Vol 1, No. 13, Part I, 17 April 1997

Vol 1, No. 13, Part I, 17 April 1997

This is Part I of Radio Free Europe/Radio Liberty's Newsline.
Part I is a compilation of news concerning Russia, Transcaucasia and
Central Asia. Part II, covering Central, Eastern, and Southeastern
Europe, is distributed simultaneously as a second document.  Back
issues of RFE/RL NewsLine are available through RFE/RL's WWW
pages: http://www.rferl.org/newsline/search/

Back  issues of the OMRI Daily Digest are available through OMRI's
WWW pages: http://www.omri.cz/

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Headlines, Part I

* FEDERATION COUNCIL DELAYS DECISION ON TROPHY ART
   LAW

* CHUBAIS SAYS "MONSTROUS" CRISIS FORCES REVISION
   OF BUDGET

* MORE FALLOUT FROM "YEREVANGATE" ARMS SCANDAL

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RUSSIA

FEDERATION COUNCIL DELAYS DECISION ON TROPHY
ART LAW. The Federation Council has decided to use written
ballots in the vote on the law on cultural valuables, thereby
delaying a decision on the controversial legislation, RFE/RL's
Moscow bureau reported yesterday. According to the unusual
voting procedure, ballots will be distributed to deputies who
did not attend yesterday's session and the final tally will be
announced sometime next month. Although Russian
commentators believe the Federation Council is likely to
override President Boris Yeltsin's veto of the law, the delay
spares Yeltsin a potentially embarrassing scandal during his
three-day visit to Germany. Yeltsin arrived yesterday in Baden-
Baden, where he is to hold talks with German Chancellor
Helmut Kohl and receive an award from a German media
organization.

CHUBAIS SAYS "MONSTROUS" CRISIS FORCES REVISION
OF BUDGET. First Deputy Prime Minister Anatolii Chubais
has announced that the 1997 budget must be substantially
revised because of a "monstrous" crisis, RFE/RL's Moscow
bureau reports. Addressing the Federation Council today,
Chubais said the budget exceeds the state's means by 100
trillion rubles ($17.4 billion). He noted that revenues during
the first quarter of this year totaled only 57% of government
targets and that tax collection was only at 39% of budgeted
levels. The government is expected to submit a revised budget
to the parliament this month, but the sharp proposed cuts in
non-essential spending are likely to meet with strong
opposition. Chubais said that despite the revision, the
government will still be able to pay all pension arrears by 1
July.

MINIMUM PENSION INCREASE APPROVED. By a vote of 99
to 16, the Federation Council has approved a law that would
raise the minimum monthly pension by 13% to 78,620 rubles
($14) beginning on 1 March. Pension Fund head Vasilii
Barchuk urged deputies before the ballot not to pass the law,
saying the extra expenditures could not be financed. Deputy
Prime Minister Oleg Sysuev told ITAR-TASS yesterday that the
measure would index debts rather than pensions. Yeltsin is
likely to veto the law. Meanwhile, the Federation Council has
decided to vote on the law on the government (see RFE/RL
Newsline, 15 April 1997) using the same written ballot
procedure adopted for the trophy art law.

ANOTHER CONSTITUTIONAL COURT NOMINEE
REJECTED. The Federation Council has rejected the
candidacy of presidential legal adviser Mikhail Krasnov, whom
Yeltsin nominated to the Constitutional Court last week,
RFE/RL's Moscow bureau reported yesterday. Yeltsin tried
twice in 1994 to appoint Krasnov to the court but was stymied
by the council. Last month, the upper house refused to
confirm Mikhail Fedotov, Yeltsin's first choice to fill the latest
vacancy in the court. While Yeltsin searches for a new
nominee, the court will function with 18 rather than 19
judges.

