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Newsline - April 17, 1997




FEDERATION COUNCIL DELAYS DECISION ON TROPHY

ART LAW. The Federation Council has decided to use written ballots in the vote on the law on cultural valuables, thereby delaying a decision on the controversial legislation, RFE/RL's Moscow bureau reported yesterday. According to the unusual voting procedure, ballots will be distributed to deputies who did not attend yesterday's session and the final tally will be announced sometime next month. Although Russian commentators believe the Federation Council is likely to override President Boris Yeltsin's veto of the law, the delay spares Yeltsin a potentially embarrassing scandal during his three-day visit to Germany. Yeltsin arrived yesterday in Baden- Baden, where he is to hold talks with German Chancellor Helmut Kohl and receive an award from a German media organization.

CHUBAIS SAYS "MONSTROUS" CRISIS FORCES REVISION OF BUDGET.

First Deputy Prime Minister Anatolii Chubais has announced that the 1997 budget must be substantially revised because of a "monstrous" crisis, RFE/RL's Moscow bureau reports. Addressing the Federation Council today, Chubais said the budget exceeds the state's means by 100 trillion rubles ($17.4 billion). He noted that revenues during the first quarter of this year totaled only 57% of government targets and that tax collection was only at 39% of budgeted levels. The government is expected to submit a revised budget to the parliament this month, but the sharp proposed cuts in non-essential spending are likely to meet with strong opposition. Chubais said that despite the revision, the government will still be able to pay all pension arrears by 1 July.

MINIMUM PENSION INCREASE APPROVED.

By a vote of 99 to 16, the Federation Council has approved a law that would raise the minimum monthly pension by 13% to 78,620 rubles ($14) beginning on 1 March. Pension Fund head Vasilii Barchuk urged deputies before the ballot not to pass the law, saying the extra expenditures could not be financed. Deputy Prime Minister Oleg Sysuev told ITAR-TASS yesterday that the measure would index debts rather than pensions. Yeltsin is likely to veto the law. Meanwhile, the Federation Council has decided to vote on the law on the government (see RFE/RL Newsline, 15 April 1997) using the same written ballot procedure adopted for the trophy art law.

ANOTHER CONSTITUTIONAL COURT NOMINEE REJECTED.

The Federation Council has rejected the candidacy of presidential legal adviser Mikhail Krasnov, whom Yeltsin nominated to the Constitutional Court last week, RFE/RL's Moscow bureau reported yesterday. Yeltsin tried twice in 1994 to appoint Krasnov to the court but was stymied by the council. Last month, the upper house refused to confirm Mikhail Fedotov, Yeltsin's first choice to fill the latest vacancy in the court. While Yeltsin searches for a new nominee, the court will function with 18 rather than 19 judges.

NEW CABINET APPOINTMENTS.

Yeltsin has named Aleksandr Pochinok, until now chairman of the State Duma subcommittee on taxes, to head the State Tax Service, Russian news agencies reported yesterday. Pochinok belongs to the Russia's Democratic Choice party of Yegor Gaidar and Anatolii Chubais. Yeltsin has also appointed Mikhail Fradkov to head the Foreign Trade Ministry. Fradkov has been acting foreign trade minister since Oleg Davydov was removed in last month's cabinet reshuffle. In addition, Yeltsin created an advisory Presidential Economic Department, which will be supervised by former finance minister and current presidential adviser Aleksandr Livshits.

DUMA LIMITS TV COVERAGE OF ITS WORK.

The State Duma has voted by 264 to 30 to bar TV journalists from filming in the Duma chamber, ITAR-TASS reported yesterday. Instead, the Duma's press service will release videotapes of parliamentary sessions to TV networks. Duma Information Committee Chairman Oleg Finko of the Liberal Democratic Party of Russia, who proposed the measure, said the new rules would allow voters to watch "unbiased information" about the Duma's work. The major TV networks generally portray the parliament in an unfavorable light, and opposition deputies have long complained of media bias. In March, the Duma stripped journalists from state-controlled Russian Public Television (ORT) of their accreditation for one month. ORT appealed to the Supreme Court, which ruled that the Duma's ban was illegal.

