WASHINGTON, D.C. 20005 -- 202-347-2624 -- FAX 202-347-4631

Daily intelligence briefing on the former Soviet Union

Tuesday, June 12, 2001

Russian Federation


India-Russia Test Medium-Range Missile

• The Press Trust of India (PTI) reported that India and Russia, for the first time, jointly test-fired a surface-to-surface missile Tuesday from a test range in India’s eastern coastal state Orissa. Defense scientists from the two countries launched the PJ-10 medium-range missile from the interim test range at Chandipur-on-Sea, about 1,200 kilometers southeast of New Delhi. The Russian-built rocket is completely guided by an onboard computer. The 6.9-meter missile uses solid and liquid propellants in its two-stage system, is capable of carrying multiple warheads, and can strike targets about 280 kilometers away within 300 seconds. The missile’s various components were flown in from Russia last month and assembled at the test range. Indian Defense Minister Jaswant SINGH and scientists from both countries were present at the test. India and Russia are traditional defense allies with the former Soviet Union having been India’s largest supplier of military equipment. In recent months, the two countries have entered into technical cooperation, with New Delhi planning to step up defense purchases from Moscow. The two also agreed, during SINGH’s visit to Russia last week, to undertake joint development of new arms for India’s air force, army and navy. New Delhi has an indigenous missile development program and in the past year has test fired some of its own missiles, including the nuclear-capable Agni ballistic missile. Today’s test, as with past tests, is certain to raise the tension of arms build up in the region, particularly with Pakistan.

Pro-Moscow Administrator Killed In Grozny

• Despite heightened security around Grozny and its neighboring villages and a campaign to protect local officials, Chechen rebels killed another pro-Moscow administrator on Sunday. Gunmen burst into the home of Lukman MADALOV, administrative head of Valerik village, and fired at point blank range over 17 times at MADALOV and his wife. The administrator was killed instantly, while his wife is recovering from serious leg wounds in a nearby hospital. Vladimir MOLTENSKOI, acting commander of Russian forces in the North Caucasus district, told RTR state television, “Yes, this barbaric act did take place...despite our efforts of recent days to prevent this as much as possible.” MOLTENSKOI said he had attended a meeting of administrative heads, chaired by Moscow-installed local leader Akhmad KADYROV, at which each was told he would be issued with a pistol, Reuters reported. He added, “A guard of three to five people...from our command will also be provided for each. Work is going ahead on this at full steam....Many had weapons and a guard before, but this will provide a legal framework.” Itar-Tass news agency quoted MOLTENSKOI as saying 300 pistols were being distributed at a government building. Weapons were even being handed out to local Muslim clergy. Officials associated with KADYROV’s administration have been singled out. In April, one man was even killed by a bomb while being interviewed on television. Three quit last week after one of their colleagues was shot dead. KADYROV, a former Muslim cleric, was quoted by Interfax news agency as denouncing the latest killing as, “clearly political, with the aim of intimidating everyone who supports the efforts of our country’s leaders to establish order in Chechnya.”

Meanwhile, local pro-Moscow Prime Minister Stanislav ILYASOV denied reports that a ban had been slapped on all movements of soldiers and equipment in connection with today’s Russian Independence Day holiday. In addition, the military announced an easing by two hours of the nightly curfew imposed on the region on Russia’s southern flank.

Yeltsin Granted Fatherland Award

• Russian President Vladimir PUTIN signed a decree on awarding first Russian President Boris YELTSIN with the Order “For Services to the Fatherland,” 1st Class. The head of state announced this news, opening a reception in honor of Russia’s Independence Day. “Today, we mark a decade of the institute of presidency in Russia,” PUTIN said. “This day is historically connected with the name of the first Russian president Boris Nikolayevich YELTSIN. I congratulate him on this holiday.” YELTSIN, who was warmly hailed, is in good health after being hospitalized this past winter for pneumonia. YELTSIN has suffered many health issues, including heart bypass surgery in 1996.


Ruble = 29.15/$1.00 (NY rate)

Ruble = 29.15/$1.00 (CB rate)

Ruble = 24.71/1 euro (CB rate)

Gov't To Defend, Duma To Fight Budget

• Russian Prime Minister Mikhail KASYANOV pledged on Saturday to defend his Cabinet’s 2002 budget, against deputies from the Russian State Duma. He foresaw no big overhaul in prospective cabinet changes, but wanted to boost efficiency and ministerial responsibility. He said the budget had a pragmatic approach to income and expenditure and promised to meet foreign debt commitments, Reuters reported. He noted that the deputies had to be altered to ensure passage. The Cabinet gave approval in principle this week to the budget, with ministers noting warnings by President Vladimir PUTIN to boost pay for the military and keep to targets. Finance Minister Alexei KUDRIN said it allowed for a balanced economy and anticipated structural reforms and took account of external debt payments regardless of oil prices.

