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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, July 2, 1999

justice for the last ten years. When his mandate expired in June, President Boris YELTSIN named him for the job again. The upper house of the Russian parliament approved LEBEDEV without discussion. LEBEDEV has been working in the judicial system for over 30 years. He declined to comment on the Russian top judicial body's decision, which had recognized as legitimate the institution of criminal proceedings against Yuri SKURATOV. He flatly said, "as the Chief Justice of the Supreme Court, I may not say anything in connection with a case which may be examined in the future."

US Missionary Released From Chechnya

· Kidnappers have released American missionary Herbert GREGG, who was abducted from Daghestan and held in Chechnya for seven months. In a dramatic videotape demand for ransom, his captors showed GREGG as they cut off his right index finger. Russian Interior Ministry troops conducted the operation to free GREGG, but they did not identify GREGG's captors. No ransom was paid for his release. GREGG looked weak and tired as he arrived in Moscow's Sheremetyevo Airport. He could not say how he had been treated in captivity, except, "They treated me in different ways according to the person." Hundreds of Russians and foreigners have been kidnapped in and around Chechnya in recent years by gangs seeking ransom. Vladimir ZORIN, Chairman of the Nationalities Policy Committee Sunday said, "kidnapping people has become a trade in North Caucasus, particularly in Chechnya."

Russian Federation


Yeltsin To Sign Duma Elections Decree

· Chairman of the Central Electoral Commission (CEC) Alexander VESHNYAKOV is confident that Russian Boris YELTSIN will soon sign a decree for elections to the Russian State Duma. The parliamentary elections are likely to be held on August 20th. VESHNYAKOV said he had no doubts that, "the President will do that within the framework of his constitutional powers." A law on the election of members of the Duma will come into effect on Saturday. Rossiiskaya Gazeta is planning to finalize the official publication of the Duma election law, the size of which is more than 300 pages. VESHNYAKOV said the work on the law continued for about 18 months. The law was repeatedly scrutinized at CEC and in regional electoral commissions.

Federal Security Service (FSB) director Vladimir PUTIN noted that security agencies will play an important part in the run-up to parliamentary elections. He said, "They [the elections] must take place in terms defined by the Constitution, in full compliance with the norms of election legislature. They must be free, equal, and democratic." Security agents will control capital flows during the election campaign and dig up information about illegalities, he said. "Our main task is to prevent criminals from penetrating into power. A breakthrough has appeared in public opinion, and people are feeling the necessity for the law enforcement agencies, and the security services in particular, to work efficiently."

Lebedev To Remain Chief Justice

· The Russian Federation Council today in a vote of 132 to eight against and three abstentions to keep Vyacheslav LEBEDEV as the chairman of the Russian Supreme Court. LEBEDEV has been the chief

Today's News Highlights


Stock Market Rallies

Business Profitable, But Risky

LUKoil Tender In 10 Days

UES On Energy Debts

European Republics

Estonian Econ. To Recover

South Caucasus & Central Asia

Rus-Georgia Differ Militarily

Kazakh Incomes Increase

Uzbek Considers Uranium




July 2, 1999

Intercon's Daily


Ruble = 24.21/$1.00 (NY rate)

Ruble = 24.29/$1.00 (CB rate)

Ruble = 24.87/1 euro (CB rate)

Jan Feb Mar Apr May Jun

Russian Stock Market Rallies On IMF News

· The Russian stock market is making a strong comeback, fueled by expectations of a new loan from the International Monetary Fund (IMF) and higher world oil prices. The Russian Trading System opened today at 131.46 points, a 4.6 percent increase over the previous day. By midday it had jumped another 2 percent. The Associated Press reports that the index is up 110 percent since Russia's financial crash. In August, 1998, the government defaulted on its domestic debt and devalued the ruble, sending the stock market into a tailspin. Economic analysts are pleased with the economic rebound ahead of their predictions. Even more impressive is that the economy strengthened during political turmoil. Today's rise is primarily due to IMF remarks that the Fund is satisfied with the government's efforts in implementing several banking reforms and new taxes. The Fund is widely expected to vote later this month to approve the $4.5 billion loan.

Commercial Banks To Sue CB For Licenses

· Russian bankers on Thursday threatened to sue the Central Bank for pulling the licenses of insolvent commercial banks Uneximbank, Mosbiznesbank, Promstroibank, and Mezhkombank on Wednesday. The Central Bank insisted that its decision to revoke the licenses was made under pressure from the International Monetary Fund (IMF).

