Be slow of tongue and quick of eye. - Cervantes
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 74 Part I, 17 April 1998


___________________________________________________________
RFE/RL NEWSLINE Vol 2, No. 74 Part I, 17 April 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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RUSSIAN MEDIA EMPIRES II
Businessmen, government leaders, politicians, and financial 
companies continue to reshape Russia's media landscape. This 
update of a September report identifies the players and 
their media holdings via charts, tables and articles: 
http://www.rferl.org/nca/special/rumedia2/index.html

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Headlines, Part I

* DUMA REJECTS KIRIENKO AGAIN

* BEREZOVSKII DENIES RIFT WITH YELTSIN

* U.S. CALLS FOR END TO TURKMEN-AZERBAIJAN DISPUTE

End Note: CASPIAN UPS AND DOWNS

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RUSSIA

DUMA REJECTS KIRIENKO AGAIN. The State Duma on 17 April 
again refused to confirm acting Prime Minister Sergei 
Kirienko, with only 115 deputies voting in favor, 271 voting 
against, and 11 abstaining, RFE/RL's Moscow bureau reported. 
Kirienko fared worse than in the first Duma vote on his 
candidacy, when he had 143 supporters and 186 deputies 
voting against (see "RFE/RL Newsline," 10 April 1998). The 
Duma's decision to hold an open vote on 17 April contributed 
to Kirienko's poor showing, as it appears to have 
strengthened discipline among his main opponents: the 
Communist, Agrarian, and Popular Power factions. Communist 
Party leader Gennadii Zyuganov has repeatedly charged that 
Kirienko lacks enough experience to head the government. 
Kirienko told reporters after the vote that he is "relaxed" 
and said he found the Duma debate over his candidacy 
"interesting and constructive," Reuters reported. LB

YELTSIN NOMINATES KIRIENKO A THIRD TIME. President Boris 
Yeltsin nominated Kirienko for prime minister a third time 
less than an hour after the Duma's vote on 17 April, 
RFE/RL's Moscow bureau reported. Presidential spokesman 
Sergei Yastrzhembskii said Yeltsin reacted "calmly" to the 
vote, adding that "we expect the third round to bring the 
result that is necessary for the entire country, and Sergei 
Kirienko will be confirmed." Yeltsin would be 
constitutionally obliged to dissolve the Duma if deputies 
rejected his prime ministerial nominee a third time. The 
Duma has challenged Yeltsin's right to nominate the same 
candidate more than once, but Constitutional Court Chairman 
Marat Baglai confirmed on 16 April that the court is 
unlikely to consider that appeal before the fall. LB

BEREZOVSKII DENIES RIFT WITH YELTSIN... The influential 
businessman Boris Berezovskii has denied reports that he 
recently received a stern warning from Yeltsin (see "RFE/RL 
Newsline," 15 April 1998). In an interview with NTV on 16 
April, Berezovskii acknowledged that he and Yeltsin spoke by 
telephone but said the two had a "very friendly and 
constructive conversation." He commented that they talked 
about the presidential elections scheduled for 2000 but not 
about acting Prime Minister Kirienko. Yeltsin is alleged to 
have warned Berezovskii against trying to influence the 
formation of the new government. Although Berezovskii has 
praised Kirienko in public, some media financed by him have 
criticized the acting prime minister. Berezovskii is rumored 
to be supporting acting Deputy Prime Minister Ivan Rybkin 
for the premiership. Rybkin was Security Council secretary 
when Berezovskii was deputy secretary of that council from 
November 1996 until November 1997. LB

