RFE/RL NEWSLINE Vol. 2, No. 9, Part I, 15 January 1998

A daily report of developments in Eastern and Southeastern
Europe, Russia, the Caucasus and Central Asia prepared by
the staff of Radio Free Europe/Radio Liberty.

This is Part I, a compilation of news concerning Russia,
Transcaucasia and Central Asia. Part II covers Central,
Eastern, and Southeastern Europe and is distributed
simultaneously as a second document. Back issues of RFE/RL
NewsLine and the OMRI Daily Digest are online at RFE/RL's
Web site: http://www.rferl.org/newsline

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Headlines, Part I

* CHERNOMYRDIN FAILS TO ATTEND CABINET MEETING

* RYBKIN IN GROZNY

* UKRAINE RATIFIES TREATY WITH RUSSIA

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RUSSIA

CHERNOMYRDIN FAILS TO ATTEND CABINET MEETING.
Prime Minister Viktor Chernomyrdin did not attend a 15
January cabinet meeting that he was scheduled to chair. An
unnamed government aide told Reuters that Chernomyrdin
has gone to the Barvikha clinic, where President Boris Yeltsin
spent two weeks in December. However, government
spokesman Igor Shabdurasulov denied that Chernomyrdin was
at the sanitarium, saying the premier was working on
documents at home. Earlier, a government spokeswoman
confirmed that First Deputy Prime Minister Anatolii Chubais
chaired the cabinet meeting, but she claimed to have no
information on Chernomyrdin's whereabouts. The prime
minister returned to Moscow on 14 January after visits to
Turkmenistan and Tajikistan. Chernomyrdin underwent heart
bypass surgery in 1992, before he was appointed prime
minister, but he has had no apparent health problems in recent
years. LB

YELTSIN UNHAPPY WITH DELAYS ON START-2
RATIFICATION. Yeltsin is not pleased that the State Duma
has repeatedly delayed consideration of the START-2 arms
control treaty, presidential spokesman Sergei Yastrzhembskii
told ITAR-TASS on 15 January. He said Yeltsin believes the
postponements harm the interests of the Russian armed forces,
prospects for further reductions in strategic offensive weapons,
and Russian-U.S. relations. U.S. President Bill Clinton is
scheduled to visit Moscow in 1998, but both Russian and U.S.
officials have said that visit should be held only after Russia
ratifies START-2. The Duma is not scheduled to consider the
treaty during the first half of the year (see "RFE/RL Newsline,"
13 January 1998). LB

RYBKIN IN GROZNY.  As head of a government delegation to
Grozny on 14 January, Russian Security Council Secretary Ivan
Rybkin met with Chechen President Aslan Maskhadov and
acting Prime Minister Shamil Basaev. Discussions focused on
short-term measures to enhance cooperation, specifically
Russian economic assistance. Also discussed was a possible visit
to Chechnya by Chernomyrdin to pave the way for Russian
President Yeltsin's planned trip. Rybkin told journalists later he
believes a constitutional law should be adopted giving
Chechnya the status of either a full or associate member of the
Russian Federation.  Also on 14 January, the Russian Security
Council issued a statement denying media reports that the
State Duma voted two days earlier to cut federal spending on
Chechnya, ITAR-TASS reported. LF

ABDULATIPOV WARNS  AGAINST "STARVING"
CHECHNYA. Addressing Duma deputies on14 January, Russian
Deputy Prime Minister Ramazan Abdulatipov called for
increased funding for reconstruction in Chechnya, arguing that
a "hungry and angry Chechen is dangerous both to Russia and
to Chechnya." Abdulatipov said  Russia wasted the time that
has elapsed since the signing in August 1996 of the Khasavyurt
accords, which postponed a decision on Chechnya's future
status within the Russian Federation. He added that if delays in
expediting reconstruction of the Chechen infrastructure
continue, "in one year [radical field commander Salman]
Raduev will come to power in Grozny," an RFE/RL
correspondent in Moscow reported. LF

DUMA CONCERNED ABOUT DEFENSE INDUSTRY,
AVIATION. The Duma on 14 January approved a resolution
demanding that state support for the military-industrial
complex be raised to a level that would provide for Russia's
security, ITAR-TASS reported. The resolution instructed the
Audit Chamber to examine how funds earmarked for
conversion of defense industry enterprises have been spent. It
also argued that at his next meeting with the president, prime
minister, and Federation Council speaker, Duma Speaker
Gennadii Seleznev should call for the president and
government to stop "ignoring appeals from the State
Duma...concerning the armed forces, defense industry, and
Russian science." Also on 14 January, the lower house called for
the government to create an independent commission to
investigate airplane accidents. A resolution on the "critical
situation in Russian aviation" said such a commission should
include members of the Russian Academy of Sciences and
Duma deputies. LB

