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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 3, No. 159, Part I, 17 August 1999


________________________________________________________
RFE/RL NEWSLINE Vol. 3, No. 159, Part I, 17 August 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

* POWER MINISTERS RETAIN THEIR JOBS

* CHECHEN RADICAL WARNS OF NEW MILITARY OPERATION IN
DAGHESTAN

* UZBEKISTAN DENIES ITS PLANES BOMBED TAJIK TERRITORY

End Note: ONE YEAR AFTER THE MELTDOWN: FEARS WANE, SHADOW
LINGERS
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RUSSIA

POWER MINISTERS RETAIN THEIR JOBS... Russian President Boris
Yeltsin signed a decree on 17 August reappointing Defense
Minister Igor Sergeev, Foreign Minister Igor Ivanov, Interior
Minister Vladimir Rushailo, Emergencies Minister Sergei
Shoigu, and Federal Security Service director Nikolai
Patrushev. Prime Minister Vladimir Putin pledged that the
cabinet's composition will be finalized and submitted to
Yeltsin this week, Interfax reported. JAC

...AS FORMER PROSECUTOR LANDS AT JUSTICE MINISTRY. Yeltsin
also appointed former acting Prosecutor-General Yurii Chaika
as justice minister, replacing Pavel Krasheninnikov.
Krasheninnikov was widely tipped to lose his job for his
failure to find a legal pretext to ban or otherwise punish
the Communist Party. Chaika, 48, recently retired from the
Prosecutor-General's Office in order to avoid waiting until
October for the Federation Council to consider his request to
resign from that post (see "RFE/RL Newsline," 10 August
1999). Russian media speculated earlier that Chaika, like his
predecessor Yurii Skuratov, faced pressure from the Kremlin
to suspend his office's investigations into alleged
corruption involving two members of Yeltsin's inner circle,
media tycoon Boris Berezovskii and Pavel Borodin, head of the
Kremlin's facilities directorate. JAC

DUMA CONFIRMS PUTIN. State Duma deputies on 16 August voted
by 233 in favor of Putin's candidacy for prime minister, only
seven more than necessary. Eighty-four voted against him,
while 17 abstained. Most members of the Liberal Democratic
Party, Our Home Is Russia, and Russian Regions voted to
support Putin, while voting among other factions was more
uneven. Among the Communists, who form the largest faction,
32 members voted for Putin, 52 against, four abstained, and
41 did not vote at all, according to Interfax. Before the
vote took place, Communist Party leader Gennadii Zyuganov
told members that they could vote as they wish on Putin's
candidacy. The Duma will convene its regular fall session on
14 September, according to ITAR-TASS, and the Duma Council
will hold its first meeting after the summer recess on 13
September. JAC

CHECHEN RADICAL WARNS OF NEW MILITARY OPERATION IN
DAGHESTAN... Chechen field commander Shamil Basaev told
Interfax and ORT on 16 August that within the next few days
the Islamist militants will enlarge the zone of combat
operations in Daghestan and establish control over more
territory. Such an operation could mean pushing eastward
through the Andi River canyon to seize the Tsuntin, Khunzakh,
and Gumbet Raions and the main highway to Buynaksk and
Makhachkala, according to "Nezavisimaya gazeta" of 17 August.
The Russian federal command in Daghestan dismissed Basaev's
warning as a "bluff." LF

...WHILE RUSSIANS CLAIM 'BREAKTHROUGH' IN BOTLIKH. Meanwhile,
the commander of the North Caucasus Military District,
Colonel-General Viktor Kazantsev, told journalists in
Makhachkala on 16 August that federal forces have achieved a
"breakthrough" in Botlikh Raion and taken all the
strategically important heights there, Caucasus Press
reported. Russian military spokesmen claimed last week to
have established control over Tsumadin Raion. According to
"Nezavisimaya gazeta," the militants occupied several
villages in Botlikh along a crescent-shaped ridge, including
the crucial village of Tando, which was being subjected to
constant high-altitude bombing. The brunt of the fighting is
being borne by Daghestani volunteer brigades. The Russian
army forces are reportedly undisciplined, badly trained, and
underfed. Russian Interior Ministry sources in Makhachkala
estimated the Islamists' casualties since 7 August at 400. LF

