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RFE/RL NEWSLINE Vol. 2, No. 107 Part I, 5 June 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 107 Part I, 5 June 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 RUSSIAN MEDIA EMPIRES III A new prime minister has taken office, Boris Berezovsky's now a CIS official, and the state plans to form a new media holding company. See our updated media report. http://www.rferl.org/nca/special/rumedia3/index.html (English) http://www.rferl.org/bd/ru/russian/content/reports/rumedia3/ index.html (Russian) xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * YELTSIN CALLS FOR STRICT TAX DISCIPLINE * KIRIENKO GETS SUPPORT, NOT AID IN PARIS * ABKHAZ TALKS CONTINUE End Note: LITTLE SIGN OF BALANCE-OF-PAYMENTS CRISIS IN TURKMENISTAN xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN CALLS FOR STRICT TAX DISCIPLINE. In his weekly radio address, Russian President Boris Yeltsin said on 5 June that the crisis on Russia's financial markets has been "defused" but that the government and Central Bank must continue to take measures to preclude further destabilization, Russian agencies reported. Yeltsin said that federal, regional, and local governments must learn to live within their means, use budget funds rationally, and stop accumulating debts. He warned that tax policy "must become as tough as possible" and that tax-evaders will be prosecuted, noting that failure to collect taxes means that public sector wages cannot be paid. LF RUSSIAN MARKETS STABILIZE. After two days of rebounding from the earlier sell-off, the main Russian stock market index closed down 0.22 percent on 4 June, Russian agencies reported. Shares in Gazprom lead the market, rising 13.7 percent after climbing 20.2 percent the day before. The ruble also fell slightly against the dollar from 6.16 to 6.17. On 5 June, the Central Bank reduced its refinancing rate from 150 percent to 60 percent. PG NEMTSOV, URINSON DIFFER OVER CAUSES OF FINANCIAL CRISIS. In an interview with the 4 June "Kommersant-Daily," First Deputy Prime Minister Boris Nemtsov argued that the financial crisis of the previous week was "prompted by the budget deficit." He added that the government's attempt to reduce expenditures and increase revenues should have been made two years ago. Nemtsov excluded the possibility of the government raising loans from Russia's oligarchs rather than seeking them abroad, saying that the Russian business tycoons "do not have that much money, they simply act like they do." But Finance Minister Yakov Urinson offered a different explanation for the crisis in an interview with "Noviye izvestiya" published the same day. Urinson said the crisis was the combined result of several adverse trends, including the government crisis, the coal miners' strikes, the southeast Asian economic crisis, a weak export structure, and lack of confidence among foreign investors. LF KIRIENKO GETS SUPPORT, NOT AID IN PARIS. Russian Prime Minister Sergei Kirienko won support from the French government for his reform program but said he has not asked for or received any additional aid, Interfax reported on 4 June. Kirienko said the situation in Russia is stabilizing "smoothly and reliably" and that Moscow does not need any financial assistance. Following two days in Paris, Kirienko departed for Crimea to participate in a summit of Black Sea states. PG PRIMAKOV PRAISES UN SECURITY COUNCIL POSITION ON INDIA, PAKISTAN. Foreign Minister Yevgenii Primakov on 4 June said that the "joint stance" of the five permanent members of the UN Security Council on recent nuclear tests by India and Pakistan represents a major achievement, ITAR-TASS reported. Primakov's comments came immediately before the five's foreign ministers were to meet in Geneva on this issue. Also on 4 June, Russia pledged to provide the International Atomic Energy Agency with more information on Russian nuclear plants that export to non-nuclear countries, Interfax reported. PG DUMA POSTPONES START II HEARINGS. After voting down a move to cancel hearings on the arms control accord, the State Duma agreed on 4 June to postpone them from 9 June to 16 June in order to meet with senior military and Foreign Ministry officials who will be out of town on the earlier date, ITAR-TASS reported. Duma speaker Gennadii Seleznev warned that the hearings could still be canceled if U.S. President Clinton continues to demand that Russia ratify