When in doubt, tell the truth. - Mark Twain
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 114 Part I, 16 June 1998


___________________________________________________________
RFE/RL NEWSLINE Vol. 2, No. 114 Part I, 16 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

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Headlines, Part I

* STOCK MARKET HITS ANOTHER LOW

* FINANCE MINISTER WON'T CONFIRM SECRET BORROWING

* GEORGIAN-ABKHAZ TALKS MAY RESUME THIS WEEK

End Note: POWER COUNTERVAILING AND OTHERWISE
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RUSSIA

STOCK MARKET HITS ANOTHER LONGTIME LOW. The index of leading
shares on the Russian stock market fell 7 percent on 15
June, hitting its lowest point since 1996, the "Financial
Times" reported. The bond market declined as well, as yields
on government treasury bills rose above the Central Bank's
annual refinancing rate of 60 percent. Share values rose
slightly in early trading the next day, after Russian news
agencies quoted unnamed government officials as saying the
IMF will send a team to Moscow next week to negotiate an
additional aid package for Russia. Financial analysts have
said a multi-billion-dollar bailout is needed to restore the
confidence of Russian and foreign investors. Meanwhile, the
presidential press service announced on 15 June that
President Boris Yeltsin will chair a meeting of government
and parliamentary officials on 23 June to discuss an "anti-
crisis" economic program. That meeting was previously
scheduled for 30 June. LB

FINANCE MINISTER WON'T CONFIRM SECRET BORROWING. Interfax
reported on 16 June that Finance Minister Mikhail Zadornov
declined to confirm a "Financial Times" report saying Russia
has secretly borrowed at least $200 million from Western
banks in recent weeks (see "RFE/RL Newsline," 11 June 1998).
In June and December 1997, Russia borrowed hundreds of
millions of dollars from U.S. billionaire George Soros and
from foreign banks, but news of those short-term loans first
emerged months after the fact (see "RFE/RL Newsline," 19
February and 5 March 1998). LB

RAILROADS SLASH CARGO RATES FOR SOME GOODS. Russian
railroads lowered shipping rates for coal, iron ore, oil,
and fuel oil by 25 percent on 15 June in line with a
government decision the previous week, Russian news agencies
reported. Deputy Prime Minister Boris Nemtsov told
journalists on 8 June that the reduction in cargo rates is a
"major structural step in the [government's] industrial
policy." The change will cost the railroads an estimated 6
billion rubles ($970 million), with half of the losses  from
coal transportation alone, according to Nemtsov. He has said
that the monopoly Unified Energy System will in June or July
adopt significant reductions in electricity rates for
industries. LB

INTERIOR TROOPS FACE SHARP CUTS. Interior Minister Sergei
Stepashin on 15 June announced that the ministry's troops
will be reduced during the next two years from some 250,000
to 120,000-140,000, Russian news agencies reported.
Stepashin and Colonel-General Pavel Maslov, the commander of
the Interior Ministry's troops, briefed Yeltsin on the
planned restructuring earlier the same day. Stepashin told
journalists that Russia does not need the ministry's troops
to "duplicate" the Defense Ministry's ground forces and said
the Interior Ministry troops will become a more mobile
force. The size of the troops grew significantly during
Anatolii Kulikov's tenure as interior minister. Shortly
after Yeltsin sacked Kulikov in March, officials said the
Interior Ministry's troops would be downsized from 257,000
to 220,000 (see "RFE/RL Newsline," 25 March 1998). LB

YELTSIN RESTRUCTURES TRAFFIC POLICE. Stepashin on 15 June
announced that Yeltsin has signed a decree transforming the
State Automobile Inspectorate (GAI) into the State Road
Safety Inspectorate, ITAR-TASS reported. The GAI has long
been notorious for corrupt officers who stop vehicles
arbitrarily and demand bribes from drivers. According to
Stepashin, the restructuring of the inspectorate will help
motorists by introducing simpler registration rules. He also
said vehicles that are less than 10 years old will no longer
have to have technical checks every year. Instead, they will
be checked every five or 10 years, which will save time for
motorists and give officers fewer opportunities to take
bribes. LB

