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RFE/RL NEWSLINE

RFE/RL NEWSLINE Vol. 3, No. 223, Part I, 16 November 1999


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RFE/RL NEWSLINE Vol. 3, No. 223, Part I, 16 November 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

* CHECHEN LEADERS APPEAL FOR HELP

* SHOIGU SUBJECTED TO NEW SCRUTINY

* OSCE REGISTERS VIOLATIONS IN GEORGIAN RUNOFF POLL

End Note: OVERCOMING CORRUPTION
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RUSSIA

CHECHEN LEADERS APPEAL FOR HELP. Chechen President Aslan
Maskhadov has appealed to Muslim states to "take an
appropriate position" in response to the Russian devastation
of Chechnya, Reuters reported on 16 November, quoting the
secretary-general of the Organization of the Islamic
Conference, Azzedine Laraki. Speaking in Jeddah, Laraki
called on Russia to seek a peaceful solution to the conflict.
He added that because of that conflict, he has rejected an
invitation to visit Russia. In Prague, Chechen Foreign
Minister Ilyas Akhmadov told journalists at RFE/RL's
headquarters on 15 November that Moscow systematically
rejects Chechen proposals for talks on resolving the conflict
and that an outside mediator is needed. He said the UN could
assume that role, as it did in Kosova (see also Part II). LF

RUSSIAN REPRESENTATIVE ADVISES CIVILIANS TO LEAVE GROZNY.
Russian presidential representative to Chechnya Nikolai
Koshman on 15 November advised the remaining civilian
population of Grozny to leave the city "for their own
safety," noting that a corridor leading north from Grozny has
been opened for this purpose, Interfax reported. Koshman was
speaking at a press conference in Moscow on 15 November after
he and Foreign Minister Igor Ivanov had tried to justify
Moscow's Chechnya policy to G-7 ambassadors. On 12 November,
Koshman had said he considers it inappropriate to rebuild
Grozny a second time and proposed designating Gudermes the
capital. Koshman also said that by 25 December, Russia aims
to create eight tent camps in the "liberated" areas of
northern Chechnya to which displaced persons will be
encouraged to return. He predicted that over the next month,
local Chechen communities would elect representatives to a
new parliament, which, he said, would then name a new
government by February 2000. LF

BASAEV PESSIMISTIC OVER INTERNATIONAL COMMUNITY'S ABILITY TO
PRESSURE MOSCOW. Field commander Shamil Basaev said in Grozny
on 15 November he does not believe the West will succeed at
the upcoming OSCE summit in Istanbul in persuading Russia to
stop the war in Chechnya, Interfax reported. Basaev denied
rumors of disagreements within the Chechen leadership or
between individual field commanders. But he admitted that
some residents of Gudermes had colluded with Russian troops
and helped the latter take the town under their control (see
"RFE/RL Newsline," 12 November 1999). OSCE Chairman-in-Office
Knut Vollebaek said on 15 November that Russia must set a
deadline for withdrawing its troops from Chechnya, according
to AP. LF

RUSSIAN MILITARY DENIES BATTLE FOR ACHKHOI-MARTAN. Chechen
chief of staff Mumadi Saidaev said on 15 November that
Russian armored columns were advancing from two directions on
the town of Achkhoi Martan, southwest of Grozny. He noted,
however, that those troops encountered serious resistance
from the town's Chechen defenders, Interfax reported. But a
Russian military spokesman denied that either direct clashes
had taken place or that federal forces had incurred heavy
losses. Meanwhile, systematic air strikes continued against
Bamut and the towns of Sernovodsk and Urus Martan, while
Grozny suffered fewer air raids than in recent days. LF

SHOIGU SUBJECTED TO NEW SCRUTINY... Emergencies Minister and
leader of the interregional movement Unity (Edinstvo) Sergei
Shoigu announced on 15 November that he will go on vacation
from 25-30 November in order to prepare for the upcoming
State Duma elections, ITAR-TASS reported. Shoigu's
announcement follows criticism from media and public figures
that his recent tours to cities in Siberia, the Far East, and
the North Caucasus were in effect campaign trips (see "RFE/RL
Russian Federation Report," 3 November 1999.) Under Russian
election law, officials are allowed to campaign only in their
free time. In its latest issue (no. 45), "Literaturnaya
gazeta" profiles Shoigu and the work of his ministry.
According to the journal, Shoigu recently said that he takes
a poor view of citizens who do not participate in elections
and proposed "to deprive Russian citizenship to anyone who
fails to vote three times in a row." JAC