...ADMITS HE SUPPORTS LEBED. Yeltsin was also reportedly 
angered by Berezovskii's decision to help finance former 
Security Council Secretary Aleksandr Lebed's gubernatorial 
campaign in Krasnoyarsk Krai, RFE/RL's Moscow bureau 
reported on 14 April. Speaking to NTV, Berezovskii admitted 
that he is supporting Lebed, who was once a bitter rival 
(see "RFE/RL Newsline," 7 November 1997 and 18 February 
1998). He explained that he is trying to help secure "the 
continuity of power" after the next presidential election. 
If Lebed loses in Krasnoyarsk, he will be out of the running 
for the presidential race, Berezovskii argued. However, 
Berezovskii wants Lebed to remain a contender for the 
nationalist electorate that Moscow Mayor Yurii Luzhkov is 
courting in advance of his expected presidential bid. That 
way, Lebed and Luzhkov can keep "fighting it out among 
themselves," Berezovskii added. LB

YELTSIN SEEKS TO DISPEL HEALTH RUMORS. Yeltsin announced on 
16 April that he is "as healthy as ever" and dismissed 
speculation that his health took a turn for the worse as 
"funny." During a televised meeting with his chief of staff, 
Valentin Yumashev, and Aleksandr Livshits, deputy head of 
the presidential administration, Yeltsin acknowledged that 
he went to the Central Clinical Hospital the previous day 
but said he was there for only 30 minutes while his dentist 
replaced a crown on one of his teeth. Yeltsin's spokesman 
Sergei Yastrzhembskii on 15 April denied that the president 
had gone to the hospital and said nothing about a visit to 
the dentist (see "RFE/RL Newsline," 16 April 1998). Yeltsin 
is scheduled to fly to Japan late in the evening on 17 April 
and to return to Moscow two days later. Yastrzhembskii said 
the president will not delegate his powers while he is out 
of the country. LB

DUMA APPROVES TAX CODE IN FIRST READING. The Duma on 16 
April approved by 312 to 17 the government's draft tax code 
in the first reading, RFE/RL's Moscow bureau reported. Nine 
other versions of the tax code had been proposed, but two 
were withdrawn during the course of the debate in the Duma 
and the rest were supported by fewer deputies than the 
government's draft. Grigorii Yavlinskii's Yabloko faction 
voted for the government's draft, although Yavlinskii was a 
vocal critic of the tax code the government proposed last 
year. The Duma passed that code in the first reading last 
June but, following months of negotiations over thousands of 
amendments, did not support it in the second reading. 
Following the appointment of former Yabloko member Mikhail 
Zadornov as finance minister last November, Zadornov's aide, 
Mikhail Motorin, replaced Sergei Shatalov, the main author 
of the government's previous draft tax code, as deputy 
finance minister. LB 

INVESTIGATION INTO BREAKUP OF STUDENT RALLY BEGINS... The 
Sverdlovsk Oblast prosecutor's office has opened a criminal 
case in connection with violence at a recent student's 
demonstration in Yekaterinburg, ITAR-TASS and RFE/RL's 
correspondent in the city reported on 16 April. The same 
day, the oblast government held a session that was attended 
by members of an Interior Ministry investigative commission. 
Oblast Prime Minister Aleksei Vorobev chaired the meeting in 
the absence of Governor Eduard Rossel. Deputy Interior 
Minister Valerii Fedorov, who heads the investigative 
commission, said at the government session that the city and 
oblast authorities, the organizers of the student 
demonstration, and law enforcement agencies should share 
responsibility for the events, ITAR-TASS reported. Oblast 
Deputy Prime Minister Anatolii Gaida has offered his 
resignation, explaining that he failed to cope with the 
events that led to the violence (see "RFE/RL Newsline," 15 
April 1998). LB 

...WHILE FEDERAL OFFICIALS BLAME LOCAL AUTHORITIES FOR 
VIOLENCE. At a government session in Moscow, both acting 
Prime Minister Sergei Kirienko and acting Interior Minister 
Sergei Stepashin charged that the local authorities were to 
blame for the violence, Russian news agencies reported. 
Valerii Kraev, the head of the Sverdlovsk branch of the 
Interior Ministry, on 16 April took responsibility for 
ordering police to push protesting students away from the 
regional government building. He explained that the students 
were throwing sticks, ice, and empty bottles at the police. 
But Stepashin said the Yekaterinburg law enforcement 
authorities displayed unprofessional conduct and failed to 
handle the situation properly. He also noted that 
politicians failed to turn up for an authorized 
demonstration in order to hear the students' grievances, 
prompting the angry students to embark on an unsanctioned 
march to the regional government building, where the violent 
clashes occurred. LB 