POLISH RESEARCHERS MISSING IN DAGHESTAN. The Polish Embassy
in Moscow has contacted the Russian Foreign and Interior
Ministries and the Federal Security Service to ask for help
in locating two women researchers from the Polish Academy of
Sciences Center for Environmental Protection who disappeared
while travelling in Daghestan last week, Interfax reported.
Their car has been found abandoned in Gunib Raion, and they
are believed to have been abducted. LF

CHECHEN PRESIDENT AGAIN DENIES INVOLVEMENT IN DAGHESTAN
FIGHTING. In a televised address to the population of
Daghestan on 15 August, Aslan Maskhadov accused Russian
security services of precipitating the crisis in Daghestan
through their support for extremist Islamist missionaries
from Daghestan who settled in Chechnya, Interfax reported.
Addressing some 5,000 people who participated in a rally in
Grozny the following day to protest the hostilities in
Daghestan, Maskhadov similarly accused Moscow of trying to
trigger a civil war in Chechnya and of trying to compromise
his leadership by depicting the fighting in Daghestan as a
conflict that Chechnya instigated against Daghestan. Also on
16 August, the Chechen authorities began mobilizing
reservists and veterans of the 1994-1996 war. LF

COMMUNISTS PURGE RANKS. Spiritual Heritage leader Aleksei
Podberezkin was expelled from the Duma Communist faction on
16 August. Communist Party leader Zyuganov said Podberezkin
had "effectively left" the faction when he announced his
group's intention to run in parliamentary elections separate
from the Communist Party. Podberezkin told NTV that day that
at its congress in early October, his movement will discuss
whether to join the Fatherland-All Russia alliance (see
"RFE/RL Newsline," 30 July 1999). According to NTV, Duma
Security Committee Chairman Viktor Ilyukhin, another member
of the Communist faction and leader of the Movement to
Support the Army, said he does not rule out that he, too,
will be expelled soon. Ilyukhin has said that his group is
opposed to joining the For Victory alliance, currently being
organized by Communist Partly leader Zyuganov. JAC

YELTSIN ASKS THAT CRIMINALS BE KEPT OUT OF DUMA... Russian
President Yeltsin on 16 August urged the head of the Federal
Tax Police, Vyacheslav Soltaganov, to increase his force's
efforts to prevent persons with a criminal record from
becoming members of the lower legislative chamber, ITAR-TASS
reported. Interior Minister Rushailo said earlier that
Russian law enforcement agencies are expecting to encounter
"new, financially and administratively better-organized
attempts by criminal structures to drag their candidates into
the Duma." "Slovo" reported in its 15 August issue that known
criminals seek not only the office of Duma deputy but also
Duma staff positions. According to the publication, the
certificate of a deputy's assistant grants the certificate-
holder free rides on public transportation, free telephone
calls and access to any organization in order to obtain
information. It reported that deputies have on average 120
assistants, although only five of those assistants are
entitled to salaries. JAC

...AS ELECTION COMMISSION THREATENS CRACK DOWN ON CAMPAIGN
ADVERTISING. Central Election Commission Chairman Aleksandr
Veshnyakov warned the Liberal Democratic Party of Russia, led
by Vladimir Zhirinovskii, that it must stop its pre-election
television and radio advertising if it wants to run in the 19
December Duma elections, ITAR-TASS reported on 13 August.
Campaigning, according to Veshnyakov, can start only on the
day of registration of candidates or party lists, which is
not expected until early October. Documents for registration
must be submitted by 25 October but no earlier than 25
September, according to "Kommersant-Daily" on 11 August. "The
Moscow Times" concluded on 17 August that Veshnyakov "appears
more willing than his predecessors to enforce a narrow,
literal interpretation of Russia's election law and perhaps
use it to block a party from participating in elections." JAC

