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

Friday, November 12, 1999

tempts to interfere in Russia's internal affairs, which will be met with a resolute rebuff in the future as well, according to a Foreign Ministry statement. Russian Foreign Ministry spokesman Vladimir RAKHMANIN said, "Chechnya is a part of Russia. And trips by any people claiming they are representatives of a free or independent Chechnya show lack of respect for Russia's territorial integrity." France's Foreign Minister Hubert VEDRINE said that AKHMADOV was invited by the Council of Europe based in Strasbourg and may stay as long as a week.

Three Candidates Vie For Post Of Moscow Mayor

· The Moscow City Election Commission on Thursday registered three candidates for the post of Moscow mayor: incumbent Moscow Mayor Yuri LUZHKOV, Russian president's business minister Pavel BORODIN, and leader of the Union of Right-Wing Forces, former Russian Prime Minister Sergei KIRIYENKO. The commission also registered candidates for the post of vice-mayor of Moscow. Running for the post with LUZHKOV will be incumbent deputy-mayor Valery SHANTSEV. In tandem with BORODIN will be Head of the Federal Tax Police Service Leonid TROSHIN, while KIRIYENKO is partner with head of the Academy of City Environment Development Vyacheslav GLAZYCHEV. Muscovites will elect its mayor on December 19th, which is also the date of the parliamentary polls. LUZHKOV has transformed Moscow from a dull Soviet city to a vibrant European city. But his opponents accuse him of running a corrupt regime for the benefit of business cronies. His

Russian Federation

Politics

Russia Rejects OSCE Offer To Resolve Conflict

· After meeting with Russian Foreign Minister Igor IVANOV, Norwegian Foreign Minister Knut VOLLEBAEK, chairman of the Organization for Security and Cooperation in Europe (OSCE), said that Russia has rejected an offer for the OSCE to help resolve the conflict. "IVANOV said he doesn't see a political role for the OSCE at this stage." The head of an OSCE mission Kim TRAAVIK has described the refugee situation in Ingushetia as "serious." But he was unable to evaluate the conditions for refugees living with the Russian "security zone." On Thursday, TRAAVIK and his team were prevented from traveling into Chechnya by authorities. The mission has cut its trip to the conflict zone short. TRAAVIK pointed out that a lot has been done to render aid to the people living in tents, adding, however, that the situation remains complicated, and people live in very difficult conditions. According to TRAAVIK, a Norwegian diplomat, it could aggravate if no corresponding measures are taken to render assistance to the displaced persons. Thousands of refugees seeking to flee Chechnya have been lined up for miles behind Russian checkpoints, sometimes waiting for days with little food or water in snow and freezing temperatures.

Russia Warns France Against Meddling

· Russia criticized France on Wednesday for receiving the Chechen foreign minister Ilyas AKHMADOV in Paris. According to a Russian embassy in Paris statement, Russia regards the reception of AKHMADOV by French Foreign Ministry officials as an "unfriendly gesture" toward Russia. It accused France of, "acting in complicity with Chechen separatists and terrorists." First Deputy Foreign Minister Alexander AVDEYEV warned against at

Today's News Highlights

Russia

Uneximbank Nears Debt Deal

Fed. Council Passes Oil PSAs

US Invest. Fund Wins Tender

European Republics

Kuchma Gears Up For Run-off

New Lith. Cabinet Approved

South Caucasus & Central Asia

Alfa Troops Infiltrate Georgia

Armenian Suspects Total 10

Politics-Economics-Business

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Friday

November 12, 1999

Intercon's Daily

popularity has been falling sharply in recent months due to his sparing with the Kremlin. KIRIYENKO is running on an anti-nomenklatura capitalism platform. "The main threat to us is not the Communists. But nomenklatura capitalism is real and dangerous and LUZHKOV is proposing the Moscow model for the whole of Russia." BORODIN has been entangled by rumors of corruption and bribery scandals. However, he may have the advantage by calling in favors from the Kremlin to further weaken LUZHKOV's reputation.

Economy

Ruble = 26.10/$1.00 (NY rate)

Ruble = 26.31/$1.00 (CB rate)

Ruble = 27.38/1 euro (CB rate)

May Jun Jul Aug Sep Oct Nov

IMF To Reviews Economic Progress

· The International Monetary Fund (IMF) mission, reviewing Russia's economic progress, has issued a request to the Russian Tax Ministry to supply documentation on Russia's gas monopoly Gazprom's payments to the budget. Tax Minister Alexander POCHINOK said he met with members of the IMF mission in Moscow. The question of Tatneft oil company cropped up, in addition to questions of Gazprom's current and future payments. Tatneft has failed to meet its obligations for payments to the budget on a regular basis. The situation is favoring Gazprom and it will surpass annual targets for payments, POCHINOK said. The Tax Minister told the IMF mission the tax on Russian enterprises is near the limit and cannot be increased. A higher tax collection may be achieved by perfecting tax plan

ning. Regarding the resignation of IMF managing director Michel CAMDESSUS, POCHINOK said there may be certain difficulties in the negotiating process in this connection. He said CAMDESSUS had been knowledgeable about the state of affairs in Russia and wished reforms in Russia to continue.

