RFE/RL NEWSLINE Vol. 2, No. 165 Part I, 27 August 1998

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RFE/RL NEWSLINE Vol. 2, No. 165 Part I, 27 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

* RUBLE IN FREE-FALL

* NEW, OLD CANDIDATES FOR CENTRAL BANK FLOATED

* ARMENIA TO BE REPRESENTED AT TURKISH ANNIVERSARY
CELEBRATION

End Note: DIVIDED ON SECURITY IN THE BALTICS
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RUSSIA

RUBLE IN FREE-FALL. The Central Bank on 27 August suspended
trading for the second day in a row, with the ruble opening
at nearly 9.5 rubles to $1, according to ITAR-TASS. The
previous day, the ruble dropped to 8.26 rubles to $1 from
the previous day's level of 7.86, and a spokesman for the
Central Bank announced that the bank does not think that
massive currency interventions will serve any purpose.
Analysts point to a likely dearth of hard-currency funds.
According to the "Financial Times" on 20 August, from late
July to late August, the Central Bank spent all of the $4.8
billion of support provided by the IMF to defend the ruble.
State Duma Budget Committee Chairman Aleksandr Zhukov of the
Russian Regions faction told reporters on 26 August that the
central government should impose currency restrictions to
ease the current monetary crisis. However, a Central Bank
official told Interfax that the bank will not impose such
restrictions because they would signify "a transition to a
different economic model." JAC

SBERBANK OUT OF DOLLARS. According to Ekho Movsky on 26
August, branches of Sberbank, Russia's largest bank, are not
allowing their customers to make withdrawals from their
foreign-currency accounts because of a lack of cash. Several
branches in Moscow had no foreign currency whatsoever that
day. Customers are able to withdraw money from their ruble
accounts but only in sums of up to 2,000 rubles ($254) per
day. JAC

FEDERATION COUNCIL TO MEET IN SEPTEMBER. According to
"Parlamentskaya gazeta" on 27 August, the Federation Council
will hold an emergency session on 3-4 September. Council
Chairman Yegor Stoyev said that Council members will discuss
the country's economic situation. JAC

PAGING ALAN GREENSPAN. The latest to join the chorus of
policymakers criticizing the Central Bank is acting Prime
Minister Viktor Chernomyrdin himself, who said "Financial
and economic policy are questions to which I am giving my
full attention. I am extremely dissatisfied with the work of
the Central Bank for the last two days." Also disparaging
was Dmitrii Vasiliev, head of the Federal Securities
Commission, who told Interfax on 26 August that the Central
Bank not only failed to maintain sufficient foreign exchange
reserves but also delayed the devaluation unnecessarily,
making the restructuring of short-term debt unavoidable.
Former Minister for Foreign Economic Relations Sergei Glazev
described the Central Bank's leadership as the "main
culprit" in Russia's current financial disaster. Glazev
forecast further declines in the ruble to 12 to 15 rubles to
$1 by the end of the fall, unless the government centralizes
foreign-exchange reserves, "re-dollarizes" the banking
system, and freezes prices. JAC

NEW, OLD CANDIDATES FOR CENTRAL BANK FLOATED. "Noviye
Izvestiya" reported on 26 August that "there is persistent
talk of that old lion of the banking system Viktor
Gerashchenko being invited back" to head the Central Bank.
Gerashchenko, chairman of the Central Bank under
Chernomyrdin, was at the helm on 11 October 1994, dubbed
"Black Tuesday," when the ruble lost more than 25 percent of
its value . Another candidate more widely touted for the
position is Aleksandr Shokhin, leader of the Our Home is
Russia faction. JAC

CENTRAL BANK PROMOTING SURVIVAL OF THE LARGEST? "Izvestiya"
on 27 August reports that a number of smaller banks, such as
Dialog, MDM, and Probiznesbank, have protested the recent
announcement of a merger between Uneximbank, Menatep, and
Most (see "RFE/RL Newsline," 26 August 1998). They argue
that the Central Bank policy's is creating special
conditions for selected banks at the expense of the
remaining banks, which may not be as big but are possibly
more reliable. According to the newspaper, some skeptical
observers consider the merger purely one of convenience and
that once the financial crisis is over, the three banks'
mutual attraction will fade. In addition, they note that
those three banks are headed by powerful personalities,
Vladimir Potanin, Mikhail Khodorkovskii, and Vladimir
Gusinskii, whose past relations with one another have not
always been smooth. "Kommersant-Daily" reported on 26 August
that several more banks are expected to merge before the
week's end. JAC

