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

Tuesday, February 22, 2000

Russian Federation

Politics

CEC Registers 11 For Presidential Campaign

· The Russia's Central Election Commission (CEC) has registered 11 candidates for the March 26th presidential elections. The candidates include suspended general prosecutor Yuri SKURATOV, Communist Party leader Gennady ZYUGANOV, Yabloko party leader Grigory YAVLINSKY, Chechen businessman Umar DZHABRAILOV, Kemerovo Governor Aman TULEYEV, Samara Governor Konstantin TITOV, and Acting Russian President Vladimir PUTIN. Ella PAMFILOVA, previously a Russian State Duma deputy, is the first woman to run for the presidency. She represents the For Civil Dignity organization, which is aimed at setting a precedent for other women. DZHABRAILOV, who has denied being tied to organized crime, has refused to disclose his electoral platform, saying only that he supports private property and foreign investment and was "chosen by God to save the world...starting with my country," the Associated Press reported. Liberal Democratic Party leader Vladimir ZHIRINOVSKY was not registered by CEC because he failed to declare an apartment owned by his son. He will appeal to the courts against the ban. Each candidate had to gather the signatures of half a million supporters and provide evidence of income, property and funding.

PUTIN is leading in the opinion polls with about 58 percent of the vote. He is followed by ZYUGANOV, who is backed by 20 percent of the voters along with Aman TULEYEV and Girgory YAVLINSKY with 10 percent each. In a surprise move, the liberal Union of Right forces, which had aligned itself with PUTIN in the December's parliamentary election, has decided not to support any candidate.

St. Petersburg Ex-Mayor Sobchak Dies

· Former Mayor of St. Petersburg and reformist leader Anatoly SOBCHAK died on Sunday from a heart attack in Kaliningrad, where he was campaigning in support of acting President Vladimir PUTIN. He was elected mayor of St. Petersburg on June 12, 1991. Later that year, SOBCHAK persuaded the commander of Leningrad's military district not to join the failed coup to oust Mikhail GORBACHEV. He was a member of a group of radical democrats in the Congress of People's Deputies, which called for more rapid reforms. Following the fall of the Soviet Union, SOBCHAK was known for his democratic values and for a time was considered to be a possible presidential candidate. In 1997, however, SOBCHAK fled Russia after prosecutors started pursuing him on charges of corruption. PUTIN, as head of the Federal Security Services, was instrumental in clearing SOBCHAK of those charges, enabling SOBCHAK to return to Russia last July. PUTIN was St. Petersburg's deputy mayor during SOBCHAK's mayoral stint. The two worked closely together for six years, pushing forward privatization and land reform. SOBCHAK will be buried at the Nikolskoye cemetery of Alexander Nevsk Laura on February 24th. PUTIN will come to St. Petersburg to bid a farewell to his former boss, professor, and advisor. "Anatoly SOBCHAK will go down in history as a shining example among the a generation of politicians who created a new Russian state and its constitution," PUTIN said.

Raduyev Reportedly Killed

· The Interfax news agency on Friday reported

Today's News Highlights

Russia

1999 GDP Figures

Alfa Bank Seeks Funds

Bykov To Be Extradited

European Republics

Belarus Prime Minister Sacked

Ukraine To Float Gryvnia

South Caucasus & Central Asia

Georgia Receives US Aid

Trans-Caspian Plan Hits Snag

Gazprom-Turkmen Discuss Gas

Politics-Economics-Business

Page

Tuesday

February 22, 2000

Intercon's Daily

that Salman RADUYEV, one of the leading Chechen rebel field commanders, was killed in a special operation by Russian elite units in the Nozhai-Yurt administrative district of Chechnya. The Russian Defense Ministry said, "This information is currently being clarified and verified." However, the Defense Ministry has declined to officially verify RADUYEV's death. The Russian Federal Security Service's (FSB) department on Chechnya said that it is examining information about RADUYEV's death. Salman RADUYEV, the son-in-law of first Chechen president Dzhokhar DUDAYEV, became well known in January 1996, when his squad raided Dagestan and held the village of Pervomaiskoye for several days. According to the FSB, RADUYEV was injured in Chechnya when the federal forces fired on his squad.

