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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 136, Part I, 10 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

* DUMA REJECTS BUDGET IN FIRST READING

* YELTSIN SAYS NO THIRD TERM

* KAZAKH PRIME MINISTER RESIGNS

End Note : GAZPROM'S PLANS STRAIN RUSSIAN-BULGARIAN
RELATIONS
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RUSSIA

DUMA REJECTS BUDGET IN FIRST READING. The State Duma on 9
October rejected the draft budget for 1998 in the first reading, by
326 to 13 with one abstention, RFE/RL's Moscow bureau reported.
Deputies rejected a motion sponsored by the Popular Power faction
to send the budget directly back to the government. They also voted
down a Yabloko motion to schedule a no confidence vote for 10
October. Deputies then approved a Communist proposal to send the
budget to a trilateral commission representing the Duma, the
Federation Council, and the government. The creation of a trilateral
commission is a departure from normal Duma procedure, under
which a conciliatory commission on the budget would include mainly
Duma and government representatives. Federation Council deputies,
many of whom have already criticized the draft budget, are now
expected to have more influence on the budget debate than the
upper house had last year.

KREMLIN WELCOMES OUTCOME OF BUDGET VOTE. President Boris
Yeltsin told reporters in Strasbourg, where he is attending the
Council of Europe summit, that he is confident work on the 1998
budget will now proceed "normally," Russian news agencies reported
on 9 October. He commented that Duma deputies had apparently
understood his recent radio address. In that address, Yeltsin warned
that the Duma must become more cooperative or risk exhausting the
patience of the president and the public (see "RFE/RL Newsline," 3
and 6 October 1997). First Deputy Prime Minister Anatolii Chubais
called the Duma's decision to create a trilateral commission a "victory
for common sense," which "makes the adoption of a budget before
the end of the year a realistic proposition." (The 1997 budget was not
signed into law until late February.) Speaking to reporters in Bishkek
on 10 October, Prime Minister Viktor Chernomyrdin praised the
Duma's decision to create a trilateral commission as "absolutely
correct."

ZYUGANOV PINS HOPES ON REGIONAL LEADERS. Communist Party
leader Gennadii Zyuganov announced on 9 October that his party
insisted on forming a trilateral commission to discuss the 1998
budget because it wants tougher negotiations with the government
than during the 1997 budget process, RFE/RL's Moscow bureau
reported. He also told journalists, "we badly need the support of the
Federation Council" in order to change the government's economic
policies, according to Reuters. Regional leaders have particularly
objected to the government's plans to decrease expenditures on
"transfers," or federal funds allocated to most regions. The draft
budget would cut spending on such transfers from 15 percent of total
budget revenues to 13 percent. ITAR-TASS on 7 October quoted an
unnamed government representative as saying that the government
will not give in to demands that planned spending on regional
transfers be restored to the current level.

YABLOKO DEMANDS WITHDRAWAL OF NEW TAX CODE. Yabloko
member Oksana Dmitrieva, who heads a Duma subcommittee on the
budget, announced that the movement's faction may alter its
opposition to the 1998 budget and its support for a no-confidence
vote if the government withdraws the new tax code, ITAR-TASS
reported on 9 October. Yabloko leader Grigorii Yavlinskii has
repeatedly criticized the proposed code as a "repressive document"
that would not significantly lower the tax burden on enterprises.
First Deputy Prime Minister Chubais and First Deputy Finance
Minister Aleksei Kudrin on 9 October indicated that the government
will accept some compromises on the code. For instance, they said, it
could be introduced in stages rather than all at once on 1 January
1998. Projected revenues in the 1998 budget are based on the
assumption that the new tax code will be in effect at the beginning of
the year.

YELTSIN SAYS NO THIRD TERM. Yeltsin has again said that he will not
seek a third term as president in 2000, Russian news agencies
reported. Upon his arrival in Strasbourg for the Council of Europe
summit, Yeltsin said, "As the president, I am the guarantor of the
constitution. I should be the first to give an example of how to abide
by the constitution." He said he will not seek a constitutional
amendment to allow himself a third term and expressed hope that
after he leaves office, he will be succeeded by a "young, energetic
democrat." Yeltsin made similar comments in September, but during
a recent visit to Nizhnii Novgorod he appeared to leave the door open
to a possible presidential candidacy in 2000. Yeltsin's spokesman
Sergei Yastrzhembskii recently argued that the current constitution
would allow Yeltsin to serve a third term.

