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

Thursday, September 9, 1999

Russian Federation

Politics

Explosion Destroys Apartment Building

· Approximately 23 are dead, more than 150 residents were injured and hospitalized, and over 100 are missing and could be trapped in the rubble of a nine story apartment building on Guryanov Street in southeast Moscow, after a massive explosion erupted just shortly after midnight. Cranes, bulldozers and some 400 specialists and rescuers are working at the site to sift through a gnarled mess of trees, metal, shattered glass and concrete to find survivors. The explosion shattered windows in buildings hundred of yards from the blast and flipped over cars in the surround streets. A total of 72 apartments have been destroyed. About 1,200 people have been evacuated from the blast-torn apartment building and adjoining flats. President Boris YELTSIN was briefed on the devastating incident by Prime Minister Vladimir PUTIN, who at a Cabinet meeting claimed that the blast was caused by natural gas. However, Moscow Mayor Yuri LUZHKOV, Emergency Minister Sergei SHOIGU, and the Federal Security Service (FSB) believe otherwise, speculating that it was a terrorist attack, possibly linked to the invasion of Daghestan. LUZHKOV announced the establishment of a committee to investigate the cause of the explosion. He said, "Of course, we cannot rule out that this is a string of terrorist acts, a move by the bandits to wreak revenge on Russians for their first defeat in Daghestan." SHOIGU said, "It does not look like gas." He added that, "Experts will establish the real cause of the accident later on Thursday or tomorrow." The FSB said, "The nature of the damage and the number of casualties," suggest an explosive device was placed in the building. One resident said, "There was absolutely no smell of gas, If such a powerful blast had been caused by gas its smell would have been around for hours." This explosion

follows two recent bombing incidents. On August 31st, a bomb exploded in a video arcade in the Manezh Square Mall outside of the Kremlin. On Sunday, a car bomb exploded outside of a five story military housing complex, killing 64 people.

Arcade Bombing Suspect Flees

· After receiving a new summons from investigators at the Federal Security Service (FSB), the 29-year-old leader of the Union of Revolutionary Writers Dmitry PIMENOV, who is the number one suspect in the video arcade bombing last week, has fled Russia, escaping to Poland via Ukraine. He claims he is innocent of the bombing attack on the Manezh shopping complex just yards from the Kremlin. PIMENOV said he had no intention of returning to Russia until his name is cleared. Shortly after the explosion, FSB investigators claimed to have found a flyer left by a previously unknown anti-consumer organization claiming responsibility for the attack. Forty people were injured in the blast, some seriously, and a woman has since died of her injuries.

Moscow Mayoral Elections Set For Dec. 19th

· Moscow's city assembly on Wednesday approved a measure bringing forward mayoral election by six months to coincide with Russian State Duma elections on December 19th. The move is in favor of Moscow Mayor Yuri LUZHKOV because other wise he would have been forced to choose between contesting the presidential or mayoral elections. Rumors floating around Moscow that President Boris

Today's News Highlights

Russia

Resolution on Metals and Timber

New Business Newspaper

European Republics

Lith. Votes To Close Ignalina

IMF Releases $184 Loan

South Caucasus & Central Asia

Georgia Prepares For NATO

Aliyev To Run For Third Term?

Trilateral Cooperation Increases

China-Turkmen Dicuss Military

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YELTSIN may resign on September 19th prompting an emergency presidential election on December 19th have been denied. It is speculated that by resigning, YELTSIN would give Prime Minister and chosen successor Vladimir PUTIN three months as acting president ahead of the new elections and a chance to boost his popularity. PUTIN called the rumors "harmful and groundless." One citizen quoted in the Financial Times said, "This retirement scenarios has been doing the rounds in Moscow, but with all the scandals swirling around the country, it would be a particularly bad time to bow out."

Economy

Ruble = 25.01/$1.00 (NY rate)

Ruble = 25.71/$1.00 (CB rate)

Ruble = 27.31/1 euro (CB rate)

Summers On Further IMF Loans To Russia

· In an interview with CNN television on Wednesday, US Treasury Secretary Lawrence SUMMERS said the International Monetary Fund (IMF) can issue additional loans to Russia, with the provision of a strict account of their spending. As for additional IMF loans to Russia, SUMMERS stressed that it was a matter of adequate safeguards against their misuse and of an account of how the loans were spent in the recent years. Russia can count on IMF loans, but on the provision of strict compliance with these terms, he said. The US will watch Russia's progress with meeting these terms, SUMMERS said.

