DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 903,

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, April 6, 1998

Press Service, all the leaders of the parliamentary factions and groups are expected to take the floor, as well as some members of the Federation Council and representatives from the Russian government. Acting Prime Minister Sergei KIRIYENKO will also give a speech. President YELTSIN intends to make a final statement, summing up the results of the deliberations. According to the Presidential Press Service, twenty-three people will take part in the work of the meeting. The Russian State Duma will debate KIRIYENKO's nomination on Friday.

Kiriyenko Promises Back Wages To Be Paid

· Acting Prime Minister Sergei KIRIYENKO in a government meeting Saturday with union leaders announced that the Russian Finance Ministry has found funds which will be used to pay off back wages before the planned Russia-wide protest set for April 9th. KIRIYENKO said the transfers would be appropriated by the ministry as early as at the start of the next week. "Reasons that make people take to streets and join in the protest action are understandable, and the situation where people conscientiously work and do not get honestly earned money is humiliating," KIRIYENKO said. The trade unions estimate that public and private sector wage arrears have climbed this year to a new record of 57 billion rubles ($9.4 billion). He said finding solutions to the problem of non-payments is a joint task of authorities at all levels and employees, whose delegates also attended the government meeting, a format he described as a "tripartite regime." KIRIYENKO

Russian Federation

Politics

Yeltsin's Ax Falls Again in Nizhny Novgorod

· Following a controversial election in Nizhny Novgorod, where a convicted embezzler Andrei KLIMENTYEV was elected Mayor and the election annulled, Russian President Boris YELTSIN has fired his personal representative to Nizhny Novgorod Yuri LEBEDEV in a official decree. Although it is not mentioned in the decree, YELTSIN's decision is widely believed to be based on his disapproval of the election. YELTSIN reprimanded Nizhny Novgorod Oblast Governor Ivan SKLYAROV for not ensuring that the law was followed during the mayoral election. He also reprimanded deputy chief of staff of the presidential administration Viktoria MITINA, and head of the administration's territorial department Sergei SAMOILOV for, "unsatisfactory organization of work regarding...the territorial department." On Tuesday, YELTSIN had said he was, "deeply concerned" by the election results and promised an investigation.

Round Table Discussion Format

· In a move last week to gain support for the candidacy of Sergei KIRIYENKO as Prime Minister, Russian President Boris YELTSIN agreed to hold round table talks with parliament members to listen to their policies and personnel recommendations as well as ally their outstanding concerns. Presidential Press Secretary Sergei YASTRZHEMBSKY said today that YELTSIN expects the participants of Tuesday's round table talks to back Sergei KIRIYENKO's candidacy to the post of prime minister. At the round table talks YELTSIN will give an opening statement, which will be followed by speeches of Federation Council Speaker Yegor STROYEV and First Deputy Speaker of the Russian State Duma Vladimir RYZHKOV. An exchange of views will take place after that. According to the

Today's News Highlights

Russia

Iranian Min. Meets With Nemtsov

UES Elects Board of Directors

Rus Bids on S. Africa Contract

European Republics

Rus-Latvian Tensions Increase

Estonian Contract Killer Caught

South Caucasus & Central Asia

Attack on Funeral of Esebua

Georgia-Rus Discuss Pipeline

Kyrgyzstan Reshuffles Gov't

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promised that the new government would continue work under a signed accord between the Russian government, employees and unions. It is crucial now to define obligations of federal authorities, regional and municipal administrations, he said. KIRIYENKO has stressed that his government will pay more attention to social welfare issues.

Iranian Oil Minister Meets With Nemtsov

· Russian acting First Deputy Prime Minister Boris NEMTSOV and Iranian Petroleum Minister Bijan NAMDAR-ZANGANEH held talks in Moscow Saturday on a joint oil policy to cope with the price crisis. The Iranian Minister said that Tehran sharply cut its oil production to prevent the prices on the world market from falling further. He called on major oil producers and exporters to follow its example. NEMTSOV said, "Russia is interested in improving the state of the world market but is simultaneously pursuing a consistent policy of supporting its own oil producers." The Russian government is drawing up measures to dampen the effects of low oil prices on bigger Russian oil companies. NEMTSOV stressed that in implementing its anti-crisis measures, the Russian government is keeping in mind, "the interests of the country's biggest oil companies," which are private property. NAMDAR-ZANGANEH said that Russian fuel and energy companies will be granted priority in implementing joint projects on Iranian territory. Russia has suffered heavy losses of about $5 trillion due to the lower oil price in the international market, therefore Russian acting Prime Minister Sergei KIRIYENKO on March 25th firmly refused the requirement from OPEC to reduce its oil production. At the end of the week, Russia will meet with the Organization of Petroleum Exporting Countries (OPEC) in Moscow to hammer out a coordinated policy on the international oil market.

