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

Tuesday, September 14, 1999

be involved. He did note that Russia's GRU military intelligence was "actively engaged" in the investigation of the Moscow blasts.

US-Russia Sign Y2K Join Missile Center Deal

· US Defense Secretary William COHEN and Russian Defense Minister Igor SERGEYEV agreed on Monday to work together in dealing with the millennium bug problem in relation to national security concerns. The two sides signed a joint statement on the setting up of a The Y2K Center for Strategic Stability to be based at the US Space Command headquarters in Colorado Springs. The center will work to avert computer glitches in the two states' early warning systems. Ten Russian specialists will fly to the US in late December to work at the center that will operate until mid-January of 2000. The plan for the center was aborted by Russia, when NATO began air strikes on Yugoslavia. Both Russia and the US have thousand of long-range nuclear missiles and both officials are anxious to avoid an unlikely but potentially disastrous mistake. COHEN and SERGEYEV stressed the importance of working together in solving differences over Kosovo, arms control, START-II Treaty and beginnings of START-III Treaty as well as the 1972 Anti-Ballistic Missile (ABM) Treaty. COHEN said that he discussed with SERGEYEV for the first time amending the ABM treaty to take into account US concerns about what it sees as the growing threat of a limited attack from rogue nations. He urged the Russian State Duma to ratify START-II, but believes there will be little action until

Russian Federation

Politics

New Arsenal Found, Three Detained

· As terror spreads through Moscow after a series of massive bombings on Guryanova Street and Kashirskoye Highway, despite presidential calls for calm, Russian police today discovered an arsenal with almost 2 tons of explosives in an apartment on Borisovsky Prudi Street in southwestern Moscow and a 70-meter length of fuse. Interior Minister Vladimir RUSHAILO, who was appointed in charge of the investigation, said that when investigators arrived on the scene the building was "virtually set for a blast." The building was evacuated and the explosives safely detonated by experts at a military training ground. In addition, more than 10 new bomb threats have proved false. The death toll from Monday's apartment bombing has reached 119 people, with only four residents surviving the blast. No one has claimed responsibility for the blast, but authorities are blaming terrorists. RUSHAILO said that the explosions were linked to Chechen warlords Shamil BASAYEV and KHATTAB, but some speculate differently. The police have detained three suspects being linked to the bombing and the Russian Federal Security Service (FSB) are circulating photo sketches of three other suspects, including Mukhit LAIPANOV, who rented space in the basement of both buildings.

Moscow police have increased their patrols of strategic areas, searching cars and cellars of apartment buildings, and checking resident's documents. Russian President Boris YELTSIN also ordered tight security at airports, nuclear power stations, oil pipelines, and other possible targets across the country. Russian military forces will join the security operation in Moscow. However, Defense Minister Igor SERGEYEV did not specify how the military would

Today's News Highlights

Russia

London Club On Soviet Debt

New Poll On Presid. Elections

European Republics

Rus-Lithuania To Boost Trade

Ukraine Approves 2000 Budget

South Caucasus & Central Asia

NATO-Georgian Co-op Seminar

Caucasus Arms Trade Absurd!

Kazakh Admits MiG Mistake

Foreign Mins. Against Terrorism

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after December's parliamentary elections. Today, COHEN is visiting a number of enterprises in Russian Arkhangelsk and Severodvinsk involved in the so-called NUNN-LUGAR program aiming at ensuring security of Russian nuclear arsenals.

Economy

Ruble = 25.75/$1.00 (NY rate)

Ruble = 25.53/$1.00 (CB rate)

Ruble = 26.51/1 euro (CB rate)

WB-Russia Review Technical Credit Option

· Russian First Deputy Prime Minister Viktor KHRISTENKO today met with head of the World Bank mission in Russia Michael CARTER to discuss opportunities for Russia to get a so-called "technical" $30 million credit for the purpose of reforming its regional financial systems. The meeting pointed out that it would be worth opening that credit, only if it was to be followed by another same-target credit for a much greater amount. To get the credits, Russia is prepared to revise the amounts of World Bank credits granted to Russia for other projects. CARTER proposed that another meeting with KHRISTENKO be held next week to discuss issues related to the forthcoming session of the bodies of the World Bank and International Monetary Fund, scheduled to be held in the end of September in Washington. KHRISTENKO is expected to attend that session.

London Club Discusses Soviet Debt

· The creditor committee of the London Club is meeting today over restructuring the former Soviet Union's commercial debt. Delegates of nine major Western banks and of a US investor group are attending the meeting, which will generate a common stance on restructuring the Soviet debt to which Russia is responsible. Several draft restructuring projects will be reviewed, including a draft based on Russia's proposals. Some sources said Russia's version is flexible, but proposes decisive steps for exchanging the former Soviet Union's debt to the London Club for new debt obligations. The meeting is preparation ahead of the arrival of a Russian delegation led by Finance Minister Mikhail KASAYANOV, due on Wednesday. The city's banking quarters do not rule out that the creditor committee will decide on a plan close to the restructuring of Mexico's debt in 1988. It is not ruled out, however, that a final decision will be put off until the end of the

next year, when there is more certainty about Russia's financial and political outlook. The restructuring of the debt to the London Club, which is estimated at $30 billion, is a crucial stage finishing the revision of terms and deadline of repayment of the Soviet debt after Russia's August agreement with the Paris Club.

