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Newsline - August 20, 1997


Security Council Deputy Secretary Boris Berezovskii said in Moscow on 19 August that a ransom was paid for the two journalists from the television production company VID and the three from NTV released in Chechnya on 17 and 18 August. Chechen security official Magomed Magomadov had told journalists on 17 August that the two VID employees were freed by a special brigade under his command. NTV president Igor Malashenko similarly charged on 19 August that "a seven-figure dollar sum" was paid to secure the release of the three NTV journalists, Russian media reported. Malashenko accused Chechen Vice President Vakha Arsanov of being "the primary organizer" of a "highly developed kidnapping machine." He also suggested that President Aslan Maskhadov was aware of that connection but powerless to stop it. Malashenko said that Chechen First Deputy Prime Minister Movladi Udugov "provides propaganda cover-up" for the kidnappers, according to NTV.


Speaking at the opening of a session of the Security Council on 20 August, President Boris Yeltsin was sharply critical of Malashenko's accusations that the Chechen leadership is involved in hostage-taking, Interfax reported. Yeltsin said that "the Caucasus is a complex region" and that "we cannot allow figures like Malashenko to begin press conferences by insulting the Chechen leadership." Yeltsin criticized Berezovskii for encouraging the media in their negative coverage of events in Chechnya. Berezovskii wields considerable influence at Russian Public Television, and companies linked to Berezovskii own stakes in "Nezavisimaya gazeta," the weekly "Ogonek," and the TV-6 network. Assessing the situation in the North Caucasus, Yeltsin said it is improving "extremely slowly" and that every power agency, including government ones, should take extra measures to stabilize it, according to ITAR-TASS.


Yeltsin has submitted to the State Duma a draft law on a state of emergency. In an explanatory note, Yeltsin pointed out that the RSFSR law that remains in force is obsolete and in many respects contradicts the Russian Constitution, according to "Krasnaya zvezda" on 19 August. Yeltsin also noted that attempts to apply the existing law in North Ossetia's disputed Prigorodnyi Raion over the past two years have demonstrated the legislation's shortcomings. Over the past two month, Ingush President Ruslan Aushev has repeatedly called for the imposition of a state of emergency to stabilize the situation in Prigorodnyi Raion, but Yeltsin and North Ossetian President Akhsarbek Galazov have both rejected his proposal as unconstitutional.


First Deputy Prime Minister and Finance Minister Anatolii Chubais says the Finance Ministry has transferred 5.9 trillion rubles ($1 billion) to the Defense Ministry, ITAR-TASS reported on 20 August. He said that sum is enough to pay off all wage debts to military personnel. (A July presidential decree ordered the government to pay all debts to soldiers within two months.) Some other benefits owed to soldiers will be paid in September, Chubais added. Various government officials have said recent large privatization auctions helped provide the funds for the government to settle wage debts to the armed forces as well as to state employees such as doctors and teachers, which are to be paid by 1 January.


Anatolii Ponidelko, head of the Interior Ministry's branch in St. Petersburg and Leningrad Oblast, has said that the so-called Tambov criminal group may have been behind the 18 August assassination of St. Petersburg Deputy Governor Mikhail Manevich, who had headed the city's Property Committee, RFE/RL's correspondent in St. Petersburg reported on 20 August. Ponidelko said he has already sent the Procurator-General's Office a list of city officials believed to have ties to the Tambov group. He indicated that at least four people are believed to have been involved in the murder. Officials have already released a description of the suspected killer based on eyewitness accounts. Meanwhile, the St. Petersburg daily "Smena" on 20 August quoted former Mayor Anatolii Sobchak as saying Manevich's assassination may have been linked to the upcoming privatization of a city-owned stake in the St. Petersburg port.


The Russian consortium composed of Energomashexport, Leningrad Metals Plant, and Elektrosila, failed to win the tender to provide generators and turbines for China's Three Gorges Dam. Leonid Matveev, the director of Gidroenergo, part of Energomashexport, was quoted by Interfax on 19 August as saying the decision is not "a tragedy for Russia," but he added that had the Russian consortium been chosen, Russia would have been able to "advance its power industry in terms of quality." But "Nezavisimaya gazeta" on 20 August said the Chinese decision, which was leaked to the international media, could be a "time bomb" for Russian-Chinese relations. The dam, which needs 14 foreign-made generators and turbines, will be the largest in the world.


