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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, March 3, 2000

Russian Federation


Rebels Ambush Special Police In Grozny

· Despite claims by Russian commanders that the fighting in Chechnya is over, the Russian military admitted today that rebels attacked the elite OMON police brigade in the Staropromyslovsky district of Grozny. At least 20 officers died in the surprise ambush, with an estimated 29 wounded. One eyewitness said that the rebels appeared to be firing on the squad from all sides using machine guns and grenades. NTV said on Thursday that the death toll was 12, while state-owned television RTR quoted the military as saying one soldier had died. Russian troops sent in reinforcements to drive out the rebels in the attack which lasted several hours. The Kremlin spokesman on Chechnya Sergei YASTER-ZHEMBSKY said, "The battle lasted several hours. [The OMON troops] couldn't immediately pursue the fighters because they had mined not only their positions but also all exit routes." Officials had not reported any clashes near Grozny since Russia said it seized the city on February 6th. Russian troops earlier this week said they controlled the Chechen territory, after seizing the last major rebel stronghold in Shatoi. However, the latest attack shows that the rebels have not been fully defeated. Rebel leaders have promised to carry on struggle against the Russians using their traditional tactic of hit-and-run attacks. Chechen President Aslan MASKHADOV this week in an interview with Radio Liberty declared that the war would be a long one and that he forces would resist Russian troops. He said, "Out of 25,000 volunteers who took up arms, 23,000 to 23,500 remain. The fighting will go on for a long time." Russia has estimated that 800-2,000 rebels are still at large. The Chechen President insisted that rebels still control the Argun gorge and surrounding areas. MASKHADOV again appealed to Russia to start

peace talks; Russia again rejected negotiations. Russia's newly appointed commissioner for human rights in Chechnya said two envoys from the Council of Europe would be allowed to join his team in the separatist region, although they would not be allowed to talk to the media.

Alfa Bank Warns Against Putin Mania

· In Kommersant Daily on Tuesday, Alfa Bank president and former foreign trade minister Pyotr AVEN warned that Acting President Vladimir PUTIN could end up hated like past leaders. He said, "Vladimir PUTIN is the new Russian wonder, the focus of elevated expectations and many years of unfulfilled hopes. That explains his fantastic ratings." He added, "True, the greater the hopes today, the deeper the disappointment tomorrow. It's like a pendulum. And the more popular is the leader promising wonders, the more he will be hated when the miracle does not happen." AVEN cited that a similar pendulum swing occurred with Soviet leader Mikhail GORBACHEV and former president Boris YELTSIN. AVEN added, "Russia needs firm principles and clear morals." He suggested improving the mentality of Russian business ethics, boosting foreign investors' protection, eradicating corrupt and irresponsible officials and unscrupulous businessmen. He said society regarded tax evasion and bribe-taking as almost acceptable behavior. "A whole system of institutional measures is needed to cure the illness, and I repeat, a transformation of public morality...We will have to wait a long time before a deep, effective

Today's News Highlights


Platinum Quota Decree Signed

BP Amoco To Invest $10B

European Republics

Mykolayiv Plant Privatization

Belarus To Supply Iraq Trucks

South Caucasus & Central Asia

Georgian Presid. Candidates

Estonia-Azeri Sign Trade Agmt.

New Azeri Bank To Open In April




March 3, 2000

Intercon's Daily

morality takes root, possibly decades," Reuters reported.


Ruble = 28.6/$1.00 (NY rate)

Ruble = 28.59/$1.00 (CB rate)

Ruble = 27.53/1 euro (CB rate)

Sep Oct Nov Dec Jan Feb

Putin Signs Platinum Export Decree

· Russian Acting President Vladimir PUTIN earlier this week signed a decree setting export quotas for palladium, platinum, and rhodium. Prices for platinum and palladium fell on Thursday on reports that Russia will release supplies to the world market after months of bureaucratic delays. It is still not clear when supplies will be made available from the Central Bank and Gokhran, the state treasury. On Thursday, palladium's price was fixed at $670 per ounce, compared with $696 on Wednesday. Platinum, meanwhile, dropped to $463 from $474 on Wednesday, the Financial Times reported.

Russia Cuts LPG Duties

· Russia will cut liquefied petroleum gas (LPG) export duties from 60 Euro to 40 Euro ($38.6) per ton. Acting President Vladimir PUTIN has signed a resolution. The cut in duties will take effect in April. Russia produces about 5 million tons of LPG, of which about 1.5 million tons are exported, said First Deputy Minister Alexander KOCHNEV.