CHECHNYA CREATES SPECIAL TASK FORCE TO SEARCH FOR HOSTAGES.

The Chechen Interior Ministry has created a 20-strong force tasked with searching for abducted persons, Russian agencies reported yesterday, quoting Interior Minister Kazbek Makhashev. The force's top priority will be to locate the four journalists from Radio Rossii and ITAR-TASS who were abducted in Grozny on 4 March. Meanwhile, Russian Security Council Secretary Ivan Rybkin said former Chechen Security Department head Abu Movsayev's warning of terrorist attacks on eight Russian cities on 21 April--the first anniversary of the death of Chechen President Dzhokhar Dudaev--was a "provocation." Rybkin also said that a peace accord between Moscow and Chechnya is "almost ready," AFP reported.

ZYUGANOV SEEKING ALLIANCE WITH LEADERS OF NATURAL MONOPOLIES.

Communist Party leader Gennadii Zyuganov says his party is joining forces with leaders of the natural monopolies in the energy and transportation sectors to oppose the government's restructuring plans, RFE/RL's Moscow bureau reported. Zyuganov said the policies pursued by "radical reformers" would lead to Russia's disintegration. He added that he has spoken with many regional leaders who share his concerns. Zyuganov also claimed that the government has a "secret plan" to dissolve the Duma and to make economic restructuring irreversible during the few months before new parliamentary elections would have to be held. Duma deputy Viktor Sheinis of Yabloko told RFE/RL that a Communist alliance with the heads of Russia's natural monopolies would probably alienate the more hard-line communists in Zyuganov's camp.

GOVERNOR DEFENDS NATURAL MONOPOLIES.

Sverdlovsk Oblast Governor Eduard Rossel says the gas monopoly Gazprom, the electricity giant Unified Energy System, and the railways network should not be restructured "under any circumstances," ITAR-TASS reported yesterday. At the same time, he called on the natural monopolies to cut their tariffs by one-third. Earlier this week, Rossel advocated restoring the Ministry of Defense Industry to provide state planning and protection for Russia's military-industrial complex. That ministry was abolished last month and its responsibilities transferred to the Economics Ministry. Kommersant-Daily suggested on 15 April that Rossel may be seeking to revive the Ministry of Defense Industry so that he can join the government as head of the ministry.

RUSSIA SIGNS PROTOCOL ON ABOLISHING DEATH PENALTY.

Russia has signed Protocol 6 of the European Convention on Human Rights, which outlaws capital punishment, Reuters reported yesterday, citing a statement released by the Council of Europe. Russia agreed to abolish the death penalty within three years when it joined the Council of Europe in February 1996, and Yeltsin ordered the Foreign Ministry to sign the protocol earlier this year. However, the measure is unlikely to be ratified by the parliament. Last month, the Duma voted against a moratorium on the death penalty.

RUSSIA TO LAUNCH MORE EUROBONDS.

First Deputy Finance Minister Aleksei Kudrin says that within the next few months, Russia will float its third Eurobond issue, which will be denominated in dollars, ITAR-TASS reported yesterday. Kudrin said two or three more Eurobond issues will be launched by the end of the year. Russia launched its first $1 billion issue of Eurobonds last November and floated its second issue, worth 2 billion German marks ($1.18 billion), in March. Meanwhile, Central Bank Chairman Sergei Dubinin announced on 15 April that the governments of Moscow, St. Petersburg, and Nizhnii Novgorod Oblast are likely to issue Eurobonds this year, ITAR-TASS reported. Yeltsin issued a decree earlier this month allowing the three regions to issue Eurobonds to cover up to 30% of their annual revenues.

RUSSIA REFUSES TO PROMISE NOT TO CHANGE TRADE RULES.

