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Newsline - February 24, 1998




YELTSIN HINTS HE MAY SACK SOME MINISTERS

President Boris Yeltsin announced on 23 February following a meeting with Prime Minister Viktor Chernomyrdin that "certain people will have to answer" for their actions at a 26 February cabinet meeting, and that he will "immediately make a decision" on their future, Russian news agencies reported. The government is to report on its 1997 performance during that meeting, which was initially scheduled for early December but has been postponed several times. In recent weeks, Yeltsin has said "one or two faces" in the government may change but has indicated he will not fire First Deputy Prime Ministers Anatolii Chubais and Boris Nemtsov (see "RFE/RL Newsline, 5 and 6 February 1998). During a 17 February speech to both houses of the parliament, Yeltsin said "we will have another government" if ministers fail to meet certain economic goals. LB

DEPUTY PREMIERSHIPS TO BE ABOLISHED?

Former presidential adviser Georgii Satarov, who helped draft Yeltsin's speech to the parliament, told ITAR-TASS on 19 February that Yeltsin is planning an "administrative reform" that may involve eliminating the posts of deputy prime ministers. A 65-page document circulated among parliamentary deputies on 17 February referred to plans to make ministries the "supporting elements" of the government. According to Satarov, the reform will reduce and eventually eliminate the role of deputy prime ministers, who currently share responsibility for running some ministries with ordinary ministers. Duma Speaker Gennadii Seleznev has said the new law on the government requires Yeltsin to eliminate the post of first deputy prime ministers (see "RFE/RL Newsline," 13 January 1998). LB

RUSSIA, SYRIA MEND FENCES

A Russian government delegation that included Justice Minister Sergei Stepashin and Atomic Energy Minister Viktor Mikhailov arrived in Damascus on 20 February for talks aimed at reviving the two countries' "strategic partnership" and to attend the first session of the Russian-Syrian technical and economic committee, created five years ago, Russian media reported. According to "Russkii telegraf" of 21 February, Stepashin had previously disclosed that military-technical cooperation, including the sale to Syria of Russian arms, would be a key topic at the talks. Syria owes Russia some $10 billion for arms purchases. The next day, Stepashin and Mikhailov met with Syrian President Hafez al-Assad, to whom they handed a letter from Russian President Boris Yeltsin containing proposals for developing bilateral cooperation. On 23 February, the two sides signed a series of cooperation agreements on nuclear power, trade, and tourism. LF

DUMA RATIFIES AGREEMENTS WITH KAZAKHSTAN

The State Duma on 20 February ratified agreements between Moscow and Aqmola on Russia's use of firing and test ranges on Kazakh territory, ITAR-TASS reported. Russia is to pay $27.5 million annually for the use of those sites, but $24.3 million is take the form of military hardware deliveries and the training of Kazakh servicemen. BP

ZYUGANOV PLEASED WITH DEVELOPMENTS IN IRAQ

Communist Party leader Gennadii Zyuganov told journalists on 23 February that his party is satisfied with the results of UN Secretary-General Kofi Annan's recent talks with Iraqi leaders, Russian news agencies reported. He especially praised the Russian Foreign Ministry and Foreign Minister Yevgenii Primakov for their work in settling the crisis in Iraq. Zyuganov added that all of the Duma factions, except for Yabloko, "worked actively" for a peaceful settlement to the problem. Grigorii Yavlinskii and other Yabloko members criticized a resolution adopted by the Duma on Iraq and charged that sending a plane to Baghdad filled with humanitarian aid and Duma deputies was a political stunt rather than an attempt to resolve the crisis (see "RFE/RL Newsline," 5 and 9 February 1998). LB

OFFICIALS MARK HOLIDAY WITH PROMISES TO MILITARY

Yeltsin announced on 23 February, Defenders of the Fatherland Day, that he is "much more optimistic about military reform" than he was a year ago, Interfax reported. The same day, Prime Minister Chernomyrdin promised that the wages of military personnel will be doubled in 1998 and that all servicemen will have apartments before the year 2000. During a 23 February meeting with Defense Minister Igor Sergeev, Yeltsin said a Japanese loan of $1.5 billion will be invested in a government program to build housing for military personnel who have left or will leave the armed forces because of downsizing, ITAR-TASS reported. According to "Kommersant-Daily" on 24 February, the government currently owes officers an average of 10 million old rubles ($1,600) each. LB

