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Newsline - August 29, 1997


President Boris Yeltsin on 28 August issued a decree "on measures to strengthen state direction of military organization in the Russian Federation." The decree creates a State Military Inspectorate, which will be part of the presidential administration. It also removes Yurii Baturin as Defense Council secretary and appoints First Deputy Defense Minister Andrei Kokoshin as state military inspector and Defense Council secretary. Kokoshin will leave his Defense Ministry post, which he has held since spring 1992. He told Interfax that he does not plan any changes in the Defense Council staff. The Chief Military Inspectorate will coordinate government defense policy and will oversee the implementation of decisions and decrees in that area, Kokoshin said. Baturin had headed the Defense Council since its creation in July 1996. According to ITAR-TASS, he will remain a presidential adviser. Both Baturin and Kokoshin are civilians.


In an interview with ITAR-TASS on 29 August, Russian Atomic Energy Minister Viktor Mikhailov "categorically" denied recent reports in the Western press that Russia may have conducted a nuclear test at the Arctic site of Novaya Zemlya. On 28 August, Washington officially asked Moscow for an explanation of a "seismic event with explosive characteristics" recorded near that site in mid-August. Mikhailov said that only hydrodynamic experiments have taken place at Novaya Zemlya. He blamed any seismic incidents on earthquakes, which, he said, are quite common in that region. Staging a nuclear test would contravene the Comprehensive Test Ban Treaty, which Russia and the U.S. have signed but not yet ratified.


Levon Ter-Petrossyan and Yeltsin, meeting on the second day of Ter-Petrossyan's state visit to Moscow, signed a treaty on friendship, cooperation, and mutual assistance, Russian media reported on 29 August. Yeltsin commented that the treaty "meets the vital and lasting interests of the two states." The two leaders also signed several agreements, including on the transit of oil across Armenia.


Yeltsin on 28 August appointed Anatolii Adamishin as CIS Affairs Minister, filling a government post that had been vacant for nearly two months, Russian news agencies reported. Adamishin most recently served as Russia's ambassador to the United Kingdom from September 1994 until June 1997. He was deputy Soviet Foreign Minister from 1986 until 1990 and was first deputy to Russian Foreign Minister Andrei Kozyrev from 1992 to 1994. According to the 29 August "Nezavisimaya gazeta," Adamishin was considered a strong contender to replace Kozyrev as foreign minister in 1994, but Kozyrev held on to his post until January 1996. Yeltsin appointed former CIS Affairs Minister Aman Tuleev as governor of Kemerovo Oblast on 1 July.


Yeltsin on 28 August appointed Natalya Dementeva as culture minister to replace Yevgenii Sidorov, RFE/RL's Moscow bureau reported. Dementeva had served as director of the State History Museum in St. Petersburg's Peter and Paul Fortress since 1987. She told ITAR-TASS that in her new post, she hopes "to achieve greater fairness in [the government's] treatment of museums and libraries." Most Russian museums and libraries face chronic funding problems. Sidorov had served in the government since March 1992 and had survived numerous cabinet reshuffles. No reason was given for his dismissal; the presidential press service said only that he is to be transferred to an unspecified new post. Dementeva is the third woman in the Russian cabinet. On 25 August, Yeltsin appointed Natalya Fonareva to head the State Anti-Monopoly Committee. Health Minister Tatyana Dmitrieva was appointed in August 1996.


Also on 28 August, Yeltsin appointed Deputy Culture Minister Mikhail Shvydkoi as chief editor of the new state-run television network Kultura. The network will broadcast nationwide, excluding St. Petersburg and Leningrad Oblast, where its programs will be broadcast for only a few hours a day (see "RFE/RL Newsline," 27 August 1997). Its programs will be produced in Moscow and broadcast on a frequency currently used by the St. Petersburg Channel 5 network. In a 29 August nationwide radio address, Yeltsin said that, in creating the new network, "we are repaying our debt to Russian culture." He expressed hope that Kultura will not "frighten us with crime horror stories and will not fill our heads with political squabbles." Kultura will not broadcast commercial advertisements and will show primarily cultural and educational programs.


