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RFE/RL NEWSLINE Vol. 2, No. 137 Part I, 20 July 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 137 Part I, 20 July 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 * YELTSIN MOVES TO RAISE TAXES BY DECREE * GOVERNMENT WANTS TO CHANGE TAX RATES UNILATERALLY * ABKHAZ RELEASE GEORGIAN COMMANDER End Note: DIPLOMACY WITHIN RUSSIA xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN MOVES TO RAISE TAXES BY DECREE... President Boris Yeltsin has made good on the Kremlin's promise that presidential decrees will be used to implement economic policies that are considered vital by the government but have not gained parliamentary approval. Aleksandr Livshits, deputy head of the presidential administration, announced on 19 July that Yeltsin has issued a decree raising the land tax, Russian news agencies reported. The decree calls for doubling the tax on plots of land that are in cities or are not being used for the declared purpose and quadrupling the tax on other categories of land. The State Duma recently rejected a draft law on increasing the land tax rate. Article 90 of the constitution states that the president may not issue decrees that contradict existing federal laws. LB ...VETOES SOME PARTS OF ANTI-CRISIS PLAN. Yeltsin on 19 July vetoed two laws that were approved by the Federation Council two days earlier. The laws would have reduced the profit tax for enterprises from 35 percent to 30 percent and more than halved excise duties on oil. Livshits noted that the laws would have reduced annual federal revenues by 8.7 billion rubles ($1.4 billion) and 7.7 billion rubles, respectively. He said Russia cannot afford such losses when the Duma has not approved other measures to augment revenues, Russian news agencies reported. Prime Minister Sergei Kirienko addressed the Duma on 17 July and said that the laws approved by the lower house would increase federal budget revenues by only 3.1 billion rubles and all budget revenues combined by only 28.2 billion rubles (the anti-crisis program called for corresponding increases of 71 billion rubles and 102 billion rubles, respectively). LB GOVERNMENT WANTS TO CHANGE TAX RATES UNILATERALLY... The government has issued a directive to revise the list of products that are subject to value-added tax below the standard rate of 20 percent, ITAR-TASS reported on 19 July. Effective 1 August, the discounted VAT rate of 10 percent will apply only to bread and milk products, along with some children's goods. A law to institute those changes was part of the government's anti-crisis program, but Finance Minister Mikhail Zadornov withdrew it from consideration by the Duma on 1 July, after many deputies harshly criticized the proposal. On 17 July, Prime Minister Kirienko brought the Duma a draft law that would give the government the authority to introduce changes in tax rates by up to 10 percent. Such tax hikes would go into effect as long as the Duma does not reject them within 10 days of when the government announces the planned changes. LB ...ORDERS HIKE IN IMPORT TARIFFS. Prime Minister Kirienko announced on 18 July that the government has issued a directive raising all import duties by 3 percent, Russian news agencies reported. He acknowledged that the measure is "harsh" and will lead to price increases, but he said it is necessary to boost budget revenues and support domestic industry. According to Interfax, the Economics Ministry estimates the increase in import duties will bring in 1 billion rubles ($160 million) in additional revenues. The increase will not apply to goods imported from CIS countries, ITAR-TASS reported on 20 July. Like the latest presidential decree and vetoes, the directives on VAT and customs duties are aimed at demonstrating the government's commitment to the anti-crisis plan that was the basis for Russia's recent negotiations with international financial organizations. The IMF board of directors is to meet on 20 July in Washington to make a final decision on a bailout package involving $11.2 billion in new loans to Russia this year. LB MIXED REACTION TO INCREASE IN IMPORT DUTIES. Duma Speaker Gennadii Seleznev, a prominent member of the Communist Party, told Interfax on 18 July that he supports the government's plan to raise import duties, adding that the government should have done so "long ago." Seleznev said such a policy falls within the government's jurisdiction but warned against attempts to issue government directives that contradict legislation. Aleksandr Shokhin, leader of the Our Home Is Russia Duma faction, argued that raising import duties is "understandable and justified" in Russia's current