RFE/RL NEWSLINE Vol 2, No. 199, Part I, 14 October 1998

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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

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Headlines, Part I

* PRIMAKOV DETAILS ECONOMIC PLAN

* RUSSIA EMBRACES HOLBROOKE AGREEMENT

* ALIEV CLAIMS VICTORY

End Note
VLADIVOSTOK: POLITICAL STRUGGLE AMID ECONOMIC CRISIS
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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.

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