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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 1, No. 187, Part I, 30 December 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

Note to readers: "RFE/RL Newsline" will not appear
on 31 December or 1 January, which are public
holidays in the Czech Republic, or on 2 January.

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Headlines, Part I

* RUSSIA, CHINA SIGN NUCLEAR DEAL

* KEMEROVO COAL MINERS DEMAND ACTION

* TAJIKISTAN, IRAN SIGN DEFENSE ACCORD

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RUSSIA

RUSSIA, CHINA SIGN NUCLEAR DEAL. Russian First Deputy
Prime Minister Boris Nemtsov departed China on 30
December, one day after attending the signing ceremony of a
nuclear power facility deal worth an estimated $3 billion.
Russia will provide two VVER-1000 reactors for the
Lianyungang nuclear facility in eastern China. Russian
Atomic Energy Minister Viktor Mikhailov, also at the signing
ceremony, had called the deal "the contract of the century,"
according to a 28 December report from ITAR-TASS.
Mikhailov noted after the signing that Russia's victory in the
tender for the project proved the country's ability to
compete on the world market. ITAR-TASS also reported that
the Lianyungang plant will require another four reactors,
possibly offering Russia further opportunities to sell reactors
and other equipment to China. BP

YELTSIN TO TAKE TWO-WEEK VACATION. President Boris
Yeltsin will leave Moscow on 5 January for a two-week
vacation in Valdai (Novgorod Oblast), Russian news agencies
reported on 29 December. The vacation was scheduled after
Yeltsin recently fell ill and spent two weeks at the Barvikha
clinic. The president's doctors and Kremlin officials have said
Yeltsin is recovering from an ordinary viral infection. They
have repeatedly denied rumors that Yeltsin's latest illness is
connected to his past heart problems. LB

PRIMAKOV ON NATO, IRAN, HIS OWN FUTURE. In an
extensive interview published in "Nezavisimaya gazeta" on
30 December, Russian Foreign Minister Yevgenii Primakov
complained  of "a tendency to turn the Russia-NATO Council
into a debating club" rather than a forum for resolving
disagreement and achieving the maximum degree of
rapprochement. He again expressed his opposition to NATO
membership for the Baltic states, stressing that Russia's
objections are not so much strategic as "moral-political",
given that the Russian population would find it difficult to
accept the use by another military bloc of the infrastructure
created by the USSR. Primakov again insisted that the
Russian government is not supplying Iran with nuclear
technology, but conceded that he could not "totally exclude"
the possibility of individual scientists supplying such
technology clandestinely. Lastly, Primakov again rejected
persistent rumors of his imminent resignation, affirming
that Yeltsin trusts him. LF

KEMEROVO COAL MINERS DEMAND ACTION. An emergency
congress of coal miners in the Kuznetsk basin (Kemerovo
Oblast), the largest in Russia, on 29 December resolved to
organize a general strike if the federal government does not
help the region's coal sector by 15 January, RFE/RL's Moscow
bureau reported. Kemerovo Governor Aman Tuleev told
RFE/RL in a telephone interview that the miners want a
government commission to come to Kemerovo. He noted that
they are demanding not new promises, but only that the
government keep earlier pledges on funding for the coal
sector. On 22 December, some 250 miners from the Kuznetsk
basin blocked the Trans-Siberian Railroad for about 10
hours. That protest ended after Fuel and Energy Minister
Sergei Kirienko promised that the government would send
13 billion rubles ($2.2 million) to the region. However, only
5 billion rubles have since arrived in Kemerovo. LB

CHUBAIS SAYS COAL INDUSTRY FULLY FINANCED THIS
YEAR. First Deputy Prime Minister Anatolii Chubais
announced on 29 December that the government has met
1997 budget targets on financing the coal industry, Russian
news agencies reported. Speaking in Moscow to an
interdepartmental government commission on socio-
economic problems of Russia's coal-mining regions, Chubais
said 6.479 trillion rubles ($1.1 billion) has been allocated to
the coal sector this year. Owing to poor tax collection, the
government substantially reduced 1997 expenditures in
many areas. However, Chubais claimed funding for the coal
sector was not affected by those cuts and conformed to
original 1997 spending plans. LB

