The way I see it, if you want the rainbow, you gotta put up with the rain. - Dolly Parton
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 3, No. 41, Part I, 1 March 1999


________________________________________________________
RFE/RL NEWSLINE Vol 3, No. 41, Part I, 1 March 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

* WHO'S MINDING THE KREMLIN?

* MOSCOW URGING REGIONAL AUTHORITIES TO PRESSURE LOCAL MEDIA

* ARMENIA CONDEMNS AZERBAIJAN'S KARABAKH APPEAL

End Note: ARMENIA'S DEFICIT CONTINUES TO GROW, DESPITE
BOOSTED TRADE WITH WEST
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RUSSIA

WHO'S MINDING THE KREMLIN? Only four days after his spokesman
announced he had fully recovered from a bout with stomach
ulcer, Russian President Boris Yeltsin returned to the
hospital on 27 February complaining of stomach pains.
Yeltsin's doctors announced on 1 March that Yeltsin's
condition has stabilized but that he is likely to remain in
the hospital for a week, RFE/RL's Moscow bureau reported.
Prime Minister Yevgenii Primakov, who began a two-week
vacation on 28 February, so far has no plans to return to
Moscow, his spokeswoman, Tatyana Aristarkhova, told ITAR-TASS
on 27 February. She noted that First Deputy Prime Minister
Yurii Maslyukov will perform Primakov's duties during his
absence. JAC

CHINESE PREMIER ENDS VISIT TO RUSSIA. Zhu Rongji concluded
his four-day visit to Russia on 27 February by visiting Saint
Petersburg, Russian media reported. Zhu met with governor
Vladimir Yakovlev and visited the local branch of the plant
that is producing generators for the Lianyougan nuclear power
station under construction in China's Jiangsu Province.
During his trip, Zhu signed a total of 11 agreements, half of
which dealt with trade between Chinese and Russian regions
along the countries' common border and feasibility studies
for natural gas fields in Siberia (see "RFE/RL Newsline," 26
February 1999). The latter agreements are expected to result
in a pipeline transporting gas to Mongolia, China, and Japan.
BP

MOSCOW URGING REGIONAL AUTHORITIES TO PRESSURE LOCAL MEDIA.
The State Committee for Publishing has recommended that local
authorities actively use their authority with the local
presses in the struggle against political extremism, "Vremya
MN" reported on 26 February. Two means at local authorities'
disposal, according to the newspaper, are withholding tax
privileges or applying financial pressure to local newspapers
that promote political extremism. About 20 percent of
regional newspapers and journalists currently lack the
necessary resources to survive, making them vulnerable to
such economic pressure. "Vremya MN" notes that local
authorities own significant chunks of the regional press, for
example 45 percent in the Adygei Republic, 52 percent in
Dagestan, 53 percent in Kalmykia, and 33 percent in Karelia.
The newspaper notes that the definition of what constitutes
political extremism is likely to vary widely from region to
region. JAC

DUMA DEPUTY MAKES NEW ALLEGATIONS AGAINST CENTRAL BANK. State
Duma deputy (independent) and member of the Budget Committee
Nikolai Gonchar told reporters on 26 February that the
Central Bank used the Channel Island firm FIMACO not only to
manage its foreign currency reserves but also to hide
millions of dollars in profits made on treasury bill market.
According to Gonchar, in September 1996 FIMACO earned a $38.9
million profit by investing in GKOs. By law, such profits
should be directed to the federal budget, but they were not.
Gonchar said that the Central Bank issued a special
regulation allowing it not to show these amounts on its
balance sheets. Instead, the profits were recorded in special
accounts, to which the office of the Prosecutor-General was
denied access. JAC