U.S. ADMITS LIST OF RUSSIAN AGENCIES UNDER 'EXTRA SCRUTINY.' 
U.S. State Department spokesman James Rubin on 16 April 
confirmed a "USA Today" report that there is an "informal 
list" of 20 Russian agencies that receive "extra scrutiny" 
because of suspected dealings with Iran, Reuters and AFP 
reported. Rubin said there is currently no ban on assistance 
to those agencies but that the U.S. is "extremely concerned 
and quite troubled" by reports that Iran has received 
missile program technology from Russia. Rubin refused to 
name any of the Russian agencies on the list but did say it 
does not include the Russian Space Agency, contrary to the 
"USA Today" report. The next day, acting Prime Minister 
Kirienko said that while he opposes transfer of military 
technology to Iran or Libya,  both countries "are future 
markets and whoever goes there now will in the future have a 
strong foothold." BP

DUMA SEEKS HIGHER WAGES FOR SOLDIERS. The Duma on 15 April 
overrode a presidential veto on a law that would 
substantially raise soldiers' wages, "Russkii telegraf" 
reported. Yeltsin vetoed the law "on the status of those in 
military service" because it would mandate spending that is 
not provided for in the 1998 budget. According to First 
Deputy Finance Minister Vladimir Petrov, the law would 
provide wage increases not only to soldiers in the army and 
navy but also to troops who are subordinated to other 
agencies (such as the Interior Ministry or the Federal 
Security Service). Petrov estimated it would cost 52 billion 
rubles ($8.5 billion) over two years to implement the law. 
If the Federation Council also overrides Yeltsin's veto, the 
president will be obliged to sign the law. LB

GOVERNMENT APPROVES PROGRAM TO SUPPORT AUTO INDUSTRY. The 
government on 16 April approved a program aimed at 
stimulating foreign investment in the automobile industry, 
Interfax reported. The main points of the program were 
outlined in a February presidential decree. It would provide 
tax breaks and reduced customs duties to companies that 
invest at least 1.5 billion rubles ($250 million) in the 
automobile industry over five years, provided that the share 
of Russian parts used in the cars manufactured rises to at 
least 50 percent within that period. During his speech to 
the Duma on 17 April, Kirienko pledged that the government 
will support the automobile industry despite the objections 
voiced by the IMF, ITAR-TASS reported. In February, IMF 
Managing Director Michel Camdessus argued that Russian 
taxpayers should not subsidize the activities of foreign 
automobile manufacturers (see "RFE/RL Newsline," 12 and 20 
February 1998). LB

'CAPSULES OF LOVE' APPEAR IN MOSCOW. As part of a program to 
combat the spread of sexually transmitted diseases, more 
than 1,000 machines dispensing condoms will be installed 
around the Russian capital, RFE/RL correspondents and ITAR-
TASS reported. The so-called "Capsule of Love" program is 
aimed specifically at syphilis. There are currently 17,000 
registered cases of the disease among Moscow's population, 
and the incidence of the disease among youths aged 12-14 is 
increasing alarmingly. The machines will first be installed 
in train stations, nightclubs, and discos and later in 
casinos and gas stations. However, those installed outdoors 
will only be in operation for six or seven months of the 
year, as condoms cannot be stored at temperatures below 5 
degrees Celsius. BP