circumstances, but he noted that such a policy "is at odds somewhat with our plan to join the World Trade Organization in the near future," Interfax reported. Duma Privatization Committee Chairman Pavel Bunich, also of Our Home Is Russia, criticized the directive during an interview with Ekho Moskvy, saying Russian consumers will be hurt by rising prices for imported goods. LB FEDERATION COUNCIL APPROVES MANY LAWS IN ANTI-CRISIS PLAN. The Federation Council on 17 July approved a number of government-backed laws with minimal debate. Deputies passed the first part of a new tax code, which stipulates the rights and obligations of taxpayers and the tax authorities, ITAR-TASS reported. The Council also approved the following measures: a law allowing regional authorities to introduce a sales tax; a revised budget code; a revised law on gambling taxes; a law strengthening government regulation of alcohol production; a law to simplify taxation of small businesses; a law changing the allocation of land tax revenues between federal and regional budgets; a law lowering the profit tax, and a law allowing enterprises to sell goods at prices below production cost. LB KIRIENKO WANTS DUMA TO HOLD SPECIAL SESSION IN AUGUST. Speaking in the Duma on 17 July, Prime Minister Kirienko urged deputies to convene a special session in August to consider new draft laws on economic and tax policy, RFE/RL's Moscow bureau reported. The premier told reporters that such a session may be held on 10 August. Although the Duma's summer recess is scheduled to run through early September, Duma Speaker Seleznev did not rule out holding a special session next month, ITAR-TASS reported. Although the Duma passed many government-backed laws in July, it voted down some key parts of the anti-crisis program. On 17 July, deputies rejected in the second reading a draft law on changing the income tax scale. That draft was already substantially different from the government's initial proposal on revising income tax rates (see "RFE/RL Newsline," 17 July 1998). LB UPPER HOUSE APPROVES LAW ESTABLISHING BORDER TAX. The Federation Council on 17 July approved a law that would establish a tax for filling out documents when crossing the Russian border. The Duma approved the measure last month. The government sought to introduce a border tax last year, but the Constitutional Court ruled that taxes may be introduced only through legislation, not government directives (see "RFE/RL Newsline," 12 November 1997 and 23 June 1998). Also on 17 July, the Council passed a law on rescheduling debts to the federal budget, which would allow enterprises to pay back fines over four years and other penalties over 10 years, ITAR-TASS reported. But the upper house rejected a draft law on foreign investment, which was passed by the Duma two days earlier. LB GDP DECLINED IN FIRST HALF OF YEAR... Russia's GDP during the first six months of 1998 totaled some 1.182 trillion rubles ($190 billion), down 0.5 percent compared with the same period in 1997, according to data released by the State Statistics Committee on 17 July. Total industrial output during the first half of 1998 was calculated at 767 billion rubles, up 0.1 percent compared with the same period in 1997, Russian news agencies reported. However, industrial output declined in the second quarter of 1998 following gains in the first quarter of the year. LB ...AS WAGE ARREARS CONTINUE TO GROW. Wage arrears grew by 4.6 percent in June to reach 69.97 billion rubles ($11.2 billion), Russian news agencies reported on 17 July, citing the State Statistics Committee. Federal, regional, and local budgets combined owe 12.43 billion rubles to state employees, which accounts for 17.8 percent of the total wage arrears. Back wages declined in June in only seven of the 89 regions of the Russian Federation. Meanwhile, the State Statistics Committee has calculated the average monthly subsistence level in Russia for the first half of 1998 at 429 rubles per person, 19 rubles higher than the equivalent figure for 1997. The average nominal monthly salary in Russia during the first half of 1998 was 1,042 rubles, up 12.35 percent from the equivalent figure for 1997. However, that statistic only measures wages on paper, not wages that workers actually receive. LB TRANS-SIBERIAN BLOCKADE LIFTED... The blockade of the Trans- Siberian Railroad near the towns of Yurga and Anzhero- Sudhensk, Kemerovo Oblast, was lifted on 19 July following the arrival of Deputy Prime Minister Oleg Sysuev in the region. At a meeting between regional leaders, directors of industrial enterprises, and strike leaders, Sysuev admitted that protocols he signed in Kemerovo Oblast in May