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RFE/RL NEWSLINE Vol 2, No. 204, Part I, 21 October 1998
___________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 204, Part I, 21 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 * CENTRAL BANK TO AX ALMOST 300 BANKS * UN APPEALS FOR FIRE-FIGHTING AID FOR FAR EAST * GEORGIAN PRESIDENT SEES NO NEED FOR STATE OF EMERGENCY End Note: UZBEKISTAN'S ECONOMY PERFORMING RESPECTABLY DESPITE SLOW REFORMS xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA CENTRAL BANK TO AX ALMOST 300 BANKS... According to a plan submitted to the State Duma, the Central Bank (CB) plans to eliminate roughly 275 of the nation's more than 1,500 commercial banks in the first half of 1999, Reuters reported on 20 October. The CB will also design and implement individual restructuring plans for 15 banks, including large ones unable to operate but allegedly too "socially important" to close. The CB will acquire stakes in the banks as collateral, which would eventually be transferred to new investors in the better-functioning, restructured banks. Roughly 860 banks are stable and have enough resources to survive without significant CB assistance, according to the plan. The CB would acquire stakes in a fourth group of almost 400 banks, including regional banks with large branch networks, on a three-year basis and would appoint the managers of those banks. JAC ...AS INKOMBANK'S FATE HANGS IN BALANCE. Inkombank President Vladimir Vinogradov on 16 October repeated an earlier suggestion that the Central Bank assume temporary administration of his bank. Analysts have interpreted this and earlier offers as an indication of just how badly off the bank must be. Once the third largest bank in Russia in terms of assets, Inkombank heavily invested in the short-term treasury bond market long after most banks deemed it prudent to do so. Nevertheless, it is likely to be included in the list of 15 "socially important" banks worth saving. JAC PRIMAKOV, MASLYUKOV OFFER ECONOMIC NOSTRUMS... Addressing the ninth congress of the Union of Russian Industrialists and Entrepreneurs on 20 October, Prime Minister Yevgenii Primakov outlined some new government measures, while First Deputy Prime Minister Yurii Maslyukov seemed to advocate a return to monopoly production of certain "vital goods." Primakov pledged to reduce value-added and profit taxes in the near future, according to "Rossiiskaya gazeta." In addition, he said that the government will spend 7 billion rubles ($410 million) to repay debts owed to power companies in part to ease the critical situation in the fuel and energy sector before the winter. Maslyukov said that "powerful concerns" should control the manufacture of other vital goods. For example, only one company should operate the entire aerospace industry. According to Interfax, Maslyukov added that "the dollar mass can be reduced only if the ruble mass grows." JAC ...AS VOLSKII RETURNS TO PUBLIC EYE. Industrialist Arkadii Volskii, leader of the union, whose name was once mentioned as often as Boris Berezovskii's, has returned to influence economic policy-making. Volskii told a union gathering on 20 October that the Primakov government "has started listening to the proposals of those working in the real sector." Earlier he told reporters that even given the country's current crisis, industrialists should not ask the ask the government to adopt harmful measures in their defense. Strong protectionism, he explained, makes sense only if applied to those items that compete with domestic goods and do not have to be imported, such as oil and gas equipment, according to "Rossiiskaya gazeta." JAC GOVERNMENT SUBMITS BUDGET TO IMF. The government approved the main features of the a draft emergency fourth quarter budget, Finance Minister Mikhail Zadornov told reporters on 20 October. When preparing the budget, the Finance Ministry assumed an exchange rate of 17 rubles per dollar and revenues of 65 billion to 75 billion rubles and expenditures of some 130 billion rubles. According to Zadornov, money-printing will not exceed 20 billion rubles and the government still plans to cover the budget deficit with foreign loans. However, on 21 October, "Izvestiya" argued that the current IMF mission will review the budget only as a matter of "political ritual," labeling the current IMF mission to Moscow as "the most pointless in the entire history of relations between Russia and the fund." It also said that the Primakov