DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

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Daily intelligence briefing on the former Soviet Union

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Friday, March 24, 2000

internet users have voted YAVLINSKY ahead of PUTIN. PUTIN's campaign managers have taken the offensive against YAVLINSKY through the state-controlled TV channel. Channel one has accused YAVLINSKY of several crimes including having plastic surgery and accepting funds from foreign entities to finance his campaign. These mud-slinging methods have appeared to sparked a backlash against PUTIN. Leonid BORUSHNOI, a computer technician, said, "I was not sure how to vote. But after I saw how the official TV channel dished dirt on all other candidates, I lost any desire to vote for PUTIN. I will vote either for YAVLINSKY or against everyone."

Election or Coronation?

· Acting President Vladimir PUTIN, fearing voter apathy and the rise of popularity of his competitors, today encouraged all Russians to get out and vote in Sunday's presidential election. To win, PUTIN needs a majority in a vote with better than 50 percent turnout. If fewer than half the eligible voters cast ballots or if PUTIN doesn't get at least 50 percent of the votes cast on Sunday, a second round of voting will be held on April 16th. He told voters, "I'm asking you about just one thing¾go to the polling stations and vote. Listen to yourself and make your choice." For many Russians, the question remains choice? What choice? Several political analysts have doubted the extent to which this election is democratic; even Communist Party leader Gennady ZYUGANOV has warned the election will be rigged in favor of PUTIN. ZYUGANOV added that voting in Chechnya will be

Russian Federation

Politics

Two Main Challengers To Putin's Power

· Russian citizens head to the polls on Sunday to elect their second president since the fall of the Soviet Union. Candidates on the ballot include: acting President Vladimir PUTIN, Communist Party leader Gennady ZYUGANOV, Yabloko party leader Girgory YAVLINSKY, Liberal Democratic Party leader Vladimir ZHIRINOVSKY, Governor of the Samara region Konstantin TITOV, Governor of the Kemerovo region Aman TULEYEV, former Prosecutor General Yuri SKURATOV, ethnic Chechen businessman deemed "the Donald TRUMP of Russia" Umar DZHABRAILOV, head of an organization called For Civil Dignity Ella PAMFILOVA, senior deputy from the Fatherland-All Russia party Stanislav GOVORUKHIN, and head of Spiritual Heritage party Alexei PODBERYOZKIN. PUTIN is widely expected to win the election. In recent opinion polls, PUTIN has received nearly 50 percent of the vote. His main challengers are ZYUGANOV and YAVLINSKY; their combined ratings may threaten PUTIN's bid to win the election outright. ZYUGANOV, who pushed former president Boris YELTSIN into a second round in the 1996 election, is expected to win 24 percent. YAVLINSKY's ratings have almost doubled in recent days to nearly 10 percent. One YAVLINSKY supporter explained, "I don't like any of the candidates, but I decided to vote for YAVLINSKY because he is the only alternation to PUTIN. PUTIN never looks straight into people's eyes and an honest man cannot hide his eyes. He may not be a STALIN, but I think he is going to lead the country in that direction," the Financial Times reported. Andrei PIONTKOVSKY, director of the Center of Strategic Studies said, "In the past few days we have seen an overwhelming swing of support among the middle class audience towards YAVLINSKY." In addition,

