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

Thursday, March 25, 1999

president." The results of such elections must reflect the real will of the voters and ensure post-election political stability. He said that the electoral system needed some fundamental renovations. VESHNYAKOV also said that the newly formed Central electoral Commission, which will work until the year 2003, will need to strengthen its apparatus structure without any personnel shake-ups. VESHNYAKOV has worked for the Central Electoral Commission of the Russian Federation since 1994. He has been the Commission's executive secretary since March 1995. NDR faction leader in the State Duma Vladimir RYZHKOV said VESHNYAKOV, "is a man of high integrity, a responsible person, a man who is wrongly described as belonging to one or another political camp....With him in this office I will personally feel confident that the elections in Russia will be held honestly and in strict compliance with law." Oleg SYSUYEV, the Russian President's deputy chief of staff who attended the first meeting of the Central Electoral Commission, said the administration of the Russian President is pleased with the election results. Valentin VLASOV withdrew his candidature from the ballot prior to the election of the Commission chairman. He was elected Deputy Chairman of the Central Electoral Commission. VLASOV will be in charge of controlling the financial electoral funds and ensuring threat they be distributed openly. The meeting of the new Central Electoral Commission was attended by SYSU-YEV, First Vice Speaker of the Duma KUZNET-SOV, and Deputy Chairman of the Federation Council PLATONOV.

Russian Federation

Politics

Kiriyenko To Make Political Comeback?

· Former prime minister Sergei KIRIYENKO confirmed that he has been approached by presidential administrators regarding accepting a new position in the government. He specifically said that he is under consideration for the post of secretary of the Security Council, left vacant by the dismissal of Nikolai BORDYUZHA. Kommersant Daily cited a YELTSIN administration source, saying the presidential representative to the Commonwealth of the Independent States Ivan RYBKIN and former ambassador to France Yuri RYZHOV are also possible candidates for the position. Moskovsky Komsomolets suggested that RYBKIN's appointment would support the theory that media-oil tycoon Boris BEREZOVSKY has strengthened his Kremlin influence. Nezavisimaya Gazeta suggests that General Anatoly KVASHNIN, chief of staff of the armed forces, could be appointed as BORDYUZHA's replacement.

Meanwhile, Prime Minister Yevgeny PRIMAKOV signed a decree introduced changes to the list of personnel of the Inter-Agency Commission on the Protection of State Secrets. The list now includes PROKOPYEV, the government's deputy chief of staff, in place of TORSHIN, who was expelled.

Veshnyakov Elected CEC Chairman

· Alexander VESHNYAKOV was unanimously elected Chairman of the Central Electoral Commission of the Russian Federation on Wednesday. He said that he valued the Commission's high professional standards, independence and the absence of "any political engagement." VESHNYAKOV said the Central Electoral Commission's main task was to prepare and hold "honest and fair federal elections first of the Russian State Duma and then of the

Today's News Highlights

Russia

Ruble Loses 5.4 Percent

Cameco Signs Uranium Deal

European Republics

Estonian Government Approved Black Sea Fleet Agmt Passes

South Caucasus & Central Asia

Calls For Pipeline Security

Wax Visits Tbilisi, Baku

Lith Speaker In Georgia

Kazakh Claims Ownership: Jets

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March 25, 1999

Intercon's Daily

Russian Delegation Headed For Vietnam

· A Russian governmental delegation, headed by First Deputy Prime Minister Vadim GUSTOV, arrived in Hanoi today for a six-day visit to discuss economic cooperation. GUSTOV will continue negotiations with Vietnamese President Tran Du'c LU'ONG, Prime Minister Phan van KHAI, Deputy Prime Minister Ngo Xuan LOG, and Communist Party Secretary-General Le Kha PHIEU. Economic issues will be a key topic for discussion at a session of the bilateral commission for trade, economic, scientific, and technical cooperation, opening on Friday. The session will focus on boosting bilateral trade volumes in the fields of banking and finances, power engineering, and oil and gas. The delegation will visit the Vietnamese-Russian oil-producing company Vietsovpetro, which has reached an extraction level of 11 million tons of oil per annum from the shelf in South Vietnam. Representatives of the Russian foreign economic association Zarubezhneft the sides will discuss with Vietnamese state company Petrovietnam plans for the construction of an oil-refinery in Central Vietnam to be the largest in South-East Asia.

Economy

Ruble = 24.22/$1.00 (NY rate)

Ruble = 24.18/$1.00 (CB rate)

Ruble = 26.33/1 euro (CB rate)