Political leaders and well-known cultural figures in St. Petersburg are unhappy with Yeltsin's decree creating Kultura, RFE/RL's correspondent in the city reported on 28 August. Yurii Kravtsov, chairman of the St. Petersburg legislature, has issued a statement protesting that the city "has been deprived of its voice." In his 29 August radio address, Yeltsin addressed those concerns, noting that new Culture Minister Dementeva "understands the enormous capabilities of our northern capital like no one else." The president added that Dementeva will make sure that St. Petersburg's history, culture and art are well represented on Kultura broadcasts.


First Deputy Prime Minister Anatolii Chubais has been instructed to work with members of the parliament to secure the passage of the 1998 budget, Interfax reported on 28 August. Chubais is far more unpopular in the State Duma than Prime Minister Viktor Chernomyrdin, especially among Communist deputies, who along with left-wing allies have a near-majority in the Duma. Duma Security Committee Chairman and Communist Viktor Ilyukhin has claimed that U.S. banks have allocated $4 million to a British company charged with improving Chubais's image in time for the next presidential election, "Kommersant-Daily" reported on 29 August. Last year, the Communist Duma faction threatened to vote against the 1997 budget if 11 conditions were not met, including the dismissal of Chubais as then presidential chief of staff. Although Chubais was not fired, most Communist deputies voted for the budget's passage.


Sergei Belyaev announced on 29 August that he is resigning as leader of the Our Home is Russia (NDR) Duma faction and as deputy chairman of the NDR council, ITAR-TASS reported. He told journalists that the pro-government movement, chaired by Prime Minister Chernomyrdin, is "sliding toward the principles of bureaucratic, nomenklatura leadership." He also charged that the NDR is drawing closer ideologically to the "communist left camp." Belyaev said he is ready to cooperate with Duma deputies from Yegor Gaidar's party Russia's Democratic Choice (DVR). (In the December 1995 parliamentary election, nine DVR members were elected to the Duma.) Chernomyrdin announced in July that Belyaev was resigning, but at the time Belyaev denied having any such plans. "Nezavisimaya gazeta" reported on 29 August that at least 10 deputies are expected to quit the NDR faction along with Belyaev.


Yeltsin told Prime Minister Chernomyrdin on 28 August that "Russian Federation subjects must be given more rights," ITAR-TASS reported. Noting that he was impressed during a recent visit to Saratov Oblast, Yeltsin said that "governors who take initiative can do many things on their own, we can trust them." Yeltsin made similar remarks during his visit to Saratov (see "RFE/RL Newsline," 27 August 1997). However, a July presidential decree enhancing the powers of Yeltsin's appointed representatives in the regions has been viewed as an attempt to reduce the authority of elected governors, in particular their power to supervise how federal funds are spent in the regions.


Foreign investment totaled $6.67 billion during the first half of 1997, more than triple the $2.01 billion recorded during the same period last year, ITAR-TASS reported on 28 August, citing the State Statistics Committee. Foreign investment totaled $6.5 billion in 1996. As of 1 July 1997, total foreign investment was relatively low at $17.8 billion (the corresponding figure for Hungary, for example. at the end of 1996 was $16 billion). But in a recent survey of 40 leading investment firms conducted by the U.S. firm Broadgate Consultants, three-quarters of respondents said Russia is the "premier vehicle for post-communist investment," an RFE/RL correspondent in Washington reported on 25 August. Sixty percent of respondents said Russia's stock market -- which has gone up some 200 percent during the last year -- is still undervalued.