Today's News Highlights

Russia

Details on Detained Spy

WB To Release Coal Loan

European Republics

EBRD-Ukraine To Cooperate

Lith. Receives Advisor Bids

South Caucasus & Central Asia

Georgian Troops Sent Home

Kulov Detained For Questioning

Special Report

Open Letter To Vladimir Putin

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Friday

March 24, 2000

Intercon's Daily

almost impossible to control. He specifically accused officials of artificially increasing the number of registered voters in Chechnya. "Such cynicism compromises the very concept of democratic election," he said. Clearly, Russian citizens have the right to vote. However, it has been evident since December 31,1999 who the next president of Russia will be. When former president Boris YELTSIN resigned on the last day of 1999, Russia according to the constitution was forced to call for early election within three months. He further boosted the standings of his virtually unknown and inexperienced prime minister by anointing PUTIN as his heir. Such terms run counter to democratic values. The election will be an election only in the sense that Russian citizens will go to the polls. It will be a coronation by the fact that the transfer of power was made by one man nearly three months ahead of the poll date. This election in a true sense is the end of the Russian democratic revolution and is a reversion back to the Soviet style elections, where the party selected a leader and the citizens were forced to "unanimously" approve the leader with typically 99.9 percent of the vote. Concern is also growing that the state media has played favorites to PUTIN's campaign. Alexander PUMPYANKSY of Novoye Vremya said, "All the candidates are equal, but one is more equal than all the others. This shows that we do not yet have a real ripe democracy. We are more of a Asiatic country, a post-Communist society in which the administrative mentality still prevails." Konstantin TITOV, a presidential candidate pointed out, "If one candidate has five hours on the television screen and another has 1 minute and 18 seconds, there is absolutely no equality."

PUTIN's challengers have warned Russians that the acting President hasn't offered any clear policies and is simply an extension of YELTSIN, who is blamed for pushing the country into economic disarray after the government's August 1998 debt default and decision to let the ruble fall, causing the collapse of many banks and deteriorating living standards. Presidential candidate and leader of the Yabloko party Girgory YAVLINSKY said, "I think PUTIN is dangerous for Russia's democracy...There's no difference between ZYUGANOV and PUTIN. ZYUGANOV simply likes a red flag and PUTIN doesn't care about that." He also called PUTIN a "secret Communist" and a danger to democracy. He said, "If we let

this Trojan horse enter the Kremlin, everything will be worse inside than during the Soviet era...Russian elite's support for PUTIN will mean their desire to continue on `YELTSIN's way,' keeping all characteristics of the previous economic life." However, the great concern is that PUTIN will not maintain the status quo established by YELTSIN, but revert to Soviet practices where the state reigns supreme.

Aleskei PARFENENOK, who owns a travel company, said the main argument against PUTIN is uncertainty. He said, "We don't know what he is going to do when he is in power. He talks about brining order, but I fear this could result in a serious clamp-down on private business," the Financial Times reported. PUTIN has called for a strong state, where the power is centralized in the Kremlin. In order to do this, many fear that civil society will be at risk and that includes closing the public space which allows independent entities and organizations to operate freely. He will use economic means to try to force regional governors to relinquish their powers to the Kremlin. Beside continuing the criminal state of politics in Russia, the demise of the so-called election process, and the restrictions on media outlets, PUTIN has also obliterated and ignored the basic human rights of his own people and ethnic Chechens. He launched "Operation Whirlwind," a mission to round up suspects, after three apartment building bombings. These round-ups targeted dark-skinned ethnic residents. Hundreds of citizens were detained without an ounce of evidence. His abuses of human rights in Chechnya are horrific. The military offensive against Chechen terrorists have caused thousands of deaths through its indiscriminate bombing, and forced tens of thousands civilians to become refugees as their villages were destroyed by air-raids, mines, and bombing. Sergei KOVALYEV, Russia's leading human rights advocate argues that democracy means not only expressing the will of the majority, but protecting the rights of the minority¾ including the peaceful civilian population of Chechnya. He said, "Is there a threat to democracy from the side of the future Russian president? I do not only think so, I am sure of it."

Details Released On Alleged Spy For Britain

· Russia's counter-intelligence service today revealed the first details of an alleged spy seized by Federal Security Service (FSB) agents on March

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March 24, 2000

Intercon's Daily

15th, on suspicion of spying for Britain with the help of security police from Estonia. The FSB said the Russian citizen was recruited in 1999 by British diplomat Pablo MILLER in Estonia. The citizen, whose name has not been released, in the past served as a senior officer for the domestic special services. The FSB has said that it is believed this alleged spy traveled regularly to Tallinn to meet his British handlers or to send information via the Estonian security police. The FSB information center reported that the agent's mission was to obtain the following information: the pre-election situation in Russia, information on prominent politicians and possible approaches to them; presence of Russian intelligence sources in British secret services, political structures, intelligence and counterintelligence bodies in the US and other NATO countries; personnel of the Russian Foreign Intelligence Service (SVR), SVR operations abroad, data on officers working abroad and possibility of their recruitment; structure, governing and operative composition, spheres and efficiency of operations by Russian counterintelligence bodies; methods and priorities in the work of the Federal Agency of Government Communications and Information at Russian President; and economic and ecological situation in Russian regions, Itar-Tass reported. The spy is being detained in Moscow's Lefortovo jail. Russia already has one alleged spy for Britain in detention, Platon OBUKHOV. His trial has been repeatedly postponed.