YELTSIN PROPOSES KARABAKH PEACE CONFERENCE. Over a gourmet
dinner in Strasbourg on 9 October, Yeltsin and French President
Jacques Chirac agreed to invite the presidents of Armenia and
Azerbaijan, Levon Ter-Petrossyan and Heidar Aliev, to Moscow for
quadrilateral talks on the Karabakh conflict, ITAR-TASS reported.
Yeltsin expressed the hope that such talks could lead to "another step
forward" in the peace process. Russia and France, together with the
U.S., are co-chairmen of the Organization for Security and Cooperation
in Europe's Minsk Group, which since1992 has been trying to
mediate a settlement of the conflict. Yeltsin added that the U.S. is also
invited to participate in the talks. Arkadii Ghukasyan, the president
of the unrecognized Nagorno-Karabakh Republic, is apparently not
invited. Ter-Petrossyan, who is also in Strasbourg for the Council of
Europe summit, is to proceed to Paris for an official visit during
which he will meet with Chirac.

RUSSIAN-CHECHEN TALKS RESUME. Russian Security Council
Secretary Ivan Rybkin, together with his deputies Boris Agapov and
Boris Berezovskii, met near Sochi on 9 October with Chechen First
Deputy Prime Minister Movladi Udugov, Russian agencies reported.
Rybkin had said before leaving Moscow that "there is no alternative
to a peace process" and that talks would therefore continue. But he
added that the Russian government mission in Grozny, whose
personnel were recently expelled, may be closed if it proves
"redundant." Chechen Presidential Press Secretary Kazbek Khadzhiev
told ITAR-TASS on 10 October that Udugov had again proposed to
the Russian delegation that Moscow and Grozny sign an inter-state
treaty providing for the establishment of diplomatic relations.
Moscow has repeatedly refused to consider this, insisting that
Chechnya remains a federation subject. Also on 9 October, Chechen
President Aslan Maskhadov dismissed the Supreme Court judges
responsible for Islamic law because of unspecified "errors," ITAR-
TASS reported.

CHUBAIS, LUZHKOV SPAR OVER COMPENSATION FOR MOSCOW. First
Deputy Prime Minister Chubais on 9 October defended the
government's decision to remove special subsidies for Moscow from
the draft 1998 budget, Russian news agencies reported. In the past,
such payments have compensated Moscow for the costs of
maintaining federal facilities in the capital. Chubais argued that
average monthly wages in Moscow are twice as high as the Russian
average. He added that Moscow's request for compensation payments
was unconvincing given the lavish celebrations recently held to mark
the city's 850th anniversary. Chubais also noted sarcastically that
Moscow may receive the payments after all if the parliament votes
"to take money from other Russian regions and give it to Moscow as
the most needy Federation subject." Moscow Mayor Yurii Luzhkov
vowed that his administration will fight all government decisions
that infringe on the capital's interests (see "RFE/RL Newsline," 9
October 1997).

JUSTICE MINISTRY TO RUN PRISONS. Yeltsin on 9 October issued a
presidential decree transferring the penitentiary system from the
jurisdiction of the Interior Ministry to the Justice Ministry, Russian
news agencies reported. The transfer is in line with
recommendations of the Council of Europe and has been anticipated
since June, shortly before former Federal Security Service director
Sergei Stepashin was appointed justice minister. "Nezavisimaya
gazeta" remarked on 10 October that a new government commission
to be charged with implementing the transfer has difficult work
ahead. In addition, the parliament will have to amend at least 50
laws. "Kommersant-Daily" reported on 9 October that according to
Interior Ministry data, some 20,000 workers in the prison system
have resigned in recent months because they do not want to work
under the jurisdiction of the Justice Ministry.

