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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 134, Part I, 8 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

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Headlines, Part I

*CHERNOMYRDIN ASKS DUMA NOT TO "FIGHT" WITH GOVERNMENT


*SPOKESMAN SAYS YELTSIN LEGALLY ENTITLED TO SEEK THIRD
TERM


*KARABAKH PRESIDENT REJECTS MINSK GROUP PEACE PLAN

End Note
RUSSIA'S LANDMARK DEAL WITH LONDON CLUB
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RUSSIA

CHERNOMYRDIN ASKS DUMA NOT TO "FIGHT" WITH GOVERNMENT.
Prime Minister Viktor Chernomyrdin on 8 October appealed to State
Duma deputies not to start a "fight" with the government by passing
a vote of no confidence, RFE/RL's Moscow bureau reported.
Addressing a plenary session of the Duma, Chernomyrdin argued that
the Russian economy is improving and warned that the public does
not need more political confrontation. Before Chernomyrdin's speech,
the Duma rejected a Yabloko-sponsored motion to put a no-
confidence vote on the Duma's 8 October agenda. But after the prime
minister's address, Duma Speaker Gennadii Seleznev announced that
the Duma is likely to consider a confidence motion on 15 or 16
October. Communist Party leader Gennadii Zyuganov announced on 7
October that his faction has collected 146 signatures in favor of
calling such a vote (90 signatures are required).

CHUBAIS DEFENDS GOVERNMENT'S WORK. After Chernomyrdin's
speech, First Deputy Prime Minister Anatolii Chubais addressed the
Duma and defended the government's economic policies, RFE/RL's
Moscow bureau reported. Chubais acknowledged that tax collection
remains a major obstacle to fulfilling the budget. Tax revenues
improved significantly in the second quarter of 1997 only to fall
again in the third quarter, he said, according to Reuters. But Chubais
promised that the government will further improve tax collection. He
also noted that by exceeding planned social spending by 41 percent,
the government had managed to pay off all pension arrears. "I don't
think the government should be criticized for that," Chubais added.
Earlier this year, the government imposed spending cuts in many
areas in accordance with a "sequester" plan not approved by
parliament (see "RFE/RL Newsline," 6 May and 20 June 1997).

COMMUNISTS NOT AFRAID OF DUMA DISSOLUTION. Communist Party
leader Zyuganov told journalists on 7 October that his party will back
a no-confidence vote because the government's "radical wing ...has
gained the upper hand" and is imposing "destructive" policies on the
country, Interfax reported. He acknowledged that a no-confidence
vote could eventually lead to the dissolution of the Duma, but he
added that "the country is more important" than seats in the
parliament. Duma Legislation Committee Chairman Anatolii
Lukyanov, a prominent Communist, told RFE/RL's Moscow bureau on
7 October that he believes Yeltsin will not dissolve the Duma because
the government cannot pass a new tax code or a budget if the lower
house is not in session. A single no-confidence vote would not give
Yeltsin the constitutional right to dissolve the Duma. But if deputies
vote no confidence twice within three months, Yeltsin will be able to
decide whether to dismiss the government or dissolve the lower
house.

GOVERNMENT NOT AFRAID OF BEING DISMISSED. First Deputy
Finance Minister Aleksei Kudrin told RFE/RL's Moscow bureau on 7
October that he is not concerned about the consequences of a possible
no-confidence vote by the Duma, since "the president is on our side."
Kudrin, who spent the day discussing the 1998 budget with Duma
deputies, added that within the government and the Finance
Ministry, "more radical" approaches to forming next year's budget
have been suggested. Duma deputies would therefore do well to
negotiate with the government now, Kudrin added, rather than
sending the draft budget back to the cabinet.

DRAFT BUDGET LIKELY TO GO TO CONCILIATORY COMMISSION. The
Duma is virtually certain to reject the draft 1998 budget in the first
reading, but deputies appear likely to support creating a conciliatory
commission to work out a compromise with the government. In
remarks to the Duma on 8 October, Communist Party leader
Zyuganov argued that Duma deputies, Federation Council deputies,
and government representatives should discuss the budget, RFE/RL's
Moscow bureau reported. The support of communist deputies would
ensure passage of a motion to form a conciliatory commission.
Following meetings with various government ministers on 7 October,
deputies from the Agrarian, Russian Regions, Liberal Democratic
Party of Russia, and Our Home Is Russia factions indicated that they
will support forming such a commission.

