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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, October 14, 1999

Banca del Gottardo, said that the guarantee for the credit cards was only in effect for two months. He did not know whether the credit cards were ever issued. STREUN pointed out that guarantees are usually sought so that cards can be provided to foreigners who lack a Swiss bank account or a Swiss-based employer to verify income information. The Associated Press reported that the guarantee, which would go into effect if any purchases with the credit cards went unpaid, was never invoked.

YELTSIN suffered another humiliating defeat on Wednesday, when the Federation Council for the third time in a vote of 98 to 52 refused to back the President's dismissal of SKURATOV. Prior to the vote, SKURATOV told the deputies that YELTSIN's interest in firing him was a plan to crush the investigation into Kremlin corruption. "The choice is simple: stop the wave of corruption and save what remains of the nation's prestige or follow the path indicated by corrupt Kremlin officials." A Kremlin statement said that the post of prosecutor general, "cannot be occupied by a person who has allowed himself to be used in a dirty game, compromised the high title of prosecutor and tried to turn the prosecutor's office into a tool of the political fight." The third vote leaves YELTSIN and SKURATOV in a stalemate. YELTSIN can't fire SKURATOV, but SKURATOV can't work while suspended. SKURATOV said that though he remains suspended, his office will continue the investigation, including meetings with Swiss authorities on a number of related cases.

Russian Federation


Putin's Popularity Grows

· Prime Minister Vladimir PUTIN's popularity is growing among the Russian population. According to the latest public opinion poll conducted by Vladimir PETUKHOV, director of the Center for Social and Political Analysis under the Russian Independent Institute for Social and National Problems, 10.4 percent of the population are ready to vote for PUTIN in the upcoming presidential elections. PUTIN, the Kremlin chosen heir, is second only to Yevgeny PRIMAKOV, the anti-Kremlin candidate who enjoys the support of 23.7 percent of those polled. Communist Party leader Gennady ZYUGANOV is supported by 13.7 percent, and Moscow Mayor Yuri LUZHKOV by 6.9 percent, a drop from 11.5 percent in July. PRIMAKOV is also the most trusted politician, PETUKHOV said. He is followed by PUTIN, with 39.2 percent of the votes, and LUZHKOV. The poll's results can be explained by the longing for stability and order which is currently dominant in the Russian society, PETUKHOV said. PRIMAKOV embodies stability, while PUTIN is viewed by many as the one who tries to establish order. The poll was conducted in 12 Russian regions from October 2nd to 4th. The center contacted 1,800 people of 11 social and professional groups in 58 cities, towns and villages.

Corrupt Credit Card Case Continues

· Switzerland's Banca del Gottardo today admitted that it had provided a guarantee for credit cards for Russian President Boris YELTSIN and his daughters, Tatyana DYACHENKO and Yelena OKULOVA, on the instruction of Swiss construction firm Mabetex Project Engineering. Mabetex has been implicated in an investigation started by suspended prosecutor general Yuri SKURATOV of alleged Kremlin corruption. Marco STREUN, of the legal department at

Today's News Highlights


IMF Warns Russia On Spending

Philip Morris Appeals TM Ruling

European Republics

Kiev-LUKoil Sign Station Deal

Kuchma Catches Cold-Fever

Estonia Signs WTO Protcol

South Caucasus & Central Asia

Four UN Hostages Released

Georgia To Modernize Su-25s?

KEGOC Plans Major Overhaul




October 14, 1999

Intercon's Daily

Russia-Germany To Hold Relaxed Meeting

· The Russian Igor IVANOV is meeting today with his German counterpart Joschka FISCHER, in Russia's St. Petersburg. They will discuss a range of bilateral and international matters. IVANOV and FISCHER will meet in an informal, no-neckties setting in one of the city's governmental residences later in the day. Their talks will be held, "both in a narrow circle and in a broader attendance." Bilateral topics include the implementations of accords reached by the two states. International discussions will focus on European security, in particular preparations for the summit of the Organization for Security and Cooperation in Europe (OSCE) to be held in Istanbul, Turkey, in November. Their talks will also address Russia's cooperation with the European Union (EU), in which Germany plays an important role, the Russian Foreign Ministry's spokesman Vladimir RALKHMANIN said. He added that Russia is prepared to brief Germany on the situation in Chechnya, if asked. Early on Friday, IVANOV and FISCHER will hold a joint press conference at Grand Hotel Europe, after which they will go to the Smolny Palace to meet Saint Petersburg's governor Vladimir YAKOLEV.


