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

Tuesday, November 16, 1999

tains that it targets only rebel fighters and dismisses the criticism as interference in Russia's internal affairs, reminiscent of Slobodan MILOSEVIC in Kosovo. In a conversation with UN Secretary-General Kofi ANNAN, Prime Minister Vladimir PUTIN said, "Russia is prepared for a political settlement to the Chechen problem, but not with those who have posed (for pictures) over the corpses of our citizens." PUTIN's attendance at the OSCE summit is not planned for at this time. Last week, Foreign Minister Igor IVANOV rejected an offer by from OSCE to help resolve the conflict. Since the Chechen campaign began, more than 200,000 residents have fled and an estimated 4,000 innocent civilians have lost their lives. IVANOV said the OSCE summit should focus on the creation of European security in the 21st Century. "If someone in Istanbul tries to change the agenda and shift the accent to Chechnya, these countries will assume responsibility for this."

The Russian President, rarely permitted by doctors to travel abroad, will also meet with Turkish President Suleyman DEMIREL, German Chancellor Gerhard SCHROEDER and French President Jacques CHIRAC. Several agreement are expected to be signed at the summit including the European Security Charter, the Conventional Forces in Europe arms control treaty (CFE), the Baku-Ceyhan oil pipeline agreement between the US, Turkey, Azerbaijan and Georgia, and the Turkey-Turkmenistan gas pipeline, which bypasses Russia. PUTIN has expressed fear that Russia is losing its economic

Russian Federation

Politics

OSCE Summit To Focus On Chechnya

· On the opening day of the Organization for Security and Cooperation in Europe (OSCE) summit in Istanbul, a largely unfocused grouping of 54 nations, all eyes will be on the Russian President Boris YELTSIN and US President Bill CLINTON and all ears will listen closely to their remarks on the situation in Chechnya. US-Russian relations have been strained by NATO's expansion, the alliance's actions in Kosovo, the Bank of New York money laundering scheme, and the US request to amend the Anti-Ballistic Missile treaty of 1972. These issues have been compounded by accusations and criticisms, making this meeting the frostiest ever. Turkey has placed the Russian relentless air and artillery bombardment of Chechen villages at the top of the summit's agenda. In a letter to CLINTON, a group of Senators wrote that, "Russia's conduct in Chechnya constitutes a brutal assault on the core values of the [OSCE]." This is no time for the CLINTON administration to take a weak stance in dealing with Russia. Instead, it should warn Russia that generous International Monetary Funds will not be forthcoming, until Russia ends its bombing of civilian centers and ends its intimidation of Georgia and Azerbaijan. The failure of a strong US Russian policy, as in the previous Chechen War, is making the current conflict all the more dangerous, not only in Russia but throughout the South Caucasus.

YELTSIN has vowed to press ahead with the campaign aimed at destroying Chechen militants, despite strong international criticism. He stressed, "We will not stop until not a single terrorist remains in our territory." He is planning to state that the West, "have no right to blame Russia for destroying bandits, thugs and terrorists in its territory." Moscow main

Today's News Highlights

Russia

Security Council Appointments

Econ. Ministry Reports To Duma

Kalishnikov Exports Rise

European Republics

Ukraine's Trade Declines

South Caucasus & Central Asia

Georgia To Retain CFE Quotas

Giorgadze-Primakov Ties

Explosives Found In Armenia

Tajik Presidential Inauguration

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November 16, 1999

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and political stronghold in the Caucasus and Central Asia region. In today's The Wall Street Journal Op-Ed page, George MELLOAN writes that, "Moscow has been trying to rope Azerbaijan and Georgia back into its own orbit." Russia has threatened economic sanctions against Azerbaijan and Georgia, demanded the implementation of a visa regime to prevent the entrance of terrorists and weapons to Chechnya, which has in no way been proven, and refused to withdrawal "peacekeeping" troops monitoring the Abkhaz region. The Op-Ed piece said that, "both Azeri President Geidar ALIYEV and Georgian President Eduard SHEVARDNADZE have been targets of assassination attempts with distinct Russian fingerprints." The concern is that Russia will not end its campaign after taking Chechnya, but will try to regain effective control over Georgia and Azerbaijan. Russia's actions, although deemed internal, have far reaching applications for the Caucasus, Central Asia, and European security and stability. Although YELTSIN may be Russia's representative at the OSCE summit and will no doubt blast the world community for meddling into its internal affairs, the real man in control of the Chechen campaign is PUTIN, who analysts describe as becoming, "a bit too ambitious for his own and everyone else's good."

New Security Council Appointments

· Russian President Boris YELTSIN appointed Sergei IVANOV, former deputy director of the Federal Security Service (FSB) to the post of Security Council Secretary. The President appointed FSB Director Nikolai PATRUSHEV a permanent member of the Security Council, and Justice Minister Yuri CHAIKA a member of the Security Council. The same decree dismissed former prime minister Sergei STEPASHIN and former justice minister Pavel KRASHENINNIKOV as members of the Security Council. On Monday, Prime Minister Vladimir PUTIN opened a Security Council meeting stressing, "today, the most serious tasks are to ensure the reliable security and safety of the individual, society and the state. In order to accomplish these tasks a maximum concentration of efforts and close coordination of the activity of all state structures are needed."

