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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, February 7, 2000

is Russia later adopted an appeal to parties and voters describing PUTIN as, "a politician capable of consolidating all right-minded forces in society and of raising the authority of Russian power at all levels." CHERNOMYRDIN's announcement came just one day after former prime minister Yevgeny PRIMAKOV, regarded as a main contender, withdrew from the race. Moscow Mayor Yuri LUZHKOV, an ally of PRIMAKOV in the parliamentary election, said he regretted PRIMAKOV's decision not to challenge PUTIN. The acting President's main challengers are Communist Party leader Gennady ZYUGANOV, liberal Grigory YAVLINSKY and ultra-nationalist Vladimir ZHIRINOVSKY. The most recent poll shows PUTIN ahead with 55 percent, followed by ZYUGANOV with 20 percent. PUTIN's popularity has grown because of his tough stance on the war, his ability to face down western criticism, and his raising of teachers' and doctors' salary as well as raising pensions.

New Military Doctrine Approved

· The Russian Security Council on Friday approved a draft new military doctrine, replacing a doctrine drawn up in 1993. The new doctrine incorporates changes in policy regarding North Caucasus regions and NATO. At Security Council Secretary Sergei IVANOV's suggestion, the meeting's participants, representing all of the key organizations and departments, were given two months to finalize the draft military doctrine, after which the president will sign a decree introducing the new doctrine. Colonel General Valery

Russian Federation


Putin Declares Chechen Campaign Complete

· Russian acting President Vladimir PUTIN on Sunday said, "The operation to liberate Grozny has been completed." Federal troops claimed victory as they gained control of Chechnya's capital. Russia has been fighting Chechen rebels for nearly five months. He noted that Russian flags have been hoisted over Grozny's administrative buildings. Television showed troops roaming the city, reduced to a complete rubble after more than a month of fighting. Top officials noted that they were having difficulty setting up command posts because there were no buildings that were stable and secure. It is estimated that total of 93,000 army and Interior Ministry troops had been posted in Chechnya. These numbers are lower than previously reported. Approximately, 1,000 troops will be sent home and a permanent garrison of 15,000 will remain. Army commanders said the focus of their military operation has moved to the southern mountains, where rebels escaped to after fleeing Grozny. Russian troops had beaten back a group of rebels trying to reach the hills near Gekhi-Chu, a village southwest of Grozny. Federal troops swept through the village of Katyr-Yurt in Chechnya's west and found the more than 300 rebel bodies. Chechen fighters have vowed to continue their war for the next 50 years, leaving federal troops still vulnerable to their hit-and-run tactics.

Chernomyrdin Endorses Putin For President

· Former Russian prime minister Viktor CHERNOMYRDIN on Saturday, speaking at the assembly of Our Home is Russia, ruled out that he will run in the early presidential elections on March 26th and endorsed acting president Vladimir PUTIN. He entered the race when his party failed to generate support for the parliamentary election in December. Our Home

Today's News Highlights


Blue Stream Construction Starts

Transneft Outlines Plans

European Republics

LUKoil-Mazheikiu Sign Agrmt.

Split Parliament Meets

South Caucasus & Central Asia

Supsa Terminal 1999 Results

Azerbaijan Joins ADB

Kyrgyz Inflation Reaches 39.9

Tajik Predicts Aluminum Output




February 7, 2000

Intercon's Daily

MANILOV, the first deputy chief of the Russian Armed Forces General Staff said last month that the new doctrine "clearly and distinctly" viewed nuclear armaments as a deterrent. "Russia has the right to use nuclear armaments exclusively in case of an aggression against itself and its allies and only when it is impossible to prevent by conventional means the liquidation of Russia as a subject of international relations, a sovereign entity in these relations," MANILOV said. PUTIN pointed out that the new doctrine was prompted in part by NATO's new concept allowing it to make military decisions without approval of the UN Security Council. Beside NATO and the US, Russia is also worried about the threat of Islamic militants, who are battling Russian troops in rebel Chechnya and are feuding with the governments of several former Soviet republics in Central Asia, PUTIN said.


Ruble = 28.77/$1.00 (NY rate)

Russia To Repay IMF $200 Million

· The Russian Finance Ministry today announced that on Tuesday it plans to repay $200 million of debt owed to the International Monetary Fund (IMF). Russia has already repaid $435 million to the Fund in January. Russia repaid $3.61 billion to the Fund in 1999, but remains the IMF's largest single borrower. The government has pledged to meet obligations on all debts incurred after the collapse of the Soviet Union in 1991, which is mostly IMF loans and Eurobonds, but is seeking to reschedule more than $100 billion of Soviet-era debt. Russia is scheduled to repay $3 billion in foreign debts in just the first quarter of 2000.

