RFE/RL NEWSLINE Vol 1, No. 157, Part I, 11 November 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:
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News from the Armenian Service's Yerevan bureau is posted to
RFE/RL's  Armenia Report each weekday.

RFE/RL ARMENIA REPORT
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Headlines, Part I

*RUSSIA, CHINA PRESS IRAQ TO COOPERATE WITH UN


*CENTRAL BANK MEASURES DESIGNED TO RESTORE CONFIDENCE


*GEORGIAN AUTHORITIES TRY TO PREVENT FUGITIVES' CONGRESS

End Note
OBSTACLES TO RESOLVING KARABAKH CONFLICT
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RUSSIA

RUSSIA, CHINA PRESS IRAQ TO COOPERATE WITH UN. Meeting in
Beijing on 10 November, the foreign ministers of Russia and China,
Yevgenii Primakov and Qian Qichen, called on the Iraqi leadership to
resume cooperation with the UN weapons inspectors, Russian media
reported. They also called for restraint on the part of "all nations
concerned" in order to preclude a recourse to arms. On 11 November,
Russian presidential press spokesman Sergei Yastrzhembskii likewise
criticized Baghdad's obstruction of the UN weapons inspectors but
added that Russia "decisively" opposes using Iraq's defiance of the
UN Security Council "as a cover for military strikes against Baghdad
and Iraq," Western agencies reported. LF

YELTSIN VISITS CHINA'S NORTHEAST... On 11 November, President
Boris Yeltsin spent the last day of his China visit in the northeastern
city of Harbin, which was the center of the country's Russian
community last century, when Russia helped build the Chinese
Eastern Railway. Yeltsin met with the 50 or so Russians who remain
in the city. Yeltsin said he went to Harbin to help develop economic
relations between his country and China. With a population of some 9
million, Harbin ranks as the fifth largest city in China and is a major
industrial center situated close to the frontier with Russia. BP

...AFTER SONG AND DANCE IN BEIJING. Reuters quotes Yeltsin's
spokesman Yastrzhembskii as revealing that President Jiang Zemin
sang Russian songs and danced with Yeltsin's daughter and adviser
Tatyana Dyachenko to the strains of Tchaikovsky's "Sleeping Beauty"
at a state banquet in Beijing on 10 November. Also participating in
the festivities were Russian First Deputy Prime Minister Boris
Nemtsov and Chinese Deputy Prime Minister Li Lanqing, who
reportedly sang "Moscow Nights" together. But at a press conference
on 9 November, the two appeared out of harmony when Li claimed
they have much in common but was interrupted by Nemtsov's
pointing out that "we Russians are democrats." Nemtsov and Li did,
however, salvage a multi-billion dollar deal for Russia to help
construct a nuclear power plant in China. A final agreement is
expected to be signed by the end of 1997. BP

CENTRAL BANK MEASURES DESIGNED TO RESTORE CONFIDENCE...
Central Bank Chairman Sergei Dubinin and First Deputy Prime
Minister Anatolii Chubais announced on 10 November that recent
turmoil on the Russian stock and bond markets prompted the Central
Bank to impose "temporary" measures, RFE/RL's Moscow bureau
reported. The bank raised the annual refinancing rate from 21-28
percent and commercial banks' reserve requirements for foreign
currency from 6-9 percent. Appearing on NTV, Dubinin said the
"preventive" measures, along with a new exchange rate policy, are
designed to increase trust in the ruble and "make purchases of
foreign currency unprofitable" (see "RFE/RL Newsline," 10 November
1997). He added that the Central Bank's gold and foreign-currency
reserves, which totaled $22.6 billion as of 1 November, are sufficient
to keep the exchange rate stable. LB

...BUT MARKET CONTINUES TO FALL. The Russian Trading System
Index declined by 8.3 percent on 10 November following the
announcement of the new Central Bank measures, and leading
Russian stocks continued to decline in value the following day. The
most liquid corporate stocks dropped by 15 percent or more,
according to "Kommersant-Daily" on 11 November. Russian treasury
bills and longer-term government bonds also declined on 10
November. It was unclear why the steep declines on the stock
market did not lead to a halt of the Russian Trading System. The
Russian Federal Securities Commission recently announced that
trading will be halted if average share values decline by more than 5
percent in a single session. A few days later, officials said declines of
at least 7.5 percent will lead to a halt. LB