GKO PLAN CRITICIZED FOR ITS SUBSTANCE... The reaction of
both foreign and domestic investors to the government's plan
to restructure short-term debt was less than enthusiastic
(see "RFE/RL Newsline," 26 August 1998). "Izvestiya" of 27
August concludes that the "blow to investor confidence" will
reverberate for many years to come. The "Financial Times"
reports that foreign investors are facing losses ranging
from more than $33 billion to $50 billion. Credit Suisse
First Boston, which was believed to own a large proportion
of Russia's short-term debt, said that its net profits
plunged from $754 million as of 30 June 1998 to $500
million. JAC

...AND TIMING. The Russian press was highly critical of the
Russian government for its more than 24-hour delay in
announcing details of its debt plan. "Noviye Izvestiya" of
26 August argued that "two trading days on the exchange were
spent in uncertainty." It added that the market needs
"clear, immediate, and positive news" but is getting "more
and more questions." "Kirienko acted correctly but always
three to four weeks late," while Chernomyrdin did "much that
was useful and necessary but was several months late,"
according to the newspaper. "Izvestiya" wrote the same day
that markets fell because Chernomyrdin has not said a word
about his intended economic policy. Although "Kirienko was
slow to act because of his catastrophic lack of political
support," the newspaper argued that Chernomyrdin has no such
excuse. "Every hour of delay" is expensive, it added, saying
"money will start pouring out of the economy." JAC

LOW EXPECTATIONS FOR RUSSIAN-U.S. SUMMIT. Sergei Rogov,
director of the Moscow-based USA and Canada Institute, told
reporters on 26 August that the "financial collapse of the
ruble has radically changed the entire agenda of the U.S.
president's visit." Russia's economic situation will
overshadow all other issues, he noted. Rogov concluded that
"the financial crisis in Russia may be viewed as a failure
of U.S. policy toward Russia since 1991." US President Bill
Clinton will not bring " a bagful of money"; instead, he
will most likely offer only advice. Clinton is scheduled to
visit Russia from 1 to 3 September. JAC

GERMANY OFFERS WORDS NOT CASH. According to "Kommersant-
Daily" on 26 August, Germany, Russia's steadfast supporter
and largest lender and foreign investor, had suspended its
usual policy of providing financial support in times of
crisis. Instead, Chancellor Helmut Kohl "offers only
advice," such as overhaul the country's financial and
banking systems and create attractive conditions for foreign
investors, while German Finance Minister Theo Waigel is even
more blunt: "Russia must do it by itself." Meanwhile, Japan,
according to the newspaper, is accelerating its plans to
provide a $1.5 billion credit to Russia. Japanese
policymakers believe that Chernomyrdin will succeed in
enabling the country to conform to IMF objectives. JAC

CHERNOMYRDIN MEETS WITH CAMDESSUS IN CRIMEA. Chernomyrdin,
following orders from President Yeltsin, flew to Crimea in
the evening of 26 August to meet with IMF Managing Director
Michel Camdessus, Interfax reported. According to the
Russian government information department, the two men
discussed Russia's steps to minimize the impact of the
financial crisis on the Russian economy and its efforts to
stabilize the country's finances. Chernomyrdin also met with
Ukrainian President Leonid Kuchma and visiting Belarusian
President Alyaksandr Lukashenka, whom he informed about the
situation on the Russian financial market (see related items
in Part II). He stressed the need for concerted action by
the three countries since their economies are closely
integrated. JM

SOME DUMA FACTIONS UNCOOPERATIVE. Chernomyrdin's attempts to
establish a coalition government is meeting with resistance
from some Duma factions. Grigorii Yavlinskii, leader of the
Yabloko faction, told Interfax on 26 August that his party
will not negotiate for seats in the government and will vote
against Chernomyrdin as prime minister. He said that the
"downfall of the ruble, which is not over, is a direct
consequence of the earlier Chernomyrdin government." ITAR-
TASS reported on 26 August that the Agrarian faction has
also threatened that it will vote against Chernomyrdin if
the two documents being drawn up by a "trilateral
commission" of Duma and government officials are not
approved in advance. Those two documents are the political
treaty between the executive and legislative branch and the
new anti-crisis plan. Chernomyrdin has been insisting that
the Duma consider the issue of his candidacy first. JAC

