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

Friday, March 19, 1999

ZASTROZHNAYA, and Vladimir BUTAYEV members of the Central Election Commission of Russia. Under Russian legislation, the Central Election Commission is comprised of 15 members. Five are appointed by the Russian State Duma, five by the Federation Council, and the other five by the president. The President also nominated his representative in the Constitutional Court, Mikhail MITYUKOV, for a vacant seat of a member of the Court. The seat became vacant after Constitutional Court member Vladimir OLEINIK died suddenly in February, 1998. MITYUKOV said, "I consider it an honor the fact of the proposal itself, regardless of results of a vote." He is to be confirmed by the Federation Council. Another government decree appointed customs Colonel-General Mikhail YEGOROV as acting chairman of the Russian State Customs Committee, or GKT. He replaces Valery DRAGANOV, who was dismissed last Saturday. The government also nominated former chief of the GKT's directorate Mikhail VANIN. DRAGANOV sacked VANIN last summer in the campaign of, "purging the customs bodies from officials who compromised themselves."

Vladikavkaz Bomb Kills 65, Injures Hundreds

· A bomb blast, with the impact of eight pounds of TNT, ripped through a busy open market in Vladikavkaz, the North Ossetia capital which borders the break-away region of Chechnya, killing at least 65 and injuring more than a hundred peo-ple. Differing reports cite that the bomb was place behind a potato kiosk or was planted in a nearby car. Rus

Russian Federation

Politics

Yeltsin Wields The Ax: Hires And Fires

· Russian President Boris YELTSIN released from the Center Clinical Hospital wielded his mighty ax and made several changes to his administration and government. Today, he relieved Nikolai BOR-DYUZHA from his duties as head of the Russian presidential administration and secretary of the Russian Security Council. YELTSIN replaced BORDYUZHA with Alexander VOLOSHIN, a man linked to business tycoon Boris BEREZOVSKY. He had been working as deputy head of the presidential administration since September 12, 1998. VOLOSHIN also has close relations with former chief of the Kremlin staff Valentin YUMASHEV. BORDYUZHA's removal is clearly linked to the controversy surrounding the blackmailing of prosecutor general Yuri SKURATOV. As Intercon reported on Tuesday, Moskovsky Komsomolets stated that it was BORDYUZHA who used the videotape of SKURATOV's private sexual activities to force his resignation. However, a Kremlin spokesman said BORDYUZHA resigned for health reasons. It was not clear who would become the next secretary of the Security Council.

The President signed a decree relieving Oleg SOKOLOV of his duties as Russia's permanent representative to the international organizations in Vienna. YELTSIN appointed by decree Valery LOSHCHININ as SOKOLOV's replacement. YELTSIN on Wednesday appointed five new members to the Central Election Commission. Pursuant to Article 22 of the federal law Concerning Basic Guarantees of the Suffrage and the Right to Vote in Referendums for Citizens of the Russian Federation YELTSIN decreed to appoint Lyubov AGAYEVA, Valentin VLASOV, Vasily VOLKOV, Olga

Today's News Highlights

Russia

Russia Desperate For Funds

BMW-Avtodor Sign Agreement

European Republics

Belarus To Export Optical Equip.

Lith-Turkey Strengthen Relations

South Caucasus & Central Asia

Adamia Calls For Base Removal

Mengarishvili In Armenia

AIG Forms Insurance JV

Turkmen-Azeri On Oil Fields

Politics-Economics-Business

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Friday

March 19, 1999

Intercon's Daily

sian President Boris YELTSIN has declared the explosion a terrorist act and ordered Interior Minister Sergei STEPASHIN and Federal Security Service (FSB) Vladimir PUTIN to investigate the bombing. Road blocks have been set -up around the city and the market has been sealed for further investigations. No terrorist group has claimed responsibility for the explosion.

Tensions have been rising between Russia and Chechnya since the kidnapping of Interior Ministry representative Gennady SHPIGUN on March 5th. Prime Minister Yevgeny PRIMAKOV and Chechen President Aslan MASKHADOV are expected to meet at an undisclosed location in the coming days. Russian presidential envoy to Chechnya Valentin VLASOV, who himself was kidnapped and held for several months in 1998, said that, "Such a meeting is an extreme necessity now." PRIMAKOV and MASKHADOV first officially met in Vladikavkaz in October, 1998 pledging to help stabilize the situation in Chechnya and the entire Northern Caucasus. VLASOV has called for reviewing the progress made in stepping up the interaction of law enforcement bodies in combating crime, particularly kidnapping.

Berezovsky To Be Arrested Soon?

