RFE/RL NEWSLINE Vol 2, No. 194, Part I, 7 October 1998

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RFE/RL NEWSLINE Vol 2, No. 194, Part I, 7 October 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

* THOUSANDS TURN OUT FOR NATIONWIDE PROTEST

* RUSSIA THREATENS TO USE UN SECURITY COUNCIL VETO

* ARMENIAN PARLIAMENT CONTINUES ATTACK ON GOVERNMENT

End Note: RUSSIAN CRISIS HITS UKRAINIAN FIRMS
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RUSSIA

THOUSANDS TURN OUT FOR NATIONWIDE PROTEST. According to
Interfax, initial reports from the Interior Ministry suggest
that more than 60,000 people turned out for public protests
in the Far East on 7 October--a much smaller turnout than
organizers had expected. In Vladivostok only 3,000, rather
than the expected 5,000 citizens, participated, AP reported.
ITAR-TASS estimated that turnout in Novosibirsk was some
35,000 people. Nakhodka witnessed one of its largest protest
meetings the previous day when about 3,000 gathered in the
city's main square. An RFE/RL correspondent in Novosibirsk
noted that the centerpiece of protesters demands was the
payment of back wages but that they also called for the
resignation of President Boris Yeltsin. An RFE/RL
correspondent in Irkutsk reported that cold weather thinned
the ranks of protesters in that Siberian city, with mostly
pensioners and Communist Party activists showing up. JAC

FINAL PROTEST COUNT TO BE DELAYED. A final count on the
number of participants in the Russia's day of national
protest may not be available for sometime. In some cities,
union leaders' estimates of the number people taking part in
ongoing protests were twice the amount estimated by local
police. The pre-event estimates of the "sponsors" of the
protest action also varied widely. Mikhail Shmakov, head of
the Russian Federation of Independent Trade Unions, predicted
that 25 million would participate in marches, and Communist
Party leader Gennadii Zyuganov said he was counting on 40
million. "Nezavisimaya gazeta" forecast a modest turnout
based on what many considered the event's "dress rehearsal,"
the fifth anniversary of storming of the parliament on 3-4
October. Both "Nezavisimaya gazeta" and "Kommersant-Daily"
reported that the early October event attracted no more than
5,000 participants. However, "Kommersant-Daily" suggested
that organizers usually underestimate the number of
participants. "Nezavisimaya gazeta" receives financial
backing from Boris Berezovskii's LogoVAZ group, while the
sources of financing for "Kommersant-Daily" are unknown. JAC

RUSSIA THREATENS TO USE UN SECURITY COUNCIL VETO. After NATO
postponed a decision on Kosova until 8 October, NTV on 6
October suggested that Russia's tough stance against bombings
may have been the cause. Foreign Minister Igor Ivanov
announced that Russia will veto any effort proposed in the UN
Security Council to authorize NATO air strikes against
Yugoslavia. Both Foreign Ministry spokesman Vladimir
Rakhmanin and Armed Forces Colonel General Vladislav Putilin
held news conferences in which they stressed that peaceful
ways of settling the Kosova conflict have not been exhausted-
-especially since President Yeltsin's telephone conversation
with Yugoslav President Slobodan. After their discussion,
Milosevic agreed to allow an OSCE delegation into Kosova (see
"RFE/RL Newsline," 6 October 1998). JAC

KOSOVA OUTCOME TO DETERMINE RUSSIA'S STATUS? Russian
policymakers, analysts, and the press are linking the outcome
of Russia's campaign against NATO air strikes in Yugoslavia
with both Russia's status as a world power and its talks with
the IMF. Our Home is Russia faction leader Aleksandr Shokhin
declared that if Russia's tough statements on NATO air
strikes against Yugoslavia are ignored, then it will be
obvious that Russia is losing its status as a great power. He
told reporters on 6 October that he believes Kosova
constitutes a "dramatic turning point in defining Russia's
role in the world." Georgii Arbatov, honorary director of the
Institute for U.S. and Canada Studies, told Interfax that
Russia should pressure Milosevic rather than the West. He
said "It is difficult to act as a great power when you
constantly beg for aid." Meanwhile, "Izvestiya" the same day
reported that after "having lost its last hope of obtaining
IMF monies", the Russian government issued
uncharacteristically bold statements against a possible NATO
action. JAC