GOVERNMENT CREATES COMMISSION ON DEFENSE INDUSTRY

Chernomyrdin has signed a resolution appointing First Deputy Prime Minister Chubais to chair a new government commission for the financial recovery of the defense industry, ITAR-TASS reported on 23 February. Deputy Prime Minister and Economics Minister Yakov Urinson will be that commission's deputy chairman. Chubais announced on 20 February that the government plans to revise its procedure for concluding contracts with defense enterprises and to reduce the number of such enterprises receiving state orders from 1,700 to 600, Interfax reported (see "RFE/RL Newsline," 16 February 1998). LB

MILITARY PROBES EXPLOSIONS AT BASES

In preliminary findings, military investigators say fires and explosions on 21 February at two bases--one in the Saratov Oblast city of Engels, the other outside Volgograd--were the result of negligence, ITAR-TASS reported. At the Engels base, boxes containing 23-millimeter cartridges caught fire, while at the ammunition depot near Volgograd, boxes with 125-millimeter shells for T-70 tanks went up in flames. No deaths or injuries have been reported, and officials say the two fires are not related. Investigators, however, are continuing their probe. They say arson may have been a cause and that terrorism has not been ruled out. BP

NDR LEADER EXPLAINS POSITION ON BUDGET

Aleksandr Shokhin, the leader of the pro-Russian Our Home Is Russia (NDR) faction, confirmed on 23 February that his faction voted against the draft 1998 budget in the fourth reading on 20 February, RFE/RL's Moscow bureau reported. The Duma fell 35 votes short of approving the document, and the support of the NDR faction would have made up the shortfall. Shokhin explained that the Duma was voting on an unamended version of the budget, having rejected a government proposal to tie certain expenditures to the receipt of revenues. Duma First Deputy Speaker Vladimir Ryzhkov of NDR argued that passing an unchanged version of the budget would merely lead to a presidential veto. Shokhin again advocated giving the government more leeway on reducing expenditures in the case of revenue shortfalls. LB

ZYUGANOV BLASTS GOVERNMENT STANCE ON BUDGET

Communist Party leader Zyuganov charged that the government prefers to work without a budget so that it "does not have to answer for anything," Russian news agencies reported on 23 February. Zyuganov's statements echo recent accusations by Duma Speaker Gennadii Seleznev (see "RFE/RL Newsline," 23 February 1998). Meanwhile, Yeltsin told journalists on 23 February that he will "insist on" the adoption of a realistic budget for 1998. He asked rhetorically why the authorities should "deceive the people" by allocating money on paper that will not be paid out. LB

ZADORNOV CONFIDENT ON CREDIT RATING

Finance Minister Mikhail Zadornov says he is confident that Moody's and Standard and Poor's will not lower Russia's sovereign debt rating after representatives of the agencies visit Moscow in late February, ITAR-TASS reported on 23 February. Speaking in London following a conference on employment and economic development in Russia and the G-7 countries, Zadornov said there are "absolutely no reasons" to lower Russia's credit rating. In recent months, both rating agencies have revised their outlooks for Russia from "stable" to "negative." But Zadornov said the government has figures with which to persuade the agencies. He cited new data showing that GDP in January 1998 was up 1.5 percent over the same month in 1997 and that tax and customs revenues have increased while yields on treasury bills have fallen. LB

NEWSPAPER WARNS OF RATING AGENCIES' INFLUENCE

"Nezavisimaya gazeta" argued on 20 February that rating agencies such as Moody's and Standard and Poor's are "ready to replace the IMF" as the main Western monitor of the Russian economy. The newspaper noted that a downgrade by those agencies could increase the cost of borrowing by millions of dollars, both for governments and for commercial banks (which cannot have a higher credit rating than that of the country in which they are based). It suggested that the agencies act primarily in the interests of Western and especially U.S. creditors. Since those creditors suffered huge financial losses recently on Southeast Asian markets, they may be looking to charge higher interest rates to other borrowers--hence the drive to reduce Russia's credit rating, "Nezavisimaya gazeta" argued. The newspaper called on the Central Bank to stop trading in treasury bills, which, it said, has contributed to instability on Russian markets. LB

COURT UPHOLDS APPEAL BY ENVIRONMENTALISTS

In the first case of its kind, the Supreme Court has ruled in favor of an appeal by environmental groups against government instructions allowing the development of some federally owned forested areas, RFE/RL's Moscow bureau reported on 20 February. Last April, the environmentalists appealed against 12 government regulations that allowed some 32,000 hectares of forest to be cleared for other uses, such as the construction of homes. They said the government had failed to comply with laws requiring that ecological surveys be conducted before forests can be converted to other land uses. Vera Mishenka, the president of the Eko-Yuris institute, said the court's ruling affects only a few regulations that were based on old forestry laws, not similar government instructions based on the new forestry code. She added that it will be a challenge to force the government and the Federal Forestry Service to implement the court ruling. LB

