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Newsline - March 3, 1998




CABINET RESHUFFLE CLAIMS ANOTHER VICTIM

President Boris Yeltsin on 2 March dismissed Atomic Energy Minister Viktor Mikhailov, one of the longest-serving cabinet members, RFE/RL's Moscow bureau reported. Mikhailov had not been considered a likely candidate for dismissal. Prime Minister Viktor Chernomyrdin said Mikhailov resigned from the government in order to focus on scientific research, adding that the president thanked him for the work of his ministry during his tenure, Interfax reported. Mikhailov had headed the Atomic Energy Ministry since March 1992. Commenting on the recent cabinet dismissals (see "RFE/RL Newsline," 2 March 1998), Chernomyrdin said "the government's current policy is not being changed and will not be changed," but he noted that there will be changes in "the methods and approaches used" by the heads of some ministries. Yeltsin downplayed the significance of the reshuffle, adding that "ministers come, ministers go," ITAR-TASS reported. LB

DID MIKHAILOV JUMP OR WAS HE PUSHED?

A Russian commentator interviewed by RFE/RL on 2 March suggested, however, that Mikhailov may have been under pressure to resign, noting that his ministry was not informed in advance of his resignation. Andrei Piontkovskii said that Mikhailov, who began his career at Arzamas-16 under the late Andrei Sakharov, had implemented "his own personal policy," particularly toward sales of nuclear technology to Iran, and regarded himself as a "hawk" defending Russia's dwindling super-power status. But Piontkovsii concluded that the decision to replace Mikhailov as minister was probably not dictated by foreign-policy considerations; rather, it is likely to have stemmed either from disagreements within the ministry over uranium sales to the U.S. or from personal tensions between Mikhailov and Prime Minister Chernomyrdin. First Deputy Premier Boris Nemtsov has consistently criticized Mikhailov's ministry for failing to pay wage arrears to its employees, according to "Kommersant-Daily" on 3 March. LF

CHECHEN RESPONSE TO RYBKIN'S APPOINTMENT

Chechen Foreign Minister Movladi Udugov told ITAR-TASS on 2 March that it is "immaterial' who succeeds Ivan Rybkin as secretary of the Russian Security Council. Udugov said that Rybkin's appointment as Russian deputy prime minister for CIS affairs will expedite the establishment of Chechen-Russian ties and the recognition of Chechen independence, according to Interfax. He noted that Rybkin retains his post as head of the commission to negotiate the terms of a Russian-Chechen treaty. One of the Chechen members of that commission, Khozh-Akhmed Yarikhanov, praised Rybkin's contribution to economic reconstruction in Chechnya, to the repatriation of prisoners of war, and to ensuring the "signing of basic documents." Rybkin told journalists that he will have to pass on to his successor an "enormous amount of information" on Chechnya. LF

KOKOSHIN REPLACES RYBKIN ON SECURITY COUNCIL

Yeltsin on 3 March appointed Defense Council Secretary and Chief Military Inspector Andrei Kokoshin as secretary of the Security Council, RFE/RL's Moscow bureau reported. According to presidential spokesman Sergei Yastrzhembskii, the Defense Council has been abolished. Its personnel, along with that of the State Military Inspectorate, has been incorporated into the Security Council. Kokoshin, a civilian, was first deputy defense minister before being appointed to head the Defense Council and the newly created military inspectorate last August. The abolition of the Defense Council is unlikely to have a major impact, since most of its members are also on the Security Council. When Yeltsin created the Defense Council in July 1996, that body was widely seen as a counterweight to Aleksandr Lebed, who had been appointed Security Council secretary the previous month. LB

REACTION TO OTHER CABINET CHANGES

According to the 3 March issue of "Novye izvestiya," Education Minister Vladimir Kinelev was fired because of the total failure of education reform plans, which, the newspaper said, were drafted by top officials without sufficient input from teachers. "Novye izvestiya" also argued that Aleksandr Tikhonov, Kinelev's replacement, will represent the government's interests rather than standing up for those of the education sector in the government. "Rossiiskie vesti" suggested on 3 March that First Deputy Prime Minister Nemtsov instigated the decision to sack Transportation Minister Nikolai Tsakh. The newspaper said Tsakh had been a vocal critic of the Railroad Ministry, which is one of the ministries under Nemtsov's supervision. Meanwhile, Russian news agencies reported on 2 March that Sergei Frank, until now first deputy transportation minister, will replace Tsakh. Earlier the same day, Yastrzhembskii had said Yeltsin appointed Yurii Mikhailov to that post. LB

OPPOSITION FORMS 'SHADOW CABINET'

