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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Wednesday, October 27, 1999

Russian Federation


FBI Team Not To Investigate Bombings

· A team from the Federal Bureau of Investigation (FBI) that was ready to investigate the terrorist bombings in Russia is no longer making the trip. The FBI said that reversal was due to a lack of interest on the Russian side. Russian officials have blamed a wave of bombings in Moscow and elsewhere on Islamic separatists, and have cited the bombings as a major reason for invading the breakaway region of Chechnya. FBI Director Louis FREEH, "offered our assistance when he met last month with the Russian delegation" of high-ranking law enforcement officials in Washington, FBI spokesman Paul BRESSON said Tuesday. Russia did not take the Bureau up on its offer. BRESSON said the team could still go to Moscow if the Russian government requests it, but it would "depend on how they preserved evidence" from apartment building bombings and elsewhere. A number of weeks have passed since the last bombing, and "certainly time is the enemy in any forensic investigation," he added. He said bomb scene debris usually contains "minute pieces of evidence," and, "had it been collected properly and preserved properly" by the Russians, "it's not a lost cause."

Yeltsin Vows To Rid Chechnya Of Terrorists

· The Russian forces are advancing deeper into the breakaway republic of Chechnya after reaching the edge of its capital Grozny. Units of paratroopers and marines from the Russian federal forces were massed on the outskirts of Chechnya's second largest city of Gudermes, 32 kilometers east of Grozny. On Monday, troops and tanks were heading southeast to a major road that runs by the airport and into the city. It is believed that Russia wants to seize the airport, which served as a Russian base during the 1994 to 1996 war. Russian planes bombarded

Grozny hitting an oil-processing plant, causing large plumes of smoke and fires. Federal troops claimed to have seized the villages of Azamat-Yurt, Stepnoye, Nizhny Gerzel, Kadi-Yurt in the Gudermes district, and the rebel-held villages of Engel-Yurt and Komsomolskoye. Interior troops and police units cleaned the villages of Stepnoye and Azamat-Yurt. Russian planes and artillery continued heavy strikes at rebel positions in Gudermes, controlled by the irreconcilable rebel commanders Salman RADUYEV and Arbi BARAYEV. All populated areas in Chechnya's Shelkovskoy, Naursky and Nadterechny districts have been cleared of rebels, with five of the 31 populated areas in Grozny district liberated and one encircled. Controls at the Russian borders with Azerbaijan and Georgia have been tightened and new border posts set up in Tsunta and Tsumada to prevent rebel incursions from Chechnya. Chechen refugees fleeing hostilities to Ingushetia have outnumbered its urban population, according to the Emergencies Ministry. More than 169,000 people have arrived in Ingushetia, a town of 129,000 locals. The refugee situations in areas adjacent to Chechnya remains difficult. More than 187,000 people have escaped to Ingushetia, North Ossetia, Dagestan and the Stavropol Territory. Commander of the Eastern Group of federal troops Lieutenant-General Gennady TROSHEV announced that a bounty of $1 million has been place on Chechen field commander, Shamil BASAYEV's head. Head of the Russian Information Center Mikhail MARGELOV said that the reward

Today's News Highlights


WB Linn To Visit Moscow

Trade Turnover Declines

Chechen Bypass To Be Built

European Republics

Estonian Minister Charged

New Pipeline Construction Starts

South Caucasus & Central Asia

Gunmen Kill Armenian PM

Georgia Demands Retraction




October 27, 1999

Intercon's Daily

would be paid by extra-budgetary means. Russian President Boris YELTSIN, who had be silent on the month long offensive, vowed to get rid of terrorism. Before leaving on vacation, he said, "We want to do away with terrorism, to get rid once and for all of the center of terrorism, international terrorism in Chechnya and let people live calmly and peacefully. Russian soldiers and officers will return peace and calm to the long-suffering Chechen territory."


Ruble = 25.01/$1.00 (NY rate)

Ruble = 25.8/$1.00 (CB rate)

Ruble = 27.3/1 euro (CB rate)

London Club Talks Continue Friday

· The next round of negotiations between Russia and the London Club will continue on Friday, October 29th. Finance Minister Mikhail KASYANOV will participate in the talks. The sides will discuss terms and, probably, basic parameters of the restructuring of the Russian debt to the London club. They may debate the size of the former Soviet debt that may be written off, an easy-term period of payments, and the interest rate in servicing the debt, the Russian Finance Ministry noted. It is not expected that the sides will reach a final agreement, only that their stances will come closer. The overall debt of the former Soviet Union to the London Club, with interest included, is about $32 billion.

WB Linn To Visit Russia

· Johannes LINN, the World Bank Vice-President for Europe and Central Asia, is tentatively scheduled to visit Russia on November 12th. While in Moscow, the ranking international official is to sum up the results of the work of the EBRD regular missions that have been preoccupied with coal and economic restructuring loan projects and to hold a concluding round of consultations on a strategy for the EBRD's further activities in Russia. LINN will continue the dialogue started at the joint annual meeting of the World Bank and the International Monetary Fund. LINN will meet with First Deputy Prime Minister Viktor KHRISTENKO.

