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Daily intelligence briefing on the former Soviet Union

Published every business day since 1993

Friday, December 15, 2000

cording to our information this is false. You cannot believe anything YASTRZHEMBSKY says," SUGAIPOV said. Russians have wrongly announced several times that Chechen leaders were killed or wounded.

Prosecutors Drop Mabetex Case

· Russian prosecutors have ended their probe into allegations that Swiss-based company Mabetex bribed former President Boris YELTSIN, his daughters, former Kremlin Property Chief Pavel BORODIN and other officials, The Moscow Times reported. Ruslan TAMAYEV, the deputy head of the Prosecutor General's Office who was in charge of the case said, "The prosecutor's office issued a special regulation declining to open a criminal case into Boris YELTSIN and his family members." He noted that the Swiss had failed to provide sufficient evidence. Former Prosecutor General Yuri SKURATOV opened the case two years ago to investigate whether Russian officials received millions of dollars in kickbacks from Mabetex and Mercata Trading and Engineering, which renovated parts of the Kremlin, federal government's offices, and YELTSIN's private residence. Officials at the companies have also denied making illegal payments. All the documents on the case will be sent to state archives. Earlier this year, Swiss magistrates indicted five people over their investigation of Mabetex, and issued an arrest warrant for alleged money laundering against BORODIN. In September, Swiss prosecu

Russian Federation


Russia's New Strategy Against Chechen Rebels

· Russian generals, tired of hit-and-run attacks by Chechen rebels, have changed warfare tactics by deploying small contingents of troops in the rebel region to hunt down leading Chechen commanders. Armed forces chief of staff Anatoly KVASHNIN said by fanning out across the province, police and troops would hobble the rebels' movements and stop them blending with civilians often willing to give them food and shelter. "Such garrisons will be stationed in more than 200 of Chechnya's 357 towns and villages…I think that this will be the most resolute stage of the anti-terrorist operation." The decision, certain to expose troops to greater danger, illustrates the degree of exasperation in the Kremlin with the military's inability to stamp out rebel attacks and stem a steady trickle of Russian casualties, Reuters reported. The redeployment is due to be completed within two months. The move also aims to give at least some protection to local pro-Moscow administrators, regular targets of rebel hit men. The military has repeatedly vowed that it will deal the rebels a crushing blow this winter. Russia's long standing strategy has provided for troops based in a handful of strong points to launch search-and-destroy raids against the rebels, backed up by shelling and aircraft fire.

Meanwhile, Kremlin spokesman Sergei YASTRZHEMBSKY announced on Wednesday that Chechen President Aslan MASKHADOV had been wounded more than a month ago in fighting with Russian troops. MASKHADOV's driver and two of his bodyguards were killed in a special operation by Russian forces on November 7th, but MASKHADOV escaped. Umar SUGAIPOV of the Chechen Information Center in London denied the report. "Ac

Today's News Highlights


Financial Intelligence Approved

Gazprom Sued Over Debts

European Republics

Chernobyl Closed For Good

Estonia Cuts Corporate Taxes

South Caucasus & Central Asia

Georgia Adopts 2001 Budget

OPIC Reviews Caspian Pipeline

NATO Commander Visits Uzbek

Kazakhstan Reshuffles Cabinet




December 15, 2000

Intercon's Daily

tors voiced doubt that Russia was pursuing this and other cases as strenuously as it could and had been unwilling to make arrests in the case. Swiss prosecutor Bernard BERTOSSA said, "We have no intention of ending our investigations in spite of the Russian decision." He remains determined to prove that Mabetex was used as a front by senior Kremlin officials to channel millions of dollars in kickbacks.

INF Treaty Deadline Details Agreed Upon

· The US, Russia, Ukraine, Kazakhstan, and Belarus signed an agreement on Thursday outlining details for the ending of round-the-clock monitoring at missile plants in Utah and Russia. The May 31, 2001 deadline for dismantling the plants' monitoring systems was set in the US-Soviet Intermediate Range Nuclear Forces treaty signed by Presidents Ronald REAGAN and Mikhail GORBACHEV in December, 1987. The Intermediate Range Nuclear Forces (INF) treaty banned intermediate-range nuclear missiles and was the first treaty to lead to the destruction of an entire class of nuclear weapons. "Although the INF treaty is of unlimited duration, the treaty's extensive inspection regime, including continuous monitoring at missile assembly plants in Magna, Utah, and Votkinsk, Russia, will be concluded at midnight May 31, 2001," the countries said in a joint statement. The same five nations on Monday signed an agreement specifying procedures for the phased elimination, under the Strategic Arms Reduction Treaty, of the last SS-24 intercontinental missiles in Ukraine. It will see major components that are essential to the missiles' use destroyed in a first phase, after which they will no longer be usable. The final date for the missiles to be eliminated is December 4, 2001.