Economy

WB To Release $100M Coal Loan

· The World Bank today will release a $100 million installment of a coal loan for Russia. The coal loan, split into social and privatization tranches, is meant to cushion reform in the sector and should go straight to the budget. A spokesman for Deputy Prime Minister Viktor KHRISTENKO told Reuters that Russia expected the Japanese government, co-lender with the World Bank, to make a decision about $100 in co-financing for Russia in the nearest future. Conditions for receiving the coal loan include progress in closing loss-making mines, payments to laid-off workers, moves away from subsidizing uneconomic production, better management of subsidies, and completion of a survey on the social impact of restructuring. The World Bank's Country Director for Russia

Michael CARTER on Tuesday said the bank may disburse the last $50 million social tranche of the coal loan early this summer, and the last $100 million for privatization later this year.

Kasyanov Predicts 3 Percent Economic Growth

· Russian First Deputy Prime Minister Mikhail KASYANOV today predicted that Russia's economy will grow three percent this year. He noted that further expansion depends on the amount of foreign investment. In a CNN interview, KASYANOV said, "We expect three percent growth in gross domestic product this year, the same as last year, inflation is going down and foreign exchange reserves are rising." KASYANOV said consistent structural reforms are now needed. He pointed to political instability as the major obstacle to growth, but he said society was now consolidating. KASYANOV has been pinned by political analysts to head the new government, if acting President Vladimir PUTIN win the presidential election on Sunday. KASYANOV said the new government would seek to improve laws to make the investment climate more attractive and would provide for equal access to the market for all participants.

Ruble = 28.36/$1.00 (NY rate)

Ruble = 28.33/$1.00 (CB rate)

Ruble = 27.65/1 euro (CB rate)

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Business

Vnesheconombank Withdraws Lawsuit

· Russia' state-owned Vnesheconombank has withdrawn a lawsuit against Media Most, a Russian

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Friday Intercon's Daily March 24, 2000

holding company that owns national television channel NTV. Vnesheconombank sought to recover more than $862,000 in interest on a $42.2 million loan to Media Most. Vnesheconombank agreed to accept $560,000 in Russian Finance Ministry bonds. Vnesheconombank spokeswoman Tatyana GOLODETS denied the suit had been tied to political battles. She said, "We saw it as a situation between creditors and borrowers," adding, "the bank's management decided to meet NTV halfway." Vnesheconombank called due in July interest and principal payments on loans to Media Most; a court later ruled Media Most must pay, though the holding company said it couldn't because it held unredeemed Finance Ministry bonds.

Novokuznetsky Alyumin. Declared Bankrupt

· A Russian court approved the bankruptcy of Novokuznetsky Alyuminievy Zavod, Russia's fifth-largest aluminum smelter. Under the ruling by the Siberian court, the company will be under control of an outside manager for one year. Sergei CHERNYSHOV was appointed temporary manager in January. A meeting of Novokuznetsk's creditors voted to recommend CHERNYSHOV be appointed external manager if the bankruptcy was confirmed. Kuzbassenergo, a subsidiary of Unified Energy Systems, Russia's electricity distributor, initiated the bankruptcy over debts for supplied electricity. Novokuznetsky Alyuminievy was forced into bankruptcy because of about 1.45 billion rubles ($50.9 million) of debts in January. When Russian companies face bankruptcy they are placed under temporary external management, and if declared bankrupt, under full external management. The court has also placed a moratorium on repaying debts which had become due before the introduction of external management. Novokuznetsk produced 272,000 tons of aluminum last year and exported 261,000 tons. Exports were briefly halted in January when the insolvency proceedings started, but have since resumed.