ONE YEAR AFTER CRISIS, DOMESTIC INDUSTRY HAS REVIVED... One
year after the 17 August 1998 financial crisis, the Russian
population's standard of living has fallen 25-30 percent,
former Economics Minister Yevgenii Yasin told RFE/RL's Moscow
bureau. However, according to Yasin, positive trends have
emerged, such as the "increase in exports, the domestic
production growth to replace imports, [and] the improved
budget situation" (see also "End Note" below). Andrei
Ilarionov, head of the Institute for Economic Analysis, told
reporters on 16 August that the ruble's devaluation reduced
the tax burden on industry by 7 percent, while the Russian
Statistics Agency reported the same day that industrial
production grew 4.5 percent during the first seven months of
1999, compared with the same period last year. Twelve of the
15 basic industries the agency tracks showed positive growth.
JAC

...SOME BANKS HAVE BEEN WEEDED OUT... As of 1 July, seven of
Russia's top 25 banks had lost their licenses, while another
five had managed to hold onto their licenses but could not
meet their obligations to clients, according to Interfax on
16 August. One of the latter, SBS Agro, was granted yet
another breather when on 16 August the Central Bank declared
a 30-day moratorium on the payment of claims to creditors of
the bank. According to a Central Bank press release, the
moratorium is being imposed to preserve SBS-Agro's assets and
"prevent instances where the claims of some creditors of the
lending institution are met at the expense of others." On 17
August, Soyuz Banking Group President Aleksandr Smolenskii
said that SBS-Agro bank could decide unilaterally to close
unless the government makes viable proposals by 1 September
to restructure the Soyuz banking group, which includes the
bank. JAC

...BUT ECONOMIC RECOVERY WILL LIKELY WITHER. Credit agency
Fitch ICBA concluded on 16 August that despite the recent
rebound in industrial production, there is little evidence
that once the scope for import substitution has been
exhausted, investment and expanded exports will emerge to
sustain the current economic recovery, according to Reuters.
The agency also predicted that the Russian government will
not implement major economic reforms before the looming
presidential elections. And, without a radical restructuring
of the enterprise sector and the attraction of substantial
investment, including foreign direct investment, the economy
is likely to reach the limit of its productive capacity soon,
according to the agency. JAC

RUSSIAN, JAPANESE DEFENSE CHIEFS DISCUSS SECURITY. Meeting in
Moscow on 16 August, Igor Sergeev and Hosei Norota signed a
memorandum on boosting ties between the two countries'
defense agencies. Sergeev told Norota that Russia regards
Japan as "an influential and responsible neighbor." Norota,
for his part, sought to appease Russian concerns about
Japan's decision to carry out research with the U.S. on
setting up an "umbrella" to protect U.S. troops and allies in
Asia against missile attacks, Reuters reported. Russia is
concerned that such a system would force a revision of the
1972 ABM Treaty. "It cannot be said that the Russian side was
satisfied with today's explanations," a Russian Defense
Ministry official said. Meanwhile, talks are scheduled to
begin in Moscow on 17 August between Russian and U.S. experts
on the Start-3 treaty and on possible changes to the ABM
Treaty in view of U.S. plans to develop its own national ABM
system. JC

MALAYSIAN PREMIER IN FAR EAST. Mahathir Mohamad is currently
on a visit to Khabarovsk Krai aimed at boosting economic
ties, AP and Russian agencies reported. On 16 August, he told
Governor Viktor Ishaev that Malaysia is interested in
Khabarovsk's timber and machine-building sectors. He toured
the Komsomolsk-na-Amure aircraft company, which produces
Sukhoi fighter jets and bombers and, according to Interfax,
accounts for one-third of the region's industrial potential.
And on 17 August, he is expected to visit a shipyard before
leaving for Beijing the next day. JC

MORE RUSSIAN POLICE ARRIVE IN KOSOVA. Ivan Shushkevich, who
is the head of the Russian Interior Ministry's international
relations department, told ITAR-TASS on 16 August that so far
Russia has sent 69 policemen to Kosova and that another 31
will arrive by 20 August. Russia plans to deploy a total of
210 policemen in the 3,100-strong international police force
by mid-September. Twenty of those policemen previously served
in the UN Police Task Force in Bosnia-Herzegovina. Several
will assume senior positions at the police headquarters in
Prishtina. FS

