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RFE/RL NEWSLINE Vol. 2, No. 124 Part I, 30 June 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 124 Part I, 30 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * DUMA SCHEDULES SPECIAL SESSION TO CONSIDER GOVERNMENT PROGRAM * FOURTH SUSPECT ARRESTED IN KALMYKIAN JOURNALIST'S MURDER * ALIEV ALLY TO CONTEND AZERBAIJANI PRESIDENTIAL POLL End Note: CHUBAIS TRIES TO JOLT ELECTRICITY SECTOR xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA DUMA SCHEDULES SPECIAL SESSION TO CONSIDER GOVERNMENT PROGRAM. Following a meeting of the State Duma Council on 30 June, Duma Speaker Gennadii Seleznev announced that deputies will hold an extraordinary session on 15 and 16 July to consider the draft laws in the government's anti-crisis program in the second and third readings, ITAR-TASS reported. The laws are set to be considered in the first reading before the Duma finishes its spring session on 3 July. Finance Minister Zadornov expressed confidence that "all the draft laws have a chance of winning the Duma's approval" in mid-July, Reuters reported on 30 June. The previous day, Duma Budget Committee Chairman Aleksandr Zhukov of the Russian Regions said government estimates that the anti-crisis program will boost budget revenues by some 100 billion rubles ($16 billion) are "overly optimistic," Russian news agencies reported. LB DUMA COMMITTEE APPROVES MOST TAX PROPOSALS... The Duma Budget Committee on 29 June recommended that the lower house approve in the first reading most of the tax laws proposed by the government, RFE/RL's Moscow bureau reported. However, some laws may undergo substantial amendments. For instance, some Budget Committee members endorsed plans to charge a single rate of value-added tax on all goods except for bread, milk products, and children's food, but they also called for lowering VAT from the current rate of 20 percent. (Finance Minister Zadornov described as a "joke" proposals to reduce VAT, which accounted for nearly half of all federal revenues during the first four months of 1998, Interfax reported.) The committee postponed consideration of the proposed law on income tax, which some deputies slammed. Communist Yurii Voronin said giving the federal government 40 percent of income tax revenues would break the budgets of tens of thousands of cities. LB ...BUT OPPOSES LAW TAXING SERVICES NOT PAID FOR. Of the 12 government-backed tax laws considered by the Duma Budget Committee on 29 June, the committee recommended that the lower house reject in the first reading only one, "Kommersant-Daily" reported on 30 June. That proposal would force companies to pay taxes and excise duties on services and goods at the time they are shipped to the consumer, rather than when payment is received. Such a law would deal a major blow to companies with numerous non-paying customers, such as the gas monopoly Gazprom and the electricity giant Unified Energy System. LB CHERNOMYRDIN CALLS FOR MORE EXPERIENCE IN GOVERNMENT. Former Prime Minister Viktor Chernomyrdin on 29 June called for reinforcing the government with "people who have experience and knowledge," Russian news agencies reported. He argued that "it is obvious that the laws submitted by the government to the State Duma were prepared in haste," adding that "there is an obvious lack of people who could understand what is going on." (Prime Minister Sergei Kirienko is 35 years old, and Oleg Sysuev, age 45, is the oldest of the three deputy prime ministers.) However, Chernomyrdin denied that he is seeking to return to the cabinet. He called for amendments to some of the government proposals, which, in his view, would harm the interests of the regions. By way of example, he named proposals to phase out agriculture subsidies, introduce a sales tax, and shift more responsibility for financing science and education to regional authorities. LB COMMISSION ON IMPEACHMENT HOLDS FIRST MEETING. The Duma commission that will decide whether a motion to impeach President Boris Yeltsin is warranted convened for the first time on 29 June, Russian news agencies reported. Chairman Vadim Filimonov, a member of the Communist faction, announced that the commission will work through the Duma's summer recess. Filimonov declined to set a deadline for the completion of the commission's work. Duma First Deputy Speaker Vladimir Ryzhkov has charged that main goal of the commission is to protect the Duma against dissolution, "Pravda" reported on 30 June. The president cannot disband the lower house of the parliament if the Duma has adopted a motion on impeachment. Filimonov's commission could quickly draft such a motion and put it on the Duma's agenda if the threat of dissolution appeared imminent, "Kommersant-Daily" noted on 30 June. LB YELTSIN SACKS REPRESENTATIVE AT CONSTITUTIONAL COURT. Yeltsin on 29 June sacked Sergei Shakhrai as his representative at the Constitutional Court, Russian news agencies reported. The presidential decree gave no reason for the dismissal, but Shakhrai claimed he