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

Friday, October 27, 2000

Russian Federation

Politics

Russian Media Under Putin

· Radio Free Europe/Radio Liberty held a briefing on Monday with Sergei Grigoriants, Chairman of Glasnost Public Foundation and director of Glasnost-North Caucasus Information Center, speaking on "Media Freedom Under Putin". The discussion was focused on how much control the Russian government is exerting over the media. According to Grigoriants, the freedom of information in Russia has practically ceased to exist. The coverage of the Chechen offensive has been especially affected. The character of information in the media has also dramatically changed. Nearly 85 percent of all television programs and television channels are mirroring each other. The number of programs covering the cultural events is overwhelming, signaling a return to Soviet-style programming. The government has turned the media into a tool used to project 30-year old propaganda messages. These messages include allegations that the West is trying to gain control over the Russian media.

Russian President Vladimir PUTIN has taken a strong interest in the media. He personally selects which journalists he will give personal interviews. If they do not agree to work by his rules, they risk losing their slot on television. An example of this is the case of Sergei Dorenko. On September 9^th, his weekly show was pulled off the air. The journalist claimed that President Putin himself was behind the decision to cancel the show as a response to DORENKO's refusal to work on PUTIN's team. The current goal of the PUTIN's administration is to monopolize the media and exert maximum control over it. With few exceptions, all central television channels, radio stations, and newspapers appear

to be already under Kremlin's control. The recent scandal over Media Most group owned by Vladimir GUSINSKY is another testimony to PUTIN's determination to clamp down on the press' freedom. The attempts to control the media are spreading to capture the Internet. Sometimes these attempts are successful. On August 28^th, 10 masked policemen wielding automatic rifles burst into the office of Glasnost Foundation forcing a dozen people to lie facedown for some 40 minutes. After they left with no explanation, none of the Russian sites could say a single word on the searching of the Glasnost Foundation for 24 hours. GRIGORYANTS described this event as a "conscious, government action aimed at intimidating civil society".

As Intercon reported earlier this month, the agreement between Media Most and Gazprom has allowed GUSINSKY to maintain a stake and to prevent the Russian government from indirectly obtaining a majority holding. The two companies also report that they are in talks with foreign investors, who could maintain Media Most's independent stance on domestic and international events for Russian viewers. Gazprom had been in talks with Rupert MURDOCH's Australian newspaper publishing company News Corp. to purchase Media Most.

Gov't HQ Evacuated

After Bomb Threat

· The Staff at the Russian government's main offices, known as the White House, were evacuated this afternoon

Today's News Highlights

Russia

Gov't Collects Extra Revenues

LUKoil To Trade On NEWEX

European Republics

Lith. Approves New PM

Kiev Worried Over Pipeline

South Caucasus & Central Asia

Marriott Invests In Tbilisi

Iran Cut s Power To Azerbaijan

Kyrgyz Presidential Elections

Tajik To Get $51M IMF Loan

Politics-Economics-Business

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Friday

October 27, 2000

Intercon's Daily

due to a bomb threat. An anonymous call, placed at 12:06 pm. said a bomb had been planted in the building and was set to explode at 3 pm. Evacuation began at 2:15 pm. Witnesses said people had poured out of the building. People mostly looked calm and there was only one fire engine and one ambulance in the area. Personnel were not permitted to re-enter the building until 4:20 p.m. Russian population centers have been hit by bomb blasts in recent years, including an explosion in a Moscow underground walkway in August that killed 13 people.

Economy

Ruble = 27.92/$1.00 (NY rate)

Ruble = 27.82/$1.00 (CB rate)

Ruble = 23.22/1 euro (CB rate)

Nov Dec Jan FebMar Apr MayJun Jul Aug Sep Oct

Russia Collects Extra Budget Revenues

· The Russian Finance Ministry is expecting to receive 272 billion rubles ($9.7 billion) in extra budget revenues this year. Deputy Finance Minister Tatyana GOLIKOVA told a news conference Thursday, "On October 12^th we in fact exceeded [annual] revenue targets and we have started collecting the so-called additional revenue." These funds will be used to pay down Russia's foreign debt and to fill gaps to compensate for lost foreign loans. Prime Minister Mikhail KASYANOV praised the government's achievements in collecting extra revenues and financing social spending, but said military expenditure should be increased due to the

ongoing conflict in rebel Chechnya. "Budget revenue has been rising faster than we planned...Big additional spendings are allocated for national defense and law enforcement," he said. GOLIKOVA said its was more difficult for the government to fulfill spending plans as some foreign credits that had been budgeted for were not available, but the government planned to meet this year's budget spending targets by December 10^th, Reuters reported. The government has already channeled 200 billion rubles of additional budget revenues to repay foreign debt and replace foreign loans, which failed to materialize, and it would continue to do so until it met spending targets, she added. The International Monetary Fund (IMF) has been withholding loans from Russia pending implementation of structural reforms.