Ruble Loses Value Against The Dollar

· The Russian ruble lost 5.4 percent against the US dollar in the afternoon session of trading Wednesday on the Moscow Interbank Currency Exchange. Dealers agree that it will continue to fall due to the increasing ruble liquidity. Alfa Bank dealer Alexei BUKLEYEV said, "Increased demand for dollars, which drives the ruble down, was caused by the increased ruble liquidity from redemption of three-month GKOs [treasury bills] and payment of OFZ [bonds] coupons for the total amount of 7.5 billion rubles, The Journal of Commerce reported. He added that another factor to the ruble's fall is the Central Bank's rule effective today, which tightens dollar buying rules for importers. Yet another critical reason for the fall in the ruble, is Prime Minister Yevgeny PRIMAKOV's decision to cancel his visit to the US. The postponement of talks with the International Monetary Fund's (IMF) Managing Director Michel CAMDESSUS could prompt the Central Bank

to crank-up the money presses to cover the budget deficit. An increase in the money supply would cause the ruble to slide further. If the economy continues its downward trend, the political balance devised by PRIMAKOV could be in jeopardy as well as IMF lending. With tensions rising around the conflict in Kosovo, Russia's chance for IMF lending is looking grim as a result of its stance on international issues. Ariel COHEN of The Heritage Foundation's Kathryn and Shelby Cullom Davis International Studies Center said if Russia wants US support for IMF lending, it needs to explain: why Russia's debt should be forgiven; why it continues to proliferate ballistic missile and nuclear technology to China and Iran; why it opposes the US on NATO expansion and intervention in Kosovo; and why it refuses to ratify the START-II Treaty. He said, "If Russia wants additional aid from the United States and the West, it must act as a responsible member of the international community, cooperate with the United States, and reform its economy."

Business

Norilsk Nickel To Invest $200M For Upgrade

· Russia's major metals producer Norilsk Nickel said in a statement on Wednesday it would spend approximately $200 million this year to purchase modern equipment. The company did not specify the type of equipment to be acquired nor the source of investments. Norilsk Nickel said that it was pursuing a policy of attracting loans under favorable conditions. Norilsk Combine, the core unit of Norilsk Nickel, secured hard currency loans in 1997 to 1998 at an annual rate of 8 to 14 percent. In 1998, Norilsk Nickel reduced its hard currency debts to banks and financial organizations by 47.6 percent and its ruble debt by 19.7 percent, Reuters reported. The modernization program, first introduced in February, is aimed at adopting more efficient smelting technologies and installation of new equipment.

Cameco Signs Uranium Deal With Russia

· Canada's Cameco Corporation, France's COGEMA, and US-German collaboration Nukem on Wednesday announced they have signed a commercial agreement with Techsnabexport (Tenex), the commercial arm of the Russian Atomic Energy Ministry (MINATOM), for the purchase of natural uranium derived from highly enriched uranium (HEU)

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Thursday

March 25, 1999

Intercon's Daily

contained in Russian nuclear weapons. The weapons-derived uranium is the result of a 20-year agreement signed in 1993 between the US and Russia. Under the HEU agreement, 500 metric tons of HEU are to be diluted in Russia and delivered to the US as low-enriched uranium (LEU), suitable for use in nuclear energy plants. The LEU being delivered during the 20-year period represents approximately 400 million pounds of natural uranium and purchased by the US. Under the terms of the commercial agreement, of the approximately 360 million pounds U3O8 scheduled for delivery from Russia to the US over the 15-year term remaining in the HEU agreement, the companies have exclusive options to purchase about 260 million pounds. The commercial agreement is structured to strictly comply with the HEU agreement and various implementing agreements between the US and Russia, as well as US and Russian legal requirements. Cameco's president and chief executive officer Bernard MICHEL said, "It [the agreement] should permit the Russian Federation to receive maximum value for its weapons-derived uranium, thereby encouraging the process of disarmament. At the same time, the commercial agreement will provide Cameco with additional business opportunities using an alternate source of uranium." Cameco is the world's largest publicly traded uranium producer.

Moscow Telephone Co. Pays $8.8M Coupon

· The Moscow Telephone Company (MGTS) on Tuesday paid in full a $8.8 million payment on a $150 million Eurobond coupon. The Eurobond has a 12.5 percent semi-annual coupon, making the company's expected payment $9.2 million. The MGTS spokeswoman said she couldn't comment on the reason for the discrepancy. "I can only say I was told the coupon was paid in full." A telecommunications analyst at Moscow investment bank MFK Renaissance Yuri KRAPIVIN said the company could be buying back its own debt. "I can't say why they paid less, but it's possible the company itself has bought some of its Eurobonds."

Chubais' Nominees For UES Board

· United Energy System of Russia (UES) Chairman Anatoly CHUBAIS has nominated former members of the Russian government, Yegor GAIDAR, Sergei KIRIYENKO, Boris NEMTSOV and Boris FYODOROV, as candidates for the joint-stock

company's Board of Directors. "A greater part of the candidates named by me, are not going to enter into the Board of Directors of the UES of Russia. For example, Sergei KIRIYENKO said it did not coincide with his own plans," CHUBAIS noted. Russian State Duma speaker Gennady SELEZNYOV stressed that the Duma will make its own recommendations for board members. He pointed out that members of the Right Cause Party do not have a strong background in power engineering.

European Republics

Estonian Presid. Approves New Government

· Estonian President Lennart MERI approved the new government led by Prime Minister Mart LAAR on Wednesday night. The new 15-member cabinet includes Foreign Minister Toomas Hendrik ILVES, Defense Minister Juri LUIK, Internal Affairs Minister Juri MOIS, and Finance Minister Siim KALLAS. The new government will be sworn in on Friday and hold its first meeting on March 30th. On Monday, Estonian parliament authorized LAAR to form the cabinet.