The Russian delegation at talks with the World Trade Organization in Geneva has refused to promise not to toughen trade rules while Russia is negotiating to join the WTO, according to ITAR-TASS yesterday. Deputy Foreign Trade Minister Georgii Gabuniya said Moscow hopes to maintain "stability" in its trade legislation but cannot rule out the need to enact changes in the future. The U.S., Canada, Japan, and the EU asked Russia to proclaim a "standstill" on trade rules on 15 April, Reuters reported. Russia applied for WTO membership in 1993.




MORE FALLOUT FROM "YEREVANGATE" ARMS SCANDAL.

Zahid Garalov, head of an Azerbaijani parliamentary delegation in Tibilisi to discuss Russian arms shipments to Armenia via Georgian territory, told a press conference yesterday that the arms transfers were sanctioned by Georgian Defense Minister Vardiko Nadibaidze, a close associate of former Russian Defense Minister Pavel Grachev. The Armenian news agency Turan quoted Garalov as saying the weaponry included "tactical missiles of the P-17 complex," which can carry chemical or nuclear warheads. Nadibaidze, for his part, told the Azerbaijani ambassador in Tbilisi that he shared Azerbaijan's concern, Nezavisimaya gazeta reports today. Meanwhile, the Russian State Duma has approved a resolution demanding more stringent state control over arms sales abroad, ITAR-TASS reported yesterday.

ABKHAZIA CUTS POWER SUPPLIES TO GEORGIA.

Abkhaz President Vladislav Ardzinba on 15 April ordered power supplies to Georgia to be cut off in retaliation for Tbilisi's decision the previous day to re-route all telephone communications from Abkhazia to Russia via Tbilisi, ITAR- TASS reported. Georgian Minister of Communications Pridon Indjia said his country's decision was in accordance with international agreements. An Abkhaz government statement denied this was the case, saying the move was a violation of human rights and could jeopardize further peace talks.

ARMENIA, TURKMENISTAN, IRAN SIGN MORE COOPERATION AGREEMENTS.

The foreign ministers of Armenia, Turkmenistan, and Iran have signed memoranda on cooperation in trade, transport, banking, and energy and gas supplies and on tourism, ITAR-TASS reported. The three leaders met yesterday in Yerevan. It was the sixth such meeting in two years on expanding trade and economic cooperation between the three countries. Iranian Foreign Minister Ali Akbar Velatyati said "the doors to this cooperation are open to other countries." The Chinese Ambassador to Armenia also attended the meeting, Noyan Tapan reported.

KAZAKSTAN WANTS COSSACKS AWAY FROM ITS BORDER.

Kazakstan has lodged an official protest with Moscow over the inclusion of Cossacks in Russian formations guarding the countries' common border, Reuters reported yesterday. Kazakstan's Foreign Ministry expressed "serious concern" about what it called the "experiment" by the Russian Federal Border Guards. A spokesman for the border guards said the formations were made up of volunteers and that not all those volunteers are Cossacks. He added that while the formations are currently unarmed, that may soon change because of "irregularities" in the region, particularly drug smuggling.

TAJIK SECURITY FORCES STORM PRISON.

Tajik security forces have stormed a prison in the northern city of Khujand where more than 100 inmates seized control earlier this week, RFE/RL correspondents in the area report today. Initial reports indicate as many as 40 people have died in the security force attack, although officials in Dushanbe are saying no blood has been shed. Some 800 people are currently being held in the prison, which is intended to accommodate only 300. On 15 April, the rebel inmates took four guards hostage to demand trials for those not yet sentenced and hospitalization for those seriously ill. They are also opposed to any prisoners being moved to the southern part of Tajikistan, where prison conditions are reported even worse. Rumors that some inmates would be moved to the south sparked the revolt.




BELARUSIAN CONSTITUTIONAL COURT RULES 1996 REFERENDUM IS BINDING.

