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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 131, Part I, 3 October 1997



A daily report of developments in Eastern and Southeastern Europe,
Russia, the Caucasus and Central Asia prepared by the staff of Radio
Free Europe/Radio Liberty.

This is Part I, a compilation of news concerning Russia, Transcaucasia
and Central Asia. Part II covers Central, Eastern, and Southeastern
Europe and is distributed simultaneously as a second document.
Back issues of RFE/RL NewsLine and the OMRI Daily Digest are online
at RFE/RL's Web site:
http://www.rferl.org/newsline

RUSSIAN MEDIA EMPIRES. Government and business entities control
many major Russian media. This special report on the RFE/RL Web
site lists the important players.
http://www.rferl.org/nca/special/rumedia/index.html

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Headlines, Part I

* YELTSIN WARNS DUMA

* RUSSIA WANTS APOLOGY FROM GROZNY

* ARMENIA SLASHES 1997 BUDGET EXPENDITURES

End Note
MORE PRIVATIZATION REVERSALS TO COME?

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RUSSIA

YELTSIN WARNS DUMA. President Boris Yeltsin warned State Duma
deputies in a nationwide radio address on 3 October that "the
people's patience, the president's patience is not limitless," RFE/RL's
Moscow bureau reported. Yeltsin again assailed the lower house of
the parliament for rejecting government-backed reductions in social
benefits and for passing a land code that does not allow the purchase
and sale of farmland (see "RFE/RL Newsline," 30 September 1997).
Yeltsin also accused the Duma of undermining Russia's prestige by
"intruding" on foreign policy issues, ITAR-TASS reported. He
concluded that the Duma "must work for the good of Russia," because
"it is too expensive a luxury for the people to pay for your
irresponsibility." Yeltsin's address came on the anniversary of the
day in 1993 that he ordered tanks to shell the opposition-dominated
parliament, which he had previously sought to disband by decree.

ZYUGANOV DECRIES "BLACKMAIL." Communist Party leader Gennadii
Zyuganov slammed Yeltsin's radio address as a "confrontational
ultimatum" that seeks to "blackmail" the Duma before deputies
consider the draft 1998 budget, Reuters reported on 3 October.
Zyuganov charged that Yeltsin's government "is utterly bankrupt--
financially and intellectually." He vowed, "We will not vote for this
budget." In an open letter to Yeltsin published in "Sovetskaya
Rossiya" on 2 October, Duma Security Committee Chairman Viktor
Ilyukhin, a leading Communist, criticized the president's "cynical"
practice of criticizing the Duma generally and opposition deputies
personally. Some Russian media have speculated that confrontation
this fall  over the 1998 budget may eventually lead to the Duma's
dissolution. In addition, some newspapers, including the popular
weekly "Argumenty i fakty," have recently published articles
charging that the Duma deputies have too many expensive privileges
and perks, which allegedly cost taxpayers 125 million rubles
($21,300) a month per deputy.

RUSSIA WANTS APOLOGY FROM GROZNY. Russian Security Council
spokesman Igor Ignatev told journalists on 2 October that the
Russian representation in Chechnya will return to Grozny only after
the Chechen leadership has formally apologized for their expulsion.
Vice president Vakha Arsanov ordered the 80 representation staff
members to leave Chechnya on 30 September, but President Aslan
Maskhadov and Russian Deputy Premier Ramazan Abdulatipov
agreed  the next day they should return (see "RFE/RL Newsline," 1
and 2 October 1997). Ignatev predicted that it will be "extremely
difficult" to restore the mutual trust that evolved during the
negotiating process. Abdulatipov, however, told NTV that he still
thinks it is possible "to find common viewpoints."