NEW CABINET APPOINTMENTS. Yeltsin has named
Aleksandr Pochinok, until now chairman of the State Duma
subcommittee on taxes, to head the State Tax Service, Russian
news agencies reported yesterday. Pochinok belongs to the
Russia's Democratic Choice party of Yegor Gaidar and Anatolii
Chubais. Yeltsin has also appointed Mikhail Fradkov to head
the Foreign Trade Ministry. Fradkov has been acting foreign
trade minister since Oleg Davydov was removed in last
month's cabinet reshuffle. In addition, Yeltsin created an
advisory Presidential Economic Department, which will be
supervised by former finance minister and current presidential
adviser Aleksandr Livshits.

DUMA LIMITS TV COVERAGE OF ITS WORK. The State
Duma has voted by 264 to 30 to bar TV journalists from
filming in the Duma chamber, ITAR-TASS reported yesterday.
Instead, the Duma's press service will release videotapes of
parliamentary sessions to TV networks. Duma Information
Committee Chairman Oleg Finko of the Liberal Democratic
Party of Russia, who proposed the measure, said the new rules
would allow voters to watch "unbiased information" about the
Duma's work. The major TV networks generally portray the
parliament in an unfavorable light, and opposition deputies
have long complained of media bias. In March, the Duma
stripped journalists from state-controlled Russian Public
Television (ORT) of their accreditation for one month. ORT
appealed to the Supreme Court, which ruled that the Duma's
ban was illegal.

CHECHNYA CREATES SPECIAL TASK FORCE TO SEARCH
FOR HOSTAGES. The Chechen Interior Ministry has created a
20-strong force tasked with searching for abducted persons,
Russian agencies reported yesterday, quoting Interior Minister
Kazbek Makhashev. The force's top priority will be to locate the
four journalists from Radio Rossii and ITAR-TASS who were
abducted in Grozny on 4 March. Meanwhile, Russian Security
Council Secretary Ivan Rybkin said former Chechen Security
Department head Abu Movsayev's warning of terrorist attacks
on eight Russian cities on 21 April--the first anniversary of the
death of Chechen President Dzhokhar Dudaev--was a
"provocation." Rybkin also said that a peace accord between
Moscow and Chechnya is "almost ready," AFP reported.

ZYUGANOV SEEKING ALLIANCE WITH LEADERS OF
NATURAL MONOPOLIES. Communist Party leader Gennadii
Zyuganov says his party is joining forces with leaders of the
natural monopolies in the energy and transportation sectors to
oppose the government's restructuring plans, RFE/RL's
Moscow bureau reported. Zyuganov said the policies pursued
by "radical reformers" would lead to Russia's disintegration. He
added that he has spoken with many regional leaders who
share his concerns. Zyuganov also claimed that the
government has a "secret plan" to dissolve the Duma and to
make economic restructuring irreversible during the few
months before new parliamentary elections would have to be
held. Duma deputy Viktor Sheinis of Yabloko told RFE/RL that
a Communist alliance with the heads of Russia's natural
monopolies would probably alienate the more hard-line
communists in Zyuganov's camp.

GOVERNOR DEFENDS NATURAL MONOPOLIES. Sverdlovsk
Oblast Governor Eduard Rossel says the gas monopoly
Gazprom, the electricity giant Unified Energy System, and the
railways network should not be restructured "under any
circumstances," ITAR-TASS reported yesterday. At the same
time, he called on the natural monopolies to cut their tariffs by
one-third. Earlier this week, Rossel advocated restoring the
Ministry of Defense Industry to provide state planning and
protection for Russia's military-industrial complex. That
ministry was abolished last month and its responsibilities
transferred to the Economics Ministry. Kommersant-Daily
suggested on 15 April that Rossel may be seeking to revive the
Ministry of Defense Industry so that he can join the
government as head of the ministry.

RUSSIA SIGNS PROTOCOL ON ABOLISHING DEATH
PENALTY. Russia has signed Protocol 6 of the European
Convention on Human Rights, which outlaws capital
punishment, Reuters reported yesterday, citing a statement
released by the Council of Europe. Russia agreed to abolish
the death penalty within three years when it joined the Council
of Europe in February 1996, and Yeltsin ordered the Foreign
Ministry to sign the protocol earlier this year. However, the
measure is unlikely to be ratified by the parliament. Last
month, the Duma voted against a moratorium on the death
penalty.

