RFE/RL NEWSLINE Vol 2, No. 28 , Part II, 11 February 1998

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RFE/RL NEWSLINE Vol 2, No. 28 , Part II, 11 February 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 II, a compilation of news concerning Central, Eastern, and
Southeastern Europe.  Part I covers Russia,
Transcaucasia and Central Asia 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 II

* UKRAINIAN PRESIDENT WANTS PRIVATIZATION TO RESUME

* ALBANIA CALLS FOR PEACEFUL SOLUTION IN KOSOVO

* ROMANIAN PARLIAMENT APPROVES FIVE NEW MINISTERS

* End Note: DONETSK STEEL MILL FORGES AHEAD

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EAST-CENTRAL EUROPE

UKRAINIAN PRESIDENT WANTS PRIVATIZATION TO RESUME. Leonid Kuchma told a
group of businessmen in Kyiv that privatization must resume, AFP reported
on 11 February. Kuchma decried the parliamentary freeze on the
privatization of state assets and pledged to end the government's monopoly
on energy. On 9 February, the cabinet had  announced it will sell 40
percent of the country's largest oil refinery in March. It said that
presidential decrees would be used to get around the parliamentary ban on
privatization.  Kuchma also said that great efforts will be made to reduce
barter trade in Ukraine and the black economy. PB

RUSSIAN MINISTER IN KYIV FOR TALKS ON ECONOMIC PROGRAM. Anatolii Adamishin,
Russian minister for cooperation with the CIS states, met with Ukrainian
officials on 10 February to conclude drawing up details of a 10-year
program on economic cooperation, ITAR-TASS reported. Adamishin held talks
with Prime Minister Valery Pustovoitenko and Deputy Prime Minister Serhei
Tyhypko in an effort to finalize a draft agreement scheduled to be signed
by the  Russian and Ukrainian presidents when they meet in Moscow next
week. Adamishin said the two sides have created "an unusual document" that
established "favorable conditions" for improved bilateral trade and
cooperation. He added that he hoped Ukraine will take "a more active part"
in the work of the CIS. PB

BELARUSIAN COURT REDUCES FINE AGAINST SOROS FOUNDATION. A Belarusian
Arbitration Court has revised a ruling against the Soros Foundation, an
RFE/RL correspondent in Washington reported on 10 February. The court said
the foundation must pay $28,000 in fines, adding that its property will be
confiscated. After receiving a $3 million fine in September for allegedly
not paying various taxes, the foundation shut down its Minsk offices (see
"RFE/RL Newsline," 4 September 1997). The government had also accused
foundation workers of involvement in opposition political activities. A
spokesman for the Soros Foundation said in Washington that it is encouraged
by the court's decision. PB

DRUG ADDICTION GROWS IN BELARUS. The Belarusian government said on 10
February that the number of registered drug addicts in the country has
increased four-fold since 1992, Belapan reported. A Ministry of Health
official said nearly 3,500 addicts are registered but that the real number
of drug users is probably closer to 17,000. The official said Belarus does
not have a long-term rehabilitation center for drug addicts. PB

SWEDISH GOVERNMENT APPROVES ARMS DELIVERIES TO BALTICS. The Swedish
government has approved  the delivery of used weapons and military
equipment to the Baltic States, ETA and BNS reported on 10 February. The
deliveries will include anti-tank and anti-aircraft weaponry as well as
jeeps and armored personnel carriers. Some of the armaments will be donated
, while another part will be sold for a symbolic price, Swedish Foreign
Minister Lena Hjelm-Wallen said. "The technical equipment to be sent to the
Baltics is meant for training purposes and cannot be used in combat,"
Hjelm-Wallen added. JC

ESTONIAN GOVERNMENT APPROVES INTEGRATION PRINCIPLES. The government on 10
February approved the principles of a national integration policy, ETA
reported. An integration program is to be drafted within the next few
months and implemented next year. The main goals of the program include a
significant decrease in the number of people without citizenship, increased
possibilities for acquiring Estonian citizenship, and an improved knowledge
of Estonian among aliens. The government foresees the education system
playing a major role in the integration process and stresses that the
integration program must be debated and approved by politicians and the
general public alike. JC