RUSSIA DENIES SUPPLYING ARMENIA WITH MEDIUM-RANGE NUKES.
Russian Foreign Ministry spokesman Valerii Nesterushkin told
journalists on 2 October that Russia has not supplied Armenia with
medium-range missiles capable of carrying nuclear warheads,
Interfax reported. Nesterushkin said Russia destroyed its medium
and short-range nuclear missiles by May1991 in accordance with the
INF treaty. Azerbaijani Foreign Minister Hasan Hasanov had claimed
in September that Russia supplied Armenia with such missiles. Also
on 2 October, Hasanov delivered a protest note to the Russian
ambassador in Baku, Turan reported. The note listed 14 Russian-
Armenian agreements on military cooperation that, Hasanov argued,
constitute a "military union" between the two countries. Hasanov
called for a moratorium on ratifying the Armenian-Russian
friendship and cooperation treaty, signed in late August, pending a
solution of the Karabakh conflict.

RUSSIA-IRAN UPDATE.  A spokesman for Russia's Federal Security
Service (FSB) told ITAR-TASS on 2 October that the FSB has
intercepted unnamed persons who were attempting to supply Iran
with technology for producing nuclear missiles. The previous day,
Iranian ambassador to Moscow Mehdi Safari told a news conference
that the "rumors about Iran's desire to use  Russian technology for
production of nuclear weapons are totally groundless," according to
Interfax. But Reuters on 2 October quoted  an Israeli intelligence
source as confirming that Russian nuclear technology continues to be
transferred to Iran with official approval.  Meanwhile, Yeltsin on 1
October denounced U.S. criticism of the $2 billion gas deal concluded
several days earlier by Gazprom, France's Total, Malaysia's Petronas
and the National Iranian Oil Company. Yeltsin said Russia, France, and
Iran "are independent and freedom-loving countries. No other
country should dictate to them what documents to sign," Interfax
reported.

CHERNOMYRDIN IN NETHERLANDS. Addressing the parliament of The
Netherlands on 2 October, Prime Minister Viktor Chernomyrdin again
reaffirmed Russia's disapproval of NATO expansion and argued that
NATO should be transformed into less of a military and more of a
political organization. Chernomyrdin later told financial and business
representatives that attracting more Dutch investment is a "pressing
issue" for Moscow. He urged his listeners  to "lose no time" in
investing, particularly in the energy, transport, and food storage
sectors.  He also confirmed that Moscow plans to repay in full its
$510 million debt to The Netherlands. The previous day,
Chernomyrdin had met with his  Dutch counterpart, Wim Kok, to
discuss cooperation and security in Europe and bilateral trade and
economic issues.

"KOMSOMOLSKAYA PRAVDA" BLASTS CHERNOMYRDIN.
"Komsomolskaya pravda" on 2 October accused Chernomyrdin of
violating a presidential decree in order to provide government loan
guarantees for a satellite television project connected to Vladimir
Gusinskii's Media-Most company. In June 1997, Chernomyrdin signed
two directives offering government guarantees for $140 million in
bank loans sought by the previously unknown company Bonum-1 to
build and launch a communications satellite. "Komsomolskaya
pravda" reported that Bonum-1 is a fictitious organization whose
founders are also high-ranking executives at Most Bank or other
companies founded by Gusinskii. It also charged that the directives
signed by Chernomyrdin violate a May presidential decree that
called  for curtailing government loan guarantees (see "RFE/RL
Newsline," 13 May 1997). Oneksimbank is a major shareholder in
"Komsomolskaya pravda." Media outlets owned by Media-Most have
recently criticized Oneksimbank and First Deputy Prime Ministers
Anatolii Chubais and Boris Nemtsov.

"IZVESTIYA" DEFENDS CHUBAIS. "Izvestiya" on 3 October reported
that attacks against Chubais "in various forms and on various fronts"
are only making the first deputy prime minister more "decisive and
uncompromising." The newspaper noted that Chubais has moved to
take away commercial banks' authorization to handle tax payments
from enterprises. It argued that the new policy, soon to be declared
in a presidential decree, will be a major blow to some bankers,
"although the gains for the budget and for the state as a whole are
obvious." (Some commercial banks have earned huge profits by
delaying transfers of state funds to the government in order to earn
interest off those funds.) The newspaper predicted that "the decisive
actions of the [first] deputy prime minister and the forthcoming
presidential decree will lead to a new round in the so-called
information war." Oneksimbank is a major shareholder in "Izvestiya."

