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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, October 18, 1999

by interior troops and special-purpose detachments of the Russian Interior Ministry, as well as by the Chechen population itself, not by army units. The air force will continue raids on rebel groups and their bases. Plans on Sunday dropped bombs and launched missiles against a cement factory, just 15 miles outside of Grozny. Colonel-General Viktor KAZANTSEV, leading the operation, vowed to crush the Islamic rebels, but added that this is not a full scale war. Russia's Army has taken control of the highway linking Ingushetia's Nazran and the Chechen capital Grozny. Troops saddled the road after crushing guerrilla strongholds on Tersky mountain range and beating Chechen guerrillas out of Goragorsk. Troops will deliver humanitarian aid, includes text-books, exercise books, pencils and pens for school children, to several villages in northern Chechnya.

KAZANTSEV said he is ready for talks with Chechen President Aslan MASKHADOV. Moscow, however, is insisting that MASKHADOV first hand over warlord Shamil BASAYEV and other rebel leaders who organized invasions into Daghestan in September. MASKHADOV, who has repeatedly called for talks, now says that room for compromise and settlement is rapidly shrinking. Prime Minister Vladimir PUTIN denied that federal troops will launch a full-scale assault against Grozny. He said, "We will not undertake the tactics of a large-scale military actions with tank attacks and the storming of towns." He stressed that Moscow wants to avoid unnecessary loss of life in its bid to wipe out the rebels.

Russian Federation


CIS IPA Declares Abkhazian Poll Illegitimate

· The Commonwealth of Independent States (CIS) Inter-Parliamentary Assembly (IPA) on Saturday declared the October 3rd presidential elections in Abkhazia and referendum on its independence illegitimate. In a statement adopted at its session, the Assembly called on Georgia and Abkhazia to negotiate, compromise, and reach a political settlement. Regarding its possible withdrawal from the IPA, Georgian parliament deputy speaker Eldar SHENGELAYA said, "we managed to reach a compromise by confirming the principles of Georgia's state integrity and receiving assurances from the interested sides that they will refrain from steps that could complicate the internal Georgian [Georgian-Abkhazian] negotiating process." Russian State Duma speaker Gennady SELEZNYOV admitted that some of the steps taken by Moscow, "were not quite proper from the parliamentary point of view. We should have informed the Georgian parliament of the participation of the Russian delegation in the Abkhazian elections as observers." Delegates also called for joint efforts to fight organized crime, terrorism and separatism. Federation Council speaker Yegor STROYEV said, "effective economic interaction in the CIS did not and does not exist." He pointed out that promises of economic support have failed to be backed by concrete actions. STROYEV said, "Apparently, we are doing something wrong. Apparently, our approaches and practical policy have flaws which must be rectified."

Troops Begin Phase II In Chechen Operation

· Russian federal troops have completed the first phase of their anti-terrorist operation in Chechnya. The second phase includes re-grouping of troops and improvement of fire power. It will be performed

Today's News Highlights


Securities Chairman Resigns

Aeroflot Scandal Grows

European Republics

Ukraine Joins Security Council

Minsk March Gets Out Of Control

South Caucasus & Central Asia

President Praises Negotiations

Georgian-German Talks

Russian Guards Withdraw

Demirel-Aliyev Meet In Baku




October 18, 1999

Intercon's Daily


Ruble = 25.8/$1.00 (NY rate)

Ruble = 25.88/$1.00 (CB rate)

Ruble = 28.17/1 euro (CB rate)

Federal Securities Chairman Resigns

· Russia's Federal Securities Commission chairman Dmitry VASILIEV on Friday submitted his resignation to President Boris YELTSIN in protest of the reversal of government protection to shareholders' rights. YELTSIN accepted the resignation of his longest-serving minister, but has not yet named his successor. The Wall Street Journal reported that VASILIEV often clashed with local business interests and with the Russian Central Bank, which sought to regulate the Russian market. He pushed for the establishment of a US-style securities market and supported the protection of private investors. His resignation follows two court rulings which turned back rights of individual investors. A St. Petersburg court ordered private investors to return to the state share in the Lomonosov Porcelain Factory. A Russian court backed Yukos' plans to issue shares at a subsidiary, Samaraneftegaz, and sell the to a set of offshore companies that investors suspect are connected to management. VASILIEV, who voted against the issue said, "The system here doesn't protect investors." He plans to set up a non-governmental system for protecting investors on Russia's stock exchange. He added that the system would include legal representation and organizational support VASILIEV resigned earlier this year to protest what he saw as errors in the way the government of former Prime Minister Yevgeny PRIMAKOV government was handling the country's economic crisis, but his resignation was not accepted.

