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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 99, Part I, 20 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

*BEREZOVSKII, MALASHENKO ON RUSSIAN JOURNALISTS' RELEASE


*RUSSIAN FINANCE MINISTRY TRANSFERS FUNDS FOR MILITARY
WAGE ARREARS

*REBEL TAJIK FORCES SURRENDER

End Note
YELTSIN PLEDGES FAIR PRIVATIZATION
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RUSSIA

BEREZOVSKII, MALASHENKO ON RUSSIAN JOURNALISTS' RELEASE.
Security Council Deputy Secretary Boris Berezovskii said in Moscow
on 19 August that a ransom was paid for the two journalists from the
television production company VID and the three from NTV released
in Chechnya on 17 and 18 August. Chechen security official Magomed
Magomadov had told journalists on 17 August that the two VID
employees were freed by a special brigade under his command. NTV
president Igor Malashenko similarly charged on 19 August that "a
seven-figure dollar sum" was paid to secure the release of the three
NTV journalists, Russian media reported. Malashenko accused
Chechen Vice President Vakha Arsanov of being "the primary
organizer" of a "highly developed kidnapping machine." He also
suggested that President Aslan Maskhadov was aware of that
connection but powerless to stop it. Malashenko said that Chechen
First Deputy Prime Minister Movladi Udugov "provides propaganda
cover-up" for the kidnappers, according to NTV.

YELTSIN DEFENDS CHECHENS. Speaking at the opening of a session of
the Security Council on 20 August, President Boris Yeltsin was
sharply critical of Malashenko's accusations that the Chechen
leadership is involved in hostage-taking, Interfax reported. Yeltsin
said that "the Caucasus is a complex region" and that "we cannot
allow figures like Malashenko to begin press conferences by insulting
the Chechen leadership." Yeltsin criticized Berezovskii for
encouraging the media in their negative coverage of events in
Chechnya. Berezovskii wields considerable influence at Russian
Public Television, and companies linked to Berezovskii own stakes in
"Nezavisimaya gazeta," the weekly "Ogonek," and the TV-6 network.
Assessing the situation in the North Caucasus, Yeltsin said it is
improving "extremely slowly" and that every power agency,
including government ones, should take extra measures to stabilize
it, according to ITAR-TASS.

YELTSIN SUBMITS DRAFT LAW ON STATE OF EMERGENCY. Yeltsin has
submitted to the State Duma a draft law on a state of emergency. In
an explanatory note, Yeltsin pointed out that the RSFSR law that
remains in force is obsolete and in many respects contradicts the
Russian Constitution, according to "Krasnaya zvezda" on 19 August.
Yeltsin also noted that attempts to apply the existing law in North
Ossetia's disputed Prigorodnyi Raion over the past two years have
demonstrated the legislation's shortcomings. Over the past two
month, Ingush President Ruslan Aushev has repeatedly called for the
imposition of a state of emergency to stabilize the situation in
Prigorodnyi Raion, but Yeltsin and North Ossetian President
Akhsarbek Galazov have both rejected his proposal as
unconstitutional.

FINANCE MINISTRY TRANSFERS FUNDS FOR MILITARY WAGE
ARREARS. First Deputy Prime Minister and Finance Minister Anatolii
Chubais says the Finance Ministry has transferred 5.9 trillion rubles
($1 billion) to the Defense Ministry, ITAR-TASS reported on 20
August. He said that sum is enough to pay off all wage debts to
military personnel. (A July presidential decree ordered the
government to pay all debts to soldiers within two months.) Some
other benefits owed to soldiers will be paid in September, Chubais
added. Various government officials have said recent large
privatization auctions helped provide the funds for the government
to settle wage debts to the armed forces as well as to state
employees such as doctors and teachers, which are to be paid by 1
January.

