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RFE/RL NEWSLINE Vol 1, No. 158, Part I, 12 November1997
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 News from the Armenian Service's Yerevan bureau is posted to RFE/RL's Armenia Report each weekday. RFE/RL ARMENIA REPORT http://www.rferl.org/bd/ar/index.html xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * RUSSIA HOPES TO OVERCOME 'DISTRUST' IN BALTICS * GOVERNMENT APPROVES DRAFT AGREEMENT WITH CHINA * HILLARY CLINTON IN KAZAKHSTAN End Note : RUSSIAN GOVERNMENT MOVES TO PROTECT RUBLE xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx REGIONAL AFFAIRS RUSSIA HOPES TO OVERCOME 'DISTRUST' IN BALTICS. Russian Foreign Ministry spokesman Gennadii Tarasov announced on 11 November that Russia hopes to continue consultations in order to "transform the Baltic region into a zone of stability, trust, and cooperation," Russian news agencies reported. Commenting on the rejection by the Baltic presidents of Russia's offer to guarantee their countries' security, Tarasov expressed hope that in time "the interests of good-neighborliness and cooperation" in the Baltic region will overcome "distrust" and "psychological" issues inherited from the past. Russian State Duma Speaker Gennadii Seleznev told journalists the same day that he expects the Baltic States to "play a game with Russia," judging by their continuing aspirations to join NATO. Seleznev recalled that President Boris Yeltsin and the Duma have both said Russia will reconsider the Founding Act signed with NATO in May if the alliance admits the Baltics. LB RUSSIA GOVERNMENT APPROVES DRAFT AGREEMENT WITH CHINA. The government has approved a draft agreement with China on joint economic use of some islands located in border rivers, Russian media reported on 11 November. No details have been released on which islands are covered by the accord. President Boris Yeltsin and Chinese leaders discussed the issue during Yeltsin's recent visit to China. Meanwhile in Japan, visiting Chinese Prime Minister Li Peng discussed with five former Japanese premiers the possibility of four- way talks (involving Russia, the U.S., China, and Japan) on promoting peace and stability in the Pacific. BP COUNCIL OF EUROPE DELEGATION IN GROZNY. A special commission of the Parliamentary Assembly of the Council of Europe held talks in Grozny on 11 November with Vice President Vakha Arsanov, acting Prime Minister Shamil Basaev, and parliamentary deputies, Russian agencies reported. The deputies asked the commission to recognize Chechnya's political independence and argued that adherence to Islamic law is the only way to combat crime in Chechnya. The delegation advised, however, that Chechnya's political status can be decided only jointly by Moscow and Grozny. It advised the Chechens to seek "a reasonable compromise" with Russia. Some deputies walked out of the talks to protest that advice, according to Interfax. LF CHECHEN PRESIDENT FLIES TO U.S. Aslan Maskhadov on 11 November flew from Turkey to the U.S., Russian media reported. An unnamed ministry spokesman told Interfax that the trip was not coordinated with the Russian Foreign Ministry, nor did the U.S. inform the ministry about it. Chechen First Deputy Foreign Minister Movladi Udugov said it was a private visit and denied Maskhadov will meet with any U.S. officials. "Izvestiya," however, reported the next day that the Chechen president will meet with State Department Special Adviser for the Newly Independent States Stephen Sestanovich. Asked in Grozny whether Maskhadov plans to remain in the U.S. as "honorary president in exile," Maskhadov's press spokesman Kazbek Khadzhiev said the Chechen president is the most influential leader in Chechnya, and "will never desert his people," Interfax reported. LF MINISTERS INSIST WAGE ARREARS TO BE PAID. First Deputy Finance Minister Vladimir Petrov announced on 11 November that the government will pay all wage arrears to state employees by the end of this year, Russian news agencies reported. Petrov said such wage arrears currently total some 9.3 trillion rubles ($1.6 billion). Meanwhile, Prime Minister Viktor Chernomyrdin announced during a visit to the Komi Republic that once the back wages have been paid, the government will begin to raise wages, pensions, and stipends paid out of the federal budget. The same day, Chernomyrdin said the government has allocated 250 billion rubles toward paying back wages to coal miners in the Vorkuta area of Komi. LB TAX SERVICE CHIEF OPTIMISTIC ON NEW COLLECTION EFFORTS. State Tax Service chief Aleksandr Pochinok predicted that new measures to boost tax collection will significantly increase the government's intake of "real money," RFE/RL's Moscow bureau reported. Pochinok praised a recent presidential decree prohibiting