REALLOCATION OF DUMA COMMITTEES DELAYED. Duma
Speaker Seleznev announced on 14 January that the leaders of
the seven registered Duma factions have agreed to leave the
current distribution of committee chairmanships in place until
the parliament  approves the 1998 budget, RFE/RL's Moscow
bureau reported. He added that the issue would not be
considered before March. Under the January 1995 agreement
on committees, which was to expire this month, the Communist
faction was allowed to appoint heads of nine Duma committees.
Our Home Is Russia, Liberal Democratic Party of Russia, and
Yabloko factions were given four committees each, the Popular
Power faction  three, and the Agrarian and Russian Regions
factions two each. Our Home Is Russia has since sought
unsuccessfully to remove Lev Rokhlin, who was expelled from
the faction last September, from the post of Defense Committee
chairman. LB

NUMBER OF BANKS CONTINUES TO DECLINE. Central Bank
Deputy Chairman Aleksandr Turbanov announced on 14
January that Russia had 1,697 commercial banks as of 1
January, Interfax reported. In 1995, there were more than
2,500 such  banks in Russia. Turbanov said 43 percent of
Russian banks currently have less than 1 million ECU in
registered capital ($1.1 million). He noted that in order to
receive a license, new banks are now required to have
registered  capital of at least 4 million ECU. He added that
beginning on 1 January 1999, all banks will be required to
have at least 1 million ECU in registered capital or else lose
their banking licenses. Turbanov advised banks that currently
do not meet this requirement to consider merging with larger
institutions. According to Central Bank Deputy Chairman Denis
Kiselev, licenses were revoked from some 330 Russian banks in
1997, ITAR-TASS reported on 13 January. LB

NEW LIMITS ON FOREIGN BORROWING BY BANKS. In
response to the turmoil on international financial markets, the
Central Bank has changed its regulations on foreign borrowing
by commercial banks, "Russkii telegraf" reported on 14
January. Commercial banks will now be allowed to borrow a
maximum of 400 percent of their registered capital, or 28
percent of their total assets, from foreign banks. Central Bank
Deputy Chairman Kiselev told "Russkii telegraf" that the change
is designed to ward off a potential crisis if foreign creditors lose
confidence in the Russian banking system. He added that the
new rule merely limits the growth of foreign borrowing by
Russian banks and will not require them to reduce current
borrowing levels. However, the newspaper reported that some
bankers believe the Central Bank changed its rules because on
international financial markets, loans to Russian commercial
banks are competition for Russian government bonds. "Russkii
telegraf" is fully owned by Oneksimbank. LB

FOREIGN-CURRENCY RESERVES DEPLETED BY MARKET
TURMOIL. Central Bank Chairman Sergei Dubinin announced
on 13 January that the bank's gold and foreign-currency
reserves totaled $18 billion as of 1 January, about the same
level as at the beginning of December 1997, Russian news
agencies reported. The Central Bank's gold and foreign-current
reserves totaled nearly $25 billion in September, but the bank
spent billions in subsequent months to support Russian
treasury bills (GKOs) and prevent a significant devaluation of
the ruble. Dubinin expressed the hope that by the end of 1998,
yields on GKOs will fall from 31-32 percent currently to 15-18
percent. At the height of the market instability in November,
GKO yields reached 45 percent. LB

PUBLIC TRUST IN RUBLE LOW. Also on 13 January, Dubinin
said more must be done to increase the public's trust in the
ruble, ITAR-TASS reported. He noted that Russian citizens' cash
holdings in U.S. dollars are now estimated at $30 billion. He did
not specify how the authorities plan to achieve greater trust in
the ruble. The recent redenomination, which took three zeroes
off the ruble, was in part designed to increase trust in Russia's
currency and facilitate the "dedollarization" of the economy. LB

KEMEROVO MINERS STAGE WARNING STRIKE. Workers at
all coal mines in Kemerovo Oblast staged a one-day warning
strike on 15 January, an RFE/RL correspondent in Kemerovo
reported. The miners, many of whom are owed several months
of wages, are demanding more financial support for the coal
industry. Kemerovo's Kuznetsk coal basin is the largest in
Russia. In an interview with RFE/RL's Moscow bureau on 14
January, Kemerovo Governor Aman Tuleev described the strike
as "madness," saying it will mainly harm the interests of the
miners. Tuleev recently held negotiations with Prime Minister
Chernomyrdin and other government officials in Moscow. A
government commission to be chaired by Fuel and Energy
Minister Sergei Kirienko will fly to Kemerovo on 19 January.
Speaking to RFE/RL, Tuleev particularly praised First Deputy
Prime Minister Chubais's work to secure financing for the coal
industry. LB

