Miracles are natural. When they do not occur, something has gone wrong. - A Course in Miracles
RFE/RL NEWSLINE

Vol 1, No. 66, Part I, 3 July 1997


Vol 1, No. 66, Part I, 3 July 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

*YELTSIN INSTRUCTS GOVERNMENT TO PAY WAGE ARREARS


*MORE PROBLEMS ON "MIR" SPACE STATION


*MEMBERS OF TAJIK RECONCILIATION COUNCIL APPOINTED

End Note
YEREVAN CONFERENCE HIGHLIGHTS DIFFERENT ECONOMIC PROSPECTS OF TRANSCAUCASIAN
STATES

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RUSSIA

YELTSIN INSTRUCTS GOVERNMENT TO PAY WAGE ARREARS. At a 2 July meeting with
Prime Minister Viktor Chernomyrdin, President Boris Yeltsin instructed the
government to pay its debts to the armed forces within two months and all wage
arrears to teachers, doctors, and other state employees within three months,
Russian news agencies reported. Persistent wage arrears have prompted
teachers, doctors, and communications workers to stage strikes in many
regions. First Deputy Finance Minister Aleksei Kudrin estimated in May that
wage arrears in Russia total 53.7 trillion rubles ($9.3 billion), ITAR-TASS
reported on 16 May. Of that sum, he said, 11.2 trillion rubles are owed to
workers by federal, regional, or local governments and the rest by non-state
enterprises. Kudrin also said in May that the federal government would pay all
its wage arrears to state employees by the end of July.

NEW JUSTICE MINISTER SETS TASKS. Sergei Stepashin, a former director of the
Federal Security Service, announced that as justice minister he will help
bring Russian laws and legal procedures in line with European norms to comply
with the country's obligations as a member of the Council of Europe, Russian
news agencies reported on 2 July. However, he said this process could take
between 10 to15 years. Stepashin also said he has already met with First
Deputy Prime Minister and Finance Minister Anatolii Chubais to discuss
financing for the Justice Ministry and court system. Chubais promised to do
"all that is necessary" to provide the judicial branch with sufficient funds,
Stepashin added. Supreme Court Chairman Vyacheslav Lebedev announced on 1 July
that dozens of courts across Russia have been forced to suspend their
activities for lack of funding from the federal government, ITAR-TASS
reported.

YELTSIN PLEDGES TO SUPPORT TULEEV, CHUBAIS TO SUPPORT COAL INDUSTRY. Yeltsin
promised to support Kemerovo Oblast Governor Aman Tuleev during a 2 July
meeting with the new governor, Russian news agencies reported. The same day,
chairing a meeting of the interdepartmental government commission on social
and economic problems of coal mining regions, First Deputy Prime Minister
Anatolii Chubais said the government will allocate 300 billion rubles ($52
million) to the coal industry by 15 July. But he asked Tuleev to investigate
the possible misuse of 180 billion rubles transferred to Kemerovo last year as
part of a World Bank loan: "First the names and the punishment [of those
responsible], then financial support from the center." Tuleev's press service
called on Kemerovo trade unions not to go ahead with an oblast-wide strike
planned for 11 July. Meanwhile, Yeltsin appointed former Kemerovo Governor
Mikhail Kislyuk to head the Federal Service for Regulation of Natural
Transportation Monopolies.

MUTED REACTION TO NEW ACCUSATIONS AGAINST CHUBAIS. Neither First Deputy Prime
Minister Chubais nor the government's press service has issued a statement on
new accusations against Chubais published in "Izvestiya" on 1 July. The paper
claimed, among other things, that the Center for the Protection of Private
Property, founded by Chubais in early 1996, received an allegedly suspicious
loan from Stolichnyi Bank (see "RFE/RL Newsline," 2 July 1997). Citing the
U.S. journal "Demokratizatsiya," "Izvestiya" also said that the Russian Center
for Privatization, which Chubais had long coordinated, received more than $100
million in recent years from international financial organizations. But a 2
July press conference held by that center's director-general, Viktor
Pankrashchenko, was attended by only 15 or so journalists, none of them from
television networks, RFE/RL's Moscow bureau reported. Pankrashchenko discussed
his center's 1996 achievements and 1997 projects but declined to comment on
the "Izvestiya" article.