Despite Russia's record in repaying its loans and the better than expected performance of its economy, the IMF said Russia won't receive any new loans until it has made sufficient progress on "structural reforms." The IMF mission, after holding talks in Moscow, has urged the government to enact new bankruptcy legislation, and force the gas, electricity, and railway industries to increase the cash component of their revenues to reduce the level of barter in the economy. A Fund statement said, "Progress on the structural reform front has been limited. This remains a cause for concern since positive macro-economic performance cannot be sustained without further

significant structural reforms." Russia has been waiting since September for a $640 million installment of a $4.5 billion loan. Earlier, IMF officials said the payment was delayed because of political pressure by the US and other member nations over Russia's military action in Chechnya. Before the war started, the installment was held due to allegations that Russian businesses had laundered money through the Bank of New York. Russia will resume talks on the loan in April after early presidential elections in March, Alexei MOZHIN, Russia's delegate to the IMF said.


Ceremony Marks Blue Steam Project's Start

· On Thursday representatives of the Russian State Duma, regional officials, Turkish pipeline company Botas, and various diplomat gathered in Krasnodar to attend a ceremony marking the official start of construction on the Blue Stream pipeline. Two sections of pipe labeled Russia and Turkey were welded together. No other pipes, however, were on site. Head of Russian gas monopoly Gazprom Rem VYAHIREV said, "Let the sparks from this welding be transformed as soon as possible into flames coming from gas stoves in Turkish homes. We hope the first gas will reach the Turkish coast in a year's time." A total of 360 billion cubic meters of gas will be delivered under the Black Sea through the pipeline by 2025. The $2.5 billion, 1,200 kilometer long pipeline, will be built jointly by Gazprom and Italian ENI. Gas flowing through the pipes to Turkey will originate in the Zapolyarnoe gas field in western Siberia. The Russian government's current affairs commission is scheduled to meet on Tuesday to review the Blue Stream project. First Deputy Prime Minister Mikhail KASYANOV will chair the meeting.

Transneft Outlines Plans For Russia

· State-controlled oil transportation monopoly Transneft's president Semyon VAINSHTOK outlined plans on new projects in Russia in an interview with Vedomosti. He said that a tender for constructions on the Baltic Oil Pipeline System to increase crude exports from Russia's far north and Western Siberia to the Baltic Sea has been held. Regarding the Baku-Novorossiisk pipeline, VAINSHTOK said, "We have laid 145 kilometers [of the bypass pipeline]. We have two-thirds [left] to accomplish...We will spend the money [on the construction] and then

When you need to know it as it happens




February 7, 2000

Intercon's Daily

charge the companies, which will use the pipeline. The costs of it will be included in the [transport] tariff. He noted that the Transneft has signed an agreement with Russia's second largest oil producer Yukos for the construction of a pipeline from Russia to China. He also added, "I do not dismiss the possibility that Transneft will become an oil producing company in the nearest future."

deal is slated to be completed by April and requires $220 million in investment over five years. The Estonian government has already held talks with Suncor, Canada's fourth largest integrated oil company, about establishing an oil shale mining operation in the Baltic nation.

Split Parliament To Hold Negotiations

· The leftist minority and the rebel center-right-wing majority parliament will meet today to discuss a solution to the parliamentary crisis. The leftist assembly said it was not prepared to back down and cede the legislature building to center-right opponents. The meeting was announced by Natalya VITRENKO, head of the ultra-left Progressive Socialist party, who said that rebel parliament will come to the leftist assembly, which has remained in the parliament building. Police units have sealed off the parliament, prevented the press from entering, and have cut-off radio broadcasts of sessions. The leftists say they will accept no compromise and insist that the rival faction should unconditionally return to the parliament. "We will press ahead with our tactics. We will hold our sessions and wait for the decision of the Constitutional Court," VITRENKO said. The majority parliament has elected its own speaker and held sessions in the Exhibition Hall. The parliament split on January 20th when nearly 250 centrist and right-wing deputies walked out of the 450-seat legislature in protest at leftist speaker Alexander TKACHENKO's refusal to put to the vote a motion calling for his dismissal. The rebel parliament, backed by President Leonid KUCHMA, has pledged to adopt legislation to boost reforms and improve relations with foreign creditors.

South Caucasus & Central Asia

Georgia Fails To Meet Tax Collection Targets

· Georgian President Eduard SHEVARDNADZE in a national radio address today expressed his dissatisfaction with the newly formed Tax and Revenues Ministry. He specifically pointed out the failure of the Customs Service to collect duties. "Despite the repeated demands, the Customs service did not succeed in the work and the Georgian budget lost 10 million lari just in January." The President told the Tax and Revenues Minister Michael MACHAVARIANI to work harder to change the situations with the collection of funds for the state budget. He hopes that

European Republics

LUKoil-Mazheikiu Sing Oil Contract

· LUKoil Baltija, a unit of Russian LUKoil, on Friday signed a one year deal with Lithuania's Mazheikiu Nafta for 360,000 tons of oil products. LUKoil Baltija spokesman Aleksandras JUOZAPAITIS told Reuters the products will be used at the Russian firm's local gas stations, which totals 60. Last year US-based Williams took a 33 percent stake and operational control from the Lithuanian government, a move which angered LUKoil, which had also been seeking a stake in Mazheikiu. The Lithuanian refinery suffered three costly shutdowns in 1999, due to cuts by LUKoil during negotiations for a long-term supply deal. JUOZAPAITIS said, "For now negotiations on a long term agreement have been suspended, but we hope for progress when Williams President John BUMGARNER and LUKoil officials meet in early March." The state has retained a 59 percent stake in Mazheikiu, but is looking to sell about 10 percent to one of its suppliers to ensure a steady flow of oil.