First Deputy Prime Minister Boris Nemtsov has been appointed chairman of a new government council on social and economic reforms, which will consist of cabinet ministers and heads of several local governments, ITAR-TASS reported on 20 August. Deputy Prime Ministers Valerii Serov and Oleg Sysuev will also be on the new council, which will submit policy recommendations to the government, taking local concerns into account. In recent months, the government and presidential administration have been courting mayors of large cities and other local leaders. Some observers have speculated that Moscow is backing top local officials as a potential counterweight to regional governors, who are less susceptible to pressure from the Kremlin after winning gubernatorial elections.


Central Bank First Deputy Chairman Sergei Aleksashenko has said the bank will spend 60-70 billion rubles ($10-12 million) by the end of the year to educate the public about the planned redenomination of the ruble, Russian news agencies reported on 19 August. As of 1 January 1998, the ruble will lose three zeroes. New coins and bank notes will be issued, although old bank notes will be valid through 1998 and may be exchanged in banks until the end of 2002. Yeltsin and various government officials have promised that the redenomination will not hurt the public or cause a sharp rise in inflation (see "RFE/RL Newsline," 8 and 11 August 1997). To convey that message and to explain how the reform will be implemented, the Central Bank is preparing brochures, posters, and television commercials.


Former "Izvestiya" editor Igor Golembiovskii's new daily "Novye Izvestiya" will soon receive its first credit of 20 billion rubles ($3.4 million) and will begin publication in November, Golembiovskii told the latest edition of "Moskovskie novosti." The new paper will employ 32 former "Izvestiya" journalists, including Otto Latsis, Sergei Agafonov, Sergei Dardykin, and Valerii Yakov. Golembiovskii said that Media-Most head Vladimir Gusinskii is not involved but that it is "possible" that Security Council Deputy Secretary Berezovskii is among the financial backers of "Novye Izvestiya." "Kommersant-Daily" reported on 20 August that companies controlled by Berezovskii will be among those expected to provide $40 million in financing for "Novye Izvestiya" over the next two years. Berezovskii, however, says he is not involved in the project. The paper plans to open five bureaus in Western Europe, Japan, and the U.S., which very few Russian media outlets can afford.


The legislature of the Altai Republic on 19 August elected Vladilen Volkov as head of the government, the highest executive post in the republic, ITAR-TASS reported. Volkov was previously chairman of Altai's legislature. His predecessor as head of the government, Valerii Chaptynov, died of a heart attack on 10 August. Daniil Tabaev, up to now deputy chairman of the Altai legislature, was elected to replace Volkov as chairman of that body. Volkov and Tabaev will both also be members of the Federation Council (upper house of the parliament), which is made up of top executive and legislative officials from the Russian regions.


The Procurator-General's Office has announced that a survey on sexual experience, carried out in connection with a sex education program of the Ministry of Education, is illegal, ITAR-TASS reported on 19 August. The survey, entitled "What do you know about sex?", was carried out among a number of 12-year-old students in eight Russian regions. It included questions such as, "Is it possible for a girl to become pregnant before she begins menstruating?" and "What does a normal man's sperm consist of?" Experts from the procuracy concluded that the questions were "vulgar and immoral" and risked "tactlessly arousing the sexual instinct of those surveyed." In seven Russian regions, children filled out the forms without their parents' consent. The procuracy also said the Ministry of Education had entrusted "dubious" sociological research organizations with conducting the survey.


A government directive requiring Russian-language labels on all imported food will not go into effect until 1 July 1998, ITAR-TASS reported on 20 August, citing a resolution recently approved by the government. The directive, issued in December 1996, requires imported food to carry Russian labels listing the country of origin and the ingredients, as well as information about calories, vitamin content, shelf-life, and correct storage. The new rules were to have gone into effect in May, but Foreign Trade Ministry officials said the previous month that food importers had asked the government to delay introducing the regulations until January 1998. The importers say they need more time to adapt to the new rules. More than half of all food consumed in Russia is imported, according to ITAR-TASS on 1 May.


The fighting between followers of Col. Mahmud Khudaberdiyev and forces loyal to the Tajik government is over. Prosecutor-General Salomiddin Sharipov said on national television on 19 August that "Khudaberdiyev's rebellious brigade failed in their attempt at a military coup." More than 50 of Khudaberdiyev's 1,500 troops were killed in the fighting; and an estimated 700 have since surrendered. Khudaberdiyev and some 40-70 of his followers are reported to have taken refuge in the mountains near the Uzbek border, while others have gone into hiding into southwestern Tajikistan. The Tajik government has launched a helicopter and airplane search for them. The Uzbek government repeated its promise to hand over any of Khudaberdiyev's followers who try to cross into Uzbekistan. Meanwhile, Tashkent denied reports that Khudaberdiyev was already in Uzbekistan.