Uneximbank Near Deal With Creditors

· Uneximbank, once one of Russia's largest banks before the financial crisis, is near a deal with creditors to restructure $2 billion in debt. Uneximbank is part of a financial empire, Interros, controlled by business tycoon Vladimir POTANIN. Uneximbank was the first Russian financial institution to default on a Eurobond payment. On Thursday, 99 percent of Unexim's creditors voted in favor of restructuring the bank rather than moving ahead with bankruptcy proceedings. They also asked the Central Bank to re-issue Uneximbank's license, which was revoked earlier this year. This week, a committee of 11 international institutional creditors, including holders of $600 million in defaulted currency-forward contracts, backed the restructuring. Members of that committee include Lehman Brothers Holding Inc., European Bank for Reconstruction and Development, Citigroup Inc.'s Citibank, Societe Generale Vostok, International Finance Corporation, and Standard Bank Investmen Corp.'s Standard Bank London, The Wall Street Journal reported.

Business

Sidanko Appeals Kondpetroleum Sale

· Russian oil company Sidanko, in which BP Amoco owns a 10 percent stake, has appealed against a court ruling upholding the sale of its production subsidiary Kondpetroleum. The Nyagan arbitration court invalidated a $750 million Sidanko loan to Kondpetroleum. Because the subsidiary never settled the loan, Sidanko argued before the court that it had the right to sit on the creditors committee which bankrupted Kondpetroleum earlier this year, the Dow Jones Newsline reported. Sidanko was barred for the committee, which last week agreed to sell the Sidanko-controlled oil producer to its rival Tyumen Oil Company for about $52 million. Tyumen, Russia's sixth biggest oil producer according to output, is expanding rapidly by using Russia's bankruptcy process to seize control of Sidanko's key oil-production subsidiaries.

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Fed. Council Passes Oil PSAs

· Russia's Federation Council Thursday passed two laws which added new oilfileds to the list of deposits which can be developed under production sharing agreements (PSAs). The laws, earlier passed by the Russian State Duma, have to be signed by President Boris YELTSIN to become effective. The first oilfield is Northern Territories in the Komi and Nenets regions, with estimated reserves of 4.4 billion barrels of oil. A joint venture between Russia's largest oil producer LUKoil and US Conoco will develop the oilfield. The second oilfield is Priobskoye in Western Siberia, with more than 6.6 billion barrels of recoverable reserves. This field will be developed by Yukos, Russia's second largest oil company.

US Investment Fund Wins Gold Tender

· Nevada-Manhattan Fund, a US investment fund, has won a tenders for the development of a gold field in the Krasnoarmeisky region. It is the first time that a foreign company has been granted a gold-mining license in the region. According to the terms of the tenders, the gold mining should start at Glukhoye gold field after 5 years of prospecting. The gold resources at the field are estimated at 150 tons. The license has been granted to the company for a 25-year period. During that time, the fund is expected to invest about $2 million into the region's gold mining industry. The Nevada-Manhattan Fund is registered with Los Angeles. Interests of the fund in the region are not confined solely to gold mining. The company has already invested about $1.5 million into the coast fishery, farming and refuse incineration.

involved in the decision-making process...In a sense, the practice of lending out enterprise shareholdings contradicts reform." Oleg TARANOV, head of the Agency for Corporate Rights, which has lent out stakes in nine enterprises over the past few months, defended the action. He said, "Of course it is very profitable to opponents of President KUCHMA to make a scandal out of this. But all we are doing is trying to find effective managers through a transparent process." Today, KUCHMA talked with students hoping to inspire them to vote and counterbalance the mainly elderly, but active and well-disciplined Communist supporters. Many young voters are apathetic, cynical and disillusioned, but do not want Ukraine to revert to Soviet-style Communism. One nineteen year old said, "To vote for SYMONENKO means to support the past, to elect KUCHMA means to choose the future...I do not want to go back to (Soviet) Pioneer camps." On Thursday, KUCHMA campaigned in "enemy territory," SYMONENKO's hometown of Yasynuvata. Surprisingly, he was greeted by crowd holding supportive posters. He said, "Russia was, is, and will be our strategic partner. Never under any circumstances should we make enemies with Russia." However, he pointed out, "Ukraine should remain an independent country and God help Russia resolve its own problems. KUCHMA's opponent has called for closer relation with Russia, a break from NATO and the International Monetary Fund, and increased state-control over the economy.

