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Politics-Economics-Business

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

Thursday, November 1, 2001

Russian Federation

Politics

Straw Holds Anti-Terror Talks, Presses On Iraq

• British Foreign Secretary Jack STRAW held talks with Russian officials Wednesday on the military campaign in Afghanistan. He hailed Russia as a “key ally” in the war against terrorism. STRAW said the action against terror suspect Osama BIN LADEN’s network in Afghanistan has already, “destroyed much of the al-Qaeda terrorist network” and weakened the military capability of Afghanistan’s ruling Taliban movement that is sheltering it. After meeting with STRAW, Russian Defense Minister Sergei IVANOV said Russia has no plans to widen its participation in the anti-terror coalition. “Russia has long ago determined its position and its level of participation,” he said in remarks shown on Russian television. That will not change, “irrespective of how the operation proceeds,” he added. While Moscow has provided military intelligence, offered its airspace for humanitarian flights, and welcomes U.S. military presence in the Central Asian nations bordering Afghanistan, STRAW called on the Kremlin to do more. He urged Russia to support efforts to revamp U.N. sanctions against Iraq. He said, “I would hope in particular for greater understanding on Russia’s part of our approach of helping Iraq’s people while maintaining controls on Iraq’s weapons of mass destruction.” In July, the threat of a Russian veto blocked proposed U.S.-British “smart sanctions” to ease U.N. restrictions on Iraqi imports of civilian goods, while keeping in place tough controls over military imports and Iraqi oil revenues. Russia seeks the rescinding of sanctions while trying to persuade Iraq to accept a resumption of U.N. inspections to prove that the country holds no weapons of mass destruction. It was the only U.N. Security Council member to reject the proposal. STRAW’s visit coincided with Russian Foreign Minister Igor IVANOV’s talks with U.S. Secretary of State Colin POWELL, U.S. Deputy Secretary of State Richard ARMITAGE’s visit to Moscow, and U.S. National Security Adviser Condoleezza RICE’s telephone conversation with her Russian counterpart, Vladimir RUSHAILO. This will be followed up by U.S. Secretary of Defense Donald RUMSFELD, who will visit the Kremlin this weekend.

Russia Rejects A Moderate Taliban Gov’t

• Russian Foreign Minister Igor IVANOV ruled out Monday the participation of moderate Afghan Taliban representatives in any future government in Kabul, Interfax news agency reported. He reiterated this stance after meeting with his Spanish counterpart Josep PIQUE. IVANOV will travel to the U.S. this week to meet with U.S. Secretary of State Colin POWELL. The U.S. officials earlier stated that moderate elements of the Taliban movement, but not its leaders, could be brought into a future administration, Reuters reported. Interfax quoted IVANOV as saying that the Taliban were responsible for, “crimes committed in Afghanistan and for the tragedy which the Afghan people are now suffering…We believe it is basically incorrect to divide the Taliban into moderate and less moderate.” IVANOV said there was no place in government for “even the so-called ‘moderate’ Taliban,” and that this viewpoint was shared by “the majority of world opinion.” Russian President Vladimir PUTIN, speaking in Tajikistan last week on his way back from an Asia-Pacific summit in China, called for a future Afghan government reflecting the country’s ethnic composition. He saw no reason to include the Taliban. IVANOV said Russia made a clear distinction between the Taliban and the majority Pashtun ethnic group from which most of the ruling movement is drawn.

Economy

Ruble = 29.68/$1.00 (NY rate)

Ruble = 29.75/$1.00 (CB rate)

Ruble = 27.11/1 euro (CB rate)

Putin Sets Up Anti-Money Laundering Body

• Russian President Vladimir PUTIN on Wednesday signed an order on creating a body to combat money laundering, Reuters reported. The step fulfills a promise Russia made in August to the Group of Seven industrialized countries after criticism that it was not doing enough to fight dirty money. A source said PUTIN had appointed Deputy Tax Minister Viktor ZUBKOV to head the new body. In the new post, he would be given the status of a first deputy finance minister. In February 2002, a new law aimed at fighting money will come into effect. The bill was passed by parliament earlier this year and signed into law by PUTIN in August. The President, who last year estimated capital flight from Russia at $20 billion, has said that stemming the flow of criminal money is vital to improve the country’s international financial reputation and attract foreign investment.

