Increase The Peace. - John Singleton
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 157 Part I, 17 August 1998


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RFE/RL NEWSLINE Vol. 2, No. 157 Part I, 17 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

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Headlines, Part I

* MOSCOW ALLOWS RUBLE TO FALL

* DUMA TO HOLD SPECIAL SESSION ON 21 AUGUST

* ARRESTS AT BAKU OPPOSITION RALLY

End Note: STATEMENT OF THE GOVERNMENT OF THE RUSSIAN
FEDERATION AND THE CENTRAL BANK OF RUSSIA
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RUSSIA

MOSCOW ALLOWS RUBLE TO FALL. Russian Prime Minister Sergei
Kirienko has announced that the ruble will be allowed to
fluctuate between 6 and 9.5 rubles to the dollar until the
end of the year, Interfax reported on 17 August. While
Kirienko said this step "does not mean a devaluation," the
ruble fell by 0.12 rubles to the dollar following the
announcement. Kirienko also announced a 90-day moratorium on
servicing the foreign debt and a restructuring of government
bonds due before the end of 1999. And he said that the
government will be backing the 12 largest banks in order to
ensure that they continue to operate normally. The prime
minister did not rule out changes in the government after he
meets with President Boris Yeltsin, who has returned to
Moscow from his vacation. Kirienko also said he will discuss
the changes with IMF officials. Meanwhile, the Central Bank
introduced limits for non-residents on currency exchange
operations "of a capital nature" to protect the Russian
market against speculation (see "End Note" for joint
statement issued by the Russian government and the Central
Bank). PG

CENTRAL BANK'S DUBININ SAYS END TO SPECULATION IN SIGHT.
Russian Central Bank Governor Sergei Dubinin said that the
government and the bank have taken these steps to protect
Russian citizens and domestic manufacturers instead of
"players on the foreign exchange market and the market of
short-term government securities," ITAR-TASS reported on 17
August. He said that he believes that these measures will
"put an end" to speculation on the market and allow
resources to go to the "real sector" of the economy.
Anatolii Chubais, Yeltsin's special representative to
international financial institutions, was equally upbeat. In
a statement distributed by ITAR-TASS on 17 August, Chubais
said that "in response to the threat of financial panic, the
government was forced to take extraordinary measures. These
measures in no way are a retreat from the earlier announced
course." Also on 17 August, the IMF issued a statement
expressing support for, and urging investors "to
understand," the Russian government's measures, ITAR-TASS
reported. PG

DUMA TO HOLD SPECIAL SESSION ON 21 AUGUST. Duma chairman
Gennadii Seleznev told ITAR-TASS on 17 August that the State
Duma has decided to invite President Yeltsin to participate
in a special session of the parliament on 21 August.
Seleznev said that the Duma will hold another special
meeting on 25 August. PG

RUSSIA MEDIA FOCUSES ON FOREIGN COVERAGE OF FINANCIAL
CRISIS. Russian news agencies and other media outlets gave
prominent coverage over the weekend to Western commentary on
the Russian crisis. All focused on the 14 August telephone
conversation between Russian President Boris Yeltsin and
U.S. President Bill Clinton and ongoing consultations by the
IMF and the G-7 countries about a possible new aid package
to Moscow. A proposal by financier George Soros that Russia
establish a currency board was sharply criticized both
because of the assumption that Soros was betting on a ruble
devaluation, something he denied, and because of the power
such a board would have over the Russian economy. Standard &
Poor's on 14 August lowered the country's short-term rating
for foreign-exchange commitments from B to C. Another
international rating company, Moody's, had downgraded
Russian issues the previous day. PG

YELTSIN SAYS RUSSIAN REGIONS MUST PAY ON AGROBONDS.
Aleksandr Livshits, the deputy head of the presidential
administration, said on 14 August that Yeltsin has ordered
the government to find ways "within a month" to force
Russian regions to make payments on their agrobond
obligations, Interfax-FIA reported. Some 45 Russian regions
were to have paid investors some 2 billion rubles (some $330
million) by now, but less than a third of that amount has
been paid on time. Some regions--including Kalmykia and
Lipetsk--have not paid at all, Livshits said. Such a
situation, he added, "has had a negative impact on investor
confidence in the Russian financial market as a whole." PG

KRASNOYARSK, PETERSBURG ADOPT ANTI-CRISIS MEASURES.
Krasnoyarsk Governor Aleksandr Lebed has created a special
anti-crisis group on his territory, ITAR-TASS reported on 14
August. Lebed said the new labor-management-administration
group will be in a position to "react promptly to problems
and prevent explosions of social discontent in the region."
In making this announcement to local unions, he said he
hopes they will be responsible in any protests they
undertake and that he is refusing to accept his wages until
"we get out of the mess" the country is now in. Meanwhile,
St. Petersburg Governor Vladimir Yakovlev said his region
will also attempt to stabilize the situation. But he added
that the role of any one region is minimal and that "the
country will be in a fever for long if the government starts
to patch the holes." PG