ONEKSIMBANK BEHIND "IZVESTIYA" ATTACKS? The formerly pro-government
"Izvestiya" followed up its unprecedented attack on Chubais with a 2 July
article by the same authors criticizing Menatep bank and its alleged
government patrons, such as Central Bank Chairman Sergei Dubinin. Some
analysts believe the new editorial line of "Izvestiya" is related to the
recent election of Oneksimbank deputy chairman Mikhail Kozhokin as chairman of
the newspaper's board of directors. In a 2 July interview with RFE/RL's Moscow
bureau, Sergei Markov, senior associate of the Carnegie Moscow Center,
suggested that Oneksimbank President Vladimir Potanin has turned against the
government. Markov noted that Oneksimbank lost a bid to acquire the Sibneft
oil company in May and more recently failed to install the head of an
Oneksimbank affiliate on the Gazprom board of directors (see "RFE/RL
Newsline," 30 June 1997). Potanin was first deputy prime minister from August
1996 to March 1997.

MORE PROBLEMS ON "MIR" SPACE STATION. A malfunction in the gyrodines of the
space station "Mir" is complicating its ability to draw power through its
solar panels, international media reported. Deputy chief of Russian Mission
Control Sergei Krikalev said on 3 July that the astronauts are using the
station's rocket engines to realign the station's position but that "it
presents no danger for either the station or the cosmonauts as we have enough
fuel." The latest theory as to why a cargo ship crashed into "Mir" is that the
cargo ship was overloaded and its breaking systems did not compensate for the
additional weight as it docked with "Mir." Meanwhile, the cargo ship was
allowed to enter Earth's atmosphere and burn up over the Pacific Ocean on 2
July.

RUSSIA FAVORS LIFTING OIL EMBARGO ON IRAQ. Meeting on 2 July with a visiting
Iraqi parliamentary delegation, First Deputy Prime Minister Boris Nemtsov said
the Russian leadership advocates lifting the oil embargo on Iraq, providing
that Baghdad "complies with all UN resolutions." He added that Russia will
raise this issue with the UN Security Council in October, ITAR-TASS reported.
Federation Council Chairman Yegor Stroev similarly told journalists on 2 July
after talks with his Iraqi counterpart, Saadoun Hammadi, that the "question of
lifting the embargo is justified," noting that it "had caused a sharp increase
in infant mortality," Interfax reported. Russian State Duma speaker Gennadii
Seleznev told the Iraqi delegation the previous day that "Russia has an
economic interest in restoring ties with Iraq, and Russian businessmen are
prepared to work with their Iraqi colleagues."

AZERBAIJANI PRESIDENT IN MOSCOW. Heidar Aliev arrived in Moscow on 2 July on
his first official visit since regaining power in Azerbaijan four years ago,
Russian and Western agencies reported. Aliev told journalists on his arrival
that "Azerbaijan has good relations with Russia" and that he hoped to sign a
"soundly-based" bilateral treaty on friendship and cooperation as well as 12
other agreements. Aliev met on 2 July with Russian Prime Minister Viktor
Chernomyrdin and discussed the export of Azerbaijan's Caspian oil via Russia
and the legal status of the Caspian Sea. Aliev also held talks with Moscow
Mayor Yurii Luzhkov and with Foreign Minister Yevgenii Primakov.

CENTRAL BANK HEAD ON GOLD, HARD CURRENCY RESERVES, AUTHORIZED BANKS. Central
Bank Chairman Sergei Dubinin has announced that as of 1 July, the Central
Bank's gold and hard currency reserves had risen to $23.8 billion, compared
with $15 billion at the beginning of 1997, RFE/RL's Moscow bureau reported on
2 July. He also said the Central Bank has discovered that two commercial banks
authorized to handle state funds defrauded the budget of more than $400
million. Details about those banks, which he did not name, have been sent to
the Procurator-General's Office for investigation, Dubinin added. Asked by
RFE/RL to comment on the 2 July "Izvestiya" report saying he had used his
connections to help Menatep gain permission to handle more state funds than
any other bank, Dubinin avoided a direct answer, saying only, "As far as I
know, in the rating of lobbyists [in the government] I come in last place."

