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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

Friday, March 17, 2000

Russian Federation

Politics

Hackers, Robbers Block Scandalous Article

· On Wednesday, computer hackers broke into Novaya Gazeta's computer system and destroyed files and layouts connected to a scandalous article on the funding of acting President Vladimir PUTIN's campaign. The article was prepared to reveal that an oligarch banker Alexander MAMUT was helping to fund PUTIN's campaign. This hacker black-out action follows another unwelcome entry, when burglars last week stole a computer containing all the details on the newspaper's advertisers. Since then, a number of advertisers have broken their contracts with Novaya Gazeta. Deputy editor of the newspaper and deputy of the Russian State Duma Yuri SHCHEKOCHIKHIN pointed out that the newspaper has been beset by a number of episodes including four investigations by tax police within two years, audits, legal suits, and the situation has been compounded now with the burglary and hack-attack. He said these actions were clearly designed to hinder the newspaper's work and delay the publication of possibly harmful information to the acting president. SHCHEKOCHIKHIN, a member of Grigory YAVLINSKY's Yabloko party, servers as deputy chairman of the parliamentary security committee and a member of its anti-corruption commission. He said the newspaper plans to publish an expanded version of the newspaper on Monday containing the now controversial article. YAVLINSKY who is running against PUTIN said the harassment of Novaya Gazeta highlighted the unfavorable political mood ahead of the elections. "In such a political atmosphere as is developing in the country as a whole, any incident today can be perceived by people both as a political provocation and as a limitation on citizens' rights and freedoms," the Financial Times reported. It should be noted that one of PUTIN's first

decree in early January authorized federal subsidiaries to 2,500 local newspapers, including 19 provincial newspapers. Many speculate that this is part of a strategy to control the press and shift their loyalties from regional businessmen to the center, primarily to PUTIN himself.

Zyuganov Clear On What He Stands For

· Communist Party leader Gennady ZYUGANOV is campaigning for the second time in the presidential election, aiming to recapture the glory days provided by the Soviet Union. This time, as in his first campaign, ZYUGANOV is running in second according to opinion polls, well behind acting President Vladimir PUTIN. In a television address, he boomed out in a loud voice, "The regime of YELTSIN's successor will bring you poverty and gradual extinction, dictatorship and a free rein to violence. That is what awaits Russia if you allow yourselves to be deceived." While PUTIN has failed to set out a concrete program, ZYUGANOV has outlined what he would do if elected president. Reuters reported that his plans include raising the minimum wage, increasing salaries for teachers and doctors, cutting health care, housing, transport and fuel costs. He would also cut taxes, increase spending on the weapons industry, science and culture. ZYUGANOV has plans to nationalize the oil and gas industry, putting an end to capital flight, which he put at $1.5 billion a month, and nationalizing the vodka industry. He would "normalize" money supply, which analysts take as code for printing money to fund spending. He

Today's News Highlights

Russia

Russia To Make IMF Payment

Gazprom Get SACE Guarantees

European Republics

WB Approves New Baltic Loans

Kuchma Cuts Oil Duties

South Caucasus & Central Asia

Georgia To Question Raduyev

Investment Conference Opens

Azerbaijan Wants To Join NATO

Kazakh Approves Bank Amend.

Politics-Economics-Business

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Friday

March 17, 2000

Intercon's Daily

also promises in a letter to voters to introduce price controls, guarantee work to each Russian in the space of two years and to bring about the birth of "renewed Soviet power." He promises not to be a totalitarian leader, but stands for the building of a strong state, reducing the wide powers enjoyed currently by the president and restoring parliament's control.

Meanwhile, PUTIN said in a press conference today that Russia is doing well in its campaign to rid Chechnya of terrorists. He pointed out that Federal Security Service (FSB) officers this week captured Chechen warlord Salman RADUYEV. He said, "Look at him! He looks like an animal...We should turn them all into animals!" Even reporters of the press were taken back with PUTIN's unpresidential statement. FSB head Nikolai PATRUSHEV pointed out that RADUYEV has pleaded not guilty to charges of terrorism. After initial tests, doctors have determined RADUYEV to be sane. PATRUSHEV said that RADUYEV knows the location of Chechen warlords Shamil BASAYEV and KHATTAB and an operation is being launched to apprehend them.

