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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 89, Part I, 6 August 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

*COMPANY LINKED TO ONEKSIMBANK WINS NORILSK NICKEL
AUCTION

*YELTSIN CONCERNED ABOUT ATTACKS ON NEMTSOV


*THREE CANDIDATES REGISTERED FOR KARABAKH PRESIDENTIAL
ELECTIONS

End Note: THREE ZEROS TO GO OFF RUBLE BILLS

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RUSSIA

COMPANY LINKED TO ONEKSIMBANK WINS NORILSK NICKEL
AUCTION. The closed joint-stock company Svift, which is affiliated
with the Oneksimbank financial empire, on 5 August won an auction
for a 38 percent stake in Norilsk Nickel. Svift's winning bid was for
236.18 million Ecus (about $250 million). The terms of the sale
require the winner to invest an additional $300 million and also pay
back a $170 million loan Oneksimbank extended to the government
in November 1995. (In exchange for that loan, Oneksimbank gained
management rights over the 38 percent Norilsk stake.) Within five
business days after the deal is signed, Svift must transfer 400 billion
rubles ($69 million) to Norilsk Nickel. Only one other bid was
submitted for the stake, for 171 million Ecus. It is not yet known
what companies were behind the losing bid.

AUCTION GOES AHEAD DESPITE LAST-MINUTE PROTESTS. A six-
member commission on 5 August decided to go ahead with the
Norilsk auction despite a last-minute appeal from Prime Minister
Viktor Chernomyrdin that the sale be postponed (see "RFE/RL
Newsline," 5 August 1997). Five members of that commission--
representing Norilsk Nickel, Oneksimbank, the Oneksimbank affiliate
International Finance Corporation, the Finance Ministry, and the
State Property Committee--voted to conduct the auction as
scheduled, while the commission member representing the Russian
Federal Property Fund abstained, according to ITAR-TASS. The
commission vote was expected to be closer after State Property
Committee Chairman Alfred Kokh was reported to have agreed that
the sale should be postponed. But State Property Committee Deputy
Chairman Sergei Molozhavyi told ITAR-TASS that Kokh's committee
and the Procurator-General's Office had in the end agreed that there
were no legal grounds for postponing the auction. Chernomyrdin has
not yet commented on the Norilsk sale.

"KOMMERSANT-DAILY" ON HOW AUCTION WENT AHEAD. Citing
unnamed sources in the State Property Committee, "Kommersant-
Daily" reported on 6 August that on the morning of 5 August,
Oneksimbank President Vladimir Potanin and State Property
Committee Chairman Alfred Kokh met with Procurator General Yurii
Skuratov and persuaded him that the Norilsk sale should go ahead as
scheduled. (Prime Minister Chernomyrdin cited an appeal from the
procuracy when he ordered the Norilsk sale to be postponed.)
Following that meeting, Potanin reportedly brought a letter signed by
Kokh and Skuratov to a secret meeting with Chernomyrdin. However,
"Kommersant-Daily" noted that Oneksimbank's competitors are
already planning to contest the Norilsk auction in court. Meanwhile,
"Nezavisimaya gazeta" on 6 August slammed the machinations
surrounding the Norilsk auction and charged that Chernomyrdin's
subordinates in the government "ignored his orders." "Nezavisimaya
gazeta" has sharply criticized Oneksimbank recently (see "RFE/RL
Newsline," 29-30 July 1997).

YELTSIN CONCERNED ABOUT ATTACKS ON NEMTSOV. President Boris
Yeltsin on 6 August said he is concerned by the recent media attacks
against First Deputy Prime Minister Boris Nemtsov, ITAR-TASS
reported. The president expressed hope that there will be "no more
pressure of that kind." Nemtsov has recently been criticized both by
political opponents and by media outlets that had previously devoted
mostly favorable coverage to him (see "RFE/RL Newsline," 29-31
July, 4-5 August 1997). Yeltsin returned to Moscow on 5 August,
ending a four-week vacation in the Republic of Karelia and Samara
Oblast. He has not yet commented on the Norilsk Nickel auction. He
did not comment directly on the recent controversial auction of 25
percent plus one share of the telecommunications giant Svyazinvest,
although First Deputy Prime Minister Anatolii Chubais told
journalists that Yeltsin was satisfied with the way that auction was
conducted.

