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RFE/RL NEWSLINE Vol. 2, No. 100 Part I, 27 May 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 100 Part I, 27 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 xxxxxxxxxxxxxxxxxxx SPECIAL REPORT xxxxxxxxxxxxxxxxxxxxxx CRISIS ON UKRAINIAN FARMS The decline of Ukraine's agriculture sector has been continuous since Kyiv declared independence from the Soviet Union in 1991. This report includes articles and photos. http://www.rferl.org/nca/special/ukraine-farms/index.html xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * NO BIDDERS IN ROSNEFT AUCTION * GOVERNMENT SEEKS EMERGENCY LOANS * ABKHAZ EXPEL GEORGIAN GUERRILLAS FROM GALI End Note: MOSCOW'S JOB-CRISIS MANAGEMENT xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA NO BIDDERS IN ROSNEFT AUCTION. Prime Minister Sergei Kirienko announced on 26 May that the auction for 75 percent plus one share of the state-owned oil company Rosneft will be declared invalid because no bids have been submitted, Russian media reported. He said the government will announce within one week new terms for selling a controlling stake in the company. During the last two months, potential investors repeatedly charged that the government was asking too much for the Rosneft stake (the minimum bid was some $2.1 billion, plus $400 million to invest in the company). In recent days, "Nezavisimaya gazeta" and "Kommersant-Daily" have both alleged that the cash-strapped government was putting pressure on the gas monopoly Gazprom to purchase Rosneft. "Kommersant-Daily" reported on 27 May that shortly before the deadline for submitting bids, Kirienko discussed the Rosneft sale with Gazprom head Rem Vyakhirev and Vladimir Potanin, the founder of Oneksimbank. LB BATTERING OF STOCK, BOND MARKETS CONTINUES... Russian share values continued to post steep declines in early trading on 27 May after being battered the two previous days. The benchmark index for the stock market dropped by some 7 percent and is down more than 50 percent since the beginning of 1998. According to Reuters, the index has reached an 18- month low. One Western broker quoted by Reuters said a "blind panic" has hit the market. Also on 27 May, prices for government treasury bills (GKOs) continued to fall, pushing up yields that already exceeded 60 percent at the end of the previous day. Speaking to an RFE/RL correspondent in Moscow, an analyst for a Western investment bank suggested that the failure of the Rosneft auction was widely expected and is not the primary cause of the latest market declines. LB ...BUT OFFICIALS SAY NO DEVALUATION IN WORKS. Prime Minister Kirienko and Finance Minister Mikhail Zadornov on 26 May insisted that the government is not considering a sharp devaluation of the ruble, Russian news agencies reported. But "Kommersant-Daily" on 27 May argued that the threat of devaluation is growing and advised readers to put their money in dollars. The newspaper said "only a crazy person could recommend investing money in shares that have almost halved in value in two weeks." "Nezavisimaya gazeta" on 27 May argued that earlier this year the authorities maintained the ruble at an artificially high level and said "sooner or later" there will be a devaluation. The newspaper, which is financed by CIS Executive Secretary Boris Berezovskii's LogoVAZ group, also argued that "the unpredictability of [President Boris Yeltsin's] policy is the main factor in all economic crises in recent years." LB GOVERNMENT SEEKING EMERGENCY LOANS. "Russkii telegraf" and "Kommersant-Daily" on 26 May reported that the government is seeking a special credit from the IMF to help stabilize the markets and prevent a ruble devaluation. Deputy Prime Minister Viktor Khristenko said Russia is conducting negotiations with the IMF and the World Bank on "various forms" of possible financial support, Russian news agencies reported. But Finance Minister Zadornov said the government has made no formal requests for funds from international financial organizations. "Kommersant-Daily" said the IMF is considering a request for several billion dollars. The fund has not yet announced a decision on releasing the next $670 million tranche of a four-year, $10 billion loan to Russia, but an IMF statement on 26 May praised the government's plans to cut spending. Yeltsin signed a decree the same day on measures to reduce expenditures by 40 billion rubles ($6.5 billion) this year, according to Khristenko. LB KOMI MINERS LIFT LAST RAIL