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RFE/RL NEWSLINE Vol. 2, No. 156, Part I, 14 August 1998
___________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 156, Part I, 14 August 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 RULES OUT RUBLE DEVALUATION * DUMA TO UPSTAGE YELTSIN-CLINTON SUMMIT? * IRAN OFFERS TO MEDIATE KARABAKH CONFLICT * End Note: THE DOG THAT DIDN'T BARK xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN RULES OUT RUBLE DEVALUATION. Arriving in Novgorod on 14 August, Russian President Boris Yeltsin told journalists that "there will be no devaluation--that's firm and definite." He said that there is "no need" for such a step, given that "we shall be able to keep under control the situation on the Russian financial markets," according to ITAR-TASS. Yeltsin argued that the turmoil on Russia's financial markets is to be attributed at least partly to global market troubles. LF RUSSIAN STOCK MARKET CONTINUES TO FALL. Russia's benchmark stock index on 13 August was 6 percent down on the previous day. According to "Izvestiya," trading was suspended for 45 minutes after "blue-chip" stocks dropped 15-25 percent. Russian Prime Minister Sergei Kirienko described traders' behavior as "psychologically driven," arguing that the Russian economy is in better shape now than it was in July, according to Interfax, He noted that the country's currency reserve is larger and tax collections have risen. Echoing earlier remarks by other administration officials, he said external factors such as the slump in oil prices and the Asian crisis have adversely influenced the Russian market (see "RFE/RL Newsline," 13 August 1998). JAC MORE CENTRAL BANK INTRIGUES? "Nezavisimaya Gazeta" on 13 August maintained that economic fundamentals have not changed significantly enough to explain the market's decline. Instead, the newspaper attributed the market turmoil to a coalition of the Russian Central Bank, Sberbank, and other financial institutions, which together own 66 percent of government treasury bills and have conspired to bring the Kirienko government down. According to the newspaper, neither the Central Bank and its cohorts nor the communist opposition in the State Duma is capable of removing Kirienko. Only a mysterious "third force" is powerful enough, and it is "in a hurry to change the government," "Nezavisimaya Gazeta" commented. Boris Berezovskii's LogoVAZ group is a financial backer of the newspaper, which has been highly critical of the Central Bank chairman (see "RFE/RL Newsline," 6 August 1998). JAC DEFAULT, DEVALUATION... The government's arguments notwithstanding, market analysts continue to predict a devaluation or default. According to "Izvestiya" on 13 August, many bankers believe that a default is more than a 50 percent possibility. Some even predict a default followed by a devaluation. But more believe that a devaluation will occur without a default. Dmitrii Volkov, head of the information and analysis unit at Rossiskii Kredit bank, told "Kommersant- Daily" on 13 August that the risk of a devaluation is much greater than that of a default, arguing that the government will simply keep paying its foreign creditors while ignoring or postponing its domestic obligations. Proponents of devaluation got a boost when international financier George Soros recommended in a letter to the "Financial Times" on 13 August that Russia introduce a currency board after a modest devaluation of 15-25 percent. JAC ...AND/OR INFLATION? Andrei Illarionov, director of the Institute of Economic Analysis, warned on 13 August that inflation is inevitable and only the earliest possible devaluation would cost the least social pain. Illarionov has been promoting the devaluation option since late July (see "RFE/RL Newsline," 31July 1998). JAC INTERBANK LOAN MARKET PARALYZED. A shortage of liquidity among Russia's major banks has stalled most activity on the interbank loan market. The Central Bank imposed strict limitations on hard currency volumes bought by traders and acquired by banks. Imperial Bank is reportedly one of the banks that has had trouble repaying its loans, according to Interfax. Deputy Fuel and Energy Minister Sergei Chizhov has reportedly ordered its chief shareholders, Gazprom and LUKOIL, not to take actions that would undermine the bank during this time of crisis. JAC DUMA TO UPSTAGE YELTSIN-CLINTON SUMMIT? The Duma Council will meet on 17 August to reach a final decision on the timing of an emergency session. President Yeltsin wrote to the Duma on 14 August proposing that it convene such a session, presidential spokesman Sergei Yastrzhembskii told ITAR-TASS. Prime Minister Kirienko had requested that Duma convene mid- August to consider new anti-crisis legislation. However, a meeting of Duma factions and deputies groups declared a meeting impossible before 2 or 4 September. U.S. President Bill Clinton will be in Moscow from 1 to 3 