government's eager welcome of IMF Managing Director Michel Camdessus's call for food aid is a strong sign of how bad the economy really is. JAC UN APPEALS FOR FIRE-FIGHTING AID FOR FAR EAST. The UN called on the international community to provide assistance to combat forest fires that have already destroyed 15 million cubic meters of timber in Russia's Far East region . According to ITAR-TASS on 20 October, Russian fireman and specialists do not have enough specialized equipment, clothing, spare parts, or fuel. The UN said that $2.5 million is needed and emphasized that the fires could spread, threatening two oil and gas pipelines as well as neighboring China. Earlier, the UN called the fires a world ecological disaster with potential climactic consequences for the northern hemisphere, since the millions of tons smoke produced by the fires is likely to contribute to global warming. Until 14 October, when it finally began to rain, Khabarovsk "was periodically so enveloped in smoke that airplanes couldn't land, boats couldn't navigate the Amur River and cars drove with their headlights on during the day," the "Moscow Times" reported on 20 October. JAC GOVERNMENT NIXES UNION WITH YUGOSLAVIA. Russian Foreign Ministry spokesman Vladimir Rakhmanin dismissed the proposal of some Duma deputies to invite Yugoslavia to join the union of Russia and Belarus, Interfax reported on 20 October. He called such an idea impractical "at this stage," saying it is mainly a "reflection of the friendly feelings between the Russian and Yugoslav peoples." Duma deputy speaker Sergei Baburin (People's Power), who led the Duma delegation to Yugoslavia, told reporters the previous day that "leaders of the Serbian radical party said that they will initiate the question of joining the union of Belarus and Russia in the Yugoslav parliament." JAC SHAKHRAI'S BACK AND PRIMAKOV'S GOT HIM. Sergei Shakhrai, former presidential representative to the Constitutional Court, has been appointed Prime Minister Primakov's legal adviser, Interfax reported on 20 October. Yeltsin dismissed Shakhrai on 29 June without publicly giving a reason, but Shakhrai himself claimed that he was let go because of his prediction that President Boris Yeltsin would be impeached by the Duma. He also urged support for Moscow Mayor Yurii Luzhkov during the upcoming presidential race (see "RFE/RL Newsline," 30 June 1998). The same day, Yeltsin also appointed Nikolai Kulikov as deputy interior minister in charge of Moscow. And on 17 October, Yeltsin signed a decree appointing Aleksandr Avdeev first deputy foreign minister. JAC MASLYUKOV PLAN TO HURT DEFENSE CONTRACTORS? First Deputy Prime Minister Maslyukov's recently announced plan to manufacture 35-40 Topol-M missiles a year has received more criticism (see "RFE/RL Newsline," 8 October 1998). "Kommersant vlast" on 13 October argued that Maslyukov's plan to concentrate on strategic missiles "would spell doom" to the rest of the military industrial complex. According to the newspaper, experts estimate the cost of manufacturing a single Topol-M at between $35 million to $40 million," while the defense budget for 1998 amounts to only $7 billion. Therefore, "Maslyukov wants to pump all of the money in the budget set aside for weapons manufacture into manufacturing ICBMs." JAC DEFENSE MINISTER IN VIETNAM. Igor Sergeev signed an intergovernmental agreement on military-technological cooperation with his Vietnamese counterpart, Pham Van Tra, on 21 October, ITAR-TASS reported. He also discussed future sales of weapons to Vietnam and the Russian Navy's use of Vietnam's Camranh Bay base until the year 2004. En route to Vietnam, Sergeev stopped over in New Dehli to discuss a military-technological cooperation agreement through the year 2010 with India. Sergeev said he hopes the document will be ready for signing when Yeltsin makes a scheduled visit in December. Sergeev departs for China on 21 October, the last stop of his tour of Asian countries. BP RUSSIAN POLITICIANS APPEAL TO YOUTH. At the inauguration of the new mayor of Nizhnii Novgorod, former mayor and Deputy Prime Minister Boris Nemtsov, 39, called for the formation of political bloc called Young Russia, "Nezavisimaya gazeta" reported on 20 October. Nemtsov also posted an appeal on his web page on the Internet, calling for young people to become more involved in politics and overrule people of the past (see also http://www.nemtsov.ru/news/last/1998/10/08.htm). Meanwhile, Moscow Mayor