YELTSIN MEETS WITH INGUSH, NORTH OSSETIAN PRESIDENTS

Yeltsin held talks in Moscow on 23 February with Ruslan Aushev and Aleksandr Dzasokhov and congratulated the latter on his election as president last month, Russian media reported. The Russian president expressed concern that agreements between Russia and Chechnya are ineffective and reiterated his intention to travel to Chechnya. Dzasokhov told journalists later that both he and Aushev believe the heads of all North Caucasus republics and regions should travel to Grozny before Yeltsin does. Dzasokhov proposed tax breaks of up to seven years for the North Caucasus republics to enable them to put their infrastructure in order. He stressed that the 23 February meeting demonstrated Russia's "serious interests" in the North Caucasus. And he proposed greater coordination between regional leaders, specifically in the drafting of a new nationalities policy for the region. LF

TATAR PUBLIC CENTER LEADER OUTLINES TACTICS

Fandas Safiullin told journalists in Kazan on 19 February that his party will shift the focus of its activities "from the streets to the State Council," RFE/RL's Kazan bureau reported. Safiullin, who is a council member, said the center will continue to agitate for Tatarstan's "true independence" and for "establishing true democracy." On his election as chairman last month, Safiullin had argued that the center must change its policies in order to regain public support, which had been dwindling. But outgoing chairman Zaki Zainullin said his replacement by Safiullin was intended to make the center an instrument for implementing the policies of President Mintimer Shaimiev. The Tatar Public Center was founded in 1989 and has consistently advocated Tatarstan's independence from the Russian Federation. Shaimiev, for his part, has taken a more accommodating approach toward relations with Moscow. LF




ZVIADISTS RULE OUT RELEASING MORE HOSTAGES

Gocha Esebua, who heads the band of some 20 supporters of former Georgian President Zviad Gamsakhurdia holding three UNOMIG observers and several Georgians hostage in the west Georgian village of Djikhaskari, announced on 23 February that he will not release any more hostages. Esebua accused the Georgian authorities of reneging on a 21 February agreement whereby one Uruguayan UN observer was released in return for the promise that CIS peacekeeping troops deployed along the border between Abkhazia and the rest of Georgia would be replaced by a UN force. But Georgian Security Minister Jemal Gakhokidze claimed that Esebua agreed to release the first hostage unconditionally, according to Caucasus Press. Also on 23 February, Czech presidential spokesman Jaroslav Kulisek rejected Esebua's proposal that President Vaclav Havel should mediate talks between the Georgian government and Gamsakhurdia's supporters. LF

SHEVARDNADZE SETS CONDITIONS FOR TALKS

Speaking on Georgian radio on 23 February, President Shevardnadze said that negotiations on meeting the kidnappers' demands can begin only after a decision has been taken on which group of Gamsakhurdia's supporters is to participate and only after the unconditional release of the hostages. But Shevardnadze subsequently ordered Georgian Ambassador to Moscow Vazha Lortkipanidze to meet with Nemo Burchuladze to discuss the hostage-takers' demands, Caucasus Press reported. Burchuladze was deputy chairman of the Georgian parliament under Gamsakhurdia from 1990-1991 and has lived in Moscow since Gamsakuhurdia's ouster in January, 1992. But on 24 February, Burchuladze sent a representative to meet with Lortkipanidze in his place, RFE/RL's Tbilisi bureau reported. LF

ARMENIAN OFFICIAL DETAILS ELECTION SAFEGUARDS

Speaking at a press conference in Yerevan on 23 February, Armenian Central Electoral Commission chairman Khachatur Bezirjian listed measures intended to minimize the possibility of fraud at the 16 March presidential elections and RFE/RL's Yerevan bureau reported. Bezirjian said voting protocols from individual precincts will be faxed to the commission immediately after the vote count is finished and will be made public before the votes are tabulated and added together by higher-level commissions. Bezirjian also announced that the commission will introduce transparent glass ballot boxes to ensure every voter casts only one ballot. He said the government has earmarked 180 million drams ($360,000) for organizing the ballot. Fourteen candidates have announced their intention of running. LF

NO OBSTACLES TO KOCHARYAN'S CANDIDACY?

