No. 116, Part I, 15 June 1995

We welcome you to Part I of the Open Media Research Institute's Daily
Digest. This part focuses on Russia, Transcaucasia and Central Asia, and
the CIS. Part II, distributed simultaneously as a second document,
covers East-Central and Southeastern Europe.  Back issues of the Daily
Digest, and other information about OMRI, are available through our WWW
pages: http://www.omri.cz/OMRI.html

RUSSIA
GUNMEN ATTACK TOWN IN STAVROPOL. International and Russian agencies
reported on 14 June that a large group of unidentified gunmen attacked
the Southern Russian town of Budennovsk, located in Stavropol Krai,
about 120 km northwest of the border with Chechnya. The gunmen
reportedly launched assaults on the local police headquarters,
administrative buildings, and other sites, as well as shooting randomly
at town residents. Russian news agencies reported at least 41 deaths and
large numbers of wounded. Interfax reported that one group of gunmen had
fled the town to the south in buses with hostages, while another group
was reported to have barricaded itself in the local hospital with about
60 hostages. According to Russian agency reports, the gunmen had
identified themselves as Chechen separatist fighters, and were demanding
the cessation of Russian military operations in Chechnya in return for
the hostages'  release. There has been no independent confirmation of
the group' s identity. -- Scott Parrish, OMRI, Inc.

MOSCOW DENOUNCES ATTACK, INTENSIFIES SECURITY MEASURES. Officials in
Moscow reacted harshly to the attack, which they attributed to fighters
led by separatist Chechen President Dzhokhar Dudaev, international and
Russian agencies reported on 14 June. A government statement denounced
the attack as a "monstrous provocation" aimed at "inflaming ethnic
hatred," but confidently asserted that "partisan war will not spread
into Russia." However, Lt. General Alexander Kulikov, commander of the
Russian forces in Chechnya, said it is possible the attackers were "one
of the separate groups of bandits trying to destabilize the situation
and attract attention," suggesting they were not linked to Dudaev.
Dudaev spokesman Khamad Kurbanov denied responsibility for the attack,
which he blamed on the Russian government. Moscow placed all federal
forces in the North Caucasus on "full battle alert," in anticipation of
further attacks, and dispatched reinforcements to the region. Security
measures in the Moscow region were also intensified. Interior Minister
Viktor Yerin and FSB head Sergei Stepashin flew from Moscow to
Budennovsk to take personal command of the anti-terrorist operation,
ITAR-TASS reported. -- Scott Parrish, OMRI, Inc.

YELTSIN ACCEPTS LEBED' S RESIGNATION. President Yeltsin accepted the
resignation of Lt. Gen. Alexander Lebed, commander of Russia' s 14th
Army in the former Soviet republic of Moldova, and dismissed him from
the armed forces, Western and Russian agencies reported on 14 June.
Yeltsin then appointed as his replacement, Maj. Gen. Valery Yevnevich,
who until recently has been first deputy commander of the elite First
Guards'  Army. Defense Minister Pavel Grachev had already accepted the
resignation, but Yeltsin had to make the final decision as commander in
chief of the armed forces. Lebed offered to resign two weeks ago as a
protest against plans to downgrade the 14th Army and then withdraw it
from Moldova in three years. He claimed that those plans would lead to
new bloodshed in the area. Lebed is known to have political ambitions
and is expected to join the race for the Russian presidency.   -- Robert
Orttung, OMRI, Inc.

