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RFE/RL NEWSLINE Vol. 2, No. 234, Part I, 7 December 1998
________________________________________________________ RFE/RL NEWSLINE Vol. 2, No. 234, Part I, 7 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Headlines, Part I * YELTSIN'S BACK, SOME STAFF GET THE SACK * LIBERALS LEAD IN FIRST ROUND OF ST. PETERSBURG ELECTION * GEORGIA DEVALUES THE LARI End Note: RUMORS OF OLIGARCHS' DEMISE GREATLY EXAGGERATED xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN'S BACK, SOME STAFF GET THE SACK... During a brief trip to his office from the hospital on 7 December, President Boris Yeltsin dismissed the chief of the presidential administration, Valentin Yumashev, and three of Yumashev's deputies: Yurii Yarov, Mikhail Komissar, and Yevgenii Savostyanov. Yumashev will be replaced by Nikolai Bordyuzha, secretary of the Security Council and former head of the Federal Border Service. Yeltsin also transferred the Justice Ministry and Federal Tax Service to his direct oversight, in addition to the 13 ministries and agencies he was already overseeing. Russian media reported on 5 December that when meeting with Yeltsin at the hospital, Prime Minister Yevgenii Primakov had asked the president to heed the advice of his doctors and not leave the hospital ahead of schedule. Komissar told ITAR-TASS that he had wanted to leave his post in order to return to Interfax, while Yarov has been named the president's representative at the Federation Council. JAC ...WHILE OTHER DISMISSALS PENDING? Deputy chief of the presidential administration Oleg Sysuev told ITAR-TASS that the reshuffle "is not the last step" the president will take to bolster his power. "Segodnya" on 4 December had tipped that Sysuev would be dismissed. The newspaper quoted Yumashev as saying that Sysuev was "carried away on a 'wave of emotion'" when he joined the recently formed center-right bloc and that the presidential administration will not support that alliance. The newspaper also noted that Yumashev openly supported former Prime Minister Viktor Chernomyrdin for the upcoming presidential elections and had met with the Our Home Is Russia faction at Yeltsin's bidding, according to presidential spokesman Dmitrii Yakushkin. JAC LIBERALS LEAD IN FIRST ROUND OF ST. PETERSBURG ELECTION. According to preliminary results, liberal parties performed well in the first round of city elections in St. Petersburg, RFE/RL's St. Petersburg bureau reported on 7 December. Twenty-two candidates from Yabloko, 18 from Yurii Boldyrev's bloc, two from the Soglasie [Accord] bloc, and 10 Communists will participate in run-off elections on 20 December. Meanwhile, the City Election Commission annulled results at one polling station where the number of final votes counted was higher than the number of voters, according to ITAR- TASS. The day of the election, three polling stations received bomb threats, according to Interfax. JAC KAMCHATKA CONTINUES TO FREEZE. Despite a high-level visit from the Minister of Emergency Situations last month, energy supplies are again running dangerously low in Kamchatka Oblast, "Izvestiya" reported on 5 December. The newspaper added that not one of the agencies that signed a protocol on 5 November to resolve situation on the peninsula has fulfilled its pledges. For the past two months, the temperatures in homes in Petropavlovsk- Kamchatskii have not risen above 8-13 degrees Celsius, "Kommersant-Daily" reported. There is no hot water, and in some raions there is no cold water either. According to "Izvestiya," current fuel supplies were set to last only 24 hours. Interfax reported the same day that residents of the central part of the oblast have been living without electricity since 30 November, but two tankers carrying fuel oil will arrive on 8 December. JAC RUSSIA MAY EXTEND 'AMNESTY' FOR CAPITAL ABROAD. Russia is considering granting an amnesty for capital illegally diverted abroad, Prime Minister Primakov told the World Economic Forum in Moscow on 4 December. The "amnesty" would be granted by allowing Western banks to open branches in Russia and allow their customers to open numbered bank accounts without having to provide documentation for the source of their money. Primakov also pledged that Russia will not reverse the results of privatization, although he added that "something will have to be corrected." Speaking more generally, he noted that the unsuccessful economic reforms of the past "have given birth to an economy of distrust in Russia" and a crisis of confidence has afflicted almost all links in the nation's "economic chain, between the state and the people, [between] debtors and creditors, and [among] power branches." JAC GOVERNMENT PROMISES MORE FUNDS FOR MILITARY. First Deputy Prime Minister Yurii Maslyukov said on 4 December that the government will earmark 3.5 percent of GDP for military spending. He added that the "economic situation in the country will change for the better in 1999, and we will channel more resources to the country's security." However, the presidential decree allocating 3.5 percent of GDP for national defense "has never been implemented," Duma Defense Committee Deputy Chairman Aleksei Arbatov of Yabloko told Interfax on 2 December. He also noted that the 1998 budget