Nizhny Novgorod Misses Eurobond Payment

· The city of Nizhny Novgorod has technically defaulted on an interest payment on its Eurobond, after failing to persuade bondholders to approve a debt restructuring plan, RFE\RL Newsline reported. This is the first case of a Russian municipal government's default, technical or otherwise, on a Eurobond payment. The interest payment on Nizhny Novgorod's five-year, $100 million bond had been due on October 3rd, after which the city had a 10-day grace period to make the payment. However, at a meeting in London last week, support for the Nizhny restructuring plan among creditors fell short of the required

75 percent. Talks between the region's representatives and bondholders will continue this Thursday and Friday.

Tax Collectors Get Tough On Debtors

· Moscow Tax officials are warning major tax debtors that it will begin to collect for taxes by seizing property. Unified Energy System is the main target of this tax offensive. It has a debt to the Federal Tax Service department for Moscow of approximately 3.7 billion rubles. The department said it would arrest and sell some property of the debtors. The Tax police has issued 28 resolutions on the arrest of 7.2 billion rubles worked of property of bad debtors. Other companies issued warnings include Rosenergoatom, ZIL Company, the Belkomtorg trading house, Moseximbank, the Satellite TV Broadcasting Association, and the Eskimo-Fili Company.


Siberian Oil Barron Shot Dead

· Head of Siberian oil company, Novosibirsk-geologiya was shot dead at point blank range outside his home early Friday morning. Police spokesman Mikhail BIRYUKOV confirmed that Yuri, "FYODOROV was shot as he was leaving his home to go to the airport." Gunmen pumped FYODOROV with eight bullets and beat up his driver. Police are investigating the murder and believe that he was killed because of his work. Novosibirkskgeologiya offers oil and gas exploration services and has offices in several Siberian cities. Novosibirsk law enforcement officers said the investigation can not rule out a contract killing.

Aeroflot Laundering Scandal Grows

· Russian investigators have revised the amount of money they suspect Russian business tycoon Boris BEREZOVSKY and two airline executives laundered and hid in Swiss bank accounts from $200 million to $600 million. The new figure was presented to Swiss authorities by Russian investigators. They claim BEREZOVSKY, Nikolai GLUSHKOV, and Alexander KRASNEKER stole $400 million of profits from the Russian airline Aeroflot as well as $200 million in air traffic fees. The three accused then hid that money in two Swiss companies Andava and Forus Services. According to investigators it was laundered through various financial operations, including the purchase of property and shares. Forus

When you need to know it as it happens




October 18, 1999

Intercon's Daily

has denied that it committed any wrongdoing. Earlier, Forus filed a suit against Switzerland's former prosecutor general Carla DEL PONTE for possible industrial espionage and breach of official secrecy. On October 11th, representatives of the Russian Prosecutor General's Office and the Swiss Federal Prosecutor's Office met in St. Petersburg and shared further information, which was handed over to Russia after the talks. General Nikolai VOLKOV in charge of the investigation of the Aeroflot affair said that the investigation into the Aeroflot affair could last for about one year. He added that preliminary charges have been made against BEREZOVSKY, GLUSHKOV, and KRASNEKER for their involvement with the activities of Andava and Aeroflot.

terpart Alexander VOLOSHIN met to discuss the draft Union Treaty between the two countries. MYASNIKOVICH said the greatest challenge is to work out a mechanism for implementing decisions adopted at the highest level and decisions provided for in the draft treaty. Police and interior troopers said they would react strongly against any more demonstrations, adding that it is not at all about to surrender power. The Organization for Security and Cooperation in Europe (OSCE) is leading efforts to hold talks between LUKASHENKO and his opponents over the scope of the presidential powers. According to an OSCE statement, "Meaningful negotiations cannot be undertaken in a climate of distrust and fear. It has urged the release of opposition leader Mikhail CHIGIR from prison."

South Caucasus & Central Asia

President Praises Hostage Negotiations

· Georgian President Eduard SHEVARDNADZE thanked Georgian law enforcing bodies, military, an ministers for their work in the successful release of the UN military observers and their interpreter, who were taken hostage in Kodori Gorge by Svanetian rebels. All of the hostages were released as a result of two days of negotiations. The Georgian President believes that in overcoming that crisis situation Georgia proved that it is able to settle even the hardest problems. SHEVARDNADZE noted that while he was on visit to Germany he kept contact with the Georgian interior and defense ministries and attentively followed the hostage negotiations. The terrorists and their supporters expected the Georgian President to cut short his official visit to Germany, but their expectations did not come true, SHEVARDNADZE said according to Prime News Agency. Comment: As the SHEVARDNADZE government expands its experience and is confident in its capabilities, the President is more able to carry on diplomatic visits and negotiations, despite minor domestic issues. By SHEVARDNADZE not canceling his foreign trip to deal with the situation personally, Georgia continues to demonstrate that it is evolving into a more stable and normal state. Meanwhile, Defense Minister David TEVZADZE and Georgian army General Staff chief Jony PIRTSKHALAISHVILI have accused the UN Military Observer Mission in Georgia (UNOMIG) of exceeding their powers. TEVZADZE said that military observers had flown over parts of

European Republics

Ukraine Voted To Join UN Security Council

· Ukraine has become a non-permanent member of the UN Security Council in 2000 to 2001 in a vote on Thursday. Ukrainian Foreign Minister Boris TARASYUK commented the next day that the election is proof of Ukraine's "balanced" foreign policy linked with President Leonid KUCHMA, RFE\RL Newsline reported. Ukraine competed for the place on the UN Security Council against Slovakia, which withdrew its candidacy during the voting.