Communist Party leader Gennadii Zyuganov says the "popular-patriotic forces" have formed a "shadow cabinet" whose members are to be announced soon, ITAR-TASS reported on 2 March. Speaking to journalists in Orenburg Oblast, where he is campaigning on behalf of opposition candidates in upcoming legislative elections, Zyuganov said participants in a nationwide protest planned for 9 April will demand the creation of a "government of people's trust or national unity." Zyuganov is also the head of the Popular-Patriotic Union of Russia, a Communist-led umbrella movement formed out of organizations that supported his 1996 presidential bid. LB

CHUBAIS, NEMTSOV LOSE BODYGUARDS

Presidential spokesman Yastrzhembskii announced on 2 March that Yeltsin has signed a decree revoking the right of 12 high-ranking officials to have state-funded personal bodyguards, Russian news agencies reported. The decree affects First Deputy Prime Ministers Anatolii Chubais and Nemtsov, deputy prime ministers, and Yurii Yarov, the first deputy head of the presidential administration. According to "Kommersant-Daily" on 3 March, those officials will retain bodyguards when they are outside Moscow. Although Yastrzhembskii described the decree as a cost-cutting measure, "Kommersant-Daily" said the saving will be minimal and that the decree is more likely a political move against Chubais and Nemtsov. Last December, Yeltsin signed a decree requiring first deputy prime ministers to use commercial airlines for official travel. Special government planes are now used only by six top officials (see "RFE/RL Newsline," 12 December 1997). LB

PROSECUTOR-GENERAL LESS OPTIMISTIC ABOUT LISTEV CASE

Yurii Skuratov on 2 March told journalists not to expect the March 1995 murder of television journalist Vladislav Listev to be solved soon, ITAR-TASS reported. Skuratov acknowledged that progress has been made in the investigation but cautioned against drawing "analogies" between Listev's murder and the October 1994 killing of journalist Dmitrii Kholodov. Two suspects have been charged in the Kholodov case. On 28 February, ITAR-TASS quoted Skuratov as predicting that the Listev case would soon be solved. Petr Triboi, the chief investigator in the case, told "Izvestiya" on 27 February that he has received death threats. He also charged that some close colleagues of Listev have sought to hinder his investigation, but he singled out former Security Council Deputy Secretary Boris Berezovskii as having been particularly cooperative (see "RFE/RL Newsline," 27 February and 2 March 1998). LB

ELECTORAL COMMISSION WANTS STRICTER REGULATIONS...

Central Electoral Commission Chairman Aleksandr Ivanchenko says his commission wants the parliament to amend the law on parliamentary elections to toughen the regulations on submitting signatures for registration and to raise the minimum turnout requirement. In an interview with RFE/RL's Moscow bureau on 26 February, Ivanchenko expressed the hope that the law will prevent electoral blocs and individual candidates from submitting a total number of signatures that exceeds the required amount by more than 10 percent. (In the past, candidates and blocs have often submitted far more signatures than they need in case a large number of signatures are invalidated by the electoral commission.) Ivanchenko also advocated a 50 percent minimum turnout for elections to the State Duma, although he said he supports retaining the current 25 percent minimum for by-elections for Duma seats. LB

...TAKES NO STAND ON ABOLISHING PROPORTIONAL REPRESENTATION

In the same interview with RFE/RL's Moscow bureau, Ivanchenko said the Central Electoral Commission has no preference on whether the Duma should be elected entirely in single-member districts or by means of a mixed system involving proportional representation, as under the current law. He said he is against calling a nationwide referendum on changing the electoral law, which some presidential advisers have proposed (see "RFE/RL Newsline," 23 January 1998). Ivanchenko noted that holding a referendum would be very expensive. Commenting on proposals to change the law to require runoffs in single-member districts if no candidate gained more than 50 percent of the vote in the first round, Ivanchenko said such a move would raise the costs of conducting the elections by 25 percent at most. LB

YELTSIN APPROVES BURIAL PLANS FOR LAST TSAR

Yeltsin on 2 March approved plans to bury Nicholas II and his family in St. Petersburg on 17 July, Russian news agencies reported. The government unanimously supported those plans at a 27 February cabinet meeting (see "RFE/RL Newsline," 2 March 1998). LB

