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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, April 3, 1998

jointly with producers of heavy electrical engineering equipment to supply Russia with power generating complexes of high thermal efficiency. The company plans in cooperation with the Japanese government to participate in implementing similar joint projects in Russia. The Japanese-Russian cooperation in energy is part of the YELTSIN-HASHIMOTO plan adopted by the leaders of the two countries during their first informal meeting in Krasnoyarsk in the autumn in last year. Another meeting in Japan is scheduled for April 18-19th.

OPEC Discusses Oil With Russia, April 11th

· Russia's acting First Vice-Premier Boris NEMTSOV on Wednesday said that the OPEC officials led by OPEC Secretary-General Rilwani LUKMAN are expected to visit Moscow on April 11th for talks on petroleum prices on the world market. NEMTSOV noted that Russia intended to hold consultations with petroleum exporting countries, both the OPEC member countries and non-member countries. Russia, one of the world's largest oil exporters, has been hard-hit by falling prices. Western economists estimate Russia still relies on oil exports for a considerable portion of state revenues. Crude oil and oil products account for more than 60 percent of Russia's total exports. Last week, Russia decided to cut a transportation tax it was charging oil companies for using state-owned pipelines. The move will cost Russia billions in lost revenues, but Russian oil companies said they would be driven into loss if the cut wasn't made. The government has resisted giving

Russian Federation


Yeltsin Urges Russians To Pay Income Taxes

· President Boris YELTSIN in his regular radio address urged Russian citizens to pay taxes, saying payment of taxes is a person's moral duty to his country. In Russia, income taxes account for 6 percent of the entire amount of tax revenue to the treasury, as against 80 percent in the other developed countries, he pointed out. "Tax evasion destroys the budget. And therefore it is a serious crime." The President said that many have paid their taxes voluntarily, "It means they have become law-abiding tax payers. And when a majority becomes such, Russia will be a truly civilized state." The president said that those who are wealthy or have achieved successes in life should share with those who are old, poor or cannot provide for themselves. YELTSIN said that more and more people pay taxes in good faith in Russia, whose number is expected to exceed five million this year, three times more than that in 1995. He also emphasized that the government is reforming the tax code, "to gradually ease the tax burden," on citizens. YELTSIN added that, "there will, of course, remain those who are discontent. There are such people in any country. But discontent is not a pretext not to pay taxes."

Russia-Japan Power Project

· The Japanese trading company Mitsui Bussan announced on Monday that it will take part in the implementation of a large project of the construction of thermal power stations in Russia. According to preliminary estimates, about $3 billion will be spent on the construction of five thermal power stations with a yield of from 240 to 1,100 thousand kilowatts in the Nizhny Novgorod and Sakhalin region. Mitsui Bussan will finance the project and supply modern equipment for the thermal power stations. It plans

Today's News Highlights


Iranian Oil Minister In Moscow

Rus-Swiss Defense Mins. Meet

United Energy's CEO Resigns

European Republics

Belarus Nationals Protest Union

Latvian Economics Min. Fired

Kuchma's new Cabinet

South Caucasus & Central Asia

Cameco-Kyrgyz Mine Profits

IMF Grants $10M To Tajikistan




April 3, 1998

Intercon's Daily

the oil companies a tax break, and hopes a concerted effort with OPEC nations will cut world market supplies and drive oil prices to last year's levels.

Iranian Oil Minister Visits Moscow

· Iranian Oil Minister Bijan Namdar ZANGANEH is expected to meet with Russian acting First Deputy Prime Minister Boris NEMTSOV and acting Minister of Fuel and Energy Viktor OTT on Saturday to discuss the situation on world oil markets in view of falling prices for oil, according to the Russian Fuel and Energy Ministry. The Ministry has already drafted a number of measures to overcome the negative tendencies following a sharp drop in prices for oil on world markets. The Ministry, however, has not yet been decided whether these measures will be touched upon during the meeting with the Iranian Minister. The Russian Deputy Minister of Fuel and Energy Yelena TELEGINA today stated that Russia is not going to decrease oil extraction to combat the slump in oil prices. The two sides are likely to raise the issue of broadening Russian companies' participation in the development of oil fields in Iran. Zarubezhneft and Gazprom already have projects in Iran.

Rus-Swiss Defense Ministers Sign Accord

· Russia's Acting Defense Minister Igor SERGEYEV and Switzerland's Defense Minister Adolf OGI on Thursday signed a plan of action to boost their cooperation in 1998-1999. SERGEYEV said after the signing ceremony Russian-Swiss military cooperation, "can have very good prospects" and Swiss army reform experience can prove very helpful. The two ministers also discussed European security. OGI said the Organization for Security and Cooperation in Europe should become "the fundamental" of the European security system, and the United States and Canada should enjoy equal opportunities of building its architecture. At the same time, he stressed Russia's central role in European security. The signed action plan provides for exchanges of military delegations and consultations on a broad range of matters between the nations. OGI will visit the Taman Division, address the officer cadets at the Academy of the General Staff of the Russian Armed Forces, tour St.Petersburg and meet the Command of the Leningrad Military District.

