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

Monday, May 1, 2000


had been set free under the amnesty. The Russians have never reported how many people have been arrested since federal forces moved into Chechnya. Russia refuses to hold peace talks with elected Chechen President Aslan MASKHADOV, saying he has no control over warlords who are leading the rebel attacks.

Nostalgic Russians March In May Day Parades

· Thousands of nostalgic Russians waved red flags and banners and held portraits of Soviet dictator Josef STALIN during a march in Moscow. Representatives of trade unions and Communists rallied to mark May Day in Moscow and other cities across Russia. Pensioners and those hit by increased gas and electricity prices took to the streets. Pensioner Dina GULICHEVA said, "We were all free and happy then," referring to the Soviet-era. She adds, "These democrats have taken everything away from me." The focus of the march shifted from calls for former president Boris YELTSIN to step down to demands for pension payments and an increase of wages measures to help domestic producers meet the demands of market economics. Moscow Mayor Yuri LUZHKOV joined the trade unions in their march on Moscow's main thoroughfare, Tverskaya Street. The Communist Party and other leftists held their own procession, with Soviet songs, dancing, and skits criticizing capitalist society. Communist Party leader Gennady ZYUGANOV in a speech denounced parliament's ratification of the

Russian Federation

Politics

Chechen Rebels Inflict More Harm To Troops

· Chechen rebels launched new attacks against Russian federal troops over the weekend, targeting police stations, check points, and Russia's main military base in Chechnya. The rebels also attacked an armored column, leaving many Russian soldiers dead. Rebel spokesman Movladi UDUGOV said rebels had blown up mines and then used grenade launchers and flame throwers to open fire on the armored convoy, which had been escorted by helicopter gunships. He said two armored vehicles had been destroyed in the hour-long battle and put separatist losses at four wounded, one in serious condition. Approximately, 13 Russian soldiers were killed after an attack on Sunday near Backi-Yurt east of Grozny.

Russian forces responded by stepping up its bombing campaign in southern Chechnya, where most of the rebels are concentrated. Su-24 bombers and Su-25 attack jets had flown 24 combat missions since Saturday, the military command's service said. Mi-24 helicopter gunships made more than 40 flights to provide air cover for ground troops. Russian commanders claims that heavy air and artillery strikes in past 24 hours destroyed nine rebel camps and a number of other fortified positions.

On Sunday, Russia granted amnesty to 31 former rebels a detention camp in northern Chechnya. The releases fell under an amnesty order that said rebels not found guilty of serious crimes would be freed if they gave up their weapons. "The goodwill action has a favorable influence on the general situation in Chechnya and eases the social situation," said Russia's prosecutor general in Chechnya, Vladimir KRAVCHENKO. He noted that 105 rebels

Today's News Highlights

Russia

Tax Collection Exceeds Target

Tabak Opens Moscow Office

MSDW, CSFB Win Advisor Role

European Republics

Officers Sacked -Missile Mistake

Ukraine's CB Reserves Fall

South Caucasus & Central Asia

Georgian Presid. Inauguration

Baku-Ceyhan Package Initialed

Police Club Azeri Protestors

Politics-Economics-Business

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Monday

May 1, 2000

Intercon's Daily

START-II disarmament Treaty. In St. Petersburg, marchers pledged to "build a positive image" for the city. Leading the rally was governor Vladimir YAKOVLEV, running for re-election this month.

Babitsky Wins Prize For War Coverage

· The Organization for Security And Cooperation in Europe (OSCE) has selected Radio Free Liberty journalist Andrei BABITSKY the winner of a prestigious $20,000 Award for Journalism and Democracy, based on his coverage of Chechnya during the military conflict. The OSCE said, BABITSKY, "has been one of the very few critical voices commenting on the situation and recent developments in the region." His controversial coverage has been recognized for its "objectivity and fairness." The OSCE added, "[He] reported on the conflict in Chechnya with complete disregard for his personal safety," reporting from Chechen rebel position. The Russian military arrested BABITSKY in January claiming not only that he did not have the proper accreditation papers, but also that he was acting in collusion with the rebels. Military commanders held BABITSKY for several weeks, only to hand him over to a group of rebels. In late February, BABITSKY resurface in Daghestan and was re-arrested by Federal Security Service officers. He was then transferred to Moscow and later was released.

Economy

Ruble = 28.46/$1.00 (NY rate)

Ruble = 28.40/$1.00 (CB rate)

Ruble = 26.03/1 euro (CB rate)

Money Supply Rises By 3.5 Billion Rubles

· Russia's money supply expanded by 3.5 billion rubles ($123 million) in the week ending April 24th, according to a Central Bank report. The money supply, which includes cash currency in circulation plus required reserves, rose to 339.5 billion rubles from 336 billion rubles on April 17th. Russian foreign currency and gold reserves totaled $17 billion on April 21st, the highest level since the government's Treasury debt default in August, 1998. The Russian ruble for delivery today rose to 28.40 against the dollar in Moscow trading from 28.43 to the dollar.