JOURNALIST ATTACKED IN MORDOVIA. Stanislav Kholopov, the 
editor in chief of the privately owned weekly newspaper 
"Stolitsa S" in Saransk (Republic of Mordovia), was beaten 
and stabbed outside his home on 16 April, "Nezavisimaya 
gazeta" reported. He remains hospitalized following 
emergency surgery. Local observers believe the attack was 
connected to Kholopov's professional activities. "Stolitsa 
S," which is an influential newspaper in the republic with a 
circulation of some 60,000, has run hard-hitting reports on 
alleged torture committed by police. Those reports 
ultimately led to criminal convictions against several 
police officers and the dismissal of high-ranking officials 
in the republican branch of the Interior Ministry (see 
"RFE/RL Newsline," 18 February 1998). The newspaper's 
coverage may also have angered local crime groups, according 
to "Nezavisimaya gazeta." LB

NEW CRIMINAL CASE OPENED AGAINST WOULD-BE NIZHNII MAYOR. The 
Nizhnii Novgorod prosecutor's office has opened another 
criminal case against Andrei Klimentev, the apparent winner 
of the mayoral election in the city that was recently 
annulled. Klimentev was arrested four days after that 
election for allegedly breaking a promise not to leave the 
city while his retrial on embezzlement charges is pending 
(see "RFE/RL Newsline," 1 and 2 April 1998). According to 
Governor Ivan Sklyarov, the new case against Klimentev is 
based on three alleged crimes: slander, violating another 
citizen's right to privacy, and publicly insulting an 
official, "Kommersant-Daily" reported on 15 April. Sklyarov 
is the alleged victim of all three crimes. He was mayor of 
Nizhnii Novgorod before being elected governor last July and 
is a supporter of acting Mayor Vladimir Gorin, who finished 
a close second to Klimentev in the 29 March election. LB

CHECHNYA DENIES INVOLVEMENT IN MURDER OF RUSSIAN OFFICERS... 
Chechen leaders on 16 April denied any involvement in the 
attack earlier that day on a Russian military motorcade. 
Five men died in that attack, which took place close to the 
Ingushetian-North Ossetian border. Russian acting Interior 
Minister Sergei Stepashin had alleged that renegade Chechen 
gunmen were responsible for the shootings. Chechen Prime 
Minister Shamil Basaev said the attack was aimed at 
destabilizing Ingushetia and its president, Ruslan Aushev. 
Basaev added that the Chechen authorities are ready to 
assist Moscow in investigating the incident and expressed 
surprise that Moscow has not yet asked for such help. 
Aushev, for his part, denied the attack took place on Ingush 
territory, telling Interfax that it was on the North 
Ossetian side of the border. LF

...WHILE OSSETIAN TALKS CANCELED. North Ossetian President 
Aleksandr Dzasokhov has cut short his planned trip to 
Georgia because of the 16 April killings and returned to 
Vladikavkaz, ITAR-TASS reported. Dzasokhov was in Tskhinvali 
that day for talks with South Ossetian President Lyudvig 
Chibirov. He had planned to travel to Tbilisi for talks with 
Georgian leaders on resolving the conflict between South 
Ossetia and the Georgian government. LF 

BEREZOVSKII RULES OUT NEW WAR IN NORTH CAUCASUS. Interviewed 
by NTV on 16 April, former deputy Security Council secretary 
Boris Berezovskii condemned the attack earlier that day but 
ruled out the possibility of a new war in the North 
Caucasus. At the same time, he conceded that the situation 
there is "fragile and tense." Referring to the agreement 
concluded last year between Moscow and the Chechen 
leadership on the transit of Azerbaijan's Caspian oil via 
Chechnya, he argued that oil remains an important factor for 
promoting stability in the Caucasus but is not the only one. 
LF

