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

Wednesday, November 11, 1998

spokesman noted that frequently the state has been unable to meet payment requirements for defense orders. As a result, penalties and fines are imposed on enterprises for their debts to budgets of different levels, to extra-budgetary funds, communal services and suppliers of components. He noted that bankruptcy of an enterprise means its will be privatized. Bankruptcy proceedings were opened against some strategic enterprises for national security and they were then listed as non-eligible for privatization.

Duma Votes Down Recall Of Berezovsky

· The Russian State Duma today voted down a move to recall business tycoon Boris BEREZOVSKY from his post as Executive Secretary of the Commonwealth of Independent States (CIS). Communist Deputy Oleg GRISHEKEVICH presented the proposal to the Duma and suggested it should appeal President Boris YELTSIN and Prime Minister Yevgeny PRIMAKOV. His proposal was backed by 176 votes, short of the mandatory 226 votes needed to pass a resolution. GRISHEKEVICH declared that, "BEREZOVSKY has advocated social hatred and civil war," and that his statement urging to ban the Communist Party, "goes beyond the boundaries of decency and political logic."

BEREZOVSKY calling for a ban on the Communist Party said, "They only call themselves Communists, but in fact they are fascists." His comments follow a vote not to censure Communist deputy Albert MAKASHOV for anti-Semitic remarks.

Russian Federation

Politics

Kulik Investigated On Corruption Charges

· Just one week after Russian Liberal lawmaker Grigory YAVLINSKY and three deputies submitted a letter to Prime Minister Yevgeny PRIMAKOV questioning the activities of some Cabinet members as being corrupt, the prosecutors are opening a corruption case against Deputy Prime Minister Gennady KULIK. The Deputy Prime Minister is suspected of being involved in fraudulent activities during his tenure as first deputy prime minister in charge of agriculture in the Russian republic of the Soviet Union. KULIK will be investigated in a 1990 case in which the Soviet government offered to pay state-farm workers for their produce with certificates called Harvest Bonds that the government said could be exchanged for scarce goods such as electronic equipment, jeans, and foreign-made shoes. Most workers never received their goods. These scarce goods were to be bought from profits of exported oil products to the West. Profits from the oil were estimated to be $30 million. Prosecutor General Yuri SKURATOV said that the investigation will, "answer the question of the degree of Gennady KULIK's involvement in the affair." KULIK said, "If prosecutors have grounds for going back to the case, let them."

Yeltsin Orders End To Defense Bankruptcy

· Russian President Boris YELTSIN has ordered the government to stop bankruptcy procedures against enterprises which are vital to the nation's defense and security. Some companies which are in question, include the Research Institute for Radio Engineering and the Myasishchev Experimental Machine-building Plant. The President has ordered the government to introduce in the Russian State Duma legislation to change the federal law on insolvency of enterprises in the Defense sector. A Kremlin

Today's News Highlights

Russia

Nationalization of SBS-Agro

Transaero Cuts Domestic Flights

European Republics

Ukraine Passes NATO Program

South Caucasus & Central Asia

Georgian Assassins Sentenced

Azeri Opposition Threatened

Turkey-Turkmen Joint Ventures

Turkey-Iranian Gas Deals

Uzbek Begins WTO Application

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Economy

Ruble = 15.56/$1.00 (NY rate)

Ruble = 15.58/$1.00 (CB rate)

Rus. Economic Predictions

· Russian First Deputy Prime Minister Vadim GUSTOV today predicted that the ruble/dollar exchange rate will not exceed 20 ruble to the dollar this year. He said the government expects the ruble to stay within the range of 17 rubles to 20 rubles to the dollar. GUSTOV added that forecasting beyond the year-end was difficult, as the situation of the Russian economy will be largely dependent on the condition of international financial market. He noted that any changes in the price of oil on world markets will influence the ruble/dollar exchange rate.

Finance Minister Mikhail ZADORNOV predicts that the Russian federal budget deficit in October to December, 1998, will total 65 billion rubles. The government plans to cover part of this deficit with a 25 billion ruble emission and the profits from the sale of a 2.5 percent stake of Gazprom, estimated to earn $650 million. According to the State Committee for Statistics, the inflation rate in Russia for October totaled 4.5 percent. Over the period of January to October, 1998 inflation has reached 56.4 percent.

Russia To Nationalize SBS-Agro

· The Russian government on Tuesday said that it will take over Russia's largest private savings bank, SBS-Agro, in a move to save it from financial failure. Many banks are on the breach of collapse due to Russia's economic and financial crisis. The government has said it will work to save some of the most viable banks. Critics warn that by nationalizing SBS-Agro the government is taking on more debts, which it cannot meet. Deputy Prime Minister Gennady KULIK said that the government will acquire a controlling interest in SBS-Agro Bank before the end of the year and use it to extend credits to the agricultural sector. KULIK said, "Returning control of the bank to the state is in line with our principles of building a financial system in the agricultural sector." SBS-Agro has the second-largest retail network after state-controlled Sberbank. SBS-Agro handled many of the loans and money transfers from the government to Russia's impoverished farms before it was shakened by the economic crisis.

