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RFE/RL NEWSLINE Vol. 2, No. 138 Part I, 21 July 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 138 Part I, 21 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 * IMF BOARD APPROVES NEW LOAN * DUMA TO HOLD SPECIAL SESSION IN AUGUST * ARMENIAN PRESIDENT SHRUGS OFF COUP PREDICTIONS End Note: A FOURTH BALTIC REPUBLIC? xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA IMF BOARD APPROVES NEW LOAN. The IMF's board of directors on 20 July agreed to immediately disburse the first tranche of a $11.2 billion stabilization loan for Russia. However, the first tranche will total $4.8 billion, rather than $5.6 billion, as had been expected. According to an IMF statement, the first tranche was reduced because of "delays in implementing" the conditions for the new loan. The rest of the loan will be disbursed later this year, provided that Russia meets its economic policy commitments. The State Duma recently rejected several key laws that the government proposed in order to increase revenues and reduce budget expenditures. The government and President Boris Yeltsin are trying to introduce some of those measures through government directives and presidential decrees. Unified Energy System head Anatolii Chubais attended the IMF board meeting in his capacity as Yeltsin's envoy to international financial institutions. LB RUSSIA DELAYS BILLIONS IN DEBT SERVICING COSTS. Deputy Finance Minister Mikhail Kasyanov told journalists on 21 July that the voluntary swap of short-term treasury bills (GKOs) for medium- and long-term Eurobonds "helps to give the government more breathing space for four or five months," Reuters reported. The swap was announced last week (see "RFE/RL Newsline," 14 July 1998). Holders of some $4.4 billion in GKOs agreed to exchange them for some $5.9 billion in U.S. dollar-denominated bonds (of which roughly half will mature in seven years and the other half in 20 years). The Finance Ministry also sold an additional $500 million in Eurobonds for cash. The swap adds $6.4 billion to Russia's foreign debt burden but reduces the amount of high-interest GKOs that need to be repaid in the coming months. Kasyanov said 60 percent of those who agreed to exchange GKOs for Eurobonds were foreign investors. LB DUMA TO HOLD SPECIAL SESSION IN AUGUST. Duma Speaker Gennadii Seleznev announced on 21 July that the Duma will hold a special session in August to consider government-backed laws on economic policy, ITAR-TASS reported. Speaking to reporters in Istanbul, Seleznev predicted that the Duma will convene between 15 and 20 August. Deputy Prime Minister Viktor Khristenko on 20 July sent the Duma a letter on behalf of the government requesting that deputies hold a special session to consider eight laws, RFE/RL's Moscow bureau reported. Those measures include a proposal to give the government the authority to unilaterally change tax rates by up to 10 percent (see "RFE/RL Newsline," 20 July 1998). LB GOVERNMENT ISSUES ANOTHER DIRECTIVE ON TAX POLICY. Beginning on 1 August, value-added tax will be levied when goods are delivered to consumers, rather than when companies receive payment for those goods, according to a new government directive that was announced on 20 July. The government included a draft law to impose such a change in its anti- crisis program, but the measure, which would hurt companies with large numbers of non-paying consumers, was overwhelmingly rejected by the Duma. Duma Budget Committee Chairman Aleksandr Zhukov of the Russian Regions faction said the new procedure for charging VAT is expected to bring in 2.6 billion rubles ($418 million) by the end of this year, of which 1.9 billion rubles will go to the federal budget, Interfax reported. The measure could increase annual revenues of all budgets by some 8.4 billion rubles, according to Zhukov. LB DUMA DEPUTIES QUESTION CONSTITUTIONALITY OF AUSTERITY STEPS... Duma Budget Committee Chairman Zhukov has charged that the government exceeded its authority in issuing the latest directive on value-added tax. He told journalists on 20 July that tax issues must be settled by federal law. He added that "whatever political and economic reasons are pressing on the president and the government, they should not violate the constitution," Reuters reported. Duma Legislation Committee Chairman Anatolii Lukyanov of the Communist faction told RFE/RL that the recent presidential decree on raising the land tax clearly violates the constitution (see "RFE/RL Newsline," 20 July 1998). Duma deputy Yelena Mizulina of Yabloko agreed, but in an interview with RFE/RL's Moscow bureau, she said the Constitutional Court has a backlog of some six months and is unlikely to rush to hear a challenge of decrees and government directives on tax policy. LB ...AS ILYUKHIN LINKS LATEST DECREES TO IMPEACHMENT PROCEEDINGS. Duma Security Committee Chairman Viktor Ilyukhin, also a Communist, told RFE/RL's Moscow bureau on 20 July that issuing an unconstitutional decree would provide further grounds