Pro-Moscow Chechens To Free Babitsky

· Bislan GANTAMIROV, a pro-Moscow Chechen leader said that his militia will rescue Radio Free Liberty reporter Andrei BABITSKY from a gang of Chechen rebels. He said that BABITSKY was being held by rebels in a southern Chechen village. He said, "My militia will be honored to free, to win Babitsky from the fighters." GANTAMIROV said he would then hand BABITSKY over to Russian troops, which originally handed the reported over to Chechen rebels in exchange for five Russian soldiers. He added that BABITSKY was being held in Duba-Yurt, a village at the mouth of a gorge in southern Chechnya, although this has not been verified. GANTAMIROV noted that his gang had not been involved in BABITSKY's detention. He said, "My militia did not arrest BABITSKY. That's stupid. I have good relations with journalists, I give them advice and offer cooperation in their professional work."

US-funded Radio Liberty said on Friday it had received no ransom demand for BABITSKY. The statement contradicts the Russian tabloid Komsomolskaya Pravda, which quoted Russian security service sources as saying BABITSKY was being held by Chechens seeking ransom from the radio station. "We have received no ransom demand...none of these statements are credible to us. We want to see him alive and well," Sonia WINTER said. "He was arrested by Russian authorities, they were responsible for his safety, then played risky games. Whether they tortured him or handed him over to be imprisoned and tortured, we don't know."

Economy

Ruble = 28.74/$1.00 (NY rate)

Ruble = 28.86/$1.00 (CB rate)

Ruble = 29.07/1 euro (CB rate)

1999 Budget Surplus And GDP Figures

· Russia's primary budget surplus, excluding its debt servicing, totaled 2.2 percent of gross domestic product (GDP) in 1999. The GDP total is above a predicted 2 percent. First Deputy Prime Minister Mikhail KASYANOV on Monday said preliminary data showed 1999 budget revenues were 611.7 billion rubles or 13.7 percent of GDP and spending was 674 billion rubles or 15 percent of GDP, leaving a budget deficit of 62.3 billion rubles. KASYANOV did not release information on the ruble terms of the primary surplus, one of the key indicators of a country's ability to deal with its debt. Revenues budgeted for 1999 were 473.67 billion rubles or 11.84 percent of GDP, spending was expected at 575.04 billion rubles or 14.38 percent of GDP, while the deficit was seen at 101.37 billion rubles or 2.53 percent of GDP. The economy grew more than expected last year and inflation was also faster than forecast, causing GDP to rise 11.6 percent in ruble terms to 4.476 trillion compared to the level expected in the budget, Reuters reported. Real GDP growth was 3.2 percent, according to preliminary figures from the State Statistics Committee, which could release lower final results, KASYANOV said.

Business

Alfa Bank Seeks Funds For Expansion

· Alfa-Bank, one of the Russia's largest privately owned bank, is seeking international investors to buy into a new Eurobond to be issued in the first half of 2001. The bank hopes to raise $200 million to help finance expansion and increase corporate lending. The bank plans to increase its branch network from 39 to 79. It also plans to expand business in Ukraine. Alfa Bank recently bought a Ukrainian commercial bank with one branch called Kiev Investment Bank. It also plans to introduce Russian stock trading on the Internet in about three months. Alfa Bank, part of Alfa Group, a Russian conglomerate with interests in oil, banking, and the metals industry founded by Mikhail FRIEDMAN, said it would borrow part of the money through a loan from a group of banks and may later sell Eurobonds. Alfa Bank president Pytor AVEN is

When you need to know it as it happens

Politics-Economics-Business

Page

Tuesday

February 22, 2000

Intercon's Daily

optimistic that, following the successful negotiations with the London Club over the $32 billion Soviet debt and the end of the presidential election in March, investors will re-gain confidence in Russian companies. AVEN pointed out that the bank does not need the new funds to pay off existing obligations due this Summer. At the end of 1999, Alfa Bank had $200 million in capital and $1 billion in assets, the Financial Times reported. "A foreign partner will help our reputation, and provide capital and technology," chief executive officer of Alfa Bank Alexander KNASTER said.