Sberbank Expands By 26 Percent

· A Sberbank press service official said that the number of legal entities' accounts at the Russian Savings Bank, Sberbank, grew by 26 percent over the first nine months of 1998, to total 990,000 by October 1st. A steady influx of corporate clients to Sberbank has been also observed during the crisis of Russia's financial and banking system. In particular, the Magnitogorsk metallurgical complex, the KomiTEK, Orenburgneft, and Kurganmachzavod engineering plant have become new big clients of Sberbank. The amount of legal entities' resources attracted by Sberbank from January to September 1998 increased by 37 percent.

Business

Aeroflot Receives New Boeing 737-400

· Russian International Airlines, Aeroflot today received the seventh new jet airliner Boeing-737-400, which is scheduled to fly routes to Europe. Meanwhile, two Boeing-737-400 airliners will be flown on domestic routes to Irkutsk and Omsk. Technical assistance in the maintenance of the new aircraft will be given by Lufthansa Technik company. Aeroflot crews and maintenance staff have already undergone training at a factory of the Boeing Corporation in Seattle, USA. The renewing of Russia's fleet of aircraft with modern airliners will allow for the removal of TU-154 aircraft, which are inferior to new airliners regarding comfort, noise level, ecological safety and fuel consumption, from domestic and Western routes. Aeroflot's fleet consists of 120 planes. The new plane is part of a contract between Aeroflot and Boeing for the leasing of 10 Boeing 737-400 airlines signed in April, 1997. Aeroflot concluded a crediting agreement with the United States Chase Manhattan Bank which finances 85 percent of the sum of the deal. The last of the Boeing aircraft is to be delivered to the Russian side in February 1999.

Transaero To Cut Domestic Flights

· Russian air company Transaero will cut its domestic flights this Fall and Winter by 30 percent. The company plans to concentrate on international flights in an effort to raise more foreign currency revenues. The routes will not be changed, but in Russia the company will use smaller aircraft. Flights to Tyumen, Samra, and Novy Urengoi have been temporarily canceled. Transaero has been forced to implement these changes due to the economic crisis. However,

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in addition to Frankfurt, Los Angeles, Almaty and Tashkent, Transaero is planning to offer new routes to London and New York in December. A route to Hanover is planned to be available in February.

Gazprom-LUKoil To Sign Agreement

· Gazprom chief Rem VYAKHIREV today said that Russian gas monopoly Gazprom and oil company LUKoil are going to sign an accord on cooperation in the energy field. He said the accord was to be signed a few days ago, but the two companies' leaders were busy and the date had to be postponed.

VYAKHIREV said, "Most likely, we shall sign this accord in late November." The accord is expected to include provisions on the joint use of satellite gas and oil among other aspects of cooperation.

Russia Vendors Authorized In Norway

· Russian vendor traders have received authorization from Norway's Justice Ministry to sell their products in the streets and squares of settlements north of Norway. Chairman of the Ser-Varanger community in the province of Finnmark Anton JERIJARVI welcomed Russians to come to Kirkenes and trade in the city. One day a week in Kirkenes will be declared as Sales Day. JERIJARVI stressed that the Ser-Varagen community is a bridge between Norway and the northeast of Russia. He noted that, "Our residents welcome open and free trade and want to associate with their neighbors in Russia. A border line here is a border of friendship. The Russians who will agree to participate in Sales Days will be issued a special permits by the Norwegian authorities valid for a term of one year.

a decree approving the state program of Ukraine's cooperation with NATO for the period ending in 2001 within the framework of the Partnership For Peace program. The state program was drawn up on the basis of corresponding provisions of the Constitution, the Main Guidelines of Foreign Policy, the Military Doctrine, the Conceptual Framework for National Security (fundamentals of state policy) and other normative legal acts. A number of Ukrainian ministries and agencies participated in that work. The state program is aimed at ensuring the implementation of all provisions of the Charter on special partnership between Ukraine and NATO, signed in July 1997. It outlines the directions of Ukraine's cooperation with NATO not only in the political and military spheres, but also in the sphere of military technology, science and technology, civilian planning during emergency situations, the struggle against the spreading of nuclear technologies, against terrorism, organized crime and drug smuggling, as well as in the sphere of standardization, information technologies, environmental protection, air traffic control and space exploration. The provisions of the state program will be put into effect through the fulfillment of annual working plans within the framework of the Charter on special partnership between Ukraine and NATO.