NEMTSOV DOUBTS NEED FOR "EXTREME CONSTITUTIONAL STEPS."
First Deputy Prime Minister Boris Nemtsov told reporters in the
Republic of Karelia that the government does not expect to have to
take "extreme constitutional steps" against the State Duma, Russian
news agencies reported on 7 October. However, he said Yeltsin may
take such steps "in order to maintain law and order" if Duma
deputies are "intransigent." Nemtsov commented that he is closer to
Grigorii Yavlinskii's Yabloko movement than to any other political
group, but he professed not to understand why Yabloko members
have refused to join the government. "If there is a chance to do
something properly, this chance must be taken," he argued. Speaking
to the Duma's plenary session on 8 October, Yavlinskii sharply
criticized government policies and said the government deserves a
vote of no confidence at the earliest possible date, RFE/RL's Moscow
bureau reported.

SPOKESMAN SAYS YELTSIN LEGALLY ENTITLED TO SEEK THIRD
TERM. Presidential spokesman Sergei Yastrzhembskii says Yeltsin is
legally entitled to seek a third term as president in 2000, even
though the constitution adopted in December 1993 allows a president
to serve only two consecutive terms. In an interview published in
the Belgian newspaper "Le Soir" on 7 October, Yastrzhembskii argued
that Yeltsin served his first term under a previous constitution and
has been elected president only once under the new constitution.
Yastrzhembskii refused to speculate on the likelihood of Yeltsin
seeking a third term. Yeltsin announced in September that he would
not run for president again. But during a recent visit to Nizhnii
Novgorod, he refused to rule out his possible candidacy in 2000 (see
"RFE/RL Newsline," 2 October 1997).

YELTSIN HAILS LONDON CLUB DEAL... Yeltsin on 7 October met with
representatives of 11 leading banks in the London Club and praised a
recent debt restructuring deal as an "enormous political step for
Russia," Russian news agencies reported. Russia and the London Club
signed a 25-year, $32 billion debt restructuring deal the previous
day (see "End Note" below). Yeltsin told the bankers that Russia has
"mastered the market," saying that current economic indicators are
strong and that 70 percent of property is privately owned. But he
called on the London Club banks to invest more in the Russian
economy and to extend more loans to both Russian and foreign
investors.

...CRITICIZES PROPOSED RUSSIAN-JAPANESE PROJECTS. Yeltsin has
instructed the presidential administration and government to draft
new proposals on joint projects to be discussed at his November
meeting with Japanese Prime Minister Ryutaro Hashimoto, Russian
news agencies reported on 7 October. During a meeting with Prime
Minister Chernomyrdin, Yeltsin said he was dissatisfied with a list of
proposed Russian-Japanese projects given to him recently. He called
the projects too small and too narrowly focused on developing
Russian raw materials, adding that he would like to see proposals on
more "strategic" matters and on developing new technologies.

CHERNOMYRDIN DENIES VIOLATING PRESIDENTIAL DECREE. Prime
Minister Chernomyrdin has sent a letter to the editorial board of
"Komsomolskaya pravda" denying the accuracy of a recent report
published by the newspaper, government spokesman Igor
Shabdurasulov told ITAR-TASS on 7 October. The newspaper alleged
that Chernomyrdin violated a presidential decree by granting loan
guarantees for a commercial satellite television project (see "RFE/RL
Newsline," 3 October 1997). The company behind the project was
reported to be linked to Vladimir Gusinskii's Media-Most company.
Shabdurasulov commented that political rumors and accusations
against government ministers appear whenever the government
takes on "serious tasks," such as its current work to gain
parliamentary approval for the 1998 budget and new tax code.