In a live interview with Ekho Moskvy on 28 August, Russian Deputy Prime Minister Ramazan Abdulatipov said "it is utopian to regard Chechnya as a member of the federation now." But he added that no one should forget that Chechnya is listed as a member of the federation in the Russian Constitution. He suggested that a solution should be found that took into account both "axioms." Finding a solution will take a long time, Abdulatipov said, but no one should predict the outcome in terms of Chechnya's "entrance" or "exit" from Russia "as if other forms of cooperation did not exist." Abdulatipov's comments are the clearest indication yet that at least some in the Russian government are willing to accept a dramatically different status for Chechnya than the one outlined in the Russian Constitution for all federation subjects.


Russian First Deputy Premier Boris Nemtsov told Interfax on 28 August that Moscow and Grozny are making progress toward an agreement that would allow Caspian basin oil to flow across Chechnya. Nemtsov's upbeat assessment, however, is not supported by reports that the Chechen leadership is interested in exploring a Georgian route that would bypass the Russian Federation. Those reports, which surfaced in the past, have gained new currency as the Chechen government seeks to arrange a high-level meeting with Tbilisi.


The Second World Congress of Tatars, which opened in Kazan on 29 August, has attracted some 460 delegates from more than 20 states and more than 60 Russian regions, RFE/RL's Tatar-Bashkir Service reported. Bashkortostan President Murtaza Rakhimov, Russian Deputy Prime Minister Abdulatipov, and Russian State Duma Nationalities' Affairs Committee Chairman Vladimir Zorin are all attending the two-day meeting. On the agenda are the revival of the Tatar nation and expanded contacts among Tatars worldwide.


Amonullo Negmatzoda, Tajikistan's chief Islamic cleric, was kidnapped by unidentified persons on 27 August, an RFE/RL correspondents in Dushanbe reported. The Interior Ministry on 29 August confirmed that Negmatzoda was missing and presumed kidnapped, but it could not say if there was any truth to rumors that Rezvon Sadirov was responsible. In February, Sadirov and his brother Bahrom briefly held hostage members of the UN observer team in Tajikistan. Two of Negmatzoda's sons were kidnapped in late July. It is speculated that Negmatzoda was going to meet with the kidnappers when he, too, disappeared.


Turdakan Usubaliyev, the head of the Kyrgyz parliamentary commission on water issues, met with commission members and officials from the Justice and Foreign Ministries on 28 August, RFE/RL corespondents in Bishkek reported. Usubaliyev said that "next to nothing" has been done to implement the parliament's 27 June decision to charge Kazakhstan and Uzbekistan for water from Kyrgyz reservoirs. The parliament called for concrete plans on prices for those supplies.


Residents of Bishkek's Vostok-5 area have nominated Zamira Sydykova as their choice to fill an empty seat in parliament, RFE/RL correspondents reported on 28 August. Sydykova, who has been chief editor of Kyrgyzstan's only independent newspaper since 1992, was recently released from prison after serving a sentence on charges of libel against the head of Kyrgyzstan's state gold company. From August 1995 to January 1997, she was barred from practicing journalism after being found guilty of libel against President Askar Akayev. Her nomination to the parliament is expected to be seconded at a meeting of the Movement for the Protection of the People on 29 August. Sydykova would take the seat vacated by Mira Jangaracheva in 1996, when she was appointed deputy premier.


The Muftiat (Muslim Board) will meet in September to discuss the spread of Wahhabi movements in Kyrgyzstan, RFE/RL correspondents in Bishkek reported. The announcement was made by head of the Muftiat Abdysatar-Agy Majitov on 28 August.


Nizami Khudiev, the chairman of Azerbaijani State Television (AzTV) said an agreement with Iranian Television on re-broadcasting will be signed in September, an RFE/RL correspondent in Baku reported on 28 August. Under a 1993 agreement, AzTV aired a one-hour Iranian Television broadcast each day but suspended those broadcasts in June 1997 because of alleged extremist and anti-Azeri propaganda. Iran had stopped Azeri broadcasting to Iran almost immediately after it began in 1993, citing technical reasons. Khudiev said that under the new agreement, Azeri programs in Iran and Iranian broadcasts in Azerbaijan will be aired at the same time.