NEMTSOV SAYS 50,000 OFFICERS TO ACQUIRE APARTMENTS. Deputy
Prime Minister Boris Nemtsov says 50,000 officers who are
leaving the armed forces will be able to acquire apartments
this year, Russian news agencies reported on 15 June.
Speaking to journalists after a meeting with Yeltsin,
Nemtsov said the government has already transferred money
for purchasing apartments to some 3,000 officers. There is
an acute housing shortage in the military, and career
officers who leave military service rarely have the funds to
buy apartments. In May, the government began to implement
its policy to help retiring military personnel buy housing,
but as military spending remains below budget targets, it is
unclear whether the program will be implemented in full. LB

CHERNOMYRDIN MAKES IT OFFICIAL. Former Prime Minister Viktor
Chernomyrdin on 15 June confirmed that he plans to run for a
State Duma seat this September, Russian news agencies
reported. He made the announcement during a visit to Yamal-
Nenets Autonomous Okrug, where the by-election will be held
to fill the seat Vladimir Goman gave up to become chairman
of the State Committee on the North. Most of Russia's gas
reserves are located in the okrug, and Chernomyrdin is a
former head of the gas monopoly Gazprom, the largest
employer in Yamal-Nenets. LB

YELTSIN NOT TO ATTEND TSAR'S REBURIAL. Deputy Prime Minister
Nemtsov on 15 June confirmed that Yeltsin will not attend
the 17 July reburial of Nicholas II, Russia's last tsar. The
president's decision was expected, particularly after the
Holy Synod of the Russian Orthodox Church decided not to
send high-level clerics to the ceremony in St. Petersburg
(see "RFE/RL Newsline," 10 and 11 June 1998). Nemtsov said
Prime Minister Sergei Kirienko will appoint an official
government representative to attend the ceremony. LB

SUSPECT IN CORRUPTION CASE TO BE RETURNED TO RUSSIA. Greek
Justice Minister Evangelos Yiannopoulos on 15 June approved
plans to extradite Andrei Kozlenok, a key suspect in a high-
level corruption case, to Russia, ITAR-TASS reported. The
Greek Supreme Court rejected Kozlenok's final appeal against
extradition last month (see "RFE/RL Newsline," 19 May 1998).
Kozlenok then applied for political asylum in Greece, but
the Greek minister for public order rejected his application
on 9 June. Kozlenok, who is accused of embezzling $180
million worth of precious metals and gemstones, claims that
his life will be in danger in Russia. If he cooperates with
investigators or is tried, several former high-ranking
officials may be implicated in the case. LB

DUMA DEPUTY PROPOSES NEW LIBEL LAW. Iosif Kobzon, a popular
singer and State Duma deputy, has announced that he and an
academic, Yurii Bokan, are preparing a draft law on
protecting the honor and dignity of Russian citizens, ITAR-
TASS reported on 15 June. He did not specify any of the
draft's provisions or explain why he considers current
legislation prohibiting libel and slander inadequate. In
1996, Kobzon won a libel lawsuit against "Sovetskaya
Rossiya," which accused him of having ties to organized
crime (see "OMRI Daily Digest," 6 March 1996). He is a
culture adviser to Moscow Mayor Yurii Luzhkov, who recently
lost a libel suit against Russia's Democratic Choice leader
Yegor Gaidar (see "RFE/RL Newsline," 21 May 1998). LB

TWO SUSPECTS  CONFESS TO MURDERING JOURNALIST... Two
suspects arrested in connection with the murder of
"Sovetskaya Kalmykia Segodnya" editor Larisa Yudina have
confessed to the crime, Interfax reported on 16 June,
quoting Yurii Biryukov, the deputy head of the Prosecutor-
General's Office's Main Department in the North Caucasus. He
said Sergei Vaskin, a former aide to Kalmykian President
Kirsan Ilyumzhinov, and Tyurbi Boskomdzhiev, Ilyumzhinov's
representative in Volgograd Oblast, have been charged with
premeditated murder. Authorities are still searching for a
third suspect in the case, Biryukov said. Investigators
believe Yudina's murder was linked to her journalist
activities. "Sovetskaya Kalmykia Segodnya," which is printed
outside the republic, is the only local newspaper that
criticizes Ilyumzhinov. Yeltsin remarked on 15 June that
"not everything" relating to the investigation can be shared
with law enforcement officials in Kalmykia. LB