REDENOMINATION TO BE APPLIED TO OLD SAVINGS ACCOUNTS.
Central Bank Chairman Sergei Dubinin has confirmed that the
redenomination of the ruble, planned for 1 January 1998, will be
applied to savings accounts opened in Sberbank before 1992. In an
interview published in "Izvestiya" on 10 October, Dubinin said the
accounts, which were rendered virtually worthless by high inflation
in the early 1990s, will be indexed when a separate law is
implemented. "Redenomination has nothing to do with this," he
added. Dubinin told ITAR-TASS on 9 October that the government
currently lacks the funds to restore the value of the old Sberbank
accounts. Opposition politicians have called for not applying the
redenomination to the old accounts, which would in effect increase
their value by 1000 times. Yeltsin has previously indicated that the
government was considering this option (see "RFE/RL Newsline," 25
August and 19 September 1997).

POLITICIANS DEMAND PRESIDENTIAL ELECTION IN KARACHAEVO-
CHERKESSIA. Ten prominent politicians in the Republic of
Karachaevo-Cherkessia have sent an open letter to Yeltsin
demanding that a presidential election be held in the republic,
RFE/RL's correspondent in Vladikavkaz reported on 9 October.
Karachaevo-Cherkessia is the only Russian region still governed by a
Yeltsin appointee who has never faced an election. President
Vladimir Khubiev has been the top official in Karachaevo-Cherkessia
for 18 years. Yeltsin issued a decree in 1995 extending Khubiev's
authority until 1999. In April 1997, the republic's Supreme Court
ruled that Karachaevo-Cherkessia's constitution requires the
president to be elected. The court instructed the republican
legislature to set an election date by September, but the legislature,
which is dominated by supporters of Khubiev, ignored the court
ruling. Communist candidates did well in Karachaevo-Cherkessia in
the 1995 State Duma election and in the Russian presidential election
last year.

U.S. BANKER GIVEN SINGLE-ENTRY VISA. U.S. citizen Boris Jordan,
who heads the Moscow-based investment bank MFK and the
Renaissance Capital fund, has returned to Moscow after being
granted a single-entry visa, ITAR-TASS and Reuters reported on 9
October. The visa allows Jordan to remain in Russia for only one
week. A spokesman for Renaissance indicated that the terms of the
new visa are "unacceptable" and that Jordan should be given a new
multiple entry visa. MFK, which plans to merge with Renaissance
Capital, is part of the Oneksimbank empire. First Deputy Prime
Minister Boris Nemtsov has criticized the recent decision to revoke
Jordan's multiple entry visa, saying the incident was inspired by
Russia's "bank war" and will deter foreign investors from doing
business in Russia (see "RFE/RL Newsline," 8 October 1997).

CIS PRIME MINISTERS MEET. Seven CIS prime ministers and 7 first
deputy premiers met in Bishkek on 9 October to discuss the Concept
for Integrated Economic Development of the CIS. That document was
discussed, but not unanimously endorsed, at the previous summit in
March 1997 (see "RFE/RL Newsline," 1 April 1997). All the
participants in the 9 October meeting, except Georgia, signed a
document on implementing this concept. Twenty-three other
agreements were signed, including on transnational corporations, a
common agricultural market, and international road transport.
Addressing his CIS counterparts, Russian Prime Minister
Chernomyrdin expressed concern that trade between CIS states had
declined by 10 percent during the first six months of this year.
Chernomyrdin also called for a coordinated monetary policy.
According to "Izvestiya" on 10 October, the prospect of introducing a
single CIS currency between 2005 and 2010 was also discussed.

TRANSCAUCASUS AND CENTRAL ASIA

KAZAKH PRIME MINISTER RESIGNS... Akezhan Kazhegeldin, currently
in Switzerland for medical treatment, tendered his resignation on 10
October, as did his cabinet. President Nursultan Nazarbaev accepted
Kazhegeldin's resignation, allegedly on health grounds, but asked the
government to continue to discharge its duties. Addressing the
parliament earlier the same day, Nazarbaev had acknowledged the
government's "energetic" work but said that "reforms have been
insufficient and in some aspects have not produced the desired
results." Kazhegeldin's resignation had been widely predicted
following allegations of corruption and two interviews with Russian
newspapers in September in which he claimed to have been
recruited by the KGB in the late 1980s and to have played a key role
in the arms scandal. Kazhegeldin also predicted that all the younger
members of his cabinet would soon resign. Nazarbaev reacted to
Kazhegeldin's September revelations by immediately appointing
Deputy Premier Ahmetzhan Yesimov acting premier.