FINANCE MINISTRY FAILS TO FULFILL PROMISES TO SAKHALIN
MINERS. Sakhalin Governor Igor Farkhutdinov told ITAR-TASS
on 15 August that the federal Finance Ministry has sent 95
million rubles (some $15 million) instead of the 121 million
it had promised to deal with wage arrears. His comments came
as the deadline for paying back wages to the region's miners
expired. In a related development, Russian Deputy Minister
for Fuel and Energy Igor Kozhukhovskii told the news agency
on 14 August that the Russian cabinet on 20 August will
discuss how to cope with problems in the country's troubled
mining industry and particularly in hard-hit Kemerovo
Oblast. He suggested that despite the overall crisis, there
are some reasons for optimism: the size of wage arrears has
fallen while production and funds budgeted for retraining
have increased. PG

YELTSIN SAYS CIS STATES MUST BLOCK TALIBAN. After
conversations with the presidents of Tajikistan and
Uzbekistan, Russian President Boris Yeltsin said in Novgorod
on 14 August that "the three countries must unite their
efforts and raise a barrier to the Taliban," Interfax
reported. Federal Border Service chief Colonel-General
Nikolai Bordyuzha said in Beijing that his men are ready to
prevent any incursions. But Russian Defense Minister Igor
Sergeev downplayed the situation, saying that "for now"
there is no danger of Taliban groups crossing into CIS
territory. Despite a recent lull in the fighting in northern
Afghanistan, ever more Russian leaders--from Patriarch
Aleksii II of Moscow and All-Russia to Duma speaker
Seleznev--have expressed concern about developments there.
PG

YELTSIN VETOES PROPOSED REFERENDUM CHANGES. Yeltsin on 14
August rejected a Duma-passed constitutional law that would
have allowed referendums to be held to recall the president
or to change his term, ITAR-TASS reported. Yeltsin said that
the draft is unconstitutional and thus not subject to future
discussion. PG

NEW DUTIES FORCE IMPORTERS TO PAY HIGHER INDIRECT TAXES. The
imposition of a new 3 percent import duty on 15 August means
that importers will have to pay higher VAT and excise taxes
as well, an official of the State Customs Committee told
Interfax the previous day. In addition, the imposition of
this new duty may complicate relations with Belarus.
According to Russian customs officials, Belarus does not
plan to levy an equivalent duty or pay the amount due to
Moscow, as required by its trade agreement. As a result,
Russia will be forced to resume the practice of identifying
the country of origin for all goods imported to Russia via
Belarus. PG

JOURNALIST ATTACKED IN BASHKORTOSTAN. Sergei Fufayev, a
reporter long critical of the Ufa authorities, was beaten up
by three young men early on 14 August, ITAR-TASS reported.
Noting that his attackers told him "to get away from
Bashkortostan," Fufayev said he considered the incident an
act of "political terrorism" and that he will appeal to the
Federal Security Service for protection. PG

TATARSTAN ALLOWS FOREIGNERS TO BUY SOME LAND. As of 15
August, foreigners can buy and sell land from Tatarstan's
state land reserve, ITAR-TASS reported. It thus becomes the
second Russian Federation subject to permit such
transactions: Saratov passed a similar law at the end of
1997. PG

KHABAROVSK: PAY TAXES, AVOID AUDITS. The Khabarovsk regional
authorities have distributed their first "obedient taxpayer"
certificates to two companies, ITAR-TASS reported on 16
August. The certificates, established by the Khabarovsk
governor, are given to any legal entity that pays its taxes
on time. They allow the bearer to avoid an audit by the tax
police for the following two years. PG

NORTH CAUCASUS REJECTS GOVERNMENT'S REGIONAL DEVELOPMENT
PROGRAM. Meeting in Pyatigorsk on 14-15 August,
representatives of Russia's North Caucasus republics,
Ukraine's Luhansk Oblast and of Abkhazia and South Ossetia
unanimously rejected a program drafted by the federal
government to promote social and economic stabilization in
the region, Caucasus Press reported. The participants said
the program does not include urgent measures needed to
ensure economic stabilization and fails to take into
consideration the financial potential of either Russia in
general or the individual North Caucasian federation
subjects. They appealed to President Yeltsin to upgrade the
program to the status of a presidential one and to include
in it only measures that would contribute to a rapid
improvement in the economic situation in the region. LF

