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, January 20, 1999

he remarked that it is very hard to become the chairman of the faction ten months before elections. CHERNOMYRDIN described RYZHKOV as, "a notable politician and a man who has his own stance." Today, the faction will propose the election of Chairman of the Committee on Local Government Andrei POLYAKOV as the First Deputy Speaker. Nikolai PISKUN, former deputy head of the Taimyr district administration, is suggested as the head of the Local Government Committee.

Explosion At US Embassy No Accident

· The Zhiguli car explosion outside the US embassy in Moscow on Sunday has been determined to be a small bomb, which was placed underneath the car belonging to the Federal Security Service (FSB). Kommersant Daily, owned by Alexander SMOLENSKY, and Segodnya, owned by the Most conglomerate Vladimir GUSINSKY reported that local police revealed that the homemade bomb had 100 to 150 grams of TNT. Kommersant Daily said that the, "official story about an explosion caused by a technical fault in the car," is an attempt by the FSB to cover up one of its mistakes. The explosion apparently was no accident, but is connected to warnings received the embassy in Arabic of an imminent terrorist attack. Other Intercon sources suspect that the real culprits are the Russian security forces themselves and recall an earlier rocket propelled (RPG) attack on the US Embassy Defense attache's office on September 13, 1995 as well as a bomb with was defused in August of the same year. This

Russian Federation

Politics

Russia-Cuba Strengthen Relations

· Cuban Foreign Minister Roberto ROBAINA on Tuesday met with chairman of the Russian Federation Council Yegor STROYEV, State Duma speaker Gennady SELEZNYOV, and Prime Minister Yevgeny PRIMAKOV in Moscow. ROBAINA said Cuba is ready to raise the status of consultations and contacts in all spheres, restore the friendship bridge which has always united the two peoples, and boost the trade. The Russian Prime Minister expressed hope that ROBAINA had fruitful meetings in Moscow and was satisfied with the visit. "We are glad that Cuba's isolation is gradually unraveling, that economic change in the US policy towards Cuba is taking place; we are glad that internal stabilization is under way in Cuba's economy," PRIMAKOV said. On Monday, ROBAINA had talks with Russian Foreign Minister Igor IVANOV, at which the parties discussed bilateral cooperation issues and key international problems. IVANOV stressed, "relations with Cuba have been and remain one of the top priorities in Russia's foreign policy." At the close of the meeting, the sides signed a Program for Cultural and Scientific Cooperation for 1999 to 2001 and a Joint Russian-Cuban Statement in support of the United Nations Organization. ROBAINA also met with Emergency Minister Sergei SHOIGU, who heads the Russian side of the intergovernmental commission on trade, economic and scientific cooperation.

Ryzhkov Elected Chairman Of NDR

· Russian State Duma first deputy speaker Vladimir RYZHKOV was nominated by leader of Our Home is Russia (NDR) Viktor CHERNOMYRDIN and approved as chairman of the faction, RYZHKOV promised to do everything possible to help the movement's success in the future parliament elections. However,

Today's News Highlights

Russia

Privatization Plans Continue

Spies Influtrate The Media

Sino-Russian Pipeline Talks

European Republics

IMF Review Ukrainian Reforms

South Caucasus & Central Asia

Mutiny Investigation Finalized

CST To Be Extended?

Kazakh President Installed

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is the latest in unsolved crimes and attacks on US Embassies around the world.

Economy

Ruble = 22.98/$1.00 (NY rate)

Ruble = 22.39/$1.00 (CB rate)

Ruble = 25.93/1 Euro (CB rate)

WB Considers Changes For Reform Programs

· World Bank Governor for Russia Michael CARTER in a live program of the Echo of Moscow radio show on Tuesday said that Russia and the World Bank will discuss possible changes in programs of reforms financed by three budget-substituting loans within the next two weeks. He said those changes might be related to the financial crisis that shook Russia in August 1998. CARTER noted that the loan for a structural reorganization of economics may be changed to take into account the progress of banking reforms. A very strong program of reforms was coordinated at negotiations on the third loan for a structural reorganization of economics by the World Bank and the government of Sergei KIRIYENKO. The World Bank and the Cabinet are discussing prospects for two tranches of the third loan on a structural reorganization of economics—those of $500 million and $700 million, two $200 million tranches of a coal loan and the third tranche to support social reforms at an amount of $250 million. CARTER noted that the World Bank is confident to that Russia will meet its credit commitments, but concerned that Russia will not meet economic growth targets. The economic growth will raise the chance to return the money given to Russia by the World Bank, CARTER stressed. In his words, the Russian servicing of its debt to the World Bank takes a very small part of the Russian budget. Delegates from the Russian government and the World Bank met unofficially over the weekend to work on plans for Russia's reforms. After meeting with World Bank President James WOLFENSOHN in Washington last week, First Deputy Prime Minister Yuri MASLYUKOV pointed out that only technical problems of cooperation exist between the two parties, and no serious, principle differences. International Monetary Fund (IMF) officials begin meetings Thursday to review Russia's reforms. The IMF has been critical of Russia's draft 1999 budget calling it unrealistic. Meanwhile, the Russian State Duma on Tuesday

passed the 1999 budget in the second reading by a vote of 297 to 54, with five abstensions.

