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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, November 30, 1998

was considering whether YELTSIN, as commander in chief of the armed forces, is responsible for the decay of the Russian military. The commission failed to draw any conclusions reasoning that it would be too difficult to prove that YELTSIN's neglect was premeditated. The panel has already charged YELTSIN for instigating the collapse of the Soviet Union, crushing his enemy with government troops and tanks, and the launching of a civil war in Chechnya. The commission will submit its final report to the Duma, which will decide whether to launch the impeachment motion requiring a two-thirds majority.

Italian Foreign Min. To Visit Moscow

· Russian Prime Minister Yevgeny PRIMAKOV today met with Italian Foreign Minister Lamberto DINI during his visit to Moscow. PRIMAKOV called Italy a, "reliable partner." During DINI's stay, he met with Russian First Premier Vadim GUSTOV and held talks with Russian Foreign Minister Igor IVANOV. Russia and Italy will prepare for and determine when Italian President Oscar SCALFARO should visit Moscow. Russian President Boris YELTSIN paid a state visit to Italy in February. Italy occupies the second place among Russia's trade partners in Europe. DINI said that Italy will help Russia through its financial and economic difficulties.

Russian To Export Arms To Syria

· During a recent visit to Damascus, Russian Defense Minister Igor SERGEYEV and his Syrian counterpart reached an understanding on military assis

Russian Federation


Liberals Agree To Form New Coalition

· The death of prominent democratic lawmaker Galina STAROVOITOVA has prompted several lawmakers to form a center-right alliance against hard-liners. The coalition, which aims to keep the Communists from returning to power, includes Democratic Choice leader Yegor GAIDAR, former first deputy prime ministers Boris NEMTSOV an Anatoly CHUBAIS, former prime minister Sergei KIRIYENKO, Saratov Governor Dmitry AYATSKOV and deputy head of presidential administration Oleg SYSUYEV. GAIDAR said that the founding conference will be held either December 10th or 15th. AYATSKOV denied that he is participating in the coalition. Yabloko leader Grigor YAVLINSKY said that plans to form a center-right block are, "empty and useless." He said he will not unite with GAIDAR or CHUBAIS. Russian State Duma speaker Gennady SELEZNYOV said that the group will last, "no more than a month." The liberals will fight bitterly over selecting a leader and, "as a result of it, they will all perish," noting that liberal groups have been divided in the past on issues.

On Friday, presidential press secretary Dmitry YAKUSHKIN said that President Boris YELTSIN may "regret in a way," dismissing the young reformers. He said, "He [YELTSIN] always regarded and still regards them as successors. There is a paternal sentiment, too...I think some names will reappear already during the parliamentary elections."

Impeachment Panel Fails To Reach Decision

· The impeachment commission's work received a new impetus but failed to reach a decision, while Russian President Boris YELTSIN was being treated in the hospital for pneumonia for the ninth straight day. The Russian State Duma's impeachment panel

Today's News Highlights


Primakov Cuts VAT,Profit Taxes

Gazprom Pipeline In Romania

European Republics

Ukraine To Raise Oil Transit Fee

Latvian Cabinet Approved

South Caucasus & Central Asia

Georgia Seeks IMF Loans

ADB Grants $10M To Kyrgyz

Kyrgyz-Uzbek On Gas Exports

Uzbek-Iran On Afghan Situation




November 30, 1998

Intercon's Daily

tance. Russia will export to Syria armaments worth over $2 billion and will offer Syria assistance in modernizing planes and tanks which were earlier purchased in the former Soviet Union. Russia will export Sukhoi-27 planes, T-80 tanks and air-defense systems on the basis of S-300s. And, Russian experts will modernize MiG-21s, MiG-23s, MiG-29s, as well as T-72 tanks. Syrian newspaper Al-Ittihad said that the Russian-Syrian understanding in the military cooperation has "strategic importance."


