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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 2, No. 231, Part I, 2 December 1998


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RFE/RL NEWSLINE Vol 2, No. 231, Part I, 2 December 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 DAMPENS HOPES FOR IMF CASH

* STRIKING TEACHER DIES AS PROTEST ACTIONS SPREAD

* RUSSIA CALLS FOR STRICTER CONTROLS ON BORDER WITH
AZERBAIJAN

End Note: FIGURING RUSSIA'S FOREIGN DEBT
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RUSSIA

PRIMAKOV DAMPENS HOPES FOR IMF CASH... IMF Managing
Director Michel Camdessus met with Prime Minister
Yevgenii Primakov on 1-2 December. In remarks to
reporters on 2 December, Primakov seemed to suggest that
victory for his government in the form of a renewed flow
of cash is not in the offing. Camdessus "arrived with an
attache case containing documents, not money," he said.
He added that it would be "naive to imagine that
[Camdessus] will decide today whether to release the
funds." However, he told the Federation Council earlier
on 2 December that he had a "favorable impression" after
the first round of talks. Central Bank Chairman Viktor
Gerashchenko suggested that he at least is not
optimistic. "I think everybody realizes that we will not
get any money from the fund this year," Ekho Moskvy
quoted him as saying. Primakov earlier signed a decree
increasing Russia's quota in the fund. JAC

...AS BUDGET IS SLAMMED IN WASHINGTON. Meanwhile,
Russian economists gathered for a "brainstorming"
session at IMF headquarters were themselves not very
optimistic. Andrei Illarionov told "Komsomolskaya
pravda" on 2 December that a "sane" economist cannot
take the government's budget seriously. "A realistic
assessment of tax revenues would be 6-8 percent of GDP.
The draft budget for 1999 includes expenditures equal to
16 percent of GDP," he commented. "Vremya MN" suggested
the previous day that the "psychological
incompatibility" between IMF personnel and Russian
government officials is exacerbating negotiations. The
daily quoted a member of the Russian negotiating team as
saying that First Deputy Prime Minister Yurii Maslyukov
will "assure [the IMF mission] he is for structural
reform and privatization." But, the daily continued, the
IMF mission members have "newspaper clippings with his
statements about, among other things, the necessity of
stopping the privatization of defense enterprises." JAC

WORLD BANK LOANS REVISED. Because of the country's
changed economic conditions, the World Bank is revising
the terms of three of its loans to Russia, ITAR-TASS
reported on 1 December, quoting World Bank Russia
Country Director Michael Carter. According to the
agency, the bank was originally scheduled to issue the
second tranche of a $1.5 billion economic restructuring
loan and a $800 million coal sector loan as well as the
third tranche of a $800 million social security
adjustment loan before the end of 1998. According to
Interfax, Carter said Russia has not fulfilled the main
condition of disbursement of the social security
adjustment loan, namely balancing the Pension Fund. JAC

STRIKING TEACHER DIES AS PROTEST ACTIONS SPREAD. A
school teacher in Ulyanovsk Oblast who had been
participating in a hunger strike to protest unpaid wages
died on 1 December, Russian Television reported. Some
450 teachers in the area began the hunger strike at the
end of November, and seven of them have already been
hospitalized. Meanwhile, teachers in eight schools in
Khabarovsk Krai have gone on strike to protest back
wages totaling 158 million rubles ($9 million), and
another 6,000 teachers in Irkutsk Oblast have joined
colleagues who stopped work, ITAR-TASS reported on 2
December. In Chita Oblast, teachers at one school have
called off their 14-day hunger strike after funds were
found to pay wages through September. JAC

IS U.S. ABANDONING RUSSIAN STEEL FIRMS, RUSSIA? Russian
steelmakers published an appeal to Prime Minister
Primakov and U.S. Vice President Al Gore in "Izvestiya"
on 1 December asking again that a long-term agreement on
metals trade be concluded (see "RFE/RL Newsline," 12
November 1998). Russian steel firm executives reportedly
believe U.S. officials are deliberately delaying talks
under pressure from domestic steelmakers, "The Journal
of Commerce" reported. According to RFE/RL's Washington
bureau, if a preliminary U.S. Commerce Department
finding is put into practice in February, then high
tariffs on Russian hot-rolled steel imports to the U.S.
will be imposed retroactively. On 25 November, both
"Izvestiya" and "Kommersant-Daily" concluded that the
preliminary finding is indicative of a broader shift in
the U.S.'s foreign policy away from supporting Russia.
"Izvestiya" also argued that "Bill Clinton's advisers
have evidently concluded that nothing worthwhile can
happen in Russia" and "it is pointless to waste
resources on it." JAC