Economy

Ruble = 26.24/$1.00 (NY rate)

Ruble = 26.24/$1.00 (CB rate)

Ruble = 27.111 euro (CB rate)

Economic Min. Present Report To Duma

· According to a report presented on instruction of Prime Minister Vladimir PUTIN to the Russian State Duma today, the Economic Ministry has assessed that the economy has improved, but has not reached a stable, long-term basis. The report says industrial output and gross domestic product (GDP) were growing in the period from January to September, above all due to the increase of exports and relative cutting on production costs. The financial state of enterprises in the real sector of the economy has been considerably improving and the inflation rate was low. The ruble rate is predictable and stable. Industrial output in January to September rose 7 percent, compared to the corresponding period in 1998. Agricultural output dropped 2 percent. As of September 1st, wage arrears amounted to 54.6 billion rubles, 22.4 billion rubles less than at the beginning of the year. Tax collection has considerably improved and pension arrears have been fully repaid. At the same time, after a sharp drop in the real monetary incomes of the population in August to September 1998, the incomes increased very slowly this year. Qualitative improvement in the investment activity has not been reached in the recent months despite the improvement in the dynamics of investment to the fixed assets. Capital flight is still a major negative factor in the economy.

The Organization for Economic Cooperation and Development (OECD) is predicting a more positive outlook for the Russian economy in the near future, but pointed out that recovery remains fragile and uncertain. "While there are signs of recovery, the macro-economic situation remains potentially rather fragile." Real GDP growth should decline to 1 percent in 2000 and 2001, from 2 percent in 1999. While inflation was seen declining from 40 percent this year to 30 percent in 2000 and 20 percent in 2001, the OECD said upward pressure on energy and transportation prices could eventually hit manufacturing.

Business

Kalashnikov Exports On The Rise

· Russia is enlarging the exports of Kalashnikov tommy-guns. The overall sum of contracts on the supply of tommy-guns abroad will reach several dozens of millions of dollars in 1999-2000, according to Promexport. The main buyers of the Kalashnikovs will be African countries. Promexport's public rela

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tions department said the Izhmash plant will finalize the supplies of the 7.62-millimeter modernized Kalashnikovs to a North African country to a total sum of almost $4 million by the end of this year. Commercial offers have been made to a number of Middle Eastern countries on the supply of various modifications of the Kalashnikov, including the ones using the NATO 5.6-millimeter cartridges. Until recently the Kalashnikov tommy-gun, which has become popular abroad, and the MiG-29 fighter jet have accounted for 20 percent of the country's arms exports. The 50th anniversary of the adoption of the Kalashnikov and the 80th birthday of the tommy-gun's maker, Mikhail KALASHNIKOV was celebrated in a party used to promote its products on Wednesday.

(CFE) to Russia. After the reduction of arms in framework of CFE, most all of Russian arms will remain at the territory of Georgia, the President stressed. On the threshold of Organization for Security and Cooperation in Europe (OSCE) Summit in Istanbul SHEVARDNADZE said that Georgia is ready for "serious compromises", although will "bring its interests up seriously". SHEVARDNADZE did not give the detail description of those compromises. Russian Foreign Minister Igor IVANOV's earlier made a statement that Georgia and Moldova have a "key to the solution of this problem [the adaptation of the treaty]." SHEVARDNADZE called his statements "unfair." He added a "main problem with adaptation of the treaty is the problem of Russia, that is, reduction of its arms available in the south," referring to Russia's building up its weapons in the North Caucasus for its anti-terror operation in Chechnya. He stressed that Georgia is ready "for some compromises, but not to the detriment of the country's interests." In a letter to US President Bill CLINTON, a group of 12 Republican Senators called on the President to refuse to sign the amended arms agreement with Russia, unless Moscow halts "indiscriminate" military attacks in Chechnya. They said that they, "would be reluctant to endorse any agreement concluded under these circumstances." The Senators further pointed out that Russia's blatant violations of the CFE treaty due to its operations in Chechnya, "weaken each day the credibility and reliability of arms-control treaties that are the cornerstone to international peace and stability," The Washington Times reported.

NATO Assembly Votes Russian Bases Out

· On Monday, at a meeting of the NATO parliamentary assembly in Amsterdam, a resolution concerning NATO's relations with Russia was passed. In Paragraph #7 of the document it acknowledged that, "the governments of Georgia and Moldova have repeatedly asked Russia to remove its forces from their territories and that Russia has supported violent separatists movements in these countries." The resolution continued in Paragraph #8 Section B that "the NATO parliamentary assembly urges the Russian Federation to withdraw immediately all its military forces from Georgia and Moldova." This resolution will add additional pressure on the Russian military to negotiate in good faith with their Georgian counterparts in Istanbul on Russian base removal.