...AS NEW INFORMATION COMES TO LIGHT ABOUT HIS MINISTRY. The
journal also reported that Shoigu, who has been unusually
successful in marshalling budget funds for his agency,
managed to establish a special force within the ministry
armed with light infantry weapons and staffed by former
agents of elite forces such as Alpha. Among its missions is
counter-terrorism and "providing security for the
constitutional system." The journal argues that the existence
of the group has been kept a secret with the complicity of
the Kremlin, which "possibly saw" in the "enhanced Emergency
Ministry a kind of gun under the pillow." However, this
violates the constitution "since the ministry is not among
the bodies specified for 'providing security.'" The office of
Moscow Mayor Yurii Luzhkov reportedly owns 25 percent of the
stock of "Literaturnaya gazeta" Publishers. JAC

YELTSIN APPOINTS PUTIN'S CHOICE FOR SECURITY COUNCIL CHIEF.
President Boris Yeltsin on 15 November named Sergei Ivanov,
the deputy director of the Federal Security Service (FSB), as
the secretary of the Security Council. The 46-year-old Ivanov
takes over that post from Prime Minister Vladimir Putin, who
proposed Ivanov as his successor at the council, Interfax
reported, quoting presidential spokesman Dmitrii Yakushkin.
Like Putin, Ivanov is a native of St. Petersburg and made a
career in intelligence, first in the KGB and then in the FSB,
both at home and abroad. Also on 15 November, Yeltsin signed
a decree appointing FSB Director Nikolai Patrushev (another
St. Petersburg native) a permanent member of the council to
replace former Prime Minister Sergei Stepashin. JC

DUMA TO BOOST MILITARY SPENDING. The State Duma's Budget
Committee on 15 November recommended that the Duma adopt
amendments to the 1999 budget that will increase military
spending by 8.695 billion rubles ($330 million), Interfax
reported. Last week, Finance Minister Mikhail Kasyanov
explained that at least some of the unexpected additional tax
revenues collected would be directed toward the army (see
"RFE/RL Newsline," 15 November 1999). "Vremya MN" on 16
November reported that although all factions and political
parties have already declared they will support the
activities of the government in Chechnya, deputies would like
more specific information from the government on how the
money will be spent. The daily added that with elections
looming, deputies would also like to earmark additional funds
for assistance to children. The Duma is scheduled to hold the
third reading of the 2000 budget on 29 November and the
fourth reading on 3 December--16 days before the Duma
elections. JAC

INDUSTRIAL PRODUCTION CONTINUES TO EDGE UP. Russian
industrial production grew 7.5 percent during the first 10
months of 1999, compared with the same period last year,
according to the Russian Statistics Agency on 15 November.
During the first three quarters, production jumped 7 percent
(see "RFE/RL Newsline," 20 October 1999). Output in October
alone leaped 10.3 percent, compared with the same month last
year. The Organization for Economic Cooperation and
Development forecast in its latest economic outlook that
Russian GDP growth will slip to 1 percent in 2000 from 2
percent in 1999, Reuters reported on 16 November. The OECD
concluded that "while there are signs of recovery, the
macroeconomic situation remains potentially rather fragile."
The organization also noted that while inflation would
decline from 40 percent this year to 30 percent in 2000,
upward pressure on energy and transportation prices would
eventually hurt the manufacturing sector. JAC

RUSSIA TO CONTINUE TO PUSH FOR DEBT WRITE-OFF. One day before
the next round of negotiations with London Club creditors was
scheduled to begin, Finance Minister Kasyanov told reporters
on 15 November that the Russian government will ask the
London Club creditors to write off 40 percent of its debt,
Interfax reported. In September, Western sources told
Interfax that Russia was hoping to have 30 percent of its
debt to the club written off (see "RFE/RL Newsline," 16
September 1999). London Club members are reportedly prepared
to consider partial debt forgiveness if the government is
prepared to convert all debts from Vneshekonombank securities
into Eurobonds. JAC