Bezirjian also said he believes Prime Minister and acting President Robert Kocharyan fulfills the electoral law requirement that presidential candidates must be citizens of the Republic of Armenia and have lived there for ten years. He added, however, that a final decision on this issue will be taken by the entire Central Electoral Commission. Bezirjian pointed out that Kocharyan is treated as an Armenian citizen when given visas by foreign embassies. Also on 23 February, presidential candidate David Shahnazarian argued on Armenian Television that Kocharyan's candidacy is unconstitutional. But in an interview in "Aravot" the next day, Kocharyan pointed out that "the Republic of Armenia has not existed for 10 years. Besides, I was a deputy to the Armenian parliament for seven years. I have served as Armenian prime minister for one year. If I'm not eligible, then who is?" LF

TURKMEN PRESIDENT IN BRUSSELS

Saparmurat Niyazov signed a memorandum of understanding with the Anglo-Dutch company Shell during his visit to Brussels on 23 February, Interfax reported. Late last year, Shell was named to head a consortium that will build and maintain a pipeline from Turkmenistan to Turkey. Niyazov also met with NATO Secretary-General Javier Solana and Belgian Prime Minister Jean-Luc Dehaene. Also on 23 February in the Turkmen capital, Ashgabat, representatives of the Economic Cooperation Organization began discussing oil and gas pipeline routes. All 10 member nations sent representatives, except Azerbaijan. BP

LUKASHENKA PRAISES PRIMORSKII GOVERNOR

Belarusian President Alyaksandr Lukashenka highly praised Primorskii Krai Governor Yevgenii Nazdratenko during an visit to Vladivostok on the way home from the Olympics in Nagano, Japan, RFE/RL's correspondent in Vladivostok reported on 23 February. Lukashenka said he and Nazdratenko agree on privatization and border policy. (The governor has long been an opponent of First Deputy Prime Minister Chubais and has accused the government of planning to give up territory in Primore to China.) Lukashenka hinted that the Russian government's "young reformers" are secret opponents of integration with Belarus. But he cited an economic cooperation agreement signed in Vladivostok as evidence that Russian regional leaders are welcoming closer ties with Minsk. He also said he hopes Ukrainian President Leonid Kuchma loses a presidential election scheduled for 1999, because, he commented, Kuchma opposes integration with Russia and Belarus. LB

UKRAINE SAYS TERRITORIAL DISPUTE WITH RUSSIA 'NON-EXISTENT'

The Ukrainian Foreign Ministry said on 23 February that a territorial dispute between Moscow and Kyiv "never existed and cannot exist," ITAR-TASS reported on 23 February. The statement came in response to Moscow Mayor Yuri Luzhkov's recent claims to Crimea and its port city of Sevastopol (see "RFE/RL Newsline," 23 February 1998). The Foreign Ministry said that, as in Russia, "serious politicians in Ukraine" realize that good relations between Kyiv and Moscow are based on "mutual respect, sovereignty, and territorial integrity." The Ukrainian parliament has approved a bilateral treaty with Russia that guarantees current borders between the two countries. PB

BALTIC SEA REGIONS SIGN ACCORD IN POLAND

Regions from six countries bordering the Baltic Sea signed a cooperation agreement aimed at creating a "Baltic Euro- region," AFP reported on 22 February. "The Baltic Sea is becoming a sea of the European Union," Polish Foreign Minister Bronislaw Geremek said at the signing in the northern city Polish town of Malbork. Representatives from the Danish island Bornholm, Latvia's Liepaja and Lithuania's Klaipeda regions, the Russian exclave Kaliningrad Oblast, and the Swedish provinces Kalmar, Kronenburg, and Blekinge, and Polish provinces Elblag, Gdansk, Olsztyn, and Slupsk signed the accord, which promotes cooperation in economics, agriculture, transportation, environmental protection, and education. PB




CRIMEA'S SAFONTSEV DIES FROM BOMB INJURIES

Aleksandr Safontsev, the first deputy prime minister of Crimea, died in the hospital on 23 February, two weeks after suffering severe injuries in an assassination bombing, ITAR-TASS reported. A bomb exploded as his car drove by a garbage can in Tavriya, near Simferopol (see "RFE/RL Newsline," 6 February 1998). One person has been detained in connection with the remote-controlled bombing. PB

TRIAL OF BELARUSIAN YOUTHS CONCLUDES

Closing arguments have been made in the trial of two Belarusian teenagers charged with hooliganism, RFE/RL's Belarusian Service reported on 23 February . Prosecutor Dzmitri Tsimafeev asked the judge to find the youths guilty. He is seeking a two-year prison sentence for 19-year old Alexei Shydlowsky and a two-year suspended jail term for 16- year-old Vadzim Labkovich. Both youths have served more than six months in pre-trial detention on vandalism charges. They have apologized and compensated authorities for the minor paint damage caused by their actions. Defense attorney Nadzeja Dudarava said the case is political and is based on her clients' membership in the youth wing of the Belarusian Popular Front. PB

