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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, April 17, 2000

Russian Federation


Putin-Blair Meet At Downing Street

· Russian President-elect Vladimir PUTIN and British Prime Minister Tony BLAIR met at 10 Downing Street in London today. British police boosted security as some 50 to 60 protesters upset by Russia's tough military campaign against Chechen rebels turned out in groups to demonstrate. They were shouting and waving banners demanding, "Stop the torture in Chechnya." The two leaders ignored the demonstrators as they shook hands and exchanged greetings, then went inside for talks and lunch. Ahead of the meeting, BLAIR spokesman Alastair CAMPBELL said, "The Prime Minister is not going to apologize for developing a good relationship with a new world leader…What we won't do is to allow the entirety of our relations with Russia...to be defined by one issue." PUTIN will also meet with business leaders and bankers, Foreign Minister Robin COOK, and be presented to Queen Elizabeth.

PUTIN wants to use his trip to Britain as a bridge-builder with the US, other western nations and institutions. He said he is seeking to create, "a good base for cooperation also of our western partners, cooperation based on a balance of interests." PUTIN said the new economic system is really operating in Russia. Instruments of the market economy do not merely exist but "have already proved their strength and helped overcome the consequences of the crisis quite promptly". Gross domestic product rose by 3.2 percent last year. Industrial growth in these areas ranged from 16 to 21 percent last year. The results of the first quarter of the current year are encouraging, too. The rates of growth of prices dropped by half. Inflation decreased to 0.6 percent in March 2000.

START II Submitted To Federation Council

· The Russian-US START II Treaty, ratified by the Russian State Duma on Friday, was submitted to the Federation Council for approval. The treaty will be discussed in the upper house of parliament on Wednesday. The Treaty will be considered by the Committee for Security and Defense as well as the Committee for International Affairs on Tuesday. A group of upper house members, led by Speaker Yegor STROYEV, will receive a group of US Senators on Monday evening. They will definitely touch on the START II treaty and on the future of the Anti-Ballistic Missile accord.

The treaty gives the US and Russia until 2007 to halve their nuclear arsenals to 3,000 to 3,5000 warheads each. President-elect Vladimir PUTIN said that it will not immediately scrap any nuclear ballistic missiles; but only decommission those missiles, which have already expired their life-service. He said, "not a single missile, not a single charge will be removed from duty until the expiration of the final guaranteed time of their use." PUTIN's comments appear to be aimed at the Communist Party, which vehemently opposed the treat, saying it was a serious threat to Russia's national security and would give the United States a major military advantage.

US President Bill CLINTON on Friday hailed the Duma's approval of the START II nuclear arms reduction treaty. He said, "START II will make our people safer and our partnership with a demo

Today's News Highlights


Putin Hints on New Premier

Russia Promises G-7 Reforms

UES Raises Rates

European Republics

Berzins Nominated For PM

Ukraine's Referendums Pass

South Caucasus & Central Asia

Ukraine-Georgian Generals Meet

Albright In Kazakhstan

Albright In Kyrgyzstan




April 17, 2000

Intercon's Daily

cratic Russia stronger…It will open the door to further significant steps to reduce nuclear arms and the nuclear danger." The President also said the latest action has paved the way for new talks on further arms reductions under START III. Another round of US-Russian negotiations on START III and the Anti-Ballistic Missile (ABM) Treaty opened in Geneva today. Due to Friday's approval, the START III talks will have more substance and may take the next step of proposing further cuts in nuclear arsenals. The Russian delegation to the consultations is led by Yuri KAPRALOV, director of the Foreign Ministry's security and disarmament department, and the US' delegation by John HOLUM, under secretary of state for arms control and security. The Russian side insists that strategic arms reduction is closely related to keeping restrictions on defense systems in place. The US has been pushing for a modification of the ABM Treaty to permit the development of a missile defense shield.

Putin Hints On New Premier

· Russian President-elect Vladimir PUTIN said Mikhail KASYANOV, the First Deputy Prime Minister and Finance Minister, is one of the potential candidates for the post of prime minister in his new Cabinet. PUTIN said he will form the new Cabinet after his May inauguration. He said during his visit to the United Kingdom that he plans to work closely with the new Cabinet. PUTIN also said the new government won't be a government of technocrats and that it will carry its own responsibilities. As Finance Minister, KASYANOV successfully negotiated an agreement with private creditors to reduce and extend repayment terms on Russia's debt.


