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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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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? xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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