We are so bound together that no man can labor for himself alone. Each blow he strikes in his own behalf helps to mold the universe. - K. Jerome
RFE/RL NEWSLINE

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

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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
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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.

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