DUMA HEARS REPORTS ON DRUG USE

The Duma on 2 March heard reports on the growing problems related to drug use in the country. Nikolai Gerasimenko, the chairman of the Duma's Health Committee, said there are now more than 2 million regular drug users in Russia; 4 million people have experimented with narcotics, while some 400,000 are addicts. Gerasimenko said he expects those figures to double by 2000. Deputy Interior Minister Vladimir Kolesnikov, the deputy chairman of the government commission on drug abuse and sales, said there were 185,000 drug-related crimes in Russia last year, a 91 percent increase over 1996. The largest increases were among young adults, minors, and women. Gennadii Onishchenko, the chief state sanitary physician, said the growth in the use of drugs is contributing to an increase in HIV cases. He noted that of the 4,300 people registered as HIV positive, more than 90 percent are drug addicts. BP

LEBED SUBMITS SIGNATURES IN KRASNOYARSK

Former Security Council Secretary Aleksandr Lebed on 3 March handed over to the Krasnoyarsk Krai Electoral Commission registration documents, including petitions with 23,000 signatures supporting his candidacy for governor, ITAR-TASS reported. State Duma deputy Petr Romanov, the Communist- backed candidate and former director of a factory in the krai, submitted his signature lists on 2 March. Lebed is considered the main rival to incumbent Governor Valerii Zubov, but Romanov could become a kingmaker if he finishes a strong third in the first round of the election on 26 April. "Russkii telegraf" reported on 28 February that incumbent Governor Valerii Zubov is conducting negotiations with local Communists, who fared well in legislative elections in the krai last December (see "RFE/RL Newsline," 9 and 23 December 1997). The newspaper argued that if Zubov can reach an agreement with the Communists, who are sharp opponents of Lebed, the incumbent's chances will improve dramatically. LB




RUSSIA MAY WITHDRAW TROOPS FROM GEORGIA

Russian Defense Minister Igor Sergeev told journalists on 2 March that Russia is ready to consider withdrawing its troops from Georgia if there is a consensus that its military bases there are no longer needed, Russian agencies reported. Since 1993, the Georgian opposition has opposed Russia's military presence in Georgia. Last week, Tbilisi requested that Sergeev postpone his visit scheduled for 27-28 February until after the19-20 March CIS summit. A new agreement on the status of the three Russian military bases in Georgia was to have been signed during that visit. LF

ARMENIAN PREMIER PLEDGES ELECTION TRANSPARENCY

Robert Kocharyan has once again pledged that the Armenian authorities will take all possible measures to ensure that the 16 March presidential poll is free and fair, RFE/RL's Yerevan bureau reported. Kocharyan made that pledge at meetings with U.S. Assistant Under Secretary of State Stephen Coffey in Yerevan on 1 March and with the heads of the Organization for Security and Cooperation in Europe's election monitoring mission staff the following day. Kocharyan also said he has reached agreement with rival candidate Vazgen Manukyan that candidates' proxies will be empowered to monitor voting by military personnel. Interior and National Security Minister Serzh Sarkisyan said on 2 March that police will strictly abide by the regulation prohibiting their presence at electoral precincts. By the 1 March deadline, 12 candidates had submitted to the Central Electoral Commission the documentation and minimum 25,000 signatures necessary to run in the election, Noyan Tapan reported. LF

AZERBAIJANI PROSECUTOR-GENERAL ON EXTRADITIONS FROM RUSSIA

In an interview published in "Trud" on 28 February, Azerbaijani Prosecutor-GeneralEldar Hasanov argued that the extradition from Russia of a number of prominent political figures to stand trial on charges of terrorism or treason is in accordance with a Russian-Azerbaijani agreement concluded in 1992 and the subsequent Minsk Convention signed by CIS states. Hasanov rejected Russian press allegations that Azerbaijanis are extradited to Baku because of their political beliefs. He also denied that he has ever received a request from President Heidar Aliyev to demand the extradition of one of Aliev's political opponents. But a recent bulletin released by the Human Rights Center of Azerbaijan cites several cases in which Azerbaijani political refugees in Ukraine have been detained and mistreated before their extradition to Azerbaijan, where they were tried and sentenced. LF

TURKEY, CASPIAN LITTORAL STATES DISCUSS EXPORT PIPELINE

Meeting in Istanbul on 1-2 March, the foreign ministers of Turkey, Georgia, Azerbaijan, Turkmenistan, and Kazakhstan expressed varying degrees of support for the construction of the Baku-Ceyhan export pipeline for Caspian oil. They failed, however, to make a definite commitment to that project. At the same time, they stressed they are committed to multiple oil and gas pipelines in order to transport Caspian hydrocarbon resources to the West. Turkish Foreign Minister Ismail Cem suggested that Russian and U.S. representatives be invited to future meetings to discuss the Baku-Ceyhan project, the "Turkish Daily News" reported on 2 March. Russian Foreign Minister Yevgenii Primakov was not invited to the Istanbul talks. A Russian Foreign Ministry spokesman told Caucasus Press on 2 March that the proposed northern pipeline from Baku to Novorossiisk is "more rational and economical" than the Baku-Ceyhan option. LF