SPECULATION ON MOTIVE FOR ASSASSINATION IN ST. PETERSBURG.
Anatolii Ponidelko, head of the Interior Ministry's branch in St.
Petersburg and Leningrad Oblast, has said that the so-called Tambov
criminal group may have been behind the 18 August assassination of
St. Petersburg Deputy Governor Mikhail Manevich, who had headed
the city's Property Committee, RFE/RL's correspondent in St.
Petersburg reported on 20 August. Ponidelko said he has already
sent the Procurator-General's Office a list of city officials believed to
have ties to the Tambov group. He indicated that at least four people
are believed to have been involved in the murder. Officials have
already released a description of the suspected killer based on
eyewitness accounts. Meanwhile, the St. Petersburg daily "Smena" on
20 August quoted former Mayor Anatolii Sobchak as saying
Manevich's assassination may have been linked to the upcoming
privatization of a city-owned stake in the St. Petersburg port.

REACTION TO CHINESE DAM TENDER. The Russian consortium
composed of Energomashexport, Leningrad Metals Plant, and
Elektrosila, failed to win the tender to provide generators and
turbines for China's Three Gorges Dam. Leonid Matveev, the director
of Gidroenergo, part of Energomashexport, was quoted by Interfax on
19 August as saying the decision is not "a tragedy for Russia," but he
added that had the Russian consortium been chosen, Russia would
have been able to "advance its power industry in terms of quality."
But "Nezavisimaya gazeta" on 20 August said the Chinese decision,
which was leaked to the international media, could be a "time bomb"
for Russian-Chinese relations. The dam, which needs 14 foreign-
made generators and turbines, will be the largest in the world.

NEMTSOV TO HEAD COUNCIL ON SOCIAL, ECONOMIC REFORM. First
Deputy Prime Minister Boris Nemtsov has been appointed chairman
of a new government council on social and economic reforms, which
will consist of cabinet ministers and heads of several local
governments, ITAR-TASS reported on 20 August. Deputy Prime
Ministers Valerii Serov and Oleg Sysuev will also be on the new
council, which will submit policy recommendations to the
government, taking local concerns into account. In recent months, the
government and presidential administration have been courting
mayors of large cities and other local leaders. Some observers have
speculated that Moscow is backing top local officials as a potential
counterweight to regional governors, who are less susceptible to
pressure from the Kremlin after winning gubernatorial elections.

CENTRAL BANK PLANNING PUBLIC RELATIONS CAMPAIGN. Central
Bank First Deputy Chairman Sergei Aleksashenko has said the bank
will spend 60-70 billion rubles ($10-12 million) by the end of the
year to educate the public about the planned redenomination of the
ruble, Russian news agencies reported on 19 August. As of 1 January
1998, the ruble will lose three zeroes. New coins and bank notes will
be issued, although old bank notes will be valid through 1998 and
may be exchanged in banks until the end of 2002. Yeltsin and
various government officials have promised that the redenomination
will not hurt the public or cause a sharp rise in inflation (see "RFE/RL
Newsline," 8 and 11 August 1997). To convey that message and to
explain how the reform will be implemented, the Central Bank is
preparing brochures, posters, and television commercials.

NEW "IZVESTIYA" TO APPEAR IN NOVEMBER. Former "Izvestiya"
editor Igor Golembiovskii's new daily "Novye Izvestiya" will soon
receive its first credit of 20 billion rubles ($3.4 million) and will
begin publication in November, Golembiovskii told the latest edition
of "Moskovskie novosti." The new paper will employ 32 former
"Izvestiya" journalists, including Otto Latsis, Sergei Agafonov, Sergei
Dardykin, and Valerii Yakov. Golembiovskii said that Media-Most
head Vladimir Gusinskii is not involved but that it is "possible" that
Security Council Deputy Secretary Berezovskii is among the financial
backers of "Novye Izvestiya." "Kommersant-Daily" reported on 20
August that companies controlled by Berezovskii will be among those
expected to provide $40 million in financing for "Novye Izvestiya"
over the next two years. Berezovskii, however, says he is not
involved in the project. The paper plans to open five bureaus in
Western Europe, Japan, and the U.S., which very few Russian media
outlets can afford.