called for 2.9 percent of GDP for the armed forces but only one-third of those funds was disbursed. The military newspaper "Krasnaya zvezda" said that the 2.6 percent of GDP allocated for the military in the 1999 draft budget will "finish off the army once and for all." JAC ORTHODOX CHURCH PLAYING ENHANCED ROLE IN ARMY? Russian Orthodox priests' blessings of vessels, armaments, and boundary posts is becoming increasingly popular in the armed forces, "Segodnya" reported on 4 December. The newspaper also noted that despite the Defense Ministry's official position that it does not discriminate on the basis of nationality or religion, it continues to register the nationality of its servicemen. According to the ministry's tally, more than 75 percent of the armed forces are Slavic. The next largest groups are the Tatars, who compose 2.2 percent, and the Ossetians, 1.1 percent. The paper concluded that owing to the "centrifugal mood" within the armed forces, the "would- be Russian professional army may turn out to be exclusively Slavic and particularly Orthodox, which is nonsense in a multinational federal state." JAC RUSSIAN STEEL PRODUCERS UNDER PRESSURE FROM CANADA. Russian steel producers, already facing possible punitive tariffs on their products in the U.S., are now being investigated for dumping in Canada, ITAR-TASS reported on 5 December. Five major steel producers in Canada have filed a complaint against Russian exporters of hot-rolled steel. The Ottawa government will investigate the complaint over the next 60 days. Russian exporters, according to the agency, have almost 16 percent of the Canadian market for hot rolled steel. JAC SLAIN DEPUTY'S WIFE DECLARED SANE. Psychiatrists have found Tamara Rokhlin, wife of murdered Duma deputy Lev Rokhlin, sane, ITAR-TASS reported on 6 December. In a television interview, her daughter and son-in-law repeated their earlier claim that Tamara Rokhlin has confessed to her husband's murder only because of a threat to the life of her children. They continue to assert that the murder was politically motivated. JAC MAYORAL ELECTION CONCLUDES QUIETLY. The acting mayor of Anzhero-Sudzhensk in Kemerovo Oblast, Viktor Ivshin, was elected to his post on 6 December, ITAR-TASS reported. Ivshin captured almost twice as many votes as the only other contender, Liberal Democratic Party member Sergei Zamotaev. More than 56 percent of eligible voters participated in the election. JAC KVASHNIN IN JAPAN. At the end of a three-day visit to Japan, General Anatolii Kvashnin, chief of staff of Russia's armed forces, told journalists he discussed with Japanese military and political officials the "normative and legal basis for development of relations between Moscow and Tokyo in the military sphere," Russian media reported on 6 December. Kvashnin also said that the possibility of a "joint information security system to coordinate relations and resolve political problems that arise" had been discussed but only in general terms. Much work remains in order to implement such a project, he added. Kvashnin met with Chief of Staff of the Japanese Armed Forces Admiral Kadzuya Natsukawa, Foreign Minister Masahiko Komura, and the chief of Japan's National Defense Agency, Hoseya Norota . Kvashnin commented that it is a sign of progress in Russo-Japanese relations that he is the first chief of the Russian General Staff ever to visit Japan. BP CHECHNYA DENIES CONTACTS WITH TALIBAN. Acting Chechen Foreign Minister Isa Idigov on 4 December denied a report in the London-based newspaper "Al Hayat" that Grozny may offer political asylum to Saudi millionaire Osama bin Laden, who is wanted for his role in the U.S. embassy bombings in Kenya and Tanzania in August, ITAR- TASS reported. Idigov also denied that the Chechen leadership and Taliban representatives are holding talks on establishing diplomatic relations. Idigov's predecessor, Movladi Udugov, had said in August that such talks are under way (see "RFE/RL Newsline," 24 August 1998). LF CHECHEN PARLIAMENT, PRESIDENT AT ODDS OVER GOVERNMENT. The Chechen parliament on 4 December again rejected President Aslan Maskhadov's proposed structure for the republic's new government as "too sophisticated," ITAR- TASS reported. Maskhadov has proposed dividing cabinet posts into nine blocs, each headed by a deputy prime minister.The parliament wants to limit the number of deputy premiers to five (see "RFE/RL Newsline," 24 November 1998). Speaking on Chechen Television on 5 December, Maskhadov said he will re-submit his planned government structure to the parliament without amending that document. LF TRANSCAUCASUS AND CENTRAL ASIA GEORGIA DEVALUES LARI. The government on 4 December approved National Bank chairman Irakli Managadze's proposal to cease propping up the country's failing currency, ITAR-TASS reported. The lari lost 30 percent of its value over the past week. Managadze admitted that the move could result in the lari plummeting to 2-4 to the dollar, which would be the equivalent of a 50-150 percent devaluation. In an interview with Caucasus Press on 7 December, Finance Minister Davit Onoprishvili predicted that the lari would stabilize at between 2-2.5 to the dollar within seven to 10 days. President Eduard Shevardnadze the same day said the devaluation does not