The Prosecutor-General's Office has launched an investigation into "Asaba," "Nasha Gazeta," and "Vecherny Bishkek," according to RFE/RL correspondents in Bishkek. All three newspapers have printed articles on corruption among parliamentary deputies. Deputy Dosbol Nur Uluu said comments in "Nasha Gazeta" that all chairmen of parliamentary committees were from Kyrgyzstan's southern regions were disinformation. The Prosecutor-General's Office in July requested permission from the parliament to initiate lawsuits against seven deputies, but the parliament denied the request and formed its own investigative committee.


President Nursultan Nazarbayev told the government on 19 August that the administration will move from Almaty to the new capital, Akmola, by 10 October, Interfax reported on 19 August. Nazarbayev had said earlier that he would be in the new capital to greet the New Year, but there is speculation that the reluctance of most ministries to move to Akmola has prompted Nazarbayev to bring forward the relocation schedule. Of the 28 ministries, only two have moved so far, together with the National Agency for Press and Mass Media. Moreover, of the 45 embassies accredited in Kazakhstan, only nine have bought plots of land in Akmola for their new buildings.


Three Russians serving with the CIS peacekeeping force deployed along the border between Abkhazia and the rest of Georgia were abducted by armed Georgians on 16 August, Russian media reported three days later. ITAR-TASS quoted Tamaz Nadareishvili, the chairman of the Abkhaz parliament in exile in Tbilisi, as saying the kidnappers will release their hostages in return for the bodies of two Georgians killed by Abkhaz militants in Abkhazia's Gali Raion one week earlier. The Russian Embassy in Tbilisi has expressed concern at the incident. Georgian First Deputy Minister of National Security Avtandil Ioseliani has requested Abkhaz President Vladislav Ardzinba's assistance in securing the peacekeepers' release. Forty-two peacekeepers have been killed since the force was sent to Georgia in July 1994.


Nadareishvili announced on 19 August that he is resigning as chairman of the Abkhaz parliament in exile to protest the Georgian authorities policy toward Abkhazia, according to RFE/RL's Tbilisi bureau. He again argued that the use of military force is the only way to resolve the conflict. "Nezavisimaya gazeta" on 19 August quoted Georgian parliamentary deputy speaker Germane Patsatsia, who heads the Apkhazeti faction in the legislature, as saying that the faction's 12 members will resign their mandates to protest the agreement signed by Georgian President Eduard Shevardnadze and his Abkhaz counterpart, Vladislav Ardzinba, on 15 August. Patsatsia said the agreement is tantamount to Georgian recognition of Abkhaz independence.


A meeting between the Georgian and Chechen presidents scheduled to take place in Tbilisi before 20 August has been postponed indefinitely, ITAR-TASS reported on 19 August, quoting a Chechen representative in the Georgian capital. Arrangements for the meeting were discussed during three visits to Tbilisi in late July and early August by Chechen Deputy Prime Minister Akhmed Zakaev.


President Lyudwig Chibirov issued a decree on 16 August reimposing a night-time curfew in the would-be secessionist north Georgian region. Reuters on19 August quoted a local official in the capital, Tskhinvali, as saying the decision was prompted by an upsurge in "acts of banditry", but Interfax and "Nezavisimaya gazeta" on 20 August quoted a South Ossetian government spokesman as saying that the crime figures have remained stable for the past several months. "Nezavisimaya gazeta" suggests that the curfew is intended to counter the traffic in illegal alcohol from Georgia to the Russian Federation.


The Belarusian KGB on 19 August called three journalists to testify in the case of the four Russian Public Television (ORT) journalists detained near the Belarusian-Lithuanian border on 15 August, RFE/RL's Minsk correspondent reported. Those called to give testimony are ORT reporter Viktor Detlyakovich; Dmitri Novozhilov, the head of the ORT Minsk bureau; and Reuters correspondent Andrei Makhovsky, who also works for Belarus's "Delovaya Gazeta." Another Russian journalist, ORT reporter Vladimir Foshenko, was detained on 18 August for refusing to testify, Belapan reported. Russian Ambassador to Belarus Valery Loschinin said on 19 August that Moscow is now demanding that Minsk release the journalists, regardless of whether they broke the law.


