DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 903,

WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, November 22, 1999

Chechnya's Shelkovskoy, Naursky and Nadterechny districts that are in control of federal forces. They are enforcing curfews. Western Chechens civilians have been fleeing amid constant bombardment. Since the beginning of the eight week campaign, a total of 222,000 displaced persons have left Chechnya since the beginning of the anti-terrorist combat operation, with some 194,000 displaced persons are staying in Ingushetia, Dagestan, North Ossetia and the Stavropol Territory. Thousands innocent civilians have been killed in the indiscriminate attacks.

Matviyenko In Severe Car Accident

· Russian Deputy Prime Minister Valentina MATVIYENKO, in charge of social programs in the past three Cabinets, suffered injuries in a road accident on Saturday on the Penza-Kamenki highway. The motorcade was returning to Penza from Russian poet Mikhail LERMONTOV's museum in Tarkhany when an UAZ-425 ambulance suddenly skidded off from the outbound lane and slammed into MATVIYENKO's Chevrolet at a high speed. The UAZ driver died on the spot. Deputy head of the Penza regional administration Vyacheslav TARASOV and the Chevrolet driver also died. MATVIYENKO was taken to the Penza's hospital with a concussion and two broken legs. Regional administration head Vasily BOCHKAREV received a craniocerebral injury and three other officials sustained injuries. Presidential chief of staff Alexander VO-LOSHIN immediately informed President Boris YELTSIN of the accident and Prime Minister Vladimir PUTIN

Russian Federation

Politics

Russia Continues Chechen Campaign

· Despite major concessions on Chechnya made at the Organization for Security and Cooperation in Europe's (OSCE) summit, Russia's leadership and military commanders are confident they will achieve their goals in the offensive against Chechen rebels. Speaking on state television on Saturday after a meeting with President Boris YELTSIN, Prime Minister Vladimir PUTIN ruled out negotiations with "terrorists." He pledged, "We will not let up in the slightest. We will continue as we have done up till now," the Financial Times reported. Foreign Minister Igor IVANOV and other Russian representatives agreed to work with the OSCE to reach a political solution to the crisis. They have also played down the speed and scope of an OSCE visit to the region.

Russian forces have surrounded 80 percent of Gronzy and will control it by mid-December. Troops are first planning to take Argun, on the road to Grozny, and cleanse it of Chechen rebel fighters. The Armed Forces chief of staff Anatoly KVASHNIN believes that Grozny will surrender without a fight, like other towns in Chechnya such as Gudermes and Achkhoi-Martan. Chechen fighters are said to have been reinforcing the capital's defenses. The next target of Russian troops is the southern town of Urus-Martan. Ramzan AKHMADOV, a Chechen commander, said, "We will not give up Urus-Martan without a fight. There will be a battle. We will ask all to leave Urus-Martan." It is estimated that the more than 3,000 rebels protecting the town are armed with anti-aircraft guns, stinger anti-aircraft missiles, grenade launchers, and light arms. The military announced that three Ka-50 Black Shark helicopters had been sent to the region. The gunships have high maneuverability. Police have taken up duty in

Today's News Highlights

Russia

State Property Confernce Opens

Uneximbank Revives License

BP Amoco Faces Write-Off

European Republics

Rus-Ukraine Coordinate Policy

Ukraine Nuclear Reactor Leaks

South Caucasus & Central Asia

Shpigun Held In Georgia?

Sarkisyan Appointed To NSC

Kazakhstan Arrests Separatists

Politics-Economics-Business

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Monday

November 22, 1999

Intercon's Daily

sent First Deputy Health Minister Gennady ONISHCHENKO, Deputy Interior Minister Pyotr LATYSHEV, and a team of doctors to Penza to evaluate MATVIYENKO's condition. The Deputy Prime Minister has undergone minor surgery and is being flown to Moscow in a special plane. "MATVIYENKO was given an adequate medical aid at the hospital and an operation was performed on her to extract fragments from forehead and cosmetic sutures were put in," ONISCHENKO said. He described MATVIYENKO's condition as being of "medium severity" and as being "adequate to the injuries sustained. MATVIYENKO sustained a contused wound in the forehead, a rupture of the internal ligament of the left knee joint and multiple bruises all over the body," ONISCHENKO said.

Economy

Ruble = 26.39/$1.00 (NY rate)

Ruble = 26.49/$1.00 (CB rate)

Ruble = 27.3/1 euro (CB rate)

State Property Conference Opens

· The Russian Ministry for the Management of State Property will discuss the State property management and privatization at an all-Russia conference on a State property management system today and Tuesday. Attending the conference will be State Property Minister Farit GAZIZULLIN, Tax Minister Alexander POCHINOK, Nuclear Energy Minister Yevgeny ADAMOV, Chairman of the Russian Federal Property Foundation Igor SHUVALOV, Chairman of the Board of the Unified Energy Systems of Russia Anatoly CHUBAIS, president of LUKoil Vagit ALEKPEROV, and president of GAZ Nikolai PUGIN. The meeting will be also attended by the leaders of a number of Subjects of the Federation (constituent republics, regions, and other administrative units), the Federal Council and State Duma, and such enterprises as Gazprom, Rosneft, Transneft, Tyumen Oil Company, Russian Airlines Aeroflot, and the Svyazinvest. The State property management and privatization concept was approved by the government in September 1999.

