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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, March 10, 2000

Russian Federation


Putin's Approval Bounces Up To 60 Percent

· According to a recent public opinion poll conducted by Public Opinion & Market Research during the week of February 26th to 27th, acting President Vladimir PUTIN's rating soared to new heights to 60 percent. If the presidential election was held on March 5th, as the poll asked citizens, he would be elected president. There would be no need for a second-round run-off election, since he is predicted to win the election with over 50 percent of the vote. The presidential election is scheduled to be held on March 26th, however, PUTIN's victory is all but certain. Russia's Public Opinion & Market Research is an independent research agency. The poll has a margin of error of 2.5 percent, and was based on 1,500 respondents.

If the presidential elections took place next Sunday [March 5th], for whom would you vote?

Vladimir Putin 60 percent

Gennady Zyuganov 23 percent

Grigory Yavlinsky 8 percent

Aman Tulyev 2 percent

Konstantin Titov 2 percent

Others 3 percent

Against all 2 percent

Zhirinovsky Want To Rule Russia For Life

· Flamboyant nationalist and the newest presidential candidate Vladimir ZHIRINOVSKY on Thursday said he would never leave the Kremlin if elected as Russia's new head of state in the March 26th presidential election. "If I get into the Kremlin, I shall never leave the place and will rule this beloved but terrible Russia for the rest of my life." ZHIRINOVSKY's candidacy was in jeopardy until the Supreme Court

overturned a decision by the Central Election Commission barring him from participating in the election due to failure to disclose his total property value. ZHIRINOVSKY said he would keep the country, "balanced on the boundary between war and peace." He called for closer ties with India and Iraq and described China, Turkey and the United States as enemies. "We have to deal with them but we should keep enemies in a state of fear," ZHIRINOVSKY added. He also said he opposed letting women take top political jobs. "A woman cannot rule Russia where every day you face questions of life and death because she should think primarily about children."

Status of Chechnya Considered

· Russian Acting President Vladimir PUTIN in an interview published in Kommersant daily said that he would consider putting Chechnya under direct presidential rule from Moscow over the next couple of years. PUTIN, the outright front-runner, has been the mastermind behind Russia's military campaign against Chechen terrorists. While, Russia claims to control the whole separatists region, rebels are still reeking havoc on federal troops in sporadic hit-and-run guerrilla-style attacks. Chechen President Aslan MASKHADOV, who has offered to hold peace negotiations, vowed to continue fighting against Russian troops primarily in Chechnya's southern mountains. Russia has branded MASKHADOV a criminal and refuses to negotiate with him. PUTIN told the newspaper government efforts would now focus on reviving Chechnya's economy and providing social

Today's News Highlights


Gazprom Expots Bypass Ukraine

TWG Aluminum Sales Legal

European Republics

Ukraine Hopes To Join WTO

Youth Group Seizes Building

South Caucasus & Central Asia

Georgia To Revamp Customs

Shell Buys Inam Oil Stake

Azeri-Turkmen Agree On Quotas

Turkmen-Russia Hold Gas Talks




March 10, 2000

Intercon's Daily

guarantees to its population to undermine separatist influence. He said that in deciding the future of the region, Russia would cooperate with influential Chechens and take into account the interests of the local population. But he vowed to suppress armed resistance. "Those still holding arms, in mountain caves¾they must be dispersed and wiped out."

Meanwhile, Russian Defense Minister Igor SERGEYEV confirmed today that 85 Russian paratroopers were killed by Chechen fighters in the Argun gorge on the night of February 29th, instead of the earlier reported 31. He said, "A great number of bandits were eliminated, but unfortunately our guys were killed too...We will be killing them until the end."


Ruble = 28.53/$1.00 (NY rate)

Ruble = 28.5/$1.00 (CB rate)

Ruble = 27.45/1 euro (CB rate)

Sep Oct Nov Dec Jan Feb Mar

Russia Makes $60.6M Payment To IMF

· The Russian Finance Ministry today has made a scheduled payment of $60.6 million to the International Monetary Fund (IMF). A ministry spokesman said further IMF payments will be made on March 17th in the amount of $57 million and on March 28th in the amount of $61 million. First Deputy Prime Minister Mikhail KASYANOV has said Russia would have to pay more than $1 billion in foreign debt in March. Russia said it paid $387.4 million to the Fund in February. The IMF said Russia repaid $362 million in January. The government has pledged to meet obligations on all foreign debts incurred after the collapse of the Soviet Union in 1991, mostly IMF

loans and Eurobonds, but it is seeking to restructure more than $100 billion of Soviet-era debt.