The Ukrainian Ministry of Statistics on 19 August reported that of the 11 CIS states, only Ukraine and Russia registered a decrease in gross domestic product in the first half of 1997, compared with the same period last year, Infobank reported. Ukraine's GDP fell by 7.4 percent, whereas Russia's was down 0.2 percent. During the same period, industrial production fell in Armenia, Ukraine, Tajikistan, and Moldova but rose by 22 percent in Kyrgyzstan, the highest increase within the CIS states. With the exception of Belarus and Georgia, all CIS states registered a decrease in the production of consumer goods. Food production in Belarus increased by 16 percent and non-food production by 32 percent.


The government on 19 August formed a five-member commission, headed by Prime Minister Mart Siimann, to consider a proposal for administrative reform, ETA reported. In January, Economy Minister Jaak Leimann, Transport and Communications Minister Raivo Vare, and Finance Minister Mart Opmann had proposed reducing the number of parliamentary deputies from 101 to 71, merging several ministries, and having only four local governments. The reform would save an estimated 500 million kroons ($36 million) a year.


Lawmakers on 19 August voted unanimously to strip independent deputy and former Defense Minister Audrius Butkevicius of his parliamentary immunity, BNS and dpa reported. Prosecutor-General Kazys Pednycia had requested such a move against Butkevicius, who is suspected of accepting a $15,000 bribe from businessman Klemensas Kirsa in return for pressing for the dismissal of a legal case involving Kirsa's company, Dega Ltd (see "RFE/RL Newsline," 13 August 1997). Pednycia said his office will immediately launch legal proceedings against Butkevicius. The 37-year-old deputy has admitted taking the money from Kirsa but claims it was a personal loan.


The Polish Peasant Party (PSL) on 19 August submitted a parliamentary no-confidence motion against Prime Minister Wlodzimierz Cimoszewicz of the post-communist Democratic Left Alliance (SLD), PAP reported. The two parties have been coalition partners for almost four years. The PSL said Cimoszewicz must go because he has blocked a decision to grant advance payments to farmers for the 1997 harvest. Other parties see the move as an attempt to boost the PSL's dwindling popularity ratings ahead of the 21 September elections. Jozef Oleksy of the SLD said the move was likely to lead to the breakup of the coalition.


Aleksander Kwasniewski arrived in Bratislava on 20 August for a two-day official visit, Slovak Radio reported. The visit was scheduled to take place in July but was postponed owing to widespread flooding in the south of Poland. Kwasniewski last met with his Slovak counterpart, Michal Kovac, at a meeting of eight Central European presidents in Slovenia in early June. Kwasniewski is scheduled to meet with Kovac, Slovak Prime Minister Vladimir Meciar, and other officials.


The opposition on 19 August requested that the parliament hold a special session to discuss the case of deputy Frantisek Gaulieder, who was stripped of his mandate in 1996. The Slovak Constitutional Court in July ruled that the parliament violated Gaulieder's constitutional rights. Gaulieder was forced to leave after the parliament received a resignation letter allegedly from him but which he says was forged. Gaulieder quit Prime Minister Vladimir Meciar's Movement for a Democratic Slovakia one month before he was dismissed from the parliament, which is dominated by the ruling party.


Responding to the U.S.'s request that Slovakia and Bulgaria destroy their short-range SS-23 missiles (see "RFE/RL Newsline," 19 August 1997), a Slovak Defense Ministry spokesman said Bratislava does not plan to eliminate its missiles. Slovakia says the weapons play an integral role in the country's defense. TASR on 19 August quotes the spokesman as saying that the elimination of the missiles would "have to be a political decision" resolved on the basis of compensation. However, another government spokesman was quoted as saying Bratislava was still willing to discuss the matter with Washington. A Bulgarian Foreign Ministry spokesman said on 19 August that scrapping Bulgaria's eight SS-23s would not be "in the national interest."


The International Police Task Force (IPTF) and SFOR took charge of six police stations in Banja Luka on 20 August. IPTF spokesmen said that the UN police believe the buildings may have been the site of human rights violations. The stations belong to the police loyal to Pale-based Interior Minister Dragan Kijac, an arch-rival of Republika Srpska President Biljana Plavsic (see also "RFE/RL Bosnia Report," 20 August 1997). On 18 August, Plavsic said that her police found large quantities of incriminating evidence in one of the stations. She added that one document referred to a secret political command called "Jedinstvo [Unity] 97," of which she had not previously known. She called this and other revelations "frightening."