IMF OFFICIAL IN MOSCOW. After meeting with Chubais, Dubinin,
Prime Minister Viktor Chernomyrdin, and other top officials, IMF
First Deputy Managing Director Stanley Fischer on 10 November
praised the decision to raise interest rates. He said the move
dispelled potential doubts about the Russian government's
commitment to stable inflation levels and exchange rates, Russian
news agencies reported. Fischer confirmed that the IMF believes the
crucial task for the Russian government is to tighten control over
budget revenues and expenditures. He added that a recently delayed
$700 million loan issue to Russia will not be released before early
1998. Meanwhile, Chubais told reporters that the government has
drafted a plan to "radically" improve tax collection. He gave no
details, saying Chernomyrdin is expected to approve the plan soon.
LB

DUMA COMMITTEE APPROVES TAX LAWS, REVISED BUDGET. The
State Duma Budget Committee on 10 November recommended that
the lower house of the parliament approve a package of tax laws and
the revised 1998 budget in the first reading, ITAR-TASS reported.
The government recently submitted the tax laws, which are intended
to provide extra revenues to cover increased 1998 spending
projections. Those increases were approved during recent
negotiations between government and parliamentary representatives
(see "RFE/RL Newsline," 29 October 1997). The Duma Council on 11
November announced the lower house will consider the tax
legislation and the budget in the first reading at a 13 November
plenary session, ITAR-TASS reported. LB

MEDIA SPIN ON BEREZOVSKII'S DISMISSAL. Media outlets close to
former Security Council Deputy Secretary Boris Berezovskii continue
to speculate that his dismissal could have grave consequences for his
main rivals, First Deputy Prime Ministers Chubais and Nemtsov (see
"RFE/RL Newsline," 6 November 1997). Russian Public Television
news commentator Sergei Dorenko on 8 November argued that by
firing Berezovskii, Yeltsin has left Chubais and Nemtsov with no one
to complain about or blame for policy failures. NTV anchor Yevgenii
Kiselev made similar remarks during a broadcast the following day.
"Nezavisimaya gazeta," which is partly financed by Berezovskii's
LogoVAZ group, argued on 10 November that "however you look at
it, Berezovskii's dismissal is advantageous most of all for Berezovskii
himself." In contrast, Nikolai Svanidze of state-run Russian
Television, which is close to Chubais, on 9 November cited various
Western commentators as praising the decision to sack Berezovskii.
LB

COMMANDER ANNOUNCES CUTS IN INTERIOR MINISTRY TROOPS.
Colonel-General Leontii Shevtsov, the commander of the Interior
Ministry troops, announced on 10 November that the number of
troops subordinated to that ministry will be cut to 220,000 by 1999,
ITAR-TASS reported. The Interior Ministry troops have already been
reduced from 440,000 in 1992 to 257,000 today, Shevtsov said.
"Kommersant-Daily" reported on 11 November that plans are under
way to reorganize and change the functions of forces subordinated to
the Interior Ministry, the Emergency Situations Ministry, and the
Federal Border Service. Citing an unnamed Defense Ministry source,
Interfax reported on 8 November that Defense Council Secretary and
Chief Military Inspector Andrei Kokoshin has been discussing
restructuring plans with top officials from those bodies as well as
from the Defense Ministry. LB

SERGEEV SAYS MOLDOVAN FIGHTER PLANES CAN'T CARRY NUKES.
Defense Minister Igor Sergeev on 10 November denied that MiG-29C
jets recently sold by Moldova to the U.S. can carry nuclear weapons,
Russian news agencies reported. The U.S. has purchased 21 MiG-29C
fighter jets from Moldova in order to prevent "rogue states," such as
Iran, from buying them (see "RFE/RL Newsline," 5 and 6 November
1997). U.S. Defense Secretary William Cohen claimed the jets are
capable of launching nuclear missiles. Sergeev dismissed that claim
as an "outright lie," saying hardware enabling the Moldovan MiGs to
carry nuclear weapons was removed in 1989. A statement released
by the Russian Air Force corroborated Sergeev's remarks. LB

LUZHKOV SUES 'RUSSKII TELEGRAF.' Moscow Mayor Yurii Luzhkov
has filed a libel lawsuit against the newspaper "Russkii telegraf," the
mayor's office told Interfax on 10 November. Arkadii Murashev, a
member of Yegor Gaidar's party Russia's Democratic Choice, is quoted
in the newspaper's 28 October issue as saying Luzhkov is the "biggest
entrepreneur in the city, who has everyone else under his thumb."
Luzhkov's court appeal claims the accusation is false and has
damaged the mayor's honor, dignity, and business reputation. He is
demanding that the newspaper publish either a retraction or proof of
the accusation. LB