SIBNEFT PAYS TAX DEBTS OF OMSK REFINERY... The Sibneft
oil company, part of Boris Berezovskii's business empire, met
a 25 December deadline for paying 644.8 billion rubles
($108 million) in debts owed to the federal budget by its
subsidiary, the Omsk Oil Refinery, State Tax Service chief
Aleksandr Pochinok announced on 26 December. He said the
Omsk refinery still owes some 427 billion rubles in fines and
penalties, but expressed hope that the company will stay
current on its tax payments in 1998, ITAR-TASS reported.
The government's commission on tax and budgetary
discipline recently ordered the Omsk refinery to pay its
debts by 25 December or face penalties including the
possible seizure and sale of company assets (see "RFE/RL
Newsline," 18 December 1997). LB

...BUT NOT ENTIRELY IN CASH. Aleksandr Meling, the general
director of the Omsk Oil Refinery, told ITAR-TASS on 29
December that the refinery's tax debts were paid partly in
cash and partly through offsets against debts owed to the
refinery by government agencies, including the Defense
Ministry. Under a recent presidential decree that takes
effect on 1 January, the government will be prohibited from
canceling taxes owed by enterprises against other debts
owed to those enterprises (see "RFE/RL Newsline," 10
November 1997). LB

ANGARSK PETROCHEMICAL COMPANY FAILS TO MEET
DEADLINE. The press service of the Sidanko oil company,
part of the Oneksimbank empire, says it has transferred 550
billion rubles ($92 million) to the federal budget toward
paying the tax debts of its subsidiary, the Angarsk
Petrochemical Company, ITAR-TASS reported on 30
December. Like the Omsk Oil Refinery, Angara was ordered
to pay its tax debts, estimated at 766 billion rubles, in full
by 25 December. Petr Karpov, acting head of the Federal
Bankruptcy Administration, warned on 29 December that
the property of the Angara company may be seized and sold
if the debts are not paid, RFE/RL's Moscow bureau reported.
An aide to First Deputy Prime Minister Chubais announced
on 29 December that Chubais has instructed various
government agencies to begin procedures to force Angara to
pay its debts. LB

ELECTRICITY GIANT SAYS IT HAS PAID DEBTS. The press
service of the electricity giant Unified Energy System (EES)
claimed on 29 December that the company has paid its tax
debts in full, Interfax reported. The government's
commission on tax and budgetary discipline ordered EES to
pay some 600 billion rubles ($100 million) in debts to the
federal budget by 31 December. LB

COURT REJECTS CHALLENGE TO SIBNEFT PRIVATIZATION.
The Moscow Arbitration Court on 25 December turned down
a legal challenge to the May privatization of a 51 percent
stake in the Sibneft oil company, Reuters and ITAR-TASS
reported. The KM-Invest company, which is part of the
Oneksimbank empire, sought to annul the auction after
being excluded from the bidding for the Sibneft stake. The
Financial Oil Company, which is part of Boris Berezovskii's
business empire, won that auction. The Moscow Arbitration
Court had ordered that the controlling stake in Sibneft be
impounded pending the resolution of the case (see "RFE/RL
Newsline," 23 December 1997), but those shares have now
been released. KM-Invest plans to appeal the ruling. LB

ZYUGANOV PREDICTS IMMINENT OUSTER OF CHUBAIS.
Communist Party leader Gennadii Zyuganov told journalists
on 29 December that First Deputy Prime Minister Chubais's
"days [in the government] are numbered," Interfax reported.
He argued that the government will fail to pay all wage
arrears to state employees and that Chubais will
consequently be forced to leave the government by the end
of January. After Zyuganov made similar remarks on 25
December, Chubais told Interfax that Zyuganov's "plans for
me and my own [plans] do not coincide." The same day, First
Deputy Prime Minister Nemtsov also denied that Chubais
will soon leave the government, RFE/RL's Moscow bureau
reported. LB

LUZHKOV SAYS DEPENDENCE ON IMF IS 'NATIONAL
DISGRACE.' Moscow Mayor Yurii Luzhkov claimed on 29
December that Russia's economic policy goals are formed by
foreign institutions and termed the situation a "national
disgrace," Interfax reported. He said U.S. Vice President Al
Gore and IMF Managing Director Michel Camdessus should
not be able to "praise or scold" Prime Minister Viktor
Chernomyrdin for government decisions. Letters sent to
Chernomyrdin by Camdessus and World Bank president
James Wolfensohn recently sparked a scandal (see RFE/RL
Newsline, 18, 19 and 23 December 1997). In addition,
Luzhkov charged that the IMF member states want Russia to
"remain a source of raw materials for the civilized world." He
also argued that in order to improve the standard of living
in Russia, capital must be channeled from what he called the
"parasitic sector of the economy" to the manufacturing
sector. LB

