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RFE/RL NEWSLINE Vol 2, No. 199, Part I, 14 October 1998
________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 199, Part I, 14 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * PRIMAKOV DETAILS ECONOMIC PLAN * RUSSIA EMBRACES HOLBROOKE AGREEMENT * ALIEV CLAIMS VICTORY End Note VLADIVOSTOK: POLITICAL STRUGGLE AMID ECONOMIC CRISIS xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA PRIMAKOV DETAILS ECONOMIC PLAN... In his address to the Federation Council on 14 October, Prime Minister Yevgenii Primakov filled in more details of his government's economic plan (see "RFE/RL Newsline," 7 October 1998). Primakov explained that his government's three main tasks are reform of the banking sector and tax system as well as the elimination of companies debts to the government and to one another. He pledged to cut value-added tax and the profit tax and authorize a write-off of enterprise debts owed to the government. According to Primakov, the government will release 50 million rubles ($3.2 million) without "an emission or the participation of banks." Primakov noted that at the point from which his government started work, GDP has fallen 16 percent and real incomes 11 percent. JAC ...COMMENTS ON BANKING, PRIVATIZATION. Contradicting an earlier Interfax report, Primakov told the Federation Council that Russian banks are being divided into three different groups under the Central Bank's restructuring plan: banks that have survived and will continue to work, banks that are failing but are important for the economy and will be saved, and banks that are performing poorly and will be eliminated (see "RFE/RL Newsline," 13 October 1998). Primakov repeated an earlier pledge to continue privatization but elaborated that Russia needs a different kind of privatization. He explained that the Rosneft and Svyazinvest tenders would have sold valuable companies too cheaply. The previous day, First Deputy Prime Minister Yurii Maslyukov said that the Svyazinvest tender should be canceled because of the low asking price. JAC VASILIEV TO REMAIN ON JOB. Despite offering his resignation last month to protest the reappointment of Finance Minister Mikhail Zadornov, Federal Securities Chairman Dmitrii Vasiliev told Bloomberg on 13 October that he will continue in his post (see "RFE/RL Newsline," 28 September 1998). Vasiliev said that he was able to reach agreement with Prime Minister Primakov on three economic policy issues of importance to him. Primakov agreed to end any discussion of nationalization, to treat all holders of Russian government debt alike, and to bail out depositors rather than bank owners when restructuring the banking sector. However, Primakov would not agree to lift restrictions on foreign-currency trading. According to Bloomberg, the Russian stock market index dropped 88 percent this year, "making it the world's worst-performing primary index." JAC RUBLE STRENGTHENING? The ruble rose 16 percent to 13 rubles per dollar by mid-day on 14 October, its biggest one-day increase in more than a month. The previous day, the ruble rose 5 percent against the dollar. Bloomberg quoted traders who said the Central Bank and commercial banks are propping up the ruble to avoid losses on forward contracts due to expire on 15 October. Another factor they cited was the government's announcement that it will increase the amount of foreign exchange that exporters must convert to rubles from 50 percent to 75 percent. The ruble experienced a similiar strengthening in mid-September. Interfax reported that Central Bank Chairman Viktor Gerashchenko said the exchange rate should be controlled. Earlier, Gerashchenko had said the ruble's exchange rate should be allowed to float (see "RFE/RL Newsline," 1 October 1998). JAC CENTRAL BANK TO SAVE SBS AGRO. Central Bank Chairman Gerashchenko told reporters on 13 October that his bank will save the failing SBS Agro bank. The bank will give SBS Agro an emergency loan in exchange for equity; the government will also increase its shares of Sberbank. Gerashchenko emphasized, according to ITAR-TASS, that the "bank should prop up the banks which can still hold up their heads, which are still keeping afloat." He revealed that a bank restructuring plan was being worked on with the assistance of experts from the World Bank, IMF, and European Bank for Reconstruction and Development. ITAR-TASS also reported that a special agency would be created at the Central Bank to supervise the reform of the banking sector. JAC RUSSIA EMBRACES HOLBROOKE AGREEMENT. Russian officials have hailed the agreement reached by Yugoslav President Slobodan Milosevic and U.S. special envoy Richard Holbrooke. Prime Minister Primakov told the Federation Council on 14 October that "obviously there will be no strike." He also predicted that "a relaxation in tensions" will occur. Russian Foreign Minister Igor Ivanov told ITAR-TASS that "real prospects for reaching a political settlement in [Kosova] have emerged." Colonel-General Leonid Ivashov, head of the office for international military cooperation at the Ministry of Defense, declared that Russia is willing to send 200-250 observers to Kosova to oversee implementation of UN Security Council Resolution 1199. He also told reporters that since Belgrade has agreed to fulfill the requirements of the resolution, Russia will perceive any NATO strikes as an act of aggression. He added that such strikes would mean that other European countries