BLOCKADE. Coal miners in Inta (Komi Republic), who started the recent wave of protests that crippled several major Russian railroads, on 26 May agreed to end their nearly two-week blockade of the Vorkuta- Moscow line, Russian news agencies reported. Some 55 million rubles ($8.9 million) from various sources has arrived in Inta in recent days, enough to cover part of the wage arrears owed to the miners. But Tatyana Loginova, a spokeswoman for the local coal company Intaugol, told Interfax that the miners will resume their "rail war" if the money the federal government promised to help deliver does not arrive by 5 June. Economics Minister Yakov Urinson said that as part of the agreement reached with the Inta miners, the government has promised not to ask prosecutors to file criminal charges against those who blocked the railroads (see also "End Note" below). LB RAILROAD MINISTRY PLANS LAWSUITS TO RECOUP LOSSES. Railroad Minister Nikolai Aksenenko announced on 26 May that his ministry plans to file suits in arbitration courts to compensate for some of the losses caused by the recent blockades staged by unpaid coal miners, ITAR-TASS reported on 26 May. The ministry estimates that the protests cost railroad companies more than 460 million rubles ($75 million). He did not specify who would be the targets of such lawsuits. It is unclear how the unpaid miners who blocked the railroads could be forced to pay damages to the Railroad Ministry. Meanwhile, workers in the Mosbass coal- mining region of Tula Oblast have decided not to block major transportation routes after receiving 27.7 million rubles in the last four days, enough to cover two months of back wages, ITAR-TASS reported on 26 May. LB PAYMENT IN KIND A POOR SUBSTITUTE FOR WAGES. When they cannot pay their workers, Russian enterprises often pay their employees in kind by allowing them to shop from special stores and deduct the amount spent from the wages they are owed. While such payment schemes help workers survive during long stretches without paychecks, they often cheat them out of the value of their wages. Special stores run by enterprises sell products at prices far higher than the market value of the goods. For instance, "Kommersant- Daily" on 26 May quoted one coal miner in Rostov Oblast as saying employees at his mine were offered Daewoo video cassette recorders in lieu of cash. But those who accepted the VCRs had 1,800 rubles ($292) deducted from their back wages, even though such VCRs sell locally for 700 rubles. LB BORDER SERVICE NOT TO BE MERGED WITH FSB. Federal Border Service Director Nikolai Bordyuzha says his service will not be merged with the Federal Security Service (FSB), Interfax reported on 26 May. Earlier this year, Bordyuzha said the president would issue a decree subordinating the border service to the FSB (see "RFE/RL Newsline," 28 January and 4 February 1998). But he told journalists on 26 May that the authorities have determined that it is "expedient" to preserve the border service as a separate entity, which will closely coordinate its activities with other law enforcement bodies, including the FSB. State Duma deputy Andrei Nikolaev, Bordyuzha's predecessor, was a vocal critic of the plans to merge the border and security services. LB YELTSIN OFFERS TO SCRAP OLD SUBS IN BARENTS SEA. Russia and Norway on 26 May signed an environmental protection agreement that calls for Russian decommissioned nuclear submarines in the Barents Sea to be dismantled, ITAR-TASS reported. Norway will grant loans to Russia worth $35 million to help finance scrapping the old submarines because Moscow is unable to pay for the disposal of radioactive waste. However, Russia's Atomic Energy Ministry said it will take several billion dollars to complete the task. Many of the submarines still have nuclear fuel aboard and are slowly rusting in docks. Also on 26 May, the Norwegian companies Statoil and Norsk Gidro signed a protocol on cooperation with Russia's Gazprom to develop a natural gas field in the Barents Sea. BP YELTSIN SEEKS TO IMPROVE RELATIONS WITH REGIONAL LEADERS. Yeltsin met with seven regional leaders in the Kremlin on 26 May and expressed regret that "a kind of gap has appeared between the governors and the president," NTV and ITAR-TASS reported. Those present were heads of seven of Russia's eight regional associations: Sverdlovsk Oblast Governor Eduard Rossel (representing the Urals association), Astrakhan Oblast Governor Anatolii Guzhvin (the Greater Volga association), North Ossetian