The Constitutional Court has overturned its ruling on the November 1996 presidential referendum, which gave Alyaksandr Lukashenka sweeping powers, RFE/RL's Minsk correspondent reports. The court ruled last year that the vote was non-binding. Lukashenka responded by issuing a decree that reversed the court ruling, prompting the resignation of seven of the court's justices. Yesterday, the court endorsed the presidential decree by ruling that the referendum is binding.

UKRAINIAN PRESIDENT TO VETO OUSTER OF CRIMEAN PREMIER.

Presidential Chief-of-Staff Yevhen Kushnariov told journalists yesterday that Leonid Kuchma will veto the ouster of Crimean Premier Arkadiy Demydenko by the peninsula's parliament and ask the Constitutional Court to rule whether Crimean legislators had the right to dismiss the premier. By announcing his planned veto, Kuchma is indirectly challenging his former political ally Anatoliy Franchuk, whom the Crimean parliament named as Demydenko's replacement and whose son is married to Kuchma's daughter. Franchuk was loyal to Kyiv during his previous term as Crimean premier in 1995. In other news, Kuchma signed a decree yesterday banning creation of so-called citizens organizations in Crimea, which, he said, were unconstitutional.

SHARANSKY VISITS BABI YAR.

Natan Sharansky, Israeli trade minister and former Soviet political prisoner, paid an emotional visit yesterday to Babi Yar, where an estimated 34,000 Jews from Kyiv were killed by the Nazis in September 1941. Later, tens of thousands of Jews and non-Jews were also executed at the ravine. Sharansky said he was visiting the memorial site for the first time and found it a very difficult experience. Sharansky was persecuted for his fight to allow Jews in the Soviet Union to emigrate to Israel. He returned to Ukraine on 13 April for the first time since he left in the 1960s to attend university in Moscow.

ESTONIA SAYS IT WILL NOT RENEGOTIATE BORDER TREATY WITH RUSSIA.

Prime Minister Mart Siiman says Estonia considers a draft border agreement with Russia to be final and does not intend to reopen negotiations, dpa reported yesterday. Siiman was responding to a Russian Foreign Ministry statement criticizing Tallinn's position on the draft accord and calling for another round of negotiations (see RFE/RL Newsline, 16 April 1997). The Estonian premier said new talks would "indefinitely delay the signing of a treaty" and stressed that Tallinn is ready to sign the agreement as it now stands. Meanwhile, Estonian lawmakers yesterday were unable to reach agreement on ratifying a protocol to the European Convention on Human Rights, which bans the death penalty. Most speakers called for keeping capital punishment but voted to postpone making a decision until September.

SOLIDARITY URGES POLES TO REJECT NEW CONSTITUTION.

The National Committee of the Solidarity trade union has urged its supporters to take part in the 25 May referendum on the country's new constitution and to cast their ballots against that document, RFE/RL's Warsaw correspondent reported yesterday. The new constitution was adopted by the National Assembly earlier this month. Solidarity chairman Marian Krzaklewski said yesterday that the four major parliamentary parties that voted in favor of the new constitution have refused to let the public choose between the parliament's constitution and a draft backed by Solidarity. He added that the four parties also rejected any amendments to the parliament's constitution proposed by the right-wing opposition. An opinion poll conducted last month by the Public Opinion Research Center showed 41% of respondents supporting the parliament's constitution, 15% rejecting it, and the remainder undecided.

AUSTERITY MEASURES ANNOUNCED IN CZECH REPUBLIC.

The Czech government announced yesterday that it will cut budget expenditures by 5%, slash the growth of wages in the state sector, and introduce a system of import deposits in a bid to stem the rapidly growing foreign trade deficit. It will also prosecute more vigorously those involved in economic crime and seek to improve the tax collection system. The devaluation of the crown is not envisaged. The government also pledged that in the long term, it will go ahead with outstanding privatization projects and adopt laws making capital markets more transparent. The chairmen of the three government coalition parties told journalists that the short- term economic measures will be painful but are unavoidable. Long-term changes are intended to revive the economy and "strengthen the rule of law," they added. The coalition leaders were unable to agree on changes in the government lineup, however.

