Much unhappiness has come into the world because of bewilderment and things left unsaid. - Dostoevsky
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 167, Part I, 25 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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ENERGY POLITICS IN THE CASPIAN AND RUSSIA: Oil has begun
flowing from the Caspian Sea, home to one of the biggest oilfields in
the world. RFE/RL provides continuing coverage of regional energy
developments on its Web site.
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Headlines, Part I

*YELTSIN INSISTS HE WON'T FIRE CHUBAIS


*CHERNOMYRDIN IN VIETNAM


*ARMENIA TO PROPOSE "POLITICAL DIALOGUE" WITH EU

End Note
AZERBAIJANI PRIVATIZATION MAKES PROGRESS ON SEVERAL
FRONTS
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RUSSIA

YELTSIN INSISTS HE WON'T FIRE CHUBAIS... Russian President Boris
Yeltsin on 25 November said he will not "give up" First Deputy Prime
Minister Anatolii Chubais, despite opposition calls for Chubais's
ouster, ITAR-TASS reported. Chubais was removed as finance
minister on 20 November over payments for an unpublished book on
privatization, which critics charged were thinly veiled bribes. Yeltsin
said the $90,000 fees that Chubais and four associates received in the
book deal were a "mistake" but not illegal. Rather, Yeltsin said, the
issue posed a "moral and ethical problem." The president, who made
those comments before meeting with Chubais at the Kremlin, also
criticized the cabinet and said its shortcomings would be discussed at
a meeting scheduled for 1 December. AW

...DEMANDS GOVERNMENT REPORT. Saying some criticism of his
government is justified, Yeltsin ordered his cabinet on 24 November
to deliver a report on its own record at a meeting on 1 December.
Yeltsin said most of the criticism was "superficial" but added that
State Duma critics are "right in many things concerning the work of
the government." Yeltsin said he hoped the 1 December meeting of
cabinet ministers and heads of various (unspecified) ministries
would yield "a serious talk." ITAR-TASS reported. Yeltsin was
speaking before meeting with new Finance Minister Mikhail
Zadornov, with whom he discussed the government's draft 1998
budget. The draft is due to be debated by the Duma on 5 December.
AW

YELTSIN SAYS FOREIGN TRADE MINISTRY EFFORTS LACKING. Yeltsin
later continued his criticism of the government in talks with Foreign
Trade Minister Mikhail Fradkov, ITAR-TASS reported. The president
said trade had not matched breakthroughs in foreign relations with
countries such as China, Japan, and, to a lesser degree, Canada and
Finland. The poor trade record could be a result of a "lack of energy,
intelligence, or something else" at the Foreign Trade Ministry, Yeltsin
said. AW

MITINA SUGGESTS CHUBAIS'S OUSTER AS FINANCE MINISTER WAS
INEVITABLE... Viktoriya Mitina, Yeltsin's new deputy chief of staff,
has lauded former Finance Minister Anatolii Chubais for his
intelligence and organizational abilities. But at the same time, she
hinted that his recent sacking as finance minister was inevitable,
saying there are bound to be repercussions when one government
clique tries to strengthen its position vis-a-vis others, ITAR-TASS
reported on 24 November. Mitina was appointed to her new post on
20 November to succeed Aleksandr Kazakov, who, along with two
other officials, was fired over the book payments scandal in which
Chubais was also involved. AW

...OUTLINES NEW RESPONSIBILITIES. Also on 24 November, Mitina
announced she will focus on regional affairs and that Yurii Yarov,
who served as Kazakov's first deputy, will take over administrative
duties, Interfax reported. Mitina, who previously was a deputy
prefect in Moscow's Zelenograd district, said she will spend most of
her time outside Moscow, searching for regional administrators,
especially women, who have the potential to become national
leaders, according to ITAR-TASS. Mitina also called for a
restructuring of the presidential administration to rid it of "jealousy
and misunderstanding," although she ruled out the need for a further
cabinet reshuffle. AW