TRANSCAUCASUS AND CENTRAL ASIA

U.S. CALLS FOR END TO TURKMEN-AZERBAIJAN DISPUTE. U.S. 
ambassador Stanley Escudero met with Azerbaijani President 
Heidar Aliev in Baku on 15 April and  handed over a letter 
from U.S. Vice President Al Gore calling on Azerbaijan and 
Turkmenistan to resolve their dispute over the ownership of 
two Caspian oil fields before Turkmen President Saparmurat 
Niyazov's 20 April visit to the U.S., Russian agencies 
reported. Last summer, Turkmenistan claimed ownership of the 
Kyapaz and Chirag fields, which Azerbaijan says lie within 
its sector of the Caspian. At his meeting with Escudero, 
Aliev announced he has formally approved construction of 
proposed Trans-Caspian pipelines to export oil and gas from 
Kazakhstan and Turkmenistan. Those pipelines would link up 
with the proposed pipeline from Baku to the Turkish 
Mediterranean terminal at Ceyhan (see also "End Note"). LF

ARMENIAN FOREIGN MINISTRY QUERIES OSCE ELECTION VERDICT. The 
Armenian Foreign Ministry on 15 April issued a statement 
registering its concern about significant discrepancies 
between the preliminary report issued by the Organization 
for Security and Cooperation in Europe's observer mission 
and its final assessment of the second round of the 
presidential poll, Reuters reported. The OSCE final 
assessment concluded that the poll "does not meet the OSCE 
standards to which Armenia committed itself." The Foreign 
Ministry statement pointed out that four other observer 
groups, including those sent by the Council of Europe and 
the Russian State Duma, failed to register violations. LF

ARMENIAN OPPOSITION PARTY MAY COOPERATE WITH PRESIDENT. 
Speaking at a press conference in Yerevan on 16 April, 
Shavarsh Kocharian, a leading member of the National 
Democratic Union, said his party is willing to support 
Robert Kocharian because the new president's agenda does not 
contradict that of the NDU, ArmenPress reported. But 
Shavarsh Kocharian said the NDU is concerned that the new 
president may not be able to implement his programs under 
the existing regime. He said the NDU will offer its support 
to President Kocharian only if he takes steps toward the 
Armenia that the NDU envisions. NDU chairman Vazgen Manukian 
polled 12.24 percent of the vote in last month's pre-term 
presidential elections. He was among several defeated 
candidates who protested alleged falsification of the vote. 
LF

ANOTHER ATTEMPT TO KILL GEORGIAN PRESIDENT PLANNED? Mamuka 
Areshidze, chairman of the Georgian parliamentary Commission 
for Relations with Caucasian Peoples, told journalists in 
Tbilisi on 15 April that the Georgian Ministry of National 
Security is aware preparations are being made in the North 
Caucasus for a further attempt on the life of Georgian 
President Eduard Shevardnadze, Caucasus Press and 
"Nezavisimaya gazeta" of 17 April reported. Areshidze added 
that several North Caucasian militants participated in the 
failed 9 February attempt to kill the Georgian president. LF

RYBKIN'S WHIRLWIND TOUR OF CENTRAL ASIA. Russian acting 
Deputy Prime Minister Ivan Rybkin was in Ashgabat on 15 
April where he met with President Saparmurat Niyazov and 
discussed regional security, Russian loans to Turkmenistan, 
and the status of the Caspian, Interfax reported. The 
following day in Dushanbe, Rybkin promised the Tajik 
government that Russian troops will remain in the country 
and that the military exercise with Russia's 201st motorized 
division in southern Tajikistan was "a demonstration of the 
political will necessary for settling many problems here," 
Interfax reported. Later the same day in the Uzbek capital, 
Rybkin said Russia is not seeking to "usurp the right to 
reform the CIS," Radio Mashal reported. And on 17 April, 
Rybkin was in the Kyrgyz capital where he expressed regret 
that President Askar Akayev will not attend the 29 April CIS 
summit owing to a previous engagement. Rybkin's tour of the 
four countries was intended to review plans for that summit. 
BP