Business

US Telecom Issues IPO For Russian Expansion

· Golden Telecom Inc. plans to offer 4.65 million shares in a projected range of $16 to $18.50 per shares to expand its operations in Russia. Golden Telecom provides a broad range of services to businesses and high-usage customers, including local access networks, data, and long distance services via a fiber optic and satellite-based network, and mobile cellular networks across Europe and into the former Soviet republics. The company operates under a variety of brand names in Moscow, St. Petersburg, Kiev, and other population centers in the Commonwealth of Independent States. Golden Telecom plans to use the funds raised in the IPO (initial public offering) to expand its network, fund possible acquisitions and business development, and other general corporate purpose. Global financier George SOROS holds a 16 percent stake in Golden Telecom's parent company GTS based in McLean, Virginia.

Aksyonenko For Transneft Leadership Change

· Russian First Deputy Prime Minister Nikolai AKSYONENKO on Monday instructed government representatives in the Transneft Oil Company to have the chief executives of the company be changed within three days. He also said the government representatives should ensure that Semen VAINSHTOK, a vice-president of the LUKoil Company be elected Transneft's president. The move was initiated by the Russian Fuel and Energy Ministry in order to, "boost the efficiency of state management of Transneft." The company is ranked among natural monopolies, and engages in pumping Russian oil via main pipelines, including its export. According to the company's charter, in order to change the company's chief executives, the state representatives' board must call a meeting of the board of directors, which calls an extraordinary general meeting of shareholders.

Int'l Oil And Gas Exhibition Opens

· An international Oil and Gas 1999 exhibition

When you need to know it as it happens

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opened today in Tyumen. More than 200 enterprises of the cities of Russia, Germany, Denmark, Finland, Ireland, Britain, Canada, Ukraine, and Kazakhstan are displaying their products in pavilions and an open area of about 5,000 square meters. Specialists and visitors to the exhibition took particular interest in new oil-and-gas production technologies by St.Petersburg scientists, equipment and machinery made by the Volga tubing mill, the Zabsibgazprom gas-industry joint-stock company, and the State Missile Design Center named after Academician MAKEYEV. A special section focuses on environmental safety in oil-and-gas production during the transportation of hydrocarbonate, restructuring of defense-industry enterprises, conversion to civilian production in the interests of the fuel-and-power sector, and the installing of gas in Siberian territory. The exhibition will run until September 18th.

Tuesday Tid-Bit

Poll On Electing A President, Alive Or Dead

· In a nationwide poll conducted by the Public Opinion Foundation, Russians were asked among living and deceased politician who they would elect president. Leading the poll were two late Soviet leaders Leonid BREZHNEV and Yuri ANDROPOV with 12 percent support. Following the deceased leaders was former prime minister and leader of the Fatherland-All Russia bloc Yevgeny PRIMAKOV with 10 percent of the vote. Rounding out the poll were Russian Communist Party leader Gennady ZYUGANOV and Josef STALIN both receiving 7 percent, while Moscow Mayor Yuri LUZHKOV garnered 6 percent and Vladimir LENIN with 3 percent.

Ukrainian Cabinet Approves 2000 Draft Budget

· The Ukrainian government has approved a 2000 draft state budget that provides for revenues totaling 37.4 billion gryvnia (some $8 billion). The government expects to gain 2.5 billion gryvnia from the privatization of state property. A list of enterprises designated for sale in 2000 was submitted earlier to the parliament, RFE\RL Newsline reported.

South Caucasus & Central Asia

NATO-Georgia Hold Cooperation Seminar

· Georgian Defense Minister David TEVZADZE, NATO representatives, and other national security advisors are meeting today to participate in a two-day seminar NATO-Georgia: perspectives for cooperation in Georgian highland resort Gudauri. Topics for discussion are based on recommendations turned in to the Georgian government by the International Council of Advisers on Security Issues which call for Georgia to reform the Armed Forces and to have an army coinciding with NATO standards. These recommendations were approved by the National Security Council of Georgia this summer. TEVZADZE believes Georgia will have a military body answering to the norms of democratic society by 2004. Chairman of the International Council of Advisers, created by an order from President Eduard SHEVARDNADZE last year, retired British general Sir Garry JOHNSON and adviser to NATO Secretary General Chris DONNELY are attending the seminar. DONNELY has said that the presence of Russian military bases in Georgia must be decided on by the government of the country. He added that heavy arms existing at Russian military bases must be brought into accordance with quotas set by the agreement on decrease of common arms in Europe.

