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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, April 16, 1999

Russian Federation


Duma Endorses On Yugosalv Membership

· The Russian State Duma today in a vote of 293 to 54 with one abstention passed a draft resolution on Yugoslavia joining the Rus-Belarus Union. The resolution calls on the Russian President and the government to, "immediately start the scrutiny of international, political, economic, legal and other questions related to the resolution of the federal Skupstina [parliament] of the Federal Republic of Yugoslavia" on its joining the Rus-Belarus Union. The Communist, Liberal Democratic, Our Home Is Russia, People's Power, Russia's Regions and Agrarian factions voted for the resolution and the liberal Yabloko faction against. Communist Alexander SHABANOV called the resolution an, "important and very timely step" which "can stop the military action in the Balkans, make Western politicians think very seriously." Our Home leader Vladimir RYZHKOV hailed Yugoslavia's possible membership, saying that it could positively influence the Balkan situation. He added, however, that any steps with potential to push Russia into the military action are unacceptable, and, "the union can come in question only after cessation of NATO's missile and bomb strikes on Yugoslavia." Yabloko member Yuri AVERCHEV said that Yugoslavia's membership, "can be the breakup of the CIS and complete isolation of Russian in the world." Ukraine has condemned the creation of a three-party union of Yugoslavia, Russia and Belarus. It believes that such a union, "will not increase European stability and security, and will not settle the Kosovo crisis." Ukrainian Foreign Minister Boris TARASYUK said the union would undermine stability in Europe and the world because of Russia's status of nuclear power, and peak contradictions between countries of the Commonwealth of Inde

pendent States (CIS). He does not rule out that this would even dissolve the CIS.

FSB Defused Bomb In Downtown Moscow

· Russian Federal Security Service (FSB) officers defused a homemade bomb on Shchepkin Street in Moscow and arrested a suspect. The unidentified suspect, who did not resist being handcuffed and said he was planning to sell the bomb to a commercial kiosk owner. He is a resident of the Sokolniky district. Experts from the Federal Security Service said bomb was made of a grenade primer and two packs of 7.62 mm rounds. Before defusing the bomb, officers shut down nearby stores, evacuated children from a school, and blocked traffic on the street about two miles form the Kremlin.

St. Petersburg Banker Killed

· Deputy director of the private St. Petersburg Bank for Reconstruction and Development, Sergei KHRABROV died from a gunshot wound to the head on Thursday night. The incident occurred outside the entrance to his St. Petersburg apartment building in an apparent contract hit. An investigation is underway, but police have not commented on possible suspects or motives. St. Petersburg has experienced a number of high-profile killings that target businessmen and politicians.

Bordyuzha Appointed Chairman Of State Customs

· Russian Prime Minister Yevgeny PRIMAKOV on Thursday appointed former chief of the Kremlin Staff Nikolai

Today's News Highlights


Dollar Bonds Jump 30 Percent

LUKoil Invests In Bulgaria

European Republics

Latvia Bans Death Penalty

Ukrainian-Georgian Ferry Route

South Caucasus & Central Asia

Baku-Supsa Pipeline To Open

Georgia-Russia On Railways

NAOC Pulls Out Of Caspian

Caspa Reports On Oil Shipments




April 16, 1999

Intercon's Daily

BORDYUZHA as Chairman of the State Customs Committee of Russia. The appointment was approved by President Boris YELTSIN.

Meanwhile, Russian Taxation Minister Georgy BOOS denied rumors that he was going to resign. He said he will continue working at his post until, "he carried through the work he had started." BOOS sees a link between the rumors about his possible resignation and a tough position assumed by the Taxation Ministry on a number of issues. "We have been treading on the toes of some officials in office now and some former very high- ranking officials. I am not particularly concerned about problems of party construction. The most important thing for me is the security of the state, including its economic and social security," he said.


Ruble = 24.8/$1.00 (NY rate)

Ruble = 24.77/$1.00 (CB rate)

Ruble = 26.4/1 euro (CB rate)

Nov Dec Jan Feb Mar Apr

Russian Bonds Jump By Almost 30 Percent

· Buoyed by news that the World Bank will resume lending of a $2.3 billion loan and that lenders might be willing to forgive debts, Russia's dollar eurobond prices rallied by almost 30 percent in the past 10 days. Confidence returning to the market is in part due to Russia's increasing ability to service its international obligations. The Financial Times reported that the Russian international bond maturing in 2028, the most liquid of Russian issues, leapt by

15 percent in the past two days to 39 percent of face values on indications that Russia might be able to exclude its dollar eurobonds from debt reorganization. In meetings with Russia's deputy finance minister Mikhail KASYANOV, the Paris Club indicated that it might be willing to reschedule payments on Soviet-era debt due in 1999 and 2000. Russia owes about $3 billion in principal payments to the Paris Club in 1999 and 2000. There is uncertainty as to whether Russia will also ask to restructure the interest payment on its Paris Club debt.

