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, April 21, 1999

PRIMAKOV, Foreign Minister Igor IVANOV, and Federation Council Speaker Yegor STROYEV. SKURATOV addressed the Council saying that he "cannot remain at this post under the operating legal system in Russia." According to Deputy of the State Duma and member of the State Duma Security Committee Gennady RAIKOV, SKURATOV listed several names in his speech, against whom criminal cases were instituted. He lashed out at the present Russian system of executive and judicial powers. SKURATOV said that the case against him was unlawful. The Kremlin has redefined its reasons for wanting SKURATOV removed. It said that SKURATOV had to be sacked for "a split" with other law enforcement agencies and among prosecutors of his office as well. "The Federal Security Service, the Interior ministry mistrust the actions of the Prosecutor General," presidential chief of staff Alexander VOLOSHIN said.

On Tuesday at a meeting of the 19 regional and territorial governors, President Boris YELTSIN offered the governors certain concessions for their loyalty in the key vote to dismiss SKURATOV. The President has twice tried to fire the crime-busting prosecutor after he launched an investigation involving kickbacks allegedly received by senior Kremlin officials, including YELTSIN's daughter, from a Swiss construction firm in return for lucrative contracts. YELTSIN needs the governors' approval to remove SKUR-ATOV. He is prepared to discuss a possible candidate for the post of prosecutor-general with all

Russian Federation

Politics

Yeltsin Meets With Former Japanese Premier

· Today, Russian President Boris YELTSIN welcomed Japanese former prime minister Ryutaro HASHIMOTO and his wife, Kumiko, to the Kremlin. HASHIMOTO, who serves as foreign policy adviser to Japanese Prime Minister Keizo OBUCHI, is visiting Russia at YELTSIN's invitation. Before leaving Tokyo, OBUCHI stated that he hopes talks will contribute to, "keeping the light on" for stalled negotiations intended to conclude a peace treaty between Japan and Russia. HASHIMOTO and YELTSIN in November, 1997 agreed that their countries would resolve the long-standing territorial row and conclude a peace treaty by the end of 2000. The row involves a group of islands seized by the Soviet military at the end of World War II. HASHIMOTO and YELTSIN are expected to discuss the general relationship between their two countries as well as the Kosovo conflict in Yugoslavia and the North Atlantic Treaty Organization's (NATO's) continued air strikes. Russia has opposed the escalating air strikes, meant to force Yugoslav President Slobodan MILOSEVIC to accept a peace treaty with ethnic Albanians in the province of Kosovo and to stop Serbian forces from attacking ethnic Albanians in the province. Japan has indicated it will support a diplomatic solution to the conflict, but earlier expressed understanding for the NATO airstrikes, calling them an "unavoidable step to prevent human atrocity."

Fed. Council Considers Skuratov's Resignation

· The Russian Federation Council behind closed doors today is considering Prosecutor General Yuri SKURATOV's resignation plea. The session will be attended not only by members of the presidential administration but also representatives of power structures, including Prime Minister Yevgeny

Today's News Highlights

Russia

Russia To Default On MinFins

LUKoil To Issue Ruble-Bonds

European Republics

Estonia Receives Loans

Ukraine-Swiss Sign Assistance

South Caucasus & Central Asia

US Businessmen Tour Georgia

Baku Turns Over MiG Jets

Tajik Foreign Trade Shrinks

Tajik-Rus Sign Military Agrmt.

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April 21, 1999

Intercon's Daily

members of the Federation Council. He humbly told the council, "I shall not impose anybody on you. On the contrary, I shall hear your opinion and after that I shall suggest a candidate to you." It is believed that the Federation Council will take into account who has been nominated as SKURATOV's successor, when considering his resignation. STROYEV said the Council will also review what will happen to the investigation into corruption charges and whether it might end in a stalemate. In his opinion, the discussion of the resignation of the Prosecutor-General will become a, "starting point for democratic transformations in Russia."

Economy

Ruble = 24.77/$1.00 (NY rate)

Ruble = 24.78/$1.00 (CB rate)

Ruble = 26.26/1 euro (CB rate)

Russia To Default On Soviet MinFins

· Russian Deputy Finance Minister Mikhail KASYANOV announced in London on Tuesday that Russia is planning to miss the repayment of a third installment of $1.3 billion on MinFin bonds originated by the Soviet Union due in May 14th. This will prevent a default on dollar international bonds issued since the collapse of the Soviet Union. It plans to pay $330 million in interest falling due at the same time. KASYANOV said, "Unfortunately, as hard as we tried to accumulate money and stabilize the situation, we can't do this." The default however could still trigger cross-default on the total $11 billion of outstanding MinFin paper. By defaulting on one obligation, Russia has opened itself to the possibility that creditors will demand immediate repayment. Russia is hoping to work with investors to limit the problem. "We are trying to find the way, the understanding with creditors how to address this problem. We would follow the course of bringing positions closer together, in order not to increase the problem." Responding to the news, Standard & Poor's lowered the rating on MinFin bonds from triple C minus to double C minus. Russia must repay over $17 billion in foreign debts falling due this year, as well as meet its obligations on maturing dollar-denominated domestic bonds. Federal revenues are expected to be less than $20 billion. The government had hoped to boost its currency reserves in the first quarter with funds from a multi-billion dollar International Monetary Fund loan, but the talks on disbursement of the frozen IMF