ACTING CHAIRMAN OF DUMA BUDGET COMMITTEE UPBEAT ON
BUDGET. Aleksandr Zhukov, the acting chairman of the Duma budget
committee and a member of the communist-allied Russia's Regions
bloc, expressed optimism on 24 November that the 1998 draft
budget will be approved when the Duma considers it in early
December, ITAR-TASS reported. "The delay in the budget is mostly of
a political nature," he added. Zhukov said the State Duma will need
time to study parts of the draft budget, revised by a tripartite
conciliation commission. He also announced the budget committee
will meet on 26 November to consider its position on the revised
budget parameters reached by the conciliation commission, according
to ITAR-TASS. Zadornov held the chairmanship of the budget
committee until his recent appointment as finance minister. AW

YAVLINSKII DISMISSES RUMORS OF A SPLIT. Yabloko leader Grigorii
Yavlinskii said on 24 November that Zadornov's decision to leave the
party and join the government as finance minister has not led to a
split in Yabloko, Interfax and ITAR-TASS reported. Yavlinskii said
Yabloko members unanimously had agreed that Zadornov should not
have accepted the offer to join the government, whose policies
Yavlinskii described as "bankrupt." Yavlinskii said he did not expect
Yabloko's opposition to the government to change now that Zadornov
is at the head of the Finance Ministry. AW

TWO BUDGET COMMITTEE MEMBERS OFFERED KEY POSTS IN FINANCE
MINISTRY. Mikhail Motorin, the head of the Duma budget
committee's office, confirmed on 24 November that he has accepted
an offer by Zadornov to join the Finance Ministry, Interfax reported.
Motorin said his role is unclear, but he noted he has been offered the
post of deputy finance minister in charge of tax policies. That post
was held by Sergei Shatalov, who on 24 November announced his
resignation. Shatalov said that he expected Motorin to replace him
and that Tatyana Nesterenko of the Russia's Regions bloc would
succeed Alexander Smirnov as head of the Main Federal Treasury
Department. Nesterenko confirmed to Interfax that she has been
offered the post, but she declined further comment. AW

FINANCE MINISTRY CLOSES SEVEN ACCOUNTS AT ONEXIMBANK. The
Finance Ministry on 24 November announced it has closed seven of
its accounts at the Oneximbank, AFP and dpa reported. The accounts
were used to handle government tax receipts, according to Deputy
Finance Minister Alexander Smirnov. Together, the closed accounts
held more than $147 million in foreign currency, he said.
Oneximbank accounts of the Federal Customs Service also will be
closed by year's end, but two accounts will remain open at the bank
for servicing Russia's foreign debt, according to Smirnov. Critics have
accused Oneximbank of delaying budget transfers to Russia's regions
so that bankers can use the money to earn profits in the high-yield
government securities market. In May, Yeltsin issued a decree
ordering all state accounts in private banks to be transferred to the
central bank by year's end. AW

CHERNOMYRDIN IN VIETNAM... Prime Minister Viktor Chernomyrdin
met with his Vietnamese counterpart, Phan Van Khai, in Hanoi on 24
November to discuss cooperation in gas and oil exploration and
military sales, Russian media reported. It was announced that Russia
will increase arms shipments to Vietnam, but no details were
provided. The two premiers failed to reach agreement on Vietnam's
debt to Russia totaling 10 billion so-called convertible rubles, which
was left over from the Soviet era. That debt is the main topic on
Chernomyrdin's agenda during his three-day visit. Also on 24
November, Chernomyrdin met with Vietnamese President Tran Duc
Luong and handed him an invitation from President Yeltsin to pay an
official visit to Russia. In related news, a Russian cargo plane
delivered more than 24 tons of humanitarian aid to Vietnam, which
was recently hit by typhoon Linda. BP

...TOGETHER WITH GAZPROM, ZARUBEZHNEFT OFFICIALS. Gazprom's
Rem Vyakhirev and PetroVietnam's Ngo Thuong San have signed
protocols to cooperate in gas extraction off Vietnam's northern coast,
Interfax reported on 24 November. the protocol foresees cooperation
in the construction of off-shore oil rigs and in the transportation of
gas from existing fields. Oleg Popov of Zarubezhneft agreed with the
same Vietnamese company to build Vietnam's first oil refinery,
which will have an annual capacity of 6.5 million tons. Russia is
already a partner in the Vietsovpetro joint venture, which produces
some 9 million tons of oil yearly. Russian and Vietnamese officials
also discussed ways to increase annual production at the joint
venture to 14 million tons. BP