Business

Russian Firms To Trade On NEWEX

· Several Russian firms, including the nation's largest oil company LUKoil, will be traded on the electronic New Europe Exchange (NEWEX) when it is launched on November 3^rd. Russian companies will account for about half of the some 90 firms listed when the central and eastern European exchange, a joint venture between the Deutsche Bourse and the Vienna Bourse, starts up. NEWEX aims to be a low-risk channel for western capital seeking investment in Central and Eastern Europe, but some bourses in the region see it as a competitive threat, Reuters reported. The exchange also seeks to become a one-stop shop for trading central and eastern European shares, boosting transparency, liquidity and efficiency, according to NEWEX board member Erich OBERSTEINER. Other Russian companies participating on the exchange will be Sibneft, Tatneft, and Russian telecommunications firm Samara Svyazinform.

Uralelectromed To Raise Copper Output

· Russia's second largest copper producer, Uralelectromed, plans to produce 320,000 tons of copper this year, 20,000 above its nameplate capacity. Uralelectromed, based in Verkhnyaya Pyshma, had said earlier this year it planned to produce around 300,000 tons of copper, up from 271,000 tons in 1999. "Andrei KOZITSIN said at a meeting with employees that this year we would override our design capacity and produce around

When you need to know it as it happens

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320,000 tons of copper," Elvira SAFINA, Uralelectromed's spokeswoman told Reuters. "Uralelectromed has accumulated large stocks of blister copper and copper scrap, which will allow the increase in [refined copper] output," she added. But she declined to say what technical resources would be used to reach the new volume. SAFINA said in the first nine months of this year Uralelectromed increased its refined copper output by 14.3 percent from the same period last year, when it produced 185,765 tons of the metal.

Ukraine Has Concerns Over Bypass Pipeline

· Although Ukrainian President Leonid KUCHMA has stated he is undaunted by Russian plan to build a gas pipeline bypassing its territory, Prime Minister Viktor YUSHCHENKO expressed concern over a possible loss of lucrative gas transit. "We are confident that Russia must be interested in the existing [gas transport] system, and we have proposed strong arguments to Russia to maintain this system," he said. YUSHCHENKO declined to give details of Ukraine's proposals. Last week, Russia's Gazprom signed a letter of intent with Germany's Ruhrgas and Wintershall, France's Gaz de France and Italy's Snam to create a new export channel bypassing Ukraine to ship more gas to energy-hungry European consumers. The new, $2 billion, 600-km (375-mile) Russia-Europe gas pipeline is expected to have a maximum capacity of 60 billion cubic meters (bcm) of gas per year and would run through Belarus, Poland and Slovakia. YUSHCHENKO pointed out that Russia is not using its current pipeline through Ukraine to its full capacity. "Our [gas] transport system is used only by 60 percent to 70 percent and we can easily boost its capacity by 60 bcm with a small investment," he said. The Prime Minister added, "Ukraine will do its best to present to both Russia and the European Union...our more efficient transit channel…I'm confident our financial arguments are convincing." Russian Ambassador to Ukraine Ivan ABOIMOV on Tuesday pointed out that the pipeline's plan, "is not targeted against the Ukrainian-Russian relations." Poland, through which the pipeline would be laid, had previously objected to the plan because it would bypass Ukraine. The Polish government has made helping Ukraine join the European and international community a priority. On Tuesday, Polish President Alexander KWASNIEWSKI said Poland could reach a compromise, if Ukraine would share in the plan's economic benefits. He added that Ukraine did not need to be a part of the project geographically. Last week, the Polish Economics Ministry said it opposed the Gazprom plan on economic, political and ecological grounds and the government urged an international conference of all countries involved to discuss the proposal. On Monday, Russian President Vladimir PUTIN had ordered Deputy Prime Minister Viktor KHRISTENKO to start negotiating with Poland over the pipeline.