GEORGIAN PIPELINE AGREEMENT SIGNED

Chevron Overseas, Britain's Caspian Trans Company, and the Georgian state oil company signed an agreement in Tbilisi on 2 March on the reconstruction of two sections of the export pipeline to transport Azerbaijani Caspian oil to Georgia's Black Sea coast. Work on the Khashuri-Batumi section will begin within four months, and that section will be linked to the Ali-Bayramli- Khashuri pipeline by mid-1999. The annual throughput capacity of the Ali- Bayramli-Batumi pipeline will be 7.5-8 million metric tons, according to Chevron President Richard Matzke. The pipeline will transport not only Azerbaijani crude but some Kazakh oil from the Tengiz field that Chevron is developing together with Mobil and Kazakh and Russian oil companies. More than 1 million metric tons of Tengiz oil have been exported by tanker to Baku and then by rail through Georgia since 1997. LF

KYRGYZSTAN'S INDEPENDENT MEDIA COMPLAINS OF DISCRIMINATION

The Kyrgyz Association of Independent Electronic Mass Media has sent a letter to the cabinet complaining of "discriminatory actions of government structures against non-government mass media." RFE/RL's Kyrgyz Service, who has obtained a copy of the letter, said the association singles out the difficulties experienced by Mezon TV in acquiring a license to broadcast in 1997, the shutdown of Radio Almaz on 23 February, and the temporary closure of the television and radio station VOSST one week earlier. The association notes a "serious violation of Article 8 of the law on mass media" in the case of both Radio Almaz and VOSST, whose closure was ordered by the National Agency on Communications. Under the mass media law, a broadcasting station can be closed down only in accordance with a decision by the station's management or the courts. BP

KAZAKH PRESIDENT MEETS WITH FOREIGN INVESTORS

Nursultan Nazarbayev, meeting with foreign investors and government officials in Almaty on 2 March, said the cabinet will continue to give "support and help...necessary [for foreign investors] to work successfully" in Kazakhstan, ITAR-TASS and Reuters reported. However, Nazarbayev warned investors they are subject to Kazakh laws on taxation and should not over-report costs to keep down reported profits. After listening to reports by foreign investors, Nazarbayev heavily criticized some members of the government. The president asked one minister why it takes some four months to issue investors with licenses. He added that, "As of today, I am relieving your ministry of responsibility for licensing." BP

TURKMENISTAN TO TRIPLE GAS EXPORTS TO IRAN IN 1999

Turkmen President Saparmurat Niyazov has said the country's gas industry must be ready to export 12 billion cubic meters of natural gas to Iran via the Korpedzhe-Kurdkui pipeline in 1999, Interfax reported on 2 March. This year, Turkmenistan plans to export 4 billion cubic meters, of which 35 percent will be in payment for the construction by Iran of the pipeline. Tehran is to pay $40 per 1,000 cubic meters for the remainder of the gas. During his visit to Turkmenistan in January, Russian Prime Minister Chernomyrdin offered to pay $36 per 1,000 cubic meters, but Russia would re-export the gas to third countries at a far higher price. BP




EU CRITICIZES BELARUS OVER CONVICTED YOUTHS

The EU has sharply criticized the Belarusian government for its treatment of two youths convicted last week of vandalism, an RFE/RL correspondent in London reported on 2 March. A statement issued by Britain, the current holder of the EU Presidency, said the union considers the six-month pre-trial detention, the heavy police guard during the trial, and the severe nature of their sentences to be disproportionate to the crime committed. It urged Belarusian officials to show clemency to the two youths, one of whom was sentenced to 18 months' hard labor (see "RFE/RL Newsline," 25 February 1998). The statement said that Eastern European countries associated with the EU "align themselves" with the declaration. PB

ODESSA MAYOR BLAMES OPPONENTS FOR VIOLENCE

Eduard Hurvits said on 2 March that the political opposition was responsible for the recent spate of violence in Odessa, which he described as an effort to force him out. Hurvits added that police have links with criminal groups that want him ousted. He noted that they have not even investigated the disappearance of city official Ihor Svoboda, Hurvits' friend, who was allegedly kidnapped last week and is still missing. Hurvits is currently engaged in a power struggle with regional administration chairman Ruslan Bodelan, who has filed mismanagement charges against Hurvits and called for him to be replaced. PB