BANK OF ESTONIA ESTIMATES 9 PERCENT GDP GROWTH LAST YEAR

The Estonian central bank has estimated GDP growth in 1997 at 9 percent, up from 4 percent the previous year, ETA reported on 23 February. In its 1997 financial policy report, the bank said the growth resulted mainly from increased exports as well as larger demand in the domestic private sector. The bank added that its new economic policies should curb domestic consumption this year, meaning that GDP growth will be more modest. JC

ESTONIAN PRESIDENT WANTS FEWER POLITICAL PARTIES

Lennart Meri told "Postimees" on 23 February that a small country like Estonia needs only three or four political parties with distinct platforms instead of the existing 33, ETA reported. Meri urged like-minded parties to merge, noting that in many cases parties may have similar programs but their leaders cannot find common ground owing to personal differences. JC

ULMANIS APOLOGIZES FOR LATVIA'S ROLE IN HOLOCAUST

Latvian President Guntis Ulmanis on 23 February unofficially apologized for his country's role in the Nazi Holocaust. Ulmanis, who is on a three-day visit to Israel, said at an official reception at Israeli President Ezer Weizman's residence that his nation is aware of the role some of its citizens played in the persecution of Latvian Jews. At the same time, he stressed that Latvians also saved the lives of many Jews during the war, an RFE/RL correspondent in Riga reported. Israeli officials told Ulmanis that Latvia should undertake a "serious investigation" of the whereabouts of Nazi war criminals living in Latvia. But on 23 February, the Latvian Prosecutor-General's Office said it has no information about people living in Latvia who could be persecuted for the murder of Jews or other war crimes, BNS reported. JC

POLISH PRESIDENT, POPE SIGN CONCORDAT

Aleksander Kwasniewski and Pope John Paul II have signed a Concordat governing relations between Warsaw and the Roman Catholic Church, Reuters reported on 23 February. The pope signed the document at the Vatican, while Kwasniewski put his signature to it in Warsaw, despite objections from his Socialist allies, who claimed the accord gives the Catholic Church too much power in society. Kwasniewski denies those charges and said "good and friendly" relations between Poland and the Vatican "will be developing even better" under the Concordat. The Solidarity-led government signed the Concordat just before it lost the 1993 elections to the Democratic Left Alliance, which then failed to ratify the document. PB

INCREASED DRUG USE IN POLAND

The government said on 23 February that there are between 30,000 and 40,000 drug addicts in Poland, AFP reported. The Office for Drug Addiction said this is an increase over recent years, during which the level of drug usage had remained relatively stable. An official at the office said that an upsurge in usage of synthetic drugs and amphetamines is the primary reason for the increase. PB

CZECH POLICE QUESTION FORMER ODA LEADER

Police on 23 February questioned former Civic Democratic Alliance (ODA) chairman Vladimir Dlouhy in connection with the donations scandal, CTK reported, citing Nova Television Dlouhy said he did not fear he would be prosecuted because the ODA paid the necessary taxes on the donations. The same day, Jiri Skalicky, who recently resigned as ODA chairman, met with President Vaclav Havel and presented him with a three-page report on the ODA's finances. After the meeting, Havel said the documents show that some of the suspicions were "ungrounded" but, he added, this does not mean that "everything was correct as regards ODA financing." The president commented that the ODA is a party that has "a special spirit" and "it would be a pity if it disappeared from political life." MS

SLOVAK OPPOSITION LEADER ON MECIAR

Opposition leader Milan Knazko, who is a former foreign minister and a former ally of Prime Minister Vladimir Meciar, says the premier does not want Slovakia to become a member of NATO or the EU because "in a normal democracy, his position would be threatened." Knazko told the Czech daily "Lidove noviny" on 23 February that he cannot provide "proof" that Meciar is "cooperating with the KGB" but it is "clear that he prefers pursuing Russia's interests to those of Slovakia." He added that he cannot judge Meciar's "mental health" but has often seen him suffering from depression and losing self-control at public meetings. MS

HUNGARY, FRANCE SIGN MILITARY SECRECY PACT

Visiting French Defense Minister Alain Richard and his Hungarian counterpart, Gyorgy Keleti, have signed a military secrecy agreement that applies to both military hardware and data, Hungarian media reported on 23 February. Richard told reporters in Budapest that France counts on Hungary in strengthening NATO's European wing to counterbalance the influence of the U.S. in the organization. Meeting with Foreign Minister Laszlo Kovacs, Richard said the ratification of Hungary's NATO accession will be "unproblematic" as far as France is concerned. MSZ