In an interview published in "Panorama" on 28 August, Minister of National Security Namiq Abbasov said a group of people involved in an attempted coup d'etat will go on trial within the next two months. Abbasov said an assassin hired by former Prime Minister Suret Husseinov to murder President Heidar Aliyev has been arrested in Baku along with other members of a terrorist group planning a series of attacks in Baku. Abbasov also claimed that the terrorist group unsuccessfully attempted to blow up the office of the Permanent Representative of Naxcivan Republic in Baku. Abbasov accused former President Ayaz Mutalibov and ex-KGB chief Vagif Guseinov of being behind the plot.


Wang Bingquian, the deputy leader of the Chinese parliament, said on August 28 that Beijing wants to dramatically expand its ties with Baku on all levels, ITAR-TASS reported. Wang made his remarks on arriving in the Azerbaijani capital for a four-day official visit. China and Azerbaijan signed a friendship and cooperation accord during President Aliev's visit to Beijing in 1994.


Russian President Boris Yeltsin said after his telephone conversation on 28 August with his Belarusian counterpart, Alyaksandr Lukashenka, that Lukashenka had promised to release two Russian Public Television (ORT) journalists from detention . However, when he spoke to reporters after his talks with visiting Russian Foreign Minister Yevgenii Primakov, Lukashenka did not confirm he had promised to release the two journalists. He said all problems will be solved at a meeting with Yeltsin. Lukashenka again blamed the ORT management for the incident and demanded a public apology. Seven ORT journalists have been detained in Belarus in the past month in two separate incidents on charges of violating the Belarusian-Lithuanian border. Five have been released under pressure from Moscow, but two -- both Belarusian citizens -- remain in jail. Yeltsin sent Primakov to Minsk to settle the dispute.


Opposition proposals to increase the powers of the parliament have failed to win support in an initial vote, Unian reported on 28 August. The three proposals were aimed at boosting the authority of the legislature at the expense of the executive and judicial branches and included the power to override a presidential veto by a simple majority. The proposals also aimed to limit the powers of the Constitutional Court and give the legislature the right to interpret the law. Nationalist lawmakers and centrists loyal to President Leonid Kuchma had criticized the proposed changes.


Kuchma said on 28 August that he is satisfied with the pace of the turnover to Ukraine of part of the former Soviet Black Sea Fleet. Kuchma made the remark following talks with Russian Defense Minister Igor Sergeev in Kyiv, Interfax reported. Kuchma said Ukraine has no problems with the division of the naval force under the agreement signed by Moscow and Kyiv in May. Sergeev, who concluded a three-day visit to Ukraine on 28 August, said Russia is fully abiding by the transfer timetable. Under the May agreement, Russia is ceding part of the former Soviet Black Sea fleet to Ukraine, while Moscow has the right to use most of Sevastopol port over the next 20 years as the base of its Black Sea Fleet.


The parliament has voted to appoint Einars Repse for a second six-year term as chairman of the Bank of Latvia, BNS reported on 29 August. The 35-year-old Repse oversaw monetary reforms in his first term. He introduced a new Latvian currency called the lat in 1992 and maintained a strict fiscal policy during Latvia's banking crisis in 1995. Repse also introduced tough regulations for the commercial banking sector. He told reporters after his reappointment that he guarantees a stable national currency and decreasing inflation.


Interfax on 28 August quoted Lithuanian President Algirdas Brazauskas as saying that Lithuanian-Russian relations are "normal" and correspond to current "ties between European states." Brazauskas, who was speaking after meeting in Vilnius with Russian Deputy Premier Valerii Serov, said he hoped a border treaty between the two countries would soon be initialed. Brazauskas and Serov also discussed economic cooperation, the readmission of refugees, and avoiding double taxation. Serov is in Vilnius to attend a session of the Russian-Lithuanian Intergovernmental Commission, BNS reported.