Carlos Westendorp, the international community's chief representative in Bosnia, underscored Plavsic's demand that Kijac be fired. The Spanish diplomat and U.S. envoy Robert Gelbard called for new elections in the Republika Srpska following their meeting with Plavsic in Banja Luka on 19 August. The diplomats said a new vote is the best way to solve the leadership crisis among the Bosnian Serbs. Plavsic plans to head a new party in parliamentary elections she has called for October. In the past week, Deputy Prime Ministers Ostoja Kremenovic and Djuradj Banjac have signaled their support for her and her party. Meanwhile in Pale, Dragan Kalinic, the president of the parliament, said there should be new presidential elections if Plavsic insists on going ahead with a legislative vote.


President Plavsic told 2,000 of her supporters in Banja Luka on 19 August that they should assemble every evening to protest against the Pale-based "hawks" and their policy of "terror." She said that Kijac's police "are bugging your homes and tapping your telephones. You have no privacy. They are using the instruments of black terror.... Don't give your town to tyrants. We want freedom." But Momcilo Krajisnik, the Serbian member of the Bosnian joint presidency, warned that "if Mrs. Plavsic continues to heed her so-called advisers, she risks being isolated.... There is no force in the world that can save her."


An SFOR spokesman in Banja Luka said on 19 August that peacekeepers there have received reinforcements, an RFE/RL correspondent reported from the northwestern town. Republika Srpska Finance Minister Ranko Travar handed in his resignation to Plavsic, saying he can no longer deal with the current crisis. In Sarajevo, Gelbard read out a statement from U.S. envoy Richard Holbrooke, who stressed Washington's long-term commitment to Bosnia.


Drazen Budisa, one of the two main protagonists for the leadership of the Croatian Social Liberal Party (HSLS), said in Zagreb on 19 August that a "special party assembly" is the only way out of the deadlock between him and former presidential candidate Vlado Gotovac. Budisa added that the meeting's main task will be to set up new elections for the party leadership, an RFE/RL correspondent reported from the Croatian capital. Budisa charged that Gotovac and his loyalists have hijacked the leadership.


Spokesmen for the UN administration in eastern Slavonia said in Vukovar on 19 August that the policy of buying up weapons has come to an end, and that as of 20 August anyone found in possession of illegal weapons will face prosecution. The spokesmen added that the buy-up program yielded 6,370 rocket or mine launchers, 14,000 grenades and bombs, and 2 million pieces of ammunition, an RFE/RL correspondent reported from Vukovar. Critics charge that the UN paid for obsolete weapons and that some of the sellers bought better weapons with the money they received.


The Kosovo Information Center on 19 August said that unknown persons shot and wounded Elez Miftari near Djakovica the previous night. The center is close to the Democratic League of Kosovo of shadow-state President Ibrahim Rugova. In Skopje, the Foreign Ministry said it opposes any reduction in the number of UN peacekeepers in Macedonia. UN Secretary-General Kofi Annan has recommended cutting the force from 1,000 to 300 troops. BETA news agency says the government fears that Annan's proposal reflects a loss of confidence in the executive's willingness to reach a lasting settlement with the large ethnic Albanian minority. Also in Skopje, Transportation Minister Abdulmenaf Bedzeti said that a French firm has offered to help finance the proposed east-west railroad line across Macedonia. That railroad would greatly reduce Macedonia's economic and political dependence on Greece and Serbia, which control the existing north-south routes.


President Rexhep Mejdani sacked army commander Gen. Adem Copani on 19 August and replaced him with Aleks Andoni. Defense Minister Sabit Brokaj recently called for the resignation or dismissal of officers whom he claimed the previous government had used to suppress demonstrations against President Sali Berisha. The Socialist-led government says it is trying to rid the judiciary, security forces, and military of incompetent political appointees and replace them with what it calls "experienced" personnel. The opposition Democrats charge that the Socialists are carrying out a political purge. Some observers feel that the Socialists are reverting to the practice in which the party in power appoints its loyalists to all government jobs (see "End Note" in "RFE/RL Newsline," 12 August 1997).


