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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, April 7, 1998

Russian Federation


Duma Plans to Vote on Kiriyenko on Friday

· First Deputy Speaker of the Russian State Duma Vladimir RYZHKOV said the Duma formally decided to consider the nomination of Sergei KIRIYENKO as Russia's Prime Minister on Friday. RYZHKOV along with Federation Council chairman Yegor STROYEV, faction leaders, trade union representatives, and Kremlin officials attended Russian President Boris YELTSIN's round table talks. In his opening remarks, the President stressed the need to approve KIRIYENKO, ruled out a coalition government, and declared 1998 a non-confrontational year. He said, "We have spent two week without a government...It is very serious, of course. If it continues, we will lose out even more." He added that he had considered several other nominees for Prime Minister before choosing KIRIYENKO. YELTSIN remains confident that the Duma will approve KIRIYENKO on the first vote. Presidential spokesman Sergei YASTRZHEMBSKY said that YELTSIN has no "reserve" candidate for Prime Minister and he will continue to nominate KIRIYENKO if the Duma rejects him. YELTSIN clarified that his request for suggestions on cabinet ministers and his call for professional figures to work in government does not mean he supports a coalition government. He said that cabinet candidates should be, "approached objectively, on business and professional grounds, not on political considerations." YELTSIN continued to present an air of compromise to ministers by suggesting, "that we declare 1998 a non-confrontational year for factions, parties, authorities and so on. I don't veto, you don't reject. Let's give it a try."

At the round table talks, YELTSIN faced a call for tougher government policies in economic matters from representatives of the Federation Council. The

Federation Council has held a series of hearings and sittings to discuss the need for upgrading the government role in the regulation of the market economy, creating conditions for a more intensive investment activity, greater effectiveness and competitiveness of Russian manufacturers, normalization of the system of state finances and money circulation, and the leveling out of the social and economic development of the regions.

Kiriyenko Demands Pension Plan Of Actions

· After meetings with regional directors of the pension fund on Monday, Russian acting Prime Minister Sergei KIRIYENKO said that the deficit of Russia's Pension fund may run into nearly 20 trillion old rubles ($3.3 billion) unless urgent measures are taken. KIRIYENKO demanded that the directors present a plan of action to the government by the end of the week to normalize the situation. He said, "the plan may envisage tough measures, but this cannot be otherwise as the life of pensioners depends on this." KIRIYENKO believes that the action plan should include the following provisions: it is necessary to enhance the centralized activity of the Pension fund, cut ineffective spending, and ensure that indebtedness to the Pension fund which now amounts to 88 billion rubles should be restored. The acting Prime Minister announced that the delay with the payment of pensions is now seven to ten days all over Russia. He said, however, that there exists a considerable gap between the incomes and expenditures of the Pension fund. If the gap persists at the present

Today's News Highlights


Yugoslavia-Gazprom Sign Agmt.

Russia Gets MTV

Yuksi- Elf Sign Agreement

European Republics

Lith-Bulgarian Relations Improve

Ericsson-Kievstar Sign Agmt.

South Caucasus & Central Asia

EU Gives Additional Aid to Azer.

Armenia's President: Kocharyan

CIS Economic Statistics




April 7, 1998

Intercon's Daily

level, the situation with the payment of pensions will be critical by the end of the year. He said the problem of pensions in Russia cannot be resolved within one month. KIRIYENKO has been pushing to add a social dimension to Russia's strict economic policies in line with Russian President Boris YELTSIN's demands. Today, KIRIYENKO announced he will submit a proposed line-up of his cabinet to YELTSIN within a week, whether he is approved on Friday or not.


Ruble = 6,116/$1.00 (NY rate)

Ruble = 6,118/$1.00 (CB rate)

Ruble = 6,103|6,133/$1.00 (buy|sell rates)

Japan Ex-Im Bank Loan To Russia

· The Export-Import Bank of Japan for the first time will extend a loan to Russia without requiring a guarantee by the Russian government for Russian projects. According to a bank spokesman, the loan will be used for part of a four billion yen ($29.8 million) project to upgrade Russia's rail system, and involves the purchase of train regulators from Japanese electrical machinery maker Hitachi Ltd. The Ex-Im Bank will lend about two billion yen and another 1.4 billion yen is expected from Japanese commercial banks with trade credits from the Ministry of International Trade and Industry. Earlier this year, the Ex-Im Bank announced it would overturn limits of $1.2 billion on loans to Russian borrowers. It now considers projects based on its individual merits. Bilateral relations have improved significantly in the fields of science and business, following recent delegation exchanges.


