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RFE/RL NEWSLINE Vol 2, No. 37, Part I, 24 February 1998
___________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 37, Part I, 24 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 SEARCH RFE/RL NEWSLINE BY REGION Use the RFE/RL Web site's new search engine to limit your search to a regional section of RFE/RL Newsline, e.g. Russia or Southeastern Europe: http://www.rferl.org:8080/ xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * YELTSIN HINTS HE MAY SACK SOME MINISTERS * RUSSIA, SYRIA MEND FENCES * ZVIADISTS RULE OUT RELEASING MORE HOSTAGES * End Note: GEORGIA'S FAST-GROWING ECONOMY xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN HINTS HE MAY SACK SOME MINISTERS. President Boris Yeltsin announced on 23 February following a meeting with Prime Minister Viktor Chernomyrdin that "certain people will have to answer" for their actions at a 26 February cabinet meeting, and that he will "immediately make a decision" on their future, Russian news agencies reported. The government is to report on its 1997 performance during that meeting, which was initially scheduled for early December but has been postponed several times. In recent weeks, Yeltsin has said "one or two faces" in the government may change but has indicated he will not fire First Deputy Prime Ministers Anatolii Chubais and Boris Nemtsov (see "RFE/RL Newsline, 5 and 6 February 1998). During a 17 February speech to both houses of the parliament, Yeltsin said "we will have another government" if ministers fail to meet certain economic goals. LB DEPUTY PREMIERSHIPS TO BE ABOLISHED? Former presidential adviser Georgii Satarov, who helped draft Yeltsin's speech to the parliament, told ITAR-TASS on 19 February that Yeltsin is planning an "administrative reform" that may involve eliminating the posts of deputy prime ministers. A 65-page document circulated among parliamentary deputies on 17 February referred to plans to make ministries the "supporting elements" of the government. According to Satarov, the reform will reduce and eventually eliminate the role of deputy prime ministers, who currently share responsibility for running some ministries with ordinary ministers. Duma Speaker Gennadii Seleznev has said the new law on the government requires Yeltsin to eliminate the post of first deputy prime ministers (see "RFE/RL Newsline," 13 January 1998). LB RUSSIA, SYRIA MEND FENCES. A Russian government delegation that included Justice Minister Sergei Stepashin and Atomic Energy Minister Viktor Mikhailov arrived in Damascus on 20 February for talks aimed at reviving the two countries' "strategic partnership" and to attend the first session of the Russian-Syrian technical and economic committee, created five years ago, Russian media reported. According to "Russkii telegraf" of 21 February, Stepashin had previously disclosed that military-technical cooperation, including the sale to Syria of Russian arms, would be a key topic at the talks. Syria owes Russia some $10 billion for arms purchases. The next day, Stepashin and Mikhailov met with Syrian President Hafez al-Assad, to whom they handed a letter from Russian President Boris Yeltsin containing proposals for developing bilateral cooperation. On 23 February, the two sides signed a series of cooperation agreements on nuclear power, trade, and tourism. LF DUMA RATIFIES AGREEMENTS WITH KAZAKHSTAN. The State Duma on 20 February ratified agreements between Moscow and Aqmola on Russia's use of firing and test ranges on Kazakh territory, ITAR-TASS reported. Russia is to pay $27.5 million annually for the use of those sites, but $24.3 million is take the form of military hardware deliveries and the training of Kazakh servicemen. BP ZYUGANOV PLEASED WITH DEVELOPMENTS IN IRAQ. Communist Party leader Gennadii Zyuganov told journalists on 23 February that his party is satisfied with the results of UN Secretary-General Kofi Annan's recent talks with Iraqi leaders, Russian news agencies reported. He especially praised the Russian Foreign Ministry and Foreign Minister Yevgenii Primakov for their work in settling the crisis in Iraq. Zyuganov added that all of the Duma factions, except for Yabloko, "worked actively" for a peaceful settlement to the problem. Grigorii Yavlinskii and other Yabloko members criticized a resolution adopted by the Duma on Iraq and charged that sending a plane to Baghdad filled with humanitarian aid and Duma deputies was a political stunt rather than an attempt to resolve the crisis (see "RFE/RL Newsline," 5 and 9 February 1998). LB OFFICIALS MARK HOLIDAY WITH PROMISES TO MILITARY. Yeltsin announced on 23 February, Defenders of the Fatherland Day, that he is "much more optimistic about military reform" than he was a year ago, Interfax reported. The same day, Prime Minister Chernomyrdin promised that the wages of military personnel will be doubled in 1998 and that all servicemen will have apartments before the year 2000. During a 