the treaty as a precondition for his visit to Moscow. PG YELTSIN VETOES LAND CODE. President Yeltsin on 4 June vetoed a land code passed by the Duma that would have made most private real estates deals illegal, Interfax reported. He said that its provision violates the constitution. In a related move, the government on 4 June asked the Constitutional Court to nullify a Duma bill that would prevent foreigners from owning more than 25 percent of power companies in Russia. This step came even as some Duma members indicated that they are willing to consider eliminating the 25 percent restriction from the legislation. PG YELTSIN WANTS "MORE BALANCED" PRESS COVERAGE. Presidential spokesman Sergei Yastrzhembskii has said that Yeltsin wants "more balanced" coverage of developments in Russia but that he is not opposed to "freedom of expression," including criticism of himself, ITAR-TASS reported on 4 June. "There are invisible threads between the president and the mass media, a very reliable umbilical cord," Yastrzhembskii added. Meanwhile, at a conference devoted to the creation of a state transmission monopoly, Mikhail Seslavinskii, the chairman of the Russian television and radio broadcasting service, said "the state has the right for information flows as powerful as private corporations have." And Russian Deputy Prime Minister Oleg Sysuev said the government wants a structure that would allow the state to compete successfully on the information market. However, Kemerovo governor Aman Tuleev released a statement saying he will challenge those plans in court. PG NEW TAX CHIEF PROMISES TO TARGET 1,000 RICH RUSSIANS. In a bid to persuade ordinary people to pay their taxes, Russia's new tax chief Boris Fyodorov released a statement on 4 June saying his service will target 1,000 prominent Russians for special audits, Russian agencies reported. In a related development, Prime Minister Kirienko said in Paris on 4 June that he expects the Duma to give preliminary approval to a new tax code before taking its summer recess. But he also stressed that taxes would be determined until that time by presidential decrees, ITAR-TASS reported. PG LUKOIL OPPOSES OPEC MEMBERSHIP UNLESS OTHERS JOIN. Leonid Fedun, LUKoil's vice president, told Interfax on 4 June that Russia should not join OPEC unless Kazakhstan, Azerbaijan, and Turkmenistan become members at the same time. He explained that those countries "will take over the markets we may leave" if Russia were forced to cut its exports to conform to OPEC limits. PG RUSSIA, JAPAN EXPAND MILITARY TIES. Kadzuya Natsukawa, the chairman of Japan's joint Chiefs of Staff, told ITAR-TASS on 4 June that Moscow and Tokyo are expanding military cooperation in order to improve security in the Asia-Pacific region. But he added that Japan currently has no plans to buy any of Russia's Su-27 combat planes. In another military development, Russia on 4 June conducted its first-ever joint exercise with the British Navy in the Baltic Sea. PG AFGHANISTAN FIGHTING WORRIES MOSCOW. The Russian Foreign Ministry on 4 June expressed concern about renewed fighting in Afghanistan, Interfax reported. But the same day, Foreign Ministry deputy spokesman Valerii Nesterushkin said Moscow is pleased by Tajikistan's decision to establish a commission including representatives of the government, the parliament, and the opposition to work out a law on political parties. PG ASEAN CHIEF PRAISES RUSSIA. Secretary-General of the Association of South East Asian Nations (ASEAN) Rodolfo Severino praised Russia on 4 June for its role in the organization, saying "thanks to Russia a certain balance of forces has been created in the Asian Pacific region," ITAR- TASS reported. Severino's comments were made one day after ASEAN held its first conference in Moscow, which addressed, among other issues, the southeast Asian financial crisis and nuclear testing by Pakistan and India (India and Russia are two of the "dialogue partners" of the nine-member association). ASEAN is to ask the five recognized nuclear states to persuade Pakistan and India to sign the Non- Proliferation Treaty. ITAR-TASS on 3 June quoted Russian Deputy Foreign Minister Grigorii Karasin as describing ASEAN as a "major pole in an emerging multi-polar world." BP NEW HUMAN RIGHTS MONITOR SAYS SITUATION IN RUSSIA 'AWFUL.' Oleg Mironov, the newly appointed human rights commissioner, told a press conference in Moscow on 4 June