Russia's money supply rose by 4 billion rubles ($140.3 million) in the week ending on March 6th, according to the Central Bank said. The money supply, which includes cash currency in circulation plus required reserves, grew from 307.2 billion rubles on February 28th to 311.2 billion rubles. Russian gold and foreign currency reserves rose $300 million to $13.9 billion in the week ending March 3rd.

WB President To Visit Russia

· World Bank President James WOLFENSOHN is planning a trip to visit Russia soon. Preliminary information suggests he will visit Russia on March 11th to 13th with an expert group of economic analysts. Earlier reports said WOLFENSOHN could join the work of the Russian government's consultative committee on foreign investment.


Gazprom Exports To Bypass Ukraine

· Gazprom's chairman of the board Rem VYAKHIREV on Thursday said the gas monopoly plans to export its gas bypassing Ukraine to do away with dependence on Ukraine, debts as well as gas theft in that country. The chairman said, "We are not going to persuade anyone in Ukraine or argue any longer. It is useless to waste time and money." He noted that the company has already built a pipeline to Europe via Poland. Its capacity will make up some 14 billion cubic meters by the end of the year, and is expected to amount to 30 billion cubic meters in a year-and-a-half time. Gazprom is also working on two other pipeline projects; the shortest of which runs through Belarus, Poland and Slovakia. VYAKHIREV stressed that by avoiding Ukraine, it hopes to get payments in full.

Trans-World Stake Sales Legal

· Russian Minister of Anti-Monopoly Policy Ilya YUZHANOV said the sale by Trans-World Group of 70 percent of Russia's aluminum producing assets to individual shareholders of Sibneft, Russia's sixth-largest oil producer, is legal. YUZHANOV reported the ministry's findings to acting President Vladimir PUTIN. The ministry said there was no proof that the aluminum company stakes belong to a single owner. "The deals which took place in February and March

When you need to know it as it happens




March 10, 2000

Intercon's Daily

did not formally breach the anti-monopoly legislation, as an investigation has shown that in each case stakes of less than 20 percent have been bought." The ministry's probe of the transactions was instigated by Sibirsky Aluminiyum, Russia's third-largest aluminum producer. Trans-World Group, an international metals trading company, and its former partner Lev CHERNOI, a businessman with vast industrial interests across the former Soviet Union, say they've carried out the sale of all their stakes in Russia's aluminum industry and that only some paperwork on the transactions needs to be finished soon. The sales included Russia's two biggest aluminum plants, Bratsk and Krasnoyarsk. They also bought a minority interest in Krasnoyarsk Hydropower Station and nearly half of Russia's major alumina producer, Achinsk Alumina Plant. In addition, Russia's fifth largest aluminum plant, Novokuznetsk, said it sold a controlling interest in Novokuznetsk to LogoVaz, a car dealership founded by business tycoon Boris BEREZOVSKY. YUZHANOV said he knew the buyers and sellers of the stakes, but did not name them.

Court Halts Promostroybank's Bankruptcy Case

· Kommersant Daily reported that a Russian federal court overruled an earlier court decision to declare Promostroybank bankrupt. Three weeks ago, Acting President Vladimir PUTIN asked the government to review the possibility of halting Promostroybank's bankruptcy and reorganizing it with the help of a state agency. The bank will also have its Central Bank operating license returned. Many of Russia's largest banks were closed down after the government defaulted on $40 billion in Treasury debt in 1998.

Vneshtorgbank Reports $255M Profit

· Russia's state foreign trade bank owned by the central bank ,Vneshtorgbank, has reported a profit of $255 million last year, after a loss of $1.5 billion in 1998, according to Russian daily The Moscow Times. Bank Chairman Yuri PONOMARYOV also said it paid $770 million in foreign debt in 1999, including $450 million in forward contracts, promises to deliver dollars for rubles at a certain exchange rate at a given future date, $120 million in syndicated loans, and $200 million in dollar-denominated bonds. The bank last week approved a plan to streamline its operations and said it aims to increase assets from the

current 90 billion rubles ($3.2 billion) to 150 billion rubles. Vneshtorgbank provides financing and services to Russian exporters and importers.

Phone Cables Laid Along Pipeline?