CRISIS TO CREATE NEW RICH, POOR. "Russkii telegraf" on 25
August predicts that the current banking crisis will trigger
a "second" large-scale redistribution of wealth. Corporate
clients who keep their working capital in banks rather than
engage in barter will suffer. It added that some will likely
go bankrupt, while those companies that operate primarily
with cash, such as export-oriented companies, will sell "for
a song to domestic investors." Moreover, the "financial
exhaustion of the center" will accelerate separatist trends
in the regions, who will be forced to rely on their own
resources to survive the current crisis, according to the
newspaper. JAC

ELF CANCELS PLANS FOR SIBNEFT. "Kommersant-Daily" reported
on 26 August that the French oil company Elf Aquitaine has
canceled its plans to acquire a 12-15 percent stake in
Sibneft. Elf was planning to invest more than $500 million
in the Russian oil firm. Observers suspect that the drop in
Sibneft's credit rating from BB- to B- on 17 August and the
general financial crisis in Russia prompted the French
company to alter its plans. An Elf spokesman cited changing
economic conditions and the continuing drop in the price of
oil for the turnabout. JAC

TATARSTAN'S PRESIDENT DEPLORES RUSSIA'S LACK OF NATIONALITY
POLICY. In a recent interview with Interfax, Mintimer
Shaimiev said that the Russian government "remains
indifferent" toward non-Russian nationalities and religious
affairs in Tatarstan and other regions of the Russian
Federation, RFE/RL's Kazan bureau reported on 27 August.
Shaimiev added that he is concerned about the possibility of
conflict in Dagestan, where he said the Russian Ministry for
Nationality Affairs and Federal Relations, headed by
Yevgenii Sapiro, is doing nothing to ease tensions. LF

SITUATION STABILIZES IN MAKHACHKALA. The demonstrators who
converged on the capital of Dagestan on 26 August returned
to their home towns of Kizilyurt and Khasavyurt later that
day, following talks with representatives of the republic's
government and an appeal by the father of murdered Mufti
Said-Mukhamed Abubakarov not to engage in violence during
the period of mourning. The protesters had demanded the
immediate resignation of State Council chairman Magomedali
Magomadov and the clarification of the mufti's murder last
week. Talks continued between the protesters and government
representatives in Kizilyurt on 27 August, RFE/RL's North
Caucasus correspondent reported. Deputy Prime Minister Gadji
Makhachev told the protesters that the republic's leadership
is ready to consider the question of Magomadov's resignation
providing the legal requirements for his impeachment are
observed. LF

WAHHABIS IN DAGESTAN DISTANCE THEMSELVES FROM CHECHEN
THREATS. "Nezavisimaya gazeta" on 27 August quoted one of
the leaders of the three Dagestani villages that last week
declared an independent Islamic territory as denouncing as a
"provocation" former Chechen acting Prime Minister Shamil
Basaev's statement that his men are ready to defend Islamic
radicals in Dagestan if the latter are attacked by Dagestani
government forces (see "RFE/RL Newsline," 21 August 1998).
Russian newspapers are increasingly reporting that the
alleged links between Islamic radicals in Chechnya and
Dagestan are the reason for the crackdown on Wahhabis in
Dagestan. LF

TRANSCAUCASUS AND CENTRAL ASIA

ARMENIA TO BE REPRESENTED AT TURKISH ANNIVERSARY
CELEBRATION. Turkish President Suleyman Demirel has invited
his Armenian counterpart, Robert Kocharian, to attend the
75th anniversary celebrations of the founding of the
Republic of Turkey, RFE/RL's Yerevan bureau reported on 26
August, quoting presidential public affairs adviser Gassia
Apkarian. Apkarian said that Kocharian has accepted the
invitation on behalf of Armenia and will soon announce who
will represent the country. Demirel was one of numerous
heads of state who congratulated Kocharian on his election
as president in March. Turkey and Armenia currently do not
have diplomatic relations, and Turkey has said the opening
of a border crossing with Armenia is conditional on the
withdrawal of Armenian forces from occupied Azerbaijani
territory adjacent to Nagorno-Karabakh and on Yerevan's
recognition of Azerbaijani sovereignty over the disputed
enclave. LF