CHERNOMYRDIN CLAIMS ECONOMY IS GROWING. Attending a science awards ceremony in
Moscow, Prime Minister Chernomyrdin announced on 2 July that GDP grew by
slightly more than 1% in the first six months of 1997, Russian news agencies
reported. Chernomyrdin did not say how that figure was calculated. The State
Statistics Committee announced in June that GDP for the first five months of
1997 was down 0.2% from 1996 levels. In addition, cabinet officials recently
said the government had revised its 1997 economic forecasts and was predicting
a GDP decline of up to 2% for the year. Also on 2 July, Central Bank head
Dubinin said inflation for the first six months of 1997 was 8.4%. But the
State Statistics Committee estimated inflation for the first half of the year
at 8.6%, down from 15.5% inflation during the same period in 1996, Interfax
reported.

CONSTITUTIONAL COURT STRIKES DOWN REPUBLICAN ANTI-CRIME LAW... The
Constitutional Court has ruled that an anti-crime law in the Republic of
Mordovia violates citizens' constitutional rights, ITAR-TASS reported on 2
July. The law allowed those suspected of belonging to organized criminal
groups to be detained for up to 30 days without charges being brought against
them. Yeltsin recently rescinded a 1994 anti-crime decree that allowed law
enforcement agencies to detain some suspects for up to 30 days without filing
charges (see "RFE/RL Newsline," 18 June 1997).

...AND REGIONAL LAW ON RESIDENCE PERMITS. Also on 2 July, the Constitutional
Court struck down a Moscow Oblast law requiring new residents to pay a fee
equivalent to 300 monthly minimum wages (more than 22.5 million rubles or
$3,900) in order to receive a residence permit for the oblast, ITAR-TASS
reported. The court found that the law violates citizens' constitutional right
to live anywhere in the Russian Federation. Judges also said the law
contradicts the constitution by imposing a regional tax not provided for by
federal legislation. According to the weekly "Itogi" (no. 25), the
Constitutional Court in March 1996 struck down a similar residence permit
("propiska") requirement imposed by the city of Moscow. The weekly commented
that by ignoring the earlier Constitutional Court decision, the Moscow Oblast
legislature had forced the court to consider the same case twice.

GOVERNMENT SIGNS POWER-SHARING AGREEMENTS WITH SARATOV, VOLOGDA. Prime
Minister Chernomyrdin has signed power-sharing agreements between the federal
government and the administrations of Saratov and Vologda Oblasts, ITAR-TASS
reported on 2 July. More than two dozen of Russia's 89 regions have signed
similar agreements with federal authorities to obtain various economic and
political privileges. Saratov Governor Dmitrii Ayatskov and Vologda Governor
Vyacheslav Pozgalev were both Yeltsin appointees who easily won gubernatorial
elections in their oblasts in fall 1996.


TRANSCAUCASUS AND CENTRAL ASIA

MEMBERS OF TAJIK RECONCILIATION COUNCIL APPOINTED. The 26 members of the Tajik
Reconciliation Council have been named, RFE/RL corespondents in Dushanbe
reported. The council has13 members from the United Tajik Opposition and 13
from the Tajik government. Among the government members are Deputy Prime
Minister Basgul Dodikhudoyeva, First Deputy Parliamentary Speaker Abdumajid
Dostiyev, presidential adviser Ibrahim Usmonov, and Minister of Labor
Shukurjon Zuhurov. The UTO representatives include UTO leader Said Abdullo
Nuri and chairman of the Democratic Party Juma Niyazov. The council will
convene in Moscow on 7 July to elect a chairman from the UTO and a deputy
chairman from the government. The question of a general amnesty will also be
discussed.