PRIMAKOV APPEALS TO POCKETBOOK, CUPBOARD. In his televised
address to the nation on 6 October, Prime Minister Yevgenii
Primakov promised Russian citizens not only that back wages
and pensions but fruits, vegetables, and potatoes during the
cold winter. He noted that his government has slashed tariffs
on transportation of fruits and vegetables and removed other
restrictions against movement of food on Russian territory.
With regard to remedying the nation's economy, he emphasized
restructuring the banking system, creating an effective tax
system, and breaking "the vicious circle of nonpayments"
between businesses and the budget as well as among businesses
themselves. Primakov also promised to continue with
privatization but "not so some individuals and groups can get
rich." Primakov explained his government's delay in
presenting a finished economic program by citing the
program's dependence on negotiations currently being
conducted at home and abroad. JAC

TAX REFORM IN THE WORKS. In the same address, Primakov
promised that the government will submit proposals to improve
the tax system in the "nearest future." In the meantime, he
reported giving instructions to the state tax service to
release equipment from storage worth more than $1 billion
that had been seized from enterprises that did not pay their
taxes. He justified the action, saying the enterprises employ
"human beings" and are "about to yield solid profits to the
state soon" once the equipment has been reinstalled. JAC

RUSSIA PREPARED FOR FAILURE WITH IMF? The Russian press is
characterizing Russian government talks with the IMF as
"circular" and likely to end in failure. "Vremya MN" on 6
October reported that the IMF is demanding that the
government complete its economic program. However, "Russia
claims it cannot complete its program until it knows whether
or not the West will give it money." "Izvestiya" the same day
said that although Zadornov has threatened the West with the
possibility of domestic unrest and Russian default on loans
owed to Western banks if money is not forthcoming, "Russia's
position remains bad." The newspaper explained that "the fund
has no money, since the US Congress has not agreed to grant
it an extra $18 billion" and the "IMF 'doctors' have other
patients--in East Asia and South America." Meanwhile, State
Duma Chairman Gennadii Seleznev told reporters that Zadornov
may bring a "disquieting message" to Moscow from Washington.
LUKoil and Oneksimbank are major investors in "Izvestiya,"
and Sberbank and the Central Bank provide indirect financial
support to "Vremya MN."JAC

GOVERNMENT TO LOCK UP VODKA STILLS. Russian President Boris
Yeltsin signed a decree on 6 October establishing tighter
government regulation of the production and distribution of
alcohol stronger than 28 percent proof. According to ITAR-
TASS, alcohol will be produced only by companies that the
state either fully owns or has a controlling interest in.
Deputy Prime Minister Gennadii Kulik told reporters that the
measure will not increase prices or diminish the choice of
imported alcohol available. Kulik explained that the change
in regulation could yield an additional 30-35 billion rubles
($1.9 billion) in budget revenues by curbing the illegal
production and import of vodka and other alcohol. It may also
save lives. "Profil" reported on 7 September that almost
22,000 Russians had already died in 1998 after drinking fake
vodka, according to Interior Ministry data. JAC

POLITICAL FOE OF LEBED ARRESTED. A deputy of Krasnoyarsk
Governor Aleksandr Lebed's predecessor has been charged with
misusing budget funds, according to "Kommersant-Daily" on 6
October. Vladimir Kuzmin, former first deputy governor, was
arrested for allegedly misappropriating 9 billion old rubles
that were intended for residents of Krasnoyarsk but were
deposited instead in an interest-bearing account in a Moscow
bank. "Vremya MN" reported that a group of Duma deputies from
a variety of political organizations have appealed to the
prosecutor on Kuzmin's behalf. According to the newspaper,
many in Krasnoyarsk believe that the prosecutor's pursuit of
Kuzmin is primarily political. During his election campaign,
Lebed had promised to investigate the activities of his
predecessor. JAC

RUSSIA SAYS CHECHEN KIDNAPPINGS THREATEN WORLD COMMUNITY.
Foreign Ministry spokesman Rakhmanin told ITAR-TASS on 6
October that kidnappings in Chechen "can be regarded only as
a challenge to the present Chechen leadership and to the
world community" by those who seek to destabilize Chechnya.
Rakhmanin added that Russian and Chechen investigators have
made no progress in identifying those responsible, a
statement confirmed by Chechen acting Deputy Prime Minister
Kazbek Makhashev. In other developments, Leon Wascinski, the
OSCE official responsible for Chechnya, arrived in Moscow on
6 October to discuss the situation. And Yeltsin's press
secretary, Dmitrii Yakushkin, denied reports that the family
of Valentin Vlasov, the Russian official kidnapped in
Chechnya, has not received state support, as Interior
Minister Sergei Stepashin said on 5 October, the Russian
agency reported. PG

