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RFE/RL NEWSLINE Vol 3, No. 1, Part I, 4 January 1999
________________________________________________________ RFE/RL NEWSLINE Vol 3, No. 1, Part I, 4 January 1999 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, CLINTON PLEDGE TO MAINTAIN U.S.-RUSSIAN TIES * CREDIT RATING OF SEVEN RUSSIAN REGIONS LOWERED * UTO FIELD COMMANDERS SACKED AFTER SHOOT-OUT End Note: OIL AND GAS NO PANACEA FOR CASPIAN COUNTRIES' ECONOMIC WOES xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx RUSSIA YELTSIN, CLINTON PLEDGE TO MAINTAIN U.S.-RUSSIAN TIES. Russian President Boris Yeltsin spoke by telephone with his U.S. counterpart, Bill Clinton, on 30 December and repeated his opposition to U.S. and British attacks on Iraq. According to Interfax citing the Russian presidential press service, Yeltsin and Clinton agreed on the need to preserve and extend the "positive potential of U.S.-Russian relationships developed over the past few years." The two leaders also discussed preparations for the next session of the commission headed by Russian Prime Minister Yevgenii Primakov and U.S. Vice President Al Gore as well as U.S. Secretary of State Madeleine Albright's upcoming visit to Moscow scheduled for the end of January. JAC RUSSIA CONDEMNS SHOOTINGS IN ANGOLA┼ The Russian Foreign Ministry condemned UNITA for shooting down a second UN plane over Angola on 3 January. A ministry statement called for the UN Security Council to take "the most decisive and tough measures, envisaged by the UN Charter, against [UNITA]." According to the statement, six civilian airplanes had already been shot down in Angola over territory controlled by UNITA. JAC ┼CALLS FOR UPDATE OF CFE TREATY┼ The Foreign Ministry has again called for a revision of the Conventional Forces in Europe (CFE) treaty before NATO is expanded in the spring. According to a ministry statement on 2 January, the OSCE Foreign Ministers' Council agreed in Oslo to settle in the first months of 1999 the key problems of adapting the CFE treaty to reflect the new reality. The Russian Foreign Ministry contends that the admission of new members to NATO will undermine the "validity of the CFE treaty" and "threaten Russia's security." Moscow's hopes of strengthening the role of the OSCE as a pan-European security organization and as a counterweight to an expanded NATO are viewed as unrealistic by many OSCE member states. JAC/LF ┼ASSESSES S-300 REDEPLOYMENT DECISION. Russian Foreign Ministry spokesman Vladimir Rakhmanin told Interfax on 30 December that any amendments to the agreement to sell Russian S-300 air defense missiles to Cyprus must be negotiated by the Greek Cypriot government and the Russian arms exporter Rosvooruzhenie. Rakhmanin said that Russia will abide by the terms of the January 1997 deal to supply the missiles and expects Cyprus to do the same. On 30 December, Cypriot President Glafcos Clerides announced that the missiles, which should have been delivered to Cyprus in November, would be temporarily deployed on Crete instead. Duma Defense Committee Chairman Viktor Ilyukhin told ITAR-TASS that the stationing of the S-300s on Greek territory does not pose a threat to Russia, given the cordial relations between the two countries. LF CREDIT RATING OF SEVEN RUSSIAN REGIONS LOWERED. Fitch ICBA lowered the credit rating of seven Russian regions, ITAR-TASS reported on 30 December. Belgorod, Leningrad, Kaliningrad, and Moscow Oblasts, the Republics of Komi and Sakha (Yakutia), and Krasnoyarsk Krai all received a new lower credit rating of CCC. Krasnoyarsk, whose governor is General Aleksandr Lebed, a possible presidential contender in 2000, fared the worst, earning a place on the agency's "red list," according to ITAR- TASS. JAC RYAZAN ABOLISHES TRIALS BY JURY. Ryazan Oblast Governor Vyacheslav Lyubimov and Ryazan Oblast Duma Chairman Vladimir Fedotkin have informed the Supreme Court, the Yeltsin administration, and the Justice Ministry that they have abolished trials by jury, "Vremya MN" reported on 30 December. The daily quoted an anonymous administration source as saying that the "experiment" with such trials "has been discontinued" because it was a "failure" and, at 50,000-80,000 rubles ($2,400-$3,900) a year, cost the regional budget "too much." A council of local judges appealed to the Prosecutor-General's Office and the Federation Council in late December to revoke the local authorities' decision, but they have so far received no reply. The