KAZAK PRESIDENT PROMISES PENSIONS WILL BE PAID. Nursultan Nazarbayev, speaking
on national television and radio on 2 July, told pensioners all arrears will
be paid by the end of 1997, RFE/RL correspondents in Almaty reported. On 1
July, a new system for paying pensions was launched whereby pensioners are to
receive their benefits on the first day of the following month (meaning June
pensions were to be disbursed on 1 July). Nazarbayev promised pensions would
be paid regularly and without any delay, saying a special state board will
make sure that local administrations do not use pension funds for other
purposes, as has happened in the recent past. The president called on
pensioners to be patient and not to take part in demonstrations or other
protests.

KYRGYZ PRESIDENT ON CUSTOMS UNION WITH RUSSIA, BELARUS, KAZAKSTAN. Askar
Akayev told journalists in Bishkek on 2 July that the customs union between
Russia, Belarus, Kazakstan, and Kyrgyzstan has not lived up to expectations
owing to problems "between Russia and Kazakstan," RFE/RL correspondents and
Russian media reported. He pointed out that Kazakstan has raised its customs
tariffs without consulting other union members. Akayev said if the union
functioned at its full potential, Kyrgyzstan could boost its trade turnover
with Russia and Kazakstan by three or four times. He also noted that
Kyrgyzstan's GDP grew by 5% in the first half of 1997 and said that, on the
whole, the privatization process has been successful.

BEREZOVSKII CONTINUES ABKHAZ SHUTTLE DIPLOMACY... Following talks on 1 July in
Tbilisi with Georgian President Eduard Shevardnadze and parliamentary chairman
Zurab Zhvania, Russian Security Council Deputy Secretary Boris Berezovskii
flew to Sukhumi to discuss with Abkhaz President Vladislav Ardzinba
unspecified proposals for resolving the Abkhaz conflict, Russian and Western
agencies reported. Berezovskii flew back to Tbilisi on 2 July with proposals
that Georgian Foreign Minister Irakli Menagharishvili characterized as "rather
interesting," according to ITAR-TASS. After a second round of talks with
Shevardnadze, Berezovskii returned to Sukhumi with Zhvania and Georgian
Ambassador to Russia Vazha Lortkipanidze, "Nezavisimaya gazeta" reported on 3
July. Berezovskii said that the negotiations were "difficult" but that the
main goal is to "move forward all the time."

...WHILE BATURIN WARNS AGAINST WITHDRAWING PEACEKEEPERS. Meanwhile, Russian
Defense Council Secretary Yurii Baturin held talks in Tbilisi on 2 July with
Shevardnadze and Georgian Defense Minister Vardiko Nadibaidze on military and
economic cooperation, Russian and Western agencies reported. Baturin later
told journalists that it is in the interest of both countries that Russia
maintains its military bases in Georgia. Baturin said that the CIS
peacekeeping force currently deployed along the border between Abkhazia and
the rest of Georgia would be withdrawn after its mandate expires on 31 July if
Georgia insists. But he warned that this could lead to a resumption of
hostilities, Reuters reported. After discussing Georgia's claims to part of
the Black Sea fleet with Nadibaidze, Baturin told journalists that the value
of the former Soviet naval base at Poti far exceeds that of the vessels
formerly stationed there, according to Interfax.

IRAN PROTESTS MISTREATMENT OF ITS NATIONALS IN AZERBAIJANI PRISONS. The
Iranian Foreign Ministry has formally protested to the Azerbaijani ambassador
in Tehran about the alleged mistreatment of Iranians held in Azerbaijani
jails, Western agencies reported, citing IRNA. An Iranian Foreign Ministry
official claimed that three Iranians recently died as a result of ill
treatment and that conditions in Azerbaijan's prisons do not conform with intern
 ational
standards.