Luzhkov announced that he plans to revive the Young Pioneer League of former Soviet days. The "Moscow Times" quoted Fatima Tsagalova of the city government's public relations department as saying that the political element of the former league would be discarded. Plans to revive the Young Octobrists have not been announced. JAC PKK LEADER "NOT IN RUSSIA." Russian Foreign Ministry spokesman Rakhmanin told journalists in Moscow on 20 October that he cannot confirm media reports that the leader of the Kurdistan Workers' Party, Abdullah Ocalan, is currently in Russia, Interfax reported. On 12 October, the Armenian Foreign Ministry denied a senior Turkish government official's claim that the PKK leader has left Syria for Armenia (see "RFE/RL Newsline," 12-13 October 1998). LF TRANSCAUCASUS AND CENTRAL ASIA GEORGIAN PRESIDENT SEES NO NEED FOR STATE OF EMERGENCY. Speaking on Georgian Television on 20 October, Eduard Shevardnadze said he will not impose a state of emergency because the mutiny by Georgian army units in western Georgia is over. A spokesman for the Georgian Defense Ministry told Caucasus Press that 80 percent of the servicemen who participated have returned to their barracks, and that their leader, Akaki Eliava, is on the run with several dozen supporters. The Georgian prosecutor-general has opened a criminal case against Eliava on charges of treason, which could carry a life sentence. Shevardnadze again named former Georgian deputy parliament speaker Nemo Burchuladze as a co- instigator of the revolt, but Security Minister Djemal Gakhokidze, who was temporarily held hostage by Eliava's men on 19 October, said he did not see Burchuladze with Eliava. LF ELIAVA IN ABKHAZIA? Georgian parliament speaker Zurab Zhvania told Caucasus Press on 20 October that Eliava and his men left the west Georgian region of Mingrelia to join forces with other "illegal armed detachments" in Abkhazia's Gali raion. The chairman of the Abkhaz parliament in exile, Tamaz Nadareishvili, told the daily newspaper "Rezonansi" that Eliava, a former supporter of deceased president Zviad Gamsakhurdia, is a member of an elite Abkhaz security unit. LF GAMSAKHURDIA SUPPORTERS ROUNDED UP IN GEORGIA. Several known Gamsakhurdia supporters, including Giorgi Kervalishvili, the president of the Human Rights Protection Organization, were arrested in Tbilisi in connection with the failed insurrection, Caucasus Press reported on 20 October, citing "Rezonansi." LF GEORGIAN PIPELINE CONSTRUCTION RESUMES. The Azerbaijan International Operating Company has resumed reconstruction of the export oil pipeline from Baku to the Georgian Black Sea port of Supsa, Interfax reported on 20 October. Work was suspended for security reasons the previous day when news of the Eliava mutiny became known. LF ARMENIAN, KARABAKH PRESIDENTS MEET. Robert Kocharian and Arkadii Ghukasian met in Yerevan on 20 October for " a routine exchange of information," primarily on economic issues, RFE/RL's Yerevan bureau reported. Ghukasian told journalists later that he and Kocharian also discussed the Karabakh conflict and that they agreed that its solution should include the granting of "non-conventional" status to the unrecognized Nagorno-Karabakh Republic. That status will fall short of full independence, Ghukasian said. He added that he can see "no reasons" for a resumption of hostilities with Azerbaijan, according to Interfax. LF AZERBAIJANI PARLIAMENT TO BOYCOTT COUNCIL OF EUROPE TALKS ON KARABAKH? Ghukasian told journalists on 20 October that he has accepted an invitation to attend hearings on Karabakh organized by the Parliamentary Assembly of the Council of Europe in Strasbourg in early November, RFE/RL's Yerevan bureau reported (see "RFE/RL Newsline," 19 October 1998). The foreign ministers and parliament speakers of Armenia and Azerbaijan are also invited to those talks. But the Azerbaijani parliament has refused to send a delegation to the talks if Ghukasian is present, Turan reported on 20 October. LF AFTERMATH OF AZERBAIJANI PRESIDENTIAL ELECTIONS. Eleven opposition lawmakers on 20 October proposed that the parliament debate violations of the election law during the presidential election campaign and vote count, Turan reported. Parliamentary speaker Murtuz Alesqerov suggested that the issue be discussed by one of the parliament's committees. Meanwhile, the leaders of the several dozen organizations aligned in the Movement for Electoral Reform and Democratic Elections initialed a