BEREZOVSKII ASSAILS 'BOLSHEVIK' MENTALITY OF
CHUBAIS. Boris Berezovskii lashed out at Chubais during a
24 December press conference, RFE/RL's Moscow bureau
reported. He again accused Chubais of having a "Bolshevik"
mentality, which, he said, was well-suited for the first stage
of Russian economic reforms. However, he claimed that the
second stage of Russian reforms requires "super-
professionalism." Berezovskii also said western financial
institutions should not "dictate" policy demands to the
Russian government, ITAR-TASS reported. Media partly
financed by Berezovskii, including the Russian Public
Television network and "Nezavisimaya gazeta," have accused
Chubais of using his contacts with the World Bank and the
IMF to put pressure on Chernomyrdin. Chubais is believed to
have played an important role in persuading Yeltsin to fire
Berezovskii from the Security Council in November. LB

CHUBAIS RETURNS FIRE. In an interview published in
"Izvestiya" on 24 December, Chubais claimed that
Berezovskii's frequent allegations about "Bolshevism"
conceal his true goals. Chubais argued, "Berezovskii naively
thinks [his] whole problem is with Chubais. The problem is
that no authorities in Russia (if they are civilized) will ever
allow themselves to be transformed into a housemaid for big
business." He recalled an interview Berezovskii gave the
"Financial Times" in autumn1996, in which Berezovskii
boasted that he and six other bankers controlled half the
Russian economy. LB

DUMA APPROVES AMNESTY. The State Duma on 24
December approved an amnesty proposed by Yeltsin in
order to reduce prison overcrowding. Some 35,000 convicts
will be released from prison under the amnesty, mainly men
over age 60, pregnant women, mothers of young children or
women over age 55, inmates who have tuberculosis, and
veterans who participated in armed conflicts during their
military service. Repeat offenders and those convicted of the
most serious violent crimes will not be covered by the
amnesty. The measure will affect another 365,000 convicted
criminals, either by shortening their prison terms or by
commuting punishments that do not involve serving time in
prison. The measure need not be approved by the
Federation Council or by Yeltsin, since the constitution grants
the Duma the sole right to adopt amnesties. LB

UPPER HOUSE FAILS TO OVERRIDE VETO ON VETERANS'
BENEFITS. The Federation Council on 24 December failed to
override a presidential veto of an amendment to the law on
veterans, ITAR-TASS reported the next day. The amendment
would have expanded the definition of a "veteran of labor"
and thereby increased the number of citizens eligible for
certain benefits. Yeltsin vetoed the measure after the
government calculated that the amendment would entail
paying out an additional 12 trillion rubles ($2 billion)
annually. Government officials have called for restructuring
social benefits payments to provide financial support only to
those living in poverty rather than to whole categories of
citizens. LB

ADVERTISING FIRM HIRES BOOK SCANDAL CASUALTY.
Former State Property Minister Maksim Boiko has been
appointed general director of the Video-International
advertising firm, ITAR-TASS reported on 24 December.
Boiko, an ally of First Deputy Prime Minister Chubais, served
in the cabinet for just three months before being sacked for
receiving a $90,000 payment as a co-author of an
unpublished book on privatization (see "RFE/RL Newsline,"
17 November 1997). Video-International has close ties to
the Kremlin and produced the television commercials for
Yeltsin's 1996 re-election campaign. One of the firm's
founders, Mikhail Lesin, was appointed deputy chairman of
the fully state-owned Russian Television network in June. LB

PRESIDENT OF CHUVASHIA RE-ELECTED. Nikolai Fedorov was
re-elected as president of Chuvashia on 28 December with
some 56.5 percent of the vote compared to 35 percent for
his main rival, Valentin Shurchanov, the leader of the
Communist Party's branch in Chuvashia. The three other
presidential candidates each gained less than 2 percent of
the vote. According to an RFE/RL correspondent who visited
Chuvashia during the presidential campaign, local observers
predicted Fedorov's victory but had expected that he would
be forced to contest a runoff election against Shurchanov.
(Fedorov won December 1993 presidential elections in
Chuvashia only in the second round, and even then he
gained less than 30 percent of the vote.) Before he became
president of Chuvashia, Fedorov was Russia's justice
minister, and some observers believe he has ambitions to
return to high politics. LB