ALBANIAN POLICE RETAKE CONTROL OVER SHKODER

Special riot police on 23 February retook control of the northern Albanian city of Shkoder, "Dita Informacion" reported. Police overpowered a group of some 100 armed and masked men who had taken control of the bridge over the Drin River at the entrance to the city and had mined the bridge with dynamite. Police arrested 16 people, one of whom is a well-known local smuggler. Prime Minister Fatos Nano replaced local police chief Mithat Havari on the grounds that Havari failed to cope with the initial armed attack by the gang the previous day. Nobody was injured in the unrest, according to hospital spokesmen. FS

MUTUAL RECRIMINATIONS OVER SHKODER

Socialist Party Secretary Petro Koci put the blame for the unrest on the Democratic Party, saying that Democrats have become a "go-between linking [government] institutions and organized crime, which [in reality] governs the prefecture of Shkoder." He added that the unrest was preceded by a Democratic Party rally, which, he argued, "clearly proves the direct connection" between that party's activities and "public [criminal activities] that result in actions against the state," "Zeri i Popullit" reported. Democratic leader Sali Berisha countered that "the accusations...are proof of [the Socialists'] communist and Leninist mentality." He accused the government of having provoked the unrest to destabilize the city, according to "Rilindja Demokratike." FS

ALBANIAN PARLIAMENTARY SPEAKER SUSPENDS CONSTITUTIONAL COURT

Parliamentary speaker Skender Gjinushi on 23 February said that all Constitutional Court decisions will be declared null and void until the court replaces three of its nine members by drawing lots. Gjinushi added that under current legislation law, the court should have replaced three judges in December 1997. but its nine members refused to do so. Meanwhile, the parliamentary lustration commission gave evidence to the legislature that Constitutional Court chief judge Rustem Gjata was a communist-era secret service agent. The commission proposed that the parliament dismiss him from office, "Gazeta Shqiptare" reported. FS

U.S. CALLS TUDJMAN SPEECH UNACCEPTABLE...

U.S. special envoy Robert Gelbard has said in Belgrade that it is unacceptable that Croatian President Franjo Tudjman had questioned the territorial integrity of Bosnia in a speech two days earlier (see "RFE/RL Newsline," 23 February 1998). "We are profoundly angered by the speech given by President Tudjman. His historical allusions are outrageous, dangerous, and ridiculous.... This violates the Dayton peace accords.... Tudjman needs to watch his language," Gelbard added. Tudjman regards the Bosnian Muslims as a political and cultural threat to Europe and favors a partition of Bosnia between Serbs and Croats. Foreign pressure led Tudjman into making a tactical alliance with the Muslims against the Serbs in 1994 and into signing the Dayton peace agreement for a united Bosnia nearly two years later. PM

...EASES SANCTIONS ON MILOSEVIC

Gelbard also said in Belgrade on 23 February that the government of Yugoslav President Slobodan Milosevic has shown "good will" and "a significant positive influence" in helping bring the moderate government of Prime Minister Milorad Dodik to power in the Republika Srpska. In return, Gelbard said that Washington will allow Belgrade to open a consulate in New York and to increase the size of its diplomatic staff accredited to the UN there. The Yugoslav airline JAT will have landing rights in the U.S., and Yugoslavia will be invited to join the U.S.- sponsored Southeastern European Cooperation Initiative. Gelbard added, however, that the "outer wall" of sanctions against Belgrade will remain until Yugoslavia makes more progress in promoting democracy, resolving the Kosovo dispute, and sending indicted war criminals to The Hague. The "outer wall" bars Yugoslavia from full membership in the UN, the IMF, and the World Bank. PM

DODIK UPBEAT ON WORLD BANK LOANS

After returning from Washington, Dodik said in Banja Luka on 23 February that he had "agreed with World Bank representatives on a favorable $20 million loan to the Republika Srpska, to be paid over the next 35 years and with a 10-year grace period.... The realization of [this and other] financial assistance agreements will put the Republika Srpska in a much better position." The loan is aimed primarily at helping small and medium-sized businesses. Dodik added that he expects the World Bank to "grant another loan of $33 million" for the Republika Srpska government budget" in March or April. PM