that Russia's human rights record is currently "awful," Western agencies reported. He noted that he will not push for an early ban on executions, despite Moscow's commitments. (Russian Prime Minister Kirienko issued a similar statement in Paris.) Mironov also complained that his predecessor, Sergei Kovalev, had left him with "no office, no personnel, and no documents." As a result, Mironov concluded , he will have to start work "from scratch." PG GOVERNMENT FIRM TO MANAGE FEDERAL PROPERTY ABROAD. In a bid to improve revenues from Russian property held abroad, the Russian government has decided to create a state-owned firm to manage such holdings, Interfax reported on 4 June. According to the State Property Ministry, Russia currently has more than 2,500 pieces of real estate in some 120 countries, not all of which are being actively used. PG NO REHABILITATION FOR YEZHOV, FRINOVSKII. The Military Collegium of the Russian Supreme Court on 4 June refused to rehabilitate two Stalin-era secret police officials, People's Commissar for Internal Affairs Nikolai Yezhov and his deputy, Mikhail Frinovskii, Interfax reported. Both men, executed in 1940, were notorious for their role in Stalin's purges and show trials. PG LUZHKOV SAYS MUSCOVITES DRINK TOO MUCH WATER. Moscow Mayor Yurii Luzhkov told Interfax on 4 June that the water supply in Moscow now conforms to "European and world standards." But he complained that residents are drinking too much of it, nearly twice as much as the per capita norm in European cities. That amount, he said, represents "an unaffordable luxury." Meanwhile, Chairman of the State Committee for Ecology Viktor Danilov-Danelian told Interfax that Moscow is one of 80 Russian cities that are environmentally unsafe. PG KEMEROVO GOVERNOR DISPUTES MOSCOW KEEPING ITS PROMISES. Aman Tuleev told Radio Mayak on 4 June that Moscow is not keeping its promises to pay back wages to the Kuzbass coal miners, ITAR-TASS reported. But the Russian news agency reported that some 100 million rubles ($16.2 million) has been dispatched to that region over the past 10 days. Tuleev also announced plans to institute criminal proceedings against 50 local officials who, he said, were responsible for failing to pay local workers in the past. PG U.S. SHUTTLE DOCKS WITH 'MIR.' "Discovery" docked with the "Mir" space station on 4 June in what is the last time that a U.S. shuttle will dock with the station. "Mir' is scheduled to be closed down early next year. The orientation system aboard "Mir" began functioning fully again on 1 June, after a computer problem had left the station drifting and jeopardized the docking with "Discovery." U.S. astronaut Andrew Thomas will return to Earth aboard the shuttle after more than four months on "Mir." Once undocked, the Discovery will travel alongside Mir to help locate a puncture in one of the station's Spektr modules. The puncture occurred last June when a cargo ship rammed into the station. BP TRANSCAUCASUS AND CENTRAL ASIA ABKHAZ TALKS CONTINUE. CIS Executive Secretary Boris Berezovskii returned from Tbilisi to Abkhazia for a second round of talks with Abkhaz President Vladislav Ardzinba in Gagra on 4 June, Russian agencies reported. Ardzinba told journalists that significant progress was made in preparing for a meeting between himself and Georgian President Eduard Shevardnadze, adding that "appropriate documents" will be drafted within the next few days. In Moscow, the head of the Russian Foreign Ministry task force that is mediating a settlement of the Abkhaz conflict said talks between the Georgian and Abkhaz special envoys are also making progress. But in Tbilisi, Georgian presidential adviser Levan Aleksidze said the Russian Foreign Ministry's rejection of a Bosnia-style peace enforcement operation in Abkhazia violates the document on additional measures for resolving the Abkhaz conflict adopted at the April CIS summit. LF U.S. AGAIN VETOES OIL EXPORT PIPELINE VIA IRAN... Meeting with President Heidar Aliev in Baku on 4 June, U.S. Special Envoy to the Newly Independent States Stephen Sestanovich said Washington supports a multi-variant approach to the transportation of Caspian hydrocarbons to world markets, Russian agencies reported. At the same time, he ruled out routing any pipeline through Iran. U.S. Energy Secretary Federico Pena, speaking at the "Crossroads of the World" conference in Istanbul last week, fully endorsed the Baku- Ceyhan