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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 34, Part I, 19 February 1998


___________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 34, Part I, 19 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

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SPECIAL REPORT: A quarter of Russia's labor force receives its wages late,
in kind or not at all. This three-article series on the RFE/RL Web site
examines why. Russia's Workers: Why They Go Without Wages
http://www.rferl.org/nca/special/rulabor/index.html

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Headlines, Part I

* RUSSIAN OFFICIALS WELCOME ANNAN'S IRAQI VISIT

* RUSSIA HOLDS DIFFICULT TALKS WITH IMF

* THREE UN OBSERVERS KIDNAPPED IN WESTERN GEORGIA

* End Note: RUSSIA'S MALADY: ASIAN FLU OR NATIVE VIRUS?

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RUSSIA

RUSSIAN OFFICIALS WELCOME ANNAN'S IRAQI VISIT. Russian Foreign Minister
Yevgenii Primakov said in Budapest on 18 February that UN Secretary-General
Kofi Annan's upcoming visit to Iraq "represents an opportunity for a
political solution to the crisis around Iraq," ITAR-TASS reported.
Primakov's remarks were echoed in Moscow by Russian presidential spokesman
Sergei Yastrzhembskii, who called the visit "extremely important" and said
the Kremlin will "be awaiting the results." Meanwhile, a representative of
the Russian oil company Rozneft, Vladimir Vyunitskii, said Russia's
position on the Iraqi crisis is not being influenced by Russian oil
companies desiring to exploit Iraq's oil resources. Vyunitskii also said
neither Rozneft nor LUKoil is involved in projects in Iraq other than those
approved by the UN. BP

LI PENG CONCERNED ABOUT TRADE DEFICIT WITH RUSSIA. Chinese Prime Minister
Li Peng left Moscow for Beijing on 18 February after expressing  concern
about China's $2 billion trade deficit with Russia. Li said there is room
for increased economic cooperation between the two countries and that the
volume of trade between China and Russia ($6 billion in 1997) could match
that between China and the U.S. ($150 billion). In the 19 February edition
of "Nezavisimaya gazeta," Li denied Chinese workers are settling in
Russia's Far East and establishing "China Towns." He said Chinese citizens
traveling or working in Russia must adhere to Russian regulations on
obtaining visas, stressing that their presence in Russia does not
constitute a "secret colonization." Meanwhile, ITAR-TASS reported on 18
February that President Boris Yeltsin's informal meeting with his Chinese
counterpart, Jiang Zemin, will take place in Russia this summer or in early
fall. BP

RUSSIA TO TAKE OVER CONSTRUCTION OF BUSHEHR. Atomic Energy Minister Viktor
Mikhailov told journalists in Moscow on 18 February that Russia will
complete construction of the Iranian nuclear power station at Bushehr,
since Iranian firms contracted to carry out project have proven incapable
of doing so, Russian agencies reported. Mikhailov said the Iranian
companies' failure to build the reactor chamber has delayed completion of
the project by 20 months. He again denied that Russia has supplied
dual-purpose technologies to Iran or that Iran has the potential to
manufacture nuclear weapons. LF

CZECH SENATE DELEGATION IN MOSCOW. Russian Prime Minister Viktor
Chernomyrdin and a Czech Senate delegation led by Senate Chairman Petr
Pithart discussed improving Russian-Czech economic cooperation during talks
in Moscow on 18 February, Czech Television reported. The Czech delegation
expressed interest in better trade links with Russian regions, an area in
which the Czech Republic currently lags behind other European countries.
The officials also discussed the planned reintroduction of a visa regime
for Russians traveling to the Czech Republic. Proposals for settling
Russia's debt to the Czech Republic were also discussed, CTK reported.
Following talks with Russian Defense Minister Igor Sergeev, Pithart told
journalists that while "it is obvious that the Russians are not
enthusiastic about the prospect of our joining NATO," Sergeev had
acknowledged that NATO expansion is a "new reality." LB

RUSSIA HOLDS DIFFICULT TALKS WITH IMF. Talks between Russian and IMF
experts continued into the night on 18 February, ITAR-TASS and Reuters
reported. IMF Managing Director Michel Camdessus arrived in Moscow the
previous day for talks before the fund decides whether to extend the next
tranche of its three-year, $10 billion loan to Russia. On 18 February, he
met with Chernomyrdin and senior officials including First Deputy Prime
Ministers Anatolii Chubais and Boris Nemtsov. Later the same day, an
unnamed Russian source told ITAR-TASS that a "mass of problems" emerged
during negotiations with the IMF. Among the disputed issues are IMF demands
that Russia reduce tariffs on oil imports and introduce duties on oil
transports. (Yeltsin last month vetoed a law that would have established
such duties.) The IMF also objects to a recent presidential decree granting
tax breaks for some foreign investments in the automobile industry.
"Kommersant-Daily" on 19 February reported that the IMF conceded on all
those points. LB

