DAILY REPORT ON RUSSIA

AND THE FORMER SOVIET REPUBLICS

INTERCON INTERNATIONAL USA, INC., 725 15th STREET, N.W., SUITE 903,

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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Monday, November 13, 2000

Russian Federation

Politics

Yakovlev On US Defense System Plans

· Russian President Vladimir PUTIN has issued a statement calling for continued talks with the US on the Anti-Ballistic Missile Treaty of 1972 (ABM). He stated, "we are open to continue such discussions within the Permanent Consultative Commission¾a negotiating forum, successfully functioning since 1973 in compliance with the Treaty¾after agreement to raise the level of representation of the sides on the Commission, if need be." Moscow remains against US plans to build a National Missile Defense system, which they claim would violate the ABM Treaty, which strictly limits defenses against nuclear attack. PUTIN has said he wants to strengthen the ABM Treaty. Commander of the Strategic Rocket Forces General Vladimir YAKOVLEV, however, said it would be difficult to persuade the US to not go ahead with defense plans and to avoid rewriting the ABM Treaty. "As a counterbalance to American plans to modify the treaty's references to anti-missile defenses, YAKOVLEV proposed `to introduce an unchanging general indicator of strategic weapons which would include anti-missile defense means as well as means of nuclear attack'," Interfax said. It quoted YAKOVLEV as saying this would mean that a country wishing to increase one component in the equation would have to cut back on the other. He also said Russia could equate its land-based nuclear forces with US submarine-based missiles. There was no immediate reaction from the United States, but Russian defense writer Alexander GOLTS said the General's comments were a significant change. "It's a completely new approach," he told Reuters. "His a shift from our orthodox position that the ABM treaty is the foundation of strategic stability." YAKOVLEV called in

Russian agencies to make his remarks. "He clearly had something to say and it was clearly sanctioned," a defense source said. YAKOVLEV's forces face cuts and a probable merger with the air force, which controls aircraft-launched nuclear weapons. GOLTS said YAKOVLEV could be seeking to bolster the importance of his forces, but that this would not justify such a public shift in arms control policy.

Russia Conducted Nuclear Tests In October

· Russia conducted two underground sub-critical nuclear tests on October 20^th and October 27^th on Novaya Zemlya Island in northeastern Russia, the Press Service of Russia's Atomic Energy Ministry said November 3^rd. The Press Service said the tests had been planned for a long time, but diplomatic sources believe Russia went ahead with them with Tuesday's US presidential election in mind. Russia, which opposes any introduction of a national missile defense system by the US, wants to emphasize its status as a nuclear power and emphasize its vantage point in negotiations on nuclear disarmament with the new US administration. Russia conducted similar tests twice in January and three times between late August and early September, the ministry said. It noted that these October tests would be the last for this year. Since the US conducted its 12^th sub-critical nuclear test in mid-August in Nevada, the international community and antinuclear groups stepped up criticism of the two countries. The Press Service said the purpose of the Russian tests was to confirm the state of

Today's News Highlights

Russia

Moody Raises Bond Rating

Gusinisky Arrest Warrant Issued

Media Most-Gazprom Settlement

European Republics

Lith. Approves New Program

Estonian Unemployment Rate

South Caucasus & Central Asia

Murder Remains A Mystery

Council Of Europe Invitation

ExxonMobil To Boost Output

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November 13, 2000

Intercon's Daily

the storage of nuclear warheads, saying the level of radiation remains within ordinary limits.

Government Clerks To Receive Raise

· Russian President Vladimir PUTIN signed a decree increasing by 20 percent wages for government clerks as of December 1^st, Prime-Tass news agency reported. The average Russian worker received a wage of 2,403 rubles ($86.70) in September, 46.9 percent more than for September 1999, according to the State Statistics Committee. Workers in the country's energy industry received 7,216 rubles in August on average, while education workers got 1,060 rubles on average in that month, the report said. Workers were owed wage arrears totaling 39 billion rubles as of October, an increase of 1.8 percent from September.

Economy

Ruble = 27.83/$1.00 (NY rate)

Ruble = 27.75/$1.00 (CB rate)

Ruble = 23.86/1 euro (CB rate)

Moody Raises Foreign Currency Bond Rating

· Moody's today upgraded Russia's ceiling for foreign bonds from B3 to B2 and the country's ceiling for foreign currency bank deposits from Caa1 to B3. The international credit rating agency said currently outstanding Eurobonds of the Russian Federation, rated B3, would continue to be on review for a possible upgrade and that non restructured Russian Federal Loan Bonds (OFZs) issued after March 1^st, 1999 would also be rated B3. As a result of the change in the bank deposit ceiling, Moody's said the foreign currency deposit ratings of Gazprombank and Vneshtorgbank were raised from Caa1 to B3, Reuters reported. It added that all ratings not on review retained their stable outlook. "Russia's economy has picked up sharply over the past 18 months, with significant improvements to be found in the current account, fiscal position and foreign currency reserves," according to a Moody's statement. The rating agency said growth in domestic investment and demand had widened the basis of the economic recovery, adding that the sharp rise in oil prices and large currency depreciation had played an important role in this revival. It said that as a result of the overall economic upturn, Russia has enhanced its ability to repay foreign and local currency debt obligations.