Russian Privatization To Continue

· Russian First deputy State Property Minister Alexander BRAVERMAN on Sunday said that privatization in Russia will continue at the planned pace. He noted that all western banks, which were engaged in assessing privatized enterprises, continue to cooperate with Russia. He said the assessments of the banks will be used at major auctions, such as the planned sale of 2.5 percent stake of Gazprom, as well as of shares of LUKoil oil company and Svyazinvest telecom. BRAVERMAN said that it is necessary to find "alternative ways" of selling shares of most attractive companies. The alternatives can be convertible bonds or other instruments. He said that market research is needed to determine what kind and how many securities can be purchased by what kind of groups or market segments. BRAVERMAN said, "It is a complex process, but we shall not delay it. It will be done quickly."

Consumer Prices Grow 3.2 Percent

· The State Statistics Committee on Thursday released a report showing that consumer prices in Russia grew 3.2 percent from January 1st to January 11th. The increase included a 2.2 percent markup on January 6th through 11th. A daily price increment this month slipped to 0.285 percent from 0.335 percent in December 1998, when monthly inflation ran at 11.6 percent. Inflation for the whole 1998 was 85 percent compared with 11 percent for 1997.

Business

Spies Infiltrate The Media

· Major-General Yuri KOBALADZE, head of the information section of the SVR, Russia's external security service and one of two successor branches of the KGB, has been appointed deputy chairman of the VGTRK Russian public television. KOBALADZE will become ninth deputy of Mikhail SHVYDKOI. He will be responsible for public relations and international ties of the uniform production-and-technological complex of the state electronic media being formed on the basis of VGTRK. KOBALADZE was born in 1949 in Tblisi, graduated from the international journalism department of the Moscow State Institute of International Relations, worked in London

When you need to know it as it happens

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with Tass new service and with Gosteleradio. This is the second time a spy has been appointed to a media post, since former spy master Yevgeny PRIMAKOV became Prime Minister. The first was another SVR employee, Lev KOSHELYOV, appointed as director of Vesti, VGTRK's new program. PRIMAKOV has appointed allies to senior positions with the VGTRK and squeezed out opponents in other media outlets. The government has also been fighting to regain control over ORT Television, which is 51 percent owned by the state but heavily influenced by business tycoon Boris BEREZOVSKY. The media played a significant role in rallying support for Russian President Boris YELTSIN's campaign in 1996. PRIMAKOV has repeatedly stated that because of his age he will not run for president in 2000.

Chinese Delegation Discusses Gas Pipeline

· A Chinese delegation led by Chairman of the State Planning Committee ZENG Peiyan and Gazprom leader Rem VYAKHIREV on Tuesday held negotiations in Moscow on long-term cooperation. VYAKHIREV said that the talks are to review the possibility of developing a cooperation with Gazprom and whether to import natural gas from Western Siberia. Four spheres of the cooperation between the Russian energy company and China were outlined including exports of energy from the existing power plants, the scientific-technical cooperation, the supply of surplus electricity from Siberian power plants to China, and possible investments in the construction of Buriyskaya and Boguchanskaya power plants on Russian territory.

Deputy Minister of Fuel and Energy Yelena TELEGINA said that before the talks the Chinese delegation met with head of the Unified Energy Systems of Russia company management Anatoly CHUBAIS, Economics Minister Andrei SHA-POVALYANTS and heads of the Russian Yukos oil company. Today, the Chinese delegation will attend the first plenary meeting of the Russian-Chinese submission on energy which acts under a bilateral commission preparing regular meetings of the Russian and Chinese prime ministers. Priority will be given to the consideration of the Kovyktinsky gas condensate field and the construction of an export gas pipeline from Russia to China and South Korea. The Kovyktinsky deposit is believed to contain about

1.5 billion cubic meters of gas. The export pipeline will be about 3,000 kilometers long. The project is valued at $5 billion to $7 billion.