the government from canceling debts to enterprises against taxes owed (see "RFE/RL Newsline," 10 November 1997). Pochinok said the 10 largest Russian taxpayers have frequently used offsets but will now be forced to come up with cash to pay their taxes. Pochinok also said some oil companies, among the country's largest tax debtors, will be allowed to export more oil if they stick to a schedule for paying tax arrears. Speaking in Komi on 11 November, Chernomyrdin said he will sign a "radical" government plan on improving tax collection within a few days. He gave no details except to say the plan does not introduce any new taxes. LB MINISTER OUTLINES PRIVATIZATION PLANS. State Property Minister Maksim Boiko announced on 11 November that privatization brought more than 12 trillion rubles ($2 billion) to the federal budget during the first 10 months of 1997, RFE/RL's Moscow bureau reported. Although that figure exceeds total planned revenues from privatization for 1997, the state hopes to acquire another 10 trillion rubles from privatization sales before the end of the year. (Privatization proceeds will make up part of the shortfall caused by low tax collection rates.) Before the end of the year, Boiko said, the state will sell a 16 percent stake in the regional utility Lenenergo as well as stakes in four oil companies: 0.96 percent of LUKoil; 48 percent of the Tyumen Oil Company;19.68 percent of Slavneft (a Russian-Belarusian company); and 34 percent of the Eastern Oil Company. LB STATE WILL NOT SELL MORE SHARES IN ORT. Boiko also said the state will not sell any of its shares in Russian Public Television (ORT) once the network is transformed from a closed to an open joint-stock company. He noted that the transformation, which is expected to be approved at a 13 November shareholders' meeting, will permit private companies to sell their shares in ORT if they wish. However, he said the state will keep its 51 percent stake in the network. Boiko also explained that a new council of government representatives at ORT, which he chairs, is intended to coordinate the policy of various government ministries and agencies toward ORT (see "RFE/RL Newsline," 4 November 1997). LB CONSTITUTIONAL COURT RULES BORDER TAX LEGAL. The Constitutional Court on 11 November ruled that forcing citizens to pay a tax for filling out documents upon crossing the Russian border does not violate the constitutional right to leave and enter the country freely, "Nezavisimaya gazeta" and "Kommersant-Daily" reported. Khabarovsk Krai Governor Viktor Ishaev filed the court appeal, saying the border tax violates constitutional and international norms and would harm the local economy in Khabarovsk. The judges rejected arguments that the border tax is illegal but agreed with Ishaev's claim that taxes may be established only by federal law. (The current law on the state border permits the government to determine the level of the border tax.) Consequently, although a government resolution sought to impose the border tax as of 1 November, that tax cannot be levied until a specific law has been adopted by the parliament and signed by the president. LB KHAKAMADA SEEKS FUNDING TO SUPPORT SMALL BUSINESSES. Irina Khakamada, who heads the State Committee on Support and Development of Small Businesses, is seeking 218 billion rubles ($37 million) in budget funding for her committee next year, "Kommersant-Daily" and "Izvestiya" reported on 12 November. The committee did not receive any budget funding in 1997 and was not included in the expenditures foreseen in the original draft budget for 1998. But Khakamada noted the Duma has proposed a budget amendment that would provide funding for the committee. She added that money will not be given directly to businesses but will be used to create regional centers where entrepreneurs can seek information and legal advice. LB PROSECUTOR-GENERAL ON FIGHTING HATE CRIMES. Prosecutor General Yurii Skuratov says his office, the Justice Ministry, and the Federal Security Service will set up an interdepartmental group to combat hate crimes, Russian news agencies reported on 11 November. Attending a board meeting of the Russian Jewish Congress, Skuratov said that during the last two years, the Prosecutor-General's Office has opened 49 criminal cases on charges of inciting ethnic, racial, or religious hatred. But he said law enforcement agencies have had trouble investigating such crimes, in part because Russian law lacks a precise definition of fascism. LB JUSTICE MINISTRY SEEKS RIGHT TO REGISTER PRINT MEDIA. Justice Minister Sergei Stepashin supports amending the law on the mass media to force publications to register with his ministry as well as with the State Press Committee, "Izvestiya" reported on 12 November. Stepashin said his ministry would exclude