OTECHESTVO CONTEMPLATES BRANCHING INTO TV BROADCASTING.
Moscow Mayor Yurii Luzhkov told reporters on 26 February that
his Otechestvo [Fatherland] political movement will announce
its candidate for presidential elections in 2000 at its
second congress, to be held on 24 April. The same day,
Luzhkov told members of Otechestvo's Central Council that the
movement will have to establish its own printing facilities
and "consider the possibility of entering TV broadcasting"
because Russian Public Television and Russian Television have
received instructions not to "shed any light on the purposes
or tasks of the movement," "Kommersant-Daily" reported on 27
February. According to the newspaper, the upcoming congress
will be held outside Moscow. Members suggested the cities of
Novosibirsk, Yekaterinburg, and Nizhnii Novogorod. One
participant even jokingly suggested Sevastopol, the city in
Crimea, the loss of which prompted Luzhkov to oppose the
Russian-Ukrainian friendship treaty. In response, Luzhkov
quipped, "Perhaps even Kiev...." JAC

NEXT DUMA TO HAVE NAZI, HARDLINE COMMUNIST FACTIONS?
President of the Politika think-tank Vyacheslav Nikonov told
reporters on 25 February that the next Duma may have a Nazi
faction, Interfax reported. He also predicted that the
Movement in Support of the Army, led by Duma deputies Albert
Makashov and Viktor Ilyukhin, will easily clear the 5 percent
barrier and will sever themselves completely from the
Communist Party if they are given much time "on the air." He
concluded that Our Home is Russia will manage to survive
until the September parliamentary elections only with the
financial support of Gazprom. Nikonov told "Kommersant-Daily"
on 26 February that unknown candidates will have to spend at
least $150,000-$200,000 on their campaigns in order to have a
decent chance of winning. JAC

NEW 'MARGARET THATCHER' PARTY LAUNCHED. About 400 people
gathered in St. Petersburg on 26 February to create a new
conservative political party called "Thatcherites of Russia,"
based on the political and economic principles of the former
British Prime Minister Margaret Thatcher. Part of the group's
manifesto is to reduce taxes, establish a Russian House of
Lords, and preserve the results of the country's past
privatization efforts, Reuters reported. The new party will
not participate in upcoming Duma elections, according to
ITAR-TASS. JAC

OIL TOWN ELECTS NEW MAYOR. Voters in Nefteyugansk in the
Khanty-Mansi Autonomous Okrug on 28 February elected Vladimir
Tkachev as mayor. Tkachev was the deputy of the previous
mayor, Vladimir Petukhov, who was slain in an apparent
contract killing last summer. Turnout was 64.2 percent. JAC

CONFLICT BETWEEN RELIGIOUS SCHOOL, ST. PETERSBURG POLICE
CONTINUES. A standoff between police, students, teachers, and
parents at a school operated by a Dutch evangelical group in
St. Petersburg continued for a fifth consecutive day on 26
February. The school is defying a court order requiring it to
move; the city government maintains that the school is
unlicensed, does not meet sanitary and fire safety standards,
and is run by a group that is registered as a social rather
than a religious organization, according to AP and Reuters.
School and human rights group officials counter that the real
conflict is over the right of religious groups to teach their
faith. JAC

ST. KSENIA ICON LEAKING FOR SECOND TIME. An icon of Saint
Ksenia in the Yakovlevskoe village church in Kostroma Oblast
starting oozing myrrh for the second time in three years,
ITAR-TASS reported on 26 February. According to the village
priest, the icon first started weeping tears of myrrh during
the funeral service of a local woman much venerated for her
kindness. JAC

RUSSIAN SOLDIERS OF FORTUNE FIGHTING IN HORN OF AFRICA?
Reports that some mercenaries fighting in the Ethiopia and
Eritrea might be Russian citizens are difficult either to
confirm or deny, "Izvestiya" reported on 25 February. A
spokesman for the Ethiopian embassy in Moscow told the
newspaper that his country has no foreign mercenaries at all,
only Russian military specialists who have been invited to
teach at higher educational institutions. Representatives of
the Eritrean Embassy in Moscow said that Russian aircraft
pilots are fighting with the Ethiopian army. An "expert"
working on the Russian publication, "Soldier of Fortune,"
suggested that foreign soldiers may be members of other CIS
countries who happen to speak Russian well and have therefore
been mistaken for Russian citizens. JAC