UKRAINIAN DEPUTIES CRITICIZE ACCORD WITH RUSSIA

A group of Ukrainian parliamentary deputies on 2 March criticized the 10-year economic cooperation agreement signed by Ukrainian and Russian Presidents Leonid Kuchma and Boris Yeltsin in Moscow last week. Deputy Serhiy Teryokhin said such an agreement must be ratified by the Ukrainian parliament. He added that the country would lose billions of dollars as a result of the accord, which included tax exemptions and lower tariffs for Russian gas transiting Ukraine. PB

ESTONIA AIMS FOR STABLE GDP GROWTH

Finance Minister Mart Opmann says his government is aiming for GDP growth of 5.5-6 percent over the next few years, BNS and ETA reported on 2 March. Opmann, who was addressing a group of Finnish financial leaders and businessmen, noted that the Finance Ministry predicts inflation at 9.6 percent this year, down from 10.6 percent in 1997. He said that Tallinn would seek to boost exports in a bid to deal with the foreign trade deficit. And he added that the parliament will approve various austerity measures before the summer recess. JC

LATVIAN DEPUTIES BLOCK VOTE OF CONFIDENCE

Latvian deputies on 2 March declined to hold a vote of confidence in the government, BNS and Reuters reported. Prime Minister Guntars Krasts proposed the vote after Latvia's Way, the second largest coalition partner, had accused Krasts of seeking to slow down privatization and failing to abide by the government coalition agreement. Krasts was unable, however, to gather enough support to block a procedural resolution preventing the confidence vote from taking place. The premier told BNS that if the government is not able to show solidarity and if parliamentary deputies interfere with its goals, "we will have to repeat the vote of confidence or find more radical steps." JC

LITHUANIA INDICTS ANOTHER SUSPECTED WAR CRIMINAL

The Prosecutor-General's Office has brought formal charges against Kazys Gimzauskas, who was deputy chief of the Vilnius security police from 1941- 1944 and is suspected of involvement in genocide against Jews, BNS reported on 27 February. Gimzauskas has denied the charges, claiming that he was a member of the anti-Nazi underground. He told BNS that he will repeat his "statement of innocence" under oath. The trial of Aleksandras Lileikis, who was Gimzauskas's superior during the period 1941-1944, is due to begin soon. JC

EU OFFICIAL SAYS POLAND LEADS AMONG EASTERN ASPIRANTS

Juergen Trumpf, the secretary-general of the EU Council of Foreign Ministers, said on 2 March that Poland is the leader among former Warsaw Bloc nations seeking to enter the EU. Trumpf, who was in Warsaw for discussions ahead of the 31 March EU membership talks, met with Polish Prime Minister Jerzy Buzek. Buzek said afterwards that it would take Poland about 20 months to adjust legislation to meet EU standards, adding that the most difficult changes will be in the agricultural sector. PB

CZECH POLICE DETAIN RUSSIAN CO-OWNER OF WEAPONS EXPORT FIRM

The Russian co-owner of the Kamo company, which exported decommissioned Czech military equipment to North Korea, has been detained, Nova Television reported on 27 February. Vojtech Filip, who is a lawyer and also a parliamentary deputy representing the Communist Party of Bohemia and Moravia, is reported to have helped the company obtain a license, which, however, was not valid for the export of decommissioned material. Filip stressed that the role he played was in his capacity as a lawyer and had "nothing to do with the Communist Party," CTK reported. MS

PRAGUE TO END 'SPECIAL RELATIONSHIP' WITH SLOVAKIA

Czech Deputy Foreign Minister Pavel Telicka on 2 March told journalists that the Czech Republic's "special relationship" with Slovakia is likely to end once Prague joins the EU, CTK reported. Telicka, who is Czech chief negotiator in the accession talks with the EU, said Prague would like Slovakia to be included on the list of countries involved in fast-track accession talks. But if that does not happen, he stressed, the Czech Republic will have to act in line with EU directives on the security of borders of member countries. The Czech Republic and Slovakia established a customs union following the breakup of the former Czechoslovakia. MS

KOVAC STEPS DOWN AS SLOVAK PRESIDENT

Michal Kovac, speaking at a ceremony marking the end of his term as Slovak president, said it would be "in the interest of Slovakia if intensive negotiations and the good will of all parties involved led to [the] parliament electing a new Slovak president within a short time," Reuters and AFP reported on 2 March. Kovac also criticized the "lack of cooperation" demonstrated by the government headed by Vladimir Meciar. Some presidential powers have passed to Meciar in the absence of an elected successor to Kovac. Some 5,000 demonstrators staged a protest outside the presidential palace, shouting "Meciar-- dictator." MS

