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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Wednesday, January 13, 1999

in nuclear non-proliferation. Prime Minister Yevgeny PRIMAKOV said, "such strong-arm methods or sanctions against our organizations are counterproductive for relations between Russia and the United States." First Deputy minister of nuclear power Lev RYABEV called the move unfounded and that the US has no evidence. Mendeleyev University Rector Pavel SARKISOV said that his institution, "is not engaged in any nuclear research and has no direct or covert agreements with Iran." He did note that there are Iranian students studying polymers, not nuclear subjects. Russian Defense Minister Igor SERGEYEV said, "These centers could not have handed over such technologies, because they do not possess them in full measure." The sanctions will be discussed today during talks in Washington between Deputy Secretary of State Strobe TALBOTT and Russian Deputy Prime Minister Yuri MASYLUKOV.

Communist Party Split, Continues Political Trend

· Russia's Communist Party on Tuesday held a closed door plenary session at party headquarters. The agenda of the meeting was unknown, but many conclude that the position of various factions in the party in preparation of parliamentary elections to be held in December, 1999 was discussed. Viktor ILYUKHIN, the radical leader of the parliamentary security committee announced that he will form his own electoral block based on the Movement for the Support of the Army (DPA) before the December election, the Financial Times reported. His party might pro

Russian Federation


US Imposes Sanction On Three Institutions

· In a speech at the annual Carnegie International Non-proliferation Conference Tuesday, US President Bill CLINTON's national security adviser Sandy BERGER announced that the US has imposed economic sanctions against Mendeleyev Chemical Technical University in Moscow, the Scientific Research and Design Institute of Power and Technology (NIKIET), and the Moscow Aviation Institute, accusing them of leaking nuclear and missile technology to Iran. "We've made it very clear the administration has authority to act against entities that violate international nonproliferation standards and we will use that authority to protect our security," BERGER said. The sanctions bans all US aid, contracts and export-import transactions to these institutions. "Weapons scientists and institutions face increased financial pressure to sell their wares to whomever is in the market, including rogue states," he said. BERGER did not describe the assistance the three are believed to have provided Iran nor did he give details of the sanctions. He did make a distinction between the actions of private organizations and those of the Russian government. BERGER said that, "Only Russia can police its own borders, factories and technology industry." He added that the most effective shield against leakages of technology is not US sanctions but an efficient exports control system in Russia. Last week, Russian President Boris YELTSIN signed a resolution amending a law tightening the control of exports of dual use technologies. The US imposed similar sanctions against seven other Russian institutions in July, following an Iranian test-fire of a missile that could strike Israel and other US allies. The Russian Foreign Ministry branded the US sanctions as groundless and said that it violated accords on cooperation

Today's News Highlights


Maslyukov Visits Washington

Yeltsin Signs Platinum Decree

Exxon Neftegaz Reaches Agrmt.

European Republics

US To Hold Ukrainian Aid

Belarus- Gazprom To Sign Deal

South Caucasus & Central Asia

Abkhaz Allow Refugees' Return

Ibraimov-Primakov Meet

Tajik Tenders Cotton Mills




January 13, 1999

Intercon's Daily

vide a place for hard-liners unhappy with Communist Party leader Gennady ZYUGANOV. ILYUKHIN is expected to be joined by controversial deputy Albert MAKASHOV and several other Communist deputies. ILYUKIN and MAKASHOV have come under fire from Jewish groups and liberal politicians for anti-Semitic remarks. This was just one of many incidents which has forced ZYUGANOV to distance himself and the party from these types of opinions. It has also been reported that Russian State Duma Speaker Gennady SELEZNYEV and the social democratic wing of the party will split and form a new party. SELEZNYEV said he was ready to head a new left-of-center coalition. ZYUGANOV played down these possible splits by suggesting that the Communist Party may cooperate with the Fatherland Party formed by Moscow Mayor Yuri LUZHKOV. The Mayor, however, rejected that such an alliance will be formed. The split of Russia's largest party emphasizes the fragmentation and diversification of Russia's political spectrum. The Communist Party is not the only faction that is experiences splits and upheavals. Our Home is Russia relieved Alexander SHOKHIN as parliamentary leader in December because of difference with the party's leader former prime minister Viktor CHERNOMYRDIN. Deputy Boris KUZNETSOV was named acting parliamentary leader of Our Home is Russia until a new one is elected. In the previous parliamentary election held in December, 1995, 43 political parties competed, but only 4 parties won enough votes to hold parliamentary seats. With new political parties being formed and party splits, this year's parliamentary elections may reach the same number of competing political parties as the 1995 elections. ZYUGANOV said, "It's one of the possibilities for our broad bloc to take part as three columns, the KPRF [Communist Party], the enlightened patriots [SELEZNYOV], and the national-patriots [ILYUKHIN]."