Yugoslavia-Gazprom Deal Realized

· According to Belgrade's Politika newspaper, Yugoslavia and Russia's gas giant Gazprom have signed a $240 million agreement on the export of Yugoslav farm produce to Russian in a barter deal for Russian gas. Yugoslavia will export $80 million worth of food to Russia annually for three years in exchange for an annual 3.0-3.5 billion cubic meters of Russian gas imports. For those gas imports, Yugoslavia is to pay 75 percent in farm produce, industrial goods, and constructive services and 25 percent in cash. The agreement is the realization of a deal Yugoslavia and Russia made in 996, after the UN lifted the oil and trade embargo on Belgrade in 1992.

"I Want My MTV" in Russia

· America's MTV Networks, a unit of Viacom Inc., and Russia's Biz Enterprises Company have announced a multi-year licensing agreement to develop and launch a customized MTV for Russian youth, to be available 24-hours a day. This is the first time a western television network has agreed to customized its programs for a Russian audience. The announcement was made today by Chairman and CEO of MTV Networks Tom FRESTON and Chairman of Biz Enterprises Boris ZOSIMOV. The new Moscow-based music television network, to be launched in the fourth quarter of 1998, will be distributed via VHF and UHF terrestrial frequencies and reach more than 10 million households. Tailored to the musical tastes and lifestyles of 12 to 34 year-old Russians, MTV will present locally-produced programming from its Moscow production base. All music video playlists for MTV Russia will be determined in Moscow by locally-hired staff and presented by Russian VJs. The network will feature a unique mix of music videos from local artists as well as international acts. The network will also show MTV's signature programs such as MTV Unplugged, MTV Video Music Awards, and MTV Europe Music Awards. FRESTON is committed to making Russian MTV, "speak Russian, look Russian, be Russian. It will reflect Russian youth and connect them to their peers everywhere else." ZOSIMOV added that, "This is the perfect time for MTV to launch in Russia. With the rich musical and cultural variations of the region, Russian MTV will highlight the music and issues of interest to the first generation of free Russian youth." MTV is the largest television network in the world and is available in one quarter of the world's television households, including Asia, Australia, Europe, Japan, Latin America, and New Zealand. Biz Enterprises, one of the largest media and entertainment companies in Russia, owns and operates a music television programming company Biz-TV, radio station HIT-FM, numerous magazines related to music and fashion, the Biz Media Advertising Agency and Biz Entertainment, a concert and special events promotion and production company. Additionally, Biz Enterprises operates Ukrainian and Belarus music television programming companies.

Yuksi-Elf Aquitaine Sign Agreement

· Russia's Yuksi and France's Elf Aquitaine on Monday signed a framework agreement in Moscow

When you need to know it as it happens




April 7, 1998

Intercon's Daily

to cooperate in the exploration, production, and procession of oil and gas. The agreement contains a provision concerning cooperation in the sale of oil and gas on international markets. Yuksi President Mikhail KHODORKOVSKY said the long-term agreement will help the Russian company to gain new markets of oil production and capital. Elf Aquitaine agreed to help Yuksi develop long-term strategy for developing its retail network of service stations and exchange their expertise in other areas as well. Discussions for the agreement began in March after Elf Aquitaine purchased 5 percent of the Yuksi stock for $528 million. Both Yuksi and Elf Aquitaine decided to cooperate in the development of Sumgutskoye deposit, the biggest in Siberia, and the exploration of Yurubchenskoye deposit. Elf Aquitaine President Philippe JAFFRE said that the sides are planning to establish a joint venture to develop Russian oil deposits. So far, joint work will be held in Russia, but the French company in future intends to involve Yuksi in the development of oil deposits in Africa and the North Sea, JAFFRE said.

Meanwhile, KHODORKOVSKY said Yuksi is holding talks with other foreign companies, including Amoco, "on joint work in some spheres." KHODORKOVSKY said that Elf Aquitaine and Yuksi are considering participating in the privatization of Russian oil company Rosneft. However, KHODORKOVSKY noted that Yuksi's participation in it will largely depend on the market situation and will not use Yuksi's funds. KHODORKOVSKY has advocated postponing the sale of Russian oil companies until, "a more economically feasible time," Interfax reported.

tures," he said. The Bulgarian delegation will also meet with members of the Committee for foreign affairs, President Valdas ADAMKUS, Prime Minister Gediminas VAGNORIUS as well as Foreign Minister Algirdas SAUDARGAS.

Ericsson Signs Agreement With Kievstar

· Ericsson has signed a three year framework agreement with the mobile network operator Kievstar G.S.M. JSC in Ukraine covering GSM network solutions. Ericsson estimates that deliveries within the agreement will reach a total value of more than $100 million (SEK 800 million) during the three year period. Ericsson has also received a first order within this agreement valued at $20.5 million (SEK 164 million) from Kievstar. Kievstar is one of three network operators with a license to operate GSM networks in Ukraine. With this new agreement Kievstar will extend their network to ultimately cover most of the country. President of Ericsson's local company in Ukraine Leif EDWALL said, "This agreement is yet another sign that Ericsson's activities in the country are increasing. I'm quite optimistic about future business in Ukraine and we're building a strong support for our customers in wireless and fixed networks." Ericsson combines their expertise in fixed and mobile networks, mobile phones, and infocom systems to make the company a world leader in telecommunications supplies.

