If there is anyone listening to whom I owe money, I'm prepared to forget it if you are. - Errol Flynn
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 169 Part I, 2 September 1998


________________________________________________________
RFE/RL NEWSLINE Vol. 2, No. 169 Part I, 2 September 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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RUSSIA IN CHAOS
Continuing coverage in English and Russian of Russia's
economic and political crisis.
http://www.rferl.org/nca/special/ruchaos98/index.html

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Headlines, Part I

* IMF TO DELAY NEXT TRANCHE?

* CLINTON, YELTSIN AGREE ON BALLISTIC MISSILES

* SUSPECTS IN UN MURDERS ARRIVE IN DUSHANBE

End Note: LITHUANIA FINDS MAINTAINING FIXED EXCHANGE
RATE INCREASINGLY DIFFICULT
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RUSSIA

IMF TO DELAY NEXT TRANCHE? The IMF may delay the next
$4.3 billion disbursement to Russia, scheduled to be
released in September, Bloomberg reported. The agency
cites an interview with Stanley Fisher, the fund's first
deputy managing director, broadcast by CNN on 1
September. Fisher said, "It's clear that the Russians
will have to do quite a lot before that money can be
released. That means we have to consider the possibility
that it will take longer than this month." He also said
that "there's a lot of belief out there that they can do
things in an unorthodox way. That's not really true, and
our role is to help them as they realize they have to
confront their problems." Also on 1 September, Reuters
reported that the U.S. Senate adopted a non-binding
resolution urging the IMF not to give Russia more money
if the country's economic policies are significantly
altered by the Russian Communist Party or offer markedly
less free market conditions. JAC

DUMA, ADMINISTRATION STALEMATE CONTINUES... President
Boris Yeltsin on 1 September reaffirmed his support for
acting Prime Minister Viktor Chernomyrdin, telling
reporters: "I will be fighting to ensure that, within
literally a week, the chairman of the government will be
endorsed." The same day, the State Duma Council approved
a proposal made by People's Power faction leader Nikolai
Ryzhkov, to address the nation on why it rejected
Chernomyrdin and will continue to do so. The Duma will
vote on Chernomyrdin's candidacy on 4 September, as the
Communist Party faction had requested, rather than on 7
September, as previously announced. JAC

...AS CHERNOMYRDIN ORGANIZES GOVERNMENT. According to
Interfax, Chernomyrdin has directed the government to
continue working, despite its uncertain status. He
ordered the Finance Ministry to draft proposals for tax
reform "immediately." On 2 September, he approved a
proposal to reduce customs tariffs on imported goods.
"Russkii telegraf" the previous day reported that acting
Deputy Prime Minister Boris Fedorov has ordered the
State Tax Service, of which he is also acting director,
to apply the entire range of punitive measures allowed
under the law against taxpayers who have been tardy with
their payments. According to the "Moscow Times" of 2
September, the State Tax Service distributed a letter to
schoolchildren warning them that they will be deprived
of a free education if their parents do not pay their
taxes. JAC

DUMA ELECTIONS NEXT YEAR? "Izvestiya" on 2 September
reported that although the Russian Constitution
stipulates that an election be organized so that a new
Duma meets no later than four months after the old one's
dissolution, the 1998 budget does not envision the large
expenditure that an election would require. Therefore,
the newspaper concludes, an election may be delayed
until the next fiscal year. The newspaper also suggests
that the Duma could prevent its dissolution by bringing
impeachment proceedings against Yeltsin, which would
give the deputies a reprieve, at least until the
Federation Council considers whether to approve the
Duma's decision. "Russkii telegraf" reported on 1
September that Aleksandr Kotenkov, presidential
representative to the Duma, said that in the case of the
lower house's dissolution, he "doubted" that new Duma
elections could be held in the time stipulated by the
constitution. JAC

CLINTON, YELTSIN AGREE ON BALLISTIC MISSILES. According
to ITAR-TASS on 2 September, Presidents Bill Clinton and
Yeltsin have reached an understanding on exchanging
information on ballistic missile launches by third
countries. According to "The Washington Post," Moscow
and Washington will immediately notify each other of any
combat, test, or research launchings of long-, medium-,
and short-range missiles from the territories of other
countries. The agreement is expected to reduce future
misunderstandings and/or tense situations, similar to
the one that developed when Norway launched a research
missile in January 1995. On 31 July 1998, North Korea
tested a ballistic missile, which according to some
reports, landed in Russian waters. Three days later,
Interfax reported that Russian Foreign Ministry
Spokesman Vladimir Rakhmanin said Russia "is already
exchanging information with the US, China, Japan, and
South Korea." JAC