publications that promote fascism or other radical ideologies. He added "this is in no way control over the mass media. It will not affect respectable newspapers and magazines, it will affect primarily small papers and fascist leaflets, the majority of which are printed underground." LB CONFUSION OVER SOBCHAK. The condition and whereabouts of former St. Petersburg Mayor Anatolii Sobchak remain unknown following conflicting media reports. Sobchak's wife, Duma deputy Lyudmila Narusova, told Interfax on 10 November that heart surgery had been performed on Sobchak. Speaking to ITAR-TASS the next day, she said her husband is still in the hospital and is preparing to undergo unspecified medical treatment. Also on 11 November, representatives of the American Hospital in Paris confirmed Sobchak sought treatment at the hospital but denied he has undergone heart surgery. AFP quoted American Hospital representatives as saying Sobchak checked out of that hospital after a series of tests showed "everything was fine." Some Russian observers believe Sobchak has used his heart problems as a pretext to escape questioning by law enforcement authorities. LB CHERNOMYRDIN SAYS POLICY ON FAR NORTH TO CHANGE. Speaking to students in Komi, Chernomyrdin said the government will become more selective in its support for industry in the far north, ITAR- TASS reported on 11 November. Unprofitable enterprises, including some coal mines, will be closed, he said. In addition, residents of cities and villages that have poor economic prospects will be moved to more southern regions. Deputy Prime Minister Ramazan Abdulatipov, who recently visited Magadan Oblast, has also argued that current government policy toward the far north is inefficient, "Izvestiya" reported on 12 November. Rather than dividing Russia into northern and southern regions and giving more financial support to the north, Abdulatipov says, the government should provide more help to all regions in need. Abdulatipov is from the North Caucasus republic of Dagestan, which is one of the poorest Russian regions. LB TULEEV APPOINTS NEW MAYOR OF SIBERIAN TOWN. Kemerovo Oblast Governor Aman Tuleev on 11 November appointed Bakhtiyar Mamaev as the acting mayor of Leninsk-Kuznetskii, "Kommersant- Daily" reported. Up to now, Mamaev has been first deputy mayor of the city, whose elected mayor, Gennadii Konyakhin, is in custody awaiting trial on corruption charges. Before his arrest, Konyakhin appointed deputy Mark Guskov as acting mayor. Tuleev's action is in apparent conflict with the law on local government, which says that regional authorities can terminate the authority of an elected local leader and appoint a replacement only following a court ruling (see "RFE/RL Newsline," 21 October 1997). Konyakhin told "Kommersant- Daily" that he plans to contest Mamaev's appointment in court. LB DAGESTAN ENCOUNTERS PROBLEMS IN CREATING SELF-DEFENSE FORCES. The Russian Prosecutor-General's Office has tasked its Dagestani counterpart with determining whether the Dagestani government's decision to create a 5,000-strong volunteer militia to patrol the border with Chechnya violates the Russian Constitution, ITAR-TASS reported on 11 November. The issue is still being discussed by the Dagestani Security Council, since the new militia would necessitate legalizing illegal and criminal armed bands, according to "Nezavisimaya gazeta" on 12 November. Meanwhile, Dagestani Security Council Secretary Magomed Tolboev has said spiraling tensions between Dagestan and Chechnya are the direct consequence of Chechnya's aspiration to act as leader of the North Caucasian peoples, Interfax reported. LF TRANSCAUCASUS AND CENTRAL ASIA HILLARY CLINTON IN KAZAKHSTAN. U.S. first lady Hillary Clinton arrived in the Kazakh capital on 11 November on the first leg of her tour of five CIS countries. Addressing a group of young people, Clinton said she is impressed with "what has been accomplished in just six years [of independence]." She also attended the opening of a women's health care center that was built under a sister-city program between Almaty and Tucson, Arizona. The next day, Clinton visited the Kazakh Academy of Sciences, where she addressed a "Women in Politics" conference. "A country's progress depends on the progress made by women." Later on 12 November, she arrived in the Kyrgyz capital. BP GEORGIAN PRESIDENT IN ALMATY. During Eduard Shevardnadze's first official visit as president to Kazakhstan on 10-11 November, Georgian and Kazakh leaders signed 16 cooperation agreements on trade, economic, scientific, and military cooperation, Russian agencies reported. Shevardnadze and his Kazakh counterpart, Nursultan Nazarbayev, discussed prospects for building a pipeline beneath the Caspian to facilitate the export of Kazakh oil via Georgia. They also