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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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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 xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 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. xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx Copyright (c) 1999 RFE/RL, Inc. 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