The only thing one knows about human nature is that it changes. - Oscar Wilde
RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol 3, No. 68, Part I, 8 April 1999


________________________________________________________
RFE/RL NEWSLINE Vol 3, No. 68, Part I, 8 April 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

* RUSSIA RETHINKING MILITARY DOWNSIZING

* DUMA SAYS NO TO POLITICAL PEACE TREATY

* KAZAKHSTAN'S TENGE STABILIZES

END NOTE: Mostly Silence On Impact Of Kazakh Currency Float
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RUSSIA

RUSSIA RETHINKING MILITARY DOWNSIZING... Defense Minister
Igor Sergeev announced on 7 April that his ministry intends
to revise its plans for reducing the size of Russia's armed
forces. He told reporters that the current size of the army
with 1.2 million soldiers could not be lowered and that
combat units would be reinforced with auxiliary formations.
Sergeev linked the revision to NATO's new strategic concept,
adding that "the steps which NATO has taken against
Yugoslavia increase our anxiety." "Kommersant-Daily" reported
the same day that Duma legislators have rediscovered their
commitment to military spending and that the military is
already spending more money, roughly $2 million extra since
NATO bombing began on 24 March, on a variety of texts and the
de-mothballing of one S-300 anti-aircraft missile system.
According to the daily, "a fundamental review of the law on
the budget is proposed in favor of the military-industrial
complex." JAC

...AND VERIFYING YUGOSLAV MILITARY INTELLIGENCE REPORTS?
"Segodnya" argued on the same day that one source of anxiety
for the General Staff may be the lack of reliable information
about manpower and equipment in the conflict zone. It notes
that the "General Staff remains confident about Yugoslav air
defense systems," but they are not offering any evidence of
the system's good performance, which suggests that they
themselves are having difficulty obtaining such proof.
Therefore, the mission of the intelligence-gathering warship
recently dispatched to the Adriatic is not only to track NATO
"but also to verify the reliability of the information that
Belgrade is sharing with Moscow." JAC

YELTSIN REJECTS PROPOSAL TO SUPPLY ARMS TO YUGOSLAVS. The
State Duma adopted a resolution on 7 April that President
Boris Yeltsin and the government consider supplying
Yugoslavia with weapons, military hardware, and relevant
spare parts. The measure was supported by 279 deputies, with
34 against and four abstentions. That day, presidential
spokesman Dmitrii Yakushkin responded to the action by
reporting that Yeltsin believes that the conflict in
Yugoslavia offers no military solution and that arms
shipments would mean "a slow introduction of Russia into the
war" and an "inevitable escalation of the conflict with
unpredictable consequences." Addressing the success of the
efforts of the president and government to convene a "Group
of 8" meeting on the Kosova crisis, Foreign Minister Igor
Ivanov said that "what matters is that Western capitals have
not yet said a definite 'no,' although they have not said a
firm 'yes' either." JAC

DUMA SAYS NO TO POLITICAL PEACE TREATY... The State Duma
rejected the political stability accord on 7 April with only
137 deputies voting in favor; 226 votes were needed for it to
pass. Under the document, which a working group--composed of
various members of Russia's branches of goverment--spent many
weeks drafting, President Yeltsin would have agreed not to
dismiss the government and the Duma. And in turn, the
president and the Duma would not raise the issue of
confidence in the government without a prior consultation
with each other. In one recent version of the document, the
president would agree that a government of the parliamentary
majority would be formed after elections, but the Kremlin
deleted this from the draft it signed (see "RFE/RL Newsline,"
22 March 1999). JAC

...YES TO LAW ON PORNOGRAPHY. The same day the Duma adopted
legislation "on state protection of the morality and health
of the population and on the enhancement of control over
trade in products of a sexual nature." The bill was supported
by 234 lawmakers and opposed by 121 with one abstention.
Under the legislation, trade in "sexual" products must be
conducted with a license and such products must be sold only
in "specially designated locations." Television and radio
broadcasts of erotic programs will be restricted to between
1-4 am. The "Moscow Times" reported that during an earlier
debate on the same bill in October 1997, two deputies lapsed
into a dispute over the merits of domestic versus foreign-
produced condoms. JAC

SKURATOV'S FATE TO BE KNOWN ON 21 APRIL? In his address to
the Duma on 7 April, Yurii Skuratov, who is currently
suspended from the post of prosecutor-general pending the
outcome of a criminal investigation, refused to offer eager
legislators details about criminal investigations into the
activities of some top Kremlin officials. He also refused to
confirm or deny whether he was the man in a videotape
televised earlier romping with two young women. He did attack
the Kremlin, saying that "never before have corrupt officials
cast such a brazen challenge to the law." He also said that
he will stay in his job if lawmakers support him. Federation
Council Committee for Constitutional Legislation head Sergei
Sobyanin told reporters that the upper body might hold an
extraordinary session on 21 April to discuss Skuratov's
resignation--after the body has been provided with exhaustive
information on the issue. JAC