CLINTON GETS RAVE, PAN. Russian Public Television warmly
appraised US President Clinton's speech on 1 September
to the Moscow State Institute of International
Relations. The newscaster said that "Clinton has
displayed an amazing knowledge of Russian history. He
kept quoting Pushkin and Chekhov, and it was obvious
that he is very familiar with the economic situation in
Russia." However, "Noviye izvestiya" on 2 September
declared the summit "a meeting of two invalids" that was
"pointless." It added that "both participants in the
event are in political plaster, bound to their
presidential seats exclusively by their own thirst for
power." JAC

LUKIN OPINES ON START-II. Vladimir Lukin, Duma
International Affairs Committee chairman, told Ekho
Moskvy on 1 September that "there is not yet a majority
in favor of START-II in the Duma, because the issue has
been excessively politicized." He added that he thinks
the U.S. administration's attempt to link Clinton's
visit with ratification of START-II is a "serious
diplomatic mistake." However, he noted that START-II is
advantageous to Russia because it reduces the U.S.'s
nuclear potential and allows Russia to maintain parity
with the U.S., despite its financial difficulties. Lukin
added that after a new government has been installed,
the Duma can address the treaty; "First we must
depoliticize it, remove it from the arena of political
squabbles." According to Interfax, Clinton said that he
and President Yeltsin have already agreed on key
provisions of START-III. JAC

FINANCE MINISTRY OFFICIAL ARRESTED. First Deputy Finance
Minister Vladimir Petrov, who was involved in IMF
negotiations, was arrested on 1 September on suspicion
of taking a large bribe, ITAR-TASS reported. According
to the State Prosecutor's Office, Petrov is also
suspected of using his position to benefit a commercial
bank. JAC

TEACHERS STRIKE IN ALTAI, BURYATIA. According to ITAR-
TASS, some 11,000 teachers in the Altai Republic went on
strike 2 September to demand unpaid wages totaling 116
million rubles ($10.7 million). Interfax reported that
the strike will last only three days, but if wages go
unpaid the strike will resume in mid-September and
October. Teachers at schools in Ulan-Ude, Buryatia, also
began a three-day warning strike beginning on 2
September to demand back wages totaling some 7 million
rubles. JAC

PRESS ON POWER MINISTRIES' PREPARATIONS. The Russian
press continues to carry reports on the efforts of the
Defense Ministry and Federal Security Service (FSB) to
ready themselves for "mass disturbances." According to
"Nezavisimaya gazeta" on 2 September, constant military
maneuvers are being used to maintain the effectiveness
of army units. The most combat-capable mobile units are
intensively engaged in combat training. Airborne assault
troops, marines, and aviation and ground force units are
on constant combat readiness. "Noviye izvestiya"
reported on 1 September that the FSB will set up a
separate directorate for defense of the constitution.
According to an FSB source, the service will not be
ready for a coup d'etat or social upheaval, because it
has been "very much weakened by the in-house
reorganization." More than 2,000 counterintelligence
officers are to be laid off. JAC

DAGESTAN MUFTI'S PRESUMED MURDERER ARRESTED. Dzhelav
Gadjibagomedov, who is alleged to be a Wahhabi from the
Dagestani village of Karamakhi, was arrested on 31
August on suspicion of murdering Dagestan's mufti Said-
Mukhamed Abubakarov last month, Interfax reported,
citing unspecified sources in Makhachkala.
Gadjibagomedov is said to have been trained in Chechnya
by Jordanian field commander Khottab, allegedly a
sympathizer of the radical Islamists. "Izvestiya" on 25
August published Abubakarov's last interview, in which
the late mufti expressed concern at the weakness of the
republic's leadership and called for a clearly defined
state policy with regard to Islam, which is the religion
of the majority of Dagestan's population. In an
interview in "Trud" on 2 September, former Russian
Deputy Premier Ramazan Abdulatipov attributed the spread
of radical Islam in Dagestan to appalling socio-economic
conditions, high unemployment, and the indifference of
the republic's leadership to those phenomena. LF

MORE BLOODSHED ON NORTH OSSETIAN-INGUSH BORDER. One
person was killed and three injured in a gunfight on 1
September between North Ossetian police and the
passengers of a car they flagged down close to the
border with Ingushetia, ITAR-TASS reported. Elsewhere on
the border, one ethnic Ingush was killed and a second
seriously wounded when North Ossetian border guards
opened fire for reasons that are unclear, according to
Caucasus Press. During the night of 31 August-I
September a bomb exploded on a window sill of the
government building in the Ingushetian capital, Nazran,
causing minor damage but no casualties. LF