Russian Crime Increases By 7.7 Percent

· Russia's crime rate increased by 7.7 percent in 1998, primarily due to the economic and financial crises and low standards of living. Prosecutor General Yuri SKURATOV said that the number of severe crimes rose by 10 percent and economic crimes by 15 percent last year, The Journal of Commerce reported. Prime Minister Yevgeny PRIMAKOV has repeatedly stressed that the need to combat crime in Russia is one of the top priorities of his government.


Ruble = 22.58/$1.00 (NY rate)

Ruble = 22.58/$1.00 (CB rate)

Ruble = 25.24/1 euro (CB rates)

Maslyukov To Confer With US Officials

· Russian First Deputy Prime Minister Yuri MASLYUKOV, leading a delegation which includes Economics Minister Andrei SHAPOVALYANTS, Deputy Finance minister Oleg VYUGIN, deputy governor of the Central Bank Tatiana PARAMONOVA and senior officials of the Ministry of the Atomic Energy, the Ministry of State Property, the Ministry of Fuel and energy, the State Communications Committee, the State Building Committee and the Russian Commercial Agency, is meeting with top US officials and international lenders in Washington beginning today. His talks will focus on Russia's economic situation. Today, he is meeting with State Department officials and the vice president's national security adviser Leon FERTH. On Thursday, MASLYUKOV will confer with International Monetary Fund Managing Director Michel CAMDESSUS and World Bank Chairman James WOLFENSOHN on Moscow's future cooperation with these international lenders. MASLYUKOV will attend a Russian-US investment symposium at Harvard University's John F. Kennedy school of state administration over the weekend.

Decree On Platinum, Palladium Quotas Signed

· Russian President Boris YELTSIN on Sunday signed decree setting the quotas for Russian platinum at 20 tons and palladium at 100 metric tons. Deliveries of platinum and palladium are expected to begin today or Thursday. Quotas in 1998 were delayed until April, keeping the metals off the market for most of the first half of the year and causing prices to rise as a result. 1997 also experienced major delays in signing quotas. Russia accounts for 20 percent of platinum and more than 60 percent of world palladium supplies. The metal will come from state precious metals and stones reserve Gokhran, the Central Bank and major producer Norilsk Nickel.


Gazprom Needs Answer On Misappropriations

· Russian gas monopoly Gazprom is demanding a prompt answer from Ukrainian authorities concern

When you need to know it as it happens




January 13, 1999

Intercon's Daily

ing the misappropriation of the Russian gas exported to the West through a Ukraine-traversing pipeline. An estimated 2.5 billion cubic meters of the Russian gas has been siphoned off by Ukraine in December 1998. Gazprom president Rem VYAKHIREV sent telegrams to Ukrainian Prime Minister Valery PUSTOVOITENKO and Neftegaz Ukrainy company's chief Igor BAKAI to say that the practice is inadmissible. VYAKHIREV said he expects to get an answer as to how long will this be allowed to continue. The daily misappropriation of the gas from the export main and other pipelines on Ukrainian territory amounts to 55 million cubic meters by the January. Ukraine's total debt for Russian gas deliveries is $1.6 billion. PUSTOVOITENKO on Tuesday ordered a probe into the "subject of claims" of the Russian gas company, Ukrainian National Security Council Deputy Secretary Alexander RAZUMKOV said. Neftegaz Ukrainy's deputy chief Taras FREYUK said in a statement that Ukraine, "has not overdrawn a single cubic meter of the Russian gas...I do not understand what two and a half billion cubic meters of gas is in question." Neftegaz Ukrainy's press service said the company's leaders are not against Gazprom setting up a fact-finding commission. FREYUK also denied that Ukraine's debts totaled $1.6 billion; he said the figure was $734.5 million.

Exxon Neftegaz, Two Cos. Reach Agreement

· US Exxon Corporation announced Tuesday that its affiliate, Exxon Neftegas Limited, Rosneft and Rosneft-Sakhalinmorneftegas have reached agreement in principle for the participation of each of the Russian companies in the rights and obligations with respect to Exxon's two Sakhalin III blocks, Ayashskiy and East Odoptinskiy, located offshore Sakhalin Island in far east Russia. Exxon Neftegas was awarded a 100 percent interest in the two blocks after the 1993 Sakhalin III tender. Exxon Neftegaz said seismic data suggest that these areas have substantial potential mineral resources, although exploratory drilling will be required to confirm commercial stores. Exxon hopes that the accord with the Russian companies will be helpful to the Russian State Duma's approval to the development of these fields under the federal law on production-sharing agreements. The company said the production-sharing deals on both areas remain to be approved by governments of the Sakhalin region and Russia. Chairman of Exxon Neftegas Limited K. T. KOONCE

said, "The recent passage by the State Duma of the Russian Federation of the Amendments to the Production Sharing Law and the associated PSA Enabling Legislation are very encouraging steps...We look forward to the timely passage of the Enabling Law by the Federation Council and subsequent approval of both laws by President YELTSIN."