Harmon Calls For Maintaining Engagement

· Head of the US Export-Import Bank James HARMON on Friday said, "I believe that the United States should continue to be engaged with Russia." He pointed out that 99 percent of Ex-Im Bank loans

with Russia are being fully serviced. HARMON said, "Ex-Im Bank's experiences in Russia have been better than satisfactory." He did not specify a date when the bank would finalize some $500 million in loan guarantees, but said that board would decide on the loans, "at an appropriate time." HARMON refused to say that the approval is being delayed in connection with Russia's bloody military campaign in Chechnya. Analysts are following closely the economic impact of the Chechen offensive on the Russian budget and its relations with the international community and its lenders. Russia is also hoping for the International Monetary Fund (IMF) to approve a delayed second installment of a $4.5 billion loan reached in July. The IMF is waiting for Russia to meet requirements which includes structural reforms in the Central Bank and commercial banking sector. One official said, "The considerations for Russian IMF loans are being judged on economic terms solely...There are a number of financial issues that are impacting the loan schedule. In terms of the United States, we need to keep our own interests in assisting Russian democracy and de-nuclearization. There have been no decisions on this question." US Republican presidential front-runner George W. BUSH said, "When The Russian government attacks civilians, it can no longer expect aid from international lending institutions."

Business

Uneximbank License Returned On Trial Basis

· The Russian Central Bank on Thursday returned Uneximbank's banking license on a trial basis for a term of three months. The license was returned a day after holders of the $300 million in defaulted Eurobonds and floating-rate notes voted to approve Uneximbank's debt restructuring. Uneximbank defaulted earlier this year on an Eurobond, making it the first by a Russian institution since the August 1998 government default on Treasury bills and devaluation of the ruble. Under the restructuring plan, Uneximbank will pay creditors 10 cents on the dollar for $1.4 billion in unpaid debts and issue $130 million in new bonds. The bank will also form an investment company owned by the creditors to supervise the workout of assets still owned by Uneximbank.

BP Face Major Write-off

· BP Amoco this week will face the write-off of more than $485 million investment in Russian oil

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November 22, 1999

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company Sidanko. BP Amoco has been forced to make such a move because Sidanko's best production subsidiary Chernogorneft is to be sold-off in a liquidation tender on November 26th. BP Amoco purchased a 10 percent stake in Sidanko in 1997. BP Amoco, Sidanko shareholders, and the European Bank for Reconstruction and Development have been challenging the decision to liquidate Chernogorneft.

yet been determined. A similar incident occurred earlier his year. The Khemlnitsky plant, one of 14 reactors still functioning in Ukraine, relies on Soviet technology which is different from what is used in Chernobyl. Ukraine relies on nuclear power for up to 45 percent of its electricity.

South Caucasus & Central Asia

Russia Claims Shpigun Is Held In Georgia

· Officials of the North Caucasian Regional Board for Combating Organized Crime believe that Russian General Gennady SHPIGUN, the representative of the Russian Interior Ministry in Chechnya, who was kidnapped in Grozny, may be in one of the Georgian villages near the border with Chechnya. Itar-Tass reported that this information was obtained from one of the recently freed hostages, a resident of Daghestan. The former hostage said that he was kept locked up for several days in the same basement with Gennady SHPIGUN early in November. He also indicated the place where this happened, namely the Georgian village of Shatili, which is approximately five kilometers from the Rus-Georgian border. Last week, Russian helicopters dropped bombs on the village of Shatili. No casualties have been reported, but Georgia has lodged an official protest with the Russian government. No confirmation of SHPIGUN's whereabouts was received from any other sources. SHPIGUN was kidnapped at the Grozny airport on March 5, 1999. The kidnappers demanded on March 17th, a ransom of $15 million.

Azeri To Supply Georgia Gas

· The Government of Azerbaijan is taking active measures for starting supplying Georgia with natural gas within the next few days. The Azeri Deputy Prime Minister Abid SHARIFOV told Prime News Agency today that it plans to export up to 300 million cubic meters of natural gas to Georgia during the Winter period. SHARIFOV stressed that despite the deficit of natural gas in Azerbaijan, official Baku has decided to "help Georgia out" in answer to the appeal from the Georgian government. According to him, Azerbaijan has the infrastructure for transporting natural gas to the Kazakh region, bordering Georgia.

Clinton Meets With Aliyev And Kocharyan

· US President Bill CLINTON on the sidelines of the Organization for Security and Cooperation in

European Republics

Rus-Ukraine To Coordinate Foreign Policy

· Russian President Boris YELTSIN and Ukrainian President Leonid KUCHMA on Saturday agreed to continue efforts to coordinate their countries' foreign policy policies. In a telephone conversation with the Ukrainian President, YELTSIN thanked him for supporting Russia's stance at the Organization for Security and Cooperation in Europe (OSCE) summit in Istanbul. The two leaders discussed the summit's results and stressed that signing of the Declaration, the Charter of European Security, and adapted Conventional Forces in Europe Treaty are of, "fundamental importance for safeguarding peace, stability and security in Europe without dividing lines, on the basis of the generally recognized norms of international law, while the attempt to introduce dissonance in the work of the European forum failed," according to the presidential press service.

