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RFE/RL NEWSLINE Vol. 2, No. 89 Part I, 12 May 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 89 Part I, 12 May 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 Headlines, Part I * YELTSIN OUTLINES FOREIGN POLICY PRIORITIES... * ...SAYS INDIA 'LET US DOWN' BY CONDUCTING NUCLEAR TESTS * ARMENIAN OPPOSITIONIST OFFERED KEY POSITION End Note: YOUNG RUSSIAN GOVERNMENT FACES SAME OLD PROBLEMS xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN OUTLINES FOREIGN POLICY PRIORITIES... President Boris Yeltsin on 12 May outlined the main goals of Russian foreign policy in a 45-minute address to Foreign Ministry officials, RFE/RL's Moscow bureau and ITAR-TASS reported. Yeltsin named the top priorities as preserving the country's territorial integrity, ensuring its national security, democratizing society, carrying out unspecified reforms, and integrating the Russian economy into the world economy. He said Russian diplomats and politicians have an opportunity to influence global events for the better in today's "multipolar" world, adding that in current conditions, "there is no place for dictates by one country, even the most powerful." Yeltsin also spoke of the importance of Russian cooperation with the U.S. and again called on diplomats to help persuade the State Duma to ratify the START-2 arms control treaty, which, he said, would help Russia achieve "total balance" with U.S. nuclear arsenals, ITAR-TASS reported. LB ...SAYS INDIA 'LET US DOWN' BY CONDUCTING NUCLEAR TESTS. Yeltsin also commented that India "let us down" by conducting nuclear tests two days earlier, ITAR-TASS reported. The president, who is scheduled to visit India later this year, said that "by working in a diplomatic way" he hopes to dissuade India from conducting more tests. Russian Deputy Atomic Energy Minister Viktor Mikhailov said the tests could be "the start of new spiral in the development of nuclear weapons for so-called threshold countries." Mikhailov emphasized that Russia has not helped India to develop nuclear bombs, but he added there is a possibility Russia will supply nuclear reactors to Indian power plants. BP YELTSIN ON NATO. In his speech to the Foreign Ministry, Yeltsin expressed the hope that Russian cooperation with NATO will transform that organization into an alliance that "strengthens" rather than "threatens" European security, RFE/RL's Moscow bureau reported on 12 May. Reaction to the U.S. Senate's vote on NATO membership for Poland, Hungary, and the Czech Republic has been muted in Russia; Foreign Ministry officials did not comment for several days (see "RFE/RL Newsline," 6 May 1998). The Russian Defense Ministry on 7 May issued a statement saying the U.S. made a "fatal mistake" in approving NATO expansion plans, which, it said, will impede START-2 ratification by Russia, Interfax reported. Meanwhile, AFP on 11 May quoted the Danish Defense Ministry as saying a Russian platoon will take part in NATO military exercises in Denmark from 18-29 May. It will be the first participation by Russian troops in military exercises under the alliance's Partnership for Peace program. LB ATOMIC ENERGY MINISTER ON IRAN, NUCLEAR TECHNOLOGY. In an interview with Ekho Moskvy on 11 May, Yevgenii Adamov again confirmed that the nuclear technology sold by Russian to Iran for the Bushehr nuclear reactor cannot be used for military purposes. But Adamov said he has no doubts that Iran is trying to acquire the potential to produce nuclear weapons, noting that its specialists in that field were trained in Western, not Russian, universities. And he conceded that it is important to provide financial incentives to Russian nuclear specialists to dissuade them from accepting offers of employment abroad. LF FINANCE MINISTRY OFFICIAL RENEWS TALK OF JOB CUTS. First Deputy Finance Minister Aleksei Kudrin on 10 May announced that the government will implement plans to eliminate 200,000 jobs in the state sector, mostly in the bureaucracy, Reuters and AFP reported. Speaking in Kyiv as a Russian delegate to the annual meeting of the European Bank for Reconstruction and Development, Kudrin said the downsizing plans are part of an effort to reduce federal expenditures by 68 billion rubles ($11 billion) this year. Kudrin first announced the planned layoffs in late March. But Sergei Kirienko, then acting prime minister, said no such policy had been discussed, and Yeltsin dismissed reports of the massive downsizing as "an invention or a provocation" (see "RFE/RL Newsline," 27 March and 2 April 1998). In an interview published in "Kommersant-Daily" on 8 May, Kirienko said "we must live within our means..., we will get nowhere if we do everything in the old way." LB YELTSIN SIGNS LAW ON ELECTRICITY GIANT. Yeltsin has signed a law regulating the distribution of shares in the