N. Caucasus Leaders To Implement Structures

· Leaders of North Caucasus republics and delegations of Azerbaijan and Georgia met in Grozny on Saturday. The participants unanimously agreed that it is necessary to create Caucasian structures in the region which could influence on the situation in the North Caucasus. Chechen First Prime Minister Movladi UDUGOV said he believes that this role can be played by an organization for security and cooperation in Caucasus, which would be analogous to the Organization for Security and Cooperation in Europe. The group agreed to invite Armenia to the

next meeting, to be called the "meeting of fifteen," but the place had not specified yet. It will focus on agreements on the creation of Caucasian structures, UDUGOV said.

Air Force To Be Cut By 120,000 Servicemen

· Chief of the Air Force press service Alexander DROBYSHEVSKY was quoted by Krasnaya Zvezda newspaper as saying that about 120,000 servicemen, including 40 generals, will be cut from Russia's Air Force and Air-Defense Force. Over 50 officers will be transferred to other military districts, and more than 300 military settlements will be closed, DROBYSHEVSKY said. According to him, 87 percent of the funds to be received from the sale of military property will be transferred to the Defense Ministry. He added that 60 percent of the off-budget funds which the Air Force is expected to receive from paid air transportation will be used for the purchase of housing for servicemen, which has been a critical obstacle in restructuring the military. Out of the 1,000 housing certificates which the Defense Ministry has received, 385 have been delivered to the Air Force, DROBYSHEVSKY said.

Economy

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

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

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

Gold and Currency Reserves Decrease

· The Central Bank of Russia today announced that as of March 1, 1998, Russia's gold and currency reserves had decreased by 15.7 percent since January, reaching $15 billion. The reserves registered a 0.4 percent decrease compared to February, 1998. As of March 1, 1998, the currency accounted for $10.2 billion in the reserves and the gold for $4.8 billion, which is over 500 metric tons with the price of a troy ounce standing at $300. The currency and gold figures stood at $12.9 billion and $4.9 billion, respectively, in the beginning of 1998.

Business

Chubais, Brevnov Elected to UES Board

· Shareholders of the Unified Energy Systems of Russia (UES) held an irregular meeting outside Moscow on Saturday to re-elect the board of directors of Russia's key electricity company. The meeting's procedure was approved on Friday by the

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board of directors in office which unanimously voted for accepting the resignation tendered by Boris BREVNOV as chief executive officer. BREVNOV resigned following accusations of misuse of UES funds. Former First Deputy Prime Minister Anatoly CHUBAIS and BREVNOV were elected to the board of directors supported by foreign shareholders. The government, which owns the controlling stake in UES, withdrew its nomination of CHUBAIS since he was ousted. Russian Deputy Fuel and Energy Minister Viktor KUDRYAVY, an ally of acting Prime Minister Sergei KIRIYENKO, was elected chairman of the board of directors. The election took place at the first session of the new board of directors, which was held right after an extraordinary meeting of shareholders on Saturday. KUDRYAVY's candidacy was supported by the state representation with UES. Head of Russia's monopolies watchdog Natalya FONAREVA, acting minister without portfolio Yevgeny YASIN, and Deputy head of State gas monopoly Gazprom Pytor RODIONOV were also elected to the board. Of the 15 UES board members, 11 are officials at the federal or regional level. The Board of Directors will choose a successor to the chief executive officer later this month. Until then, Oleg BRITVIN will continue as acting chief executive officer.

Russia Bids To Sell Fighter Jets To South Africa

· According to Johannesburg's local newspaper Business Day, Russia has declared that it will participate in a bid to supply South Africa with MiG fighter planes. Russia will submit this week a tender to Amscor, the state-owned arms producer in South Africa, to sell the country with 24 MiG AT twin-engine fighter trainers. The Russian-designed and manufactured jets are equipped with French engines and avionics. Senior official of Moscow Aviation Production Organization Nikolay ANDREEZ said last week that Russia's tender will include an offset proposal exceeding the value of the aircraft. This will include the production locally of MiG AT components and avionics and the final assembly and testing of the aircraft. Russia also offered to establish a technical support center which could service all MiG aircraft on the continent, ANDREEZ said. By accepting the tender, South Africa would significantly benefit from Russian technology transfers and increased export opportunities to Russia, ANDREEZ said. Germany, Sweden and Britain have also submitted proposals to South Africa for the replacement of outdated and

aging military equipment, including trainer jets. The South African Air Force plans to replace its Impala fleet by 2005 and will need about 24 new aircraft.

European Republics

Bomb Explosion Fuels Rus-Latvian Tensions

· A bomb exploded at approximately 2:00 am today outside the Russian Embassy in Riga, Latvia, damaging several diplomats' cars and a portion of the embassy building. Latvian police say no one was injured in the incident. Latvian President Guntis ULMANIS denounced the blast calling on the Interior Ministry to bring the perpetrators to justice. Foreign Minister Valdis BIRKAVS said, "any manifestations of terrorism are utterly unacceptable" and expressed confidence that, "the executors of this cynical and outrageous crime will be unable to destabilize the situation in the country and discredit the prestige of Latvia in the eyes of the international public," RFE/RL Newsline reported. The Latvian National Security Council has demanded the dismissal of police chief Aldis LIELJUKIS. In a statement the Russian Foreign Ministry said, "this terrorist act is the result of the spurring of anti-Russian hysteria in Latvia, of encouraging nationalism and extremism. It added that, "blasts ring out, monuments are defiled, fascists are raising their heads. This is to be stopped. We demand that the Latvian authorities take decisive measures to punish those guilty." After the explosion of a Riga synagogue on April 2nd and the vandalizing of a Lijepaja monument to the victims of the Holocaust, local police has reinforced the protection of synagogues and monuments to Russian soldiers. Relations between Russia and Latvia have continued to deteriorate following a crackdown on Russian pensioners during a protest in March.