23 February meeting with Defense Minister Igor Sergeev, Yeltsin said a Japanese loan of $1.5 billion will be invested in a government program to build housing for military personnel who have left or will leave the armed forces because of downsizing, ITAR-TASS reported. According to "Kommersant-Daily" on 24 February, the government currently owes officers an average of 10 million old rubles ($1,600) each. LB GOVERNMENT CREATES COMMISSION ON DEFENSE INDUSTRY. Chernomyrdin has signed a resolution appointing First Deputy Prime Minister Chubais to chair a new government commission for the financial recovery of the defense industry, ITAR-TASS reported on 23 February. Deputy Prime Minister and Economics Minister Yakov Urinson will be that commission's deputy chairman. Chubais announced on 20 February that the government plans to revise its procedure for concluding contracts with defense enterprises and to reduce the number of such enterprises receiving state orders from 1,700 to 600, Interfax reported (see "RFE/RL Newsline," 16 February 1998). LB MILITARY PROBES EXPLOSIONS AT BASES. In preliminary findings, military investigators say fires and explosions on 21 February at two bases--one in the Saratov Oblast city of Engels, the other outside Volgograd--were the result of negligence, ITAR-TASS reported. At the Engels base, boxes containing 23-millimeter cartridges caught fire, while at the ammunition depot near Volgograd, boxes with 125-millimeter shells for T-70 tanks went up in flames. No deaths or injuries have been reported, and officials say the two fires are not related. Investigators, however, are continuing their probe. They say arson may have been a cause and that terrorism has not been ruled out. BP NDR LEADER EXPLAINS POSITION ON BUDGET. Aleksandr Shokhin, the leader of the pro-Russian Our Home Is Russia (NDR) faction, confirmed on 23 February that his faction voted against the draft 1998 budget in the fourth reading on 20 February, RFE/RL's Moscow bureau reported. The Duma fell 35 votes short of approving the document, and the support of the NDR faction would have made up the shortfall. Shokhin explained that the Duma was voting on an unamended version of the budget, having rejected a government proposal to tie certain expenditures to the receipt of revenues. Duma First Deputy Speaker Vladimir Ryzhkov of NDR argued that passing an unchanged version of the budget would merely lead to a presidential veto. Shokhin again advocated giving the government more leeway on reducing expenditures in the case of revenue shortfalls. LB ZYUGANOV BLASTS GOVERNMENT STANCE ON BUDGET. Communist Party leader Zyuganov charged that the government prefers to work without a budget so that it "does not have to answer for anything," Russian news agencies reported on 23 February. Zyuganov's statements echo recent accusations by Duma Speaker Gennadii Seleznev (see "RFE/RL Newsline," 23 February 1998). Meanwhile, Yeltsin told journalists on 23 February that he will "insist on" the adoption of a realistic budget for 1998. He asked rhetorically why the authorities should "deceive the people" by allocating money on paper that will not be paid out. LB ZADORNOV CONFIDENT ON CREDIT RATING. Finance Minister Mikhail Zadornov says he is confident that Moody's and Standard and Poor's will not lower Russia's sovereign debt rating after representatives of the agencies visit Moscow in late February, ITAR-TASS reported on 23 February. Speaking in London following a conference on employment and economic development in Russia and the G-7 countries, Zadornov said there are "absolutely no reasons" to lower Russia's credit rating. In recent months, both rating agencies have revised their outlooks for Russia from "stable" to "negative." But Zadornov said the government has figures with which to persuade the agencies. He cited new data showing that GDP in January 1998 was up 1.5 percent over the same month in 1997 and that tax and customs revenues have increased while yields on treasury bills have fallen. LB NEWSPAPER WARNS OF RATING AGENCIES' INFLUENCE. "Nezavisimaya gazeta" argued on 20 February that rating agencies such as Moody's and Standard and Poor's are "ready to replace the IMF" as the main Western monitor of the Russian economy. The newspaper noted that a downgrade by those agencies could increase the cost of borrowing by millions of dollars, both for governments and for commercial banks (which cannot have a higher credit rating than that of the country in which they are based). It suggested that the agencies act primarily in the interests of Western and especially U.S. creditors. Since those creditors suffered huge financial losses recently on Southeast Asian markets, they may be looking to charge higher interest rates to other borrowers--hence the drive to reduce Russia's credit rating, "Nezavisimaya gazeta" argued. The newspaper called on the Central Bank to stop trading in treasury bills, which, it said, has contributed to instability on