and CIS states, including Russia, could also become targets. JAC YELTSIN REPORTS BACK FOR DUTY. Despite having been diagnosed with "tracheobronchitis," President Boris Yeltsin showed up for work on 14 October, Interfax reported. The previous day, Duma Security Committee Chairman Viktor Ilyukhin of the Communist Party faction called for an urgent medical check on Yeltsin "for the purpose of his constitutional removal from office," Interfax reported. Meanwhile, presidential spokesman Dmitrii Yakushin said that the issue of Yeltsin stepping down before his term expires is not even being discussed. "Segodnya" speculated that administration staff arranged for Yeltsin to visit Central Asia, despite their concerns about his health, as a kind of "training exercise" to determine whether he can withstand lengthy flights and public appearances. "Segodnya" is owned by Vladimir Gusinskii's Media-Most group. JAC GOVERNMENT INCREASING FOOD SUPPLY? Prime Minister Primakov told the Federation Council on 14 October that his government has spent 600 million rubles ($38 million) over the past two weeks to build a national food reserve, Interfax reported He also said that his government has slashed railway tariffs for agricultural products by 50 percent, repealed the 3 percent duty on food imports, and arranged for farm products to flow freely between regions. However, the "Journal of Commerce" reported the previous day that some oblast and city authorities are continuing to enforce regulations intended to keep food prices low and prevent food producers and traders from finding more profitable markets. "Ekonomika i zhizn" reported in its October issue that Russia food imports in September were six times lower than the previous month's level. Responding to earlier reports that Russia has asked the EU for humanitarian assistance, Deputy Prime Minister Gennadii Kulik told reporters that Russia "did not ask for [food] aid, but "such aid was proposed to it" (see "RFE/RL Newsline," 12 October 1998). JAC COURT CONSIDERS ELECTION LAW. The Constitutional Court began considering the law on the election of Duma deputies on 13 October. It is responding to a request by the Saratov regional legislature, which argues that certain provisions of the law violate the constitution. According to "Izvestiya" on 14 October, the court will focus on the so-called 5 percent barrier that parties have to overcome in which to gain parliamentary representation. Mikhail Mityukov, presidential representative to the court, told reporters that President Yeltsin thinks the law needs a drastic overhaul. Yeltsin favors a majority system rather than the current one, in which deputies are elected on party lists. While Mityukov predicted that more regions will make similar appeals to the court, Yelena Mizulina, Duma representative to the court, told Interfax that the initiative "probably comes from the presidential administration rather than Saratov." JAC TRANSCAUCASUS AND CENTRAL ASIA ALIEV CLAIMS VICTORY... Azerbaijani President Heidar Aliev claimed victory on 13 October, two days after the presidential elections. Official results are due on 15 October. The 75-year-old incumbent said "I have been elected president and now I am at peace". He added that he received some three-quarters of votes cast. Opposition parties boycotted the ballot. Aliev told reporters he foresees "a wonderful future for Azerbaijan in the 21st century--Azerbaijan will develop as an independent nation". He promised to announce programs to help some 800,000 Azerbaijanis displaced by the fighting in and around Nagorno Karabakh. JN ...WHILE MONITORS QUESTION LEGITIMACY OF ELECTIONS. The U.S. based National Democratic Institute (NDI) released a preliminary report on 13 October detailing abuses, including ballot box stuffing and intimidation of voters. The NDI report says "further investigation is needed to determine the extent of the irregularities and incidents of fraud that affected the voting, counting, and tabulation processes". It adds that "these flaws give cause for serious concern and raise questions about how the possibility for a second round should be resolved." And the report argued that it is "very disturbing" that the violations appeared to be systematic and that almost all were committed in favor of Aliev. JN ALIEV CALLS FOR CHANGES IN CIS... Aliev says the CIS "will exist even after the year 2000." In an interview published in "Novoye izvestiya" on 13 October, Aliev said changes are necessary to make the CIS an effective international organization. He criticized the CIS for "not being built on a parity basis but rather revolving around Russia." Aliev said this situation must be altered and CIS countries should be equal. "It is clear that the CIS charter was written at the bidding of Russia and Russian interests lie at its core," he said. "If the situation does not change, it will be difficult to count on radical transformations, on the commonwealth suddenly becoming an effective international organization," he said. JN ...INDICATES FINAL DECISION ON BAKU-CEYHAN PIPELINE IN OFFING. Aliev speaking to reporters on 13 October dismissed an 11 October "New York Times" report alleging that the Baku-Ceyhan oil pipeline will not be built, saying the report is "opinion...of a private character that does not represent the opinion of the state" He said he does not think that the issue will be resolved before the end of October. Meanwhile, U.S. State Dept. spokesman James Rubin said in Washington