The Central Bank believes that it was necessary to revoke the licenses in order to qualify for new foreign loans. The IMF urged Russia to stop wasting scarce resources on shaky banks and to speed up the liquidation of insolvent organizations. President of the Association of Russian Banks Sergei YEGOROV called the Central Bank's action "impulsive" and "anti-state." He said, "The [association] and the Russian banks will seek protection in the courts." Central Bank chairman Viktor GERASHCHENKO stood by the Bank's decision, stating that these four banks had deserved to lose their licenses long ago. He noted that closing some of Russia's 18 largest banks will be difficult, in part because they hold $850 million in deposits. GERASHCHENKO said that the Cabinet is drafting a bill that would partially compensate deposits in the banks that are to be liquidated.


Yastrzhembsky Elected Chairman Of TV Center

· Moscow City deputy prime minister Sergei YASTRZHEMBSKY last week was elected chairman of the board of the TV Center channel. He outlined plans for TV Center in a broadcast on Ekho Moskvy radio, which include mixing more with Russian people, dispelling myths about Moscow, and giving a true coverage of relations between the capital and regions. According to YASTR-ZHEMBSKY, TV Center lags behind the biggest channels—ORT, RTR, and NTV—both from the point of view of the size of it audience and the number of regions to which it broadcasts and the quality of its programs. The Moscow City government owns a 90 percent stake in TV Center. YASTRZHEMBSKY skirted a question of whether his appointment to the new post was connected with the coming elections. He admitted that his appointment might be viewed from that position, then dropped the subject.

Also elected to the board of directors was Sergei LISOVSKY, head of SV Holding and former presidential campaign aide to President Boris YELTSIN. According to Kommersant-Daily, LISOVSKY is rumored to be a financial backer for Moscow Mayor Yuri LUZHKOV's presidential campaign. In an interview, he predicted that the upcoming election will witness more voter fraud than the 1996 ballot. He also believes that YELTSIN has not decided to cancel the presidential elections. Media outlets greatly influenced the last presidential elections. Parliamen

When you need to know it as it happens




July 2, 1999

Intercon's Daily

tary elections are scheduled for December and presidential elections for the summer of 2000.

Berezovsky To Spread Media Influence

· Business tycoon Boris BEREZOVSKY on Wednesday said that his own LogoVAZ company and a variety of groups are negotiating to acquire shares in Kommersant Publishing, which issues Kommersant-Daily. According to BEREZOVSKY, the Alfa Group, Unified Energy Systems, National Reserve Bank are engaged in the talks.

Russian Businesses Profitable, But Risky

· The Statistics Agency on Tuesday reported that a total of 56.7 percent of the Russian companies subject to inspection from January to April 1999, proved to be profitable. The percentage of unprofitable companies decreased 4.7 percent, compared to the same period in 1998. Revenues exceeded expenditures most in the sphere of industry by 83.7 billion rubles ($3.3 billion), and transport by 20.5 billion rubles ($800 million). The money equivalent of losses left revenues behind by 4.2 billion rubles ($175 million) in public services, and by 1.9 billion rubles ($83 million) in trade and public catering.

However, London-based Merchant International Group (MIG), an international risk consultant, surveyed the biggest off-beat risks outside the normal run of business criteria and found that Russia topped the list. Weighing factors often seen as peripheral, from corruption and violent crime to red tape and basic cultural difference, Russia remained the riskiest business location for US and British companies. MIG, which has estimated that non-conventional risks cost companies investing or operating in emerging market countries more than $15 billion a year, said the risks in any one place also varied according to the origins of the foreign company.

LUKoil Tender Set For 10 Days

· Russian State Property Minister Farid GAZIZULLIN on Wednesday said a tender for a sale of 9 percent state-owned stake in LUKoil will take place in 10 days. Russian and foreign investors will be invited to participate without any restrictions, GAZIZULLIN said. The 9 percent, which is 26.6 percent of the state package, has already received a market value. However, he declined to give figures.

UES Reports Energy Debts

· Unified Energy Systems' (UES) press depart

ment released information Thursday showing that the overall energy debt of Russian enterprises reached 154 billion rubles in January-May 1999, marking a 15 percent increase. According to UES, Russian budget enterprises and organizations owed 16.2 billion rubles by July 1st. The debt of locally financed budget institutions accounted for more than 29 billion rubles. Non-payments make it hard for electric power stations to accumulate fuel. The worst hit are the traditional energy crisis areas in the Arkhangelsk, Novosibirsk, Omsk, and Ivanovsky regions, as well as Kamchatka and Sakhalin in the Far East.

Carmaker Stops Producing GAZ-66 Trucks

· Carmaker GAZ has taken its GAZ-66 trucks out of production. The GAZ-66, primarily assembled to fulfill the orders from the Russian Defense Ministry, will be replaced by the Sadko multi-purpose medium trucks. A spokesman for the Nizhny Novgorod-based GAZ joint-stock company pointed out that the case was not just in switching from one model to another, but marked a completion in restructuring the truck production process. The GAZ works has modified most of its previous truck models and has launched the production of Gazel pickups. It is planning to focus on the assembly of light cars within the next few years, including projects with the well-known Italian car-maker, Fiat.