Russia To Attend IMF, WB Joint Session

· A Russian delegation led by First Deputy Prime Minister Yuri MASLYUKOV will take part in a Spring joint session of the International Monetary Fund (IMF) and the World Bank to be held in Washington on April 23rd. Included in the delegation will be Finance Minister Mikhail ZADORNOV, Central Bank chairman Viktor GERASHCHENKO, and Economics Minister Andrei SHAPOVALYANTS. Spring sessions of the IMF and the World Bank are held annually with participation of the countries cooperating with those international financial organizations. ZADORNOV said that the session happens to coincide with negotiations to finalize the conditions for Russia begin granted a third loan. These funds would be used for economic restructuring and finishing the work on the program of Russia-IMF cooperation. Deputy Finance Minister Oleg VYUGIN, who along with MASLYUKOV and ZADORNOV participated in the talks with an IMF mission in Moscow this week, said Russia and the IMF have several uncoordinated issues left linked to quarterly budget parameters, monetary policy of the Central Bank and the restructuring of the banking system. According to him those are not irreconcilable contradictions, and compromise can be found.

Iran-Russia Reach Oil Agreement

· Russian Fuel and Energy Minister Sergei GENERALOV and his Iranian counterpart Bijan Namdar ZANGANEH on Wednesday signed a memorandum of understanding on oil and gas development The agreement covers the purchase of equipment and chemicals cooperation in petrochemical joint ventures, and the construction of underground gas storage facilities. According to GENERALOV, this agreement is the first of its kind. He said, "we attach great significance to this event. The docu

When you need to know it as it happens




April 16, 1999

Intercon's Daily

ment we signed today [Wednesday] is basically the fist document on the coordination of activities between the two ministries. We hope that it will invigorate contacts." Iran said that it is determined to develop a strategic partnership with Russia. Iran also is ready to make payments for the delivery of Russian equipment worth $13 million, which is waiting in Astrakhan, waiting to be shipped to Iran. ZANFANEH said that Iran and Russia are among the world's largest oil and gas producers and their potential for cooperation is inexhaustible.


Lukoil To Invest In Bulgaria

· On Thursday at a ceremony unveiling its first filling station in Sofia, the Russian LUKoil company pledge to start an investment program in the Bulgarian economy. Sofia Mayor Stefan SOFIYANSKY and LUKoil President Vagit ALEKPEROV cut the ribbon at the filling station. ALEKPEROV also met with Bulgarian President Pyotr STOYANOV and Prime Minister Ivan KOSTOV. He said, "LUKoil possibilities to invest in Bulgarian industry" were the main subject of discussions. "Our side has such possibilities as well as a desire. The volume of oil production by LUKoil tops several times the volume of processing by our refineries." ALEKPEROV declined to comment on the possibility of LUKoil purchasing the controlling interest of a Burgas refinery Neftokhim. A group of LUKoil experts will inspect the state of Neftokhim, the biggest oil refinery in the Balkans.

Transneft-Transpetol Sign Agreement

· The heads of the Russian Transneft and Slovak Transpetrol oil companies on Thursday signed an agreement on cooperation and joint activity. The deal provides for stable deliveries of Russian oil to Slovakia and its transit through Slovak oil pipelines, as well as contribution in fulfilling intergovernmental agreements. The participants in the meeting agreed to cooperate in developing the oil pipeline system in Slovakia and increasing the volumes of oil deliveries on the Mediterranean market via the port of Omisalj, Croatia. The sides are developing a program of mutually advantageous cooperation, including direct deliveries of equipment and materials, rendering of repair services, attracting Russian specialists for the construction of oil reservoirs and other objects for oil pipeline transportation in Slovakia.

European Republics

Latvia Bans The Death Penalty

· Lifting another barrier to its accession to the European Union (EU), the Latvian parliament on Thursday in a vote of 64 to 15 with five abstentions approved the sixth protocol of the European Convention on Human Rights, which bans the death penalty. Approval of this protocol is seen as crucial for the Baltic State to have a chance to join the fast-track accession talks with Cyprus, the Czech Republic, Estonia, Hungary, Poland, and Slovenia. However, capital punishment remains popular with Latvian citizens, with surveys indicating about two-thirds of the nation approves of the death penalty. Capital punishment opponents said that there was a high degree of danger that relatives of crime victims might lynch the offenders. A number of lawmakers cited statistics, with 250 murders registered in 1998 and 60 in the first three months of this year. Lithuania and Estonia both abolished capital punishment last year.