Foreign Trade Turnover Declines

· Russia's foreign trade turnover has declined by 23.3 percent over the first eight months of 1999, compared to the same period in 1998. Turnover has

reached $63.4 billion, according to the State Customs Committee and the Russian Statistics Agency. The foreign trade turnover with non-Commonwealth of Independent State members has dropped by 19.1 percent and with the Commonwealth of Independent States by 38.1 percent, and has amounted to 82.3 and 17.7 percent of the overall foreign trade respectively. The first eight month of 1999, have decreased in the Russian export by 9.3 percent, reaching $43.5 billion, compared to the same months of the last year. Import has gone down by 42.6 percent to $19.9 billion. Statistics registered a slide in the so-called shuttle-trade as well. It reached $7.2 billion in January-August 1999, accounting for 10.3 percent in the general trade turnover.


Russia To Build Chechen Bypass Pipeline

· Transneft company's vice president, Sergei TER-SARKISYANTS on Tuesday announced the beginning of construction for a pipeline that will bypass Chechnya. Construction of the 300-kilometer-long pipeline to be completed by May 2000, will be cheaper than originally planned. It will cost less than $100 million, against the original $180 million. The European Bank for Reconstruction and Development (EBRD) had been expected to provide a guaranteed investment of $120 million. However, because of the reduce cost, Transneft will be able to provide most of the financing out of its own funds. The company needs to attract only $40 million to $50 million of investments.

The state-owned oil pipeline monopoly will allow domestic and foreign oil companies to take equity positions in new export pipeline projects. Transneft will retain a 51 percent stake in such projects. Transneft president Semyon VAINSHTOCK said several companies have already expressed an interest in investing in the new pipeline bypassing Chechnya. He also has proposed a plan to the Caspian Pipeline Consortium, the international group which is building a new pipeline to Novorossiisk from western Kazakhstan, to link with the Chechen bypass with an existing unused section of CPC pipeline in Russia, the Financial Times reported.

Meanwhile, Russia and Libya signed a $182 million contract Tuesday for the construction by Russian crews of a 70-mile section of a gas pipeline between

When you need to know it as it happens




October 27, 1999

Intercon's Daily

Khums and Tripoli. This pipeline is scheduled to be completed in January 2001. The contract, between Russia's Zarubezhneftegazstroi and Libya's National Oil Corp., is part of a series of commercial deals Russian firms will sign in Libya.

line. Gaztranzit shareholders signed conditions for crediting with the European Bank for Reconstruction and Development (EBRD), which will fund 75 percent of the Tarutino project cost. The station will help to boost a throughput capacity of the operating gas pipeline by 3.8 billion cubic meters of gas per year in the direction of Romania, Bulgaria and Turkey. A new Talnoye-Ananyev gas pipeline will help to boost transit capacity by over 18 billion cubic meters.

South Caucasus & Central Asia

Armenian Gunmen Stage Coup, Killing Nine

· Armenian Prime Minister Vazgen SARKISYAN was assassinated today, when four to six gunmen opened fire in the country's parliament building. SARKISYAN was giving a speech at the main podium to a joint parliament and Cabinet session, which was carried live on Armenian radio. The transmission was cut after the shooting started. One eyewitness said that gunmen armed with pistols and automatic machine guns fired in all directions, including a row of seats where high ranking officials were seated. Nine others were killed, including parliamentary speaker Karen DEMIRCHYAN, deputy speaker Yuri BAKHSHYAN, Energy Minister Leonard PETROSYAN and senior economic official Mikhail KOTANYAN, with more than 30 wounded. Lawmakers and journalists fled in a panic as the gunmen shouted, "We have come to avenge those who have drunk the blood of the nation" and added that they were launching a coup." The gunmen are holding dozens of hostages in the building and have issued demands to talk on national television and for a helicopter. The parliamentary building was immediately sealed off by hundreds of police and security agents. Officials are negotiating with the gunmen for the release of the hostages and President Robert KOCHARYAN is personally directing the security forces around the building.

Journalist Konstantin PETROSYAN, who escaped from the attack, said he recognized one of the gunmen as Nairiu UNANYAN, a former journalist and member of the nationalist Dashnak party. But presidential press secretary Vahe GABRIELYAN told CNN television, "This is just a handful of terrorists or individual people who don't have any affiliation with any political party or organizations, at least they don't claim any...This is definitely not a coup d'etat." SARKISYAN, a former defense minister, was ap

European Republics

Estonian Minister Charged In Money Transfer

· Estonia's Finance Minister Siim KALLAS will appear in court today on charges of complicity in disappearance of $10 million. This sum was transferred through the North Estonian Bank to a now non-existent Swiss company, Paradiso SAL, in 1993 when KALLAS was chairman of the Estonian Central Bank. The company later paid to the North Estonian Bank $2 million in interest. The end destiny of the principal is unknown. The Finance Minister had denied any part of the Central Bank in the transaction, but investigators discovered guarantee letters with his signatures and Urmas KAYU, the Central Bank's lawyer who was also charged. The case was heard by a lower court that issued an acquitting verdict on the grounds of a lack of the "element of crime." However, the Prosecutor's office appealed the verdict in the State Court. If KALLAS and KAYU are found guilty, they face imprisonment and paying damages equivalent to $8 million at the 1993 exchange rate.