for removing Yeltsin from office. Ilyukhin has been a leading proponent of impeaching the president. The Duma's commission on impeachment is to hold hearings on 27 July to consider the first of five possible charges against Yeltsin: that he committed treason by signing the Belavezha accords, which dissolved the USSR in December 1991. Other charges on which opponents want to impeach Yeltsin include the launching of the war in Chechnya, the forcible disbanding of the Supreme Soviet in October 1993, and presiding over "genocide" of Russian citizens. LB NEWSPAPER VIEWS LEGALITY OF NEW DECREES, DIRECTIVES... "Kommersant-Daily" argued on 21 July that the decree increasing the land tax is legal because the increase will come in the form of "indexing" the tax rate by the government. The newspaper also said the government acted within its powers when it reduced the number of products subject to a lower rate of value-added tax (see "RFE/RL Newsline," 20 July 1998). However, the newspaper charged that many other proposals allegedly being considered by the government and Kremlin would be illegal. It advised readers to ignore possible attempts to change by decree or directive the rules on paying income tax and making contributions to the Pension Fund. The newspaper also claimed that Ruslan Orekhov, the head of the presidential administration's legal department, refused to recommend signing decrees to change tax legislation, on the grounds that such decrees violate the constitution. LB ...CLAIMS BEREZOVSKII TRIED TO SINK NEW LOAN. "Kommersant- Daily" alleged on 21 July that CIS Executive Secretary Boris Berezovskii has been trying to sabotage Russia's chances of receiving additional stabilization funds from the IMF. The newspaper said Berezovskii, who is currently visiting the U.S., has been spreading media reports about alleged corruption in international financial organizations as a means of doing battle with Prime Minister Sergei Kirienko and Chubais, Russia's chief negotiator with the IMF and World Bank. "Kommersant-Daily" claimed that Berezovskii has found allies among U.S. opponents of the latest IMF bailout package. Media financed by Berezovskii have sharply criticized Chubais since last summer and Kirienko since he became prime minister. The financial backers of "Kommersant- Daily" are not known. LB TAX SERVICE CHIEF GAINS NEW AUTHORITY. Boris Fedorov, the head of the State Tax Service, will also supervise the work of the Federal Tax Police and the Federal Currency and Export Control Service, in accordance with a government order issued on 20 July. Rumors have been circulating in Moscow that Fedorov is to join the government's presidium, but a government official could not confirm that rumor, "Nezavisimaya gazeta" reported on 21 July. Fedorov has reportedly proposed that the Tax Service, Tax Police, Federal Currency and Export Control Service, and State Customs Service be combined into a single "revenues ministry." However, Kirienko appears to have rejected that proposal, "Nezavisimaya gazeta" reported. LB KIRIENKO MEETS GAZPROM HEAD. Prime Minister Kirienko and Gazprom chief executive Rem Vyakhirev met behind closed doors on 20 July, Russian news agencies reported. The government did not release an official comment after the meeting. Gazprom, for its part, issued a statement on 21 July saying Kirienko and Vyakhirev agreed on the principles for repaying Gazprom's debt to the state and the debts of budget-funded organizations to the gas monopoly, ITAR-TASS reported. The statement said a group of experts, including representatives of the Finance Ministry, Fuel and Energy Ministry, State Tax Service, government apparatus and Gazprom, will draft proposals on settling some of the debts through "offsets"--a potentially major concession to Gazprom. A presidential decree banned the practice of canceling tax debts against government debts to enterprises. However, an exception was recently made for the electricity giant Unified Energy Systems (see "RFE/RL Newsline," 16 July 1998). LB PRESIDENT CREATES NEW STATE-OWNED ALCOHOL COMPANY. A presidential decree has ordered the creation of a new company to monitor the production and sale of alcoholic beverages, Russian news agencies reported on 19 July. The new firm, to be called Rosspirtprom, will be fully owned by the federal government. Yeltsin and the government have long promised to strengthen regulation of alcohol production and distribution, both to boost budget revenues and crack down on the sale of poisonous products, but previous measures have had little effect. Last week, both houses of the parliament passed a law on strengthening regulation of the alcohol industry, which was part of the government's anti-crisis program. LB TWO MORE PEOPLE ARRESTED IN KHOLODOV MURDER. Two more people have been arrested in connection with the October 1994 murder of "Moskovskii komsomolets" journalist Dmitrii Kholodov, ITAR-TASS reported on 20 July, citing the Prosecutor- General's Office. The names of the new suspects have not been released, but one