REGIONAL AFFAIRS

U.S. URGES MOSCOW TO ENGAGE IN DIALOGUE WITH RIGA... 
Secretary of State Madeleine Albright has sent a letter to 
her Russian counterpart, Yevgenii Primakov, urging Moscow to 
engage in a dialogue with Riga to resolve their differences 
over the ethnic Russian minority in Latvia. State Department 
spokesman James Rubin said on 16 April that Washington does 
not want to see Russian-Latvian relations "spin out of 
control," adding that the U.S. regards "threats or 
sanctions" as "counterproductive." The State Department also 
welcomed amendments to the citizenship law proposed by a 
Latvian government working group (see "RFE/RL Newsline," 16 
April 1998). JC

...WHILE MOSCOW SAYS SUCH LETTERS "NORMAL PRACTICE." Also on 
16 April, the Russian Foreign Ministry responded to a "New 
York Times" report that Albright's letter to Primakov was 
"harsh" in tone, Interfax reported. "There is nothing harsh 
in the correspondence between [Primakov and Albright]," a 
ministry official told the Russian news agency. He also 
commented that exchange of such letters is "normal practice" 
in discussing "various international issues of mutual 
interest." "Nobody in Moscow is talking about sanctions 
against Latvia. What is under discussion is the possibility 
of instilling order in trade and economic relations with 
that country and taking specific steps designed to help Riga 
understand the need to normalize its relations with ethnic 
minorities in that country," the official said. JC

LUKASHENKA DISCUSSES PAYMENT FOR RUSSIAN OIL. Belarusian 
President Alyaksandr Lukashenka met in Minsk on 16 April 
with managers of Russia's four largest oil companies 
(LUKoil, Slavneft, Yukos, and Surgutneftegaz) to discuss 
payment for crude oil supplies to Belarus, Interfax 
reported. Until recently, Minsk paid for 70 percent of the 
oil supplies in hard currency and 30 percent in commodities. 
It has run into difficulty making those payments, however, 
since the Russian government demanded that the total sum be 
paid in hard currency. Lukashenka said Belarus owes Russia 
some $170 million for oil deliveries because "there is no 
reliable settlement procedure." LUKoil President Vagit 
Alekperov said before the meeting that a new means of 
payment will certainly be found because the two sides "have 
no alternative to cooperation and mutual understanding," 
Interfax reported. But according to Reuters, no results were 
publicly announced after the meeting. JM