Head of the Russian State Duma’s Budget Committee Alexander ZHUKOV said that the government will have trouble passing the current 2002 draft budget. Deputies would likely find fault with some of the budget’s main parameters, including forecasts for annual inflation and a planned surplus. The government’s 2002 draft budget forecasts a surplus of 1.26 percent of gross domestic product and targets annual inflation of 12 percent to 13 percent. “We need to see where we will be at the end of 2001. If inflation this year hits 20 percent then of course inflation of 12 percent to 13 percent [in 2002] is too low,” ZHUKOV said. The Russian government originally set the forecast for 2001 annual inflation at 12 percent to 14 percent, but on Thursday raised that target to 14 percent to 16 percent, citing strong price growth in the first five months. ZHUKOV said that deputies would also question the budget’s surplus. He said, “Why should we not refinance debts or borrow from the Central Bank?” ZHUKOV added there would also be significant dissent among deputies about the government’s plans for spending cuts on industry, agriculture and transport.


Today's News Highlights


Yeltsin Gets Fatherland Award

Budget Debates

European Republics

Orthodox Priests Protest Pope

Ukrtelecom To Sell Small Stake

Belarus To Get Currency Funds

South Caucasus & Central Asia

Sukhumi Blocks Gudauta Base

Uzbek Sentences IMU Villagers

Published every business day since 1993


Intercon's Daily

When you need to know it as it happens

European Republics

Orthodox Priests Protest Pope’s Visit

• Several hundred Orthodox priests and nuns marched through the Ukrainian capital Thursday to protest against Pope John Paul’s visit to Ukraine on June 23rd. The five-day trip in Kiev and Lviv is opposed by the country’s dominant Orthodox Church, which is closely linked to Moscow and has accused the Roman Catholic Church of stealing converts and land. Priests and nuns, bearing icons and banners emblazoned with “Pope persona non grata,” walked through central Kiev to the parliament building and the historic monastery site of Lavra Pechersk, Reuters reported. Several hundred believers followed the protestors. More than two million people are expected to travel to see the Pope in Lviv, an area with a large Catholic population. Father Teodozy YANKIV, from Ukraine’s biggest Catholic Church, the Greek-Catholic Church said, “Some 600,000 invitations have already been printed for the two services in Kiev and another 1.6 million will be invited in Lviv.” The Polish-born Pope in April rejected a request by Ukraine’s Orthodox Church to postpone the trip. Head of the Russian Orthodox Church Alexiy II has declined to meet the Pope and has prevented him from traveling to Russia. The Orthodox Church was the only confession officially tolerated when Ukraine was part of the Soviet Union. The property of the Catholic Church was turned over to the Orthodox Church and the repossession of that property in the early 1990s, after Ukraine gained its independence, sometimes led to violent clashes. Two property disputes continue to this day. On Monday, Ukrainian Foreign Minister Anatoly ZLENKO said authorities had information that “provocations” were being organized. The Pope has said he wants to see unity between Western and Eastern churches, which split in the Great Schism of 1054.

Ukrtelekom To Sell Smaller Stake In UMC

• State telecom monopoly Ukrtelekom announced today it will sell only a 25 percent stake in the country’s largest mobile operator Ukrainian Mobile Communications (UMC), half of what was originally planned. The government has cleared the way for a sale of the entire state stake of 51 percent in UMC, which was set up in 1992 by Ukrtelekom and three telecoms companies: Deutsche Telekom, TeleDanmark, and Dutch KPN Group with 16.3 percent each. A senior source in Ukrtelekom told Reuters the state-owned company was unwilling to sell its entire 51 percent stake in the lucrative mobile operator and wanted to buy stakes from foreign shareholders. “We do not want to sell our stake in UMC. But if the government insists on a sale our position will be to keep 26 percent and sell 25 percent,” he said. Head of the State Property Fund Alexander BONDAR said that privatization advisers said the sale of Ukrtelekom’s UMC stake would significantly cut the value of the monopoly. “All the advisers have said we must not sell UMC’s stake before Ukrtelekom privatization,” BONDAR said. The government plans to sell 37 percent of Ukrtelekom at an open tender in November or December this year, raising some $600 million from the sale. Deutsche Telekom and TeleDanmark have expressed interest in raising their stakes in UMC. The mobile operator expects its net profits to grow by 30 percent this year from $18.1 million in 2000 and has more than 600,000 subscribers. KPN Group, struggling under a mountain of debt, plans to sell its 16.3 percent in UMC, together with other non-core assets.

Rumsfeld On NATO Expansion

• US Secretary of Defense Donald RUMSFELD in a meeting on Saturday in Finland said that the Baltic States had made “good progress in their military efforts” toward qualifying for NATO membership. He noted that the US favors adding new members when they are ready. The BUSH administration, however, has not specified any timetable for NATO expansion and RUMSFELD did not say whether the US would support the membership of the Baltic States at this time. The issue of NATO membership for the Estonia, Latvia, and Lithuania is especially sensitive in Moscow because it would mean expanding the alliance for the first time onto territory of the former Soviet Union. Russia strongly opposed the last NATO expansion in 1999 when Poland, Hungary and the Czech Republic joined the alliance. RUMSFELD also assured the Baltic and Nordic nations they will be included in the administration’s consultations on taking a new approach to security and defense, which RUMSFELD called a “new framework of deterrence.” Estonia, Latvia, and Lithuania are among nine countries considered candidates for NATO membership, although the alliance is not expected to decide which, if any, to admit until November, 2002. The subject is expected to come up when US President George W. BUSH attends a NATO meeting in Brussels on Wednesday and meets Russian President Vladimir PUTIN in Slovenia on June 16th.