Business

TNK-Itera Form Gas JV

• Tyumen Oil Co. (TNK) and Itera have agreed to establish a joint venture based on the assets of the gas-producing company Rospan, which is in bankruptcy proceedings. According to a company press release, TNK’s Executive Director German KHAN and Itera’s Igor MAKAROV negotiated this agreement in Salekhard, the capital of the Yamalo-Nenets Autonomous Area, with the participation of Yuri NEELOV, governor of this region, and Vice Governor Iosif LEVINSON. The agreement includes the following basic provisions: both companies will have equal rights and powers to manage and control the production and financial operations of the joint venture; and the partners’ shareholding in the business will be established on the basis of Rospan’s assets with Itera holding a 56 percent interest and TNK holding a 44 percent interest in the company. The company will be reregistered in Novy Urengoi in the Yamalo-Nenets Autonomous Area. MAKAROV said, “I look forward to Itera and Tyumen Oil working together and am ready to make every effort so that our company proves it is worthy of working in Yamal.” “We regard this agreement as Tyumen Oil’s big start in Yamal. In implementing our plans, we will certainly rely on our partner’s experience and support by the governor and regional administration,” KHAN said. Governor NEELOV expressed his satisfaction that the two companies had settled their conflict regarding Rospan’s assets. “The solution to the problem has been found and the conflict has ceased to exist. Both Itera’s and Tyumen Oil’s top officials should be given their due for having acted like real statesmen.”

Intercon's Daily

Thursday

November 1, 2001

European Republics

Netherlands Support Baltic’s NATO Bid

• Dutch Prime Minister Wim KOK said on Wednesday Netherlands will back Estonia, Latvia and Lithuania’s bid to join NATO at the defense alliance’s summit in Prague in late 2002, Reuters reported. Speaking to reporters during his visit in Estonia’s capital Tallinn KOK said the, “Finalization of decision-making [on which states will be invited] is still going to take place so I can not anticipate it, but basically, our support [for the Baltic States] is there, there should be no misunderstanding about this.” NATO membership has been a key goal of the three Baltic states since they regained independence in 1991. Earlier this month, a senior NATO official said U.S. President George W. BUSH is more strongly committed than ever to the eastward enlargement of NATO in the view of the September 11^th attacks. It was the clearest indication so far that the new spirit of cooperation between Russia and the West in the fight against terrorism would not prompt the U.S. to defer or scale down the next wave of NATO enlargement. Russia has in the past fiercely opposed NATO expansion to the former Soviet territory, but President Vladimir PUTIN seemed to have softened that stance during his visit to Brussels earlier this month.

Anthrax Found At U.S. Embassy In Lithuania

• The U.S. State Department announced that the U.S. Embassy in Lithuania has discovered traces of what appears to be anthrax in two mailbags. Spokesman Richard BOUCHER said, “Preliminary results show trace amounts of what appears to be anthrax present in two of five mail bags that were sent to the laboratory for examination.” Kazimiera RUTIENE, head of the microbiology laboratory of the Vilnius public health center said, “Following tests, we can say with a 95, maybe even 98 percent certainty, that we found anthrax in at least in one of the five mailbags.” The results will be provided in 48 to 72 hours. The Embassy has sealed off the mailroom and antibiotics were available to employees, Reuters reported. Vytautas BAKASENAS, deputy director of the Infectious Disease Control Center in Vilnius, said, “We will also have to check the premises [of the embassy] where those mailbags were as well as their transport.” The State Department is one of many federal agencies in Washington affected by an anthrax scare after the potentially deadly biological warfare agent was sent through the mail, contaminating post offices and machinery. Traces have already been found at two mailrooms in the main State Department building and in a pouch sent to Peru. Four people have died, and another 16 people have been confirmed as suffering from anthrax in New Jersey, New York, Washington and Florida after the deadly bacteria were sent in a number of letters in the last month.

South Caucasus & Central Asia

Shevardnadze Dismisses Government

• Amidst the political and social turmoil caused by the recent raid of Rustavi-2 television, Georgian President Eduard SHEVARDNADZE addressed the nation, Prime News Agency reported. In his televised speech Wednesday, SHEVARDNADZE stated that he will resign, if the parliament passes a no-confidence vote concerning Interior Minister Kakha TARGAMADZE and Prosecutor General Geogri MEPARISHVILI. The President stressed that the State Security Ministry is responsible for the incident at Rustavi-2 and the Interior Ministry was not involved in the incident. According to SHEVARDNADZE, MEPARISHVILI was aware of the Rustavi-2 raid. However, “he [MEPARISHVILI] is an honest man and a qualified lawyer,” the President said. SHEVARDNADZE criticized the staff at the independent television station for defying a court order to open their financial records for examination, but he admitted that former State Security Minister Vakhtang KUTATELADZE’s, “methods...were not very well thought of.” According to SHEVARDNADZE, the events of the past few days are a part of the political conspiracy aimed at overthrowing the President and the government. SHEVARDNADZE admitted that the conspiracy might have been masterminded by some State Security Ministry officials who joined the ministry under former minister Igor GIORGADZE, accused of the assassination attempt against SHEVARDNADZE in 1995. Since then, SHEVARDNADZE believes, new forces have joined this secret opposition, which receives “signals” from abroad. The President stressed that he will never raise his personal interests above those of the state and he pledged to do everything he can to ease the political tension in Georgia. SHEVARDNADZE claimed responsibility for the current events because he appointed the ministers and he was the head of the Citizens Union of Georgia, which has among its members some politicians unfaithful to the President. He said that the acts of some young politicians, “smells of careerism.” SHEVARDNADZE also expressed confidence that nothing threatens freedom of speech in Georgia because freedom of speech is the biggest achievement of the Georgian democracy.

