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, November 2, 1998

Constitution—without violating the current one—would hardly be shorter than that."

Impeachment Commission Reviews Charges

· The Russian State Duma's impeachment commission plans to complete its inquiry of Russian President Boris YELTSIN by the end of this year. The commission's chairman Vadim FILIMONOV said it is reviewing the fourth charge against YELTSIN, for his "wrecking the Russian armed forces." He said, "I think by the end of December we shall review the remaining two articles of the indictment—wrecking the armed forces and genocide of the Russian people." He said the impeachment commission will meet on November 16th to hear the accusing side on the indictment's fourth article. He noted that the commission will focus on expert statements and reviewing relevant materials. The commission took notice of the accusing side represented by Duma security committee chairman Viktor ILYUKHIN. He said the accusing side was ready to continue participation in the impeachment commission's proceedings. "We are ready to state our considerations concerning the fourth article of the indictment—on the condition of the Russian armed forces," ILYUKHIN said, adding that, "for these purposes, there will be appeals from Duma deputies supporting the indictment about inviting to the commission's sittings a number of persons who have a relation to wrecking the Russian armed forces."

Economy

Ruble = 16.06/$1.00 (NY rate)

Ruble = 15.82/$1.00 (CB rate)

Russian Federation

Politics

Preparing For A Post-Yeltsin Era

· As Russian President Boris YELTSIN rests in the Black Sea resort city Sochi, presidential hopefuls are competing for his post which appears to be almost empty or the vice-president position under consideration. As one political analyst pointed out, "YELTSIN's absence is not destabilizing the country because his disappearance has already become accepted by the Russian people." YELTSIN's deputy chief of staff Oleg SYSUYEV on Friday said the President will formally announce his reduced role in a speech to parliament. He is expected to formally give away some of his powers next year. YELTSIN has agreed to rewrite the Constitution changing the powers of the President and will monitor the elections in 2000 to ensure they are free and fair. The 1993 Constitution was tailored for YELTSIN and gives no real power to parliament or the prime minister. The parliament, prime minister, and president seem to have divergent views on what changes should be made. Even possible presidential contenders agree a change should be made, but disagree on what kind of change should take the place of a strong presidency. Nikolai PETROV, a political analyst for the Carnegie Endowment for Peace said, "The wishes to change something are obvious, but they do not at all coincide, and often contradict one another. Each of the political players wants to change the Constitution in his favor, and nobody wants to do it in the favor of others, and certainly doesn't want to give up what they have now." The President will appoint a Constitutional panel to discuss and negotiate changes. However, changing the Constitution is a long and complicated process. PETROV said, "The year and a half remaining for YELTSIN as President are rather safe, because the process of changing the

Today's News Highlights

Russia

IMF Leaves, No Loan Plege

UES To Pay 4thQ Taxes

Gazprom Stake To Be Sold

European Republics

Belarus-Rus Changes Format?

Estonian Gov't Stands Firm

South Caucasus & Central Asia

Georgian-Russian Border Talks

Azeri-Turkemn Caspian Talks

Kazakh-Uzbek Sign Agreements

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Cabinet Approved Economic Crisis Plan

· On Saturday, the Russian Cabinet approved the long-awaited plan for pulling the country out of the economic crisis. The plan calls for support for domestic industries, paying off of wages and pensions, and establishing price controls. Prime Minister Yevgeny PRIMAKOV said the country needed strong state intervention in order to come out of the financial and economic crisis, but noted that the plan does not go as far as Soviet style measures. PRIMAKOV emphasized that Russia does not reject market reforms, but is using the state's power to save them. The plan will be published after November 5th. It has already failed to win the support of International Monetary Fund (IMF). The IMF criticized the plan as a, "significant step backwards in forming a market economy." Without the IMF's backing and financial support, Russia will have to print rubles to cover $17 billion in external debt payments next year. PRIMAKOV said this will not lead to inflation. The government has promised to keep annual inflation down to 25 percent to 30 percent, the Financial Times reported. Comment: The complexities of PRIMAKOV's plan are best described by German newspaper Maerkische Oderzeitung, "On the one hand, the Russian cabinet of ministers will try to establish control over price formation on certain foodstuffs and medicines, as well as support government enterprises. On the other hand, Moscow makes it clear it will not abandon the path of democratic and economic reforms." The questions remains whether this plan can really work and whether inflation can be controlled by price requirements?