European Republics

Ukraine's Foreign Trade Declines

· Ukraine's foreign trade volume in the first nine months of 1999 declined to $16.68 billion, a 19.9 percent drop compared to the same period last year. According to a report recently released by the Ukrainian National Statistics Committee, in the past nine months, the country's exports totaled $8.25 billion and imports $8.43 billion, ending with a deficit of $182 million. The Ukraine's trade deficit was cut down while the total volume keeps dropping, a senior official from the Foreign Economic Relations and Trade Ministry said. The trade deficit of the past nine months was $150 million less than the same period last year and positive signs are witnessed in the third quarter as far as merchandise and service export is concerned, he added. Ukraine trades with 179 countries and regions worldwide. Its products sell primarily to Russia, which accounts for 20.2 percent of Ukraine's total export volume, China (7.1 percent), Turkey (6 percent), German (5.1 percent) and Italy (4 percent). It imports mainly from Russia, which accounts for 46.8 percent of the total volume, Turkmenistan (8.3 percent), Germany (7.5 percent), the US (3 percent), and Belarus (2.9 percent).

South Caucasus & Central Asia

Georgia To Retain CFE Quotas

· Georgian President Eduard SHEVARDNADZE in his Monday national radio address stated that Georgia will not turn over its quotas determined in the Conventional Forces in Europe arms control treaty

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Georgian Pres. Links Giorgadze And Primakov

· In an interview for ORT Television, Georgian President Eduard SHEVARDNADZE confirmed that former Russian prime minister Yevgeny PRIMAKOV has connections with Igor GIORGADZE, who is wanted by Interpol for the 1995 assassination attempt against SHEVARDNADZE, and their involvement in the planned coup attempt in May, 1999. He said, "I respect Yevgeny Maximovich [PRIMAKOV] and have know one another for a long time, but this is not a secret any more that when we got the information about the terrorist acts which were planned, we activated our operational assets according to the Supreme Court decisions, including phone tapping and the name of PRIMAKOV was stated by Igor GIORGADZE, while he was talking with his Georgian connections." He said, "GIORGADZE was saying that Prime Minister PRIMAKOV was all on their side." The President would not give the names of others involved in the act, since the investigation is ongoing. He said, "the fact is that all the terrorists and mercenaries who were participating in this act were trained on Russian territory." SHEVARDNADZE noted that Georgia is still seeking the extradition of GIORGADZE from Moscow, where he has been living and is often seen in public. He said that GIORGADZE's extradition has been requested at the highest levels. "Several times I personally addressed Mr. PRIMAKOV as Foreign Minister and President YELTSIN in the presence of all the heads of the states of the CIS that we should not artificially make troubles without our relations among ourselves."

In an interview with Prime News Agency, chairman of the Russian State Duma's foreign relations committee Vladimir LUKIN accused Georgia and Azerbaijan in having, "an inefficient policy against the sovereignty of Russia." He explained, "Russia has recognized the sovereignty of Georgia and Azerbaijan and in return demands from Georgia and Azerbaijan to recognize the sovereignty of Russia in framework of existing state borders." He warned, "If Georgia and Azerbaijan continue interfering with

Russia's anti-terrorist operation in Chechnya, by their inefficient position, then our relations will seriously worsen."

Armenian Demolition Team Find Explosives

· Just three weeks after gunmen seized the parliament and assassinated the Armenian Prime Minister Vazgen SARKISYAN, parliamentary speaker Karen DEMIRCHYAN, and six other officials, an anonymous caller alerted officials of a package with explosive material hidden in the parliament building. Deputy Interior Minister Ovanes VARYAN said that, after three hours of searching, a demolition team on Monday found and disarmed an explosive device. He described the device as not life threatening. "The packet which was found by sappers was not dangerous and if it had gone off would not have badly damaged the building." VARYAN added that further safety checks will be carried out in the building again today. Following the massacre on October 27th, Interior Minister Suren ABRAMYAN and National Security Minister Serzh SARKISYAN resigned under pressure from the Armed Forces.

Tajik President Sworn Into Office

· Incumbent President Emomali RAKHMONOV, who won a landslide victory in the November 6th elections extending his term of office for another seven years, was sworn into office today. "As President, I vow to defend the Constitution and laws of the republic, guarantee rights, liberties, honor and dignity of citizens, defend territorial integrity, political, economic and cultural independence of Tajikistan, loyally serve to the people," RAKHMONOV said in his inaugural address. "The strengthening of independence, peace and unity of the people is the way of development and prosperity which the Tajik people will go in the 21st century." In the field of the economy, the government will give attention to market relations and social reforms. On foreign relations, RAKHMONOV said, "we will not leave the chosen path, strengthening our friendly ties and cooperation on the principles of international norms, in the first place with Russia and the states of Central Asia."

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

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