RUSSIA CRITICIZES GERMAN AID IN DE-MINING CHECHNYA. Russian
Foreign Ministry spokesman Vladimir Rakhmanin told
journalists on 26 February that his ministry has lodged a
complaint with the German embassy over Bonn's failure to
inform Moscow in advance that it is training Chechens to
detect and defuse mines, Reuters and ITAR-TASS reported.
Rakhmanin objected that such specialized knowledge can also
be used to plant mines. LF

RUSSIAN, CHECHEN OFFICIALS DISCUSS COORDINATING ANTI-CRIME
MEASURES. Russian Interior Minister Sergei Stepashin met with
Chechen Deputy Prime Minister Turpal Atgeriev in Dagestan on
26 February to discuss how to combat crime in Chechnya and
the surrounding regions, Russian agencies reported. Stepashin
explicitly denied that Moscow plans to designate the border
between Chechnya and Dagestan an international one. LF

CONVICTED CHECHEN TERRORISTS TO SERVE PRISON TERMS IN
CHECHNYA? Chechen Prosecutor-General Magomed Magomadov told
Interfax on 26 February that the two Chechen women sentenced
earlier last month for involvement in a bomb blast at the
Pyatigorsk railway station in April 1997 may be sent back to
Chechnya under agreements between Moscow and Grozny. Chechen
President Aslan Maskhadov appealed to Russian President
Yeltsin to allow them to do so after Chechen militants had
threatened reprisals in Stavropol Krai, where the trial took
place (see "RFE/RL Newsline," 17 and 19 February 1999). A
Russian Justice Ministry official had said in mid-February
that the women would serve their terms in Vologda. LF

TRANSCAUCASUS AND CENTRAL ASIA

ARMENIA CONDEMNS AZERBAIJAN'S KARABAKH APPEAL... The Armenian
Foreign Ministry on 25 February issued a statement
criticizing Azerbaijani President Heidar Aliev's appeal to
the French, Russian, and U.S. presidents to take more
resolute measures to resolve the Karabakh conflict, Noyan
Tapan reported (see "RFE/RL Newsline," 24 February 1999). The
statement said it is "especially distressing" that Baku,
which rejected the most recent peace plan proposed by the
OSCE Minsk Group, is calling on the mediators to demonstrate
a more constructive approach. The statement termed
Azerbaijan's position "unconstructive," adding that it is the
primary obstacle to a settlement of the conflict. It also
criticized Azerbaijan's "refusal to recognize Nagorno-
Karabakh as a full party to peace talks" and its attempts to
"place the conflict in the broader context of Russian-Turkish
relations." French President Jacques Chirac has responded to
Aliev's appeal, Turan reported on 26 February but did not
elaborate. LF

...AND ITS PROTEST OVER DEFENSE COOPERATION. In a separate
statement issued on 26 February, the Armenian Foreign
Ministry dismissed as "unfounded" and "illogical" Azerbaijani
allegations that Armenia's ongoing military cooperation with
Russia threatens to destabilize the Caucasus, RFE/RL's
Yerevan bureau reported. It stressed that both UN and OSCE
statutes recognize the right of any member state to choose
how to ensure its security. The statement also rejected
Baku's claims that transfers of Russian arms to Russian bases
in Armenia constitute a violation of the limits imposed by
the Treaty on Conventional Forces in Europe. Azerbaijan has
itself exceeded its CFE arms ceilings, imports arms, and is
engaged in the production of offensive weapons, the statement
argued. LF

ARMENIAN PRESIDENT CONDEMNS ARMY HAZING. Meeting on 25
February with a group of mothers whose sons died as a result
of violence at the hands of their army superiors, Robert
Kocharian vowed a "serious struggle" to eradicate criminal
violence and non-combat deaths within the armed forces, Noyan
Tapan reported. In January, Human Rights Watch had published
extensive data on such crimes, claiming that they disqualify
Armenia from full membership in the Council of Europe.
Armenian officials have rejected that argument, claiming that
some of the Human Rights Watch data is inaccurate (see
"RFE/RL Newsline," 22 January 1999). LF