PROMINENT U.S. BANKER STRIPPED OF RUSSIAN ENTRY VISA.
Russian authorities have revoked the multiple entry visa of Boris
Jordan, a U.S. citizen who heads the Moscow-based investment banks
MFK and Renaissance Capital. Sources in the Foreign Ministry told
Interfax on 7 October that unspecified "state interests" are behind
the decision, which, the sources said, was not made by the Foreign
Ministry. Jordan, who was denied a Russian entry visa in 1996, has
applied for a new visa. MFK is part of the Oneksimbank empire and
was involved in the consortium that recently acquired a major stake
in Svyazinvest. According to Reuters, Renaissance Capital is involved
in a controversy over management of one of Russia's largest steel
mills. First Deputy Prime Minister Nemtsov said it is "outrageous" to
revoke Jordan's visa and attributed the incident to the "continuation
of the bank war," ITAR-TASS reported on 8 October.

KEMEROVO GOVERNOR MAKES NEW ALLEGATIONS AGAINST
PROSECUTOR. Aman Tuleev has vowed that Valentin Simuchenkov,
the prosecutor of Kemerovo Oblast, will be brought to justice for
allegedly not taking action against the oblast's "mafia structures." In
a 7 October interview with RFE/RL's Moscow bureau, Tuleev accused
Simuchenkov of creating and overseeing a fund collecting
contributions from organizations that owe taxes to the oblast budget.
He charged that Simuchenkov has "closed his eyes" to many crimes
and is responsible for a "disgraceful practice" whereby accused
murderers are often set free on bail and people charged with less
serious crimes remain in custody. Simuchenkov recently filed several
slander lawsuits against Tuleev (see "RFE/RL Newsline," 7 October
1997). Tuleev said he will seek to have the court hearings held in
any Russian region except Kemerovo.

PRIMORE LEGISLATURE STANDS BEHIND APPOINTED MAYOR. The
Primorskii Krai Duma continues to consider Yurii Kopylov the
legitimate mayor of Vladivostok, despite a court ruling, a protest by
the krai prosecutor, and a criminal case recently opened against
Kopylov, RFE/RL's correspondent in Vladivostok reported. Deputies
on the krai Duma's Council heard a report from Kopylov on 7 October
and praised him for showing courage in difficult political conditions.
The legislature has appealed to officials at Vladivostok's law
enforcement agencies and the local treasury, as well as to commercial
banks authorized to handle city funds, asking them not to hinder
Kopylov's attempts to carry out his duties. Meanwhile, ITAR-TASS
reported on 8 October that Vladivostok Mayor Viktor Cherepkov has
undergone unspecified surgery and will remain hospitalized for
another two weeks. When he went on sick leave, Cherepkov
appointed Nikolai Markovtsev acting mayor (see "RFE/RL Newsline,"
1 and 6 October 1997).

BASHKIR PRESIDENT NOT TO RUN FOR SECOND TERM. Murtaza
Rakhimov has announced he will not run for reelection in late 1998,
"Kommersant-Daily" reported on 7 October. Until now, he was
considered the only prospective candidate. The newspaper cited
unsubstantiated allegations in other Russian media that Rakhimov is
implicated in the illegal sale of petroleum products. The 63-year-old
Rakhimov was elected chairman of the Bashkir Oblast Soviet in 1990
and president of Bashkortostan three years later.


TRANSCAUCASUS AND CENTRAL ASIA

KARABAKH PRESIDENT REJECTS MINSK GROUP PEACE PLAN. Arkadii
Ghukasyan told journalists on 7 October that Karabakh cannot accept
any proposed peace plan based on the region's subordination to
Baku, RFE/RL's correspondent in Stepanakert reported. Ghukasyan
said Nagorno-Karabakh is ready to discuss a "confederative
relationship" with Azerbaijan and to cede part of its de facto
independence to establish such a relationship. Ghukasyan also
rejected a "phased" resolution of the conflict whereby a decision on
Karabakh's status will be postponed until the final stage of the peace
process. He admitted that a "package" solution resolving all
contentious issues within one framework document would be more
difficult to achieve, according to Noyan Tapan. Ghukasyan also
admitted that he recently discussed with Armenian President Levon
Ter-Petrossyan unspecified differences in their approaches to
resolving the conflict. Also on 7 October, the Karabakh Foreign
Ministry released a statement protesting violations of the
confidentiality of the peace process by Azerbaijani leaders, including
President Heidar Aliev.