European Republics

IMF May Withhold Ukrainian Loan

· An International Monetary Fund (IMF) mission has arrived in Kiev to review economic reforms and study the 1999 state budget. Assistant Director of the IMF Second European Department Mohammed SHADMAN-VALAVI said the visit will last through January 26th. After that the mission will present its recommendations to the IMF Board of Directors on resuming loan installments to Ukraine. SHADMAN-VALAVI said that it is important for the mission to understand whether the budget revenues are realistic and how the deficit, approximately 1 percent of the Ukrainian gross domestic production, will be financed. It is also interested in government reforms, privatization programs, monetary policy, and plans in the energy reform. The agricultural situation has not been discussed. SHADMAN-VALAVI has refused to comment on a possible outcome of negotiations between the IMF mission and the Ukrainian government. He added that Ukraine is in a "critical situation" and will have no other option but to adopt "difficult and unpopular" measures. The extended financing program stipulates the allocation of $2.2 billion worth of loans within three years. The program started in September 1998, and Ukraine was given two installments totaling $336 million last fall. However, the financing was stopped in November due to moderate successes of the Ukrainian reforms and their slow rates. Deputy Prime Minister Sergei TYGIPKO noted that 42 out of the 141 items of the program have been fulfilled. Another 18 items have been prepared by the government and will be finally coordinated with the IMF mission

South Caucasus & Central Asia

Mutiny Investigation Finalized

· Deputy Main Military Prosecutor Nodar OKRUASHVILI on Tuesday said that Georgia's Military Prosecutor's office has finalized the investigation of the anti-governmental mutiny that occurred in Western Georgia on October 19 through 21, 1998. The majority of 44 men arrested on suspicion of organizing the mutiny and taking part in it are supporters of ex-president Zviad GAMSAKHURDIA.

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Some are former members of Zviadist armed units, others are former high-ranking officials from the GAMSAKHURDIA presidency in 1991. All of the 44 arrested are accused of high treason, an arms theft and other misdeeds. Several officers of the Georgian Defense Ministry are charged with the crime as well. Police are still searching for seven more organizers and participants in the mutiny, including its leader Lieutenant-Colonel Akaky ELIAVA, who have been hiding in mountains in Georgia. Over 200 soldiers and officers of the Senakskaya brigade of the Georgian Defense Ministry were maneuvered to assist in the mutiny. Almost all of them voluntarily returned to the barracks on October 21st to 22nd, 1998. Russian Media reports that he is threatening to organize another mutiny. This is viewed as propaganda to tarnish Georgia's international image.

CIS Security Consider Extending Treaty

· The Secretaries of the Security Councils of the countries which are parties to the Collective Security Treaty (CST) held a working meeting Tuesday. Most of the participants agreed to extend the Treaty, secretary of the Russian Security Council, head of the presidential administration Nikolai BORDYUZHA said at the meeting's conclusion. Only one of the participants in the treaty, representative of Uzbekistan, did not take part in the working meeting. The Georgian representative believes it is necessary to for adapting the treaty to contemporary conditions before prolonging it. Other participants in the meeting said that the document should first be extended and then adapted to present conditions. The ultimate decisions on prolonging the treaty will be taken at a summit of the CIS countries. In addition, the activity of security councils of all member-states of the Treaty was discussed at the working meeting to exchange experience, BORDYUZHA said. The Russian Security Council notes that the CST could become an effective tool to oppose such new threats as across-the-border terrorism, illegal narcotics traffic, contraband of arms, organized crime. Creating a joint rapid-reaction peacekeeper forces that could be used in peacekeeping operations under the

United Nations auspices was discussed at the meeting. The CST was adopted in Tashkent on May 15, 1992, by the leaders of Armenia, Russia, Kazakhstan, Kyrgyzstan, Uzbekistan, and Turkmenistan. Belarus joined the CST in June, Azerbaijan in September, and Georgia in December, 1993.

Kazakhstan President Inaugurated

· Kazakhstan's re-elected President Nursultan NAZARBAYEV was sworn in today for another, seven year term. He won the presidential elections on January 10th with a landslide 79.9 percent of the vote. The inauguration ceremony was held in the Congress Hall of Kazakhstan's capital. The ceremony was attended by prime ministers and parliament speakers of 14 states, including Turkey, China, Iran and CIS members, as well as presidents of Russia's republics of Tatarstan, Bashkortostan, Yakutia and Ingushetia, and governors of Astrakhan, Omsk, Orenburg, Chelyabinsk and Tyumen regions. In his speech at the inauguration ceremony NAZARBAYEV outlined main tasks for the next few years—to ensure a worthy life for the population and democratization of society. "This year we shall conduct parliamentary elections in accordance with a new election law and in which all parties and public organizations will take part," he said. Commenting on the results of the presidential elections, NAZARBAYEV said that the Kazakh people had for the first time proved their unity to the world. During his campaign he declared that, "there are five keys to the door opening the way to prosperity for his country. These keys are an anti-crisis program, maintenance of political stability, strengthening inter-ethnic accord and social partnership, democratization of society, the struggle against corruption, reasonable social policy and integration." He noted that political and economic reforms will continue so long as the stability of the country remains unaffected. NAZARBAYEV met with Russian Prime Minister Yevgeny PRIMAKOV, who delivered a personal message of congratulations to NAZARBAYEV from Russian President Boris YELTSIN. They exchanged views on bilateral cooperation, including border regions.

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

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