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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, October 16, 2000

Russian Federation

Politics

Putin Performance Rating Improves

· According to a recent opinion poll conducted by the Public Opinion Foundation, approximately 80 percent of Russians believe that Russian President Vladimir PUTIN is doing a satisfactory job or better. This is an increase from 78 percent approval rating a week earlier. The poll showed that 47 percent of respondents said PUTIN's performance as president was satisfactory; 30 percent rated his performance as good; and 3 percent rated it as excellent. The poll, based on a survey of 2,000 eligible voters in 56 population centers in 29 of Russia's 89 regions on October 7^th and 8^th, carries a 3.6 percent margin of error. PUTIN won the most approval for his performance in domestic politics, especially a Kremlin reception to congratulate Russia's Olympic medal winners, efforts to fight crime in the regions, and plans to cut army staff. Voters highlighted PUTIN's actions on the international sphere by citing his response to the change of government in Yugoslavia and a visit to India.

Russian Oligarch Caught By Staged Murders

· The charges brought against aluminum tycoon Anatoly BYKOV have been reduced from murder to conspiracy to commit murder, after authorities admitted they staged the murders. Sergei LAPIN, first deputy prosecutor for Moscow's northwest district, told Reuters that BYKOV was charged with plotting to kill businessman Pavel STRUGANOV and a bodyguard, both of whom had been "reported" shot dead last month. They are now confirmed by LAPIN as being alive. Authorities staged the two murders as a trap to catch BYKOV, following a tip by an anonymous source that BYKOV had ordered him to carry out the killings. The elaborate phony killing included broadcasted television footage showing

men loading the bodies of the "reported" victims into a morgue truck. BYKOV's lawyers have denied any link to the incident. His lawyer Genrikh PADVA said, "There are no bodies. It's nonsense. It was a set-up." However, after the killings were widely publicized, the supposed contract killer returned to BYKOV's home wired with recording devices and told BYKOV that he had killed the men. Prosecutors will try to show that BYKOV hired a killer to shoot the men, but that the killer decided to cooperate with authorities.

BYKOV was arrested last year in Hungary under an Interpol warrant alleging manslaughter and money laundering. He was released in Krasnoyarsk earlier this year. He is now being held in Moscow's Lefortovo prison. BYKOV is a major political and business figure in Siberia, where he used to run a giant aluminum smelter and other businesses in his home city of Krasnoyarsk. He often clashed with governor Alexander LEBED, a former presidential candidate. The Krasnoyarsk plant BYKOV once headed is now controlled by Russky Alyuminy, a huge concern established earlier this year by shareholders of the Sibneft Oil Company and the Sibirsky Aluminum group.

Republicans Challenge Gore On Secret Pact

· US Senate Majority Leader Trent LOTT, along with three members of the Foreign Relations Committee Senator Jesse HELMS (Rep.-NC), Senator Sam BROWN-BACK (Rep-KS), and Senator Gor

Today's News Highlights

Russia

CB Reserves, Money Supply

LUKoil Buys Export Railcars

European Republics

Belarus Election Marred

Ukraine To Recieve WB Loans

South Caucasus & Central Asia

Georgia On CIS Security

Two More Escapees Captured

Fondel Metal Wins Azeri Tender

Armenian Economic Statistics

Politics-Economics-Business

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Monday

October 16, 2000

Intercon's Daily

don SMITH (Rep-OR) in a letter to US President Bill CLINTON have demanded an explanation on Vice President Al GORE's secret arms pact with former Russian prime minister Viktor CHERNOMYRDIN. "Please assure us that this is not the case and that the Vice President did not, in effect, sign a pledge with Viktor CHERNOMYRDIN in 1995 that committed your administration to break US law by dodging sanctions requirements." It adds that the Senators are, "truly disturbed to discover that the true motivation behind these 'fudging of the facts' was a secret deal in which the Vice President committed the administration to dodge the law." They further note that the story first reported by The New York Times is particularly disturbing after receiving assurances from the State Department's top nonproliferation official Robert EINHORN that US domestic laws would be implemented and enforced, "regardless of whether or not side agreements had be concluded with foreign nations." In 1995, GORE and CHERNOMYRDIN agreed that the US would not seek penalties against Russia for current weapons sales to Iran through December 31, 1999. This agreement appears to have violated the 1992 Iran-Iraq Arms Nonproliferation Act, sponsored by GORE and Senator John MCCAIN (Rep.-AZ) and the Foreign Assistance Act. Russia has continually violated this secret agreement and remains a significant supplier of conventional arms to Tehran. MCCAIN said the agreement, "shows indefensibly bad judgment." In a separate statement, SMITH said, "The Russians have almost single-handedly armed the government of Iran with everything from combat aircraft and diesel submarines to nuclear weapons-related technology…The vice president owes the Congress and the American people an explanation for his actions, and an indication of how he intends to rectify the damage that has been done to US security." The White House spokesman Jake SIEWERT on Friday responded to the news saying, "These [shipments] are in the judgment of the Pentagon antiquated equipment that pose no threat to the United States and only a threat to (Iraqi President) Saddam HUSSAIN." Another White House officials said that the 1992 law did not apply to the Russia-Iran case, because the weaponry involved was not advanced.