VLADIVOSTOK MAYOR ANNOUNCES RESIGNATION. During a live radio
address on 11 November, Viktor Cherepkov surprised local observers
and politicians by announcing that he will soon resign and call new
mayoral elections, RFE/RL's correspondent in Vladivostok reported.
He told journalists later that after leaving office, he plans to continue
to fight local corruption and to write his memoirs. Cherepkov, a
longtime political enemy of Primorskii Krai Governor Yevgenii
Nazdratenko, was elected mayor in 1994 but ousted by Nazdratenko
later that year. Since being reinstated by presidential decree in
September 1996, Cherepkov has continued to clash with
Nazdratenko's supporters. Most recently, he rebuffed an attempt by
the krai legislature to remove him from office. Some observers have
charged that the rivalry between Cherepkov and Nazdratenko has
exacerbated Primore's economic problems, including rampant wage
arrears and frequent energy crises. LB

SOBCHAK HAS SURGERY IN PARIS. Former St. Petersburg Mayor
Anatolii Sobchak underwent heart surgery in Paris on 10 November,
Interfax reported. Sobchak's wife, Duma deputy Lyudmila Narusova,
told the news agency that the former mayor is in satisfactory
condition and plans to return to St. Petersburg following his
recovery. She denied Russian customs agents' statements to ITAR-
TASS that Sobchak and Narusova had flown to New York. Law
enforcement officials want to question Sobchak in connection with a
corruption investigation against his former associates. The
Prosecutor-General's Office told Interfax that since no charges have
been filed against Sobchak, he is not prohibited from traveling
abroad. Investigators have not been allowed to see him since 3
October, when he fell ill during an interrogation. LB

CHECHNYA IMPOSES ISLAMIC DRESS FOR WOMEN. Female students
and women working in the state sector in Chechnya must in future
conform with the Islamic dress code, Vice President Vakha Arsanov
announced on Chechen television on 10 November. Managers who
fail to enforce this requirement will be dismissed. Three days earlier,
Arsanov banned the production and sale of alcoholic drinks in
Chechnya, according to Interfax. LF

CHERNOMYRDIN MEETS WITH TATAR PRESIDENT. Prime Minister
Chernomyrdin met with Mintimer Shaimiev in Moscow on 10
November to discuss the economic situation in Tatarstan and
cooperation between the Tatar and federal governments, RFE/RL's
Kazan bureau reported. Russian government spokesman Igor
Shabdurasulov told journalists later that Chernomyrdin has called for
drafting an economic recovery program for Tatarstan's debt-ridden
KamAZ truck factory, Russian agencies reported. A Russian
government delegation to Vietnam on 17 November will include
KamAZ management representatives. Vietnamese and Japanese
companies have recently expressed interest in concluding joint
ventures with the plant. LF

TRANSCAUCASUS AND CENTRAL ASIA

GEORGIAN AUTHORITIES TRY TO PREVENT FUGITIVES' CONGRESS.
Several thousand police were deployed around the Philharmonia
building in Tbilisi on 11 November to prevent a congress of
representatives of the ethnic Georgians forced to flee Abkhazia and
South Ossetia during the fighting in both regions from 1990-1993,
CAUCASUS PRESS reported. Two of the congress's organizers were
detained by police, while the meeting has convened in other, smaller
premises. Georgian President Eduard Shevardnadze had on 10
November criticized the congress, whose delegates want to protest
the Georgian leadership's failure to achieve political settlements of
either conflict that would allow them to return home. They also
intend to demand Shevardnadze's resignation. LF

ARMENIAN RULING PARTY BACKS PRESIDENT'S KARABAKH POLICY.
Vano Siradeghyan, the chairman of the Armenian Pan-National
Movement (HHSh), told an RFE/RL correspondent in Yerevan on 10
November that the movement has pledged its support for President
Levon Ter-Petrossyan's strategy for resolving the Karabakh conflict.
Ter-Petrossyan met behind closed doors on 8 November to discuss
the peace process with the movement's board and the leaders of the
five smaller parties aligned with the HHSh in the ruling
Hanrapetutyun coalition. Siradeghyan said the Armenian leadership's
decision not to reveal details of the latest peace plan proposed by the
Organization on Security and Cooperation in Europe's Minsk group
"plays into the hands of the opposition. " But he added that it is
"premature" to disclose particulars. LF