Bykov To Be Extradited To Russia

· A Hungarian court has decided to extradite the director-general of Krasnoyarsk Aluminum Plant, Anatoli BYKOV. The date of his extradition has not been made public. He is wanted on charges of money laundering by Russia. BYKOV owns 28 percent of the shares in the company. Russia's sixth largest oil company, Sibneft last week purchased several aluminum smelters including Krasnoyarsk Aluminum Plant. On Saturday, at an Extraordinary General Meeting of the plant, shareholders voted to remove BYKOV from his post as chairman and elected a new seven-member board. A replacement for BYKOV has not yet been appointed. Shareholders voted against a new share issue, which could have raised the plant's charter capital by 52.7 percent. Krasnoyarsk Aluminum Plant spokesman Dmitry CHECHKIN pointed out that, "The composition of the shareholders has significantly changed." However, he noted that holding the Extraordinary General Meeting was not related to the change of ownership. Krasnoyarsk Aluminum Plant produced 836,500 tons of primary aluminum last year, up from 1998 production of 802,000 tons.

approves his initiatives. LUKASHENKO has praised his nominee YERMOSHIN as a capable leader and good planner, but both officials and the opposition have said the new premier is unlikely to push market reforms stalled under LING.

LING's government has been criticized for falling living standards and growing discontent among the 10 million citizens, as well as for the high inflation and a poor grain harvest last year. Former prime minister Mikhail CHIGIR said, "LING's dismissal symbolizes the deadlock in the country's economic course." According to State Television, LING turned in his resignation to the President on his own accord. It also reported that, "the president thanked him for his conscientious work." LING's departure took even his own spokesman by surprise. "I learned that the prime minister had been dismissed from an evening news program on television," Ivan ZNATKEVICH said. On Monday, LUKASHENKO awarded LING with the Order of Honor.

Ukraine To Sell Odessa Refinery Stake

· The Ukrainian government plans to sell a 25 percent stake in Black Sea-based Odeskiy Naftopeperobnyi Zavod, also known as the Odessa Oil Refinery. The Odessa stake will be offered on the Ukraine Stock Exchange at the end of March. LUK-Sintez Oil Ltd., a joint venture between Lukoil-International and Sintez, a UK-registered oil trading company, already holds 51.9 percent of the refinery. Lukoil-Investholding, a subsidiary of Lukoil-International GmbH, an Austrian-based trading unit of Lukoil Holding, Russia's number one oil producer, holds a 60 percent stake in the joint venture, with the balance owned by Sintez.

Ukraine To Float Gryvnia

· The Ukrainian government and Central Bank announced Monday that the national currency, the gryvnia, will be allowed to float after years of trying to keep its value within a trading band. In a joint statement, the Cabinet and Central Bank said the move to float the gryvnia is aimed, "to assist Ukraine's integration into the world market." Ukraine has tried to keep the gryvnia within a trading band of 3.4 to 4.6 gryvnia to the dollar. According to the joint statement the move, "will keep Ukrainian goods competitive and enterprises profitable...At the same time, the Cabinet and the Central Bank will closely follow the country's economic development and the situation

European Republics

Belarus Prime Minister Sacked

· Belarus President Alexander LUKASHENKO sacked Prime Minister Sergei LING on Friday and named the head of Minsk administration, Vladimir YERMOSHIN, as acting prime minister. LUKASHENKO has asked the parliament to approve YERMOSHIN in the post. Belarus' parliament, under the control of the President, will hold a special session on March 14th to discuss YERMOSHIN's candidacy. The current loyal legislature usually

