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RFE/RL NEWSLINE Vol 2, No. 244, Part I, 21 December 1998
________________________________________________________ RFE/RL NEWSLINE Vol 2, No. 244, Part I, 21 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 * RUSSIA HAILS END TO STRIKES AGAINST IRAQ * YURII BOLDREV BLOC SCORES BIG SUCCESS IN ST. PETERSBURG * GEORGIA PUTS SECURITY FORCES ON FULL ALERT End Note: RUSSIA'S ECONOMIC COLLAPSE xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA RUSSIA HAILS END TO STRIKES AGAINST IRAQ... Russian President Boris Yeltsin lauded the end of U.S.-U.K. air strikes against Iraq, saying that "common sense has finally prevailed." Yeltsin added that by resolutely opposing the military operation against Iraq, "Russia once again demonstrated that it is a powerful factor in the maintenance of international stability and security." Russian ambassadors will return to their posts in Washington and London "as soon as the bombing stops," an "informed source in Russian diplomatic circles" had told "Kommersant-Daily" on 19 December. According to the source, "a return to confrontation [with the U.S.] is not worth it for the very reason that it is not in our interests." The daily also reported that the atmosphere at the recent Russia-NATO Joint Council meeting was friendly and that Russia does not blame NATO for the attacks because France, a key member, opposed them. JAC ...VOWS TO PREVENT SIMILIAR EPISODE IN BALKANS. Meanwhile, Prime Minister Yevgenii Primakov said Russia is satisfied that the strikes have ended, but he added that he viewed "with apprehension statements that this may be just a respite," ITAR-TASS reported on 20 December. The previous day, Primakov said Russia "will focus a keener eye on the situation in the Balkans" in light of Russia's failure to avert air attacks against Iraq. JAC RUHRGAS WINS GAZPROM TENDER. Germany's Ruhrgas was named the winner of a 2.5 percent stake in Gazprom on 19 December. The only other bidder had been Interoil Finance, which represented the interests of LUKoil, Interfax reported. Ruhrgas offered to pay $660 million-- $9 million above the government's starting price. Ruhrgas also plans to acquire an additional 1.5 percent stake by establishing a joint venture with a Gazprom subsidiary, Gazexport, Bloomberg reported on 21 December. Ruhrgas will be able to purchase the additional stake on the Russian domestic market at the domestic price because the joint venture will be a local company, according to the agency. JAC YURII BOLDYREV BLOC SCORES BIG SUCCESS IN ST. PETERSBURG. The Yurii Boldyrev bloc captured more seats in St. Petersburg's legislative assembly than other contenders in the 20 December run-off elections. RFE/RL's St. Petersburg bureau reported on the next day that the Boldyrev bloc won 15 seats, Yabloko eight, and Communists five, while the Soglasie [Accord] bloc won only one seat. In addition, 14 independent candidates were elected. Turnout was 10 percent lower than in the first round of voting (see "RFE/RL Newsline," 7 December 1998). No serious election violations were recorded during the second round, according to the city's Prosecutor's Office, ITAR-TASS reported. Boldyrev, a former member of the Yabloko party, is a State Duma deputy who has won widespread popularity in St. Petersburg for his investigations under the auspices of Duma's Audit Chamber. JAC OTECHESTVO HOLDS FOUNDING CONGRESS... The founding congress of Moscow Mayor Yurii Luzhkov's new Otechestvo [Fatherland] movement was held on 19 December. As expected, Luzhkov was elected the movement's leader. Luzhkov called for the creation of a "modern army, a reliable nuclear deterrent system," and market reform but not radical market reform. Nobel prize-winning author Aleksandr Solzhenitsyn, who recently turned down the nation's top honor, sent a message to the congress asking it "to unite the forces that the country needs." Luzhkov also received messages of support from Patriarch of Moscow and All Russia Aleksii II and Duma deputy Colonel General Boris Gromov. The Justice Minister registered the party immediately after the congress, hours before the deadline expired for parties to register to compete in 1999 Duma elections. JAC ...AS MOVEMENT SPREADS IN REGIONS. A number of regional branches of Otechestvo are