that the U.S. remains committed to the construction of a Baku-Ceyhan pipeline transiting Georgia. Rubin commented that "we remain committed...to making the Baku-Ceyhan and the east-west corridor a reality. JN ARMENIAN AGRICULTURE ANNOUNCES PLANS TO PRIVATIZE MORE LAND. Agriculture Minister Vladimir Movsisian told reporters in Yerevan on 13 October that the government plans to privatize the remaining 120,000 hectares of state-owned agricultural land, RFE/RL's Armenian Service reported. Most agricultural land in Armenia was privatized in 1991. But a fledgling market infrastructure and lack of machines have severely restricted the volume of agricultural output. Movsisian says the ministry has succeeded in bringing its role and structure into conformity with the existing realities of private land ownership. He says the state's main task now is to engage in a "long-term agricultural planning" and offer "consulting services" to farmers through its "regional scientific centers" that will be set up soon. Movsisian said his ministry will encourage banks to lend more to the agricultural sector at lower interest rates. JN WORLD BANK TO ASSIST LAND REGISTRATION PROJECT. The World Bank's International Development Association (IDA) announced in Washington, D.C. on 13 October it has approved an $8 million loan to Armenia to help set up a land registration system. The bulk of the loan, more than $6 million, will be used to build a mapping center, survey land, and produce cadastral (public record) maps. The remainder of the funds will be used to establish a central office and 11 branch offices to record land and other property in a chronological record of owners, their rights, and obligations. The loan requires repayment over 35 years with a 10-year grace period. Loans granted by the IDA, the World Bank arm dealing with the poorest nations, carry no interest but charge a small annual fee. JN GEORGIA SAYS BOTH SIDES OPPOSE RENEWAL OF ABKHAZ CONFLICT... Georgian State Minister Vazha Lortkipanidze told Caucasus Press that the main result of his meeting with an Abkhaz delegation in Tbilisi on 13 October was the mutual desire not to renew the Georgian-Abkhaz conflict. He warned that there are still forces wishing to renew hostilities in Abkhazia and "we must join efforts in struggling against them". Lortkipanidze said the two sides considered issues that are to be discussed at the Georgian-Abkhaz talks in Athens on 16-18 October, in particular the political status of Abkhazia and economic relations between the two sides. He said Georgian and Abkhaz energy and agriculture specialists discussed prospects for relations as well as domestic trade issues and signed an agreement on intentions. Lortkipanidze says military commanders participating in the meeting discussed fulfillment of Abkhaz-Georgian peace agreements. JN ....WHILE ABKHAZIA DENIES RUSSIA IS BEING LOCKED OUT. The head of the Abkhaz delegation to the Tbilisi talks, Anri Jergenia, told Caucasus Press on 13 October that scheduling negotiations between Sukhumi and Tbilisi in Athens "does not mean that Russia is losing its peacekeeping importance but indicates that the circle of countries involved in the conflict settlement is expanding." Jergenia characterized the discussions in Tbilisi as concrete: "We discussed all questions regarding the conflict settlement and took one more step toward each other." JN ASSASSINATION ATTEMPT ON FORMER KAZAKH PREMIER? Reuters reported on 13 October that two shots were fired at former Prime Minister and likely presidential candidate Akezhan Kazhegeldin that day. Kazhegeldin was at a stable he frequents outside Almaty. No one was reported to have been hurt, but Kazhegeldin has canceled a press conference scheduled for 14 October. BP CRIMINAL GROUP BROKEN UP IN TAJIKISTAN. Tajik law enforcement agencies have disbanded a criminal group in the northern part of the country, ITAR-TASS reported on 14 October. During an operation the previous day in Khujand (the largest city in Leninabad Oblast), 38 people were taken into custody, of whom 18 belonged to the Interior Ministry's special forces. The group is accused of "banditry and kidnapping." Meanwhile in the southeastern suburbs of Dushanbe, a similar operation is under way. Some 13 suspected criminals have been killed and six detained there. BP COTTON HARVEST DISAPPOINTS TURKMEN PRESIDENT. Saparmurat Niyazov visited the Mary Region on 13 October to express his disappointment with the cotton harvest there, Interfax reported on 13 October. Niyazov noted that the region has failed to meet its quota for cotton and that the country will now harvest only half of the planned 1.5 million tons. Niyazov instructed Mary officials to find ways to improve future harvests. RFE/RL correspondents in Ashgabat reported that Niyazov also lashed out at some officials, saying that they grew fat while the country prepared to go hungry owing to their poor performance. He added that they may be the next to face hunger if the situation does not improve. BP END NOTE VLADIVOSTOK: POLITICAL STRUGGLE AMID ECONOMIC CRISIS by Floriana Fossato The ongoing political struggle in the port city of Vladivostok is fiercer than ever, at a very bad time. The election of the mayor of Vladivostok degenerated into confusion last month when the local electoral commission, in a last-minute decision, ordered that the name of the controversial incumbent, Viktor Cherepkov, be deleted from the ballot. It based that decision on his alleged use of municipal