PRIMAKOV REJECTS HOSPITALIZATION. Prime Minister Yevgenii
Primakov was expected to stay at home on 8 April to recover
from radiculitis, ITAR-TASS reported that day. According to
the agency, doctors recommended hospitalization, but Primakov
categorically refused. AFP had reported earlier that
Primakov's back ailment was sciatica. JAC

BEREZOVSKII PLEDGES TO RETURN TO RUSSIA NEXT WEEK.
Influential business tycoon Boris Berezovskii told reporters
in Paris on 7 April that he will return to Moscow next week
to explain his "situation" to prosecutors. However, his
lawyer, Genrii Reznik, told Interfax that Berezovskii "must
not return under any circumstances," since the Prosecutor-
General office "does not even feign an observance of the
law." Meanwhile, SBS Agro bank head Aleksandr Smolenskii will
remain in Austria, where he is a citizen, and continue his
treatment for the flu, according to his press spokesman,
Eduard Krasnyanskii, the "Moscow Times" reported on 8 April.
Krasnyanskii called the prosecution of Smolenskii "bizarre"
and an attempt to dredge up issues that were long ago
resolved. The same day, Deputy Prime Minister Gennadii Kulik
said that Smolenskii's legal difficulties would not affect
SBS-Agro, which will continue receiving financial assistance
from the Central Bank in order to revive it, Interfax
reported. JAC

STAVROPOL CLOSES BORDER WITH CHECHNYA. Stavropol Krai
Governor Aleksandr Chernogorov ordered on 7 April the closure
of the administrative border between his territory and
Chechnya, ITAR-TASS reported. All movements of peoples and
goods along the 113-kilometer strip of land have been banned.
Chernogorov justified his decision by citing the murder on 6
April of four policemen in the Kursk raion of the krai
allegedly by a Chechen crime gang. Because of rising crime,
Kursk policemen had been offering--for a fee--to escort cargo
through their district (see "RFE/RL Russian Federation
Report," 7 April 1999). In addition, Kursk raion head Sergei
Logvinov announced that transit between towns in the raion
would be banned between the hours of 8 pm and 6 am,
"Izvestiya" reported on 8 April. JAC

SIBERIAN REGIONS WRANGLE OVER CREATION OF SPECIAL ECONOMIC
ZONE. The East Siberian Railroad and the governments of the
Buryatia Republic and Chita Oblast are attempting to
establish a special economic zone along the Baikal-Amur
Railway in order to boost the railway's revenues and the
economies of the regions it traverses, "EWI's Russian
Regional Report" reported on 8 April. They believe that
attracting industry along the railway line is key to making
it self-supporting. They will likely encounter some
resistance in the legislative assembly of Irkutsk Oblast,
which will debate a bill establishing such a zone on 27
April. The government of Irkutsk opposes the bill because it
would lose tax payments it receives from the exploitation of
valuable mineral deposits in the zone, such as the Kovyktin
gas field and Sukhoi gold deposit. According to the report,
Irkutsk Deputy Governor Yurii Berezutskii believes that
Irkutsk should prepare its own version of the law. JAC

NEW TEACHERS STRIKE IN THE FAR EAST. A teachers strike in
Petropavlovsk-Kamchatskii in the Kamchatka Oblast continued
for a third day, Interfax-Eurasia reported on 7 April.
Teachers at 16 schools and kindergartens are protesting an
almost six-month backlog of unpaid wages. JAC

YELTSIN EXPANDS SECURITY COUNCIL MEMBERSHIP. President
Yeltsin ordered on 7 April that a special decree be prepared
adding Federation Council Chairman Yegor Stroev and State
Duma Chairman Gennadii Seleznev to the Security Council,
ITAR-TASS reported. JAC.