being formed rapidly, "Vremya MN" reported on 15 December. Leaders of local Otechestvo branches include Moscow Oblast Governor Anatolii Tyazhlov, Asktrakhan Mayor Igor Bezrukanikov, Volgograd Mayor Yurii Chekov, Bashkortostan Republic Prime Minister Rim Bakiev, Udmurtia State Council Chairman Aleksandr Volkov, Kalmykia Republic Prime Minister Viktor Baturin (Luzhkov's brother-in-law), Murmansk Oblast Governor Yurii Evdokimov, and Novosibirsk Oblast Governor Vitalii Mukha, according to the daily. In Tver Oblast, a founding congress of the local branch attracted most of the region's ruling elite, according to "EWI Russian Regional Report" of 17 December, while Tver Governor Vladimir Platov's first deputy governor Viktor Opekunov was selected the branch's leader. JAC FOREIGN BANKERS RAISE SPECTRE OF LAWSUITS TO COLLECT ON DEBT. Foreign holders of defaulted Russian government short-term treasury bonds have formed a special subcommittee to investigate their legal options for recovering money owed by the Russia government. ITAR- TASS on 18 December described the formation of the subcommittee as a split among the international bankers; however, the "Moscow Times" the next day cited Dan Jackson, emerging markets director-general at Nomura, as denying that any rift exists. Nomura is chairing the subcommittee. According to the daily, the Russian negotiating team is tacitly using Russia's underdeveloped legal base "as a handicap" in its negotiations. JAC NEW REGIONAL FOOD RESTICTIONS IMPOSED. Belgorod Oblast Governor Yevgenii Savchenko on 18 December signed a decree prohibiting the sale of foodstuffs to distributors from outside the oblast as well as tightening price controls for food sales within the oblast, ITAR-TASS reported. As a result, the price for poultry dropped 40 percent, eggs 25 percent, and butter 36-39 percent. Earlier this month, "Komsomolskaya pravda" reported that Krasnodar Krai is experiencing food shortages because Krai Governor Nikolai Kondratenko has imposed price ceilings for foodstuffs. JAC COMMUNISTS' POSITION ON ANTI-SEMITISM CLARIFIED? After refraining from rebuking his fellow Communist Party member and Duma Deputy Viktor Ilyukhin for his recent anti-Semitic remarks, Communist Party leader Gennadii Zyuganov showed that he has a slightly different take on the issue, "Kommersant-Daily" reported on 19 December. Zyuganov told reporters that former Soviet leader Mikhail "Gorbachev, Yeltsin, and [former Prime Minister Viktor] Chernomyrdin are all Russians, but the harm that they inflicted upon Russia is more than that of the Jews, [former Deputy Prime Minister Anatolii] Chubais, [former acting Prime Minister Yegor] Gaidar and [former Foreign Minister Andrei] Kozyrev." JAC HEAD CHOSEN FOR BANK RESTRUCTURING AGENCY. Central Bank deputy chairman Aleksandr Turbanov has been named head of the new Agency for Restructuring Credit Organizations (ARKO), "Izvestiya" reported on 18 December. According to the daily, Turbanov is ideally suited for the task since he was educated as a lawyer and spent 20 years at the Ministry of Internal Affairs as an investigator. The newspaper also reported that he has significant authority among banking, government, and parliamentary circles. JAC PRIMAKOV HAILS RUSSIAN-INDIAN RELATIONS... Prime Minister Primakov said at a 21 December meeting with Indian President Kocheril Raman Narayanan that Russo- Indian relations are developing well, Russian agencies reported. He also described India as "a great power." Primakov and Narayanan discussed cooperation in a wide variety of fields, and India stressed its desire to purchase atomic, space, and biological technologies, according to ITAR-TASS. Discussions on sales of Russian arms to India are expected later the same day. On 18 December, Russian arms manufacturer Rosvooruzhenie signed a contract with the Indian airforce on the delivery of 10 SU-30K fighter planes. Meanwhile, on 21 December, the two countries' Justice Ministers signed an agreement on mutual assistance in investigating criminal cases and on extradition. BP ...PROPOSES 'STRATEGIC TRIANGLE.' Speaking to journalists before meetings with Indian government officials, Primakov called for the creation of a "strategic triangle" made up of Russia, India, and China, ITAR-TASS reported. Primakov did not elaborate but noted that "much depends in the region and the world in general on the policy pursued by India, China, and Russia." It is doubtful, however, that India and China would be interested in such a formation, given their long-standing animosity. BP SINGLE CURRENCY PROPOSED FOR RUSSIA, UKRAINE. Ukrainian parliamentary speaker Oleksandr Tkachenko told reporters in Moscow on 18 December that "Russia and Ukraine must join not only political efforts but create a common economic space through sharing currency," ITAR-TASS reported. Tkachenko was visiting the Russian State Duma as part of an official delegation. Meanwhile, Oleg Sysuev, deputy head of the presidential administration, voiced concern about recent statements by Belarusian President Alyaksandr Lukashenka on 19 December. After seeing Lukashenka's latest interview on Russian Television, he said "closer integration with a country whose president is preaching such ideas scares me" (see "RFE/RL Newsline," 18 December 1998). However, he added that "integration between the peoples of Russia and Belarus should be continued." JAC RUSSIA TO HAVE NEW MAN IN PARIS. Russian President Yeltsin has appointed Nikolai Afanasevskii as new ambassador to France, Interfax reported on 18 December. Afanasevskii has been serving as deputy foreign minister with responsibility for European security issues including OSCE, NATO, and Balkan affairs. JAC CHECHEN DEPUTIES OPPOSE PROPOSAL FOR NEW RELIGIOUS BODY. Chechen lawmakers have reacted negatively to Vice President Vakha Arsanov's 20 December proposal to establish a new state religious body, a Shura or constitutional council, ITAR-TASS reported the next day. Arsanov had suggested that the new body would help to bridge the divide between President Aslan Maskhadov and his opponents, but both lawmakers and the president suggested that the proposal is an attempt by the opposition to increase power. PG CHECHNYA SUSPENDS CRACKDOWN FOR RAMADAN. Chechen Deputy Security Minister Abu Bazhiyev told ITAR-TASS on 21 December that Grozny will suspend its crackdown on crime during Ramadan. But he added that the authorities will remain on the alert throughout the period. PG TRANSCAUCASUS AND CENTRAL ASIA GEORGIA PUTS SECURITY FORCES ON FULL ALERT... The Georgian government put Interior Ministry and security forces deployed in western Georgia on full alert on 18 December in response to an alleged buildup of Abkhaz armed forces in Abkhazia's southernmost Gali Raion (see "RFE/RL Newsline," 15-16 December 1998), Reuters and ITAR-TASS reported. A Georgian statement attributed that alleged buildup to Abkhaz plans to launch reprisals on Georgian-populated villages in Gali. Abkhaz Interior Minister Amazbei Kchach and Foreign Minister Daur Arshba both denied either that additional troops have been sent to Gali or than any attack on the district's Georgian population is planned. Abkhaz President Vladislav Ardzinba criticized the Georgian move as aimed at undermining efforts to resolve the conflict peacefully, according to Interfax. Also on 18 December, Russian Foreign Ministry spokesman Mikhail Mayorov expressed concern at the "escalation of mutual tensions" and the mobilization of Georgian forces, ITAR-TASS reported. LF ...AS GEORGIAN, ABKHAZ REPRESENTATIVES AGREE TO FURTHER TALKS. During talks in Geneva on 18 December, Georgian Minister of State Vazha Lortkipanidze and Abkhaz Premier Sergei Bagapsh agreed to meet again on 22 December in Gali Raion in order to discuss the implementation of previously signed agreements, Caucasus Press reported. On 17 December, they had discussed measures to prevent a resumption of hostilities in the region. But Lev Mironov, the Russian representative to the talks, said the proposed meeting between the Georgian and Abkhaz presidents was not discussed. Eduard Shevardnadze and Vladislav Ardzinba were to have signed a protocol on the repatriation to Gali of ethnic Georgian displaced persons at that meeting, which was originally scheduled for November. LF SHEVARDNADZE SAYS HIS ASSASINS HIDING IN ABKHAZIA. In a 21 December statement, Georgian President Shevardnadze said he remains committed to a peaceful settlement of the Abkhaz conflict, ITAR-TASS reported. But in a remark that may exacerbate tensions between Tbilisi and that breakaway region, the Georgian leader said he has information that