RUSSIA TOOK OUT 'DISCREET' LOANS IN LATE 1997. The Russian government drew
$950 million in loans from Western banks in late 1997, the "Financial
Times" reported on 18 February, citing an unnamed source familiar with the
government's borrowing. Deputy Finance Minister Mikhail Kasyanov
acknowledged that the government took out some short-term loans late last
year but said the sum--which he refused to reveal--was "much lower than
$950 million." Kasyanov said the IMF was informed about the borrowing,
which, he added, fell within the limits of Russian law. Last November and
December, facing pressure to support the ruble and pay wage arrears to
state employees, government officials negotiated with a consortium of
Western banks on a possible $2 billion loan. However, officials eventually
announced that Russia did not need that loan (see "RFE/RL Newsline," 5 and
11  December 1997). LB

BUDGET COMMITTEE EVALUATES PROPOSED AMENDMENTS. The Duma Budget Committee
on 18 February recommended that deputies approve nine of the 12 amendments
to the 1998 budget recently submitted by the government (see "RFE/RL
Newsline," 17 and 18 February 1998). The three amendments that the
committee rejected include the controversial proposal to withhold spending
27.9 billion rubles ($4.6 billion) until the government has received
sufficient revenues to cover them, Interfax reported. Those 27.9 billion
rubles were added to the budget during negotiations between government and
parliamentary representatives last fall. The increase in planned
expenditures was considered vital to securing the Duma's approval for the
budget in the second and third readings. Also on 18 February, Chernomyrdin
discussed the budget amendments in meetings with Liberal Democratic Party
of Russian leader Vladimir Zhirinovsky and Popular Power faction leader
Nikolai Ryzhkov. LB

CHERNOMYRDIN ASKED TO SETTLE DISPUTE BETWEEN OFFICIALS. Dmitrii Vasilev,
chairman of the Russian Federal Securities Commission, has asked Prime
Minister Chernomyrdin to appoint a commission to investigate charges
recently leveled by Finance Minister Mikhail Zadornov, ITAR-TASS reported
on 17 February. In a letter to Chernomyrdin last month, Zadornov accused
the Federal Securities Commission of misappropriating budget funds,
violating government directives, and keeping poor accounts of how it spent
World Bank loans totaling $120 million. Vasilev informed Chernomyrdin that
he will resign if the allegations against his commission prove accurate. LB

ANIMOSITY BETWEEN VASILEV, ZADORNOV RUNS DEEP. The animosity between
Zadornov and Vasilev, who began to clash soon after Zadornov was appointed
finance minister last November, has recently worsened. Last month, Vasilev
said Zadornov had made statements that triggered declines on Russian
financial markets (see "RFE/RL Newsline," 3 February 1998). Later, the
Federal Fund for Defending the Rights of Investors and Shareholders filed
suit against the Finance Ministry for slander, "Kommersant-Daily" reported
on 31 January. In December, the ministry demanded that the fund--which is
connected to the Federal Securities Commission--return to the state budget
some 207 billion old rubles ($34.5 million) in proceeds from the auction of
a stake in Svyazinvest. At the time, Zadornov cited an Audit Chamber report
which charged that the fund was poorly managing its money and had not begun
compensating cheated investors (ostensibly its main task). LB

VOTE ON LAND CODE DISAPPOINTS OPPOSITION... Communist Party leader Gennadii
Zyuganov warned on 18 February that there will be a "big war" in Russia if
the purchase and sale of farmland is allowed, RFE/RL's Moscow bureau
reported. Disappointed by the Federation Council's refusal to override a
presidential veto on the land code, Zyuganov said Yeltsin lied when he said
in his recent address to the parliament that a compromise on land reform
was reached during Kremlin roundtable talks. Tula Oblast Governor Vasilii
Starodubtsev told RFE/RL that he favors Russia having one law regulating
land relations nationwide, not different laws in different regions.
Starodubtsev was one of the founders of the Agrarian Party, whose Duma
faction was largely responsible for drafting the code. Krasnodar Krai
Governor Nikolai Kondratenko charged during the debate over the code that
anyone who supports the unrestricted sale of land is a "Judas" subverting
fundamental Russian values, Interfax reported. LB