· Russian State Duma Speaker Gennady SELEZNYOV today said that, "an arrest warrant will be soon issued" for oil-to-media tycoon Boris BEREZOVSKY. "He is counting his last days, his chair is shaking," he said during a visit to Tyumen. "The discrediting materials against Russian Prosecutor General Yuri SKURATOV, which have been made public by the press of late, are a result of the agony of the CIS Executive Secretary," the post occupied by BEREZOVSKY at present, SELEZNYOV said. He added that new discrediting materials on other officials were likely to appear soon in BEREZOVSKY's controlled Nezavisimaya Gazeta. He also said that, "all companies mentioned in SKURATOV's report are controlled by BEREZOVSKY." In his speech to the Federation Council, SKURATOV mentioned Aeroflot, the AvtoVAZ car-maker and Atoll, a private bodyguard firm which is suspected of arranging the tapping of telephone calls of the family and entourage of the Russian president. However, Deputy prosecutor general Mikhail KATYSHEV said he knows nothing about the pending arrest.

Economy

Ruble = 23.65/$1.00 (NY rate)

Ruble = 23.68/$1.00 (CB rate)

Ruble = 25.96/1 euro (CB rate)

Oct Nov Dec Jan Feb Mar

Russia Desperate For IMF Funds

· Russian Prime Minister Yevgeny PRIMAKOV, Finance Minister Mikhail ZADORNOV, Taxation Minister Georgy BOOS and First vice-premier Yuri MASLYUKOV are meeting with members of the International Monetary Fund (IMF) mission today. MASLYUKOV earlier noted that he intends to discuss "remaining unsettled issues" at the meeting. PRIMAKOV in an interview with NBC television on Thursday said that the Russian government will be weakened if Russia does not unlock the International Monetary Fund's loans. "We shall face hard times if this happens," nevertheless Russia will never perish and will not cease to exist, PRIMAKOV stressed. At the request of the IMF mission, contacts between the parties taking part in the talks and the press have been limited. Central Bank Chairman Viktor GERASHCHENKO said that only talks between PRIMAKOV and IMF Managing Director Michel CAMDESSUS can help Russia restructure its Soviet-era debt. He said, "If this doesn't happen, the country's gold and foreign exchange reserves will be exhausted." He noted that the Central Bank has paid out $1.5 billion since the beginning of the year to service the country's foreign debt. The Bank had budgeted $2.1 billion for foreign debt payments in the first quarter. GERASHCHENKO added that to support the ruble in February, the Central Bank had spent $250 million.

When you need to know it as it happens

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March 19, 1999

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Industrial Output Falls 4 percent

· Industrial production in Russia for the period January and February 1999 totaled 371 million rubles, which was 4.3 percent less than in the corresponding period of last year, according to a report released Thursday by the State Committee for Statistics.

Money Supply Increased

· The Central Bank of Russia on Monday in an official report stated that the money supply in Russia increased by 21 percent in 1998 to 452.5 billion rubles. Cash in hand is said to have grown by 44 percent from 130.4 billion rubles to 187.8 billion rubles. The volume of non-cash money increased by 8.6 percent in 1998. Money supply in national terms is a volume of ready money in circulation beyond banks plus balance in national currency on clearing and current accounts and deposits of non-financial institutions, organizations and people residing in Russia. Deposits in foreign currency do not fall under the definition.

Business

BMW and Avtodor Sign Agreement

· The German machine-building company Bavarian Motor Works (BMW) and the Russian joint-stock company Avtodor signed a working agreement on an assembly of BMW cars and Landrover Defender in the Kaliningrad region. It is planned to begin production of these cars this summer. The projected capacity of the enterprise is 10,000 cars a year. The volume of investments in the development of the production base will amount to about 50 million DM and in the distribution network 75 million DM. The volume of sales of BMW in 1998 to Russia through official dealers declined approximately by 13 percent to 940 cars. BMW delivers to Russia BMW cars of the third, fifth, seventh and eighth series and a Z-3 series. In 1998, the Avtodor company increased the volume of sales of Kia cars assembled at the enterprise approximately by 22 percent to 1,540 cars.

Belarus equipment will be installed mainly on infantry fighting vehicles of the Russian make which the Emirates Army adopted for service. Superviser of the Belarus display at the fourth international defense armaments exhibition, Idex 1999, in Abu Dhabi Vyacheslav SHEIDA said cooperation of Russia and Belarus on the foreign scene, "helps develop allied relations between Moscow and Minsk and is to the benefit of both countries." SHEIDA noted visitors interest in Volat 74135 tank transporter of the Minsk tractor works. It hopes that this powerful tank transporter will be bought for the Emirates Army. Industrial output consists of almost a quarter of defense industry and dual- purpose products in Belarus.

Lith-Turkish Strengthen Relations

· Turkish President Suleyman DEMIREL and Lithuanian President Valdas ADAMKUS called for developing bilateral political, trade and economic relations between the two countries in Ankara on Thursday. The Presidents noted they share similar positions on international issues, including European security. At a joint press conference, they stressed that the two countries began developing cooperation in 1930 when Turkey and Lithuania signed the treaty of friendship and cooperation. In 1991, Lithuania proclaimed independence and Turkey was the first country which recognized it and established diplomatic relations with Vilnius. During ADAMKUS' three day visit, the sides will sign an agreement on cooperation in the field of military education.