September for meetings with President Yeltsin. JAC FSB TO TARGET MINERS? According to "Moskovskii Komsomolets" on 13 August, Director of the Federal Security Service (FSB) Vladimir Putin has ordered his officers to collect information to bring criminal charges against striking miners. Putin's order was greeted with open bewilderment by FSB personnel, who questioned whether such activity came under the FSB's jurisdiction. The newspaper notes that the Lubyanka has had its own problems paying wages. JAC KALMYKIA'S 'TEAM LEADER' SPEAKS OUT. President of Kalmykia Kirsan Ilyumzhinov explained his theories of governing in an interview with "Parlamentskaya Gazeta" on 13 August. When pressed to admit that he was a dictator, Ilyumzhinov explained that Kalmykia is governed by a team of young people who discuss the republic's problems fiercely and passionately but always democratically. "Once a decision is made, I always demand its implementation," he explained. "In this way, I am a dictator." According to Ilyumzhinov, the political opposition in Kalmykia accounts for only 5 percent to 7 percent of the population, so there is in fact little opposition for him to squelch. JAC NOVGOROD TO GET UPGRADE. During his visit to Novgorod on 14 August President Yeltsin announced he will sign a decree within days changing the name of the city to Velikii Novgorod, ITAR-TASS reported. JAC YELTSIN SAYS RUSSIA, TAJIKISTAN, UZBEKISTAN CAN REPEL TALIBAN ADVANCE. Yeltsin also said in Novgorod that Russia, Tajikistan, and Uzbekistan "are fully capable of resisting the Taliban," ITAR-TASS reported. The previous day, Yeltsin had a phone conversation with Tajik President Imomali Rakhmonov, following which the Kremlin released a statement saying "the CIS must agree on a series of questions on strengthening the Commonwealth's southern borders." BP PAKISTANI AMBASSADOR TO RUSSIA SPEAKS OUT ON AFGHANISTAN. Masoor Alam said in an interview with Interfax on 13 August that his country's policy toward Afghanistan "has been not to have favorites." Alam was responding to claims made by several Russian officials recently that Pakistan is giving direct aid to Afghanistan's Taliban movement (see "RFE/RL Newsline," 13 August 1998). Alam said Pakistan has "maintained an attitude of neutrality" and advocates "bringing about a cease-fire and intra-Afghan dialogue." He admitted that Pakistan has "always recognized the group in control of Kabul as the government of Afghanistan." He also said in areas controlled by the Taliban "there has been almost complete peace and a reduction in the crime rate." Russia has not played a "constructive role" in Afghan events, Alam concluded. BP VLADIVOSTOK DEPUTY MAYOR ESCAPES PETROL BOMB. Nikolai Beletskii and his family escaped unscathed on 13 August after unknown assailants threw two Molotov cocktails through the window of their apartment, "Nezavisimaya gazeta" reported on 14 August. Beletskii is the closest associate of Vladivostok mayor Viktor Cherepkov. Meanwhile, paramedics in Vladivostok have voted to continue their 10-day old strike, despite the allocation by the mayor's office of a 1.243 billion rubles (some $207 million) loan to pay wage arrears for April-May, ITAR-TASS reported on 14 August. The strikers are demanding a decision on a permanent source of financing for the first-aid service. LF LEBED PRAISES RYBKIN'S CAUCASIAN EXPERTISE. In an interview with Interfax on 13 August, Krasnoyarsk Krai Governor Aleksandr Lebed lamented the Russian leadership's "ostrich" policy toward the North Caucasus and called for creating the post of Russian presidential representative in the region. Lebed suggested that Ivan Rybkin, who succeeded him as Russian Security Council secretary, would be the ideal candidate for such a post. "Nezavisimaya gazeta" on 14 August recalled that one year ago, Lebed harshly criticized Rybkin's activities in Chechnya and accused him of systematically sabotaging the Khasavyurt accord, which Lebed signed with then Chechen chief of staff Aslan Maskhadov (see "RFE/RL Newsline," 1 September 1997). LF CORRECTION. "RFE/RL Newsline" on 12 August cited incorrect Russian agency reports saying that the Russian government is going to sell off 50 percent of the telecommunications giant Svyazinvest. In fact the government will sell only 25 percent minus two shares. Last year, it sold a 25 percent plus one share in the firm. TRANSCAUCASUS AND CENTRAL ASIA IRAN OFFERS TO MEDIATE KARABAKH CONFLICT. During talks in Baku on 12 August, Azerbaijani President Heidar Aliev and Iranian Foreign Minister Kamal Kharrazi affirmed their mutual commitment to expand bilateral cooperation, specifically in the sphere of transporting energy resources and in supplying electricity to the Azerbaijani exclave of Nakhichevan, Interfax reported. But they failed to make substantive progress toward resolving their differences over determining the legal status of the Caspian or to reach