Ruble = 18.4/$1.00 (NY rate)

Ruble = 17.88/$1.00 (CB rate)

Camdessus-Primakov Meeting Tuesday

· International Monetary Fund (IMF) Managing Director Michel CAMDESSUS will arrive in Moscow on Tuesday to hold two-day talks with Russian Prime Minister YEVGENY PRIMAKOV on Russia's economic situation. Russia is still hoping that the IMF will release the next installment of a $22.6 billion rescue package, which was put on hold in August. Russia is also trying to reschedule around $9 billion in payments due next year on Soviet foreign debt. The IMF has been sticking to its requirements for serious tax reforms and boost in collections, as well as a clear budget providing a surplus of 3.5 percent to 4 percent in 1999. Today, the government canceled plans to discuss the 1999 budget; the meeting has been rescheduled for Thursday. The 1999 budget is expected to be presented to the Russian State Duma by Friday.

This weekend the wily spy master PRIMAKOV sent out mixed signals as to how he will present Russia's cause to the IMF Managing Director. He said, "We should comply with their conditions, but not because we are overly obedient." However, he also said, "I find myself irritated when young kids come and start imposing their conditions. They have read many books but they don't know life as it is or the actual situation in Russia." PRIMAKOV insists that the money will clear foreign debts and inject cash into the economy. On the other hand he also warns that if the IMF fails to release the $4.3 billion installment, Russia will start the money-printing presses. The Central Bank states that it has only printed 5 billion rubles since the crisis, but other reports suggest that the real figure is more than 33 billion rubles since

August 31st. Finance Minister Mikhail ZADORNOV said, "At the moment, money is not the main thing we need from the IMF, although we need that too." He believes that Russian needs the IMF's understanding to help convince other creditors to reschedule Russia's debt. He said, "Without the consent of the IMF, creditors won't agree to defer, or possible partly write off, Russia's external debt."

Primakov Cuts VAT And Profit Taxes

· Russian Prime Minister Yevgeny PRIMAKOV on Friday said the government will propose reducing the value-added tax from 20 percent to 14 percent and the profit tax from 35 percent to 30 percent in an effort to collect more taxes. He said, "These measures help expand the base for taxation." PRIMAKOV added that the VAT cut should be particularly popular because it will lower the cost of electricity and other consumer expenses. Critics say that the VAT tax was the wrong one to cut, since reducing the VAT would deprive the budget of about 30 billion to 60 billion rubles. The VAT tax accounts for about half of all revenues. However, Tax Chief Georgy BOOS said that a new 5 percent sales tax on most consumer products will help make up the difference. These taxation changes will be presented to the Russian State Duma before Friday and will form the basis for Russia's 1999 budget.


Gazprom To Build Pipeline In Romania

· Russian gas monopoly Gazprom is planning to build a gas pipeline in Dobrogea, Romania, Gazprom President Rem VYAKHIREV told Romanian Prime Minister Radu VASILE in Bucharest on Thursday. He added that the new pipeline will allow Gazprom to double its capacity to transit gas through Romania to Balkan countries. Romania, Bulgaria, the former Yugoslav Republic of Macedonia, and Greece will be able to receive 1 billion cubic meters of gas annually. Construction on the pipeline could begin as early as next Spring and be completed by 2000 or 2002. VASILE expressed hope in boosting Romanian and Russian economic relations.

Rapota Appointed New Arms Chief

· Russian President Boris YELTSIN on Friday dismissed Rosvooruzheniye chief Yevgeny ANANYEV, blamed for a slump in Russia's weapons exports, and appointed Grigory RAPOTA as his

When you need to know it as it happens




November 30, 1998

Intercon's Daily

replacement. RAPOTA has been a long time aide to Prime Minister Yevgeny PRIMAKOV and joined the KGB in 1966. Earlier this year, RAPOTA was appointed deputy secretary of the presidential security council, where he was in charge of monitoring nuclear and missile non-proliferation. He said that as chief of Rosvooruzheniye he will ensure the continuity of its work and observe all of its prior obligations.

