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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, May 24, 1999

Russian Federation


Yeltsin Approves Power Ministers

· Before leaving for a vacation in Sochi, Russian President Boris YELTSIN re-appointed key ministers to Prime Minister Sergei STEPASHIN's Cabinet. They include Foreign Minister Igor IVANOV, Defense Minister Igor SERGEYEV, Justice Minister Pavel KRASHENINNIKOV, Minister for Emergencies Sergei SHOIGU. Vladimir RUSHAILO, a former deputy interior minister, was named Interior Minister, a position previously held by STEPASHIN. Former Railways Minister Nikolai AKSENENKO was named first deputy prime minister for industry. Other deputy prime ministers are expected to be appointed this week. STEPASHIN also named Alexander MIKHAILOV chief of the information department. He was formerly chief of the Interior Ministry's public relations department. STEPASHIN and the chief of the Russian president's office Alexander VOLOSHIN left for Sochi to confer with YELTSIN over more appointments, particularly finance and economic ministers. STEPASHIN has expressed that he wants to retain Mikhail ZADORNOV as finance minister and give Alexander ZHUKOV the deputy prime minister position. ZHUKOV has said he would turn down a deputy position. First Deputy Prime Minister Yuri MASLYUKOV and Deputy Prime Minister Gennady KULIK are definitely leaving the Cabinet. The shift of influence in the Cabinet from the Communists to market reformers caused STEPASHIN to state that he will not become the puppet of financial groups and leading business leaders. He said in an interview with the NTV Itogi television program on Sunday, "Next Thursday when we discuss a very important question in the socio-economic development of our country and some aspects related to consultations with the International Monetary Fund and the work in the State Duma, it will be a new government, efficient

and enjoying adequate powers of the new cabinet."

Greco-Russian Confer On Kosovo, Pipelines

· Greek Foreign Minister Georgos PAPANDREOU on Friday held talks in Moscow with his Russian counterpart Igor IVANOV and with special presidential Balkans envoy Viktor CHERNOMYRDIN on the conflict in Yugoslavia. Copies of a draft resolution prepared by the Greek Foreign Ministry for the UN Security Council were presented by PAPANDREOU to CHERNOMYRDIN, Finnish President Martti AHTISAARI, and US Deputy Secretary of State Strobe TALBOTT on Wednesday. The sides discussed a plan for further work within the scope of the Rus-Greek-Swiss initiative focus to render humanitarian aid to the Yugoslav conflict victims. The plan was approved at a meeting in Athens by the tri-partite initiative coordinating committee.

Russian Deputy Fuel and Energy Minister Yelena TELEGINA and Greek Development Minister Evangelos VENIZELOS on Tuesday discussed the plans for building an oil pipeline and joint power generation projects. The pipeline project envisions joint construction by Greece, Russia and Bulgaria of a transport link for Russian oil between the Bulgarian port of Burgas and the Greek port of Alexandroupolis, bypassing the Turkish straits. A group of Russian experts reviewed with their Greek colleagues the results of the first phase of preparation of the feasibility study for the Burgas-Alexandroupolis pipeline. On Wednesday, both sides signed a memorandum se

Today's News Highlights


Attack On Maskhadov Aide

Duma Reviews IMF Legislation

London Club Talks Continue

Rus-Italy To Build Yak-130

European Republics

Ukraine Adjusts Lombard Rate

Estonia To Enter WTO

South Caucasus & Central Asia

Suspected Terrorist Arrested

Baku Hosts OEC




May 24, 1999

Intercon's Daily

curing the future of an oil pipeline project. They also agreed to expedite the establishment of the international company Trans-Balkan Pipeline SA, which will build and operate the pipeline and reaffirmed the previous agreement on share participation in the authorized capital of the company. In 1994, Greece, Russia and Bulgaria signed an initial agreement for the construction of the 300 kilometers high-pressure pipeline, which will have a capacity of 600,000 barrels a day.

Attack On Maskhadov Aide Claims One Life

· Gunmen opened fire on the car belonging to the head of the Chechen Governmental Department for the Regional Policy and a close associate of President MASKHADOV, Danilbek TAMKAYEV, on Sunday. The attackers killed his brother Adam and TAMKAYEV receive multiple gunshot wounds. He is in critical condition. No one has claimed responsibility for the attack. Several gunmen groups were noticed near the North Caucasian constituencies of Russia adjoining Chechnya. Gunmen open fire at military helicopters and police armor vehicles which patrol the roads and farms. Mobile interior units have toughened control over forests and mountain paths the gunmen may use to come from Chechnya. The interior troopers have a close interaction with the Vladikavkaz border unit placed on the main transport ways of the Caucasus.

Early this morning, an explosive device went off in the city of Kaspijsk, Russia's republic of Daghestan. According to preliminary information, the device was planted on a ceiling of a building housing the prosecutor's office, the military commissariat, and a department of the Ministry for Emergency Situations. No one was injured in the blast, but the building suffered a minor damage. A week ago, an explosive device equivalent to up to four kilograms of TNT was defused in Kaspijsk.