ULMANIS URGES LAWMAKERS TO ADMIT GENOCIDE CRIMES AMONG LATVIANS. Latvian
President Guntis  Ulmanis  has sent a letter to the parliamentary
Commission on Foreign Affairs urging lawmakers to admit that Latvians
participated in genocide against Jews during World War Two, Interfax
reported on 10 February. "The historical  truth is that there were Latvians
who participated in the Holocaust and there were Latvians who helped Jews
and hid them in their houses," Ulmanis said.  He added that he plans to
meet with Latvians who hid Jews during the Nazi occupation. The previous
day,  the director of the Simon Wiesenthal Center had told "Diena" that
Latvian society is reluctant to admit that "numerous Latvians" collaborated
with the Nazis. Ulmanis is scheduled to visit Israel on 22-23 February. JC

CENTRAL EUROPEAN FOREIGN MINISTERS LOBBY FOR NATO EXPANSION. The foreign
ministers of the Czech Republic, Hungary, and Poland said in Washington on
10 February that any delay in the U.S. Senate's approval of NATO expansion
would "send the wrong signal" to other nations that want to join the
alliance. Hungary's Laszlo Kovacs said such a delay would also discourage
reforms in those countries and encourage extremists in Russia. Poland's
Bronislaw Geremek commented that a pause in NATO expansion after the
admission of the three new members would "play into Russian hands" at a
time when Moscow is gradually becoming part of European security
arrangements.  President Bill Clinton will formally ask the U.S. Senate on
11 February to approve the expansion of the alliance. Meanwhile, the U.S.
has officially confirmed that it has asked the three states to support a
possible military operation against Iraq. MS

POLAND OFFERS UNIT FOR USE IN PERSIAN GULF. Deputy Foreign Minister Radek
Sikorski said that Poland would send an anti-chemical and biological
warfare unit to the Persian Gulf in the event of a U.S.-led attack on Iraq,
Reuters reported on 10 February. Sikorski said the decision was made at a
cabinet meeting after U.S. Secretary of State Madeleine Albright had
requested a pledge of aid from  Polish Foreign Minister Bronislaw Geremek
in Washington the previous day. Sikorski stressed that Warsaw hopes there
will be no military conflict, but he said Poland's commitment to send such
a unit is "an expression of solidarity with U.S. efforts" to make Iraq
abide by UN resolutions. PB

CZECH PRESIDENT ON IRAQI CRISIS... Vaclav Havel on 10 February told
journalists that the possible participation of Czech forces in military
action against Iraq would serve a "fundamentally political purpose." "If we
want others to guarantee our safety, then we must be ready to guarantee the
safety of others in turn," he said. Havel added that he doubted that "Czech
fighter planes would be attacking Saddam Hussein's palace" but noted that
he believed "we are capable of providing some kind of support logistics." MS

...AND DOMESTIC AFFAIRS. Havel said at the same press conference that the
Civic Democratic Alliance (ODA) must "press" its 1995 donors to allow their
names to be made public (see "RFE/RL Newsline," 10 February 1998). He said
that he admired ODA chairman Jiri Skalicky for wanting to keep his promise
to the anonymous donors to keep their names secret but failed to understand
why the donors insisted on anonymity. Havel also said he favors changing
the present electoral system to a combined, proportional-majority one. At
present the Chamber of Deputies is elected using a  proportional system and
the Senate using a majority one. MS

SLOVAK COURT RULES AGAINST GOVERNMENT. The Constitutional Court has ruled
that the government violated the constitution by refusing to include in
last May's referendum a question on whether the country's president should
be elected by popular vote, RFE/RL's Bratislava bureau reported. The
opposition had collected 350,000 signatures in favor of including that
question, along with three others on accession to NATO. The Interior
Ministry had ruled, however, that including the question would be
unconstitutional. MS

NEW ROUND OF SLOVAK PRESIDENTIAL ELECTIONS ANNOUNCED The third round of
Slovak presidential elections is to be held on 5 March, three days after
President Michal Kovac's mandate runs out, AFP reported, quoting
parliamentary chairman Ivan Gasparovic. In other news, the German
authorities on 10 February officially asked the Czech Republic to extradite
Michal Kovac Jr., the son of the outgoing Slovak president, CTK reported.
Kovac Jr. is suspected of having helped cheat a Slovak company in 1992 (see
"RFE/RL Newsline," 5 and 6 February 1998). MS

FOREIGN INVESTMENT IN HUNGARY DOUBLED LAST YEAR.  The National Bank of
Hungary and the Central Statistics Office have announced that, in the first
11 months of 1997, the 4,396 companies with foreign participation invested
some 69.3 billion forints ($346 million). That is twice the amount during
the same period in 1996, "Napi Gazdasag" reported on 11 February. The U.S.
is the largest investor in Hungary with 28.5 billion forints (or 41 percent
of total foreign investments), followed by The Netherlands,  France, and
Germany. MSZ