ARMENIAN SECURITY MINISTER OPPOSES UNILATERAL
CONCESSIONS. Interior and Security Minister Serzh Sarkisyan told
journalists in Yerevan on 10 November that he favors an "honorable
peace" with Azerbaijan that is not based on unilateral concessions,
RFE/RL's Yerevan bureau reported. Sarkisyan, who was born in
Nagorno-Karabakh, downplayed suggestions of a rift between the
president and the power ministers over how best to resolve the
conflict. Sarkisyan also said President Ter-Petrossyan's decision in
November1996 to merge the Interior and Security Ministries has
contributed to a reduction of the shadow economy's activities and a
substantial increase in tax collection, according to ARMENPRESS. LF

ARMENIAN GOVERNMENT REVISES ECONOMIC FORECAST. The
Armenian Finance and Economics Ministry has revised its forecast
for 1997 following the government's failure to meet macroeconomic
targets in the first ten months, RFE/RL's Yerevan bureau reported.
GDP growth has been revised downward from 5.7 percent to 3.3
percent. Annual inflation is now expected to reach 21 percent, while
a 10 percent rate was originally forecast. The ministry has also
proposed that the government cut budget expenditures by 11
percent or 17 billion drams ($34 million) since the volume of
international loans is lower than expected. The proposed cutbacks
will largely affect government investments and expenditures other
than social entitlements. LF

BULGARIA WANTS TO BUY, RE-EXPORT AZERBAIJANI OIL. Visiting
Foreign Minister Nadezhda Mikhailova signed a protocol on regular
consultations with her Azerbaijani counterpart Hasan Hasanov, Turan
reported on 10 November. Mikhailova discussed with both Hasanov
and President Heidar Aliev the possibility of Bulgaria's purchasing
Azerbaijani oil and the transportation of Caspian oil to Europe via
Bulgaria. Hasanov agreed that some Azerbaijani oil exported via the
Western pipeline to the Georgian port of Supsa could be shipped by
tanker to Bulgaria, according to CAUCASUS PRESS. Mikhailova also
said Bulgaria wants to accede to the transport agreement concluded
by Azerbaijan, Georgia, and Ukraine within the framework of the
TRASECA project. LF

KARIMOV SAYS UZBEKISTAN FOLLOWS ITS OWN PATH. Uzbek
President Islam Karimov said in an interview published in
"Izvestiya" on 11 November that Uzbekistan is not following any
particular model of development but rather is discovering "its own
potential." He said his policies are leading to a gradual change in the
mind-set of the people, which will eventually allow greater social
freedoms. Currently, "order and free elections" are most important,
he noted. With regard to Uzbekistan's estrangement from Russia,
Karimov denied that development was "by design." He noted that
Russia usually conducts trade by barter but that Uzbekistan is
interested in cash. BP

KYRGYZSTAN SETS UP INVESTMENT AGENCY. Kyrgyzstan has
established an Agency for Foreign Investments, Interfax reported on
10 November. The new agency is aimed at managing "important
sectors of the national economy" and is a condition for receiving a
$44 million loan from the Asian Development Bank. In other news,
Prime Minister Apas Jumagulov criticized the delays in adopting the
1998 budget, saying it will have a "negative effect on the economic
situation in the country." The budget foresees a deficit of 4.2 percent,
compared with a projected 1997 deficit of 5.6 percent. The budget
will be increased by 253 million som ($15 million) to total 7.84
billion som, half of which is targeted for the public sector. The
parliament recently rejected the first draft of the budget. BP

