DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, January 7, 1999

develop good-neighborly relations. The status of political emigrant granted by Poland to STANKEVICH does not affect his citizenship and allows him to remain in Poland. Last March, the Polish judiciary refused to extradite STANKEVICH to Russia whose Prosecutor General's Office had instituted criminal proceedings against him. Russian Commissioner for human rights Oleg MIRONOV believes that STANKEVICH's status was granted only to him because he, "was a rather prominent politician." MIRONOV expressed doubts that, "should any other person with a criminal record go to Poland he would be given a status similar to the one granted to STANKEVICH." STANKEVICH stressed that he is not in conflict with the law, but denounces those who use the law for their own political goals. He said that he hopes to return to Russia to defend his innocence but only after Russian President Boris YELTSIN leaves his position.

Kokh Denied Entry To US

· On December 23, 1998 at New York's John F. Kennedy International Airport, the former head of Russia's State Property Committee, Alfred KOKH was denied entry to the US. Spokeswoman for the US Immigrations and Naturalization Service Barbara FRANCIS said, "We find him inadmissible. He was not admitted and was returned to Russia." She did not disclose the reason for refusing KOKH. However, in May, Moscow's prosecutor's office brought embezzlement charges against KOKH, who was a deputy prime minister until March. KOKH is

Russian Federation

Politics

Yeltsin Appoints Gusarov Deputy Foreign Min.

· Russian President Boris YELTSIN Wednesday signed a decree appointing Yevgeny GUSAROV deputy foreign minister, the presidential press service reported. He will replace Nikolai AFANASYEVSKY who was appointed Russia's Ambassador to France. GUSAROV was the head of the Foreign Ministry's Department for Pan-European Cooperation before the appointment. He has been working as a diplomat since he graduated from the MGIMO Moscow State Institute of International Relations in 1972. He worked in several foreign countries, including Canada. His latest foreign trip was to South Africa, where he served as Russia's ambassador to South Africa and Lesotho.

Stankevich Granted Asylum In Poland

· Russia on Wednesday criticized Poland for granting refugee status to Sergei STANKEVICH, a former Russian politician wanted in Russia for taking a $10,000 bribe to organize a concert in Red Square in 1992. STANKEVICH denies the charge saying it is a political frame-up. The Russian Foreign Ministry said there was no legal justification for giving asylum to STANKEVICH, a prominent figure during Perestroika and a member of the young reformers group. The Ministry said, "Attempts by certain circles in Poland to give a political coloration to what is a criminal case and the absence of any legal justification for this decision by the Polish government is reason for serious doubts about its readiness for honest cooperation between the law enforcement agencies of the two countries." It believes that STANKEVICH does not qualify for refugee status under any conditions in the international accords. Russia said that Poland's decision is out of line with statements by Polish officials about their desire to

Today's News Highlights

Russia

1999 Budget To Pass In Feb?

Int'l Paper Buys Mill In St. Pete.

European Republics

Latvia-Estonia Prime Mins. Meet

Adamkus Meets Smith, Mozel

South Caucasus & Central Asia

Georigan Lari Depreciates

Kazakh To Limit Food Imports

Romania To Export Kazakh Oil

Niyazov Suspend Death Penalty

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January 7, 1999

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one of the highest-ranking figures to be charged with corruption in post-Soviet Russia. He was one of many politicians who accepted a $90,000 advance to write a book about privatization. Other co-authors, including then head of the government's privatization program Deputy Prime Minister Maxim BOIKO, former head of the Federal Bankruptcy Agency Pytor MOSTOVOI, Russian President Boris YELTSIN's former chief of staff Alexander KAZAKOV, and former First Deputy Prime Minister Anatoly CHUBAIS had charges dropped against them for lack of evidence. KOKH's case also involved illegally obtaining a stateowned apartment in 1993. KOKH heads of the Moscowbased Montes Auri investment company and has been barred from traveling abroad.

Economy

Ruble = 23.39/$1.00 (NY rate)

Ruble = 21.91/$1.00 (CB rate)

IBRD To Grant Russia $400M Credit

· The International Bank for Reconstruction and Development (IBRD) has plans to grant Russia a $400 million credit for road and bridge construction in 1999. The Federal Road Service press service on Wednesday said the IBRD project will be implemented in accordance with the general program of federal roads overhauling and repair. The agreement on the loan is to go into effect in February 1999. Road repair in Siberia and the Far East will be financed from the loan. Bridges across the rivers Amur at Khabarovsk, Volga (Saratov), Ob (Surgut), the Northern Dvina (Kotlas) will go into operation in 1999-2000. A bridge pass across the Kola Gulf, the Ulyanovsk and Volgograd bridges across the Volga will be completed.

Russian Budget To Be Approved In February?