The government on 28 August easily survived a no confidence motion less than four weeks before general elections, Polish media reported. The vote was a formality after the co-ruling Peasant Party (PSL) abandoned its bid to oust Prime Minister Wlodzimierz Cimoszewicz. The PSL had threatened to try to bring down the government after Cimoszewicz refused to provide advance funds for grain purchases from Polish farmers. In a concession to the PSL, the government -- which is dominated by Cimoszewicz's Democratic Left Alliance -- agreed to buy 300,000 tons of grain. Under the constitution, the no-confidence motion still had to be held, however.


Aleksander Kwasniewski on 28 August signed a law strengthening the powers of the Constitutional Tribunal and increasing the number of its judges, Reuters reported. The new law raises the number of judges by three to a total of 15. Critics argue that the new legislation could allow the current government to appoint its supporters to the expanded Constitutional Tribunal before general elections on 21 September. The opposition wanted to wait for the new parliament to be formed before appointing additional judges.


Johan Bastin, the director of the Municipal and Environmental Infrastructure team at the London-based European Bank for Reconstruction and Development, told journalists on 28 August that the EBRD has offered $109 million in loans to Polish and Czech cities devastated by the recent flooding. He said the aid is will be used to rehabilitate water supplies, sewerage, transportation, and heating services. Officials in the Polish city of Wroclaw have reached agreement with the bank for a $30 million loan. Bank officials are currently discussing loan terms with authorities in the Ostrava region of the Czech Republic.


Czech Internal Affairs Minister Jan Ruml on 28 August officially opened a documentation center in the city of Pardubice where Czech citizens will be able to see files kept on them by the communist Secret Police (StB). He told journalists that the opening of the Interior Ministry's Secret Archives and Document Service Section office is a small compensation for past wrongs committed by the StB. The law on opening StB files took effect in December 1996, although citizens have been able to request information only since 1 June 1997. Some 10,000 people have already asked to see their files.


Parliamentary Chairman Ivan Gasparovic on 28 August postponed until next month a parliamentary debate on reinstating deputy Frantisek Gaulieder after the three-party ruling coalition boycotted a special session of the parliament. It was the third consecutive day that coalition legislators had refused to discuss a Constitutional Court ruling in July that overturned the parliament's expulsion of Gaulieder. In December 1996. Gauleider was expelled after the parliament received a resignation letter from him that he says he did not write. He was stripped of his mandate after he quit Prime Minister Vladimir Meciar's Movement for a Democratic Slovakia. Meciar claimed on Slovak Television on 27 August that Gaulieder had demanded 15 million crowns (some $450,000) in return for giving up his mandate. When Meciar's party refused, he allegedly began claiming he had not signed the resignation letter. Gaulieder told journalists on 28 August that Meciar's statement is a "lie."


In an unexpected reversal of its previous position, the cabinet on 28 August decided to hold binding referenda on the country's accession to NATO and on the ownership of land by foreign companies registered in Hungary. Prime Minister Gyula Horn said the referenda will be held simultaneously on 16 November. The decision still has to be approved by the parliament. Horn expressed confidence that the majority of voters will back joining NATO. He also said that, with 20 percent of the country's arable land lying fallow, the market price of land is far below its value. "We want to see as much capital as possible pumped into the agricultural sector," he remarked. The opposition Hungarian Democratic Forum announced it opposes the cabinet's proposed formulation on land ownership and will continue collecting signatures for a referendum proposed by the opposition.


The cabinet on 28 August approved a draft budget for 1998 providing for a deficit of 430.8 billion forint (some $ 2.1 billion). The draft foresees 3-4 percent growth in GDP, a 13-14 percent rise in consumer prices, and a 2 percent growth in real income, Hungarian media reported. It also proposes to make voluntary pension fund contributions 50 percent tax deductible and regular pension insurance contributions 25 percent deductible. Farmers with no more than three hectares of land will be able to lease those plots tax free. The draft also calls for a 10-year tax exemption for investments exceeding 3 billion forints in regions requiring special development. Corporate tax will drop from 27 percent to 20 percent, while the tax on dividends will increase from 27 percent to 35 percent.