South Caucasus & Central Asia

Adamia Calls For removal Of Russian Bases

· Head of Georgia's parliamentary committee on military and security Revaz ADAMIA has called for the legislature to press President Eduard SHEVARDNADZE on the removal of two Russian bases in Georgia immediately. He said, "We have to start talks about a pull-out of two Russian bases." The two bases he refers to are Varziani located near Tbilisi and Gudauta in the breakaway region of Abkhazia. ADAMIA claims that Russia is using these two bases to destabilize the political system in Georgia and help separatists. He is referring to the fact that former Georgian Security chief Igor GIORGADZE, who is accused of organizing the assassination attempt on SHEVARDNADZE's life in 1995, escaped to Russia via the Varziani military base. Georgia has also

European Republics

Belarus To Build Electron Optical Equipment

· Belarus signed a contact in the United Arab Emirates under which Beltechexport company will supply for the Emirates Army with electron optical equipment worth approximately $28 million. The

When you need to know it as it happens

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claimed that Russian troops from the Gudauta base joined with Abkhazian rebels in May, 1998, helping in them to force thousands of ethnic Georgians to flee the Gali region. ADAMIA also accused Russian troops in Georgia of selling weapons. He said that Moscow has failed to live up to an agreement to help Georgia restore control over Abkhazia, a condition of keeping the bases on Georgia's sovereign territory. Russia has refused to pay Georgia rent for the bases or even pay for electricity or water. ADAMIA said, "It is time now to become harder with Russia. Either they should fulfill their obligations or get out."

His remarks are a reaction to statements from a Russian hearing, which threaten the sovereignty of Georgia. Intercon sources report from Moscow that a hearing was held on March 4, 1999, by the Anti-NATO Commission of the State Duma of the Russian Federation. The meeting was chaired by Sergei BABURIN and the principle speaker was Duma speaker Gennady SELEZNYOV. At this hearing Liberal Democratic Party leader Vladimir ZHIRINOVSKY stated, "If Russia had the will, we would be able to tear Georgia into five independent units: Abkhazia, South Ossetia, Mengrelia, Adjaria, and Armenian Javakhetia." This hearing was held after Uzbekistan, Azerbaijan, and Georgia said they were considering withdrawing from the Commonwealth of Independent States Collective Security Treaty. ZHIRINOVSKY criticized the foreign policies of Ukraine, Georgia, Azerbaijan, and Uzbekistan. He said Russia should facilitate maximum disintegration of Azerbaijan, Ukraine and Georgia.

Georgia -Armenian Foreign Mins. Meet

· Georgian Foreign Minister Irakly MENAGAR-ISHVILI is meeting with representatives of the Armenian Foreign Ministry today in Yerevan. The agenda of the talks includes traditional matters concerning the development of good neighborly relations between the two states as well as bilateral trade and the resurgence of the Silk Road trade routes. The Georgian ports of Poti and Batumi are used for the delivery of fuel, food, and other cargoes to Armenia

in view of the blockade of transportation routes to Azerbaijan and Turkey.

AIG Forms Insurance Joint Venture

· American International Group Inc. said it has formed a joint venture to create a property/casualty company to sell insurance and reinsurance in Azerbaijan. AIG said it is the first US insurance company to win a license to operate in Azerbaijan. The joint venture with the Nurgun Group, an Azeri trading and financial services company, allows AIG to form the AIG Caspian Insurance Co., or AIG Caspian. Through the joint venture, AIG assumes the insurance portfolio of Nurgun's Caspian Insurance Co. Ltd. AIG said it plans to sell personal and commercial lines, along with selling reinsurance in Azerbaijan. AIG executive vice president Martin SULLIVAN said, "As a developing country and energy-producing nation, Azerbaijan presents real opportunities for growth." Viladi MANIYEV will be named general manager of the AIG headquarters in Baku. AIG's operates in 130 countries and jurisdictions.

Turkmen-Azeri To Resolve Oil Dispute

· Turkmen President Saparmurat NIYAZOV and Azeri President Geidar ALIYEV on Tuesday have agreed to settle all disputable issues in the development of Caspian oil fields in April. They instructed working groups to boost the drafting of related documents to settle the problem of the Azeri and Chirag disputable fields in the Caspian Sea by drawing a medium line. The documents will be signed during a Turkmen visit by the Azeri leader. The dispute has delayed a project broadly support by the US administration. The Azeri President praised the initiatives of Turkmenistan aimed at the completing the Trans-Caspian gas pipeline project. Back in February, the American PSG Company was named the leader of the gas pipeline consortium, and a framework agreement on the Turkmen gas supply to Turkey was signed in Ashgabat last week. NIAZYOV and ALIYEV agreed that the Trans-Caspian project will give a positive impetus to the bilateral relations and fill their partnership with a practical content.

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

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