document entitled "Charter 98" condemning the falsification of the election. The signatories pledged to launch a peaceful campaign for the ouster by legal means of Heidar Aliev, whom they do not recognize as the legitimate president. Also on 20 October, a Baku district court sentenced six supporters of defeated presidential candidate Etibar Mamedov to three to five days in prison for jeering and whistling at Aliev when he arrived at Baku's Palace Hotel on 18 October for his inauguration ceremony. LF KAZAKH PRESIDENT TO RUN IN JANUARY ELECTIONS. Nursultan Nazarbayev announced on 20 October that he will run in the January presidential elections, Russian and Kazakh media reported. Early elections were announced on 8 October. At the time, numerous reports claimed Nazarbayev was "undecided" about running in the elections. Interfax quotes the president as saying his decision to run was made after receiving telegrams "from about a million Kazakh citizens" requesting he take part in the elections. BP NO OPPOSITION CANDIDATES REGISTER TO DATE...The head of Kazakh Central Electoral Commission, Zagipa Baliyeva, said that as of 19 October, no one has requested the necessary forms for registering as a candidate, Interfax reported. Potential candidates have until 10 November to be nominated. They then have until 30 November to collect 161,000 signatures, pay an election registration fee of nearly 2.5 million tenge (about $30,000) from their own funds, produce a mental health certificate, and pass a Kazakh language test. Nazarbayev passed his language proficiency test the same day he announced his candidacy. BP ...WHILE ONE POTENTIAL CANDIDATE APPEARS OUT OF RACE ALREADY. A Kazakh court on 20 October found former Kazakh Prime Minister Akezhan Kazhegeldin guilty in absentia for participating in "mass gatherings and sessions of an unregistered organization," RFE/RL correspondents in Almaty reported. Kazhegeldin left Kazakhstan after the alleged assassination attempt against him on 13 October. The next day, he announced his intention to run for the presidency. Under a recently passed Kazakh law, Kazhegeldin will be unable to run in the presidential elections following his conviction of a crime. BP TURKMEN TV CHIEF SACKED, RUSSIAN BROADCASTS SHORTENED. Turkmen President Saparmurat Niyazov on 20 October fired Klychmurad Kakabayev, head of Turkmen Television, after criticizing the standard of programming, "Nezavisimaya gazeta" reported on 21 October. Kakabayev was accused of serious financial violations and replaced by Annageldy Nurgeldyev. Niyazov also announced that the rebroadcasting of Russian Public Television programs will be cut to five hours daily. Niyazov said the move is necessary because of the cost of such broadcasts and because their contents often contradict the moral standards of Turkmen society. Niyazov called for Turkmen Television and Radio to become advocates of patriotism and a high standard of morality. BP CONFISCATED WEAPONS HEAD BACK TO IRAN. The Kyrgyz parliament held a special session on 20 October to decide what to do with 700 tons of weapons seized on a train earlier this month (see "RFE/RL Newsline," 13 October 1998), Interfax and ITAR- TASS reported. According to RFE/RL correspondents, the Iranian ambassador to Kyrgyzstan attended the session and told lawmakers his country has obtained clearance from Uzbekistan and Turkmenistan to allow the train to return to Iran with its cargo. The train originated in Iran and traveled through Turkmenistan and Uzbekistan before Uzbek customs officials noticed that two of the 20 railway cars, designated as carrying "humanitarian aid" bound for Afghanistan, contained weapons. Customs officials in Kyrgyzstan then impounded 16 of the railway cars outside Osh, while the other two remain unaccounted for. The Erkin Kyrgyzstan Party favored giving the weapons to the Kyrgyz armed forces. BP END NOTE UZBEKISTAN'S ECONOMY PERFORMING RESPECTABLY DESPITE SLOW REFORMS by Michael Wyzan Uzbekistan has chosen a gradual path to economic reform, arguing that the conditions prevailing in the Central Asian country militate against a radical move to a market economy. Indeed, the macroeconomic effects of the break-up of the USSR and the move away from central planning have been mild in Uzbekistan. Observers disagree on whether there is some inherent merit in gradualism or whether the country's agrarian structure and reliance on a few commodities (especially cotton, gold, and natural gas) easily sold