SLOVAK OFFICIALS ON CONTROVERSIAL EDUCATION MINISTRY DECREE.

Deputy Prime Minister Katarina Tothova says a Ministry of Education memorandum urging that some subjects in minority schools be taught only by ethnic Slovaks is "unfortunate." Tothova was speaking to journalists yesterday following her meeting in Bratislava with OSCE High Commissioner on Ethnic Minorities Max van der Stoel, who has criticized the memorandum. Speaking on Slovak Radio, Foreign Minister Pavol Hamzik took issue with presidential spokesman Vladimir Stefko's statement that both President Michal Kovac and Van der Stoel said during their meeting yesterday that the memorandum is discriminatory and violates human rights. Stefko said Van der Stoel noted only that the memorandum violates the spirit of the Slovak Constitution. Education Ministry State Secretary Ondrej Nemcok, the author of the memorandum, told Radio Twist that the document is in accordance with government policies. But he added that those policies will be somewhat modified.

HUNGARIAN FOREIGN MINISTER ON NATO MEMBERSHIP.

Laszlo Kovacs says the ambassadors of all 16 NATO member countries support Hungary's bid to join the alliance. The foreign minister was speaking to reporters yesterday in Brussels after he met with the permanent ambassadors' council of the member states. He also submitted his country's official application for NATO membership at the alliance's headquarters. Magyar Hirlap today quotes a NATO official as saying the minister can rest assured that Hungary will be among the first group of applicants invited to accession negotiations at NATO's July summit in Madrid. No more official NATO-Hungarian meetings will take place before the summit.




OSCE MEDIATOR NOT TO MEET WITH ALBANIAN REBELS.

Franz Vranitzky, the OSCE's mediator for Albania, is remaining in Tirana today, after canceling plans to travel to the northern city of Shkoder and to meet with rebel leaders in Vlora. One of the rebels said Vranitzky's move is the result of interference by Albanian President Sali Berisha, who maintains the rebels are hindering progress toward elections and refuses to negotiate with them. Vranitzky said yesterday he believes it is useful to listen to rebel leaders but that he will deal only with the Albanian government. Vranitzky also argued that the June elections are being jeopardized by deep differences among political parties on how best to deal with the rebels.

PROBLEMS THREATEN ALBANIAN ELECTIONS.

Berisha says he does not want OSCE monitors present during the June elections. Speaking in Tirana yesterday, he noted there were "terrible problems" when OSCE monitors were on hand during the May 1996 parliamentary elections. Berisha said he prefers the Council of Europe to do the monitoring. The OSCE and many other foreign observers claimed the 1996 vote was flawed, but the Council of Europe was less critical. Berisha also suggested that holding the elections should be linked to the conclusion of an all-party agreement on ending the debate over the collapse of pyramid schemes, which wiped out the savings of hundreds of thousands of Albanians. Meanwhile, Justice Minister Spartak Ngjela told Vranitzky that it will not be possible to disarm civilians by election day.

MORE AUTHORITY FOR HAGUE COURT?

Discussions have begun at the Hague-based International Criminal Tribunal for the former Yugoslavia that could make or break the court's authority, an RFE/RL correspondent reported yesterday. At issue is whether the tribunal can call for measures to be taken against states that refuse to comply with its requests for cooperation. If the court gets the necessary international backing, it will be able to demand the arrest of key individuals or invoke sanctions against the offending state. The debate was triggered by the failure of the Croatian and Bosnian federal defense ministers to hand over evidence in the case of Croatian Gen. Tihomir Blaskic, who is in custody in The Hague. Court officials insist that their work will not be a deterrent against future war crimes unless the tribunal is able to punish those who do not cooperate with it.

OSCE ON CROATIAN ELECTIONS.