RUSSIA TO LAUNCH MORE EUROBONDS. First Deputy
Finance Minister Aleksei Kudrin says that within the next few
months, Russia will float its third Eurobond issue, which will
be denominated in dollars, ITAR-TASS reported yesterday.
Kudrin said two or three more Eurobond issues will be
launched by the end of the year. Russia launched its first $1
billion issue of Eurobonds last November and floated its
second issue, worth 2 billion German marks ($1.18 billion), in
March. Meanwhile, Central Bank Chairman Sergei Dubinin
announced on 15 April that the governments of Moscow, St.
Petersburg, and Nizhnii Novgorod Oblast are likely to issue
Eurobonds this year, ITAR-TASS reported. Yeltsin issued a
decree earlier this month allowing the three regions to issue
Eurobonds to cover up to 30% of their annual revenues.

RUSSIA REFUSES TO PROMISE NOT TO CHANGE TRADE
RULES. The Russian delegation at talks with the World Trade
Organization in Geneva has refused to promise not to toughen
trade rules while Russia is negotiating to join the WTO,
according to ITAR-TASS yesterday. Deputy Foreign Trade
Minister Georgii Gabuniya said Moscow hopes to maintain
"stability" in its trade legislation but cannot rule out the need
to enact changes in the future. The U.S., Canada, Japan, and
the EU asked Russia to proclaim a "standstill" on trade rules
on 15 April, Reuters reported. Russia applied for WTO
membership in 1993.

TRANSCAUCASUS AND CENTRAL ASIA

MORE FALLOUT FROM "YEREVANGATE" ARMS SCANDAL.
Zahid Garalov, head of an Azerbaijani parliamentary
delegation in Tibilisi to discuss Russian arms shipments to
Armenia via Georgian territory, told a press conference
yesterday that the arms transfers were sanctioned by Georgian
Defense Minister Vardiko Nadibaidze, a close associate of
former Russian Defense Minister Pavel Grachev. The Armenian
news agency Turan quoted Garalov as saying the weaponry
included "tactical missiles of the P-17 complex," which can
carry chemical or nuclear warheads. Nadibaidze, for his part,
told the Azerbaijani ambassador in Tbilisi that he shared
Azerbaijan's concern, Nezavisimaya gazeta reports today.
Meanwhile, the Russian State Duma has approved a
resolution demanding more stringent state control over arms
sales abroad, ITAR-TASS reported yesterday.

ABKHAZIA CUTS POWER SUPPLIES TO GEORGIA. Abkhaz
President Vladislav Ardzinba on 15 April ordered power
supplies to Georgia to be cut off in retaliation for Tbilisi's
decision the previous day to re-route all telephone
communications from Abkhazia to Russia via Tbilisi, ITAR-
TASS reported. Georgian Minister of Communications Pridon
Indjia said his country's decision was in accordance with
international agreements. An Abkhaz government statement
denied this was the case, saying the move was a violation of
human rights and could jeopardize further peace talks.

ARMENIA, TURKMENISTAN, IRAN SIGN MORE
COOPERATION AGREEMENTS. The foreign ministers of
Armenia, Turkmenistan, and Iran have signed memoranda on
cooperation in trade, transport, banking, and energy and gas
supplies and on tourism, ITAR-TASS reported. The three
leaders met yesterday in Yerevan. It was the sixth such
meeting in two years on expanding trade and economic
cooperation between the three countries. Iranian Foreign
Minister Ali Akbar Velatyati said "the doors to this cooperation
are open to other countries." The Chinese Ambassador to
Armenia also attended the meeting, Noyan Tapan reported.

