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

Tuesday, June 20, 2000

appointed by Russian President Vladimir PUTIN to represent Chechnya. At least 10 of Chechnya's 18 districts have written to PUTIN claiming that KADYROV is not an acceptable candidate for that post and that they will not work with him. They claim he contributed to "the deaths of tens of thousands of civilians and the destruction of the republic during the era of General Djokhar DUDAYEV," and the war of 1994 to 1996. KADYROV claims that PUTIN's former representative in Chechnya, Nikolai KOSHMAN, and others are trying to push events in the region towards what he called a repeat of 1996, when Moscow installed a leader hated by Chechens. "The process of moving the administrative functions of the Chechen republic from the government's representative...to a head of the Chechen Republic is mired in clear sabotage."

Meanwhile, KADYROV has tried to reach out to Chechen rebels calling on them to lay down their arms and make peace. He has reiterated his intention to discuss peaceful resolutions with Chechen President Aslan MASKHADOV, field commander Ruslan GELAYEV, and "all those who wish to end this war," but not with "bandits who...took hostages." KADYROV has promised MASKHADOV protection, provided he resigns voluntarily and apologizes to the Chechen people for betraying their confidence in him. He is also appealing to Chechen field commanders to offer suggestions on how to restore peace and stability. KADYROV plans to offer government posts to several mem

Russian Federation

Politics

Court Declines To Rule On Gusinsky's Appeal

· A Moscow District Court today decided not to rule on an appeal filed by media giant Vladimir GUSINSKY's lawyers claiming that he had been unlawfully jailed last Wednesday. GUSINSKY's lawyer Genri REZNIK explained the court ruled that since GUSINSKY had been released there was no longer a need to decide whether his detention had been legal. GUSINSKY, formally charged on Friday with fraud and embezzlement, was released following a promise not to leave the Moscow during the investigation. Pressure from the nation's other leading oligarchs and the international community, citing concerns of restrictions on the press, as well as Russian President Vladimir PUTIN's own admission that the arrest and detention was "excessive" helped lead to his release. REZNIK said, "[GUSINSKY was released] in a cowardly way because they were afraid to answer our complaint." His legal team argued that the arrest was illegal because authorities can only detain a suspect if he is deemed dangerous; he might flee; or his freedom would jeopardize an investigation. REZNIK said the legal team would appeal the court's decision not to rule on the case. Deputies in the Russian State Duma will debate a bill sponsored by two liberal parties that would call on President Vladimir PUTIN to sack Prosecutor-General Vladimir USTINOV over the GUSINSKY affair. USTINOV has not commented on the case. PUTIN claims he will not intervene with the prosecutor's office because it should remain politically independent.

Kadryov Wanted Dead Or Alive

· Chechen Vice President Vakha ARSANOV on Friday offered a reward of $250,000 for the killing or capture of Chechen Mufti Akhmed-hadji KADYROV,

Today's News Highlights

Russia

Russia To Review Econ. Plan

LUKoil Welcomes Kalyuzhny

European Republics

Nokia Opens Ukrainian Office

EBRD Invests In Mobile Industry

South Caucasus & Central Asia

Georgia Clarifies Base Property

New Armenian Chief Of Staff

Robertson To Visit Kazakhstan

Peacekeepers In Tajik Disband

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Tuesday

June 20, 2000

Intercon's Daily

bers of MASKHADOV's cabinet, including first deputy premiers Nuzhen DAAYEV and Musa DOSHUKAEV. KADYROV appealed by name to his rivals for the post of interim Chechen leader, State Council chairman Malik SAIDULLAYEV, Moscow businessman and former Russian presidential candidate Umar DZHABRAILOV and former militia commander Beslan GAANTEMIROV, offering them jobs, "if they are interested in helping their people," RFE\RL Newsline reported. GANTAMIROV has been convicted of stealing funds earmarked for reconstruction. MASKHADOV has ruled out talks with a Kremlin-picked man.

Economy

Ruble = 28.26/$1.00 (NY rate)

Ruble = 28.24/$1.00 (CB rate)

Ruble =26.99/1 euro (CB rate)

Russia To Consider Economic Plan

· The Russian government will consider a short-term economic program on June 28^th. The 18-month plan, according to Trade and Economic Development Minister German GREF, aims to reform the tax system and boost the nation's investment climate. He added that the Cabinet had wanted to review a 10-year program this week. "But after detailed work we agreed to prepare a precise quarterly action plan for the next 18 months," he said. The plan also calls for greater state influence over so-called natural monopolies, mainly energy production and transport firms. "This concerns tariff regulation and control over investment in companies," GREF said. It is believed that the plan will also allow the Central Bank to continue to set quotas for foreign banks in Russia. The plan would raise the current maximum 12 percent share in total bank capital. GREF also noted that the plan would call for a gradual reduction in import tariffs, which may help Russia gain entry into the World Trade Organization (WTO).

