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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Thursday, September 7, 2000

Russian Federation


AP Reporter Beaten In Chechnya

· An Associated Press reporter, Ruslan MUSAYEV who is an ethnic Chechen, was detained, beaten, and held overnight in a covered pit by Russian troops in Grozny. The incident came amid tight security to ward off anticipated rebel attacks on Wednesday's anniversary of Chechnya's 1991 declaration of independence, the Associated Press reported. MUSAYEV was shopping in a marketplace, when Russian authorities stopped him and demanded his documents. MUSAYEV's passport does not show him as registered as a resident of Grozny, so the servicemen took him to a military base at Khankala. The reporter suffered bruised ribs and spent the night in a pit with four other detained Chechen men. After being forced to turn over $600 he had hidden in his clothes and his gold watch, police took MUSAYEV on a military truck to the border with Ingushetia and then released him.

Grenade Attack Injures 16 In Moscow

· Sixteen people were injured early today when a grenade exploded on a Moscow sidewalk near a line of prostitutes on Bolshaya Sukharevskaya Street. NTV Television reported that eight people were hospitalized and one remains in a serious condition. The station also said police had detained five people who were being investigated for a possible role in the attack. A detective investigating the case told NTV that the blast looked like a settling of accounts between rival criminal gangs rather than an act of terrorism.

Ostankino Tower Damage Estimated At $40M

· Anvar SHAMUZAFAROV, chairman of the Russian State Construction Committee has estimated that repairing the Ostankino Tower, which acts as

a major communication tower for Moscow, will cost at least $40 million. The tower was damaged by a devastating fire, which broke out on August 27th. The damage caused 15 million people to be without television broadcasts for three days. Top priorities will be repairing elevators and the steel cables that support the 1,771-foot Ostankino Tower. It is unclear how much the government is able to contribute to the repairs. Despite the damage, SHAMUZAFAROV insisted that the structure was stable. "The Ostankino Tower is a work of genius and will reach the same age as the Pyramids of Egypt," he said on national television. Russian authorities insist that a spark from a short circuit caused the fire.

On Tuesday, a spokesman for Chechnya's rebel President Aslan MASKHADOV claimed responsibility for the fire. "The fire was a very successful action that our special units carried out." The groups said that the tower was a target because, "that's where all the anti-Chechen propaganda was broadcast from" to Russia and the world. Federal Security Service officials deny that Chechen terrorism caused the fire.

Rus-US Sign Plutonium Deal

· Russia and the US have formally signed a deal under which both countries will destroy a total of 68 tons of weapons-grade plutonium. A government statement said that US Vice-President Al GORE signed the agreement in Washington on August 29th and

Today's News Highlights


WB To Resume Loan Talks

Gazprom Pipeline Bursts

Tymen May Win Iranian Contract

European Republics

Lith. August Joblessness Rises

EBRD To Lend $100M

Ukraine To Increase Oil Supplies

South Caucasus & Central Asia

Wolf Supports MEP Project

Kazzinc To Open New Deposits




September 7, 2000

Intercon's Daily

Russian Prime Minister Mikhail KASYANOV signed it in Moscow on Friday, Reuters reported. The deal, aimed at reducing the nuclear threat, was agreed between Russian President Vladimir PUTIN and US President Bill CLINTON during their summit in Moscow in June. US expert have said it takes only a small amount, six to eight kg (13 to 18 lb), of the metal to make a powerful bomb. "The agreement stipulates that the activities of Russia and the United states connected with the destruction of weapons-grade plutonium will be open for the international community and will be under the control of the International Atomic Energy Agency (IAEA)," the statement said.

Russia will release 34 tons of weapon-grade plutonium in the process of nuclear disarmament and Atomic Energy Minister Yevgeny ADAMOV estimated its price in fuel equivalent after utilization at over $10 billion. ADAMOV said that, "the total nuclear weapons reduction in Russia fully meets the START-2 commitments which Moscow observed even before the treaty was ratified." He pointed out that the treaty called for necessary funds to be provided; these funds are estimated to be up to $2 billion. PUTIN and CLINTON are due to meet on the sidelines of the UN Millennium Summit in New York this week.

UK Offers Nuclear Clean Up Funding

· Britain on August 27th pledged to grant 80 million pounds ($118 million) to help the former Soviet Union deal with nuclear safety issues. "Nuclear hazards do not recognize international boundaries," Foreign Secretary Robin COOK said in a statement. "The countries of the former Soviet Union face enormous nuclear problems that affect the lives of us all and these problems need to be urgently addressed by the whole international community," Reuters reported. A Foreign Office official said the Cold War had left Russia with large stocks of weapons grade nuclear materials, which need to be safely stored. He said a further 12 million pounds was being allocated to help deal with chemical and biological weapons stocks and facilities. "This new tranche of money will almost triple existing spending and widen the scope of the support that we are able to give," COOK said. He first announced a package of assistance when visiting Murmansk last year.