...AS KALMYK AUTHORITIES BAN RALLY IN JOURNALIST'S MEMORY.
The authorities in the Republic of Kalmykia have prohibited
a rally planned in memory of Yudina, ITAR-TASS reported on
15 June. Lidiya Dordzhieva, a close friend of Yudina's and
head of a grass-roots organization in Kalmykia, told the
news agency that the authorities banned the rally on the
"pretext" that it might stir up ethnic strife in the
republic. Dordzhieva came to Moscow on 15 June, saying she
has received death threats in Elista, the capital of
Kalmykia, since Yudina was killed. Yudina's last story,
published posthumously in "Sovetskaya Kalmykia Segodnya,"
covered Dordzhieva's forced treatment at a psychiatric
clinic in Elista this March. LB

YELTSIN CONGRATULATES BASHKIR PRESIDENT... Yeltsin has
congratulated Murtaza Rakhimov on his victory in the 14 June
presidential election in Bashkortostan, ITAR-TASS reported
on 16 June. A telegram from Yeltsin said Bashkortostan's
voters demonstrated that "they tie their hopes for the well-
being of the republic with your political leadership. The
latest elections are convincing evidence that the republic's
population supports the economic strategy and reforms that
are being carried out." Rakhimov has been a loyal ally of
Yeltsin and is believed to have helped Yeltsin substantially
improve his showing in Bashkortostan during the 1996
presidential election. In the first round of that election,
Yeltsin trailed Communist candidate Gennadii Zyuganov in the
republic by 42 percent to 34 percent. However, in the second
round, Yeltsin gained 51 percent of the vote in
Bashkortostan to 43 percent for Zyuganov. LB

...AS RACE DRAWS MIXED REACTION FROM OTHERS. Commenting on
the presidential election in Bashkortostan, some Russian
media and politicians noted that voters had no genuine
alternative to Rakhimov, as the incumbent's opponents were
excluded from the ballot (see "RFE/RL Newsline," 15 June
1998). Russia's Democratic Choice leader Yegor Gaidar on 15
June denounced the election as an "anti-constitutional
farce," RFE/RL's Moscow bureau reported. "Kommersant-Daily"
on 16 June quoted unnamed sources from Rakhimov's campaign
as saying the incumbent did not want to tarnish his image as
an unchallenged leader by competing against opponents such
as Duma deputy Aleksandr Arinin. Meanwhile, Federation
Council Speaker Yegor Stroev welcomed Rakhimov's victory on
15 June. Stroev was re-elected last October as governor of
Orel Oblast with some 95 percent of the vote. As in
Bashkortostan, the only alternative candidate on the ballot
in Orel spoke out in favor of the incumbent. LB

RUSSIA TO PAY ARREARS FOR USE OF CHECHEN PIPELINE. Russian
Deputy Prime Minister  Nemtsov told journalists on 15 June
that  by the end of this week, Moscow will settle its debts
to Chechnya for the maintenance and security of the Baku-
Grozny-Tikhoretsk-Novorossiisk oil pipeline, Russian
agencies reported. The previous day, Chechen acting Prime
Minister Shamil Basaev threatened to halt shipments of oil
through the pipeline unless Moscow honored its commitments
under the agreement signed in September 1997. Chechen
President Aslan Maskhadov told Interfax on 15 June that
Russia has not yet provided any funds for security measures
but added that he hopes shipments will not need to be
suspended. LF