ARMENIAN FOREIGN MINISTER IN IRAN. During a visit to Tehran
on 24-25 August, Vartan Oskanian met with Iranian President
Mohammad Khatami, parliamentary speaker Ali Akbar Nateq
Nouri and Foreign Minister Kamal Kharrazi, Noyan Tapan and
IRNA reported. Oskanian described bilateral relations as
"excellent," while Khatami termed them "deep, historical,
and strong." The talks focused on expanding bilateral trade,
transport ties, and economic cooperation, including laying a
gas pipeline from Iran to Armenia and the construction of a
highway from Meghri (on Armenia's southern frontier with
Iran) via Georgia to the Black Sea port of Poti. Oskanian
and Kharrazi also discussed the prospects for resuming talks
on resolving the Karabakh conflict and for trilateral
cooperation between Iran, Armenia and Georgia, and between
Iran, Armenia and Greece. The Iranian, Armenian, and Greek
foreign ministers will hold talks in Tehran on 7 September.
"Yerkir" on 27 August quoted Artashes Baghumian, an ethnic
Armenian deputy of the Iranian parliament, as saying that
the Kocharian government has "great confidence in the
Iranian government." LF

AZERBAIJAN, TURKMENISTAN HOLD FURTHER TALKS ON CASPIAN. An
Azerbaijani government delegation led by First Deputy Prime
Minister Abbas Abbasov and including Foreign Minister Tofik
Zulfugarov met with President Saparmurat Niyazov and other
officials in Ashgabat on 24 August to discuss, among other
issues, the delineation of the dividing line between the two
countries' respective sectors of the Caspian Sea, ITAR-TASS
and ANS-Press reported. Baku and Ashgabat have held two
rounds of lower-level talks on dividing the Caspian, most
recently in late March. Azerbaijani officials expressed
their disapproval and concern when the U.S. oil company
Mobil won a tender in June to develop the disputed
Kyapaz/Serdar field. Both Azerbaijan and Turkmenistan claim
ownership of that field. LF

MAYOR OF WESTERN TAJIK CITY KILLED. An attack on the mayor's
office in Tursunzade on 27 August left six people dead and
four others seriously wounded, RFE/RL correspondents
reported. Among those killed was the mayor of the city,
Nurullo Khairullaev, and the head of his administration.
Armed men in masks and camouflage uniforms opened fire
outside the building, also killing two guards and a
policeman. One of the attackers was also killed. The Tajik
president's spokesman, Zafar Saidov, said the attack was
politically motivated. Tursunzade was a haven for criminal
groups during Tajikistan's five-year civil war and has
frequently witnessed shootouts. BP

TAJIK GOVERNMENT, OPPOSITION, UN ENVOY HOLD TALKS. UN
special envoy to Tajikistan Jan Kubis met with United Tajik
Opposition (UTO) leader Said Abdullo Nuri and parliamentary
deputy Abdumajid Dostiyev on 26 August to discuss the peace
process, ITAR-TASS reported. Nuri again mentioned the fate
of the more than 200 UTO fighters still awaiting transport
back to Tajikistan from northern Afghanistan. Kubis said the
UN will help once the UTO hands over four people located in
UTO-held territory and suspected of killing UN employees in
Tajikistan in late July. Nuri said that the order has been
given to send them to Dushanbe but that for "technical
reasons," it has not been possible as yet. Nuri said the
suspects will arrive in Dushanbe in the "next few days." BP

U.S. EMBASSY GUARDS IN DUSHANBE ACCUSED OF OVERSTEPPING
BOUNDS. The Russian Embassy in Dushanbe has complained about
increased security measures at the U.S. Embassy in the Tajik
capital, Interfax and ITAR-TASS reported on 26 August. Both
the Russian and U.S. Embassies are located in the Oktyabr
Hotel. The previous day, U.S. Embassy guards demanded to
search the car of an Iranian diplomat who wanted to visit
the Russian Embassy. The Iranian official refused to allow
them to do so and returned to his embassy. Russian
Ambassador to Tajikistan Yevgenii Belov complained to U.S.
charges d' affaires Patricia Campeter over the incident.
Campeter sent apologies to both the Russian and Iranian
Embassies, saying the guards are new and not yet acquainted
with proper protocol. BP

TURKMENISTAN, PAKISTAN INSIST U.S. COMPANY FULFILL CONTRACT.
Pakistani Minister of State for Foreign Affairs Mohammed
Kanju and Turkmen President Saparmurat Niyazov agreed on 26
August that they will insist U.S. company UNOCAL fulfill its
part of a planned pipeline project, Interfax reported.
UNOCAL owns 56 percent of shares in the Centagaz consortium,
which plans to build a pipeline from Turkmenistan via
Afghanistan to Pakistan. The U.S. company announced it had
suspended its participation in the project following last
week's attack by the U.S. on terrorist positions in
Afghanistan. BP