GOVERNMENT CONSIDERING STRENGTHENING STATE ROLE IN
MANAGING ORT. The government is considering changes in how the
state's 51 percent stake in the Russian Public Television (ORT)
network is managed, Russian news agencies reported on 5 August,
citing an unnamed government source. The source said the measures
being considered would not involve personnel or programming
changes at ORT, which broadcasts on Channel 1. ORT's news coverage
has long been considered slanted in favor of the president and
government. However, since the Svyazinvest auction, the network
has broadcast sharp criticism of some government officials.
Meanwhile, in an open letter published in "Nezavisimaya gazeta" on 5
August, ORT news director Andrei Vasilev responded to criticism of
the network's news coverage voiced on 2 August by presidential
spokesman Sergei Yastrzhembskii. Yastrzhembskii had accused ORT
of ignoring important stories in its newscasts.

ORT GENERAL DIRECTOR RUMORED TO BE ON THE WAY OUT. Rumors
that ORT General Director Sergei Blagovolin will soon step down or be
dismissed have again been circulating in Moscow following a recent
meeting between Blagovolin and Prime Minister Chernomyrdin.
ITAR-TASS reported on 5 August that Blagovolin, currently on
vacation, has neither confirmed nor denied those rumors. An ORT
spokesman quoted by "Izvestiya" on 6 August said Blagovolin has not
resigned but did not rule out the possibility that he will step down
soon. "Kommersant-Daily" on 6 August quoted Blagovolin as saying
he had told the ORT board of directors that he would decide his
future plans during his summer holiday. Blagovolin was appointed
general director of ORT in March 1995, a few weeks before the
network began broadcasting on Channel 1. During the last year, he
has periodically criticized the network's news coverage, leading to
numerous previous rumors of his impending departure.

PROGRAM FEATURING ORT GENERAL DIRECTOR NOT AIRED ON
CHANNEL 2. Nikolai Svanidze, chairman of the fully state-owned
Russian Television (RTR) network that broadcasts on Channel 2, on 5
August decided not to air the latest edition of the program "Moment
Istiny" (Moment of Truth), "Kommersant-Daily" reported on 6
August. That show featured an interview with ORT General Director
Blagovolin, in which he criticized the way ORT is managed and said
he believes the weekly analytical program hosted by ORT journalist
Sergei Dorenko is "extremely destructive." The interview was
recorded on 20 June, long before Dorenko's recent criticism of
Oneksimbank and various government officials (see "RFE/RL
Newsline," 28, 29 July 1997). Svanidze told "Kommersant-Daily" that
he pulled the program because he did not want RTR to appear to be
attacking ORT. "Moment Istiny" host Andrei Karaulov slammed what
he described as a "political" decision not to air his program.

GRACHEV EXPECTS NEW APPOINTMENT SOON. Former Defense
Minister Pavel Grachev says Yeltsin recently told him that "your days
of relaxation are coming to an end." In an interview published in
"Komsomolskaya pravda" on 5 August, Grachev predicted that he will
be appointed to a new post sometime this autumn. Asked whether he
might become Russian ambassador to NATO, Grachev said such
rumors had some foundation, adding that he would accept that post
if it were offered to him. Yeltsin sacked Grachev in June 1996, two
days after the first round of the presidential election. In June of this
year, presidential spokesman Sergei Yastrzhembskii denied Russian
media reports that Grachev was being considered for the
ambassadorship to NATO (see "RFE/RL Newsline," 6 June 1997).

ZYUGANOV ON OPPOSITION PLANS. Speaking to journalists in St.
Petersburg, Communist Party leader Gennadii Zyuganov said the left
opposition will again present the government with 11 demands,
including the dismissal of First Deputy Prime Minister Chubais,
RFE/RL's correspondent in St. Petersburg reported on 5 August.
Communists first issued those demands last December as a condition
for their support of the 1997 budget. Zyuganov confirmed that his
party will lead nationwide protests this autumn demanding Yeltsin's
resignation and changes in government policies. He also advocated
changing the State Duma's rules to allow factions to revoke the
mandates of deputies who were elected to the Duma on party lists
(see "RFE/RL Newsline," 1 and 4 August 1997). Regarding recent
criticism of Duma Speaker Gennadii Seleznev by Communist Duma
deputy Vladimir Semago, Zyuganov said Semago should concentrate
on investigating the accuracy of income declarations submitted by
government officials.