COMMISSION BLOCKS PROPOSED REFERENDUM IN
ROSTOV. The Rostov Oblast Electoral Commission has refused
for a third time to register an opposition group seeking to hold
a referendum asking voters whether they trust Rostov Oblast
Governor Vladimir Chub. The commission ruled that the
wording of the proposed question is open to multiple
interpretations, "Kommersant-Daily" reported on 14 January.
The two previous attempts to register a group supporting the
referendum were rejected for the same reason. The
Communist-backed opposition in Rostov has sought to hold the
referendum on Chub on 29 March, the same day legislative
elections are scheduled in the oblast. Chub was appointed
governor of Rostov by Yeltsin in 1991 and won a September
1996 election to retain his post. However, supporters of Chub's
Communist opponent charged that the 1996 election was
marked by widespread fraud. LB

REGIONAL AFFAIRS

UKRAINE RATIFIES TREATY WITH RUSSIA. By a vote of
317 to 27, Ukrainian lawmakers ratified a friendship treaty
with Russia on 14 January.  President Leonid Kuchma and his
Russian counterpart, Boris Yeltsin, signed the treaty last May
following years of bilateral disputes over the division of the
former Soviet Black Sea Fleet. The document reaffirms the
countries' borders and thereby reduces Moscow's chances of
claiming Crimea or its port city Sevastopol, as several Russian
politicians have advocated. The Ukrainian parliament has yet to
consider ratifying several agreements on the fleet, which are
expected to face considerable opposition among lawmakers. PB

YELTSIN PLEASED WITH RATIFICATION OF TREATY.
Russian presidential spokesman Sergei Yastrzhembskii told
Interfax on 14 January that Boris Yeltsin welcomed the
"convincing ratification" of the treaty by the Ukrainian
parliament and expects the Russian parliament to "give equally
convincing support" to the document. The Russian State Duma
is scheduled to consider the treaty in early February. Although
Duma First Deputy Speaker Vladimir Ryzhkov predicted on 14
January that the treaty will be ratified, the document is
expected to meet with vocal opposition from some Duma
members, including Vladimir Zhirinovsky's Liberal Democratic
Party of Russia faction and Popular Power faction co-leader
Sergei Baburin. They have called for more transmissions of
Russian television broadcasts in Ukraine. Baburin has also
warned that Russia will pave the way for Ukraine's possible
accession to NATO if it ratifies a treaty renouncing all claims on
Ukrainian territory. LB

SPOKESMAN SAYS YELTSIN NOT PREJUDICED AGAINST
BALTICS. Also on 14 January, Yastrzhembskii said that Yeltsin
wants a "constructive dialogue" with the leaders of the Baltic
States, Interfax and BNS reported on 14 January. The Russian
news agency quoted Yastrzhembskii as stressing that Yeltsin
has "no prejudices" against any of the Baltic leaders and that
Russia intends to continue to develop relations with the Baltic
States. Yastrzhembskii pointed to progress in Russian-
Lithuanian relations but noted that ties with Estonia and Latvia
are not developing well because the rights of ethnic Russians in
those countries are being violated. JC

ADAMKUS SAYS KALININGRAD "INTERNATIONAL
PROBLEM." Lithuanian President-elect Valdas Adamkus told
the Polish weekly "Wrpost" that the status of Kaliningrad Oblast
remains an "international problem," BNS reported on 14
January. Adamkus explained that statement by noting that "at
the Potsdam Conference, the great powers transferred
Kaliningrad to the administration of the USSR, but only
temporarily--in other words, until such a time when a decision
is made as to what is to be done further." He argued that
problems related to the region should be resolved by
international organizations, while stressing that cooperation
with "all neighbors" is indispensable for peace "in this part of
Europe." By contrast, incumbent President Algirdas Brazauskas
last month distanced himself from challenges by Lithuanian
politicians regarding Kaliningrad's status. Such challenges,
Brazauskas said, "complicate our relations with neighboring
countries and, of course, with  Russia." JC