YELTSIN AFFIRMS PRESIDENTIAL ELECTION DATE. After meeting
with Central Elections Commission Chairman Aleksandr
Veshnyakov on 15 November, President Yeltsin told reporters
that Russia's next presidential elections will be held on 4
June 2000. That date was established in accordance with the
bill on presidential elections, which was passed by the Duma
in its first reading in late October. A second reading has
not yet been scheduled, but Veshnyakov said earlier that he
hopes the draft law will be approved no later than early
December. JAC

KVASHNIN WARNS OF 'RETALIATORY MEASURES' OVER POSSIBLE ABM
CHANGES... Chief of the General Staff of the Russian Armed
Forces General Anatolii Kvashnin said on 15 November that if
the U.S. sets up a national defense system, Russia will have
to take "retaliatory steps and raise the effectiveness of
[its] strategic nuclear forces." Arguing that the U.S.
process of deploying such a system has become "irrevocable,"
Kvashnin commented that the "selection of the deployment
areas makes the objective of the national system clear. It is
to intercept ballistic missiles launched from Russia and
China." The U.S. is proposing a limited national defense
system based in Alaska. JC

...SAYS NATO MIGHT USE FORCE ON TERRITORY OF FORMER USSR.
Also on 15 November, Kvashnin said that Moscow has not ruled
out the possibility that NATO will use force on the territory
of the former Soviet Union, among other places. "Not only the
growing military-political activity in the former Soviet
Union but [also] the evident attempts to declare these
regions a sphere of NATO security interests are alarming," he
commented. Arguing that "Kosovo and Iraq" were the first
examples of NATO's "growing readiness" to use armed force,
Kvashnin went on to say that "one may expect that other
territories, including former Soviet territories, will be no
exception." At the same time, Kvashnin noted that Moscow
still believes that there is "no alternative to cooperation
with NATO" and hopes to renew "equal and constructive
relations" with the alliance. JC

U.S. CARRIER NOT TO RETURN TO RUSSIAN FAR EAST IN SHORT TERM.
Charles Cooper, director for international operations at
Alaska Airlines, told Interfax-Eurasia on 15 November that
his company will resume flights to Russia's Far East no
sooner than the middle of the next decade of the next
century. The company began serving Khabarovsk in 1991. Last
November, following the August 1998 financial crisis, the
company closed its operations in Russia. Far Eastern cities
have recently witnessed increased air fares owing to the
rising cost of jet fuel (see "RFE/RL Russian Federation
Report," 10 November 1999). For example, Domodedovo increased
fares for flights between Magadan and Moscow by more than
one-third. JAC

MOSCOW CONTINUES TO PRESSURE LONDON. An official at the
Russian Embassy to the U.K. told journalists in London on 15
November that Moscow has requested that the British
authorities carry out a thorough investigation to establish
whether "Muslim centers" for training fighters in Chechnya
"can function" in the U.K., ITAR-TASS reported. He added that
if it becomes clear to Russia that the British authorities
have "a soft approach to the issue to the detriment of
Russia's national interests," Russian-British relations will
be "affected." That statement follows an incident in which
Russian journalists were allegedly beaten by people attending
a meeting to raise funds for Chechen forces fighting against
Russian troops (see "RFE/RL Newsline," 15 November 1999). JC

TRANSCAUCASUS AND CENTRAL ASIA

LOW-GRADE EXPLOSIVES FOUND IN ARMENIAN PARLIAMENT. Police on
15 November evacuated the Armenian parliament building
following an anonymous telephone warning to speaker Armen
Khachatrian, RFE/RL's Yerevan bureau reported. They
subsequently found under the presidium table a package
containing low-level explosives. That package was rendered
harmless, and Deputy Interior Minister Oganes Varyan denied
it was life-threatening. Presenting newly appointed National
Security Minister Karlos Petrosian to ministry personnel on
15 November, President Robert Kocharian said it is still
premature to give a final evaluation of the 27 October
parliament shootings, in which eight people, including Prime
Minister Vazgen Sargsian, died. LF

ARMENIA SENDS RESCUE TEAM TO TURKEY. An Armenian government
spokesman said on 15 November that Yerevan is ready to send
relief supplies, including blankets, generators, and
medicines, to those made homeless by the 12 November
earthquake in northwestern Turkey, RFE/RL's Yerevan bureau
reported. A 24-strong Armenian rescue squad flew to the
region on 13 November. LF