Russian markets. LB COURT UPHOLDS APPEAL BY ENVIRONMENTALISTS. In the first case of its kind, the Supreme Court has ruled in favor of an appeal by environmental groups against government instructions allowing the development of some federally owned forested areas, RFE/RL's Moscow bureau reported on 20 February. Last April, the environmentalists appealed against 12 government regulations that allowed some 32,000 hectares of forest to be cleared for other uses, such as the construction of homes. They said the government had failed to comply with laws requiring that ecological surveys be conducted before forests can be converted to other land uses. Vera Mishenka, the president of the Eko-Yuris institute, said the court's ruling affects only a few regulations that were based on old forestry laws, not similar government instructions based on the new forestry code. She added that it will be a challenge to force the government and the Federal Forestry Service to implement the court ruling. LB YELTSIN MEETS WITH INGUSH, NORTH OSSETIAN PRESIDENTS. Yeltsin held talks in Moscow on 23 February with Ruslan Aushev and Aleksandr Dzasokhov and congratulated the latter on his election as president last month, Russian media reported. The Russian president expressed concern that agreements between Russia and Chechnya are ineffective and reiterated his intention to travel to Chechnya. Dzasokhov told journalists later that both he and Aushev believe the heads of all North Caucasus republics and regions should travel to Grozny before Yeltsin does. Dzasokhov proposed tax breaks of up to seven years for the North Caucasus republics to enable them to put their infrastructure in order. He stressed that the 23 February meeting demonstrated Russia's "serious interests" in the North Caucasus. And he proposed greater coordination between regional leaders, specifically in the drafting of a new nationalities policy for the region. LF TATAR PUBLIC CENTER LEADER OUTLINES TACTICS. Fandas Safiullin told journalists in Kazan on 19 February that his party will shift the focus of its activities "from the streets to the State Council," RFE/RL's Kazan bureau reported. Safiullin, who is a council member, said the center will continue to agitate for Tatarstan's "true independence" and for "establishing true democracy." On his election as chairman last month, Safiullin had argued that the center must change its policies in order to regain public support, which had been dwindling. But outgoing chairman Zaki Zainullin said his replacement by Safiullin was intended to make the center an instrument for implementing the policies of President Mintimer Shaimiev. The Tatar Public Center was founded in 1989 and has consistently advocated Tatarstan's independence from the Russian Federation. Shaimiev, for his part, has taken a more accommodating approach toward relations with Moscow. LF TRANSCAUCASUS AND CENTRAL ASIA ZVIADISTS RULE OUT RELEASING MORE HOSTAGES. Gocha Esebua, who heads the band of some 20 supporters of former Georgian President Zviad Gamsakhurdia holding three UNOMIG observers and several Georgians hostage in the west Georgian village of Djikhaskari, announced on 23 February that he will not release any more hostages. Esebua accused the Georgian authorities of reneging on a 21 February agreement whereby one Uruguayan UN observer was released in return for the promise that CIS peacekeeping troops deployed along the border between Abkhazia and the rest of Georgia would be replaced by a UN force. But Georgian Security Minister Jemal Gakhokidze claimed that Esebua agreed to release the first hostage unconditionally, according to Caucasus Press. Also on 23 February, Czech presidential spokesman Jaroslav Kulisek rejected Esebua's proposal that President Vaclav Havel should mediate talks between the Georgian government and Gamsakhurdia's supporters. LF SHEVARDNADZE SETS CONDITIONS FOR TALKS. Speaking on Georgian radio on 23 February, President Shevardnadze said that negotiations on meeting the kidnappers' demands can begin only after a decision has been taken on which group of Gamsakhurdia's supporters is to participate and only after the unconditional release of the hostages. But Shevardnadze subsequently ordered Georgian Ambassador to Moscow Vazha Lortkipanidze to meet with Nemo Burchuladze to discuss the hostage-takers' demands, Caucasus Press reported. Burchuladze was deputy chairman of the Georgian parliament under Gamsakhurdia from 1990-1991 and has lived in Moscow since Gamsakuhurdia's ouster in January, 1992. But on 24 February, Burchuladze sent a representative to meet with Lortkipanidze in his place, RFE/RL's Tbilisi bureau reported. LF ARMENIAN OFFICIAL DETAILS ELECTION SAFEGUARDS. Speaking at a press conference in Yerevan on 23 February, Armenian Central Electoral Commission chairman Khachatur Bezirjian listed measures intended to minimize the possibility of fraud at the 16 March presidential elections and RFE/RL's Yerevan bureau