TRANSCAUCASUS AND CENTRAL ASIA

ARRESTS AT BAKU OPPOSITION RALLY. Azerbaijani police
arrested 106 of the 5,000 or so people who attended the
opposition rally in a Baku suburb on 15 August to protest
the authorities' failure to provide democratic conditions
for the 11 October presidential elections Interfax reported
quoting Interior Minister Ramil Usubov. Almost all those
detained were subsequently released. Opposition
representatives estimated the number of demonstrators in
Baku at closer to 20,000, saying 300 were detained. They
added that a total of 50,000 people took part in protest
demonstrations across the country. Earlier on 15 August,
Baku police had detained 15 opposition activists and
temporarily surrounded the home of Azerbaijan Popular Front
party chairman Abulfaz Elchibey. Police also detained an
RFE/RL correspondent in Gyandja and prevented opposition
activists from picketing the Supreme Court, the Presidential
Chancellery, and the Baku Mayor's Office, Turan reported. LF

STANDOFF DEFUSED ON GEORGIAN-ARMENIAN BORDER. Georgian army
detachments were prevented from conducting joint maneuvers
with Russian forces on 13 August in Akhalkalaki Raion, which
borders on Armenia, according to an RFE/RL correspondent in
the Georgian capital. According to the Georgian governor of
the region, Gigla Baramidze, the Georgian units were halted
by 25 Armenians armed with mortars and other artillery, who
Baramidze said were members of the Djavakhk organization.
That group was formed to protect the interests of the
district's predominantly Armenian population. But a local
Armenian official told Caucasus Press that the Armenians had
merely intended to warn the Georgian troops of possible
hostile reactions by local Armenian residents unaware of the
real reason for the Georgian troops' presence in the region.
Although Georgian Television had announced the maneuvers in
advance, some Armenians in Akhalkalaki feared that the
Georgian troops were planning to deport them. The Georgian
units subsequently withdrew. LF

GEORGIA, ABKHAZIA MARK SIXTH ANNIVERSARY OF OUTBREAK OF WAR.
Speaking in Sukhumi on 14 August, the anniversary of the
Georgian incursion that precipitated the 1992-1993 war,
Abkhaz President Vladislav Ardzinba assessed the prospects
for a settlement as remote, Reuters reported. Ardzinba
warned that he will refuse to participate in future peace
talks if attacks by Georgian guerrillas on Abkhaz police
continue, adding that such attacks "will not go unanswered
by our side." Georgian presidential adviser Levan Aleksidze
told Interfax that "sooner or later" Abkhazia will again
become part of a united Georgia and that the unresolved
conflict should be settled by peaceful means. But Tamaz
Nadareishvili, chairman of the ethnic Georgian Abkhaz
parliament in exile, told Interfax that military force is
the only way to ensure the return to Abkhazia of the ethnic
Georgian population forced to flee during the fighting. LF

UZBEK PRESIDENT VISITS AFGHAN BORDER. Islam Karimov visited
the city of Termez, located on the border with Afghanistan
on 15 August, ITAR-TASS and Reuters reported. Karimov met
with senior military officials in the city and said he is
confident in the ability of the country's armed forces to
protect the border. Of the civilian population, Karimov said
they "are confident in their own strength. Such a nation is
invincible." In a related story, the Uzbek Defense Ministry
released a statement on 14 August denying a "Kommersant-
Daily" report the same day alleging Uzbek military units had
crossed the Amu-Darya and were taking up positions in the
Panjshir Gorge in Afghanistan. BP

TAJIK OPPOSITION CALLS FOR REFERENDUM AGAIN. The United
Tajik Opposition on 14 August renewed its call to hold a
nationwide referendum on rewording part of the constitution,
Interfax reported. The UTO objects to the term "secular
state," which, it says, prevents some groups from
participating in the country's political life. UTO deputy
leader, now first deputy Prime Minister Khoja Akbar
Turajonzoda, had called for such a referendum before
returning to Tajikistan from self-imposed exile in Tehran in
February. The government's response is the same now as then:
"Those articles shall not be changed even in a referendum."
BP

REGIONAL HEAD MURDERED IN TAJIKISTAN. The head of the
Shahrinaw Region, Kalandar Khaydarov, was killed by unknown
assailants on 16 August, ITAR-TASS reported. Men in military
clothing broke into his home in Shahrinaw, 40 kilometers
west of Dushanbe, and took Khaydarov away. His body was
found later with multiple bullet wounds. Police are
attributing the crime to a mafia dispute. BP

IRANIAN FOREIGN MINISTER IN KAZAKHSTAN. Kamal Kharrazi met
with Kazakh President Nursultan Nazarbayev in Astana on 14
August to discuss the Caspian Sea, Interfax and IRNA
reported. Nazarbayev said the Russian-Kazakh agreements on
the division of the sea could serve as a model for resolving
the Caspian's status. Kharrazi said the sea should be de-
militarized to "become a sea of friendship and peace." The
two also discussed resuming shipments of Kazakh crude oil to
Iran via the Caspian. Kharrazi noted that the planned Neka-
Persian Gulf pipeline will be completed in two years and
that shipments of crude oil will then resume. BP