"NO DIFFERENCES" OVER KARABAKH BETWEEN ARMENIAN
PRESIDENT, FOREIGN MINISTRY. Speaking at a news conference in
Yerevan on 6 October, Foreign Ministry spokesman Arsen Gasparyan
denied Turkish press speculation about differences of opinion over
Karabakh between Levon Ter-Petrossyan and the Foreign Ministry.
Gasparyan said that such differences "do not and cannot exist."
Gasparyan differentiated between applying the "phased" approach to
the negotiating process and to a settlement document. At the same
time, he declined to elaborate on the provisions of the "phased" plan
proposed by the Minsk Group co-chairmen before the three conflict
sides have submitted their written responses to that plan. They are
scheduled to do so within the next few days. Gasparyan also
expressed the hope that Baku will at last consent to direct talks with
the Karabakh Armenian leadership. He said that only such talks
could "yield a breakthrough and give new impetus to the peace
process."

RUSSIAN FOREIGN MINISTER IN BAKU. Following his meeting with
President Aliev in Baku on 7 October, Yevgenii Primakov told
journalists that the two-hour talks were "useful and interesting,"
Russian agencies reported. Primakov again stressed that the Russian-
Armenian treaty on friendship, cooperation and mutual assistance,
signed in late August, is not directed against Azerbaijan and will not
be used to support forces that oppose Azerbaijan's territorial
integrity. Primakov welcomed Baku's positive assessment of the most
recent Karabakh peace proposals by the co-chairmen of the
Organization for Security and Cooperation in Europe's Minsk Group.
Aliev said those proposals entail the withdrawal of Armenian forces
first from six districts adjacent to Karabakh and then from the
Karabakh town of Shusha and the district of Lachin, which lies
between Karabakh and the Azerbaijani-Armenian frontier.

GEORGIA WON'T OPEN AIR SPACE TO CHECHNYA. Zurab Chankotadze,
the head of the Georgian Air Transport department, told Interfax on
7 October that Chechnya has not officially asked Georgia to open an
air corridor across its territory. Chankotadze commented that if the
Chechen leadership were to make such a request, it would be
"impossible" for Georgia to comply without Russia's consent. Also on
7 October, Chechen parliamentary speaker Ruslan Alikhadzhiev told
ITAR-TASS that Chechnya is preparing to issue its own domestic and
international passports.

CHEVRON ON PIPELINE ROUTES FOR KAZAKH OIL. Chevron President
Richard Matzke has held separate talks in Almaty and Baku with
Presidents Nursultan Nazarbaev and Heidar Aliev on the optimal
route for exporting oil from Kazakhstan's Tengiz field. That field will
yield some 7.5 million metric tons by the end of 1997, but only 3
million can be exported via the existing pipeline across Russia.
Matzke told journalists in Almaty on 3 October that he would prefer
to export larger quantities via Russia but that if this proves
impossible Chevron will consider the Baku-Batumi pipeline.
Meanwhile, Vladimir Stanev, director-general of the Russian affiliate
of the Caspian Pipeline Consortium, which is to build a pipeline from
Tengiz to the Russian Black Sea port of Novorossiisk, said on 7
October that a feasibility study for that pipeline will be completed by
April 1998. Construction will begin in September 1998 and will be
completed by August 2000.

TENSIONS RISE BETWEEN KAZAKH MARCHERS, POLICE. Police
continue to prevent workers from the Achisay Polimetal plant in
Kentau from crossing a bridge over the Arys irrigation canal near
Turkestan, ITAR-TASS reported. The workers are planning to march
on Almaty to protest non-payment of wages. They have rejected an
offer by regional officials to pay half the accumulated wage arrears
and are demanding payment in full. Representatives of the local
trade union branch in Kentau have met with Turkestan's mayor and
agreed to send five delegates to the capital to meet with President
Nazarbaev, RFE/RL's Almaty bureau reported. Workers'
representatives from the cities of Tekeli, Pavlodar, and Oskemen
have traveled to Turkestan to demonstrate solidarity with the
marchers, whose numbers have grown to some 2,000, including 300
women and 100 children.