President Aleksandr Dzasokhov (North Caucasus association), Khabarovsk Krai Governor Viktor Ishaev (Far East and Trans-Baikal association), Novosibirsk Oblast Governor Vitalii Mukha (Siberian Accord), St. Petersburg Governor Vladimir Yakovlev (North-west association), and Yaroslavl Oblast (Central Russia). Yeltsin promised to meet with the leaders of all regions in late June. The Federation Council, composed of top legislative and executive officials from each region, has increasingly proved willing to adopt legislation opposed by the president (see "RFE/RL Newsline," 21 May 1998). LB NTV DIRECTOR RESPONDS TO YELTSIN ON PRIVATE MEDIA. Oleg Dobrodeev, the director-general of the private network NTV, on 26 May responded to Yeltsin's recent charge that media owners are sometimes "the worst censors" (see "RFE/RL Newsline," 26 May 1998). Addressing the world congress of the International Press Institute, Dobrodeev said Yeltsin "offended" many journalists who work for private outlets and understand "the value of free speech," "Kommersant-Daily" reported on 27 May. He noted the authorities are accustomed to viewing television as a political weapon and that journalists partly contributed to that view through their near-unanimous support for Yeltsin's 1996 presidential campaign. (Dobrodeev's predecessor as NTV director, Igor Malashenko, openly worked for Yeltsin's campaign team.) But Dobrodeev predicted that the experience of 1996 will not be repeated in future elections. In an interview with Interfax on 26 May, Dobrodeev promised that NTV will provide "impartial and objective" coverage of the next presidential race. LB TATAR PRESIDENT NOMINATES NEW PARLIAMENT SPEAKER. At a parliamentary session on 26 May, Mintimer Shaimiev proposed Prime Minister Farid Mukhametshin to succeed Vassilii Likhachev as parliamentary chairman, RFE/RL's Kazan Bureau reported. Likhachev was appointed Russian permanent representative to the EU earlier this month. The leader of the opposition Tatar Public Center, Fandas Safiullin, has proposed Challi Mayor Rafgat Altynbayev, to succeed Likhachev. "Nezavisimaya gazeta" on 22 May suggested that Shaimiev is eager to replace Mukhametshin as premier because of the latter's inability to manage the republic's economy. LF DAGESTANI SECURITY CHIEF PROPOSES POSTPONING PRESIDENTIAL ELECTIONS. The State Council on 26 May voted to proceed with the elections scheduled for 26 June to the council's chairmanship, "Nezavisimaya gazeta" reported. But Security Council Chairman Magomed Tolboev told Interfax he thinks the elections should be postponed for one year to allow for the republic's constitution to amend to provide for direct elections to that post. At present, the State Council chairman is elected by a constituent assembly composed of council deputies and representatives of Dagestan's 34 ethnic groups. Direct elections to that post were one of the demands made by Union of Muslims of Russia chairman Nadirshakh Khachilaev, whose armed supporters temporarily occupied the government building in Makhachkala last week. A Makhachkala police official has said that criminal proceedings may be brought against Khachilaev and his brother for that action. LF TRANSCAUCASUS AND CENTRAL ASIA ABKHAZ EXPEL GEORGIAN GUERRILLAS FROM GALI. Abkhaz forces have established control over the 12-kilometer security zone on the Abkhaz side of the border between Abkhazia and the rest of Georgia, expelling the last remaining Georgian guerrillas after overnight fighting, AFP reported on 27 May. The Abkhaz have reportedly also taken control of the Inguri hydroelectric power station close to the border. LF GEORGIAN OFFICIALS LOOK FOR SCAPEGOAT FOR GALI DEBACLE... Former Georgian Security Minister Shota Kviraya has accused unnamed foreign intelligence services of instigating Georgian guerrillas to undertake the attack that triggered the fighting, Caucasus Press reported on 27 May. "Nezavisimaya gazeta" reported that Russia and the UN have been aware for several years that the Georgian government is sponsoring the guerrillas, who have bases in western Georgia, but have not formally raised the issue with Tbilisi. Georgian Ambassador to Russia Vazha Lortkipanidze claimed that "certain Georgian forces" had gone to Gali Raion to "fan tensions" that led to the conflict. It is unclear whether Lortkipanizde was alluding to the so-called Abkhaz parliament in exile, which is composed of ethnic Georgian deputies to the Abkhaz parliament elected in 1991. Those deputies had planned to