The OSCE says the 13 April Croatian elections were largely free and fair but that problems did occur. In a report issued yesterday in Zagreb, the organization noted problems in the Serbian enclave of Eastern Slavonia continued even after the UN --which organized the ballot there--extended voting to a second day. Those problems included an absence of ballot papers and ballot boxes, misprinted ballots, and incomplete voting lists. The OSCE commended the UN, however, for correcting the problems. UN officials are expected to decide later this week whether to declare the Slavonian elections valid. The OSCE said voting in the rest of Croatia was an "improvement" over the 1995 parliamentary elections but that problems remain. It said opposition parties lacked proper access to state-run media and that voting secrecy was not guaranteed at many polling stations.

MONTENEGRIN PRIME MINISTER TO CHANGE GOVERNMENT BUT ON OWN TERMS.

At the start of his visit to Greece, Milo Djukanovic has received pledges for credits worth $90 million from bankers in Athens, Nasa Borba reports today. Before leaving home, he said at a stormy meeting of the governing Democratic Socialist Party (DPS) that he will reorganize the government within 60 days. He insisted, however, that he will not make the changes "immediately or on anyone's orders," an RFE/RL correspondent reported from Podgorica yesterday. Djukanovic is under pressure from President Momir Bulatovic to fire three ministers who have been critical of Serbian President Slobodan Milosevic.

SLOVENIA STARTS TO RATIFY EU AGREEMENT.

Prime Minister Janez Drnovsek said in Ljubljana yesterday that the parliament will start procedures today to ratify Slovenia's association agreement with the EU. He added that his party will also press for changes in Slovenian law in keeping with that agreement. The main issue is changing the constitution to allow foreigners to own property. Fears remain among the public that such changes will enable Austrians and especially former Italian residents of Slovenia to buy up real estate. Slovenia is the only former Yugoslav republic to have an association agreement with the EU.

ROMANIAN DEFENSE MINISTER ON TREATY WITH UKRAINE.

Victor Babiuc says talks with Ukraine on the pending basic treaty are deadlocked over the demarcation of the countries' common border in the Danube delta, ownership of the continental shelf around Serpents Island in the Black Sea, and the situation of the Romanian minority in the Ukraine. In an interview with RFE/RL's Romanian service yesterday, Babiuc said that contrary to international practice, Ukraine wants the common border traced on the Romanian side of the Danube's Chilia branch instead of in the middle of the waterway. Kyiv is also demanding ownership of the continental shelf around Serpents Island, while Bucharest wants the Hague International Tribunal to rule on the matter if negotiations are still stalled after two years. Finally, Bucharest is demanding that the Romanian minority in Ukraine be granted rights recognized by the Council of Europe.

ROMANIAN POLICE LAUNCH INVESTIGATION INTO BUSINESS TYCOON.

George Constantin Paunescu, the business tycoon known for his close ties with Romania's previous government, has been officially placed under investigation for forgery, RFE/RL's Bucharest bureau reports. Colonel Pavel Abraham, chief of the police general inspectorate, told a press conference yesterday that Paunescu is suspected of using a $10 million loan from abroad for purposes other than those officially declared. Crin Halaicu, former mayor of Bucharest, is also under investigation for fraud.

MOLDOVA CUTS NATURAL GAS SUPPLIES TO TRANSDNIESTER.

Moldova has cut off or substantially reduced natural gas supplies to several towns in its breakaway Transdniester region, Infotag reported. Yesterday's move is linked to the announcement earlier this week that Russia will sever supplies to Moldova if its debts to Gazprom are not settled within 30 days (see RFE/RL Newsline, 16 April 1997). More than half of the $570 million debt is owed by Tiraspol. Vladimir Atamaniuk, deputy chairman of the Transdniester Supreme Soviet, said that if Tiraspol is asked to pay separately for its gas deliveries, it should also "receive its legitimate share of the assets of the former Soviet Union." He accused Moldovan President Petru Lucinschi of applying "massive economic and political pressure" on the Transdniester.