Ruble = 27.88/$1.00 (NY rate)

Ruble = 27.85/$1.00 (CB rate)

Ruble = 24.33/1 euro (CB rate)

World Bank To Resume Loan Talks

· World Bank director for Russia, Michael CARTER, on Tuesday said the Bank will resume talks with Russia this week on plans to support structural reforms of the economy and the possible replacement of the Structural Adjustment Loan, SAL-3. World Bank officials said previously the Bank would cancel or replace the SAL-3 program, which amounts to $1.5 billion, $1.1 billion of which has not yet been disbursed because Russia failed to meet the conditions for the loan. World Bank Eastern Europe chief Johannes LINN said in July the Bank was ready to lend about $1 billion to Russia to support economic reforms, but he gave no precise timeframe. The Bank has expressed satisfaction with the improving situation as regards the investment portfolio. "We have reached a stage where we need to review our strategy in Russia...There are possibilities for a more active relationship between the government and the Bank than we've seen in the last two years," CARTER said. The 1998 SAL-3 was very broad. The World Bank hopes to be more selective on its projects and more specific. A World Bank mission, which will review conditions for release of a $50 million loan installment for the coal sector, is expected in Moscow in the middle of October. A total $800 million coal loan, agreed in 1997, is split into social and privatization installment, which are meant to cushion reform in the sector and, like SAL-3 funds, should go straight to the budget.

CARTER said the government, whose new economic program has been backed by the Bank, should take the lead in implementing structural reforms, while the Bank planned to be more active not only in offering financial aid but in sharing its expertise. "There is less need for the Bank to fill the [government's] financial gaps," CARTER said, adding the Bank's financing may increase, but the size of the Bank's financial aid would depend on implementation of structural reforms.

When you need to know it as it happens




September 7, 2000

Intercon's Daily


Gazprom Turns Off Burst Pipeline

· Gazprom's, Russia's gas monopoly, switched off its gas pipeline to Finland last night, after it burst in a stretch near St. Petersburg. According to the Russia's Emergency Ministry, no one was injured and there was no fire after the underground pipeline burst near the village of Mikhalyovo. It is not known what caused the accident. Finland buys about 5 billion cubic meters a year of Gazprom's gas, less than 0.5 percent of the company's sales in Europe. Gazprom depends on exports for revenue because it faces problems collecting payment from domestic customers.

Tyumen May Win Iranian Contract

· Tyumen Oil Co., Russia's fifth largest oil producer, may win the rights to explore five oil fields in Iran, Prime-Tass news agency reported, citing an unnamed source in the company. Tyumen Oil has been in negotiations with the Iranian state oil company for several months regarding developing the sites, which need as much as $300 million of investment. Iran has already signed deals with other Russian oil companies, including Slavneft, a producer owned by the Russian and Belarus governments, Russia's state-owned Rosneft and Tatneft, Russia's fourth oil producer. Gazprom, Russia's natural gas monopoly, plans to invest $50 million to develop Iran's South Pars No. 2 and No. 3 gas deposits by the end of the year. The company already invested $250 million in that offshore project.

of economic recovery there are considerably more contract jobs on offer, particularly in construction and other service sectors." Lithuania's unemployment has remained above 11 percent since March 2000, after the government introduced austerity measures to offset the effects of Russia's 1998 financial crisis. Analysts say the economy and the employment rate have been slow to recover, due to the dollar, to which the Lithuanian lit is pegged to at a four-to-one rate, making exports less competitive. According to official forecasts, the unemployment rate is expected to stand at 11.2 percent by year-end, but analysts say that may not be realistic given structural reforms and the privatization process that are under way.

EBRD To Lend $100M To Power Generators

· The European Bank for Reconstruction and Development (EBRD) said it may offer a one-year, $100 million loan to Ukraine's four state power plants to help them stock up on fuel before the winter. The London-based bank is expected to make a final decision on the loan at its October 3rd meeting, said Anton USOV, an EBRD spokesman in Kiev. The loan would be given to Dniproenergo, Donbasenergo, Zakhidenergo and Tsentrenergo, thermal power generating plants that have 55 percent of the country's electricity generating capacity. Ukraine would have to repay the loan, which is to have a six-month grace period, in equal monthly payments during six months after the grace period expires. Ukraine said it is falling short of fuel reserves, as its power generating facilities are forced to use more coal and fuel oil, because the government so far has failed to agree with Russia on supplies of natural gas in the second part of this year. Ukraine said its coal reserves were at about 1,500 tons in the beginning of the month, down from between 5,000 to 6,000 tons it is targeting to have by mid-October, Bloomberg News reported.

