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

Thursday, November 4, 1999

The situation in the Caucasus will be discussed. ECEVIT called for the settlement of the Chechen conflict through peaceful means while preserving Russia's territorial integrity. During the visit it is planned that a number of documents will be signed, including the protocol of the meeting of the Mixed intergovernmental Rus-Turkish commission on commercial, economic, scientific and technical cooperation, the agreement on cooperation in the Black Sea area, on visa-free travel of citizens of both countries with diplomatic passports and the protocol on cooperation between Itar-Tass and Turkey's main agency for information and the press. The businessmen are seeking to boost exports which are down to a third of the level before the Russian financial crisis.

Rus-Chechen Remains Complex And Tragic

· Thousands of refugees are still caught on the border between Chechnya and Ingushetia. Russia shut the border 13 days ago as it geared up its latest military campaign against Islamic rebels in Chechnya. The border has been open in a sparing manner, allowing only a trickle of refugees through. On Tuesday, 273 people managed to leave Chechnya and on Wednesday this figure reached 1,026. There are more than 20,000 women children and elderly are waiting to escaping the bombing on the border. Russian police blame the long delays on a disorderly Ingush passport administration. Many refugees are bribing border guards to get through. One observer claimed that the only real border crossing is by armed troops in tanks and helicopters shuttling the generals in

Russian Federation

Politics

Rus-Turkey Discuss Blue Stream Project

· Turkish Prime Minister Bulent ECEVIT, with a delegation including Energy Minister Cumhur ERSUMER, Foreign Minister Ismail CEM, Intelligence hear Senkal ATASAGUN, and about 40 businessmen, arrived in Moscow today to hold bilateral talks on economic, political, and military cooperation as well as regional and international issues. ECEVIT will meet with Russian President Boris YELTSIN, Prime Minister Vladimir PUTIN, Russian State Duma speaker Gennady SELEZNYOV and Federation Council Yegor STROYEV. Moscow and Turkey are expected to sign a tax protocol related to the 1,200 kilometer Blue Stream pipeline to pump gas under the Black Sea to Turkey. The pipeline will have a capacity of 16 billion cubic meters of gas per year. Turkey currently receives only 8 billion meter per year. The Blue Stream is seen as a rival for the Trans-Caspian pipeline from Turkmenistan to Turkey. Turkey has been reluctant to endorse the Blue Stream project before the November 18th to 19th Istanbul summit of the Organizations for Security and Cooperation in Europe. The two sides will discuss the joint manufacturing of 145 attack helicopters.

The Russian and Turkish prime ministers are going to issue a joint statement condemning terrorism. It will confirm the resolve of the two countries to observe international anti-terrorism conventions and to exert efforts to consolidate international law for combating terrorism. ECEVIT plans to express his nation's concern over support from some Russian political circles for the Kurdish Worker's Party (PKK). Adbullah OCALAN, the PKK leader, took refuge in Russia, before he was seized in Syria. The Turkish Prime Minister will urge Russia to ban PKK members for its territory as part of an anti-terrorism agreement.

Today's News Highlights

Russia

Crime Continues To Rise

IFC Invests In Silver Mine

European Republics

Rus-Belarus Parliament Meets

Landsbergis Visits Washington

New Lith. Prime Minister

South Caucasus & Central Asia

Georgia Hopes To Join NATO

New Armenian Prime Minister

Iran-Kyrgyz Boost Relations

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November 4, 1999

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charge of this campaign. It is now believed that 500 people per hour are passing into Ingushetia, where up to 200,000 refugees are being temporarily housed. More refugees are expected as Russian continues to bomb terrorists. Ingush President Ruslan AUSHEV said the refugee situation on the administrative border with Chechnya was "critical." AUSHEV met Russian Deputy Prosecutor General Mikhail KATYSHEV in Magas, Nazran, on Wednesday to discuss the issue. The situation remains complex as there is a shortage of food, warm clothes, medications and fuel. UN mission chief Nicholas COUSSIDIS, who has been assessing humanitarian needs, said it is vital that the borders be opened.

New York-based Human Rights Watch group has accused both Russia and the Islamic rebels of war crimes, since Russia launched its military offensive against terrorists in Chechnya. It said the rocket attack on the central market in Grozny, "may have been a serious violation of the laws of war," for using, "indiscriminate and disproportionate force," and called for a full and transparent investigation. It accused the rebels of using the civilian population to shield military objects, particularly in the case of suggestions that warlord Shamil BASAYEV set up his headquarters in the market.

Economy

Ruble = 26.26/$1.00 (NY rate)

Ruble = 26.24/$1.00 (CB rate)

Ruble = 27.53/1 euro (CB rate)

Crime Continues To Rise

· During the period from January to September, reported crimes in Russia have increased by 21 percent, compared to the same period in 1998. Deputy Interior Minister Igor ZUBOV said that the number of registered thefts increased by 35 percent, abductions by 21 percent, robbery by 23 percent, and fraud by 14 percent. Violent crimes continue to be on the rise in many regions, with the national rate of premeditated murder increasing by 5.7 percent and assault and battery by 3.2 percent. Many criminologist suggest the that Russia's financial crisis in August, 1998 is the cause for the recent rise in crime.