AZERBAIJAN ASKED TO RESPOND TO TORTURE ALLEGATIONS. The UN
Committee Against Torture in Geneva on 15 November asked
Azerbaijan's Deputy Prosecutor-General Fikret Mamedov to
respond to claims by human rights watchdogs that Azerbaijani
prisoners are subjected to ill-treatment and torture, an
RFE/RL correspondent in Geneva reported. Mamedov conceded
that isolated cases of ill-treatment occur. He outlined new
legislation intended to improve the rights of detainees and
preclude police brutality. LF

GEORGIA REJECTS RUSSIAN CRITICIM OVER CFE. In his weekly
radio broadcast, Georgian President Eduard Shevardnadze said
on 15 November that Russian Foreign Minister Igor Ivanov's
claim that Georgia and Moldova are creating obstacles to the
signing at the OSCE Istanbul summit of the revised CFE treaty
is "unfair," ITAR-TASS reported. Shevardnadze told
journalists later that day that Georgia will not give up the
quota of armaments to which it is entitled under the CFE
treaty. It currently shares that quota with Russia on a 50:50
basis. He said Georgia is ready to make unspecified
compromises, but not to the detriment of the country's
interests. LF

OSCE REGISTERS VIOLATIONS IN GEORGIAN RUNOFF POLL. In a
statement issued in Tbilisi on 15 November, the OSCE/ODIHR
Election Observation Mission registered "serious violations"
during the runoff poll the previous day in 24 constituencies
where no candidate had won a majority in the 31 October vote,
Caucasus Press reported. Those irregularities included
intimidation of members of local election commissions and
ballot-stuffing in Tbilisi, Abasha, and Chkhorotsku. The
statement also noted deficiencies in tabulating the first
round returns. And it said that only 13 out of 19 members of
the Central Electoral Commission signed the final protocol
listing the first round results. LF

GEORGIA'S FUEL AND ENERGY MINISTER RESIGNS. Temur Giorgadze
announced at a Tbilisi press conference on 15 November that
he has submitted his resignation following a public
disagreement with Mikhail Saakashvili, who heads the majority
Union of Citizens of Georgia faction in the Georgian
parliament, Caucasus Press reported. President Shevardnadze
said that Giorgadze's decision to step down was "in principle
correct." Georgia has long suffered from intermittent and
inadequate electricity supplies. A foreign study earlier this
year calculated that $1.5 billion in foreign investment is
needed in order to rehabilitate the entire power generating
network. LF

KAZAKHSTAN CALCULATES DAMAGE FROM RUSSIAN ROCKET EXPLOSION.
The director of Kazakhstan's Space Research Agency, Meirbek
Moldabekov, told journalists on 15 November that Russian and
Kazakh experts have estimated that Kazakhstan should receive
19 million tenges (approximately $36,000) in compensation for
the damage caused when a Russian proton rocket exploded on 27
October shortly after blastoff from the Baikonor cosmodrome,
RFE/RL's Kazakh Service reported. Kazakhstan's Deputy Premier
Aleksandr Pavlov and his Russian counterpart, Ilya Klebanov,
will sign an agreement on 17 November on the payment of
compensation for the damage. Pavlov told both chambers of
Kazakhstan's parliament on 12 November that when he meets
with Klebanov he will insist that Russia pays promptly and in
full the $115 million annual rent for the use of Baikonur,
according to Interfax. LF

KAZAKHSTAN ABOLISHES RESTRICTIONS ON FOREIGN-CURRENCY
EARNINGS. National Bank of Kazakhstan Chairman Grigorii
Marchenko told a congress of financiers in Almay on 15
November that the bank has revoked its April requirement that
exporters sell 50 percent of their foreign-currency earnings,
Interfax-Kazakhstan reported. Marchenko said the financial
system has now stabilized following the de facto devaluation
of the tenge in April. LF

KYRGYZ PARLIAMENT REJECTS BUDGET DRAFT IN FIRST READING.
Parliamentary deputies on 15 November rejected the draft
budget for 2000 after the government refused to increase the
minimum wage for teachers and doctors, RFE/RL's Bishkek
bureau reported (see "RFE/RL Newsline," 15 November 1999).
Meanwhile the Kyrgyz government has failed to reach agreement
with the IMF on the terms of a second Economic Structural
Adjustment Facility loan. Talks on that loan will resume in
February. LF