...DRAWS PRAISE FROM SOME REGIONAL LEADERS. Moscow Mayor Yurii Luzhkov told
RFE/RL's Moscow bureau that he voted against the land code on 18 February
because it contained "nothing sensible" on regulating land in cities.
Tatarstani President Mintimer Shaimiev also praised the Council's refusal
to override Yeltsin's veto of the code. Tatarstan is among the many regions
that are drafting their own land laws allowing the purchase and sale of
farmland. LB

UPPER HOUSE APPROVES LAW ON CONSTITUTIONAL CHANGES. The Federation Council
on 18 February approved a law outlining the procedure for adopting
constitutional amendments, ITAR-TASS reported. Under the legislation,
Amendments must be supported by two-thirds of State Duma deputies,
three-quarters of Federation Council deputies, and two-thirds of Russian
regional legislatures (see "RFE/RL Newsline," 9 February 1998). Also on 18
February, the Council delayed consideration of a law on cooperation with
Iraq in light of the current tense situation surrounding that country. In
addition, deputies approved a resolution asking the president, government,
and Duma to take steps to improve Russian industrial policy. Among other
things, the resolution urged the government to settle all its debts to
defense industry enterprises within the first half of this year. LB

COURT REJECTS INDEFINITE DETENTION OF FOREIGNERS. The Constitutional Court
on 17 February struck down a passage in the law on the legal status of
foreign citizens that allowed foreigners to be detained indefinitely until
a decision is made on their deportation, "Kommersant-Daily" reported on 18
February. The law is a holdover from the Soviet period, and a new version
has not yet been approved by the parliament. The first-ever appeal from a
foreigner to be considered by the court was filed by Yakhye Dashti-Gafur, a
Kurd who was held for two-and-a-half months in a detention center near
Moscow. The court found that, as in the case of Russian citizens,
foreigners and stateless people can be detained for more than 48 hours only
if a court order to that effect is issued. Judges rejected arguments by
representatives of the parliament and the Interior and Foreign Ministries
that foreigners facing deportation should be considered a "special case." LB

KALMYKIAN PRESIDENT DISSOLVES GOVERNMENT. Kirsan Ilyumzhinov on 16 February
dissolved the government of the Republic of Kalmykia and subordinated all
the ministries to himself, "Izvestiya" reported on 19 February. Ilyumzhinov
portrayed the decree as a budget-cutting measure to reduce bureaucracy, but
"Izvestiya" argued that it is aimed at widening the president's already
extensive control over political life in Kalmykia. Ilyumzhinov faces
virtually no opposition from the republican legislature or branches of
federal agencies, with the exception of the Kalmykian branch of the Federal
Security Service. "Izvestiya" cast doubt on whether the Ilyumzhinov is
legally entitled to dissolve the government and predicted that the
Constitutional Court will eventually have to rule on his decree.
Ilyumzhinov flouted federal legislation banning single-candidate elections
when he ran unopposed for re-election in 1995. LB

DZASOKHOV OUTLINES PRIORITIES, PROBLEMS. Speaking at his first press
conference in Moscow since his 18 January election as North Ossetian
president, Aleksandr Dzasokhov said his top priority is to change his
republic's dubious image as a source of adulterated vodka,
"Kommersant-Daily" reported on 18 February. But Dzasokhov admitted that it
will be difficult to assemble a government capable of galvanizing the
region's stagnating economy, given that many of those to whom he has
offered government posts have refused them. He argued that Moscow should be
"more generous" in its economic support of the North Caucasus republics.
Dzasokhov also expressed the hope that incumbent Ruslan Aushev, whom he
described as a friend,  will be reelected as president of neighboring
Ingushetia on 1 March, according to ITAR-TASS. LF

TRANSCAUCASUS AND CENTRAL ASIA

THREE UN OBSERVERS KIDNAPPED IN WESTERN GEORGIA. A group of 20 unidentified
men on 19 February abducted three members of the UN observer force
stationed in western Georgia and their driver. The four men and their
abductors have been surrounded in the village of Dzhikhaskari by Georgian
Interior Ministry forces who are negotiating with the abductors the release
of the hostages. CTK quoted Georgian Interior Minister Kakha Targamadze as
saying the abductors wish to exchange the hostages for the seven suspects
arrested in connection with the 9 February bid to kill Georgian President
Eduard Shevardnadze. LF