A crowd of Bosnian Serbs threw stones and Molotov cocktails at SFOR troops and UN police in Brcko on 28 August. NATO troops fired back with tear gas, in what is the first time the peacekeepers have used such deterrents against civilians in Bosnia. Two U.S. soldiers and one Serbian woman were injured, and 25 UN police vehicles were destroyed. U.S. helicopters flew over the town throughout the night. The hard-line leadership of Radovan Karadzic called on Bosnian Serbs to rally after SFOR backed police loyal to Republika Srpska President Biljana Plavsic in their attempt to take over a police station. Momcilo Krajisnik, the Serbian representative on the Bosnian presidency and Karadzic's chief spokesman, congratulated the crowd on Pale Radio: "I hope that you will repeat this feat a hundred times if we find ourselves in danger because we have the right to defend ourselves."


U.S. spokesmen in Bosnia and Washington warned the Bosnian Serbs on 28 August not to attack peacekeepers again. Brcko was quiet on 29 August after UN police completed an evacuation of their personnel from the town. Karadzic's police have surrounded a UN police station outside Brcko. SFOR increased troop strength in Bijeljina following demonstrations by organized Bosnian Serb crowds on 28 August. In several other towns across northern Bosnia, Plavsic's police took control of police stations. In related news, the "Los Angeles Times" of 29 August quotes U.S. envoy Richard Holbrooke as saying NATO will protect Plavsic if Karadzic's supporters try to overthrow her. In Sarajevo, Alija Izetbegovic, the Muslim member of the joint presidency, said that recent developments involving rival Serbian factions indicate that Plavsic is gaining the upper hand in what he called a critical phase for the Dayton agreement.


The president of the Republika Srpska founded the Serbian People's League (SNS) in Banja Luka on 28 August. The new party will take part in the local elections slated for September and in the Bosnian Serb elections she has called for October. Plavsic said the SNS will put an end to the Bosnian Serb practice "of conducting political life as though it were an intrigue" and will make sure that the media provide "objective information," an RFE/RL correspondent reported from Banja Luka. Plavsic was recently expelled from the governing Serbian Democratic Party, of which she was a founding member. And in Sarajevo, election organizers from the Organization for Security and Cooperation in Europe announced that more than 2.5 million Bosnian citizens have registered to vote in the September elections.


Plavsic told the independent Zagreb weekly "Globus" of 28 August that she hopes the Republika Srpska and Croatia will establish economic links "as soon as possible." She added that she fondly remembers her student days in Zagreb and knows that Serbs and Croats can get along without getting into political arguments. Western Bosnia, including Banja Luka, traditionally had closer economic links to Zagreb than to Belgrade. Moreover, economic relations with Croatia would make her part of the Republika Srpska less dependent on Serbian territories controlled by her rivals. The interview is her first with a Croatian publication for some time. "Globus" is a popular, nationalist magazine that made its name through sensationalist, anti-Serb reporting during the war.


Zlatko Lagumdzija, the president of the multi-ethnic Social Democratic Party, told "Oslobodjenje" of 28 August that his party can beat the nationalists in the local elections. He says that the large Serbian, Croatian, and Muslim nationalist parties will be deprived of their usual electoral advantage of having nationally known leaders on the ballot. Lagumdzija added that his party hopes to win votes by putting forward well-known local personalities who will offer concrete solutions to local problems. The Social Democrats -- also known as the reformed communists -- have previously obtained their best electoral results in Tuzla and Sarajevo.