DEFENSE MINISTRY LOSING BATTLE OVER BUDGET. Defense
Minister Igor Sergeev has said that the amount of money
set aside for the armed forces in the 1999 budget
represents a "fatal" shortfall According to "Obshchaya
gazeta" on 26 November, the "minimum requirements for
the army and navy in 1999 total 107 billion rubles" ($6
billion), only slightly more than the forecast budget
deficit, according to a version of the document
published in "Kommersant-Daily" on 1 December. That
document states that total expenditures will equal 587.4
billion rubles. Meanwhile, "Moskovskii komsomolets"
reported on 28 November that the driving force behind
opposition to Sergeev's plan to form a joint command for
strategic nuclear forces is Chief of General Staff
Anatolii Kvashnin. The daily argued that the "scandal"
over the objections of [Deputy Defense Minister Nikolai]
Mikhailkov "is but a smoke screen for the real
intrigue." It went on to define that intrigue as one in
which Kvashnin and his mentor, former Defense Minister
Pavel Grachev, are biding their time until Kvashnin
replaces Sergeev. JAC

PRE-ELECTION JOCKEYING CONTINUES. The press continued to
carry stories of "courtships" between political parties
in advance of the 1999 parliamentary elections.
"Kommersant-Daily" suggested on 2 December that former
Prime Minister Sergei Kirienko is trying to distance
himself from the recently formed right-center alliance
and is actively negotiating with Moscow Mayor Yurii
Luzhkov to join his Otechestvo [Fatherland] movement.
Meanwhile, Samara Governor Konstantin Titov has not
defected from Our Home is Russia (NDR) in favor of
Otechestvo, as was expected. He anticipates receiving
the position of NDR co-chairman, which has still to be
created, "EWI Russian Regional Report" reported on 24
November. Titov has been openly critical of NDR leader
Viktor Chernomyrdin (see "RFE/RL Newsline," 15 October
1998). JAC

MORE ELECTION "IRREGULARITIES" IN ST. PETERSBURG.
Elections monitors have begun arriving in St. Petersburg
for a vote scheduled for 6 December, ITAR-TASS reported
on 1 December. A number of violations of election law
have already been recorded, and the agency reported that
the registration of several contenders is likely to be
annulled. Russian Television reported that at least 20
candidates for the St. Petersburg legislature have a
criminal record. One candidate was charged with
corruption only this week, while another has been
detained on suspicion of extortion. State Duma Security
Committee Chairman and member of the Communist Party
Viktor Ilyukhin told ITAR-TASS that the murder of
liberal activist and Duma deputy Galina Starovoitova was
most likely linked to the upcoming elections in St.
Petersburg. JAC

FINANCIAL PRESSURES CONTINUE AT ORT. The Russian
government met on 1 December to discuss the unpaid debts
of Russian Public Television, which had recently forced
the station to dramatically trim its daily newscast. ORT
Director-General Igor Shabdurasulov told reporters after
the meeting that ORT will submit a two-year "rescue
plan" to the government by 5 December and that
reductions in ORT's work force from September 1998 to
January 1999 will total 15 -20 percent. He added that
payroll accounts for only 15 percent of total spending
and that by the end of 1998, ORT will owe more than $100
million. Meanwhile, bailiffs who had temporarily
suspended their inventory of the station's property will
resume their work since no decision on restructuring the
station's debt has been taken. JAC

ADMINISTRATION DENIES DEATH PENALTY REPORTS. Oleg
Sysuev, deputy head of the presidential administration,
told reporters that Primakov's government has no
intention of lifting the moratorium on the death
penalty, despite comments by Prime Minister Primakov
calling for the "physical elimination" of certain
criminals (see "RFE/RL Newsline," 1 December 1998).
Russia imposed a moratorium on the death penalty when it
joined the Council of Europe in 1996. JAC

CHECHEN PRESIDENT CALLS FOR COORDINATION IN COMBATING
CRIME. In a telegram addressed to his counterparts in
Ingushetia, North Ossetia, and Dagestan, Aslan Maskhadov
has proposed that the Interior Ministries of all four
republics cooperate in fighting oil thefts and
abductions, Reuters and Interfax reported on 1 December.
On 28 November in Vladikavkaz, North Ossetian President
Aleksandr Dzasokhov told a roundtable discussion
convened by the Confederation of Peoples of the Caucasus
that coordinated action between unspecified North
Caucasus republics has halted the rise in crime in the
region, "Nezavisimaya gazeta" reported on 2 December.
Meanwhile, a senior official of the Grozneft oil company
was kidnapped in Grozny on 1 December. LF