Ruble = 24.65/$1.00 (NY rate)

Ruble = 24.6/$1.00 (CB rate)

Ruble = 25.97/1 euro (CB rate)

Budget Committee Considers Legislation

· The budget committee of the Russian State Duma on Thursday discussed a number of budget-amending bills submitted by the government to meet the

conditions imposed on Russia by the International Monetary Fund (IMF). If passed by the Duma, the bills will allow the IMF to considering disbursing the credit line for Russia. After having discussed the bills aiming to increase the Russian budget revenues, the committee suggested that the Duma should pass the federal bill On Restructuring of the Credit Organization in the first reading. The committee rejected two bills imposing a tax on some motor vehicles, and gas stations, saying they had to be finalized. Deputy head of the committee Vladimir NIKITIN said the committee is ready to work with the government to improve the bills. He further added that it was necessary to explain to the taxpayers how much and for what they were paying. Deputy Finance Minister Oleg VYUGIN in his turn noted that the package of bills had, "a good chance to be passed by the State Duma, as Russia needed the bills badly to tap the IMF credit line." Prime Minister Sergei STEPASHIN admitted that the bills submitted by the PRIMAKOV government, "were insufficiently calculated and drafted in haste." IMF Managing Director Stanley FISCHER expressed support for STEPASHIN and said he is committed to maintaining contacts with Moscow. The tax collection in Russia was not bad in the first two months of this year, FISCHER noted. The overall percentage of collected taxes as against the gross domestic product is rather large, but the share taken by the federal authorities is much smaller than it should be, he said. FISCHER believes, Moscow should either increase efforts to collect budget revenues or cut the spending. Last month the International Monetary Fund and Russia agreed to resume the cooperation, and the IMF promised to bring $4.5 billion worth of additional credits in the next 18 months.

In addition to meeting IMF requirements, Duma speaker Gennady SELEZNYOV said that the government plans to present to the Duma the first draft of the 2000 budget as early as June.

Russia-UK Discussed Trade Missions

· A delegation of the Russian Trade Ministry and British governmental officials held negotiations in London on Thursday and Friday to discuss the future of the Russian trade mission in Great Britain. The British authorities have offered to Moscow to cut the staff of the trade mission and subordinate the remaining personnel to the Russian embassy in Great

When you need to know it as it happens




May 24, 1999

Intercon's Daily

Britain. Regardless of whether the proposal is accepted, the Russian embassy will have another seven staffers to continue the job they have at the trade mission. A main reason given by London for the offer is the absence of a British trade mission in Moscow. The Russian trade mission functions in London on a basis of the intergovernmental agreement of the 1930s.

Russian Continues London Club Talks

· The second round of talks between Russia and the London Club of creditors on restructuring part of Russia's foreign debts are opening in London on Monday. The Russian side will be represented by First Deputy Finance Minister Mikhail KASYANOV. The present round of meetings, which is a continuation of the April 19th-20th dialogue, will last till Wednesday. The aim of consultations with the London Club, an informal association of 600 private banks, is to review the volume of Russia's commercial debt inherited from the Soviet Union. The Russian side is expected to be briefed on the common approach of Western commercial creditors for the prospects of writing-off the Russian debt, estimated at $29.3 billion. This figure fluctuates due to calculations of credits in various currencies that have constantly changing exchange rates. During the April consultations with the London Club, the governing committee received Russian proposals on versions of writing-off the debt. The creditors have now received a full account on the financial situation in Russia and were given various parameters for consideration to restructure payments.


Aero-KAMOV Chief Engineer Murdered

· The chief engineer of Russia's Aero-KAMOV Air Company, identified as ABDULLIN, was killed Sunday night in the entry hall of his apartment by a gunshot wound to his head. The weapon has been unidentified. The Moscow chief police department said the murderer had managed to escape. A spent bullet and a 7.62-mm cartridge-case with a foreign marking were found on the scene. Police have launched an investigation into the case.

Rus-Italy Agree To Build Yak-130AEM Aircraft

· Russia's First Deputy Minister of Trade Igor MITROFANOV and Italy's First Deputy Defense Minister of Italy Massimo BRUTTI on Thursday

signed in Rome an inter-governmental agreement starting a project for the joint manufacture of a Yak-130AEM trainer aircraft. Attending the signing ceremony were heads of the Yakovlev design office, the Nizhny Novgorod aircraft factory Sokol, and Italian heads of the Aermacci Company. The agreement provides for a parity development of the aircraft in the interests of the Ministries of Defense and Industry of both countries. "The signing of the inter-governmental agreement between Russia and Italy on the implementation of the program for the manufacture of a Yak-130AEM trainer aircraft is a unique fact in history of our country's economic cooperation with foreign partners," MITROFANOV said. A trainer plane is intended mainly for deliveries to the domestic markets of the member states of the program for the manufacture of the Yak-130 aircraft. The cost of one airplane is some $8 million to $10 million. In March, the Yak-130 passed all necessary flight tests. MITROFANOV pointed out, "It is a unique aircraft," due to its capability for angles of attack up to 42 degrees. Italy believes, in the next 8 to 10 years it will be possible to sell 300 Yak-130AEM aircraft without taking into account sales in European countries and Russia. Italy will require 100 Yak-130AEM trainer planes before 2007.