NORTH OSSETIAN PRESIDENTIAL ELECTION PREVIEW. A
group of academics in Vladikavkaz have addressed an
appeal to President Akhsarbek Galazov, former rector of the
North Ossetian State University, not to seek a second term in
the presidential elections scheduled for 18 January,
RFE/RL's North Caucasus correspondent reported on 29
December. Recent opinion polls show that 60 per cent of
those questioned intend to vote for Russian State Duma
deputy Aleksandr Dzasokhov. Only 10 per cent favor
Galazov. Twelve potential candidates have been registered
for the poll. LF

DAGESTAN DEMANDS EXTRADITION OF BUINAKSK GUNMEN.
Dagestan's State Council on 29 December demanded that
Chechen President Aslan Maskhadov hand over the gunmen
responsible for the 22 December attack on a Russian army
facility in the Dagestani village of Buinaksk, Interfax
reported. Russian Interior Ministry forces on 22 December
had surrounded, but then failed to apprehend, the gunmen.
The commander of the North Caucasus Military District,
Colonel-General Viktor Kazantsev, told journalists on 23
December that he suspected Khottab, the Jordanian field
commander still under arms in Chechnya, of masterminding
the attack. Maskhadov denied on 27 December that any
citizens of Chechnya had participated. LF

TRANSCAUCASUS AND CENTRAL ASIA

TAJIKISTAN, IRAN SIGN DEFENSE ACCORD. Tajik Defense
Minister Sherali Khairulloyev and his Iranian counterpart
Rear-Admiral Ali Shamkhani signed a letter of
understanding on defense cooperation in Tehran on 29
December, ITAR-TASS and IRNA reported. Shamkhani said
Iran would provide logistical and technical training to
military personnel in Tajikistan in order to "consolidate
peace and stability in the region." The defense accord is the
first Tajikistan has signed with a non-CIS member state. BP

UNITED STATES CAUTIOUS ABOUT IRAN-TURKMEN
PIPELINE. The United States took a cautious view of the
official opening of a pipeline bringing natural gas from
Turkmenistan to Iran, according to AFP and ITAR-TASS. The
Korpedzhe-Kurdkui pipeline will eventually stretch into
Turkey and make Turkmen gas available to Europe but must
run across Iran. U.S. State Department spokesman James
Foley said on 29 December America will "carefully examine"
any proposals for pipelines through Iranian territory but
added that construction of the Korpedzhe-Kurdkui line
began two years before the U.S. adopted a law imposing
sanctions on any company doing business with Iran or
Libya, and therefore does not "appear to constitute
sanctionable activity." BP

AZERBAIJANI EX-PARLIAMENT SPEAKER: "ALIEV IS NO
CHURCHILL."  In a statement to RFE/RL's Azerbaijani Service
on 21 December, former parliament speaker Rasul Guliev
accused Azerbaijani President Heidar Aliev of systematically
liquidating those persons who engineered his return to
power in Baku in June, 1993. Guliev said that he had
believed that Aliev could transform Azerbaijan as Churchill
had transformed Britain and Adenauer -- Germany, but that
instead Aliev's policies had led to serious defeats in the
Karabakh war. Guliev said that the rift between himself and
Aliev stemmed from disagreements during the budget
debate in March, 1996, and Guliev's criticism one month
later of immoderate adulation of the president. Guliev was
constrained to resign in September, 1996, and was stripped
of his deputy's mandate on 16 December. Azerbaijani human
rights activivists have protested that move as illegal in a
letter to the Supreme Court, Turan reported on 27 December.
LF

GEORGIA EXTRADITES KURDISH ACTIVIST TO TURKEY.  A
spokesman for the Moscow-based Front for the National
Liberation of Kurdistan, which is loosely aligned with the
banned PKK (Kurdistan Workers' Party),  suggests that the
Georgian authorities were motivated by economic
considerations when they agreed to extradite to Turkey
Suleyman Koc, a member of the Turkish National-Democratic
Party, "Nezavisimaya gazeta" reported on 30 December. Koc
had fled to Georgia to avoid a ten-year prison sentence in
Turkey, and had worked at a Tbilisi center for Georgia's
40,000 ethnic Kurds, who are concerned that his extradition
may herald a crackdown on FNLK activities in Georgia. LF