"NEZAVISIMAYA GAZETA" ON CHUBAIS, ROSNEFT. "Nezavisimaya
gazeta" on 3 October published a lengthy commentary expressing
relief that the government's "young wolves," led by First Deputy
Prime Minister Chubais, have failed to bring off an attempted
"revolution" this year. The newspaper argued that "the real threat of
dictatorship in Russia comes not from the Communist
revanchists...but from the Chubais team." The previous day,
"Nezavisimaya gazeta" sharply criticized the government's planned
privatization of the Rosneft oil company (see "RFE/RL Newsline," 26
September 1997). The newspaper argued that foreign investors will
be allowed to acquire a controlling stake in Rosneft. It added that
foreign investment in the oil industry is "very good in general," but
only if Western investors do not receive controlling packets of shares
in Russian companies. "Nezavisimaya gazeta," partly financed by the
LogoVAZ group of Security Council Deputy Secretary Boris
Berezovskii, has repeatedly criticized Chubais and privatization
policy in recent months.

ENERGY CRISIS ABATES IN PRIMORE. Electricity supplies to
Primorskii Krai residents are back to normal now that coal miners
and energy workers have ended their strike and coal shipments to
power stations have been resumed, RFE/RL's correspondent in
Vladivostok reported on 3 October. A government commission
headed by First Deputy Fuel and Energy Minister Sergei Kirienko
held consultations over several days with local politicians,
representatives of Primore's utility Dalenergo, and coal company and
trade union officials. Kirienko also was involved in government
commissions sent to Primore during the krai's previous energy crisis,
in May and June. He told journalists on 2 October that there were no
"objective" reasons for the energy crisis in September (see "RFE/RL
Newsline," 16 and 19 September 1997). He said wage arrears to
miners and energy workers had grown because Primore officials had
not fulfilled a protocol signed during First Deputy Prime Minister
Nemtsov's June visit to Primore.

GAZPROM, TATARSTAN REACH AGREEMENT ON GAS DEBTS. Tatar
Prime Minister Farid Mukhametshin and Gazprom chairman Rem
Vyakhirev have signed an agreement on rescheduling Tatarstan's 4.3
trillion ruble ($733 million) debt for natural gas deliveries,
"Nezavisimaya gazeta" reported on 3 October. The debt must now be
paid by the end of this year. The newspaper had reported on 25
September that gas supplies to several regions of Tatarstan had been
cut because of the outstanding debt. It also reported that
Mukhametshin had failed to persuade Vyakhirev to agree to
rescheduling the debt. Meanwhile, addressing the Tatarstan State
Council on 1 October, chairman Vasilii Likhachev said that  claims
made in Kemerovo by Russian State Duma speaker Gennadii Seleznev
were an "insult to Tatarstan's honor." Seleznev had accused Tatarstan
and Bashkortostan of destroying the Russian Federation.

REGISTRATION OF LUTHERAN MISSION REVOKED IN KHAKASSIA. The
authorities in the Republic of Khakassia have revoked the
registration of the Evangelical Lutheran Mission of Khakassia "in
accordance with the adoption of the law on freedom of conscience
and religious organizations," the Keston News Service reported on 2
October. Under that law, which was recently signed by Yeltsin,
"religious groups" that cannot prove they have existed in Russia for
at least 15 years will have fewer rights than registered "religious
organizations." The Evangelical Lutheran Mission was registered in
June 1996. Rev. Pavel Zayakin, the mission's director in Khakassia,
argued that Lutheranism has existed in Russia for more than 400
years. He added that the mission will file a court appeal against the
Khakassian authorities. Supporters of the religion law have said it is
aimed primarily against cults and "totalitarian sects," not "real
religions" (see "RFE/RL Newsline," 22 and 23 September 1997).