Ukrainians will vote in the run-off election on November 14th. In the first round, KUCHMA won 36 percent of the vote, while SYMONENKO won 22 percent.

Lithuanian Parliament Confirms New Cabinet

· Lithuania's parliament on Thursday in a vote of 76 to 33, with three abstentions, approved the new Cabinet and fiscal reform-oriented program of Prime Minister Andrius KUBILIUS. Only the posts of prime minister, finance and economics ministers have changed from the previous government's 14-member cabinet, which came into office in June of this year. Vytautas DUDENAS will serve as Finance Minister, while Valentinas MILAKNIS will serve as Economics Minister. KUBILIUS said, "I want to reiterate this: without any hesitation we will have to take immediate steps to make radical cuts in public spending."

European Republics

Kuchma Gears Up For Run-Off Elections

· Incumbent Leonid KUCHMA is pulling out all stops as he fine-tunes his campaign to target businessmen, young voters, and even the hometown of his opponent, Petro SYMONENKO. State-owned shareholdings in profitable Ukrainian enterprises have fallen into the hands of private businessmen, which many observers see as an attempt to secure support for KUCHMA. Shares have been transferred to these influential voters after being transferred to local administrations or directly by decree of Prime Minister Valery PUSTOVOITENKO, the Financial Times reported. Vadim VASILIEV of the State Property Fund said, "It is not excluded that politics is

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South Caucasus & Central Asia

Russian Alfa Troops Infiltrates Georgia

· Following the devastating massacre in the Armenian parliament, Armenian President Robert KOCHARYAN sought assistance from Russia to keep the peace in Yerevan. Russia responded by sending in a battalion of Russia's elite Alfa troops. As they were traveling to Yerevan, one unit landed at the Russian Vaziani base in Georgia before going on to Armenia. Intercon sources report that approximately 40 members did not continue to their destination and had been waiting instructions from Russia. Georgian officials had become quite concerned of their presence. The Vaziani base was used in 1995 as the escape route for Igor GIORGADZE, after the assassination attempt on Georgian President Eduard SHEVARDNADZE. The unexplained presence of the commandos at the base right before the October 31st Georgian parliamentary election caused the government great concern. Intercon has obtained information that the one possible purpose of the Alfa battalion is to enter the breakaway region of Chechnya via Georgia. Another possibility is that they were in Georgia to engage in destabilizing acts. Chairman of the Georgian parliamentary Committee for Defense and Security Revaz ADAMIA said that Georgian intelligence has information that the group consists of the best trained soldiers of Alfa and is armed with a special diversion equipment: snipers rifles, remote-controlled mines and grenades. ADAMIA said that the Georgian intelligence service have noted that a few days ago 30 soldiers from the group left Vaziani in an unidentified direction, Prime News Agency reported. According to ADAMIA, airdrome of Russian base in Vaziani has been preparing for receiving military planes during last month. According to the officers, five Russian transport helicopters have landed in Vaziani at night, since the end of October. One source claims that Russia is forming a troop of 750 soldiers to supposedly be transported to Chechnya. Georgia earlier refused Russia to use its military bases in Georgia for attacking Chechnya from the South.

Comment: This once again illustrates the provocative use of these bases by Russian authorities without consultations with the Georgian government. Georgia is monitoring the bases' operation. Matched with the disinformation concerning Georgian support for the Chechen rebels, especially with the illegal seizure of American military uniforms on Thursday in Moscow destined for the Georgian army, these actions add fuel to the regional tensions. Sources indicate that top officials of the Georgian government fear another attempt on the Georgian President's life is in the making. Peter MAMRADZE, chief of staff to SHEVARDNADZE, says that, "living next to Russia is like living on the side of a volcano." "Even now there are reactionary forces in Russia who never could accept that Georgia and other republics are fully independent. The plan is to restore the Soviet Union," MAMRADZE explained.

Suspects In Armenian Massacre Total 10

· Armenian authorities have arrested four more people in connection with the attack on the parliament on October 27th, which killed the Prime Minister, parliamentary speaker and several other top officials. Prosecutor Artak ARUTYUNIAN said Nairi BADALIAN, the chief of the Logos opinion research firm, was arrested. He did not disclose the identities of the other suspects. The first group of five were arrested on October 28th, after holding deputies hostage in the parliament. On Wednesday, Musheg MOVSESYAN, a deputy in the parliament was arrested and charged with orchestrating the attack. He was stripped of his parliamentary immunity.

Meanwhile, an unexploded grenade was found at Armenian Deputy Prime Minister Vagan SHIRKHANYAN's apartment entrance. No damage was caused. SHIRKHANYAN is responsible for the coordination of the production infrastructure SHIRKHANYAN's inclusion in the composition of a newly-formed government is at the moment the main source of controversy between the Armenian president on the one hand, and the prime minister and the military on the other.

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

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