some of those who attempted to kill him in February 1998 are hiding in Abkhazia's Gali Raion. He added that "rendering any support to terrorists is unacceptable for the Georgian authorities." PG GEORGIAN PARAMILITARIES MEET. Members and veterans of up to one dozen Georgian informal paramilitary units that fought in Abkhazia and South Ossetia in the early 1990s gathered at the Shavnabada camp near Tbilisi on 19 December to discuss the possibility of joining forces to restore Tbilisi's jurisdiction over those two territories, Caucasus Press reported. One of the participants was Zurab Samushia, leader of the White Legion guerrilla movement, which is currently operating in southern Abkhazia. A Georgian Defense Ministry representative who attended the gathering expressed the hope that the informal paramilitaries would not act independently of the ministry. The veterans demanded an amnesty for members of the banned paramilitary organization Mkhedrioni who are currently serving prison sentences for terrorism. The veterans argued that the imprisoned Mkhedrioni members had fought to preserve Georgia's territorial integrity. LF GEORGIAN BORDERGUARDS REPLACE RUSSIANS ON TURKISH BORDER. Units of the Russian Federal Border Service on 20 December turned over responsibility for guarding a portion of the Georgian-Turkish border to Georgian borderguards, ITAR-TASS reported. The Russian unit is to be deployed to Russia's Volgograd Oblast. Three other Russian detachments still guarding that border will be withdrawn in the near future under the terms of an agreement between Moscow and Tbilisi. On 21 December, Georgian President Shevardnadze said his government will assume complete responsibility over control of all Georgia's borders by 1 July 1999. PG GEORGIAN HUNGER STRIKER FOUND DEAD. Nugzar Lezhava, one of several dozen supporters of deceased former President Zviad Gamsakhurdia who had launched a hunger strike to demand the release of a former Georgian parliamentary deputy arrested in Moscow last week, was found dead on 18 December, Caucasus Press reported. Gamsakhurdia's widow, Manana Archvadze-Gamsakhurdia, accused the police of having broken into the home of deceased Georgian dissident Merab Kostava, where Lezhava had taken refuge, and of murdering him. LF PRESENT, FORMER ARMENIAN FOREIGN MINISTERS DIFFER OVER KARABAKH PEACE PLAN. Vartan Oskanian told RFE/RL's Yerevan bureau on 19 December that the Karabakh peace plan proposed by the Minsk Group co-chairs during their November visit to the Transcaucasus is an improvement on their previous proposal and thus constitutes "a big step forward" toward resolving the conflict. "This document is substantially different from the previous one," Oskanian said. On 18 December, Oskanian's predecessor as foreign minister, Alexander Arzoumanian, had told journalists that "there is no difference" between the 1997 proposal and the more recent one. Arzoumanian claimed to have seen the most recent draft, the details of which have not been made public. LF NAZARBAYEV WANTS BOOSTED TIES WITH 'GOD-GIVEN NEIGHBOR.' Kazakh President Nursultan Nazarbayev, visiting the southwestern city of Aktau on 18 December to meet with voters, said CIS countries should move closer together to confront the economic crisis they all face, Interfax reported. With reference to the upcoming visit of Russian Prime Minister Yevgenii Primakov to Kazakhstan, he said the two countries are considering forming an economic stabilization fund as well as food aid for countries hard hit by the economic crisis. Nazarbayev said he is "bewildered" by Russia's requests for humanitarian grain shipments, noting that "Russians keep selling grain in Kazakh regions along the border with Russia at $30-40 per ton." At the same time, he urged greater cooperation between the two countries is necessary, saying that Russia is "a neighbor given to us by God." BP KAZAKH PRESIDENTIAL CANDIDATE PRESENTS PROGRAM. Engels Gabbasov said on 18 December that there are "many faults" in the economic reform process currently under way, Interfax reported. Gabbasov said a remedy is needed for the "critical situation in industry and agriculture, low living standards of the majority of the population, and the growth of crime and the shadow economy." Gabbasov said if successful in the 10 January elections, he