is a civilian and one is in the military. Earlier this year, two officers in the Airborne Troops were arrested and charged with the premeditated murder of Kholodov. A third suspect, a civilian who previously served in the Airborne Troops, was arrested and charged in April. Kholodov, an investigative journalist who had reported on corruption in the military, was killed by a booby-trapped briefcase. LB KEMEROVO RAILROAD BLOCKED AGAIN FOLLOWING COURT RULING. Coal miners have resumed the blockade of the Novokuznetsk- Tashtagol railroad, in Kemerovo Oblast, to protest a city court's warning to two organizers of the recent seven-day blockade of the railroad, Interfax reported. On 20 July, the court warned two trade union activists that the blockade had violated the law. In an interview with RFE/RL the same day, Kemerovo Oblast Governor Aman Tuleev said that legal action taken against organizers of the recent blockades would ignite a "social explosion." He argued that it would be fairer to initiate criminal proceedings against the federal government for illegally closing mines, failing to find new work for laid-off miners, and failing to pay miners' wages. Tuleev also expressed doubt that a government commission set up to investigate the misappropriation of federal funds in Kemerovo will make any progress. BT RUSSIA, SOUTH KOREA AGREE TO TALKS ON SPY SCANDAL. Russian Foreign Ministry spokesman Grigorii Karasin said on 20 July that Foreign Minister Yevgenii Primakov will meet with his South Korean counterpart, Park Chung Soo, on the sidelines of the ASEAN conference in Manila later this month, Interfax and ITAR-TASS reported. The two will discuss the recent spy scandal in which South Korean diplomat Cho Sung Woo was expelled for spying and South Korea retaliated by expelling Russian diplomat Oleg Abramkin. A cooperation agreement between the Russian and South Korean special services still exists, and according to Interfax, "diplomatic sources" in Moscow say that agreement will be annuled only at South Korea's initiative. Also on 20 July, South Korea announced it is recalling five of its diplomats from Moscow and Vladivostok. BP RUSSIA, INDIA SIGN PRELIMINARY CONTRACT ON NUCLEAR PLANT. Russia and India on 20 July signed a contract that provides for a feasibility study on building a nuclear power plant in Kudankulam, ITAR-TASS and Interfax reported. A general contract on construction is expected to be signed in the next three to six months. Russia will supply two VVER-1000 light- water reactors, worth an estimated $2.6 billion, for the plant. Russia has been criticized for negotiating the sale of the reactors following India's nuclear tests in May. But according to both Interfax and ITAR-TASS, the reactors cannot create weapons-grade plutonium. BP SELEZNEV IN ANKARA. Duma speaker Seleznev held talks in Ankara on 20 July with Turkish President Suleyman Demirel and parliamentary speaker and former Foreign Minister Hikmet Cetin, Russian agencies reported. Demirel noted that peace and stability in the Black Sea region depend largely on Turkey and Russia. He expressed the hope that those two countries will cooperate more closely within the framework of the Parliamentary Assembly of the Black Sea Economic Cooperation Organization. Seleznev and Demirel also reviewed progress in implementing the "Blue Stream" project to export Russian natural gas to Turkey. Speaking at a joint press conference with Cetin, Seleznev argued that Cyprus has the right to select its own defense arrangements, affirming that the S-300 missiles that Russia has sold Nicosia are "for defensive purposes," the "Turkish Daily News" reported. LF MOSCOW MILITARY PROSECUTOR ON HIV-POSITIVE CONSCRIPTS. Of the 160 cases of HIV reported among conscripts in the Moscow military district from 1993-1998, 88 percent had become infected with the virus before being drafted, Mikhail Kislytsyn told a 20 July press conference. Kislytsyn warned that HIV-positive conscripts pose a psychological and physical danger to other soldiers and themselves, RFE/RL's Moscow bureau reported. He also noted that following a medical inspection of some 12,000 conscripts in the Moscow military district for 1998, 822 were sent to be treated for various medical conditions, 636 were found to be malnourished, and 14 were "immediately sent home." Kislytsyn said he supports mandatory HIV-testing for conscripts and that the Defense Ministry will sue local administrations to seek reimbursement for funds spent on those illegally drafted. BT BASAEV KEEPS DISTANCE FROM MASKHADOV. Shamil Basaev told Interfax on 20 July that he has accepted the post of deputy commander of the Chechen armed forces only for the 12 days that President Aslan Maskhadov has extended the state of emergency imposed last month. Basaev said that during those 12 days, it should be possible to implement Maskhadov's decree on mobilizing another 5,000 national guard reservists to crack down on widespread crime. Basaev criticized Maskhadov's decree ordering the expulsion from Chechnya of several