Black Sea Fleet Agreements Approved

· Ukraine's parliament, in a vote of 250 to 63 with five abstentions, on Wednesday ratified agreements with Russia on dividing the former Soviet Black Sea Fleet. The agreements, which took years to negotiate and was signed by Russian President Boris YELTSIN and Ukrainian President Leonid KUCHMA in 1997, leave Russia with about 460 vessels and Ukraine with 162 and $526 million in compensation for the rest of its half of the fleet. The badly aging Black Sea Fleet has been a key source of tension between Russia and Ukraine since the 1991 Soviet collapse. Russia will keep its portion of the fleet and its infrastructure in the mainly ethnic Russian port of Sevastopol, on Ukraine's Crimean Peninsula, until 2017. In addition to the agreement dividing the fleet, Russia and Ukraine agreed to ecological safety of the areas of deployment, radio wave range on the territory of Ukraine, and air navigation support. The parliament had been slow in ratifying the agreements, which were opposed by many nationalists who saw the deal as conceding too much to Russia. YELTSIN said, "This step by Ukrainian lawmakers follows the path of strengthening the two countries' strategic partnership, and creates favorable prospects for solving other questions of mutual interest."

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South Caucasus & Central Asia

Georgian President Calls For Pipeline Security

· Georgian President Eduard SHEVARDNADZE has signed a decrees instructing an interdepartmental commission of the National Security Council to take appropriate measures to ensure 24 hour security of the Baku-Supsa pipeline. Last week in Tbilisi, Georgian Defense Minister David TEVZADZE and Azeri Defense Minister Safar ABIEV signed a protocol on conducting joint exercises in Ukraine in April. Participating in those exercises will be Georgian, Azerbaijani, and Ukrainian forces deployed to guard the Baku-Supsa pipeline.

Lithuania-Georgia Talk On Bilateral Issues

· Lithuanian parliament speaker Vytautas LANDSBERGIS arrived in Tbilisi on a three-day official visit on Wednesday. During his visit, LANDSBERGIS plans to discuss bilateral relations, regional issues, and ways to expand inter-parliamentary cooperation, as well as share legislative experiences. No official documents are expected to be signed. Today, The Lithuanian parliamentary speaker is scheduled to meet his Georgian counterpart Zurab ZHVANIA and parliamentary majority leaders. Then he will travel to the ancient Georgian capital Metskheta, 20 kilometers west of Tbilisi, and meet Lithuanians living in Georgia. On the final day of the visit, LANDSBERGIS will have talks with Georgian President Eduard SHEVARDNADZE, state minister Vazha LORDKIPANIDZE and Foreign Minister Irakly MENAGARISHVILI.

Wax Visits Georgia and Azerbaijan

· Director for Plans and Policy for the US European Command headquarters Charles WAX met with top level policy makers in Georgia and Azerbaijan as part of his Caucasus tour. WAX met with senior Georgian parliamentary and Defense Ministry officials on Monday and Tuesday. Parliamentary Defense and Security Committee chairman Revaz ADAMIA said that talks focused on Georgia's broader participation in NATO's Partnership for Peace program. Recently,

ADAMIA and his committee has been criticized by chairman of Adjarian government Aslan ABASHIDZE for ADAMIA's strong stance on the removal of Russian bases in Tbilisi and Gudauta. Clearly, cooperation between NATO and Georgia continues to emerge as the relationship of choice. Much of this is related to the growing perception in Georgia that Russian bases are a source of instability as reflected in a USIA public opinion poll. In Baku, WAX met with Defense Minister Safar ABIEV and Azeri President Geidar ALIYEV. WAX said his visit to Baku was a fact-finding mission. He noted that US military cooperation with Azerbaijan should be balanced by similar cooperation with other countries in the region.

Kazakh Claims Ownership Of MiGs

· Kazakhstan's deputy premier and foreign minister Kasymzhomart TOKAYEV on Wednesday claimed ownership of the six disassembled MiG-21s seized from an An-12-100 Russian Cargo plane owned by the Polyot Russian air company, which was detained Friday in Baku. Azeri Custom officials refused to allow the plane to leave, when the MiGs were discovered. It was suspected that the fighter jets were headed for Yugoslavia, which is under an international arms embargo. Baku police detained 34 persons, including 18 crew members, among whom two are Kazakhs, one Ukrainian and another from Belarus. The crew said the cargo plane was headed for North Korea, while Russia said its final destination was Slovakia. The Slovak authorities had no information about the transportation of the jets. The Slovak Defense Ministry has tried to contact Agroplast Company, which is the consignor and the consignee of the cargo. The Agroplast Company sells arms and makes major international deals. According to TOKAYEV, the MiG-21 planes had been in service with the Kazakhstan air forces since the Soviet-era. When their service life expired, the Kazakh government decreed their sale. It signed a contract with the Czech company Agroplast, which undertook to transport the planes from Kazakhstan. He said that the planes could not be used in combat and would be used for training purposes only.

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: $950.00 per year. A discount is

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