SOUTHEASTERN EUROPE

ALBANIA CALLS FOR PEACEFUL SOLUTION IN KOSOVO. Foreign Minister Paskal Milo
said in Ljubljana on 10 February that Albania wants a peaceful resolution
of the Kosovo dispute. "We hope it will not come to an armed conflict in
Kosovo as that would have catastrophic consequences that would weigh upon
all of the Balkans.... Pressure [by the Yugoslav authorities] on the
Albanians in Kosovo proves that Belgrade is sticking to its old policy and
mentality and that it lacks the will to find a new approach.... We do not
support any armed groups that want to start a fight in Kosovo and are
against all terrorism, be it Serbian or Albanian." PM

TENSIONS CONTINUE IN SRBICA. Spokesmen for the Democratic League of Kosovo,
the main ethnic Albanian political organization in the province, have said
Serbian police try to intimidate or provoke Albanians in Srbica on a daily
basis, BETA reported on 10 February. Serbian police have resumed patrols on
the Srbica-Klina road, but regular bus traffic has not resumed. Local Serbs
also told BETA that the situation in Srbica and nearby Kosovska Mitrovica
is tense. In recent weeks, the clandestine Kosovo Liberation Army has
maintained a strong presence in the area. PM

IZETBEGOVIC SLAMS FRANCE. Alija Izetbegovic, the Muslim member of the joint
presidency and its current chairman, protested to the French government on
10 February over the reception received by Republika Srpska President
Biljana Plavsic the previous day (see "RFE/RL Newsline," 10 February 1998).
Izetbegovic charged that Plavsic was treated like a head of state, which,
he added, showed that France favors the Serbs over Bosnia's other ethnic
groups. Izetbegovic stated that France has displayed "arrogant behavior
typical of a great power toward a state that is fighting for its survival."
PM

BRCKO LOBBYISTS IN VIENNA. The Bosnian Serbs cannot afford to lose Brcko,
Prime Minister Milorad Dodik told the Vienna international arbitration
commission on that strategic town on 10 February. He has said repeatedly in
recent days that Brcko must remain in Bosnian Serb hands if his government
is to survive. Also on 10 February, Plavsic told the Vienna commission
that Brcko is vital for the survival of the Bosnian Serb state. Ejup Ganic,
the president of the mainly Croatian and Muslim federation, said in Vienna,
however, that the international community "cannot reward genocide by
bringing in [Dodik] and saying "yes, there was genocide here, but here is a
nice guy.'" Brcko had a Muslim and Croatian majority before the 1992-1995
war but is now almost completely Serbian owing to "ethnic cleansing." PM

MILOSEVIC PROMOTES ECONOMIC LINKS TO BOSNIA. Yugoslav President Slobodan
Milosevic, Dodik, and a number of Serbian and Bosnian business leaders
agreed in Belgrade on 10 February to promote cooperation in metallurgy.
Some $20 million in unspecified foreign loans will be used to develop a
partnership between Serbia's Sartid mills in Smederevo, the iron mill in
Zenica in the mainly Muslim and Croat federation, and the Ljubija mines
near Prijedor in the Republika Srpska. Milosevic recommended that
Montenegro's Nis iron mill be included in the partnership in the future.
Elsewhere in Belgrade, workers in 14 metallurgical plants went on strike,
an RFE/RL correspondent reported from the Serbian capital. PM

ARBOUR SEEKS EXTRADITIONS. Louise Arbour, the Hague-based  war crimes
court's chief prosecutor, called upon Yugoslav Justice Minister Zoran
Knezevic in Belgrade on 10 February to change legislation in order to
permit the extradition of indicted war criminals to The Hague. PM

BECHTEL TO FINANCE CROATIAN HIGHWAY. Negotiations have been completed
between the Croatian government and the U.S. Bechtel Corporation on the
financing of the key Zagreb-Dubrovnik highway, an RFE/RL correspondent
reported from the Croatian capital on 10 February. Work will begin this
fall on the first segment, which will connect Zagreb and Sisak. The highway
will then cut across northwestern Bosnia to the coast. PM

