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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 100 Part I, 27 May 1998


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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

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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
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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.

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