electricity giant Unified Energy System (EES), Interfax reported on 8 May. Officials, including Anatolii Sliva, the president's representative in the Federation Council, have sharply criticized the law, but Yeltsin was forced to sign it after both houses of the parliament overrode his veto. Among its most controversial points is a provision saying that foreign shareholders may own no more than 25 percent of the company's shares. The number of shares currently in foreign hands is estimated at 28 percent to 30.6 percent, and it is unclear how the law's provision on foreign ownership will be enforced. LB NEWSPAPER SAYS LAW SPELLS TROUBLE FOR CHUBAIS. "Kommersant- Daily" argued on 12 May that the law on EES shares will lend support to efforts to remove Anatolii Chubais as chief executive of the company. The law transfers to regional authorities the management of one-third of the state-owned shares in EES, which would leave the federal government in control of fewer than half of the shares. Although some regional leaders have hailed Chubais's appointment as head of the company, others are opposed, including Federation Council Speaker Yegor Stroev and Orenburg Oblast Governor Vladimir Yelagin. Meanwhile, "Kommersant-Daily" noted that newly appointed Fuel and Energy Minister Sergei Generalov has replaced Prime Minister Kirienko as chairman of the collegium of state representatives in EES. Generalov worked in the Menatep Bank before he joined the government, and the newspaper said unnamed bureaucrats are describing Generalov as a "counterweight" against Chubais in the energy sector. LB CENTRAL BANK PUTS COMMERCIAL BANK UNDER TEMPORARY MANAGEMENT... The Central Bank has introduced a special administration to manage Tokobank for the next two months, Russian news agencies reported on 8 May. Central Bank First Deputy Chairman Andrei Kozlov said the move is aimed at preventing liquidity problems from becoming "major difficulties" at one of Russia's 20 largest commercial banks. Vladimir Stolyarenko, first deputy head of the Imperial Bank, has been appointed provisional chief executive of Tokobank. Imperial Bank is linked to the gas monopoly Gazprom and is one of Tokobank's largest creditors. Unnamed sources in Tokobank told the 12 May "Kommersant- Daily" that the temporary administration plans to draw up an inventory of the bank's assets and pass the information to a potential buyer. LB ...WHILE MOVE DRAWS MIXED REACTION. Shortly after the Central Bank announced its decision to put a provisional administration in place at Tokobank, the U.S. rating agency Moody's said it may downgrade the credit ratings of nine Russian banks, "Kommersant-Daily" reported on 12 May. Tokobank President Pavel Nefidov told Interfax on 8 May that the Central Bank made a "hasty decision" that could hurt the Russian banking system. He noted that Tokobank is one of Russia's main recipients of foreign loans. ("Kommersant- Daily" said the bank owes some $500 million to Western creditors.) Meanwhile, the European Bank for Reconstruction and Development, which owns a 9.6 percent stake in Tokobank, issued a statement on 9 May welcoming the Central Bank's decision, AFP reported. LB YELTSIN LIKELY TO SKIP TSAR'S REBURIAL. Viktor Aksyuchits, an adviser to Deputy Prime Minister Boris Nemtsov, says Yeltsin is unlikely to attend the reburial ceremony for Nicholas II in St. Petersburg on 17 July, Russian news agencies reported on 8 May. Nemtsov heads a government commission that is planning the funeral. Earlier on 8 May, Yeltsin met with Patriarch of Moscow and All Russia Aleksii II, the head of the Russian Orthodox Church. According to Aksyuchits, the patriarch will not be present at the funeral either. Pavel Ivanov, a medical doctor who has studied the remains, told NTV on 10 May that scientific tests have proven beyond all doubt that the bones are those of Nicholas and his family. But Church officials have expressed doubt about the authenticity of the remains. Moscow Mayor Luzhkov also spoke out recently against holding a state funeral for the tsar (see "RFE/RL Newsline," 7 May 1998). LB LEBED CONFIDENT OF VICTORY IN KRASNOYARSK... Former Security Council Secretary Aleksandr Lebed appeared relaxed and self- assured during an appearance on NTV on 10 May, one week before the second round of the gubernatorial election in Krasnoyarsk Krai. Lebed outpolled the incumbent, Valerii Zubov, by 10 percent in the first round. Responding to allegations that he is seeking the governor's post merely as a stepping stone for a future presidential bid, Lebed said he will not run for president until he has improved the Krasnoyarsk economy, adding that he does not know how many years he will need to accomplish that task. The krai electoral commission has issued warnings to both Lebed and Zubov about possible campaign violations and may attempt to annul