STRIKE BY VLADIVOSTOK MUNICIPAL WORKERS CONTINUES. Garbage
continues to pile up in the streets of Vladivostok as a strike by
municipal workers enters its third week, RFE/RL's correspondent in
Vladivostok reported on 5 August. Mayor Viktor Cherepkov, who has
blamed the protests on "political intrigues" (see "RFE/RL Newsline,"
23 July 1997), still refuses to meet the strikers' demands, which
include payment of wage arrears and a contract with the city on
providing services. The municipal workers also have called on
Cherepkov to resign. Primorskii Krai Governor Yevgenii Nazdratenko,
a longtime bitter political foe of Cherepkov's, has now entered the
fray. Nazdratenko recently invited representatives of the striking
garbage collectors to sign a contract with the krai administration
rather than with the Vladivostok authorities. Meanwhile, doctors and
local health officials have warned of possible outbreaks of epidemics
in Vladivostok if the garbage is not cleared away.

RUSSIAN ROCKET LIFTS OFF. The Soyuz TM-26 spacecraft
successfully lifted off from the Baikonur launch site on 5 August,
according to Russian media. Cosmonauts Anatolii Solovev and Pavel
Vinogradov are due to dock with the Mir space station on 7 August.
Aboard the station, the two Russians and one American are still
trying to repair an oxygen generating system which failed last week.
Russian cosmonauts Vasilii Tsibliev and Aleksandr Lazutkin are
scheduled to return to Earth on 14 August. On 20 August, Solovev
and Vinogradov will attempt to make repairs on Mir's spektr module,
which was damaged in a collision with a cargo ship on 25 June. The
third man aboard Mir, U.S. astronaut Michael Foale, is scheduled to
leave the space station in late September.

MOSCOW TO EXPEDITE FUNDING FOR CHECHNYA. Russian Security
Council Secretary Ivan Rybkin told Interfax on 5 August that Moscow
will transfer 700 billion rubles ($120.7 million) in budget funds to
Chechnya by the end of this year. Rybkin also said that millions of
dollars worth of frozen Chechen assets would be released. Rybkin
and Russian Prime Minister Chernomyrdin had discussed financing
reconstruction in Chechnya on 4 August. Also on 5 August, Chechen
Deputy Prime Minister Akhmed Zakaev flew to Moscow to prepare
for a meeting between Yeltsin and Chechen President Aslan
Maskhadov. No date has yet been set for that meeting. Chechen First
Deputy President Movladi Udugov told ITAR-TASS that Maskhadov
will propose signing a fully-fledged inter-state treaty between Russia
and Chechnya and also will raise the issue of financial compensation,
estimated at 1,500 trillion rubles ($25.8 billion), to Chechnya.

CHECHNYA OPENS PERMANENT REPRESENTATION IN KAZAN. On 4
August Chechnya's permanent representative in Kazan, Umar Aiupov,
met with Tatarstan's president Mintimer Shaimiev, RFE/RL's Kazan
bureau reported citing Tatarstan Television. Shaimiev said that
Tatarstan is ready to broaden mutually advantageous economic,
technological and cultural ties with Chechnya, and advocated "the
most extensive possible economic independence from the center."
Tatarstan, which Shaimiev noted is "one of only 12 Russian regions
that pay more into the state budget than they receive from the
center in subsidies," has concluded an agreement with Moscow that
the goods and services which it supplies to Chechnya will be
considered as part of its tax obligation to Moscow.

FOUR FRENCH AID WORKERS MISSING IN DAGESTAN. Police in
Makhachkala have launched a search for four French aid workers
who disappeared in the city on the evening of 2 August, Russian
media reported on 6 August. "Nezavisimaya gazeta" on 6 August
quoted unnamed Dagestani officials as expressing concern at a
marked increase in violent crime, abductions and thefts of cattle in
the regions of Dagestan that border on Chechnya and the alleged
formation of a Chechen "fifth column" in Dagestan. The newspaper
quotes OSCE officials in Chechnya as warning that the Chechen
leadership is deliberately provoking a crisis in relations with
Dagestan.

UNIKOMBANK EXECUTIVE REAPPEARS. Unikombank deputy
chairman Andrei Gloriozov has reappeared in Moscow after being
missing for several days, "Kommersant-Daily" reported on 5 August.
The paper said Gloriozov had been kidnapped on 30 July, along with
his driver and a bodyguard. The three men were apparently released
three days later, but "Kommersant-Daily" said there are conflicting
stories as to whether the kidnappers were demanding a ransom of
$17 million or compromising information on various bankers or state
officials. It appears that no ransom was paid. Unikombank was at the
center of a recent scandal involving alleged fraudulent use of
government funds (see "RFE/RL Newsline," 4 August 1997).