· Russian State Duma First Deputy Speaker Vladimir RYZHKOV believes that the 1999 budget may be approved in its fourth and final reading as early as February 10th. RYZHKOV noted that he had a meeting with Chairman of the Duma Committee for Budget, Tax, Bank and Financial Affairs Alexander ZHUKOV on Tuesday to discuss the deadlines for the debate on the draft budget. The second reading of the budget, RYZHKOV stated, "will be most likely discussed on January 15th", adding that, "we simply cannot prepare the document for consideration at a plenary meeting of the Duma before that date due to

purely technical reasons." He said that an additional plenary meeting may be held on January 25th, to discuss the draft in the third reading, which may be put off until February 3rd. After Duma approval, the 1999 budget will be reviewed in the Federation Council. RYZHKOV said that 150 amendments were submitted by the deadline, regarding the redistribution of budget expenditures. These include, "increase spendings on the army, science, education, public health, and several regions, including the North and the Far East." He added that most will fail because the Duma has already endorsed the total sums of the revenues and spending. Until the 1999 budget is passed, Prime Minister Yevgeny PRIMAKOV authorized the government to spend money at the same rate as 1998.

Business

Transaero Increases Moscow-London Flights

· Russia's air company Transaero will increase the number of flights between Moscow and London starting from January 17th. In addition to Monday and Friday flights, the company will also offer a flight on Sunday. This route is serviced by the Boeing-737-700 aircraft. Flights depart from Moscow's Sheremetyevo Airport at 9.10 a.m. and arrive at London's Gatwick Airport at 1 p.m. Transaero representatives said the additional flight was organized in response to the growing number of passengers wishing to travel to London and back. Sunday flights service business people, students, people going to forums or colleges. "The Sunday flight will be most convenient in this respect," a Transaero official said.

Aeroflot Buys Two More Boeing Planes

· Russia's Aeroflot has purchased two more Boeing-737-400 planes to modernize its aging fleet. The eighth and the ninth of the 10 Boeings purchased by Aeroflot are due to arrive in Moscow's Sheremetyevo Airport from Seattle. The total number of foreign-made aircraft operated by Aeroflot under leasing agreements has reached 23, which is one fifth of the company's fleet. The new planes will be used on Moscow-Munich, Moscow-London or Moscow-Rome lines, an Aeroflot official said Wednesday.

International Paper Purchases Svetogorsk Stake

· New York-based International Paper Tuesday announced that it has completed the purchase of a majority interest in Svetogorsk, a Russia-based pulp

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and paper business. President of International Paper Europe Robert AMEN said, "This investment supports International Paper's efforts to serve the growing markets of Europe. Svetogorsk's product lines complement ours, and the mill has excellent cost potential." Svetogorsk makes uncoated free sheet, liquid packaging board and softwood market pulp in the Russian town of Svetogorsk, located on the border with Finland, approximately 85 miles north of St. Petersburg. The mill will shortly complete a new sheeting facility, which will substantially increase its cut size capacity. International Paper's European Papers business already has manufacturing operations in France, Germany, Poland, and the United Kingdom. International Paper is a global producer of printing papers, packaging and forest products with more than 80,000 employees worldwide.

meeting kicks off a series of working meetings between the Lithuanian President and foreign ambassadors in Vilnius.

Wednesday, ADAMKUS received Russian Ambassador Konstantin MOZEL. ADAMKUS said that he "assesses positively" relations between the two countries and hopes that, "the spirit of good- neighborliness and cooperation in Lithuanian-Russian relations will continue to prevail." MOZEL expressed interest in future bilateral cooperation. He noted that if any problem arise over ethnic Russians in Lithuania, "they will get solved quickly." He said that Russia will always inquire about its compatriots in Lithuania, "because their life here is of interest to Moscow."

South Caucasus & Central Asia

Georgian Lari Depreciates

· The Georgian lari hit a record low as it lost 20 percent of its value against the US dollar on Wednesday. It fell from an exchange rate Tuesday of 1.97 lari per dollar to 2.18 lari per dollar on the Tblisi Interbank Currency Exchange. Street trading pegged the lari even lower at 2.15 or 2.25 lari per dollar. Tbiluniversalbank dealer Givi KORINTELI said, "Everyone wants to buy dollars because of fears of further depreciation of the lari. People have plenty of lari and it could cause further falls." Bank of Georgia dealer Kakha BUKIA believes that the lari will fall to at least 2.5 lari per dollar soon. The lari had been one of the strongest currencies among the former Soviet republics. However, the world financial crisis, a reduction in exports to Russia, and poor tax collection has weakened the lari.

Meanwhile, on Tuesday the Georgian Central Bank set an exchange rate for the euro for the first time at 2.3246 lari to the euro. Central Bank dealer Irakli DONADZE said that the rate calculation is based on a euro per dollar cross-rate. He said that the euro is expected to be traded on the Tblisi Interbank Currency Exchange, but did not specify when.