Ruble = 28.5/$1.00 (NY rate)

Ruble = 28.85/$1.00 (CB rate)

Ruble = 27.52/1 euro (CB rate)

Russia Promises G-7 More Reforms

· The Group of Seven major industrial nations met in Washington DC on Saturday. Finance Ministers agreed that the outlook for the world economy was improving, but declined to address this week's sharp plunge in US stock markets. Members of the Group of Seven, Britain, Canada, France, Germany, Italy, Japan and the US, signed a joint statement on the state of the world economy. "Pros

pects for expansion in industrial countries and the world economy more generally continued to brighten...The underlying fundamentals of the expansion of the major economic areas have strengthened since our last meeting…Nonetheless, continued vigilance and further action are needed to promote a more balanced and therefore more sustainable pattern of growth among our economies." The Group of Seven nations also said, "The Russian economy has strengthened during the past year, offering a unique opportunity to move forward with reform by utilizing its high economic potential…However, fundamental economic reforms will be essential if this positive trend is to be sustained." The Group of Seven advised Russia to establish, "impartial rule of law" and "implementing structural reforms," and it stressed that multilateral and bilateral support should increasingly be focused on these areas. They also stated that they expect Russia to implement a program that would undertake structural reforms in the banking system and reduce the role of barter in the economy. Russian Finance Minister Mikhail KASYANOV promised that Russia will pursue deeper economic reforms. He also noted that although Russia wanted to build close links with international financial institutions, the country could get by even without additional loans. "Russia can leave this year without further borrowings. We're running a budget with a surplus." Russia finished the first quarter of the year with a budget surplus that was 0.8 percent of gross domestic product.


UES Raises Rates By 50 Percent

· Unified Energy Systems, Russia's monopoly electricity utility, plans to raise electricity rates by 50 percent to 55 percent this year. According to UES Chief Executive Anatoly CHUBAIS, UES will increase electricity output by using coal, hydroelectric and nuclear plants. UES will build up fuel stocks for the coming winter after problems with natural gas deliveries and the need to cut off supplies to some customers, CHUBAIS said, the agency reported. UES said it will cut power in the second quarter to some customers who haven't paid their bills to reduce costs after Gazprom, Russia's natural gas monopoly and biggest company, reduced gas supplies.

When you need to know it as it happens




April 17, 2000

Intercon's Daily

Gazprom On Gas Exports

· Russia's natural gas monopoly, Gazprom's chief executive officer Rem VYAKHIREV wants the gas firm to export over the next 30 years 2.7 trillion cubic meters of gas, or 6 percent of the total volume of the company's reserves. He said, "This is not a fatal amount for us. Our partners may be absolutely sure that we shall honor all our commitments…I'm afraid, I will never make any money selling gas in Russia." Gazprom has recently received the first 40 percent of "live money" [cash] from Russian consumers. Europe is still using its reserves of Algerian and Norwegian gas, which end in about seven to 10 years. VYAKHIREV added, "Time is playing into the hands of the gas sellers. Russia should keep as much gas as possible. Let's forget about the gas already sold. But what remains should be kept unspent for another 10 years."

LUKoil To Take Over Norsi Oil

· LUKoil, Russia's number one oil producer, has increased its pressure on Norsi Oil, a refinery holding based in central Russia. LUKoil is aiming to acquire Norsi's petrochemical assets. Norsi Oil and Sibirsko-Uralskaya Neftegazokhimicheskaya Kompaniya, the nation's number one gas refiner, have created Sibur-Neftekhim, which united the most lucrative petrochemical assets of Norsi refinery. LUKoil, which holds a 6 percent stake in Norsi Oil, attempted to cancel the creation of Sibur-Neftekhim. LUKoil earlier said that the oil company is interested in acquiring controlling stake in Norsi Oil, whose products could be supplied to Ukraine's Oriana Petrochemical Company for processing.

week due to differences on the privatization program, the People's Party, which has a majority in parliament, decided to let Latvia's Way, the second biggest party in Latvia, nominate its candidate to the post of the prime minister. The coalition agreed to try and create a new government, and possibly widen it to include the centrist New Party. SKELE's People's Party holds 24 seats. Latvia's Way holds 21 seats. Nationalist Fatherland and Freedom, a junior coalition partner, holds 16 seats, while the New Party has eight.

Kuchma's Powers Expanded By Positive Vote

· The Ukrainian Central Election Commission (CEC) has announced that the controversial weekend referendum passed with more that 80 percent. It said turnout was almost 79 percent, easily passing the 50 percent needed to make the poll valid. The main question expanded the powers of President Leonid KUCHMA to disband the parliament. KUCHMA had insisted he needed to increase his influence over parliament, which he has accused of stalling reforms. The parliament has the final word in approving constitutional changes, needed to put the referendum into effect. The CEC said that 81 percent of voters supported forming a two-chamber legislature to represent regional interests while 89 percent favored an end to deputies'' immunity from prosecution. Over 90 percent wanted the number of deputies cut from 450 to 300 and 84 percent agreed the President could dismiss the assembly if it did not pass a budget or form a majority. Opposition parties have slammed the vote as an attempt to put parliament into Kuchma's pocket and stifle democracy while rights watchdog the Council of Europe also objected to the referendum. The Council earlier this month threatened to suspend Ukraine unless new referendum legislation was passed. KUCHMA has been at odds with the legislature since he was first elected in 1994. US Secretary of State Madeleine ALBRIGHT gave support to the KUCHMA administration during her visit to Kiev on Friday. She said, "President KUCHMA and Prime Minister [Viktor] YUSHCHENKO clearly recognize that now is the time to attack old problems, such as energy reforms, with a new vigor." She stressed that Ukraine was at a, "very important point in its democratic development," alluding to Sunday's referendum. ALBRIGHT said the US and its allies would fund cash-strapped Ukraine's con

