I wanted to change the world. But I have found that the only thing one can be sure of changing is oneself. - Aldous Huxley
RFE/RL NEWSLINE

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

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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?
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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.

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