the election. According to "Kommersant-Daily" on 12 May, Lebed's representatives persuaded the Krasnoyarsk Krai Court to overturn only one of the two warnings issued to his campaign staff (see "RFE/RL Newsline," 7 May 1998). LB ...AS IS INCUMBENT GOVERNOR. Appearing on NTV on 10 May, Zubov appeared nervous but said the momentum has swung in his favor going into the runoff election. He admitted that Moscow Mayor Yurii Luzhkov's support for his candidacy was not "effective" and explained that residents of the regions have a "complex" attitude toward the capital. Several political consultants from Moscow have come to Krasnoyarsk to help Zubov during the final stages of the campaign, NTV reported. The governor is stressing his own accomplishments and portraying Lebed as a dangerous man who has no policy agenda and whose campaign is being financed by shady characters. Zubov has taken credit for persuading the federal authorities to release funds to Krasnoyarsk. Although Yeltsin's spokesman criticized Zubov's recent "ultimatum" to the president (see "RFE/RL Newsline," 5 and 6 May), the federal government allocated 50 million rubles ($8.1 million) to Krasnoyarsk, "Segodnya" reported on 7 May. LB BASHKORTOSTANI PRESIDENT SET FOR EASY RE-ELECTION. Murtaza Rakhimov appears to be headed for an easy victory in the presidential election to be held in Bashkortostan on 14 June. The republican electoral commission has denied registration to two would-be opponents: former republican Prime Minister Marat Mirgazyamov and banker Rafis Kadyrov, "Kommersant-Daily" reported on 12 May. The commission has already excluded another vocal critic of Rakhimov from the race (see "RFE/RL Newsline," 7 May 1998), leaving just two candidates: Rakhimov and Bashkortostani Forestry Minister Rif Kazakkulov. The latter appears to be running for president only in order to give the appearance of an alternative to the incumbent, the newspaper argued. Under similar circumstances, Federation Council Speaker and Orel Oblast Governor Yegor Stroev and Mordovian President Nikolai Merkushkin won re-election with more than 95 percent of the vote (see "RFE/RL Newsline," 27 October 1997 and 16 February 1998). LB BUDDHIST BOOK SCANDAL MAY INFLUENCE BURYAT ELECTIONS. With the 21 June presidential elections in Buryatia approaching, the issue of a Tibetan Atlas of Medicine lent to a US organization for an exhibition is being kept alive," "Kommersant-Daily" reported on 12 May. The book will be on exhibition for one year or so in the U.S. and will undergo restoration there. Buddhists fear it will not be returned in its entirety, and some presidential candidates are using the issue for their own ends. One such candidate is a former prime minister of Buryatia, Vladimir Saganov, who has sided with the Buddhists in calling for the book's return and criticizing President Leonid Potapov for allowing the book to leave the republic. Buddhists make up about one-fifth of the population of Buryatia. BP SEARCH FOR PRESIDENTIAL ENVOY CONTINUES. Russian law enforcement agencies investigating the 1 May abduction of Yeltsin's envoy to Chechnya, Valentin Vlasov, are now concentrating their search on the border area between Chechnya and Dagestan and have established contact with the kidnappers, "Izvestiya" reported on 12 May. The Chechen authorities have expressed their displeasure that Russian officials failed to inform them before making contact with the kidnappers. Chechen Deputy Prosecutor-General Magomed Magomadov warned that if Russia were to pay the ransom demanded by the kidnappers, it would be helping "finance organized crime" in Chechnya. LF CHECHNYA RATIFIES PEACE TREATY WITH RUSSIA. The Chechen parliament on 11 May ratified the treaty on peace and the principles of bilateral relations signed one year earlier by Russian President Yeltsin and his Chechen counterpart, Aslan Maskhadov, ITAR-TASS reported. Speaking at the ratification ceremony, Maskhadov affirmed that Chechnya will continue to develop its relations with Russia on the basis of that treaty, which the Chechen side argues is tantamount to an official recognition of Chechnya's independence from the Russian Federation. LF CHECHEN PRESIDENT, PRIME MINISTER DISAGREE ON DAGESTAN. Maskhadov also made clear that while he defends Chechnya's right to independence, he "deeply respects the choice of the peoples of Dagestan and Ingushetia" that their republics remain part of the Russian Federation, Interfax reported. But Chechen acting Prime Minister Shamil Basaev has again stressed that the ultimate objective of the recently established Congress of People of Chechnya and Dagestan is the unification of those two republics. In an interview published in "Nezavisimaya gazeta" on 12 May, Dagestani Nationalities Minister Magomedsalih Gusaev argued that no more than 5 percent of the members of any