Estonia-US Sign Oil Shale Agmt.

· Estonia and the US on Friday signed a three-year agreement which could bring in up to $1 million in investments to explore technically and economically feasible ways to process oil shale in the Baltic state. Solutions to the environmental impact of oil shale processing will also be investigated under the agreement signed in Tallinn by US Energy Secretary Bill RICHARDSON and Estonian Economy Minister Mihkel PARNOJA. RICHARDSON said, "Estonia is far more advanced with using oil shale and we [the US] need that expertise. On the basis of this exchange we can...establish a clean and profitable enterprise in the United States." NRG is in the final stages of taking a 49 percent stake in the Narva Power Plants, two oil shale-fired power plants that provide about 95 percent of Estonia's energy. The

When you need to know it as it happens




February 7, 2000

Intercon's Daily

February will bring better results. SHEVARDNADZE said, "The Interior Ministry and the State Security Ministry will help the Minister of Tax Revenues if necessary, but the situation with the revenues to the budget must be improved in the next two months."

In addition, Georgia's Foreign Minister Irakli MENAGARISHVILI voiced his concern that Georgia is on the verge of losing its right to vote in the UN because of the membership fee debts. He expressed hope that the ministry of finance of Georgia would find the finances for repaying the $6 million debt to the UN. Other debtors include Ukraine, Kyrgyzstan, Tajikistan, Turkmenistan, Uzbekistan, Moldova, Afghanistan, Bosnia and Herzegovina, Yugoslavia and Iraq. UN Secretary-General Kofi ANNAN suggested at least a partial payment of the indebtedness and noted that a two-year debt denied the country the right to vote at the General Assembly in accordance with the UN Charter. If a minimum payment is submitted against the current budget, the debtor preserves the voting right. Ukraine has already lost the right to vote because of its debts.

Supsa Terminal Results For 1999

· Vice-president of Georgian International Oil Corporation Irakli KELBAKIANI told Prime News Agency that 32 tankers have transported over 3.2 million tons of crude Caspian oil from Supsa terminal in 1999. He said 1.42 million tons from the transported oil is owned by BP Amoco. US Exxon has transported 560,000 tons, Turkish Petroleum has transported over 360,000 tons, Unocal over 330,000 tons, LUKoil approximately 300,000 tons, Statoil over 240,000 tons, Itochu has transported up to 180,000 tons, Total International Ltd. has transported up to 140,000 tons, and Delta over 50,000 tons of oil. According to KELBAKIANI, revenues from transit of Caspian oil by Baku-Supsa pipeline in 1999 totaled approximately $ 4.5 million. The oil terminal was opened last April.

Azerbaijan Becomes 58th Member of ADB

· Azerbaijan has become the 58th member of the Asian Development Bank (ADB), the Manila-based

bank said. The bank will undertake its first operational mission to the country at the end of February to prepare an economic report and interim operational strategy for the country that will help determine such issues as Azerbaijan's borrowing terms, its eligibility for congressional financing and the share of project costs to be borne by the ADB. Azerbaijan has a population of 7.9 million and its annual per-capita income of $518 puts it among the lowest-income countries in the Caucasus region. The country has massive oil and gas reserves and tapping them is crucial to its long-term development, the ADB said. Major challenges include development of a viable financial sector, improvement of decision-making in the public sector to use hydrocarbon income to raise general living standards, and for development of non-oil sectors.

Kyrgyz Inflation Rockets To 39.9 Percent

· Inflation in Kyrgyzstan has soared to a five-year high of 39.9 percent in 1999. This is a rise from 17 percent in 1998. Last year, prices rose 45.5 percent for foodstuffs, 30 percent for non-food goods and 35.9 percent for services, according to the National Statistics Committee of Kyrgyzstan. Inflation in Kyrgyzstan was 13 percent in 1997, 35 percent in 1996, 32 percent in 1995 and 52 percent in 1994.

Tajik Predicts 2000 Aluminium Output

· Tajikistan's sole aluminium producer expects to produce 290,000 to 300,000 tons of refined metal in 2000, an increase from 230,000 in 1999. One plant official said the increase will be possible with the help of foreign capital. The government is already holding talks with potential investors. Tajikistan relies heavily on aluminium exports to prop up an economy left in ruins by the 1992 to 1997 civil conflict. It exported 224,300 tons last year worth $308.1 million, or 74 percent of export earnings outside the Commonwealth of Independent States. The plant processes alumina from Kazakhstan, Russia, and Ukraine. Nameplate capacity is 517,000 tons, but high transport costs and lack of cash means it has been operating well below capacity since 1991.

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

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When you need to know it as it happens