IMF Leaves Russia Without Disbursing Funds

· As of late Friday, the International Monetary Fund (IMF) had not received a plan from the Russian government which spelled out specific policies it would take to pull the nation out of its economic crisis. The IMF mission left after 10 days of fruitless talks. The IMF made no pledge to release the next $4.3 billion installment of a $22.6 billion bailout loan package. Its said the government must demonstrate that its crisis plan is being implemented and is feasible. A Fund statement said, "While there was a common view on the desirable objectives for economic policy through the end of next year, the necessary policy measures are still under consideration." The Fund said talks could resume if there was a, "program which could be supported by the inter

national community." The Russian Economics Minister said the plan relies on as-yet-unreleased IMF loans, but Prime Minister Yevgeny PRIMAKOV insists that Russia will survive with or without foreign aid. PRIMAKOV said, "It would be easier for us to stand on our feet if we get [outside] support, but if we don't get it Russia will neither lie down nor fall on its knees." This weekend he said, "We count on IMF support, and we hope we will get support in restructuring our debts." He added that a dialogue is continuing with the Fund. PRIMAKOV noted that the mission objected to measures calling for state regulations of the economy, but that such objections run counter to the statements of IMF Managing Director Michel CAMDESSUS that macro-economic policies alone are insufficient to manage and economy.

Government To Support Banks, Pay Pensions

· First Deputy Prime Minister Vadim GUSTOV today said the Russian government will support a number of commercial banks, specifically SBS-Agro. GUSTOV said the government was planning, "normalization of the banks" in the nearest future. He added that it was necessary to, "preserve a few banks, or else we shall lose all." GUSTOV declared that the government had already taken some effective measures to ease social tension in the country, including the full payment of all pensions across the country in October. "The next task consists in the payment of all pension arrears for the months preceding October. According to him, the government has allocated 12 billion rubles to pay the pensions in full before December." GUSTOV said further priority measures to be taken by the Russian government and the Central Bank to stabilize the social and economic situation in the country will be published in the press on Thursday, November 5th.

Business

UES To Pay 4th Quarter Taxes

· The Russian Federal Tax Service and Unified Energy Systems of Russia (UES) have signed a protocol on the settlement of their dispute over the payment of taxes in the fourth quarter of 1998. Russian Federal Tax Service chief Georgy BOOS said that UES has already paid about 140 million rubles in taxes for October. Under the agreement, UES will be paying increasing amounts until year's end. BOOS said that the Ministry of Railways will be the next to sign a tax accord with the Federal Tax

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Service. He noted that other major tax payers have signed similar payment obligation agreements, including Russian gas giant Gazprom.

Yeltsin Decrees 5 Percent Gazprom Sale

· Russian President Boris Yeltsin has signed a decree to sell part of the government-held package of shares in the Russian gas giant Gazprom opens stock company. The decree will allow foreign investors to participate in the sale. The Russian government has increased a limit on foreign ownership of Gazprom stock from 9 percent to 14 percent. The date of the sale has not been determined. The decree which takes effect from the day of its official publication determines the terms and conditions for the sale of 5 percent of the Gazprom shares at an auction sale and/or through a commercial tender. The stake could be worth almost $1 billion. The news of the sale caused Gazprom share prices to soar by 30 percent at the Moscow Stock Exchange. During the day, trading was suspended five times as the average stock index exceeded the ceiling magnitude established by the Federal commission on the Securities Market.

Maslyukov Visits Vympelkom

· First Deputy Prime Minister Yuri MASLYUKOV today visited the cellular communications company Vympelkom. MASLYUKOV dismissed his having balled out any privileges to Vympelkom. He said the schedule of settlements between the Russian Space Agency and the joint stock company Vympelkom had been revised on his orders, explaining that it was related to the financial crisis which broke out in Russia. He also brushed aside the implication that some cellular communications companies enjoyed preferences in ownership of frequency bands. MASLYUKOV also discussed the government's plan to revise downward the value added tax and the profit tax, and solve problems with social taxes. He said, "it is planned to decrease the value added tax by up to 15 percent, the profit tax by five percent, as well as to resolve problems with social taxes."

governing bodies of the Union formed under the treaty signed by the Belarus President Alexander LUKASHENKO and Russian President Boris YELTSIN, in Moscow on April 2, 1997. The other two bodies are the Supreme Council of the Union and the Executive Committee of the Union. The Parliamentary Assembly is the Union's representative body made up of groups of deputies delegated to it by the Federal Assembly of Russian and the National Assembly of Belarus. Each country delegates 36 deputies to the Parliamentary Assembly. The terms of their service and the procedure of the termination of their competence are determined by each member-country's parliament independently. The Parliamentary Assembly decides on the development of the legislational basis for the integration of the member-states in the political, legislational, economic, social, humanitarian and other fields. The Belarus-Russian Union Parliamentary Assembly holds sessions twice a year. The Parliamentary Assembly is due to be transformed into a standing legislating body of the Union. State Duma Speaker Gennady SELEZNYOV is Chairman of the Parliamentary Assembly of the Union of Belarus and Russia. Russian First Deputy Prime Minister Vadim GUSTOV is attending the Parliamentary Assembly of the Union of Belarus and Russia. Beside the deputies, a delegation of the Yugoslavian parliament is also participating in the work of the session. The delegation is headed by leader of the Serbian Radical Party, Deputy Prime Minister of Serbia Vojislav SESELJ. The Yugoslavian parliamentarians will probably be granted observers' status at the session. The Belarus-Russian Commission is expected to adopt a resolution on the situation in Kosovo.