European Republics

IMF Believes Estonia Is Ready For Recovery

· The International Monetary Fund (IMF) on Thursday said that Estonia's economy is well positioned for a recovery. However, it added that Estonia needs to accelerate the implementation of the remaining structural reforms. After an increase in productivity by nearly 12 percent in 1997, Estonia's economy slowed to 4 percent in 1998, and appears to have contracted in early 1999. The IMF believes this years contraction is due to economic situations in neighboring countries and related banking system difficulties. The Fund praised Estonian officials for their success in narrowing current account deficit, reducing inflation, and implementing essential structural reforms. According to an IMF statement, "Directors recognized that the immediate difficulties in the banking system had now been successfully overcome, and considered that Estonia's economy was well positioned for a recovery."

When you need to know it as it happens




July 2, 1999

Intercon's Daily

South Caucasus & Central Asia

Georgia-Russia Differ On Military Stances

· Georgian Foreign Minister Irakly MENAGARISHVILI on Thursday said there were "differences" in Russia's and Georgia's stands on bilateral military cooperation, which were discussed during Moscow consultations on Tuesday and Wednesday. According to the Foreign Minister, Russia maintains that the talks between the two countries should mainly center round the quotas set by the treaty on conventional arms in Europe, while Georgia believes that, "now it is difficult, problematic and impossible to talk about figures, and it is necessary to consider new principles of military cooperation between the two countries because those principles that were worked out in 1994-1995 and underline bilateral agreements concluded at that period are now almost invalid." He also added that Georgia sees its security dependent on being a part of the European security system. MENAGARISHVILI said, "Georgia's goal is to completely integrate into European economic, political and defense structure." He said Georgia preferred security guarantees of, "existing within the common European home" to provisions of the Commonwealth of Independent States (CIS) collective security treaty. Georgia opted not to extend the CIS collective security treaty which expired in April 1999, saying the treaty did not take into account her interests and needed to be adjusted to the current situation. In addition to looking westward, Georgia hopes to focus on regional cooperation in the Caucasus. MENAGARISHVILI said that Armenia President Robert KOCHARYAN and Azeri President Geidar ALIYEV, have supported the initiative put by their Georgian President Eduard SHEVARDNADZE to call a summit of South Caucasus leaders. He said the date has not be set, but that it could be held in Tbilisi this year.

Kazakhstan Incomes Increased 4.4 Percent

· The average monthly income in Kazakhstan increased 4.4 percent in the first quarter to 8,870 tenge, according to the State Statistics Agency. This

was equal to $100 at March exchange rates of 88.3 tenge to the dollar. Net incomes, after tax payments, rose by 4.9 percent year-on-year from January to March. Unfortunately, incomes of 69 percent of the population in the Central Asian nation did not exceed 3,000 tenge, while another 24 percent were earning about 6,000 tenge. The highest earners, receiving more than 18,000 tenge, constituted 0.4 percent. The agency also found that people were spending most of their earned incomes. Monthly spending per person was about 8,663 tenge in the first quarter, a rise of 3.5 percent year-on-year. More than 50 percent of the spending was on food and communal services, while people spent the least on education and health.

Uzbek Revises Gold JV, Considers Uranium

· Because of low gold prices, Uzbekistan's Navoi Mining and Metallurgical Plant (NGMK) is considering changing the terms of a proposed gold mining project with Britain's Oxus Resources Corp. NGMK chief engineer Yevgeny TOLSTOV said, "We cannot set up a joint venture when world prices are at their lowest. We have suggested a different approach, that of underground mining. Oxus has agreed to conduct a new feasibility study within the next six months." Under the original project Oxus and NGMK, Uzbekistan's leading gold producer, were to restructure a 1995 joint venture, Amantaitau Goldfields, using open-pit methods. Project costs were estimated at $196 million. The Amantaitau and Daugystau fields, with an estimated 300 tons of gold, were to have been developed by Canada's Cameco Corp. and Britain's Lonrho Plc. Uzbekistan produces about 80 tons of gold annually. Of that amount, NGMK mines 90 percent. The company also announced it will set up a uranium mining joint venture with French giant Cogema. TOLSTOV said NGMK was considering increasing its presence in the uranium market because prices for the metal is predicted to rise after 2000. A joint venture agreement with Cogema is likely to be signed at the end of the year. NGMK, the nation's only uranium producer, expects to produce 2,200 tons of uranium in 1999.

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When you need to know it as it happens