funds to support his campaign. Subsequently, the results of the election were declared invalid. It is likely that the Russian Supreme Court will have to rule on the allegations against Cherepkov. The debate over the mayor is an important one in Vladivostok, which has a population of 800,000 and is eight time zones east of Moscow. Cherepkov is both loved and hated by most citizens for his eccentric style and his feud with regional governor Yevgenii Nazdratenko. That feud has caused much hardship for citizens. For example, in a city where ambulances have been on strike for the past few months to protest 19 months of unpaid wages, the regional and municipal administrations have been unable to decide who should support the service financially. Cherepkov told an RFE/RL correspondent that "ambulance service employees are not the city's responsibility." He added that he "could create an alternative ambulance service in five minutes" but "would not do so, because the governor would immediately come up with another source of conflict." Frustrated locals say that over the last few years, it has become increasingly "difficult even to survive" in Vladivostok, despite the possibilities stemming from the region's proximity to Asian markets. For years, the city suffered from a severe shortage of energy and water supplies. Many neighborhoods in the hilly city experience protracted water and energy cuts. And even in the city's main hotels, hot water is available for just a couple of hours a day. Aleksandr Ghelbakh, press secretary of the local energy company "Dalenergo," which is at the center of the energy crisis, told RFE/RL that "this is a non- payment crisis, not an energy crisis." Cherepkov and Nazdratenko have often traded accusations of corruption and mismanagement. Despite recognizing the drawbacks of the situation, many citizens told RFE/RL before the mayoral elections that they would likely support Cherepkov because "despite his devotion to astrology and eccentric practices, if he wants, he can get things done. For instance, he built much needed new roads very quickly." Cherepkov and his aides have denied critics' claims that the roads, like other projects, were part of a plan to attract citizens' support. The English-language newspaper "Vladivostok News" last month reported that city hall had paid for a discotheque four days a week for much of the summer, at a cost of more than $900 per night. Disc jockeys reportedly frequently reminded the crowds that the mayor was sponsoring the event, but the mayor's office has said the organizers' main goal was to "give young people something to do." In the mayoral elections, some 40 percent of the voters showed up at polling stations--a sufficient number for the vote to be validated, said Ilya Grichenko, the chairman of the local electoral commission. However, preliminary results issued by the commission indicated that more than half of the voters who cast ballots voted against all candidates. Russian media said officials at some polling stations complied with the order to strike Cherepkov's name from the list of candidates, while others simply refused to do so. The chairman of the regional Duma, Sergei Dudnik, called the commission's decision a mistake because Cherepkov had not yet been found guilty of committing the alleged irregularities. Both Dudnik and President Boris Yeltsin's representative in the region, Viktor Kondratov, had appealed to Yeltsin to urge that Cherepkov's name be left on the ballot, warning of possible unrest. Kondratov said tensions were building in the region "because of unlawful acts...against the background of deteriorating economic problems." According to Kondratov, who is not seen as sympathetic toward Nazdratenko, the situation was being deliberately exacerbated so that "the whole indignant population" of Primorskii Krai would take to the streets on the 7 October All-Russian protest action. (In the event, about 3,000 people gathered in the central square of Vladivostok to protest wage arrears and to burn an effigy of President Boris Yeltsin.) Vitalii Kirsanov, head of the Far Eastern Branch of the State Customs Committee, says the imports to Primore have declined by half since the ruble crisis hit Russia. In comments reported in the "Vladivostok News," he said importers prefer to re-export their goods, rather then unload their ships. Kirsanov added that traders are reluctant to ship and deliver goods, preferring to wait for the stabilization of the ruble. In an interview with RFE/RL, Vladimir Stegni, head of the regional department of International Economic Relations and Tourism, predicted that the devaluation of the ruble would heavily hit Primore because the region imports 80 percent of its goods, including foodstuffs, from China, South Korea, and Japan. Shuttle trade, particularly between the Far East and China, is rapidly decreasing. Many traders provide the region's markets with affordable goods have been working at a loss since the crisis began. And many, particularly from China, are halting their activities. This is the second article in a three-part series on Russia's Far East by Floriana Fossato, an RFE/RL correspondent based in Moscow. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to firstname.lastname@example.org with the word subscribe as the subject of the message. HOW TO UNSUBSCRIBE Send an email to email@example.com with the word unsubscribe as the subject of the message. 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