Ruble =25.7/$1.00 (NY rate)

Ruble = 25.67/$1.00 (CB rate)

Ruble = 27.71/1 euro (CB rate)

IMF Issues Warning Over Defense Spending

· International Monetary Fund (IMF) Managing Director Michel CAMDESSUS on Wednesday warned Russia, "if I see that the budget is over-shooting because of an uncontrolled increase in military spending, we shall interrupt our support." With regard to other macro-economic conditions of the fund's support, CAMDESSUS said that, "these conditions are being satisfied and they are doing even better than we require." His comment follows Prime Minister Vladimir PUTIN statement to a group of leaders of regional legislative assemblies on Tuesday in which he revealed that the split in revenues in the 2000 budget will be 52 percent for the center and 48 percent for the regions. He pointed out that 2 percent of the federal center's portion will be devoted to national defense. According to the draft budget approved by the conciliatory commission, 145.3 billion rubles ($5.6 billion) are allocated for national defense, which is 18 percent of total pro

jected revenues of 791.3 billion rubles. PUTIN today said that CAMDESSUS is only, "one of the key figures in the Fund." He added that the operation in Chechnya is financed from additional budget revenues and have nothing to do with IMF money. Russian State Duma deputy speaker Boris KUZNETSOV said the IMF has no grounds to describe the Russian budget as going out of control over excessive military spending. He believes that additional military expenses as a result of fight against terrorists with a simultaneous cuts on other expenses, "can not be regarded as a violation of the coordinated economic program." He said that CAMDESSUS is now adding on other considerations. KUZNETSOV added that withholding the next IMF installment, "completely disrupts the earlier agreed upon with the IMF budget parameters." Earlier this week, the IMF Managing Director said the next credit will be given to Russia after it fulfills all conditions. He added there is no set period for giving the tranche, and all that it is in the hands of Russia.


Philip Morris To Appeal TM Ruling

· US tobacco company Philip Morris, which has a 16 percent share of the Russian cigarette market, said it will appeal a trademark ruling to the Russian Supreme Arbitration Court. Philip Morris claims that its trademark rights have been violated by Invest Trust because two of its brands are packaged in such a way to confuse consumers. Invest Trust's Soyuz Planeta and Evro Street are similar to Philip Morris' Soyuz Apollo and Bond Street and are significantly cheaper than the US brands. The Wall Street Journal reports that the two Soyuz brands feature pictures of spaceships orbiting a planet and the other has identical lettering. A Moscow regional arbitration court, however, said the designs weren't so similar that they were confusing. Andrew WHITE, Philip Morris' vice president for in Eastern Europe said, "This is a disturbing precedent, both for us and for other foreign firms operating in Russia. But we are quite confident we're on the right side of the law."

Sibneft Head To Seek Duma Seat

· Ekho Moskvy reported on Monday that Sibneft head Roman ABRAMOVICH is planning to run for a the Chukotka Autonomous Okrug seat in the Russian State Duma. The station pointed out that Chukotka Governor Aleksandr NAZAROV was a

When you need to know it as it happens




October 14, 1999

Intercon's Daily

founder of Unity, which has been accused of being linked to Russian business tycoon Boris BEREZOVSKY. ABRAMOVICH and BEREZOVSKY, who is also running for the Duma, are close associates. Ekho Moskvy is owned by Media-Most Group, whose head, Vladimir GUSINSKY, is a BEREZOVSKY rival, RFE\RL Newsline reported. NAZAROV said he will support a candidate from the Unity party list.

northeast of Tallinn, was known in the Soviet era as site of a clandestine plant for uranium enrichment and processing of other rare metals. Sweden, Denmark, Finland, Norway, the Environmental Corporation and the Investment Bank of Northern Europe, and the European Commission have offered funding. Estonia's expenditures on the realization of the project have been estimated at three million euro. The Okosil company is to be the main operator in charge of the project which was especially created for this purpose. Thirty-five percent of the shares of this company are owned by the state, and the rest belong to the Silmet plant which is the successor of the former Soviet uranium enrichment plant. Estonia's Measures to ensure sanitary clean-up of the hazardous dumping site include protective belts to be built from the sea in the shape of wave breakers and reinforcements of the existing dike. A barrier will be built to prevent leak of ground waters, and the dumping site itself will be covered with a water-proof shield. If the project in Sillamae is successfully implemented the Estonian Environment Ministry believes that it will be the first safe radioactive dumping site out of 29 similar sites in Central and Eastern Europe.

Estonia Signs WTO Law

· Estonian President Lennart MERI on Monday signed into law the ratification of the World Trade Organization (WTO) accession protocol. While the parliament had passed the protocol last month by a vote of 48 to seven, Legal Chancellor Eerik-Juhan TRUUVALI suggested the ballot was not legal: as membership places a financial burden upon Estonia. He argued majority support among the 101 parliamentary members is required, RFE\RL Newsline reported. However, the government ruled that the vote was indeed valid. Estonia will become a member of the WTO, 30 days after the organization's Secretariat is informed of ratification.

South Caucasus & Central Asia

Four of Seven Hostages Freed In Kodori Gorge

· According to the report of the First Channel of Georgian television the terrorists in Kodori Gorge have released four hostages. Representatives of Germany, Uruguay, Switzerland and the Czech Republic have been freed. Details and the condition of the four hostages are unknown. The military

European Republics

Kuchma Cancels Campaign Appearances

· Ukrainian President Leonid KUCHMA has been forced to cancel some campaign appearances for his re-election this week due to contracting a cold and fever. A spokesman said, "The President has a cold after being chilled during his recent trips to eastern Ukraine. KUCHMA has a slight fever." KUCHMA is seeking a second five-year term and has been meeting a demanding schedule of trips across the country. The President has canceled three rallies in the capital planned for today and a trip to Cherkasy in central Ukraine on Friday. However, he still has plans to visit Donetsk in eastern Ukraine on Sunday and will travel to 12 other regions before the presidential election on October 31st.