FORMER ARMENIAN CP LEADER LAUNCHES NEW POLITICAL PARTY.
Hundreds of delegates attended the 27 February founding
congress in Yerevan of Karen Demirchian's center-left
People's Party of Armenia (HZhK), RFE/RL's Yerevan bureau
reported. In a 90-minute speech, Demirchian, the runner-up to
Robert Kocharian in the 1998 presidential elections, vowed to
establish "democratic and popular socialism" if his party
comes to power. Deploring what he termed the
"deindustrialization" of Armenia under the failed liberal
economic policies of successive post-Soviet governments,
Demirchian called for comprehensive state programs to revive
both industry and agriculture. He said he favors a state-
regulated and socially-oriented market economy. The HZkK
currently claims some 25,000 members throughout Armenia. LF

AZERBAIJAN MARKS ANNIVERSARY OF KHODJALY KILLINGS...
Azerbaijanis on 26 February commemorated the 1992 killings by
Russian and Karabakh Armenian troops of several hundred
Azerbaijani civilians in the Karabakh village of Khodjaly.
Aliev termed those deaths "one of the most terrible tragedies
of the 20th century," adding that the Azerbaijani leadership
bore part of the blame for them. He vowed that if necessary,
Azerbaijan will use force to liberate those regions currently
occupied by Karabakh Armenian troops, Turan reported. LF

...AS OFFICIAL VERSION OF KILLINGS QUESTIONED. But the
chairman of the commission on human rights and national
minorities of the parliament of the unrecognized Nagorno-
Karabakh Republic told Noyan Tapan on 26 February that
Azerbaijani claims that the Khodjaly killings constituted a
deliberate massacre are unfounded. He said the attack on
Khodjaly was necessitated by the concentration in the village
of huge quantities of armaments and that the Azerbaijani
leadership was warned in advance of the attack in order to
enable it to evacuate the civilian population. He also quoted
then President Ayaz Mutalibov as confirming that the
Armenians had announced that they would leave a corridor for
Azerbaijani civilians to leave the village unharmed before
the attack. LF

GEORGIAN PRESIDENT VISITS TURKEY. During his two-day visit to
Ankara and Istanbul on 26-27 February, Eduard Shevardnadze
held talks with his Turkish counterpart, Suleymen Demirel,
and with Prime Minister Bulent Ecevit on the prospects for
resolving regional conflicts and expanding economic and
transport cooperation, including the planned Kars-Tbilisi
railway. In a joint communique released following
Shevardnadze's meeting with Demirel, the two presidents
called for the swiftest possible implementation of the Baku-
Ceyhan oil export pipeline project. Shevardnadze told
journalists on his return to Tbilisi on 27 February that
Turkey will bear part of the estimated $3 billion cost of
building that pipeline, ITAR-TASS reported. Shevardnadze also
said Demirel would not object if part of Azerbaijan's Caspian
oil were exported through the alternative pipeline from Baku
to Georgia's Black Sea port of Supsa. Adjar President Aslan
Abashidze failed to accompany Shevardnadze because of poor
health, "Akhali toaba" reported on 27 February. LF

ANOTHER BOMB EXPLODES IN ALMATY. A home-made bomb exploded
outside the Russian Orthodox cathedral in the former
Kazakhstani capital, Almaty, on 26 February, ITAR-TASS
reported. Four people were injured and required medical
attention as a result of the blast, which also caused
substantial damage to the building, Police have taken a 43-
year-old man into custody in connection with the bombing. The
man had recently been released from jail, and it remains
unclear what his motive might have been. There are no reports
that he is linked to the bombing that took place in downtown
Almaty on 21 February (see "RFE/RL Newsline," 23 February
1999). BP