European Republics

Ukraine Cuts Refinancing And Lombard Rate

· Ukraine's Central Bank on Friday announced that as of today it is cutting the refinancing rate from 50 percent to 45 percent and its Lombard rate from 55 percent to 50 percent. The Central Bank last revised its refinancing rate on April 28th. The bank has been lowering its rates since December due to what it says is "a more stable situation" on the money market. A senior central bank official on Thursday said the Bank's liquid foreign reserves has risen to $768 million as of May 20th from $705 million on April 28th. He said total currency reserves were some $220 million higher than the liquid ones.

Estonia Signs WTO Accession Documents

· Estonian Foreign Minister Tommas ILVES on Friday signed documents on Estonia's accession to the World Trade Organization (WTO), making it the 135th member. In 1998, Latvia became the first Baltic State to join the WTO. Estonia, which began WTO negotiations in 1994, agreed to immediately bring all

When you need to know it as it happens




May 24, 1999

Intercon's Daily

its economic and trade policies in line with WTO fair trade rules and to join the WTO's accords on government procurement and subsidies to civil aircraft. The parliament must pass 16 legislative acts by October 31st. Membership will follow 30 days after Estonia notifies the WTO that it has ratified the accession protocol.

South Caucasus & Central Asia

Georgia Security Officials Thwart Attack

· Georgia's Interior Ministry, Security Ministry, and Intelligence Department worked together to thwart preparations for a wide-reaching terrorist attack in Georgia aimed at assassinating President Eduard SHEVARDNADZE and "directed against the democratic development of Georgia, against its integration with Europe and the world." Interior and Security Ministry officials arrested eight people in Tbilisi on Saturday and seized weapons, including machine guns, sniper rifles, grenades and grenade launchers. According to officials the group was planning, "an especially grave crime against the state and the country's president." Defense Minister David TEVZADZE confirmed that senior Defense Ministry officials General Gudjar KURASHVILI was among those arrested.

In his weekly radio address, SHEVARDNADZE boldly declared that the organizers of the terrorist group were abroad. He linked the latest plot to Russia and conservative forces opposed to Georgia's pro-Western policies, which include efforts to one day join NATO. "As concerns the participants in this group, which prepared an especially dangerous state crime and has a whole arsenal of weapons—their allies and bosses, they are in another country, of course we are talking basically about Russia." He stopped short of linking the plot with the Russian government or leadership.

Sakinform reported that an investigation is in progress in order to identify and arrest other persons that could be involved in this crime. Police have in

creased security around the President, stepped up patrols, and set up road blocks. The criminal case is initiated by the Security Ministry and the State Prosecutor of Georgia is supervising the case. Georgian officials have not commented on unconfirmed reports that the group of terrorist were in possession of candidacy posters for former security minister Igor GIORGADZE; he is wanted in connection with the 1995 assassination attempt on SHEVARDNADZE. The Georgian President has survived two attempts on his life. The latest was in February, 1998, when gunmen opened fire on his motorcade in Tbilisi with grenades and automatic-weapon fire.

Baku Hosts OEC Foreign Ministers

· The ninth session of the Council of foreign ministers of the Organization for Economic Cooperation (OEC) ended in Baku on Friday. Ministers adopted a joint statement, which outlines the outlines main directions for cooperation between states of the region on a vast territory stretching from the Mediterranean sea to the Indian ocean. Five of the OEC member-states, including Azerbaijan, Kazakhstan, Pakistan, Turkmenistan and Iran, were represented at the session by foreign ministers and the other member-states by deputy foreign ministers. Azeri Foreign Minister Tofik ZULFUGAROV was elected rotating chairman of the OEC Council of Foreign Ministers. He will serve in that position until May, 2000. Vafa GULUZADE, Azeri state counselor for issues of foreign politics, said the cooperation envisages developing and deepening contacts between countries of the region in the OEC framework, above all, in the energy and communications fields. The cooperation presupposes interaction in construction of a transport corridor Europe-Caucasus-Asia, part of which has already been used as far as Uzbekistan, and in the construction of transport arteries to take energy resources to world markets. All this will help ensure economic revival and political stability in the region, GULUZADE said. Azerbaijan became a full-fledged member in 1992, joining the OEC simultaneously with Kazakhstan and the Central Asian states.

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

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