Economy

Ruble = 28.43/$1.00 (NY rate)

Ruble = 28.4/$1.00 (CB rate)

Ruble = 27.65/1 euro (CB rate)

Sep Oct Nov Dec Jan Feb Mar

Russian To Make $57.8M Payment To IMF

· The Russian Finance Ministry is prepared to make a scheduled payment of $57.8 million to the International Monetary Fund (IMF) today. One min

istry official said, "We have reserved $57.8 million for a payment on Friday. But the payment will be made in euros." Russia paid $60.6 million to the IMF on March 10th and should also repay $61.1 million on March 28th. 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, which is mostly IMF loans and Eurobonds. It is also seeking to restructure more than $100 billion of Soviet-era debt.

Business

Tyumen And Sidanko To Sign Deal Soon

· Russia's Tyumen Oil Company said that within one month or two it expects to sign a final deal its former rival Sidanko, which had been agreed on in principle in December. Tyumen first vice president and chief financial officer Joseph BAKALEYNIK noted that a key part of the deal will be joint rehabilitation of the giant Samotlor oil field in western Siberia. That field is predicted to hold about seven billion barrels in total reserves. BAKALEYNIK also said that according to preliminary estimates, Tyumen's profits should rise to $300 million in 1999 from $45 million in 1998. BP Amoco, which owns 10 percent of Sidanko, will provide technical supervision and assistance to the joint development venture. Also under the deal, the Chernogorneft assets, which were sold to Tyumen in November 1999, will go back to Sidanko free of debt and Tyumen will get 25 percent plus one share of Sidanko. BAKALEYNIK said, "There are nitty gritty details to be worked out..."

Gazprom Receives SACE Loan Guarantees

· Russia's gas monopoly, Gazprom, said Italy's export-import agency SACE approved loan guarantees to help finance a $2.9 billion project to deliver gas to Turkey through the Blue Stream project. Mediocredito Centrale, an Italian state-owned investment and retail bank, plans to finance the project together with Banca Commerciale Italiana, a unit of Italy's biggest bank Banca Intesa, and West Merchant Bank, a unit Westdeutsche Landesbank, Germany's biggest state-owned bank. Gazprom earlier agreed with the three banks to secure loans worth $800 million. The gas company didn't specify

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	Friday			March 17, 2000
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	the value of SACE's guarantees. A group of Japanese companies plans to secure an additional $600 million in loans guaranteed by Japan's MITI and JBIC export-import agencies for equipment supplies to Gazprom's project. Blue Stream Pipeline Co., equally owned by Italy's Eni and Gazprom, plans to secure funds for the construction of 375 kilometers line under the Black Sea to Turkey. The Russian gas company together with its trading unit and subcontractors, have a $25 billion contract with Turkey's Botas company to ship about 360 billion cubic meters of gas to the capital, Ankara, between 2001 and 2025. The first shipment of 2 billion cubic meters will start to flow in 2001, with the full capacity of 16 billion cubic meters a year expected by 2010. The Blue Stream project is in direct competition with the US-backed Baku-Tbilisi-Ceyhan pipeline. Surgutneftegaz Oil Co. Reports Revenues · Surgutneftegaz Oil Co., the parent holding of Surgutneftegaz, Russia's third-largest oil producer, estimated 1999 revenues at 81 billion rubles ($3.3 billion), according to Vice President Gennady BURTSEV of Surgut Oil. The Surgut subsidiary produced 37.6 million tons (752,000 barrels per day) of crude last year up 6.8 percent, or 48,000 barrels per day, from output in 1998. The company's capital expenditures were 13.1 billion rubles in 1999. The Surgut subsidiary produced 3.1 million tons of oil in February up 12.6 percent from the output in February 1999. New Vremya Editor Appointed · Russian daily Vremya MN appointed Dmitry MURZIN as chief editor, after the previous editor Vladimir GUREVICH resigned with all the journalists. The last issue of the paper managed by GUREVICH was issued on March 6th. The former editor and his team of journalists this week began publishing a new newspaper called Vremya Novostei that will be published five times a week.		over the next three years that would provide fast-disbursing support to meet and address Latvia's external financial needs and support its medium term reform program." The loan will be a fixed-spread loan denominated in US dollars with a maturity of 17 years, including a five-year grace period. The World Bank has provided some $355.41 million for 17 operations in Latvia since the country joined the bank in 1992. The World Bank also approved a $25 million loan to Estonia for the improvement of traffic along the Tallinn-Tartu-Luhamaa Road. The project is designed to help develop systems and technologies that will have applications for other road safety problems in Estonia. The loan will help fund a project with a total cost of $49.5 million, including $22.65 million from the Estonian government, $1.65 million from the European Union, and $200,000 from the Finnish government. The loan has a maturity of 15 years, including a five-year grace period. The World Bank has provided $138 million for eight projects in Estonia since the country joined the bank in 1992. Kuchma Lifts Oil Import Duties · Ukrainian President Leonid KUCHMA on Wednesday, before flying to Tbilisi and Baku, signed into law temporary cuts in import duties on oil and oil products which were approved by parliament earlier this month. Ukrainian officials say the law, effective upon publication, is vital to preventing fuel shortages during the spring sowing season. The law provides for value added tax payments on crude oil and gas condensate imports to be lifted completely until January 1, 2001. The law also lifts import duties on diesel and petrol imports and a 20 euro per ton excise on diesel until June 1st. Until June 1st, VAT payments on diesel imports will not be paid at the border as currently, but at the point of sale. Excise duties will raised to 60 euros per tons from October 1st on petrol and to 30 euros per tons on diesel to compensate for revenues lost during this period of lower duties. Ukraine is dependent on energy imports. South Caucasus & Central Asia Georgian Officials To Question Raduyev · The Procurator-General's Office of Georgia has sent an investigation team to Moscow to question Chechen field commander Salman RADUYEV, who
		European Republics WB Approves Loans For Latvia, Estonia · The World Bank on Thursday approved a $40.41 million structural adjustment loan (SAL) package for Latvia, the bulk of it to be used for administrative and economic reforms. According to a bank statement, "This loan is the first in a series of up to three loans