Financial Intelligence Service Approved

· Russian President Vladimir PUTIN on Wednesday approved plans to create a financial intelligence service that would investigate money laundering and tax evasion. Government officials have long complained that Russian businesses and individuals are underreporting their earnings, channeling profits abroad, and paying only a fraction of the taxes they owe. The creation of a department to fight tax evasion was proposed by Russian Tax Police Chief Vyacheslav SOLTAGANOV. PUTIN

approved the proposal, but no details were released on when the department may be formed, how its agents would operate, or what its powers would be. SOLTAGANOV only quoted PUTIN as saying that tax police should work, "within the limits of law." One of PUTIN's first economic actions as president was to streamline Russia's chaotic and virtually unenforceable tax system and to introduce a flat, 13 percent personal income tax.

Ruble = 27.95/$1.00 (NY rate)

Ruble = 27.96/$1.00 (CB rate)

Ruble = 25.12/1 euro (CB rate)

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Lender Sues Gazprom Over Debts

· France's number two lender, Credit Agricole Indosuez, is suing Russian gas company Gazprom over debts of "around $100 million," La Tribune reported, citing unnamed Indosuez sources. Indosuez is bringing lawsuits against the world's biggest gas company in Moscow, New York, and Brussels to recover unpaid debts on foreign-exchange contracts signed with its Indosuez International Finance unit before the Russian financial crisis of 1998, La Tribune said. Interfax earlier reported the Russian authorities were investigating Indosuez on suspicion of theft of funds and goods belonging to Russian financial institutions. Indosuez has said the investigation is groundless.

When you need to know it as it happens




December 15, 2000

Intercon's Daily

European Republics

Chernobyl Closes For Good

· In a dramatic, live broadcasted ceremony an engineer at Chernobyl nuclear power plant, the site of the world's worst nuclear accident in 1986, turned a knob shutting down the plant's last reactor for good. "Mr. President of Ukraine, the third reactor is being stopped for good. I have nothing more to add," reported the station's director, Vitaly TOVSTONOHOV, wearing white protective clothing. Following years of pressure from the West, Ukraine's President Leonid KUCHMA agreed earlier this year to close down Chernobyl in return for Western financial aid to help finish building replacement reactors and shutter Chernobyl. Officials say it will take until 2008 before the last fuel rods are removed from the plant, which is 125 kilometers (70 miles) north of Kiev in a poisoned no-go zone. The European Bank for Reconstruction and Development (EBRD) will lend Ukraine $215 million and the European Union's Euroatom will lend the government $585 million. Another $348 million should come from export credit agencies, $124 million from Russia, $50 million from the Ukrainian government and $158 million from Ukraine's Energoatom.

KUCHMA, who has been concerned about lost jobs and high electricity bills following Chernobyl's closure, has argued that new reactors to be built in Rivne and Khmelnytskyi would be needed to replace lost power from Chernobyl once it is taken off line from the nation's power grid. The third reactor, now shut permanently, had produced only 6 percent of the nation's electricity needs, or about enough to supply Kiev, at best, and was most recently shut between December 6th and Thursday, when it was turned on at low power for safety checks. The new reactors, which will cost $1.48 billion to complete, will produce more than 10 percent of Ukraine's power needs when they are completed. The first one, in Khmelnytskyi, will be completed in 2003; the reactor in Rivne should be completed by 2005.

Cutting Corporate Taxes Proves Successful

· Estonian Finance Minister Siim KALLAS today said that by slashing corporate income tax on reinvested profits the government had handed business about one billion kroons ($57 million) of addi

tional resources. The corporate tax reform this year has helped boost reinvested profits and improved the Baltic country's competitiveness and attractiveness to investors, KALLAS told a business conference. He also said that Estonia needed to maintain a policy of low taxation and to facilitate the participation of private business in state services. He said that administrative, pension, and budget reforms needed to be finished. According to the Finance Ministry, KALLAS saw the biggest problems of Estonia's economic development lying in a shortage of professional workforce, Reuters reported.

South Caucasus & Central Asia

Earthquake Shakes Tbilisi

· On Thursday, an earthquake shook the Marneuli region of Georgia, about 40 kilometers south-west of Tbilisi. The earthquake registered 5 on the Richter scale and 4 in the capital city of Tbilisi. The earthquake was also felt in Rustavi, Gori, and other regions of Mtskheta-Mtianeti. According to the Emergency Situation and Citizen Defense Department data, the earthquake did not cause any damage to buildings or deaths.