Russia Considers Export Tariff Hike

· The Russian government, specifically the Economics and Finance Ministries, is drawing up a list of

export duties to be raised to finance spending in the 2000 budget. Economics Minister Andrei SHAPOVALYANTS said that it is considering raising the raw material export duties and has already completed examining a rise in oil export tariffs. SHAPOVALYANTS said the government has to take the unpopular measure as the situation in the external market favors exports at present, which jeopardize the domestic market's supply. "This is a matter of survival of the national economy and supply of the domestic market." Finance Minister Mikhail KASYANOV noted that the price of oil has doubled this year as well as the price on metals and chemicals. He said, "These are being considered as a source of income. Now we're preparing a list of which products might face new tariffs." Russia is one of the world's biggest producer of timber, natural gas, oil, nickel, steel, aluminum, and other commodities.

IFC Invests In Russian Silver Mine

· The International Finance Corporation (IFC), a business subsidiary of the World Bank, has announced plans to invest $63.4 million in a project to reopen a defunct silver mine in the eastern region of Magadan. The investment will bring jobs, prospects of new entrepreneurship, and high environmental standards along with exploitation of one of the biggest primary silver deposits in the world. The financing will be provided to Serebro Dukat, which purchased the mining rights in 1997 after the mine was shut down for lack of funds and poor facilities. The project, estimated at $105 million, is to extract an annual 500 tons of silver and one ton of gold during 15 years. According to an IFC press release, the re-opening of the mine will generate approximately $300 million in tax revenues and transfer new technology and management skills to Russia's mining sector. Dukat will be 90 percent owned by Pan American Silver Corp. of Canada and 10 percent by IFC. Pan American owns, operates, and develops silver mines in Mexico and South America, and conducts exploration worldwide. Dukat is Pan American's first venture in Russia. IFC will become a shareholder in both Dukat and Pan American.

Business

Gazprom Tender Date Still Unknown

· Russian gas monopoly Gazprom's deputy board chairman and former Central Bank chief Sergei DUBININ said that the Russian Ministry of State

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Property is considering selling 3.7 percent of state-owned shares in Gazprom through an investment tender. He said the exact date of the tender has yet to be determined. The stock market is low at the moment and this will most certainly, "influence the date of bidding," DUBININ pointed out.

Rosvooruzheniye To Export $2.7B Of Weapons

· Rosvooruzheniye, Russia's state-owned weapons trader, plans to export some $2.7 billion of weapons in 1999, while the value of its orders may reach $10.5 billion. Earlier, the company planned to collect $8 billion of orders, Rosvooruzheniye's chief marketing adviser Alexander KOTELKIN said. Russia may receive more than $3 billion from arms sales this year, through the efforts of Rosvooruzheniye, Promexport, the military and industrial complex MAPO, the Antei concern and the Tula-based instrument design bureau, he said. KOTELKIN declined to name contracts which Rosvooruzheniye is planning to sign in the near future. However, he emphasized that Russia may, "have pleasant surprises in this field until the end of the year." Rosvooruzheniye's general director Aleksei OGAREV appointed KOTELKIN as his adviser. KOTELKIN's main responsibility will be to ensure the growth of Russian weapons exports.

begin his two-day official visit. He is scheduled to meet high ranking officials in the US CLINTON Administration and leaders of Congress. According to a Lithuanian Embassy press release, LANDSBERGIS will meet with Speaker of the House of Representatives Dennis HASTERT, Deputy Secretary of State Strobe TALBOTT, Undersecretary of Defense Walter SLOCOMBE, Senator Richard LUGAR, Congressman Tom LANTOS, and others on Capital Hill. On Friday, he will accept the first Truman-Reagan Freedom Award.

Lithuanian Prime Minister Approved

· The Lithuanian parliament Wednesday approved President Valdas ADAMKUS' nomination of its first deputy chairman Andrius KUBILIUS as the new Prime Minister. KUBILIUS, a physicist and a member of the ruling body of the Conservative Party, replaces Rolandas PAKSAS who resigned over the Mazheikiu Nafta oil refinery sale to Williams International. ADAMKUS is expected to issue a decree by the constitution, giving KUBILIUS 15 days to form a new cabinet, the 10th since regaining independence. The new Prime Minister said he will take immediate steps to form a new cabinet, adopt a government program, and resolve urgent problems. He said, "The main task for me as prime minister is to immediately stabilize financial markets...We need to implement major reforms in heavily monopolized branches of the economy, such as the energy sector, and to pay major attention to integration to the European Union and NATO." Analysts believe that many of the prior ministers will be re-appointed to the cabinet. KUBILIUS will have to appoint new finance and economic ministers, as both resigned two weeks ago in protest to the refinery sale. He said he already has a choice of several members of parliament and other people for the position of the economic minister.