FEDERATION COUNCIL REJECTS ELECTORAL LAW COMPROMISE, FOR NOW. The
Federation Council rejected the compromise State Duma electoral law on
14 June by a vote of 76-26, with 13 abstentions, Western and Russian
agencies reported. Another 14 votes were needed for it to pass. Later in
the day, 77 Federation Council members supported a decision to annul the
results of the earlier vote and once again debate and vote on the bill
on 15 June, Interfax reported. The Council rejected the bill because its
members say allotting half the seats to party lists gives too much
representation to Moscow-based political parties, and because it
requires only a 25% voter turnout for the elections to be valid. The
draft had been approved by the conciliatory commission that included
representatives of the president, Duma, and Council. The Duma had
already approved the compromise on 9 June. If the Council does not
reverse itself, the Duma will try to override the decision with a two-
thirds vote and send the bill to Yeltsin, according to Duma deputy
Viktor Sheinis. Presidential adviser Georgy Satarov indicated that the
president would face a difficult choice if the bill is presented to him.
On 15 June, Izvestiya warned that failure to adopt the law would not
only threaten the parliamentary elections in December but lead to
overall political instability. -- Robert Orttung, OMRI, Inc.

YELTSIN BEHIND FEDERATION COUNCIL VOTE?. Federation Council member
Yelena Mizulina, who played a large role in working out the compromise
on the Duma electoral law, told Interfax that the defeat was organized
by the presidential staff which is not interested in holding elections
in December as mandated by the constitution. Other speculation in the
Moscow press suggests that the delay is an attempt to hold the
presidential and parliamentary elections simultaneously in June 1996.
Duma Speaker Ivan Rybkin made this proposal in 1994 following
consultations with Yeltsin, Council Speaker Vladimir Shumeiko, and Prime
Minister Viktor Chernomyrdin. -- Robert Orttung, OMRI, Inc.

GOVERNMENT ADOPTS PROGRAM TO COMBAT UNEMPLOYMENT. The Russian government
has adopted a program to fight unemployment in 1995, Rossiiskaya gazeta
reported on 14 June. It aims to help 3 million people find work, create
260,000 new jobs, and provide temporary employment for 1.3 million
people; it will be financed with 5.6 million rubles ($1.2 billion) from
the State Employment Fund. The report cited experts as predicting that
the number of officially registered unemployed could increase to 3-4
million by the end of the year (from about 2.2 million now) owing to
bankruptcies in various sectors, including light industry, machine
building, construction, and the military-industrial complex. The article
also warned that successful implementation of the program is threatened
by the widespread practice of officials squandering public funds. On 25
May, Finance Minister Vladimir Panskov sharply criticized the Federal
Employment Service for wasting government money. -- Penny Morvant, OMRI,
Inc.

RUSSIA' S CHOICE SLAMS DRAFT CRIME LAW. The Russia' s Choice faction in
the Duma has lashed out at a draft law on organized crime submitted by
the Security Committee, saying it "is pervaded by the cynical disregard
for basic human rights" and could become "a powerful instrument in
creating a police state," Interfax reported on 14 June. Faction leader
Yury Rybakov said the draft law, due to receive its second reading in
the Duma next week, would give government bodyguard services, the Tax
Police, and the Customs Committee the right to create their own services
to investigate organized crime and that these would be authorized to
stage undercover sting operations and plant agents in government and
public bodies as well as criminal groups. Thus, Rybakov contended, "any
public or political organization" could find itself "full" of such
agents. -- Penny Morvant, OMRI, Inc.

FINAL QUAKE TOLL PUT AT 1,989. Vitaly Gomilevsky, the deputy governor of
Sakhalin Oblast, announced on 14 June that the final death toll from the
earthquake that destroyed Neftegorsk on 28 May was 1,989, Reuters
reported. ITAR-TASS quoted First Deputy Prime Minister Oleg Soskovets as
saying that plans to reinforce existing buildings on the island and
build stronger structures in the future will be finalized this week. --
Penny Morvant, OMRI, Inc.

RUSSIANS FINALLY CLOSE DEALS AT PARIS AIR SHOW. Two Russian space
companies have announced that they will be engaging in joint projects
with Western partners, according to press releases distributed at the
1995 Paris Air Show. NPO Energomash announced it would form a joint
venture with Pratt & Whitney to produce and sell a modified Russian-made
rocket engine. RSC Energia, based in Primorsky krai, announced that it
would join with Rockwell Aerospace and Daimler-Benz Aerospace to
investigate the commercial feasibility of its free-flying space
servicing vehicle, called Inspector. It will launch an Inspector to the
Mir space station in January 1997 to validate the concept. -- Doug
Clarke, OMRI, Inc.