RUSSIA DENIES SHIPPING S-300 COMPONENTS TO CYPRUS.  A
Russian Defense Ministry spokesman on 15 June denied that
the missile-launching pads found by Turkish authorities the
previous day on a Maltese-registered ship transiting the
Turkish straits were part of a consignment of S-300 missiles
intended for Greek Cyprus, Russian agencies reported. The
ship's cargo was designated as tractors and cars bound for
Egypt. Also on 15 June, Russian Foreign Ministry spokesman
Vladimir Rakhmanin denied a Turkish news agency report that
Russia may reconsider the delivery of the S-300s to Cyprus
if Ankara agrees to purchase large amounts of Russian
weaponry, Interfax reported. LF

TRANSCAUCASUS AND CENTRAL ASIA

GEORGIAN-ABKHAZ TALKS MAY RESUME THIS WEEK.  Georgian
presidential press secretary Vakhtang Abashidze told
Interfax on15 June that talks between the Georgian and
Abkhaz presidential envoys that were suspended in Moscow on
11 June may resume this week. At a meeting with journalists
in Sukhumi on 15 June, the Abkhaz representative at those
talks, Anri Djergenia, said he believes a meeting between
the Georgian and Abkhaz presidents should take place as soon
as possible. The chairman of the Abkhaz parliament in exile,
Tamaz Nadareishvili, told Caucasus Press it should assume
responsibility for conducting talks with the Abkhaz
leadership. He added that it should also liaise with the
Georgian guerrilla movement and allocate emergency aid to
the Georgian displaced persons who fled Abkhazia during last
month's fighting. The previous day, an Abkhaz policeman was
shot dead when Georgian guerrillas ambushed a patrol in
Abkhazia's Gali Raion, Russian agencies reported. LF

GEORGIAN PRESIDENT PRAISES RUSSIAN POSITION.  In his weekly
radio address on 15 June, Eduard Shevardnadze expressed his
approval for Moscow's "clear-cut and radical" assessment of
last month's fighting in Gali. Shevardnadze said that if the
present situation does not change, Moscow will classify what
happened in May as genocide and ethnic cleansing. He did not
say, however, what exactly would impel Russia to revise its
evaluation of events that have already taken place. LF

GEORGIAN FOREIGN MINISTER IN YEREVAN. Irakli Menagharishvili
made a brief stopover in Yerevan on 15 June on his return
from a three-day official visit to Tehran, RFE/RL's Yerevan
bureau reported. Menagharishvili and his Armenian
counterpart, Vartan Oskanian, reached agreement on
coordinating activities aimed at expediting the two
countries' integration into European structures and on
resuming the work of a joint commission on economic issues.
The two also discussed the recent fighting in Abkhazia but
subsequently refused to comment on reports that Yerevan may
join ongoing efforts to mediate a settlement of that
conflict. Menagharishvili told journalists that Georgia's
policy of maintaining good relations with both Armenia and
Azerbaijan does not impinge on either country's interests.
Oskanian positively assessed Georgian President
Shevardnadze's "Peaceful Caucasus" initiative but noted that
Azerbaijan is an obstacle to Armenian participation in pan-
Caucasian initiatives, Caucasus Press reported. LF

ARMENIANS FROM KARABAKH PUSH FOR REPATRIATION. Armenians
forced to flee Nagorno-Karabakh's Shaumian raion during an
assault by Soviet army and Azerbaijani OMON troops in June
1991 visited the Yerevan embassies of the three countries
that co-chair the OSCE Minsk Group, Noyan Tapan reported on
12 June. The fugitives are classified as  internally
displaced persons, not as refugees, because they fled within
the confines of the USSR. They appealed for help in
returning to their homes and in tracing missing relatives.
LF

DEMIRCHIAN REGISTERS OWN POLITICAL PARTY. The Armenian
Ministry of Justice on 15 June formally registered the
National Party of Armenia Noyan Tapan reported. That
formation is  headed by former Armenian Communist Party
First Secretary and defeated presidential candidate Karen
Demirchian. "Azg" on 16 June described the new party's
orientation as  "centrist, moderately liberal, and social
democratic," predicting that it will result in a
"redistribution of forces in Armenia's political landscape."
LF