on world markets account for the relatively good performance. Whatever the explanation, Uzbekistan's gross domestic product (GDP) declined less in the early years of the transition than in any other former Soviet republic. Uzbekistan's GDP this year is expected to be 91.1 percent of the 1990 level; comparable figures are 34.7 percent for Russia and 44.6 percent for Kazakhstan. By 1996, Uzbekistan's GDP was growing, albeit at a modest 1.6 percent rate. In 1997, it grew by 5.2 percent and in the first half of this yea by 4 percent. Agriculture has traditionally dominated production and exports. In 1997, the sector accounted for 26.8 percent of GDP, with cotton fiber alone responsible for 36 percent of export earnings. Cotton harvests, which remain the most important statistic to watch, fluctuate from year to year between 3.5 million and 4 million metric tons. This is down from the 4.6 million tons harvested in 1990, although the decline is to a certain extent the result of a policy to diversify agriculture by increasing production of grain, fruits, and vegetables. The service sector has grown sufficiently rapidly to become the largest of the economy (producing 30.7 percent of GDP last year). Industry, which is dominated by textiles, machinery, fuels, and non-ferrous metals (especially gold), has performed relatively well, registering positive growth in every year since 1994. Consumer price inflation has fallen from its peak of 1,117 percent in 1994 to only 13 percent in the 12 months to June 1998. However, it is too early to tell whether inflation in 1998 will be much lower than the projected 22 percent (or 1997's 27.6 percent). As a rule, the central bank significantly increases the money supply in the fall, as farmers and agricultural enterprises are paid by the state for fulfilling state orders for cotton and other crops. Another pro-inflationary factor is the 50 percent raise granted to public sector workers on 1 July. The use of state orders is not the only aspect of the economy that has remained virtually the same since the fall of the USSR. Officially, unemployment was only 0.4 percent in June. The average monthly wage, calculated at the official exchange rate, was $53 in the second quarter, up from $48 in December 1997. This gives Uzbekistan the second highest dollar wage in Central Asia after Kazakhstan, where the figure was $129 in June. In most years, Uzbekistan has run trade surpluses or small deficits, although 1996, with its poor cotton and wheat harvests, was an exception. Last year, there was a modest $143 million trade deficit, while from January-June 1998, there was a $203 million surplus. Exports and imports have been diverted away from the CIS, which accounted for 25 percent of exports and 31 percent of imports in the second quarter (compared with 62 percent and 54 percent, respectively, in 1994). The current account deficit in 1997, according to the IMF, was 4.6 percent of GDP, below the level at which alarm bells usually ring. Uzbekistan's ability to run up external imbalances is limited by the fact that it has not received support from the IMF since December 1996, when the fund suspended disbursements under a $185 million loan. The IMF took this action in response to the government's introduction of foreign-exchange controls in the aftermath of the 1996 poor harvests. There continue to exist two separate exchange rates for the sum--one determined on the Republican Currency Stock Exchange, where the central bank regulates transactions by limiting the number of participants, and another "market" rate determined on other exchanges, which are less tightly regulated. Since November 1996, the second rate (against the dollar) has generally been about twice the official one. For example, the official rate in June was 89.7 sum to the dollar, while market rate was 169.5 sum. During the crisis in Russia, the official rate has weakened considerably, reaching 105.4 sum on 15 October. It is tempting to see Uzbekistan's economic statistics as similar to Belarus's insofar as they reflect significant economic growth in a state that has avoided serious reform. However, Uzbekistan's economy is clearly less distorted than Belarus's in that the commodities that dominate the former's exports would presumably do so regardless of which economic system it had. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria. 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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