convene in western Georgia in late May. LF ...SLAM RUSSIAN, UN TROOPS. Georgian Foreign Minister Irakli Menagharishvili on 26 May said that the 1,500-man predominantly Russian CIS peacekeeping force deployed along the internal border acted "completely irresponsibly and took no measures to stop the violence," Reuters reported. Parliamentary Defense Committee chairman Revaz Adamia said the Russian troops did nothing to prevent the Abkhaz from bringing heavy artillery into the conflict zone, Caucasus Press reported. Tamaz Nadareishvili, chairman of the Abkhaz parliament in exile, told Caucasus Press that the UN observer force on the border is exclusively engaged in compiling reports to send to UN Secretary-General Kofi Annan. LF GEORGIA CANCELS INDEPENDENCE DAY CELEBRATIONS. Most events planned to commemorate the 80th anniversary of Georgia's independence were canceled, Caucasus Press reported on 26 May. The official reason was the ongoing hostilities in Gali, but Interfax reported that rumors were circulating in Tbilisi of plans to assassinate Shevardnadze during the celebrations. LF ARMENIAN FOREIGN DEBT INCREASING. Finance and Economy Minister Eduard Sandoyan told the parliament on 26 May that the country's external debt continues to grow and is nearing $700 million, RFE/RL's Yerevan bureau reported. He said 45 percent of that sum is owed to the World Bank and the IMF, $109 million to Russia, and some $52 million to EU states. Last December, Armen Darpinian, currently prime minister and at the time finance and economy minister, estimated that the country's external debt would total $668.5 million by late 1997 and reach $797.1 million by the end of this year. Sandoyan rejected allegations that external borrowing encourages embezzlement and makes Armenia politically dependent on donor states and organizations. The parliament nonetheless announced the formation of a special commission "to look into the efficiency of using international loans." LF WORLD BANK RELEASES AID TO TAJIK OPPOSITION. The World Bank is to release $50,000 from a $165,000 grant to help the Tajik opposition set up medical centers and vocational training institutes, ITAR-TASS reported on 26 May. World Bank officials, Tajik Deputy Prime Minister Abdurahmon Azimov, and United Tajik Opposition leader Said Abdullo Nuri signed an agreement on the grant in March. BP U.S. EXIMBANK LENDS TURKMENISTAN $96 MILLION. Turkmen President Saparmurat Niyazov on 26 May signed an agreement with the U.S. Export-Import Bank whereby the bank will lend Turkmenistan $96 million to develop its gas industry, Interfax reported. Niyazov also signed an agreement with the bank on financing a $212 million project for developing that industry. Interfax reported that Eximbank bank is considering making loans to Turkmenistan without government guarantees. BP MORE PEOPLE TAKEN ILL AFTER KYRGYZ CHEMICAL SPILL. One week after a truck from the Kumtor gold mining company spilled sodium cyanide into the Barskoon River in eastern Kyrgyzstan, 475 people have become sick and sought medical treatment, Interfax reported. Of those, 68 have been kept in the hospital. Officials from the Kyrgyz government and the Kumtor company continue to say that the effects from the spill will be negligible. BP END NOTE MOSCOW'S JOB-CRISIS MANAGEMENT by Floriana Fossato Over the past several days, Russia's new government had the opportunity to convince angry coal miners, state- sector employees, and increasingly anxious Western investors and domestic businessmen of its ability to govern. However, economic analysts argue that the government will have to show huge political and economic initiative if it wants to achieve some much-needed results. Following two days of intense negotiations with top government officials, frustrated coal miners on 25 May lifted a 10-day blockade of the Trans-Siberian and North Caucasus railroads. The national protest, which came on the heels of a week of wildcat protests, immobilized more than 600 freight and passenger trains across Russia, causing losses to the railroads that the Transport Ministry estimated at some $29 million. The blockades also hurt many industries, which were unable to transport their goods to markets or obtain vital supplies. The temporary resolution of the issue came as a surprise to many, as it followed a first round of unsuccessful negotiations in the Siberian region of Kemerovo, in the southern Rostov region, and in the northern Vorkuta region, conducted by Deputy Prime Ministers Oleg