Ukraine-Georgia-Bulgaria Open Ferry Route

· In addition to attending the opening of the Baku-Supsa pipeline, Ukrainian President KUCHMA will also attend a ceremony to open a Poti-Ilyichivsk railway ferry service. Ukrainian Transport Minister Ivan DANKEVICH on Wednesday said that the new ferry route will help strengthen trade relations. He noted that the ferry will go from Bulgaria's Varna port to Poti through Ukraine's Ilyichivsk port, which overlaps by part of the ancient Silk Road. Both ceremonies are also to be attended by the Presidents of Georgia and Azerbaijan, and by executives of the companies which are part of the International Oil Consortium. Kiev hopes that crude transported by the pipeline will eventually go from Baku to Supsa to Ukraine's Black Sea port of Odessa and then later to be shipped to Brody at the Polish border via a new pipeline under construction. Ukrainian Interior Minister Yuri KRAVCHENKO and his Georgian counterpart Kakha TARGAMADZE are expected to sign a protocol on cooperation between the two countries' Interior Ministries.

South Caucasus & Central Asia

Georgia-Azerbaijan To Open Pipeline

· The unveiling of the Baku- Supsa oil pipeline for the transportation of early Caspian oil will take place

When you need to know it as it happens




April 16, 1999

Intercon's Daily

on Saturday in Supsa on the Georgian Black Sea coast. A spokesman from the Georgian International Oil Corporation (GIOC) said that the ceremony will be attended by Georgian President Eduard SHEVARDNADZE, Azeri President Geidar ALIYEV, Ukrainian President Leonid KUCHMA, GIOC President Gia CHANTURIA, Azeri International Operating Company (AIOC) President David WOODWARD, adviser to the US President and the Secretary of State on Caspian energy issues Richard MORNINGSTAR, as well as representatives of the US administration, different international organizations and heads of foreign oil companies. The oil terminal at Supsa includes a floating facility with the displacement of 150,000 tons for shipping oil on tankers, situated three kilometer off Supsa. The floating facility is connected by a pipeline to the terminal in Supsa, consisting of four reservoirs each having a 40,000-ton capacity. The construction of the Georgian section of the pipeline was completed in March. The entire Baku-Supsa pipeline is 830 kilometers long, while its capacity is over five million tons of oil a year. According to GIOC, Georgia will profit up to $30 million a year from the transit of early Caspian oil.

MORNINGSTAR arrived in Tbilisi today ahead of the opening of the Baku-Supsa oil pipeline to hold talks with Georgian President Eduard SHEVARDNADZE, State Minister Vazha LORDKIPANIDZE, Parliament Speaker Zurab ZHVANIA, and Foreign Minister Irakly MENAGARISHVILI. MORNINGSTAR will address a meeting of the Georgian parliament committee on defense and discuss transportation security of Caspian energy resources.

Georgia-Russia Discuss Rail Transport

· Georgian President Eduard SHEVARDNADZE and Railway Director Akaki CHKHAIDZE met with Russian Transport Minister Nikolai AKSENENKO Thursday in Tbilisi. They discussed the possibility of writing off Georgian railway debts to Russia and the resumption of rail traffic. This would include freight traffic from Russia via Abkhazia to the Black Sea port of Poti. A preliminary agreement was reached on the

repair of Russian locomotives and carriages at a Tbilisi plant.

NAOC Withdraws From Caspian Project

· An international consortium, North Apsheron Operating Co. (NAOC), has decided to withdraw from an oil exploration project in the Caspian Sea. NAOC said it has been unable to confirm commercially viability of deposits off the shore of Baku. NAOC is owned by Japanese trading house Itochu, BP Amoco, Unocal Corp. of the US, Delta Niimir Co. of Saudi Arabia and Azerbaijan's state oil company Socar. Since an accord on the development project was reached in December 1996, the consortium has conducted test drilling in three locations about 60 kilometers from the Apsheron Peninsula near Baku. The Azerbaijan International Operating Co. is the only international consortium to have full drilling operations in the area.

Caspar Reports Increase In Oil Shipments

· Azerbaijan's state marine shipping company Caspar's head of foreign economic relations Ilgham MAMEDOV said that Caspar tankers has shipped 1.278 million tons of oil and petroleum products across the Caspian Sea in the first quarter of 1999. This is an increase of 190,000 tons from the same period in 1998. It also shipped 1.014 million tons of crude oil and petroleum products which transited Azerbaijan, or 308,000 tons more than in the same period last year. MAMEDOV said the amount would have been larger if shipments by US major oil company Chevron, which exports crude from its giant Tengiz field in Kazakhstan, had not disrupted for a month in February while new tariffs were being negotiated. He said, "Last year, Caspar's tanker shipped 300,000 to 330,000 tons of Chevron's Tengiz crude per month, but because of the question of tariffs this year, we only shipped 238,000 tons of Chevron oil in the first quarter." Chevron has said its wants to increase shipments this year to 5 million tons. In addition to Kazakh oil Caspar also handles around 50,000 to 60,000 tons of Turkmenistan crude every month.

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

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