European Republics

Lithuanian Prime Minister Approved

· In a vote of 79 to 51 with seven abstentions, the Lithuanian Parliament approved the nomination of Vilnius Mayor Rolandas Paksas as prime minister on Thursday. Paksas held the post for five months in 1999. According to Reuters, he stepped down in protest over a controversial oil sector privatization deal, left the now outgoing ruling Homeland Union party, and currently leads the laissez faire Liberal Union. PAKSAS told Parliament he expects to finalize his Cabinet and program as early as next week. Paksas plans to eliminate the 24 percent corporate tax and slash income tax on individuals from 29 percent to 24 percent. He also pledges to cut red tape and sack unneeded tax officials¾all to lift the fortunes of average Lithuanians who were left behind by 10 years of tough post-Soviet reforms. "Our main task is to form a strong middle class. Foreign policy aims remain the same¾NATO, the European Union and good neighborly relations," Paksas said before the vote.

USDA Approves $35M To Baltic States

· The US Department of Agriculture (USDA) on Tuesday authorized $35 million in credit guarantees for export sales of US farm commodities and manufactured goods to the Baltic region. The export credits authorized under the GSM-102 program, Facility Guarantee program and Supplier Credit program help countries finance purchases of US farm goods. The authorizations are for fiscal year 2001, which began October 1^st. Recipients of the export credits in the Baltic region include Estonia, Latvia, and Lithuania.

When you need to know it as it happens

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South Caucasus & Central Asia

Marriott To Open Two Hotels In Tbilisi

· The Marriott International hotel chain plans to open two hotels in Georgia's capital, Tbilisi. One will be the former Hotel Tbilisi, which will be called the Tbilisi Marriott. After extensive renovation to the hotel will boast a cutting-edge business center, conference space, and health club. The second property will be managed under the corporation's mid-price Courtyard by Marriott brand. Located on Freedom Square, the hotel will offer 120 rooms, a fitness center, and meeting facilities. Both hotels are expected to open in 2001.

Iran To Cut Power Exports To Azerbaijan

· Iran warned Azerbaijan on Thursday it would stop power exports to it today over Baku's alleged failure to pay a $45 million electricity debt. Iranian state television quoted Masoud HOJJAT, deputy head of the state power company Tavanir, as saying Azerbaijan had paid just $1 million for Iranian electricity deliveries to the Azeri region of Nakhichevan in the past three years. Azeri media have quoted officials in Azerbaijan as saying they were negotiating a schedule for the payment of the nation's electricity bill to Iran. In February, Iran said it was exporting 45 megawatts (MW) of electricity to Azerbaijan, 40 MW to Turkey, and 150 MW to Armenia. It said some power was imported from Armenia at peak consumption periods in Iran.

Kyrgyz To Hold Presidential Elections

· The voting electorate of Kyrgyzstan will go to the polls to elect a president on Sunday. The incumbent and only president independent Kyrgyzstan has known, Askar AKAYEV, is predicted to easily win re-election. He is running against five other candidates. Little is known about AKAYEV's competitors as there is limited media coverage of their platforms or even the election in general. Felix KULOV, AKAYEV's main opponent, withdrew early in the campaign, after refusing to take a Kyrgyz language test, saying it violated the rights of ethnic minorities.

KULOV, arrested in March and charged with abuse of office during his term as head of the National Security Ministry in the mid 1990s, was unexpectedly released in August.

There is a low interest in this election, despite a small controversy over term limits. The Kyrgyz Constitution limits the number of presidential terms to two. Some opponents claim that AKAYEV has already served two terms; the first after independence and second following his 1995 re-election. AKAYEV says the first period was an exceptional transitional phase, and his first true term started in 1995. Kyrgyzstan, dependent on aid from western and international lending institutions, has typically been more responsive to criticism than other regional leaders. The West has already criticized the campaign period. The European Union is concerned with reported infringements of democratic rules. The Organization for Security and Cooperation in Europe (OSCE) is sending 100 observers to monitor the vote and noted that some worrying trends were evident. A turnout of 50 percent is required for the election to be valid. A candidate winning 50 percent plus one vote is elected on the first round. If no candidate gets the required vote, a runoff election is held within two weeks.

Tajikistan To Receive $51M IMF Loan

· The International Monetary Fund (IMF) on Wednesday approved in principle a $51 million loan to Tajikistan, under the IMF's Poverty Reduction and Growth Facility. The IMF Executive Board said final approval is pending a review of the war-scarred country's Poverty Reduction Strategy Paper by the World Bank Executive Board, probably on October 31^st. If the decision is finalized, Tajikistan will receive the first quarterly disbursement of $8 million. "Macroeconomic developments in Tajikistan during the first half of 2000 were favorable, despite the difficult external environment, as demonstrated by the continued growth of GDP and a decline in inflation," said Eduardo ANINAT, IMF Deputy Managing Director and Acting Chairman.

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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