KAZAKH PRESIDENT MEETS WITH TURKISH COUNTERPART.  Nursultan
Nazarbaev and Suleyman Demirel held talks at the latter's
Ankara residence on 15 June,  an RFE/RL's Kazakh Service
correspondent reported. Nazarbaev called for increasing the
annual trade turnover between the two countries from  $267
million to $1 billion, according to dpa. Nazarbaev also met
with Foreign Minister Ismail Cem and Premier Mesut Yilmaz.
Kazakh Presidential spokesman Kairat Sarybaev told Interfax
on 14 June that Nazarbaev's talks with Turkish leaders would
focus on the expansion of bilateral economic ties and
Kazakhstan's possible use of the proposed Baku-Ceyhan
pipeline simultaneously with other routes  for the export of
Kazakh oil. LF

END NOTE

POWER COUNTERVAILING AND OTHERWISE

by Paul Goble

	The weakness of the Russian state increasingly allows
privatized firms there to challenge its authority, but the
strength of these firms on occasion may help Moscow to
extract more resources from the international financial
community.
	That dual role of large Russian firms was highlighted
at the  weekend, when Gazprom chief Rem Vyakhirev told
European officials that his firm would not be able to afford
to sign new gas export contracts if the Russian government
implemented plans to collect more taxes from his company.
	But because the IMF reportedly has demanded that
Moscow break up the Russian gas monopoly, Vyakhirev's threat
at a meeting in Sardinia could trigger a new financial and
hence political crisis in the Russian capital.
	In a speech in Sardinia to the European Business
Congress, which Vyakhirev himself founded, the Gazprom chief
said  that Moscow's plans to impose a value-added tax of 22
percent and an excise duty of 30 percent on exports would
effectively "bury" future gas supplies from Russia to
Europe.
	Such taxes, Vyakhirev said, were making the export of
gas increasingly unprofitable, with his company now losing
approximately "a dollar for every 1,000 cubic meters." No
privately owned firm, he noted, could continue to operate
for very long with such losses.
	By painting the situation in such dark colors,
Vyakhirev was clearly hoping to use the threat of reduced
natural gas deliveries to force the West to stop putting
pressure on the Russian government over tax collection. The
West wants Moscow to improve its collection of taxes,
particularly from large firms like his.
	But Vyakhirev's effort to enlist Western support for
his company against the Russian authorities may
paradoxically work to the advantage of that very government
as well.
	In order to ensure that Russian gas keeps flowing
westward, Europeans and those dependent on the European
economies are likely to press both for a more understanding
approach to Moscow's difficulties with tax collection and
for additional loans to the beleaguered Russian government.
And they may even back away from the support they apparently
have given to IMF plans to demand that the Russian
government break up Gazprom and make other reforms if Moscow
is to receive more aid.
	If Vyakhirev's threat works in that way, the Russian
government would be the beneficiary in the short run, but
the Russian economy and political system might be its
victims over the longer haul.
	Greater IMF assistance and less IMF micro-management
of the Russian economy could indeed give Moscow the
resources it needs to get through its current financial
crisis and also allow it greater freedom of action in
dealing with powerful interests in Russian society. But this
victory could prove a Pyrrhic one both for the Russian
government and for Gazprom itself.
	More foreign assistance and fewer conditions on it
would allow the Russian government to put off some reforms
that will be necessary if it is to put its economy back on
track. And to the extent that happens, the crises that
Russia is experiencing may be put off but will not be
solved.
	And any success by Gazprom in holding both the Russian
government and Western Europe hostage on tax collections and
gas deliveries is likely to increase demands from reformers
in the Russian government for breaking up a domestic firm
with so much power.
	Such demands and the certain resistance by Gazprom and
other members of the oligarchy that now dominates the
Russian economic scene could trigger a new and potentially
more serious political crisis. And that crisis, in turn,
would provide another measure of the strengths and
weaknesses of both sides as well as of the ways in which
each continues to depend on and support the other.

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