TRANSCAUCASUS AND CENTRAL ASIA

ROW OVER AZERBAIJAN'S MUNICIPAL ELECTION LAW CONTINUES. At a
meeting in Baku on 16 August, members of Azerbaijan's Central
Electoral Commission said that the amendments to the law on
municipal elections proposed by the U.S. National Democratic
Institute and the Azerbaijani opposition Movement for
Electoral Reform and Democratic Elections (MERDE) constitute
"a premeditated insult" and interference into the country's
internal affairs, Turan reported. They also condemned
accusations that commission chairman Djafar Veliev is ready
to falsify the results of the poll. Veliev presided over the
parliamentary elections in November 1995 and the October 1998
presidential poll, both of which were described by
international observers as undemocratic and marred by
widespread fraud. Meanwhile, two opposition representatives
of MERDE told Turan on 16 August that they do not regard
presidential administration official Ali Hasanov's criticism
of the proposed amendments as valid (see "RFE/RL Newsline,"
16 August 1999). LF

TYPHOID OUTBREAK IN AZERBAIJANI ARMY. Azerbaijan's Defense
Ministry reported on 16 August that two servicemen died of
typhoid on 4 August and another 100 are suffering from the
disease, Interfax reported. Turan on 16 August cited "Yeni
Musavat" as reporting that the victims were serving at the
Geranboy and Gilazi military camps and that a quarantine has
been imposed. LF

GEORGIAN OFFICIAL SAYS DAGHESTAN FIGHTING COULD DELAY POPE'S
VISIT. A spokeswoman for the Georgian Orthodox Church told
Reuters in Tbilisi on 16 August that it may be appropriate to
delay Pope John Paul II's trip to Georgia until 2001 because
of the unstable situation resulting from the fighting in
Daghestan. Vatican envoy Giovanni Battista Re announced in
Tbilisi on 15 August after talks with Georgian Foreign
Minister Irakli Menagharishvili and the head of the Georgian
Orthodox church, Catholicos Ilia II, that the pontiff will
visit Georgia at an unspecified date this fall (see "RFE/RL
Newsline," 16 August 1999). Caucasus Press on 13 August cited
"Dilis gazeti" as reporting that members of the Islamic Shura
of Daghestan, which last week proclaimed an independent
Islamic republic, have sent an e-mail to Georgian President
Eduard Shevardnadze assuring him of their desire to establish
friendly relations with Georgia once they take power in
Daghestan. LF

KAZAKH ELECTION OFFICIAL CASTS DOUBT ON FORMER PREMIER'S
ELIGIBILITY... Zaghipa Balieva told journalists in Almaty on
16 August that former Prime Minister Akezhan Kazhegeldin may
not, after all, be eligible to contend the 10 October
elections to Kazakhstan's lower chamber of parliament,
Interfax reported. Balieva had said at a press conference
last week that the administrative offense Kazhegeldin
committed in 1998 by participating in an unregistered public
movement does not constitute an impediment to him taking part
in the October ballot (see "RFE/RL Newsline," 13 August
1999). But on 16 August Balieva said that she was unaware
that Kazhegeldin had also been found guilty of contempt of
court. LF

...AS DEADLINE PASSES FOR REGISTRATION OF CANDIDATES TO
SENATE. Balieva also said on 16 August that a total of 33
candidates have registered to contend the 16 seats in the
upper chamber of parliament, RFE/RL's Almaty bureau reported.
She said that the OSCE has prepared special television
programming to inform the electorate about the ballot. Also
on 16 August, Petr Svoik, one of the leaders of the
opposition Azamat Party, was refused registration in an
Almaty district as a candidate for a lower house seat. The
next day, "Nezavisimaya gazeta" reported that for the first
time in Kazakhstan, new computer technology will be used to
record the identity of every citizen who casts a vote and
thus preclude multiple voting during the upcoming
parliamentary elections. LF