Rus-Belarus Celebrate Union's Anniversary

· Russia and Belarus Thursday celebrated the anniversary of the signing of the Russia-Belarus

Union Treaty with two high level bilateral talks in Moscow and Minsk. Russian Foreign Minister Yevgeny PRIMAKOV and his Belarus counterpart Ivan ANTONOVICH in Moscow agreed that Russian-Belarus relations had improved considerably and that the integration process within the framework of the Russia-Belarus Union was developing dynamically, the Russian Foreign Ministry said in a press release. The two ministers, "coordinated positions on key international issues and similar approaches to integration processes within the CIS [Commonwealth of Independent States]," the statement said. According to the Russian foreign minister, Russian-Belarus relations are bound to promote integration among the CIS member states. ANTONOVICH said he shared PRIMAKOV's assessment of the Russian-Belarus relations. "Certainly, the current processes within the CIS are complicated and require greater attention, and such sub-regional associations prove the fact that the CIS member states are searching for better variants of further development and, no doubt, all the CIS member states and CIS institutions are set to improve the Commonwealth," ANTONOVICH said.

Acting Russian vice-premier for the affairs of the CIS Ivan RYBKIN met with Belarus President Alexander LUKASHENKO and republican Prime Minister Sergei LING in Minsk. RYBKIN noted that they held, "very constructive and substantive talks with the leadership of the Belarus on a broad range of issues." Among questions under discussion, the sides dealt with aspects of monetary, financial and customs activities, transportation of gas and oil, as well as electricity between the two countries. The sides held a detailed conversation on prospects for Russian-Belarus cooperation, including development of interaction between the Belarus as well as republics, territories and regions of the Russian Federation. Belarus and Russia agreed to set up a joint working group to study the situation in the financial and currency field in Belarus, involving representatives of the Russian and Belarus government and the national banks of the two countries. RYBKIN said the Belarus National Bank made a mistake by withdrawing from trading on the Moscow Interbank Currency Exchange in February. He believes experts of the two countries should analyze all he details of the Belarus ruble's fall and work out recommendations to be considered by both governments. "We should listen to each other, especially to

When you need to know it as it happens




April 3, 1998

Intercon's Daily

what specialists say," RYBKIN said, adding that, "executives should interact as closely as the governments and the presidents do." He also said that Belarus National Bank board chairman Pyotr PROKOPOVICH met Russian Central Bank Chairman Sergei DUBININ in the evening.


Ruble = 5,881/$1.00 (NY rate)

Ruble = 6,114/$1.00 (CB rate)

Ruble = 6,098|6,130/$1.00 (buy|sell rates)

Oct Nov Dec Jan Feb Mar Apr

Rus-Finland Commit To Increase Trade

· At a three day exhibit titled Trade of Russia and European Union in Imatra, Finland 170 companies, 40 of them Russian, committed to increasing bilateral trade. The exhibit aims to emphasize Finland's role as the only country of the European Union having a common border with Russia. The exhibition's director Leo POTKONEN said that, "We have chosen Imatra for the first such exhibition for the reason that this is the closest city to Russia with excellent exhibition facilities. It is situated at a distance of only seven kilometers from the border and has convenient communications with St.Petersburg and Russia's North-West." Many participants in the exhibition succeeded in establishing ties that will promote the growth of trade. Sergei ALEXEYEV, director general of Lenexpo joint-stock company, participating in the exhibition, expressed the hope that such functions on the border, building bridges between Russia and the European Union, will attract firms not only from Russia's Northwest but also from other Russian regions.


United Energy Systems' CEO Resigns

· The chief executive officer of Russia's national electric monopoly Unified Energy Systems (UES), Boris BREVNOV's resignation was accepted today by the board of directors. BREVNOV said his decision would defuse a political row over the leadership of one of Russia's biggest companies. His resignation is on the eve of a vote on the company's new board of directors scheduled for Saturday. The meeting will be opened by current chairman of the board of directors Anatoly DYAKOV, who will then delegate the authority of conducting the meeting to acting Federal Minister Yevgeny YASIN. BREVNOV still holds a chance of been elected to the new board of directors if he polls the required number of votes. Outgoing First Deputy Prime Minister Anatoly CHUBAIS also remains on the voting list, but state representatives refuse to back him since CHUBAIS is no longer a public official. The state currently holds 52.7 percent interest in UES, but it has announced plans to reduce that to 50 percent plus one share. Following the elections for board of directors, the new board will nominate candidates to replace BREVNOV. It is believed that the government will nominate deputy chief executive Oleg BRITVIN to replace BREVNOV and deputy fuel and energy Minister Viktor KUDRYAVY to replace DYAKOV as chairman. The new executive is subject to approval by the Cabinet. BREVNOV said he would remain in the energy sector and was previously nominated to chair the board of leading regional utility Mosenergo.

