DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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

WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Tuesday, December 1, 1998

visit India for discussion of the bilateral long-term cooperation program. It is expected that talks with India's leadership will be sealed by signing a, "very important document - an agreement on development of trade, economic, industrial, financial and scientific-technical cooperation between Russia and India until the year 2010," MASLYUKOV said. The cooperation agreement was initialed on November 28th at the fifth meeting of the Russian-Indian cooperation commission in Moscow. Following the visit, PRIMAKOV plans to hold meetings with the leadership of Kazakhstan in Astana.

DPR Elects New Leader

· The Democratic Russian party (DPR) on Saturday at its 11th congress elected Georgy KHATSENKOV as its new leader. KHATSENKOV, professionally trained in journalism, left the Communist Party in 1990 and actively participated in the pro-democracy movement. He described himself as a manager rather than political leader of the DPR. KHATSENKOV said that his main goal is to build the DPR into a self sufficient party so that it may run in the 1999 Russian State Duma election alone, and not a part of an alliance. He said the election alliance, "may be most unexpected," but it will not enter any cooperation with Yegor GAIDAR's Russia's Democratic Choice and the Liberal Democratic Party of Vladimir ZHIRINOVSKY.

Economy

Ruble = 17.88/$1.00 (NY rate)

Ruble = 18.25/$1.00 (CB rate)

Russian Federation

Politics

New Theories In Starovoitova's Murder

· New theories have surfaced in the murder investigation of Russian State Duma deputy Galina STAROVOITOVA. St. Petersburg prosecutor-general announced that it is seeking businessman Ruslan KOLYAK on suspicion of his involvement in the murder. It has also been speculated that the motivation for the murder could be related to the business activities of STAROVOITOVA's son, who lives in Britain. This is highly unlikely and most believe her murder was politically motivated.

Meanwhile, the Russian media claims that business tycoon and Commonwealth of Independent States Executive Secretary Boris BEREZOVSKY has concocted the breaking story of Federal Security Service's (FSB) internal hit squad in attempt to prevent the FSB from investigating his ties with groups in Chechnya. The Russian press points out that the three FSB officers who went public with the story of being ordered to assassinate BEREZOVSKY, were previously assigned to investigate a bombing attack against BEREZOVSKY more than three years ago. The fact that BEREZOVSKY had relations with these officers for many years adds credence to these claims. Early suspicion of their story, prompted many to believe that BEREZOVSKY could have paid the officers off. However, five other officers have supported their facts. BEREZOVSKY may have been able to pay off one officer or three, but much more difficult to pay off eight officers.

Primakov To Visit India On Behalf Of Yeltsin

· Russian First Deputy Prime Minister Yuri MASLYUKOV today announced that Prime Minister Yevgeny PRIMAKOV is scheduled for an official visit to India on December 20th to 23rd. PRIMAKOV will

Today's News Highlights

Russia

Russia Issued $724 Million

Interros Shares To Pay Arrears?

Tuesday Tid Bits

European Republics

Belarus Trade Unions To Protest

PACE To Strip Kiev's Mandate?

South Caucasus & Central Asia

UN Urges Georgia-Abkhaz Talks

New AIOC Consortium President

Cipco Ceases Operations

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Russia Issues $724M Against London Club Debt

· On Wednesday, Russian state owned Vneshekonombank issued a $724 million bond to cover part of Russia's foreign debt payments. Deputy finance minister Mikhail KASYANOV said after meeting with representatives of the London Club that the proceeds will be used to pay off debts due in 1999. Russia is scheduled to pay $17. 5 billion in 1999, to fully service its foreign obligations, including $9 billion due on debts inherited from the Soviet Union. Vneshekonombank is the Russian government's bank for foreign economic relations and administers the government's external debt.

Russia Seeks IMF Loan Installments

· In a meeting with International Monetary Fund's (IMF) managing director Michel CAMDESSUS today, Russian Prime Minister Yevgeny PRIMAKOV is seeking further installments of an IMF $22.6 billion bailout package. Russia only received $5 billion, before the installments were frozen in September due to the devaluation of the ruble, defaults on loan payments, and the virtual collapse of the banking system. PRIMAKOV warns that if Russia does not receive loans, it will print more rubles. The IMF has said the government must come up with a realistic recovery plan before more money will be released. The IMF hopes the plan will include tax reforms, means to improve tax collection, and the restructuring of the collapsing banking system. Former prime minister Sergei KIRIYENKO speaking in New York said, "Everyone understands that budget parameters remain vague, and their clarification depends on CAMDESSUS' visit. The IMF must realize that and accept compromises with Russia in reaching agreements on restructuring foreign debts."