Outrageous Statements On Caucasus Arms

· Chairman of the Supreme Council of Adjaria Aslan ABASHIDZE renewed and supported outrageous statements made by Russian State Duma Gennady SELEZNYEV, who said that Georgia illegally supplies arms to North Caucasus. "Trade with arms in Georgia exists and it is a fact," ABASHIDZE said in Batumi. The Adjarian leader did not give a single example proving his accusations against the central government of Georgia. The only fact used by Adjarian leader for proving his statement was detainment of a shipment of aerobombs in Batumi, which was intended for utilization in Bulgaria. In March,

European Republics

Rus-Lithuania Aim At Boosting Trade

· Lithuania's statistics service noted in a report on Friday that bilateral trade and economic ties with Russia over the past two or three months are showing signs of revival. Lithuanian exports to Russia increased by 26.4 percent in July as compared to June, 1999. Imports from Russia dropped by 8.3 percent. The two countries have accelerated mutual settlements for Lithuanian goods sold in Russia. Russia, that used to rank fourth in Lithuanian foreign trade before July 1999 after Germany, Latvia and Belarus, has now moved to the third place.

When you need to know it as it happens

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Georgian military-industrial center Delta was exporting 242 aerobombs to Bulgarian factory Dunarit. The right for utilizing aerobombs in Bulgaria was given to Delta by the National Security Council of Georgia. Adjarian government prohibited export of those bombs through Batumi. The shipment of bombs was sent to Bulgarian factory Dunarit through the Port of Poti instead in April.

State adviser of Azerbaijan for foreign policy Vafa GULUZADE used strong words when commenting on SELEZNYEV's statements. He stressed to Prime News Agency that the statement on arms entering the North Caucasus through the territory of Azerbaijan and Georgia is slanderous. According to him, back during Chechen war Russian authorities attempted to accuse Azerbaijan of the same thing, but were not able to prove it. GULUZADE said the opposite was true, that Chechens purchased arms from Russian officers. The Georgian State Security Ministry said SELEZNYEV's comment that Georgia trades arms in the Caucasus is absurd. Georgia is not an arms-producing country and does not participate in conflicts. Intercon has unconfirmed reports that Russian military arms may have been sold to those forces fighting Russian troops in Daghestan. As was the case during the Chechen war, Russian military may very well be selling arms to those who fuel this conflict. Chairman of the parliamentary committee for Defense and National Security Rezo ADAMIA said, "If arms illegally leave Georgia, that happens from Russian military bases located in its territory." He said information on such facts regularly gets to Georgian power ministries.

Kazakhstan Admits MiG Sale Mistake

· Kazakhstan's Foreign Minister Kasymzhomart TOKAYEV admitted for the first time on Sunday that a "group of people" illegally sold a number of its MiG-21 fighter jets to North Korea, but said the government had no knowledge of the sales. He said the sale was a "criminal and irresponsible" violation of the existing export control system. TOKAYEV did not say how many planes were sold or when. Local media is

reporting approximately 30 planes were sold to Stalinist North Korea. Kazakhstan's arsenal is usually sold through privatized or partly privatized companies. However, the lapse in security and control of the sales, gives the impression that the government has little control over who sells which arms to whom. President Nursultan NAZARBAYEV last month ordered an investigation of the sales, resulting in the dismissal of his defense minister and national security chief. According to TOKAYEV's statement, "The Kazakh leadership is truly sorry about what has happened." Washington, however, is not taken the illegal sales lightly. The US has threatened to cut financial aid to Kazakhstan, which now stands at $75 million per year.

Foreign Mins. Pledge To Combat Terrorism

· Foreign Ministers from 16 nations, in Almaty attending the Interaction and Confidence Building Measures in Asia, today pledged to boost peace and democracy and to wipe out terrorism from Asia. Kazakh President Nursultan NAZARBAYEV, who proposed the forum, said, "Asia is torn apart by conflicts and mistrust. Special importance must be attached to terrorism and extremism because of the volatile situation in Asia today." The conference was attended by Russia, Tajikistan, Uzbekistan, Kyrgyzstan, Azerbaijan, China, Mongolia, Afghanistan, Pakistan, India, Iran, Israel, Egypt, Turkey, and the Palestinian administration. Russian Foreign Minister Igor IVANOV said that the fight against terrorism and extremism was of greatest concern given the bombings in Moscow and uprising in Daghestan. His comments echo what Defense Minister Igor SERGEYEV's stressed to US counterpart William COHEN on Monday. SERGEYEV said, "In the past, terrorists were just carrying out separate acts of terrorism. Now they are waging a terrorist war against us. These are new realities and we have to oppose them with new steps on our part." COHEN commented that the Moscow apartment bombing, "is a cowardly and callous act of terrorism in which innocent people have been killed in wanton disregard of the lives of people who are noncombatants."

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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