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RFE/RL NEWSLINE

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

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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
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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.

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