Estonian Government To Stand Firm

· Estonia's government is standing firm, saying it will not resign over parliament's rejection of its draft budget last week. Government spokesman Daniel VAARIK, "The government does not plan to resign." He said the Cabinet did not plan to discuss linking a confidence motion to the budget or quitting over the row. The Cabinet met today at an undisclosed location to discuss its direction for the next four months. On October 28th, the parliament rejected the government's 1999 budget because its gross domestic product growth forecast of six percent and planned 21 percent increase in revenues were too optimistic due to the Russian financial crisis, Reuters

European Republics

Belarus-Russian Union Format Change?

· The Parliamentary Assembly of the Union of Belarus and Russia opened its 9th session in Yaroslavl today. The Assembly is one of the three

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reported. The government has resubmitted the draft plan unchanged. Justice Minister Paul VARUL said that if lawmakers reject the draft budget for a second time without debating it, the government will be unable to continue in office. Finance Minister Mart OPMANNN pointed out that no figures have been submitted to prove what the opposition claims is the draft's, "excessive optimism."

South Caucasus & Central Asia

Georgia-Russian Hold Border Talks

· Georgian-Russian border talks opened in Moscow today. The Russian delegation is represented by Federal Border Service Director Colonel-General Konstantin TOTSKY and Foreign Ministry officials, while the Georgian delegation is represented by the State Border Department Chairman Lieutenant-General Valery CHKHEIDZE and ambassador to Russia Malkhaz KAKABADZE. According to the Georgian State Border Department press release the talks will address the two states' cooperation in border guarding and the time-table and arrangements of Russia turning over to Georgia property of Russian border troops that are located in Georgia under an intergovernmental agreement of February 3, 1994. The delegations will also discuss the guarding of a Black Sea economic zone, operative and investigating activities of border guards, and prevention of arm, radioactive material and drug-trafficking, which was approved by the joint Georgian-Russian commission on border issues of January 16, 1998.

Meanwhile, a meeting between Georgian President Eduard SHEVARDNADZE and Abkhaz President Vladislav ARDZINBA will take place in the first half of November, probably in Sukumi. It is expected that the two presidents will sign the repatriation agreement and another renouncing the use of force.

Azeri-Turkmen To Discuss Caspian Disputes

· The leaders of Azerbaijan and Turkmenistan are

scheduled to meet in November to discuss how to divide several oil and gas fields in the Caspian Sea. Turkmen President Saparmurat NIYAZOV and Azeri President Geidar ALIYEV will meet in Turkmenbashi, which overlooks a disputed area. The disputed Caspian areas are the Azeri, Chirag and Kyapaz fields. Turkmenistan claims entire or partial ownership of the first two fields, which are being developed by Azerbaijan's $8 billion oil consortium with international oil majors. The Kyapaz field, which Turkmenistan calls Serdar, is one of the fields Turkmenistan has put up for tender for rights to develop its part of the Caspian shelf. NIYAZOV has offered to divide the Caspian into sectors but gave no details. NIYAZOV, leader of a nation desperate for gas revenues, refused to sign the Ankara Declaration endorsing the Baku-Ceyhan as the main export pipeline for Caspian gas. He felt that by signing the declaration, Turkmenistan would waive its right to these disputed Caspian fields. Turkmenistan has not been able to export gas since March 1997, except for small quantities to Iran, because Russia has blocked pipelines to European markets.

Kazakh-Uzbekistan Sign Agreements

· Kazakhstan and Uzbekistan have signed an eternal friendship agreement, pledging to tackle key political and economic issues together. Uzbek President Islam KARIMOV said, "I am confident that this document will form a solid base for our relations in the third millennium." Kazakh President Nursultan NAZARBAYEV said, "I believe that together we will be able to influence affairs in Europe and Asia." NAZARBAYEV and KARIMOV signed a economic cooperation agreement for 1998-2005 and set accords aimed at boosting ties in the fuel and energy sector. The two leaders discussed the situation in Tajikistan and Afghanistan. The summit was overshadowed by media reports of their rivalry for leadership in Central Asia. KARIMOV said, "Somebody form the Russian press writes that relations between Tashkent and Astana have become cold and strained. I think this happens when Moscow wants it."

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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