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RFE/RL NEWSLINE Vol 2, No. 30, Part I, 13 February 1998
___________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 30, Part I, 13 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 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx FIVE NEW LANGUAGES ADDED TO REAL AUDIO SCHEDULE Listen to one hour of news in Bulgarian, Estonian, Latvian, Lithuanian and Romanian at the RFE/RL Web site: http://www.rferl.org/realaudio/ xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * COHEN, SERGEEV HOLD TALKS IN MOSCOW * CHUBAIS SAYS FINANCIAL CRISIS HAS PASSED * RADUEV CLAIMS RESPONSIBILITY FOR SHEVARDNADZE ASSASSINATION BID * End Note: TER-PETROSSYAN LEAVES A MIXED ECONOMIC PICTURE xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA COHEN, SERGEEV HOLD TALKS IN MOSCOW. Russian Defense Minister Igor Sergeev and U.S. Secretary of Defense William Cohen, meeting in Moscow on 12 February, sought to emphasis their common position that Baghdad must allow UN inspectors access to suspect sites in Iraq. Nonetheless, differences emerged between the two leaders. Sergeev warned of the implications for Russian-U.S. relations should the U.S. attack Iraq. Such a development would put ties between the two countries "back several years," Sergeev said. The Russian official also stressed that the Persian Gulf crisis does not affect only Iraq and the U.S. but "involves the vital interests of Russia and other countries in the region." He posed the question of whether "America is ready for all the possible consequences" if it attacked Iraq and whether such an attack would "help to strengthen stability and security in the world." BP RUSSIAN MINISTRY DENIES 'WASHINGTON POST' REPORT. At his 12 February meeting with U.S. Secretary of Defense Cohen, Sergeev rejected allegations in a "Washington Post" article the same day that in 1995 Russia had contracted to sell Iraq equipment that could be used for the production of biological weapons. Sergeev said "there was no agreement. We had no plans to reach such an agreement." Cohen added he had no knowledge of the allegations and therefore could neither confirm nor deny them. Meanwhile, Foreign Minister spokesman Gennadii Tarasov said "Russia has never struck any deal with Iraq contravening the existing [UN sanctions]." Tarasov denied the article's claim that Russia is informing Iraq about the UN Inspection Committee's activities. "We resolutely reject this misreporting," Tarasov said, adding that the article's timing "is not accidental." Meanwhile, Foreign Minister Yevgenii Primakov told reporters on 13 February the article is a "provocation." BP CHUBAIS SAYS FINANCIAL CRISIS HAS PASSED. First Deputy Prime Minister Anatolii Chubais announced at a 12 February cabinet meeting that the "second wave of the financial crisis" that began last fall has subsided, Russian news agencies reported. He said the government and Central Bank managed to "rebuff" an attack on the ruble in late January and earlier this month, when the Central Bank raised the refinancing rate to 42 percent to stave off a ruble devaluation (see "RFE/RL Newsline," 30 January and 2 February 1998). Chubais also noted that yields on government treasury bills (GKOs) fell from 45 percent on 30 January to 34 percent in recent days. He said the government intends to meet the goal of bringing GKO yields down to 15-18 percent by year-end. That target was set in the government's 12 major tasks for 1998, recently approved by President Boris Yeltsin and Prime Minister Viktor Chernomyrdin. LB YELTSIN CUTS KREMLIN STAFF. Yeltsin on 12 February issued a decree dismissing 100 officials in the presidential administration and reducing the total staff of the administration to 1,945, Russian news agencies reported. The casualties included Yurii Baturin, Yeltsin's adviser on security questions since spring 1993, and Boris Kuzyk, adviser on military-technical cooperation abroad since summer 1994. According to the 13 February "Rossiiskie vesti," the official newspaper of the presidential administration, the cutbacks are intended to eliminate duplication and competition within the administration, which, the newspaper said, has led to the president receiving conflicting information. "Kommersant-Daily" argued on 13 February that Kuzyk's dismissal is the final blow to the team of Aleksandr Kotelkin, which oversaw Russian arms exports from late 1994 until August 1997, when Yeltsin sacked Kotelkin as the head of the arms exporter Rosvooruzhenie (see "RFE/RL Newsline," 22 and 25 August 1997). LB U.S. OFFICIAL DENIES REPORT ON YELTSIN CAMPAIGN FINANCING. "Nezavisimaya gazeta" on 13 February quoted an unnamed official in the U.S. embassy in Moscow as denying that U.S. funds were used to finance Yeltsin's 1996 presidential campaign. "Moskovskii komsomolets" recently alleged that the U.S. transferred $500 million to Moscow in March 1996 and that large Russian