Georgian Parliament Adopts 2001 Budget

· The Georgian parliament, in a vote of 120 to 21, approved the 2001 budget of $558 million in its third and final reading on Wednesday, with minor amendments. The budget deficit, projected to be 3.9 percent of gross domestic product (GDP), is to be covered by domestic resources and loans from multinational financial institutions. Spending is projected at 1.117 billion lari ($558 million) on revenues of 839.7 million lari. Head of the parliament's budgetary office Roman GOTSIRIDZE said, "The 2001 budget is more realistic than last year's budget was before it had to be cut. It is realistic, but it will be hard to fulfill." The budget forecast inflation of 5-6 percent, GDP growth of 3-4 percent, and the lari currency expected to average 2.00 per dollar. The International Monetary Fund (IMF) has recommended that Georgia take additional steps, including the adoption of the 2001 budget, before the Fund could make the final decision to release its $150 million loan program.

Meanwhile, Finance Minister Zurab NOGAIDELI approved the resignation of National Treasury Head

When you need to know it as it happens




December 15, 2000

Intercon's Daily

Guram TARASHVILI. The ministry has been planning to dismiss TARASHVILI from the posts for long time, as the Chamber of Control has detected number of violations in the National Treasury. The ministry has been calling for serious staff changes in the Treasury.

Russian Withdrawal Costs 1.3 Million Lari

· Georgian Finance Minister Zurab NOGAIDELI told Prime News Agency that the withdrawal of Russian bases from Georgia has cost Georgia 1,307,000 lari. He said the cost is coming out of the Customs Department, which is coordinating the withdrawal of Russian technology for the bases. According to one of the terms of the bill on Amendments and Additions to the 2000 State Budget, the funds for the Russian technique withdrawal for the customs department should be allocated from the reserve fund of the State budget. NOGAIDELI predicted that the expense will continue to rise in the future. The US is providing so-called operational financing for the withdrawal.

US Credit Agencies Consider Pipeline

· The US Overseas Private Investment Corp. (OPIC) and the US Export-Import Bank met with a group of investors for the $2.4 billion Caspian Pipeline, which would transport oil from the Caspian Sea to Turkey's Mediterranean coast. The US, which is eager to limit Russian and Iranian influence in the energy-rich Caspian area, has long pushed for a one million barrels-per-day pipeline to Turkey. The project has yet to get off the ground because of its huge cost and disappointing drilling results in the Caspian. Prospects for the pipeline improved after OKIOC discovered oil off the Kazakh Caspian shelf earlier this year. Kazakh government officials said the site could be one of the world's largest offshore oil fields. Azerbaijan committed to fill up 80 percent of the Caspian pipeline and American officials are trying to persuade Kazakhstan to provide the rest. OPIC is an independent branch of the US government whose purpose is to facilitate private investment in countries strategically important to the US.

NATO Commander Visits Uzbekistan

· NATO Commander South-Eastern Europe General Tamer AKBASH arrived Wednesday in Tashkent to discuss military cooperation with Uzbekistan. In the course of his four-day visit, AKBASH plans to meet with Uzbek Defense Minister Kodir GULOMOV and National Security Council Secretary Mirakbar RAKHMONKULOV.

Kazakhstan Reshuffles Cabinet

· Kazakh President Nursultan NAZARBAYEV Wednesday reshuffled the Cabinet and appointed some new officials. The Energy, Industry, and Trade Ministry will be replaced with the Energy and Minerals Ministry. Vladimir SHKOLINIK, the former minister, will be in charge of the new ministry and serve as deputy prime minister as well. The Economics Ministry will be changed into the Economics and Trade Ministry. The Investment Administration, Purchase Administration and Anti-drug Administration will be abolished and the power of the three departments will be transferred to the Foreign Affairs Ministry, the Finance Ministry, and the Justice Ministry, respectively.

At the same time, Kazakhstan will set up two administrations to support middle and small enterprises and to manage the reserve of materials. Kanat SAUDABAYEV, director of the Cabinet office, will be transferred to the post of Ambassador to the US, and Altai TLEUBERDIN will fill up his vacancy. All the changes will be finished in one month.

Turkmenistan's GDP Rises

· Turkmenistan's gross domestic product (GDP) rose 17.0 percent in January to November, compared with the same period last year, and totaled 21 trillion manat ($4.04 billion), the State Statistics agency, Turkmenstatprognoz, announced Thursday. In the period January to November, 1999 GDP rose 15 percent.

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

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When you need to know it as it happens