European Republics

Belarus Nationals Protest Union Holiday

· An estimated 700 supporters of the nationalist Belarus Popular Front (BPF) Thursday staged an unauthorized protest in Minsk. About ten supporters of the were beaten and detained by police after they tore up and burnt a Russian flag, protesting against the celebration of the anniversary of the Russian-Belarus Union. The Union established closer economic, political, and military ties, but stopped short of a full merger. A BPF leader Yuri KHADYKO said the Union was set up without the participation of the Belarus people and caused, "nothing but harm." Another activist Vyachevslav SIVCHIK said. "It is an artificial holiday, dedicated to an artificial Union. We

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April 3, 1998

Intercon's Daily

recognize neither this Union, which does not meet our national interests, not this holiday."

Latvian Economic Minister Fired

· Latvian Prime Minister Guntar KRAST today said that he has decided to fire Economic Minister Atis SAUSNITIS for exaggerating fears of sanctions by Russia and for slow progress on privatization plans. Although no sanctions have been officially declares, SAUSNITIS said earlier this week that they had effectively begun, as $300 million worth of goods are being held by Russian customs. KRAST accused SAUSNITIS of failing to move ahead the sale of the key state energy company Latvenergo. In addition to these two points, the Latvian bourse slid behind the other Baltic stock exchanges this week. Latvia's index closed at 569.3 on Thursday verses 652.41 the week before, seeing its two largest single-day losses this year on Tuesday and Wednesday amid near panic selling.

Kuchma Describes New Cabinet

· Ukrainian President Leonid KUCHMA said Tuesday that key figures in the cabinet would remain, although some less important posts might be changed. KUCHMA said what Ukraine needs is not changes but stability. KUCHMA's opponents called for replacement of the current government led by Prime Minister Valery PUSTOVOITENKO, shortly after preliminary results suggested their apparent victory in Sunday's parliament elections. The Communist Party won 25 percent of the votes, according to initial results. Foreign Minister Gennady UDOVENKO will turn in his resignation because he has been elected as a deputy of the Ukrainian parliament representing the Rukh party. The Ukrainian law does not permit holding simultaneously posts in the executive and legislative authorities. Many speculate that he will be the next deputy parliamentary speaker. UDOVENKO will continue in the capacity of chairman of the UN General Assembly until early September. Ukraine's Ambassador to Benelux and chief of the Ukrainian mission at NATO Boris TARASYUK is expected to replace UDOVENKO as foreign minister.

South Caucasus & Central Asia

Canadian-Kyrgyz Gold Mine Profits

· Canadian partner Cameco Corp. announced that operations at the Canadian-Kyrgyz Kumtor gold mine, the largest enterprise in Kyrgyzstan produced a profit of $18.9 million in 1997. The joint venture had total revenues of $175.6 million, which yielded $18.9 million in profit. The $450 million project produced 15.6 tons of gold in 1997, exceeding an earlier estimate of 12.8 tons. The company's target for 1998 is 17.4 tons of gold. The Kyrgyz government owns two-thirds of Kumtor and the remaining third is owned by Cameco, which is the world's biggest private sector producer of uranium. MICHEL complained about the slow progress of a government committee formed to study the joint venture at a cost to Cameco of $100,000. In a meeting with Kyrgyz President Askar AKAYEV, Cameco President said the government review, "has cost us a great deal of time and money. It will not bring Kyrgyzstan anything positive and will not facilitate the attraction of new investment," Reuters reported.

Tajik Receives $10 Million IMF Credit

· The International Monetary Fund (IMF) on Wednesday approved a $10 million loan to Tajikistan to overcome consequences of the armed conflict. The credit is part of an ongoing effort to strengthen macro-economics discipline, step up structural reforms, and efforts to ensure rescheduling of Tajikistan's debts to foreign creditors. The IMF said, "Tajikistan's economic program will continue to be challenged by ongoing political uncertainties, the high level of external debt and limited foreign exchange reserves." It also noted that the Tajik economy positively reacts to efforts for its stabilization, which is seen by declining inflation rates and increasing confidence in the Tajik national currency. In 1997, the growth of real gross domestic product was achieved in Tajikistan for the first time since independence. Under the program Tajikistan is expected to post 4.4 percent inflation-adjusted growth for 1998, an increase from 2.2 percent in 1997.

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

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