END NOTE

CASPIAN UPS AND DOWNS

by Liz Fuller

	Developments since the beginning of this month have 
substantively changed the prospects for developing Caspian 
oil reserves and exporting them to world markets. While 
Moscow has further modified its stance on the status of the 
Caspian Sea, it now seems certain that there will be delays 
in completing two of the pipelines intended to transport oil 
from Kazakhstan and Azerbaijan.
	Meeting last week in Moscow, Russian President Boris 
Yeltsin and his Kazakh counterpart, Nursultan Nazarbaev, 
again affirmed their agreement on dividing the entire sea 
bed of the Caspian into national sectors proceeding from the 
median line and leaving the sea waters under joint control. 
Discussing this option during their two-day summit in 
January, the two presidents had called for the drafting of a 
bilateral agreement delineating their respective national 
sectors.
	That move represented a concession to Kazakhstan on 
the part of Moscow: last August, the Kazakh government had 
formally protested a Russian tender for developing several 
north Caspian oil and gas fields on the grounds that the 
deposits in question were located in Kazakhstan's sector of 
the sea. The Russian Foreign Ministry rejected that protest 
but at the same time announced Moscow will abandon its 
previous negotiating position, adopted in late 1996, whereby 
it would permit all five Caspian littoral states (Russia, 
Iran, Kazakhstan, Turkmenistan, and Azerbaijan) to freely 
develop hydrocarbon resources located in a 45-mile offshore 
zone but would allow deposits in the remainder of the sea to 
be developed only by unanimous consent. Iran and 
Turkmenistan signaled their agreement with this approach, 
but both Kazakhstan and Azerbaijan, which at that time had 
already signed three lucrative agreements with Western 
consortia to exploit deposits beyond the 45-mile coastal 
zone, opposed it.
	The Russian-Kazakh agreement is to be signed on 28 
April, but its implementation may prove problematic, given 
that the two sides still disagree over the water depth to be 
used in calculating the median line. And Kazakhstan's 
prospects of exporting its oil in bulk received a further 
setback this week with the announcement that the Caspian 
pipeline running from the vast Tengiz field via Astrakhan to 
Russian Black Sea port of Novorossiisk will not be completed 
before late 2001, one year later than planned. 
	Azerbaijan and Turkmenistan, too, appear to be closer 
to reaching an agreement in their dispute over the ownership 
of several Caspian deposits, including Chirag and Kyapaz. 
Visiting Baku in early April, Turkmen Foreign Minister Boris 
Shikhmuradov announced that "there is no disagreement 
between us in principle on dividing the Caspian." He added 
that "we are ready to reach a mutual agreement with 
Azerbaijan." Two days ago, U.S. Ambassador to Azerbaijan 
Stanley Escudero delivered to Azerbaijani President Heidar 
Aliev, a letter from U.S. Vice President Al Gore asking 
Aliev and his Turkmen counterpart, Saparmurat Niyazov, to 
resolve the disagreement before Niyazov's planned trip to 
Washington next week. 
	A solution to the Azerbaijani-Turkmen dispute is 
crucial for an agreement on constructing an alternative 
pipeline to export oil from both Kazakhstan and 
Turkmenistan. That pipeline would run across the bed of the 
Caspian to Baku and thus link up with Azerbaijan's export 
pipeline network. Aliev and Nazarbaev first agreed on the 
expediency of a Trans-Caspian oil pipeline during the 
former's visit to Almaty last summer. The Azerbaijani 
president announced his official endorsement of Trans-
Caspian pipelines for oil and gas during his 14 April 
meeting with Escudero, but he did not give any indication of 
who might agree to finance the project, estimated to cost $3 
billion. Russia is opposed to an underwater pipeline across 
the Caspian on ecological grounds, given that the Caspian is 
a seismically sensitive zone. And it is unclear whether the 
Russian compromise proposal on the status of the sea, 
whereby the waters would fall under joint jurisdiction, 
constitutes an obstacle to building such a pipeline.
	Moreover, construction of the Trans-Caspian pipeline 
depends on a decision on how best to export oil from Baku. 
At present, limited amounts of Caspian oil are being 
exported through the sole operational pipeline, which runs 
north from Baku via Chechnya to Novorossiisk. A second 
pipeline running west from Baku to the Georgian Black Sea 
coast of Supsa, which is currently undergoing repair, was 
expected to go into operation in the fall of this year. But 
earlier this month, it became apparent that this pipeline is 
in far worse condition than originally believed. Experts say 
it needs to be almost totally rebuilt, meaning its 
completion will be delayed by up to one year. The cost of 
repairs has already reached $590 million, almost double the 
original estimate, and Azerbaijan's State Oil Company is 
reportedly refusing to increase the budget further.
	This setback strengthens the arguments espoused by 
both the U.S. and the Turkish government in favor of having 
the so-called Main Export Pipeline for Caspian oil from the 
Azerbaijani, Kazakh, and Turkmen sectors run from Baku to 
the Turkish Mediterranean terminal at Ceyhan. The U.S. 
favors that route because it avoids Russian territory and 
will therefore strengthen the common pro-Western orientation 
of Azerbaijan and Georgia. But most Western companies 
currently engaged in developing Azerbaijani oil fields 
regard the Baku-Ceyhan option as the least advantageous of 
the three on economic grounds--the projected cost is between 
$2.5 and $3 billion. A decision between the three possible 
routes for the Main Export Pipeline--Baku-Novorossiisk, 
Baku-Supsa, or Baku-Ceyhan--is due to be taken in October 
but will almost certainly be postponed.

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Natasha Bulashova, Greg Cole
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Updated: 1998-11-

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