will restore "the state monopoly on oil, gas, and precious and non-ferrous metals [as well as] as on the production and sales of alcoholic beverages." Gabbasov also said industry should be revived by restructuring the energy sector. He added that he also favors cuts in the prices of electricity, fuels, and lubricants for agricultural producers, and he spoke out in favor of free education and medical care as well as increased benefits for mothers with many children. Gabbasov said Kazakhstan needs improved ties with CIS countries especially those taking part in the CIS Customs Union alongside Kazakhstan. BP UZBEK, MOLDOVAN PRESIDENTS VOW GREATER COOPERATION. Islam Karimov and Petru Lucinschi held a press conference in Tashkent on 18 December, Interfax reported. Karimov said cooperation between the two countries will be expanded, singling out projects linked with the exploitation of the Black Sea and in the sphere of communications. Interfax reported that bilateral trade in 1997 amounted to some $9 million and in the first nine months of 1998 totaled some $6 million. BP KARIMOV ADMITS TO WEAPONS PROGRAM IN ARAL SEA... At the Tashkent press conference on 18 December, Karimov said, in the context of the U.S. and U.K. air strikes against, that during Soviet times his country had biological weapons: "I can openly say this now...a bacteriological weapon was being developed in the Aral Sea area on Barsa Kelmes Island." Karimov said the leadership of the Uzbek SSR did not know about the program, but he added that since independence, his country has allowed "the international community" to take soil samples "in order to find out the scale of the work, what kind of organisms they were trying to create." BP ...TAKES A SWIPE AT BEREZOVSKII. Karimov also criticized the work of CIS Executive Secretary Boris Berezovskii, saying Berezovskii is ignoring plans to reform the CIS, which are currently being discussed by CIS prime ministers." He added that Berezovskii is attempting "to determine the future of the commonwealth at separate meetings with the presidents of the CIS countries," Interfax reported. Karimov said Berezovskii has a different program from that of "the document approved by the CIS experts." Uzbek Television limited its coverage of Karimov's comments on Berezovskii to the Uzbek president saying he admires Berezovskii but does not like the CIS executive secretary's plan for restructuring the CIS. BP END NOTE RUSSIA'S ECONOMIC COLLAPSE By Floriana Fossato Russia's economic landscape at the end of 1998 is a desolate one. In the wake of August's financial collapse, the government's coffers are virtually empty. There is no money to service loans taken out to meet basic state obligations or to pay wage and pension arrears to Russia's impoverished population. Inflation continues to increase. Cautiously optimistic economic forecasts for next year, released by the government of Prime Minister Yevgenii Primakov, have been criticized as aimed at attracting much-needed Western financial aid and placating frustrated domestic constituencies. And economic analysts say the draft 1999 budget recently produced by the government is unrealistic. They point out that it assumes Russia will obtain new loans from the MF and other international organizations, even though IMF officials have repeatedly stressed no additional money will be forthcoming until Russia draws up a credible economic recovery plan. Legislators are willing to help Primakov's government to an unprecedented degree. But many of them also express doubts about the draft budget. In August, former Prime Minister Sergei Kirienko's reformist government brought about its own downfall by devaluing the ruble, defaulting on some debts, and introducing a 90-day moratorium on foreign debt payments. During its five months in office, Kirienko's government had made several frantic attempts to stave off the crash, with Kirienko saying Russia should finally learn to "live by its own means." However, a brutal political fight, fueled by financial tycoons with influential political ties, began to intensify along with the economic crisis. Russia subsequently defaulted on 281 billion ruble- denominated treasury bills and bonds. (That was the equivalent of $43 billion in August and, by year's end, nearly $14 billion, as the ruble fell from