Ananyev-Izmail Pipeline To Be Jointly Built

· Neftegaz Ukrainy board chairman Igor BAKAI called the construction project on the Ananyev-Izmail gas pipeline, "an important step to mutual understanding" between the Russian gas monopoly Gazprom and Neftegaz Ukrainy. In an interview with Segodnya, he emphasized that the pipeline, being built by the Ukrainian-Turkish Gaztranzit, is the first major project in Ukraine, involving the two oil and gas companies simultaneously. According to BAKAI, investments to enlarge the system of transit gas pipelines in the framework of Gaztranzit operations will reach $780 million over the next three years. Out of the total, $600 million will be long-term credits from Western banks. Gaztranzit will return credits out of revenues, received for services on preparation and transit of Russian export gas along new pipelines. Project documentation has been drafted to build a Tarutino compressor station and 146 kilometers of the second section of the Ananyev-Izmail gas pipe

When you need to know it as it happens




October 27, 1999

Intercon's Daily

pointed prime minister in June, after his alliance won the May 30th general election. SARKISYAN and DEMIRCHYAN were among the top leaders of Armenia. Ironically, SARKISYAN has been promoting a harder line toward negotiations with Azerbaijan. His political movement forced the resignation of President Levon Ter-PETROSYAN in February 1998. It accused him of pursuing "defeatist" policies on the issue of independence for Nagorno-Karabakh by agreeing to consider returning the territory to Azerbaijan. Their deaths could throw Armenia into greater political chaos.

Intercon sources have been monitoring the dramatic situation in the Caucasus region and predicted that Armenia and Azerbaijan were on the verge of making a major announcement regarding the Nagorno-Karabakh conflict. On Monday, Azeri Foreign Minister Tofik ZULFUGAROV and other high-ranking officials resigned because of a disagreement with the President's principles for the settlement. Simultaneously with the resignations and heightened talks, the Azeri Prime Minister Artur RASIZADE and the President's son Ilham ALIYEV, the first vice president of Azerbaijan's State Oil Company (Socar), did not appear for the US Azeri Chamber of Commerce's Third Annual Conference and Exhibition in Washington DC. RASIZADE was to be the lead speaker on Monday. Their absence at the conference appears to confirm that settlement plans had become controversial. Many government members are trying to distance themselves from an agreement which might be unpopular in Azerbaijan. It appears that Azerbaijan was ready to make concessions to Armenia in the peace settlement. US undersecretary of state Strobe TALBOTT held talks in Baku with President Geidar ALIYEV and was scheduled to meet with KOCHARYAN in Yerevan today. ALIYEV and KOCHARYAN have held three face-to-face confidential talks since the Summer. Results of those talks have not been made public. The US has pushed the two sides to take significant steps toward peace and had hoped that Azerbaijan and Armenia would agree to a framework at the

Organization for Security and Cooperation in Europe (OSCE) summit in Istanbul. Former Azeri senior foreign policy adviser Vafa GULUZADE said, "It would be difficult for Armenia to conclude a peace deal with Azerbaijan because there are forces that don't want this." Azeri First Deputy Foreign Minister Khalaf KHALAFOV said, "I can't exclude that this was initiated by outside forces that want to destabilize the country during the Nagorno-Karabakh talks."

Georgia Demands Retraction From Borisov

· The Georgian Foreign Ministry has demanded that the Russian commander of the Batumi military base Major-General Vyacheslav BORISOV retract, "his irresponsible and provocative statements made in an interview with Tbilisi's Rustavi-2 television company" on the Georgian parliamentary election on October 31st. BORISOV several days ago said that if the Revival Party led by Chairman of the Supreme Council of the Autonomous Republic of Adjaria Aslan ABASHIDZE wins a majority in the parliament, the new parliament would quickly ratify the Russian-Georgian agreement on Russian military bases, thereby legalizing the bases on Georgian territory for 25 more years. The Georgian protest note said that BORISOV's statement constitutes interference into Georgia's internal affairs. "The high-ranking serviceman of Russia unceremoniously interfered in the election campaign underway on territory of a foreign country and, thus, inadmissibly broke the universal rules and principles of the international law." The Ministry also demanded that Russia take measures to prevent any interference in the election campaign by servicemen of the Russian Forces temporary stationed in Georgia as well as other actions which might entail the aggravation of the political situation on the eve of the parliamentary elections. Chairman of the Georgian parliament's Committee for Defense and Security Revaz ADAMIA demanded that BORISOV be announced as persona non-grata and to expel him from Georgia. Georgian President Eduard SHEVARDNADZE and Russian President Boris YELTSIN held a telephone conversation on Tuesday, but no details were disclosed.

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