newspaper concluded that if the "illegal action" of the Ryazan authorities goes unpunished, then other regions are likely to follow suit. JAC INFLATION SURGED IN 1998. Russia's inflation rate in 1998 soared to 84.4 percent from 11 percent in 1997, according to the State Statistics Committee. GDP dipped 5 percent, compared with a 0.8 percent gain the previous year, Interfax reported on 31 December. Industrial output slipped 5.5 percent. Meanwhile, Russia's stock market performed worse than any of the 32 exchanges in transitional economies monitored by the International Finance Corporation. JAC TOKOBANK DECLARED BANKRUPT. A Moscow court on 29 December declared Tokobank bankrupt, ITAR-TASS reported. The bank, which was once one of Russia's largest, ran into problems even before the devaluation of the ruble on 17 August, and the Central Bank had taken over its management in May. According to an audit, the bank owes 7.8 billion rubles ($378 million), while its assets amount to only 3.4 billion rubles. JAC 'MIR' TO SPEND ANOTHER NEW YEAR IN SPACE? Russian space officials continue to scramble for some way to extend the operational life of "Mir," as Russian cosmonaut Sergei Avdeev celebrated his birthday and 500th day in space on 1 January. An international firm is prepared to finance the space station's operation for the next three years, according to Yurii Semenov, construction designer at the Energiya space rocket corporation, Interfax reported the previous day. Semenov reported that to keep the station operating for one year costs $250 million. The Russian Space Agency will need about $300 million to fund its share of the International Space Station. Avdeev and fellow cosmonaut Grigorii Grechko celebrated the New Year with 100 grams of cognac--not champagne, which turns "into light foam and disperses into the air in zero gravity," the "Moscow Times" reported. JAC KOKH DENIED ENTRY TO U.S. Former Chairman of the State Property Committee Alfred Kokh was denied entry into the U.S. on 23 December for undisclosed reasons, Reuters reported. In May, the Moscow Prosecutor-General's Office opened a criminal case against Kokh alleging that he and other former officials embezzled property when they acquired apartments in the capital. JAC NEW AMBASSADOR TO ARRIVE MID-JANUARY. Russia's newly appointed ambassador to the U.S., Yurii Ushakov, will arrive in Washington to assume his new duties on 19 January, RIA Novosti reported on 31 December. His predecessor, Yulii Vorontsov, is to retire. JAC CHECHEN PARLIAMENT, SHARIAH COURT SEEK COMPROMISE... Meeting on 30 December with parliamentary deputies, members of Chechnya's Supreme Shariah Court agreed to review their 24 December ruling calling for the dismissal of parliamentary speaker Ruslan Alikhadjiev and the suspension of the parliament's powers, ITAR-TASS reported (see "RFE/RL Newsline," 30 December, 1998). The previous day, the parliament had annulled the court ruling but agreed to a request by President Aslan Maskhadov to suspend that annulment until 5 January. In the future, representatives of the Muslim clergy will work with legislators to ensure that legislation conforms with shariah norms. LF ...AS PRESIDENT BOWS TO COURT'S DECISIONS. Speaking on Chechen Television on 30 December, Maskhadov said that he enjoys the support of the Chechen people and that the ongoing attempt by three rival field commanders to persuade the Supreme Shariah Court to impeach him will not succeed. On 3 January, Maskhadov issued a decree abolishing the Marsho charitable foundation formerly headed by his wife. The Supreme Shariah Court had dismissed her from that post on 24 December, arguing that women should not occupy positions of influence. Maskhadov has also indicated his readiness to comply with the court's demand that he dismiss several leading officials, his spokesman Mairbek Vachagaev told Interfax on 3 January. LF TRANSCAUCASUS AND CENTRAL ASIA UTO FIELD COMMANDERS SACKED AFTER SHOOT-OUT. The leader of the United Tajik Opposition (UTO), Said Abdullo Nuri, has dismissed Rahmon Sanginov and Khojali Pirmuhammadov as field commanders, ITAR-TASS reported on 31 December. The previous day, an argument between the two field commanders erupted into a gun battle outside the building where the Tajik National Reconciliation Commission meets, leaving several people dead and injured (see "RFE/RL Newsline," 30 December 1998). Nuri also ordered the field commanders' units to surrender their arms. The UTO leadership