Miracles are natural. When they do not occur, something has gone wrong. - A Course in Miracles
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 2, No. 234, Part I, 7 December 1998


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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

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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
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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.
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               Copyright (c) 1998 RFE/RL, Inc.
                     All rights reserved.
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