WHO WILL FUND RUSSIAN SPACE INDUSTRY? In a statement to mark
the 40th anniversary of the Soviet Union's successful launch of
Sputnik, the first artificial satellite in orbit, Yeltsin promised that the
state "will continue to do everything necessary to preserve and
develop" space research in Russia, ITAR-TASS reported on 2 October.
The same day, Russian Space Agency head Yurii Koptev told ITAR-
TASS that his agency plans to raise additional funds for research
through advertisements on spacecraft and space facilities. Koptev
said advertising agencies will soon be able to bid for exclusive rights
to make advertisements related to Russia space projects., for which
millions of dollars annually could be earned. Funding shortages have
hampered Russian space research in recent years. Earlier this year,
authorities announced that the launch of the first module of the
"Alpha" international space station will be delayed from November
1997 until June 1998.

TRANSCAUCASUS AND CENTRAL ASIA

ARMENIA SLASHES 1997 BUDGET EXPENDITURES.  Finance and
Economics Minister Armen Darbinyan told journalists in Yerevan on
2 October that projected budget expenditures for 1997 will be
slashed by15 billion drams ($30 million), RFE/RL's Yerevan bureau
reported.  Darbinyan said the cuts are necessary because of
"incorrect budget estimates" of the amount of financial aid from
foreign donor states and international financial institutions. He
added, however, that government revenues in September reached a
record high of 10.1 billion drams, more than double the amount for
the same period in 1996. Darbinyan, who took part in the recent
annual meetings of the World Bank and IMF in Hong Kong, said the
World Bank  gave the green light for Armenian access to its
commercial loans. This move, he said, reflects the West's support of
Yerevan's economic policies.

THREE KILLED IN CASPIAN HELICOPTER CRASH.  Three people were
killed on 2 October when an Azerbaijani Airlines helicopter carrying
oil workers crashed into the Caspian Sea, Russian and Azerbaijani
agencies reported. Sixteen people are still missing. The cause of the
crash is unknown; visibility at the time was normal, according to
Turan.  Three days earlier, Belgian Foreign Minister Erik Derycke was
forced to cancel a planned visit to Baku after the Azerbaijani Airlines
airplane on which he was booked had to be grounded for technical
reasons.

GEORGIAN PARLIAMENT ADOPTS NEW DEFENSE DOCTRINE. The
parliament on 1 October adopted a defense doctrine drafted earlier
this year, RFE/RL's Tbilisi bureau reported. Parliament Defense and
Security Committee Chairman Rezo Adamia described the document
as a "defensive defense doctrine," meaning that the armed forces can
use force only to repel aggression. Opposition parties have criticized
the doctrine as "superficial" and claimed it does not address the
country's specific problems, in particular the need to restore
territorial integrity.

ANOTHER HOSTAGE-TAKING IN TAJIKISTAN.  A meat plant factory
manager and his son were abducted by an unidentified armed gang
in Dushanbe during the night of 2-3 October, ITAR-TASS reported.
Police believe that the perpetrators are fighters loyal to warlord
Revzon Sodirov and that Sodirov wishes to exchange the hostages for
his brother, Bakhrom, who is being held in custody for the February
abduction of a group of UN observers.  Meanwhile, Interfax on 2
October quoted United Tajik Opposition leader Said Abdullo Nuri as
saying the repatriation of the estimated 2,500-3,000 opposition
forces from Afghanistan is being delayed by logistical and financial
problems.

PROTEST MARCH CONTINUES IN KAZAKHSTAN.  Some 1,000 workers
from the southern city of Kentau who began marching to Almaty on
1 October to protest wage and pension arrears have reached
Shymkent, RFE/RL's Almaty bureau reported on 2 October. Some of
the marchers, including the trade union leaders who organized the
protest, proceeded by train to Almaty; the rest are continuing on
foot. An attempt by South Kazakhstan Oblast Prosecutor-General
Sultan Jabanov to halt the marchers was unsuccessful. Meanwhile,
Interfax on 2 October reported that 10  inmates of a high security
prison in western Kazakhstan have been hospitalized after slitting
open their stomachs to protest prison conditions.