END NOTE

YEREVAN CONFERENCE HIGHLIGHTS DIFFERENT ECONOMIC PROSPECTS OF TRANSCAUCASIAN
STATES

by Michael Wyzan

        The American University of Armenia staged a conference in Yerevan in mid
 -June
on "The Transcaucasus Today: Prospects for Regional Integration." Participants
included officials and scholars from Armenia and Georgia, along with foreign
specialists on the area. Officials were also invited from Baku, but they
declined to attend. The Azerbaijani view was presented instead by Azeris
living abroad and by Western scholars.
        The conference highlighted Armenia's frustration with what it perceives
 as a
tilt in the West (and especially the U.S.) toward the Azerbaijani position on
the Nagorno-Karabakh dispute--a shift that they blame on the attractiveness of
Caspian Sea oil. Whatever the topic under discussion at the conference, the
participants kept returning to petroleum--a subject that is obviously of great
importance to Azerbaijan. Georgia will be the site of one or more pipelines
carrying Azerbaijani oil. Since it enjoys good relations with Azerbaijan,
Georgia need not sacrifice other national objectives to enjoy those pipelines'
economic and other benefits.
        On the other hand, it is unlikely that Armenia would be the site of a
pipeline carrying Caspian oil. The only way to convince Azerbaijan to agree to
such a scenario would presumably be to return Nagorno-Karabakh to Azerbaijani
sovereignty. Moreover, even if such a pipeline were built, Azerbaijan could
always stop the flow of oil in response to a provocation or try to convince
Armenia to change its position on an issue under discussion.
        World Bank economist Jonathan Walters argued that the large investments
 in
infrastructure that the region urgently needs cannot be financed without
substantial (private) foreign direct investment. He noted that reforming the
state--including establishing judicial independence and appropriate regulation
of natural monopolies--is pivotal to attracting investors in the
infrastructure. Foreign investment and increased exports will gain in
importance as the international financial institutions wean the Transcaucasian
states from generous support for their fiscal and current account imbalances.
        Robert E. Ebel of the Center for Strategic and International Studies in
Washington, D.C., noted that U.S. energy policy prioritizes reducing the
country's dependence on Persian Gulf oil. That fact accounts for the U.S.'s
recently awakened interest in the region. In the early 20th century, Great
Britain dominated the concessions working Caucasian oil deposits.
        Ebel observed that oil wealth need not promote economic development; ins
 tead,
it may result in arms races, corruption, large-scale consumer-goods imports,
and the construction of show projects. The former USSR's concentration on
exploiting oil and gas deposits in Russia--rather than those in Azerbaijan,
Kazakstan, or Turkmenistan--has left a significant share of unexploited
deposits in those new states. However, despite the growing interest in those
deposits, Caspian Sea oil cannot replace Persian Gulf oil in terms of
political risk, quantity, cost of production, or market access. Ebel expects
that within ten years, Caspian Sea oil will account for only 3%-4% of world
production.
        Andrei Illarionov of the Institute of Economic Analysis in Moscow noted
 that
the Transcaucasian states suffered from the sharpest output declines in the
Council of Independent States (CIS). However, economic growth resumed early,
starting with Armenia (the first CIS member to experience positive growth) in
1994, followed by Georgia in 1995 and Azerbaijan last year. Inflation and
budget deficits have fallen markedly in all three countries. Illarionov noted
that inter-regional trade is below potential, although trade volumes between
Georgia and the other two countries have recently risen significantly. The
long-awaited oil and gas investment boom in Azerbaijan began in 1996, when it
received 17% of gross domestic product in foreign direct investment.
        In the end, it seems pointless to lecture the Armenians--as many Western
participants did--on the economic benefits of improved relations with their
neighbors. Armenia (and Nagorno-Karabakh) would no more sacrifice their
perceived national interests to share Azerbaijani oil wealth than Israel would
withdraw from the Golan Heights in exchange for a similar promise from Iran or
Saudi Arabia. Rapprochement between Armenia and Azerbaijan may be a distant
prospect.
        Fortunately, technological advance has made such a rapprochement less cr
 ucial
for Armenia's economic development than in the past. Today, a land-locked
nation that has troubled relations with its neighbors but a highly skilled
population and good connections with the outside world should be capable of
enjoying rapid economic growth. For example, diamonds polished in Armenia,
exported by air to Antwerp, are currently one of Armenia's largest exports.
        Once political and economic life is sufficiently stable, the prospects o
 f
Diaspora Armenians and others investing in the creation of a local "Silicon
Valley" are likely to be good. Such activity has already begun.

The author is a research scholar at the International Institute for Applied
Systems Analysis in Laxenburg, Austria.




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