Gazprom To Approve New Board Of Directors

· The Board of Directors of the Russia's gas monopoly Gazprom has approved a list of 23 candidates for a future Board of Directors. The list is to be considered at the forthcoming meeting of shareholders in June. The shareholders are to select 11 people from among the suggested

candidatures. Listed among candidates are Russian Deputy Prime Minister Viktor KHRISTENKO, Viktor CHERNOMYRDIN, head of the Energia inter-factional association in the Russian State Duma, State Property Minister Farit GAZIZULIN, Deputy Minister Gherman GREF, Chairman of the Russian Federal Property Foundation Igor SHUVALOV, Fuel and Energy Minister Viktor KALYUZHNY, and Anti-Monopoly Policy Minister Ilya YUZHANOV.

Hungary's Drugmaker To Produce In Russia

· Egis Rt., Hungary's second-largest drugmaker, plans to start production in Russia by buying a factory. Egis wants to make drugs at a plant in Russia to profit from a recovery in demand following the collapse of the market in 1998 and to pre-empt a possible import surcharge levied by the government, boosting the cost of foreign-made drugs. Laszlo MAROSFFY, Egis' financial director said, "Russia is a huge market and we're looking into some production in the country...We had approval from the board and at the moment we're looking into how we physically do it." Egis and rival drugmaker Gedeon Richter Rt. are turning back to traditional export markets. Richter, which derived about a quarter of its sales from the former Soviet Union in 1999, started packaging and storing drugs in Russia after building a factory costing about $10 million. The Farmograd unit, 100 kilometers from Moscow, started operating in December last year. Egis' sales to the former Soviet Union in 1999, fell 6.8 percent to $12.3 million, or 15.4 percent of total exports and less than 10 percent of total sales. Richter's sales to the region totaled $56.8 million in 1999, down 22 percent from a year before.

Kvaerner To Sell Majority Stake In Shipyard

· Kvaerner ASA, an Anglo-Norwegian construction company, will sell its 75.6 percent stake in Kvaerner Vyborg Verf, a shipyard near the Russian Baltic port of Vyborg. ZAO Ako Barss, a St. Petersburg shipbuilder founded in 1993, will purchase the stake for an undisclosed price. Vyborg Verf built a floating rocket launch pad called the Sea Launch in 1996, and has since then operated at 10 percent of capacity. In the past few years, the biggest Russian shipbuilders have been increasing output, with orders coming from Asian countries, such as India and China, and oil companies, such as LUKoil.

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Georgian servicemen who deserted from their unit at the Kodjori training camp earlier this month have now returned.

Hurricane To Buy Kazakh Refinery

· Hurricane Kumkolmunai, the Kazakh subsidiary of Canada's Hurricane Hydrocarbons has been approved as the buyer of the Chimkent oil refinery. A senior refinery official announced that, "The Chimkent refinery will be sold for 33 percent of the shares of Hurricane Hydrocarbons plus $51 million in cash." These terms were confirmed by a Hurricane Kumkolmunai spokesman, who added that a purchase agreement will be signed on March 31st in London. Hurricane controls a large oil field in Kazakhstan's southern region of Kyzyl-Orda and has often sparred with the refinery over oil deliveries and refining prices. The Chimkent refinery, one of oil-rich Kazakhstan's three refining plants, is owned by the country's Kazkommertz Bank through affiliated structures. It has the capacity to refine six million tons of crude a year.

Kulov Detained For Questioning

· The leading opposition figure in Kyrgyzstan was seized from the cardiology ward of a Bishkek hospital where he was undergoing treatment by Kyrgyz Security Ministry officers for questioning. Former security minister Felix KULOV said, "As a man, I am not used to hiding...I expected this." KULOV, who suffers from high blood pressure, alleges he was denied a parliamentary seat in this month's election by mass rigging. KULOV believes that officials loyal to Kyrgyz President Askar AKAYEV masterminding his election defeat in order to keep him out of a presidential election later this year. He said he would probably be accused of abusing his powers while holding a state office, but gave no more details. On Thursday, approximately 250 people demonstrated outside the Security Ministry to demand the release KULOV. Security Ministry department head Ikramadin AITKULOV today said that KULOV has been charged with abuse of power while he served as security minister and deputy premier and with violating the rights and interests of the state and individual citizens. He said that KULOV is also suspected of misappropriating some $22,000 that the Security Ministry had received from unnamed commercial firms. Reportedly, KULOV has refused to give testimony and gone on a hunger strike to protest his arrest.

