tajikistan participation as an effort to strengthen ties between the five countries.

Tajik To Receive World Bank $50M Loan

· The World Bank announced it will provide Tajikistan with a $50 million loan for telecommunications, roads and public transportation, health care, and education. The first installment, $20 million, is expected to be granted in the third quarter of 1998. The release of the remainder will depend on how successful the first installment is used. In 1998, Tajikistan will have received $70 million in loans to finance anti-poverty programs.

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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When you need to know it as it happens