package have dragged on longer than expected. The Russian Central Bank says foreign currency reserves have slumped below $11 billion. After the default on the MinFins, Russia will have only one class of debt on which it has stayed current, the Eurobonds. Last August, Russia also defaulted on $40 billion in Treasury debt, missed a $362 million Principal Note payment on the London Club in December, and has more than $2 billion in arrears to the Paris Club.

Paris Club To Restructure Soviet-era Debt

· The Paris Club of creditors has agreed to the restructuring of 20 percent of Russia's debt dating back to the Soviet period. Under a plan made public in London Wednesday by chief representative of the Paris Club from Germany Siegfried BORGGREFFE, the Paris Club is prepared to reschedule up to $8 billion in principal and interest payments out of $42 billion Soviet-era debt owed to western governments. Germany is the biggest lender. BORGGREFFE confirmed that Bonn would not be prepared to forgive any Soviet Union debt. Germany and the Paris Club are prepared to re-negotiate $8 billion of Soviet -era debt, including some of the $3 billion on which payments have already been missed. The restructuring deal is contingent on an agreement reached between Russian and the International Monetary Fund (IMF). First Deputy Finance Minister Mikhail KASYANOV said that an agreement with the IMF is expected by week's end. He also confirmed that Moscow will stand by all its foreign financial obligations.

Business

LUKoil To Issue Ruble Denominated Bonds

· Russia's largest oil company LUKoil will soon submit to the Federal Securities Commission a plan of issuing a new tranche of corporate ruble-denominated bonds. The company's spokesman said, "At the present time, an application is being prepared, and the most likely time of its submission to the commission is the next week." LUKoil is expected to issue its ruble-denominated bonds due in five years, with interest to be paid every half-year. It is predicted that Russia's gas monopoly Gazprom and the Tyumen Oil Company will follow suit in a bid to attract foreign investment expected to turn spare in progress of Russia's restructuring its GKOs, or treasury bills. The deadline for swapping the outstanding GKOs is

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April 30th, and Russian authorized banks will open special accounts on May 1st for money of foreign investors. Russian First Deputy Finance Minister Mikhail KASYANOV said in London on Friday that all of Western investors will soon be provided with a list of authorized banks to operate with the special accounts and a list of stocks and bonds that can be bought by non-residents.

this agreement in a fairly short time, thanks to the joint investigations we're already conducting," DEL PONTE said. The parties held the talks behind closed doors regarding a case against former prime minister, Pavel LAZARENKO, who is currently in the US. Ukraine and Switzerland requested the US to extradite the ex-premier, who is charged with illegal operations with foreign currency and embezzlement of budget funds. Although Kiev and Washington have no agreement on the extradition of people suspected of committing crimes, Ukraine hopes LAZARENKO will be extradited. LAZARENKO has applied for political asylum, citing that he will face torture if he returns to his homeland. He also claims that the charges have been brought against him because he is a presidential candidate for the Gromada party.

South Caucasus & Central Asia

Zhvania-Primakov Discuss Economics

· Russian Prime Minister Yevgeny PRIMAKOV on Tuesday met in Moscow with speaker of the Georgian parliament Zurab ZHVANIA to discuss economic cooperation. The sides showed vested interest in deepening the mutually beneficial cooperation between the two countries. According to the spokeswoman, the meeting concentrated on the settlement of the Georgia-Abkhazia conflict. The sides pointed out the importance of the agreement reached on the draft protocol on the refugees' return to the Gali region of Abkhazia in compliance with the decision taken by the Council of the Commonwealth of Independent States (CIS) Heads of State in April. PRIMAKOV and ZHVANIA exchanged views on the NATO military operation in Yugoslavia. The Russian side pointed out the inadmissibility of force application against a sovereign state. PRIMAKOV stressed the necessity for immediate cessation of air strikes against Yugoslavia and for resumption of peace process. ZHVANIA stressed that Georgian condemns the ethnic cleansing in Kosovo. The Georgian speaker also met with Moscow Mayor Yuri LUZHKOV, who called for a, "clear concept" for Russian policy in the South Caucasus. He warned, "Russia must not lose Georgia as a good neighbor."