Opening today’s emergency meeting of the Georgian parliament, Chairman Zurab ZHVANIA stated that the parliament convened to express its solidarity to the Rustavi-2 television team and to discuss how to prevent similar incidents in the future. According to ZHVANIA, the deputies were expected to discuss the responsibility of TARGAMADZE and MEPARISHVILI for the Rustavi-2 incident. Thousands protested outside the parliament, as it convened this morning. Deputy Kote KEMULARIYA blamed the law enforcement structures for the current conflict in Georgia. He demanded the resignation of TARGAMADZE and MEPARISHVILI. The New Right political faction suggested that the President dismiss the entire government, some parliament leaders, and the speaker. The faction also proposed holding a discussion on amendments to the Constitution needed for the introduction of the Cabinet of Ministers and creating the position of prime minister. During a two-hour break of the emergency parliamentary session, deputy Koba DAVITASHVILI addressed the protesters in front of the parliament building and called on the resignation of SHEVARDNADZE. The demonstrators responded to this statement with an ovation. Then, ZHVANIA also addressed the crowd, stating that he was ready to resign, but only after TARGAMADZE steps down. ZHVANIA promised to continue in his position to maintain a stable political environment in Georgia. He told the crowd that the only solution to the current turmoil is to hold parliamentary elections as soon as possible. He said, “Let us start consultations on finding a candidate for a new parliament speaker, who I think will be elected on Tuesday. And let us begin consultations as quickly as possible about the line-up of a new cabinet.” ZHVANIA added that SHEVARDNADZE’s resignation is unacceptable. He told demonstrators outside parliament, “The president must keep his office. He explained, “We are not struggling for power.” Analysts have speculated that SHEVARDNADZE misread the protests as an attempted coup d’etat by ZHVANIA. This was not the case, as ZHVANIA put his own position on the line for the stability of Georgia.

Meanwhile, both TARGAMADZE and MEPARISHVILI announced their resignations as interior minister and prosecutor general respectively. MEPARISHVILI stated that his report on the situation at Rustavi-2 will be published nation-wide on Friday. Following the news, SHEVARDNADZE decided to dismiss the entire government without an explanation. According to ZHVANIA, SHEVARDNADZE called on the parliament to immediately discuss the constitutional changes needed for the introduction of the cabinet of ministers. Having made this statement, ZHVANIA resigned from his position as parliament chairman. Deputy speaker Gigi TSERETELI has become acting chairman of the parliament. Meanwhile, SHEVARDNADZE held a meeting with the fired Georgian government ministers. According to the Prime News Agency, all ministers approved SHEVARDNADZE’s decision. Their deputies will temporarily perform ministerial duties as acting ministers. According to the Prime News Agency, some ministers will probably keep their posts. However, this information is still confidential and unconfirmed.

Former justice minister and newly elected parliamentary deputy Mikhail SAAKASHVILI, who just arrived from Moscow, addressed the rally in front of the parliament. He announced that a new national movement is being formed in Georgia. He has called on the people of Georgia to join the movement. Commander of the Georgian Interior Forces Georgi SHERVASHIDZE stated that despite the situation in the country, he had not receive any orders to place the interior forces on full alert. If necessary, he added, the interior forces will be used. Chairman of Adjaria Supreme Council Aslan ABASHIDZE condemned the protests on the streets of Tbilisi and stated that the organizers of the street protests, “push the country into the abyss of destabilization.” He also accused the parliament of, “trying to use the situation in their interests,” blaming the executive power for the crisis in Georgia.