BRCKO HARBOR OPENED

Six ships that had been trapped in the Serbian port of Smederevo since the Bosnian war broke out in 1992 arrived in the Serb-held Sava River port of Brcko on 23 February. The previous week, transport ministers from the Republika Srpska and the mainly Croatian and Muslim federation reached an agreement to open the port temporarily to allow the ships to return. A permanent agreement to reopen the harbor has not been concluded. The disputed town of Brcko is a key transportation hub connecting Bosnia, Croatia, and Yugoslavia. PM

DRIVERS BLOCK BELGRADE STREETS

Taxi and truck drivers blocked roads in and around the Serbian capital on 24 February to demand lower taxes and higher fares. The previous day, several thousand pensioners demonstrated outside the Serbian parliament to urge payment of back pensions and improved living conditions. Pensioners in particular are affected by poverty across the former Yugoslavia. PM

SERBIAN KINGPIN ARRESTED

Spokesmen for the Serbian Interior Ministry on 23 February confirmed media reports that police have arrested Nenad Djordjevic for embezzling $10 million from the Serbian Health Insurance Service, which he headed until recently. Djordjevic is a key political ally of Milosevic's wife, Mirjana Markovic, and a deputy chairman of her United Yugoslav Left party. Djordjevic is widely regarded as one of the richest men in Serbia, an RFE/RL correspondent reported from Belgrade. PM

EU CALLS FOR DIALOGUE IN KOSOVO

EU foreign ministers issued a statement in Brussels on 23 February appealing to "all parties concerned [with the Kosovo issue] to exercise restraint and refrain from all acts of violence to achieve political goals." The ministers said they will support any settlement acceptable to the Serbs and Albanians. The statement added that the most likely solution would be to establish broad autonomy for Kosovo within Yugoslavia. PM

ROMANIAN BUDGET TO BE SUBMITTED IN MARCH

Emil Constantinescu on 23 February said an agreement has been reached to submit the draft budget to the parliament "by end of March." That agreement was reached at a meeting of ministers in charge of the economic sector and members of parliamentary economic commissions, RFE/RL's Bucharest bureau reported. For the first time, opposition members of the parliamentary commissions participated in such a meeting. Earlier, Prime Minister Victor Ciorbea said that an IMF decision not to disburse the third tranche of the approved stand-by loan would not have any influence on the budget, because the country's monetary reserves are very large. He added, however, that it would negatively impact on Romania's image in the eyes of foreign investors. Mediafax said Ciorbea's dismissal was "imminent" in view of the failure of the negotiations with the IMF. MS

MOLDOVAN PREMIER WITHDRAWS PARLIAMENTARY CANDIDACY....

Dumitru Diacov, the leader of the pro- presidential For a Democratic and Prosperous Moldova Bloc, told journalists in Chisinau on 23 February that Prime Minister Ion Ciubuc has withdrawn his candidacy for the 22 March parliamentary elections. Ciubuc had planned to run as the number two candidate on the bloc's lists. Last week, the parliament ruled that members of the executive must suspend their government activities if they run for a seat in the legislature. Diacov said it is "more important" that Ciubuc remain as head of the cabinet. He said the premier will continue to be a member of the pro-presidential party, which bears the same name as the bloc. An RFE/RL correspondent in Chisinau said Ciubuc's withdrawal is thought to considerably diminish the electoral chances of the bloc. Several ministers belonging to various parties have announced they have suspended their government activities. MS

...WHILE LUCINSCHI ASKS ELECTORATE TO SUPPORT PREMIER'S PARTY

In his weekly televised address to the nation, President Petru Lucinschi on 22 February called on the electorate to support political parties willing to cooperate with him, saying he would like Ciubuc to stay on as premier. Lucinschi said he would not single out any party but added that the actions of parties like the center-right Democratic Convention of Moldova demonstrate that they are bent on not cooperating with him. He said if the elections are won by parties that would "struggle against the president," this would lead to conflicts with Moldova's neighbors and inter- ethnic strife in what he called a repetition of the "Transdniestrian blunder." Lucinschi said he is "unhappy" with the constitution and with the electoral system and will strive to have both changed after the elections in order to better "promote cooperation between the branches of the government." MS

BULGARIA SEES NATO AS KEY

Foreign Minister Nadezhda Mihailova told the annual meeting of Germany's Suedosteuropa Gesellschaft in Munich on 21 February that achieving NATO membership is the main aim of Bulgarian foreign policy. She stressed that there is no security in Europe without security in the Balkans and that Balkan stability requires Bulgarian participation in "security- generating structures." Mihailova noted that the sound development of bilateral relations with each of Bulgaria's immediate neighbors is possible only within a broader European, multilateral framework. With reference to Russia, she said that Bulgaria's desire for membership in NATO is not directed at any third country, but she stressed that Sofia will not allow any third country a veto right over Bulgaria's security policy. Mihailova added that Bulgaria's second priority is to secure membership in the EU. PM




GEORGIA'S FAST-GROWING ECONOMY


by Michael Wyzan

In 1997, the Georgian economy continued to dig itself out of the hole that resulted from the political turmoil and poor economic policy-making during the early years of independence. The decline in gross domestic product (GDP) from 1991-1994 was nearly 73 percent, the largest collapse in the former USSR.