TRANSCAUCASUS AND CENTRAL ASIA

SUSPECTS IN UN MURDERS ARRIVE IN DUSHANBE. Three men
suspected of murdering four UN employees in central
Tajikistan in July were taken by helicopter to Dushanbe
on 1 September, RFE/RL correspondents reported. The
three were taken into custody by forces of the United
Tajik Opposition (UTO) and are reportedly former members
of the UTO. A fourth suspect remains at large. The three
men are being questioned, and formal charges are
expected to be filed in the next 10 days. The UN special
envoy to Tajikistan, Jan Kubis, has expressed his
satisfaction at the arrest of the three men. On 2
September, he said he has begun working on plans to
repatriate some 200 UTO fighters currently in northern
Afghanistan (see "RFE/RL Newsline," 1 September 1998).
BP

SUSPECTS IN TURSUNZADE SHOOTING IDENTIFIED. Tajik police
have identified most of those involved in the 27 August
attack on the mayor's office in the western Tajik town
of Tursunzade, ITAR-TASS reported on 1 September. Police
took three residents of that town into custody and
learned from them the names of several others. Tajik
authorities claim many have fled to another country and
that a request has been made to law enforcement
authorities in that country to apprehend the suspects.
Tajik officials refused to name the country, but
immediately after the shootings in Tursunzade, the Tajik
government had said many of the culprits had escaped to
Uzbekistan. Five people, including the mayor, were
killed in that attack. BP

CRIME STILL A PROBLEM IN TAJIK CAPITAL. RFE/RL
correspondents have confirmed reports by the Voice of
the Islamic Republic of Iran that the home of UTO deputy
leader Muhammadsharif Himmatzoda came under fire from a
grenade launcher on 31 August. Three people were wounded
in that attack. The Dushanbe home of the head doctor of
the government's medical clinic also came under fire on
30 August, ITAR-TASS reported. The previous day, a
Russian border guard officer was shot in the back in
downtown Dushanbe and remains in a critical condition.
On 1 September, an automobile driven by a Russian
journalist was carjacked in downtown Dushanbe. The
journalist was held in a basement on the outskirts of
the capital but managed to escape after several hours.
So far, no suspects have been apprehended for any of
these crimes. BP

RUSSIAN DAILY PUBLISHES LIST OF POTENTIAL TROUBLE-MAKERS
IN UZBEKISTAN. "Vremya MN" on 1 September published a
list of potential trouble-makers that the Uzbek
government has allegedly distributed to leaders in
villages and city districts. Those leaders are to keep
track of residents between 16-32 years of age who have
left the city and to find out what they are doing now
and how their families are supported. Others who are to
be kept an eye on include shuttle traders traveling to
Saudi Arabia, Turkey, Pakistan, or Iran; those who call
upon women and girls to adhere to Islamic codes of
conduct; anyone who has links with Wahhabis; anyone who
has ever grown a beard; any man who has more than one
wife; any family members of known Wahhabis who have
reached 18 years of age and are not serving in the armed
forces; and any girls who were married off before they
turned 16. BP

TURKMEN "DISSIDENT" ARRESTED. The former spokesman for
Turkmen President Saparmurat Niyazov was arrested on 1
September in Ashgabat on charges of embezzlement, RFE/RL
correspondents reported. Durdumuhammed Gurbanov, who
served as presidential spokesman from 1991-1994, is
accused of mismanagement of funds and misuse of state
property. Gurbanov, who has criticized the Turkmen
government in the international media this year, has
been branded a dissident by the Turkmen government. BP

AZERBAIJANI OPPOSITION TO GO AHEAD WITH BANNED RALLY.
The Movement for Democratic Elections and Democratic
Reforms, which unites some two dozen opposition parties
and NGOs, voted on 1 September to go ahead with plans to
hold a demonstration on Baku's central Freedom Square on
5 September, despite the ban imposed by Baku Mayor
Rafael Allakhverdiev, Turan reported. Allakhverdiev has
also written to the leadership of the Azerbaijan Popular
Front Party rejecting their request that the party be
allowed to retake possession of its headquarters in
central Baku. Allakhverdiev claimed that large
quantities of arms and ammunition were found in the
basement of the building, which, he said, proved that
the premises were not used for purely political
purposes. The party was evicted from the building in
early 1994. LF

GEORGIA TAKES MEASURES TO PREVENT DYSENTERY EPIDEMIC.
The Georgian Ministry of Health has advised residents of
Tbilisi to boil all drinking water as a precautionary
measure following 84 cases of amebic dysentery in
Tbilisi last month, Caucasus Press reported. Two people
died of the disease and another 30 were hospitalized.
Investigations established that the disease is not being
spread by drinking water but that salad herbs cultivated
in southern Georgia were washed in contaminated water.
Health Minister Avtandil Djorbenadze told journalists on
1 September that additional measures to monitor the
quality of food on sale in Tbilisi will be introduced.
LF