TRANSCAUCASUS AND CENTRAL ASIA

RUSSIA CALLS FOR STRICTER CONTROLS ON BORDER WITH
AZERBAIJAN. Major-General Sergei Bondarev, deputy
commander of the North Caucasus department of the
Russian Federal Border Service, told colleagues on 30
November that controls on the Russian-Azerbaijani border
will be intensified in the near future, Turan reported.
Bondarev cited the anticipated sharp price hikes for
food and other consumer goods in Dagestan, which, he
said, might impel the local population to travel to
neighboring Azerbaijan, where prices are cheaper.
Residents of villages on the Dagestani side of the
border crossed into Azerbaijan last week and tried to
disarm Azerbaijani border guards. They were frustrated
about not being allowed to cross the border at will (see
"RFE/RL Caucasus Report," Vol. 1, No. 40, 1 December
1998). LF

U.S. EXPRESSES CONCERN AT MEDIA CRACKDOWN IN AZERBAIJAN.
U.S. State Department spokesman James Rubin said on 1
December that the sentencing of Azerbaijani opposition
journalist Fuad Gakhramanly over an unpublished article
constitutes part of the Azerbaijani government's broader
campaign to "harass the opposition and restrict freedom
of thought and expression," AP reported. Rubin called on
the Azerbaijani leadership "to engage in dialogue with,
not harassment of, political opponents." Meanwhile, some
20 independent newspaper editors have ended a hunger
strike begun in mid-November, but their deputies and the
entire editorial staff of the newspaper "Cumhurriyet"
have begun fasting in their place, Turan reported on 1
December. Meeting last week in Baku with OSCE Chairman-
in-Office Bronislaw Geremek, Azerbaijani President
Heidar Aliev rejected the latter's argument that the
libel suits brought against opposition newspapers are at
odds with the principle of free speech, according to the
"Neue Zuercher Zeitung" on 1 December. LF

AZERBAIJANI PARLIAMENT RATIFIES ANOTHER OIL CONTRACT.
Parliamentary deputies on 1 December voted by 88 to
three with two abstentions to ratify the $2 billion
contract concluded in London in July 1998 to develop the
Inam Caspian oil field, which has estimated reserves of
100 million metric tons, Turan reported. The Azerbaijani
state oil company SOCAR has a 50 percent stake, Amoco 25
percent, and the British Monument Oil and Gas and the
Central Fuel Company of Russia 12. 5 percent each. In
November, the parliament ratified the production-sharing
agreements on exploiting the Shemakha-Gobustan and
Muradkhanly fields. LF

ARMENIAN PRESIDENT CRITICIZES PREVIOUS REGIME. In an
interview with three leading Armenian television
channels on 30 November, Robert Kocharian condemned the
approach of his predecessor, Levon Ter-Petrossian,
toward privatizing state enterprises, resolving the
Karabakh conflict, and campaigning for international
recognition of the 1915 genocide, Noyan Tapan reported.
He described the previous regime's Karabakh policy as
"conciliatory" and as implying that Armenia did not
support Karabakh Armenians' aspiration to independent
status. But Kocharian refrained from explicitly
condemning Ter-Petrossian's administration, as demanded
by opposition parties over the past several weeks. LF

TAJIK NATIONAL BANK OFFICIAL KIDNAPPED. Four armed men
in camouflage outfits stopped the car of Tajik National
Bank deputy chairman Nawruz Valiyev and kidnapped him on
2 December, ITAR-TASS and Reuters reported. On 26
November, the Russian news agency reported that the
incidence of kidnapping in Tajikistan has doubled in the
first nine months of this year, compared with same
period in 1997. Moreover, there are currently 2,068
wanted criminals at large, although some of them may no
longer be in Tajikistan. BP

KAZAKH PRESIDENTIAL CANDIDATE HOLDS PRESS CONFERENCE.
Serikbolsyn Abdildin, the presidential candidate from
the Communist Party, held a press conference in Almaty
on 1 December to outline his political program, RFE/RL
correspondents reported. Abdildin said Kazakhstan needs
an "equal society" and a diversified economy that
includes elements of both central planning and a free
market. He also said Kazakhstan should seek closer ties
with Russia, specifically by concluding a joint defense
treaty. Abdildin noted that poverty must be tackled
immediately as about 80 percent of the population can be
considered "poor." BP