Republican Presidential nominee George W. BUSH's spokesman Ari FLEISCHER said, "This is

one of the most damaging things that could happen to American security and to the security of our allies in the Middle East." He said that GORE should have consulted Congress on the matter and that the guidelines of the deal should have been made public. The four Senators said that the written text of that understanding was never given to the Senate. They questioned whether GORE had the legal authority to make the agreement and if it should have been submitted for congressional review. BROWNBACK has said, "The vice president of the United States has no business making these kinds of seemingly illegal pledges." He called the agreement "completely unacceptable" and said Congress should have been consulted. SIEWERT said, "The agreement was made public at the time, and Congress was given the opportunity to know more about it five years ago."

BUSH advisor on foreign policy Robert ZOELLICK hinted to The Wall Street Journal that the campaign plans to use the secret pact against GORE. The Democratic campaign has emphasized GORE's foreign policy experience. ZOELLICK pointed out, "GORE has experience, but bad experience." BUSH's national-security aide, Condoleezza RICE, said GORE's efforts reflected a pattern of "weakness and constant capitulation" toward Russia.

Economy

Ruble = 27.9/$1.00 (NY rate)

Ruble = 27.86/$1.00 (CB rate)

Ruble = 23.63/1 euro (CB rate)

CB Gold Reserves, Money Supply

· The Central Bank announced that Russian foreign currency and gold reserves rose by $300 million to a record $25.3 billion in the week ending October 6^th. The reserves are at the highest level since the fall of the Soviet Union in 1991. The previous high was $25 billion in the week ending September 29^th, 2000. The reserves rose by $300 million in the week ending September 29^th. Russia's money supply contracted by 2.9 billion rubles in the week ending October 2^nd, the Central Bank said. Russia's money supply expanded by 9.6 billion rubles ($343.8 million) in the week ending October 9^th. The money supply, which includes cash currency in circulation plus required reserves, totaled 447.2 billion rubles. Russia's money supply con

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	Monday			October 16, 2000
	Intercon's Daily
	tracted by 2.9 billion rubles in the week ending October 2^nd, the Central Bank said. The value of gold reserves held by Russia's Central Bank rose by $81 million to $3.523 billion as of October 1^st, compared to September 1^st total of $3.442 billion. The Central Bank officially values its gold reserves at $300 per troy ounce. The Bank's total gold and foreign exchange reserves had increased to $24.997 billion by October 1^st from $23.731 on September 1^st. The Central Bank's reserves include gold, foreign currency and Special Drawing Rights, an international reserve asset that is essentially a currency of the International Monetary Fund (IMF). Business LUKoil Buys Railcars For Oil Export · LUKoil Holding signed a $71 million contract with Uralvagonzavod, one of Russia's biggest military tank producers, under which Uralvagonzavod will supply of 4,000 railcars for oil transportation by 2006. The contract will make LUKoil's transport unit, LUKoil-Trans, Russia's second rail shipper after the Railways Ministry. The oil company already operates 4,500 railcars that carry 98 percent of its exports of refined oil product. Russian oil companies face a shortage of railcars as the Ministry cannot meet demand with its shrinking stock of 70,000 oil-tank railcars. The Ministry, which wrote off 2,000 rail tanks in 1999 while buying 450 new ones, didn't acquire any new oil cars this year. LUKoil is reorganizing its transport units to increase efficiency and cut costs. The company in October united its river and ocean tanker fleets under LUKoil -Arctic-Tanker.		that turnout is estimated at 45 percent throughout the country, with lower participation in large cities. The boycott appeared to have been successful in the capital Minsk, with only a thin trickle of voters arriving at booths through the day. However, it appeared to be mostly ignored in rural areas, where the government is popular, the Associated Press reported. On Saturday, opposition leaders called a rally against Belarus President Alexander LUKASHENKO. About 3,000 people turned out to demonstrate. Independent observers claimed that ballots were falsified and others were destroyed, and they reported numerous other violations. According to a joint statement of Organization for Security and Cooperation in Europe, the European Parliament, and the Council of Europe's technical assessment mission, "The 15 October parliamentary elections process in Belarus failed to meet international standards for democratic elections…The minimum requirements were not met for the holding of free, fair, equal, accountable and open elections." It added that, "State-controlled media provided only a prejudiced approach which dominated print and electronic information…[authorities] severely limited basic rights of citizens, including rights of free expression, assembly and association, and brought elements of intimidation and bans into the election campaign." Many Western governments never even recognized the outgoing legislature, which was elected in a dubious vote in 1996 after LUKASHENKO ousted its opposition-dominated predecessor. LUKASHENKO pointed out that, "The non-recognition of these elections will very negatively effect the image of the democratic west and clearly show the double standards from which originates the politics of Western states," NTV reported. The West has mostly scorned LUKASHENKO, saying he has ignored democratic and economic reforms. World Bank To Deliver Ukraine Loans · World Bank President James Wolfensohn said Friday the Bank will deliver $70 million in loans to upgrade Ukraine's coal mining sector, but added that further lending would depend on the country's economic performance next year. According to Wolfensohn, "things are moving very much in the right direction." The Bank plans to provide $1.4 billion in a three-year cooperation program that links
		European Republics Belarus Election Marred · Opposition Parties in Belarus are contesting Sunday's controversial Parliamentary elections, claiming that turnout did not reach the legal limit of 50 percent. Opposition leaders, including Stanislav SHUSHKEVICH, had called on voters to boycott the election because access to the media for their parties had been limited and restricted. Election officials said about 60 percent of registered voters in the former Soviet republic of 10 million had cast ballots. Opposition leader Anatoly LEBEDKO said