route for the Main Export Pipeline and pledged to try to secure U.S. funding for it. ANS-Press on 3 June quoted Turkish Energy Secretary Cumhur Ersumer as affirming that Turkey is ready to fund the Baku-Ceyhan project if Azerbaijan drops its insistence on retaining the decisive vote in managing the new pipeline company. LF ...WHILE BAKU CONSIDERS ALTERNATIVES. Speaking at a press conference in Baku pegged to the Fifth Caspian Oil and Gas Exhibition, Natik Aliev, the president of Azerbaijan's state oil company SOCAR, said Baku is currently assessing 11 export pipeline routes. He described the Iranian route as economically attractive but said that export via Bulgaria and Greece to the Mediterranean is also an option. Aliev added that, in view of its superior quality, Azerbaijani oil could be refined in Ukraine, Bulgaria, and Romania. "Nezavisimaya gazeta" on 4 June reported that SOCAR and the Russian pipeline concern Transneft have concluded an agreement on the export of 9-10 million metric tons of Azerbaijani oil from Baku to Novorossiisk when the current export agreement expires in 2001. LF EVACUATION OF BARSKOON BEGINS. Kyrgyz Deputy Prime Minister Boris Silayev on 4 June announced that 3,500 residents of the Barskoon area on the southern shore of Lake Issyk-Kul will be evacuated to the northern shore, RFE/RL correspondents reported. The village of Barskoon is located near the scene of the 20 May spill of sodium cyanide into the Barskoon River. More than 1,000 people received medical attention in the week following the spill, and one woman died from cyanide poisoning. Residents of the southern shore are demanding the Kumtor gold mining operation, which is responsible for the spill, be shut down. Concerns have also been raised about the storage of 2,000 tons of sodium cyanide in the town of Balykchy, on the western shore of Issyk-Kul. Despite mounting evidence of a major environmental disaster, government officials continue to say it is safe to swim in the lake. BP AKAYEV FAVORS ELECTORAL REFORM. Kyrgyz President Askar Akayev, addressing a 4 June conference on "Improving the Election System in Kyrgyzstan," said he wants to abolish the requirement of at least 50 percent turnout for an election to be valid, Interfax reported. Akayev said the cost of holding run-off elections is too high and that he favors "winner-takes-all" elections. An amendment has been drafted and is expected to be submitted to the parliament later this year. BP REGIONAL AFFAIRS BLACK SEA ECONOMIC COOPERATION FORUM CONVENES IN YALTA. At a forum of the Black Sea Economic Cooperation (BSEC) organization in Yalta on 5 June, the BSEC leaders signed a joint declaration and a charter proclaiming the BSEC a regional economic organization, ITAR-TASS reported. Ukrainian President Leonid Kuchma said in his opening speech that "the BSEC is transforming into a major component of Europe's new security system." He added that Ukraine is in favor of creating a BSEC free-trade zone. The forum is attended by the presidents of Albania, Armenia, Azerbaijan, Bulgaria, Georgia, Moldova, Romania, Turkey, and Ukraine as well as the prime ministers of Greece and Russia. JM BEREZOVSKII DENIES PLANS TO MOVE CIS HQ. CIS Executive Secretary Boris Berezovskii told journalists on 4 June that allegations that he plans to transfer CIS headquarters from Minsk to Moscow are untrue, Interfax reported. Belarusian envoy to the CIS Sergei Posokhov had claimed on 3 June that Berezovskii and his staff had made preparations for such a move. Posokhov had expressed Belarus's strong opposition to such an intention. He added that Ukraine, Uzbekistan, Armenia, and Tajikistan had similarly expressed objections to that intention. LF END NOTE LITTLE SIGN OF BALANCE-OF-PAYMENTS CRISIS IN TURKMENISTAN by Michael Wyzan Turkmenistan's GDP and exports are dominated by gas and cotton. Its largely unreformed economy has been more affected by developments on these markets than by the trends that usually characterize transition economies. The lack of reform extends to the statistical authorities. The country publishes less economic data than any other CIS member. Even now, the CIS's Interstate Statistical Committee still has virtually no 1997 figures on Turkmenistan. That makes it difficult to figure out from abroad what is happening there; visiting the country is not particularly helpful either in identifying macroeconomic trends, as the author learned