Business

UES-Japan Study Electricity Projects

· United Energy Systems' (UES) chairman of the board Anatoly CHUBAIS and Japanese Foreign Minister Masahiko KOMURA on Monday held talks in Tokyo over the feasibility in principle of Russia's Sakhalin island's electricity deliveries to Japan's island of Hokkaido in a project called Energomost or Energy Bridge. Experts believe that a powerful cable line will need to be laid on the sea bottom connecting Sakhalin and Hokkaido for electricity deliveries from heat and power stations on Sakhalin. CHUBAIS said that the Energomost project is estimated to cost

about $12 billion for the construction of two heat and power stations in Sakhalin, one to run on natural gas and the other on coal. CHUBAIS said that UES is drafting a feasibility study in cooperation with Japanese experts and then will offer sizable shares for bidding. He noted that early estimates suggest that Sakhalin electricity will be three times cheaper than Japan's average price.

Interros Shares To Pay Tax Arrears?

· President of Interros Group Vladimir POTANIN on Wednesday said that the financial-industrial group is prepared to give the Russian government shares in Kondpetroleum Oil Company and all of the Angarsk Refinery to restructure the company's tax arrears, sign an agreement with creditors, and reach a production-sharing agreement on the company's deposits. POTANIN said, "If the companies need support from the state, it should be converted into property." He presented the plan during a meeting with First Deputy Prime Minister Yuri MASLYUKOV, who agreed to form a committee with Fuel and Energy Minister Sergei GENERALOV. That committee will present its solutions in a week and a half. Interros holds the bulk of shares in Kondpetroleum and parent oil firm Sidanko. The Angarsk Refinery belongs to Sidanko. POTANIN said that Interros is not planning to transfer shares in Norilsk Nickel, Severonickel, and Pechenganickel.

Government Reviews ORT Debt

· The Russian government, represented by deputy prime ministers Valentina MATVIYENKO and Vladimir BULGAK, today is meeting with ORT Television's general director Igor SHABDURASULOV and Commonwealth of Independent States Executive Secretary Boris BEREZOVSKY, as a private investor in ORT, to review the company's financial situation. SHABDURASULOV said ORT's debt totals $75 million. In November, under a court order, bailiffs started inventorying the indebted television station in an effort to create a manifest of assets to be liquidated to pay off its debts. After a meeting of the creditor, debtor, and government officials, the government promised to ask the litigating party to withdraw their suits and court bailiffs to suspend the inventory process. The government owns a 51 percent holding in ORT.

Meanwhile, presidential representative Alexander KOTENKOV told the Russian State Duma on Friday

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that President Boris YELTSIN, "was not aware at all about the power of attorney to shares of ORT Television." He added, "judging by statements made by Boris BEREZOVSKY, Alexander KORZHAKOV and Viktor ILYUKIN, these documents were drawn by BEREZOVSKY at KORZHAKOV's request and were kept by KORZHAKOV himself."

Tuesday Tid-Bits

Media Team Drifting On Artic Island

· While banishing the media to remote island may be the dream of many US citizens tired of the LEWINSKY-CLINTON affair coverage, a Russian emergency team is set to rescue a three-man television crew stranded on an Artic Island. Today, Russia will send a helicopter to evacuate the crew, which was making a documentary on polar bears. The men have been living in a cabin on the island since September 2nd with a diesel generator, computer, cellular telephone, and access to e-mail, but supplies are running low. Temperatures in the region are about 20 degrees below zero with strong winds, threatening the rescue attempt.

Surprise, Holiday For Mothers

· On November 29th, Russia celebrated the country's first official Mother's Day. The holiday came as a surprise to many, who say they only heard about it Sunday when government officials on the television and radio hailed the holiday. The government used the occasion to announce that it wants to achieve a 10 percent drop in the abortion rate by 2000. Seven out of 10 pregnancies in Russia end in abortion with 70 percent of women developing complications after the abortion.

Lukashenko Fights For Lower Vodka Prices

· Last month, Belarus President Alexander LUKASHENKO blasted Prime Minister Sergey LING for doubling the price of vodka. Belarus citizens rushed to sweep stores of their precious supply of vodka before the price came into effect. On national television, LUKASHENKO criticized LING saying, "Why do you Sergey Stepanovich, discredit the country? What need was there to double vodka prices? You hate people." He ordered LING to compensate for the price hike by increasing monthly wages by the amount it costs to buy several bottles of vodka. LUKASHENKO added, "If you raise prices

it is necessary to increase revenues and compensate this rise to people. You don't need a lot of brains to see price increases was a bungling." He also blamed government officials for shortages of eggs, butter, margarine, and sugar.

European Republics

Trade Unions To Protest Poverty Conditions

· Five major Belarus Trade Unions are planning a rally in Minsk on Wednesday to protest against the poverty its works have been force to live in. Belarus authorities are expected to exert pressure to prevent a massive protest; it is estimated that 30,000 people will participate. Deputy Prime Minister Vladimir ZAMYATALIN ordered government officials to meet with trade union leaders to explain the government's anti-crisis policies. The deadline given by the President to parliament to stabilize the situation in the consumer market runs out today. President Alexander LUKASHENKO said, "If the country's leader is unable to ensure a normal situation in the area he answer for, then he is not fit for the post. Such people should be fired." Reports show that milk products are in demand in the market and there is no meat, or chicken and no eggs in the market for long. People line for bread in some places. Price rises on these and other food products have had a very negative effect on the lifestyles of most Belarus citizens.