released a statement on 31 December warning that those who oppose the peace process in Tajikistan will be severely punished, regardless of services previously rendered. BP FORMER DEPUTY PROSECUTOR-GENERAL MURDERED IN TAJIKSTAN. Tolib Boboyev, the former prosecutor-general of Leninabad Oblast, was killed by masked gunmen while visiting the home of his son on 2 January, ITAR-TASS reported. Boboyev was the only person killed in the attack. Police are investigating the incident. According to the news agency, Boboyev was a former member of the National Unity Party, which was earlier headed by former Prime Minister Abdumalik Abdullojonov. Abdullojonov was implicated in the violence in northern Tajikistan in early November and is currently wanted by Tajik law enforcement agencies. BP ELECTIONS, REFERENDUM PLANNED IN TAJIKISTAN IN 1999. President Imomali Rakhmonov told journalists on 31 December that his country faces "a serious examination" in 1999, when, he said, parliamentary and presidential elections as well as a referendum on amendments to the constitution will take place, ITAR-TASS reported. Rakhmonov added that the social, political and, moral maturity of the country depends on the people's participation in these events and on efforts at strengthening the peace process. BP SIX KILLED ALONG UZBEK-TURKMEN BORDER. Three men shot and killed three Uzbek policemen near the border with Turkmenistan on 29 December, ITAR-TASS and Interfax reported. The three then attempted to cross over into Turkmenistan but were stopped at a border crossing. In the shoot-out that followed, two Turkmen policemen and a Turkmen customs official were killed. One of the attackers was eventually apprehended, but the other two remain unaccounted for. The identity of the two fugitives is reportedly known, but there are no details on the reason for the attack. BP GEORGIAN PRESIDENT SEES NO SWIFT SOLUTION TO ABKHAZ CONFLICT. Eduard Shevardnadze told journalists in Tbilisi on 30 December that he thinks a settlement of the Abkhaz conflict in 1999 is highly improbable, ITAR- TASS reported. Shevardnadze said that resolving the conflict will depend largely on whom is elected president of Georgia in the 2000 elections, adding that he will seek re-election. Georgian Foreign Minister Irakli Menagharishvili told Interfax on 30 December that he too does not believe that a solution to the conflict will be reached this year. Predicting a "long and difficult" period of negotiations, he added that Georgian displaced persons who fled Abkhazia should participate in the decision on Abkhazia's future. LF GEORGIA HOPES TO JOIN COUNCIL OF EUROPE, WTO IN 1999. Menagharishvili also said the process of Georgia's accession to full membership in the Council of Europe will begin late this month, according to ITAR-TASS. He added that a decision about Georgian membership in the World Trade Organization is expected in the second half of the year. LF ARMENIAN FOREIGN MINISTER REVIEWS 1998. In an interview with RFE/RL's Yerevan bureau, Vartan Oskanian characterized 1999 as "quite a positive year" for Armenian foreign policy, singling out the OSCE Minsk Group's new draft proposals for resolving the Karabakh conflict and improved relations with all neighboring states, including Turkey. Oskanian also said there was a greater emphasis in 1998 on relations with Europe. He predicted that 1999 will mark the beginning of "a political dialogue" with the EU and that Armenia will "probably" be accepted as a full member of the Council of Europe in the course of the year. But that latter decision, he added, may be contingent on how the 1999 parliamentary elections are conducted. LF END NOTE OIL AND GAS NO PANACEA FOR CASPIAN COUNTRIES' ECONOMIC WOES by Michael Wyzan Azerbaijan, Kazakhstan, and Turkmenistan have large deposits of crude oil and natural gas, the exploitation of which plays a major role in their economies. Despite the fact that Azerbaijan and Turkmenistan have been slow economic reformers, they, like Kazakhstan, have succeeded in attracting large volumes of foreign direct investment (FDI) into the fossil fuel sector. Kazakhstan received $3.2 billion in oil and gas- related FDI from 1993 through June 1998, while Azerbaijan's oil sector attracted $1.8 billion in FDI from 1994 through June 1998. This investment helped to make these countries the main recipients of such investment per capita in the CIS. Oil currently represents about 65 percent of Azerbaijani exports and more than 80 percent of