in April. What data are available show GDP falling by about 25 percent in 1997. Turkmenistan should also should be experiencing a balance-of-payments crisis, having run up an approximately $250 million trade deficit and $600 million current account deficit last year (an enormous 32 percent of GDP) following many years of surpluses on both accounts. While imports contracted last year by about 50 percent to some $1 billion, exports fell by more than 55 percent to around $750 million. However, there is little indication so far of any crisis. Construction continues day and night on a number of large infrastructure or "prestige" projects, such as a congress hall and an arch commemorating the country's neutrality. All such construction is carried out by foreign contractors, who must be paid in foreign currency, and makes uses of imported machinery. For a city with some 400,000 inhabitants, Ashgabat has an unusually large number of hotels, with restaurants serving imported food. Most important, Turkmenistan has yet to agree to a reform program with the IMF, making it one of only two post- communist countries never to have done so (the other being Yugoslavia). Thus, there has been no lending from the IMF to support the balance of payments. Moreover, the absence of an IMF program means that the World Bank is unable to lend the country more than $100 million. Despite the collapse in exports and GDP, certain other macroeconomic indicators were favorable in 1997: consumer price inflation (December-to-December) fell to 21 percent from 446 percent in 1996. The parallel market exchange rate (Turkmenistan maintained a multiple exchange rate system until April) was stable, while monetary policy was tight and the budget essentially balanced. The large decline last year in GDP resulted chiefly from a collapse in gas exports. During the Soviet era, Turkmenistan exported about 70 billion cubic meters of gas annually; by 1997, this figure had fallen to 6.5 billion, down by 70 percent from 1996. Gas export revenues fell from $674 million in 1996 to $274 million last year. The reason for last year's decline is clear: in March 1997, the government halted gas exports to its CIS partners-- namely, Armenia, Georgia, and Ukraine--because these countries had built up large arrears to it for earlier deliveries. The larger, longer-term decline set in 1994, when a dispute with Gazprom resulted in the company's refusal to allow Turkmen gas into its pipeline for sale to European customers. The issues in dispute largely concern the price of the gas and the share of the payment that is to be made in currency (rather than by barter). In any case, since a large amount of gas has not been paid for, the positive entry in the current account under gas exports has had to be netted out in the capital account. Last year, both the positive and negative entries fell, which meant that the decline in gas exports had a smaller impact on the balance of payments than would normally be the case. Cotton production rose last year to 630 million tons, from 436 million tons in 1996, although it remains far below the Soviet-era peak of 1.4 billion tons. Even with the increase in production, however, cotton exports fell last year, when the harvest remained unsold due to a price disagreement with Turkish and Pakistani buyers. Another factor restraining imports is the authorities' use of administrative methods to achieve precisely that end. Access to foreign exchange is severely restricted, with most such currency made available through auctions. And those wishing to import consumer goods are not ordinarily allowed to participate in those sales. Finally, Turkmenistan has weathered its balance-of- payments problems partly because it has unusually large foreign reserves, amounting to almost $1 billion at the end of 1997. This is equivalent to 15 months of imports, easily the highest such figure in the CIS. These reserves even grew slightly in 1997. Much of the reserves are directly under the president's control. If, as feared, the country registers another $500- 600 million current account deficit this year, maintaining macroeconomic stability will depend on whether the president decides to release some of "his" reserves. This is a matter about which observers can only speculate. The author is an economist living in Austria. 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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