TRANSCAUCASUS AND CENTRAL ASIA

IMF TEAM SAYS GEORGIA'S SOCIAL SAFETY NET "UNSUSTAINABLE."
A team of experts from the International Monetary Fund (IMF) has
told Georgian authorities that the country's social support system is
"unsustainable" because it is not providing adequate protection to the
most vulnerable, an RFE/RL correspondent in Washington reported
on 5 August. The Georgian safety net currently costs the equivalent
of about 3 percent of GDP (gross domestic product, the size of the
economy) or about one-third of the state budget, but the standard
monthly benefit level of 9.8 lari (7.70 dollars) is equal to only one-
tenth the official minimum subsistence level. The IMF experts said
that many people in Georgia have managed to maintain living
standards at about subsistence levels with support from relatives
and by depleting their assets which in the long term is
"unsustainable".

THREE CANDIDATES REGISTERED FOR KARABAKH PRESIDENTIAL
ELECTIONS. On 5 August the Central Election Commission of the self-
proclaimed Republic of Nagorno-Karabakh registered three
candidates for the presidential elections to be held on 1 September,
an RFE/RL correspondent reported from Stepanakert. They are the
current Nagorno-Karabakh Foreign Minister Arkadii Ghukasyan,
parliament speaker Artur Tovmasyan, and parliament deputy Boris
Arushanyan. Acting president Leonard Petrossyan is not running as a
candidate. Observers expect that the vote will be a race between
Ghukasyan and Arushanyan. The post of president became vacant in
March 1997, when incumbent Robert Kocharyan was appointed
Prime Minister of Armenia. Kocharyan received a majority of more
than 86 percent in the November 1996 presidential elections. The
elections were not recognized as valid either by Azerbaijan or by the
international community. His closest rival, Boris Arushanyan, polled
6.9 percent.

CONFUSION OVER LUKOIL'S PARTICIPATION IN KYAPAZ/SERDAR. On
5 August the Russian Foreign Ministry issued a statement confirming
that the Russian oil companies Rosneft and Lukoil have withdrawn
from the contract they signed in early July with the Azerbaijani state
oil company SOCAR to develop the Kyapaz (Serdar) Caspian oil field,
ITAR-TASS reported. Turkmenistan had immediately protested that
the oilfield in question lies in Turkmenistan's sector of the Caspian.
On 31 July, a spokesman for Rosneft President Yuri Bespalov told
Interfax Rosneft would withdraw from the contract. The "Financial
Times" on 6 August, however, quoted a spokesman for Lukoil as
saying that Lukoil will not withdraw. Also on 5 August, Iranian
deputy foreign minister Mahmud Vaezi criticized the signing by
Azerbaijan of four new major oil contracts with U.S. companies, AFP
reported. Vaezi said the contracts "ignore the rights and interests of
other countries" and risk precipitating a crisis in the Caspian region.

JAILED KYRGYZ JOURNALIST RELEASED. The Kyrgyz Supreme Court
on 5 August overturned a decision by a Bishkek municipal court and
acquitted the editor of the Kyrgyz independent weekly newspaper
"Res Publica," Zamira Sydykova, of slander charges, according to
RFE/RL correspondents in Bishkek. Sydykova had been sentenced to
18 months in a prison colony after the head of the Kyrgyz state gold
company, Dastan Sarygulov, filed suit charging several articles in Res
Publica had slandered him. Sydykova was found guilty on 23 May
and has been serving her sentence, doing janitorial work at the
colony, since that time.

KAZAKHSTAN PLANS TO INSTALL NUCLEAR REACTORS. The Kazakh
government has approved a plan to install six nuclear reactors at its
first nuclear power plant by the year 2030, according to a 5 August
ITAR-TASS report. The new Russian-made VVER reactors will be
installed at a power plant on the southern shore of Lake Balkhash.
Kazakhstan is heavily dependent on Russian and Uzbek supplies of
energy and is deep in debt to both countries as a result. The project
is estimated to cost about $5 billion.