UZBEKISTAN PROPOSES AFGHAN PEACE PLAN. Addressing the UN
General Assembly on 7 October, Uzbek Foreign Minister Abdulaziz
Kamilov proposed creating a "Contact Group" for Afghanistan
composed of Russia, the U.S., China, Iran, and countries bordering on
Afghanistan, AFP reported. The group would hold talks with the
various warring Afghan factions in a bid to mediate an end to the
war. Kamilov also called for an arms embargo against Afghanistan.
"The New York Times" on 5 October quoted Kamilov as saying that
Uzbekistan advocates creating a coalition government in Kabul that
would include the Taliban and other political groups. He said that no
single faction is strong enough to build a stable government.

END NOTE

RUSSIA'S LANDMARK DEAL WITH LONDON CLUB

by Stephanie Baker

        Russia and the London Club of commercial creditors have
signed a landmark agreement to restructure Soviet-era debts totaling
billions of dollars. Russia inherited the massive debt after the
collapse of the Soviet Union under a deal with the former republics
that gave Moscow control over all Soviet foreign assets. The long-
awaited restructuring deal allows Russia to pay off some $32 billion
over 25 years. It comes shortly after Russia joined the Paris Club of
official creditors, following an agreement that $40 billion in Soviet
debts to foreign governments would be rescheduled over 25 years.
        Officials hail the London Club deal as paving the way for a new
wave of investment in the Russian economy. Talking to journalists
after the 6 October signing ceremony, First Deputy Prime Minister
Anatolii Chubais said "leaders of the biggest banks in the world
recognized the irreversibility of our reforms and the prestige of
Russia in the international community." He said the agreement would
speed up Russia's efforts to join other international financial
institutions and help pump desperately needed funds into the
economy. He also commented that the deal would allow Russian
enterprises to tap international financial sources, weaning them off
dependency on the nation's powerful banks. "In effect it opens the
door to a non-oligarchic capitalism in Russia," he remarked.
        Tessen von Heydebreck, a board member at the Deutsche Bank
who worked on the restructuring, told reporters that the agreement
heralds Russia's return to the international capital markets "as a
reliable creditor." He said the agreement could result in a credit
rating upgrade for Russia, which would reduce Moscow's costs of
borrowing on global financial markets.
        Top officials from 13 major banks took part in the 6 October
signing ceremony in Moscow, together with officials from
Vneshekonombank, which has been the Russian government's agent
in the negotiations. The deal restructures $24 billion in principal and
$8 billion in interest payments on a combined total of 27,000 loans
extended to Russia by foreign commercial banks. Von Heydebreck
described the agreement as "one of the largest financial transactions
of its kind."
        Banking officials attending the signing said the deal would be
an incentive for commercial banks to lend to Russia. Thomas Wells,
the vice president of Bank of America in London, said it would "give
commercial banks additional confidence to lend to Russia and to
private enterprises."
        Chubais moved to bolster confidence further on 6 October when
he announced that Russia will now focus on restructuring an
additional $4 billion in outstanding debts owed by Soviet-era
enterprises to commercial creditors outside the London Club deal.
Those credits were not guaranteed by the Soviet authorities.
        The closing date for the London Club deal is 2 December, when
Russia is scheduled to pay $3 billion in cash toward overdue interest.
At that time, the holders of the loans will retire the original debt and
receive new Vneshekonombank bonds in exchange. There will be two
kinds of the new bonds: some representing interest owed, others
principal owed.
        Eric Fine, an analyst at Morgan Stanley, said there could be
volatility on the market as the closing date approaches. But he
maintained that in the long term, the London Club deal would help
Russia attract a new class of investors and boost its reputation as a
reliable creditor on international markets.

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


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