Black Sea Fleet Debt Rising

· The debt of the Russian Black Sea Fleet to

Ukraine, where it is stationed, keeps growing day by day. The debt to the naval base of Sevastopol alone amounts to the equivalent of more than $6 million. According to deputy chairman of Sevastopol's administration Valentin BORISOV, almost half of the sum are debts of military units and fleet's agencies to city enterprises for services and fuel. He also stressed that as they, "operate in the legislative field of Ukraine and are Ukrainian economic entities, they run the risk of entering into conflict with the country's current legislation."


BP Amoco Commits Investment To Russia

· BP Amoco director Sir John BROWN met with Russian Minister and Chairman of the interdepartmental commission on Russia's participation in the Group of Eight industrialized countries Alexander LIFSHITZ on Thursday in London. BROWN confirmed that BP Amoco regards its work in Russia as a strategic priority and pledged to continue investing in Russia. BP Amoco company, one of the biggest in the world, is now developing the Kovykta oil field in the Tyumen region, West Siberia. Its confirmed reserves amount to 860 billion cubic meters, and the forecast deposits are estimated at some 1.2 trillion cubic meters of gas. BP Amoco intends to bring its investments in Russia to $10 billion. BROWNE pointed out that BP Amoco's dispute with its Russian creditors from Sidanko has been cleared up. LIFSHITZ said the sides are expected to sign an agreement at the end of March or the beginning of April. He added, "BP Amoco's operation in Russia is a signal to the entire world. If things go somehow wrong for this company in Russia, many other foreign investors put on a red light with regard to that country. If the British company keeps mum, the yellow light goes on, and if it says that all is in order, the green light is switched on." However, a new disagreement is brewing in Moscow. Gas station owners complained to Mayor Yuri LUZHKOV over allocation to BP Amoco 16 sites for construction of gasoline stations in Moscow. The city gas retail market is valued annually from $5 billion to $7 billion. Moscow-based ST Group, a construction company, holds a 26 percent stake in Petrolcomplex, a marketing joint venture with BP Amoco. ST Group has interest in Moscow Oil Co., an oil holding, which owns Central Fuel Co.

When you need to know it as it happens




March 3, 2000

Intercon's Daily

Foreign Investment In Telecom Is Rising

· Foreign investment in Russia's communication industry is predicted to reach $134 million in 2000, according to Communication and Information Minister Leonid REIMAN said on Tuesday. In 1999, foreign companies invested $90 million in telecommunication in Russia, while in 1998 the total reached $309 million. REIMAN points out that the peak of foreign involvement was in 1997, when $820 million were invested. Russia's investment figures will go up from 15.4 billion rubles ($550 million) to 17.3 billion rubles ($618 million). Up to sixty percent of Russia's investment comes from the companies which are involved in the industry. Share prices of telecom companies have risen by 40 percent on the average in 2000, REIMAN said. The Economy Ministry is now considering earmarking a federal subsidy worth nine million rubles ($230,000) for the industry. One million rubles ($35,000) will be allocated for the modernization of postal services, three million rubles ($107,000) for Siberian postal branches and five million rubles ($178,000) for civil-defense facilities.

Plant is one of the last sources of aluminum in the former Soviet Union, which is not yet controlled by a Russian conglomerate, the Financial Times reported.

Belarus-Iraq Reach Truck-Tires Deal

· Belarus and Iraq have reached an agreement for Belarus to supply Iraq with trucks and tires for transporting humanitarian aid. "Belarus, under the bilateral agreement, will supply...450 trucks and 10,000 tires," the Belarus Foreign Ministry spokesman Nikolai BORISEVICH said. He said the agreement had been reached in Baghdad late last month at a meeting of Belarus Deputy Prime Minister Vladimir ZAMETALIN and Iraqi President Saddam HUSSEIN. The trucks and tires are included in the schedule of approved items to be purchased with the oil revenues because they are used to transport humanitarian goods.

Mazheikiu, Texaco Sign Product Deal

· Lithuanian oil concern Mazheikiu Nafta said on Thursday it will supply its products to the local fuel retail arm of Hydro Texaco. The company said in a statement that the agreement is initially for one year, but provided no further details on the terms or volumes of the deal. Mazheikiu Nafta has product supply agreements with the local arms of Statoil Lietuva, Neste Lietuva, LUKoil Baltija, LUKoil Baltija-Servisas, Ventus Nafta and Uotas.