SLOVAK DAILY REVEALS FINANCING OF MECIAR'S 1994 CAMPAIGN

"Sme" on 2 March reported that the 1994 election campaign of Meciar's Movement for a Democratic Slovakia (HZDS) was heavily financed by "moguls" who had bought major Slovak companies during the privatization process. "Sme" singled out Alexander Rezes, director-general of the Vychodoslovenske Zelenziarne steel giant, and Vladimir Poor from Trnava, western Slovakia, who bought heavily into the oil storage and refinery branches. MS

HUNGARY TO FURTHER EXAMINE DAM PROJECT

Hungarian Foreign Minister Laszlo Kovacs told the parliament on 2 March that the cabinet will order further examinations of the Slovak-Hungarian Danube hydropower project before it approves the framework agreement signed in Bratislava last week (see "RFE/RL Newsline," 2 March 1998). Since those examinations will take months, it is unlikely that any agreements related to the project will be signed with Slovakia before the May elections, Kovacs said. MS

HUNGARIAN OPPOSITION PARTY TO SUPPORT FAR- RIGHTISTS

The Christian Democratic People's Party (KDNP) on 1 March announced that in some electoral districts, it will support the candidates of the far-right Hungarian Justice and Life Party, headed by Istvan Csurka. In one district, the KDNP will back a candidate of the National Association for Hungary. That party was set up last year by Agnes Nagy Maczo, who is well known for her anti-Semitic views and who was expelled from the Smallholders' Party. MSZ




NEARLY 300 KOSOVARS INJURED IN PROTEST

A violent police crackdown on a protest demonstration by Kosovars in Pristina on 2 March left some 289 ethnic Albanians injured, local Albanian-language dailies reported. Major international television broadcasters carried footage that showed police indiscriminately beating even elderly demonstrators. The footage also indicated that some young Albanians threw stones at police. PM

SERBIA SAYS KOSOVO SITUATION "UNDER CONTROL"

Federal Interior Minister Pavle Bulatovic said in the parliament on 2 March that the situation in Kosovo is under control and that there is no need for military intervention or to declare a state of emergency. In Pristina, an Interior Ministry spokesman said the authorities will not permit what he called "demonstrations that support terrorism." And in Belgrade, representatives of the Helsinki Committee for Human Rights strongly condemned "brutal police repression against the Albanians." The spokesmen added that repressive measures by the police only serve to "reinforce the existing state- sanctioned apartheid" dividing Serbs and Albanians and to give the Albanians no choice except to use violence themselves. PM

KOSOVARS WARN OF "TERRIBLE WAR"

Xhafer Shatri, the information minister of the Kosovo government-in-exile, said in Geneva on 2 March that a "terrible war" will break out in Kosovo and affect surrounding countries if the international community does not intervene quickly in the wake of recent violence. In Pristina, shadow state President Ibrahim Rugova appealed to the international community--in particular to the U.S. and the EU--to put diplomatic pressure on Belgrade to "end violence in Kosovo." The steering committee of the Democratic League of Kosovo (LDK), the leading Kosovar political party, also appealed to the international community to help stop what the LDK called the dangerous escalation of violence. LDK representatives conveyed their views directly to U.S. and U.K. diplomats in Belgrade, an RFE/RL correspondent reported from the Serbian capital. PM

U.S. APPEALS TO SERBIA OVER KOSOVO

A State Department spokesman said in Washington on 2 March that the U.S. is "appalled" by the police violence in Kosovo and appealed to the Serbian authorities to address the Albanians' concerns. The spokesman also urged both sides to engage in an "unconditional dialogue." He warned, however, that the U.S. may reconsider its February decision to lift some long-standing commercial and diplomatic restrictions on Serbia "in light of Serbian actions in Kosovo over the last three days." He added that Washington is "considering further actions that might increase Belgrade's isolation." PM

EU CONDEMNS VIOLENCE...

The British Foreign Office issued a statement in the name of the EU on 2 March saying that "the EU unreservedly condemns the violent repression of non-violent expressions of political views, including peaceful demonstrations as well as the use of violence and terrorism to achieve political goals. It regrets that police action led directly to civilian casualties." PM

...AS DOES RUSSIA

The Foreign Ministry issued a statement in Moscow on 2 March noting that Russia "has unequivocally denounced terrorist acts and called for refraining from using force," Interfax reported. It urged the Yugoslav authorities to begin a dialogue with Albanian representatives. "The Kosovo problem should be settled on the basis of the territorial integrity of the Federal Republic of Yugoslavia, and of observing the rights of ethnic Albanians and other nationalities in accordance with OSCE standards, the Helsinki principles, and the UN Charter," the statement said. PM