RUSSIAN NAVAL OFFICER CHARGED WITH SPYING FOR JAPAN. A
Russian naval officer has been charged with spying for the Japanese,
ITAR-TASS reported on 24 November. Documents were confiscated
from Captain Grigorii Pasko at the Vladivostok airport when he was
leaving for Niigata, Japan, on 20 November. The counterintelligence
service determined that the documents contained classified
information about defense plants in Primorskii Krai. Pasko was
arrested on his return from Japan three days later. BP

FLARE-UP AT CEREMONY IN VLADIVOSTOCK. Ill-feelings between
Primorskii Krai Governor Yevgenii Nazdratenko and embattled
Valdivostok Mayor Viktor Cherepkov came to the fore at a 23
November ceremony at which a new Interior Ministry building was
opened in Vladivostock. An RFE/RL correspondent in the city
reported the next day that despite not being invited by the mayor,
Nazdratenko showed up at the ceremony just minutes before the
start and began giving a speech in which he took credit for the
building's construction. An angered Cherepkov called a halt to the
ceremonies and had all refreshments removed . As the banquet
tables were being cleared, Nazdratenko entered the room and
reportedly punched an elderly war veteran in the head when the
latter failed to heed Nazdratenko's orders to leave the food on the
table. The war veteran has filed charges against Nazdratenko. AW

TRANSCAUCASUS AND CENTRAL ASIA

ARMENIA TO PROPOSE "POLITICAL DIALOGUE" WITH EU... At his
weekly press briefing on 24 November, Foreign Ministry spokesman
Arsen Gasparian said Armenia will soon make a formal offer to the
EU to start what it calls a political dialogue on security and foreign
policy issues, RFE/RL's Yerevan bureau reported. That dialogue
would be in addition to existing economic cooperation. Gasparian said
the proposal reflects "substantial progress" in relations between the
EU and Armenia in recent months. He noted that Armenian First
Deputy Foreign Minister Vartan Oskanian recently signed a
temporary agreement on cooperation with the EU in Brussels, which
will remain in force until the April 1996 Treaty on Partnership and
Cooperation signed by the EU and Armenia is ratified by all union
members. LF

...AND TO EXPAND COOPERATION WITH NATO. At the same press
briefing, Gasparian said that while in Brussels, First Deputy Foreign
Minister Oskanian reached agreement with NATO officials on
boosting bilateral ties within the framework of the Partnership for
Peace program, RFE/RL's Yerevan bureau and Noyan Tapan reported.
Gasparian said NATO's role in the Transcaucasus should complement,
and not infringe on, the CIS Collective Security Treaty, Russian-
Armenian agreements on security cooperation, and the CFE Treaty.
Gasparian accused Azerbaijan of trying to use NATO as an instrument
to "contain and oppose" Russia in the Transcaucasus. Gasparian
termed that policy "destructive," arguing that it may exacerbate
"tension" in the region. LF

ARMENIAN DEFENSE MINISTER ASSESSES CIS MILITARY
COOPERATION. In an interview in "Nezavisimaya gazeta" on 25
November, Vazgen Sargsian affirmed that Armenia aspires to "good-
neighborly relations with all neighboring states based on the
principles of guaranteeing peaceful coexistence and the regional
balance of forces." Sargsian said some CIS states signed the CIS
Collective Security Treaty solely in order to obtain the maximum
possible share of former Soviet military hardware. He said he finds
"incomprehensible" Russia's complaints about NATO expansion
eastward in the light of Moscow's failure to promote the creation of a
single CIS defense space. Sargsian again denied that Armenia
received any illegal supplies of arms from Moscow. He noted that
Azerbaijan received three times more equipment, including strategic
weapons, from the former Soviet army than did Armenia.
Azerbaijan's defense expenditure in recent years was four times
higher than Armenia's, he added. LF

ARMENIAN DRAFT BUDGET CRITICIZED. Father Husik Lazarian, the
outgoing chairman of the majority Hanrapetutyun faction in the
parliament, said on 24 November that there is growing disagreement
between Hanrapetutyun and the government over the latter's
economic policies, which run counter to the bloc's electoral programs,
RFE/RL's Yerevan bureau reported. Lazarian criticized the 1998 draft
budget, which he said provided for "survival" rather than
"development." He argued that, if passed, the budget would at best
maintain living standards at the same level as this year and may
even cause real wages to drop in 1998. Lazarian threatened not to
vote for the draft budget unless major changes are made to it. He
declined to say, however, whether his views reflect those of the
majority faction. LF