discussed Kazakhstan's possible accession to the 1996 Sarakh agreement between Azerbaijan, Georgia, and Turkmenistan on transport and communications, according to "Nezavisimaya gazeta" of 12 November. That accord would enable Kazakhstan to participate as a full member in the TRASECA transport project. LF GEORGIA ABOLISHES DEATH PENALTY. The parliament on 11 November passed a draft law proposed by President Shevardnadze abolishing capital punishment, Russian agencies reported. Mikhail Saakashvili, the chairman of the parliamentary committee for constitutional and legal problems, told CAUCASUS PRESS that Georgia is the second former Soviet republic to abolish the death penalty, after Moldova. Shevardnadze declared a moratorium on executions in December 1996. LF GEORGIAN OPPOSITION CLOSES RANKS. Addressing a congress of Georgian displaced persons from Abkhazia in Tbilisi on 11 November, radical Georgian opposition leaders proposed that nationalist forces should jointly contend the next parliamentary elections, CAUCASUS PRESS reported on 12 November. Nodar Natadze said the parties should demand Georgia's withdrawal from the CIS and the withdrawal of Russian troops from Georgia. He also urged that Tbilisi reject the confederation model of resolving the Abkhaz and South Ossetian conflicts. Meanwhile, former parliamentary speaker Vakhtang Goguadze has joined the new For Georgia's Salvation bloc, led by the United Communist Party of Georgia, according to "Nezavisimaya gazeta" of 12 November. Goguadze quit the ruling Union of Citizens of Georgia in 1995 to form the Tanadgoma union, which won 3 seats in parliamentary elections that year. LF UPCOMING GEORGIAN-ABKHAZ TALKS IN JEOPARDY? CAUCASUS PRESS on 12 November quotes Georgian Ambassador to Moscow Vazha Lortkipanidze as saying that Abkhazia is trying to postpone the talks scheduled to open in Geneva on 17 November on resolving the Abkhaz conflict. Lortkipanidze said that the Abkhaz leadership objects to the so-called Friends of Georgia (which include the U.S., France, Germany, and the U.K.) participating as mediators rather than observers. He said that Georgia rejects that restriction. LF KARABAKH DEBATE CONTINUES. Andranik Hovakimian, the deputy chairman of the board of the ruling Armenian Pan-National Movement, has suggested that the key to resolving the Karabakh conflict is to "work out a new type of status for Karabakh" that entails neither outright independence nor autonomy, Noyan Tapan reported on 11 November. Meanwhile former presidential adviser Ashot Manucharyan has claimed that President Levon Ter- Petrossyan is acting under instructions from "certain international centers" in advocating a compromise solution to the conflict. Manucharyan, who is political secretary of the recently established Union of Socialist Forces , warned that a "phased" solution to the conflict would lead to civil war because the majority of Armenia's population rejects that option. LF US ENERGY SECRETARY IN YEREVAN. Federico Pena arrived in Yerevan on 11 November from Ankara, where he discussed Turkey's role as a transit country for Central Asian oil and gas and expressed the U.S.'s support for the planned Baku-Ceyhan export pipeline, the "Turkish Daily News" and ARMENPRESS reported. Pena met with Ter- Petrossyan and Armenia's foreign and energy ministers to discuss Armenia's role in the planned east-west transport corridor. In a statement issued by the U.S. Embassy in Yerevan on 11 November, Pena affirmed that the "time is right to think seriously about creating or improving electrical power, oil, and natural gas infrastructure linkages among Armenia, Georgia, Turkey and Azerbaijan." LF AZERBAIJAN RATIFIES ANOTHER OIL CONTRACT. The parliament on 11 November ratified a $4 billion contract signed by Chevron and the Azerbaijani state oil company SOCAR in August, Turan and Russian agencies reported. Chevron has a 30 percent stake to develop the Apsheron (formerly Zeinalabdin Tagiev) field, which has estimated reserves of 120 million metric tons. SOCAR has 50 percent stake, while France's Total later acquired 20 percent. Also on 11 November, Aleksandr Zhirov, the director-general of Chernomortransneft, said shipment of Azerbaijan's Caspian oil by tanker from Novorossiisk will begin on 10 December, according to ITAR-TASS. Speaking in Syktyvkar, Russian Prime Minister Viktor Chernomyrdin affirmed that the northern route via the Russian Federation is commercially the best one for the export of Azerbaijan's Caspian oil. LF END NOTE RUSSIAN GOVERNMENT MOVES TO PROTECT RUBLE by Stephanie Baker Reacting to persistent jitters on world financial markets, Russia's Central Bank announced on 10 November that it will raise interest rates and alter its ruble policy next year to ward off any speculative attacks on the