· Russia's gas monopoly Gazprom and Eni, Europe's fourth-largest oil company are considering laying telephone cables under the Black Sea as part of its Blue Stream gas pipeline project, which will link Russia and Turkey. Rome-based Eni said it formed joint-ventures with Gazprom, and Gaztelecom, a Russian telecom company, to study proposals for fiber optic cable networks, including one linking Berlin and Helsinki. Other companies are using similar infrastructure to build networks. Energis Plc has spent 600 million pounds ($951 million) stringing cable from the National Grid electricity poles and through London's underground subway network, while Enron Corporation has said it is building a telecommunications network.

European Republics

Ukraine Hopes For Breakthrough In WTO Talks

· Ukraine Foreign Minister Boris TARASYUK on Thursday said he hoped to successfully end negotiations to join the Trade Organization (WTO) by the end of the year. Ukraine began the process to join the trade organization in 1993 with talks on going since 1995. He said, "We hope that this year will be marked with a breakthrough in this process of accession to WTO. I think that hopefully this year will be the last one in this process." But trade experts believe no breakthrough is in sight and difficult issues still remain due to the slow pace of market and trade reforms in Ukraine. The last negotiations were held in June, 1998, and no new round was scheduled in the near future.

Young Radicals Seize Communist Party HQ

· Eleven student protesters from the Independent Ukraine Youth Group seized the Ukrainian Communist Party headquarters in downtown Kiev shortly after midday Thursday demanding a ban on the Communist Party and an end to cooperation with Russian acting President Vladimir PUTIN. Other demands included a purge of former Communists occupying state posts, and called on Ukraine to leave the Commonwealth of Independent States (CIS). The group agreed to surrender after being

When you need to know it as it happens



Friday Intercon's Daily March 10, 2000

allowed to speak with the Ukraine's Prime Minister Viktor YUSHCHENKO and examine the government's program for 2000. The 13 hour stand-off ended early this morning, once government officials and lawmakers agreed to consider their political program. Nationalists in Ukraine have long opposed close ties to Russia and accuse the Communist Party of being a Russian agent, which has an imperialistic motives. The youths spread gasoline inside the two-story building to prevent police from entering. They also placed an old car next to the entrance, claiming that it contained explosives. This was enough to send Communists members fleeing from the building. Over a loudspeaker the group's leader, Sergei, said, "We're not terrorists. We're not against democratic interests, but we demand to implement our requirements." After the teenagers surrendered, one member said, "We hope that our trial will turn into a trial of Ukraine's Communist Party."

Latvia's Consumer Prices Rise

· Latvia's Central Statistical Bureau reported Thursday that consumer prices rose 0.5 percent in February from January, led by communications prices, and were 3.4 percent higher than in February 1999. In January, consumer prices rose 1.1 percent from the previous month and were 3.1 percent higher than a year earlier. Communications prices rose in February, climbing 3.1 percent from January. Transportation prices rose 2.1 percent, while prices for alcohol and tobacco rose 0.7 percent. Prices for clothing and footwear fell the furthest in February, dropping 1.2 percent. Prices for recreation and culture fell 0.3 percent.

South Caucasus & Central Asia

Georgia Works To Boost Customs' Revenues

· Georgia is aiming to plug-up a huge loop hole through which millions in revenues for the federal budget are lost each year. The Georgian government has planned to take active measures to prevent customs fraud, smuggling, bribes and other graft. It has called for reforms to the Customs Ministry which include an increase in wages for customs and tax official to between 300 lari and 2,000 lari, computerization of the ministry, and stricter authorization policies. The training of the

department staff and its computerization will be financed by USAID. According to Transport Minister Merab ADEISHVILI, Georgia intends to lower the tariffs for transportation of cargoes through its territory in framework of the Eurasian transport corridor TRACECA project by 20 percent to 25 percent. The government has hired British company ITS in August, 1999, to monitor customs and boost revenues. ITS specializes in pre-shipment inspection, which determines the value of cargo prior to coming into port so that importers don't under or over invoice the estimated cost. ITS, however, has failed to reach agreement in South Ossetia and Adjaria has refused to let it operate for over a year now. Georgian Tax Revenues Minister Michael MACHAVARIANI has been negotiating with the administration of the president of South Ossetia on transit and joint prevention of smuggling, "although no precise decisions have been made yet," Prime News Agency reported.

South Ossetia and the Batumi port on the Black Sea provides a large loophole for smugglers. An ITS office was opened in Adjaria in early Fall last year, but did not function, due to certain problems. Chairman of the parliamentary committee for taxes and revenues Zurab NOGAIDELI told Prime News Agency that ITS must be permitted to operate in Adjaria in the next few days. He said that ITS management is holding negotiations with Adjarian Chairman Aslan ABASHIDZE. Adjaria has also withheld other taxes from the federal budget. Comment: This appears to be part of a strategy to remove Georgian President Eduard SHEVARDNADZE from office not by political means. Instead, the opposition intends to cause the government to fail to uphold its budgetary goals through economic sabotage.