KAZAKH JOURNALIST FOUND DEAD. Armial Tasymbekov was found
dead in his apartment in Almaty last weekend, his relatives
told RFE/RL's bureau in the former capital on 17 August. No
further details of the circumstances of his death are
available. Tasymbekov was briefly incarcerated in a
psychiatric hospital earlier this year on suspicion of
involvement in daubing slogans on buildings in Astana that
denigrated President Nursultan Nazarbaev and extolled former
Prime Minister Kazhegeldin (see "RFE/RL Newsline," 3 and 6
May 1999). LF

BP REVERSES DECISION TO QUIT KAZAKH OIL PROJECT. BP Amoco has
gone back on its decision to sell its 9.5 percent stake in
the Offshore Kazakhstan International Operating Company
(OKIOC) for an asking price of $440 million, Interfax
reported on 16 August, quoting an unnamed OKIOC official. BP
had announced in July that it planned to sell its share in
the consortium, regardless of whether the first test well
yielded hydrocarbons (see "RFE/RL Newsline," 30 July 1999).
On 13 August, ITAR-TASS reported that Kazakhstan's Prime
Minister Nurlan Balghymbaev had set in motion the drilling
machine to bore OKIOC's first offshore test well. LF

KAZAKHSTAN MAY SOON DECIDE ON SECOND OIL EXPORT PIPELINE.
Speaking at a news conference in Atyrau after the OKIOC
ceremony, Balghymbaev said the choice of a second Caspian
export pipeline (in addition to the one from Tengiz to
Novorossiisk, which is scheduled to go into operation in mid-
2001) will be contingent on the results of the test well,
which, he said, should be available in three to four months,
Interfax reported. Balghymbaev hinted that the route via
Turkmenistan to Iran is the most likely option, noting that
the feasibility study for the alternative pipeline to China
will not be completed for another two months. LF

KYRGYZSTAN ADMITS RANSOMING HOSTAGES. Ministry of National
Security spokesman Talant Razzakov told an RFE/RL
correspondent in Bishkek on 16 August that the Kyrgyz
authorities paid $50,000 in cash to obtain the 13 August
release of four local guerrillas from Uzbekistan took hostage
one week earlier in the southern district of Batken (see
"RFE/RL Newsline," 10 and 16 August 1999). The kidnappers had
originally demanded a $1 million payment. Razzakov also said
that Defense Ministry forces have begun a military operation
with the aim of neutralizing the guerrillas. Razzakov
confirmed that Uzbek planes bombed some mountainous areas in
Batken on 15 August as well as Tajikistan's neighboring
Djirgatal district in an attempt to hit the guerillas. He did
not elaborate. According to "Vechernii Bishkek" of 16 August,
the Uzbek bombing raid was coordinated with the Kyrgyz
leadership. LF

DATE SET FOR KYRGYZSTAN'S LOCAL ELECTIONS. Central Electoral
Commission chairman Sulaiman Imanbaev announced in Bishkek on
16 August that President Askar Akayev has signed a decree
scheduling local elections for 17 October, RFE/RL's Bishkek
bureau reported. LF

UZBEKISTAN DENIES ITS PLANES BOMBED TAJIK TERRITORY.
Tajikistan's Foreign Minister Talbak Nazarov on 16 August
lodged an official complaint with Uzbekistan's ambassador in
Dushanbe, Bakhtiar Urdashev, following an incident the
previous day in which four jets approaching from Kyrgyz
airspace dropped eight bombs on Tajikistan's Djirgatal
district, Russian agencies reported. Buildings were destroyed
and some 100 sheep and cattle killed, but there were no human
casualties. Djirgatal is close to the border with
Kyrgyzstan's Osh Oblast, where guerrillas from Tajikistan,
some of them reportedly ethnic Uzbeks, took four Kyrgyz
officials hostage last week (see above). The Uzbek Foreign
Ministry denied any knowledge of the bombing. LF