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Politics-Economics-Business					Page

Monday

October 16, 2000

Intercon's Daily

lending with government's future performance. Bloomberg News reported that the Ukrainian government also expects to receive a $100 million loan from the Bank next month for promoting private land ownership. The loan will help pay for issuing deeds to land. Before the end of the year, Ukraine also wants to qualify for a $100 million loan to help improve its banking industry. Earlier this month, Wolfensohn said he was, "quite optimistic" on the outcome of talks with Ukraine's Cabinet and the Central Bank over the payment. According to Reuters, the World Bank is one of the ex-Soviet state's major lenders and has already disbursed $2.022 billion to Ukraine.

South Caucasus & Central Asia

Georgia Not Interested In CIS Security

· Georgian Ambassador at Large Avtandil NAPETVARIDZE said Georgia does not plan to join the CIS Collective Security Treaty. "Georgia sees nothing special in the fact that member states of the CIS Collective Security Treaty¾Russia, Belarus, Kazakhstan, Armenia, Kyrgyzstan and Tajikistan¾adopted in Bishkek a decision to move toward closer military-political integration." He added that, "sovereign countries have the right to pursue such a form of cooperation that will allow them to strengthen security." "Georgia will watch closely what this cooperation will give the six countries in the field of security," he added. Georgia seceded from the Collective Security Treaty in April, 1999.

Georgia Arrests Another Escapee

· Head of the Racha-Lechkhumi police department Tamaz BICHASHVILI said that Mamuka DZHANGVELADZE, one of the twelve criminals who escaped from the Republic Prison Hospital on October 1^st, was arrested today. He was sentenced to 13 years of prison in 1998. Unconfirmed reports also indicate that Khvicha MANCHKHAVA, nicknamed Shakhter (or Miner) was also arrested. He was sentenced to 6 years of prison in 1997. Six fugitives remain at large. Local authorities believe

that five escapees are still hiding in the western part of Georgia in the forest of Abrolauri Region. The perimeter around the 25 square kilometers of forest is heavily guarded and police are blocking all exits in the area. However, poor weather conditions are delaying further searches in this area.

Fondel Metal Wins Azeralyuminy Tender

· Dutch firm Fondel Metal won a tender on Thursday for long-term management of Azerbaijan's Azeralyuminy after agreeing to invest $1 billion in the firm, Reuters reported. Of this sum the winner will have to invest $300 million in the next three years in modernization of the Azeri firm. Fondel must repay about $1.6 million in wage arrears and triple output to 150,000 metric tons of aluminum a year. Tender committee head Yusif EIYUBOV said other contenders included a British company, Aluminum Development, which offered $362.5 million of investments and Russia's aluminum giant Russky Alyuminy, which offered $124 million. Azeralyuminy includes a smelter, a bauxite raw material mine, and a plant producing alumina, the intermediate product for aluminum smelting. The smelter has a nameplate capacity of 55,000 tons of primary aluminum per year, but it produced only 1,200 tons of the metal in 1999. The alumina plant produced 77,000 tons of alumina in 1999, but its design capacity is 450,000 tons per year. The mine is capable of producing one million tons of bauxite per year, but it has lain idle in the last few years. EIYUBOV said that if Fondel failed to fulfill a single condition of the investment program, the State Property ministry would award the contract to manage Azeralyuminy to the runner up, Aluminum Development.

Armenian Economic Statistics

· Armenia's industrial output rose 5.9 percent in August, 2000, in year-on-year terms and stood 3.5 percent above last month's levels, the National Statistics Service announced today. Armenia's gross domestic product (GDP) rose 3.2 percent in year-on-year terms in January-August of 2000.

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

Oleg D. Kalugin, Content Advisor Jennifer M. Rhodes, Principal Editor

Tatyana Kortova, Contributing 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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