signify the end of economic reform in Georgia. He said that the IMF and World Bank will shortly provide Georgia with $40-50 million and $20-25 million, respectively. The latter sum, however, is earmarked for the needs of the displaced persons and for funding the country's health system. LF GEORGIAN-ABKHAZ SUMMIT UNLIKELY? Georgian President Shevardnadze said on 7 December in his weekly radio address that Tbilisi is ready to lift the blockade of the border between Abkhazia and Russia, provided that Abkhazia provides adequate security guarantees for Georgian displaced persons wishing to return to Abkhazia's Gali Raion, Caucasus Press reported. But Shevardnadze said that Abkhaz leader Vladislav Ardzinba is demanding additional compromises to which Georgia cannot currently agree. Those demands include the dissolution of the Abkhaz parliament in exile, the abolition of the White Legion and Forest Brothers, and the trial of members of those two guerrilla organizations, according to "Nezavisimaya gazeta" on 5 December. Georgian Minister of State Vazha Lortkipanidze had told journalists the previous day that the security guarantees offered by the Abkhaz side are inadequate, Interfax reported. Shevardnadze and Ardzinba had planned to meet in November to sign a protocol on the repatriation of Georgian displaced persons. LF DEFEATED AZERBAIJANI PRESIDENTIAL CANDIDATE REJECTS TALKS. Azerbaijan National Independence Party chairman Etibar Mamedov told the parliament on 4 December that he will agree to talks with representatives of the country's leadership only after the publication of protocols giving the results of the 11 October presidential election, Reuters reported. Those protocols should have been published within 30 days of the election. Mamedov and other defeated opposition candidates dispute the official results, which gave incumbent Heidar Aliev 76.11 percent of the vote. Mamedov believes he polled more than 35 percent and therefore deprived Aliev of the two-thirds of the vote needed to avoid a runoff. On 3 December, a leading member of Aliev's Yeni Azerbaycan party said that opposition representatives have unconditionally accepted the president's offer of a dialogue, according to Turan. LF GAS SUPPLIES TEMPORARILY CUT OFF IN TAJIKISTAN. Gas supplies to Dushanbe and regions in the southwest have been indefinitely cut off by neighboring Uzbekistan owing to technical problems, ITAR-TASS reported on 5 December. Uzbektransgaz has informed Tajikistan's energy company of the problem and promised deliveries will resume very soon. Tajikistan owes some $33 million for gas received in the first 10 months of this year. BP KYRGYZSTAN DECLARES MORATORIUM ON DEATH PENALTY. Kyrgyz President Askar Akayev on 5 December signed a decree imposing a two-year moratorium on the death penalty, ITAR-TASS reported. The move comes three days after he declared an amnesty for 2,000 prisoners to commemorate the 50th anniversary of the signing of the UN Declaration on Human Rights. On 3 December, Turkmenistan announced it is placing a moratorium on the death penalty. BP KAZHEGELDIN GIVES INTERVIEW TO RUSSIAN DAILY. In an interview with "Kommersant-Daily" published on 4 December, former Kazakh Prime Minister Akezhan Kazhegeldin said that owing to the absence of political organizations in Kazakhstan, "society and government existed separately," resulting in "branches of government becoming wedded to one another" and changes to the constitution to hold early elections and increase the president's term in office to seven years. Kazhegeldin, who was barred from participating in next month's presidential elections, said he will "form a habit in society of confronting the government." He also said he will participate in a future presidential election, predicting that such a ballot will have to be held again in two years. BP TURKMEN PRESIDENT ADDRESSES STATE COUNCIL. Saparmurat Niyazov, addressing the State Council on 3 December, said the country's cotton sales will bring in revenues of $900 million, but he expressed disappointment at the failure to meet the cotton harvest target for 1998, Interfax reported. Niyazov said the cotton target will be lowered from 1.5 million tons this year (690,000 tons were reportedly gathered) to 1.3 million tons in 1999. The grain target figure of 1.2 million will remain the same for 1999. Niyazov added that the 1999 budget, totaling some 20.5 trillion manat ($4 billion), includes sufficient funds to maintain health-care levels, provide free gas, water, energy, and salt to the population, and subsidize flour prices. BP END NOTE RUMORS OF OLIGARCHS' DEMISE GREATLY EXAGGERATED by Donald N. Jensen Since the collapse of Russia's economy in August, much has been written about the demise of the business oligarchs--the small circle of influential entrepreneurs who grew rich over the past decade through close ties to the government, currency speculation, and, some say, criminal activities. Indeed, the business empires heavily dependent on the financial sector, such as Vladimir Gusinskii's Most Group and Vladimir Potanin's Oneksimbank, have been seriously damaged by the crash, while Aleksandr Smolenskii's SBS-Agro and Vladimir Vinogradov's Inkombank are ruined. However, entrepreneurs with extensive interests either in natural