A shoot-out near Erseka, close to the Macedonian and Greek borders, left two gangsters dead and three other gangsters and two policemen wounded on 19 August. Meanwhile in Gjirokastra, parliamentary speaker Skender Gjinushi said the government's "intention is to provide the country with a [new] constitution. And this intention will be realized at the beginning of next year, by mid-February." He added that a committee is already working on the document, which the government will then submit to a popular referendum. Berisha failed in a 1994 referendum to win approval for his proposed basic law.


The government on 19 August abolished the Romanian Petroleum Company, set up by Nicolae Vacaroiu's cabinet last year, and replaced it with the National Petroleum Society (SNP). The new company merges two refineries and the state-owned Peco gas stations, which account for some 43 percent of the country's retail gasoline sales. The two refineries will have an annual capacity of some 6 millions tons; the other five million tons needed to cover country's total needs will be imported, RFE/RL's Bucharest bureau reported. The government intends to privatize the SNP in the second half of 1998. In other news, Finance Minister Mircea Ciumara told RFE/RL on 19 August that the ministry will be reorganized to improve control over tax control and customs, in particular.


Senate Chairman Petre Roman on 19 August told a Bucharest court that in September 1991, when he was prime minister, he had approved the arrival of the Jiu valley miners in the capital after he was informed that they were threatening train attendants with knives. Roman said he had agreed with former President Ion Iliescu that the government would "return its mandate" and be reshuffled to include other political forces. Instead, Iliescu had announced that he was accepting Roman's resignation. Roman also noted that the miners had been "manipulated." Miners leader Miron Cozma, who is charged with undermining state authority and breaking firearms laws, said his trial was "political" Romanian media reported. He also agreed with members of the public who shouted that Iliescu should join Cozma in the dock.


Corneliu Vadim Tudor, the leader of the ultra-nationalist Greater Romania Party (PRM), has invited French National Front chairman Jean-Marie Le Pen and former Russian Security Council Secretary Aleksandr Lebed to attend the PRM congress in November. Le Pen canceled a visit in May owing to the early French elections. At that time, Tudor announced the "imminent birth of a Nationalist International" (see "RFE/RL Newsline, 1 and 11 April 1997). After visiting Bucharest earlier this year, front deputy chairman Dominique Chaboche said the PRM and the front were "ideologically tied" in the struggle against a United Europe and the idea of "globalization dictated by the U.S." Tudor said he invited Lebed because he has a good chance of becoming the next Russian president and is among those with whom Tudor can discuss the reunification of Bessarabia and northern Bukovina (now part of Moldova and Ukraine) with Romania.


The Chisinau Court of Appeal on 19 August ruled that the government must recognize the Bessarabian Metropolitan Church (see "RFE/RL Newsline," 7 and 14 August 1997). RFE/RL's Chisinau bureau reported that the government can appeal the decision within 15 days. The government has refused to recognize the Bessarabian Church, which is subordinated to the Bucharest patriarchate. It recognizes only the Moldovan Orthodox Church, which is subordinated to the Moscow patriarchate. The Bessarabian Church claims some 400,000 believers.


Ion Gucu told ITAR-TASS on 19 August that Moldova will have to wait until the second decade of the next century to achieve economic growth comparable to the level 10 years ago. He said his forecast was based on calculations made by government experts. He added that he believes 1997 will be a turning point in the Moldovan economy, bringing to an end several years of decline. Gucu said the slight rise in production registered in the second quarter of 1997 was due to the resumption of economic reforms following the halt caused by the 1996 presidential campaign. Moldovan Academy of Sciences experts, on the other hand, believe without major foreign investments, the economy will continue to stagnate in the near future.


Turkey is trying to persuade the Bulgarian authorities to reopen an electronic components plant that was closed in July, Turkish media reported on 20 August. Osman Ak, chairman of the Turkish company that has a majority share in the Mikroark plant in the Bulgarian city of Botevgrad, says the plant's closure is threatening to discourage foreign investment in Bulgaria and is straining ties between Ankara and Sofia, A Bulgarian court ordered Mikroark shut down on 18 July, after a government-appointed trustee found that the agreement to establish the factory in 1992 was signed by the deputy minister of industry rather than the minister. Under Bulgarian law, the minister must sign such an agreement. Ak said the trustee was a member of the former communist establishment, which, he added, wants to torpedo foreign investments in Bulgaria.


by Floriana Fossato, Stephanie Baker, and Laura Belin

President Boris Yeltsin on 15 August commented directly for the first time on the continuing scandal over Russian privatization policy. The president insisted that his government will not favor any bank and will limit the influence of financial groups on privatization auctions. Future privatization deals should be "fair, based on strict legislative rules, and allowing no [procedural] deviations," he said.