citizens of Arab countries, whom the president accused of propagating Wahhabism and creating illegal armed units in a bid to seize power. Warning against "a witch hunt," Basaev claimed that the Arabs currently in Chechnya were not involved in last week's clashes in Gudermes, "Nezavisimaya gazeta" reported. Basaev, however, denied that there are substantive disagreements between himself and Maskhadov. LF ISLAMIC REGIMENT PROTESTS ITS DISBANDING. Several dozen members of the Special Purpose Islamic Regiment, abolished by Maskhadov for its participation in the attack on the national guard units in Gudermes last week, met in Noviye Atagi, south of Grozny, on 20 July, RFE/RL's correspondent in the Chechen capital reported. The Islamic fighters called on former Chechen acting President Zelimkhan Yandarbiev to lead a campaign against Maskhadov, whose policies Yandarbiev had criticized in a television broadcast several days earlier. All roads into Grozny remain sealed off. LF TRANSCAUCASUS AND CENTRAL ASIA ARMENIAN PRESIDENT SHRUGS OFF COUP PREDICTIONS. Speaking to journalists at Lake Sevan on 19 July, Robert Kocharian said that accelerating economic growth will substantially improve living standards in Armenia "within two or three years." He said the first positive results of his policies will be visible already in 1998, which he predicted will be "the most stable year" since independence. Kocharian said the chances of renewed hostilities after the October presidential elections in Azerbaijan are "almost nil" but added that the country should always be prepared for war. The president derisively dismissed the 16 July prediction by Armenian Pan- National Movement (HHSh) chairman Vano Siradeghian that a grave political crisis will result in the ouster of the present leadership either this fall or next spring. Siradeghian had told supporters that the present authorities are leading Armenia to international isolation and a new war in Nagorno-Karabakh. LF ARMENIA'S YERKRAPAH, REPUBLICAN PARTY ANNOUNCE MERGER. The Yerkrapah union of war veterans issued a statement on 20 July announcing the merger of its political wing with the Republican Party of Armenia (HHK), RFE/RL's Yerevan bureau reported. The new organization will bear the HHK's name and will elect a new leadership as well as adopt a party program and new statutes at a congress slated for late October. HHK chairman Andranik Markarian said that Yerkrapah members, including its parliamentary deputies, will not be admitted to the party automatically but on an individual basis. According to Smbat Ayvazian, chairman of the Yerkrapah group within the parliament, Yerkrapah selected the HHK as an ally because of its nationalist ideology and past record. Yerkrapah is the largest single group within the Armenian parliament (see "RFE/RL Caucasus Report," Vol. 1, No. 11, 12 May 1998). LF AZERBAIJAN ACCUSES RUSSIA OF VIOLATING CFE TREATY. The Azerbaijani Foreign Ministry has issued a statement on the 14-15 July visit to Armenia of Russian Defense Minister Igor Sergeev, Turan reported on 20 July. According to the statement, agreements reached by Sergeev and Armenian officials on further cooperation "do not promote the establishment of peace in the Transcaucasus or resolution of the Armenian-Azerbaijani conflict...and "damage Russia's image as mediator." It argues that the agreement on supplies to Armenia of military equipment, allegedly including S-300 air defense missiles, violates the 1990 Treaty on Conventional Forces in Europe. While in Yerevan, Sergeev declined to comment on media reports that Russia is to send S-300 missiles to Armenia. LF GEORGIAN PRESIDENT PRAISES BORDER COOPERATION WITH RUSSIA. In his weekly radio broadcast on 20 July, Eduard Shevardnadze expressed his gratitude to the Russian border guards who have helped protect Georgia's frontiers with Turkey over the past six years. Georgia has taken over from Russia responsibility for patrolling its sea borders. On 17 July the Georgian parliament passed a law under which Georgia will also assume sole control of its land borders during the next two years. The Abkhaz leadership has threatened to open fire on Georgian coastal patrol vessels. Shevardnadze, who was discharged from hospital on 17 July after minor surgery, suggested that Tbilisi will permit Abkhazia to patrol its own coastline in return for concessions over the repatriation to Gali Raion of ethnic Georgians forced to flee during the fighting in May, AP reported. LF U.S. COMPANY TO APPEAL KAZAKH GOVERNMENT DECISION. The CCL Oil Company has announced it will appeal the Kazakh government's decision to take away the company's shares in the Pavlodar Oil Refinery, RFE/RL correspondents reported on 21 July. The U.S. firm bought a 70.8 percent share in the refinery in March 1997, but the Kazakh government announced last month that the company has failed to meet its obligations and that it is therefore giving the company's shares to the Kazakh Oil State Committee. CCL Oil will appeal to the Kazakh Supreme Court. RFE/RL