KAZAKSTAN WANTS COSSACKS AWAY FROM ITS
BORDER. Kazakstan has lodged an official protest with
Moscow over the inclusion of Cossacks in Russian formations
guarding the countries' common border, Reuters reported
yesterday. Kazakstan's Foreign Ministry expressed "serious
concern" about what it called the "experiment" by the Russian
Federal Border Guards. A spokesman for the border guards
said the formations were made up of volunteers and that not
all those volunteers are Cossacks. He added that while the
formations are currently unarmed, that may soon change
because of "irregularities" in the region, particularly drug
smuggling.

TAJIK SECURITY FORCES STORM PRISON. Tajik security
forces have stormed a prison in the northern city of Khujand
where more than 100 inmates seized control earlier this week,
RFE/RL correspondents in the area report today. Initial
reports indicate as many as 40 people have died in the
security force attack, although officials in Dushanbe are
saying no blood has been shed. Some 800 people are currently
being held in the prison, which is intended to accommodate
only 300. On 15 April, the rebel inmates took four guards
hostage to demand trials for those not yet sentenced and
hospitalization for those seriously ill. They are also opposed to
any prisoners being moved to the southern part of Tajikistan,
where prison conditions are reported even worse. Rumors that
some inmates would be moved to the south sparked the revolt.

Sky Cloudy for Russian Defense Industry

by Simon Saradzhyan

        Despite record export sales, the Russian defense industry
fears that output will continue to fall in 1997, along with
already meager state subsidies. The industry is regretting the
loss of its main defender and lobbyist, the Ministry of Defense
Industry Ministry, or Miniboronprom, which was disbanded
earlier this year as part of the cuts in the federal government.
Its responsibilities were transferred to an expanded Ministry of
Economics.
        Former Minboronprom official Yurii Chervakov says there
is a widespread feeling that the crisis cannot be overcome in
the near future. But why is Russia's massive defense industry
plunged into gloom when overseas sales are booming? A
dramatic expansion of arms sales is expected to provide the
equivalent of U.S. $4 billion this year.
        Chervakov explains that domestic business has dried up,
and that is hitting hard the many non-export defense
enterprises. Even in cases where it is still placing orders with
enterprises, the Russian military ends up paying for less than
half of the equipment it actually receives. Tens of thousands of
defense industry workers have gone without wages for months,
and the number of defense enterprises has shrunk more than
three-fold in the last few years. Today, there are only 500 such
enterprises.
        Even those companies that have converted their
production to civilian goods are troubled. Last year, they saw
their output fall by 24%, as they could not compete against
cheap imports.
        Official figures show that Russia has cut its military
spending from 7.9% of gross domestic product in 1990 to the
current 3.7%. Chervakov and other former Minoboronprom
officials say they are pessimistic about the government's recent
promises to pay wage arrears and to increase funding for 1997
defense orders. Those orders include contracts for military
research and development, design, construction, production,
and arms purchases. The government managed to fund only
half of last year's orders.
        The state is so impoverished that it is currently funding
construction of only one prototype of each type of advanced
weaponry in its arms development program. That program is
intended to revamp the Russian military's aging arsenal by the
year 2005.
        Chervakov says he believes Minoboronprom's demise will
disrupt sweeping defense industry reforms that were planned
and partly implemented by Miniboronprom. The former
ministry wanted to unite more than 320 defense production
facilities, research institutes, and design bureaus into 30
state-controlled corporations. He said that at least five such
conglomerates have been set up but that prospects for further
consolidations now seem dim. He also said the Ministry of
Economics will find great difficulty in taking over many
aspects of defense equipment procurement because of a lack of
specialists.
        Of course, not all analysts paint such a gloomy picture as
the Miniboronprom experts. Yaroslav Lisovolik of the Russian-
European Center for Economic Reforms offers a different
perspective. He expects the government to allocate enough
resources to preserve advanced technologies until an economic
recovery enables it to support full military production.
According to the Economics Ministry, the country will be able
to resume spending 5.5% of GDP on the military by early next
century.

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               Copyright (c) 1997 RFE/RL, Inc.
                     All rights reserved.
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