banks, many of which financed Yeltsin's campaign, acquired that money (see "RFE/RL Newsline," 11 February 1998). The U.S. embassy official told "Nezavisimaya gazeta" that the $500 million in new $100 bills were stored at the embassy because no Russian bank--not even the Central Bank--would guarantee the security of such a large sum. Russian banks purchased the new $100 bills for equivalent sums in old bank notes, the source said. LB SUPREME COURT HEARS PENSIONER'S CASE AGAINST GOVERNMENT. In the first case of its kind, the Supreme Court is hearing an appeal from a pensioner against the federal government, RFE/RL's Moscow bureau reported on 12 February. Zinaida Samokhina is protesting the government's decision to set 760,000 old rubles ($127) as the average wage for the fourth quarter of 1997. That estimate is used to calculate pensions distributed after 1 February 1998, and critics have said the government's estimate is far lower than the real average wage paid from October-December 1997 (see "RFE/RL Newsline," 22 January 1998). Nikolai Samokhin, who is representing his mother in the Supreme Court hearings, told RFE/RL that the government's action violated various Russian laws and international norms. Government officials have said adopting a higher wage estimate would bankrupt the Pension Fund and cause pension arrears to mount. LB PENSION FUND CHAIRMAN SUING COMMERCIAL BANKS. Vasilii Barchuk has vowed to file lawsuits against commercial banks, including Sberbank and Menatep, for allegedly violating the civil code, "Kommersant-Daily" reported on 7 February. Barchuk charges that since the Constitutional Court struck down an article of that code giving wage payments precedence over tax payments (see "RFE/RL Newsline," 6 January 1998), the banks have attached a very low priority to paying contributions to the Pension Fund. Barchuk estimated that the fund received some 2 billion rubles ($330 million) less than it should have in January as a result of the court's decision. He has also asked the Prosecutor-General's Office to examine the legality of the commercials banks' actions. LB AUDIT CHAMBER FINDS MASSIVE IRREGULARITIES AT RTR. The Audit Chamber on 12 February announced that it found massive financial irregularities in its audit of the fully state-owned network Russian Television (RTR), RFE/RL's Moscow bureau reported. The chamber found that the State Property Committee failed to monitor the finances of RTR, leading to huge losses for the state when property, precious metals, and funds were misappropriated. Nikolai Svanidze, the network's chairman since February 1997, said he entirely agrees with the Audit Chamber's conclusions. Most of the violations uncovered by the chamber occurred during Oleg Poptsov's tenure as chairman of the network, from 1990 until February 1996. The chamber's representatives cautioned against interpreting their findings as evidence in support of privatizing the network. They also spoke out against a law that would ban advertising on RTR, which the Duma recently passed in the first reading. LB ORT APPROVES NEW BOARD OF DIRECTORS, CHARTER. Shareholders in the 51 percent state-owned network Russian Public Television (ORT) on 12 February approved a new board of directors and charter for the network, ITAR-TASS and "Kommersant-Daily" reported. Vitalii Ignatenko, the director of the state-run news agency ITAR-TASS, will chair the 11-member board of directors. The board will also include ORT general director Kseniya Ponomareva, her deputy Badri Patarkatsishvili, Yeltsin's daughter and adviser Tatyana Dyachenko, Deputy Prime Minister Oleg Sysuev, government spokesman Igor Shabdurasulov, presidential spokesman Sergei Yastrzhembskii, Gazprom-Media head Viktor Ilyushin, and Yurii Dubov, an executive from Boris Berezovskii's LogoVAZ business empire. Although Berezovskii will not serve on the board, he attended the 12 February meeting. The new ORT charter transforms the network from a closed to an open joint-stock company. LB CHARGES FILED AGAINST SUSPECT IN JOURNALIST'S MURDER. The Prosecutor-General's Office has officially charged retired Colonel Pavel Popovskikh with planning and taking part in the murder of journalist Dmitrii Kholodov, Interfax reported on 12 February. Kholodov was killed by a booby-trapped briefcase in October 1994. Popovskikh formerly headed the intelligence department of the Airborne Troops. Aleksandr Zhilin, who reports on military topics for "Moskovskie novosti" and RFE/RL, told RFE/RL's Moscow bureau on 12 February that sources in the Airborne Troops say investigators searched Popovskikh's office last year. They reportedly uncovered documents listing the names of journalists who were particularly critical of former Defense Minister Pavel Grachev and suggested actions to be taken against those journalists. Grachev was defense minister when Kholodov, who reported on military corruption, was murdered. LB SOLDIER APPEALS CONVICTION