South Caucasus & Central Asia

Court Sentences 1995 Assassin Organizers

· Three years after a failed assassination attempt on Georgian President Eduard SHEVARDNADZE, Georgia's Supreme Court on Tuesday sentenced the 15 organizers to jail terms of up to 15 years. SHEVARDNADZE survived with only cuts and bruises when a car bomb exploded as he was leaving parliament on August 29, 1995. Jaba IOSELIANAI, who led the Mkhedrioni private militia now disbanded received an 11 year sentence; former deputy security minister Temur KHACHISHVILI was jailed for 15 years; and Georgy GELASHVILI, also a former Mkhedrioni leader, received 14 years. The Mkhedrioni helped oust former president Zviad GAMSAKHURDIA during the fighting in Georgian in 1991-1992. The key organizer who has been linked to other destabilizing events in Georgia, Igor GIORGADZE is still wanted for his involvement. It is widely believed GIORGADZE, the former Georgian Security Minister, escaped to Russia on a military transport plane.

European Republics

Lithuanian-Belarus Presidents Meet In Minsk

· Belarus President Alexander LUKASHENKO and Lithuanian President Valdas ADAMKUS are to meet at a border check point Kammeny Log-Medeninkai on the Belarussian-Lithuanian border Thursday. The press service of the Belarus President reported that during the talks the two Presidents are planning to discuss issues pertaining to the development of cooperation in different fields. LUKASHENKO and ADAMKUS will also exchange opinions on other problems of mutual interest and international issues.

Ukraine Extends NATO Cooperation Agmt.

· Ukrainian President Leonid KUCHMA has signed

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The attack of August 1995, and February 9,1998 are being compared for similarities. As recent as last month, Georgia's Prosecutor General's called on Russia to increase its search for GIORGADZE and to extradite him to Georgia to serve out his sentence. Recently, GIORGADZE was interviewed on Russia's NTV and absurdly stated that SHEVARDNADZE was responsible for the attempt on his life and the deaths of all those in Georgia.

Azeri Gov't Threatens Jail Terms For Protesters

· Azerbaijan's parliament today passed a resolution on the destabilizing activities of several opposition parties and groups. The resolution urged law and order services, "to take all legal measures to defend honor and dignity of Azeri President Geidar ALIYEV." The parliament said its resolution was prompted by increasingly frequent insults against ALIYEV coming from participants of the opposition's meetings and marches, whose speeches often contain affronts against ALIYEV.

Prosecutor General Eldar HASANOV told the parliament that, "In Azerbaijan there is a campaign going on which attempts to destroy state structures. Those who attempt to grab power should know they are knocking on the door to prison." He singled out Azerbaijan's top opposition leaders: Head of the Popular Front Abulfaz ELCHIBEY, Musavat Leader Isa GAMBAR, and National Independence Party leader Etibar MAMEDOV. "I'm not worries about this. It's just a scare tactic," MAMEDOV said scoffing off threats of arrest. Opposition leaders plan to stage more rallies later this month and say they will not relent until ALIYEV resigns.

National Security Minister Namik ABBASOV said secret services of several states were trying to use Azerbaijan's opposition as a tool in their plan to split Azerbaijan as a state. ABBASOV said several opposition leaders had connections with those secret services, without elaborating. This weekend two opposition protests ended in violence. On Saturday, riot police used clubs to beat back an unsanctioned

march, while Sunday protesters were attacked by a gang, which opposition parties claim to have close ties with ALIYEV. Pro-government factions said it was not incidental that the opposition stepped up its activity, as a decision on the main pipeline route to export Azeri Caspian oil to world markets draws near.

Turk-Turkmen Presidents Meet Over JV

· Turkish President Suleyman DEMIREL is scheduled to arrive in Turkmenistan today for a three-day official visit. He is to attend activities marking the opening of facilities which have been constructed by Turkish builders: Turkmenistan's National Museum, Ashgabat's largest mosque, as well as a Coca Cola production plant. DEMIREL is accompanied by members of the Turkish business community. Negotiations on an expansion of bilateral cooperation are to be held during the visit. Turkey's capital investments in the Turkmen economy over the past four years total almost $1.5 billion. Turkmenistan builds about 60 facilities jointly with Turkish firms, with the contract value of the facilities totaling $770 million. About 50 joint ventures, predominantly in the textile industry, operate in Turkmenistan. Over the period from January to June, 1998, the export of Turkmen commodities to Turkey ran at $43.2 million, while imports from Turkey amounted to $54.5 million.

Turkey-Iran Break Ground For New Pipeline

· Despite the US stance on the rouge status of Iran, Turkey on Monday began construction on a pipeline to carry natural gas from Iran and Turkmenistan to Turkey and Europe. The 623 mile long pipeline, running from Erzurum to Ankara, will be completed in 2001. The US has criticized the gas deal, signed in 1996. The US encourages Turkey and Turkmenistan to transfer gas through a Caspian Sea pipeline, instead an Iranian line. However, Turkey in dire need of natural gas believes that Iran can offer the quickest solution. Under the deal worth $20 billion, Turkey will initially buy 105 billion cubic feet of gas from Iran annually, with the expectation that it will increase four times that amount in the future. Via another pipeline, Turkey will begin receiving Iranian gas by mid-1999.

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

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