Despite concerns about Croatia's fascist past, the Israeli government will recognize that country in the hope of making a major arms sale, the Israeli daily "Haaretz" reported on 28 August. The deal is allegedly worth some $200 million and has been under discussion for several years. Soon after gaining independence in 1991, Croatia began a far-reaching program to bring its military up to NATO standards. The Simon Wiesenthal Center has urged Israel not to recognize Croatia, despite Zagreb's apology for fascist crimes during World War II (see "RFE/RL Newsline," 28 August 1997).


Albanian Defense Minister Sabit Brokaj and his Italian counterpart, Beniamino Andreatta, signed an agreement on 28 August in Rome to revitalize the Albanian army, "Gazeta Shqiptare" reported. Italy will help Albania restructure and modernize its forces by providing equipment, advice, and training totaling $17 million. Some 300 Italian military experts will work in Albania, and Albanian officers will undergo training in Italy. Rome will also provide an additional $200 million to other Albanian state institutions, such as the police, customs, health services, schools, and the judiciary as part of a three-year EU program. Meanwhile, negotiations about the return of 10,000 Albanian refugees from Italy are continuing. "Koha Jone" reported that the refugees are likely to be sent home in three stages.


An expert commission from the Council of Europe offered help on legal reform to Prime Minister Fatos Nano and other top officials in Tirana on 28 August, "Zeri i Popullit" reported. In other news, Democratic Party (PD) spokesman Genc Pollo said that the party will not participate in parliamentary commissions unless it is allowed to name the head of the chief anti-corruption body, known as the State Control Commission, "Rilindja Demokratike" reported on 29 August. A round-table of political parties agreed before the June elections that a member of an opposition party should head the commission, but some Socialist legislators now want a Socialist to chair that body.


President Emil Constantinescu on 28 August appointed Sorin Moisescu as prosecutor-general, RFE/RL's Bucharest bureau reported. He replaces Nicolae Cochinescu, who was dismissed several days ago. The 58-year-old Moisescu was appointed a judge at the Supreme Court of Justice in 1990. He had been a presidential counselor in charge of the Judicial Department since February 1997. He had also coordinated the anti-corruption campaign launched by President Constantinescu. Moisescu was not a member of the communist party and had no links with the communist secret police, according to a statement released by the President's Office.


After meeting with Prime Minister Ion Ciubuc on 28 August, deputy Vlad Cubreacov, who represents the Bessarabian Metropolitan Church, said Ciubuc displayed "good-will" toward finding a solution to the issue of the Church's official recognition, RFE/RL's Chisinau bureau reported. Cubreacov said that the Bessarabian Church on 25 August submitted an amended version of its statutes, which take into account objections raised by the government. He added that the premier was "in general satisfied with this version," although he still "raised some objections." Meanwhile, President Petru Lucinschi recently told Metropolitan Vladimir of the rival Moldovan Orthodox Church not to "make a drama" out of the recognition of the Bessarabian Church, Moldovan media reported. Lucinschi added that recognition would "reduce tensions" and that the Council of Europe is also demanding recognition of the Church.


President Petru Lucinschi signed the land sale law on 27 August, which is Independence Day in Moldova. The law, passed by the parliament in late July, was one of the IMF conditions for signing a memorandum with the Moldovan government. Meanwhile, the Party of Moldovan Communists announced that it has collected the 200,000 signatures necessary for a referendum on the law, which the party opposes.


The Standing Bureau of the Moldovan Liberal Party (PLM) on 28 August announced it will run jointly with the Party of Democratic Forces (PFD) and the National Peasant Party (PNT) in the 1998 parliamentary elections. PLM Deputy Chairman Vlad Darie told BASA-press that the decision was due to the fact that the other opposition bloc, the Democratic Convention of Moldova, has treated the PLM badly. The PNT has adopted a similar decision, but the PFD has yet to make its position known. The three parties' leaders will meet on 6 September to decide on forming a joint electoral bloc.


by Michael Wyzan

In some respects, Macedonia's macroeconomic performance became satisfactory by 1996. Retail-price inflation fell to 0.25 percent annually, the lowest level among transition economies that year. Price stability continued in the first five months of 1997, with 3.2 percent deflation.