END NOTE

OBSTACLES TO RESOLVING KARABAKH CONFLICT

by Liz Fuller

        Since the spring of 1992, the Organization on Security and
Cooperation in Europe's Minsk Group has sought to mediate a political
solution of the Nagorno-Karabakh conflict. Azerbaijan has accepted
the most recent peace plan drafted by the Minsk Group co-chairmen
and presented to the three conflict parties in September. Armenia
has accepted it as a basis for further talks but has expressed
reservations, while Nagorno-Karabakh has rejected it. Those stances
throw into doubt U.S. diplomats' optimistic predictions that a formal
accord ending the conflict may be signed by the end of 1997.
        There are five obstacles to a solution of the conflict, two of
which are political and three procedural or logistic. The first is
Nagorno-Karabakh's future political status vis-a-vis the Azerbaijani
government. Arkadii Ghukasyan, the unrecognized republic's
president, has said repeatedly he will never agree to any status that
subordinates Karabakh to Baku. He advocates "horizontal ties"
between the two territories, without specifying precisely what he
means by that. A confederative arrangement, for example, would
preserve Azerbaijan's territorial integrity, which the OSCE insists
must be enshrined in any settlement document. Azerbaijani
President Heidar Aliev has proposed the "broadest possible
autonomy" for Karabakh, but the very concept of "autonomy" is
discredited throughout the former USSR as bestowing only minimal
rights and benefits.
        The second political obstacle is resistance in both Armenia and
Azerbaijan to any substantive concessions. In response to President
Levon Ter-Petrossyan's relentlessly pragmatic arguments in favor of
a compromise that would entail less than outright independence for
Karabakh, Armenia's opposition parties branded him a traitor to
national interests and demanding his resignation. Azerbaijan's Round
Table opposition coalition similarly rejected the most recent Minsk
Group peace proposal, which it perceives as aimed at forcing
concessions from Baku that could result in "loss of control over
Nagorno-Karabakh." And Ter-Petrossyan's proposal to submit any
peace agreement for public endorsement before it is signed could
derail a settlement at the final stage.
        The first procedural or logistic obstacle is Azerbaijan's
insistence that the conflict is international, rather than internal, and
resulted from Armenia's "aggression" against Azerbaijan. Claiming
that Yerevan is the aggressor and therefore the logical negotiating
partner, Baku has consequently refused to engage in direct talks with
the Karabakh Armenian leadership.
        The second logistic obstacle is the timetable for resolving the
conflict. The most recent draft peace plan proposed by the OSCE is
based on the "phased" or "step-by-step" approach. In other words, it
envisages a series of measures that would begin with the withdrawal
of Armenian forces from six occupied districts of Azerbaijan, the
repatriation of the enclave's Azerbaijani population, and the
deployment of an international peacekeeping force to prevent a
resumption of hostilities. Formal negotiations on Karabakh's future
status would begin only after those and other measures have been
implemented.
        The "phased" approach has been endorsed by Baku but rejected
by the Karabakh Armenians. They argue that it obliges them to cede
their only bargaining chip--the occupied territories -- and offers
them no firm guarantee of receiving anything in return. They reason
that once they withdraw from the districts in question, Baku may
refuse to begin negotiations. Instead, the Karabakh Armenians favor
a "package" solution to the conflict whereby all contentious issues
(troop withdrawal, repatriation, deployment of international
peacekeepers, Karabakh's future status) are simultaneously resolved
within one framework document.
        Closely linked to the choice between the "packet" and "phased"
approaches is the need to guarantee Karabakh's security against the
possibility of a renewed Azerbaijani attack. Ghukasyan and
Armenian First Deputy Foreign Minister Vartan Oskanian both argue
that the international community should give Armenia--and possibly
other states--an official mandate to act as guarantors of Karabakh's
security. (Ghukasyan mentioned Russia, France, the U.S., "and
possibly Iran" in this context.) The OSCE recently sent a group of
military officers to tour the region and assess the needs of an OSCE
peacekeeping force. Ghukasyan doubts, however, that the
organization's member states would agree to provide more than a
"purely symbolic" military force, which would be deployed for a
limited period and which might withdraw in the event of a mass
assault by Azerbaijani troops.
        Finally, an additional obstacle to a settlement is Iran. By virtue
of its geographical position and its harmonious relations with
Armenia, Tehran is keenly interested in resolving the conflict. But
since it is not an OSCE member, there is no forum within which it
may formally participate in the peace process. (Part of the rationale
for enlisting the Conference on Security and Cooperation in Europe,
the OSCE's predecessor, to help resolve the Karabakh conflict was to
exclude Iran. In February and March1992, the Iranian authorities
succeeded in mediating two separate cease-fire agreements, both of
which collapsed almost immediately.) Specifically, Tehran says the
deployment of military forces as part of a settlement of the conflict
would be potentially destabilizing, according to Armenian Democratic
Party leader Aram Sargsian. It is therefore doubtful whether any
peace agreement that does not have Tehran's imprimatur could bring
lasting stability to the region.

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