European Republics

Ukraine-EBRD Hold Cooperation Talks

· The Ukrainian government and the European Bank for Reconstruction and Development (EBRD) plan to sign a memorandum which will enable them to solve issues emerging over EBRD's projects in Ukraine. Prime Minister Viktor YUSHCHENKO and EBRD vice president Charles FRANK reached the agreement during a meeting on Wednesday. YUSHCHENKO said the sides focused in their first round of talks on the EBRD's projects in Ukraine, specifically on achieved results and preparatory projects. He said the relations between the Ukrainian government and the EBRD are constructive and business-like. FRANK said that the sides discussed energy and telecommunications projects. He added, "I think there is a lot of potential for collaboration and cooperation with this government, but actions are more important than words. Economic reforms in Ukraine still have a very long way to go and the investment climate still needs to be improved. Our ability to operate in Ukraine depends on very close cooperation with the government, particularly the government's ability and commitment to achieve more reforms." According to the Ukrainian Cabinet, the EBRD board of directors has approved 33 projects in Ukraine worth 1.4 billion euros. The EBRD has disbursed 384.9 million euros. Eleven other projects are being drafted, with their EBRD financing to total over 400 million euros.

South Caucasus & Central Asia

Georgian Peacekeepers Sent Home

· Georgia's peacekeeping contingent serving with KFOR in Kosovo were sent back to Tbilisi for insubordination before their eight-month tour of duty was complete. RFE/RL Newsline reports that Georgian troops had refused to accept orders from the Turkish officers under whom they served and had locked themselves in their barracks and declared a hunger-strike. Georgian military officials admitted that the Georgian Defense Ministry has failed to pay on time the $600 per month to which the men were entitled. A Georgian Defense Ministry spokesman denied last week that Georgian peacekeepers have returned home because of friction with the Turkish contingent. Meanwhile, the 60

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Open Letter To Putin, V.V,

Acting President Of The Russian Federation

Mr. Putin,

I have had the dubious honor recently of being mentioned by you in an interview with Russian journalists: you called me "traitor."

Were you not the highest official of the state of which I'm a citizen, I would have ignored this insult. I'm used to it. Since 1990 when I publicly denounced the KGB of the USSR and spoke out in favor of radical reforms in my country, I was damned by the Soviet State. I was stripped of my rank, decorations, pension. Criminal charges were thrown at me.

To my aid came 1.2 million people of the Krasnodar region, who, in the face of furious resistance from the Communist Party officials and the provocations of the KGB, elected me Peoples' Deputy of the USSR. In the Spring of 1992, President Yeltsin discussed the possibility of my appointment as the head of the Russian Intelligence Service, but he remarked then that my former KGB colleagues will most likely not agree to accept me back in their ranks. Yeltsin was probably right, for subsequent events left no doubts that the spirit of Chekism — totalitarianism, and the bolshevik mentality with its inherent hatred and intolerance toward dissent — has not only remained in fact, but ultimately prevailed in the organs of Russian intelligence and security. With Primakov's appointment as the Prime Minister this Chekist spirit penetrated many corridors of power in Russia. Today, it has triumphed in the Kremlin.

Quite a few people in Russia and in the West have entertained hopes that your juridical education will facilitate the creation of the state ruled by law in our country. But, obviously, your, lengthy service in the KGB and in the German Democratic Republic dulled your legal consciousness. One cannot otherwise interpret your typically Soviet, selective approach to the principle of presumption of innocence — the cornerstone of Law and Order in a democratic state. Without due process of law, pending investigation, court action you throw accusations of treason at people unpalatable to your taste.