MACEDONIA CALLS FOR ACTION ON KOSOVO

Macedonian parliamentary speaker Tito Petkovski said in Vienna on 2 March that "when the [Kosovo] problem turns into an armed conflict, it will spread beyond Kosovo's boundaries. Without rapid [diplomatic] intervention, the stability of the whole region is threatened, including Macedonia," he added. Meanwhile in Skopje, government spokesman Zoran Ivanov said that the Macedonian authorities are "following the developments in Kosovo with great concern." He said that Macedonia expects the "problem will be solved peacefully, through a dialogue between the authorities in Belgrade and the political forces in Pristina," BETA news agency reported. Ivanov denied unspecified media reports that the border between Macedonia and Yugoslavia is closed. PM

SLOVENIA LAUNCHES KOSOVO APPEAL

The Slovenian Foreign Ministry said in a statement in Ljubljana on 2 March that Slovenia "is extremely concerned about the increasing violence and new victims in Kosovo.... The killings should be stopped in order to start a tolerant political dialogue which should replace bloodshed and violence.... Slovenia supports an active role of the international community in settling the situation.... The international community should insist that human rights and liberties are respected." Slovenia currently holds a seat on the UN Security Council. PM

ALBANIAN PARLIAMENT WANTS NATO PRESENCE

Albanian lawmakers on 2 March approved a statement saying it is ready to "cooperate in every way" if NATO or the UN request that peacekeeping troops be stationed in the western Balkan region, "Koha Jone" reported. At an emergency parliamentary session, representatives of the Democratic Party proposed holding an all-Albanian national roundtable to formulate a common policy on Kosovo. Elsewhere, Prime Minister Fatos Nano urged the international community to become involved in the dispute, adding that the "developments in Drenica show that efforts to solve the Kosovo problems cannot be delayed any longer." Nano also telephoned with his Greek counterpart, Kostas Simitis, to urge him to use his good relations with Belgrade to help reach a settlement. FS/PM

ALBANIAN OPPOSITION CALLS FOR KOSOVO RESTRAINT

Democratic Party leader Sali Berisha issued a statement in Tirana on 2 March appealing to the U.S. and EU to help prevent "any further aggravation of the conflict, which could have unforeseen consequences for Kosovo and the southern Balkans." The former president also called on "the political leadership and individual Albanians in Kosovo to restrain themselves so as not to aggravate the conflict with Belgrade's police regime." Berisha was generally known as a supporter of the Kosovars during his presidency from 1992-1997. PM

ROMANIAN PRESIDENT HINTS CIORBEA MAY BE SACRIFICED

Emil Constantinescu said after a 2 March meeting with the National Peasant Party Christian Democratic (PNTCD) leadership that in order to resolve the ongoing political crisis, the PNTCD "must ignore party interests." Observers believe this is a hint to the PNTCD that Prime Minister Victor Ciorbea may have to go if cooperation within the ruling coalition is to be restored. Constantinescu pointed out that the PNTCD is the largest political force within the coalition and that its responsibility toward solving the crisis is therefore "all the greater." He also said Romania is at present experiencing five crises: economic, social, political, moral, and communications-related. The last of those crises, he stressed, is particularly affecting the work of the cabinet. MS

ANOTHER COALITION PARTY DISTANCES ITSELF FROM CABINET

Romanian Alternative Party (PAR) chairman Varujan Vosganian on 2 March said the cabinet has lost the authority needed to relaunch economic reform. He accused Ciorbea of delaying the process of drafting the budget and said the premier is suffering from a "centralist perception of the national economy." The previous day, a prominent leader of the National Liberal Party hinted that he backs the Democratic Party's demand that Ciorbea resign (see "RFE/RL Newsline," 2 March 1998). MS

MOLDOVAN PRESIDENT ON UPCOMING ELECTIONS

In his weekly address to the nation, Petru Lucinschi on 2 March said that regardless of the outcome of the parliamentary elections later this month, Moldova will have no choice but to pursue reforms. But he warned that the elections could result in the "slowing down" of the reform process and may even "make us lose another five to seven years." Lucinschi said the success of reforms depended to a great extent on cooperation between himself and the legislature. He explained that, for this reason, he was calling on the electorate to back political parties that have already demonstrated their willingness to cooperate with him, Infotag and BASA-press reported. MS

RUSSIA WANTS IMPROVED TIES WITH BULGARIA

Igor Stroev, chairman of the Federation Council, said in Sofia on 2 March that Russia wants to improve ties with Bulgaria, which are strained because of ongoing disputes over gas supplies, ITAR-TASS reported. Stroev is heading a Russian delegation that is taking part in the celebrations to mark 120 years since the Russo-Bulgarian victory against Turkey. MS