VEB To Pay $279 Million Bond Coupons

· Russia's Finance Ministry has instructed Vneshekonombank (VEB), the state foreign debt agent, to transfer $279.4 million to pay interest on government Eurobonds coming due this week. The funds are to be transferred on June 23^rd, a ministry official told Reuters. Russia has to pay $159.4 million in interest on its 2028 Eurobond on June 24^th

and a $120 million coupon on its 2007 Eurobond on June 26^th.

Russia Won't Attend OPEC Meeting

· Russian Energy Minister Alexander GAVRIN will not attend the meeting of the Organization of the Petroleum Exporting Countries (OPEC), which opens on Wednesday. He said, "We can only watch, but we have not yet been invited to attend the meeting as an observer." He added that although he would not attend himself, somebody from the Energy Ministry would be in Vienna during the meeting. Russia is the world's third largest oil producer with output of over six million barrels per day but has never been a member of OPEC.

Business

Gazprom Head Announces Retirement In 2001

· While in Berlin in connection with the presidential summit, Gazprom Chairman Rem VYAKHIREV announced plans for his retirement in 2001. He added, "If someone is very eager, I am ready to retire even now....But I don't see a need to leave my post until my contract expires in 2001, because so far there is no person who can efficiently replace me without damage to Gazprom." VYAKHIREV also said that he has a successor in mind "from within Gazprom, but [that individual] has not matured yet." Kommersant-Daily speculated the next day that Mezhregiongaz head Valentin NIKISHIN is the most likely candidate, having strengthened that company significantly over the past two years. This morning VYAKHIREV met with President Vladimir PUTIN. Some industry specialists speculate that the two will discuss Gazprom's differences with United Energy System of Russia (UES). Prior to his visit to Germany, PUTIN met with UES Chairman Anatoly CHUBAIS.

Norilsk Nickel Plans To Expand Network

· Norilsk Nickel, the world's second-largest palladium producer, said it plans to develop a marketing network outside of Russia, according to Chairman Yuri KOTLYAR. Norilsk may buy the London-based Norimet metal trading company, which is the general partner of the Russian company. The final decision on the purchase will be made either by the company's board or its shareholders at the annual meeting on June 23^rd. Norilsk Nickel earlier proposed to set up a trading company

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between Russia's precious metals suppliers to coordinate overseas sales.

LUKoil Supports Kalyuzhny As Caspian Envoy

· Vagit ALEKPEROV, head of Russia's largest oil company LUKoil, welcomed the appointment of former fuel and energy minister and deputy prime minister Viktor KALYUZHNY as special Russian presidential envoy in the Caspian region. In an interview with Nezavisimaya Gazeta ALKEPEROV said, "The United States long ago defined those regions in which they have an interest. And they already have a special representative in the Caspian. Why shouldn't the Caspian interest Russia?" He described KALYUZHNY as, "the best minister" for the job. ALEKPEROV further pointed out that having a single representative in the region would end the conflicts of interest between the three Russian bodies¾the foreign, natural resources and energy ministries¾which now look after Russian interests there, Reuters reported.

NAPETVARIDZE on Friday said that Georgia will not lay claim to any of the equipment or armaments to be withdrawn from Russia's Gudauta and Vaziani military bases on its territory. He explained that Georgia will demand compensation for equipment, valued at several billion dollars, removed from Georgia to Russia in the early 1990s. Georgian parliamentary Defense and Security Committee Chairman Revaz ADAMIA took issue with senior Russian Defense Ministry official Colonel General Leonid IVASHOV's statement that Georgia has no legal claim on Russian military equipment. ADAMIA pointed out that immovable property on the Russian bases is the property of Georgia, according to the Vienna Convention.

Deputy To Receive Protection After Threats

· Georgian parliamentary speaker Zurab ZHVANIA on Friday asked the Interior Ministry to provide protection for parliamentary deputy Temur JGUSHIA and his family, after receiving "open threats." JGUSHIA had accused Georgian guerrillas of involvement in smuggling goods from Abkhazia to Georgia, the RFE/RL Newsline's Caucasus Press reported. The following day, Abkhaz parliament in exile chairman Tamaz NADAREISHVILI, whom JGUSHIA claimed condones the guerrillas' smuggling activities, appealed to Georgian President Eduard SHEVARDNADZE to take measures to halt the smuggling and to punish "slanderers."

New Armenian Chief of Staff

· Artashes TUMANYAN has been appointed as the chief of the Armenian president's staff. Prior to this appointment he served first deputy foreign minister of Armenia since September 1999. In 1997 to 1999, he headed the Armenian tax inspection and was a presidential adviser for the industrial infrastructure, budget and relations with the parliament. From 1992 to 1995, he served as deputy speaker to the parliament. In 1990, TUMANYAN was elected as a parliament deputy and a deputy head of the parliament commission for finance, credits and budget.