Resolutions On Metals And Timber

· The Russian government has approved several resolutions on metal products and timber. One resolution extends a 5 percent export tariff on lead, tin, tungsten, molybdenum, tantalum, bismuth, cadmium, titanium, zirconium, antimony, manganese, beryllium, chromium, germanium, vanadium, gallium, hafnium, indium, niobium, rhenium, and thallium, Reuters reported. The tariff applies to primary metals, products from these metal and scrap, with the exception of scrap lead and scrap titanium, which are liable to a 20 percent tariff under a separate resolution in force from April. The tax also applies to a group referred to as "alkaline metals" except potassium and "alkaline earth metals" as well as metals oxides. In addition, a range of seafood, alcohol, and strong alcoholic drinks, with the exception of vodka and sweet liquors are liable to a 5 percent export tariff.

The resolution raises to 20 percent, but no lower than 24 euros per cubic meter, from 10 percent but no lower than 12 euros per cubic meter, export tariffs on oak, ash, and beech timbers and some timber products. Tariffs do not apply to members of the Custom Union, which includes Belarus, Kazakhstan, Kyrgyzstan, and Tajikistan.

Business

New Russian Language Business Newspaper

· The Financial Times, The Wall Street Journal, and Independent Media on Tuesday launched a new Russian language business magazine, claiming to be independent of political influences and the powerful oligarchs. One billboard heralding the newspaper reads, "Any oligarch can buy our newspaper, at a kiosk." The newspaper, called Vedomosti, contains a black and white news and comment sections, and a pink companies and market section. David BELL, chairman of the Financial Times, described Vedomosti as a newspaper, "made by Russians for Russians," while Karen HOUSE, president of Dow Jones International, said Russian business would benefit from the, "timely accurate, business information," provided by, "the right partners and the right editorial team." Leonid BERSHIDSKY, a 27-year old, leads the 40-staff Moscow editorial team. Vedomosti is available in Moscow and will be launched in St. Petersburg in October. The Financial Times and The Wall Street Journal will invest $10 million to support the newspaper over the next three years and will sell advertising through their own networks. Vedomosti has lined up $2.3 million in advertising.

St. Petersburg Television Back On The Air

· St. Petersburg Television Network was allowed to resume broadcasting on Friday after it apologized for its critical coverage of the Right Cause concert/ rally last month. The Press Ministry had suspended the company's license for airing the report on Right Cause which according to the ministry was "insulting" to viewers and violated laws on the media and voters' rights. Politicians and network officials have accused to ministry of censorship ahead of parliamentary and presidential elections. Press Minister Mikhail LESIN and network officials met on Friday. St. Petersburg Television Network signed a protocol expressing regret over the coverage and an admission that it violated "legislation on the media." However, Network chief Alexander POTENKHIN de

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fended the show saying, "there was not an ounce of anything that goes against the law."

Ukraine speed up privatization plans and approve a realistic budget for 2000.

Earlier this month, the World Bank decided to disburse a second $100 million installment under a $300 million financial sector adjustment loan to Ukraine. To receive the funds, Ukraine had to pass laws on the Central Bank, bank, and banking activity and introduce a system for insuring individual deposits at commercial banks.

Baltic And Black Sea Summit Opens On Friday

· Presidents and high-ranking officials of 22 states will attend the summit of Baltic and Black Sea countries scheduled in Yalta for September 10th and 11th. The summit will be attended by Russia First Deputy Prime Minister Viktor KHRISTENKO and representatives from CIS states, Poland, Slovakia, Turkey, Finland, the Baltic States, Hungary, and Bulgaria. The participants cover a wide range of organizations, including NATO, the European Union, the Commonwealth of Independent States (CIS), the Organization for Security and Cooperation in Europe (OSCE), the Organization of the Black Sea countries' economic cooperation and the Central European initiative. Chief of the Ukrainian Foreign Ministry press center Igor GRUSHKO said the purpose of the Baltic-Black Sea Summit is, "to consolidate efforts of the countries of the region as a constituent and inalienable part of the European process of creating the future architecture of security in Europe." The sides are expected to discuss the present state of political, economic and humanitarian cooperation, exchange experience in conducting political and economic reforms, discuss prospects for the expansion of cooperation in the interests of strengthening stability and security in Europe. Ukrainian President Leonid KUCHMA will conduct a number of bilateral meetings with participants on the sidelines.

South Caucasus & Central Asia

Georgia Begins NATO Preparations

· Georgian parliament chairman for the Defense and Security Committee Revaz ADAMIA on Wednesday said that preparations for a legislative base for joining NATO has begun. According to him, over the past four years the Georgian parliament has adopted 30 laws for determining functions of power structures. ADAMIA pointed out that a state security