TRANSCAUCASUS AND CENTRAL ASIA

CANADA TO HELP PRIVATIZE ARMENIAN TRANSPORT SECTOR. Armenian
Transport Minister Yervand Zakharian told journalists in
Yerevan on 7 April after meeting with his visiting Canadian
counterpart, David Collonate, that Ottawa will provide
technical assistance in privatizing and restructuring the
country's transportation sector, RFE/RL's Yerevan bureau
reported. Zakharian said the Canadian government will help
Armenia privatize state-owned Armenian Airlines and that a
"tentative agreement" has been reached whereby Armenian
Airlines will lease several middle-range commercial jets from
Canada to replace its aging Soviet aircraft. LF

OSCE CHAIRMAN POSTPONES TRIP TO TRANSCAUCASUS. OSCE chairman
Knut Vollebaek has postponed his trip to the Transcaucasus
that was due to begin on 13 April, Turan reported on 7 April,
citing unnamed diplomatic sources in Baku. Instead, Frank
Lambach, who is Germany's representative to the OSCE Minsk
Group, will travel to Armenia and Azerbaijan on 5-7 May. An
OSCE spokesman told RFE/RL on 8 April that the primary reason
for Vollebaek's decision was the situation in Kosova, and
that he may visit Armenia and Azerbaijan in August. LF

AZERBAIJANI OIL CONSORTIUM CUTS BACK ON PRODUCTION.
Azerbaijan International Operating has halved production from
the Chirag Caspian field, from 100,000 barrels per day to
50,000 bpd, as a result of the closure of the Baku-
Novorossiisk oil export pipeline, Turan and ITAR-TASS
reported on 7 April (see "RFE/RL Newsline," 6 April 1999).
ITAR-TASS quoted Ilham Aliev, vice president of the
Azerbaijani state oil company SOCAR, as saying that more
crude would be transported through the western Baku-Supsa
pipeline. But oil experts point out that the capacity of that
pipeline is only 40,000 bpd. LF

ABKHAZIA CHALLENGES TBILISI OVER DETAINED FISHERMEN... Abkhaz
Security Minister Astamur Tarba said on 7 April that the
Abkhaz leadership has begun negotiations with Tbilisi on
exchanging the 10-man crew of a Georgian fishing vessel
detained in Abkhaz territorial waters on 3 April for four
Abkhaz civilians held prisoner in Georgia, Caucasus Press
reported. But Georgian intelligence service press spokesman
Archil Chkhartishvili said those negotiations are likely to
be complicated by the fact that the four Abkhaz are being
held by Georgian guerrillas who do not take orders from the
central government. LF

...AND ACCUSES GOVERNMENT-IN-EXILE OF 'TERRORIST' ATTACK.
Also on 7 April, Tarba told Caucasus Press that he has
evidence that the Security Ministry of the so-called Abkhaz
government-in-exile, representing ethnic Georgians forced to
flee Abkhazia during the 1992-1993 war, was responsible for a
2 April landmine explosion in Abkhazia's Gali raion. Four
people were seriously injured in that explosion, which Tarba
said had been intended to kill Konstantin Ozgan, who heads
the Abkhaz commission that is overseeing the unilateral
repatriation to Gali of ethnic Georgian displaced persons.
Ozgan had traveled to Gali that day to meet with Georgian
repatriates. Abkhaz Security Minister-in-exile Vitalii
Mikhelidze denied the accusation. LF

IS ADJAR LEADER IN DANGER OF BEING KILLED? A leading security
official from Georgia's Black Sea republic of Adjaria is
currently in Tbilisi investigating the claims by Georgian
Interior Ministry employee Omar Kedelashvili that he was
ordered by Georgian intelligence to assassinate Adjar
parliament chairman Aslan Abashidze, "Rezonansi" reported on
7 April. Georgian security officials have denied
Kedelashvili's allegations. A spokesman for Abashidze, who
for the past seven years has ruled independently of the
central Georgian government in Tbilisi, told Interfax on 7
April that Georgia's expression of support for the NATO air
strikes against Yugoslavia are "a departure from...balanced
foreign policy" and run counter to Georgia's declared policy
of strategic partnership with Russia. LF

KAZAKHSTAN'S TENGE STABILIZES. The exchange rate for
Kazakhstan's currency against the dollar rose by over 17
percent on 7 April and a further 4.7 percent on 8 April,
Interfax reported. As of 8 April, the tenge was trading at
112.79 to the dollar, compared with an average of 118 to $1
the previous day and 138.5 to the dollar on 5 April. National
Bank chairman Karim Masimov told journalists on 7 April that
the exchange rate should be set at 115-120 tenge to the
dollar. President Nursultan Nazarbaev told journalists in
Astana on 7 April that the decision by the government and
National Bank to allow the tenge to float was a normal
reaction to "a crisis environment," and should not be
regarded as "a disaster." He predicted that inflation will
remain low and that the tenge will not fluctuate widely (see
also "End Note" below). LF