END NOTE

1997: Another Busy Year for the IMF in the Post-Communist
World

by Michael Wyzan

        The International Monetary Fund (IMF) continues to
play the dominant role in providing financial support for the
balance of payments of post-communist and developing
countries. The fund has the dual role of providing such
support and of encouraging economic reform by attaching
stringent conditions to its loans.
        In 1997 the IMF approved new credits for Albania,
Armenia (actually, the second annual loan under a three-
year facility), Azerbaijan, Bulgaria, Croatia, Estonia, Georgia
(an identical situation to Armenia's), Kyrgyzstan, Latvia,
Macedonia, Mongolia, Romania, Tajikistan, and Ukraine.
        Among the transition countries not listed, some -
including Kazakhstan, Lithuania, Moldova, and Russia -
attempted during the year to qualify for the release of
tranches under existing loans. The Visegrad countries have
had sufficiently strong private capital inflows not to rely on
the IMF for balance-of-payments support, although Hungary
was awarded a two-year loan in March 1996, which it has
not drawn upon.
        The IMF suspended lending in1995 to Belarus and
Uzbekistan out of dissatisfaction with their weak reform
efforts, in the latter case citing the restrictive foreign
exchange regime introduced that year. Two further striking
cases are Federal Yugoslavia and Turkmenistan. The former
has been under UN sanctions and is not yet a member of the
IMF; the latter is a member, but has not been sufficiently
reformist to quality for support.
        Bulgaria and Romania won large new loans in April (in
this endnote, all agreements are dated based on when hey
received approval from the IMF's Executive Board), as new,
reformist governments vowed to put their predecessors'
sluggishness behind them. The Bulgarian loan is supposed to
provide $657 million over 14 months, while the Romanian
one is slated to provide $414 million over 13 months.
Subsequently, the fund pronounced itself satisfied with
Bulgarian economic policy, and released additional loan
tranches in July, August, and December.
        Romania's relations with the fund in1997 were
problematic, however. In the summer the IMF criticized the
size of the budget deficit, continuing high inflation, and price
controls on energy and food products. It was especially
concerned about the slow pace of liquidation and
privatization of state enterprises, prompting the government
to announce in August the closure of 17 enterprises. That
move led to the Fund's releasing of the second tranche in
September.
        The IMF remains concerned about slow privatization
and high inflation in Romania. However, a privatization
decree issued on 21 December, if passed by parliament in
February, may help convince it to release the next tranche in
early 1998.
        Albania received $12 million from the IMF in
November for "emergency post-conflict assistance." In
August, the IMF HAD set as conditions for renewed lending
that the authorities close the remaining pyramid schemes,
privatize or liquidate two of three state banks, reform the
civil service, create an agricultural land market, improve tax
collection, raise tax rates, and cut government spending.
Agreement was held up until November by legal problems
involving the closure of the pyramids. Tajikistan received a
similar, $10 million, loan in December.
        At the other end of the spectrum are Estonia and
Latvia, which both received standby loans late in 1997 -
worth $22 million and $45 million, respectively - which they
do not intend at present  to draw upon.
        Relations between the IMF and Croatia made headlines
in an unusual way in1997. Under pressure from the United
States, the fund in July refused to release a $40 million loan
tranche. The U.S. cited Zagreb's balking at releasing war
criminals to the Hague. Those individuals were apprehended
and dispatched to the Netherlands in October, and the IMF
approved the release of the money, but Croatia then decided
it did not need the funds after all.
        Russia and Ukraine, two of the IMF's biggest
borrowers, experienced ups and downs in their relations
with it IN 1997. In October, the fund, citing poor tax
collection, announced that it would not release a $700
million tranche of a loan to Russia until early 1998.
However, an IMF mission in December recommended
releasing it, citing progress in that area.
        Ukraine received a one-year, $542 million standby
loan in August. That is not as good news as it seems, since
Kyiv and the IMF had been negotiating over a $2.9 billion,
three-year loan, but in the end the fund decided that reform
progress had been insufficient.
        Relations with the IMF mirror the overall direction of
transition
economies. Relations remain on track between the fund and
the
Transcaucasian states, even though Georgia and Azerbaijan
were slow starters on reform. In contrast, the IMF, citing
problems with
privatization, energy pricing, and the budget deficit,
postponed from June until July releasing one loan tranche to
Moldova (an early CIS reformer); it then delayed until early
1998 releasing the next one.

*Michael Wyzan is an economist living in Austria.

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