single ethnic group in Dagestan espouse separatist ideas. He added that those people "entertain the illusion that Islam is the cure for all ills." Gusaev rejected predictions that Dagestan will break away from Russia within two years. LF TRANSCAUCASUS AND CENTRAL ASIA ARMENIAN OPPOSITIONIST OFFERED KEY POSITION. President Robert Kocharian has offered David Vartanian, a senior member of the opposition National Democratic Union (AZhM), the post of head of the oversight service within the presidential administration, RFE/RL's Yerevan bureau reported on 11 May, quoting a member of the AZhM board. The presidential press service has declined to confirm or deny that report. The AZhM protested that the March presidential elections, in which its chairman Vazgen Manukian polled 12 percent of the vote in the first round, were neither free nor fair. LF AZERBAIJANIS PROTEST MOSCOW MURDER. Azerbaijani police on 11 May dispersed some 50 people who planned to stage a protest outside the Russian embassy in Baku following the 7 May murder of an Azerbaijani trader at Moscow's Luzhniki stadium market, Turan reported. "Nezavisimaya gazeta" reported on 12 May that Azerbaijani traders at the market are being stripped of their licenses. LF KYRGYZ SECURITY MINISTRY REPORTS ON WAHHABIS. Misir Ashirkulov said at a 11 May press briefing that his ministry has discovered evidence that Islamic fundamentalists are working in Kyrgyzstan, ITAR-TASS and Interfax reported. Ashirkulov confirmed reports by the newspaper "Vecherny Bishkek" that raids by the ministry's special forces have uncovered materials connected to Wahhabis and to an Uyghur separatist movement called For Free Eastern Turkestan. The Ittipak Uyghur group told RFE/RL's Kyrgyz service on 5 May that they have no knowledge of the existence in Kyrgyzstan of For Free Eastern Turkestan. ITAR-TASS and Interfax quoted Ashirkulov as saying Kyrgyzstan will cooperate with Russia, Uzbekistan, and Tajikistan in fighting fundamentalism (see "RFE/RL Newsline," 6 May 1998). However, RFE/RL correspondents present at the briefing were unable to confirm that statement. BP ECONOMIC COOPERATION ORGANIZATION CONVENES IN ALMATY. At the end of the 10-member Economic Cooperation Organization (ECO) summit in Almaty on 11 May, the member nations released a declaration calling for the establishment of a bank of commerce and trade and a joint air company as well as the abolition of tariffs on trade between ECO members, RFE/RL correspondents, ITAR-TASS, and IRNA reported. The declaration also said the member nations will intensify efforts to combat illegal narcotics smuggling. The rotating presidency of the ECO was passed from Turkmen President Saparmurat Niyazov to Kazakh President Nursultan Nazarbayev. The member states are Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkey, Turkmenistan, and Uzbekistan. BP ECO LEADERS HIGHLIGHT PRIORITIES. Kazakh President Nazarbayev said his country's trade with other ECO member states amounted to $1.12 billion in 1997, down on the previous year, and argued that most-favored nation status should be granted to those states, Interfax reported. At a meeting of four out of the five Caspian littoral states, Nazarbayev maintained his country's position on dividing the Caspian into sectors, while Turkmen President Saparmurat Niyazov said the sea should serve the interests of peace and cooperation. Ousted Afghan President Burhanuddin Rabbani called for support from the ECO in restarting the Afghan peace talks. Referring to oil and gas pipeline projects and improved transportation links between the countries, Uzbek President Islam Karimov said the ECO "has not reached a level where all of its projects can be put into practice." BP END NOTE YOUNG RUSSIAN GOVERNMENT FACES SAME OLD PROBLEMS by Laura Belin With the formation of Prime Minister Sergei Kirienko's government nearly complete, it is clear that President Boris Yeltsin has made good on his promise to promote a new generation of politicians. In the process, he has handed a stunning victory to the group informally known as the "young reformers." Yeltsin resisted demands from powerful businessmen such as Boris Berezovskii to exclude Deputy Prime Minister Boris Nemtsov from the new government. Oleg Sysuev (at 45, the eldest of the deputy prime ministers) is ideologically close to Nemtsov, and Deputy Prime Minister Viktor Khristenko left his native Chelyabinsk Oblast for a Finance Ministry post last July, when that ministry was headed by then First Deputy Prime Minister Anatolii Chubais. With Yeltsin's blessing, Chubais became chief executive of Russia's electricity monopoly, Unified Energy System. Supporters of Chubais and Nemtsov have predicted that at last the Russian government will give economic reform a decisive push. But Kirienko's team will face major obstacles in implementing its policy