Yeltsin also indicated that the recent departure of Alfred Kokh as deputy prime minister and State Property Committee head was linked to controversial sales of state property. Kokh, who had overseen privatization deals since September 1996, officially resigned last week, but many Russian commentators believe he was forced out. Although an earlier statement issued by Yeltsin's office had expressed satisfaction with Kokh's work, Yeltsin noted that "some banks are apparently closer [than others] to the heart of Alfred Kokh, and this is not proper." Yeltsin added that economist Maksim Boiko was appointed to replace Kokh largely in the expectation that Boiko will be even-handed toward all banks.

The sale of substantial shares in the telecommunications monopoly Svyazinvest set off a financial and media war in late July, dividing Russia's previously allied financial elite. The scandal intensified following the 5 August sale of a government stake in the metals giant Norilsk Nickel. Prime Minister Viktor Chernomyrdin had called for the Norilsk auction to be postponed on 4 August. But the next day, following meetings with Oneksimbank President Vladimir Potanin (who was a first deputy prime minister from August 1996 until March 1997) and several government officials, the prime minister agreed that the sale should take place on schedule.

Influential news media charged that the auctions had been unfair. Kokh and other government officials were accused of having close ties to Oneksimbank, which led the consortium that won the Svyazinvest auction and is affiliated with the company that acquired Norilsk Nickel.

Financial analysts, for their part, sharply criticized the sale of the 38 percent stake in Norilsk Nickel as an "insider deal" rigged in favor of Oneksimbank. They noted that the outcome was the logical conclusion of the loans-for-shares privatization scheme drawn up in 1995. Potanin is believed to have been one of the main architects of that scheme, which was implemented by both Kokh and Chubais.

Critics of the loans-for-shares deals say the government allowed favored banks to acquire management rights over major state-owned stakes in Russia's biggest oil and industrial companies. In return, the banks extended loans to the government, but those loans were far below the market value of the shares. In addition, banks that participated in the loans-for-shares scheme were authorized to organize future auctions of the shares, giving them an important advantage over potential competitors in those auctions. The scheme effectively allowed banks to turn management control of state-owned shares into ownership. (A new privatization law that went into effect on 2 August prohibited loans-for-shares deals.)

In the case of the 25 percent stake in Svyazinvest, Western financial analysts said the government, which organized the tender, may have appeared to favor Oneksimbank. But they pointed out that the auction was conducted more fairly than were previous deals. Russian government officials have said all future auctions will be modeled on the Svyazinvest tender: state property will be sold to the highest bidder. The Oneksimbank-led consortium -- which also involved Deutsche Bank's Deutsche Morgan Grenfell, Morgan Stanley Asset Management, and U.S. financier George Soros's Quantum Fund -- bid $1.875 billion. The government plans to use its share of that sum to help pay its huge debt to the army and the state sector.

Igor Lipkin, chairman of the Russian Federal Property Fund, on 14 August said the Svyazinvest deal has already brought nearly $700 million to federal coffers. While Chernomyrdin ordered an investigation into the legality of the Svyazinvest sale, he has warned against "jumping to conclusions or making hasty allegations" about privatization auctions.

First Deputy Prime Minister Boris Nemtsov has acknowledged that the Norilsk Nickel sale was controversial. But in an interview with RFE/RL in Sochi, where he has been vacationing, he noted that such scandals were inevitable, given the regulations governing loans-for-shares deals. In addition, Nemtsov turned the tables on the man believed to be behind much of the recent criticism of the privatization deals: business magnate and Security Council Deputy Secretary Boris Berezovskii. Nemtsov told RFE/RL that whatever its flaws, the Norilsk auction was conducted "more democratically and openly" than the May sale of a stake in the Sibneft oil company. (Financial structures linked to Berezovskii won the Sibneft tender.)

In addition, Nemtsov said the state should establish control over both the finances and the "ideological foundations" of Russian Public Television (ORT). Berezovskii wields considerable influence at ORT, which sharply criticized the Svyazinvest sale. He is also believed to have participated in the losing consortium in that auction, although he denies any involvement in the bidding.

Floriana Fossato is an RFE/RL correspondent in Moscow, and Stephanie Baker is a freelance writer in the Russian capital.