Azeri's Privatization Plan Gets Final Touches

· The privatization plan for Azerbaijan's state assets is receiving its final touches before being released to foreign investors. It is still unclear whether the plan will include oil and telecommunication assets. At a press conference on Monday, the presidential administration said that the long-

European Republics

Nokia Opens Ukrainian Office

· Nokia, the world's biggest cellular-phone maker, opened an office in Ukraine. The office currently employs four people and reports to Nokia's regional office based in Warsaw. The European Bank for Reconstruction and Development said earlier this month it believed there was a, "substantial room" for growth in the Ukrainian mobile phone sector, as less than 1 percent of the population subscribes to such services, compared with over 3 percent in Romania, over 8 percent in Poland and over 12 percent in the Czech Republic.

EBRD To Invest In Mobile Phone Industry

· The European Bank for Reconstruction and Development (EBRD) announced on Thursday it plans to invest $34 million in the Kyivstar GSM mobile phone company. Kyivstar has 120,000 customers, or 29 percent of the mobile phone market in Ukraine. The bank said the investment is aimed at increasing competition in the country's private sector.

South Caucasus & Central Asia

Georgia Clarifies Division Of Property

· Georgian Foreign Ministry spokesman Avtandil

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awaited privatization program, to cover a three-year period, could be accepted by the end of June. Head of the economic policy department at the presidential administration Mayil RAGIMOV said, "It should all be ready by the end of June." President Geidar ALIYEV is expected to approve the program in the next several days. Azeri privatization virtually ground to a halt last year as a plan to transfer prized state assets such as state oil company Socar, telecommunications and the state airline AZAL to private ownership, was slow in going to parliament for approval, Reuters reported. The program is structured so that ALIYEV can decide the exact amount of shares to be sold off, the proportion of cash sales and the timetable for the sell-off of each enterprise. The new bill would remove some restrictions on foreign participation in the process and allows foreign companies working in Azerbaijan to buy privatization vouchers without being required to buy options in order to use the cheques.

Life-Long Powers To Be Debated

· Later this month, Kazakhstan's parliament will debate a pro-presidential Civic Party proposal to give President Nursultan NAZARBAYEV certain powers even when he is no longer head of the oil-rich state. Those powers would include the right to address the nation, parliament, government bodies, and officials on key initiatives; to lead the Peoples' Assembly; to be a member of the Kazakh National Security Council; to award an annual prize for peace and progress; to make suggestions to future presidents on appointments to and dismissals from official positions; and to advise presidents on declaring a state of war or emergency. Deputies agreed to discuss the measures twice before the end of the month. It is possible that a vote could follow. According to Reuters, Communist Party leader Serikbolsyn ABDILDIN condemned the draft bill as unconstitutional. The West and international monitoring agencies have condemned NAZARBAYEV for tightening his grip on power and stifling pluralism. The Organization for Security and Cooperation in Europe refused to observe

Kazakhstan's presidential election in January, 1999, after NAZARBAYEV's main rival, former Prime Minister Akezhan KAZHEGELDIN, was barred on a technicality.

NATO's Robertson To Visit Kazakhstan

· NATO Secretary-General George ROBERTSON will pay a visit to Kazakhstan on July 4^th. Head of the Press Service of the Kazakh Foreign Ministry Amangeldy TAZHENOV announced today that the NATO Secretary-General would visit Kazakhstan in the course of his tour of the five Central Asian countries. He also said that ROBERTSON would meet Kazakh President Nursultan NAZARBAYEV and some other high-ranking officials. It is possible that Kazakhstan's cooperation with NATO in accordance with the Partnership for Peace Program would be discussed during the visit.

Peacekeepers In Tajikistan To Be Disbanded

· Russian Senior General Leonid IVASHOV, head of the defense ministry's international relations department, said that Moscow will disband its Russian peacekeepers, marking three years after a peace deal ended a vicious civil war. Russian troops will be re-deployed into law enforcement and anti-terrorist activities. The peacekeepers, estimated to number 6,000-8,000, operate under the 201st motorized division. They are separate from a Russian border security force numbering around 11,000, deployed along the Tajik-Afghan frontier to counter the threat of terrorism and religious extremism. IVASHOV did not indicate if any forces would be withdrawn. Early Monday morning a bomb exploded in Dushanbe in a building used by Russian border troops. No injuries were reported. The previous day, police located a bomb concealed under a railroad bridge in the city and defused it 15 minutes before it was due to explode.

The Daily Report on Russia and FSU

will not be published June 26th through July 4th

in observance of Intercon's summer break and

in celebration of Independence Day.

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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