MChS Hooked Up To New Network

· Russia's Ministry of Extreme Situations (MChS) is being hooked up to a new network by Russian Informsvyaz that will provide various types of communications between MChS facilities, including voice, fax, and data communications. Video services will be added in the future. The network will link both stationary locations and mobile teams and interconnect with the information and communications systems of other governmental institutions in Russia and similar services in other countries.

Vneshekonombank To Open In S. Africa

· Russia's Vneshekonombank president Andrei KOSTIN said that the bank plans to open a representative office in South Africa in 1999. After meeting with Russian businessmen and visiting South African Vice president Thabo MBEKI, KOSTIN said that Vneshekonombank considers South Africa as a launching pad for work with other African countries. He believes that Russian banks could work with South African partners not only on the diamond, gold and non-ferrous metal markets, but also in the fields of power engineering, machine-building, and military-technical cooperation.

59 to 24 with no abstentions approved the center-right minority government headed by Vilis KRISTOPANS, chairman of the liberal party Latvian Way. The government consists of representatives from Latvian Way, nationalistic Fatherland and Freedom Party, and the New Party. The Peoples Party which won 24 seats in the parliament, Popular Accord Party with 16 seats, and Social Democrats with 14 seats are in the opposition. KRISTOPANS singled out that Latvia's integration into the European Union is his first priority. He will also continue to improve relations with Russia and NATO. The new Cabinet will also follow a conservative financial policy, precluding a budget deficit. The new ministers are as follows: Foreign Minister Valdis BIRKAVS, Education and Science Minister Janis GAIGALS, Finance Minister Ivars GODMAIS, Cultural Minister Karina PETERSONE, Transport Minister and deputy prime minister Anatoly GORBUNOV, and Minister of State Income Aija POCA of the Latvian Way Party; Defense Minister Girts KRISTOVSKIS, Interior Minister Roberts JURDZS, Environmental and Regional Development Minister Vents BALODIS, Welfare Minister Vladimir MARKAROV, Minister for cooperation with international financial organizations Roberts ZILE, deputy prime minister for European Integration Guntars KRASTS, State Minister for Environmental Protection Inese VAIDERE of the Fatherland and Freedom Party; Justice Minister Ingrida LABUCKA and Economics Minister Ainars SLESERS of the New Party.

South Caucasus & Central Asia

Georgia Seeking IMF Loans

· Georgian President Eduard SHEVARDNADZE in a national radio address stated that Georgia has asked the International Monetary Fund (IMF) for loans to cope with the impact of Russia's economic crisis, poor harvests, and lack of fuel. He said, "I don't know what aid they will give us, but I hope it will be quite substantial." Georgia has been hit with shock waves from the Russian economic crisis in August. Georgian exports have suffered the most, since neighboring nations are unable to purchase fruit and wine. Power shortages have forced authorities to tighten energy rationing from eight hours in 1997 to six hours of usage in Tblisi. In the past month, the Georgian currency has weakened against the dollar falling from 1.34 lari to 1.56 lari to the dollar. In

European Republics

Ukraine To Raise Oil Transit Fee

· Naftogaz Ukrainy, Ukraine's national oil and gas company, is planning to increase its fee for transit of oil through its territory by main pipeline by 20 percent. The increase is intended to counter a rise in tariffs for electricity. The effective tariff of $2.35 per ton of oil per 100 kilometers does not make up for pipage and pipeline servicing expenses. In 1997, as much as 52.9 million tons of Russian and Kazakh oil crossed Ukraine through pipelines. Ukraine received about $58.8 million for its transit services last year.

Latvian Parliament Approves Cabinet

· The Latvian parliament on Thursday in a vote of

When you need to know it as it happens




November 30, 1998

Intercon's Daily

addition, only 76 percent of planned revenues were collected in the first nine months of this year. Georgian tax collection, at nine percent of GDP is among the lowest in the world.