EU TO PROMOTE INDEPENDENT MEDIA IN CROATIA. An EU official said in Zagreb
on 10 February that Brussels has increased its support for the independent
media from $1.76 million in 1997 to $2.94 million in 1998. The official
said that goals include setting up a nationwide independent television
network and establishing a newspaper distribution system independent of the
governing Croatian Democratic Community (HDZ). The HDZ currently controls
all television broadcasting, most radio stations, most periodicals, and the
newspaper distribution system. PM

U.S. URGES MEIDANI TO OVERCOME POLARIZATION. Undersecretary of State Thomas
Pickering urged visiting Albanian President Rexhep Meidani on 10 February
to "utilize the non-partisan nature of his office to reach out to all
Albanian political forces, promoting constructive dialogue and opposition
participation in the affairs of government and development of a
constitution," a spokesman said in Washington. The Albanian president then
left for Turkey, where he will spend three days accompanied by a large
political and economic delegation. PM

NANO APPEALS FOR FOREIGN EXPERTISE. Albania seeks foreign advice as well as
investment, Prime Minister Fatos Nano told foreign ambassadors and
representatives of the World Bank and the IMF in Tirana on 10 February. "We
want to know your ideas, advice, and suggestions about what we should
improve quicker, do better or differently...so that we lose no more
time--and funds." Nano added that his country appreciates the aid it has
received, but he stressed that "direct private investments are the
injections that will revive this country more quickly and better."
Representatives of the World Bank said the bank will provide a $10.25
million credit to provide guarantees to foreign investors against
"political risks." PM

ROMANIAN PARLIAMENT APPROVES FIVE NEW MINISTERS.  A joint session of the
Romanian parliament on 10 February approved  the nomination of five new
ministers proposed by Premier Victor Ciorbea,  RFE/RL's Bucharest bureau
reported.  A sixth minister, Mihai Sorin Stanescu, who was originally
nominated by the premier, withdrew his candidacy after two parliamentary
commissions  recommended against approving his nomination as  secretary of
state with ministerial rank at the Ministry of Defense on grounds of his
unfamiliarity with  military affairs. Stanescu, a National Liberal Party
(PNL) member, said he had to withdraw owing to pressure from the National
Peasant Party Christian Democratic (PNTCD). In a related development, 15
PNL senators sent an open latter to PNL Chairman Mircea Ionescu-Quintus
protesting PNTCD "dictates" on nominating new ministers and demanding that
the relations between the two parties be discussed at a PNL National
Council meeting on 21 February. MS

U.S.-MOLDOVAN NEGOTIATIONS ON MILITARY EQUIPMENT DELIVERIES. Sources at the
Moldovan Ministry of Defense have told an RFE/RL Chisinau bureau
correspondent that negotiations are under way with the U.S. on the delivery
of military equipment to Chisinau. The deliveries are to be part of the
second installment of payments for the U.S. purchase last year of 21
Moldovan MiG-29 planes. The second installment totals $40 million, as did
the first installment. Moldova will also receive medical equipment,
computers for its educational institutions, and "special equipment" for the
Interior and Security Ministries. In other news, Lieutenant-General
Nicholas Kehoe, the deputy chairman of NATO's Military Committee, ended a
three-day visit to Moldova on 10 February. He met with Defense Ministry
officials to discuss cooperation within the Partnership for Peace Program.
MS

BULGARIAN PRESIDENT MEETS WITH CLINTON. Petar Stoyanov on 10 February met
with President Bill Clinton at the White House, an RFE/RL correspondent
reported. Clinton later told journalists that "historic changes" have taken
place in Bulgaria over the last year and that Stoyanov has played a "key
role" in them." Under Stoyanov's leadership, Clinton said, Bulgaria has
"aligned itself firmly" with "the family of democratic nations" and "moved
forward" in implementing "difficult economic reforms," strengthened civil
institutions, and stepped up its fight against organized crime.  Stoyanov
said he and Clinton discussed the role of Bulgaria in the Balkans. He
expressed hope that Bulgaria will be a strong candidate for NATO
second-wave expansion and pledged that his country will be an "equal,
reliable and stable partner" of the U.S. MS

CLINTON LAUNCHES 'ACTION PLAN FOR SOUTHEAST EUROPE.' Following his 10
February meeting with Bulgarian President Stoyanov, Clinton launched what
he called the "Southeast Europe Action Plan," an RFE/RL correspondent in
Washington reported. The plan is designed to expand U.S. relations with
Bulgaria, Romania, Macedonia, and Slovenia and aims at closer economic,
political-military, and law-enforcement cooperation between the U.S and
those countries. A statement issued by the White House said the plan will
promote greater regional cooperation and will aim at setting up bilateral
and multilateral groups among those states as well as with the EU. MS