have not been fulfilled on schedule. He announced that all wage arrears until 15 July will be repaid on 22 July. The previous day, Prime Minister Kirienko warned that following a government investigation, charges will be made against organizers of the blockade. Regional trade union leader Anatolii Chekis vowed that unions will offer "special protection" to anyone who is charged in connection with the protests. BT ...WHILE GOVERNMENT PROMISES LONG-TERM SOLUTIONS. Sysuev promised that the government will stop addressing Kemerovo's problems as a matter of urgency and instead address the region's "deep systematic crisis." Another government commission is to arrive in Kemerovo by 22 July to prepare for a cabinet session devoted to the region's problems slated for August, Sysuev told journalists. He also said that the federal government will share power with oblast authorities "on a slightly different basis." Meanwhile, Kemerovo Prosecutor Valentin Simuchenkov said that more than 180 criminal cases have been opened against managers of mines, middlemen, and local administration officials in Kemerovo Oblast, ITAR-TASS reported on 19 July. Government officials have long blamed miners' economic woes on corruption and embezzlement at mining enterprises (see "RFE/RL Newsline," 3 June 1998). BT FSB CHIEF IN ISRAEL. In an interview published in the 17 July issue of "Novye izvestiya," the director of Russia's Federal Security Service (FSB), Nikolai Kovalev, described talks he held with Israeli officials on 15-16 July. Kovalev said that during those talks, Israeli officials "constantly returned to" the topic of preventing the transfer from Russia to Iran of nuclear and rocket technology. Kovalev said he saw some "material" gathered by the Israelis on the subject. He did not deny such transfers are taking place but said they are being conducted by commercial firms, not the Russian government, and that the FSB has already begun operations aimed at stopping such transactions. Kovalev also said the FSB now has an official in Israel and that Israeli security agencies are exchanging information on terrorists and drug traffickers. BP PASTUKHOV DISCUSSES CASPIAN IN TEHRAN. Russian First Deputy Foreign Minister Boris Pastukhov and his Iranian counterpart, Morteza Sarmadi, issued two joint statements on 19 July at the end of Pastukhov's three-day visit to Tehran, IRNA reported. The two deputy ministers affirmed that until the five Caspian littoral states reach agreement on a new document defining the status of the Caspian, the Soviet- Iranian treaties of 1921 and 1940 remain in force. They also said that any proposals for laying Trans-Caspian undersea oil or gas pipelines are potentially harmful to the Caspian eco-system. The two countries agree on the equal division of the Caspian sea-bed, but not the utilization of its waters and resources beneath the seabed. A second statement registered concern over delays in the implementation of the Tajik peace accord signed last summer but lauded the role of the UN in the peace process. LF RUSSIA, IRAN SUPPORT NUCLEAR-FREE ZONE IN MID EAST. The directors of the Russian and Iranian Foreign Ministry Departments for disarmament, non-proliferation, and export control held talks in Tehran on 15-16 July, ITAR-TASS reported. Both sides affirmed their determination to meet their international obligations in those fields, according to a Russian Foreign Ministry communique summarized by Interfax. The Foreign Ministries also issued a joint statement calling on all countries to consider declaring the Middle East a nuclear-free zone. LF COURT SAYS GOVERNMENT CAN'T ECONOMIZE ON JUDICIARY. The Constitutional Court on 17 July struck down an article from the 1998 budget empowering the government to reduce spending on the judicial system, "Kommersant-Daily" reported. Article 124 of the constitution stipulates that funding for courts comes solely from the federal budget and must provide for the "complete and independent" functioning of the judiciary. This year, the government cut spending on courts by 26.2 percent, despite appeals by the Federation Council and influential judges as well as presidential orders issued in July, which instructed the government to make the "normal functioning of the judicial system" a priority. Many courts now lack the funds for basic expenses such as electricity, telephone charges, and postage. "Kommersant-Daily" argued that even if the 1998 budget is implemented in full, planned spending of some 4.5 billion rubles ($723 million) on the courts is inadequate. LB BASAEV NAMED DEPUTY COMMANDER OF CHECHEN ARMED FORCES. Chechen President Aslan Maskhadov has issued a decree naming former acting