...WHILE PRESIDENT NAMES SUCCESSOR. Addressing the parliament
on 10 October, Nazarbaev named Nurlan Balgimbaev, the head of the
Kazakhstan National Petroleum Company, as prime minister.
Balgimbaev, who will turn 50 in November, is a graduate of the
Kazakh Polytechnical Institute and has spent most of his working life
as an engineer in the oil sector. Between 1986 and 1992, he worked
in the former USSR Oil and Gas Industry Ministry in Moscow. He then
studied at MIT, in the U.S., and at Chevron's headquarters. He was
appointed Kazakh oil and gas industry minister in October 1994 and
head of the state oil company created to replace that ministry in
March 1997.

TAJIK PRESIDENT ORDERS RELEASE OF OPPOSITION MEMBERS.
Following his 8 October meeting with United Tajik Opposition (UTO)
leader Said Abdullo Nuri, Imomali Rakhmonov has ordered the
release by 12 October of some 170 out of 700 jailed opposition
supporters, according to an Interfax report. An amnesty for
participants in the 1992-1993 fighting provides for their release.
Rakhmonov and Nuri also discussed how to repatriate opposition
fighters still in Afghanistan and where they should be stationed once
back in Tajikistan.

TAJIK MILITARY MOVES TO FREE HOSTAGES. The Tajik presidential
guard on 9 October launched an operation to locate and secure the
release of six hostages currently held by warlord Rizvon Sodirov on
the outskirts of Dushanbe (see "RFE/RL Newsline," 3 October 1997).
Davlat Usmon, the chief of staff of the armed units subordinate to the
UTO, told ITAR-TASS that "it is time to put an end to terrorism,
lawlessness, and hostage-taking." He said that "adequate measures"
will be taken against all illegal armed groups that fail to comply with
the 16 November deadline to surrender their arms.

ARMENIA AGREES "IN PRINCIPLE" TO KARABAKH PEACE PLAN.
Armenian Foreign Ministry spokesman Arsen Gasparyan told
RFE/RL's Yerevan bureau on 9 October that Armenia has accepted in
writing the most recent Karabakh peace plan proposed by the
Organization for Security and Cooperation in Europe's Minsk Group.
Gasparyan said Armenia accepts the plan "as a basis for further
negotiations" but has unspecified serious reservations about it.
Gasparyan denied statements by some Azerbaijani officials that the
plan's first stage involves an immediate withdrawal of Karabakh
Armenian forces from six occupied Azerbaijani districts and that the
future of the Shusha and Lachin districts will be solved at the same
time as the issue of Nagorno-Karabakh's status. Mediators have not
yet decided on "the sequence of the stages," he commented.
Azerbaijani presidential adviser Vafa Gulu-Zade told Interfax on 9
October that Azerbaijan gave its written acceptance of the peace plan
on 8 October.

SHOOTINGS ON CIS-TURKISH FRONTIER. Shortly after taking off from
Batumi on 8 October, a Russian border guards helicopter came under
fire, Russian agencies reported. The helicopter belonged to the
Russian border guards unit that, together with its Georgian
counterpart, jointly controls the Georgian-Turkish frontier. The
helicopter was badly damaged, but none of the crew or passengers
were injured. In a second incident on 9 October, Russian border
guards in Armenia were fired on from Turkish territory. No
casualties were reported. The Turkish Foreign Ministry denied any
knowledge of the first incident, while the governor of Artvin
province said on 9 October that local peasants had opened fire on the
helicopter. According to the Russian Federal Border Service, the
helicopter had not entered Turkish airspace.