Tax Collection Exceeds Target

· Russia's Tax Ministry has already collected 42.4 billion rubles ($1.5 billion) in April, exceeding its 42

billion rubles budget target, Tax Minister Alexander POCHINOK said Thursday. POCHINOK pointed out that Russian gas monopoly Gazprom paid 12 billion rubles of taxes in April, while another main taxpayer, Unified Energy System (UES), paid only 1 billion rubles of a planned 1.5 billion rubles. POCHINOK earlier said April would be the most successful month in the history of the ministry as tax collection. He predicted that tax collection would hit 50 billion rubles. The March tax total reached 47 billion rubles. The Tax Ministry collected 41.5 billion rubles in February and 37.5 billion rubles in January.

Business

Uralelektromed Cuts Exports

· Uralelektromed, Russia's second-largest copper producer, will more than halve its exports this year due to rising domestic demand and a wish to avoid price volatility on the London Metals Exchange, The Wall Street Journal reported. "More than half of the 300,000 metric tons we plan to produce this year will go to the domestic market." In March, Andrei KOZITSYN, general manager of Urals Mining and Metallurgy Co., which incorporates Uralelektromed, said it planned to produce 280,000 tons of copper this year, of which 70 percent would be exported. Uralelektromed produced about 270,000 tons of copper last year.

Tabak Opens Moscow Office

· Austria Tabak International, a subsidiary of Austria Tabakwerke, Austria's largest maker and retailer of tobacco products, will open an office in Moscow to launch local production of its Memphis brand cigarettes in May. The company said it aims to manufacture 40 million cigarettes a month at a plant just outside Moscow. "We are enlarging our cigarette operations with local production," said Gunter PANHOFER, managing director of Austria Tabak International. The Vienna-based tobacco producer said sales abroad surged 70 percent in the first quarter of 2000; profit fell 25 percent last year to 106.8 million euros ($98 million) in the absence of one-time gains that raised profit the previous year.

MSDW, CSFB To Advise on LUKoil Sale

· Morgan Stanley Dean Witter (MSDW) and Credit Suisse First Boston (CSFB) have won a tender to advise the Russian government on the sale of 4.5

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percent to 7 percent of LUKoil, according to a state property fund spokesman on Friday. The government owns 15 percent of Russia's largest oil producer, and plans to sell part of it by year's end. The government is considering selling the stake in the form of foreign-trading American Depositary Receipts. "If a decision is taken to sell the shares abroad, the tender winners will have the right to participate in [arranging] the sale," the spokesman said. LUKoil has also asked its annual meeting to approve a share issue, part of which would be sold as level three American Depositary Receipts, listed on the New York Stock Exchange, in cooperation with the government sale.

swapped more than $2.3 billion of its debts for new seven-year Eurobonds. It paid $230 million of accrued interest on previous Eurobonds. YAREMENKO, speaking at a banking conference of ex-Soviet states, said the Central Bank had bought for reserves a total of $550 million since January, including $117 million in April. The gryvnia, around 5.40 per dollar, has firmed this month from about 5.50 in March. YAREMENKO said the gryvnia should strengthen further, given a planned restructuring of debt to sovereign creditors, expected financing by international lenders, revenues from cash sell-offs later this year and an improving foreign trade balance, Reuters reported. He said the authorities expects that the International Monetary Fund, which froze lending over slow reforms last September, will resume lending in July.

South Caucasus & Central Asia

Shevardnadze Takes Presidential Oath

· Georgia celebrated President Eduard SHEVARDNADZE's inauguration with a parade and formal ceremony, at which he was sworn in to office for a second term on Sunday. Avtandil DEMETRASHVILI, chairman of the Constitutional court administered the presidential oath in a ceremony held outside the parliament building. SHEVARDNADZE promised he would turn the country's slumping economy around over the next five years of his presidency. SHEVARDNADZE easily won a second term in elections on April 9th. The inauguration coincided with Orthodox Easter Sunday, which SHEVARDNADZE noted was, "a sign from above…that our nation is in for revival and flowering." Catalikos-Patriarch Ilia II, the leader of the Georgian church, congratulated the President and said he would be, "a symbol of a peaceful and strong Georgia as before." In a speech after his inauguration, SHEVARDNADZE promised to purge his government of corrupt ministers and to launch a relentless battle against graft. Under Georgian law, the cabinet resigns en masse after a presidential election. SHEVARDNADZE hinted many ministers would not be back in the next cabinet. "We will get rid of those who can't deal with their responsibilities and those who are mixed up in dirty affairs," he said. SHEVARDNADZE will also focus on a new economic plan and enforce a policy of paying wages and pensions on time. Collecting targeted figures of