US Businessmen Tour Georgia

· A delegation of US entrepreneurs arrived in Georgia on Sunday to familiarize themselves with

European Republics

EBRD Grants Estonia Loan For Airport And Rails

· The European Bank for Reconstruction and Development (EBRD) has granted Estonia a $7 million loan aimed at helping Tallinn Airport modernize its passenger terminal. The 14 year loan, guaranteed by the Estonian government, complements a $9 million from the European Investment Bank and a grant of $2 million from the European Union PHARE program. The EBRD has also loaned $15 million to create a more efficient railway network. The European Investment Bank granted a loan for track renewal. Estonia has also received a 45 million grant from PHARE program for rail projects, RFE\RL Newsline reported.

Ukraine-Russia End Three-day Border Talks

· Ukrainian State Committee for Border Protection, Colonel-General Viktor BANNY, and Russian Federal Border Guard Service director, Colonel-General Konstantin TOTSKY, are ending their three-day talks in Kiev today. The talks focused on ways to improve cooperation between the border guard services of the two countries. Special attention during the meeting was paid to the operation of border checkpoints on the Russian-Ukrainian border and improvement of border control. TOTSKY and BANNY discussed prospects for closer interaction between their agencies on the Black Sea, the Sea of Azov, and in the Kerch Strait, and joint measures to protect bioresources.

Ukraine-Swiss Sign Mutual Assistance Memo.

· Ukraine's Prosecutor General Mikhail POTEBENKO and Swiss Federal Prosecutor Carla DEL PONTE, who is leading a delegation of Swiss prosecutors, on Monday in Kiev signed a memorandum on mutual assistance between the prosecutor's offices of the two countries in combating organized crime and money laundering. "We have prepared

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the commercial potential of Georgia and consider the possibilities of investing in its economy. The visit was arranged by a counselor for the New Independent States of the US Department of Commerce. The delegation includes representatives from 12 US companies operating in different spheres. According to the representative, a favorable climate has been created in Georgia for investments as well as progress has been developed in market economy, of which the development of private sector and the process of privatization are the sign.

Baku Hands Over Detained MiG-21

· Azeri Transport Prosecutor Chingiz MAMEDOV on Tuesday announced that Baku has handed over to Kazakhstan six MiG-21 fighter jets detained on board a Russian Ruslan cargo aircraft, when it landed at the Bina international airport on March 19th. In his words, the fighter jets belonged to Kazakhstan and were passed over by official request of the Kazakh Prosecutor General. MAMEDOV added, "We decided to hand over the planes and the investigation to the Kazakh public prosecutor and on April 18th the MiGs were flown out by cargo plane." The planes had been detains under the suspicion that they were bound for Yugoslavia. Azeri officials discovered discrepancies between the flight log, customs documents and passengers' accounts of the cargo's destiny. Russia and Kazakhstan later said that the cargo plan had been chartered to deliver Kazakh planes to Slovakia. Azeri President Geidar ALIYEV on March 31st released the cargo plane and its passengers after talks with Moscow Mayor Yuri LUZHKOV. The criminal investigation was launched under Azeri's criminal code which bars the transport of arms across its territory without permission.

Tajik Foreign Trade Shrinks

· Tajikistan's foreign trade turnover totaled $327 million from January to March, including electric power and natural gas, which is a 6 percent drop as compared with the same period last year. According to the State Statistics Agency under the Tajik government, the country's exports in the first three

months of the year reached $144.9 million, a 1 percent growth as compared with January-March 1998. Imports dropped by 10 percent to $182.1 million. On the whole, imports exceed exports by 26 percent, making the a trade deficit of $37.1 million. The State Statistics Agency says that export to countries of the Commonwealth of Independent States (CIS) from January to March increased 7 percent compared with the same period in 1998, while imports slumped 20 percent. Exports to foreign countries fell by 3 percent, while imports grew by 17 percent in the same period. The foreign trade turnover with the CIS decreased by 13 percent, while a 4 percent growth was registered with foreign states.

Rus-Tajik Sign Military, Interior Agreements

· Russian and Tajik Presidents Boris YELTSIN and Emomali RAKHMONOV on Friday signed a number of agreements and a declaration on alliance interaction between their nations, oriented toward the 21st century. The two leaders also agreed to prolong the stay of Russian troops in Tajikistan and approved a Russian military base on its territory. The military base will be created on the basis of the 201st motorized rifle division of Russia, which has been deployed in Tajikistan for over eight years. "Russia was and is the guarantor of maintaining peace and stability not only in our region but also in the whole world," RAKHMONOV stated during the ceremonial signing of a cooperation agreement between the two states. The Tajik President said military cooperation with Russia will in no way be aimed against security or interests of other countries. "We shall not stand our territory be used against third countries," he stressed. The base, defensive in its character, would help Tajikistan draw on Russia's military experience to build a "full-blooded" military of its own. Russian Interior Minister Sergei STEPASHIN and his Tajik counterpart Khumidin SHARIPOV agreed that their ministries will cooperate against drug trafficking via Afghanistan and Tajikistan to Russia as well as "reactionary Islamic fundamentalism and weapons smuggling." The agreement also covers the search and arrest in Russia of Tajik criminals.

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

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