NEW HEADS OF GOVERNMENT, LEGISLATURE CHOSEN IN ALTAI
REPUBLIC. The legislature of the Altai Republic on 19 August elected
Vladilen Volkov as head of the government, the highest executive
post in the republic, ITAR-TASS reported. Volkov was previously
chairman of Altai's legislature. His predecessor as head of the
government, Valerii Chaptynov, died of a heart attack on 10 August.
Daniil Tabaev, up to now deputy chairman of the Altai legislature,
was elected to replace Volkov as chairman of that body. Volkov and
Tabaev will both also be members of the Federation Council (upper
house of the parliament), which is made up of top executive and
legislative officials from the Russian regions.

PROCURACY DECLARES SCHOOL SURVEY ON SEX ILLEGAL. The
Procurator-General's Office has announced that a survey on sexual
experience, carried out in connection with a sex education program of
the Ministry of Education, is illegal, ITAR-TASS reported on 19
August. The survey, entitled "What do you know about sex?", was
carried out among a number of 12-year-old students in eight Russian
regions. It included questions such as, "Is it possible for a girl to
become pregnant before she begins menstruating?" and "What does a
normal man's sperm consist of?" Experts from the procuracy
concluded that the questions were "vulgar and immoral" and risked
"tactlessly arousing the sexual instinct of those surveyed." In seven
Russian regions, children filled out the forms without their parents'
consent. The procuracy also said the Ministry of Education had
entrusted "dubious" sociological research organizations with
conducting the survey.

RUSSIAN-LANGUAGE FOOD LABELS DELAYED AGAIN. A government
directive requiring Russian-language labels on all imported food will
not go into effect until 1 July 1998, ITAR-TASS reported on 20
August, citing a resolution recently approved by the government.
The directive, issued in December 1996, requires imported food to
carry Russian labels listing the country of origin and the ingredients,
as well as information about calories, vitamin content, shelf-life, and
correct storage. The new rules were to have gone into effect in May,
but Foreign Trade Ministry officials said the previous month that
food importers had asked the government to delay introducing the
regulations until January 1998. The importers say they need more
time to adapt to the new rules. More than half of all food consumed
in Russia is imported, according to ITAR-TASS on 1 May.

TRANSCAUCASUS AND CENTRAL ASIA

REBEL TAJIK FORCES SURRENDER. The fighting between followers of
Col. Mahmud Khudaberdiyev and forces loyal to the Tajik
government is over. Prosecutor-General Salomiddin Sharipov said on
national television on 19 August that "Khudaberdiyev's rebellious
brigade failed in their attempt at a military coup." More than 50 of
Khudaberdiyev's 1,500 troops were killed in the fighting; and an
estimated 700 have since surrendered. Khudaberdiyev and some 40-
70 of his followers are reported to have taken refuge in the
mountains near the Uzbek border, while others have gone into hiding
into southwestern Tajikistan. The Tajik government has launched a
helicopter and airplane search for them. The Uzbek government
repeated its promise to hand over any of Khudaberdiyev's followers
who try to cross into Uzbekistan. Meanwhile, Tashkent denied
reports that Khudaberdiyev was already in Uzbekistan.

KYRGYZ PROSECUTOR-GENERAL INVESTIGATES NEWSPAPERS. The
Prosecutor-General's Office has launched an investigation into
"Asaba," "Nasha Gazeta," and "Vecherny Bishkek," according to
RFE/RL correspondents in Bishkek. All three newspapers have
printed articles on corruption among parliamentary deputies. Deputy
Dosbol Nur Uluu said comments in "Nasha Gazeta" that all chairmen
of parliamentary committees were from Kyrgyzstan's southern
regions were disinformation. The Prosecutor-General's Office in July
requested permission from the parliament to initiate lawsuits against
seven deputies, but the parliament denied the request and formed
its own investigative committee.

