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