ADJARIA AMENDS CONSTITUTION. The Supreme Soviet of Georgia's
autonomous Adjar Republic voted on 22 November to amend the
region's constitution, Caucasus Press reported on 24 November. The
head of the Revival faction within the Georgian parliament said the
amendments provide for the creation of the post of ombudsman and
a Constitutional Court. But the opposition Party of National Ideology
of Georgia issued a statement condemning the amendments, which
they claim endow Adjar Supreme Soviet chairman Aslan Abashidze
with "virtually unlimited powers" and increase Adjaria's status
almost to that of an independent state. On 24 November, Abashidze
dismissed the internal affairs ministers and his deputies because of a
recent increase in crime. Abashidze will take over as acting interior
minister in addition to his chairmanship of the Supreme Soviet. LF

GEORGIAN OFFICIAL RESIGNS OVER MASS POISONING. Rustavi Mayor
Temuri Dalakishvili has resigned following the recent gastro-enteritis
epidemic in the city caused by the leakage of sewage into the
drinking water supply (see "RFE/RL Newsline," 21 November 1997),
Caucasus Press reported on 24 November. More than 400 people,
most of them children, have been hospitalized. LF

ENERGY CRISIS IN TBILISI? Georgian Energy Minister Davit
Zubitashvili is negotiating terms with Russia's Gazprom for a
resumption of natural gas supplies, which have been cut owing to
Georgia's unpaid debts, Caucasus Press reported on 24 November.
None of Tbilisi's gas-fired power stations is currently functioning. LF

TAJIK DONOR CONFERENCE BEGINS IN VIENNA. At the opening of a
two-day donor conference in Vienna on 24 November, Tajik
President Imomali Rakhmonov told delegates that $7 billion is
needed to repair damage caused during Tajikistan's five-year civil
war. Said Abdullo Nuri, the leader of the United Tajik Opposition and
the chairman of the National Reconciliation Commission, assured
potential donors that the inclusion of UTO members in the
government will not have a negative impact post-war reform. "We
are not going to impose our political and religious ideas on anyone,"
Nuri said. The Swiss government is to help Tajikistan's membership
in the Asian Development Bank by paying the $3.7 million admission
fee. Tajik officials are hoping to raise $65 million at the conference.
BP

UZBEK PRIME MINISTER IN U.S. Utkur Sultanov met with U.S. Deputy
Secretary of State Strobe Talbott, Energy Secretary Federico Pena,
and U.S AID administrator William Atwood in Washington on 24
November, ITAR-TASS reported. Sultanov praised U.S.-Uzbek
cooperation, noting that in the last three years the trade volume
between the two countries has risen sevenfold. The U.S. is
Uzbekistan's second biggest trade partner and accounts for $800
million in direct investment since 1991. Officials announced that the
U.S.-Uzbek commission on political, economic, and technological
cooperation will convene for the first time in February 1998. BP

BIG DRUG BUST IN UZBEKISTAN. Uzbek customs officials and National
Security Service agents have discovered more than 200 kilograms of
narcotics aboard a Dushanbe-Moscow train, ITAR-TASS reported on
24 November. The drugs were concealed in the train's dining car.
This is reportedly the largest drug bust in Uzbekistan this year. BP

MAJOR KAZAKH CANAL IN DANGER OF FREEZING OVER. Irregular
electricity energy to the Irtysh-Karaganda canal may cause the vital
waterway to freeze over this year, ITAR-TASS reported on 24
November. Energy supplies have been curtailed to the company
operating the canal because of payment arrears. The 458-kilometer
long canal supplies nearly all of central Kazakhstan with water. BP