Also in 1996, the budget deficit in 1996 was -0.4 percent of gross domestic product (GDP) owing to a large surplus on the central government budget. GDP growth was positive (1.6 percent) for the first time since independence, as was industrial production growth (3.2 percent). Those positive tendencies continued in the first half of 1997, with industrial output rising by 2.4 percent.

Nonetheless, the economy still faces severe problems. A comparison between those seeking work and those officially considered "employed" yields an unemployment rate of 41 percent for 1996. A more realistic estimate of those economically active results in a rate of 27 percent for last year, which is still the highest among transition countries. Moreover, unemployment continues to rise (and employment to fall).

Foreign trade results were disappointing in the wake of the end in late 1995 of both the Greek embargo against Macedonia and of the UN sanctions against federal Yugoslavia. The current account deficit in 1996 was $345 million, up from $227 million in 1995. The increase in the trade deficit from $455 million in 1995 to $520 million in 1996 was due to a fall in exports from $652 million to $503 million (imports were virtually unchanged). Foreign trade figures for January-May 1997 reveal little change from last year, although exports increased slightly.

Before the lifting of most UN sanctions against federal Yugoslavia in November 1995, Macedonia traded with that country but such commerce went unreported. After November 1995, a major increase in (reported) trade with federal Yugoslavia was expected. The delay until October 1996 in establishing a tariff-free trade regime undoubtedly limited that increase.

In fact, (reported) exports to Serbia and Montenegro rose from $85 million in 1995 to $241 million in 1996. Another encouraging sign was the increase in trade with Greece, with exports rising from $14 million to $63 million and imports from $29 million to $83 million. However, those export increases were more than offset by declines in exports to the rest of the EU (from $394 million to $239 million) and to the former Soviet bloc (from $446 million to $126 million).

The government blames those disappointing exports on such factors as the slowdown in economic growth in the EU, Bulgaria's economic collapse, and livestock diseases as well as other agricultural problems. Although such developments undoubtedly played roles in the export decline, they are not severe enough to explain a fall of the magnitude that occurred. Moreover, such a situation is especially worrisome in a country that has attracted little foreign investment, is accumulating arrears in principle and interest to the London Club of commercial bank creditors, and whose national bank's foreign reserves are low ($268 million at the end of 1996) and declining.

Economists often seek to explain a worsening current account by looking for a "real effective appreciation" of the currency. In other words, they would look to see if a country's exchange rate failed to depreciate fast enough to make up for its inflation rate being higher than in its major trading partners?

But in the case of Macedonia, inflation in 1996 was lower than in the EU and the U.S. The national bank even calculates that the competitiveness of the country's exports increased by 4 percent in 1996. However, since such competitiveness declined in 1994 and 1995, it was down 9 percent on 1993 levels.

Declining competitiveness is an especially severe problem in former Yugoslav republics, because their price levels and wage rates are closer to EU ones than is the case in other transition economies. Macedonia's average monthly wage has been more than $200 since September 1994, This means labor costs there are closer to those in Estonia or Slovakia than to those at similar levels of development, such as Bulgaria or Romania.

The high price level in Macedonia is partly the result of historical factors. But it also reflects a strategy beginning in the fourth quarter of 1995 to make the exchange rate the main economic policy variable. A stable denar fights inflation but at the cost of declining export competitiveness and a somewhat depressed economy.

In recognition of this problem, the government in early July devalued the denar against the Deutsche mark by 16 percent and introduced such measures as a wage freeze and cuts in public expenditures. Those steps were taken at the insistence of the IMF, which has supported and guided Macedonia's reforms. In November 1996, the fund awarded Skopje a three-year $80 million loan.

The author is a research scholar at the International Institute for Applied Systems Analysis in Laxenburg, Austria.