RUSSIA INCREASES TRANSIT QUOTA FOR OIL FROM KAZAKHSTAN. The
press service of Kazakhstan's national oil and gas company
said on 26 February that an agreement has been signed on
increasing the amount of oil Kazakhstan can ship via Russia
to countries outside the CIS, Interfax reported. The
agreement, signed the previous day, allows Kazakhstan to ship
6 million tons of oil annually via Russian pipelines. Russia
had agreed in December to increase the volume of oil
transiting its territory from 3.5 million tons to 5 million.
A spokesman for the national oil company said the increase
"meets the export potential of Kazakhstan." BP

SUSPECT IN TASHKENT BOMBINGS CAPTURED... ITAR-TASS reported
on 27 February, that one of six men sought by Uzbek
authorities in connection with the 16 February bombings in
Tashkent, has been take into custody. Ravshan Salijanov, 27,
is from the Uzbek city of Namangan and was apprehended in
Tashkent. BP

...TO JOIN HUNDREDS OF OTHERS IN DETENTION? The acting
director of the Moscow-based Society for Assistance of Human
Rights in Central Asia, Vitaly Ponomarev, told a news
conference on 26 February, that more than 500 people have
been arrested in Uzbekistan since the 16 February bombings,
Reuters reported. A statement released by the organization
claims that among those arrested are "Islamic activists,
members of their families, supporters of religious groups not
loyal to the regime, and several opposition activists." Many
are reported to still be in jail. Ponomarev commented that
while it is unclear how many people have been arrested, "at
least 200 is absolutely certain, just in Tashkent." He added
that his figures are based on information received from
various human rights organizations in Uzbekistan. BP

MONEY SUPPLY STEADILY INCREASING IN TURKMENISTAN.
Turkmenistan's Central Bank reported that the amount of money
in circulation increased by 5.4 percent a month last year,
Interfax reported on 25 February. The bank said this is an
improvement over the 6.9 percent monthly increase recorded in
1997. Although the official rate of exchange for the Turkmen
national currency, the manat, remains steady, at 5,200 to $1,
unofficial reports indicate it is trading illegally at more
than double that rate. BP

KYRGYZSTAN, RUSSIA REPEAT CALLS FOR PEACE IN AFGHANISTAN.
Consultations between officials from the Kyrgyz and Russian
Foreign Ministries took place in Bishkek on 26 February and
resulted in a call for "UN-supervised negotiations," Interfax
reported. Both parties said they felt "a degree of moral
responsibility" for events in Afghanistan, and both agreed
that negotiations that were conducted in the Turkmen capital,
Ashgabat, last month by representatives of the Taliban and
the northern alliance are an encouraging sign. Both also said
their countries are "always ready" to help settle the
conflict. BP

HUMAN RIGHTS REPORTS RELEASED FOR CIS CENTRAL ASIAN STATES. A
human rights report conducted by the U.S. State Department
and released on 26 February indicates that the five CIS
Central Asian states have changed little since the 1997
survey was conducted. Kyrgyzstan faired the best but came
under criticism for its citizens' inability to change their
government through the electoral process. Kazakhstan, too,
was complimented on respecting human rights, but early
presidential elections and irregularities in the campaigning
process were noted. Tajikistan and Uzbekistan continued to
have "poor" human rights records but were eclipsed by
Turkmenistan, whose record was deemed "dismal." Freedom of
speech and of the press was deemed insufficient in all five
countries, as were conditions in jails. The report also noted
that violence against women in those countries is a major
problem. BP