agreement on expanded Iranian participation in the exploitation of Azerbaijan's Caspian oil. Kharrazi advocated direct talks between Baku and Yerevan on resolving the Karabakh conflict, saying that Iran is prepared to mediate such talks, ANS-Press reported. LF AZERBAIJANI OPPOSITION ACCEPTS RESTRICTIONS ON BAKU RALLY. Azerbaijani opposition parties on 13 August met to discuss, and finally agreed to, the Baku city authorities' offer to make available a motor-racing stadium on the outskirts of Baku for a mass rally on 15 August. Riot police held practice maneuvers at that stadium last week, according to RFE/RL's Baku bureau. Also on 13 August, the Democratic Congress, which unites a number of opposition parties, issued a statement rejecting claims made the previous day by Interior Minister Ramil Usubov that opposition activists intend to resort to violence during the planned rally, Turan reported. LF PASTUKHOV CALLS FOR SHEVARDNADZE-ARDZINBA MEETING. Speaking at a press conference in Moscow on 13 August, Russian First Deputy Foreign Minister Boris Pastukhov criticized what he termed the apparent unwillingness of either Georgia or Abkhazia to make an effort to resolve the Abkhaz conflict and expedite the repatriation of ethnic Georgian displaced persons, Interfax reported. Pastukhov said that "two significant documents prepared with Russia's help" remain unsigned, and he suggested that a meeting between Georgian President Eduard Shevardnadze and his Abkhaz counterpart, Vladislav Ardzinba, might lead to the signing of an agreement on preventing further armed clashes and on repatriating the fugitives. Some Georgian displaced persons have spontaneously established contact with the Abkhaz authorities, who have granted them permission to return on condition that they never take up arms against the Abkhaz, Caucasus Press reported on 14 August. LF ARMENIAN PRESIDENT SAY ECONOMIC STABILITY 'TOP PRIORITY.' In an interview with "Noviye izvestiya" on 14 August, Robert Kocharian said Armenia's economic upswing is largely the result of innovations in the tax system and budget that he had introduced in his capacity as former premier in the spring of 1997. "We have moved from the concept of survival to that of active development," he remarked. A further key factor, Kocharian said, is the increased willingness of diaspora Armenians to invest in the country's economy. Kocharian said he believes that the ongoing process of determining domestic and foreign policy priorities in all the Transcaucasus states and Caucasus republics militates against regional accord at present. He pointed out that the original venue for the September conference on the TRACECA project to which his Azerbaijani counterpart, Aliev, has invited him was Tbilisi but that Aliev himself had insisted it be moved to Baku. LF ARMENIA'S ASSYRIANS STRUGGLE TO PRESERVE IDENTITY. Speaking at a press conference on 12 August, a spokeswoman for the Assyrian community greeted the introduction of a class with Aramaic-language instruction in one of Yerevan's schools. But at the same time, she called for the reinstatement of an Armenian-Assyrian teacher fired from a school in one of three predominantly Assyrian-populated villages near the capital, RFE/RL's Yerevan bureau reported. The spokeswoman said that the Assyrian community has shrunk in recent years from 9,000 to approximately 4,000, as many of its members have been forced to emigrate for economic reasons. She stressed that "the Armenian state does everything for us not to leave the country." LF OPINIONS DIFFER OVER TALIBAN 'THREAT.' Kazakh President Nursultan Nazarbayev said in Astana on 13 August that he is concerned about events in Afghanistan, ITAR-TASS and Interfax reported. Nazarbayev said Kazakh troops are already deployed in Tajikistan and warned Afghanistan's Taliban movement not to "overstep the boundaries" of its own country. Nazarbayev said that he is against "the use of force" and added that Kazakhstan wants to see a stable Afghanistan and will seek "normal relations" with that country once the war is over. He also said a stable Afghanistan offered the possibility to lay oil and gas pipelines through that country. In the Kyrgyz capital, Bishkek, First Deputy Defense Minister Major-General Ismail Isakov said the same day he does not believe the Taliban will cross CIS borders. "Breaching the border of even one Central Asian state would mean declaring war on all countries in the region, [which are] tied by the [CIS] collective security treaty," he said. BP KAZAKHSTAN WORRIED ABOUT ISLAMIC FUNDAMENTALISM. ITAR-TASS on 14 August reported that officials in Kazakhstan are worried about "foreign missionaries" propagandizing the teachings of radical fundamentalist Islam. According to news agency, criminal proceedings have been brought against missionaries from Egypt, Sudan, and Jordan. A Turkish citizen has been discovered teaching Wahhabism in the southern Kazakh