TRANSCAUCASUS AND CENTRAL ASIA

KAZAKH PARLIAMENT APPROVES AMENDMENTS. A joint session of the
Kazakh parliament on 7 October passed amendments to the
country's constitution, RFE/RL correspondents in Astana
reported. Under those amendments, the term of deputies in the
lower house would be extended from four to five years and in
the upper house from five to six years. The president's term
in office would be increased from five to seven years, and
parliamentary and presidential elections would be held in
January 1999, one year ahead of schedule. BP

UN RESUMES FOOD PROGRAM IN TAJIKISTAN. Despite the fact that
most of the personnel of the UN mission to Tajikistan remain
outside that country's borders, the program to supply food to
fighters of the United Tajik Opposition resumed on 6 October,
ITAR-TASS reported. The UN mission is providing food and
blankets to 10 UTO centers in eastern Tajikistan at the
request of the Tajik government. The bulk of the UN mission
will not return until an investigation into the murders of
four UN employees in late July has been completed and the
findings made public. BP

ARCHITECT FOR NEW KAZAKH CAPITAL CHOSEN. Kazakh President
Nursultan Nazarbayev on 6 October announced the winner of a
competition to design the new Kazakh capital, Astana,
Interfax reported. Japanese architect Kise Kurokawa was
selected from the 27 competitors. Nazarbayev said the winning
design reflects a symbiosis of European and Asian cultures
and of nature and man. BP

KYRGYZ GOVERNMENT RELEASES INITIAL ESTIMATE OF ISSYK KUL
DAMAGE. Deputy Prime Minister Boris Silayev has said that
according to a preliminary estimate, the damage caused by the
sodium cyanide spill earlier this year in the southern area
of Issyk Kul totals 91 million som (about $4 million),
Interfax reported on 7 October. In May, a truck belonging to
the Kumtor gold mine overturned into the Barskoon River,
which flows into Issyk Kul, spilling 1.7 tons of sodium
cyanide into the water. Silayev, who heads the government
commission investigating the damage to the area, said the
estimate does not include agricultural losses. An RFE/RL
journalist who visited the village most affected by the
spill, Barskoon, found that while a medical center has been
set up there, residents have not received compensation for
their losses and humanitarian aid to the village amounted to
one notebook, one pen, and five pieces of candy per
inhabitant. BP

ARMENIAN PARLIAMENT CONTINUES ATTACK ON GOVERNMENT.
Opposition deputies stepped up their attacks on the
government's privatization program during a special meeting
of the parliament on 6 October, RFE/RL's Armenian Service
reported. Vano Siradeghian, chairman of the former ruling
Armenian Pan-National Movement, said that President Robert
Kocharian is intent on replacing the current parliament with
a rubber-stamp legislature. He said that Kocharian may seek
to dissolve the assembly before the end of this year and call
elections that are likely to be manipulated by "people with
money and levers." PG

ARMENIAN PRESIDENT WANTS ENHANCED RUSSIAN ROLE IN CAUCASUS.
Kocharian said on 6 October that Yerevan will seek to expand
Moscow's role in the Caucasus, including in the transport of
oil and gas, ITAR-TASS reported. Kocharian also said that his
government highly values Russia's role in resolving conflicts
across the region. PG

ARMENIAN COMMUNISTS PLEDGE SOLIDARITY WITH RUSSIAN PROTEST.
The Armenian Communist Party issued an appeal on 6 October
calling for its supporters to take to the streets to express
"solidarity" with the mass protest action scheduled to take
place in Russia the next day, RFE/RL's Armenian Service
reported. Sergey Badalian, the party's leader, said that he
expects "tens of thousands" of supporters to march in central
Yerevan, adding that "there is a revolution going on in
Russia." Badalian also said that he and his supporters will
demand the ouster of the "anti-popular" Yerevan government
and Armenia's inclusion in a "new union" of former Soviet
republics. PG