FOR ARMS DEPOT BLAZE. Sergei Chugaev, who was sentenced to 10 years in prison last month for starting a fire at an arms depot in April 1997, has appealed his conviction, "Kommersant-Daily" reported on 12 February. Chugaev allegedly started the blaze in Bira (Jewish Autonomous Oblast) by carelessly dropping a cigarette (see "RFE/RL Newsline," 29 April 1997 and 26 January 1998). He claims he was "set up" by officers who illegally sold weapons and ammunition and then deliberately set the fire in order to conceal their crime. However, Oleg Mikhailov, the presiding judge at the trial at which Chugaev was convicted, told "Kommersant-Daily" that law enforcement officials have found no proof to substantiate those allegations. LB YELTSIN'S PRIMORE REPRESENTATIVE OFFERS TO GIVE UP SPECIAL POWERS. Viktor Kondratov, the presidential representative in Primorskii Krai, on 11 February informed the krai Duma that he plans to ask Yeltsin to rescind a May 1997 decree granting him special powers, ITAR-TASS reported. The decree, issued during a protracted energy crisis in the krai, transferred to Kondratov many powers previously wielded by Governor Yevgenii Nazdratenko, including the authority to supervise how federal funds are spent in Primore. Nazdratenko claimed the decree was unconstitutional, and the Federation Council appealed to Yeltsin to rescind it last July (see "RFE/RL Newsline," 9 June and 8 July 1997). In his message to the krai Duma, Kondratov explained that he no longer needs the expanded authority because the legislature can monitor the activities of the Primore administration, "Kommersant-Daily" reported on 13 February. Many opponents of Nazdratenko were elected to the krai Duma last December. LB WOULD-BE CANDIDATES DENOUNCE CAMPAIGN IN MORDOVIA... Nikolai Merkushkin, the head of the Republic of Mordovia, appears poised for an easy victory in a 15 February election to retain his post. However, would-be challengers say they were excluded from the campaign so that Merkushkin would have no genuine competition. The only other registered candidate is Aleksei Sharov, a little-known director of a macaroni factory. Local observers consider Sharov a "back-up" for the incumbent, RFE/RL's Moscow bureau reported on 5 February. (Russian law forbids candidates from running unopposed.) Among the seven candidates denied registration by the Mordovian Electoral Commission are State Duma deputy Nikolai Medvedev, a well-known local figure and member of the Russian Regions faction, and Duma deputy Yevgenii Kosterin, the leader of the Communist Party branch in Mordovia. LB ...WHILE MORDOVIAN PRESIDENT DENIES FOUL PLAY. In an interview with an RFE/RL correspondent in Mordovia, Merkushkin denied that he used his political influence to bar prominent opponents from the campaign. Saying he would prefer Medvedev and Kosterin to be in the race, he accused them of not wanting to run so as not to reveal the low level of their support. Medvedev has called for a criminal investigation into recent events in Mordovia. He told an RFE/RL correspondent in Moscow that his longtime supporters have been threatened and intimidated. He also charged that there is no legal basis for holding an election this month in Mordovia. For his part, Kosterin appealed to the Mordovian Supreme Court after the electoral commission denied him registration. After losing that court case, he appealed to the Russian Supreme Court and sent a complaint to the Prosecutor-General's Office. LB TRANSCAUCASUS AND CENTRAL ASIA RADUEV CLAIMS RESPONSIBILITY FOR SHEVARDNADZE ASSASSINATION BID. Speaking on his private Chechen Television channel on 12 February, radical field commander Salman Raduev claimed that his Caucasian Home organization was responsible for the failed 9 February attempt to assassinate Georgian President Eduard Shevardnadze, Interfax reported. Georgian Interior Minister Kakha Targamadze and two senior Chechen officials have expressed skepticism about Raduev's claim. But Russian Security Council Secretary Ivan Rybkin told an RFE/RL correspondent in Moscow on 13 February that it cannot be ruled out that Raduev is speaking the truth. Georgian investigators on 12 February located the Tbilisi apartment used by the attackers. That apartment had been rented by a Chechen woman, according to Caucasus Press. LF THREE MORE CONTENDERS FOR ARMENIAN PRESIDENCY... Congresses of the Union for Self-Determination and the Democratic Party of Armenia have proposed their chairmen, Paruir Hairikian and Aram Sargsian, as candidates for the 16 March presidential elections. Both men registered as candidates in the September 1996 presidential ballot but withdrew their candidacies in support of Vazgen Manukyan. Hairikyan said he is confident that, if elected, he could solve Armenia's most pressing problems within a year. Sargsian said he would hold the Armenian Pan-National Movement responsible for its policies, according to Noyan Tapan. Meanwhile, former