When you need to know it as it happens

Politics-Economics-Business

Page

Tuesday

February 22, 2000

Intercon's Daily

on the currency market in order to protect the monetary system, ensure the stability of the gryvnia and pursue a currency policy that will promote Ukraine's economic growth." The more liberal currency policy meets demands of international lenders who have insisted on the abolition of administrative restrictions on Ukraine's forex market and confirms a de facto policy which began last year. The move has largely been expected since it is an official acknowledgment of a policy in effect since the second half of last year, when the bank, short on reserves, let the gryvnia break the set band at that time. On Monday, the official rate was set at 5.5748 gryvnia per dollar and the government expects an average rate of 5.78 this year. The Central Bank, with reserves at just over $1 billion at the start of this year, became an active buyer of hard currency last year, purchasing more than $700 million.

South Caucasus & Central Asia

Georgia's Border Guard Receives US Aid

· Georgia's State Border Guard Department received $227, 000 in aid from the US. According to an agreement between the US and Georgia, senior adviser to the head of the US Border Guard Forces Jack GARRIMAN gave the Georgian Border Guard Department tents, sleeping-bags, warm coats, electric generators, Summer and Winter clothing and shoes. The aid is aimed for the highland border zones of Georgia in Shatili and Omalo regions.

Problems Develop With Trans-Caspian Plan

· Georgian President Eduard SHEVARDNADZE believes that some problems with the Trans-Caspian pipeline project have developed. He said, "Some problems have arisen between Azerbaijan and Turkmenistan in the implementation of accords on construction of the Trans-Caspian gas pipeline that were reached in last year's November in Istanbul." SHEVARDNADZE said the problems were mostly related to the recent discovery of a new large gas field in Azerbaijan's sector of the Caspian Sea. The Georgian President hopes that these disputes will be

solved when Azeri President Geidar ALIYEV returns from the US. The draft inter-state agreement on implementation of Istanbul accords between the governments of Georgia, Turkmenistan, Azerbaijan and Turkey will be ready for signing by end-March, with the signing scheduled for early April. SHEVARDNADZE said at Monday press-conference, negotiations on the Trans-Caspian gas-pipe continue and American companies, which have taken responsibility for the realization of the project, are very active at the negotiations. Turkmen President Saparmurat NIYAZOV for the first time last week doubted the attractiveness of the Trans-Caspian gas-pipe for Turkmenistan. Construction on the Trans-Caspian gas-pipe is planned to begin by the end of 2000.

Gazprom-Turkmenistan Discuss Gas Contract

· Russian gas monopoly Gazprom and Turkmenistan held talks in Ashgabat on the delivery of natural gas to Russia. Turkmen President Saparmurat NIYAZOV met with Gazprom chief executive Rem VYAKHIREV. The sides are likely to sign a gas purchase contract in April. Gazprom is willing to buy Turkmen gas because it's likely to face shortages totaling 40 billion cubic meters of gas in 2001. The two sides have set up working groups which will discuss a possible long-term contract for deliveries to Russia. The plan, for a 30-year gas contract with delivery of 20 billion cubic meters (bcm) of gas annually, would substantially boost Turkmen gas supplies to Gazprom from the current level of 20 bcm fixed last December. The possibility of raising gas supplies to Russia had been discussed at a summit of leaders of ex-Soviet states in Moscow last month and NIYAZOV said the main issue was price. "The only question now is price. If they can pay $36 for 1,000 cubic meters, they can learn to pay $45," he said. "I told [Russia's Acting President Vladimir] PUTIN that profits must be shared." The price of $36 per 1,000 cubic meters of gas supplied to Russia is fixed at the Turkmen-Uzbek border. The gas shipments will be handled by Itera, a US-registered gas trading company.

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

available for non-profit institutions.

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 2000, Intercon International, USA.

When you need to know it as it happens

Politics-Economics-Business

Page