correspondents note that the vice president of the Kazakh Oil State Committee is Timur Kulibayev, who is also the son-in-law of the Kazakh president. BP END NOTE: A FOURTH BALTIC REPUBLIC? by Paul Goble A proposal by a senior Moscow politician to transform Russia's Kaliningrad Oblast into an autonomous Russian Baltic republic could reorder the geopolitics of the Baltic region. Moreover, it could transform the constitutional order of the Russian Federation itself. The proposal was made in the 17 July issue of "Izvestiya." Vladimir Shumeiko, a former Russian deputy prime minister and the chairman of the Russian Federation Council, said in the Moscow daily that he favors upgrading Kaliningrad Oblast into an autonomous republic, lest that non-contiguous part of the Russian state suffer a social explosion or become "a protectorate of a neighboring country or even an area managed by the Council of Europe." Shumeiko made the suggestion in response to a Russian government plan to reduce economic subsidies to this non- contiguous part of the federation. If adopted, his proposal almost certainly would fuel a new movement in Kaliningrad for the creation of a fourth Baltic republic as well as demands by other Russian regions for preferential treatment. But even if this proposal is not adopted--and the immediate chances for passage seem slim--the suggestion will almost inevitably exacerbate tensions both in the Baltic Sea region and in Russia as well. Around the Baltic region, it will raise questions about Moscow's intentions. And within the Russian Federation, it will reopen the question about what Moscow will accept as far as relations between the regions and the center are concerned. Consequently, even if this proposal is not approved, it is a major political watershed. According to Shumeiko--who once ran for governor of Kaliningrad--that region "is paying what it has to." Moreover, he said, the current arrangements only "provide compensation" for the region's remoteness from the center. They do nothing to provide genuine "benefits." Consequently, if those subsidies are ended, Shumeiko argued, some "45,000 small entrepreneurs and their families will lose their businesses and incomes." Prices for food will double, the number of unemployed will rise to 75,000, and trade will collapse. And "investors will say good-bye, never to return." Such a series of developments would create at least a social explosion or, even more dangerously, the collapse of all public authority there, Shumeiko argued. In such an environment, some Kaliningraders would seek to become an independent protectorate or even an independent entity protected by the Council of Europe. At one level, of course, such a scenario is part and parcel of a political argument to persuade other Russian politicians to rethink plans to drop assistance to this region. But at another level, Shumeiko's proposal reflects a fundamental, if seldom commented upon political reality. Ever since the Soviet government seized Koenigsberg from Germany at the end of World War II and renamed it Kaliningrad, the region has been a potentially serious problem for Moscow and the Russian Federation, of which it was made a part. Prior to the recovery of independence by Lithuania and the collapse of the USSR, Soviet authorities were largely able to manage the situation because they could ignore republic boundaries and simply treat this area as an outpost of military power on the Baltic Sea, even as they replaced the largely German population with Russians and Ukrainians. But after 1991, the situation changed. Kaliningrad was isolated from Russia by an independent Lithuania and Poland. The Soviet navy was in disarray. And the ecological and economic catastrophes that Soviet forces had left behind led many Kaliningraders to think that perhaps they should become the fourth Baltic republic. That movement was in effect killed both by Western opposition to any "secession from secession" and by Russian Federation concerns about the need to maintain some military outpost in the Baltic region, following troop withdrawals from Estonia, Latvia, and Lithuania. But neither ended Moscow's problems in the oblast. Moscow quickly proved incapable of taking care of the oblast's population. And neighboring countries--including Germany, Poland, and Lithuania--sought to increase their influence and leverage in a region each had claimed at some point in history. Despite this outside investment and attention, conditions in Kaliningrad have continued to deteriorate. An end to Russian subsidies will do nothing to slow that process. And that decline, in turn, particularly given Shumeiko's proposal, will reopen the question about the future of Kaliningrad and the status of its people. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to firstname.lastname@example.org with the word subscribe as the subject of the message. HOW TO UNSUBSCRIBE Send an email to email@example.com with the word unsubscribe as the subject of the message. 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