KAZAKH GOVERNMENT IN NEW CAPITAL BY MID-OCTOBER?
President Nursultan Nazarbayev told the government on 19 August
that the administration will move from Almaty to the new capital,
Akmola, by 10 October, Interfax reported on 19 August. Nazarbayev
had said earlier that he would be in the new capital to greet the New
Year, but there is speculation that the reluctance of most ministries
to move to Akmola has prompted Nazarbayev to bring forward the
relocation schedule. Of the 28 ministries, only two have moved so far,
together with the National Agency for Press and Mass Media.
Moreover, of the 45 embassies accredited in Kazakhstan, only nine
have bought plots of land in Akmola for their new buildings.

RUSSIAN PEACEKEEPERS ABDUCTED IN WESTERN GEORGIA. Three
Russians serving with the CIS peacekeeping force deployed along the
border between Abkhazia and the rest of Georgia were abducted by
armed Georgians on 16 August, Russian media reported three days
later. ITAR-TASS quoted Tamaz Nadareishvili, the chairman of the
Abkhaz parliament in exile in Tbilisi, as saying the kidnappers will
release their hostages in return for the bodies of two Georgians killed
by Abkhaz militants in Abkhazia's Gali Raion one week earlier. The
Russian Embassy in Tbilisi has expressed concern at the incident.
Georgian First Deputy Minister of National Security Avtandil Ioseliani
has requested Abkhaz President Vladislav Ardzinba's assistance in
securing the peacekeepers' release. Forty-two peacekeepers have
been killed since the force was sent to Georgia in July 1994.

CONTINUED PROTEST AGAINST SHEVARDNADZE-ARDZINBA
DECLARATION. Nadareishvili announced on 19 August that he is
resigning as chairman of the Abkhaz parliament in exile to protest
the Georgian authorities policy toward Abkhazia, according to
RFE/RL's Tbilisi bureau. He again argued that the use of military
force is the only way to resolve the conflict. "Nezavisimaya gazeta" on
19 August quoted Georgian parliamentary deputy speaker Germane
Patsatsia, who heads the Apkhazeti faction in the legislature, as
saying that the faction's 12 members will resign their mandates to
protest the agreement signed by Georgian President Eduard
Shevardnadze and his Abkhaz counterpart, Vladislav Ardzinba, on 15
August. Patsatsia said the agreement is tantamount to Georgian
recognition of Abkhaz independence.

SHEVARDNADZE-MASKHADOV MEETING POSTPONED INDEFINITELY.
A meeting between the Georgian and Chechen presidents scheduled
to take place in Tbilisi before 20 August has been postponed
indefinitely, ITAR-TASS reported on 19 August, quoting a Chechen
representative in the Georgian capital. Arrangements for the meeting
were discussed during three visits to Tbilisi in late July and early
August by Chechen Deputy Prime Minister Akhmed Zakaev.

SOUTH OSSETIA REIMPOSES CURFEW. President Lyudwig Chibirov
issued a decree on 16 August reimposing a night-time curfew in the
would-be secessionist north Georgian region. Reuters on19 August
quoted a local official in the capital, Tskhinvali, as saying the decision
was prompted by an upsurge in "acts of banditry", but Interfax and
"Nezavisimaya gazeta" on 20 August quoted a South Ossetian
government spokesman as saying that the crime figures have
remained stable for the past several months. "Nezavisimaya gazeta"
suggests that the curfew is intended to counter the traffic in illegal
alcohol from Georgia to the Russian Federation.