Minsk Freedom March Gets Out Of Control

· Dozens have been injured and hundred arrested, including one Russian deputy, following a march in Minsk on Sunday where about 20,000 called for freedom. Police clashed with the demonstrators after their march continued passed its authorized route and moved close to downtown near the Presidential administration building. Protesters threw rocks and bricks, while police used clubs to beat back the crowd. They carried a nationalist red and white Belarus flag and the blue European Union flag, with banners reading "To Europe without LUKASHENKO. No fire arms were used to disperse the demonstrators, who called for freedom, denounced President Alexander LUKASHENKO's plan to unite Belarus with Russia, urged the President to resign, and demanded the end to repression against the opposition. Before marching to the center of town, protesters burned a draft copy of the Rus-Belarus Union Treaty. The day before Belarus presidential chief of staff Mikhail MYASNIKOVICH and his Russian coun

When you need to know it as it happens




October 18, 1999

Intercon's Daily

Kodori Gorge filming unnamed, "strategic facilities," without prior consent of the Georgian and local authorities. The Defense Minister said he planned to meet the leadership of the UN Military Observe Mission shortly to ask them to refrain from such actions in the future.

Georgian-German Talks Successful

· Georgian President Eduard SHEVARDNADZE, for the first time since the Berlin Wall came down and the collapse of the Soviet Union, visited Germany last week. During his visit he met with Federal Chancellor Gerhardt SCHROEDER, President Johannes RAU, Speaker Wolfgang THIERSE, the head of the Siemens Board, the President of the Martin Bauer Company, other representatives of the German business community, as well as former foreign affairs minister Hans Dietrich GENSCHER. He stressed that there are still threats to peace despite the end of the Cold War. The President said that the 21st century should be dedicated to closing the gap between the rich and poor nations of the world. He noted that ethnic conflicts threaten peace everywhere. "That is why I believe we must fight ethnic cleansing as an evil, wherever it may be, and opposing aggressive separatism throughout the world," the Financial Times reported. SHEVARDNADZE said that Georgia has an easier time reaching out to the West, particularly the US, than it does with former Soviet colleagues in Moscow. He said that the renewed war in Chechnya to its North is a reminder of the threat of its neighbor. He said the conflict in Chechnya, "is the worst-case scenario and it would be the worst thing that could happened for Russia and its neighbors," if a full-scale war is launched. Fears of a possible spill-over of the conflict have been evident in mistaken bombing of villages in Georgia and Azerbaijan, requests by Russia to keep troops in Georgia, and the flow of thousands of Chechen refugees into Georgia. The concern is that Russia will target the refugees as possible rebels and attack them, "wherever they may go." He said that the restoration of Georgia's territorial integrity is as inevitable as the unification of Germany. SHE

VARDNADZE believes that Germany has played and will play an important role in preservation of peace in the Caucasus region. Germany is Georgia's fourth largest trading partner. It has actively invested in Georgia's banking, agriculture, energy, telecommunication industries. SCHROEDER has accepted an invitation to visit Georgia before the next presidential election

The Georgian Ambassador to Germany Kote GABASHVILI summarized SHEVARDNADZE's highly successful visit to Germany as demonstrating Germany's firm resolve to help Georgia in every way possible to develop and integrate with the West. Financial help from Germany to the government will continue and not be diminished. The German Defense Minister has invited SHEVARDNADZE to brief a NATO conference in Munich in February, 2000 on the situation in the Caucasus. The Georgian President was decorated with the highest medal of honor and presented with an honorary doctorate from Freidrich Schiller University.

Russian Border Guards' Withdrawal Complete

· Russia's Federal Border Guard Service has completed its withdrawal from Georgia. Prime News Agency reported that the last 27 automobiles of Batumi and Khichauri Russian border guard units passed through Lower Zaramag checkpoint on Friday. Russia withdrew its border guard units from Georgia in various stages based on the intergovernmental agreement signed in October, 1998. Chairman of the state border guard department of Georgia Valery CHKHEIDZE said that one more unit of Russian border guards remains in the territory of Abkhazia and will be withdrawn next week.

Meanwhile, today Defense Minister David TEVZADZE is attending a ceremony marking the hand over of the 15th military town in Akhalkalaki, owned by Russian forces to the Georgian army. Adviser to the Defense Minister Alexander MCHEDLISHVILI said that the base will be re-equipped into a civilian medical facility.

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

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When you need to know it as it happens