presidential adviser Davit Shahnazarian has announced that he will contend the election as an independent candidate, RFE/RL's Yerevan bureau reported on 12 February. LF ...BUT DEFENSE MINISTER DECLINES TO RUN. Vazgen Sargsian has rejected a request by the majority Yerkrapah parliamentary group to run as its presidential candidate, Caucasus Press reported on 13 February, citing Noyan Tapan. Yerkrapah leader Albert Bazeyan said Sargsian considers his primary responsibility to be strengthening the army and that his candidacy would substantiate Western assertions that the "party of war" has come to power in Armenia. LF MANUKYAN CALLS FOR NEW CONSTITUTION, PARLIAMENTARY ELECTIONS. Addressing a rally of some 20,000 people in Yerevan on 12 February, presidential candidate Vazgen Manukyan said the upcoming presidential poll must be free and fair to ensure that the former leadership is prevented from returning to power, Noyan Tapan reported. Manukyan affirmed that, if elected, he would hold pre-term parliamentary elections and amend the country's constitution. Manukyan said the Karabakh conflict should be resolved through "peace talks and compromises" rather than unilateral concessions, according to Interfax. LF OSKANIAN HOPES FOR NEW KARABAKH PROPOSALS. Acting Foreign Minister Vartan Oskanian says he hopes that when the three co-chairmen of the Organization for Security and Cooperation in Europe's Minsk Group meet in Paris on 17 February, they will try to come up with a revised peace plan for Nagorno-Karabakh acceptable to both Yerevan and Stepanakert. But he added that it will be difficult for the co-chairmen to modify the existing proposals without retreating too far from their original position. In an interview published in "Hayastani Hanrapetutyun" on 11 February, Oskanian said the current proposals contain both positive and negative points but that the negative points relate to issues of principle. He said that to accept those points as a basis for negotiations would be to predetermine the outcome of the talks and would therefore be unacceptable to Nagorno-Karabakh. LF ARMENIA REJECTS AZERBAIJANI REPORT OF FRONTIER SHOOTING. The Armenian Defense Ministry on 12 February denied a report by its Azerbaijani counterpart claiming an Azerbaijani soldier was wounded when Armenian forces opened fire on Azerbaijani territory two days earlier, Russian and Armenian agencies reported. Noyan Tapan pointed out that the distance between the Armenian and Azerbaijani locations named in the Azerbaijani report is more than 6 kilometers. Such a distance is far greater than the range of the sub-machine guns reportedly used by the Armenian attackers, the agency pointed out. LF AZERBAIJAN, LEBANON SIGN COOPERATION AGREEMENTS. Azerbaijani and Lebanese government ministers signed agreements on encouraging and protecting investments, trade and economic cooperation, customs cooperation, and air travel during the 11-12 February visit to Baku of Lebanese Prime Minister Rafik Hariri, Turan and ITAR-TASS reported. Hariri met with his Azerbaijani counterpart, Artur Rasi-zade, parliamentary speaker Murtuz Alesqerov, and President Heidar Aliev to discuss the prospects for Lebanese investments in Azerbaijan and for purchasing Azerbaijani oil exported via the planned Baku-Ceyhan pipeline. LF IRAN ENDORSES AZERBAIJANI-TURKMEN STAND ON CASPIAN. Iranian President Mohammad Khatami has written to his Turkmen counterpart, Saparmurad Niyazov, to express his support for the 5 February agreement signed by the Azerbaijani and Turkmen foreign ministers on dividing the Caspian Sea into national sectors, Turkmen Foreign Minister Boris Shikhmuradov told Interfax on 12 February. Khatami said that the agreement does not contravene Tehran's principles for Caspian cooperation, but he added that general decisions must be endorsed by all five littoral states. Iranian Foreign Minister Kamil Kharrazi is expected to discuss the status of the Caspian during his visit to Moscow later this month. Russian President Boris Yeltsin told "Corriere della Sera" on 9 February that a new agreement is needed on the Caspian's legal status before its resources can be developed. Yeltsin complained that some European countries engaged in developing Caspian hydrocarbons are infringing on Russia's national interests. LF END NOTE TER-PETROSSYAN LEAVES A MIXED ECONOMIC PICTURE by Michael Wyzan When Armenian President Levon Ter-Petrossyan resigned on 3 February, local and world attention focused on the implications of his action for attempts to resolve the conflict over Nagorno-Karabakh. But there has been little discussion, at least outside the country, of the economic implications of his resignation. One reason for optimism is that the government of Prime Minister Robert Kocharyan has scored a number of successes in economic policy-making and enjoyed satisfactory relations with the IMF and World Bank. The government's achievements include a