was fired for remarks he made at a 27 June congress of his Party of Russian Unity and Accord (PRES). Addressing that congress, Shakhrai predicted that the Duma will support a motion to impeach Yeltsin by the necessary two-thirds majority. He also called for supporting Moscow Mayor Yurii Luzhkov in the next presidential election. But "Kommersant-Daily" and "Russkii telegraf" both suggested on 30 June that Shakhrai's dismissal has been in the works for several weeks. Yeltsin appointed Kremlin official Mikhail Mityukov to replace Shakhrai as his representative at the Constitutional Court, which will consider several cases important to the president later this year. LB SHAKHRAI PUTS STAKE ON LUZHKOV. Shakhrai told "Kommersant- Daily" on 30 June that his Party of Russian Unity and Accord (PRES) will most likely compete in the next parliamentary elections as part of a coalition supporting Moscow Mayor Luzhkov. He predicted that such a coalition could gain one- third of the vote. Shakhrai believes that the next Duma elections will determine two leading candidates for the presidency: Luzhkov and Krasnoyarsk Krai Governor Aleksandr Lebed. In December 1993, when Shakhrai was in Yeltsin's inner circle and was a deputy prime minister, PRES gained 6.7 percent of the vote in Duma elections. In 1995, Shakhrai was an important figure behind the creation of Chernomyrdin's Our Home Is Russia movement. However, he parted ways with Chernomyrdin, and PRES competed alone in the December 1995 parliamentary election, gaining just 0.36 percent of the vote. LB THREE CUSTOMS OFFICIALS TO BE FIRED OVER CONFLICT WITH MEDIA... State Customs Committee head Valerii Draganov announced on 29 June that he has sent Prime Minister Kirienko a request to dismiss three deputy heads of the committee: Valerii Shpagin, Valerii Maksimtsev, and Nikolai Lyutov, Russian media reported. Draganov noted he did not make such a recommendation easily. His decision is a response to a recent open letter to Yeltsin signed by more than 15 editors of Russian publications who slammed the activities of customs officials. In February, the committee issued an order to charge value-added tax on print media published abroad. Journalists argued that the order violated the 1995 law on state support for the mass media, and the Supreme Court agreed on 15 June. Nevertheless, the following week customs officials held up issues of several Russian magazines, demanding proof that they are cultural, scientific, or educational in nature. LB ...BUT JOURNALISTS NOT CELEBRATING VICTORY YET. Sergei Parkhomenko, the editor of the weekly magazine "Itogi," told RFE/RL's Moscow bureau on 29 June that journalists welcome Draganov's remarks but are waiting for more concrete actions to ensure that the State Customs Committee will not interfere with shipments of print media to Russia. "Itogi," one of many Russian magazines published in Finland, was among the publications held up last week by customs officials. The law on state support for the mass media exempts all print media from paying value-added tax except for publications devoted to advertising or erotica. But according to Parkhomenko, customs officials now demand that magazines obtain documents with every edition to prove that they are neither advertising nor erotic publications. According to "Kommersant-Daily" on 30 June, customs officials on 29 June again held up editions of several Russian magazines at the border. LB DEFENSE MINISTRY HIRES BACK FORMER BIGWIGS. The Defense Ministry has hired back many former prominent officers, "Nezavisimoe voennoe obozrenie" reported in its 26 June-2 July edition. Several months ago, former Defense Minister Pavel Grachev was hired as an adviser to the state-owned arms exporter Rosvooruzhenie. Earlier this month, officials announced the imminent appointment of former Soviet Defense Minister Dmitrii Yazov, one of the key figures in the August 1991 coup, as an adviser to Leonid Ivashov, head of the Defense Ministry's Main Directorate for International Military Cooperation. Former Ground Forces commander Vladimir Semenov and former General Staff chief Mikhail Kolesnikov have also joined the ranks of Defense Ministry advisers. "Nezavisimoe voennoe obozrenie" argued that the appointments reflect a strategy to "neutralize" potential leaders of political opposition in military ranks. LB GOVERNMENT TRIES TO ASSUAGE FEARS OF EDUCATION REFORM. Prime Minister Kirienko told a 26 June meeting of higher-education directors that the government will not economize on education, "Kommersant-Daily" reported on 27 June. In a 19 June interview with "Izvestiya," Education Minister Aleksandr Tikhonov said that "the transformation of Russia into a country of paid education is a political and social myth." Their remarks aim to mollify widespread opposition among Duma deputies and educators to planned higher- education reforms, including the mergers of some institutions, the reduction of the number of teachers by one-fifth, the replacement of government stipends with means-tested "social