city of Shambyl, and an Uzbek citizen was recently deported for violating the country's law on freedom of worship and religious associations. The Uzbek citizen was reportedly preaching "radical Islamic fundamentalism" in the town of Kyzylorda, arranging polygamous marriages, and encouraging "young religious fanatics" to follow him "blindly." BP IRANIAN FOREIGN MINISTER IN TURKMENISTAN. Kamal Kharrazi arrived in the Turkmen capital, Ashgabat, on 13 August, ITAR- TASS reported. At talks with President Saparmurat Niyazov on the status of the Caspian Sea, the two agreed to form a working group that will develop a plan on the legal framework for dividing the Caspian among the littoral states and present that plan to the presidents of Iran and Turkmenistan by 1 September. There was no progress on Iran's proposal to purchase Turkmen natural gas. Kharrazi offered $32 per 1,000 cubic meters, while Niyazov reminded him that Russia's offer of $36 per 1,000 cubic meters had already been turned down. Kharrazi spoke out against Afghanistan's Taliban movement at a press conference, but there are no reports indicating that Turkmen officials commented on the issue. BP THE DOG THAT DIDN'T BARK by Paul Goble The most remarkable feature of the current Russian economic crisis is one that most commentaries have overlooked: namely, that the Russian collapse has not spread to the other post-Soviet states. Even five years ago, most of the former Soviet republics were still sufficiently integrated that difficulties in the largest of them would inevitably have a large and immediate impact on all the others. Now that has changed. More and more post-Soviet countries have succeeded in diversifying their trading partners so that problems in Russia will not be the determining factor in their development. That is not to say that the problems in Moscow will not have an impact. Rather, the ways in which these Russian problems will affect the non-Russian countries are very different and more indirect than many are now assuming. First, some but by no means all of the post-Soviet states remain sufficiently integrated with the Russian economy that problems in Moscow will have precisely the kind of impact that some are assuming will happen across the region. Ukraine, Belarus and Kazakhstan, for example, will be under enormous pressure to devalue their national currencies if the Russian ruble continues to fall. Second, many of the post-Soviet states have not yet completed the reform of their economic and legal systems that would make them able to withstand negative trends abroad. These countries--which are in the majority--thus suffer from many of the same kind of problems that Russia does and for the same reasons. Without reforms, they cannot attract the kind of investment that will help power their future development. Indeed, the exceptions to this general pattern-- Estonia, Latvia, and Lithuania--prove the rule. The three Baltic countries rapidly liberalized their economies and now enjoy some of the highest rates of Western investment and economic growth anywhere in the region. Those that have failed to reform their economies, on the other hand, are in increasing difficulty. But the primary cause of their problems is the absence of reform rather than difficulties in the Russian marketplace. Third, all of these countries are profoundly affected by the attitudes of Western investors. Because the Russian market is the best-known, many in the West have concluded that all post-Soviet states and indeed all emerging markets are in the same situation. That is absolutely wrong. In the most recent quarter for which economic statistics are available, virtually all the post-Soviet states did better than Russia on virtually every measure of economic development, relative to the size of their markets. But while those judgments are incorrect, they have an impact on the economies of the other countries in the region, an impact that some analysts in both Moscow and the West will undoubtedly suggest shows just how "integrated" the region remains. To a large extent, this misreading of the economic situation in the post-Soviet states reflects a larger misunderstanding of the situation there. Nearly seven years after the Soviet Union collapsed, all too many in the West continue to refer to the countries there as "new independent states" and to think about the region as a single whole rather than as 12 new countries and the three restored Baltic States. Such observers thus have missed the broad diversification over the last few years in a region dominated until a decade ago by a single center. If the Russian economic crisis does in the end have an impact across all these countries, it is far more likely to be the result of Western misperceptions than the product of integration left over from Soviet times. 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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