European Republics

US Aid To Ukraine Contingent On Reforms

· The United States Congress earmarked $195 million in aid for Ukraine to support ongoing economic reforms. Half of the funds will be available after February 18th, when US Secretary of State Madeleine ALBRIGHT delivers her report to the congress on Ukraine's reform process and US investment in the country. The US wants Ukraine to present a coherent strategy for economic reforms and better business climate in the next few weeks. National Security Council Director for Russian, Ukrainian, and Eurasian affairs Carlos PASCUAL said, "It is clear that in the coming weeks a great deal of work must still be done to come up with a viable and effective strategy." PASCUAL and other officials have held talks with government ministers over the past three days. These talks focused on the need for reforms in the tax system, energy and agriculture sectors, and government, as well as the need to attract investment. Coordinator for assistance to the newly independent states William TAYLOR, "What we will be looking for is not merely words or intentions or expectations, but there will have to actually be accomplishments. Last year, the US also demanded that half of its $225 million in aid to Ukraine be linked to Ukraine's reform achievements.

Belarus-Gazprom To Sign Accord

· Russian gas monopoly Gazprom and Belarus are expected to sign in the near future an agreement on volumes of deliveries of Russian natural gas to Belarus and on terms of its transit across the Belarus territory. Gazprom Chairman Rem VYAKHIREV, company representatives, and Belarus Prime Minister Sergei LING held a working meeting on Tuesday. One company representative said, the Gazprom management considers an agreement on the whole prepared, and experts continue to work on unsettled issues. They include Belarus debt for deliveries of

When you need to know it as it happens




January 13, 1999

Intercon's Daily

Russian gas, which at present amounts to about $200 million, and its payment terms.

South Caucasus & Central Asia

Abkhaz Agree To Refugee Repatriation

· The Abkhazian leadership has agreed to an organized repatriation of the Gali district beginning March 1st. Abkhaz representative Vladislav ARDZINBA on Tuesday said, "We confirm the right of all refugees who left the Gali district of Abkhazia to a voluntary and safe return to places of their permanent residence." He called on the international community, including the UN, Russia and member-countries of the Friends to Georgia Group to, "help the solution of the humanitarian problem." ARDZINBA appealed to Russia for canceling a government resolution of December 19, 1994, and raising the question of canceling a resolution of the CIS Council of State Heads of January 19, 1996, in the part concerning limits on trade, economic, financial, transport and other operations with Abkhazia. Abkhaz representative Konstantin OZGAN will head a governmental commission supervising the socio-economic rehabilitation of the Gali district and creating conditions for the return of refugees. Georgian presidential adviser Levan ALEKSIDZE believes that the Abkhaz offer is motivated by its need for economic aid. Georgian leadership insists that all ethnic Georgians who return to Gali be permitted to participate in local councils and the police.

Kyrgyz Prime Minister Visits Moscow

· The conclusion of meetings between Russian Prime Minister Yevgeny PRIMAKOV and his Kyrgyz counterpart Zhumabek IBRAIMOV in Moscow today is that both sides need to implement bilateral agreements. PRIMAKOV said, "It is essential now to set up joint production structures, develop cooperation in production and consolidate the Customs Union instead of concentrating of theorizing." IBRAIMOV stressed that Kyrgyz leaders' decision for Kyrgyzstan to join the World Trade Organization, "is not to interfere with the interests of the states in the Cus

toms Union." Members of the Customs Union are Russia, Kyrgyzstan, Kazakhstan, Belarus, and Tajikistan. Before leaving Bishkek IBRAIMOV declared that politically and economically Russia was, is and will be "our main strategic partner." A package of joint document was signed as a result of the intergovernmental Russian-Kyrgyz negotiations. It included an intergovernmental agreement on cooperation in the information area, an intergovernmental agreement on avoiding double taxation and prevention of the nonpayment of income tax, and a memorandum on cooperation in small businesses between the Russian Ministry for the Antimonopoly Policy and Support for Enterprise and the Kyrgyz Ministry of Foreign Trade and Industry. The sides were expected to discuss draft agreements on informational, humanitarian and military cooperation and the possibility of opening cultural and information centers in Moscow and Bishkek. This is IBRAIMOV's first visit as Prime Minister. The ministers of Defense, Finance, Foreign Trade, Industry and Foreign Affairs, who are accompanying IBRAIMOV, held meetings with their Russian counterparts. Kyrgyzstan's debt to Russia is about $132 million, which Kyrgyzstan is interested in paying part by shares in its industrial enterprises.

Tajikistan Announces Tender On Cotton Mills

· The Tajikistan State Committee for the Management of State Property has announced an international tender to sell 22 cotton ginning mills. A Committee official has said that up for sale are 22 lots with 75 percent of shares [plus one share] of each enterprise, with the exception of one ginnery, which puts up 60 percent of shares for sale. A starting price is to be fixed on January 25, 1999. The deadlines for price proposals and entries is Thursday, March 11, 1999. Participants in the tender are not restricted in their bidding; participants can bid for any lots.

The Daily Report on Russia and Former Soviet Republics

will not be published on Monday January 18th in observance of Martin Luther King Jr. Day

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

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