END NOTE

DONETSK STEEL MILL FORGES AHEAD

by Stefan Korshak

In Ukraine, conventional wisdom has it that managers of enterprises must
thoroughly re-educate themselves in capitalist ways before foreign
investors will come up with cash. But the recently privatized Donetsk Iron
and Steel Works (DISW) enterprise has found another way.
        The steel it makes is in demand around the world. After coming
through the Soviet collapse in better shape than most other steel mills,
DISW now has a foreign backer helping it plan for the future.
        The mill has been operating for more than 100 years. The present
directors took over in 1994, when enterprise after enterprise in Ukraine's
"smokestack sector" was going under. Immediately after independence, DISW
not only kept afloat but thrived by supplying enterprises throughout the
CIS.
        Geography helped DISW. The iron ore, coke, pellets, concentrates,
and refractors needed to convert iron ore into pressed sheets and rolled
pipe are available in abundance in surrounding regions of the country.
Thus, when CIS borders went up and customs duties were imposed, DISW did
not need to pay such duties to import raw materials. Just about the only
input that the Ukrainian steel industry, in general, and DISW, in
particular, have lacked in recent years is power. The situation was stable
until 1994, when the state began phasing out electricity subsidies. About
the same time, hyper-inflation hit, meaning that not only did the company
have to draw down its financial resources to maintain production but the
economy in which it operated was thrown into chaos.
        Imposition of new tariffs and value-added tax in CIS countries cut
into earnings as well. Worse still, smaller operators in the West began to
complain about the volume of cheap Ukrainian steel pouring into their home
markets. European and U.S. politicians began talking about "level playing
fields" and "dumping."
        The approved business school solution in 1996 would have probably
been to sell everything, downsize 80 percent of the employees, and either
open a smaller, more efficient mill, or invest capital resources into
government Treasury bills. But since at the time the government owned DISW,
liquidation was not an option for top managers.
        Ukraine's State Property Fund (SPF) has applied several approaches
toward converting a government company into a private one. Usually, the
bigger the company and the more likely its product could have a military
application, the larger the stake the SPF orders the government to
maintain. DISW qualified on both counts for a large government stake.
        In 1996, the SPF handed down a privatization decision for the plant
whereby ordinary citizens got 40 percent of shares and the government 20
percent. The remaining 40 percent went onto the market as a single-share
bloc. The competition winner was Autoaliance-Doverie, whose majority
shareholder is British MetalsRussia Ltd. For $50 million, the
Hong-Kong-based steel manufacturer and trader got 40 percent of the Donetsk
works. Already a provider of investment money for Russian steel plants,
MetalsRussia has, so far, pumped operating capital totaling $9 million in
equipment and $17 million into DISW.
        The task for both DISW and MetalsRussia management has been to find
a niche on the international market for a large-capacity steel factory,
relatively inefficient in energy and raw materials usage.
        The restructured enterprise altered its approach to foreign
markets, focusing on export to Southeast Asia. Manufacturers in places like
Singapore and Bangkok, who have no domestic steel industries to protect,
want cheap steel.
        One portion of the MetalsRussia cash investment is going into
machines to make Donetsk steel more marketable. But besides making better
steel, DISW must make its product cheaper, which, above all, means reducing
the energy cost per ton of steel. Smaller Western mills make competitive
steel largely because their energy costs are relatively low. Such an
operation in Ukraine would not only throw a lot of workers onto the
unemployment line but would put miners of raw materials out of work.
        Part of MetalsRussia's investment has gone into energy-saving
projects, like overhauling and upgrading DISW's Electric Furnaces. That
leaves the problem of finding markets for DISW's cheaper, better-quality
product.
        A global company with steel interests worldwide, MetalsRussia,
through its parent company Sakhavria Group Thailand, has opened up an
existing market for DISW products. Owning factory shares in sites like
Pakistan, Russia, India, and Ukraine, the foreign interest links DISW's
products into the international market for steel. In theory, the future for
DISW, and firms like it, looks rosy. The product is competitive. Foreign
capital has been tied into domestic manufacturing. Salaries are paid on
time. And the Ukrainian government is interested in the company's success.

The author is a Kyiv-based journalist who regularly contributes to RFE/RL.


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