assistance" to needy students, and government licensing of commercially operated schools (see "RFE/RL Newsline," 19 March and 21 May 1998). Viktor Sadovnichii, the principal of Moscow State University, charged that government under-funding of higher education threatens Russians' constitutional right to acquire an education, "Nezavisimaya gazeta" reported on 27 June. BT FOURTH SUSPECT ARRESTED IN KALMYKIAN JOURNALIST'S MURDER. Police in Elista have arrested a fourth suspect in connection with the 7 June murder of Larisa Yudina, the editor of "Sovetskaya Kalmykia Segodnya," "Kommersant-Daily" reported on 30 June. Sergei Lipin was incriminated during an interrogation of one of the other three suspects in the case. He is accused of moving Yudina's body after the murder to the pond where it was discovered. According to "Kommersant-Daily," Lipin has already confessed to his part in the crime but insists that he does not know who gave the order to kill Yudina. Like the other suspects, he is being held in pre-trial detention in Stavropol Krai. LB JOURNALIST BEATEN IN KIROV. Sergei Bachinin, the editor-in- chief of the newspaper "Vyatskii nablyudatel" in Kirov (Kirov Oblast), was hospitalized on 29 June with a severe concussion and other skull injuries, ITAR-TASS reported on 30 June. Colleagues at the newspaper, which is critical of the local authorities, became suspicious when Bachinin did not turn up for a work-related party on 27 June and did not come to the office two days later. They went to his apartment on 29 June and found him lying on his bed in a pool of blood. Colleagues believe the crime is linked to the editorial policy of "Vyatskii nablyudatel" and Bachinin's long-standing conflicts with the city authorities. According to ITAR-TASS, Bachinin ran for mayor of Kirov in 1996 and was the main rival of the candidate who won that election. LB CHECHEN PRESIDENT, FOREIGN MINISTER AT ODDS OVER OSCE. Chechen Foreign Minister Movladi Udugov told journalists in Grozny on 29 June that his ministry has given the OSCE mission in the Chechen capital 15 days to apply to the government for an official mandate to continue its activities in Chechnya, Russian agencies reported. He said the mission will be asked to leave Chechnya if it fails to do so. Udugov argued that allowing the OSCE to remain in Chechnya under an agreement signed by the Russian government is tantamount to acknowledging Chechnya's subordination to Russia. And he added that the ultimatum had the approval of President Aslan Maskhadov. But Maskhadov's press spokesman, Mairbek Vachagaev, told Interfax that the president has no intention of expelling the OSCE mission from Chechnya, although he thinks it "correct" that the mission should coordinate its continued presence with the Chechen government. LF CHECHNYA WANTS UN MEMBERSHIP. Also on 29 June, Udugov said that Chechnya will apply for UN membership, Interfax reported. He added that talks on diplomatic recognition currently being conducted with more than 10 countries would have brought "positive results" long ago but for the interference of the Russian Foreign Ministry. LF TATARSTAN ABOLISHES LANGUAGE BONUS. The 15 percent wage increase granted to employees in the republic's culture and education sectors who are fluent in both Tatar and Russian is illegal and has been rescinded, according to a ruling by Tatar prosecutor-general cited in "Nezavisimaya gazeta" of 30 June. The increases had provoked a storm of criticism when they were introduced last year. LF TRANSCAUCASUS AND CENTRAL ASIA ALIEV ALLY TO CONTEND AZERBAIJANI PRESIDENTIAL POLL. Nizami Suleymanov, chairman of the pro-government Independent Azerbaijan Party, told a news conference in Baku on 29 June that he will run in the presidential elections scheduled for October, Turan reported. He explained his decision by saying that "only Allah is indispensable," and that alternatives exist to the incumbent, Heidar Aliev. At the same time, he added that he has no doubts that Aliev will be re-elected. He said that the opposition parties' plan to boycott the poll was an acknowledgment of defeat. Suleymanov ran as a presidential candidate in June 1992, against Azerbaijan Popular Front chairman Abulfaz Elchibey. He won 38 percent of the vote on the strength of a pledge to end the war in Nagorno-Karabakh within three months. LF EX-PRESIDENT SUMMONED BY AZERBAIJANI INTERIOR MINISTRY. Azerbaijan Popular Front Party chairman Abulfaz Elchibey was summoned to the Interior Ministry's Department to Combat Organized Crime on 29 June, Turan reported. Elchibey linked the summons to the criminal case recently opened against a member of the Azerbaijan Popular Front Party in connection with a draft document confiscated during a search of the editorial offices of the opposition newspaper "Chag." The authorities have termed the document subversive. LF ARMENIA TO EXEMPT SMALL BUSINESSES FROM INCOME TAX. In a bid to boost budget revenues and preclude tax evasion, the Armenian government has drafted legislation extending the so-called system of "fixed payments" to more categories of small businesses, thereby exempting them from income tax, RFE/RL's Yerevan bureau reported. Under that law kiosks, open-air markets, and some services sector outlets will pay a fixed amount of money to the state, depending on their location and size. Finance and Economy Minister Eduard Sandoyan told the parliament on 29 June that the measure will not only increase budget revenues but will also expand the tax base by cracking down on tax evasion among owners of small businesses. Sandoyan also sought approval for a 25 percent increase in fixed payments for those businesses already operating under the system to bring their contributions into line with inflation. LF NAGORNO-KARABAKH TO HOLD LOCAL ELECTIONS. The government of the unrecognized Nagorno-Karabakh Republic has reaffirmed its intention to hold elections to local self-government bodies, RFE/RL's Stepanakert correspondent reported on 29 June. Those elections will take place on 27 September. A government directive specifically instructs local authorities to cooperate with the Nagorno-Karabakh Central Election Commission in ensuring a free and fair vote. Previous presidential and parliamentary elections in Nagorno-Karabakh were not deemed legitimate by the international community because the disputed region's ethnic Azerbaijani minority, who fled during the early years of the conflict, was unable to participate. LF ARTICLE CLAIMS KARABAKH IS READY FOR UN MEMBERSHIP. An article published in "Nezavisimaya gazeta" on 30 June lists the reasons why the author considers Nagorno-Karabakh qualifies for UN membership. The article points out that the December 1991 referendum on independence from Azerbaijan took place in accordance with existing Soviet legislation. It also says that, as a non-UN member, Karabakh is deprived of the opportunity to defend itself by diplomatic, as opposed to military, means. An article published by the same author in "Nezavisimaya gazeta" in January similarly called for the "decolonization" of Karabakh and for the creation of a permanent security corridor linking the enclave with Armenia. That article argued that only international recognition could provide adequate security for the Karabakh population. LF NATO CALLS KAZAKHSTAN 'RELIABLE PARTICIPANT.' Klaus Naumann, chairman of NATO's Military Committee, began a two-day visit to the Kazakh capital Astana on 29 June, RFE/RL correspondents and Interfax reported. Naumann met with Kazakh Defense Minister Mukhtar Altynbayev. Meeting with parliamentary deputies, Naumann said that NATO is interested in stability in Central Asia and that Kazakhstan is a "reliable participant" in the alliance's Partnership for Peace program. Naumann held discussions with Altynbayev on the military exercises scheduled for September in Kazakhstan, Kyrgyzstan, and Uzbekistan as part of the NATO program. BP JAPAN TO HELP UPGRADE AIRPORT IN KAZAKH CAPITAL. Kazakh Foreign Minister Kasymjomart Tokayev on 29 June announced that Japan will lend Kazakhstan more than 22 billion yen (some $150 million) to improve the airport in the Kazakh capital, Interfax and ITAR-TASS reported. The Astana airport was built more than 30 years ago. According to ITAR-TASS, it "does not correspond to international standards of civilian aviation." BP ISRAELI DELEGATION ARRIVES IN KAZAKHSTAN. An Israeli delegation led by Minister of Industry and Trade Natan Sharanskii arrived in Almaty on 29 June, RFE/RL correspondents and Interfax reported. Sharanskii, who is also the co-chairman of the Israeli-Kazakh Economic Commission, said he hopes trade between the two countries can be increased, Interfax reported that in recent years, Israel has exported farm produce worth $1 billion to Kazakhstan. Sharanskii said trade will improve once Kazakh producers have more information about "borrowing, business plans, or mortgage mechanisms." The Israeli delegation is scheduled to leave for Uzbekistan on 30 June. BP GLASNOST FOUNDATION APPEALS TO UZBEK PRESIDENT OVER JAILED JOURNALIST. The Glasnost Defense Foundation has appealed to Islam Karimov to ask for a revision of the verdict against journalist Shadi Mardiev. A copy of the letter, obtained by RFE/RL's Uzbek Service, claims two of the five charges on which Mardiev was convicted are based on the former criminal code. Mardiev was accused of extortion and slander by the Samarkand regional deputy prosecutor following a broadcast the journalist made last November. A Syr-Darya district court sentenced him to 11 years earlier this month. The Glasnost Defense Foundation claims Mardiev was convicted because of his political criticism. It wants Karimov to ensure a full and unbiased investigation into his case. BP END NOTE CHUBAIS TRIES TO JOLT ELECTRICITY SECTOR by Stephanie Baker With its glass walls and high-tech security, the new headquarters of Komienergo, the regional electricity company in Russia's Far North, seem extravagant for a company saddled with debts and struggling to make ends meet. But the company's management said looks are