END NOTE

ONE YEAR AFTER THE MELTDOWN: FEARS WANE, SHADOW LINGERS

By Floriana Fossato

	Many analysts assessing the state of the Russian economy
one year after the August 1998 financial meltdown note that
their worst fears have not come true. Some even feel that it
was a healthy development for Russia.
	Former Economics Minister Yevgenii Yasin, for example,
recently told RFE/RL that last August's meltdown was a
"moment of truth" for Russia. "We found out that it is
impossible to live on debts and impossible to live with an
inflated ruble exchange rate," he said. "The market has
brought everything back to normal. Now we stand on a more
realistic footing. We can like it or not, but it is better to
dance to this music than to live on illusions."
	A year ago today, the government of then Prime Minister
Sergei Kirienko in effect devalued the ruble and defaulted on
some domestic debt. Within three weeks, the ruble plummeted
from six to 16 to the dollar, banks refused to return clients
their savings, most business activities suffered huge losses,
and foreign investment dried up. As a result, many people
lost their jobs, and most of those who managed to keep them
saw their salaries reduced or delayed.
	When the crisis peaked last summer, Russians emptied
shop shelves and started stocking up on goods, preparing for
the worst. They once again showed their endless capacity for
enduring cataclysms. And, significantly, there was no major
social unrest.
	A new left-leaning government led by Yevgenii Primakov
talked much about implementing measures that could have led
to hyperinflation. But in the end it avoided a full economic
crash by enforcing a policy that some observers called
"positive inaction." As a result, the ruble continued its
fall, but finally found firmer ground at a rate of about 24
to the dollar.
	Following the ruble devaluation, imports fell
drastically--by 46 percent in the first half of this year--
helping boost domestic production. Demand has increased for a
wide range of domestically produced goods, which now are
cheaper owing to the devaluation. Those goods range from food
products to construction materials.
	Another reason for Russia's improving trade balance is
the upward trend of world prices for oil and other raw
materials. A barrel of Russian oil was worth only 8.58
dollars in February, but the price had risen to 19.34 dollars
by July.
	Yasin, however, notes that the current positive trend
had a high price and that currently Russians are poorer than
a year ago. "The positive trends we notice now in industry
and in several other sectors--the increase in exports, the
[domestic] production growth to replace imports, the improved
budget situation--has been paid for by the people. The
population's standard of living has decreased by 25 to 30
percent."
	Official figures released in July say that the number of
Russians living in poverty increased from 33 million last
year to 55 million this year. This means that nearly four out
of every 10 people live below the official subsistence level,
defined as a monthly income not exceeding 829 rubles (some
$34).
	The average monthly wage now equals about $50, having
fallen from some $200 before last August. The average pension
now equals only about $17 a month.
	Some economic analysts argue that government policies
have contributed little to the current positive trends. Denis
Rodionov, an analyst with Brunswick Warburg, told RFE/RL that
"deeper reforms--structural and institutional--are still not
there." He said that the main policy needs continue to be the
reform of monopolies, the introduction of bankruptcy
legislation, the reduction of barter practices, the
improvement of tax collection, and the restructuring of the
banking system.
	Others argue that another huge problem is persisting
corruption and the inefficiency of both the authorities and
state and private businesses.
	The government and central bank program outlining
economic policy for this year states that the Russian
authorities are committed to further structural reform. The
program was submitted to the IMF ahead of the fund's long-
awaited decision late last month to issue $4.5 billion in new
loans over the next 18 months. The money is intended to help
refinance previous loans that are coming due.
	The IMF decision has been of critical importance for
Russia. Not only has it unlocked additional funds from the
World Bank and Japan's Eximbank. It has also made possible an
agreement with the Paris Club of foreign debtors on
postponing payment of some Soviet-era debts.
	 But the IMF's new loan was accompanied by unusually
strong words from fund officials. Citing an audit that found
Russia's central bank had falsified the size of its reserves
in 1996 by secretly channeling funds through the offshore
company FIMACO, the IMF's first deputy managing director,
Stanley Fischer, said the fund has "made clear to the highest
levels of Russian government" that what happened was
"unacceptable".
	Peter Westin, an economist at the Moscow-based European
Center for Economic Policy, wrote recently in the English-
language "Moscow Times" that the IMF decision "was mainly
political." He said it "reconfirms the suspicion that
creditors view Russia as too big to fail."
	One year after the meltdown, most analysts seem to agree
that the shadow of August 1998 lingers.

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