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RFE/RL NEWSLINE

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

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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
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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.
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