currency. Central Bank chairman Sergei Dubinin said the temporary interest rate hike, combined with a more flexible exchange-rate policy, would shore up investor confidence in Russia, following the crisis on world financial markets over the past two weeks. Dubinin said at a joint news conference with First Deputy Prime Minister Anatolii Chubais that, as of 11 November, the Central Bank will raise its key refinancing rate, which guides interest rates, to 28 percent from 21 percent. He said the tightening of monetary policy is a temporary move designed to protect the ruble, which has come under pressure owing to recent upheavals on the financial markets. Dubinin added that the Central Bank's decision to change its ruble policy in 1998 will bolster trust in the currency. Under the new policy, the Central Bank will abandon its ruble corridor, allowing the currency to fluctuate by 15 percent in either direction of a so-called pivot rate. That rate will be set at 6.1 rubles to the U.S. dollar and will inch up to 6.2 rubles to the dollar from 1998-2000. The new policy coincides with the government's plans to lop three zeroes off the ruble beginning on 1 January 1998, making 1,000 old rubles equal to one new ruble. Russia has kept to a crawling-peg exchange-rate policy since 1995, allowing the ruble to devalue gradually against the dollar in line with inflation. The government, which has successfully brought down rampant inflation, is targeting a rate of 5-7 percent in 1998. Dubinin said he expected the ruble to devalue by 2-5 percent in 1998, depending on inflation. He tried to dispel fears that the new ruble policy would lead to major fluctuations in the exchange rate, saying the Central Bank's hard-currency reserves stood at a healthy $22.6 billion as of 1 November. "No leaps of the currency-exchange rate will be allowed," he said. "Neither today, nor tomorrow, nor on New Year's Eve will there be a dramatic devaluation." But a Central Bank statement acknowledged that the ruble could come under pressure, alluding to trends in other emerging markets such as Brazil and South Korea. Analysts said the bank's decision essentially to widen the band in which the ruble trades could lead to greater volatility but that the move to a more flexible exchange rate regime would send the right signal to speculators. Peter Boone, an economist at Brunswick Capital Management, said the wider band means the Central Bank may allow the ruble to depreciate in the case of a speculative attack. But he said given Russia's strong economic fundamentals, the ruble would withstand any such attack and quickly bounce back. Boone said Russia's decision to adopt a more flexible ruble policy is a response to currency problems in other emerging markets, such as Southeast Asia, where rigid exchange rate regimes have attracted the attention of speculators. "It spells the end of very tightly controlled exchange-rate regimes in countries open to foreign capital flows," he commented. In addition to raising the refinancing rate, the Central Bank also said it would increase its Lombard rates, used for lending to commercial banks, and increase the hard-currency reserve requirements for commercial banks to 9 percent from 6 percent, beginning on 12 November. The move contradicts the government's previously stated aim of reducing interest rates to free up funds for desperately needed investments in the economy. But Dubinin and Chubais said the temporary interest rate hike is necessary to help lure back funds into the government treasury bill market, which has been hard hit by the worldwide flight from emerging market assets. As Chubais put it: "Russia is not an island cut off from the rest of the world." He said the hike is a temporary measure designed to shield Russia from the crisis on international financial markets and will be reassessed once markets stabilize. Economists applauded the government's decision to raise interest rates, saying it will help stem the flow of funds out of treasury bills. Brigitte Granville, chief Russia economist at J.P. Morgan in London, said a currency crisis might have occurred if the Central Bank had not tightened monetary policy. Foreign investors, who want to leave the treasury bill market, need to sell rubles and buy dollars, putting pressure on the ruble to devalue. Several emerging market economies, such as Brazil and Ukraine, raised interest rates, making Russian treasury bills look less attractive to foreign investors. Although the interest rate hike caused treasury bill prices to plummet, the government hopes the higher yields will tempt investors back, when it issues new bills. The author is a Moscow-based RFE/RL correspondent. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1997 RFE/RL, Inc. 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