reported. Bezirjian said voting protocols from individual precincts will be faxed to the commission immediately after the vote count is finished and will be made public before the votes are tabulated and added together by higher-level commissions. Bezirjian also announced that the commission will introduce transparent glass ballot boxes to ensure every voter casts only one ballot. He said the government has earmarked 180 million drams ($360,000) for organizing the ballot. Fourteen candidates have announced their intention of running. LF NO OBSTACLES TO KOCHARYAN'S CANDIDACY? Bezirjian also said he believes Prime Minister and acting President Robert Kocharyan fulfills the electoral law requirement that presidential candidates must be citizens of the Republic of Armenia and have lived there for ten years. He added, however, that a final decision on this issue will be taken by the entire Central Electoral Commission. Bezirjian pointed out that Kocharyan is treated as an Armenian citizen when given visas by foreign embassies. Also on 23 February, presidential candidate David Shahnazarian argued on Armenian Television that Kocharyan's candidacy is unconstitutional. But in an interview in "Aravot" the next day, Kocharyan pointed out that "the Republic of Armenia has not existed for 10 years. Besides, I was a deputy to the Armenian parliament for seven years. I have served as Armenian prime minister for one year. If I'm not eligible, then who is?" LF TURKMEN PRESIDENT IN BRUSSELS. Saparmurat Niyazov signed a memorandum of understanding with the Anglo-Dutch company Shell during his visit to Brussels on 23 February, Interfax reported. Late last year, Shell was named to head a consortium that will build and maintain a pipeline from Turkmenistan to Turkey. Niyazov also met with NATO Secretary-General Javier Solana and Belgian Prime Minister Jean-Luc Dehaene. Also on 23 February in the Turkmen capital, Ashgabat, representatives of the Economic Cooperation Organization began discussing oil and gas pipeline routes. All 10 member nations sent representatives, except Azerbaijan. BP REGIONAL AFFAIRS LUKASHENKA PRAISES PRIMORSKII GOVERNOR. Belarusian President Alyaksandr Lukashenka highly praised Primorskii Krai Governor Yevgenii Nazdratenko during an visit to Vladivostok on the way home from the Olympics in Nagano, Japan, RFE/RL's correspondent in Vladivostok reported on 23 February. Lukashenka said he and Nazdratenko agree on privatization and border policy. (The governor has long been an opponent of First Deputy Prime Minister Chubais and has accused the government of planning to give up territory in Primore to China.) Lukashenka hinted that the Russian government's "young reformers" are secret opponents of integration with Belarus. But he cited an economic cooperation agreement signed in Vladivostok as evidence that Russian regional leaders are welcoming closer ties with Minsk. He also said he hopes Ukrainian President Leonid Kuchma loses a presidential election scheduled for 1999, because, he commented, Kuchma opposes integration with Russia and Belarus. LB UKRAINE SAYS TERRITORIAL DISPUTE WITH RUSSIA 'NON-EXISTENT.' The Ukrainian Foreign Ministry said on 23 February that a territorial dispute between Moscow and Kyiv "never existed and cannot exist," ITAR-TASS reported on 23 February. The statement came in response to Moscow Mayor Yuri Luzhkov's recent claims to Crimea and its port city of Sevastopol (see "RFE/RL Newsline," 23 February 1998). The Foreign Ministry said that, as in Russia, "serious politicians in Ukraine" realize that good relations between Kyiv and Moscow are based on "mutual respect, sovereignty, and territorial integrity." The Ukrainian parliament has approved a bilateral treaty with Russia that guarantees current borders between the two countries. PB BALTIC SEA REGIONS SIGN ACCORD IN POLAND. Regions from six countries bordering the Baltic Sea signed a cooperation agreement aimed at creating a "Baltic Euro-region," AFP reported on 22 February. "The Baltic Sea is becoming a sea of the European Union," Polish Foreign Minister Bronislaw Geremek said at the signing in the northern city Polish town of Malbork. Representatives from the Danish island Bornholm, Latvia's Liepaja and Lithuania's Klaipeda regions, the Russian exclave Kaliningrad Oblast, and the Swedish provinces Kalmar, Kronenburg, and Blekinge, and Polish provinces Elblag, Gdansk, Olsztyn, and Slupsk signed the accord, which promotes cooperation in economics, agriculture, transportation, environmental protection, and education. PB END NOTE GEORGIA'S FAST-GROWING ECONOMY by Michael Wyzan In 1997, the Georgian economy continued to dig itself out of the hole that resulted from the political turmoil and poor economic policy-making during the early years of independence. The decline in gross domestic product (GDP) from 1991-1994 was nearly 73 percent, the largest collapse in the former USSR. Last year's economic performance was especially impressive in view