Sysuev and Boris Nemtsov and by Economics Minister Yakov Urinson, respectively. In his 22 May radio address, President Boris Yeltsin raised tensions as he told strikers their protest was "unreasonable" and that they were making a difficult situation worse. Prosecutor-General Yurii Skuratov quoted the president as saying that the miners had "gone too far," and that Yeltsin believed that coal miners "have not yet learned to work in a market economy." The immediate reaction of the miners, who have not received pay in months and, in some cases, not in the last two years, was to vow to block the railroads until all wages arrears had been paid. However, after intense negotiations, the miners agreed to end the blockade--for the time being. Key rail lines to Eastern and Southern Russia have been re-opened. Officials in Kemerovo said on 25 May that it will take about a week for trains on the Trans-Siberian railway to get back on schedule. Only miners in the Arctic Komi Republic continued to prevent freight trains from using the Moscow-Vorkuta railroad on 25 May, but they lifted their blockade the following day. Speaking after his return to Moscow from Rostov, Deputy Prime Minister Nemtsov commented "many words have been said in the past, but now there is time only for decisive action." He said that "the government will immediately act to create new jobs for workers made redundant, when financially ailing mines are closed down." But, he added, mines will be closed only in those regions where enough money is found to create new work places and a proper social safety net, including the possibility of relocating and employment in different regions for miners who lose their jobs. Closing down Russia's unprofitable mines is a measure international financial institutions favor, but which previous governments have been hesitant to implement. Moscow's inability to tackle more resolutely the issue of restructuring the coal industry has led to the spiraling wage arrears problem. Most of the unpaid wages are not owed by the state but directly by the mines, a great number of which have been privatized. However, company heads say they cannot pay their workers because they are not being paid by the government and private customers who buy the coal. Despite their readiness to appease the miners, neither Sysuev nor Nemtsov contradicted Yeltsin and Prime Minister Sergei Kirienko, who last week had insisted that the government would not give in to mounting demands to loosen its austere monetary policy to pay all wage arrears to miners. The two ministers explained that there would be no printing of money and no re-distribution of funds between regions or between different sectors of the economy. Kirienko, for his part, commented that the new government "is responsible not only for putting out today's fire but also for the future of the country's economy as a whole." Most analysts suggest that the government's performance during the crisis was effective. Nikolai Petrov, a senior associate with the Carnegie Center in Moscow, told RFE/RL that the government "has dealt rather well with this crisis..., despite subjective attempts by other people to exploit the outcome of the situation for their ends." According to Petrov, trade union activists in the regions played a much more positive role in the negotiations than national leaders. The strike showed, as other protest actions have shown, that "big trade unions, keeping their Soviet-style traditions and their immense properties, don't have real influence over the workers, who are driven mainly by anger and frustration," Petrov commented. Rory McFarquhar, an analyst with the Russian-European Centre for Economic Policy, told RFE/RL that the government had "successfully defended the budget vis-a-vis the miners' demands." However, he said "the overall economic situation is very precarious, as crises seem to feed on themselves." According to McFarquhar, "objectively, Russia's economic situation was worse in the past two years, but subjectively, for a confluence of difficult circumstances, the new government is in a situation where many people, including concerned investors and financial operators, have lost their previous confidence and perceive [the situation] as being worse now." The author is an RFE/RL correspondent based in Moscow. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to firstname.lastname@example.org with the word "subscribe" as the subject or body of the message. 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