Business

Prosecutors Issue Gusinsky Arrest Warrant

· Russia's general prosecutor issued an arrest warrant today for financier Vladimir GUSINSKY, flamboyant head of Russia's biggest independent media group, Media Most, on embezzlement charges. GUSINSKY failed to appear for questioning. He is currently residing outside of the country. GUSINSKY's detention for three days earlier this year on similar charges caused an international outcry and raised doubts about President Vladimir PUTIN's commitment to press freedom. The arrest warrant said GUSINSKY was being sought throughout Russia and that he was to be held in detention. GUSINSKY's lawyer, Genri REZNIK, said the prosecutor's office had refused to outline the charges to him. The charges against GUSINSKY were disclosed after Media Most and its biggest creditor, gas giant Gazprom, had clinched an agreement on eliminating large debts. REZNIK said GUSINSKY had no attention of turning up at any request by court or prosecutor's office. "My client does not wish to become a victim of lawlessness and cause further suffering to those close to him," he said. Media Most issued a statement pledging to challenge the, "illegal acts of the Russian general prosecutor related to GUSINSKY's legal case." The group said the action was either intended to upset the agreement to clear its debts or was "simple revenge" by prosecutors, Reuters reported.

Gazprom Increases Control Over NTV

· Independent media group Media Most and Russian gas giant Gazprom over the weekend signed an accord on clearing $211.6 million in debts by transferring Media Most shares to Gazprom. Media Most spokesman Dmitry OSTALSKY said the agreement would settle outstanding differences, but "does not involve editorial issues...or personnel matters." Details would be confirmed and disclosed at a hearing on Tuesday of a Moscow court which had been due to deal with a suit launched by Gazprom to recover its debts. Gazprom had sued Media Most, which runs NTV Television, to recover $211.6 million in loans backed by shares in the company, plus $36.9 million in interest. The loan had been secured against collateral including 20 percent of Media Most shares, a stake reduced to 17.1 percent through of an issue of new shares.

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Media Most and Gazprom Media officials were not available for comment. Media Most's owner Vladimir GUSINSKY was jailed for three days in June. He was released and allowed to leave the country after being forced to sign a previous debt-settlement agreement. GUSINSKY later claimed that this shares-for-freedom agreement was invalid because of the use of force. The agreement comes as federal prosecutors issued an arrest warrant against GUSINSKY for failing to appear for questioning on fraud charges.

Estonian Unemployment Rate Rises

· The number of unemployed in Estonia totaled 47,600 or 5.5 percent of the workforce in October, according to the Estonian Labor Board. In September, 42,900 were unemployed or 4.9 percent of the workforce. In October, 1999, unemployment in Estonia totaled 5.2 percent of the workforce or 45,100. These figures are based on the number of people who have registered as seeking employment with state labor exchanges.

South Caucasus & Central Asia

New Clues In Mysterious Russo Murder

· Italian reporter for Radio Radicale, Antonio RUSSO, was found dead on the side road near a Caucasus mountain pass Gombori on October 16^th in Georgia. Curiously, there was not a trace on his body to indicate that he struggled or evidence to identify his attackers. It appeared that pressure from a large object was applied to RUSSO's chest until four ribs cracked and internal bleeding caused him to die of shock. While this answered how he died, the mystery surrounding why he died still remains unclear. His apartment in Tbilisi was ransacked. Expensive satellite equipment to get his broadcasts immediately on the air, his laptop computer, digital camera, video tapes, and other documentation were stolen. The Observer noted that RUSSO's friends believe he was assassinated by the Russian Secret Service because the reporter discovered that unconventional weapons were being used against children. The Georgian Times reported that on September 25^th, RUSSO addressed a conference "War and Environment," in which he condemned the Russian army for applying a new experimental bacteriological weapon of mass destruction, and provided proper evidence. The title of his speech was, "The new weapon that Russians are going to use in Chechnya." In a letter to its Georgian counterparts, the Russian Foreign Affairs Ministry denounced the conference and said it, "bore blatant anti-Russian inclinations. In October, RUSSO notified his mother that he had obtained a video showing dead children, unimaginable horror, and war crimes. He noted that the world would see the video when he returned to Italy on October 18^th. He never returned and the video has since disappeared. An environmental organization in Tbilisi and colleagues in Rome alleged RUSSO had evi