Even you predecessor, the man of old formation, with all known weaknesses did not allow himself such an unpardonable boorishness in regard to the citizens of his country. If I were of your frame of mind, I could very well brand you as a thief, bribe-taker and even war criminal, more so you have left behind in Leningrad, a foul smell of corruption, and some of your former associates are now on the run outside Russia's borders. But I'm averse to such treatment of people, even my offenders. Unless there is proof, solid evidence, nothing has legal power and for that reason nothing can be incriminated to anyone. However, you have already taken the bit in your teeth without realizing yet, that in your capacity of the acting president it is not befitting to label people and behave like your current admirers from the newspaper "Zavtra." However paradoxical it may be, but between you and the so called "irreconcilable opposition" there exits an innate bond.

Unlike you who in the past analyzed the problems of NATO in Dresden, I put together more simple and available to anyone facts related to your bio and life style. Last December you returned to the walls of Lubyanka the memorial plague of Y. Andropov, spiritual heir of Felix Dzerjinsky, "the knight of the revolution," who symbolizes Communist despotism.

Together with your comrades in arms from the Russian Communist party and Zhirinovsky's "liberal democrats" you toasted the blessed memory of dictator Joseph Stalin. Earlier you paid a friendly visit to the inglorious KGB veteran and state criminal Kryushkov. And before that you rendered an invaluable service to your Kremlin sponsors by unlawfully framing the Prosecutor General of Russia for his timid attempts to tackle corruption crimes in the highest echelons of power.

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Occasionally making reverences to the West and even NATO, you are simultaneously tightening the screws inside the country. You denounced the environmentalists as "tools of foreign special services." You have been cultivating the amenable media, but are afraid to face journalists who are not on a short leash of the state.

You authorized the harassment for more than a month of "Radio Liberty" correspondent Andrei Babitsky and branded him as a traitor only because he wanted to tell the bitter truth about the Chechen war to all who wanted to know the truth. Finally, the bloodiest war since Stalin's death against your own people is on your conscience. Under the pretext of fighting terrorism, you have virtually leveled to the ground the entire country as if it were not part of Russia; murdered thousands of innocent elderly people, women, and children; sent to slaughter barely feathered Russian fledgling soldiers. You accused the Chechens as the perpetrators of the terrorist acts in Moscow and Volgodonsk without producing so far any evidence of their involvement in these crimes.

You appear to be utterly unaware of notions such as a national liberation movement or the right of nations to self-determination. In justification of your acts, you discourse about the territorial integrity of Russia, but Russia, not the Russian Federation — a bolshevik invention — has lost Ukraine, the Baltic States, and the Central Asia, and the Trans-Caucasus. Once you've lost your head you don't cry about your hair.

As a native Leningrader, I feel ashamed listening to your speeches heavily interspersed with bolshevik-gulag jargon: "hit your mugs," "waste in the outhouse," "eliminate as a class," "reduce to the animal state," etc.

Artem Borovik, who died mysteriously in a plane crash, in his last issue of "Top Secret" magazine quoted you as having said to the people who know you, "There are three ways to influence people: blackmail, vodka, and the threat to kill."

You are a dangerous, unpredictable man, Mr. Putin. Dangerous not only to the people you pointed at by your commanding finger, but also to the course of democracy in Russia, to the young generation of our citizens.

In 1990, I sued in court leaders of the USSR for their unlawful acts against me. In August of 1991, I was fully rehabilitated by President M.S. Gorbachev and ever since I have been a retired, not disgraced, general with all ensuing civil rights, pension, etc. At the end of 1995, I left for the USA under a contract and did not plan to remain there for more than three years. Since then, the situation in Russia has changed substantially. The forces of revenge have mounted an offensive. Smearing honest peoples' reputation is becoming a norm.

In the Russia of V.V. Putin, criminalized and corrupt with pocket justice and legal proceedings, I have no faith.

In the circumstances, I'll have to ask for political asylum in the free world in the hope that as a political refugee, I shall be able to live outside Russia with dignity and in safety.

You can take pride, Mr. Putin, in the fact that you are opening a new page in the history of Russia's political emigration.

Oleg D. Kalugin

Washington, DC

March 20, 2000

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

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