END NOTE

YELTSIN PLEDGES FAIR PRIVATIZATION

by Floriana Fossato, Stephanie Baker, and Laura Belin

        President Boris Yeltsin on 15 August commented directly for
the first time on the continuing scandal over Russian privatization
policy. The president insisted that his government will not favor any
bank and will limit the influence of financial groups on privatization
auctions. Future privatization deals should be "fair, based on strict
legislative rules, and allowing no [procedural] deviations," he said.
        Yeltsin also indicated that the recent departure of Alfred Kokh
as deputy prime minister and State Property Committee head was
linked to controversial sales of state property. Kokh, who had
overseen privatization deals since September 1996, officially
resigned last week, but many Russian commentators believe he was
forced out. Although an earlier statement issued by Yeltsin's office
had expressed satisfaction with Kokh's work, Yeltsin noted that
"some banks are apparently closer [than others] to the heart of
Alfred Kokh, and this is not proper." Yeltsin added that economist
Maksim Boiko was appointed to replace Kokh largely in the
expectation that Boiko will be even-handed toward all banks.
        The sale of substantial shares in the telecommunications
monopoly Svyazinvest set off a financial and media war in late July,
dividing Russia's previously allied financial elite. The scandal
intensified following the 5 August sale of a government stake in the
metals giant Norilsk Nickel. Prime Minister Viktor Chernomyrdin had
called for the Norilsk auction to be postponed on 4 August. But the
next day, following meetings with Oneksimbank President Vladimir
Potanin (who was a first deputy prime minister from August 1996
until March 1997) and several government officials, the prime
minister agreed that the sale should take place on schedule.
        Influential news media charged that the auctions had been
unfair. Kokh and other government officials were accused of having
close ties to Oneksimbank, which led the consortium that won the
Svyazinvest auction and is affiliated with the company that acquired
Norilsk Nickel.
        Financial analysts, for their part, sharply criticized the sale of
the 38 percent stake in Norilsk Nickel as an "insider deal" rigged in
favor of Oneksimbank. They noted that the outcome was the logical
conclusion of the loans-for-shares privatization scheme drawn up in
1995. Potanin is believed to have been one of the main architects of
that scheme, which was implemented by both Kokh and Chubais.
        Critics of the loans-for-shares deals say the government
allowed favored banks to acquire management rights over major
state-owned stakes in Russia's biggest oil and industrial companies.
In return, the banks extended loans to the government, but those
loans were far below the market value of the shares. In addition,
banks that participated in the loans-for-shares scheme were
authorized to organize future auctions of the shares, giving them an
important advantage over potential competitors in those auctions.
The scheme effectively allowed banks to turn management control of
state-owned shares into ownership. (A new privatization law that
went into effect on 2 August prohibited loans-for-shares deals.)
        In the case of the 25 percent stake in Svyazinvest, Western
financial analysts said the government, which organized the tender,
may have appeared to favor Oneksimbank. But they pointed out that
the auction was conducted more fairly than were previous deals.
Russian government officials have said all future auctions will be
modeled on the Svyazinvest tender: state property will be sold to the
highest bidder. The Oneksimbank-led consortium -- which also
involved Deutsche Bank's Deutsche Morgan Grenfell, Morgan Stanley
Asset Management, and U.S. financier George Soros's Quantum Fund
-- bid $1.875 billion. The government plans to use its share of that
sum to help pay its huge debt to the army and the state sector.
        Igor Lipkin, chairman of the Russian Federal Property Fund, on
14 August said the Svyazinvest deal has already brought nearly
$700 million to federal coffers. While Chernomyrdin ordered an
investigation into the legality of the Svyazinvest sale, he has warned
against "jumping to conclusions or making hasty allegations" about
privatization auctions.
        First Deputy Prime Minister Boris Nemtsov has acknowledged
that the Norilsk Nickel sale was controversial. But in an interview
with RFE/RL in Sochi, where he has been vacationing, he noted that
such scandals were inevitable, given the regulations governing loans-
for-shares deals.
        In addition, Nemtsov turned the tables on the man believed to
be behind much of the recent criticism of the privatization deals:
business magnate and Security Council Deputy Secretary Boris
Berezovskii. Nemtsov told RFE/RL that whatever its flaws, the Norilsk
auction was conducted "more democratically and openly" than the
May sale of a stake in the Sibneft oil company. (Financial structures
linked to Berezovskii won the Sibneft tender.)
        In addition, Nemtsov said the state should establish control
over both the finances and the "ideological foundations" of Russian
Public Television (ORT). Berezovskii wields considerable influence at
ORT, which sharply criticized the Svyazinvest sale. He is also believed
to have participated in the losing consortium in that auction,
although he denies any involvement in the bidding.

Floriana Fossato is an RFE/RL correspondent in Moscow, and
Stephanie Baker is a freelance writer in the Russian capital.

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