FSU Oil Exports Near Record Highs

· Oil exports from the former Soviet Union (FSU) swelled to near record highs in February, spurred by high international prices, according to the International Energy Agency (IEA) monthly Oil Market Report released today. "Net FSU exports in February increased by 130,000 barrels per day (bpd) from upwardly revised January volumes to 3.83 million bpd...Compared to a year earlier, February exports were an extraordinary 730,000 bpd higher, equaling the record levels seen during the summer of




March 10, 2000

Intercon's Daily

1999. These figures represent a rise against the normal seasonal trend, Reuters reported. Russia is taking advantage of high international prices by exporting large volumes of crude and crude products. The easing of export restrictions and the need to finance military operations in Chechnya were behind the rise, the IEA said.

Shell Buys 25 Percent Stake In Inam Oil Field

· Royal/Dutch Shell Group, the world's second-biggest publicly traded oil company, has purchased a 25 percent stake in an Azeri oil field for $36 million. Shell has expressed a commitment to expanding its business in the Caspian region. After many months of talks, the oil company agreed to pay Lasmo Plc and Central Fuel Caspian Sea Ltd. $18 million each for their 12.5 percent stakes in the Inam field, which lies in water more than 30 meters deep. Inam is Shell's first investment in Azerbaijan in more than 90 years. US experts at the State Department have estimated that the Caspian region more than the reserves of Kuwait and Iran combined at 200 billion barrels of oil. Others predict the reserves to be much less at between 25 billion and 35 billion. Gavin GRAHAM, Shell Exploration's regional vice-president for central Asia, said in a statement, the purchase, "will provide both the platform for future growth in the high potential Azeri oil and gas sector and synergy with Shell's Caspian gas strategy."

Socar, Azerbaijan's state-owned oil company, has a 50 percent stake in Inam, while BP Amoco, which operates the field, owns a 25 percent share. Drilling of the first well at Inam is due to begin during the third quarter of this year. Shell's exploration costs at the field will be between $30 million and $50 million.

Azeri-Turkmenistan Agree On Gas Quotas

· Azeri President Geidar ALIYEV and Turkmen President Saparmurat NIYAZOV broke the stalemate over the volumes of a proposed $2.4 billion pipeline from Turkmenistan to Turkey during a telephone conversation. The two Presidents agreed on the quota for transportation of Azerbaijan natural gas

by the gas-pipe and to have draft agreements drawn up for their signatures. NIYAZOV told his Cabinet during a meeting broadcast on national television, "Azerbaijan will have five billion cubic meters a year and we shall have the remaining 25 billion. Azerbaijan has agreed to that and we shall sign the agreement soon." ALIYEV initially demanded a 50 percent share in the pipeline quota. Turkmenistan has consistently refused to give its neighbor more than one-sixth of its annual transportation capacity, saying that ceding more would damage its own economic interests. The agreement will further spur the pipeline project linking Turkmen gas fields to Turkey via Azerbaijan and Georgia, thereby reducing Turkmenistan's dependence on Russian pipelines. Analysts also say the Turkmen project is already far advanced, while Azerbaijan will need time to get a pipeline of its own up and running. An official for the Oil and Gas Ministry told Reuters today that the long-delayed framework agreement between the four participating nations would be signed in April this year fixing the positions and obligations of all parties. The pipeline is being built by a consortium uniting Royal/Dutch Shell and PSG of the US which includes Bechtel Enterprises and General Electric Capital Services.

Turkmen-Russia Gas Deliveries Talks Begin

· Turkmen Deputy Prime Minister Yelly GURBANMURADOV is expected to represent Turkmenistan at the talks with Gazprom top executives on deliveries of Turkmen gas to Russia. Negotiations on a long-term agreement will open today in Moscow. The agreement is to deliver 50 billion cubic meter of Turkmen gas per year to Russia. Under the current agreement, Turkmenistan will supply Russia with 20 billion cubic meters of gas this year. According to Gazprom chairman Rem VYAKHIREV, "the only problem is whether or not Turkmenistan will be able to supply this amount of gas every year, and what will be the price of gas." In addition, the Russian side regards the price of $36 dollars per 1,000 cubic meters, which it pays for Turkmen gas deliveries now, as "economically unreasonable."

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

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