Deputy Chairman of the Russian Federation Council International Committee Mikhail MARGELOV stated that the situation in Georgia might go beyond the control of the Georgian authorities. He said that, under the current circumstances, Russia, “should provide moral support to President Eduard SHEVARDNADZE not to allow the situation in Georgia to go unchecked.” “Russia has another chance to be the guarantor of stability in the post Soviet territory.” MARGELOV believes the Georgian President has a chance to keep power not applying to the use of force, “but SHEVARDNADZE should realize that this chance is [only with] in Russia.” Russian President Vladimir PUTIN has stated that Russia, “has been closely monitoring the situation in Georgia.” Meeting in the Kremlin with the Chairmen of the foreign constitutional courts, PUTIN said, “Russia cares about Georgia and wishes it all the best.”

Comment: SHEVARDNADZE’s reference to officials of the State Security Service, appointed when Igor GIORGADZE was minister, calls into question President PUTIN’s statement. GIORGADZE is wanted on an Interpol warrant for the first assassination attempt on SHEVARDNADZE in 1995 and has since been linked with the 1999 coup attempt. GIORGADZE has been reportedly sheltered in Moscow, since the failed 1995 attempt. Other recent events also call into question Russian President PUTIN’s intentions. Last week, Georgia’s territorial integrity was violated with the bombing of Georgian villages by what appears to be Russian fighter aircraft. Today, Intercon sources in Georgia reported that Russian intelligence personnel have been identified as operating in the Javaheti region within the ethnic Armenian community and officials are concerned about possible ethnic problems developing there.

As Georgia works through the challenges of democratic life, in an extremely public way, it continues to face pressures from outside its borders, while skirmishes continue in Abkhazia. The internal political turmoil Georgia now faces is a combination of many factors, but first among them has been the inability to effectively organize a government to combat institutional corruption. With SHEVARDNADZE’s call for resubmission of legislation creating a cabinet of ministers and prime minister position, the question remains whether this will be supported or scuttled by the divergent political interests represented in the Georgian parliament. ZHVANIA’s call for new parliamentary elections may be an indication of how deeply divided the parliament is concerning the future direction of Georgia. The true political test of SHEVARDNADZE and those politically close to him will come with the vote on this reorganization of government. If successful, the possibility of reinvigorating the government apparatus to effectively combat corruption and simplify itself will be present. If it fails, it would be politically disastrous. Failure would condemn the government and activate the political opposition. This could not only lead to SHEVARDNADZE’s removal, but no doubt return Georgia to the chaos of its past. These remarkable events continue to show that civil society and politics remain strong and vigorous. However, the failure of the government administratively and the lack of economic progress continue to pressure the system to its breaking point. It is most important that this fragile situation is not exacerbated by outside forces. This is a chance for President PUTIN to become a hero and a true friend to Georgia. PUTIN can show himself to be a statesman and a world player by stepping forward to calm the situation and improve Russia’s relationship with Georgia. In so doing, the respect and influence Russia seeks can be obtained. It is extremely important that the West reaches out to Russia in a collective action to stabilize the situation and resolve the deep seeded problems of Abkhazia in Georgia and Nagorno-Karabakh in Azerbaijan-Armenia. For any outside force to seek advantage over these events would only guarantee failure in their medium and long-term goals.

EU-Uzbek Agree On Post-Taliban Afghanistan

• European Union (EU) President and Belgian Foreign Minister Louis MICHEL met with Uzbek President Islam KARIMOV and senior ministerial officials in Tashkent on Wednesday. The focus of talks was the EU’s vision of a post-Taliban government in Afghanistan. The EU believes the government should embrace all ethnic groups in the Afghan nation. Reuters reported that MICHEL said, “We think that Afghanistan needs a broad coalition representing all the ethnic groups...this coalition should not be one created by an outside country or power, but must really be favorable to the population.” KARIMOV said, “the Northern Alliance has a role to play, but cannot have a monopoly...and has to share power with other groups.” Uzbek Foreign Minister Abdulaziz KAMILOV rejected any role for the Taliban in a future Afghan government. He said, “All ethnic groups should participate in the new government of Afghanistan, including Pushtuns. More than that, we think Pushtuns traditionally play a very important role, but speaking about Pushtuns we don’t mean the Taliban at all.” MICHEL praised Uzbekistan’s, “courageous stand” in supporting the international coalition and engaging itself in the fight against international “terrorism.” MICHEL is on a regional tour to demonstrate the 15-nation Union’s support for the West’s new friends in the “war against terrorism.” He is to visit Tajikistan and Turkmenistan, which also border Afghanistan.

When you need to know it as it happens

Intercon's Daily

November 1, 2001

Thursday

When you need to know it as it happens

Thursday Intercon's Daily November 1, 2001

Intercon's Daily

November 1, 2001

Thursday

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

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When you need to know it as it happens