of continuing domestic tension surrounding the failure to resolve the stalemate over the fate of Abkhazia and ongoing problems in political and economic relations with Russia. Since last fall, Moscow has refused entry to hundreds of trucks transporting Turkish-produced alcohol to Russia via Georgia. For the second consecutive year, Georgia was the fastest-growing economy within the CIS and second only to Bosnia among transition economies. GDP grew by 11.3 percent in 1997, following an 11 percent increase the previous year. Despite an acceleration late in 1997, consumer price inflation on a December-to-December basis was 7.9 percent, compared with 13.8 percent the previous year. The exchange rate against the dollar remains one of the most stable among transition countries, having moved only to 1.32 from 1.25 at the lari's introduction in October 1995. Wages continue to grow. The average monthly wage in the third quarter of 1997 was some $50, twice the amount a year earlier. Progress was made in several areas of economic policy. On the fiscal front, a new tax code was introduced, the Ministry of Finance was reorganized, the first treasury bill auctions were held, and the 1998 budget was introduced in the parliament far earlier than in previous years and with more realistic revenue projections. Those developments followed on the heels of the appointment as finance minister of Mikhail Chkuaseli, who, at age 26, is undoubtedly the youngest person in the world to hold that position. (His Armenian counterpart, Armen Darbinian is 32.) Headway was also made in strengthening the banking system, with three former state banks being certified in accordance with international standards. Privatization, though seemingly stalled in the first half of 1997, advanced in July, when all shares in 266 enterprises were sold at "zero cash auctions." At those auctions, bidders were offered shares in companies whose stock had remained unsold at two previous cash auctions There was no reserve price, and shares were distributed in proportion to the amounts offered by bidders (instead of the usual practice of seeing how many bids are made for shares at a fixed price). In addition, foreign investors bought controlling stakes in three promising enterprises: a brewery, a bottler, and a producer of sparking wines. And in August, President Eduard Shevardnadze rescinded a May 1996 decree that had suspended the privatization of 51 companies deemed of strategic importance. However, a closer look at macroeconomic and foreign sector performance shows that Georgia still has a long way to go before it is on its feet economically. While the budget deficit has fallen from 4.4 percent of GDP in 1996 to a projected 2 percent this year, revenue collection remains among the worst in the world. From January to September 1997, revenue was only 8 percent of GDP. The authorities have managed to keep deficits small by limiting expenditures and by running arrears, particularly on education in rural areas. Moreover, given that the lari has weakened only slightly and inflation continues at a faster rate than in Georgia's main Western partners, there is increasing concern about rising foreign sector imbalances. Unfortunately, data on exports and imports are unreliable, since a large percentage of trade is unregistered owing to problems with the customs service, especially in Adzharia, on the border with Turkey. Available data suggest a large trade imbalance: in January, Economy Minister Vladimir Papava cited a figure of $600 million for all of 1997. Meanwhile, the IMF and World Bank, along with the EU and the U.S., continue to help finance Georgia's current account deficit. That level of support will not last indefinitely, making such large imbalances unsustainable in the long run. Another worrisome indicator is a foreign debt totaling $1.485 billion as of 1 October 1997. Much of that debt is owed to international bodies: $220 million to the IMF, $250 million to the World Bank, and $125 million to the EU. But Turkmenistan is Georgia's largest creditor, with Tbilisi having accumulated about $460 million in outstanding debts for natural gas shipments. Ashgabat suspended such shipments in March 1997, which led to a worsening of the energy situation in Georgia. And the two sides failed to agree on debt rescheduling during Shevardnadze's visit to Turkmenistan in December. Registered cumulative foreign investment as of 1 October was only $105.3 million, the leading investors being Israel, Ireland, the U.S., South Korea, and Germany. Many factors constrain business development (both foreign and domestic) and drive businesses into the shadow economy. Those factors include irregular energy supplies, poor transportation links and telecommunications, problems with the banking system, and an often corrupt and inefficient bureaucracy. The author is an economist living in Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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