KYRGYZ OFFICIALS DOWNPLAY IMPACT OF TENGE DEVALUATION. Acting
Prime Minister Boris Silaev said on state television on 7
April that the government of Kyrgyzstan is taking measures to
stabilize the som, which he said will not fall further in
value, Interfax reported. Silaev said the initial decline in
the som's exchange rate to the dollar was a natural reaction
to the devaluation of Kazakh's tenge. He added that the
government will discuss whether amendments to the 1999
budget, or the adoption of an austerity program, are
necessary. Acting National Bank chairman Ulan Sarbanov said
the official som/dollar exchange rate was 36.5:1 on 7 April,
and that the Bank will make every effort to stabilize it at
36-38.5 soms to the dollar. LF

TAJIKISTAN, RUSSIA SIGN PROTOCOL ON DEFENSE COOPERATION. On 7
April, the final day of his three-day visit to Dushanbe,
Russian Defense Minister Igor Sergeev and his Tajik
counterpart, Sherali Khairulloev, signed a protocol on
military cooperation for 1999, AP-Blitz reported. Sergeev
later told journalists that the agreement formally allowing
Moscow to maintain a military base in Tajikistan will be
signed during President Imomali Rakhmonov's visit to Moscow
later this month, ITAR-TASS reported (see "RFE/RL Newsline,"
7 April 1999). LF

END NOTE

Mostly Silence On Impact Of Kazakh Currency Float

By Robert Lyle

	The international financial community is keeping a
discreet silence on Kazakhstan's attempt to float the foreign
exchange rate of its currency, the tenge, and the impact this
is having on the country's neighbors.
	The International Monetary Fund (IMF) resident
representative in Almaty, Paul Ross, praised the move earlier
this week saying it would "restore the competitive position"
of Kazakhstan globally and help promote growth.
	He said it should have a positive impact on Kazakhstan's
trade balance by heading off protectionist pressures which
have emerged in the last few months. It should also help
reduce the high interest rates in the country, he said.
	Additionally, said Ross, the move will reduce the
vulnerability of the economy to future external shocks like
the Russian financial crisis.
	On 7 April the World Bank's resident representative,
Kadry Tanzhu Yurukoglu, added his institution's endorsement,
calling the currency float "a step in the right direction"
which will both improve Kazakhstan's competitiveness and its
macroeconomic stability.
	But beyond those comments, the IMF, the World Bank, and
even commercial financial analysts have had nothing more to
say about the early effects of the move and its impact on
neighboring countries, especially Kyrgyzstan.
	Kazakhstan Prime Minister Nurlan Balgimbaev said the
move was necessary because since the start of the Russian
financial crisis, Kazakhstan's foreign trade has decreased by
$1.3 billion due to dramatically reduced exports.
Kazakhstan's exports were far too expensive, especially in
countries like Russia, because the tenge was being traded at
such a high rate.
	But the country's trade union federation said that while
Kazakhstan's export competitiveness may improve, it believes
workers will be hurt. The federation predicts a radical drop
in consumer purchasing power because it believes the floating
tenge will hurt, not help, trade.
	While there were reports of some hoarding of goods by
consumers who quickly cleaned out retail stores in
anticipation of higher import prices, the country's bankers
late on 7 April said there had been no run on deposits at the
Narodnyi (National) Bank and that the supply of hard currency
and the demand for it were about equal.
	That would indicate, said National Bank Chairman
Kadyrzhan Damitov, that the rate of around 118 tenge to the
dollar is a relatively adequate reflection of the market.
	Kyrgyzstan, which saw its currency, the som, drop in
reaction to the moves in Kazakhstan, waited anxiously as the
som began to recover on 7 April. Still, observers in Bishkek
were noting that privately-owned exchange officers were not
trading after the previous day's 14 percent drop in the som's
exchange rate.
	Government officials have been meeting with banks and
other domestic financial organizations to look for ways to
invigorate the development of small and medium-sized
businesses as a way to broaden and strengthen the country's
basic economy.
	 That is precisely why the IMF, the World Bank, and
others have refused to comment any more beyond endorsing the
concept. It is a policy that the head of the U.S. Federal
Reserve (Central Bank), Alan Greenspan, and senior American
treasury officials have followed religiously -- never comment
on exchange rates. No matter what the comment is, they all
say privately, it can have dramatically unexpected
consequences.
	So the IMF, the World Bank, and others will continue
their discreet silence for the foreseeable future, allowing
their pointed inattention (they hope) to help take the focus
off the exchange rate and return it to building more solid,
market-oriented economies.
	An IMF team will be flying to Kazakhstan at the end of
this month to begin Almaty's annual review and to help decide
what further lending the fund may need to provide. Kazakhstan
is finishing up a three-year extended facility loan and is
expected to draw the final $218 million shortly. The annual
review will be the time when the fund can tell Almaty and the
rest of the world just how it believes the currency float has
been handled.

Robert Lyle is an RFE/RL senior correspondent based in
Washington.
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                     All rights reserved.
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