Thailand Police Arrest Estonian Contract Killer

· On Saturday, an Estonian citizen Hardo KERS was arrested in a Bangkok airport on suspicion of killing a Russian businessman Konstantin POVOLOTSKY on Tuesday. POVOLOTSKY owns several restaurants on the popular Thai resort Pattaya. KERS has confessed to committing the murder. He said he was hired for $5,500 by a certain Russian businessman, a partner of POVOLOTSKY. His name is not disclosed in the interests of investigation. The police official also said the contractual killer may be sentenced to 20 years in prison.

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South Caucasus & Central Asia

5 Mourners Shot Dead at Esebua Funeral

· Georgian police said that unidentified assailants opened fire and threw a grenade at a funeral procession for Gocha ESEBUA, the head of a terrorist group that took hostage four UN officers in February. Five mourners were killed and eight were injured about 100 meters from the cemetery in Zugdidi on Sunday. Zugdidi Governor Bondo DJIKIA said that security measures around the town have been intensified. ESEBUA, a proclaimed loyalist to post Soviet President Zviad GAMSAKHURDIA, demanded the release of those arrested after an assassination attempt on President Eduard SHEVARDNADZE. ESEBUA was killed on March 31st in a fire exchange with Spetsnaz police units not far away from a house in Onaria, the Zugdidi region, where he was hiding. The gunman was offered to surrender, but he refused and opened fire. His chief assistant, Zurab SHONIA was killed in Sunday's massacre. Security Minister Dzhemal GAKHOKIDZE said the attack at the cemetery had been carried out by radical Zviadists who considered SHONIA and other members of ESEBUA's group traitors. SHONIA and others gave themselves up to police at the end of February's hostage crisis. SHEVARDNADZE said that the attack shows there are, "deep divisions in the radical wing of the Zviadists, who have effectively degenerated into a terrorist gang. Although their membership is dwindling daily, the terrorist are still capable of doing a great deal of harm to society." Georgian officials say the Zviadists were engaged by reactionary forces in Russia determined to instigate chaos is Georgia. Intercon sources report that Parliamentary Speaker Zurab ZHVANIA stated in his address to the Center for Strategic and International Studies that it is these types of covert actions conducted by powerful forces in Russia which threaten Georgia.

Georgia-Russia Discuss Pipeline

· The speaker of the Georgian Parliament Zurab ZHVANIA, in a statement at the national Press Club, said that Georgian and Russian officials are discuss

ing a project to build a pipeline to link the oil terminals of Novorossiisk and Supsa. Such a pipeline could be a "very strong argument" for the resolution of the conflict in Abkhazia, thorough which the pipeline would have to pass. "Pipeline proposals sometimes make people more co-operative," the Financial Times reported ZHVANIA as saying. Novorossiisk and Supsa are expected to be two of the main exit points for oil from the Caspian Sea.

Kyrgyz Government Reshuffled

· Kyrgyz President Askar AKAYEV has decreed to cut the government by ten positions to improve efficiency of the government work. AKAYEV cut the deputy prime ministers in charge of agriculture, finance and social programs have been scrapped. The president also abolished the Ministry for Cooperation with Commonwealth of Independent States (CIS) Members and shifted its functions to the Foreign Ministry. Only one deputy prime minister post has been retained in the reshuffle and Kyrgyzstan's representative to the four-nation Integration Committee and the Customs Union will be given the rank of a deputy premier, a Presidential statement said. On March 25, the president appointed Kubanychbek ZHUMALIYEV as the new prime minister, which gained overwhelming support from the parliament. ZHUMALIYEV retains his position, as well as the ministers of foreign affairs, defense, interior, health care, and ecology. First Deputy Prime Minister in charge of Industry Amangeldy MURALIYEV was dismissed. AKAYEV is to sign a decree appointing Bishkek Mayor Boris SILAYEV as deputy prime minister as well as new ministers. Among the changes are Kemelbek NANAEV, replacing Jan FISHER as CIS affairs minister; Nelly BEISHENALIEVA, replacing Larisa GUTNICHENKO as justice minister; Sovetbek TOKTOMYSHEV, replacing Askar KAKEEV as education, science and culture minister; Orosmat ABDYKALYKOV, replacing Andrei IORDAN as minister of industry and foreign trade, and Imankadyr RYSALIEV, replacing Asylgul ABDUREKHMENOVA as minister of labor and social affairs, RFE/RL Newsline reported.

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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