European Republics

Ukraine Sacks Officers For Missile Mistake

· Ukraine's Defense Ministry has fired two officers and demoted a third because of a defective missile that slammed into an apartment building during training exercises in late April, killing three people. Ukraine's Defense Minister Oleksandr KUZMUK said he sacked the deputy commander of artillery forces Colonel Volodymyr TERESHCHENKO, "for gaps in organization and preparation of the missile firing exercises and ignoring safety measures." Another missile forces officer, Colonel Heorhiy KORNEYEV, was also fired because he failed to give, "an unbiased report on training results" to the ministry. The first deputy commander of northern artillery forces Valeriy PTASHYNSKY was demoted by one rank for "misleading the Defense Ministry about exercise results." Military experts determined that a missile test-fired from a training range 90 kilometers (56 miles) from the town of Brovary on April 20th veered off-course due to defects in its energy supply system. Military officials initially denied that the missile hit the building.

Ukraine's CB Reserves Fall To $993 Million

· The Ukrainian Central Bank's gross hard currency reserves fell from $1.211 billion at the start of this year to $993.4 million as of April 21st, a senior bank official said on Friday. Serhiy YAREMENKO, head of the Central Bank's currency regulation department, said the fall was due to a recent payment of $230 million to Ukraine's private creditors. Earlier this month, the government reached a restructuring agreement with private investors and

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tax revenues is also an aim of the new administration. SHEVARDNADZE has said a major revenue shortfall threatens the state's existence. He also vowed to work to solve conflicts with separatists in South Ossetia and Abkhazia.

Baku-Ceyhan Host Government Agmt. Initialed

· On Friday in Washington, Georgian Foreign Minister Irakly MENAGARISHVILI, Azeri Foreign Minister Vilayat QULIYEV and Turkish Deputy Foreign Minister Murat BALKAN, representing their respective governments, initialed the host government agreements, establishing the legal framework for investment in the Baku-Tbilisi-Ceyhan oil pipeline. The package of agreements forms the bases of an offer the three governments can propose to potential investors in the pipeline. The pipeline is estimated to cost $2.7 billion.

US Secretary of State Madeleine ALBRIGHT and US Ambassador John WOLF attended the ceremony at the State Department. She said the package of agreements was, "a major step forward in the evolution of this east-west energy corridor." US President Bill CLINTON said, "I look forward to the next phase of this effort, when companies from the United States, Western Europe and Russia will work with those of Azerbaijan, Georgia, Kazakhstan and Turkey to transform legal frameworks into commercial reality." The next step would be ratification of the agreements by the parliaments of the three countries. Georgian President Eduard SHEVARDNADZE, in his inauguration address on Sunday, praised the Baku-Ceyhan agreement as being the highlight of his first term in office. He further thanked Foreign Minister Irakly MENAGARISHVILI, US Ambassador Tedo JAPARIDZE, and Georgian International Oil Corporation (GIOC) president Gia CHANTURIA for their contribution in bringing the agreement to a successful conclusion. QULIYEV said, "the significance of the Main Export Pipeline goes beyond developing vast economic potential of the Caspian; this project will make a major contribution in pro

moting regional cooperation, securing peace, stability and prosperity for our region." BALKAN said, "There was one link missing and today we have been able to conclude that link... Now we have a package which we believe is commercially viable and very attractive." BP Amoco, Exxon Mobil Corp., Unocal Corp. and other foreign companies have contracts to drill oil in the Caspian Sea. Some companies with contracts in the region have said they favor waiting for more oil reserves to be proven before participating in the Baku-Ceyhan pipeline. The pipeline construction plan may be finished by the end of this year, and the pipeline is scheduled to be completed by 2004.

Azeri Authorities Club Protestors

· Approximately, 200 people were arrested and 60 wounded in an opposition protest in Baku over the weekend, when police with batons violently disperse about 1,000 demonstrators. Police figures report that 46 people were detained and 34 policemen wounded in the clashes. Opposition leaders said Arif GADZHIYEV, secretary of the Musavat party, Panakh GUSEINOV, chair of the People's Party of Azerbaijan, and another prominent opposition leader, Fazil GAZANFAROGLY, were detained. They were sentenced to 13 days in jail. Organizers could face up to six years on more serious charges of defying a ban on protests. The Azeri Popular Front said in a statement that 15 of its members, including several leaders, were arrested during the protest on Saturday. It said criminal cases have been opened against three of the arrested.

Protestors were demanding that parliamentary elections to be held this fall will be free and fair and without government intimidation or fraud. A presidential spokesman dismissed opposition allegations that a parliamentary election could be rigged. Azeri authorities had refused to sanction the march around the Central Fizuli Square, but said the demonstration could take place on the outskirts of the city. Protestors broke through the police lines, instigating the clashes.


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

Daily Report on Russia is published Monday-Friday (excluding holidays), by Intercon International, USA. Subscription price for Washington, D.C. Metro area: $950.00 per year. A discount is

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