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RFE/RL NEWSLINE Vol. 2, No. 157 Part I, 17 August 1998
___________________________________________________________ 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to email@example.com with the word subscribe as the subject of the message. 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