EUROLEFT PARTY FORMED IN BULGARIA

The Euroleft alliance has set up a new party, called Bulgarian Euroleft, whose aim is to unite Bulgaria's leftist formations and to establish a "modern, European social democracy" in the country, RFE/RL's Sofia bureau reported on 1 March. Euroleft was formed by defectors from the Socialist Party and won 14 seats in the April 1997 elections. Its leader, Alexander Tomov, will also head the new party. MS




BULGARIAN ECONOMY FROZEN EIGHT MONTHS AFTER START OF CURRENCY BOARD


by Michael Wyzan

A deep economic crisis began in Bulgaria in May 1996 and reached its apogee when the consumer price index (CPI) rose 242.7 percent in February 1997 alone. The lev fell from 70.4 to the dollar at the end of 1995 to 2,045.5 to the dollar just 14 months later, as the national bank's foreign reserves fell from almost $1.5 billion in June 1995 to roughly a quarter of that in January 1997. The average monthly wage nose-dived from over $127 in December 1995 to under $25 in February 1997.

Bulgaria's crisis reflected both poor macroeconomic policy and severe structural problems, especially the failure to privatize enterprises and banks or even to change the way they operated. Banks made uncollectable loans to enterprises; when the banks in turn got into trouble, the national bank frequently bailed them out through refinancing (i.e., lending) or programs to replace their bad debt with government bonds. Interest on those bonds became a burden on the budget, especially in 1996, when the deficit hit 11.5 percent of gross domestic product (GDP). The crisis and its aftermath caused a shakeout among large enterprises and banks. In the end, 14 of 27 banks failed.

The government of Prime Minister Ivan Kostov, elected in April 1997, introduced a currency board on 1 July. Under such a board, the exchange rate against a major currency is fixed and backed 100 percent (or more) by foreign reserves. The only increases allowed in the domestic money supply result from converting foreign currency into domestic money.

The economy has stabilized greatly since the currency board's introduction. CPI inflation has fallen to 0.5-2 percent monthly over the last four months (it was 2.1 percent in January). That it has not fallen further partly reflects the weakening of the German mark against the dollar in July and August of 1997 and January 1998 and the liberalization of food and energy prices. Average monthly wages reached almost $108 in December 1997, twice their dollar level a year earlier.

Confidence has returned to the banks, with people converting their money back into leva and redepositing it with them. The international financial institutions have resumed lending to Bulgaria. During 1997 it received $320 million from a loan awarded in April by the IMF, whose Bulgarian mission chief said in February that performance is "better than expected." Bulgaria also signed loan agreements with the World Bank ($100 million) and the EU ($250 million) last year. These factors contributed to a rise in the national bank's foreign reserves to over $2 billion by the end of 1997.

For all the good news, the economy remains depressed, with GDP declining by 7.4 percent in 1997. While many observers had predicted rising unemployment this winter, that has not happened: the unemployment rate in January was 14.2 percent, higher than in the autumn, but equal to its level in July 1997.

Banks are now flush with liquidity but seemingly unwilling to lend to enterprises. The main use for banks' funds is buying government bonds. With the budget deficit sharply reduced -- it was 3.6 percent of GDP last year and is projected at 2 percent this year -- the government demands less credit. Interest rates are extremely low. The national bank set its basic annual interest rate recently at 5.53 percent, with inflation (optimistically) projected at 16.5 percent. If banks resume lending to enterprises, interest rates on such loans will be much higher. Loans of that type are especially risky now that banks can no longer expect national bank bailouts.

One irony is that although the economic crisis began with a huge drop in the lev, that event was not preceded by a large current account deficit. Bulgarian had small trade and current account surpluses in 1996 and larger ones in 1997.

However, the continuing inflation under a fixed exchange rate regime will result in Bulgarian exports becoming more expensive and imports cheaper, undoubtedly leading to rising trade and current account deficits. That could occur as soon as this year, especially when the dollar wage exceeds its historical high of $128.

Then the question becomes whether financial inflows, especially foreign direct investment, will flow in sufficiently to finance badly needed imports, especially of investment goods. Although there has been disappointment over the failure so far to receive higher credit ratings from international rating agencies, several large privatization deals have been signed involving foreign investors.

One positive development is bank privatization. In July, the government announced the sale of the United Bulgarian Bank (Bulgaria's second largest) to several investors, including the European Bank for Reconstruction and Development; and Japan's Nomura won a tender on 18 February to buy 78.3 percent of the Postal Bank. The author is an economist living in Austria.


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