resources extraction, such as Rem Viakhirev of Gazprom and Vagit Alekperov of LUKoil, or in industry, such as Mikhail Khodorkovskii of Menatep and Boris Berezovskii of LogoVAZ, remain influential, albeit less so than previously. The oligarchs came to the notice of many people in the West in October 1996, when Berezovskii boasted in an interview that he and six other tycoons had ensured Yeltsin's reelection by bankrolling his campaign. Moreover, he bragged that he and six cronies controlled much of the Russian economy. But while the Big Seven, as the oligarchs came to be called, controlled a large chunk of the economy and had a decisive say on some key issues, their influence was less than Berezovskii had suggested. There were many issues, such as military reform, where they played virtually no role at all. Moreover, there were influential interest groups at the time that Berezovskii did not mention: LUKoil, Gazprom, lobbyist holdovers from the Soviet era such as collective farmers, and regional leaders like Moscow Mayor Yurii Luzhkov. Since the meltdown, Moscow's Alfa Bank, which has long-standing ties to the Yeltsin administration and whose relatively small holdings in the now defunct short-term securities market left it more or less unscathed, has been able to gain a competitive advantage over its more exposed rivals. In the absence of a strong state treasury, Alfa has been "authorized" to service the St. Petersburg City budget, a task offering numerous possibilities for corruption. Banks that service oil, gas, and precious metals exporters also remain important. In the regions, the economic collapse has accelerated the formation of oligarchic structures. In Saint Petersburg and Yekaterinburg, local governments have taken over regional banks to ensure ready access to revenue streams. The Nizhnii Tagil Metallurgy Combine has given a 25 percent stake to the government of Sverdlovsk Oblast in exchange for the restructuring of its tax debts and the cancellation of the salaries it owed its workers. Still other oligarchs are regrouping. The strategic alliance recently announced by LUKoil and Gazprom may strengthen their economic and political clout. Gazprom already pays a quarter of all Russia's taxes, and LUKoil is also a major contributor to the country's tax coffers. Even if they do not unite, the firms will almost certainly remain two of the few effective foreign-policy levers, especially toward Europe and Russia's neighbors. Indeed, Yevgenii Primakov's government, far from trying to end crony capitalism, appears to be favoring its own cronies. Favored banks participated in several debt swaps orchestrated by the Central Bank in September, and the Central Bank has sharply reduced reserve requirements to increase banks' liquidity. Most of the "socially important" large banks the government intends to save have ties to the new government, Central Bank Chairman Viktor Gerashchenko, or the Luzhkov administration. The government has announced that it intends to save, among others, Menatep and Most. The former has strong supporters in power, though few depositors and no regional network. The latter's extensive media holdings make it invaluable as the legislative and presidential elections approach. Meanwhile, Oneksimbank, widely considered to have been close to ousted the ousted Sergei Kirienko, Anatolii Chubais, and Boris Nemtsov, has so far been left in the cold. In the non-banking sector, the government's highly publicized battle with Gazprom over taxes owed appears to have been resolved in the firm's favor. Gazprom will provide food aid to needy Russians instead of paying money to the cash-starved federal government. A shakeup in the leadership of Rosvooruzhenie, the state arms export agency, now under the control of an alleged Primakov protege, suggests that the Russian arms industry may well experience a resurgence as it more aggressively seeks clients for high-tech weaponry abroad. That is not to say that Russia's business interests win every battle. The government has warned six major oil companies that their access to highly profitable export pipelines will be cut off if they do not draft a plan to sell more crude on the domestic market. There are serious differences among the oligarchs over policy and economic interests, such as protectionism. But since the differences are often over who is to receive increasingly scarce government favors, they are unlikely to benefit the long-suffering Russian public and may well become fiercer as total default looms. What survived the August collapse, however, are the rules by which Russian politics is played. Much of politics is informal, authority is personalized, institutions are weak, the distinction between public and private is blurred, and money is the currency of political power. Some people will doubtless profit financially under such regulations, but economic reform and democratic development will likely stagnate. It was this absence of the rule of law in the sphere of economic reform that the 1998 EBRD Transition Report cited as one of the reasons why Russia's transition has been so difficult. The author is associate director of broadcasting at RFE/RL. 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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