END NOTE

FIGURING RUSSIA'S FOREIGN DEBT

by Robert Lyle

	An official of Germany's Deutsche Bank laughs when
asked the size of Russia's total external debt. "The
overall figures vary so much I don't want to get
involved in that," he says.
	Deutsche Bank, one of the world's largest, with
commercial loan and investment exposure of more than $1
billion in Russia, uses the figure of $182.8 billion as
its best-guess-estimate of what Russia, publicly and
privately, owes the rest of the world.
	United Financial Group and the daily "Moscow Times"
put the total outstanding debt even higher, at $195
billion--$150 billion in state debt and $45 billion in
commercial debt. If the United Financial figures are
correct, Russia borrowed $70 billion in 1997 and the
first six months of 1998.
	The global organization of commercial financial
firms, the Institute of International Finance (IIF),
says Russia borrowed $22 billion in the first half of
1998 alone.
	The IMF will not release the figures it is using,
although in a report before Moscow's splurge of
borrowing and this year's financial crisis, it put
Russia's external debt at the end of 1996 at $125
billion. That included Soviet debt Moscow assumed on the
break-up of the USSR and then rescheduled as well as
$15.4 billion still owed to its old partners in the
communist economic and trade group COMECON.
	Russia has not issued an official accounting of all
of its external debt, but Deutsche Bank estimates that
the largest portion--$152.8 billion--is owed by the
Russian federation government. It estimates that local
and regional governments owe another $1.5 billion and
banks and corporations $28.5 billion.
	The United Financial Group and the "Moscow Times"
put debt due in 1999 at $32.5 billion--$17.5 billion in
state debt and $15 billion in commercial debt. The IIF,
however, says the $17.5 billion government figure does
NOT include whatever Russia will pay on treasury bills
now being rescheduled.
	Deutsche Bank includes the interest as well in its
estimates that public and private borrowers in Russia
are supposed to pay foreign creditors a total of $49
billion in 1999. Meanwhile, Deputy Finance Minister
Mikhail Kasyanov has said Moscow will be able to pay
back less than $10 billion of the $17.5 billion owed
through 1999.
	The overall situation is confusing because
negotiations on dealing with each part of the debt are
conducted with different creditors under different
circumstances.
	For example, Russia's official debt to commercial
bankers is being dealt with in at least two sets of
talks under the so-called London Club, a grouping of
about 600 commercial banks worldwide. The most pressing
talks are over part of the rescheduled Soviet Union
debt--instruments called PRINS--which is due on 2
December but has a 15-day grace period. Under the
rescheduling agreement worked out in 1997, half of what
is due on 2 December was to be paid in cash and half in
bonds to be called Interest Arrears Notes (IANs).
Instead, Russia has now proposed to pay the entire $724
million with new IANs said to be worth only about 13
percent of their face value.
	Russian officials in Moscow have been quoted as
saying there would be an additional $216 million cash
interest payment. The "Moscow Times" reports that Russia
feels an obligation to honor this paper, but the banks
involved in the London talks said they have seen nothing
on that.
	A Deutsche Bank spokesman says this issue may be
taken up this week by negotiators from the banks but
that most of their attention is still focused on the
agreement in principle announced two weeks ago on the
Russian government treasury notes, known as GKOs. The
spokesman said a number of subcommittees of commercial
bankers are still working on the Russian offer of a
complicated mix of instruments to handle the
approximately $10 billion owed on the GKOs to foreign
commercial creditors.
	There continue to be disagreements among the
Western banks involved. One group--those with continuing
active business involvement in Russia--are willing to
take more ruble-denominated securities that could be
used only for transactions within Russia. A second group
wants to get hard currency out as quickly as possible.
	Russian official government debt to other
countries--handled through the so-called Paris Club of
official creditors -- amounted to more than $50.4
billion at the end of 1996. But that is nearly covered
by the more than $47 billion other countries owe Russia.
Most are Soviet-era debts owed by poor, developing
countries.
	Russia's other big foreign debt is what it owes the
IMF, the World Bank, and the European Bank for
Reconstruction and Development, totaling more than $25.5
billion.
	Russian officials last week suggested they might
ask the IMF to "reschedule" what Moscow is due to repay
the fund in 1999, but IMF officials have underscored
that the fund does not and will not reschedule debt owed
by member countries.
	IMF officials will not say exactly how much Russia
is due to repay in 1999--it has kept up its repayments
so far on a total debt of $19.58 billion-- but United
Financial estimates that $4.8 billion is due next year.
IMF officials point out that the repayment schedule is
heavier in later years because of grace periods in some
of the loans.

The author is an RFE/RL correspondent based in
Washington. Floriana Fossato, a Moscow-based RFE/RL
correspondent, contributed to this article.

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                     All rights reserved.
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