Georgia-Bulgaria Strengthen Cooperation

· Georgian President Eduard SHEVARDNADZE met with Bulgarian President Petar STOYANOV in Tblisi on Thursday, pledging to work more closely together to develop the Black Sea region. The leaders discussed the implementation of the TRACECA project, including the ferry project to link the Port of Poti with Varna and the prospect for exporting Caspian oil to Bulgaria. SHEVARDNADZE said, "This will be an important step toward moving the countries of the Black Sea basin closer together and accomplishing the tasks we have set ourselves." He noted that railway links at Georgia's Port of Poti on the Black Sea set to open in February 1999 will improve ties and boost trade. STOYANOV for his part praised the Great Silk Road development program in the Caucasus and Central Asian regions. He said, "Our countries are the bridge between Europe and Asia." The Georgian and Bulgarian Presidents signed a number of bilateral agreements on defense and frontier cooperation, combating drugs and crime, and avoiding double taxation.

Armenia To Receive Russian Nuclear Fuel

· Russian Atomic Energy Minister Yevgeny ADAMOV Wednesday said that Russia will continue supplying nuclear fuel for Armenia's Medzamor nuclear power plant. He said the program will continue, "out of political necessity," despite Armenia's debt of 180 million rubles ($10 million) for earlier deliveries. Russian First Deputy Prime Minister Vadim GUSTOV said that an agreement on the supply of fuel elements will be signed within days, RFE\RL Newsline reported.

ADB Approves $10M Loan For Kyrgyzstan

· The Asian Development Bank (ADB) on Friday approved a $10 million loan to Kyrgyzstan. The funds will be used to improve basic health and education in the Jalal-Abad and Osh provinces.

Kyrgyz-Uzbekistan Negotiate Gas Exports

· Today, Kyrgyz President Askar AKAYEV is scheduled to arrive in Tashkent to discuss softer terms of deliveries of Uzbek gas deliveries in 1999 and to solve the issue of Kyrgyzstan's gas debt. Kyrgyzstan has no gas fields and imports all its gas from Uzbekistan at $55 per 1,000 cubic meters. The director of Kyrgyzenergo Company Bakirdin SARTKAZIYEV said the Kyrgyz side would bargain for a 20 percent lower price. He said Kyrgyzstan, "would want to repay to Uzbekistan 70 percent of the gas debt with goods and food." Under an earlier contract, Kyrgyzstan pays 50 percent of its debt in the hard currency and 50 percent in commodities and food. Kyrgyzstan's gas debt to Uzbekistan totaled $3.3 million by November, and the Uzbek side warned that it would stop gas deliveries unless the monetary part of the debt is cleared by December 1st. Kyrgyzstan is working to form an agreeable arrangement with Uzbekistan on its debts and further gas deliveries.

Uzbek-Iranian Foreign Mins. On Afghanistan

· Uzbek Foreign Minister Abdulaziz KAMILOV and his Iranian counterpart Kamal KHARRAZI in Tehran on Tuesday called for the formation of a broad-based government in Afghanistan through political dialogue. The two sides discussed the Afghan and Tajikistan crisis and the need for regional cooperation to help resolve them. The two ministers expressed grave concerns over growing terrorism, insecurity and illicit trade in armaments and narcotics in the region. On bilateral ties, they said that both Tehran and Tashkent are determined to enhance bilateral ties and consolidate regional cooperation. Uzbekistan is interested in expanding its cooperation with Iran in commercial, economic, and telecommunications sectors, KAMILOV said. KHARRAZI said the economic potential, geographical locations, and the rich resources of Iran and Uzbekistan go far beyond the present level of cooperation. He stated that this demands further expansion of bilateral ties in various fields, increase in trade, and cooperation.

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

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When you need to know it as it happens