European Republics

Latvia's Way Nominates New PM

· Latvia's Way Party, a member of the collapsed coalition, has nominated Riga city mayor Andris BERZINS as a candidate for the post of the Latvian prime minister. BERZINS was elected Riga city mayor in March, 1997 and is one of the most popular politicians in Latvia, according to the results of public opinion polls. He has served in three previous Cabinets. Party spokeswoman Dais GULBE noted that he was nominated by a secret ballot on Sunday and that he is considered to be, "one of the team." After the resignation of the government and prime minister Andris SKELE last

When you need to know it as it happens




April 17, 2000

Intercon's Daily

tinued participation in NATO's Kosovo peacekeeping mission and announced a joint conference in Kiev in June in trafficking in women and children.

South Caucasus & Central Asia

Ukrainian-Georgian Generals To Meet

· Head of Ukrainian Armed Forces General Staff Vladimir SHKICHENKO is scheduled to pay his first official visit to Georgia Wednesday, April 19th. Prime News Agency reported that the agreement on General SHKICHENKO's visit to Tbilisi was achieved during the visit of the deputy defense minister of Georgia Grigol KATAMADZE to Kiev. Negotiations of Vladimir SHKICHENKO with the head of Georgian Armed Forces General staff Jony PIRTSKHALAISHVILI are on the agenda of the visit. Later this month, PIRTSKHALAISHVILI will visit the US and tour the national guard facilities in the state of Georgia, Fort Bragg, and the Army War College in Carlisle, Pennsylvania.

Arms Exporter Killed By Gun Fire

· Talgat IBRAYEV, the head of Kazspetsexport a state-owned arms export firm, died in a spray of machine gun fire early Saturday morning in Kazakhstan's commercial capital Almaty. The police said IBRAYEV's driver was injured in the attack and an investigation had been launched. No further details were given. The shooting took place hours before US Secretary of State Madeleine ALBRIGHT held talks with Kazakh President Nursultan NAZARBAYEV. ALBRIGHT said their talks included discussion of a scandal involving Soviet-made warplanes being sold to North Korea. Kazakhstan possesses an ageing arsenal of Soviet-era weapons, which are sometimes sold abroad. Last year, a scandal broke when around 40 MiG-21 fighters turned up in North Korea, regarded by Washington as a "rogue" state. ALBRIGHT expressed "surprise and disappointment" over the MiG case and the recent promotion of a senior Kazakh official, who played a key role in the illegal sale. Kazakhstan has said the fighter transfer was

a "chance" occurrence, illegally organized by a private firm. ALBRIGHT also assured NAZARBAYEV that the US will provide an additional $3 million for measures to bolster Kazakhstan's security. She also said that Washington hopes Kazakhstan will commit to exporting oil through the Baku-Ceyhan pipeline. ALBRIGHT also met for over an hour with leading members of several pro-government and three Kazakh opposition parties.

Albright Pushes Democracy In Kyrgyz

· US Secretary of State Madeleine ALBRIGHT on Sunday flew from Astana to Bishkek, Kyrgyzstan on the second leg of her Central Asian tour. She met with President Askar AKAYEV and senior security officials to discuss bilateral relations and the threat of international terrorism, organized crime, and drug trafficking. ALBRIGHT also brought $3 million in aid to boost border patrols. Tajik rebels invaded Kyrgyzstan last summer. One US official said, "The Secretary is bringing with her a package of security measures to show them that we are committed to their sovereignty and independence not just in words, but in deeds." ALBRIGHT also expressed deep concern over the procedural violations during the parliamentary elections in March. She also described as "a huge mistake" the arrest and detention of opposition Ar-Namys party chairman Felix KULOV, who is believed to be the primary challenger to AKAYEV in the upcoming presidential elections. ALBRIGHT added that it is wrong to think of political opponents in a criminal light. AKAYEV for his part pledged to ensure that no such violations occur during the presidential elections later this year. He also promised to seek the release of KULOV before the presidential election. He also announced that he would form a working group so that politicians, the OSCE, non-governmental organizations and newly elected members of parliament could discuss the issues. ALBRIGHT said Washington would "watch and wait and monitor" to make sure AKAYEV fulfills his promises. She added the presidential election will determine if Kyrgyzstan goes along a path to "stability or chaotic instability."

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