Armenian Parliament Approves Budget

· Armenia's Parliament on December 29, 1998, in a vote of 122 to 22 and three abstentions approved the 1999 budget. The budget plans a deficit of 56.618 billion drams or 5.2 percent of gross domestic product (GDP). Revenues were set at 191.692 billion drams ($367 million) or 17.4 percent of GDP

European Republics

Latvian, Estonian Prime Mins. Meet In Tallin

· Latvian Prime Minister Vilis KRISTOPANS and his Estonian counterpart Mart SIIMANN met today in Tallin to discuss political and economic relations between their nations. The prime ministers and delegations of Latvia and Estonia focused on issues of implementation of bilateral agreements and joint activities of the two Baltic countries on the way to integration into European structures and NATO. KRISTOPANS and SIIMANN were expected to review a proposal on quotas for deliveries of pork from Estonia, which are threatening to bankrupt Latvian producers. KRISTOPANS also met Speaker of the Estonian parliament Toomas SAVI and Foreign Minister Raul MALKS.

Lithuanian President Meets Smith, Mozel

· Lithuanian President Valdas ADAMKUS on Tuesday met with US Ambassador to Vilnius Keith SMITH. The President said he hoped that at the NATO summit in Washington in April, 1999 a decision would be made on new possibilities for the Lithuanian membership in the North Atlantic Alliance. ADAMKUS confirmed his intention to participate in the Washington summit. The President and the Ambassador discussed the fulfillment of the US-Baltic Charter signed in Washington in January 1998, by the presidents of the United States, Latvia, Lithuania and Estonia. Bilateral relations and military cooperation were also discussed. SMITH and ADAMKUS'

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and spending at 248.31 billion drams or 22.6 percent of GDP. The deficit is to be covered by domestic resources, income from treasury bill issues, and credits from international financial organizations and donor countries. Armenia is planning for a rise in inflation of 9.9 percent from 1 percent to 2 percent forecast for 1998. Real GDP growth was set for 4 percent to 6 percent, compared to 6 percent last year. The parliament approved an increase in defense spending from 33.3 billion drams in 1998 to 40 billion drams, which is 21.7 percent of total spending. Neighboring Azerbaijan also increased defense spending by 21.6 percent compared with 1998. Both nations have yet to resolve the conflict over the disputed Nagorno-Karabakh region.

Romania To Help Export Kazakh Oil

· Romania's national oil company Petrom will play a key role in the transportation of oil from Kazakhstan in early 1999. Nicolae STAICULESCU, a senior official at the Ministry of Industry and Commerce, said that Petrom offered two proposals to Almaty authorities concerning the transportation of Kazakh oil to the West via Romania. The first proposal suggested transporting the oil in tankers from Kazakhstan's Aktau port on the Caspian Sea to Romania's Constanta and then processing it in Petrom's refineries. A second proposal was for the Kazakh oil to be transported to the Russian port of Novorossiisk on the Black Sea and then taken over by the Romanian side to be processed. Kazakhstan accepted the two proposals which will be perfected through a contract, STAICULESCU said. Both sides are making efforts for the first transport of Caspian oil from Kazakhstan, which is expected to reach Romania in early 1999.

Kazakhs Limit Food Imports From Russia

· Starting January 11th, Kazakhstan will limit food imports from its key trading partner Russia in an attempt to protect its domestic market and national enterprises. The restrictions include some meat products, dairy products, rice, flour, pasta, wheat, and corn. This is part of an anti-crisis measure

worked out by Kazakh Prime Minister Nurlan BALGIMBAYEV and Russian Prime Minister Yevgeny PRIMAKOV at Moscow's suggestion in December. The measure is designed to prevent speculators from dumping Russian food commodities into Kazakhstan at very low prices due to the collapse of the ruble. Russian products are already becoming scarce. It is unlikely to have a negative effect on the normal development of bilateral trade. Mukhtar ABLYAZOV, Kazakh Minister of Energy, Industry and Trade said in a statement that Kazakh producers, "must increase output of goods, broaden their range, improve the quality of those goods so as to create new jobs and so that production is sufficiently competitive to ensure that the influx of rival goods does not prove a threat." Kazakhstan restriction will remain in place for 6 months, with the option to extend the period for another six months.

Turkmenistan Suspends Death Penalty

· Turkmen President Saparmurat NIYAZOV Wednesday announced a moratorium on the death penalty at a meeting with the country's Supreme Court judges. Members of the Turkmen Popular Council will make the necessary constitutional amendments in December 1999. About 700 people were on the death row in Turkmenistan last year, 90 percent for drug trafficking. Their sentences are likely to be commuted to life imprisonment, but the death penalty could be imposed in exceptional cases. Other former Soviet republics have also suspended the death penalty, including Armenia in 1991, Russia in 1996, Ukraine and Georgia in 1997, and Azerbaijan and Kyrgyzstan in 1998.

NIYAZOV has created a Commission for Human Rights that he will head. It will supervise the police, military and judiciary. Its members will include the National Security Committee, Interior Ministry, and the Prosecutor General's Office as well as heads of local and regional administrations, RFE\RL Newsline reported. International human rights groups have criticized NIYAZOV for restricting freedoms in Turkmenistan.

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

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