the FDI that it has received, while in Kazakhstan the oil and gas sector accounts for about a quarter of exports and two-thirds of FDI (although the latter figure varies widely from year to year). Nonetheless, the production of oil and gas has not increased rapidly in any of the three countries; none is currently a major producer of these commodities on the world market. Pipeline routings remain a contentious issue, with economic and geopolitical considerations (especially the U.S.'s desire to minimize Russian and Iranian involvement) often conflicting. Accordingly, it is unlikely that fossil fuels will contribute substantially to economic growth in these countries over the next few years. International oil and gas companies are currently sending mixed signals about the prospects for oil and gas development in the Caspian region. A number of such companies have closed down their operations recently. For example, Unocal announced on 8 December that it was withdrawing from all Caspian projects except those based in Azerbaijan. The next day, Shell, Chevron, and Mobil signed a new agreement with Kazakhstan on oil exploration in the Caspian. Production data reveal largely declining trends, at least through the end of 1997. Azerbaijan produced 9 million tons of crude oil in 1997, down from 12.5 million in 1990, while Kazakhstan's oil production in 1997 was virtually unchanged from the 1990 level. The most striking case is Turkmen gas extraction, which plummeted from 88 billion cubic meters in 1990 to 17 billion in 1997. Since gas represents two-thirds of both GDP and exports in a "normal year" (for example, in 1994), this collapse in gas production has had dire consequences for the economy, with GDP declining by 25.9 percent in 1997. The decline in Turkmen gas production, which is all the more striking in a country with a good sectoral infrastructure and the world's fourth-largest gas reserves, occurred in two stages. At the beginning of 1994, a dispute with Gazprom resulted in the Russian gas giant's refusal to allow into its pipeline Turkmen gas bound for Europe. A visit to Ashgabat in late November 1998 by Russian State Duma speaker Gennadii Seleznev failed to resolve the dispute. Earlier, in March 1997, the government halted gas exports to its CIS partners namely, Armenia, Georgia, and Ukraine because those countries had built up large arrears to it for earlier deliveries. However, at the end of 1998, Turkmenistan and Ukraine signed an agreement that will allow the flow of Turkmen gas to resume to Ukraine. Although there are grounds for optimism that in the long run, fossil fuels will play a major role in the three countries' economic development, a lot of problems must be resolved between now and then. World economic conditions are unfavorable at present. Not only are prices low, but investors are leery of putting money into CIS countries after the collapse of the Russian economy. And a number of large oil and gas projects are coming on stream outside the region. Moreover, developing countries have rarely genuinely benefited from oil and gas booms. In what economists call the "Dutch disease," large inflows occurring in the sector contribute to strong exchange rates, which make it difficult to export other goods. In countries without transparent and efficient government sectors and with considerable regional or social inequality, revenues flowing into state coffers often benefit only tiny elites. Governments frequently spend oil money before it is earned and make commitments on which they cannot renege when oil prices fall. Azerbaijan, Kazakhstan, and Turkmenistan seem likely to suffer from these problems. Only Kazakhstan has a diversified economy, although even in that country, there is concern that the government is counting excessively on oil and gas. One encouraging sign is Turkmenistan's attempt to diversify its economy by building 50 joint-venture textile plants. Another is Kazakhstan's pension reform, under which pensions are based on the retiree's contributions during his working life rather than paid out of a large state fund (a tempting target for government misuse) fueled by the contributions of current workers. The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1998 RFE/RL, Inc. All rights reserved. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx HOW TO SUBSCRIBE Send an email to email@example.com with the word subscribe as the subject of the message. 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