RUSSIAN DEPUTY DEFENSE MINISTER ON TROOP CUTS IN TRANSDNIESTER.

Gen. Vladimir Toporov says the Russian military contingents stationed in the Transdniester will be reduced to the "most propitious level," BASA-press reported. Toporov, who met yesterday in Chisinau with Moldovan Defense Minister Valeriu Pasat, said the "very large" infrastructure of Russia's Transdniester-based troops "imposes huge expenses." He said the reorganization of the contingent has already started and will continue, adding that no decision has yet been taken on "what [Russian military equipment] can be destroyed, what will be withdrawn, and what will remain." He did not specify a deadline for the withdrawal, nor did he confirm Russian Defense Council Secretary Yurii Baturin's February statement that of the 6,000 or so troops stationed in the region, only 2,500 will remain after the reorganization.

BULGARIAN PRESIDENT SAYS HE FAVORS REFERENDUM ON MONARCHY.

Petar Stoyanov says that if the new parliament elected this weekend decides to hold a referendum on reintroducing the monarchy, he would "accept the decision with satisfaction and immediately set a date for it," RFE/RL's Sofia bureau reported. Stoyanov was speaking yesterday after meeting with Bulgaria's former monarch, Simeon II. The president pointed out that the Tirnovo constitution, which provided for a constitutional monarchy, was abolished when the country was "under the occupation of a foreign military power."




Sky Cloudy For Russian Defense Industry
by Simon Saradzhyan

Despite record export sales, the Russian defense industry fears that output will continue to fall in 1997, along with already meager state subsidies. The industry is regretting the loss of its main defender and lobbyist, the Ministry of Defense Industry Ministry, or Miniboronprom, which was disbanded earlier this year as part of the cuts in the federal government. Its responsibilities were transferred to an expanded Ministry of Economics.

Former Minboronprom official Yurii Chervakov says there is a widespread feeling that the crisis cannot be overcome in the near future. But why is Russia's massive defense industry plunged into gloom when overseas sales are booming? A dramatic expansion of arms sales is expected to provide the equivalent of U.S. $4 billion this year.

Chervakov explains that domestic business has dried up, and that is hitting hard the many non-export defense enterprises. Even in cases where it is still placing orders with enterprises, the Russian military ends up paying for less than half of the equipment it actually receives. Tens of thousands of defense industry workers have gone without wages for months, and the number of defense enterprises has shrunk more than three-fold in the last few years. Today, there are only 500 such enterprises.

Even those companies that have converted their production to civilian goods are troubled. Last year, they saw their output fall by 24%, as they could not compete against cheap imports.

Official figures show that Russia has cut its military spending from 7.9% of gross domestic product in 1990 to the current 3.7%. Chervakov and other former Minoboronprom officials say they are pessimistic about the government's recent promises to pay wage arrears and to increase funding for 1997 defense orders. Those orders include contracts for military research and development, design, construction, production, and arms purchases. The government managed to fund only half of last year's orders.

The state is so impoverished that it is currently funding construction of only one prototype of each type of advanced weaponry in its arms development program. That program is intended to revamp the Russian military's aging arsenal by the year 2005.

Chervakov says he believes Minoboronprom's demise will disrupt sweeping defense industry reforms that were planned and partly implemented by Miniboronprom. The former ministry wanted to unite more than 320 defense production facilities, research institutes, and design bureaus into 30 state-controlled corporations. He said that at least five such conglomerates have been set up but that prospects for further consolidations now seem dim. He also said the Ministry of Economics will find great difficulty in taking over many aspects of defense equipment procurement because of a lack of specialists.

Of course, not all analysts paint such a gloomy picture as the Miniboronprom experts. Yaroslav Lisovolik of the Russian- European Center for Economic Reforms offers a different perspective. He expects the government to allocate enough resources to preserve advanced technologies until an economic recovery enables it to support full military production. According to the Economics Ministry, the country will be able to resume spending 5.5% of GDP on the military by early next century.


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