Russia To Release Belarus Stabilization Loan

• Russian Prime Minister Mikhail KASYANOV announced that Russia will release the next installment in a credit to stabilize the Belarus ruble by the end of June. The installment will total $30 million. The Central Banks of both countries are expected to agree on the amount of the following installment by the end of August. “We are acting in accordance with a previously approved program,” KASYANOV added. The decision to grant this credit was made in light of the preparation for the introduction of a single currency by Russia and Belarus. The Russian ruble will become the common currency of the Russian-Belarus Union effective 2004. Last week, Belarus President Alexander LUSKASHENKO accused Russia of failing to fulfill the stabilization program and dragging its feet on the merger of Belarus and Russia into a single Union.

South Caucasus & Central Asia

Sukhumi Residents Block Gudauta Withdrawal

• The population of Sukhumi, including some Russians, have staged several days of rallies to protest against the liquidation of the Gudauta military base in the unrecognized republic of Abkhazia. Monday, Sukhumi officials made a statement that they will not allow Russian military hardware to be removed from the Gudauta military base. The deputy defense minister of the unrecognized republic of Abkhazia Givi AGRVA told Prime News Agency that, “Neither leadership nor people of Abkhazia will allow military hardware to be removed because it must be handed over to the Abkhaz side to ensure the security of the republic.” Since the end of last week, the base has been blocked by the population which doesn’t allow the military withdraw. According to AGRVA, “The troops can go, but the hardware should stay.” Deputy head of international relations of the Georgian State Chancellery Shalba PICHKHADZE said the rallies of the Abkhazian populations could have been inspired by some forces in Moscow. Commonwealth of Independent States (CIS) Institute Director Konstantin ZATULIN said, “It is possible that the residents of Abkhazia understand the interests of Russia better than management of the Russian delegation on the negotiation process with Tbilisi headed by Deputy Prime Minister Ilya KLEBANOV, who continues the line of [Georgian] President SHEVARDNADZE and former head of Russian Foreign Ministry on giving up Russian geopolitical positions in the post Soviet space.” In December, 1999, Advisor to the Georgian President Levan ALEXIDZE warned, “Moscow is preparing justification for its active interference with the Abkhazian conflict, as Russia does not want to withdrawal the military base from Gudauta...” The Assistant to the Abkhaz leader Astamur TANIYA made a statement today saying Sukhumi officials are not making any predictions about what will happen with the protests in Gudauta. Sukhumi acknowledges that Russia must comply with its international obligations over closing the base, but, “this is difficult to explain to the population, which equates the Russian troops with its security and guarantees for stability,” Prime News Agency reported. He stressed that the rallies near the base were not inspired by either Moscow or Sukhumi. Georgian Chairman of the parliament’s Defense and Security Committee, Gia BARAMIDZE expressed hope on Saturday that Russia will fulfill its obligations it assumed at the Organization for Security and Cooperation in Europe (OSCE) Istanbul summit and withdraw its military based from Gudauta by July 1, 2001.

Uzbek Sentences Islamic Militant Villagers

• Four Uzbekistan courts in Tashkent have sentenced 74 Uzbek villagers accused of cooperating with armed Islamic militants to various prison terms ranging from three to 18 years. Ruslan SHARIPOV, the head of the Human Rights Society of Uzbekistan’s (HRSU) press center, said the villagers had been accused of serious crimes, including terrorism and encroachment on the constitutional order. The accused were from the Surkhandarya region, near the border with Tajikistan. United Press International reported that HRSU has accused the Uzbek government of forcibly resettling hundreds of ethnic Tajiks suspected of supporting Islamic insurgents. Talib YAKUBOV, the HRSU’s secretary general, said over the past year nine, villagers in the Surkhandarya region had been forced from their homes. Last summer, the region was the scene of fighting between the Uzbek army and armed militants calling themselves the Islamic Movement of Uzbekistan (IMU). Tashkent sources said an estimated 70 to 100 members of the IMU had infiltrated the area from Tajikistan. The IMU is seeking to overthrow the regime of President Islam KARIMOV and transform the republic into an Islamic state. Washington placed the IMU on its list of terrorist organizations last September and has been blamed for a series of bomb attacks in Tashkent in 1999.

June 12, 2001

When you need to know it as it happens


Intercon's Daily

June 12, 2001

Intercon's Daily


Daily Report on Russia is for the exclusive use of the subscriber only. Reproduction and/or distribution is not permitted without the expressed written consent of Intercon. Daily Report on Russia  copyright 2001, Intercon International, USA.

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

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

Tatyana Kotova, Contributing Editor

When you need to know it as it happens

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

available for non-profit institutions.

June 12, 2001