JAPANESE TRAINING CENTER TO OPEN IN TASHKENT. The Japanese
company "NEC" will open a communication's training center in the
Uzbek capital of Tashkent, this October, ITAR-TASS reported on 6
August. The center will offer instruction by "highly qualified experts"
from NEC in the use of modern communications equipment. NEC and
Mitsiu Bissan are already helping Uzbekistan reconstruct its
telephone exchange infrastructure. The Japanese company also has
already established a similar center in St. Petersburg.

END NOTE

RUSSIA: THREE ZEROS TO GO OFF RUBLE BILLS

By Stephanie Baker

 Declaring an end to the era of inflation, Russian President Boris
Yeltsin on 4 August announced that the Central Bank will lop three
zeros off the ruble next year with the introduction of a new ruble
note. He also said that the bank will bring back the kopek, which will
be one one-hundredth of a ruble.
        Analysts said Russia's decision to issue a new ruble note was a
mostly cosmetic confidence building exercise. But they say it is
significant for being the first time Russia will revamp its currency
without wreaking havoc and robbing the population of hard-won
savings.
        Starting January 1, 1998, the Central Bank is to issue new notes
and coins, including a shiny new kopek, which will be used in
parallel with the old bills for one year. An old 1,000 ruble note will
be equal to a new 1 ruble note. By the start of 1999, the government
plans to phase out use of the old notes, but old rubles can be
exchanged for new notes until 2002.
        Yeltsin said in a nationwide address that over the last 50 years,
monetary reform had hit the "common people" particularly hard. But
now the government is determined to prevent any suffering. As he
put it: "Nobody is going to lose anything as a result of the reform.
Nobody's interests will be trampled on -- the reform will not amount
to confiscation." By announcing plans to introduce the new bills a full
five months in advance, the Central Bank hopes it will have enough
time to persuade Russians not to panic. It has even set up a hot-line
to field inquiries.
        During previous currency reforms in 1991 and 1993, many
Russians lost their savings when they were forced to switch old notes
for new ones virtually overnight. The government hopes to avoid the
characteristic chaos this time by introducing the new notes gradually.
        In Yeltsin's words: "I want everyone to be well-prepared for it,
so that there will be no haste or stress."
        After weathering hyperinflation and several botched attempts
at monetary reform, most Russians hold their savings in dollars. On
the streets of Moscow, most people greeted the announcement
calmly, noting that the exchange rate to the dollar is unlikely to
fluctuate.
        The reforms should slim down the average consumer's wallet
by getting rid of worthless bills, such as the hated 100 ruble note.
The new notes, which look almost identical to the rubles currently in
circulation but minus three zeros, will be issued in five
denominations: 5, 10, 50, 100, 500.
        Coins will be revived with the introduction of 1, 2 and 5 ruble
denominations. Kopeks will be issued in 1, 5, 10 and 50
denominations.
        Central Bank Chairman Sergei Dubinin said the new notes
would help boost public confidence in what he called a "new heavy
and firm ruble." He added that redenomination would not affect
Russia's monetary policy next year.
        Dubinin said the decision to introduce the new notes signals an
end to inflation and the economic slump of years past. Once rampant
inflation, which peaked in 1992, has been largely brought under
control, with the government forecasting a 12 percent rate this year.
        Dubinin dismissed speculation that the cost of printing new
notes would drain the Central Bank's resources or put added
pressure on the government's cash-strapped budget. He said there is
constant demand to replace old notes with crisp new bills, spurred
by the proliferation of automatic teller machines.
        Pavel Teplukhin, an economist at Troika Dialog, said previous
attempts at monetary reform had essentially amounted to a
confiscation money from the population. As he put it: "This time
people will not suffer."
        Others said the decision to knock of three zeros from the ruble
only signals that the government has the muscle and confidence to
stick to a stable ruble and low inflation.
        Rumors of a re-denomination first surfaced last February, but
the government waited until now to announce the reforms,
apparently cheered by upbeat news on the economic front and
increased political stability.
        The move could give a boost to the government's economic
reforms by removing inflationary expectations and persuading
Russians to choose rubles over dollars, luring some of the so-called
"mattress money" into ruble bank accounts.
        As Roland Nash, an economist at the Moscow investment bank
Renaissance Capital, put it: "It should encourage people to hold their
savings in rubles, which should free up some capital to invest in the
real economy."

 The author is an RFE/RL correspondent based in Moscow.
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               Copyright (c) 1997 RFE/RL, Inc.
                     All rights reserved.
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