CORRECTION: In the "End Note" entitled "Improving Economy
Has Yet To Affect Living Standards In Armenia" (see "RFE/RL
Newsline," 26 August 1998), the last two sentences of the
sixth paragraph should read as follows: "Negotiations are
under way on the release of the last $45 million tranche,"
Anayiotos told RFE/RL. "Yerevan has reason to expect that it
will receive the loan, as it is on schedule to meet most
ESAF targets for 1998."

END NOTE

DIVIDED ON SECURITY

by Paul Goble

	Estonians, Latvians, and Lithuanians agree that they
cannot defend themselves and that no one is likely to defend
them, but they disagree profoundly about the nature of the
threat to their countries and about just how useful various
international groups are likely to be in helping them deal
with it.
	Both the points of agreement and those of disagreement
are likely to make it increasingly difficult for the three
Baltic governments to maintain a common position on their
efforts to join NATO and the EU and for the West to treat
them as a single bloc, rather than as three very different
countries.
	Earlier this summer, the Estonian Saar polling company
interviewed 1,000 adults in each of the three Baltic
countries to determine popular attitudes toward a variety of
security questions and to find out how people in each think
their governments should proceed.
	Commissioned by NATO and the Lithuanian Foreign
Ministry, the poll revealed a remarkable pattern of
agreement and disagreement along national lines.
	Huge majorities--76 percent of Estonians, 81 percent
of Latvians, and 72 percent of Lithuanians--believe that
their countries would not be able to effectively defend
themselves in the event of a military attack. And most also
believe that the West would be unlikely to help them in the
event of such an attack.
	According to the poll, only 23 percent of Estonians,
15 percent of Latvians, and 15 percent of Lithuanians are
confident that Western countries would provide military
assistance. Instead, small majorities in all three believe
that the West's assistance in such circumstances would be
limited to diplomatic activities.
	Such judgments about the willingness of the West to
help, however, apparently do not disturb most people in
these three countries. Indeed, the Saar poll found that more
than 95 percent of the residents in each country were
convinced that their state does not currently face any real
military threat from another country.
	But that is where the unanimity ends and the
differences begin. According to this poll, Estonians,
Latvians, and Lithuanians disagree on the nature of the
threats facing their countries, on whether they should join
NATO, and on what mix of international memberships they
believe would best meet their security needs.
	Estonians believe that the greatest threats to their
security come from abroad, but Latvians and, to a lesser
extent, Lithuanians believe that the greatest security
threats are domestic ones. Only 35 percent of Estonians
believe that they face a domestic security threat, while 62
percent of Latvians and 45 percent of Lithuanians hold that
opinion.
	According to the Estonian director of the poll, Andrus
Saar, this pattern reflects what he called Estonia's more
balanced pattern of economic development, one in which there
is much less variation among sectors, as compared with the
situation in the other two countries.
	The three nationalities also diverge, if somewhat less
dramatically, over the value of NATO membership for their
countries. A bare majority of Lithuanians--51 percent--
support the idea of joining NATO, with only 25 percent
opposed to that step. In Estonia, 43 percent want to join
the Western alliance, but 25 percent are opposed. And in
Latvia, only 37 percent support the idea of membership, with
29 percent opposed.
	But perhaps most interesting are the differences among
the three peoples on the approaches they believe would give
them the greatest amount of security. Some 30 percent of
Estonians believe that membership in both NATO and the EU
would provide the best guarantee, while 29 percent think
that neutrality would be the best stance.
	Among Latvians, 29 percent believe that neutrality
would be best, with 26 percent favoring membership in both
NATO and the EU, and smaller percentages backing membership
in only NATO or only the EU.
	Finally, 26 percent of Lithuanians believe NATO
membership would give their country the best chance for
security, with 23 percent backing neutrality and 23 percent
backing membership in both the Western alliance and the EU.
	Obviously, these numbers could quickly change if the
geopolitics of the region change or if national leaders
expand their own efforts to promote particular security
agendas.
	But the differences this poll reveals suggest that the
three countries are likely to move in increasingly different
directions and that the international community, long
accustomed to thinking of them as the undifferentiated
Balts, is going to have to respond to that development.

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