RUBLE SURGES UP 70 MORE POINTS. The Russian ruble surged 70 points
against the U.S. dollar in 14 June MICEX trading, closing at 4,766
rubles to $1, Russian and Western agencies reported. Since early May,
the ruble has risen 364 points, or nearly 7%, representing its strongest
climb in two years. Intervention by the Central Bank of Russia to slow
the currency' s rise has flooded the market with rubles, increasing the
money supply. Deputy Economics Minister Sergei Vasiliev told the media
that the surging ruble "could undermine efforts to tame inflation". --
Thomas Sigel, OMRI, Inc.

MICEX HOLDS FIRST AUCTION ON NEW FEDERAL BONDS. The first auction of new
government securities, federal loan bonds, was held at the MICEX on 14
June, Interfax reported. The Central Bank of Russia, acting as an agent
of the Finance Ministry, placed 59% of the planned amount of bonds, with
an average annual profit rate of 94%, on the market. While foreign
investors can own federal loan bonds, some restrictions apply. All
transactions must be expedited through any of the 70 official dealers of
the Finance Ministry. Federal loan bonds have a circulation period of
378 days and a floating quarterly coupon rate pegged to the
profitability rate in the treasury bond market. -- Thomas Sigel, OMRI,
Inc.

PRODUCTION-SHARING LAW PASSED. The draft law "On Production-Sharing
Agreements" which was rejected on 9 June by the State Duma, passed on 14
June, Interfax reported. Once finalized and adopted, the law will remove
some of the vagueness concerning jurisdiction over resources, licensing,
and taxation for foreign oil companies. A high-ranking official in one
of Russia' s largest oil companies, YUKOS, told the Petroleum
Information Agency that the law will enable companies to sign a $20
billion contract with U.S. Amoco on exploration of the Priobe oil and
gas field in Western Siberia. In addition, another 12 major oil and gas
projects, suspended due to the gap in legislation, can now be launched.
-- Thomas Sigel, OMRI, Inc.

TRANSCAUCASIA AND CENTRAL ASIA

KAZAKHSTAN TO HAVE NEW CONSTITUTION. Kazakh President Nursultan
Nazarbaev has approved the main provisions of a new constitution,
Interfax reported on 13 June. The Kazakh president said the current
constitution is obsolete and an obstacle to progress, according to VEK.
Nazarbaev met with the head of the French Constitutional Court, Roland
Dumas, and Kazakh Justice Minister Nagashbai Shaikenov on 12 June to
discuss the new constitution. Shaikenov said it met international
standards, providing for a democratic state with a strong presidency and
a more coherent arrangement for power sharing between government
branches. The new parliament will be bicameral, but the head of state
will have the power to dissolve it. There will be a provision for
impeaching the president. Nazarbaev said there will be no dual
citizenship and that Russian will not be made an official language,
however the requirement for government officials to be proficient in the
Kazakh language has been postponed for 15 years. -- Bruce Pannier, OMRI,
Inc.

KARIMOV ISSUES DECREES ON LIBERALIZING ECONOMY. Uzbek President Islam
Karimov issued a decree aimed at accelerating the transformation of
state-owned enterprises into publicly held companies, Interfax reported
on 13 June. However, the details of the scheme have not yet been made
public. First Deputy Prime Minister Ismail Dzhurabekov told Handelsblatt
in May that most small and medium-sized businesses, especially in the
service sector, had already been sold to their employees on the basis of
long-term interest free loans. The EBRD, however, estimates that no more
than 20% of GDP is currently generated by the private sector. Also on 13
June, Karimov issued another decree lifting restrictions on the exchange
of the som for foreign currency. Meanwhile, over the past 17 months,
Uzbekistan has signed credit agreements worth $900 million with various
donor countries and international financial institutions. -- Lowell
Bezanis and Elizabeth Fuller, OMRI, Inc.

[As of 1200 CET]

Compiled by Victor Gomez

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