South Caucasus & Central Asia

Kazakhstan Receives $15M WB Loan

· The World Bank has decided to extend a line of credit worth $15 million to help Kazakhstan push forward reforms in the agricultural sector. Details of the program, as reported Monday by the Kazakhstan Telegraph Agency, were discussed by Deputy Prime Minister Salimovich KARIBZANOV and World Bank officials. The approved credit will go to private rural businesses. Other bank projects this year would help reform the country's pension and regulatory systems. The World Bank has provided a total of $1.2 billion for 14 projects in Kazakhstan since 1992.

EU Increases Financial Grants to Azerbaijan

· The European Commission Monday proposed to provide Azerbaijan with additional grants worth 30 million ECU ($32.1 million) over a three-year period. The executive body of the 15 nation European Union

European Republics

Lithuanian-Bulgarian Increase Relations

· A delegation of the Bulgarian parliament, led by its speaker Jordan SOKOLOV, arrived in Lithuania on Monday for a three-day visit aimed to boost inter-parliamentary ties and exchange law-making experience. After meeting with his Lithuanian counterpart Vytautas LANDSBERGIS, SOKOLOV said the sides pointed out the similarity of the nations's foreign policy goals. "Sofia and Vilnius pursue the same goals: the membership in NATO and the European Union, and encounter nearly the same problems along the path towards integration into these struc

When you need to know it as it happens




April 7, 1998

Intercon's Daily

(EU), proposed the financial assistance in view of Azerbaijan's reform programs. The EU assistance is expected to help alleviate the cost of the country's reform programs and to help the Caucasian country cope with its refugee problem. European commissioner responsible for economic, financial and monetary affairs Yves-Thibault DE SILGUY said, "The improvement in the Azerbaijan social situation that could result from this assistance would be an essential element for political and social stability in the region," Xinhua News reported. He also said the assistance, complementing financing from the International Monetary Fund and the World Bank, will contribute to sustaining economic and structural reforms in the country. The EU has provided the biggest share of international humanitarian assistance to Azerbaijan, with a total committed fund of 208 million ECU ($222.6 million) between 1992 and 1997. The EU also provides financial assistance to other countries in the region, including Armenia and Georgia.

Kocharyan Official Presidential Winner

· Armenia's Central Electoral Commission on Monday, after summing up the final results of the run-off held on March 30th, officially announced Robert KOCHARYAN as winner of the Presidential election. Eighteen people participated in the electoral commission's final decision. Two of them, representatives of the National Democratic Union, refused to vote and sign the final statement on the returns of the early election. KOCHARYAN earned 908,613 votes, or 60 percent of the ballots cast in the polls, his rival Karen DEMIRCHYAN, Armenia's former Communist leader, came in second with 618764 votes, or 40 percent. A total of 1,567,703 people, out of 2,300,816 voted. KOCHARYAN will be inaugurated on April 9 at a special session of Armenian parliament. After being sworn in, the President is due to name Armenia's new prime minister, who will then be instructed to submit proposals for the composition of the government. KOCHARYAN was Armenia's Prime Minister since March 1997, and its acting President since February 4, 1998. KOCHARYAN thinks that the

republic's main domestic issue is the rallying of all political forces to normalize the social and political situation in the country. He has announced his intention to form a special body consisting of the leaders of all political parties to advise him on internal policy matters.

CIS Nations Improving Economically

· The Commonwealth of Independent States (CIS) Inter-State Statistics Committee reported that member states continue to enjoy an improved economic situation in the first two months of this year. The industrial production in most of the CIS member countries have maintained a momentum of growth, the report stated. Statistics showed that the industrial production in the Kyrgyzstan increased by 63.3 percent in the first two months of this year, the highest among the CIS members. It was followed by Belarus with an increase of 13.3 percent; Tajikistan, 9.2 percent; Moldova, 6 percent and Kazakhstan, 4 percent. Ukraine, Russia and Azerbaijan registered a growth of 1.9 percent, 1.4 percent and 0.6 percent respectively. The report also said that the price indexes in Kyrgyzstan, Kazakhstan, Russia, Azerbaijan and Ukraine are dropping at an average one percent or less.

Turkmen Municipal Elections

· The elections of people's representatives and municipal councils took place in Turkmenistan on Sunday based on new election laws, passed by the Turkmen parliament on November 25, 1997. The final results of the elections will be summed up later this week. Those elected as members of the People's Council will be vested with powers to tackle such matters as a national referenda on changing the State border, the introduction of amendments and addenda to the Constitution, and other crucial decisions in the political and economic life of the country. The Gengeshi is also a representative body but at the local self-government level. The Gengeshis are empowered to administer their respective territories, including the right to fix a budget, taxes and tackle other matters concerning local administration.

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

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