END NOTE

GAZPROM'S PLANS STRAIN RUSSIAN-BULGARIAN RELATIONS

by Ron Synovitz

        A dispute over Gazprom's plans for a Balkan pipeline network
has developed into a political crisis between Sofia and Moscow.
Bulgarian officials accuse Moscow of letting Gazprom's economic
agenda influence foreign relations. Bulgarian newspapers go further,
charging that Moscow is using the Russian natural gas monopoly's
economic influence to pressure Sofia on issues such as the Bulgarian
desire to join NATO and the EU. At the root of the dispute is a battle
for control of pipelines that carry Russian natural gas across Bulgaria
to Macedonia, Turkey, Serbia, and Greece.
        The disagreement has stalled construction for years of a crucial
pipeline link from Bulgaria's Black Sea port of Burgas to Greece's
Aegean Sea port at Alexandropolis. Gazprom insists that the project's
joint venture, Topenergy, should be given control of Bulgaria's gas
pipeline network for nearly 50 years. That would essentially give
Gazprom control of pipelines on Bulgarian territory because the
Russian firm owns 50 percent of Topenergy and has the allegiance of
the largest Bulgarian partner, the private conglomerate Multigroup.
Gazprom also wants a Multigroup-owned distributor, Overgas, to be
an intermediary for most Russian gas deliveries in Bulgaria.
        The demands have angered Sofia's pro-market government,
which controls only 20 percent of Topenergy through the state-
owned Bulgargaz. Prime Minister Ivan Kostov's cabinet complains
that a private monopolist intermediary like Multigroup would force
impoverished Bulgarians to pay 30 percent more than German
consumers now pay for Russian gas. Instead, Kostov wants gas
deliveries in Bulgaria to be handled by Bulgargaz. Sofia also wants
Multigroup subsidiaries to sell their Topenergy shares to Bulgargaz,
thus raising the state holding to 50 percent.
        Bulgaria depends upon Russia for oil and gas, and Gazprom is
the largest and perhaps most politically influential company in
Russia. Allegations that Gazprom has a powerful say in Moscow's
political decisions are based on the fact that Viktor Chernomyrdin
headed the firm from its creation in the late 1980s until he became
Russian prime minister in 1992.
        Meanwhile, many companies under the Multigroup umbrella
are reported to have been started by Sofia's totalitarian-era ruling
elite in the late 1980s and early 1990s. Headed by alleged Soviet-era
Bulgarian Intelligence Service agent Iliya Pavlov, Multigroup has
been accused of draining the Bulgarian economy by plundering
assets of state firms through hidden privatization schemes.
        The late Andrei Lukanov also has been closely linked to
Multigroup. Lukanov, a former Communist Party Central Committee
member, became Bulgaria's first post-communist premier after
helping orchestrate the fall of dictator Todor Zhivkov in November
1989. Some three years earlier, Lukanov's friendship with
Chernomyrdin helped him negotiate a cheap gas supply contract that
continued until early this year. The contract benefited firms like the
state steel maker Kremikovtzi, by far the largest Bulgarian consumer
of Russian gas, and the private Intersteel Ltd., a Multigroup
subsidiary that has profited from conducting Kremikovtzi's trade
operations. Lukanov was also Topenergy's first board chairman, a
position that he held until a few months before his assassination by
an unknown gunman in Sofia on 2 October 1996. His successor at
Topenergy was Multigroup's Pavlov.
        Recent editorials in the Sofia press have exacerbated tensions
by charging that Gazprom is trying to retain a monopoly on the gas
market for both itself and its Multigroup partners in order to give
Moscow leverage over the political situation in Sofia. Russian
Ambassador to Bulgaria Leonid Kerestedjiantz has called the articles
"organized harassment." But Prime Minister Kostov and Foreign
Minister Nadezhda Mihailova have both said they are feeling
pressure from the Russian government. Mihailova has urged Moscow
not to confuse economic disputes with political relations.
        Ivan Krastev, a political scientist in Sofia who sometimes
advises the government, says Gazprom is trying to implement a
calculated plan that threatens Bulgarian independence on issues like
NATO and European Union membership. He argues that a Gazprom-
backed intermediary would allow Russia to limit the sovereignty of
small countries by raising gas prices or refusing to deliver supplies.
He calls the scenario the "doctrine of Vyakhirev," in reference to
current Gazprom Chairman Rem Vyakhirev.
        Gazprom and Bulgargaz have so far failed to reach agreement
on a new gas contract. The Bulgarian Interior Ministry has accused
Gazprom of trying to "blackmail" Sofia with high prices.
        Moreover, relations have been strained further by Sofia's
recent refusal to invite Russia to talks with U.S. Defense Secretary
William Cohen and defense officials from eight southeastern
European countries. Russian Foreign Minister Yevgenii Primakov
refused to meet Mihailova in New York during the United Nations
General Assembly. Primakov's spokesman said Bulgaria tried too late
to arrange the meeting. But Mihailova's spokesman says Sofia tried
repeatedly to confirm a meeting that had been agreed in advance.

The author is an RFE/RL news editor.

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