European Republics

Lithuania Approves New Program

· The Lithuanian parliament on Thursday, in a vote of 72 to 48 with 16 abstaining, approved the government of Prime Minister Rolandas PAKSAS and its new program. The Cabinet was sworn in following Thursday's vote. The coalition government, formed last month following parliamentary elections, includes the center-right Liberal Union and center-left New Union (Social Liberals) and is led by PAKSAS. In addition to pursuing membership in the European Union and NATO, the government plans to make economic reforms and privatization top priorities, according to a Lithuanian Embassy statement. PASKAS added that the program, "will give priority to education. It will start real pension reform. It will tame bureaucracy and liberate business, simplify the tax system and reduce the tax burden, which will lead to the creation of new jobs." The government also aims to improve the investment climate by abolishing the corporate profit tax and replacing it with a tax on dividends. The government promised to cut the personal income tax rate from the present level of 34 percent to 24 percent and value-added taxes for construction from 18 percent to 5 percent. PAKSAS said the new government program aims to keep the annual budget deficit between 2 percent and 3 percent of gross domestic product and eventually balance it. "I am the supporter of encouraging of state spending within budget deficit of 2 to 3 percent budget deficit towards those programs which would promote the growth of economy, but it will depend on the agreement with the International Monetary Fund (IMF)," PAKSAS said. The outgoing government agreed with IMF to keep the budget deficit within 1.4 percent in 2001.

When you need to know it as it happens

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dence of a new Russian weapon that killed people slowly. A former Georgian deputy, who occasionally helped RUSSO, Mamuka ARESHIDZE said, "I think he [RUSSO] was killed because someone wanted to conceal the material he gathered¾this is why the videos disappeared." He added that security forces are often trained in, "how to apply pressure to crush people to death without leaving any trace of violence."

Council Of Europe Issues Invitations

· The Council of Europe on Thursday issued conditional invitations to Armenia and Azerbaijan to join the democracy and human rights group provided Azerbaijan response within one month to allegations of fraud in the November 5^th parliamentary elections. International observers¾including those from the Council¾reported ballot stuffing and other widespread examples of fraud in the election won by President Geidar ALIYEV's ruling New Azerbaijan party (Yeni). The Council of Europe encouraged both nations to step up their efforts to reach a peaceful solution to their 12-year-old conflict over Nagorno-Karabakh. Azerbaijan and Armenia have been eager to join the Council as part of policies aimed at closer integration with the West. A Council statement said the invitations would be, "confirmed when the date of the accession ceremony is fixed." Italian Foreign Minister Lamberto DINI, whose country holds the Council presidency, said Armenia and Azerbaijan would become members next January. The Council of Europe was founded in 1949 as a club of western European democracies and expanded rapidly in the 1990s to 41 members after the fall of communism in Eastern Europe.

ExxonMobil Boosts Output In Kazakhstan

· ExxonMobil is boosting oil output in Kazakhstan and expects the next US administration to support American oil firms in the region, no matter who becomes president, a company official said on Friday. ExxonMobil senior vice president Gary LONGWELL, following a meeting with Kazakh Prime Minister Kasymzhomart TOKAYEV, said, "What

ever administration there may be in the United States, we think that its relations with those companies [in the Caspian basin] will be supportive and that current policy will continue." The two discussed increasing output from the giant onshore Tengiz oilfield, the future of the offshore Kashagan field in the Caspian, potentially one of the largest oil discoveries in the world for 30 years, and a pipeline being built from Tengiz to Novorossiisk on Russia's Black Sea coast. ExxonMobil holds 25 percent of Tengiz and 7.5 percent of the Caspian Pipeline Consortium, building the link to Novorossiisk, and is also a member of the Offshore Kazakhstan International Operating Company (OKIOC), which is exploring Kashagan. LONGWELL said the work presented formidable technological challenges. "Developing resources here in Kazakhstan presents significant difficulties. In particular there are high costs. There are technological problems. But all the same we're sure that effective work is possible here." ExxonMobil says it plans to raise output at Tengiz to 260,000 barrels per day by the end of this year from the current rate of 220,000 barrels per day.

Kazakh Armed Forces Offered To Neighbors

· Kazakhstan's parliament has offered its armed forces to its neighbors, upon request from their presidents, to maintain peace. The parliament agreed to the government proposal after Defense Minister Sat TOKPAKBAYEV told the house late on Thursday that it was vital to combat international terrorism, which with drug trafficking is one of the plagues of Central Asia. "The activity of international terrorist forces has taken on a permanent character and we must always be ready to give our closest neighbors military help...this is in line with the interests of Kazakhstan's national security," TOKPAKBAYEV said. Central Asians states have expressed concern over the possible spread of Islamic fundamentalism. They particularly fear Afghanistan, which is 95 percent controlled by the radical Islamic Taleban militia. Groups of armed rebels invaded Uzbekistan and Kyrgyzstan several times during the summer.

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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