Ukraine To Increase Iranian Oil Supplies

· Ukraine wants to increase Iranian oil supplies and pay for the deliveries with domestically produced goods, Kievskie Vedomosti Ukrainian daily newspaper reported, citing First Deputy Prime Minister Yuri YEKHANUROV. YEKHANUROV met with Iran's government delegation earlier in Kiev. Iran wants to boost bilateral cooperation in the agriculture, machine and aircraft-building industries, the

European Republics

Lithuanian August Unemployment Rises

· Lithuania's unemployment rate climbed to a new post-Soviet high in August, above the 200,000 mark for the second straight month. The unemployment rate rose to 11.8 percent, 0.2 percentage points above July's 11.6 percent. In July 1999, the unemployment rate was 8.1 percent.

The Labor Exchange said on Wednesday it expects the trend to begin to flatten as the economy recovers. Janina GAIZUTYTE, deputy head of the exchange, said, "Next month, unemployment should stabilize as we saw a significant decrease of people registering with the labor exchange. With the signs

When you need to know it as it happens




September 7, 2000

Intercon's Daily

newspaper reported. Ukraine said it may also pay for oil supplies with construction of industrial facilities in Iran, the newspaper said. Ukraine depends on supplies from Russia for most of its domestic oil needs and wants to diversify deliveries.

South Caucasus & Central Asia

Wolf Confirms Support For MEP

· The US confirmed its support of the main export pipeline (MEP) Baku-Tbilisi-Ceyhan and Trans-Caspian gas-pipe for transit of Turkish gas to Turkey via Azerbaijan and Georgia in a special meeting between Georgian President Eduard SHEVARD-NADZE and Special Adviser to the US President and Secretary of State for Caspian energy resources John WOLF in New York. The two sides focused on oil and gas transportation through Georgia, according to presidential spokesman Kakha IMNADZE. WOLF noted that the development of the MEP is going successfully. He pointed out that the Turkish side has already puts its engineers to work on its part of the Baku-Tbilisi-Ceyhan route. During the meeting it was mentioned that the plans of the Trans-Caspian gas-pipe are still active.

Total Fina Elf Puts Azeri Oil Stakes Up For Sale

· Total Fina Elf, the world's fourth-largest publicly traded oil producer, is selling part of its holdings in exploration projects offshore of Azerbaijan in the Caspian Sea. The firm said it decided to sell to reduce investment obligations and cut costs. Total is holding talks with Wintershall, an oil and gas subsidiary of Germany's BASF for the sale of a 20 percent stake in the Lenkoran field, offshore in the Caspian, which is part of the larger Lenkoran-Talysh-Deniz project. The project requires $1.5 billion in investment and has deposits with an estimated 700 million barrels of oil. Total secured 55 percent of Lenkoran-Talysh-Deniz after consolidating its assets following its acquisition of Belgium's PetroFina and France's Elf Aquitaine. Wintershall currently controls 10 percent share of the project through its Deminex unit, along with a 25 percent

stake held by the State Oil Company of Azerbaijan (SOCAR) and a 10 percent stake held by Iran's OIEC. Total last month agreed to sell a 10 percent stake to LUKoil Holding, Russia's top oil producer, in a venture in the Russian Arctic. Meanwhile, Royal Dutch/Shell Group, Europe's top oil company, agreed in June to swap holdings in the North Sea and the Gulf of Mexico for USX-Marathon Group's stake in a $10 billion Russian natural gas project. BP Amoco earlier agreed to sell Alaskan oil fields to Phillips Petroleum Co., while Britain's Lasmo sold Caspian assets to Shell. Stephen DASHEVSKY, an analyst at Aton brokerage explains, "This is a global process in which international companies try to reshuffle their projects when oil prices stay high. Companies try to prepare themselves for the next cycle of oil price declines." Crude oil rose to near a 10-year high, with oil for October delivery climbing as much as 50 cents, or 0.17 percent, to $34 a barrel in electronic trading on the New York Mercantile Exchange.

Kazzinc To Produce At Two New Zinc Deposits

· Kazakhstan's largest zinc producer, Kazzinc, plans to bring two new zinc ore deposits into production within the next five years. Kazzinc vice president Gennady KLYUEV said, "We are now working out a draft plan for the development of the Novoleninogorsk and Obruchevsky deposits. The draft will be prepared over the course of two years, this year and next. We're expecting to start production in 2004 or 2005." He believes that adding the new deposits would secure Kazzinc's future over the coming decades. Kazzinc has two main deposits currently in production. Maleyevsky has reserves of ore sufficient for 35 to 40 years, KLYUEV said. Tishinsky will last for 20 years. Kazzinc produced 245,000 tons of zinc last year. "The overall level of reserves is somewhere in the region of 100 million tons of ore," KLYUEV said, including the new deposits. By the end of next year, Maleyevsky will produce 2.5 million tons of ore, with a further 1.35 million coming from Tishinsky in the same timeframe.

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