REGIONAL AFFAIRS

MEDIA FREEDOM IN DANGER IN SEVEN CIS STATES. A recent report
compiled by the international journalists' organization Reporters sans
Frontieres lists seven CIS states and two East European countries
where journalists' rights and freedoms are seriously threatened.
Those countries are Moldova, Ukraine, Belarus, Turkmenistan,
Tajikistan, Azerbaijan, and Uzbekistan as well as Romania and
Macedonia, according to INFOTAG on 24 November. The assessment
is based on the availability and influence of state-run media, the
level of development of the independent media, violence against
journalists, and the number of court proceedings against the media
initiated by official bodies. Moldova was named as the worst
offender owing to its 1994 press law, which makes it very difficult
for journalists to defend their rights. All attempts by democratically-
minded Moldovan deputies to revise that law have failed, the report
noted. LF

END NOTE

AZERBAIJANI PRIVATIZATION MAKES PROGRESS ON SEVERAL
FRONTS

by Michael Wyzan

        The privatization process in Azerbaijan is governed by a three-
year program whereby 70 percent of enterprises are to be privatized
by the end of 1998. The program divides enterprises into small,
medium-size, and large and employs different privatization methods
for each category of firm. In industry, enterprises with fewer than
50 workers are considered small, while those with between 50 and
300 are classified as medium-sized and those with more than 300 as
large. The respective figures in the service sector are 10, 11-50, and
more than 50.
        Small enterprises are privatized by auction. More than 15,000
such firms have been sold this way, and the process is now 70-80
percent complete. A local peculiarity is that, even under communism,
small enterprises were run by individuals who were regarded as
their "owners." All but one of the auctions have had only one bidder.
It is considered unethical to bid against someone who is already seen
as owning the firm up for auction.
        The absence of competition at auctions may reduce the state's
privatization revenues and deprive many individuals of the
opportunity to participate in small-scale privatization. Nonetheless,
the sense of ownership felt by Azerbaijanis even when "their" small
businesses were state property illustrates the entrepreneurial
inclinations of much of the population. Those inclinations are evident
in the quality of service in Baku's many restaurants and shops, which
is unusually high for a postcommunist country.
        The privatization of such small businesses is relatively easy
and uncontroversial. But determining the fate of large industrial
enterprises that have lost their markets in the former Soviet Union is
another matter, as is finding a way for the local private sector to
participate in the burgeoning oil business. Although the state oil
company will not be privatized, experts estimate that private
consortia will account for 75 percent of oil production by 2010.
        A mass privatization program was launched in March. Under
that program, 7,100,000 books--each containing four vouchers--were
distributed among the population between 1 March and 15 August.
All citizens were eligible to participate, and each was entitled to a
single book or, in the case of war veterans, two books.
        The first step in the privatization of larger enterprises is to
turn them into joint-stock companies, after which 15 percent of the
shares must be sold to their employees for vouchers. Another 55
percent must be sold at open voucher auctions and the remaining 30
percent in cash auctions in which foreigners may also participate.
        Voucher auctions have been held at regular intervals over the
eight months since the program was launched. At any such auction,
some 50 enterprises are up for sale and bidding takes place in six
cities, with the results pooled by computer. The prices of the shares
are determined by the number of vouchers offered for them in those
auctions. To date, shares in 340 large enterprises have been sold. By
the end of 1997, that figure is expected to reach 400 (out of a total of
some 2,000).
        Vouchers are tradable, officially at the country's 10-20 voucher
shops but in practice also on the black market. There is as yet no
stock exchange where the shares obtained with the vouchers could
be traded, although it is possible to update computer records to
indicate that share ownership has changed.
        Large enterprises fall into one of four categories. Companies in
the first category may not be privatized and include railroads, water
facilities, historical and cultural monuments, pension funds, and the
national bank. The second category comprises companies that may be
privatized only by presidential decree; such companies are involved
in fuel and energy production, petrochemicals, telecommunications,
and bread- and wine-making. The privatization method for firms in
this category is the same as for other large firms, except that a non-
voting "golden share" is reserved for the state.
        The third category covers enterprises that may be privatized
only by decree of the Council of Ministers; those companies deal with
sales of oil and oil products, construction, road maintenance, and
medical services. The final category embraces the remaining large
enterprises, all of which must be privatized.
        Investment funds have yet to be set up, although the
legislation governing such bodies is already in place. In the long run,
creating mutual investment funds and pension funds--which will
allow people to benefit from the nation's vast resource wealth--may
be more important for the country's economic fortunes than giving
those people shares in moribund industrial enterprises.

The author is an economist living in Austria.


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