MORE PRIVATIZATION REVERSALS TO COME?

by Stephanie Baker

        In a sign that pressure is building to clean up Russia's scandal-
plagued privatization process, the Moscow Arbitration Court has
ruled that 41 percent of the shares in the chemicals plant
Cherepovets Azot be returned to the government.
        It is the first high-profile privatization to be reversed,
targeting the country's third largest bank, Oneksimbank, which in
1994 acquired a 41 percent stake in the chemicals factory. The court
ruled on 29 September that the shares should be returned to the
government because Oneksimbank had failed to meet the investment
conditions stipulated in the tender.
        Russian media have played up the case because Oneksimbank's
founder, former First Deputy Prime Minister Vladimir Potanin, has
been embroiled in a media war over his involvement in recent
privatization sales. Potanin led a consortium that won a major stake
in Russia's telecommunications holding company Svyazinvest in July.
The apparent losing bidders, however, cried foul play and launched a
campaign against the sale through their media outlets. In early
August, a company linked to Oneksimbank won an auction for a
controlling stake in the metals giant Norilsk Nickel, despite last-
minute calls for that auction to be postponed.
        Recent allegations that former State Property Committee
Chairman Alfred Kokh, who oversaw both auctions, accepted money
from a Swiss company linked to Oneksimbank for a questionable
book deal have only intensified speculation that Svyazinvest and
Norilsk Nickel were sweetheart deals.
        Sergei Dorenko, a Russian Public Television (ORT) journalist,
first publicized Oneksimbank's mismanagement of Cherepovets in a
report aired just after the Svyazinvest auction. He alleged that
Oneksimbank dodged its investment requirements under the tender
by diverting $41 million to an off-shore bank. In an interview with
RFE/RL, Dorenko later claimed credit for the court's decision, saying
his coverage of the story had forced the court to take a closer look at
the case.
        State Property Minister Maksim Boiko, however, portrayed the
court's ruling as part of his efforts to clean up the privatization
process, which has been plagued by accusations that the state has
handed property to insider banks at cut-rate prices. Boiko said that
funds earmarked for investment in the Cherepovets factory had been
used for other purposes. He pledged to ensure the "honest"
enforcement of investment terms following sell-offs of state
property.
        Whether the court's decision was politically motivated is open
to speculation. But there is clearly pressure building on the
government to plug some of the many loopholes that have been
exploited during the privatization process.
        Until just recently, the government had used "investment
tenders" to sell off state property. But many of the owners were able
to evade the investment conditions due to lax oversight or, as many
observers believe, insider deals between the buyer and seller.
        Russia's new privatization law attempts to define the rules of
the game more clearly. Although the Cherepovets case was tried
under the criminal code after charges of fraud were brought, the
privatization law includes a provision that allows sales of state
shares to be reversed if investment conditions have not been
fulfilled.
        The new law, which went into effect on 2 August, also allows
sales of state property to be overturned if there is evidence of
collusion between buyer and seller, if the price of the sale has been
fixed, or if beneficial conditions have been granted to one bidder
over another. While the law is clearly meant to address some of the
wrongs that have dogged the privatization process, and particularly
the Cherepovets case, some lawyers point out that the legislation is
so vague that it makes overturning a privatization for political or
technical reasons relatively easy. The law could affect not just major
players like Oneksimbank but smaller investors as well.
        William Simons, a lawyer with Pepper, Hamilton & Sheets and a
faculty member at Leiden University's Institute for East European
Law and Russian Studies in The Netherlands, says the law creates
uncertainty for owners. He asks: "From a policy point of view, the
main question is, once a transaction has been completed, is it a stable
decision or can it be turned back?"
        The law mentions nothing about shares that were auctioned off
and then resold to third parties, nor does it clearly spell out a statute
of limitations.
        Last month, the State Duma set up a committee to investigate
whether the sales of Svyazinvest, the oil company Sibneft, Norilsk
Nickel, and the Tyumen Oil Company complied with existing
legislation. The committee, culled from different parliamentary
factions, is due to announce its findings on 1 November. It is charged
with examining the starting prices of the state shares, procedures for
the sales, and the role of state officials in the auctions. Observers,
however, doubt that the committee's findings will result in any
reversals.

The author is a Moscow-based RFE/RL correspondent.





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