KYRGYZSTAN ESTABLISHES DIPLOMATIC RELATIONS WITH AFGHANISTAN.
Meeting in Moscow on 15 November, the Kyrgyz and Afghan
ambassadors to Russia, Akmatbek Nanaev and Abdul Wahif
Assifi, signed a protocol establishing diplomatic relations,
RFE/RL's Bishkek bureau reported. LF

TAJIK PRESIDENT SWORN IN. Imomali Rakhmonov was sworn in for
a second term as president on 16 November, Asia Plus-Blitz
reported. Russian Prime Minister Vladimir Putin, the foreign
ministers of Iran, Afghanistan, and Ukraine, and senior
officials from China, India, and Uzbekistan attended the
ceremony in Dushanbe. Rakhmonov said the most important
objectives of his second term in office are creating
conditions for political pluralism and media freedom,
cracking down on crime, terrorism, and drug-smuggling, and
making Tajik products more competitive on world markets. With
regard to foreign policy, Tajikistan will continue
strengthening ties with Russia, other Central Asia states,
and the world community, he said. LF

END NOTE

OVERCOMING CORRUPTION

by Paul Goble

	Macroeconomic reforms--such as privatization, price
liberalization and making national currencies convertible--
are not in themselves sufficient to overcome the corruption
now holding back many post-communist countries, according to
the European Bank for Reconstruction and Development.
	In its annual report on transition economies released
last week, the EBRD argues that such reforms have not had the
effects on either relations between the state and the economy
or hence on the level of corruption that both that bank and
most other advocates of reform had expected.
	 And it concludes that post-communist governments must
do more to promote fair and transparent laws, strong
regulatory agencies, and efficient and effective court
systems if they are to bring corruption under control,
something the bank said few of these countries have been able
to do so far.
	In short, the solutions to the multifaceted problems of
corruption are more often to be found in politics rather than
economics.
	In the past, the EBRD, like other international lenders,
has tended to shy away from discussing corruption in these
countries, typically treating it as a transitional problem
certain to be cured by the kind of free market reforms it and
other Western institutions have advocated.
	But as the bank's report acknowledges, the high levels
of corruption in these countries and, more important, the
real sources of that corruption have prompted the EBRD to
change its approach.
	The level of corruption in many of these countries is
staggering. According to the report, officials in Georgia
extract in the form of bribes some 8.1 percent of the annual
revenues of companies operating there. In Ukraine, that
figure is 6.5 percent, and in the Commonwealth of Independent
States as a whole 5.7 percent.
	By adding to the costs of doing business, bribery keeps
many firms from making a profit and thus dooms them to an
early end. At the same time, demands for bribes discourage
new investors from both within the countries involved and
abroad.
	Indeed, the EBRD found that newly formed companies in
these countries had to pay almost twice as much of their
revenues in bribes as did more established concerns--5.4
percent, compared with 2.8 percent. And thus bribes serve as
yet another barrier to the establishment of new businesses.
	Perhaps the most striking aspect of this year's EBRD
report on transition economies, however, is its focus on what
macroeconomic reforms cannot achieve by themselves. The bank
noted that most post-communist countries have privatized many
firms and reduced direct state intervention in the economy.
	But those macroeconomic steps have not necessarily
reduced "the overall level of intervention or the informal
tax imposed on firms in the form of bribes and time spent
dealing with government officials."
	Indeed, the EBRD found that state-owned firms and
privatized ones of the same size were forced to pay
approximately the same percentage in bribes, an indication
that privatization has not had the impact on corruption that
many had expected.
	Sometimes this appears to be because the new owners are
the former communist-era managers, who have a special
relationship with government officials. Sometimes it is
because the firms or the government agencies with which they
must deal have one or another kind of monopoly power,
something privatization has done little to change.
	Because economic changes alone have failed to overcome
corruption, the EBRD argued that these countries must turn to
political means instead. Indeed, in releasing the report, the
bank's president, Horst Koehler, said: "I underline this
twice. Weak institutions are the main obstacle to economic
growth in a number of transition countries."
	But in contrast to some analysts who have written off
any chance for improvement in these societies, the EBRD notes
that the fight against corruption can be won by leaders and
governments willing to take the political risks involved in
breaking with the past and building institutions capable of
managing a modern, free market economy.

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