CONSTRUCTION OF TURKMEN-PAKISTANI PIPELINE TO BEGIN THIS
YEAR. A Turkmen government official said construction of the
1,271 kilometer Turkmen-Pakistani pipeline will start before
the end of this year, Interfax reported on 14 August.
Gochmurad Nazdzhanov said recent events in Afghanistan,
where the Taliban movement have captured most of that
country, will not affect the pipeline schedule. "It is a
purely economic project," Nazdzhanov said, "we cannot see
any reason for postponing the work." After Pakistan, the
Turkmen government has the best relations with the Taliban,
who for the past two years have occupied territory adjacent
to Turkmenistan. BP

END NOTE

STATEMENT OF THE GOVERNMENT OF THE RUSSIAN FEDERATION AND
THE CENTRAL BANK OF RUSSIA

 	A crisis broke out on world financial markets when the
Russian economy was at the start of a recovery. From October
1997 the Government and the Bank of Russia have been
protecting the main achievements of the economic policy of
the recent years--stable prices and a fixed ruble and,
hence, the living standards of the people.
 	The problem of servicing the national debt aggravated
sharply [sic] with the worsening of the foreign economic
situation and because of the unsatisfactory state of affairs
with revenues of the budget. Expenditures for the redemption
of the earlier issued state securities and the payment of
interest on them have become a heavy burden on the state
budget with tax collection being low. The Russian Government
has to reduce the domestic state debt, cutting expenditures
under the federal budget and making external borrowings. The
Government's economic program was backed in July by
international financial organizations and leading countries
of the world.
 	However, the crisis aggravating in Asia and a new fall
of world prices of oil have not permitted the restoration of
the confidence in Russian securities and, hence, the
improvement of the situation with the budget. The country's
foreign currency reserves continue shrinking and the banking
system experiences certain difficulties.
 	In this situation the Government and the Bank of
Russia deem it necessary to take a set of measures aimed at
the normalization of the financial and budget policy.
	1. As of August 17, 1998, the Bank of Russia floats
the ruble within new limits of the "currency corridor" fixed
at the level of from 6 to 9.5 rubles to the US dollar.
Interventions by the Bank of Russia will be made to lessen
sharp fluctuations in the ruble rate. The Bank of Russia
will be using the interest policy for the same purpose.
	2. State securities (treasury bills and federal loans
bonds) that are to be canceled up to December 31, 1999,
inclusively, will be exchanged for new securities. The
technical parameters of the exchange will be announced on
Wednesday, August 19, 1998. Biddings in the market of
treasury bills -- federal loan bonds are suspended till the
securities' exchange is completed.
	3. Under the provisions of the regulations of the
International Monetary Fund, the Government and the Bank of
Russia introduce temporary restrictions for Russian
residents on large-scale foreign currency operations. A 90-
day moratorium is imposed as of August 17, 1998 on the
repayment of credits received from non-residents in the
Russian Federation, on the payment of insurance on credits
insured by the mortgage of securities, on the payments under
fixed-term contracts in foreign currency. Non-residents in
the Russian Federation are prohibited to invest funds into
ruble assets with the time for repayment of up to one year.
	4. The Government and the Bank of Russia regard a
stable functioning of the banking system and the system of
settlements and payments in the Russian Federation as one of
[its] important priorities. In this connection, the
Government and the Bank of Russia favor the setting up of a
payments' pool by the biggest Russian banks to maintain
stability of interbank settlements. At the same time the
Bank of Russia is going to exert efforts to consolidate the
Russian banking system, drawing into this stable [sic]
Russian Banks and leading foreign banks.
 	5. To restore the financial market, the Russian
Government will shortly begin placing short-term treasury
bills (for a term of one or two weeks). A broader range of
securities will be issued for the population.
	6. The Government and the Bank of Russia address to
the Federal Assembly a legislative initiative to tighten
control over the flow of currency abroad. At the same time
the Government and the Bank of Russia are going to take
urgent actions in the area within the bounds of their
powers.
 	7. The Russian Government repeatedly suggests to the
State Duma to hold an extraordinary session before the end
of August to pass key draft laws helping to ensure the
timely payment of pensions and wages to workers in the state
sector, to create legislative procedures for banks'
stabilization and to strengthen the system of currency
regulation and currency control.

Prime Minister,			President,
Russian Federation 		Bank of Russia

S.V. Kirienko			S.K. Dubinin

Source: ITAR-TASS, 17 August 1998.

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