END NOTE

LITHUANIA FINDS MAINTAINING FIXED EXCHANGE RATE
INCREASINGLY DIFFICULT

Michael Wyzan

	Lithuania's economy generally receives less
attention from foreign observers than its two Baltic
neighbors. It is often seen as less reformed than
Estonia and Latvia, although since last year its
macroeconomic performance has been at least as strong as
theirs.
	A continuing distinction between Lithuania and the
other two Baltic States is that it remains more
dependent on trade with Russia: 22 percent of its
exports went to that country during January-April, while
the corresponding figure for imports was 24.4 percent.
The corresponding figures for Latvian trade with Russia
during the same period were 17.4 percent for exports and
13.6 percent for imports. Some 8.3 percent of Estonia's
exports went to Russia, while 8.5 percent of its imports
came from there.
	Most Lithuanian macroeconomic indicators are highly
favorable. GDP in the first quarter of 1998 was 6.9
percent higher than in the same period last year,
reflecting an acceleration of economic growth from
1997's figure of 5.7 percent. Sales of industrial
production were up by 9.4 percent during the first six
months, almost double last year's 5.0 percent.
	While production has boomed, consumer price
inflation has subsided, reaching 6.1 percent in the 12
months to June, compared with 8.4 percent in the year to
December 1997. Another favorable macroeconomic indicator
is the budget deficit, which as of May was on target to
meet the goal of 1 percent of GDP, which was agreed to
with the IMF. That deficit fell from 4.5 percent in 1996
to 1.8 percent last year.
	Wages have been booming, along with the economy:
the average gross monthly wage reached $249 in May,
compared with $199 a year earlier. This may explain why
the unemployment rate has been higher during every month
this year than in the corresponding month in 1997.
However, by June the difference was negligible, with the
rate that month of 5.5 percent only slightly above June
1997's 5.3 percent.
	Large current account deficits have been a hallmark
of the Lithuanian economy. As economic growth turned
positive in 1995, the current account imbalance rose
from $94 million (2.2 percent of GDP) in 1994 to $981
million in 1997 (a high 10.3 percent). This trend
continued into the first quarter of 1998, when the
deficit was $514 million, up $118 million on the same
period last year.
	Such deficits have been commonplace in rapidly
growing transition economies, especially ones with fixed
exchange rates; the litas has been pegged at four to the
dollar under the currency board introduced in April
1994.
	The Bank of Lithuania is currently undergoing a
transition to a normal central bank, a three-stage
process scheduled to be completed next year. For
example, under the currency board, the bank is not
allowed to provide overnight loans to commercial banks.
In April, as part of the transition to central banking,
it set the interest rate it will charge on such loans.
	To retain confidence in monetary policy, the fixed
rate for the litas against the dollar is to remain valid
at least until 1999, when the currency will be tied
partly to EU currencies; by the end of 2000, the litas
will be pegged to the Euro.
	Although the current account deficit is high, the
Bank of Lithuania's foreign reserves have risen
steadily, reaching $1.2 billion in June (further
augmented by privatization proceeds in July), compared
with $939.6 million in June 1997. Another encouraging
sign is the rapid rise in foreign direct investment,
which was a cumulative $1.1 billion at the end of June,
compared with. $727.6 million in June 1997.
	The IMF's Executive Board in July praised the
government for increasing excise taxes, improving tax
collection and the budget process, privatization
successes in banking and telecommunications; and
creating an Energy Pricing Commission. The board called
for further fiscal tightening to limit the growth of
expenditures and to put the Social Security Agency on a
firmer footing, especially by raising the retirement
age.
	These are the standard recommendations that the
fund would make to any successful economy in transition.
A more interesting question is how vulnerable Lithuania
will prove to contagion from the financial turbulence in
East Asia and especially Russia. Large current account
deficits under fixed exchange regimes are often an
indication of such vulnerability.
	The key issue is whether Lithuania will be able to
manage the transition to central banking under a fixed
exchange rate or whether it will be forced to allow its
currency to weaken, as the Czech Republic did in spring
1997 and Russia on 17 August 1998. In this context,
Lithuania's high trade dependence on Russia is
worrisome, since the weaker ruble will probably further
increase the Baltic State's already large trade deficit
with that country.

The author is a research scholar at the International
Institute for Applied Systems Analysis in Laxenburg,
Austria.

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