South Caucasus & Central Asia

Georgia Plans To Join NATO

· Georgian ambassador to Russia Malkhaz KAKABADZE confirmed in a live broadcast that Georgia intends to join NATO after making necessary reforms. Georgian President Eduard SHEVARDNADZE last month said that if he wins the presidential elections in April, 2000, Georgia will enter NATO in 2005. KAKABADZE reminded Rus

European Republics

Rus-Belarus Parliamentary Assembly

· The thirteenth extraordinary session of the Parliamentary Assembly of the Russia-Belarus Union is meeting in the Russian State Duma today. The meeting will be devoted to accelerate the integration processes between the two countries and to matters linked with the nationwide discussion of the draft treaty on the foundation of a United Russia-Belarus State. The deliberations are expected to be chaired by Duma Speaker Gennady SELEZNYOV, who is concurrently Speaker of the Belarus-Russia Parliamentary Assembly. Participants will discuss was to boost the powers of the existing parliamentary bodies in the effort to form a united state and to enhance their role in making decisions at the level of leading governing bodies of the Belarus-Russia Union.

Lithuanian Speaker Begins US Tour

· Chairman of the Lithuanian parliament, Vytautas LANDSBERGIS, arrived in Washington DC today to

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sian listeners that Georgia is an independent state and has a sovereign right to enter any organization of its choosing. He said Georgia's relations with NATO are based on the agreement between NATO and Georgia in the framework of the Partnership for Peace Program. KAKABADZE said Georgia's wish to enter NATO is explained by the fact that Tbilisi is not satisfied with the security system with Russia's participation and does not take part in the collective security treaty of the Commonwealth of Independent States (CIS). SHEVARDNADZE at a Monday press conference said that he believes Russia is not planning on spreading its anti-terrorist miliary actions from Chechnya to Georgia and Azerbaijan. Commenting on the statement of the representative of the USA in NATO Alexander VERBSHOW that NATO would provide assistant to Georgia and Azerbaijan in case of involvement of those countries in the North Caucasus military actions, Georgian president said that such development of events is impossible. "I am sure that the aggression against sovereign countries will not be left without attention by NATO and the whole world community," SHEVARDNADZE said. Meanwhile, former Russian prime minister Sergei STEPASHIN said that, "NATO and Georgia should seriously think before making such a step," in joining the alliance. He said the accession of Georgia to NATO "will destabilize situation not only in Georgia, but in the whole Caucasus region".

Meanwhile, preparations for the multi-national conference for military exercises of NATO have started in Tbilisi, with a group of 12 NATO officers arriving to help organize. Up to 250 military specialists are expected to participate in the conference on November 8th to 12th. The multinational exercises are to be held in May 2000 in Germany. Soldiers from up to 40 countries will participate in the exercises.

Sarkisyan Replaced By Younger Brother

· Aram SARKISYAN, the younger brother of assassinated Armenian Prime Minister Vazgen SARKISYAN, has been appointed the new premier-minister of Armenia. President Robert KOCHARYAN

on Wednesday chose him to replace his older brother upon the recommendation of the Unity Party. The Unity Party said that Aram SARKISYAN will provide continuity for Armenia in turbulent times. Prior to his appointment, Aram SARKISYAN was the director of Ararat Cement Factory and has no political experience. Last year, Sarkisyan became director of the closed state joint stock company Ararattsement. He is a member of the Republican Party of Armenia and the union of volunteer militiamen Yevkrapa, an organization of war veterans who fought on the Armenian border and in Nagorno- Karabakh.

Iran-Kyrgyz To Boost Regional Cooperation

· Iranian Foreign Minister Kamal KHARRAZI and his visiting Kyrgyz counterpart Muratbek YIMANALIYEV agreed Monday to enhance economic ties, and improve bilateral and regional cooperation in line with their own national interests. The two leaders stressed that there is sufficient ground for cooperation between the two countries and called for more consultations to explore the potential for mutual economic cooperation. KHARRAZI also called for cooperation between the two countries in fighting terrorism, drug trafficking, organized crimes and maintaining peace and security in the region. Iran has focused on promoting peace and security in the region, stressing that economic development depends on regional security and stability. On bilateral economic development and prospects, KHARRAZI said that their third joint economic commission would be held within days to study Iran's economic and industrial capabilities and its participation in building roads, bridges, dams, cement plants, silos, electricity installations and its contribution to food industry in Kyrgyzstan.

YIMANALIYEV said that Kyrgyzstan appreciated Iran's stand toward crisis in southern Kyrgyzstan and that the crisis was resolved thanks to the assistance of the international community including Iran. He said that the Kyrgyz nation attaches more importance to the friendly relations with Iran and is keen on developing the Tehran-Bishkek ties.

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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