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was recently captured by Russian Federal Security Service (FSB) officers under a special mission. Georgia's question will focus on RADUYEV's involvement in the terrorist attack on Georgian President Eduard SHEVARDNADZE on February 9, 1998. Procurator-General Jamal BABILASHVILI said his office will work to confirm RADUYEV's February 1998 statement that the gang Wolves Without Borders had committed the attack with his knowledge. Officials of the Georgian Ministry for Security said that RADUYEV could have been involved in the Tbilisi terrorist act, because a "Chechen trace" was found during the investigation of the 1998 terrorist attempt on the life of SHEVARDNADZE. During the attack, one of the terrorist was killed. He was identified as Visamudin JANGALIYEV, a 28-year-old Chechen, who lived in Daghestan. The Procurator-General's office notes that many facts need to be clarified and verified.

Georgian Investment Conference Opens

· The two-day conference Development of the Investment Market in Georgia opened in Tbilisi Sheraton Metechi Palace Hotel Thursday. Representatives of government and parliament, state and private structures and of certain international financial institutions, like the International Monetary Fund, the World Bank, USAID, the UN Development Project are participating in the conference which is organized by Eurasia Group and Metromedia International Communication. The conference participants will discuss the process of economic reforms in Georgia, formation of the market of capital, introduction of international accounting standards, perspectives for the development of telecommunication sector. Georgian President Eduard SHEVARDNADZE stressed that Georgia is committed to creating an investment climate favorable to international businesses. He said investors should expect the state to support their developments in Georgia.

Azerbaijan Prepares To Join NATO

· Azerbaijan President Geidar ALIYEV Thursday said his country is preparing to join the North Atlantic

Treaty Organization (NATO) in future. Azerbaijan "values cooperation with NATO very much" and the bilateral relations are developing in a normal manner, ALIYEV said. He pointed out that, "joining NATO is not a unilateral process, NATO's admission is required." He stressed that the countries, which do not like the idea of Baku's accession to NATO, themselves announce that they are ready to join the alliance. "We cannot lag behind them."

Azerbaijan Hands Over Iranian Convicts

· Azerbaijan has handed over a group of 50 Iranian convicts, who had been sentenced to life imprisonment in Azerbaijan, to the Iranian authorities. This was the second group of convicts handed over to Iran by Azerbaijan under an agreement for extradition of prisoners. Earlier this month, Azerbaijan released 59 Iranians found guilty of drug smuggling or illegal entry into the republic while Iran freed 18 Azeri prisoners sentenced to prison terms in Iran.

Kazakhstan Adopts Secrecy Laws

· Kazakhstan's parliament on Thursday adopted amendments to banking laws, which make it harder for tax police and inspectors to go through individuals' and companies' accounts and seize their assets. Deputy Remis MADINOV said a conciliation commission set up to debate different versions of the legislation decided state "fiscal services" could only seize company accounts on the basis of one pretext rather than six previously. These changes are designed to boost confidence in Kazakhstan's banking system. Government officials believe that Kazakh citizens have more money in overseas accounts and hidden at home than in the nation's banking system. Revenues Minister Zeinulla KAKIMZHANOV said that the version of the legislation adopted by deputies seriously reduced the powers of fiscal organizations. "I would have thought a more sensible approach would have been not to narrow the authority, but to strictly regulate this authority so that a functionary abusing his position would take responsibility," Reuters reported. The amendments must be approved by the President before taking effect.

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

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