LUKoil-Kiev City Gov't Sign Gas Deal

· Russia's largest oil company, LUKoil and the city government of Kiev on Wednesday signed a cooperation deal, gaining the rights to build more than ten gas stations around the capital. Kiev Mayor Alexander OMELCHENKO said the agreement would help create a more diversified gasoline market in Kiev. Five new gas stations will be completed by the end of this year and the rest by the end of 2000. No financial details were released. LUKoil President Vagit ALEKPEROV, who signed the deal, said his company hopes to build as many as 150 gas stations in Kiev, southern Ukraine, and the Black Sea Crimean peninsula.

Estonia Plans To Close Nuclear Waste Depot

· Germany's Wismut GmbH has developed a plan to shut down Estonia's nuclear waste depot in Sillamae, ensuring protection from possible radioactive contamination, to be completed in seven years and at a cost of 20 million eruos. Sillamae, situated on the coast of the Gulf of Finland 180 kilometers

When you need to know it as it happens




October 14, 1999

Intercon's Daily

observers from Greece, Sweden, and their interpreter are still being held by the terrorists, Georgian television claims. Negotiations with the terrorists, who seized six military observers of the UN and their interpreter Wednesday, continued today led by Georgian Defense Minister David TEVZADZE, head of Georgian Armed Forces General Staff Lieutenant-General Jony PIRTSKHALAISHVILI, and the Georgian president's authorized representative in Kodori Gorge Iveri CHELIDZE. Earlier today the kidnappers increased their ransom demand from $200,000 per person to $250,000. They threatened to begin killing the hostages until they receive the payment.

A group of unidentified masked gunmen seized the military observers shortly after their helicopter landed in Azhara village of the Kodori Gorge. The observers were delivering aid to the region. Their pilot fortunately was able to fly the helicopter to safety after being fired on. "On Wednesday night, the hostages were in the villages of Mramba, some two kilometers from the location where they had been seized," head of terrorism prevention service under the ministry of state security of Georgia Levan KENCHADZE said. The UN has condemned the kidnapping and is in close contact with the Georgian government.

President Eduard SHEVARDNADZE quickly ordered a team to, "conduct operations to free the captives." He predicted the hostages' release could be secured in two or three days. KENCHADZE told Prime News Agency, negotiations with the terrorists are continuing. PIRTSKHALAISHVILI and CHELIDZE began negotiations Wednesday night with the terrorists by radio. CHELIDZE this morning said, "We reached agreement with the terrorists that they will release two hostages—one UN military observer from Sweden, Jorden OLDSBERG, and a sergeant form Germany, Dirk KRAUS." Georgian Defense minister David TEVZADZE arrived in Kodori Gorge this morning, after cutting short his visit to Ukraine, and made headway. "If a need arises to involve the army in an operation for the hostages' release, we shall be involved to the extent we find necessary," he said.

Tbilisi officials believe the kidnapping was inspired by outside forces interested in destabilization of situation in Georgia. Chairman of Georgian parliament Zurab ZHVANIA told journalists that the Kodori Gorge incident could be a political provocation and a continuation of ridiculous statements that the organization Free Svanetia has invited Shamil BASAYEV and his gunmen to spend the Winter in Kodori Gorge. TEVZADZE claimed that the incident was inspired by outside forces, interested in aggravating the situation in that region of Georgia, prior to the parliamentary elections on October 31st.

Georgia To Modernize Sukhoi Fighter Jets

· Georgia may participate in modernization program for Russian Su-25 fighter jets. The director of Russian joint-stock company Sukhoi Vladimir BABAK told Prime News Agency, some technical characteristics of the plane are to be improved which will allow the Su-25s to be equip with ultra-modern armaments, including rockets and aerobombs. The director general of Tbilisi State Aviation Plant Vazha TORDIA said, after the planned testing of modernized Su-25 at the end of this year, Tbilisi aviation builders may join in the process.

KEGOC Plans Major Systems Overhaul

· Kazakhstan's utility monopoly Kazakhstan Electricity Grid Operating Company (KEGOC) is planning to overhaul its grid systems using loans worth about $200 million from international lenders. Almas MYNBAYEV, head of the legal department of the state-owned KEGOC, said it hopes to receive $140 million from the World bank and $56 million from the European Bank for Reconstruction and Development, with the remaining $72 million to come from the company. The contracts with lenders are expected to be signed shortly. He added that the company is seeking to implement a joint project with Russia's Unified Energy Systems (UES) to which Kazakhstan owes a total of $249 million in unpaid electricity bills. MYNBAYEV said this debt could be paid by handing over to UES a 51 percent stake in the Ekibastuz electricity generating plant in Kazakhstan.

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

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