shift toward market privatization from a variant based on vouchers, which failed to inject new capital into enterprises or change the way they are managed. That change in approach is already paying off. Ninety percent of Armentel, the national telecommunications company, was sold to a Greek consortium in December, and the prospects for large-scale investment in mining are improving (a Canadian company has agreed to invest $200 million in gold mining). Russian investment is set to flow into the energy sector, and the famous Yerevan cognac factory is up for tender. The regime's other achievements include liberalizing the banking system, making the country the first CIS state to allow only courts access to information on bank accounts, improving tax collection, and passing legislation on tax reform (for example, broadening the base of the value-added tax). At the same time, however, most economic indicators deteriorated in 1997, following three years in which Armenia registered one of the best performances within the CIS. GDP growth for the first 11 months of 1997 was 2.7 percent, compared with a projected 6 percent for the year as a whole (and with 5.4-6.9 percent over the previous three years). Growth was fueled by trade and services, while industrial output stagnated. Although the growth figures are respectable by CIS standards, Armenia is no longer the most dynamic member; the economies of Azerbaijan, Georgia, and Kyrgyzstan are all growing faster. Another disappointment is consumer price inflation, which was 21.1 percent for the first 11 months, compared with a projected 10 percent for the year (and 5.7 percent in 1996). The trade deficit for the first 11 months was $608 million, meaning that the figure for the whole year almost certainly exceeded the 1996 level of $571 million. Both those figures and the current account deficits of about $500 million are large for an economy the size of Armenia's. However, inflows from the Diaspora, international financial institutions, and foreign countries, especially the U.S., have prevented the imbalances from destabilizing the economy. Virtually the same could be said for the budget deficit; while it remained high at 6.8 percent of GDP in 1997, it is nonetheless declining. Last November, the World Bank announced it would provide $200 million in 1997-1998 to finance the budget deficit and infrastructural investment. The IMF has been a bit more standoffish, delaying the release of the first of two annual tranches of a three-year loan agreed in February 1996 until the second half of 1997 out of concern over tax collection and public debt. The fund, concerned about the worsening macroeconomic indicators, energy pricing policy, and the management of privatization, did not approve release of the second tranche until early February of this year. In late 1997, the government acknowledged that the year had been a disappointment but nonetheless projected major improvements for 1998: 5.2 percent GDP growth, 9 percent inflation, a stable exchange rate, and a budget deficit of 5.5 percent of GDP. In the wake of Ter-Petrossyan's resignation, the most important factor for the fate of the economy is the identity of the next set of policy-makers. Vazgen Manukyan, who narrowly lost the disputed president elections in September 1996, announced on 5 February that he would campaign for the presidency on a ticket favoring democracy and industrial development. Based on Manukyan's campaign pledges from 1996, industrial development may mean protectionism in foreign trade, activist industrial policy (including subsidization of failing enterprises), and closer economic ties with Moscow. At the more extreme end of the political spectrum, the communist party claimed last September to have collected 1 million signatures for a petition demanding that Armenia join the Russia-Belarus union. The Communists have urged a halt to privatization and a large increase in social welfare payments. Armenia, along with other transition nations such as Moldova, is experiencing "reform fatigue." Generally good economic policy and, at least until last year, satisfactory macroeconomic statistics have failed to assuage popular frustration with high levels of poverty and socio-economic inequality. Despite encouraging signs, total foreign investment remains tiny and interest among private investors is growing only slowly. Kocharyan differs from Ter-Petrossyan in that he argues good economic policy and reforms aimed at wiping out corruption will suffice to ensure satisfactory economic performance even without progress on Nagorno-Karabakh. Armenia's economic results in 1997 leave some doubt about that argument. If the next government lacks Kocharyan's commitment to fundamental reform, the country's economic future will look rather cloudy. The author is an economist based in Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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