RFE/RL NEWSLINE Vol 3, No. 1, Part I, 4 January 1999

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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

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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
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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 ANGOLAŠ 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

ŠCALLS FOR UPDATE OF CFE TREATYŠ 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

ŠASSESSES 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.
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