Premier Shamil Basaev deputy commander-in- chief of the republic's armed forces, ITAR-TASS reported on 20 July. On 17-18 July, Maskhadov signed orders on the expulsion from Chechnya of five foreign nationals suspected of creating illegal armed formations and disseminating Wahhabist ideology. He also extended for another 10 days the state of emergency declared on 23 July, and he mobilized some 5,000 reservists with the declared aim of continuing the ongoing crackdown on organized crime. On 19 July, Maskhadov abolished the Sharia Guard, which was involved in the 14-15 July fighting in Gudermes. Some of its members released 32 convicts from a prison in Grozny on 18 July. LF TWO MORE CONTRACT KILLINGS IN DAGESTAN. The director-general of the Makhachkala port, Siradjudin Yusupov, was shot dead on the evening of16 July during a rendez-vous with his mistress, whom the killers then abducted, RFE/RL's North Caucasus correspondent reported. Yusupov was also a deputy in the Dagestani parliament and one of the leaders of Dagestan's ethnic Laks. "Nezavisimaya gazeta" on 18 July noted that Yusupov had jurisdiction over imports and the refining of Azerbaijani oil. Also during the evening of 16 July, the head of the Dagestani branch of Rospechat, Urudj Ibragimov, was shot in the courtyard of his house in Makhachkala. LF TRANSCAUCASUS AND CENTRAL ASIA ABKHAZ RELEASE GEORGIAN COMMANDER. Following negotiations between Abkhaz and Georgian intelligence officials and Chechen former Premier Shamil Basaev, the Abkhaz authorities have released Ruzgen Gogokhia, a Georgian battalion commander taken prisoner in Sukhumi in 1995 and sentenced to death the following year by an Abkhaz court, Caucasus Press reported. In other news, the EU has allocated 1.15 million ECUs ($1.265 million) in aid for the displaced persons forced to flee Abkhazia during the fighting in May, ITAR- TASS reported. LF COMMISSION ENDORSES MINOR AMENDMENTS TO ARMENIAN CONSTITUTION. The commission tasked with proposing amendments to the Armenian Constitution has rejected options that would drastically curtail the sweeping powers currently given to the president. On 17 July, 15 commission members approved a set of principles nominally providing for a "semi-presidential republic" but in effect maintaining the existing system of government. The remaining three members advocated a parliamentary system. President Robert Kocharian had warned against a "revolutionary" revision of the constitution but had proposed giving the cabinet greater latitude and limiting the president's power to dissolve the parliament. No amendments have been proposed for the areas of defense, national security, and foreign policy; changes in those areas are the president's prerogative under the constitution. The commission also voted down a motion by the opposition National Democratic Union to scrap the present constitution, which it claims was "illegally adopted," and start drafting a new basic law. LF FEW RESULTS AT CENTRAL ASIAN UNION SUMMIT. The presidents of Kazakhstan, Kyrgyzstan, and Tajikistan as well as the prime minister of Uzbekistan met in the Kyrgyz resort town of Cholpon-Ata on 17 July, RFE/RL correspondents reported. As a result of Uzbek President Islam Karimov's absence owing to illness, the planned signing of several documents has been delayed until October, when the next summit is scheduled. However, the participants did agree on changing the name of the union to the "Central Asian Economic Community." Kyrgyz President Askar Akayev and Kazakh President Nursultan Nazarbayev signed an agreement delimiting their countries common borders. And they also became in-laws the following day when Akayev's son married Nazarbayev's daughter. BP ISRAELI COMPANY TO HELP DEVELOP KAZAKH COMMUNICATIONS. The Israeli firm Gilat has signed a $6.2 million deal with Kazakhtelekom to provide 250 cities and towns in Kazakhstan with satellite communications, Interfax reported on 17 July. BP UZBEKISTAN ASKS FOR INTERNATIONAL AID IN WAKE OF FLOOD. Uzbekistan has appealed for international aid to alleviate the effects of flooding in the eastern part of the country, Reuters reported on 17 July. Melting snow in the mountains of neighboring Kyrgyzstan caused reservoirs to overflow on 8 July and resulted in a major flood in the Uzbek section of the Fergana Valley. ITAR-TASS reported on 18 July that the death toll has reached 115. But, as the search continues for more bodies, Uzbek Interior Minister Zakir Almatov says "that number is sure to change." BP END NOTE DIPLOMACY WITHIN RUSSIA by Paul Goble A dramatic increase in the number and intensity of ties between Russia's regions and various foreign countries has prompted