SHEVARDNADZE ASSASSINATION SUSPECT NAMED. One of the two suspects arrested
in Zugdidi on 17 February in connection with the 9 February attempt to kill
Georgian President Shevardnadze has been named as Gennadii Kobalia,  a
distant relative of the former commander of ousted President Zviad
Gamsakhurdia's private army,  Russian agencies reported.  The next day,
Russian Prosecutor-General Yuri Skuratov again affirmed Russia's readiness
to assist the Georgian investigation into the assassination attempt. But
Skuratov disclaimed any knowledge of the whereabouts of former Georgian
Security Minister Igor Giorgadze, who fled to Russia following the August
1995 car bomb attack on Shevardnadze. Georgia has demanded the extradition
of Giorgadze, who is suspected of involvement in both attempts on
Shevardnadze's life. LF

ARMENIA'S HAIRIKYAN WANTS ELECTORAL LAW CHANGED. Self-Determination Union
chairman and presidential candidate Paruir Hairikyan told supporters on 18
February that unless the electoral law's provisions on the composition of
electoral commissions are amended, it will be difficult to ensure that the
16 March presidential poll is free and fair, RFE/RL's Yerevan bureau
reported. Representation of various parliamentary factions on the electoral
commissions is directly proportional to the number of seats each faction
received in the 1995 elections. But numerous deputies from the former
majority Hanrapetutyun faction have since defected to other parliamentary
groups.  Supporters of a second presidential candidate, National Democratic
Union chairman Vazgen Manukyan, have complained that the Armenian media are
violating the election law by  devoting the lion's share of their election
coverage to Prime Minister and acting President Robert Kocharyan, according
to Interfax on 18 February. LF

AZERBAIJAN BLASTS LEBED'S  TRIP TO KARABAKH. Presidential foreign policy
adviser Vafa Gulu-zade  said on 18 February that former Russian Security
Council Secretary Aleksandr Lebed's visit to Nagorno-Karabakh is a
"violation of international ethics and international norms," ITAR-TASS
reported. Lebed was one of some 30 Russian political figures who flew to
Stepanakert via Yerevan on 18 February to participate in the 10th
anniversary celebrations of the Nagorno-Karabakh Oblast Soviet's adoption
of an appeal to the Soviet leadership to transfer the oblast to Armenian
jurisdiction.  Also on 18 February, the Azerbaijani Defense Ministry issued
a statement blaming Armenia for an incident the previous day in which a car
carrying cease-fire monitors from the Organization for Security and
Cooperation in Europe were traveling.  One Azerbaijani soldier was wounded
in the ensuing exchange of fire. LF

IRAN PROPOSES PRISONER EXCHANGE WITH BAKU. Iranian Justice Minister
Mohammed Montazeri proposed at a meeting with his Azerbaijani counterpart,
Sudaba Huseinova, in Baku on 17 February that the two countries take steps
to repatriate prisoners, Turan reported on 18 February. There are an
estimated 70 Iranian citizens currently serving prison terms in Azerbaijan,
mostly for drug-related offenses, while some 20 Azerbaijanis are imprisoned
in Iran. LF

TAJIK GOVERNMENT SAYS OPPOSITION VIOLATED PEACE ACCORD. The Tajik
government has sent a letter to United Tajik Opposition leader Said Abdullo
Nuri complaining about violations of the peace agreement, Interfax reported
on 18 February. The letter alleges that UTO supporters were involved in the
killing of two police officers whose bodies were found on 7 February. It
also points out that UTO field commander Rahmon Sanginov is demanding the
return of UTO deputy leader Ali Akbar Turajonzoda from Tehran and all UTO
fighters still in Afghanistan. Sanginov said he is prepared to take
hostages if his demands are not met. BP

TURKMENISTAN, RUSSIA AGREE ON GAS TRANSIT. Interfax on 18 February quoted
an unnamed Turkmen official as saying his government and Russia have agreed
on terms for shipping Turkmen natural gas to Ukraine via Russia. For every
1,000 cubic meters of gas shipped by Turkmenistan, Russia will receive
$1.75 per 100 kilometers of the 1,050 kilometer pipeline that crosses its
territory. BP

END NOTE

RUSSIA'S MALADY: ASIAN FLU OR NATIVE VIRUS?