END NOTE

ARMENIA'S DEFICIT CONTINUES TO GROW, DESPITE BOOSTED TRADE
WITH WEST

by Emil Danielyan

	Armenia's huge trade deficit increased last year,
despite robust economic growth, according to recently
released government data. The growing imbalance was
accompanied by declining economic ties with former Soviet
republics, which accounted for just a quarter of Armenia's
foreign trade. Net exports fell by 3.9 percent to a meager
$223.4 million, while imports were almost unchanged at $812.1
million. The resulting $588.7 million deficit was up 2
percent on 1997.
	Economists have long wondered how a country can get by
when it is importing 3.6 times more than it exports. One of
the reasons is that Armenia has an enormous shadow economy.
The government estimates that its volume equals official GDP.
Money transfers from thousands of Armenians working abroad is
another important source of unaccounted foreign earnings.
Also bridging the gap is continuing humanitarian aid--which
totaled $83.6 million in 1998--as well as international
loans. Last year saw some $210 million in direct foreign
investments, more than the combined total for the previous
several years.
	These mitigating factors notwithstanding, analysts say
that without a sharp rise in exports, Armenia will find it
increasingly difficult to cope with its foreign debt, let
alone achieve a major improvement in living standards. Within
the next couple of years, servicing of that debt, which
currently stands at $740 million, will become an even heavier
burden on the state budget as the government starts repaying
the bulk of the money.
	"We live off future generations. Our children will bear
the brunt of our huge current account deficit," Bagrat
Asatrian, president of the Armenian Bank Association, told
RFE/RL.
	One of the consequences of this situation is the
precariousness of the relative macroeconomic stability that
Armenia has enjoyed since 1996. It has been maintained to a
large extent by regular financial injections from the IMF and
World Bank.
	The Armenian economy grew by 7.2 percent in 1998, which
witnessed 1.3 percent consumer price deflation. This growth
rate becomes less impressive when seen against the backdrop
of the economic collapse of the early 1990s, when the
country's GDP plummeted by 60 percent. Low inflation
contrasts with unusually high interest rates, which Asatrian
attributes to weak exports.
	Last month, the bank raised its re-financing rate to
53.5 percent, following a 3 percent drop in the value of the
national currency, the dram. Asatrian, himself a former
Central Bank chairman, believes the "artificial" maintenance
of the dram's exchange rate in 1998 only added to the trade
deficit, paving the way for much cheaper Russian imports.
	GDP growth mainly resulted from a big boost in the
agricultural and construction sectors, which offset a 2.5
decrease in industrial output. Figures show that industrial
output started falling in August, when the Russian financial
crisis erupted. The fall in exports occurred in the second
half of the year, as large Armenian enterprises, heavily
dependent on the Russian market, were hit by the turmoil
there. Exports to Russia, until now the biggest source of
external earnings, plummeted by 36.5 percent. That the
Russian crisis was responsible for the growing deficit is
evidenced by the fact that Armenian exports to countries
outside the former USSR increased slightly. About three-
quarters of foreign trade was with countries outside the CIS.
	In a major development, the EU pulled ahead of the CIS
as Armenia's leading trade partner, with a $334.4 million
turnover in 1998. By contrast, economic ties with neighboring
Iran further decreased. Iran even lagged behind the US's $110
million share (including U.S. aid). On a country basis,
Russia was still Armenia's main partner, however. But Russian
natural gas supplies accounted for $92 million in their
$222.6 million trade volume.
	One consequence of the EU's greater importance for
Armenia was a six-fold hike in the volume of trade with
Britain. In 1998, the U.K. became the number one European
importer of goods from Armenia, receiving products worth
roughly $70 million. Another consequence was that the value
of Armenia's exports to Belgium exceeded that of its exports
to Russia last year, refined diamonds being the main product.
Precious stones and metals, made up the biggest share of all
Armenian exports., accounting for one quarter. Other exports
included machines, scrap metal, food, and chemical products.
More than the half the imports to resource-poor Armenia was
food and raw materials.
	The new pattern of foreign trade suggests that land-
locked Armenia is finding ways to break its geographical
isolation from Western markets. That isolation is aggravated
by the unresolved Nagorno-Karabakh conflict and other ethnic
disputes in the region. But economists say that openness to
the world must involve a corresponding growth in exports. And
they argue that higher growth rates are needed and must be
export-oriented. This, in turn, will require substantial
capital and modern technology--neither of which is currently
available in Armenia. Attracting more foreign investment thus
becomes all the more necessary.

The author is an RFE/RL correspondent based in Yerevan.
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