six to nearly 21 to the dollar.) Following the financial collapse, Russia's banking sector lost liquidity, payments and salaries were blocked, and many Russians, who had timidly started to trust the banks, lost their savings. Within one week in August both the reformist government and, in effect, the stock market disappeared. Within two weeks, the ruble lost two-thirds of its value. Many of the country's banks turned into empty glass fortresses. Others are being saved by the new government, with little regard for private depositors' losses. Next year, analysts say, Russia may default on $17.5 billion in outstanding payments on its foreign debt, including some $1.7 billion in Eurobonds. That would make it the first country in world history to default on government-guaranteed securities sold abroad. The government and the IMF continue to discuss how Moscow can pay its debts and improve its finances. The outcome of those talks will determine whether the IMF provides additional loans. On both sides, the phrase "fiscal discipline" is repeated like a mantra, but officials involved acknowledge that the chances of Russia radically improving its finances in the coming year are nil. In 1996 and 1997, Russia's economy had begun to show signs of growth. This occurred despite widespread tax delinquency, pervasive capital flight, vitriolic quarrels among the country's oligarchs, and the failure of international financial institutions to offer assistance during Moscow's first attempts at radical reform. So what were the reasons for the collapse in 1998? One reason, many analysts say, was the broader international meltdown that wiped out emerging markets in Asia and produced a global financial crisis. The analysts also point out that international prices for oil, gas, and metals -- all major Russian exports -- sank to record low levels. That spelled disaster for a country in which oil and gas production accounts for about one-third of all domestic taxes and for more than half of foreign-currency revenues. But international experts believe the major cause for the collapse lies elsewhere. They say that the huge debt Russia inherited from the Soviet Union spiraled as a result of additional borrowing by Russia. That, they argue, created a kind of a pyramid that eventually imploded when, because of increasing evidence of widespread corruption and incompetent corporate governance, confidence in Russia began crumbling, Currently, three sets of debt-restructuring talks are under way. The government has appealed for restructuring and refinancing both Russian and Soviet debt. More important, Russia is negotiating new credits with the IMF as well as the refinancing of an estimated $4.8 billion due in repayments to the fund in 1999. Unlike other international debts, those to the IMF cannot be renegotiated. If Russia defaults on its obligations to the IMF, it will join the ranks-and attain the perceived risk level-- of some African countries. Primakov has brought a small measure of economic stability since he took office. But many old bad habits, rejected by the previous reformist government, are. In 1997, President Boris Yeltsin banned barter trade between private companies and the government because it was seen as inflationary, inducing corruption, and a way to avoid structural reform. But the current government has returned to barter to provide fuel and food to some needy Russian regions. Still, the cabinet has performed better than initially feared. It has not resorted to the printing of large amounts of money, which would have led to hyper- inflation. Primakov says there will be no (what he calls) "uncontrolled" printing of money to pay international and domestic debts next year. However, this month, the Duma passed a bill authorizing the printing of 25 billion rubles before the end of the year. The hope is the money will be used to pay wages and pensions. The 1999 draft budget estimates inflation at 30 percent. Some economic analysts say that the best Russia can hope for is a rate of 60 to 70 percent. Despite this and other pessimistic forecasts, the country and its people are muddling through, albeit with difficulty. The author is an RFE/RL correspondent based in Moscow. 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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