South Caucasus & Central Asia

Georgian Presidential Candidates

· Georgian President Eduard SHEVARDNADZE will face competition in his bid for the presidency. Twelve out of 16 people who applied to the Central Electoral Commission have been approved to participate in the election, scheduled for April 9th. The full list of candidates is as follows: incumbent President Eduard SHEVARDNADZE, Adjar Supreme Council Chairman Aslan ABASHIDZE, parliamentary deputy Djumber PATIASHVILI, Mdzleveli Political Association member Avtandil DJOGLIDZE, Progressive Party Chairman Vazha ZHGENTI, former Finance Minister Guram ABSANDZE, David AGHMASHENEBELI Party chairman Roin LIPARTELIANI, independent candidate Tengiz ASANIDZE, Unity of Georgian Nationalists leader Gia MAMALADZE, Georgian Corporation of Lawyers chairman Kartlos GHARIBASHVILI, and Inde

European Republics

Ukraine's Privatization Spurs Competition

· The privatization of Ukraine's Mykolayiv Plant, which produces aluminum, is spurring competition among Russia's oligarchs, who seek to control the Russian aluminum industry. The International Monetary Fund (IMF) has asked Alexander BONDAR, head of Ukraine's state property fund, to broaden the privatization tender, scheduled for mid-March, by increasing the stake from 30 percent to more than 50 percent. The Ukrainian government owns a 55 percent stake in Mykolayiv Plant. Analysts, who have reviewed tender documents, say that the privatization has been designed to favor a Russian group, Siberian Aluminum Company (Sibalco). Sibalco already holds a 30 percent stake in the plant and the offering of another 30 percent by the Ukrainian government would give Sibalco a controlling share. A Russian business group headed by businessmen Lev CHERNOI and Boris BEREZOVSKY is also interested in the plant. Last week, BEREZOVSKY and another business tycoon Roman ABRAMOVICH consolidated their holdings by buying out the Bratsk and Krasnoyarsk Aluminum smelters, the Krasnoyarsk Hydro Electric Station, and the Achinsk Aluminum refinery from Trans-World Metals. Mykolayiv

When you need to know it as it happens




March 3, 2000

Intercon's Daily

pendent Association of the Unemployed representative Gela GELASHVILI. National Ideology Party Chairman Zurab GAGNIDZE was also approve, but has already withdrawn from running. Ushangi DONDZHASHVILI, acting head of the St. Ilia the Righteous Society Gia CHKHIKVADZE, and Georgian Communist Party Central Committee chairman Ivane TSIKLAURI failed to collect the 50,000 required signatures.

Estonia-Azerbaijan Sign Trade Agmt.

· The Estonian and Azeri foreign ministers signed a intergovernmental agreement on trade and economic cooperation and interaction in the customs area in Baku on Thursday. Estonian Foreign Minister Toomas Hendrik ILVES arrived in Azerbaijan on a two-day official visit on Wednesday. The Estonian Minister pledged that Tallinn supported Baku's efforts aimed at joining the Council of Europe. "Azerbaijan can be sure that Estonia is its good friend seeking to strengthen bilateral relations," he added. In the evening, the Estonian Foreign Minister was received by Azeri President Geidar ALIYEV.

New Azeri Bank To Open April 1st

· Azerbaijan's United Joint Stock Bank, formed from a merger of three state banks, will opens its doors and launch operations throughout the nation on April 1st. The bank's president Zakir ZEYNALOV said on Wednesday he hoped the bank, which received its license earlier this week, would eventually repay some of the debts it had inherited from the three banks. The International Monetary Fund and World Bank made the merger of Agroprombank, Prominvestbank and Savings Bank a condition for the release of future credits for Azerbaijan. "These three Azeri banks had difficulties fulfilling their obligations to clients due to large debts owed to them by state enterprises which were operating at a loss," ZEYNALOV said. Banking reform has been painfully slow. Privatization of its leading bank, the International Bank of Azerbaijan, has been delayed since 1998. ZEYNALOV said a commission was working to evaluate assets of the three banks before transfer

ring them to the new bank as well as to calculate the exact figure for debts, which are estimated at about 500 billion manats ($112 million). ZEYNALOV explained the bank's services, "We shall serve the treasury of Azerbaijan, the social fund, the labor fund as well as extra-budgetary funds and provide normal banking services for households and companies." The bank has charter capital of 22 billion manats.

Russia May Increase Kazakh Oil Shipments

· Russia is considering Kazakhstan requests to raise crude oil shipments by 10.5 percent to 12 million tons this year as Kazakhstan looks to increase exports via Transneft. In 1999, Russia agreed to transport 9.5 million tons of Kazakhstan crude and is prepared to boost that figure to 11 million this year. Kazakhstan has requested a further 1 million ton increase in its allocation. This request faces strong opposition from Russia's oil producers, as they compete for hard currency revenue from limited capacity at export outlets. The government will begin reviewing the latest request in the upcoming weeks.

Upcoming Events

March 2nd:

US Secretary of State Madeleine Albright meets with Russian Foreign Minister Igor Ivanov in London to discuss Chechnya.

Russian Deputy Prime Minister Ilya Kelbanov visits China.

March 16th to 17th:

Ukrainian Leonid Kuchma to visit Georgia.

March 23rd:

US House of Representatives hears testimony on Ukraine's misuse of IMF Funds.

March 26th:

Russian Presidential Elections

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



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