SHEVARDNADZE PRAISES OSCE ROLE IN CAUCASUS. Speaking to the
OSCE Parliamentary Assembly in Tbilisi on 6 October,
President Eduard Shevardnadze praised the role of the OSCE in
seeking to settle conflicts in the Caucasus region, Interfax
reported. Shevardnadze said that he is particularly pleased
that the OSCE has become the first international organization
to "bravely and openly" declare that Georgians were subject
to ethnic cleansing in Abkhazia. And he said that his
government is prepared to help the OSCE find a settlement to
the Karabakh dispute between Armenia and Azerbaijan. PG

GUAM GROUP TO COOPERATE TO OVERCOME WORLD CRISIS.
Representatives of the four GUAM countries--Ukrainian Premier
Valery Pustovoitenko, Moldovan Premier Ion Ciubuk, Georgian
state minister Bazha Lordkipanidze, and Azerbaijan
presidential economic adviser Vakhid Akhundov--issued a
declaration in Washington on 6 October that their governments
will work together to overcome the world economic crisis,
Interfax reported. They said that they will both coordinate
their policies and seek to promote transit across their
region. PG

END NOTE

RUSSIAN CRISIS HITS UKRAINIAN FIRMS

by Stefan Korshak

	Ukraine's Motor-Sych appeared to have it all: direct
government support, an expanding Russian customer base, cheap
labor and materials, as well as a weak national currency to
exploit those advantages even further.
	Then the Russian financial crisis set in, sending the
ruble into freefall. Motor Sych's customer base of large
Russian aerospace companies dried up almost immediately. The
few customers that remained operational could pay only in
rubles. Moreover, a number of Russian suppliers of key
components shut down their production lines.
	Motor Sych, Ukraine's largest engine maker, is among a
host of companies paying for Ukraine's inability--or
unwillingness--to loosen the economic bond with Russia.
	The recent price of maintaining such close ties has been
steep. Falling exports to Russia have crippled key industries
such as metallurgy and machine building. And it has forced
the government to devalue the hryvna.
	Through August, Russia had accounted for almost half
(44.3 percent) of Ukraine's general trade turnover in 1998.
Most exports (55 percent) to Russia were products of the
former Soviet military-industrial complex: for example,
metallurgical products (15 percent), heavy machinery (14
percent), and chemicals (10 percent).
	In July, Russia slapped a 3 percent import duty on
Ukrainian industrial and agricultural commodities. Then the
crisis hit.
	The hryvna's downslide, rooted in Ukraine's long-
standing foreign currency crunch, might also have been
prompted by a calculated effort by the government to make
exports competitive.
	Paul Gregory, head of the research section at Alfa
Capital Kyiv, told RFE/RL that "one way for the Ukrainian
government to increase income is to increase the volume of
its exports." He said "one means of doing that is worsening
the hryvna's exchange rate against other currencies, so
Ukrainian products become cheaper."
	But Gregory also said that even if the Ukrainian
exchange rate winds up lower relative to the ruble than it
was before the crisis, it will not affect trade statistics
until some time next year.
	The Donetsk Iron and Steel Works (DISW), one of
Ukraine's metal exporters, was another company hit first by
the Russian excise duty and then by the fall of the ruble.
	Olexsander Pilipenko, DISW's vice president, told RFE/RL
that his company is not currently receiving many new orders
from Russia. He said the main reason is that Russian
companies are short of funds.
	A partly privatized mill and a leader in the Ukrainian
steel industry, DISW was in the process of expanding and
modernizing its product line when the Russian crisis hit. The
crisis put a damper on that process.
	Pilipenko said that as of the beginning of September,
many Russian firms stopped sending payments to his company.
He said Russian companies buy only 10 percent of his firm's
products, adding that "non-payment by any customer is by no
means good news."
	With some 80 percent of its products traditionally
labeled for Russia, Motor Sych is worse off. Vladislav
Matvienko of Motor Sych's import-export division said its
"Russian customers are experiencing certain problems in
settling contracts agreed with earlier." He said Russian
firms "are still paying, but sometimes with a delay." And
when they pay, he added, they do it often in rubles, which
only adds to Motor-Sych's problems.
	Matvienko added that "like many other companies," his is
having trouble exchanging rubles paid by Russian firms. He
noted that his company sometimes has to exchange into a third
currency--a so-called multi-stage currency exchange --in
order to get the currency it needs to make its own payments.
	The Ukrainian government has curtailed sales of dollars
and the conversion of rubles on Ukrainian exchanges, making
the Russian currency essentially worthless. There are no
clear prospects of a change in that situation any time soon.

The author is a Kyiv-based RFE/RL correspondent.

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