by Peter J. Stavrakis

        The financial crises that swept through Asian economies have had
global repercussions.  Western  markets braced for the worst, and Latin
American states feared the debilitating effects of the same contagion.
Russia was also hit hard, its formerly booming stock market plunging 49
percent in value since November 1997, followed by a jump in domestic
interest rates.  Yet while Asian states are surviving their affliction and
Western stock markets have recovered, Russia remains unable to shake its
economic malaise.
        External investors remain wary of Russia.  The "Financial Times"
reports that foreign money totaling $600 million fled the ruble-denominated
bond market last month.  Equally telling, the much-vaunted Russian economic
boom has failed to materialize. GNP grew at a miserly 0.4 percent in 1997,
and leading politicians such as First Deputy Prime Minister Anatolii
Chubais--earlier so bold in their predictions for robust growth--revised
their estimates and predicted real economic growth only in the next
century.  Even modestly promising reports of increasing tax revenues failed
to calm jittery financial markets.
        Russia's  fabled reformers also appear unable to respond decisively
to the crisis.  Brazil, faced with its own Asian economic fallout, acted
adroitly by introducing a strong  fiscal austerity  program.  The Kremlin,
by contrast,  appears mired in its preference for clan politics.  Those
different responses reflect that while Russia's current problems are the
same as those of Asian economies, the causes are fundamentally different
and suggest that Russia's time of troubles is far from over.
        Asian and Latin American states possess robust and diversified
market economies and political institutions skilled at harnessing economic
growth for broader socio-economic development.  Russia, by contrast, has a
kind of oligarchic capitalism controlled by a combination of old political
and new economic elites, thriving amid an extralegal "shadow state."
Instead of Western-style free-market democracy, Russia's central power
structures have derived from a fusion  of corrupt government officials and
private sector elites.  This congeries of elites has survived principally
by preying on the resources and productive elements of Russian society--as
well as  foreign investors.
        The  1995 "loans for shares" privatization--arguably one of
history's most remarkable shell games that funneled state resources to a
select elite--gave post-Soviet clans the economic base essential for
survival, while simultaneously cutting out domestic and foreign
competitors.  Russian clan leaders--Prime Minister Victor Chernomyrdin,
Chubais, Boris Berezovskii, Mikhail Khodorkovskii, Peter Aven, and
others--closed ranks and  vigorously defended their assets from competitors
representing  a threat to their control of the economy.  Foreign investors
such as GE Moscow, Australia's Star Mining, TransWorld Metals soon found
how quickly and arbitrarily the law could be reinterpreted or rewritten to
deprive them of legitimate investments.
        The prevalence of closed bond offerings is a more recent means of
preventing fair and open competition.  As minority shareholders in Sidanco
recently learned, the Russian oil giant intended to use that device to
dilute the shareholders' interest in the company.  Investment in Russia has
a become a high-stakes game in which only the politically well-connected
earn the privilege of risking their fortunes.
        Oligarchic capitalism in Russia reached a new stage with the merger
of Yukos and Sibneft to form Yuksi oil company.  Khodorkovskii, president
of Yukos and an opponent of open foreign investment in Russia energy
markets, viewed that merger as the best means of consolidating a domestic
alliance with Berezovskii, head of the LogoVAZ conglomerate, while blocking
substantial foreign investment in the Russian oil industry.
        Lost in the Russian power struggle, however, are considerations
fundamental to a sound economy.  There is no evidence that Yuksi's greater
size will translate into enhanced global competitiveness.  Restrictive
conditions on foreign shareholding militate against improvement of
corporate governance.  The Russian government continues the best of Soviet
traditions, producing economic performance data that fail to persuade
outsiders that budgetary commitments can be met.  Persistent wage
non-payment in the government sector is but one indicator that the
promising fiscal picture may be merely part of a larger Potemkin village.
        Foreign investors have solid grounds for being wary.  At present,
Russia's state and economic oligarchs appear more inclined to use the lure
of vast potential to attract foreign capital and assistance monies that
will be used to prop up an economy that has produced nothing of any real
value in nearly a decade--and has little prospect of doing so in the
future.  Yet even that approach cannot endure, and the problem of a
stagnant, unstable, even resentful Russia will remain on the international
agenda.
        Russian ingenuity is  sorely lacking here, the only alternative
being calls for the strengthening of the Russian state. Such an option
should make neighbors nervous, partners wary, and investors protective of
their wallets.

The author is an associate professor of political science at the University
of Vermont.


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