European Republics

Lith Gov't Approves Nuclear Plant Closure

· Lithuania's government on Wednesday set 2005 as the deadline for decommissioning the first of its two reactors at the Soviet-built Ignalina Nuclear Power Plant. The Cabinet voted unanimously in support of the deadline, in hopes that it will help clear a path towards European Union (EU) membership. The EU believes the nuclear reactors should be phased out. Foreign Minister Algirdas SAUDARGAS said, "This government decision is the result of our dialog with the European Commission and though I don't know their opinion, I think this will make [entry] negotiations easier. Parliament must still approve the shutdown date. Economics Minister Eugenijus MALDEIKIS said the shutdown, "is closely linked with long-term and essential European Union financial support." Closing costs for the first reactor could reach $2.5 billion. Estimates for the full decommissioning of the entire plant range as high as $4 billion, which Lithuania is unable to cover alone. Ignalina, which operates two reactors similar to the ones that caused the Chernobyl disaster in 1986, generates over 80 percent of Lithuania's electrical energy needs. Lithuania believes that using the alternative thermal power station would make the country more dependent on Russia for oil or gas supplies. Already twice this year, Russia has cut off oil supplies in an attempt to gain shares in the Lithuanian Mazheikiu Nafta refinery. The Ignalina Power Plant also employs directly or indirectly some 30,000 Russians, the Financial Times reported. Closing the plant could sour relations with Russia.

IMF Releases Loan To Ukraine

· The International Monetary Fund (IMF) approved the release of a $184 million loan installment to Ukraine on Tuesday as part of a $2.6 billion aid package. The installment is expected to be received in Kiev in the next few days. The Fund approved the three-year loan in 1998, but has suspended disbursements several times because the government didn't meet its economic reform requirements. Ukraine is in great need of new loans so it can meet more than $3 billion in foreign debt obligations in 2000. Some analysts predict that Ukraine will default on its 2000 debt obligations. The IMF repeated demands that

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system had been created by the parliamentary committee he heads. In a speech at a parliament session, he said that the committee for Defense and Security officially demands the withdrawal of Russian military bases from Georgia. Prime News Agency reports that according to ADAMIA, an agreement between Georgia and Russia has been reached for the creation of a joint commission to carry out all the procedures for the withdrawal of Russian military bases. Chairman of the Committee on Foreign Relation Kakha CHITAIA points out that while relations with Russia have not been well managed, the Georgian parliament has received approximately 100 representatives of the US Congress, Senate, and other state structures. He believes that the deepening of relations between the US and Georgia is a great achievement.

Aliyev May Consider A Third Term

· Azeri President Geidar ALIYEV does not exclude his re-election for the third term in 2003. The President made this comment in a speech to high- ranking members of his New Azerbaijan Party this past weekend. "If in 2003 the citizens of Azerbaijan, the voters think that Geidar ALIYEV shall be the President for another five years, he will be such," ALIYEV told his supporters. At age 76 and after surviving heart surgery, ALIYEV does not accept references to his age and health as making him a weak leader. He said, being a man who had been serving for the people of Azerbaijan and the state all his life, he would like all future presidents of Azerbaijan, "to be loyal to the cause of Geidar ALIYEV and the cause of the New Azerbaijan party...But time has not come for that because Geidar ALIYEV is capable of working for a long time." Under the constitution of Azerbaijan, drafted with the direct participation of ALIYEV, none can be elected as the president for more than two terms. However, a constitutional amendment is possible before the elections of 2003.

Trilateral Cooperation Develops Further

· Armenian, Greek and Iranian foreign ministers on Wednesday met in Yerevan for the third round of

consultations as part of the program of trilateral cooperation. Speaking about the situation in the Northern Caucasus, Iranian Foreign Minister Kamal KHARAZI stressed that the situation in Dagestan "is Russia's internal affair." On relations with Turkey, Armenian Foreign Minister Vartan OSKANYAN said that Ankara continues to maintain a blockade of Armenia and called for invigorating a direct dialogue with Turkey in order to overcome the crisis. The Greek and Iranian foreign ministers said they were satisfied with the direct dialogue and called for settling of the Nagorno-Karabakh conflict as soon as possible in order to establish peace and stability in the region. OSKANYAN said a memorandum of understanding to be signed on the results of the talks will facilitate the strengthening and expansion of relations between the three countries. After the signing ceremony, Armenia stressed the need to implement the agreements into practice. Commenting on concrete aspects of cooperation between Armenia, Greece and Iran, KHARAZI noted the importance of building the gas pipeline Iran-Armenia because the three countries are interested in the success of this project.

China and Turkmen Discuss Military Relations

· Chief of the General Staff of the Chinese People's Liberation Army FU Quannyou met with Turkmen Vice-Prime Minister, Defense Minister Batyr SARGZHAYEV in Beijing on Monday. FU called for strengthening Chinese-Turkmen military relations. He said, "SARDZHAYEV's visit opens a new page in exchanges between the defense ministries of China and Turkmenistan. It will lays a solid foundation for the further development of friendly relations between the two countries." The talks also focused on the Taiwanese problem. FU stressed that the Chinese army is ready to protect the country's sovereignty and territorial integrity and put an end to any attempts to divide the country. SARGZHAYEV earlier met with Chinese Prime Minister ZHU Rongji and Defense Minister CHI Haotian. This is SARDZHAYEV's first visit to China in the history of bilateral relations between the two countries.

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

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