the central Russian government to set up a special department within the Foreign Ministry to deal with such contacts. Established earlier this year to "regulate rather than forbid" such contacts, the new department has yet to receive full parliamentary approval. The State Duma approved the measure last month, but the Federation Council--in which the regions are represented directly--has yet to back it. On the one hand, many people in Moscow approve such expanded contacts between the regions and foreign countries. Not only do such ties help to promote economic development, but they are widely viewed in Europe and the U.S. as entirely natural. The EU, for example, has institutionalized sub-state representation at a variety of forums. Any number of American states maintain special liaison offices in key foreign trade partners. And the Russian authorities themselves have openly pushed ties between regions within the Commonwealth of Independent States as a means of promoting the integration of that organization's 12 member countries. On the other hand, even more officials in the Russian capital are concerned about the negative impact that such contacts may have on Russian foreign policy, Russian political development, and even the stability of the Russian state. Representatives of the Foreign Ministry noted several weeks ago that Moscow was extremely unhappy when several Russian regions entered into direct economic contacts with Abkhazia, a breakaway region in Georgia. Such contacts undercut Moscow's efforts to promote ties with Tbilisi, they argued. The Russian Foreign Ministry was even more upset when representatives of Bashkortostan, Dagestan, Sakha, Tatarstan, and several other regions participated in an Istanbul conference that formally recognized the Turkish Republic of Northern Cyprus. Not only did that declaration contradict Russian policy vis-a-vis that island, but it inevitably raised questions in the Greek half of the island about just how reliable a partner the Russian government will prove to be. And the Russian Foreign Ministry openly complained to the press in June that Saratov Governor Dmitrii Ayatskov's efforts to promote ties with German Chancellor Helmut Kohl crossed the line between what Moscow considers permissible and what it does not. The Russian government is also concerned about the ways in which such ties between its regions and foreign countries could affect domestic political development. While the central authorities seem pleased by the economic aspect of such contacts, they are less happy about the way in which such an independent source of wealth allows the regions to act with respect to Moscow. Regions with significant foreign ties often negotiate with the relatively weak central government from a position of strength, giving the regions rather than Moscow the upper hand on such issues as tax collection and the implementation of centrally adopted laws. Finally, many in Moscow are nervous about the way in which such ties could help to power secessionist movements within the Russian Federation. Many of the most independent- minded regions of the country, populated by ethnic Russian and non-Russian alike, are actively pushing to have representatives abroad, just as some union republics did in the Soviet period. Several recent Russian commentaries have recalled the symbolic importance for Ukrainians and Belarusians of the missions to the UN that those two republics maintained from 1945 until the end of Soviet power. Tatarstan, for example, now has representatives of various kinds in more than 15 countries. Chechnya is actively pursuing such contacts. And even regions like Leningrad, Pskov, and Karelia are entering into special relationships with foreign states. In most countries around the world, such ties between regions and foreign countries would not seem to be a serious problem. Both the central governments and the regions recognize that there is a more or less natural division between their powers and responsibilities. But that is not the case in Russia. From the viewpoint of both Moscow and the regions, their relationship is one in which the gains of Moscow appear to the regions like a return to hypercentralization and the gains of the regions look to Moscow like the first step toward secession. For this reason, the contacts Russian regions now have with foreign countries could prove explosive. But the creation of a new department at the Russian Foreign Ministry suggests that Moscow may now be preparing to institutionalize something that has long been common in other countries. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. 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