Last year's economic performance was especially impressive in view of continuing domestic tension surrounding the failure to resolve the stalemate over the fate of Abkhazia and ongoing problems in political and economic relations with Russia. Since last fall, Moscow has refused entry to hundreds of trucks transporting Turkish- produced alcohol to Russia via Georgia.

For the second consecutive year, Georgia was the fastest-growing economy within the CIS and second only to Bosnia among transition economies. GDP grew by 11.3 percent in 1997, following an 11 percent increase the previous year. Despite an acceleration late in 1997, consumer price inflation on a December-to-December basis was 7.9 percent, compared with 13.8 percent the previous year.

The exchange rate against the dollar remains one of the most stable among transition countries, having moved only to 1.32 from 1.25 at the lari's introduction in October 1995. Wages continue to grow. The average monthly wage in the third quarter of 1997 was some $50, twice the amount a year earlier.

Progress was made in several areas of economic policy. On the fiscal front, a new tax code was introduced, the Ministry of Finance was reorganized, the first treasury bill auctions were held, and the 1998 budget was introduced in the parliament far earlier than in previous years and with more realistic revenue projections. Those developments followed on the heels of the appointment as finance minister of Mikhail Chkuaseli, who, at age 26, is undoubtedly the youngest person in the world to hold that position. (His Armenian counterpart, Armen Darbinian is 32.)

Headway was also made in strengthening the banking system, with three former state banks being certified in accordance with international standards. Privatization, though seemingly stalled in the first half of 1997, advanced in July, when all shares in 266 enterprises were sold at "zero cash auctions." At those auctions, bidders were offered shares in companies whose stock had remained unsold at two previous cash auctions There was no reserve price, and shares were distributed in proportion to the amounts offered by bidders (instead of the usual practice of seeing how many bids are made for shares at a fixed price).

In addition, foreign investors bought controlling stakes in three promising enterprises: a brewery, a bottler, and a producer of sparking wines. And in August, President Eduard Shevardnadze rescinded a May 1996 decree that had suspended the privatization of 51 companies deemed of strategic importance.

However, a closer look at macroeconomic and foreign sector performance shows that Georgia still has a long way to go before it is on its feet economically. While the budget deficit has fallen from 4.4 percent of GDP in 1996 to a projected 2 percent this year, revenue collection remains among the worst in the world. From January to September 1997, revenue was only 8 percent of GDP. The authorities have managed to keep deficits small by limiting expenditures and by running arrears, particularly on education in rural areas.

Moreover, given that the lari has weakened only slightly and inflation continues at a faster rate than in Georgia's main Western partners, there is increasing concern about rising foreign sector imbalances. Unfortunately, data on exports and imports are unreliable, since a large percentage of trade is unregistered owing to problems with the customs service, especially in Adzharia, on the border with Turkey.

Available data suggest a large trade imbalance: in January, Economy Minister Vladimir Papava cited a figure of $600 million for all of 1997. Meanwhile, the IMF and World Bank, along with the EU and the U.S., continue to help finance Georgia's current account deficit. That level of support will not last indefinitely, making such large imbalances unsustainable in the long run.

Another worrisome indicator is a foreign debt totaling $1.485 billion as of 1 October 1997. Much of that debt is owed to international bodies: $220 million to the IMF, $250 million to the World Bank, and $125 million to the EU. But Turkmenistan is Georgia's largest creditor, with Tbilisi having accumulated about $460 million in outstanding debts for natural gas shipments. Ashgabat suspended such shipments in March 1997, which led to a worsening of the energy situation in Georgia. And the two sides failed to agree on debt rescheduling during Shevardnadze's visit to Turkmenistan in December.

Registered cumulative foreign investment as of 1 October was only $105.3 million, the leading investors being Israel, Ireland, the U.S., South Korea, and Germany. Many factors constrain business development (both foreign and domestic) and drive businesses into the shadow economy. Those factors include irregular energy supplies, poor transportation links and telecommunications, problems with the banking system, and an often corrupt and inefficient bureaucracy. The author is an economist living in Austria.


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