initiatives. The government's most urgent task is a familiar one. Owing to poor tax collection and revenue shortfalls caused by the slump in oil prices, the government continues to have trouble meeting its basic obligations. Last summer, pension arrears were settled with much fanfare. But early this year, those arrears began to pile up again--even though the government used questionable statistical techniques to keep pensions lower than the level apparently required by a new law. The Finance Ministry has already proposed cutting 1998 budget expenditures by more than 12 percent. Kirienko has pledged to boost revenues as well, but making up for lost revenues will be more difficult for his government than it was for his predecessor's. In 1997, the government plugged some budget holes by expanding its privatization program. The biggest sale, that of a 25 percent stake in the telecommunications giant Svyazinvest, brought in nearly $1.9 billion. The State Property Ministry has already raised its privatization revenue targets for 1998 by more than 80 percent. The first major sale is scheduled for late May, when a 75 percent stake in the oil company Rosneft goes on the auction block. The minimum bid has been set at some $2.1 billion. The government may never see that money, however. Since last November, an auction for a stake in the oil company Slavneft and two attempts to sell a stake in the Eastern Oil Company have all failed because fewer than two bids were submitted. (Russian law requires at least two bids for a privatization auction to be valid.) History could well repeat itself in the Rosneft auction. Two of the three major potential investment consortia have suggested they will not take part in the auction because of the high price tag. If the Rosneft sale falls through, the government is unlikely to meet its targets for proceeds from other major privatization deals, such as the planned sale of a 24 percent stake in Svyazinvest. In the meantime, the government is seeking other sources of cash. Russia floated a DM 1.25 billion ($682 million) Eurobond in March and a 750 billion lira ($425 million) Eurobond in April. Finance Ministry officials have said another Eurobond may be issued in June. The ministry also recently signed an agreement on a $1.5 billion loan from the Export-Import Bank of Japan. Those efforts will help pay pensions and wages to state employees, but not without substantial costs in the future. Unlike tax revenues or proceeds from privatization sales, loans must eventually be paid back with interest. Even if the government manages to improve tax collection and meet its budgetary obligations, far-reaching economic reforms will require changes in Russian legislation. Kirienko's cabinet is not well positioned to persuade the State Duma to back such changes. The Communist Party, which along with allied groups holds a near majority in the Duma, will likely be in no mood to compromise. The showdown over Kirienko's confirmation embarrassed party leaders, who appeared either unable to enforce party discipline or insincere in their opposition to Kirienko's candidacy. Several dozen deputies elected to the Duma as Communists supported the prime minister in the third and decisive vote. But Yeltsin rewarded neither them nor their preferred "experienced managers" with senior economic posts. To add insult to injury, the president handed a plum job to Chubais, probably the politician most hated by the leftist opposition. Furthermore, Kirienko's team may not be able to count on the once reliable allies of Viktor Chernomyrdin's government. Aleksandr Shokhin, the leader of the Our Home Is Russia Duma faction, told Interfax on 7 May that his faction no longer considers itself responsible for the government's actions. Yeltsin did not heed any of the faction's recommendations on cabinet appointments. Nor did he appoint any ministers representing Vladimir Zhirinovsky's Liberal Democratic Party of Russia, which, like Our Home Is Russia, backed Kirienko's confirmation unanimously in the final Duma vote. Yeltsin has the power to ignore the Duma's wishes when appointing the government. But the constitution gives him no such luxury when it comes to adopting legislation. Resentment over the composition of the new cabinet will further complicate efforts to pass a new tax code by the end of the year. Yeltsin's appointment of Ilya Yuzhanov as land policy minister suggests that the standoff between the legislature and the executive over the land code will continue. And Sysuev, who failed twice in 1997 to persuade the Duma to approve reductions in social benefits, is unlikely to improve on that record this year. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to email@example.com with the word "subscribe" as the subject or body of the message. 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