TRANSCAUCASUS AND CENTRAL ASIA

ARMENIAN PREMIER RULES OUT SUBORDINATING
KARABAKH TO BAKU. Speaking to journalists in Yerevan on
14 January, Robert Kocharian again rejected any settlement of
the Karabakh conflict that would entail the subordination of the
unrecognized Nagorno-Karabakh Republic to Azerbaijan,
RFE/RL's Yerevan bureau reported. Kocharian argued that a
confederation in which Azerbaijan and Nagorno-Karabakh
would have equal status is the optimum way of preserving
Azerbaijan's territorial integrity, according to Noyan Tapan. He
acknowledged that serious differences emerged within the
Armenian leadership over Karabakh at the 7-8 January
Security Council session, adding that such differences are "a
normal phenomenon." But Kocharian denied a press report that
his resignation was discussed at the Security Council session
(see "RFE/RL Newsline," 14 January 1998). LF

GEORGIAN OFFICIALS RESPOND TO MAFIA CHARGES
AGAINST DIPLOMAT. Georgian parliamentary  chairman
Zurab Zhvania and parliamentary Commission for Foreign
Affairs chairman Kakha Chitaia have expressed their support
for the country's diplomatic corps while acknowledging
shortcomings in its work, Caucasus Press reported on 14
January. The two officials were responding to a statement by
parliamentary Commission on State and Legal Affairs chairman
Mikhail Saakashvili accusing Georgian Ambassador to Italy Begi
Tavartkiladze of neglecting his duties and of ties with "dubious"
Italian financial circles. LF

AZERBAIJAN DENIES SELLING MISSILES TO PERU.
Azerbaijan's Ministry of Defense has officially denied
allegations in the "Washington Times" on 12 January that
Azerbaijan has sold to Peru air-to-air missiles worth $8 million,
Turan reported on 14 January. "The New York Times" on 7
January had cited a Human Rights Watch report  that gun-
runners from Azerbaijan, Turkmenistan, Ukraine, and Bulgaria
had transported arms to Hutu and Tutsi militants in Burundi.
LF

AZERBAIJANI OIL OUTPUT DOWN, BUT EXPORTS UP.
Azerbaijan in 1997 met its oil production target of 9.02 million
metric tons, down 0.9 per cent on 1996 levels, Interfax
reported on 12 January. In an interview with "Nezavisimaya
gazeta" two days later, Natik Aliev, the president of the state
oil company SOCAR, admitted that the target for extraction of
natural gas was not met. Aliev disclosed that in 1997
Azerbaijan exported a record quantity of oil, the lion's share of
which went to Iran, Georgia, and Dagestan.  (That oil was
extracted by SOCAR, not by any of the international consortia of
which SOCAR is a member.)  Aliev said that domestic
consumption of oil has fallen since SOCAR began demanding
pre-payment for deliveries to all domestic customers, except
the Ministries of Defense and Agriculture. LF

AZERBAIJANI PRESIDENT NAMES EXPERTS TO
NEGOTIATE WITH TURKMENISTAN. Heidar Aliev has
appointed a group of oil officials and diplomats to conduct talks
with Turkmenistan on delineating the dividing line between
the Azerbaijani and Turkmen sectors of the Caspian,  Turan and
Interfax reported on 13 January . Foreign Minister Hasan
Hasanov told journalists that it may prove easier for the five
Caspian littoral states to reach agreement on the disputed
status of the Caspian after the sea's median line is delineated.
Visiting Ashgabat on 13 January, Russian Prime Minister
Chernomyrdin expressed the hope that all disputes related to
Caspian Sea resources will be resolved this year. LF

RUSSIAN PREMIER IN TURKMENISTAN ...  On the second
day of his visit to Ashgabat, Chernomyrdin on 14 January
failed to reach agreement with Turkmen President Saparmurat
Niyazov on the resumption of Turkmen natural gas exports via
Russia. Niyazov rejected Russian offers to purchase 25 billion
cubic meters of gas for resale to Ukraine or to pay $32 in
transit tariffs per thousand cubic meters of Turkmen gas
exported to Ukraine via Russia. But both Niyazov and Gazprom
board chairman Rem Vyakhirev, who accompanied
Chernomyrdin, hinted that a compromise on export tariffs may
be reached, but not earlier than within one month.  LF

... AND TAJIKISTAN. In Dushanbe on 14 January,
Chernomyrdin and Tajik President Imomali Rakhmonov signed
several bilateral agreements, including one on defense
cooperation in 1998. Talks focused on Tajikistan's request for
membership in the CIS customs union and a possible 500
million ruble ($85 million) Russian loan to Tajikistan. Tajik
Prime Minister Yakhye Azimov told Interfax on 13 January
that a "financial injection" is needed to enable Tajikistan to
honor previously signed bilateral agreements with Russia. But
Russian Deputy Prime Minister Valerii Serov said Russia could
not agree to such a loan before adoption of the 1998 budget.
Serov also said that complete stabilization of the political
situation in Tajikistan is necessary before Russia can complete
construction of the Rogun hydroelectric power station,  in
which it has a 50 percent stake. LF