PACE Threatens To Strip Ukraine's Mandate

· The Parliamentary Assembly of the Council of Europe's (PACE) monitoring committee is considering stripping the Ukrainian delegation of its mandate in PACE. The committee believes that Kiev is failing to comply with its obligations to the Council of Europe which must be implemented by June 1999. It said that Ukraine has moved too slowly to build a law-governed state, delayed the transfer of the penitentiary system from the Interior Ministry to the Justice Ministry, and failed to pass laws improving the work of local bodies of power, stop the death penalty, and ensure the rights of Crimean Tatars. According to PACE headquarters in Strasbourg, a draft resolution that the monitoring committee intends to submit to the PACE session in January, 1999 contains a proposal to strip Ukraine's mandate. PACE is expected to send messages to international organizations and lending institutions to consider these findings in their dealings with Ukraine.

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South Caucasus & Central Asia

UN Urges Georgia-Abkhazia To Step Up Talks

· The UN Security Council has encouraged Georgia and Abkhazia to step up peace talks before renewed fighting breaks out. It calls for the planned meeting between Georgian President Eduard SHEVARDNADZE and Abkhaz leader Vladislav ARDZINBA to take place as soon as possible. SHEVARDNADZE noted that the reason for postponing the November meeting was Abkhazia's refusal to grant security guarantees for ethnic Georgians returning to Abkhazia. ARDZINBA said, "By constantly postponing the signing of the protocol on the return of refugees and the restoration of the Abkhazian economy, as well as a peace agreement, the Georgian side virtually impedes the return of people to their homes." He called on Georgia to, "give a clear and unambiguous answer," concerning its readiness to sign peace documents. He also accused Georgia of defaulting on its obligations. Talks will go nowhere until both sides decide where to hold them, Sukhumi or Tblisi. Chairman of the Abkhaz parliament in exile Tamaz NADAREISHVILI said he has information that the Abkhaz were planning to shoot down SHEVARDNADZE's airplane if he flew to Sukhumi to meet with ARDZINBA, RFE\RL Newsline.

Woodward Appointed AIOC Consortium Presid.

· The Azerbaijan International Operating Company (AIOC) announced on Friday the appointment of David WOODWARD as president of the AIOC consortium, effective January 1, 1999. WOODWARD, presently in charge of British Petroleum (BP) exploration and production in Baku, will succeed John LEGGATE. WOODWARD said that his main priority will be to ensure that more Azeris are moved into positions of responsibility with in the AIOC. The international consortium is developing three oil fields offshore Azerbaijan at a cost of $10 billion. Consortium members are BP, Ramco Energy, Statoil, TPAO, Delta Nimir, LUKoil, Itochu Corp., Amoco Corp., Unocal Corp., Exxon Corp., Pennzoil, and Socar.

Cipco Ceases Operations

· The Caspian International Petroleum Company, Cipco, is ceasing operations in the Karabakh prospect due to "uncommercial reserves." Cipco predicts that about 40 percent of its staff will be dismissed this month with the rest leaving in early January, 1999. Cipco's first two test wells earlier this year failed to find any oil, but did detect gas. An Azeri news agency said, "Taking this into consideration, Cipco experts said that the hydrocarbon reserves are not commercially advantageous. Following this, the company has decided to terminate its activities in Azerbaijan." Cipco's shareholders are Italy's Agip (5 percent), Pennzoil Company (30 percent), Socar (7.5 percent), LUKoil (12.5 percent), and LUKAgip (45 percent).

Kazakh Presidential Candidates Announced

· Kazakhstan's Central Elections Committee on Monday announced the presidential candidates who have met the deadline to register for January's election. They are: incumbent President Nursultan NAZARBAYEV, chairman of the Customs Committee Gany KASYMOV, parliamentary deputy Engels GABBASOV, and the Communist Party chairman Serikholsyn ABDILDIN. Karishal ASSANOV said he was withdrawing his candidacy because he did not want to participate in the "farce" being organized in Kazakhstan. He also said that NAZARBAYEV has greater access to the media than all his opponents. ABDILDIN said that he might not be able to meet signature requirements and pay the registration fee. Former prime minister Akezhan KAZHEGELDIN has been barred from running in the election because of an arrest in connection with attending an illegal political meeting. The US State Department and other human rights organizations have denounced the early elections and the Supreme Court's decision not to rescind its prior ruling on KAZHEGELDIN's activities. Candidates have complained that the early elections have not given their parties enough time to mount a challenging campaign against the incumbent President. NAZARBAYEV promised to have "just and democratic" elections.

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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