deceiving. Ivan Medvedev, Komienergo's financial director, says: "We built this place through barter." Since the company was collecting only 10 percent of its bills in cash, building a new headquarters through bartered goods made sense. The local timber mill could not pay its electricity bill in cash but had plenty of wood to spare. Cement and other construction materials acquired through such creative barter transactions also were used. Although the building continues to raise eyebrows among locals, it stands as a symbol of Russia's cashless economy, which has given rise to inefficiencies and financial abuses. It is also a symptom of the company's messy financial state, where barter reigns supreme and debts pile up. Komienergo's accounts receivable as of 1 June 1 stood at a staggering $1.7 billion rubles ($280 million) or about half of total sales, with federal and local budgets the biggest debtors by far. But the company owes almost as much to its suppliers and to the government in taxes. Like many in Russia, managers at Komienergo are counting on the country's best-known reformer, Anatolii Chubais, to pull out his financial wand. After being fired as first deputy prime minister in March, Chubais was appointed in late April to take over as chief executive of Russia's giant electricity company Unified Energy Systems (EES), which owns a controlling stake in Komienergo and almost all of the country's regional utilities. The appointment came after months of behind-the- scenes wrangling and intense opposition from the State Duma, which balked at Chubais's running a company that allows him to wield political influence over the regions in the run-up to parliamentary elections. At the helm of Russia's largest company by sales and its most traded stock, Chubais would seem to have his hands full. But Russia's financial crisis has pulled him back into the government yet again to negotiate an emergency stabilization loan from the IMF. The job of running state-controlled EES puts Chubais at the center of the biggest structural problem facing the Russia: non-payments. EES is at the hub of a vicious circle of unpaid bills totaling some $96 billion, which is choking the economy and putting a break on investments. EES and its subsidiaries are owed roughly $21 billion, including massive unpaid bills by government-funded organizations. It, in turn, has built up unwieldy debts to state budgets and suppliers, such as gas monopoly Gazprom. EES currently owns the national electricity grid, operates 34 power plants, and holds controlling stakes in 70 regional utilities that have a monopoly on local distribution. Under reforms outlined in a presidential decree, Russia's power generating facilities will be separated from transmission, but Chubais has said the transformation will take two to three years. At present, competition is being smothered. Instead of independent power stations competing to supply power on a national grid, prices are set by local regulators. While a wholesale market for power exists at the national level, regional utilities often block industries from tapping other cheaper sources of electricity by charging high transmission fees. There is also a web of opaque financial deals carried out in barter and unregulated promissory notes. If Chubais can sort out the company's financial mess and make EES more transparent, it could help spur economic growth. In his words: "All transformations in EES will directly affect the Russian economy as a whole." If he fails to make headway at EES, economists say, Russia is more likely to remain stuck in first gear, dragged down by insolvent companies that cannot pay their bills. Chubais is relying on devising a new strategy for implementing a restructuring plan that languished under his predecessor, Boris Brevnov, who was pushed out by the company's Soviet-era directors after less than a year on the job. Analysts said that unlike Brevnov, Chubais has the political muscle to push through reforms, such as raising electricity tariffs for households, breaking up regional monopolies, and turning off non-paying customers. While many of the proposals are not new, Chubais has for the first time outlined a blueprint for restructuring the electricity sector and distributed it to investors and regional leaders for comments and suggestions. His strategy to implement the plan relies heavily on the political and administrative skills he honed in the government. Using both a carrot and stick, Chubais has said he will force the federal government to pay its bills to local utilities that agree to implement tough reforms. Given Russia's overall economic difficulties, the task is huge and time is short. Prime Minister Sergei Kirienko has given Chubais until the fall to make palpable improvements at EES. But most analysts say he cannot be expected to turn around the lumbering electricity giant in six months. The author is an RFE/RL Moscow-based correspondent. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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