KAZAKH  OPPOSITION CONDEMNS CHINESE REPRESSION
OF UIGHURS. Members of the AZAT, AZAMAT, and ATTAN-
Kazakhstan movements convened a press conference in Almaty
on 14 January to condemn the execution last month in China's
Xinjiang Autonomous Region of 13 young Uighurs for their
alleged involvement in terrorist and separatist activities,
RFE/RL's Almaty bureau reported on 15 January. Leaders of
the ethnic Uighur minority in Kazakhstan have sent a written
protest to the Chinese Embassy in Almaty. The Kazakh
opposition activists called on the Kazakh government to sever
all economic and other relations with China until the oppression
of ethnic Uighurs in Xinjiang ends. LF


END NOTE

YELTSIN ORDERS CABINET TO KICKSTART ECONOMY

by Stephanie Baker

        President Boris Yeltsin has ordered the government to
ensure that 1998 is the first year Russia records solid economic
growth, but his finance minister has cast doubt on whether that
goal can be realized.
        After meeting with First Deputy Prime Minister Boris
Nemtsov at a holiday retreat in northwestern Russia on 13
January, Yeltsin issued a statement saying he is instructing the
government take steps to ensure Russia achieves 2-4 percent
growth in 1998.
        Yeltsin called for the government to push through a new
tax code this year and reduce tax rates to stimulate the
economy. He also urged the government to take steps to bring
down interest rates in order to allow private sector lending to
get off the ground.
        But Finance Minister Mikhail Zadornov said in an
interview published the same day that he doubts whether the
country can achieve economic growth in 1998. "To be honest, I
am not a big optimist about economic growth in 1998.... I think
the [1998] parameters will roughly follow figures for 1997," he
told the Russian daily "Nezavisimaya Gazeta."
        Zadornov's comments put him at odds with the rest of the
government. Prime Minister Viktor Chernomyrdin told a
cabinet meeting last week that promising year-end economic
results mean that Russia is well placed to achieve growth this
year. And First Deputy Prime Minister Anatolii Chubais has
said that 2 percent growth in 1998 is realistic.
        According to preliminary figures, Russia's gross domestic
product was up a modest 0.4 percent in 1997, the first time the
country recorded economic growth since the collapse of the
Soviet Union. But Zadornov said the recent market crisis had
thrown a wrench into the government's economic plans. As he
put it: "The market crisis of October-November has thrown
Russia back at least half a year." The Finance Minister said it
would take a minimum of three months to bring down interest
rates.
        The global financial crisis that began last October has hit
Russia hard, as foreign investors fled both the country's debt
and equity markets. Yields on treasury bills jumped to 45
percent in November, before coming down to the current level
of roughly 32 percent. But yields are still well above pre-crisis
levels of 17 percent.
        Central Bank chairman Sergei Dubinin told  State Duma
deputies on 13 January that foreign investors withdrew $8
billion from the debt and equity markets during the last few
months of 1997. He said the bank's hard currency and gold
reserves stood at $18 billion as of 1 January 1998, unchanged
from 1 December. In September, reserves stood at $25 billion.
        As Dubinin put it: "Foreign investors have now calmed
down, and  practically no money is  being taken out of Russia."
But he admitted that foreigners were by and large still staying
away from the Russian market, which was keeping T-bill yields
high.
        The market crisis has jacked up the government's cost of
borrowing, putting a squeeze on the federal budget. Zadornov
said the government would not resort to borrowing to cover
budget holes as long as yields on treasury bills remain at
current levels. He said the Finance Ministry will continue to
place only  enough treasury bills on the market every week to
retire old debt.
        Zadornov said the first quarter of 1998 will be difficult
for the budget due to the high cost of borrowing on domestic
markets and an expected drop in tax collection rates in January
and February. Russia has been struggling to boost tax collection
rates, which were dismally low all last year.
        Zadornov also said his ministry will press ahead with tax
reform and submit a revised tax code to the Duma by the end
of January, taking into account proposals from deputies. In his
words: "We think that, together with the State Duma, we will
succeed in finalizing the draft tax code and passing its basic
parts in the first half of the year."
        With Duma elections scheduled for 1999 and a
presidential election slated for 2000, observers have noted that
1998 is the last year the government can hope to push through
tax reform.

The author is a Moscow-based RFE/RL correspondent.


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