Ukrainian Prime Minister Valery PUSTOVOITENKO and his Russian counterpart Vladimir PUTIN are expected to meet in Moscow in the end of November or the beginning of December. They will discuss the implementation of agreements reached at the meetings of the Ukrainian-Russian intergovernmental commission, with special attention to cooperation in the energy sector.

Ukraine Nuclear Reactor Leaks

· Ukrainian officials shut down the sole reactor at the Khemlnitsky nuclear power plant after a leak was noted in its cooling system. Colonel PATSENKO said, "The reactor was switched off from the electricity network and is being shut down. This is not an accident, but rather what would be described as an incident. Levels of radioactivity at the station have undergone no change." He said that the level of the incident on the international scale of seven had not

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Europe (OSCE) summit in Istanbul held bilateral meetings separately with Azeri President Geidar ALIYEV and Armenian President Robert KOCHARYAN. Their meetings focused on settlement of the Nagorno-Karabakh conflict. CLINTON has called for the two leaders to pursue dialogue for finding a solution to the Nagorno-Karabakh problem. ALIYEV and KOCHARYAN said they valued the part of the international community in negotiations over Nagorno-Karabakh and called for more active work within the frame of the OSCE's Minsk Group. The Minsk group is co-chaired by Russia, the United States and France. CLINTON showed an understanding and respect that the two sides were unprepared to settle any accords at the summit due to the dramatic massacre in the Armenian Parliament on October 27th. The tragedy affected Armenia's stability, and KOCHARYAN needs some time "to restore the internal political consensus," one official said. The US administration official withheld conjectures as to when such an accord could be signed by ALIYEV and KOCHARYAN. The two leaders attended consultations of foreign ministers of the Minsk troika - Russian Foreign Minister Igor IVANOV, French Foreign Minister Hubert VEDRINE and US Secretary of State Madeleine ALBRIGHT.

Azerbaijan and Armenia on Friday proposed setting up a Caucasian security system to bring an end to the Nagorno-Karabakh. KOCHARYAN said that regional countries should come together to try to prevent further conflict. "It is important to create a system of national security in the northern Caucasus and include all countries of the region in it. Ending this conflict is in the interests of both our people." ALIYEV said that a security and cooperation system should include Armenia, Azerbaijan, and Georgia, regional powers Russia and Turkey, and the US.

Sarkisyan Appointed Secretary of NSC

· Armenian President Robert KOCHARYAN signed a presidential decree appointing Serge SARKISYAN, Chief of the Presidential Staff, to serve concurrently as Secretary of Armenia's National Security Council

(NSC). Another Presidential decree stipulates that the NSC Secretary from now on is a member of this deliberative body to the President. SARKISYAN previously has served as Defense Minister, Chief of the State National Security Agency, and Interior and National Security Minister. Despite the fact that an NSC list has never been officially published, it is known that the Council includes the Parliament Speaker, the Prime Minister, the Chief Justice of the Constitutional Court, Ministers of the Interior, Foreign Affairs, National Security, and Defense, the Yerevan Mayor (since September 28th) and now the NSC Secretary.

Kazakhstan Arrests Separatist Plotters

· On Friday, Kazakhstan's Security Service arrested 22 people, including 12 Russian citizens, on suspicion of preparing a separatists coup in Ust-Kamenogorsk, the Eastern region of the country, which has a strong Russian-speaking population. Security forces seized a hand grenade, 270 assault rifle cartridges, four loaded magazines, and 14 Molotov cocktails. Deputy head of the Eastern Kazakhstan branch of the National Security Committee Viktor KUNIN said, "Their apparent aim was to establish a `Russian Land' in the area, separate from Kazakhstan." The group, called Rus, planned to seize regional governors' offices and security and police buildings in the city. Reuters reports that Russia has made no territorial claims on Kazakhstan since the collapse of the Soviet Union in 1991, although officials vow to protect the rights of Russian-speakers living there." Kazakh President Nursultan NAZARBAYEV has avoided promoting a strong anti-Slavic movement. He knows Kazakhstan cannot do without Moscow's support. Russia accounts for 30 to 40 percent of Kazakhstan's foreign trade.

The Daily Report on Russia

and the Former Soviet Republics

will not be published on November 25th-26th,

in celebration of the Thanksgiving holiday.

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

Daily Report on Russia is published Monday-Friday (excluding holidays), by Intercon International, USA. Subscription price for Washington, D.C. Metro area: $950.00 per year. A discount is

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Daily Report on Russia is for the exclusive use of the subscriber only. Reproduction and/or distribution is not permitted without the expressed written consent of Intercon. Daily Report on Russia Ó copyright 1999, Intercon International, USA.

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